What changed in this filing

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Item 1. Financial Statements

2023-11-09 compared with 2023-08-09 · 308 added, 203 removed, 611 unchanged (46% of the section changed)

3 unchanged sentences

(Dollars in thousands)

June 30, 2023  

December 31, 2022  

September 30, 2023

December 31, 2022

Cash and cash equivalents

2 unchanged sentences

Accounts receivable, inclusive of the blenders’

tax credit of $ 9,807  and $ 8,970 , and net of allowances for bad debt of $ 80  and $ 48 , respectively

tax credit of $ 13,084 and $ 8,970 , and net of allowances for bad debt of $ 67 and $ 48 , respectively

29,493  

49 unchanged sentences

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

Common stock, $ 0.0001 par value, 75,000,000 shares authorized, 43,763,243 and 43,763,243 issued and outstanding as of June 30, 2023 and December 31, 2022

Accumulated other comprehensive loss

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

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

$ 116,752  

11 unchanged sentences

related parties

( 728 )  

( 700 )  

Distribution –

related parties

Gross (loss) profit

19,985  

16,901  

13,807  

Selling, general, and administrative expenses

4 unchanged sentences

Total operating expenses

(Loss) income from operations

(11,583 )  

Income from operations

16,890  

4 unchanged sentences

( 103 )  

Gain (loss) on marketable securities

(Loss) gain on marketable securities

( 590 )  

1 unchanged sentence

Other income (expense)

( 2,527 )  

(Loss) income before taxes

Income before taxes

17,477  

14,032  

Income tax provision

$ 2,776  

Income tax provision (benefit)

$ 15,780  

Net (loss) income

$ 13,998  

Earnings per common share

$ 0.06  

$ 0.36  

(Loss) earnings per common share

$ 0.32  

13 unchanged sentences

43,763,243  

Comprehensive (loss) income

Net (loss) income

$ ( 9,859 )  

Comprehensive income

$ 2,776  

$ 15,780  

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

$ 13,998  

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

( 71 )  

Income tax effect

Total other comprehensive (loss) income, net of tax

( 16 )  

Total other comprehensive (loss) income, net of tax

( 56 )  

Comprehensive (loss) income

Comprehensive income

$ 2,776  

5 unchanged sentences

(Dollars in thousands)

For the Six Months Ended June 30, 2023

For the Nine Months Ended September 30, 2023

Comprehensive

2 unchanged sentences

Balance - December 31, 2022

43,763,243  

$ ( 1 )  

$ 282,489  

$ 283,000  

Other comprehensive gain

21,081  

Balance - March 31, 2023

43,763,243  

$ 282,489  

$ 21,589  

$ 304,098  

Other comprehensive loss

( 16 )  

( 9,859 )  

Balance - June 30, 2023

For the Six Months Ended June 30, 2022

43,763,243  

$ 282,489  

$ 11,730  

$ 294,223  

Balance - September 30, 2023

43,763,243  

$ 282,489  

$ 14,506  

$ 296,999  

For the Nine Months Ended September 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  

2 unchanged sentences

$ 262,806  

Stock based compensation

Other comprehensive loss

( 56 )  

15,780  

Balance - September 30, 2022

43,763,243  

$ 282,489  

$ ( 3,922 )  

$ 278,576  

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

3 unchanged sentences

(Unaudited) 

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities

Net income (loss)

$ 13,998  

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

2 unchanged sentences

Change in fair value of equity securities

( 3,117 )  

Change in fair value of derivative instruments

Loss on the sale of investments

Stock based compensation

Loss on disposal of property and equipment

2 unchanged sentences

Accounts receivable

( 3,295 )  

Accounts receivable –

related parties

(149 )  

Income tax receivable

1 unchanged sentence

Prepaid expenses - related parties

( 5,019 )  

Accounts payable

( 14,910 )  

Accounts payable –

related parties

( 800 )  

Accrued expenses and other current liabilities

( 404 )  

Accrued expenses and other current liabilities –

1 unchanged sentence

Deferred revenue

( 2,030 )  

Other noncurrent liabilities

Net cash used in operating activities

Net cash provided by operating activities

44,127  

Cash flows from investing activities

1 unchanged sentence

Proceeds from the sale of marketable securities

37,701  

Proceeds from the sale of property and equipment

Capital expenditures

( 4,994 )  

Net cash provided by (used in) investing activities

35,698  

Cash flows from financing activities

Payment of dividends

( 7,877 )  

Deferred financing costs

( 14 )  

Net cash used in financing activities

( 7,891 )  

Net change in cash and cash equivalents

30,283  

33,747  

Cash and cash equivalents at beginning of period

175,640  

137,521  

Cash and cash equivalents at end of period

$ 205,923  

$ 171,268  

Cash paid for income taxes

26 unchanged sentences

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

In July 2023, the FASB issued Proposed Accounting Standards Update (ASU) No.

2023 - ED500 Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220 - 40 ):

Disaggregation of Income Statement Expenses, which aims to provide investors with more useful information about an entity’s expenses by improving disclosures on income statement expenses. 

The amendments in this Proposed ASU would require public business entities to disclose disaggregated information about specific categories underlying certain income statement expense line items.

The Company is evaluating this proposed accounting standard.

GOVERNMENT TAX CREDITS

15 unchanged sentences

(Dollars in thousands, except per share amounts)

 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.

8 unchanged sentences

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

The contract assets at June 30, 2023 

and December 31, 2022 

consist of unbilled revenue from one customer and are recorded as accounts receivable in the consolidated balance sheets.

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

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

six months ended June 30, 2023 

and 2022, respectively.

The contract assets at 

September 30, 2023 and 

December 31, 2022 consist of unbilled revenue from one customer and cash due from another customer and are recorded as accounts receivable in the consolidated balance sheets.

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

Increases to contract liabilities from cash received or due for a performance obligation of chemical segment plant expansions were $ 506  and $ 733  for the three months and $ 538  and $ 733  for the nine months ended September 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 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.

Revenue recognized in the chemical segment from the contract liability reductions was $ 444  and $ 2,037  for the three months and $ 2,402  and $ 5,211  for the nine months ended September 30, 2023 and 2022 , 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.

1 unchanged sentence

Contract Assets and Liability Balances

June 30, 2023

September 30, 2023

December 31, 2022

3 unchanged sentences

Contract assets, included in accounts receivable

$ 1,097  

Contract liabilities, included in deferred revenue - short-term

6 unchanged sentences

Transaction price allocated to the remaining performance obligations:

At June 30, 2023, approximately $ 13,244  of revenue is expected to be recognized from remaining performance obligations.

At September 30, 2023 , approximately $ 13,306  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.

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 45  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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Contract revenue from customers with > 1-year arrangements

15 unchanged sentences

Timing of revenue :

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Bill-and-hold revenue

13 unchanged sentences

$ 278,198  

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

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

As of September 30, 2023 and 

December 31, 2022 , $ 4,010  and $ 4,473  of bill-and-hold revenue had not shipped, respectively. 

The carrying values of inventory were as follows as of:

June 30, 2023

September 30, 2023

December 31, 2022

13 unchanged sentences

$ 26,761  

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

A LIFO liquidation of $151and  $ 2,124  occurred in the nine and twelve months ended September 30, 2023 and December 31, 2022, respectively.

The liquidation in 2023 related to the reduction of biodiesel inventory and the liquidation in 2022 related to the exit from pipeline business.

Notes to Consolidated Financial Statements of FutureFuel Corp.

8 unchanged sentences

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 2023  or 2022.

The Company had no derivative instruments that qualified under these rules as designated accounting hedges in 

2023 or 2022 .

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

Realized gains and losses on derivative instruments and changes in fair value of the derivative instruments are recorded in the consolidated statements of operations as a component of cost of goods sold and amounted to a 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.

Realized gains and losses on derivative instruments and changes in fair value of the derivative instruments are recorded in the consolidated statements of operations as a component of cost of goods sold and amounted to a loss of $ 14,068  and $ 1,373  (realized loss of $ 7,286  and gain of $ 2,150 ) for the three and nine months ended September 30, 2023 , respectively, and a gain of $ 4,688  and loss of $ 21,917  (realized gain of $ 4,023  and loss of $ 24,970 ) for the three and nine months ended September 30, 2022 , respectively.

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

Asset (Liability)

June 30, 2023

September 30, 2023

December 31, 2022

Contract Quantity

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

$ ( 3,665 )  

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.

The margin account maintained with a broker to collateralize these derivative instruments carried an account balance of $ 5,079  and $ 2,088  at September 30, 2023 and 

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

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

1 unchanged sentence

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. 

September 30, 2023 , FutureFuel held no  marketable equity and trust preferred (debt) securities.

The previous sale of these securities was recorded as a component of net income with a gain of $ 575 in the 

nine months ended September 30, 2023. 

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 . 

2 unchanged sentences

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 .

In accordance with ASC 321, the change in the fair value of marketable equity securities (preferred and other equity instruments) is reported as a component of net income.

The change in the fair value of marketable equity securities (preferred and other equity instruments) for the three and nine months ended September 30, 2022 was a loss of $ 602 and $ 7,940 , respectively.

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, 

Sales of debt securities were $ 0  in the nine months ended September 30, 2022 .

Notes to Consolidated Financial Statements of FutureFuel Corp.

10 unchanged sentences

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

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

and December 31, 2022. 

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

December 31, 2022 . 

Asset (Liability)

2 unchanged sentences

Inputs Considered as:

June 30, 2023

September 30, 2023

Derivative instruments

16 unchanged sentences

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

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

June 30, 2023

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

September 30, 2023

December 31, 2022

8 unchanged sentences

(Dollars in thousands, except per share amounts)

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.

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 thereto, 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”).

6 unchanged sentences

Pursuant to the First Amendment, the interest rate floats at the following margins over SOFR or base rate based upon our leverage ratio.

Adjusted SOFR Rate Loans and

Consolidated Leverage Ratio

Adjusted SOFR Rate Loans and

Letter of Credit Fee

3 unchanged sentences

0.00 %  

0.15 %  

1.25 %  

0.25 %  

0.15 %  

1.50 %  

1.00:1.0 And < 1.50:1.0

1.25 %  

0.25 %  

1.50:1.0 And < 2.00:1.0

1.50 %  

0.50 %  

2.00:1.0 And < 2.50:1.0

1.75 %  

3 unchanged sentences

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

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

or December 31, 2022.

There were no borrowings under the Credit Agreement at September 30, 2023  or December 31, 2022 .

INCOME TAX PROVISION

The following table summarizes the income tax provision.  

Three Months Ended June 30,

Six Months Ended June 30,

Income tax provision (benefit)

Three Months Ended September 30,

Nine Months Ended September 30,

Income tax provision

$ 1,697  

Effective tax 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.

The Company’s income tax provision for the three and nine months ended September 30, 2023  comprises only small amounts of current state taxes. 

No deferred tax benefits on ongoing tax losses 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. 

The three -month period in 2022 similarly reflected immaterial state taxes and miscellaneous items, while the nine -month period included the cumulative impact of valuation allowances recorded against certain existing deferred tax assets.

Notes to Consolidated Financial Statements of FutureFuel Corp.

1 unchanged sentence

EARNINGS PER SHARE

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

Three Months Ended June 30,

Six Months Ended June 30,

Net (loss) income

In the three and nine months ended September 30, 2023 and 2022 , FutureFuel used the treasury method in computing earnings per share.

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

Three Months Ended September 30,

Nine Months Ended September 30,

$ 2,776  

$ 15,780  

$ 13,998  

Weighted average shares outstanding –

43,763,243  

Effect of dilutive securities:

1 unchanged sentence

Weighted average shares outstanding –

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.

43,765,709  

43,763,243  

43,765,163  

43,763,243  

Basic earnings per share

$ 0.06  

$ 0.36  

$ 0.32  

$ 0.01  

Diluted earnings per share

$ 0.06  

$ 0.36  

$ 0.32  

$ 0.01  

For the three and nine months ended September 30, 2023 , 41,534  and 42,080  options to purchase FutureFuel’s common stock were excluded, respectively, in the computation of diluted earnings per share as all were anti-dilutive.

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

RELATED PARTY TRANSACTIONS

3 unchanged sentences

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.

During the three months ended September 30, 2023, a settlement was reached on the previously disclosed natural gas dispute. 

See Note 14 Legal Matters.

Notes to Consolidated Financial Statements of FutureFuel Corp.

8 unchanged sentences

(multi-customer specialty chemicals).

FutureFuel’s biofuels segment primarily manufactures and markets biodiesel.

FutureFuel’s biofuel segment primarily manufactures and markets biodiesel.

Biodiesel revenues are generated through the sale of biodiesel to customers through FutureFuel’s distribution network at the Batesville Plant, through distribution facilities available at leased oil storage facilities, and through a network of remotely located tanks.

Biofuels revenues also include the sale of biodiesel blends with petrodiesel;

Biofuel revenues also include the sale of biodiesel blends with petrodiesel;

petrodiesel with no biodiesel added;

internally generated, separated Renewable Identification Numbers (“RINs”);

biodiesel production byproducts;

and the purchase and sale of other petroleum products on common carrier pipelines. 

Biodiesel selling prices and profitability can at times fluctuate based on the timing of unsold, internally generated RINs.

and biodiesel production byproducts. Biodiesel selling prices and profitability can at times fluctuate based on the timing of unsold, internally generated RINs.

FutureFuel does not allocate production costs to internally generated RINs, and, from time to time, can enter into sales of biodiesel on a “RINs-free”

1 unchanged sentence

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  

As of September 30, 2023 , FutureFuel held 4.2  million of RINs in inventory with a fair market value of $ 6,971  and no cost.

Comparatively, at September 30, 2022 , FutureFuel held 8.1  million of RINs in inventory with a fair market value of $ 12,752  

Summary of business by segment

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Custom chemicals

$ 14,454  

$ 16,047  

$ 46,650  

$ 44,028  

Performance chemicals

Chemical revenue

Biofuel revenue

11,834  

17,233  

Chemical revenue

17,847  

21,506  

58,484  

61,261  

Biofuel revenue

98,905  

96,635  

217,757  

216,937  

Total Revenue

Segment gross profit (loss)

Total gross profit (loss)

$ 116,752  

$ 118,141  

$ 276,241  

$ 278,198  

Segment gross profit

$ 6,878  

$ 8,362  

$ 21,917  

$ 17,976  

( 3,008 )  

11,623  

( 5,016 )  

Total gross profit

$ 3,870  

$ 19,985  

$ 16,901  

$ 13,807  

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

3 unchanged sentences

While FutureFuel is unable to predict the outcomes of these matters, it does not believe, based upon currently available facts, 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.

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.

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

During the three months ended September 30, 2023, the parties to the previously disclosed natural gas dispute and the Company entered into a settlement agreement to resolve the matter completely .

Based on such settlement, the Company released $ 882 of the previously accrued expense.

Notes to Consolidated Financial Statements of FutureFuel Corp.

(Dollars in thousands, except per share amounts)

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

11 unchanged sentences

The custom product group is composed of specialty chemicals manufactured for a single customer whereas the performance product group is composed of chemicals manufactured for multiple customers.

The biofuels segment is composed of one product group.

The biofuel segment is composed of one product group.

Management believes that the diversity of each segment strengthens the company in the ability to utilize resources and is committed to growing each segment.

Within the United States Environmental Protection Agency (EPA) Renewable Fuel Standard (RFS), we generate 1.5 Renewable Identification Numbers (RINs) for each gallon of biodiesel sold in the United States with a classification of a D4 RIN.

RINs are used to monitor the level of renewable fuel traded in a given year in accordance with RFS 2 within the EPA moderated transaction system (EMTS). 

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

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. 

As of September 30, 2023, we held 4.2 million D4 and D6 RINs with a fair market value of $6,971.

Comparatively, as of September 30, 2022, we held 8.1 million RINs with a fair market value of $12,752. 

Summary of Financial Results

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

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)

Three Months Ended September 30,

Income from operations

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.

Nine Months Ended September 30,

Income from operations

Earnings per common share:

Adjusted EBITDA*

* Adjusted EBITDA restated for the three and nine 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.

14 unchanged sentences

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.

Additionally, we held marketable securities of certain debt securities (trust preferred stock) and in preferred stock and other equity instruments during the nine months ended September 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.

1 unchanged sentence

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

Three Months Ended June 30,

Six Months Ended June 30,

Net (loss) income

Three Months Ended September 30,

Nine Months Ended September 30,

Non-cash stock-based compensation

Interest and dividend income

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Loss on disposal of property and equipment

Unrealized loss (gain) on derivative instruments

(Gain) loss on marketable securities

Income tax provision (benefit)

Unrealized loss (gain) on derivative instruments

Loss (gain) on marketable securities

Income tax provision

Adjusted EBITDA*

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

Six Months Ended June 30,

Net cash used in operating activities

Nine Months Ended September 30,

Net cash provided by operating activities

Benefit for deferred income taxes

Interest and dividend income

Income tax provision (benefit)

Income tax provision

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.

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

Results of Operations  

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Volume/product mix effect

Gross (loss) profit

Operating expenses

Other income (expense)

Income tax provision (benefit)

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.

Income tax provision

Consolidated revenue in the three and nine months ended September 30, 2023 decreased $1,389 and $1,957 compared to the three and nine months ended September 30, 2022, respectively.

In the three- and nine-month periods ended September 30,2023, chemical segment sales volumes declined $3,763 and $2,294, respectively, on weakened glycerin markets and the timing of recognition of capital recovery. 

Partially improving chemical sales in both the three- and nine-month comparison periods was a favorable product mix and revenue from new custom chemical contracts. 

Biofuel segment net sales increased $2,270 and $820, respectively, in the three- and nine-month comparison periods on higher sales volumes mostly offset by lower average prices. 

D4 RIN prices dropped significantly during the quarter as renewable diesel volumes increased in the market.

Gross profit in the three months ended September 30, 2023 decreased $16,115 as compared to the same period of 2022, from:

(i) the spread in biofuel price and feedstock price narrowed (inclusive of the effect of the D4 RIN price decline);

(ii) the change in the activity in derivative instruments with a realized loss of $7,286 in the current three-month period as compared to a realized gain of $4,023 in the same three-months of the prior year;

(iii) the change in the mark-to-market derivative position which was an unrealized loss of $6,782 as compared to an unrealized gain of $665 in the three months ended September 30, 2023 and 2022, respectively;

(iv) the reduction from the timing of recognition of capital recovery; and (v) the change in the adjustment in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting. The adjustment in item (v) increased gross profit $2,528 in the three months ended September 30, 2023 as compared to $6,133 in 2022. These contrasting results in items (i) and (ii) reflect the impact of price movements in the biodiesel market during the course of each year compared to when we committed to our feedstock acquisition. 

In 2022, prices rose sharply as a consequence of the conflict in Ukraine and we recorded mark-to-market losses on the derivative instruments we use to hedge our biodiesel margins.

The losses were then offset by significant gains in physical sales in the period. 

In 2023, biodiesel prices fell in the first half of the year and then rose in the third quarter. 

This generated derivative gains for the first half of the year and now mark-to-market losses in the third quarter against committed sales in the fourth quarter.

Gross profit for the nine months ended September 30, 2023 was $16,901 as compared to $13,807 in the nine months ended September 30, 2022. 

This increase resulted from (i) the change in our realized derivative gains of $2,150 in the current nine-month period as compared to realized losses of $24,970 in the prior nine-month period given the explanation noted in the three-month comparative period, 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 $6,023 in the current nine-month period as compared to $1,308 in the prior nine-month period.

Operating  e xpenses

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.

Operating expenses increased $478 and $1,897 in the three and nine months ended September 30, 2023, as compared to the three and nine months ended September 30, 2022.

This increase was primarily from increased compensation and legal expense.

Other income (expense)

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.

Other income (expense) increased income $1,904 and $12,502 in the three and nine months ended September 30, 2023, respectively, as compared to the same periods of 2022. In the current three-month period interest income was $2,527 as compared to dividend and interest income of $1,210 and a loss of $590 on marketable securities in the same period of 2022. In the current nine-month period, marketable securities were sold with realized gains of $575 and interest income was $6,595 as compared to unrealized losses on marketable securities of $7,366 and interest and dividends income of $2,621, in the same period of 2022.

Income tax provision (benefit)

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.

The Company’s income tax provision for the three and nine months ended September 30, 2023 comprises only small amounts of current state taxes.

No deferred tax benefits on ongoing tax losses 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. 

The three-month period in 2022 similarly reflected immaterial state taxes and miscellaneous items, while the nine-month period included the cumulative impact of valuation allowances recorded against certain existing deferred tax assets.

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.

Chemical Segment

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Volume/product mix effect

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

Chemical revenue in the three and nine months ended September 30, 2023 decreased 17.0% or $3,659 and 4.5% or $2,777, respectively, compared to the same comparative periods of 2022.

Revenue for our custom chemicals (unique chemicals produced under contract for specific customers) for the three and nine months ended September 30, 2023 totaled $14,454 and $46,650, a decrease of $1,593 and an increase of $2,622 from the same periods in 2022, respectively.

Custom chemicals sales revenue was reduced in the current reporting periods as compared to the prior year periods from the timing of recognition of upfront capital reimbursements from customers.

The reduction in sales revenue from the recognition of deferred revenue was $1,978 and $3,174 in the three and nine months ended September 30, 2023 as compared to the same periods of 2022.

(See Note 3 to our consolidated financial statements).

Also reducing sales revenue were lower volumes of chemicals sold into the energy market.

Partially offsetting these reductions were sales from two new contracts in the agricultural market. Performance chemicals (composed of multi-customer products which are sold to the open market based on specification) revenue was $3,393 and $11,834, a decrease of $2,066 and $5,399 from the three and nine months ended September 30, 2022, respectively.

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

Gross profit for the chemical segment for the three months ended September 30, 2023, decreased $1,484 when compared to the same period of 2022.

This decrease was primarily from:

t he timing of recognition of upfront capital payments as noted above;

(ii) reduced glycerin sales;

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 $234 as compared to $710 in the same period of 2022.

Gross profit for the chemical segment for the nine months ended September 30, 2023 increased $3,941 when compared to the same period of 2022 from: 

(i) product mix, 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 $1,105 in the nine months ended September 30, 2023 as compared to a decrease in gross profit of $463 in the same comparative period of 2022. 

Partially reducing this increase in gross profit was the timing of recognition of upfront capital payments as noted above.

Biofuel  

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Volume/product mix effect

Gross (loss) profit

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

Gross (loss) profit

Biofuels revenue in the three and nine months ended September 30, 2023 increased $2,270 and $820, respectively, as compared to the same periods of 2022.

These increases resulted from increased sales volumes of 14% and 21%, mostly offset by reduced average prices of 12% and 21%, respectively.

The lower prices were driven in part by the reduction in D4 RIN prices which according to S&P Global (September 29, 2023 authored by Phillip Herring and Melvin Lee), dropped 44.5% in 2023 due to an increase of renewable diesel production and a decline in biodiesel margins. 

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.

A significant portion of our biodiesel sold was to four major refiners/blenders in the three months ended September 30, 2023 and to two major refiners in the three months ended September 30, 2022 and in the nine months ended 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:

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

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

(ii) our sales to these customers are not under fixed terms and the customers have no fixed obligation to purchase any minimum quantities except as stipulated by short-term purchase orders;

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.

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.

Biofuels gross loss was $3,008 and $5,016 in the three and nine months ended September 30, 2023, respectively, a decrease in gross profit of $14,631 in the three-month comparative period, and an increased loss of $847 in the nine-month comparative period of 2022. In the current three months of 2023, the change in the activity in derivative instruments was a realized loss of $7,286 as compared to a realized gain of $4,023 in the same three months of the prior year.

Also increasing gross losses was the change in the mark-to-market derivative position which was an unrealized loss of $6,782 as compared to an unrealized gain of $665 in the three months ended September 30, 2023 and 2022, respectively. As described previously, heating oil futures prices rose in the three months ended September 30, 2023 whereas they had fallen overall for the first six months of the year. This moved our derivatives position from a gain to a loss position that will be offset by sales later in the year. 

In addition to this, there has been a decline in margins driven by the effect of the D4 RIN price decline as previously noted and increases in feedstock prices.

Reducing gross profit in the three months ended September 30, 2023 was the change in the adjustment in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting.

This adjustment increased gross profit $2,294 in the three months ended September 30, 2023 as compared to $5,423 in the same comparative period of 2022. 

For the nine months ended September 30, 2023, the change increased gross profit $6,023 as compared to $1,771 in the same comparative period of 2022. 

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

4 unchanged sentences

Asset (Liability)

June 30, 2023

September 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 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.

Bill-and-hold transactions for the three and nine months ended September 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.

1 unchanged sentence

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

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

Revenues under bill-and-hold arrangements were $10,149 and $31,504 for the three and nine months ended September 30, 2023, respectively.

Liquidity and Capital Resources

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

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

Nine Months Ended September 30,

Net cash provided by operating activities

Net cash provided by (used in) investing activities

2 unchanged sentences

Operating Activities

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. 

Cash provided by operating activities was $2,476 in the nine months ended September 30, 2023 as compared to $44,127 in the same period of 2022.

This decrease in cash was primarily attributable to the change in accounts payable, including accounts payable - related parties, demonstrating a cash outflow of $25,771, primarily from the timing of vendor payments, the change in fair value of equity securities of $11,057, the change in inventory demonstrating a cash outflow of $10,939, and the change in accounts receivable, including accounts receivable - related parties, demonstrating a cash outflow of $8,933.  

Partially offsetting these cash outflows was the change in net income of $14,965.

Investing Activities

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. 

Cash provided by investing activities was $35,698 in the nine months ended September 30, 2023 as compared to cash used in investing activities of $2,503 in the nine months ended September 30, 2022.

Of the $38,201 change, $37,438 was the result of increased proceeds from the sale of marketable securities. 

Cash was also provided by a decrease in the collateralization of derivative instruments of $2,126. Offsetting these increases in cash was an increase of capital expenditures of $1,302. 

Financing Activities

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. 

Cash used in financing activities was $7,891 and $7,877 in the nine months ended September 30, 2023 and 2022, respectively, primarily for payments of dividends on our common stock. 

Credit Facility

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

In the 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.

In the first three 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 2022.

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

5 unchanged sentences

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

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

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.”

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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.

We sold all marketable securities in the nine months ended September 30, 2023.

The fair value of the debt securities and equity instruments totaled $0 and $37,126 at September 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.

2 unchanged sentences

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

This activity was captured in our consolidated balance sheets at June 30, 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 June 30, 2023 or December 31, 2022 because they do not meet the definition of a hedge instrument as defined under GAAP.

This activity was captured in our consolidated balance sheets at September 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 September 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:

5 unchanged sentences

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