NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For The Three Years Ended
December 31, 2016
,
2015
and
2014
(In Thousands, Except Share and Per Share Amounts)
NOTE 1—ORGANIZATION, PRESENTATION, AND NATURE OF THE BUSINESS
Renewable Energy Group, Inc. (the "Company" or "REG") is a company focused on providing cleaner, lower carbon intensity products and services. Today, we principally generate revenue as a leading North American biofuels producer with a nationwide distribution and logistics system. The Company participates in each aspect of biomass-based diesel production, from acquiring feedstock, managing construction and operating biomass-based diesel production facilities, to marketing, selling and distributing biomass-based diesel and its co-products. To do this, REG utilizes this nationwide production, distribution and logistics system as part of an integrated value chain model to focus on converting natural fats, oils and greases into advanced biofuels and converting diverse feedstocks into renewable chemicals.
Upon completion of acquiring the remaining interest in Petrotec AG as further discussed in Note 4 - Acquisitions, the Company owns and operates
fourteen
biorefineries, with
twelve
locations in North America and
two
locations in Europe, which includes
thirteen
operating biomass-based diesel production facilities with aggregate nameplate production capacity of
502 million
gallons per year, or mmgy, and
one
fermentation facility. REG has
one
feedstock processing facility. The Company's network includes the addition of a
20
-million gallon nameplate capacity biomass-based diesel refinery located in DeForest, Wisconsin, acquired in March 2016.
Nine
of these plants are “multi-feedstock capable” which allows them to use a broad range of lower cost feedstocks, such as inedible corn oil, used cooking oil and inedible animal fats in addition to vegetable oils, such as soybean oil and canola oil.
The Company also has
three
partially constructed production facilities and
one
non-operational production facility. The Company will need to raise additional capital to complete construction of these plants and fund working capital requirements. It is uncertain when financing will be available. During fourth quarter 2016, the Company wrote down the carrying value at its Emporia facility to its estimated salvage value due to competition from foreign, imported product and the probability of that project being completed in the near term is unlikely.
The biomass-based diesel industry and the Company’s business have benefited from the continuation of certain federal and state incentives. The federal biodiesel mixture excise tax credit (the "BTC") was reinstated for 2015, in effect throughout 2016 and lapsed on January 1, 2017. It is uncertain whether the BTC will be reinstated thereafter. The expiration along with other amendments of any one or more of those laws, could adversely affect the financial results of the Company.
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, and entities which it controls. All intercompany balances and transactions have been eliminated for consolidated reporting purposes.
Cash and Cash Equivalents
Cash and cash equivalents consists of money market funds and demand deposits with financial institutions. The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.
Accounts Receivable
Accounts receivable are carried at invoiced amount less allowance for doubtful accounts. Management estimates the allowance for doubtful accounts based on existing economic conditions, the financial conditions of customers, and the amount and age of past due accounts. Receivables are considered past due if full payment is not received by the contractual due date. Past due accounts are generally written off against the allowance for doubtful accounts only after reasonable collection attempts have been exhausted. Activity regarding the allowance for doubtful accounts was as follows:
|
|
|
|
|
Balance, January 1, 2014
|
$
|
2,124
|
|
Amount charged to selling, general and administrative expenses
|
1,453
|
|
Charge-offs, net of recoveries
|
(1,304
|
)
|
Balance, December 31, 2014
|
2,273
|
|
Amount charged to selling, general and administrative expenses
|
(803
|
)
|
Charge-offs, net of recoveries
|
(119
|
)
|
Balance, December 31, 2015
|
1,351
|
|
Amount charged to selling, general and administrative expenses
|
630
|
|
Charge-offs, net of recoveries
|
(106
|
)
|
Balance, December 31, 2016
|
$
|
1,875
|
|
Inventories
Inventories are valued at the lower of cost or net realizable value. Cost is determined based on the first-in, first-out method. There were no lower of cost or market adjustments made to the inventory values reported as of
December 31, 2016
and
2015
.
Renewable Identification Numbers (RINs)
When the Company produces and sells a gallon of biomass-based diesel,
1.5
to
1.7
RINs per gallon are generated. RINs are used to track compliance with Renewable Fuel Standards (RFS2). RFS2 allows the Company to attach between
zero
and
2.5
RINs to any gallon of biomass-based diesel. As a result, a portion of the selling price for a gallon of biomass-based diesel is generally attributable to RFS2 compliance. However, RINs that the Company generates are a form of government incentive and not a result of the physical attributes of the biomass-based diesel production. Therefore, no cost is allocated to the RIN when it is generated, regardless of whether the RIN is transferred with the biomass-based diesel produced or held by the Company pending attachment to other biomass-based diesel production sales.
In addition, the Company also obtains RINs from third parties who have separated the RINs from gallons of biomass-based diesel. From time to time, the Company holds varying amounts of these separated RINs for resale. RINs obtained from third parties are initially recorded at their cost and are subsequently revalued at the lower of cost or market as of the last day of each accounting period and the resulting adjustments are reflected in costs of goods sold for the period. The value of these RINs is reflected in “Prepaid expenses and other assets” on the consolidated balance sheet. The cost of goods sold related to the sale of these RINs is determined using the average cost method, while market prices are determined by RIN values, as reported by the Oil Price Information Service (OPIS).
California’s Low Carbon Fuel Standard
The Company generates Low Carbon fuel Standard (LCFS) credits for its low carbon fuels or blendstocks when its qualified low carbon fuels are imported by REG to California though approved physical pathways. LCFS credits are used to track compliance with California’s LCFS, which enables the Company to generate LCFS credits based upon the carbon intensity of qualified fuels that are imported by REG into California. Other companies can take title outside of California and generate LCFS credits instead of REG upon import into the state. One LCFS credit equates to one metric ton reduction of carbon dioxide compared to the petroleum fuel baseline so the amount gallons of low carbon fuel consumption to generate one credit will vary. As a result, a portion of the selling price for a gallon of biomass-based diesel sold into California is also attributable to LCFS compliance. However, LCFS credits that the Company generates are a form of government incentive and not a result of the physical attributes of the biomass-based diesel production. Therefore, no cost is allocated to the LCFS credit when it is generated, regardless of whether the LCFS credit is transferred with the biomass-based diesel produced or held by the Company on other biomass-based diesel sales that do not transfer credits.
In addition, the Company also obtains LCFS credits from third party trading activities. From time to time, the Company holds varying amounts of these 3rd party LCFS credits for resale. LCFS credits obtained from third parties is initially recorded at their cost and are subsequently revalued at the lower of cost or net realizable value as of the last day of each accounting period and the resulting adjustments are reflected in costs of goods sold for the period. The value of LCFS obtained from third parties is reflected in “Prepaid expenses and other assets” on the consolidated balance sheet. The cost of goods sold related to the sale of these LCFS credits is determined using the average cost method, while market prices are determined by LCFS
values, as reported by the Oil Price Information Service (OPIS). At year end, the Company held no LCFS credits purchased from third parties.
The Company records assets acquired and liabilities assumed through the exchange of non-monetary assets based on the fair value of the assets and liabilities acquired or the fair value of the consideration exchanged, whichever is more readily determinable.
Derivative Instruments
Derivatives are recorded on the balance sheet at fair value with changes in fair value recognized in current period earnings. The Company did not elect to use hedge accounting for all periods presented.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost less accumulated depreciation. Maintenance and repairs are expensed as incurred. Depreciation expense is computed on a straight-line method based upon estimated useful lives of the assets. Estimated useful lives are as follows:
|
|
|
Automobiles and trucks
|
5 years
|
Computers and office equipment
|
5 years
|
Office furniture and fixtures
|
7 years
|
Machinery and equipment
|
5-30 years
|
Leasehold improvements
|
the lesser of the lease term or 30 years
|
Buildings and improvements
|
30-40 years
|
In April 2015, the Company experienced a fire at its Geismar facility, resulting in the shutdown of the facility. The Company estimated fixed assets of approximately
$11,027
were impaired as a result of the fire. At December 31, 2016, the Company had received property proceeds of
$19,037
from insurance for the property damage. The excess of the property insurance proceeds over the net book value of the impaired assets,
$8,010
, was recorded as gain on involuntary conversion on the Consolidated Statements of Operations. These proceeds for property damage were final and have been approved and paid by the insurance carriers.
In September 2015, another fire occurred at the Geismar facility. The Company estimated fixed assets of approximately
$1,414
were impaired by the September fire. At December 31, 2016, the Company recorded proceeds of
$2,939
from insurance for the property damage. The excess of the property insurance proceeds over the net book value of the impaired assets of
$1,525
, was recorded as gain on involuntary conversion on the Consolidated Statements of Operations. In addition, as of December 31, 2016, the Company recognized the undisputed portion of
$15,060
from its business interruption insurance claim related to the September 2015 fire, which was recorded as an increase in biomass-based diesel sales in the Company's consolidated Statements of Operations. The Company continues to work with the insurance carriers on the in-dispute portion of the business interruption claim. None of this in-dispute business interruption insurance amount has been recognized in earnings at December 31, 2016.
As of December 31, 2016
,
2015
and
2014
, the Company capitalized interest incurred on debt during the construction of assets of
$537
,
$897
and
$1,345
, respectively.
Goodwill
Goodwill is tested for impairment annually on July 31 or when impairment indicators exist. Goodwill is allocated and tested for impairment by reporting units. At December 31, 2016 and December 31, 2015, the Company had goodwill in the Services reporting unit. The analysis is based on a comparison of the carrying value of the reporting unit to its fair value, determined utilizing both a discounted cash flow methodology and a market comparable methodology. The determination of whether or not the asset has become impaired involves a significant level of judgment in the assumptions underlying the approach used to determine the fair value of the Company’s reporting units. The inputs used to estimate the fair value of the Company’s Services reporting unit are considered Level 3 inputs of the fair value hierarchy and included the following: (1) The Company’s financial projections for its reporting unit were based on its analysis of various factors which include, among other things, demands, margins, whether the BTC is reinstated, capital expenditures and economic conditions. Such estimates are consistent with those used in the Company’s budgeting and capital investment reviews, incorporating current market information, historical factors and the regulatory environment; (2) The long-term growth rates assumed for the Company’s reporting unit was based on a comparison to similar publicly traded companies, supported by market information obtained from
external sources; and (3) The discount rate used to measure the present value of the projected future cash flows was determined by separately estimating borrowing cost of capital, equity cost of capital, and entity structure. Changes in estimates of future cash flows caused by items such as unforeseen events or sustained unfavorable changes in market conditions could negatively affect the fair value of the reporting unit’s goodwill asset and result in an impairment charge. The 2016 annual impairment test determined that the fair value of the Services reporting unit exceeded its carrying value by approximately
16%
. During 2015, the Company had a full write-off of goodwill in the Biomass-based Diesel and Renewable Chemicals reporting units.
Impairment of Long-lived Assets
The Company tests its long-lived assets for recoverability when events or circumstances indicate that its carrying amount may not be recoverable. Significant assumptions used in the undiscounted cash flow analysis, when it is required, include the projected demand for biomass-based diesel based on annual renewable fuel volume obligations under the Renewable Fuel Standards (RFS2), the Company's capacity to meet that demand, the market price of biomass-based diesel and the cost of feedstock used in the manufacturing process. For facilities under construction, estimates also include the capital expenditures necessary to complete construction of the plant and the projected costs of financing. Late during the year ended December 31, 2016, the Company recorded impairment charges of
$15,593
related to its Emporia facility's property, plant and equipment assets resulting from competition from foreign, imported product and the probability of that project being completed in the near term is unlikely. In addition, the Company recorded impairment charges of
$2,300
against certain property, plant and equipment as the carrying amounts of these assets were deemed not recoverable given the assets' deteriorating physical conditions identified during the fourth quarter of 2016. In 2015, other than those related to the 2015 Geismar fires of
$12,441
, which were fully offset by insurance receipts and/or accounts receivable for insurance coverage, there was no other impairments recorded for the years ended
December 31, 2015
and
2014
.
Convertible Debt
In June 2016, the Company issued
$152,000
aggregate principal amount of
4%
convertible senior notes due 2036 (the "2036 Convertible Notes"). The Company may not elect to issue shares of common stock upon conversion of the 2036 Convertible Notes to the extent such election would result in the issuance of more than 19.99% of the common stock outstanding immediately before the issuance of the 2036 Convertible Notes until the Company receives stockholder approval for such issuance. As a result, the embedded conversion option is accounted for as an embedded derivative liability. This liability is recorded at fair value, and
$13,045
fair value adjustments were recorded for the year ended
December 31, 2016
. The Company expects to continue marking the embedded conversion option to market unless and until shareholders authorize additional common shares during its Annual Shareholder Meeting. See "Note 10 - Debt" for a further description of the transaction.
Capped Call Transaction
In connection with the issuance of the 2014 convertible senior notes, the Company entered into capped call transactions. The purchased capped call transactions were recorded as a reduction to common stock-additional paid-in-capital. Because this was considered to be an equity transaction and qualifies for the derivative scope exception, no future changes in the fair value of the capped call will be recorded by the Company. During 2016, in connection with the issuance of the 2036 Convertible Notes, certain call options covered by the original capped call transaction were rebalanced and reset to cover
100%
of the total number of shares of the Company's Common Stock underlying the remaining principal of the 2019 Convertible Notes. The impact of these transactions, net of tax, was reflected as an addition/reduction to common stock-additional paid-in capital as presented in the Consolidated Statements of Redeemable Preferred Stock and Equity.
Share Repurchase Programs
In February 2015, the Company's board of directors approved a share repurchase program of up to
$30,000
of the Company's shares of common stock. Shares may be repurchased from time to time in open market transactions, privately negotiated transactions or by other means. The Company accounts for share repurchases using the cost method. Under this method, the cost of the share repurchase is recorded entirely in treasury stock, a contra equity account. The Company used the remaining available funds of approximately
$6,687
authorized under this program to repurchase
738,448
shares of Common Stock during the first 6 months of 2016.
In March 2016, the Company's board of directors approved a repurchase program of up to
$50,000
of the Company's shares of common stock and/or convertible notes, in effect through March 5, 2018. Under the program, which is in addition to the
$30,000
common stock repurchase program announced in February 2015, the Company may repurchase shares or convertible notes from time to time in open market transactions, privately negotiated transactions or by other means. The timing and amount of repurchase transactions were determined by the Company's management based on its evaluation of
market conditions, share price, bond price, legal requirements and other factors. During 2016, the Company repurchased
5,070,375
shares of Common Stock for
$44,019
under this program. In addition, the Company used approximately
$5,584
under this program to repurchase
$6,000
principal amount of the Company's 2019 Convertible Notes, finishing up the program in 2016.
Foreign Currency Transactions and Translation
The Company’s reporting and functional currency is U.S. dollars. Monetary assets and liabilities denominated in currencies other than U.S. dollars are remeasured into their respective functional currencies at exchange rates in effect at the balance sheet date. The resulting exchange gain or loss is included in the Company’s Consolidated Statements of Operations as foreign exchange gain (loss) unless the remeasurement gain or loss relates to an intercompany transaction that is of a long-term investment nature and for which settlement is not planned or anticipated in the foreseeable future. Gains or losses arising from translation of such transactions are reported as a component of accumulated other comprehensive income (loss) in the Company’s Consolidated Balance Sheets.
The Company translates the assets and liabilities of its foreign subsidiaries from their respective functional currencies to U.S. dollars at the appropriate spot rates as of the balance sheet date. Generally, our foreign subsidiaries use the local currency as their functional currency. Changes in the carrying value of these assets and liabilities attributable to fluctuations in spot rates are recognized in foreign currency translation adjustment, a component of accumulated other comprehensive income (loss) in the Company’s Consolidated Balance Sheets.
The other comprehensive loss amounts presented in the Company's Consolidated Statements of Comprehensive Income (Loss) and Consolidated Statements of Redeemable Preferred Stock and Equity mainly include the foreign currency translation adjustment resulting from translating the financial statements of Petrotec AG from Euros to US Dollars, the Company's functional currency.
Revenue Recognition
The Company recognizes revenues from the following sources:
|
|
•
|
the sale of biomass-based diesel and its co-products, as well as Renewable Identification Numbers (RINs), California Low Carbon Fuel Standard credits (LCFS credits) and raw material feedstocks, purchased or produced by the Company at owned manufacturing facilities and manufacturing facilities with which the Company has tolling arrangements;
|
|
|
•
|
the resale of biomass-based diesel, RINs, LCFS credits and raw material feedstocks acquired from third parties;
|
|
|
•
|
the sale of petroleum-based heating oil and diesel fuel acquired from third parties, along with the sale of these items further blended with biodiesel produced at wholly owned facilities;
|
|
|
•
|
incentives received from federal and state programs for renewable fuels; and
|
|
|
•
|
fees received for the marketing and sales of biomass-based diesel produced by third parties and from managing operations of third party facilities.
|
Biomass-based diesel, including RINs and LCFS credits, and raw material feedstock revenues are recognized where there is persuasive evidence of an arrangement, delivery has occurred, the price has been fixed or is determinable and collectability can be reasonably assured.
Fees received under toll manufacturing agreements with third parties are generally established as an agreed upon amount per gallon of biomass-based diesel produced. The fees are recognized where there is persuasive evidence of an arrangement, delivery has occurred, the price has been fixed or is determinable and collectability can be reasonably assured.
Revenues associated with the governmental incentive programs are recognized when the amount to be received is determinable, collectability is reasonably assured and the sale of product giving rise to the incentive has been recognized. The Company received funds from the United States Department of Agriculture (USDA) in the amount of
$434
,
$624
and
$600
for the years ended
December 31, 2016
,
2015
and
2014
, respectively. The Company records amounts when it has received notification of a payment from the USDA or is in receipt of the funds and records the awards under the Program in "Biodiesel government incentives" as they are closely associated with the Company's biomass-based diesel production activities.
Freight
Amounts billed to customers for freight are included in biomass-based diesel sales. Costs incurred for freight are included in costs of goods sold.
Advertising Costs
Advertising costs are charged to expense as they are incurred. Advertising and promotional expenses were
$1,746
,
$1,288
and
$755
for the years ended
December 31, 2016
,
2015
and
2014
, respectively.
Research and Development
Research and development (R&D) costs are charged to expense as incurred. In process research and development (IPR&D) assets acquired in connection with acquisitions are recorded on the Consolidated Balance Sheets as intangible assets. During October 2016, the Company entered into the first commercial sale agreement to sell certain products made from the IPR&D platform. This triggered the review of the impairment and useful life of the IPR&D assets. The Company performed a final discounted cash flow analysis at October 31, 2016 prior to assigning a useful life to the IPR&D assets. No impairment was identified related to the Company's IPR&D balance at October 1, 2016, December 31, 2016 and 2015. The Company then determined the useful life of the IPR&D assets to be
15 years
and utilizes a straight line method to amortize these assets over the useful life.
Employee Benefits Plan
The Company sponsors an employee savings plan under Section 401(k) of the Internal Revenue Code. The Company makes matching contributions equal to
50%
of the participant’s pre-tax contribution up to a maximum of
6%
of the participant’s eligible earnings. Total expense related to the Company’s defined contribution plan was
$1,168
,
$1,071
and
$855
for the years ended
December 31, 2016
,
2015
and
2014
, respectively.
Stock-Based Compensation
Stock-based compensation expense is measured at the grant-date fair value of the award and recognized as compensation expense over the vesting period.
Income Taxes
The Company uses the asset and liability method to account for income taxes. Accordingly, deferred income taxes are recognized for differences between the financial statement and tax bases of assets and liabilities at enacted statutory tax rates in effect for the years in which differences are expected to reverse. Changes in tax rates are recognized directly to the income statement as they arise. Consideration is given to positive and negative evidence related to the realization of the deferred tax assets and valuation allowances are established to reduce deferred tax assets to the amounts expected to be realized. Significant judgment is required in making this assessment.
For uncertain tax positions, the Company recognizes tax benefits that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized.
With regard to non-US subsidiaries, the Company will indefinitely reinvest any future earnings outside of the U.S. and
currently does not have any undistributed earnings.
Concentrations
One
customer represented slightly less than 10% of the total consolidated revenues of the Company for the years ended December 31, 2016 and 2015. This customer accounted for more than 10% of the total consolidated revenues of the Company for the year ended
December 31, 2014
. All customer amounts disclosed in the table are related to biomass-based diesel sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Customer A
|
$
|
144,849
|
|
|
$
|
114,030
|
|
|
$
|
231,780
|
|
The Company maintains cash balances at financial institutions, which may at times exceed the
$250
coverage by the U.S. Federal Deposit Insurance Company.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dates of the financial statements and reported amounts of revenues and expenses during the reporting periods. These estimates are based on information that is currently available to
management and on various assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from those estimates.
New Accounting Pronouncements
On February 25, 2016, the FASB issued ASU 2016-02, which introduces a lessee model that brings most leases on the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in ASC 606, the FASB’s new revenue recognition standard (e.g., those related to evaluating when profit can be recognized). Furthermore, the ASU addresses other concerns related to the current leases model. The ASU is effective for annual periods beginning after December 15, 2018 and interim periods therein. The Company anticipates this standard will have a material impact on our consolidated financial statements. While the Company is continuing to assess all potential impacts of the standard, the Company currently believes the most significant impact relates to its accounting for office, railcar and terminal operating leases. The Company plans to apply a modified retrospective transition approach to each applicable lease that exists at January 1, 2017 as well as leases entered after this date.
In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting”. The amendments in this updated guidance include changes to simplify the codification for several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public entities, this guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted. The Company elected early adoption for the quarter ended December 31, 2016. As part of the adoption the Company has elected to continue to account for forfeitures of share-based payments by estimating the number of award expected to be forfeited and adjusting the estimate when it is no longer probable that the employee will fulfill the service condition. This change had no cumulative effect on retained earnings or other components of equity and did not change the net assets as of the beginning of the period of adoption (January 1, 2016). In addition, the Company assessed that the other adjustments provided in the new guidance did not have any material impact on its consolidated financial statements.
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606), (ASU 2014-09) which will require entities to recognize revenue in an amount that reflects the transfer of promised goods or services to a customer in an amount based on the consideration the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 also requires disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. The amendments may be applied retrospectively to each prior period presented, or retrospectively with the cumulative effect recognized as of the date of initial application. ASU 2014-09 is effective for interim and annual reporting periods beginning after December 15, 2017. The Company is still evaluating its contracts with customers in relation to the requirements of ASU 2014-09, and has not concluded on the financial statement impact of implementing ASU 2014-09. The Company expects to complete its assessment by the quarter ending September 30, 2017.
In March 2016, the FASB issued ASU 2016-08, "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Consideration (Reporting Revenue Gross versus Net)" that clarifies how an entity should identify the unit of accounting for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements, such as service transactions. The guidance also re-frames the indicators to focus on evidence that an entity is acting as a principal rather than an agent. The guidance is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. In May 2016, the FASB issued ASU 2016-12, which amends certain aspects of the new revenue standard, ASU 2014-09. The amendments address issues such as collectability; presentation of sales tax and other similar taxes collected from customers; noncash consideration; contract modifications and completed contracts at transition; and transition technical correction. The guidance is effective for public business entities for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. In December 2016, the FASB issued ASU 2016-20 providing technical corrections and improvements to Topic 606, Revenue from Contracts with Customers. While the Company is continuing to assess all potential impacts of the new revenue standard, the Company anticipates that the standard will not have a material impact on its consolidated financial statements.
NOTE 3—STOCKHOLDERS’ EQUITY OF THE COMPANY
Common Stock
The Company has authorized capital stock consisting of
450,000,000
shares, all with a par value of
$.0001
per share, which includes
300,000,000
shares of Common Stock,
140,000,000
shares of Common Stock A and
10,000,000
shares of Preferred Stock including
3,000,000
shares of Series B Preferred Stock.
Each holder of Common Stock is entitled to
one
vote for each share of Common Stock held on all matters submitted to a vote of stockholders. Subject to preferences that may apply to shares of previously outstanding Series A Preferred Stock and currently outstanding Series B Preferred Stock as outlined below, the holders of outstanding shares of Common Stock are entitled to receive dividends. After the payment of all preferential amounts required to the holders of Series B Preferred Stock, all of the remaining assets of the Company available for distribution shall be distributed ratably among the holders of Common Stock.
NOTE 4—ACQUISITIONS
2016 Acquisition
Sanimax Energy, LLC
On March 15, 2016, the Company acquired fixed assets and inventory from Sanimax Energy, including the
20
mmgy nameplate capacity biomass-based diesel refinery in DeForest, Wisconsin. The Company completed its initial accounting of this business combination as the valuation of the real and personal property was finalized as of September 30, 2016.
The following table summarizes the consideration paid for the acquisition from Sanimax Energy:
|
|
|
|
|
|
March 15, 2016
|
Consideration at fair value for acquisition from Sanimax:
|
|
Cash
|
$
|
12,541
|
|
Common stock
|
4,050
|
|
Contingent consideration
|
4,500
|
|
Total
|
$
|
21,091
|
|
The fair value of the
500,000
shares of Common Stock issued was determined using the closing market price of the Company's common shares at the date of acquisition.
The Company may pay contingent consideration of up to
$5,000
(Earnout Payments) over a
7
-year period after the acquisition, subject to achievement of certain milestones related to the biomass-based diesel gallons produced and sold by REG Madison. The Earnout Payments are payable in cash and cannot exceed
$1,700
in any one year period beginning March 15, 2016 through 2023 and up to
$5,000
in aggregate. As of December 31, 2016, the Company has recorded a contingent liability of
$3,835
, approximately
$1,790
of which has been classified as current on the Consolidated Balance Sheets.
The following table summarizes the fair values of the assets acquired at the acquisition date.
|
|
|
|
|
|
March 15, 2016
|
Assets (liabilities) acquired from Sanimax Energy:
|
|
Inventory
|
$
|
1,591
|
|
Property, plant and equipment
|
19,500
|
|
Total identifiable assets acquired
|
21,091
|
|
|
|
Accrued expenses and liabilities
|
—
|
|
Net identifiable assets acquired
|
$
|
21,091
|
|
The following unaudited pro forma condensed combined results of operations assume that the Sanimax Energy acquisition was completed as of January 1, 2014 and as if the stock had been issued on the same date.
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|
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|
|
|
Year ended December 31, 2016
|
|
Year ended December 31, 2015
|
|
Year ended December 31, 2014
|
Revenues
|
$
|
2,049,658
|
|
|
$
|
1,406,580
|
|
|
$
|
1,282,361
|
|
Net income (loss) attributable to the Company's common stockholders
|
43,453
|
|
|
(157,524
|
)
|
|
83,612
|
|
Basic net income (loss) per share attributable to common stockholders
|
$1.06
|
|
$(3.54)
|
|
$2.03
|
2015 acquisitions
Imperium Renewables, Inc.
On August 19, 2015, the Company acquired substantially all the assets of Imperium Renewables, Inc. (Imperium), including the
100
-mmgy nameplate biomass-based diesel refinery and deepwater port terminal at the Port of Grays Harbor, Washington. The results of Imperium's operations have been included in the consolidated financial statements since that date. The Company has finalized its accounting of this business combination during the fourth quarter of 2015.
The following table summarizes the consideration paid for Imperium:
|
|
|
|
|
|
August 19, 2015
|
Consideration at fair value for Imperium:
|
|
Cash
|
$
|
36,748
|
|
Common stock
|
15,310
|
|
Contingent consideration
|
5,000
|
|
Total
|
$
|
57,058
|
|
The fair value of the
1,675,000
shares of Common Stock issued to Imperium was determined using the closing market price of the Company's common shares at the date of acquisition.
Subject to achievement of certain milestones related to the biomass-based diesel gallons produced and sold by REG Grays Harbor and whether the BTC is reinstated, Imperium may receive certain contingent consideration (Earnout Payments) over a
two
-year period after the acquisition. The Earnout Payments will be payable in cash. As of
December 31, 2016
, the Company has recorded a contingent liability of
$2,093
, all of which has been classified as current on the Consolidated Balance Sheets.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date.
|
|
|
|
|
|
August 19, 2015
|
Assets (liabilities) acquired of Imperium:
|
|
Cash
|
$
|
168
|
|
Accounts receivable
|
8,274
|
|
Inventory
|
18,989
|
|
Other current assets
|
87
|
|
Property, plant and equipment
|
46,476
|
|
Intangible assets
|
2,900
|
|
Total identifiable assets acquired
|
76,894
|
|
|
|
Accounts payable
|
(4,828
|
)
|
Accrued expenses and other liabilities
|
(942
|
)
|
Debt
|
(5,225
|
)
|
Deferred tax liabilities
|
(3,483
|
)
|
Total liabilities assumed
|
(14,478
|
)
|
Net identifiable assets acquired
|
62,416
|
|
Less: Bargain purchase gain
|
5,358
|
|
Net assets acquired
|
$
|
57,058
|
|
Imperium was acquired at a price less than fair value of the net identifiable assets, and the Company recorded a net of tax bargain purchase gain of
$5,358
. All future adjustments will be reported in the Consolidated Statements of Operations. The bargain purchase gain is reported in the "Other Income, Net" on the Consolidated Statements of Operations. Prior to recognizing a bargain purchase gain, the Company reassessed whether all assets acquired and liabilities assumed had been correctly identified as well as the key valuation assumptions and business combination accounting procedures for this acquisition. After careful consideration and review, the Company concluded that the recognition of a bargain purchase gain was appropriate for this acquisition. Factors that contributed to the bargain purchase price were:
•
The assets were not fully utilized by the seller and that the transaction was completed with a motivated seller that appeared to have recapitalized its investments and desired to exit the facilities that no longer fit its strategy given the uncertainties in the industry.
•
The Company was able to complete the acquisition in an expedient manner, with a cash payment, stock issuance and without a financial contingency, which was a key attribute for the seller. The relatively small size of the transaction for the Company, the lack of required third-party financing and the Company's expertise in completing similar transactions in the past gave the seller confidence that the Company could complete the transaction quickly and without difficultly.
•
Due to the unique nature of the products and limited number of potential buyers for this business, the seller found it advantageous to accept the Company's purchase price based upon our demonstrated ability to operate similar businesses, and financial strength that may enable the Company to make improvement and run the business at increased production rates in the long run.
2014 acquisitions
Petrotec AG
On December 24, 2014, the Company acquired
69.08%
of the outstanding common shares and voting interest of Petrotec. The results of Petrotec’s operations have been included in the consolidated financial statements since that date. During the last quarter of 2015, the Company completed its purchase accounting for this business combination. The finalization of the purchase price allocation did not result in material adjustments.
The following table summarizes the consideration paid for Petrotec:
|
|
|
|
|
|
December 24, 2014
|
Consideration at fair value for Petrotec:
|
|
Common stock
|
$
|
20,022
|
|
The fair value of the
2,070,538
common shares issued to Petrotec was determined on the basis of the closing market price of the Company's common shares at the date of acquisition.
The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date as the purchase price allocation was finalized:
|
|
|
|
|
|
December 24, 2014
|
Assets (liabilities) acquired of Petrotec:
|
|
Cash
|
$
|
13,523
|
|
Accounts receivable
|
4,989
|
|
Inventory
|
9,470
|
|
Other current assets
|
3,583
|
|
Property, plant and equipment
|
25,026
|
|
Other noncurrent assets
|
369
|
|
Total identifiable assets acquired
|
56,960
|
|
|
|
Accounts payable
|
(8,171
|
)
|
Accrued expenses and other liabilities
|
(2,151
|
)
|
Debt
|
(16,192
|
)
|
Non-current liabilities
|
(1,462
|
)
|
Total liabilities assumed
|
(27,976
|
)
|
Net identifiable assets acquired
|
28,984
|
|
Non-controlling interest
|
(8,962
|
)
|
Net assets acquired
|
$
|
20,022
|
|
The fair value of the
30.92%
noncontrolling interest in Petrotec is estimated to be
$8,962
at the date of the acquisition. The fair value of the noncontrolling interest was estimated using a combination of the income approach and a market approach.
The Company recognized
$1,289
of acquisition related costs that were expensed in the period the acquisition occurred.
In April 2015, Petrotec's application to de-list its shares of common stock from the Frankfurt Stock Exchange was approved. From the end of the October 8, 2015 trading day, Petrotec's shares of common stock are no longer traded on a regulated market of any stock exchange.
During 2016 and 2015, the Company acquired additional common shares of Petrotec as part of the cash tender offers and open market purchases for
$149
and
$4,828
, respectively. At December 31, 2016 and 2015, the Company owned
90.58%
and
87.49%
of the outstanding common shares and voting interest of Petrotec.
In January 2017, the Company completed its acquisition of the remaining minority interest in Petrotec and now owns
100%
of Petrotec's outstanding shares.
Syntroleum Corporation/Dynamic Fuels, LLC
On June 3, 2014, REG Synthetic Fuels, a wholly-owned subsidiary of the Company included in the Biomass-based diesel segment, acquired substantially all the assets of Syntroleum, which consisted of a
50%
limited liability company membership interest in Dynamic Fuels, as well as intellectual property and other assets. Dynamic Fuels owns a
75
mmgy nameplate capacity renewable hydrocarbon diesel biorefinery located in Geismar, Louisiana. The following table summarizes the consideration paid for Syntroleum.
|
|
|
|
|
|
June 3, 2014
|
Consideration at fair value for Syntroleum:
|
|
Common stock
|
$
|
34,831
|
|
The fair value of the
3,493,613
shares of Common Stock issued to Syntroleum was determined on the basis of the closing market price of the Company's common shares at the date of acquisition.
The fair value of the Syntroleum renewable hydrocarbon diesel technology was determined using the relief from royalty method, or RFR, which reflects the savings realized by owning the intangible assets. The value under RFR method is dependent upon the following factors for an asset: royalty rate, discount rate, expected life and projected revenue.
On June 6, 2014, REG Synthetic Fuels acquired the remaining
50%
ownership interest in Dynamic Fuels, from Tyson Foods. The Company renamed Dynamic Fuels to REG Geismar, LLC, which is included in the Biomass-based diesel segment. The finalization of the purchase price allocation resulted in an increase in goodwill of
$3,202
relating to higher than initially estimated net operating losses prior to the acquisition of Syntroleum and Dynamic Fuels.
The following table summarizes the consideration paid to Tyson Foods for Dynamic Fuels:
|
|
|
|
|
|
June 6, 2014
|
Consideration at fair value for Dynamic Fuels:
|
|
Cash
|
$
|
16,447
|
|
Contingent consideration
|
28,900
|
|
Total
|
$
|
45,347
|
|
The following table summarizes the amount of assets acquired and liabilities assumed at the acquisition date for the combined acquisition of Syntroleum and Dynamic Fuels:
|
|
|
|
|
|
June 6, 2014
|
Assets (liabilities) acquired of Syntroleum and Dynamic Fuels:
|
|
Cash
|
$
|
253
|
|
Other current assets
|
4,666
|
|
Property, plant and equipment
|
121,567
|
|
Goodwill
|
71,398
|
|
Intangible assets
|
8,900
|
|
Other noncurrent assets
|
10,281
|
|
Other current liabilities
|
(1,024
|
)
|
Deferred tax liabilities
|
(8,310
|
)
|
Debt
|
(113,553
|
)
|
Other noncurrent liabilities
|
(14,000
|
)
|
Total
|
$
|
80,178
|
|
Subsequent to the closing of the Tyson Foods transaction, REG Geismar paid off the debt owed to Tyson Foods in the amount of
$13,553
.
Subject to achievements related to the sale of renewable hydrocarbon diesel at the REG Geismar production facility, Tyson Foods may receive contingent consideration of up to
$35,000
. The Company will pay contingent consideration, if and when, the Company achieves certain sales volumes. The agreement calls for periodic payments based on pre-determined payments per gallon of product sold. The probability weighted contingent payments were discounted using a risk adjusted discount rate of
5.8%
. The contingent payments will be payable in cash. As of
December 31, 2016
, the Company has recorded a contingent
liability of
$27,065
, of which
$9,589
has been classified in accrued expenses and other liabilities on the Consolidated Balance Sheets.
LS9, Inc.
On January 22, 2014, REG Life Sciences, a wholly-owned subsidiary of the Company, acquired substantially all of the assets and certain liabilities of LS9. This acquisition's finalized purchase price allocation did not result in material adjustments. The following table summarizes the consideration paid and the amounts of assets acquired and liabilities assumed at the acquisition date:
|
|
|
|
|
|
January 22, 2014
|
Consideration at fair value:
|
|
|
Cash
|
$
|
15,275
|
|
Common stock
|
26,254
|
|
Contingent consideration
|
17,050
|
|
Total
|
$
|
58,579
|
|
|
|
|
|
|
|
January 22, 2014
|
Assets (liabilities) acquired:
|
|
|
Property, plant and equipment
|
$
|
8,215
|
|
In-process research & development intangible assets
|
15,956
|
|
Goodwill
|
34,846
|
|
Other noncurrent liabilities
|
(438
|
)
|
Total
|
$
|
58,579
|
|
The fair value of the
2,230,559
shares of Common Stock issued as part of the consideration paid for LS9 was determined on the basis of the closing market price of the Company's common shares at the date of acquisition.
Subject to achievement of certain milestones related to the development and commercialization of products from LS9’s technology, LS9 may receive contingent consideration of up to
$21,500
(Earnout Payments) over a
five
-year period after the acquisition. The Earnout Payments will be payable in cash, the Company's stock or a combination of cash and stock at the Company's election. As of
December 31, 2016
and
2015
, the Company has recorded a contingent liability of
$13,575
and
$7,590
, respectively,
$4,165
and
$3,958
, respective of which has been classified as current on the Consolidated Balance Sheets.
416 S. Bell, LLC
Prior to July 25, 2014, the Company had a
50%
ownership in 416 S Bell, LLC (Bell, LLC), a variable interest entity (VIE) joint venture that owned and leased to the Company its corporate office building in Ames, Iowa. Commencing January 1, 2011, the Company had the right to execute a call option with the joint venture member, Dayton Park, LLC (Dayton Park), to purchase Bell, LLC and commencing on January 1, 2013, Dayton Park had the right to execute a put option with the Company to sell Bell, LLC. The Company determined it was the primary beneficiary of Bell, LLC and had consolidated Bell, LLC into the Company’s financial statements since January 1, 2011.
On July 25, 2014, the Company completed the acquisition of the remaining
50%
interest in Bell, LLC in exchange for
$1,423
cash. The Company determined that this transaction did not result in a change of control and as such has accounted for it as an equity transaction. Neither goodwill nor a gain/loss was recognized in conjunction with the acquisition.
NOTE 5—INVENTORIES
Inventories consist of the following at December 31:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Raw materials
|
$
|
34,560
|
|
|
$
|
28,989
|
|
Work in process
|
3,775
|
|
|
3,014
|
|
Finished goods
|
107,073
|
|
|
53,887
|
|
Total
|
$
|
145,408
|
|
|
$
|
85,890
|
|
NOTE 6—PROPERTY, PLANT AND EQUIPMENT
Company's owned property, plant and equipment consists of the following at December 31:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Land
|
$
|
5,412
|
|
|
$
|
4,221
|
|
Building and improvements
|
134,398
|
|
|
103,199
|
|
Leasehold improvements
|
10,520
|
|
|
8,149
|
|
Machinery and equipment
|
511,461
|
|
|
397,632
|
|
|
661,791
|
|
|
513,201
|
|
Accumulated depreciation
|
(138,372
|
)
|
|
(75,119
|
)
|
|
523,419
|
|
|
438,082
|
|
Construction in process
|
76,055
|
|
|
136,502
|
|
Total
|
$
|
599,474
|
|
|
$
|
574,584
|
|
During 2016, the Company recorded impairment charges of
$15,593
related to its Emporia facility's property, plant and equipment assets. Refer to Note 2 for further details.
NOTE 7—INTANGIBLE ASSETS
Amortizing intangible assets consist of the following at December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Cost
|
|
Accumulated Amortization
|
|
Net
|
|
Weighted Average Remaining Life
|
Raw material supply agreement
|
$
|
6,230
|
|
|
$
|
(1,987
|
)
|
|
$
|
4,243
|
|
|
9.0 years
|
Renewable hydrocarbon diesel technology
|
8,300
|
|
|
(1,429
|
)
|
|
6,871
|
|
|
12.5 years
|
Acquired customer relationships
|
2,900
|
|
|
(396
|
)
|
|
2,504
|
|
|
8.6 years
|
Ground lease
|
200
|
|
|
(127
|
)
|
|
73
|
|
|
4.9 years
|
In-process research and development
|
15,956
|
|
|
(177
|
)
|
|
15,779
|
|
|
14.8 years
|
Total intangible assets
|
$
|
33,586
|
|
|
$
|
(4,116
|
)
|
|
$
|
29,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Cost
|
|
Accumulated Amortization
|
|
Net
|
|
Weighted Average Remaining Life
|
Raw material supply agreement
|
$
|
6,230
|
|
|
$
|
(1,551
|
)
|
|
$
|
4,679
|
|
|
10.0 years
|
Renewable hydrocarbon diesel technology
|
8,300
|
|
|
(876
|
)
|
|
7,424
|
|
|
13.5 years
|
Acquired customer relationships
|
2,900
|
|
|
(106
|
)
|
|
2,794
|
|
|
9.6 years
|
Ground lease
|
200
|
|
|
(112
|
)
|
|
88
|
|
|
5.9 years
|
Total amortizing intangibles
|
17,630
|
|
|
(2,645
|
)
|
|
14,985
|
|
|
|
In-process research and development, indefinite lives
|
15,956
|
|
|
—
|
|
|
15,956
|
|
|
|
Total intangible assets
|
$
|
33,586
|
|
|
$
|
(2,645
|
)
|
|
$
|
30,941
|
|
|
|
The raw material supply agreement acquired is amortized over its
15
year term based on actual usage under the agreement and expires in 2025. The Company determined the estimated amount of raw materials to be purchased over the life of the
agreement to calculate a per pound rate of consumption. The rate is then multiplied by the actual usage each period for expense reporting purposes.
Amortization expense of
$1,471
,
$1,112
and
$1,298
for intangible assets was recorded for the years ended
December 31, 2016
,
2015
and
2014
, respectively.
Estimated amortization expense for fiscal years ended December 31 is as follows:
|
|
|
|
|
2017
|
$
|
2,366
|
|
2018
|
2,372
|
|
2019
|
2,379
|
|
2020
|
2,386
|
|
2021
|
2,392
|
|
Thereafter
|
17,575
|
|
Total
|
$
|
29,470
|
|
NOTE 8—OTHER ASSETS
Prepaid expenses and other current assets consist of the following at December 31:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Commodity derivatives and related collateral, net
|
$
|
7,127
|
|
|
$
|
10,097
|
|
Prepaid expenses
|
10,665
|
|
|
8,504
|
|
Deposits
|
2,897
|
|
|
3,824
|
|
RIN inventory
|
9,398
|
|
|
5,656
|
|
Taxes receivable
|
4,539
|
|
|
1,814
|
|
Other
|
1,646
|
|
|
1,987
|
|
Total
|
$
|
36,272
|
|
|
$
|
31,882
|
|
RIN inventory is valued at the lower of cost or net realizable value and consists of (i) RINs the Company generates in connection with its production of biomass-based diesel and (ii) RINs acquired from third parties. RINs generated by the Company are recorded at no cost, as these RINs are government incentives and not a tangible output from its biomass-based diesel production. The cost of RINs acquired from third parties is determined using the average cost method. RIN market value is based upon pricing as reported by the Oil Price Information Service (OPIS). Since RINs generated by the Company have zero cost associated to them, the lower of cost or market adjustment in RIN inventory reflects only the value of RINs obtained from third parties. RIN inventory values were adjusted in the amount of
$612
and
$3,027
at
December 31, 2016
and
2015
, respectively, to reflect the lower of cost or market.
Other noncurrent assets consist of the following at December 31:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Spare parts inventory
|
$
|
3,532
|
|
|
$
|
2,922
|
|
Catalysts
|
4,479
|
|
|
5,742
|
|
Deposits
|
2,392
|
|
|
2,370
|
|
Other
|
2,227
|
|
|
785
|
|
Total
|
$
|
12,630
|
|
|
$
|
11,819
|
|
NOTE 9—ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consist of the following at December 31:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Accrued property taxes
|
$
|
1,518
|
|
|
$
|
1,056
|
|
Accrued employee compensation
|
15,005
|
|
|
8,776
|
|
Accrued interest
|
537
|
|
|
578
|
|
Contingent consideration, current portion
|
17,637
|
|
|
14,762
|
|
Unfavorable lease obligation, current portion
|
1,828
|
|
|
1,828
|
|
Excise tax payable
|
1,603
|
|
|
—
|
|
Other
|
788
|
|
|
1,466
|
|
Total
|
$
|
38,916
|
|
|
$
|
28,466
|
|
Other noncurrent liabilities consist of the following at December 31:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Straight-line lease liability
|
$
|
2,421
|
|
|
$
|
2,751
|
|
Asset retirement obligations
|
1,140
|
|
|
1,062
|
|
Other
|
1,295
|
|
|
1,097
|
|
Total
|
$
|
4,856
|
|
|
$
|
4,910
|
|
NOTE 10—DEBT
The Company’s term debt at December 31 is as follows:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
4.00% Convertible Senior Notes, $152,000 face amount, due in June 2036
|
$
|
113,446
|
|
|
$
|
—
|
|
2.75% Convertible debt, $73,838 face amount, due in June 2019
|
67,254
|
|
|
126,053
|
|
REG Geismar GOZone bonds, secured, variable interest rate, due in October 2033
|
—
|
|
|
100,000
|
|
REG Danville term loan, secured, variable interest rate of LIBOR plus 4%, due in December 2017
|
8,163
|
|
|
—
|
|
REG Newton term loan, secured, variable interest rate of LIBOR plus 4%, due in December 2018
|
13,063
|
|
|
16,800
|
|
REG Mason City term loan, fixed interest rate of 5%, due in July 2019
|
2,659
|
|
|
3,675
|
|
REG Ames term loans, secured, fixed interest rates of 3.5% and 4.25%, due in January 2018 and December 2019, respectively
|
3,565
|
|
|
3,901
|
|
REG Grays Harbor term loan, variable interest of minimum 3.5% or Prime Rate plus 0.25%, due in May 2022
|
9,273
|
|
|
5,225
|
|
Other
|
468
|
|
|
908
|
|
Total debt before debt issuance costs
|
217,891
|
|
|
256,562
|
|
Less: Current portion of long-term debt
|
15,402
|
|
|
5,206
|
|
Less: Debt issuance costs (net of accumulated amortization of $ 3,705 and $2,296, respectively)
|
6,286
|
|
|
4,105
|
|
Total long-term debt
|
$
|
196,203
|
|
|
$
|
247,251
|
|
REG Danville
On October 31, 2015, REG Danville, LLC entered into a Second Amended and Restated Loan Agreement with Fifth Third Bank regarding the construction/term loan (the "Fifth Third Construction/Term Loan"). The renewed Fifth Third Construction/Term Loan increased the principal amount of the Construction/Term Loan to
$12,000
and had a
three
-year term with the maturity of the loan being extended to December 19, 2017. The loan requires monthly principal payments of
$212
and interest to be charged using LIBOR plus
4%
per annum. The loan agreement contains various loan covenants.
Convertible Senior Notes
On June 2, 2016, the Company issued
$152,000
aggregate principal amount of the 2036 Convertible Notes in a private offering to qualified institutional buyers. The 2036 Convertible Notes bear interest at a rate of
4.00%
per year payable semi-annually in arrears on June 15 and December 15 of each year, beginning December 15, 2016. The notes will mature on June 15, 2036, unless repurchased, redeemed or converted in accordance with their terms prior to such date.
Prior to December 15, 2035, the 2036 Convertible Notes will be convertible only upon satisfaction of certain conditions and during certain periods as stipulated in the indenture. On or after December 15, 2035 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the 2036 Convertible Notes may convert their notes at any time. Unless and until the Company obtains stockholder approval under applicable NASDAQ Stock Market rules, the 2036 Convertible Notes will be convertible, subject to certain conditions, into cash. If the Company obtains such stockholder approval, the 2036 Convertible Notes may be settled in cash, the Company’s common shares or a combination of cash and the Company’s common shares, at the Company’s election. The Company may not redeem the 2036 Convertible Notes prior to June 15, 2021. Holders of the 2036 Convertible Notes will have the right to require the Company to repurchase for cash all or some of their notes at
100%
of their principal, plus any accrued and unpaid interest on each of June 15, 2021, June 15, 2026 and June 15, 2031. Holders of the 2036 Convertible Notes will have the right to require the Company to repurchase for cash all or some of their notes at
100%
of their principal, plus any accrued and unpaid interest upon the occurrence of certain fundamental changes. The initial conversion rate is
92.8074
common shares per $1,000 (one thousand) principal amount of 2036 Convertible Notes (equivalent to an initial conversion price of approximately
$10.78
per common share).
The net proceeds from the offering of the 2036 Convertible Notes were approximately
$147,118
, after deducting fees and offering expenses of
$4,882
, which was capitalized as debt issuance costs and is being amortized through June 2036.
The Company evaluated the terms of the conversion features under the applicable accounting literature, including Derivatives and Hedging, ASC 815, and determined that a certain feature required separate accounting as a derivative. This derivative was recorded as a long-term liability, "Convertible Debt Conversion Liability" on the Consolidated Balance Sheets and will be adjusted to reflect fair value each reporting date. The fair value of the convertible debt conversion liability at issuance was
$40,145
. The fair value of the convertible debt conversion liability at
December 31, 2016
was
$27,100
. The Company recognized gains of
$13,045
for the year ended
December 31, 2016
, which are reflected in the "Change in Fair Value of Convertible Debt Conversion Liability" on the Consolidated Statements of Operations. The debt liability component of 2036 Convertible Notes was determined to be
$111,855
at issuance, reflecting a debt discount of
$40,145
. The debt discount is to be amortized through June 2036. The effective interest rate on the debt liability component was
2.45%
.
In June 2016, approximately
$35,101
of the net proceeds from the offering of the 2036 Convertible Notes were used to repurchase
4,060,323
shares of the Company's Common Stock in privately negotiated transactions. In addition, approximately
$61,954
of the net proceeds from the offering were used to repurchase
$63,912
principal amount of the Company's 2019 Convertible Notes in privately negotiated transactions. In September 2016, the Company used approximately
$5,584
under the March 2016 share repurchase program to repurchase an additional
$6,000
principal amount of the 2019 Convertible Notes. The repurchases resulted in a gain on debt extinguishment of
$2,331
, which is reflected on the Consolidated Statements of Operations.
REG Grays Harbor, LLC
In July 2015, REG Grays Harbor entered into a credit agreement with Umpqua Bank, or Umpqua Credit Agreement, whereby it can borrow up to
$10.0 million
for capital expenditure projects. Amounts borrowed under the Umpqua Credit Agreement bear interest at a per annum rate at of minimum of
3.50%
or Prime Rate plus
0.25%
. In addition, in July 2015 REG Grays Harbor entered into a line of credit note or Umpqua Line of Credit Note in conjunction with the Umpqua Credit Agreement for a maximum borrowing amount of
$5,000
. In September 2016, REG Grays Harbor entered into the first loan modification agreement with Umpqua Bank, or the First Modification, to extend the maturity date of the Umpqua Line of Credit to July 31, 2018. The terms of the Umpqua Credit Agreement provide that any principal outstanding under the Umpqua Line of Credit Note on July 31, 2016 shall be converted into term debt. At
December 31, 2016
, the total outstanding borrowing under the Umpqua Credit Agreement was all term debt and amounted to
$9,273
, bearing an interest rate of
4.30%
per annum.
REG Geismar
REG Geismar was the obligor with respect to
$100,000
aggregate principal amount of Gulf Opportunity Zone tax-exempt bonds, or GOZone Bonds, originally due in October 2033, through a loan agreement with the Louisiana Public Facilities Authority. REG Geismar’s payment obligations on the GOZone Bonds were supported by a letter of credit issued by a financial institution. REG Geismar was party to an agreement to reimburse the financial institution for any draws on the letter
of credit and that obligation was secured by a
$101,315
certificate of deposit by the Company and pledged in favor of the financial institution. On September 6, 2016, REG Geismar caused the Louisiana Public Facilities Authority to call for redemption all of the outstanding GOZone Bonds as of September 6, 2016. The redemption was funded by application of the funds generated by release of the certificate of deposit.
Lines of Credit
The Company’s revolving debt at December 31 are as follows:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Total revolving loans (current)
|
$
|
52,844
|
|
|
$
|
23,149
|
|
Maximum remaining available to be borrowed under revolving lines of credit
|
$
|
100,237
|
|
|
$
|
23,067
|
|
On March 16, 2016, REG Energy Services, LLC ("REG Energy Services") entered into an operating and revolving line of credit agreement (the "Agreement") with Bankers Trust Company (“Bankers Trust”). Pursuant to the Agreement, Bankers Trust agreed to provide an operating and revolving line of credit (the "Line of Credit") to REG Energy Services in the amount of
$30,000
. Amounts outstanding under the Agreement bear variable interest as stipulated in the Agreement. The Agreement contains various loan covenants that restrict REG Energy Services’ ability to take certain actions, including prohibiting it in certain circumstances from making payments to the Company. In addition, the Line of Credit is secured by substantially all of REG Energy Services’ accounts receivable and inventory.
On September 30, 2016, REG Services Group, LLC and REG Marketing & Logistics Group, LLC, the Company's wholly owned subsidiaries entered into a Joinder and Amendment No. 11 to Credit Agreement (the “Amendment”) to that certain Credit Agreement originally dated as of December 23, 2011, by and among Borrowers, the lenders party thereto (“Lenders”) and Wells Fargo Capital Finance, LLC, as the agent, and Fifth Third Bank, as a new lender (as amended, the “Well Fargo Revolver”). Pursuant to the Amendment, the maximum commitment of the Lenders under the M&L and Services Revolver to make revolving loans was increased from
$60,000
to
$150,000
, and an accordion feature was added to the M&L and Services Revolver, which allows the Company's subsidiaries that are borrowers to request commitments for additional revolving loans in aggregate amount not to exceed to
$50,000
, subject to customary conditions, including the consent of Lenders providing such additional commitments.
The Amendment extended the maturity date of the M&L and Services Revolver to September 30, 2021. Loans advanced under the M&L and Services Revolver bear interest based on a one-month LIBOR rate (which shall not be less than
zero
), plus a margin based on Quarterly Average Excess Availability (as defined in the Revolving Credit Agreement), which may range from
1.75%
per annum to
2.25%
per annum.
The M&L and Services Revolver contains various loan covenants that restrict each subsidiary borrower’s ability to take certain actions, including restrictions on incurrence of indebtedness, creation of liens, mergers or consolidations, dispositions of assets, repurchase or redemption of capital stock, making certain investments, making distributions to us unless certain conditions are satisfied, entering into certain transactions with affiliates or changing the nature of the subsidiary’s business. In addition, the subsidiary borrowers are required to maintain a fixed charge coverage ratio of at least
1.0
to
1.5
if excess availability under the M&L and Services Revolver is less than
10%
of the total
$150,000
of current revolving loan commitments, or
$15,000
currently. The M&L and Services Revolver is secured by the subsidiary borrowers’ membership interests and substantially all of their assets. In addition, the M&L and Services Revolver is secured by the accounts receivable and inventory of REG Albert Lea, LLC, REG Houston, LLC, REG New Boston, LLC, and REG Geismar, LLC (collectively, the "Plant Loan Parties") subject to a
$40,000
limitation with respect to each of the Plant Loan Parties.
Maturities of the term debt, including the convertible debt, are as follows for the years ending December 31:
|
|
|
|
|
2017
|
$
|
15,402
|
|
2018
|
14,757
|
|
2019
|
69,497
|
|
2020
|
1,576
|
|
2021
|
1,638
|
|
Thereafter
|
115,021
|
|
Total
|
217,891
|
|
Less: current portion
|
15,402
|
|
|
$
|
202,489
|
|
NOTE 11—INCOME TAXES
Income tax benefit (expense) for the years ended December 31 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Current income tax benefit (expense)
|
|
|
|
|
|
Federal
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
State
|
94
|
|
|
—
|
|
|
—
|
|
Foreign
|
(1,036
|
)
|
|
(225
|
)
|
|
—
|
|
|
(942
|
)
|
|
(225
|
)
|
|
—
|
|
Deferred income tax benefit (expense)
|
|
|
|
|
|
Federal
|
2,113
|
|
|
24,151
|
|
|
(14,112
|
)
|
State
|
6,936
|
|
|
9,736
|
|
|
1,420
|
|
Foreign
|
(2,560
|
)
|
|
1,035
|
|
|
9
|
|
Net operating loss carryforwards created
|
105,165
|
|
|
88,110
|
|
|
61,640
|
|
|
111,654
|
|
|
123,032
|
|
|
48,957
|
|
Income tax benefit (expense) before valuation allowances
|
110,712
|
|
|
122,807
|
|
|
48,957
|
|
Deferred tax valuation allowances
|
(114,980
|
)
|
|
(114,106
|
)
|
|
(52,529
|
)
|
Income tax benefit (expense)
|
$
|
(4,268
|
)
|
|
$
|
8,701
|
|
|
$
|
(3,572
|
)
|
A reconciliation of the reported amount of income tax expense to the amount computed by applying the statutory federal income tax rate to earnings from continuing operations before income taxes is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
U.S. Federal income tax expense at a statutory rate of 35 percent
|
$
|
(17,143
|
)
|
|
$
|
56,144
|
|
|
$
|
(30,139
|
)
|
State taxes, net of federal income tax benefit
|
11,442
|
|
|
12,777
|
|
|
5,119
|
|
Tax position on government incentives
|
117,630
|
|
|
85,423
|
|
|
76,662
|
|
Goodwill impairment tax impact
|
2,876
|
|
|
(35,062
|
)
|
|
—
|
|
Bargain purchase gain
|
—
|
|
|
1,875
|
|
|
—
|
|
Foreign net operating loss expiration
|
(2,383
|
)
|
|
—
|
|
|
—
|
|
Other
|
(1,710
|
)
|
|
1,650
|
|
|
(2,685
|
)
|
Total (expense) benefits for income taxes before valuation allowances
|
110,712
|
|
|
122,807
|
|
|
48,957
|
|
Valuation allowances
|
(114,980
|
)
|
|
(114,106
|
)
|
|
(52,529
|
)
|
Total benefit (expense) for income taxes
|
$
|
(4,268
|
)
|
|
$
|
8,701
|
|
|
$
|
(3,572
|
)
|
The Company receives government incentive payments and excludes this revenue from federal and state taxable income. This tax position of excluding government incentives from taxable income has been accepted by the Internal Revenue Service under audit for 2010 and 2011 and has been approved by the Joint Committee on Taxation. As a result of excluding these government incentive payments, the Company currently has cumulative losses in recent years and initially established a valuation allowance in 2013 to reduce its total deferred tax assets to the amount more-likely-than-not to be realized.
In 2015, the Company had a non-cash impairment charge for goodwill of
$175,028
, of which
$91,961
was not deductible for tax purposes. A
$32,186
tax impact related to the non-deductible portion of the goodwill impairment charge is reflected in the tax reconciliation above for 2015 in the amount of
$35,062
, offset with
$2,876
in 2016.
The tax effects of temporary differences that give rise to the Company’s deferred tax assets and liabilities at December 31 are as follows:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Deferred Tax Assets:
|
|
|
|
Goodwill
|
$
|
42,082
|
|
|
$
|
39,172
|
|
Net operating loss carryforwards
|
346,768
|
|
|
243,865
|
|
Tax credit carryforwards
|
1,597
|
|
|
1,597
|
|
Start-up costs
|
857
|
|
|
988
|
|
Stock-based compensation
|
5,853
|
|
|
4,703
|
|
Terminal leases
|
2,603
|
|
|
3,859
|
|
Capitalized research and development
|
11,394
|
|
|
8,096
|
|
Accrued compensation
|
4,419
|
|
|
2,546
|
|
Inventory capitalization
|
3,227
|
|
|
2,046
|
|
Allowance for doubtful accounts
|
800
|
|
|
567
|
|
Other
|
2,363
|
|
|
1,569
|
|
Deferred tax assets
|
421,963
|
|
|
309,008
|
|
Deferred Tax Liabilities:
|
|
|
|
Prepaid expenses
|
(1,724
|
)
|
|
(1,338
|
)
|
Property, plant and equipment
|
(61,431
|
)
|
|
(65,398
|
)
|
Intangibles
|
(3,591
|
)
|
|
(3,909
|
)
|
Deferred revenue
|
(3,454
|
)
|
|
—
|
|
Convertible debt
|
(5,797
|
)
|
|
(3,626
|
)
|
Unrealized gain (loss) on available for sale investments
|
874
|
|
|
(1,752
|
)
|
Other
|
(2,084
|
)
|
|
(2,007
|
)
|
Deferred tax liabilities
|
(77,207
|
)
|
|
(78,030
|
)
|
Net deferred tax assets (liabilities)
|
344,756
|
|
|
230,978
|
|
Valuation allowance
|
(365,035
|
)
|
|
(250,164
|
)
|
Net deferred taxes
|
$
|
(20,279
|
)
|
|
$
|
(19,186
|
)
|
At
December 31, 2016
, the Company has recorded a deferred tax asset of
$346,768
reflecting the benefit of federal, state and foreign net operating loss carry-forwards. Federal net operating loss carry-forward totals
$887,228
and will begin to expire in
2028
, while the amount and expiration dates of state net operating losses vary by jurisdiction. Changes in ownership of the Company, as defined by Section 382 of the Internal Revenue Code of 1986, as amended, may limit the utilization of federal and state net operating losses and credit carry-forwards in any one year. The Company has performed an ownership change analysis in 2016 to determine the impact of changes in ownership on utilization of carry-forward attributes, the results of which have been incorporated into our financial statements.
In evaluating available evidence around the recoverability of net deferred tax assets, the Company considers, among other factors, historical financial performance, expectation of future earnings, length of statutory carry-forward periods and ability to carry back losses to prior periods, experience with operating loss and tax credit carry-forwards expiring unused, tax planning strategies and timing for the of reversals of temporary differences. In evaluating losses, management considers the nature, frequency and severity of losses in light of the conditions giving rise to those losses. As a result of the above described tax position of excluding government incentive payments from taxable income, the Company currently has cumulative losses in recent years and has established a valuation allowance to reduce its total deferred tax assets to the amount more-likely-than-not to be realized. Activity regarding the valuation allowance for deferred tax assets was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Beginning of year balance
|
$
|
250,164
|
|
|
$
|
136,547
|
|
|
$
|
76,916
|
|
Changes in valuation allowance charged to income
|
114,980
|
|
|
114,106
|
|
|
52,529
|
|
Foreign currency translation
|
(109
|
)
|
|
(773
|
)
|
|
—
|
|
Acquisition
|
—
|
|
|
284
|
|
|
7,102
|
|
End of year balance
|
$
|
365,035
|
|
|
$
|
250,164
|
|
|
$
|
136,547
|
|
The Company analyzes filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, and all open tax years in these jurisdictions to determine if it has any uncertain tax positions on any of its income tax returns. An uncertain tax position represents the Company’s expected treatment of a tax position taken in a filed tax return, or planned to be taken in a tax return not yet filed, that has not been reflected in measuring income tax expense for financial reporting purposes. The Company does not recognize income tax benefits associated with uncertain tax positions where it is determined that it is not more-likely-than-not, based on the technical merits, that the position will be sustained upon examination.
A reconciliation of the total amounts of unrecognized tax benefits at December 31 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Beginning and end of year balance
|
$
|
1,900
|
|
|
$
|
1,900
|
|
|
$
|
1,900
|
|
The amount of unrecognized tax benefits that would affect the effective tax rate if the tax benefits were recognized was
$0
at
December 31, 2016
,
2015
and
2014
. The remaining liability for unrecognized tax benefits is related to tax positions for which there is a related deferred tax asset. The Company does not believe it is reasonably possible that the amounts of unrecognized tax benefits existing as of
December 31, 2016
will significantly increase or decrease over the next
twelve
months. Interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense. The Company has
not
recorded any such amounts in the periods presented.
The Company is subject to tax in the U.S. and various state and foreign jurisdictions. The U.S. Internal Revenue Service has examined the Company's federal income tax returns through 2008, as well as 2010 and 2011. All other years are subject to examination, while various state and foreign income tax returns also remain subject to examination by state taxing authorities.
The Company considers its foreign earnings of non U.S. subsidiaries to be permanently reinvested. Any amount would become taxable upon a repatriation of assets from the subsidiary or a sale or liquidation of the subsidiary. The Company has not made a provision for U.S. or additional foreign withholding taxes. The Company has
$0
deferred tax liability related to investments in its foreign subsidiaries. If the Company had a deferred tax liability related to its foreign subsidiaries it would be unrecorded as the Company considers its foreign earnings indefinitely reinvested.
NOTE 12—STOCK-BASED COMPENSATION
On October 26, 2011, the stockholders approved the 2009 Stock Incentive Plan (the 2009 Plan) which authorizes up to
4,160,000
shares of Company Common Stock to be issued for the award of restricted stock, restricted stock units (RSUs), performance restricted stock units (PRSUs) and stock appreciation rights (SARs) at the discretion of the Company Board as compensation to employees, consultants of the Company and to non-employee directors. Under the 2009 Plan, an additional
1,800,000
shares, or
5,960,000
shares in total, are reserved for issuance as approved by shareholders on May 15, 2014. The expense is measured at the grant-date fair value of the award and recognized as compensation expense on a straight-line basis over the service period, which is the vesting period. There was no cash flow impact resulting from the grants of these awards. The 2009 Plan is generally protected from anti-dilution via adjustments for any stock dividends, stock split, combination or other recapitalization.
The Company recorded stock-based compensation expense of
$5,896
,
$5,161
and
$5,883
for the years ended
December 31, 2016
,
2015
and
2014
, respectively. The stock-based compensation costs were included as a component of selling, general and administrative expenses. At
December 31, 2016
, there was
$8,103
of unrecognized compensation expense related to unvested awards, which is expected to be recognized over a period of approximately
2.9 years
.
Restricted Stock Units
The following table summarizes information about the Company’s Common Stock RSU’s granted, vested, exercised and forfeited:
|
|
|
|
|
|
|
|
|
Number of
Awards
|
|
Weighted
Average Issue
Price
|
Awards outstanding - January 1, 2014
|
500,928
|
|
|
|
$15.81
|
|
Issued
|
257,030
|
|
|
|
$10.97
|
|
Vested and restriction lapsed
|
(124,906
|
)
|
|
|
$10.42
|
|
Forfeited
|
(16,658
|
)
|
|
|
$10.95
|
|
Awards outstanding - December 31, 2014
|
616,394
|
|
|
|
$15.00
|
|
Issued
|
339,280
|
|
|
|
$9.34
|
|
Vested and restriction lapsed
|
(295,089
|
)
|
|
|
$9.36
|
|
Forfeited
|
(22,687
|
)
|
|
|
$10.56
|
|
Awards outstanding - December 31, 2015
|
637,898
|
|
|
|
$12.87
|
|
Issued
|
504,647
|
|
|
|
$9.07
|
|
Vested and restriction lapsed
|
(249,356
|
)
|
|
|
$9.77
|
|
Forfeited
|
(33,938
|
)
|
|
|
$8.15
|
|
Awards outstanding - December 31, 2016
|
859,251
|
|
|
|
$11.73
|
|
The RSUs convert into
one
share of common stock upon vesting. RSU’s cliff vest at the earlier of expressly provided service or performance conditions. The service period for these RSU awards, excluding those issued to the Company’s Board of Directors (
one year
) and certain executive management (
four
year), is a
three
year period from the grant date. The performance conditions provide for accelerated vesting upon various conditions including a change in control or other common stock liquidity events.
Performance Restricted Stock Units
The following table summarizes information about the Company’s Common Stock RSU’s granted, vested, exercised and forfeited:
|
|
|
|
|
|
|
|
|
Number of Awards
|
|
Weighted Average Issue Price
|
Awards outstanding -January 1, 2015
|
—
|
|
|
$
|
—
|
|
Issued
|
59,623
|
|
|
$
|
9.40
|
|
Vested and restriction lapsed
|
—
|
|
|
$
|
—
|
|
Forfeited
|
—
|
|
|
$
|
—
|
|
Awards outstanding - December 31, 2015
|
59,623
|
|
|
$
|
9.40
|
|
Issued
|
175,217
|
|
|
$
|
9.06
|
|
Vested and restriction lapsed
|
—
|
|
|
$
|
—
|
|
Forfeited
|
—
|
|
|
$
|
—
|
|
Awards outstanding - December 31, 2016
|
234,840
|
|
|
$
|
9.15
|
|
The PRSUs convert into
one
share of common stock upon vesting. PRSUs vest in different tranches upon meeting certain performance conditions, which are generally based on the Company's stock price performance and expressly provided service. These PRSUs are fair valued at grant date based on Monte Carlo simulations. The derived service period for these PRSU awards as a result of the Monte Carlo simulation, is a approximately
two
year period from the grant date. The performance conditions provide for accelerated vesting upon various conditions including a change in control or other common stock liquidity events.
Stock Appreciation Rights
The following table summarizes information about SARs granted, forfeited, vested and exercisable:
|
|
|
|
|
|
|
|
|
|
|
Number of
SAR’s
|
|
Weighted Average
Exercise
Price
|
|
Weighted
Average
Contractual
Term
|
SAR's outstanding - January 1, 2014
|
1,373,069
|
|
|
|
$10.28
|
|
|
|
Granted
|
449,225
|
|
|
|
$11.73
|
|
|
|
Exercised
|
(435
|
)
|
|
|
$7.37
|
|
|
|
Forfeited
|
(12,557
|
)
|
|
|
$11.57
|
|
|
|
SAR's outstanding - December 31, 2014
|
1,809,302
|
|
|
|
$10.63
|
|
|
8.1 years
|
Granted
|
655,855
|
|
|
|
$9.47
|
|
|
|
Exercised
|
(14,470
|
)
|
|
|
$9.21
|
|
|
|
Forfeited
|
(54,561
|
)
|
|
|
$10.30
|
|
|
|
SAR's outstanding - December 31, 2015
|
2,396,126
|
|
|
|
$10.33
|
|
|
7.6 years
|
Granted
|
176,824
|
|
|
|
$8.80
|
|
|
|
Exercised
|
(8,003
|
)
|
|
|
$8.57
|
|
|
|
Forfeited
|
(56,932
|
)
|
|
|
$10.75
|
|
|
|
SAR's outstanding - December 31, 2016
|
2,508,015
|
|
|
|
$10.22
|
|
|
6.7 years
|
SAR's exercisable - December 31, 2016
|
1,015,440
|
|
|
|
$15.92
|
|
|
6.7 years
|
SAR's expected to vest - December 31, 2016
|
1,096,639
|
|
|
|
$10.19
|
|
|
6.7 years
|
The SARs vest
25%
annually on each of the four anniversary dates following the grant date and expire after
ten years
. The fair value of each SAR grant is estimated using the Black-Scholes option-pricing model as set forth in the table below:
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
The weighted average fair value of stock appreciation rights issued (per unit)
|
$2.79 - $3.74
|
|
$3.33 - $3.90
|
|
$4.18 - $4.93
|
Dividend yield
|
—%
|
|
—%
|
|
—%
|
Weighted average risk-free interest rate
|
1.1% - 1.4%
|
|
1.4% - 1.6%
|
|
1.5% - 1.8%
|
Weighted average expected volatility
|
40%
|
|
40%
|
|
40%
|
Expected life in years
|
6.25
|
|
6.25
|
|
6.25
|
Stock Options
The following table summarizes information about Common Stock options granted, exercised, forfeited, vested and exercisable:
|
|
|
|
|
|
|
|
|
|
|
Number
of Options
|
|
Weighted Average
Exercise
Price
|
|
Weighted
Average
Contractual
Term
|
Options outstanding - January 1, 2014
|
87,026
|
|
|
|
$23.75
|
|
|
2.6 years
|
Granted
|
—
|
|
|
|
$—
|
|
|
|
Exercised
|
—
|
|
|
|
$—
|
|
|
|
Forfeited
|
—
|
|
|
|
$—
|
|
|
|
Options outstanding - December 31, 2014
|
87,026
|
|
|
|
$23.75
|
|
|
1.6 years
|
Granted
|
—
|
|
|
|
$—
|
|
|
|
Exercised
|
—
|
|
|
|
$—
|
|
|
|
Forfeited
|
—
|
|
|
|
$—
|
|
|
|
Options outstanding - December 31, 2015
|
87,026
|
|
|
|
$23.75
|
|
|
0.6 years
|
Granted
|
—
|
|
|
|
$—
|
|
|
|
Exercised
|
—
|
|
|
|
$—
|
|
|
|
Forfeited/Expired
|
(87,026
|
)
|
|
|
$—
|
|
|
|
Options outstanding - December 31, 2016
|
—
|
|
|
|
$—
|
|
|
0.0 years
|
Options exercisable - December 31, 2016
|
—
|
|
|
|
$—
|
|
|
0.0 years
|
There were
no
outstanding stock options at December31, 2016. There was no intrinsic value of options granted, exercised or outstanding during the periods presented.
NOTE 13—RELATED PARTY TRANSACTIONS
The Company reassesses its related parties at reporting dates and has determined that West Central Cooperative, now
known as Landus Cooperative ("Landus"), is no longer a related party because it does not hold ten percent or more of the
Company’s outstanding Common Stock, and no longer has the right to a seat on the Company's board throughout 2016 and for the last nine months of 2015. Transactions with Landus, prior to the Company's determination that Landus was no longer a related party, amounted to
$4,542
and
$42,622
for 2015 and 2014, respectively, primarily related to raw material purchases at market prices. This amount was included in the "Costs of goods sold - Biomass-based diesel" on the Consolidated Statements of Operations.
NOTE 14—OPERATING LEASES
The Company leases certain land and equipment under operating leases. Total rent expense under operating leases was
$22,487
,
$19,814
and
$17,498
for the years ended
December 31, 2016
,
2015
and
2014
, respectively. For each of the next five calendar years and thereafter, future minimum lease payments under operating leases that have initial or remaining noncancelable lease terms in excess of one year are as follows:
|
|
|
|
|
|
Total
Payments
|
2017
|
$
|
18,731
|
|
2018
|
16,575
|
|
2019
|
15,300
|
|
2020
|
10,626
|
|
2021
|
10,242
|
|
Thereafter
|
40,553
|
|
Total minimum payments
|
$
|
112,027
|
|
The Company's leases consist primarily of access to distribution terminals, biomass-based diesel storage facilities, railcars and vehicles. At the end of the lease term the Company, generally, has the option to (a) return the leased equipment to the lessor, (b) purchase the property at its then fair value or (c) renew its lease at the then fair rental value on a year-to-year basis or for an agreed upon term. Certain leases allow for adjustment to minimum rentals in future periods as determined by the Consumer Price Index.
NOTE 15 — DERIVATIVE INSTRUMENTS
The Company has entered into heating oil and soybean oil futures, swaps and options (commodity derivative contracts) to reduce the risk of price volatility related to anticipated purchases of feedstock raw materials and to protect gross profit margins from potentially adverse effects of price volatility on biomass-based diesel sales where prices are set at a future date. All of the Company’s derivatives are recorded at fair value on the Consolidated Balance Sheets. Unrealized gains and losses on commodity futures, swaps and options contracts used to risk-manage feedstock purchases or biomass-based diesel inventory are recognized as a component of biomass-based diesel costs of goods sold reflected in current results of operations.
At
December 31, 2016
, the net notional volumes of heating oil and soybean oil covered under the open commodity derivative contracts were
45.4 million
gallons and
41.0 million
pounds, respectively.
The Company offsets the fair value amounts recognized for its commodity derivative contracts with cash collateral with the same counterparty under a master netting agreement. The net position is presented within Prepaid expenses and other assets in the Consolidated Balance Sheets, see "Note 10 – Other Assets". As of
December 31, 2016
, the Company posted
$9,366
of collateral associated with its commodity-based derivatives with a net liability position of
$2,239
.
The following tables provide details regarding the Company’s derivative financial instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
December 31, 2015
|
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
Gross amounts of commodity derivative contracts recognized at fair value
|
$
|
1,272
|
|
|
$
|
3,511
|
|
|
$
|
4,644
|
|
|
$
|
185
|
|
Cash collateral
|
9,366
|
|
|
—
|
|
|
5,638
|
|
|
—
|
|
Total gross amount recognized
|
10,638
|
|
|
3,511
|
|
|
10,282
|
|
|
185
|
|
Gross amounts offset
|
(3,511
|
)
|
|
(3,511
|
)
|
|
(185
|
)
|
|
(185
|
)
|
Net amount reported in the Consolidated Balance Sheets
|
$
|
7,127
|
|
|
$
|
—
|
|
|
$
|
10,097
|
|
|
$
|
—
|
|
The following table sets forth the pre-tax gains (losses) included in the Consolidated Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Gain (Loss)
Recognized in income
|
|
2016
|
|
2015
|
|
2014
|
Commodity derivatives
|
Cost of goods sold – Biomass-based diesel
|
|
$
|
(35,386
|
)
|
|
$
|
35,983
|
|
|
$
|
61,631
|
|
NOTE 16—FAIR VALUE MEASUREMENT
The fair value hierarchy prioritizes the inputs used in measuring fair value as follows:
|
|
•
|
Level 1—Quoted prices for identical instruments in active markets.
|
|
|
•
|
Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations, in which all significant inputs are observable in active markets.
|
|
|
•
|
Level 3—Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
|
A summary of assets (liabilities) measured at fair value is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Commodity contract derivatives
|
$
|
(2,239
|
)
|
|
$
|
(1,297
|
)
|
|
$
|
(942
|
)
|
|
$
|
—
|
|
Convertible debt conversion liability
|
$
|
(27,100
|
)
|
|
—
|
|
|
(27,100
|
)
|
|
—
|
|
Contingent consideration for acquisitions
|
$
|
(46,568
|
)
|
|
—
|
|
|
—
|
|
|
(46,568
|
)
|
|
$
|
(75,907
|
)
|
|
$
|
(1,297
|
)
|
|
$
|
(28,042
|
)
|
|
$
|
(46,568
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2015
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Commodity contract derivatives
|
$
|
4,459
|
|
|
2,196
|
|
|
2,263
|
|
|
—
|
|
Contingent consideration for acquisitions
|
$
|
(41,712
|
)
|
|
—
|
|
|
—
|
|
|
(41,712
|
)
|
|
$
|
(37,253
|
)
|
|
$
|
2,196
|
|
|
$
|
2,263
|
|
|
$
|
(41,712
|
)
|
The following is a reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the years ended as follows:
|
|
|
|
|
|
|
|
|
|
Contingent Consideration for Acquisitions
|
|
2016
|
|
2015
|
Balance at beginning of period, January 1
|
$
|
41,712
|
|
|
$
|
39,319
|
|
Fair value of contingent consideration at measurement date
|
4,500
|
|
|
5,000
|
|
Change in estimates included in earnings
|
7,904
|
|
|
(359
|
)
|
Settlements
|
(7,548
|
)
|
|
(2,248
|
)
|
Balance at end of period, December 31
|
$
|
46,568
|
|
|
$
|
41,712
|
|
The Company used the following methods and assumptions to estimate fair value of its financial instruments:
Commodity contract derivatives:
The instruments held by the Company consist primarily of futures contracts, swap agreements, purchased put options and written call options. The fair value of contracts based on quoted prices of identical assets in an active exchange-traded market is reflected in Level 1. Contract fair value is determined based on quoted prices of similar contracts in over-the-counter markets and are reflected in Level 2.
Contingent consideration for acquisitions:
The fair value of the contingent consideration regarding REG Life Sciences, LLC ("REG Life Sciences") is determined using an expected present value technique. Expected cash flows are determined using the probability weighted-average of possible outcomes that would occur should achievement of certain milestones related to the development and commercialization of products from REG Life Sciences' technology occur. There is no observable market data available to use in valuing the contingent consideration; therefore, the Company developed its own assumptions related to the expected future delivery of product enhancements to estimate the fair value of these liabilities. An
8.0%
discount rate is used to estimate the fair value of the expected payments.
The fair value of all other contingent consideration is determined using an expected present value technique. Expected cash flows are determined using the probability weighted-average of possible outcomes that would occur should the achievement of certain milestones related to the production and/or sale of biomass-based diesel at the specific production facility. A discount rate ranging from
5.8%
to
10.0%
is used to estimate the fair value of the expected payments.
Convertible debt conversion liability:
The fair value of the convertible debt conversion liability is estimated using the Black-Scholes model incorporating the terms and conditions of the 2036 Convertible Notes and considering changes in the prices of the Company's common stock, Company stock price volatility, risk-free rates and changes in market rates. The valuations are, among other things, subject to changes in the Company's credit worthiness as well as change in general market conditions. As the majority of the assumptions used in the calculations are based on market sources, the fair value of the convertible conversion liability is reflected in Level 2.
Debt and lines of credit:
The fair value of long-term debt and lines of credit was established using discounted cash flow calculations and current market rates reflecting Level 2 inputs.
The estimated fair values of the Company’s financial instruments, which are not recorded at fair value are as follows as of December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
Asset (Liability)
Carrying Amount
|
|
Estimated Fair Value
|
|
Asset (Liability)
Carrying Amount
|
|
Estimated Fair Value
|
Financial Liabilities:
|
|
|
|
|
|
|
|
Debt and lines of credit
|
$
|
(270,735
|
)
|
|
$
|
(264,267
|
)
|
|
$
|
(279,711
|
)
|
|
$
|
(275,123
|
)
|
NOTE 17—NET INCOME (LOSS) PER SHARE
Basic net income per common share is presented in conformity with the two-class method required for participating securities. Participating securities include, or have included, Series A Preferred Stock, Series B Preferred Stock and RSU's.
Under the two-class method, net income is reduced for distributed and undistributed dividends earned in the current period. The remaining earnings are then allocated to Common Stock and the participating securities. The Company calculates the effects of participating securities on diluted earnings per share (EPS) using both the “if-converted or treasury stock” and "two-class" methods and discloses the method which results in a more dilutive effect. The effects of Common Stock options, warrants, stock appreciation rights and convertible notes on diluted EPS are calculated using the treasury stock method unless the effects are anti-dilutive to EPS.
The following potentially dilutive average number of securities were excluded from the calculation of diluted net income per share attributable to common stockholders during the periods presented as the effect was anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Options to purchase common stock
|
43,513
|
|
|
87,026
|
|
|
87,026
|
|
Stock appreciation rights
|
2,422,716
|
|
|
2,072,130
|
|
|
1,400,824
|
|
Warrants to purchase common stock
|
—
|
|
|
—
|
|
|
17,916
|
|
2019 Convertible notes
|
7,895,675
|
|
|
10,838,218
|
|
|
6,295,075
|
|
2036 Convertible notes
|
8,209,651
|
|
|
—
|
|
|
—
|
|
Total
|
18,571,555
|
|
|
12,997,374
|
|
|
7,800,841
|
|
The following table presents the calculation of diluted net income per share for the years ended
December 31, 2016
,
2015
and 2014 (in thousands, except share and per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Net income (loss) attributable to the Company's common stockholders - Basic
|
$
|
43,453
|
|
|
$
|
(151,392
|
)
|
|
$
|
81,620
|
|
Plus: distributed dividends to Preferred Stockholders
|
—
|
|
|
—
|
|
|
40
|
|
Plus (less): effect of participating securities
|
874
|
|
|
—
|
|
|
(418
|
)
|
Net income (loss) attributable to common stockholders
|
44,327
|
|
|
(151,392
|
)
|
|
81,242
|
|
Less: effect of participating securities
|
(874
|
)
|
|
—
|
|
|
—
|
|
Net income (loss) attributable to the Company's common stockholders - Diluted
|
$
|
43,453
|
|
|
$
|
(151,392
|
)
|
|
$
|
81,242
|
|
Shares:
|
|
|
|
|
|
Weighted-average shares outstanding - Basic
|
40,897,549
|
|
|
43,958,803
|
|
|
40,740,411
|
|
Adjustment to reflect stock appreciation right conversions
|
5,311
|
|
|
—
|
|
|
9,502
|
|
Weighted-average shares outstanding - Diluted
|
40,902,860
|
|
|
43,958,803
|
|
|
40,749,913
|
|
|
|
|
|
|
|
Net income (loss) per share attributable to common stockholders - Diluted
|
$
|
1.06
|
|
|
$
|
(3.44
|
)
|
|
$
|
1.99
|
|
NOTE 18—REPORTABLE SEGMENTS AND GEOGRAPHIC INFORMATION
The Company reports its reportable segments based on products and services provided to customers. The Company re-assesses its reportable segment on an annual basis. During the fourth quarter of 2015, the Company determined that as
activities surrounding its renewable chemicals business increase, it changed the composition of its operating segments from
two
reportable segments to
three
reportable segments by presenting Renewable Chemicals separate from Biomass-based diesel. The new reportable segments generally align the Company's external financial reporting segments with its new internal operating segments, which are based on its internal organizational structure, operating decisions, and performance assessment. There are no changes to the Company's assessments in 2016. As such, our reportable segments at December 31, 2016 include Biomass-based diesel, Services, Renewable Chemicals and Corporate and other activities. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. All prior period disclosures below have been recast to present results on a comparable basis.
The Biomass-based diesel segment processes waste vegetable oils, animal fats, virgin vegetable oils and other feedstocks and methanol into biomass-based diesel. The Biomass-based diesel segment also includes the Company’s purchases and resale of biomass-based diesel produced by third parties. Revenue is derived from the purchases and sales of biomass-based diesel, RINs and raw material feedstocks acquired from third parties, sales of biomass-based diesel produced under toll manufacturing arrangements with third party facilities, sales of processed biomass-based diesel from Company facilities, related by-products and renewable energy government incentive payments, in the U.S. and internationally.
The Services segment offers services for managing the construction of biomass-based diesel production facilities and managing ongoing operations of third party plants and collects fees related to the services provided. The Company does not allocate items that are of a non-operating nature or corporate expenses to the business segments. Revenues are recorded by the Services segment at cost.
The Renewable Chemicals segment consists of research and development activities involving the production of renewable chemicals, additional advanced biofuels and other products from the Company's proprietary microbial fermentation process and the operations of a demonstration scale facility located in Okeechobee, Florida. The Renewable Chemicals segment started to have research and development collaborative and initial product revenues in 2016.
The Corporate and Other segment includes trading activities related to petroleum-based heating oil and diesel fuel as well as corporate activities, which consist of corporate office expenses such as compensation, benefits, occupancy and other administrative costs, including management service expenses. Corporate and other also includes income/(expense) not associated with the reportable segments, such as corporate general and administrative expenses, shared service expenses, interest expense and interest income, all reflected on an accrual basis of accounting. In addition, corporate and other includes cash and other assets not associated with the reportable segments, including investments. Intersegment revenues are reported by the Services and Corporate and Other segments.
The following table represents the significant items by reportable segment for the results of operations for the years ended
December 31, 2016
,
2015
and
2014
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Net sales:
|
|
|
|
|
|
Biomass-based Diesel (includes Petrotec's net sales of $171,358, $145,039, and $3,563, respectively)
|
$
|
1,952,361
|
|
|
$
|
1,326,452
|
|
|
$
|
1,264,850
|
|
Services
|
87,014
|
|
|
102,731
|
|
|
85,149
|
|
Renewable Chemicals
|
2,065
|
|
|
—
|
|
|
—
|
|
Corporate and other
|
106,572
|
|
|
68,984
|
|
|
11,940
|
|
Intersegment revenues
|
(106,780
|
)
|
|
(110,823
|
)
|
|
(88,108
|
)
|
|
$
|
2,041,232
|
|
|
$
|
1,387,344
|
|
|
$
|
1,273,831
|
|
Income (loss) before income taxes
|
|
|
|
|
|
Biomass-based diesel (includes Petrotec's income (loss) of $5,007, $(1,643), and $(337), respectively)
|
$
|
64,814
|
|
|
$
|
(100,152
|
)
|
|
$
|
104,136
|
|
Services
|
2,970
|
|
|
6,323
|
|
|
6,980
|
|
Renewable Chemicals
|
(19,787
|
)
|
|
(52,728
|
)
|
|
(12,252
|
)
|
Corporate and other
|
984
|
|
|
(13,854
|
)
|
|
(12,754
|
)
|
|
$
|
48,981
|
|
|
$
|
(160,411
|
)
|
|
$
|
86,110
|
|
Depreciation and amortization expense, net:
|
|
|
|
|
|
Biomass-based diesel (includes Petrotec's amounts of $2,849, $3,259, and $0, respectively)
|
$
|
29,018
|
|
|
$
|
22,799
|
|
|
$
|
13,497
|
|
Services
|
613
|
|
|
302
|
|
|
204
|
|
Renewable Chemicals
|
1,550
|
|
|
1,413
|
|
|
1,293
|
|
Corporate and other
|
1,696
|
|
|
1,362
|
|
|
802
|
|
|
$
|
32,877
|
|
|
$
|
25,876
|
|
|
$
|
15,796
|
|
Cash paid for purchases of property, plant and equipment:
|
|
|
|
|
|
Biomass-based diesel (includes Petrotec's amounts of $1,353, $1,816, and $0, respectively)
|
$
|
52,952
|
|
|
$
|
59,859
|
|
|
$
|
52,846
|
|
Services
|
4,731
|
|
|
1,510
|
|
|
643
|
|
Renewable Chemicals
|
473
|
|
|
672
|
|
|
532
|
|
Corporate and other
|
2,549
|
|
|
2,436
|
|
|
6,142
|
|
|
$
|
60,705
|
|
|
$
|
64,477
|
|
|
$
|
60,163
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Goodwill:
|
|
|
|
Biomass-based diesel
|
$
|
—
|
|
|
$
|
—
|
|
Services
|
16,080
|
|
|
16,080
|
|
Renewable Chemicals
|
—
|
|
|
—
|
|
|
$
|
16,080
|
|
|
$
|
16,080
|
|
Assets:
|
|
|
|
Biomass-based diesel (including Petrotec's assets of $51,822 and $45,471)
|
$
|
1,026,349
|
|
|
$
|
1,048,923
|
|
Services
|
53,823
|
|
|
60,308
|
|
Renewable Chemicals
|
22,883
|
|
|
23,872
|
|
Corporate and other
|
299,825
|
|
|
308,782
|
|
Intersegment eliminations
|
(266,277
|
)
|
|
(218,265
|
)
|
|
$
|
1,136,603
|
|
|
$
|
1,223,620
|
|
Geographic Information:
The following geographic data include net sales attributed to the countries based on the location of the subsidiary making the sale and long-lived assets based on physical location. Long-lived assets represent the net book value of property, plant and equipment. Sales and long-lived assets of the Company's investment in Petrotec comprise substantially all of the amounts categorized as Foreign in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Net sales:
|
|
|
|
|
|
United States
|
$
|
1,869,874
|
|
|
$
|
1,242,305
|
|
|
$
|
1,270,268
|
|
Foreign
|
171,358
|
|
|
145,039
|
|
|
3,563
|
|
|
$
|
2,041,232
|
|
|
$
|
1,387,344
|
|
|
$
|
1,273,831
|
|
|
|
|
|
|
2016
|
|
2015
|
Long-lived assets:
|
|
|
|
United States
|
$
|
580,868
|
|
|
$
|
553,987
|
|
Foreign
|
18,606
|
|
|
20,597
|
|
|
$
|
599,474
|
|
|
$
|
574,584
|
|
NOTE 19—COMMITMENTS AND CONTINGENCIES
The Company is involved in legal proceedings in the normal course of business. The Company currently believes that any ultimate liability arising out of such proceedings will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.
The Company has entered into contracts for supplies of hydrogen, nitrogen and utilities for the REG Geismar production facility and natural gas for REG Albert Lea. The following table outlines the minimum take or pay requirement related to the purchase of hydrogen, nitrogen, utilities and natural gas.
|
|
|
|
|
2017
|
$
|
3,857
|
|
2018
|
3,784
|
|
2019
|
3,748
|
|
2020
|
3,297
|
|
2021
|
2,976
|
|
Thereafter
|
9,570
|
|
Total
|
$
|
27,232
|
|
As of
December 31, 2016
, REG Geismar relies on one supplier to provide hydrogen necessary to execute the production process. Any disruptions to the hydrogen supply during production from this supplier will result in the shutdown of the REG Geismar plant operations. The Company is currently seeking additional hydrogen suppliers for the REG Geismar facility.
NOTE 20—SUPPLEMENTAL QUARTERLY INFORMATION (UNAUDITED)
During the third quarter 2016 close process, the Company identified errors in its previously reported interim financial statements for the quarter ended March 31, 2016 pertaining to certain biomass-based diesel sales completed in that quarter that contained BTC sharing terms resulting in an overstatement of biomass-based diesel sales and a corresponding understatement of accounts payable, deferred income taxes and income tax expense for the three months ended March 31, 2016 and the six months ended June 30, 2016. The correction of the errors is reflected in the quarterly information below.
Based on an evaluation of all relevant facts, the Company assessed the materiality of these errors on the first and second quarter interim financial statements and concluded under ASC 250 that the correction was immaterial to the Company’s results for the three months ended March 31, 2016 and six months ended June 30, 2016 and an amendment of previously filed reports was not required. In accordance with ASC 250, the Company elected to correct these errors by revising the consolidated financial statements and other financial information contained within this Annual Report on Form 10-K for the periods impacted to correct the effect of these errors.
The following table represents the significant items for the results of operations on a quarterly basis for the years ended
December 31, 2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
2016
|
|
Three Months
Ended
June 30,
2016
|
|
Three Months
Ended
September 30,
2016
|
|
Three Months
Ended
December 31,
2016
|
Revenues
|
$
|
297,870
|
|
|
$
|
558,301
|
|
|
$
|
624,640
|
|
|
$
|
560,421
|
|
Gross profit (loss)
|
17,384
|
|
|
24,862
|
|
|
47,350
|
|
|
81,920
|
|
Selling, general, and administrative expenses including research and development expense
|
23,703
|
|
|
25,277
|
|
|
25,604
|
|
|
31,864
|
|
Impairment of property, plant and equipment
|
—
|
|
|
—
|
|
|
—
|
|
|
17,893
|
|
Net income (loss) from operations
|
(6,319
|
)
|
|
(415
|
)
|
|
21,746
|
|
|
32,163
|
|
Other income (expense), net
|
159
|
|
|
7,432
|
|
|
558
|
|
|
(6,343
|
)
|
Net income (loss) attributable to the Company
|
(6,918
|
)
|
|
7,606
|
|
|
23,442
|
|
|
20,197
|
|
Net income (loss) per share attributable to common stockholders - basic
|
(0.16
|
)
|
|
0.18
|
|
|
0.59
|
|
|
0.51
|
|
Net income (loss) per share attributable to common stockholders - diluted
|
(0.14
|
)
|
|
0.18
|
|
|
0.59
|
|
|
0.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
2015
|
|
Three Months
Ended
June 30,
2015
|
|
Three Months
Ended
September 30,
2015
|
|
Three Months
Ended
December 31,
2015
|
Revenues
|
$
|
230,918
|
|
|
$
|
373,762
|
|
|
$
|
394,856
|
|
|
$
|
387,808
|
|
Gross profit
|
(16,195
|
)
|
|
15,907
|
|
|
4,405
|
|
|
106,426
|
|
Selling, general, and administrative expenses including research and development expense
|
20,535
|
|
|
19,749
|
|
|
21,995
|
|
|
27,969
|
|
Impairment of goodwill
|
—
|
|
|
—
|
|
|
—
|
|
|
175,028
|
|
Loss from operations
|
(36,730
|
)
|
|
(3,842
|
)
|
|
(17,590
|
)
|
|
(96,571
|
)
|
Other income (expense), net
|
(2,471
|
)
|
|
972
|
|
|
869
|
|
|
(5,048
|
)
|
Net loss attributable to the Company
|
(38,107
|
)
|
|
(2,001
|
)
|
|
(15,675
|
)
|
|
(95,609
|
)
|
Net loss per share attributable to common stockholders - basic
|
(0.86
|
)
|
|
(0.05
|
)
|
|
(0.36
|
)
|
|
(2.18
|
)
|
Net loss per share attributable to common stockholders - diluted
|
(0.86
|
)
|
|
(0.05
|
)
|
|
(0.36
|
)
|
|
(2.18
|
)
|
The results of operations for the three months ended December 31, 2015 reflect a goodwill impairment of
$175,028
(before tax) and net benefit from the reinstatement of the BTC of
$95,008
.