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Renewable Energy Group Reports Third Quarter 2014 Financial Results

| Nov 13, 2014

Q3 2014 Highlights

  • 89 million gallons sold, up 14.4% y/y
  • 64 million gallons produced, up 12.3% y/y
  • Net income of $5 million
  • Adjusted EBITDA of $11 million
  • REG Geismar started production and sales of renewable hydrocarbon diesel in October
  • Completed upgrades at REG Mason City in October

AMES, Iowa--(BUSINESS WIRE)-- Renewable Energy Group, Inc. ("REG" or the "Company") (NASDAQ:REGI) today announced its financial results for the third quarter ended September 30, 2014.

Revenues for the quarter were $384.3 million. Compared to the third quarter of 2013, REG sold 14.4% more gallons of biomass-based diesel, while revenues decreased by 16.2% and Adjusted EBITDA decreased by 77.7%.

"Our third quarter results reflect a very solid financial performance despite weak market conditions, while we worked to bring REG Geismar online and continued to invest in product development," said Daniel J. Oh, President and Chief Executive Officer. "Our traditional biodiesel business saw double digit volume growth of gallons sold and produced, compared to the third quarter of last year. The Mason City upgrades, which now allow that biorefinery to use lower cost feedstocks, were completed on time and within budget, and reflect our continued investment and focus on the biomass-based diesel business."

Oh continued, "We are very pleased with the progress at REG Geismar and operations start-up that was completed safely, timely and within our budget expectations."

Third Quarter 2014 Operating Highlights                            

For the third quarter, REG sold 88.8 million gallons of biodiesel, an increase of 14.4% compared to the third quarter of 2013. REG produced 63.8 million gallons of biodiesel during the quarter, a 12.3% increase when compared to the third quarter of 2013. The balance of the gallons sold consisted of 18.0 million gallons purchased from third parties and resold through the Company's distribution network and 7.0 million gallons from inventory.

REG continues to invest in its fleet of biomass-based diesel plants. The Company completed the upgrades at REG Mason City and the upgrades at REG Newton are progressing as planned.

REG Geismar began production and selling renewable hydrocarbon diesel in October, restarting the plant the Company acquired in June. The 75-million gallon nameplate capacity biorefinery had been in stand-by mode since December 2012.

Third Quarter 2014 Financial Results

All figures refer to the quarter ending September 30, 2014, unless otherwise noted.

Revenues of $384.3 million decreased 16.2% when compared to the third quarter of 2013. The decline is attributable to a reduction in average sales price and lower RIN prices, which more than offset the 14.4% increase in gallons sold. The average price per gallon of biodiesel sold during the third quarter was $3.54, or 28.5% lower than in the same quarter of 2013.

Gross profit was $22.7 million, or 5.9% of revenues, compared to gross profit of $57.8 million, or 12.6% of revenues, for the third quarter of 2013. The decrease in gross profit resulted from margin compression caused by lower selling prices.

Operating income was $6.0 million, compared to $45.2 million for the third quarter of 2013.

Net income attributable to common stockholders was $4.5 million, or $0.11 per share on a fully diluted basis. This compares to $78.5 million, or $2.31 per share on a fully diluted basis in the third quarter of 2013, which included tax benefits of $42.1 million, or $1.12 per share on a fully diluted basis.

Third Quarter 2014 Balance Sheet

At September 30, 2014, REG had liquid assets, which includes cash, cash equivalents and marketable securities, of $128.6 million, an increase of $2.7 million during the quarter.

At September 30, 2014, accounts receivable were $35.4 million, or 8 days of sales, a decrease of $13.0 million from June 30, 2014. Inventory was $49.4 million, or 12 days of sales, a decrease of $20.8 million during the quarter.

The table below summarizes REG's results for Q3 2014.

 

REG Q3 2014 Revenues and Adjusted EBITDA Summary

(dollars and gallons in thousands)

 

 

 

 

 

 

  Q3 2014  

  Q3 2013  

Y/Y Change

Gallons sold

88,821

77,626

14.4

%

Average selling price

$

3.54

$

4.95

-28.5

%

Total revenues

$

384,258

$

458,444

-16.2

%

Adjusted EBITDA

$

10,893

$

48,901

-77.7

%

Adjusted EBITDA margin (1)

2.8

%

10.7

%

 

(1) Adjusted EBITDA margin is defined as adjusted EBITDA as a percentage of total revenues.

 

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:

 

 

 

 

 

 

 

 

Three Months

Three Months

Nine Months

Nine Months

Ended

Ended

Ended

Ended

September 30,

September 30,

September 30,

September 30,

2014

2013

2014

2013

(In thousands)

Net income

$

4,572

$

86,703

$

13,220

$

156,236

Adjustments:

Income tax (benefit) expense

(248

)

(42,051

)

(12,274

)

3,452

Interest expense

2,867

577

4,622

1,757

Other (income) expense, net

(124

)

 

(66

)

 

(556

)

(276

)

Change in fair value of contingent liability

(1,059

)

(1,443

)

Straight-line lease expense

(142

)

(163

)

(455

)

(484

)

Depreciation

3,332

2,598

9,526

6,974

Amortization

303

(181

)

(66

)

(571

)

Non-recurring lease cancellation (1)

1,904

Non-recurring business interruption (2)

(863

)

Non-cash stock compensation

 

1,392

 

 

1,484

 

 

4,041

 

 

3,869

 

Adjusted EBITDA before 2012 blenders tax credit is allocated into historical results

10,893

48,901

18,519

170,094

2012 Retroactive biodiesel tax credit (3)

 

 

 

 

 

 

 

(57,745

)

Adjusted EBITDA

$

10,893

 

$

48,901

 

$

18,519

 

$

112,349

 

 

(1) In April 2014, we bought out the remaining life of the land lease at our Danville, Illinois facility and subsequently purchased the land. The amount represents the portion related to canceling the lease.

(2) We incurred a non-recurring business interruption charge at one of our production facilities in November 2012; we reflected the gain contingency in our operating performance of 2012 having received the corresponding insurance proceeds in February 2013, thus excluding it from first quarter 2013 adjusted EBITDA.

(3) On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which reinstated a set of tax extender items including the reinstatement of the federal Biodiesel Mixture Excise Tax Credit for 2013 and the retroactive reinstatement of the credit for 2012. The retroactive credit for 2012 resulted in a net benefit to REG that was recognized in the first quarter of 2013, but which relates to the operating performance and results during 2012 and is thus reallocated to 2012.

 

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. is a leading North American advanced biofuels producer and developer of renewable chemicals. REG utilizes a nationwide production, distribution and logistics system as part of an integrated value chain model to focus on converting natural fats, oils and greases into advanced biofuels and converting diverse feedstocks into renewable chemicals. With 10 active biorefineries across the country, research and development capabilities, and a diverse and growing intellectual property portfolio, REG is committed to being a long-term leader in bio-based fuels and chemicals.

For more than a decade, REG has been a reliable supplier of advanced biofuels which meet or exceed ASTM quality specifications. REG sells REG-9000™ biomass-based diesel to distributors so consumers can have cleaner burning fuels that help diversify the energy complex and increase energy security. REG-9000™ biomass-based diesel is distributed in most states in the U.S. REG also markets ultra-low sulfur diesel and heating oil in the northeastern US.

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 expected favorable impact of the Company's plant upgrades and the future growth of its markets.  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; 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; availability of federal and state governmental tax credits and incentives for biomass-based diesel production; 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 use the technology acquired from LS9 to produce renewable chemicals, fuels and other products on a commercial scale and at a competitive cost, and customer acceptance of the products produced; our ability to successfully integrate Syntroleum and Dynamic Fuels and their employees into our existing business; whether REG Geismar will be able to produce renewable hydrocarbon diesel consistently or profitably; and other risks and uncertainties described from time to time in REG's annual report on Form 10-K, quarterly reports on Forms 10-Q and other periodic filings with the Securities and Exchange Commission.

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 NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(in thousands, except share and per share amounts)

 

 

 

 

 

 

 

 

Three months ended

Nine months ended

September 30,

September 30,

September 30,

September 30,

2014

2013

2014

2013

REVENUES:

Biodiesel sales

$

382,296

$

399,226

$

919,255

$

859,058

Biodiesel government incentives

 

1,830

 

 

59,203

 

 

16,742

 

 

248,385

 

384,126

458,429

935,997

1,107,443

Services

 

132

 

 

15

 

 

219

 

 

104

 

 

384,258

 

 

458,444

 

 

936,216

 

 

1,107,547

 

COSTS OF GOODS SOLD:

Biodiesel

361,523

400,575

886,719

912,673

Services

 

20

 

 

20

 

 

67

 

 

149

 

 

361,543

 

 

400,595

 

 

886,786

 

 

912,822

 

GROSS PROFIT

22,715

57,849

49,430

194,725

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

 

16,707

 

 

12,686

 

 

45,861

 

 

33,556

 

INCOME FROM OPERATIONS

 

6,008

 

 

45,163

 

 

3,569

 

 

161,169

 

OTHER INCOME (EXPENSE), NET:

Change in fair value of contingent consideration

1,059

-

1,443

-

Other income

124

66

556

276

Interest expense

 

(2,867

)

 

(577

)

 

(4,622

)

 

(1,757

)

 

(1,684

)

 

(511

)

 

(2,623

)

 

(1,481

)

INCOME BEFORE INCOME TAXES

4,324

44,652

946

159,688

INCOME TAX BENEFIT (EXPENSE)

 

248

 

 

42,051

 

 

12,274

 

 

(3,452

)

NET INCOME

 

4,572

 

 

86,703

 

 

13,220

 

 

156,236

 

PLUS - GAIN ON REDEMPTION OF PREFERRED STOCK

-

-

378

-

LESS - CHANGES IN UNDISTRIBUTED DIVIDENDS ALLOCATED TO PREFERRED STOCKHOLDERS

-

(147

)

-

(147

)

LESS - DISTRIBUTED DIVIDENDS TO PREFERRED STOCKHOLDERS

-

(258

)

(40

)

(1,848

)

LESS - EFFECT OF PARTICIPATING PREFERRED STOCK

-

(6,455

)

-

(18,010

)

LESS - EFFECT OF PARTICIPATING SHARE-BASED AWARDS

 

(68

)

 

(1,381

)

 

(196

)

 

(2,273

)

NET INCOME ATTRIBUTABLE TO THE COMPANY'S COMMON STOCKHOLDERS

$

4,504

 

$

78,462

 

$

13,362

 

$

133,958

 

NET INCOME PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS:

BASIC

$

0.11

 

$

2.32

 

$

0.33

 

$

4.20

 

DILUTED

$

0.11

 

$

2.31

 

$

0.32

 

$

4.20

 

WEIGHTED-AVERAGE SHARES USED TO COMPUTE NET INCOME PER SHARE

ATTRIBUTABLE TO COMMON STOCKHOLDERS:

BASIC

 

42,374,768

 

 

33,790,034

 

 

40,216,467

 

 

31,918,951

 

DILUTED

 

42,432,005

 

 

34,016,476

 

 

40,228,929

 

 

31,924,197

 

 

 

 

RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

AS OF SEPTEMBER 30, 2014 AND DECEMBER 31, 2013

(in thousands, except share and per share amounts)

 

 

 

 

September 30, 2014

December 31, 2013

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

67,270

$

153,227

Marketable securities

61,378

-

Accounts receivable, net

35,422

82,911

Inventories

49,382

85,814

Prepaid expenses and other assets

 

39,786

 

 

25,568

 

Total current assets

253,238

347,520

Property, plant and equipment, net

462,053

286,044

Property, plant and equipment, net - variable interest entity

-

5,180

Goodwill

175,472

84,864

Intangible assets, net

29,280

4,867

Deferred income taxes

1,470

-

Other assets

29,356

12,380

Restricted cash

 

104,815

 

 

-

 

TOTAL ASSETS

$

1,055,684

 

$

740,855

 

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Revolving line of credit

$

-

$

10,986

Current maturities of long-term debt

6,105

6,729

Current maturities of long-term debt - variable interest entity

-

300

Accounts payable

53,942

48,727

Accrued expenses and other liabilities

15,361

12,305

Deferred income taxes

8,968

3,687

Deferred revenue

 

99

 

 

15,503

 

Total current liabilities

84,475

98,237

Unfavorable lease obligation

7,058

7,905

Deferred income taxes

-

2,691

Contingent consideration for acquisitions

39,411

-

Long-term debt

241,495

23,422

Long-term debt - variable interest entity

-

3,729

Other liabilities

 

4,153

 

 

6,838

 

Total liabilities

 

376,592

 

 

142,822

 

COMMITMENTS AND CONTINGENCIES

Series B preferred stock ($.0001 par value; 3,000,000 shares authorized; 0 and 143,313 shares outstanding, redemption amount $0 and $3,583, respectively)

-

3,963

EQUITY:

Company stockholders' equity:

Common stock ($.0001 par value; 300,000,000 shares authorized; 42,306,595 and 36,506,221 shares outstanding, respectively)

4

4

Common stock - additional paid-in-capital

431,153

359,671

Warrants - additional paid-in-capital

147

147

Retained earnings

251,692

238,134

Accumulated other comprehensive loss

(18

)

-

Treasury stock (530,898 and 530,898 shares, respectively)

 

(3,886

)

 

(3,886

)

Total equity

 

679,092

 

 

594,070

 

TOTAL LIABILITIES AND EQUITY

$

1,055,684

 

$

740,855

 

 

 

Investor Relations:
ICR, LLC
Gary Dvorchak, CFA, 310-954-1123
Senior Vice President
gary.dvorchak@icrinc.com
or
Company:
Renewable Energy Group, Inc.
Todd Robinson, 515-239-8048
Director, Investor Relations
Todd.Robinson@regi.com

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