Note 3 - Revenue Recognition

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

3) REVENUE RECOGNITION

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

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

Contract Assets and Liabilities:

Contract assets consist of unbilled amounts typically resulting from revenue recognized through bill-and-hold arrangements. The contract assets at  September 30, 2023 and  December 31, 2022 consist of unbilled revenue from one customer and cash due from another customer and are recorded as accounts receivable in the consolidated balance sheets. Contract liabilities consist of advance payment arrangements related to material rights recorded as deferred revenue in the consolidated balance sheets. Increases to contract liabilities from cash received or due for a performance obligation of chemical segment plant expansions were $506 and $733 for the three months and $538 and $733 for the nine months ended September 30, 2023 and 2022, respectively. Contract liabilities are reduced as the Company transfers product to the customer under the renewal option approach. Revenue recognized in the chemical segment from the contract liability reductions was $444 and $2,037 for the three months and $2,402 and $5,211 for the nine months ended September 30, 2023 and 2022, respectively. These contract asset and liability balances are reported on the consolidated balance sheets on a contract-by-contract basis at the end of each reporting period.

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

Contract Assets and Liability Balances	September 30, 2023		December 31, 2022
Trade receivables, included in accounts receivable*	$	15,432	$	16,459
Contract assets, included in accounts receivable	$	977	$	775
Contract liabilities, included in deferred revenue - short-term	$	3,281	$	3,565
Contract liabilities, included in deferred revenue - long-term	$	10,025	$	11,605

*Exclusive of the BTC of $13,084 and $8,970, respectively, and net of allowances for bad debt of $67 and $48, respectively, as of the dates noted.

Transaction price allocated to the remaining performance obligations:

At September 30, 2023, approximately $13,306 of revenue is expected to be recognized from remaining performance obligations. FutureFuel expects to recognize this revenue ratably over expected sales over the expected term of its long-term contracts which range from three to five years. Approximately 25% of this revenue is expected to be recognized over the next 12 months, and 75% is expected to be recognized over the subsequent 45 months. These amounts are subject to change based upon changes in the estimated contract life and estimated quantities to be sold over the contract life.

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

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

Disaggregation of revenue - contractual and non-contractual:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Contract revenue from customers with > 1-year arrangements	$	8,291	$	9,762	$	28,318	$	26,052
Contract revenue from customers with < 1-year arrangements		108,406		108,324		247,757		251,980
Revenue from non-contractual arrangements		55		55		166		166
Total revenue	$	116,752	$	118,141	$	276,241	$	278,198

Timing of revenue:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Bill-and-hold revenue	$	10,149	$	9,713	$	31,504	$	26,960
Non-bill-and-hold revenue		106,603		108,428		244,737		251,238
Total revenue	$	116,752	$	118,141	$	276,241	$	278,198

As of September 30, 2023 and  December 31, 2022, $4,010 and $4,473 of bill-and-hold revenue had not shipped, respectively.