Renewable Energy Group, Inc. - Quarter Report: 2013 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2013

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-35397

RENEWABLE ENERGY GROUP, INC.

(Exact name of registrant as specified in its charter)

DELAWARE		26-4785427
(State of other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

416 South Bell Avenue Ames, Iowa		50010
(Address of principal executive offices)		(Zip code)

(515) 239-8000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨		Accelerated filer ¨

Non-accelerated filer x		Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO x

As of October 30, 2013, the registrant had 36,451,262 shares of Common Stock issued and outstanding.

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL INFORMATION

RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

	September 30, 2013			December 31, 2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	135,883		$	66,785
Accounts receivable, net (includes amounts owed by related parties of $425 and $771 as of September 30, 2013 and December 31, 2012, respectively)		66,621			18,768
Inventories		59,887			45,206
Deferred income taxes		—			2,512
Prepaid expenses and other assets		39,985			15,812
Total current assets		302,376			149,083
PROPERTY, PLANT AND EQUIPMENT, NET		280,907			242,885
PROPERTY, PLANT AND EQUIPMENT, NET—VARIABLE INTEREST ENTITY		5,233			5,405
GOODWILL		84,864			84,864
DEFERRED INCOME TAXES		22			969
OTHER ASSETS (includes amounts owed by related parties of $141 and $692 as of September 30, 2013 and December 31, 2012, respectively)		12,392			12,578
TOTAL ASSETS	$	685,794		$	495,784
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current maturities of notes payable	$	22,020		$	4,955
Current maturities of notes payable—variable interest entity		296			283
Accounts payable (includes amounts owed to related parties of $268 and $2,950 as of September 30, 2013 and December 31, 2012, respectively)		51,650			28,131
Accrued expenses and other liabilities		10,156			6,475
Deferred income taxes		5,413			—
Deferred revenue		987			—
Total current liabilities		90,522			39,844
UNFAVORABLE LEASE OBLIGATION		8,188			9,035
NOTES PAYABLE		9,366			27,776
NOTES PAYABLE—VARIABLE INTEREST ENTITY		3,806			4,030
OTHER LIABILITIES		6,945			7,292
Total liabilities		118,827			87,977
COMMITMENTS AND CONTINGENCIES (Note 15)
SERIES B PREFERRED STOCK ($.0001 par value; 3,000,000 shares authorized; 525,617 and 2,995,106 shares outstanding at September 30, 2013 and December 31, 2012, respectively; redemption amount $13,140 and $74,878 at September 30, 2013 and December 31, 2012, respectively)		14,564			83,043
EQUITY:
Company stockholders’ equity:
Common stock ($.0001 par value; 300,000,000 shares authorized; 35,677,946 and 30,559,935 shares outstanding at September 30, 2013 and December 31, 2012, respectively)		4			3
Common stock—additional paid-in-capital		347,397			273,989
Warrants—additional paid-in-capital		147			147
Retained earnings		208,211			53,823
Total paid-in-capital and retained earnings		555,759			327,962
Treasury stock (484,660 and 462,985 shares outstanding at September 30, 2013 and December 31, 2012, respectively)		(3,356	)		(3,198	)
Total stockholders’ equity		552,403			324,764
TOTAL LIABILITIES AND EQUITY	$	685,794		$	495,784

See notes to condensed consolidated financial statements.

RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

	Three Months Ended September 30, 2013			Three Months Ended September 30, 2012			Nine Months Ended September 30, 2013			Nine Months Ended September 30, 2012
REVENUES:
Biodiesel sales	$	399,226		$	320,999		$	859,058		$	774,814
Biodiesel sales – related parties		—			6			—			6
Biodiesel government incentives		59,203			1,868			248,385			8,070
		458,429			322,873			1,107,443			782,890
Services		15			39			104			196
		458,444			322,912			1,107,547			783,086
COSTS OF GOODS SOLD:
Biodiesel		388,518			308,445			875,475			689,914
Biodiesel—related parties		12,057			11,633			37,198			42,199
Services		20			43			149			199
		400,595			320,121			912,822			732,312
GROSS PROFIT		57,849			2,791			194,725			50,774
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (includes related party amounts of $0 and $2 for the three and nine months ended September 30, 2013, respectively, and $2 and $154 for the three and nine months ended September 30, 2012, respectively)		12,686			9,902			33,556			33,878
INCOME (LOSS) FROM OPERATIONS		45,163			(7,111	)		161,169			16,896
OTHER INCOME (EXPENSE), NET:
Change in fair value of preferred stock conversion embedded derivative		—			—			—			11,975
Change in fair value of Seneca Holdco liability		—			—			—			349
Other income		66			56			276			121
Interest expense (includes related party amounts of $2 and $30 for the three and nine months ended September 30, 2013, respectively, and $1 and $22 for the three and nine months ended September 30, 2012, respectively)		(577	)		(1,150	)		(1,757	)		(3,262	)
		(511	)		(1,094	)		(1,481	)		9,183
INCOME (LOSS) BEFORE INCOME TAXES		44,652			(8,205	)		159,688			26,079
INCOME TAX BENEFIT (EXPENSE)		42,051			2,165			(3,452	)		(3,669	)
NET INCOME (LOSS)		86,703			(6,040	)		156,236			22,410
EFFECTS OF RECAPITALIZATION		—			—			—			39,107
LESS—ACCRETION OF SERIES A PREFERRED STOCK TO REDEMPTION VALUE		—			—			—			(1,808	)
LESS—CHANGE IN UNDISTRIBUTED DIVIDENDS ALLOCATED TO PREFERRED STOCKHOLDERS		(147	)		(862	)		(147	)		(1,685	)
LESS—DISTRIBUTED DIVIDENDS TO PREFERRED STOCKHOLDERS		(258	)		—			(1,848	)		(1,470	)
LESS—EFFECT OF PARTICIPATING PREFERRED STOCK		(6,455	)		—			(18,010	)		(8,952	)
LESS—EFFECT OF PARTICIPATING SHARE-BASED AWARDS		(1,381	)		—			(2,273	)		(3,145	)
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY’S COMMON STOCKHOLDERS	$	78,462		$	(6,902	)	$	133,958		$	44,457
NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS:
BASIC	$	2.32		$	(0.24	)	$	4.20		$	1.60
DILUTED	$	2.31		$	(0.24	)	$	4.20		$	0.28
WEIGHTED AVERAGE SHARES USED TO COMPUTE NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS:
BASIC		33,790,034			29,292,349			31,918,951			27,729,676
DILUTED		34,016,476			29,292,349			31,924,197			33,676,699

See notes to condensed consolidated financial statements.

RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND EQUITY (Unaudited)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

(IN THOUSANDS EXCEPT SHARE AMOUNTS)

							Company Stockholders’ Equity
	Redeemable Preferred Stock Shares			Redeemable Preferred Stock			Common Stock Shares		Common Stock		Class A Common Stock Shares			Class A Common Stock			Common Stock - Additional Paid-in Capital		Warrants - Additional Paid-in Capital			Retained Earnings			Cost of Treasury Stock			Total
BALANCE, January 1, 2012		13,455,522		$	147,779			—	$	—		13,962,155		$	1		$	80,747	$	3,698		$	36,528		$	(398	)	$	120,576
Derecognition of Series A Preferred Stock		(13,455,522	)		(149,587	)		—		—		—			—			—		—			—			—			—
Issuance of Series B Preferred Stock and common stock		2,999,493			83,165			—		—		7,660,612			1			111,795		(3,551	)		—			—			108,245
Issuance of common stock in initial public offering, net of issue cost of $8,780		—			—			7,200,000		1		(342,860	)		—			59,918		—			—			—			59,919
Issuance of common stock		—			—			—		—		318,501			—			3,958		—			—			—			3,958
Conversion of Class A common stock to common stock		—			—			21,598,408		2		(21,598,408	)		(2	)		—		—			—			—			—
Conversion of restricted stock units to common stock (net of 420,724 shares of treasury stock purchased)		—			—			823,795		—		—			—			—		—			—			(2,676	)		(2,676	)
Stock compensation expense		—			—			—		—		—			—			12,687		—			—			—			12,687
Accretion of Series A Preferred Stock to redemption value		—			1,808			—		—		—			—			—		—			(1,808	)		—			(1,808	)
Series B Preferred Stock dividends paid		—			—			—		—		—			—			—		—			(1,470	)		—			(1,470	)
Net income		—			—			—		—		—			—			—		—			22,410			—			22,410
BALANCE, September 30, 2012		2,999,493		$	83,165			29,622,203	$	3		—		$	—		$	269,105	$	147		$	55,660		$	(3,074	)	$	321,841
BALANCE, January 1, 2013		2,995,106		$	83,043			30,559,935	$	3		—		$	—		$	273,989	$	147		$	53,823		$	(3,198	)	$	324,764
Issuance of common stock		—			—			58,501		—		—			—			423		—			—			—			423
Conversion of Series B Preferred Stock to common stock		(2,469,489	)		(68,479	)		4,988,995		1		—			—			69,116		—			—			—			69,117
Conversion of restricted stock units to common stock (net of 21,675 shares of treasury stock purchased)		—			—			70,515		—		—			—			—		—			—			(158	)		(158	)
Stock compensation expense		—			—			—		—		—			—			3,869		—			—			—			3,869
Series B Preferred Stock dividends paid		—			—			—		—		—			—			—		—			(1,848	)		—			(1,848	)
Net income		—			—			—		—		—			—			—		—			156,236			—			156,236
BALANCE, September 30, 2013		525,617		$	14,564			35,677,946	$	4		—		$	—		$	347,397	$	147		$	208,211		$	(3,356	)	$	552,403

See notes to condensed consolidated financial statements.

RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

(IN THOUSANDS)

	Nine Months Ended September 30, 2013			Nine Months Ended September 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	156,236		$	22,410
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation expense		6,974			6,192
Amortization expense of assets and liabilities, net		(365	)		(291	)
Gain on disposal of property, plant and equipment		(67	)		—
Provision for doubtful accounts		99			707
Stock compensation expense		3,869			12,687
Deferred tax expense		8,872			3,008
Change in fair value of preferred stock conversion feature embedded derivatives		—			(11,975	)
Change in fair value of Seneca Holdco liability		—			(249	)
Premium paid for Seneca Landlord investment		—			(7,063	)
Expense settled with stock issuance		—			1,898
Changes in asset and liabilities:
Accounts receivable, net		(47,959	)		12,004
Inventories		(14,681	)		2,745
Prepaid expenses and other assets		(24,441	)		(18,631	)
Accounts payable		23,843			4,305
Accrued expenses and other liabilities		3,432			(3,968	)
Deferred revenue		987			(6,748	)
Net cash flows provided by operating activities		116,799			17,031
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for purchase of property, plant and equipment		(28,785	)		(6,399	)
Cash proceeds from involuntary disposal of fixed assets		330			—
Change in restricted cash		—			(64	)
Cash paid for investments		(58	)		(4	)
Cash paid for Soy Energy asset acquisition		(10,933	)		—
Net cash flows used in investing activities		(39,446	)		(6,467	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on line of credit		1,103,568			1,074,905
Repayments on line of credit		(1,103,568	)		(1,076,079	)
Cash received from issuance of note payable		3,000			—
Cash paid on note payable		(9,690	)		(8,050	)
Cash paid for debt issuance costs		(47	)		(137	)
Repayment of investment in Seneca Landlord		—			(4,000	)
Cash received from initial public offering		—			63,747
Cash paid for issuance of common stock and preferred stock		(25	)		(1,699	)
Cash paid for treasury stock		(282	)		(3,074	)
Cash paid for preferred stock dividends		(1,205	)		(1,470	)
Cash paid for fractional common stock shares		(6	)		—
Net cash flows provided from (used in) financing activities		(8,255	)		44,143
NET CHANGE IN CASH AND CASH EQUIVALENTS		69,098			54,707
CASH AND CASH EQUIVALENTS, Beginning of period		66,785			33,575
CASH AND CASH EQUIVALENTS, End of period	$	135,883		$	88,282

(continued)

RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012

(IN THOUSANDS)


	Nine Months Ended September 30, 2013			Nine Months Ended September 30, 2012
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid (received) for income taxes	$	(6,538	)	$	3,435
Cash paid for interest	$	1,496		$	3,048
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Effects of recapitalization				$	39,107
Accretion of preferred stock to redemption value				$	1,808
Amounts included in period-end accounts payable for:
Purchases of property, plant and equipment	$	3,608		$	2,514
Incentive stock liability for raw material supply agreement	$	439		$	362
Issuance of common stock for Seneca Landlord put/call option				$	591
Issuance of common stock for dividends	$	643
Issuance of note payable for acquisition	$	5,135

(concluded)

See notes to condensed consolidated financial statements.

RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Unaudited

For The Three and Nine Months Ended September 30, 2013 and 2012

(In Thousands, Except Share and Per Share Amounts)

NOTE 1 — BASIS OF PRESENTATION AND NATURE OF THE BUSINESS

The condensed consolidated financial statements have been prepared by Renewable Energy Group, Inc. and its subsidiaries (the Company), without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted as permitted by such rules and regulations. All adjustments, consisting of normal recurring adjustments, have been included. Management believes that the disclosures are adequate to present fairly the financial position, results of operations and cash flows at the dates and for the periods presented. It is suggested that these interim financial statements be read in conjunction with the consolidated financial statements and the notes thereto appearing in the Company’s latest annual report on Form 10-K. Results for interim periods are not necessarily indicative of those to be expected for the fiscal year.

On January 3, 2012, the Company filed its Second Amended and Restated Certificate of Incorporation which executed a one-for-2.5 reverse stock split of the issued and outstanding shares of its common stock. All numbers of common shares and per share data in the accompanying condensed consolidated financial statements and related notes have been retroactively adjusted. On January 24, 2012, in connection with the IPO, the Series A Preferred Stock was converted into a combination of shares of Series B Preferred Stock and Class A Common Stock. On January 24, 2012, the Company completed an initial public offering (IPO) of shares of Common Stock in which it sold 7,200,000 shares at a price to the public of $10 per share, which included 342,860 shares of Common Stock from selling shareholders. The IPO raised approximately $59,919 net of underwriting fees and offering costs. On January 24, 2012, the Company acquired the Seneca Facility pursuant to the exercise of its option under the Funding, Investor Fee and Put/Call Agreement, by and among the Company, Seneca Landlord, LLC (Seneca Landlord) and certain subsidiaries of the Company. See “Note 3 – Stockholders’ Equity of the Company” for a further description of the IPO.

As of September 30, 2013, the Company owned biodiesel production facilities with an aggregate nameplate production capacity of 257 million gallons per year (mmgy).

The biodiesel industry and the Company’s business have benefited from certain federal and state incentives. On January 2, 2013, the federal blenders tax credit, which expired on December 31, 2011, was retroactively reinstated to January 1, 2012 through December 31, 2013. Revenues associated with governmental incentive programs are recognized when the amount to be received is determinable, collectability is reasonably assured and the sale of product giving rise to the incentive has been recognized. During the three and nine months ended September 30, 2013, the Company earned biodiesel government incentive revenues in the amount of $59,203 and $248,385, respectively, and $1,868 and $8,070 for the three and nine months ended September 30, 2012, respectively. The 2012 federal blenders tax credit portion recognized during the first quarter of 2013 increased biodiesel government incentive revenues.

During the third quarter of 2013, the Company revised the presentation of biodiesel sales and biodiesel government incentives revenue reported for the six months ended June 30, 2013 and the three months ended March 31, 2013 to reflect the blenders tax credit amount paid to customers of $69,534 as a reduction of biodiesel sales versus biodiesel government incentives revenue. The revision corrects the presentation of the blenders tax credits passed through to customers as a reduction of biodiesel sales in accordance with the guidance provided by ASC Subtopic 605-50, Revenue Recognition – Customer Payments and Incentives. Specifically, the Company determined that the cash amount of blender tax credits passed through to customers is analogous to consideration given by a vendor to a customer. This revision has no impact on any other previously reported historical period. The Company believes the revised presentation is not material to its previously reported historical condensed consolidated statements of operations. Additionally, this revision had no impact on total revenue, gross profit, net income, earnings per share, the condensed consolidated balance sheets, the condensed consolidated statement of redeemable preferred stock and equity or the condensed consolidated statements of cash flows in any previously reported historical period.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company, consolidated with the accounts of all of its subsidiaries and affiliates in which the Company holds a controlling financial interest as of the financial statement date. Normally, a controlling financial interest reflects ownership of a majority of the voting interests. Other factors considered in determining whether a controlling financial interest is held include whether the Company

possesses the authority to purchase or sell assets or make other operating decisions that significantly affect the entity’s results of operations and whether the Company is the primary beneficiary of the economic benefits and financial risks of the entity. Intercompany accounts and transactions have been eliminated.

Inventories

Inventories consist of raw materials, work in process and finished goods and are valued at the lower of cost or market. As of September 30, 2013 and December 31, 2012, there were no adjustments to reduce inventory to the lower of cost or market. Cost is determined based on the first-in, first-out method.

Renewable Identification Numbers (RINs)

When the Company produces a gallon of biodiesel, 1.5 RINs per gallon are generated. RINs are used to track compliance with Renewable Fuel Standards (RFS2). RFS2 allows the Company to attach between zero and 2.5 RINs to any gallon of biodiesel. When the Company sells a gallon of biodiesel, 1.5 RINs are generally attached. As a result, a portion of the selling price for a gallon of biodiesel is generally attributable to RFS2 compliance. However, RINs that the Company generates are a form of government incentive and not a result of the physical attributes of the biodiesel production. Therefore, no cost is allocated to the RIN when it is generated, regardless whether the RIN is transferred with the biodiesel produced or held by the Company pending attachment to other biodiesel production sales. In addition, the Company also obtains RINs from third parties who have separated the RINs from gallons of biomass-based diesel by blending the biomass-based diesel with at least 80% petroleum diesel fuel. From time to time, the Company holds varying amounts of these separated RINs for resale. RINs obtained from third parties are initially recorded at their cost at the time we acquire them and are subsequently revalued at the lower of cost or market as of the last day of each accounting period and the resulting adjustments are reflected in costs of goods sold for the period. The value of RINs obtained from third parties is reflected in “Prepaid expenses and other assets” on the consolidated balance sheet. The cost of goods sold related to the sale of these RINs is determined using the average cost method, while market prices are determined by RIN values, as reported by the Oil Price Information Service (OPIS).

Preferred Stock Accretion

On January 24, 2012, in connection with the IPO, the Series A Preferred Stock was converted into a combination of shares of Series B Preferred Stock and Class A Common Stock. Accretion of the Series A Preferred Stock was terminated at the time of the conversion. The Company recorded the Series B Preferred Stock at fair value, which was a premium over its redemption value; therefore no accretion is recorded for the Series B Preferred Stock (ASC Topic 480-10-S99).

Accretion of $0 for the three and nine months ended September 30, 2013 and $0 and $1,808 for the three and nine months ended September 30, 2012, respectively, has been recognized as a reduction to income available to common stockholders in accordance with paragraph 15 of ASC Topic 480-10-S99, Classification and Measurement of Redeemable Securities (ASC Topic 480-10-S99).

Goodwill

The Company accounts for goodwill in accordance with ASC Topic 350, Intangibles – Goodwill and Other. The Company reviews the carrying value of goodwill for impairment annually on July 31 or when impairment indicators exist. Goodwill is allocated and reviewed for impairment by reporting units. The Company’s reporting units consist of its two operating segments, the biodiesel operating segment and services operating segment. The analysis is based on a comparison of the carrying value of the reporting unit to its fair value, determined utilizing a discounted cash flow methodology. Additionally, the Company reviews the carrying value of goodwill whenever events or changes in business circumstances indicate that the carrying value of the assets may not be recoverable. Changes in estimates of future cash flows caused by items such as unforeseen events or sustained unfavorable changes in market conditions could negatively affect the fair value of the reporting unit’s goodwill asset and result in an impairment charge. The annual impairment test determined that the fair value of the biodiesel operating segment exceeded its carrying value by approximately 43% and the services operating segment exceeded its carrying value by approximately 20%. There was no impairment of goodwill recorded in the periods presented.

Revenue Recognition

The Company recognizes revenues from the following sources:

•

the sale of biodiesel and its co-products, as well as Renewable Identification Numbers (RINs) and raw material feedstocks, purchased or produced by the Company at owned and leased manufacturing facilities and manufacturing facilities with which the Company has tolling arrangements;

•

the resale of biodiesel, RINs and raw material feedstocks acquired from third parties;

•

fees received under toll manufacturing agreements with third parties;

•

incentives received from federal and state programs for renewable fuels; and

•

fees received for the marketing and sales of biodiesel produced by third parties and from managing operations of third party facilities.

Biodiesel, including RINs, and raw material feedstock revenues are recognized where there is persuasive evidence of an arrangement, delivery has occurred, the price has been fixed or is determinable and collectability can be reasonably assured.

Fees received under toll manufacturing agreements with third parties are generally established as an agreed upon amount per gallon of biodiesel produced. The fees are recognized where there is persuasive evidence of an arrangement, delivery has occurred, the price has been fixed or is determinable and collectability can be reasonably assured.

Revenues associated with the governmental incentive programs are recognized when the amount to be received is determinable, collectability is reasonably assured, and the sale of product giving rise to the incentive has been recognized.

While in general the Company has not historically offered sales incentives to customers, the uncertainty around the reinstatement of the federal blenders’ tax credit led to the introduction of such an incentive during 2012. Specifically, during 2012 the Company negotiated contracts with certain customers to allow such customers to share in the value of federal blenders tax payments if the law were to be reinstated. The federal blenders tax credit was reinstated on January 2, 2013 and the Company recognized $69,534 of cash payments owed to customers as a reduction of Biodiesel sales revenue. Before 2012, the Company did not have similar contracts and none of its sales subsequent to December 31, 2012 contain such provisions.

Fees for managing ongoing operations of third party plants, marketing biodiesel produced by third party plants and from other services are recognized as services are provided. The Company also has performance-based incentive agreements that are included as management service revenues. These performance incentives are recognized as revenues when the amount to be received is determinable and collectability is reasonably assured.

Stock-Based Compensation

On August 31, 2011, the Company’s Board of Directors (Company Board) approved the Amended and Restated 2009 Stock Incentive Plan, which was then approved by the Company’s shareholders on October 26, 2011. Eligible award recipients are employees, non-employee directors and advisors who provide service to the Company. The Company accounts for stock-based compensation in accordance with ASC Topic 718, Stock Compensation (ASC Topic 718). Compensation expense is measured at the grant-date fair value of the award and recognized as compensation expense over the vesting period. Compensation expense of $1,483 and $3,869 for the three and nine months ended September 30, 2013, respectively, and $2,965 and $12,687 for the three and nine months ended September 30, 2012, respectively, was recorded for restricted stock units and stock appreciation rights awarded to employees and non-employee directors in return for services. During January 2013, the Company granted 20,000 shares of stock appreciation rights to an employee for services with a vesting period of four years. During February 2013, the Company granted 50,000 shares of restricted stock units to an employee that vested and converted to common stock immediately based upon meeting certain performance requirements. During May 2013, the Company granted 84,921 shares of restricted stock units and 313,482 shares of stock appreciation rights to employees with vesting periods of three and four years, respectively. During the third quarter 2013, the Company granted 50,000 shares of restricted stock units which will vest on December 31, 2013 and 19,262 shares of restricted stock units which will cliff vest in three to four years. Also during the third quarter 2013, the Company grated 1,575 shares of stock appreciation rights to various employees which have a vesting period of four years.

Recapitalization

In connection with the Company’s IPO on January 24, 2012, the Company gave effect to the one-time conversion of Series A Preferred Stock and certain common stock warrants into 7,660,612 shares of newly-issued Common Stock and 2,999,493 shares of $74,987 aggregate liquidation preference Series B Preferred Stock with cumulative dividends of 4.5% per annum. All Series A Preferred Stock was converted and no Series A Preferred Stock remains outstanding. The Company recorded the effects from the exchange of Series A Preferred Stock for Series B Preferred Stock and Common Stock as an extinguishment in accordance with ASC 260-10-S99-2.

Accordingly, the Company recognized an addition to the income available to common shareholders in the amount of $39,107. This amount was determined by comparing the fair value of the Series B Preferred Stock and Common Stock issued of $152,327 to the carrying amount of the Series A preferred shares that were redeemed of $191,434. The excess of the carrying amount of Series A Preferred Stock that were redeemed over the fair value of the Series B Preferred Stock and Common Stock that were issued was recorded as an increase to additional paid-in capital and was added to net earnings

available to common shareholders of $39,107. The Series B Preferred Stock fair value was determined using Monte Carlo simulation methodology with the assistance of external third-party experts to calculate the fair-value using the Company’s common stock at time of conversion. The significant assumptions included the volatility rate and risk-free rate based upon the yield of the U.S. Industrials B curve.

Net Income (Loss) Per Share

Basic and diluted net income (loss) per common share are presented in conformity with the two-class method required for participating securities. The two-class method includes an earnings allocation formula that determines earnings for each class of common stock according to dividends declared and undistributed earnings for the period.

The holders of the Series B Preferred Stock accrue dividends at a rate of $1.125 per share per annum. Dividends are cumulative, accrue on a daily basis from the date of issuance and compound annually from the date of issuance. If dividends on the Series B Preferred Stock have not been paid or declared, the deficiency shall be paid or declared before any dividend is declared for Common Stock. Dividends in arrears do not bear interest. Holders of the Series B Preferred Stock are allowed to participate in the dividends to common stockholders in the event that dividends on Common Stock exceed that of the Series B Preferred Stock as if the Series B Preferred Stock had been converted to Common Stock at the beginning of the year.

The Company calculates the effects of the Series B Preferred Stock on diluted EPS under the “if-converted” method unless the conversion of the convertible preferred stock is anti-dilutive to basic EPS. The effects of Common Stock options, warrants, restricted stock units and stock appreciation rights on diluted EPS are calculated using the treasury stock method unless the effects are anti-dilutive to EPS.

The following potentially dilutive weighted average securities were excluded from the calculation of diluted net income (loss) per share attributable to common stockholders during the periods presented as the effect was anti-dilutive:

	Three Months Ended September 30, 2013		Three Months Ended September 30, 2012		Nine Months Ended September 30, 2013		Nine Months Ended September 30, 2012
Options to purchase common stock		87,026		87,026		87,026		87,026
Restricted stock units		—		1,134,421		—		1,409,659
Stock appreciation rights		314,036		1,043,693		1,194,477		655,762
Warrants to purchase common stock		—		17,916		—		42,054
Redeemable preferred shares		—		5,998,986		—		—
Total		401,062		8,282,042		1,281,503		2,194,501

The following table presents the calculation of diluted net income per share for the three and nine months ended September 30, 2013 and for the nine months ended September 30 2012. For the three months ended September 30, 2012, the effect from all convertible securities was anti-dilutive (in thousands, except share and per share data):

		Three Months Ended September 30, 2013			Nine Months Ended September 30, 2013			Nine Months Ended September 30, 2012
Net income attributable to the Company’s common stockholders	$	78,462		$	133,958		$	44,457
Less: effects of recapitalization		—			—			(39,107	)
Plus: change in undistributed dividends allocated to preferred stockholders		147			147			1,685
Plus: distributed dividends to Preferred Stockholders		258			1,848			1,470
Plus: accretion of Series A Preferred Stock to redemption value		—			—			1,808
Plus: (gain) loss due to change in fair value of Series A Preferred Stock conversion feature embedded derivatives		—			—			(11,975	)
Plus: effect of participating securities		7,836			20,283			12,097
Net income available to common stockholders		86,703			156,236			10,435
Less: effect of participating securities		(8,191	)		(22,275	)		(1,108	)
Net income attributable to the Company’s common stockholders after dilutive effects	$	78,512		$	133,961		$	9,327

Shares:
Weighted-average shares used to compute basic net income per share		33,790,034			31,918,951			27,729,676
Adjustment to reflect conversion of preferred stock		—			—			5,947,023
Adjustment to reflect stock appreciation right conversions		221,909			4,977			—
Adjustment to reflect warrants to purchase common stock		4,533			269			—
Weighted-average shares used to compute diluted net income per share		34,016,476			31,924,197			33,676,699
Net income per share attributable to common stockholders
Diluted	$	2.31		$	4.20		$	0.28

Variable Interest Entities

The Company uses both quantitative and qualitative analysis when evaluating its variable interest entities (VIE) and determining the primary beneficiary (PB) of a VIE. The Company consolidates a VIE if it has both (a) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and (b) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

New Accounting Pronouncements

In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (Topic 740). The amendments in ASU 2013-11 provide guidance on the financial statement presentation of unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU 2013-11 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The Company will reflect the impact of these amendments beginning with the Company’s Quarterly Report on Form 10-Q for the period ending March 31, 2014. The Company does not anticipate a material impact to the Company’s financial position, results of operations or cash flows as a result of this change.

NOTE 3 — STOCKHOLDERS’ EQUITY OF THE COMPANY

Common Stock

On January 3, 2012, the Company filed its Second Amended and Restated Certificate of Incorporation which affected a one-for-2.5 reverse stock split on the shares issued and outstanding. The Amended and Restated Certificate of Incorporation authorized capital stock consisting of 450,000,000 shares, all with a par value of $.0001 per share which includes 300,000,000 shares of Common Stock (the class of common stock offered in the IPO), 140,000,000 shares of Class A Common Stock and 10,000,000 shares of preferred stock including 3,000,000 shares of Series B Preferred Stock.

Each holder of Common Stock is entitled to one vote for each share of Common Stock held on all matters submitted to a vote of stockholders. Subject to preferences that may apply to shares of outstanding Series B Preferred Stock as outlined below, the holders of outstanding shares of Common Stock are entitled to receive dividends. After the payment of all preferential amounts required to the holders of Series B Preferred Stock, all of the remaining assets of the Company available for distribution shall be distributed ratably among the holders of Common Stock.

On January 24, 2012, the Company completed an IPO of shares of Common Stock in which it sold 7,200,000 shares at a price to the public of $10 per share, which included 342,860 shares of Class A Common Stock from selling shareholders. The IPO raised approximately $59,919 net of underwriting fees and offering costs. In connection with the Company’s IPO on January 24, 2012, the Company gave effect to the one-time conversion of Series A Preferred Stock and certain common stock warrants into 7,660,612 shares of newly-issued Class A Common Stock and 2,999,493 shares of $74,987 aggregate liquidation preference Series B Preferred Stock with cumulative dividends of 4.50% per annum. On June 30, 2015, each holder of Series B Preferred Stock will have the right to require the Company to redeem its shares at the redemption price of $25.00 per share plus an amount equal to any accumulated and unpaid dividends (Redemption Price). The holder of any shares of Series B Preferred Stock will have the right to convert such shares, together with accumulated and unpaid dividends (whether or not declared) into shares of Common Stock at the conversion rate in effect at such time. If the closing sale price of the Common Stock exceeds certain pricing thresholds, then the Company may, at its option, cause up to all of the then outstanding shares of Series B Preferred Stock (and corresponding accumulated and unpaid dividends) to be converted into shares of the Company’s Common Stock at the then-applicable conversion rate.

Common Stock Issued During 2013

On February 15, 2013, the Company had 50,000 restricted stock units vest into 28,325 shares of Common Stock, net of 21,675 shares of treasury stock.

On March 18, 2013, the Company issued 58,501 shares of Common Stock with respect to the intangible supply agreement in connection with the purchase of substantially all Tellurian Biodiesel, Inc. and American BDF, LLC assets.

During the first quarter 2013, certain Series B Preferred Stockholders converted 1,140 shares of preferred stock into 2,300 shares of Common Stock as provided for in the preferred stock shareholder agreement.

On May 23, 2013, the Company had 42,190 restricted stock units vest into 42,190 shares of Common Stock.

During the second quarter 2013, certain Series B Preferred Stockholders converted 852,464 shares of preferred stock into 1,734,577 shares of Common Stock as provided for in the preferred stock shareholder agreement.

During the third quarter 2013, certain Series B Preferred Stockholders converted 1,097,520 shares of preferred stock into 2,204,653 shares of Common Stock as provided for in the preferred stock shareholder agreement.

During the third quarter 2013, the Company’s closing sale price of its Common Stock exceeded $15.00 for at least 20 days in a 30 consecutive trading day period with the average daily trading volume exceeding 200,000 shares. Therefore, the Company opted to cause 50% of the then-outstanding shares of Series B Preferred Stock to be converted as provided for in the preferred stock shareholder agreement. The Company converted 518,365 shares of Series B Preferred Shares into 1,047,465 shares of Common Stock.

Common Stock Warrants

Under the Company’s outstanding warrants, the holder may purchase the number of shares of Common Stock underlying each warrant held for a purchase price of $11.16 per share. The warrant holder may “net exercise” the warrants and use the common shares received upon exercise of the warrants outstanding as the consideration for payment of the exercise price.

The warrant holders are generally protected from anti-dilution by adjustments for any stock dividends, stock split, combination or other recapitalization.

Stock Issuance Costs

In addition to the warrants, other direct costs of obtaining capital by issuing the common and preferred stock were deducted from related proceeds with the net amount recorded as preferred stock or stockholders’ equity. Direct costs incurred for the three and nine months ended September 30, 2013 were $0 and $25, respectively, and $0 and $700 for the three and nine months ended September 30, 2012, respectively.

NOTE 4 — REDEEMABLE PREFERRED STOCK

The Company’s restated certificate of incorporation filed on February 26, 2010 authorized 60,000,000 shares of preferred stock, including 14,000,000 shares of Series A Preferred Stock, with a par value of $.0001. The Company’s Board of Directors had discretion, subject to the approval of certain shareholders, as to the designation of voting rights, dividend rights, redemption price, liquidation preference and other provisions of each issuance.

On July 15, 2011, holders of the Company’s Series A Preferred Stock approved a second amended and restated certificate of incorporation, to be effective prior to the completion of the Company’s initial public offering, to, among other things, convert and redeem the Company’s outstanding Series A Preferred Stock for a combination of Class A Common Stock and Series B Preferred Stock. This was approved by the Company’s common stockholders during the Company’s annual stockholder meeting on October 26, 2011.

On January 3, 2012, the Company filed its Second Amended and Restated Certificate of Incorporation which affected a one-for-2.5 reverse stock split of the issued and outstanding shares of Common Stock. The Second Amended and Restated Certificate of Incorporation authorized capital stock consisting of 450,000,000 shares, all with a par value of $.0001 per share which includes 300,000,000 shares of Common Stock (the class of common stock offered in the IPO), 140,000,000 shares of Class A Common Stock and 10,000,000 shares of preferred stock including 3,000,000 shares of Series B Preferred Stock.

The rights, preferences, privileges and restrictions granted to and imposed on the Preferred Stock are set forth below. The holders of Preferred Stock are generally protected from anti-dilution by adjustments for any stock dividends, stock split, combination or other recapitalization.

Series B Preferred Stock

Dividend Provisions

The holders of the Series B Preferred Stock are entitled to receive, when, as and if declared by the board of directors, cumulative dividends on each outstanding share of Series B Preferred Stock at the annual rate of 4.50% of the stated value. Dividends are payable semi-annually in arrears on June 30 and December 30 of each year, beginning on June 30, 2012. The Company may, at its option, defer a regularly scheduled dividend payment and instead pay accumulated and unpaid dividends on the following dividend payment date. The Company can only defer two such dividend payments and may not defer consecutive dividend payments. The Company will pay any dividend in cash, by delivering shares of Common Stock or through any combination of cash and shares of Common Stock.

Liquidation Rights

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company’s affairs, a holder of Series B Preferred Stock will be entitled to be paid, before any distribution or payment may be made to any holders of junior stock, an amount per share of Series B Preferred Stock, referred to as the Liquidation Preference, equal to the sum of the stated value of a share of Series B Preferred Stock of $25.00, referred to as the Stated Value, plus the amount of any accumulated and unpaid dividends, whether or not declared, to, but excluding, the date of payment.

If upon any liquidation or dissolution, the remaining net assets of the Company are insufficient to pay the amount that the Series B Preferred Stock holders are due as indicated above, the holders of Series B Preferred Stock will share ratably in any distribution of the remaining assets of the Company.

Conversion Rights

At any time following the lock-up expiration date, the holder of any shares of Series B Preferred Stock will have the right to convert such shares, together with accumulated and unpaid dividends (whether or not declared) into shares of Common Stock at a conversion rate in effect at such time. The initial conversion rate for each $25.00 of Liquidation Preference will be equal to $25.00 divided by a price that is 125% of the public offering price in the IPO.

The conversion rate is subject to adjustment from time to time upon the following events: a distribution or dividend of Common Stock, certain subdivisions and combinations of the Common Stock, the issuance to holders of Common Stock of certain rights or warrants to purchase Common Stock, certain dividends or distributions of capital stock, evidences of indebtedness, other assets or cash to holders of Common Stock, or, under certain circumstances, a payment we make in respect of a tender offer or exchange offer for Common Stock.

If, at any time following the lock-up expiration date, the closing sale price of the Common Stock exceeds $15.00 for at least 20 trading days in any 30 consecutive trading day period and the average daily trading volume of the Common Stock for at least 20 trading days in such period exceeds 200,000 shares or $2,500, then the Company may, at its option, cause up to 50% of the then-outstanding shares of Series B Preferred Stock, and corresponding accumulated and unpaid dividends, to be converted into shares of Common Stock at the then-applicable conversion rate. If at any time following the lock-up expiration date, the closing sale price of the Common Stock exceeds $16.00 for at least 20 trading days in any 30 consecutive trading day period and the average daily trading volume of the Common Stock for at least 20 trading days in such period exceeds 200,000 shares or $2,500, the Company may, at its option, cause up to all of the then-outstanding shares of Series B Preferred Stock, and corresponding accumulated and unpaid dividends, to be converted into shares of Common Stock at the then-applicable conversion rate.

Voting Rights

Each holder of the Series B Preferred Stock is entitled to vote their share of Series B Preferred Stock on an as-converted basis on any matters presented to holders of Common Stock for their consideration. Except as required by law, holders of Series B Preferred Stock will vote on an as-converted basis together with the holders of Common Stock and with the holders of any other class or series of the Company’s capital stock entitled to vote with the Common Stock, as a single class.

The vote or consent of at least 75% of the shares of the Series B Preferred Stock at the time outstanding, voting as a separate class, shall be necessary to amend, alter or repeal the terms of the Series B Preferred Stock so as to adversely affect the powers, preferences or rights of the Series B Preferred Stock.

Redemption Rights

Except as set forth below, the Company may not redeem the Series B Preferred Stock prior to the date, referred to as the Initial Optional Redemption Date, which is 18 months following the lock-up expiration date. On or after the Initial Optional Redemption Date, the Series B Preferred Stock may be redeemed at the Company’s option, in whole or in part, for cash at a price per share equal to the Stated Value, plus any accumulated and unpaid dividends, which the Company refers to as the Redemption Price. If a change of control transaction occurs any time before the Initial Optional Redemption Date, then the Company may elect to redeem all, but not part, of the outstanding shares of Series B Preferred Stock for cash at the Redemption Price plus a “make-whole” payment for each share of Series B Preferred Stock equal to $2.25 less the amount of any dividends paid on such share since the original issuance date of the Series B Preferred Stock.

If before March 31, 2015, the Company conducts an equity offering or offerings for cash that results in aggregate net proceeds in excess of $20,000, then, subject to the Company having legally available funds, the Company will offer to purchase or redeem the maximum number of shares of Series B Preferred Stock at a price equal to the Stated Value plus the amount of any accumulated and unpaid dividends to, but excluding, the purchase date that may be purchased or redeemed using 25% of those net proceeds. Before the Initial Optional Redemption Date, the Company will use those net proceeds to offer to purchase, in a tender offer, Series B Preferred Stock, and after the Initial Optional Redemption Date, the Company will use those net proceeds to redeem Series B Preferred Stock.

On June 30, 2015, each holder of Series B Preferred Stock will have the right to require the Company to redeem its shares at the Redemption Price, subject to the Company having legally available funds. If at any time dividends on any shares of Series B Preferred Stock are unpaid as of the specific dividend payment date and the non-payment continues for a period of 30 days, then the holders of not less than 25% of the then-outstanding Series B Preferred Stock may require the Company, subject to the Company having legally available funds, to redeem all outstanding shares of Series B Preferred Stock at the Redemption Price.

NOTE 5 — ACQUISITIONS

Soy Energy, LLC

On July 30, 2013, the Company and REG Mason City, LLC (REG Mason City), a subsidiary of the Company, completed the acquisition of Soy Energy, LLC’s (Soy Energy) assets. Pursuant to the Asset Purchase Agreement, the Company acquired substantially all the assets of Soy Energy in exchange for $10,933 cash and the issuance of a $5,135 promissory note to Soy Energy. The assets of Soy Energy consisted of a 30 mmgy nameplate capacity biodiesel facility and related assets, located in Mason City, Iowa.

The Company determined that the Soy Energy assets were not a business as defined under ASC Topic 805, Business Combinations (ASC Topic 805), on the basis that the assets were not an integrated set of activities or assets that were capable of being conducted or managed in a manner that would provide any economic benefit to the Company. As a result, the

Company accounted for the Soy Energy assets as an asset acquisition. Neither goodwill nor a gain from a bargain purchase was recognized in conjunction with the acquisition.

The following table summarized the allocation of the purchase price to the fair values of the net assets acquired at the date of acquisition:

	Allocation at July 30, 2013
Assets (liabilities) acquired:
Property, plant and equipment	$	16,085
Other current liabilities		(17	)
Total	$	16,068

NOTE 6 — VARIABLE INTEREST ENTITIES

The Company has a 50% ownership in 416 S. Bell, LLC (Bell, LLC), a VIE joint venture that owns and leases to the Company its corporate office building in Ames, Iowa. Commencing January 1, 2011, the Company has the right to execute a call option with the joint venture member, Dayton Park, LLC (Dayton Park), to purchase Bell, LLC and commencing on January 1, 2013, Dayton Park has the right to execute a put option with the Company to sell Bell, LLC. The Company determined it was the primary beneficiary of Bell, LLC and has consolidated Bell, LLC into the Company’s financial statements since January 1, 2011. The Company is the primary beneficiary due to its ownership interest and having an exercisable call option that allows the Company to direct the activities that most significantly impact Bell, LLC’s economic performance and gives the Company the majority of the benefit from the use of Bell, LLC’s assets. During February 2013, the Bell, LLC promissory note was amended to reflect the current interest rate of 3.5% per annum and a maturity date of January 14, 2018. The note is secured by a mortgage interest in the office building.

The carrying values and maximum exposure for all unconsolidated VIE’s are as follows:

	September 30, 2013				December 31, 2012
Investment:	Investments		Maximum Exposure		Investments		Maximum Exposure
Western Iowa Energy LLC	$	671	$	671	$	613	$	613
Western Dubuque Biodiesel LLC		2,005		2,005		2,005		2,005
	$	2,676	$	2,676	$	2,618	$	2,618

NOTE 7 — INVENTORIES

Inventories consist of the following:

	September 30, 2013		December 31, 2012
Raw materials	$	21,785	$	9,835
Work in process		1,567		448
Finished goods		36,535		34,923
Total	$	59,887	$	45,206

NOTE 8 — PREPAID EXPENSES AND OTHER ASSETS

Prepaid expense and other assets consist of the following:

	September 30, 2013		December 31, 2012
Commodity derivatives and related collateral, net	$	16,161	$	7,637
Prepaid expenses		2,924		2,176
Deposits		277		857
RIN inventory		16,820		99
Income taxes receivable		3,630		4,735
Other		173		308
Total	$	39,985	$	15,812

RIN inventory is valued at the lower of cost or market. RIN inventory consists of (i) RINs the Company generates in connection with its production of biodiesel and (ii) RINs acquired from third parties. RINs generated by the Company are recorded at no cost, as these RINs are government incentives and not a tangible output from its biodiesel production. The cost of RINs acquired from third parties is determined using the average cost method. RIN market value is based upon pricing as reported by the Oil Price Information Service (OPIS). Since RINs produced by the Registrant have zero cost associated to them, the lower of cost or market adjustment in RIN inventory reflects only the value of RINs acquired from third parties. RIN inventory values were adjusted in the amount of $240 and$21 at September 30, 2013 and December 31, 2012, respectively, to reflect the lower of cost or market.

NOTE 9 — BORROWINGS

The Company’s term borrowings are as follows:

	September 30, 2013		December 31, 2012
REG Danville term loan	$	6,226	$	10,060
REG Newton term loan		18,426		21,175
Other		6,734		1,496
Total notes payable	$	31,386	$	32,731

Bell, LLC promissory note—variable interest entity	$	4,102	$	4,313

On November 3, 2011, REG Danville, LLC (REG Danville) entered into an Amended and Restated Loan Agreement with Fifth Third Bank (Fifth Third Loan). The renewed Fifth Third Loan has a three year term with an automatic one year extension upon certain cumulative principal payment thresholds being met. The loan requires monthly principal payments of $150 and interest based on a rate of LIBOR plus 5% per annum. The effective rate is 5.18% at September 30, 2013. The loan is secured by our Danville facility. The loan agreement contains various loan covenants that restrict REG Danville’s ability to take certain actions, including prohibiting it in certain circumstances from making payments to the Company. The Fifth Third Loan requires semi-annual excess cash flow payments beginning on December 31, 2011. REG Danville must pay Fifth Third a principal payment in the amount equal to 50% of its Excess Cash Flow. The Fifth Third Loan agreement defines excess cash flow as REG Danville’s EBITDA plus certain affiliate payments less principal payments, interest expense, taxes and unfunded maintenance capital expenditures. The excess cash flow payment required for the first half of 2013 was $1,178 and was paid in August 2013. The Company recorded an estimated excess cash flow payment of $1,012 for the second half of 2013 which will be paid in 2014.

On March 4, 2013, REG Danville entered into the First Amendment to the Amended and Restated Loan Agreement (First Amendment) with Fifth Third Loan. The First Amendment includes changes to the debt covenants based upon the Company executing a tax sharing agreement with REG Danville. The tax sharing agreement provides that REG Danville will share the liability for income taxes via an allocation based upon a separate-return approach. Although the Company is not directly compensated for the use of carry-forward attributes, the tax sharing agreement allows each affiliate to benefit from net operating losses and tax credits that each generates.

On December 20, 2012, REG Newton and AgStar Financial Services, PCA (AgStar) extended the term of the AgStar Loan. The maturity date of the AgStar Loan is March 8, 2014.

On July 30, 2013, REG Mason City entered into an agreement with Soy Energy (Soy Energy Loan). The Soy Energy Loan has a six year term and is secured by the Mason City facility. The loan requires interest only payments for the first eight months and monthly principal and interest payments of approximately $92 starting in April 2014. Interest is based on a fixed rate of 5%. The loan agreement contains a covenant that restricts REG Mason City’s ability to take certain actions, including prohibiting it in certain circumstances from making payments to the Company. The Soy Energy Loan requires annual excess cash flow payments beginning on December 31, 2013. REG Mason City must pay Soy Energy a principal payment in the amount equal to 50% of its excess cash flow. As of September 30, 2013, the balance on the loan was $5,135.

NOTE 10 — INCOME TAXES

The Company historically included revenue from certain government incentive payments in taxable income on its federal and state income tax returns. In connection with the U.S. Internal Revenue Service audits of the 2011 and 2010 years, the Company proposed that these government incentive payments should be excluded from taxable income. The U.S. Internal Revenue Service accepted this position and on August 1, 2013, the Company received notification from the congressional Joint Committee on Taxation approving the audit results and associated refund claim. Based on information obtained in connection with these audits, the Company changed its position related to these government incentive payments to exclude them from taxable income for years 2008 through the current year. This change had a significant impact on the Company’s provision for income taxes in the third quarter 2013. This change reduced taxable income in each year between 2008 and 2012 and also impacts fiscal 2013. The majority of this reduction increased our net operating loss carry forwards available to offset future taxable income to approximately $156,500 as of September 30, 2013, rather than resulting in a refund of taxes previously paid. If not utilized, federal net operating losses will begin to expire in 2028 while expiration dates for state net operating losses vary by jurisdiction. As of September 30, 2013, net operating losses generated a deferred tax asset of $60,360. As a result of excluding these government incentive payments, the Company currently has cumulative losses in recent years and has established a valuation allowance of $63,067 as of September 30, 2013 to reduce its total deferred tax assets to the amount more-likely-than-not to be realized.

The tax effects of temporary differences that give rise to the Company’s deferred tax assets and liabilities are as follows:

	September 30, 2013						December 31, 2012
	Current			Noncurrent			Current			Noncurrent
Deferred tax assets
Net operating loss carry forwards	$	—		$	60,360		$	—		$	4,806
Other		17,075			20,101			3,136			20,460
Deferred tax assets		17,075			80,461			3,136			25,266

Deferred tax liabilities		(10,988	)		(28,872	)		(624	)		(24,297	)
Net deferred tax assets		6,087			51,589			2,512			969
Valuation allowance		(11,500	)		(51,567	)		—			—
Net deferred taxes	$	(5,413	)	$	22		$	2,512		$	969

Income tax expense attributable to operations differed from the expense computed using the federal statutory rate (35%) primarily as a result of government incentives, state income taxes net of federal income tax effects, and valuation allowances. A reconciliation of the reported amount of income tax expense to the amount computed by applying the statutory federal income tax rate to earnings from continuing operations before income taxes is as follows:

	Nine Months Ended September 30, 2013			Nine Months Ended September 30, 2012


U.S. Federal income tax (expense) benefit at a statutory rate of 35 percent	$	(55,892	)	$	(9,095	)
Tax position on government incentives		105,338			—
State taxes, net of federal income tax benefit		10,972			(1,007	)
Embedded derivative		—			4,191
Excess tax benefits		—			(3,402	)
Other, net		(803	)		83
Total (expense) benefit for income taxes before valuation allowance		59,615			(9,230	)
Valuation allowance		(63,067	)		5,561
Total (expense) benefit for income taxes	$	(3,452	)	$	(3,669	)

Uncertain tax positions are evaluated and amounts are recorded when it is more-likely-than-not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Judgment is required in evaluating each uncertain tax position to determine whether the more-likely-than-not recognition threshold has been met. There has been no change to this amount in the current year.

NOTE 11 — RELATED PARTY TRANSACTIONS

Related parties include certain investors as well as entities in which the Company has an equity method investment or an investment combined with a management and operational services agreement (MOSA) or board seat. Investors defined as related parties include (i) the investor having ten percent or more ownership, including convertible preferred stock, in the Company or (ii) the investor holding a board seat on the Company’s Board of Directors. After the IPO, the number of related parties decreased due to the dilution of ownership of prior investors as well as the reduction of the number of board seats on the Company’s board held by related party investors.

Summary of Related Party Transactions

		Three Months Ended September 30, 2013		Three Months Ended September 30, 2012		Nine Months Ended September 30, 2013		Nine Months Ended September 30, 2012
	Revenues – Biodiesel sales (a)	$	—	$	6	$	—	$	6
	Cost of goods sold – Biodiesel (b)	$	12,057	$	11,633	$	37,198	$	42,199
	Selling, general, and administrative expenses (c)	$	—	$	2	$	2	$	154
	Interest expense (d)	$	2	$	1	$	30	$	22

(a)	Represents transactions with West Central

(b)	Represents transactions with related parties as follows:
	West Central	$	12,057	$	11,633	$	37,198	$	38,250
	Bunge		—		—		—		3,949
		$	12,057	$	11,633	$	37,198	$	42,199

(c)	Represents transactions with related parties as follows:
	West Central	$	—	$	2	$	2	$	41
	Bunge		—		—		—		113
		$	—	$	2	$	2	$	154

(d)	Represents transactions with related parties as follows:
	West Central	$	2	$	1	$	30	$	13
	Bunge		—		—		—		9
		$	2	$	1	$	30	$	22

Summary of Related Party Balances

		As of September 30, 2013		As of December 31, 2012
	Accounts receivable (a)	$	425	$	771
	Other assets (a)	$	141	$	692
	Accounts payable (a)	$	268	$	2,950

(a)	Represents balances with West Central

West Central Cooperative

The Company’s Ralston facility is co-located with West Central Cooperative’s (West Central) soybean crush facility and is required to pay interest for amounts owed on extended trade terms.

West Central leases the land under the Company’s production facility at Ralston, Iowa to the Company at an annual cost of one dollar. The Company is responsible for the property taxes, insurance, utilities and repairs for the facility relating to this lease. The lease has an initial term of twenty years and the Company has options to renew the lease for an additional thirty years.

In 2006, the Company executed an asset use agreement with West Central to provide for the use of certain assets, such as office space, maintenance equipment and utilities. The agreement requires the Company to pay West Central its proportionate share of certain costs incurred by West Central. This agreement has the same term as the land lease. During February 2012, the Company renegotiated the asset use agreement. The new agreement provides for the use of certain assets, such as buildings, equipment and utilities, which will be charged to the Company based on fixed and variable components.

Bunge North America

Prior to 2013, the Company purchased feedstocks from Bunge North America, Inc. (Bunge) for the production of biodiesel. The costs associated with the purchased feedstocks are reflected in costs of goods sold – biodiesel when sold to the end customer.

The Company entered into an agreement for Bunge to provide services related to the procurement of raw materials and the purchase and resale of biodiesel produced by the Company. The Company was required to pay interest for the aggregate outstanding amounts owed to Bunge. Also, as part of the agreement, the Company was required to pay an incentive fee to Bunge for meeting certain hedging goals utilizing Bunge’s advice. On November 8, 2011, the Company gave notice of termination to Bunge in accordance with the agreement. The agreement expired May 2012.

NOTE 12 — DERIVATIVE INSTRUMENTS

The Company has entered into derivatives to hedge its exposure to price risk related to feedstock inventory and biodiesel finished goods inventory. Additionally, the Company has entered into an interest rate swap with the objective of managing risk caused by fluctuations in interest rates associated with the REG Danville note payable. The Company does not enter into derivative transactions for trading purposes.

All of the Company’s derivatives are designated as non-hedge derivatives and are utilized to manage cash flow.

Unrealized gains and losses on commodity futures, swaps and options contracts used to hedge feedstock purchases or biodiesel inventory are recognized as a component of biodiesel costs of goods sold reflected in current results of operations. Commodity hedge gains and losses are generally offset by other corresponding changes in gross margin through changes in either biodiesel sales price and/or feedstock price. As of September 30, 2013, the Company had 2,249 open commodity contracts. The fair value of these contracts was a net liability position of $1,254 and $416, as of September 30, 2013 and December 31, 2012, respectively, and was recorded in prepaid expenses and other assets.

Unrealized gains and losses on the interest rate swap are recorded in other income (expense), net in the Company’s statements of operations. The Company manages interest rate risk associated with the REG Danville variable interest rate note payable using a fixed rate swap. The interest rate swap agreement had outstanding notional values of $3,520 and $5,245 as of September 30, 2013 and December 31, 2012, respectively. The agreement effectively fixes the variable component of the interest rate on the Term Loan at 0.92% through July 2015. The fair value of the interest rate swap agreement was $24 and $46 at September 30, 2013 and December 31, 2012, respectively, and is recorded in other noncurrent liabilities.

The following tables provide details regarding the Company’s derivative financial instruments:

	As of September 30, 2013
	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Interest rate swap		$	—	Other liabilities	$	24
Commodity swaps	Prepaid expenses and other assets		2,104	Prepaid expenses and other assets		3,457
Commodity options	Prepaid expenses and other assets		160	Prepaid expenses and other assets		61
Total derivatives		$	2,264		$	3,542

	As of December 31, 2012
	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Interest rate swap		$	—	Other liabilities	$	46
Commodity swaps	Prepaid expenses and other assets		305	Prepaid expenses and other assets		476
Commodity options	Prepaid expenses and other assets		143	Prepaid expenses and other assets		388
Total derivatives		$	448		$	910

		Three Months Ended September 30, 2013			Three Months Ended September 30, 2012			Nine Months Ended September 30, 2013			Nine Months Ended September 30, 2012
	Location of Gain (Loss) Recognized in income	Amount of Gain (Loss) Recognized in Income on Derivatives			Amount of Gain (Loss) Recognized in Income on Derivatives			Amount of Gain (Loss) Recognized in Income on Derivatives			Amount of Gain (Loss) Recognized in Income on Derivatives
Embedded derivative	Change in fair value of preferred stock conversion feature embedded derivatives	$	—		$	—		$	—		$	11,975
Interest rate swap	Other income (loss)		4			(2	)		21			(14	)
Commodity futures	Cost of goods sold – Biodiesel		—			(4	)		(2	)		(4	)
Commodity swaps	Cost of goods sold – Biodiesel		(10,694	)		(17,962	)		(3,053	)		(4,916	)
Commodity options	Cost of goods sold – Biodiesel		(515	)		(4	)		(115	)		64
Total		$	(11,205	)	$	(17,972	)	$	(3,149	)	$	7,105

The tables below represent the amounts subject to an enforceable master netting arrangement not otherwise disclosed:

Offsetting of Derivative Assets


As of September 30, 2013
Description	Gross Amounts Recognized		Gross Amounts Offset in the Statement of Financial Position			Net Amounts Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position			Net Amount
Derivatives	$	19,679		(2,264	)		17,415		(17,415	)	$	—

Offsetting of Derivative Liabilities


As of September 30, 2013
Description	Gross Amounts Recognized		Gross Amounts Offset in the Statement of Financial Position			Net Amounts Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position		Net Amount
Derivatives	$	3,542		(2,264	)		1,278		—	$	1,278

Offsetting of Derivative Assets


As of December 31, 2012
Description	Gross Amounts Recognized		Gross Amounts Offset in the Statement of Financial Position			Net Amounts Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position			Net Amount
Derivatives	$	8,501		(448	)		8,053		(8,053	)	$	—

Offsetting of Derivative Liabilities


As of December 31, 2012
Description	Gross Amounts Recognized		Gross Amounts Offset in the Statement of Financial Position			Net Amounts Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position		Net Amount
Derivatives	$	910		(448	)		462		—	$	462

NOTE 13 — FAIR VALUE MEASUREMENT

ASC Topic 820, Fair Value Measurement (ASC Topic 820), establishes a framework for measuring fair value in GAAP and expands disclosures about fair market value measurements. ASC Topic 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering assumptions, ASC Topic 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

—	Level 1 — Quoted prices for identical instruments in active markets.

—	Level 2 — Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations, in which all significant inputs are observable in active markets.

—	Level 3 — Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

In addition, ASC Topic 820 requires disclosures about the use of fair value to measure assets and liabilities to enable the assessment of inputs used to develop fair value measures, and for unobservable inputs, to determine the effects of the measurements on earnings.

A summary of assets (liabilities) measured at fair value is as follows:

	As of September 30, 2013
	Total			Level 1		Level 2			Level 3
Interest rate swap	$	(24	)	$	—	$	(24	)	$	—
Commodity swaps	$	(1,353	)		—		(1,353	)		—
Commodity options	$	99			—		99			—
	$	(1,278	)	$	—	$	(1,278	)	$	—

	As of December 31, 2012
	Total			Level 1		Level 2			Level 3
Interest rate swap	$	(46	)	$	—	$	(46	)	$	—
Commodity swaps	$	(171	)		—		(171	)		—
Commodity options	$	(245	)		—		(245	)		—
	$	(462	)	$	—	$	(462	)	$	—

The following is a reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended September 30, 2012:

	Series A Preferred Stock Embedded Derivatives			Seneca Holdco Liability
Ending balance—January 1, 2012	$	(53,822	)	$	(11,903	)
Total unrealized gains (losses)		11,975			349
Purchases		—			—
Issuance		—			—
Settlements		41,847			11,554
Ending balance—March 31, 2012	$	—		$	—
Total unrealized gains (losses)		—			—
Purchases		—			—
Issuance		—			—
Settlements		—			—
Ending balance—September 30, 2012	$	—		$	—

The company used the following methods and assumptions to estimate fair value of its financial instruments:

Valuation of Preferred Stock embedded conversion feature derivatives: The estimated fair value of the derivative instruments embedded in the Company’s outstanding preferred stock is determined using the option pricing method to allocate the fair value of the underlying stock to the various components comprising the security, including the embedded derivative. The allocation was performed based on each class of preferred stock’s liquidation preference and relative seniority. Derivative liabilities are adjusted to reflect fair value at each period end. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments. The derivative instrument is reflected in Level 3.

Interest rate swap: The fair value of the interest rate swap was determined based on a discounted cash flow approach using market observable swap curves. The swap agreement is reflected in Level 2.

Commodity derivatives: The instruments held by the Company consist primarily of futures contracts, swap agreements, purchased put options and written call options. The fair value of contracts based on quoted prices of identical assets in an active exchange-traded market is reflected in Level 1. Contracts whose fair value is determined based on quoted prices of similar contracts in over-the-counter markets are reflected in Level 2.

Seneca Holdco liability: The liability represents the combination of the Call Option and the Put Option related to the purchase of the membership interest of Landlord. The fair value of the Seneca Holdco liability is determined using an option pricing model and represents the probability weighted present value of the gain that is realized upon exercise of each option. The Call Option and Put Option contract is reflected in Level 3.

Notes payable and lines of credit: The fair value of long-term debt and lines of credit was established using discounted cash flow calculations and current market rates reflecting Level 2 inputs.

The estimated fair values of the Company’s financial instruments, which are not recorded at fair value, are as follows:

	September 30, 2013						December 31, 2012
	Asset- (Liability) Carrying Amount			Fair Value			Asset- (Liability) Carrying Amount			Fair Value
Financial Liabilities:
Notes payable and lines of credit	$	(35,488	)	$	(35,393	)	$	(37,044	)	$	(37,000	)

The carrying amounts reported in the Condensed Consolidated Balance Sheets for cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate their fair values.

NOTE 14 — REPORTABLE SEGMENTS

The Company reports its reportable segments based on services provided to customers, which include Biodiesel, Services and Corporate and other activities. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company has chosen to differentiate the reportable segments based on the products and services each segment offers.

The Biodiesel segment processes waste vegetable oils, animal fats, virgin vegetable oils and other feedstocks and methanol into biodiesel. The Biodiesel segment also includes the Company’s purchases and resale of biodiesel produced by third parties. Revenue is derived from the purchases and sales of biodiesel and raw material feedstocks acquired from third parties, sales of biodiesel produced under toll manufacturing arrangements with third party facilities, sales of processed biodiesel from Company facilities, sales of RINs, related by-products and renewable energy government incentive payments. The Services segment offers services for managing the construction of biodiesel production facilities and managing ongoing operations of internal and third party plants and collects fees related to the services provided. The Company does not allocate items that are of a non-operating nature or corporate expenses to the business segments. Intersegment revenues are reported by the Services segment, which manages the construction and operations of facilities included in the Biodiesel segment. Revenues are recorded by the Services segment at cost. Corporate expenses consist of corporate office expenses including compensation, benefits, occupancy and other administrative costs, including management service expenses.

The following table represents the significant items by reportable segment:

	Three Months Ended September 30, 2013			Three Months Ended September 30, 2012			Nine Months Ended September 30, 2013			Nine Months Ended September 30, 2012
Net sales:
Biodiesel	$	458,429		$	322,873		$	1,107,443		$	782,890
Services		17,854			9,666			46,809			26,223
Intersegment revenues		(17,839	)		(9,627	)		(46,705	)		(26,027	)
	$	458,444		$	322,912		$	1,107,547		$	783,086
Income (loss) before income taxes:
Biodiesel	$	57,854		$	2,795		$	194,770		$	50,777
Services		(5	)		(4	)		(45	)		(3	)
Corporate and other (a)		(13,197	)		(10,996	)		(35,037	)		(24,695	)
	$	44,652		$	(8,205	)	$	159,688		$	26,079
Depreciation and amortization expense, net:
Biodiesel	$	2,214		$	1,771		$	5,854		$	5,307
Services		35			12			86			21
Corporate and other (a)		237			197			669			573
	$	2,486		$	1,980		$	6,609		$	5,901
Cash paid for purchases of property, plant and equipment:
Biodiesel	$	8,363		$	1,613		$	26,573		$	5,369
Services		30			345			504			387
Corporate and other (a)		335			49			1,708			643
	$	8,728		$	2,007		$	28,785		$	6,399

	September 30, 2013		December 31, 2012
Goodwill:
Biodiesel	$	68,784	$	68,784
Services		16,080		16,080
	$	84,864	$	84,864
Assets:
Biodiesel	$	423,842	$	357,305
Services		20,577		20,033
Corporate and other (b)		241,375		118,446
	$	685,794	$	495,784

(a)	Corporate and other includes income/(expense) not associated with the reportable segments, such as corporate general and administrative expenses, shared service expenses, interest expense and interest income.

(b)	Corporate and other includes cash and other assets not associated with the reportable segments, including investments.

NOTE 15 — COMMITMENTS AND CONTINGENCIES

The Company is involved in legal proceedings in the normal course of business. The Company currently believes that any ultimate liability arising out of such proceedings will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

NOTE 16 — SUBSEQUENT EVENTS

The Company has performed an evaluation of subsequent events through the date the financial statements were issued and has determined there have been no material subsequent events requiring disclosure.

* * * * * *

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report contains forward-looking statements regarding Renewable Energy Group, Inc., or “we,” “our” or “the Company” that involve risks and uncertainties such as anticipated financial performance, business prospects, technological developments, products, possible strategic initiatives and similar matters. In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “estimate,” “predict,” “potential,” “plan,” or the negative of these terms, and similar expressions intended to identify forward-looking statements.

These forward-looking statements include, but are not limited to, statements about facilities currently under development progressing to the construction and operational stages, including planned capital expenditures and our ability to obtain financing for such construction; existing or proposed legislation affecting the biodiesel industry, including governmental incentives and tax credits; our utilization of forward contracting and hedging strategies to minimize feedstock and other input price risk; anticipated future revenue sources from our operational management and facility construction services; the expected effect of current and future environmental laws and regulations on our business and financial condition; our ability to renew existing and expired contracts at similar or more favorable terms; expected technological advances in biodiesel production methods; our competitive advantage relating to input costs relative to our competitors; the market for biodiesel and potential biodiesel consumers; our ability to further develop our financial, managerial and other internal controls and reporting systems to accommodate future growth; expectations regarding the realization of deferred tax assets and the establishment and maintenance of tax reserves and anticipated trends; expectations regarding our expenses and sales; anticipated cash needs and estimates regarding capital requirements and needs for additional financing; and challenges in our business and the biodiesel market.

These forward-looking statements are based on management’s current expectations, estimates, assumptions and projections, which are subject to risks and uncertainties. These risks and uncertainties could cause actual results to differ materially from those expected. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Risks and uncertainties include, but are not limited to, those risks discussed in Item 1A Part II in this Quarterly Report on Form 10-Q for the three-months ended September 30, 2013. We encourage you to read this Management’s Discussion and Analysis of Financial Condition and Results of Operations in conjunction with the accompanying condensed consolidated financial statements and related notes. Forward-looking statements contained in this report present management’s views only as of the date of this report. Except as required under applicable law, we do not intend to issue updates concerning any future revisions of management’s views to reflect events or circumstances occurring after the date of this report.

Overview

We are the largest producer of biodiesel in the United States and have been a leader in the biodiesel industry since 1996. We operate eight active biodiesel production facilities with aggregate nameplate production capacity of 257 million gallons per year, or mmgy. We produce biodiesel primarily from lower cost feedstocks, such as inedible corn oil, used cooking oil and inedible animal fat. A small portion of our biodiesel is produced using virgin vegetable oils, such as soybean oil. We own the following biodiesel production facilities with the specified nameplate capacities: a 12 mmgy facility in Ralston, Iowa; a 35 mmgy facility near Houston, Texas; a 45 mmgy facility in Danville, Illinois; a 30 mmgy facility in Newton, Iowa; a 60 mmgy facility in Seneca, Illinois; a 30 mmgy biodiesel production facility near Albert Lea, Minnesota; a 15 mmgy facility in New Boston, Texas; and a 30 mmgy facility in Mason City, Iowa which was idle at the time we purchased it in July 2013. See “Note 5 – Acquisition” in our condensed consolidated financial statements for a further description of our acquisition of the Mason City biorefinery. We completed repairs to the New Boston facility and started producing biodiesel at this facility in June 2013. We completed repairs to the Mason City facility and started producing biodiesel at the facility in October 2013.

For the three and nine months ended September 30, 2013, we sold 78 million and 186 million gallons, respectively, of biodiesel, including 17 million and 30 million gallons, respectively, that we purchased from third parties and resold. During 2012, we sold a total of 188 million gallons of biodiesel, including 25 million gallons we purchased from third parties and resold.

We own four partially completed biodiesel production facilities. In 2007, we began construction of two 60 mmgy nameplate production capacity facilities, one near New Orleans, Louisiana and the other in Emporia, Kansas. In February 2008, we halted construction of these facilities as a result of conditions in the biodiesel industry and our inability to obtain financing necessary to complete construction of the facilities. Construction of the New Orleans facility is approximately 45% complete and construction of the Emporia facility is approximately 20% complete. Further, during the third quarter of 2010, we acquired a 15 mmgy nameplate biodiesel production capacity facility in Clovis, New Mexico which is approximately 50% complete. Currently, the Clovis facility is being operated as a terminal. In November 2012, we completed our acquisition of Bulldog Biodiesel, LLC, a 15 mmgy facility near Atlanta, Georgia, that was idled at the time we purchased it and will remain so until certain repairs or upgrades are made. We plan to complete construction of these facilities as financing becomes available, subject to market conditions.

We derive revenues from two reportable business segments: Biodiesel and Services

Biodiesel Segment

Our Biodiesel segment, as reported herein, includes:

—	the operations of the following biodiesel production facilities:

—	a 12 mmgy nameplate biodiesel production facility located in Ralston, Iowa;

—	a 35 mmgy nameplate biodiesel production facility located near Houston, Texas;

—	a 45 mmgy nameplate biodiesel production facility located in Danville, Illinois;

—	a 30 mmgy nameplate biodiesel production facility located in Newton, Iowa;

—	a 60 mmgy nameplate biodiesel production facility located in Seneca, Illinois;

—	a 30 mmgy nameplate biodiesel production facility located near Albert Lea, Minnesota;

—	a 15 mmgy nameplate biodiesel production facility located in New Boston, Texas, since its acquisition in October 2012 that was idle prior to acquisition. We completed repairs to the facility and started producing biodiesel at the facility in June 2013;

—	a 30 mmgy nameplate biodiesel production facility located in Mason City, Iowa, since its acquisition in July 2013 that was idle prior to acquisition. We completed repairs to the facility and started producing biodiesel at the facility in October 2013;

—	purchases and resale of biodiesel, Renewable Identification Numbers, or RINs, and raw material feedstocks acquired from third parties;

—	our sales of biodiesel 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 and other co-products of the biodiesel production process. In 2012 and the nine months ended September 30, 2013, our revenues from the sale of co-products were less than five percent of our total Biodiesel segment revenues.

In accordance with EPA Regulations, we generate 1.5 biomass-based diesel Renewable Identification Numbers, or RINs, for each gallon of biodiesel we produce. RINs are used to track compliance with RFS2 using the EPA moderated transaction system, or EMTS. RFS2 allows us to attach between zero and 2.5 RINs to any gallon of biodiesel we sell. We generally attach 1.5 RINs when we sell a gallon of biodiesel. As a result, a portion of our selling price for a gallon of biodiesel is generally attributable to RFS2 compliance, but no cost is allocated to the RINs generated by our biodiesel production because RINs are a form of government incentive and not a result of the physical attributes of the biodiesel production. In addition, RINs, once obtained with gallons of biodiesel, may then be separated by the acquirer and sold separately. From time to time, we may acquire these RINs from third parties for resale. The value of these RINs acquired from third parties is reflected in “Prepaid expenses and other assets” on our condensed consolidated balance sheet. At each balance sheet date, this RIN inventory is valued at the lower of cost or market and resulting adjustments are reflected in our cost of goods sold for the period. The cost of RINs obtained from third parties is determined using the average cost method. Because we do not allocate costs to RINs generated by our biodiesel production, fluctuations in the value of our RIN inventory represent fluctuations in the value of RINs we have obtained from third parties.

Services Segment

Our Services segment includes:

—	biodiesel facility management and operational services, whereby we provide day-to-day management and operational services to biodiesel production facilities; and

—	construction management services, whereby we act as the construction management and general contractor for the construction of biodiesel production facilities.

Historically, we provided facility operations management services to owners of biodiesel production facilities under management and operational services agreements, or MOSAs. During 2010, we ceased providing services to three of these facilities, acquired one and continued to provide limited services to the other facility. The termination of our MOSAs has not had a significant impact on our financial statements. Our Services segment has been focused internally on managing and upgrading our facilities.

We have utilized our construction management expertise internally to upgrade our facilities during the last three years. We completed a $21 million upgrade to our Albert Lea facility in the second quarter 2013. In addition, we spent $4 million and $1 million in repairs of our recently acquired New Boston and Mason City facilities, respectively. We anticipate external revenues derived from construction management services will be minimal in future periods. Demand for our construction management and facility

management and operational services depend on capital spending by potential customers and existing customers, which is directly affected by trends in the biodiesel industry. We have not received any orders or provided services to outside parties for new facility construction services since 2009.

Factors Influencing Our Results of Operations

The principal factors affecting our segments are the market prices for biodiesel and the feedstocks used to produce biodiesel, as well as governmental programs designed to create incentives or requirements for the production and use of biodiesel.

Governmental programs favoring biodiesel production and use

Biodiesel has historically been more expensive than petroleum-based diesel when excluding incentives and credits. The biodiesel industry’s growth has largely been the result of federal and state programs that require or incentivize biodiesel, which allows biodiesel to compete with petroleum-based diesel on price.

On July 1, 2010, RFS2 was implemented, stipulating volume requirements for the amount of biomass based diesel and other advanced biofuels that must be utilized in the United States each year. Under RFS2, Obligated Parties, including petroleum refiners and fuel importers, must show compliance with these standards. Currently, biodiesel meets three categories of an Obligated Party’s annual renewable fuel required volume obligation, or RVO—biomass-based diesel, undifferentiated advanced biofuel and renewable fuel. The RFS2 program requires the domestic use of one billion gallons of biodiesel in 2012 and 1.28 billion gallons in 2013. Our sales volumes and revenues have benefited from our increased production, as well as an increase in demand relating to the implementation of RFS2.

RFS2 required the use of one billion gallons of biomass-based diesel in 2012. Obligated Parties are allowed to satisfy up to 20% of their RVO in a given year with RINs from the prior year. The 2011 carry-over could be used to satisfy up to 200 million gallons of the one billion 2012 requirement. According to EMTS data, approximately 1.14 billion gallons of biomass-based diesel was produced during 2012, indicating that between the 2011 carry-over and 2012 year production, there was sufficient biomass-based diesel produced to satisfy the 2012 RVO of one billion gallons and create carryover towards the 2013 RVO. The 2013 RFS2 requirement for biomass-based diesel is 1.28 billion. According to EMTS data, approximately 1.22 billion gallons of biomass-based diesel was produced during the first nine months of 2013, which indicates there will be sufficient biomass-based diesel produced in 2013 to satisfy the 2013 RVO of 1.28 billion gallons and create carryover towards the 2014 RVO. As of this filing, the EPA has not proposed or finalized the 2014 RVOs. A draft of the 2014 RVO was leaked and reported in the press. The leaked draft reflected a 2014 and 2015 biomass-based diesel RVO of 1.28 billion gallons in each of those years and a reduced Advanced Biofuel RVO of 2.21 billion gallons rather than the original EISA volume of 3.75 for 2014. Shortly after the leaked document made it into the press, the EPA put out a statement saying “[t]he agency has made no final decision on the proposed renewable fuel standards for 2014.” Market prices for biomass-base diesel RINs fell in the days following the release of the leaked document.

The federal blenders tax credit provides a $1.00 refundable tax credit per gallon of 100% pure biodiesel, or B100, to the first blender of biodiesel with petroleum-based diesel fuel. The blenders tax credit expired on December 31, 2011. On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which reinstated the federal biodiesel blenders tax credit for 2013 and retroactively reinstated the credit for 2012. The retroactive credit for 2012 resulted in a net benefit to us of $57.7 million in the first nine months of 2013.

Biodiesel and feedstock price fluctuations

Our operating results generally reflect the relationship between the price of biodiesel, including credits and incentives, like RINs and the price of feedstocks used to produce biodiesel.

Biodiesel is a low carbon, renewable alternative to petroleum-based diesel fuel and is primarily sold to the end user after it has been blended with petroleum-based diesel fuel. Biodiesel prices have historically been heavily influenced by petroleum-based diesel fuel prices. Accordingly, biodiesel prices have generally been impacted by the same factors that affect petroleum prices, such as worldwide economic conditions, supply and demand factors, wars and other political events, OPEC production quotas, changes in petroleum refining capacity and natural disasters.

Regulatory and legislative factors influence the price of biodiesel, in addition to petroleum prices. Biomass-based diesel RIN pricing, a value component that was introduced via RFS2 in July 2010, has had a significant impact on our biodiesel pricing. For example, the value of RINs, as reported by Oil Price Information Service, or OPIS, has been significant to the price of biodiesel, contributing approximately $1.83, or 38% of the average B100 Upper Midwest spot price of a gallon of biodiesel as reported by The Jacobsen in December 2011. During 2012, the value of RINs, as reported by OPIS, contributed to the average B100 spot price of a gallon of biodiesel, as reported by The Jacobsen, and range from a low of $0.63 per gallon, or 24%, in October to a high of $2.39, or 50%, per gallon in January. There was a sharp decline in RIN prices during third quarter 2012 that carried through the end of the year. During the last half of 2012, RIN pricing declined from $1.17 per RIN at June 30, 2012 to the low price of $0.42 per RIN in October, finishing the year at $0.64 per RIN on December 31, 2012, as reported by OPIS, which contributed to the decline in price of biodiesel during 2012. During the first nine months of 2013, the value of RINs, as reported by OPIS, contributed approximately $1.26, or 26%, of the average B100 Upper Midwest spot price of a gallon of biodiesel, as reported by The Jacobsen.

During 2012, feedstock expense accounted for 86% of our biodiesel production cost, while methanol and chemical catalysts expense accounted for 4% and 2% of our biodiesel production cost, respectively.

Feedstocks for biodiesel production, such as inedible corn oil, used cooking oil, inedible animal fat and soybean oil are commodities and market prices for them will be affected by a wide range of factors unrelated to the price of biodiesel and petroleum-based diesel fuels. The following table outlines some of the factors influencing supply and price for each feedstock:

Feedstock		Factors Influencing Supply and Price
Inedible Corn Oil		Implementation of inedible corn oil separation systems into existing and new ethanol facilities
		Demand for inedible corn oil from other markets
		Ethanol production
		Export demand
		Extraction system yield
Used Cooking Oil		Export demand
		Population
		Number of restaurants in the vicinity of collection facilities and terminals which is dependent on population density
		Eating habits, which can be impacted by the economy
Inedible Animal Fat		Export demand
		Number of slaughter kills in the United States
		Demand for inedible animal fat from other markets
Soybean Oil		Export demand
		Weather conditions
		Soybean meal demand
		Farmer planting decisions
		Government policies and subsidies
		Crop disease

During 2012, 84% of our feedstocks were comprised of inedible corn oil, used cooking oil and inedible animal fats with the remainder coming from refined vegetable oil.

Most biodiesel in the United States is made from soybean oil. Soybean oil prices have fluctuated greatly, but have generally remained at historically high levels since early 2007 due to higher overall commodity prices. Over the period January 2006 to September 2013, soybean oil prices (based on daily closing nearby futures prices on the CBOT for crude soybean oil) have ranged from $0.21 per pound, or $1.58 per gallon of biodiesel, in January 2006 to $0.70 per pound, or $5.28 per gallon of biodiesel, in March 2008, assuming 7.5 pounds of soybean oil yields one gallon of biodiesel. The average closing price for soybean oil during 2012 was $0.52 per pound, or $3.92 per gallon of biodiesel, compared to $0.55 per pound, or $4.13 per gallon of biodiesel, in 2011.

Over the period from January 2008 to September 2013, the price of choice white grease, an inedible animal fat (based on daily closing nearby futures prices for The Jacobsen reported Missouri River delivery of choice white grease), has ranged from $0.095 per pound, or $0.76 per gallon of biodiesel, in December 2008 to $0.5250 per pound, or $4.20 per gallon of biodiesel, in June 2011, assuming 8.0 pounds of choice white grease yields one gallon of biodiesel. The average closing price for choice white grease during 2012 was $0.4133 per pound, or $3.31 per gallon of biodiesel, compared to $0.4567 per pound, or $3.65 per gallon of biodiesel, in 2011.

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 of biodiesel made from a lower cost feedstock from December 2011 to September 2013. The results were derived using assumed conversion factors for the yield of each feedstock and subtracting the cost of producing one gallon of biodiesel made from each respective lower cost feedstock from the cost of producing one gallon of biodiesel made from soybean oil.

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—	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 (based on 7.5 pounds per gallons).

(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 (based on 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).

Our results of operations generally will benefit when the spread between biodiesel prices and feedstock prices widens and will be harmed when this 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 for biodiesel, and the spread between the two, from December 2011 to September 2013.

LOGO

(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.

(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 (based on 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.

The 2012 drought in the Midwestern United States increased the cost of corn and soybeans. Following the drought, there was a decrease in the price of animal fats, which may have been related to increases in slaughter rates, putting more supply on the market. If the increased slaughter rates or increased cost of corn and soybeans reduces future slaughter rates, the price of animal fats may rise as supply decreases in the future. Widespread availability of palm oil worldwide has resulted in decreased feedstock prices of animal fats and vegetable oils. The 2013 corn and soybean harvest is anticipated to be the largest on record which has put downward pressure on prices for animal fats and vegetable oils.

Risk Management

The profitability of the biodiesel production business largely depends on the spread between prices for feedstocks and biodiesel, including government incentives, each of which is subject to fluctuations due to market and political factors. Adverse price movements for these commodities directly affect our operating results. We attempt to protect operating margins by entering into risk management contracts that mitigate price volatility of our feedstocks, such as inedible corn oil, used cooking oil, inedible animal fat and also mitigate energy price volatility. We create offsetting positions by using a combination of forward fixed-price physical purchases and sales contracts on feedstock and biodiesel, risk management futures contracts, swaps and options primarily on heating oil and soybean oil; however, the extent to which we engage in risk management activities varies substantially from time to time, and from feedstock to feedstock, depending on market conditions and other factors. In making risk management decisions, we utilize research conducted by outside firms to provide additional market information.

Inedible corn oil, used cooking oil and inedible animal fat are the primary feedstocks we used to produce biodiesel in 2012 and the first nine months of 2013. We utilize several varieties of inedible animal fat, such as beef tallow, choice white grease and poultry fat derived from livestock. There is no established futures market for lower cost feedstocks. The purchase prices for lower cost feedstocks are generally set on a negotiated flat price basis or spread to a prevailing market price reported by the USDA price sheet or

The Jacobsen. Our efforts to risk manage against changing inedible corn oil, used cooking oil and inedible animal fat prices have involved entering into futures contracts, swaps or options on other commodity products, such as soybean oil or heating oil. However, these products do not always experience the same price movements as lower cost feedstocks, making risk management for these feedstocks challenging. We manage feedstock supply risks related to biodiesel production in a number of ways, including, where available, through long-term supply contracts. For example, most of the feedstock requirements for our Ralston facility are supplied under an agreement with West Central that expires January 31, 2014 and automatically renews for one additional year unless either party provides sufficient notice of cancellation prior to the renewal. The purchase price for soybean oil under these contracts may be indexed to prevailing Chicago Board of Trade, or CBOT, soybean oil market prices with a negotiated market basis. We utilize futures contracts, swaps and options to risk manage, or lock in, the cost of portions of our future soybean oil requirements generally for varying periods up to one year.

Our ability to mitigate our risk of falling biodiesel and RIN prices is limited. We have entered into forward contracts to supply biodiesel. However, pricing under these forward sales contracts generally has been indexed to prevailing market prices, as fixed price contracts for long periods on acceptable terms have generally not been available. There is no established market for biodiesel futures in the United States. Our efforts to hedge against falling biodiesel prices generally involve entering into futures contracts, swaps and options on other commodity products, such as diesel fuel and heating oil. However, these products do not always experience the same price movements as biodiesel.

We generate 1.5 biomass-based diesel RINs for each gallon of biodiesel we produce. We also obtain RINs from third party transactions which we hold for resale. There is no established futures market for RINs, which severely limits the ability to risk manage the price of RINs. We enter into forward contracts to sell RINs and we use risk management position limits to manage RIN inventory.

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 forward fixed-price physical contracts on feedstocks and biodiesel or inventories. Gains and losses on derivative financial instruments are recognized each period in operating results while corresponding gains and losses on physical contracts are generally not recognized until quantities are delivered or title transfers. Our results of operations are impacted when there is a period mismatch of recognized gains or losses associated with the change in fair value of derivative instruments used for risk management purposes at the end of the reporting period while the purchase or sale of feedstocks or biodiesel has not yet occurred and thus the offsetting gain or loss will be recognized in a later accounting period.

We incurred risk management losses of $11.2 million and $3.2 million from our derivative financial instrument hedging activity for the three and nine months ended September 30, 2013, respectively, compared to risk management losses of $18.0 and $4.9 million for the three and nine months ended September 30, 2012, respectively. Changes in the value of these futures, swaps or option instruments are recognized in cost of goods sold. Over the first nine months of 2013, we had risk management losses of approximately $0.02 per gallon sold. Over the last three fiscal years ended December 31, 2012, 2011 and 2010, risk management losses have represented an expense averaging $0.02 per gallon sold.

Seasonality

Our operating results are influenced by seasonal fluctuations in the demand for biodiesel. Our sales tend to decrease during the winter season due to blending concentrations being reduced to adjust for performance during colder weather. Colder seasonal temperatures can cause the higher cloud point biodiesel we make from inedible animal fats to become cloudy and eventually gel at a higher temperature than petroleum-based diesel or lower cloud point biodiesel made from soybean oil, canola oil or inedible corn oil. Such gelling can lead to plugged fuel filters and other fuel handling and performance problems for customers and suppliers. Reduced demand in the 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 point biodiesel. In addition, most of our production facilities are located in colder Midwestern states and our costs of shipping increases as more biodiesel is transported to warmer climate states during winter.

RINs prices may also be subject to seasonal fluctuations. As mentioned above, we generate 1.5 biomass-based diesel RINs for each gallon of biodiesel we produce. The RIN is dated for the calendar year in which it is generated. These RINs are used by Obligated Parties to satisfy their annual RVOs under the RFS2 program. Since only 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 the RVO 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 and increase if it is undersupplied. In 2011, which had an RVO for biomass-based diesel of 800 million gallons, biomass-based diesel RIN prices, as reported by OPIS, began to decrease in October when biomass-based diesel RIN generation neared the equivalent of 800 million gallons of biomass-based diesel, as reported by EMTS. In 2012, which had a RVO for biomass-based diesel of one billion gallons, biomass-based diesel RIN prices, as reported by OPIS, began to decrease in September when biomass-based diesel RIN generation neared the equivalent of 900 million gallons, as reported by EMTS. For the first nine months of 2013, the most recent data available from EMTS, approximately 1.22 billion gallons of biomass-based diesel RINs have been generated toward the 2013 biomass-based diesel RVO of 1.28 billion gallons, or 96% of the 2013 biomass-based diesel 2013 RVO. This compares to approximately 901 million for the same nine months in 2012, or 90% of the 2012 biomass-based diesel RVO.

Industry capacity and production

Our operating results are influenced by our industry’s capacity and production, including in relation to RFS2 production requirements. According to EMTS data, approximately 1.1 billion gallons of biomass-based diesel was produced in the United States in 2011. 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 of 1 billion gallons of biomass-based diesel for 2012. As of this filing, the EPA has not proposed or finalized the 2014 biomass-based diesel requirement. Under RFS2, Obligated Parties are entitled to satisfy up to 20% of their annual requirement for 2013 with gallons used in 2012, meaning that 2012 gallons could potentially be used to satisfy 256 million gallons of the 1.28 billion gallon requirement for 2013.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, equities, revenues and expenses and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for judgments we make about the carrying values of assets and liabilities that are not readily apparent 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:

Goodwill asset valuation. While goodwill is not amortized, it is subject to periodic reviews for impairment. As required by ASC Topic 350, “Intangibles—Goodwill and Other,” we review the carrying value of goodwill for impairment annually on July 31 or when we believe impairment indicators exist. Goodwill is allocated and reviewed for impairment by reporting units. The Company’s reporting units consist of its two operating segments, the biodiesel operating segment and services operating segments. The analysis is based on a comparison of the carrying value of the reporting unit to its fair value, determined utilizing a discounted cash flow, or DCF, methodology and consideration of a market approach. Additionally, we review the carrying value of goodwill whenever events or changes in business circumstances indicate that the carrying value of the assets may not be recoverable. Changes in estimates of future cash flows caused by items such as unforeseen events or sustained unfavorable changes in market conditions could negatively affect the fair value of the reporting unit’s goodwill asset and result in an impairment charge.

We engaged an independent external valuation specialist to provide assistance in measuring the fair value of our biodiesel and services reporting units using an income approach. The income approach uses a discounted cash flow, or DCF, analysis based on cash flow estimates prepared by us in addition to comparing other selected public guideline company information. The selected DCF method is an invested capital method. In performing the services reporting unit goodwill impairment analysis, cash flows generated from services provided to third parties and to the biodiesel segment were used to determine the reporting unit’s fair value.

The annual impairment tests as of July 31, 2013 determined that the fair value at the biodiesel operating segment exceeded its value by approximately 43% and the services operating segment exceeded its value by approximately 20%. No impairment of goodwill was recorded at September 30, 2013 or during the years 2012, 2011 and 2010. There can be no assurances that future circumstances and/or conditions will not change, which could result in an impairment of goodwill. Such circumstances and/or conditions could include, but are not limited to, further decline in the price of our common stock, deterioration in our financial condition or results of operations, and/or adverse changes in the fair value of our assets and liabilities. Management continues to monitor circumstances and conditions for events that could result in an impairment of our goodwill.

The Company’s declines in income before income taxes for the services reporting unit are primarily a result of construction revenues being derived from company-owned facilities during this period and the termination of four third party MOSAs, which occurred in early 2010. Income before income taxes, as it appears in the segment footnote disclosure, presents only the income from third parties after the elimination of intersegment revenues and associated costs. Two of these MOSAs ceased because the facilities to which services were being provided were acquired in a business combinations. During the periods presented in the annual financial statements the amount of service revenues earned from third parties declined, but the amount of service revenues earned from the biodiesel segment increased. After incorporating intersegment revenues, presented in the segment footnote, increased from 2010 to 2011 and again from 2011 to 2012. In addition, income before income taxes increased from 2010 to 2011 and remained positive from 2011 to 2012. The operating results for the services segment were significantly impacted by the improvement in the biodiesel industry induced by the volume requirements set forth in RFS2. Since services revenue from facility management and operations is principally earned on a per gallon basis, improvements in industry production volumes generally yield similar improvements in the services reporting unit operating income, cash flows and estimated fair value. Therefore, we do not believe the recent operational results of the services segment represent an indicator of impairment for the reporting unit.

Income taxes. We recognize tax benefits that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. Significant judgment is required in evaluating our tax positions, including evaluating uncertainties around the technical merits and measurement of our tax position to exclude certain government incentives from taxable income.

We evaluate our deferred tax assets to determine if valuation allowances are required or should be adjusted. A valuation allowance is established against our deferred tax assets based on consideration of all available evidence, both positive and negative, using a “more likely than not” standard. This assessment considers, among other matters, the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of statutory carry-forward periods, our experience with tax attributes expiring unused and tax planning alternatives. In making such judgments, significant weight is given to evidence that can be objectively verified. As a result of excluding certain government incentives from taxable income, we are in a cumulative loss position for the preceding three years which is considered significant negative evidence that is difficult to overcome on a “more likely than not” standard through objectively verifiable data. While our long-term financial outlook remains positive, we concluded that our ability to rely on our long-term outlook and forecasts as to future taxable income was limited due to uncertainty created by the weight of the negative evidence. As a result, we recorded a valuation allowance of $63.1 million as of September 30, 2013.

Results of Operations

Three and nine months ended September 30, 2013 and 2012

Set forth below is a summary of certain financial information (in thousands) for the periods indicated:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
Revenues
Biodiesel	$	399,226		$	321,005		$	859,058		$	774,820
Biodiesel government incentives		59,203			1,868			248,385			8,070
Total biodiesel		458,429			322,873			1,107,443			782,890
Services		15			39			104			196
Total		458,444			322,912			1,107,547			783,086
Costs of goods sold
Biodiesel		400,575			320,078			912,673			732,113
Services		20			43			149			199
Total		400,595			320,121			912,822			732,312
Gross profit		57,849			2,791			194,725			50,774
Selling, general and administrative expenses		12,686			9,902			33,556			33,878
Income (loss) from operations		45,163			(7,111	)		161,169			16,896
Other income (expense), net		(511	)		(1,094	)		(1,481	)		9,183
Income tax benefit (expense)		42,051			2,165			(3,452	)		(3,669	)
Net income (loss) attributable to REG		86,703			(6,040	)		156,236			22,410
Effects of recapitalization		—			—			—			39,107
Accretion of preferred stock to redemption value		—			—			—			(1,808	)
Change in undistributed dividends allocated to preferred stockholders		(147	)		(862	)		(147	)		(1,685	)
Distributed dividends to preferred stockholders		(258	)		—			(1,848	)		(1,470	)
Effects of participating preferred stock		(6,455	)		—			(18,010	)		(8,952	)
Effects of participating share-based awards		(1,381	)		—			(2,273	)		(3,145	)
Net income (loss) attributable to the Company’s common stockholders	$	78,462		$	(6,902	)	$	133,958		$	44,457

Revenues. Our total revenues increased $135.5 million, or 42%, and $324.4 million, or 41%, to $458.4 million and $1,107.5 million for the three and nine months ended September 30, 2013, respectively, from $322.9 million and $783.1 million for the three and nine months ended September 30, 2012. This increase was primarily due to an increase in gallons sold and the reinstatement of the blenders tax credit that was signed into law on January 2, 2013 as follows:

Biodiesel. Biodiesel revenues including government incentives increased $135.5 million, or 42%, and $324.5 million, or 41%, to $458.4 million and $1,107.4 million for the three and nine months ended September 30, 2013, from $322.9 million and $782.9 million for the three and nine months ended September 30, 2012. This increase in biodiesel revenues consisted primarily of a $57.3 million and $240.3 million increase in biodiesel government incentives for the three and nine months ended September 30, 2013, respectively, compared to the prior year period. Of these increases, $0 million and $57.7 million for the three and nine months ended September 30, 2013, respectively, reflects the retroactive application of the blenders tax credit for 2012. We recognized a net benefit of $57.7 million. The increase in biodiesel revenues also reflects an increase in gallons sold of

15.9 million, or 26%, and 35.7 million, or 24%, to 77.6 million and 185.7 million for the three and nine months ended September 30, 2013, respectively, compared to 61.7 million gallons and 150.0 million gallons for the three and nine months ended September 30, 2012, respectively. Finally, the increase in gallons sold reflects increased throughput across our production facilities. Our average B100 sales price per gallon increased $0.51, or 11%, and $0.11, or 2%, to $4.95 and $4.71 for the three and nine months ended September 30, 2013, respectively, compared to $4.44 and $4.60 for the three and nine months ended September 30, 2012, respectively. The average B100 sales price increase is due to the increase in demand for biomass-based diesel, the increase in our distribution network due to additional terminal sites throughout the country and the increase in emerging biomass-based diesel markets such as heating oil. The increase in average sales price for the three and nine months ended September 30, 2013 contributed to a $31.5 million and $16.5 million revenue increase when applied to the number of gallons sold during the respective periods of 2012. The increase in gallons sold for the three and nine months ended September 30, 2013 accounted for revenue increases of $78.7 and $168.1 million for the three and nine months ended September 30, 2013, respectively, using pricing for the respective periods of 2013.

Services. Service revenues were $0.1 million and $0.2 million for the nine months ended September 30, 2013 and 2012, respectively.

Costs of goods sold. Our costs of goods sold increased $80.5 million, or 25%, and $180.5 million, or 25%, to $400.6 million and $912.8 million for the three and nine months ended September 30, 2013, respectively, from $320.1 million and $732.3 million for the three and nine months ended September 30, 2012, respectively. Costs of goods sold as a percentage of revenues were 87% and 82% for the three and nine months ended September 30, 2013, respectively, compared to 99% and 94% for the three and nine months ended September 30, 2012, respectively. The increase in costs of goods sold as a percentage of revenues in the 2013 periods was primarily due to higher revenues per gallon from reinstatement of the blender’s tax credit and higher biodiesel prices and lower feedstock costs in the 2013 periods:

Biodiesel. Biodiesel costs of goods sold increased $80.5 million, or 25%, and $180.6 million, or 25%, to $400.6 million and $912.7 million for the three and nine months ended September 30, 2013, respectively, compared to $320.1 million and $732.1 million for the three and nine months ended September 30, 2012, respectively. The costs of goods sold increased from additional gallons sold in the first nine months 2013 and was partially offset by slightly lower feedstock prices in 2013 as compared to 2012. Average lower cost feedstocks prices for the three and nine months ended September 30, 2013 were $0.41 and $0.40 per pound, respectively, compared to $0.42 and $0.44 per pound for the three and nine months ended September 30, 2012, respectively. Soybean oil costs for the three and nine months ended September 30, 2013 were $0.48 and $0.52 per pound, respectively, compared to $0.56 and $0.55 per pound for the three and nine months ended September 30, 2012, respectively. We had losses of $11.2 million and $3.2 million from risk management trading activity for the three and nine months ended September 30, 2013, respectively, compared to losses of $18.0 million and $4.9 million from risk management trading for the three and nine months ended September 30, 2012, respectively. Biodiesel costs of goods sold as a percentage of revenues were 87% and 82% for the three and nine months ended September 30, 2013, respectively, compared to 99% and 94% for the three and nine months ended September 30, 2012, respectively. The decrease in costs of goods sold as a percentage of revenues in the 2013 periods was primarily due to revenues from the reinstated blenders tax credit and higher biodiesel prices as well as declining feedstock prices during 2013 compared to 2012 and to a lesser extent lower risk management losses during 2013 compared to 2012.

Services. Services expenses were $0.1 million and $0.2 for the nine months ended September 30, 2013 and 2012, respectively.

Selling, general and administrative expenses. Our selling, general and administrative, or SG&A, expenses were $12.7 million and $33.6 million for the three and nine months ended September 30, 2013, respectively, compared to $9.9 million and $33.9 million for the three and nine months ended September 30, 2012, respectively. SG&A expenses increased $2.8 million, or 28%, and decreased $0.3 million, or 1%, for the three and nine months ended September 30, 2013, respectively. The three months ended September 30, 2013 increase of $2.8 million was mostly due to an increase in wages and benefits of $1.3 million and a $0.6 million increase in professional fees.

The comparison of the nine months ended September 30, 2013 and 2012 remained mostly constant between years. The $0.3 million decrease was primarily related to a decrease of wage and benefit expense of $2.4 million and a decrease of $0.6 million in bad debt expense. These expense decreases were offset by increases of $1.1 million in meeting and travel, $0.4 million in computer technology, $0.3 million of depreciation expense and $0.5 million for research, rent and safety expenses.

Other income (expense), net. Other expense was $0.5 million and $1.5 million for the three and nine months ended September 30, 2013, respectively, compared to other expense of $1.1 million and other income of $9.2 million for the three and nine months ended September 30, 2012, respectively. In 2012, other income is primarily comprised of the changes in fair value of the Series A Preferred Stock conversion feature embedded derivative, changes in fair value of Seneca Holdco liability. In 2013, other income is primarily interest expense, interest income and the other non-operating items. The change in fair value of the Series A Preferred Stock conversion feature embedded derivative resulted in $0 million of expense for the three and nine months ended September 30, 2013 and $0 million and $12.0 million of income for the three and nine months ended September 30, 2012, respectively. The change in fair value of the Seneca Holdco liability was $0 million of expense for the three and nine months ended September 30, 2013 and was $0 million and $0.3 million of income for the three and nine months ended September 30, 2012, respectively. Interest expense decreased

$0.6 million and $1.5 million to $0.6 million and $1.8 million for the three and nine months ended September 30, 2013, respectively, from $1.2 and $3.3 million for the three and nine months ended September 30, 2012, respectively, as a result of reduced debt levels.

Income tax benefit (expense). There was income tax benefit recorded during the three months ended September 30, 2013 of $42.1 million and income tax expense of $3.5 million for the nine months ended September 30, 2013 compared to an income tax benefit of $2.2 million for the three months ended September 30, 2013 and income tax expense of $3.7 million for the nine months ended September 30, 2012. See “Note 2 – Summary of Significant Accounting Policies” in our condensed consolidated financial statements for a description of income tax benefits (expense).

Effects of Recapitalization. In January 2012, we completed an initial public offering of our common stock. Due to the IPO, we recorded the effects from recapitalization of $39.1 million in the first quarter of 2012. To account for the exchange of Series A Preferred Stock for the newly issued Series B Preferred Stock and common stock, we compared the fair value of the Series B Preferred Stock and common shares issued to the carrying amount of the Series A preferred shares that were redeemed. The excess of the carrying amount of Series A Preferred Stock that were redeemed over the fair value of the Series B Preferred Stock and common shares that were issued was recorded as an increase to additional paid-in capital and was added to net earnings available to common shareholders.

Preferred stock accretion. Preferred stock accretion was $0 million for the three and nine months ended September 30, 2013, compared to $0 million and $1.8 million for the three and nine months ended September 30, 2012, respectively, associated with the Series A Preferred Stock that was terminated upon completion of the IPO. During January 2012, as part of our IPO and the conversion of the Series A Preferred Stock to Series B Preferred Stock, the accretion of the Series A Preferred Stock was terminated and we determined that no accretion was deemed necessary on the newly issued Series B Preferred Stock. See “Note 4 – Redeemable Preferred Stock” in our condensed consolidated financial statements for a description of the transaction.

Change in undistributed dividends. Undistributed preferred stock dividends were $0.1 million and $0.1 million for the three and nine months ended September 30, 2013, respectively, and a net reduction of $0.9 million and $1.7 million for the three and nine months ended September 30, 2012, respectively. During January 2012, the Series A Preferred Stock converted to Series B Preferred Stock and Common Stock as part of our IPO. All previous undistributed dividends were cancelled as part of the conversion. The new Series B Preferred Stock agreement requires us to pay dividends on a semi-annual basis.

Distributed dividends. Distributed dividends related to the Series B Preferred Stock were $0.3 million and $1.8 million for the three and nine months ended September 30, 2013, respectively, and $0 and $1.5 million for the three and nine months ended September 30, 2012, respectively.

Effects of participating preferred stock. Effects of participating preferred stock was $6.5 million and $18.0 million for the three and nine months ended September 30, 2013, respectively, and $0 million and $9.0 million for the three and nine months ended September 30, 2012, respectively.

Effects of participating share-based awards. Effects of participating restricted stock units was $1.4 and $2.3 million for the three and nine months ended September 30, 2013, respectively, and $0 million and $3.1 million for the three and nine months ended September 30, 2012, respectively.

Liquidity and Capital Resources

Sources of liquidity. Since inception, a significant portion of our operations have been financed through the sale of our capital stock. From August 1, 2006 through September 30, 2013, we received cash proceeds of $201.0 million from sales of preferred stock and common stock. At September 30, 2013 and December 31, 2012, we had cash and cash equivalents of $135.9 million and $66.8 million, respectively. At September 30, 2013, we had total assets of $685.8 million, compared to total assets of $495.8 million at December 31, 2012. At September 30, 2013, we had term debt of $35.5 million, compared to term debt of $37.0 million at December 31, 2012. There were no outstanding borrowings on our revolving line of credit at September 30, 2013 or December 31, 2012.

Our borrowings (in millions) are as follows:

	September 30, 2013		December 31, 2012
REG Danville term loan	$	6.2	$	10.1
REG Newton term loan		18.4		21.2
Other		6.8		1.4
Total notes payable	$	31.4	$	32.7
Bell, LLC promissory note	$	4.1	$	4.3

We have disclosed under the heading “Liquidity and Capital Resources” in our December 31, 2012 Annual Report on Form 10-K the capital resources which materially affect our financial statements. There have been no material changes from the capital resources previous disclosed other than those noted below. You should carefully consider the liquidity and capital resources set forth in our Annual Report on Form 10-K along with the information described below.

On November 3, 2011, REG Danville, LLC entered into an Amended and Restated Loan Agreement with Fifth Third Bank (Fifth Third Loan). The renewed Fifth Third Loan has a three year term with an automatic one year extension upon certain cumulative principal payment thresholds being met. The loan requires monthly principal payments of $150,000 and interest to be charged using LIBOR plus 5% per annum. The Fifth Third Loan is secured by our Danville facility. The loan agreement contains various loan covenants that restrict REG Danville’s ability to take certain actions, including prohibiting it in certain circumstances from making payments to the Company. Beginning on December 31, 2011, we are required to make semi-annual principal payments in an amount equal to 50% of its Excess Cash Flow. The Fifth Third Loan agreement defines Excess Cash Flow as REG Danville’s EBITDA plus certain affiliate payments less principal payments, interest expense, taxes and unfunded maintenance capital expenditures. We recorded an excess cash flow payment of $1.2 million for the six months ended June 30, 2013 which was paid in the third quarter of 2013. We recorded an estimated excess cash flow payment of $1.0 million through September 30, 2013 for the second half of 2013 which will be paid in 2014. As of September 30, 2013, there was $6.2 million outstanding under the Fifth Third Loan.

On March 4, 2013, REG Danville entered into the First Amendment to the Amended and Restated Loan Agreement (First Amendment) with Fifth Third Loan. The First Amendment includes changes to the debt covenants based upon us executing a tax sharing agreement with REG Danville. The tax sharing agreement provides that REG Danville will share the liability for income taxes via an allocation based upon a separate-return approach. Although we are not directly compensated for the use of carry-forward attributes, the Tax Sharing Agreement allows each affiliate to benefit from net operating losses and tax credits that each generates.

On December 20, 2012, REG Newton and AgStar Financial Services, PCA (AgStar) extended the term of the AgStar Loan. The maturity date of the AgStar Loan is March 8, 2014. We have initiated discussions for an additional extension to the loan.

On July 30, 2013, REG Mason City issued a $5.1 million promissory note to Soy Energy, LLC in connection with the acquisition of the Mason City production facility. The loan has a six year term and is secured by the Mason City facility. The loan requires interest only payments for the first eight months and monthly principal and interest payments of $92,000 starting in April 2014. Interest is based on a fixed rate of 5%. The effective rate is 5% at September 30, 2013. The loan agreement contains a covenant that restricts REG Mason City’s ability to take certain actions, including prohibiting it in certain circumstances from making payments to us. The loan requires that 50% of annual excess cash flow to be applied to principal beginning on December 31, 2013. As of September 30, 2013, the balance on the loan was $5.1 million.

We and our subsidiaries were in compliance with all restrictive financial covenants associated with our borrowings as of September 30, 2013.

Cash flow. The following table presents information regarding our cash flows and cash and cash equivalents for the nine months ended September 30, 2013 and 2012 (in thousands):

	Nine Months Ended September 30,
	2013			2012
Net cash flows provided by operating activities	$	116,799		$	17,031
Net cash flows used in investing activities		(39,446	)		(6,467	)
Net cash flows provided by (used in) financing activities		(8,255	)		44,143
Net change in cash and cash equivalents		69,098			54,707
Cash and cash equivalents, end of period	$	135,883		$	88,282

Operating activities. Net cash provided by operating activities was $116.8 million for the nine months ended September 30, 2013. For the first nine months of 2013, net income was $156.2 million, which includes depreciation and amortization expense of $6.6 million, stock-based compensation expense of $3.9 million and an expense for deferred taxes of $8.9 million. We also used $58.8 million to fund net working capital requirements, consisting of a $14.7 million increase in inventory, a $48.0 million increase in accounts receivable and a $24.4 million increase in prepaid expenses, which was offset by a $27.3 million increase in accounts payable and accruals and an increase in deferred revenues of $1.0 million. The increase in accounts receivable is due to the reinstatement of the blenders tax credit in 2013 and an increase in sales for the first nine months of 2013 when compared to the same period of 2012. The increase in accounts payable and accruals is related to the purchase of raw materials for increased production and the addition of a tolling agreement with Iowa Renewable Energy, LLC.

Net cash provided by operating activities was $17.0 million for the nine months ended September 30, 2012. For the nine months ended September 30, 2012, net income was $22.4 million, which includes depreciation and amortization expense of $6.2 million, stock-based compensation expense of $12.7 million, a decrease in the non-cash change in the preferred stock embedded derivative liability of $12.0 million, a decrease in the non-cash change in the Seneca Holdco, LLC liability of $0.2 million, a decrease of $7.1 million for the premium paid to Seneca Landlord on the original investment and an increase in deferred tax expense of $3.0 million. We also used $10.3 million to fund net working capital requirements, consisting of a $2.7 million increase in inventory due to increased production and sales volume, a $12.0 million decrease in accounts receivable, a $18.6 million increase in prepaid expenses, an decrease in deferred revenues of $6.7 million and a $0.3 million increase in accounts payable and accruals.

Investing activities. Net cash used in investing activities for the nine months ended September 30, 2013 was $39.4 million, consisting primarily of net cash used to pay for facility construction of $28.8 million for upgrades to the Albert Lea, New Boston,

Mason City and Seneca facilities, $0.1 million used to pay for investments, and $10.9 million used to purchase of the Mason City facility. We received $0.3 million from insurance proceeds for the involuntary disposal of fixed assets.

Net cash used in investing activities for the nine months ended September 30, 2012 was $6.5 million, consisting of net cash used to pay for facility construction of $6.4 million and cash used to establish restricted cash in the amount of $0.1 million.

Financing activities. Net cash used in financing activities for the nine months ended September 30, 2013 was $8.3 million. We paid $0.3 million for the purchase of treasury stock. We drew $3.0 million on a note payable and paid down $9.7 million of notes payable. We paid $1.2 million of preferred stock dividends.

Net cash provided by financing activities for the nine months ended September 30, 2012 was $44.1 million. We received $63.7 million from the completion of our IPO. We paid down $8.0 million on our notes payable and repaid $4.0 million for the investment in Seneca Landlord. We also paid $1.7 million for the issuance of common stock and preferred stock, $3.1 million for the repurchase of common stock, $1.5 million for the payment of preferred stock dividends and $0.1 million for debt issuance cost.

Capital expenditures. We have four partially constructed plants, one near New Orleans, Louisiana, one in Emporia, Kansas, one in Clovis, New Mexico and one near Atlanta, Georgia. We expect additional investments of approximately $145 to $160 million in the aggregate, excluding working capital requirements, may be invested before these plants would be able to commence production. These facilities would add an expected 150 mmgy to our nameplate production capacity. Our Clovis plant is currently being operated as a terminal facility. We plan to make significant capital expenditures when debt or equity financing becomes available to complete construction of these four facilities. In 2013, we completed upgrades to our Albert Lea facility, our New Boston facility, and our Mason City facility. Capital expenditures related to these facility upgrades were approximately $20 million, $4 million and $1 million, respectively, through September 30, 2013. We also plan to undertake an additional $20 million upgrade at our Mason City facility along with various facility upgrades at our existing facilities to further expand processing capabilities. We may enter into additional tolling arrangements with third parties from time to time where third parties will produce biodiesel on our behalf using our feedstocks. Such arrangements may require investments of additional working capital during the tolling periods.

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 for facilities under construction and capital improvement projects for our operating facilities. Since these discussions are ongoing, we are uncertain when or if financing 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 likely increase our leverage and interest costs and would likely be secured by certain of our assets. Additional equity or equity-linked financings would 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 and other covenants on our project subsidiaries, including restrictions on the ability to make distributions, to guarantee indebtedness and to incur liens on the plants of such subsidiaries.

Adjusted EBITDA

We use earnings before interest, taxes, depreciation and amortization, adjusted for certain additional items, identified in the table below, or Adjusted EBITDA, as a supplemental performance measure. We present Adjusted EBITDA because we believe it assists investors in analyzing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Adjusted EBITDA to evaluate, assess and 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:

(In thousands)	Three Months Ended September 30, 2013			Three Months Ended September 30, 2012			Nine Months Ended September 30, 2013			Nine Months Ended September 30, 2012
Net income (loss)	$	86,703		$	(6,040	)	$	156,236		$	22,410
Adjustments:
Income tax expense (benefit)		(42,051	)		(2,165	)		3,452			3,669
Interest expense		577			1,150			1,757			3,262
Other income (expense), net		(66	)		(56	)		(276	)		(121	)
Change in fair value of Seneca Holdco liability		—			—			—			(349	)
Change in fair value of preferred stock conversion feature embedded derivatives		—			—			—			(11,975	)
Stock issued for glycerin agreement termination		—			—			—			1,898
Straight-line lease expense		(163	)		(31	)		(484	)		(237	)
Depreciation		2,598			2,097			6,974			6,192
Amortization		(181	)		(208	)		(571	)		(553	)
Non-recurring business interruption ⁽¹⁾		—			—			(863	)		—
Blenders tax credit ⁽²⁾		—			18,912			(57,745	)		45,985
Stock-based compensation		1,484			2,965			3,869			12,687
Adjusted EBITDA	$	48,901		$	16,624		$	112,349		$	82,868

(1)

We incurred a non-recurring business interruption charge at one of our production facilities in November 2012; we reflected the gain contingency in our operating performance of 2012 having received the corresponding insurance proceeds in February 2013, thus excluding it from first quarter 2013 adjusted EBITDA.

(2)

On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which reinstated a set of tax extender items including the reinstatement of the federal biodiesel blenders tax credit for 2013 and retroactively reinstated the credit for 2012. The retroactive credit for 2012 resulted in a net benefit to us that was recognized in first quarter 2013, but because this credit relates to the operating performance and results of 2012 it is excluded from 2013 adjusted EBITDA and allocated to the 2012 periods based upon gallons sold. Excluding the $18.9 million and $46.0 million federal biodiesel blenders tax credit from three and nine months ended September 30, 2012, respectively, results in adjusted EBITDA of $(2.3) million and $36.9 million for the three and nine months ended September 30, 2012, respectively.

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 as alternatives to cash flows from operating activities or a measure of our liquidity or profitability. Adjusted EBITDA has limitations as an analytical tool, and should not 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 of our 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, and Adjusted EBITDA does not reflect cash requirements for such replacements;

—	stock-based compensation expense is an important element of our long term incentive compensation program, although we have excluded it as an expense when evaluating our operating performance; and

—	other companies, including other companies in the industry, may calculate these measures differently than we do, limiting their usefulness as a comparative measure.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Recent Accounting Pronouncements

For a discussion of new accounting pronouncements affecting the Company, refer to “Note 2 – Summary of Significant Accounting Policies” to our condensed consolidated financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The 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 the investment to fluctuate. To minimize this risk, we maintain a portfolio of cash equivalents in short-term investments in money market funds.

Commodity Price Risk

Over the period from January 2007 through September 2013, average diesel prices based on Platts reported pricing for Group 3 (Midwest) have ranged from a high of approximately $4.10 per gallon reported in July 2008 to a low of approximately $1.03 per gallon in March 2009, with prices averaging $2.58 per gallon during this period. Over the period from January 2006 through September 2013, soybean oil prices (based on closing sales prices on the CBOT nearby futures, for crude soybean oil) have ranged from a high of $0.7040 per pound in March 2008 to a low of $0.2108 per pound in January 2006, with closing sales prices averaging $0.4311 per pound during this period. Over the period from January 2008 through September 2013, animal fat prices (based on prices from The Jacobsen Missouri River, for choice white grease) have ranged from a high of $0.5250 per pound in June 2011 to a low of $0.0950 per pound in December 2008, with sales prices averaging $0.3519 per pound during this period. Over the period from July 2010 through September 2013, RIN prices (based on prices from OPIS) have ranged from a high of $1.99 in September 2011 to a low of $0.42 in October 2012, with sales prices averaging $1.02 during this period.

Higher feedstock prices or lower biodiesel prices result in lower profit margins and, therefore, represent unfavorable market conditions. Traditionally, we have not been able to pass along increased feedstock prices to our biodiesel customers. The availability and price of feedstocks are subject to wide fluctuations due to unpredictable factors such as weather conditions during the growing season, rendering volumes, carry-over from the previous crop year and current crop year yield, governmental policies with respect to agriculture and supply and demand.

We 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 2012. Market risk is estimated as the potential loss in fair value, resulting from a hypothetical 10% adverse change in the fair value of our lower cost feedstock and soybean oil requirements and biodiesel sales. The results of this analysis, which may differ from actual results, are as follows:

	2012 Volume (in millions)		Units	Hypothetical Adverse Change in Price			Change in Annual Gross Profit (in millions)		Percentage Change in Gross Profit
Biodiesel		188.4	gallons		10	%	$	100.6		171.4	%
Lower Cost Feedstocks		1,184.6	pounds		10	%	$	50.9		86.7	%
Soybean Oil		225.5	pounds		10	%	$	12.3		21.0	%

We attempt to protect operating margins by entering into risk management contracts that mitigate price volatility of our feedstocks, such as inedible animal fat and inedible corn oil and energy prices. We create offsetting positions by using a combination of forward physical purchases and sales contracts on feedstock and biodiesel, including risk management futures contracts, swaps and options primarily on heating oil and soybean oil; however, the extent to which we 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 percent adverse change in the prices of heating oil would have a negative effect on the fair value of these instruments of $8.5 million. A 10 percent adverse change in the price of soybean oil would have a negative effect on the fair value of these instruments of $2.1 million.

Interest Rate Risk

We are subject to interest rate risk in connection with our $1.4 million loan from the proceeds of Variable Rate Demand Industrial Development Revenue Bonds, or IFA Bonds, issued by the Iowa Finance Authority to finance our Ralston facility. The IFA Bonds bear interest at a variable rate determined by the remarketing agent from time to time as the rate necessary to produce a bid for the purchase of all of the Bonds at a price equal to the principal amount thereof plus any accrued interest at the time of determination, but not in excess of 10% per annum. The interest rate on the bonds was 0.11% for the last week of September 2013. A hypothetical increase in interest rate of 10% would not have a material effect on our annual interest expense.

We are subject to interest rate risk relating to REG Danville’s assumed $24.6 million term debt financing which was renewed on November 3, 2011 according to the Amended and Restated Loan Agreement with Fifth Third Bank. The renewed term loan has a three year term with an automatic one year extension upon certain cumulative principal payment thresholds being met. The term loan

bears interest at a fluctuating rate based on LIBOR. Interest will accrue on the outstanding balance of the term loan at LIBOR plus 500 basis points. Interest accrued on the outstanding balance of the loan at September 30, 2013 at 5.18%.

REG Danville entered into an interest rate swap agreement in connection with the aforementioned term loan on December 23, 2011 to be effective January 1, 2012. The swap agreement effectively fixes the variable component of the interest rate at 0.92% on a notional amount of approximately $3.5 million of REG Danville’s term loan through July 2015. The fair value of the interest rate swap agreement was $0.1 million and $0.1 million at September 30, 2013 and December 31, 2012, respectively, and is recorded in the other noncurrent liabilities. The interest rate swap agreement is not designated as a cash flow or fair value hedge. Gains and losses based on the fair value change in the interest rate swap agreement are recognized in the statement of operations as a change in the fair value of interest rate swap agreement. A hypothetical increase in interest rate of 10% would not have a material effect on our annual interest.

REG Newton is subject to interest rate risk relating to its assumed $23.6 million term debt financing from AgStar. Interest will accrue on the outstanding balance of the term loan at 30-day LIBOR or 2.00%, whichever is higher, plus 300 basis points (effective rate at September 30, 2013 of 5.00%). A hypothetical increase in interest rate of 10% would not have a material effect on our annual interest expense.

We are subject to interest rate risk under our Wells Fargo Revolver entered into on December 23, 2011 under which we had $0 million borrowed and outstanding at September 30, 2013. Amounts borrowed under the Wells Fargo Revolver bear interest, in the case of LIBOR rate loans, at a per annum rate equal to the LIBOR rate plus the LIBOR Rate Margin (as defined in the Wells Fargo Revolver), which may range from 2.50 to 3.25 percent, based on the Quantity Average Excess Availability Amount (as defined in the Wells Fargo Revolver). All other amounts borrowed that are not LIBOR rate loans bear interest at a rate equal to the greatest of (i) (A) 1.75% per annum, (B) the Federal Funds Rate plus 0.5%, (C) the LIBOR Rate (which rate shall be calculated based upon an interest period of three months and will be determined on a daily basis), plus 1.5% points, and (D) the rate of interest announced, from time to time, within Wells Fargo Bank, National Association at its principal office in San Francisco as its “prime rate,” plus (ii) the Base Rate Margin (as defined in the Wells Fargo Revolver), which may range from 1.00 to 1.75 percent, based on the Quantity Average Excess Availability Amount. The Base Rate Margin is subject to reduction or increase depending on the amount available for borrowing under the Wells Fargo Revolver. The loan was a base rate loan as of September 30, 2013 (effective rate at September 30, 2013 of 4.75%). A hypothetical increase in interest rate of 10% would not have a material effect on our annual interest expense.

Inflation

To 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 biodiesel we produce, maintain our production facilities adequately, build new biodiesel production facilities and expand our existing facilities as well as the demand for our facility construction management and operations management services.

ITEM 4. CONTROLS AND PROCEDURES

We maintain a system of disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and the Chief Financial Officer, 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 the desired control objectives.

Management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as of September 30, 2013. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2013.

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) that occurred during the three months ended September 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We may from time to time be involved in claims, proceedings and litigation arising from our business and property ownership. We believe, based on currently available information, that the results of such proceedings, in the aggregate, will not have a material adverse effect on our financial position, operations or liquidity.

ITEM 1A. RISK FACTORS

Our business, financial condition, results of operations and liquidity are subject to various risks and uncertainties, including those described below, and as a result, the trading price of our common stock could decline.

Risk Associated With Our Business

Loss or reductions of governmental requirements for the use of biofuels could have a material adverse effect on our revenues and operating margins.

The biodiesel industry relies substantially on federal requirements and state policies for use of biofuels. Since biodiesel has been more expensive to produce than petroleum-based diesel fuel over the past few years, the biodiesel industry depends on governmental programs that support a market for biodiesel that might not otherwise exist.

The most important of these government programs in the United States is RFS2, which requires that a certain volume of biomass-based diesel fuel, which includes biodiesel, be consumed. RFS2 became effective on July 1, 2010 and applies through 2022. We believe that the increase in demand for our biodiesel since July 2010 is directly attributable to the implementation of RFS2. In addition, we believe that biodiesel prices since July 2010 benefited significantly from RFS2.

There can be no assurance that Congress will not repeal, curtail or otherwise change, or that the EPA will not curtail or otherwise change the RFS2 program in a manner adverse to us. The petroleum industry is generally opposed to RFS2 and can be expected to continue to press for changes that eliminate or reduce its impact. Any repeal or reduction in the RFS2 requirements or reinterpretation of RFS2 resulting in our biodiesel failing to qualify as a required fuel would materially decrease the demand for and price of our biodiesel, which would materially and adversely harm our revenues and cash flows.

If Congress decides to repeal or curtail RFS2, or if the EPA is not able or willing to enforce RFS2 requirements, the demand for our biodiesel based on this program and any increases in demand that we expect due to RFS2 would be significantly reduced or eliminated and our revenues and operating margins would be materially harmed. In addition, although we believe that state requirements for the use of biofuels increase demand for our biodiesel within such states, they generally may not increase overall demand in excess of RFS2 requirements. Rather, existing demand for our biofuel from petroleum refiners and petroleum fuel importers in the 48 contiguous states or Hawaii, which are defined as “Obligated Parties” in the RFS2 regulations, in connection with federal requirements, may shift to states that have use requirements or tax incentive programs.

The EPA is required to determine the volume of biomass-based diesel that will be required each year beginning in 2013 based on the EPA’s consideration of a variety of factors, including biomass-based diesel production, consumption, and infrastructure issues, the likely impact of biomass-based diesel production and use in a variety of areas, including climate change, energy security, the agricultural sector, air quality, transportation fuel costs, job creation, and water quality, and other factors. RFS2 requires that the biomass-based diesel annual volume requirement be at least 1 billion gallons in each of those years. The biomass-based diesel volume requirement for 2013 is 1.28 billion gallons.

As of this filing, the EPA has not proposed or finalized the 2014 RVOs. A draft of the 2014 RVO was leaked and reported in the press. The leaked draft reflected a 2014 and 2015 biomass-based diesel RVO of 1.28 billion gallons in each of those years and a reduced Advanced Biofuel RVO of 2.21 billion gallons rather than the original EISA volume of 3.75 for 2014. Shortly after the leaked document made it into the press, the EPA put out a statement saying “[t]he agency has made no final decision on the proposed renewable fuel standards for 2014.” Market prices for biomass-base diesel RINs fell from $0.655 per RIN to $0.53 per RIN in the days following the release of the leaked document. Once proposed by EPA, the Office of Management and Budget, or OMB, has to approve EPA’s proposal, based on the same factors outlined above. Due to the delay in the proposal, which EPA was required to determine and publish by November 30, 2012, it is possible that the 2014 RVO will be challenged in court which may delay any final determination of the 2014 RVOs, which could reduce the demand for and price of our biodiesel, which could harm our revenues and cash flows.

As an illustrative example, according to EMTS data, biomass-based diesel was produced and imported into the U.S. at average rate of 172 million gallons per month for July, August and September, the last three months of available EMTS data. If that rate is maintained in October, November and December, approximately 1.74 billion gallons of biomass-based diesel RINs would be generated in 2013. Adding the 2012 carry-over to the 2013 RIN generation, would result in an estimated total biomass-based diesel RIN availability of approximately 1.94 billion gallons, which is approximately 660 million gallons more than required to satisfy the 1.28 billion gallon 2013 biomass-based diesel RVO. If the 2014 biomass-based diesel RVO is only 1.28 billion gallons, that would limit the 2014 carryover to 256 million gallons, or 20% of 1.28 billion, thus resulting in an excess supply of 404 million gallons of biomass-based diesel RINs. These excess RINs may be used to fulfill the advanced biofuel RVO or the renewable fuel RVO. If the volume of excess biomass-based diesel RINs exceeds the volume the Obligated Parties desire to use to fulfill their advanced biofuel and renewable fuel requirements, the demand for and price of our biodiesel and biomass-based diesel RINs may be reduced, which could harm our revenues and cash flows.

Our gross margins are dependent on the spread between biodiesel prices and feedstock costs.

Our gross margins depend on the spread between biodiesel prices and feedstock costs. Historically, the spread between biodiesel prices and feedstock costs has varied significantly. Although actual yields vary depending on the feedstock quality, the average

monthly spread between the price per gallon of 100% pure biodiesel, or B100, as reported by The Jacobsen Publishing Company, or The Jacobsen, and the price per gallon for the amount of choice white grease, a common inedible animal fat used by us to make biodiesel, was $1.83 in 2008, $1.25 in 2009, $1.06 in 2010, $1.32 in 2011 and $1.26 in 2012 assuming 8.0 pounds of choice white grease yields one gallon of biodiesel. The average monthly spread for the amount of crude soybean oil required to produce one gallon of biodiesel, based on the nearby futures contract as reported on the Chicago Board of Trade, or CBOT, was $0.61 per gallon in 2008, $0.39 in 2009, $0.25 per gallon in 2010, $0.89 in 2011 and $0.65 in 2012 assuming 7.5 pounds of soybean oil yields one gallon of biodiesel. For 2011 and 2012, approximately 83% and 84%, respectively, of our total feedstock usage was inedible animal fat, used cooking oil or inedible corn oil and 17% and 16%, respectively, was soybean oil, compared to approximately 91% for inedible animal fat, used cooking or inedible corn oil and 9% for soybean oil in 2010.

Biodiesel has traditionally been marketed primarily as an additive or alternative to petroleum-based diesel fuel and as a result biodiesel prices have been influenced by the price of petroleum-based diesel fuel, adjusted for government incentives supporting renewable fuels, rather than biodiesel production costs. A lack of close correlation between production costs and biodiesel prices means that we may be unable to pass increased production costs on to our customers in the form of higher prices. Any decrease in the spread between biodiesel prices and feedstock costs, whether as a result of an increase in feedstock prices or a reduction in biodiesel prices, including, but not limited to, a reduction in the value of RINs, such as the decrease that occurred in the last few months of 2012 and since September 1, 2013, would adversely affect our gross margins, cash flow and results of operations. For a detailed description of RINs, see “Business—Government Programs Favoring Biodiesel Production and Use—Renewable Identification Numbers.”

The costs of raw materials that we use as feedstocks are volatile and our results of operations could fluctuate substantially as a result.

The cost of feedstocks is a significant uncertainty for our business. The success of our operations is dependent on the price of feedstocks and certain other raw materials that we use to produce biodiesel. 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. At elevated price levels, these feedstocks may be uneconomical to use, as we may be unable to pass feedstock cost increases on to our customers.

The price and availability of feedstocks and other raw materials may be influenced by general economic, market and regulatory factors. These factors include weather conditions, farming decisions, government policies and subsidies with respect to agriculture and international trade, and global supply and demand. The significance and relative impact of these factors on the price of feedstocks is difficult to predict, especially without knowing what types of feedstock materials will be optimal for use in the future, particularly at new facilities that we may construct or acquire.

Since 2009, we have principally used inedible corn oil, used cooking oil and inedible animal fats as our feedstocks for the production of biodiesel. Our decision to shift to these feedstocks resulted from the reduction in profit caused by a significant increase in soybean oil prices, which rose from $0.1435 per pound in February 2001 to $0.7040 per pound in March 2008, and soybean oil having generally remained at high levels since that time. While prices for these alternative feedstocks can experience price volatility similar to soybean oil, their prices can also vary significantly from soybean oil based on market conditions. Since January 1, 2008, the cost per pound of choice white grease, an inedible animal fat commonly used by us in the production of biodiesel, has traded in a range of $0.0950 to $0.5250 based on the closing nearby futures prices on the CBOT. The 2012 drought conditions experienced in the Midwest increased the cost of corn, soybeans and other feedstocks, including animal fat. Historically, the price of animal fat has been affected by the amount of rendering volumes in the United States, as well as demand from other markets. As the cost of animal feed rises as a result of the drought in the Midwest, the price of animal products may also rise, thereby reducing demand and rendering volumes. If biodiesel production continues to increase in response to RFS2, we expect that more biodiesel producers will seek to use lower cost feedstocks, potentially increasing our costs of production. In addition, because the market for animal fat is less developed than markets for vegetable oils such as soybean oil, we generally are unable to enter into forward contracts at fixed prices. Further, the markets for used cooking oil and inedible corn oil are in their nascent stages.

The market and supply for used cooking oil as a feedstock for biodiesel is growing. The commercial supply of inedible corn oil is growing as more ethanol producers are installing corn oil extraction technology in their ethanol plants. Inedible corn oil is not generally available in quantities sufficient to cover all of our operations. Approximately 75% of U.S. ethanol plants have the equipment necessary to extract inedible corn oil that can be used in biodiesel production. There are a number of additional ethanol producers who have announced plans to install corn oil extraction equipment in their ethanol plants. If more ethanol plants do not acquire and utilize corn oil extraction equipment or if ethanol plants are idled, we may not be able to obtain additional amounts of inedible corn oil for use in our production of biodiesel and may be forced to utilize higher cost feedstocks to meet increased demand, which may not be economical.

Loss of or reductions in tax incentives for biodiesel production or consumption would have a material adverse effect on our revenues and operating margins.

The biodiesel industry is also substantially aided by federal and state tax incentives. Prior to RFS2, the biodiesel industry relied principally on these tax incentives to bring the price of biodiesel more in line with the price of petroleum-based diesel fuel to the end user. The most significant tax incentive program was the federal blenders tax credit. The blenders tax credit provided a $1.00 refundable tax credit per gallon of pure biodiesel, or B100, to the first blender of biodiesel with petroleum-based diesel fuel. The blenders tax credit expired on December 31, 2009 and was re-enacted in December 2010, retroactively for all of 2010 and

prospectively for 2011. The blenders tax credit expired again on December 31, 2011 and was again re-enacted on January 2, 2013, retroactively for all of 2012 and prospectively for 2013. There is no assurance that it will be reinstated when it expires at the end of 2013. Unlike RFS2, the blenders tax credit has a direct effect on federal government spending and could be changed or eliminated as a result of changes in the federal budget policy. The absence of and uncertainty around the blenders tax credit during 2012 materially curtailed demand for biodiesel and reduced margins. Although the blenders tax credit was reinstated for all of 2012, it was restated in January of 2013 and thus is reflected in our 2013 earnings. It is uncertain what action, if any, Congress may take with respect to extending the blenders tax credit beyond 2013 or when such action might be effective. If Congress does not reinstate the credit, demand for our biodiesel and the price we are able to charge for our product may be significantly reduced, harming revenues and profitability. When the blenders tax credit expired on December 31, 2011, we experienced an industry-wide acceleration of gallons sold in the fourth quarter of 2011, which was further influenced by the ability of Obligated Parties to satisfy up to 20% of their renewable volume obligation, or RVO, for 2012 through RINs obtained in 2011. We believe the resulting buildup of biodiesel inventories reduced gallons sold in the first quarter of 2012. We may experience something similar with the blenders tax credit scheduled to expire again on December 31, 2013.

In addition, several states have enacted tax incentives for the use of biodiesel. For example, Illinois offers an exemption from the generally applicable 6.25% sales tax for biodiesel blends that incentivizes blending at 11% biodiesel, or B11. Like the federal blenders tax credit, the Illinois tax incentive program and the tax incentive programs of other state could be changed as a result of state budget considerations or otherwise. Reduction or elimination of such incentives could materially and adversely harm our revenues and profitability.

Risk management transactions could significantly increase our operating costs and working capital requirements and may not be effective.

In an attempt to partially offset the effects of volatile feedstock costs and biodiesel fuel prices, we may enter into contracts that establish market positions in feedstocks, such as inedible corn oil, used cooking oil, inedible animal fats and soybean oil, and related commodities, such as heating oil and ultra-low sulfur diesel, or ULSD. The financial impact of such market positions will depend on commodity prices at the time that we are required to perform our obligations under these contracts. Risk management arrangements will also expose us to the risk of financial loss in situations where the counterparty defaults on its contract or, in the case of exchange-traded or over-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 prices paid or received by us. 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. Changes in the value of these futures instruments are recognized in current income and may result in margin calls. We may also vary the amount of risk management strategies we undertake, or we may choose not to engage in risk management transactions at all. Further, our ability to reduce the risk of falling biodiesel prices and rising feedstock costs will be limited as currently there is no established futures market for biodiesel or the vast majority of our feedstocks, nor are fixed-price long-term contracts generally available. As a result, our results of operations and financial position may be adversely affected by increases in the price of feedstocks or decreases in the price of biodiesel that are not managed effectively. For example, we had losses of $4.6 million from risk management trading activity for the year ended December 31, 2012, compared to gains of $3.0 million from risk management trading for the year ended December 31, 2011, respectively. Our increased losses were largely due to a decrease in soybean oil prices in September 2012 and an increase in heating oil prices during the third quarter of 2012 which resulted in reduced market value of our derivative financial instruments related to fourth quarter biodiesel sales.

Our success depends on our ability to manage our growing and changing operations.

Since our formation, our business has grown significantly in size and complexity. This growth has placed, and is expected to continue to place, significant demands on our management, systems, internal controls and financial and physical resources. In addition, we expect that we will need to further develop our financial and managerial controls and reporting systems to accommodate future growth. This will require us to incur expenses related to hiring additional qualified personnel, retaining professionals to assist in developing the appropriate control systems and expanding our information technology infrastructure. Our inability to manage growth effectively could have a material adverse effect on our results of operations, financial position and cash flows.

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 36% and 23% of our total revenues in 2012 and 2011, respectively. Our agreements with Pilot have typically had a one-year term and our current agreement with Pilot expires December 31, 2013. In the event we lose Pilot as a customer or Pilot significantly reduces the volume of biodiesel it buys from us, it could be difficult to replace the lost revenues in the short term and potentially over an extended period, and our profitability and cash flow could be materially harmed. Past news reports indicated that Pilot was the subject of a federal criminal investigation involving alleged fraud related to customer diesel fuel rebates. We cannot determine what effect, if any, this may have on our future business relationship with Pilot.

Our business is primarily dependent upon one product. As a consequence, we may not be able to adapt to changing market conditions or endure any decline in the biodiesel industry.

Our business is currently focused almost entirely on the production and sale of biodiesel, with glycerin and fatty acid sales and the operations of our Services segment representing only a small portion of revenues. Our reliance on biodiesel means that we may not be able to adapt to changing market conditions or to withstand any significant decline in the size or profitability of the biodiesel industry. For example, in 2009 and the beginning of 2010, we were required to periodically idle our plants due to insufficient demand at profitable price points which materially affected our revenues. If we are required to idle our plants in the future or are unable to adapt to changing market conditions, our revenues and results of operations may be materially harmed.

Technological advances and changes in production methods in the biodiesel industry could render our plants obsolete and adversely affect our ability to compete.

It is expected that technological advances in biodiesel production methods will continue to occur and new technologies for biodiesel production may develop. Advances in the process of converting oils and fats into biodiesel could allow our competitors to produce biodiesel faster and more efficiently and at a substantially lower cost. If we are unable to adapt or incorporate technological advances into our operations, our production facilities could become less competitive or obsolete. Further, it may be necessary for us to make significant expenditures to acquire any new technology and retrofit our plants in order to incorporate new technologies and remain competitive. There is no assurance that third-party licenses for any proprietary technologies that we would need access to in order to remain competitive for either existing processes or new technology will be available to us on commercially reasonable terms or that any new technologies could be incorporated into our plants. In order to execute our strategy to expand into the production of renewable chemicals, additional advanced biofuels, next generation feedstocks and related 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 to obtain such licenses or rights on favorable terms. If we are unable to obtain, implement or finance new technologies, our production facilities could be less efficient than our competitors, we may not be able to successfully execute our strategy and our results of operations could be substantially harmed.

If we are unable to respond to changes in ASTM or customer standards, our ability to sell biodiesel may be harmed.

We currently produce biodiesel to conform to or exceed standards established by ASTM. ASTM standards for biodiesel and biodiesel blends may be modified in response to new observations from the industries involved with diesel fuel. New tests or more stringent standards may require us to make additional capital investments in, or modify, plant operations to meet these standards. In addition, some biodiesel customers have developed their own biodiesel standards which are stricter than the ASTM standards. If we are unable to meet new ASTM standards or our biodiesel customers’ standards cost effectively or at all, our production technology may become obsolete, and our ability to sell biodiesel may be harmed, negatively impacting our revenues and profitability.

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 our products to our customers and to deliver raw materials to us. The costs of these transportation services are affected by the volatility in fuel prices, such as those caused by recent geopolitical and economic events. For example, in 2012, the market rates of leasing new rail cars nearly doubled as a result of increased demand to move domestically drilled crude oil from new supply fields in the upper Midwest to various refineries. We have not been able in the past, and may not be able in the future, to pass along part or all of any of these increases to customers. If we continue to be unable to increase our prices as a result 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 to deliver raw materials or products in a timely manner could harm our reputation, negatively affect our customer relationships and have a material adverse effect on our business, financial condition and results of operations.

We are dependent upon our key management personnel and the loss of any of these persons could adversely affect our results of operations.

We are highly dependent upon key members of our management team for the execution of our business plan. We believe that our future success is highly dependent on the contributions of these key employees. There can be no assurance that any individual will continue in his or her capacity for any particular period of time. The loss of any of these key employees could delay or prevent the achievement of our business objectives and have a material adverse effect upon our results of operations and financial position.

We and certain subsidiaries have indebtedness, which subjects us to potential defaults, could adversely affect our ability to raise additional capital to fund our operations and limits our ability to react to changes in the economy or the biodiesel industry.

At September 30, 2013, our total long-term debt was $35.5 million. This includes consolidated long-term debt owed by our Variable Interest Entities, or VIEs, including 416 South Bell, LLC, or Bell, LLC. In December 2011, certain of our subsidiaries

entered into a new revolving credit agreement with a bank group and Wells Fargo Capital Finance, LLC, which we refer to as the Wells Fargo Revolver. At September 30, 2013, there was no balance outstanding under our lines of credit, all of which we guarantee.

All of the agreements for our indebtedness contain financial covenants the breach of which would result in an event of default by us or our subsidiary obligor. For a discussion of the financial covenants related to our debt agreements, see “Management’s discussion and analysis of financial condition and results of operations—Liquidity.”

Our subsidiaries are required annually to pay a certain portion of our excess cash flow at our Danville and Newton facilities to their respective lenders, which reduces the cash flow that we receive from these facilities.

Our indebtedness could:

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require us to dedicate a substantial portion of our cash flow from operations to payments of principal, interest on, and other fees related to such indebtedness, thereby reducing the availability of our cash flow to fund working capital and capital expenditures, and for other general corporate purposes;

—	increase our vulnerability to general adverse economic and biodiesel industry conditions;

—	limit our flexibility in planning for, or reacting to, changes in our business and the biodiesel industry, which may place us at a competitive disadvantage compared to our competitors that have less debt; and

—	limit among other things, our ability to borrow additional funds.

Despite our current debt levels, we and our subsidiaries may incur substantially more debt. This could exacerbate the risks associated with our substantial indebtedness.

We and our subsidiaries may incur substantial additional debt in the future, including secured debt. We and certain of our subsidiaries are not currently prohibited under the terms of our debt from incurring additional debt, pledging assets, refinancing our debt or taking a number of other actions that could diminish our ability to make payments thereunder. If new indebtedness is added to our current debt levels, the related risks that we and our subsidiaries now face could intensify.

We have partially constructed or non-operational plants and planned plant upgrades that require capital that we may not be able to raise and an impairment could negatively impact our financial position, results of operations and future cash flows.

We have four partially constructed or non-operational plants, one near New Orleans, Louisiana, one in Emporia, Kansas, one in Clovis, New Mexico and one near Atlanta, Georgia. We may choose to invest approximately $145 to $160 million in the aggregate, excluding working capital requirements, before these plants would be able to commence production. Our Clovis plant is currently being operated as a terminal facility. In order to complete construction or upgrade these facilities as planned, we will require additional capital. In November 2012, we acquired a biodiesel facility near Atlanta, Georgia that had been idled prior to our acquisition and will remain so until certain repairs or upgrades are made. We also have various upgrades planned for our operating facilities, including the upgrades we are currently undertaking at our Mason City, Iowa facility. While we intend to finance certain upgrades to our existing facilities from our cash flow from operations, we may need to raise significant capital to complete construction of the four partially constructed or non-operational facilities and to fund related working capital requirements. It is uncertain when or if financing will be available. It is also likely that the terms of any project financing would include customary financial and other covenants restricting our project subsidiaries, including restrictions on the ability to make distributions, to guarantee indebtedness and to incur liens on the plants of such subsidiaries. We also may engage in acquisitions of assets or facilities in the future that require significant investment to complete or operate. If we are unable to obtain such capital on satisfactory terms, or if such capital is otherwise unavailable, or if we encounter cost overruns on these projects such that we have insufficient capital, we may have to postpone completion of these projects indefinitely, which may adversely affect our ability to implement our strategy and our future revenues and future cash flows.

We may not successfully identify and complete acquisitions and other strategic relationships on favorable terms or achieve anticipated synergies relating to any such transactions, and integration of acquisitions may disrupt our business and management.

We regularly review domestic and international acquisitions of biofuel production facilities and have acquired most of our facilities from third parties. However, we may be unable to identify suitable acquisition candidates in the future. Even if we identify appropriate acquisition candidates, we may be unable to complete such acquisitions on favorable terms, if at all. In addition, we may not realize the anticipated benefits of any or all of our past or future transactions and each transaction has numerous risks. These risks include:

—	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;

—	disruption of our ongoing business and distraction of our management and employees from other opportunities and challenges;

—	inability to achieve the financial and strategic goals for the acquired and combined businesses;

—	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;

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potential failure of the due diligence processes to identify significant problems, liabilities or other shortcomings or challenges of an acquired company or technology, including but not limited to, issues with the acquired company’s intellectual property, product quality, environmental liabilities, data back-up and security, revenue recognition or other accounting practices, employee, customer or partner issues or legal and financial contingencies;

—	exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, an acquisition, including but not limited 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.

In addition, one of our strategic goals is to expand our biodiesel production capabilities into international markets. In the event we expand our operations into international markets through acquisitions or otherwise, we may be exposed to additional risks, including unexpected changes in foreign laws and regulations, political and economic instability, challenges in managing foreign operations, increased costs to adapt our systems and practices to those used in foreign countries, export duties, currency fluctuations and restrictions, tariffs and other trade barriers, and the burdens of complying with a wide variety of foreign laws, each of which could have a material adverse effect on our business, financial condition, results of operations and liquidity.

We intend to pursue strategic initiatives to diversify our business that will require significant funding and management attention and these initiatives may not be successful.

We are seeking opportunities to diversify our product lines, as a commercialization partner for companies engaged in the development of new advanced biofuels, by using our biorefinery platform to produce renewable chemicals from bio-mass feedstocks and by entering entirely new industries through acquisitions or otherwise. There is no assurance that new technologies capable of economically producing advanced biofuels will be developed, that the developers of these technologies will select us as their commercialization partner or that the terms of any such collaborative arrangement will be favorable to us. Further, the renewable chemicals market is underdeveloped. Any chemicals that we produce from renewable sources may not prove to be as effective as chemicals produced from petroleum or other sources and, regardless of their effectiveness, renewable chemicals may not be accepted in the chemical marketplace. Furthermore, we may not be able to acquire companies in different industries at attractive valuations or at all. These strategic initiatives will require significant funding and management attention, and if we are not successful in implementing them, our financial condition and results of operations may be harmed.

We may be obligated to redeem our Series B preferred stock beginning in 2015.

On June 30, 2015, each holder of the then-outstanding shares of Series B preferred stock may require that up to all of such holder’s shares of Series B preferred stock be redeemed by us out of funds lawfully available at a price per share equal to $25 per share plus any accumulated and unpaid dividends. As of the date of this filing, the amount of this potential obligation would be approximately $14.6 million. In order to satisfy any redemption request, we may need to use limited cash resources on hand, be required to borrow money, issue equity securities or sell assets to meet this obligation, which could impair our working capital, reduce the funds necessary to operate and grow our business, involve significant dilution to holders of our Common Stock or require the disposition of our key assets. If we are subject to a redemption request, it could have a material adverse effect on our financial condition, results of operations and cash flows, and cause the price of our Common Stock to decline.

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. Our sales tend to decrease during the winter season due to perceptions that biodiesel will not perform adequately in colder weather. Colder seasonal temperatures can cause the higher cloud point biodiesel we make from inedible animal fats to become cloudy and eventually gel at a higher temperature than petroleum-based diesel or lower cloud point biodiesel made from soybean, canola, used cooking oil or inedible corn oil. Such gelling can lead to plugged fuel filters and other fuel handling and performance problems for customers and suppliers. Reduced demand in the winter for our higher cloud point biodiesel may result in excess supply of such higher cloud point biodiesel and lower prices for such higher cloud point biodiesel. In addition, most of our production facilities are located in colder Midwestern states and our costs of shipping biodiesel to warmer climates generally increase in cold weather months.

In addition, our RINs also have an element of seasonality to them. Since only 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 the RVO year. As a result, one would expect RIN prices to decrease as the calendar year progresses if the RIN market is oversupplied compared to that year’s RVO and increase if it is undersupplied. For example, in 2012, which had a RVO for biomass-based diesel of one billion gallons, biomass-based diesel RIN prices, as reported by OPIS, began to decrease in September when biomass-based diesel RIN generation neared the equivalent of 900 million gallons, as reported by EMTS. Similarly, in September of 2013 when biomass-based diesel RIN generation reached approximately 960 million gallons, biomass-based diesel RIN prices, as reported by OPIS, began to decline. As a result of these seasonal fluctuations, comparisons of operating measures between consecutive quarters may not be as meaningful as comparisons between longer reporting periods.

Failure to comply with governmental regulations, including EPA requirements relating to RFS2, could result in the imposition of penalties, fines, or restrictions on our operations and remedial liabilities.

The biodiesel industry is subject to extensive federal, state and local laws and regulations related to the general population’s health and safety and compliance and permitting obligations, including those related to the use, storage, handling, discharge, emission and disposal of municipal solid waste and other waste, pollutants or hazardous substances, discharges, air and other emissions, as well as land use and development. Existing laws also impose obligations to clean up contaminated properties or to pay for the cost of such remediation, often upon parties that did not actually cause the contamination. Compliance with these laws, regulations and obligations could require substantial capital expenditures. Failure to comply could result in the imposition of penalties, fines or restrictions on operations and remedial liabilities. These costs and liabilities could adversely affect our operations.

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 adverse effect on our business in general and on our results of operations, competitive position or financial condition. We are unable to predict the effect of additional environmental laws and regulations which may be adopted in the future, including whether any such laws or regulations would significantly increase our cost of doing business or affect our operations in any area.

Under certain environmental laws and regulations, we could be held strictly liable for the removal or remediation of previously released materials or property contamination regardless of whether we were responsible for the release or contamination, or if current or prior operations were conducted consistent with accepted standards of practice. Such liabilities can be significant and, if imposed, could have a material adverse effect on our financial condition or results of operations.

In addition to the regulations mentioned above, we are subject to various laws and regulations related to RFS2, most significantly regulations related to the generation and dissemination of RINs. These regulations are highly complex and evolving, requiring us to periodically update our compliance systems. For example, in 2008, we unintentionally generated duplicate RINs as a result of a change to the software we use to manage RIN generation. We voluntarily reported this violation to the EPA and followed EPA guidance in correcting the issue promptly. In 2011, we entered into an administrative settlement agreement with the EPA regarding this violation and paid a fine for this inadvertent violation. Any violation of these regulations by us, inadvertently or otherwise, could result in significant fines and harm our customers’ confidence in the RINs we issue, either of which could have a material adverse effect on our business. For a detailed description of RINs, see “Business—Government Programs Favoring Biodiesel Production and Use—Renewable Identification Numbers.”

In response to certain cases of RIN fraud whereby biodiesel producers were selling biomass-based diesel RINs without having produced the required renewable fuel, the EPA is in the process of implementing a quality assurance program for RIN compliance. Compliance with these or any new regulations or Obligated Party verification procedures could require significant expenditures to attain and maintain compliance. Failure to comply could result in the imposition of penalties, fines, restrictions on operations, loss of customers and remedial liabilities. These costs and liabilities may have a material adverse effect on our business in general and on our results of operations, competitive position or financial condition. We are unable to predict the effect of any additional regulatory or customer requirements which may be adopted in the future, including whether any such regulations or verification procedures would significantly increase our cost of doing business or affect our operations in any area.

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 biodiesel production facilities, are owned by subsidiaries and some of these subsidiaries are subject to loan covenants that generally restrict them from paying dividends, making distributions or making loans to us or to any other subsidiary. These limitations will restrict our ability to repay indebtedness, finance capital projects or pay dividends to stockholders from our subsidiaries’ cash flows from operations.

Our business may suffer if we are unable to attract or retain talented personnel.

Our success depends on the abilities, expertise, judgment, discretion, integrity, and good faith of our management and employees to manage the business and respond to economic, market and other conditions. We have a relatively small management team and employee base, and the inability to attract suitably qualified replacements or additional staff could adversely affect our business. No assurance can be given that our management team or employee base will continue their employment, or that replacement personnel with comparable skills could be found. If we are unable to attract and retain key personnel and additional employees, our business may be adversely affected.

If 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 of our stock.

Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. The process of maintaining our internal controls may be expensive and time consuming and may require significant attention from management. Although we have concluded as of December 31, 2012 that our internal control over financial reporting provides reasonable assurance

regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, because of its inherent limitations, internal control over financial reporting may not prevent or detect fraud or misstatements. Failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our results of operations or cause us to fail to meet our reporting obligations. If we or our independent registered public accounting firm discover a material weakness, the disclosure of that fact could harm the value of our stock and our business.

A natural disaster, leak, fire or explosion at any of our production plants or customer’s facilities could increase our costs and liabilities.

Because biodiesel and some of its inputs and outputs are combustible and flammable, a leak, fire or explosion may occur at a plant or customer’s facility which could result in damage to the plant and nearby properties, injury to employees and others, and interruption of operations. In addition, our Houston facility, due to its coastal location, is vulnerable to hurricanes, which may cause plant damage, injury to employees and others and interruption of operations and all of our plants could incur damage from other natural disasters. A majority of our facilities are also located in the Midwest, which is subject to tornado activity. If any of the foregoing events occur, we may incur significant additional costs including, among other things, loss of profits due to unplanned temporary or permanent shutdowns of our facilities, clean-up costs, liability for damages or injuries, legal expenses, and reconstruction expenses, which would seriously harm our results of operations 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 if we believe the cost of available insurance is excessive relative to the risks presented. As a result of market conditions, premiums and deductibles for certain insurance policies can increase substantially and, in some instances, certain insurance policies may become unavailable or available only for reduced amounts of coverage. As a result, we 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 to maintain insurance at levels we believe are appropriate for our business and consistent with industry practice, we will not be fully insured against all risks. In addition, pollution, environmental risks and the risk of natural disasters generally are not fully insurable. Losses and liabilities from uninsured and underinsured events and delay in the payment of insurance proceeds could have a material adverse effect on our financial condition and results of operations.

Confidentiality agreements with employees and others may not adequately prevent disclosures of confidential information, trade secrets and other proprietary information.

We rely in part on trade secret protection to protect our confidential and proprietary information and processes. However, trade secrets are difficult to protect. We have taken measures to protect our trade secrets and proprietary information, but these measures may not be effective. For example, we require new employees and consultants to execute confidentiality agreements upon the commencement of their employment or consulting arrangement with us. These agreements generally require that all confidential information developed by the individual or made known to the individual by us during the course of the individual’s relationship with us be kept confidential and not disclosed to third parties. These agreements also generally provide that knowhow and inventions conceived by the individual in the course of rendering services to us are our exclusive property. Nevertheless, these agreements may be breached, or may not be enforceable, and our proprietary information may be disclosed. Further, despite the existence of these agreements, third parties may independently develop substantially equivalent proprietary information and techniques. Accordingly, it may be difficult for us to protect our trade secrets. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

Moreover, we cannot assure you that our technology does not infringe upon any valid claims of patents that other parties own. In the future, if we are found to be infringing on a patent owned by a third party, we might have to seek a license from such third party to use the patented technology. We cannot assure you that, if required, we would be able to obtain such a license on terms acceptable to us, if at all. If a third party brought a legal action against us or our licensors, we could incur substantial costs in defending ourselves, and we cannot assure you that such an action would be resolved in our favor. If such a dispute were to be resolved against us, we could be subject to significant damages.

Insiders have significant ownership positions and will continue to be able to exercise influence over corporate matters.

One of our pre-IPO investors, West Central Cooperative beneficially owns approximately 8.9% of our common stock, and as a result has substantial influence over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or its assets. In addition, two of our directors are affiliated with West Central Cooperative. This concentration of ownership and contractual power over the appointment of directors could limit other stockholders’ ability to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control over us.

In the event we enter into new construction contracts, we may be exposed to a variety of risks that could affect our ability to realize profit.

While our construction services management business has had only limited external operations over the last three years, we intend to continue to pursue opportunities to provide these services. Substantially all of our revenues from our new facility construction services business have been derived from fixed unit price contracts. Fixed unit price contracts require us to perform the contract for a fixed unit price irrespective of our actual costs. As a result, we realize a profit on these contracts only if we and our subcontractors successfully estimate our costs and then successfully control actual costs and avoid cost overruns. Further, we have historically subcontracted substantially all of our construction work to Todd & Sargent, Inc. and TSW, LLC on a time and materials, rather than fixed, basis. As a result, we have less control over the largest component of our plant construction costs and the risk of cost overruns generally falls on us rather than our subcontractors. If we or our subcontractors do not perform a contract within cost estimates, then cost overruns may cause us to incur losses or cause the contract not to be as profitable as we initially expected. This, in turn, could negatively affect our cash flow, earnings and financial position. As we have acquired assets and begun consolidating the industry, our construction services management business has almost exclusively been focused on internal intercompany projects.

If we or our subcontractors perform extra or change order work that is not approved by the customer in advance we may have a dispute with the customer over whether the work performed is beyond the scope of the work included in the original project plans and specifications or, if the customer agrees that the work performed qualifies as extra work, the price that the customer is willing to pay for the extra work. These disputes may result in us not receiving payment for all or a significant portion of work that we or our subcontractors have performed. Even where the customer agrees to pay for the extra work, we may be required to fund the cost of that work for a lengthy period of time until the change order is approved and paid by the customer. To the extent actual recoveries with respect to change orders or amounts subject to contract disputes or claims are less than the estimates used in our financial statements, the amount of any shortfall will reduce our revenues and profits, and this could have a material adverse effect on our working capital and results of operations.

Risks Related to the Biodiesel Industry

The market price of biodiesel is influenced by the price of petroleum-based distillate fuels, such as ultra-low sulfur diesel, and decreases in the price of petroleum-based distillate fuels or RIN values would very likely decrease the price we can charge for our biodiesel, which could harm our revenues and profitability.

Historically, biodiesel prices have been strongly correlated to petroleum-based diesel prices and in particular ULSD, regardless of the cost of producing biodiesel itself. We market our biofuel as an alternative to petroleum-based fuels. Therefore, if the price of petroleum-based diesel falls, the price of biodiesel could decline, and we may be unable to produce products that are an economically viable alternative to petroleum-based fuels. Petroleum prices are volatile due to global factors, such as the impact of wars, political uprisings, OPEC production quotas, worldwide economic conditions, changes in refining capacity and natural disasters. Additionally, demand for liquid transportation fuels, including biodiesel, is impacted by economic conditions.

Just as a small reduction in the real or anticipated supply of crude oil can have a significant upward impact on the price of petroleum-based fuels, a perceived reduction of such threats can result in a significant reduction in petroleum-based fuel prices. A reduction in petroleum-based fuel prices may have a material adverse effect on our revenues and profits if such price decrease reduces the price we are able to charge for our biodiesel.

There was a sharp decline in RIN prices during third quarter 2012 that carried through the end of 2012. During this period, RIN pricing declined from $1.17 per RIN at June 30, 2012 to $0.64 per RIN at December 31, 2012, as reported by OPIS, which contributed to the decline in price of biodiesel. RIN prices declined from $1.09 per RIN at July 1, 2013 to $0.35 per RIN at October 30, 2013, as reported by OPIS. A reduction in RIN values, such as those experienced in the second half of 2012 or since the third quarter of 2013, may have a material adverse effect on our revenues and profits as such price decrease reduce the price we are able to charge for our biodiesel.

We operate in a highly competitive industry and competition in our industry would increase if new participants enter the biodiesel business.

We operate in a very competitive environment. The biodiesel industry is primarily comprised of smaller entities that engage exclusively in biodiesel production, large integrated agribusiness companies that produce biodiesel along with their soybean crush businesses and increasingly, integrated petroleum companies. We face competition for capital, labor, feedstocks and other resources from these companies. In the United States, we compete with soybean processors and refiners, including Archer-Daniels-Midland Company, LLC, Cargill, Inc. and Louis Dreyfus Commodities. In addition, petroleum refiners are increasingly entering into biodiesel and renewable diesel production. These and other competitors that are divisions of larger enterprises may have greater financial resources than we do. We also have many smaller competitors. If our competitors consolidate or otherwise grow and we are unable to similarly increase our scale, our business and prospects may be significantly and adversely affected.

In addition, petroleum companies and diesel retailers form the primary distribution networks for marketing biodiesel through blended petroleum-based diesel. If these companies increase their direct or indirect biodiesel and renewable diesel production, there will be less of a need to purchase biodiesel from independent biodiesel producers like us. Such a shift in the market would materially harm our operations, cash flows and financial position.

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 Oil operates four renewable diesel plants: a 240 million gallon per year plant in Singapore, a 240 million gallon per year plant in Rotterdam, Netherlands, and two 60 million gallon per year plants in Porvoo, Finland. Dynamic Fuels, LLC, has recently announced that their 75 million gallon per year renewable diesel plant in Geismar, Louisiana was producing near its reported capacity. Diamond Green Diesel, LLC has completed construction and commenced operations of its 137 million gallon per year renewable diesel plant in Norco, Louisiana in 2013. Under RFS2, renewable diesel made from biomass meets the definition of biomass-based diesel and thus is eligible, along with biodiesel, to satisfy the RFS2 biomass-based diesel requirement described in “Business—Government Programs Favoring Biodiesel Production and Use.” Furthermore, under RFS2, renewable diesel may receive up to 1.7 RINs per gallon, whereas biodiesel currently receives 1.5 RINs per gallon. For a detailed description of RINs and RIN values, see “Business—Government Programs Favoring Biodiesel Production and Use—Renewable Identification Numbers.” As the value of RINs increases, this 0.2 RIN advantage may make renewable diesel more cost-effective, both as a petroleum-based diesel substitute and for meeting RFS2 requirements. If renewable diesel proves to be more cost-effective than biodiesel, our revenues and 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 attached to these fuels. The EPA recently adopted regulations to amend the definition of “Home Heating Oil” under RFS2, which expands the scope of fuels eligible to generate RINs. This will increase competition within heating oil markets by introducing fuels that generate more RINs (i.e., cellulosic diesel) and may be more cost competitive than biodiesel utilized as heating oil.

The biodiesel industry will also face increased competition resulting from the advancement of technology by automotive, industrial and power generation manufacturers which are developing more efficient engines, hybrid engines and alternative clean power systems. Improved engines and alternative clean power systems offer a technological solution to address increasing worldwide energy costs, the long-term availability of petroleum reserves and environmental concerns. If and when these clean power systems are able to offer significant efficiency and environmental benefits and become widely available, the biodiesel industry may not be able to compete effectively with these technologies and government requirements for the use of biodiesel may not continue.

The development of alternative fuels and renewable chemicals also puts pressure on feedstock supply and availability to the biodiesel industry. If these emerging technologies compete with biodiesel for feedstocks, are more profitable or have greater governmental support than biodiesel does, then the biodiesel industry may have difficulty in procuring the feedstocks necessary to be successful.

Increased industry-wide production of biodiesel could have a negative effect on our margins and there remains excess production capacity in the biodiesel industry.

According to EPA EMTS data, approximately 1.1 billion gallons of biomass-based diesel RINs were generated in 2011, 1.14 billion gallons were generated in 2012 and approximately 1.24 billion gallons have been generated in 2013 through September 30, 2013, the most recent monthly data available. Such production was in excess of the 800 million gallon RFS2 requirement for 2011 and one billion gallon requirement for 2012, and is on track to exceed the 1.28 billion requirement for 2013. Should biodiesel production continue to remain above RFS2 required volumes, the resulting supply could put downward pressure on our margins for biodiesel, negatively affecting our profitability.

Under RFS2, Obligated Parties are entitled to satisfy up to 20% of their annual volume requirement for any given year with gallons used in the previous year so long as they are in compliance with the RFS2. EMTS data indicates that Obligated Parties may have carried over approximately 200 million gallons of biomass-based diesel RINs from 2012 into 2013. As an illustrative example, according to EMTS data, biomass-based diesel was produced and imported into the U.S. at average rate of 172 million gallons per month for July, August and September, the last three months of available EMTS data. If that rate is maintained in October, November and December, approximately 1.74 billion gallons of biomass-based diesel RINs could be generated in 2013. Adding the 2012 carry-over to the 2013 RIN generation, would result in an estimated total biomass-based diesel RIN availability of approximately 1.94 billion gallons, which is approximately 660 million gallons more than required to satisfy the 1.28 billion gallon 2013 biomass-based diesel RVO. If the 2014 biomass-based diesel RVO is only 1.28 billion gallons, that could limit the 2014 carryover to 256 million gallons, or 20% of 1.28 billion, thus resulting in an excess supply of 404 million gallons of biomass-based diesel RINs. These excess RINs can be used to fulfill the advanced biofuel RVO or the renewable fuel RVO. If the volume of excess biomass-based diesel RINs exceeds the volume the Obligated Parties desire to use to fulfill their advanced biofuel and renewable fuel requirements, the demand for and price of our biodiesel and biomass-based diesel RINs may be reduced, which could harm our revenues and cash flows.

Many biodiesel plants in the United States do not currently operate, and of those that do, many do not operate at full capacity. According to the NBB, as of September 12, 2012, 2.7 billion gallons per year of biodiesel production capacity in the United States were registered under the RFS2 program by NBB members. In addition to this amount, several hundred more gallons of U.S. based biomass-based diesel production capacity was registered by non-NBB members and another 1.2 billion gallons of biomass-based diesel production was registered by foreign producers. Furthermore, plants under construction and expansion in the United States as of December 31 2011, if completed, could add an additional several hundred million gallons of annual biodiesel production capacity. The annual production capacity of existing plants and plants under construction far exceeds both historic consumption of biodiesel in the United States and 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 biodiesel gross margins, harming our revenues and profitability.

The European Commission has imposed anti-dumping and countervailing duties on biodiesel blends imported into Europe, which have effectively eliminated our ability to sell those biodiesel blends in Europe.

In March 2009, as a response to the federal blenders tax credit, the European Commission imposed anti-dumping and anti-subsidy tariffs on biodiesel produced in the United States. These tariffs have effectively eliminated European demand for 20% biodiesel blends, or B20, or higher imported from the United States. The European Commission has extended these tariffs through 2014. In May 2011, the European Commission imposed similar anti-dumping and countervailing duties on biodiesel blends below B20. These duties significantly increase the price at which we and other United States biodiesel producers will be able to sell such biodiesel blends in European markets, making it difficult or impossible to compete in the European biodiesel market. These anti-dumping and countervailing duties therefore decrease the demand for biodiesel produced in the United States and increase the supply of biodiesel available in the United States market. Such market dynamics may negatively impact our revenues and profitability.

If automobile manufacturers and other industry groups express reservations regarding the use of biodiesel, our ability to sell biodiesel will be negatively impacted.

Because it is a relatively new product, research on biodiesel use in automobiles is ongoing. Some industry groups have recommended that blends of no more than 5% biodiesel be used for automobile fuel due to concerns about fuel quality, engine performance problems and possible detrimental effects of biodiesel on rubber components and other engine parts. Although some manufacturers have encouraged use of biodiesel fuel in their vehicles, cautionary pronouncements by other manufacturers or industry groups may impact our ability to market our biodiesel.

Perception about “food vs. fuel” could impact public policy which could impair our ability to operate at a profit and substantially harm our revenues and operating margins.

Some people believe that biodiesel may increase the cost of food, as some feedstocks such as soybean oil used to make biodiesel can also be used for food products. This debate is often referred to as “food vs. fuel.” This is a concern to the biodiesel industry because biodiesel demand is heavily influenced by government policy and if public opinion were to erode, it is possible that these policies would lose political support. These views could also negatively impact public perception of biodiesel. Such claims have led some, including members of Congress, to urge the modification of current government policies which affect the production and sale of biofuels in the United States.

Concerns regarding the environmental impact of biodiesel production could affect public policy which could impair our ability to operate at a profit and substantially harm our revenues and operating margins.

Because biodiesel is a relatively new product, the environmental impacts associated with biodiesel production and uses have not yet been fully analyzed. Under the 2007 Energy Independence and Security Act, the EPA is required to produce a study every three years of the environmental impacts 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 was released 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 the intensification of corn production; (2) whether future impacts are positive or negative will be determined by the choice of feedstock, land use change, cultivation and 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 analyses find that biodiesel production and use has resulted in, or could in the future result in, adverse environmental impacts, such findings could also negatively impact public perception of biodiesel and acceptance of biodiesel as an alternative fuel, which also could result in the loss of political support.

To the extent that state or federal laws are modified or public perception turns against biodiesel, use requirements such as RFS2 and state tax incentives may not continue, which could materially harm our ability to operate profitably.

Problems with product performance, in cold weather or otherwise, could cause consumers to lose confidence in the reliability of biodiesel which, in turn, would have an adverse impact on our ability to successfully market and sell biodiesel.

Concerns about the performance of biodiesel could result in a decrease in customers and revenues and an unexpected increase in expenses. Biodiesel typically has a higher cloud point than petroleum-based diesel. The cloud point is the temperature below which a fuel exhibits a noticeable cloudiness and is the conventional indicator of a fuel’s potential for cold weather problems. The lower the cloud point, the better the fuel should perform in cold weather. According to an article published by Iowa State University Extension, the cloud point of biodiesel is typically between 30 °F and 60 °F, while the cloud point of the most common form of pure petroleum-based diesel fuel is typically less than 20 °F. It is our experience that when biodiesel is mixed with pure petroleum-based diesel to make a two percent biodiesel blend, the cloud point of the blended fuel can be 2 °F to 6 °F higher than petroleum-based diesel and the cloud point of a twenty percent biodiesel blend can be 15 °F to 35 °F higher than petroleum based diesel, depending on the individual cloud points of the biodiesel and petroleum-based diesel. Cold temperatures can therefore cause biodiesel blended fuel to become cloudy and eventually to gel when pure petroleum-based diesel would not, and this can lead to plugged fuel filters and other fuel handling and performance problems for customers and suppliers. The consequences of these higher cloud points may cause demand for biodiesel in northern and eastern United States markets to diminish during the colder months, which are the primary markets in which we currently operate.

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 heated building or heated storage tanks, which result in higher storage costs. This and other performance problems, including the possibility of particulate formation above the cloud point of a blend of biodiesel and petroleum-based diesel, may also result in increased expenses as we try to remedy these performance problems, including the costs of extra cold weather treatment additives. Remedying these performance problems may result in decreased yields, lower process throughput or both, as well as substantial capital 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 effect on our cash flows and results of operations.

Growth in the sale and distribution of biodiesel is dependent on the expansion of related infrastructure which may not occur on a timely basis, if at all, and our operations could be adversely affected by infrastructure limitations or disruptions.

Growth in the biodiesel industry depends on substantial development of infrastructure for the distribution of biodiesel. Substantial investment required 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 are generally beyond our control. Also, we compete with other biofuel companies for access to some of the key infrastructure components such as pipeline and terminal capacity. As a result, increased production of biodiesel or other biofuels will increase the demand and competition for necessary infrastructure. Any delay or failure in expanding distribution infrastructure could hurt the demand for or prices of biodiesel, impede delivery of our biodiesel, and impose additional costs, each of which would have a material adverse effect on our results of operations and financial condition. Our business will be dependent on the continuing availability of infrastructure for the distribution of increasing volumes of biodiesel and any infrastructure disruptions could materially harm our business.

We may face competition from imported biodiesel and renewable diesel, which may reduce demand for biodiesel produced by us and cause our revenues to decline.

Biodiesel and renewable diesel imports into the United States have increased significantly and compete with United States produced biodiesel. The imported fuels may benefit from production incentives or other financial incentives in their home countries that offset some of their production costs and enable them to profitably sell biodiesel or renewable diesel in the United States at lower prices than United States-based biodiesel producers. Under RFS2, imported biodiesel and renewable diesel is eligible and, therefore, competes to meet the volumetric requirements for biomass-based diesel. As imports increase, this could make it more challenging for us to market or sell biodiesel in the United States, which would have a material adverse effect on our revenues. Imported biodiesel that does not qualify under RFS2, also competes in jurisdictions where there are biodiesel blending requirements.

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. Nitrogen oxide is a contributor to ozone and smog. These emissions may decrease the appeal of biodiesel to environmental groups and agencies who have been historic supporters of the biodiesel industry, potentially harming our ability to market our biodiesel.

In addition, several states may act to regulate potential nitrogen oxide emissions from biodiesel. California is in the process of formulating biodiesel regulations that may also require such an additive. In states where such an additive is required to sell biodiesel, the additional cost of the additive may make biodiesel less profitable or make biodiesel less cost competitive against petroleum-based diesel or renewable diesel, which would negatively impact our ability to sell our products in such states and therefore have an adverse effect on our revenues and profitability.

Several biofuels companies throughout the United States have filed for bankruptcy over the last several years due to industry and economic conditions.

Unfavorable worldwide economic conditions, lack of credit and volatile biofuel prices and feedstock costs have likely contributed to the necessity of bankruptcy filings by biofuel producers. Our business has been, and in the future may be, negatively impacted by the industry conditions that influenced the bankruptcy proceedings of other biofuel producers, or we may encounter new competition from buyers of distressed biodiesel properties who enter the industry at a lower cost than original plant investors.

Risks Related to Our Common Stock

The 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 blenders tax credit;

—	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 generally and from time to time experience significant price and volume fluctuations that are not related to the operating performance of particular 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. The amount of our Common Stock or securities convertible into or exchangeable for our Common Stock issued in connection with an investment or acquisition could constitute a material portion of our then outstanding Common Stock.

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 any of our classes of common stock to date, have contractual restrictions against paying cash dividends and currently intend to retain our future 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 a gain 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 will contain anti-takeover provisions that could delay or discourage takeover 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 changes in 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 a stockholders’ 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 of directors, 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 or amend or repeal the provisions of our amended and restated certificate of incorporation regarding the classified board, the election and removal of directors 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, or DGCL. These provisions may prohibit or restrict large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us. These provisions in our amended and restated certificate of incorporation and bylaws and under Delaware law could discourage potential takeover 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 price being lower than it would without these provisions.

If securities or industry analysts issue an adverse or misleading opinion regarding our stock or do not publish research or reports about our business, our stock price and trading volume could decline.

The trading market for our Common Stock relies in part on the research and reports that equity research analysts publish about us and our business. It is difficult for companies such as ours to attract independent equity research analysts to cover our Common Stock. We do not control these analysts or the content and opinions included in their reports. The price of our Common Stock could decline if one or more equity research analysts downgrade our Common Stock or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business. If one or more equity research analysts ceases coverage of our company, we could lose visibility in the market, which in turn could cause our stock price to decline.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OR PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

During the third quarter of 2013, the Company revised the presentation of biodiesel government incentives passed through to customers to reflect such amounts as a reduction of biodiesel sales rather than as a reduction of biodiesel government incentives for the first quarter of 2013. In this specific filing, the revision impacted the year to date results for the Company but had no impact on the third quarter of 2013 results and this is described in Note 1. The revision had no impact on comparative 2012 results but did impact its previously reported historical condensed consolidated statements of operations for the three months ended March 31, 2013, as revised in the second quarter 2013 interim financial statements, and for the six months ended June 30, 2013. The Company, however, believes the revised presentation is not material to either of these periods as it had no impact on total revenue, gross profit, net income, earnings per share, the condensed consolidated balance sheets, the condensed consolidated statement of redeemable preferred stock and equity or the condensed consolidated statements of cash flows in these historical periods.

The effects of this revised presentation on the unaudited condensed consolidated statement of operations for the six months ended June 30, 2013, and three months ended March 31, 2013 are as follows (in thousands):


		Six months ended June 30, 2013								Three months ended March 31, 2013
	As previously reported			Adjustment			As adjusted		As previously reported				Adjustment			As adjusted
REVENUES:
Biodiesel sales	$		529,366	$	(69,534	)	$	459,832			$	189,255	$	(69,534	)	$	119,721
Biodiesel government incentives			119,648		69,534			189,182				75,071		69,534			144,605
	$		649,014	$	—		$	649,014			$	264,326	$	—		$	264,326

ITEM 6. EXHIBITS

(A) Exhibits:

Exhibit No.		Description
3.1		Amended and Restated Bylaws of Renewable Energy Group, Inc. (the “Company”) (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed September 12, 2013)
31.1		Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
31.2		Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
32.1*		Certification of the Chief Executive Officer pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*		Certification of the Chief Financial Officer pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

* In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34-47986, the certifications furnished in Exhibit 32.1 and Exhibit 32.2 hereto are deemed to accompany this Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	RENEWABLE ENERGY GROUP, INC.


Dated: November 8, 2013	By:	/s/ Daniel J. Oh
		Daniel J. Oh
		Chief Executive Officer (Principal Executive Officer)

Dated: November 8, 2013	By:	/s/ Chad Stone
		Chad Stone
		Chief Financial Officer (Principal Financial Officer)

Dated: November 8, 2013	By:	/s/ Chad A. Baker
		Chad A. Baker
		Controller and Chief Accounting Officer (Principal Accounting Officer)