Renewable Energy Group, Inc. (REGI)

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Renewable Energy Group, Inc. (REGI)

Q1 2013 Earnings Conference Call

May 1, 2013 16:30 ET


Monte Bullock - Treasurer

Dan Oh - President and Chief Executive Officer

Chad Stone - Chief Financial Officer


Michael Cox - Piper Jaffray

Mahavir Sanghavi - UBS

John Quealy - Canaccord

Sven Eenmaa - Stifel



Good day, ladies and gentlemen, and welcome to the Renewable Energy Group Inc. First Quarter 2013 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. As a reminder this conference call is being recorded.

I would now like to turn the conference over to your host Monte Bullock, Treasurer. You may begin.

Monte Bullock - Treasurer

Thank you. Good afternoon everyone, and welcome to our first quarter 2013 earnings conference call. With me today is our President and Chief Executive Officer, Dan Oh; and our Chief Financial Officer, Chad Stone. We are here to discuss our first quarter financial results and recent developments.

Before we begin, I would like to remind everyone that this call is being webcast and is available at the Investor Relations section of our website at A replay of this webcast will be available on our website beginning late this afternoon. The webcast includes an accompanying slide deck. The slides will appear automatically with the webcast, but you will need to advance them manually as we prompt you. For those of you dialing in, the slides can be downloaded, along with the earnings press release, in the Investor Relations section of our website.

Turning to slide 2 we would like to advise you that some of the information discussed in this conference call will contain forward-looking statements. These statements involve risks, uncertainties, and assumptions that are difficult to predict. Such forward-looking statements are not a guarantee of performance. The company's actual results could differ materially from those contained in such statements. Several factors could cause or contribute to such differences. These factors are described in detail in the risk factors and other sections of our annual report on Form 10-K and quarterly reports on Form 10-Q, which are on file with the SEC. These forward-looking statements speak only as of the date of this call. The company undertakes no obligation to publicly update any forward-looking statements based on new information or revised expectations.

Today’s discussion also includes non-GAAP financial measures. We believe these metrics will help investors to assess the operating performance of our core business. Please see the press release for a reconciliation of the non-GAAP measures to the most comparable GAAP measures.

With that, let me now turn the call over to our President and Chief Executive Officer, Dan Oh.

Dan Oh - President and Chief Executive Officer

Thank you, Monte and thank you everyone for joining the call. I want to start by reviewing our operations in the quarter including recent developments. After that I will turn the call over to Chad for additional financial details.

You will see that the retroactive Biodiesel Mixture Excise Tax Credit commonly referred to as the blenders tax credit was recognized in the first quarter of 2013 financial statements. The result is a net benefit of $57.4 million. Chad will provide further details about this later.

Beyond that this was the best first quarter for production and gallons sold in the company’s history which serves as evidence that we are building a profitable, durable and reliable business. Our ability to utilize lower cost raw materials at commercial-scale biodiesel plants and then distribute our product nation wide is the foundation of our business.

With respect to our operations in the first quarter we sold 39 million gallons of biodiesel an increase of 14% compared to Q1 of 2012. We generated $22 million and adjusted EBITDA for the quarter after removing the $57.4 million net benefit from the retroactive 2012 tax credit. Chad will review the details of our adjusted EBITDA calculations later in the call.

Meanwhile let me now discuss significant actions we took in the first quarter to enable REG to sustained it’s growth then I will address some of the factors that we believe have produced favorable market conditions for biodiesel. In first quarter we proactively took advantage of the favorable feedstock pricing and strong RIN prices resulting in attractive margins. We did this by producing and storing high cloud biodiesel intended for warmer weather sales where we typically see higher demand.

In 2012 we announced several new North Eastern terminal locations and in the first quarter we added one more in Rochester, New York. These terminals drove new sales for REG this quarter modestly reducing the seasonality in our business. Most notably the Northeast heating oil market is increasing it’s use of biodiesel creating a new source of winter demand.

Our upgrade project at REG Albert Lea remains on track to be completed by the end of the second quarter. This upgrade will allow us to bring in a wider variety of raw materials including inedible corn oil and used cooking oil. In addition as planned our technology and manufacturing team is nearing completion of the repairs at our New Boston, Texas facility. Today we are using this site as a terminal location and for feedstock pretreatment.

Biodiesel production is slated to begin by the end of the second quarter. As part of our focus on improving and expanding our national infrastructure we are expanding at Seneca in meaningful ways. We are increasing storage capacity there by 1.5 million gallons which can be used for either feedstock or biodiesel. This gives us more flexibility and how we run the plant.

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