UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended |
OR
| | 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: |
(Exact Name of Registrant as Specified in Its Charter)
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| (State or Other Jurisdiction of |
| (IRS Employer Identification No.) |
| Incorporation or Organization) |
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| (Address of Principal Executive Offices) | (Zip Code) | |
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| (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 |
| | | |
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.
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).
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 ☐ |
| | ☑ |
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| Non-accelerated filer ☐ |
| Smaller reporting company | |
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| Emerging growth company | |
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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
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of May 12, 2025:
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
FutureFuel Corp.
Consolidated Balance Sheets
(Dollars in thousands)
| (Unaudited) | ||||||||
| March 31, 2025 | December 31, 2024 | |||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, inclusive of the blenders’ tax credit of $ and $, respectively, and net of allowances for expected credit losses of $ and $, respectively | ||||||||
| Inventory, net | ||||||||
| Income tax receivable | ||||||||
| Prepaid expenses | ||||||||
| Prepaid expenses – related parties | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Other assets | ||||||||
| Total noncurrent assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Accounts payable, inclusive of the blenders’ tax credit rebates due customers of $ and $, respectively | $ | $ | ||||||
| Accounts payable – related parties | ||||||||
| Deferred revenue – current | ||||||||
| Dividends payable | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Deferred revenue – noncurrent | ||||||||
| Noncurrent deferred income taxes | ||||||||
| Other noncurrent liabilities | ||||||||
| Total noncurrent liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Preferred stock, $ par value, shares authorized, issued and outstanding | ||||||||
| Common stock, $ par value, shares authorized, shares issued and outstanding as of March 31, 2025 and December 31, 2024 | ||||||||
| Additional paid in capital | ||||||||
| Retained earnings (accumulated deficit) | ( | ) | ||||||
| Total stockholders’ equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
FutureFuel Corp.
Consolidated Statements of Operations and Net Income
(Dollars in thousands, except per share amounts)
(Unaudited)
| Three Months Ended |
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| March 31, |
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| 2025 |
2024 |
|||||||
| Revenue |
$ | $ | ||||||
| Cost of goods sold |
||||||||
| Cost of goods sold – related parties |
||||||||
| Distribution |
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| Distribution – related parties |
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| Gross (loss) profit |
( |
) | ||||||
| Selling, general, and administrative expenses |
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| Compensation expense |
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| Other expense |
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| Related party expense |
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| Research and development expenses |
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| Total operating expenses |
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| (Loss) income from operations |
) | |||||||
| Interest and dividend income |
||||||||
| Interest expense |
( |
) | ( |
) | ||||
| Other expense |
( |
) | ||||||
| Other income, net |
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| (Loss) income before taxes |
( |
) | ||||||
| Income tax provision |
||||||||
| Net (loss) income |
$ | ( |
) | $ | ||||
| (Loss) earnings per common share |
||||||||
| Basic |
$ | ( |
) | $ | ||||
| Diluted |
$ | ( |
) | $ | ||||
| Weighted average shares outstanding |
||||||||
| Basic |
||||||||
| Diluted |
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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 Three Months Ended March 31, 2025 | ||||||||||||||||||||
| Additional | Total | |||||||||||||||||||
| Common Stock | paid in | Retained | Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Earnings | Equity | ||||||||||||||||
| Balance - December 31, 2024 | $ | $ | $ | $ | ||||||||||||||||
| Stock based compensation | - | ( | ) | |||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance - March 31, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| For the Three Months Ended March 31, 2024 | ||||||||||||||||||||
| Additional | Total | |||||||||||||||||||
| Common Stock | paid in | Retained | Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Earnings | Equity | ||||||||||||||||
| Balance - December 31, 2023 | $ | $ | $ | $ | ||||||||||||||||
| Cash dividends declared, $ per common share | - | ( | ) | ( | ) | ( | ) | |||||||||||||
| Stock based compensation | - | |||||||||||||||||||
| Net income | - | |||||||||||||||||||
| Balance - March 31, 2024 | $ | $ | $ | $ | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
FutureFuel Corp.
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Amortization of deferred financing costs | ||||||||
| Provision for deferred income taxes | ||||||||
| Change in fair value of derivative instruments | ||||||||
| Stock based compensation | ||||||||
| Gain on disposal of property and equipment | ( | ) | ||||||
| Noncash interest expense | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Accounts receivable – related parties | ( | ) | ||||||
| Inventory | ) | ( | ) | |||||
| Income tax receivable | ||||||||
| Prepaid expenses | ||||||||
| Prepaid expenses – related parties | ( | ) | ||||||
| Other assets | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ( | ) | ||||
| Accounts payable – related parties | ( | ) | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Deferred revenue | ( | ) | ( | ) | ||||
| Other noncurrent liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Collateralization of derivative instruments | ( | ) | ( | ) | ||||
| Proceeds from the sale of property and equipment | ||||||||
| Capital expenditures | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Payment of dividends | ( | ) | ( | ) | ||||
| Deferred financing costs | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Net change in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Cash dividends declared in the current period, not paid | $ | $ | ||||||
| Noncash investing and financing activities: | ||||||||
| Noncash capital expenditures | $ | ( | ) | $ | ||||
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 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 2024 Annual Report on Form 10-K, inclusive of the audited consolidated financial statements, and should be read in conjunction with these consolidated financial statements. Certain reclassifications were made to prior year amounts to conform to the 2025 presentation.
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; FutureFuel Warehouse Company, L.L.C.; and Legacy Regional Transport, L.L.C. Intercompany transactions and balances have been eliminated in consolidation.
Some of the Company's manufacturing equipment requires periodic, planned shutdowns of significant parts of our facility in order to perform necessary inspections, cleanings, and maintenance activities, referred to as turnarounds. The cost of turnarounds incurred for routine repairs and maintenance or unplanned outages at our facility are expensed as incurred.
Recently Adopted Accounting Standards
Accounting standards updates (“ASU”) No. 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures: The FASB issued this ASU in December 2023 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. The Company has adopted the new standard effective for the year ended December 31, 2025; however, the required disclosures are effective for our 2025 annual report. The adoption will have an immaterial impact on the Company's financial statements and disclosures.
Accounting Standards Issued Not Yet Adopted as of March 31, 2025
ASU No. 2024-03 Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses: The FASB issued this ASU in November 2024 which aims to provide investors with more useful information about an entity’s expenses by improving disclosures on income statement expenses. The amendments in this ASU require all public business entities to disclose disaggregated information about specific categories underlying certain income statement expense line items. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is evaluating this accounting standard and currently does not expect the adoption to have a material impact on its financial statements and disclosures.
| 2) |
GOVERNMENT TAX CREDITS |
BIODIESEL BLENDERS' TAX CREDIT, SMALL AGRI-BIODIESEL PRODUCER TAX CREDIT, and CLEAN FUEL PRODUCTION TAX CREDIT
The biodiesel Blenders’ Tax Credit (“BTC”) provided 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 recorded this credit as a reduction to cost of goods sold as applicable sales were made. The BTC expired December 31, 2024.
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 was eligible for this credit and recognized the credit in the same accounting period as the benefit from the BTC. The benefit of this credit was recognized as a component of income tax (benefit) provision. This credit expired December 31, 2024.
The Inflation Reduction Act created the clean fuel production credit (“CFPC”) in August 2022 for qualifying transportation fuel produced and sold in the years 2025 through 2027.
The CFPC is a nonrefundable and transferable 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 $0.20 per nonaviation fuel gallon. The Company is a registered producer that meets the wage and apprenticeship requirements to receive the credit applicable to the level of GHG emissions for the fuel the Company produces. However, there is a lack of clarity from the U.S. Treasury Department with respect to the CFPC with final rules yet to be issued. In addition, there has been a delay of the Renewable Fuel Obligation for 2026. For the three months ended March 31, 2025, the Company had only sold inventory that was produced in 2024 which was not eligible for the CFPC; therefore, no CFPC credits were recognized for the three months ended March 31, 2025. As eligible inventory is produced and sold, the Company will account for the CFPC as a reduction to cost of goods sold when product is sold.
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 receipt of the credit.
| 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 is 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.
The Company leases warehouse space under a short-term lease agreement with a term of twelve months. Lease revenue recognized under this agreement was $
Contract Assets and Liabilities:
Contract assets consist of unbilled amounts typically resulting from revenue recognized through bill-and-hold arrangements. The contract assets at March 31, 2025 and December 31, 2024 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 $
The following table provides the balance of receivables, contract assets, and contract liabilities from contracts with customers.
| Contract Assets and Liability Balances | March 31, 2025 | December 31, 2024 | December 31, 2023 | |||||||||
| Trade receivables, included in accounts receivable* | $ | $ | $ | |||||||||
| Contract assets, included in accounts receivable | ||||||||||||
| Contract liabilities, included in deferred revenue - short-term | ||||||||||||
| Contract liabilities, included in deferred revenue - long-term | ||||||||||||
*Exclusive of the BTC of $
Transaction price allocated to the remaining performance obligations:
At March 31, 2025, approximately $
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 March 31, | ||||||||
| 2025 | 2024 | |||||||
| Contract revenue from customers with > one-year arrangements | $ | $ | ||||||
| Contract revenue from customers with < one-year arrangements | ||||||||
| Revenue from non-contractual arrangements | ||||||||
| Total revenue | $ | $ | ||||||
Timing of revenue:
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Bill-and-hold revenue | $ | $ | ||||||
| Non-bill-and-hold revenue | ||||||||
| Total revenue | $ | $ | ||||||
As of March 31, 2025 and December 31, 2024, $
| 4) | INVENTORY |
The carrying values of inventory were as follows as of:
| March 31, 2025 | December 31, 2024 | |||||||
| At average cost (approximates current cost) | ||||||||
| Finished goods | $ | $ | ||||||
| Work in process | ||||||||
| Raw materials | ||||||||
| LIFO reserve | ( | ) | ( | ) | ||||
| Total inventory | $ | $ | ||||||
There was
| 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 2025 or 2024. 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 loss of $
The volumes and carrying values of FutureFuel’s derivative instruments were as follows at:
| Asset (Liability) | ||||||||||||||||
| March 31, 2025 | December 31, 2024 | |||||||||||||||
| Contract Quantity | Fair Value | Contract Quantity | Fair Value | |||||||||||||
| Regulated fixed price future commitments, included in other current assets (in thousand barrels) | $ | ( | ) | $ | ( | ) | ||||||||||
The margin account maintained with a broker to collateralize these derivative instruments carried an account balance of $
| 6) | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
Accrued expenses and other current liabilities consisted of the following at:
| March 31, 2025 | December 31, 2024 | |||||||
| Refundable deposit | $ | $ | ||||||
| Employment tax credit | ||||||||
| Accrued employee liabilities | ||||||||
| Accrued property, franchise, motor fuel and other taxes | ||||||||
| Other | ||||||||
| Total | $ | $ | ||||||
| 7) | BORROWINGS |
On February 21, 2025, 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 and amended on March 30, 2020 (as amended, the “Prior Credit Agreement”) and further amended on February 21, 2025 with the lender party thereto, Regions Bank as administrative agent, collateral agent, and syndication agent. The Credit Agreement consists of a -year revolving credit facility in a dollar amount of up to $
The interest rate floats at the following margins over Secured Overnight Financing Rate ("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 | % | % | % | |||||||||
| ≥ 1.00:1.0 And < 1.50:1.0 | % | % | % | |||||||||
| ≥ 1.50:1.0 And < 2.00:1.0 | % | % | % | |||||||||
| ≥ 2.00:1.0 And < 2.50:1.0 | % | % | % | |||||||||
| ≥ 2.50:1.0 | % | % | % | |||||||||
The terms of the Credit Facility contain certain negative covenants and conditions including a maximum consolidated leverage ratio and a minimum consolidated interest coverage ratio.
There were borrowings under the Credit Agreement at March 31, 2025 or December 31, 2024.
| 8) | INCOME TAX PROVISION |
The following table summarizes the income tax provision.
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Income tax provision | $ | $ | ||||||
| Effective tax rate | % | % | ||||||
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, was comprised primarily of an increase in the valuation allowance against net deferred assets, plus immaterial state taxes and miscellaneous items.
| 9) | EARNINGS PER SHARE |
In the three months ended March 31, 2025 and 2024, FutureFuel used the treasury method in computing earnings per share.
Basic and diluted earnings per common share were computed as follows:
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Numerator: | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Denominator: | ||||||||
| Weighted average shares outstanding – basic | ||||||||
| Effect of dilutive securities: | ||||||||
| Stock options and other awards | ||||||||
| Weighted average shares outstanding – diluted | ||||||||
| Basic (loss) earnings per share | $ | ( | ) | $ | ||||
| Diluted (loss) earnings per share | $ | ( | ) | $ | ||||
For the three months ended March 31, 2025 and 2024,
| 10) | RELATED PARTY TRANSACTIONS |
FutureFuel enters into transactions with companies affiliated with or controlled by a director and significant shareholder. 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 cost of goods sold and distribution are the result of net sales and purchases of blended biodiesel with these related parties along with the associated expense from storage and terminalling services provided by these related parties.
| 11) |
SEGMENT INFORMATION |
FutureFuel has reportable segments organized along similar product groups – chemicals and biofuels. The chief operating decision maker ("CODM”) is Roeland Polet, the chief executive officer. The CODM reviews the significant components for each of our segments. The CODM evaluates the performance of each reportable segment and decides how to allocate resources based on segment gross profit (loss), which includes the revenue and expenses that are directly attributable to management of each segment. The CODM uses segment gross profit (loss) to assess the income generated by each reportable segment and to decide which reportable segment to reinvest profits or pay dividends. Segment gross profit (loss) is also used to analyze performance against the budget and the Company’s competitors.
Chemicals
FutureFuel’s chemical segment manufactures diversified chemical products that are sold externally to third party customers. This segment is composed of 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”); biodiesel production byproducts; and revenue and profits from Legacy Regional Transport. 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 March 31, 2025, FutureFuel held
Summary of business by segment
| Three months ended March 31, 2025 |
||||||||||||
| Chemical |
Biofuel |
Total |
||||||||||
| Revenue |
$ | $ | $ | |||||||||
| Less: |
||||||||||||
| Cost of goods sold |
||||||||||||
| Distribution |
||||||||||||
| Segment gross loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
| Reconciliation of Segment gross loss to Net loss before income taxes: |
||||||||||||
| Selling, general, and administrative expenses |
$ | |||||||||||
| Research and development expenses |
||||||||||||
| Other income, net |
( |
) | ||||||||||
| Net loss before income taxes |
$ | ( |
) | |||||||||
| Three months ended March 31, 2024 |
||||||||||||
| Chemical |
Biofuel |
Total |
||||||||||
| Revenue |
$ | $ | $ | |||||||||
| Less: |
||||||||||||
| Cost of goods sold |
||||||||||||
| Distribution |
||||||||||||
| Segment gross profit |
$ | $ | $ | |||||||||
| Reconciliation of Segment gross profit to Net income before income taxes: |
||||||||||||
| Selling, general, and administrative expenses |
$ | |||||||||||
| Research and development expenses |
||||||||||||
| Other income, net |
( |
) | ||||||||||
| Net income before income taxes |
$ | |||||||||||
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) | 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.
| 14) |
SUBSEQUENT EVENTS |
The Company evaluated subsequent events that would require an adjustment to the Company’s consolidated financial statements or require disclosure in the notes to the consolidated financial statements through the date of issuance of the consolidated financial statements. Where applicable, the notes to these consolidated financial statements have been updated to discuss significant subsequent events which have occurred.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations of FutureFuel Corp. (“FutureFuel”, “the Company”, “we”, or “our”) should be read together with our consolidated financial statements, including the notes thereto, set forth herein and in our 2024 Annual Report on Form 10-K. This discussion contains forward-looking statements that reflect our current views with respect to future events and financial performance. Actual results may differ materially from those anticipated in these forward-looking statements. See “Forward-Looking Information” below for additional discussion regarding risks associated with forward-looking statements.
Unless otherwise stated, all dollar amounts are in thousands.
Overview
Our Company is managed and reported in two reporting segments: chemicals and biofuels. Within the chemical segment are two product groupings: custom chemicals and performance chemicals. The custom product group is composed of specialty chemicals manufactured for a single customer whereas the performance product group is composed of chemicals manufactured for multiple customers. The biofuel segment is composed of one product group. Management believes that the diversity of each segment strengthens the company in the ability to utilize resources and is committed to growing each segment.
Within the United States Environmental Protection Agency (“EPA”) Renewable Fuel Standard (“RFS”), we generate 1.5 Renewable Identification Numbers (“RINs”) for each gallon of biodiesel sold in the United States with a classification of a D4 or D6 RIN. RINs are used to monitor the level of renewable fuel traded in a given year in accordance with RFS within the EPA moderated transaction system. 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.
Summary of Financial Results
Set forth below is a summary of certain consolidated financial information for the periods indicated.
| Three Months Ended March 31, |
||||||||||||||||
| Dollar |
% |
|||||||||||||||
| 2025 |
2024 |
Change |
Change |
|||||||||||||
| Revenue |
$ | 17,538 | $ | 58,281 | $ | (40,743 | ) | (70 | )% | |||||||
| (Loss) income from operations |
$ | (18,838 | ) | $ | 2,198 | $ | (21,036 | ) | na |
|||||||
| Net (loss) income |
$ | (17,643 | ) | $ | 4,330 | $ | (21,973 | ) | na |
|||||||
| (Loss) earnings per common share: |
||||||||||||||||
| Basic |
$ | (0.40 | ) | $ | 0.10 | $ | (0.50 | ) | na |
|||||||
| Diluted |
$ | (0.40 | ) | $ | 0.10 | $ | (0.50 | ) | na | |||||||
| Adjusted EBITDA |
$ | (16,057 | ) | $ | 7,108 | $ | (23,165 | ) | na |
|||||||
We use adjusted EBITDA as a key operating metric to measure both performance and liquidity. Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is not a substitute for operating income, net income, or cash flow from operating activities (each as determined in accordance with GAAP) as a measure of performance or liquidity. Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of results as reported under GAAP. We define adjusted EBITDA as net (loss) income before interest, income taxes, depreciation, and amortization expenses, excluding, when applicable, non-cash stock-based compensation expenses, public offering expenses, acquisition-related transaction costs, purchase accounting adjustments, losses on disposal of property and equipment, non-cash gains or losses on derivative instruments, and other non-operating income or expenses. Information relating to adjusted EBITDA is provided so that investors have the same data that we employ in assessing the overall operation and liquidity of our business. Our calculation of adjusted EBITDA may be different from similarly titled measures used by other companies; 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. 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. This measure isolates the effects of certain items, including depreciation and amortization (which may vary among our operating segments without any correlation to their underlying operating performance), non-cash stock-based compensation expense (which is a non-cash expense that varies widely among similar companies), and non-cash gains and losses on derivative instruments (which can cause net income to appear volatile from period to period relative to the sale of the underlying physical product).
We utilize commodity derivative instruments primarily to attempt to mitigate the effect of commodity price volatility and to provide greater certainty of cash flows associated with sales of our commodities. We utilize mark-to-market accounting to account for these instruments. Thus, our results in any given period can be impacted, sometimes significantly, by changes in market prices relative to our contract price along with the timing of the valuation change in the derivative instruments relative to the sale of biofuel. We include the mark-to-market or non-cash portion of this item as an adjustment to adjusted EBITDA as we believe it provides a relevant indicator of the underlying performance of our business in a given period.
The following table reconciles net (loss) income, the most directly comparable GAAP performance financial measure, with adjusted EBITDA.
| Three Months Ended March 31, |
||||||||
| 2025 |
2024 |
|||||||
| Net (loss) income |
$ | (17,643 | ) | $ | 4,330 | |||
| Depreciation |
2,328 | 2,615 | ||||||
| Non-cash stock-based compensation |
226 | 22 | ||||||
| Interest and dividend income |
(1,237 | ) | (2,800 | ) | ||||
| Non-cash interest expense and amortization of deferred financing costs |
35 | 35 | ||||||
| Gain on disposal of property and equipment |
(31 | ) | - | |||||
| Unrealized loss on derivative instruments |
259 | 2,274 | ||||||
| Income tax (benefit) provision |
6 | 632 | ||||||
| Adjusted EBITDA |
$ | (16,057 | ) | $ | 7,108 | |||
The following table reconciles cash flows from operations, the most directly comparable GAAP liquidity financial measure, with adjusted EBITDA.
| Three Months Ended March 31, |
||||||||
| 2025 |
2024 | |||||||
| Net cash used in operating activities |
$ | (5,395 | ) | $ | (12,211 | ) | ||
| Deferred income taxes, net |
- | (626 | ) | |||||
| Interest and dividend income |
(1,237 | ) | (2,800 | ) | ||||
| Income tax provision |
6 | 632 | ||||||
| Change in operating assets and liabilities, net |
(9,431 | ) | 22,113 | |||||
| Adjusted EBITDA |
$ | (16,057 | ) | $ | 7,108 | |||
Results of Operations
Consolidated
| Three Months Ended March 31, |
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| Change |
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| 2025 |
2024 |
Amount |
% | |||||||||||||
| Revenues |
$ | 17,538 | $ | 58,281 | $ | (40,743 | ) | (70 | )% | |||||||
| Volume/product mix effect |
(37,805 | ) | (65 | )% | ||||||||||||
| Price effect |
(2,938 | ) | (5 | )% | ||||||||||||
| Gross (loss) profit |
(14,563 | ) | 5,007 | (19,570 | ) | na | ||||||||||
| Operating expenses |
(4,275 | ) | (2,809 | ) | (1,466 | ) | (52 | )% | ||||||||
| Other income, net |
1,201 | 2,764 | (1,563 | ) | (57 | )% | ||||||||||
| Income tax provision |
6 | 632 | (626 | ) | (99.1 | )% | ||||||||||
| Net (loss) income |
$ | (17,643 | ) | $ | 4,330 | $ | (21,973 | ) | na |
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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. This adjustment increased gross profit $625 in the current three-month period as compared to an increase of $3,028 in the same period of the prior year.
Operating expenses
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.
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.
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 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.
Chemical Segment
| Three Months Ended March 31, |
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| Change |
||||||||||||||||
| 2025 |
2024 |
Amount |
% | |||||||||||||
| Revenues |
$ | 9,365 | $ | 18,059 | $ | (8,694 | ) | (48 | )% | |||||||
| Volume/product mix effect |
(7,949 | ) | (44 | )% | ||||||||||||
| Price effect |
(745 | ) | (4 | )% | ||||||||||||
| Gross (loss) profit |
$ | (5,729 | ) | $ | 4,021 | $ | (9,750 | ) | na | |||||||
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.
Biofuel Segment
| Three Months Ended March 31, |
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| Change |
||||||||||||||||
| 2025 |
2024 |
Amount |
% | |||||||||||||
| Revenues |
$ | 8,173 | $ | 40,222 | $ | (32,049 | ) | (80 | )% | |||||||
| Volume/product mix effect |
(29,856 | ) | (74 | )% | ||||||||||||
| Price effect |
(2,193 | ) | (6 | )% | ||||||||||||
| Gross (loss) profit |
$ | (8,834 | ) | $ | 986 | $ | (9,820 | ) | na | |||||||
Biofuels revenue in the three months ended March 31, 2025, decreased $32,049 as compared to the same period of 2024. This decrease resulted from 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. No assurances can be given that we will continue to sell to such major refiners, or, if we do sell, the volume we will sell or the profit margin we will realize. We do not believe that the loss of these customers would have a material adverse effect on our biofuels segment or on us as a whole because: (i) we believe that we could readily sell our biodiesel to other customers on equivalent terms as potential demand from other customers for biodiesel exceeds our production capacity; (ii) our sales to these customers are not under fixed terms and the customers have no fixed obligation to purchase any minimum quantities except as stipulated by short-term purchase orders; and (iii) the prices we receive from these customers are based upon then-market rates, as would be the case with sales of this commodity to other customers.
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. This adjustment increased gross profit $339 in the current three-month period as compared to an increase in gross profit of $2,276 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.
For our derivative activity, we recognize all derivative instruments as either assets or liabilities at fair value in our consolidated balance sheets. The realized and unrealized derivative gains and losses are recorded as cost of goods sold. Our derivative instruments do not qualify for hedge accounting under the specific guidelines of ASC Topic 815, Derivatives and Hedging. None of the derivative instruments are designated and accounted for as hedges.
The volumes and carrying values of our derivative instruments included in other current assets were as follows:
| Asset (Liability) |
||||||||||||||||
| March 31, 2025 |
December 31, 2024 |
|||||||||||||||
| Contract Quantity |
Fair Value |
Contract Quantity |
Fair Value |
|||||||||||||
| Regulated fixed price future commitments (in thousand barrels) |
120 | $ | (494 | ) | 100 | $ | (235 | ) | ||||||||
| *All derivative instruments are entered into with the standard contract terms and conditions in accordance with major trading authorities of the New York Mercantile Exchange. |
Critical Accounting Estimates
Revenue Recognition
The Company recognizes revenue under ASC Topic 606, Revenue from Contracts with Customers. Certain long-term contracts had upfront non-cancellable payments considered material rights. The Company applied the renewal option approach in allocating the transaction price to the material rights. For each of these contracts, the Company estimated the expected contractual volumes to be sold at the most likely expected sales price as a basis for allocating the transaction price to the material right. Estimated amortization is updated quarterly on a prospective basis. These custom chemical contracts have payment terms of 30 days. See Note 3 to our consolidated financial statements for additional information.
For most product sales, revenue is recognized when product is shipped from our facilities and risk of loss and title have passed to the customer, which is in accordance with our customer contracts and the stated shipping terms. Nearly all custom manufactured products are manufactured under written master service agreements. Performance chemicals and biodiesel are generally sold pursuant to the terms of written purchase orders. In general, customers do not have any rights of return, except for quality disputes. All of our products are tested for quality before shipment, and historically returns have been inconsequential and we typically do not offer rebates.
Biodiesel selling prices can at times fluctuate based on the timing of unsold, internally generated RINs. From time to time, sales of biodiesel are on a “RINs-free” basis. Such method of selling results in applicable RINs being held. The value of the RINs is not reflected in revenue until such time as the RIN sale has been completed.
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. These sales were subject to written monthly purchase orders. The product was custom manufactured and stored at the customer’s request and could not be sold to another buyer. Credit and payment terms for bill-and-hold customers are similar to other custom chemicals customers. Revenues under bill-and-hold arrangements were $4,590 and for the 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.
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, |
||||||||
| 2025 |
2024 |
|||||||
| Net cash used in operating activities |
$ | (5,395 | ) | $ | (12,211 | ) | ||
| Net cash used in investing activities |
(4,082 | ) | (3,485 | ) | ||||
| Net cash used in financing activities |
(2,993 | ) | (2,626 | ) | ||||
We believe that existing cash balances and cash flow to be generated from operating activities and borrowing capacity under the amended and restated credit agreement will be sufficient to fund operations, product development, cash dividends, and capital requirements for the foreseeable future.
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.
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. This $597 increase in cash used was primarily due to an increase in capital expenditure of $1,730 partially offset by the change in the collateralization of derivative instruments of $1,102.
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.
Credit Facility
We have a credit agreement, as amended 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. The facility terminates on February 21, 2030. See Note 7 to our consolidated financial statements for additional information regarding our credit agreement.
We intend to fund future capital requirements for our businesses from cash flow as well as from existing cash, cash investments, and, if the need should arise, borrowings under our credit facility. We do not believe there will be a need to issue any securities to fund such capital requirements.
Dividends
Regular cash dividends of $0.06 per share were paid on our common stock in each quarter of 2025 and 2024. The regular cash dividend amounted to $2,628 and $2,626 in 2025 and 2024, respectively. The declaration of these regular quarterly cash dividends was made in the three months ended December 31, 2024, and December 31, 2023, respectively.
Capital Management
As a result of our initial equity offering, our subsequent positive operating results, the exercise of warrants, and the issuance of shares in our at-the-market offering, we accumulated excess working capital. Some of this excess working capital has been paid out as special and regular cash dividends. Third parties have not placed significant restrictions on our working capital management decisions.
A significant portion of these funds were held in cash or cash equivalents at multiple financial institutions such as depositary accounts, money market accounts, and other similar accounts at selected financial institutions.
Off- Balance Sheet Arrangements
We engage in two types of transactions to mitigate the impacts of changes in prices for both commodity sales and purchases. 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”). 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. The purchase of biofuels feedstock generally involves two risk components: basis and price. Basis covers any refining or processing required as well as transportation. Price covers the purchases of the actual agricultural commodity. Both basis and price fluctuate over time. A supply agreement with a vendor constitutes a hedge when we have committed to a certain volume of feedstock in a future period and have fixed the basis for that volume.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
All dollar amounts expressed as numbers in these Market Risk Disclosures are in thousands (except per share amounts).
In recent years, general economic inflation has not had a material adverse impact on our profit, as we have passed some price increases along to our customers. However, we are subject to certain market risks as described below.
Market risk represents the potential loss arising from adverse changes in market rates and prices. Commodity price risk is inherent in the chemicals and biofuels business both with respect to inputs (electricity, coal, raw materials, biofuel feedstock, etc.) and outputs (manufactured chemicals and biofuels).
We seek to mitigate our market risks associated with the manufacturing and sale of chemicals by entering into long-term sales contracts that include contractual market price adjustment protections to allow changes in market prices of key raw materials to be passed on to the customer. Such price protections are not always obtained, however, and some raw material price risk remains significant.
In order to manage price risk caused by market fluctuations in biofuel prices, we may enter into exchange-traded commodity futures and options contracts. We account for these derivative instruments in accordance with ASC 815. 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. We had no derivative instruments that qualified under these rules as designated accounting hedges in the first three months of 2025 or 2024. Changes in the fair value of our derivative instruments are recognized at the end of each accounting period and recorded in the consolidated statement of operations as a component of the cost of goods sold within the biodiesel segment.
Our immediate recognition of derivative instrument gains and losses can cause net income to be volatile from period to period due to the timing of the change in value of the derivative instruments relative to the volume of biofuel being sold. At March 31, 2025 and December 31, 2024, the fair value of our derivative instruments was a net liability of $494 and $235, respectively.
Our gross profit will be impacted by the prices we pay for raw materials and conversion costs (costs incurred in the production of chemicals and biofuels) for which we do not possess contractual market price adjustment protection. These items are principally composed of yellow grease, used cooking oil, and cottonseed oil. The availability and price of these items are subject to fluctuations due to unpredictable factors such as weather conditions, overall economic conditions, governmental policies, commodity markets, and global supply and demand.
We prepared a sensitivity analysis of our exposure to market risk with respect to key raw materials and conversion costs for which we do not possess contractual market price adjustment protections, based on average prices for the first three months of 2025. Assuming that the prices of the associated finished goods could not be increased and assuming no change in quantities sold, there were no raw materials or conversion costs for which a hypothetical, adverse 10% change in the average price of the commodity would result in a 1% or greater decrease in gross profit.
We had no borrowings at March 31, 2025, or December 31, 2024, and as such, we were not exposed to interest rate risk for those periods. Due to the relative insignificance of transactions denominated in foreign currency, we consider our foreign currency risk to be immaterial.
Item 4. Controls and Procedures.
Management’s Evaluation of our Disclosure Controls and Procedures
Under the supervision and with the participation of our chief executive officer and our principal financial officer and other senior management personnel, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e)) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on that evaluation, our chief executive officer and our principal financial officer have concluded that these disclosure controls and procedures, at September 30, 2024, were effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act are recorded, processed, summarized, and reported accurately and within the time periods specified in the SEC's rules and forms.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
We are not a party to, nor is any of our property subject to, any material pending legal proceedings, other than ordinary routine litigation incidental to our business. However, from time to time, we may be a party to, or a target of, lawsuits, claims, investigations, and proceedings, including product liability, personal injury, asbestos, patent and intellectual property, commercial, contract, environmental, antitrust, health and safety, and employment matters, which we expect to be handled and defended in the ordinary course of business. While we are unable to predict the outcome of any matters currently pending, we do not believe that the ultimate resolution of any such pending matters will have a material adverse effect on our overall financial condition, results of operations, or cash flows. However, adverse developments could negatively impact earnings or cash flows in future periods.
Item 1A. Risk Factors.
There have been no material changes to the risk factors we previously disclosed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
None.
Item 5. Other Information.
Insider Trading Arrangements
There have been adoptions or terminations of Rule 10b5-1 plan or non-Rule 10b5-1 trading arrangements by any Section 16 officer or director of the Company during the quarter ended March 31, 2025.
Item 6. Exhibits.
Special Note Regarding Forward-Looking Information
This report, and the documents incorporated by reference into this report contain forward-looking statements. Forward-looking statements deal with our current plans, intentions, beliefs, and expectations, and statements of future economic performance. Statements containing such terms as “believe,” “do not believe,” “plan,” “expect,” “intend,” “estimate,” “anticipate,” and other phrases of similar meaning are considered to contain uncertainty and are forward-looking statements. In addition, from time to time we or our representatives have made or will make forward-looking statements orally or in writing. Furthermore, such forward-looking statements may be included in various filings that we make with the SEC, or in press releases, or in oral statements made by or with the approval of one of our authorized executive officers.
These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. Factors that might cause actual results to differ include, but are not limited to, those set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in FutureFuel’s Annual Report on Form 10-K for the year ended December 31, 2024 and in our future filings made with the SEC. You should not place undue reliance on any forward-looking statements contained in this report which reflect our management’s opinions only as of their respective dates. Except as required by law, we undertake no obligation to revise or publicly release the results of any revisions to forward-looking statements. The risks and uncertainties described in this report and in subsequent filings with the SEC are not the only ones we face. New factors emerge from time to time, and it is not possible for us to predict which will arise. There may be additional risks not presently known to us or that we currently believe are immaterial to our business. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. If any such risks occur, our business, operating results, liquidity, and financial condition could be materially affected in an adverse manner. You should consult any additional disclosures we have made or will make in our reports to the SEC on Forms 10-K, 10-Q, and 8-K, and any amendments thereto. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this report.
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| FUTUREFUEL CORP. |
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| By: |
/s/ Roeland Polet |
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| Roeland Polet, Chief Executive Officer |
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| Date: May 12, 2025 |
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| By: |
/s/ Rose M. Sparks |
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| Rose M. Sparks, Chief Financial Officer |
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| and Principal Financial Officer |
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| Date: May 12, 2025 |
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