Fourth Quarter 2015 Highlights
- 99 million gallons sold
- Revenue of $387.8 million
- Adjusted EBITDA of $21.6 million
- Net income of $79.4 million, excluding non-cash goodwill impairment of $175.0 million
- Net loss of $95.6 million, including non-cash goodwill impairment
- Retroactive reinstatement of biodiesel tax credit for 2015 and extension for 2016
- Renewable volume obligations finalized for biomass-based diesel for 2014 through 2017
Full Year 2015 Highlights
- 375 million gallons sold
- Revenue of $1.4 billion
- Adjusted EBITDA of $50.2 million
- Net income of $23.3 million, excluding non-cash goodwill impairment of $175.0 million
- Net loss of $151.7 million, including non-cash goodwill impairment
- Nameplate production capacity increased to 432 million gallons/year
- Increased ownership of Petrotec
Renewable Energy Group, Inc. recently announced its financial results for the fourth quarter and full year ended December 31, 2015.
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% compared to the fourth quarter of 2014. Revenue increased by 15% while Adjusted EBITDA decreased by 37% 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% more total gallons, revenue increased by 9%, and Adjusted EBITDA decreased by 53%, 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 Chief Executive Officer. “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 multi-year RVO will grow biomass-based diesel beyond two 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 non-cash goodwill impairment charge in the amount of $175.0 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 October 31, 2015. 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 2015 Operating Highlights
REG sold 98.8 million total gallons of fuel, an increase of 33% 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 2015 Financial Results
All figures refer to the quarter ending December 31, 2015, unless otherwise noted.
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% 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% 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%, compared to 33% 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 $175.0 million non-cash 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 non-cash goodwill impairment charge of $175.0 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% decrease compared to the 2014 period. Fourth quarter 2014 adjusted EBITDA was $34.0 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 December 31, 2015, REG had liquid assets, which include cash and cash equivalents and marketable securities, of $47.1 million, a decrease of 36% 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 December 31, 2015, accounts receivable were $310.7 million, an increase of $258.8 million from September 30, 2015, mainly as a result of the entire 2015 BTC being recorded in the fourth quarter. Inventory was $85.9 million, an increase of $7.0 million during the quarter.