What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-11 compared with 2025-05-12 · 109 added, 58 removed, 137 unchanged (55% of the section changed)

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Unless otherwise stated, all dollar amounts are in thousands.

Our Company is managed and reported in two reporting segments:

Our Company is managed and reported in two reportable segments:

chemicals and biofuels.

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

As of March 31, 2025, we held 2.3 million D4 RINs with a fair market value of $2,077.

Comparatively, as of March 31, 2024, we held 2.0 million RINs with a fair market value of $1,624, and at December 31, 2024, we held 3.1 million RINs with a fair market value of $1,831.

As of June 30, 2025, we held 0.5 million D4 RINs with a fair market value of $604.

Comparatively, as of June 30, 2024, we held 2.1 million RINs with a fair market value of $1,055.

On June 13, 2025, the EPA proposed a rule to establish RFS volume requirements and percentage standards for 2026 and 2027.

Key changes in the proposal include a potential increase in RINs in biomass-based diesel from 5.36 billion in 2025 to 7.12 billion in 2026 and 2027 and a reduction in the RINs generated for imported or foreign-feedstock-based renewable fuel and the removal of renewable electricity from the program.

Starting in 2026, imported renewable fuel or fuel produced domestically using foreign feedstocks would generate 50% fewer RINs compared to purely domestic renewable fuel.

In addition, the proposed rule would reduce the RIN equivalency factor for renewable diesel from 1.7 to 1.6.

The final rule could materially affect the Company's operations and financial results.

The Company is currently evaluating the potential impact of this rule and participating in the public comment period.

On July 4, 2025, the Budget Reconciliation Act of 2025 was signed into law which made modifications to the CFPC.

The Budget Reconciliation Act is expected to help level the competitive environment for biodiesel by:

(i) reducing the tax credit for sustainable aviation fuel (“SAF”) from $1.75 per gallon to $1.00 per gallon effective January 1, 2026;

(ii) requiring that all feedstock for SAF be sourced from North America, as required for biomass based diesel;

and (iii) extending the clean fuel production credit (“CFPC”) for an additional two years through December 31, 2029.

Summary of Financial Results

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

Three Months Ended March 31,

Three Months Ended June 30,

(Loss) income from operations

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Adjusted EBITDA

Six Months Ended June 30,

(Loss) income from operations

Net (loss) income

(Loss) earnings per common share:

Adjusted EBITDA

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

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therefore, the results of our calculation are not necessarily comparable to the results of other companies.

Adjusted EBITDA allows our chief operating decision makers to assess the performance and liquidity of our business on a consolidated basis to assess the ability of our operating segments to produce operating cash flow to fund working capital needs, to fund capital expenditures, and to pay dividends.

Adjusted EBITDA allows our chief operating decision maker to assess the performance and liquidity of our business on a consolidated basis to assess the ability of our operating segments to produce operating cash flow to fund working capital needs, to fund capital expenditures, and to pay dividends.

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

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Net (loss) income

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Gain on disposal of property and equipment

Unrealized loss on derivative instruments

Income tax (benefit) provision

Unrealized (gain) loss on derivative instruments

Income tax provision

Adjusted EBITDA

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

Three Months Ended March 31,

Net cash used in operating activities

Six Months Ended June 30,

Net cash (used in) provided by operating activities

Deferred income taxes, net

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Results of Operations

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Volume/product mix effect

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Net (loss) income

Consolidated revenue in the three months ended March 31, 2025, decreased $40,743 compared to the three months ended March 31, 2024.

This decline was from lower sales volumes in the biofuel segment of $29,856 driven by the extended plant turnaround to improve plant reliability and product quality.

The turnaround, which was further extended by severe weather conditions, also reduced the chemical segment sales volumes by $7,949.

Sales revenue was also reduced $2,193 in the biofuel segment from lower prices.

The renewable fuel market continues to be negatively impacted by the expiration of the BTC and lack of clarity on the clean fuel production credit (CFPC).

Gross profit in the three months ended March 31, 2025, decreased $19,570 as compared to the same period of 2024, due primarily to:

(i) reduced throughput due to the issues noted above, (ii) increased spend on parts and contract labor for the turnaround and (iii) a reduced benefit from the change in the adjustment in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting.

Consolidated revenue in the three and six months ended June 30, 2025, decreased $36,736 and $77,479, compared to the three and six months ended June 30, 2024, respectively.

This decrease was primarily attributed to uncertainty surrounding the CFPC, which negatively and materially impacted the biofuel segment.

In the first three months of the year, we initiated an extended plant turnaround as a measure to improve plant reliability and product quality.

This extended turnaround negatively impacted both segments.

We resumed biodiesel production in April to fulfill existing sales obligations.

The weak market conditions continued into the current three-month period and led the Company to idle its biodiesel production.

As a result of these market conditions, the Company implemented a reduction in force in July.

The Company retained employees with expertise to facilitate the restart of biodiesel production upon the return of more favorable market conditions.

Gross profit in the three months ended June 30, 2025 , decreased $17,424 as compared to the same period of 2024 , due primarily to reduced throughput from the market conditions noted above.

Also reducing gross profit in the current three-month period was the change in the adjustment in the carrying value of our inventory as determined utilizing the last-in, first-out, (“LIFO”) method of inventory accounting.

This adjustment increased gross profit $1,232 in the current three-month period as compared to an increase of $1,313 in the same period of the prior year.

Partially offsetting the decrease in gross profit was the effect of liquidation of biofuel inventory of $2,394.

Gross profit in the six months ended June 30, 2025 , decreased $36,994 as compared to the same period of 2024 , primarily from the reduced throughput given the issues noted above along with increased spend on parts and contract labor for the turnaround.

Also reducing gross profit in the current six-month period was a benefit from 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 $1,857 in the current six-month period as compared to an increase of $4,341 in the prior six-month period.

Partially offsetting these decreases in gross profit in the current six-month period was the effect of liquidation of biofuel inventory of $2,394.

Operating e xpenses

Operating expenses increased $1,466 in the three months ended March 31, 2025, as compared to the three months ended March 31, 2024.

The increase was from separation compensation expense in the current period, equity compensation issued in 2024, increased board fees, and higher research and development expenses.

Operating expenses decreased $45 in the three months ended June 30, 2025, as compared to the three months ended June 30, 2024.

The net decrease was from reduced legal and board fees partially offset by increased compensation expense.

Operating expenses increased $1,421 in the six months ended June 30, 2025, as compared to the six months ended June 30, 2024.

The increase was from separation compensation (unrelated to any reduction in force) expense in the current period, equity compensation for grants issued in September 2024, increased board fees, and higher research and development expenses.

Other income, net

Other income decreased a net $1,563 in the three months ended March 31, 2025, as compared to the same period of 2024 from lower interest income of $1,237 compared to $2,800 in the prior period.

Other income decreased a net $2,579 in the three months ended June 30, 2025, as compared to the same period of 2024 from the receipt of a legal settlement of $2,750 in the prior period.

In addition, in the current three-month period interest income was $1,068 as compared to $1,521 in the prior period.

Other income decreased a net $4,142 in the six months ended June 30, 2025, as compared to the same period of 2024 from the same reasons previously mentioned with interest income being $2,016 lower.

Income tax provision

The Company’s income tax provision for the three months ended March 31, 2025, is comprised of immaterial state taxes and miscellaneous items .

The provision for the three months ended March 31, 2024 , comprised primarily an increase in the valuation allowance against net deferred assets, plus immaterial state taxes and miscellaneous items.

The Company’s income tax provision for the three and six months ended June 30, 2025, is comprised of an increase in its net deferred tax liability plus immaterial state taxes and miscellaneous items.

The provision for the three months ended June 30, 2024, consists of immaterial state taxes and miscellaneous items.

The provision for the six months ended June 30, 2024 includes immaterial state taxes and, primarily, the initial establishment of the net deferred tax liability reflecting the Company’s determination that its future reversing net deferred tax liabilities would not support full realization of its 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.

During the quarter ended March 31, 2024, the Company evaluated the available evidence and determined a discrete adjustment was required to increase its valuation allowance, resulting in a net deferred tax liability of $626 as of March 31, 2024.

Since March 31, 2024, the Company’s deferred tax assets have been reduced to zero and an additional net liability has been recognized.

Chemical Segment

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Volume/product mix effect

Gross (loss) profit

Chemical revenue in the three months ended March 31, 2025, decreased 48.1% or $8,694 compared to the three months ended March 31, 2024.

This decline was from weather related issues that extended the downtime of the plant turnaround.

Revenue from custom chemicals for the three months ended March 31, 2025 totaled $8,409, a net decrease of $7,018 from the same period in 2024, resulting from lower sales volumes of $7,949 primarily from products sold in the energy markets, and lower prices of $745.

Performance chemicals revenue was $956, a decrease of $1,676 from the three months ended March 31, 2024 .

This decrease was mostly from lower sales volumes of glycerin due to reduced production resulting from the plant turnaround.

Gross loss for the chemical segment was $5,729 for the three months ended March 31, 2025, a decrease of $9,750 compared to the same period of 2024.

This decrease was primarily from reduced throughput as described above.

Gross profit (loss)

Chemical revenue in the three months ended June 30, 2025, decreased 14% or $2,617 compared to the three months ended June 30, 2024.

Revenue from custom chemicals for the three months ended June 30, 2025 totaled $14,250, a net decrease of $1,333 from the same period in 2024, resulting from lower sales volumes of products sold in the energy markets of $1,998 and lower price effect of $727 from less amortization of revenue.

Partially offsetting the decrease was a rise in sales volumes of products sold in the polymer coatings market of $1,101.

Performance chemicals revenue was $2,369, a decrease of $1,284 from the three months ended June 30, 2024 from lower volumes of $1,306.

This decrease was driven by reduced volumes of glycerin, a chemically refined by-product of biodiesel, due to the plant turnaround and polymer modifier chemicals.

Chemical revenue in the six months ended June 30, 2025, decreased 30% or $11,311 compared to the six months ended June 30, 2024.

This decline was due to weather related issues that extended the downtime of the plant turnaround and slower production rates as we restarted the plant.

Revenue from custom chemicals for the six months ended June 30, 2025 totaled $22,659, a net decrease of $8,351 from the same period in 2024, resulting from lower sales volumes of $5,972 primarily from products sold in the energy markets, and lower price effect of $1,572 from less amortization of deferred revenue.

Performance chemicals revenue was $3,325, a decrease of $2,960 from the six months ended June 30, 2024 .

This decrease was mostly from lower sales volumes of glycerin, due to reduced production resulting from the plant turnaround, and polymer modifier chemicals.

Gross profit (loss) for the chemical segment was $1,667 and ($4,062) for the three and six months ended June 30, 2025, a decrease of $3,010 and $12,760, respectively, compared to the same periods of 2024.

These decreases were primarily from reduced throughput in the first three months of fiscal year 2025 and reduced amortization of deferred revenue as described above for the six-month period.

Partially offsetting this decrease in the three-month period was a benefit from 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 $553 in the current three-month period, as compared to an increase of $289 in the same period of the prior year.

In the six-month period, this adjustment contributed to the decrease in gross profit with an increase of $839 in the current six-month period as compared to an increase of $1,041 in the prior year period.

Biofuel Segment

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Volume/product mix effect

Gross (loss) profit

Biofuels revenue in the three months ended March 31, 2025, decreased $32,049 as compared to the same period of 2024.

This decrease resulted fro m the extended plant turnaround to improve plant reliability and product quality which was further extended due to inclement weather.

The renewable fuel market continues to be negatively impacted by the expiration of the BTC and lack of clarity on the CFPC.

No significant customers existed in the three months ended March 31, 2025, as compared to four in the three months ended March 31, 2024.

Biofuels revenue in the three months ended June 30, 2025 , decreased $34,119 as compared to the same period of 2024 .

This decrease resulted from the temporary idling of biodiesel production due to continued renewable fuel market uncertainty resulting from the lack of clarity regarding the CFPC and other market conditions.

Biofuels revenue in the six months ended June 30, 2025 , decreased $66,168 as compared to the same period of 2024 .

This decrease resulted from the extended plant turnaround to improve plant reliability and the subsequent temporary idling of production for the reasons stated above and other market conditions.

A significant portion of our biodiesel sold was to three and two major customers in the three and six months ended June 30, 2025, respectively, as compared to three major customers in both the three and six months ended June 30, 2024.

No assurances can be given that we will continue to sell to such major refiners, or, if we do sell, the volume we will sell or the profit margin we will realize.

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and (iii) the prices we receive from these customers are based upon then-market rates, as would be the case with sales of this commodity to other customers.

Biofuel gross loss was $8,834 in the three months ended March 31, 2025, a decrease in gross profit of $9,820 from the comparative period in 2024.

This decrease primarily resulted from reduced sales volumes, stemming from the extended plant turnaround mentioned above.

Also reducing gross profit was a reduced benefit from the change in the adjustment in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting.

Biofuel gross loss was $10,434 in the three months ended June 30, 2025 , a decrease in gross profit of $14,414 from the comparative period in 2024 .

This decrease primarily resulted from reduced sales volumes, stemming from the temporary idling as stated above.

Also reducing gross profit was the change in the activity of derivative instruments with a realized gain of $77 and an unrealized gain of $540 in the current three-month period as compared to a realized gain of $835 and an unrealized gain of $578 in the same period of the prior year.

Further impacting gross profit 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 $679 in the current three-month period as compared to an increase in gross profit of $1,024 in the same period of the prior year.

Partially increasing gross profit was the change in the activity of derivative instruments with a realized gain of $93 and an unrealized loss of $259 in the current three-month period as compared to a realized loss of $1,190 and an unrealized loss of $2,274 in the same period of the prior year.

Benefiting gross profit in the current period was the effect of liquidation of biofuel inventory of $2,394.

Biofuel gross loss was $19,268 in the six months ended June 30, 2025 , a decrease in gross profit of $24,234 from the comparative period in 2024 .

This decrease primarily resulted from reduced sales volumes, stemming from the extended plant turnaround and temporary idling described above.

Partially offsetting these decreases was the change in the activity of derivative instruments with a realized gain of $169 and an unrealized gain of $281 in the current six-month period as compared to a realized loss of $354 and an unrealized loss of $1,696 in the same period of the prior year.

Further impacting gross profit 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 $1,018 in the current six-month period as compared to an increase in gross profit of $3,300 in the same period of the prior year.

Lastly, benefiting gross profit was the effect of liquidation of biofuel inventory of $2,394.

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

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Asset (Liability)

March 31, 2025

June 30, 2025

December 31, 2024

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

Bill-and-hold transactions for the three months ended March 31, 2025 and 2024 were related to custom chemicals customers whereby revenue was recognized in accordance with contractual agreements based upon product being produced and ready for use by the customer.

Bill-and-hold transactions for the three and six months ended June 30, 2025 and 2024 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.

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

Revenues under bill-and-hold arrangement s were $4,590 and for t he three months ended March 31, 2025.

As of March 31, 2025 and December 31, 2024, $5,628 and $7,301 of bill-and-hold revenue had not shipped, respectively.

Revenues under bill-and-hold arrangement s were $9,845 and $14,435 for t he three and six months ended June 30, 2025, respectively.

As of June 30, 2025 and December 31, 2024, $6,309 and $7,301 of bill-and-hold revenue had not shipped, respectively.

Liquidity and Capital Resources

Our net cash from operating activities, investing activities, and financing activities for the three months ended March 31, 2025 and 2024 is set forth in the following table.

Three Months Ended March 31,

Net cash used in operating activities

Our net cash from operating activities, investing activities, and financing activities for the six months ended June 30, 2025 and 2024 is set forth in the following table.

Six Months Ended June 30,

Net cash (used in) provided by operating activities

Net cash used in investing activities

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Operating Activities

Cash used in operating activities was $5,395 in the three months ended March 31, 2025, as compared to $12,211 in the same period of 2024.

This decrease in cash used was primarily attributable to the change in inventory of $16,737 and the change in accounts receivable, including accounts receivable - related parties, demonstrating a cash inflow of $9,928.

Also contributing to the current period decrease in cash used was the change in accounts payable, including accounts payable - related parties, of $2,255, and the change in accrued expenses of $1,262.

Partially offsetting these cash inflows was the change in net (loss) income of $21,973 and the change in the fair value of derivative instruments of $2,015.

Cash used in operating activities was $183 in the six months ended June 30, 2025, as compared to cash provided by operating activities of $15,588 in the same period of 2024.

This increase in cash used was primarily attributable to the change in net (loss) income resulting in a cash outflow of $41,960.

Also contributing to the current period increase in cash used was the change in other assets of $3,156, and the change in accrued expenses of $2,924.

Partially offsetting these cash outflows was the change in accounts receivable, including accounts receivable - related parties, resulting in a cash inflow of $15,937, the change in accounts payable, including accounts payable - related parties, of $9,186, the change in inventory of $7,221, and the change in deferred revenue of $1,617.

Investing Activities

Cash used in investing activities was $4,082 in the three months ended March 31, 2025, as compared to $3,485 in the three months ended March 31, 2024.

Cash used in investing activities was $8,585 in the six months ended June 30, 2025, as compared to $5,312 in the six months ended June 30, 2024.

This $3,273 increase in cash used was primarily due to an increase in capital expenditure of $4,208 partially offset by the change in the collateralization of derivative instruments of $901.

Financing Activities

Cash used in financing activities was $2,993 and $2,626 in the three months ended March 31, 2025 and 2024, respectively, primarily for payments of dividends on our common stock.

Cash used in financing activities was $5,621 and $114,660 in the six months ended June 30, 2025 and 2024, respectively, primarily for payments of dividends on our common stock inclusive of a special dividend of $109,408 paid in the prior six-month period.

Credit Facility

We have a credit agreement, as amended on February 21, 2025, with a syndicated group of commercial banks for $75,000.

We have a credit agreement, as amended and restated on February 21, 2025, with a syndicated group of commercial banks for $75,000.

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

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The declaration of these regular quarterly cash dividends was made in the three months ended December 31, 2024, and December 31, 2023, respectively.

In addition, on April 9, 2024, we paid a special dividend of $2.50 per share on our common stock which amounted to $109,408.

The declaration of this special dividend was made in the first quarter of 2024.

Capital Management

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First, for our biofuel sales, we enter into the purchase and sale of futures contracts and options on futures contracts of energy commodities.

This activity was captured in our consolidated balance sheets at March 31, 2025, and December 31, 2024 as derivative instruments recorded in accordance with ASC Topic 815, Derivatives and Hedging (“ASC 815”).

This activity was captured in our consolidated balance sheets at June 30, 2025, and December 31, 2024 as derivative instruments recorded in accordance with ASC Topic 815, Derivatives and Hedging (“ASC 815”).

Second, for our biofuel feedstocks, we execute purchase contracts and supply agreements with certain vendors that may meet the normal purchase and normal sales exception of ASC 815.

These transactions are recognized in earnings and were not recorded in our consolidated balance sheets at March 31, 2025, or December 31, 2024 to the extent that we are able to apply the normal purchase and normal sales exception of ASC 815.

These transactions are recognized in earnings and were not recorded in our consolidated balance sheets at June 30, 2025, or December 31, 2024 to the extent that we are able to apply the normal purchase and normal sales exception of ASC 815.

The purchase of biofuels feedstock generally involves two risk components:

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis