ff20240630_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, 2024

☐	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 9, 2024: 43,763,243

PART I FINANCIAL INFORMATION

Item 1. Financial Statements.

FutureFuel Corp.

Consolidated Balance Sheets

(Dollars in thousands)

	(Unaudited)
	*June 30, 2024*		*December 31, 2023*
Assets
Cash and cash equivalents	$	115,060	$	219,444
Accounts receivable, inclusive of the blenders’ tax credit of $14,976 and $11,381, respectively, and net of allowances for expected credit losses of $145 and $55, respectively		33,386		28,406
Accounts receivable – related parties		8		1
Inventory, net		29,516		32,978
Income tax receivable		1,960		1,940
Prepaid expenses		2,190		4,346
Prepaid expenses – related parties		12		12
Other current assets		1,509		3,419
Total current assets		183,641		290,546
Property, plant and equipment, net		74,070		72,711
Other assets		3,474		3,824
Total noncurrent assets		77,544		76,535
Total Assets	$	261,185	$	367,081
Liabilities and Stockholders’ Equity
Accounts payable, inclusive of the blenders’ tax credit rebates due customers of $890 and $890	$	11,378	$	22,178
Accounts payable – related parties		42		42
Deferred revenue – current		5,000		3,863
Dividends payable		5,251		10,503
Accrued expenses and other current liabilities		11,468		4,758
Total current liabilities		33,139		41,344
Deferred revenue – non-current		9,720		12,570
Noncurrent deferred income taxes		626		-
Other noncurrent liabilities		3,305		3,287
Total noncurrent liabilities		13,651		15,857
Total liabilities		46,790		57,201
Commitments and contingencies (See Note 13)
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, none issued and outstanding		-		-
Common stock, $0.0001 par value, 75,000,000 shares authorized, 43,763,243 shares issued and outstanding as of June 30, 2024 and December 31, 2023		4		4
Additional paid in capital		204,820		282,489
Retained earnings		9,571		27,387
Total stockholders’ equity		214,395		309,880
Total Liabilities and Stockholders’ Equity	$	261,185	$	367,081

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

FutureFuel Corp.

Consolidated Statements of Operations and Comprehensive Income

(Dollars in thousands, except per share amounts)

(Unaudited)

	*Three Months Ended*						*Six Months Ended*
	June 30:						June 30:
	*2024*			*2023*			*2024*			*2023*
Revenue	$	72,409		$	85,308		$	130,690		$	159,469
Revenue – related parties		-			-			-			20
Cost of goods sold		62,788			92,626			115,492			144,562
Cost of goods sold – related parties		12			18			27			28
Distribution		910			1,216			1,407			1,774
Distribution – related parties		42			40			100			94
Gross profit (loss)		8,657			(8,592	)		13,664			13,031
Selling, general, and administrative expenses
Compensation expense		1,061			954			2,048			2,092
Other expense		1,076			874			1,839			1,883
Related party expense		153			156			306			309
Research and development expenses		916			1,007			1,822			2,079
Total operating expenses		3,206			2,991			6,015			6,363
Income (loss) from operations		5,451			(11,583	)		7,649			6,668
Interest and dividend income		1,521			1,732			4,321			4,068
Interest expense		(34	)		(34	)		(69	)		(67	)
Gain on marketable securities		-			42			-			575
Other income (expense)		2,639			(1	)		2,638			-
Other income (expense), net		4,126			1,739			6,890			4,576
Income (loss) before taxes		9,577			(9,844	)		14,539			11,244
Income tax provision		6			15			638			22
Net income (loss)	$	9,571		$	(9,859	)	$	13,901		$	11,222

Earnings (loss) per common share
Basic	$	0.22		$	(0.23	)	$	0.32		$	0.26
Diluted	$	0.22		$	(0.23	)	$	0.32		$	0.26
Weighted average shares outstanding
Basic		43,763,243			43,763,243			43,763,243			43,763,243
Diluted		43,763,243			43,763,243			43,763,243			43,764,890

Comprehensive income (loss)
Net income (loss)	$	9,571		$	(9,859	)	$	13,901		$	11,222
Other comprehensive (loss) income from unrealized net (losses) gains on available-for-sale debt securities		-			(20	)		-			2
Income tax effect		-			4			-			(1	)
Total other comprehensive (loss) income, net of tax		-			(16	)		-			1
Comprehensive income (loss)	$	9,571		$	(9,875	)	$	13,901		$	11,223

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

FutureFuel Corp.

Consolidated Statements of Stockholders’ Equity

(Dollars in thousands)

(Unaudited)

	*For the Six Months Ended June 30, 2024*
					*Accumulated*
					*Other*		*Additional*						*Total*
	*Common Stock*				*Comprehensive*		*paid-in*			*Retained*			*Stockholders’*
	*Shares*		*Amount*		*Income (Loss)*		*Capital*			*Earnings*			*Equity*
Balance - December 31, 2023		43,763,243	$	4	$	-	$	282,489		$	27,387		$	309,880
Cash dividends declared, $2.50 per common share		-		-		-		(77,691	)		(31,717	)		(109,408	)
Stock based compensation		-		-		-		22			-			22
Net income		-		-		-		-			4,330			4,330
Balance - March 31, 2024		43,763,243	$	4	$	-	$	204,820		$	-		$	204,824
Net income		-		-		-		-			9,571			9,571
Balance - June 30, 2024		43,763,243	$	4	$	-	$	204,820		$	9,571		$	214,395

	*For the Six Months Ended June 30, 2023*
					*Accumulated*
					*Other*			*Additional*					*Total*
	*Common Stock*				*Comprehensive*			*paid-in*		*Retained*			*Stockholders’*
	*Shares*		*Amount*		*(Loss) Income*			*Capital*		*Earnings*			*Equity*
Balance - December 31, 2022		43,763,243	$	4	$	(1	)	$	282,489	$	508		$	283,000
Other comprehensive income		-		-		17			-		-			17
Net income		-		-		-			-		21,081			21,081
Balance - March 31, 2023		43,763,243	$	4	$	16		$	282,489	$	21,589		$	304,098
Other comprehensive loss		-		-		(16	)		-		-			(16	)
Net loss		-		-		-			-		(9,859	)		(9,859	)
Balance - June 30, 2023		43,763,243	$	4	$	-		$	282,489	$	11,730		$	294,223

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

FutureFuel Corp.

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

	*Six Months Ended June 30,*
	*2024*			*2023*
Cash flows from operating activities
Net income	$	13,901		$	11,222
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		4,760			5,155
Amortization of deferred financing costs		51			49
Provision for deferred income taxes		626			-
Change in fair value of equity securities		-			(3,117	)
Change in fair value of derivative instruments		1,696			(3,259	)
Stock based compensation		22			2,543
Loss on disposal of property and equipment		-			8
Noncash interest expense		18			17
Changes in operating assets and liabilities:
Accounts receivable		(4,980	)		(2,369	)
Accounts receivable – related parties		(7	)		(1	)
Inventory		3,462			(40,601	)
Income tax receivable		(20	)		19
Prepaid expenses		2,156			1,706
Other assets		555			(4,502	)
Accounts payable		(11,649	)		(6,269	)
Accounts payable – related parties		-			24
Accrued expenses and other current liabilities		6,710			321
Accrued expenses and other current liabilities – related parties		-			(1	)
Deferred revenue		(1,713	)		(2,037	)
Other noncurrent liabilities		-			427
Net cash provided by (used in) operating activities		15,588			(40,665	)
Cash flows from investing activities
Collateralization of derivative instruments		(42	)		3,154
Proceeds from the sale of marketable securities		-			37,701
Capital expenditures		(5,270	)		(3,875	)
Net cash (used in) provided by investing activities		(5,312	)		36,980
Cash flows from financing activities
Payment of dividends		(114,660	)		(5,251	)
Deferred financing costs		-			(14	)
Net cash used in financing activities		(114,660	)		(5,265	)
Net change in cash and cash equivalents		(104,384	)		(8,950	)
Cash and cash equivalents at beginning of period		219,444			175,640
Cash and cash equivalents at end of period	$	115,060		$	166,690

Cash paid for income taxes	$	-		$	20
Noncash capital expenditures	$	1,182		$	244

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

Notes to Consolidated Financial Statements of FutureFuel Corp.

(Dollars in thousands, except per share and per gallon amounts)

(Unaudited)

1)	SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared by FutureFuel Corp. (“FutureFuel” or “the Company”) in accordance and consistent with the accounting policies stated in the Company's 2023 Annual Report on Form 10-K, as amended, inclusive of the audited consolidated financial statements, and should be read in conjunction with these consolidated financial statements.

In the opinion of FutureFuel, all normal recurring adjustments necessary for a fair presentation have been included in the unaudited consolidated financial statements. The unaudited consolidated financial statements have been prepared in compliance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with instructions to Form 10-Q adopted by the Securities and Exchange Commission (“SEC”). Accordingly, the unaudited consolidated financial statements do not include all the information and footnotes required by GAAP for complete financial statements and do include amounts that are based upon management estimates and judgments. Future actual results could differ from such current estimates. The unaudited consolidated financial statements include assets, liabilities, revenues, and expenses of FutureFuel and its direct and indirect wholly owned subsidiaries; namely, FutureFuel Chemical Company; FFC Grain, L.L.C.; FutureFuel Warehouse Company, L.L.C.; and Legacy Regional Transport, L.L.C. Intercompany transactions and balances have been eliminated in consolidation.

Recently Adopted Accounting Standards

No new accounting standards have been adopted recently.

Issued Accounting Standards Not Yet Adopted

In December 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which aims to address requests for improved income tax disclosures from investors that use the financial statements to make capital allocation decisions. The amendments in this ASU address the investor requests for more transparency of income tax information and apply to all entities that are subject to income taxes. The ASU is effective for years beginning after December 15, 2024, but early adoption is permitted. This ASU should be applied on a prospective basis, although retrospective application is permitted. Management is currently evaluating the impact of the changes required by the new standard on the Company's financial statements and related disclosures.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which aims to improve disclosures about a public entity’s reportable segments. This update addresses requests from investors for more detailed information about a reportable segment’s expenses in order to improve understanding of a public entity’s business activities, overall performance, and potential future cash flows. The amendments in this ASU require public business entities to disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker and are included within each reported measure of segment profit or loss. This update does not change how an entity identifies or aggregates its reportable segments or how it applies the quantitative thresholds to determine them. This update is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years starting after December 15, 2024. This ASU must be applied retrospectively to all prior periods presented. Management is currently evaluating the impact of the changes required by this new standard on the Company's financial statements and related disclosures for the year ending December 31, 2024.

Notes to Consolidated Financial Statements of FutureFuel Corp.

(Dollars in thousands, except per share and per gallon amounts)

(Unaudited)

2)	GOVERNMENT TAX CREDITS

BIODIESEL BLENDERS’ TAX CREDIT and SMALL AGRI-BIODIESEL PRODUCER TAX CREDIT and CLEAN FUEL PRODUCTION TAX CREDIT

The biodiesel Blenders’ Tax Credit (“BTC”) provides a one dollar per gallon tax credit to the blender of biomass-based diesel with at least 0.1% petroleum-based diesel fuel. The Company records this credit as a reduction to cost of goods sold as applicable sales are made.

The Further Consolidated Appropriations Act of 2020 was passed by Congress and signed into law on December 20, 2019, retroactively reinstating the BTC for 2018 and 2019 and extending it through December 31, 2022. The Inflation Reduction Act (“IRA”) extended the BTC through December 31, 2024.

As part of each law from which the BTC was reinstated, small agri-biodiesel producers with production capacity not in excess of 60 million gallons were eligible for an additional income tax credit of $0.10 per gallon on the first 15 million gallons of agri-biodiesel sold (the “Small Agri-biodiesel Producer Tax Credit”). The Company is eligible for this credit and recognizes the credit in the same accounting period as the benefit from the BTC. The benefit of this credit is recognized as a component of income tax (benefit) provision.

The IRA created the clean fuel production credit (“CFPC”) for qualifying transportation fuel produced after 2024 and sold on or before December 31, 2027. The CFPC consolidates and replaces several fuel related credits set to expire December 31, 2024 including the BTC and the Small Agri-biodiesel Producer Tax Credit.

The CFPC is an income tax credit structured on a sliding scale so that producers become eligible for larger credits as the greenhouse gas (“GHG”) emissions of the fuels they produce approach zero. For producers meeting the prevailing wage and registered apprenticeship requirements, the maximum credit is $1.00 per gallon of nonaviation fuel. For producers not meeting the prevailing wage and registered apprenticeship requirements, the maximum credit is 20 cents per nonaviation fuel gallon.

CARES ACT – EMPLOYEE RETENTION TAX CREDIT

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), was enacted on March 27, 2020, to encourage eligible employers to retain employees on their payroll through, among other things, an available employee retention tax credit. The Consolidated Appropriations Act, effective January 1, 2021 broadened the eligibility of the credit. FutureFuel has applied for this credit and will recognize the benefit of the credit once reasonable assurance can be made as to the retention of the credit.

Notes to Consolidated Financial Statements of FutureFuel Corp.

(Dollars in thousands, except per share and per gallon amounts)

(Unaudited)

3)	REVENUE RECOGNITION

The majority of revenue is from short term contracts with revenue recognized when a single performance obligation to transfer product under the terms of a contract with a customer are satisfied.

Certain of the Company's custom chemical contracts within the chemical segment contain a material right as defined by ASC Topic 606, Revenue from Contracts with Customers, from the provision of a customer option to purchase future goods or services at a discounted price as a result of upfront payments provided by customers. Each contract also has a performance obligation to transfer products with 30-day payment terms. The Company recognizes revenue when the customer takes control of the inventory, either upon shipment or when the material is made available for pick up. If the customer is deemed to take control of the inventory prior to pick up, the Company recognizes the revenue as a bill-and-hold transaction in accordance with ASC Topic 606. The Company applies the renewal option approach in allocating the transaction price to these material rights and transfer of product. As a basis for allocating the transaction price to the material right and transfer of product, the Company estimates the expected life of the contract, the expected contractual volumes to be sold over that life, and the most likely expected sales price. Each estimate is updated quarterly on a prospective basis.

Contract Assets and Liabilities:

Contract assets consist of unbilled amounts typically resulting from revenue recognized through bill-and-hold arrangements. The contract assets at June 30, 2024 and December 31, 2023 consist of unbilled revenue from one customer and unbilled capital reimbursement from another customer and are recorded as accounts receivable in the consolidated balance sheets. Contract liabilities consist of advance payment arrangements related to material rights recorded as deferred revenue in the consolidated balance sheets. Increases to contract liabilities from cash received or due for a performance obligation of chemical segment plant expansions were $0 and $32 for both the three and six months ended June 30, 2024 and 2023, respectively. Contract liabilities are reduced as the Company transfers product to the customer under the renewal option approach. Revenue recognized in the chemical segment from the contract liability reductions was $797 and $739 for the three months and $1,603 and $1,958 for the six months ended June 30, 2024 and 2023, respectively. These contract asset and liability balances are reported on the consolidated balance sheets on a contract-by-contract basis at the end of each reporting period.

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

Contract Assets and Liability Balances	*June 30, 2024*		*December 31, 2023*
Trade receivables, included in accounts receivable*	$	16,962	$	15,897
Contract assets, included in accounts receivable		1,448		1,128
Contract liabilities, included in deferred revenue - short-term		4,793		3,656
Contract liabilities, included in deferred revenue - long-term		6,578		9,318

*Exclusive of the BTC of $14,976 and $11,381, respectively, and net of allowances for expected credit losses of $145 and $55, respectively, as of the dates noted.

Transaction price allocated to the remaining performance obligations:

At June 30, 2024, approximately $11,371 of revenue is expected to be recognized from remaining performance obligations. FutureFuel expects to recognize this revenue ratably over expected sales over the expected term of its long-term contracts ranging from two to four years. Approximately 42% of this revenue is expected to be recognized over the next 12 months, and 58% is expected to be recognized over the subsequent 30 months. These amounts are subject to change based upon changes in the estimated contract life and estimated quantities to be sold over the contract life.

The Company applies the practical expedient in ASC 606-10-50-14 and excludes the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less; and (ii) contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed.

Notes to Consolidated Financial Statements of FutureFuel Corp.

(Dollars in thousands, except per share and per gallon amounts)

(Unaudited)

The following tables provide revenue from customers disaggregated by the type of arrangement and by the timing of the recognized revenue.

Disaggregation of revenue - contractual and non-contractual:

	*Three Months Ended June 30,*				*Six Months Ended June 30,*
	*2024*		*2023*		*2024*		*2023*
Contract revenue from customers with > one-year arrangements	$	8,735	$	9,562	$	17,975	$	20,027
Contract revenue from customers with < one-year arrangements		63,618		75,690		112,604		139,351
Revenue from non-contractual arrangements		56		56		111		111
Total revenue	$	72,409	$	85,308	$	130,690	$	159,489

Timing of revenue:

	*Three Months Ended June 30,*				*Six Months Ended June 30,*
	*2024*		*2023*		*2024*		*2023*
Bill-and-hold revenue	$	11,020	$	10,765	$	22,664	$	21,355
Non-bill-and-hold revenue		61,389		74,543		108,026		138,134
Total revenue	$	72,409	$	85,308	$	130,690	$	159,489

As of June 30, 2024 and December 31, 2023, $3,651 and $4,317 of bill-and-hold revenue had not shipped, respectively.

4)	INVENTORY

The carrying values of inventory were as follows as of:

	*June 30, 2024*			*December 31, 2023*
At average cost (approximates current cost)
Finished goods	$	9,427		$	16,235
Work in process		1,156			611
Raw materials and supplies		23,993			25,532
		34,576			42,378
LIFO reserve		(5,060	)		(9,400	)
Total inventory	$	29,516		$	32,978

A LIFO liquidation of $444 occurred in the six months ended June 30, 2024. No liquidation occurred in the six months ended June 30, 2023.

Notes to Consolidated Financial Statements of FutureFuel Corp.

(Dollars in thousands, except per share and per gallon amounts)

(Unaudited)

SEC Form 10-Q filed by FutureFuel Corp.