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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 September 30, 2024

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

 

logo.jpg

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware  

 

20-3340900

(State or Other Jurisdiction of 

 

(IRS Employer Identification No.)

Incorporation or Organization) 

 

 

   
8235 Forsyth Blvd., Suite 400, St Louis, Missouri   63105
(Address of Principal Executive Offices) (Zip Code)
   
 (314) 854-8352  
 (Registrant’s Telephone Number, Including Area Code) 

                                             

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

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

FF

NYSE

 

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

 

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

 

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

 

Large accelerated filer   ☐  

 

Accelerated filer 

☑

 

Non-accelerated filer     ☐  

 

Smaller reporting company

☑ 

 

 

 

Emerging growth company

☐

 

 

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

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of November 8, 2024: 43,763,243 

 

 
 
 

 

 

PART I FINANCIAL INFORMATION

   

Item 1. Financial Statements.

 

FutureFuel Corp.

Consolidated Balance Sheets

(Dollars in thousands)

 

   (Unaudited)     
  

September 30, 2024

  

December 31, 2023

 

Assets

        

Cash and cash equivalents

 $133,398  $219,444 

Accounts receivable, inclusive of the blenders’ tax credit of $3,964 and $11,381, respectively, and net of allowances for expected credit losses of $136 and $55, respectively

  15,967   28,406 

Accounts receivable – related parties

  -   1 

Inventory, net

  24,878   32,978 

Income tax receivable

  -   1,940 

Prepaid expenses

  964   4,346 

Prepaid expenses – related parties

  12   12 

Other current assets

  1,018   3,419 

Total current assets

  176,237   290,546 

Property, plant and equipment, net

  76,815   72,711 

Other assets

  3,414   3,824 

Total noncurrent assets

  80,229   76,535 

Total Assets

 $256,466  $367,081 

Liabilities and Stockholders’ Equity

        

Accounts payable, inclusive of the blenders’ tax credit rebates due customers of $890 and $890, respectively

 $11,587  $22,178 

Accounts payable – related parties

  124   42 

Income tax payable

  359   - 

Deferred revenue – current

  4,135   3,863 

Dividends payable

  2,626   10,503 

Accrued expenses and other current liabilities

  10,820   4,758 

Total current liabilities

  29,651   41,344 

Deferred revenue – non-current

  9,593   12,570 

Noncurrent deferred income taxes

  618   - 

Other noncurrent liabilities

  3,313   3,287 

Total noncurrent liabilities

  13,524   15,857 

Total liabilities

  43,175   57,201 

Commitments and contingencies (See Note 13)

          

Preferred stock, $0.0001 par value, 5,000,000 shares authorized, none issued and outstanding

  -   - 

Common stock, $0.0001 par value, 75,000,000 shares authorized, 43,763,243 shares issued and outstanding as of September 30, 2024 and December 31, 2023

  4   4 

Additional paid in capital

  204,911   282,489 

Retained earnings

  8,376   27,387 

Total stockholders’ equity

  213,291   309,880 

Total Liabilities and Stockholders’ Equity

 $256,466  $367,081 

 

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

    

Nine Months Ended

  
    September 30,     September 30,  
   

2024

    

2023

    

2024

    

2023

  

Revenue

   $ 51,140     $ 116,752     $ 181,830     $ 276,221  

Revenue – related parties

     -       -       -       20  

Cost of goods sold

     50,152       113,328       165,644       257,890  

Cost of goods sold – related parties

     36       (728 )     63       (700 )

Distribution

     532       244       1,939       2,018  

Distribution – related parties

     37       38       137       132  

Gross profit

     383       3,870       14,047       16,901  

Selling, general, and administrative expenses

                                

Compensation expense

     1,140       1,010       3,188       3,102  

Other expense

     994       1,247       2,833       3,130  

Related party expense

     156       153       462       462  

Research and development expenses

     981       1,163       2,803       3,242  

Total operating expenses

     3,271       3,573       9,286       9,936  

(Loss) income from operations

     (2,888 )     297       4,761       6,965  

Interest and dividend income

     1,830       2,527       6,151       6,595  

Interest expense

     (35 )     (36 )     (104 )     (103 )

Gain on marketable securities

     -       -       -       575  

Other (expense) income

     (105 )     -       2,533       -  

Other income, net

     1,690       2,491       8,580       7,067  

(Loss) income before taxes

     (1,198 )     2,788       13,341       14,032  

Income tax (benefit) provision

     (3 )     12       635       34  

Net (loss) income

   $ (1,195 )   $ 2,776     $ 12,706     $ 13,998  
                                 

(Loss) earnings per common share

                                

Basic

   $ (0.03 )   $ 0.06     $ 0.29     $ 0.32  

Diluted

   $ (0.03 )   $ 0.06     $ 0.29     $ 0.32  

Weighted average shares outstanding

                                

Basic

     43,763,243       43,763,243       43,763,243       43,763,243  

Diluted

     43,763,243       43,765,709       43,763,243       43,765,163  
                                 

Comprehensive (loss) income

                                

Net (loss) income

   $ (1,195 )   $ 2,776     $ 12,706     $ 13,998  

Other comprehensive income from unrealized net gains on available-for-sale debt securities

     -       -       -       2  

Income tax effect

     -       -       -       (1 )

Total other comprehensive income, net of tax

     -       -       -       1  

Comprehensive (loss) income

   $ (1,195 )   $ 2,776     $ 12,706     $ 13,999  

 

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 Nine Months Ended September 30, 2024

 
          

Accumulated

             
          

Other

  

Additional

      

Total

 
  

Common Stock

  

Comprehensive

  

paid-in

  

Retained

  

Stockholders’

 
  

Shares

  

Amount

  

Income (Loss)

  

Capital

  

Earnings

  

Equity

 

Balance - December 31, 2023

  43,763,243  $4  $-  $282,489  $27,387  $309,880 

Cash dividends declared, $2.50 per common share

  -   -   -   (77,691)  (31,717)  (109,408)

Stock based compensation

  -   -   -   22   -   22 

Net income

  -   -   -   -   4,330   4,330 

Balance - March 31, 2024

  43,763,243  $4  $-  $204,820  $-  $204,824 

Net income

  -   -   -   -   9,571   9,571 

Balance - June 30, 2024

  43,763,243  $4  $-  $204,820  $9,571  $214,395 

Stock based compensation

  -  $-  $-   91   -   91 

Net loss

  -   -   -   -   (1,195)  (1,195)

Balance - September 30, 2024

  43,763,243  $4  $-  $204,911  $8,376  $213,291 

 

 

   

For the Nine Months Ended September 30, 2023

  
                   

Accumulated

                          
                   

Other

    

Additional

            

Total

  
   

Common Stock

    

Comprehensive

    

paid-in

    

Retained

    

Stockholders’

  
   

Shares

    

Amount

    

(Loss) Income

    

Capital

    

Earnings

    

Equity

  

Balance - December 31, 2022

     43,763,243     $ 4     $ (1 )   $ 282,489     $ 508     $ 283,000  

Other comprehensive income

     -       -       17       -       -       17  

Net income

     -       -       -       -       21,081       21,081  

Balance - March 31, 2023

     43,763,243     $ 4     $ 16     $ 282,489     $ 21,589     $ 304,098  

Other comprehensive loss

     -       -       (16 )     -       -       (16 )

Net loss

     -       -       -       -       (9,859 )     (9,859 )

Balance - June 30, 2023

     43,763,243     $ 4     $ -     $ 282,489     $ 11,730     $ 294,223  

Net income

     -       -       -       -       2,776       2,776  

Balance - September 30, 2023

     43,763,243     $ 4     $ -     $ 282,489     $ 14,506     $ 296,999  

 

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

 

3
 
 

 

FutureFuel Corp.

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited) 

 

   

Nine Months Ended September 30,

  
   

2024

    

2023

  

Cash flows from operating activities

                

Net income

   $ 12,706     $ 13,998  

Adjustments to reconcile net income to net cash provided by operating activities:

                

Depreciation

     6,923       7,736  

Amortization of deferred financing costs

     77       75  

Provision for deferred income taxes

     618       -  

Change in fair value of equity securities

     -       (3,117 )

Change in fair value of derivative instruments

     1,439       3,523  

Loss on the sale of investments

     -       2,543  

Stock based compensation

     113       -  

Loss on disposal of property and equipment

     24       8  

Noncash interest expense

     26       26  

Changes in operating assets and liabilities:

                

Accounts receivable

     12,439       (3,295 )

Accounts receivable – related parties

     1       6  

Inventory

     8,100       (149 )

Income tax receivable

     1,940       32  

Prepaid expenses

     3,382       2,700  

Other assets

     872       963  

Accounts payable

     (11,043 )     (14,910 )

Accounts payable – related parties

     82       (800 )

Income tax payable

     359       -  

Accrued expenses and other current liabilities

     6,062       (404 )

Deferred revenue

     (2,705 )     (2,030 )

Other noncurrent liabilities

     -       1,553  

Net cash provided by operating activities

     41,415       8,458  

Cash flows from investing activities

                

Collateralization of derivative instruments

     423       (2,991 )

Proceeds from the sale of marketable securities

     -       37,701  

Proceeds from the sale of property and equipment

     6       -  

Capital expenditures

     (10,605 )     (4,994 )

Net cash (used in) provided by investing activities

     (10,176 )     29,716  

Cash flows from financing activities

                

Payment of dividends

     (117,285 )     (7,877 )

Deferred financing costs

     -       (14 )

Net cash used in financing activities

     (117,285 )     (7,891 )

Net change in cash and cash equivalents

     (86,046 )     30,283  

Cash and cash equivalents at beginning of period

     219,444       175,640  

Cash and cash equivalents at end of period

   $ 133,398     $ 205,923  
                 

Noncash capital expenditures

   $ 452     $ 518  

 

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 and per gallon amounts)

(Unaudited)

 

 

1)

SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

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

 

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

 

Recently Adopted Accounting Standards

 

The Company had no recently adopted accounting standards updates (“ASU”).

  

Accounting Standards Issued Not Yet Adopted as of September 30, 2024

 

ASU No. 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures: The FASB issued this update in November 2023 which aims to improve disclosures about a public entity’s reportable segments. These changes will affect the Company’s segment reporting beginning with its Annual Report for the year ended December 31, 2024, and will be applied retrospectively to all prior periods presented. The amendments in this ASU require public business entities to disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker and are included within each reported measure of segment profit or loss. This update does not change how an entity identifies or aggregates its reportable segments or how it applies the quantitative thresholds to determine them. Management believes the adoption of this ASU will have a minimal impact on the Company’s financial statements and related disclosures.

 

ASU No. 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures: The FASB issued this update in December 2023 which aims to address requests for improved income tax disclosures from investors that use the financial statements to make capital allocation decisions. The amendments in this ASU address the investor requests for more transparency of income tax information and apply to all entities that are subject to income taxes. The ASU is effective for years beginning after  December 15, 2024, but early adoption is permitted.  This ASU should be applied on a prospective basis, although retrospective application is permitted. The Company will adopt the new standard effective for the year ended December 31, 2025, and does not expect the adoption to have a material impact on its financial statements and disclosures. 

 

ASU No. 2024-03 Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses: The FASB issued this update in November 2024 which aims to provide investors with more useful information about an entity’s expenses by improving disclosures on income statement expenses. The amendments in this ASU require all public business entities to disclose disaggregated information about specific categories underlying certain income statement expense line items. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.  Early adoption is permitted. The Company is evaluating this accounting standard and does not expect the adoption to have a material impact on its financial statements and disclosures.

 

 

 

 

 

5
Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share and per gallon amounts)
(Unaudited)
 

 
 

2)

GOVERNMENT TAX CREDITS

 

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

 

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

 

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

 

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

 

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

 

The CFPC is an income tax credit structured on a sliding scale so that producers become eligible for larger credits as the greenhouse gas (“GHG”) emissions of the fuels they produce approach zero. For producers meeting the prevailing wage and registered apprenticeship requirements, the maximum credit is $1.00 per gallon of nonaviation fuel.  For producers not meeting the prevailing wage and registered apprenticeship requirements, the maximum credit is 20 cents per nonaviation fuel gallon. In June 2024, when the Internal Revenue Service gave notice of the requirement, the Company applied for registration as a producer that meets the wage and registered apprenticeship requirements to receive the credit applicable to the level of GHG emissions for the fuel the Company produces.

 

 

CARES ACT – EMPLOYEE RETENTION TAX CREDIT

 

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

 

6
Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share and per gallon amounts)
(Unaudited)
 
 

3)

REVENUE RECOGNITION

 

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

 

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

 

Contract Assets and Liabilities:

 

Contract assets consist of unbilled amounts typically resulting from revenue recognized through bill-and-hold arrangements. The contract assets at  September 30, 2024 and  December 31, 2023 consist of unbilled revenue from one customer and unbilled capital reimbursement from another customer and are recorded as accounts receivable in the consolidated balance sheets. Contract liabilities consist of advance payment arrangements related to material rights recorded as deferred revenue in the consolidated balance sheets. Increases to contract liabilities from cash received or due for a performance obligation of chemical segment plant expansions were $0 and $506 for the three months and $0 and $538 for the nine months ended September 30, 2024 and 2023, respectively. Contract liabilities are reduced as the Company transfers product to the customer under the renewal option approach. Revenue recognized in the chemical segment from the contract liability reductions was $936 and $444 for the three months and $2,539 and $2,402 for the nine months ended September 30, 2024 and 2023, respectively. These contract asset and liability balances are reported on the consolidated balance sheets on a contract-by-contract basis at the end of each reporting period.

 

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

 

Contract Assets and Liability Balances

  

September 30, 2024

    

December 31, 2023

  

Trade receivables, included in accounts receivable*

   $ 11,753     $ 15,897  

Contract assets, included in accounts receivable

     250       1,128  

Contract liabilities, included in deferred revenue - short-term

     3,928       3,656  

Contract liabilities, included in deferred revenue - long-term

     6,506       9,318  

 

*Exclusive of the BTC of $3,964 and $11,381, respectively, and net of allowances for expected credit losses of $136 and $55, respectively, as of the dates noted.

 

Transaction price allocated to the remaining performance obligations:

 

At September 30, 2024, approximately $10,434 of revenue is expected to be recognized from the remaining performance obligations. FutureFuel expects to recognize this revenue ratably over the expected sales over the expected term of its long-term contracts ranging from two to six years. Approximately 38% of this revenue is expected to be recognized over the next 12 months, and 62% is expected to be recognized over the subsequent 63 months. These amounts are subject to change based upon changes in the estimated contract life and estimated quantities to be sold over the contract life.

 

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

 

7
Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share and per gallon amounts)
(Unaudited)
 

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

 

Disaggregation of revenue - contractual and non-contractual:

 

   

Three Months Ended September 30,

    

Nine Months Ended September 30,

  
   

2024

    

2023

    

2024

    

2023

  

Contract revenue from customers with > one-year arrangements

   $ 8,966     $ 8,291     $ 26,941     $ 28,318  

Contract revenue from customers with < one-year arrangements

     42,119       108,406       154,723       247,757  

Revenue from non-contractual arrangements

     55       55       166       166  

Total revenue

   $ 51,140     $ 116,752     $ 181,830     $ 276,241  

 

Timing of revenue:

 

   

Three Months Ended September 30,

    

Nine Months Ended September 30,

  
   

2024

    

2023

    

2024

    

2023

  

Bill-and-hold revenue

   $ 10,211     $ 10,149     $ 32,875     $ 31,504  

Non-bill-and-hold revenue

     40,929       106,603       148,955       244,737  

Total revenue

   $ 51,140     $ 116,752     $ 181,830     $ 276,241  

 

As of September 30, 2024 and  December 31, 2023, $4,482 and $4,317 of bill-and-hold revenue had not shipped, respectively. 

 

 

4)

INVENTORY

 

The carrying values of inventory were as follows as of:

 

   

September 30, 2024

    

December 31, 2023

  

At average cost (approximates current cost)

                

Finished goods

   $ 7,914     $ 16,235  

Work in process

     748       611  

Raw materials and supplies

     22,732       25,532  
      31,394       42,378  

LIFO reserve

     (6,516 )     (9,400 )

Total inventory

   $ 24,878     $ 32,978  

 

A Last In First Out (“LIFO”) liquidation of $935 occurred in the nine months ended September 30, 2024. There was no liquidation in the twelve months ended December 31, 2023.

 

8
Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share and per gallon amounts)
(Unaudited)
 
 

5)

DERIVATIVE INSTRUMENTS

 

The Company records all derivative instruments at fair value. Fair value is determined by using the closing prices of the derivative instruments on the New York Mercantile Exchange at the end of an accounting period. Changes in the fair value of derivative instruments are recognized at the end of each accounting period and recorded in the statements of operations and comprehensive income as a component of cost of goods sold. These instruments use inputs considered Level 1 holdings.

 

Fair value accounting pronouncements include a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of FutureFuel. Unobservable inputs are inputs that reflect FutureFuel’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The hierarchy is broken down into three levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

 

In order to manage commodity price risk caused by market fluctuations in biofuel prices, future purchases of feedstock used in biodiesel production, physical feedstock, finished product inventories attributed to the process, and other petroleum products purchased or sold, the Company may enter into exchange-traded commodity futures and options contracts. The Company accounts for these derivative instruments in accordance with ASC 815-20-25, Derivatives and Hedging. Under this standard, the accounting for changes in the fair value of a derivative instrument depends upon whether it has been designated as an accounting hedging relationship and, further, on the type of hedging relationship. To qualify for designation as an accounting hedging relationship, specific criteria must be met and appropriate documentation maintained. The Company had no derivative instruments that qualified under these rules as designated accounting hedges in 2024 or 2023. The Company has elected the normal purchase and normal sales exception for certain feedstock purchase contracts and supply agreements.

 

Total gains and losses on derivative instruments and changes in fair value of the derivative instruments are recorded in the consolidated statements of operations as a component of cost of goods sold and amounted to a net gain of $1,947 (including settlements of $1,691) and a net loss of $102 (including settlement gains of $1,337) for the three and nine months ended September 30, 2024, and a net loss of $14,068 (including settlements of $7,286) and $1,373 (includingsettlement gains of $2,150) for the three and nine months ended September 30, 2023.

 

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

 

   

Asset (Liability)

  
   

September 30, 2024

    

December 31, 2023

  
   

Contract Quantity

    

Fair Value

    

Contract Quantity

    

Fair Value

  

Regulated fixed price future commitments, included in other current assets (in thousand barrels)

     105     $ 297       354     $ 1,736  

 

The margin account maintained with a broker to collateralize these derivative instruments carried an account balance of $322 and $745 at September 30, 2024 and  December 31, 2023, 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.

 

9
Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share and per gallon amounts)
(Unaudited)
 
 

6)

MARKETABLE SECURITIES

 

At September 30, 2024 and December 31, 2023, FutureFuel held no marketable equity and trust preferred (debt) securities. 

 

During the three months ended June 30, 2023, FutureFuel exited its position in marketable equity and trust preferred (debt) securities. The sale of these securities was recorded as a component of net income with gains of $575 in the nine months ended September 30, 2023.

 

 

7)

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

 

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

 

   

September 30, 2024

    

December 31, 2023

  

Refundable deposit

   $ 6,500     $ -  

Accrued employee liabilities

     2,724       2,179  

Accrued property, franchise, motor fuel and other taxes

     1,378       1,346  

Lease liability, current

     93       389  

Other

     125       844  

Total

   $ 10,820     $ 4,758  

 

 

10
Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share and per gallon amounts)
(Unaudited)
 

 
 

8)

BORROWINGS

 

On March 30, 2020, the Company, with FutureFuel Chemical Company as the borrower and certain of the Company’s other subsidiaries as guarantors, amended and restated its credit agreement (the “Credit Agreement”) originally entered into on April 16, 2015 (as amended, the “Prior Credit Agreement”) with the lenders party thereto, 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.

 

On  March 1, 2023, the Company entered into a First Amendment to the Credit Agreement (the “First Amendment”). The First Amendment primarily amends the Credit Agreement to transition the Credit Facility from the London Interbank Offered Rate to the Secured Overnight Financing Rate (“SOFR”) and other conforming changes, in each case as more specifically set forth in the First Amendment. The First Amendment does not modify the aggregate amount, or expiration date, of the Credit Facility. Pursuant to the First Amendment, the interest rate floats at the following margins over SOFR, or base rate based upon our leverage ratio.

 

  

Adjusted SOFR Rate Loans and

         

Consolidated Leverage Ratio

 

Letter of Credit Fee

  

Base Rate Loans

  

Commitment Fee

 

< 1.00:1.0

  1.00%  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 consolidated minimum interest coverage ratio.

 

There were no borrowings under the Credit Agreement at September 30, 2024 or December 31, 2023.

 

11
Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share and per gallon amounts)
(Unaudited)
 
 

9)

INCOME TAX PROVISION

 

The following table summarizes the income tax provision.  

 

   

Three Months Ended September 30,

    

Nine Months Ended September 30,

  
   

2024

    

2023

    

2024

    

2023

  

Income tax (benefit) provision

   $ (3 )   $ 12     $ 635     $ 34  

Effective tax rate

     0.3 %     0.4 %     4.8 %     0.2 %

 

The Company’s income tax benefit was insignificant in the three months ended September 30, 2024. In the nine months ended September 30, 2024, the provision was comprised primarily of an increase in the valuation allowance against net deferred assets, plus immaterial state taxes and miscellaneous items.  No deferred tax benefits on ongoing tax losses or other deferred tax assets have been recognized, reflecting management’s determination that none of the net deferred tax assets are more likely than not to be realized.  The three- and nine-month periods in 2023 reflected immaterial state taxes and miscellaneous items.

 

The Company evaluates its deferred tax assets quarterly and records a valuation allowance to reduce these assets to the amount that is more likely than not to be realized.

 
 

10)

EARNINGS PER SHARE

 

In the three and nine months ended September 30, 2024 and 2023, FutureFuel used the treasury method in computing earnings per share.

 

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

 

  

Three Months Ended September 30,

  

Nine Months Ended September 30,

 
  

2024

  

2023

  

2024

  

2023

 

Numerator:

                

Net (loss) income

  

$ (1,195)

   

$ 2,776

   

$ 12,706

   

$ 13,998

 

Denominator:

                

Weighted average shares outstanding – basic

  

43,763,243

   

43,763,243

   

43,763,243

   

43,763,243

 

Effect of dilutive securities:

                

Stock options and other awards

  

-

   

2,466

   

-

   

1,920

 

Weighted average shares outstanding – diluted

  

43,763,243

   

43,765,709

   

43,763,243

   

43,765,163

 
                 

Basic (loss) earnings per share

  

$ (0.03)

   

$ 0.06

   

$ 0.29

   

$ 0.32

 

Diluted (loss) earnings per share

  

$ (0.03)

   

$ 0.06

   

$ 0.29

   

$ 0.32

 


For each of the three and nine months ended September 30, 2024, 44,000 options to purchase FutureFuel’s common stock were excluded in the computation of diluted earnings per share as all were anti-dilutive. In the three and nine months ended September 30, 2023, 41,534 and 42,080 options, respectively, were excluded as all were anti-dilutive.

 
 

11)

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 and purchases of biodiesel, petrodiesel, blends, and other petroleum products with these related parties along with the associated expense from storage and terminalling services provided by these related parties.

 

12
Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share and per gallon amounts)
(Unaudited)
 
 

12)

SEGMENT INFORMATION

 

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

 

Chemicals

 

FutureFuel’s chemical 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 biofuel segment primarily manufactures and markets biodiesel. Biodiesel revenues are generated through the sale of biodiesel to customers through FutureFuel’s distribution network at its Batesville Plant, through distribution facilities available at leased oil storage facilities, and through a network of remotely located tanks. Biofuel revenues also include the sale of biodiesel blends with petrodiesel; petrodiesel with no biodiesel added; internally generated, separated Renewable Identification Numbers (“RINs”); and biodiesel production byproducts. Biodiesel selling prices and profitability can at times fluctuate based on the timing of unsold, internally generated RINs. FutureFuel does not allocate production costs to internally generated RINs, and from time to time, can enter into sales of biodiesel on a “RINs-free” basis, resulting in FutureFuel maintaining possession of the applicable RINs from the sale. The benefit derived from the eventual sale of the RINs is not reflected in results of operations until such time as the RINs sale has been completed, which may lead to variability in reported operating results.

 

As of September 30, 2024, FutureFuel held 5.0 million RINs with a fair market value of $2,556 and no cost. Comparatively, at September 30, 2023, FutureFuel held 4.2 million RINs with a fair market value of $6,971 and no cost and at December 31, 2023 4.3 million RINs were held with a fair market value of $6,567 and no cost. These fair values are considered Level 1 inputs.  

 

Summary of business by segment

 

   

Three Months Ended September 30,

    

Nine Months Ended September 30,

  
   

2024

    

2023

    

2024

    

2023

  

Revenue

                                

Custom chemicals

   $ 15,323     $ 14,454     $ 46,333     $ 46,650  

Performance chemicals

     2,605       3,393       8,890       11,834  

Chemical revenue

     17,928       17,847       55,223       58,484  

Biofuel revenue

     33,212       98,905       126,607       217,757  

Total Revenue

   $ 51,140     $ 116,752     $ 181,830     $ 276,241  
                                 

Segment gross profit (loss)

                                

Chemical

   $ 3,407     $ 6,878     $ 12,105     $ 21,917  

Biofuel

     (3,024 )     (3,008 )     1,942       (5,016 )

Total gross profit

   $ 383     $ 3,870     $ 14,047     $ 16,901  
                                 

Operating expenses

   $ 3,271     $ 3,573     $ 9,286     $ 9,936  

(Loss) income from operations

     (2,888 )     297       4,761       6,965  

Other income, net

     1,690       2,491       8,580       7,067  

(Loss) income before taxes

   $ (1,198 )   $ 2,788     $ 13,341     $ 14,032  

 

Depreciation is allocated to segment cost of goods sold based on plant usage. The total assets and capital expenditures of FutureFuel have not been allocated to individual segments as large portions of these assets are shared to varying degrees by each segment, causing such an allocation to be of little value.

 

13
Notes to Consolidated Financial Statements of FutureFuel Corp.
(Dollars in thousands, except per share and per gallon amounts)
(Unaudited)
 
 

13)

LEGAL MATTERS

 

From time to time, FutureFuel and its subsidiaries are parties to, or targets of, lawsuits, claims, investigations, regulatory matters, and proceedings, which are being handled and defended in the ordinary course of business. While FutureFuel is unable to predict the outcomes of these matters, it does not believe, based upon currently available facts, that the ultimate resolution of any such pending matters will have a material adverse effect on its overall financial condition, results of operations, or cash flows.

 

During the three months ended June 30, 2024, the Company resolved a prior-year legal dispute which resulted in a cash payment of $2,750 to FutureFuel which is reflected in Other (expense) income in the Consolidated Statements of Operations and Comprehensive Income in the nine months ended September 30, 2024.

 

 
 

 

14
 

 

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 chemical segment are two product groupings: custom chemicals and performance chemicals. The custom product group is composed of specialty chemicals manufactured for a single customer whereas the performance product group is composed of chemicals manufactured for multiple customers. The biofuel segment is composed of one product group. Management believes that the diversity of each segment strengthens the company in the ability to utilize resources and is committed to growing each segment.

 

Within the United States Environmental Protection Agency (“EPA”) Renewable Fuel Standard (“RFS”), we generate 1.5 Renewable Identification Numbers (“RINs”) for each gallon of biodiesel sold in the United States with a classification of a D4 or D6 RIN. RINs are used to monitor the level of renewable fuel traded in a given year in accordance with RFS 2 within the EPA moderated transaction system.  We do not assign cost of goods sold to the generation of RINs as the physical fuel generates the full cost. As of September 30, 2024, we held 5.0 million D4 and D6 RINs with a fair market value of $2,556. Comparatively, as of September 30, 2023, FutureFuel held 4.2 million RINs with a fair market value of $6,971, and at December 31, 2023, 4.3 million RINs were held with a fair market value of $6,567.   

 

15
 

  

Summary of Financial Results

 

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

  

   

Three Months Ended September 30,

  
                   

Dollar

    

%

  
   

2024

    

2023

    

Change

    

Change

  

Revenue

   $ 51,140     $ 116,752     $ (65,612 )     (56 )%

(Loss) income from operations

   $ (2,888 )   $ 297     $ (3,185 )  

na

  

Net (loss) income

   $ (1,195 )   $ 2,776     $ (3,971 )  

na

  

(Loss) earnings per common share:

                                

Basic

   $ (0.03 )   $ 0.06     $ (0.09 )  

na

  

Diluted

   $ (0.03 )   $ 0.06     $ (0.09 )   na  

Adjusted EBITDA

   $ (973 )   $ 9,659     $ (10,632 )  

na

  

 

   

Nine Months Ended September 30,

  
                   

Dollar

    

%

  
   

2024

    

2023

    

Change

    

Change

  

Revenue

   $ 181,830     $ 276,241     $ (94,411 )     (34 )%

Income from operations

   $ 4,761     $ 6,965     $ (2,204 )     (32 )%

Net income

   $ 12,706     $ 13,998     $ (1,292 )     (9 )%

Earnings per common share:

                                

Basic

   $ 0.29     $ 0.32     $ (0.03 )     (9 )%

Diluted

   $ 0.29     $ 0.32     $ (0.03 )     (9 )%

Adjusted EBITDA

   $ 13,042     $ 18,230     $ (5,188 )     (28 )%

 

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, non-cash gains or losses on derivative instruments, and other non-operating income or expenses. Information relating to adjusted EBITDA is provided so that investors have the same data that we employ in assessing the overall operation and liquidity of our business. Our calculation of adjusted EBITDA may be different from similarly titled measures used by other companies; therefore, the results of our calculation are not necessarily comparable to the results of other companies.

     

Adjusted EBITDA allows our chief operating decision makers to assess the performance and liquidity of our business on a consolidated basis to assess the ability of our operating segments to produce operating cash flow to fund working capital needs, to fund capital expenditures, and to pay dividends. In particular, our management believes that adjusted EBITDA permits a comparative assessment of our operating performance and liquidity, relative to performance and liquidity based on GAAP results. This measure isolates the effects of certain items, including depreciation and amortization (which may vary among our operating segments without any correlation to their underlying operating performance), non-cash stock-based compensation expense (which is a non-cash expense that varies widely among similar companies), and non-cash gains and losses on derivative instruments (which can cause net income to appear volatile from period to period relative to the sale of the underlying physical product).

 

16
 

 

We utilize commodity derivative instruments primarily to attempt to mitigate the effect of commodity price volatility and to provide greater certainty of cash flows associated with sales of our commodities. We utilize mark-to-market accounting to account for these instruments. Thus, our results in any given period can be impacted, sometimes significantly, by changes in market prices relative to our contract price along with the timing of the valuation change in the derivative instruments relative to the sale of biofuel. We include the mark-to-market or non-cash portion of this item as an adjustment to adjusted EBITDA as we believe it provides a relevant indicator of the underlying performance of our business in a given period.

 

Additionally, we held marketable securities of certain debt securities (trust preferred stock) and in preferred stock and other equity instruments during the nine months ended September 30, 2023, but sold all marketable security investments during the three months ended June 30, 2023. The realized and unrealized gains and losses on these marketable securities fluctuated from period to period. We included this item as an adjustment to adjusted EBITDA in the prior year period as we believed it provided a relevant indicator of the underlying performance of our business.

 

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

 

   

Three Months Ended September 30,

    

Nine Months Ended September 30,

  
   

2024

    

2023

    

2024

    

2023

  

Net (loss) income

   $ (1,195 )   $ 2,776     $ 12,706     $ 13,998  

Depreciation

     2,163       2,581       6,923       7,736  

Non-cash stock-based compensation

     91       -       113       -  

Interest and dividend income

     (1,830 )     (2,527 )     (6,151 )     (6,595 )

Non-cash interest expense and amortization of deferred financing costs

     34       35       103       102  

Loss on disposal of property and equipment

     24       -       24       8  

Unrealized (gain) loss on derivative instruments

     (257 )     6,782       1,439       3,523  

Gain on marketable securities

     -       -       -       (575 )

Other income

     -       -       (2,750 )     (1 )

Income tax (benefit) provision

     (3 )     12       635       34  

Adjusted EBITDA

   $ (973 )   $ 9,659     $ 13,042     $ 18,230  

 

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

 

   

Nine Months Ended September 30,

  
   

2024

     2023  

Net cash provided by operating activities

   $ 41,415     $ 8,458  

Deferred income taxes, net

     (618 )     -  

Interest and dividend income

     (6,151 )     (6,595 )

Income tax provision

     635       34  

Change in operating assets and liabilities, net

     (19,489 )     16,334  

Other income

     (2,750 )     (1 )

Adjusted EBITDA

   $ 13,042     $ 18,230  

 

17
 

 

Results of Operations 

 

Consolidated

 

   

Three Months Ended September 30,

    

Nine Months Ended September 30,

  
                   

Change

                    

Change

  
   

2024

    

2023

    

Amount

    

%

    

2024

    

2023

    

Amount

    

%

  
                                                                 

Revenues

   $ 51,140     $ 116,752     $ (65,612 )     (56.2 )%   $ 181,830     $ 276,241     $ (94,411 )     (34.2 )%

Volume/product mix effect

                     (39,558 )     (33.9 )%                   $ (46,469 )     (16.8 )%

Price effect

                     (26,054 )     (22.3 )%                   $ (47,942 )     (17.4 )%
                                                                 

Gross profit

     383       3,870       (3,487 )   (90.1 )%   $ 14,047     $ 16,901     $ (2,854 )     (16.9 )%

Operating expenses

     (3,271 )     (3,573 )     302       8.5 %     (9,286 )     (9,936 )     650       6.5 %

Other income, net

     1,690       2,491       (801 )   (32.2 )%     8,580       7,067       1,513       21.4 %

Income tax (benefit) provision

     (3 )     12       (15 )   na       635       34       601       1767.6 %

Net (loss) income

   $ (1,195 )   $ 2,776     $ (3,971 )  

na

     $ 12,706     $ 13,998     $ (1,292 )     (9.2 )%

 

Consolidated revenue in the three months ended September 30, 2024, decreased $65,612 compared to the three months ended September 30, 2023. This decline was driven mostly by lower sales volumes in the biofuel segment of $41,015. Production issues, primarily stemming from delays by equipment suppliers that created an extended service utility downtime, which prevented us from building the biodiesel inventories we would typically have available to sell in the three months ended September 30, 2024. Also reducing sales revenue in the three-month period, were lower prices in the biofuel segment of $24,678 due to a decline in renewable fuel and RIN prices with market supply in excess of the EPA RIN mandate. In our chemical segment, sales revenue increased $81 for the three months ended September 30, 2024, compared to the prior-year period, due primarily to stronger sales volumes in the coatings market of $1,457, but was mostly offset by reduced chemical sales prices, $1,376, from chemicals sold into the agricultural and energy markets.

 

Consolidated revenue in the nine months ended September 30, 2024, decreased $94,411 compared to the nine months ended September 30, 2023. As noted above, this decline was driven mostly by lower sales volumes in the biofuel segment of $48,590 as production issues in the first three months of the year related to harsh winter weather and the production issues noted above in the three months ended September 30, 2024, prevented us from building the biodiesel inventories we would typically have available to sell during the current period.  Also reducing sales revenue in the nine-month period, were lower prices in the biofuel segment of $42,560 due to a decline in renewable fuel and RIN prices with market supply in excess of the EPA RIN mandate. In our chemical segment, sales revenue declined a net $3,261 ($5,382 on reduced prices on chemicals sold into the agricultural and energy markets partially offset by increased volumes in the energy market, $2,121), compared to the prior-year period.

 

Gross profit in the three months ended September 30, 2024, decreased $3,487 as compared to the same period of 2023, due primarily to:  (i) lower sales prices in the chemical agricultural and energy markets and (ii) reduced throughput of biofuel segment volumes primarily due to the issues noted above.

 

Gross profit in the nine months ended September 30, 2024 decreased $2,854 as compared to the same period of 2023, primarily due to:  (i) a reduction of RIN sales in the current nine-month period and (ii) the change in the adjustment in the carrying value of our inventory as determined utilizing the Last In First Out (“LIFO”) method of inventory accounting.  This adjustment increased gross profit $2,885 in the nine months ended September 30, 2024, as compared to an increase of $6,023 in the same period of 2023.  Gross profit was negatively impacted by the change in the activity of derivative instruments with a realized loss of $354 and unrealized loss of $1,696 in the nine months ended September 30, 2024, as compared to a realized gain of $9,437 and unrealized gain of $3,259 in the same period of 2023.  Gross profit was also negatively impacted in the nine-month period ended September 30, 2024, by higher costs resulting from the impact of extreme winter weather and the production issues noted above. 

 

Operating expenses

 

Operating expenses decreased $302 in the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The decrease was from lower administrative and research and development expenses. Operating expenses decreased $650 in the nine months ended September 30, 2024, as compared to the same period of 2023.  This decrease also resulted from lower research and development and administrative expenses.

 

Other income, net

 

Other income decreased a net $801 in the three months ended September 30, 2024, as compared to the same period of 2023 from lower interest income of $1,830 compared to $2,527 in the prior period. Other income increased a net $1,513 in the nine months ended September 30, 2024, from the receipt of a legal settlement of $2,750. Partially offsetting this increase was lower interest income of $6,151 compared to dividend and interest income of $6,595 and a gain of $575 on marketable securities in the same period of 2023.

 

18
 

 

Income tax (benefit) provision 

 

The Company’s income tax benefit was insignificant in the three months ended September 30, 2024. In the nine months ended September 30, 2024, the provision was comprised primarily of an increase in the valuation allowance against net deferred assets, plus immaterial state taxes and miscellaneous items.  No deferred tax benefits on ongoing tax losses or other deferred tax assets have been recognized, reflecting management’s determination that none of the net deferred tax assets are more likely than not to be realized.  The three-month period in 2023 similarly reflected immaterial state taxes and miscellaneous items.

 

The Company evaluates its deferred tax assets quarterly and records a valuation allowance to reduce these assets to the amount that is more likely than not to be realized.

 

Chemical Segment

 

   

Three Months Ended September 30,

    

Nine Months Ended September 30,

  
                   

Change

                    

Change

  
   

2024

    

2023

    

Amount

    

%

    

2024

    

2023

    

Amount

    

%

  
                                                                 

Revenues

   $ 17,928     $ 17,847     $ 81       0.5 %   $ 55,223     $ 58,484     $ (3,261 )     (5.6 )%

Volume/product mix effect

                     1,457       8.2 %                   $ 2,121       3.6 %

Price effect

                     (1,376 )     (7.7 )%                   $ (5,382 )     (9.2 )%
                                                                 

Gross profit

   $ 3,407     $ 6,878     $ (3,471 )     (50.5 )%   $ 12,105     $ 21,917     $ (9,812 )     (44.8 )%