FutureFuel Corp.

Previous wording

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.

Current wording

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations of FutureFuel Corp. (“FutureFuel”, “the Company”, “we”, or “our”) should be read together with our consolidated financial statements, including the notes thereto, set forth herein and in our 2024 Annual Report on Form 10-K. This discussion contains forward-looking statements that reflect our current views with respect to future events and financial performance. Actual results may differ materially from those anticipated in these forward-looking statements. See “Forward-Looking Information” below for additional discussion regarding risks associated with forward-looking statements.

Previous wording

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.

Current wording

Within the United States Environmental Protection Agency (“EPA”) Renewable Fuel Standard (“RFS”), we generate 1.5 Renewable Identification Numbers (“RINs”) for each gallon of biodiesel sold in the United States with a classification of a D4 or D6 RIN. RINs are used to monitor the level of renewable fuel traded in a given year in accordance with RFS within the EPA moderated transaction system. We do not assign cost of goods sold to the generation of RINs as the physical fuel generates the full cost. As of March 31, 2025, we held 2.3 million D4 RINs with a fair market value of $2,077. Comparatively, as of March 31, 2024, we held 2.0 million RINs with a fair market value of $1,624, and at December 31, 2024, we held 3.1 million RINs with a fair market value of $1,831.

Previous wording

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.

Current wording

We use adjusted EBITDA as a key operating metric to measure both performance and liquidity. Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is not a substitute for operating income, net income, or cash flow from operating activities (each as determined in accordance with GAAP) as a measure of performance or liquidity. Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of results as reported under GAAP. We define adjusted EBITDA as net (loss) income before interest, income taxes, depreciation, and amortization expenses, excluding, when applicable, non-cash stock-based compensation expenses, public offering expenses, acquisition-related transaction costs, purchase accounting adjustments, losses on disposal of property and equipment, non-cash gains or losses on derivative instruments, and other non-operating income or expenses. Information relating to adjusted EBITDA is provided so that investors have the same data that we employ in assessing the overall operation and liquidity of our business. Our calculation of adjusted EBITDA may be different from similarly titled measures used by other companies; therefore, the results of our calculation are not necessarily comparable to the results of other companies.

Previous wording

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

Current wording

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

Previous wording

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.

Current wording

Other income decreased a net $1,563 in the three months ended March 31, 2025, as compared to the same period of 2024 from lower interest income of $1,237 compared to $2,800 in the prior period.

Previous wording

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.

Current wording

The Company’s income tax provision for the three months ended March 31, 2025, is comprised of immaterial state taxes and miscellaneous items. The provision for the three months ended March 31,2024, comprised primarily an increase in the valuation allowance against net deferred assets, plus immaterial state taxes and miscellaneous items.

Previous wording

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.

Current wording

The Company evaluates its deferred tax assets quarterly and records a valuation allowance to reduce these assets to the amount that is more likely than not to be realized. During the quarter ended March 31, 2024, the Company evaluated the available evidence and determined a discrete adjustment was required to increase its valuation allowance, resulting in a net deferred tax liability of $626 as of March 31, 2024.

Previous wording

Chemical revenue in the three months ended September 30, 2024, increased 0.5% or $81 compared to the three months ended September 30, 2023. Revenue from custom chemicals for the three months ended September 30, 2024 totaled $15,323, a net increase of $869 from the same period in 2023, resulting from higher sales volumes of $1,791 from products sold in the agricultural and energy markets, which were partially offset by lower prices of $1,204. Performance chemicals revenue was $2,605, a decrease of $788 from the three months ended September 30, 2023. This decrease was mostly from lower sales volumes of glycerin due to reduced production resulting from the extended service utility downtime caused by equipment suppliers.

Current wording

Chemical revenue in the three months ended March 31, 2025, decreased 48.1% or $8,694 compared to the three months ended March 31, 2024. This decline was from weather related issues that extended the downtime of the plant turnaround. Revenue from custom chemicals for the three months ended March 31, 2025 totaled $8,409, a net decrease of $7,018 from the same period in 2024, resulting from lower sales volumes of $7,949 primarily from products sold in the energy markets, and lower prices of $745. Performance chemicals revenue was $956, a decrease of $1,676 from the three months ended March 31, 2024. This decrease was mostly from lower sales volumes of glycerin due to reduced production resulting from the plant turnaround.

Previous wording

A significant portion of our biodiesel sold was to two and three major refiners/blenders in the three and nine months ended September 30, 2024, respectively, as compared to four and two in the three and nine months ended September 30, 2023, respectively. No assurances can be given that we will continue to sell to such major refiners, or, if we do sell, the volume we will sell or the profit margin we will realize. We do not believe that the loss of these customers would have a material adverse effect on our biofuels segment or on us as a whole because: (i) we believe that we could readily sell our biodiesel to other customers on equivalent terms as potential demand from other customers for biodiesel exceeds our production capacity; (ii) our sales to these customers are not under fixed terms and the customers have no fixed obligation to purchase any minimum quantities except as stipulated by short-term purchase orders; and (iii) the prices we receive from these customers are based upon then-market rates, as would be the case with sales of this commodity to other customers.

Current wording

No significant customers existed in the three months ended March 31, 2025, as compared to four in the three months ended March 31, 2024. No assurances can be given that we will continue to sell to such major refiners, or, if we do sell, the volume we will sell or the profit margin we will realize. We do not believe that the loss of these customers would have a material adverse effect on our biofuels segment or on us as a whole because: (i) we believe that we could readily sell our biodiesel to other customers on equivalent terms as potential demand from other customers for biodiesel exceeds our production capacity; (ii) our sales to these customers are not under fixed terms and the customers have no fixed obligation to purchase any minimum quantities except as stipulated by short-term purchase orders; and (iii) the prices we receive from these customers are based upon then-market rates, as would be the case with sales of this commodity to other customers.

Previous wording

Biofuel gross loss was $3,024 in the three months ended September 30, 2024, a decrease in gross profit of $16 from the comparative period in 2023. This decrease primarily resulted from reduced sales volumes, 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 gross profit was the change in the adjustment in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting. This adjustment decreased gross profit $1,038 in the current three-month period as compared to an increase in gross profit of $2,294 in the same period of the prior year. Partially increasing gross profit was: (i) the change in the activity of derivative instruments with a realized gain of $1,691 and an unrealized gain of $256 in the current three-month period as compared to a realized loss of $7,286 and an unrealized loss of $6,782 in the same period of the prior year, and (ii) the change in the number of separated RINs held in inventory at September 30, 2024 with a fair market value of $2,556 as compared to $6,971 at September 30, 2023.

Current wording

Biofuel gross loss was $8,834 in the three months ended March 31, 2025, a decrease in gross profit of $9,820 from the comparative period in 2024. This decrease primarily resulted from reduced sales volumes, stemming from the extended plant turnaround mentioned above. Also reducing gross profit was a reduced benefit from the change in the adjustment in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting. This adjustment increased gross profit $339 in the current three-month period as compared to an increase in gross profit of $2,276 in the same period of the prior year. Partially increasing gross profit was the change in the activity of derivative instruments with a realized gain of $93 and an unrealized loss of $259 in the current three-month period as compared to a realized loss of $1,190 and an unrealized loss of $2,274 in the same period of the prior year.

Previous wording

Revenue from bill-and-hold transactions in which a performance obligation exists is recognized when the total performance obligation has been met and control of the product has transferred. Bill-and-hold transactions for the three and nine months ended September 30, 2024 and 2023 were related to custom chemicals customers whereby revenue was recognized in accordance with contractual agreements based upon product being produced and ready for use by the customer. These sales were subject to written monthly purchase orders. The product was custom manufactured and stored at the customer’s request and could not be sold to another buyer. Credit and payment terms for bill-and-hold customers are similar to other custom chemicals customers. Revenues under bill-and-hold arrangements were$10,211 and$32,875 for the three and nine months ended September 30, 2024, respectively. As of September 30, 2024 and December 31, 2023, $4,482 and $4,317 of bill-and-hold revenue had not shipped, respectively.

Current wording

Revenue from bill-and-hold transactions in which a performance obligation exists is recognized when the total performance obligation has been met and control of the product has transferred. Bill-and-hold transactions for the three months ended March 31, 2025 and 2024 were related to custom chemicals customers whereby revenue was recognized in accordance with contractual agreements based upon product being produced and ready for use by the customer. These sales were subject to written monthly purchase orders. The product was custom manufactured and stored at the customer’s request and could not be sold to another buyer. Credit and payment terms for bill-and-hold customers are similar to other custom chemicals customers. Revenues under bill-and-hold arrangements were$4,590 and for the three months ended March 31, 2025. As of March 31, 2025 and December 31, 2024, $5,628 and $7,301 of bill-and-hold revenue had not shipped, respectively.

Previous wording

Our net cash from operating activities, investing activities, and financing activities for the nine months ended September 30, 2024 and 2023 is set forth in the following table.

Current wording

Our net cash from operating activities, investing activities, and financing activities for the three months ended March 31, 2025 and 2024 is set forth in the following table.

Previous wording

Cash provided by operating activities was $41,415 in the nine months ended September 30, 2024, as compared to $8,458 in the same period of 2023. This increase in cash was primarily attributable to the change in accounts receivable, including accounts receivable - related parties, demonstrating a cash inflow of $15,729. Also contributing to the current period increase in cash was the change in inventory of $8,249, the change in accrued expenses and other current liabilities of $6,466, and the change in accounts payable, including accounts payable - related parties, of $4,749. Partially offsetting these cash inflows was the change in the fair value of derivative instruments of $2,084, and the change in net income of $1,292.

Current wording

Cash used in operating activities was $5,395 in the three months ended March 31, 2025, as compared to $12,211 in the same period of 2024. This decrease in cash used was primarily attributable to the change in inventory of $16,737 and the change in accounts receivable, including accounts receivable - related parties, demonstrating a cash inflow of $9,928. Also contributing to the current period decrease in cash used was the change in accounts payable, including accounts payable - related parties, of $2,255, and the change in accrued expenses of $1,262. Partially offsetting these cash inflows was the change in net (loss) income of $21,973 and the change in the fair value of derivative instruments of $2,015.

Previous wording

Cash used in investing activities was $10,176 in the nine months ended September 30, 2024, as compared to cash provided by investing activities of $29,716 in the nine months ended September 30, 2023. This $39,892 decrease in cash was primarily due to the change in proceeds from the sale of marketable securities of $37,701 and included an increase in capital expenditure of $5,611. Partially offsetting these reductions in cash was the change in the collateralization of derivative instruments of $3,414.

Current wording

Cash used in investing activities was $4,082 in the three months ended March 31, 2025, as compared to $3,485 in the three months ended March 31, 2024. This $597 increase in cash used was primarily due to an increase in capital expenditure of $1,730 partially offset by the change in the collateralization of derivative instruments of $1,102.

Previous wording

Cash used in financing activities was $117,285 and $7,891 in the nine months ended September 30, 2024 and 2023, respectively, primarily for payments of dividends on our common stock inclusive of a special dividend of $109,408 paid in the current nine-month period.

Current wording

Cash used in financing activities was $2,993 and $2,626 in the three months ended March 31, 2025 and 2024, respectively, primarily for payments of dividends on our common stock.

Previous wording

We have a credit agreement, as amended on March 30, 2020, 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 8 to our consolidated financial statements for additional information regarding our credit agreement.

Current wording

We have a credit agreement, as amended on February 21, 2025, with a syndicated group of commercial banks for $75,000. The loan is a revolving facility, the proceeds of which may be used for our working capital, capital expenditures, and general corporate purposes. The facility terminates on February 21, 2030. See Note 7 to our consolidated financial statements for additional information regarding our credit agreement.

Previous wording

On April 9, 2024, we paid a special dividend of $2.50 per share on our common stock which amounted to $109,408. The declaration of this special dividend was made in the first quarter of 2024. Regular cash dividends of $0.06 per share were paid on our common stock in each quarter of 2024 and 2023. The regular cash dividend amounted to $2,626 in each of the quarters of 2024 and 2023. The declaration of these regular quarterly cash dividends was made in the three months ended December 31, 2023, and December 31, 2022, respectively.

Current wording

Regular cash dividends of $0.06 per share were paid on our common stock in each quarter of 2025 and 2024. The regular cash dividend amounted to $2,628 and $2,626 in 2025 and 2024, respectively. The declaration of these regular quarterly cash dividends was made in the three months ended December 31, 2024, and December 31, 2023, respectively.