Renewable Energy Group
Annual Report 2016

Plain-text annual report

RENEWABLE ENERGY GROUP, INC. FORM 10-K (Annual Report) Filed 03/10/17 for the Period Ending 12/31/16 Address Telephone CIK 416 S. BELL AVENUE AMES, IA 50010 515-239-8000 0001463258 Symbol REGI SIC Code 2860 - Industrial Organic Chemicals Industry Renewable Fuels Energy 12/31 Sector Fiscal Year http://www.edgar-online.com © Copyright 2017, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use. UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549______________________________________FORM 10-K(Mark One)xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2016or¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission File Number: 001-35397______________________________________RENEWABLE ENERGY GROUP, INC.(Exact name of registrant as specified in its charter)Delaware26-4785427(State or other jurisdiction ofincorporation or organization)(I.R.S. EmployerIdentification No.) 416 South Bell Avenue, Ames, Iowa50010(Address of principal executive offices)(Zip Code)Registrant’s telephone number, including area code: (515) 239-8000Securities registered pursuant to Section 12(b) of the Act:Title of each class:Name of each exchange on which registered:Common Stock, par value $.0001 per shareNASDAQ Global MarketSecurities registered pursuant to Section 12(g) of the Act:None(Title of class)______________________________________Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No xIndicate 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 xIndicate 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 thepreceding 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 thepast 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 besubmitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes x 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 ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in 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 thedefinitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.Large accelerated filer¨Accelerated filerx Non-accelerated filer¨ (Do not check if a smaller reporting company)Smaller reporting company¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No xAs of June 30, 2016, the aggregate market value of Common Stock held by non-affiliates was $337,816,047 .As of February 28, 2017 , 38,565,260 shares of Common Stock of the registrant were issued and outstanding.______________________________________Documents Incorporated By ReferenceAll or a portion of Items 10 through 14 in Part III of this Form 10-K are incorporated by reference to the Registrant’s definitive proxy statement on Schedule 14A,which will be filed within 120 days after the close of the fiscal year covered by this report on Form 10-K, or if the Registrant’s Schedule 14A is not filed withinsuch period, will be included in an amendment to this Report on Form 10-K which will be filed within such 120 day period.Table of ContentsTABLE OF CONTENTS PagePART I ITEM 1.Business1ITEM 1A.Risk Factors11ITEM 1B.Unresolved Staff Comments25ITEM 2.Properties25ITEM 3.Legal Proceedings26ITEM 4.Mine Safety Disclosures27 PART II ITEM 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities28ITEM 6.Selected Financial Data31ITEM 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations32ITEM 7A.Quantitative and Qualitative Disclosures about Market Risk52ITEM 8.Financial Statements and Supplementary Data54ITEM 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure91ITEM 9A.Controls and Procedures91ITEM 9B.Other Information92 PART III ITEM 10.Directors, Executive Officers and Corporate Governance93ITEM 11.Executive Compensation93ITEM 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters93ITEM 13.Certain Relationships and Related Transactions, and Director Independence93ITEM 14.Principal Accounting Fees and Services93 PART IV ITEM 15.Exhibits, Financial Statement Schedules94ITEM 16.Form 10-K Summary94Table of ContentsPART ICautionary Statement Regarding Forward-Looking InformationThis annual report on Form 10-K contains, in addition to historical information, certain forward-looking statements within the meaning of the Private SecuritiesLitigation Reform Act of 1995. All statements other than statements of historical facts contained in this report, including statements regarding our future results ofoperations and financial position, strategy and plans, and our expectations for future operations, are forward-looking statements. The words “believe,” “may,”“will,” “would,” “might,” “could,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “plan,” “seek,” “potential,” “expect” and similar expressions areintended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about futureevents and trends that we believe may affect our financial condition, results of operations, strategy, short-term and long-term business operations and objectives,and financial needs. Forward-looking statements include, but are not limited to, statements about:•our financial performance, including revenues, cost of revenues and operating expenses;•government programs, policymaking and mandates relating to renewable fuels;•the availability, future price and volatility of feedstocks;•the future price and volatility of petroleum;•our liquidity and working capital requirements;•anticipated trends and challenges in our business and competition in the markets in which we operate;•our ability to successfully implement our acquisition strategy and integration strategy;•progressing facilities currently under development to the construction and operational stages, including planned capital expenditures and our abilityto obtain financing for such construction;•our ability to protect proprietary technology and trade secrets;•the development of competing alternative fuels, energy services and renewable chemicals;•our risk management activities;•product performance, in cold weather or otherwise;•seasonal fluctuations in our business;•our current products as well as products we are developing;•critical accounting policies and estimates, the impact or anticipated impact of recent accounting pronouncements, guidance or changes in accountingprinciples and future recognition of impairments for the fair value of assets, including goodwill, financial instruments, intangible assets and otherassets acquired; and•assumptions underlying or relating to any of the foregoing.These statements reflect current views with respect to future events and are based on assumptions and subject to risks and uncertainties. We note that a variety offactors could cause actual results and experience to differ materially from the anticipated results or expectations expressed in our forward-looking statements.Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements are also subject to risks anduncertainties that could cause actual results to differ materially from those expected. These risks and uncertainties include, but are not limited to, those risksdiscussed in Item 1A of this report.Forward-looking statements contained in this report present management’s views only as of the date of this report. We undertake no obligation to publicly updateforward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures wemake on related subjects in our 10-Q and 8-K reports filed with the Securities and Exchange Commission.ITEM 1.BusinessGeneralWe focus on providing cleaner, lower carbon intensity products and services. We are North America's largest producer of advanced biofuels. We utilize anationwide production, distribution and logistics system as part of an integrated value chain model designed to convert natural fats, oils and greases into advancedbiofuels. During 2016 , we sold 567 million gallons and1Table of Contentshad revenues of $2.0 billion . We are also engaged in research and development efforts focused on the conversion of diverse feedstocks into renewable chemicals.We own and operate a network of 14 biorefineries. Twelve biorefineries are located in the United States and two in Germany, and 13 of which produce biodiesel orrenewable hydrocarbon diesel and have an aggregate nameplate production capacity of 502 million gallons per year, or mmgy. We also operate one microbialfermentation facility in connection with our development of renewable chemicals and one feedstock processing facility. We believe our fully integrated approach,which includes acquiring feedstock, managing biorefinery facility construction and upgrades, operating biorefineries, and distributing through a network ofterminals, positions us to serve the market for biomass-based diesel and other advanced biofuels along with other products and services.We are a lower-cost biomass-based diesel producer. We primarily produce our biomass-based diesel from a wide variety of lower cost feedstocks, includinginedible corn oil, used cooking oil and inedible animal fat. We also produce biomass-based diesel from virgin vegetable oils, which are more widely available andtend to be higher in price. We believe our ability to process a wide variety of feedstocks provides us with a cost advantage over many biomass-based dieselproducers, particularly those that rely primarily on higher cost virgin vegetable oils, such as soybean oil or canola oil.We are in the process of developing renewable chemicals through our development-stage industrial biotechnology business, REG Life Sciences, which usesproprietary microbial fermentation processes to produce renewable chemicals, fuels and other products. Fatty acids are one of three product areas REG LifeSciences has focused on, along with esters and alcohols.We sell petroleum-based heating oil and diesel fuel, which enables us to offer additional biofuel blends, while expanding our customer base. We sell heating oiland ultra-low sulfur diesel, or ULSD, at terminals throughout the northeastern U.S. as well as BioHeat® blended fuel at one of our existing Northeastern terminallocations. We expanded our sales of additional biofuel blends to Midwest terminal locations and look to potentially expand to other areas across North America.We acquired a 75 mmgy nameplate capacity renewable hydrocarbon diesel biorefinery located in Geismar, Louisiana in June 2014. We began production at theGeismar facility in October 2014 after our completion of certain upgrades. The facility was idle from April 2015 to March 2016 while repairs were made related tothe two separate fires that occurred at the facility in April and September 2015. Our Geismar facility has been running at high run rates since early October 2016.We also expanded our business internationally by acquiring a majority interest in Petrotec AG ("Petrotec"), in December 2014. During 2015 and 2016, we acquiredadditional shares in Petrotec through cash tender offers and purchases on the open market. At December 31, 2016, we owned approximately 91% of Petrotec'soutstanding shares. In January 2017, we completed the acquisition of the remaining minority interest in Petrotec and now own 100% of its outstanding shares.Petrotec is a fully-integrated company utilizing used cooking oil and other waste feedstocks to produce biomass-based diesel at its two biorefineries in Emden andOeding, Germany. Our production capacity in Europe is approximately 50 mmgy.In August 2015, we acquired our Grays Harbor facility, a 100 mmgy nameplate biodiesel plant and terminal at the Port of Grays Harbor, Washington. Thisacquisition expanded our production fleet to the west coast of the United States. The Grays Harbor location includes 18 million gallons of storage capacity and aterminal that can accommodate feedstock intake and fuel delivery on deep-water PANAMAX class vessels as well as possessing significant rail and truck transportcapabilities. To date, the production facility's primary feedstock has been canola oil sourced nearby in the Pacific Northwest. In March 2016, we acquired our 20 mmgy nameplate biodiesel refinery located in DeForest, Wisconsin, REG Madison, LLC, which produces biodiesel fromyellow grease, rendered animal fats, and inedible corn oil, in addition to refined vegetable oils using our patented technology currently in use at our Seneca, Illinoisplant. The facility has both truck and rail capabilities.Plant Network2Table of ContentsOur production network in North America consists of the following owned facilities:Property Nameplate 1ProductionCapacity (mmgy) Estimated ProductionCapacityfor CurrentFeedstockMix as of December 31,2016 (mmgy) REGOperationsCommenced Feedstock Capability Ralston, Iowa 12 12 2002 Refined Oils and FatsAlbert Lea, Minnesota 30 30 2005 Crude, High FFA and Refined Oils andFatsNewton, Iowa 30 30 2007 Crude, High FFA and RefinedOils and FatsSeabrook, Texas 35 35 2008 Refined Oils and FatsDanville, Illinois 45 45 2009 Crude, High FFA and RefinedOils and FatsSeneca, Illinois 60 60 2010 Crude, High FFA and RefinedOils and FatsNew Boston, Texas 15 14 2013 Crude, High FFA and RefinedOils and FatsEllenwood, Georgia 2 15 n/a n/a N/AMason City, Iowa 30 30 2013 Crude, High FFA and RefinedOils and FatsGeismar, Louisiana 3 75 75 2014 Crude, High FFA and RefinedOils and FatsOkeechobee, Florida 4 n/a n/a 2014 n/aGrays Harbor, Washington 100 92 2015 Refined Oils and FatsMadison, Wisconsin 5 20 20 2016 Crude, High FFA and RefinedOils and FatsPartially Constructed Facilities % Complete St. Rose, Louisiana 60 n/a ~45% Crude, High FFA and RefinedOils and FatsEmporia, Kansas 60 n/a ~20% Crude, High FFA and Refined Oils andFatsClovis, New Mexico 15 n/a ~50% Crude, High FFA and RefinedOils and Fats1  The nameplate capacity listed above is based on original plant design.2  Idled by prior owner at time of our purchase and remains idled pending repairs or upgrades. We have not yet set a production date.3  Plant commenced operations in March 2016 after being shut down since April 2015 due to two separate fires that occurred in April and September 2015.4  Okeechobee is a demo-scale microbial fermentation facility for the development and production of renewable chemicals, fuels and other products.5  Acquired in March 2016 from Sanimax Energy.Our production network in Europe consists of the following facilities:3Table of ContentsProperty NameplateProductionCapacity 1 (milliongallons) Estimated ProductionCapacityfor CurrentFeedstockMix as of December31, 2016 (milliongallons) OperationsCommenced Feedstock CapabilityEmden, Germany 27 27 2008 Crude, High FFA and RefinedOils and FatsOeding, Germany 23 23 2001 Crude, High FFA and RefinedOils and Fats1  The nameplate capacity listed above is based on the output of the original plant design. In Germany, nameplate capacity can be based on input, which is30 mmgy for Emden and 26 mmgy for Oeding or 185,000 metric tons for these two locations.In addition to the production facilities and fermentation facility listed above, we maintain a testing laboratory at our corporate headquarters in Ames, Iowa, whichallows us to test various feedstocks for conversion into biomass-based diesel, as well as various manufacturing processes available in the production of biomass-based diesel. We also have a regional office in Tulsa, Oklahoma, focused on maintaining and developing advanced biofuel technologies and renewable chemicals.Our industrial biotechnology research and development activities, conducted in South San Francisco, are dedicated to the development of renewable chemicals,advanced biofuels and other products using our proprietary microbial fermentation technology.Our Feedstocks and Other InputsOur ability to use a wide range of feedstocks gives us the flexibility to respond to changes in feedstock pricing to maintain our feedstock cost advantage. We havethe ability to change our processing techniques to accommodate different feedstocks and feedstock mixes. In 2016, approximately 72% of our total feedstock usagewas lower cost inedible corn oil, used cooking oil or rendered animal fat feedstock and the remaining 28% was from refined vegetable oils, such as soybean oil orcanola oil.We procure our feedstocks from numerous vendors in quantities ranging from truckload to railcar to water vessel to pipeline. There is no established futures marketfor lower cost feedstocks. Inedible corn oil is typically purchased in nearby forward positions of one to three months, and occasionally longer, on fixed pricedcontracts. We generally purchase used cooking oil and rendered animal fats on one to four week forward positions using fixed pricing or an indexed pricecompared to a published index such as USDA reports or recognized industry price reports such as The Jacobsen or Informa. Soybean and canola oils can bepurchased on a spot or forward contract basis from a number of suppliers and pricing for these vegetable oils is compared to the broadly traded Soybean Oil Indexof the Chicago Mercantile Exchange (CME).From time to time, we work with developers of next generation feedstocks, such as algae and camelina, to assist them in bringing these new feedstocks to market.We have converted several of these feedstocks, as well as other second generation feedstocks, into high quality biomass-based diesel in our laboratory andproduction facilities. We believe we are well positioned to incorporate many new feedstocks into our production process as they become commercially available.We procure methanol, chemical catalysts used in our production process such as sodium methylate and hydrochloric acid, under fixed-price contracts and formula-indexed contracts based upon competitive bidding. These procurement contracts typically last from three months to one year. The price of methanol is indexed tothe monthly reported published price such as the JJ&A Methanol report or Southern Chemical (SSC) report.DistributionWe have established a national distribution system to supply biomass-based diesel throughout the United States. Each of our biomass-based diesel facilities isequipped with an on-site rail loading system, a truck loading system, or both. Our Seneca biorefinery near the Illinois River has direct barge access supplyingcustomers using the inland waterways system. Our Houston biorefinery has barge and deep-water ship loading capability. Our Grays Harbor biorefinery has deep-water capability for PANAMAX class vessels. We also manage some customers’ biomass-based diesel storage tanks and replenishment process. We lease 484railcars for transportation and lease biomass-based diesel storage tanks in 49 terminals as of December 31, 2016. In general, the terminals where we lease ourbiomass-based diesel storage tanks are petroleum fuel terminals so that fuel distributors and other biomass-based diesel customers can create a biomass-baseddiesel blend at the terminal before further distribution. Terminal leases typically have one- to three-year terms and are generally renewable subject to certain termsand conditions. During 2016, we have sold our various products in 47 states, four provinces in Canada, Peru, as well as Europe.4Table of ContentsRisk ManagementThe prices for feedstocks and biomass-based diesel can be volatile and are not always closely correlated. Lower cost feedstocks are particularly difficult to riskmanage given that such feedstocks are not traded in any public futures market. To manage feedstock and biomass-based diesel price risks, we utilize forwardcontracting, hedging and other risk management strategies, including the use of futures, swaps, options and over-the-counter products.In establishing our risk management strategies, we draw from our own in-house risk management expertise and we consult with industry experts. We utilizeresearch conducted by outside firms to provide additional market information and risk management strategies. We believe combining these sources of knowledge,experience and expertise gives us a more sophisticated and global view of the fluctuating commodity markets for raw materials and energy, which we then canincorporate into our risk management strategies.SeasonalityBiodiesel producers have experienced seasonal fluctuations in demand for biodiesel. Biodiesel demand has tended to be lower during winter in most states due toblending concentrations being reduced. To mitigate some of these seasonable fluctuations in demand, we have upgraded our Newton and Danville biorefineries toproduce distilled biodiesel from lower cost feedstocks, thus allowing that product to have improved cold-weather performance.Renewable Identification Number, or RIN, prices may also be subject to seasonal fluctuations. The RIN is dated for the calendar year in which it is generated.Since 20% of an Obligated Party's annual Renewable Volume Obligation, or RVO, can be satisfied by prior year RINs, most RINs must come from biofuelproduced or imported during the RVO year. As a result, RIN prices can be expected to increase as the calendar year progresses if the RIN market is undersuppliedcompared to that year's RVO and decrease if it is oversupplied. For further discussion and background on RINs, see "Government Programs Favoring Biomass-based Diesel Production and Use" below.CompetitionWe face competition from producers and suppliers of petroleum-based diesel fuel, from other biomass-based diesel producers, marketers, traders and distributors.The size of the biomass-based diesel industry is small compared to the size of the petroleum-based diesel fuel industry and large petroleum companies have greaterresources than we do. Our principal competitive differentiators are product quality, both biomass-based diesel and RIN quality, supply reliability and price. Wealso face competition in the biomass-based diesel RIN compliance market from producers of renewable hydrocarbon diesel and in the advanced biofuel RINcompliance market from producers of other advanced biofuels. In the United States and Canadian biomass-based diesel markets, we compete with large, multi-product companies that have greater resources than we do. Archer Daniels Midland Company, Cargill Incorporated, Louis Dreyfus Commodities Group and AgProcessing Inc. are major international agribusiness corporations and biodiesel producers with the financial sourcing and marketing resources to be formidablecompetitors in the biodiesel industry. These agribusiness competitors tend to make biodiesel from higher cost virgin vegetable oils such as soybean or canola oil,which they produce as part of their integrated agribusinesses. We are also in competition with producers of renewable hydrocarbon diesel, such as Neste Oil, whichhas approximately 882 million gallons of renewable hydrocarbon diesel production capacity in Asia and Europe and Diamond Green Diesel, LLC, the joint venturebetween Valero Energy Corp. and Darling International with approximately 160 million gallons of production capacity and plans to grow its capacity to 275million gallons by end of 2017. Renewable hydrocarbon diesel can also satisfy the RFS2 biomass-based diesel requirement if the renewable hydrocarbon dieselmeets the greenhouse gas reduction requirements and may satisfy Canadian renewable fuel requirements. Neste Oil has greater financial resources than we do.In the RFS2 advanced biofuel market, we also compete with other producers and importers of advanced biofuels, such as Brazilian sugarcane ethanol producersand producers of biogas used in transportation. We face increasing competition from imported biomass-based diesel and expect this to continue. In January 2015,the EPA announced the approval of a plan submitted by CARBIO, a consortium of Argentinean renewable fuel producers, which allows for Argentinian biodieselmade from soybean oil to generate RINs. Imported biomass-based diesel that does not qualify under RFS2, also competes in jurisdictions where there are biomass-based diesel blending requirements.We also face competition from independent biodiesel producers. Most of these competitors own only one biodiesel plant and thus, do not enjoy the benefits ofscale that we do. Many of these competitors own biodiesel plants that can process only higher cost virgin vegetable oils. Furthermore, in our marketing anddistribution, we face competition from biomass-based diesel traders such as US Oil, NGL, Noble, Shell, Tenaska, Vitol and others. These trading companies mayhave greater financial resources than we do and are able to take significant biomass-based diesel positions in the marketplace. These competitors are oftencustomers and/or suppliers of ours as well.Segment and Geographic Information5Table of ContentsWe re-assess our reportable segments on an annual basis. Prior to 2015, our business was organized into two reportable segments - the Biomass-based Dieselsegment and the Services segment. As a result of the increased activities surrounding our renewable chemicals business, in 2015 we began reporting a newsegment, Renewable Chemicals, which was previously included in the Biomass-based Diesel segment. Financial and geographic information regarding oursegments can be found in Note 18 to our consolidated financial statements included under Part II, Item 8 of this report.Government Programs Favoring Biomass-Based Diesel Production and UseThe biomass-based diesel industry benefits from numerous federal and state government programs, the most important of which is RFS2.Renewable Fuel StandardOn July 1, 2010, RFS2’s biomass-based diesel requirement became effective, requiring for the first time that a certain percentage of the diesel fuel consumed in theUnited States be made from renewable sources. The biomass-based diesel requirement can be satisfied by two primary fuels, biodiesel and renewable hydrocarbondiesel. RFS2 required the use of one billion gallons of biomass-based diesel in 2012, required 1.28 billion gallons in 2013 and at least one billion gallons each yearthereafter, with such higher amounts to be determined by the United States Environmental Protection Agency, or EPA, subject to the Office of Management andBudget, or OMB, approval. On November 30, 2015, the EPA issued the final 2014 through 2016 RVO rules whereby the biomass-based diesel volumes were set at1.63 billion, 1.73 billion, 1.90 billion gallons for 2014, 2015 and 2016, respectively. In November 2016, the EPA issued the final 2017 biomass-based dieselvolume at 2 billion gallons and additionally set the 2018 target at 2.1 billion gallons.The biomass-based diesel requirement is one of four separate renewable fuel requirements under RFS2. The RFS2 requirements are based on two primarycategories and two subcategories. The two primary categories are conventional renewable fuel, which is primarily satisfied by corn ethanol, and advanced biofuel,which is defined as a biofuel that reduces lifecycle greenhouse gas emissions by at least 50% compared to the petroleum-based fuel the biofuel is replacing. Theadvanced biofuel category has two subcategories, cellulosic biofuel, to be satisfied by newly developed cellulosic biofuels, such as ethanol made from woodybiomass, and biomass-based diesel, which is satisfied by biodiesel and renewable hydrocarbon diesel, or RHD. RFS2’s total advanced biofuel requirement is largerthan the combined cellulosic fuel and biomass-based diesel requirements, thus requiring the use of additional volumes of advanced biofuels.The RFS2 requirement for advanced biofuels can be satisfied by any advanced biofuel, including biodiesel, renewable hydrocarbon diesel, biogas used intransportation, biobutanol, cellulosic ethanol or sugarcane-based ethanol, so long as it meets the 50% greenhouse gas reduction requirement. The advanced biofuelrequirement was 2.88 billion gallons in 2015, 3.61 billion gallons in 2016, and 4.28 billion gallons in 2017.The advanced biofuel RVO is expressed in terms of ethanol equivalent volumes, or EEV, which is based on the fuel’s renewable energy content compared toethanol. Biodiesel has an EEV of 1.5 and RHD has an EEV of 1.5-1.7, compared to 1.0 for sugarcane-based ethanol. Accordingly, it requires less biomass-baseddiesel than sugarcane-based ethanol to meet the required volumes as each gallon of biomass-based diesel counts as more gallons for purposes of fulfilling theadvanced biofuel RVO, providing an incentive for Obligated Parties to purchase biomass-based diesel to meet their advanced biofuel RVO.The RFS2 volume requirements apply to petroleum refiners and petroleum fuel importers in the 48 contiguous states and Hawaii, who are defined as “ObligatedParties” in the RFS2 regulations, and requires these Obligated Parties to incorporate into their petroleum-based fuel a certain percentage of renewable fuel orpurchase credits in the form of RINs from those who do. An Obligated Party’s RVO is based on the volume of petroleum-based fuel they produce or import. Thelargest United States petroleum refining companies, such as Valero, Phillips 66, ExxonMobil, British Petroleum, Chevron and Shell, represent the majority of thetotal RVO, with the remainder made up of smaller refiners and importers.Renewable Identification NumbersThe EPA created the renewable identification number, or RIN, system to track renewable fuel production and compliance with the renewable fuel standard. EPAregistered producers of renewable fuel may generate RINs for each gallon of renewable fuel they produce. In the case of biomass-based diesel, generally 1.5 to 1.7biomass-based diesel RINs may be generated for each gallon of biomass-based diesel produced, based upon the fuel's renewable energy content. Renewable fuel,including biomass-based diesel, can then be sold with associated RINs attached. RINs may also be separated from the gallons of renewable fuel they represent andonce separated they may be sold as a separate commodity. RINs are ultimately used by Obligated Parties to demonstrate compliance with the RFS2. ObligatedParties must obtain and retire the required number of RINs to satisfy their RVO during a particular compliance period. An Obligated Party can obtain RINs bybuying renewable fuels with RINs attached, buying RINs that have been separated, or producing renewable fuels themselves. All RIN activity under RFS2 must beentered6Table of Contentsinto the EPA’s moderated transaction system, which tracks RIN generation, transfer and retirement. RINs are retired when used for compliance with the RFS2requirements.The value of RINs is significant to the price of biomass-based diesel. In 2015, RIN prices as a percentage contribution to the average B100 spot price, as reportedby OPIS fluctuated significantly throughout the year and range from a low of $0.58 per gallon, or 23%, in September to a high of $1.55 per gallon, or 53%, inJanuary. In 2016, RIN prices as a percentage contribution to the average B100 spot price, as reported by OPIS fluctuated significantly throughout the year andrange from a low of $1.05 per gallon, or 37%, in September to a high of $1.89 per gallon, or 54%, in January.Biodiesel Tax CreditThe federal biodiesel mixture excise tax credit, or BTC, when in effect, provides a $1.00 per gallon excise tax credit to the first blender of biomass-based dieselwith at least 0.1% petroleum-based diesel fuel. The BTC can then be credited against such biodiesel federal excise tax liability or the blender can obtain a cashrefund from the United States Treasury for the value of the credit. The BTC became effective January 1, 2005 and then lapsed January 1, 2010 before beingreinstated retroactively on December 17, 2010. The BTC again lapsed as of December 31, 2011 and on January 2, 2013, it was again reinstated, retroactively for2012 and through December 31, 2013. The BTC lapsed again on December 31, 2013 and was retroactively reinstated for 2014 on December 19, 2014. OnDecember 18, 2015, the BTC was reinstated for 2015 and was in effect until December 31, 2016. The BTC is best thought of as an incentive shared across theentire value chain through routine, daily trading and negotiation. The BTC lapsed again on January 1, 2017, but is generally expected to return even though timingand form of the incentive, if reinstated, are uncertain. California Low Carbon Fuel Standard CreditsThe California Low Carbon Fuel Standard, or LCFS, regulation is a rule designed to reduce greenhouse gas emissions associated with transportation fuels used inCalifornia. The regulation quantifies lifecycle greenhouse gas emissions by assigning a “carbon intensity” (CI) score to each transportation fuel based on that fuel’slifecycle assessment. Each fuel provider (generally the fuel’s producer or importer, or “regulated party”) is required to ensure that the overall CI score for its fuelpool meets the annual carbon intensity target for a given year. A regulated party’s fuel pool can include gasoline, diesel, and their blendstocks and substitutes. Inother words, excess CI reductions from one type of fuel (e.g. diesel) can be used to offset insufficient reductions in another fuel (e.g. gasoline).We get CI credits when we sell qualified biomass-based diesel into California. CI credits ranged from $56 per metric ton to $129 per metric ton in 2016.Other State ProgramsAccording to the U.S. Department of Energy, more than 40 states have implemented various programs that encourage the use of biomass-based diesel throughblending requirements as well as various tax incentives. For example, Illinois offers an exemption from the generally applicable 6.25% sales tax on fuel forbiomass-based diesel blends that incentivizes blending at 11% biomass-based diesel, or B11, through December 31, 2018. Illinois’ program has made that state oneof the largest biomass-based diesel markets in the country. Since 2006, Iowa has had in place a retailer’s incentive for blended fuel which has been modified overtime. For 2013 through 2017, retailers earn $0.045 per gallon of B5. Iowa also has a biomass-based diesel production incentive that provides $0.02 per gallon ofproduction capped after the first 25 million gallons per production plant. Iowa recently enacted an increase in its excise tax on fuel, which is three cents per gallonless for B11 or higher blends than the diesel fuel tax. In Texas, the biomass-based diesel portion of biomass-based diesel blends are exempt from state excise tax,which results in a $0.20 per gallon incentive for B100.Currently, Minnesota law requires a B5 biodiesel blend throughout the entire year. In 2014, the law required the state to increase blends to a B10 blend in thesummer months. Oregon has implemented a B5 biodiesel blend requirement. New Mexico, Pennsylvania and Washington have all adopted legislation requiringbiomass-based diesel blends beginning at B2 (and B5 in New Mexico) with incremental increases, provided certain feedstock or production minimums are met.Several northeast states, including Connecticut and Vermont, have adopted legislation requiring biomass-based diesel blends in home heating oil. In October 2016,the City of New York has adopted legislation requiring biomass-based diesel blends at a 5% rate for heating oil starting on October 1, 2017 and the blend levelthen moves to 10% in 2025, 15% in 2030 and 20% in 2034. In addition, Oregon and Washington State have been in the process of developing and implementingtheir own low carbon fuel programs. Oregon is currently engaged in the rulemaking process.Although we believe that state requirements for the use of biofuels increase demand for our biomass-based diesel within such states, they may not increase overalldemand in excess of RFS2 requirements. Rather, existing demand for our biofuel from7Table of ContentsObligated Parties in connection with federal requirements may shift to states that have use requirements or tax incentive programs.Environmental MattersOur manufacturing facilities, like other fuel and chemical production facilities, are subject to various federal, state and local environmental laws and regulations,including those relating to the discharge of materials into the air, water and ground; the generation, storage, handling, use, transportation and disposal of hazardousmaterials; ecological and natural resources; and the health and safety of our employees, contractors and the public. These laws and regulations require us to obtainand comply with numerous environmental permits to construct and operate each facility. They can require expensive pollution control equipment or operationalchanges to limit actual or potential impacts to human health and the environment. A violation of these laws, regulations or permit conditions could result insubstantial fines, natural resource damage, criminal sanctions, permit revocations and or facility shutdowns. We do not currently have any environmentalproceedings either pending or threatened against our facilities that would materially affect our business or financial condition. Furthermore, we do not anticipate amaterial adverse effect on our business or financial condition as a result of our efforts to comply with these requirements as presently in effect.HistoryOur predecessor, REG Biofuels, LLC, formerly named REG Biofuels Inc., which was formerly named Renewable Energy Group, Inc., was formed under the lawsof the State of Delaware in August 2006 upon acquiring the assets and operations of the biodiesel division of West Central Cooperative, or West Central, and twoof West Central’s affiliated companies, InterWest, L.C. and REG, LLC. Set forth below is a summary of the significant events of our company since June 2008.8Table of ContentsDate Events DescriptionJune 2008 Houston facility We acquired our Houston facility from U.S. Biodiesel Group, Inc., or USBG, through a transaction which included anequity investment in us by USBG.February through April2010 Danville, Newton andSeneca facilities We acquired our Danville facility by merger from Blackhawk Biofuels, LLC. We acquired our Newton Facility, throughthe purchase of substantially all of the assets and liabilities of Central Iowa Energy, LLC. We closed a transaction inwhich we agreed to lease and operate the Seneca facility and certain related assets.July 2010 Tellurian Biodiesel,Inc. and AmericanBDF, LLC We acquired certain assets of Tellurian Biodiesel, Inc., or Tellurian, and American BDF, LLC, or ABDF. Tellurian was aCalifornia-based biodiesel company and marketer. ABDF was a joint venture owned by Golden State Service Industries,Restaurant Technologies, Inc., or RTI, and Tellurian. The purchase connects RTI’s national used cooking oil collectionsystem with our national network of biodiesel manufacturing facilities.September 2010 Clovis facility We acquired for stock the partially constructed Clovis facility.July 2011 Albert Lea facility We acquired for stock all the assets and certain liabilities of SoyMor cooperative and SoyMor Biodiesel, LLC.January 2012 REG IPO We completed our initial public offering in which we sold 6.8 million shares of our Common Stock at a price to thepublic of $10.00 per share.January 2012 Seneca facility We exercised an option to purchase our Seneca facility, which we previously operated under lease.October 2012 New Boston facility We acquired substantially all the assets of North Texas Bio Energy, LLC, or NTBE, including a 15 mmgy nameplatecapacity biorefinery in New Boston, Texas.November 2012 Atlanta facility We acquired substantially all the assets of BullDog Biodiesel, LLC, or BullDog.July 2013 Mason City facility We acquired substantially all of the assets of Soy Energy, LLC's, or the Soy Energy Assets. The Soy Energy Assetsconsisted of a 30 mmgy nameplate capacity biodiesel facility and related assets located in Mason City, Iowa. We beganproducing biodiesel at this facility on October 1, 2013.January 2014 LS9 We acquired substantially all of the assets and liabilities of LS9, a development stage company focused on the use ofproprietary technologies to make renewable chemicals and other products.June 2014 Synthetic Fuels andGeismar facility We acquired substantially all the assets of Syntroleum, which consisted of a 50% limited liability company membershipinterest in Dynamic Fuels, a 75 mmgy renewable hydrocarbon diesel production facility in Geismar, LA. Subsequentlyon June 6, 2014, we acquired the remaining 50% ownership interest in Dynamic Fuels from Tyson Foods. At closing, werenamed Dynamic Fuels, REG Geismar, LLC or REG Geismar.December 2014 Petrotec AG We acquired 69% equity ownership in Petrotec AG from its majority shareholder. As of December 31, 2016, we ownedapproximately 91% of Petrotec's shares. On January 2, 2017, we completed the acquisition of the remaining minorityinterest in Petrotec and own 100% of the equity in Petrotec.August 2015 Grays Harbor facility We acquired substantially all of the assets of Imperium Renewables, Inc., or Imperium, including a 100 mmgy nameplatebiorefinery and terminal at the Port of Grays Harbor, Washington.March 2016 Madison facility We acquired fixed assets and inventory from Sanimax Energy, including the 20 mmgynameplate capacity biomass-based diesel refinery in DeForest, Wisconsin.EmployeesAs of December 31, 2016 , we had 703 full-time employees. None of our employees are represented by a labor organization or under any collective bargainingagreements. We consider our relationship with our employees to be good.Intellectual PropertyWe own a significant number of U.S. and international patents and expect to file additional patent applications as we continue to pursue technological innovations.We have also developed trade secrets, and have licensed intellectual property related to our biomass-based diesel and industrial biotechnology businesses. We havedeveloped a patented technology that uses microbes to convert sugars to biodiesel in an one-step fermentation process similar to ethanol manufacturing. Some ofthe patents issued to us do not expire until 2034 and additional patent applications in prosecution if issued will extend beyond 2034.Customer concentrationOur sales to one customer, Pilot Travel Centers LLC, or Pilot, were $144.8 million, $114.0 million and $231.8 million, representing approximately 8%, 8% and18% of our total revenues for 2016, 2015, and 2014, respectively. Our revenues from9Table of ContentsPilot generally do not directly include the RINs associated with the gallons of biomass-based diesel sold. The value of those RINs represented approximately anadditional 9% and 13% of our total sales in 2016 and 2015, respectively based on the OPIS average RIN price for the year.Research and developmentWe devote considerable resources to our research and development programs. Our biomass-based diesel research and development programs have been primarilytargeted towards improving the quality and efficiency of the biomass-based diesel production process and developing applications for co-products. Ourdevelopment stage industrial biotechnology business conducts research and development involving the production of renewable chemicals, additional advancedbiofuels and other products from our proprietary microbial fermentation process. In January 2016, ExxonMobil Research and Engineering Company and REG LifeSciences commenced a joint development collaboration to develop technology to produce biodiesel by fermenting renewable cellulosic sugars from sources such asagricultural waste. In October 2016, the Company delivered its first commercial product, a specialty fatty acid. REG developed, produced and deliveredapproximately one metric ton of the renewable, multi-functional chemical to Aroma Chemical Services International, a leading specialty manufacturer and supplierof flavor and fragrance ingredients. Fatty acids are one of three product areas REG Life Sciences has focused on, along with esters and alcohols.We expect our research and development expense to decrease in future periods as the business unit generates collaboration revenue. In November 2016, wecommenced a strategic review of the life sciences business. We incurred research and development expense of $18.2 million , $16.9 million, and $12.4 million forthe years ended December 31, 2016, 2015 and 2014, respectively.Executive Officers of the RegistrantDaniel J. Oh , age 52, has served as our Chief Executive Officer and as a Director since September 2011 and President since April 2009. Mr. Oh served as ourChief Operating Officer from June 2007 to September 2011, our Chief Financial Officer and Executive Vice President from June 2006 to June 2007 and asSecretary from August 2006 until March 2009. From May 2004 to May 2006, Mr. Oh served at Agri Business Group, Inc., or ABG, an agribusiness managementconsulting firm, including as Associate Director, Director and Vice President. Prior to joining ABG, Mr. Oh served in several different positions, including SeniorFinancial Analyst, Financial Team Leader and Manager, in the Corporate Finance and Investment Banking area of the Corporate Strategy and BusinessDevelopment Group at Eli Lilly and Company, a global pharmaceutical company, from August 2001 to May 2004. From 2000 to August 2001, Mr. Oh served as aconsultant with McKinsey & Company, a leading consulting firm, where he focused on the pharmaceutical industry. From 1987 to 1998, Mr. Oh served as anofficer in the United States Army, earning the rank of Major. Mr. Oh holds an M.B.A. from the University of Chicago with concentrations in finance, accountingand strategic management as well as a B.S. with a concentration in economics from the United States Military Academy. Mr. Oh serves as a director of WasteResource Management, Inc. Mr. Oh’s employment agreement with us provides that he will serve as a director.Chad Stone , age 47, has served as our Chief Financial Officer since August 2009. Prior to joining us from October 2007 to May 2009, he was a Director atProtiviti Inc., a global business consulting and internal audit firm. From August 1997 to September 2007, Mr. Stone served as Director withPricewaterhouseCoopers and worked at Arthur Andersen from July 1992 to August 1997, departing as a manager. Mr. Stone has served on executive Board of theIowa Biodiesel Board since 2011 and was named chair in September 2014. In October 2015, Mr. Stone began serving on the University of Iowa School ofManagement's Advisory Committee. In November 2015, Mr. Stone was elected to the Governing Board of the National Biodiesel Board. Mr. Stone has over 20years of experience in leading financial reporting, strategy, policy and compliance. Mr. Stone holds an M.B.A. with concentrations in finance, economics andaccounting from the University of Chicago, Graduate School of Business and a B.B.A in Accounting from the University of Iowa. He is also a Certified PublicAccountant.Brad Albin , age 54, has served as our Vice President, Manufacturing since February 2008. Mr. Albin also served as Vice President of Construction Services fromApril 2007 through February 2008. From September 2006 through April 2007, Mr. Albin served as Director, Construction. Prior to joining us, Mr. Albin served asGeneral Manager for West Central, one of our predecessors from July 2006 through September 2006. From November 2002 to January 2006, Mr. Albin served asExecutive Director of Operations for Material Sciences Corporation, where he directed multi-plant operations that served the automotive and global applianceindustries. From 1996 to 2002, Mr. Albin was the Vice President of Operations for Griffin Industries. Mr. Albin has over 25 years of experience in executiveoperations positions in multi-feedstock biomass-based diesel, chemical, food and automotive supplier companies, such as The Monsanto Company, TheNutraSweet Company and Griffin Industries. Mr. Albin was a charter member of the National Biodiesel Accreditation Committee. Mr. Albin serves on the boardof the Iowa Renewable Fuels Association and was the President in 2012, as well as, Vice President in 2011. In November 2014, Mr. Albin completed theAdvanced Management Program from the University of Chicago Booth School of Business and he holds a B.S. in Chemistry from Eastern Illinois University.10Table of ContentsGary Haer , age 63, has served as our Vice President, Sales and Marketing since we commenced operations in August 2006. From October 1998 to August 2006,Mr. Haer served as the National Sales and Marketing Manager for biodiesel for West Central and was responsible for developing the marketing and distributioninfrastructure for biomass-based diesel sales in the United States. Mr. Haer has over 15 years of experience in the biomass-based diesel industry. Mr. Haer has beenelected to various officer positions of the National Biodiesel Board during his tenure from 1998 to 2015. Mr. Haer holds a M.B.A. from Baker University and aB.S. in accounting from Northwest Missouri State University.Available InformationOur internet address is http://www.regi.com. Through that address, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K,and amendments to those reports are available free of charge as soon as reasonably practicable after they are filed with the United States Securities and ExchangeCommission. The information contained on our website is not included in, or incorporated by reference into, this annual report on Form 10-K.ITEM 1A.Risk FactorsOur business, financial condition, results of operations and liquidity are subject to various risks and uncertainties, including those described below. As a result,the trading price of our common stock could decline.RISKS RELATED TO FEDERAL AND STATE INCENTIVESRFS2: The elimination or abatement of federal governmental requirements for the use of biofuels could have a material adverse effect on our revenuesand operating margins.The biomass-based diesel industry relies substantially on federal programs requiring the consumption of biofuels. Biomass-based diesel has historicallybeen more expensive to produce than petroleum-based diesel fuel, and governmental programs support a market for biomass-based diesel that might not otherwiseexist.We believe the Renewable Fuel Standard Program is the most important of these government programs in the United States. Under this program, the EPApromulgated a regulation commonly known as RFS2, which became effective on July 1, 2010 and applies through 2022. RFS2 requires consumption of biomass-based diesel fuel, including biodiesel and renewable hydrocarbon diesel, at specified volumes, known as renewable volume obligations, or RVO.Under RFS2, the EPA is required to set the RVO annually based on a variety of considerations. Over the past several years, the EPA has set the minimumannual consumption volume at increasing levels from 1.28 billion gallons in 2013 to 1.90 billion gallons in 2016. For 2017, the EPA set the minimum annualconsumption volume at 2.00 billion gallons and has set 2.10 billion gallons as the minimum annual consumption volume target for 2018.We believe that much of the increase in demand for our biomass-based diesel since July 2010 is attributable to, and accelerated by, the existence andimplementation of RFS2. In addition, we believe that biomass-based diesel prices have received significant support from RFS2 since July 2010.State requirements and incentives for the use of biofuels increase demand for our biomass-based diesel within such states, but such state requirements andincentives do not increase overall demand for biofuels in excess of RFS2 requirements. Rather, we believe state requirements and tax incentives influence wherepetroleum refiners and petroleum fuel importers choose to consume the volume requirements established by the EPA under RFS2.The United States Congress could repeal, curtail or otherwise change RFS2 in a manner adverse to us. Similarly, the EPA could curtail or otherwise changeRFS2 in a manner adverse to us, including reducing the RVO to the statutory minimum level of 1 billion gallons. The petroleum industry has generally beenopposed to RFS2 and is expected to continue to press for changes that eliminate or reduce its impact. We cannot predict what changes will be instituted by the newadministration or the impact, if any, of these changes to our business. It is possible, however, that future government proposals to reduce or eliminate budgetarydeficits may include reduced allocations to the EPA and other agencies, or abolish such agencies and any programs thereunder entirely and may adversely affectour business and other businesses within our industry. New legislation, or a significant change in rules, regulations, directives or standards could reduce demandfor our products and services, and/or increase expenses, which could have a material adverse effect on our business, financial condition and results of operations.Any repeal or reduction in the RFS2 requirements or reinterpretation of RFS2 resulting in our biomass-based diesel failing to qualify as a required fuelwould materially decrease the demand for and price of our biomass-based diesel, which would materially and adversely affect our revenues and cash flows.11Table of ContentsLoss of or reductions in tax incentives for biomass-based diesel production or consumption may have a material adverse effect on industry revenues andoperating margins.Federal and state tax incentives have historically aided the biomass-based diesel industry. Prior to the 2010 implementation of RFS2, the biomass-baseddiesel industry relied principally on tax incentives to make the price of biomass-based diesel more cost competitive with the price of petroleum-based diesel fuel tothe end user.FederalBiodiesel Tax CreditThe most significant tax incentive program has been the federal biodiesel mixture excise tax credit, referred to as the Biodiesel Tax Credit or BTC. Underthe BTC, the entity to first blend pure biomass-based fuel, or B100, with petroleum-based diesel fuel receives a $1.00-per-gallon refundable tax credit.The BTC was established on January 1, 2005 and has lapsed and been reinstated retroactively and prospectively several times. Most recently, the BTC wasreinstated on December 18, 2015, covering 2015 retroactively and 2016 prospectively. But it lapsed again on December 31, 2016, and we are currently operatingwithout the benefit of the BTC. In the past when the BTC has lapsed, we and others in the industry have operated without any assurance that a reinstatement wouldcover the lapsed period retroactively. There is no assurance that the BTC will be reinstated or, if reinstated, that its application will be retroactive, prospective orboth.Unlike RFS2, the BTC has a direct effect on federal government spending and could be changed or eliminated as a result of changes in the federal budgetpolicy. We cannot predict what action, if any, Congress or the new administration may take with respect to the BTC or whether such action would applyretroactively or prospectively. If the BTC is not reinstated, demand for our biomass-based diesel and the price we are able to charge for our product may declinesignificantly, harming revenues and profitability.In addition, uncertainty regarding the extension or reinstatement of the BTC has caused, and may in the future cause, fluctuations in our operating results.Historically, sales have increased shortly before the BTC lapses and then decreased shortly thereafter. For example, when the BTC was scheduled to expire onDecember 31, 2011, production and sales industry-wide accelerated in the fourth quarter of 2011, but declined in the first quarter of 2012, after the BTC lapsed.We believe reduced demand in the first quarters of 2014 and 2015 also resulted from the lapsing of the BTC at the end of 2013 and 2014, respectively. Similarly,we believe that the lapsing of the BTC on December 31, 2016 caused an acceleration of revenues in the fourth quarter of 2016, which is likely to result in a declinein demand during the first quarter of 2017.StateSeveral states have enacted tax incentives for the use of biodiesel and/or biomass-based diesel. For example, we derive a significant portion of our revenuesfrom operations in the State of Illinois. Illinois has a generally applicable 6.25% sales tax, but offers an exemption from this tax for a blend of fuel that consists of11% biodiesel, or B11, which is set to expire December 31, 2018.State budget or other considerations could cause the modification or elimination of the tax incentive programs of Illinois and other states. The abatement orelimination of such incentives could materially and adversely affect our revenues and profitability.Increased industry-wide production of biomass-based diesel, including as a result of existing excess production capacity, could harm our financial results.If the volume of excess biomass-based diesel RINs exceeds the volume mandated for use under RFS2, the demand for and price of our biomass-baseddiesel, and biomass-based diesel RINs may be reduced, which could adversely affect our revenues and cash flows.According to the National Biodiesel Board, or NBB, as of May 6, 2016, 3.0 billion gallons per year of biodiesel production capacity in the United States wasregistered under the RFS2 program by NBB members. In addition to this amount, several hundred million more gallons of U.S. based biomass-based dieselproduction capacity was registered by non-NBB members and another 4.5 billion gallons of biomass-based diesel production was registered by foreign producers.The annual production capacity of existing plants and plants under construction far exceeds both historic consumption of biomass-based diesel in the United Statesand required consumption under RFS2. If this excess production capacity was fully utilized for the U.S. market, it would increase competition for our feedstocks,increase the volume of biomass-based diesel on the market and may reduce biomass-based diesel gross margins, harming our revenues and profitability.Increased biomass-based diesel production may result in the generation of RINs in excess of the volume of RINs mandated for consumption under RFS2.RIN prices can be expected to decrease as the calendar year progresses if the RIN12Table of Contentsmarket is oversupplied compared to that year’s RVO. For example, in 2012, which had a RVO for biomass-based diesel of one billion gallons, biomass-baseddiesel RIN prices, as reported by OPIS, began to decrease in September when biomass-based diesel RIN generation neared the equivalent of 900 million gallons, asreported by EMTS. Similarly, in September of 2013 when biomass-based diesel RIN generation reached approximately 960 million gallons compared to a 2013biomass-based diesel RVO of 1.28 billion gallons, biomass-based diesel RIN prices, as reported by OPIS, began to decline.RISKS RELATED TO OUR BUSINESS OPERATIONS AND THE MARKETS IN WHICH WE OPERATEOur gross margins are dependent on the spread between biomass-based diesel prices and feedstock costs, each of which are volatile and can cause ourresults of operations to fluctuate substantially.Biomass-based diesel has traditionally been marketed primarily as an additive or alternative to petroleum-based diesel fuel, and, as a result, biomass-baseddiesel prices have been influenced by the price of petroleum-based diesel fuel, adjusted for government incentives supporting renewable fuels, rather than biomass-based diesel production costs. If there is a lack of close correlation between production costs and biomass-based diesel prices, we may be unable to pass increasedproduction costs on to our customers in the form of higher prices. If there is a decrease in the spread between biomass-based diesel prices and feedstock costs,whether as a result of an increase in feedstock prices or a result of a reduction in biomass-based diesel and RIN prices, our gross margins, cash flow and results ofoperations would be adversely affected.Energy prices, particularly the market price for crude oil, are volatile. The average price at which we sold our biomass-based diesel increased from $2.97 pergallon in 2015 to $3.17 per gallon in 2016. Petroleum prices are volatile due to global factors, such as the impact of wars, political uprisings, new extractiontechnologies and techniques, OPEC production quotas, worldwide economic conditions, changes in refining capacity and natural disasters.In addition, an element of the price of biomass-based diesel that we produce is the value of the associated RINs. RIN prices as reported by OPIS trendedhigher throughout 2016, starting the year at $0.75 per RIN, climbing to a high of $1.26 in December. RIN prices ended 2016 at $1.05 per RIN. In other years therewas more significant volatility in RIN prices. In 2013, RIN prices decreased sharply from $1.09 per RIN on July 1, 2013 to $0.35 per RIN on December 31, 2013.Reductions in RIN values, such as those experienced in prior years, may have a material adverse effect on our revenues and profits as they directly reduce the pricewe are able to charge for our biomass-based diesel.A decrease in the availability or an increase in the price, of feedstocks may have a material adverse effect on our financial condition and operating results.The price and availability of feedstocks and other raw materials may be influenced by general economic, market and regulatory factors. These factors includeweather conditions, farming decisions, government policies and subsidies with respect to agriculture and international trade and global supply and demand. Duringperiods when the BTC has lapsed, biomass-based diesel producers may elect to continue purchasing feedstock and producing biomass-based diesel at negativemargins under the assumption the BTC will be retroactively reinstated, and consequently, the price of feedstocks may not decrease to a level proportionate tocurrent operating margins. The development of alternative fuels and renewable chemicals also puts pressure on feedstock supply and availability to the biomass-based diesel industry. The biomass-based diesel industry may have difficulty in procuring feedstocks at economical prices if these emerging technologies competewith biomass-based diesel for feedstocks, are more profitable or have greater governmental support than biomass-based diesel.At elevated feedstock price levels, certain feedstocks may be uneconomical to use, as we may be unable to pass feedstock cost increases on to ourcustomers. In addition, we generally are unable to enter into forward contracts at fixed prices for some of our feedstocks, such as animal fat, because markets forthese feedstocks are less developed.Historically, the spread between biomass-based diesel prices and feedstock costs has varied significantly. Although actual yields vary depending on thefeedstock quality, the average monthly spread between the price per gallon of 100% pure biodiesel, or B100, as reported by The Jacobsen Publishing Company,and the price per gallon for the amount of choice white grease, a common inedible animal fat used by us to make biomass-based diesel, was $0.92 in 2014, $1.09 in2015 and $1.28 in 2016, assuming eight pounds of choice white grease yields one gallon of biomass-based diesel. The average monthly spread for the amount ofcrude soybean oil required to produce one gallon of biomass-based, based on the nearby futures contract as reported on the Chicago Board of Trade, was $0.65 in2014, $0.58 in 2015 and $0.73 in 2016, assuming 7.5 pounds of soybean oil yields one gallon of biomass-based. For the periods from 2014 to 2016, approximately85%, 85% and 72%, respectively, of our annual total feedstock usage was inedible corn oil, used cooking oil or inedible animal fat, and approximately 15%, 15%and 28%, respectively, was virgin vegetable oils.Risk management transactions could significantly increase our operating costs and may not be effective.In an attempt to partially offset the effects of volatile feedstock costs and biomass-based diesel fuel prices, we enter into contracts that establish marketpositions in feedstocks, such as inedible corn oil, used cooking oil, inedible animal fats and soybean oil, along with related commodities, such as heating oil andultra-low sulfur diesel, or ULSD. The financial impact of13Table of Contentssuch market positions depends on commodity prices at the time that we are required to perform our obligations under these contracts as well as the cumulative sumof the obligations we assume under these contracts.Risk management activities can themselves result in losses when a position is purchased in a declining market or a position is sold in a rising market. Riskmanagement arrangements expose us to the risk of financial loss in situations where the counterparty defaults on its contract or, in the case of exchange-traded orover-the-counter futures or options contracts, where there is a change in the expected differential between the underlying price in the contract and the actual pricespaid or received by us. Changes in the value of these futures instruments are recognized in current income and may result in margin calls. We may also vary theamount of risk management strategies we undertake, or we may choose not to engage in risk management transactions at all. Our results of operation may benegatively impacted if we are not able to manage our risk management strategy effectively.One customer accounted for a meaningful percentage of revenues and a loss of this customer could have an adverse impact on our total revenues.One customer, Pilot Travel Centers LLC, or Pilot, accounted for 8%, 8% and 18% of our revenues in 2016, 2015 and 2014, respectively. Our revenues fromPilot generally do not include the RINs associated with the gallons of biomass-based diesel sold to Pilot. The value of those RINs represented approximately anadditional 9% and 13% of our total sales in 2016 and 2015, respectively, based on the OPIS average RIN price for the year. In the event we lose Pilot as a customeror Pilot significantly reduces the volume of biomass-based diesel bought from us, it could be difficult to replace the lost revenues from biomass-based diesel andRINs, and our profitability and cash flow could be materially harmed. We do not have a long term contract with Pilot that ensures a continuing level of businessfrom Pilot.Our facilities and our customers' facilities are subject to risks associated with fire, explosions, leaks, and other natural disasters which may disrupt ourbusiness and increase costs and liabilities.Because biomass-based diesel and some of its inputs and outputs are combustible and/or flammable, a leak, fire or explosion may occur at a plant orcustomer’s facility which could result in damage to the plant and nearby properties, injury to employees and others, and interruption of operations. For example, inApril 2015 and again in September 2015, we experienced fires at our Geismar facility. In the April fire, two employees were injured. In the September fire, oneemployee and three contractors were injured. Multiple parties and our subsidiary have been named as a defendant in lawsuits filed by contractors injured in theSeptember fire and these suits allege that injuries resulted from, among other things, our negligence. We may be subject to additional litigation in connection withthese incidents. In addition, the Occupational Safety and Health Administration, or OSHA, has issued seven "serious" citations to the Geismar facility, which hasimplemented abatement actions in accordance with those citations. If OSHA becomes dissatisfied with the abatement implementation, there is a possibility that itcould impose additional citations or fines.As a result of the fires, our Geismar facility was shut down from April 2015 through early March 2016 while repairs and upgrades were completed. Whilewe expect a significant portion of the costs associated with the Geismar fires will be covered by insurance, our insurance company may dispute coverage and wemay be subject to costs and penalties that are not covered by insurance. Accordingly, as a result of these two incidents at the Geismar facility, we may incursignificant additional costs, including potential liability for damages or injuries, legal expenses and loss of profit, which could seriously harm our results ofoperations and financial condition.A majority of our facilities are also located in the Midwest, which is subject to tornado activity. REG Life Sciences' research and development center is inSouth San Francisco, California, which is subject to earthquakes. In addition, our Houston and Geismar facilities, due to their Gulf Coast locations, are vulnerableto hurricanes and flooding, which may cause plant damage, injury to employees and others and interruption of operations. For example, in August 2016 weexperienced reduced operating days at our Geismar facility as a result of local area flooding. Each of our plants could incur damage from other natural disasters aswell. If any of the foregoing events occur, we may incur significant additional costs including, among other things, loss of profits due to unplanned temporary orpermanent shutdowns of our facilities, cleanup costs, liability for damages or injuries, legal expenses and reconstruction expenses, which would harm our results ofoperations and financial condition.Our insurance may not protect us against our business and operating risks.We maintain insurance for some, but not all, of the potential risks and liabilities associated with our business. For some risks, we may not obtain insurance ifwe believe the cost of available insurance is excessive relative to the risks presented. As a result of market conditions, premiums and deductibles for certaininsurance policies can increase substantially and, in some instances, certain insurance policies may become unavailable or available only for reduced amounts ofcoverage. As a result,14Table of Contentswe may not be able to renew our existing insurance policies or procure other desirable insurance on commercially reasonable terms, if at all. Although we intend tomaintain insurance at levels we believe are appropriate for our business and consistent with industry practice, we will not be fully insured against all risks. Inaddition, pollution, environmental risks and the risk of natural disasters generally are not fully insurable. Losses and liabilities from uninsured and underinsuredevents and delay in the payment of insurance proceeds could have a material adverse effect on our financial condition and results of operations.Our business is primarily dependent upon two similar products. As a consequence, we may not be able to adapt to changing market conditions or endureany decline in the biomass-based diesel industry.Our revenues are currently generated almost entirely from the production and sale of biodiesel and renewable hydrocarbon diesel, collectively referred to asbiomass-based diesel. Our reliance on biomass-based diesel means that we may not be able to adapt to changing market conditions or to withstand any significantdecline in the size or profitability of the biomass-based diesel industry. Historically we were required to periodically idle our plants, particularly during the firstquarter of the year due to insufficient demand at profitable price points. If we are required to idle our biomass-based diesel plants in the future or are unable toadapt to changing market conditions, our revenues and results of operations may be materially harmed.We face competition from imported biodiesel and renewable hydrocarbon diesel, which may reduce demand for biomass-based diesel produced by us andcause our revenues and profits to decline.Biodiesel and renewable hydrocarbon diesel imports into the United States have increased significantly and compete with biodiesel and renewablehydrocarbon diesel produced in the United States. The imported fuels may benefit from production incentives or other financial incentives in foreign countries thatoffset some of their production costs and enable importers to profitably sell biodiesel or renewable hydrocarbon diesel in the United States at lower prices thanUnited States-based biodiesel and renewable hydrocarbon diesel producers. Under RFS2, imported biodiesel and renewable hydrocarbon diesel is eligible and,therefore, competes to meet the volumetric requirements for biomass-based diesel and advanced biofuels. If imports continue to increase, this could make it morechallenging for us to market or sell biomass-based diesel in the United States, which would have a material adverse effect on our revenues. In January 2015, theEPA announced the approval for Argentinian biodiesel made from soybean oil to generate RINs. Imported biomass-based diesel that does not qualify under RFS2,also competes in jurisdictions where there are biomass-based diesel blending requirements.Technological advances and changes in production methods in the biomass-based diesel industry and renewable chemical industry could render ourplants obsolete and adversely affect our ability to compete.It is expected that technological advances in biomass-based diesel production methods will continue to occur and new technologies for biomass-based dieselproduction may develop. Advances in the process of converting oils and fats into biodiesel and renewable hydrocarbon diesel could allow our competitors toproduce biomass-based diesel faster and more efficiently and at a substantially lower cost. In addition, we currently produce biomass-based diesel to conform to orexceed standards established by the American Society for Testing and Materials ("ASTM"). ASTM standards for biomass-based diesel and biomass-based dieselblends may be modified in response to new technologies from the industries involved with diesel fuel.New standards or production technologies may require us to make additional capital investments in, or modify, plant operations to meet these standards. Ifwe are unable to adapt or incorporate technological advances into our operations, our production facilities could become less competitive or obsolete. Further, itmay be necessary for us to make significant expenditures to acquire any new technology and retrofit our plants in order to incorporate new technologies and remaincompetitive. In order to execute our strategy to expand into the production of renewable chemicals, additional advanced biofuels, next generation feedstocks andrelated renewable products, we may need to acquire licenses or other rights to technology from third parties. We can provide no assurance that we will be able toobtain such licenses or rights on favorable terms. If we are unable to obtain, implement or finance new technologies, our production facilities could be less efficientthan our competitors, and our ability to sell biomass-based diesel may be harmed, negatively impacting our revenues and profitability.Our intellectual property is integral to our business. If we are unable to protect our intellectual property, or others assert that our operations violate theirintellectual property, our business could be adversely affected.Our success depends in part upon our ability to protect and prevent others from using our intellectual property. Failure to obtain or maintain adequateintellectual property protection could adversely affect our competitive business position. We rely on a combination of intellectual property rights, includingpatents, copyrights, trademarks and trade secrets in the United States and in select foreign countries. Effective patent, copyright, trademark and trade secretprotection may be unavailable, limited or not applied for in some countries.15Table of ContentsWe rely in part on trade secret protection to protect our confidential and proprietary information and processes. However, trade secrets are difficult toprotect. We have taken measures to protect our trade secrets and proprietary information, but these measures may not be effective. For example, we require newemployees and consultants to execute confidentiality agreements upon the commencement of their employment or consulting arrangement with us. Theseagreements generally require that all confidential information developed by the individual or made known to the individual by us during the course of theindividual’s relationship with us be kept confidential and not disclosed to third parties. These agreements also generally provide that knowhow and inventionsconceived by the individual in the course of rendering services to us are our exclusive property. Nevertheless, these agreements may be breached, or may not beenforceable, and our proprietary information may be disclosed. Despite the existence of these agreements, third parties may independently develop substantiallyequivalent proprietary information and techniques.It may be difficult for us to protect and enforce our intellectual property. Costly and time-consuming litigation could be necessary to enforce and determinethe scope of our proprietary rights. If we pursue litigation to assert our intellectual property rights, an adverse judicial decision in any legal action could limit ourability to assert our intellectual property rights, limit our ability to develop new products, limit the value of our technology or otherwise negatively impact ourbusiness, financial condition and results of operations.A competitor could seek to enforce intellectual property claims against us. Defending intellectual property rights claims asserted against us, regardless ofmerit, could be time-consuming, expensive to litigate or settle, divert management resources and attention and force us to acquire intellectual property rights andlicenses, which may involve substantial royalty payments. Further, a party making such a claim, if successful, could secure a judgment that requires us to paysubstantial damages.Increases in our transportation costs or disruptions in our transportation services could have a material adverse effect on our business.Our business depends on transportation services to deliver raw materials to us and finished products to our customers. The costs of these transportationservices are affected by the volatility in fuel prices or other factors. For example, from January 2015 to mid-2016 we saw huge drops in diesel prices in the US.However, the last half of 2016 diesel started to trend upward. These movements can be drastic and unpredictable. US oil production in the Bakkens drives the tankcar business. If the production from this area increases, the demand for railcars increase and will significantly increase rail car prices. We have not been able in thepast, and may not be able in the future, to pass along part or all of any of these price increases to customers. If we continue to be unable to increase our prices as aresult of increased fuel costs charged to us by transportation providers, our gross margins may be materially adversely affected.If any transportation providers fail to deliver raw materials to us in a timely manner, we may be unable to manufacture products on a timely basis.Shipments of products and raw materials may be delayed due to weather conditions, strikes or other events. Any failure of a third-party transportation provider todeliver raw materials or products in a timely manner could harm our reputation, negatively affect our customer relationships and have a material adverse effect onour business, financial condition and results of operations.We are dependent upon our key management personnel and other personnel whereby the loss of any of these persons could adversely affect our results ofoperations.Our success depends on the abilities, expertise, judgment, discretion, integrity and good faith of our management and employees to manage the business andrespond to economic, market and other conditions. We are highly dependent upon key members of our relatively small management team and employee base thatpossess unique technical skills for the execution of our business plan. There can be no assurance that any individual will continue in his or her capacity for anyparticular period of time or that replacement personnel with comparable skills could be found. The inability to retain our management team and employee base orattract suitably qualified replacements and additional staff could adversely affect our business. The loss of employees could delay or prevent the achievement ofour business objectives and have a material adverse effect upon our results of operations and financial position.We have not generated significant revenues from sales of renewable chemicals to date and we expect to incur additional costs and face significantchallenges to develop this business.In January 2014, we entered the market for renewable chemicals through the acquisition of a development stage company. To date, we have incurredsignificant costs and have not generated significant revenues from this business. In order to generate revenue from our renewable chemicals, there must be awilling market for the products and we must be able to produce sufficient quantities of our products, which we have not done to date and would not be able to doon our own without incurring significant capital expenditure to build a commercial scale production facility. There are multiple options for how we could16Table of Contentspursue generating revenue from our renewable chemicals business. Some options would require additional capital expenditures prior to generating revenue.In this market, we would still be selling renewable chemicals as an alternative to chemicals currently in use, and in some cases the chemicals that we seek toreplace have been used for many years. The potential customers for our renewable chemical products generally have well developed manufacturing processes andarrangements with suppliers of the chemical components of their products and may resist changing these processes and components. These potential customersfrequently impose lengthy and complex product qualification procedures on their suppliers. Factors that these potential customers consider during the productqualification process include consumer preference, manufacturing considerations such as process changes and capital, other costs associated with transitioning toalternative components, supplier operating history, regulatory issues, product liability and other factors, many of which are unknown to, or not well understood by,us. Some of our products may also require regulatory registrations and approvals from governmental authorities. The requirements for obtaining regulatoryregistrations and approvals may change or may take longer than we anticipate. Satisfying these processes may take many months or years.If we are unable to convince these potential customers that our products are comparable to the chemicals that they currently use, or that the use of ourproducts produce benefits to them, we will not be successful in these markets and our business will be adversely affected. In addition, in contrast to the taxincentives relating to biofuels, tax credits and subsidies are not currently available in the United States for consumer products or chemical companies who userenewable c hemical products. We do not expect meaningful revenue from our sale of renewable chemicals in the near term.The evaluation of strategic alternatives for our life sciences unit may adversely affect our business and may not result in any specific action ortransaction.In November 2016, we announced that our board of directors had authorized a review of strategic alternatives for our life sciences business to enhance valuefor stockholders. There can be no assurance that this ongoing strategic review will result in any specific action or transaction or that any action taken or transactionwe may enter into will prove to be beneficial to stockholders. In addition, the pendency of this strategic review exposes us to risks and uncertainties, includingpotential difficulties in retaining and attracting key life sciences employees during the review process, distraction of our management from other importantbusiness activities, and potential difficulties in establishing or maintaining relationships between this business unit and third parties, all of which could harm ourbusiness.We may encounter difficulties in effectively integrating the businesses we acquire, including our international businesses where we have limited operatinghistory.We may face significant challenges in effectively integrating entities and businesses that we acquire, and we may not realize the benefits anticipated fromsuch acquisitions. Achieving the anticipated benefits of our acquired businesses will depend in part upon whether we can integrate our businesses in an efficientand effective manner. Our integration of acquired businesses involves a number of risks, including:•difficulty in integrating the operations and personnel of the acquired company;•difficulty in effectively integrating the acquired technologies, products or services with our current technologies, products or services;•demands on management related to the increase in our size after the acquisition;•the diversion of management’s attention from daily operations to the integration of acquired businesses and personnel;•failure to achieve expected synergies and costs savings;•difficulties in the assimilation and retention of employees;•difficulties in the assimilation of different cultures and practices, as well as in the assimilation of broad and geographically dispersed personnel andoperations;•difficulties in the integration of departments, systems, including accounting systems, technologies, books and records and procedures, as well as inmaintaining uniform standards and controls, including internal control over financial reporting, and related procedures and policies;•incurring acquisition-related costs or amortization costs for acquired intangible assets that could impact our operating results;•the need to fund significant working capital requirements of any acquired production facilities;•potential failure of the due diligence processes to identify significant problems, liabilities or other shortcomings or challenges of an acquiredcompany or technology, including but not limited to, issues with the acquired company’s intellectual property, product quality, environmentalliabilities, data back-up and security, revenue recognition or other accounting practices, employee, customer or partner issues or legal and financialcontingencies;17Table of Contents•e xposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, an acquisition, including but notlimited to, claims from terminated employees, customers, former stockholders or other third parties; and•incurring significant exit charges if products or services acquired in business combinations are unsuccessful.Our ability to recognize the benefit of our acquisition of Petrotec, a German biodiesel producer of which we acquired majority ownership during 2014 andfull ownership in January 2017, or any other international operations we may invest in the future, will require the attention of management and is subject to anumber of risks. We have no experience operating a biorefinery outside of the United States. The biodiesel market in Europe benefits from regulations thatencourage the use of biodiesel. These regulations are subject to political and public opinion and may be changed. In addition, expanding our operationsinternationally subjects us to the following risks:•recruiting and retaining talented and capable management and employees in foreign countries;•challenges caused by distance, language and cultural differences;•protecting and enforcing our intellectual property rights;•difficulties in the assimilation and retention of employees;•the inability to extend proprietary rights in our technology into new jurisdictions;•currency exchange rate fluctuations;•general economic and political conditions in foreign jurisdictions;•foreign tax consequences;•foreign exchange controls or U.S. tax restrictions that might restrict or prevent us from repatriating income earned in countries outside the UnitedStates;•political, economic and social instability;•higher costs associated with doing business internationally; and•export or import regulations as well as trade and tariff restrictions.Our failure to successfully manage and integrate our acquisitions could have an adverse effect on our operating results, ability to recognize internationalrevenue, and our overall financial condition.We incur significant expenses to maintain and upgrade our operating equipment and plants, and any interruption in the operation of our facilities mayharm our operating performance.We regularly incur significant expenses to maintain and upgrade our equipment and facilities. The machines and equipment that we use to produce ourproducts are complex, have many parts and some are run on a continuous basis. We must perform routine maintenance on our equipment and will have toperiodically replace a variety of parts such as motors, pumps, pipes and electrical parts. In addition, our facilities require periodic shutdowns to perform majormaintenance and upgrades. These scheduled shutdowns of facilities result in decreased sales and increased costs in the periods in which a shutdown occurs andcould result in unexpected operational issues in future periods as a result of changes to equipment and operational and mechanical processes made during theshutdown period.Growth in the sale and distribution of biomass-based diesel is dependent on the expansion of related infrastructure which may not occur on a timelybasis, if at all, and our operations could be adversely affected by infrastructure limitations or disruptions.Growth in the biomass-based diesel industry depends on substantial development of infrastructure for the distribution of biodiesel. Substantial investmentrequired for these infrastructure changes and expansions may not be made on a timely basis or at all. The scope and timing of any infrastructure expansion aregenerally beyond our control. Also, we compete with other biofuel companies for access to some of the key infrastructure components such as pipeline andterminal capacity. As a result, increased production of biomass-based diesel will increase the demand and competition for necessary infrastructure. Any delay orfailure in expanding distribution infrastructure could hurt the demand for or prices of biomass-based diesel, impede delivery of our biomass-based diesel, andimpose additional costs, each of which would have a material adverse effect on our results of operations and financial condition. Our business will be dependent onthe continuing availability of infrastructure for the distribution of increasing volumes of biomass-based diesel and any infrastructure disruptions could materiallyharm our business.Risks related to the potential permanent idling of our facilities.We perform strategic reviews of our business, which may include evaluating each of our facilities to assess their viability and strategic benefits. As part ofthese reviews, we may idle--whether temporarily or permanently--development or operations of certain of our facilities in order to reduce participation in marketswhere we determine that our returns are not acceptable.18Table of ContentsWe have three partially constructed plants, one near New Orleans, Louisiana, one in Emporia, Kansas and one in Clovis, New Mexico. We also own one non-operational plant near Atlanta, Georgia. If we decide to permanently idle or abandon development of these facilities or any other facilities or assets, we are likely toincur significant cash expenses, as well as substantial non-cash charges for impairment of those assets. In the fourth quarter of 2016, we recorded an impairmentcharge of $15.6 million, reflecting the difference between the carrying amount associated with the partially constructed Emporia facility and the estimated salvagevalue due to competition from foreign, imported product and the probability of that project being completed in the near term is unlikely.We operate in a highly competitive industry and competition in our industry would increase if new participants enter the biomass-based diesel business.We operate in a very competitive environment. The biomass-based diesel industry is primarily comprised of smaller entities that engage exclusively inbiodiesel production, large integrated agribusiness companies that produce biodiesel along with their soybean crush businesses and increasingly, integratedpetroleum companies. We face competition for capital, labor, feedstocks and other resources from these companies. In the United States, we compete with soybeanprocessors and refiners, including Archer-Daniels-Midland Company, Cargill, and Louis Dreyfus Commodities. In addition, petroleum refiners are increasinglyentering into biomass-based diesel production. Such petroleum refiners include Neste Oil with approximately 882 million gallons of global renewable hydrocarbondiesel production capacity in Asia and Europe and Valero Energy Corporation with its Diamond Green joint venture that operates an approximate 160 million-gallon renewable hydrocarbon diesel plant. These and other competitors that are divisions of larger enterprises may have greater financial resources than we do.Petroleum companies and diesel retailers form the primary distribution networks for marketing biomass-based diesel through blended petroleum-based diesel.If these companies increase their direct or indirect biomass-based diesel production, there will be less need to purchase biomass-based diesel from independentbiomass-based diesel producers like us. Such a shift in the market would materially harm our operations, cash flows and financial position.A volatile regulatory environment, lack of debt or equity investments and volatile biofuel prices and feedstock costs have likely contributed to the necessityof bankruptcy filings by biofuel producers. We may encounter new competition from buyers of distressed biodiesel properties that enter the industry at a lower costthan original plant investors or from competitors consolidating or otherwise growing. Our business has been, and in the future may be, negatively impacted by theindustry conditions that influenced the bankruptcy proceedings of other biofuel producers. Our business and prospects may be significantly and adversely affectedif we are unable to similarly increase our scale.Our business is subject to seasonal fluctuations, which are likely to cause our revenues and operating results to fluctuate.Our operating results are influenced by seasonal fluctuations in the price of and demand for biodiesel. Seasonal fluctuations may be based on both theweather and the status of both the BTC and RVO obligations. Demand may be higher in the quarters leading up to the expiration of the BTC as customers seek topurchase biodiesel when they can benefit from the agreed upon value sharing of the BTC with producers of biodiesel. Seasonal fluctuation also occurs in the coldermonths when historically there has been reduced demand for biodiesel in northern and eastern United States markets, which are the primary markets in which wecurrently operate.Biodiesel typically has a higher cloud point than petroleum-based diesel. The cloud point is the temperature below which a fuel exhibits a noticeablecloudiness and eventually gels, leading to fuel handling and performance problems for customers and suppliers. Reduced demand in the winter for our higher cloudpoint biodiesel may result in excess supply of such higher cloud point biodiesel and lower prices for such higher cloud point biodiesel. Most of our productionfacilities are located in colder Midwestern states and our costs of shipping biodiesel to warmer climates generally increase in cold weather months.The tendency of biodiesel to gel in colder weather may also result in long-term storage problems. In cold climates, fuel may need to be stored in a heatedbuilding or heated storage tanks, which result in higher storage costs. Higher cloud point biodiesel may have other performance problems, including the possibilityof particulate formation above the cloud point which may result in increased expenses as we try to remedy these performance problems, including the costs of extracold weather treatment additives. Remedying these performance problems may result in decreased yields, lower process throughput or both, as well as substantialcapital costs. Any reduction in the demand for our biodiesel product, or the production capacity of our facilities will reduce our revenues and have an adverse effecton our cash flows and results of operations.Failure to comply with governmental regulations, including EPA requirements relating to RFS2 and FDA requirements relating to the Food SafetyModernization Act, could result in the imposition of penalties, fines, or restrictions on our operations and remedial liabilities.19Table of ContentsThe biomass-based diesel industry is subject to extensive federal, state and local laws and regulations. Under certain environmental laws and regulations, wecould be held strictly liable for the removal or remediation of previously released materials or property contamination regardless of whether we were responsiblefor the release or contamination, and regardless of whether current or prior operations were conducted consistent with accepted standards of practice. Many of ourassets and plants were acquired from third parties and we may incur costs to remediate property contamination caused by previous owners. Compliance with theselaws, regulations and obligations could require substantial capital expenditures. Failure to comply could result in the imposition of penalties, fines or restrictions onoperations and remedial liabilities.Changes in environmental laws and regulations occur frequently, and any changes that result in more stringent or costly waste handling, storage, transport,disposal or cleanup requirements could require us to make significant expenditures to attain and maintain compliance and may otherwise have a material adverseeffect on our business in general and on our results of operations, competitive position or financial condition. We are unable to predict the effect of additionalenvironmental laws and regulations which may be adopted in the future, including whether any such laws or regulations would significantly increase our cost ofdoing business or affect our operations in any area.We are subject to various laws and regulations related to RFS2, most significantly regulations related to the generation and dissemination of RINs. Theseregulations are highly complex and continuously evolving, requiring us to periodically update our compliance systems. Recently, the EPA implemented a qualityassurance program and regulations related to the generation and sale of biomass-based diesel RINs. Compliance with these or any new regulations or ObligatedParty verification procedures could require significant expenditures to attain and maintain compliance. Any violation of these regulations by us, could result insignificant fines and harm our customers’ confidence in the RINs we issue, either of which could have a material adverse effect on our business.The development of alternative fuels and energy sources may reduce the demand for biodiesel, resulting in a reduction in our revenues and profitability.The development of alternative fuels, including a variety of energy alternatives to biodiesel has attracted significant attention and investment. Neste Oiloperates four renewable hydrocarbon diesel plants: a 300 million gallon per year plant in Singapore, a 300 million gallon per year plant in Rotterdam, Netherlands,and two 60 million gallon per year plants in Porvoo, Finland. In the United States, Diamond Green Diesel, LLC operates a 160 million gallon per year renewablehydrocarbon diesel plant in Norco, Louisiana. Under RFS2, renewable hydrocarbon diesel made from biomass meets the definition of biomass-based diesel andthus is eligible, along with biodiesel, to satisfy the RFS2 biomass-based diesel requirements. Furthermore, under RFS2, renewable hydrocarbon diesel may receiveup to 1.7 RINs per gallon, whereas biodiesel currently receives 1.5 RINs per gallon. As the value of RINs increases, this 0.2 RIN advantage may make renewablehydrocarbon diesel more cost-effective, both as a petroleum-based diesel substitute and for meeting RFS2 requirements. If renewable hydrocarbon diesel proves tobe more cost-effective than biodiesel, revenues from our biodiesel plants and our results of operations would be adversely impacted.In addition, the EPA may allow other fuels to satisfy the RFS2 requirements and allow RINs to be generated upon the production of these fuels. The EPArecently adopted regulations to amend the definition of “Home Heating Oil” under RFS2, which expands the scope of fuels eligible to generate RINs.The biomass-based diesel industry will also face increased competition resulting from the advancement of technology by automotive, industrial and powergeneration manufacturers which are developing more efficient engines, hybrid engines and alternative clean power systems. Improved engines and alternativeclean power systems offer a technological solution to address increasing worldwide energy costs, the long-term availability of petroleum reserves andenvironmental concerns. If and when these clean power systems are able to offer significant efficiency and environmental benefits and become widely available,the biomass-based diesel industry may not be able to compete effectively with these technologies and government requirements for the use of biofuels may bediscontinued.If automobile manufacturers and other industry groups express reservations regarding the use of biodiesel, our ability to sell biodiesel will be negativelyimpacted.Because it is a relatively new product compared with petroleum diesel, research on biodiesel use in automobiles is ongoing. While most heavy dutyautomobile manufacturers have approved blends of up to 20% biodiesel, some industry groups have recommended that blends of no more than 5% biodiesel beused for automobile fuel due to concerns about fuel quality, engine performance problems and possible detrimental effects of biodiesel on rubber components andother engine parts. Although some manufacturers have encouraged use of biodiesel fuel in their vehicles, cautionary pronouncements by other manufacturers orindustry groups may impact our ability to market our biodiesel.20Table of ContentsPerception about “food vs. fuel” could impact public policy which could impair our ability to operate at a profit and substantially harm our revenues andoperating margins.Some people believe that biomass-based diesel may increase the cost of food, as some feedstocks such as soybean oil used to make biomass-based diesel canalso be used for food products. This debate is often referred to as “food vs. fuel.” This is a concern to the biomass-based diesel industry because biomass-baseddiesel demand is heavily influenced by government policy and if public opinion were to erode, it is possible that these policies would lose political support. Theseviews could also negatively impact public perception of biomass-based diesel. Such claims have led some, including members of Congress, to urge themodification of current government policies which affect the production and sale of biofuels in the United States.Concerns regarding the environmental impact of biomass-based diesel production could affect public policy which could impair our ability to operate at aprofit and substantially harm our revenues and operating margins.Under the Energy Independence and Security Act of 2007, or the EISA, the EPA is required to produce a study every three years of the environmentalimpacts associated with current and future biofuel production and use, including effects on air and water quality, soil quality and conservation, water availability,energy recovery from secondary materials, ecosystem health and biodiversity, invasive species and international impacts. The first such triennial report wasreleased in February 2012. The 2012 report concludes that (1) the extent of negative impacts to date are limited in magnitude and are primarily associated with theintensification of corn production; (2) whether future impacts are positive or negative will be determined by the choice of feedstock, land use change, cultivationand conservation practices; and (3) realizing potential benefits will require implementation and monitoring of conservation and best management practices,improvements in production efficiency, and implementation of innovative technologies at commercial scales. Should future EPA triennial studies, or other analysesfind that biofuel production and use has resulted in, or could in the future result in, adverse environmental impacts, such findings could also negatively impactpublic perception and acceptance of biofuel as an alternative fuel, which also could result in the loss of political support. To the extent that state or federal laws aremodified or public perception turns against biomass-based diesel, use requirements such as RFS2 and state tax incentives may not continue, which could materiallyharm our ability to operate profitably.Nitrogen oxide emissions from biodiesel may harm its appeal as a renewable fuel and increase costs.In some instances, biodiesel may increase emissions of nitrogen oxide as compared to petroleum-based diesel fuel, which could harm air quality. Nitrogenoxide is a contributor to ozone and smog. New technology diesel engines eliminate any such increase. Emissions from older vehicles while the fleet turns over maydecrease the appeal of biodiesel to environmental groups and agencies who have been historic supporters of the biodiesel industry, potentially harming our abilityto market our biodiesel.In addition, several states may act to regulate potential nitrogen oxide emissions from biodiesel. California recently adopted regulations that limits thevolume of biodiesel that can be used or requires an additive to reduce potential emissions. In states where such an additive is required to sell biodiesel, theadditional cost of the additive may make biodiesel less profitable or make biodiesel less cost competitive against petroleum-based diesel or renewable hydrocarbondiesel, which would negatively impact our ability to sell our products in such states and therefore have an adverse effect on our revenues and profitability.RISKS RELATED TO OUR INDEBTEDNESSWe and certain subsidiaries have indebtedness, which subjects us to potential defaults, that could adversely affect our ability to raise additional capital tofund our operations and limits our ability to react to changes in the economy or the biomass-based diesel industry.At December 31, 2016 , our total term debt before debt issuance costs was $217.9 million . This includes $113.4 million aggregate carrying value on our$152.0 million face amount, 4.00% convertible senior notes due in June 2036, which we refer to as the 2036 Convertible Notes, and $67.3 million aggregatecarrying value on our $73.8 million face value, 2.75% convertible senior notes due in June 2019, which we refer to as the 2019 Convertible Notes. We also haveshort-term debt obligations under revolving credit agreements provided by certain banks. At December 31, 2016, there were $52.8 million of borrowings madeunder our revolving lines of credit. See "Note 10 - Debt" to our Consolidated Financial Statements for a description of our indebtedness.Our indebtedness could:•require us to dedicate a substantial portion of our cash flow from operations to payments of principal, interest on, and other fees related to suchindebtedness, thereby reducing the availability of our cash flow to fund working capital and capital expenditures, and for other general corporatepurposes;21Table of Contents•increase our vulnerability to general adverse economic and biomass-based diesel industry conditions, including interest rate fluctuations, because aportion of our revolving credit facilities are and will continue to be at variable rates of interest;•limit our flexibility in planning for, or reacting to, changes in our business and the biomass-based diesel industry, which may place us at a competitivedisadvantage compared to our competitors that have less debt; and•limit among other things, our ability to borrow additional funds.Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including the 2036 Convertible Notes and2019 Convertible Notes, depends on our future financial performance, which is subject to several factors including economic, financial, competitive and otherfactors beyond our control. Our business may not generate cash flow from operations in the future sufficient to satisfy our obligations under our indebtedness orany future indebtedness we may incur as well as our ability to make necessary capital expenditures. If we are unable to generate such cash flow, we may berequired to adopt one or more alternatives, such as reducing or delaying investments or capital expenditures, selling assets, refinancing or obtaining additionalcapital on terms that may be onerous or highly dilutive. Our ability to refinance the 2036 Convertible Notes, the 2019 Convertible Notes or our other existingindebtedness or future indebtedness will depend on the conditions in the capital markets and our financial condition prior to maturity of the indebtedness.Despite our current indebtedness levels, we may still incur significant additional indebtedness. Incurring more indebtedness could increase the risksassociated with our substantial indebtedness.We and our subsidiaries may be able to incur substantial additional indebtedness, including additional secured indebtedness, in the future. As of December 3,2016, we had $95.2 million of undrawn availability under our line of credit with Wells Fargo and Fifth Third "M&L and Services Revolver", subject to borrowingbase limitations. After giving effect to the borrowing base limitation, we had availability of approximately $80.2 million under the M&L and Services Revolver asof December 31, 2016. In addition, the indentures governing our convertible notes do not prevent us from incurring additional indebtedness or other liabilities thatconstitute indebtedness. If new debt or other liabilities are added to our current debt levels, the related risks that we and our subsidiaries now face could intensify.We are subject to counterparty risk with respect to the capped call transactions that we entered into in connection with the issuance of our 2019Convertible Notes.In connection with the issuance of our 2019 Convertible Notes, we entered into privately-negotiated capped call transactions with various counterparties. Thecounterparties to the capped call transactions are financial institutions, and we will be subject to the risk that they might default under the capped call transactions.Our exposure to the credit risk of the option counterparties will not be secured by any collateral. Recent global economic conditions have resulted in the actual orperceived failure or financial difficulties of many financial institutions. If any option counterparty becomes subject to insolvency proceedings, we will become anunsecured creditor in those proceedings, with a claim equal to our exposure at that time under our transactions with such option counterparty. Our exposure willdepend on many factors, but generally, an increase in our exposure will be correlated to an increase in the market price and volatility of shares of our commonstock. In addition, upon a default by any option counterparty, we may suffer more dilution than we currently anticipate with respect to our common stock. We canprovide no assurances as to the financial stability or viability of the option counterparties.We may not have the ability to raise the funds necessary to settle conversions of our convertible notes in cash or to repurchase the convertible notes forcash upon a fundamental change or on a repurchase date, and our future debt may contain limitations on our ability to repurchase the convertible notes.Holders of the 2019 or 2036 Convertible Notes will have the right to require us to repurchase their 2019 or 2036 Convertible Notes upon the occurrence of afundamental change at a repurchase price generally equal to 100% of their principal amount, plus accrued and unpaid interest, if any.Holders of the 2036 Notes will also have the right to require us to repurchase their notes on each of June 15, 2021, June 15, 2026 and June 15, 2031 at arepurchase price generally equal to 100% of their principal amount, plus accrued and unpaid interest, if any.In addition, upon conversion of the 2019 or 2036 Convertible Notes, unless we elect to deliver solely shares of our common stock to settle such conversion(other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the 2019 or 2036 Convertible Notesbeing converted. However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of the 2019 or2036 Convertible Notes upon a fundamental change or to settle conversion of the 2019 or 2036 Convertible Notes in cash.22Table of ContentsIn addition, our ability to repurchase the 2019 or 2036 Convertible Notes may be limited by law, by regulatory authority or by agreements governing ourfuture indebtedness. Our failure to repurchase 2019 or 2036 Convertible Notes at a time when the repurchase is required by the indenture would constitute a defaultunder the indenture governing the 2019 or 2036 Convertible Notes. A default under the indenture or the fundamental change itself could also lead to a defaultunder agreements governing our other indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or graceperiods, we may not have sufficient funds to repay the indebtedness and repurchase the convertible notes.Certain provisions in the indenture governing the 2019 or 2036 Convertible Notes could delay or prevent an otherwise beneficial takeover or takeoverattempt of us.Certain provisions in the 2019 or 2036 Convertible Notes and the indenture could make it more difficult or more expensive for a third party to acquire us.For example, if a takeover would constitute a fundamental change, holders of the 2019 or 2036 Convertible Notes will have the right to require us to repurchasetheir 2019 or 2036 Convertible Notes in cash. In addition, if a takeover constitutes a make-whole fundamental change, we may be required to increase theconversion rate for holders who convert their 2019 or 2036 Convertible Notes in connection with such takeover. In either case, and in other cases, our obligationsunder the 2019 or 2036 Convertible Notes and the indenture could increase the cost of acquiring us or otherwise discourage a third party from acquiring us orremoving incumbent management.The accounting method for convertible debt securities that may be settled in cash could have a material effect on our reported financial results.Because we are required to elect to settle note conversions solely in cash (or, subject to certain limitations, with a combination of cash and shares of ourcommon stock) before we obtain the stockholder approval described in Note 2 and 10 of the Consolidated Financial Statements, we have to separately account forthe conversion option associated with the 2036 Convertible Notes as an embedded derivative under Accounting Standards Codification, or ASC, Topic 815,Derivatives and Hedging. Under this treatment, the note conversion option will be measured at its fair value and accounted for separately as a liability that ismarked-to-market at the end of each reporting period. The initial value allocated to the conversion option will be treated as a debt discount that will be amortizedinto interest expense over the term of the 2036 Convertible Notes. For each financial statement period after the issuance of the 2036 Convertible Notes until weobtain the stockholder approval, a gain (or loss) will be reported in our statement of operations to the extent the valuation of the conversion option changes fromthe previous period.As a result, we may experience related non-cash volatility to our net income (loss). In addition, as a result of the amortization of the debt discount, theinterest expense associated with the 2036 Convertible Notes will be greater than the coupon rate on the 2036 Convertible Notes, which will result in lower reportednet income. If we obtain the stockholder approval referred to above, then we expect that the conversion option will qualify for equity treatment and will no longerbe marked to market at the end of each reporting period. However, we may never obtain this stockholder approval.We are a holding company and there are limitations on our ability to receive dividends and distributions from our subsidiaries.All of our principal assets, including our biomass-based diesel production facilities, are owned by subsidiaries and some of these subsidiaries are subject toloan covenants that generally restrict them from paying dividends, making distributions or making loans to us or to any other subsidiary. These limitations willrestrict our ability to repay indebtedness, finance capital projects or pay dividends to stockholders from our subsidiaries’ cash flows from operations.Our debt agreements impose significant operating and financial restrictions on our subsidiaries, which may prevent us from capitalizing on businessopportunities.Certain of our revolving and term credit agreements, including our M&L and Services Revolver, impose significant operating and financial restrictions oncertain of our subsidiaries. These restrictions limit our certain of our subsidiaries’ ability, among other things, to:• incur additional indebtedness or issue certain disqualified stock and preferred stock;• place restrictions on the ability of certain of our subsidiaries to pay dividends or make other payments to us;• engage in transactions with affiliates;• sell certain assets or merge with or into other companies;• guarantee indebtedness; and• create liens.23Table of ContentsWhen (and for as long as) the availability under the M&L and Services Revolver is less than a specified amount for a certain period of time, funds depositedinto deposit accounts used for collections will be transferred on a daily basis into a blocked account with the administrative agent and applied to prepay loans underthe M&L and Services Revolver.As a result of these covenants and restrictions, we may be limited in how we conduct our business and we may be unable to raise additional debt or equityfinancing to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness we may incur could include morerestrictive covenants. There is no assurance that we will be able to maintain compliance with these covenants in the future and, if we fail to do so, that we will beable to obtain waivers from the lenders and/or amend the covenants.There are limitations on our ability to incur the full $150.0 million of commitments under the M&L and Services Revolver. Borrowings under our M&L andServices Revolver are limited by a specified borrowing base consisting of a percentage of eligible accounts receivable and inventory, less customary reserves. Inaddition, under the M&L and Services Revolver, a monthly fixed charge coverage ratio would become applicable if excess availability under the M&L andServices Revolver is less than 10% of the total $150 million of current revolving loan commitments, or $15 million. As of December 31, 2016, availability underthe M&L and Services Revolver was approximately $95.2 million . However, it is possible that excess availability under the Revolving Credit could fall below the10% threshold in a future period. If the covenant trigger were to occur, our subsidiaries who are the borrowers under M&L and Services Revolver would berequired to satisfy and maintain on the last day of each month a fixed charge coverage ratio of at least 1.0x for the preceding twelve month period.As of December 31, 2016, our consolidated fixed charge coverage ratio was approximately 3.1x. Our ability to meet the required fixed charge coverage ratiocan be affected by events beyond our control, and we cannot assure you that we will meet this ratio. A breach of any of these covenants could result in a defaultunder the M&L and Services Revolver.RISKS RELATED TO OUR COMMON STOCKThe market price for our common stock may be volatile.The market price for our common stock is likely to be highly volatile and subject to wide fluctuations in response to factors including the following:•actual or anticipated fluctuations in our financial condition and operating results;•changes in the performance or market valuations of other companies engaged in our industry;•issuance of new or updated research reports by securities or industry analysts;•changes in financial estimates by us or of securities or industry analysts;•investors’ general perception of us and the industry in which we operate;•changes in the political climate in the industry in which we operate, existing laws, regulations and policies applicable to our business and products,including RFS2, and the continuation or adoption or failure to continue or adopt renewable energy requirements and incentives, including the BTC;•other regulatory developments in our industry affecting us, our customers or our competitors;•announcements of technological innovations by us or our competitors;•announcement or expectation of additional financing efforts, including sales or expected sales of additional common stock;•additions or departures of key management or other personnel;•litigation;•inadequate trading volume;•general market conditions in our industry; and•general economic and market conditions, including continued dislocations and downward pressure in the capital markets.In addition, stock markets experience significant price and volume fluctuations from time to time that are not related to the operating performance ofparticular companies. These market fluctuations may have material adverse effect on the market price of our common stock.We may issue additional common stock as consideration for future investments or acquisitions.We have issued in the past, and may issue in the future, our securities in connection with investments and acquisitions. Our stockholders could suffersignificant dilution, from our issuances of equity or convertible debt securities. Any new equity securities we issue could have rights, preferences and privilegessuperior to those of holders of our common stock. The amount of our common stock or securities convertible into or exchangeable for our common stock issued inconnection with an investment or acquisition could constitute a material portion of our then outstanding common stock.24Table of ContentsIf we fail to maintain effective internal control over financial reporting, we might not be able to report our financial results accurately or prevent fraud.In that case, our stockholders could lose confidence in our financial reporting, which would harm our business and could negatively impact the value ofour stock.Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. The process of maintaining our internal controls maybe expensive and time consuming and may require significant attention from management. Although we have concluded as of December 31, 2016 that our internalcontrol over financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles, because of its inherent limitations, internal control over financial reporting may not preventor detect fraud or misstatements. For example, in connection with the preparation of our quarterly report for the third quarter of 2016, we identified a materialweakness in internal control over financial reporting relating to our biomass-based diesel sales contract review process, which has been subsequently remediated.Failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our results of operations or cause usto fail to meet our reporting obligations. If we or our independent registered public accounting firm discover a material weakness, the disclosure of that fact couldharm the value of our stock and our business.We have never paid dividends on our common stock and we do not anticipate paying any cash dividends in the foreseeable future.We have paid no cash dividends on our common stock to date, have contractual restrictions against paying cash dividends and currently intend to retain ourfuture earnings to fund the development and growth of our business. As a result, stockholders must look solely to appreciation of our common stock to realize again on their investment. This appreciation may not occur. Investors seeking cash dividends should not invest in our common stock.Delaware law and our amended and restated certificate of incorporation and bylaws contain anti-takeover provisions that could delay or discouragetakeover attempts that stockholders may consider favorable.Provisions in our amended and restated certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changesin our management. These provisions include the following:•the right of the board of directors to elect a director to fill a vacancy created by the expansion of the board of directors;•the requirement for advance notice for nominations for election to the board of directors or for proposing matters that can be acted upon at astockholders’ meeting;•the ability of the board of directors to alter our bylaws without obtaining stockholder approval;•the ability of the board of directors to issue, without stockholder approval, up to 10,000,000 shares of preferred stock with rights set by the board ofdirectors, which rights could be senior to those of common stock;•a classified board;•the required approval of holders of at least two-thirds of the shares entitled to vote at an election of directors to adopt, amend or repeal our bylaws oramend or repeal the provisions of our amended and restated certificate of incorporation regarding the classified board, the election and removal ofdirectors and the ability of stockholders to take action by written consent; and•the elimination of the right of stockholders to call a special meeting of stockholders and to take action by written consent.In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, orDGCL. These provisions may prohibit or restrict large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging orcombining with us. These provisions in our amended and restated certificate of incorporation and bylaws and under Delaware law could discourage potentialtakeover attempts and could reduce the price that investors might be willing to pay for shares of our common stock in the future and result in our market pricebeing lower than it would without these provisions.ITEM 1B.Unresolved Staff CommentsNone.ITEM 2.PropertiesThe following table lists each of our owned production facilities and their location, use, and nameplate production capacity. Each facility listed below is used byour Biomass-based diesel Segment, except for Okeechobee, which is used by our Renewable Chemicals segment.25Table of ContentsPRODUCTION FACILITIES - NORTH AMERICALocation Use NameplateProductionCapacity(mmgy)Ralston, Iowa Biomass-based diesel production 12Seabrook, Texas Biomass-based diesel production 35Danville, Illinois Biomass-based diesel production 45Newton, Iowa Biomass-based diesel production 30Seneca, Illinois Biomass-based diesel production 60Albert Lea, Minnesota Biomass-based diesel production 30New Boston, Texas Biomass-based diesel production 15Ellenwood, Georgia Biomass-based diesel production 15Mason City, Iowa Biomass-based diesel production 30Geismar, Louisiana* Biomass-based diesel production 75Grays Harbor, Washington Biomass-based diesel production 100DeForest, Wisconsin Biomass-based diesel production 20Okeechobee, Florida Fermentation facility N/A* This facility produces renewable hydrocarbon diesel, naphtha, and liquid petroleum gas.Our Ellenwood facility was idled by the previous owners prior to our acquisition and will remain so until repairs or upgrades are made where the facility meets ourstandards. We have not yet set a production date for our Ellenwood facility.PETROTEC'S PRODUCTION FACILITIES - EUROPELocation Use NameplateProductionCapacity(mmgy)Emden, Germany Biomass-based diesel production 27Oeding, Germany Biomass-based diesel production 23The following table lists our partially constructed or idled biomass-based diesel production facilities, the planned nameplate capacity and the approximate level ofcompletion.PARTIALLY CONSTRUCTED FACILITIESLocation Use Nameplate ProductionCapacity(mmgy) ApproximateCompletionLevelSt. Rose, Louisiana Biomass-based diesel production 60 45%Emporia, Kansas Biomass-based diesel production 60 20%Clovis, New Mexico Biomass-based diesel production 15 50%We own our corporate headquarters located at 416 South Bell Avenue, Ames, Iowa 50010, comprised of 60,480 square feet of office and laboratory space; as wellas another building located at 215 Alexander Avenue, Ames, Iowa 50010 which is comprised of 12,000 square feet of office space. We have committed to buying aproperty located at 300 South Bell Avenue, Ames, Iowa 50010, for which certain closing terms are pending.ITEM 3.Legal ProceedingsWe are not a party to any material pending legal proceeding, nor is any of our property the subject of any material pending legal proceeding, except ordinaryroutine litigation arising in the ordinary course of our business and incidental to our26Table of Contentsbusiness, none of which is expected to have a material adverse impact upon our business, financial position or results of operations.ITEM 4.Mine Safety DisclosuresNone.27Table of ContentsPART IIITEM 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesMarket For Our Common EquityOur common stock began trading on the NASDAQ Global market on January 19, 2012. Prior to that time, there was no public market for our stock. Thetable below sets forth the high and low sales price of our common stock.2016High LowFourth Quarter$10.60 $8.10Third Quarter$9.90 $7.90Second Quarter$10.43 $8.31First Quarter$9.59 $6.53 2015High LowFourth Quarter$9.76 $7.06Third Quarter$11.96 $7.25Second Quarter$12.80 $8.10First Quarter$9.93 $8.30HoldersAs of February 28, 2017 , there were approximately 2,374 holders of record of our common stock.DividendsWe have never paid, and do not intend to pay in the future, a cash dividend on our common stock. In addition, we have entered into agreements thatcontractually restrict certain of our subsidiaries from paying dividends, making distributions or making loans to our parent company or to any other subsidiaries.Securities Authorized for Issuance Under Equity Compensation PlansThe following table provides certain information as of December 31, 2016 , with respect to our equity compensation plans:PLAN CATEGORYNUMBER OFSECURITIESTO BE ISSUEDUPONEXERCISE OFOUTSTANDINGOPTIONS,WARRANTSAND RIGHTS WEIGHTEDAVERAGEEXERCISEPRICE OFOUTSTANDINGOPTIONS,WARRANTSAND RIGHTS NUMBER OFSECURITIESREMAININGAVAILABLEFOR FUTUREISSUANCEUNDER EQUITYCOMPENSATIONPLANSEquity compensation plans approved by stockholders3,602,1061 $10.222 897,900Equity compensation plans not approved by stockholders— — —Total3,602,106 $10.22 897,9001Includes 859,251 shares underlying outstanding restricted stock units, 234,840 shares underlying outstanding performance restricted stock units, and2,508,015 shares underlying outstanding stock appreciation rights.2Restricted stock units and performance restricted stock units do not have an exercise price and therefore have not been included in the calculation ofweighted average exercise price.Performance GraphThe following performance graph is not “soliciting material,” is not deemed filed with the SEC, and is not to be incorporated by reference into any of ourfilings under the Securities Act of 1933 or the Securities Exchange Act of 1934, as amended, respectively.28Table of ContentsThe following graph shows a comparison of the cumulative total returns from January 19, 2012 to December 31, 2016 , for us, the Elements MLCX BiofuelsETN Index and the Russell 3000 Index. The graph assumes that $100 was invested on January 19, 2012 in our common stock, the Elements MLCX Biofuels ETNIndex and the Russell 3000 Index, and that all dividends were reinvested. 01/19/2012 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016REGI$100.00 $58.60 $114.60 $97.10 $92.50 $97.00Elements MLCX Biofuels ETN100.00 108.00 93.44 84.57 72.32 73.77Russell 3000100.00 109.17 142.96 157.50 155.58 171.77Sales of Unregistered SecuritiesOn March 15, 2016, we issued 33,973 shares of our common stock with respect to the intangible supply agreement in connection with the purchase ofsubstantially all of the assets of Tellurian Biodiesel, Inc. and American BDF, LLC assets.Issuer Purchases of Equity SecuritiesOn February 19, 2015, the Board of Directors approved a stock repurchase program authorizing up to $30.0 million in repurchases. The program was ineffect through October 31, 2016. During 2016, we used up the remaining $6.7 million to repurchase 90,654 shares of our Common Stock under this program.In March 2016, the Company's board of directors approved a repurchase program of up to $50.0 million of the Company's shares of common stock and/orconvertible notes, in effect through March 5, 2018. Under the program, which was in addition to the $30.0 million common stock repurchase program announcedin February 2015, the Company may repurchase shares or bonds from time to time in open market transactions, privately negotiated transactions or by other means.During 2016, we used up all the authorized amount to repurchase 5,070,375 shares under of our Common Stock under this program, in addition to the partialrepurchases of our 2019 Convertible Notes.29Table of ContentsPeriodTotal Number ofShares PurchasedAverage Price perShareTotal Number ofShares Purchasedas Part of PubliclyAnnounced PlanApproximateDollar Value ofShares that MayYet Be PurchasedFebruary 2015 Share Repurchase Program:March 2016 (from March 1, 2016 to March 31, 2016)647,794$8.983,126,907$870,000April 2016 (from April 1, 2016 to April 30, 2016)90,654$9.583,217,561$—March 2016 Share and Convertible Debt Repurchase Program:June 2016 (June 1, 2016 to June 30, 2016)4,442,823$8.654,442,823$11,600,000July 2016 (July 1, 2016 to July 31, 2016)500,000$8.884,942,823$7,100,000August 2016 (August 1, 2016 to August 31, 2016)57,561$9.505,000,384$6,600,000September 2016 (September 1, 2016 to September 30, 2016)69,991$8.405,070,375$—30Table of ContentsITEM 6.Selected Financial DataThe following selected consolidated financial data should be read together with “Management’s Discussion and Analysis of Financial Condition and Resultsof Operations” and our financial statements and related notes included elsewhere in this annual report.The selected consolidated balance sheet data as of December 31, 2016 and 2015 , and the selected consolidated statements of operations data for each yearended December 31, 2016 , 2015 and 2014 , have been derived from our audited consolidated financial statements which are included elsewhere in this annualreport. The selected consolidated balance sheet data as of December 31, 2014 , 2013 and 2012 , and the selected consolidated statements of operations data for theyears ended December 31, 2013 and 2012 have been derived from our audited consolidated financial statements not included in this annual report. Year Ended December 31, 2016(1) 2015 (2) 2014 (3) 2013 (4) 2012(5) (In thousands, except per share amounts)Consolidated Statement of Operations Data: Total revenues$2,041,232 $1,387,344 $1,273,831 $1,498,138 $1,015,034Net income (loss) attributable to the company's commonstockholders43,453 (151,392) 81,620 165,254 43,482Net income (loss) per share attributable to common stockholders Basic1.06 (3.44) 2.00 5.00 1.53Diluted1.06 (3.44) 1.99 5.00 0.27 Consolidated Balance Sheet Data: Total assets$1,136,603 $1,223,620 $1,367,736 $740,855 $495,784Long-term debt196,203 247,251 242,031 27,151 31,806Redeemable preferred stock— — — 3,963 83,043(1)Reflects the acquisition of Sanimax Energy on March 15, 2016 as further described in Note 4 of Item 8 - Financial Statements and Supplementary Data.In addition, the results reflect the issuance of the convertible senior notes on June 2, 2016 as further described in Note 10 of Item 8 - Financial Statementsand Supplementary Data.(2)Reflects the acquisition of our Grays Harbor facility on August 19, 2015 as further described in Note 4 and the impact of goodwill impairment as furtherdescribed in Note 2 of Item 8 - Financial Statements and Supplementary Data.(3)Reflects the acquisitions of REG Life Sciences as of January 22, 2014, REG Synthetic Fuels and Geismar facility on June 3, 2014 and June 6, 2014,respectively, and the majority interest in Petrotec as of December 24, 2014 as further described in Note 4 of Item 8 - Financial Statements andSupplementary Data. In addition, the results reflect the issuance of the convertible senior notes on June 3, 2014 as further described in Note 10 of Item 8 -Financial Statements and Supplementary Data.(4)Reflects the acquisition of our Mason City facility as of July 30, 2013.(5)Reflects the acquisition of our New Boston facility as of October 26, 2012 and our Atlanta facility on November 16, 2012.31Table of ContentsITEM 7.Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe following discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto that appear elsewhere inthis report. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. Actual results may differmaterially from those discussed in these forward-looking statements due to a number of factors, including those set forth in the section entitled “Risk Factors” andelsewhere in this report.OverviewOur Company focuses on providing cleaner, lower carbon intensity products and services. We utilize a nationwide production, distribution and logisticssystem as part of an integrated value chain model to focus on converting natural fats, oils and greases into advanced biofuels. We own and operate 14 biorefineries(upon acquiring the remaining interest in Petrotec AG in January 2017) with 12 locations in North America and 2 locations in Germany, which consist of 13biomass-based diesel or biodiesel and renewable hydrocarbon diesel plants, with aggregate nameplate production capacity of 502 gallons per year, or mmgy andone demonstration scale fermentation facility. We also have one feedstock processing facility in Germany. We are also engaged in research and developmentefforts focused on the conversion of diverse feedstocks into renewable chemicals and ester-based products.We are a lower-cost biomass-based diesel producer. We primarily produce our biomass-based diesel from a wide variety of lower cost feedstocks, includinginedible corn oil, used cooking oil and inedible animal fat. We also produce biomass-based diesel from virgin vegetable oils, which are more widely available andtend to be higher in price. We believe our ability to process a wide variety of feedstocks provides us with a cost advantage over many biomass-based dieselproducers, particularly those that rely primarily on higher cost virgin vegetable oils, such as soybean oil or canola oil.We expanded our business internationally by acquiring a majority interest in Petrotec AG, or Petrotec, in December 2014. We continued to acquire additionalshares in Petrotec throughout 2015 and 2016, and in January 2017, we acquired full equity ownership of Petrotec, now called REG Germany. As of December 31,2016, we owned approximately 91% of Petrotec's shares. Our Germany operations are a fully-integrated company and utilize used cooking oil and other wastefeedstocks to produce biomass-based diesel at our two biorefineries in Germany. The combined nameplate production capacity is approximately 50 mmgy.We sell petroleum-based heating oil and diesel fuel, which enables us to offer additional biofuel blends, while expanding our customer base. We sell heatingoil and ultra-low sulfur diesel, or ULSD, at terminals throughout the northeastern U.S. as well as BioHeat® blended heating fuel at one of our existing Northeastterminal locations. In 2015, we expanded our sales of additional biofuel blends to Midwest terminal locations and look to potentially expand in other areas acrossNorth America.In January 2014, we acquired a development-stage industrial biotechnology business focusing on microbial fermentation to develop and produce renewablechemicals, fuels and other products.We acquired a 75 mmgy nameplate capacity renewable hydrocarbon diesel biorefinery located in Geismar, Louisiana in June 2014. Our Geismar facility hadbeen idled by its previous owner, began operating again by us in October 2014 and was shutdown between April 2015 and early March 2016 due to two separatefires that occurred in April and September 2015. Our Geismar facility has been running at high utilization since early October 2016.In August 2015, we acquired our Grays Harbor facility, a 100 mmgy nameplate biodiesel plant and terminal at the Port of Grays Harbor, Washington. Thisacquisition expanded our production fleet to the west coast of the United States. The Grays Harbor location includes 18 million gallons of storage capacity and aterminal that can accommodate feedstock intake and fuel delivery on deep-water PANAMAX class vessels as well as possessing significant rail and truck transportcapabilities. To date, the production facility's primary feedstock has been canola oil.In March 2016, we acquired our 20 mmgy nameplate biodiesel refinery located in DeForest, Wisconsin, or REG Madison, plant that produces biodiesel fromyellow grease, rendered animal fats, and inedible corn oil, in addition to refined vegetable oils using our patented technology currently in use at our Seneca, Illinoisplant. The facility has both truck and rail capabilities.During 2016 , we sold 567 million total gallons, including 77 million biomass-based gallons we purchased from third parties and resold, 45 million biomass-based diesel gallons by our majority-owned Petrotec and 54 million petroleum-based diesel gallons. During 2015 , we sold 375 million total gallons, including40 million gallons we purchased from third parties and resold, 40 million biomass-based diesel gallons by our majority-owned Petrotec and 30 million petroleum-based diesel gallons.Our businesses are organized into three reportable segments - the Biomass-based Diesel segment, the Services segment and the Renewable Chemicalssegment. As the activities surrounding our renewable chemicals business increase, we began reporting in 2015 a new segment - Renewable Chemicals, which waspreviously included in the Biomass-based Diesel segment.32Table of ContentsBiomass-based Diesel SegmentOur Biomass-based Diesel segment, as reported herein, includes:•the operations of the following biomass-based diesel production facilities:•a 12 mmgy nameplate biomass-based diesel production facility located in Ralston, Iowa;•a 35 mmgy nameplate biomass-based diesel production facility located near Houston, Texas;•a 45 mmgy nameplate biomass-based diesel production facility located in Danville, Illinois;•a 30 mmgy nameplate biomass-based diesel production facility located in Newton, Iowa;•a 60 mmgy nameplate biomass-based diesel production facility located in Seneca, Illinois;•a 30 mmgy nameplate biomass-based diesel production facility located near Albert Lea, Minnesota;•a 15 mmgy nameplate biomass-based diesel production facility located in New Boston, Texas;•a 30 mmgy nameplate biomass-based diesel production facility located in Mason City, Iowa;•a 75 mmgy nameplate renewable hydrocarbon diesel production facility located in Geismar, Louisiana;•a 27 mmgy nameplate biomass-based diesel production facility located in Emden, Germany;•a 23 mmgy nameplate biomass-based diesel production facility located in Oeding, Germany;•a 100 mmgy nameplate biomass-based diesel production facility located in Grays Harbor, Washington; and•a 20 mmgy nameplate biodiesel production facility located in DeForest, Wisconsin, since its acquisition in March 2016.•purchases and resale of biomass-based diesel, petroleum-based diesel, Renewable Identification Numbers, or RINs, California Low Carbon FuelStandard Credits, or LCFS credits, and raw material feedstocks acquired from third parties;•sales of biomass-based diesel produced under toll manufacturing arrangements with third party facilities using our feedstocks; and•incentives received from federal and state programs for renewable fuels.We derive a small portion of our revenues from the sale of glycerin, free fatty acids, naphtha and other co-products of the biomass-based diesel productionprocess. In 2016 and 2015 , our revenues from the sale of co-products were less than five percent of our total Biomass-based diesel segment revenues. During 2016and 2015, revenues from the sale of petroleum-based heating oil and diesel fuel acquired from third parties, along with the sale of these items further blended withbiodiesel produced at wholly owned facilities or purchased from third parties, were slightly over 5% of our total revenues.In accordance with EPA regulations, we generate 1.5 to 1.7 RINS, for each gallon of biomass-based diesel we produce. RINs are used to track compliancewith RFS2 using the EPA moderated transaction system, or EMTS. RFS2 allows us to attach between zero and 2.5 RINs to any gallon of biomass-based diesel wesell. We generally attach 1.5 to 1.7 RINs when we sell a gallon of biomass-based diesel. As a result, a portion of our selling price for a gallon of biomass-baseddiesel is generally attributable to RFS2 compliance, but no cost is allocated to the RINs generated by our biomass-based diesel production because RINs are a formof government incentive and not a result of the physical attributes of the biomass-based diesel production. In addition, RINs, once obtained with gallons ofbiomass-based diesel, may be separated by the acquirer and sold separately. Regularly, we obtain RINs from third parties for resale. The value of these RINsobtained from third parties is reflected in “Prepaid expenses and other assets” on our consolidated balance sheet. At each balance sheet date, this RIN inventory isvalued at the lower of cost or net realizable value and resulting adjustments are reflected in our cost of goods sold for the period. The cost of RINs obtained fromthird parties is determined using the average cost method. Because we do not allocate costs to RINs generated by our biomass-based diesel production, fluctuationsin the value of our RIN inventory represent fluctuations in the value of RINs we have obtained from third parties.Services SegmentOur Services segment includes:•biomass-based diesel facility management and operational services, whereby we provide day-to-day management and operational services tobiomass-based diesel production facilities as well as other clean-tech companies; and•construction management services, whereby we act as the construction management and general contractor for the construction of biomass-baseddiesel production facilities.We have utilized our construction management expertise internally to upgrade our facilities, such as our facilities located in Albert Lea, New Boston, MasonCity and Newton. In October 2016, we completed a $34.5 million upgrade to our Danville facility. In November 2016, we started a $24 million expansion projectat our Ralston facility. During 2015 and the first33Table of Contentsquarter of 2016, we spent over $42 million, the majority of which was covered by our property and casualty insurance proceeds due to damages from fires in Apriland September 2015, related to restoration repairs and upgrade projects at our Geismar facility. The Geismar facility came back on line in early March 2016.Demand for our construction management and facility management and operational services depend on capital spending by potential customers and existingcustomers, which is directly affected by trends in the biomass-based diesel industry. We have not received any orders or provided services to outside parties fornew facility construction services since 2009.Renewable Chemicals SegmentOur Renewable Chemicals segment includes:•research and development activities focusing on microbial fermentation to develop and produce renewable chemicals, additional advanced biofuelsand other products;•collaborative research and development and other service activities to continue to build out the technology platform; and•the operations of a demonstration scale fermentation facility located in Okeechobee, Florida since its acquisition in January 2014.In January 2016, ExxonMobil Research and Engineering Company entered into an agreement with our subsidiary, REG Life Sciences, LLC, or REG LifeSciences, to develop technology for the production of biodiesel by fermenting renewable cellulosic sugars from sources such as agricultural waste. In October2016, REG Life Sciences sold and delivered its first commercial product, a specialty fatty acid. REG developed, produced sold, and delivered approximately onemetric ton of the renewable, multi-functional chemical to Aroma Chemical Services International. Fatty acids are one of three product areas REG Life Sciences hasfocused on, along with esters and alcohols.During late November 2016, the Company's Board of Directors authorized a review of strategic alternatives for REG Life Sciences. There can be noassurance that this ongoing strategic review will result in any specific action or transaction or that any action taken or transaction we may enter into will prove tobe beneficial to stockholders.Factors Influencing Our Results of OperationsThe principal factors affecting our results of operations and financial conditions are the market prices for biomass-based diesel and the feedstocks used toproduce biomass-based diesel, as well as governmental programs designed to create incentives for the production and use of biomass-based diesel.Governmental programs favoring biomass-based diesel production and useBiomass-based diesel has historically been more expensive to produce than petroleum-based diesel. The biomass-based diesel industry’s growth has largelybeen the result of federal and state programs that require or incentivize the production and use of biomass-based diesel, which allows biomass-based diesel to beprice-competitive with petroleum-based diesel.On July 1, 2010, RFS2 was implemented, stipulating volume requirements for the amount of biomass-based diesel and other advanced biofuels that must beutilized in the United States each year. Under RFS2, Obligated Parties, including petroleum refiners and fuel importers, must show compliance with thesestandards. Currently, biodiesel and renewable hydrocarbon diesel production meets three categories of an Obligated Party’s annual renewable fuel required volumeobligation, or RVO—biomass-based diesel, undifferentiated advanced biofuel and renewable fuel. At December 31, 2016, the final RVO targets for the biomass-based diesel volumes for the years 2014 to 2018 as set by the EPA are as follows: 20142015201620172018Biomass-based diesel1.63 billion gallons1.73 billion gallons1.90 billion gallons2.00 billion gallons2.1 billion gallonsActual production or imports continue to grow as illustrated by the EMTS data noted below: 201420152016Biomass-based diesel produced or imported volume1.75 billion gallons1.81 billion gallons2.6 billion gallonsThe federal biodiesel mixture excise tax credit, or the BTC, has generally provided a $1.00 refundable tax credit per gallon to the first blender of biomass-based diesel with petroleum-based diesel fuel. The BTC became effective January 1,34Table of Contents2005, but since January 1, 2010 it has been allowed to lapse and then be reinstated a number of times. For example, the BTC lapsed on January 1, 2014 and wasretroactively reinstated for 2014 on December 19, 2014 and lapsed on January 1, 2015. On December 18, 2015, the Protecting Americans from Tax Hikes Act of2015 was signed into law, which reinstated and extended a set of tax provisions, including the retroactive reinstatement for 2015 and extension for 2016 of theBTC. The BTC again lapsed on January 1, 2017 and has not been reinstated as of the date of this report. It is uncertain whether the BTC will be reinstated and ifreinstated, whether it would be reinstated retroactively. The lapsing or modification of the BTC could adversely affect our future financial results.Biomass-based diesel and feedstock price fluctuationsOur operating results generally reflect the relationship between the price of biomass-based diesel, including credits and incentives and the price of feedstocksused to produce biomass-based diesel.Biomass-based diesel is a low carbon, renewable alternative to petroleum-based diesel fuel and is primarily sold to the end user after it has been blended withpetroleum-based diesel fuel. Biomass-based diesel prices have historically been heavily influenced by petroleum-based diesel fuel prices. Accordingly, biomass-based diesel prices have generally been impacted by the same factors that affect petroleum prices, such as crude oil supply and demand balance, worldwideeconomic conditions, wars and other political events, OPEC production quotas, changes in refining capacity and natural disasters.Regulatory and legislative factors also influence the price of biomass-based diesel. Biomass-based diesel RIN pricing, a value component that wasintroduced via RFS2 in July 2010, has had a significant impact on our biomass-based diesel pricing. The following table shows for 2014, 2015 and 2016 the highand low average monthly contributory value of RINs, as reported by OPIS to the average B100 spot price of a gallon of biodiesel, as reported by The Jacobsen interms of dollars per gallon and as a percentage of the average spot price.The fluctuations in the value of RINs during 2016 and 2015 resulted in write-downs of $19.4 million and $9.0 million, respectively, on RIN inventoryacquired from third parties. See “Note 8 – Other Assets” to our consolidated financial statements. We enter into forward contracts to sell RINs and we use riskmanagement position limits to manage RIN exposure.During 2016 , feedstock expense accounted for 78% of our production cost, while methanol and chemical catalysts expense accounted for 5% and 3% of ourcosts of goods sold, respectively.Feedstocks for biomass-based diesel production, such as inedible corn oil, used cooking oil, inedible animal fat and soybean oil are commodities and marketprices for them will be affected by a wide range of factors unrelated to the price of biomass-based diesel and petroleum-based diesel fuels. The following tableoutlines some of the factors influencing supply and price for each feedstock:35Table of Contents FeedstockFactors Influencing Supply and Price Inedible Corn OilUsed Cooking OilInedible AnimalFatCanola OilSoybean OilDemand for inedible corn oil from renewable fuel and other markets þ Ethanol production þ Export demand þþþþþExtraction system yield þ Implementation of inedible corn oil separation systems into existingand new ethanol facilities þ Implementation of co-located biodiesel/renewable diesel plants withethanol facilities þ Feed demand þþþ New or expected biodiesel capacity þ Weather conditions þ þþBiomass-based diesel demand þ þþPopulation þ Number of restaurants in the vicinity of collection facilities andterminals which is dependent on population density þ Cooking methods and eating habits, which can be impacted by theeconomy þ Number of slaughter kills in the United States þ Demand for inedible animal fat from other markets þ Demand for canola oil for food use þ Canola crush margin þ Canola meal demand þ Crop disease þþPalm oil supply þ Soybean meal demand þSouth American crop production þFarmer planting decisions þGovernment policies and subsidies þDuring 2016 and 2015, 72% and 85% of our feedstocks, respectively, were comprised of inedible corn oil, used cooking oil and inedible animal fats with theremainder coming from virgin vegetable oil.The graph below illustrates the spread between the cost of producing one gallon of biodiesel made from soybean oil to the cost of producing one gallon ofbiodiesel made from a lower cost feedstock for the period December 2011 through December 2016. The results were derived using assumed conversion factors forthe yield of each feedstock and subtracting the cost of producing one gallon of biodiesel made from each respective lower cost feedstock from the cost ofproducing one gallon of biodiesel made from soybean oil.36Table of Contents(1)Used cooking oil prices are based on the monthly average of the daily low sales price of Missouri River yellow grease as reported by The Jacobsen (basedon 8.5 pounds per gallon).(2)Inedible corn oil prices are reported as the monthly average of the daily distillers’ corn oil market values delivered to Illinois as reported by The Jacobsen(based on 8.2 pounds per gallon).(3)Choice white grease prices are based on the monthly average of the daily low prices of Missouri River choice white grease as reported by The Jacobsen(based on 8.0 pounds per gallon).(4)Soybean oil (crude) prices are based on the monthly average of the daily closing sale price of the nearby soybean oil contract as reported by CBOT (basedon 7.5 pounds per gallons).Our results of operations generally will benefit when the spread between biomass-based diesel prices and feedstock prices widens and will be harmed whenthis spread narrows. The following graph shows feedstock cost data of choice white grease and soybean oil on a per gallon basis compared to the sale price data forbiodiesel, and the spread between the two, from December 2011 to December 2016.(1)Biodiesel prices are based on the monthly average of the midpoint of the high and low prices of B100 (Upper Midwest) as reported by The Jacobsen.37Table of Contents(2)Soybean oil (crude) prices are based on the monthly average of the daily closing sale price of the nearby soybean oil contract as reported by CBOT (basedon 7.5 pounds per gallon).(3)Choice white grease prices are based on the monthly average of the daily low price of Missouri River choice white grease as reported by The Jacobsen(based on 8.0 pounds per gallon).(4)Spread between biodiesel price and choice white grease price.(5)Spread between biodiesel price and soybean oil (crude) price.During 2016, NY Harbor ULSD prices ranged from $0.87 per gallon in January to $1.70 per gallon in December with the average price for the year of $1.37per gallon. The US crude oil production increased while crude inventories decreased due to US refineries operating at a high utilization rate during the first half ofthe year. In late September 2016, OPEC made statements that the group is willing to cut production to help balance world crude supply and demand helped supportenergy prices in late September and into October. Feedstock prices trended higher in 2016, led by the tightness in the palm oil market and strong demand frombiodiesel producers for fats and inedible corn oil. The soybean crop yield was at record high in the fall of 2016. US cattle slaughter numbers in 2016 are higherthan the prior year, as the cattle industry was in an expansion phase. Hog slaughter remained consistent with the prior year numbers, staying at a historically highlevel.Risk ManagementThe profitability of producing biomass-based diesel largely depends on the spread between prices for feedstocks and biomass-based diesel, includingincentives, each of which is subject to fluctuations due to market factors and each of which is not significantly correlated. Adverse price movements for thesecommodities directly affect our operating results. We attempt to protect cash margins for our own production and our third-party trading activity by entering intorisk management contracts that mitigate the impact on our margins from price volatility in feedstocks and biomass-based diesel. We create offsetting positions byusing a combination of forward fixed-price physical purchases and sales contracts on feedstock and biomass-based diesel, including risk management futurescontracts, swaps and options primarily on the New York Mercantile Exchange NY Harbor ULSD and CBOT Soybean Oil; however, the extent to which we engagein risk management activities varies substantially from time to time, and from feedstock to feedstock, depending on market conditions and other factors. In makingrisk management decisions, we utilize research conducted by outside firms to provide additional market information in addition to our internal research andanalysis.Inedible corn oil, used cooking oil, inedible animal fat, canola oil and soybean oil are the primary feedstocks we used to produce biomass-based diesel in2014, 2015 and 2016. We utilize several varieties of inedible animal fat, such as beef tallow, choice white grease and poultry fat derived from livestock. There isno established futures market for these lower cost feedstocks. The purchase prices for lower cost feedstocks are generally set on a negotiated flat price basis orspread to a prevailing market price reported by the USDA price sheet or The Jacobsen. Our efforts to risk manage against changing prices for inedible corn oil,used cooking oil and inedible animal fat have involved entering into futures contracts, swaps or options on other commodity products, such as CBOT soybean oiland NY Harbor ULSD. However, these products do not always experience the same price movements as lower cost feedstocks, making risk management for thesefeedstocks challenging. We manage feedstock supply risks related to biomass-based diesel production in a number of ways, including, where available, throughlong-term supply contracts. The purchase price for soybean oil under these contracts may be indexed to prevailing CBOT soybean oil market prices with anegotiated market basis. We utilize futures contracts, swaps and options to risk manage, or lock in, the cost of portions of our future feedstock requirementsgenerally for varying periods up to one year.Our ability to mitigate our risk of falling biomass-based diesel prices is limited. We have entered into forward contracts to supply biomass-based diesel.However, pricing under these forward sales contracts generally has been indexed to prevailing market prices, as fixed price contracts for long periods on acceptableterms have generally not been available. There is no established futures market for biomass-based diesel in the United States. Our efforts to hedge against fallingbiomass-based diesel prices generally involve entering into futures contracts, swaps and options on other commodity products, such as diesel fuel and NY HarborULSD. However, price movements on these products are not highly correlated to price movements of biomass-based diesel.We generate 1.5 to 1.7 biomass-based diesel RINs for each gallon of biomass-based diesel we produce and sell. We also obtain RINs from third partytransactions which we hold for resale. There is no effective established futures market for biomass-based diesel RINs, which severely limits the ability to riskmanage the price of RINs. We enter into forward contracts to sell RINs and we use risk management position limits and value at risk to manage RIN exposure.As a result of our strategy, we frequently have gains or losses on derivative financial instruments that are conversely offset by losses or gains on forwardfixed-price physical contracts on feedstocks and biomass-based diesel or inventories. Gains and losses on derivative financial instruments are recognized eachperiod in operating results while corresponding gains and losses on physical contracts are generally not recognized until quantities are delivered or title transferswhich may be in the38Table of Contentssame or later periods. Our results of operations are impacted when there is a period mismatch of recognized gains or losses associated with the change in fair valueof derivative instruments used for risk management purposes at the end of the reporting period when the purchase or sale of feedstocks or biomass-based diesel hasnot yet occurred and thus the offsetting gain or loss will be recognized in a later accounting period.We had risk management losses of $35.4 million from our derivative financial instrument trading activity for the year ended December 31, 2016 , comparedto risk management gains of $36.0 million for the year ended December 31, 2015 . Changes in the value of these futures or swap instruments are reflected incurrent income or loss, generally within our cost of goods sold. In 2016, risk management losses resulted mostly from the significant volatility in the commoditiesmarket and accounted for a loss of 0.06 per gallon sold. Over the three years prior to 2016, risk management gains have represented an average income of $0.10per gallon sold. The current three-year average, which incorporates 2016 risk management losses, reflects an average income of $0.05 per gallon sold. In general,over the course of a twelve-month period or more, we expect to incur a slight risk management loss when commodities are stable to compensate for the value ofrisk management protection from market volatility.SeasonalityOur operating results are influenced by seasonal fluctuations in the demand for biodiesel. Biodiesel demand tends to decrease during the winter season in theNorthern and Midwestern states due to reduced blending concentrations because colder temperatures can cause the higher cloud point biodiesel we make frominedible animal fats to become cloudy and eventually gel at a higher temperature than petroleum-based diesel or biodiesel made from soybean oil, canola oil orinedible corn oil. Such gelling can lead to plugged fuel filters and other fuel handling and performance problems for customers and suppliers. Reduced demand inthe winter for our higher cloud point biodiesel can result in excess supply of such higher cloud point biodiesel and lower prices for such higher cloud pointbiodiesel. In addition, most of our production facilities are located in colder Midwestern states and our costs of shipping increases as more biodiesel is transportedto warmer climate states during winter. The seasonable demand factor is somewhat offset by higher blended heating oil demand in the Northeastern United States.RIN prices may also be subject to seasonal fluctuations. The RIN is dated for the calendar year in which it is generated, commonly referred to as the RINvintage. Since 20% of an Obligated Party's annual RVO can be satisfied by prior year RINs, most RINs must come from biofuel produced or imported during theRVO year. As a result, RIN prices can be expected to decrease as the calendar year progresses if the RIN market is oversupplied compared to that year's RVO andprices may increase if the market is undersupplied. For example, during 2013, biomass-based diesel RIN generation was 1.78 billion gallons when the RVO forbiomass-based diesel was 1.28 billion gallons, resulting in declining RIN prices during the third and fourth quarters as production rates exceeded the RVO. For2014, biomass-based diesel RIN generation was 1.75 billion gallons while the RVO was finalized at 1.63 billion for 2014. In 2015, biomass-based diesel RINgeneration was 1.81 billion gallons versus a finalized RVO volume set at 1.73 billion. In 2016, biomass-based diesel RIN generation was 2.6 billion gallons versusa finalized RVO volume set at 1.9 billion gallons.Industry capacity and productionOur operating results are influenced by our industry’s capacity and production, including in relation to RFS2 production requirements. According to EMTSdata, approximately 1.1 billion gallons of biomass-based diesel was produced in the United States in 2011, primarily reflecting the recommencement of, or increasein, operations at underutilized facilities in response to RFS2 requirements. Such production was in excess of the 800 million gallon RFS2 requirement for 2011.During 2012, according to EMTS data, approximately 1.1 billion gallons of biomass-based diesel was produced, which also was above RFS2 required volumes of1 billion gallons of biomass-based diesel for 2012. Production in 2011, 2012 and 2013 was in excess of continued expanding RFS2 volume requirements. Asreported by EMTS, the biomass-based diesel RIN generation was 1.78 billion gallons in 2013 when the RVO for biomass-based diesel was 1.28 billion. Biomass-based diesel production, as reported by EMTS was 1.81 billion gallons for 2015, 600 million gallons higher than 2014. In 2016, according to EMTS data, 2.6billion gallons of biomass-based diesel was produced and/or imported into the U.S., compared to the equivalent 1.81 billion gallons in 2015.During 2016 and 2015, the amount of imported biodiesel gallons qualifying under RFS2 has increased from 334.2 million gallons in 2015 to approximately692.9 million gallons in 2016, based on the information from the Energy Information Administration. Imported gallons will likely make up a growing percentageof the RVO, as the EPA has approved a plan to allow Argentinian biodiesel made from soybean oil to qualify for RINs generation. Under RFS2, Obligated Partiesare entitled to satisfy up to 20% of their annual requirement with prior year RINs.Components of Revenues and Expenses39Table of ContentsWe derive revenues in our Biomass-based diesel segment from the following sources:•sales of biodiesel and renewable hydrocarbon diesel produced at our facilities, including RINs and LCFS credits, transportation, storage andinsurance costs to the extent paid for by our customers;•revenues from our sale of biomass-based diesel and RINs produced by third parties through toll manufacturing arrangements with us;•resale of finished biomass-based diesel, RINs and LCFS credits acquired from third parties, and raw material feedstocks acquired from others;•revenues from our sale of petroleum-based heating oil and ultra-low sulfur diesel, or ULSD, acquired from third parties, along with the sale of thesepetroleum-based products further blended with biodiesel produced at our wholly owned facilities;•sales of glycerin, other co-products of the biomass-based diesel production process; and•incentive payments from federal and state governments, including the BTC, and from the USDA Advanced Biofuel Program.We derive revenues in our Services segment from the following sources:•fees received from operations management services that we provide for biomass-based diesel production facilities, typically based on productionrates and profitability of the managed facility; and•amounts received for services performed by us in our role as general contractor and construction manager for upgrades and repairs to our biomass-based diesel production facilities.We derive revenues in our Renewable Chemicals segment from the following sources:•collaborative research and development and other service revenue for research and development activities to continue to build out the technologyplatform; and•sales of renewable chemical products.Cost of goods sold for our Biomass-based diesel segment includes:•with respect to our production facilities, expenses incurred for feedstocks, catalysts and other chemicals used in the production process, leases,utilities, depreciation, salaries and other indirect expenses related to the production process, and, when required by our customers, transportation,storage and insurance;•with respect to biomass-based diesel acquired from third parties produced under toll manufacturing arrangements, expenses incurred for feedstocks,transportation, catalysts and other chemicals used in the production process and toll processing fees paid to the facility producing the biomass-baseddiesel;•with respect to finished goods and RINs acquired from third parties, the purchase price of biomass-based diesel and RINs on the spot market or undercontract, and related expenses for transportation, storage, insurance, labor and other indirect expenses;•adjustments made to reflect the lower of cost or market values of our finished goods inventory, including RINs acquired from third parties;•expenses from the purchase of petroleum-based heating oil and ULSD acquired from third parties; and•changes during the applicable accounting period in the market value of derivative and hedging instruments, such as exchange traded contracts, relatedto feedstocks and commodity fuel products.Cost of goods sold for our Services segment includes:•with respect to our facility management and operations activities, primarily salary expenses for the services of management employees for eachfacility and others who provide procurement, marketing and various administrative functions; and•with respect to our construction management services activities, primarily our payments to subcontractors constructing the production facility andproviding the biomass-based diesel processing equipment, and, to a much lesser extent, salaries and related expenses for our employees involved inthe construction process.Cost of goods sold for our Renewable Chemicals segment includes:•research and development activities specifically related to the collaborative research and development projects; and•with regards to our production of renewable chemical expenses incurred for feedstocks, catalysts and other chemicals used in the production process,leases, utilities, depreciation, salaries and other indirect expenses related to the production process, and, when required by our customers,transportation, storage and insurance.40Table of ContentsSelling, general and administrative expense consists of expenses generally involving corporate overhead functions and operations at our Ames, Iowa,international operations and regional offices.Research and development expenses are mainly related to activities of our Renewable Chemicals segment, which is seeking to bring industrial biotechnologyproducts to market and drive growth.Impairment of property, plant and equipment represents non cash impairment charges of certain property, plant and equipment items.Other income (expense), net is primarily comprised of the change in fair value of contingent considerations, gain on debt extinguishment related to therepurchase of partial principal amounts of our 2019 Convertible Notes, changes in fair value of convertible debt conversion liability, interest expense including theaccretion of convertible debt and amortization of deferred financing costs, and interest income and gain on involuntary conversion, which represents the amount ofinsurance proceeds in excess of the net book value of the property damage recorded by us related to the April 2015 fire at our Geismar facility.Critical Accounting PoliciesOur discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared inaccordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates andjudgments that affect the reported amount of assets, liabilities, equities, revenues and expenses and related disclosure of contingent assets and liabilities. Weevaluate our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonableunder the circumstances, the results of which provide the basis for judgments we make about the carrying values of assets and liabilities that are not readilyapparent from other sources. Because these estimates can vary depending on the situation, actual results may differ from the estimates.We believe the following critical accounting policies affect our more significant judgments used in the preparation of our consolidated financial statements:Revenue recognition.We recognize revenues from the following sources:•the sale of biomass-based diesel, including RINs, LCFS credits, biomass-based diesel co-products and raw material feedstocks purchased by us orproduced by us at owned manufacturing facilities, leased manufacturing facilities and manufacturing facilities with which we have tollingarrangements;•resale of finished biomass-based diesel, including RINs, LCFS credits and raw material feedstocks acquired from others;•revenues from our sale of petroleum-based heating oil and ultra-low sulfur diesel, or ULSD, acquired from third parties, along with the sale of theseitems further blended with biodiesel produced at our facilities or purchased from third parties;•fees received under toll manufacturing agreements with third parties;•fees received from federal and state incentive programs for renewable fuels;•fees received for the marketing and sales of biomass-based diesel produced by third parties; and•revenue from collaborative research and development and other service activities.Biomass-based diesel sales as well as RINs, LCFS credits and raw material feedstock revenues are recognized when there is persuasive evidence of anarrangement, delivery has occurred, the price has been fixed or is determinable and collectability can be reasonably assured.Revenues associated with governmental incentive programs are recognized when the amount to be received is determinable, collectability is reasonablyassured and the sale of product giving rise to the incentive has been recognized. Our revenue from governmental incentive programs is generally comprised ofamounts received from the USDA Advanced Biofuel Program, or the USDA Program, and the biodiesel tax credit. For a discussion of the biodiesel tax credit, seethe section entitled “Risk factors-Loss of or reductions in tax incentives for biomass-based diesel production or consumption may have a material adverse effect onindustry revenues and operating margins” and “Factors Influencing Our Results of Operations-Governmental programs favoring biomass-based diesel productionand use.” In connection with the biodiesel tax credit, we file a claim with the Internal Revenue Service, or IRS, for a refund of excise taxes each week for gallonswe have blended to B99.9 and sold during the prior week. The biodiesel tax credit provided a $1.00 refundable tax credit per gallon. On December 18, 2015, theProtecting Americans from Tax Hikes Act of 2015 was signed into law, which reinstated and extended a set of tax provisions,41Table of Contentsincluding the retroactive reinstatement for 2015 and extension for 2016 of the federal biodiesel mixture excise tax credit, which lapsed after December 31, 2016.Fees for managing ongoing operations of third party plants, marketing biomass-based diesel produced by third party plants and from other services arerecognized as services are provided. We also have performance-based incentive agreements that are included as management service revenues. These performanceincentives are recognized as revenues when the amount to be received is determinable and collectability is reasonably assured.Impairment of Long-Lived Assets and Certain Identifiable Intangibles .We have three partially constructed production facilities and one non-operational production facility. In 2007, the Company commenced construction of two60 mmgy production facilities, one near New Orleans, Louisiana and the other in Emporia, Kansas. In 2008, the Company halted construction of these facilities asa result of conditions in the biomass-based diesel industry and the credit markets. Construction of the New Orleans facility is approximately 45% complete andconstruction of the Emporia facility was approximately 20% complete. In September 2010, the Company acquired a 15 mmgy production facility in Clovis, NewMexico which is approximately 50% complete. Currently, the Clovis facility is being operated as a terminal. In November 2012, the Company completed ouracquisition of Bulldog Biodiesel, LLC, a 15 mmgy production facility near Atlanta, Georgia, that was non-operational at the time the Company purchased it andwill remain idled until certain repairs or upgrades are made.We review long-lived assets, including property, plant and equipment and definite-lived intangible assets for impairment when circumstances dictate. Suchevaluations generally are focused on our plants - regardless of whether they are operating, are under construction or are currently on a “construction hold.” Thelatter assets are those that receive the most attention as their future cash flows are subject to the most uncertainty. Asset are impaired if the undiscounted net cashflows estimated to be generated by those assets are less than their carrying amounts. If estimated future undiscounted cash flows are not sufficient to recover thecarrying 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 isdetermined by management estimates using discounted cash flow calculations. The estimate of cash flows arising from the future use of the asset that are used inthe impairment analysis requires judgment regarding what we would expect to recover from the future use of the asset.Other Considerations - Means of financing of facilities under construction or construction on hold: In 2008, we halted construction on our NewOrleans, Louisiana and Emporia, Kansas facilities as a result of conditions in the biomass-based diesel industry and the credit markets. Other than with respect tothe Emporia facility discussed further below, we continue to pursue financing and intend to complete the facilities when industry conditions improve and financingbecomes available on terms satisfactory to us. Since construction halted at these facilities in 2008, we have continued to monitor the construction sites and performroutine maintenance on the partially constructed assets. We also have pursued programs under which we could obtain a government guarantee to enhance ourability to obtain financing for these facilities. We will continue to pursue such government programs in the future to the extent they arise. If available, we wouldalso consider using funds from operations to fund a portion of the construction at these facilities. As currently configured, the assets can be completed as biomass-based diesel production facilities, or with alternative or additional capabilities for the manufacture of specialty chemicals or other renewable products such asadvanced biofuels and renewable chemicals. Some of the existing components could be transported for use at our other production facility locations, or they couldbe sold to third parties for various uses.Our undiscounted cash flows analysis at the end of the third quarter of 2016 indicated that the estimated cash flows would be sufficient to cover thecarrying values of our New Orleans, Atlanta, Clovis and Emporia facilities, which amounted to $46.4 million, $2.6 million, $2.6 million and $17.1 millionrespectively at September 30, 2016. There were no changes in the carrying amounts of our New Orleans, Atlanta and Clovis facilities between September 30, 2016and December 31, 2016. Late during the last quarter of 2016, we recorded impairment charges of $15.6 million, which reflected the difference between thecarrying amount and the estimated salvage value of our Emporia facility as a result of competition from foreign, imported product and the probability of thatproject being completed in the near term is unlikely. We believe this site continues to be a good opportunity for future biorefinery operations. We used externalconsultants to assist with the impairment calculation in establishing salvage value of certain assets. In 2015, we recorded property, plant and equipmentimpairments of approximately $12.4 million due to the April and September 2015 fire at our Geismar facility, which was offset in full by our property insuranceproceeds.There were no other asset impairment charges for the years ended December 31, 2016 , 2015 or 2014. Refer to “Note 2 – Summary of SignificantAccounting Policies” to our consolidated financial statements.42Table of ContentsResults of OperationsFiscal years ended December 31, 2016 and December 31, 2015Set forth below is a summary of certain financial information (dollars in thousands and gallons in millions except per gallon data) for the periods indicated: Twelve Months EndedDecember 31, 2016 2015Gallons sold567.1 374.7Average B100 price per gallon$3.17 $2.97 Revenues$2,041,232 $1,387,344Costs of goods sold1,869,716 1,276,801Gross profit171,516 110,543Selling, general and administrative expenses88,285 73,397Research and development expense18,163 16,851Impairment of property, plant and equipment17,893 —Impairment of goodwill— 175,028Income (loss) from operations47,175 (154,733)Other income (expense), net1,806 (5,678)Income tax benefit (expense)(4,268) 8,701Net income (loss)44,713 (151,710)Less—Net income (loss) attributable to noncontrolling interests386 (318)Net income (loss) attributable to the Company44,327 (151,392)Effects of participating share-based awards(874) —Net income (loss) attributable to the Company’s common stockholders$43,453 $(151,392)Revenues . Our total revenues increased $653.9 million , or 47% , to $2,041.2 million for the year ended December 31, 2016 , from $1,387.3 million for the yearended December 31, 2015 . This increase was primarily due to a 51% increase in gallons sold and increased government incentives revenues, as well as improvingaverage selling prices throughout the year as a result of a more stable energy market. The majority of the increase in the gallons sold was a result from the GraysHarbor, and Geismar operating throughout 2016 and the Madison facility from March 2016.Biomass-based diesel revenues including government incentives increased $651.9 million , or 47% , to $2,039.1 million during the year ended December 31,2016 , from $1,387.1 million for the year ended December 31, 2015 . The BTC contributed $100.8 million to the increase in biomass-based diesel revenue for theyear ended December 31, 2016 . Our average B100 sales price per gallon increased $0.20 , or 7% , to $3.17 during the year ended December 31, 2016 , comparedto $2.97 during the year ended December 31, 2015 . The increase in average sales price from 2015 to 2016 contributed to a $74.9 million revenue increase whenapplied to the number of gallons sold during 2015 . Gallons sold increased 192.4 million , or 51% , to 567.1 million during the year ended December 31, 2016 ,compared to 374.7 million during the year ended December 31, 2015 . The increase in gallons sold for the year ended December 31, 2016 accounted for a revenueincrease of $609.9 million using 2016 average sales pricing. During 2016, we recorded $15.1 million in an initial and partial settlement of our business interruptioninsurance claim related to the September 2015 fire at our Geismar facility as an increase to our biomass-based diesel revenues. Sales of separated RIN inventorywere $274.8 million and $186.5 million for the years ending December 31, 2016 and 2015 , respectively.Costs of goods sold. Our costs of goods sold increased $592.9 million , or 46% , to $1,869.7 million for the year ended December 31, 2016 , from $1,276.8 millionfor the year ended December 31, 2015 . Costs of goods sold as a percentage of revenues were 92% for the years ended December 31, 2016 and 2015 .Biomass-based diesel costs of goods sold increased in 2016 due to a 51% increase in gallons sold. Average lower cost feedstocks prices for the year endedDecember 31, 2016 were $0.28 per pound, compared to $0.27 per pound for the year ended December 31, 2015 . Average soybean oil costs for the year endedDecember 31, 2016 were $0.33 per pound in comparison to $0.32 per pound for the year ended December 31, 2015 . We recorded risk management losses of $35.4million from our derivative financial instrument activity in 2016, compared to risk management gains of $36.0 million for 2015. This fluctuation in riskmanagement gains and losses was mainly due to the volatility in the commodities market. The current three-year43Table of Contentsaverage, which incorporates 2016 risk management losses, represents an average income of $0.05 per gallon sold. In addition, the movements in the value of RINsduring 2016 resulted in a $19.4 million write-down to lower of cost or net realizable value, which was mainly based on the future contracted RIN prices, on RINinventory held throughout the year compared to a write-down of $9.0 million during 2015. Costs of goods sold for separated RIN inventory sales excluding lowerof cost write-downs were $231.4 million and $173.7 million for the years ending December 31, 2016 and 2015, respectively.Selling, general and administrative expenses. Our selling, general and administrative, or SG&A, expenses were $88.3 million for the year ended December 31,2016 , compared to $73.4 million for the year ended December 31, 2015 . SG&A expenses increased $14.9 million , or 20% , for the year ended December 31,2016 as compared to the year ended December 31, 2015. As a percentage of revenues, our SG&A expenses were 4.3% and 5.3% for the year ended December 31,2016 and 2015 , respectively. The increase year over year was primarily due to a $11.6 million increases in employee related expenses as headcount increased fromprior year acquisitions supporting growth and a $3.3 million increase in professional services expenses, largely associated with international expansion, theGeismar fire and to support our growth.Research and development expense. Our research and development expenses were $18.2 million for the year ended December 31, 2016 , compared to $16.9million for the year ended December 31, 2015 . The majority of the research and development expenses involved our Life Sciences business.Impairment of property, plant and equipment. Late during the year ended December 31, 2016, we recorded impairment charges of $15.6 million against property,plant and equipment assets at our partially completed facility in Emporia, Kansas. The impairment charge resulted from competition from foreign, importedproduct and the probability of that project being completed in the near term is unlikely. In addition, we recorded impairment charges of $2.3 million against certainplant property, plant and equipment at our other facilities as the carrying amounts of these amounts were deemed not recoverable given the assets deterioratingphysical conditions identified in the last quarter of 2016. The amount of property, plant and equipment impairment recorded in 2015 was approximately $12.4million due to the April and September 2015 fires at our Geismar facility, which was offset in full by our property insurance proceeds.Impairment of goodwill. We recorded a non-cash impairment charge of $175.0 million of goodwill for the year ended December 31, 2015. There were noimpairments of goodwill recorded during 2016.Other income (expense), net. Other income was $1.8 million for the year ended December 31, 2016 compared to other expense of $5.7 million for the year endedDecember 31, 2015 . Other income (expense) is primarily comprised of change in fair value of contingent consideration, interest expense, interest income and othernon-operating items. The increase in the overall other income of $7.5 million was mainly due to a gain on debt extinguishment of $2.3 million related to therepurchase of $69.9 million principal amount of the 2019 Convertible Notes, changes in fair value of convertible debt conversion liability of $13.0 million relatedto the newly issued 2036 Convertible Notes and gain on involuntary conversion of $9.9 million, which represented the amount of insurance proceeds in excess ofthe net book value of the property damage recorded by us related to the April 2015 and September 2015 fires at our Geismar facility. Our insurance policies coverreplacement costs incurred to replace the property damaged by the fires. The overall increase in other income in 2016 was partially offset with the change in fairvalue of contingent consideration related to previous acquisitions in the amount of $7.9 million and a $4.1 million increase in interest expense as a result of theissuance of the 2036 Convertible Notes.Income tax expense. There was an income tax expense recorded during the year ended December 31, 2016 of $4.3 million , compared to an income tax benefit of$8.7 million for the year ended December 31, 2015 . At December 31, 2016 and 2015 , we had net deferred income tax assets of approximately $344.8 million and$231.0 million , respectively, with a valuation allowance of $365.0 million and $250.2 million , respectively. As a result, our effective tax rate was 8.7% and 5.4%for the years ended December 31, 2016 and 2015 , respectively. We have an income tax receivable of $4.5 million and $1.8 million as of December 31, 2016 and2015 , respectively.Effects of participating share-based awards. Effects of participating restricted stock units was $0.9 million and $0.0 million for the years ended December 31,2016 and 2015 , respectively.Fiscal years ended December 31, 2015 and December 31, 2014Set forth below is a summary of certain financial information (dollars in thousands and gallons in millions except per gallon data) for the periods indicated:44Table of Contents Twelve Months EndedDecember 31, 2015 2014Gallons sold374.7 287.3Average B100 price per gallon$2.97 $3.62 Revenues$1,387,344 $1,273,831Costs of goods sold1,276,801 1,113,219Gross profit110,543 160,612Selling, general and administrative expenses73,397 62,681Research and development expense16,851 12,424Impairment of goodwill175,028 —Income (loss) from operations(154,733) 85,507Other income (expense), net(5,678) 603Income tax expense8,701 (3,572)Net income (loss)(151,710) 82,538Less---Net loss attributable to noncontrolling interest(318) (73)Net income (loss) attributable to the Company(151,392) 82,611Change in undistributed dividends allocated to preferred stockholders— 378Distributed dividends to preferred stockholders— (40)Effects of participating preferred stock— (91)Effects of participating share-based awards— (1,238)Net income (loss) attributable to the Company’s common stockholders$(151,392) $81,620Revenues . Our total revenues increased $ 113.5 million , or 9% , to $1,387.3 million for the year ended December 31, 2015 , from $ 1,273.8 million for the yearended December 31, 2014 . This increase was primarily attributable to the volume increases in 2015 as compared to 2014 as a result of our international expansionand increased domestic sales. The increase was offset by the decline of biomass-based diesel pricing as a result of the drop in energy prices, such as crude oil andheating oil, in conjunction with lost revenues due to our Geismar facility being shut down for repairs from the April and September fires.Biomass-based diesel revenues including government incentives increased $113.7 million , or 9% , to $1,387.1 million during the year ended December 31,2015 , from $1,273.4 million for the year ended December 31, 2014 . The 2015 revenues reflected a net benefit of $95.0 million in government incentive revenueas a result of the December 18, 2015 retroactive reinstatement of the federal biodiesel mixture excise tax credit for 2015 and the net effect of an increase in gallonssold, but coupled with a decrease in biomass-based diesel prices. The increase in gallons sold reflects a full-year inclusion of our majority-owned internationalsales activity in addition to increased throughput across our production facilities. Due to lower RIN and energy prices in 2015, our average B100 sales price pergallon decreased $0.65 , or 18% , to $2.97 during the year ended December 31, 2015 , compared to $3.62 during the year ended December 31, 2014 . The decreasein average sales price from 2014 to 2015 contributed to a $186.7 million revenue decrease when applied to the number of gallons sold during 2014 . Gallons soldincreased 87.4 million , or 30% , to 374.7 million during the year ended December 31, 2015 , compared to 287.3 million during the year ended December 31, 2014. The increase in gallons for the year ended December 31, 2015 accounted for a revenue increase of $259.6 million using 2015 average sales pricing. The increasein biomass-based diesel government incentives was mainly due to the increase in gallons sold and that market participants were acting as if the biodiesel tax creditwould be reinstated throughout the year. Sales of separated RIN inventory were $186.5 million and $130.2 million for the years ending December 31, 2015 and2014 , respectively.Costs of goods sold. Our costs of goods sold increased $163.6 million , or 15% , to $1,276.8 million for the year ended December 31, 2015 , from $1,113.2 millionfor the year ended December 31, 2014 . Costs of goods sold as a percentage of revenues were 92% and 87% for the years ended December 31, 2015 and 2014 ,respectively. The increase in costs of goods sold as a percentage of revenues in 2015 was primarily due to the net effect of lower revenues per gallon, which was adirect impact of the drop in crude oil prices on biomass-based diesel prices and slightly offset by lower feed stock costs in 2015 as compared to 2014. Averagelower cost feedstocks prices for the year ended December 31, 2015 was $0.27 per pound, compared to $0.33 per pound for the year ended December 31, 2014 .Average soybean oil costs for the year ended December 31, 2015 was $0.32 per pound in comparison to $0.38 per pound for the year ended December 31, 2014 .Due to the significant decline in energy market prices such as crude oil and heating oil throughout 2015, we had gains of $36.0 million from risk managementtrading45Table of Contentsactivity for the year ended December 31, 2015 , compared to gains of $61.6 million from risk management trading for the year ended December 31, 2014 ,respectively. Over the last three years prior to 2015, risk management gains have represented an average income of $0.07 per gallon sold. The current three-yearaverage, which incorporates 2015 risk management gains, represents an average income of $0.10 per gallon sold. In addition, the decrease in the value of RINsduring 2015 resulted in a $9.0 million write-down to lower of cost or market on RIN inventory held throughout the year compared to a write-down of $4.3 millionduring 2014. Costs of goods sold for separated RIN inventory sales were $182.7 million and $119.8 million for the years ending December 31, 2015 and 2014,respectively.Selling, general and administrative expenses. Our selling, general and administrative, or SG&A, expenses were $73.4 million for the year ended December 31,2015 , compared to $62.7 million for the year ended December 31, 2014 . SG&A expenses increased $10.7 million , or 17% , for the year ended December 31,2015 as compared to the year ended December 31, 2014. As a percentage of revenues, our SG&A expenses were 5.3% and 4.9% for the year ended December 31,2015 and 2014 , respectively. This increase was driven mainly from a $7.5 million increase due to international expansion as we included twelve month operatingresults of Petrotec, a $1.5 million increase in legal and professional fees incurred to support our growth and international expansion, a $0.8 million increase indepreciation expense, $1.8 million increase in information technology and insurance expenses. These increases were offset by a decrease in bad debt expense ofapproximately $2.9 million.Research and development expense. Our research and development expenses were $16.9 million for the year ended December 31, 2015 , compared to $12.4million for the year ended December 31, 2014 . The increase in research and development expenses was primarily due to the increased research and developmentactivities to bring products to market and drive growth, mainly in regards to our REG Life Sciences business focusing on microbial fermentation to develop andproduce renewable chemicals, fuels and other products.Impairment of goodwill. We recorded a non-cash impairment charge of $175.0 million of goodwill for the year ended December 31, 2015. There were noimpairments recorded during 2014. This impairment charge represents a complete write-off of goodwill in the Biomass-based Diesel and Renewable Chemicalsreporting units. The impairment charge was as a result of our second goodwill impairment test, as we determined that triggering events had occurred subsequent toour annual goodwill impairment testing at July 31, 2015 due to the continued decline in our results of operations and the decrease in our common stock price andmarket capitalization.Other income (expense), net. Other expense was $5.7 million for the year ended December 31, 2015 compared to other income of $0.6 million for the year endedDecember 31, 2014 . Other income (expense) is primarily comprised of change in fair value of contingent consideration, interest expense, interest income, bargainpurchase gain and other non-operating items. The decrease in the overall other income (expense) of $6.3 million was mainly due to the bargain purchase gain of$5.4 million, which was offset by an increase in interest expense of $5.2 million as a full-year interest expense was recorded in 2015 on our Convertible Notes andlosses due to change in fair value of contingent consideration of $0.4 million compared to a gain of $6.6 million in 2014.Income tax expense. There was an income tax benefit recorded during the year ended December 31, 2015 of $8.7 million , compared to an income tax expense of$3.6 million for the year ended December 31, 2014 . At December 31, 2015 and 2014 , we had net deferred income tax assets of approximately $231.0 million and$114.7 million , respectively, with a valuation allowance of $250.2 million and $136.5 million , respectively. As a result, our effective tax rate was 5.4% and 4.1%for the years ended December 31, 2015 and 2014 , respectively. We have an income tax receivable of $1.8 million and $2.8 million as of December 31, 2015 and2014 , respectively.Gain on redemption of preferred stock. We recognized a gain of $0.4 million which represents the difference between the carrying amount and the amount we paidto redeem all of the then outstanding Series B Preferred Stock shares in March 2014. There was no redemption gain (loss) on preferred stock in 2015.Effects of participating preferred stock. There was no effect from participating preferred stock in 2015. The effect was $0.1 million for the year endedDecember 31, 2014 .Effects of participating share-based awards. Effects of participating restricted stock units was $0.0 million and $1.2 million for the years ended December 31,2015 and 2014 , respectively.Adjusted EBITDAWe use earnings before interest, taxes, depreciation and amortization, adjusted for certain additional items, identified in the table below, or AdjustedEBITDA, as a supplemental performance measure. We present Adjusted EBITDA because we believe it assists investors in analyzing our performance acrossreporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use AdjustedEBITDA to evaluate, assess46Table of Contentsand benchmark our financial performance on a consistent and a comparable basis and as a factor in determining incentive compensation for our executives.The following table provides our Adjusted EBITDA for the periods presented, as well as a reconciliation to net income: Year endedDecember 31, Year endedDecember 31,(In thousands)1Q-2016 2Q-2016 3Q-2016 4Q-2016 2016 1Q-2015 2Q-2015 3Q-2015 4Q-2015 2015Net income (loss)$(6,888) $7,714 $23,505 $20,382 $44,713 $(38,304) $(2,163) $(15,671) $(95,572) $(151,710)Adjustments: Income tax (benefit)expense728 1,296 (1,203) 3,447 4,268 (897) (707) (1,050) (6,047) (8,701)Interest expense3,311 3,738 4,487 4,451 15,987 2,743 2,928 2,921 3,275 11,867Other income(expense), net88 (15,738) (2,699) 2,546 (15,803) (565) (1,779) 462 1,410 (472)Change in fair value ofcontingentconsideration(15) 3,571 1,124 3,224 7,904 293 (2,121) 1,106 363 (359)Gain on involuntaryconversion(3,543) (997) (3,470) (1,884) (9,894) — — — — —Gain on bargainpurchase— — — — — — — (5,358) — (5,358)Impairment of goodwill— — — — — — — — 175,028 175,028Impairment of assets(2)— — — 17,893 17,893 — — — — —Straight-line leaseexpense(94) (80) (73) (38) (285) (158) (145) (19) (94) (416)Depreciation7,674 7,824 7,949 8,378 31,825 5,613 6,134 6,261 6,989 24,997Amortization(140) (134) (129) 46 (357) (219) (206) (199) (91) (715)Other— — — — — 197 162 (4) 486 841Biodiesel tax credit (1)— — — — — 15,745 22,883 27,264 (65,892) —Non-cash stockcompensation1,076 858 2,133 1,829 5,896 1,080 1,156 1,191 1,734 5,161Adjusted EBITDA$2,197 $8,052 $31,624 $60,274 $102,147 $(14,472) $26,142 $16,904 $21,589 $50,163(1)On December 18, 2015, the Protecting Americans from Tax Hikes Act of 2015 was signed into law, which reinstated and extended a set of tax provisions,including the retroactive reinstatement for 2015 and extension for 2016 of the federal biodiesel mixture excise tax credit. The retroactive credit for 2015resulted in a net benefit to us that was recognized in the fourth quarter of 2015, however because this credit relates to the full year operating performanceand results, we allocated the first three quarters of 2015, respectively, based upon gallons sold and excluded those amounts from the fourth quarter 2015Adjusted EBITDA.(2)Represents the impairment charge to write down the carrying value of certain assets, mostly attributed to the Company's Emporia facility, to remainingsalvage value.Adjusted EBITDA is a supplemental performance measure that is not required by, or presented in accordance with, generally accepted accounting principles,or GAAP. Adjusted EBITDA should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP, or asalternatives to cash flows from operating activities or a measure of our liquidity or profitability. Adjusted EBITDA has limitations as an analytical tool, and shouldnot be considered in isolation, or as a substitute for any of our results as reported under GAAP. Some of these limitations are:•Adjusted EBITDA does not reflect our cash expenditures for capital assets or the impact of certain cash clauses that we consider not to be an indication ofour ongoing operations;•Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital requirements;•Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness;•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, andAdjusted EBITDA does not reflect cash requirements for such replacements;47Table of Contents•stock-based compensation expense is an important element of our long term incentive compensation program, although we have excluded it as an expensewhen evaluating our operating performance; and•other companies, including other companies in our industry, may calculate these measures differently than we do, limiting their usefulness as acomparative measure.Liquidity and Capital ResourcesSources of liquidity. At December 31, 2016 and 2015 , the total of our cash and cash equivalents was $116.2 million and $47.1 million , respectively. AtDecember 31, 2016 , we had term debt before debt issuance costs of $217.9 million , compared to term debt before debt issuance costs of $256.6 million atDecember 31, 2015 . This term debt is due in various tranches and the maturities are reflected in the contractual obligations table below. We set aside a total of$4.0 million of restricted cash in the form of certificates of deposits as collateral for certain letters of credit. The debt is subject to various financial covenants. Wewere in compliance with the restrictive financial covenants associated with the borrowings as of December 31, 2016.Our term debt before debt issuance costs (in millions) is as follows (total balance may not foot due to rounding): December 31, 2016 20154.00% Convertible Senior Notes, $152,000 face amount, due in June 2036$113.4 $— 2.75% Convertible debt, $73,838 face amount, due in June 201967.3 126.1REG Geismar GOZone bonds, secured, variable interest rate, due in October 2033— 100.0REG Danville term loan8.2 —REG Newton term loan13.1 16.8REG Mason City term loan2.7 3.7REG Ames term loans3.6 3.9REG Grays Harbor term loan9.3 5.2Other0.3 0.9Total term debt before debt issuance costs$217.9 $256.6In addition, we had revolving debt (in millions) as follows: December 31, 2016 2015Total revolving loans (current)$52.8 $23.1Maximum remaining available to be borrowed under the Wells Fargo/Fifth Third and Bankers Trust revolving linesof credit$100.2 $23.12019 Convertible NotesIn June 2014, the Company issued $143.8 million in convertible senior notes (the “2019 Convertible Notes”) with a maturity date of June 15, 2019, unlessearlier converted or repurchased. The 2019 Convertible Notes bear interest at a rate of 2.75% per annum, payable semi-annually in arrears, beginning December15, 2014.The initial conversion rate is 75.3963 shares of Common Stock per $1 principal amount of 2019 Convertible Notes, which represents an initial conversionprice of approximately $13.26 per share. The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaidinterest. Certain corporate events that occur prior to the stated maturity date can cause the Company to increase the conversion rate for a holder.Prior to December 15, 2018, holders may convert all or any portion of their 2019 Convertible Notes only under certain limited circumstances where the saleprice of Common Stock for a period of time is (i) greater than or equal to 130% of the conversion price of the 2019 Convertible Notes on each applicable tradingday; (ii) less than 98% of the product of the last reported sale price of the Common Stock and the conversion rate of the 2019 Convertible Notes on each applicabletrading day; or (iii) upon the occurrence of specified corporate events. On or after December 15, 2018 until the close of business on the second scheduled tradingday immediately preceding the maturity date of the 2019 Convertible Notes, holders may convert their 2019 Convertible Notes at any time, regardless of theforegoing circumstances. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of Common Stock or a combination of cash andshares of Common Stock, at the48Table of ContentsCompany’s election. The Company's current intent is to settle the principal amount of the 2019 Convertible Notes in cash upon conversion. If the conversion valueexceeds the principal amount, the Company would deliver shares of its common stock in respect to the remainder of its conversion obligation in excess of theaggregate principal amount (conversion spread).The 2019 Convertible Notes are not redeemable at the Company’s option prior to maturity.We may, from time to time, depending on market conditions and other factors, repurchase our outstanding indebtedness, including our 2019 ConvertibleNotes, whether or not such indebtedness trades above or below its face amount, for cash and/or in exchange for other securities or other consideration, in each casein open market purchases and/or privately negotiated transactions.During 2016, we bought back $69.9 million principal amount of the 2019 Convertible Notes in privately negotiated transactions using proceeds from theissuance of the 2036 Convertible Notes discussed below.2036 Convertible NotesIn June 2016, we issued $152.0 million aggregate principal amount of 4.00% Convertible Senior Notes due 2036 (the “2036 Convertible Notes”) in a privateoffering to qualified institutional buyers. The 2036 Convertible Notes bear interest at a rate of 4.00% per year payable semi-annually in arrears on June 15 andDecember 15 of each year, beginning December 15, 2016. The notes will mature on June 15, 2036, unless repurchased, redeemed or converted in accordance withtheir terms prior to such date.Prior to December 15, 2035, the 2036 Convertible Notes will be convertible only upon satisfaction of certain conditions and during certain periods asstipulated in the indenture. On or after December 15, 2035 until the close of business on the second scheduled trading day immediately preceding the maturity date,holders of the 2036 Convertible Notes may convert their notes at any time. Unless and until we obtain stockholder approval under applicable NASDAQ StockMarket rules, the 2036 Convertible Notes will be convertible, subject to certain conditions, into cash. If we obtain such stockholder approval, the 2036 ConvertibleNotes may be settled in cash, our common shares or a combination of cash and our common shares, at our election. We may not redeem the 2036 ConvertibleNotes prior to June 15, 2021. Holders of the 2036 Convertible Notes will have the right to require us to repurchase for cash all or some of their notes at 100% oftheir principal, plus any accrued and unpaid interest on each of June 15, 2021, June 15, 2026 and June 15, 2031. Holders of the 2036 Convertible Notes will havethe right to require the Company to repurchase for cash all or some of their notes at 100% of their principal, plus any accrued and unpaid interest upon theoccurrence of certain fundamental changes. The initial conversion rate is 92.8074 common shares per $1,000 principal amount of 2036 Convertible Notes(equivalent to an initial conversion price of approximately $10.78 per common share).The net proceeds from the offering of the 2036 Convertible Notes were approximately $147.1 million, after deducting fees and offering expenses of $4.9million, which was capitalized as debt issuance costs and is being amortized through June 2036. We evaluated the terms of the conversion features under theapplicable accounting literature, including Derivatives and Hedging, ASC 815, and determined that the features required separate accounting as a derivative. Thisderivative was capitalized as a long-term liability, "Convertible Debt Conversion Liability" on the Consolidated Balance Sheets and will be adjusted to reflect fairvalue each reporting date. The fair value of the convertible debt conversion liability at issuance was $40.1 million.GOZone bondsOur subsidiary, REG Geismar, LLC, or REG Geismar, was the obligor with respect to $100.0 million aggregate principal amount of Gulf Opportunity Zonetax-exempt bonds, or GOZone Bonds, originally due in October 2033, through a loan agreement with the Louisiana Public Facilities Authority. REG Geismar’spayment obligations on the GOZone Bonds were supported by a letter of credit issued by a financial institution. REG Geismar was party to an agreement toreimburse the financial institution for any draws on the letter of credit and that obligation was secured by a $101.3 million certificate of deposit by us and pledgedin favor of the financial institution. On September 6, 2016, REG Geismar caused the Louisiana Public Facilities Authority to call for redemption all of theoutstanding GOZone Bonds as of September 6, 2016. The redemption was funded by application of the funds generated by release of the certificate of deposit.REG Danville, LLCOn December 19, 2014, one of our subsidiaries, REG Danville, LLC, or REG Danville, entered into a Second Amended and Restated Loan Agreement withFifth Third Bank which provides for a $12.0 million construction and term loan facility (the49Table of Contents“Fifth Third Construction/Term Loan”) that matures on December 19, 2017. Principal of the Fifth Third Construction/Term Loan is currently amortizing inmonthly installments of $0.2 million and bears interest based upon LIBOR plus a margin of 4% per annum. In addition, the Fifth Third Construction/Term Loanrequires REG Danville to prepay principal based on 50% of its annual excess cash flows. The Fifth Third Construction/Term Loan is secured by the real propertyand certain personal property of REG Danville and is guaranteed by us. The Fifth Third Construction/Term Loan contains financial covenants which require REGDanville to achieve a minimum fixed charge coverage ratio of at least 1.25 to 1.00, a minimum tangible net worth, and which limits its annual capital expenditures.The Fifth Third Construction/Term Loan contains various loan covenants, including prohibiting it in certain circumstances from making payments to us, and alsoincludes events of default, which in addition to certain customary terms and changes of control of REG Danville, are triggered if REG Danville fails to achieve aspecified minimum annual volume of biodiesel production. As of December 31, 2016, there was $8.2 million outstanding under the Fifth Third Construction/TermLoan.Bankers Trust Line of CreditOn March 16, 2016, REG Energy Services, LLC ("REG Energy Services") entered into a revolving line of credit agreement (the "Energy ServicesRevolver") with Bankers Trust Company (“Bankers Trust”), which expires March 2017. Pursuant to the Agreement, Bankers Trust agreed to provide a revolvingline of credit (the "Line of Credit") to REG Energy Services in the amount of $30.0 million, subject to certain borrowing base limitations based upon REG EnergyServices eligible inventory and accounts receivable. Amounts outstanding under the Energy Services Revolver bear variable interest as stipulated in theAgreement. As of December 31, 2016, there was $3.2 million outstanding under the Energy Services Revolver. The Energy Services Revolver contains customarycovenants and events of default, which include a limitation on REG Energy Services ability to make distributions to us if an event of default has occurred under theEnergy Services Revolver and financial covenants that require REG Energy Services to maintain certain covenants based upon its tangible net worth. REG EnergyServices’ obligations under the Energy Services Revolver are secured by certain of its accounts receivable and inventory and are guaranteed by us. The Companyis currently working with Bankers Trust to extend or renew the Agreement.Wells Fargo and Fifth Third RevolverOn September 30, 2016, REG Services Group, LLC and REG Marketing & Logistics, LLC, our wholly-owned subsidiaries entered into a Joinder andAmendment No. 11 to Credit Agreement (the “Amendment”) to that certain Credit Agreement originally dated as of December 23, 2011, by and among Borrowers,the lenders party thereto (“Lenders”) and Wells Fargo Capital Finance, LLC, as the agent, and Fifth Third Bank, as a new lender (as amended, the “M&L andServices Revolver”). Pursuant to the Amendment, the maximum commitment of the Lenders under the M&L and Services Revolver to make revolving loans wasincreased from $60.0 million to $150.0 million and an accordion feature was added to the M&L and Services Revolver which allows our subsidiaries that are theborrowers under the M&L and Services Revolver to request commitments for additional revolving loans in aggregate amount not to exceed $50.0 million subject tocustomary conditions, including the consent of Lenders providing such additional commitments. The Amendment extended the maturity date of the M&L andServices Revolver to September 30, 2021. Loans advanced under the M&L and Services Revolver bear interest based on a one-month LIBOR rate (which shall notbe less than zero), plus a margin based on Quarterly Average Excess Availability (as defined in the Revolving Credit Agreement), which may range from 1.75%per annum to 2.25% per annum.The M&L and Services Revolver contains various loan covenants that restrict each subsidiary borrower’s ability to take certain actions, including restrictionson incurrence of indebtedness, creation of liens, mergers or consolidations, dispositions of assets, repurchase or redemption of capital stock, making certaininvestments, making distributions to us unless certain conditions are satisfied, entering into certain transactions with affiliates or changing the nature of thesubsidiary’s business. In addition, the subsidiary borrowers are required to maintain a fixed charge coverage ratio of at least 1.0 to 1.0 if excess availability underthe M&L and Services Revolver Revolver is less than 10% of the total $150 million of current revolving loan commitments, or $15 million currently. The M&Land Services Revolver is secured by our subsidiary borrowers’ membership interests and substantially all of their assets. In addition, the M&L and ServicesRevolver is secured by the accounts receivable and inventory of REG Albert Lea, LLC, REG Houston, LLC, REG New Boston, LLC, and REG Geismar, LLC(collectively, the “Plant Loan Parties”) subject to a $40.0 million limitation with respect to each of the Plant Loan Parties. We guarantee the obligations of theborrowers under the M&L and Services Revolver.Cash flow. The following table presents information regarding our cash flows and cash and cash equivalents for the years ended December 31, 2016 , 2015and 2014 :50Table of Contents Year EndedDecember 31, 2016 2015 2014 (in thousands) Net cash flows provided from operating activities$75,303 $80,160 $32,528Net cash flows used in investing activities(63,765) (67,922) (217,033)Net cash flows provided from (used in) financing activities58,174 (27,274) 94,794Net change in cash and cash equivalents69,712 (15,036) (89,711)Cash and cash equivalents, end of period$116,210 $47,081 $63,516The historical cash flows shown above illustrate that we have consistently generated positive cash flows from operations. In 2016, we generated $ 75.3million of cash from operating activities. We received approximately $243.7 million related to the 2015 reinstatement of the BTC, of which $148.7 million waspaid to our vendors and customers. In addition, approximately $ 58.6 million of operating cash was used to build up our inventories. Our net cash flows used ininvesting activity was impacted by the release of our restricted cash related to the early redemption of the GOZone Bonds, which was offset by the use of cash toacquire certain assets of Sanimax Energy, along with expenditures made for continued biorefinery capital improvements. The cash receipts from property insurancecoverage of $10.9 million helped offset the cash amounts used in other aforementioned investing activities. Our investing activity has historically focused onacquisitions and plant upgrade projects. Only one acquisition was made in each of 2016 and 2015, while there were three acquisitions in 2014. Financing activitieshave moved hand in hand with our investing activities. Financing activities were impacted by the issuance of the 2036 Convertible Notes and the early redemptionof the GOZone Bonds. Total proceeds from the issuance of the 2036 Convertible Notes after issuance costs were approximately $147.4 million, $60.9 million ofwhich was used to extinguish a portion of the 2019 Convertible Notes and $35.1 million of which was used to fund additional share repurchases, in addition topayments made under our share repurchase programs and the additional $6 million repurchase of the 2019 convertible notes in September 2016. Financingactivities in 2014 included the 2019 Convertible Notes we issued to finance the Dynamic Fuels and Syntroleum acquisitions. In 2015, there was no significant debtobtained while we spent approximately $23.3 million on our share repurchase program.Capital expenditures: We have three partially constructed plants, one near New Orleans, Louisiana, one in Clovis, New Mexico and one in Emporia, Kansasalong with a non-operational plant near Atlanta, Georgia. We expect additional investments of approximately $165 million to $270 million in the aggregate,excluding working capital requirements, would be required before these plants would be able to commence production. These facilities would add an expected 150mmgy to our nameplate production capacity. Our Clovis plant is currently being operated as a terminal facility. We plan to make significant capital expenditureswhen debt or equity financing becomes available to complete construction of these four facilities.During 2016, our capital expenditures were $60.7 million , including $13.9 million towards the planned $34.5 million upgrade to our Danville facility and$9.1 million in repairs and upgrades to bring our Geismar facility back on-line in March 2016. We began a planned $7.0 million upgrade project at our newlyacquired Madison facility in the second quarter of 2016. Our budgeted capital expenditures for 2017 are approximately $60 million to $75 million, includingupgrades to the Ralston, Madison, Geismar and Grays Harbor facilities, among others.We continue to be in discussions with lenders in an effort to enter into equity and debt financing arrangements to meet our projected financial needs forfacilities under construction and capital improvement projects for our operating facilities. Since these discussions are ongoing, we are uncertain when or iffinancing will be available. The financing may consist of common or preferred stock, debt, project financing or a combination of these financing techniques.Additional debt would increase our leverage and interest costs and would likely be secured by certain of our assets. Additional equity or equity-linked financingswould likely have a dilutive effect on our existing and future stockholders. It is likely that the terms of any project financing would include customary financial andother covenants on our project subsidiaries, including restrictions on the ability to make distributions, to guarantee indebtedness and to incur liens on the plants ofsuch subsidiaries.Contractual Obligations:The following table describes our commitments to settle contractual obligations in cash as of December 31, 2016 :51Table of Contents Payments Due by Period Total Less Than1 Year Years 1-3 Years4-5 More Than5 Years (In thousands)Long Term Debt (1)$265,616 $21,948 $99,963 $3,931 $139,774Contingent Consideration (2)46,568 17,637 28,931 — —Operating Lease Obligations (3)112,028 18,731 42,502 13,839 36,956Purchase Obligations (4)27,232 3,857 10,829 5,952 6,594Other Obligations (5)7,645 — — — — $459,089 $62,173 $182,225 $23,722 $183,324(1)See Note 10 of Item 8 for additional detail. Includes fixed interest associated with these obligations.(2)Represents contingent consideration relating to our acquisitions of LS9, Syntroleum/Dynamic Fuels and Imperium. See Note 4 of Item 8 for additionaldetail.(3)Operating lease obligations consist of leases of distribution terminals, biomass-based diesel storage facilities, railcars and vehicles.(4)Purchase obligations for our production facilities.(5)Includes commitments, other facility obligations and a $1.9 million of liability for unrecognized tax benefits as the timing and amounts of cash paymentsare uncertain (the amounts have not been classified by period).Off-Balance Sheet ArrangementsWe have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes infinancial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.Recent Accounting PronouncementsFor a discussion of new accounting pronouncements affecting us, refer to “Note 2 – Summary of Significant Accounting Policies” to our consolidatedfinancial statements.ITEM 7A.Quantitative and Qualitative Disclosures about Market RiskThe primary objectives of our investment activity are to preserve principal, provide liquidity and maximize income without significantly increasing risk.Some of the securities we invest in are subject to market risk. This means that a change in prevailing interest rates may cause the principal amount of theinvestment to fluctuate. To minimize this risk, we maintain a portfolio of cash equivalents in short-term investments in money market funds.Commodity Price RiskOver the period from January 2010 through December 2016 , average diesel prices based on Platts reported pricing for Group 3 (Midwest) have ranged froma high of approximately $3.64 per gallon reported in October 2012 to a low of approximately $0.85 per gallon in January 2016, with prices averaging $2.43 pergallon during this period. Over the period January 2010 to December 2016, soybean oil prices (based on daily closing nearby futures prices on the CBOT for crudesoybean oil) have ranged from a high of $0.5977 per pound, or $4.48 per gallon of biodiesel in April 2011 to a low of $0.2605 per pound, or $1.95 per gallon inSeptember 2015 assuming 7.5 pounds of soybean oil yields one gallon of biodiesel with closing sales prices averaging $0.4224 per pound or $3.17 per gallon. Overthe period from January 2010 through December 2016 , animal fat prices (based on prices from The Jacobsen Missouri River, for choice white grease) have rangedfrom a high of $0.5450 per pound in June 2011 to a low of $0.1600 per pound in December 2015, with sales prices averaging $0.3454 per pound during this period.Over the period from July 2010 through December 2016 , RIN prices (based on prices from OPIS) have ranged from a high of $1.99 in September 2011 to a low of$0.24 in November 2013, with sales prices averaging $0.87 during this period.Adverse fluctuations in feedstock prices as compared to biomass-based diesel prices result in lower profit margins and, therefore, represent unfavorablemarket conditions. The availability and price of feedstocks are subject to wide fluctuations due to unpredictable factors such as weather conditions during thegrowing season, rendering volumes, carry-over from the previous crop year and current crop year yields, governmental policies with respect to agriculture andsupply and demand, among others.52Table of ContentsWe have prepared a sensitivity analysis to estimate our exposure to market risk with respect to our sales contracts, lower cost feedstock requirements,soybean oil requirements and the related exchange-traded contracts for 2016 . Market risk is estimated as the potential loss in fair value, resulting from ahypothetical 10% adverse change in the fair value of our lower cost feedstock and soybean oil requirements and biomass-based diesel sales. The results of thisanalysis, which may differ from actual results, are as follows: 2016 Volume (in millions) Units Hypothetical Adverse Change in Price Impact on Annual Gross Profit (in millions) Percentage Change in Gross ProfitTotal Biomass-based Diesel567.1 gallons 10% $(179.8) (104.5)%Total Lower Cost Feedstocks2,210.7 pounds 10% $(59.7) (34.7)%Total Canola Oil572.4 pounds 10% $(18.9) (11.0)%Total Soy Oil307.6 pounds 10% $(10.2) (5.9)%We attempt to protect operating margins by entering into risk management contracts that mitigate price volatility of our feedstocks, such as inedible animalfat and inedible corn oil and energy prices. We create offsetting positions by using a combination of forward physical purchases and sales contracts on feedstockand biomass-based diesel, including risk management futures contracts, swaps and options primarily on heating oil and soybean oil; however, the extent to whichwe engage in risk management activities varies substantially from time to time, and from feedstock to feedstock, depending on market conditions and other factors.A 10% adverse change in the price of NYMEX NY Harbor ULSD would have a negative effect on the fair value of these instruments of $7.8 million. A 10%adverse change in the price of CBOT Soybean Oil would have a negative effect on the fair value of these instruments of $1.4 million.Interest Rate RiskREG Newton is subject to interest rate risk relating to its $13.1 million term debt financing from AgStar. Interest will accrue on the outstanding balance ofthe term loan at 30-day LIBOR plus 400 basis points (effective rate at December 31, 2016 of 4.54%).We are subject to interest rate risk under our M&L and Services Revolver under which we had $50 million borrowed and outstanding at December 31, 2016.Amounts borrowed under the M&L and Services Revolver bear interestat a per annum rate equal to the one month LIBOR rate plus a margin, which may rangefrom 1.75% per annum to 2.25% per annum, based on the Quarterly Average Excess Availability (as defined in the M&L and Services Revolver). As of December31, 2016, the effective interest rate under the M&L and Services Revolver was 2.77%.We are subject to interest rate risk under our Energy Services Revolver, whereby by our wholly owned subsidiary, REG Energy Services can borrow up to$30.0 million, subject to certain borrowing base limitations based upon eligible inventory and accounts receivable. Amounts borrowed under the Energy ServicesRevolver bear interest at a per annum rate based upon one-month LIBOR rate plus 2.50% per annum.Following the acquisition of Imperium, we are subject to interest rate risk under a credit agreement with Umpqua Bank, or Umpqua Credit Agreement,whereby our wholly owned subsidiary, REG Grays Harbor, can borrow up to $10.0 million for working capital. Amounts borrowed under the Umpqua CreditAgreement bear interest at a per annum rate at of minimum of 3.50% or Prime Rate plus 0.25%. The nominal rate at December 31, 2016 was 4.30%.Our weighted average interest rate on variable rate debt balances during 2016 was 3.43% and a hypothetical increase in interest rate of 10% would not have amaterial effect on our annual interest expenses and consolidated financial statements.InflationTo date, inflation has not significantly affected our operating results, though costs for petroleum-based diesel fuel, feedstocks, construction, labor, taxes,repairs, maintenance and insurance are all subject to inflationary pressures. Inflationary pressure in the future could affect our ability to sell the biomass-baseddiesel we produce, maintain our production facilities adequately, build new biomass-based diesel production facilities and expand our existing facilities as well asthe demand for our facility construction management and operations management services.53Table of ContentsITEM 8.Financial Statements and Supplementary DataREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders ofRenewable Energy Group, Inc.We have audited the accompanying consolidated balance sheets of Renewable Energy Group, Inc. and subsidiaries (the “Company”) as of December 31, 2016 and2015, and the related consolidated statements of operations, comprehensive income (loss), redeemable preferred stock and equity, and cash flows for each of thethree years in the period ended December 31, 2016. We also have audited the Company's internal control over financial reporting as of December 31, 2016, basedon criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. TheCompany's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment ofthe effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting.Our responsibility is to express an opinion on these financial statements and an opinion on the Company's internal control over financial reporting based on ouraudits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internalcontrol over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, andevaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal controlover financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based onthe assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide areasonable basis for our opinions.A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principalfinancial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receiptsand expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on thefinancial statements.Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls,material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of theinternal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or thatthe degree of compliance with the policies or procedures may deteriorate.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Renewable Energy Group,Inc. and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period endedDecember 31, 2016, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained,in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control - IntegratedFramework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission./s/ Deloitte & Touche LLPDes Moines, IowaMarch 10, 201754Table of ContentsRENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSAS OF DECEMBER 31, 2016 AND 2015(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) 2016 2015ASSETS CURRENT ASSETS: Cash and cash equivalents$116,210 $47,081Accounts receivable, net164,949 310,731Inventories145,408 85,890Prepaid expenses and other assets36,272 31,882Total current assets462,839 475,584Property, plant and equipment, net599,474 574,584Goodwill16,080 16,080Intangible assets, net29,470 30,941Investments12,110 8,797Other assets12,630 11,819Restricted cash4,000 105,815TOTAL ASSETS$1,136,603 $1,223,620LIABILITIES AND EQUITY CURRENT LIABILITIES: Revolving lines of credit$52,844 $23,149Current maturities of long-term debt15,402 5,206Accounts payable99,137 236,817Accrued expenses and other liabilities38,916 28,466Deferred revenue27,246 333Total current liabilities233,545 293,971Unfavorable lease obligation15,515 17,343Deferred income taxes20,279 19,186Long-term contingent consideration for acquisitions28,931 26,949Convertible debt conversion liability27,100 —Long-term debt (net of debt issuance costs of $6,286 and $4,105, respectively)196,203 247,251Other liabilities4,856 4,910Total liabilities526,429 609,610COMMITMENTS AND CONTINGENCIES (NOTE 21) EQUITY: Common stock ($.0001 par value; 300,000,000 shares authorized; 38,553,413 and 43,837,714 shares outstanding, respectively)5 4Common stock—additional paid-in-capital480,906 474,367Retained earnings214,007 169,680Accumulated other comprehensive loss(5,751) (4,009)Treasury stock (9,246,002 and 3,178,372 shares, respectively)(81,824) (28,762)Total equity attributable to the Company's shareholders607,343 611,280Noncontrolling interest2,831 2,730Total equity610,174 614,010TOTAL LIABILITIES AND EQUITY$1,136,603 $1,223,620See notes to consolidated financial statements.55Table of ContentsRENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2016 , 2015 AND 2014(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) 2016 2015 2014REVENUES: Biomass-based diesel sales$1,417,595 $954,742 $922,602Separated RIN sales274,800 186,539 130,170Biomass-based diesel government incentives346,672 245,868 220,634 2,039,067 1,387,149 1,273,406Other revenues2,165 195 425 2,041,232 1,387,344 1,273,831COSTS OF GOODS SOLD: Biomass-based diesel1,616,991 1,089,437 950,642Biomass-based diesel—related parties— 4,542 42,622Separated RINs250,809 182,688 119,788Other costs of goods sold1,916 134 167 1,869,716 1,276,801 1,113,219GROSS PROFIT171,516 110,543 160,612SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES (includes related party amounts of $0, $0, and$45, respectively)88,285 73,397 62,681RESEARCH AND DEVELOPMENT EXPENSE18,163 16,851 12,424IMPAIRMENT OF PROPERTY, PLANT, AND EQUIPMENT17,893 — —IMPAIRMENT OF GOODWILL— 175,028 —INCOME (LOSS) FROM OPERATIONS47,175 (154,733) 85,507OTHER INCOME (EXPENSE), NET: Change in fair value of contingent consideration(7,904) 359 6,631Change in fair value of convertible debt conversion liability13,045 — —Gain on debt extinguishment2,331 — —Gain on involuntary conversion9,894 — —Other income427 5,830 662Interest expense (includes related party amounts of $0, $0, and $7, respectively)(15,987) (11,867) (6,690) 1,806 (5,678) 603INCOME (LOSS) BEFORE INCOME TAXES48,981 (160,411) 86,110INCOME TAX BENEFIT (EXPENSE)(4,268) 8,701 (3,572)NET INCOME (LOSS)44,713 (151,710) 82,538LESS—NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTEREST386 (318) (73)NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY44,327 (151,392) 82,611PLUS—GAIN ON REDEMPTION OF PREFERRED STOCK— — 378LESS—EFFECT OF CHANGES TO PREFERRED STOCK— — (40)LESS—EFFECT OF PARTICIPATING PREFERRED STOCK— — (91)LESS—EFFECT OF PARTICIPATING SHARE-BASED AWARDS(874) — (1,238)NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY’S COMMON STOCKHOLDERS$43,453 $(151,392) $81,620Net income (loss) per share attributable to common stockholders: Basic$1.06 $(3.44) $2.00Diluted$1.06 $(3.44) $1.99Weighted-average shares used to compute net income (loss) per share attributable to common stockholders: Basic40,897,549 43,958,803 40,740,411Diluted40,902,860 43,958,803 40,749,913 See notes to consolidated financial statements.56Table of ContentsRENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)FOR THE YEARS ENDED DECEMBER 31, 2016 , 2015 AND 2014(IN THOUSANDS) 2016 2015 2014Net income (loss)$44,713 $(151,710) $82,538Unrealized losses on marketable securities, net of taxes of $0, $0 and $0, respectively— — (11)Foreign currency translation adjustments(1,848) (5,022) —Other comprehensive loss(1,848) (5,022) (11)Comprehensive income (loss)42,865 (156,732) 82,527Less — Comprehensive loss attributable to noncontrolling interest(106) (1,013) —Comprehensive income (loss) attributable to the Company$42,971 $(155,719) $82,527See notes to consolidated financial statements.57Table of ContentsRENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND EQUITYFOR THE YEARS ENDED DECEMBER 31, 2016 , 2015 AND 2014 (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS) RedeemablePreferredStockShares RedeemablePreferredStock Company Stockholders’ Equity CommonStockShares CommonStock CommonStock-AdditionalPaid-inCapital RetainedEarnings AccumulatedOtherComprehensiveLoss TreasuryStock Noncontrolling Interest TotalBALANCE, January 1, 2014143,313 3,963 36,506,221 $4 $359,818 $238,134 $— $(3,886) $— $594,070Issuance of common stock— — 49,662 — 582 — — — — 582Conversion of Series B Preferred Stock to common stock(816) (23) 1,634 — 23 — — — — 23Preferred stock redemption(142,497) (3,940) — — — 378 — — — 378Issuance of common stock in acquisitions (net of issuancecosts of $942)— — 7,794,710 — 80,163 — — — — 80,163Conversion of restricted stock units to common stock (net of54,252 shares of treasury stock purchased)— — 70,654 — — — — (526) — (526)Convertible notes conversion feature (net of taxes of $5,082and net of issuance cost of $886)— — — — 19,068 — — — — 19,068Purchase of capped call transactions— — — — (11,904) — — — — (11,904)Purchase of remaining interest in VIE (net of taxes of $300)— — — — (524) — — — — (524)Acquisition of noncontrolling interest— — — — — — — 8,962 8,962Stock compensation expense— — — — 5,883 — — — — 5,883Comprehensive income items— — — — — — (11) — — (11)Series B Preferred Stock dividends paid— — — — — (40) — — — (40)Net income (loss)— — — — — 82,611 — — (73) 82,538BALANCE, December 31, 2015— — 44,422,881 4 453,109 321,083 (11) (4,412) 8,889 778,662Issuance of common stock— — 37,966 — 412 — — — — 412Issuance of common stock in acquisitions— — 1,675,000 — 15,310 — — — — 15,310Conversion of restricted stock units to common stock (net of92,608 shares of treasury stock purchased)— — 295,089 — — — — (854) — (854)Treasury stock activity— — (2,593,222) — — — — (23,473) — (23,473)Acquisition of noncontrolling interest— — — — — — — — (4,828) (4,828)Stock compensation expense— — — — 5,161 — — — — 5,161Comprehensive income items— — — — — — (3,998) — (1,013) (5,011)Net loss— — — — — (151,392) — — (318) (151,710)Other— — — — 375 (11) — (23) — 341BALANCE, December 31, 2015— — 43,837,714 4 474,367 169,680 (4,009) (28,762) 2,730 614,010Issuance of common stock— — 33,973 — 316 — — — — 316Issuance of common stock in acquisition— — 500,000 1 4,050 — — — — 4,051Conversion of restricted stock units to common stock (net of69,307 shares of treasury stock purchased)— — 180,049 — — — — (767) — (767)Partial termination of capped call options (inclusive of taximpact of $116)— — — — 1,863 — — — — 1,863Convertible debt extinguishment impact (net of tax impactof $2,144)— — — — (5,560) — — — — (5,560)Treasury stock purchases— — (5,998,323) — — — — (52,295) — (52,295)Acquisition of noncontrolling interest— — — — — — — — (179) (179)Stock compensation expense— — — — 5,896 — — — — 5,896Other comprehensive income (loss)— — — — (26) — (1,742) — (106) (1,874)Net income— — — — — 44,327 — — 386 44,713BALANCE, December 31, 2016— — 38,553,413 $5 $480,906 $214,007 $(5,751) $(81,824) $2,831 $610,174See notes to consolidated financial statements.58Table of ContentsRENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2016 , 2015 AND 2014(IN THOUSANDS) 2016 2015 2014CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)$44,713 $(151,710) $82,538Adjustments to reconcile net income (loss) to net cash flows from operating activities: Depreciation expense31,825 24,997 15,255Amortization expense of assets and liabilities, net1,052 570 541Accretion of asset retirement obligations78 72 67Accretion of convertible note discount5,147 4,699 2,635Accretion of marketable securities— 189 553Impairment of property, plant and equipment, net17,893 — —Provision for doubtful accounts630 (803) 1,453Stock compensation expense5,896 5,161 5,883Impairment of goodwill— 175,028 —Impairment of investment— 1,915 —Deferred tax expense (benefits)3,009 (8,953) 3,641Change in fair value of contingent consideration7,904 (359) (6,631)Gain on involuntary conversion(9,894) — —Bargain purchase gain— (5,358) —Change in fair value of convertible debt conversion liability(13,045) — —Gain on debt extinguishment(2,331) — —Other(70) (231) 249Changes in asset and liabilities, net of effects from mergers and acquisitions: Accounts receivable145,068 (20,309) (207,877)Inventories(58,551) 29,631 (277)Prepaid expenses and other assets(5,566) 16,315 (12,146)Accounts payable(133,139) 32,422 143,131Accrued expenses and other liabilities7,771 (6,769) 2,336Deferred revenue26,913 (16,347) 1,177Net cash flows provided from operating activities75,303 80,160 32,528CASH FLOWS FROM INVESTING ACTIVITIES: Cash paid for marketable securities— (52,435) (80,974)Cash receipts from marketable securities— 68,979 63,840Cash paid for purchase of property, plant and equipment(60,705) (64,477) (60,163)Insurance proceeds for asset impairments10,949 11,027 —Cash receipts from disposal of fixed assets— — 45Transfer into restricted cash— (4,000) (117,660)Transfer out of restricted cash1,960 15,845 —Cash paid for investments(3,249) (1,452) (2,779)Cash paid for acquisitions and additional interests, net of cash acquired(12,720) (41,409) (19,369)Other investing activities— — 27Net cash flows used in investing activities(63,765) (67,922) (217,033)CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings on line of credit26,445 6,470 5,693Borrowing on other lines of credit10,185 — —Repayments on other lines of credits(2,437) — —Cash received for issuance of debt11,775 104 5,490Cash paid for capped call transactions— — (11,904)Cash received on convertible debt152,000 — 143,750Cash paid on debt(74,562) (6,708) (37,798)Cash paid for debt issuance costs(6,369) (542) (4,719)Cash received on partial termination of capped call options159 — —Cash paid for issuance of common stock and preferred stock— — (1,587)Cash paid for redemption of preferred stock— — (3,562)Cash paid for treasury stock(51,474) (24,350) (529)Cash paid for contingent consideration(7,548) (2,248) —Cash paid for preferred stock dividends— — (40)Net cash flows provided from (used in) financing activities58,174 (27,274) 94,794NET CHANGE IN CASH AND CASH EQUIVALENTS69,712 (15,036) (89,711)CASH AND CASH EQUIVALENTS, Beginning of period47,081 63,516 153,227Effect of exchange rate changes on cash(583) (1,399) $—CASH AND CASH EQUIVALENTS, End of period$116,210 $47,081 $63,516(continued)59Table of ContentsRENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2016 , 2015 AND 2014(IN THOUSANDS) 2016 2015 2014SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION: Cash paid (received) for income taxes$410 $(189) $(1,847)Cash paid for interest$9,920 $6,947 $4,065SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Common stock repurchased included in accrued expenses and other liabilities$— $464 $526Amounts included in period-end accounts payable for: Purchases of property, plant and equipment$3,833 $7,734 $4,220Issuance costs$250 $84 $311Incentive common stock liability for supply agreement$— $316 $412Issuance of common stock for acquisitions$4,050 $15,310 $80,163Contingent consideration for acquisitions$4,500 $5,000 $45,950Debt assumed in acquisition$— $5,225 $129,745Release of restricted cash to pay off the GOZone Bonds$101,315 $— $—Repayment of GOZone Bonds$100,000 $— $—Non-cash transfer of line of credit to long-term debt$4,498 $— $—Non-cash allocation of proceeds from the 2036 Convertible Notes issuance to convertible debt conversionliability$40,145 $— $—Non-cash allocation of purchase price between debt and equity related to the repurchase of the 2019Convertible Notes$7,387 $— $—Non-cash share repurchases from partial capped call termination$1,588 $— $—Gain on redemption of preferred stock$— $— $378Accruals of insurance proceeds related to impairment of property, plant and equipment$313 $1,414 $—See "Note 4 - Acquisitions" for noncash items related to the acquisition transactions. See notes to consolidated financial statements.(concluded)60Table of ContentsRENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor The Three Years Ended December 31, 2016 , 2015 and 2014(In Thousands, Except Share and Per Share Amounts)NOTE 1—ORGANIZATION, PRESENTATION, AND NATURE OF THE BUSINESSRenewable Energy Group, Inc. (the "Company" or "REG") is a company focused on providing cleaner, lower carbon intensity products and services. Today,we principally generate revenue as a leading North American biofuels producer with a nationwide distribution and logistics system. The Company participates ineach aspect of biomass-based diesel production, from acquiring feedstock, managing construction and operating biomass-based diesel production facilities, tomarketing, selling and distributing biomass-based diesel and its co-products. To do this, REG utilizes this nationwide production, distribution and logistics systemas part of an integrated value chain model to focus on converting natural fats, oils and greases into advanced biofuels and converting diverse feedstocks intorenewable chemicals.Upon completion of acquiring the remaining interest in Petrotec AG as further discussed in Note 4 - Acquisitions, the Company owns and operates fourteenbiorefineries, with twelve locations in North America and two locations in Europe, which includes thirteen operating biomass-based diesel production facilitieswith aggregate nameplate production capacity of 502 million gallons per year, or mmgy, and one fermentation facility. REG has one feedstock processing facility.The Company's network includes the addition of a 20 -million gallon nameplate capacity biomass-based diesel refinery located in DeForest, Wisconsin, acquired inMarch 2016. Nine of these plants are “multi-feedstock capable” which allows them to use a broad range of lower cost feedstocks, such as inedible corn oil, usedcooking oil and inedible animal fats in addition to vegetable oils, such as soybean oil and canola oil.The Company also has three partially constructed production facilities and one non-operational production facility. The Company will need to raiseadditional capital to complete construction of these plants and fund working capital requirements. It is uncertain when financing will be available. During fourthquarter 2016, the Company wrote down the carrying value at its Emporia facility to its estimated salvage value due to competition from foreign, imported productand the probability of that project being completed in the near term is unlikely.The biomass-based diesel industry and the Company’s business have benefited from the continuation of certain federal and state incentives. The federalbiodiesel mixture excise tax credit (the "BTC") was reinstated for 2015, in effect throughout 2016 and lapsed on January 1, 2017. It is uncertain whether the BTCwill be reinstated thereafter. The expiration along with other amendments of any one or more of those laws, could adversely affect the financial results of theCompany.NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of ConsolidationThe consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, and entities which it controls. All intercompanybalances and transactions have been eliminated for consolidated reporting purposes.Cash and Cash EquivalentsCash and cash equivalents consists of money market funds and demand deposits with financial institutions. The Company considers all highly liquid debtinstruments purchased with an original maturity of three months or less to be cash equivalents.Accounts ReceivableAccounts receivable are carried at invoiced amount less allowance for doubtful accounts. Management estimates the allowance for doubtful accounts basedon existing economic conditions, the financial conditions of customers, and the amount and age of past due accounts. Receivables are considered past due if fullpayment is not received by the contractual due date. Past due accounts are generally written off against the allowance for doubtful accounts only after reasonablecollection attempts have been exhausted. Activity regarding the allowance for doubtful accounts was as follows:61Table of ContentsBalance, January 1, 2014$2,124Amount charged to selling, general and administrative expenses1,453Charge-offs, net of recoveries(1,304)Balance, December 31, 20142,273Amount charged to selling, general and administrative expenses(803)Charge-offs, net of recoveries(119)Balance, December 31, 20151,351Amount charged to selling, general and administrative expenses630Charge-offs, net of recoveries(106)Balance, December 31, 2016$1,875InventoriesInventories are valued at the lower of cost or net realizable value. Cost is determined based on the first-in, first-out method. There were no lower of cost ormarket adjustments made to the inventory values reported as of December 31, 2016 and 2015 .Renewable Identification Numbers (RINs)When the Company produces and sells a gallon of biomass-based diesel, 1.5 to 1.7 RINs per gallon are generated. RINs are used to track compliance withRenewable Fuel Standards (RFS2). RFS2 allows the Company to attach between zero and 2.5 RINs to any gallon of biomass-based diesel. As a result, a portion ofthe selling price for a gallon of biomass-based diesel is generally attributable to RFS2 compliance. However, RINs that the Company generates are a form ofgovernment incentive and not a result of the physical attributes of the biomass-based diesel production. Therefore, no cost is allocated to the RIN when it isgenerated, regardless of whether the RIN is transferred with the biomass-based diesel produced or held by the Company pending attachment to other biomass-based diesel production sales.In addition, the Company also obtains RINs from third parties who have separated the RINs from gallons of biomass-based diesel. From time to time, theCompany holds varying amounts of these separated RINs for resale. RINs obtained from third parties are initially recorded at their cost and are subsequentlyrevalued at the lower of cost or market as of the last day of each accounting period and the resulting adjustments are reflected in costs of goods sold for the period.The value of these RINs is reflected in “Prepaid expenses and other assets” on the consolidated balance sheet. The cost of goods sold related to the sale of theseRINs is determined using the average cost method, while market prices are determined by RIN values, as reported by the Oil Price Information Service (OPIS).California’s Low Carbon Fuel StandardThe Company generates Low Carbon fuel Standard (LCFS) credits for its low carbon fuels or blendstocks when its qualified low carbon fuels are importedby REG to California though approved physical pathways. LCFS credits are used to track compliance with California’s LCFS, which enables the Company togenerate LCFS credits based upon the carbon intensity of qualified fuels that are imported by REG into California. Other companies can take title outside ofCalifornia and generate LCFS credits instead of REG upon import into the state. One LCFS credit equates to one metric ton reduction of carbon dioxide comparedto the petroleum fuel baseline so the amount gallons of low carbon fuel consumption to generate one credit will vary. As a result, a portion of the selling price for agallon of biomass-based diesel sold into California is also attributable to LCFS compliance. However, LCFS credits that the Company generates are a form ofgovernment incentive and not a result of the physical attributes of the biomass-based diesel production. Therefore, no cost is allocated to the LCFS credit when it isgenerated, regardless of whether the LCFS credit is transferred with the biomass-based diesel produced or held by the Company on other biomass-based dieselsales that do not transfer credits.In addition, the Company also obtains LCFS credits from third party trading activities. From time to time, the Company holds varying amounts of these 3rdparty LCFS credits for resale. LCFS credits obtained from third parties is initially recorded at their cost and are subsequently revalued at the lower of cost or netrealizable value as of the last day of each accounting period and the resulting adjustments are reflected in costs of goods sold for the period. The value of LCFSobtained from third parties is reflected in “Prepaid expenses and other assets” on the consolidated balance sheet. The cost of goods sold related to the sale of theseLCFS credits is determined using the average cost method, while market prices are determined by LCFS62Table of Contentsvalues, as reported by the Oil Price Information Service (OPIS). At year end, the Company held no LCFS credits purchased from third parties. The Company records assets acquired and liabilities assumed through the exchange of non-monetary assets based on the fair value of the assets and liabilitiesacquired or the fair value of the consideration exchanged, whichever is more readily determinable.Derivative InstrumentsDerivatives are recorded on the balance sheet at fair value with changes in fair value recognized in current period earnings. The Company did not elect to usehedge accounting for all periods presented.Property, Plant and EquipmentProperty, plant and equipment is recorded at cost less accumulated depreciation. Maintenance and repairs are expensed as incurred. Depreciation expense iscomputed on a straight-line method based upon estimated useful lives of the assets. Estimated useful lives are as follows: Automobiles and trucks5 yearsComputers and office equipment5 yearsOffice furniture and fixtures7 yearsMachinery and equipment5-30 yearsLeasehold improvementsthe lesser of the lease term or 30 yearsBuildings and improvements30-40 yearsIn April 2015, the Company experienced a fire at its Geismar facility, resulting in the shutdown of the facility. The Company estimated fixed assets ofapproximately $11,027 were impaired as a result of the fire. At December 31, 2016, the Company had received property proceeds of $19,037 from insurance forthe property damage. The excess of the property insurance proceeds over the net book value of the impaired assets, $8,010 , was recorded as gain on involuntaryconversion on the Consolidated Statements of Operations. These proceeds for property damage were final and have been approved and paid by the insurancecarriers.In September 2015, another fire occurred at the Geismar facility. The Company estimated fixed assets of approximately $1,414 were impaired by theSeptember fire. At December 31, 2016, the Company recorded proceeds of $2,939 from insurance for the property damage. The excess of the property insuranceproceeds over the net book value of the impaired assets of $1,525 , was recorded as gain on involuntary conversion on the Consolidated Statements of Operations.In addition, as of December 31, 2016, the Company recognized the undisputed portion of $15,060 from its business interruption insurance claim related to theSeptember 2015 fire, which was recorded as an increase in biomass-based diesel sales in the Company's consolidated Statements of Operations. The Companycontinues to work with the insurance carriers on the in-dispute portion of the business interruption claim. None of this in-dispute business interruption insuranceamount has been recognized in earnings at December 31, 2016.As of December 31, 2016 , 2015 and 2014 , the Company capitalized interest incurred on debt during the construction of assets of $537 , $897 and $1,345 ,respectively.GoodwillGoodwill is tested for impairment annually on July 31 or when impairment indicators exist. Goodwill is allocated and tested for impairment by reportingunits. At December 31, 2016 and December 31, 2015, the Company had goodwill in the Services reporting unit. The analysis is based on a comparison of thecarrying value of the reporting unit to its fair value, determined utilizing both a discounted cash flow methodology and a market comparable methodology. Thedetermination of whether or not the asset has become impaired involves a significant level of judgment in the assumptions underlying the approach used todetermine the fair value of the Company’s reporting units. The inputs used to estimate the fair value of the Company’s Services reporting unit are considered Level3 inputs of the fair value hierarchy and included the following: (1) The Company’s financial projections for its reporting unit were based on its analysis of variousfactors which include, among other things, demands, margins, whether the BTC is reinstated, capital expenditures and economic conditions. Such estimates areconsistent with those used in the Company’s budgeting and capital investment reviews, incorporating current market information, historical factors and theregulatory environment; (2) The long-term growth rates assumed for the Company’s reporting unit was based on a comparison to similar publicly tradedcompanies, supported by market information obtained from63Table of Contentsexternal sources; and (3) The discount rate used to measure the present value of the projected future cash flows was determined by separately estimating borrowingcost of capital, equity cost of capital, and entity structure. Changes in estimates of future cash flows caused by items such as unforeseen events or sustainedunfavorable changes in market conditions could negatively affect the fair value of the reporting unit’s goodwill asset and result in an impairment charge. The 2016annual impairment test determined that the fair value of the Services reporting unit exceeded its carrying value by approximately 16% . During 2015, the Companyhad a full write-off of goodwill in the Biomass-based Diesel and Renewable Chemicals reporting units.Impairment of Long-lived AssetsThe Company tests its long-lived assets for recoverability when events or circumstances indicate that its carrying amount may not be recoverable. Significantassumptions used in the undiscounted cash flow analysis, when it is required, include the projected demand for biomass-based diesel based on annual renewablefuel volume obligations under the Renewable Fuel Standards (RFS2), the Company's capacity to meet that demand, the market price of biomass-based diesel andthe cost of feedstock used in the manufacturing process. For facilities under construction, estimates also include the capital expenditures necessary to completeconstruction of the plant and the projected costs of financing. Late during the year ended December 31, 2016, the Company recorded impairment charges of$15,593 related to its Emporia facility's property, plant and equipment assets resulting from competition from foreign, imported product and the probability of thatproject being completed in the near term is unlikely. In addition, the Company recorded impairment charges of $2,300 against certain property, plant andequipment as the carrying amounts of these assets were deemed not recoverable given the assets' deteriorating physical conditions identified during the fourthquarter of 2016. In 2015, other than those related to the 2015 Geismar fires of $12,441 , which were fully offset by insurance receipts and/or accounts receivablefor insurance coverage, there was no other impairments recorded for the years ended December 31, 2015 and 2014 .Convertible DebtIn June 2016, the Company issued $152,000 aggregate principal amount of 4% convertible senior notes due 2036 (the "2036 Convertible Notes"). TheCompany may not elect to issue shares of common stock upon conversion of the 2036 Convertible Notes to the extent such election would result in the issuance ofmore than 19.99% of the common stock outstanding immediately before the issuance of the 2036 Convertible Notes until the Company receives stockholderapproval for such issuance. As a result, the embedded conversion option is accounted for as an embedded derivative liability. This liability is recorded at fair value,and $13,045 fair value adjustments were recorded for the year ended December 31, 2016 . The Company expects to continue marking the embedded conversionoption to market unless and until shareholders authorize additional common shares during its Annual Shareholder Meeting. See "Note 10 - Debt" for a furtherdescription of the transaction.Capped Call TransactionIn connection with the issuance of the 2014 convertible senior notes, the Company entered into capped call transactions. The purchased capped calltransactions were recorded as a reduction to common stock-additional paid-in-capital. Because this was considered to be an equity transaction and qualifies for thederivative scope exception, no future changes in the fair value of the capped call will be recorded by the Company. During 2016, in connection with the issuance ofthe 2036 Convertible Notes, certain call options covered by the original capped call transaction were rebalanced and reset to cover 100% of the total number ofshares of the Company's Common Stock underlying the remaining principal of the 2019 Convertible Notes. The impact of these transactions, net of tax, wasreflected as an addition/reduction to common stock-additional paid-in capital as presented in the Consolidated Statements of Redeemable Preferred Stock andEquity.Share Repurchase ProgramsIn February 2015, the Company's board of directors approved a share repurchase program of up to $30,000 of the Company's shares of common stock. Sharesmay be repurchased from time to time in open market transactions, privately negotiated transactions or by other means. The Company accounts for sharerepurchases using the cost method. Under this method, the cost of the share repurchase is recorded entirely in treasury stock, a contra equity account. TheCompany used the remaining available funds of approximately $6,687 authorized under this program to repurchase 738,448 shares of Common Stock during thefirst 6 months of 2016.In March 2016, the Company's board of directors approved a repurchase program of up to $50,000 of the Company's shares of common stock and/orconvertible notes, in effect through March 5, 2018. Under the program, which is in addition to the $30,000 common stock repurchase program announced inFebruary 2015, the Company may repurchase shares or convertible notes from time to time in open market transactions, privately negotiated transactions or byother means. The timing and amount of repurchase transactions were determined by the Company's management based on its evaluation of64Table of Contentsmarket conditions, share price, bond price, legal requirements and other factors. During 2016, the Company repurchased 5,070,375 shares of Common Stock for$44,019 under this program. In addition, the Company used approximately $5,584 under this program to repurchase $6,000 principal amount of the Company's2019 Convertible Notes, finishing up the program in 2016.Foreign Currency Transactions and TranslationThe Company’s reporting and functional currency is U.S. dollars. Monetary assets and liabilities denominated in currencies other than U.S. dollars areremeasured into their respective functional currencies at exchange rates in effect at the balance sheet date. The resulting exchange gain or loss is included in theCompany’s Consolidated Statements of Operations as foreign exchange gain (loss) unless the remeasurement gain or loss relates to an intercompany transactionthat is of a long-term investment nature and for which settlement is not planned or anticipated in the foreseeable future. Gains or losses arising from translation ofsuch transactions are reported as a component of accumulated other comprehensive income (loss) in the Company’s Consolidated Balance Sheets.The Company translates the assets and liabilities of its foreign subsidiaries from their respective functional currencies to U.S. dollars at the appropriate spotrates as of the balance sheet date. Generally, our foreign subsidiaries use the local currency as their functional currency. Changes in the carrying value of theseassets and liabilities attributable to fluctuations in spot rates are recognized in foreign currency translation adjustment, a component of accumulated othercomprehensive income (loss) in the Company’s Consolidated Balance Sheets.The other comprehensive loss amounts presented in the Company's Consolidated Statements of Comprehensive Income (Loss) and Consolidated Statementsof Redeemable Preferred Stock and Equity mainly include the foreign currency translation adjustment resulting from translating the financial statements ofPetrotec AG from Euros to US Dollars, the Company's functional currency.Revenue RecognitionThe Company recognizes revenues from the following sources:•the sale of biomass-based diesel and its co-products, as well as Renewable Identification Numbers (RINs), California Low Carbon Fuel Standardcredits (LCFS credits) and raw material feedstocks, purchased or produced by the Company at owned manufacturing facilities and manufacturingfacilities with which the Company has tolling arrangements;•the resale of biomass-based diesel, RINs, LCFS credits and raw material feedstocks acquired from third parties;•the sale of petroleum-based heating oil and diesel fuel acquired from third parties, along with the sale of these items further blended with biodieselproduced at wholly owned facilities;•incentives received from federal and state programs for renewable fuels; and•fees received for the marketing and sales of biomass-based diesel produced by third parties and from managing operations of third party facilities.Biomass-based diesel, including RINs and LCFS credits, and raw material feedstock revenues are recognized where there is persuasive evidence of anarrangement, delivery has occurred, the price has been fixed or is determinable and collectability can be reasonably assured.Fees received under toll manufacturing agreements with third parties are generally established as an agreed upon amount per gallon of biomass-based dieselproduced. The fees are recognized where there is persuasive evidence of an arrangement, delivery has occurred, the price has been fixed or is determinable andcollectability can be reasonably assured.Revenues associated with the governmental incentive programs are recognized when the amount to be received is determinable, collectability is reasonablyassured and the sale of product giving rise to the incentive has been recognized. The Company received funds from the United States Department of Agriculture(USDA) in the amount of $434 , $624 and $600 for the years ended December 31, 2016 , 2015 and 2014 , respectively. The Company records amounts when it hasreceived notification of a payment from the USDA or is in receipt of the funds and records the awards under the Program in "Biodiesel government incentives" asthey are closely associated with the Company's biomass-based diesel production activities.FreightAmounts billed to customers for freight are included in biomass-based diesel sales. Costs incurred for freight are included in costs of goods sold.65Table of ContentsAdvertising CostsAdvertising costs are charged to expense as they are incurred. Advertising and promotional expenses were $1,746 , $1,288 and $755 for the years endedDecember 31, 2016 , 2015 and 2014 , respectively.Research and DevelopmentResearch and development (R&D) costs are charged to expense as incurred. In process research and development (IPR&D) assets acquired in connectionwith acquisitions are recorded on the Consolidated Balance Sheets as intangible assets. During October 2016, the Company entered into the first commercial saleagreement to sell certain products made from the IPR&D platform. This triggered the review of the impairment and useful life of the IPR&D assets. The Companyperformed a final discounted cash flow analysis at October 31, 2016 prior to assigning a useful life to the IPR&D assets. No impairment was identified related tothe Company's IPR&D balance at October 1, 2016, December 31, 2016 and 2015. The Company then determined the useful life of the IPR&D assets to be 15 yearsand utilizes a straight line method to amortize these assets over the useful life.Employee Benefits PlanThe Company sponsors an employee savings plan under Section 401(k) of the Internal Revenue Code. The Company makes matching contributions equal to50% 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 definedcontribution plan was $1,168 , $1,071 and $855 for the years ended December 31, 2016 , 2015 and 2014 , respectively.Stock-Based CompensationStock-based compensation expense is measured at the grant-date fair value of the award and recognized as compensation expense over the vesting period.Income TaxesThe Company uses the asset and liability method to account for income taxes. Accordingly, deferred income taxes are recognized for differences between thefinancial 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. Changesin tax rates are recognized directly to the income statement as they arise. Consideration is given to positive and negative evidence related to the realization of thedeferred tax assets and valuation allowances are established to reduce deferred tax assets to the amounts expected to be realized. Significant judgment is required inmaking this assessment.For uncertain tax positions, the Company recognizes tax benefits that are more likely than not to be sustained upon examination by tax authorities. Theamount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized.With regard to non-US subsidiaries, the Company will indefinitely reinvest any future earnings outside of the U.S. andcurrently does not have any undistributed earnings. ConcentrationsOne customer represented slightly less than 10% of the total consolidated revenues of the Company for the years ended December 31, 2016 and 2015. Thiscustomer accounted for more than 10% of the total consolidated revenues of the Company for the year ended December 31, 2014 . All customer amounts disclosedin the table are related to biomass-based diesel sales: 2016 2015 2014Customer A$144,849 $114,030 $231,780The Company maintains cash balances at financial institutions, which may at times exceed the $250 coverage by the U.S. Federal Deposit InsuranceCompany.Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the datesof the financial statements and reported amounts of revenues and expenses during the reporting periods. These estimates are based on information that is currentlyavailable to66Table of Contentsmanagement and on various assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from those estimates.New Accounting PronouncementsOn February 25, 2016, the FASB issued ASU 2016-02, which introduces a lessee model that brings most leases on the balance sheet. The new standard alsoaligns many of the underlying principles of the new lessor model with those in ASC 606, the FASB’s new revenue recognition standard (e.g., those related toevaluating when profit can be recognized). Furthermore, the ASU addresses other concerns related to the current leases model. The ASU is effective for annualperiods beginning after December 15, 2018 and interim periods therein. The Company anticipates this standard will have a material impact on our consolidatedfinancial statements. While the Company is continuing to assess all potential impacts of the standard, the Company currently believes the most significant impactrelates to its accounting for office, railcar and terminal operating leases. The Company plans to apply a modified retrospective transition approach to eachapplicable lease that exists at January 1, 2017 as well as leases entered after this date.In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting”. The amendments in this updated guidanceinclude changes to simplify the codification for several aspects of the accounting for share-based payment transactions, including the income tax consequences,classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public entities, this guidance is effective for fiscal yearsbeginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted. The Company elected early adoption forthe quarter ended December 31, 2016. As part of the adoption the Company has elected to continue to account for forfeitures of share-based payments byestimating the number of award expected to be forfeited and adjusting the estimate when it is no longer probable that the employee will fulfill the servicecondition. This change had no cumulative effect on retained earnings or other components of equity and did not change the net assets as of the beginning of theperiod of adoption (January 1, 2016). In addition, the Company assessed that the other adjustments provided in the new guidance did not have any material impacton its consolidated financial statements.In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers(Topic 606), (ASU 2014-09) which will require entities to recognize revenue in an amount that reflects the transfer of promised goods or services to a customer inan amount based on the consideration the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 also requires disclosures regardingthe nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. The amendments may be applied retrospectively to eachprior period presented, or retrospectively with the cumulative effect recognized as of the date of initial application. ASU 2014-09 is effective for interim and annualreporting periods beginning after December 15, 2017. The Company is still evaluating its contracts with customers in relation to the requirements of ASU 2014-09,and has not concluded on the financial statement impact of implementing ASU 2014-09. The Company expects to complete its assessment by the quarter endingSeptember 30, 2017.In March 2016, the FASB issued ASU 2016-08, "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Consideration (ReportingRevenue Gross versus Net)" that clarifies how an entity should identify the unit of accounting for the principal versus agent evaluation and how it should apply thecontrol principle to certain types of arrangements, such as service transactions. The guidance also re-frames the indicators to focus on evidence that an entity isacting as a principal rather than an agent. The guidance is effective for public business entities for fiscal years beginning after December 15, 2017, and interimperiods within those fiscal years. In May 2016, the FASB issued ASU 2016-12, which amends certain aspects of the new revenue standard, ASU 2014-09. Theamendments address issues such as collectability; presentation of sales tax and other similar taxes collected from customers; noncash consideration; contractmodifications and completed contracts at transition; and transition technical correction. The guidance is effective for public business entities for fiscal yearsbeginning after December 15, 2017 and interim periods within those fiscal years. In December 2016, the FASB issued ASU 2016-20 providing technicalcorrections and improvements to Topic 606, Revenue from Contracts with Customers. While the Company is continuing to assess all potential impacts of the newrevenue standard, the Company anticipates that the standard will not have a material impact on its consolidated financial statements.NOTE 3—STOCKHOLDERS’ EQUITY OF THE COMPANYCommon StockThe Company has authorized capital stock consisting of 450,000,000 shares, all with a par value of $.0001 per share, which includes 300,000,000 shares ofCommon Stock, 140,000,000 shares of Common Stock A and 10,000,000 shares of Preferred Stock including 3,000,000 shares of Series B Preferred Stock.67Table of ContentsEach 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 topreferences that may apply to shares of previously outstanding Series A Preferred Stock and currently outstanding Series B Preferred Stock as outlined below, theholders of outstanding shares of Common Stock are entitled to receive dividends. After the payment of all preferential amounts required to the holders of Series BPreferred Stock, all of the remaining assets of the Company available for distribution shall be distributed ratably among the holders of Common Stock.NOTE 4—ACQUISITIONS2016 AcquisitionSanimax Energy, LLCOn March 15, 2016, the Company acquired fixed assets and inventory from Sanimax Energy, including the 20 mmgy nameplate capacity biomass-baseddiesel refinery in DeForest, Wisconsin. The Company completed its initial accounting of this business combination as the valuation of the real and personalproperty was finalized as of September 30, 2016.The following table summarizes the consideration paid for the acquisition from Sanimax Energy: March 15, 2016Consideration at fair value for acquisition from Sanimax: Cash$12,541Common stock4,050Contingent consideration4,500Total$21,091The fair value of the 500,000 shares of Common Stock issued was determined using the closing market price of the Company's common shares at the date ofacquisition.The Company may pay contingent consideration of up to $5,000 (Earnout Payments) over a 7 -year period after the acquisition, subject to achievement ofcertain milestones related to the biomass-based diesel gallons produced and sold by REG Madison. The Earnout Payments are payable in cash and cannot exceed$1,700 in any one year period beginning March 15, 2016 through 2023 and up to $5,000 in aggregate. As of December 31, 2016, the Company has recorded acontingent liability of $3,835 , approximately $1,790 of which has been classified as current on the Consolidated Balance Sheets.The following table summarizes the fair values of the assets acquired at the acquisition date. March 15, 2016Assets (liabilities) acquired from Sanimax Energy: Inventory$1,591Property, plant and equipment19,500Total identifiable assets acquired21,091 Accrued expenses and liabilities—Net identifiable assets acquired$21,091The following unaudited pro forma condensed combined results of operations assume that the Sanimax Energy acquisition was completed as of January 1, 2014and as if the stock had been issued on the same date.68Table of Contents Year ended December 31,2016 Year ended December 31,2015 Year ended December 31,2014Revenues$2,049,658 $1,406,580 $1,282,361Net income (loss) attributable to the Company's commonstockholders43,453 (157,524) 83,612Basic net income (loss) per share attributable to commonstockholders$1.06 $(3.54) $2.032015 acquisitionsImperium Renewables, Inc.On August 19, 2015, the Company acquired substantially all the assets of Imperium Renewables, Inc. (Imperium), including the 100 -mmgy nameplatebiomass-based diesel refinery and deepwater port terminal at the Port of Grays Harbor, Washington. The results of Imperium's operations have been included in theconsolidated financial statements since that date. The Company has finalized its accounting of this business combination during the fourth quarter of 2015.The following table summarizes the consideration paid for Imperium: August 19, 2015Consideration at fair value for Imperium: Cash$36,748Common stock15,310Contingent consideration5,000Total$57,058The fair value of the 1,675,000 shares of Common Stock issued to Imperium was determined using the closing market price of the Company's commonshares at the date of acquisition.Subject to achievement of certain milestones related to the biomass-based diesel gallons produced and sold by REG Grays Harbor and whether the BTC isreinstated, Imperium may receive certain contingent consideration (Earnout Payments) over a two -year period after the acquisition. The Earnout Payments will bepayable in cash. As of December 31, 2016 , the Company has recorded a contingent liability of $2,093 , all of which has been classified as current on theConsolidated Balance Sheets.The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date.69Table of Contents August 19, 2015Assets (liabilities) acquired of Imperium: Cash$168Accounts receivable8,274Inventory18,989Other current assets87Property, plant and equipment46,476Intangible assets2,900Total identifiable assets acquired76,894 Accounts payable(4,828)Accrued expenses and other liabilities(942)Debt(5,225)Deferred tax liabilities(3,483)Total liabilities assumed(14,478)Net identifiable assets acquired62,416Less: Bargain purchase gain5,358Net assets acquired$57,058Imperium was acquired at a price less than fair value of the net identifiable assets, and the Company recorded a net of tax bargain purchase gain of $5,358 .All future adjustments will be reported in the Consolidated Statements of Operations. The bargain purchase gain is reported in the "Other Income, Net" on theConsolidated Statements of Operations. Prior to recognizing a bargain purchase gain, the Company reassessed whether all assets acquired and liabilities assumedhad been correctly identified as well as the key valuation assumptions and business combination accounting procedures for this acquisition. After carefulconsideration and review, the Company concluded that the recognition of a bargain purchase gain was appropriate for this acquisition. Factors that contributed tothe bargain purchase price were:• The assets were not fully utilized by the seller and that the transaction was completed with a motivated seller that appeared to have recapitalized itsinvestments and desired to exit the facilities that no longer fit its strategy given the uncertainties in the industry.• The Company was able to complete the acquisition in an expedient manner, with a cash payment, stock issuance and without a financial contingency,which was a key attribute for the seller. The relatively small size of the transaction for the Company, the lack of required third-party financing and theCompany's expertise in completing similar transactions in the past gave the seller confidence that the Company could complete the transaction quickly andwithout difficultly.• Due to the unique nature of the products and limited number of potential buyers for this business, the seller found it advantageous to accept theCompany's purchase price based upon our demonstrated ability to operate similar businesses, and financial strength that may enable the Company to makeimprovement and run the business at increased production rates in the long run.2014 acquisitionsPetrotec AGOn December 24, 2014, the Company acquired 69.08% of the outstanding common shares and voting interest of Petrotec. The results of Petrotec’s operationshave been included in the consolidated financial statements since that date. During the last quarter of 2015, the Company completed its purchase accounting forthis business combination. The finalization of the purchase price allocation did not result in material adjustments.The following table summarizes the consideration paid for Petrotec:70Table of Contents December 24, 2014Consideration at fair value for Petrotec: Common stock$20,022The fair value of the 2,070,538 common shares issued to Petrotec was determined on the basis of the closing market price of the Company's common sharesat the date of acquisition.The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date as the purchase price allocation wasfinalized: December 24, 2014Assets (liabilities) acquired of Petrotec: Cash$13,523Accounts receivable4,989Inventory9,470Other current assets3,583Property, plant and equipment25,026Other noncurrent assets369Total identifiable assets acquired56,960 Accounts payable(8,171)Accrued expenses and other liabilities(2,151)Debt(16,192)Non-current liabilities(1,462)Total liabilities assumed(27,976)Net identifiable assets acquired28,984Non-controlling interest(8,962)Net assets acquired$20,022The fair value of the 30.92% noncontrolling interest in Petrotec is estimated to be $8,962 at the date of the acquisition. The fair value of the noncontrollinginterest was estimated using a combination of the income approach and a market approach.The Company recognized $1,289 of acquisition related costs that were expensed in the period the acquisition occurred.In April 2015, Petrotec's application to de-list its shares of common stock from the Frankfurt Stock Exchange was approved. From the end of the October 8,2015 trading day, Petrotec's shares of common stock are no longer traded on a regulated market of any stock exchange.During 2016 and 2015, the Company acquired additional common shares of Petrotec as part of the cash tender offers and open market purchases for $149 and$4,828 , respectively. At December 31, 2016 and 2015, the Company owned 90.58% and 87.49% of the outstanding common shares and voting interest of Petrotec.In January 2017, the Company completed its acquisition of the remaining minority interest in Petrotec and now owns 100% of Petrotec's outstanding shares.Syntroleum Corporation/Dynamic Fuels, LLC71Table of ContentsOn June 3, 2014, REG Synthetic Fuels, a wholly-owned subsidiary of the Company included in the Biomass-based diesel segment, acquired substantially allthe assets of Syntroleum, which consisted of a 50% limited liability company membership interest in Dynamic Fuels, as well as intellectual property and otherassets. Dynamic Fuels owns a 75 mmgy nameplate capacity renewable hydrocarbon diesel biorefinery located in Geismar, Louisiana. The following tablesummarizes the consideration paid for Syntroleum. June 3, 2014Consideration at fair value for Syntroleum: Common stock$34,831The fair value of the 3,493,613 shares of Common Stock issued to Syntroleum was determined on the basis of the closing market price of the Company'scommon shares at the date of acquisition.The fair value of the Syntroleum renewable hydrocarbon diesel technology was determined using the relief from royalty method, or RFR, which reflects thesavings realized by owning the intangible assets. The value under RFR method is dependent upon the following factors for an asset: royalty rate, discount rate,expected life and projected revenue.On June 6, 2014, REG Synthetic Fuels acquired the remaining 50% ownership interest in Dynamic Fuels, from Tyson Foods. The Company renamedDynamic Fuels to REG Geismar, LLC, which is included in the Biomass-based diesel segment. The finalization of the purchase price allocation resulted in anincrease in goodwill of $3,202 relating to higher than initially estimated net operating losses prior to the acquisition of Syntroleum and Dynamic Fuels.The following table summarizes the consideration paid to Tyson Foods for Dynamic Fuels: June 6, 2014Consideration at fair value for Dynamic Fuels: Cash$16,447Contingent consideration28,900Total$45,347The following table summarizes the amount of assets acquired and liabilities assumed at the acquisition date for the combined acquisition of Syntroleum andDynamic Fuels: June 6, 2014Assets (liabilities) acquired of Syntroleum and Dynamic Fuels: Cash$253Other current assets4,666Property, plant and equipment121,567Goodwill71,398Intangible assets8,900Other noncurrent assets10,281Other current liabilities(1,024)Deferred tax liabilities(8,310)Debt(113,553)Other noncurrent liabilities(14,000)Total$80,178Subsequent to the closing of the Tyson Foods transaction, REG Geismar paid off the debt owed to Tyson Foods in the amount of $13,553 .Subject to achievements related to the sale of renewable hydrocarbon diesel at the REG Geismar production facility, Tyson Foods may receive contingentconsideration of up to $35,000 . The Company will pay contingent consideration, if and when, the Company achieves certain sales volumes. The agreement callsfor periodic payments based on pre-determined payments per gallon of product sold. The probability weighted contingent payments were discounted using a riskadjusted discount rate of 5.8% . The contingent payments will be payable in cash. As of December 31, 2016 , the Company has recorded a contingent72Table of Contentsliability of $27,065 , of which $9,589 has been classified in accrued expenses and other liabilities on the Consolidated Balance Sheets.LS9, Inc.On January 22, 2014, REG Life Sciences, a wholly-owned subsidiary of the Company, acquired substantially all of the assets and certain liabilities of LS9.This acquisition's finalized purchase price allocation did not result in material adjustments. The following table summarizes the consideration paid and the amountsof assets acquired and liabilities assumed at the acquisition date: January 22, 2014Consideration at fair value: Cash$15,275Common stock26,254Contingent consideration17,050Total$58,579 January 22, 2014Assets (liabilities) acquired: Property, plant and equipment$8,215In-process research & development intangible assets15,956Goodwill34,846Other noncurrent liabilities(438)Total$58,579The fair value of the 2,230,559 shares of Common Stock issued as part of the consideration paid for LS9 was determined on the basis of the closing marketprice of the Company's common shares at the date of acquisition.Subject to achievement of certain milestones related to the development and commercialization of products from LS9’s technology, LS9 may receivecontingent consideration of up to $21,500 (Earnout Payments) over a five -year period after the acquisition. The Earnout Payments will be payable in cash, theCompany's stock or a combination of cash and stock at the Company's election. As of December 31, 2016 and 2015 , the Company has recorded a contingentliability of $13,575 and $7,590 , respectively, $4,165 and $3,958 , respective of which has been classified as current on the Consolidated Balance Sheets.416 S. Bell, LLCPrior to July 25, 2014, the Company had a 50% ownership in 416 S Bell, LLC (Bell, LLC), a variable interest entity (VIE) joint venture that owned andleased to the Company its corporate office building in Ames, Iowa. Commencing January 1, 2011, the Company had the right to execute a call option with the jointventure member, Dayton Park, LLC (Dayton Park), to purchase Bell, LLC and commencing on January 1, 2013, Dayton Park had the right to execute a put optionwith the Company to sell Bell, LLC. The Company determined it was the primary beneficiary of Bell, LLC and had consolidated Bell, LLC into the Company’sfinancial statements since January 1, 2011.On July 25, 2014, the Company completed the acquisition of the remaining 50% interest in Bell, LLC in exchange for $1,423 cash. The Company determinedthat this transaction did not result in a change of control and as such has accounted for it as an equity transaction. Neither goodwill nor a gain/loss was recognizedin conjunction with the acquisition.NOTE 5—INVENTORIESInventories consist of the following at December 31:73Table of Contents 2016 2015Raw materials$34,560 $28,989Work in process3,775 3,014Finished goods107,073 53,887Total$145,408 $85,890NOTE 6—PROPERTY, PLANT AND EQUIPMENTCompany's owned property, plant and equipment consists of the following at December 31: 2016 2015Land$5,412 $4,221Building and improvements134,398 103,199Leasehold improvements10,520 8,149Machinery and equipment511,461 397,632 661,791 513,201Accumulated depreciation(138,372) (75,119) 523,419 438,082Construction in process76,055 136,502Total$599,474 $574,584During 2016, the Company recorded impairment charges of $15,593 related to its Emporia facility's property, plant and equipment assets. Refer to Note 2 forfurther details.NOTE 7—INTANGIBLE ASSETSAmortizing intangible assets consist of the following at December 31: December 31, 2016 Cost AccumulatedAmortization Net Weighted AverageRemaining LifeRaw material supply agreement$6,230 $(1,987) $4,243 9.0 yearsRenewable hydrocarbon diesel technology8,300 (1,429) 6,871 12.5 yearsAcquired customer relationships2,900 (396) 2,504 8.6 yearsGround lease200 (127) 73 4.9 yearsIn-process research and development15,956 (177) 15,779 14.8 yearsTotal intangible assets$33,586 $(4,116) $29,470 December 31, 2015 Cost AccumulatedAmortization Net Weighted AverageRemaining LifeRaw material supply agreement$6,230 $(1,551) $4,679 10.0 yearsRenewable hydrocarbon diesel technology8,300 (876) 7,424 13.5 yearsAcquired customer relationships2,900 (106) 2,794 9.6 yearsGround lease200 (112) 88 5.9 yearsTotal amortizing intangibles17,630 (2,645) 14,985 In-process research and development, indefinite lives15,956 — 15,956 Total intangible assets$33,586 $(2,645) $30,941 The raw material supply agreement acquired is amortized over its 15 year term based on actual usage under the agreement and expires in 2025. TheCompany determined the estimated amount of raw materials to be purchased over the life of the74Table of Contentsagreement to calculate a per pound rate of consumption. The rate is then multiplied by the actual usage each period for expense reporting purposes.Amortization expense of $1,471 , $1,112 and $1,298 for intangible assets was recorded for the years ended December 31, 2016 , 2015 and 2014 ,respectively.Estimated amortization expense for fiscal years ended December 31 is as follows:2017$2,36620182,37220192,37920202,38620212,392Thereafter17,575Total$29,470NOTE 8—OTHER ASSETSPrepaid expenses and other current assets consist of the following at December 31: 2016 2015Commodity derivatives and related collateral, net$7,127 $10,097Prepaid expenses10,665 8,504Deposits2,897 3,824RIN inventory9,398 5,656Taxes receivable4,539 1,814Other1,646 1,987Total$36,272 $31,882RIN inventory is valued at the lower of cost or net realizable value and consists of (i) RINs the Company generates in connection with its production ofbiomass-based diesel and (ii) RINs acquired from third parties. RINs generated by the Company are recorded at no cost, as these RINs are government incentivesand not a tangible output from its biomass-based diesel production. The cost of RINs acquired from third parties is determined using the average cost method. RINmarket value is based upon pricing as reported by the Oil Price Information Service (OPIS). Since RINs generated by the Company have zero cost associated tothem, the lower of cost or market adjustment in RIN inventory reflects only the value of RINs obtained from third parties. RIN inventory values were adjusted inthe amount of $612 and $3,027 at December 31, 2016 and 2015 , respectively, to reflect the lower of cost or market.Other noncurrent assets consist of the following at December 31: 2016 2015Spare parts inventory$3,532 $2,922Catalysts4,479 5,742Deposits2,392 2,370Other2,227 785Total$12,630 $11,819NOTE 9—ACCRUED EXPENSES AND OTHER LIABILITIESAccrued expenses and other liabilities consist of the following at December 31:75Table of Contents 2016 2015Accrued property taxes$1,518 $1,056Accrued employee compensation15,005 8,776Accrued interest537 578Contingent consideration, current portion17,637 14,762Unfavorable lease obligation, current portion1,828 1,828Excise tax payable1,603 —Other788 1,466Total$38,916 $28,466Other noncurrent liabilities consist of the following at December 31: 2016 2015Straight-line lease liability$2,421 $2,751Asset retirement obligations1,140 1,062Other1,295 1,097Total$4,856 $4,910NOTE 10—DEBTThe Company’s term debt at December 31 is as follows: 2016 20154.00% Convertible Senior Notes, $152,000 face amount, due in June 2036$113,446 $— 2.75% Convertible debt, $73,838 face amount, due in June 201967,254 126,053REG Geismar GOZone bonds, secured, variable interest rate, due in October 2033— 100,000REG Danville term loan, secured, variable interest rate of LIBOR plus 4%, due in December 20178,163 —REG Newton term loan, secured, variable interest rate of LIBOR plus 4%, due in December 201813,063 16,800REG Mason City term loan, fixed interest rate of 5%, due in July 20192,659 3,675REG Ames term loans, secured, fixed interest rates of 3.5% and 4.25%, due in January 2018 and December 2019,respectively3,565 3,901REG Grays Harbor term loan, variable interest of minimum 3.5% or Prime Rate plus 0.25%, due in May 20229,273 5,225Other468 908Total debt before debt issuance costs217,891 256,562Less: Current portion of long-term debt15,402 5,206Less: Debt issuance costs (net of accumulated amortization of $ 3,705 and $2,296, respectively)6,286 4,105Total long-term debt$196,203 $247,251REG DanvilleOn October 31, 2015, REG Danville, LLC entered into a Second Amended and Restated Loan Agreement with Fifth Third Bank regarding theconstruction/term loan (the "Fifth Third Construction/Term Loan"). The renewed Fifth Third Construction/Term Loan increased the principal amount of theConstruction/Term Loan to $12,000 and had a three -year term with the maturity of the loan being extended to December 19, 2017. The loan requires monthlyprincipal payments of $212 and interest to be charged using LIBOR plus 4% per annum. The loan agreement contains various loan covenants.Convertible Senior Notes76Table of ContentsOn June 2, 2016, the Company issued $152,000 aggregate principal amount of the 2036 Convertible Notes in a private offering to qualified institutionalbuyers. The 2036 Convertible Notes bear interest at a rate of 4.00% per year payable semi-annually in arrears on June 15 and December 15 of each year, beginningDecember 15, 2016. The notes will mature on June 15, 2036, unless repurchased, redeemed or converted in accordance with their terms prior to such date.Prior to December 15, 2035, the 2036 Convertible Notes will be convertible only upon satisfaction of certain conditions and during certain periods asstipulated in the indenture. On or after December 15, 2035 until the close of business on the second scheduled trading day immediately preceding the maturity date,holders of the 2036 Convertible Notes may convert their notes at any time. Unless and until the Company obtains stockholder approval under applicable NASDAQStock Market rules, the 2036 Convertible Notes will be convertible, subject to certain conditions, into cash. If the Company obtains such stockholder approval, the2036 Convertible Notes may be settled in cash, the Company’s common shares or a combination of cash and the Company’s common shares, at the Company’selection. The Company may not redeem the 2036 Convertible Notes prior to June 15, 2021. Holders of the 2036 Convertible Notes will have the right to require theCompany to repurchase for cash all or some of their notes at 100% of their principal, plus any accrued and unpaid interest on each of June 15, 2021, June 15, 2026and June 15, 2031. Holders of the 2036 Convertible Notes will have the right to require the Company to repurchase for cash all or some of their notes at 100% oftheir principal, plus any accrued and unpaid interest upon the occurrence of certain fundamental changes. The initial conversion rate is 92.8074 common shares per$1,000 (one thousand) principal amount of 2036 Convertible Notes (equivalent to an initial conversion price of approximately $10.78 per common share).The net proceeds from the offering of the 2036 Convertible Notes were approximately $147,118 , after deducting fees and offering expenses of $4,882 , whichwas capitalized as debt issuance costs and is being amortized through June 2036.The Company evaluated the terms of the conversion features under the applicable accounting literature, including Derivatives and Hedging, ASC 815, anddetermined that a certain feature required separate accounting as a derivative. This derivative was recorded as a long-term liability, "Convertible Debt ConversionLiability" on the Consolidated Balance Sheets and will be adjusted to reflect fair value each reporting date. The fair value of the convertible debt conversionliability at issuance was $40,145 . The fair value of the convertible debt conversion liability at December 31, 2016 was $27,100 . The Company recognized gainsof $13,045 for the year ended December 31, 2016 , which are reflected in the "Change in Fair Value of Convertible Debt Conversion Liability" on the ConsolidatedStatements of Operations. The debt liability component of 2036 Convertible Notes was determined to be $111,855 at issuance, reflecting a debt discount of$40,145 . The debt discount is to be amortized through June 2036. The effective interest rate on the debt liability component was 2.45% .In June 2016, approximately $35,101 of the net proceeds from the offering of the 2036 Convertible Notes were used to repurchase 4,060,323 shares of theCompany's Common Stock in privately negotiated transactions. In addition, approximately $61,954 of the net proceeds from the offering were used to repurchase$63,912 principal amount of the Company's 2019 Convertible Notes in privately negotiated transactions. In September 2016, the Company used approximately$5,584 under the March 2016 share repurchase program to repurchase an additional $6,000 principal amount of the 2019 Convertible Notes. The repurchasesresulted in a gain on debt extinguishment of $2,331 , which is reflected on the Consolidated Statements of Operations.REG Grays Harbor, LLCIn July 2015, REG Grays Harbor entered into a credit agreement with Umpqua Bank, or Umpqua Credit Agreement, whereby it can borrow up to $10.0million for capital expenditure projects. Amounts borrowed under the Umpqua Credit Agreement bear interest at a per annum rate at of minimum of 3.50% orPrime Rate plus 0.25% . In addition, in July 2015 REG Grays Harbor entered into a line of credit note or Umpqua Line of Credit Note in conjunction with theUmpqua Credit Agreement for a maximum borrowing amount of $5,000 . In September 2016, REG Grays Harbor entered into the first loan modificationagreement with Umpqua Bank, or the First Modification, to extend the maturity date of the Umpqua Line of Credit to July 31, 2018. The terms of the UmpquaCredit Agreement provide that any principal outstanding under the Umpqua Line of Credit Note on July 31, 2016 shall be converted into term debt. AtDecember 31, 2016 , the total outstanding borrowing under the Umpqua Credit Agreement was all term debt and amounted to $9,273 , bearing an interest rate of4.30% per annum.REG GeismarREG Geismar was the obligor with respect to $100,000 aggregate principal amount of Gulf Opportunity Zone tax-exempt bonds, or GOZone Bonds, originallydue in October 2033, through a loan agreement with the Louisiana Public Facilities Authority. REG Geismar’s payment obligations on the GOZone Bonds weresupported by a letter of credit issued by a financial institution. REG Geismar was party to an agreement to reimburse the financial institution for any draws on theletter77Table of Contentsof credit and that obligation was secured by a $101,315 certificate of deposit by the Company and pledged in favor of the financial institution. On September 6,2016, REG Geismar caused the Louisiana Public Facilities Authority to call for redemption all of the outstanding GOZone Bonds as of September 6, 2016. Theredemption was funded by application of the funds generated by release of the certificate of deposit.Lines of CreditThe Company’s revolving debt at December 31 are as follows: 2016 2015Total revolving loans (current)$52,844 $23,149Maximum remaining available to be borrowed under revolving lines of credit$100,237 $23,067On March 16, 2016, REG Energy Services, LLC ("REG Energy Services") entered into an operating and revolving line of credit agreement (the"Agreement") with Bankers Trust Company (“Bankers Trust”). Pursuant to the Agreement, Bankers Trust agreed to provide an operating and revolving line ofcredit (the "Line of Credit") to REG Energy Services in the amount of $30,000 . Amounts outstanding under the Agreement bear variable interest as stipulated inthe Agreement. The Agreement contains various loan covenants that restrict REG Energy Services’ ability to take certain actions, including prohibiting it in certaincircumstances from making payments to the Company. In addition, the Line of Credit is secured by substantially all of REG Energy Services’ accounts receivableand inventory.On September 30, 2016, REG Services Group, LLC and REG Marketing & Logistics Group, LLC, the Company's wholly owned subsidiaries entered into aJoinder and Amendment No. 11 to Credit Agreement (the “Amendment”) to that certain Credit Agreement originally dated as of December 23, 2011, by andamong Borrowers, the lenders party thereto (“Lenders”) and Wells Fargo Capital Finance, LLC, as the agent, and Fifth Third Bank, as a new lender (as amended,the “Well Fargo Revolver”). Pursuant to the Amendment, the maximum commitment of the Lenders under the M&L and Services Revolver to make revolvingloans was increased from $60,000 to $150,000 , and an accordion feature was added to the M&L and Services Revolver, which allows the Company's subsidiariesthat are borrowers to request commitments for additional revolving loans in aggregate amount not to exceed to $50,000 , subject to customary conditions, includingthe consent of Lenders providing such additional commitments.The Amendment extended the maturity date of the M&L and Services Revolver to September 30, 2021. Loans advanced under the M&L and ServicesRevolver bear interest based on a one-month LIBOR rate (which shall not be less than zero ), plus a margin based on Quarterly Average Excess Availability (asdefined in the Revolving Credit Agreement), which may range from 1.75% per annum to 2.25% per annum.The M&L and Services Revolver contains various loan covenants that restrict each subsidiary borrower’s ability to take certain actions, including restrictionson incurrence of indebtedness, creation of liens, mergers or consolidations, dispositions of assets, repurchase or redemption of capital stock, making certaininvestments, making distributions to us unless certain conditions are satisfied, entering into certain transactions with affiliates or changing the nature of thesubsidiary’s business. In addition, the subsidiary borrowers are required to maintain a fixed charge coverage ratio of at least 1.0 to 1.5 if excess availability underthe M&L and Services Revolver is less than 10% of the total $150,000 of current revolving loan commitments, or $15,000 currently. The M&L and ServicesRevolver is secured by the subsidiary borrowers’ membership interests and substantially all of their assets. In addition, the M&L and Services Revolver is securedby the accounts receivable and inventory of REG Albert Lea, LLC, REG Houston, LLC, REG New Boston, LLC, and REG Geismar, LLC (collectively, the "PlantLoan Parties") subject to a $40,000 limitation with respect to each of the Plant Loan Parties.Maturities of the term debt, including the convertible debt, are as follows for the years ending December 31:2017$15,402201814,757201969,49720201,57620211,638Thereafter115,021Total217,891Less: current portion15,402 $202,48978Table of ContentsNOTE 11—INCOME TAXESIncome tax benefit (expense) for the years ended December 31 is as follows: 2016 2015 2014Current income tax benefit (expense) Federal$— $— $—State94 — —Foreign(1,036) (225) — (942) (225) —Deferred income tax benefit (expense) Federal2,113 24,151 (14,112)State6,936 9,736 1,420Foreign(2,560) 1,035 9Net operating loss carryforwards created105,165 88,110 61,640 111,654 123,032 48,957Income tax benefit (expense) before valuation allowances110,712 122,807 48,957Deferred tax valuation allowances(114,980) (114,106) (52,529)Income tax benefit (expense)$(4,268) $8,701 $(3,572)A reconciliation of the reported amount of income tax expense to the amount computed by applying the statutory federal income tax rate to earnings fromcontinuing operations before income taxes is as follows: 2016 2015 2014U.S. Federal income tax expense at a statutory rate of 35 percent$(17,143) $56,144 $(30,139)State taxes, net of federal income tax benefit11,442 12,777 5,119Tax position on government incentives117,630 85,423 76,662Goodwill impairment tax impact2,876 (35,062) —Bargain purchase gain— 1,875 —Foreign net operating loss expiration(2,383) — —Other(1,710) 1,650 (2,685)Total (expense) benefits for income taxes before valuation allowances110,712 122,807 48,957Valuation allowances(114,980) (114,106) (52,529)Total benefit (expense) for income taxes$(4,268) $8,701 $(3,572)The Company receives government incentive payments and excludes this revenue from federal and state taxable income. This tax position of excludinggovernment incentives from taxable income has been accepted by the Internal Revenue Service under audit for 2010 and 2011 and has been approved by the JointCommittee on Taxation. As a result of excluding these government incentive payments, the Company currently has cumulative losses in recent years and initiallyestablished a valuation allowance in 2013 to reduce its total deferred tax assets to the amount more-likely-than-not to be realized.In 2015, the Company had a non-cash impairment charge for goodwill of $175,028 , of which $91,961 was not deductible for tax purposes. A $32,186 taximpact related to the non-deductible portion of the goodwill impairment charge is reflected in the tax reconciliation above for 2015 in the amount of $35,062 ,offset with $2,876 in 2016.The tax effects of temporary differences that give rise to the Company’s deferred tax assets and liabilities at December 31 are as follows:79Table of Contents 2016 2015Deferred Tax Assets: Goodwill$42,082 $39,172Net operating loss carryforwards346,768 243,865Tax credit carryforwards1,597 1,597Start-up costs857 988Stock-based compensation5,853 4,703Terminal leases2,603 3,859Capitalized research and development11,394 8,096Accrued compensation4,419 2,546Inventory capitalization3,227 2,046Allowance for doubtful accounts800 567Other2,363 1,569Deferred tax assets421,963 309,008Deferred Tax Liabilities: Prepaid expenses(1,724) (1,338)Property, plant and equipment(61,431) (65,398)Intangibles(3,591) (3,909)Deferred revenue(3,454) —Convertible debt(5,797) (3,626)Unrealized gain (loss) on available for sale investments874 (1,752)Other(2,084) (2,007)Deferred tax liabilities(77,207) (78,030)Net deferred tax assets (liabilities)344,756 230,978Valuation allowance(365,035) (250,164)Net deferred taxes$(20,279) $(19,186)At December 31, 2016 , the Company has recorded a deferred tax asset of $346,768 reflecting the benefit of federal, state and foreign net operating losscarry-forwards. Federal net operating loss carry-forward totals $887,228 and will begin to expire in 2028 , while the amount and expiration dates of state netoperating losses vary by jurisdiction. Changes in ownership of the Company, as defined by Section 382 of the Internal Revenue Code of 1986, as amended, maylimit the utilization of federal and state net operating losses and credit carry-forwards in any one year. The Company has performed an ownership change analysisin 2016 to determine the impact of changes in ownership on utilization of carry-forward attributes, the results of which have been incorporated into our financialstatements.In evaluating available evidence around the recoverability of net deferred tax assets, the Company considers, among other factors, historical financialperformance, expectation of future earnings, length of statutory carry-forward periods and ability to carry back losses to prior periods, experience with operatingloss and tax credit carry-forwards expiring unused, tax planning strategies and timing for the of reversals of temporary differences. In evaluating losses,management considers the nature, frequency and severity of losses in light of the conditions giving rise to those losses. As a result of the above described taxposition of excluding government incentive payments from taxable income, the Company currently has cumulative losses in recent years and has established avaluation allowance to reduce its total deferred tax assets to the amount more-likely-than-not to be realized. Activity regarding the valuation allowance for deferredtax assets was as follows: 2016 2015 2014Beginning of year balance$250,164 $136,547 $76,916Changes in valuation allowance charged to income114,980 114,106 52,529Foreign currency translation(109) (773) —Acquisition— 284 7,102End of year balance$365,035 $250,164 $136,54780Table of ContentsThe Company analyzes filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, and all open tax years inthese jurisdictions to determine if it has any uncertain tax positions on any of its income tax returns. An uncertain tax position represents the Company’s expectedtreatment 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 taxexpense for financial reporting purposes. The Company does not recognize income tax benefits associated with uncertain tax positions where it is determined that itis not more-likely-than-not, based on the technical merits, that the position will be sustained upon examination.A reconciliation of the total amounts of unrecognized tax benefits at December 31 is as follows: 2016 2015 2014Beginning and end of year balance$1,900 $1,900 $1,900The amount of unrecognized tax benefits that would affect the effective tax rate if the tax benefits were recognized was $0 at December 31, 2016 , 2015 and2014 . The remaining liability for unrecognized tax benefits is related to tax positions for which there is a related deferred tax asset. The Company does not believeit is reasonably possible that the amounts of unrecognized tax benefits existing as of December 31, 2016 will significantly increase or decrease over the next twelvemonths. Interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense. The Company has not recorded any suchamounts in the periods presented.The Company is subject to tax in the U.S. and various state and foreign jurisdictions. The U.S. Internal Revenue Service has examined the Company's federalincome tax returns through 2008, as well as 2010 and 2011. All other years are subject to examination, while various state and foreign income tax returns alsoremain subject to examination by state taxing authorities.The Company considers its foreign earnings of non U.S. subsidiaries to be permanently reinvested. Any amount would become taxable upon a repatriation ofassets from the subsidiary or a sale or liquidation of the subsidiary. The Company has not made a provision for U.S. or additional foreign withholding taxes. TheCompany has $0 deferred tax liability related to investments in its foreign subsidiaries. If the Company had a deferred tax liability related to its foreignsubsidiaries it would be unrecorded as the Company considers its foreign earnings indefinitely reinvested. NOTE 12—STOCK-BASED COMPENSATIONOn October 26, 2011, the stockholders approved the 2009 Stock Incentive Plan (the 2009 Plan) which authorizes up to 4,160,000 shares of CompanyCommon Stock to be issued for the award of restricted stock, restricted stock units (RSUs), performance restricted stock units (PRSUs) and stock appreciationrights (SARs) at the discretion of the Company Board as compensation to employees, consultants of the Company and to non-employee directors. Under the 2009Plan, an additional 1,800,000 shares, or 5,960,000 shares in total, are reserved for issuance as approved by shareholders on May 15, 2014. The expense is measuredat the grant-date fair value of the award and recognized as compensation expense on a straight-line basis over the service period, which is the vesting period. Therewas no cash flow impact resulting from the grants of these awards. The 2009 Plan is generally protected from anti-dilution via adjustments for any stock dividends,stock split, combination or other recapitalization.The Company recorded stock-based compensation expense of $5,896 , $5,161 and $5,883 for the years ended December 31, 2016 , 2015 and 2014 ,respectively. The stock-based compensation costs were included as a component of selling, general and administrative expenses. At December 31, 2016 , there was$8,103 of unrecognized compensation expense related to unvested awards, which is expected to be recognized over a period of approximately 2.9 years .Restricted Stock UnitsThe following table summarizes information about the Company’s Common Stock RSU’s granted, vested, exercised and forfeited:81Table of Contents Number ofAwards WeightedAverage IssuePriceAwards outstanding - January 1, 2014500,928 $15.81Issued257,030 $10.97Vested and restriction lapsed(124,906) $10.42Forfeited(16,658) $10.95Awards outstanding - December 31, 2014616,394 $15.00Issued339,280 $9.34Vested and restriction lapsed(295,089) $9.36Forfeited(22,687) $10.56Awards outstanding - December 31, 2015637,898 $12.87Issued504,647 $9.07Vested and restriction lapsed(249,356) $9.77Forfeited(33,938) $8.15Awards outstanding - December 31, 2016859,251 $11.73The RSUs convert into one share of common stock upon vesting. RSU’s cliff vest at the earlier of expressly provided service or performance conditions. Theservice period for these RSU awards, excluding those issued to the Company’s Board of Directors ( one year ) and certain executive management ( four year), is athree year period from the grant date. The performance conditions provide for accelerated vesting upon various conditions including a change in control or othercommon stock liquidity events.Performance Restricted Stock UnitsThe following table summarizes information about the Company’s Common Stock RSU’s granted, vested, exercised and forfeited: Number ofAwards Weighted AverageIssue PriceAwards outstanding -January 1, 2015— $—Issued59,623 $9.40Vested and restriction lapsed— $—Forfeited— $—Awards outstanding - December 31, 201559,623 $9.40Issued175,217 $9.06Vested and restriction lapsed— $—Forfeited— $—Awards outstanding - December 31, 2016234,840 $9.15The PRSUs convert into one share of common stock upon vesting. PRSUs vest in different tranches upon meeting certain performance conditions, which aregenerally based on the Company's stock price performance and expressly provided service. These PRSUs are fair valued at grant date based on Monte Carlosimulations. The derived service period for these PRSU awards as a result of the Monte Carlo simulation, is a approximately two year period from the grant date.The performance conditions provide for accelerated vesting upon various conditions including a change in control or other common stock liquidity events.Stock Appreciation RightsThe following table summarizes information about SARs granted, forfeited, vested and exercisable:82Table of Contents Number ofSAR’s Weighted AverageExercisePrice WeightedAverageContractualTermSAR's outstanding - January 1, 20141,373,069 $10.28 Granted449,225 $11.73 Exercised(435) $7.37 Forfeited(12,557) $11.57 SAR's outstanding - December 31, 20141,809,302 $10.63 8.1 yearsGranted655,855 $9.47 Exercised(14,470) $9.21 Forfeited(54,561) $10.30 SAR's outstanding - December 31, 20152,396,126 $10.33 7.6 yearsGranted176,824 $8.80 Exercised(8,003) $8.57 Forfeited(56,932) $10.75 SAR's outstanding - December 31, 20162,508,015 $10.22 6.7 yearsSAR's exercisable - December 31, 20161,015,440 $15.92 6.7 yearsSAR's expected to vest - December 31, 20161,096,639 $10.19 6.7 yearsThe SARs vest 25% annually on each of the four anniversary dates following the grant date and expire after ten years . The fair value of each SAR grant isestimated using the Black-Scholes option-pricing model as set forth in the table below: 2016 2015 2014The weighted average fair value of stock appreciation rights issued (per unit)$2.79 - $3.74 $3.33 - $3.90 $4.18 - $4.93Dividend yield—% —% —%Weighted average risk-free interest rate1.1% - 1.4% 1.4% - 1.6% 1.5% - 1.8%Weighted average expected volatility40% 40% 40%Expected life in years6.25 6.25 6.25Stock OptionsThe following table summarizes information about Common Stock options granted, exercised, forfeited, vested and exercisable:83Table of Contents Numberof Options Weighted AverageExercisePrice WeightedAverageContractualTermOptions outstanding - January 1, 201487,026 $23.75 2.6 yearsGranted— $— Exercised— $— Forfeited— $— Options outstanding - December 31, 201487,026 $23.75 1.6 yearsGranted— $— Exercised— $— Forfeited— $— Options outstanding - December 31, 201587,026 $23.75 0.6 yearsGranted— $— Exercised— $— Forfeited/Expired(87,026) $— Options outstanding - December 31, 2016— $— 0.0 yearsOptions exercisable - December 31, 2016— $— 0.0 yearsThere were no outstanding stock options at December31, 2016. There was no intrinsic value of options granted, exercised or outstanding during the periodspresented.NOTE 13—RELATED PARTY TRANSACTIONSThe Company reassesses its related parties at reporting dates and has determined that West Central Cooperative, nowknown as Landus Cooperative ("Landus"), is no longer a related party because it does not hold ten percent or more of theCompany’s outstanding Common Stock, and no longer has the right to a seat on the Company's board throughout 2016 and for the last nine months of 2015.Transactions with Landus, prior to the Company's determination that Landus was no longer a related party, amounted to $4,542 and $42,622 for 2015 and 2014,respectively, primarily related to raw material purchases at market prices. This amount was included in the "Costs of goods sold - Biomass-based diesel" on theConsolidated Statements of Operations.NOTE 14—OPERATING LEASESThe Company leases certain land and equipment under operating leases. Total rent expense under operating leases was $22,487 , $19,814 and $17,498 for theyears ended December 31, 2016 , 2015 and 2014 , respectively. For each of the next five calendar years and thereafter, future minimum lease payments underoperating leases that have initial or remaining noncancelable lease terms in excess of one year are as follows: TotalPayments2017$18,731201816,575201915,300202010,626202110,242Thereafter40,553Total minimum payments$112,027The Company's leases consist primarily of access to distribution terminals, biomass-based diesel storage facilities, railcars and vehicles. At the end of thelease 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 itslease 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 asdetermined by the Consumer Price Index.84Table of ContentsNOTE 15 — DERIVATIVE INSTRUMENTSThe Company has entered into heating oil and soybean oil futures, swaps and options (commodity derivative contracts) to reduce the risk of price volatilityrelated to anticipated purchases of feedstock raw materials and to protect gross profit margins from potentially adverse effects of price volatility on biomass-baseddiesel sales where prices are set at a future date. All of the Company’s derivatives are recorded at fair value on the Consolidated Balance Sheets. Unrealized gainsand losses on commodity futures, swaps and options contracts used to risk-manage feedstock purchases or biomass-based diesel inventory are recognized as acomponent of biomass-based diesel costs of goods sold reflected in current results of operations.At December 31, 2016 , the net notional volumes of heating oil and soybean oil covered under the open commodity derivative contracts were 45.4 milliongallons and 41.0 million pounds, respectively.The Company offsets the fair value amounts recognized for its commodity derivative contracts with cash collateral with the same counterparty under amaster netting agreement. The net position is presented within Prepaid expenses and other assets in the Consolidated Balance Sheets, see "Note 10 – Other Assets".As of December 31, 2016 , the Company posted $9,366 of collateral associated with its commodity-based derivatives with a net liability position of $2,239 .The following tables provide details regarding the Company’s derivative financial instruments: December 31, 2016 December 31, 2015 Assets Liabilities Assets LiabilitiesGross amounts of commodity derivative contractsrecognized at fair value$1,272 $3,511 $4,644 $185Cash collateral9,366 — 5,638 —Total gross amount recognized10,638 3,511 10,282 185Gross amounts offset(3,511) (3,511) (185) (185)Net amount reported in the Consolidated BalanceSheets$7,127 $— $10,097 $—The following table sets forth the pre-tax gains (losses) included in the Consolidated Statements of Operations: Location of Gain (Loss) Recognized in income 2016 2015 2014Commodity derivativesCost of goods sold – Biomass-baseddiesel $(35,386) $35,983 $61,631NOTE 16—FAIR VALUE MEASUREMENTThe fair value hierarchy prioritizes the inputs used in measuring fair value as follows:•Level 1—Quoted prices for identical instruments in active markets.•Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active andmodel-derived valuations, in which all significant inputs are observable in active markets.•Level 3—Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.A summary of assets (liabilities) measured at fair value is as follows: As of December 31, 2016 Total Level 1 Level 2 Level 3Commodity contract derivatives$(2,239) $(1,297) $(942) $—Convertible debt conversion liability$(27,100) — (27,100) —Contingent consideration for acquisitions$(46,568) — — (46,568) $(75,907) $(1,297) $(28,042) $(46,568)85Table of Contents As of December 31, 2015 Total Level 1 Level 2 Level 3Commodity contract derivatives$4,459 2,196 2,263 —Contingent consideration for acquisitions$(41,712) — — (41,712) $(37,253) $2,196 $2,263 $(41,712)The following is a reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis using significantunobservable inputs (Level 3) during the years ended as follows: Contingent Consideration for Acquisitions 2016 2015Balance at beginning of period, January 1$41,712 $39,319Fair value of contingent consideration at measurement date4,500 5,000Change in estimates included in earnings7,904 (359)Settlements(7,548) (2,248)Balance at end of period, December 31$46,568 $41,712The Company used the following methods and assumptions to estimate fair value of its financial instruments:Commodity contract derivatives: The instruments held by the Company consist primarily of futures contracts, swap agreements, purchased put optionsand written call options. The fair value of contracts based on quoted prices of identical assets in an active exchange-traded market is reflected in Level 1. Contractfair value is determined based on quoted prices of similar contracts in over-the-counter markets and are reflected in Level 2.Contingent consideration for acquisitions: The fair value of the contingent consideration regarding REG Life Sciences, LLC ("REG Life Sciences") isdetermined using an expected present value technique. Expected cash flows are determined using the probability weighted-average of possible outcomes thatwould occur should achievement of certain milestones related to the development and commercialization of products from REG Life Sciences' technology occur.There is no observable market data available to use in valuing the contingent consideration; therefore, the Company developed its own assumptions related to theexpected future delivery of product enhancements to estimate the fair value of these liabilities. An 8.0% discount rate is used to estimate the fair value of theexpected payments.The fair value of all other contingent consideration is determined using an expected present value technique. Expected cash flows are determined using theprobability weighted-average of possible outcomes that would occur should the achievement of certain milestones related to the production and/or sale of biomass-based diesel at the specific production facility. A discount rate ranging from 5.8% to 10.0% is used to estimate the fair value of the expected payments.Convertible debt conversion liability: The fair value of the convertible debt conversion liability is estimated using the Black-Scholes modelincorporating the terms and conditions of the 2036 Convertible Notes and considering changes in the prices of the Company's common stock, Company stock pricevolatility, risk-free rates and changes in market rates. The valuations are, among other things, subject to changes in the Company's credit worthiness as well aschange in general market conditions. As the majority of the assumptions used in the calculations are based on market sources, the fair value of the convertibleconversion liability is reflected in Level 2.Debt and lines of credit: The fair value of long-term debt and lines of credit was established using discounted cash flow calculations and currentmarket rates reflecting Level 2 inputs.The estimated fair values of the Company’s financial instruments, which are not recorded at fair value are as follows as of December 31:86Table of Contents 2016 2015 Asset (Liability)Carrying Amount EstimatedFair Value Asset (Liability)Carrying Amount EstimatedFair ValueFinancial Liabilities: Debt and lines of credit$(270,735) $(264,267) $(279,711) $(275,123)NOTE 17—NET INCOME (LOSS) PER SHAREBasic net income per common share is presented in conformity with the two-class method required for participating securities. Participating securitiesinclude, or have included, Series A Preferred Stock, Series B Preferred Stock and RSU's.Under the two-class method, net income is reduced for distributed and undistributed dividends earned in the current period. The remaining earnings are thenallocated to Common Stock and the participating securities. The Company calculates the effects of participating securities on diluted earnings per share (EPS)using both the “if-converted or treasury stock” and "two-class" methods and discloses the method which results in a more dilutive effect. The effects of CommonStock options, warrants, stock appreciation rights and convertible notes on diluted EPS are calculated using the treasury stock method unless the effects are anti-dilutive to EPS.The following potentially dilutive average number of securities were excluded from the calculation of diluted net income per share attributable to commonstockholders during the periods presented as the effect was anti-dilutive: Year Ended December 31, 2016 2015 2014Options to purchase common stock43,513 87,026 87,026Stock appreciation rights2,422,716 2,072,130 1,400,824Warrants to purchase common stock— — 17,9162019 Convertible notes7,895,675 10,838,218 6,295,0752036 Convertible notes8,209,651 — —Total18,571,555 12,997,374 7,800,841The following table presents the calculation of diluted net income per share for the years ended December 31, 2016 , 2015 and 2014 (in thousands, exceptshare and per share data): 2016 2015 2014Net income (loss) attributable to the Company's common stockholders - Basic$43,453 $(151,392) $81,620Plus: distributed dividends to Preferred Stockholders— — 40Plus (less): effect of participating securities874 — (418)Net income (loss) attributable to common stockholders44,327 (151,392) 81,242Less: effect of participating securities(874) — —Net income (loss) attributable to the Company's common stockholders - Diluted$43,453 $(151,392) $81,242Shares: Weighted-average shares outstanding - Basic40,897,549 43,958,803 40,740,411Adjustment to reflect stock appreciation right conversions5,311 — 9,502Weighted-average shares outstanding - Diluted40,902,860 43,958,803 40,749,913 Net income (loss) per share attributable to common stockholders - Diluted$1.06 $(3.44) $1.99NOTE 18—REPORTABLE SEGMENTS AND GEOGRAPHIC INFORMATIONThe Company reports its reportable segments based on products and services provided to customers. The Company re-assesses its reportable segment on anannual basis. During the fourth quarter of 2015, the Company determined that as87Table of Contentsactivities surrounding its renewable chemicals business increase, it changed the composition of its operating segments from two reportable segments to threereportable segments by presenting Renewable Chemicals separate from Biomass-based diesel. The new reportable segments generally align the Company'sexternal financial reporting segments with its new internal operating segments, which are based on its internal organizational structure, operating decisions, andperformance assessment. There are no changes to the Company's assessments in 2016. As such, our reportable segments at December 31, 2016 include Biomass-based diesel, Services, Renewable Chemicals and Corporate and other activities. The accounting policies of the segments are the same as those described in thesummary of significant accounting policies. All prior period disclosures below have been recast to present results on a comparable basis.The Biomass-based diesel segment processes waste vegetable oils, animal fats, virgin vegetable oils and other feedstocks and methanol into biomass-baseddiesel. The Biomass-based diesel segment also includes the Company’s purchases and resale of biomass-based diesel produced by third parties. Revenue is derivedfrom the purchases and sales of biomass-based diesel, RINs and raw material feedstocks acquired from third parties, sales of biomass-based diesel produced undertoll manufacturing arrangements with third party facilities, sales of processed biomass-based diesel from Company facilities, related by-products and renewableenergy government incentive payments, in the U.S. and internationally.The Services segment offers services for managing the construction of biomass-based diesel production facilities and managing ongoing operations of thirdparty 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 thebusiness segments. Revenues are recorded by the Services segment at cost.The Renewable Chemicals segment consists of research and development activities involving the production of renewable chemicals, additional advancedbiofuels and other products from the Company's proprietary microbial fermentation process and the operations of a demonstration scale facility located inOkeechobee, Florida. The Renewable Chemicals segment started to have research and development collaborative and initial product revenues in 2016.The Corporate and Other segment includes trading activities related to petroleum-based heating oil and diesel fuel as well as corporate activities, whichconsist of corporate office expenses such as compensation, benefits, occupancy and other administrative costs, including management service expenses. Corporateand other also includes income/(expense) not associated with the reportable segments, such as corporate general and administrative expenses, shared serviceexpenses, interest expense and interest income, all reflected on an accrual basis of accounting. In addition, corporate and other includes cash and other assets notassociated with the reportable segments, including investments. Intersegment revenues are reported by the Services and Corporate and Other segments.The following table represents the significant items by reportable segment for the results of operations for the years ended December 31, 2016 , 2015 and2014 :88Table of Contents 2016 2015 2014Net sales: Biomass-based Diesel (includes Petrotec's net sales of $171,358, $145,039, and $3,563,respectively)$1,952,361 $1,326,452 $1,264,850Services87,014 102,731 85,149Renewable Chemicals2,065 — —Corporate and other106,572 68,984 11,940Intersegment revenues(106,780) (110,823) (88,108) $2,041,232 $1,387,344 $1,273,831Income (loss) before income taxes Biomass-based diesel (includes Petrotec's income (loss) of $5,007, $(1,643), and $(337),respectively)$64,814 $(100,152) $104,136Services2,970 6,323 6,980Renewable Chemicals(19,787) (52,728) (12,252)Corporate and other984 (13,854) (12,754) $48,981 $(160,411) $86,110Depreciation and amortization expense, net: Biomass-based diesel (includes Petrotec's amounts of $2,849, $3,259, and $0,respectively)$29,018 $22,799 $13,497Services613 302 204Renewable Chemicals1,550 1,413 1,293Corporate and other1,696 1,362 802 $32,877 $25,876 $15,796Cash paid for purchases of property, plant and equipment: Biomass-based diesel (includes Petrotec's amounts of $1,353, $1,816, and $0,respectively)$52,952 $59,859 $52,846Services4,731 1,510 643Renewable Chemicals473 672 532Corporate and other2,549 2,436 6,142 $60,705 $64,477 $60,163 2016 2015Goodwill: Biomass-based diesel$— $—Services16,080 16,080Renewable Chemicals— — $16,080 $16,080Assets: Biomass-based diesel (including Petrotec's assets of $51,822 and $45,471)$1,026,349 $1,048,923Services53,823 60,308Renewable Chemicals22,883 23,872Corporate and other299,825 308,782Intersegment eliminations(266,277) (218,265) $1,136,603 $1,223,620Geographic Information:89Table of ContentsThe following geographic data include net sales attributed to the countries based on the location of the subsidiary making the sale and long-lived assetsbased on physical location. Long-lived assets represent the net book value of property, plant and equipment. Sales and long-lived assets of the Company'sinvestment in Petrotec comprise substantially all of the amounts categorized as Foreign in the table below. 2016 2015 2014Net sales: United States$1,869,874 $1,242,305 $1,270,268Foreign171,358 145,039 3,563 $2,041,232 $1,387,344 $1,273,831 2016 2015Long-lived assets: United States$580,868 $553,987 Foreign18,606 20,597 $599,474 $574,584 NOTE 19—COMMITMENTS AND CONTINGENCIESThe Company is involved in legal proceedings in the normal course of business. The Company currently believes that any ultimate liability arising out ofsuch proceedings will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.The Company has entered into contracts for supplies of hydrogen, nitrogen and utilities for the REG Geismar production facility and natural gas for REGAlbert Lea. The following table outlines the minimum take or pay requirement related to the purchase of hydrogen, nitrogen, utilities and natural gas.2017$3,85720183,78420193,74820203,29720212,976Thereafter9,570Total$27,232As of December 31, 2016 , REG Geismar relies on one supplier to provide hydrogen necessary to execute the production process. Any disruptions to thehydrogen supply during production from this supplier will result in the shutdown of the REG Geismar plant operations. The Company is currently seekingadditional hydrogen suppliers for the REG Geismar facility.NOTE 20—SUPPLEMENTAL QUARTERLY INFORMATION (UNAUDITED)During the third quarter 2016 close process, the Company identified errors in its previously reported interim financial statements for the quarter ended March31, 2016 pertaining to certain biomass-based diesel sales completed in that quarter that contained BTC sharing terms resulting in an overstatement of biomass-based diesel sales and a corresponding understatement of accounts payable, deferred income taxes and income tax expense for the three months ended March 31,2016 and the six months ended June 30, 2016. The correction of the errors is reflected in the quarterly information below.Based on an evaluation of all relevant facts, the Company assessed the materiality of these errors on the first and second quarter interim financial statementsand concluded under ASC 250 that the correction was immaterial to the Company’s results for the three months ended March 31, 2016 and six months ended June30, 2016 and an amendment of previously filed reports was not required. In accordance with ASC 250, the Company elected to correct these errors by revising theconsolidated financial statements and other financial information contained within this Annual Report on Form 10-K for the periods impacted to correct the effectof these errors.90Table of ContentsThe following table represents the significant items for the results of operations on a quarterly basis for the years ended December 31, 2016 and 2015 : Three Months Ended March 31, 2016 Three Months Ended June 30, 2016 Three Months Ended September 30, 2016 Three Months Ended December 31, 2016Revenues$297,870 $558,301 $624,640 $560,421Gross profit (loss)17,384 24,862 47,350 81,920Selling, general, and administrative expenses includingresearch and development expense23,703 25,277 25,604 31,864Impairment of property, plant and equipment— — — 17,893Net income (loss) from operations(6,319) (415) 21,746 32,163Other income (expense), net159 7,432 558 (6,343)Net income (loss) attributable to the Company(6,918) 7,606 23,442 20,197Net income (loss) per share attributable to commonstockholders - basic(0.16) 0.18 0.59 0.51Net income (loss) per share attributable to commonstockholders - diluted(0.14) 0.18 0.59 0.51 Three Months Ended March 31, 2015 Three Months Ended June 30, 2015 Three Months Ended September 30, 2015 Three Months Ended December 31, 2015Revenues$230,918 $373,762 $394,856 $387,808Gross profit(16,195) 15,907 4,405 106,426Selling, general, and administrative expenses includingresearch and development expense20,535 19,749 21,995 27,969Impairment of goodwill— — — 175,028Loss from operations(36,730) (3,842) (17,590) (96,571)Other income (expense), net(2,471) 972 869 (5,048)Net loss attributable to the Company(38,107) (2,001) (15,675) (95,609)Net loss per share attributable to common stockholders - basic(0.86) (0.05) (0.36) (2.18)Net loss per share attributable to common stockholders -diluted(0.86) (0.05) (0.36) (2.18)The results of operations for the three months ended December 31, 2015 reflect a goodwill impairment of $175,028 (before tax) and net benefit from thereinstatement of the BTC of $95,008 .ITEM 9.Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone.ITEM 9A.Controls and ProceduresEvaluation of Disclosure Controls and ProceduresDisclosure controls and procedures are designed to ensure that information required to be disclosed in the Company’s reports we file or submit under theSecurities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities Exchange Commission’s rules andforms, and that such information is accumulated and communicated to management, including our Chief Executive Officer ("CEO") and the Chief FinancialOfficer ("CFO"), as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures,management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving thedesired control objectives.Our management, under the supervision of and with the participation of the CEO and CFO performed an evaluation of the effectiveness of our disclosurecontrols and procedures (as defined in Rules 13a-15(e) and 15-d-15(e) under the Securities91Table of ContentsExchange Act of 1934 as of the end of the period covered by this report, December 31, 2016. In connection with our evaluation of disclosure controls andprocedures, we have concluded that our disclosure controls and procedures are effective as of December 31, 2016.Management’s Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, managementconcluded that our internal control over financial reporting was effective as of December 31, 2016.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation ofeffectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Deloitte & Touche LLP has audited our internal control over financial reporting as of December 31, 2016 and has issued an attestation report regarding itsassessment included herein.Changes in Internal Control over Financial ReportingOther than with respect to the remediation procedures detailed below for the previously identified material weaknesses, there have been no changes duringour quarter ended December 31, 2016 in our internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) that have materiallyaffected, or are reasonably likely to materially affect, our internal control over financial reporting.As previously disclosed in Item 9A of our Form 10-Q for the nine months ended September 30, 2016, management concluded that there was a materialweakness in internal control over financial reporting related to the Company's sales contract review control over the recognition of biomass-based diesel sales notoperating effectively. In response to the material weakness identified, management developed and implemented a remediation plan to address the underlyingcauses of the material weakness, which was subject to senior management review and Audit Committee oversight.The remediation plan included:• Increasing the frequency of the sales contract review control from a quarterly meeting to a monthly;• Developing, documenting and implementing policies and procedures to identify non-standard sales contracts;• Increasing the scope of the control to include any sharing agreements regardless of having the biodiesel mixture excise tax credit in place ornot;• Expanding control owners for the sales contract review control to include treasury, tax and sales personnel in addition to accounting personnel;and• Personnel changes were made to strengthen the operating effectiveness of the control, in addition to increasing education, support and oversightof the employees tasked with the identification and evaluation of sales contract with nonstandard terms to ensure the application of the proper accountingtreatment in accordance with United States generally accepted accounting principles.Implementation of the remediation plan described above and the resulting improvements in controls have strengthened our internal control over financialreporting and have addressed the related material weakness that was identified during the third quarter of 2016. As part of our assessment of internal control overfinancial reporting during the fourth quarter of 2016, management tested and evaluated all internal controls to assess whether they are designed and operatingeffectively as of December 31, 2016. Management determined that its internal controls over financial reporting were designed and operating effectively to preventand detect a material misstatement due to error or fraud and therefore concluded that the material weakness was remediated.ITEM 9B.Other InformationNone.92Table of ContentsPART IIIITEM 10.Directors, Executive Officers and Corporate GovernanceThis Item is incorporated by reference to our definitive proxy statement on Schedule 14A, which will be filed within 120 days after the close of the fiscal yearcovered by this report on Form 10-K, or if our proxy statement is not filed by that date, will be included in an amendment to this Report on Form 10-K.ITEM 11.Executive CompensationThis Item is incorporated by reference to our definitive proxy statement on Schedule 14A, which will be filed within 120 days after the close of the fiscal yearcovered by this report on Form 10-K, or if our proxy statement is not filed by that date, will be included in an amendment to this Report on Form 10-K.ITEM 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThis Item is incorporated by reference to our definitive proxy statement on Schedule 14A, which will be filed within 120 days after the close of the fiscal yearcovered by this report on Form 10-K, or if our proxy statement is not filed by that date, will be included in an amendment to this Report on Form 10-K.ITEM 13.Certain Relationships and Related Transactions, and Director IndependenceThis Item is incorporated by reference to our definitive proxy statement on Schedule 14A, which will be filed within 120 days after the close of the fiscal yearcovered by this report on Form 10-K, or if our proxy statement is not filed by that date, will be included in an amendment to this Report on Form 10-K.ITEM 14.Principal Accounting Fees and ServicesThis Item is incorporated by reference to our definitive proxy statement on Schedule 14A, which will be filed within 120 days after the close of the fiscal yearcovered by this report on Form 10-K, or if our proxy statement is not filed by that date, will be included in an amendment to this Report on Form 10-K.93Table of ContentsPART IVITEM 15.Exhibits, Financial Statement Schedules(a)Financial Statements(i)Consolidated Balance Sheets as of December 31, 2016 and 2015(ii)Consolidated Statements of Operations for the years ended December 31, 2016 , 2015 and 2014(iii)Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2016 , 2015 , 2014(iv)Consolidated Statements of Redeemable Preferred Stock and Equity for the years ended December 31, 2016 , 2015 and 2014(v)Consolidated Statements of Cash Flows for the years ended December 31, 2016 , 2015 and 2014(vi)Notes to the Consolidated Financial Statements for the years ended December 31, 2016 , 2015 and 2014(b) ExhibitsThe Exhibits filed as part of this Annual Report on Form 10-K, or incorporated by reference, are listed on the Exhibit Index immediately preceding such Exhibits,which Exhibit Index is incorporated herein by reference.94Table of Contents(c)Financial Statement SchedulesITEM 16. Form 10-K SummaryNot applicable.SIGNATURESPursuant 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 itsbehalf by the undersigned, thereunto duly authorized.RENEWABLE ENERGY GROUP, INC. By:/s/ Daniel J. Oh Daniel J. Oh President and Chief Executive OfficerDate: March 10, 2017POWER OF ATTORNEYKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Chad Stone and Chad A. Baker,and each of them, his true and lawful attorneys-in-fact, each with full power of substitution, for him in any and all capacities, to sign any amendments to this reporton Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, herebyratifying and confirming all that each of said attorneys-in-fact or their substitute or substitutes may do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrantand in the capacities and on the dates indicated. Date/s/ Daniel J. OhPresident, Chief Executive Officer and Director (PrincipalExecutive Officer)March 10, 2017Daniel J. Oh /s/ Chad StoneChief Financial Officer(Principal Financial Officer)March 10, 2017Chad Stone /s/ Chad A. BakerController and Chief Accounting Officer(Principal Accounting Officer)March 10, 2017Chad A. Baker /s/ Jeffrey StroburgDirector (Chairman)March 10, 2017Jeffrey Stroburg /s/ Delbert ChristensenDirectorMarch 10, 2017Delbert Christensen /s/ Peter J.M.HardingDirectorMarch 10, 2017Peter J. M. Harding /s/ Randolph L. HowardDirectorMarch 10, 2017Randolph L. Howard /s/ Michael A. JacksonDirectorMarch 10, 2017Michael A. Jackson /s/ Michael ScharfDirectorMarch 10, 2017Michael Scharf /s/ Christopher SorrellsDirectorMarch 10, 2017Christopher Sorrells 95Table of ContentsEXHIBIT INDEXExhibitNumber Description 3.1 Third Amended and Restated Certificate of Incorporation of Renewable Energy Group, Inc. (the “Company”), effective as of January 24, 2012(incorporated by reference to Exhibit 3.1 (c) to the Company’s Registration Statement on Form S-1/A filed September 8, 2011). 3.2 Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 (b) to the Company’s Registration Statement on FormS-1/A filed November 18, 2011). 4.1 Form of Common Stock Certificate of the Company (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on FormS-1/A filed November 18, 2011). 4.2 Indenture, dated as of June 3, 2014, between the Company and Wilmington Trust, National Association, as trustee (incorporated by reference toExhibit 4.1 to the Company’s Current Report on Form 8-K filed June 3, 2014). 4.3 First Supplemental Indenture, dated as of June 3, 2014, between the Company and Wilmington Trust, National Association, as trustee(incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K dated May 29, 2014). 4.4 Form of Note (included in Exhibit 4.2). 4.5 Indenture dated as of June 2, 2016, between the Company and Wilmington Trust, National Association, as trustee (including form of Note)(incorporated by reference to Exhibit 4.1 to to the Company's Current Report on Form 8-K dated June 2, 2016). 10.1 2009 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the three monthsended June 30, 2010 filed August 16, 2010). 10.2 Renewable Energy Group Annual Incentive Plan for Executive Officers (incorporated by reference to Appendix A to the Company’s ProxyStatement for the Annual Meeting of Stockholders of April 4, 2013, filed on April 4,2013).* 10.3 Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K filedMarch 14, 2016).* 10.4 Form of Stock Appreciation Right Award Agreement (incorporated by reference to Exhibit 10.1 to the Company's Annual Report on Form 10-Kfiled March 14, 2016).* 10.5 Form of Performance Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report onForm 10-Q filed November 7, 2016).* 10.6 Amended and Restated Loan Agreement dated November 3, 2011 by and between REG Danville, LLC and Fifth Third Bank (incorporated byreference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed November 9, 2011). 10.7 Credit Agreement dated as of December 23, 2011 by and among the lenders identified on the signature pages thereto, Wells Fargo CapitalFinance, LLC, REG Services Group, LLC and REG Marketing & Logistics Group, LLC (incorporated by reference to Exhibit 10.1 to theCompany’s Current Report on Form 8-K filed December 29, 2011). 10.8 Amendment No. 1 to Credit Agreement, dated as of January 31, 2012, by and among the lenders identified onthe signature pages thereto, Wells Fargo Capital Finance, LLC, REG Services Group, LLC and REG Marketing& Logistics Group, LLC (incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K filed March 14, 2016). 10.9 Amendment No. 2 to Credit Agreement, dated as of February 29, 2012, by and among the lenders identified onthe signature pages thereto, Wells Fargo Capital Finance, LLC, REG Services Group, LLC and REG Marketing& Logistics Group, LLC (incorporated by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10-K filed March 14, 2016). 10.10 Amendment No. 3 to Credit Agreement, dated as of May 1, 2012, by and among the lenders identified on thesignature pages thereto, Wells Fargo Capital Finance, LLC, REG Services Group, LLC and REG Marketing &Logistics Group, LLC (incorporated by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10-K filed March 14, 2016). 96Table of ContentsExhibitNumber Description10.11 Amendment No. 4 to Credit Agreement, dated as of January 9, 2013, by and among the lenders identified on thesignature pages thereto, Wells Fargo Capital Finance, LLC, REG Services Group, LLC and REG Marketing &Logistics Group, LLC (incorporated by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K filed March 14, 2016). 10.12 Amendment No. 5 to Credit Agreement, dated as of August 9, 2013, by and among the lenders identified on thesignature pages thereto, Wells Fargo Capital Finance, LLC, REG Services Group, LLC and REG Marketing &Logistics Group, LLC (incorporated by reference to Exhibit 10.13 to the Company’s Annual Report on Form 10-K filed March 14, 2016). 10.13 Consent and Amendment No. 6 to Credit Agreement, dated as of December 23, 2013, by and among the lendersidentified on the signature pages thereto, Wells Fargo Capital Finance, LLC, REG Services Group, LLC and REG Marketing & Logistics Group,LLC (incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K filed March 14, 2016). 1,014 Amendment No. 7 to Credit Agreement, dated as of May 19, 2014, by and among the lenders identified on thesignature pages thereto, Wells Fargo Capital Finance, LLC, REG Services Group, LLC and REG Marketing &Logistics Group, LLC (incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K filed March 14, 2016). 10.15 Amendment No. 8 to Credit Agreement, dated as of February 20, 2015, by and among the lenders identified onthe signature pages thereto, Wells Fargo Capital Finance, LLC, REG Services Group, LLC and REG Marketing& Logistics Group, LLC (incorporated by reference to Exhibit 10.16 to the Company’s Annual Report on Form 10-K filed March 14, 2016). 10.16 Amendment No. 9 to Credit Agreement, dated as of July 16, 2015, by and among the lenders identified on thesignature pages thereto, Wells Fargo Capital Finance, LLC, REG Services Group, LLC and REG Marketing &Logistics Group, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-Kfiled July 22, 2015). 10.17 General Continuing Guaranty dated as of December 23, 2011 in favor of Wells Fargo Capital Finance, LLC, as agent (incorporated by referenceto Exhibit 10.2 to the Company’s Current Report on Form 8-K filed December 29, 2011). 10.18 Membership Interest Purchase Agreement, dated as of May 20, 2014, by and among Renewable Energy Group, Inc., REG Synthetic Fuels, LLCand Tyson Foods, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed May 27, 2014).+ 10.19 Capped Call Confirmation, dated May 29, 2014, between of Bank of America, N.A. and the Company (incorporated by reference to Exhibit 10.1to the Company’s Current Report on Form 8-K filed June 3, 2014). 10.20 Capped Call Confirmation, dated May 29, 2014, between of Wells Fargo Bank, National Association, and the Company (incorporated byreference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed June 3, 2014). 10.21 Additional Capped Call Confirmation, dated May 30, 2014, between of Bank of America, N.A. and the Company (incorporated by reference toExhibit 10.3 to the Company’s Current Report on Form 8-K filed June 3, 2014). 1,022 Additional Capped Call Confirmation, dated May 30, 2014, between of Wells Fargo Bank, National Association, and the Company (incorporatedby reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed June 3, 2014). 10.23 Employment Agreement, effective January 1, 2015, between Renewable Energy Group, Inc. and Daniel J. Oh (incorporated by reference toExhibit 10.24 to the Company’s Current Report on Form 8-K filed December 24, 2014). 10.24 Joinder and Amendment No. 11 to Credit Agreement, dated as of September 30, 2016, by and among the lenders identified on the signaturepages thereto, Wells Fargo Capital Finance, LLC, Fifth Third Bank, REG Services Group, LLC and REG Marketing & Logistics Group, LLC(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 4, 2016). 12.1 Statement regarding computation of ratios 21.1 List of Subsidiaries 23.1 Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm 97Table of ContentsExhibitNumber Description24.1 Power of Attorney (included in the signature page to this report) 31.1 Certification of Daniel J. Oh pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Chad Stone pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Chief ExecutiveOfficer. 32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Financial Officer. + Confidential treatment requested * Management contract or compensatory plan, contract or arrangement 101.1 The following financial information of the Company and its subsidiaries for the fiscal year ended December 31, 2016, is formatted in XBRLinteractive data files: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of RedeemablePreferred Stock and Equity; (iii) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements. As provided inRule 406T of Regulation S-T, this information is furnished and not filed for purposes of Section 18 of the Securities Exchange Act of 1934 and isnot otherwise subject to liability under those sections. 98EXHIBIT 12.1RENEWABLE ENERGY GROUP, INC.STATEMENT REGARDING COMPUTATION OF RATIOS(in thousands) For the year ended December 31, 2011 2012 2013 2014 2015 2016Earnings (deficiency): Pre-tax income (loss) from continuing operations before adjustment for equity investees $91,409 $23,713 $191,301 $86,110 $(160,411) $48,981Add: Fixed Charges 11,015 11,312 7,756 12,516 17,222 23,270Amortization of cap interest 68 31 31 31 154 156Subtract: Interest capitalized — 33 335 1,345 897 88Preference security dividends — 3,156 2,055 — — —Earnings (deficiency) $102,492 $31,867 $196,698 $97,312 $(143,932) $72,319 Fixed charges: Interest expense and amortization of costs related to indebtedness $8,095 $4,679 $2,397 $6,690 $11,867 $15,987Interest capitalized — 33 335 1,345 897 88Estimate of interest within rental expenses 2,920 3,444 2,969 4,441 4,458 7,195Preference security dividends — 3,156 2,055 40 — —Total fixed charges $11,015 $11,312 $7,756 $12,516 $17,222 $23,270 Ratio of Earnings to Fixed Charges including Preference SecurityDividends (1) (2) 9.3 2.8 25.4 7.8 — 3.1Deficiency in the coverage of fixed charges  N/A  N/A  N/A  N/A $161,154 N/A(1) Fixed charges. The term “fixed charges” means the sum of the following: (a) interest expensed and capitalized, (b) amortized premiums, discounts andcapitalized expenses related to indebtedness, (c) an estimate of the interest within rental expense, and (d) preference security dividend requirements of consolidatedsubsidiaries.(2) Our net losses were insufficient to cover fixed charges in the year 2015. Because of these deficiencies, the ratio information is not applicable.Exhibit 21.1RENEWABLE ENERGY GROUP, INC. SUBSIDIARIES REG Biofuels, LLC IowaREG Marketing & Logistics Group, LLC IowaREG Services Group, LLC IowaREG Energy Services, LLC IowaREG Capital, LLC IowaREG Synthetic Fuels, LLC IowaREG Life Sciences, LLC IowaREG Canada Holdings Inc. British ColumbiaREG European Holdings B.V. NetherlandsREG Construction & Technology Group, LLC IowaREG Ventures, LLC IowaREG Venture Services, LLC IowaREG Real Estate Holdings, LLC IowaREG Ralston, LLC IowaREG Ames, LLC IowaREG Houston, LLC TexasREG Danville, LLC DelawareREG Albert Lea, LLC IowaREG Newton, LLC IowaREG Seneca, LLC IowaREG New Orleans, LLC IowaREG New Boston, LLC IowaREG Mason City, LLC IowaREG Emporia, LLC IowaREG Clovis, LLC IowaREG Atlanta, LLC IowaREG Okeechobee, LLC IowaREG Geismar, LLC DelawareREG Grays Harbor, LLC WashingtonREG Madison, LLC WisconsinREG Bioproducts, LLC (formerly known as REG Processing Systems, LLC) IowaREG Chemicals, LLC IowaREG Feedstock, LLC IowaREG Overseas Holdings B.V. NetherlandsREG International Trading & Commodities B.V. NetherlandsREG International Feedstock B.V. NetherlandsREG Energy Europe B.V. NetherlandsREG Overseas Services Group, B.V. NetherlandsREG Energy Solutions Europe B.V. NetherlandsREG Germany AG GermanyExhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in Registration Statement No. 333-168374 on Form S-8 and Registration Statement No. 333-208759 on Form S-3 of our report dated March 10, 2017 , relating to the consolidated financial statements of Renewable Energy Group, Inc.and subsidiaries, and the effectiveness of Renewable Energy Group, Inc. and subsidiaries’ internal control over financial reporting, appearingin this Annual Report on Form 10-K of Renewable Energy Group, Inc. for the year ended December 31, 2016 ./s/ DELOITTE & TOUCHE LLPDes Moines, IowaMarch 10, 2017Exhibit 31.1I, Daniel J. Oh, certify that:1. I have reviewed this annual report on Form 10-K of Renewable Energy Group, Inc.2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant andhave:a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting.5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Dated: March 10, 2017/s/ Daniel J. OhDaniel J. Oh Chief Executive OfficerExhibit 31.2I, Chad Stone, certify that:1. I have reviewed this annual report on Form 10-K of Renewable Energy Group, Inc.2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant andhave:a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting.5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’sauditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; andb. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Dated: March 10, 2017/s/ Chad StoneChad StoneChief Financial OfficerExhibit 32.1SECTION 1350 CERTIFICATIONSI, Daniel J. Oh, Chief Executive Officer of Renewable Energy Group, Inc. (the “Company”), certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 ofthe Sarbanes-Oxley Act of 2002, that to my knowledge the Annual Report on Form 10-K of the Company (the “Report”), which accompanies this Certificate, fullycomplies 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 allmaterial respects, the financial condition and results of operations of the Company.Dated: March 10, 2017 /s/ Daniel J. OhDaniel J. OhChief Executive OfficerExhibit 32.2SECTION 1350 CERTIFICATIONSI, 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 ofthe Sarbanes-Oxley Act of 2002, that to my knowledge the Annual Report on Form 10-K of the Company (the “Report”), which accompanies this Certificate, fullycomplies 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 allmaterial respects, the financial condition and results of operations of the Company.Dated: March 10, 2017 /s/ Chad StoneChad StoneChief Financial Officer

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