What changed in this filing

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Item 1. Financial Statements

2023-08-09 compared with 2023-05-09 · 243 added, 182 removed, 571 unchanged (43% of the section changed)

3 unchanged sentences

(Dollars in thousands)

March 31, 2023  

June 30, 2023  

December 31, 2022  

1 unchanged sentence

$ 166,690  

$ 175,640  

Accounts receivable, inclusive of the blenders’

12 unchanged sentences

37,126  

Other current assets

1 unchanged sentence

274,273  

273,776  

Property, plant and equipment, net

32 unchanged sentences

72,969  

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 March 31, 2023 and December 31, 2022

Accumulated other comprehensive income (loss)

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, 2023 and December 31, 2022

Accumulated other comprehensive loss

Additional paid in capital

13 unchanged sentences

(Dollars in thousands, except per share amounts)

Three Months Ended March 31,  

Three Months Ended June 30,

Six Months Ended June 30,

$ 85,308  

$ 117,640  

$ 159,469  

$ 159,714  

Revenue –

3 unchanged sentences

113,798  

144,562  

161,017  

Cost of goods sold –

2 unchanged sentences

related parties

Gross profit (loss)

Gross (loss) profit

( 8,592 )  

13,031  

Selling, general, and administrative expenses

4 unchanged sentences

Total operating expenses

Income (loss) from operations

(Loss) income from operations

(11,583 )  

( 1,515 )  

Interest and dividend income

1 unchanged sentence

( 34 )  

( 33 )  

( 67 )  

Gain (loss) on marketable securities

Other income  

( 3,239 )  

Other expense

Other income (expense)

Income (loss) before taxes

( 2,527 )  

(Loss) income before taxes

( 9,844 )  

( 4,042 )  

11,244  

Income tax provision (benefit)

Net income (loss)

( 938 )  

Earnings (loss) per common share

Net (loss) income

$ ( 9,859 )  

$ ( 3,104 )  

$ 11,222  

(Loss) earnings per common share

$ ( 0.23 )  

$ ( 0.07 )  

$ 0.26  

$ ( 0.23 )  

$ ( 0.07 )  

$ 0.26  

Weighted average shares outstanding

3 unchanged sentences

43,763,243  

Comprehensive income (loss)

Net income (loss)

43,763,243  

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

43,763,243  

43,764,890  

43,763,243  

Comprehensive (loss) income

Net (loss) income

$ ( 9,859 )  

$ ( 3,104 )  

$ 11,222  

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

( 20 )  

( 86 )  

Income tax effect

Total other comprehensive income (loss), net of tax

Comprehensive income (loss)

Total other comprehensive (loss) income, net of tax

( 16 )  

( 68 )  

Comprehensive (loss) income

$ ( 9,875 )  

$ ( 3,172 )  

$ 11,223  

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

2 unchanged sentences

(Dollars in thousands)

For the Three Months Ended March 31, 2023

For the Six Months Ended June 30, 2023

Comprehensive

Stockholders’

 (Loss) Income

Balance - December 31, 2022

1 unchanged sentence

Balance - March 31, 2023

For the Three Months Ended March 31, 2022

Other comprehensive loss

Balance - June 30, 2023

For the Six Months Ended June 30, 2022

Comprehensive

9 unchanged sentences

Other comprehensive loss

( 49 )  

( 12,398 )  

4 unchanged sentences

$ 265,978  

Other comprehensive loss  

( 68 )  

Net loss  

( 3,104 )  

Balance - June 30, 2022  

43,763,243  

$ 282,443  

$ ( 19,702 )  

$ 262,806  

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

3 unchanged sentences

(Unaudited) 

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities

37 unchanged sentences

Cash and cash equivalents at end of period

Cash paid for interest

Cash paid for income taxes

Noncash investing and financing activities:

Cash dividends declared, not paid

Noncash capital expenditures

23 unchanged sentences

The amendments in this Proposed ASU, if adopted, would address the investor requests for more transparency of income tax information and would apply to all entities that are subject to income taxes.

The Company is in the process of evaluating this accounting standard.

The Company is in the process of evaluating this proposed accounting standard.

GOVERNMENT TAX CREDITS

10 unchanged sentences

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 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 through, among other things, an available employee retention tax credit. 

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

13 unchanged sentences

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

The contract assets at March 31, 2023 

The contract assets at June 30, 2023 

and December 31, 2022 

1 unchanged sentence

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 was $ 0  for the three months ended March 31, 2023 

Increases to contract liabilities from cash received for a performance obligation of chemical segment plant expansions were $ 32  and $ 0  for the three months and $ 32  and $ 0  for the 

six months ended June 30, 2023 

and 2022, 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 $ 1,219  and $ 2,213  in the three months ended March 31, 2023 

Revenue recognized in the chemical segment from the contract liability reductions was $ 739  and $ 961 for the three months and $ 1,958  and $ 3,173 for the six months ended June 30, 2023 

and 2022, respectively.

2 unchanged sentences

Contract Assets and Liability Balances

March 31, 2023

June 30, 2023

December 31, 2022

12 unchanged sentences

Transaction price allocated to the remaining performance obligations:

At March 31, 2023, approximately $ 13,950  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 three  to four  years.

Approximately 25 % of this revenue is expected to be recognized over the next 12 months, and 75 % is expected to be recognized over the subsequent 36 months.

At June 30, 2023, approximately $ 13,244  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 three  to five  years.

Approximately 26 % of this revenue is expected to be recognized over the next 12 months, and 74 % is expected to be recognized over the subsequent 48  months.

These amounts are subject to change based upon changes in the estimated contract life and estimated quantities to be sold over the contract life.

5 unchanged sentences

Disaggregation of revenue - contractual and non-contractual:

Three Months Ended March 31,  

Three Months Ended June 30,

Six Months Ended June 30,

Contract revenue from customers with > 1-year arrangements

1 unchanged sentence

$ 6,148  

$ 20,027  

$ 16,290  

Contract revenue from customers with < 1-year arrangements

1 unchanged sentence

111,592  

139,351  

143,656  

Revenue from non-contractual arrangements

2 unchanged sentences

$ 117,796  

$ 159,489  

$ 160,057  

Timing of revenue :

Three Months Ended March 31,  

Three Months Ended June 30,

Six Months Ended June 30,

Bill-and-hold revenue

1 unchanged sentence

$ 7,971  

$ 21,355  

$ 17,247  

Non-bill-and-hold revenue

1 unchanged sentence

109,825  

138,134  

142,810  

Total revenue

1 unchanged sentence

$ 117,796  

As of March 31, 2023 and December 31, 2022, 

$ 3,651 and $ 4,473  of bill-and-hold revenue had not shipped, respectively. 

$ 159,489  

$ 160,057  

As of June 30, 2023 and December 31, 2022, 

$ 4,302  and $ 4,473  of bill-and-hold revenue had not shipped, respectively. 

The carrying values of inventory were as follows as of:

March 31, 2023

June 30, 2023

December 31, 2022

13 unchanged sentences

$ 26,761  

No liquidation occurred in the three months ended March 31, 2023 

No liquidation of last in first out ("LIFO") layers occurred in the six months ended June 30, 2023 

Notes to Consolidated Financial Statements of FutureFuel Corp.

10 unchanged sentences

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

2022, respectively.

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 $ 4,389  and $ 12,695 (realized gains of $ 6,032 and $ 9,437 ) for the three and six  months ended June 30, 2023, respectively, and a loss of $ 17,476 and $ 26,605 (realized losses of $ 18,327 and $ 28,992 ) for the three and six months ended June 30, 2022, respectively.

The volumes and carrying values of FutureFuel’s derivative instruments were as follows at: 

Asset (Liability)

March 31, 2023

June 30, 2023

December 31, 2022

Quantity 

Contract Quantity 

Regulated fixed price future commitments, included in other current assets (in thousand barrels)

The margin account maintained with a broker to collateralize these derivative instruments carried an account balance of ($ 2,329 ) and $ 2,088  at March 31, 2023 

$ 3,117  

The margin account maintained with a broker to collateralize these derivative instruments carried an account balance of ($ 1,066 ) and $ 2,088  at June 30, 2023 

and December 31, 2022, respectively, and was classified as other current assets in the consolidated balance sheets.

1 unchanged sentence

MARKETABLE SECURITIES

At March 31, 2023 

and December 31, 2022, FutureFuel had investments in certain marketable equity and trust preferred (debt) securities which had a fair market value of $ 37,681  and $ 37,126 , 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 $ 3,697  and $ 3,675  at March 31, 2023 

and December 31, 2022, respectively, with the unrealized gain of $ 21  and unrealized loss of $ 1 , net of taxes, as a component of stockholders' equity. 

In accordance with ASC 321, the change in the fair value of marketable equity securities (preferred and other equity instruments) for the three months ended March 31, 2023 

and 2022, was reported as a component of net income as a gain of $ 533  and a loss of $ 4,100 , respectively. 

The aggregate fair value of debt securities with unrealized losses totaled $ 1,676 and $ 2,627  at March 31, 2023 

December 31, 2022, respectively.

The Company determined an allowance for credit losses for these debt securities was not necessary as of March 31, 2023.

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

There were no sales of debt securities in the three months ended March 31, 2023 

The debt securities held at March 31, 2023, had a contractual maturity of greater than ten years.

During the three months ended 

June 30, 2023, 

FutureFuel exited its position in marketable equity and trust preferred (debt) securities.

The sale of these securities was recorded as a component of net income with gains of $ 42 and $ 575 in the three and six months ended June 30, 2023, respectively. 

At December 31, 2022, FutureFuel had investments in certain marketable equity and trust preferred (debt) securities which had a fair market value of $ 37,126 . 

These investments were classified as current assets in the consolidated balance sheet. 

The trust preferred securities held at December 31, 2022 were designated as being available-for-sale. 

Accordingly, these securities were recorded at fair value of $ 3,675 .

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  was reported as a component of net income as a loss of $ 3,239 .

The change in the fair value of marketable equity securities (preferred and other equity instruments) for the six months ended June 30, 

2022  was a loss of $ 7,339 .

The aggregate fair value of debt securities with unrealized losses totaled $ 2,627  at 

December 31, 2022.

Sales of debt securities were $ 0  in the six months ended June 30, 

Notes to Consolidated Financial Statements of FutureFuel Corp.

10 unchanged sentences

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

The following tables provide information by level for assets and liabilities that are measured at fair value, on a recurring basis, at March 31, 2023 

The following tables provide information by level for assets and liabilities that are measured at fair value, on a recurring basis, at June 30, 2023 

and December 31, 2022. 

3 unchanged sentences

Inputs Considered as:

March 31, 2023

June 30, 2023

Derivative instruments

Preferred stock and other equity instruments

Trust preferred stock 

$ 3,117  

Asset (Liability)

4 unchanged sentences

Derivative instruments

$ ( 142 )  

Preferred stock and other equity instruments

Trust preferred stock 

$ 33,450  

Trust preferred stock

$ 3,676  

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

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

March 31, 2023

June 30, 2023

December 31, 2022

38 unchanged sentences

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

There were no borrowings under the Credit Agreement at March 31, 2023 

There were no borrowings under the Credit Agreement at June 30, 2023 

or December 31, 2022.

1 unchanged sentence

The following table summarizes the income tax provision.  

Three Months Ended March 31,  

Three Months Ended June 30,

Six Months Ended June 30,

Income tax provision (benefit)

Effective tax rate

The Company’s effective tax rate for the three months ended March 31, 2023 

reflects management’s assessment that none of the tax benefits anticipated to be generated in 2023 are realizable. 

Accordingly, valuation allowances have been recorded such that net deferred tax assets both generated in 2023 and anticipated at year-end are $ 0 . 

The net deferred tax asset at December 31, 2022 was also $ 0 .

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

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

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

During the first quarter of 2023, based on all available evidence, the Company determined that its assets for net operating loss, capital loss, and tax credit carryforwards as well as its other deferred tax assets are more likely than not realizable only to the extent of its deferred liabilities. 

Accordingly, its net deferred tax asset after application of valuation allowance at March 31, 2023 is $ 0 .

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

The effective tax rate for the three months ended March 31, 2023 and March 31, 2022 

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 benefits in 2023, realizability concerns have negated their impacts on the effective rate.

The Company’s effective tax rates for the three and six months ended June 30, 2023 decreased compared to the three and six months ended June 30, 2022 primarily due to changes in the assessment of realizability of deferred tax assets. 

In the three and six month periods in 2023, the income tax provision reflects only small amounts of current state taxes. 

No deferred tax benefits have been recognized, reflecting management’s determination that none of the net deferred tax assets generated on its 2023 tax losses are more likely than not to be realized. 

In the three and six month periods in 2022, tax benefits on tax losses generated were recognized, but limited by the assessment that the net deferred tax assets generated would more likely than not be only partially realized.

Notes to Consolidated Financial Statements of FutureFuel Corp.

1 unchanged sentence

EARNINGS PER SHARE

In the three months ended March 31, 2023 

In the three and six months ended June 30, 2023 

and 2022, FutureFuel used the treasury method in computing earnings per share.

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

Three Months Ended March 31,

Net income (loss)

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

Weighted average shares outstanding –

2 unchanged sentences

Weighted average shares outstanding –

Basic earnings (loss) per share

Diluted earnings (loss) per share

For the three months ended March 31, 2023 

and 2022, 40,707  and 24,000 options to purchase FutureFuel’s common stock were excluded in the computation of diluted earnings per share as all were anti-dilutive. 

Basic (loss) earnings per share

Diluted (loss) earnings per share

For the three and six months ended June 30, 2023, 22,000 and 42,354  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, 2022, 12,000 and 24,000 options were excluded, respectively.

RELATED PARTY TRANSACTIONS

2 unchanged sentences

Related party revenues are the result of sales of biodiesel, petrodiesel, blends, other petroleum products, and other similar or related products to these related parties.

Related party cost of goods sold and distribution are the result of sales of biodiesel, petrodiesel, blends, and other petroleum products to these related parties along with the associated expense from storage and terminalling services provided by these related parties.

Related party cost of goods sold and distribution are the result of sales and purchases of biodiesel, petrodiesel, blends, and other petroleum products with these related parties along with the associated expense from storage and terminalling services provided by these related parties.

During 2021, a related party managed natural gas purchases for FutureFuel, initially paid for the natural gas, and subsequently invoiced FutureFuel for the same plus a nominal fee for such services. 

The natural gas matter as discussed in Note 14, Legal Matters, is in reference to the natural gas supplier, not the related party.

As of November 1, 2021, FutureFuel began managing all of its natural gas purchases.

Notes to Consolidated Financial Statements of FutureFuel Corp.

19 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.

As of June 30, 2023, FutureFuel held 11.8 million of RINs in inventory with a fair market value of $ 19,461  and no cost, which were traded in July.

Comparatively, at June 30, 2022, FutureFuel held 2.8 million of RINs in inventory with a fair market value of $ 4,943  

Summary of business by segment

Three Months Ended March 31,  

Three Months Ended June 30,

Six Months Ended June 30,

Custom chemicals

$ 16,620  

$ 15,715  

Performance chemicals

Chemicals revenue

21,881  

21,561  

Biofuels revenue

52,300  

20,700  

Chemical revenue

Biofuel revenue

Total Revenue

$ 74,181  

$ 42,261  

Segment gross profit (loss)

$ 8,623  

$ 5,418  

13,000  

Segment gross profit (loss)

Total gross profit (loss)

$ 21,623  

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

4 unchanged sentences

As a result of the ext raordinary increase in natural gas prices, the Attorney General of Arkansas launched a civil investigative demand against several natural gas suppliers in 2021.

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

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

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

The Company continues to dispute the February 2021 natural gas bill, and payment thereof is pending further investigation.

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

16 unchanged sentences

We do not assign cost of goods sold to the generation of RINs as the physical fuel generates the full cost.

As of March 31, 2023, we held 1.5 million D4 RINs with a market value of $2,357.   

As of June 30, 2023, we held 11.8 million D4 RINs with a 

fair market value of $19,461, all of which were sold in July.

Comparatively, as of June 30, 2022, we held 2.8 million RINs with a fair market value of $4,943. 

Summary of Financial Results

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

Three Months Ended March 31,

Three Months Ended June 30,

Loss from operations

Loss per common share:

Adjusted EBITDA*

Six Months Ended June 30,

Income (loss) from operations

Net income (loss)

Earnings per common share:

Earnings (loss) per common share:

Adjusted EBITDA*

* Adjusted EBITDA restated for the three and six months of 2022 consistent with 2023 reporting to exclude cash (realized) gains and losses on derivative instruments.

We use adjusted EBITDA as a key operating metric to measure both performance and liquidity.

2 unchanged sentences

Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of results as reported under GAAP.

We define adjusted EBITDA as net income before interest, income taxes, depreciation, and amortization expenses, excluding, when applicable, non-cash stock-based compensation expenses, public offering expenses, acquisition-related transaction costs, purchase accounting adjustments, losses on disposal of property and equipment, gains or losses on derivative instruments, and other non-operating income or expenses.

We define adjusted EBITDA as net income before interest, income taxes, depreciation, and amortization expenses, excluding, when applicable, non-cash stock-based compensation expenses, public offering expenses, acquisition-related transaction costs, purchase accounting adjustments, losses on disposal of property and equipment, non-cash gains or losses on derivative instruments, and other non-operating income or expenses.

Information relating to adjusted EBITDA is provided so that investors have the same data that we employ in assessing the overall operation and liquidity of our business.

4 unchanged sentences

In particular, our management believes that adjusted EBITDA permits a comparative assessment of our operating performance and liquidity, relative to a performance and liquidity based on GAAP results.

This measure isolates the effects of certain items, including depreciation and amortization (which may vary among our operating segments without any correlation to their underlying operating performance), non-cash stock-based compensation expense (which is a non-cash expense that varies widely among similar companies), and gains and losses on derivative instruments (which can cause net income to appear volatile from period to period relative to the sale of the underlying physical product).

This measure isolates the effects of certain items, including depreciation and amortization (which may vary among our operating segments without any correlation to their underlying operating performance), non-cash stock-based compensation expense (which is a non-cash expense that varies widely among similar companies), and non-cash gains and losses on derivative instruments (which can cause net income to appear volatile from period to period relative to the sale of the underlying physical product).

We utilize commodity derivative instruments primarily to protect our operations from downward movements in commodity prices, and to provide greater certainty of cash flows associated with sales of our commodities.

1 unchanged sentence

Thus, our results in any given period can be impacted, and sometimes significantly, by changes in market prices relative to our contract price along with the timing of the valuation change in the derivative instruments relative to the sale of biofuel.

We include this item as an adjustment as we believe it provides a relevant indicator of the underlying performance of our business in a given period.

Additionally, we invest in marketable securities of certain debt securities (trust preferred stock) and in preferred stock and other equity instruments.

The realized and unrealized gains and losses on these marketable securities can fluctuate significantly from period to period.

We include this item as an adjustment as we believe it provides a relevant indicator of the underlying performance of our business in a given period.

We include the mark-to-market or non-cash portion of this item as an adjustment as we believe it provides a relevant indicator of the underlying performance of our business in a given period.

Additionally, we held marketable securities of certain debt securities (trust preferred stock) and in preferred stock and other equity instruments during the six months ended June 30, 2023, but sold all investments during the three months ended June 30, 2023.

The realized and unrealized gains and losses on these marketable securities fluctuated from period to period.

We included this item as an adjustment as we believed it provided a relevant indicator of the underlying performance of our business in a given period.

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

Three Months Ended March 31,

Net income (loss)

Three Months Ended June 30,

Six Months Ended June 30,

Net (loss) income

Interest and dividend income

1 unchanged sentence

Loss on disposal of property and equipment

(Gain) loss on derivative instruments

Unrealized loss (gain) on derivative instruments

(Gain) loss on marketable securities

2 unchanged sentences

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

Three Months Ended March 31,

Six Months Ended June 30,

Net cash used in operating activities

2 unchanged sentences

Income tax provision (benefit)

(Gain) loss on derivative instruments

Change in fair value of derivative instruments

Change in operating assets and liabilities, net

Adjusted EBITDA*

* Adjusted EBITDA restated for the three and six months of 2022 consistent with 2023 reporting to exclude cash (realized) gains and losses on derivative instruments.

Results of Operations  

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Volume/product mix effect

Gross profit (loss)

Gross (loss) profit

Operating expenses

1 unchanged sentence

Income tax provision (benefit)

Net income (loss)

Consolidated revenue in the three months ended March 31, 2023 increased 75.5% or $31,920 compared to the three months ended March 31, 2022.

This increase resulted from increased sales volume and price in the biofuels segment and to a lesser extent, from increased sales volume in the chemical segment which was partially offset by reduced sales prices in the chemical segment from product mix.

Gross profit in the three months ended March 31, 2023 was $21,623 as compared to a gross loss of $7,155 in the three months ended March 31, 2022.

This increase primarily resulted from i) the change in the activity in derivative instruments with a gain of $8,307 in the three months ended March 31, 2023 and a loss of $9,129 in the same period of the prior year (these include realized gains and losses and a mark to market assessment against inventories yet to be sold -see note 5 of our consolidated financial statements). Affordable feedstocks were acquired and converted to biodiesel which will be sold mostly in the three months ended June 30 and September 30, 2023;

and ii) the change in the adjustment in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting. 

This adjustment increased gross profit $3,783 in the three months ended March 31, 2023 as compared to $481 in the prior year quarter.

Net (loss) income

Consolidated revenue in the three and six months ended June 30, 2023 decreased $32,488 and $568 compared to the three and six months ended June 30, 2022.

These decreases resulted, in part, from the timing of separated RINs in our biofuel segment held in inventory at June 30, 2023 with a fair market value of $19,461 which were sold in July.

(See Critical Accounting Estimates.) In addition, in the three months ended June 30, 2023, biofuel segment sales volume decreased 11% or $11,057 (and inventory increased) on forward sales to the second half of 2023 on stronger margins.

In the six months ended June 30, 2023, biofuel segment sales volumes increased 4.9% or $5,901.

As a result of the separated RINs mentioned above, and held in inventory at no cost, a gross loss of $8,592 resulted in the three months ended June 30, 2023 (a reduction of $9,569 from the comparative prior year period). Partially offsetting this decrease was the change in the adjustment in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting. This adjustment decreased gross profit $288 and $5,307 in the three months ended June 30, 2023 and 2022, respectively. In addition, in the prior three-month comparison period, derivative losses resulted from unprecedented volatility in the heating oil futures market for which we modified our derivative strategy to help mitigate reoccurrence. Margins also improved in our chemical segment to 34% from 23% in the prior year period on new product trials and product mix.

Gross profit for the six months ended June 30, 2023 was $13,031 as compared to a gross loss of $6,178 in the six months ended June 30, 2022. 

This increase resulted from (i) the change in our realized derivative gains of $9,437 in the current six-month period as compared to realized losses of $28,992 in the prior six-month period given unprecedented market volatility as described above, and (ii) the change in the adjustment in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting. 

This adjustment increased gross profit $3,495 in the current six-month period as compared to a decrease of gross profit of $4,825 in the prior six-month period. 

Gross profit did not include $19,461 from separated RINs generated in the six months ended June 30, 2023 and sold in July 2023. 

Lastly, for the six-month comparative period, chemical margins improved to 37% from 24% in the prior six-month period on new products and product mix.

Operating  e xpenses

Operating expenses increased $920 in the three months ended March 31, 2023, as compared to the three-months ended March 31, 2022.

This slight increase was primarily from increased compensation and legal expense.

Operating expenses increased $499 and $1,419 in the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022.

This increase was primarily from increased compensation and legal expense.

Other income (expense)

Other income was $2,837 in the three months ended March 31, 2023, as compared to the same period of the prior year other expense of $3,495 which was primarily from:

i) the change in unrealized gains on marketable securities in the current period as compared to unrealized losses in the same period of the prior year and ii) an increase in interest income.

Other income (expense) increased income $4,266 and $10,598 in the three and six months ended June 30, 2023, as compared to the same periods of 2022. In the current three- and six-month period, marketable securities were sold with realized gains of $42 and $575 as compared to the comparative prior periods with unrealized losses on marketable securities of $3,239 and $7,366, respectively. 

In addition, interest and dividend income increased $985 and $2,657 in the current three- and six-month periods.

Income tax provision (benefit)

The Company’s effective tax rate for the three months ended March 31, 2023 was unfavorably impacted by the assessment that net deferred tax assets would not more likely than not be realizable in full. 

The effective tax rate for the three months ended March 31, 2023 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 2023, realizability concerns have negated their impacts on the effective rate.

Additionally, the net income tax benefit for the three months ended March 31, 2022 was unfavorably impacted by the recognition of tax expense for valuation allowances against various tax attribute carryforwards existing at January 1, 2022.

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

In the three- and six-month periods in 2023, the income tax provision reflects only small amounts of current state taxes. 

In the three- and six-month periods in 2022, tax benefits on tax losses generated were recognized, but limited by the assessment that the net deferred tax assets generated would more likely than not be only partially realized.

Chemical Segment

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Volume/product mix effect

Chemical revenue in the three months ended March 31, 2023 increased 1.5% or $320 compared to the three months ended March 31, 2022.

Revenue for our custom chemicals (unique chemicals produced under contract for specific customers) for the three months ended March 31, 2023 totaled $16,620, an increase of $905 from the same period in 2022.

Custom chemicals used in the manufacture of industrial antioxidants experienced stronger volumes and higher selling prices. 

In addition, new business from other custom products contributed $1,129, an increase of $893 from the prior year.

Performance chemicals (composed of multi-customer products which are sold to the open market based on specification) revenue was $5,261, a decrease of $585 from the three months ended March 31, 2022.

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

Gross profit for the chemical segment for the three months ended March 31, 2023, increased $3,205 when compared to the same period of 2022 primarily from favorable product mix as described above. 

Biofuels Segment

Three Months Ended March 31,

Chemical revenue in the three and six months ended June 30, 2023 increased 3.1% or $562 and 2.2% or $882 compared to the three and six months ended June 30, 2022.

Revenue for our custom chemicals (unique chemicals produced under contract for specific customers) for the three and six months ended June 30, 2023 totaled $15,576 and $32,196, an increase of $3,310 and $4,215 from the same periods in 2022.

Custom chemicals used in the gas and oil and antioxidant industries experienced stronger volumes and higher selling prices. In addition, new business from other custom products increased $1,622 and $2,155, in the three and six months, respectively, from the comparative prior year periods. Performance chemicals (composed of multi-customer products which are sold to the open market based on specification) revenue was $3,180 and $8,441, a decrease of $2,748 and $3,333 from the three and six months ended June 30, 2022, respectively.

This decrease was mostly from lower sales of glycerin as markets softened.  

Gross profit for the chemical segment for the three and six months ended June 30, 2023, increased $2,220 and $5,425 when compared to the same period of 2022 primarily from improved margins in the three and six months of the current year (34% and 37%) as compared to the prior year (23% and 24%) on stronger volumes as noted above and on favorable product mix from new products. 

Biofuel  

Three Months Ended June 30,

Six Months Ended June 30,

Volume/product mix effect

Gross profit (loss)

Biofuels revenue in the three months ended March 31, 2023 increased 152.6% or $31,600 as compared to the same period of 2022.

The biodiesel and biodiesel blend volumes increased as compared to the prior year, primarily from the absence of economical feedstock in the prior year period.

In addition, selling prices increased with the overall improvement in the fuel industry and from improved RIN prices. 

Gross (loss) profit

Biofuels revenue in the three and six months ended June 30, 2023 decreased $33,050 and $1,450 as compared to the same periods of 2022.

These decreases resulted, in part, from the timing of separated RINs held in inventory at June 30, 2023, with a fair market value of $19,461 which were sold in July.

(See Critical Accounting Estimates.) In addition, in the three months ended June 30, 2023, biofuel segment sales volume decreased 11% or $11,057 (and inventory increased) on forward sales to the second half of 2023 on stronger margins. In the six months ended June 30, 2023, biofuel segment sales volumes increased 4.9% or $5,901. 

A significant portion of our biodiesel sold was to three major refiners/blenders in the three months ended March 31, 2023 and to two major refiners in the first quarter of 2022. 

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.

A significant portion of our biodiesel sold was to two major refiners/blenders in the three and six months ended June 30, 2023 and 2022. No assurances can be given that we will continue to sell to such major refiners, or, if we do sell, the volume we will sell or the profit margin we will realize.

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

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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 profit was $13,000 in the three months ended March 31, 2023, an increase of $25,573 from the gross loss of $12,573 in the same period of 2022. 

This increased profit was from:

i) the change in the activity in derivative instruments with a gain of $8,307 in the three months ended March 31, 2023, as compared to a loss of $9,129 in the three months ended March 31, 2022 (these include realized gains and losses and a mark to market assessment against inventories yet to be sold - see note 5 of our consolidated financial statements), ii) an increase in biodiesel margins, and iii) the change in the adjustment in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting. 

This adjustment increased gross profit $2,614 in the three months ended March 31, 2023 as compared to $967 in the prior year quarter.  

As a result of the separated RINs mentioned above, and held in inventory at no cost, biofuels gross loss was $15,008 and $2,008, in the three and six months ended June 30, 2023;

an increased loss of $11,789 in the three-month comparative period, and a decreased loss of $13,784 in the six-month comparative period of 2022.

Partially offsetting this increased loss in the three-month comparative period was the change in the activity in derivative instruments with a realized gain of $6,032 in the current three-month period, as compared to a realized loss of $18,327 in the prior year comparative period and the change in the adjustment in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting. This adjustment decreased gross profit $251 in the current three-month period as compared to a decrease of $4,640 in the three-month period of 2022. 

Gross losses in the six months ended June 30, 2023 were lower as compared to the same period of the prior year from:

(i) the change in the activity in derivative instruments with a realized gain of $9,437 in the six months ended June 30, 2023, as compared to a realized loss of $28,992 in the six months ended June 30, 2022, (ii) the change in the activity in derivative instruments with unrealized gains of $3,259 in the six months ended June 30, 2023 as compared to an unrealized gain of $2,388 in the prior year six month period, and (iii) the change in the adjustment in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting. This adjustment increased gross profit $2,624 in the six months ended June 30, 2023 as compared to a decrease in gross profit of $3,652 in the same prior year period.

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

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Asset (Liability)

March 31, 2023

June 30, 2023

December 31, 2022

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

Bill-and-hold transactions for the three months ended March 31, 2023 and 2022 were related to custom chemicals customers whereby revenue was recognized in accordance with contractual agreements based upon product being produced and ready for use by the customer.

Bill-and-hold transactions for the three and six months ended June 30, 2023 and 2022 were related to custom chemicals customers whereby revenue was recognized in accordance with contractual agreements based upon product being produced and ready for use by the customer.

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

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

Revenues under bill-and-hold arrangements were $10,590 and $9,276 for the three months ended March 31, 2023 and 2022, respectively.

Revenues under bill-and-hold arrangements were $10,765 and $21,355 for the three and six months ended June 30, 2023, respectively.

Liquidity and Capital Resources

Our net cash from operating activities, investing activities, and financing activities for the three months ended March 31, 2023 and 2022 are set forth in the following table.

Three Months Ended March 31,

Net cash used in operating activities

Our net cash from operating activities, investing activities, and financing activities for the six months ended June 30, 2023 and 2022 are set forth in the following table.

Six Months Ended June 30,

Net cash used in operating activities

Net cash provided by (used in) investing activities

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Operating Activities

Cash used in operating activities was $29,810 in the three months ended March 31, 2023 as compared to $10,576 in the same period of 2022.

This decrease in cash was primarily attributable to the change in inventory demonstrating a cash outflow of $31,773, the change in accounts receivable, including accounts receivable - related parties, demonstrating a cash outflow of $11,049, primarily from the timing of customer payments, and the change in fair value of equity securities of $4,633. 

Cash used in operating activities was $34,357 in the six months ended June 30, 2023 as compared to $1,910 in the same period of 2022.

This decrease in cash was primarily attributable to the change in inventory demonstrating a cash outflow of $35,937, the change in accounts payable, including accounts payable - related parties, demonstrating a cash outflow of $25,742, primarily from the timing of vendor payments, and the change in fair value of equity securities of $10,456. 

Partially offsetting these cash outflows was the change in net income of $26,724.

Investing Activities

Cash provided by investing activities was $1,868 in the three months ended March 31, 2023 as compared to cash used in investing activities of $3,335 in the three months ended March 31, 2022. 

Of the $5,203 change, $6,991 was the result of a decrease in the collateralization of derivate instruments. 

Offsetting this increase in cash was an increase in capital expenditures of $1,482 and a net decrease in the sales of marketable securities of $250. 

Cash provided by investing activities was $30,672 in the six months ended June 30, 2023 as compared to cash used in investing activities of $1,206 in the six months ended June 30, 2022.

Of the $31,878 change, $37,451 was the result of increased proceeds from the sale of marketable securities. Offsetting this increase in cash was an increase in the collateralization of derivative instruments of $3,537 and an increase of capital expenditures of $1,980. 

Financing Activities

Cash used in financing activities was $2,640 and $2,626 in the three months ended March 31, 2023 and 2022, respectively, primarily for payments of dividends on our common stock. 

Cash used in financing activities was $5,265 and $5,251 in the six months ended June 30, 2023 and 2022, respectively, primarily for payments of dividends on our common stock. 

Credit Facility

We have a credit agreement with a syndicated group of commercial banks for $100,000 as amended on March 30, 2020.

We have a credit agreement, as amended on March 30, 2020, with a syndicated group of commercial banks for $100,000.

The loan is a revolving facility, the proceeds of which may be used for our working capital, capital expenditures, and general corporate purposes.

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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 months ended March 31, 2023 and 2022, we paid a regular quarterly cash dividend in the amount of $0.06 per share on our common stock.

The regular cash dividend amounted to $2,626 in the three months ended March 31, 2023 and $2,626 in the three months ended March 31, 2022.

The declaration of these regular quarterly cash dividends was made in the three months ended December 31, 2022 and March 31, 2022, respectively.

In the first two quarters of 2023 and 2022, 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 quarters of 2023 and $2,625 in each of the quarters of 2022.

The declaration of these regular quarterly cash dividends was made in the three months ended December 31, 2022 and March 31, 2022, respectively.

Capital Management

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

In the periods ended March 31, 2023 and December 31, 2022, 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.”

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

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

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

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

We also held equity securities with readily available market values.

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 $37,681 and $37,126 at March 31, 2023 and December 31, 2022, respectively.

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

We sold all marketable securities in the three months ended June 30, 2023.

The fair value of the debt securities and equity instruments totaled $0 and $37,126 at June 30, 2023 and December 31, 2022, respectively.

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

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

This activity was captured in our consolidated balance sheets at March 31, 2023 and December 31, 2022.

This activity was captured in our consolidated balance sheets at June 30, 2023 and December 31, 2022.

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

Derivatives and Hedging .

These hedging transactions are recognized in earnings and were not recorded in our consolidated balance sheets at March 31, 2023 or December 31, 2022 because they do not meet the definition of a hedge instrument as defined under GAAP.

These hedging transactions are recognized in earnings and were not recorded in our consolidated balance sheets at June 30, 2023 or December 31, 2022 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