Renewable Energy Group reports Q4, full-year 2015 financials

By Renewable Energy Group Inc. | March 09, 2016
Renewable Energy Group Inc. announced its financial results for the fourth quarter and full year ended Dec. 31.

For the fourth quarter of 2015, revenue was $387.8 million on 99 million gallons sold with adjusted EBITDA of $21.6 million. REG increased total gallons sold by 33 percent compared to the fourth quarter of 2014. Revenue increased by 15 percent while adjusted EBITDA decreased by 37 percent in the fourth quarter of 2015 compared to the same period in 2014, due primarily to compressed margins.

For the full year 2015, revenue was $1.4 billion on 375 million gallons sold with adjusted EBITDA of $50.2 million. For the full year 2015, REG sold 30 percent more total gallons, revenue increased by 9 percent, and adjusted EBITDA decreased by 53 percent, compared to 2014. The decline in adjusted EBITDA is primarily attributable to the challenging market conditions in the energy and commodity sectors in 2015, compounded by the Geismar biorefinery being offline.

“Despite challenging conditions in markets in which we operate, 2015 was another year of growth and resiliency for REG,” said Daniel J. Oh, president and CEO. “We generated positive adjusted EBITDA, further grew our records of gallons produced and sold, continued to expand our nameplate production capacity and increased our ownership share in Petrotec.”

Oh continued, “We are encouraged about our outlook for 2016 and beyond. The regulatory clarity and growth trajectory EPA provided last year with a multiyear RVO will grow biomass-based diesel beyond 2 billion gallons by next year, and effectively already has when you consider carryover RINs. And with the biodiesel tax credit being in place for this year, contributions from the restart of our Geismar renewable hydrocarbon diesel biorefinery and a full-year of production at Grays Harbor, we are well-positioned for future growth.”

The company reported net losses under generally accepted accounting principles (GAAP) of $95.6 million in the fourth quarter and $151.7 million for 2015. During the fourth quarter, the company recognized a noncash goodwill impairment charge in the amount of $175 million. Under GAAP, the company is required to conduct a goodwill impairment test at least annually and when impairment indicators are present. Goodwill is considered impaired when the carrying amount exceeds its implied fair value. The company concluded that the decline in the company’s common stock price observed during the third and fourth quarter represented a sustained decline and that triggering events occurred during this period requiring an interim goodwill impairment test as of Oct. 31. The company does not expect the accounting write down to impact its business or financial results beyond the fourth quarter.

The company’s board of directors has approved a repurchase program of up to $50 million of the company's outstanding shares of common stock and/or convertible bonds. Under the program, REG may repurchase shares or bonds from time to time in open market transactions, privately negotiated transactions or by other means. The timing and amount of repurchase transactions will be determined by the company’s management based on its evaluation of market conditions, share price, bond price, legal requirements and other factors. The program may be suspended, modified or discontinued at any time without prior notice.

Fourth quarter operating highlights

REG sold 98.8 million total gallons of fuel, an increase of 33 percent compared to the fourth quarter of 2014. Gallons sold in the quarter included 12.3 million gallons purchased from third parties and resold through the company’s extensive distribution network, 13.8 million gallons of petroleum-based diesel fuel and 9.7 million gallons sold by Petrotec.

REG produced 81.5 million gallons of biomass-based diesel during the quarter, an increase of 7.5 million gallons over the fourth quarter of 2014. The growth in production resulted from additional capacity from the Grays Harbor acquisition and inclusion of Petrotec for the full quarter in 2015 compared to a few days in 2014. The company utilized contract or toll manufacturing, which contributed 4.8 million gallons in the quarter.

Fourth quarter financial results

Revenue of $387.8 million increased $50.2 million when compared to the fourth quarter of 2014. The increase in revenue was driven by volume growth of 33 percent and an increase in the amount recognized from reinstatement of the federal biodiesel mixture excise tax credit (BTC), offset by lower biomass-based diesel prices. The average price per gallon sold (including RINs) for B100 was $2.69, a decrease of 11 percent from the same period in 2014.

Gross profit was $106.4 million, compared to $111.2 million for the fourth quarter of 2014. Gross margin was 27 percent, compared to 33 percent in the year-earlier quarter. The decrease in gross profit was primarily due to the compressed margin environment the company experienced in the fourth quarter.

Operating loss was $96.6 million compared to operating income of $81.9 million for the fourth quarter of 2014. The loss was largely due to the $175 million noncash goodwill impairment charge discussed above.

Net loss attributable to common stockholders was $95.6 million, or $2.18 per share on a fully diluted basis. This compares to a net income of $69.4 million, or $1.61 per share on a fully diluted basis in the fourth quarter of 2014. Net income attributable to common shareholders was $79.4 million, excluding the noncash goodwill impairment charge of $175 million, or $1.81 per share on a fully diluted basis.

Adjusted EBITDA (including adjustments for the allocation of the retroactive reinstatement of the BTC for the first three quarters of 2015) was $21.6 million, a 37 percent decrease compared to the 2014 period. Fourth quarter 2014 adjusted EBITDA was $34 million. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization and further adjusted for certain items identified below under “Adjusted EBITDA Summary.”

At Dec. 31, REG had liquid assets, which include cash and cash equivalents and marketable securities, of $47.1 million, a decrease of 36 percent during the quarter. For the year, the company's liquid asset balance decreased by $33.2 million as a result of the investments in facility upgrades, acquisitions and cash used to buy back shares, offset by cash generated from operations. At Dec. 31, accounts receivable were $310.7 million, an increase of $258.8 million from Sept. 30, mainly as a result of the entire 2015 BTC being recorded in the fourth quarter. Inventory was $85.9 million, an increase of $7 million during the quarter.

The table below summarizes REG’s results for Q4 2015:

 

REG Q4 2015 Revenues and Adjusted EBITDA Summary
(dollars and gallons in thousands)

 

 

 

4Q-2015

 

 

4Q-2014

 

 

Y/Y Change

Gallons sold

     

 

98,780

     

 

74,005

   

33

%

Average selling price

   

$

 

2.69

   

$

 

3.03

   

(11

)%

Total revenues

   

$

 

387,808

   

$

 

337,615

   

15

%

Adjusted EBITDA (1)(2)

   

$

 

21,589

   

$

 

34,033

   

(37

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) On Dec. 19, 2014, the Tax Increase Prevention Act of 2014 was signed into law, which reinstated a set of tax extender items including the retroactive reinstatement of the federal biodiesel mixture excise tax credit (BTC) for 2014 and lapsed on Dec. 31, 2014. The retroactive credit for 2014 resulted in a net benefit to us of $95 million, $79 million of which was recognized in the fourth quarter of 2014. Because this credit relates to the full year operating performance and results, the company allocated a portion of the credit to each of the first three quarters of 2014 based upon gallons sold in each quarter and excluded those amounts from the fourth quarter 2014 adjusted EBITDA.

(2) On Dec. 18, 2015, the Protecting Americans from Tax Hikes Act of 2015 was signed into law, which reinstated a set of tax extender items including the retroactive reinstatement of the BTC for 2015 and prospectively in effect for 2016. The retroactive credit for 2015 resulted in a net benefit to us of $95 million that was recognized in the fourth quarter of 2015. Because this credit relates to the full year operating performance and results, the company allocated a portion of the credit to each of the first three quarters of 2015 based upon gallons sold in each quarter and excluded those amounts from the fourth quarter 2015 adjusted EBITDA.

Full year 2015 results

REG sold 374.7 million total gallons, an increase of 30 percent compared to 287.3 million gallons in 2014. Gallons sold in 2015 included 39.6 million gallons purchased from third parties and resold through the company’s extensive distribution network, 30.3 million gallons of petroleum-based diesel fuel and 39.9 million gallons sold by Petrotec.

The average B100 price per gallon (including RINs) sold by REG was $2.97, compared to $3.62 in 2014.

REG produced 300.3 million gallons of biomass-based diesel, compared to 235.9 million gallons in 2014. The growth in production resulted from additional capacity from the Grays Harbor acquisition and inclusion of Petrotec for the full year in 2015 compared to a few days in 2014. The company utilized contract or toll manufacturing, which contributed 17.3 million gallons.

Revenue was $1.39 billion, an increase of $113.5 million, or 9 percent, versus 2014 revenue of $1.27 billion. The increase was due to a 30 percent increase in gallons sold, an increase in the amount recognized from reinstatement of the BTC and increased revenue from separated RIN inventory; offset by an 18 percent decline in biomass-based diesel prices throughout 2015 as compared to 2014.

Gross profit was $110.5 million, compared to $160.6 million in 2014.

Operating loss was $154.7 million, compared to operating income of $85.5 million in 2014. The loss was largely due to the $175 million noncash goodwill impairment charge discussed above.

Net loss attributable to common stockholders was $151.4 million, or $3.44 per share on a fully diluted basis for 2015. This compares to a net income of $81.6 million, or $1.99 per share on a fully diluted basis for 2014. Net income attributable to common shareholders was $23.6 million, excluding the noncash goodwill impairment charge of $175 million, or $0.54 per share on a fully diluted basis.

Adjusted EBITDA was $50.2 million, compared to $107.8 million in 2014, resulting in an adjusted EBITDA margin of 4 percent.

The table below summarizes the quarterly and year end results for 2015 and 2014:

 

REG Annual Results Summary
(dollars and gallons in thousands except per gallon data)

 

 

 

1Q

 

 

2Q

 

 

3Q

 

 

4Q

 

 

Year

Gallons sold 2015

     

59,860

       

96,082

       

119,967

       

98,780

       

374,689

 

Gallons sold 2014

     

47,266

       

77,173

       

88,821

       

74,005

       

287,265

 

Y/Y Change

     

27

%

     

25

%

     

35

%

     

33

%

     

30

%

                             

 

B100 ASP per gallon 2015

   

$

3.34

     

$

3.35

     

$

2.76

     

$

2.69

     

$

2.97

 

B100 ASP per gallon 2014

   

$

3.81

     

$

3.90

     

$

3.77

     

$

3.03

     

$

3.62

 

Y/Y Change

     

(12

)%

     

(14

)%

     

(27

)%

     

(11

)%

     

(18

)%

                             

 

Total revenues 2015

   

$

230,918

     

$

373,762

     

$

394,856

     

$

387,808

     

$

1,387,344

 

Total revenues 2014

   

$

219,040

     

$

332,918

     

$

384,258

     

$

337,615

     

$

1,273,831

 

Y/Y Change

     

5

%

     

12

%

     

3

%

     

15

%

     

9

%

                             

 

Adjusted EBITDA 2015

   

$

(14,472

)

   

$

26,142

     

$

16,904

     

$

21,589

     

$

50,163

 

Adjusted EBITDA 2014

   

$

14,706

     

$

24,248

     

$

34,780

     

$

34,033

     

$

107,767

 

Y/Y Change

     

N/M

     

8

%

     

(51

)%

     

(37

)%

     

(53

)%

                             

 

Adjusted EBITDA margin 2015

     

(6

)%

     

7

%

     

4

%

     

6

%

     

4

%

Adjusted EBITDA margin 2014

 

 

 

7

%

 

 

 

7

%

 

 

 

9

%

 

 

 

10

%

 

 

 

8

%

                             

 

Adjusted EBITDA reconciliation

The company uses earnings before interest, taxes, depreciation and amortization, 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.

For adjusted EBITDA for the periods presented, as well as reconciliation to net income, and more, click here

 
 
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