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What changed in FutureFuel Corp.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of FutureFuel Corp.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+225 added−228 removedSource: 10-K (2024-03-14) vs 10-K (2023-03-14)

Top changes in FutureFuel Corp.'s 2023 10-K

225 paragraphs added · 228 removed · 177 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

59 edited+13 added−13 removed106 unchanged
Biggest changeIn the biofuels business segment, innovations and process know-how are vigorously protected as appropriate. As may be necessary, we will seek to license technologies from third parties that complement our strategic business objectives. Neither our business as a whole, nor any particular segment, is materially dependent upon any one particular patent, copyright, or trade secret.
Biggest changeIn the chemicals business segment, performance chemicals are protected utilizing patents, both United States patents and international patents, or maintained as Trade Secrets. In the biofuels business segment, innovations and process know-how are vigorously protected as appropriate. As may be necessary, we will seek to license technologies from third parties that complement our strategic business objectives.
Biodiesel demand has tended to be lower during the winter in northern and Midwestern states due to concerns about biodiesel’s ability to operate optimally in cold weather as compared to petrodiesel. This seasonal fluctuation has been strongest for biodiesel made from animal fats and used cooking oils.
Biodiesel demand has tended to be lower during the winter in northern and Midwestern states due to historical concerns about biodiesel’s ability to operate optimally in cold weather as compared to petrodiesel. This seasonal fluctuation has been strongest for biodiesel made from animal fats and used cooking oils.
Our performance chemicals product portfolio includes polymer modifiers that enhance stain resistance and dye-ability to nylon and polyester fibers, in addition to several small-volume specialty chemicals and solvents for diverse applications. We are committed to growing and adapting our biofuels and chemicals businesses.
Our performance chemicals product portfolio includes polymer modifiers that enhance stain resistance and dye-ability of nylon and polyester fibers, in addition to several small-volume specialty chemicals and solvents for diverse applications. We are committed to growing and adapting our biofuels and chemicals businesses.
The future for biodiesel will be driven by feedstock availability; its market price compared to renewable diesel; and State and Federal regulations and incentives. We also compete with other producers of biodiesel regionally, nationally, and with foreign imports.
The future of biodiesel will be driven by feedstock availability; its market price compared to renewable diesel; and State and Federal regulations and incentives. We also compete with other producers of biodiesel regionally, nationally, and with foreign imports.
Finally, biodiesel also benefits from favorable properties compared to petrodiesel (e.g., negligible sulfur content, lower particulate matter, lower greenhouse gas emissions, and a higher cetane number leading to better engine performance and lubrication).
Biodiesel also benefits from favorable properties compared to petrodiesel (e.g., negligible sulfur content, lower particulate matter, lower greenhouse gas emissions, and a higher cetane number leading to better engine performance and lubrication).
We do not believe that the loss of any of these customers would have a material adverse effect on our biofuels segment or on us as a whole in that: (i) biofuels are a commodity with a large potential customer base; (ii) we believe that we could readily sell biofuels to other customers; (iii) the prices we receive from these customers are based upon then-market rates; and (iv) our sales to the customers are not under fixed terms, and the customers have no obligation to purchase any minimum quantities except as stipulated by short term purchase orders. 7 Table of Contents Competition Renewable diesel is a rapidly growing and competing biofuel with biodiesel.
We do not believe that the loss of any of these customers would have a material adverse effect on our biofuels segment or on us as a whole in that: (i) biofuels are a commodity with a large potential customer base; (ii) we believe that we could readily sell biofuels to other customers; (iii) the prices we receive from these customers are based upon then-market rates; and (iv) our sales to the customers are not under fixed terms, and the customers have no obligation to purchase any minimum quantities except as stipulated by short term purchase orders. 7 Table of Contents Competition Renewable diesel continues to be a rapidly growing and competing biofuel with biodiesel.
Operations personnel have received extensive training and are highly skilled. Additionally, all site manufacturing and infrastructure is fully automated and computer-controlled. Due to the lack of locally-available process industry infrastructure, the workforce is substantially self-sufficient in the range of required operational skills and experience. Voluntary attrition at the site has averaged 8.2% over the past five years.
Operations personnel have received extensive training and are highly skilled. Additionally, all site manufacturing and infrastructure is fully automated and computer-controlled. Due to the lack of locally-available process industry infrastructure, the workforce is substantially self-sufficient in the range of required operational skills and experience. Voluntary attrition at the site has averaged 9.2% over the past five years.
No chemical customer represented greater than 10% of total sales revenue in 2022 or 2021. Competition Historically, there have been significant barriers to entry for competitors with respect to specialty chemicals, primarily due to the fact that the relevant technology and manufacturing capability has been held by a small number of companies.
No chemical customer represented greater than 10% of total sales revenue in 2023 or 2022. Competition Historically, there have been significant barriers to entry for competitors with respect to specialty chemicals, primarily due to the fact that the relevant technology and manufacturing capability has been held by a small number of companies.
We are headquartered in St. Louis, Missouri, and our manufacturing operations are conducted at our facility in Batesville, Arkansas. Trading of our common stock on the New York Stock Exchange (“NYSE”) commenced on March 23, 2011 under the symbol “FF”. During 2022, we distributed normal quarterly cash dividends of $0.06 per share.
We are headquartered in St. Louis, Missouri, and our manufacturing operations are conducted at our facility in Batesville, Arkansas. Trading of our common stock on the New York Stock Exchange (“NYSE”) commenced on March 23, 2011 under the symbol “FF”. During 2023, we distributed normal quarterly cash dividends of $0.06 per share.
Management Team and Human Capital Our executive management team at the Batesville plant consists of individuals with a combined 90 plus years of experience in the chemicals industry, comprising technical, operational, and business responsibilities. The members of the executive team also have international experience, including assignments in Europe and Asia.
Management Team and Human Capital Our executive management team at the Batesville plant consists of individuals with a combined 100 plus years of experience in the chemicals industry, comprising technical, operational, and business responsibilities. The members of the executive team also have international experience, including assignments in Europe and Asia.
The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers such as us that file electronically with the SEC. You may access that site at http://www.sec.gov. Our Internet website address is www.futurefuelcorporation.com.
The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers such as us that file electronically with the SEC. You may access that site at https://www.sec.gov. Our Internet website address is www.futurefuelcorporation.com.
We make available free of charge, through the “Investor Relations - SEC Filings” section of our Internet website (https://futurefuel-corporation.ir.rdgfilings.com), our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (or the Exchange Act), as soon as reasonably practicable after electronically filing such material with, or furnishing it to, the SEC.
We make available free of charge, through the “Investors” section of our Internet website (https://futurefuel-corporation.ir.rdgfilings.com), our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (or the Exchange Act), as soon as reasonably practicable after electronically filing such material with, or furnishing it to, the SEC.
The operational and commercial management group at the Batesville site includes additional degreed professionals with an average experience of more than 25 years in the chemical industry. Our Batesville workforce comprises approximately 472 full-time non-union employees, and includes degreed professionals including chemists (some with PhDs) and engineers (including licensed professional electrical, mechanical, and chemical engineers).
The operational and commercial management group at the Batesville site includes additional degreed professionals with an average experience of more than 25 years in the chemical industry. Our Batesville workforce comprises approximately 515 full and part time non-union employees, and includes degreed professionals including chemists (some with PhDs) and engineers (including licensed professional electrical, mechanical, and chemical engineers).
The renewable fuel obligations are based on estimates that the Energy Information Association provides to the USEPA on the volumes of gasoline it expects will be sold or introduced into commerce. The USEPA released the final rules to implement the RFS on April 10, 2007. Under those rules, the RFS compliance period began on September 1, 2007.
The renewable fuel obligations are based on estimates that the Energy Information Association provides to the USEPA on the volumes of transportation fuels it expects will be sold or introduced into commerce. The USEPA released the final rules to implement the RFS on April 10, 2007. Under those rules, the RFS compliance period began on September 1, 2007.
See https://afdc.energy.gov/files/pdfs/30882.pdf . 2 Table of Contents Our technical and operational competency acquired as a supplier of specialty chemicals, inclusive of research and development and analytical laboratory testing, enabled the development of a flexible manufacturing process.
See https://afdc.energy.gov/files/pdfs/30882.pdf . 2 Table of Contents Our technical and operational competency developed as a supplier of specialty chemicals, inclusive of research and development and analytical laboratory testing, enabled the expansion of a flexible manufacturing process.
Chemical Products Custom manufacturing involves producing unique products for strategic customers, generally under multi-year or long-term contracts. Most of these products are produced under confidentiality agreements in order to protect each company’s intellectual property. This is a service-based business where customers value dependability, regulatory compliance, technical capabilities, responsiveness, product quality, process scale up and improvement, operational safety, and environmental protection.
Chemical Products Custom manufacturing involves producing unique products for strategic customers, generally under multi-year or long-term contracts. Most of these products are produced under confidentiality agreements in order to protect each company’s intellectual property. This is a service-based business where customers value dependability, regulatory compliance, technical capabilities, responsiveness, quality assurance and control, process improvement, operational safety, and environmental protection.
We believe that we are well positioned for growth due to the combination of our scale of operations, technical capabilities, reputation, and financial strength. Supply and Distribution Specialty chemicals are generally high unit value products sold in packaged, or low-volume bulk form, and for which distribution is a relatively minor component of cost.
We believe that we are well positioned for growth due to the combination of our scale of operations, technical capabilities, on-site utilities and wastewater treatment, reputation, and financial strength. Supply and Distribution Specialty chemicals are generally high unit value products sold in bulk, or low-volume packaged form, and for which distribution is a relatively minor component of cost.
As a producer of a broad and diverse portfolio of chemicals, our intellectual property relates to a wide variety of products and processes acquired through the development and manufacture of over 300 specialty chemicals during the history of the site.
As a producer of a broad and diverse portfolio of chemicals, our intellectual property relates to a wide variety of products and processes acquired through the development and manufacture of over 300 specialty chemicals.
FutureFuel Chemical Company’s principal executive offices are located at 2800 Gap Road, Highway 394 South, Batesville, Arkansas 72501-9680. Its telephone number is (870) 698-3000. Plant Location We own approximately 2,200 acres of land six miles southeast of Batesville in north central Arkansas fronting the White River.
FutureFuel Chemical Company’s principal executive offices are located at 2800 Gap Road, Highway 394 South, Batesville, Arkansas 72501-9680. FutureFuel Chemical Company's telephone number is (870) 698-3000. Plant Location We own approximately 2,200 acres of land six miles southeast of Batesville in north central Arkansas.
In the case of our custom manufacturing business, the customers are often the “brand owners” and, therefore, control factors related to demand, such as market development, patent expirations and external manufacturing strategy. In such cases, we may be unable to increase or maintain our level of sales revenue for these products.
In the case of our custom manufacturing business, the customers are typically the “brand owners” and, therefore, they control factors related to production demand, such as market development, patent expirations and their external manufacturing strategy. In such cases, we may be unable to increase or maintain our level of sales revenue for these products.
We believe that these core competencies, established in support of the legacy chemical business, are applicable to building a technology-based position in biofuels and associated bio-based specialty products and expanding our chemical segment product lines. Research and development expense incurred by us for the years ended December 31, 2022, 2021, and 2020 were $3,415, $3,484, and $2,988, respectively.
We believe that these core competencies, established in support of the legacy chemical business, are applicable to building a technology-based position in biofuels and associated bio-based specialty products and expanding our chemical segment product lines. Research and development expense incurred by us for the years ended December 31, 2023, 2022 and 2021 were $4,398,000, $3,415,000, and $3,484,000, respectively.
We also make available free of charge, through the “Investor Relations - Corporate Governance” section of our website (https://futurefuel-corporation.ir.rdgfilings.com/company-information), the corporate governance guidelines of our board of directors, the charters of each of the committees of our board of directors, and the code of business conduct and ethics for our directors, officers, and employees.
We also make available free of charge, through the “Investors - Corporate Governance” section of our website (https://futurefuel-corporation.ir.rdgfilings.com/corporate-governance), the corporate governance guidelines of our board of directors, the charters of each of the committees of our board of directors, and the code of business conduct and ethics for our directors, officers, and employees.
Our cash expenditures related to environmental protection and improvement were approximately $10,268, $9,547, and $10,057 for the years ended December 31, 2022, 2021, and 2020, respectively, and are included in costs of goods sold in the consolidated statements of income for each period.
Our cash expenditures related to environmental protection and improvement were approximately $12,854,000, $10,268,000, and $9,547,000 for the years ended December 31, 2023, 2022 and 2021, respectively, and are included in costs of goods sold in the consolidated statements of income for each period.
Approximately 500 acres of the site are occupied with batch and continuous manufacturing facilities, laboratories, and associated infrastructure, including on-site liquid waste treatment. Land and infrastructure are available to support expansion and business growth.
Approximately 500 acres of the site are occupied with our manufacturing facilities, laboratories, and associated infrastructure, including on-site liquid hazardous and non-hazardous waste treatment. Land and infrastructure are available to support expansion and business growth.
Biodiesel is a renewable energy product consisting of mono-alkyl esters of fatty acids. The mono-alkyl esters are typically produced from vegetable oil, fat, or grease feedstocks. Biodiesel is used primarily as a blend with petrodiesel (usually 5% (commonly referenced as “B5”) to 20% (commonly referenced as “B20”) by volume).
Biodiesel is a renewable energy product consisting of mono-alkyl esters of fatty acids. These esters are typically produced from vegetable oil, fat, or grease feedstocks. Biodiesel is used primarily as a blend with petrodiesel (usually 5%, commonly referenced as “B5,” to 20%, commonly referenced as “B20,” by volume).
Operations For the year ended December 31, 2022, approximately 80% of our revenue was derived from biofuels, 14% from manufacturing specialty chemicals for specific customers (“custom manufacturing”), and 6% of revenues from multi-customer specialty chemicals (“performance chemicals”). Our biofuels business segment primarily involves the production and sale of biodiesel and petrodiesel blends.
Operations For the year ended December 31, 2023, approximately 78% of our revenue was derived from biofuels, 18% from manufacturing specialty chemicals for specific customers (“custom manufacturing”), and 4% of revenues from multi-customer specialty chemicals (“performance chemicals”). Our biofuels business segment primarily involves the production and sale of biodiesel and petrodiesel blends.
Customers and Markets Our chemical products are used in a variety of markets and end uses, including detergent, agrochemical, automotive, oil and gas, coatings, nutrition, and polymer additives. Some of the chemical products can be cyclically driven by changes in energy and agricultural commodity prices.
Customers and Markets Our chemical products are used in a variety of markets and end uses, including detergent, agrochemical, automotive, oil and gas, coatings, nutrition, and polymer additives. Some of the chemical products can be cyclically driven by changes in general demand factors.
In addition, the chemical properties of the biodiesel (e.g., cloud point, pour point, and cetane number) depend on the type of feedstock. See EIA, Monthly Biodiesel Production Report, http://www.eia.gov/biofuels/biodiesel/production/biodiesel.pdf. In the United States, the majority of biodiesel historically has been made from domestically produced crude soybean oil due to its widespread availability and ease of processing.
In addition, the chemical properties of the biodiesel (e.g., cloud point, pour point, and cetane number) depend on the type of feedstock. In the United States, the majority of biodiesel historically has been made from domestically produced crude soybean oil due to its widespread availability and ease of processing.
The price of crude glycerin is impacted by supply and demand balance, energy prices, and prices for other commodities such as corn and soy. Crude glycerin can be refined into a purer form and then used in higher value markets such as specialty chemical production, agricultural formulations, food, pharmaceutical, and/or cosmetic applications.
The price of crude glycerin is impacted by supply and demand balance, energy prices, and prices for other commodities such as corn and soy. We also refine a large portion of our crude glycerin into a purer form which is used in higher value markets such as specialty chemical production, agricultural formulations, food, pharmaceutical, and/or cosmetic applications.
Our business produces both crude glycerin and refined glycerin for commercial sales. Crude glycerin is not suitable for most commercial applications due to high impurity levels and is sold into commercially viable uses for the crude product such as energy, agricultural and animal feed, and other applications not requiring high purity.
Our business produces both crude glycerin and refined glycerin for commercial sales. Crude glycerin is sold into commercially viable uses for the crude product such as construction materials, agricultural and animal feed, and other applications not requiring high purity.
As a result, the biodiesel feedstock market in the United States transitioned from this expensive first-generation soy feedstock to alternative second-generation lower-cost, non-food feedstocks, such as waste vegetable oil, tallow, and inedible corn oil.
However, it is also one of the more costly feedstocks on the market. As a result, the biodiesel feedstock market in the United States transitioned from this expensive first-generation soy feedstock to incorporate alternative second-generation lower-cost, non-food feedstocks, such as waste vegetable oil, tallow, and inedible corn oil.
We have added the capability to refine our crude glycerin to an industrial grade with higher value applications. Our business strives to maximize availability of the higher value refined glycerin based on refining capacity, product specifications, prices, and other market conditions. Biodiesel Residue An additional byproduct of the biodiesel production process is biodiesel distillation residue.
Our business strives to maximize availability of the higher value refined glycerin based on refining capacity, product specifications, prices, and other market conditions. Biodiesel Residue An additional byproduct of the biodiesel production process is biodiesel distillation residue.
In particular, the 2005 Act’s provisions included biodiesel as part of the minimum volume (i.e., a mandate) of renewable fuels (the “renewable fuels standard” or “RFS”) to be included in the nationwide gasoline and diesel pool. The volume increased each year, from 4 billion gallons per year in 2006 to 16.55 billion gallons per year in 2013.
In particular, the 2005 Act’s provisions included biodiesel as part of the minimum volume (i.e., a mandate) of renewable fuels (the “renewable fuels standard” or “RFS”) to be included in the nationwide gasoline and diesel pool. The volume, which is intended to increase each year, began at four billion gallons per year in 2006.
This is a relatively low-priced commodity that we aggregate and sell to multiple customers, primarily for use in Bunker C #6 Oil and as an asphalt release agent. Biodiesel Production Capacity According to Biodiesel Magazine (February 13, 2023) the United States had a total combined annual operational capacity of 2,266 million gallons from 60 biodiesel plants. See http://www.biodieselmagazine.com/plants/listplants/USA/.
This is a relatively low-priced commodity that we aggregate and sell to multiple customers, primarily for use in Bunker C #6 Oil and as an asphalt release agent. Biodiesel Production Capacity According to Biodiesel Magazine 2024 Winter Edition, the United States had a total combined annual operational capacity of 2,221 million gallons from 64 biodiesel plants.
Our Batesville plant produces biodiesel, which is sometimes referenced as “B100.” A biodiesel blend is currently used in the facility’s diesel fleet. We offer B100 and biodiesel blended with petrodiesel (B2, B5, B10, B20, B50, and B99 blends) at our Batesville facility and at a short-term leased storage facility in Little Rock, Arkansas.
Our Batesville plant produces biodiesel, which is sometimes referenced as “B100.” We offer B100 and biodiesel blended with petrodiesel (B2, B5, B10, B20, B50, and B99 blends) at our Batesville facility and at a short-term leased storage facility in Little Rock, Arkansas. In addition, we deliver blended product to customers within our region.
Renewable Fuel Volumes* 2021 2022 2023 ** Cellulosic biofuel (million gallons) 560 630 720 Biomass-based diesel (billion gallons) 2.43 2.76 2.82 Advanced biofuel (billion gallons) 5.05 5.63 5.82 Renewable fuel (billion gallons) 18.84 20.63 20.82 * Units for all volumes are ethanol-equivalent, except for biomass-based diesel volumes, which are expressed as physical gallons. * See https://www.epa.gov/renewable-fuel-standard-program/final-volume-standards-2020-2021-and-2022#rule-summary ** USEPA Proposed Volumes, December 1, 2022 4 Table of Contents Federal Blenders ’ and Producers ’ Credits Biodiesel tax incentives have been provided through various federal statutes, including the 2005 Act and the American Jobs Creation Act, and later, the Emergency Economic Stabilization Act of 2008.
Renewable Fuel Volumes (billion RINs)* 2023 2024 2025 Cellulosic biofuel 0.84 1.09 1.38 Biomass-based diesel 2.82 3.04 3.35 Advanced biofuel 5.94 6.54 7.33 Renewable fuel 20.94 21.54 22.33 * Units for all volumes are ethanol-equivalent, except for biomass-based diesel volumes, which are expressed as physical gallons. * See https://www.epa.gov/renewable-fuel-standard-program/final-renewable-fuels-standards-rule-2023-2024-and-2025. 4 Table of Contents Federal Blenders ’ and Producers ’ Credits Biodiesel tax incentives have been provided through various federal statutes, including the 2005 Act and the American Jobs Creation Act, and later, the Emergency Economic Stabilization Act of 2008.
We also are registered in the states of California and Oregon fuel programs, which incentivize the use of low carbon fuels specific to biomass-based diesel. Washington is in the process of implementing a similar program. As we expand our business, we will assess these and other state incentives and determine if we qualify.
We are also registered in fuel programs in the states of California and Oregon, which incentivize the use of low carbon fuels specific to biomass-based diesel. We will continue to assess these and other state incentives and determine if we qualify. We will also stay abreast of regulations and update registrations if eligible.
We do not have long term contracts with any biofuels customer, but rather sell on the basis of monthly or short-term, multi-month purchase orders at prices based upon then-prevailing market rates.
Significant customers for the years ended December 31, 2023, 2022, and 2021 varied from year to year, and were comprised of five customers. We do not have long term contracts with any biofuels customer, but rather sell on the basis of monthly or short-term, multi-month purchase orders at prices based upon then-prevailing market rates.
Operational plant capacity decreased more than 550 million gallons from 2020 as the renewable diesel market expanded (see Competition ) and feedstock prices increased. We believe that the biodiesel industry will continue to be highly competitive given the excess capacity.
Operational plant capacity decreased more than 550 million gallons from 2020 as the renewable diesel market expanded (see Competition ) and feedstock prices increased.
Our continuous production line produces biodiesel from these second-generation lower-cost feedstocks with high-free fatty acids and has demonstrated a biodiesel production capacity in excess of 58 MMgy. Legislative Incentives Biodiesel production and use in the United States continues to be heavily influenced in large part by legislative initiatives at both the federal and state levels.
Our plant has a demonstrated production capacity of 59 MMgy. Legislative Incentives Biodiesel production and use in the United States continues to be heavily influenced in large part by legislative initiatives at both the federal and state levels.
We will also stay abreast of regulations and update registrations if eligible. Summary We will continue to identify and pursue other legislative incentives to support our business.
Summary We will continue to identify and pursue other legislative incentives to support our business.
Biodiesel made from such feedstocks has a higher cloud point (which is the point at which a fuel begins to gel) than biodiesel produced from vegetable oils, such as soybean, canola, or crude corn oil. This higher cloud point may cause cold weather performance issues.
Biodiesel made from such feedstocks has a higher cloud point (which is the point at which a fuel begins to gel) than biodiesel produced from vegetable oils, such as soybean, canola, or crude corn oil. The mandate for biodiesel usage as established by RFS2 may interject an additional seasonal fluctuation in our biodiesel business.
The year 2021 marked the first full year that these legacy products were no longer sold. Our current custom manufacturing product portfolio is more diversified into multiple markets including agrochemicals, oilfield chemicals, industrial intermediates, and fabric care markets. Performance chemicals comprise products which are generally available to the open market and sold to multiple customers.
Our current custom manufacturing product portfolio is more diversified into multiple markets including agrochemicals, oilfield chemicals, industrial intermediates, and fabric care markets. Performance chemicals comprise products which are generally available to the open market and sold to multiple customers. These products are sold based upon specification and are intended for specific performance in specialty end-use applications determined by the customer.
Our custom manufacturing products are manufactured by continuous production, dedicated batch or general-purpose batch mode depending on specific product and the volumes required.
Our custom manufacturing products are manufactured by continuous production, dedicated batch or general-purpose batch mode depending on the specific product and the volumes required. Management believes that we are a full-service strategic partner to our key and potential customers in this segment.
As part of that focus on growth, we have introduced procedural updates to our operation to allow re-entry to the pharma intermediates market and this capability has been validated by third party audits. Our chemicals business is based on a solid reputation as a technology-driven, highly reliable, and globally competitive chemicals producer.
We have actively worked to develop our chemicals business with new customers in more diversified growth markets. As part of that focus on growth, we have introduced procedural updates to our operation to allow re-entry to the pharma intermediates market. This capability has been validated by third party audits.
To comply with this regulation, we must update equipment monitoring systems, chemical leak detection programs, maintenance programs, vessel pressure relief systems, emission reporting protocols and related procedures and these changes must be complete before August 12, 2023. We have budgeted the funds necessary to comply with these regulations.
To comply with this regulation, we updated equipment monitoring systems, chemical leak detection programs, maintenance programs, vessel pressure relief systems, emission reporting protocols and related procedures.
The biomass-based diesel mandate rose annually and reached 2.43 billion gallons per year in 2021. On June 3, 2022, USEPA finalized a package of actions setting biofuel volumes for the Renewable Fuel Standard (RFS) program for years 2020, 2021, and 2022, and introducing regulatory changes intended to enhance the program’s objectives, reducing previously finalized volumes for 2020 and 2021.
The biomass-based diesel mandate rose annually and reached 2.43 billion gallons per year in 2021. On June 21, 2023, USEPA finalized a package of actions setting biofuel volumes for the Renewable Fuel Standard (RFS) program for years 2023, 2024, and 2025. The following table shows the finalized volume requirements by the USEPA with a steady growth rate in biomass-based diesel.
Our plant’s custom manufacturing product portfolio includes products that are used in the coatings, chemical intermediates, industrial and consumer cleaning, oil and gas, and specialty polymers industries. Historically, our custom manufacturing product portfolio was highly concentrated on two significant legacy products, namely a laundry detergent additive for a leading consumer products company and a proprietary row crop herbicide.
Historically, our custom manufacturing product portfolio was highly concentrated on two significant legacy products, namely a laundry detergent additive for a leading consumer products company and a proprietary row crop herbicide. The year 2021 marked the first full year that these legacy products were no longer sold.
The small agri-biodiesel credit provides for an annual tax incentive in the amount of $0.10 per gallon on the first 15 million gallons of qualified agri-biodiesel produced.
Like the BTC, the small agri-biodiesel credit which provides for an annual tax incentive in the amount of $0.10 per gallon on the first 15 million gallons of qualified agri-biodiesel produced was also extended to December 31, 2024 by the Inflation Reduction Act of 2022 and has not been reinstated with the CFPC.
For the twelve months ended December 31, 2021, three customers represented approximately 52% of biofuel revenue (41% of total revenue). For the twelve months ended December 31, 2020, one customer represented approximately 20% of biofuel revenue (12% of total revenue).
For the year ended December 31, 2023, two customers represented approximately 44% of biofuel revenue (35% of total revenue). For the year ended December 31, 2022, two customers represented approximately 34% of biofuel revenue (27% of total revenue). For the year ended December 31, 2021, three customers represented approximately 52% of biofuel revenue (41% of total revenue).
Additionally, we have declared normal quarterly cash dividends of $0.06 per share on our common stock for the calendar year 2023. Our business is managed in two segments: chemicals and biofuels. The chemicals segment manufactures a diversified listing of chemical products that are sold to third party customers.
Our business is managed in two segments: chemicals and biofuels. The chemicals segment manufactures a diversified listing 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.
We have added the capability to refine our crude glycerin to an industrial grade of glycerin for higher value specialty chemical applications. 9 Table of Contents Future Strategy We believe we have built a solid reputation as a safe, reliable, cost competitive, and technology-driven chemical producer.
This portfolio includes a family of polymer (nylon and polyester) modifiers, glycerin products, consumer cleaning products, surfactants, and several small-volume specialty chemicals and solvents for diverse applications. 9 Table of Contents Future Strategy We believe we have built a solid reputation as a safe, reliable, cost competitive, and technology-driven chemical producer.
As markets continue to evolve, we will remain agile and flexible in responding to new situations as they develop. 1 Table of Contents Narrative Description of Our Business Principal Executive Offices Our principal executive offices are located at 8235 Forsyth Blvd., 4th Floor, Clayton, Missouri 63105. Our telephone number is (314) 854-8352.
Combined with the synergies of operating a shared chemical manufacturing facility, this has allowed us to be consistently successful in a highly competitive market. 1 Table of Contents Narrative Description of Our Business Principal Executive Offices Our principal executive offices are located at 8235 Forsyth Blvd., 4th Floor, Clayton, Missouri 63105. Our telephone number is (314) 854-8352.
This scale and the design of our plant in Batesville allows us to process a wide variety of feedstocks and continuously achieve high biodiesel yields. Combined with the synergies of operating a shared chemical manufacturing facility, this has allowed us to be consistently successful in a highly competitive market.
With respect to our biofuels segment, our plant demonstrated capacity of approximately 59 million gallons per year (“MMgy”) during 2023. This scale and the design of our plant in Batesville allows us to process a wide variety of feedstocks and continuously achieve high biodiesel yields.
The most important of these is the one dollar per gallon Blenders' Tax Credit (“BTC”) applicable to all biodiesel. This credit has lapsed and been reinstated numerous times over the last decade. The BTC was not in place during 2012, 2014, 2015, 2018, and the majority of 2019. For each of these years, the BTC was retroactively reinstated.
The most important of these is the one dollar per gallon Blenders' Tax Credit (“BTC”) applicable to all biodiesel. This credit has lapsed and been reinstated numerous times over the last decade. The Inflation Reduction Act of 2022 extended the credit through December 31, 2024 and established a new Clean Fuel Production Credit (“CFPC”) effective January 1, 2025.
However, these second-generation feedstocks increased substantially in price as they are also used to produce renewable diesel which often commands a higher margin due to typically lower variable operating costs and its ability to be used as a direct substitute for petrodiesel.
Demand for second-generation feedstocks has increased substantially as they are also used to produce renewable diesel which has lower marginal costs than conventional biodiesel production and can also be used as a direct substitute for petrodiesel. Our continuous production line can produce biodiesel from this wide range of feedstocks, allowing for maximum flexibility in feedstock selection.
We retain a strong emphasis on operational excellence, cost control, and efficiency improvements to enable us to compete in the worldwide chemical industry. With respect to our biofuels segment, our plant has a demonstrated capacity near 59 million gallons per year (“MMgy”) with almost 50 MMgy produced during 2022.
Our chemicals business is based on a solid reputation as a technology-driven, highly reliable, and globally competitive chemicals producer. We retain a strong emphasis on operational excellence, cost control, and efficiency improvements to enable us to compete in the worldwide chemical industry.
Renewable diesel operational capacity in the US is approximately 1,623 million gallons per year with that figure expected to increase significantly in the next five years. This total is significantly greater than current biodiesel feedstock consumption and will require an increase in the supply chain to meet that demand.
Renewable diesel operational capacity in the US has grown significantly since 2018 and at the end of 2023 was at approximately 3,249 million gallons per year with that figure expected to continue to rise over the next five years. In 2023 renewable diesel capacity and production surpassed that of conventional biodiesel.
Outlook for the Biodiesel Industry/Our Future Strategy The passage of the Inflation Reduction Act in August of 2022 extended the BTC through December 31, 2024. Large scale investment in large scale renewable diesel plants competing for the same feedstock pool will put significant pressure on small scale conventional biodiesel producers.
Once the mandate for a calendar year is met, or is anticipated to be met, demand for biodiesel may decrease. Outlook for the Biodiesel Industry/Our Future Strategy The passage of the Inflation Reduction Act in August of 2022 extended the BTC through December 31, 2024 and introduced the CFPC effective January 1, 2025.
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The majority of the revenues from the chemicals segment are derived from the custom manufacturing of specialty chemicals for specific customers. We have actively worked to develop our chemicals business with new customers in more diversified growth markets.
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We have declared normal quarterly cash dividends of $0.06 per share on our common stock for the calendar year 2024.
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As the market has adapted to the supply chain and logistical impacts of COVID-19, first felt in the spring of 2020 we have remained alert to those conditions to ensure that we maintain the appropriate operating margins for every element of our business.
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Additionally, during the first quarter of 2024, we declared a special cash dividend of $2.50 per share on our common stock payable on April 9, 2024, to the holders of record of all the issued and outstanding shares of common stock as of the close of business on March 26, 2024.
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In 1998, Congress approved the use of biodiesel as an Energy Policy Act compliance strategy, which allowed federal, state, and public fleets covered by this Act to meet their alternative fuel vehicle purchase requirements by simply buying biodiesel and burning it in new or existing diesel vehicles in a minimum B20 blend.
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Our ability to efficiently manage the co-products and waste products associated with these more challenging feedstocks and still achieve excellent yields and processing rates has allowed us to remain competitive.
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In addition, we deliver blended product to a small group of customers within our region.
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The CFPC consolidates and replaces several fuel related credits currently scheduled to expire at the end of 2024, including credits for the production of biodiesel, agri-biodiesel, renewable diesel, second-generation biofuel, sustainable aviation fuel, alternative fuels, and alternative fuels mixtures.
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Since we started our biodiesel production, the cost of crude soybean oil has increased due in part to its use in biodiesel production and competing food demands.
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In contrast to these expiring provisions, which subsidize specific types of low-greenhouse gas (“GHG”) emission fuels, the CFPC is technology neutral and is intended to subsidize the production of any transportation fuel with zero or low GHG emissions.
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The reduction is based on significant and unanticipated events such as COVID. The following table shows the finalized volume requirements by the USEPA with a modest growth rate in biomass-based diesel.
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The CFPC is structured on a sliding scale so that producers become eligible for larger credits as the GHG emissions of the fuels they produce approach zero. For producers meeting prevailing wage and registered apprenticeship requirements, the maximum credit is $1.00 per gallon of nonaviation fuel and $1.75 per gallon of aviation fuel.
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The longest period of retroactive reinstatement was in late December 2019 which reinstated the credit for 2018 through December 31, 2022. The Inflation Reduction Act of 2022 extended the credit through December 31, 2024. Like the BTC, the small agri-biodiesel credit was not in place for the majority of 2019.
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For producers not meeting prevailing wage and registered apprenticeship requirements, the maximum credit is 20 cents per gallon of nonaviation fuel and 35 cents per gallon of aviation fuel.
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In late December 2019, the small agri-biodiesel credit was retroactively reinstated from its expiry on January 1, 2018 through December 31, 2022 and was also extended to December 31, 2024 by the Inflation Reduction Act of 2022.
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Nevertheless, the biodiesel industry has been resilient throughout this period with production levels in the first nine months of 2023 similar to those of 2021 and 2022 (Source: https://www.eia.gov/totalenergy/data/browser/index.php?tbl=T10.04A#/?f=M&start=200101&end=202309&charted=20-6.) Even so, we believe that the biodiesel industry will continue to be highly competitive given the excess capacity and increased competition for feedstocks.
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Although the regional market is still being developed, we estimate that the regional direct market available to us at maturity will be at least 30 million gallons per year. For the twelve months ended December 31, 2022, two customers represented approximately 34% of biofuel revenue (27% of total revenue).
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The forecasted increases in renewable diesel capacity will require an increase in the supply chain to meet that demand. This was also the case in 2018 and new capacity was constructed to meet demand.
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That increase is presently being driven by price (feedstock prices have also increased significantly since the beginning of 2020); and the economic benefits in California under the Low Carbon Fuel Standard where almost all domestically produced and imported renewable diesel is sold and used.
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As well as being driven by the benefits of the RFS and those of the Californian Low Carbon Fuel Standard (LCFS), renewable diesel production is also attractive to US Oil companies as it allows them to repurpose refinery hydro-processing equipment close to existing hydrogen supply facilities that would otherwise be redundant or uneconomical.
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The mandate for biodiesel usage as established by RFS2 may interject an additional seasonal fluctuation in our biodiesel business. Once the mandate for a calendar year is met, or is anticipated to be met, demand for biodiesel may decrease.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeBiomass-based diesel has historically been more expensive to produce than petroleum-based diesel fuel and these governmental programs support a market for biomass-based diesel that might not otherwise exist. The petroleum industry is opposed to many of these government incentives and can be expected to continue to challenge these incentives.
Biggest changeThe expiration or loss of mandates or incentives would have a material adverse effect on our business. The biomass-based diesel industry relies on governmental programs requiring or incentivizing the consumption of biofuels. Biomass-based diesel has historically been more expensive to produce than petroleum-based diesel fuel and these governmental programs support a market for biomass-based diesel that might not otherwise exist.
In addition, several states have acted to regulate potential nitrogen oxide emissions from biodiesel. Texas currently requires that biodiesel blends contain an additive to eliminate this perceived nitrogen oxide increase. California is in the process of formulating biodiesel regulations that may also require such an additive. The USEPA may also institute requirements for such an additive.
In addition, several states have acted to regulate potential nitrogen oxide emissions from biodiesel. Texas currently requires biodiesel blends contain an additive to eliminate this perceived nitrogen oxide increase. California is in the process of formulating biodiesel regulations that may also require such an additive. The USEPA may also institute requirements for such an additive.
The Company, like many companies today, is the target of industrial espionage, including cyber-attacks. The Company has determined that these attacks have resulted, and could result in the future, in unauthorized parties gaining access to certain confidential business information.
The Company, like many companies today, is the target of industrial espionage, including cyber-attacks. The Company has determined that these cyber-attacks have resulted, and could result in the future, in unauthorized parties gaining access to certain confidential business information.
Novelly or his designees exercises his registration rights, such exercise may have an adverse effect on the market price of our shares of common stock. St. Albans Global Management, LLC (“St. Albans”), an entity affiliated with Mr. P. A.
Novelly, II or his designees exercises his registration rights, such exercise may have an adverse effect on the market price of our shares of common stock. St. Albans Global Management, LLC (“St. Albans”), an entity affiliated with Mr. P. A.
Disruptions could also occur due to internal factors such as computer or equipment malfunction (accidental or intentional), operator error, or process failures; or external factors such as computer or equipment malfunction at third-party service providers, natural disasters, pandemic illness, changes in laws or regulations, war or other outbreak of hostilities or terrorism, cyber-attacks, or breakdown or degradation of transportation infrastructure used for delivery of supplies to the Company or for delivery of products to customers.
Disruptions could also occur due to internal factors such as computer or equipment malfunction (accidental or intentional), operator error, or process failures; or external factors such as computer or equipment malfunction at third-party service providers, natural disasters, pandemic illness, changes in laws or regulations, war or other outbreak of hostilities or terrorism, cyber-incidents, or breakdown or degradation of transportation infrastructure used for delivery of supplies to the Company or for delivery of products to customers.
There can be no assurance that we will be able to maintain or establish additional necessary strategic relationships, in which case the opportunity to grow our business may be negatively affected. 25 Table of Contents There is currently excess renewable fuel production capacity and low utilization in the industry and if non-operational and underused facilities commence or increase operations, our results of operations may be negatively affected.
There can be no assurance that we will be able to maintain or establish additional necessary strategic relationships, in which case the opportunity to grow our business may be negatively affected. 24 Table of Contents There is currently excess renewable fuel production capacity and low utilization in the industry and if non-operational and underused facilities commence or increase operations, our results of operations may be negatively affected.
These criteria could be triggered if, among other things, the number of our publicly-held shares falls below 600,000, the average closing price of our common stock is less than $1.00 per share over a consecutive 30 trading-day period, or we fail to file certain reports with the SEC.
These criteria could be triggered if, among other things, the number of our publicly-held shares fall below 600,000, the average closing price of our common stock is less than $1.00 per share over a consecutive 30 trading-day period, or we fail to file certain reports with the SEC.
The LCFS is designed to reduce greenhouse gas (“GHG”) emissions associated with transportation fuels used in California by ensuring that the total amount of fuel consumed meets declining targets for such emissions. The regulation quantifies lifecycle GHG emissions by assigning a “carbon intensity” ("CI") score to each transportation fuel based on that fuel’s lifecycle assessment.
The LCFS is designed to reduce greenhouse gas (“GHG”) emissions associated with transportation fuels used in California by ensuring that the total amount of fuel consumed meets declining targets for such emissions. The regulation quantifies lifecycle GHG emissions by assigning a “carbon intensity” (“CI”) score to each transportation fuel based on that fuel’s lifecycle assessment.
Although we have concluded as of December 31, 2022, that our internal control over financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, because of its inherent limitations, internal control over financial reporting may not prevent or detect fraud or misstatements.
Although we have concluded as of December 31, 2023, that our internal control over financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, because of its inherent limitations, internal control over financial reporting may not prevent or detect fraud or misstatements.
Such disruptions could result in an unplanned event that could be significant in scale and could negatively impact operations, neighbors, and the environment, and could have a negative impact on our results of operations. 26 Table of Contents Risks Associated With Owning Our Shares We may issue substantial amounts of additional shares without stockholder approval.
Such disruptions could result in an unplanned event that could be significant in scale and could negatively impact operations, neighbors, and the environment, and could have a negative impact on our results of operations. 25 Table of Contents Risks Associated With Owning Our Shares We may issue substantial amounts of additional shares without stockholder approval.
This could cause us to incur greater costs. 22 Table of Contents If we are unable to effectively manage the commodity price risk of our raw materials or finished goods, we may have unexpected losses. We hedge our raw materials and/or finished products for our biofuels segment to some degree to manage the commodity price risk of such items.
This could cause us to incur greater costs. 21 Table of Contents If we are unable to effectively manage the commodity price risk of our raw materials or finished goods, we may have unexpected losses. We hedge our raw materials and/or finished products for our biofuels segment to some degree to manage the commodity price risk of such items.
The total current U.S. production capacity for biodiesel is in excess of the current RFS2 mandate for 2022 and 2023. Excess production capacity over the annual mandates could result in a decline in biodiesel prices and profitability, negatively impacting our ability to maintain the profitability of our biofuels segment and recover capital expenditures in this business segment.
The total current U.S. production capacity for biodiesel is in excess of the current RFS2 mandate for 2023 and 2024. Excess production capacity over the annual mandates could result in a decline in biodiesel prices and profitability, negatively impacting our ability to maintain the profitability of our biofuels segment and recover capital expenditures in this business segment.
Cyber-attacks affecting the Company, its supply chain or customers could compromise confidential, business critical information, cause a disruption in the Company’s operations, harm the Company's reputation, or endanger the environment if the Company, its suppliers or customers do not effectively prevent, detect and recover from these or other security breaches.
Cyber-incidents affecting the Company, its supply chain or customers could compromise confidential, business critical information, cause a disruption in the Company’s operations, harm the Company's reputation, or endanger the environment if the Company, its suppliers or customers do not effectively prevent, detect and recover from these or other security breaches.
Wide fluctuations in alternative fuel prices may result from relatively minor changes in the supply of and demand for oil and natural gas, market uncertainty, and other factors that are beyond our control, including: ● worldwide and domestic supplies of oil and gas; ● the price and/or availability of biodiesel feedstocks; ● weather conditions; ● the level of consumer demand; ● the price and availability of alternative fuels; ● the availability of pipeline and refining capacity; ● the price and level of foreign imports; ● domestic and foreign governmental regulations and taxes; ● the ability of the members of the Organization of Petroleum Exporting Countries (OPEC) to agree to and maintain oil price and production controls; ● political instability or armed conflict in oil-producing regions; ● pandemics, epidemics, or disease outbreaks, such as COVID-19; and ● the overall economic environment.
Wide fluctuations in alternative fuel prices may result from relatively minor changes in the supply of and demand for oil and natural gas, market uncertainty, and other factors that are beyond our control, including: ● worldwide and domestic supplies of oil and gas; ● the price and/or availability of biodiesel feedstocks; ● weather conditions; ● the level of consumer demand; ● the price and availability of alternative fuels; ● the availability of pipeline and refining capacity; ● the price and level of foreign imports; ● domestic and foreign governmental regulations and taxes; ● the ability of the members of the Organization of Petroleum Exporting Countries (OPEC) to agree to and maintain oil price and production controls; ● political instability or armed conflict in oil-producing regions; ● pandemics, epidemics, or disease outbreaks; and ● the overall economic environment.
If we suffer such an event but do not cure it, or if such event cannot be cured, trading of our common stock on the NYSE may be suspended from dealing or our stock may be delisted. Any such suspension or delisting may have an adverse effect on the market price of our common stock. 27 Table of Contents
If we suffer such an event, but do not cure it, or if such event cannot be cured, trading of our common stock on the NYSE may be suspended from dealing or our stock may be delisted. Any such suspension or delisting may have an adverse effect on the market price of our common stock. 26 Table of Contents
As a result, we may lack the capital necessary to complete the projected expansions or capitalize on other business opportunities. 23 Table of Contents We may be unable to successfully integrate future acquisitions with our operations or realize all of the anticipated benefits of such acquisitions.
As a result, we may lack the capital necessary to complete the projected expansions or capitalize on other business opportunities. 22 Table of Contents We may be unable to successfully integrate future acquisitions with our operations or realize all of the anticipated benefits of such acquisitions.
Risks Related to our Business We are reliant upon a relatively small number of customers. Our chemical business is concentrated with four large customers covering multiple products representing greater than 72% of our chemicals segment product sales, or 15% of total revenues.
Risks Related to our Business We are reliant upon a relatively small number of customers. Our chemical business is concentrated with four large customers covering multiple products representing greater than 69% of our chemicals segment product sales, or 15% of total revenues.
The price of our common stock could decline if one or more equity research analysts downgrade our common stock or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business. If Mr.
The price of our common stock could decline if one or more equity research analysts downgrade our common stock or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business. If Mr. P.A.
Such liabilities can be significant and, if imposed, could have a material adverse effect on our financial condition or results of operations. 21 Table of Contents Our insurance may not protect us against our business and operating risks. We maintain insurance for some, but not all, of the potential risks and liabilities associated with our business.
Such liabilities can be significant and, if imposed, could have a material adverse effect on our financial condition or results of operations. Our insurance may not protect us against our business and operating risks. We maintain insurance for some, but not all, of the potential risks and liabilities associated with our business.
The impacts include, but are not limited to: ● a significant decline in demand for our products due to market disruptions, resulting in a decline in sales and prices; ● limitations of feedstocks, price volatility, or disruptions to our suppliers’ operations; ● the complete or partial closure of our manufacturing facility; ● the interruption of our distribution system, or temporary or long-term disruption in our supply chains, or delays in the delivery of our product; ● suspension of renewable fuel and/or low carbon fuel policies; ● limitations on our ability to operate our business as a result of federal, state or local regulations, including any changes to the designation of our business as “essential” by the U.S.
The impacts include, but are not limited to: ● a significant decline in demand for our products due to market disruptions, resulting in a decline in sales and prices; ● limitations of feedstocks, price volatility, or disruptions to our suppliers’ operations; ● the interruption of our distribution system, or temporary or long-term disruption in our supply chains, or delays in the delivery of our product; ● suspension of renewable fuel and/or low carbon fuel policies; ● limitations on our ability to operate our business as a result of federal, state or local regulations, including any changes to the designation of our business as “essential” by the U.S.
When unauthorized access is discovered, the Company reports such situations to governmental authorities for investigation, as appropriate, and takes measures to mitigate any potential impact. 24 Table of Contents Although management does not believe that the Company has experienced any material losses to date related to these cyber security breaches, there can be no assurance that such losses will not be suffered in the future.
When unauthorized access is discovered, the Company reports such situations to governmental authorities for investigation, as appropriate, and takes measures to mitigate any potential impact. 23 Table of Contents Although management does not believe that the Company has experienced any material losses to date related to these cyber security incidents, there can be no assurance that such losses will not be suffered in the future.
The Company seeks to actively manage the risks within its control that could lead to business disruptions and cyber security breaches through a comprehensive cyber security program that is continuously reviewed (through internal and external, third party, auditing), maintained, and upgraded.
The Company seeks to actively manage the risks within its control that could lead to business disruptions and cyber security incidents through a comprehensive cyber security program that is continuously reviewed (through internal and third party auditing), maintained, and upgraded.
Many biodiesel plants in the United States do not operate at full capacity. Further, a number of renewable diesel plants are under construction in the United States as of December 2022, if completed, would add additional renewable fuel production capacity.
Many biodiesel plants in the United States do not operate at full capacity. Further, a number of renewable diesel plants are under construction in the United States as of December 2023, and if completed, would add additional renewable fuel production capacity.
If the value of LCFS credits were to materially decrease as a result of over-supply, as a result of reduced demand for our fuels, or for other reasons including the continued impact of the COVID-19 pandemic, if the fuel produced is deemed not to qualify for LCFS credits; or if the LCFS or the manner in which it is administered or applied were otherwise changed in a manner adverse to us, our revenues and profits could be seriously harmed. 16 Table of Contents The industries in which we compete are highly competitive.
If the value of LCFS credits were to materially decrease as a result of over-supply, as a result of reduced demand for our fuels, or if the fuel produced is deemed not to qualify for LCFS credits; or if the LCFS or the manner in which it is administered or applied were otherwise changed in a manner adverse to us, our revenues and profits could be seriously harmed. 16 Table of Contents The industries in which we compete are highly competitive.
Our stock price may change dramatically as the result of: (i) announcements of new products or innovations by us or our competitors; (ii) uncertainty regarding the viability of any of our product initiatives; (iii) significant customer contracts; (iv) significant litigation; (v) the loss of or changes to the BTC or RFS2 mandate; or (vi) other factors or events that would be expected to affect our business, financial condition, results of operations, and future prospects.
Our stock price may change dramatically as the result of: (i) announcements of new products or innovations by us or our competitors; (ii) uncertainty regarding the viability of any of our product initiatives; (iii) significant customer contracts; (iv) significant litigation; (v) uncertainty with respect to changing laws and regulations that impact our business and our ability to take advantage of tax credits such as the BTC and CFPC; or (vi) other factors or events that would be expected to affect our business, financial condition, results of operations, and future prospects.
Although this business is contracted in longer-term production agreements, the loss of any of these strategic customers could have a material adverse effect on our chemicals business. Additionally, our biofuels segment has two large customers. Sales to these biodiesel customers totaled approximately 27% of total revenue (or $107,898) in 2022.
Although this business is contracted in longer-term production agreements, the loss of any of these strategic customers could have a material adverse effect on our chemicals business. Additionally, our biofuels segment has two large customers.
We expect to have capital expenditure requirements, and we may be unable to obtain needed financing on satisfactory terms. We expect to make capital expenditures for the expansion of our biofuels and chemicals production capacity and complementary infrastructure. We intend to finance these capital expenditures primarily through cash flow from our operations, borrowings under our credit facility, and existing cash.
We expect to make capital expenditures for the expansion of our biofuels and chemicals production capacity and complementary infrastructure. We intend to finance these capital expenditures primarily through cash flow from our operations, borrowings under our credit facility, and existing cash.
Risks Related to Economic Conditions, Governmental Action, and our Industry Our industry is greatly influenced by the overall global economy and as such we have the potential to be adversely affected by the COVID-19 public health pandemic and the resultant impact on our business, results of operations or financial condition.
Risks Related to Economic Conditions, Governmental Action, and our Industry Our industry is greatly influenced by the overall global economy and as such adverse economic conditions have the potential to adversely affect our business, results of operations, or financial condition.
As a manufacturer of diversified chemical products and biofuels, our business is subject to operating risks common to chemical manufacturing, storage, handling, and transportation. These risks include, but are not limited to, fires, explosions, inclement weather, natural disasters, mechanical failure, unscheduled downtime, transportation interruptions, remediation, chemical spills, discharges or releases of toxic or hazardous substances or gases.
These risks include, but are not limited to, fires, explosions, inclement weather, natural disasters, mechanical failure, unscheduled downtime, transportation interruptions, remediation, chemical spills, discharges or releases of toxic or hazardous substances or gases.
However, if our capital requirements vary materially from those provided for in our current projections, we may require additional financing sooner than anticipated. A decrease in expected revenues or adverse change in market conditions could make obtaining this financing economically unattractive or impossible.
However, if our capital requirements vary materially from those provided for in our current projections, we may require additional financing sooner than anticipated. A decrease in expected revenues, in addition to high rates of inflation and high interest rates currently being experienced and expected to persist in the near-term could make obtaining this financing economically unattractive or impossible.
However, in late December 2019, the BTC was retroactively reinstated from its expiry on January 1, 2018 through December 31, 2022. With the passage of the Inflation Reduction Act in August 2022, the BTC has been extended through December 31, 2024.
The BTC was not in place during 2018 and not in place for the majority of 2019. However, in late December 2019, the BTC was retroactively reinstated from its expiry on January 1, 2018 through December 31, 2022.
On March 1, 2023, the credit facility was amended to transition it from LIBOR to the secured overnight financing rate (“SOFR”) and to reflect other conforming changes. We do not expect the transition from LIBOR to have a material impact on our credit facility.
On March 1, 2023, the credit facility was amended to transition it from LIBOR to the secured overnight financing rate (“SOFR”) and to reflect other conforming changes. We expect to have capital expenditure requirements, and we may be unable to obtain needed financing on satisfactory terms due to inflation and increased interest rates.
If any of the state or federal laws and regulations relating to the government subsidies and mandates change, including failure to reinstate the federal biodiesel BTC, our ability to benefit from our alternative fuels business could be harmed.
If any of the state or federal laws and regulations relating to the government subsidies and mandates change, our ability to benefit from our alternative fuels business could be harmed. With respect to our biofuels platform, the United States Congress could repeal, curtail or otherwise change the RFS2 program in a manner adverse to us.
The global outbreak of the COVID-19 pandemic caused governments and industry to take measures to mitigate the spread of the virus. We source certain raw materials for our chemicals segment internationally, and as such we are subject to supply chain disruptions and price inflation for those raw materials.
We source certain raw materials for our chemicals segment internationally, and as such we are subject to supply chain disruptions and price inflation for those raw materials, which can adversely impact our business.
If transportation is restricted or is unavailable, we may not be able to sell into more lucrative markets, and consequently our cash flow from sales of biodiesel could be restricted. If automobile manufacturers and other industry groups express reservations regarding the use of biodiesel, our ability to sell biodiesel will be negatively impacted.
If transportation is restricted or is unavailable, we may not be able to sell into more lucrative markets, and consequently our cash flow from sales of biodiesel could be restricted. Concerns regarding the environmental impact of biodiesel production could affect public policy, which could impair our ability to operate at a profit and substantially harm our revenues and operating margins.
Under the BTC, the first person to blend pure biomass-based diesel with petroleum-based diesel fuel receives a one dollar per gallon refundable tax credit. The BTC was not in place during 2018 and not in place for the majority of 2019.
The petroleum industry is opposed to many of these government incentives and can be expected to continue to challenge these incentives. The most significant tax incentive program in the biomass-based diesel industry has been the BTC. Under the BTC, the first person to blend pure biomass-based diesel with petroleum-based diesel fuel receives a one dollar per gallon refundable tax credit.
Sales in 2021 to our three largest customers represented 52% of total revenues (or $133,231). Sales to one biodiesel customer totaled 12% of total revenues in 2020 (or $25,460).
Sales to these biodiesel customers totaled approximately 35% of total revenue (or $127,763,000) in 2023. Sales in 2022 to our two largest customers represented 27% of total revenues (or $107,898,000). Sales to three largest biodiesel customers totaled 52% of total revenues in 2021 (or $133,231,000).
If biodiesel feedstock costs do not decrease significantly relative to biodiesel prices, we could realize a negative gross margin on biodiesel.
Our relative position to other biodiesel producers and our absolute position with regard to the value of that credit could have a material adverse effect on us and on the biodiesel industry in general. If biodiesel feedstock costs do not decrease significantly relative to biodiesel prices, we could realize a negative gross margin on biodiesel.
We expect the third report will build on the previous two reports and provide an update of the impacts to date of the RFS program on the environment.
The USEPA released its third triennial report to Congress on biofuels and the environment in 2023, which builds on the previous two reports and provides an update on the impacts to date of the RFS and RFS2 on the environment.
Concerns regarding the environmental impact of biodiesel production could affect public policy, which could impair our ability to operate at a profit and substantially harm our revenues and operating margins. The environmental impacts associated with biodiesel production and use have not yet been fully analyzed.
The environmental impacts associated with biodiesel production and use have not yet been fully analyzed.
In addition, at various times, we have deposits with certain U.S. banks in excess of the maximum amounts insured by the U.S. Federal Deposit Insurance Corporation (the “FDIC"). As of December 31, 2022, we maintained with such banks cash balances of approximately $173.7 million in excess of the amounts insured by the FDIC.
We are exposed to government credit risk and fluctuations in market values of our cash and cash equivalent portfolio. We have deposits with certain U.S. banks in excess of the maximum amounts insured by the U.S. Federal Deposit Insurance Corporation (the “FDIC”) and holdings in certain United States Government Select Funds.
There is no guarantee that the BTC will be extended after 2024, which could have a material adverse effect on us and on the biodiesel industry in general. We operate within the biomass-based diesel industry, which relies on governmental programs requiring or incentivizing the consumption of biofuels.
Department of Homeland Security; and ● decreases in the demand for and price of RINs and LCFS credits as a result of reduced demand for petroleum-based gasoline and diesel fuel. We operate within the biomass-based diesel industry, which is influenced by governmental programs requiring or incentivizing the consumption of biofuels, including the BTC and CFPC.
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We have so far absorbed those impacts in our business; however, our ability to competitively source these raw materials after such time is uncertain given the unknown impacts of COVID-19 and potentially more disruptive future variants.
Added
With the passage of the Inflation Reduction Act in August 2022, the BTC has been extended through December 31, 2024, but is to be replaced by the CFPC on January 1, 2025. The CFPC is structured on a sliding scale so that producers become eligible for larger credits as the GHG emissions of the fuels they produce approach zero.
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Additionally, any further spread of COVID-19, which may negatively impact on our customers and thus on our business still remains unpredictable and as such, we cannot predict the degree to, or the time period over, which our sales and operations will be affected by this outbreak, and the effects could be material.
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For producers meeting prevailing wage and registered apprenticeship requirements, the maximum credit is $1.00 per gallon of biodiesel. However, the maximum credit would require zero GHG emissions which is unrealistic for almost every biodiesel producer. Guidance surrounding this credit have yet to be finalized.
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Department of Homeland Security; ● decreases in the demand for and price of RINs and LCFS credits as a result of reduced demand for petroleum-based gasoline and diesel fuel; and ● our management of the impact of COVID-19 has and will continue to require significant investment of time and may cause the Company to divert or delay the application of its resources toward other or new initiatives or investments, which may cause a material adverse impact on the results of operations.
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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 in that: (i) unlike our custom manufacturing products, biodiesel is a commodity with a large potential customer base; (ii) we believe that we could readily sell our biodiesel to other customers as potential demand from other customers for biodiesel exceeds our production capacity; (iii) 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 (iv) 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.
Removed
The extent of the impact of the COVID-19 pandemic on our business will continue to be uncertain in the near future as it continues to evolve globally. We cannot reasonably estimate the continued duration and severity of the COVID-19 pandemic, or its impact, which may be significantly harmful to our operations and profitability.
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As of December 31, 2023, we maintained with such banks cash balances of approximately $90.8 million in excess of the amounts insured by the FDIC. We are exposed to operating risks. As a manufacturer of diversified chemical products and biofuels, our business is subject to operating risks common to chemical manufacturing, storage, handling, and transportation.
Removed
We operate within the biomass-based diesel industry, which relies on governmental programs requiring or incentivizing the consumption of biofuels, including the BTC. The expiration or loss of mandates or incentives would have a material adverse effect on our business. The most significant tax incentive program in the biomass-based diesel industry has been the BTC.
Removed
With respect to our biofuels platform, the United States Congress could repeal, curtail or otherwise change the RFS2 program in a manner adverse to us.
Removed
Research on biodiesel use in automobiles is ongoing. Some industry groups have recommended that blends of no more than 5% biodiesel be used for automobile fuel due to concerns about fuel quality, engine performance problems, and possible detrimental effects of biodiesel on rubber components and other engine parts.
Removed
Although some manufacturers have encouraged use of biodiesel fuel in their vehicles, cautionary pronouncements by other manufacturers or industry groups may impact our ability to market our biodiesel. Perception about “ food vs. fuel ” could impact public policy, which could impair our ability to operate at a profit and substantially harm our revenues and operating margins.
Removed
Some people believe that biodiesel may increase the cost of food, as some feedstocks, such as soybean oil, used to make biodiesel can also be used for food products.
Removed
This debate is often referred to as “food vs. fuel.” Though our biodiesel is sourced from non-food grade feedstocks, this is a concern to the biodiesel industry because biodiesel demand is heavily influenced by government policy, and if public opinion was to erode, it is possible that these policies would lose political support.
Removed
These views could also negatively impact public perception of biodiesel. Such claims have led some, including members of Congress, to urge the modification of current government policies that affect the production and sale of biofuels in the United States.
Removed
On January 3 2023, the USEPA released for public comment an external review draft of its third triennial report to Congress on biofuels and environment. A 60-day public comment period was open through March 6, 2023.
Removed
The USEPA is required to report to Congress on the environmental and resource conservation impacts of the Renewable Fuel Standard program under Section 2004 of the Energy Independence and Security Act of 2007.
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We are exposed to credit risk and fluctuations in market values of our investments and cash and cash equivalent portfolio. We could experience significant declines in the market value of our investment or cash and cash equivalent portfolio.
Removed
Credit ratings and pricing of these investments can be negatively affected by liquidity, credit deterioration, financial results, economic risk, political risk, sovereign risk, or other factors. As a result, the value and liquidity of our cash, cash equivalents, and marketable securities could decline and result in impairment losses.
Removed
The impact of the COVID-19 pandemic and any future variants still has the potential to disrupt trade and create significant volatility in global financial markets. In this scenario, global market values and the value of our investments could experience significant declines. We are exposed to operating risks.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeQuantitative and Qualitative Disclosures About Market Risk. 46 Item 8. Financial Statements and Supplementary Data. 47 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. 77 Item 9A. Controls and Procedures. 77 Item 9B. Other Information. 79 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. 79 Part III 80 Item 10.
Biggest changeQuantitative and Qualitative Disclosures About Market Risk. 45 Item 8. Financial Statements and Supplementary Data. 46 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. 76 Item 9A. Controls and Procedures. 76
Removed
Directors, Executive Officers, and Corporate Governance. 80 Item 11. Executive Compensation. 86 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. 94 Item 13. Certain Relationships and Related Transactions, and Director Independence. 96 Item 14. Principal Accountant Fees and Services. 97 Part IV 98 Item 15. Exhibits and Financial Statement Schedules. 98 Item 16.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePlan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) Weighted-average exercise price of outstanding options, warrants and rights (b) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) Equity compensation plans approved by security holders 44,000 $ 10.74 4,310,167 Performance Graph The graph below matches the cumulative 5-Year total return of holders of the Company’s common stock with the cumulative total returns of the Russell 2000 index and a group of 26 companies grouped by SIC code (chemical industry), and customized peer group that includes: Aemetis Inc., Albemarle Corp, Alto Ingredients Inc., Amyris Inc., Archer-Daniels-Midland Co., Arkema Sa, Bunge Ltd, Cabot Corp, Celanese Corp, Chemours Co, Darling Ingredients Inc, Dow Inc, Eastman Chemical Co, Gevo Inc, Green Plains Inc, Hudson Technologies Inc, Huntsman Corp, Kronos Worldwide Inc, Lanxess Ag, Lyondellbasell Industries Nv, Olin Corp, Rex American Resources Corp, Solvay Sa, Stepan Co, and Westlake Corp.
Biggest changeNumber of securities Weighted-average Number of securities to be issued upon exercise price of remaining available for future exercise of outstanding options, issuance under equity outstanding options, warrants compensation plans (excluding warrants and rights and rights securities reflected in column (a)) Plan Category (a) (b) (c) Equity compensation plans approved by security holders 34,000 $ 9.13 4,310,167 Performance Graph The graph below compares the cumulative 5-Year total return to holders of the Company's common stock relative to the cumulative total returns of the Russell 2000 index and 24 companies, listed in footnote 1 below.
Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information The shares of our common stock are traded on the NYSE under the trading symbol “FF”. As of March 14, 2023, there are 43,763,243 shares of our common stock outstanding.
Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information The shares of our common stock are traded on the NYSE under the trading symbol “FF”. As of March 14, 2024, there are 43,763,243 shares of our common stock outstanding.
Through December 31, 2022, we issued 64,000 options to purchase shares of our common stock and awarded no shares to participants under the Incentive Plan. 29 Table of Contents Following is additional information regarding the incentive plans as of December 31, 2022.
Through December 31, 2023, we issued 64,000 options to purchase shares of our common stock and awarded no shares to participants under the Incentive Plan. 29 Table of Contents Following is additional information regarding the incentive plans as of December 31, 2023.
Holders The shares of our common stock were held by approximately 294 holders of record on March 14, 2023 as recorded on our transfer agents’ register. We believe that the number of beneficial owners of our common stock is substantially greater than the number of holders of record.
Holders The shares of our common stock were held by approximately 294 holders of record on March 14, 2024 as recorded on our transfer agents’ register. We believe that the number of beneficial owners of our common stock is substantially greater than the number of holders of record.
Purchase of Securities by Us During 2022, neither we, nor anyone acting on our behalf, purchased any shares of our common stock, which is the only class of our equity securities that is registered pursuant to Section 12 of the Exchange Act. 31 Table of Contents
Purchase of Securities by Us During 2023, neither we, nor anyone acting on our behalf, purchased any shares of our common stock, which is the only class of our equity securities that is registered pursuant to Section 12 of the Exchange Act.
Dividends The payment of cash dividends by us is dependent upon our existing cash and cash equivalents, future earnings, capital requirements, and overall financial condition. We declared and paid regular cash dividends for 2022 and 2021, a special dividend in 2021, and we have also declared dividends for 2023.
Dividends The payment of cash dividends by us is dependent upon our existing cash and cash equivalents, future earnings, capital requirements, and overall financial condition. We declared and paid regular cash dividends for 2023 and 2022, and we have also declared dividends for 2024.
We do not maintain any other equity compensation plan or individual equity compensation arrangement. Under the Incentive Plan, awards are limited to 10% of the issued and outstanding shares of our common stock in the aggregate. The shares to be issued under the Incentive Plan were registered with the SEC on a Form S-8 filed on November 9, 2017.
Under the Incentive Plan, awards are limited to 10% of the issued and outstanding shares of our common stock in the aggregate. The shares to be issued under the Incentive Plan were registered with the SEC on a Form S-8 filed on November 9, 2017.
While we anticipate similar regular cash dividends after 2023, no assurances can be given that we will declare or pay dividends for years after 2023. Securities Authorized for Issuance Under Equity Compensation Plan Our board of directors adopted an omnibus incentive plan, which was approved by our shareholders at our 2017 annual shareholder meeting (the “Incentive Plan”).
Securities Authorized for Issuance Under Equity Compensation Plan Our board of directors adopted an omnibus incentive plan, which was approved by our shareholders at our 2017 annual shareholder meeting (the “Incentive Plan”). We do not maintain any other equity compensation plan or individual equity compensation arrangement.
Removed
The graph assumes that the value of the investment in our common stock, in each index, and in the peer group (including reinvestment of dividends) was $100 on December 31, 2017 and tracks it through December 31, 2022. 30 Table of Contents Recent Sales of Securities We did not sell any of our securities within the period covered by this report in transactions that were not registered under the Securities Act.
Added
While we anticipate similar regular cash dividends after 2024, no assurances can be given that we will declare or pay dividends for years after 2024.
Added
Additionally, during the first quarter of 2024, we declared a special cash dividend of $2.50 per share on our common stock payable on April 9, 2024, to the holders of record of all the issued and outstanding shares of common stock as of the close of business on March 26, 2024.
Added
An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock, in each index and in each of the peer groups on December 31, 2018 and its relative performance is tracked through December 31,2023.
Added
(1.) The 24 companies included in the company's peer group are: Archer-Daniels-Midland Co, Arkema S.A., Albemarle Corp, Alto Ingredients Inc, Aemetis Inc, Bunge Global S.A., Cabot Corp, Chemours Co, Celanese Corp, Darling Ingredients Inc, Dow Inc, Eastman Chemical Co, Gevo Inc, Green Plains Inc, Hudson Technologies Inc, Huntsman Corp, Kronos Worldwide Inc, Lanxess A.G., Lyondellbasell Industries N.V., Olin Corp, Rex American Resources Corp, Stepan Co, Solvay S.A., and Westlake Corp. 30 Table of Contents Unregistered Sales of Equity Securities We did not sell any of our securities within the period covered by this report in transactions that were not registered under the Securities Act.
Added
On March 12, 2024, the Company’s board of directors authorized the repurchase of up to $25.0 million of Company common stock through a stock repurchase program expiring March 12, 2026. The program could be suspended or discontinued at any time, based on market, economic, or business conditions.
Added
The timing and amount of repurchase transactions will be determined by management based on its evaluation of market conditions, share price, and other factors. [TBR1] The ultimate language should be aligned here and in the earnings release. 31 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest change(Dollars in thousands) Twelve months ended December 31: 2022 2021 Net income $ 15,211 $ 26,255 Depreciation 10,454 10,452 Non-cash stock-based compensation 46 - Interest and dividend income (4,870 ) (3,119 ) Non-cash interest expense and amortization of deferred financing costs 128 127 Loss on disposal of property and equipment 64 11 Loss on derivative instruments 24,360 10,377 Loss on marketable securities 8,546 70 Income tax benefit (1,473 ) (10,325 ) Adjusted EBITDA $ 52,466 $ 33,848 The following table reconciles adjusted EBITDA with cash flows from operations, the most directly comparable GAAP liquidity financial measure: (Dollars in thousands) Twelve months ended December 31: 2022 2021 Net cash provided by operating activities $ 52,451 $ 44,084 Benefit for deferred income taxes 1,822 10,454 Interest and dividend income (4,870 ) (3,119 ) Income tax benefit (1,473 ) (10,325 ) Loss on derivative instruments 24,360 10,377 Change in fair value of derivative instruments 343 (609 ) Changes in operating assets and liabilities, net (20,168 ) (15,699 ) Other non-operating income 1 - Impairment of intangible asset - (1,315 ) Adjusted EBITDA $ 52,466 $ 33,848 36 Table of Contents Results of Operations Consolidated 2022 Compared to 2021: 2021 Compared to 2020: Change Change (Dollars in thousands) 2022 2021 $ % 2021 2020 $ % Sales $ 396,014 $ 321,386 $ 74,628 23.2 % $ 321,386 $ 204,505 $ 116,881 57.2 % Volume/product mix effect $ (30,301 ) (9.4 %) $ (21,288 ) (10.4 %) Price effect $ 104,929 32.6 % $ 138,169 67.6 % Gross profit $ 28,993 $ 23,537 $ 5,456 23.2 % $ 23,537 $ 31,307 $ (7,770 ) (24.8 %) Operating expense $ 11,447 $ 10,639 $ 808 7.6 % $ 10,639 $ 8,968 $ 1,671 18.6 % Other expense (income) $ 3,808 $ (3,032 ) $ 6,840 NA $ (3,032 ) $ (9,439 ) $ 6,407 (67.9 %) Pretax income $ 13,738 $ 15,930 $ (2,192 ) (13.8 %) $ 15,930 $ 31,778 $ (15,848 ) (49.9 %) Income tax benefit $ (1,473 ) $ (10,325 ) $ 8,852 (85.7 %) $ (10,325 ) $ (14,786 ) $ 4,461 (30.2 %) Net income $ 15,211 $ 26,255 $ (11,044 ) (42.1 %) $ 26,255 $ 46,564 $ (20,309 ) (43.6 %) 2022 Compared to 2021 Consolidated sales revenue increased 23.2% or $74,628 in 2022 compared to 2021 primarily from higher average sales prices in the biofuel segment and, to a lesser extent, in the chemical segment.
Biggest changeRealized gains and losses are included in Adjusted EBITDA in both 2022 and 2023. 36 Table of Contents Results of Operations Consolidated 2023 Compared to 2022: 2022 Compared to 2021: Change Change (Dollars in thousands) 2023 2022 $% 2022 2021 $% Sales $ 368,250 $ 396,014 $ (27,764 ) (7.0 )% $ 396,014 $ 321,386 $ 74,628 23.2 % Volume/product mix effect $ 45,350 11.5 % $ (30,301 ) (9.4 )% Price effect $ (73,114 ) (18.5 )% $ 104,929 32.6 % Gross profit $ 40,979 $ 28,993 $ 11,986 41.3 % $ 28,993 $ 23,537 $ 5,456 23.2 % Operating expense $ 13,611 $ 11,447 $ 2,164 18.9 % $ 11,447 $ 10,639 $ 808 7.6 % Other (income) expense $ (10,015 ) $ 3,808 $ (13,823 ) NA $ 3,808 $ (3,032 ) $ 6,840 NA Pretax income $ 37,383 $ 13,738 $ 23,645 172.1 % $ 13,738 $ 15,930 $ (2,192 ) (13.8 )% Income tax provision (benefit) $ 1 $ (1,473 ) $ 1,474 NA $ (1,473 ) $ (10,325 ) $ 8,852 (85.7 )% Net income $ 37,382 $ 15,211 $ 22,171 145.8 % $ 15,211 $ 26,255 $ (11,044 ) (42.1 )% 2023 Compared to 2022 Consolidated sales revenue decreased 7.0% or $27,764 in 2023 compared to 2022 primarily from lower average sales prices in the biofuel segment ($71,198) and, to a lesser extent, in the chemical segment ($1,916).
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.
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 in that: (i) unlike our custom manufacturing products, biodiesel is a commodity with a large potential customer base; (ii) we believe that we could readily sell our biodiesel to other customers as potential demand from other customers for biodiesel exceeds our production capacity; (iii) our sales to this customer are not under fixed terms and the customer has no fixed obligation to purchase any minimum quantities except as stipulated by short term purchase orders; and (iv) the prices we receive from this customer are based upon then-market rates, as would be the case with sales of this commodity to other customers.
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 in that: (i) unlike our custom manufacturing products, biodiesel is a commodity with a large potential customer base; (ii) we believe that we could readily sell our biodiesel to other customers as potential demand from other customers for biodiesel exceeds our production capacity; (iii) our sales to this customer are not under fixed terms and the customer has no fixed obligation to purchase any minimum quantities except as stipulated by short term purchase orders; and (iv) the prices we receive from this customer are based upon then-market rates, as would be the case with sales of this commodity to other customers.
Consolidated Leverage Ratio Adjusted SOFR Rate Loans and Letter of Credit Fee Base Rate Loans Commitment Fee 1.00% 0.00% 0.15% ≥ 1.00:1.0 And 1.25% 0.25% 0.15% ≥ 1.50:1.0 And 1.50% 0.50% 0.20% ≥ 2.00:1.0 And 1.75% 0.75% 0.20% ≥ 2.50:1.0 2.00% 1.00% 0.25% Certain of our subsidiaries have entered into guarantees of payment on behalf of the Company for amounts outstanding under the Credit Facility.
Adjusted SOFR Rate Loans Consolidated Leverage Ratio and Letter of Credit Fee Base Rate Loans Commitment Fee 1.00 % 0.00 % 0.15 % ≥ 1.00:1.0 And 1.25 % 0.25 % 0.15 % ≥ 1.50:1.0 And 1.50 % 0.50 % 0.20 % ≥ 2.00:1.0 And 1.75 % 0.75 % 0.20 % ≥ 2.50:1.0 2.00 % 1.00 % 0.25 % Certain of our subsidiaries have entered into guarantees of payment on behalf of the Company for amounts outstanding under the Credit Facility.
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, while isolating the effects of depreciation and amortization, which may vary among our operating segments without any correlation to their underlying operating performance, and of 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.
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, while isolating the effects of depreciation and amortization, which may vary among our operating segments without any correlation to their underlying operating performance, and of non-cash stock-based compensation expense, which is a non-cash expense that varies widely among similar companies, and unrealized 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.
SSIPA/LiSIPA revenues are generated from a diverse customer base of nylon fiber manufacturers and other customers that produce condensation polymers. Contract sales are, in certain instances, indexed to key raw materials for inflation; otherwise, there is no pricing mechanism or specific protection against raw material or conversion cost changes.
SSIPA/LiSIPA revenues are generated from a diverse customer base of nylon and polyester fiber manufacturers and other customers that produce condensation polymers. Contract sales are, in certain instances, indexed to key raw materials for inflation; otherwise, there is no pricing mechanism or specific protection against raw material or conversion cost changes.
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.
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, unrealized gains or losses on derivative instruments, and other non-operating income or expenses.
Some, but not all, of these products have pricing mechanisms and/or protections against raw material or conversion cost changes. Performance chemicals consist of specialty chemicals that are manufactured to general market-determined specifications and are sold to a broad customer base.
Some, but not all, of these products have pricing mechanisms and/or protections against raw material, energy, or conversion cost changes. Performance chemicals consist of specialty chemicals that are manufactured to general market-determined specifications and are sold to a broad customer base.
Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for (benefit from) income taxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the year.
Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for (benefit from) income taxes represent income taxes paid or payable for the current year plus the change in deferred taxes during the year.
Historically, we finance capital requirements for our business with cash flows from operations and have not had the need to incur bank indebtedness to finance any of our operations during the periods discussed herein. 43 Table of Contents Credit Facility 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.
Historically, we finance capital requirements for our business with cash flows from operations and have not had the need to incur bank indebtedness to finance any of our operations during the periods discussed herein. 42 Table of Contents Credit Facility 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.
Performance chemicals revenue (comprised of multi-customer products which are sold based on specification) was $22,156 in 2022, an increase of 31.4% or $5,289 from 2021. This increase resulted from higher selling prices of our glycerin products partially offset by lower volumes of polymer modifiers. Gross profit for the chemicals segment increased 83.6% or $11,675 in 2022 compared with 2021.
Performance chemicals revenue (comprised of multi-customer products which were sold based on specification) was $22,156 in 2022, an increase of 31.4% or $5,289 from 2021. This increase resulted from higher selling prices of our glycerin products partially offset by lower volumes of polymer modifiers. Gross profit for the chemicals segment increased 83.6% or $11,675 in 2022 compared with 2021.
Depreciation is provided for using the straight-line method over the associated asset’s estimated useful lives. 41 Table of Contents Revenue Recognition We recognize revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers , when performance obligations of the customer contract are satisfied. We sell to customers through master sales agreements or standalone purchase orders.
Depreciation is provided for using the straight-line method over the associated asset’s estimated useful lives. 40 Table of Contents Revenue Recognition We recognize revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers , when performance obligations of the customer contract are satisfied. We sell to customers through master sales agreements or standalone purchase orders.
Income tax benefit The income tax benefit in 2022 was $1,473 or an effective tax rate of (10.7%) as compared to a benefit in 2021 of $10,325 or an effective tax rate of (64.8%).
Income tax benefit (provision) The income tax benefit in 2022 was $1,473 or an effective tax rate of (10.7%) as compared to a benefit in 2021 of $10,325 or an effective tax rate of (64.8%).
The discussion of results of operations that follows is based on revenue and expenses in total and for individual product lines and does not differentiate related party transactions. 34 Table of Contents Fiscal Year Ended December 31, 2022 Compared to Fiscal Year Ended December 31, 2021 Set forth below is a summary of certain financial information for the periods indicated.
The discussion of results of operations that follows is based on revenue and expenses in total and for individual product lines and does not differentiate related party transactions. 34 Table of Contents Fiscal Year Ended December 31, 2023 Compared to Fiscal Year Ended December 31, 2022 Set forth below is a summary of certain financial information for the periods indicated.
These hedging transactions are recognized in earnings and do not qualify as a hedge accounting treatment on our consolidated balance sheets at December 31, 2022 or 2021, as they do not meet the definition of a hedge instrument as defined under GAAP. The purchase of biofuels feedstock generally involves two components: basis and price.
These hedging transactions are recognized in earnings and do not qualify as a hedge accounting treatment on our consolidated balance sheets at December 31, 2023 or 2022, as they do not meet the definition of a hedge instrument as defined under GAAP. The purchase of biofuels feedstock generally involves two components: basis and price.
We are liable for these asset retirement obligations and environmental contingencies only in certain events, primarily the closure of our Batesville, Arkansas facility. As such, we do not expect a payment related to these liabilities in the foreseeable future and therefore we have excluded this amount from the table above. 45 Table of Contents
We are liable for these asset retirement obligations and environmental contingencies only in certain events, primarily the closure of our Batesville, Arkansas facility. As such, we do not expect a payment related to these liabilities in the foreseeable future and therefore we have excluded this amount from the table above. 44 Table of Contents
We will be permitted to use net proceeds of any borrowings under the Credit Facility for working capital and other general corporate purposes. No borrowings were made under the Credit Agreement or the Prior Credit Agreement as of December 31, 2022 and 2021. See Note 13 of the consolidated financial statements for additional information regarding our Credit Agreement.
We will be permitted to use net proceeds of any borrowings under the Credit Facility for working capital and other general corporate purposes. No borrowings were made under the Credit Agreement or the Prior Credit Agreement as of December 31, 2023 and 2022. See Note 13 of the consolidated financial statements for additional information regarding our Credit Agreement.
Bill-and-hold transactions for 2022 and 2021 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.
Bill-and-hold transactions for 2023 and 2022 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.
Liquidity and Capital Resources Our net cash provided by (used in) operating activities, investing activities, and financing activities for the years ended December 31, 2022, 2021, and 2020 are set forth in the following table.
Liquidity and Capital Resources Our net cash provided by (used in) operating activities, investing activities, and financing activities for the years ended December 31, 2023, 2022 and 2021 are set forth in the following table.
The Company’s effective tax rates for the years 2022 and 2021 reflect the positive effect of certain tax credits and incentives, the most significant of which are the BTC and the Small Agri-biodiesel Producer Tax Credit.
The Company’s effective tax rates for the years 2023 and 2022 reflect the positive effect of certain tax credits and incentives, the most significant of which are the BTC and the Small Agri-biodiesel Producer Tax Credit.
We have the capability to process multiple types of feedstocks including vegetable oils, animal fats, and separated food waste oils. We can receive feedstock by rail or truck, and we have substantial storage capacity to acquire feedstock at advantaged prices when market conditions permit. Our annual biodiesel production capacity is in excess of 58 million gallons per year.
We have the capability to process multiple types of feedstocks including vegetable oils, animal fats, and separated food waste oils. We can receive feedstock by rail or truck, and we have substantial storage capacity to acquire feedstock at advantaged prices when market conditions permit. Our annual biodiesel production capacity is 59 million gallons per year.
In years in which the Company has experienced objective negative evidence in the form of three cumulative years of tax losses, the Company no longer uses taxable income projections to overcome the presumption of losses and deferred tax asset valuations are computed taking into account tax planning strategies and the reversing net deferred tax liability as a source of income.
In years in which the Company has experienced objective negative evidence in the form of three cumulative years of tax losses, the Company no longer uses taxable income projections to overcome the presumption of losses and deferred tax asset valuations are computed taking into account tax planning strategies and the reversing net deferred tax liability from temporary differences as sources of income.
The Company’s effective tax rates for the years 2021 and 2020 reflect the positive effect of certain tax credits and incentives, the most significant of which are the BTC and the Small Agri-biodiesel Producer Tax Credit.
The Company’s effective tax rates for the years 2022 and 2021 reflect the positive effect of certain tax credits and incentives, the most significant of which was the BTC and the Small Agri-biodiesel Producer Tax Credit.
There currently is uncertainty as to whether we will produce biodiesel in the future. This uncertainty results from changes in feedstock prices relative to biodiesel prices and the lack of permanency of government mandates including the blenders’ tax credit, the small producer’s tax credit, the renewable fuels program, and the California low carbon fuel program credits.
There currently is uncertainty as to whether we will produce biodiesel in the future. This uncertainty results from changes in feedstock prices relative to biodiesel prices and the lack of permanency of government mandates including the BTC, the small producer’s tax credit, the CFPC (effective January 1, 2025), the renewable fuels program, and the California low carbon fuel program credits.
Dividends In 2022, we paid regular cash dividends aggregating $0.24 per share on our common stock with record dates and payment dates as previously discussed. The regular cash dividends totaled $10,503. In 2021, we paid regular cash dividends aggregating $0.24 per share on our common stock with record dates and payment dates as previously discussed.
In 2022, we paid regular cash dividends aggregating $0.24 per share on our common stock with record dates and payment dates as previously discussed. The regular cash dividends declared in 2022 totaled $21,006; $10,503 paid in 2022 and $10,503 paid in 2023.
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. Sales revenue under bill-and-hold arrangements were $36,805, $34,655, and $32,779 for the years ended December 31, 2022, 2021, and 2020, respectively.
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. Sales revenue under bill-and-hold arrangements were $43,766, $36,805, and $34,695 for the years ended December 31, 2023, 2022 and 2021, respectively.
At December 31, 2022 and 2021, $4,473 and $3,154, respectively, was included in revenue for products that had not shipped. The latter amounts do not include Contract Assets of $775 and $362 that have not been billed nor shipped at December 31, 2022 and 2021, respectively.
At December 31, 2023 and 2022, $4,317 and $4,473, respectively, was included in revenue for products that had not shipped. The latter amounts do not include Contract Assets of $734 and $775 that have not been billed nor shipped at December 31, 2023 and 2022, respectively.
The fair value of these preferred stock, trust preferred securities, and other equity instruments, including accrued dividends and interest, totaled $37,126 and $47,190 as of December 31, 2022 and 2021, respectively. The unrealized losses on equity securities were $8,297 and $904 for December 31, 2022 and 2021, respectively.
The fair value of these preferred stock, trust preferred securities, and other equity instruments, including accrued dividends and interest, totaled $0 and $37,126 as of December 31, 2023 and 2022, respectively. The unrealized losses on equity securities were $0 and $8,297 as of December 31, 2023 and 2022, respectively.
Major products in the custom chemicals group include: (i) consumer products (cosmetics and personal care products, specialty polymers, and specialty products used in the fuels industry) ; (ii) chlorinated polyolefin adhesion promoters and antioxidant precursors for a customer; and (iii) a biocide intermediate for another customer.
Major products in the custom chemicals group include: (i) consumer products (cosmetics and personal care products, specialty polymers, and specialty products used in the fuels industry); (ii) chlorinated polyolefin adhesion promoters and antioxidant precursors for a customer; and (iii) a biocide intermediate. Pricing for the other custom manufacturing products is negotiated directly with the customer.
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. 35 Table of Contents The following table reconciles adjusted EBITDA with net income, the most directly comparable GAAP financial measure.
We include the unrealized gains and losses on the derivative instruments as an adjustment as we believe it provides a relevant indicator of the underlying performance of our business in a given period. 35 Table of Contents The following table reconciles adjusted EBITDA with net income, the most directly comparable GAAP financial measure.
In 2020, we paid regular cash dividends aggregating $0.24 per share on our common stock with record dates and payment dates as previously discussed. The regular cash dividends totaled $10,498. On March 23, 2020, we also declared a special cash dividend of $3.00 per share on our common stock.
In 2021, we paid regular cash dividends aggregating $0.24 per share on our common stock with record dates and payment dates as previously discussed. The regular cash dividends totaled $10,498. On May 10, 2021, we also declared a special cash dividend of $2.50 per share on our common stock.
All Foreign Period United States Countries Total Year ended December 31, 2022 $ 394,671 $ 1,343 $ 396,014 Year ended December 31, 2021 $ 320,148 $ 1,238 $ 321,386 Year ended December 31, 2020 $ 203,365 $ 1,140 $ 204,505 The majority of our expenses are cost of goods sold.
All Foreign Period United States Countries Total Year ended December 31, 2023 $ 367,368 $ 882 $ 368,250 Year ended December 31, 2022 $ 394,671 $ 1,343 $ 396,014 Year ended December 31, 2021 $ 320,148 $ 1,238 $ 321,386 The majority of our expenses are cost of goods sold.
Contractual Obligations Purchase obligations include the purchase of biodiesel feedstock and various other infrastructure and capital repairs as follows: Less than 1 year $ 59,111 1-3 years 785 4-5 years 177 More than 5 years - Total $ 60,073 A component of other noncurrent liabilities is a reserve for asset retirement obligations and environmental contingencies of $1,396 at December 31, 2022.
Contractual Obligations Purchase obligations include the purchase of biodiesel feedstock and various other infrastructure and capital repairs as follows: Less than 1 year $ 45,389 1-3 years 43 4-5 years - More than 5 years - Total $ 45,432 A component of other noncurrent liabilities is a reserve for asset retirement obligations and environmental contingencies of $1,431 at December 31, 2023.
Partially improving gross profit was (i) the change in adjustments in the carrying value of our inventory as determined utilizing the last-in, first-out (“LIFO”) method of inventory accounting reduced gross profit $9,921 in 2021 as compared to $5,794 in 2022, (ii) the liquidation effect of exiting the pipeline business, which increased profits $1,851 in 2022, and (iii) 2021 gross profit was unfavorably impacted by higher natural gas prices incurred from Winter Storm Uri. 2021 Compared to 2020 Biofuels sales revenue increased 102.5% or $128,517 in 2021 compared to 2020, primarily from increased selling prices of biodiesel and biodiesel blends, inclusive of separated RIN sales.
Partially improving gross profit was (i) the change in adjustments in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting reduced gross profit $9,921 in 2021 as compared to $5,794 in 2022, (ii) the liquidation effect of exiting the pipeline business, which increased profits $1,851 in 2022, and (iii) 2021 gross profit was unfavorably impacted by higher natural gas prices incurred from Winter Storm Uri.
The Company’s unrecognized tax benefit totaled $0 at December 31, 2021 and 2020. 38 Table of Contents Chemicals Segment 2022 Compared to 2021: 2021 Compared to 2020: Change Change (Dollars in thousands) 2022 2021 $ % 2021 2020 $ % Sales $ 80,893 $ 67,542 $ 13,351 19.8 % $ 67,542 $ 79,178 $ (11,636 ) (14.7 %) Volume/product mix effect (1,137 ) (1.7 )% (14,285 ) (18.0 %) Price effect 14,488 21.5 % 2,649 3.3 % Gross profit $ 25,645 $ 13,970 $ 11,675 83.6 % $ 13,970 $ 25,518 $ (11,548 ) (45.3 %) 2022 Compared to 2021 Chemical sales revenue increased 19.8% or $13,351 in 2022 compared with 2021.
The Company’s unrecognized tax benefit totaled $0 at December 31, 2022 and 2021. 38 Table of Contents Chemicals Segment 2023 Compared to 2022: 2022 Compared to 2021: Change Change (Dollars in thousands) 2023 2022 $% 2022 2021 $% Sales $ 79,333 $ 80,893 $ (1,560 ) (1.9 )% $ 80,893 $ 67,542 $ 13,351 19.8 % Volume/product mix effect 356 0.4 % (1,137 ) (1.7 )% Price effect (1,916 ) (2.4 )% 14,488 21.5 % Gross profit $ 29,936 $ 25,645 $ 4,291 16.7 % $ 25,645 $ 13,970 $ 11,675 83.6 % 2023 Compared to 2022 Chemical sales revenue decreased 1.9% or $1,560 in 2023 compared with 2022.
While many of our chemicals are used to manufacture products that are shipped, further processed, and/or consumed throughout the world, the chemical products, with limited exceptions, generally leave the United States only after we have transferred ownership.
Most of our sales are FOB the Batesville plant, although some transfer points are in other states or foreign ports. While many of our chemicals are used to manufacture products that are shipped, further processed, and/or consumed throughout the world, the chemical products, with limited exceptions, generally leave the United States only after we have transferred ownership.
We also hold certain trust preferred securities. We classify these investments as current assets in the accompanying consolidated balance sheets and designate them as being “available-for-sale”. Accordingly, they are recorded at fair value with the unrealized gains and losses, net of taxes, reported as a component of stockholders’ equity.
We classified these investments as current assets in the accompanying consolidated balance sheets and designate them as being “available-for-sale”. Accordingly, they were recorded at fair value with the unrealized gains and losses, net of taxes, reported as a component of stockholders’ equity. We exited our position in these marketable securities during 2023.
This activity was captured on our consolidated balance sheets at December 31, 2022 and 2021. Second, we hedge our biofuels feedstock through the execution of purchase contracts and supply agreements with certain vendors which meet the normal purchase and normal sales exception of ASC 815 Derivatives and Hedging .
Second, we hedge our biofuels feedstock through the execution of purchase contracts and supply agreements with certain vendors which meet the normal purchase and normal sales exception of ASC 815 Derivatives and Hedging .
Increased capital expenditures decreased cash from investing activities by $3,322. Cash provided by investing activities was $14,993 in 2021 compared to $474 in 2020 for a net increase in cash from investing activities of $14,519.
Increased capital expenditures decreased cash from investing activities by $1,244. Cash used by investing activities was $3,829 in 2022 compared to cash provided by investing activities of $14,993 in 2021 for a net decrease in cash of $18,822.
Other expense increased $6,840 from 2022 primarily from realized and unrealized losses on equity securities with a loss of $8,546 in 2022 as compared to a loss of $70 in 2021 (see Note 7 of our consolidated financial statements for further details).
This increase was primarily the result of increased compensation expense. Other expense increased $6,840 from 2022 primarily from realized and unrealized losses on equity securities with a loss of $8,546 in 2022 as compared to a loss of $70 in 2021.
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.
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.
Investing Activities Cash used by investing activities was $3,829 in 2022 compared to cash provided by investing activities of $14,993 in 2021 for a net decrease in cash of $18,822. This decrease was primarily attributable to sales of marketable securities in 2022 of $1,292 compared to the net sales of marketable securities in 2021 of $17,106.
Investing Activities Cash provided by investing activities was $30,336 in 2023 compared to cash used by investing activities of $3,829 in 2022 for a net increase in cash of $34,165. This increase was primarily attributable to the sale of marketable securities in 2023 of $37,701 compared to sales of marketable securities in 2022 of $1,292.
(Dollars in thousands) 2022 2021 2020 Net cash provided by operating activities $ 52,451 $ 44,084 $ 96,403 Net cash (used) provided by investing activities $ (3,829 ) $ 14,993 $ 474 Net cash used in financing activities $ (10,503 ) $ (119,678 ) $ (142,086 ) 42 Table of Contents Operating Activities Cash provided by operating activities increased in 2022 to $52,451 from $44,084 in 2021, a net increase of $8,367.
(Dollars in thousands) 2023 2022 2021 Net cash provided by operating activities $ 23,985 $ 52,451 $ 44,084 Net cash provided by (used in) investing activities $ 30,336 $ (3,829 ) $ 14,993 Net cash used in financing activities $ (10,517 ) $ (10,503 ) $ (119,678 ) 41 Table of Contents Operating Activities Cash provided by operating activities decreased in 2023 to $23,985 from $52,451 in 2022, a net decrease of $28,466.
Financing Activities Cash used in financing activities decreased to $10,503 in 2022, from $119,678 in 2021, a net increase of $109,175. This increase resulted from the payment of special cash dividends in 2021 of $109,408 compared to $0 in 2022. Cash used in financing activities decreased from $142,086 in 2020 to $119,678 in 2021, a net decrease of $22,408.
Cash used in financing activities decreased to $10,503 in 2022, from $119,678 in 2021, a net decrease of $109,175. This decrease resulted from the payment of special cash dividends in 2021 of $109,408 compared to $0 in 2022. Capital Expenditure Commitments We had $560 of infrastructure capital repair projects that generated commitments as of December 31, 2023.
The Company’s unrecognized tax benefit totaled $0 at December 31, 2022 and 2021. 37 Table of Contents 2021 Compared to 2020 Consolidated sales revenue increased 57.2% or $116,881 in 2021 compared to 2020. This increase primarily resulted from higher average sales prices in the biofuel segment reduced in part by lower sales volumes in both the biofuels and chemicals segment.
The Company’s unrecognized tax benefit totaled $0 at December 31, 2023 and 2022. 37 Table of Contents 2022 Compared to 2021 Consolidated sales revenue increased 23.2% or $74,628 in 2022 compared to 2021 primarily from higher average sales prices in the biofuel segment and, to a lesser extent, in the chemical segment.
The Company’s effective tax rate for 2022 includes an expense of $7,392 or 53.8% from the recording of a valuation allowance against its deferred tax assets. The Company evaluates its deferred tax assets and records a valuation allowance to reduce these assets to the amount that is more likely than not to be realized.
The Company evaluates its deferred tax assets and records a valuation allowance to reduce these assets to the amount that is more likely than not to be realized.
Partially offsetting this improvement in gross profit was the unfavorable change in the realized and unrealized activity of derivative instruments which resulted in a reduction in gross profit of $24,360 in 2022, as compared to a reduction in gross profit in 2021 by $10,377.
Partially offsetting this improvement in gross profit was the unfavorable change in the realized and unrealized activity of derivative instruments which resulted in a reduction in gross profit of $10,500 in 2022. The comparative unfavorable change was primarily from the unprecedented volatility in the NYMEX heating oil futures market. Operating expenses increased $808 in 2022 compared to 2021.
Performance chemicals revenue (comprised of multi-customer products which are sold based on specification) was $16,867 in 2021, an increase of 10.4% or $1,583 from 2020. This increase resulted from higher selling prices of our glycerin products. Gross profit for the chemicals segment decreased 45.3% or $11,548 in 2021 compared with 2020.
Performance chemicals revenue (comprised of multi-customer products which are sold based on specification) was $15,047 in 2023, a decrease of 32.1% or $7,109 from 2022. This decrease resulted from lower selling prices of our glycerin products partially offset by higher volumes. Gross profit for the chemicals segment increased 16.7% or $4,291 in 2023 compared with 2022.
Lastly, we maintain depository accounts such as checking accounts, money market accounts, and other similar accounts at selected financial institutions. 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.
Lastly, we maintain depository accounts such as checking accounts, money market accounts, and other similar accounts at selected financial institutions. As of December 31, 2023, approximately 55% of these deposits were insured by the Federal Deposit Insurance Corporation. Off-Balance Sheet Arrangements We engage in two types of hedging transactions.
In addition, we deliver blended product to a small group of customers within our region. We also sell D4 RINs from time to time. At December 31, 2022, we had 1.5 million D4 RINs in inventory. Most of our sales are FOB the Batesville plant, although some transfer points are in other states or foreign ports.
In addition, we deliver blended product to a small group of customers within our region. We also sell D4 and D6 RINs from time to time. At December 31, 2023 we held 4.3 million RINs with a market value of $6,567 and at December 31, 2022, we held 1.5 million RINs in inventory with a market value of $2,557.
This decrease resulted primarily from: (i) the loss of two custom chemical products we no longer sell; (ii) the impact of higher natural gas prices incurred during Winter Storm Uri in February 2021; and (iii) increased material cost driven by inflation and the supply chain disruption caused by the COVID-19 pandemic and the responses to it. 39 Table of Contents Biofuel Segment 2022 Compared to 2021: 2021 Compared to 2020: Change Change (Dollars in thousands) 2022 2021 $ % 2021 2020 $ % Sales $ 315,121 $ 253,844 $ 61,277 24.1 % $ 253,844 $ 125,327 $ 128,517 102.5 % Volume/product mix effect (29,164 ) (11.5 %) (7,003 ) (5.6 %) Price effect 90,441 35.6 % 135,520 108.1 % Gross profit $ 3,348 $ 9,567 $ (6,219 ) (65.0 %) $ 9,567 $ 5,789 $ 3,778 65.3 % 2022 Compared to 2021 Biofuels sales revenue increased 24.1% or $61,277 in 2022 compared to 2021, primarily from increased selling prices of biodiesel and biodiesel blends, inclusive of separated RIN sales.
In addition, the prior year gross profit was negatively impacted from higher natural gas prices incurred from Winter Storm Uri. 39 Table of Contents Biofuel Segment 2023 Compared to 2022: 2022 Compared to 2021: Change Change (Dollars in thousands) 2023 2022 $% 2022 2021 $% Sales $ 288,917 $ 315,121 $ (26,204 ) (8.3 )% $ 315,121 $ 253,844 $ 61,277 24.1 % Volume/product mix effect 44,994 14.3 % (29,164 ) (11.5 )% Price effect (71,198 ) (22.6 )% 90,441 35.6 % Gross profit $ 11,043 $ 3,348 $ 7,695 229.8 % $ 3,348 $ 9,567 $ (6,219 ) (65.0 )% 2023 Compared to 2022 Biofuels sales revenue decreased 8.3% or $26,204 in 2023 compared to 2022, primarily from decreased selling prices of biodiesel and biodiesel blends, inclusive of a decline in separated RIN sale prices.
Third parties have not placed significant restrictions on our working capital management decisions. A significant portion of these funds were held in cash or cash equivalents at multiple financial institutions. In 2022 and 2021, we also had investments in certain preferred stock and other equity instruments measured at fair value and changes in fair value recognized in net income.
We intend to retain the remaining cash to fund infrastructure and capacity expansion at our Batesville plant or to otherwise fund our future growth. Third parties have not placed significant restrictions on our working capital management decisions. A significant portion of these funds were held in cash or cash equivalents at multiple financial institutions.
This increase was primarily attributable to a $12,376 increase in the net sales of marketable securities in 2021 compared to the net sales of marketable securities in 2020. Such net sales totaled $17,106 in 2021, as compared to total net sales of $4,730 in 2020. Reduced capital expenditures increased cash from investing activities by $3,008.
This decrease was primarily attributable to sales of marketable securities in 2022 of $1,292 compared to the net sales of marketable securities in 2021 of $17,106. Increased capital expenditures decreased cash from investing activities by $3,322. Financing Activities Cash used in financing activities was $10,517 in 2023, primarily from the payment of dividends of $10,503.
Based on technical guidance from the Internal Revenue Service, the Company excludes the portion of the BTC not used to satisfy excise tax liabilities from income. See Note 3 for a discussion of the pretax earnings impact of the BTC.
Based on technical guidance from the Internal Revenue Service, the Company excludes the portion of the BTC not used to satisfy excise tax liabilities from income. The Company’s effective tax rate for 2022 includes an expense of $7,392 or 53.8% from the recording of a valuation allowance against its deferred tax assets.
Partially reducing gross profit in 2021 was the change in the realized and unrealized activity of derivative instruments in comparison to the prior year with a loss of $10,377 as compared to a gain of $4,379 in 2020. 40 Table of Contents Critical Accounting Policies and Estimates Useful Lives of Property, Plant, and Equipment We primarily base our estimate of an asset’s useful life on our experience with other similar assets.
Critical Accounting Policies and Estimates Useful Lives of Property, Plant, and Equipment We primarily base our estimate of an asset’s useful life on our experience with other similar assets.
The regular cash dividends totaled $10,498. On May 10, 2021, we also declared a special cash dividend of $2.50 per share on our common stock. This special cash dividend paid on June 4, 2021, amounted to $109,408. Total cash dividends paid in 2021 were $119,906.
This special cash dividend paid on June 4, 2021, amounted to $109,408. Total cash dividends paid in 2021 were $119,906. 43 Table of Contents Capital Management As a result of positive operating results, we accumulated excess working capital.
This increase resulted primarily from stronger margins and higher sales volumes in products sold into the oil and gas industry and glycerin markets. In addition, the prior year gross profit was negatively impacted from higher natural gas prices incurred from Winter Storm Uri. 2021 Compared to 2020 Chemical sales revenue decreased 14.7% or $11,636 in 2021 compared with 2020.
This increase resulted primarily from stronger margins and higher sales volumes in products sold into the oil and gas industry and glycerin markets.
This special cash dividend paid on April 17, 2020, amounted to $131,230. Total cash dividends paid in 2020 were $141,728. On December 3, 2020, we declared normal quarterly dividends of $0.06 per share on our common stock with record dates and payment dates as previously discussed.
Dividends In 2023, we paid regular cash dividends aggregating $0.24 per share on our common stock with record dates and payment dates as previously discussed. The regular cash dividends declared in 2023 totaled $10,503 to be paid in 2024.
Partially improving other income was the absence of realized and unrealized losses on equity securities in 2021 as compared to 2020 (see Note 7 of our consolidated financial statements).
As a result, interest and dividend income increased $4,707 in 2023 as compared to 2022. The net realized gain on the sale of marketable securities was $575 in 2023 as compared to an unrealized loss of $8,546 in 2022 (see Note 7 of our consolidated financial statements for further details).
Cash provided by operating activities decreased in 2021 to $44,084 from $96,403 in 2020, a net decrease of $52,319. This decrease was attributed to the change in accounts receivable, including accounts receivable - related parties, of $98,602. The BTC increased cash from accounts receivable in 2020 by $97,295. Additionally, net income decreased in 2021 compared to 2020 by $20,309.
Partially offsetting the decrease in cash from operations was the increase of $22,137 in net income in 2023 compared to 2022. Cash provided by operating activities increased in 2022 to $52,451 from $44,084 in 2021, a net increase of $8,367.
Removed
The custom chemicals group historically included a laundry detergent additive manufactured exclusively for a customer for use in a household detergent. Revenues generated from the laundry detergent additive were based on a supply agreement with the customer which ended in 2020. No further sales of such products are expected.
Added
(Dollars in thousands other than per share amounts) Year Year Ended Ended December 31, December 31, Dollar % 2023 2022* Change Change Revenue $ 368,250 $ 396,014 $ (27,764 ) (7 )% Income from operations $ 27,368 $ 17,546 $ 9,822 56 % Net income $ 37,382 $ 15,211 $ 22,171 146 % Earnings per common share: Basic $ 0.85 $ 0.35 $ 0.50 143 % Diluted $ 0.85 $ 0.35 $ 0.50 143 % Adjusted EBITDA* $ 34,983 $ 27,763 $ 7,220 26 % * Adjusted EBITDA for 2022 has been restated to be consistent with 2023 reporting.
Removed
In addition, our supply agreement with a major multi-national life sciences company to manufacture an intermediate for a herbicide was not extended past 2020. No further sales are anticipated. Pricing for the other custom manufacturing products is negotiated directly with the customer.
Added
Adjusted EBITDA in both years excludes the impact from unrealized gains or losses on derivatives. Realized gains and losses are included in Adjusted EBITDA in both 2022 and 2023. We use adjusted EBITDA as a key operating metric to measure both performance and liquidity. Adjusted EBITDA is a non-GAAP financial measure.
Removed
(Dollars in thousands other than per share amounts) Twelve Twelve Months Months Ended Ended December December Dollar % 31, 2022 31, 2021 Change Change Revenue $ 396,014 $ 321,386 $ 74,628 23 % Income from operations $ 17,546 $ 12,898 $ 4,648 36 % Net income $ 15,211 $ 26,255 $ (11,044 ) (42 %) Earnings per common share: Basic $ 0.35 $ 0.60 $ (0.25 ) (42 %) Diluted $ 0.35 $ 0.60 $ (0.25 ) (42 %) Adjusted EBITDA $ 52,466 $ 33,848 $ 18,618 55 % We use adjusted EBITDA as a key operating metric to measure both performance and liquidity.
Added
(Dollars in thousands) Years ended December 31: 2023 2022* Net income $ 37,382 $ 15,211 Depreciation 10,348 10,454 Non-cash stock-based compensation - 46 Interest and dividend income (9,577 ) (4,870 ) Non-cash interest expense and amortization of deferred financing costs 135 128 Loss on disposal of property and equipment 29 64 Unrealized gain on derivative instruments (1,878 ) (343 ) (Gain) loss on marketable securities (575 ) 8,546 Other income (882 ) - Income tax provision (benefit) 1 (1,473 ) Adjusted EBITDA* $ 34,983 $ 27,763 The following table reconciles adjusted EBITDA with cash flows from operations, the most directly comparable GAAP liquidity financial measure: (Dollars in thousands) Years ended December 31: 2023 2022* Net cash provided by operating activities $ 23,985 $ 52,451 Benefit for deferred income taxes - 1,822 Interest and dividend income (9,577 ) (4,870 ) Income tax provision (benefit) 1 (1,473 ) Changes in operating assets and liabilities, net 21,456 (20,168 ) Other non-operating (income) expense (882 ) 1 Adjusted EBITDA* $ 34,983 $ 27,763 * Adjusted EBITDA for 2022 has been restated to be consistent with 2023 reporting.
Removed
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.
Added
Adjusted EBITDA in both years excludes the impact from unrealized gains or losses on derivatives.
Removed
The comparative unfavorable change was primarily from the unprecedented volatility in the NYMEX heating oil futures market. Operating expenses increased $808 in 2022 compared to 2021. This increase was primarily the result of increased compensation expense.
Added
This decrease was partially offset by higher biodiesel sales volumes in the biofuel segment ($44,994). Gross profit increased 41.3% or $11,986 in 2023 compared to 2022.
Removed
Gross profit decreased 24.8% or $7,770 in 2021 compared to 2020. This decrease was primarily attributable to exorbitant natural gas prices incurred in February from Winter Storm Uri and the absence of two chemical contracts which expired in 2020.
Added
This comparative increase was primarily attributable to improved margins in both the biofuel and chemical segments inclusive of (i) the change in the realized activity of derivative instruments in comparison to the prior year with a gain of $694 as compared to a loss of $24,703 in the prior year; the prior year loss included an unfavorable impact of volatility in the NYMEX heating oil futures market of $10,500 and (ii) the change in the unrealized activity of derivative instruments in comparison to the prior year with a gain of $1,878 in the current year and a gain of $343 in the prior year.
Removed
Partially improving gross profit in the same comparative period was higher margins on biodiesel inclusive of the change the realized and unrealized activity of derivative instruments which resulted in a reduction in gross profit in 2021 by $10,377, as compared to an increase in gross profit of $4,379 in 2020. Operating expenses increased $1,671 in 2021 compared to 2020.
Added
Also contributing to this improved margin was the benefit from the change in adjustments in the carrying value of our inventory as determined utilizing the LIFO method of inventory accounting which increased gross profit $10,334 in 2023 and decreased gross profit $3,944 in 2022 (net of a liquidation of $1,850 from exiting the pipeline business).
Removed
This increase was primarily the result of an impairment of intangible assets in 2021 (See Note 10 of our consolidated financials for details) and higher research and development expense primarily for the benefit of GMP. Other income decreased $6,407 in 2021 primarily from non-operating income recognized in 2020 of $8,350.
Added
Operating expenses increased $2,164 in 2023 compared to 2022. This increase was primarily the result of increased compensation expense. Other income was $10,015 in 2023 as compared to other expenses of $3,808. During 2023, we exited our position in marketable securities and transferred the funds to interest earning deposits.
Removed
Income tax benefit (provision) The income tax benefit in 2021 was $10,325 or an effective tax rate of (64.8%) as compared to a benefit in 2020 of $14,786 or an effective tax rate of (46.5%). On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (Pub.L. 116-136) (“CARES Act”).
Added
Income tax provision (benefit) The income tax provision was $1 in 2023 or an effective tax rate of 0.0% as compared to a benefit in 2022 of ($1,473) or an effective tax rate of (10.7%).
Removed
The CARES Act, among other things, 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 available to offset 100% of taxable income in each of the 5 preceding taxable years unless the taxpayer elects to forego the carryback.
Added
The Company’s effective tax rate for 2023 and 2022 includes an expense of $6,821 or 18.2% and $7,392 or 53.8%, respectively, from the recording of a valuation allowance against its deferred tax assets.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+0 added−0 removed9 unchanged
Biggest change(Volumes 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 51,675 GAL 10 % $ 26,437 91.2 % Methanol 8,630 GAL 10 % $ 1,102 3.8 % Natural gas 1,330 MCF 10 % $ 913 3.1 % Electricity 103 MWH 10 % $ 598 2.1 % Sodium Methylate 10,982 LB 10 % $ 550 1.9 % Coal 33 Ton 10 % $ 374 1.3 % (a) Volume requirements and average price information are based upon volumes used and prices obtained for the twelve months ended December 31, 2022.
Biggest change(Volumes and dollars in thousands) Hypothetical Percentage Adverse Decrease Volume Change in Decrease in in Gross Item Requirements(a) Units Price Gross Profit Profit Biodiesel feedstocks 55,835 GAL 10 % $ 25,532 62.3 % Methanol 9,747 GAL 10 % $ 989 2.4 % Electricity 105 MWH 10 % $ 664 1.6 % Sodium Methylate 13,929 LB 10 % $ 653 1.6 % (a) Volume requirements and average price information are based upon volumes used and prices obtained for the year ended December 31, 2023.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 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.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 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 contractual inflationary price increases along to our customers. However, we are subject to certain market risks as described below.
We had no derivative instruments that qualified under these rules as designated accounting hedges in 2022 or 2021. 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.
We had no derivative instruments that qualified under these rules as designated accounting hedges in 2023 or 2022. 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.
Volume requirements may differ materially from these quantities in future years as our business evolves. We had no borrowings as of December 31, 2022 or 2021, and, as such, we were not exposed to interest rate risk for those years.
Volume requirements may differ materially from these quantities in future years as our business evolves. We had no borrowings as of December 31, 2023 or 2022, and, as such, we were not exposed to interest rate risk for those years.
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 in 2022.
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 in 2023.
Due to the relative insignificance of transactions denominated in a foreign currency, we consider our foreign currency risk to be immaterial. 46 Table of Contents
Due to the relative insignificance of transactions denominated in a foreign currency, we consider our foreign currency risk to be immaterial. 45 Table of Contents
As of December 31, 2022 and 2021, the fair values of our derivative instruments were in a liability position in the amount of $142 and $485, respectively.
As of December 31, 2023 and 2022, the fair values of our derivative instruments were in an asset position in the amount of $1,736 and a liability position of $142, respectively.

Other FF 10-K year-over-year comparisons