ff20220930c_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 September 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 November 9, 2022: 43,763,243

PART I FINANCIAL INFORMATION

Item 1. Financial Statements.

FutureFuel Corp.

Consolidated Balance Sheets

(Dollars in thousands)

	September 30, 2022			December 31, 2021
Assets
Cash and cash equivalents	$	171,268		$	137,521
Accounts receivable, inclusive of the blenders' tax credit of $8,462 and $8,232, at September 30, 2022 and December 31, 2021, respectively, and net of allowances for bad debt of $43 and $67 at September 30, 2022 and December 31, 2021, respectively		23,719			29,316
Accounts receivable – related parties		11			58
Inventory		17,400			26,920
Income tax receivable		2,001			9,760
Prepaid expenses		877			3,588
Prepaid expenses – related parties		12			4
Marketable securities		38,753			47,190
Other current assets		3,680			1,476
Total current assets		257,721			255,833
Property, plant and equipment, net		78,405			82,901
Other assets		5,212			5,596
Total noncurrent assets		83,617			88,497
Total Assets	$	341,338		$	344,330
Liabilities and Stockholders’ Equity
Accounts payable, inclusive of the blenders' tax credit rebates due customers of $890 and $890, respectively	$	23,955		$	14,912
Accounts payable – related parties		8,249			7,911
Deferred revenue – current		7,694			6,151
Dividends payable		2,626			-
Accrued expenses and other current liabilities		6,106			6,081
Accrued expenses and other current liabilities – related parties		-			1
Total current liabilities		48,630			35,056
Deferred revenue – non-current		11,084			16,755
Noncurrent deferred income tax liability		1,569			1,870
Other noncurrent liabilities		1,479			1,721
Total noncurrent liabilities		14,132			20,346
Total liabilities		62,762			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 September 30, 2022 and December 31, 2021		4			4
Accumulated other comprehensive income		5			178
Additional paid in capital		282,489			282,443
Retained earnings (accumulated deficit)		(3,922	)		6,303
Total stockholders’ equity		278,576			288,928
Total Liabilities and Stockholders’ Equity	$	341,338		$	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 September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Revenue	$	118,108		$	98,490		$	277,822		$	213,461
Revenue – related parties		33			192			376			855
Cost of goods sold		96,459			85,895			257,476			197,033
Cost of goods sold – related parties		873			2,889			4,089			14,826
Distribution		788			1,666			2,696			4,908
Distribution – related parties		36			40			130			136
Gross profit (loss)		19,985			8,192			13,807			(2,587	)
Selling, general, and administrative expenses
Compensation expense		979			571			2,336			1,622
Other expense		995			529			2,844			1,851
Related party expense		154			136			458			473
Research and development expenses		967			814			2,401			2,386
Total operating expenses		3,095			2,050			8,039			6,332
Income (loss) from operations		16,890			6,142			5,768			(8,919	)
Interest and dividend income		1,210			654			2,621			2,449
Interest expense		(32	)		(32	)		(97	)		(96	)
Loss on marketable securities		(590	)		(729	)		(7,956	)		(192	)
Other expense		(1	)		(14	)		(3	)		(1,369	)
Other income (expense)		587			(121	)		(5,435	)		792
Income (loss) before taxes		17,477			6,021			333			(8,127	)
Income tax provision (benefit)		1,697			(3,181	)		55			(12,037	)
Net income	$	15,780		$	9,202		$	278		$	3,910

Earnings per common share
Basic	$	0.36		$	0.21		$	0.01		$	0.09
Diluted	$	0.36		$	0.21		$	0.01		$	0.09
Weighted average shares outstanding
Basic		43,763,243			43,763,243			43,763,243			43,753,646
Diluted		43,763,243			43,763,243			43,763,243			43,753,709

Comprehensive income
Net income	$	15,780		$	9,202		$	278		$	3,910
Other comprehensive loss from unrealized net losses on available-for-sale debt securities		(71	)		(67	)		(219	)		(67	)
Income tax effect		15			14			46			14
Total other comprehensive loss, net of tax		(56	)		(53	)		(173	)		(53	)
Comprehensive income	$	15,724		$	9,149		$	105		$	3,857

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 Nine Months Ended September 30, 2022
					Accumulated
					Other			Additional		Retained			Total
	Common Stock				Comprehensive			Paid-in		Earnings			Stockholders’
	Shares		Amount		Income (Loss)			Capital		(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
Stock based compensation									46					46
Other comprehensive loss						(56	)							(56	)
Net income											15,780			15,780
Balance - September 30, 2022		43,763,243	$	4	$	5		$	282,489	$	(3,922	)	$	278,576

	For the Nine Months Ended September 30, 2021
					Accumulated
					Other			Additional		Retained			Total
	Common Stock				Comprehensive			Paid-in		Earnings			Stockholders’
	Shares		Amount		Income (Loss)			Capital		(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
Other comprehensive loss		-		-		(53	)							(53	)
Net income		-		-							9,202			9,202
Balance - September 30, 2021		43,763,243	$	4	$	155		$	282,446	$	(16,042	)	$	266,563

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

FutureFuel Corp.

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2022			2021
Cash flows from operating activities
Net income	$	278		$	3,910
Adjustments to reconcile net income to net cash from operating activities:
Depreciation		7,850			7,887
Amortization of deferred financing costs		72			72
Benefit from deferred income taxes		(255	)		(12,190	)
Change in fair value of equity securities		7,940			1,027
Change in fair value of derivative instruments		(3,053	)		2,147
(Gain) loss on the sale of investments		15			(835	)
Stock based compensation		46			-
Loss on disposal of property and equipment		60			11
Impairment of intangible asset		-			1,315
Noncash interest expense		-			24
Changes in operating assets and liabilities:
Accounts receivable		5,597			(5,086	)
Accounts receivable – related parties		47			1,344
Inventory		9,523			(9,805	)
Income tax receivable		7,759			7,895
Prepaid expenses		2,711			3,129
Prepaid expenses - related parties		(8	)		(12	)
Other assets		296			522
Accounts payable		9,257			13,379
Accounts payable – related parties		338			7,645
Accrued expenses and other current liabilities		25			(387	)
Accrued expenses and other current liabilities – related parties		(1	)		-
Deferred revenue		(4,128	)		(1,652	)
Other noncurrent liabilities		(242	)		(513	)
Net cash provided by operating activities		44,127			19,827
Cash flows from investing activities
Collateralization of derivative instruments		865			(2,518	)
Purchase of marketable securities		-			(21,671	)
Proceeds from the sale of marketable securities		263			40,652
Proceeds from the sale of property and equipment		61			-
Proceeds from the sale of intangible asset		-			93
Capital expenditures		(3,692	)		(665	)
Net cash (used in) from investing activities		(2,503	)		15,891
Cash flows from financing activities
Proceeds from the issuance of stock		-			231
Payment of dividends		(7,877	)		(117,284	)
Net cash used in financing activities		(7,877	)		(117,053	)
Net change in cash and cash equivalents		33,747			(81,335	)
Cash and cash equivalents at beginning of period		137,521			198,122
Cash and cash equivalents at end of period	$	171,268		$	116,787

Cash paid for interest	$	-		$	43
Cash paid for income taxes	$	72		$	83
Noncash investing and financing activities:
Noncash capital expenditures	$	214		$	32
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)	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 2021 Annual Report on Form 10-K, 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.

Recent Accounting Standards

No new accounting standards have been adopted recently and none are pending evaluation.

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 was set to expire December 31, 2022. On August 16, 2022, the Inflation Reduction Act of 2022 ("IRA") was signed into law. The IRA provides for new and revised tax incentives for clean energy, including the extension of the BTC through December 31, 2024. 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 recognizes 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 which the company invoices upon shipping. The contract assets at September 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 $733 and $178 and $733 and $707 for the three and nine months ended September 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 $2,037 and $456 for the three months, and $5,211 and $2,192 for the nine months ended September 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	September 30, 2022		December 31, 2021
Trade receivables, included in accounts receivable*	$	14,223	$	20,780
Contract assets, included in accounts receivable	$	1,045	$	362
Contract liabilities, included in deferred revenue - short-term	$	6,971	$	5,944
Contract liabilities, included in deferred revenue - long-term	$	7,554

SEC Form 10-Q filed by FutureFuel Corp.