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Note 3 - Revenue Recognition
 3 Months Ended
Mar. 31, 2022
Notes to Financial Statements  
Revenue from Contract with Customer [Text Block]

3)

 REVENUE RECOGNITION

 

FutureFuel recognizes revenue when performance obligations of the customer contract are satisfied. FutureFuel sells to customers through master sales agreements or standalone purchase orders. The majority of FutureFuel's terms of sale have a single performance obligation to transfer products. Accordingly, FutureFuel recognizes revenue when control has been transferred to the customer, generally at the time of shipment or delivery of products. For certain contracts, this occurs upon delivery of the material to a FutureFuel storage location, ready for customer pickup and separated from other FutureFuel inventory. Revenue is measured as the amount of consideration FutureFuel expects to receive in exchange for transferring products and is generally based upon a negotiated price. FutureFuel sells its products directly to customers generally under agreements with payment terms of 30 to 75 days for chemical segment customers and 2 to 10 days for biofuels segment customers.

 

Certain of FutureFuel custom chemical contracts within the chemical segment contain a material right as defined by ASU 2014-09, Revenue from Contracts with Customers ("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. FutureFuel recognizes revenue when the customer takes control of the inventory, either upon shipment or when the material is made available for pickup. 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 Topic 606. FutureFuel 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, FutureFuel estimates the expected life of the product, 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 March 31, 2022 and December 31, 2021 consist of unbilled revenue from one customer and are recorded as accounts receivable in the consolidated balance sheets. Contract liabilities consist of advance payments related to material rights recorded as deferred revenue in the consolidated balance sheets. Increases to contract liabilities from cash received for a performance obligation of chemical segment plant expansions were $0 and $209 for the three months ended March 31, 2022 and 2021, 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 were $2,213 and $723 in the three months ended March 31, 2022 and 2021, 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

 

March 31, 2022

  

December 31, 2021

 

Trade receivables, included in accounts receivable*

 $11,076  $20,780 

Contract assets, included in accounts receivable

 $1,422  $362 

Contract liabilities, included in deferred revenue - short-term

 $6,169  $5,944 

Contract liabilities, included in deferred revenue - long-term

 $10,621  $13,059 

 

*Exclusive of the BTC of $5,550 and $8,232, respectively, and net of allowances for bad debt of $55 and $67, respectively, as of the dates noted.

 

Transaction price allocated to the remaining performance obligations:

 

At March 31, 2022, approximately $16,790 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 two to four years. Approximately 37% of this revenue is expected to be recognized over the next 12 months, and 63% is expected to be recognized over the subsequent 36 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 March 31, 
  2022  2021 

Contract revenue from customers with > 1 year arrangements

 $10,142  $5,106 

Contract revenue from customers with < 1 year arrangements

  32,064   36,355 

Revenue from non-contractual arrangements

  55   55 

Total revenue

 $42,261  $41,516 

 

Timing of revenue:

 

  Three Months Ended March 31, 
  2022  2021 

Bill-and-hold revenue

 $9,276  $7,549 

Non-bill-and-hold revenue

  32,985   33,967 

Total revenue

 $42,261  $41,516 

 

As of March 31, 2022, $2,743 of the three months bill and hold revenue had not shipped.  In comparison, $2,911 of bill and hold revenue recognized in the three months ended March 31, 2021 had not shipped.  In addition, we continued to hold $572 of bill and hold inventory recognized as revenue in 2021.