Notes
to
Consolidated
Financial
Statements
of
FutureFuel
Corp.
(Dollars
in
thousands,
except
per
share
amounts)
(Unaudited)
1
)
|
NATURE OF OPERATIONS AND BASIS OF PRESENTATION
|
Organization
FutureFuel Corp. (“FutureFuel”), through its wholly-owned subsidiary, FutureFuel Chemical Company (“FutureFuel Chemical”), owns and operates a chemical production facility located on approximately 2,200 acres of land six miles southeast of Batesville in north central Arkansas fronting the White River (the “Batesville Plant”). FutureFuel Chemical manufactures diversified chemical products, biobased products comprised of biofuels, and biobased specialty chemical products. FutureFuel Chemical
’s operations are reported in two segments: chemicals and biofuels.
The chemicals segment manufactures a diversified
portfolio of chemical products that are sold to third party customers. The majority of the revenues from the chemicals segment are derived from the custom manufacturing of specialty chemicals for specific customers.
The biofuels business segment primarily produces and sells biodiesel. FutureFuel Chemical also sells petrodiesel in blends with the company
’s biodiesel and, from time to time, with no biodiesel added. Finally, FutureFuel Chemical is a shipper of refined petroleum products on common carrier pipelines and buys and sells petroleum products to maintain an active shipper status on these pipelines.
Basis
of
Presentation
The accompanying unaudited consolidated financial statements have been prepared by FutureFuel in accordance and consistent with the accounting policies stated in FutureFuel
’s 2016 audited consolidated financial statements and should be read in conjunction with the 2016 audited consolidated financial statements of FutureFuel.
In the opinion of FutureFuel, all normal recurring adjustments necessary for a fair presentation have been included in the unaudited consolidated financial statements. The unaudited consolidated financial statements have been prepared in compliance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with instructions to Form 10-Q adopted by the Securities and Exchange Commission (“SEC”). Accordingly, the financial statements do not include all the information and footnotes required by GAAP for complete financial statements, and do include amounts that are based upon management estimates and judgments. Future actual results could differ from such current estimates. The unaudited consolidated financial statements include assets, liabilities, revenues, and expenses of FutureFuel and its wholly owned subsidiaries; namely, FutureFuel Chemical Company, FFC Grain, L.L.C., FutureFuel Warehouse Company, L.L.C., and Legacy Regional Transport, L.L.C. Intercompany transactions and balances have been eliminated in consolidation.
The carrying values of inventory were as follows as of:
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
At average cost (approximates current cost)
|
|
|
|
|
|
|
|
|
Finished goods
|
|
$
|
29,183
|
|
|
$
|
27,971
|
|
Work in process
|
|
|
1,928
|
|
|
|
1,913
|
|
Raw materials and supplies
|
|
|
25,559
|
|
|
|
25,127
|
|
|
|
|
56,670
|
|
|
|
55,011
|
|
LIFO reserve
|
|
|
(4,795
|
)
|
|
|
(2,918
|
)
|
Total inventory
|
|
$
|
51,875
|
|
|
$
|
52,093
|
|
FutureFuel recorded a lower of co
st or market ("LCM") adjustment of $955 in the three months ended March 31, 2017. This LCM adjustment was recorded as a decrease in inventory values and an increase in cost of goods sold. For the three months ended March 31, 2016, the LCM adjustment was $3,544.
4
Notes
to
Consolidated
Financial
Statements
of
FutureFuel
Corp.
(Dollars
in
thousands,
except
per
share
amounts)
(Unaudited)
3
)
|
DERIVATIVE INSTRUMENTS
|
FutureFuel is exposed to certain risks relating to its ongoing business operations. Commodity price risk is the primary risk managed by using derivative instruments. Regulated fixed price futures and option contracts are utilized to manage the price risk associated with future purchases of feedstock used in FutureFuel
’s biodiesel production along with physical feedstock and finished product inventories attributed to this process.
FutureFuel recognizes all derivative instruments as either assets or liabilities at fair value in its consolidated balance sheet. FutureFuel
’s derivative instruments do not qualify for hedge accounting under the specific guidelines of ASC 815-20-25,
Derivatives
and
Hedging
. None of the derivative instruments are designated and accounted for as hedges primarily as a result of the extensive record keeping requirements.
The fair value of FutureFuel
’s derivative instruments is determined based on the closing prices of the derivative instruments on relevant commodity exchanges at the end of an accounting period. Realized gains and losses on derivative instruments and changes in fair value of the derivative instruments are recorded in the statement of operations as a component of cost of goods sold, and amounted to a gain of $1,279 and a loss of $1,039 for the three months ended March 31, 2017 and 2016, respectively.
The volumes and carrying values of FutureFuel
’s derivative instruments were as follows at:
|
|
Asset/ (Liability)
|
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
|
|
Quantity (contracts) Long/(Short)
|
|
Fair Value
|
|
Quantity (contracts) Long/(Short)
|
|
Fair
Value
|
Regulated options, included in other current assets
|
|
|
(200
|
)
|
|
$
|
(1,462
|
)
|
|
|
-
|
|
|
$
|
-
|
|
Regulated fixed price future commitments, included in other current assets
|
|
|
23
|
|
|
$
|
2
|
|
|
|
(135
|
)
|
|
$
|
(258
|
)
|
The margin account maintained with a broker to collateralize these derivative instruments
carried an account balance of $1,982 and $758 at March 31, 2017 and December 31, 2016, respectively, and is classified as other current assets in the consolidated balance sheet. The carrying values of the margin account and of the derivative instruments are included net, in other current assets.
5
Notes
to
Consolidated
Financial
Statements
of
FutureFuel
Corp.
(Dollars
in
thousands,
except
per
share
amounts)
(Unaudited)
4
)
|
MARKETABLE SECURITIES
|
At
March 31, 2017 and December 31, 2016, FutureFuel had investments in certain preferred stock, trust preferred securities, exchange traded debt instruments, and other equity instruments. These investments are classified as current assets in the consolidated balance sheet. FutureFuel has designated these securities 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.
FutureFuel
’s marketable securities were comprised of the following at March 31, 2017 and December 31, 2016:
|
|
March 31, 2017
|
|
|
|
Adjusted Cost
|
|
|
Unrealized Gains
|
|
|
Unrealized Losses
|
|
|
Fair Value
|
|
Equity instruments
|
|
$
|
44,914
|
|
|
$
|
6,051
|
|
|
$
|
(367
|
)
|
|
$
|
50,598
|
|
Preferred stock
|
|
|
55,927
|
|
|
|
2,764
|
|
|
|
(29
|
)
|
|
|
58,662
|
|
Trust preferred securities
|
|
|
3,147
|
|
|
|
46
|
|
|
|
-
|
|
|
|
3,193
|
|
Exchange traded debt instruments
|
|
|
4,154
|
|
|
|
228
|
|
|
|
-
|
|
|
|
4,382
|
|
Total
|
|
$
|
108,142
|
|
|
$
|
9,089
|
|
|
$
|
(396
|
)
|
|
$
|
116,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Adjusted Cost
|
|
|
Unrealized Gains
|
|
|
Unrealized Losses
|
|
|
Fair Value
|
|
Equity instruments
|
|
$
|
32,667
|
|
|
$
|
5,549
|
|
|
$
|
(304
|
)
|
|
$
|
37,912
|
|
Preferred stock
|
|
|
57,105
|
|
|
|
1,196
|
|
|
|
(698
|
)
|
|
|
57,603
|
|
Trust preferred securities
|
|
|
3,147
|
|
|
|
-
|
|
|
|
(9
|
)
|
|
|
3,138
|
|
Exchange traded debt instruments
|
|
|
7,420
|
|
|
|
99
|
|
|
|
(26
|
)
|
|
|
7,493
|
|
Total
|
|
$
|
100,339
|
|
|
$
|
6,844
|
|
|
$
|
(1,037
|
)
|
|
$
|
106,146
|
|
The aggregate fair value of instruments with unrealized losses totaled $1
5,511 and $31,126 at March 31, 2017 and December 31, 2016, respectively. As of March 31, 2017 and December 31, 2016, FutureFuel had no investments in marketable securities that were in an unrealized loss position for a greater than 12-month period.
5
)
|
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
|
Accrued expenses and other current liabilities, including those associated with related parties, consisted of the following at:
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
Accrued employee liabilities
|
|
$
|
2,015
|
|
|
$
|
864
|
|
Accrued property, franchise, motor fuel and other taxes
|
|
|
1,605
|
|
|
|
1,428
|
|
Other
|
|
|
250
|
|
|
|
335
|
|
Total
|
|
$
|
3,870
|
|
|
$
|
2,627
|
|
6
Notes
to
Consolidated
Financial
Statements
of
FutureFuel
Corp.
(Dollars
in
thousands,
except
per
share
amounts)
(Unaudited)
On April 16, 2015, FutureFuel, with FutureFuel Chemical as the borrower, and certain of FutureFuel
’s other subsidiaries, as guarantors, entered into a $150,000 secured and committed credit facility with the lenders party thereto, Regions Bank as administrative agent and collateral agent, and PNC Bank, N.A., as syndication agent. On May 25, 2016, FutureFuel increased the credit facility by $15,000. The credit facility consists of a five-year revolving credit facility in a dollar amount of up to $165,000, which includes a sublimit of $30,000 for letters of credit and $15,000 for swingline loans (collectively, the “Credit Facility”).
The interest rate floats at the following margins over LIBOR or base rate based upon the leverage ratio from time to time:
Consolidated Leverage Ratio
|
|
Adjusted LIBOR Rate Loans and
Letter of Credit Fee
|
|
Base Rate Loans
|
|
Commitment Fee
|
< 1.00:1.0
|
|
|
|
|
1.25%
|
|
|
|
0.25%
|
|
|
|
0.15%
|
|
≥ 1.00:1.0
|
And
|
< 1.50:1.0
|
|
|
1.50%
|
|
|
|
0.50%
|
|
|
|
0.20%
|
|
≥ 1.50:1.0
|
And
|
< 2.00:1.0
|
|
|
1.75%
|
|
|
|
0.75%
|
|
|
|
0.25%
|
|
≥ 2.00:1.0
|
And
|
< 2.50:1.0
|
|
|
2.00%
|
|
|
|
1.00%
|
|
|
|
0.30%
|
|
≥ 2.50:1.0
|
|
|
|
|
2.25%
|
|
|
|
1.25%
|
|
|
|
0.35%
|
|
The terms of the Credit Facility contain certain covenants and conditions including a maximum consolidated leverage ratio, a minimum consolidated fixed charge coverage ratio, and a minimum liquidity requirement. FutureFuel was in compliance with such covenants as of
March 31, 2017.
There were no borrowings under this credit agreement at
March 31, 2017 and December 31, 2016.
7
)
|
PROVISION/(BENEFIT) FOR INCOME TAXES
|
The following table summarizes the provision/(benefit) for income taxes.
|
|
Three months ended March 31,:
|
|
|
|
|
2017
|
|
2016
|
|
Provision/(benefit) for income taxes
|
|
$
|
1,597
|
|
|
$
|
(1,872
|
)
|
|
Effective tax rate
|
|
|
32.0
|
%
|
|
|
(21.5
|
%
|
)
|
7
Notes
to
Consolidated
Financial
Statements
of
FutureFuel
Corp.
(Dollars
in
thousands,
except
per
share
amounts)
(Unaudited)
The effective tax rate for the three months ended March 31, 2017, reflects our expected tax rate on reported operating income before income tax. Our effective tax rate in the three months ended March 31, 2017, reflects the elimination of certain tax credits and incentives which expired December 31, 2016 and were not in effect
for 2017.
The effective tax rate for the three months ended March 31, 2016, reflects our expected tax rate on reported operating income earnings before income tax. Our effective tax rate in the three months ended March 31, 2016,
reflects the positive effect of the reinstatement of the certain tax credits and incentives for 2016.
Unrecognized tax benefits totaled
$2,056 at March 31, 2017 and December 31, 2016.
FutureFuel records interest and penalties, net, as a component of income tax expense.
At March 31, 2017 and December 31, 2016, FutureFuel recorded $211 and $193, respectively, in accruals for interest or tax penalties.
We compute earnings per share using the two-class method in accordance with
ASC Topic No. 260, “
Earnings per Share
.” The two-class method is an allocation of earnings between the holders of common stock and a company’s participating security holders. Our outstanding non-vested shares of restricted stock contain non-forfeitable rights to dividends and, therefore, are considered participating securities for purposes of computing earnings per share pursuant to the two-class method. We had no other participating securities at March 31, 2017 or 2016.
Contingently issuable shares associated with outstanding service-based restricted stock units were not included in the earnings per share calculations for the three-month periods ended
March 31, 2017 or 2016 as the vesting conditions had not been satisfied.
Basic and diluted earnings per common share were computed as follows:
|
|
For the three months ended March 31,:
|
|
|
|
2017
|
|
|
2016
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
3,396
|
|
|
$
|
10,569
|
|
Less: distributed earnings allocated to non-vested stock
|
|
|
-
|
|
|
|
(15
|
)
|
Less: undistributed earnings allocated to non-vested restricted stock
|
|
|
(10
|
)
|
|
|
(44
|
)
|
Numerator for basic earnings per share
|
|
$
|
3,386
|
|
|
$
|
10,510
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
Add: undistributed earnings allocated to non-vested restricted stock
|
|
|
10
|
|
|
|
44
|
|
Less: undistributed earnings reallocated to non-vested restricted stock
|
|
|
(10
|
)
|
|
|
(44
|
)
|
Numerator for diluted earnings per share
|
|
$
|
3,386
|
|
|
$
|
10,510
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
– basic
|
|
|
43,616,636
|
|
|
|
43,475,630
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
Stock options and other awards
|
|
|
6,207
|
|
|
|
10,918
|
|
Weighted average shares outstanding
– diluted
|
|
|
43,622,843
|
|
|
|
43,486,548
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.08
|
|
|
$
|
0.24
|
|
Diluted earnings per share
|
|
$
|
0.08
|
|
|
$
|
0.24
|
|
8
Notes
to
Consolidated
Financial
Statements
of
FutureFuel
Corp.
(Dollars
in
thousands,
except
per
share
amounts)
(Unaudited)
Certain options to purchase FutureFuel
’s common stock were not included in the computation of diluted earnings per share for the three-months ended March 31, 2017 and 2016 because they were anti-dilutive in the period. The weighted average number of options excluded on this basis was 30,000 and 90,000 for the three-months ended March 31, 2017 and 2016, respectively.
FutureFuel has two reportable segments organized along similar product groups
– chemicals and biofuels.
Chemicals
FutureFuel
’s chemicals segment manufactures diversified chemical products that are sold externally to third party customers. This segment is comprised of two components: “custom manufacturing” (manufacturing chemicals for specific customers) and “performance chemicals” (multi-customer specialty chemicals).
Biofuels
FutureFuel
’s biofuels business segment primarily manufactures and markets biodiesel. Biodiesel revenues are generated through the sale of biodiesel to customers through FutureFuel’s distribution network at the Batesville Plant, through distribution facilities available at leased oil storage facilities, and through a network of remotely located tanks. Biofuels revenues also include the sale of biodiesel blends with petrodiesel, petrodiesel with no biodiesel added, RINs, biodiesel production byproducts, and the purchase and sale of other petroleum products on common carrier pipelines.
Summary
of long-lived
assets
and
revenues
by
geographic area
All of FutureFuel
’s long-lived assets are located in the United States.
Most of FutureFuel
’s sales are transacted with title passing at the time of shipment from the Batesville Plant, although some sales are transacted with title passing at the delivery point. While many of FutureFuel’s chemicals are utilized 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 ownership has transferred from FutureFuel to the customer. FutureFuel is rarely the exporter of record, never the importer of record into foreign countries, and is not always aware of the exact quantities of its products that are moved into foreign markets by its customers. FutureFuel does track the addresses of its customers for invoicing purposes and uses this address to determine whether a particular sale is within or outside the United States. FutureFuel’s revenues attributable to the United States and foreign countries (based upon the billing addresses of its customers) were as follows:
|
|
Three months ended March 31,:
|
|
|
|
2017
|
|
|
2016
|
|
United States
|
|
$
|
53,415
|
|
|
$
|
46,006
|
|
All Foreign Countries
|
|
|
696
|
|
|
|
629
|
|
Total
|
|
$
|
54,111
|
|
|
$
|
46,635
|
|
Revenues from a single foreign country during the
three-months ended March 31, 2017 and 2016 did not exceed 1% of total revenues.
9
Notes
to
Consolidated
Financial
Statements
of
FutureFuel
Corp.
(Dollars
in
thousands,
except
per
share
amounts)
(Unaudited)
Summary of
business
by
segment
|
|
Three months ended March 31,:
|
|
|
|
2017
|
|
|
2016
|
|
Revenue
|
|
|
|
|
|
|
|
|
Custom chemicals
|
|
$
|
21,952
|
|
|
$
|
20,292
|
|
Performance chemicals
|
|
|
4,405
|
|
|
|
4,776
|
|
Chemicals revenue
|
|
|
26,357
|
|
|
|
25,068
|
|
Biofuels revenue
|
|
|
27,754
|
|
|
|
21,567
|
|
Total Revenue
|
|
$
|
54,111
|
|
|
$
|
46,635
|
|
|
|
|
|
|
|
|
|
|
Segment gross profit/(loss)
|
|
|
|
|
|
|
|
|
Chemicals
|
|
$
|
7,009
|
|
|
$
|
8,572
|
|
Biofuels
|
|
|
(879
|
)
|
|
|
2,481
|
|
Total gross profit
|
|
|
6,130
|
|
|
|
11,053
|
|
Corporate expenses
|
|
|
(2,655
|
)
|
|
|
(2,524
|
)
|
Income before interest and taxes
|
|
|
3,475
|
|
|
|
8,529
|
|
Interest and dividend income
|
|
|
1,723
|
|
|
|
1,345
|
|
Interest and other expense
|
|
|
(205
|
)
|
|
|
(1,177
|
)
|
(Provision)/benefit for income taxes
|
|
|
(1,597
|
)
|
|
|
1,872
|
|
Net income
|
|
$
|
3,396
|
|
|
$
|
10,569
|
|
Depreciation is allocated to segment costs of goods sold based on plant usage. The total assets and capital expenditures of FutureFuel have not been allocated to individual segments as large portions of these assets are shared to varying degrees by each segment, causing such an allocation to be of little value.
10
)
|
FAIR VALUE MEASUREMENTS
|
Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. Fair value accounting pronouncements also include a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of FutureFuel. Unobservable inputs are inputs that reflect FutureFuel
’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The hierarchy is broken down into three levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
10
Notes
to
Consolidated
Financial
Statements
of
FutureFuel
Corp.
(Dollars
in
thousands,
except
per
share
amounts)
(Unaudited)
The following tables provide information by level for assets and liabilities that are measured at fair value, on a recurring basis, at
March 31, 2017 and December 31, 2016.
|
|
Asset (Liability)
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
Fair Value at
|
|
|
Inputs Considered as:
|
|
Description
|
|
March 31, 2017
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Derivative instruments
|
|
$
|
(1,460
|
)
|
|
$
|
(1,460
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
Preferred stock, trust preferred securities, exchange traded debt instruments, and other equity instruments
|
|
$
|
116,835
|
|
|
$
|
116,835
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset (Liability)
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
Fair Value at
|
|
|
Inputs Considered as:
|
|
Description
|
|
December 31, 2016
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Derivative instruments
|
|
$
|
(258
|
)
|
|
$
|
(258
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
Preferred stock, trust preferred securities, exchange traded debt instruments, and other equity instruments
|
|
$
|
106,146
|
|
|
$
|
106,146
|
|
|
$
|
-
|
|
|
$
|
-
|
|
11
)
|
RECLASSIFICATIONS FROM ACCUMULATED OTHER COMPREHENSIVE INCOME:
|
The following tables summarize changes in accumulated other comprehensive income from unrealized gains and losses on available-for-sale securities in the
three months ended March 31, 2017 and 2016.
Changes in Accumulated Other Comprehensive Income Unrealized Gains and
|
|
Losses on Available-for-Sale Securities
|
|
For the three months ended March 31, 2017 and 2016
|
|
(net of tax)
|
|
|
|
2017
|
|
|
2016
|
|
Balance at January 1
|
|
$
|
3,540
|
|
|
$
|
2,055
|
|
Other comprehensive income/(loss) before reclassifications
|
|
|
1,790
|
|
|
|
(221
|
)
|
Amounts reclassified from accumulated other comprehensive income
|
|
|
85
|
|
|
|
661
|
|
Net current-period o
ther comprehensive income
|
|
|
1,875
|
|
|
|
440
|
|
Balance at March 31
|
|
$
|
5,415
|
|
|
$
|
2,495
|
|
11
Notes
to
Consolidated
Financial
Statements
of
FutureFuel
Corp.
(Dollars
in
thousands,
except
per
share
amounts)
(Unaudited)
The following tables summarize amounts reclassified from accumulated other comprehensive income in the
three months ended March 31, 2017 and 2016:
|
Reclassifications from Accumulated
Other
Comprehensive Income
For the three months ended
:
|
|
|
|
|
March 31, 2017
|
|
|
|
March 31, 2016
|
|
|
Affected Line Item in Statement of Operations
|
Unrealized loss on available-for-sale securities
|
$
|
(131
|
)
|
|
$
|
(1,018
|
)
|
|
L
oss on marketable securities
|
Total before tax
|
|
(131
|
)
|
|
|
(1,018
|
)
|
|
|
Tax benefit
|
|
46
|
|
|
|
357
|
|
|
|
Total reclassifications
|
$
|
(85
|
)
|
|
$
|
(661
|
)
|
|
|
From time to time, FutureFuel and its operations are parties to, or targets of, lawsuits, claims, investigations, regulatory matters, and proceedings, which are being handled and defended in the ordinary course of business. While FutureFuel is unable to predict the outcomes of these matters, it does not believe, based upon currently available facts, that the ultimate resolution of any such pending matters will have a material adverse effect on its overall financial condition, results of operations, or cash flows.
13
)
|
RELATED PARTY TRANSACTIONS
|
FutureFuel enters into transactions with companies affiliated with or controlled by a director and significant shareholder. Revenues, expenses, prepaid amounts, and unpaid amounts related to these transactions are captured in the accompanying consolidated financial statements as related party line items.
Related party revenues are the result of sales of biodiesel, petrodiesel, blends, other petroleum products, and other similar or related products to these related parties.
Related party cost of goods sold and distribution are the result of sales of biodiesel, petrodiesel, blends, and other petroleum products to these related parties along with the associated expense from the purchase of natural gas, storage and terminalling services, and income tax and consulting services by FutureFuel from these related parties.
12
Notes
to
Consolidated
Financial
Statements
of
FutureFuel
Corp.
(Dollars
in
thousands,
except
per
share
amounts)
(Unaudited)
In April of 2015, FutureFuel acquired additional historical line space on a pipeline for $1,408. The acquired line space was recorded as an intangible asset with an indefinite life as there was no foreseeable limit on the time period over which it is expected to contribute to cash flows. The carrying value of the asset was $1,408 as of
March 31, 2017 and December 31, 2016. FutureFuel will test the intangible asset for impairment in accordance with ASC 350-30-35-18 through 35-20.
15
)
|
RECENTLY ISSUED ACCOUNTING STATEMENTS
|
The following table provides a brief description of recent Accounting Standard Updates ("ASU") issued by the FASB:
|
|
|
|
|
|
|
|
Standard
|
|
Description
|
|
Effective Date
|
|
Effect on the Financial Statements or Other Significant Matters
|
In February 2016, the FASB issued ASU 2016-02, Leases.
|
|
The new guidance supersedes the lease guidance under FASB ASC Topic 840, Leases, resulting in the creation of FASB ASC Topic 842, Leases. The guidance requires a lessee to recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term for both finance and operating leases.
|
|
Annual periods beginning after December 15, 2018. Early adoption is permitted.
|
|
The Company is currently evaluating its population of leases, and is continuing to assess all potential impacts of the standard, but currently believes the most significant impact relates to its accounting for logistics equipment. The Company anticipates recognition of additional assets and corresponding liabilities related to leases upon adoption. The Company plans to adopt the standard effective January 1, 2019.
|
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. Since that date, the FASB has issued additional ASUs clarifying certain aspects of ASU 2014-09.
|
|
The core principle of this guidance is that an
entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. To achieve the core principle, the guidance establishes the following five steps: 1) identify the contract(s) with a customer, 2) identify the performance obligation in the contract, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract, and 5) recognize revenue when (or as) the entity satisfies a performance obligation. The guidance also details the accounting treatment for costs to obtain or fulfill a contract. Lastly, disclosure requirements have been enhanced to provide sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
|
|
Annual periods beginning after December 15, 2017.
Earlier adoption was permitted, but not before December 15, 2016.
|
|
The Company is in the process of evaluating the impact of this guidance.
This new guidance, will likely result in a change in the nature and extent of the related footnote disclosures. The Company plans to adopt the new guidance when effective and presently anticipates adopting on a modified retrospective basis to each prior reporting period presented with the election of applicable practical expedients.
|
13