ff20220630b_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from __________ to ___________
	Commission file number: 0-52577

(Exact Name of Registrant as Specified in Its Charter)

Delaware		20-3340900
(State or Other Jurisdiction of		(IRS Employer Identification No.)
Incorporation or Organization)

8235 Forsyth Blvd., Suite 400, St Louis, Missouri		63105
(Address of Principal Executive Offices)		(Zip Code)

	(314) 854-8352
	(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	FF	NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐	Accelerated filer	☑
Non-accelerated filer ☐	Smaller reporting company	☐
	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of August 8, 2022: 43,763,243

PART I FINANCIAL INFORMATION

Item 1. Financial Statements.

FutureFuel Corp.

Consolidated Balance Sheets

(Dollars in thousands)

	June 30, 2022			December 31, 2021
Assets
Cash and cash equivalents	$	129,154		$	137,521
Accounts receivable, inclusive of the blenders' tax credit of $13,084 and $8,232, at June 30, 2022 and December 31, 2021, respectively, and net of allowances for bad debt of $87 and $67 at June 30, 2022 and December 31, 2021, respectively		37,488			29,316
Accounts receivable – related parties		78			58
Inventory		31,584			26,920
Income tax receivable		9,780			9,760
Prepaid expenses		1,815			3,588
Prepaid expenses – related parties		12			4
Marketable securities		39,426			47,190
Other current assets		3,506			1,476
Total current assets		252,843			255,833
Property, plant and equipment, net		79,145			82,901
Other assets		5,398			5,596
Total noncurrent assets		84,543			88,497
Total Assets	$	337,386		$	344,330
Liabilities and Stockholders’ Equity
Accounts payable, inclusive of the blenders' tax credit rebates due customers of $890 and $890, respectively	$	33,814		$	14,912
Accounts payable – related parties		8,237			7,911
Deferred revenue – current		8,091			6,151
Dividends payable		5,252			-
Accrued expenses and other current liabilities		5,422			6,081
Accrued expenses and other current liabilities – related parties		-			1
Total current liabilities		60,816			35,056
Deferred revenue – non-current		12,046			16,755
Noncurrent deferred income tax liability		167			1,870
Other noncurrent liabilities		1,551			1,721
Total noncurrent liabilities		13,764			20,346
Total liabilities		74,580			55,402
Commitments and contingencies:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, none issued and outstanding		-			-
Common stock, $0.0001 par value, 75,000,000 shares authorized, 43,763,243 and 43,763,243 issued and outstanding as of June 30, 2022 and December 31, 2021		4			4
Accumulated other comprehensive income		61			178
Additional paid in capital		282,443			282,443
Retained earnings (accumulated deficit)		(19,702	)		6,303
Total stockholders’ equity		262,806			288,928
Total Liabilities and Stockholders’ Equity	$	337,386		$	344,330

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

FutureFuel Corp.

Consolidated Statements of Operations and Comprehensive Income

(Dollars in thousands, except per share amounts)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Revenue	$	117,640		$	73,813		$	159,714		$	114,971
Revenue – related parties		156			305			343			663
Cost of goods sold		113,798			69,760			161,017			111,138
Cost of goods sold – related parties		1,956			2,727			3,216			11,937
Distribution		1,024			1,633			1,908			3,242
Distribution – related parties		41			41			94			96
Gross profit (loss)		977			(43	)		(6,178	)		(10,779	)
Selling, general, and administrative expenses
Compensation expense		701			523			1,357			1,051
Other expense		886			469			1,849			1,322
Related party expense		150			170			304			337
Research and development expenses		755			798			1,434			1,572
Total operating expenses		2,492			1,960			4,944			4,282
Loss from operations		(1,515	)		(2,003	)		(11,122	)		(15,061	)
Interest and dividend income		747			790			1,411			1,795
Interest expense		(33	)		(32	)		(65	)		(64	)
(Loss) gain on marketable securities		(3,239	)		1,612			(7,366	)		537
Other expense		(2	)		(1,355	)		(2	)		(1,355	)
Other (expense) income		(2,527	)		1,015			(6,022	)		913
Loss before taxes		(4,042	)		(988	)		(17,144	)		(14,148	)
Income tax benefit		(938	)		(4,469	)		(1,642	)		(8,856	)
Net (loss) income	$	(3,104	)	$	3,481		$	(15,502	)	$	(5,292	)

Earnings (loss) per common share
Basic	$	(0.07	)	$	0.08		$	(0.35	)	$	(0.12	)
Diluted	$	(0.07	)	$	0.08		$	(0.35	)	$	(0.12	)
Weighted average shares outstanding
Basic		43,763,243			43,754,232			43,763,243			43,748,768
Diluted		43,763,243			43,754,422			43,763,243			43,748,768

Comprehensive income (loss)
Net (loss) income	$	(3,104	)	$	3,481		$	(15,502	)	$	(5,292	)
Other comprehensive (loss) income from unrealized net (losses) gains on available-for-sale debt securities		(86	)		60			(148	)		-
Income tax effect		18			(16	)		31			-
Total other comprehensive (loss) income, net of tax		(68	)		44			(117	)		-
Comprehensive (loss) income	$	(3,172	)	$	3,525		$	(15,619	)	$	(5,292	)

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

FutureFuel Corp.

Consolidated Statements of Stockholders’ Equity

(Dollars in thousands)

(Unaudited)

	For the Six Months Ended June 30, 2022
					Accumulated
					Other			Additional					Total
	Common Stock				Comprehensive			Paid-in		Retained			Stockholders’
	Shares		Amount		Income (Loss)			Capital		Earnings (Deficit)			Equity
Balance - December 31, 2021		43,763,243	$	4	$	178		$	282,443	$	6,303		$	288,928
Cash dividends declared, $0.24 per common share		-		-		-			-		(10,503	)		(10,503	)
Other comprehensive loss		-		-		(49	)		-		-			(49	)
Net loss		-		-		-			-		(12,398	)		(12,398	)
Balance - March 31, 2022		43,763,243	$	4	$	129		$	282,443	$	(16,598	)	$	265,978
Other comprehensive loss		-		-		(68	)		-		-			(68	)
Net loss		-		-		-			-		(3,104	)		(3,104	)
Balance - June 30, 2022		43,763,243	$	4	$	61		$	282,443	$	(19,702	)	$	262,806

	For the Six Months Ended June 30, 2021
					Accumulated
					Other			Additional					Total
	Common Stock				Comprehensive			Paid-in		Retained			Stockholders’
	Shares		Amount		Income (Loss)			Capital		Earnings (Deficit)			Equity
Balance - December 31, 2020		43,743,243	$	4	$	208		$	282,215	$	89,456		$	371,883
Other comprehensive loss		-		-		(60	)		-		-			(60	)
Net loss		-		-		-			-		(8,773	)		(8,773	)
Balance - March 31, 2021		43,743,243	$	4	$	148		$	282,215	$	80,683		$	363,050
Cash dividends declared, $2.50 per share		-		-		-			-		(109,408	)		(109,408	)
Proceeds for the issuance of stock		20,000		-		-			231		-			231
Other comprehensive income		-		-		60			-		-			60
Net income		-		-		-			-		3,481			3,481
Balance - June 30, 2021		43,763,243	$	4	$	208		$	282,446	$	(25,244	)	$	257,414

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

FutureFuel Corp.

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

	Six Months Ended June 30,
	2022			2021
Cash flows from operating activities
Net loss	$	(15,502	)	$	(5,292	)
Adjustments to reconcile net income to net cash from operating activities:
Depreciation		5,276			5,231
Amortization of deferred financing costs		48			47
Benefit for deferred income taxes		(1,672	)		(8,881	)
Change in fair value of equity securities		7,339			222
Change in fair value of derivative instruments		(2,388	)		1,136
(Gain) loss on the sale of investments		27			(758	)
Loss on disposal of property and equipment		50			-
Impairment of intangible asset		-			1,315
Noncash interest expense		17			16
Changes in operating assets and liabilities:
Accounts receivable		(8,172	)		(9,946	)
Accounts receivable – related parties		(20	)		1,405
Inventory		(4,664	)		(19,625	)
Income tax receivable		(20	)		801
Prepaid expenses		1,773			1,977
Prepaid expenses – related parties		(8	)		(12	)
Other assets		125			635
Accounts payable		19,171			23,074
Accounts payable – related parties		326			7,959
Accrued expenses and other current liabilities		(659	)		7
Accrued expenses and other current liabilities – related parties		(1	)		-
Deferred revenue		(2,769	)		(1,318	)
Other noncurrent liabilities		(187	)		(342	)
Net cash used in operating activities		(1,910	)		(2,349	)
Cash flows from investing activities
Collateralization of derivative instruments		383			(2,060	)
Purchase of marketable securities		-			(19,170	)
Proceeds from the sale of marketable securities		250			37,873
Proceeds from the sale of property and equipment		56			-
Proceeds from the sale of intangible asset		-			93
Capital expenditures		(1,895	)		(488	)
Net cash (used in) provided by investing activities		(1,206	)		16,248
Cash flows from financing activities
Proceeds from the issuance of stock		-			231
Payment of dividends		(5,251	)		(114,658	)
Net cash used in financing activities		(5,251	)		(114,427	)
Net change in cash and cash equivalents		(8,367	)		(100,528	)
Cash and cash equivalents at beginning of period		137,521			198,122
Cash and cash equivalents at end of period	$	129,154		$	97,594

Cash paid for interest	$	-		$	43
Cash paid for income taxes	$	276		$	79
Noncash investing and financing activities:
Noncash capital expenditures	$	95		$	51
Noncash operating leases	$	-		$	269

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

Notes to Consolidated Financial Statements of FutureFuel Corp.

(Dollars in thousands, except per share amounts)

(Unaudited)

1)	NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Organization

FutureFuel Corp. (“FutureFuel” or “the Company”), through its wholly-owned subsidiary, FutureFuel Chemical Company (“FutureFuel Chemical”), owns and operates a chemical production facility located on approximately 2,200 acres of land six miles southeast of Batesville in north central Arkansas fronting the White River (the “Batesville Plant”). FutureFuel Chemical manufactures diversified chemical products, biobased products composed of biofuels, and biobased specialty chemical products. FutureFuel Chemical’s operations are reported in two segments: chemicals and biofuels.

The chemical segment manufactures a diversified portfolio of chemical products that are sold to third party customers. The majority of the revenues from the chemical segment are derived from the custom manufacturing of specialty chemicals for specific customers.

The biofuels segment primarily produces and sells biodiesel. FutureFuel Chemical also sells petrodiesel in blends with the Company’s biodiesel and, from time to time, with no biodiesel added.

Basis of Presentation

The unaudited consolidated financial statements have been prepared by FutureFuel in accordance and consistent with the accounting policies stated in FutureFuel’s 2021 audited consolidated financial statements and should be read in conjunction with these 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.

2)	GOVERNMENT TAX CREDITS

BIODIESEL BLENDERS’ TAX CREDIT AND SMALL AGRI-BIODIESEL PRODUCER 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 BTC will expire December 31, 2022 based on current law. The Company records this credit as a reduction to cost of goods sold.

Within the law of the BTC, small agri-biodiesel producers with production capacity not in excess of 60 million gallons are eligible for an additional tax credit of $0.10 per gallon on the first 15 million gallons of agri-biodiesel sold (the “Small Agri-biodiesel Producer Tax Credit”). The Company was eligible for this credit as part of the tax provision.

CARES ACT – EMPLOYEE RETENTION TAX CREDIT

The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), was enacted on March 27, 2020, to encourage eligible employers to retain employees on their payroll. The Consolidated Appropriations Act, effective January 1, 2021 broadened the eligibility of the credit. FutureFuel is in the process of applying for this credit and will recognize the benefit of the credit once reasonable assurance can be made as to the retention of the credit.

Notes to Consolidated Financial Statements of FutureFuel Corp.

(Dollars in thousands, except per share amounts)

(Unaudited)

3)	REVENUE RECOGNITION

FutureFuel recognizes revenue when performance obligations of the customer contract are satisfied. FutureFuel sells to customers through master sales agreements or standalone purchase orders. The majority of FutureFuel's terms of sale have a single performance obligation to transfer products. Accordingly, FutureFuel recognizes revenue when control has been transferred to the customer, generally at the time of shipment or delivery of products. For certain contracts, this occurs upon delivery of the material to a FutureFuel storage location, ready for customer pickup and separated from other FutureFuel inventory. Revenue is measured as the amount of consideration FutureFuel expects to receive in exchange for transferring products and is generally based upon a negotiated price. FutureFuel sells its products directly to customers generally under agreements with payment terms of 30 to 75 days for chemical segment customers and 2 to 10 days for biofuels segment customers.

Certain of FutureFuel custom chemical contracts within the chemical segment contain a material right as defined by ASU 2014-09, Revenue from Contracts with Customers ("Topic 606"), from the provision of a customer option to purchase future goods or services at a discounted price as a result of upfront payments provided by customers. Each contract also has a performance obligation to transfer products with 30-day payment terms. FutureFuel recognizes revenue when the customer takes control of the inventory, either upon shipment or when the material is made available for pickup. 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 Topic 606. FutureFuel 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, FutureFuel estimates the expected life of the product, 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, 2022 and December 31, 2021 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 $0 and $320 and $0 and $529 for the three and six months ended June 30, 2022 and 2021, respectively. Contract liabilities are reduced as the Company transfers product to the customer under the renewal option approach. Revenue recognized in the chemical segment from the contract liability reductions were $961 and $1,014 for the three months, and $3,173 and $1,737 for the six months ended June 30, 2022 and 2021, respectively. These contract asset and liability balances are reported on the consolidated balance sheets on a contract-by-contract basis at the end of each reporting period.

Notes to Consolidated Financial Statements of FutureFuel Corp.

(Dollars in thousands, except per share amounts)

(Unaudited)

The following table provides the balances of receivables, contract assets, and contract liabilities from contracts with customers.

Contract Assets and Liability Balances	June 30, 2022		December 31, 2021
Trade receivables, included in accounts receivable*	$	23,756	$	20,780
Contract assets, included in accounts receivable	$	726	$	362
Contract liabilities, included in deferred revenue - short-term	$	7,368	$	5,944
Contract liabilities, included in deferred revenue - long-term	$	8,461	$	13,059

*Exclusive of the BTC of $13,084 and $8,232, respectively, and net of allowances for bad debt of $87 and $67, respectively, as of the dates noted.

Transaction price allocated to the remaining performance obligations:

At June 30, 2022, approximately $15,829 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 two to four years. Approximately 47% of this revenue is expected to be recognized over the next 12 months, and 53% is expected to be recognized over the subsequent 36 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.

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,
	2022		2021		2022		2021
Contract revenue from customers with > 1-year arrangements	$	6,148	$	5,771	$	16,290	$	10,877
Contract revenue from customers with < 1-year arrangements		111,592		68,291		143,656		104,646
Revenue from non-contractual arrangements		56		56		111		111
Total revenue	$	117,796	$	74,118	$	160,057	$	115,634

Timing of revenue:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Bill-and-hold revenue	$	7,971	$	7,878	$	17,247	$	15,427
Non-bill-and-hold revenue		109,825		66,240		142,810

SEC Form 10-Q filed by FutureFuel Corp.