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Renewable Energy Group Reports Third Quarter 2021 Financial Results

Renewable Energy Group, Inc. ("REG" or the "Company") (NASDAQ: REGI) today announced its financial results for the quarter ended September 30, 2021.

Revenues for the third quarter were $1 billion on 176 million gallons of fuel sold. Net income available to common stockholders was $42 million in the third quarter of 2021, compared to net income of $22 million for the third quarter of 2020. Adjusted EBITDA was $68 million in the third quarter of 2021, compared to $55 million for the third quarter of 2020.

"REG delivered another period of solid performance in the third quarter, with strong operations and commercial optimization," said Cynthia (CJ) Warner, President and Chief Executive Officer. "We delivered these results even while managing disruptions from Hurricane Ida and volatile energy and feedstock markets. Financial results were moderated by hedge-related timing, as a substantial rise in diesel prices at the end of the quarter resulted in a risk management loss in the period, most of which is expected to be offset in the fourth quarter when the hedged gallons are scheduled for delivery."

Warner added, "Our bio-based diesel is delivering critical and valuable carbon reductions now in the on-road sector, and we are continuing to advance our strategy by initiating sales to marine and rail customers, which we anticipate will enable further substantial growth."

Third Quarter 2021 Highlights

All figures refer to the quarter ended September 30, 2021, unless otherwise noted. All comparisons are to the quarter ended September 30, 2020, unless otherwise noted.

The table below summarizes REG’s financial results for the third quarter of 2021.

REG Q3 2021 Results

(dollars and gallons in thousands, except as noted)

Q3 2021

Q3 2020

Y/Y Change

Market Data

NYMEX ULSD average price per gallon

$

2.13

$

1.20

77.5

%

D4 RIN average price per credit

$

1.60

$

0.67

138.8

%

CME Soybean oil average price per gallon

$

4.59

$

2.36

94.5

%

HOBO + 1.5xRIN average price per gallon (1)

$

0.95

$

0.85

11.8

%

Gallons sold

176,331

176,219

0.1

%

GAAP

Total revenues

$

1,006,342

$

572,358

75.8

%

Risk management gain (loss)

$

(11,640

)

$

7,486

$

(19,126

)

Operating income

$

51,056

$

23,641

116.0

%

Net income available to common stockholders

$

42,133

$

22,223

89.6

%

Non-GAAP

Adjusted EBITDA2

$

68,492

$

54,687

25.2

%

(1)

HOBO = HO NYMEX + $1.00 BTC - ((CME SBO $/lb)/100 x 7.5)

HOBO + RINs = HOBO + 1.5 x D4 RIN as quoted by the Oil Price Information Service.

(2)

See table below for reconciliation of Adjusted EBITDA to net income.

REG sold 176 million gallons of fuel, essentially flat versus the third quarter of 2020. The Company continued to improve its product mix. Renewable diesel sales increased 9 million gallons. This increase was offset by a 7 million gallon decrease in self-produced biodiesel sales and a one million gallon decrease in both third party biodiesel and petroleum diesel sales.

REG produced 128 million gallons of biodiesel and renewable diesel during the third quarter, a 7% decrease versus the prior year’s third quarter. Production at Geismar decreased 13%, primarily due to downtime caused by Hurricane Ida, the impact of which will be realized in future periods. North American biodiesel production also decreased 4 million gallons, or 4%, primarily due to production optimization.

Revenues increased from $572 million to $1 billion, largely driven by higher selling prices realized from a combination of a 139% increase in D4 RIN prices and a 78% increase in ULSD prices year over year.

Gross profit was $89 million compared to gross profit of $74 million in the third quarter of last year. The increase in gross profit was driven primarily by an improved margin environment and continued optimization. These positive factors were partially offset by a $19 million negative year-over-year swing in risk management.

Operating income was $51 million compared to operating income of $24 million, driven by the same factors as those described above for gross profit along with a $16 million decrease in impairment charges. The increase was partially offset by a $3 million increase in selling, general and administrative costs.

GAAP net income available to common stockholders increased to $42 million, or $0.83 per share on a fully diluted basis, compared to GAAP net income available to common stockholders of $22 million, or $0.51 per share on a fully diluted basis. The differential drivers are the same as those described above for operating income and gross profit along with an increase in interest expense of $7 million from the green bond issuance that closed in May.

Adjusted EBITDA was $68 million compared to $55 million, with the increase resulting from the same factors as described above for operating income.

At September 30, 2021, REG had cash and cash equivalents, restricted cash, and marketable securities (including long-term marketable securities) of $1.0 billion, an increase of $691 million from December 31, 2020. The increase in cash and cash equivalents is primarily due to the $535 million in funding, net of fees, from the Company's green bond issuance in the second quarter as well the $365 million in funding, net of fees, from the Company's equity raise in the first quarter. The combined proceeds are intended to be used for the improvement and expansion project at the Geismar facility, other strategic investments and working capital.

At September 30, 2021, accounts receivable were $197 million, an increase of $53 million from December 31, 2020 and accounts payable were $129 million, a decrease of $4 million from December 31, 2020. The value of the Company's inventory at the end of the quarter was $374 million, an increase of $165 million from December 31, 2020, due to rising commodity values.

Reconciliation of Non-GAAP Measures

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 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
September 30,
2021

Three Months
Ended
September 30,
2020

Nine Months
Ended
September 30,
2021

Nine Months
Ended
September 30,
2020

(In thousands)

Net income

$

42,467

$

22,663

$

161,205

$

95,645

Adjustments:

Income tax expense

652

1,046

4,535

4,007

Interest expense

8,619

1,545

14,007

6,154

Depreciation

11,098

9,388

33,100

27,425

Amortization of intangible and other assets

876

591

2,467

1,262

EBITDA

63,712

35,233

215,314

134,493

Gain on sale of assets

(39

)

(187

)

(Gain) loss on debt extinguishment

(18

)

4,449

(1,809

)

Gain on lease termination

(4,459

)

Interest income

(1,420

)

(777

)

(3,916

)

(1,327

)

Other (income) expense, net

738

(818

)

199

(2,178

)

Impairment of assets

3,498

19,256

5,236

19,256

Executive severance

663

Stock compensation

1,964

1,811

5,770

5,789

Adjusted EBITDA

$

68,492

$

54,687

$

227,676

$

149,578

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 an alternative 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 certain cash expenditures, including capital spending, or the impact of certain cash charges that the Company considers 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 the Company has 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 leading the energy and transportation industries’ transition to sustainability by converting renewable resources into high-quality, sustainable fuels. Renewable Energy Group is an international producer of sustainable fuels that significantly lower greenhouse gas emissions to immediately reduce carbon impact. Renewable Energy Group utilizes a global integrated procurement, distribution and logistics network to operate 12 biorefineries in the U.S. and Europe. In 2020, Renewable Energy Group produced 519 million gallons of cleaner fuel delivering 4.2 million metric tons of carbon reduction. Renewable Energy Group is meeting the growing global demand for lower-carbon fuels and leading the way to a more sustainable future.

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 market conditions, industry trends and demand, our outlook about the future, including with respect to the marine and rail markets, the planned expansion of and improvements to the Geismar facility, future risk management gains and losses, and future sales volumes. 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, cost overruns and construction delays related to the expansion project; the availability, future price, and volatility of feedstocks; the availability, future price and volatility of petroleum and products derived from petroleum; the Company’s financial performance, including revenues, cost of revenues and operating expenses; changes in governmental programs and policies requiring or encouraging the 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; availability of federal and state governmental tax incentives and incentives for bio-based diesel production; changes in the spread between bio-based diesel prices and feedstock costs; the potential impact of COVID-19 on our business and operations; risks associated with fire, explosions, leaks and other natural disasters at our facilities; any disruption of operations at our Geismar renewable diesel refinery (which would have a disproportionately adverse effect on our profitability); the unexpected closure of any of our facilities; the effect of excess capacity in the bio-based diesel industry and announced large plant expansions and potential co-processing of renewable diesel by petroleum refiners; unanticipated changes in the bio-based diesel market from which we generate almost all of our revenues; seasonal fluctuations in our operating results; potential failure to comply with government regulations; competition in the markets in which we operate; our dependence on sales to a single customer; technological advances or new methods of bio-based diesel production or the development of energy alternatives to bio-based diesel; our ability to successfully implement our acquisition strategy; the Company’s ability to retain and recruit key personnel; the Company's indebtedness and its compliance, or failure to comply, with restrictive and financial covenants in its various debt agreements; risks associated with customer negotiations; the risk that measures intended to remediate weaknesses in internal controls will prove to be inadequate; the potential for our risk management program to fail to minimize volatility; and other risks and uncertainties described in REG’s annual report on Form 10-K for the year ended December 31, 2020 and subsequently filed Form 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, 2021 AND 2020

(in thousands, except share and per share amounts)

Three months ended

Nine months ended

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

REVENUES:

Biomass-based diesel sales

$

919,051

$

492,769

$

2,139,938

$

1,350,496

Biomass-based diesel government incentives

87,287

79,484

222,309

238,006

1,006,338

572,253

2,362,247

1,588,502

Other revenue

4

105

58

718

1,006,342

572,358

2,362,305

1,589,220

COSTS OF GOODS SOLD

917,434

498,402

2,076,083

1,387,147

GROSS PROFIT

88,908

73,956

286,222

202,073

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

34,354

31,059

100,546

86,971

GAIN ON DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT

(39

)

(187

)

IMPAIRMENT OF ASSETS

3,498

19,256

5,236

19,256

INCOME FROM OPERATIONS

51,056

23,641

180,479

96,033

OTHER INCOME (EXPENSE), NET

(7,937

)

68

(14,739

)

3,619

INCOME BEFORE INCOME TAXES

43,119

23,709

165,740

99,652

INCOME TAX EXPENSE

(652

)

(1,046

)

(4,535

)

(4,007

)

NET INCOME

$

42,467

$

22,663

$

161,205

$

95,645

NET INCOME AVAILABLE TO COMMON STOCKHOLDERS

$

42,133

$

22,223

$

159,470

$

93,750

Basic net income per share available to common stockholders:

Net income per share

$

0.84

$

0.57

$

3.44

$

2.39

Diluted net income per share available to common stockholders

Net income per share

$

0.83

$

0.51

$

3.41

$

2.17

Weighted-average shares used to compute basic net income per share available to common stockholders:

Basic

50,249,162

39,306,263

46,301,147

39,154,788

Weighted-average shares used to compute diluted net income per share available to the common stockholders:

Diluted

50,563,451

43,624,340

46,739,811

43,107,989

RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

AS OF SEPTEMBER 30, 2021 AND DECEMBER 31, 2020

(in thousands, except share and per share amounts)

September 30, 2021

December 31, 2020

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

585,575

$

84,441

Marketable securities

307,894

149,521

Accounts receivable, net

196,903

143,475

Inventories

374,106

209,361

Prepaid expenses and other assets

89,051

67,657

Restricted cash

4,556

3,777

Total current assets

1,558,085

658,232

Long-term marketable securities

151,015

120,022

Property, plant and equipment, net

630,915

594,796

Right of use assets

35,379

28,840

Goodwill

16,080

16,080

Intangible assets, net

8,731

10,708

Other assets

44,012

32,720

TOTAL ASSETS

$

2,444,217

$

1,461,398

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Current maturities of long-term debt

$

3

$

50,088

Current maturities of operating lease obligations

12,328

14,581

Accounts payable

128,865

132,938

Accrued expenses and other liabilities

48,206

34,875

Deferred revenue

11,370

13,488

Total current liabilities

200,772

245,970

Deferred income taxes

6,965

6,607

Long-term debt (net of debt issuance costs of $13,759 and $1,731, respectively)

536,241

15,158

Long-term operating lease obligations

22,920

15,223

Other liabilities

2,045

4,485

Total liabilities

768,943

287,443

COMMITMENTS AND CONTINGENCIES

TOTAL EQUITY

1,675,274

1,173,955

TOTAL LIABILITIES AND EQUITY

$

2,444,217

$

1,461,398

Contacts:

Renewable Energy Group, Inc.
Todd Robinson
Deputy Chief Financial Officer and Treasurer
+1 (515) 239-8048
Todd.Robinson@regi.com

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