August 3, 2017

Renewable Energy Group Reports Second Quarter 2017 Financial Results

Q2 2017 Highlights

  • 160 million gallons sold, up 7% y/y
  • 117 million gallons produced, up 3% y/y
  • Net loss of $34.8 million or $0.90 per share
  • Adjusted net loss of $2.3 million, or $0.06 per share, excluding the non-cash expense of $32.5 million for the convertible debt conversion liability
  • Adjusted EBITDA of $19.7 million, up 145% y/y
  • Geismar $20 million land purchase and ground lease termination
  • As of June 30, 2017:
    • Cash and cash equivalents of $87.6 million
    • Net working capital of $180.3 million
    • Long-term debt of $215.3 million

AMES, Iowa, Aug. 03, 2017 (GLOBE NEWSWIRE) -- Renewable Energy Group, Inc. ("REG" or the "Company") (NASDAQ:REGI) today announced its financial results for the second quarter ended June 30, 2017.

Revenues for the quarter were $535.1 million on 160.2 million gallons of fuel sold.  Compared to the second quarter of 2016, REG sold 6.8% more gallons of fuel while revenue decreased 4.2%.  The decrease in revenue was primarily due to the lapse of the federal Biodiesel Mixture Excise Tax Credit (BTC) on January 1, 2017 and the impact of imported gallons.  Net loss attributable to common stockholders was $34.8 million, compared to a net income of $7.4 million in the second quarter of 2016.  The Company recognized a non-cash expense of $32.5 million for the convertible debt conversion liability in the quarter.  Net loss for the second quarter of 2017 attributable to common shareholders, excluding the convertible debt conversion expense, was $2.3 million.  Adjusted EBITDA for the quarter was $19.7 million compared to Adjusted EBITDA in the second quarter of 2016 of $8.1 million.  Adjusted EBITDA in the year-earlier period includes net benefits from the BTC, which was in effect at that time.

"The financial performance demonstrates the substantial earnings power of our business," said REG Interim President and CEO Randy Howard.  "With a retroactive reinstatement of the BTC, we would be on track to meet or exceed the financial goals we put forth at our recent analyst day.  If the BTC is reinstated retroactively as expected similar to prior years, both our second quarter and first half performance would be the best in company history."

Howard continued, "The REG team once again demonstrated in the quarter its ability to execute.  Our Geismar RHD facility continued to run smoothly and at high capacity.  Several biorefineries within the fleet set monthly and quarterly production records as well.  We are confident of our ability to deliver on our key initiatives, which include: maximizing profit from the traditional biodiesel fleet, optimizing and growing our RHD asset, and seeking growth through new opportunities in products, geographies, and markets."

Second Quarter 2017 Highlights

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

REG sold a total of 160.2 million gallons of fuel, an increase of 6.8%. The Company produced 117.4 million gallons of biomass-based diesel during the quarter, a 2.7% increase. The average price per gallon of biomass-based diesel sold decreased by 12.5% to $2.86 as a result of lapse of the BTC on January 1, 2017 and the impact of imported gallons.

Revenues were $535.1 million, a decrease of 4.2%. The decrease is primarily attributable to the lapse of the BTC, offset by an increase in gallons sold and higher sales of separated RINs.

On January 1, 2017, the BTC lapsed as it has several times in the past.  Each time it has been allowed to lapse 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 June 30, 2017 would increase by approximately $58 million from a BTC reinstatement.  For the first six months of 2017, the increase in net income and Adjusted EBITDA from a retroactive reinstatement is estimated to be $98 million.

Gross profit was $30.1 million, or 5.6% of revenues, compared to gross profit of $24.9 million, or 4.5% of revenues.  Gross profit as a percentage of revenue increased 1.1% due to improved margins from RIN sales.

Net loss attributable to common stockholders was $34.8 million, or $0.90 per share on a fully diluted basis. This compares to a net income of $7.4 million, or $0.18 per share on a fully diluted basis. Net loss attributable to common stockholders, excluding the non-cash expense of $32.5 million from convertible debt conversion liability, was $2.3 million or $0.06 per share on a fully diluted basis.

At June 30, 2017, REG had cash and cash equivalents of $87.6 million, an increase of $5.4 million from the prior period end.

At June 30, 2017, accounts receivable were $66.9 million, or 11 days of sales. Accounts receivable at March 31, 2017 were $58.6 million. Inventory was $135.0 million at June 30, 2017, or 24 days of sales, a decrease of $34.8 million from the prior quarter end. Accounts payable were $74.8 million and $70.0 million at June 30, 2017 and March 31, 2017, respectively.

The table below summarizes REG's results for the second quarter of 2017.

REG Q2 2017 and Q2 2016 Revenues, Net Income (Loss) and Adjusted EBITDA Summary
(dollars and gallons in thousands)
 
  Q2 2017 Q2 2016 Y/Y Change
Gallons sold 160,219  150,052  6.8%  
Average selling price $2.86  $3.27  (12.5)%  
Total revenues $535,103  $558,301  (4.2)%  
Net income (loss) attributable to common stockholders $(34,809) $7,445  N/M  
Adjusted EBITDA $19,703  $8,052  144.7%  

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 
 June 30, 
 2017
 Three Months
 Ended 
 June 30, 
 2016
 Six Months
 Ended 
 June 30, 
 2017
 Six Months
 Ended 
 June 30, 
 2016
(In thousands)        
Net income (loss) $(34,809) $7,714  $(50,723) $826 
Adjustments:        
Income tax expense 1,960  1,296  3,035  2,024 
Interest expense 4,479  3,738  9,015  7,049 
Gain on involuntary conversion   (997)   (4,540)
Other (income) expense, net (32) (2,306) 288  (2,218)
Change in fair value of convertible debt conversion liability 32,546  (13,432) 32,718  (13,432)
Change in fair value of contingent liability (24) 3,571  565  3,556 
Impairment of assets 1,341     1,341   
Loss on the Geismar lease termination 3,967    3,967   
Straight-line lease expense (85) (80) (117) (174)
Depreciation 8,523  7,824  16,946  15,498 
Amortization 149  (134) 276  (274)
Non-cash stock compensation 1,688  858   2,996  1,934 
Adjusted EBITDA $19,703  $8,052  $20,307  $10,249 

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 Company's ability to meet or exceed its financial goals for 2017 and execute on its strategic initiatives, and the estimated benefits to net income and adjusted EBITDA if the BTC is retroactively reinstated.  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 possible retroactive reinstatement of the BTC; 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 hydrocarbon 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 March 31, 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.

RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016
(in thousands, except share and per share amounts) 
 
  Three months ended Six months ended
  June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
REVENUES:         
Biomass-based diesel sales $455,928  $399,325  $799,664  $613,001 
Separated RIN sales 67,349  60,790  124,674  86,555 
Biomass-based diesel government incentives 10,821  97,153  27,762  155,554 
  534,098  557,268  952,100  855,110 
Other revenue 1,005  1,033  1,896  1,062 
  535,103  558,301  953,996  856,172 
COSTS OF GOODS SOLD:        
Biomass-based diesel 468,407  468,069  822,258  721,786 
Separated RINs 34,218  65,370  80,847  92,139 
Other costs of goods sold 1,024    2,154  2 
Impairment of long-lived assets 1,341    1,341   
  504,990  533,439  906,600  813,927 
GROSS PROFIT 30,113  24,862  47,396  42,245  
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES
 22,812  20,850  45,719  40,626 
RESEARCH AND DEVELOPMENT EXPENSE 3,181  4,427  6,779  8,353 
INCOME (LOSS) FROM OPERATIONS  4,120  (415) (5,102) (6,734)
OTHER INCOME (EXPENSE), NET (36,969) 9,425  (42,586) 9,584 
INCOME (LOSS) BEFORE INCOME TAXES (32,849) 9,010  (47,688) 2,850 
INCOME TAX EXPENSE (1,960) (1,296) (3,035) (2,024)
NET INCOME (LOSS) $(34,809) $7,714  $(50,723) $826 
NET INCOME (LOSS) ATTRIBUTABLE TO THE
COMPANY'S COMMON STOCKHOLDERS
 $(34,809 ) $7,445  $(50,723) $676 
NET INCOME (LOSS) PER SHARE ATTRIBUTABLE
TO COMMON STOCKHOLDERS:
        
BASIC $(0.90) $0.18  $(1.31) $0.02 
DILUTED $(0.90) $0.18  $(1.31) $0.02 
WEIGHTED AVERAGE SHARES USED TO
COMPUTE NET LOSS PER SHARE ATTRIBUTABLE
TO COMMON STOCKHOLDERS:
        
BASIC 38,679,849  42,407,888  38,639,672  43,153,486 
DILUTED 38,679,849  42,418,841  38,639,672  43,158,601 


RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
AS OF JUNE 30, 2017 AND DECEMBER 31, 2016
(in thousands, except share and per share amounts)
 
  June 30, 2017  December 31, 2016
ASSETS    
CURRENT ASSETS:    
Cash and cash equivalents $87,591  $116,210 
Accounts receivable, net 66,920  164,949 
Inventories 135,006  145,408 
Prepaid expenses and other assets 89,156  36,272 
    Total current assets 378,673  462,839 
Property, plant and equipment, net 614,884  599,474 
Goodwill 16,080  16,080 
Intangible assets, net 28,301  29,470 
Investments 13,020  12,110 
Other assets 9,557  12,630 
Restricted cash   4,000 
TOTAL ASSETS $1,060,515  $1,136,603 
LIABILITIES AND EQUITY    
CURRENT LIABILITIES:    
Lines of credit $69,247  $52,844  
Current maturities of long-term debt 16,674  15,402 
Accounts payable 74,818   99,137 
Accrued expenses and other liabilities 37,280  38,916 
Deferred revenue 402  27,246 
    Total current liabilities 198,421  233,545 
Unfavorable lease obligation 3,953  15,515 
Deferred income taxes 23,254  20,279 
Long-term contingent consideration for acquisitions 16,625  28,931 
Convertible debt conversion liability 59,818  27,100 
Long-term debt (net of debt issuance costs of $5,856 and $6,286, respectively) 192,807  196,203 
Other liabilities 3,749  4,856 
    Total liabilities 498,627  526,429 
COMMITMENTS AND CONTINGENCIES    
TOTAL EQUITY 561,888  610,174 
TOTAL LIABILITIES AND EQUITY $1,060,515  $1,136,603 

 

Contacts



Company:

Renewable Energy Group, Inc.

Todd Robinson

Treasurer

+1 (515) 239-8048

Todd.Robinson@regi.com

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