Renewable Energy Group Reports 3Q Financial Results

Q3 2017 Highlights

  • 152 million gallons sold, down 7% y/y
  • 120 million gallons produced, up 5% y/y
  • Net loss of $11.4 million or $0.29 per share
  • Adjusted EBITDA of negative $1.5 million
  • As of September 30, 2017: °  Cash and cash equivalents of $112.2 million  °  Net working capital of $163.5 million  °  Long-term debt of $219.1 million

Ames, IA, Nov. 07, 2017 (GLOBE NEWSWIRE) -- Renewable Energy Group, Inc. ("REG" or the "Company") (NASDAQ:REGI) today announced its financial results for the third quarter ended September 30, 2017.

Revenues for the quarter were $627.0 million on 151.5 million gallons of fuel sold.  

Revenues in the third quarter were essentially flat with the prior year period despite the lapse of the federal Biodiesel Mixture Excise Tax Credit (BTC). 

The absence of the BTC and a 7.1% decrease in gallons sold were offset by revenues from higher sales of separated RINs and a 2.2% increase in average selling price per gallon. 

Net loss attributable to common stockholders was $11.4 million, compared to net income of $22.9 million in the third quarter of 2016.  

Adjusted EBITDA for the quarter was negative $1.5 million compared to Adjusted EBITDA in the third quarter of 2016 of $31.6 million.  

The prior year Net income and Adjusted EBITDA includes net benefits from the BTC, which was in effect at that time.

"Our third quarter performance met our guidance in spite of a $25 million risk management loss," said REG Interim President and CEO Randy Howard.  

"In addition, subsidized Argentine biodiesel imports continued at record levels through most of August when the preliminary trade duties were imposed.  

Assuming that the federal government follows past practice and retroactively reinstates the BTC for 2017, we estimate that our Adjusted EBITDA for business conducted in first nine months of 2017 will be approximately $172 million, already surpassing our goal for the year of $150 million, so we believe that we are on track for a record year."

Howard continued, "We are continuing our effort to optimize our operations and make progress on our growth initiatives around renewable diesel.  

Recent developments in the trade case and renewable volume obligations are positive and we look forward to further clarity in the fourth quarter on retroactive reinstatement of the BTC and possible reform to a domestic production incentive."

Third Quarter 2017 Highlights

All figures refer to the quarter ending September 30, 2017, unless otherwise noted.  All comparisons are to the quarter ended September 30, 2016 unless otherwise noted.

The Company produced 120.3 million gallons of biomass-based diesel during the quarter, a 4.8% increase. 

REG sold a total of 151.5 million gallons of fuel, a decrease of 7.1% primarily due to fewer sales of third party product and lower volume from Germany. 

The average price per gallon of biomass-based diesel sold increased by 2.2% to $3.21 as a result of increases in the price of ultra-low sulfur diesel and RIN prices, offset by the lapse of the BTC on January 1, 2017 and the impact of imported gallons.

Revenues were $627.0 million, an increase of 0.4%. 

The Company experienced higher sales of separated RINs and a 2.2% increase in the average sales price per gallon, offset by the lapse of the BTC and fewer gallons sold.

On January 1, 2017, the BTC lapsed as it has several times in the past.  

Each time it lapsed, Congress has reinstated it retroactively.  

As a result of this history, the Company and many other industry participants have adopted contractual arrangements with customers specifying the allocation and sharing of a retroactively reinstated incentive.  

The Company estimates that if the BTC, or a similar domestic production incentive, is retroactively reinstated for 2017 on the same terms as in 2016, REG's net income and Adjusted EBITDA for business conducted in the quarter ended September 30, 2017 would increase by approximately $55 million.  

For the first nine months of 2017, the increase in net income and Adjusted EBITDA from a retroactive reinstatement is estimated to be $153 million.

Gross profit was $14.8 million, or 2.4% of revenues, compared to gross profit of $47.3 million, or 7.6% of revenues.  

Gross profit as a percentage of revenue decreased due to the lapse of the BTC, risk management losses of $25 million and the impact from increased imported gallons, offset by improved gross profit from sales of separated RINs.

Net loss attributable to common stockholders was $11.4 million, or $0.29 per share on a fully diluted basis. 

This compares to net income of $22.9 million, or $0.59 per share on a fully diluted basis.

At September 30, 2017, REG had cash and cash equivalents of $112.2 million, an increase of $24.7 million from the prior period end.

At September 30, 2017, accounts receivable were $87.7 million, or 13 days of sales. Accounts receivable at June 30, 2017 were $66.9 million. 

Inventory was $125.5 million at September 30, 2017, or 18 days of sales, a decrease of $9.5 million from the prior quarter end. 

Accounts payable were $80.4 million and $74.8 million at September 30, 2017 and June 30, 2017, respectively.

The table below summarizes REG’s results for the third quarter of 2017.

REG Q3 2017 and Q3 2016 Revenues, Net Income (Loss) and Adjusted EBITDA Summary

 

(dollars and gallons in thousands)

 

 

 

 

 

 

 

 

 

Q3 2017

 

Q3 2016

 

Y/Y Change

 

Gallons sold

 

151,521

 

 

 

163,133

 

(7.1

)%

 

Average selling price per gallon

$

3.21

 

 

$

3.14

 

2.2

###p#<

 

Total revenues

$

626,983

 

 

$

624,640

 

0.4

###p#<

 

Net income (loss) attributable to common stockholders

$

(11,373

)

 

$

22,929

 

N/M

 

 

Adjusted EBITDA

$

(1,540

)

 

$

31,624

 

N/M

 

 

 

 

 

 

 

 

 

Adjusted EBITDA Reconciliation

The Company uses earnings before interest, taxes, depreciation and amortization, and further adjusted for certain additional items, identified in the table below, or Adjusted EBITDA, as a supplemental performance measure. 

Adjusted EBITDA is presented in order to assist investors in analyzing performance across reporting periods on a consistent basis by excluding items that are not believed to be indicative of core operating performance. 

Adjusted EBITDA is used by the Company to evaluate, assess and benchmark financial performance on a consistent and a comparable basis and as a factor in determining incentive compensation for Company executives.

The following table sets forth Adjusted EBITDA for the periods presented, as well as reconciliation to net income (loss):

 

 

Three Months   Ended   September 30,   2017

 

Three Months   Ended   September 30,   2016

 

Nine Months   Ended   September 30,   2017

 

Nine Months   Ended   September 30,   2016

(In thousands)

 

 

 

 

 

 

 

Net income (loss)

$

(11,373

)

 

$

23,505

 

 

$

(62,096

)

 

$

24,331

 

Adjustments:

 

 

 

 

 

 

 

Income tax (benefit) expense

 

(115

)

 

 

(1,203

)

 

 

2,919

 

 

 

821

 

Interest expense

 

4,725

 

 

 

4,487

 

 

 

13,740

 

 

 

11,536

 

Depreciation

 

8,639

 

 

 

7,949

 

 

 

25,585

 

 

 

23,447

 

Amortization

 

307

 

 

 

(129

)

 

 

583

 

 

 

(403

)

EBITDA

$

2,183

 

 

$

34,609

 

 

$

(19,269

)

 

$

59,732

 

Gain on involuntary conversion

 

(942

)

 

 

(3,470

)

 

 

(942

)

 

 

(8,010

)

Change in fair value of convertible debt conversion liability

 

(8,560

)

 

 

(3,013

)

 

 

24,158

 

 

 

(16,455

)

Change in fair value of contingent liability

 

1,433

 

 

 

1,124

 

 

 

1,998

 

 

 

4,680

 

Other (income) expense, net

 

(12

)

 

 

314

 

 

 

278

 

 

 

(1,894

)

Impairment of assets

 

 

 

 

 

 

 

1,341

 

 

 

 

Loss on the Geismar lease termination

 

 

 

 

 

 

 

3,967

 

 

 

 

Straight-line lease expense

 

(85

)

 

 

(73

)

 

 

(202

)

 

 

(247

)

Executive severance

 

2,420

 

 

 

 

 

 

2,420

 

 

 

 

Non-cash stock compensation

 

2,023

 

 

 

2,133

 

 

 

5,019

 

 

 

4,067

 

Adjusted EBITDA

$

(1,540

)

 

$

31,624

 

 

$

18,768

 

 

$

41,873

 

Estimated retroactive BTC net benefit

 

55,000

 

 

 

 

 

 

153,000

 

 

 

 

Adjusted EBITDA with retroactive BTC net benefit

$

53,460

 

 

$

31,624

 

 

$

171,768

 

 

$

41,873

 

 

 

 

 

 

 

 

 

Adjusted EBITDA is a supplemental performance measure that is not required by, or presented in accordance with, generally accepted accounting principles, or GAAP. 

Adjusted EBITDA should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP, or as alternatives to cash flows from operating activities or a measure of liquidity or profitability. 

Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for any of the results as reported under GAAP. 

Some of these limitations are:

  • Adjusted EBITDA does not reflect cash expenditures for capital assets or the impact of certain cash uses that we consider not to be an indication of ongoing operations;
  • Adjusted EBITDA does not reflect changes in, or cash requirements for, working capital requirements;
  • Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on indebtedness;
  • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect cash requirements for such replacements;
  • Stock-based compensation expense is an important element of the Company’s long term incentive compensation program, although we have excluded it as an expense when evaluating our operating performance; and
  • Other companies, including other companies in the same industry, may calculate these measures differently, limiting their usefulness as a comparative measure.

About Renewable Energy Group Renewable Energy Group, Inc. (NASDAQ:REGI) is a leading provider of cleaner, lower carbon intensity products and services. 

We are an international producer of biomass-based diesel, a developer of renewable chemicals and are North America's largest producer of advanced biofuel. 

REG utilizes an integrated procurement, distribution, and logistics network to convert natural fats, oils, greases, and sugars into lower carbon intensity products. 

With 14 active biorefineries, a feedstock processing facility, research and development capabilities and a diverse and growing intellectual property portfolio, REG is committed to being a long-term leader in bio-based fuel and chemicals.

Note Regarding Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended, including statements regarding the possible retroactive reinstatement of the BTC, the estimated benefits to net income and adjusted EBITDA if the BTC is retroactively reinstated and our efforts to optimize our operations and achieve our growth initiatives.  

These forward-looking statements are based on current expectations, estimates, assumptions and projections that are subject to change, and actual results may differ materially from the forward-looking statements. 

Factors that could cause actual results to differ materially include, but are not limited to, potential changes in governmental programs and policies requiring or encouraging the use of biofuels, including RFS2; availability of federal and state governmental tax incentives and incentives for biomass-based diesel production, including that the BTC may not be retroactively reinstated for 2017 or that it may be reinstated on less favorable terms; changes in the spread between biomass-based diesel prices and feedstock costs; the future price and volatility of feedstocks; the future price and volatility of petroleum and products derived from petroleum; risks associated with fire, explosions, leaks and other natural disasters at our facilities; the effect of excess capacity in the biomass-based diesel industry; unanticipated changes in the biomass-based diesel market from which we generate almost all of our revenues; seasonal fluctuations in our operating results; competition in the markets in which we operate; our dependence on sales to a single customer; technological advances or new methods of biomass-based diesel production or the development of energy alternatives to biomass-based diesel; our ability to successfully implement our acquisition strategy; our ability to generate revenue from the sale of renewable chemicals, fuels and other products on a commercial scale and at a competitive cost, and customer acceptance of the products produced; whether our Geismar biorefinery will be able to produce renewable diesel consistently or profitably; and other risks and uncertainties described in REG's annual report on Form 10-K for the year ended December 31, 2016, Form 10-Q for the quarter ended June 30, 2017 and other reports subsequently filed with the SEC.  

All forward-looking statements are made as of the date of this press release and REG does not undertake to update any forward-looking statements based on new developments or changes in our expectations.

Contacts

Company: Renewable Energy Group, Inc. Todd Robinson Treasurer +1 (515) 239-8048 Todd.Robinson@regi.com 

 

RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

(in thousands, except share and per share amounts)

 

 

Three months ended

 

Nine months ended

 

September 30,  2017

 

September 30,  2016

 

September 30,  2017

 

September 30,  2016

REVENUES:

 

 

 

 

 

 

 

Biomass-based diesel sales

$

504,016

 

 

$

419,093

 

$

1,303,681

 

 

$

1,032,093

 

Separated RIN sales

 

120,389

 

 

 

104,646

 

 

245,062

 

 

 

191,201

 

Biomass-based diesel government incentives

 

741

 

 

 

100,336

 

 

28,503

 

 

 

255,890

 

 

 

625,146

 

 

 

624,075

 

 

1,577,246

 

 

 

1,479,184

 

Other revenue

 

1,837

 

 

 

565

 

 

3,733

 

 

 

1,627

 

 

 

626,983

 

 

 

624,640

 

 

1,580,979

 

 

 

1,480,811

 

COSTS OF GOODS SOLD:

 

 

 

 

 

 

 

Biomass-based diesel

 

505,871

 

 

 

456,441

 

 

1,328,129

 

 

 

1,178,227

 

Separated RINs

 

105,131

 

 

 

119,515

 

 

185,978

 

 

 

211,654

 

Other costs of goods sold

 

1,186

 

 

 

1,336

 

 

3,340

 

 

 

1,334

 

Impairment of long-lived assets

 

 

 

 

 

 

1,341

 

 

 

 

 

 

612,188

 

 

 

577,292

 

 

1,518,788

 

 

 

1,391,215

 

GROSS PROFIT

 

14,795

 

 

 

47,348

 

 

62,191

 

 

 

89,596

 

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

 

25,880

 

 

 

20,799

 

 

71,599

 

 

 

61,426

 

RESEARCH AND DEVELOPMENT EXPENSE

 

3,759

 

 

 

4,805

 

 

10,537

 

 

 

13,158

 

INCOME (LOSS) FROM OPERATIONS

 

(14,844

)

 

 

21,744

 

 

(19,945

)

 

 

15,012

 

OTHER INCOME (EXPENSE), NET

 

3,356

 

 

 

558

 

 

(39,232

)

 

 

10,140

 

INCOME (LOSS) BEFORE INCOME TAXES

 

(11,488

)

 

 

22,302

 

 

(59,177

)

 

 

25,152

 

INCOME TAX BENEFIT (EXPENSE)

 

115

 

 

 

1,203

 

 

(2,919

)

 

 

(821

)

NET INCOME (LOSS)

$

(11,373

)

 

$

23,505

 

$

(62,096

)

 

$

24,331

 

NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY’S COMMON STOCKHOLDERS

$

(11,373

)

 

$

22,929

 

$

(62,096

)

 

$

23,668

 

NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS:

 

 

 

 

 

 

 

BASIC

$

(0.29

)

 

$

0.59

 

$

(1.61

)

 

$

0.57

 

DILUTED

$

(0.29

)

 

$

0.59

 

$

(1.61

)

 

$

0.57

 

WEIGHTED AVERAGE SHARES USED TO COMPUTE NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS:

 

 

 

 

 

 

 

BASIC

 

38,772,434

 

 

 

38,744,878

 

 

38,684,412

 

 

 

41,673,223

 

DILUTED

 

38,772,434

 

 

 

38,751,706

 

 

38,684,412

 

 

 

41,678,988

 

 

 

 

 

 

 

 

 

 

RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

AS OF SEPTEMBER 30, 2017 AND DECEMBER 31, 2016

(in thousands, except share and per share amounts)

 

 

September 30, 2017

 

December 31, 2016

 

ASSETS

 

 

 

 

CURRENT ASSETS:

 

 

 

 

Cash and cash equivalents

$

112,242

 

$

116,210

 

Accounts receivable, net

 

87,723

 

 

164,949

 

Inventories

 

125,507

 

 

145,408

 

Prepaid expenses and other assets

 

65,914

 

 

36,272

 

Total current assets

 

391,386

 

 

462,839

 

Property, plant and equipment, net

 

621,165

 

 

599,474

 

Goodwill

 

16,080

 

 

16,080

 

Intangible assets, net

 

27,714

 

 

29,470

 

Investments

 

13,101

 

 

12,110

 

Other assets

 

9,227

 

 

12,630

 

Restricted cash

 

 

 

4,000

 

TOTAL ASSETS

$

1,078,673

 

$

1,136,603

 

LIABILITIES AND EQUITY

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

Lines of credit

$

92,579

 

$

52,844

 

Current maturities of long-term debt

 

10,640

 

 

15,402

 

Accounts payable

 

80,360

 

 

99,137

 

Accrued expenses and other liabilities

 

44,126

 

 

38,916

 

Deferred revenue

 

221

 

 

27,246

 

Total current liabilities

 

227,926

 

 

233,545

 

Unfavorable lease obligation

 

3,670

 

 

15,515

 

Deferred income taxes

 

22,568

 

 

20,279

 

Long-term contingent consideration for acquisitions

 

12,471

 

 

28,931

 

Convertible debt conversion liability

 

51,258

 

 

27,100

 

Long-term debt (net of debt issuance costs of $5,694 and $6,286, respectively)

 

202,789

 

 

196,203

 

Other liabilities

 

4,520

 

 

4,856

 

Total liabilities

 

525,202

 

 

526,429

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

TOTAL EQUITY

 

553,471

 

 

610,174

 

TOTAL LIABILITIES AND EQUITY

$

1,078,673

 

$

1,136,603