FutureFuel(FF) - 2023 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Part I details the company's financial performance and condition, including statements, management analysis, market risk, and internal controls Item 1. Financial Statements The company reported a significant Q1 2023 turnaround with $21.1 million net income, 76% revenue growth, and increased assets, despite negative operating cash flow Consolidated Statements of Operations (Q1 2023 vs Q1 2022) | Financial Metric | Three Months Ended March 31, 2023 ($) | Three Months Ended March 31, 2022 ($) | | :--- | :--- | :--- | | Revenue | 74,161 | 42,074 | | Gross profit (loss) | 21,623 | (7,155) | | Income (loss) from operations | 18,251 | (9,607) | | Net income (loss) | 21,081 | (12,398) | | Diluted earnings (loss) per share | 0.48 | (0.28) | Consolidated Balance Sheet Highlights | Balance Sheet Item | March 31, 2023 ($) | December 31, 2022 ($) | | :--- | :--- | :--- | | Cash and cash equivalents | 145,058 | 175,640 | | Inventory | 69,234 | 26,761 | | Total Assets | 373,278 | 355,969 | | Total Liabilities | 69,180 | 72,969 | | Total Stockholders' Equity | 304,098 | 283,000 | Consolidated Statements of Cash Flows | Cash Flow Activity | Three Months Ended March 31, 2023 ($) | Three Months Ended March 31, 2022 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | (29,810) | (10,576) | | Net cash provided by (used in) investing activities | 1,868 | (3,335) | | Net cash used in financing activities | (2,640) | (2,626) | Notes to Consolidated Financial Statements Key notes detail revenue recognition, the impact of tax credits, derivative instrument accounting, the credit facility's LIBOR to SOFR transition, and strong Biofuels segment performance - The Biodiesel Blenders' Tax Credit (BTC) of one dollar per gallon is recorded as a reduction to cost of goods sold and is set to expire on December 31, 2024[19] - As of March 31, 2023, approximately $13.95 million of revenue is expected to be recognized from remaining performance obligations over the next three to four years[28] - The company recorded a gain of $8.3 million on derivative instruments in Q1 2023, compared to a loss of $9.1 million in Q1 2022, with these instruments not designated as accounting hedges[38] - On March 1, 2023, the company amended its credit agreement to transition its credit facility from LIBOR to the Secured Overnight Financing Rate (SOFR), with no borrowings under the facility as of March 31, 2023[54][56] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A highlights 75.5% revenue growth driven by biofuels, a surge in gross profit due to derivative gains and LIFO adjustments, and strong liquidity despite negative operating cash flow Summary of Financial Results (Q1 2023 vs Q1 2022) | | 2023 ($) | 2022 ($) | Dollar Change ($) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | 74,181 | 42,261 | 31,920 | 76% | | Income (loss) from operations | 18,251 | (9,607) | 27,858 | n/a | | Net income (loss) | 21,081 | (12,398) | 33,479 | n/a | | Adjusted EBITDA | 12,495 | 2,098 | 10,397 | 496% | - The increase in gross profit to $21.6 million from a loss of $7.2 million was primarily driven by a gain on derivative instruments of $8.3 million (vs. a $9.1 million loss in Q1 2022) and a positive LIFO inventory adjustment of $3.8 million[93] - Cash used in operating activities increased to $29.8 million, mainly due to a $31.8 million cash outflow for inventory changes and an $11.0 million outflow for accounts receivable changes[113] Results of Operations by Segment Biofuels segment drove performance with 152.6% revenue growth and a significant gross profit turnaround, while Chemicals saw modest revenue growth and strong gross profit improvement Chemicals Segment Performance (Q1 2023 vs Q1 2022) | Metric | 2023 ($) | 2022 ($) | Change ($) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | 21,881 | 21,561 | 320 | 1.5% | | Gross Profit | 8,623 | 5,418 | 3,205 | 59.2% | Biofuels Segment Performance (Q1 2023 vs Q1 2022) | Metric | 2023 ($) | 2022 ($) | Change ($) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | 52,300 | 20,700 | 31,600 | 152.6% | | Gross Profit (Loss) | 13,000 | (12,573) | 25,573 | n/a | Quantitative and Qualitative Disclosures About Market Risk The company manages commodity price risk for inputs and outputs through contracts and derivatives, with a 10% adverse feedstock price change potentially decreasing gross profit by $5.3 million - The company uses derivative instruments to manage price risk in the biofuels segment, but these do not qualify for hedge accounting, leading to volatility in reported net income; the fair value of these instruments was a net asset of $4.8 million at March 31, 2023[127][128] Market Risk Sensitivity Analysis (Q1 2023) | Item | Hypothetical Adverse Price Change | Decrease in Gross Profit ($) | Percentage Decrease in Gross Profit | | :--- | :--- | :--- | :--- | | Biodiesel feedstocks | 10% | 5,320 | 24.6% | | Methanol | 10% | 257 | 1.2% | Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the reporting period, March 31, 2023[135] - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, internal controls[137] PART II OTHER INFORMATION Part II covers legal proceedings, risk factors, and other miscellaneous disclosures, confirming no material changes or significant new events Legal Proceedings and Risk Factors The company is not involved in material legal proceedings, and no material changes to previously disclosed risk factors have occurred - The company is not involved in any material pending legal proceedings outside of ordinary business litigation[140] - There have been no material changes to the risk factors disclosed in the Annual Report for the year ended December 31, 2022[141] Other Information (Items 2-6) No unregistered equity sales, senior security defaults, mine safety disclosures, or other material information were reported, with standard certifications and data files included - The company reported no activity under Item 2 (Unregistered Sales of Equity Securities), Item 3 (Defaults Upon Senior Securities), Item 4 (Mine Safety Disclosures), and Item 5 (Other Information)[142][144][146][148]