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Renewable Energy Group Reports Second Quarter 2018 Financial Results

| Aug 06, 2018

Q2 2018 Highlights

  • Net income of $33.0 million or $0.78 per diluted share, up from net loss of $34.8 million, or $0.90 per diluted share y/y
  • Adjusted net income of $23.5 million or $0.56 per share, up from $4.5 million, or $0.12 per share excluding allocation of the 2017 BTC y/y
  • Adjusted EBITDA of $42.3 million, up from $19.7 million y/y, excluding allocation of the 2017 BTC
  • Revenues of $580.2 million, up 8% y/y
  • 172 million gallons sold, up 7% y/y
  • 124 million gallons produced, up 6% y/y

Ames, IA, August 6, 2018 - Renewable Energy Group, Inc. ("REG" or the "Company") (NASDAQ:REGI) today announced its financial results for the second quarter ended June 30, 2018.

"We produced outstanding results in the first half of the year, demonstrating our ability to execute across all aspects of our business," said Randy Howard, President and Chief Executive Officer.  "We tripled our Adjusted EBITDA for the first six months compared to last year, excluding allocation of the 2017 BTC, which is an accomplishment made even more impressive because our Geismar renewable diesel refinery was offline for three weeks due to planned maintenance.  With Geismar back online and once again producing above nameplate capacity, combined with a solid margin environment, we look forward to a strong second half of the year."

Net income attributable to common stockholders was $33.0 million in the second quarter of 2018, compared to net loss of $34.8 million in the second quarter of 2017.  The improvement in net income reflects better margins in 2018 as well as more gallons sold.  Adjusted net income was $23.5 million compared to Adjusted net income of $4.5 million in the second quarter of 2017, excluding allocation of the 2017 BTC.  Second quarter 2018 Adjusted EBITDA was $42.3 million, compared to Adjusted EBITDA of $19.7 million in the second quarter of 2017, excluding allocation of the 2017 BTC.  After reallocating the net benefit of the BTC to applicable periods in 2017, Adjusted net income was $62.5 million and Adjusted EBITDA was $79.1 million in the second quarter of 2017.

Revenues for the quarter were $580.2 million on 171.9 million gallons of fuel sold.  Revenues in the second quarter increased $45.0 million compared to the second quarter of 2017 mainly due to more gallons sold and a higher average selling price in the second quarter of 2018, partially offset by lower revenue from sales of separated RINs.

The Company estimates that if the currently lapsed BTC is retroactively reinstated for 2018 on the same terms as in 2017, REG's net income, Adjusted net income and Adjusted EBITDA would each increase by approximately $66.2 million for business conducted in the quarter ended June 30, 2018 and would each increase by approximately $108.7 million for business conducted in the first six months of 2018.

Second Quarter 2018 Highlights

All figures refer to the quarter ending June 30, 2018, unless otherwise noted.  All comparisons are to the quarter ended June 30, 2017 unless otherwise noted.

REG sold a total of 171.9 million gallons of fuel, an increase of 7.3% primarily due to increased biodiesel and petroleum gallons sold, partially offset by fewer sales of biomass-based diesel gallons produced by third parties. The average selling price per gallon was $3.11, an increase of 8.7% excluding allocation of the 2017 BTC. The Company produced 124.4 million gallons of biomass-based diesel during the quarter, a 5.9% increase.

Revenues were $580.2 million, an increase of 8.4% that was primarily due to the increase in gallons sold and higher average selling price per gallon partially offset by lower revenue from sales of separated RINs.

Gross profit was $57.6 million, or 9.9% of revenues, compared to gross profit of $31.5 million, or 5.9% of revenues.  Gross profit as a percentage of revenue increased due to lower feedstock costs and operational improvements, partially offset by declining RIN prices.

Net income attributable to common stockholders was $33.0 million, or $0.78 per share on a fully diluted basis. This compares to a net loss of $34.8 million, or $0.90 per share on a fully diluted basis in the second quarter of 2017. Adjusted net income attributable to common stockholders was $23.5 million, or $0.56 per share, compared to an adjusted net income excluding allocation of the 2017 BTC of $4.5 million, or $0.12 per share, on a fully diluted basis in the second quarter of 2017.  Adjusted EBITDA was $42.3 million compared to $19.7 million, excluding allocation of the 2017 BTC, in the second quarter 2017.

At June 30, 2018, REG had cash and cash equivalents of $221.8 million, an increase of $144.1 million from December 31, 2017.  This increase is mainly due to receipt of the 2017 BTC refunds in 2018.

At June 30, 2018, accounts receivable were $91.2 million, or 14 days of sales. Accounts receivable at December 31, 2017 were $90.6 million. Inventory was $141.7 million at June 30, 2018, or 24 days of cost of sales, an increase of $6.2 million from December 31, 2017. Accounts payable were $120.7 million and $84.6 million at June 30, 2018 and December 31, 2017, respectively.  The increase in accounts payable is due to amounts due to customers resulting from the retroactive BTC reinstatement.

The table below summarizes REG’s results for the second quarter of 2018.

REG Q2 2018 and Q2 2017 Revenues, Net Income (Loss), Adjusted Net Income (Loss) and Adjusted EBITDA Summary

(dollars and gallons in thousands)

 

Q2 2018

 

Q2 2017

 

Y/Y Change

Gallons sold

171,943

 

 

160,219

 

 

7.3

%

Average selling price per gallon, excluding the BTC

$

3.11

 

 

$

2.86

 

 

8.7

%

Total revenues

$

580,150

 

 

$

535,103

 

 

8.4

%

Net income (loss) attributable to common stockholders

$

32,956

 

 

$

(34,809

)

 

N/M

Adjusted Net Income excluding 2017 BTC allocation

$

23,477

 

 

$

4,486

 

 

423.3

%

Adjusted Net Income

$

23,477

 

 

$

62,474

 

 

(62.4

)%

Adjusted EBITDA excluding 2017 BTC allocation

$

42,308

 

 

$

19,703

 

 

114.7

%

Adjusted EBITDA

$

42,308

 

 

$

79,068

 

 

(46.5

)%

 

Reconciliation of Non - GAAP Measures

The Company believes supplementing its consolidated financial statements presented in accordance with GAAP with non-GAAP measures provides investors with useful information regarding the Company's core operating performance, as well as short-term and long-term trends.

Adjusted net income and adjusted diluted earnings per common share are derived from GAAP results by excluding the non-cash impacts related to the change in the estimated fair value of the convertible debt conversion liability, change in fair value of contingent considerations, impairment of assets, and stock compensation, coupled with allocation of the net benefit of the 2017 BTC as set forth in the footnotes to the tables below and the other items identified in the tables below that we believe are not related to our core operating activities.

Earnings before interest, taxes, depreciation and amortization, and further adjusted for certain additional items identified in the table below, or 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.

Adjusted net income, adjusted diluted earnings per common share and Adjusted EBITDA as presented by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. Investors should consider non-GAAP measures in addition to, and not as a substitute for, or as superior to, financial performance measures prepared in accordance with GAAP.

Adjusted Net Income (Loss) and Adjusted EPS Reconciliation:

The following table sets forth Adjusted Net Income (Loss) and Adjusted net income (loss) per share for the periods presented, as well as a reconciliation to net income (loss) determined in accordance with GAAP:

(In thousands, except per share amounts)

Three Months
Ended
June 30,
2018

 

Three Months
Ended
June 30,
2017

 

Six Months
Ended
June 30,
2018

 

Six Months
Ended
June 30,
2017

Net income (loss) attributable to the Company

$

33,850

 

 

$

(34,809

)

 

$

248,239

 

 

$

(50,723

)

Gain on involuntary conversion

(454

)

 

 

 

(4,454

)

 

 

Gain on sale of assets

 

 

 

 

(990

)

 

 

Change in fair value of convertible debt conversion liability

 

 

32,546

 

 

 

 

32,718

 

Change in fair value of contingent considerations

(7,129

)

 

(24

)

 

(8,669

)

 

565

 

Gain on debt extinguishment

(2,337

)

 

 

 

(2,105

)

 

 

Loss on the Geismar lease termination

 

 

3,967

 

 

 

 

3,967

 

Other (income) expense, net

(2,066

)

 

(32

)

 

(2,289

)

 

288

 

Impairment of assets

 

 

1,341

 

 

 

 

1,341

 

Straight-line lease expense

(3

)

 

(85

)

 

(35

)

 

(117

)

Executive severance payment

50

 

 

 

 

215

 

 

 

Non-cash stock compensation

2,203

 

 

1,688

 

 

3,997

 

 

2,996

 

2017 BTC (1)

 

 

 

 

(204,936

)

 

 

Adjusted net income (loss) attributable to the Company

$

24,114

 

 

$

4,592

 

 

$

28,973

 

 

$

(8,965

)

Effect of participating share-based awards

637

 

 

106

 

 

730

 

 

 

Adjusted net income (loss) excluding 2017 BTC allocation attributable to common stockholders

$

23,477

 

 

$

4,486

 

 

$

28,243

 

 

$

(8,965

)

 

 

 

 

 

 

 

 

Adjusted net income (loss) attributable to the Company

$

24,114

 

 

$

4,592

 

 

$

28,973

 

 

$

(8,965

)

Allocation of 2017 BTC

 

 

59,365

 

 

 

 

96,093

 

Adjusted net income (loss) including 2017 BTC allocation attributable to the Company

24,114

 

 

63,957

 

 

28,973

 

 

87,128

 

Effect of participating share-based awards

637

 

 

1,483

 

 

730

 

 

1,936

 

Adjusted net income (loss) including 2017 BTC allocation attributable to common stockholders

$

23,477

 

 

$

62,474

 

 

$

28,243

 

 

$

85,192

 

 

 

 

 

 

 

 

 

Net income (loss) per share attributable to common stockholders

 

 

 

 

 

 

 

Diluted

$

0.78

 

 

$

(0.90

)

 

$

5.94

 

 

$

(1.31

)

 

 

 

 

 

 

 

 

Adjusted net income (loss) excluding 2017 BTC allocation per share attributable to common stockholders

 

 

 

 

 

 

 

Diluted

$

0.56

 

 

$

0.12

 

 

$

0.69

 

 

$

(0.23

)

 

 

 

 

 

 

 

 

Adjusted net income including 2017 BTC allocation per share attributable to common stockholders

 

 

 

 

 

 

 

Diluted

$

0.56

 

 

$

1.61

 

 

$

0.69

 

 

$

2.20

 

(1) On February 9, 2018, the Biodiesel Mixture Excise Tax Credit ("BTC") was retroactively reinstated for the 2017 calendar year.  The retroactive credit for 2017 resulted in a net benefit to us that was recognized in the first quarter of 2018 for GAAP purposes.  Because this credit relates to the 2017 full year operating performance and results, we removed the net benefit of the 2017 BTC from our 2018 results and allocated a portion of the net benefit of the tax credit to each of the four quarters of 2017 based upon gallons sold.

Adjusted EBITDA Reconciliation:

The following table sets forth Adjusted EBITDA for the periods presented, as well as a reconciliation to net income (loss) determined in accordance with GAAP:

 

Three Months
Ended
June 30,
2018

 

Three Months
Ended
June 30,
2017

 

Six Months
Ended
June 30,
2018

 

Six Months
Ended
June 30,
2017

(In thousands)

 

 

 

 

 

 

 

Net income (loss)

$

33,850

 

 

$

(34,809

)

 

$

248,239

 

 

$

(50,723

)

Adjustments:

 

 

 

 

 

 

 

Income tax expense

3,835

 

 

1,960

 

 

2,632

 

 

3,035

 

Interest expense

4,925

 

 

4,479

 

 

9,576

 

 

9,015

 

Depreciation

9,124

 

 

8,523

 

 

17,983

 

 

16,946

 

Amortization

310

 

 

149

 

 

618

 

 

276

 

EBITDA

52,044

 

 

(19,698

)

 

279,048

 

 

(21,451

)

Gain on involuntary conversion

(454

)

 

 

 

(4,454

)

 

 

Gain on sale of assets

 

 

 

 

(990

)

 

 

Change in fair value of convertible debt conversion liability

 

 

32,546

 

 

 

 

32,718

 

Change in fair value of contingent liability

(7,129

)

 

(24

)

 

(8,669

)

 

565

 

Gain on debt extinguishment

(2,337

)

 

 

 

(2,105

)

 

 

Other (income) expense, net

(2,066

)

 

(32

)

 

(2,289

)

 

288

 

Impairment of assets

 

 

1,341

 

 

 

 

1,341

 

Loss on the Geismar lease termination

 

 

3,967

 

 

 

 

3,967

 

Straight-line lease expense

(3

)

 

(85

)

 

(35

)

 

(117

)

Executive severance

50

 

 

 

 

215

 

 

 

Non-cash stock compensation

2,203

 

 

1,688

 

 

3,997

 

 

2,996

 

2017 BTC (1)

 

 

 

 

(204,936

)

 

 

Adjusted EBITDA excluding 2017 BTC allocation

42,308

 

 

19,703

 

 

59,782

 

 

20,307

 

Allocation of 2017 BTC (1)

 

 

59,365

 

 

 

 

96,093

 

Adjusted EBITDA

$

42,308

 

 

$

79,068

 

 

$

59,782

 

 

$

116,400

 

(1) On February 9, 2018, the Biodiesel Mixture Excise Tax Credit ("BTC") was retroactively reinstated for the 2017 calendar year.  The retroactive credit for 2017 resulted in a net benefit to us that was recognized in the first quarter of 2018 for GAAP purposes.  Because this credit relates to the 2017 full year operating performance and results, we removed the net benefit of the 2017 BTC from our 2018 results and allocated a portion of the net benefit of the tax credit to each of the four quarters of 2017 based upon gallons sold.

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 expected production at our Geismar renewable diesel facility and an expected favorable margin environment in the second the half of 2018, the possible retroactive reinstatement of the BTC for 2018, and the estimated benefits to Adjusted net income and Adjusted EBITDA if the BTC is retroactively reinstated for 2018.  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 2018 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, 2017, Form 10-Q for the quarter ended March 31, 2018 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 SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(in thousands, except share and per share amounts)

 

Three months ended

 

Six months ended

 

June 30, 2018

 

June 30, 2017

 

June 30, 2018

 

June 30, 2017

REVENUES:

 

 

 

 

 

 

 

Biomass-based diesel sales

$

551,109

 

 

$

455,928

 

 

$

825,870

 

 

$

799,664

 

Separated RIN sales

26,186

 

 

67,349

 

 

73,365

 

 

124,674

 

Biomass-based diesel government incentives

915

 

 

10,821

 

 

366,200

 

 

27,762

 

 

578,210

 

 

534,098

 

 

1,265,435

 

 

952,100

 

Other revenue

1,940

 

 

1,005

 

 

3,967

 

 

1,896

 

 

580,150

 

 

535,103

 

 

1,269,402

 

 

953,996

 

COSTS OF GOODS SOLD:

 

 

 

 

 

 

 

Biomass-based diesel

510,380

 

 

468,407

 

 

916,189

 

 

822,258

 

Separated RINs

11,011

 

 

34,218

 

 

43,748

 

 

80,847

 

Other costs of goods sold

1,138

 

 

1,024

 

 

2,276

 

 

2,154

 

 

522,529

 

 

503,649

 

 

962,213

 

 

905,259

 

GROSS PROFIT

57,621

 

 

31,454

 

 

307,189

 

 

48,737

 

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

24,512

 

 

22,812

 

 

56,166

 

 

45,719

 

RESEARCH AND DEVELOPMENT EXPENSE

2,485

 

 

3,181

 

 

9,083

 

 

6,779

 

IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT

 

 

1,341

 

 

 

 

1,341

 

INCOME (LOSS) FROM OPERATIONS

30,624

 

 

4,120

 

 

241,940

 

 

(5,102

)

OTHER INCOME (EXPENSE), NET

7,061

 

 

(36,969

)

 

8,931

 

 

(42,586

)

INCOME (LOSS) BEFORE INCOME TAXES

37,685

 

 

(32,849

)

 

250,871

 

 

(47,688

)

INCOME TAX EXPENSE

(3,835

)

 

(1,960

)

 

(2,632

)

 

(3,035

)

NET INCOME (LOSS)

$

33,850

 

 

$

(34,809

)

 

$

248,239

 

 

$

(50,723

)

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

$

32,956

 

 

$

(34,809

)

 

$

241,983

 

 

$

(50,723

)

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

 

 

 

 

 

 

 

BASIC

$

0.88

 

 

$

(0.90

)

 

$

6.35

 

 

$

(1.31

)

DILUTED

$

0.78

 

 

$

(0.90

)

 

$

5.94

 

 

$

(1.31

)

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

 

 

 

 

 

 

 

BASIC

37,413,387

 

 

38,679,849

 

 

38,112,531

 

 

38,639,672

 

DILUTED

42,079,944

 

 

38,679,849

 

 

40,713,114

 

 

38,639,672

 

 


RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

AS OF JUNE 30, 2018 AND DECEMBER 31, 2017

(in thousands, except share and per share amounts)

 

June 30, 2018

 

December 31, 2017

ASSETS

 

 

 

CURRENT ASSETS:

 

 

 

Cash and cash equivalents

$

221,775

 

 

$

77,627

 

Accounts receivable, net

91,248

 

 

90,648

 

Inventories

141,736

 

 

135,547

 

Prepaid expenses and other assets

45,294

 

 

51,880

 

Total current assets

500,053

 

 

355,702

 

Property, plant and equipment, net

591,265

 

 

587,397

 

Goodwill

16,080

 

 

16,080

 

Intangible assets, net

25,944

 

 

27,127

 

Investments

12,153

 

 

12,250

 

Other assets

7,275

 

 

7,040

 

TOTAL ASSETS

$

1,152,770

 

 

$

1,005,596

 

LIABILITIES AND EQUITY

 

 

 

CURRENT LIABILITIES:

 

 

 

Lines of credit

$

7,844

 

 

$

65,525

 

Current maturities of long-term debt

176,746

 

 

13,397

 

Accounts payable

120,733

 

 

84,608

 

Accrued expenses and other liabilities

31,549

 

 

39,187

 

Deferred revenue

161

 

 

2,218

 

Total current liabilities

337,033

 

 

204,935

 

Unfavorable lease obligation

2,823

 

 

3,388

 

Deferred income taxes

8,430

 

 

8,192

 

Long-term contingent consideration for acquisitions

3,311

 

 

8,849

 

Long-term debt (net of debt issuance costs of $4,592 and $6,627, respectively)

31,006

 

 

208,536

 

Other liabilities

3,379

 

 

4,114

 

Total liabilities

385,982

 

 

438,014

 

COMMITMENTS AND CONTINGENCIES

 

 

 

TOTAL EQUITY

766,788

 

 

567,582

 

TOTAL LIABILITIES AND EQUITY

$

1,152,770

 

 

$

1,005,596

 

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