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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549   
Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 001-35397
RENEWABLE ENERGY GROUP, INC.
(Exact name of registrant as specified in its charter)
   
Delaware
 
   
26-4785427
(State of other jurisdiction of
incorporation or organization)
 
   
(I.R.S. Employer
Identification No.)
   
 
   
416 South Bell Avenue
Ames
Iowa
50010
(Address of principal executive offices)
 
   
(Zip code)
(515) 239-8000
(Registrant’s telephone number, including area code)    

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.0001 per share
REGI
NASDAQ Global Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
   
Large accelerated filer
   
Accelerated filer
x
 
 
 
 
Non-accelerated filer
   
Smaller reporting company
 
 
 
 
 
 
 
 
Emerging growth company




If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No   x

As of October 31, 2019, the registrant had 38,964,276 shares of Common Stock outstanding.




TABLE OF CONTENTS
 
 
Page
PART I
ITEM 1.
ITEM 2.
ITEM 3.
ITEM 4.
 
 
PART II
ITEM 1.
ITEM 1A.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 5.
ITEM 6.
 
 


3



PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL INFORMATION
RENEWABLE ENERGY GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except share and per share amounts)
   
September 30,
2019
 
December 31,
2018
ASSETS
   

 
   

CURRENT ASSETS:
   

 
   

Cash and cash equivalents
$
64,093

 
$
123,575

Marketable securities

 
50,932

Accounts receivable (net of allowance for doubtful accounts of $762 and $673, respectively)
81,015

 
74,551

Inventories
163,451

 
168,900

Prepaid expenses and other assets
40,631

 
41,169

Restricted cash
3,000

 
3,000

Current assets held for sale

 
3,250

Total current assets
352,190

 
465,377

Property, plant and equipment, net
586,305

 
590,723

Right of use assets
41,799

 

Goodwill
16,080

 
16,080

Intangible assets, net
12,405

 
13,646

Other assets
22,747

 
21,270

TOTAL ASSETS
$
1,031,526

 
$
1,107,096

LIABILITIES AND EQUITY
   

 
   

CURRENT LIABILITIES:
   

 
   

Lines of credit
$
97,137

 
$
14,250

Current maturities of long-term debt
7,440

 
149,006

Current maturities of operating lease obligations
18,461

 

Accounts payable
95,400

 
95,866

Accrued expenses and other liabilities
27,081

 
35,256

Deferred revenue
954

 
300

Total current liabilities
246,473

 
294,678

Unfavorable lease obligation

 
2,259

Deferred income taxes
7,238

 
8,410

Long-term debt (net of debt issuance costs of $3,020 and $3,390, respectively)
104,847

 
33,421

Long-term operating lease obligations
33,834

 

Other liabilities
1,516

 
3,075

Total liabilities
393,908

 
341,843

COMMITMENTS AND CONTINGENCIES


 


EQUITY:
   

 
   

Common stock ($.0001 par value; 300,000,000 shares authorized; 38,964,276 and 37,318,942 shares outstanding, respectively)
5

 
5

Common stock—additional paid-in-capital
446,435

 
451,427

Retained earnings
299,281

 
427,244

Accumulated other comprehensive income
(2,640
)
 
(1,656
)
Treasury stock (10,402,635 and 11,524,975 shares outstanding, respectively)
(105,463
)
 
(111,767
)
Total equity
637,618

 
765,253

TOTAL LIABILITIES AND EQUITY
$
1,031,526

 
$
1,107,096

See notes to condensed consolidated financial statements.

1



RENEWABLE ENERGY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except share and per share amounts)
 
Three months ended
 
Nine months ended
   
September 30, 2019
 
September 30, 2018
 
September 30, 2019
 
September 30, 2018
REVENUES:
   
 
   
 
   
 
   
Biomass-based diesel sales
$
556,914

 
$
568,174

 
$
1,552,139

 
$
1,394,044

Separated RIN sales
26,762

 
26,867

 
68,821

 
100,232

Biomass-based diesel government incentives
512

 
944

 
1,510

 
367,144

   
584,188

 
595,985

 
1,622,470

 
1,861,420

Other revenue
184

 
339

 
754

 
1,806

   
584,372

 
596,324

 
1,623,224

 
1,863,226

COSTS OF GOODS SOLD:
   
 
   
 
   
 
   
Biomass-based diesel
548,819

 
535,376

 
1,613,365

 
1,451,560

Separated RINs
11,469

 
9,789

 
25,336

 
53,538

Other costs of goods sold
8

 

 
11

 

   
560,296

 
545,165

 
1,638,712

 
1,505,098

GROSS PROFIT (LOSS)
24,076

 
51,159

 
(15,488
)
 
358,128

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
24,629

 
20,985

 
76,639

 
77,151

RESEARCH AND DEVELOPMENT EXPENSE
133

 
947

 
518

 
2,008

IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT
11,145

 

 
11,613

 

INCOME (LOSS) FROM OPERATIONS
(11,831
)
 
29,227

 
(104,258
)
 
278,969

OTHER INCOME (EXPENSE), NET:
   
 
   
 
   
 
   
Change in fair value of contingent consideration
136

 
(185
)
 
(566
)
 
(673
)
Gain (loss) on debt extinguishment

 
788

 
(2
)
 
2,893

Gain on involuntary conversion

 

 

 
4,454

Other income, net
179

 
499

 
1,724

 
3,779

Interest expense
(2,866
)
 
(4,003
)
 
(10,822
)
 
(13,579
)
   
(2,551
)
 
(2,901
)
 
(9,666
)
 
(3,126
)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
(14,382
)
 
26,326

 
(113,924
)
 
275,843

INCOME TAX BENEFIT (EXPENSE)
629

 
(854
)
 
1,149

 
(3,486
)
NET INCOME (LOSS) FROM CONTINUING OPERATIONS
(13,753
)
 
25,472

 
(112,775
)
 
272,357

NET INCOME (LOSS) ON DISCONTINUED OPERATIONS (NOTE 4)
(2,193
)
 
(469
)
 
(8,672
)
 
885

NET INCOME (LOSS) TO THE COMPANY
$
(15,946
)
 
$
25,003

 
$
(121,447
)
 
$
273,242

LESS—EFFECT OF PARTICIPATING SHARE-BASED AWARDS ON CONTINUING OPERATIONS

 
673

 

 
6,976

NET INCOME (LOSS) FROM CONTINUING OPERATIONS ATTRIBUTABLE TO THE COMPANY’S COMMON STOCKHOLDERS
$
(13,753
)
 
$
24,799

 
$
(112,775
)
 
$
265,381

LESS—EFFECT OF PARTICIPATING SHARE-BASED AWARDS ON DISCONTINUED OPERATIONS

 

 

 
23

NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS ATTRIBUTABLE TO THE COMPANY’S COMMON STOCKHOLDERS
$
(2,193
)
 
$
(469
)
 
$
(8,672
)
 
$
862

Basic net income (loss) per share attributable to common stockholders:
   
 
   
 
   
 
   
Continuing operations
$
(0.35
)
 
$
0.67

 
$
(2.96
)
 
$
7.02

Discontinued operations
$
(0.06
)
 
$
(0.01
)
 
$
(0.23
)
 
$
0.02

Net income (loss) per share
$
(0.41
)
 
$
0.65

 
$
(3.19
)
 
$
7.04

Diluted net income (loss) per share attributable to common stockholders:
 
 
 
 
 
 
 
Continuing operations
$
(0.35
)
 
$
0.55

 
$
(2.96
)
 
$
6.18

Discontinued operations
$
(0.06
)
 
$
(0.01
)
 
$
(0.23
)
 
$
0.02

Net income (loss) per share
$
(0.41
)
 
$
0.53

 
$
(3.19
)
 
$
6.20

Weighted-average shares used to compute basic net income (loss) per share attributable to common stockholders:
   
 
   
 
   
 
   
Basic
38,959,606

 
37,270,928

 
38,060,782

 
37,815,598

Weighted-average shares used to compute diluted net income (loss) per share attributable to common stockholders:
 
 
 
 
 
 
 
Continuing operations
38,959,606

 
45,503,371

 
38,060,782

 
42,910,528

Discontinued operations
38,959,606

 
37,270,928

 
38,060,782

 
42,910,528

Net income (loss)
38,959,606

 
45,503,371

 
38,060,782

 
42,910,528

See notes to condensed consolidated financial statements.

2



RENEWABLE ENERGY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
(in thousands)
 
Three months ended
 
Nine months ended
 
September 30, 2019
 
September 30, 2018
 
September 30, 2019
 
September 30, 2018
Net income (loss)
$
(15,946
)
 
$
25,003

 
$
(121,447
)
 
$
273,242

Unrealized gains on marketable securities, net of taxes of $0 and $0, respectively

 
(31
)
 

 
(31
)
Foreign currency translation adjustments
(1,017
)
 
(338
)
 
(984
)
 
(1,442
)
Other comprehensive loss
(1,017
)
 
(369
)
 
(984
)
 
(1,473
)
Comprehensive income (loss) attributable to the Company
$
(16,963
)
 
$
24,634

 
$
(122,431
)
 
$
271,769

See notes to condensed consolidated financial statements.


3



RENEWABLE ENERGY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(unaudited)
(in thousands, except share amounts)
   
Company Stockholders’ Equity
   
Common
Stock
Shares
 
Common
Stock
 
Common Stock -
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Treasury
Stock
 
Total
BALANCE, January 1, 2018
38,837,749

 
$
5

 
$
515,452

 
$
134,928

 
$
278

 
$
(83,081
)
 
$
567,582

Conversion of restricted stock units to common stock (net of 51,995 shares of treasury stock purchased)
127,470

 

 

 

 

 
(621
)
 
(621
)
Settlement of stock appreciation rights in common stock (net of 14,558 shares of treasury stock purchased)
33,463

 

 

 

 

 
(172
)
 
(172
)
Partial termination of capped call options
(15,012
)
 

 
252

 

 

 
(167
)
 
85

Convertible debt extinguishment impact (net of tax impact of $68)

 

 
(440
)
 

 

 

 
(440
)
Treasury stock purchases
(641,601
)
 

 

 

 

 
(7,828
)
 
(7,828
)
Stock compensation expense

 

 
1,794

 

 

 

 
1,794

Other comprehensive income

 

 

 

 
719

 

 
719

Net income

 

 

 
214,389

 

 

 
214,389

BALANCE, March 31, 2018
38,342,069

 
$
5

 
$
517,058

 
$
349,317

 
$
997

 
$
(91,869
)
 
$
775,508

Conversion of restricted stock units to common stock (net of 88,651 shares of treasury stock purchased)
149,362

 

 

 

 

 
(1,516
)
 
(1,516
)
Settlement of stock appreciation rights in common stock (net of 28,036 shares of treasury stock purchased)
63,549

 

 
(95
)
 

 

 
(485
)
 
(580
)
Convertible debt extinguishment impact (net of tax impact of $2,267)

 

 
(23,634
)
 

 

 

 
(23,634
)
Treasury stock purchases
(1,296,243
)
 

 

 

 

 
(17,220
)
 
(17,220
)
Stock compensation expense

 

 
2,203

 

 

 

 
2,203

Other comprehensive income

 

 

 

 
(1,823
)
 

 
(1,823
)
Net income

 

 

 
33,850

 

 

 
33,850

BALANCE, June 30, 2018
37,258,737

 
$
5

 
$
495,532

 
$
383,167

 
$
(826
)
 
$
(111,090
)
 
$
766,788

Conversion of restricted stock units to common stock (net of 1,805 shares of treasury stock purchased)
13,301

 

 

 

 

 
(88
)
 
(88
)
Settlement of stock appreciation rights in common stock (net of 577 shares of treasury stock purchased)
27,666

 

 
(109
)
 

 

 
(325
)
 
(434
)
Convertible debt extinguishment impact (net of tax impact of $875)

 

 
(10,032
)
 

 

 

 
(10,032
)
Stock compensation expense

 
 
 
1,227

 

 

 

 
1,227

Other comprehensive income

 

 

 

 
(369
)
 

 
(369
)
Net income

 

 

 
25,003

 

 

 
25,003

BALANCE, September 30, 2018
37,299,704

 
$
5

 
$
486,618

 
$
408,170

 
$
(1,195
)
 
$
(111,503
)
 
$
782,095


4



   
Company Stockholders’ Equity
   
Common
Stock
Shares
 
Common
Stock
 
Common Stock -
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Treasury
Stock
 
Total
BALANCE, January 1, 2019
37,318,942

 
$
5

 
$
451,427

 
$
427,244

 
$
(1,656
)
 
$
(111,767
)
 
$
765,253

Conversion of restricted stock units to common stock (net of 138,012 shares of treasury stock purchased)
283,339

 

 

 

 

 
(2,760
)
 
(2,760
)
Settlement of stock appreciation rights in common stock (net of 9,888 shares of treasury stock purchased)
16,937

 

 
(12
)
 

 

 
(159
)
 
(171
)
Partial termination of capped call options
(1,087
)
 

 
30

 

 

 
(30
)
 

Convertible debt extinguishment impact

 

 
(152
)
 

 

 

 
(152
)
Stock compensation expense

 

 
1,353

 

 

 

 
1,353

Other comprehensive loss

 

 

 

 
(362
)
 

 
(362
)
Adoption of ASC Topic 842, Leases

 

 

 
(6,516
)
 

 

 
(6,516
)
Net loss

 

 

 
(43,404
)
 

 

 
(43,404
)
BALANCE, March 31, 2019
37,618,131

 
$
5

 
$
452,646

 
$
377,324

 
$
(2,018
)
 
$
(114,716
)
 
$
713,241

Conversion of restricted stock units to common stock (net of 805 shares of treasury stock purchased)
58,759

 

 

 

 

 
(518
)
 
(518
)
Settlement of stock appreciation rights in common stock (net of 2,274 shares of treasury stock purchased)
4,631

 

 
(7
)
 

 

 
(17
)
 
(24
)
Settlement of 2019 Convertible Senior Notes conversion premium
1,902,781

 

 
(18,779
)
 

 

 
18,779

 

Termination of capped call options
(625,558
)
 

 
8,952

 

 

 
(8,952
)
 

Stock compensation expense

 

 
1,824

 

 

 

 
1,824

Other comprehensive income

 

 

 

 
395

 

 
395

Net loss

 

 

 
(62,097
)
 

 

 
(62,097
)
BALANCE, June 30, 2019
38,958,744

 
$
5

 
$
444,636

 
$
315,227

 
$
(1,623
)
 
$
(105,424
)
 
$
652,821

Conversion of restricted stock units to common stock (net of 1,775 shares of treasury stock purchased)
3,557

 

 

 

 

 
(39
)
 
(39
)
Settlement of stock appreciation rights in common stock (net of 1,042 shares of treasury stock purchased)
1,975

 

 
(5
)
 

 

 

 
(5
)
Stock compensation expense

 

 
1,804

 

 

 

 
1,804

Other comprehensive loss

 

 

 

 
(1,017
)
 

 
(1,017
)
Net loss

 

 

 
(15,946
)
 

 

 
(15,946
)
BALANCE, September 30, 2019
38,964,276

 
$
5

 
$
446,435

 
$
299,281

 
$
(2,640
)
 
$
(105,463
)
 
$
637,618


See notes to condensed consolidated financial statements.

5



RENEWABLE ENERGY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
 
Nine months ended
   
September 30, 2019
 
September 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
   
 
   
Net income (loss)
$
(121,447
)
 
$
273,242

Net income (loss) from discontinuing operations
(8,672
)
 
885

Net income (loss) from continuing operations
(112,775
)
 
272,357

Adjustments to reconcile net income (loss) to net cash flows from operating activities:
   
 
   
Depreciation expense
27,349

 
26,720

Amortization expense of assets and liabilities, net
16,170

 
958

Gain on involuntary conversion

 
(4,454
)
Accretion of convertible note discount
2,561

 
3,846

Amortization of marketable securities
(146
)
 
(45
)
Change in fair value of contingent consideration
566

 
673

Gain on sale of assets

 
(964
)
(Gain) loss on debt extinguishment
2

 
(2,893
)
Provision for doubtful accounts
17

 
224

Impairment of property, plant and equipment
11,613

 

Stock compensation expense
4,981

 
5,224

Deferred tax expense
(1,159
)
 
3,408

Other operating activities
212

 
602

Changes in assets and liabilities:
   
 
   
Accounts receivable, net
(7,227
)
 
(146
)
Inventories
5,437

 
(6,119
)
Prepaid expenses and other assets
2,947

 
32,182

Accounts payable
(6,694
)
 
17,988

Accrued expenses and other liabilities
1,952

 
(9,215
)
Operating lease obligations
(13,778
)
 

Deferred revenue
655

 
(745
)
Net cash flows (used in) provided by operating activities - continuing operations
(67,317
)
 
339,601

Net cash flows used in operating activities - discontinuing operations
(9,832
)
 
(11,050
)
Cash (used in) provided by operating activities
(77,149
)
 
328,551

CASH FLOWS FROM INVESTING ACTIVITIES:
   
 
   
Cash paid for marketable securities
(3,478
)
 
(52,878
)
Cash received from maturities of marketable securities
54,584

 

Cash receipts for involuntary conversion

 
4,454

Cash paid for purchase of property, plant and equipment
(31,088
)
 
(37,581
)
Cash receipts for sale of assets

 
1,625

Cash paid for acquisitions and additional interests, net of cash acquired

 
(4,801
)
Cash paid for investments
(2,713
)
 

Net cash flows provided by (used in) investing activities - continuing operations
17,305

 
(89,181
)
Net cash flows provided by (used in) investing activities - discontinuing operations
3,100

 
(335
)
Cash provided by (used in) investing activities
20,405

 
(89,516
)
CASH FLOWS FROM FINANCING ACTIVITIES:
   
 
   
Net borrowings (repayments) on revolving line of credit
77,758

 
(57,288
)
Borrowings on other lines of credit
66,186

 
55,047

Repayments on other lines of credit
(60,918
)
 
(56,165
)
Cash received from notes payable

 
14,034

Cash paid on notes payable
(73,067
)
 
(74,788
)
Cash paid for debt issuance costs
(70
)
 
(532
)
Cash paid for treasury stock

 
(25,048
)
Cash paid for contingent consideration settlement
(9,003
)
 
(8,746
)
Cash received on partial termination of capped call options

 
85

Cash paid for conversion of restricted stock units and stock appreciation rights
(3,517
)
 
(3,411
)
Net cash flows used in financing activities - continuing operations
(2,631
)
 
(156,812
)
Net cash flows used in financing activities - discontinuing operations

 

Cash used in financing activities
(2,631
)
 
(156,812
)
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
(59,375
)
 
82,223

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, Beginning of period
126,575

 
77,627

Effect of exchange rate changes on cash
(107
)
 
(218
)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, End of period
$
67,093

 
$
159,632

(continued)

6




RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
 
Nine months ended
 
September 30, 2019
 
September 30, 2018
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
   
 
   
Cash paid for income taxes
$
1,515

 
$
612

Cash paid for interest
$
6,007

 
$
7,500

Leased assets obtained in exchange for new operating lease liabilities
$
11,347

 
$

 
 
 
 
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
   
 
   
Amounts included in period-end accounts payable for:
   
 
   
Purchases of property, plant and equipment
$
7,824

 
$
2,117

Contingent consideration for acquisitions
$

 
$
482

Issuance of treasury stock to settle 2019 Convertible Senior Notes conversion premium
$
(18,779
)
 
$

Receipt in treasury stock for settlement of capped call options
$
8,952

 
$

(concluded)
   
See notes to condensed consolidated financial statements.



7



RENEWABLE ENERGY GROUP, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For The