FutureFuel Corp. 10-Q

Item 1. Financial Statements. FutureFuel Corp. Consolidated Balance Sheets (Dollars in thousands) (Unaudited) June 30, 2024 December 31, 2023 Assets Cash and cash equivalents $ 115,060 $ 219,444 Accounts receivable, inclusive of the blenders’ tax credit of $ 14,976 and $ 11,381 , respectively, and net of allowances for expected credit losses of $ 145 and $ 55 , respectively 33,386 28,406 Accounts receivable – related parties 8 1 Inventory, net 29,516 32,978 Income tax receivable 1,960 1,940 Prepaid expenses 2,190 4,346 Prepaid expenses – related parties 12 12 Other current assets 1,509 3,419 Total current assets 183,641 290,546 Property, plant and equipment, net 74,070 72,711 Other assets 3,474 3,824 Total noncurrent assets 77,544 76,535 Total Assets $ 261,185 $ 367,081 Liabilities and Stockholders’ Equity Accounts payable, inclusive of the blenders’ tax credit rebates due customers of $ 890 and $ 890 $ 11,378 $ 22,178 Accounts payable – related parties 42 42 Deferred revenue – current 5,000 3,863 Dividends payable 5,251 10,503 Accrued expenses and other current liabilities 11,468 4,758 Total current liabilities 33,139 41,344 Deferred revenue – non-current 9,720 12,570 Noncurrent deferred income taxes 626 - Other noncurrent liabilities 3,305 3,287 Total noncurrent liabilities 13,651 15,857 Total liabilities 46,790 57,201 Commitments and contingencies (See Note 13) 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 shares issued and outstanding as of June 30, 2024 and December 31, 2023 4 4 Additional paid in capital 204,820 282,489 Retained earnings 9,571 27,387 Total stockholders’ equity 214,395 309,880 Total Liabilities and Stockholders’ Equity $ 261,185 $ 367,081 The accompanying notes are an integral part of these consolidated financial statements. 1 FutureFuel Corp. Consolidated Statements of Operations and Comprehensive Income (Dollars in thousands, except per share amounts) (Unaudited) Three Months Ended Six Months Ended June 30: June 30: 2024 2023 2024 2023 Revenue $ 72,409 $ 85,308 $ 130,690 $ 159,469 Revenue – related parties - - - 20 Cost of goods sold 62,788 92,626 115,492 144,562 Cost of goods sold – related parties 12 18 27 28 Distribution 910 1,216 1,407 1,774 Distribution – related parties 42 40 100 94 Gross profit (loss) 8,657 ( 8,592 ) 13,664 13,031 Selling, general, and administrative expenses Compensation expense 1,061 954 2,048 2,092 Other expense 1,076 874 1,839 1,883 Related party expense 153 156 306 309 Research and development expenses 916 1,007 1,822 2,079 Total operating expenses 3,206 2,991 6,015 6,363 Income (loss) from operations 5,451 ( 11,583 ) 7,649 6,668 Interest and dividend income 1,521 1,732 4,321 4,068 Interest expense ( 34 ) ( 34 ) ( 69 ) ( 67 ) Gain on marketable securities - 42 - 575 Other income (expense) 2,639 ( 1 ) 2,638 - Other income (expense), net 4,126 1,739 6,890 4,576 Income (loss) before taxes 9,577 ( 9,844 ) 14,539 11,244 Income tax provision 6 15 638 22 Net income (loss) $ 9,571 $ ( 9,859 ) $ 13,901 $ 11,222 Earnings (loss) per common share Basic $ 0.22 $ ( 0.23 ) $ 0.32 $ 0.26 Diluted $ 0.22 $ ( 0.23 ) $ 0.32 $ 0.26 Weighted average shares outstanding Basic 43,763,243 43,763,243 43,763,243 43,763,243 Diluted 43,763,243 43,763,243 43,763,243 43,764,890 Comprehensive income (loss) Net income (loss) $ 9,571 $ ( 9,859 ) $ 13,901 $ 11,222 Other comprehensive (loss) income from unrealized net (losses) gains on available-for-sale debt securities - ( 20 ) - 2 Income tax effect - 4 - ( 1 ) Total other comprehensive (loss) income, net of tax - ( 16 ) - 1 Comprehensive income (loss) $ 9,571 $ ( 9,875 ) $ 13,901 $ 11,223 The accompanying notes are an integral part of these consolidated financial statements. 2 FutureFuel Corp. Consolidated Statements of Stockholders’ Equity (Dollars in thousands) (Unaudited) For the Six Months Ended June 30, 2024 Accumulated Other Additional Total Common Stock Comprehensive paid-in Retained Stockholders’ Shares Amount Income (Loss) Capital Earnings Equity Balance - December 31, 2023 43,763,243 $ 4 $ - $ 282,489 $ 27,387 $ 309,880 Cash dividends declared, $ 2.50 per common share - - - ( 77,691 ) ( 31,717 ) ( 109,408 ) Stock based compensation - - - 22 - 22 Net income - - - - 4,330 4,330 Balance - March 31, 2024 43,763,243 $ 4 $ - $ 204,820 $ - $ 204,824 Net income - - - - 9,571 9,571 Balance - June 30, 2024 43,763,243 $ 4 $ - $ 204,820 $ 9,571 $ 214,395 For the Six Months Ended June 30, 2023 Accumulated Other Additional Total Common Stock Comprehensive paid-in Retained Stockholders’ Shares Amount (Loss) Income Capital Earnings Equity Balance - December 31, 2022 43,763,243 $ 4 $ ( 1 ) $ 282,489 $ 508 $ 283,000 Other comprehensive income - - 17 - - 17 Net income - - - - 21,081 21,081 Balance - March 31, 2023 43,763,243 $ 4 $ 16 $ 282,489 $ 21,589 $ 304,098 Other comprehensive loss - - ( 16 ) - - ( 16 ) Net loss - - - - ( 9,859 ) ( 9,859 ) Balance - June 30, 2023 43,763,243 $ 4 $ - $ 282,489 $ 11,730 $ 294,223 The accompanying notes are an integral part of these consolidated financial statements. 3 FutureFuel Corp. Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited) Six Months Ended June 30, 2024 2023 Cash flows from operating activities Net income $ 13,901 $ 11,222 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 4,760 5,155 Amortization of deferred financing costs 51 49 Provision for deferred income taxes 626 - Change in fair value of equity securities - ( 3,117 ) Change in fair value of derivative instruments 1,696 ( 3,259 ) Stock based compensation 22 2,543 Loss on disposal of property and equipment - 8 Noncash interest expense 18 17 Changes in operating assets and liabilities: Accounts receivable ( 4,980 ) ( 2,369 ) Accounts receivable – related parties ( 7 ) ( 1 ) Inventory 3,462 ( 40,601 ) Income tax receivable ( 20 ) 19 Prepaid expenses 2,156 1,706 Other assets 555 ( 4,502 ) Accounts payable ( 11,649 ) ( 6,269 ) Accounts payable – related parties - 24 Accrued expenses and other current liabilities 6,710 321 Accrued expenses and other current liabilities – related parties - ( 1 ) Deferred revenue ( 1,713 ) ( 2,037 ) Other noncurrent liabilities - 427 Net cash provided by (used in) operating activities 15,588 ( 40,665 ) Cash flows from investing activities Collateralization of derivative instruments ( 42 ) 3,154 Proceeds from the sale of marketable securities - 37,701 Capital expenditures ( 5,270 ) ( 3,875 ) Net cash (used in) provided by investing activities ( 5,312 ) 36,980 Cash flows from financing activities Payment of dividends ( 114,660 ) ( 5,251 ) Deferred financing costs - ( 14 ) Net cash used in financing activities ( 114,660 ) ( 5,265 ) Net change in cash and cash equivalents ( 104,384 ) ( 8,950 ) Cash and cash equivalents at beginning of period 219,444 175,640 Cash and cash equivalents at end of period $ 115,060 $ 166,690 Cash paid for income taxes $ - $ 20 Noncash capital expenditures $ 1,182 $ 244 The accompanying notes are an integral part of these consolidated financial statements. 4 Notes to Consolidated Financial Statements of FutureFuel Corp. (Dollars in thousands, except per share and per gallon amounts) (Unaudited) 1 ) SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared by FutureFuel Corp. (“FutureFuel” or “the Company”) in accordance and consistent with the accounting policies stated in the Company's 2023 Annual Report on Form 10 -K, as amended, inclusive of the audited consolidated financial statements, and should be read in conjunction with these consolidated financial statements. In the opinion of FutureFuel, all normal recurring adjustments necessary for a fair presentation have been included in the unaudited consolidated financial statements. The unaudited consolidated financial statements have been prepared in compliance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with instructions to Form 10 -Q adopted by the Securities and Exchange Commission (“SEC”). Accordingly, the unaudited consolidated financial statements do not include all the information and footnotes required by GAAP for complete financial statements and do include amounts that are based upon management estimates and judgments. Future actual results could differ from such current estimates. The unaudited consolidated financial statements include assets, liabilities, revenues, and expenses of FutureFuel and its direct and indirect wholly owned subsidiaries; namely, FutureFuel Chemical Company; FFC Grain, L.L.C.; FutureFuel Warehouse Company, L.L.C.; and Legacy Regional Transport, L.L.C. Intercompany transactions and balances have been eliminated in consolidation. Recently Adopted Accounting Standards No new accounting standards have been adopted recently. Issued Accounting Standards Not Yet Adopted In December 2023 , the FASB issued Accounting Standards Update (“ASU”) No. 2023 - 09, Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures, which aims to address requests for improved income tax disclosures from investors that use the financial statements to make capital allocation decisions. The amendments in this ASU address the investor requests for more transparency of income tax information and apply to all entities that are subject to income taxes. The ASU is effective for years beginning after December 15, 2024, but early adoption is permitted. This ASU should be applied on a prospective basis, although retrospective application is permitted. Management is currently evaluating the impact of the changes required by the new standard on the Company's financial statements and related disclosures. In November 2023 , the FASB issued ASU No. 2023 - 07, Segment Reporting (Topic 280 ): Improvements to Reportable Segment Disclosures, which aims to improve disclosures about a public entity’s reportable segments. This update addresses requests from investors for more detailed information about a reportable segment’s expenses in order to improve understanding of a public entity’s business activities, overall performance, and potential future cash flows. The amendments in this ASU require public business entities to disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker and are included within each reported measure of segment profit or loss. This update does not change how an entity identifies or aggregates its reportable segments or how it applies the quantitative thresholds to determine them. This update is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years starting after December 15, 2024. This ASU must be applied retrospectively to all prior periods presented. Management is currently evaluating the impact of the changes required by this new standard on the Company's financial statements and related disclosures for the year ending December 31, 2024. 5 Notes to Consolidated Financial Statements of FutureFuel Corp. (Dollars in thousands, except per share and per gallon amounts) (Unaudited) 2 ) GOVERNMENT TAX CREDITS BIODIESEL BLENDERS ’ TAX CREDIT and SMALL AGRI-BIODIESEL PRODUCER TAX CREDIT and CLEAN FUEL PRODUCTION TAX CREDIT The biodiesel Blenders’ Tax Credit (“BTC”) provides a one dollar per gallon tax credit to the blender of biomass-based diesel with at least 0.1% petroleum-based diesel fuel. The Company records this credit as a reduction to cost of goods sold as applicable sales are made. The Further Consolidated Appropriations Act of 2020 was passed by Congress and signed into law on December 20, 2019, retroactively reinstating the BTC for 2018 and 2019 and extending it through December 31, 2022. The Inflation Reduction Act (“IRA”) extended the BTC through December 31, 2024. As part of each law from which the BTC was reinstated, small agri-biodiesel producers with production capacity not in excess of 60 million gallons were eligible for an additional income tax credit of $0.10 per gallon on the first 15 million gallons of agri-biodiesel sold (the “Small Agri-biodiesel Producer Tax Credit”). The Company is eligible for this credit and recognizes the credit in the same accounting period as the benefit from the BTC. The benefit of this credit is recognized as a component of income tax (benefit) provision. The IRA created the clean fuel production credit (“CFPC”) for qualifying transportation fuel produced after 2024 and sold on or before December 31, 2027. The CFPC consolidates and replaces several fuel related credits set to expire December 31, 2024 including the BTC and the Small Agri-biodiesel Producer Tax Credit. The CFPC is an income tax credit structured on a sliding scale so that producers become eligible for larger credits as the greenhouse gas (“GHG”) emissions of the fuels they produce approach zero. For producers meeting the prevailing wage and registered apprenticeship requirements, the maximum credit is $1.00 per gallon of nonaviation fuel. For producers not meeting the prevailing wage and registered apprenticeship requirements, the maximum credit is 20 cents per nonaviation fuel gallon. CARES ACT – EMPLOYEE RETENTION TAX CREDIT The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), was enacted on March 27, 2020, to encourage eligible employers to retain employees on their payroll through, among other things, an available employee retention tax credit. The Consolidated Appropriations Act, effective January 1, 2021 broadened the eligibility of the credit. FutureFuel has applied for this credit and will recognize the benefit of the credit once reasonable assurance can be made as to the retention of the credit. 6 Notes to Consolidated Financial Statements of FutureFuel Corp. (Dollars in thousands, except per share and per gallon amounts) (Unaudited) 3 ) REVENUE RECOGNITION The majority of revenue is from short term contracts with revenue recognized when a single performance obligation to transfer product under the terms of a contract with a customer are satisfied. Certain of the Company's custom chemical contracts within the chemical segment contain a material right as defined by ASC Topic 606, Revenue from Contracts with Customers, from the provision of a customer option to purchase future goods or services at a discounted price as a result of upfront payments provided by customers. Each contract also has a performance obligation to transfer products with 30 -day payment terms. The Company recognizes revenue when the customer takes control of the inventory, either upon shipment or when the material is made available for pick up. If the customer is deemed to take control of the inventory prior to pick up, the Company recognizes the revenue as a bill-and-hold transaction in accordance with ASC Topic 606. The Company applies the renewal option approach in allocating the transaction price to these material rights and transfer of product. As a basis for allocating the transaction price to the material right and transfer of product, the Company estimates the expected life of the contract, the expected contractual volumes to be sold over that life, and the most likely expected sales price. Each estimate is updated quarterly on a prospective basis. Contract Assets and Liabilities: Contract assets consist of unbilled amounts typically resulting from revenue recognized through bill-and-hold arrangements. The contract assets at June 30, 2024 and December 31, 2023 consist of unbilled revenue from one customer and unbilled capital reimbursement 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 $ 0 and $ 32 for both the three and six months ended June 30, 2024 and 2023, 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 $ 797 and $ 739 for the three months and $ 1,603 and $ 1,958 for the six months ended June 30, 2024 and 2023 , respectively. These contract asset and liability balances are reported on the consolidated balance sheets on a contract-by-contract basis at the end of each reporting period. The following table provides the balances of receivables, contract assets, and contract liabilities from contracts with customers. Contract Assets and Liability Balances June 30, 2024 December 31, 2023 Trade receivables, included in accounts receivable* $ 16,962 $ 15,897 Contract assets, included in accounts receivable 1,448 1,128 Contract liabilities, included in deferred revenue - short-term 4,793 3,656 Contract liabilities, included in deferred revenue - long-term 6,578 9,318 * Exclusive of the BTC of $ 14,976 and $ 11,381 , respectively, and net of allowances for expected credit losses of $ 145 and $ 55 , respectively, as of the dates noted. Transaction price allocated to the remaining performance obligations: At June 30, 2024 , approximately $ 11,371 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 ranging from two to four years. Approximately 42 % of this revenue is expected to be recognized over the next 12 months, and 58 % is expected to be recognized over the subsequent 30 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. The Company applies the practical expedient in ASC 606 - 10 - 50 - 14 and excludes the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less; and (ii) contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed. 7 Notes to Consolidated Financial Statements of FutureFuel Corp. (Dollars in thousands, except per share and per gallon amounts) (Unaudited) The following tables provide revenue from customers disaggregated by the type of arrangement and by the timing of the recognized revenue. Disaggregation of revenue - contractual and non-contractual: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Contract revenue from customers with > one-year arrangements $ 8,735 $ 9,562 $ 17,975 $ 20,027 Contract revenue from customers with < one-year arrangements 63,618 75,690 112,604 139,351 Revenue from non-contractual arrangements 56 56 111 111 Total revenue $ 72,409 $ 85,308 $ 130,690 $ 159,489 Timing of revenue : Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Bill-and-hold revenue $ 11,020 $ 10,765 $ 22,664 $ 21,355 Non-bill-and-hold revenue 61,389 74,543 108,026 138,134 Total revenue $ 72,409 $ 85,308 $ 130,690 $ 159,489 As of June 30, 2024 and December 31, 2023 , $ 3,651 and $ 4,317 of bill-and-hold revenue had not shipped, respectively. 4 ) INVENTORY The carrying values of inventory were as follows as of: June 30, 2024 December 31, 2023 At average cost (approximates current cost) Finished goods $ 9,427 $ 16,235 Work in process 1,156 611 Raw materials and supplies 23,993 25,532 34,576 42,378 LIFO reserve ( 5,060 ) ( 9,400 ) Total inventory $ 29,516 $ 32,978 A LIFO liquidation of $ 444 occurred in the six months ended June 30, 2024. No liquidation occurred in the six months ended June 30, 2023. 8 Notes to Consolidated Financial Statements of FutureFuel Corp. (Dollars in thousands, except per share and per gallon amounts) (Unaudited) 5 ) DERIVATIVE INSTRUMENTS The Company records all derivative instruments at fair value. Fair value is determined by using the closing prices of the derivative instruments on the New York Mercantile Exchange at the end of an accounting period. Changes in the fair value of derivative instruments are recognized at the end of each accounting period and recorded in the statements of operations and comprehensive income as a component of cost of goods sold. These instruments use inputs considered Level 1 holdings. Fair value accounting pronouncements include a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of FutureFuel. Unobservable inputs are inputs that reflect FutureFuel’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The hierarchy is broken down into three levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. In order to manage commodity price risk caused by market fluctuations in biofuel prices, future purchases of feedstock used in biodiesel production, physical feedstock, finished product inventories attributed to the process, and other petroleum products purchased or sold, the Company may enter into exchange-traded commodity futures and options contracts. The Company accounts for these derivative instruments in accordance with ASC 815 - 20 - 25, Derivatives and Hedging. Under this standard, the accounting for changes in the fair value of a derivative instrument depends upon whether it has been designated as an accounting hedging relationship and, further, on the type of hedging relationship. To qualify for designation as an accounting hedging relationship, specific criteria must be met and appropriate documentation maintained. The Company had no derivative instruments that qualified under these rules as designated accounting hedges in 2024 or 2023 . The Company has elected the normal purchase and normal sales exception for certain feedstock purchase contracts and supply agreements. Total 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 net gain of $ 1,414 (including settlements of $ 836 ) and a net loss of $ 2,050 (including settlements of $ 354 ) for the three and six months ended June 30, 2024 , and a net gain of $ 4,389 (including settlements of $ 6,032 ) and $ 12,695 (including settlements of $ 9,436 ) for the three and six months ended June 30, 2023 . The volumes and carrying values of FutureFuel’s derivative instruments were as follows at: Asset (Liability) June 30, 2024 December 31, 2023 Contract Quantity Fair Value Contract Quantity Fair Value Regulated fixed price future commitments, included in other current assets (in thousand barrels) 126 $ 40 354 $ 1,736 The margin account maintained with a broker to collateralize these derivative instruments carried an account balance of $ 787 and $ 745 at June 30, 2024 and December 31, 2023 , 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. 9 Notes to Consolidated Financial Statements of FutureFuel Corp. (Dollars in thousands, except per share and per gallon amounts) (Unaudited) 6 ) MARKETABLE SECURITIES At June 30, 2024 and December 31, 2023, FutureFuel held no marketable equity and trust preferred (debt) securities. 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. 7 ) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities consisted of the following at: June 30, 2024 December 31, 2023 Refundable deposit $ 6,500 $ - Accrued employee liabilities 3,173 2,179 Accrued property, franchise, motor fuel and other taxes 1,504 1,346 Lease liability, current 184 389 Other 107 844 Total $ 11,468 $ 4,758 10 Notes to Consolidated Financial Statements of FutureFuel Corp. (Dollars in thousands, except per share and per gallon amounts) (Unaudited) 8 ) BORROWINGS On March 30, 2020, the Company, with FutureFuel Chemical Company as the borrower and certain of the Company’s other subsidiaries as guarantors, amended and restated its credit agreement (the “Credit Agreement”) originally entered into on April 16, 2015 ( as amended, the “Prior Credit Agreement”) with the lenders party 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”). The Credit Facility expires on March 30, 2025. On March 1, 2023 , the Company entered into a First Amendment to the Credit Agreement (the “First Amendment”). The First Amendment primarily amends the Credit Agreement to transition the Credit Facility from the London Interbank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”) and other conforming changes, in each case as more specifically set forth in the First Amendment. The First Amendment does not modify the aggregate amount, or expiration date, of the Credit Facility. 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 Letter of Credit Fee Base Rate Loans Commitment Fee < 1.00:1.0 1.00 % 0.00 % 0.15 % ≥ 1.00:1.0 And < 1.50:1.0 1.25 % 0.25 % 0.15 % ≥ 1.50:1.0 And < 2.00:1.0 1.50 % 0.50 % 0.20 % ≥ 2.00:1.0 And < 2.50:1.0 1.75 % 0.75 % 0.20 % ≥ 2.50:1.0 2.00 % 1.00 % 0.25 % The terms of the Credit Facility contain certain negative covenants and conditions including a maximum consolidated leverage ratio and a consolidated minimum interest coverage ratio. There were no borrowings under the Credit Agreement at June 30, 2024 or December 31, 2023 . 11 Notes to Consolidated Financial Statements of FutureFuel Corp. (Dollars in thousands, except per share and per gallon amounts) (Unaudited) 9 ) INCOME TAX PROVISION The following table summarizes the income tax provision. Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Income tax provision $ 6 $ 15 $ 638 $ 22 Effective tax rate 0.1 % ( 0.2 )% 4.4 % 0.2 % The Company’s income tax provision for the three and six months ended June 30, 2024 comprises primarily an increase in the valuation allowance against net deferred assets, plus immaterial state taxes and miscellaneous items. No deferred tax benefits on ongoing tax losses or other deferred tax assets have been recognized, reflecting management’s determination that none of the net deferred tax assets are more likely than not to be realized. The three - and six -month periods in 2023 reflected immaterial state taxes and miscellaneous items. 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. 10 ) EARNINGS PER SHARE In the three and six months ended June 30, 2024 and 2023 , FutureFuel used the treasury method in computing earnings per share. Basic and diluted earnings per common share were computed as follows: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Numerator: Net income (loss) $ 9,571 $ (9,859) $ 13,901 $ 11,222 Denominator: Weighted average shares outstanding – basic 43,763,243 43,763,243 43,763,243 43,763,243 Effect of dilutive securities: Stock options and other awards - - - 1,647 Weighted average shares outstanding – diluted 43,763,243 43,763,243 43,763,243 43,764,890 Basic earnings (loss) per share $ 0.22 $ (0.23) $ 0.32 $ 0.26 Diluted earnings (loss) per share $ 0.22 $ (0.23) $ 0.32 $ 0.26 For the three and six months ended June 30, 2024, 22,000 and 44,000 options to purchase FutureFuel’s common stock were excluded, respectively, in the computation of diluted earnings per share as all were anti-dilutive. In the three and six months ended June 30, 2023, 22,000 and 42,354 options, respectively, were excluded as all were anti-dilutive. 11 ) RELATED PARTY TRANSACTIONS FutureFuel enters into transactions with companies affiliated with or controlled by a director and significant shareholder. Revenues, expenses, prepaid amounts, and unpaid amounts related to these transactions are captured in the accompanying consolidated financial statements as related party line items. 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 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. 12 Notes to Consolidated Financial Statements of FutureFuel Corp. (Dollars in thousands, except per share and per gallon amounts) (Unaudited) 12 ) SEGMENT INFORMATION FutureFuel has two reportable segments organized along similar product groups – chemicals and biofuels. Chemicals FutureFuel’s chemical segment manufactures diversified chemical products that are sold externally to third party customers. This segment is composed of two components: “custom manufacturing” (manufacturing chemicals for specific customers) and “performance chemicals” (multi-customer specialty chemicals). Biofuels 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 its Batesville Plant, through distribution facilities available at leased oil storage facilities, and through a network of remotely located tanks. Biofuel revenues also include the sale of biodiesel blends with petrodiesel; petrodiesel with no biodiesel added; internally generated, separated Renewable Identification Numbers (“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” basis, resulting in FutureFuel maintaining possession of the applicable RINs from the sale. 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, 2024 , FutureFuel held 2.1 million RINs with a fair market value of $ 1,055 and no cost. Comparatively, at June 30, 2023 , FutureFuel held 11.8 million RINs with a fair market value of $ 19,461 and no cost and at December 31, 2023 4.3 million RINs were held with a fair market value of $ 6,567 and no cost. These fair values are considered Level 1 inputs. Summary of business by segment Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Revenue Custom chemicals $ 15,583 $ 15,576 $ 31,010 $ 32,196 Performance chemicals 3,653 3,180 6,285 8,441 Chemical revenue 19,236 18,756 37,295 40,637 Biofuel revenue 53,173 66,552 93,395 118,852 Total Revenue $ 72,409 $ 85,308 $ 130,690 $ 159,489 Segment gross profit (loss) Chemical $ 4,677 $ 6,416 $ 8,698 $ 15,039 Biofuel 3,980 ( 15,008 ) 4,966 ( 2,008 ) Total gross profit (loss) $ 8,657 $ ( 8,592 ) $ 13,664 $ 13,031 Operating expenses $ 3,206 $ 2,991 $ 6,015 $ 6,363 Income (loss) from operations 5,451 ( 11,583 ) 7,649 6,668 Other income (expense), net 4,126 1,739 6,890 4,576 Income (loss) before taxes $ 9,577 $ ( 9,844 ) $ 14,539 $ 11,244 Depreciation is allocated to segment cost of goods sold based on plant usage. The total assets and capital expenditures of FutureFuel have not been allocated to individual segments as large portions of these assets are shared to varying degrees by each segment, causing such an allocation to be of little value. 13 Notes to Consolidated Financial Statements of FutureFuel Corp. (Dollars in thousands, except per share and per gallon amounts) (Unaudited) 13 ) LEGAL MATTERS From time to time, FutureFuel and its subsidiaries are parties to, or targets of, lawsuits, claims, investigations, regulatory matters, and proceedings, which are being handled and defended in the ordinary course of business. 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. During the three months ended June 30, 2024, the Company resolved a prior-year legal dispute which resulted in a cash payment of $ 2,750 to FutureFuel which was reflected in Other income (expense) in the Consolidated Statements of Operations and Comprehensive Income in the three and six months ended June 30, 2024. 14