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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, 2020
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 AvenueAmesIowa50010
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $.0001 per shareREGIThe Nasdaq Stock Market LLC
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 filerx
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, 2020, the registrant had 39,332,719 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


FORWARD LOOKING STATEMENTS
This quarterly report on Form 10-Q contains, in addition to historical information, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial position, strategy and plans, and our expectations of future operations, are forward-looking statements. The words "believe," "may," "will," "would," "might," "could," "estimate," "continue," "anticipate," "design," "intend," "plan," "seek," "potential," "expect" and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short-term and long-term business operations and objectives, and financial needs. Forward-looking statements include, but are not limited to, statements about:
our business plans and strategies, including, but not limited to, our downstream objectives and undertakings and the capacity expansion of our Geismar, Louisiana biorefinery;
our financial performance, including expectations regarding revenues, cost of revenues and operating expenses;
changes in governmental programs, policymaking and requirements or encouraged use of biofuels, including RFS2 in the United States, renewable fuel policies in Canada and Europe, and state level programs such as California's Low Carbon Fuel Standard;
our security repurchase programs and our marketable securities;
the availability, future price and volatility of feedstocks and other inputs;
the expansion of our distribution network and transportation costs;
the future price and volatility of petroleum;
our liquidity and working capital requirements;
our leasing practices;
anticipated trends and challenges in our business and competition in the markets in which we operate;
our ability to successfully implement our acquisition strategy and integration strategy;
our ability to protect proprietary technology and trade secrets;
our risk management activities;
the industry’s capacity, production and imports;
product performance, in cold weather or otherwise;
seasonal fluctuations in our business;
our current products as well as products we are developing;
our ability to retain and recruit key personnel;
our indebtedness and our compliance, or failure to comply, with restrictive and financial covenants in our various debt agreements;
critical accounting policies and estimates, the impact or anticipated impact of recent accounting pronouncements, guidance or changes in accounting principles and future recognition of impairments for the fair value of assets, including goodwill, financial instruments, intangible assets and other assets acquired;
operating risks and the impact of disruptions to our business including, but not limited to, closures at our plant located in Geismar, Louisiana and the COVID-19 pandemic; and
assumptions underlying or relating to any of the foregoing.
These statements reflect current views with respect to future events and are based on assumptions and subject to risks and uncertainties. We note that a variety of factors, including but not limited to those Risk Factors discussed in Item 1A of Part II of this report, could cause actual results and experience to differ materially from the anticipated results or expectations expressed in our forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Forward-looking statements contained in this report present management’s views only as of the date of this report. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our 10-Q and 8-K reports filed with the Securities and Exchange Commission after the date hereof.
4


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,
2020
December 31,
2019
ASSETS      
CURRENT ASSETS:      
Cash and cash equivalents$97,187 $50,436 
Marketable securities184,916  
Accounts receivable (net of allowance for doubtful accounts of $1,613 and $1,001, respectively)
187,860 858,922 
Inventories145,998 161,429 
Prepaid expenses and other assets59,811 35,473 
Restricted cash3,000 3,000 
Total current assets678,772 1,109,260 
Long-term marketable securities101,584  
Property, plant and equipment, net592,317 584,577 
Right of use assets29,057 36,899 
Goodwill16,080 16,080 
Intangible assets, net11,018 12,018 
Other assets 31,580 26,515 
TOTAL ASSETS$1,460,408 $1,785,349 
LIABILITIES AND EQUITY      
CURRENT LIABILITIES:      
Lines of credit$ $76,990 
Current maturities of long-term debt49,906 77,131 
Current maturities of operating lease obligations14,457 15,690 
Accounts payable 135,039 369,213 
Accrued expenses and other liabilities23,107 40,776 
Deferred revenue9,654 8,620 
Total current liabilities232,163 588,420 
Deferred income taxes6,977 6,975 
Long-term debt (net of debt issuance costs of $1,767 and $2,783, respectively)
15,881 26,130 
Long-term operating lease obligations15,701 30,413 
Other liabilities5,448 1,505 
Total liabilities276,170 653,443 
COMMITMENTS AND CONTINGENCIES
EQUITY:      
Common stock ($0.0001 par value; 300,000,000 shares authorized; 39,332,314 and 38,967,079 shares outstanding, respectively)
5 5 
Common stock—additional paid-in-capital390,383 438,591 
Retained earnings905,324 800,792 
Accumulated other comprehensive income(897)(1,994)
Treasury stock (10,589,584 and 10,403,798 shares outstanding, respectively)
(110,577)(105,488)
Total equity 1,184,238 1,131,906 
TOTAL LIABILITIES AND EQUITY$1,460,408 $1,785,349 
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 endedNine months ended
   September 30, 2020September 30, 2019September 30, 2020September 30, 2019
REVENUES:            
Biomass-based diesel sales$492,769 $583,676 $1,350,496 $1,620,960 
Biomass-based diesel government incentives83,178 512 245,471 1,510 
   575,947 584,188 1,595,967 1,622,470 
Other revenue105 184 718 754 
   576,052 584,372 1,596,685 1,623,224 
COSTS OF GOODS SOLD:            
Biomass-based diesel498,362 560,288 1,386,996 1,638,701 
Other costs of goods sold40 8 151 11 
   498,402 560,296 1,387,147 1,638,712 
GROSS PROFIT (LOSS)77,650 24,076 209,538 (15,488)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES31,059 24,762 86,971 77,157 
GAIN ON DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT  (187) 
IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT19,256 11,145 19,256 11,613 
INCOME (LOSS) FROM OPERATIONS27,335 (11,831)103,498 (104,258)
OTHER INCOME (EXPENSE), NET:            
Change in fair value of contingent consideration 136  (566)
Gain (loss) on debt extinguishment18  1,809 (2)
Gain on lease termination  4,459  
Other income1,594 179 3,505 1,724 
Interest expense(1,070)(2,866)(4,732)(10,822)
   542 (2,551)5,041 (9,666)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES27,877 (14,382)108,539 (113,924)
INCOME TAX BENEFIT (EXPENSE)(1,046)629 (4,007)1,149 
NET INCOME (LOSS) FROM CONTINUING OPERATIONS26,831 (13,753)104,532 (112,775)
NET LOSS ON DISCONTINUED OPERATIONS (2,193) (8,672)
NET INCOME (LOSS)$26,831 $(15,946)$104,532 $(121,447)
LESS—EFFECT OF PARTICIPATING SHARE-BASED AWARDS ON CONTINUING OPERATIONS492  2,071  
NET INCOME (LOSS) FROM CONTINUING OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS$26,339 $(13,753)$102,461 $(112,775)
NET LOSS FROM DISCONTINUED OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS$ $(2,193)$ $(8,672)
Basic net income (loss) per share available to common stockholders:            
Continuing operations $0.67 $(0.35)$2.62 $(2.96)
Discontinued operations$ $(0.06)$ $(0.23)
Net income (loss) per share $0.67 $(0.41)$2.62 $(3.19)
Diluted net income (loss) per share available to common stockholders:
Continuing operations $0.60 $(0.35)$2.38 $(2.96)
Discontinued operations$ $(0.06)$ $(0.23)
Net income (loss) per share$0.60 $(0.41)$2.38 $(3.19)
Weighted-average shares used to compute basic net income (loss) per share available to common stockholders:            
Basic39,306,263 38,959,606 39,154,788 38,060,782 
Weighted-average shares used to compute diluted net income (loss) per share available to common stockholders:
Diluted43,624,340 38,959,606 43,107,989 38,060,782 
See notes to condensed consolidated financial statements.
2


RENEWABLE ENERGY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
(in thousands)
Three months endedNine months ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Net income (loss)$26,831 $(15,946)$104,532 $(121,447)
Unrealized gains (losses) on marketable securities, net of taxes of (99), $, $9 and $, respectively
(176) 131  
Foreign currency translation adjustments982 (1,017)966 (984)
Other comprehensive income806 (1,017)1,097 (984)
Comprehensive income (loss)$27,637 $(16,963)$105,629 $(122,431)
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, 201937,318,942 $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, 201937,618,131 $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 premium1,902,781 — (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, 201938,958,744 $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 income — — — — (1,017)— (1,017)
Net loss— — — (15,946)— — (15,946)
BALANCE, September 30, 201938,964,276 $5 $446,435 $299,281 $(2,640)$(105,463)$637,618 
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, 202038,967,079 $5 $438,591 $800,792 $(1,994)$(105,488)$1,131,906 
Conversion of restricted stock units to common stock (net of 25,134 shares of treasury stock purchased)
38,144 — — — — (578)(578)
Settlement of stock appreciation rights in common stock (net of 14,438 shares of treasury stock purchased)
16,704 — (5)— — (240)(245)
Convertible debt extinguishment impact (net of tax impact of $1,013)
— — (17,829)— — — (17,829)
Stock compensation expense— — 1,367 — — — 1,367 
Other comprehensive loss— — — — (551)— (551)
Net income— — — 76,853 — — 76,853 
BALANCE, March 31, 202039,021,927 $5 $422,124 $877,645 $(2,545)$(106,306)$1,190,923 
Conversion of restricted stock units to common stock (net of 86,701 shares of treasury stock purchased)
230,265 — — — — (2,063)(2,063)
Settlement of stock appreciation rights in common stock (net of 21,794 shares of treasury stock purchased)
39,962 — (276)— — (776)(1,052)
Convertible debt extinguishment impact (net of tax impact of $1,055)
— — (20,860)— — — (20,860)
Stock compensation expense— — 1,855 — — — 1,855 
Other comprehensive income— — — — 842 — 842 
Net income— — — 848 — — 848 
BALANCE, June 30, 202039,292,154 $5 $402,843 $878,493 $(1,703)$(109,145)$1,170,493 
Conversion of restricted stock units to common stock (net of 30,624 shares of treasury stock purchased)
23,800 — — — — (1,185)(1,185)
Settlement of stock appreciation rights in common stock (net of 7,095 shares of treasury stock purchased)
16,360 — (279)— — (247)(526)
Convertible debt extinguishment impact (net of tax impact of $318)
— — (13,992)— — — (13,992)
Stock compensation expense— — 1,811 — — — 1,811 
Other comprehensive income— — — — 806 — 806 
Net income— — — 26,831 — — 26,831 
BALANCE, September 30, 202039,332,314 $5 $390,383 $905,324 $(897)$(110,577)$1,184,238 

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, 2020September 30, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income (loss)$104,532 $(121,447)
Net income (loss) from discontinuing operations (8,672)
Net income (loss) from continuing operations104,532 (112,775)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:      
Depreciation expense27,425 27,349 
Amortization expense of assets and liabilities, net12,026 16,170 
Accretion of convertible note discount652 2,561 
Amortization of marketable securities366 (146)
Change in fair value of contingent consideration 566 
Gain on sale of property, plant and equipment(187) 
(Gain) loss on debt extinguishment(1,809)2 
Provision for doubtful accounts716 17 
Impairment of property, plant and equipment19,256 11,613 
Stock compensation expense5,033 4,981 
Deferred tax expense (benefit)2,092 (1,159)
Gain on lease termination(4,459) 
Other operating activities3 212 
Changes in assets and liabilities:      
Accounts receivable, net670,395 (7,227)
Inventories15,445 5,437 
Prepaid expenses and other assets(36,827)2,947 
Accounts payable(236,213)(6,694)
Accrued expenses and other liabilities(13,607)1,952 
Operating lease obligations(11,489)(13,778)
Deferred revenue1,034 655 
Net cash flows provided by (used in) operating activities - continuing operations554,384 (67,317)
Net cash flows used in operating activities - discontinuing operations (9,832)
Cash provided by (used in) operating activities554,384 (77,149)
CASH FLOWS FROM INVESTING ACTIVITIES:      
Cash paid for marketable securities(305,726)(3,478)
Cash received from maturities of marketable securities19,000 54,584 
Cash paid for purchase of property, plant and equipment(46,945)(31,088)
Cash paid for investments (2,713)
Other investing activities187  
Net cash flows (used in) provided by investing activities - continuing operations(333,484)17,305 
Net cash flows provided by investing activities - discontinuing operations 3,100 
Cash (used in) provided by investing activities(333,484)20,405 
CASH FLOWS FROM FINANCING ACTIVITIES:      
Net (repayments) borrowings on revolving line of credit(76,990)77,758 
Borrowings on other lines of credit 66,186 
Repayments on other lines of credit (60,918)
Cash paid on notes payable(91,590)(73,067)
Cash paid for debt issuance costs (70)
Cash paid for contingent consideration settlement (9,003)
Cash paid for conversion of restricted stock units and stock appreciation rights(5,649)(3,517)
Net cash flows used in financing activities - continuing operations(174,229)(2,631)
Net cash flows used in financing activities - discontinuing operations  
Cash used in financing activities(174,229)(2,631)
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH46,671 (59,375)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, Beginning of period53,436 126,575 
Effect of exchange rate changes on cash80 (107)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, End of period$100,187 $67,093 
(continued)
6



RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Nine months ended
September 30, 2020September 30, 2019
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:      
Cash paid for income taxes$15 $1,515 
Cash paid for interest$4,651 $6,007 
Leased assets obtained in exchange for new operating lease liabilities$3,807 $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$5,497 $7,824 
Issuance of treasury stock to settle 2019 Convertible Senior Notes conversion premium$ $(18,779)
Receipt in treasury stock for settlement of capped call options$ $8,952 
(concluded)
   
See notes to condensed consolidated financial statements.


7


RENEWABLE ENERGY GROUP, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For The Nine Months Ended September 30, 2020 and 2019
(unaudited)
(in thousands, except share and per share amounts)
NOTE 1 — BASIS OF PRESENTATION AND NATURE OF THE BUSINESS
The condensed consolidated financial statements have been prepared by Renewable Energy Group, Inc. and its subsidiaries (the "Company" or "REG"), pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted as permitted by such rules and regulations. All adjustments, consisting of normal recurring adjustments, have been included. Management believes that the disclosures are adequate to present fairly the financial position, results of operations and cash flows at the dates and for the periods presented. It is suggested that these interim financial statements be read in conjunction with the consolidated financial statements and the notes thereto appearing in the Company’s latest annual report on Form 10-K filed on March 6, 2020. Results for interim periods are not necessarily indicative of those to be expected for the fiscal year.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and related disclosures. Actual results could differ from those estimates.
The Company owns and operates a network of twelve biorefineries, with ten locations in North America and two locations in Europe, which includes twelve operating biomass-based diesel production facilities with aggregate nameplate production capacity of 505 million gallons per year ("mmgy"). Ten of these plants are “multi-feedstock capable”, which allows them to use a broad range of lower-cost feedstocks, such as distillers corn oil, used cooking oil and inedible animal fats in addition to vegetable oils, such as soybean oil and canola oil. In August 2019, the Company closed the New Boston, Texas biorefinery, which had a nameplate capacity of 15 mmgy.
The biomass-based diesel industry and the Company’s business have benefited from certain federal and state government programs. The federal biodiesel mixture excise tax credit (the "BTC") was retroactively reinstated on December 20, 2019 for the years 2018 and 2019. The BTC has also been extended through December 31, 2022. The modification of federal and state government programs could adversely affect the financial results of the Company.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies should be read in conjunction with a summary of the significant accounting policies the Company has disclosed in its Annual Report on Form 10-K for the year ended December 31, 2019.

Restricted Cash
The Company segregates certain cash balances as restricted cash that represent those funds required to be set aside by a contractual agreement. The Company classifies restricted cash between current and non-current assets based on the length of time of the restricted use.
As of September 30, 2020 and 2019, current restricted cash was $3,000, representing pledges for outstanding letters of credit issued to support our operations. See the table below for reconciliation of "Cash, Cash Equivalents and Restricted Cash" in the Condensed Consolidated Statements of Cash Flows:
September 30, 2020September 30, 2019
Cash and cash equivalents$97,187 $64,093 
Restricted cash3,000 3,000 
Total cash, cash equivalents and restricted cash in the Condensed Statements of Cash Flows$100,187 $67,093 

8


Accounts Receivable
Accounts receivable are carried at invoiced amount less allowance for doubtful accounts. Management estimates the allowance for doubtful accounts based on existing economic conditions, the financial conditions of customers and the amount and age of past due accounts. Receivables are considered past due if full payment is not received by the contractual due date. Past due accounts are generally written off against the allowance for doubtful accounts only after reasonable collection attempts have been exhausted.
September 30, 2020December 31, 2019
Trade accounts receivable from customers (net of allowance for doubtful accounts of $1,613 and $1,001, respectively)
$135,374 $185,156 
BTC receivables from the government52,482