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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
SPECIAL FINANCIAL REPORT PURSUANT TO RULE 15d-2 UNDER THE
SECURITIES EXCHANGE ACT OF 1934
Contains only the financial statements for the fiscal year ended December 31, 2009
Commission File Number: 333-161187
RENEWABLE ENERGY GROUP INC.
(Formerly REG Newco, Inc.)
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
416 South Bell Avenue
Ames, Iowa
(Address of principal executive offices)
26-4785427
(I.R.S. Employer
Identification No.)
50010
(Zip Code)
(515) 239-8000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes ¨ No x
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and
(2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of the Registrant’s knowledge, in a definitive proxy or information statement incorporated by reference to Part III
of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See definitions of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act (Check one):
Large accelerated filer ¨
Non-accelerated filer x (Do not check if a smaller reporting company)
Accelerated filer
¨
Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ¨ No x
As of June 30, 2009, there was no public trading market for the registrant’s common stock. There were 4,914,346 shares of the
registrant’s $0.0001 par value common stock outstanding on April 15, 2010.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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RENEWABLE ENERGY GROUP, INC.
TABLE OF CONTENTS
Special Financial Report Pursuant to Rule 15d-2 Under the Securities Exchange Act
of 1934 for the Fiscal Year Ended December 31, 2009
Explanatory Note
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2008 and 2009
Consolidated Statements of Operations for the Years Ended December 31, 2007, 2008 and 2009
Consolidated Statements of Redeemable Preferred Stock and Equity (Deficit) for the Years Ended December 31, 2007, 2008 and
2009
Consolidated Statements of Cash Flows for the Years Ended December 31, 2007, 2008 and 2009
Notes to the Consolidated Financial Statements
Exhibits
Signatures
i
Page
1
2
3
4
5
6
8
46
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EXPLANATORY NOTE
On January 19, 2010, the Securities and Exchange Commission (the “SEC”) declared effective the Registration Statement on Form S-
4 (Commission File No. 333-161187) (Form S-4 Registration Statement), of Renewable Energy Group, Inc. (formerly REG Newco, Inc.), a
Delaware corporation (Newco), relating to Newco’s acquisition of Central Iowa Energy, LLC, Blackhawk Biofuels, LLC and REG
Intermediate Holdco, Inc. (formerly Renewable Energy Group, Inc.). (The Form S-4 Registration Statement also covered a fourth
proposed transaction involving the assets of Western Iowa Energy, LLC, which was not completed.)
Rule 15d-2 (“Rule 15d-2”) under the Securities Exchange Act of 1934, as amended, provides generally that if a company’s
registration statement under the Securities Act of 1933, as amended, does not contain certified financial statements for the company’s last
full fiscal year preceding the year in which the registration statement becomes effective (or for the life of the company if less than a full
fiscal year), then the company must, within 90 days after the effective date of the registration statement, file a special financial report
furnishing certified financial statements for the last full fiscal year or other period, as the case may be, meeting the requirements of the
form appropriate for annual reports of that company. Rule 15d-2 further provides that the special financial report is to be filed under cover
of the facing sheet of the form appropriate for annual reports of the company.
The Form S-4 Registration Statement did not contain the certified financial statements of Newco for the year ended December 31,
2009; therefore, as required by Rule 15d-2, Newco is hereby filing the certified financial statements of REG Intermediate Holdco, Inc., the
accounting predecessor to Newco (the Company), with the SEC under cover of the facing page of an annual report on Form 10-K.
1
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Renewable Energy Group, Inc.
Ames, Iowa
We have audited the accompanying consolidated balance sheets of Renewable Energy Group, Inc. and subsidiaries (the “Company”)
as of December 31, 2009 and 2008, and the related consolidated statements of income, redeemable preferred stock and equity (deficit), and
cash flows for each of the three years in the period ended December 31, 2009. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on the financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Renewable
Energy Group, Inc. and subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of
America.
As discussed in Note 2 to the consolidated financial statements, the Company adopted Financial Accounting Standards No. 160,
Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51 (Accounting Standards Codification Topic
810, Consolidations) on January 1, 2009. The presentation and disclosure requirements have been applied retrospectively for all periods
presented.
/s/ Deloitte & Touche LLP
Des Moines, Iowa
April 19, 2010
2
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ASSETS
CURRENT ASSETS:
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2008 AND 2009
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
2008
2009
Cash and cash equivalents
Restricted cash
Accounts receivable, net (includes amounts owed by related parties of $2,269 and $3,311 as of December 31,
$ 15,311 $
6,845
5,855
2,156
2008 and 2009, respectively)
Costs and estimated earnings on uncompleted contracts in excess of billings
Inventories
Deferred income taxes
Prepaid expenses and other assets (includes amounts paid to related parties of $269 as of December 31, 2009)
7,059
62
11,795
841
8,179
50,092
126,132
16,080
7,435
38,926
6,807
6,512
12,162
—
12,840
—
4,689
37,702
124,429
16,080
7,203
1,500
6,149
7,495
$251,984 $200,558
Total current assets
Property, plant and equipment, net
Goodwill
Intangible assets, net
Deferred income taxes
Investments
Other assets
TOTAL ASSETS
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Revolving line of credit
Current maturities of notes payable
Accounts payable (includes amounts owed to related parties of $3,757 and $5,569 as of December 31, 2008
$
1,292 $
4,020
350
2,756
and 2009, respectively)
Accrued expenses and other liabilities
Deferred revenue
Billings in excess of costs and estimated earnings on uncompleted contracts
Total current liabilities
Unfavorable lease obligation
Preferred stock embedded conversion feature derivatives
Notes payable
Other liabilities
Total liabilities
COMMITMENTS AND CONTINGENCIES (Note 23)
14,178
4,445
—
173
24,108
11,412
1,765
25,161
2,913
65,359
14,133
4,197
5,480
—
26,916
11,783
4,104
25,749
10,015
78,567
Redeemable preferred stock ($.0001 par value; 30,000,000 shares authorized;
12,434,004 and 12,464,357 shares outstanding at December 31, 2008 and 2009, respectively; redemption
amount $232,884 and $247,587 at December 31, 2008 and 2009, respectively)
104,607
149,122
EQUITY (DEFICIT):
Company stockholders’ equity (deficit):
Common stock ($.0001 par value; 70,000,000 shares authorized; 19,305,117 and 19,575,117 shares
outstanding at December 31, 2008 and 2009, respectively)
Common stock - additional paid-in-capital
Warrants - additional paid-in-capital
Retained earnings (accumulated deficit)
Total stockholders’ equity (deficit)
Noncontrolling interests
Total equity (deficit)
TOTAL LIABILITIES AND EQUITY (DEFICIT)
2
57,160
4,619
—
61,781
2
15,676
4,619
(60,905)
(40,608)
20,237
82,018
13,477
(27,131)
$251,984 $200,558
See notes to consolidated financial statements.
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RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008, AND 2009
(IN THOUSANDS)
REVENUES:
Biodiesel sales
Biodiesel sales - related parties
Biodiesel government incentives
Other
Services
Services - related parties
COSTS OF GOODS SOLD:
Biodiesel
Biodiesel - related parties
Services
Services - related parties
GROSS PROFIT
2007
2008
2009
$129,799 $ 58,786 $ 91,870
17,157
10,723
19,465
6,564
—
—
128,492
76,073
—
9,970
763
140,532
89,794
4,224
234,550
4,143
5,236
85,452
1,888
1,121
131,501
112,778
28,970
8,064
63,194
213,006
21,544
39,387
39,349
3,148
1,322
83,206
2,246
73,133
54,240
1,177
—
128,550
2,951
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
(includes related party amounts of $2,590, $2,140 and $1,908 for the years ended
December 31, 2007, 2008 and 2009, respectively)
GAIN ON SALE OF ASSETS - RELATED PARTY
IMPAIRMENT ON LONG LIVED ASSETS
LOSS FROM OPERATIONS
OTHER INCOME (EXPENSE), NET:
Change in fair value of preferred stock conversion feature embedded derivatives
Change in fair value of interest rate swap
Other income (includes related party amounts of $355 for the year ended December 31, 2009)
Interest expense (included related party amounts of $149 for the year ended December 31,
2009)
Interest income
Impairment of investments
INCOME (LOSS) BEFORE INCOME TAXES AND INCOME (LOSS) FROM EQUITY
27,667
—
1,786
(7,909)
24,048
—
160
(21,962)
25,565
(2,254)
833
(21,193)
35,102
—
—
2,118
(1,413)
—
(211)
1,732
—
36,623
(1,902)
279
(1,400)
(2,318)
(2,339)
382
3,147
(2,414)
60
(200)
(1,364)
INVESTMENTS
(22,557)
(45,212)
INCOME TAX BENEFIT (EXPENSE)
(1,089)
INCOME (LOSS) FROM EQUITY INVESTMENTS
(68,858)
NET INCOME (LOSS)
7,953
LESS - NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST
(60,905)
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY
LESS - ACCRETION OF PREFERRED STOCK TO REDEMPTION VALUE
(44,181)
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY’S COMMON STOCKHOLDERS $ 27,450 $(39,783) $(105,086)
28,714
3,198
113
32,025
(141)
31,884
(4,434)
(24,280)
9,414
(1,013)
(15,879)
2,788
(13,091)
(26,692)
See notes to consolidated financial statements.
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RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008, AND 2009 (IN THOUSANDS EXCEPT SHARE AMOUNTS)
Redeemable
Preferred
Stock
Shares
Redeemable
Preferred
Stock
Common
Stock
Shares
Company Stockholders’ Equity (Deficit)
Warrants -
Additional
Paid-in
Capital
Common Stock -
Additional
Paid-in Capital
Common
Stock
Retained
Earnings
(accumulated
deficit)
Noncontolling
Interest
Total
BALANCE, January 1,
2007
6,052,632 $ 20,934 12,633,118 $
1 $
51,786 $ 3,845 $
(1,727) $
— $ 53,905
—
—
701,756 —
7,025 —
—
—
7,025
Issuance of common
stock, net of $67
of issuance costs
Issuance of preferred
stock, net of $315
of issuance costs
and $7,633 for
embedded
derivatives
Issuance of warrants
Contributions
Stock compensation
Issuance of common
stock, net of $234
of issuance costs
Issuance of preferred
stock, net of $246
of issuance costs
and $302 for
embedded
derivatives
Issuance of warrants
Contributions
Removal of
2,526,313 19,050
(711)
—
—
—
— —
— —
— —
— —
711
—
— —
—
—
—
— —
711
—
666
666
expense
Accretion of
preferred stock to
redemption value
Net income
BALANCE, December 31,
—
—
— —
3,818 —
—
—
3,818
—
—
4,434
—
— —
— —
— —
— —
(4,434)
31,884
—
(4,434)
141 32,025
2007
8,578,945 43,707 13,334,874
1
62,629
4,556
25,723
807 93,716
—
— 5,970,243
1
5,080 —
—
—
5,081
3,855,059 34,208
—
—
—
—
— —
— —
— —
— —
(63)
63
— —
—
—
—
— —
— —
22,820 22,820
noncontrolling
interest as a result
of deconsolidation
Stock compensation
expense
Accretion of
preferred stock to
redemption value
Net loss
BALANCE, December 31,
—
—
— —
— —
—
(602)
(602)
—
—
— —
3,574 —
—
—
3,574
— 26,692
—
—
— —
— —
(14,060) —
— —
(12,632)
(13,091)
— (26,692)
(2,788) (15,879)
2008
12,434,004 104,607 19,305,117
2
57,160
4,619
—
20,237 82,018
Issuance of common
stock
Issuance of preferred
stock
Stock compensation
expense
Accretion of
preferred stock to
redemption value
Increase in
Blackhawk
Biofuels LLC
members’ equity
from issuance of
common stock
Net loss
—
—
270,000 —
1,368 —
—
—
1,368
30,353
334
— —
— —
—
— —
—
—
— —
2,522 —
—
—
2,522
— 44,181
— —
(44,181) —
—
— (44,181)
—
—
—
—
— —
— —
(1,193) —
— —
—
(60,905)
1,193 —
(7,953) (68,858)
BALANCE, December 31,
2009
12,464,357 $ 149,122 19,575,117 $
2 $
15,676 $ 4,619 $ (60,905) $
13,477 $(27,131)
See notes to consolidated financial statements.
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RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008, AND 2009
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Depreciation expense
Amortization of intangible assets and liabilities, net
Gain on sale of property, plant & equipment
Provision (benefit) for doubtful accounts
Stock compensation expense
(Income) loss from equity method investees
Impairment of investments
Deferred tax expense (benefit)
Impairment of long-lived assets
Change in fair value of preferred stock conversion feature embedded derivatives
Distributions received from equity method investees
Expense settled with stock issuance
Changes in asset and liabilities, net of effects from mergers and acquisitions:
Accounts receivable
Inventories
Prepaid expenses and other assets
Accounts payable
Accrued expenses and other liabilities
Deferred revenue
Billings in excess of costs and estimated earnings on uncompleted contracts, net
Net cash flows from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for purchase of property, plant and equipment
Proceeds from the sale of fixed assets
Change in restricted cash
Cash paid for investments
Cash received from escrow for purchase of investments
Cash provided through Blackhawk transaction
Cash provided through USBG acquisition
Return of investment in Bell, LLC
Net cash flows from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on line of credit
Repayments on line of credit
Cash received for issuance of note payable
Cash paid on note payable
Cash received for issuance of preferred stock
Cash paid for issuance cost of common & preferred stock
Cash received from Bell, LLC minority partner
Cash paid for debt issuance costs
Net cash flows from financing activities
NET CHANGE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, Beginning of period
CASH AND CASH EQUIVALENTS, End of period
2007
2008
2009
$ 32,025 $(15,879) $(68,858)
1,080
2,346
—
2,012
3,818
(113)
—
(4,258)
1,786
(35,102)
421
—
9,831
2,291
(8,391)
(9,010)
(688)
—
(4,969)
(6,921)
1,798
(716)
(127)
740
3,574
1,013
1,400
(8,268)
160
(2,118)
363
867
4,438
1,334
(2,254)
(1,432)
2,522
1,089
200
45,212
833
2,339
110
334
10,585
2,162
362
(1,346)
2,718
—
(924)
(3,636)
(3,671)
(1,045)
2,915
3,443
(1,087)
5,480
(111)
(8,209)
(50,398)
—
—
(2,500)
—
—
—
—
(52,898)
(67,235)
1,315
15,904
—
500
2,225
16,895
4,223
(26,173)
(7,350)
3,032
4,689
—
—
—
—
—
371
—
—
—
(638)
26,998
(382)
666
(1,558)
25,086
5,522
(4,230)
28,821
(3,270)
—
(480)
—
(208)
26,155
880
(1,822)
100
(776)
—
—
—
—
(1,618)
(34,733)
(3,654)
(9,456)
53,698
15,311
$ 18,965 $ 15,311 $ 5,855
18,965
6
(continued)
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008, AND 2009
(IN THOUSANDS)
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid (received) for income taxes
Cash paid for interest
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Accretion of preferred stock to redemption value
Amounts included in period-end accounts payable for:
Purchases of property, plant and equipment
Capitalized costs included in other assets
Reduction of accounts receivable in consideration for increased investment in Network Plants
Equity method investment received from REG, LLC
Liabilities accrued for firm investment commitments
Intangibles assets received in exchange for common stock
Distributions receivable from equity method investee
Issuance of short-term note payable for property, plant and equipment
Reduction of accounts payable in exchange for assets
Removal of equity method investee as a result of consolidation
Assets (liabilities) acquired through the issuance of stock:
Restricted cash
Prepaid expenses and other assets
Property, plant, and equipment
Intangible assets
Other assets
Deferred tax assets
Accounts payable
Accrued expenses and other liabilities
Unfavorable lease obligation
Noncontrolling interest
Issuance of common stock for renegotiation of operating lease commitments
See notes to consolidated financial statements.
7
2007
2008
2009
$6,831 $ (2,535) $ (2,827)
$ 213 $ 2,582 $ 2,128
$4,434 $ 26,692 $44,181
$6,634 $ 1,020 $
$ 189
38
63
$3,500
$ 711 $
$2,000
$7,025
$
63
$ 918
$
773
$ 2,000
$ 22,749
61
9,420
410
67
27,383
(134)
(2,925)
(12,128)
(24,820)
$ 20,083
$ 1,359
(concluded)
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
NOTE 1 — ORGANIZATION, PRESENTATION, AND NATURE OF THE BUSINESS
On July 31, 2006, pursuant to a series of contribution agreements, West Central Cooperative (West Central) contributed its biodiesel
division (Division) and InterWest, L.C. (InterWest) to Renewable Energy Group, Inc. (the Company) in exchange for shares of common
stock of the Company, a newly formed entity. The Division, which was not a separate legal entity, operated within West Central. The
Division primarily included biodiesel sales, biodiesel marketing, commodity risk management, and third party production facility
management activities. InterWest was an Iowa limited liability company substantially wholly-owned by West Central. InterWest processed
crude soy oil and methanol into methyl ester/biodiesel and related by-products.
Contemporaneously with the transactions noted above, the Company also acquired certain assets and assumed certain liabilities of
REG, LLC (REG, LLC) (formerly known as Renewable Energy Group, LLC) for 2,036,506 shares of stock in the Company at a value of
$9.50 per share. Prior to acquiring the assets and liabilities from REG, LLC, West Central owned 50% of the outstanding units of REG,
LLC. The Division and REG, LLC assisted potential customers in determining the investment required, location and other technical factors
of building a biodiesel production facility and REG, LLC served as the general contractor as the facility was engineered and constructed.
West Central maintained a greater than 50% control of the Company subsequent to the transactions noted above. Therefore, the
Company accounted for the contribution of the Division and InterWest similar to a pooling of interests in accordance with FASB
Accounting Standards Codification (ASC) Topic 805, Business Combinations (ASC Topic 805). When accounting for a transfer of assets or
exchange of shares between entities under common control, the entity that receives the net assets or the equity interests shall initially
recognize the assets and liabilities transferred at their carrying amounts in the accounts of the transferring entity at the date of transfer.
See Note 24 - Subsequent Events for a description of subsequent events through the date the financial statements were issued,
including the acquisition by REG Newco, Inc. of the Company, as well as REG Newco, Inc.’s acquisitions of Blackhawk Biofuels, LLC
and substantially all of the assets of Central Iowa Energy, LLC.
Nature of Business
As of December 31, 2009, the Company owned biodiesel production facilities with 47 million gallons per year (mmgy) of production
capacity. Additionally, the Company commenced construction of a 60 mmgy production capacity facility near Destrehan, Louisiana and a
60 mmgy production capacity facility in Emporia, Kansas. The Company halted construction of these facilities as a result of conditions in
the biodiesel industry and its inability to obtain bond financings. REG continues to pursue financing and intends to finish the Destrehan,
Louisiana facility, which is approximately 50% complete, and the facility in Emporia, Kansas, which is approximately 20% complete, when
industry conditions improve and financing becomes available. REG continues to be in discussions with lenders in an effort to obtain
financing for facilities under construction and capital improvement projects. The Company’s Destrehan facility has a GoZone Bond
allocation of up to $100,000 in order to finance the completion of the construction of that facility and possibly related facilities. This
allocation has been extended through the end of 2010. The city incentive package for the Emporia construction project has been renewed
for an additional three years starting July 1, 2010. Additionally, as a result of halting construction, the Company performed an analysis to
evaluate if the assets under construction were impaired. Based on the expected gross cash flows of the projects, the Company determined
that no impairment has occurred. The Company manages six other biodiesel production facilities owned primarily by independent
investment groups with an aggregate of 210 mmgy capacity (hereafter referred to as “Network Plants”). For each of these facilities, the
Company has entered into a Management and Operational Services Agreement (MOSA). Under the MOSA, the Company is responsible
for procuring the necessary feedstock and other inputs for the facility, and marketing and selling the finished biodiesel product under the
Company’s brand. In addition to the biodiesel produced at the Company’s owned and managed plants, the Company also purchases and
sells biodiesel produced by third parties.
On May 9, 2008, the Company was party to a transaction whereby Blackhawk Biofuels, LLC (Blackhawk) acquired assets and
liabilities related to a 45 mmgy biodiesel production facility under construction in exchange for cash and common stock of the Company.
The transactions and accounts of Blackhawk have been consolidated by the Company under ASC Topic 810, Consolidation (ASC Topic
810) as the Company was deemed to have a controlling interest and to be the primary beneficiary of the economic benefits and results of
operations. Blackhawk’s operations consist entirely of the aforementioned biodiesel production facility that was in its development stage
throughout 2008, beginning operations in January 2009. Refer to Note 5 for more information on the Blackhawk transaction.
8
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RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
The biodiesel industry and the Company’s business has been dependent on the continuation of certain federal subsidies and regulatory
support. The biodiesel tax credit expired on December 31, 2009 and, as of the date of the financial statements, Congress has not yet
reinstated the credit. The incentives to the biodiesel industry may not continue beyond the expired date or, if they continue, the incentives
may not be at the same level. The revocation or amendment of any one or more of those laws, regulations or programs could adversely
affect the financial results of the Company. Revenues include amounts related to federal subsidies and regulatory support totaling $9,970,
$6,564 and $19,465 for the years ended December 31, 2007, 2008, and 2009, respectively.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The accompanying Consolidated Financial Statements include the accounts of Renewable Energy Group, Inc. consolidated with the
accounts of all of its subsidiaries and affiliates in which the Company holds a controlling financial interest as of the financial statement
date. Normally, a controlling financial interest reflects ownership of a majority of the voting interests. Other factors considered in
determining whether a controlling financial interest is held include whether the Company possesses the authority to purchase or sell assets
or make other operating decisions that significantly affect the entity’s results of operations and whether the Company bears a majority of
the financial risks of the entity. Intercompany accounts and transactions have been eliminated.
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.
The Company has corrected the presentation of borrowings and repayments on its line of credit for 2008. Related amounts had
previously been presented on a net basis, rather than on a gross basis as required in accordance with ASC Topic 230, Statement of Cash
Flows. The correction had no effect on net cash provided by financing activities.
Restricted Cash
Restricted cash consists of project funds and debt reserve funds related to the Blackhawk construction loan totaling $6,845 and
$2,156 as of December 31, 2008 and 2009, respectively, that have been restricted in accordance with the terms of the loan agreement.
Accounts Receivable
Accounts receivable are carried on a gross basis, less the allowance for doubtful accounts. Management estimates the allowance for
doubtful accounts based on existing economic conditions, the financial conditions of the 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 all collection attempts have been exhausted. A significant portion of the
reserves as of December 31, 2008 was established as a result of past due receivables with a single customer. During 2009, the Company
settled the outstanding receivable. Activity regarding the allowance for doubtful accounts was as follows:
Balance, January 1, 2007
Amount charged to selling, general and administrative expenses
Charge-offs, net of recovery
Balance, December 31, 2007
Amount charged to selling, general and administrative expenses
Charge-offs, net of recovery
Balance, December 31, 2008
Amount charged (benefited) to selling, general and administrative
expenses
Charge-offs, net of recovery
Balance, December 31, 2009
9
$
81
2,012
(138)
1,955
740
(165)
2,530
(1,432)
(885)
213
$
Table of Contents
Inventories
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
Inventories consist of raw materials, work in process and finished goods and are valued at the lower of cost or market. Inventory
values for the years ended December 31, 2007, 2008 and 2009 include adjustments to reduce inventory to the lower of cost or market in the
amount of $0, $1,934 and $194, respectively. Cost is determined based on the first-in, first-out method.
Derivative Instruments and Hedging Activities
The Company has entered into derivatives to hedge its exposure to price risk related to soybean oil and biodiesel inventory.
Additionally, the Company has entered into an interest rate swap with the objective of managing risk caused by fluctuations in interest rates
associated with the Blackhawk construction loan.
These derivative contracts are accounted for in accordance with ASC Topic 815, Derivatives and Hedging (ASC Topic 815), as
amended. ASC Topic 815 requires that an entity recognize and record all derivatives on the balance sheet at fair value. All of the
Company’s derivatives are designated as non-hedge derivatives and are utilized to manage cash flow. Although the contracts may be
effective economic hedges of specified risks, they are not designated as, nor accounted for, as hedging instruments. Unrealized gains and
losses on futures and options contracts used to hedge soybean oil purchases or biodiesel inventory are recognized as a component of
biodiesel costs of goods sold, and therefore are reflected in current results of operations. Unrealized gains and losses on the interest rate
swap are recorded in change in fair value of interest rate swap in the Company’s statements of operations.
Valuation of Preferred Stock Conversion Feature Embedded Derivatives
The terms of each series of the Company’s preferred stock, in place as of December 31, 2009, provide for voluntary and, under certain
circumstances, automatic conversion of the preferred stock to common stock based on a prescribed formula. See Note 24, “Subsequent
Events,” for information related to newly issued preferred stock that was issued to replace the existing preferred stock in place as of
December 31, 2009 related to the Blackhawk Biofuels and Central Iowa Energy consolidation transactions which occurred in the first
quarter of 2010. In addition, shares of each series of preferred stock are subject to redemption at the election of the holder beginning
August 1, 2011. The redemption price is equal to the greater of (i) an amount specified for each series, plus accrued and unpaid dividends
to the redemption date, and (ii) the fair market value of the preferred stock. Under ASC Topic 815, the Company is required to bifurcate
and account for as a separate liability certain derivatives embedded in its contractual obligations. An “embedded derivative” is a provision
within a contract, or other instrument, that affects some or all of the cash flows or the value of that contract, similar to a derivative
instrument. Essentially, the embedded terms contain all of the attributes of a free-standing derivative, such as an underlying market
variable, a notional amount or payment provision, and can be settled “net,” but the contract, in its entirety, does not meet the ASC Topic
815 definition of a derivative.
The Company has determined that the conversion feature of its preferred stock is an embedded derivative because the redemption
feature allows the holder to redeem preferred stock for cash at a price which can vary based on the fair market value of the preferred stock,
which effectively provides the holders of the preferred stock with a mechanism to “net settle” the conversion option. Consequently the
embedded conversion option must be bifurcated and accounted for separately because the economic characteristics of this conversion
option are not considered to be clearly and closely related to the economic characteristics of the preferred stock, which is considered more
akin to a debt instrument than equity.
Accordingly, upon issuance of its preferred stock, the Company recorded a liability representing the estimated fair value of the right
of holders of preferred stock to receive the fair market value of the common stock issuable upon conversion of the preferred stock on the
redemption date. This liability is adjusted each quarter based on changes in the estimated fair value of such right, and a corresponding
income or expense is recorded in change in fair value of preferred stock conversion feature embedded derivatives in the Company’s
statements of operations.
The Company uses the option pricing method to value the embedded derivative. The Company used the Black-Scholes options
pricing model to estimate the fair value of the conversion option embedded in each class of preferred stock. The Black-Scholes options
pricing model requires the development and use of highly subjective
10
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RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
assumptions. These assumptions include the expected volatility of the value of the Company’s equity, the expected conversion date, an
appropriate risk-free interest rate, and the estimated fair value of the Company’s equity. The expected volatility of the Company’s equity is
estimated based on the volatility of the value of the equity of publicly traded companies in a similar industry and general stage of
development as the Company. The expected term of the conversion option is based on the period remaining until the contractually
stipulated redemption date of August 1, 2011. The risk-free interest rate is based on the yield on U.S. Treasury STRIPs with a remaining
term equal to the expected term of the conversion option. The development of the estimated fair value of the Company’s equity is
discussed below in “Valuation of the Company’s Equity.”
The significant assumptions utilized in the Company’s valuation of the embedded derivative at each year end as well as the various
issuances of series of preferred stock are as follows:
Expected volatility
Risk-free rate
Preferred Stock Accretion
July 31,
2007
56.56%
4.90%
December 31,
2007
45.96%
3.26%
June 30,
2008
55.00%
2.94%
December 31,
2008
December 31,
2009
55.00%
0.91%
50.00%
0.89%
Beginning October 1, 2007, the date that the Company determined that there was a more than remote likelihood that the preferred
stock would become redeemable, the Company commenced accretion of the carrying value of the preferred stock over the period until the
earliest redemption date (August 1, 2011) to the preferred stock’s redemption value, plus accrued but unpaid dividends using the effective
interest method. This determination was based upon the current state of the public equity markets which is restricting the Company’s
ability to execute a qualified public offering, the Company’s historical operating results, and the current volatility in the biodiesel and
renewable fuels industries which have resulted in lower projected profitability. Prior to October 1, 2007, the Company had determined that
it was not probable that the Preferred Stock would become redeemable; therefore, the carrying value was not adjusted in accordance with
ASC Topic 480-10-S99, Classification and Measurement of Redeemable Securities.
Accretion of $4,434, $26,692 and $44,181 has been recognized as a reduction to income available to common stockholders in
accordance with paragraph 15 of ASC Topic 480-10-S99 for the years ended December 31, 2007, 2008, and 2009, respectively.
Valuation of the Company’s Equity
The Company considered three generally accepted valuation approaches to estimate the fair value of the aggregate equity of the
Company: the income approach, the market approach, and the cost approach. Ultimately, the estimated fair value of the aggregate equity of
the Company was developed using the Income Approach - Discounted Cash Flow (DCF) method. The value derived using this approach
was supported by a variation of the Market Approach, specifically comparisons of the implied multiples derived using the DCF method to
the multiples of various metrics calculated for guideline public companies.
Material underlying assumptions in the DCF analysis include the gallons produced and managed, gross margin per gallon, expected
long-term growth rates and an appropriate discount rate. Gallons produced and managed as well as the gross margin per gallon were
determined based on historical and forward-looking market data.
The discount rate used in the DCF analysis is based on macroeconomic, industry and Company-specific factors and reflects the
perceived degree of risk associated with realizing the projected cash flows. The selected discount rate represents the weighted average rate
of return that a market participant investor would require on an investment in the Company’s debt and equity. The percent of total capital
assumed to be comprised of debt and equity when developing the weighted average cost of capital was based on a review of the capital
structures of the Company’s publicly traded industry peers. The cost of debt was estimated utilizing the adjusted average 20-Year B-rated
corporate bond rate during the previous 12 months representing a reasonable market participant rate based on the Company’s publicly
traded industry peers. The Company’s cost of equity was estimated utilizing the capital asset pricing model, which develops an estimated
market rate of return based on the appropriate risk-free rate adjusted for the risk of the bio-fuel industry relative to the market as a whole,
an equity risk premium and a company specific risk premium. The risk premiums included in the discount rate were based on historical and
forward looking market data.
11
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RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
Discount rates utilized in the Company’s DCF model at each year end and at the various issuances of series of preferred stock are as
follows:
Discount rate
July 31,
2007
15.00%
December 31,
2007
14.00%
June 30,
2008
13.50%
December 31,
2008
December 31,
2009
15.00%
13.00%
Valuations derived from this model are subject to ongoing internal and external verification and review. Selection of inputs involves
management’s judgment and may impact net income. This analysis is done on a regular basis and takes into account factors that have
changed from the time of the last common stock issuance. Other factors affecting our assessment of price include recent purchases or sales
of our common stock, if available.
Non-monetary Exchanges
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.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost, including applicable construction-period interest, 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
Computers and office equipment
Office furniture and fixtures
Leasehold improvements
Buildings and improvements
5 years
5 years
5-15 years
the lesser of the lease term or 10 years
39 years
The Company capitalizes interest incurred on debt during the construction of assets in accordance with ASC Topic 835, Interest. For
the years ended December 31, 2007, 2008 and 2009, the Company capitalized $0, $876 and $0, respectively, of interest primarily resulting
from the construction of the Blackhawk biodiesel production facility.
Goodwill
The Company accounts for goodwill in accordance with ASC Topic 350, Intangibles – Goodwill and Other. Goodwill is reviewed
annually on July 31 by reporting unit for impairment or between annual periods when management believes impairment indicators exist. If
the carrying value of the reporting unit goodwill is considered impaired, a loss is recognized based on the amount by which the carrying
value exceeds the fair market value of the reporting unit goodwill. Fair value is determined using a discounted cash flow methodology
involving a significant level of judgment in the assumptions used. Changes to the Company’s strategy or market conditions could
significantly impact these judgments and require adjustments to recorded amounts of goodwill. There was no impairment of goodwill
recorded in the periods presented.
Impairment of Long-Lived Assets and Certain Identifiable Intangibles
The Company reviews long-lived assets, including property, plant and equipment and definite-lived intangible assets, for impairment
in accordance with ASC Topic 360, Property, Plant, and Equipment. Asset impairment charges are recorded for long-lived assets and
intangible assets subject to amortization when events and circumstances indicate that such assets may be impaired and the undiscounted net
cash flows estimated to be generated by those assets are less than their carrying amounts. If estimated future undiscounted cash flows are
not sufficient to recover the carrying value of the assets, an impairment charge is recorded for the amount by which the carrying amount of
the assets exceeds its fair value. Fair value is determined by management estimates using discounted cash flow calculations. Asset
impairment charges of $1,786, $160, and $833 were recorded for the years ended December 31, 2007, 2008, and 2009, respectively. Such
charges were primarily related to Company owned biodiesel facilities that were abandoned during construction.
12
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Investments
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
In connection with the construction of biodiesel production facilities for SoyMor Biodiesel, LLC (SoyMor), Western Dubuque
Biodiesel, LLC (WDB) and Western Iowa Energy, LLC (WIE) (collectively with Bell, LLC referred to as “Equity Method Investees”), the
Company made an equity investment in each of these entities. Because the Company has the ability to influence the operating and financial
decisions and maintains a position on the board of directors of the Equity Method Investees, the investments are accounted for using the
equity method in accordance with ASC Topic 323, Investments – Equity Method and Joint Ventures (ASC Topic 323). Under the equity
method, the initial investment is recorded at cost and adjusted to recognize the Company’s ratable share of earnings of the Equity Method
Investees.
In connection with the construction of biodiesel production facilities for Central Iowa Energy, LLC (CIE) and East Fork Biodiesel,
LLC (EFB), the Company made an equity investment. Because the Company does not have the ability to influence the operating and
financial decisions and does not maintain a position on the board of directors, the investment is accounted for using the cost method in
accordance with ASC Topic 323. Under the cost method, the initial investment is recorded at cost and assessed for impairment. During the
years ended December 31, 2007, 2008 and 2009, the Company recorded impairment in the amount of $0, $1,400 and $200, respectively, on
its investment in EFB that was determined to have been other-than-temporarily impaired.
Other Noncurrent Assets
Other noncurrent assets includes costs related to the issuance of debt, spare parts inventory and prepaid supply agreements. The debt
issuance costs are amortized to interest expense over the life of the related debt agreement. The prepaid supply agreement is amortized over
the term of the agreement.
In July 2007, the Company filed for an initial public offering (IPO). As of December 31, 2007, the Company concluded it had more
than a short postponement in the offering. Consequently, for purposes of recognition of the IPO expenses, the Company considered the IPO
aborted and expensed the $2,072 of capitalized costs during the year-ended December 31, 2007. These costs are recorded in selling, general
and administrative expenses in the consolidated statements of operations. In March 2008, the Company officially postponed its IPO of
common stock.
Revenue Recognition
The Company recognizes revenues from the following sources:
•
•
•
•
the sale of biodiesel and its co-products — both purchased and produced by the Company
fees received from federal and state incentive programs for renewable fuels
fees from construction and project management
fees received for the marketing and sales of biodiesel produced by third parties and from managing operations of third party
facilities
Biodiesel sales revenues are recognized where there is persuasive evidence of an arrangement, delivery has occurred, the price has
been fixed or is determinable and collectibility can be reasonably assured.
Revenues associated with the governmental incentive programs are recognized when the amount to be received is determinable,
collectibility is reasonably assured, and the sale of product giving rise to the incentive has been recognized.
The Company provides consulting and construction services under turnkey contracts. These contracts are accounted for under the
provisions of the ASC Topic 605-35, Revenue Recognition. These jobs require design and engineering effort for a specific customer
purchasing a unique facility. The Company records revenue on these fixed-price contracts on the percentage of completion basis using the
ratio of costs incurred to estimated total costs at completion as the measurement basis for progress toward completion and revenue
recognition. The total contract price includes the original contract plus any executed change orders only when the amounts have been
received or awarded.
13
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RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
Contract cost includes all direct labor and benefits, materials unique to or installed in the project and subcontract costs. Revisions in
estimates of cost and earnings during the course of the work are reflected in the accounting period in which the facts that require the
revision become known. Contract accounting requires significant judgment relative to assessing risks, estimating contract costs and making
related assumptions for schedule and technical issues. With respect to contract change orders, claims or similar items, judgment must be
used in estimating related amounts and assessing the potential for realization. These amounts are only included in contract value when they
can be reliably estimated and realization is probable. Billings are generated based on specific contract terms. The Company routinely
reviews estimates related to contracts and reflects revisions to profitability in earnings on a current basis. If a current estimate of total
contract cost indicates an ultimate loss on a contract, the Company would recognize the projected loss in full when it is first determined.
The Company recognizes additional contract revenue related to claims when the claim is probable and legally enforceable.
Changes relating to executed change orders, job performance, construction efficiency, weather conditions and other factors affecting
estimated profitability may result in revisions to costs and revenues and are recognized in the period in which the revisions are determined.
Billings in excess of costs and estimated earnings on uncompleted contracts represents amounts billed to customers prior to providing
related construction services.
Fees for managing ongoing operations of third party plants, marketing biodiesel produced by third party plants and from other
services are recognized as services are provided. The Company also has performance based incentive agreements that are included as
management service revenues. These performance incentives are recognized as revenues when the amount to be received is determinable
and collectibility is reasonably assured.
The Company acts as a sales agent for certain third parties, thus the Company recognizes revenues on a net basis in accordance with
ASC Topic 605-45, Revenue Recognition (ASC Topic 605-45).
Freight
The Company accounts for shipping and handling revenues and costs in accordance with ASC Topic 605-45. The Company presents
all amounts billed to the customer for freight as a component of biodiesel sales. Costs incurred for freight are reported as a component of
costs of goods sold — biodiesel materials.
Advertising Costs
Advertising and promotional expenses are charged to earnings during the period in which they are incurred. Advertising and
promotional expenses were $1,179, $798 and $235 for the years ended December 31, 2007, 2008, and 2009, respectively.
Research and Development
The Company expenses research and development costs as incurred. Research and development costs totaled $140, $59, and $187 for
the years ended December 31, 2007, 2008, and 2009, respectively.
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 approximately $146, $186, and $218 for the years ended
December 31, 2007, 2008 and 2009, respectively.
Stock-Based Compensation
On July 31, 2006, the Board approved the 2006 Stock Incentive Plan. Prior to that date, there had been no stock-based compensation
within the Company. Eligible award recipients are employees and directors of the Company. The Company accounts for stock-based
compensation in accordance with ASC Topic 718, Stock Compensation (ASC Topic 718). Compensation expense is recorded for stock
options awarded to employees and non-employee directors in return for service. The expense is measured at the grant-date fair value of the
award and recognized as compensation expense over the vesting period. The Company records expense based upon the graded vesting
schedule of the options.
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Table of Contents
Income Taxes
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
The Company recognizes deferred taxes by the asset and liability method. Under this method, 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. The effect on deferred taxes of a change in tax rates is recognized in income in the period that
includes the enactment date. In addition, valuation allowances are established if necessary to reduce deferred tax assets to amounts
expected to be realized.
Blackhawk is treated as a partnership for federal and state income tax purposes and generally does not incur income taxes. Instead, its
earnings and losses are included in the income tax returns of its members. Therefore, no provision or liability for federal or state income
taxes has been included in the consolidated financial statements of the Company as of December 31, 2009 aside from its pro-rata share
determined based on its ownership interest.
Warrants
The Company estimates the fair value of warrants issued and records that balance in additional paid-in-capital in the consolidated
balance sheet. Because the warrants relate to the common and preferred stock issued, additional paid-in-capital of common and preferred
stock was decreased by a like amount. Subsequent changes in the fair value of the warrants are not recognized in accordance with ASC
Topic 815-40, Derivatives and Hedging.
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 manement and on various assumptions that the Company
believes to be reasonable under the circumstances. Actual results could differ from those estimates.
New Accounting Pronouncements
In December 2007, the FASB issued ASC Topic 805, Business Combinations. This statement changes the way companies account for
business combinations including requiring more assets acquired and liabilities assumed to be measured at fair value, requiring liabilities
related to contingent consideration to be remeasured at fair value in each subsequent reporting period and requiring the acquirer in
preacquisition periods to expense all acquisition-related costs. ASC Topic 805 is to be applied prospectively and was adopted by the
Company on January 1, 2009.
In December 2007, the FASB issued ASC Topic 810, Consolidation. ASC Topic 810 requires noncontrolling interests in subsidiaries
initially to be measured at fair value and classified as a separate component of equity. ASC Topic 810 also requires revenues, expenses,
gains, losses and net income or loss to be reported in the consolidated financial statements at the consolidated amounts, which include the
amounts attributable to the owners of the parent and the noncontrolling interest. The amounts of consolidated net income and the amounts
attributable to the parent and the noncontrolling interest must also be presented separately on the face of the condensed consolidated
statements of operations. ASC Topic 810 is to be applied prospectively, except for the presentation and disclosure requirements, which are
to be retrospectively applied to all prior periods presented. The Company adopted this statement effective January 1, 2009 and
retrospectively reflected the presentation and disclosure requirements which resulted in reclassifying $0 and $807 from minority interest to
noncontrolling interest in the statements of equity as of January 1, 2007 and 2008, respectively.
In March 2008, the FASB issued ASC Topic 815, Derivatives and Hedging, which requires additional disclosures about the
objectives of the derivative instruments and hedging activities, the method of accounting for such instruments under ASC Topic 815 and its
related interpretations, and a tabular disclosure of the effects of such instruments and related hedged items on our financial position,
financial performance and cash flows. ASC Topic 815 is effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008. The Company adopted this statement effective with the first quarter 2009 and reflected the additional
disclosure requirements.
15
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RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
In April 2009, the FASB staff issued ASC Topic 825, Financial Instruments, which requires companies to provide interim disclosure
on the fair value of financial instruments previously required only on an annual basis. ASC Topic 825 is effective for financial statements
issued for fiscal years and interim periods ending after June 15, 2009. The Company adopted this statement effective with the second
quarter 2009 and reflected the additional disclosure requirements.
In May 2009, the FASB issued ASC Topic 855, Subsequent Events, which clarifies how companies identify and recognize events
occurring after the date of the financial statements as well as requiring enhanced disclosures. ASC Topic 855 is effective for financial
statements issued for fiscal years and interim periods ending after June 15, 2009. The Company adopted this statement effective with the
second quarter 2009 and reflected the additional disclosure requirements.
In June 2009, the FASB issued ASC Topic 105, Generally Accepted Accounting Principles. The ASC is the single source of
authoritative non-governmental U.S. generally accepted accounting principles, superseding existing accounting literature. While not
intended to change U.S. GAAP, the ASC significantly changes the way in which accounting literature is organized. This guidance is
effective for interim or annual reporting periods ending after September 15, 2009. The Company adopted this statement effective with the
third quarter 2009 and reflected the additional disclosure requirements.
In June 2009, the FASB issued ASC Topic 810, Consolidations. This Statement requires a qualitative analysis to determine the
primary beneficiary of a Variable Interest Entity (VIE). The analysis identifies the primary beneficiary as the enterprise that has both the
power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or
the right to receive benefits that could be significant to the VIE. The Statement also requires additional disclosures about an enterprise’s
involvement in a VIE. The effective date is the beginning of fiscal year 2010. The Company is currently evaluating the impact, if any, this
guidance will have on its financial statements.
The Company adopted FASB ASC Topic 820, Fair Value Measurements and Disclosures (ASC Topic 820) for financial assets and
liabilities recognized or disclosed at fair value. ASC Topic 820 defines fair value and expands disclosures about fair value measurements.
These definitions apply to other accounting standards that use fair value measurements and may change the application of certain
measurements used in current practice. The Company adopted ASC Topic 820 for financial assets and liabilities effective the beginning of
fiscal year 2008. The Company adopted ASC Topic 820 for non-financial assets and liabilities effective the beginning of fiscal year 2009.
The adoption did not have a material effect on the Company’s financial statements.
In January 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-06, Fair Value Measurements and Disclosures
(ASU 2010-06), which amends ASC Topic 820, adding new requirements for disclosures for Levels 1 and 2, separate disclosures of
purchases, sales issuances, and settlements related to Level 3 measurements and clarification of existing fair value disclosures. ASU 2010-
06 is effect for interim and annual periods beginning after December 15, 2009, except for the requirement to provide Level 3 activity of
purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010.
The Company is currently evaluating the impact, if any, ASU 2010-06 will have on its financial statements.
16
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RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
NOTE 3 — STOCKHOLDERS’ EQUITY OF THE COMPANY
As of December 31, a summary of the Company’s common stockholders and warrant holders is as follows:
Common Stock:
West Central and affiliated entities where voting is controlled by West Central
Company directors
Bunge North America, Inc.
Blue Marble Investors, LLC
U.S. Biodiesel Group
Biofuels Company of America, LLC
USRG HoldCo V LLC
Ohana Holdings LLC
Mandam B.V
GATX Corporation
Other
Total common stock outstanding
Common Stock Warrants:
Natural Gas Partners VIII, L.P.
Entities affiliated with NGP Energy Technology Partners
Viant Capital, LLC
West Central Cooperative
E D &F Man Netherlands BV
Bunge North American, Inc.
U.S. Biodiesel Group
USRG HoldCo V LLC
Ohana Holdings LLC
Mandam B.V
Other
Total common stock warrants
Common Stock
Number of
Outstanding
Shares
2008
Number of
Outstanding
Shares
2009
11,927,306 11,927,306
8,248
8,248
701,756
701,756
696,210
696,210
3,989,755
—
1,980,488 1,980,488
— 3,108,685
414,491
—
414,491
—
250,000
—
73,442
1,354
19,305,117 19,575,117
210,227
210,227
258,535
22,727
22,727
9,090
243,902
—
—
—
—
977,435
210,227
210,227
258,535
22,727
22,727
9,090
—
190,040
25,339
25,339
3,184
977,435
On June 12, 2006, the Company filed its certification of incorporation with the Secretary of State of Delaware. The certificate of
incorporation authorized 70,000,000 shares of common stock at a par value of $0.0001 per share in place as of December 31, 2009. See
Note 24, “Subsequent Events,” for information related to newly issued common stock that was issued to replace the existing common stock
in place as of December 31, 2009 related to the Blackhawk Biofuels and Centeral Iowa Energy consolidation transactions which occurred
in the first quarter of 2010.
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 outstanding preferred stock as outlined below, the holders of outstanding
shares of the Company’s common stock are entitled to receive dividends. After the payment of all preferential amounts required to the
holders of preferred stock, all of the remaining assets of the Company available for distribution shall be distributed ratably among the
holders of common stock.
17
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
Common Stock Issued During 2007:
On June 26, 2007, the Company issued 701,756 shares of common stock to Bunge North America, Inc., (Bunge), in exchange for
assistance securing a lease for the site of the New Orleans, Louisiana facility and purchasing land for the site of the Emporia, Kansas
facility as well as for Bunge entering into a soybean oil feedstock supply agreement. The Company has determined the value of the
consideration paid to be $7,025, which is reflected in stockholders’ equity and intangible assets, net on the consolidated balance sheets as
of December 31, 2007 (see Note 9).
Common Stock Issued During 2008:
On May 9, 2008, the Company issued 1,980,488 shares of common stock, in conjunction with Blackhawk’s purchase of a 45 mmgy
biodiesel plant in Danville Illinois (Note 5).
On June 26, 2008 and October 21, 2008, the Company issued 3,726,830 and 136,585 shares of common stock, respectively, in
connection with the acquisition of a 35 mmgy biodiesel production facility located in Houston, Texas from U.S. Biodiesel Group (Note 6).
On October 21, 2008, the Company issued 126,340 shares of common stock to a third party in exchange for certain manufacturing
equipment. The shares issued were then transferred from the third party to U.S. Biodiesel Group.
Common Stock Issued During 2009:
On August 3, 2009, the Company issued 10,000 and 10,000 shares of common stock to Todd & Sargent, Inc. and The Weitz Group,
LLC, respectively, in exchange for renegotiating a note payable.
On August 17, 2009, the Company issued 250,000 shares of common stock to GATX Corporation in conjunction with renegotiating
rail car leases.
Common Stock Warrants
During 2006, West Central engaged Viant Capital, LLC (Viant) to assist in raising capital for business development of the Division
and to fund various growth initiatives. As a provision of the agreement with Viant, the Company agreed to issue common stock warrants in
relation to the amount of equity capital raised. Viant may purchase one share of common stock for each warrant held for a purchase price
of $9.50 per share. The Company has the option to redeem the Viant warrants for cash by paying an amount equal to the difference
between the exercise price and the fair market value of the common stock.
Under the warrants, the holder may purchase one share of common stock for each warrant held for a purchase price of $9.50 per
share. The warrant holder may “net exercise” the warrants and use the common shares received upon exercise of the warrants outstanding
as the consideration for payment of the exercise price.
The warrant holders are generally protected from anti-dilution by adjustments for any stock dividends, stock split, combination, or
other recapitalization.
18
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
The following table summarizes the number of shares reserved for the exercise of common stock purchase warrants as of
December 31:
Issued to
Viant
Viant
Viant
Viant
Viant
Natural Gas Partners VIII
Entities affiliated with NGP Energy
Technology Partners
Natural Gas PartnersVIII
Entities affiliated with NGP Energy
Technology Partners
Viant
Natural Gas Partners VIII
NGP Energy Technologies
West Central
E D & F Man
Bunge
U.S. Biodiesel Group
Issuance Date
*August 1, 2006
*August 11, 2006
*September 15, 2006
*December 22, 2006
April 25, 2008
August 1, 2006
August 1, 2006
December 22, 2006
December 22, 2006
June 26, 2007
July 18, 2007
July 18, 2007
July 18, 2007
July 18, 2007
July 18, 2007
June 26, 2008
Expiration Date
August 1, 2011
August 11, 2011
September 15, 2011
December 22, 2011
April 25, 2018
August 1, 2014
Exercise
Price Per
Share
$ 9.50
$ 9.50
$ 9.50
$ 9.50
$ 9.50
$ 9.50
Warrants
Outstanding
2008
41,474
10,526
26,956
69,053
100,000
70,313
Warrants
Outstanding
2009
41,474
10,526
26,956
69,053
100,000
70,313
August 1, 2014
December 22, 2014
$ 9.50
$ 9.50
70,312
117,187
70,312
117,187
December 22, 2014
June 26, 2015
July 18, 2015
July 18, 2015
July 18, 2015
July 18, 2015
July 18, 2015
June 26, 2018
$ 9.50
$ 11.00
$ 11.00
$ 11.00
$ 11.00
$ 11.00
$ 11.00
$ 10.25
117,188
10,526
22,727
22,727
22,727
22,727
9,090
243,902
977,435
117,188
10,526
22,727
22,727
22,727
22,727
9,090
243,902
977,435
* The Company reissued these warrants on April 25, 2008 at terms not substantially different from the original date noted here.
No common stock warrants were issued during 2009. For purposes of determining the fair value of common stock warrants issued,
the Company used the Black-Scholes option pricing model and the assumptions set forth in the table below.
The weighted average fair value of warrants issued (per warrant)
Dividend yield
Weighted average risk-free interest rate
Weighted average expected volatility
Expected life in years
19
2007
$6.43
2008
$ 0.19
0%
5%
58%
0%
3%
55%
8.00
10.00
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
The fair value of the warrants issued in June and July 2007 and April and June 2008 was determined using the common stock value as
of July 31, 2007 and June 30, 2008, respectively. The deemed fair value of the underlying common stock on July 31, 2006, July 31, 2007
and June 30, 2008 was $9.50, $10.00, and $0.89, respectively. The methodology used to determine the fair value of the Company’s
common stock on those dates is further discussed in Note 2. Because the Company’s stock is not publicly traded, the Company used the
average historical volatility rate for publicly traded companies that are engaged in similar alternative fuel activities to those of the Company
for a similar time period as the expected life of the warrants. The expected life of the warrants was determined based upon the contractual
term of the agreements.
Stock Issuance Costs
In addition to the warrants, other direct costs of obtaining capital by issuing the common and preferred stock were deducted from
related proceeds with the net amount recorded as preferred stock or stockholders’ equity. There were no stock issuance costs during 2009.
Direct costs were incurred with the following parties for the years ended December 31:
Viant
Other
Total
2007
$183
199
$382
2008
$—
480
$480
NOTE 4 — REDEEMABLE PREFERRED STOCK
As of December 31, a summary of the Company’s redeemable preferred stockholders is as follows:
Preferred Stock:
Natural Gas Partners VIII, L.P.
Entities affiliated with NGP Energy Technology Partners
E D & F Man
Bunge
West Central
U.S. Biodiesel Group
USRG HoldCo V LLC
Ohana Holdings LLC
Mandam B.V.
Other
Total preferred stock outstanding
Number of
Outstanding
Shares
2008
Number of
Outstanding
Shares
2009
2,559,808
2,559,808
1,770,334
1,361,723
533,282
3,649,049
—
—
—
—
2,559,808
2,559,808
1,770,334
1,361,723
563,635
—
2,843,218
379,096
379,096
47,639
12,434,004 12,464,357
The Company’s certificate of incorporation authorizes 30,000,000 shares of preferred stock with a par value of $0.0001 in place as of
December 31, 2009. The Board has the discretion as to the designation of voting rights, dividend rights, redemption price, liquidation
preference, and other provisions of each issuance. See Note 24, “Subsequent Events,” for information related to newly issued preferred
stock that was issued to replace the existing preferred stock, in place as of December 31, 2009, related to the Blackhawk and Central Iowa
Energy consolidation transactions which occurred in the first quarter of 2010.
On July 31, 2006, the Board established a series of 7,000,000 shares of “Series A” convertible preferred stock (the “Series A
Preferred Stock”).
On July 18, 2007 the Board established a series of 2,240,000 shares of “Series B” senior convertible preferred stock (the “Series B
Preferred Stock”).
20
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
On June 26, 2008 the Board established a series of 558,140 shares of “Series AA” convertible preferred stock and 3,090,909 shares of
“Series BB” senior convertible preferred stock (the “Series AA Preferred Stock” and the “Series BB Preferred Stock”).
Series A Preferred Stock, Series B Preferred Stock, Series AA Preferred Stock and Series BB Preferred Stock are referred to
collectively as “Preferred Stock.”
The following summarizes each series of Preferred Stock as of December 31:
Shares outstanding
Carrying amount
Redemption amount
Shares outstanding
Carrying amount
Redemption amount
Series A
Preferred
Stock
6,578,947
$
43,300
$ 139,182
Series B
Preferred
Stock
2,206,008
26,535
$
51,945
$
Series A
Preferred
Stock
6,578,947
71,870
$
$ 146,850
Series B
Preferred
Stock
2,236,361
36,721
$
55,405
$
2008
Series AA
Preferred
Stock
558,140
4,448
$
6,000
$
2009
Series AA
Preferred
Stock
558,140
4,994
$
6,000
$
Series BB
Preferred
Stock
3,090,909
30,324
$
35,757
$
Series BB
Preferred
Stock
3,090,909
35,537
$
39,332
$
Total
12,434,004
104,607
$
232,884
$
Total
12,464,357
149,122
$
247,587
$
The following summarizes the changes in outstanding shares for each series of Preferred Stock for fiscal years ending December 31:
January 1, 2007
Issuances
December 31, 2007
Issuances
December 31, 2008
Issuances
December 31, 2009
Series AA
Preferred
Series B
Preferred
Stock
Series BB
Preferred
Stock
Total
Series A
Preferred
Stock
Stock
6,052,632
— —
526,315 1,999,998 —
6,578,947 1,999,998 —
— 6,052,632
— 2,526,313
— 8,578,945
— 206,010 558,140 3,090,909 3,855,059
6,578,947 2,206,008 558,140 3,090,909 12,434,004
30,353
6,578,947 2,236,361 558,140 3,090,909 12,464,357
30,353 —
—
—
The rights, preferences, privileges and restrictions granted to and imposed on the Preferred Stock are as set forth below. The holders
of Preferred Stock are generally protected from anti-dilution by adjustments for any stock dividends, stock split, combination or other
recapitalization.
Dividend Provisions
The holders of preferred stock, with the exception of Series AA Preferred Stock, accrue dividends at a prescribed rate for each
issuance. Dividends are cumulative and accrue on a daily basis from the date of issuance. If dividends on the preferred stock have not been
paid or declared, the deficiency shall be paid or declared before any dividend is declared for common stock. Dividends in arrears do not
bear interest. Holders of preferred stock are allowed to participate in the dividends to common stockholders in the event that dividends on
common stock exceed that on preferred stock as if the preferred stock had been converted to common stock at the beginning of the year.
Holders of at least seventy percent of the outstanding shares of the preferred stock may vote to waive the timing or amount of any dividend
payment. The Company has not declared any dividends on the preferred stock outstanding. There are $8,207, $19,352 and $33,388
preferred stock dividends in arrears as of December 31, 2007, 2008 and 2009, respectively.
The Series AA Preferred Stock does not accrue dividends unless and until the Company issues additional stock that would result in an
adjustment to the conversion price of the Series AA Preferred Stock. Upon such occurrence, the holders of Series AA Preferred Stock
would accrue dividends at the rate of $1.075 per share per annum. The dividends are cumulative and would accrue from the original
issuance date of the Series AA Preferred Stock. No dividends have been declared or accrued.
21
Table of Contents
Liquidation Rights
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
Upon the occurrence of a voluntary or involuntary liquidation (including consolidations, mergers or sale of assets as defined by the
Preferred Stock agreements), if the remaining net assets of the Company are sufficient, the holders of the Preferred Stock shall be paid no
less than liquidation value plus all dividends in arrears (whether or not declared), out of the assets of the Company legally available for
distribution to its stockholders, before any payment or distribution is made to any shareholders of common stock.
If upon any liquidation or dissolution, the remaining net assets of the Company are insufficient to pay the amount that Preferred
Stock holders are due as indicated above, the holders of Preferred Stock will share ratably in any distribution of the remaining assets of the
Company.
Conversion Rights
The holders of Preferred Stock have the right to convert the Preferred Stock plus accrued dividends into shares of common stock on a
1:1 basis by dividing the original issue price plus accrued dividends by the original issue price of the Preferred Stock if
a)
b)
a closing of the sale of shares of common stock at a level at or exceeding $19.00, $19.00, $21.50 and $19.00 per share for
Series A Preferred Stock, Series B Preferred Stock, Series AA Preferred Stock and Series BB Preferred Stock, respectively, in a
QPO, requiring aggregate proceeds to the Company of at least $40 million (the “automatic conversion”), or
the date specified in a written contract or agreement with the holders of at least a super majority of the issued and outstanding
shares of Series A Preferred Stock, provided, however, if the price per share of common stock in a QPO is less than $19.80 per
share, each of Series B Preferred Stock and Series BB Preferred Stock shall be automatically converted into such number of
common stock shares as determined by dividing the original issue price of $11 per share plus (to the extent that Company and
such Preferred Stock series holder jointly elect to include the amount of accrued dividends in the conversion) accrued dividends,
by 50% of the public offering price per share in such QPO (the “optional conversion”),
Voting Rights
Each holder of preferred stock is entitled to the number of votes equal to the number of shares of common stock into which the
preferred stock held by such holder are convertible.
Additionally, the Company is prohibited, without obtaining the approval of the holders of at least seventy percent of the then issued
and outstanding shares of preferred stock from performing certain activities including, but not limited to, amending shareholder agreements,
redeeming or purchasing any outstanding shares of the Company, declaring dividends, making certain capital expenditures, and merging or
consolidating with other entities.
Redemption Rights
On or after August 1, 2011, the holders of at least a super majority of the issued and outstanding Preferred Stock may require that the
Company redeem all or part of the issued and outstanding shares of the Preferred Stock out of funds lawfully available. The redemption
price is the greater of the fair market value per share at the date of the redemption election or $19, $22, $10.75 and $11 per share of Series
A Preferred Stock, Series B Preferred Stock, Series AA Preferred Stock, and Series BB Preferred Stock respectively, plus accrued and
unpaid Preferred Stock dividends.
22
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
The following table demonstrates certain preferred stock attributes. All amounts are per share:
Original issue price
Dividend rate per annum
Common stock price to trigger automatic conversion
Series A Preferred Stock holders required for super majority
Redemption option price
Liquidation price
Series A
Preferred
Stock
$ 9.50
$ 0.95
$ 19.00
Series B
Preferred
Stock
$ 11.00
$ 1.10
$ 19.00
Series AA
Preferred
Stock
$ 10.75
$ 1.075
$ 21.50
70%
75%
75%
$ 19.00
$ 19.00
$ 22.00
$ 22.00
$ 10.75
$ 21.50
Series BB
Preferred
Stock
$ 11.00
$ 1.10
$ 19.00
75%
$ 11.00
$ 22.00
The following table demonstrates the redemption requirements for each of the next five fiscal years ending December 31:
2010
2011
2012
2013
2014
Series A
Preferred
Stock
$ —
146,850
—
—
—
Series B
Preferred
Stock
$ —
55,405
—
—
—
Series AA
Preferred
Stock
$ —
6,000
—
—
—
Series BB
Preferred
Stock
$ —
39,332
—
—
—
Total
$ —
247,587
—
—
—
Preferred Stock Issued During 2007
On June 26, 2007 Bunge invested an additional $5,000 in the Company through the purchase of 526,315 shares of Series A Preferred
Stock. Additionally, as a result of the issuance of additional shares of Series A Preferred Stock to Bunge, the Company issued an additional
10,526 common stock warrants to Viant. Viant may purchase one share of common stock for each warrant held. The Company has the
option to redeem the Viant warrants for cash. On July 18, 2007 each of NGP Energy Technology Partners, LP, Natural Gas Partners VIII,
L.P., E D & F Man and West Central invested $5,000 and Bunge invested $2,000 through the purchase of 1,999,998 shares of Series B
Preferred Stock. In conjunction with the Series B Preferred Stock transaction, the Company also issued, for no separate consideration,
99,998 warrants to the above shareholders who may purchase one share of common stock for each warrant held.
Preferred Stock Issued During 2008
On May 9, 2008, Bunge was issued 127,273 shares of Series B Preferred Stock as part of the Blackhawk Biofuels , LLC acquisition
of a biodiesel facility in Danville, Illinois. On June 26, 2008 USBG was issued 558,140 and 3,090,909 shares of Series AA Preferred and
Series BB Preferred, respectively as part of the Company’s acquisition of a 35 mmgy biodiesel production facility in Houston, Texas and a
terminal facility in Stockton, California. During 2008, as payment for administrative services, the Company issued 78,737 shares of Series
B Preferred Stock to West Central.
Preferred Stock Issued During 2009:
On April 15, 2009, the Company issued 30,353 shares of Series B Preferred to West Central for payment of administrative services.
NOTE 5 — BLACKHAWK
On May 9, 2008 the Company was party to a transaction, whereby Blackhawk purchased a 45 mmgy biodiesel production facility
under construction located in Danville, Illinois from Biofuels Company of America, LLC. Blackhawk received the plant assets under
construction and assumed a term construction loan with principal outstanding of $24,650 in exchange for $5,250 in cash and 1,980,488
shares of common stock of the Company set
23
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
forth in the purchase agreement at $10.25 per share. Additionally, the Company issued 127,273 shares of Series B Preferred Stock with a
per share value of $11.00 as established in the purchase agreement, to Bunge on behalf of Blackhawk. In exchange for the Series B
Preferred Stock Blackhawk entered into a soy oil supply agreement with Bunge. In exchange for the common and preferred stock issued,
the Company received a subordinated convertible note from Blackhawk with a par value of $21,700.
According to the terms of the agreement, the outstanding principal may be payable in cash or Blackhawk membership units as
determined at the Company’s sole discretion. Principal is due upon maturity on May 9, 2013 and may be prepaid at any time at the election
of Blackhawk. Additionally, the Company may elect to convert the outstanding principal to membership units of Blackhawk upon
successful completion of an IPO, change in control of the Company, or May 9, 2011. Interest on the note is accrued at a rate equal to the 30
day LIBOR plus a spread of 500 basis points that is payable in cash or membership units of Blackhawk at Blackhawk’s sole discretion.
Simultaneously with this transaction the Company entered into a MOSA with Blackhawk to manage the operations of the newly
acquired plant as well as a design-build agreement to perform construction services retrofitting the plant to produce biodiesel using
alternative feedstocks. Finally, the Company received 51,563 warrants to purchase membership units in Blackhawk at $0.01 per share at
anytime with no scheduled expiration. The warrants were received by the Company as compensation for providing a guarantee of $1.5
million in indebtedness of Blackhawk under the term construction loan and they vest 20% per year after the date of issuance until fully
vested.
The Company held 1,000,000 membership units of Blackhawk as of May 9, 2008 and has subsequently received an additional
327,017 and 658,052 units in 2008 and 2009, respectively, in lieu of interest on the subordinated convertible note. The Company’s interest
represents ownership interests in Blackhawk of 8% and 12% as of December 31, 2008 and 2009, respectively.
The Company has consolidated Blackhawk according to the requirements of ASC Topic 810 as they were determined to be the
primary beneficiary (PB). The Company determined it was the PB as it holds significant variable interests resulting in it receiving the
majority of Blackhawk’s expected losses or the majority of its expected residual returns. Variable interests in Blackhawk held by the
Company are the subordinated convertible note, membership units, guaranty of indebtedness of up to $1,500, warrants, MOSA, and the
design-build agreement.
As a result of the consolidation, all accounts of Blackhawk have been included with the Company’s financial statements as of May 9,
2008, the date of the transaction. As required by ASC Topic 810 the assets, including cash of $2,225, and liabilities consolidated by the
Company were recorded at their relative fair values. The fair value of the common and preferred stock transferred as consideration was
determined as further discussed in Note 2 and is summarized as follows:
Common
Series B Preferred
Total
Fair Value
Per Share
0.89
$
9.67
$
Fair Value
$ 1,763
1,231
$ 2,994
The assets and liabilities consolidated by the Company from Blackhawk did not represent a business as defined in ASC Topic 805,
Business Combinations, therefore no goodwill was recorded. Accordingly, the Company consolidated Blackhawk and accounts for the
membership units not held by the Company as a noncontrolling interest.
NOTE 6 — ACQUISITIONS
U.S. Biodiesel Group
On June 26, 2008 the Company acquired certain assets from U.S. Biodiesel Group (USBG) in exchange for common and preferred
stock and warrants to purchase additional common stock of the Company at a predetermined price. The assets acquired include: an under
construction 35 mmgy biodiesel production facility located in Houston, Texas, a liquid terminal facility located in Stockton, California and
$16,895 in cash. In exchange for these assets the Company issued 558,140 shares, 3,090,909 shares and 3,863,415 shares of Series AA
Preferred Stock, Series BB
24
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
Preferred Stock and common stock, respectively, as well as 243,902 warrants to purchase additional common stock of the Company for
$10.25 per share. The shares awarded include those issued on June 26, 2008 as well as an additional award of 136,585 shares of common
stock awarded on October 21, 2008.
As part of the transaction the Company assumed a ground lease associated with its terminal facility in Houston, Texas. The terms of
the lease require the Company to pay above market rentals through the remainder of the lease term expiring in 2021. The Company has
recorded an intangible liability for this arrangement that will be amortized as an adjustment to lease expense over the remaining lease term.
Additionally, the Company assumed responsibility for any losses stemming from an Engineering, Procurement and Construction
Agreement dated October 24, 2006 up to $1,600. The actual losses were determined and settled by the Company on October 21, 2008
through the issuance of 136,585 shares of common stock.
The purchase price was then established by the Company using the estimated fair value of the stock given in consideration for the
assets and liabilities acquired. The fair value of the common and preferred stock issued was determined as further discussed in Note 2.
The purchase price was allocated to the assets and liabilities acquired as set forth below:
Assets (liabilities) acquired:
Cash
Property, plant and equipment
Lease benefit resulting from below market rent
Lease obligation requiring above market rent
Contingent liability on construction contract
Fair value of common and preferred stock issued
Fair value of stock issued:
Common Stock
Series AA Preferred
Series BB Preferred
Total
$ 16,895
33,692
410
(13,500)
(1,400)
$ 36,097
Fair Value
per Share
$
$
$
0.89
7.62
9.19
Fair Value
$ 3,438
4,253
28,406
$ 36,097
As it was a non-operating plant and the assets and liabilities acquired by the Company from USBG did not represent a business as
defined in ASC Topic 805, Business Combinations, no goodwill was recorded.
NOTE 7 — INVENTORIES
Inventories consist of the following at December 31:
Raw materials
Work in process
Finished goods
Total
25
2008
$ 1,944
30
9,821
$11,795
2009
$
743
22
12,075
$12,840
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
NOTE 8 — PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following at December 31:
Building and improvements
Leasehold improvements
Machinery and equipment
Accumulated depreciation
Construction in process
Total
NOTE 9 — INTANGIBLE ASSETS
Intangible assets consist of the following at December 31:
Soybean oil supply agreement intangibles
Favorable lease
Accumulated amortization
Total intangible assets
2008
$ 12,964
4,909
40,526
58,399
(6,112)
52,287
73,845
$126,132
2009
$ 12,122
4,932
51,801
68,855
(10,488)
58,367
66,062
$124,429
2008
$7,025
410
—
$7,435
2009
$7,025
200
(22)
$7,203
The soybean oil supply agreement intangible assets (supply intangibles) are amortized over the contractual period from which the
Company benefits of approximately six years. The supply intangibles are amortized using the units of production method over their
estimated useful lives. The supply intangibles are for soybean oil supply at the New Orleans, Louisiana and the Emporia, Kansas facilities,
which have yet to begin production. Therefore, no amortization has been recorded in the financial statements as of December 31, 2008 and
2009 for the supply intangibles.
Amortization expense of $1,846, $0 and $22 for intangible assets is included in the cost of goods - services in the statement of
operations for the years ended December 31, 2007, 2008 and 2009, respectively.
Estimated amortization expense does not include the supply intangibles because the specified facilities have not yet begun production.
Estimated amortization expense for fiscal years ending December 31 is as follows:
2010
2011
2012
2013
2014
Thereafter
26
$ 15
15
15
15
15
103
$178
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
NOTE 10 — INVESTMENTS
Investments consist of the following at December 31:
Investment and accumulated earnings in:
SoyMor
WIE
WDB
Bell, LLC*
CIE
EFB**
Total***
2008
2009
Ownership
Balance
Ownership
Balance
11%
2%
8%
50%
4%
4%
$1,611
566
2,395
635
1,000
600
$6,807
9%
2%
8%
50%
4%
4%
$1,354
602
2,195
598
1,000
400
$6,149
*
During 2007, the Company invested, through a wholly-owned subsidiary, $694 in 416 South Bell, LLC (Bell, LLC), whereby the
Company initially owned 51% of the outstanding units. Bell, LLC owns and leases to the Company its corporate office building located
in Ames, Iowa. In addition to this investment, the Company loaned Bell, LLC $5,100, used to purchase the office building. On
February 13, 2008, Bell, LLC obtained permanent financing from a third party lender, thus requiring the loan provided by the
Company to be repaid in full with the Company’s interest in Bell, LLC being reduced to 50%. The loan was repaid by Bell, LLC in full
during February 2008.
** As of December 31, 2007 the Company made a firm, binding commitment to East Fork Biodiesel, LLC for $2,000, however, during
2008 and 2009, subsequent to the receipt of the shares, the Company determined its investment in EFB was other-than-temporarily
impaired and thus recorded an impairment loss for the amount of $1,400 and $200, respectively.
*** The investments include a deferred tax asset of $677 fully offset by a valuation allowance. Refer to Note 15 for further discussion on
the need for a valuation allowance.
The condensed financial information of equity investments as of and for the years ended December 31, is as follows:
CONDENSED BALANCE SHEET:
Total current assets
Total noncurrent assets
Total current liabilities
Total noncurrent liabilities
CONDENSED STATEMENT OF OPERATIONS:
Sales
Costs of goods sold
Operating and other expenses
Net loss
2008
2009
$ 18,629
$ 97,297
$ 36,177
$ 13,034
2008
$ 144,734
(139,515)
(10,753)
(5,534)
$
$ 15,530
$ 90,846
$ 31,260
$ 9,303
2009
$ 74,164
(70,859)
(6,551)
$ (3,246)
2007
$ 151,333
(142,576)
(9,647)
(890)
$
27
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
NOTE 11 — OTHER ASSETS
Prepaid expenses and other current assets consist of the following at December 31:
Income taxes receivable
Commodity derivatives and related collateral, net
Prepaid insurance
Prepaid service contracts
Prepaid raw materials
Prepaid storage
Network Plant notes receivable*
Other
Total
2008
$3,649
913
928
243
—
455
1,177
814
$8,179
2009
$ 553
1,774
1,105
272
325
—
483
177
$4,689
* The Company has certain arrangements with the Network Plants that require funds to be remitted to the Network Plant upon sale of
product to the end customer before amounts have been collected by the Company. In exchange the Network Plant agrees to pay the
Company a fee equal to 50 basis points in excess of the Company’s cost of working capital as computed from time to time.
Other noncurrent assets consist of the following at December 31:
Debt issuance costs (net of accumulated amortization of $1,377 in 2008 and $318 in
2009)
Spare parts inventory
Prepaid taxes
Other
Total
NOTE 12 — ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consist of the following at:
Accrued property taxes
Accrued employee compensation
Accrued vendor profit sharing
Unrealized losses on commodity derivatives, net
Accrued interest
Unfavorable lease obligation, current portion
Other
Total
28
2008
2009
$1,722
4,762
—
28
$6,512
$1,420
4,726
412
937
$7,495
2008
$ 719
950
1,069
96
217
1,372
22
$4,445
2009
$ 792
858
—
—
193
1,829
525
$4,197
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
Unfavorable lease obligation consists of the following at December 31:
Unfavorable lease obligation
Accumulated amortization
Total unfavorable lease obligation
Current portion
Other noncurrent liabilities consist of the following at December 31:
Fair value of interest rate swap
Liability for unrecognized tax benefits
Deferred credit related to investment in Blackhawk
Total
2008
$13,500
(716)
12,784
(1,372)
$11,412
2009
$13,612
—
13,612
(1,829)
$11,783
2008
$1,413
1,500
—
$2,913
2009
$ 1,031
1,500
7,484
$10,015
As a result of the acquisition of Blackhawk that occurred on February 26, 2010, the Company recognized a deferred tax asset and an
associated deferred credit related to excess taxable basis over book basis on its investment in Blackhawk. The Company reflected the
related amounts on its consolidated balance sheet as of December 31, 2009 as the acquisition represented a recognizable subsequent event
that will reverse in the foreseeable future.
The unfavorable lease obligation (Note 6) is amortized over the contractual period the Company is required to make rental payments
under the lease. The amount expected to be amortized in 2010 of $1,829 is presented in accrued expenses and other liabilities.
An amortization benefit of $716 and $0 for noncurrent liabilities is included in the cost of biodiesel sales for the years ended
December 31, 2008 and 2009, respectively.
Estimated amortization benefit for fiscal years ending December 31 is as follows:
2010
2011
2012
2013
2014
Thereafter
NOTE 13 — CONSTRUCTION PROJECTS
Information regarding uncompleted construction projects as of December 31 are as follows:
Costs incurred on uncompleted projects
Estimated earnings
Billings to date
Billings in excess of costs and estimated earnings on uncompleted projects net
of cost and estimated earnings in excess of billings on uncompleted projects
$ 1,829
2,025
1,957
1,161
1,034
5,606
$13,612
2008
$ 1,491
153
1,644
(1,755)
$
111
There were no uncompleted construction projects for the year ended December 31, 2009. There are no amounts in accounts receivable
related to amounts billed to customers for retainage provisions in the construction contracts at December 31, 2008 and 2009.
29
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
NOTE 14 — BORROWINGS
During February 2008 the Company obtained a revolving line of credit with an aggregate borrowing capacity of $28,000. The amount
of availability under the line is capped based on qualifying accounts receivable and inventory of the Company, which also serve as
collateral for the borrowings. Interest is accrued based on either the prime rate or LIBOR plus applicable spread as determined at the
election of the Company at the time of borrowing (effective rate ranging from 3.46% to 4.89% at December 31, 2008). As of December 31,
2008 there was $1,292 outstanding under the line-of-credit. The line-of-credit expired on February 14, 2009 and was repaid in full.
The Company has financing through the Iowa Finance Authority in the form of an industrial development revenue bond. The bond
bears interest at a variable rate determined by the remarketing agent (effective rate of 1.55% and 0.61% at December 31, 2008 and 2009,
respectively). Interest is paid quarterly. Principal payments are due annually in installments of $330 through November 1, 2011, at which
time the annual installment increases and remains at $340 through November 1, 2016. The bond is secured by the Company’s biodiesel
production facility in Ralston, Iowa. The balance of this bond was $2,690 and $2,360 as of December 31, 2008 and 2009, respectively.
In May 2008, the company financed construction payables outstanding with a related party by issuing two short term notes payable
totaling $4,171. Each note bears interest at a fixed rate of 6.25% to 7.25%. The Company paid off one of the short term notes in August
2008 in the amount of $2,330. The remaining note payable is due May 19, 2010. The balance of the note as of December 31, 2008 and
2009 is $1,841 and $1,601, respectively. This note requires monthly principle payments of $40 plus interest with the remaining balance of
the note due at maturity.
In October of 2009, the Company entered into a financial assistance contract with Iowa Department of Economic Development
(IDED) consisting of two separate loans. The first loan was for $50 and requires the Company to repay the loan over a period of 5 years
with a fixed interest rate of 1.625%. As of December 31, 2009, the balance of the loan was $48. The second loan is a conditional loan of
$50 requiring the Company to add jobs at its Ames location for a specific period of time. In the event that the Company does not meet the
requirements for the conditional loan, a portion, or the entire amount, of the loan would be required to be repaid to IDED. As of
December 31, 2009, the balance of the loan was $50.
Additionally, notes payable include construction loans obtained in conjunction with the purchase of the Blackhawk biodiesel
production facility located in Danville, Illinois (Note 5) (Term Loan). Amounts outstanding as of December 31, 2008 and 2009 of $24,650
and $24,445, respectively, require interest to be accrued based on 30 day LIBOR plus 275 and 400 basis points through December 31, 2008
and 2009, respectively (effective rate at December 31, 2008 and 2009 of 4.65% and 4.23%, respectively). Monthly principal payments of
$205 plus applicable interest are required beginning April 2009 with the remaining principal and interest due at maturity on November 3,
2011. Blackhawk paid the April 2009 payment timely as scheduled. On November 25, 2009,
Blackhawk signed an amendment to the loan agreement to defer May through December principal payments. Additionally,
Blackhawk will commence monthly fixed payments of $135 plus interest on January 1, 2010. Blackhawk did not make the scheduled
principal and interest payments as aforementioned due to Blackhawk entering into a third amendment with the bank on February 26, 2010,
which defers monthly principal payments until July 1, 2010 (Note 24). Blackhawk is required to make monthly interest payments.
Also, in May 2008 Blackhawk entered into a pay-fixed/receive-variable interest rate swap agreement that effectively fixes the interest
rate on the Term Loan at 3.67% through November 2011. The fair value of the interest rate swap agreement was $1,413 and $1,031 at
December 31, 2008 and 2009, respectively, and is recorded in other noncurrent liabilities. The interest rate swap was not-designated as an
accounting hedge under ASC Topic 815 and thus all gains and losses are recorded currently in earnings.
Blackhawk has also obtained a revolving line-of-credit with an aggregate borrowing capacity of $5,000 which expired on
December 31, 2009. The revolving line of credit accrues interest at the prime rate plus 25 basis points or the 30 day LIBOR plus 300 basis
points as determined at the election of Blackhawk at the time of borrowing. Borrowings outstanding under the line-of-credit were $0 and
$350 as of December 31, 2008 and 2009, respectively.
The Company was in compliance with all restrictive financial covenants associated with its borrowings as of December 31, 2009 with
exception to the Blackhawk line-of-credit. Blackhawk is in default of the agreement as the line-of-credit expired on December 31, 2009 and
there remains a $350 outstanding balance. The Company is in the process of renegotiating the line of credit with the bank.
30
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
Maturities of the borrowings are as follows for the years ending December 31:
2010
2011
2012
2013
2014
Thereafter
Total
Less: current portion
$ 2,756
23,970
400
350
349
680
28,505
(2,756)
$25,749
NOTE 15 — INCOME TAXES
The tax effects of temporary differences that give rise to the Company’s deferred tax assets and liabilities at December 31 are as
follows:
Deferred Tax Assets:
Allowance for doubtful accounts
Inventory
Accrued expenses
Property, plant and equipment
Goodwill
Net operating loss carryforwards
Tax credit carryforwards
Alternative minimum tax carryforwards
Stock-based compensation
Investment in Blackhawk
Derivatives
Deferred revenue
Unfavorable lease
Other
Deferred tax assets
Deferred Tax Liabilities:
Derivatives
Prepaid expenses
Investment in Blackhawk
Cost method investments
Property, plant and equipment
Deferred revenue COGS
Deferred tax liabilities
Net deferred tax assets
Valuation allowance
Net deferred taxes
2008
2009
Current
Noncurrent
Current
Noncurrent
$ 997
147
235
—
—
—
—
—
—
—
—
—
—
—
1,379
(51)
(487)
—
—
—
—
(538)
841
—
$ 841
$ —
—
—
9,241
16,892
5,287
3,068
211
4,462
—
—
—
—
635
39,796
—
—
(415)
(114)
(341)
—
(870)
38,926
—
$ 38,926
$
87
194
218
—
—
—
—
—
—
—
101
2,192
—
—
2,792
—
(534)
—
—
—
(1,279)
(1,813)
979
(979)
$ —
$ —
—
—
4,932
15,720
12,057
3,068
211
5,332
6,163
—
—
823
559
48,865
—
—
—
(141)
—
—
(141)
48,724
(47,224)
1,500
$
The Company reviews the carrying amount of its deferred tax assets to determine whether the establishment of a valuation allowance
is necessary. If it is more-likely-than-not that all or a portion of the Company’s deferred tax assets will not be realized, based on all
available evidence, a deferred tax valuation allowance would be established. Consideration is given to positive and negative evidence
related to the realization of the deferred tax assets. Significant judgment is required in making this assessment.
In evaluating the available evidence, management considers, among other factors, historical financial performance, expectation of
future earnings, length of statutory carry forward periods, experience with operating loss and tax credit carry forwards not expiring unused,
tax planning strategies and timing 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 of December 31, 2009, management concluded that the 2008
and 2009 book and tax losses that result in cumulative losses represent negative evidence. This evidence combined with the uncertainty
surrounding the future availability of the federal blender’s credit that expired on December 31, 2009 and has yet to be renewed provides
negative evidence that cannot be overcome by positive and objectively verifiable evidence. Based on this evaluation, management has
concluded as of December 31, 2009, a valuation allowance was required for the entire amount of the Company’s net deferred tax assets
since positive, objectively verifiable evidence was not available to prove that it was more likely than not that the Company would be able to
realize these assets.
If future results provide positive, objectively verifiable evidence, that evidence will be considered in determining whether some or all
of the valuation allowance will be reversed.
31
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
Income tax benefit (expense) for the years ended December 31 is as follows:
Current income tax (expense) benefit
Federal
State
Deferred income tax (expense) benefit
Federal
State
Net operating loss carryforwards
Other
Income tax benefit before valuation allowances
Deferred tax valuation allowances
Income tax benefit (expense)
2007
2008
2009
$ (522)
(538)
(1,060)
3,642
616
—
—
4,258
3,198
—
$ 3,198
$ 628
518
1,146
(219)
(79)
8,566
—
8,268
9,414
—
$9,414
$ —
—
—
(3,267)
(467)
7,041
(316)
2,991
2,991
(48,203)
$(45,212)
Income tax expense attributable to operations differed from the expense computed using the federal statutory rate primarily as a result
of the change in tax status of the Company from its predecessors, state income taxes, net of federal income tax effects, income or loss from
the change in fair value of embedded conversion feature of preferred stock, incentive stock options, and various tax credits available to the
Company as a result of its manufacture and sale of biodiesel. A comparison of the statutory and effective income tax benefits and reasons
for related differences follows:
U.S. Federal income tax expense (benefit) at a statutory rate of 35 percent
Minority interest taxed at member level
State taxes, net of federal income tax benefit
Biodiesel tax credits
(Gain)/loss on embedded derivative
Incentive stock options granted
S-4 transaction cost
Other, net
Total benefits for income taxes before valuation allowances
Valuation allowances
Total (benefits) expenses for income taxes
2007
$ 10,089
—
1,705
(878)
(14,362)
276
—
(28)
(3,198)
—
$ (3,198)
2008
$(8,853)
976
(981)
—
(834)
152
—
126
(9,414)
—
$(9,414)
2009
$ (7,895)
3,177
(1,128)
—
936
240
1,210
469
(2,991)
48,203
$45,212
In accordance with ASC Topic 740, “Income Taxes,” the Company periodically reviews its portfolio of uncertain tax positions. 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:
Beginning of year balance
Increases to tax positions expected to be taken
Increases to tax positions taken during prior years
Decreases to tax positions taken during prior years
Decreases due to lapse of statute of limitations
End of year balance
32
2007
$—
—
—
—
—
$—
2008
$ —
1,500
—
—
—
$1,500
2009
$1,500
—
—
—
—
$1,500
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
The amount of unrecognized tax benefits at December 31, 2007, 2008 and 2009 that would affect the effective tax rate if the tax
benefits were recognized was $0, $1,028 and $1,028, respectively. The remaining liability was 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 will
significantly increase or decrease over the next twelve months. Interest and penalties related to unrecognized tax benefits are recognized in
income tax expense. The Company has not recorded any such amounts in the periods presented.
The Company files its tax returns according to the tax laws of the jurisdictions in which it operates, which includes the U.S. federal
jurisdictions, and various state jurisdictions. The U.S. Internal Revenue Service has completed its examination of the Company’s federal
income tax return for 2006. The Company’s federal income tax returns for 2007 and 2008 are currently under review. Various state income
tax returns also remain subject to examination by taxing authorities.
NOTE 16 — STOCK-BASED COMPENSATION
Renewable Energy Group:
On July 31, 2006, the board approved the Renewable Energy Group, Inc. 2006 Stock Incentive Plan (Plan). The Plan provides for
2,500,000 shares of common stock to be available for option grants. Option grants are awarded at the discretion of the board. Options
expire ten years from the date of the grant. There are no performance conditions associated with the options.
The common stock options are generally protected from anti-dilution via adjustments for any stock dividends, stock split,
combination, or other recapitalization.
There were no stock options granted during 2009. For purposes of determining the fair value of stock options awards, the Company
uses the Black- Scholes option pricing model and the assumptions set forth in the table below.
Weighted average fair value of options granted (per option)
Dividend yield
Range of risk-free interest rates
Weighted average risk-fee interest rate
Weighted average expected volatility
Weighted average expected life in years
Weighted average fair value of common stock
2007
$ 6.39
0%
4.54 - 4.96%
4.83%
87%
5.6
$ 9.95
2008
$ 0.06
0%
2.94 - 4.96%
4.78%
88%
5.6
$ 0.89
The fair value of the Company’s Common Stock used in determining the fair value of stock option awards by grant date is as follows:
Grant Date
July 31, 2006
August 22, 2006
October 9, 2006
December 7, 2006
May 4, 2007
July 8, 2007
July 30, 2008
Options
Awared
1,731,052
283,750
59,250
53,750
25,000
221,250
35,000
Fair Value of
Common Stock
at Grant Date
9.50
$
9.50
$
9.50
$
9.50
$
9.50
$
10.00
$
0.89
$
Fair Value of
Option
$
$
$
$
$
$
$
7.13
7.12
6.61
6.72
6.72
6.35
0.06
The fair value of the common stock used in the computation of the fair value of the options issued in 2006 was determined based on a
third party purchase of the Company’s common stock that occurred on July 31, 2006. The fair value of the options issued in July 2007 and
August 2008 was determined using the common stock value as of July 31, 2007 and June 30, 2008, respectively. The methodology used to
determine the fair value of the Company’s common stock is further discussed in Note 2.
As provided for by ASC Topic 718 the Company applied the simplified method in estimating the average expected life of the options.
The simplified method assumes that early exercise of the option will occur between the vesting date and expiration date of the option.
33
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
Because the Company’s stock is not publicly traded, the Company used the average historical volatility rate for publicly traded
companies that are engaged in similar alternative fuel activities to those of the Company. In order to estimate the expected volatility as of
the grant date, the Company used a simple average of the volatility for a similar time period as the expected life of the options and the
current implied volatility of exchange traded options.
The following table summarizes information about common stock options granted, exercised, forfeited, vested, and exercisable:
Options outstanding - January 1, 2007
Granted
Exercised
Forfeited
Options outstanding - December 31, 2007
Granted
Exercised
Forfeited
Options outstanding - December 31, 2008
Granted
Exercised
Forfeited
Options outstanding - December 31, 2009
Options exercisable - December 31, 2009
Options vested or expected to vest - December 31, 2009
Amount of
Options
2,122,802
246,250
—
(66,000)
2,303,052
35,000
—
(53,500)
2,284,552
—
—
(76,000)
2,208,552
2,171,594
2,184,563
Weighted
Average Exercise
Price
$
$
$
$
$
$
$
$
$
$
$
9.50
9.91
9.50
9.54
10.25
9.78
9.55
9.93
9.54
9.54
9.54
Weighted
Average
Contractual
Term
9.6 years
9.2 years
7.7 years
6.8 years
6.9 years
6.8 years
The following table summarizes additional information about stock options as of December 31:
Estimated unrecognized compensation cost for nonvested options
Weighted average term the expense will be recognized
2008
$
1,989
0.9 years
2009
$
144
0.7 years
Twenty-five percent of the options issued to Company employees vest on the date of grant and the remaining options vest evenly on a
monthly basis over the next three years. West Central board members were granted 110,000 options which vested 100% on the date of
grant. Six Company board members were granted 50,000 options which vest ratably by quarter over a three year term.
Subject to the terms of the stock incentive plan agreement, in the event of a change of control of the Company, the options become
fully exercisable. The Company, at its discretion, may cancel the option in exchange for a payment per share in cash in an amount equal to
the excess, if any, of the change of control price per share over the exercise price of the option.
Stock-based compensation cost relating to stock options granted to Company employees, Board members of West Central, and
Company Board members during 2007, 2008, and 2009 were $3,818, $3,574 and $2,522 for the year-ended December 31, 2007, 2008, and
2009, respectively, and were included as a component of selling, general and administrative expenses.
There was no intrinsic value of options granted, exercised or outstanding during the periods presented.
The Company intends to issue new shares upon stock option exercises.
Blackhawk:
Blackhawk has an equity-based compensation plan which provides for the issuance of options to purchase an aggregate of 650,000
units of Blackhawk to members of the board of managers, for the purpose of providing services to facilitate the construction and planned
future operations of the plant. Options to purchase the entire 650,000 units were issued on June 30, 2006. The options are exercisable at a
purchase price of $1.00 per unit at any time from and after the date on which the plant commences operations (vesting date) and will
continue for a period of one year following such date, after which all such rights shall terminate. During December 2008, Blackhawk
commenced operations and at that time the unit options were fully vested.
34
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
On May 9, 2008, Blackhawk issued an option for the purchase of an additional 100,000 units to an outside consultant for services
related to the project. This option is exercisable at a purchase price of $2.00 per unit at any time from and after the date on which the plant
commences operations and will continue for a period of seven years following such date, after which all such rights shall terminate.
The following table presents the weighted average assumptions used to estimate the fair values of the units underlying the options
granted to members of the board of managers and consultant in the periods presented, using the Black-Scholes option pricing model. The
risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of
grant.
Weighted average fair value of options granted (per option)
Dividend yield
Weighted average - risk fee interest rate
Weighted average - expected volatility
Weighted average - expected life in years
2008
$1.00
0%
5%
25%
3
Blackhawk recognized unit-based compensation expense during the period in which it was consolidated with the Company of
approximated $130 and $0 for the years ended December 31, 2008 and 2009, respectively.
35
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
NOTE 17 — RELATED PARTY TRANSACTIONS
Summary of Related Party Transactions
Revenues - Biodiesel sales
Revenues - Services
Cost of goods sold - Biodiesel
Cost of goods sold - Services
Selling, general, and administrative expenses
Other income
Interest expense
Purchase of property, plant, and equipment
Proceeds from the sale of long lived assets
(a) Represents transactions with related parties as follows:
West Central
E D & F Man
Bunge
Network Plants
(b) Represents transactions with related parties as follows:
Network Plants
E D & F Man
(c) Represents transactions with related parties as follows:
West Central
Bunge
GATX
E D & F Man
(d) Represents transactions with Todd & Sargent, Inc.
(e) Represents transactions with related parties as follows:
West Central
416 S. Bell, LLC
Todd & Sargent, Inc.
Bunge
E D & F Man
(f) Represents transactions with ED&F Man
(g) Represents transactions with related parties as follows:
Todd & Sargent, Inc.
Bunge
(h) Represents transactions with related parties as follows:
West Central
Todd & Sargent, Inc.
(i) Represents transactions with ED&F Man
36
2007
2008
2009
$ — (a)
$ 4,224 (b)
$28,970 (c)
$63,194 (d)
$ 2,590 (e)
$ —
$ —
$44,433 (h)
$ —
$10,723 (a)
$ 5,236 (b)
$39,349 (c)
$ 1,322 (d)
$ 2,140 (e)
$ —
$ —
$ 7,658 (h)
$ —
$17,157 (a)
$ 1,121 (b)
$54,240 (c)
$ —
$ 1,908 (e)
355 (f)
$
$
149 (g)
$ 4,715 (h)
$ 3,032 (i)
$ —
—
—
—
$ —
$
30
10,023
—
670
$ 10,723
$
11
14,299
2,807
40
$ 17,157
$ 4,224
—
$ 4,224
$ 4,843
393
$ 5,236
$ 1,121
—
$ 1,121
$ 28,419
—
—
551
$ 28,970
$ 38,851
—
—
498
$ 39,349
$ 21,893
31,183
861
303
$ 54,240
$ 2,390
—
185
—
15
$ 2,590
$ 1,309
603
194
—
34
$ 2,140
$
328
688
72
617
203
$ 1,908
$
$
123
26
149
$
721
43,712
$ 44,433
$
416
7,242
$ 7,658
$ —
4,715
$ 4,715
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
Summary of Related Party Balances
Accounts receivable
Prepaid Inventory
Accounts payable
(a) Represents balances with related parties as follows:
West Central
Network Plants
REG , LLC
Bunge
E D & F Man
(b) Represents balances with Bunge
(c) Represents balances with related parties as follows:
West Central
Network Plants
Todd & Sargent, Inc.
Bunge
E D & F Man
GATX
West Central Cooperative
2008
$2,269 (a)
$3,757 (c)
2009
$3,311 (a)
$ 269 (b)
$5,569 (c)
$ —
973
983
—
313
$ 2,269
$
641
695
2,421
—
—
—
$ 3,757
$
123
1,065
983
24
1,116
$ 3,311
$ 2,951
2,293
5
127
44
149
$ 5,569
The Company purchased once-refined soy oil from West Central. Purchases from West Central were $28,392, $38,848, and $21,893
for the years ended December 31, 2007, 2008, and 2009, respectively. The Company also made sales of biodiesel which totaled $30 and
$11 for the year ended December 31, 2008 and 2009, respectively.
West Central leases the land under the Company’s production facility to the Company at an annual cost of one dollar. The Company
is responsible for the property taxes, insurance, utilities and repairs for the facility relating to this lease. The lease has an initial term of
twenty years and the Company has options to renew the lease for an additional thirty years.
At the time of the signing of the contribution agreement, the Company executed an asset use agreement with West Central to provide
the use of certain assets, such as office space, maintenance equipment and utilities. The agreement requires the Company to pay West
Central its proportionate share of certain costs incurred by West Central. This agreement has the same term as the land lease. Selling,
general and administrative expenses included in the statement of operations related to this agreement totaled $25, $40, and $40 for the years
ended December 31, 2007, 2008 and 2009, respectively.
At the time of the signing of the contribution agreement, the Company entered into a contract for services with West Central, to
provide certain corporate and administrative services such as human resources, information technology, and accounting. The agreement
requires the Company to pay West Central the proportionate share of the costs associated with the provision of services, plus a 15%
margin. The agreement has a one-year term and is cancellable thereafter upon six months notice by either party. Selling, general, and
administrative expenses included in the statement of operations related to this agreement totaled $2,365, $1,269 and $288 for the years
ended December 31, 2007, 2008 and 2009, respectively.
In addition to the amounts above, the Company recorded $27, $3 and $0 of other cost of goods sold for the years ended December 31,
2007, 2008 and 2009, respectively.
The Company also acquired $721, $416 and $0 of property, plant and equipment from West Central during the years ended
December 31, 2007, 2008 and 2009, respectively.
Accounts receivable includes net balances due from West Central of $0 and $123 at December 31, 2008 and 2009, respectively.
Accounts payable includes net balances due to West Central of $641 and $2,951 at December 31, 2008 and 2009, respectively.
37
Table of Contents
Todd & Sargent, Inc.
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
Todd & Sargent, Inc. (T&S), an affiliate of a shareholder of REG, LLC, or affiliates of T&S serve as the primary subcontractors of
the biodiesel facilities engineered and constructed by the Company. T&S also provided certain accounting and administrative functions for
construction related activities. T&S-related cost of goods sold-services were $63,194, $1,322 and $0 for the years ended December 31,
2007, 2008 and 2009, respectively. Selling, general, and administrative expenses relating to T&S were $185, $194 and $72 during the years
ended December 31, 2007, 2008 and 2009, respectively. The Company incurred $123 in interest expense on a note payable for the year
ended December 31, 2009.
The Company had accounts payable due to T&S (or affiliates of T&S) of $2,421 and $5 at December 31, 2008 and 2009, respectively.
Additions to property, plant and equipment included $43,712, $7,242 and $4,715 of billings from T&S during 2007, 2008 and 2009,
respectively.
Network Plants
The Company receives certain fees for the marketing and sale of product produced by and the management of the Network Plants’
operations, in which the Company has also invested. As an additional incentive to the Company and additional compensation for the
marketing, sales and management services being rendered, the Network Plants pay a bonus to the Company on an annual basis equal to a
percentage of the net income of the Network Plant, as defined by the management agreement. Total related party management service
revenues recognized by the Company related to investees were $4,224, $4,843, and $1,121 for the years ended December 31, 2007, 2008,
and 2009, respectively. Additionally, revenues from biodiesel sales totaled $0, $670 and $40 for the years ended December 31, 2007, 2008
and 2009, respectively. The Company had accounts receivable due from the Network Plants of $973 and $1,065 at December 31, 2008 and
2009, respectively. The Company had accounts payable due to the Network Plants of $695 and $2,293 at December 31, 2008 and 2009,
respectively.
E D & F Man Holdings Ltd.
At the time of the initial closing of its preferred stock investment, the Company entered into a glycerin marketing agreement and
various terminal lease agreements with one of E D & F’s wholly owned subsidiaries, Westway Feed Products, Inc. (Westway). Under the
glycerin marketing agreement, Westway has an exclusive right to market the glycerin produced at each of the Company’s owned and
managed facilities. For the years ended December 31, 2007, 2008 and 2009, fees of $15, $34 and $203, respectively, were paid according to
the agreement. This contract has a term of five years and automatically renews in one-year periods thereafter unless terminated by either
party. The Company also has entered into a master terminal lease agreement and several leases for terminals with another wholly-owned
subsidiary of E D & F, Westway Terminal Company, Inc. These leases have terms ranging from one month to four years. The Company
leased two terminals for aggregate fees of $551, $498 and $303 during the years ended December 31, 2007, 2008 and 2009, respectively.
Additionally, the Company received $393 and $355 in terminal lease revenue from Westway during the years ended December 31, 2008
and 2009, respectively, related to its terminal facility located in Stockton, California. During July 2009, the Company sold its Stockton
terminal facility to Westway for the amount of $3,032, resulting in a gain of $2,254.
The Company also entered into a tolling agreement with E D & F for biodiesel to be produced out of the Company’s Houston plant.
Revenues on biodiesel from this toll agreement and from other biodiesel sales were $0, $10,023 and $12,659 for the years ended
December 31, 2007, 2008 and 2009, respectively. Additionally, revenues from raw material sales totaled $0, $0 and $1,640 for the years
ended December 31, 2007, 2008 and 2009, respectively.
The Company had accounts receivable due from E D & F Man of $313 and $1,116 as of December 31, 2008 and 2009, respectively.
The Company had accounts payable due to E D & F Man of $0 and $44 as of December 31, 2008 and 2009, respectively.
Bunge North America
The Company purchases feedstocks for the production of biodiesel. Purchases from Bunge were $0, $0 and $31,183 for the years
ended December 31, 2007, 2008 and 2009, respectively. The Company also made sales of biodiesel and raw materials to Bunge of $0, $0
and $2,807 for the year ended December 31, 2007, 2008 and 2009, respectively.
38
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
During July 2009, the Company entered into an agreement for Bunge to provide services related to the procurement of raw materials
and the purchase and resale of biodiesel produced by the Company. The agreement is a three-year term and either party has the ability to
cancel the agreement after the term ends. Selling, general, and administrative expenses included in the statement of operations related to
this agreement totaled $617 for the year ended December 31, 2009. The Company incurred $26 in interest expense for the year end
December 31, 2009 related to the purchase and resale of biodiesel. Also as part of the agreement, the Company is required to pay an
incentive fee to Bunge for meeting certain hedging goals utilizing Bunge’s advice.
The Company has accounts receivable due from Bunge of $24 as of December 31, 2009. The Company a prepaid inventory balance
of $269 as of December 31, 2009. The Company has accounts payable due to Bunge of $127 as of December 31, 2009.
GATX
In August 2009, the Company entered into a settlement agreement with GATX Financial Corporation regarding certain rail cars
leased by REG. The agreement provided for a cash payment by REG of $1.3 million and the issuance of 250,000 shares of REG common
stock in exchange for the satisfaction of accrued rents owed by REG and a modification of future rent obligations.
Transactions with GATX subsequent to August 2009 are disclosed herein, which corresponds to the date GATX became a stockholder
of the Company. The Company has a master lease agreement and several leases for railroad cars. These leases range from five to ten years.
For the year ended December 31, 2009, fees of $861 were paid.
The Company has accounts payable due to GATX of $149 as of December 31, 2009.
REG, LLC
As of December 31, 2008 and 2009, REG, LLC had not transferred certain assets acquired to the Company. The Company had
accounts receivable due from REG, LLC of $983 and $983 at December 31, 2008 and 2009, respectively.
416 S. Bell, LLC
The Company rents a building for administrative uses under an operating lease from 416 S. Bell, LLC. Rent payments made under
this lease totaled $603 and $688 for the year ended December 31, 2008 and 2009, respectively.
NOTE 18 — OPERATING LEASES
The Company acts as a lessee for certain land and equipment under operating leases. Total rent expense under operating leases was
$3,892, $4,361, and $8,171 for the years ended December 31, 2007, 2008 and 2009 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 as of:
2010
2011
2012
2013
2014
Thereafter
Total minimum payments
Related
Party
Payments
$ 2,436
2,422
1,411
1,083
935
2,169
$10,456
Other
Payments
$ 7,061
7,223
7,197
6,460
6,390
48,877
$83,208
Total
Payaments
$ 9,497
9,645
8,608
7,543
7,325
51,046
$ 93,664
The Company leases consist primarily of: accesses to distribution terminals, biodiesel 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.
39
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
NOTE 19 — DERIVATIVE INSTRUMENTS
From time to time the Company enters into derivative transactions to hedge its exposure to interest rate and commodity price
fluctuations. The Company does not enter into derivative transactions for trading purposes.
As of December 31, 2009, the Company has entered into heating oil and soy oil derivative instruments and an interest rate swap
agreement. The Company was engaged in heating oil and soy oil commodity-based derivatives in order to protect gross profit margins from
potentially adverse effects of price volatility on biodiesel sales where the prices are set at a future date. As of December 31, 2009 the
Company had 98 open commodity contracts. In addition, the Company manages interest rate risk associated with the Blackhawk variable
interest rate construction loan using a fixed rate swap. The interest rate swap agreement has an outstanding notional value of $24,445 as of
December 31, 2009.
ASC 815 requires all derivative financial instruments to be recorded on the balance sheet at fair value. The Company’s derivatives
are not designated as hedges and are utilized to manage cash flow. The changes in fair value of the derivative instruments are recorded
through earnings in the period of change.
Blackhawk’s interest rate swap contains a credit support arrangement that is directly linked to the construction loan with the same
counterparty. Therefore, the interest rate swap counterparty would have access to the debt service fund or other collateral posted by
Blackhawk as a result of any failure to perform under the interest rate swap agreement. As of December 31, 2009, the Company posted
$2,027 of collateral associated with its commodity-based derivatives with a net liability position of $253.
The Company’s preferred stock embedded conversion feature is further discussed in Note 2.
The following tables provide details regarding the Company’s derivative financial instruments at December 31, 2009:
Interest rate swap
Commodity derivatives
Total derivatives
Interest rate swap
Commodities derivatives
Total
As of December 31, 2009
Asset Derivatives
Balance Sheet
Location
Fair
Value
Liability Derivatives
Balance Sheet
Location
Other liabilities
Prepaid expenses and other assets $ 47 Prepaid expenses and other assets
$ 47
Fair
Value
$1,031
300
$1,331
For the Year Ended December 31, 2009
Location of Gain (Loss)
Recognized in income
Change in fair value of interest rate swap
Cost of goods sold - Biodiesel
40
Amount of
Gain (Loss)
Recognized
in Income on
Derivatives
382
$
(1,086)
(704)
$
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
NOTE 20 — FAIR VALUE MEASUREMENT
ASC Topic 820 establishes a framework for measuring fair value in GAAP, and expands disclosures about fair market value
measurements. ASC Topic 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that
should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering
assumptions, ASC Topic 820 establishes a three-tier fair value hierarchy, which 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.
In addition, ASC Topic 820 requires disclosures about the use of fair value to measure assets and liabilities to enable the assessment
of inputs used to develop fair value measures, and for unobservable inputs, to determine the effects of the measurements on earnings.
A summary of assets (liabilities) measured at fair value as of December 31, 2008 and 2009 is as follows:
Preferred stock embedded derivatives
Interest rate swap
Commodity derivatives
Preferred stock embedded derivatives
Interest rate swap
Commodity derivatives
Total
$(1,765)
$(1,413)
34
$
$(3,144)
Total
$(4,104)
$(1,031)
$ (253)
$(5,388)
2008
Level 1
$ —
—
(37)
$ (37)
Level 2
$ —
(1,413)
71
$(1,342)
2009
Level 1
$ —
—
—
$ —
Level 2
$ —
(1,031)
(253)
$(1,284)
Level 3
$(1,765)
—
—
$(1,765)
Level 3
$(4,104)
—
—
$(4,104)
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 December 31, 2008 and 2009.
Beginning balance - January 1, 2008
Total unrealized gains (losses)
Purchases, issuance, and settlements, net
Ending balance - December 31, 2008
Total unrealized gains (losses)
Purchases, issuance, and settlements, net
Ending balance - December 31, 2009
41
Preferred
Stock
Embedded
Derivatives
$ (3,581)
2,118
(302)
(1,765)
(2,339)
—
$ (4,104)
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
The company used the following methods and assumptions to estimate fair value of its financial instruments:
Valuation of preferred stock embedded conversion feature derivatives: The estimated fair value of the derivative instruments
embedded in the Company’s outstanding preferred stock is determined using the option pricing method to allocate the fair value of the
underlying stock to the various components comprising the security, including the embedded derivative. The allocation was performed
based on each class of preferred stock’s liquidation preference and relative seniority. Derivative liabilities are adjusted to reflect fair
value at each period end. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the
overall fair value of the financial instruments.
Interest rate swap: The fair value of the interest swap was determined based on a discounted cash flow approach using market
observable swap curves.
Commodity derivatives: The fair value of commodity derivative instruments is recorded in prepaid expenses and other current
assets at December 31, 2008 and 2009. 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 are reflected in Level 1. Contracts whose fair value are determined based on quoted prices of similar contracts
in over-the-counter markets are reflected in Level 2.
Notes payable 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.
The estimated fair values of the Company’s financial instruments are as follows as of December 31, 2008 and 2009:
Financial Assets:
Restricted cash
Financial Liabilities:
2008
2009
Asset (Liability)
Carrying Amount
Estimated Fair Value
Asset (Liability)
Carrying Amount
Estimated Fair Value
$
6,845
$
6,845
$
2,156
$
2,156
Notes payable and lines of credit
(30,473)
(29,543)
(28,855)
(29,124)
NOTE 21 — BUSINESS CONCENTRATIONS
Certain customers represented greater than 10% of the total consolidated revenues of the Company for the years ended December 31,
2007, 2008 and 2009.
Customer A
Customer B
Customer C
Customer D
Customer E
2007
2008
2009
Biodiesel
Revenues
$73,375
Management
Services
Revenues
$ 48,846
Biodiesel
Revenues
Management
Services
Revenues
Biodiesel
Revenues
Management
Services
Revenues
$10,779
10,023
$14,299
31,947
The management service revenue concentrations relate to construction contracts further discussed in Note 13. There is no assurance
that revenues of these amounts will recur in future periods.
In addition to the vendor concentrations with West Central, T&S, and Bunge, the Company also had purchases from another vendor
totaling $102,827, $0, and $0 during the years ended December 31, 2007, 2008 and 2009, respectively.
The Company maintains cash balances at financial institutions, which may at times exceed the $250 coverage by the U.S. Federal
Deposit Insurance Company.
NOTE 22 — OPERATING SEGMENTS
The Company reports its operating segments based on services provided to customers, which includes Biodiesel, Services, and
Corporate and Other activities. The accounting policies of the segments are the same as those described in the summary of significant
accounting policies. The Company has chosen to differentiate the operating segments based on the products and services each segment
offers.
42
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
The Biodiesel segment processes waste vegetable oils, animal fats, virgin vegetable oil and other feedstocks, and methanol into
biodiesel. The Biodiesel segment also includes the Company’s purchases and resales of biodiesel produced by third parties. Revenue is
derived from the sale of the processed biodiesel, related byproducts and renewable energy government incentive payments. The Services
segment offers services for managing the construction of biodiesel 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. Intersegment revenues are reported by the Services segment which manages the construction
of facilities included in the Biodiesel segment. The revenues are recorded by the Services segment at cost. Corporate expenses consist of
corporate office expenses including compensation, benefits, occupancy, and other administrative costs including management service
expenses.
The following table represents the significant items by operating segment for the results of operations for the years ended
December 31, 2007, 2008, and 2009, respectively:
Net sales:
Biodiesel
Services
Intersegment revenues
Income (loss) before income taxes and income (loss) from equity
investments:
Biodiesel
Services
Corporate and other (a)
Depreciation and amortization expense:
Biodiesel
Services
Purchases of property, plant, and equipment:
Biodiesel
Assets:
Biodiesel
Services (b)
Corporate and other (c)
2007
2008
2009
$140,532
144,365
(50,347)
$234,550
$ 76,073
34,472
(25,093)
$ 85,452
$128,492
5,396
(2,387)
$131,501
$ (1,216)
22,760
7,170
$ 28,714
$ (2,663)
4,909
(26,526)
$ (24,280)
$
1,119
1,832
(25,508)
$ (22,557)
$
$
1,080
2,346
3,426
$
$
1,082
—
1,082
$ 50,398
$ 67,235
$153,675
18,755
79,554
$251,984
$
$
$
5,772
—
5,772
7,350
$147,807
17,829
34,922
$200,558
(a) Corporate and other includes income/(expense) not associated with the business segments, such as corporate general and administrative
expenses, shared service expenses, interest expense, and interest income, all reflected on an accrual basis of accounting.
(b) All of the Company’s goodwill is assigned to the Services segment.
(c) Corporate and other includes cash and other assets not associated with the business segments, including investments.
NOTE 23 — COMMITMENTS AND CONTINGENCIES
On May 8, 2009 the Company entered into a series of agreements with one of its shareholders, Bunge, whereby Bunge would
purchase raw material inputs for later resale to the Company and use in producing biodiesel. Additionally, the agreements provide for
Bunge to purchase biodiesel produced by the Company for resale to the Company’s customers. These agreements provide financing for the
Company’s raw material and finished goods inventory not to exceed aggregate amounts outstanding of $10,000. In exchange for this
financing, Bunge will receive fees equal to the greater of 30 day LIBOR plus 7.5% or 10% as determined based on the amount of inventory
financed plus a monthly service fee of $40 and incentive fees not to exceed $1,500 per annum. As of December 31, 2009, there was $86 in
incentive fees due to Bunge.
The Company is involved in legal proceedings in the normal course of business. The Company currently believes that any ultimate
liability arising out of any such proceedings will not have a material adverse effect on the Company’s financial position, results of
operations, or cash flows.
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RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
NOTE 24 — SUBSEQUENT EVENTS
The Company has performed an evaluation of subsequent events through the date the financial statements were issued. On February
26, 2010, in connection with the transactions described below, the Company was renamed REG Intermediate Holdco, Inc. and REG
Newco, Inc. was renamed Renewable Energy Group, Inc. (Newco).
During January 2010, the Company received 145,307 of membership units of Blackhawk for payment in lieu of cash for accrued
interest associated with the subordinated convertible note.
On February 26, 2010, Newco completed its acquisitions (Acquisitions) of Blackhawk Biofuels, LLC (Blackhawk), and the
Company.
Pursuant to the Second Amended and Restated Agreement and Plan of Merger, executed November 31, 2009, dated and effective as
of the original execution date, May 11, 2009 (Blackhawk Merger Agreement), REG Danville, LLC, a wholly owned subsidiary of Newco,
was merged with and into Blackhawk. Upon consummation of the merger, Blackhawk became a wholly owned subsidiary of Newco.
Pursuant to the Blackhawk Merger Agreement, each outstanding Series A Unit of Blackhawk (other than such units held by the Company
or any affiliate of the Company) was converted into 0.4479 shares of Newco common stock and 0.0088 shares of Newco Series A Preferred
Stock. Each outstanding warrant for the purchase of Series A Units of Blackhawk became exercisable for the purchase of shares of Newco
common stock, with the number of shares and exercise price per share adjusted appropriately based on the 0.4479 shares exchange ratio.
Although the shares have not been distributed to the former members of Blackhawk, it is estimated that they will receive 132,500 shares of
Newco Series A Preferred Stock and 6,753,000 shares of Newco common stock.
Newco accounted for the Blackhawk acquisition as a business combination in accordance with ASC Topic 805. When accounting for
the exchange of shares between entities under common control, the entity that receives the net assets shall initially recognize the assets and
liabilities transferred at their carrying amounts in the accounts of the transferring entity at the date of transfer.
As the transaction was accounted for with carryover basis, no goodwill was recognized in conjunction with the Blackhawk
acquisition, and no significant contingent assets or liabilities were acquired or assumed in the acquisition.
On February 26, 2010, Blackhawk entered into the Third Amendment (Third Amendment) to the Loan Agreement with Fifth Third
Bank (Fifth Third) pursuant to which the parties agreed to amend certain terms of the Loan Agreement dated as of May 9, 2008, as
amended on December 23, 2008 and November 25, 2009 (Loan Agreement). Pursuant to the terms of the Third Amendment, Blackhawk
will be required to make monthly payments of accrued interest each month until July 1, 2010 and monthly principal payments in the
amount of $136 plus accrued interest thereafter. In addition, Blackhawk is required to make additional annual principal payments in
amounts equal to (i) fifty percent (50%) of Blackhawk’s excess cash flow (as defined) until such time as Blackhawk has repaid $2,458 in
principal. After such time, in addition to monthly principal and interest payments discussed above, Blackhawk will be required to pay 25%
of its excess cash flow (as defined) annually to Fifth Third until all amounts outstanding under the Loan Agreement have been repaid in
full. The Third Amendment also modified certain financial covenants contained in the Loan Agreement.
On February 26, 2010, Newco completed its acquisition of the Company. Pursuant to the Second Amended and Restated Agreement
and Plan of Merger, executed November 20, 2009, dated and effective as of the original execution date, May 11, 2009, REG Merger Sub,
Inc., a Delaware corporation and wholly owned subsidiary of Newco, was merged with and into the Company. Upon consummation of the
merger, the Company became a wholly owned subsidiary of Newco. At the closing, each share of the Company’s common stock issued and
outstanding immediately prior to the effective time was converted into the right to receive one share of Newco’s common stock, $0.0001
par value per share, and each share of the Company’s preferred stock issued and outstanding immediately prior to the effective time was
converted into the right to receive one share of Newco’s series A preferred stock, $0.0001 par value per share. All outstanding stock options
and warrants of the Company were assumed by Newco.
On February 26, 2010, Newco amended and restated its certificate of incorporation and filed a Certificate of Designation of Series and
Determination of Rights and Preferences of Series A Preferred Stock. Newco is authorized to issue two classes of shares to be designated
respectively preferred stock and common stock. The total number of shares of capital stock that Newco is authorized to issue is two
hundred million. The total number of shares of preferred stock Newco has the authority to issue is sixty million. The total number of shares
of common stock Newco has the authority to issue is one hundred forty million. The preferred stock and the common stock have a par value
of $0.0001 per share.
In connection with the Acquisitions, on February 26, 2010, Newco entered into a Stockholder Agreement (Stockholder Agreement)
by and among Newco, certain holders of Newco’s common stock and certain holders of Newco’s Series A Preferred Stock, and a
Registration Rights Agreement by and among Newco, certain holders of the Newco’s Common Stock and certain holders of Newco’s
Series A Preferred Stock.
On March 8, 2010, Newco completed its acquisition of Central Iowa Energy, LLC (CIE). Pursuant to the Second Amended and
Restated Asset Purchase Agreement, executed November 20, 2009, dated and effective as of the original execution date, May 8, 2009, REG
Newton, LLC, a wholly owned subsidiary of Newco, acquired substantially all assets and liabilities of CIE. At the closing, Newco
delivered to CIE an aggregate of approximately 4,326,059 shares of Newco’s common stock and approximately 160,914 shares of Newco’s
Series A Preferred Stock.
As of the date of the financial statements, Newco was still in the process of determining the acquisition price of CIE. The actual
allocation of the recorded amounts of the acquisition consideration transferred and the recognized amounts of the assets acquired and
liabilities assumed will be based on the final appraisals, and evaluation and estimations of fair value as of the acquisition date. Newco will
also determine the amount of goodwill, if any, that will be recorded.
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RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Three Years Ended December 31, 2007, 2008, and 2009
(In Thousands, Except Share and Per Share Amounts)
The following pro forma condensed combined results of operations assume that the Company’s acquisitions of Blackhawk and CIE
were completed as of January 1, 2007:
Revenues
Net loss
2007
$288,250
$ 19,860
2008
$157,856
$ (42,594)
2009
$ 136,960
$(122,637)
On April 9, 2010, Newco entered into a series of agreements related to the asset purchase agreement with Nova Biosource Fuels, Inc.
In September 2009, the United States Bankruptcy Court for the District of Delaware entered an order authorizing the sale of assets by Nova
Biofuels Seneca, LLC and Nova Biosource Technologies, LLC, (Nova), to Seneca Landlord, LLC (Landlord), a wholly owned subsidiary
of the Company, pursuant to terms of an Asset Purchase Agreement, dated as of September 23, 2009 (the Seneca Asset Purchase
Agreement). Pursuant to the Seneca Asset Purchase Agreement, Landlord agreed to acquire substantially all of the assets of Nova,
including all patents and intellectual property rights to Nova’s process technology (the Seneca Assets). As consideration for the Seneca
Assets, Landlord assumed the existing term debt of approximately $36,250, held by WestLB, AG, and paid a portion of the closing costs
for the transaction.
The Company has determined that the Seneca Assets do not constitute a business as defined under ASC Topic 805 on the basis that
the Seneca Assets are not an integrated set of activities or assets that are capable of being conducted or managed in a manner that would
provide any economic benefit or return to the Company. As a result, the Company accounted for the purchase of the Seneca Assets as an
asset acquisition. Neither goodwill nor a gain from a bargain purchase was recognized in conjunction with the acquisition, and no
significant contingent assets or liabilities were acquired or assumed in the acquisition.
At closing of the asset acquisition, the Company sold the equity interest in Landlord to Seneca Biodiesel Holdco, LLC (Seneca
Holdco), which is owned by Bunge North America, Inc., USRG HoldcoV, LLC and West Central, stockholders of Newco. In exchange, the
Company received a commitment from Seneca Holdco to invest $4,000 in Landlord at closing to pay for repairs to the Seneca facility.
Landlord will lease the Seneca facility to REG Seneca, LLC (REG Seneca), a wholly owned subsidiary of the Company, on a triple net
basis with rent being set at an amount to cover debt service and other expenses. REG Seneca will pay Seneca Landlord a $600 per year
investor fee, payable $150 per quarter, which is guaranteed by Newco. Seneca Holdco has a put to Newco of the Seneca Landlord equity
interests after one year provided Newco has a minimum excess net working capital (as defined) of 1.5 times the put/call price. Newco also
has a call option of the Seneca Landlord equity interests. The put/call price is the greater of 3 times the initial investment or 35% internal
rate of return. Investor fees and distributions in the first three years are credited to the put/call price. At the time the put or call is exercised,
Newco will issue 150,000 shares of Newco common stock to Seneca Holdco.
REG Services Group, LLC, a wholly owned subsidiary of the Company, will manage REG Seneca pursuant to a MOSA. Newco
granted to one of the Seneca Holdco investors an option to purchase substantial amounts of glycerin produced at Newco facilities and
Newco agreed with another of the Seneca Holdco investors to purchase a substantial amount of corn oil for use at the Seneca facility or
other Newco facilities. REG Construction & Technology Group, LLC, a wholly owned subsidiary of the Company, and Landlord entered
into a construction management agreement. REG Construction & Technology Group, LLC will manage the $4,000 of repairs at the Seneca
facility.
On April 9, 2010, Newco entered into a Revolving Credit Agreement (WestLB Revolver) with WestLB AG (WestLB). The initial
available credit amount under the agreement is $10,000 with additional lender increases up to a maximum commitment of $18,000.
Advances under the agreement are limited to the amount of certain qualifying assets of Newco that secure amounts borrowed. The
agreement requires Newco to maintain compliance with certain financial covenants. The term of the agreement is two years. The interest
rate varies depending on the loan type designation and is either 2.0% over the higher of 50 basis points above the Federal Funds Effective
Rate or the WestLB prime rate for Base Rate loans or 3.0% over adjusted LIBOR for Eurodollar loans. As of the date of the financial
statements, no amounts were outstanding under the WestLB Revolver.
The WestLB Revolver is secured by assets and ownership interests of REG Services Group, LLC and REG Marketing & Logistics
Group, LLC. In connection with the West LB Revolver, Newco issued 500,000 shares of Newco common stock to WestLB and guarantees
the outstanding obligations of the loan.
******
45
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Exhibit
No.
31.1
31.2
32.1
32.2
Exhibit Index
Description
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
Certification of the Chief Executive Officer pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
Certification of the Chief Financial Officer pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
46
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
RENEWABLE ENERGY GROUP, INC.
By:
/S/ JEFFREY STROBURG
Jeffrey Stroburg
Chief Executive Officer and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the individuals whose signatures appear below constitute and appoint Natalie
Lischer and Chad Stone, and each of them, his or her true and lawful attorney-in-fact and agents with full and several power of substitution,
for him or her and his or her name, place and stead, in any and all capacities, to sign this Annual Report on Form 10-K (including any and
all amendments), and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in fact and agents, and each of them full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agents or any of them, or their substitutes, may
lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature
Title
/S/ JEFFREY STROBURG
Jeffrey Stroburg
Chief Executive Officer (Principal
Executive Officer) and Director
/S/ CHAD STONE
Chad Stone
/S/ NATALIE LISCHER
Natalie Lischer
/S/ PAUL CHATTERTON
Paul Chatterton
/S/ SCOTT P. CHESNUT
Scott P. Chesnut
/S/ DELBERT CHRISTENSEN
Delbert Christensen
/S/ SCOTT GIESELMAN
Scott Gieselman
/S/ RANDOLPH L. HOWARD
Randolph L. Howard
/S/ MICHAEL A. JACKSON
Michael A. Jackson
/S/ JONATHAN KOCH
Jonathan Koch
/S/ ERIC HAKMILLER
Eric Hakmiller
/S/ CHRISTOPHER D. SORRELLS
Christopher D. Sorrells
/S/ DON HUYSER
Don Huyser
/S/ RONALD MAPES
Ronald Mapes
Principal Financial Officer
Principal Accounting Officer
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
47
Date
April 19, 2010
April 19, 2010
April 19, 2010
April 19, 2010
April 19, 2010
April 19, 2010
April 19, 2010
April 19, 2010
April 19, 2010
April 19, 2010
April 19, 2010
April 19, 2010
April 19, 2010
April 19, 2010
I, Jeffrey Stroburg, certify that:
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
1.
2.
3.
I have reviewed this special financial report on Form 10-K of Renewable Energy Group, Inc.;
Based on my knowledge, this special financial report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report; and
Based on my knowledge, the financial statements, and other financial information included in this special financial report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report.
Exhibit 31.1
Dated: April 19, 2010
/S/ JEFFREY STROBURG
Jeffrey Stroburg
Chief Executive Officer
I, Chad Stone, certify that:
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
1.
2.
3.
I have reviewed this special financial report on Form 10-K of Renewable Energy Group, Inc.;
Based on my knowledge, this special financial report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report; and
Based on my knowledge, the financial statements, and other financial information included in this special financial report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report.
Exhibit 31.2
Dated: April 19, 2010
/S/ CHAD STONE
Chad Stone
Chief Financial Officer
SECTION 1350 CERTIFICATIONS
Exhibit 32.1
I, Jeffrey Stroburg, Chief Executive Officer of Renewable Energy Group, Inc. (the “Company”), certify, pursuant to 18 U.S.C. §
1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge the Special Financial Report on Form 10-K of
the Company (the “Report”), which accompanies this Certificate, fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, and all information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
Dated: April 19, 2010
/S/ JEFFREY STROBURG
Jeffrey Stroburg
Chief Executive Officer
SECTION 1350 CERTIFICATIONS
Exhibit 32.2
I, Chad Stone, Chief Financial Officer of Renewable Energy Group, Inc. (the “Company”), certify, pursuant to 18 U.S.C. § 1350, as
adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge the Special Financial Report on Form 10-K of the
Company (the “Report”), which accompanies this Certificate, fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, and all information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
Dated: April 19, 2010
/S/ CHAD STONE
Chad Stone
Chief Financial Officer