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Renewable Energy Group (NASDAQ: $REGI) Reports Fourth Quarter and Full Year 2016 Financial Results

 

AMES, Iowa - March 8, 2017 (Investorideas.com Newswire) Renewable Energy Group, Inc. (NASDAQ:REGI) ("REG" or the "Company") announced its financial results for the fourth quarter and full year ended December 31, 2016.

Fourth Quarter 2016 Highlights:

Full Year 2016 Highlights:

For the fourth quarter of 2016, revenue was $560.4 million on 155.9 million gallons sold. Net income was $20.2 million and Adjusted EBITDA was $60.3 million. REG increased total gallons sold by 58% compared to the fourth quarter of 2015. Revenue increased by 45% while Adjusted EBITDA increased by 179% in the fourth quarter of 2016 compared to the same period in 2015, primarily driven by increased gallons sold and improved margins.

For the full year 2016, revenue was $2.0 billion on 567.1 million gallons sold. Net income was $44.3 million and Adjusted EBITDA was $102.1 million. For the full year 2016, REG sold 192.4 million more total gallons, revenue increased by 47%, and Adjusted EBITDA increased by 104%, compared to 2015. The increase in net income and Adjusted EBITDA is primarily attributable to significantly higher gallons sold, improving market conditions in the energy and commodity sectors in 2016, higher average selling price and increased production run rate across the Company's fleet.

"Our fourth quarter results were strong resulting from a total team effort to maximize our gallons sold as we sought to capture the lapsing tax incentive," said Daniel J. Oh, President and Chief Executive Officer. "Revenue for the full year exceeded $2 billion for the first time and we set records for gallons produced and sold in a year."

Oh continued, "The entire fleet ran very well in 2016. Notably, our Geismar biorefinery achieved a production record in the fourth quarter and has run continuously above nameplate capacity on average for the first two months of 2017. We are excited to see Geismar beginning to deliver on expectations. As we look to 2017, we expect to work our way through additional regulatory uncertainty as a company and an industry as we have done successfully several times in the past."

Fourth Quarter 2016 Operating Highlights

REG sold 155.9 million total gallons of fuel, an increase of 57.8% compared to the fourth quarter of 2015. Gallons sold in the quarter included 21.9 million gallons purchased from third parties and resold through the Company’s distribution network, 20.5 million gallons of petroleum-based diesel fuel and 12.1 million gallons contributed by Petrotec.

REG produced 130.1 million gallons of biomass-based diesel during the quarter, an increase of 48.6 million gallons over the fourth quarter of 2015. The growth in production resulted primarily from our Geismar biorefinery running at high rates in the fourth quarter of this year compared to no production at Geismar in the 2015 period, production from the Madison, Wisconsin facility acquired in the second quarter of 2016 and the remainder of the fleet producing at a high rate. The Company also utilized contract or toll manufacturing, which contributed 5.9 million gallons in the quarter.

Fourth Quarter 2016 Financial Results

All figures refer to the quarter ending December 31, 2016, unless otherwise noted. All comparisons are to the quarter ended December 31, 2015 unless otherwise noted.

Revenue of $560.4 million represented an increase of $172.6 million when compared to the fourth quarter of 2015. The increase in revenue was driven by volume growth of 57.8% and an increase in biomass-based diesel prices. The average price per gallon sold (including RINs) for B100 was $3.05, an increase of 13.4% from the same period in 2015.

Gross profit was $81.9 million, compared to $106.4 million for the fourth quarter of 2015. Gross margin was 15%, compared to 27% in the year-earlier quarter. The decrease in gross profit was primarily due to the benefit from the reinstatement of the federal biodiesel mixture excise tax credit (BTC) for 2015, all of which was recognized in the fourth quarter of 2015.

Operating income was $32.2 million compared to operating loss of $96.6 million for the fourth quarter of 2015. Fourth quarter 2016 operating income was impacted by a $17.8 million non-cash impairment charge of property, plant and equipment, of which $15.6 million related to our partially completed facility in Emporia, Kansas. The impairment charge for Emporia resulted from competition from foreign, imported product and the probability of that project being completed in the near term is unlikely. We believe this site continues to be a good opportunity for future biorefinery operations. Also in the fourth quarter of 2016, we recorded an initial and partial settlement of $15.1 million from our business interruption insurance claim related to the September 2015 fire at our Geismar facility. The loss in prior year quarter was largely due to the $175.0 million non-cash goodwill impairment charge.

Net income attributable to common stockholders was $20.2 million, or $0.51 per share on a fully diluted basis. This compares to a net loss of $95.6 million, or $2.18 per share on a fully diluted basis in the fourth quarter of 2015.

Adjusted EBITDA was $60.3 million, a 179% increase compared to the 2015 period. Fourth quarter 2015 adjusted EBITDA was $21.6 million. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization and further adjusted for certain items identified below under "Adjusted EBITDA Reconciliation."

At December 31, 2016, REG had cash and cash equivalents, of $116.2 million, an increase of 34% during the quarter. For the year, the Company's cash and cash equivalents increased by $69.1 million primarily as a result of cash generated from operations. At December 31, 2016, accounts receivable were $164.9 million, an increase of $59.9 million from September 30, 2016, mainly as a result of the increase in sales activities in the last quarter of 2016 in an effort to maximize the BTC that lapsed after December 31, 2016. Inventory was $145.4 million, an increase of $47.2 million during the quarter.

The table below summarizes REG’s results for Q4 2016:


(1) On December 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, for purposes of the calculation of quarterly Adjusted EBITDA 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 adjusted EBITDA.

Full Year 2016 Results

All figures refer to the full year ending December 31, 2016, unless otherwise noted. All comparisons are to the full year ending December 31, 2015 unless otherwise noted.

REG sold 567.1 million total gallons, an increase of 51.3% compared to 374.7 million gallons in 2015. Gallons sold in 2016 included 76.7 million gallons purchased from third parties and resold through the Company’s distribution network, 53.7 million gallons of petroleum-based diesel fuel and 44.6 million gallons sold by Petrotec.

The average B100 price per gallon (including RINs) sold by REG was $3.17, compared to $2.97 in 2015.

REG produced 445.5 million gallons of biomass-based diesel, compared to 300.3 million gallons in 2015. The growth in production resulted from the Geismar biorefinery running at, or over, capacity in the fourth quarter, production from the Madison acquisition and inclusion of Grays Harbor for the full year in 2016 compared to a five months in 2015, coupled with high production rates across the remainder of the Company's fleet. The Company also utilized contract or toll manufacturing, which contributed 23.4 million gallons in 2016 compared to 17.3 million gallons in 2015.

Revenue was $2.0 billion, an increase of $653.9 million, or 47%, versus 2015 revenue of $1.4 billion. The increase was due to a 51.3% increase in gallons sold and a 6.7% increase in average biomass-based diesel prices during 2016.

Gross profit was $171.5 million, compared to $110.5 million in 2015.

Operating income was $47.2 million, compared to an operating loss of $154.7 million in 2015. Operating income for 2016 was reduced by a $17.8 million non-cash impairment charge of property, plant and equipment. The loss in prior year was largely due to the $175.0 million non-cash goodwill impairment charge.

Net income attributable to common stockholders was $43.5 million or $1.06 per share on a fully diluted basis for 2016. This compares to a net loss of $151.4 million, or $3.44 per share on a fully diluted basis for 2015. Net income attributable to common shareholders for 2016 was $61.3 million, excluding the non-cash impairment of property, plant and equipment charge of $17.8 million, or $1.50 per share on a fully diluted basis. Net income attributable to common shareholders for 2015 was $23.6 million, excluding the non-cash goodwill impairment charge of $175.0 million, or $0.54 per share on a fully diluted basis.

Adjusted EBITDA was $102.1 million, compared to $50.2 million in 2015, resulting in an Adjusted EBITDA margin of 5%.

The table below summarizes the quarterly and year end results for 2016 and 2015:


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.

The following table provides Adjusted EBITDA for the periods presented, as well as reconciliation to net income:



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