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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, 2020

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: 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 7, 2020: 43,743,243  

 

 

 

 

PART I FINANCIAL INFORMATION

   

Item 1. Financial Statements.

 

 

FutureFuel Corp.

Consolidated Balance Sheets

(Dollars in thousands)

 

   

(Unaudited)

         
   

June 30, 2020

   

December 31, 2019

 

Assets

               

Cash and cash equivalents

  $ 187,823     $ 243,331  

Accounts receivable, inclusive of the blenders' tax credit of $16,307 and $97,295 at June 30, 2020 and December 31, 2019, respectively, and net of allowances for bad debt of $53 and $0 at June 30, 2020 and December 31, 2019, respectively

    29,223       110,264  

Accounts receivable – related parties

    312       4,602  

Inventory

    42,183       37,573  

Income tax receivable

    27,442       8,062  

Prepaid expenses

    1,150       1,932  

Prepaid expenses – related parties

    12       12  

Marketable securities

    62,095       73,620  

Other current assets

    4,228       1,493  

Total current assets

    354,468       480,889  

Property, plant and equipment, net

    95,348       98,597  

Intangible assets

    1,408       1,408  

Other noncurrent assets

    5,622       5,611  

Total noncurrent assets

    102,378       105,616  

Total Assets

  $ 456,846     $ 586,505  

Liabilities and Stockholders’ Equity

               

Accounts payable, inclusive of the blenders' tax credit rebates due customers of $6,802 and $39,423

  $ 31,503     $ 61,299  

Accounts payable – related parties

    1,475       1,255  

Deferred revenue – short-term

    3,427       5,237  

Dividends payable

    5,249       10,498  

Accrued expenses and other current liabilities

    6,982       4,410  

Accrued expenses and other current liabilities – related parties

    -       64  

Total current liabilities

    48,636       82,763  

Deferred revenue – long-term

    22,442       21,291  

Noncurrent deferred income tax liability

    13,620       12,965  

Other noncurrent liabilities

    2,204       2,388  

Total noncurrent liabilities

    38,266       36,644  

Total liabilities

    86,902       119,407  

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, 43,743,243, issued and outstanding at June 30, 2020 and December 31, 2019

    4       4  

Accumulated other comprehensive income

    133       296  

Additional paid in capital

    282,215       282,166  

Retained earnings

    87,592       184,632  

Total stockholders’ equity

    369,944       467,098  

Total Liabilities and Stockholders’ Equity

  $ 456,846     $ 586,505  

 

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

 

 

1

 

 

 FutureFuel Corp.

Consolidated Statements of Operations and Comprehensive Income

(Dollars in thousands, except per share amounts)

(Unaudited)

 

  

Three Months Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 

Revenue

 $47,310  $70,076  $99,682  $117,498 

Revenue – related parties

  112   788   822   1,867 

Cost of goods sold

  43,469   61,501   76,250   101,566 

Cost of goods sold – related parties

  1,342   4,063   3,557   7,859 

Distribution

  1,657   1,994   3,297   3,319 

Distribution – related parties

  43   36   90   89 

Gross profit

  911   3,270   17,310   6,532 

Selling, general, and administrative expenses

                

Compensation expense

  724   620   1,579   1,335 

Other expense

  403   547   985   1,048 

Related party expense

  155   130   303   259 

Research and development expenses

  768   788   1,603   1,494 

Total operating expenses

  2,050   2,085   4,470   4,136 

(Loss) income from operations

  (1,139)  1,185   12,840   2,396 

Interest and dividend income

  1,519   2,750   3,486   5,112 

Interest expense

  (31)  (44)  (87)  (87)

Gain (loss) on marketable securities

  1,573   826   (8,486)  3,753 

Other income (expense)

  8,348   (113)  8,348   (113)

Other income

  11,409   3,419   3,261   8,665 

Income before taxes

  10,270   4,604   16,101   11,061 

Income tax (benefit) provision

  (4,889)  917   (18,101)  1,875 

Net income

 $15,159  $3,687  $34,202  $9,186 
                 

Earnings per common share

                

Basic

 $0.35  $0.08  $0.78  $0.21 

Diluted

 $0.35  $0.08  $0.78  $0.21 

Weighted average shares outstanding

                

Basic

  43,743,243   43,743,243   43,743,243   43,743,243 

Diluted

  43,743,740   43,743,243   43,743,491   43,746,109 
                 

Comprehensive income

                

Net income

 $15,159  $3,687  $34,202  $9,186 

Other comprehensive income (loss) from unrealized net gains (losses) on available-for-sale debt securities

  190   22   (207)  278 

Income tax effect

  (40)  (5)  44   (59)

Total other comprehensive income (loss), net of tax

  150   17   (163)  219 

Comprehensive income

 $15,309  $3,704  $34,039  $9,405 

  

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

 

2

 

 

FutureFuel Corp.

Consolidated Statements of Stockholders’ Equity

(Dollars in thousands)

(Unaudited)

 

  

For the Six Months Ended June 30, 2020

 
          

Accumulated

             
          

Other

  

Additional

      

Total

 
  

Common Stock

  

Comprehensive

  

Paid-in

  

Retained

  

Stockholders’

 
  

Shares

  

Amount

  

Income (Loss)

  

Capital

  

Earnings

  

Equity

 

Balance - December 31, 2019

  43,743,243  $4  $296  $282,166  $184,632  $467,098 

Prior period adjustment: change in accounting principle

  -   -   -   -   (12)  (12)

Balance – January 1, 2020, As adjusted

  43,743,243  $4  $296  $282,166  $184,620  $467,086 

Cash dividends declared, $3.00 per share

  -   -   -   -   (131,230)  (131,230)

Stock based compensation

  -   -   -   49   -   49 

Other comprehensive loss

  -   -   (313)  -   -   (313)

Net income

  -   -   -   -   19,043   19,043 

Balance - March 31, 2020

  43,743,243  $4  $(17) $282,215  $72,433  $354,635 

Other comprehensive income

  -   -   150   -   -   150 

Net income

  -   -   -   -   15,159   15,159 

Balance - June 30, 2020

  43,743,243  $4  $133  $282,215  $87,592  $369,944 

 

 

   

For the Six Months Ended June 30, 2019

 
                   

Accumulated

                         
                   

Other

   

Additional

           

Total

 
   

Common Stock

   

Comprehensive

   

Paid-in

   

Retained

   

Stockholders’

 
   

Shares

   

Amount

   

Income (Loss)

   

Capital

   

Earnings

   

Equity

 

Balance - December 31, 2018

    43,743,243     $ 4     $ (20 )   $ 282,145     $ 106,949     $ 389,078  

Other comprehensive income

    -       -       202       -       -       202  

Net income

    -       -       -       -       5,499       5,499  

Balance - March 31, 2019

    43,743,243     $ 4     $ 182     $ 282,145     $ 112,448     $ 394,779  

Other comprehensive income

    -       -       17       -       -       17  

Net income

    -       -       -       -       3,687       3,687  

Balance - June 30, 2019

    43,743,243     $ 4     $ 199     $ 282,145     $ 116,135     $ 398,483  

 

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

 

3

 

 

FutureFuel Corp.

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

 

  

Six Months Ended June 30,

 
  

2020

  

2019

 

Cash flows from operating activities

        

Net income

 $34,202  $9,186 

Adjustments to reconcile net income to net cash from operating activities:

        

Depreciation

  5,862   5,602 

Amortization of deferred financing costs

  60   72 

Benefit for deferred income taxes

  699   (445)

Change in fair value of equity securities

  7,405   (4,891)

Change in fair value of derivative instruments

  198   (297)

Loss on the sale of investments

  1,080   1,138 

Stock based compensation

  49   - 

Loss on disposal of property and equipment

  2   11 

Noncash interest expense

  27   14 

Changes in operating assets and liabilities:

        

Accounts receivable

  81,029   (5,347)

Accounts receivable – related parties

  4,290   1,814 

Inventory

  (4,610)  3,180 

Income tax receivable

  (19,380)  1,336 

Prepaid expenses

  782   712 

Prepaid expenses – related parties

  -   12 

Other assets

  350   539 

Accounts payable

  (29,702)  958 

Accounts payable – related parties

  220   (1,248)

Accrued expenses and other current liabilities

  2,572   688 

Accrued expenses and other current liabilities – related parties

  (64)  - 

Deferred revenue

  (659)  591 

Other noncurrent liabilities

  (211)  (98)

Net cash provided by operating activities

  84,201   13,527 

Cash flows from investing activities

        

Collateralization of derivative instruments

  (2,877)  908 

Purchase of marketable securities

  (2,359)  (14,323)

Proceeds from the sale of marketable securities

  5,192   17,682 

Proceeds from the sale of property and equipment

  50   13 

Capital expenditures

  (2,759)  (4,659)

Net cash used in investing activities

  (2,753)  (379)

Cash flows from financing activities

        

Loan proceeds

  8,180   - 

Payment on loan

  (8,180)  - 

Deferred financing costs

  (477)  - 

Payment of dividends

  (136,479)  (5,249)

Net cash used in financing activities

  (136,956)  (5,249)

Net change in cash and cash equivalents

  (55,508)  7,899 

Cash and cash equivalents at beginning of period

  243,331   214,972 

Cash and cash equivalents at end of period

 $187,823  $222,871 
         

Cash paid for interest

 $1  $- 

Cash paid for income taxes

 $639  $898 

Noncash investing and financing activities:

        

Noncash capital expenditures

 $94  $108 

Noncash operating leases

 $-  $432 

 

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

 

4

 

Notes to Consolidated Financial Statements of FutureFuel Corp.

(Dollars in thousands, except per share amounts)

(Unaudited)

 

 

1 )

NATURE OF OPERATIONS AND BASIS OF PRESENTATION

 

Organization

 

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

 

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

 

The biofuels segment primarily produces and sells biodiesel. FutureFuel Chemical also sells petrodiesel in blends with the Company’s biodiesel and, from time to time, with no biodiesel added. FutureFuel Chemical is a shipper of refined petroleum products on common carrier pipelines and buys and sells petroleum products to maintain an active shipper status on these pipelines.

 

Basis of Presentation

 

The unaudited consolidated financial statements have been prepared by FutureFuel in accordance and consistent with the accounting policies stated in FutureFuel’s 2019 audited consolidated financial statements and should be read in conjunction with the 2019 audited consolidated financial statements of FutureFuel. 

 

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

 

 

2 )

REINSTATEMENT OF THE 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 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. As this act was passed into law in 2019, the Company recognized its impact in the last quarter of 2019 for both periods (2018 and 2019) within the Company’s 2019 financial results. Rebates to customers are recorded as a reduction of revenue.  The Company records the BTC as a reduction to cost of goods sold.

 

5

 

 Notes to Consolidated Financial Statements of FutureFuel Corp.

(Dollars in thousands, except per share amounts)

(Unaudited)  

 

 

As the law from which the BTC mentioned above was reinstated, small agri-biodiesel producers with production capacity not in excess of 60 million gallons were eligible for an additional tax credit of $0.10 per gallon on the first 15 million gallons of agri-biodiesel sold (the “Small Agri-biodiesel Producer Tax Credit”). The Company was eligible for this credit and recognized its benefit in the three months ended December 31, 2019 and in the three and six months ended June 30, 2020 as part of the tax provision.

 

 

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 chemicals segment customers and 2 to 10 days for biofuels segment customers.

 

Certain of FutureFuel custom chemical contracts within the chemicals segment contain a material right as defined by 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 and undelivered amounts typically resulting from revenue recognized through bill-and-hold arrangements. The contract assets at June 30, 2020 and December 31, 2019 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 chemicals segment plant expansions were $1,051 and $1,471, and $3,358 and $2,909, for the three and six months ended June 30, 2020 and 2019, respectively. Contract liabilities are reduced as the Company transfers product to the customer under the renewal option approach. Revenue recognized in the chemicals segment from the contract liability reductions were $2,579 and $857 for the three months, and $3,906 and $2,208 for the six months ended June 30, 2020 and 2019, 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.  Included in the three months ended June 30, 2020, was the acceleration of the recognition of the remaining material right related to a customer contract which effectively ends December 31, 2020 for which all product shipments have been fulfilled.  The amortization of this customer contract liability was $2,909 and $89, for the three months ended June 30, 2020 and 2019, respectively; $3,452 and $570, for the six months ended June 30, 2020 and 2019, respectively. 

 

6

 

 

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 Liabilities

 

June 30, 2020

  

December 31, 2019

 

Trade receivables, included in accounts receivable*

 $11,738  $11,902 

Contract assets included in accounts receivable

  1,104   1,067 

Contract liabilities, included in Deferred revenue - short-term

  3,220   5,030 

Contract liabilities, included in Deferred revenue - long-term

  18,414   17,151 

 

*Exclusive of the BTC of $16,307 and $97,295, respectively, and net of allowances for bad debt of $53 and $0 as of the dates noted.

 

Transaction price allocated to the remaining performance obligations:

 

At June 30, 2020, approximately $21,634 of revenue is expected to be recognized from remaining performance obligations. FutureFuel expects to recognize this revenue ratably with product sold over the expected term of its long-term contracts which range from four to six years. Approximately 15% of this revenue is expected to be recognized over the next 12 months, and 85% is expected to be recognized between years two and six. These amounts are subject to change based upon changes in the estimated contract life and estimated quantities to be sold over the contract life.

 

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

 

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

 

Disaggregation of revenue - contractual and non-contractual:

 

  

Three months ended June 30,

  

Six months ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 

Contract revenue from customers with > 1 year arrangements

 $4,909  $11,721  $14,523  $27,139 

Contract revenue from customer with < 1 year arrangement

  42,458   59,088   87,887   92,116 

Revenue from non-contractual arrangements

  55   55   111   110 

BTC rebate (customer rebates per Note 2)

  -   -   (2,017)  - 

Total revenue

 $47,422  $70,864  $100,504  $119,365 

 

Timing of revenue:

 

  

Three months ended June 30,

  

Six months ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 

Bill and hold revenue

 $7,335  $12,006  $17,488  $23,762 

Non-bill and hold revenue

  40,087   58,858   83,016   95,603 

Total revenue

 $47,422  $70,864  $100,504  $119,365 

 

As of June 30, 2020, $4,105 of the three- and six-months bill and hold revenue had not shipped.

 

7

 

Notes to Consolidated Financial Statements of FutureFuel Corp.

(Dollars in thousands, except per share amounts)

(Unaudited)

 

  

 

4 )

INVENTORY

 

The carrying values of inventory were as follows as of:   

 

  

June 30, 2020

  

December 31, 2019

 

At average cost (approximates current cost)

        

Finished goods

 $22,844  $22,564 

Work in process

  2,133   2,768 

Raw materials and supplies

  22,193   20,121 
   47,170   45,453 

LIFO reserve

  (4,987)  (7,880)

Total inventory

 $42,183  $37,573 

 

Lower of Cost or Market ("LCM") adjustments are recorded as a decrease in inventory values and an increase in cost of goods sold.  The inventory is relieved at the LCM adjusted cost basis when sold.  There was an LCM adjustment of $530 in the three and six months ended  June 30, 2020.  For the three and six months ended  June 30, 2019, there was no LCM adjustment.

 

 

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 statement of income as a component of cost of goods sold.

 

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 2020 or 2019. The Company has elected the normal purchase and normal sales exception for certain feedstock purchase contracts and supply agreements. 

 

Realized 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 loss of $935 and a gain of $5,922 for the three months and six months ended June 30, 2020, respectively, and a gain of $443 and a loss of $1,033 for the three months and six months ended June 30, 2019, respectively.

 

The volumes and carrying values of FutureFuel’s derivative instruments were as follows at: 

 

  

June 30, 2020

  

December 31, 2019

 
  

Contract

Quantity

Short

  

Fair

Value

  

Contract

Quantity

Short

  

Fair

Value

 

Regulated fixed price future commitments

  415  $(465)  140  $(267)

 

The margin account maintained with a broker to collateralize these derivative instruments carried an account balance of $3,968 and $1,091 at June 30, 2020 and December 31, 2019, respectively, and was classified as other current assets in the consolidated balance sheets. The carrying values of the margin account and of the derivative instruments are included net, in other current assets.

 

8

 

Notes to Consolidated Financial Statements of FutureFuel Corp.

(Dollars in thousands, except per share amounts)

(Unaudited)

 

  

 

6 )

MARKETABLE SECURITIES

 

At June 30, 2020 and December 31, 2019, FutureFuel had investments in certain debt securities (trust preferred securities and exchange-traded debt instruments) and in preferred stock and other equity instruments. These investments are classified as current assets in the consolidated balance sheets. The unrealized gain on equity securities held for the three months ended June 30, 2020 and 2019 were $2,164 and $1,883, respectively. The unrealized (loss) gain on equity securities held for the six months ended June 30, 2020 and 2019 were ($7,405) and $4,891, respectively.

 

Available-for-sale securities:

 

FutureFuel has designated the debt securities as being available-for-sale. The following comprises the available-for-sale debt securities balances included within marketable securities in the consolidated balance sheets at the respective dates:

 

  

June 30, 2020

 
  

Adjusted

Cost

  

Unrealized

Gains

  

Unrealized

Losses

  

Fair

Value

 

Trust preferred stock

 $3,676  $84  $-  $3,760 

Exchange-traded debt

  1,428   86   -   1,514 

Total debt securities

 $5,104  $170  $-  $5,274 

 

  

December 31, 2019

 
  

Adjusted

Cost

  

Unrealized

Gains

  

Unrealized

Losses

  

Fair

Value

 

Trust preferred stock

 $3,676  $250  $-  $3,926 

Exchange-traded debt

  1,428   128   (3)  1,553 

Total debt securities

 $5,104  $378  $(3) $5,479 

 

The aggregate fair value of debt securities with unrealized losses totaled $0 at June 30, 2020 and $151 at December 31, 2019.  Effective January 1, 2020 the Company adopted ASU 2016-13 using the modified retrospective approach. Under ASU 2016-13 the Company evaluates the debt securities for credit losses using the current expected credit loss model (“CECL”). At the date of adoption and at June 30, 2020, the Company held no debt securities with a fair value below adjusted cost, and no evaluation under the CECL model was required.

 

There were no sales of debt securities in the six months ended June 30, 2020 or 2019.

 

The debt securities held at June 30, 2020, had a contractual maturity of greater than ten years.

 

9

 

Notes to Consolidated Financial Statements of FutureFuel Corp.

(Dollars in thousands, except per share amounts)

(Unaudited)

 

 

 

7 )

FAIR VALUE MEASUREMENTS

 

Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. Fair value accounting pronouncements also 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.

 

The following tables provide information by level for assets and liabilities that are measured at fair value, on a recurring basis, at June 30, 2020 and December 31, 2019. 

 

   

Asset (Liability)

 
           

Fair Value Measurements Using

 
   

Fair Value at

   

Inputs Considered as:

 

Description

 

June 30, 2020

   

Level 1

   

Level 2

   

Level 3

 

Derivative instruments

  $ (465 )   $ (465 )   $ -     $ -  

Preferred stock and other equity instruments

  $ 56,821     $ 56,821     $ -     $ -  

Trust preferred stock and exchange-traded debt instruments

  $ 5,274     $ 5,274     $ -     $ -  

 

   

Asset (Liability)

 
           

Fair Value Measurements Using

 
   

Fair Value at

   

Inputs Considered as:

 

Description

 

December 31, 2019

   

Level 1

   

Level 2

   

Level 3

 

Derivative instruments

  $ (267 )   $ (267 )   $ -     $ -  

Preferred stock and other equity instruments

  $ 68,141     $ 68,141     $ -     $ -  

Trust preferred stock and exchange-traded debt instruments

  $ 5,479     $ 5,479     $ -     $ -  

 

 

 

8 )

INTANGIBLE ASSETS

 

In April of 2015, FutureFuel acquired additional historical line space on a pipeline for $1,408. The acquired line space was recorded as an intangible asset with an indefinite life as there was no foreseeable limit on the time period over which it is expected to contribute to cash flows. The carrying value of the asset was $1,408 at June 30, 2020 and December 31, 2019 FutureFuel tests the intangible asset for impairment in accordance with Topic 350, Intangibles-Goodwill and Other

 

10

 

Notes to Consolidated Financial Statements of FutureFuel Corp.

(Dollars in thousands, except per share amounts)

(Unaudited)  

 

 

 

9 )

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

 

Accrued expenses and other current liabilities consisted of the following at:   

 

   

June 30, 2020

   

December 31, 2019

 

Accrued employee liabilities

  $ 4,256     $ 2,534  

Accrued property, franchise, motor fuel and other taxes

    2,037       1,226  

Lease liability, current

    392       537  

Other

    297       113  

Total

  $ 6,982     $ 4,410  

 

 

 

10 )

BORROWINGS

 

On March 30, 2020, FutureFuel, with FutureFuel Chemical as the borrower and certain of FutureFuel’s other subsidiaries as guarantors, amended and restated its credit agreement (the “Credit Agreement”) originally entered into on April 16, 2015 (as amended, the “Prior Credit Agreement”) with the lenders party, Regions Bank as administrative agent and collateral agent, and PNC Bank, N.A., as syndication agent. The Credit Agreement consists of a five-year revolving credit facility in a dollar amount of up to $100,000, which includes a sublimit of $30,000 for letters of credit and $15,000 for swingline loans (collectively, the “Credit Facility”).  The Credit Facility expires on March 30, 2025.  The primary amendments from the Prior Credit Agreement were a reduction in the facility by $65,000, a reduction in the facility’s applicable interest rate by 0.25%, a reduction in the commitment fee, and elimination of the minimum consolidated fixed charge coverage ratio.

 

The interest rate floats at the following margins over LIBOR or base rate based upon the leverage ratio from time to time:

 

Consolidated Leverage Ratio

 

Adjusted LIBOR Rate Loans and

Letter of Credit Fee

 

Base Rate Loans

 

Commitment Fee

 

< 1.00:1.0

 1.00% 0.00% 0.15% 

≥ 1.00:1.0

And

< 1.50:1.0

 1.25% 0.25% 0.15% 

≥ 1.50:1.0

And

< 2.00:1.0

 1.50% 0.50% 0.20% 

≥ 2.00:1.0

And

< 2.50:1.0

 1.75% 0.75% 0.20% 

≥ 2.50:1.0

 2.00% 1.00% 0.25% 

 

 

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 no borrowings under the Credit Agreement at June 30, 2020 or under the Prior Credit Agreement at December 31, 2019.

 

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted to provide emergency assistance for individuals, families and businesses affected by the coronavirus pandemic. Under the CARES Act, certain subsidiaries of FutureFuel entered into a loan with Saint Louis Bank pursuant to the Paycheck Protection Program (“PPP”) totaling $8,180 on April 10, 2020. At the time that FutureFuel applied for the PPP loan, it qualified to receive the funds pursuant to the then published eligibility requirements. FutureFuel ensured continued operation as part of the nation’s critical infrastructure on the receipt and availability of these funds. However, the Small Business Administration and Treasury Department subsequently issued new guidance that cast doubt on the ability of public companies to qualify for a PPP loan. As a result, FutureFuel paid the full amount of the PPP loan on May 5, 2020. 

 

11

 

Notes to Consolidated Financial Statements of FutureFuel Corp.

(Dollars in thousands, except per share amounts)

(Unaudited)

 

 

 

11 )

INCOME TAX PROVISION

 

The following table summarizes the income tax provision.  

 

  

Three Months Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 

Income tax (benefit) provision

 $(4,889) $917  $(18,101) $1,875 

Effective tax rate

  (47.6%)  19.9%  (112.4%)  17.0%

 

The effective tax rate for the three and six months ended June 30, 2020 reflects the positive effect of the reinstatement of certain tax credits and incentives for 2020, the most significant of which were the BTC and Small Agri-biodiesel Producer Tax Credit. The BTC and Small Producer Agri-biodiesel Producer Credit were retroactively extended for 2018 and 2019 on December 20, 2019 and further extended through December 31, 2022. On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (H.R. 748) (“CARES Act”). The CARES Act provides that Net Operating Losses (“NOLs”) arising in a taxable year beginning after December 31, 2017 and before January 1, 2021 shall be treated as a carryback to each of the 5 preceding taxable years unless the taxpayer elects to forego the carryback. This enacted NOL provision had a positive effect on the effective tax rate for the three and six months ended June 30, 2020 as FutureFuel will be able to carryback its 2019 federal NOL to a year with a higher tax rate rather than forward to a year with a lower tax rate.

 

The effective tax rate for the three and six months ended June 30, 2019 reflects the unfavorable effect of the BTC and Small Producer Agri-biodiesel Producer Credit not being in the law for the first six months of 2019. The six months ended June 30, 2019 rate was also favorably impacted from a retroactive research and development credit for 2018 in a state where FutureFuel does significant business.

 

There were no unrecognized tax benefits at June 30, 2020 or December 31, 2019.

 

FutureFuel recorded interest and penalties, net, as a component of income tax provision and had accrued balances of $13 and ($557) at June 30, 2020 and December 31, 2019, respectively.

 

 

 

12 )

EARNINGS PER SHARE

 

In the three and six months ended June 30, 2020 and 2019, FutureFuel used the treasury method in computing earnings per share.

 

Basic and diluted earnings per common share were computed as follows:  

 

  

Three Months Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 

Numerator:

                

Net income

 $15,159  $3,687  $34,202  $9,186 

Numerator for diluted earnings per share

 $15,159  $3,687  $34,202  $9,186 

Denominator:

                

Weighted average shares outstanding – basic

  43,743,243   43,743,243   43,743,243   43,743,243 

Effect of dilutive securities:

                

Stock options and other awards

  497   -   248   2,866 

Weighted average shares outstanding – diluted

  43,743,740   43,743,243   43,743,491   43,746,109 
                 

Basic earnings per share

 $0.35  $0.08  $0.78  $0.21 

Diluted earnings per share

 $0.35  $0.08  $0.78  $0.21 

 

For the three and six months ended June 30, 2020, 50,000 and 62,000 options were excluded on a weighted average basis respectively, as these options were anti-dilutive in the computation of diluted earnings per share. For the three and six months ended June 30, 2019, 40,000 and 20,000 options were excluded on a weighted average basis, respectively.

 

12

 

Notes to Consolidated Financial Statements of FutureFuel Corp.

(Dollars in thousands, except per share amounts)

(Unaudited)  

 

 

 

13 )

RELATED PARTY TRANSACTIONS

 

FutureFuel enters into transactions with companies affiliated with or controlled by a director and significant shareholder. Revenues, 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 revenues are the result of sales of biodiesel, petrodiesel, blends, other petroleum products, and other similar or related products to these related parties.

 

Related party cost of goods sold and distribution are the result of sales of biodiesel, petrodiesel, blends, and other petroleum products to these related parties along with the associated expense from the purchase of natural gas, storage and terminalling services by FutureFuel from these related parties.

 

 

 

14 )

SEGMENT INFORMATION

 

FutureFuel has two reportable segments organized along similar product groups – chemicals and biofuels.

 

Chemicals

 

FutureFuel’s chemicals segment manufactures diversified chemical products that are sold externally to third party customers. This segment is composed of two components: “custom manufacturing” (manufacturing chemicals for specific customers) and “performance chemicals” (multi-customer specialty chemicals).

 

Biofuels

 

FutureFuel’s biofuels segment primarily manufactures and markets biodiesel. Biodiesel revenues are generated through the sale of biodiesel to customers through FutureFuel’s distribution network at the Batesville Plant, through distribution facilities available at leased oil storage facilities, and through a network of remotely located tanks. Biofuels revenues also include the sale of biodiesel blends with petrodiesel; the sale of petrodiesel with no biodiesel added; the sale of internally generated, separated Renewable Identification Numbers (“RINs”); the sale of biodiesel production byproducts; and the purchase and sale of other petroleum products on common carrier pipelines.  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.

 

13

 

Notes to Consolidated Financial Statements of FutureFuel Corp.

(Dollars in thousands, except per share amounts)

(Unaudited)  

 

 

Summary of business by segment

 

  

Three Months Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 

Revenue

                

Custom chemicals

 $18,041  $21,965  $41,801  $45,665 

Performance chemicals

  4,797   3,894   8,730   7,546 

Chemicals revenue

  22,838   25,859   50,531   53,211 

Biofuels revenue

  24,584   45,005   49,973   66,154 

Total Revenue

 $47,422  $70,864  $100,504  $119,365 
                 

Segment gross profit (loss)

                

Chemicals

 $7,577  $7,181  $15,591  $14,490 

Biofuels

  (6,666)  (3,911)  1,719   (7,958)

Total gross profit

 $911  $3,270  $17,310  $6,532 

 

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.

 

 

 

15 )

SPECIAL CASH DIVIDEND

 

On March 23, 2020, the Company declared a special cash dividend of $3.00 per share on common stock in the amount of $131,230 that was paid on April 17, 2020.

 

 

 

16 )

RECENTLY ISSUED ACCOUNTING STANDARDS

 

Recently Adopted Accounting Standards  

 

In the first quarter of 2020, the Company adopted ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" and the associated ASUs (collectively “Topic 326”) on a modified retrospective approach. The amendments replace the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company recorded a $12 reduction to opening retained earnings and an allowance for bad debt of $12 on our consolidated financial statements.

 

Recently Issued Accounting Standards Not Adopted  

 

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." The amendments simplify the accounting for income taxes by removing certain exceptions to the general principles of Topic 740, "Income Taxes" and improve consistent application by clarifying and amending existing guidance. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted, with the amendments to be applied on a retrospective, modified retrospective or prospective basis, depending on the specific amendment. The Company is currently evaluating the impact of adopting this guidance. 

 

14

 

Notes to Consolidated Financial Statements of FutureFuel Corp.

(Dollars in thousands, except per share amounts)

(Unaudited)  

Other

 

ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.  Effective March 12, 2020, the guidance in the update is in response to concerns about structural risks of interbank offered rates (IBORs), and, particularly, the risk of cessation of the London Interbank Offered Rate (LIBOR). Regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. This guidance will ease the accounting burden associated with transitioning away from reference rates that are expected to be discontinued within our credit facility as described in Note 10.

 

 

 

17 )

LEGAL MATTERS

 

From time to time, FutureFuel and its operations 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. 

 

During the three months ended June 30, 2020, the Company reached a legal resolution of a prior year contractual matter for which an accrual of $8,350 was relieved as other income. 

 

15

 
 

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. 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 chemicals 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 chemical product group is composed of chemicals manufactured for multiple customers. The biofuels 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.

 

Coronavirus Disease 2019 (“COVID-19”)

 

In March 2020, the World Health Organization categorized COVID-19 as a pandemic. COVID-19 continues to spread throughout the United States and other countries across the world, and the duration and severity of its effects remain unknown. Our priority remains to protect the well-being of our employees, support our customers, obtain materials from our suppliers, and maintain our manufacturing operations. We have been able to continue supplying our products to our customers to date, however, some customers have reduced their near-term demand.  We have also been able to find alternative sources for raw materials and inputs to meet our near-term supply requirements. 

 

We continue to closely monitor the impact of COVID-19 on all aspects of our business, including its impact on our customers, employees, and suppliers. The extent to which COVID-19 impacts our business, results of operations, and financial condition will depend on future developments, which are highly uncertain and are difficult to predict; these developments include, but are not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or address its impact, U.S. and foreign government actions to respond to the reduction in global economic activity, and how quickly and to what extent normal economic and operating conditions can resume.

 

Because the magnitude and duration of the COVID-19 pandemic and its economic consequences are unclear, the pandemic’s impact on our performance is difficult to predict. The three principle areas we anticipate COVID-19 to negatively impact our financial performance are our customer demand, our ability to procure raw materials and inputs from suppliers, and our ability to operate our manufacturing facility.

 

Customer Demand – Several of our major chemical customers sell the products we produce for them in markets that have been significantly impacted by COVID-19. The energy and automotive markets in particular have drastically been impacted starting in April which we anticipate will reduce chemicals segment revenue the remainder of the year based on current estimates. Low diesel prices and a Renewable Identification Number (RIN) market that has stagnated on uncertainty of required mandates has similarly reduced the value of our finished product. The duration of this impact of COVID-19 is clearly difficult to forecast.  We currently expect these markets to recover over time. However, the speed at which these market sectors rebound is highly uncertain and will be determined by reopening of economies and restoration of consumer confidence. 

 

Supply Chain Impact – Supplier shutdowns may result in raw material or input shortages and negatively impact our ability to manufacture products and meet our customers’ demand. In our biofuels segment, we are seeing significant contraction among many of our feedstock suppliers. Closures and idling of restaurants (used cooking oil source), ethanol plants (corn oil source), rendering and poultry plants (tallow and grease source) have impacted our traditional supply chain. In addition, supply shortages may impact the timing of when customer facilities reopen and/or increase production and the speed at which customers ramp up production, negatively impacting demand for our products. Lower demand increases the risk that certain suppliers may face financial issues, potentially impacting their ability to supply.

 

16

 

Operations Impact - Our manufacturing is generally considered critical services and our plant remains open to meet customer demand. In an effort to contain the spread of COVID-19, maintain the well-being of our employees, ensure compliance with governmental requirements or respond to declines in demand from customers, we have had, where possible, employees work from home and temporarily closed portions of our offices.  We continue to take actions to help prevent the spread of COVID-19 at work including social distancing, expanding cleaning and sanitization, adjusting work hours and temperature checks. To date we have had no negative impact on our ability to operate the plant safely and in a way that meets our customers’ demands.

 

Even after the COVID-19 outbreak has subsided, we may continue to experience materially adverse impacts on our financial condition and results of operations. For more information on the risks associated with COVID-19, refer to Part II, Item 1A, "Risk Factors" herein.

 

 

Summary of Financial Results

 

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

 

   

Three Months Ended June 30,

 
                   

Dollar

   

%

 
   

2020

   

2019*

   

Change

   

Change

 

Revenue

  $ 47,422     $ 70,864     $ (23,442 )     (33.1 %)

(Loss) income from operations

  $ (1,139 )   $ 1,185     $ (2,324 )     (196.2 %)

Net income

  $ 15,159     $ 3,687     $ 11,472       311.1 %

Earnings per common share:

                               

Basic

  $ 0.35     $ 0.08     $ 0.27       337.5 %

Diluted

  $ 0.35     $ 0.08     $ 0.27       337.5 %

Capital expenditures (net of customer reimbursements)

  $ 563     $ 451     $ 112       24.8 %

Adjusted EBITDA

  $ 2,652     $ 3,514     $ (862 )     (24.5 %)

 

   

Six Months Ended June 30,

 
                   

Dollar

   

%

 
   

2020

   

2019*

   

Change

   

Change

 

Revenue

  $ 100,504     $ 119,365     $ (18,861 )     (15.8 %)

Income from operations

  $ 12,840     $ 2,396     $ 10,444       435.9 %

Net income

  $ 34,202     $ 9,186     $ 25,016       272.3 %

Earnings per common share:

                               

Basic

  $ 0.78     $ 0.21     $ 0.57       271.4 %

Diluted

  $ 0.78     $ 0.21     $ 0.57       271.4 %

Capital expenditures (net of customer reimbursements)

  $ 1,133     $ 874     $ 259       29.6 %

Adjusted EBITDA

  $ 12,829     $ 8,929     $ 3,900       43.7 %

 

* Prior year amounts have been restated for comparison.

 

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 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, 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.

 

17

 

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 a 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 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 protect our operations from downward movements in commodity prices, and to provide greater certainty of cash flows associated with sales of our commodities. We enter into hedges, and we utilize mark-to-market accounting to account for these instruments. Thus, our results in any given period can be impacted, and 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 this item as an adjustment as we believe it provides a relevant indicator of the underlying performance of our business in a given period.

 

Additionally, we invest in marketable securities of certain debt securities (trust preferred stock and exchange-traded debt instruments) and in preferred stock and other equity instruments.  The realized and unrealized gains and losses on these marketable securities can fluctuate significantly from period to period.  We include this item as an adjustment as we believe it provides a relevant indicator of the underlying performance of our business in a given period. 

 

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

 

   

Three Months Ended June 30,

   

Six Months Ended June 30,

 
   

2020

    2019*     2020     2019*  

Net income

  $ 15,159     $ 3,687     $ 34,202     $ 9,186  

Depreciation

    2,858       2,877       5,862       5,602  

Non-cash stock-based compensation

    -       -       49       -  

Interest and dividend income

    (1,519 )     (2,750 )     (3,486 )     (5,112 )

Non-cash interest expense and amortization of deferred financing costs

    31       44       87       87  

Losses on disposal of property and equipment

    -       8       2       11  

(Gain) loss on derivative instruments

    935       (443 )     (5,922 )     1,033  

Loss (gain) on marketable securities

    (1,573 )     (826 )     8,486       (3,753 )

Other income

    (8,350 )     -       (8,350 )     -  

Income tax (benefit) provision

    (4,889 )     917       (18,101 )     1,875  

Adjusted EBITDA

  $ 2,652     $ 3,514     $ 12,829     $ 8,929  

 

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

 

   

Six Months Ended June 30,

 
   

2020

    2019*  

Net cash provided by operating activities

  $ 84,201     $ 13,527  

Benefit for deferred income taxes

    (699 )     445  

Interest and dividend income

    (3,486 )     (5,112 )

Income tax (benefit) provision

    (18,101 )     1,875  

(Gain) loss on derivative instruments

    (5,922 )     1,033  

Change in fair value of derivative instruments

    (198 )     297  

Change in operating assets and liabilities, net

    (34,617 )     (3,137 )

Other income

    (8,350 )     -  

Other

    1       1  

Adjusted EBITDA

  $ 12,829     $ 8,929  

 

*Prior year amounts have been restated for comparison

 

18

 

Results of Operations 

 

Consolidated

 

   

Three Months Ended June 30,

   

Six Months Ended June 30,

 
                   

Change

                   

Change

 
   

2020

   

2019

   

Amount

   

%

   

2020

   

2019

   

Amount

   

%

 
                                                                 

Revenues

  $ 47,422     $ 70,864     $ (23,442 )     (33.1 %)   $ 100,504     $ 119,365     $ (18,861 )     (15.8 %)

Volume/product mix effect

                  $ (6,980 )     (9.8 %)                   $ 5,782       4.8 %

Price effect

                  $ (16,462 )     (23.2 %)                   $ (24,643 )     (20.6 %)
                                                                 

Gross profit

  $ 911     $ 3,270     $ (2,359 )     (72.1 %)   $ 17,310     $ 6,532     $ 10,778       165.0 %

 

 

Consolidated revenue in the three and six months ended June 30, 2020, decreased $23,442 and $18,861, compared to the three and six months ended June 30, 2019. The decrease in the three months ended June 30, 2020 primarily resulted from lower selling prices in the biofuel segment of $19,473 which was negatively impacted by supply demand imbalance and lower sales volume in the chemical segment of $6,032 from an agrochemical product we no longer make.  The decrease in the six months ended June 30, 2020 primarily resulted from lower prices in the biofuel segment of $27,116 and lower sales volume in the chemical segment of $5,153.  Partially offsetting this decrease in the six-month comparison period was higher sales volumes in the biofuels segment of $10,935 given the favorable market conditions with the reinstatement of the blenders' tax credit ("BTC").

 

Gross profit in the three months ended June 30, 2020 decreased $2,359 compared to the three months ended June 30, 2019. This decrease was driven by lower prices in the biofuels segment and lower volumes in both the chemicals and biofuels segments resulting from reduced demand from the weakened global fuel market and the impact of the COVID-19 pandemic as well as an agrochemical product we no longer make.  Gross profit was also reduced by the change in the unrealized and realized activity in derivative instruments with a loss of $935 in the three months ended June 30, 2020 and a gain of $443 in the three months ended June 30, 2019. 

 

Gross profit in the six months ended June 30, 2020 increased $10,778 compared to the six months ended June 30, 2019.  This increase primarily resulted from: i) the BTC being in effect for the current period versus not being in effect in the prior six-month period; and ii) the change in the unrealized and realized activity in derivative instruments with a gain of $5,922 in the six months ended June 30, 2020 and a loss of $1,033 in the six months ended June 30, 2019.  Also benefiting gross profit in both the three and six months ended June 30, 2020 and 2019 was the adjustment in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting.  In the three months ended June 30, 2020 and 2019, this adjustment increased gross profit $1,575 and $287, respectively.  In the six months ended June 30, 2020 and 2019, this adjustment increased gross profit $2,893 and $1,924, respectively. 

 

Operating Expenses

 

Operating expenses decreased nominally in the three months ended June 30, 2020, as compared to the three months ended June 30, 2019.  In the six months ended June 30, 2020 operating expenses increased $334 as compared to the same period in the prior year.  This increase was primarily from increased compensation expenses.

 

Other Income

 

During the three months ended June 30, 2020, the Company reached a legal resolution of a prior year contractual matter for which an accrual of $8,350 was relieved as other income.

 

Income Tax Provision

 

The effective tax rate for the three months ended June 30, 2020 reflects the positive effect of the reinstatement of certain tax credits and incentives for 2020, the most significant of which were the BTC and Small Agri-biodiesel Producer Tax Credit. The BTC and Small Producer Agri-biodiesel Producer Credit were retroactively extended for 2018 and 2019 on December 20, 2019 and further extended through December 31, 2022. On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (H.R. 748) (“CARES Act”). The CARES Act provides that Net Operating Losses (“NOLs”) arising in a taxable year beginning after December 31, 2017 and before January 1, 2021 shall be treated as a carryback to each of the 5 preceding taxable years unless the taxpayer elects to forego the carryback. This enacted NOL provision had a positive effect on the effective tax rate for the three and six months ended June 30, 2020 as FutureFuel will be able to carryback its 2019 federal NOL to a year with a higher tax rate rather than forward to a year with a lower tax rate.

 

19

 

The effective tax rate for the three months ended June 30, 2019 reflects the unfavorable effect of the BTC and Small Producer Agri-biodiesel Producer Credit not being in the law for the first half of 2019. The rate was also favorably impacted from a retroactive research and development credit for a prior year in a state where FutureFuel does significant business.

 

There were no unrecognized tax benefits at June 30, 2020 or December 31, 2019.

 

FutureFuel recorded interest and penalties, net, as a component of income tax provision and had accrued balances of $13 and ($557) at June 30, 2020 and December 31, 2019, respectively.

 

Net Income

 

Net income for the three and six months ended June 30, 2020 increased $11,472 and $25,016, respectively, as compared to the same periods in 2019. This increase resulted primarily from biodiesel tax credits and incentives that were in effect in the three and six months ended June 30, 2020 that were not in effect for 2019 (see Note 2) and tax benefits in effect in the first half of 2020 not in effect for the same period in 2019 (see the income tax provision discussion above).  In the three and six months ended June 30, 2020, income was also benefited by other income from the resolution of a prior year contractual matter. Partially offsetting this increase in the six month period was the unrealized loss on equity securities. 

 

Chemicals Segment

 

   

Three Months Ended June 30,

   

Six Months Ended June 30,

 
                   

Change

                   

Change

 
   

2020

   

2019

   

Amount

   

%

   

2020

   

2019

   

Amount

   

%

 
                                                                 

Revenues

  $ 22,838     $ 25,859     $ (3,021 )     (11.7 %)   $ 50,531     $ 53,211     $ (2,680 )     (5.0 %)

Volume/product mix effect

                  $ (6,032 )     (23.3 %)                   $ (5,153 )     (9.6 %)

Price effect

                  $ 3,011       11.6 %                   $ 2,473       4.6 %
                                                                 

Gross profit

  $ 7,577     $ 7,181     $ 396       5.5 %   $ 15,591     $ 14,490     $ 1,101       7.6 %

 

 

Chemical revenue in the three and six months ended June 30, 2020 decreased $3,021 and $2,680 as compared to the three and six months ended June 30, 2019. Revenue for our custom chemicals (unique chemicals produced for specific customers) for the three and six months ended June 30, 2020 totaled $18,041 and $41,801, a decrease of $3,924 and $3,864 from the same period in 2019. Decreased revenue in the three and six months ended June 30 as compared to the prior three and six-month period were mostly driven by: i) an agrochemical product we no longer manufacture; ii) a slowdown in near-term business in both automotive and energy related applications resulting from COVID-19; and iii) the phase out of a laundry detergent additive. Partially offsetting the decrease of other custom chemical revenue in the three and six months ended June 30, 2020 and 2019 was the change in accelerated amortization of deferred revenue from customer contracts of $1,722 and $1,698, respectively.  This acceleration was primarily from fulfillment of the performance obligation on an herbicide intermediate product we will no longer make.  Performance chemicals (composed of multi-customer products which are sold based on specification) revenue was $4,797 and $8,730 in the three and six months ended June 30, 2020, an increase of $903 and $1,184 from the three and six months ended June 30, 2019. This increase was primarily from product mix on higher prices of glycerin based on a reduced supply of imported material and increased demand given COVID-19.

 

Gross profit for the chemicals segment for the three and six months ended June 30, 2020, increased $396 and $1,101, respectively, when compared to the same periods of 2019. This increase was driven primarily from the acceleration of amortization of deferred revenue from an herbicide intermediate product we will no longer make.  In the three and six months ended June 30, 2020 and 2019, the change in amortization of the deferred revenue from customer contracts increased gross profit of $1,722 and $1,698, respectively.  Partially offsetting this benefit was the unfavorable product mix variance without the production of the agrochemical product and the volume effects of COVID-19 on our business.

 

20

 

Biofuels Segment

 

   

Three Months Ended June 30,

   

Six Months Ended June 30,

 
                   

Change

                   

Change

 
   

2020

   

2019

   

Amount

   

%

   

2020

   

2019

   

Amount

   

%

 
                                                                 

Revenues

  $ 24,584     $ 45,005     $ (20,421 )     (45.4 %)   $ 49,973     $ 66,154     $ (16,181 )     (24.5 %)

Volume/product mix effect

                  $ (948 )     (2.1 %)                   $ 10,935       16.5 %

Price effect

                  $ (19,473 )     (43.3 %)                   $ (27,116 )     (41.0 %)
                                                                 

Gross (loss) profit

  $ (6,666 )   $ (3,911 )   $ (2,755 )     70.4 %   $ 1,719     $ (7,958 )   $ 9,677       (121.6 %)

 

Biofuels revenue in the three and six months ended June 30, 2020 decreased $20,421 and $16,181 as compared to the same periods of 2019, respectively.  The biodiesel and biodiesel blend prices decreased as compared to the prior year periods primarily from industry wide challenges in the fuel market.  Global fuel markets were impacted by reduced demand for oil caused by the economic impact of the COVID-19 pandemic and the decision by foreign oil producing nations not to cut supply. These factors resulted in significant declines in petroleum and biodiesel oil prices. For the three months ended June 30, 2020 sales volume declined given the weakened market, however, for the six-month comparison period, sales volume improved $10,935.    

 

Biofuels revenue from common carrier pipelines varies as its revenue recognition depends upon whether a transaction is bought from and sold to the same party. Purchases and sales of inventory with the same counterparty that are entered into in contemplation of one another (including buy/sell agreements) are combined and recorded on a net basis. Additionally, revenue from common carrier pipelines fluctuates with market conditions.  Revenue from net transactions did not change in the three-month comparison period.  In the six-month comparison period, revenue increased $169.

 

One major refiner/blender customer within our biofuels segment was greater than 10% of revenue in 2020 and 2019.  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 this customer 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 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.

 

Biofuels gross loss was $6,666 in the three months ended June 30, 2020, as compared to a gross loss of $3,911 in the same period of 2019, primarily from reduced sales volumes and lower margins given global market conditions as well as a lower of cost or market adjustment of $530 at June 30, 2020 and none for the same period in 2019.  Partially reducing this gross loss was the change in the activity in derivative instruments with a loss of $935 in the three months ended June 30, 2020, as compared to a gain of $443 in the same period of 2019.  In addition, gross profit was benefited in both three-month periods ended June 30, 2020 and 2019 by the change in adjustments in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting. This adjustment increased gross profit $1,317 and $70, respectively.   

 

Biofuels gross profit was $1,719 in the six months ended June 30, 2020, as compared to a gross loss of $7,958 in the same period of 2019, primarily from the change in the activity in derivative instruments with a gain of $5,922 in the six months ended June 30, 2020 as compared to a loss of $1,033 in the same period of 2019.  Also benefiting gross profit in both three-month periods ended June 30, 2020 and 2019 was the change in adjustments in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting. This adjustment increased gross profit $2,134 and $1,180, respectively.   

 

We recognize all derivative instruments as either assets or liabilities at fair value in our consolidated balance sheets. Our derivative instruments do not qualify for hedge accounting under the specific guidelines of Topic 815, Derivatives and Hedging. None of the derivative instruments are designated and accounted for as hedges primarily due to the extensive record keeping requirements.

 

21

 

The volumes and carrying values of our derivative instruments were as follows:

 

   

Asset (Liability)

 
   

June 30, 2020

   

December 31, 2019

 
   

Contract

Quantity

Short

   

Fair

Value

   

Contract

Quantity

Short

   

Fair

Value

 

Regulated fixed price future commitments*

    415     $ (465 )     140     $ (267 )

 

*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 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.  Estimates are 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 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. We do not offer rebates, except those related to the BTC.

 

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 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 with agreement that production was reasonable. 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. Revenue under bill-and-hold arrangements were $7,335 and $12,006 for the three months ended June 30, 2020 and 2019, respectively.  For the six months ended June 30, 2020 and 2019 bill and hold sales revenue was $17,488 and $23,762, respectively.  As of June 30,2020, $4,105 of the three- and six-month bill and hold revenue had not shipped.

 

22

 

Liquidity and Capital Resources

 

Our net cash from operating activities, investing activities, and financing activities for the six months ended June 30, 2020 and 2019 are set forth in the following table.

 

    Six Months Ended June 30,  
   

2020

   

2019

 

Net cash provided by operating activities

  $ 84,201     $ 13,527  

Net cash used in investing activities

  $ (2,753 )   $ (379 )

Net cash used in financing activities

  $ (136,956 )   $ (5,249 )

 

 

 

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.  However, as the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess our liquidity needs. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. An extended period of global supply chain and economic disruption could materially affect our business, results of operations, ability to meet debt covenants, access to sources of liquidity and financial condition.

 

 

Operating Activities

 

Cash provided by operating activities increased from $13,527 in the first six months of 2019 to $84,201 of cash provided in the first six months of 2020, for a net increase of $70,674. This increase was primarily attributable to the decrease in accounts receivable, including accounts receivable - related parties, of $86,376.  The provision of this cash resulted from the receipt of $81,029 in the first half of 2020 primarily from BTC payments, as compared to a $5,347 decrease in accounts receivable for the same period in 2019. Offsetting these net cash inflows was a $30,660 net decrease in the accounts payable, calculated from the decrease of $29,702 in the first half of 2020 as compared to an increase in the same period in 2019 of $958. This cash outflow from accounts payable was also primarily related to BTC rebates due to customers and paid in 2020.   

 

 

Investing Activities

 

Cash used in investing activities increased from $379 of cash used in the first six months of 2019 to $2,753 of cash used in investing activities in the first six months of 2020. The primary source of the increase in cash used was the result of a $3,785 increase in the collateralization of derivative instruments in the first six months of 2020 compared to the first six months of 2019. Offsetting this change was a decrease in capital expenditures of $1,900.  Our capital expenditures and customer reimbursements for capital expenditures for the six months ended June 30, 2020 and 2019 are summarized in the following table: 

 

    Six Months Ended June 30,  
   

2020

   

2019

 

Cash paid for capital expenditures

  $ 2,759     $ 4,659  

Cash received from customers as reimbursement of capital expenditures

  $ (1,626 )   $ (3,785 )

Cash paid for capital expenditures, net of reimbursements

  $ 1,133     $ 874  

 

   

Financing Activities

 

Cash used in financing activities was $136,956 and $5,249, in the six months ended June 30, 2020 and 2019, respectively. This $131,707 difference was primarily resulting from the payment of the special dividend of $131,230 on our common stock in the first six months of 2020.  The remaining increase of $477 related to debt origination costs in the six months of 2020 from the amendment of our existing credit facility.

 

23

 

Credit Facility

 

Effective March 30, 2020, we entered into an amended and restated credit agreement with a syndicated group of commercial banks for $100,000.  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 March 30, 2025. See Note 10 to our consolidated financial statements for additional information regarding our Credit Agreement.

 

During the three months ended June 30, 2020, we applied for and received loan proceeds under the Paycheck Protection Program.  On May 5, 2020, we repaid the loan in full.

 

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

 

In the three and six months of 2020 and 2019, we paid regular quarterly cash dividends in the amount of $0.06 per share on our common stock. The regular quarterly cash dividend amounted to $2,624 in each period.  On March 23, 2020 we also declared a special cash dividend of $3.00 per share in the amount of $131,230 that was paid on April 17, 2020.

 

 

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. Additionally, regular cash dividends will be paid in 2020, as previously reported. Third parties have not placed significant restrictions on our working capital management decisions.

 

A significant portion of these funds was held in cash or cash equivalents at multiple financial institutions. At June 30, 2020 and December 31, 2019, we also had investments in certain preferred stock, trust preferred securities, exchange-traded debt instruments, and other equity instruments. We classify these investments as current assets in the accompanying consolidated balance sheets and designate the debt securities as being “available-for-sale.” Accordingly, the debt securities are recorded at fair value, with the unrealized gains and losses, net of taxes, reported as a component of stockholders’ equity. We also held equity securities with readily available market values. These equity instruments are recorded at fair value, with the unrealized gains and losses reported as a component of net income. The fair value of the debt securities and equity instruments totaled $62,095 and $73,620 at June 30, 2020 and December 31, 2019, respectively.

 

Lastly, we maintain depositary accounts such as checking accounts, money market accounts, and other similar accounts at selected financial institutions.

 

24

 

Off-Balance Sheet Arrangements

 

We engage in two types of hedging transactions. First, we hedge our biofuels sales through 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 June 30, 2020 and December 31, 2019. Second, we hedge our biofuels feedstock through the execution of purchase contracts and supply agreements with certain vendors or they meet the normal purchase and normal sales exception of ASC 815 Derivatives and Hedging. These hedging transactions are recognized in earnings and were not recorded in our consolidated balance sheets at June 30, 2020 or December 31, 2019 because they do not meet the definition of a hedge instrument as defined under GAAP. 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.

 

25

 

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 costs and, as described elsewhere herein, 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, biofuels 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 sale 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 biofuels prices, we may enter into exchange-traded commodity futures and options contracts. We account for these derivative instruments in accordance with Topic 815, 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. We had no derivative instruments that qualified under these rules as designated accounting hedges in the first six months of 2020 or 2019. 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 cost of goods sold within the biofuels 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 June 30, 2020 and December 31, 2019, the fair values of our derivative instruments were a net liability of $465 and $267, 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 crude corn oil and yellow grease and petrodiesel. 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 six months of 2020. We included only those raw materials and conversion costs for which a hypothetical adverse change in price would result in a 1% or greater decrease in gross profit. Assuming that the prices of the associated finished goods could not be increased and assuming no change in quantities sold, a hypothetical 10% change in the average price of the commodity listed below would result in the following change in gross profit.

 

26

 

(Volume and dollars in thousands)

 

Item

 

Volume

Requirements

(a)

 

Units

 

Hypothetical

Adverse

Change in

Price

   

Decrease in

Gross

Profit

   

Percentage

Decrease

in Gross

Profit

 

Biodiesel feedstocks

    215,852  

LB

  10%     $ 5,871     33.9%  

Methanol

    35,908  

LB

  10%     $ 524     3.0%  

Electricity

    53  

MWH

  10%     $ 319     1.8%  

Sodium Methylate

    5,978  

MCF

  10%     $ 200     1.2%  

 

(a)   Volume requirements and average price information are based upon volumes used and prices obtained for the six months ended June 30, 2020.  Volume requirements may differ materially from these quantities in future years as our business evolves.

 

 

We had no borrowings at June 30, 2020 or December 31, 2019 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.

 

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 June 30, 2020 were effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.

 

There were no changes in our internal control over financial reporting during our last fiscal quarter that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

 

27

 

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 Form 10-K, Annual Report for the year ended December 31, 2019 filed with the SEC on March 13, 2020, except for the addition of the Risk Factor below:

 

We are subject to risks associated with public health threats and epidemics, including the novel coronavirus disease ("COVID-19").

 

We are subject to risks associated with public health threats and epidemics, including the global health concerns relating to the COVID-19 pandemic. The global pandemic has adversely impacted and is likely to further adversely impact our business and markets, including our workforce and operations and the operations of our customers and suppliers. In particular, we may experience material financial or operational impacts, including:

 

 

Significant volatility or reductions in demand for our products;

 

Delays in obtaining regulatory clearances and approvals to market our products;

 

The failure of third parties on which we rely to meet their obligations to the Company to supply the Company with methanol, which the Company requires for several manufacturing processes;

 

The failure of third parties on which we rely to meet their other obligations to the Company, or significant disruptions in their ability to do so; or

 

The inability to meet our customers’ needs due to disruptions to our operations or the operations of our third-party suppliers, contractors, logistics partners or customers including disruptions to production, development, manufacturing, administrative and supply operations and arrangements.

 


The extent to which the COVID-19 global pandemic and measures taken in response thereto impact our business, results of operations and financial condition will depend on future developments, which are highly uncertain and are difficult to predict; these developments include, but are not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or address its impact, U.S. and foreign government actions to respond to the reduction in global economic activity, and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 outbreak has subsided, we may continue to experience materially adverse impacts on our financial condition and our results of operations and many of our known risks described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2019 may be heightened.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

28

 

Item 4. Mine Safety Disclosures.

 

None.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

Exhibit

Description

11.

Statement re Computation of per Share Earnings

 

31(a).

Rule 13a-15(e)/15d-15(e) Certification of chief executive officer

31(b).

Rule 13a-15(e)/15d-15(e) Certification of chief principal officer

32.

Section 1350 Certification of chief executive officer and principal financial officer

101

Interactive Data Files**

101.INS

Inline XBRL Instance

101.SCH

Inline XBRL Taxonomy Extension Schema

101.CAL

Inline XBRL Taxonomy Extension Calculation

101.DEF

Inline XBRL Taxonomy Extension Definition

101.LAB

Inline XBRL Taxonomy Extension Labels

101.PRE

Inline XBRL Taxonomy Extension Presentation

104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

**

Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

 

29

 

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 Form 10-K Annual Report for the year ended December 31, 2019 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.

 

30

 

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.  

 

 

 

 

By:  

/s/ Paul A. Novelly

 

 

 

 

Paul A. Novelly, Chairman and Chief  

 

Executive Officer  

 

 

 

 

Date: August 7, 2020  

 

 

 

 

 

 

By:    

/s/ Rose M. Sparks

 

 

 

 

Rose M. Sparks, Chief Financial Officer

 

and Principal Financial Officer  

 

 

 

 

Date: August 7, 2020  

 

 

31
ex11.htm

 

Exhibit 11

 

 

 

Statement  of Computation of Per Share Earnings

 

In the three months and six months ended June 30, 2020 and 2019, FutureFuel computed earnings per share using the treasury method. 

 

The composition of basic and diluted earnings per share were as follows:

 

(Dollars in thousands, except per share amounts)

 

   

Three Months Ended June 30,

   

Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 

Numerator:

                               

Net income

  $ 15,159     $ 3,687     $ 34,202     $ 9,186  

Numerator for diluted earnings per share

  $ 15,159     $ 3,687     $ 34,202     $ 9,186  

Denominator:

                               

Weighted average shares outstanding – basic

    43,743,243       43,743,243       43,743,243       43,743,243  

Effect of dilutive securities:

                               

Stock options and other awards

    497       -       248       2,866  

Weighted average shares outstanding – diluted

    43,743,740       43,743,243       43,743,491       43,746,109  
                                 

Basic earnings per share

  $ 0.35     $ 0.08     $ 0.78     $ 0.21  

Diluted earnings per share

  $ 0.35     $ 0.08     $ 0.78     $ 0.21  

 

 

 

 

 
ex31-a.htm

 

Exhibit 31(a)

 

Certification

 

 

I, Paul A. Novelly, certify that:

 

 

1.

I have reviewed this report on Form 10-Q of FutureFuel Corp. (the "registrant").

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

 

 

3.

Based on my knowledge, the financial statements, and the other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

 

 

4.

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially effect, the registrant's internal control over financial reporting.

 

 

5.

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:

 

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date:   August 7, 2020   

 

 
     

/s/ Paul A. Novelly

 

Paul A. Novelly, Chairman and Chief

 

Executive Officer   

 

 

 

    

 
ex32-a.htm

Exhibit 31(b)

 

Certification

 

 

I, Rose M. Sparks, certify that:

 

 

1.

I have reviewed this report on Form 10-Q of FutureFuel Corp. (the "registrant").

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

 

 

3.

Based on my knowledge, the financial statements, and the other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

 

 

4.

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially effect, the registrant's internal control over financial reporting.

 

 

5.

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:

 

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

   

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant  role in the registrant's internal control over financial reporting.

    

 

Date:  August 7, 2020

 

 
     

/s/ Rose M. Sparks  

 

Rose M. Sparks, Chief Financial Officer

 

and Principal Financial Officer  

 

 

 

 

 

 
ex_112893.htm

Exhibit  32

Certification  Pursuant to 18

U.S.C. §1350, As Adopted

Pursuant  to

§906 of the Sarbanes -Oxley Act of 2002

 

In connection with the Quarterly Report of Future Fuel Corp. (the "Company") on Form 10-Q for the period ending June 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certify pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

 

1.

The Report fully complies with the requirements of §13(a) of the Securities Exchange Act of 1934, as amended.

 

 

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

 

/s/ Paul A. Novelly

 

 

 

Paul A. Novelly,   

 

 

 

Chairman and Chief Executive Officer   

 

 

 

 

 

 

 

 

 

 

 

/s/ Rose M. Sparks

 

 

 

Rose M. Sparks, Chief Financial Officer    

 

 

 

and Principal Financial Officer   

 

 

 

 

 

 

 

 

 

 

 

August 7, 2020

 

 

 
v3.20.2
Document And Entity Information - shares
6 Months Ended
Jun. 30, 2020
Aug. 07, 2020
Document Information [Line Items]    
Entity Central Index Key 0001337298  
Entity Registrant Name FUTUREFUEL CORP.  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2020  
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Jun. 30, 2020  
Document Transition Report false  
Entity File Number 0-52577  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 20-3340900  
Entity Address, Address Line One 8235 Forsyth Blvd., Suite 400  
Entity Address, City or Town St Louis  
Entity Address, State or Province MO  
Entity Address, Postal Zip Code 63105  
City Area Code 314  
Local Phone Number 854-8352  
Title of 12(b) Security Common Stock  
Trading Symbol FF  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   43,743,243
v3.20.2
Consolidated Balance Sheets (Current Period Unaudited) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Assets    
Cash and cash equivalents $ 187,823 $ 243,331
Accounts receivable, inclusive of the blenders' tax credit of $16,307 and $97,295 at June 30, 2020 and December 31, 2019, respectively, and net of allowances for bad debt of $53 and $0 at June 30, 2020 and December 31, 2019, respectively 29,223 110,264
Accounts receivable – related parties 312 4,602
Inventory 42,183 37,573
Income tax receivable 27,442 8,062
Prepaid expenses 1,150 1,932
Prepaid expenses – related parties 12 12
Marketable securities 62,095 73,620
Other current assets 4,228 1,493
Total current assets 354,468 480,889
Property, plant and equipment, net 95,348 98,597
Intangible assets 1,408 1,408
Other noncurrent assets 5,622 5,611
Total noncurrent assets 102,378 105,616
Total Assets 456,846 586,505
Liabilities and Stockholders’ Equity    
Accounts payable, inclusive of the blenders' tax credit rebates due customers of $6,802 and $39,423 31,503 61,299
Accounts payable – related parties 1,475 1,255
Deferred revenue – short-term 3,427 5,237
Dividends payable 5,249 10,498
Accrued expenses and other current liabilities 6,982 4,410
Accrued expenses and other current liabilities – related parties 0 64
Total current liabilities 48,636 82,763
Deferred revenue – long-term 22,442 21,291
Noncurrent deferred income tax liability 13,620 12,965
Other noncurrent liabilities 2,204 2,388
Total noncurrent liabilities 38,266 36,644
Total liabilities 86,902 119,407
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, none issued and outstanding 0 0
Common stock, $0.0001 par value, 75,000,000 shares authorized, 43,743,243, issued and outstanding at June 30, 2020 and December 31, 2019 4 4
Accumulated other comprehensive income 133 296
Additional paid in capital 282,215 282,166
Retained earnings 87,592 184,632
Total stockholders’ equity 369,944 467,098
Total Liabilities and Stockholders’ Equity $ 456,846 $ 586,505
v3.20.2
Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Accounts Receivable $ 16,307 $ 97,295
v3.20.2
Consolidated Statements of Operations and Comprehensive Income (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Revenue $ 47,422 $ 70,864 $ 100,504 $ 119,365
Gross profit 911 3,270 17,310 6,532
Selling, general, and administrative expenses        
Compensation expense 724 620 1,579 1,335
Other expense 403 547 985 1,048
Related party expense 155 130 303 259
Research and development expenses 768 788 1,603 1,494
Total operating expenses 2,050 2,085 4,470 4,136
(Loss) income from operations (1,139) 1,185 12,840 2,396
Interest and dividend income 1,519 2,750 3,486 5,112
Interest expense (31) (44) (87) (87)
Gain (loss) on marketable securities 1,573 826 (8,486) 3,753
Other income (expense) 8,348 (113) 8,348 (113)
Other income 11,409 3,419 3,261 8,665
Income before taxes 10,270 4,604 16,101 11,061
Income tax (benefit) provision 4,889 (917) 18,101 (1,875)
Net income $ 15,159 $ 3,687 $ 34,202 $ 9,186
Earnings per common share        
Earnings per common share, basic (in dollars per share) $ 0.35 $ 0.08 $ 0.78 $ 0.21
Earnings per common share, diluted (in dollars per share) $ 0.35 $ 0.08 $ 0.78 $ 0.21
Weighted average shares outstanding        
Weighted average shares outstanding, basic (in shares) 43,743,243 43,743,243 43,743,243 43,743,243
Weighted average shares outstanding, diluted (in shares) 43,743,740 43,743,243 43,743,491 43,746,109
Comprehensive income        
Net income $ 15,159 $ 3,687 $ 34,202 $ 9,186
Other comprehensive income (loss) from unrealized net gains (losses) on available-for-sale debt securities 190 22 (207) 278
Income tax effect (40) (5) 44 (59)
Total other comprehensive income (loss), net of tax 150 17 (163) 219
Comprehensive income 15,309 3,704 34,039 9,405
Non-related Parties [Member]        
Revenue 47,310 70,076 99,682 117,498
Cost of goods sold 43,469 61,501 76,250 101,566
Non-related Parties [Member] | Shipping and Handling [Member]        
Cost of goods sold 1,657 1,994 3,297 3,319
Related Parties [Member]        
Revenue 112 788 822 1,867
Cost of goods sold 1,342 4,063 3,557 7,859
Related Parties [Member] | Shipping and Handling [Member]        
Cost of goods sold $ 43 $ 36 $ 90 $ 89
v3.20.2
Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($)
$ in Thousands
Cumulative Effect, Period of Adoption, Adjustment [Member]
Common Stock [Member]
Cumulative Effect, Period of Adoption, Adjustment [Member]
AOCI Attributable to Parent [Member]
Cumulative Effect, Period of Adoption, Adjustment [Member]
Additional Paid-in Capital [Member]
Cumulative Effect, Period of Adoption, Adjustment [Member]
Retained Earnings [Member]
Cumulative Effect, Period of Adoption, Adjustment [Member]
Cumulative Effect, Period of Adoption, Adjusted Balance [Member]
Common Stock [Member]
Cumulative Effect, Period of Adoption, Adjusted Balance [Member]
AOCI Attributable to Parent [Member]
Cumulative Effect, Period of Adoption, Adjusted Balance [Member]
Additional Paid-in Capital [Member]
Cumulative Effect, Period of Adoption, Adjusted Balance [Member]
Retained Earnings [Member]
Cumulative Effect, Period of Adoption, Adjusted Balance [Member]
Common Stock [Member]
AOCI Attributable to Parent [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Total
Balance (in shares) at Dec. 31, 2018                     43,743,243        
Balance at Dec. 31, 2018                     $ 4 $ (20) $ 282,145 $ 106,949 $ 389,078
Other comprehensive income (loss)                     0 202 0 0 202
Net income                     $ 0 0 0 5,499 5,499
Balance (in shares) at Dec. 31, 2018                     43,743,243        
Balance at Dec. 31, 2018                     $ 4 (20) 282,145 106,949 389,078
Net income                             9,186
Balance (in shares) at Mar. 31, 2019                     43,743,243        
Balance at Mar. 31, 2019                     $ 4 182 282,145 112,448 394,779
Other comprehensive income (loss)                     0 17 0 0 17
Net income                     $ 0 0 0 3,687 3,687
Balance (in shares) at Dec. 31, 2019           43,743,243         43,743,243        
Balance at Dec. 31, 2019 $ 0 $ 0 $ 0 $ (12) $ (12) $ 4 $ 296 $ 282,166 $ 184,620 $ 467,086 $ 4 296 282,166 184,632 467,098
Cash dividends declared, $3.00 per share                     0 0 0 (131,230) (131,230)
Stock based compensation                     0 0 49 0 49
Other comprehensive income (loss)                     0 (313) 0 0 (313)
Net income                     $ 0 0 0 19,043 19,043
Balance (in shares) at Dec. 31, 2019           43,743,243         43,743,243        
Balance at Dec. 31, 2019 $ 0 $ 0 $ 0 $ (12) $ (12) $ 4 $ 296 $ 282,166 $ 184,620 $ 467,086 $ 4 296 282,166 184,632 467,098
Net income                             34,202
Balance (in shares) at Mar. 31, 2020                     43,743,243        
Balance at Mar. 31, 2020                     $ 4 (17) 282,215 72,433 354,635
Other comprehensive income (loss)                     0 150 0 0 150
Net income                     $ 0 $ 0 $ 0 $ 15,159 $ 15,159
v3.20.2
Consolidated Statements of Stockholders' Equity (Unaudited) (Parentheticals) - $ / shares
3 Months Ended
Mar. 23, 2020
Mar. 31, 2020
Dividends declared, per share (in dollars per share) $ 3.00 $ 3.00
v3.20.2
Consolidated Statements of Changes in Stockholders' Equity - USD ($)
$ in Thousands
Common Stock [Member]
AOCI Attributable to Parent [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Total
Balance (in shares) at Dec. 31, 2018 43,743,243        
Balance at Dec. 31, 2018 $ 4 $ (20) $ 282,145 $ 106,949 $ 389,078
Other comprehensive income (loss) 0 202 0 0 202
Net income $ 0 0 0 5,499 5,499
Balance (in shares) at Mar. 31, 2019 43,743,243        
Balance at Mar. 31, 2019 $ 4 182 282,145 112,448 394,779
Balance (in shares) at Dec. 31, 2018 43,743,243        
Balance at Dec. 31, 2018 $ 4 (20) 282,145 106,949 389,078
Net income         9,186
Balance (in shares) at Jun. 30, 2019 43,743,243        
Balance at Jun. 30, 2019 $ 4 199 282,145 116,135 398,483
Balance (in shares) at Mar. 31, 2019 43,743,243        
Balance at Mar. 31, 2019 $ 4 182 282,145 112,448 394,779
Other comprehensive income (loss) 0 17 0 0 17
Net income $ 0 0 0 3,687 3,687
Balance (in shares) at Jun. 30, 2019 43,743,243        
Balance at Jun. 30, 2019 $ 4 199 282,145 116,135 398,483
Balance (in shares) at Dec. 31, 2019 43,743,243        
Balance at Dec. 31, 2019 $ 4 296 282,166 184,632 467,098
Other comprehensive income (loss) 0 (313) 0 0 (313)
Net income $ 0 0 0 19,043 19,043
Balance (in shares) at Mar. 31, 2020 43,743,243        
Balance at Mar. 31, 2020 $ 4 (17) 282,215 72,433 354,635
Balance (in shares) at Dec. 31, 2019 43,743,243        
Balance at Dec. 31, 2019 $ 4 296 282,166 184,632 467,098
Net income         34,202
Balance (in shares) at Jun. 30, 2020 43,743,243        
Balance at Jun. 30, 2020 $ 4 133 282,215 87,592 369,944
Balance (in shares) at Mar. 31, 2020 43,743,243        
Balance at Mar. 31, 2020 $ 4 (17) 282,215 72,433 354,635
Other comprehensive income (loss) 0 150 0 0 150
Net income $ 0 0 0 15,159 15,159
Balance (in shares) at Jun. 30, 2020 43,743,243        
Balance at Jun. 30, 2020 $ 4 $ 133 $ 282,215 $ 87,592 $ 369,944
v3.20.2
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Cash flows from operating activities    
Net income $ 34,202 $ 9,186
Adjustments to reconcile net income to net cash from operating activities:    
Depreciation 5,862 5,602
Amortization of deferred financing costs 60 72
Benefit for deferred income taxes 699 (445)
Change in fair value of equity securities 7,405 (4,891)
Change in fair value of derivative instruments 198 (297)
Loss on the sale of investments 1,080 1,138
Stock based compensation 49 0
Loss on disposal of property and equipment 2 11
Noncash interest expense 27 14
Changes in operating assets and liabilities:    
Accounts receivable 81,029 (5,347)
Accounts receivable – related parties 4,290 1,814
Inventory (4,610) 3,180
Income tax receivable (19,380) 1,336
Prepaid expenses 782 712
Prepaid expenses – related parties 0 12
Other assets 350 539
Accounts payable (29,702) 958
Accounts payable - related parties 220 (1,248)
Accrued expenses and other current liabilities 2,572 688
Accrued expenses and other current liabilities – related parties (64) 0
Deferred revenue (659) 591
Other noncurrent liabilities (211) (98)
Net cash provided by operating activities 84,201 13,527
Cash flows from investing activities    
Collateralization of derivative instruments (2,877) 908
Purchase of marketable securities (2,359) (14,323)
Proceeds from the sale of marketable securities 5,192 17,682
Proceeds from the sale of property and equipment 50 13
Capital expenditures (2,759) (4,659)
Net cash used in investing activities (2,753) (379)
Cash flows from financing activities    
Loan proceeds 8,180 0
Payment on loan (8,180) 0
Deferred financing costs (477) 0
Payment of dividends (136,479) (5,249)
Net cash used in financing activities (136,956) (5,249)
Net change in cash and cash equivalents (55,508) 7,899
Cash and cash equivalents at beginning of period 243,331 214,972
Cash and cash equivalents at end of period 187,823 222,871
Cash paid for interest 1 0
Cash paid for income taxes 639 898
Noncash investing and financing activities:    
Noncash capital expenditures 94 108
Noncash operating leases $ 0 $ 432
v3.20.2
Note 1 - Nature of Operations and Basis of Presentation
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Nature of Operations [Text Block]

1 )

NATURE OF OPERATIONS AND BASIS OF PRESENTATION

 

Organization

 

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

 

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

 

The biofuels segment primarily produces and sells biodiesel. FutureFuel Chemical also sells petrodiesel in blends with the Company’s biodiesel and, from time to time, with no biodiesel added. FutureFuel Chemical is a shipper of refined petroleum products on common carrier pipelines and buys and sells petroleum products to maintain an active shipper status on these pipelines.

 

Basis of Presentation

 

The unaudited consolidated financial statements have been prepared by FutureFuel in accordance and consistent with the accounting policies stated in FutureFuel’s 2019 audited consolidated financial statements and should be read in conjunction with the 2019 audited consolidated financial statements of FutureFuel. 

 

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.

v3.20.2
Note 2 - Reinstatement of the Biodiesel Blenders' Tax Credit and Small Agri-biodiesel Producer Tax Credit
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Other Income and Other Expense Disclosure [Text Block]

2 )

REINSTATEMENT OF THE 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 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. As this act was passed into law in 2019, the Company recognized its impact in the last quarter of 2019 for both periods (2018 and 2019) within the Company’s 2019 financial results. Rebates to customers are recorded as a reduction of revenue.  The Company records the BTC as a reduction to cost of goods sold.

 

As the law from which the BTC mentioned above was reinstated, small agri-biodiesel producers with production capacity not in excess of 60 million gallons were eligible for an additional tax credit of $0.10 per gallon on the first 15 million gallons of agri-biodiesel sold (the “Small Agri-biodiesel Producer Tax Credit”). The Company was eligible for this credit and recognized its benefit in the three months ended December 31, 2019 and in the three and six months ended June 30, 2020 as part of the tax provision.

v3.20.2
Note 3 - Revenue Recognition
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Revenue from Contract with Customer [Text Block]

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 chemicals segment customers and 2 to 10 days for biofuels segment customers.

 

Certain of FutureFuel custom chemical contracts within the chemicals segment contain a material right as defined by 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 and undelivered amounts typically resulting from revenue recognized through bill-and-hold arrangements. The contract assets at June 30, 2020 and December 31, 2019 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 chemicals segment plant expansions were $1,051 and $1,471, and $3,358 and $2,909, for the three and six months ended June 30, 2020 and 2019, respectively. Contract liabilities are reduced as the Company transfers product to the customer under the renewal option approach. Revenue recognized in the chemicals segment from the contract liability reductions were $2,579 and $857 for the three months, and $3,906 and $2,208 for the six months ended June 30, 2020 and 2019, 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.  Included in the three months ended June 30, 2020, was the acceleration of the recognition of the remaining material right related to a customer contract which effectively ends December 31, 2020 for which all product shipments have been fulfilled.  The amortization of this customer contract liability was $2,909 and $89, for the three months ended June 30, 2020 and 2019, respectively; $3,452 and $570, for the six months ended June 30, 2020 and 2019, respectively. 

 

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

 

Contract Assets and Liabilities

 

June 30, 2020

  

December 31, 2019

 

Trade receivables, included in accounts receivable*

 $11,738  $11,902 

Contract assets included in accounts receivable

  1,104   1,067 

Contract liabilities, included in Deferred revenue - short-term

  3,220   5,030 

Contract liabilities, included in Deferred revenue - long-term

  18,414   17,151 

 

*Exclusive of the BTC of $16,307 and $97,295, respectively, and net of allowances for bad debt of $53 and $0 as of the dates noted.

 

Transaction price allocated to the remaining performance obligations:

 

At June 30, 2020, approximately $21,634 of revenue is expected to be recognized from remaining performance obligations. FutureFuel expects to recognize this revenue ratably with product sold over the expected term of its long-term contracts which range from four to six years. Approximately 15% of this revenue is expected to be recognized over the next 12 months, and 85% is expected to be recognized between years two and six. These amounts are subject to change based upon changes in the estimated contract life and estimated quantities to be sold over the contract life.

 

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

 

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

 

Disaggregation of revenue - contractual and non-contractual:

 

  

Three months ended June 30,

  

Six months ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 

Contract revenue from customers with > 1 year arrangements

 $4,909  $11,721  $14,523  $27,139 

Contract revenue from customer with < 1 year arrangement

  42,458   59,088   87,887   92,116 

Revenue from non-contractual arrangements

  55   55   111   110 

BTC rebate (customer rebates per Note 2)

  -   -   (2,017)  - 

Total revenue

 $47,422  $70,864  $100,504  $119,365 

 

Timing of revenue:

 

  

Three months ended June 30,

  

Six months ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 

Bill and hold revenue

 $7,335  $12,006  $17,488  $23,762 

Non-bill and hold revenue

  40,087   58,858   83,016   95,603 

Total revenue

 $47,422  $70,864  $100,504  $119,365 

 

As of June 30, 2020, $4,105 of the three- and six-months bill and hold revenue had not shipped.

 

v3.20.2
Note 4 - Inventory
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Inventory Disclosure [Text Block]

4 )

INVENTORY

 

The carrying values of inventory were as follows as of:   

 

  

June 30, 2020

  

December 31, 2019

 

At average cost (approximates current cost)

        

Finished goods

 $22,844  $22,564 

Work in process

  2,133   2,768 

Raw materials and supplies

  22,193   20,121 
   47,170   45,453 

LIFO reserve

  (4,987)  (7,880)

Total inventory

 $42,183  $37,573 

 

Lower of Cost or Market ("LCM") adjustments are recorded as a decrease in inventory values and an increase in cost of goods sold.  The inventory is relieved at the LCM adjusted cost basis when sold.  There was an LCM adjustment of $530 in the three and six months ended  June 30, 2020.  For the three and six months ended  June 30, 2019, there was no LCM adjustment.

v3.20.2
Note 5 - Derivative Instruments
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Derivative Instruments and Hedging Activities Disclosure [Text Block]

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 statement of income as a component of cost of goods sold.

 

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 2020 or 2019. The Company has elected the normal purchase and normal sales exception for certain feedstock purchase contracts and supply agreements. 

 

Realized 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 loss of $935 and a gain of $5,922 for the three months and six months ended June 30, 2020, respectively, and a gain of $443 and a loss of $1,033 for the three months and six months ended June 30, 2019, respectively.

 

The volumes and carrying values of FutureFuel’s derivative instruments were as follows at: 

 

  

June 30, 2020

  

December 31, 2019

 
  

Contract

Quantity

Short

  

Fair

Value

  

Contract

Quantity

Short

  

Fair

Value

 

Regulated fixed price future commitments

  415  $(465)  140  $(267)

 

The margin account maintained with a broker to collateralize these derivative instruments carried an account balance of $3,968 and $1,091 at June 30, 2020 and December 31, 2019, respectively, and was classified as other current assets in the consolidated balance sheets. The carrying values of the margin account and of the derivative instruments are included net, in other current assets.

 

 

  

v3.20.2
Note 6 - Marketable Securities
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Cash, Cash Equivalents, and Marketable Securities [Text Block]

6 )

MARKETABLE SECURITIES

 

At June 30, 2020 and December 31, 2019, FutureFuel had investments in certain debt securities (trust preferred securities and exchange-traded debt instruments) and in preferred stock and other equity instruments. These investments are classified as current assets in the consolidated balance sheets. The unrealized gain on equity securities held for the three months ended June 30, 2020 and 2019 were $2,164 and $1,883, respectively. The unrealized (loss) gain on equity securities held for the six months ended June 30, 2020 and 2019 were ($7,405) and $4,891, respectively.

 

Available-for-sale securities:

 

FutureFuel has designated the debt securities as being available-for-sale. The following comprises the available-for-sale debt securities balances included within marketable securities in the consolidated balance sheets at the respective dates:

 

  

June 30, 2020

 
  

Adjusted

Cost

  

Unrealized

Gains

  

Unrealized

Losses

  

Fair

Value

 

Trust preferred stock

 $3,676  $84  $-  $3,760 

Exchange-traded debt

  1,428   86   -   1,514 

Total debt securities

 $5,104  $170  $-  $5,274 

 

  

December 31, 2019

 
  

Adjusted

Cost

  

Unrealized

Gains

  

Unrealized

Losses

  

Fair

Value

 

Trust preferred stock

 $3,676  $250  $-  $3,926 

Exchange-traded debt

  1,428   128   (3)  1,553 

Total debt securities

 $5,104  $378  $(3) $5,479 

 

The aggregate fair value of debt securities with unrealized losses totaled $0 at June 30, 2020 and $151 at December 31, 2019.  Effective January 1, 2020 the Company adopted ASU 2016-13 using the modified retrospective approach. Under ASU 2016-13 the Company evaluates the debt securities for credit losses using the current expected credit loss model (“CECL”). At the date of adoption and at June 30, 2020, the Company held no debt securities with a fair value below adjusted cost, and no evaluation under the CECL model was required.

 

There were no sales of debt securities in the six months ended June 30, 2020 or 2019.

 

The debt securities held at June 30, 2020, had a contractual maturity of greater than ten years.

 

v3.20.2
Note 7 - Fair Value Measurements
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Fair Value Disclosures [Text Block]

7 )

FAIR VALUE MEASUREMENTS

 

Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. Fair value accounting pronouncements also 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.

 

The following tables provide information by level for assets and liabilities that are measured at fair value, on a recurring basis, at June 30, 2020 and December 31, 2019. 

 

   

Asset (Liability)

 
           

Fair Value Measurements Using

 
   

Fair Value at

   

Inputs Considered as:

 

Description

 

June 30, 2020

   

Level 1

   

Level 2

   

Level 3

 

Derivative instruments

  $ (465 )   $ (465 )   $ -     $ -  

Preferred stock and other equity instruments

  $ 56,821     $ 56,821     $ -     $ -  

Trust preferred stock and exchange-traded debt instruments

  $ 5,274     $ 5,274     $ -     $ -  

 

   

Asset (Liability)

 
           

Fair Value Measurements Using

 
   

Fair Value at

   

Inputs Considered as:

 

Description

 

December 31, 2019

   

Level 1

   

Level 2

   

Level 3

 

Derivative instruments

  $ (267 )   $ (267 )   $ -     $ -  

Preferred stock and other equity instruments

  $ 68,141     $ 68,141     $ -     $ -  

Trust preferred stock and exchange-traded debt instruments

  $ 5,479     $ 5,479     $ -     $ -  

 

 

v3.20.2
Note 8 - Intangible Assets
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Goodwill and Intangible Assets Disclosure [Text Block]

8 )

INTANGIBLE ASSETS

 

In April of 2015, FutureFuel acquired additional historical line space on a pipeline for $1,408. The acquired line space was recorded as an intangible asset with an indefinite life as there was no foreseeable limit on the time period over which it is expected to contribute to cash flows. The carrying value of the asset was $1,408 at June 30, 2020 and December 31, 2019 FutureFuel tests the intangible asset for impairment in accordance with Topic 350, Intangibles-Goodwill and Other

 

 

v3.20.2
Note 9 - Accrued Expenses and Other Current Liabilities
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Accounts Payable, Accrued Liabilities, and Other Liabilities Disclosure, Current [Text Block]

9 )

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

 

Accrued expenses and other current liabilities consisted of the following at:   

 

   

June 30, 2020

   

December 31, 2019

 

Accrued employee liabilities

  $ 4,256     $ 2,534  

Accrued property, franchise, motor fuel and other taxes

    2,037       1,226  

Lease liability, current

    392       537  

Other

    297       113  

Total

  $ 6,982     $ 4,410  

 

 

v3.20.2
Note 10 - Borrowings
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Debt Disclosure [Text Block]

10 )

BORROWINGS

 

On March 30, 2020, FutureFuel, with FutureFuel Chemical as the borrower and certain of FutureFuel’s other subsidiaries as guarantors, amended and restated its credit agreement (the “Credit Agreement”) originally entered into on April 16, 2015 (as amended, the “Prior Credit Agreement”) with the lenders party, Regions Bank as administrative agent and collateral agent, and PNC Bank, N.A., as syndication agent. The Credit Agreement consists of a five-year revolving credit facility in a dollar amount of up to $100,000, which includes a sublimit of $30,000 for letters of credit and $15,000 for swingline loans (collectively, the “Credit Facility”).  The Credit Facility expires on March 30, 2025.  The primary amendments from the Prior Credit Agreement were a reduction in the facility by $65,000, a reduction in the facility’s applicable interest rate by 0.25%, a reduction in the commitment fee, and elimination of the minimum consolidated fixed charge coverage ratio.

 

The interest rate floats at the following margins over LIBOR or base rate based upon the leverage ratio from time to time:

 

Consolidated Leverage Ratio

 

Adjusted LIBOR Rate Loans and

Letter of Credit Fee

 

Base Rate Loans

 

Commitment Fee

 

< 1.00:1.0

 1.00% 0.00% 0.15% 

≥ 1.00:1.0

And

< 1.50:1.0

 1.25% 0.25% 0.15% 

≥ 1.50:1.0

And

< 2.00:1.0

 1.50% 0.50% 0.20% 

≥ 2.00:1.0

And

< 2.50:1.0

 1.75% 0.75% 0.20% 

≥ 2.50:1.0

 2.00% 1.00% 0.25% 

 

 

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 no borrowings under the Credit Agreement at June 30, 2020 or under the Prior Credit Agreement at December 31, 2019.

 

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted to provide emergency assistance for individuals, families and businesses affected by the coronavirus pandemic. Under the CARES Act, certain subsidiaries of FutureFuel entered into a loan with Saint Louis Bank pursuant to the Paycheck Protection Program (“PPP”) totaling $8,180 on April 10, 2020. At the time that FutureFuel applied for the PPP loan, it qualified to receive the funds pursuant to the then published eligibility requirements. FutureFuel ensured continued operation as part of the nation’s critical infrastructure on the receipt and availability of these funds. However, the Small Business Administration and Treasury Department subsequently issued new guidance that cast doubt on the ability of public companies to qualify for a PPP loan. As a result, FutureFuel paid the full amount of the PPP loan on May 5, 2020. 

 

v3.20.2
Note 11 - Income Tax Provision
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

11 )

INCOME TAX PROVISION

 

The following table summarizes the income tax provision.  

 

  

Three Months Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 

Income tax (benefit) provision

 $(4,889) $917  $(18,101) $1,875 

Effective tax rate

  (47.6%)  19.9%  (112.4%)  17.0%

 

The effective tax rate for the three and six months ended June 30, 2020 reflects the positive effect of the reinstatement of certain tax credits and incentives for 2020, the most significant of which were the BTC and Small Agri-biodiesel Producer Tax Credit. The BTC and Small Producer Agri-biodiesel Producer Credit were retroactively extended for 2018 and 2019 on December 20, 2019 and further extended through December 31, 2022. On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (H.R. 748) (“CARES Act”). The CARES Act provides that Net Operating Losses (“NOLs”) arising in a taxable year beginning after December 31, 2017 and before January 1, 2021 shall be treated as a carryback to each of the 5 preceding taxable years unless the taxpayer elects to forego the carryback. This enacted NOL provision had a positive effect on the effective tax rate for the three and six months ended June 30, 2020 as FutureFuel will be able to carryback its 2019 federal NOL to a year with a higher tax rate rather than forward to a year with a lower tax rate.

 

The effective tax rate for the three and six months ended June 30, 2019 reflects the unfavorable effect of the BTC and Small Producer Agri-biodiesel Producer Credit not being in the law for the first six months of 2019. The six months ended June 30, 2019 rate was also favorably impacted from a retroactive research and development credit for 2018 in a state where FutureFuel does significant business.

 

There were no unrecognized tax benefits at June 30, 2020 or December 31, 2019.

 

FutureFuel recorded interest and penalties, net, as a component of income tax provision and had accrued balances of $13 and ($557) at June 30, 2020 and December 31, 2019, respectively.

 

 

v3.20.2
Note 12 - Earnings Per Share
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Earnings Per Share [Text Block]

12 )

EARNINGS PER SHARE

 

In the three and six months ended June 30, 2020 and 2019, FutureFuel used the treasury method in computing earnings per share.

 

Basic and diluted earnings per common share were computed as follows:  

 

  

Three Months Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 

Numerator:

                

Net income

 $15,159  $3,687  $34,202  $9,186 

Numerator for diluted earnings per share

 $15,159  $3,687  $34,202  $9,186 

Denominator:

                

Weighted average shares outstanding – basic

  43,743,243   43,743,243   43,743,243   43,743,243 

Effect of dilutive securities:

                

Stock options and other awards

  497   -   248   2,866 

Weighted average shares outstanding – diluted

  43,743,740   43,743,243   43,743,491   43,746,109 
                 

Basic earnings per share

 $0.35  $0.08  $0.78  $0.21 

Diluted earnings per share

 $0.35  $0.08  $0.78  $0.21 

 

For the three and six months ended June 30, 2020, 50,000 and 62,000 options were excluded on a weighted average basis respectively, as these options were anti-dilutive in the computation of diluted earnings per share. For the three and six months ended June 30, 2019, 40,000 and 20,000 options were excluded on a weighted average basis, respectively.

 

v3.20.2
Note 13 - Related Party Transactions
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Related Party Transactions Disclosure [Text Block]

13 )

RELATED PARTY TRANSACTIONS

 

FutureFuel enters into transactions with companies affiliated with or controlled by a director and significant shareholder. Revenues, 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 revenues are the result of sales of biodiesel, petrodiesel, blends, other petroleum products, and other similar or related products to these related parties.

 

Related party cost of goods sold and distribution are the result of sales of biodiesel, petrodiesel, blends, and other petroleum products to these related parties along with the associated expense from the purchase of natural gas, storage and terminalling services by FutureFuel from these related parties.

 

 

v3.20.2
Note 14 - Segment Information
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

14 )

SEGMENT INFORMATION

 

FutureFuel has two reportable segments organized along similar product groups – chemicals and biofuels.

 

Chemicals

 

FutureFuel’s chemicals segment manufactures diversified chemical products that are sold externally to third party customers. This segment is composed of two components: “custom manufacturing” (manufacturing chemicals for specific customers) and “performance chemicals” (multi-customer specialty chemicals).

 

Biofuels

 

FutureFuel’s biofuels segment primarily manufactures and markets biodiesel. Biodiesel revenues are generated through the sale of biodiesel to customers through FutureFuel’s distribution network at the Batesville Plant, through distribution facilities available at leased oil storage facilities, and through a network of remotely located tanks. Biofuels revenues also include the sale of biodiesel blends with petrodiesel; the sale of petrodiesel with no biodiesel added; the sale of internally generated, separated Renewable Identification Numbers (“RINs”); the sale of biodiesel production byproducts; and the purchase and sale of other petroleum products on common carrier pipelines.  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.

Summary of business by segment

 

  

Three Months Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 

Revenue

                

Custom chemicals

 $18,041  $21,965  $41,801  $45,665 

Performance chemicals

  4,797   3,894   8,730   7,546 

Chemicals revenue

  22,838   25,859   50,531   53,211 

Biofuels revenue

  24,584   45,005   49,973   66,154 

Total Revenue

 $47,422  $70,864  $100,504  $119,365 
                 

Segment gross profit (loss)

                

Chemicals

 $7,577  $7,181  $15,591  $14,490 

Biofuels

  (6,666)  (3,911)  1,719   (7,958)

Total gross profit

 $911  $3,270  $17,310  $6,532 

 

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.

 

 

v3.20.2
Note 15 - Special Cash Dividend
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Stockholders' Equity Note Disclosure [Text Block]

15 )

SPECIAL CASH DIVIDEND

 

On March 23, 2020, the Company declared a special cash dividend of $3.00 per share on common stock in the amount of $131,230 that was paid on April 17, 2020.

 

 

v3.20.2
Note 16 - Recently Issued Accounting Standards
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Description of New Accounting Pronouncements Not yet Adopted [Text Block]

16 )

RECENTLY ISSUED ACCOUNTING STANDARDS

 

Recently Adopted Accounting Standards  

 

In the first quarter of 2020, the Company adopted ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" and the associated ASUs (collectively “Topic 326”) on a modified retrospective approach. The amendments replace the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company recorded a $12 reduction to opening retained earnings and an allowance for bad debt of $12 on our consolidated financial statements.

 

Recently Issued Accounting Standards Not Adopted  

 

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." The amendments simplify the accounting for income taxes by removing certain exceptions to the general principles of Topic 740, "Income Taxes" and improve consistent application by clarifying and amending existing guidance. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted, with the amendments to be applied on a retrospective, modified retrospective or prospective basis, depending on the specific amendment. The Company is currently evaluating the impact of adopting this guidance. 

 

Other

 

ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.  Effective March 12, 2020, the guidance in the update is in response to concerns about structural risks of interbank offered rates (IBORs), and, particularly, the risk of cessation of the London Interbank Offered Rate (LIBOR). Regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. This guidance will ease the accounting burden associated with transitioning away from reference rates that are expected to be discontinued within our credit facility as described in Note 10.

 

 

v3.20.2
Note 17 - Legal Matters
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Legal Matters and Contingencies [Text Block]

17 )

LEGAL MATTERS

 

From time to time, FutureFuel and its operations 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. 

 

During the three months ended June 30, 2020, the Company reached a legal resolution of a prior year contractual matter for which an accrual of $8,350 was relieved as other income. 

 

v3.20.2
Note 3 - Revenue Recognition (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Contract with Customer, Contract Asset, Contract Liability, and Receivable [Table Text Block]

Contract Assets and Liabilities

 

June 30, 2020

  

December 31, 2019

 

Trade receivables, included in accounts receivable*

 $11,738  $11,902 

Contract assets included in accounts receivable

  1,104   1,067 

Contract liabilities, included in Deferred revenue - short-term

  3,220   5,030 

Contract liabilities, included in Deferred revenue - long-term

  18,414   17,151 
Disaggregation of Revenue [Table Text Block]
  

Three months ended June 30,

  

Six months ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 

Contract revenue from customers with > 1 year arrangements

 $4,909  $11,721  $14,523  $27,139 

Contract revenue from customer with < 1 year arrangement

  42,458   59,088   87,887   92,116 

Revenue from non-contractual arrangements

  55   55   111   110 

BTC rebate (customer rebates per Note 2)

  -   -   (2,017)  - 

Total revenue

 $47,422  $70,864  $100,504  $119,365 
  

Three months ended June 30,

  

Six months ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 

Bill and hold revenue

 $7,335  $12,006  $17,488  $23,762 

Non-bill and hold revenue

  40,087   58,858   83,016   95,603 

Total revenue

 $47,422  $70,864  $100,504  $119,365 
v3.20.2
Note 4 - Inventory (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Schedule of Inventory, Current [Table Text Block]
  

June 30, 2020

  

December 31, 2019

 

At average cost (approximates current cost)

        

Finished goods

 $22,844  $22,564 

Work in process

  2,133   2,768 

Raw materials and supplies

  22,193   20,121 
   47,170   45,453 

LIFO reserve

  (4,987)  (7,880)

Total inventory

 $42,183  $37,573 
v3.20.2
Note 5 - Derivative Instruments (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Schedule of Derivative Instruments [Table Text Block]
  

June 30, 2020

  

December 31, 2019

 
  

Contract

Quantity

Short

  

Fair

Value

  

Contract

Quantity

Short

  

Fair

Value

 

Regulated fixed price future commitments

  415  $(465)  140  $(267)
v3.20.2
Note 6 - Marketable Securities (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Marketable Securities [Table Text Block]
  

June 30, 2020

 
  

Adjusted

Cost

  

Unrealized

Gains

  

Unrealized

Losses

  

Fair

Value

 

Trust preferred stock

 $3,676  $84  $-  $3,760 

Exchange-traded debt

  1,428   86   -   1,514 

Total debt securities

 $5,104  $170  $-  $5,274 
  

December 31, 2019

 
  

Adjusted

Cost

  

Unrealized

Gains

  

Unrealized

Losses

  

Fair

Value

 

Trust preferred stock

 $3,676  $250  $-  $3,926 

Exchange-traded debt

  1,428   128   (3)  1,553 

Total debt securities

 $5,104  $378  $(3) $5,479 
v3.20.2
Note 7 - Fair Value Measurements (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Fair Value, Assets Measured on Recurring Basis [Table Text Block]
   

Asset (Liability)

 
           

Fair Value Measurements Using

 
   

Fair Value at

   

Inputs Considered as:

 

Description

 

June 30, 2020

   

Level 1

   

Level 2

   

Level 3

 

Derivative instruments

  $ (465 )   $ (465 )   $ -     $ -  

Preferred stock and other equity instruments

  $ 56,821     $ 56,821     $ -     $ -  

Trust preferred stock and exchange-traded debt instruments

  $ 5,274     $ 5,274     $ -     $ -  
   

Asset (Liability)

 
           

Fair Value Measurements Using

 
   

Fair Value at

   

Inputs Considered as:

 

Description

 

December 31, 2019

   

Level 1

   

Level 2

   

Level 3

 

Derivative instruments

  $ (267 )   $ (267 )   $ -     $ -  

Preferred stock and other equity instruments

  $ 68,141     $ 68,141     $ -     $ -  

Trust preferred stock and exchange-traded debt instruments

  $ 5,479     $ 5,479     $ -     $ -  
v3.20.2
Note 9 - Accrued Expenses and Other Current Liabilities (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Schedule of Accrued Liabilities [Table Text Block]
   

June 30, 2020

   

December 31, 2019

 

Accrued employee liabilities

  $ 4,256     $ 2,534  

Accrued property, franchise, motor fuel and other taxes

    2,037       1,226  

Lease liability, current

    392       537  

Other

    297       113  

Total

  $ 6,982     $ 4,410  
v3.20.2
Note 10 - Borrowings (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Schedule of Long-term Debt Instruments [Table Text Block]

Consolidated Leverage Ratio

 

Adjusted LIBOR Rate Loans and

Letter of Credit Fee

 

Base Rate Loans

 

Commitment Fee

 

< 1.00:1.0

 1.00% 0.00% 0.15% 

≥ 1.00:1.0

And

< 1.50:1.0

 1.25% 0.25% 0.15% 

≥ 1.50:1.0

And

< 2.00:1.0

 1.50% 0.50% 0.20% 

≥ 2.00:1.0

And

< 2.50:1.0

 1.75% 0.75% 0.20% 

≥ 2.50:1.0

 2.00% 1.00% 0.25% 
v3.20.2
Note 11 - Income Tax Provision (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]
  

Three Months Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 

Income tax (benefit) provision

 $(4,889) $917  $(18,101) $1,875 

Effective tax rate

  (47.6%)  19.9%  (112.4%)  17.0%
v3.20.2
Note 12 - Earnings Per Share (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]
  

Three Months Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 

Numerator:

                

Net income

 $15,159  $3,687  $34,202  $9,186 

Numerator for diluted earnings per share

 $15,159  $3,687  $34,202  $9,186 

Denominator:

                

Weighted average shares outstanding – basic

  43,743,243   43,743,243   43,743,243   43,743,243 

Effect of dilutive securities:

                

Stock options and other awards

  497   -   248   2,866 

Weighted average shares outstanding – diluted

  43,743,740   43,743,243   43,743,491   43,746,109 
                 

Basic earnings per share

 $0.35  $0.08  $0.78  $0.21 

Diluted earnings per share

 $0.35  $0.08  $0.78  $0.21 
v3.20.2
Note 14 - Segment Information (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Schedule of Segment Reporting Information, by Segment [Table Text Block]
  

Three Months Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 

Revenue

                

Custom chemicals

 $18,041  $21,965  $41,801  $45,665 

Performance chemicals

  4,797   3,894   8,730   7,546 

Chemicals revenue

  22,838   25,859   50,531   53,211 

Biofuels revenue

  24,584   45,005   49,973   66,154 

Total Revenue

 $47,422  $70,864  $100,504  $119,365 
                 

Segment gross profit (loss)

                

Chemicals

 $7,577  $7,181  $15,591  $14,490 

Biofuels

  (6,666)  (3,911)  1,719   (7,958)

Total gross profit

 $911  $3,270  $17,310  $6,532 
v3.20.2
Note 1 - Nature of Operations and Basis of Presentation (Details Textual)
6 Months Ended
Jun. 30, 2020
a
Area of Land (Acre) 2,200
Number of Operating Segments 2
v3.20.2
Note 3 - Revenue Recognition 1 (Details Textual) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Increase (Decrease) in Contract with Customer, Liability     $ (659) $ 591  
Contract with Customer, Liability, Revenue Recognized $ 2,579 $ 857 3,906 2,208  
Amortization of Contract with Customer Liability 2,909 89 3,452 570  
Accounts Receivable, Blenders' Tax Credit 16,307   16,307   $ 97,295
Accounts Receivable, Allowance for Credit Loss, Ending Balance 53   53   $ 0
Bill and Hold Inventory Invoiced, but not Shipped [Member]          
Contract with Customer, Liability, Total 4,105   4,105    
Chemicals [Member]          
Increase (Decrease) in Contract with Customer, Liability $ 1,051 $ 3,358 $ 1,471 $ 2,909  
v3.20.2
Note 3 - Revenue Recognition 2 (Details Textual)
$ in Thousands
Jun. 30, 2020
USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-07-01  
Revenue, Remaining Performance Obligation, Amount $ 21,634
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period (Year) 12 months
Revenue, Remaining Performance Obligation, Percentage 15.00%
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-07-01 | Minimum [Member]  
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period (Year) 4 years
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-07-01 | Maximum [Member]  
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period (Year) 6 years
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-07-01  
Revenue, Remaining Performance Obligation, Percentage 85.00%
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-07-01 | Minimum [Member]  
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period (Year) 2 years
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-07-01 | Maximum [Member]  
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period (Year) 6 years
v3.20.2
Note 3 - Revenue Recognition - Contract Assets and Liabilities (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Trade receivables, included in accounts receivable* [1] $ 11,738 $ 11,902
Contract assets included in accounts receivable 1,104 1,067
Contract liabilities, included in Deferred revenue - short-term 3,220 5,030
Contract liabilities, included in Deferred revenue - long-term $ 18,414 $ 17,151
[1] Exclusive of the BTC of $16,307 and $97,295, respectively, and net of allowances for bad debt of $53 and $0 as of the dates noted.
v3.20.2
Note 3 - Revenue Recognition - Disaggregation of Revenue (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Revenue $ 47,422 $ 70,864 $ 100,504 $ 119,365
Revenue from non-contractual arrangements 55 55 111 110
BTC rebate (customer rebates per Note 2) 0 0 (2,017) 0
Bill and Hold Revenue [Member]        
Revenue 7,335 12,006 17,488 23,762
Non-bill and Hold Revenue [Member]        
Revenue 40,087 58,858 83,016 95,603
Long-term Contract Revenue [Member]        
Revenue 4,909 11,721 14,523 27,139
Short-term Contract Revenue [Member]        
Revenue $ 42,458 $ 59,088 $ 87,887 $ 92,116
v3.20.2
Note 4 - Inventory (Details Textual) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Inventory Write-down $ 530 $ 0
v3.20.2
Note 4 - Inventory - Carrying Values of Inventory (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Finished goods $ 22,844 $ 22,564
Work in process 2,133 2,768
Raw materials and supplies 22,193 20,121
Inventory, gross 47,170 45,453
LIFO reserve (4,987) (7,880)
Total inventory $ 42,183 $ 37,573
v3.20.2
Note 5 - Derivative Instruments (Details Textual) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net, Total $ (935) $ 443 $ 5,922 $ (1,033)  
Restricted Cash and Cash Equivalents, Total $ 3,968   $ 3,968   $ 1,091
v3.20.2
Note 5 - Derivative Instruments - Carrying Value of Derivative Instruments (Details) - Future [Member]
$ in Thousands
Jun. 30, 2020
USD ($)
Dec. 31, 2019
USD ($)
Contract quantity short 415 140
Fair value Liabilities $ (465) $ (267)
Fair value Liabilities $ (465) $ (267)
v3.20.2
Note 6 - Marketable Securities (Details Textual) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Equity Securities, FV-NI, Unrealized Gain (Loss), Total $ 2,164 $ 1,883 $ (7,405) $ 4,891  
Debt Securities, Available-for-sale, Unrealized Loss Position, Total $ 0   0   $ 151
Proceeds from Sale and Maturity of Debt Securities, Available-for-sale, Total     $ 0 $ 0  
v3.20.2
Note 6 - Marketable Securities - Marketable Securities (Details) - USD ($)
Jun. 30, 2020
Dec. 31, 2019
Adjusted Cost $ 5,104,000 $ 5,104,000
Unrealized Gains 170,000 378,000
Unrealized Losses 0 (3,000)
Fair Value 5,274,000 5,479,000
Trust Preferred Securities [Member]    
Adjusted Cost 3,676,000 3,676,000
Unrealized Gains 84,000 250,000
Unrealized Losses 0 0
Fair Value 3,760,000 3,926
Corporate Debt Securities [Member]    
Adjusted Cost 1,428,000 1,428,000
Unrealized Gains 86,000 128,000
Unrealized Losses 0 (3,000)
Fair Value $ 1,514,000 $ 1,553,000
v3.20.2
Note 7 - Fair Value Measurements - Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Trust preferred stock and exchange-traded debt instruments $ 5,274 $ 5,479
Fair Value, Recurring [Member]    
Derivative instruments (465) (267)
Preferred stock and other equity instruments 56,821 68,141
Trust preferred stock and exchange-traded debt instruments 5,274 5,479
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]    
Derivative instruments (465) (267)
Preferred stock and other equity instruments 56,821 68,141
Trust preferred stock and exchange-traded debt instruments 5,274 5,479
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]    
Derivative instruments 0 0
Preferred stock and other equity instruments 0 0
Trust preferred stock and exchange-traded debt instruments 0 0
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]    
Derivative instruments 0 0
Preferred stock and other equity instruments 0 0
Trust preferred stock and exchange-traded debt instruments $ 0 $ 0
v3.20.2
Note 8 - Intangible Assets (Details Textual) - USD ($)
$ in Thousands
1 Months Ended
Apr. 30, 2015
Jun. 30, 2020
Dec. 31, 2019
Payments to Acquire Intangible Assets $ 1,408    
Intangible Assets, Net (Excluding Goodwill), Total   $ 1,408 $ 1,408
v3.20.2
Note 9 - Accrued Expenses and Other Current Liabilities - Accrued Expenses and Other Current Liabilities (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Accrued employee liabilities $ 4,256 $ 2,534
Accrued property, franchise, motor fuel and other taxes 2,037 1,226
Other 297 113
Total 6,982 4,410
Other Current Liabilities [Member]    
Lease liability, current $ 392 $ 537
v3.20.2
Note 10 - Borrowings (Details Textual) - USD ($)
$ in Thousands
Apr. 10, 2020
Mar. 30, 2020
Jun. 30, 2020
Dec. 31, 2019
Paycheck Protection Program, CARES Act [Member]        
Proceeds from Issuance of Long-term Debt, Total $ 8,180      
Regions Bank and PNC Bank N.A. [Member] | Revolving Credit Facility [Member]        
Line of Credit Facility, Expiration Period (Year)   5 years    
Line of Credit Facility, Maximum Borrowing Capacity   $ 100,000    
Line of Credit Facility Sublimit for Letters of Credit   30,000    
Line of Credit Facility Swingline Loans   15,000    
Line of Credit Facility, Increase (Decrease) in Maximum Borrowing Amount   $ 65,000    
Debt Instrument, Increase (Decrease) in Stated Interest Rate   (0.25%)    
Long-term Line of Credit, Total     $ 0 $ 0
v3.20.2
Note 10 - Borrowings - Leverage Ratio (Details)
6 Months Ended
Jun. 30, 2020
Leverage Ratio1 [Member]  
Commitment Fee 0.15%
Leverage Ratio1 [Member] | London Interbank Offered Rate (LIBOR) [Member]  
Spread on variable rate 1.00%
Leverage Ratio1 [Member] | Base Rate [Member]  
Spread on variable rate 0.00%
Leverage Ratio 2 [Member]  
Commitment Fee 0.15%
Leverage Ratio 2 [Member] | London Interbank Offered Rate (LIBOR) [Member]  
Spread on variable rate 1.25%
Leverage Ratio 2 [Member] | Base Rate [Member]  
Spread on variable rate 0.25%
Leverage Ratio 3 [Member]  
Commitment Fee 0.20%
Leverage Ratio 3 [Member] | London Interbank Offered Rate (LIBOR) [Member]  
Spread on variable rate 1.50%
Leverage Ratio 3 [Member] | Base Rate [Member]  
Spread on variable rate 0.50%
Leverage Ratio 4 [Member]  
Commitment Fee 0.20%
Leverage Ratio 4 [Member] | London Interbank Offered Rate (LIBOR) [Member]  
Spread on variable rate 1.75%
Leverage Ratio 4 [Member] | Base Rate [Member]  
Spread on variable rate 0.75%
Leverage Ratio 5 [Member]  
Commitment Fee 0.25%
Leverage Ratio 5 [Member] | London Interbank Offered Rate (LIBOR) [Member]  
Spread on variable rate 2.00%
Leverage Ratio 5 [Member] | Base Rate [Member]  
Spread on variable rate 1.00%
v3.20.2
Note 11 - Income Tax Provision (Details Textual) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Unrecognized Tax Benefits, Ending Balance $ 0 $ 0
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued, Total $ (13) $ (557)
v3.20.2
Note 11 - Income Tax Provision - Summary of Provisions for Income Taxes (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Income tax (benefit) provision $ (4,889) $ 917 $ (18,101) $ 1,875
Effective tax rate (47.60%) 19.90% (112.40%) 17.00%
v3.20.2
Note 12 - Earnings Per Share (Details Textual) - shares
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Share-based Payment Arrangement, Option [Member]        
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) 50,000 40,000 62,000 20,000
v3.20.2
Note 12 - Earnings Per Share - Computation of Basic and Diluted Earnings Per Common Share (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Mar. 31, 2020
Jun. 30, 2019
Mar. 31, 2019
Jun. 30, 2020
Jun. 30, 2019
Net income $ 15,159 $ 19,043 $ 3,687 $ 5,499 $ 34,202 $ 9,186
Numerator for diluted earnings per share $ 15,159   $ 3,687   $ 34,202 $ 9,186
Weighted average shares outstanding – basic (in shares) 43,743,243   43,743,243   43,743,243 43,743,243
Stock options and other awards (in shares) 497   0   248 2,866
Weighted average shares outstanding – diluted (in shares) 43,743,740   43,743,243   43,743,491 43,746,109
Basic earnings per share (in dollars per share) $ 0.35   $ 0.08   $ 0.78 $ 0.21
Diluted earnings per share (in dollars per share) $ 0.35   $ 0.08   $ 0.78 $ 0.21
v3.20.2
Note 14 - Segment Information (Details Textual)
6 Months Ended
Jun. 30, 2020
Number of Reportable Segments 2
Chemicals [Member]  
Number of Reportable Segments 2
v3.20.2
Note 14 - Segment Information - Summary of Business by Segment (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Revenues $ 47,422 $ 70,864 $ 100,504 $ 119,365
Gross profit 911 3,270 17,310 6,532
Operating Segments [Member] | Chemicals [Member]        
Revenues 22,838 25,859 50,531 53,211
Gross profit 7,577 7,181 15,591 14,490
Operating Segments [Member] | Chemicals [Member] | Custom Chemicals [Member]        
Revenues 18,041 21,965 41,801 45,665
Operating Segments [Member] | Chemicals [Member] | Performance Chemicals [Member]        
Revenues 4,797 3,894 8,730 7,546
Operating Segments [Member] | Biofuels [Member]        
Revenues 24,584 45,005 49,973 66,154
Gross profit $ (6,666) $ (3,911) $ 1,719 $ (7,958)
v3.20.2
Note 15 - Special Cash Dividend (Details Textual) - USD ($)
3 Months Ended
Mar. 23, 2020
Mar. 31, 2020
Common Stock, Dividends, Per Share, Declared (in dollars per share) $ 3.00 $ 3.00
Dividends Payable $ 131,230  
Dividends Payable, Date to be Paid Apr. 17, 2020  
v3.20.2
Note 16 - Recently Issued Accounting Standards (Details Textual) - USD ($)
$ in Thousands
Jun. 30, 2020
Jan. 01, 2020
Dec. 31, 2019
Retained Earnings (Accumulated Deficit), Ending Balance $ 87,592   $ 184,632
Accounts Receivable, Allowance for Credit Loss, Ending Balance $ 53   $ 0
Accounting Standards Update 2016-13 [Member]      
Accounts Receivable, Allowance for Credit Loss, Ending Balance   $ (12)  
Accounting Standards Update 2016-13 [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member]      
Retained Earnings (Accumulated Deficit), Ending Balance   $ (12)  
v3.20.2
Note 17 - Legal Matters (Details Textual)
$ in Thousands
3 Months Ended
Jun. 30, 2020
USD ($)
Nonoperating Income (Expense) [Member]  
Legal Resolution of a Prior Year Contractual Matter, Accrual Amount $ 8,350