Renewable Energy Group, Inc. - Quarter Report: 2018 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, 2018



¨	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, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	¨	Accelerated filer	x

Non-accelerated filer	¨	Smaller reporting company	¨

		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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 31, 2018, the registrant had 37,299,704 shares of Common Stock outstanding.

TABLE OF CONTENTS



		Page
PART I	FINANCIAL INFORMATION	1
ITEM 1.	Condensed Consolidated Financial Information	1
ITEM 2.	Management's Discussion and Analysis of Financial Information	25
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	41
ITEM 4.	Controls and Procedures	42

PART II	OTHER INFORMATION	43
ITEM 1.	Legal Proceedings	43
ITEM 1A.	Risk Factors	43
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
ITEM 3.	Defaults Upon Senior Securities	59
ITEM 4.	Mine Safety Disclosures	59
ITEM 5.	Other Information	59
ITEM 6.	Exhibits	59

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL INFORMATION

RENEWABLE ENERGY GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except share and per share amounts)



	September 30, 2018			December 31, 2017
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	156,632		$	77,627
Marketable securities	52,892			—
Accounts receivable, net	92,866			90,648
Inventories	141,151			135,547
Prepaid expenses and other assets	37,854			51,880
Restricted cash	3,000			—
Total current assets	484,395			355,702
Property, plant and equipment, net	592,697			587,397
Goodwill	16,080			16,080
Intangible assets, net	27,895			27,127
Other assets	20,171			19,290
TOTAL ASSETS	$	1,141,238		$	1,005,596
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Lines of credit	$	4,370		$	65,525
Current maturities of long-term debt	169,485			13,397
Accounts payable	99,150			84,608
Accrued expenses and other liabilities	35,620			39,187
Deferred revenue	1,472			2,218
Total current liabilities	310,097			204,935
Unfavorable lease obligation	2,541			3,388
Deferred income taxes	8,379			8,192
Long-term contingent consideration for acquisitions	259			8,849
Long-term debt (net of debt issuance costs of $4,126 and $6,627, respectively)	34,401			208,536
Other liabilities	3,466			4,114
Total liabilities	359,143			438,014
COMMITMENTS AND CONTINGENCIES
EQUITY:
Common stock ($.0001 par value; 300,000,000 shares authorized; 37,299,704 and 38,837,749 shares outstanding, respectively)	5			5
Common stock—additional paid-in-capital	486,618			515,452
Retained earnings	408,170			134,928
Accumulated other comprehensive income	(1,195		)	278
Treasury stock (11,514,218 and 9,363,166 shares outstanding, respectively)	(111,503		)	(83,081		)
Total equity	782,095			567,582
TOTAL LIABILITIES AND EQUITY	$	1,141,238		$	1,005,596

See notes to condensed consolidated financial statements.

RENEWABLE ENERGY GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except share and per share amounts)



	Three months ended						Nine months ended
	September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
REVENUES:
Biomass-based diesel sales	$	568,174		$	504,016		$	1,394,044		$	1,303,681
Separated RIN sales	26,867			120,389			100,232			245,062
Biomass-based diesel government incentives	944			741			367,144			28,503
	595,985			625,146			1,861,420			1,577,246
Other revenue	1,768			1,837			5,735			3,733
	597,753			626,983			1,867,155			1,580,979
COSTS OF GOODS SOLD:
Biomass-based diesel	535,376			505,871			1,451,565			1,328,129
Separated RINs	9,790			105,131			53,538			185,978
Other costs of goods sold	1,173			1,186			3,449			3,340
	546,339			612,188			1,508,552			1,517,447
GROSS PROFIT	51,414			14,795			358,603			63,532
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES	23,155			25,880			79,321			71,599
RESEARCH AND DEVELOPMENT EXPENSE	4,252			3,759			13,335			10,537
IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT	—			—			—			1,341
INCOME (LOSS) FROM OPERATIONS	24,007			(14,844		)	265,947			(19,945		)
OTHER INCOME (EXPENSE), NET:
Change in fair value of contingent consideration	4,566			(1,433		)	13,235			(1,998		)
Change in fair value of convertible debt conversion liability	—			8,560			—			(24,158		)
Gain on debt extinguishment	788			—			2,893			—
Gain on involuntary conversion	—			942			4,454			942
Other income (loss), net	499			12			3,778			(278		)
Interest expense	(4,003		)	(4,725		)	(13,579		)	(13,740		)
	1,850			3,356			10,781			(39,232		)
INCOME (LOSS) BEFORE INCOME TAXES	25,857			(11,488		)	276,728			(59,177		)
INCOME TAX BENEFIT (EXPENSE)	(854		)	115			(3,486		)	(2,919		)
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	25,003			(11,373		)	273,242			(62,096		)
LESS—EFFECT OF PARTICIPATING SHARE-BASED AWARDS	660			—			6,999			—
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY’S COMMON STOCKHOLDERS	$	24,343		$	(11,373	)	$	266,243		$	(62,096	)
NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS:
BASIC	$	0.65		$	(0.29	)	$	7.04		$	(1.61	)
DILUTED	$	0.53		$	(0.29	)	$	6.20		$	(1.61	)
WEIGHTED AVERAGE SHARES USED TO COMPUTE NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS:
BASIC	37,270,928			38,772,434			37,815,598			38,684,412
DILUTED	45,503,371			38,772,434			42,910,528			38,684,412

See notes to condensed consolidated financial statements.

RENEWABLE ENERGY GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

(in thousands)



	Three months ended						Nine months ended
	September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
Net income (loss)	$	25,003		$	(11,373	)	$	273,242		$	(62,096	)
Unrealized gains (losses) on marketable securities, net of taxes of $0 and $0, respectively	(31		)	—			(31		)	—
Foreign currency translation adjustments	(338		)	1,476			(1,441		)	4,657
Other comprehensive income (loss)	(369		)	1,476			(1,472		)	4,657
Comprehensive income (loss) attributable to the Company	$	24,634		$	(9,897	)	$	271,770		$	(57,439	)

See notes to condensed consolidated financial statements.

RENEWABLE ENERGY GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(unaudited)

(in thousands, except share amounts)



	Company Stockholders’ Equity
	Common Stock Shares	Common Stock		Common Stock - Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Noncontrolling Interest			Total
BALANCE, January 1, 2017	38,553,413	$	5	$	480,906		$	214,007		$	(5,751	)	$	(81,824	)	$	2,831		$	610,174
Conversion of restricted stock units to common stock (net of 24,494 shares of treasury stock purchased)	40,853	—		—			—			—			(383		)	—			(383		)
Acquisition of noncontrolling interest	—	—		(271		)	—			—			—			(2,831		)	(3,102		)
Stock compensation expense	—	—		1,308			—			—			—			—			1,308
Other comprehensive income	—	—		—			—			551			—			—			551
Net loss	—	—		—			(15,914		)	—			—			—			(15,914		)
BALANCE, March 31, 2017	38,594,266	$	5	$	481,943		$	198,093		$	(5,200	)	$	(82,207	)	$	—		$	592,634
Conversion of restricted stock units to common stock (net of 10,948 shares of treasury stock purchased)	91,040	—		—			—			—			(255		)	—			(255		)
Stock compensation expense	—	—		1,688			—			—			—			—			1,688
Other comprehensive income	—	—		—			—			2,630			—			—			2,630
Net loss	—	—		—			(34,809		)	—			—			—			(34,809		)
BALANCE, June 30, 2017	38,685,306	$	5	$	483,631		$	163,284		$	(2,570	)	$	(82,462	)	$	—		$	561,888
Conversion of restricted stock units to common stock (net of 43,962 shares of treasury stock purchased)	74,726	—		—			—			—			(214		)	—			(214		)
Settlement of stock appreciation rights in common stock (net of 35,378 shares of treasury stock purchased)	72,573	—		—			—			—			(329		)	—			(329		)
Stock compensation expense	—			2,023			—			—			—			—			2,023
Other comprehensive income	—	—		—			—			1,476			—			—			1,476
Net loss	—	—		—			(11,373		)	—			—			—			(11,373		)
BALANCE, September 30, 2017	38,832,605	$	5	$	485,654		$	151,911		$	(1,094	)	$	(83,005	)	$	—		$	553,471



	Company Stockholders’ Equity
	Common Stock Shares		Common Stock		Common Stock - Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Noncontrolling Interest		Total
BALANCE, January 1, 2018	38,837,749		$	5	$	515,452		$	134,928	$	278		$	(83,081	)	$	—	$	567,582
Conversion of restricted stock units to common stock (net of 51,995 shares of treasury stock purchased)	127,470		—		—			—		—			(621		)	—		(621		)
Settlement of stock appreciation rights in common stock (net of 14,558 shares of treasury stock purchased)	33,463		—		—			—		—			(172		)	—		(172		)
Partial termination of capped call options	(15,012	)	—		252			—		—			(167		)	—		85
Convertible debt extinguishment impact (net of tax impact of $68)	—		—		(440		)	—		—			—			—		(440		)
Treasury stock purchases	(641,601	)	—		—			—		—			(7,828		)	—		(7,828		)
Stock compensation expense	—		—		1,794			—		—			—			—		1,794
Other comprehensive income	—		—		—			—		719			—			—		719
Net income	—		—		—			214,389		—			—			—		214,389
BALANCE, March 31, 2018	38,342,069		$	5	$	517,058		$	349,317	$	997		$	(91,869	)	$	—	$	775,508
Conversion of restricted stock units to common stock (net of 88,651 shares of treasury stock purchased)	149,362		—		—			—		—			(1,516		)	—		(1,516		)
Settlement of stock appreciation rights in common stock (net of 28,036 shares of treasury stock purchased)	63,549		—		(95		)	—		—			(485		)	—		(580		)
Convertible debt extinguishment impact (net of tax impact of $2,267)	—		—		(23,634		)	—		—			—			—		(23,634		)
Treasury stock purchases	(1,296,243	)	—		—			—		—			(17,220		)	—		(17,220		)
Stock compensation expense	—		—		2,203			—		—			—			—		2,203
Other comprehensive loss	—		—		—			—		(1,823		)	—			—		(1,823		)
Net income	—		—					33,850		—			—			—		33,850
BALANCE, June 30, 2018	37,258,737		$	5	$	495,532		$	383,167	$	(826	)	$	(111,090	)	$	—	$	766,788
Conversion of restricted stock units to common stock (net of 1,805 shares of treasury stock purchased)	13,301		—		—			—		—			(88		)	—		(88		)
Settlement of stock appreciation rights in common stock (net of 577 shares of treasury stock purchased)	27,666		—		(109		)	—		—			(325		)	—		(434		)
Convertible debt extinguishment impact (net of tax impact of $875)	—		—		(10,032		)	—		—			—			—		(10,032		)
Stock compensation expense	—		—		1,227			—		—			—			—		1,227
Other comprehensive loss	—		—		—			—		(369		)	—			—		(369		)
Net income	—		—		—			25,003		—			—			—		25,003
BALANCE, September 30, 2018	37,299,704		$	5	$	486,618		$	408,170	$	(1,195	)	$	(111,503	)	$	—	$	782,095

See notes to condensed consolidated financial statements.

RENEWABLE ENERGY GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)



	Nine months ended
	September 30, 2018			September 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	273,242		$	(62,096	)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Depreciation expense	27,080			25,585
Amortization expense of assets and liabilities, net	1,756			1,455
Gain on involuntary conversion	(4,454		)	(942		)
Accretion of convertible note discount	3,846			4,044
Amortization of marketable securities	(45		)	—
Change in fair value of contingent consideration	(13,235		)	1,998
Change in fair value of convertible debt conversion liability	—			24,158
Gain on sale of assets	(964		)	—
Gain on debt extinguishment	(2,893		)	—
Provision for doubtful accounts	224			(57		)
Impairment of long-lived assets	—			1,341
Stock compensation expense	5,224			5,019
Deferred tax expense	3,431			2,292
Other operating activities	606			35
Changes in assets and liabilities:
Accounts receivable, net	(210		)	77,534
Inventories	(6,119		)	21,683
Prepaid expenses and other assets	15,207			(27,244		)
Accounts payable	18,240			(19,544		)
Accrued expenses and other liabilities	8,360			(13,574		)
Deferred revenue	(745		)	(27,025		)
Net cash flows provided by operating activities	328,551			14,662
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for marketable securities	(52,878		)	—
Cash receipts for involuntary conversion	4,454			3,000
Transfer into restricted cash	(3,000		)	—
Cash receipts of restricted cash	—			4,000
Cash paid for purchase of property, plant and equipment	(37,916		)	(48,556		)
Cash receipts for sale of assets	1,625			—
Cash paid for acquisitions and additional interests, net of cash acquired	(4,801		)	(3,639		)
Cash paid for investments	—			(816		)
Net cash flows used in investing activities	(92,516		)	(46,011		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) on revolving line of credit	(57,646		)	38,862
Borrowings on other lines of credit	491			3,873
Repayments on other lines of credit	(1,251		)	(3,000		)
Cash received from notes payable	14,033			6,363
Cash paid on notes payable	(74,788		)	(7,874		)
Cash paid for debt issuance costs	(532		)	(892		)
Cash paid for treasury stock	(25,048		)	—
Cash paid for contingent consideration settlement	(8,745		)	(10,978		)
Cash received on partial termination of capped call options	85			—
Cash paid for conversion of restricted stock units and stock appreciation rights	(3,411		)	(1,181		)
Net cash flows provided by (used in) financing activities	(156,812		)	25,173
NET CHANGE IN CASH AND CASH EQUIVALENTS	79,223			(6,176		)
CASH AND CASH EQUIVALENTS, Beginning of period	77,627			116,210
Effect of exchange rate changes on cash	(218		)	2,208
CASH AND CASH EQUIVALENTS, End of period	$	156,632		$	112,242

(continued)

RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)



	Nine months ended
	September 30, 2018		September 30, 2017
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid for income taxes	$	612	$	238
Cash paid for interest	$	7,500	$	6,603
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Amounts included in period-end accounts payable for:
Purchases of property, plant and equipment	$	2,117	$	3,174
Debt issuance cost	$	—	$	73
Contingent consideration for acquisitions	$	482	$	—

(concluded)

See notes to condensed consolidated financial statements.

RENEWABLE ENERGY GROUP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For The Three and Nine Months Ended September 30, 2018 and 2017

(unaudited)

(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" or "REG"), 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 filed on March 9, 2018. Results for interim periods are not necessarily indicative of those to be expected for the fiscal year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and related disclosures. Actual results could differ from those estimates.

As of September 30, 2018, the Company operates a network of fourteen biorefineries, with twelve locations in North America and two locations in Europe, which includes thirteen operating biomass-based diesel production facilities with aggregate nameplate production capacity of 520 million gallons per year ("mmgy") and one fermentation facility. REG also has one feedstock processing facility. Ten of these plants are “multi-feedstock capable” which allows them to use a broad range of lower-cost feedstocks, such as inedible corn oil, used cooking oil and inedible animal fats in addition to vegetable oils, such as soybean oil and canola oil.

The biomass-based diesel industry and the Company’s business have benefited from certain federal and state incentives. The federal biodiesel mixture excise tax credit (the "BTC") was retroactively reinstated on February 9, 2018 for the fiscal year 2017, but was not reinstated for 2018 and accordingly we are currently operating without the benefit of the BTC. It is uncertain whether the BTC will be reinstated to apply to 2018. The expiration or modification of any one or more of those incentives, could adversely affect the financial results of the Company.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following accounting policies should be read in conjunction with a summary of the significant accounting policies the Company has disclosed in its Annual Report on Form 10-K for the year ended December 31, 2017.

Marketable Securities

The Company’s marketable securities are classified as available-for-sale and are reported at fair value, with unrealized gains and losses, net of tax, recorded in accumulated other comprehensive income (loss). Realized gains or losses and declines in value judged to be other-than-temporary, if any, on available-for-sale securities are reported in other income, net. The Company evaluates such investments periodically for possible other-than-temporary impairment. A decline of fair value below amortized costs of debt securities is considered an other-than-temporary impairment if the Company has the intent to sell the security or if it is more likely than not that the Company will be required to sell the security before recovery of the entire amortized cost basis. In those instances, an impairment charge equal to the difference between the fair value and the amortized

cost basis is recognized in earnings. Regardless of the Company’s intent or requirement to sell a debt security, an impairment is considered other-than-temporary if the Company does not expect to recover the entire amortized cost basis; in those instances, a credit loss equal to the difference between the present value of the cash flows expected to be collected based on credit risk and the amortized cost basis of the debt security is recognized in earnings. The Company has no current requirement or intent to sell a material portion of marketable securities as of September 30, 2018. The Company expects to recover up to (or beyond) the initial cost of investment for securities held. In computing realized gains and losses on available-for-sale securities, the Company determines cost based on amounts paid, including direct costs such as commissions to acquire the security, using the specific identification method.

Accounts Receivable

Accounts receivable are carried at invoiced amount less allowance for doubtful accounts. Management estimates the allowance for doubtful accounts based on existing economic conditions, the financial conditions of customers, and the amount and age of past due accounts. Receivables are considered past due if full payment is not received by the contractual due date.

Past due accounts are generally written off against the allowance for doubtful accounts only after reasonable collection attempts have been exhausted. For the nine months ended September 30, 2018, the Company has recognized receivables of $365,155 from the federal government and of $16,688 from customers related to the 2017 biodiesel mixture excise tax credit. Through September 30, 2018, the Company has received approximately $364,989 of the $365,155 receivable from the federal government and $16,480 from customers related to the 2017 biodiesel mixture excise tax credit.

Renewable Identification Numbers ("RINs")

When the Company produces and sells a gallon of biomass-based diesel, 1.5 to 1.7 RINs per gallon are generated. RINs are used to track compliance with the Renewable Fuel Standard ("RFS2"). RFS2 allows the Company to attach between zero and 2.5 RINs to any gallon of biomass-based diesel. As a result, a portion of the selling price for a gallon of biomass-based diesel is generally attributable to RFS2 compliance. However, RINs that the Company generates are a form of government incentive and not a result of the physical attributes of the biomass-based diesel production. Therefore, no cost is allocated to the RIN when it is generated, regardless of whether the RIN is transferred with the biomass-based diesel produced or held by the Company pending attachment to other biomass-based diesel production sales.

In addition, the Company also obtains RINs from third parties who have separated the RINs from gallons of biomass-based diesel. From time to time, the Company holds varying amounts of these separated RINs for resale. RINs obtained from third parties are initially recorded at their cost and are subsequently revalued at the lower of cost or net realizable value as of the last day of each accounting period. The resulting adjustments are reflected in costs of goods sold for the period. The value of these RINs is reflected in “Prepaid expenses and other assets” on the Condensed Consolidated Balance Sheets. 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").

Low Carbon Fuel Standard

The Company generates Low Carbon Fuel Standard ("LCFS") credits for its low carbon fuels or blendstocks when its qualified low carbon fuels are transported into an LCFS market. LCFS credits are used to track compliance with the LCFS. As a result, a portion of the selling price for a gallon of biomass-based diesel sold into an LCFS market is also attributable to LCFS compliance. However, LCFS credits that the Company generates are a form of government incentive and not a result of the physical attributes of the biomass-based diesel production. Therefore, no cost is allocated to the LCFS credit when it is generated, regardless of whether the LCFS credit is transferred with the biomass-based diesel produced or held by the Company.

In addition, the Company also obtains LCFS credits from third-party trading activities. From time to time, the Company holds varying amounts of these third-party LCFS credits for resale. LCFS credits obtained from third parties are initially recorded at their cost and are subsequently revalued at the lower of cost or net realizable value as of the last day of each accounting period, and the resulting adjustments are reflected in costs of goods sold for the period. The value of LCFS credits obtained from third parties is reflected in “Prepaid expenses and other assets” on the Condensed Consolidated Balance Sheet. The cost of goods sold related to the sale of these LCFS credits is determined using the average cost method, while market prices are determined by LCFS values, as reported by the OPIS. At September 30, 2018 and December 31, 2017, the Company held no LCFS credits purchased from third parties.

The Company records assets acquired and liabilities assumed through the exchange of non-monetary assets based on the fair value of the assets and liabilities acquired or the fair value of the consideration exchanged, whichever is more readily determinable.

Property, Plant and Equipment

Property, plant and equipment is recorded at cost less accumulated depreciation. Maintenance and repairs are expensed as incurred. Depreciation expense is computed on a straight-line method based upon estimated useful lives of the assets.

In June 2017, the Company experienced a fire at its Madison facility, resulting in the shutdown of the facility. In 2017, the Company impaired fixed assets with a total net book value of approximately $2,671 as a result of the fire in June 2017. To date, the Company received payments in the amounts of $12,454 and $9,484 to cover costs incurred for property losses and business interruption, respectively.

Convertible Debt

In June 2016, the Company issued $152,000 aggregate principal amount of 4% convertible senior notes due in 2036 (the "2036 Convertible Senior Notes"). The embedded conversion option was initially accounted for as an embedded derivative liability as the Company could not elect to issue shares of common stock upon conversion of the 2036 Convertible Senior Notes to the extent such election would result in the issuance of more than 19.99% of the common stock outstanding

immediately before the issuance of the 2036 Convertible Senior Notes unless the Company received stockholder approval for such issuance. On December 8, 2017, at the special meeting of stockholders, the Company obtained approval from its stockholders to remove the common stock issuance restrictions in connection with conversions of the 2036 Convertible Senior Notes. Accordingly, the embedded conversion option, valued at $45,933 and net of tax of $18,025, was reclassified into Additional Paid-in Capital at December 8, 2017. See "Note 8 - Debt" for a further description of the 2036 Convertible Senior Notes. During the three and nine months ended September 30, 2018, the Company used $17,583 and $59,346 to repurchase $10,000 and $34,500 principal amounts of the 2036 Convertible Senior Notes, respectively. See "Security Repurchase Programs" below.

Capped Call Transaction

In connection with the issuance of the 2019 Convertible Senior Notes, the Company entered into capped call transactions. The purchased capped call transactions were recorded as a reduction to common stock-additional paid-in-capital. Because this was considered to be an equity transaction and qualifies for the derivative scope exception, no future changes in the fair value of the capped call will be recorded by the Company. During 2016, in connection with the issuance of the 2036 Convertible Senior Notes, certain call options covered by the original capped call transaction were rebalanced and reset to cover 100% of the total number of shares of the Company's Common Stock underlying the remaining principal of the 2019 Convertible Senior Notes. The impact of these transactions, net of tax, was reflected as an addition/reduction to Additional Paid-in Capital as presented in the Consolidated Statements of Stockholders' Equity.

Security Repurchase Programs

In December 2017, the Company's board of directors approved a repurchase program of up to $75,000 of the Company's convertible notes and/or shares of common stock (the "2017 Program"). In June 2018, the Company's board of directors approved another repurchase program of up to $75,000 of the Company's convertible notes and/or shares of common stock (the "2018 Program"). Under these programs, the Company may repurchase convertible notes or shares from time to time in open market transactions, privately negotiated transactions or by other means. The timing and amount of repurchase transactions under each program are determined by the Company's management based on its evaluation of market conditions, share price, bond price, legal requirements and other factors.

The table below sets out the information regarding the activities under the 2017 Program and the 2018 Program during 2018:



	Three months ended September 30, 2018								Nine months ended September 30, 3018
	Number of shares/Principal amount in $'000		December 2017 Program		June 2018 Program		Both Programs		Number of shares/Principal amount in $'000		December 2017 Program	June 2018 Program		Both Programs
Repurchases of shares of common stock	—		$	—	$	—	$	—	1,937,844		$25,048	$	—	$25,048
2019 Senior Convertible Notes Repurchases	$	—	$	—	$	—	$	—	$	6,311	$6,689	$	—	$6,689
2036 Senior Convertible Notes Repurchases	$	10,000	$1,500		$16,083		$17,583		$	34,500	$43,263	$16,083		$59,346

Research and Development

Research and development ("R&D") costs are charged to expense as incurred. In process research and development ("IPR&D") assets acquired in connection with acquisitions are recorded on the Condensed Consolidated Balance Sheets as intangible assets.

Revenue Recognition

In the first quarter of 2018, the Company adopted Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606). Under the ASU, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company applied the five-step method outlined in the ASU to all contracts with customers and elected the modified retrospective implementation method. The Company has generally a single performance obligation in its arrangements with customers. The Company believes for most of its contracts with customers, control is transferred at a point in time, typically upon delivery to the customers. When the Company performs shipping and handling

activities after the transfer of control to the customers (e.g., when control transfers prior to delivery), they are considered as fulfillment activities, and accordingly, the costs are accrued for when the related revenue is recognized. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues. The Company generally expenses sales commissions when incurred because the amortization period would have been less than one year. The Company records these costs within selling, general and administrative expenses. The implementation of the new standard did not have any material impact on the measurement or recognition of revenue of prior periods, however additional disclosures have been added in accordance with the ASU.

The following is a description of principal activities from which we generate revenue. Revenues from contracts with customers are recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services.


•	sales of biodiesel and renewable diesel produced at our facilities, including RINs and LCFS credits;


•	resale of finished biomass-based diesel, RINs and LCFS credits acquired from third parties, and raw material feedstocks acquired from others;


•	revenues from our sale of petroleum-based heating oil and ultra-low sulfur diesel, or ULSD, acquired from third parties, along with the sale of these petroleum-based products further blended with biodiesel produced at our wholly owned facilities;


•	sales of glycerin, other co-products of the biomass-based diesel production process;


•	incentive payments from federal and state governments, including the BTC, and from the USDA Advanced Biofuel Program; and


•	other revenue:


•	collaborative research and development and other service revenue for research and development activities to continue to build out the technology platform; and


•	sales of renewable chemical products.

Disaggregation of revenue:

All revenue recognized in the income statement, except for Biomass-based diesel Government Incentives, is considered to be revenue from contracts with customers. The following table depicts the disaggregation of revenue according to product line and segment:



	Reportable Segment
Three months ended September 30, 2018	Biomass-based Diesel		Services		Renewable Chemicals		Corporate and other		Intersegment Revenues			Consolidated Total
Biomass-based diesel sales, net of BTC related amount due to customers of $0	$	635,409	$	—	$	—	$	—	$	(158,644	)	$	476,765
Petroleum diesel sales	—		—		—		44,494		—			44,494
Other biomass-based diesel revenue	46,915		—		—		—		—			46,915
Separated RIN sales	26,867		—		—		—		—			26,867
Other revenues	—		21,649		1,633		—		(21,514		)	1,768
Total revenues from contracts with customers	$	709,191	$	21,649	$	1,633	$	44,494	$	(180,158	)	$	596,809
Biomass-based diesel government incentives	944		—		—		—		—			944
Total revenues	$	710,135	$	21,649	$	1,633	$	44,494	$	(180,158	)	$	597,753



	Reportable Segment
Nine months ended September 30, 2018	Biomass-based Diesel		Services		Renewable Chemicals		Corporate and other		Intersegment Revenues			Consolidated Total
Biomass-based diesel sales, net of BTC related amount due to customers of $144,944	$	1,283,778	$	—	$	—	$	9,682	$	(200,774	)	$	1,092,686
Petroleum diesel sales	—		—		—		172,210		—			172,210
Other biomass-based diesel revenue	129,148		—		—		—		—			129,148
Separated RIN sales	100,232		—		—		—		—			100,232
Other revenues	—		74,387		4,556		—		(73,208		)	5,735
Total revenues from contracts with customers	$	1,513,158	$	74,387	$	4,556	$	181,892	$	(273,982	)	$	1,500,011
Biomass-based diesel government incentives	367,144		—		—		—		—			367,144
Total revenues	$	1,880,302	$	74,387	$	4,556	$	181,892	$	(273,982	)	$	1,867,155

Contract balances:

The following table provides information about receivables and contract liabilities from contracts with customers:



	September 30, 2018
Accounts receivable	$	92,700
Short-term contract liabilities (deferred revenue)	$	(1,472	)
Short-term contract liabilities (accounts payable)	$	(9,154	)

The Company receives payments from customers based upon contractual billing schedules; accounts receivable are recorded when the right to consideration becomes unconditional. Contract liabilities include payments received in advance of performance under the contract, and are realized with the associated revenue recognized under the contract. While in general the Company has not historically offered sales incentives to customers, the uncertainty around the reinstatement of the federal biodiesel tax credit led to the Company and other market participants acting as if the federal biodiesel tax credit would be reinstated throughout the year and entering into agreements with both customers and vendors to capture the credit when or if reinstated. The impacts of the agreements with customers are recorded as contract liabilities in accounts payable and as adjustments to Biomass-based diesel sales, whereas agreements with vendors are recorded net as adjustments to Biomass-based diesel costs of goods sold on the Condensed Consolidated Statements of Operations. Significant changes to the contract liabilities during the three and nine months ended September 30, 2018 are as follows:



	July 1, 2018		Cash receipts (Payments)			Less: Impact on Revenue		Other		September 30, 2018
Deferred revenue	$	161	$	5,772		$	4,461	$	—	$	1,472
Payables to customers related to BTC	40,935		(31,781		)	—		—		9,154
	$	41,096	$	(26,009	)	$	4,461	$	—	$	10,626



	January 1, 2018		Cash receipts (Payments)			Less: Impact on Revenue			Other			September 30, 2018
Deferred revenue	$	2,218	$	19,575		$	20,318		$	(3	)	$	1,472
Payables to customers related to BTC	—		(141,622		)	(144,944		)	5,832			9,154
	$	2,218	$	(122,047	)	$	(124,626	)	$	5,829		$	10,626

New Accounting Standards

On February 25, 2016, the FASB issued ASU 2016-02, which introduces a lessee model that brings most leases on the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in ASC 606, the FASB’s new revenue recognition standard (e.g., those related to evaluating when profit can be recognized). Furthermore, the ASU addresses other concerns related to the current leases model. The ASU is effective for annual periods beginning after December 15, 2018 and interim periods therein.

On July 19, 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, which addresses certain aspects of the new leases standard, including the rate implicit in the lease, impairment of the net investment in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain transition adjustments, among other things. The amendments have the same effective date and transition requirements as ASU 2016-02. The Company is evaluating the impact of this guidance on its consolidated financial statements.

On July 31, 2018, the FASB issued ASU 2018-11, Codification Improvements to Topic 842, Leases, which provides entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The amendments have the same effective date and transition requirements as ASU 2016-02. The Company plans to apply a modified retrospective transition approach to each applicable lease that existed at January 1, 2017 and to leases entered thereafter. In addition, the Company will take advantage of the transition package of practical expedients permitted within the new leases standard, which among other things, allows the Company to carry forward the historical lease classification. The Company also plans to elect the hindsight practical expedient to determine the reasonably certain lease term for existing leases. While lease classification will remain unchanged, hindsight will result in generally shorter accounting lease terms and useful lives of the corresponding leasehold improvements. Additionally, the Company will make an accounting policy election that will keep leases with an initial term of 12 months or less off of the balance sheet and will result in recognizing those lease payments in the Condensed Consolidated Statements of Operations on a straight-line basis over the lease term.

On August 28, 2017, the FASB issued ASU 2017-12, which amends the hedge accounting recognition and presentation requirements in ASC 815 to (1) improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with those risk management activities and (2) reduce the complexity of and simplify the application of hedge accounting by preparers. The Company is still evaluating the impact on its consolidated financial statements.

On December 22, 2017, President Donald Trump signed into law “H.R. 1”, formerly known as the “Tax Cuts and Jobs Act” (the “Tax Legislation”). The Tax Legislation, which became effective on January 1, 2018, significantly revises the U.S. tax code by, among other things, lowering the corporate income tax rate from 35% to 21%, limiting deductibility of interest expense, implementing a hybrid-territorial tax system imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries (the “transition tax”), and enacted additional international tax provisions, including a minimum tax on global intangible low-taxed income (“GILTI”) and a new base erosion anti-abuse tax (“BEAT”). The Company recorded a provisional non-cash tax benefit of $13,712 in the fourth quarter of 2017. The Company finalized its accounting for the transition tax during the quarter ended March 31, 2018, and has incorporated the impact of the other Tax Legislation provisions effective for 2018 and beyond within the financial statements.

On February 28, 2018, the FASB issued ASU 2018-03, which makes technical corrections to certain aspects of ASU 2016-16 (on recognition of financial assets and financial liabilities), including equity securities without a readily determinable fair value (discontinuation and adjustments); forward contracts and purchased options; presentation requirements for certain fair value option liabilities; fair value option liabilities denominated in a foreign currency and transition guidance for equity securities without a readily determinable fair value. For public business entities, the amendments in ASU 2018-03 are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years beginning after June 15, 2018. The Company has evaluated and determined that this guidance does not significantly impact on its consolidated financial statements.

On August 28, 2018, the FASB issued ASU 2018-13, which changes the fair value measurement disclosure requirements of ASC 820. ASU 2018-13 eliminates or modifies certain disclosure requirements of ASC 820 and requires new disclosures relating to changes in unrealized gains or losses included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the applicable reporting period. ASU 2018-13 also explicitly requires entities to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. ASU 2018-13 is effective for all entities for fiscal years beginning after December 15, 2019, including interim periods therein. The

Company is evaluating the impact of this guidance on its consolidated financial statements, but does not expect the impact to be significant.

NOTE 3 — ACQUISITIONS

Sanimax Energy, LLC

On March 15, 2016, the Company acquired fixed assets and inventory from Sanimax Energy, including the 20 mmgy nameplate capacity biomass-based diesel refinery in DeForest, Wisconsin. The Company completed its initial accounting of this business combination as the valuation of the real and personal property was finalized as of September 30, 2016.

The following table summarizes the consideration paid for the acquisition from Sanimax Energy:



	March 15, 2016
Consideration at fair value for acquisition from Sanimax:
Cash	$	12,541
Common stock	4,050
Contingent consideration	4,500
Total	$	21,091

The fair value of the 500,000 shares of Common Stock issued was determined using the closing market price of the Company's common shares at the date of acquisition.

REG Madison may pay contingent consideration of up to $5,000 ("Earnout Payments") over a period of seven years after the acquisition, subject to achievement of certain milestones related to the biomass-based diesel gallons produced and sold by REG Madison. The Earnout Payments are payable in cash and cannot exceed $1,700 in any one year period beginning March 15, 2016 through 2023 and up to $5,000 in aggregate. As of September 30, 2018, the Company has recorded a contingent liability of $2,046, approximately $1,787 of which has been classified as current on the Condensed Consolidated Balance Sheets.

The following table summarizes the fair values of the assets acquired at the acquisition date:



	March 15, 2016
Assets acquired from Sanimax Energy:
Inventory	$	1,591
Property, plant and equipment	19,500
Net identifiable assets acquired	$	21,091

NOTE 4 — MARKETABLE SECURITIES

The Company's investments in marketable securities are stated at fair value and are available-for-sale. The following table summarizes the Company's investments in marketable securities:



	September 30, 2018
	Maturity	Gross Amortized Cost		Total Unrealized Gains		Total Unrealized Losses			Fair Value
Commercial paper	Within one year	$	23,812	$	—	$	(16	)	$	23,796
Corporate bonds	Within one year	29,111		—		(15		)	29,096
Total		$	52,923	$	—	$	(31	)	$	52,892

NOTE 5 — INVENTORIES

Inventories consist of the following:



	September 30, 2018		December 31, 2017
Raw materials	$	62,996	$	39,975
Work in process	4,171		3,523
Finished goods	73,984		92,049
Total	$	141,151	$	135,547

NOTE 6 — OTHER ASSETS

Prepaid expense and other assets consist of the following:



	September 30, 2018		December 31, 2017
Commodity derivatives and related collateral, net	$	3,094	$	1,610
Prepaid expenses	15,411		11,733
Deposits	2,023		2,899
RIN inventory	12,676		27,028
Taxes receivable	2,654		6,356
Other	1,996		2,254
Total	$	37,854	$	51,880

RIN inventory values were adjusted in the amounts of $2,484 and $2,629 at September 30, 2018 and December 31, 2017, respectively, to reflect the lower of cost or net realizable value.

Other noncurrent assets consist of the following:



	September 30, 2018		December 31, 2017
Investments	$	12,188	$	12,250
Spare parts inventory	2,700		2,764
Catalysts	2,167		2,962
Deposits	381		381
Other	2,735		933
Total	$	20,171	$	19,290

NOTE 7— INTANGIBLE ASSETS

Intangible assets consist of the following:



	September 30, 2018
	Cost		Accumulated Amortization			Net
Raw material supply agreement	$	6,230	$	(2,749	)	$	3,481
Renewable diesel technology	8,300		(2,398		)	5,902
Ground lease	200		(152		)	48
Acquired customer relationships	4,747		(904		)	3,843
Trademarks	704		—			704
In-process research and development	15,956		(2,039		)	13,917
Total intangible assets	$	36,137	$	(8,242	)	$	27,895



	December 31, 2017
	Cost		Accumulated Amortization			Net
Raw material supply agreement	$	6,230	$	(2,408	)	$	3,822
Renewable diesel technology	8,300		(1,983		)	6,317
Ground lease	200		(141		)	59
Acquired customer relationships	2,900		(686		)	2,214
In-process research and development	15,956		(1,241		)	14,715
Total intangible assets	$	33,586	$	(6,459	)	$	27,127

The Company recorded intangible amortization expense of $600 and $1,783 for the three and nine months ended September 30, 2018, respectively, and $587 and $1,756 for the three and nine months ended September 30, 2017, respectively.

The estimated intangible asset amortization expense for the remainder of 2018 through 2023 and thereafter is as follows:



October 1, 2018 through December 31, 2018	$	685
2019	2,746
2020	2,753
2021	2,759
2022	2,753
2023	2,760
2024 and thereafter	13,439
Total	$	27,895

NOTE 8 — DEBT

The following table shows the Company’s term debt:



	September 30, 2018		December 31, 2017
4.00% Convertible Senior Notes, $117,500 face amount, due in June 2036	$	91,532	$	116,255
2.75% Convertible Senior Notes, $67,527 face amount, due in June 2019	65,734		69,859
REG Danville term loan, secured, variable interest rate of LIBOR plus 4%, due in July 2022	9,796		11,460
REG Newton term loan, secured, variable interest rate of LIBOR plus 4%, due in December 2018	5,053		8,189
REG Ralston term loan, variable interest rate of Prime Rate plus 0.5%, due in July 2025	19,177		6,183
REG Mason City term loan, fixed interest rate of 5%, due in July 2019	—		1,153
REG Grays Harbor term loan, variable interest of minimum of 3.5% or Prime Rate plus 0.25%, due in May 2022	9,394		7,882
REG Capital term loan, fixed interest rate of 3.99%, due in January 2028	7,247		7,400
Other	79		179
Total term debt before debt issuance costs	208,012		228,560
Less: Current portion of long-term debt	169,485		13,397
Less: Debt issuance costs (net of accumulated amortization of $3,813 and $3,510, respectively)	4,126		6,627
Total long-term debt	$	34,401	$	208,536

2036 Convertible Senior Notes

On June 2, 2016, the Company issued $152,000 aggregate principal amount of the 2036 Convertible Senior Notes in a private offering to qualified institutional buyers. The 2036 Convertible Senior Notes bear interest at a rate of 4.00% per year payable semi-annually in arrears on June 15 and December 15 of each year, beginning December 15, 2016. The notes will mature on June 15, 2036, unless repurchased, redeemed or converted in accordance with their terms prior to such date.

Prior to December 15, 2035, the 2036 Convertible Senior Notes will be convertible only upon satisfaction of certain conditions and during certain periods as stipulated in the indenture. On or after December 15, 2035 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the 2036 Convertible Senior Notes may convert their notes at any time. The 2036 Convertible Senior Notes may be settled in cash, the Company’s common shares or a combination of cash and the Company’s common shares, at the Company’s election. The Company may not redeem the 2036 Convertible Senior Notes prior to June 15, 2021. Holders of the 2036 Convertible Senior Notes will have the right to require the Company to repurchase for cash all or some of their notes at 100% of their principal, plus any accrued and unpaid interest on each of June 15, 2021, June 15, 2026 and June 15, 2031. Holders of the 2036 Convertible Senior Notes will have the right to require the Company to repurchase for cash all or some of their notes at 100% of their principal, plus any accrued and unpaid interest upon the occurrence of certain fundamental changes. The initial conversion rate is 92.8074 common shares per $1,000 (one thousand) principal amount of 2036 Convertible Senior Notes (equivalent to an initial conversion price of approximately $10.78 per common share).

In addition, the 2036 Convertible Senior Notes will become convertible in the subsequent quarter if the closing price of the Company’s common stock exceeds $14.01, 130% of the Convertible Senior Notes’ initial conversion price, for at least 20 trading days during the 30 consecutive trading days prior to each quarter-end date. If the 2036 Convertible Senior Notes become convertible and should the holders elect to convert, the Company’s current intent and policy is to settle the principal amount the 2036 Convertible Senior Notes in cash, with the remaining value satisfied at the Company’s option in cash, stock or a combination of cash and stock. As of September 30, 2018, the early conversion event was met based on the Company's stock price and as a result, the 2036 Convertible Senior Notes have been classified as a current liability on the Company's Condensed Consolidated Balance Sheets at September 30, 2018.

The net proceeds from the offering of the 2036 Convertible Senior Notes were approximately $147,118, after deducting fees and offering expenses of $4,882, which was capitalized as debt issuance costs and is being amortized through June 2036.

The Company evaluated the terms of the conversion features under the applicable accounting literature, including Derivatives and Hedging, ASC 815, and determined that a certain feature required separate accounting as a derivative. This derivative was initially recorded as a long-term liability, "Convertible Debt Conversion Liability", on the Condensed Consolidated Balance Sheets and was adjusted to reflect fair value each reporting date. The fair value of the convertible debt conversion liability at issuance was $40,145. On December 8, 2017, at the Company's Special Meeting of Stockholders, the Company obtained the approval from its stockholders to remove the common stock issuance restrictions in connection with conversions of the 2036 Convertible Senior Notes. Accordingly, on December 8, 2017, the Convertible Debt Conversion Liability was remeasured at fair value at $45,933 and was then reclassified into equity. The debt liability component of 2036 Convertible Senior Notes was determined to be $111,855 at issuance, reflecting a debt discount of $40,145. The debt discount is to be amortized through June 2036. The effective interest rate on the debt liability component was 2.45%.

REG Ralston and Subsequent Event

In April 2017, REG Ralston, LLC ("REG Ralston") entered into a construction loan agreement ("Construction Loan Agreement") with First Midwest Bank. The Construction Loan Agreement allows REG Ralston to borrow up to $20.0 million during the construction period at REG Ralston and convert it into an amortizing term debt thereafter. The loan has a maturity date of July 15, 2025. The loan requires monthly principal payments and interest to be charged using prime rate plus 0.5% per annum. The loan agreement contains various loan covenants. At September 30, 2018, the effective interest rate on the amount borrowed under this Construction Loan Agreement was 5.75% per annum.

On October 19, 2018, REG Ralston entered into an amended loan agreement with First Midwest Bank to convert the Construction Loan Agreement into a term loan ("Ralston Term Loan") for a principal amount of $19,177, due on October 19, 2025. The Ralston Term Loan will bear floating interest using a LIBOR rate plus 2.25% per annum.

REG Danville

In July 2017, REG Danville, LLC ("REG Danville") entered into an amended loan agreement ("Loan Agreement") with Fifth Third Bank. The Loan Agreement allowed REG Danville to borrow $12,500 maturing in July 2022. The loan requires monthly principal payments and bears LIBOR-based variable interest rates. The loan agreement contains various loan covenants. At September 30, 2018, the effective interest rate on the amount borrowed under this Loan Agreement was 6.13% per annum.

REG Capital

In December 2017, REG Capital, LLC ("REG Capital") entered into a mortgage refinancing loan agreement ("Mortgage Refinancing Loan Agreement") with First National Bank to refinance existing mortgages on our office buildings in Ames, IA. The outstanding principal under the Mortgage Refinancing Loan Agreement is $7,247 with a maturity date of January 3, 2028. The loan requires monthly principal payments and bears a fixed interest rate of 3.99% per annum.

Lines of Credit

The following table shows the Company's lines of credit:



	September 30, 2018		December 31, 2017
Amount outstanding under lines of credit	$	4,370	$	65,525
Maximum available to be borrowed under lines of credit	$	114,728	$	60,839

The Company's wholly-owned subsidiaries, REG Services Group, LLC and REG Marketing & Logistics Group, LLC, are borrowers under a Credit Agreement dated December 23, 2011 with the lenders party thereto (“Lenders”) and Wells Fargo Capital Finance, LLC, as the agent, (as amended, the “M&L and Services Revolver”). The maximum commitment of the Lenders under the M&L and Services Revolver to make revolving loans is $150,000, subject to an accordion feature, which allows the borrowers to request commitments for additional revolving loans in an aggregate amount not to exceed to $50,000, the making of which is subject to customary conditions, including the consent of Lenders providing such additional commitments.

The maturity date of the M&L and Services Revolver is September 30, 2021. Loans advanced under the M&L and Services Revolver bear interest based on a one-month LIBOR rate (which shall not be less than zero), plus a margin based on

Quarterly Average Excess Availability (as defined in the Revolving Credit Agreement), which may range from 1.75% per annum to 2.25% per annum.

The M&L and Services Revolver contains various loan covenants that restrict each subsidiary borrower’s ability to take certain actions, including restrictions on incurrence of indebtedness, creation of liens, mergers or consolidations, dispositions of assets, repurchase or redemption of capital stock, making certain investments, making distributions to the Company unless certain conditions are satisfied, entering into certain transactions with affiliates or changing the nature of the subsidiary’s business. In addition, the subsidiary borrowers are required to maintain a fixed charge coverage ratio of at least 1.0 to 1.0 if excess availability under the M&L and Services Revolver is less than 10% of the total $150,000 of current revolving loan commitments, or $15,000 currently. The M&L and Services Revolver is secured by the subsidiary borrowers’ membership interests and substantially all of their assets. In addition, the M&L and Services Revolver is secured by the accounts receivable and inventory of REG Albert Lea, LLC, REG Houston, LLC, REG New Boston, LLC, and REG Geismar, LLC (collectively, the "Plant Loan Parties") subject to a $40,000 limitation with respect to each of the Plant Loan Parties.

In March 2018, REG Energy Services, LLC ("REG Energy Services") amended its operating and revolving line of credit agreement with Bankers Trust Company (“Bankers Trust”) that was entered in March 2016. As amended, this operating and revolving line of credit ("the Energy Services Line of Credit") was decreased to $15,000, subject to customary borrowing base limitations and the maturity was extended to September 2018. On August 30, 2018, the Energy Services Line of Credit was terminated and all outstanding amounts thereunder were repaid.

REG Germany has a trade finance facility agreement ("Uncommitted Credit Facility Agreement") with BNP Paribas, which allows it to borrow up to $25,000 for funding the purchase of goods and services. Amounts outstanding under the Uncommitted Credit Facility Agreement bear variable interest and are payable as stipulated in the agreement. The amount that can be borrowed under the agreement can be amended, cancelled or restricted at BNP Paribas's sole discretion and therefore is not included in the maximum available to be borrowed under lines of credit above. The Uncommitted Credit Facility Agreement contains various loan covenants that require REG Germany to maintain certain financial measures. At September 30, 2018, the nominal interest rates ranged from 1.50% to 4.39% per annum.

NOTE 9 — DERIVATIVE INSTRUMENTS

The Company enters into New York Mercantile Exchange NY Harbor ULSD ("NY Harbor ULSD" or previously referred to as heating oil), CBOT Soybean Oil (previously referred to as soybean oil) and New York Mercantile Exchange Natural Gas futures, swaps and options ("commodity contract derivatives") to reduce the risk of price volatility related to anticipated purchases of feedstock raw materials and to protect cash margins from potentially adverse effects of price volatility on biomass-based diesel sales where prices are set at a future date. All of the Company’s commodity contract derivatives are designated as non-hedge derivatives and recorded at fair value on the Condensed Consolidated Balance Sheets. Unrealized gains and losses are recognized as a component of biomass-based diesel costs of goods sold reflected in current results of operations. As of September 30, 2018, the net notional volumes of NY Harbor ULSD, CBOT Soybean Oil and NYMEX Natural Gas covered under the open commodity derivative contracts were approximately 87 million gallons, 264 million pounds and 1 million million British thermal units, respectively.

The Company offsets the fair value amounts recognized for its commodity contract derivatives with cash collateral with the same counterparty under a master netting agreement. The net position is presented within prepaid and other assets in the Condensed Consolidated Balance Sheets. The following table sets forth the fair value of the Company's commodity contract derivatives and amounts that offset within the Condensed Consolidated Balance Sheets:



	September 30, 2018						December 31, 2017
	Assets			Liabilities			Assets			Liabilities
Gross amounts of derivatives recognized at fair value	$	1,017		$	9,155		$	812		$	8,001
Cash collateral	11,232			—			8,799			—
Total gross amount recognized	12,249			9,155			9,611			8,001
Gross amounts offset	(9,155		)	(9,155		)	(8,001		)	(8,001		)
Net amount reported in the condensed consolidated balance sheets	$	3,094		$	—		$	1,610		$	—

The following table sets forth the commodity contract derivatives gains and (losses) included in the Condensed Consolidated Statements of Operations:



	Location of Gain (Loss) Recognized in income	Three Months Ended September 30, 2018			Three Months Ended September 30, 2017			Nine Months Ended September 30, 2018			Nine Months Ended September 30, 2017
Commodity derivatives	Cost of goods sold – Biomass-based diesel	$	(7,527	)	$	(24,989	)	$	(22,874	)	$	(6,942	)

NOTE 10 — FAIR VALUE MEASUREMENT

The fair value hierarchy prioritizes the inputs used in measuring fair value as follows:


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


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


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

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



	As of September 30, 2018
	Total			Level 1			Level 2			Level 3
Commercial paper	$	23,796		$	—		$	23,796		$	—
Corporate bonds	29,096			—			29,096			—
Commodity contract derivatives	(8,138		)	(2,685		)	(5,453		)	—
Contingent considerations for acquisitions	(12,895		)	—			—			(12,895		)
	$	31,859		$	(2,685	)	$	47,439		$	(12,895	)



	As of December 31, 2017
	Total			Level 1			Level 2			Level 3
Commodity contract derivatives	$	(7,189	)	$	(3,742	)	$	(3,447	)	$	—
Contingent considerations for acquisitions	(34,393		)	—			—			(34,393		)
	$	(41,582	)	$	(3,742	)	$	(3,447	)	$	(34,393	)

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):



	Contingent Consideration for Acquisitions
	2018			2017
Balance at beginning of period, January 1	$	34,393		$	46,568
Change in estimates included in earnings	(1,540		)	589
Settlements	(2,813		)	(3,980		)
Balance at end of period, March 31	30,040			43,177
Change in estimates included in earnings	(7,129		)	(24		)
Settlements	(2,846		)	(3,698		)
Balance at end of period, June 30	20,065			39,455
Fair value of contingent consideration at measurement date	482			—
Change in estimates included in earnings	(4,566		)	1,433
Settlements	(3,086		)	(3,300		)
Balance at end of period, September 30	$	12,895		$	37,588

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



	As of September 30, 2018						As of December 31, 2017
	Asset (Liability) Carrying Amount			Fair Value			Asset (Liability) Carrying Amount			Fair Value
Financial liabilities:
Debt and lines of credit	$	(212,382	)	$	(517,921	)	$	(294,085	)	$	(273,983	)

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. Money market funds are included in cash and cash equivalents on the Condensed Consolidated Balance Sheets.

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

Marketable securities: The fair value of marketable securities, which include commercial papers and corporate notes/bonds is obtained using quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets in markets that are not active and inputs other than quoted prices, e.g., interest rates and yield curves.

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. Contract fair value that is determined based on quoted prices of similar contracts in over-the-counter markets is reflected in Level 2.

Contingent consideration for acquisitions: The fair value of the contingent consideration regarding REG Life Sciences, LLC ("REG Life Sciences") was determined using an expected present value technique. Expected cash flows were determined using the probability weighted-average of possible outcomes that would occur should achievement of certain milestones related to the development and commercialization of products from REG Life Sciences' technology occur. There was no observable market data available to use in valuing the contingent consideration; therefore, the Company developed its own assumptions related to the expected future delivery of product enhancements to estimate the fair value of these liabilities. An 8.0% discount rate was used to estimate the fair value of the expected payments.

The fair value of all other contingent consideration is determined using an expected present value technique. Expected cash flows are determined using the probability weighted-average of possible outcomes that would occur should the achievement of certain milestones related to the production and/or sale of biomass-based diesel at the specific production facility. A discount rate ranging from 5.8% to 12.5% is used to estimate the fair value of the expected payments.

Convertible debt conversion liability: The fair value of the convertible debt conversion liability is estimated using the Black-Scholes model incorporating the terms and conditions of the 2036 Convertible Senior Notes and considering changes in the prices of the Company's common stock, Company stock price volatility, risk-free rates and changes in market rates. The valuations are, among other things, subject to changes in the Company's credit worthiness as well as change in general market conditions. As the majority of the assumptions used in the calculations are based on market sources, the fair value of the convertible conversion liability is reflected in Level 2.

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

NOTE 11 — NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is presented in conformity with the two-class method required for participating securities. Participating securities include restricted stock units ("RSUs").

Under the two-class method, net income is reduced for distributed and undistributed dividends earned in the current period. The remaining earnings are then allocated to Common Stock and the participating securities. The Company calculates the effects of participating securities on diluted earnings per share ("EPS") using both the “if-converted or treasury stock” and "two-class" methods and discloses the method which results in a more dilutive effect. The effects of Common Stock options, warrants, stock appreciation rights and convertible notes on diluted EPS are calculated using the treasury stock method unless the effects are anti-dilutive to EPS.

For the 2036 Convertible Senior Notes, the Company’s current intent is to settle conversions using cash for the principal amount of convertible senior notes converted, with the remaining value satisfied at the Company’s option in cash, stock or a combination of cash and stock. For the 2019 Convertible Senior Notes, the Company has elected to settle the principal amount

of convertible notes converted with cash and any conversion value in excess of that amount in shares of the Company's common stock. Therefore, the dilutive effect of the convertible senior notes is limited to the conversion premium.

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, 2018	Three Months Ended September 30, 2017	Nine Months Ended September 30, 2018	Nine Months Ended September 30, 2017
Stock appreciation rights	—	600,909	—	1,307,655
2019 Convertible Senior Notes	3,045,781	5,567,112	4,225,737	5,567,112
2036 Convertible Senior Notes	7,282,194	14,106,725	9,841,639	14,106,725
Total	10,327,975	20,274,746	14,067,376	20,981,492

The following table presents the calculation of diluted net income (loss) per share:



	Three Months Ended September 30, 2018		Three Months Ended September 30, 2017			Nine Months Ended September 30, 2018		Nine Months Ended September 30, 2017
Net income (loss) attributable to the Company’s common stockholders - Basic	$	24,343	$	(11,373	)	$	266,243	$	(62,096	)
Less: effect of participating securities	—		—			—		—
Net income (loss) attributable to common stockholders - Dilutive	$	24,343	$	(11,373	)	$	266,243	$	(62,096	)
Shares:
Weighted-average shares used to compute basic net income per share	37,270,928		38,772,434			37,815,598		38,684,412
Adjustment to reflect conversion of convertible notes	7,648,408		—			4,673,989		—
Adjustment to reflect stock appreciation right conversions	584,035		—			420,941		—
Weighted-average shares used to compute diluted net income per share	45,503,371		38,772,434			42,910,528		38,684,412
Net income (loss) per share attributable to common stockholders:
Diluted	$	0.53	$	(0.29	)	$	6.20	$	(1.61	)

NOTE 12 — REPORTABLE SEGMENTS AND GEOGRAPHIC INFORMATION

The Company reports its reportable segments based on products and services provided to customers. The Company re-assesses its reportable segments on an annual basis. The Company has three reportable segments, which generally align the Company's external financial reporting segments with its internal operating segments, which are based on its internal organizational structure, operating decisions and performance assessment. The Company's reportable segments at September 30, 2018 and for the year ended December 31, 2017 are composed of Biomass-based Diesel, Services, Renewable Chemicals and Corporate and other activities. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

The Biomass-based Diesel segment processes waste vegetable oils, animal fats, virgin vegetable oils and other feedstocks into biomass-based diesel. The Biomass-based Diesel segment also includes the Company’s purchases and resale of biomass-based diesel produced by third parties. Revenue is derived from the purchases and sales of biomass-based diesel, RINs and raw material feedstocks acquired from third parties, sales of biomass-based diesel produced under toll manufacturing arrangements with third party facilities, sales of processed biomass-based diesel from Company facilities, related by-products and renewable energy government incentive payments, in the U.S. and internationally.

The Services segment offers services for managing the construction of biomass-based diesel production facilities and managing ongoing operations of third-party plants and collects fees related to the services provided. The Company does not

allocate items that are of a non-operating nature or corporate expenses to the business segments. Revenues from services provided to other segments are recorded by the Services segment at cost.

The Renewable Chemicals segment consists of research and development activities involving the production of renewable chemicals, additional advanced biofuels and other products from the Company's proprietary microbial fermentation process and the operations of a demonstration scale facility located in Okeechobee, Florida.

The Corporate and Other segment includes trading activities related to petroleum-based heating oil and diesel fuel as well as corporate activities, which consist of corporate office expenses such as compensation, benefits, occupancy and other administrative costs, including management service expenses. Corporate and Other also includes income/(expense) not associated with the reportable segments, such as corporate general and administrative expenses, shared service expenses, interest expense and interest income, all reflected on an accrual basis of accounting. In addition, Corporate and Other includes cash and other assets not associated with the reportable segments, including investments. Intersegment revenues are reported by the Services and Corporate and Other segments.

The following table represents the significant items by reportable segment:



	Three Months Ended September 30, 2018			Three Months Ended September 30, 2017			Nine Months Ended September 30, 2018			Nine Months Ended September 30, 2017
Net revenues:
Biomass-based Diesel (includes REG Germany's net sales of $44,565 and $134,321 and $35,736 and $130,761 for the three and nine months ended September 30, 2018 and 2017, respectively)	$	710,135		$	619,852		$	1,880,302		$	1,542,484
Services	21,649			24,152			74,387			67,907
Renewable Chemicals	1,633			1,514			4,556			3,344
Corporate and Other	44,494			31,134			181,892			108,273
Intersegment revenues	(180,158		)	(49,669		)	(273,982		)	(141,029		)
	$	597,753		$	626,983		$	1,867,155		$	1,580,979
Income (loss) before income taxes:
Biomass-based Diesel (includes REG Germany's income of $440 and loss of ($5,249) and ($1,704) and ($3,036) for the three and nine months ended September 30, 2018 and 2017, respectively)	$	37,923		$	(9,833	)	$	285,887		$	(16,225	)
Services	652			1,316			5,409			939
Renewable Chemicals	(6,023		)	(4,550		)	(19,798		)	(14,385		)
Corporate and Other	(6,695		)	1,579			5,230			(29,506		)
	$	25,857		$	(11,488	)	$	276,728		$	(59,177	)
Depreciation and amortization expense, net:
Biomass-based Diesel (includes REG Germany's amounts of $504 and $1,871 and $712 and $2,186, for the three and nine months ended September 30, 2018, respectively)	$	8,327		$	7,947		$	25,058		$	23,517
Services	461			301			1,147			783
Renewable Chemicals	394			439			1,183			1,207
Corporate and Other	543			517			1,448			1,533
	$	9,725		$	9,204		$	28,836		$	27,040
Cash paid for purchases of property, plant and equipment:
Biomass-based Diesel (includes REG Germany's amounts of $621 and $1,322 and $570 and $2,965, for the three and nine months ended September 30, 2018 and 2017 respectively)	$	7,403		$	14,294		$	34,453		$	43,693
Services	1,308			957			3,070			2,476
Renewable Chemicals	—			7			335			14
Corporate and Other	25			1,261			58			2,373
	$	8,736		$	16,519		$	37,916		$	48,556



	September 30, 2018			December 31, 2017
Goodwill:
Services	$	16,080		$	16,080

Assets:
Biomass-based Diesel (including REG Germany's assets of $52,890 and $55,761, respectively)	$	954,717		$	898,180
Services	61,914			55,581
Renewable Chemicals	19,266			21,168
Corporate and Other	377,604			386,590
Intersegment eliminations	(272,263		)	(355,923		)
	$	1,141,238		$	1,005,596

Geographic Information:

The following geographic data include net sales attributed to the countries based on the location of the subsidiary making the sale and long-lived assets based on physical location. Long-lived assets represent the net book value of property, plant and equipment.



	Three Months Ended September 30, 2018		Three Months Ended September 30, 2017		Nine Months Ended September 30, 2018		Nine Months Ended September 30, 2017
Net revenues:
United States	$	549,366	$	574,594	$	1,724,369	$	1,417,704
Germany	44,565		35,736		134,321		130,761
Other Foreign	3,822		16,653		8,465		32,514
Non-United States	48,387		52,389		142,786		163,275
	$	597,753	$	626,983	$	1,867,155	$	1,580,979



	September 30, 2018		December 31, 2017
Long-lived assets:
United States	$	572,947	$	566,028
Germany	19,150		20,689
Other Foreign	600		680
	$	592,697	$	587,397

NOTE 13 — 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.



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 planned capital expenditures and our ability to maintain financing for such construction; existing or proposed legislation affecting the biomass-based diesel industry, including governmental incentives and tax credits; the possible joint development of a renewable diesel plant with Phillips 66; any impact of the results from the investigation and subsequent determination by the U.S. International Trade Commission regarding trade practices by Argentinean and Indonesian companies; our utilization of forward contracting and hedging strategies to minimize feedstock and other input price risk; our operational management and facility construction services; our ability to renew existing and expired contracts at similar or more favorable terms; expected technological advances in biomass-based diesel production methods; our ability to develop and market renewable chemicals; results in respect of the strategic review of our life sciences business; statements about using acquired land to improve existing production capacity and future expansion opportunities at our Geismar facility; the market for biomass-based diesel, including the factors that affect such market and our operating results and seasonal fluctuations in demand, and potential biomass-based diesel consumers; our ability to further develop our financial, managerial and other internal controls and reporting systems to accommodate future growth; the potential impact following the establishment of applicable accounting standards; the impact of recent U.S. tax legislation on our financial condition and results of operations; 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 general market conditions; anticipated cash needs and estimates regarding capital requirements and needs for additional financing; and challenges in our business and the biomass-based diesel 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 quarterly period ended September 30, 2018. 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 focus on providing cleaner, lower carbon products and services. We are North America's largest producer of advanced biofuels. We utilize a nationwide production, distribution and logistics system as part of an integrated value chain model designed to convert natural fats, oils and greases into advanced biofuels. We are also engaged in research and development efforts focused on the conversion of diverse feedstocks into various renewable chemicals, advanced biofuels and other products. We believe our fully integrated approach, which includes acquiring feedstock, managing biorefinery facility construction and upgrades, operating biorefineries, and distributing fuel through a network of terminals, positions us to serve the market for biomass-based diesel, other advanced biofuels and other products and services.

We own and operate a network of 14 biorefineries. Twelve biorefineries are located in the United States and two in Germany. Twelve biorefineries produce traditional biodiesel, one produces renewable diesel (“RD”), and one is a microbial fermentation facility used in connection with our development of renewable chemicals. Our thirteen operational biomass-based diesel production facilities have an aggregate nameplate production capacity of 520 million gallons per year ("mmgy").

We are a lower cost, lower carbon biomass-based diesel producer. We primarily produce our biomass-based diesel from a wide variety of lower cost, lower carbon feedstocks, including inedible corn oil, used cooking oil and inedible animal fat. We also produce biomass-based diesel from virgin vegetable oils, such as soybean oil or canola oil, which tend to be higher in price. We believe our ability to process a wide variety of feedstocks provides us with a cost advantage over many biomass-based diesel producers, particularly those that rely primarily on higher cost virgin vegetable oils.

We also sell petroleum-based heating oil and diesel fuel, which enables us to offer additional biofuel blends, while expanding our customer base. We sell heating oil and ultra-low sulfur diesel, or ULSD, at terminals throughout the northeastern U.S., as well as BioHeat® blended heating fuel at one of these terminal locations. In 2015, we expanded our sales of biofuel blends to Midwest terminal locations and look to potentially expand in other areas across North America.

In May 2018, we launched our latest innovation in diesel fuel, REG Ultra Clean^TM, to our customers in California and other locations. REG Ultra Clean Diesel, among the lowest emission diesel fuels on the market today, is a patent-pending fuel made of a proprietary blend of renewable diesel and biodiesel. In October 2018, we announced that we are collaborating with Phillips 66 on the possible construction of a large-scale renewable diesel plant in Washington state. The plant would utilize our propriety BioSynfining® technology for the production of renewable diesel fuel. Planned feedstocks would include a mix of waste fats, oils and greases, including regionally-sourced vegetable oils, animal fats and used cooking oil. We have not reached a definitive agreement with Phillips 66 with respect to this potential joint development project and there is no assurance that an agreement will be reached.

Our development-stage industrial biotechnology business, which we refer to as REG Life Sciences, is developing proprietary microbial fermentation processes to produce renewable chemicals, advanced biofuels and other products. Fatty acids are one of three product areas that we are focused on, along with esters and alcohols.

During the three and nine months ended September 30, 2018, we sold 179 million and 486 million total gallons of fuel, including 11 million and 32 million gallons of biomass-based diesel that we purchased from third parties and resold, 12 million and 35 million biomass-based diesel gallons produced by REG Germany and 24 million and 82 million petroleum-based diesel gallons. During 2017, we sold 587 million gallons of fuel, which included 52 million biomass-based gallons we purchased from third parties, 38 million biomass-based diesel gallons produced by REG Germany and 83 million petroleum-based diesel gallons.

Our businesses are organized into three reportable segments – the Biomass-based Diesel segment, the Services segment and the Renewable Chemicals segment.

Biomass-based Diesel Segment

Our Biomass-based Diesel segment includes:


•	the operations of the following biomass-based diesel production refineries:


•	a 30 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;


•	a 30 mmgy nameplate biodiesel production facility located in Mason City, Iowa;


•	a 75 mmgy nameplate renewable diesel production facility located in Geismar, Louisiana;


•	a 27 mmgy nameplate biodiesel production facility located in Emden, Germany;


•	a 23 mmgy nameplate biodiesel production facility located in Oeding, Germany;


•	a 100 mmgy nameplate biodiesel production facility located in Grays Harbor, Washington; and


•	a 20 mmgy nameplate biodiesel production facility located in DeForest, Wisconsin.


•	purchases and resales of biomass-based diesel, petroleum-based diesel, RINs and LCFS credits, and raw material feedstocks acquired from third parties;


•	sales of biomass-based diesel produced under toll manufacturing arrangements with third-party facilities using our feedstocks; and


•	incentives received from federal and state programs for renewable fuels.

We derive a small portion of our revenues from the sale of co-products of the biomass-based diesel production process. In 2017 and for the nine months ended September 30, 2018, our revenues from the sale of co-products were approximately five percent of our total Biomass-based Diesel segment revenues. For the three and nine months ended September 30, 2018, revenues from the sale of petroleum-based heating oil and diesel fuel acquired from third parties, along with the sale of these items further blended with biodiesel produced at wholly owned facilities or purchased from third parties, were less than ten percent of our total revenues.

In accordance with EPA regulations, we generate 1.5 to 1.7 RINs for each gallon of biomass-based diesel we produce. RINs are used to track compliance with Renewable Fuel Standard 2, or RFS2, using the EPA moderated transaction system, or EMTS. RFS2 allows us to attach between zero and 2.5 RINs to any gallon of biomass-based diesel we sell. When we attach RINs to a sale of biomass-based diesel gallons, a portion of our selling price for a gallon of biomass-based diesel is generally attributable to RFS2 compliance; but no cost is allocated to the RINs generated by our biomass-based diesel production because RINs are a form of government incentive and not a result of the physical attributes of the biomass-based diesel production. In addition, RINs, once obtained through the production and sale of gallons of biomass-based diesel, may be separated by the acquirer and sold separately. We regularly obtain RINs from third parties for resale, and the value of these RINs is reflected in “Prepaid expenses and other assets” on our Condensed Consolidated Balance Sheets. At each balance sheet date, this RIN inventory is valued at the lower of cost or net realizable value and any 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 biomass-based diesel production, fluctuations in the value of our

RIN inventory represent fluctuations in the value of RINs we have obtained from third parties. At September 30, 2018, we had approximately 34.0 million biomass-based diesel RINs and 3.1 million advanced biofuel RINs available to be sold, as compared to 37.8 million biomass-based diesel RINs and 1.2 million advanced biofuel RINs held for sale at December 31, 2017. According to the Oil Pricing Information System ("OPIS"), the median closing price at September 30, 2018 was $0.37 and $0.32 per biomass-based diesel RIN and advanced biofuel RIN, respectively, compared to $0.79 and $0.78 at December 31, 2017, respectively, per biomass-based diesel RIN and advanced biofuel RIN. We believe that the decrease in RIN value during 2018 has been influenced by spreads and record levels of Smaller Refiner Exemptions from RIN compliance requirements for 2016 and 2017.

We generate Low Carbon Fuel Standard credits for our low carbon fuels or blendstocks when our qualified low carbon fuels are imported into states that have adopted an LCFS program. As a result, a portion of the selling price for a gallon of biomass-based diesel sold into an LCFS market is also attributable to LCFS compliance. Like RINs, LCFS credits that we generate are a form of government incentive and not a result of the physical attributes of the biomass-based diesel production. Therefore, no cost is allocated to the LCFS credit when it is generated, regardless of whether the LCFS credit is transferred with the biomass-based diesel produced or held by us. At September 30, 2018, we held for sale approximately 15,250 LCFS credits, compared to 5,700 credits at December 31, 2017. According to OPIS, the median closing price at September 30, 2018 and December 31, 2017 was $187.00 and $113.00, respectively, per California LCFS credit. The increase in LCFS prices was largely attributable to growing demand for LCFS credits.

Services Segment

Our Services segment includes:


•	biomass-based diesel facility management and operational services, whereby we provide day-to-day management and operational services to biomass-based diesel production facilities; and


•	construction management services, whereby we act as the construction management and general contractor for the construction of biomass-based diesel production facilities.

During recent years, we have utilized our construction management expertise internally to upgrade our facilities, such as our facilities located in Ralston, Albert Lea, New Boston, Mason City and Newton. In March 2018, we completed the expansion project at our Ralston facility. In June 2017, we completed the acquisition of approximately 82 acres of land at and in close proximity to our Geismar, Louisiana biorefinery. The purchase included the acquisition of land we previously leased for our Geismar operations and approximately 61 additional acres in parcels adjacent to and near the facility. We plan to improve and utilize the new acreage to support existing production capacity and future expansion opportunities using the Services segment.

Renewable Chemicals Segment

Our Renewable Chemicals segment includes:


•	research and development activities focusing on microbial fermentation to develop and produce renewable chemicals, additional advanced biofuels and other biomass-based products;


•	collaborative research and development and other service activities to continue to build out the technology platform; and


•	the operations of a demonstration scale fermentation facility located in Okeechobee, Florida.

In January 2016, ExxonMobil Research and Engineering Company entered into an agreement with REG Life Sciences to develop technology for the production of biodiesel by fermenting renewable cellulosic sugars from sources such as agricultural waste. In September 2017, we signed a phase II joint development collaboration with ExxonMobil Research and Engineering to continue to develop technology to produce biodiesel fermenting renewable cellulosic sugars from sources such as agricultural waste. In October 2016, REG Life Sciences sold and delivered its first commercial product, a specialty fatty acid. REG Life Sciences developed, produced, sold and delivered approximately one metric ton of the renewable, multi-functional chemical to Aroma Chemical Services International. Fatty acids is one of three product areas REG Life Sciences has focused on, along with esters and alcohols.

Factors Influencing Our Results of Operations

The principal factors affecting our results of operations and financial condition are the market prices for biomass-based diesel and the feedstocks used to produce biomass-based diesel, as well as governmental programs designed to create incentives or requirements for the production and use of cleaner renewable fuels.

Governmental programs favoring biomass-based diesel production and use

Biomass-based diesel has historically been more expensive to produce than petroleum-based diesel, when excluding the value of biomass-based diesel incentives and credits. The biomass-based diesel industry’s growth has largely been the result of federal and state programs that require or incentivize production and use of biomass-based diesel, which allows biomass-based diesel to be priced competitively with petroleum-based diesel.

On July 1, 2010, RFS2 was implemented, stipulating volume requirements for the amount of biomass-based diesel and other advanced biofuels that must 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 and renewable diesel production meets three categories of an Obligated Party’s annual renewable fuel required volume obligation, or RVO—biomass-based diesel, undifferentiated advanced biofuel and undifferentiated renewable fuel. The final RVO targets for the biomass-based diesel and advanced biofuels volumes for the years 2015 to 2020 as set or proposed by the EPA are as follows:



	2015	2016	2017	2018	2019	2020
Biomass-based diesel	1.73 billion gallons	1.90 billion gallons	2.00 billion gallons	2.1 billion gallons	2.1 billion gallons	2.43 billion gallons (proposed)
Total Advanced biofuels	2.88 billion RINs*	3.61 billion RINs*	4.28 billion RINs*	4.29 billion RINs*	4.88 billion RINs* (proposed)	N/A

(*ethanol equivalent gallons)

The federal biodiesel mixture excise tax credit, or the BTC, has historically provided a $1.00 refundable tax credit per gallon to the first blender of biomass-based diesel with petroleum-based diesel fuel. The BTC became effective January 1, 2005, but since January 1, 2010 it has been allowed to lapse and then been reinstated a number of times. For example, the BTC lapsed on January 1, 2014, was retroactively reinstated for 2014 on December 19, 2014 and then lapsed again on January 1, 2015. On December 18, 2015, the BTC was retrospectively reinstated for 2015 and extended for 2016. The BTC again lapsed on January 1, 2017 and was reinstated on a retroactive basis for 2017 on February 9, 2018. It is not currently in effect for 2018.

As a result of this history of retroactive reinstatement of the BTC, we and many other biomass-based diesel industry producers have adopted contractual arrangements with customers and vendors specifying the allocation and sharing of any retroactively reinstated incentive. The reinstatement of the 2017 BTC resulted in a $205 million net benefit to our Adjusted EBITDA for the year ended December 31, 2017, with another $11 million related to products delivered and sales recognized in the first quarter of 2018. It is uncertain whether the BTC will be reinstated for 2018 and beyond and if reinstated, whether it would be reinstated retroactively or on the same terms. The modification or failure to reinstate the BTC could have a material adverse effect on our financial results.

Biomass-based diesel and feedstock price fluctuations

Our operating results generally reflect the relationship between the price of biomass-based diesel, including credits and incentives, and the price of feedstocks used to produce biomass-based diesel.

Biomass-based diesel is a cleaner 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. Biomass-based diesel prices have historically been heavily influenced by petroleum-based diesel fuel prices. Accordingly, biomass-based diesel prices have generally been impacted by the same factors that affect petroleum prices, such as crude oil supply and demand balance, worldwide economic conditions, wars and other political events, OPEC production quotas, changes in refining capacity and natural disasters.

Regulatory and legislative factors also influence the price of biomass-based diesel. Biomass-based diesel RIN pricing, a value component that was introduced via RFS2 in July 2010, has had a significant impact on biomass-based diesel pricing. The following table shows for 2015, 2016, 2017 and the first nine months of 2018 the high and low average monthly contributory value of RINs, as reported by OPIS, to the average B100 spot price of a gallon of biodiesel, as reported by The Jacobsen, in terms of dollars per gallon.

At the beginning of 2018, the value of RINs, as reported by OPIS, to the average B100 spot price of a gallon of biodiesel was $1.22 per gallon. The value of RINs to the average B100 spot price of a gallon of biodiesel was $0.53 per gallon at the end of September 2018. It reached a high of $1.36 per gallon of biodiesel in February 2018 and a low of $0.50 per gallon in September 2018. The RIN market was largely operating as expected as lower feedstock prices increased the spread between feedstocks and fuels and RINs came down in value. We believe that the decrease in RIN value during the third quarter of 2018 was influenced by record levels of Smaller Refiner Exemptions from RIN compliance requirements for 2016 and 2017. The decrease in the value of RINs held in inventory resulted in a $7.2 million write-down to lower of cost or net realizable value for the first nine months of 2018. We enter into forward contracts to sell RINs and we use risk management position limits to manage RIN exposure.

During 2017, feedstock expense accounted for 80% of our production cost, while methanol and chemical catalysts expense accounted for 3% and 4% of our costs of goods sold, respectively.

Feedstocks for biomass-based diesel production, such as inedible oil, used cooking oil, animal fat, canola oil and soybean oil are commodities and market prices for them will be affected by a wide range of factors unrelated to the price of biomass-based diesel and petroleum-based diesel fuels. There are a number of factors that influence the supply and price our feedstocks, such as the following: biomass-based diesel demand; export demand; government policies and incentives; weather conditions; ethanol production; cooking habits and eating habits; number of restaurants near collection facilities; hog/beef/poultry slaughter kills; palm oil supply; soybean meal demand and/or production, and crop production in the U.S. and South America, among others.

During 2017, 73% of our feedstocks were comprised of inedible corn oil, used cooking oil and inedible animal fats with the remainder coming from virgin vegetable oil.

The graph below illustrates the spread between the cost of producing one gallon of biodiesel made from soybean oil to the cost of producing one gallon of biodiesel made from a lower-cost feedstock for the period January 2016 to September 30, 2018. 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.


(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).


(4)	Soybean oil (crude) prices are based on the monthly average of the daily closing sale price of the nearby soybean oil contract as reported by CBOT (based on 7.5 pounds per gallon).

Our results of operations generally will benefit when the spread between biomass-based diesel prices and feedstock prices widens and will be harmed when this spread narrows. The following graph shows feedstock cost data for choice white grease and soybean oil on a per gallon basis compared to the per gallon sale price data for biodiesel, and the spread between biodiesel and each of soybean oil and choice white grease, from January 2016 to September 30, 2018.


(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.

During the first nine months of 2018, NY Harbor ULSD prices ranged from low of $1.84 per gallon in February to a high of $2.35 per gallon in September with the average price for the third quarter of $2.18 per gallon, up three cents from the second quarter average of $2.15 per gallon. Energy prices were steady in July, following a steady June, and sharply increased in late August with further increase in late September. Supply concerns from geopolitical actions drove energy prices upward. U.S. biodiesel prices followed the ULSD trend during the third quarter with OPIS Chicago B100 prices beginning the quarter at $2.89, rising to $2.95 in late August and finishing September at $3.08 per gallon.

Animal fat and vegetable oil production have both increased year over year, which contributed to lower feedstock prices during the third quarter of 2018. Soybean oil prices ranged from a high of $0.29 per pound in July 2018 to a low of $0.27 per pound in September 2018 with an average price for the quarter of $0.28 per pound. Soybean oil prices trended lower due to higher soybean crush rates, falling palm oil prices and China's impending tariffs on soybean imports. Strong consumer demand for meats and increasing industry capacity has continued to lead to expansions in the U.S. hog and cattle markets. Both hog and cattle slaughter numbers in the first nine months of 2018 were higher year over year.

In March 2017, the National Biodiesel Fair Trade Coalition ("Coalition") filed an antidumping and countervailing duty petition with the U.S. Department of Commerce and the U.S. International Trade Commission ("USITC"), arguing that Argentinean and Indonesian companies were violating trade laws by flooding the U.S. market with dumped and subsidized biodiesel. The Coalition comprises of the National Biodiesel Board and U.S. biodiesel producers. In May 2017, the USITC agreed to proceed with an investigation regarding this matter. In relation to this antidumping and countervailing duty petition, the Coalition filed a new allegation in July 2017 that "critical circumstances" exist with respect to imports of biodiesel from Argentina, which would allow for the imposition of duties on imports that enter the U.S. prior to preliminary determinations of subsidization and dumping. The Coalition found that imports of biodiesel from Argentina had jumped 144.5% since the March 2017 petition was filed. In December 2017, the USITC voted 4-0 affirming countervailing duty rates of 34% to 72%. The Department of Commerce issued a determination effective March 1, 2018 affirming the agency’s earlier preliminary determination that Argentina and Indonesia had dumped biodiesel imports into the U.S. Final anti-dumping rates were set at 60% to 267%. In April 2018, the USITC voted 4-0 affirming the Coalition's assertions that the industry has suffered as a result of unfairly dumped imports. The Department of Commerce issued final orders in April 2018.

Risk Management

The profitability of producing biomass-based diesel largely depends on the spread between prices for feedstocks and biomass-based diesel, including incentives, each of which is subject to fluctuations due to market factors and each of which is not significantly correlated. Adverse price movements for these commodities directly affect our operating results. We attempt to protect cash margins for our own production and our third-party trading activity by entering into risk management contracts that mitigate the impact on our margins from price volatility in feedstocks and biomass-based diesel. We create offsetting positions by using a combination of forward fixed-price physical purchases and sales contracts on feedstock and biomass-based diesel, including risk management futures contracts, swaps and options primarily on the New York Mercantile Exchange NY Harbor ULSD and CBOT 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 in addition to our internal research and analysis.

Inedible corn oil, used cooking oil, inedible animal fat, canola oil and soybean oil were the primary feedstocks we used to produce biomass-based diesel in 2017 and the first nine months of 2018. 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 these 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 prices for inedible corn oil, used cooking oil and inedible animal fat have involved entering into futures contracts, swaps or options on other commodity products, such as CBOT Soybean Oil and New York Mercantile Exchange NY Harbor ULSD. 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 biomass-based diesel production in a number of ways, including, where available, through long-term supply contracts. The purchase price for soybean oil under these contracts may be indexed to prevailing 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 feedstock requirements generally for varying periods up to one year.

Our ability to mitigate our risk of falling biomass-based diesel prices is limited. We have entered into forward contracts to supply biomass-based diesel. However, pricing under these forward sales contracts generally has been indexed to prevailing market prices, as fixed price contracts for long periods on acceptable terms have generally not been available. There is no established market for biomass-based diesel futures in the United States. Our efforts to hedge against falling biomass-based diesel prices generally involve entering into futures contracts, swaps and options on other commodity products, such as diesel fuel and New York Mercantile Exchange NY Harbor ULSD. However, price movements on these products are not highly correlated to price movements of biomass-based diesel.

We generate 1.5 to 1.7 biomass-based diesel RINs for each gallon of biomass-based diesel we produce and sell. We also obtain RINs from third-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 exposure.

As a result of our strategy, we frequently have gains or losses on derivative financial instruments that are conversely offset by losses or gains on forward fixed-price physical contracts on feedstocks and biomass-based diesel 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 but the purchase or sale of feedstocks or biomass-based diesel has not yet occurred resulting in the offsetting gain or loss that will be recognized in a later accounting period.

We recorded risk management losses of $7.5 million and $22.9 million from our derivative financial instrument activity for the three and nine months ended September 30, 2018, respectively, compared to losses of $25.0 million and $6.9 million for the three and nine months ended September 30, 2017, respectively. Changes in the value of these futures, swaps or options instruments are recognized in current income or loss.

Seasonality

Our operating results are influenced by seasonal fluctuations in the demand for biodiesel. Our biodiesel sales tend to decrease during the winter season due to reduced blending concentrations 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 biodiesel. In addition, most of our production facilities are located in colder Midwestern states in proximity to feedstock origination, and our costs of shipping can increase as more biodiesel is transported to warmer climate states during winter. To mitigate some of these seasonal fluctuations, we have upgraded our Newton and Danville biorefineries to produce distilled biodiesel from low-cost feedstocks, which has improved cold-weather performance.

RIN prices may also be subject to seasonal fluctuations. The RIN is dated for the calendar year in which it is generated, commonly referred to as the RIN vintage. Since 20% of the annual RVO of an Obligated Party (as defined under the RFS2) 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. See chart below for comparison between actual RIN generation and RVO level for biomass-based diesel as set by the EPA.



Year	RIN Generation (D4 Biomass-based Diesel)	Finalized RVO level for D4 Biomass-based Diesel
2016	2.60 billion gallons	1.90 billion gallons
2017	2.5 billion gallons	2.00 billion gallons
YTD Q3-2018	1.79 billion gallons	2.10 billion gallons

Industry capacity, production and imports

Our operating results are influenced by our industry’s capacity and production, including in relation to RFS2 production requirements. Under RFS2, Obligated Parties are entitled to satisfy up to 20% of their annual requirement with prior year RINs. Biomass-based diesel production and/or imports, as reported by EMTS, were 2.60 billion gallons for 2016, 790 million gallons higher than 2015. The amount of biomass-based diesel produced and/or imported into the U.S in 2017 was 2.50 billion gallons. In the first nine months of 2018, according to EMTS data, 1.79 billion gallons of biomass-based diesel were produced and/or imported into the U.S., compared to the equivalent 1.13 billion gallons over the same period in 2017.

The amount of imported biodiesel gallons qualifying under RFS2 decreased from 692.9 million gallons in 2016 to approximately 576.3 million gallons in 2017, based on the information from the Energy Information Administration. Imported gallons will likely make up less of a percentage of the RVO in 2018 as a result of the anti-dumping and countervailing duty trade case mentioned previously.

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 have disclosed under the heading “Critical Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, 2017 the critical accounting policies which materially affect our financial statements. There have been no material changes from the critical accounting policies previously disclosed other than those noted below. You should carefully consider the critical accounting policies set forth in our Annual Report on Form 10-K along with information described below.

Income Taxes

The Company’s income tax provision, deferred income tax assets and liabilities, and liabilities for uncertain tax benefits represent the company’s best estimate of current and future income taxes to be paid. The annual tax rate is based on income tax

laws, statutory tax rates, taxable income levels and tax planning opportunities available in various jurisdictions where the company operates. These tax laws are complex and require significant judgment to determine the consolidated provision for income taxes. Changes in tax laws, statutory tax rates, and estimates of the company’s future taxable income levels could result in actual realization of deferred taxes being materially different from amounts provided for in the consolidated financial statements.

Deferred income taxes represent temporary differences between the tax and the financial reporting basis of assets and liabilities, which will result in taxable or deductible amounts in the future. Deferred tax assets also include loss carryforwards and tax credits. These assets are regularly assessed for the likelihood of recoverability from estimated future taxable income, reversal of deferred tax liabilities and tax planning strategies. To the extent the company determines that it is more likely than not a deferred income tax asset will not be realized, a valuation allowance is established. The recoverability analysis of the deferred income tax assets and the related valuation allowances requires significant judgment and relies on estimates.

In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which allows for the recording of provisional amounts during a measurement period not to extend beyond one year of the enactment date. Although the Tax Legislation was passed late in the fourth quarter of 2017, we consider the accounting for the transition tax to be final, along with the impact of the reduction in the corporate tax rate and the accounting for the global intangible low-taxed income (“GILTI”) and base erosion anti-abuse tax (“BEAT”). As a result, the provisional tax benefit of $13.7 million recorded in the fourth quarter of 2017 has not changed.

The indefinite reinvestment in the earnings of non-US subsidiaries assertion is determined by management’s judgment about and intentions concerning future investment in operations. Management’s judgment that the Company is no longer indefinitely reinvested in the undistributed earnings of non-US subsidiaries at December 31, 2017 has been finalized. The assertion regarding undistributed non-US earnings does not have a material impact on the company’s consolidated financial statements.

Results of Operations

Three and nine months ended September 30, 2018 and 2017

Set forth below is a summary of certain financial information (dollars in thousands and gallons in millions except for per gallon data) for the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017

Gallons sold	178.8			151.5			486.0			433.9
Average biomass-based diesel price per gallon (BTC net benefit adjusted ASP of $3.03 and $3.10 for the three and nine months ended September 30, 2018)	$	3.03		$	3.21		$	3.62		$	3.01

Revenues	$	597,753		$	626,983		$	1,867,155		$	1,580,979
Cost of goods sold	546,339			612,188			1,508,552			1,517,447
Gross profit	51,414			14,795			358,603			63,532
Selling, general and administrative expenses	23,155			25,880			79,321			71,599
Research and development expense	4,252			3,759			13,335			10,537
Impairment of property, plant and equipment	—			—			—			1,341
Income (loss) from operations	24,007			(14,844		)	265,947			(19,945		)
Other income (expenses), net	1,850			3,356			10,781			(39,232		)
Income tax expense	(854		)	115			(3,486		)	(2,919		)
Net income (loss) attributable to the Company	25,003			(11,373		)	273,242			(62,096		)
Effect of participating share-based awards	660			—			6,999			—
Net income (loss) attributable to the Company's common stockholders	$	24,343		$	(11,373	)	$	266,243		$	(62,096	)

Revenues. Our revenues decreased by $29.2 million, or 5%, for the three months ended September 30, 2018 but increased by $286.2 million in the nine months ended September 30, 2018, or 18%, as compared to the same periods ended September 30, 2017. The decrease in revenues for the third quarter was primarily due to a lower average selling price, a significant drop in revenues from sales of separated RINs, partially offset by higher gallons sold. The main driver for the increase in revenues for the nine months ended September 30, 2018 was the recognition of the 2017 BTC that was earned during 2017 yet recognized in the first quarter of 2018 when it was retroactively reinstated. Higher gallons sold and higher average selling price also contributed to the increase in revenues for the nine months ended September 30, 2018, partially offset by a significant reduction in revenues from sales of separate RINs.

Biomass-based diesel revenues including government incentives in the three and nine months ended September 30, 2018 decreased $29.2 million, or 5%, for the three months ended September 30, 2018, but increased $284.2 million, or 18%, in the nine months ended September 30, 2018 over the same periods last year. Gallons sold in the third quarter of 2018 increased by 27.3 million gallons, or 18%. Our average biomass-based diesel sales price per gallon decreased $0.18, or 6%, for the three months ended September 30, 2018, but increased $0.61, or 20%, for the nine months ended September 30, 2018. The average biomass-based diesel sales price per gallon after adjustment for the 2017 BTC decreased $0.18, or 6%, for the three months ended September 30, 2018, but increased $0.09, or 3%, for the nine months ended September 30, 2018. The decrease in adjusted average sales price contributed to a $27.3 million decrease in revenues for the three months ended September 30, 2018, while for the nine months ended September 30, 2018, the increase in adjusted average sale prices led to higher revenues of $264.7 million, when applied to the number of gallons sold in the same periods of 2017. The change in gallons sold for the three and nine months ended September 30, 2018 accounted for a revenue increase of $87.6 million and $156.8 million, after adjusting for the impact of the 2017 BTC on average sales price, for the three and nine months ended September 30, 2018, respectively. The recognition of the 2017 BTC that was earned during 2017 yet recognized in the first quarter of 2018 when it was retroactively reinstated resulted in a $338.6 million increase in biomass-based diesel government incentives revenues for the nine months ended September 30, 2018, as compared to the first nine months of 2017. Sales of separated RIN inventory were $26.9 million and $100.2 million for the three and nine months ended September 30, 2018, respectively, as compared to $120.4 million and $245.1 million for the three and nine months ended September 30, 2017, respectively.

Costs of goods sold. Our costs of goods sold decreased $65.8 million and $8.9 million, or 11% and 1%, for the three and nine months ended September 30, 2018, respectively. Costs of goods sold as a percentage of revenues were 91% and 81% for the

three and nine months ended September 30, 2018, respectively, and 98% and 96% for the three and nine months ended September 30, 2017, respectively. The decrease in cost of goods sold as a percentage of revenues during the three and nine months ended September 30, 2018 was primarily due to the recognition of the 2017 BTC in full as revenues in the first quarter of 2018 and lower feedstock costs as discussed below, partially offset by lower risk management losses for the nine months ended September 30, 2018 compared to the same period in 2017.

Average prices for lower-cost feedstocks were $0.25 per pound for both the three and nine months ended September 30, 2018, respectively, as compared to $0.30 and $0.29 per pound for the three and nine months ended September 30, 2017. Average soybean oil costs were $0.30 and $0.31 per pound for three and nine months ended September 30, 2018, respectively, as compared to $0.32 per pound for both the three and nine months ended September 30, 2017, respectively. Average canola oil costs were $0.35 per pound for both the three and nine months ended September 30, 2018, as compared to $0.35 and $0.34 per pound for the three and nine months ended September 30, 2017, respectively. We recorded risk management losses of $7.5 million and $22.9 million from our derivative financial instrument activity for the three and nine months ended September 30, 2018, respectively, compared to risk management losses of $25.0 million and $6.9 million for the three and nine months ended September 30, 2017, respectively. Costs of goods sold for separated RIN inventory sales were $9.1 million and $46.4 million for the three and nine months ended September 30, 2018, respectively, and $104.2 million and $184.7 million for the three and nine months ended September 30, 2017, respectively. We recorded a lower of cost or net realizable value write down on RINs of $0.7 million and $7.2 million in the three and nine month periods, compared to write downs of $1.0 million and $1.3 million during the three and nine months ended September 30, 2017, respectively, reflecting significantly lower RIN prices during the third quarter of 2018 and a downward trend throughout 2018.

Selling, general and administrative expenses. Our selling, general and administrative, or SG&A, expenses were $23.2 million and $79.3 million for the three and nine month periods of 2018, or 4% of total revenue in each period, and $25.9 million and $71.6 million, or 4% and 5% of total revenue, respectively, in the same periods of 2017. This represents a reduction of $2.7 million, or 11%, for the quarter ended September 30, 2018, but an increase of $7.7 million, or 11%, for the nine month period, compared to the same respective periods of last year. SG&A expenses were higher in the third quarter of 2017 due to charges for executive severance costs. The increase in the nine month period year over year was driven largely from accelerated stock compensation expenses along with higher employee related compensation, arising from the Company's strong financial performance in 2018.

Research and development expense. Our research and development expenses were $4.3 million and $13.3 million for the three and nine months ended September 30, 2018, respectively, compared to $3.8 million and $10.5 million for the three and nine months ended September 30, 2017, respectively. The majority of the research and development expenses were related to activities of the Renewable Chemicals segment, which is seeking to bring industrial biotechnology products to market and drive growth. The increase in our research and development expenses in the nine months was primarily due to employee-related costs, as well as increased costs for field trials related to our Verdesoil product.

Other income (expense), net. Other income was $1.9 million and $10.8 million for the three and nine months ended September 30, 2018, respectively, compared to other income of $3.4 million and other expense of $39.2 million for the same periods in 2017. Other income (expense) is primarily comprised of change in value of contingent consideration, gain on debt extinguishment, change in fair value of convertible debt conversion liability, gain from involuntary conversion, interest expense, interest income and other non-operating items. On December 8, 2017, at the special meeting of stockholders, the Company obtained approval from its stockholders to remove the common stock issuance restrictions in connection with conversions of the 2036 Convertible Senior Notes. Accordingly, the embedded conversion option was reclassified into Additional Paid-in Capital at December 8, 2017, resulting in no fair value adjustment on the convertible debt conversion liability in 2018. The increase in the change in value of contingent consideration was mainly related to the contingent consideration at REG Life Sciences as a result of shortened duration to the final earnout determination date and reduced commercialization probability resulting from our strategic review.

Income tax expense. We recognized an income tax expense of $0.9 million and $3.5 million for the three and nine months ended September 30, 2018, respectively, as compared to tax benefit of $0.1 million and tax expense of $2.9 million for the same periods in 2017. Our tax provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items arising in that quarter. Our effective tax rate differs from the statutory tax rate primarily due to the fact that we have a valuation allowance on our domestic deferred tax assets and most of our foreign deferred tax assets.

Effects of participating share-based awards. Effects of participating share-based awards was $0.7 million and $7.0 million for the three and nine months ended September 30, 2018, respectively, and nil for the same periods in 2017.

Non - GAAP Financial Measures:

Adjusted Net Income (Loss) and Adjusted EPS Reconciliation

The Company believes supplementing its consolidated financial statements presented in accordance with generally accepted accounting principles ("GAAP") with non- GAAP measures provides investors with useful information regarding the Company's short-term and long-term trends. Adjusted net income and adjusted diluted earnings per common share are derived from GAAP results by excluding the non-cash impacts related to the change in the estimated fair value of the convertible debt conversion liability, change in fair value of contingent considerations, impairment of assets, and stock compensation, coupled with other items identified in the table below. The Company excludes these items as the Company believes they are not indicative of its core operating results or future performance. Adjusted net income, adjusted diluted earnings per common share and other non-GAAP financial measures used and presented by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. Investors should consider non-GAAP measures in addition to, and not as a substitute for, or as superior to, financial performance measures prepared in accordance with GAAP.



(In thousands, except per share amounts)	Three Months Ended September 30, 2018			Three Months Ended September 30, 2017			Nine Months Ended September 30, 2018			Nine Months Ended September 30, 2017
Net income (loss) attributable to the Company	$	25,003		$	(11,373	)	$	273,242		$	(62,096	)
Gain on involuntary conversion	—			(942		)	(4,454		)	(942		)
Gain on sale of assets	(13		)	—			(1,003		)	—
Change in fair value of convertible debt conversion liability	—			(8,560		)	—			24,158
Change in fair value of contingent considerations	(4,566		)	1,433			(13,235		)	1,998
Gain on debt extinguishment	(788		)	—			(2,893		)	—
Loss on the Geismar lease termination	—			—			—			3,967
Other (income) expense, net	(486		)	(12		)	(2,775		)	276
Impairment of assets	—			—			—			1,341
Straight-line lease expense	(61		)	(85		)	(96		)	(202		)
Executive severance payment	—			2,420			215			2,420
Non-cash stock compensation	1,227			2,023			5,224			5,019
2017 BTC⁽¹⁾	—			—			(204,936		)	—
Adjusted net income (loss) attributable to the Company	$	20,316		$	(15,096	)	$	49,289		$	(24,061	)
Effect of participating share-based awards	536			—			1,262			—
Adjusted net income (loss) excluding 2017 BTC allocation attributable to common stockholders	$	19,780		$	(15,096	)	$	48,027		$	(24,061	)

Adjusted net income (loss) attributable to the Company	$	20,316		$	(15,096	)	$	49,289		$	(24,061	)
Allocation of 2017 BTC⁽¹⁾	—			56,505			—			152,598
Adjusted net income including 2017 BTC allocation attributable to the Company	20,316			41,409			49,289			128,537
Effect of participating share-based awards	536			1,010			1,262			2,950
Adjusted net income including 2017 BTC allocation attributable to common stockholders	$	19,780		$	40,399		$	48,027		$	125,587

Net income (loss) per share attributable to common stockholders
Diluted	$	0.53		$	(0.29	)	$	6.20		$	(1.61	)

Adjusted net income (loss) excluding 2017 BTC allocation per share attributable to common stockholders
Diluted	$	0.43		$	(0.39	)	$	1.12		$	(0.62	)

Adjusted net income including 2017 BTC allocation per share attributable to common stockholders
Diluted	$	0.43		$	1.04		$	1.12		$	3.24

⁽¹⁾ On February 9, 2018, the Biodiesel Mixture Excise Tax Credit ("BTC") was retroactively reinstated for the 2017 calendar year. The retroactive credit for 2017 resulted in a net benefit to us that was recognized in the first quarter of 2018 for GAAP purposes. Because this credit relates to the 2017 full year operating performance and results, we removed the net benefit of the 2017 BTC from our 2018 results and allocated a portion of the net benefit of the tax credit to each of the four quarters of 2017 based upon gallons sold.

Adjusted EBITDA

Earnings before interest, taxes, depreciation and amortization ("EBITDA" and adjusted EBITDA are not measures of financial performance under GAAP. We use EBITDA and EBITDA adjusted for certain additional items, identified in the table below, or Adjusted EBITDA, as a supplemental performance measure. We present EBITDA and Adjusted EBITDA because we believe they assist 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 EBITDA and Adjusted EBITDA for the periods presented, as well as a reconciliation to net income (loss):



(In thousands)	Three Months Ended September 30, 2018			Three Months Ended September 30, 2017			Nine Months Ended September 30, 2018			Nine Months Ended September 30, 2017
Net income (loss)	$	25,003		$	(11,373	)	$	273,242		$	(62,096	)
Adjustments:
Income tax expense (benefit)	854			(115		)	3,486			2,919
Interest expense	4,003			4,725			13,579			13,740
Depreciation	9,097			8,639			27,080			25,585
Amortization	318			307			936			583
EBITDA	$	39,275		$	2,183		$	318,323		$	(19,269	)
Gain on involuntary conversion	—			(942		)	(4,454		)	(942		)
Gain on sale of assets	(13		)	—			(1,003		)	—
Change in fair value of convertible debt conversion liability	—			(8,560		)	—			24,158
Change in fair value of contingent liability	(4,566		)	1,433			(13,235		)	1,998
Gain on debt extinguishment	(788		)	—			(2,893		)	—
Other (income) expense, net	(486		)	(12		)	(2,775		)	278
Impairment of assets	—			—			—			1,341
Loss on the Geismar lease termination	—			—			—			3,967
Straight-line lease expense	(61		)	(85		)	(96		)	(202		)
Executive severance	—			2,420			215			2,420
Non-cash stock compensation	1,227			2,023			5,224			5,019
2017 BTC ⁽¹⁾	—			—			(204,936		)	—
Adjusted EBITDA excluding 2017 BTC allocation	$	34,588		$	(1,540	)	$	94,370		$	18,768
Allocation of 2017 BTC ⁽¹⁾	—			56,505			—			152,598
Adjusted EBITDA	$	34,588		$	54,965		$	94,370		$	171,366

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 an alternative 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 charges 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.

Liquidity and Capital Resources

Sources of liquidity. At September 30, 2018, the total of our cash and cash equivalents and marketable securities was $209.5 million, compared to $77.6 million at December 31, 2017. At September 30, 2018, we had total assets of $1,141.2 million, compared to $1,005.6 million at December 31, 2017. At September 30, 2018, we had term debt before debt issuance costs of $208.0 million, compared to term debt of $228.6 million at December 31, 2017. Our debt is subject to various financial covenants. We were in compliance with all financial covenants associated with the borrowings as of September 30, 2018.

Our term debt (in thousands) is as follows:



	September 30, 2018		December 31, 2017
4.00% Convertible Senior Notes, $117,500 face amount, due in June 2036	$	91,532	$	116,255
2.75% Convertible Senior Notes, $67,527 face amount, due in June 2019	65,734		69,859
REG Danville term loan, secured, variable interest rate of LIBOR plus 4%, due in July 2022	9,796		11,460
REG Newton term loan, secured, variable interest rate of LIBOR plus 4%, due in December 2018	5,053		8,189
REG Mason City term loan, fixed interest rate of 5%, due in July 2019	—		1,153
REG Grays Harbor term loan, variable interest of minimum of 3.5% or Prime Rate plus 0.25%, due in May 2022	9,394		7,882
REG Capital term loan, fixed interest rate of 3.99%, due in January 2028	7,247		7,400
REG Ralston term loan, variable interest rate of Prime Rate plus 0.5%, due in July 2025	19,177		6,183
Other	79		179
Total term debt before debt issuance costs	$	208,012	$	228,560

In addition, we had revolving debt (in thousands) as follows:



	September 30, 2018		December 31, 2017
Amount outstanding under lines of credit	$	4,370	$	65,525
Maximum available to be borrowed under lines of credit	$	114,728	$	60,839

A full description of our credit facilities and other agreements related to our outstanding indebtedness is included under the heading “Liquidity and Capital Resources” in our Annual Report on Form 10-K for the year ended December 31, 2017.

At September 30, 2018, there was outstanding $65.7 million aggregate principal amount of our 2.75% Convertible Senior Notes due June 15, 2019. In accordance with the indenture governing such Notes, we have elected to settle all conversions of each $1,000 principal amount of Notes being converted on or after October 23, 2018, with $1,000 in cash and any conversion value in excess of that amount in shares of our common stock.

Cash flows. The following table presents information regarding our cash flows and cash and cash equivalents for the nine months ended September 30, 2018 and 2017 (in thousands):



	Nine Months September 30,
	2018			2017
Net cash flows provided by operating activities	$	328,551		$	14,662
Net cash flows used in investing activities	(92,516		)	(46,011		)
Net cash flows provided by (used in) financing activities	(156,812		)	25,173
Net change in cash and cash equivalents	79,223			(6,176		)
Cash and cash equivalents, end of period	$	156,632		$	112,242

In the first nine months of 2018, we generated $328.6 million of cash from operations, compared to $14.7 million of cash used in operations in the first nine months of 2017. The increase in cash from operations is largely driven by net income of $273.2 million, compared to a net loss of $62.1 million for the nine months ended September 30, 2017. The primary impact on net income for the nine months ended September 30, 2018 related to the reinstatement of the 2017 BTC. In the second and third quarters of 2018, we received approximately $381.0 million related to the reinstatement of the 2017 BTC. Of this amount received, $150.8 million was due to our vendors and customers, of which $141.6 million was paid as of September 30, 2018. The increase in net cash flows used in investing activity was primarily impacted by the investment in marketable securities of $52.9 million, compared to $0 in 2017. This increase was partially offset by a reduction in cash paid for property, plant and equipment of $37.9 million, compared to $48.6 million million for the nine months ended September 30, 2017. Financing activities were impacted primarily by net repayments on revolving lines of credit of $57.6 million for the first nine months of 2018, compared to net borrowings of $38.9 million for the same period in 2017. Additionally, financing activities for the first three quarters of 2018 included $25.0 million used to buy back shares of our common stock, $6.7 million used to buy back $6.3 million principal amount of the 2019 Convertible Senior Notes and $59.3 million used to buy back $34.5 million principal amount of the 2036 Convertible Senior Notes.

Capital expenditures. During the nine months ended September 30, 2018, our capital expenditures were $37.9 million involving various projects, the majority of which were at the Madison, Ralston, Grays Harbor and Geismar facilities. During 2017, our capital expenditures were $67.6 million involving various projects, the majority of which were upgrades to our facilities in New Boston, Madison, Seneca, Geismar, Germany and Ralston. Our budgeted capital expenditures for the remainder of 2018 are approximately $15 million, which includes the optimization project at our Newton facility as well as further upgrades to other facilities, such as Albert Lea and Emden, among others.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

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 2014 through September 30, 2018, average diesel prices based on Platts reported pricing for Group 3 (Midwest) have ranged from a high of approximately $3.21 per gallon reported in November 2014 to a low of approximately $0.85 per gallon in January 2016, with prices averaging $1.89 per gallon during this period. Over the period January 2014 to September 30, 2018, soybean oil prices (based on daily closing nearby futures prices on the Chicago Board of Trade for crude soybean oil) have ranged from a high of $0.44 per pound, or $3.32 per gallon of biodiesel, in March 2014 to a low of $0.26 per pound, or $1.95 per gallon, in September 2015 assuming 7.5 pounds of soybean oil yields one gallon of

biodiesel with closing sales prices averaging $0.33 per pound, or $2.47 per gallon. Over the period from January 2014 through September 30, 2018, animal fat prices (based on prices from The Jacobsen Missouri River, for choice white grease) have ranged from a high of $0.41 per pound in May 2014 to a low of $0.16 per pound in December 2015, with sales prices averaging $0.25 per pound during this period. Over the period from January 2014 through September 30, 2018, RIN prices (based on prices from OPIS) have ranged from a high of $1.26 in December 2016 to a low of $0.33 in September 2018, with sales prices averaging $0.77 during this period.

Adverse fluctuations in feedstock prices as compared to biomass-based diesel prices result in lower profit margins and, therefore, represent unfavorable market conditions. 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 the first nine months of 2018. 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 biomass-based diesel sales. The results of this analysis, which may differ from actual results, are as follows:



	First nine months of 2018 Volume (in millions)	Units	Hypothetical Adverse Change in Price		Impact on Annual Gross Profit (in millions)			Percentage Change in Gross Profit
Total Biodiesel	486.0	gallons	10	%	$	(148.7	)	(41.5	)%
Total Lower Cost Feedstocks	2,130.3	pounds	10	%	$	(55.7	)	(15.53	)%
Total Canola Oil	463.9	pounds	10	%	$	(16.3	)	(4.5	)%
Total Soy Oil	222.4	pounds	10	%	$	(6.9	)	(1.9	)%

We attempt to protect operating margins by entering into risk management contracts that reduce the risk of price volatility related to anticipated purchases of 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 biomass-based diesel, including risk management futures contracts, swaps and options primarily on NYMEX NY Harbor ULSD and CBOT 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% adverse change in the prices of NYMEX NY Harbor ULSD would have had a positive effect on the fair value of these instruments of $20.4 million at September 30, 2018. A 10% adverse change in the price of CBOT Soybean Oil would have had a negative effect of $7.6 million on the fair value of these instruments of at September 30, 2018. A 10% adverse change in the price of NYMEX Natural Gas would have had an immaterial impact on our gross margin at September 30, 2018.

Interest Rate Risk

Our weighted average interest rate on variable rate debt balances for the nine months ended September 30, 2018 was 5.56%. A hypothetical increase in interest rate of 10% would not have a material effect on our annual interest expenses or consolidated financial statements.

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 biomass-based diesel we produce, maintain our production facilities adequately, build new biomass-based diesel 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

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed in the Company’s reports we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer ("CEO") and the Chief Financial Officer ("CFO"), as

appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Our management, under the supervision of and with the participation of the CEO and CFO, performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15-d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act") as of the end of the period covered by this report, September 30, 2018. In connection with our evaluation of disclosure controls and procedures, we have concluded that our disclosure controls and procedures were effective as of September 30, 2018.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of September 30, 2018. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control over Financial Reporting

There have been no changes during our quarter ended September 30, 2018 in our internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) 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

Neither the Company nor any of its subsidiaries are a party to any material pending legal or governmental proceeding, nor is any of our property the subject of any material pending legal or governmental proceeding, except ordinary routine legal or governmental proceedings arising in the ordinary course of our business and incidental to our business, none of which is expected to have a material adverse impact upon our business, financial position or results of operations.

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.

RISKS RELATED TO FEDERAL AND STATE INCENTIVES

Federal and state governmental requirements and incentives for the use of biofuels could be repealed, curtailed or otherwise changed, which could have a material adverse effect on our revenues, operating margins and financial condition.

The biomass-based diesel industry relies substantially on federal programs requiring the consumption of biofuels. Biomass-based diesel has historically been more expensive to produce than petroleum-based diesel fuel, and governmental programs support a market for biomass-based diesel that might not otherwise exist.

We believe the Renewable Fuel Standard Program is the most important of these government programs in the United States. Under this program, the EPA promulgated a regulation commonly known as RFS2, which became effective on July 1, 2010 and applies through 2022. RFS2 requires consumption of biomass-based diesel fuel and advanced biofuels at specified volumes, known as renewable volume obligations ("RVOs").

Under RFS2, the EPA is required to set the biomass-based diesel and advanced biofuels RVOs annually based on a variety of considerations. Over the past several years, the EPA has set the minimum annual consumption volume for biomass-based diesel at increasing levels from 1.28 billion gallons in 2013 to 1.90 billion gallons in 2016. For 2017, the EPA set the minimum annual consumption volume at 2.00 billion gallons and has set 2.10 billion gallons as the minimum annual consumption volume for 2018 and 2019. The minimum annual consumption volume for advanced biofuels has also increased. In 2015, it was set at 2.88 billion RINs and increased to 4.29 billion RINs in 2018.

We believe that much of the increase in demand for our biomass-based diesel since July 2010 is attributable to, and accelerated by, the existence and implementation of RFS2. In addition, we believe that biomass-based diesel prices have received significant support from RFS2 since July 2010.

State requirements and incentives for the use of biofuels increase demand for and the value of our biomass-based diesel within such states, but we believe that such state requirements and incentives have not increased overall demand for biofuels in excess of RFS2 requirements. Rather, we believe state requirements and incentives influence where biomass-based diesel is consumed.

The United States Congress could repeal, curtail or otherwise change RFS2 in a manner adverse to us. Similarly, the EPA could curtail or otherwise change RFS2 in a manner adverse to us, including reducing the biomass-based diesel RVO to the statutory minimum level of 1 billion gallons. The petroleum industry has generally been opposed to RFS2 and is expected to continue to press for changes that eliminate or reduce its impact. We cannot predict what changes will be instituted or the impact, if any, of these changes to our business.

Any repeal or reduction in the RFS2 requirements or reinterpretation of RFS2 resulting in our biomass-based diesel failing to qualify as a required fuel would materially decrease the demand for and price of our biomass-based diesel, which would materially and adversely affect our revenues, operating margins and financial condition.

In November of 2017, EPA finalized RVO volumes for advanced, cellulosic, and total renewable fuel for 2018 as well as biomass-based diesel for 2019. For the first time, EPA applied the full cellulosic waiver to reduce the total advanced volume nearly holding it static compared to the 2017 volume. Also for the first time, EPA held the volume for biomass-based diesel at 2.1 billion gallons, providing no growth from 2018 to 2019. In June 2018, the EPA proposed RVOs of 2.43 billion gallons for biomass-based diesel in 2020 and 4.88 billion RINs for advanced biofuels in 2019. If the EPA reduces the advanced biofuel volume from the 2018 RVO and/or reduces the biomass-based diesel RVO for 2020 in the final rule, such changes would be expected to harm our business and profitability.

The RFS has a small refinery waiver provision that allows certain small refiners to apply for an exemption of their RVO in select years. In prior years, under prior Administrations, there were few requests and even fewer exemptions granted. Under the current Administration, the number of requests has significantly increased and the granting of waivers has also increased. To date, the EPA has granted 19 waivers for the 2016 compliance year, exempting 790 million RINs and 29 waivers for the 2017 compliance year, exempting 1.46 billion RINs. These exemptions impacted the demand for and price of RINs. Biomass-based diesel RINs prices, as reported by OPIS, started the year at $0.82 and fell to $0.36 at the end of the third quarter of 2018, in part due to these unprecedented exempted volumes. Biomass-based diesel RINs have fallen further to $0.33 on October 31, 2018. If the EPA continues this practice, it will harm demand for RINs and our profitability.

A critical state program is California's Low Carbon Fuel Standard, ("LCFS"), which is designed to reduce greenhouse gas emissions associated with transportation fuels used in California by ensuring that the fuel sold meets declining targets for such emissions. The regulation quantifies lifecycle greenhouse gas emissions by assigning a “carbon intensity” ("CI") score to each transportation fuel based on that fuel’s lifecycle assessment. Each petroleum fuel provider, generally the fuel’s producer or importer (the “Regulated Party”), is required to ensure that the overall CI score for its fuel pool meets the annual carbon intensity target for a given year. A Regulated Party’s fuel pool can include gasoline, diesel, and their blendstocks and substitutes. This obligation is tracked through credits and deficits. Fuels with a CI score lower than the annual standard earn a credit, and fuels that are higher than the standard result in a deficit. Credits can be traded. We receive LCFS credits when we sell qualified biomass-based diesel in California. The California Air Resources Board recently updated the underlying program by making changes that increase the reductions in greenhouse gas emissions from 10% below to 20% below the baseline and lengthen the timeframe from 2020 to 2030. LCFS credit prices have increased from $116 per California LCFS credit on January 2, 2018 to $187 per California LCFS credit on September 30, 2018. As a result, an increasing percentage of our revenue and profit is related to sales to California and LCFS credit values. If we are not able to continue to sell our products in California or if the California LCFS price were to materially decrease, our revenues and profits could be harmed.

Loss of or reductions in tax incentives for biomass-based diesel production or consumption may have a material adverse effect on our revenues and operating margins.

Federal and state tax incentives have historically aided the biomass-based diesel industry. Prior to the 2010 implementation of RFS2, we and other participants in the biomass-based diesel industry relied principally on tax incentives to make the price of biomass-based diesel more cost competitive with the price of petroleum-based diesel fuel to the end user.

Federal

The most significant tax incentive program has been the federal biodiesel mixture excise tax credit, referred to as the Biodiesel Tax Credit ("BTC"). Under the BTC, the entity to first blend pure biomass-based diesel with petroleum-based diesel fuel receives a $1.00-per-gallon refundable tax credit.

The BTC was established on January 1, 2005 and has lapsed and been reinstated retroactively and prospectively several times. Most recently in February 2018, the BTC was retroactively reinstated for 2017, but not reinstated for 2018. Accordingly we are currently operating without the benefit of the BTC. In the past when the BTC has lapsed, we and others in the industry have operated without any assurance that a reinstatement would cover the lapsed period retroactively. There is no assurance that the BTC will be reinstated or, if reinstated, that its application will be retroactive, prospective or both.

Unlike RFS2, the BTC has a direct effect on federal government spending and could be changed or eliminated as a result of changes in the federal budget policy. We cannot predict what action, if any, Congress may take with respect to the BTC or whether such action would apply retroactively or prospectively. If the BTC is not reinstated, demand for our biomass-based diesel and the price we are able to charge for our product may decline significantly, harming revenues and profitability.

In addition, uncertainty regarding the extension or reinstatement of the BTC has caused, and may in the future cause, fluctuations in our operating results. Historically, sales have increased shortly before the BTC lapses and then decreased shortly thereafter. For example, we believe reduced demand in the first quarters of 2014 and 2015 resulted from the lapsing of the BTC at the end of 2013 and 2014, respectively. Moreover, we believe that the lapsing of the BTC on December 31, 2016 caused an acceleration of revenues in the fourth quarter of 2016, which resulted in a decline in demand during the first quarter of 2017.

When the BTC lapsed in the past, it has been retroactively reinstated by Congress. As a result of this history of retroactive reinstatement of the BTC, we and many other biomass-based diesel industry producers have adopted contractual arrangements with customers and vendors specifying the allocation and sharing of any retroactively reinstated incentive. The 2017 BTC was retroactively reinstated on February 9, 2018, resulting in a $205 million net benefit to our Adjusted EBITDA for the year ended December 31, 2017. As of September 30, 2018, we estimate that if the BTC is reinstated on the same terms as in 2017, our net income and Adjusted EBITDA for business conducted in the third quarter of 2018 and the nine months ended September 30, 2018 would increase by approximately $70 million and $178.7 million, respectively. It is uncertain whether the BTC will be reinstated and if reinstated, whether it would be reinstated retroactively or on the same terms. The lapsing or modification of the BTC would adversely affect our financial results.

State

Several states have enacted tax incentives for the use of biodiesel and/or biomass-based diesel. For example, we derive a significant portion of our revenues from operations in the State of Illinois. Illinois has a generally applicable 6.25% sales tax, but offers an exemption from this tax for a blend of fuel that consists of 11% biodiesel (B11). State budget or other considerations could cause the modification or elimination of the tax incentive programs of Illinois and other states. The curtailment or elimination of such incentives could materially and adversely affect our revenues and profitability.

Increased industry-wide production of biomass-based diesel and co-processed renewable diesel as a result of plant expansions and existing excess production capacity, could harm our financial results.

If the volume of excess biomass-based diesel RINs exceeds the volume mandated for use under RFS2, the demand for and price of our biomass-based diesel, and biomass-based diesel RINs may be reduced, which could adversely affect our revenues and profits.

According to the National Biodiesel Board ("NBB"), as of May 6, 2016, 3.0 billion gallons per year of biodiesel production capacity in the United States was registered under the RFS2 program by NBB members. In addition to this amount, several hundred million more gallons of U.S. based biomass-based diesel production capacity was registered by non-NBB members and another 4.5 billion gallons of biomass-based diesel production was registered by foreign producers. The annual production capacity of existing plants and plants under construction far exceeds both historic consumption of biomass-based diesel in the United 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 biomass-based diesel gross margins, harming our revenues and profitability.

Increased biomass-based diesel production may result in the generation of RINs in excess of the volume of RINs mandated for consumption under RFS2. RIN prices can be expected to decrease as the calendar year progresses if the RIN market is oversupplied compared to that year’s RVO. For example, in 2015, which had a RVO for biomass-based diesel of 1.73 billion gallons, biomass-based diesel RIN prices, as reported by OPIS, trended downward when biomass-based diesel RIN generation neared the equivalent of 1.8 billion gallons, as reported by EMTS.

In addition to filling the biomass-based diesel obligation, these particular RINs may also be used to help meet the total Advanced Biofuels obligation. In the past, production of other advanced biofuel (cellulosic, sugarcane ethanol, co-processed renewable diesel, etc.) have been minimal. It appears that several petroleum refiners have started or may soon start to produce co-processed renewable diesel ("CPRD").

CPRD uses the same feedstocks we use to produce biomass-based diesel. CPRD generates an advanced biofuel RIN. CPRD may be more cost-effective to produce than biomass-based diesel, particularly biodiesel. If CPRD volumes grow, we would expect feedstock prices to increase, demand for biomass-based diesel to decrease, and D5 advanced biofuel RIN prices to decrease, each of which would harm our revenues and profitability. In the event large volumes of CPRD come to market in the U.S., it may make biodiesel production uneconomic, requiring us to cease production and shut down one or more of our biodiesel plants, which would harm our business.

Several leading biomass-based diesel companies have recently announced their intention to expand their production of renewable diesel. These include World Energy's announcement to expand its Los Angeles area biorefinery from its existing 45 mmgy to over 300 mmgy; Diamond Green Diesel, the largest U.S. producer of renewable diesel, who has announced its 400 mmgy expansion; and Neste, the largest global producer of renewable diesel, which has indicated its intention to announce by the end of the year plans with respect to a proposed 300 mmgy expansion of its Singapore facility. Recently, we announced that we are collaborating with Phillips 66 on the possible construction of a large-scale renewable diesel plant in Washington state. If and when these facilities come online, it is expected that they would increase the demand for, and price of, feedstocks, thus harming our margins. The additional supply of renewable diesel is also expected to reduce demand for biodiesel and increase the supply of D4 biomass-based diesel RINs, each of which would be expected to harm our profitability.

Changes in tax laws could materially affect our financial position, results of operations, and cash flows.

The income and non-income tax regimes we are subject to or operate under are subject to significant change. Changes in tax laws, or changes in interpretations of existing laws, could materially affect our financial position, results of operations, and cash flows. For example, changes to U.S. tax laws enacted in December 2017 may significantly impact our tax obligations and effective tax rate. In addition, many countries globally, including those in which we operate today or may operate in the future, have recently proposed or recommended changes to existing tax laws or have enacted new laws that could significantly impact our tax obligations and affect where we do business or require us to change the manner in which we operate our business.

Uncertainties in the interpretation and application of the 2017 Tax Legislation could materially affect our tax obligations and effective tax rate.

H.R. 1, formerly known as the Tax Cuts and Jobs Act (the “Tax Legislation”), was enacted on December 22, 2017, and significantly affected U.S. tax law by changing, among others, how the U.S. imposes income tax on multinational corporations. The U.S. Department of Treasury has broad authority to issue regulations and interpretative guidance that may significantly impact how we will apply the law and our results of operations in the period issued.

The Tax Legislation requires complex computations not previously provided for in U.S. tax law. As such, the application of accounting guidance for such items is currently uncertain. Further, compliance with the Tax Legislation and the accounting for such provisions require accumulation of information not previously required or regularly produced by companies. As a result, we have provided a provisional estimate on the effect of the Tax Legislation in our financial statements. Our tax obligations and effective tax rate may be materially affected by a range of factors, including additional regulatory guidance being issued by applicable taxing authorities, accounting treatment being clarified, our additional analysis on the application of the law to our business and our continuous refinement of estimates in calculating the effect of the Tax Legislation on our final analysis, which will be recorded in the period completed, and which may differ from our current provisional amounts.

RISKS RELATED TO OUR BUSINESS OPERATIONS AND THE MARKETS IN WHICH WE OPERATE

Our gross margins are dependent on the spread between biomass-based diesel prices and feedstock costs, each of which are volatile and can cause our results of operations to fluctuate substantially.

Biomass-based diesel has traditionally been marketed primarily as an additive or alternative to petroleum-based diesel fuel, and, as a result, biomass-based diesel prices have been influenced by the price of petroleum-based diesel fuel, adjusted for government incentives supporting cleaner renewable fuels, rather than biomass-based diesel production costs. If there is a lack of close correlation between production costs and biomass-based diesel prices, we may be unable to pass increased production costs on to our customers in the form of higher prices. If there is a decrease in the spread between biomass-based diesel prices and feedstock costs, whether as a result of an increase in feedstock prices or a result of a reduction in biomass-based diesel and RIN prices, our gross margins, cash flow and results of operations would be adversely affected.

Energy prices, particularly the market price for crude oil, are volatile. Excluding the impact of the BTC, the average price at which we sold our biomass-based diesel decreased from $3.21 per gallon in the third quarter of 2017 to $3.03 per gallon in the third quarter of 2018. Petroleum prices are volatile due to global factors, such as the impact of wars, political uprisings, new extraction technologies and techniques, OPEC production quotas, worldwide economic conditions, changes in refining capacity and natural disasters.

In addition, an element of the price of biomass-based diesel that we produce is the value of the associated RINs. D4 RIN prices as reported by OPIS ranged from $0.33 to $0.91 per RIN during the first nine months of 2018. RIN prices started the year at $0.82 and fell to $0.36 at the end of September 2018. The RIN market was largely operating as expected as lower feedstock prices increased the spread between feedstocks and fuels, RINs came down in value. We believe that the decrease in RIN value was also negatively influenced by the market uncertainty related to ethanol and the EPA's approval of record levels of Smaller Refiner Exemptions from RIN compliance requirements for 2016 and 2017. In 2017, RIN prices ranged from $0.79 per RIN and climbed to a high of $1.17. In previous years, there was also significant volatility in RIN prices. Reductions in RIN values may have a material adverse effect on our revenues and profits as they directly reduce the price we are able to charge for our biomass-based diesel.

A decrease in the availability or an increase in the price, of feedstocks may have a material adverse effect on our financial condition and operating results. The price and availability of feedstocks and other raw materials may be influenced by general economic, market and regulatory factors. These factors include weather conditions, farming decisions, government policies and subsidies with respect to agriculture and international trade and global supply and demand. During periods when the BTC has lapsed, biomass-based diesel producers may elect to continue purchasing feedstock and producing biomass-based diesel at negative margins under the assumption that the BTC will be retroactively reinstated, and consequently, the price of feedstocks may not decrease to a level proportionate to current operating margins. The development of alternative fuels, co-processed renewable diesel and renewable chemicals as well as the growth in the volumes of renewable diesel and CPRD production also puts pressure on feedstock supply and availability to the biomass-based diesel industry. The biomass-based diesel industry may have difficulty in procuring feedstocks at economical prices if these emerging technologies that compete with biomass-based diesel for feedstocks, are more profitable or have greater governmental support than biomass-based diesel.

At elevated feedstock price levels, certain feedstocks may be uneconomical to use, as we may be unable to pass feedstock cost increases on to our customers. In addition, we generally are unable to enter into forward contracts at fixed prices for some of our feedstocks, such as animal fat, because markets for these feedstocks are less developed.

Historically, the spread between biomass-based diesel 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 ("B100") as reported by The Jacobsen Publishing Company, and the price per gallon for the amount of choice white grease necessary to produce one gallon of biomass-based diesel, a common inedible animal fat used by us to make biomass-based diesel, was $1.28 in 2016, $1.20 in 2017, and $1.76, $1.31 and $1.08 in the first, second and third quarter of 2018, assuming eight pounds of choice white grease yields one gallon of biomass-based diesel. The average monthly spread for the amount of crude soybean oil required to produce one gallon of biomass-based, based on the nearby futures contract as reported on the Chicago Board of Trade, was $0.73 in 2016, $0.64 in 2017, and $0.72, $0.76 and $0.81 in the first, second and third quarters of 2018, assuming 7.5 pounds of soybean oil yields one gallon of biomass-based. For each of the three years from 2015 to 2017, approximately 85%,72% and 73%, respectively, of our annual total feedstock usage was inedible corn oil, used cooking oil or inedible animal fat, and approximately 15%, 28% and 27%, respectively, was virgin vegetable oils. When the spread between biomass-based diesel prices and feedstock prices narrows, our profitability could be harmed.

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

In an attempt to partially offset the effects of volatile feedstock costs and biomass-based diesel fuel prices, we enter into contracts that establish market positions in feedstocks, such as inedible corn oil, used cooking oil, inedible animal fats and soybean oil, along with related commodities, such as heating oil and ultra-low sulfur diesel ("ULSD"). The financial impact of such market positions depends on commodity prices at the time that we are required to perform our obligations under these contracts as well as the cumulative sum of the obligations we assume under these contracts.

Risk management activities can themselves result in losses when a position is purchased in a declining market or a position is sold in a rising market. Risk management arrangements expose us to the risk of financial loss in situations where the counterparty defaults on its contract or, in the case of exchange-traded 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. 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. Our results of operation may be negatively impacted if we are not able to manage our risk management strategy effectively.

One customer accounted for a meaningful percentage of revenues and a loss of this customer could have an adverse impact on our total revenues.

One customer, Pilot Travel Centers LLC ("Pilot"), accounted for 8%, 8% and 8% of our revenues in the first nine months of 2018, and the full years of 2017 and 2016, respectively. In the prior years, our revenues from Pilot generally did not include the RINs or LCFS credits associated with the gallons of biomass-based diesel sold to Pilot. The value of those RINs and LCFS

credits represented approximately an additional 9% and 9% of our total sales in 2017 and 2016, respectively, based on the OPIS average RIN and LCFS price for these periods. In the event we lose Pilot as a customer or Pilot significantly reduces the volume of biomass-based diesel bought from us, it could be difficult to replace the lost revenues from biomass-based diesel and RINs, and our profitability and cash flow could be materially harmed. We do not have a long term contract with Pilot that ensures a continuing level of business from Pilot.

Our facilities and our customers' facilities are subject to risks associated with fire, explosions, leaks, and other natural disasters which may disrupt our business and increase costs and liabilities.

Because biomass-based diesel and some of its input and output are combustible and/or 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. For example, we experienced fires at our Geismar facility in April 2015 and again in September 2015 and a fire at our Madison facility in June 2017. As a result of these fires, the affected facilities were shut down for lengthy periods while repairs and upgrades were completed.

A majority of our facilities are also located in the Midwest, which is subject to tornado activity. REG Life Sciences' research and development center is in South San Francisco, California, which is subject to earthquakes. In addition, our Houston and Geismar facilities, due to their Gulf Coast locations, are vulnerable to hurricanes and flooding, which may cause plant damage, injury to employees and others and interruption of operations. For example, in August 2016 we experienced reduced operating days at our Geismar facility as a result of local area flooding and reduced operating days at our Houston facility as a result of Hurricane Harvey in August 2017. Each of our plants could incur damage from other natural disasters as well. 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, cleanup costs, liability for damages or injuries, legal expenses and reconstruction expenses, which would harm our results of operations and financial condition.

In addition, California has become one of our largest markets, served by our Geismar and Midwest facilities. Should a natural disaster or other event disrupt our ability to transport, store, and deliver products to the California market, our revenue and profits would be harmed.

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.

Our business is primarily dependent upon two similar products. As a consequence, we may not be able to adapt to changing market conditions or endure any decline in the biomass-based diesel industry.

Our revenues are currently generated almost entirely from the production and sale of biodiesel and renewable diesel, collectively referred to as biomass-based diesel. Our reliance on biomass-based diesel means that we may not be able to adapt to changing market conditions including the growth in the renewable diesel and co-processed renewable diesel or to withstand any significant decline in the size or profitability of the biomass-based diesel industry. Historically we were required to periodically idle our plants, particularly during the first quarter of the year due to insufficient demand at profitable price points. If we are required to idle our biomass-based diesel plants in the future or are unable to adapt to changing market conditions, our revenues and results of operations may be materially harmed.

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

Biodiesel and renewable diesel imports into the United States have increased significantly and compete with biodiesel and renewable diesel produced in the United States. The imported fuels may benefit from production incentives or other financial incentives in foreign countries that offset some of their production costs and enable importers to profitably sell biodiesel or renewable diesel in the United States at lower prices than United States-based biodiesel and renewable diesel producers. Under RFS2, imported biodiesel and renewable diesel is eligible and, therefore, competes to meet the volumetric requirements for biomass-based diesel and advanced biofuels. If imports continue to increase, this could make it more challenging for us to market or sell biomass-based diesel in the United States, which would have a material adverse effect on

our revenues. In January 2015, the EPA announced the approval for Argentinian biodiesel made from soybean oil to generate RINs. Imported biomass-based diesel that does not qualify under RFS2, also competes in jurisdictions where there are biomass-based diesel blending requirements.

In March 2017, the National Biodiesel Fair Trade Coalition ("Coalition") filed an antidumping and countervailing duty petition with the U.S. Department of Commerce and the U.S. International Trade Commission ("USITC"), arguing that Argentinean and Indonesian companies were violating trade laws by flooding the U.S. market with dumped and subsidized biodiesel. The Coalition comprises of the National Biodiesel Board and U.S. biodiesel producers. In May 2017, the USITC agreed to proceed with an investigation regarding this matter. In relation to this antidumping and countervailing duty petition, the Coalition filed a new allegation in July 2017 that "critical circumstances" exist with respect to imports of biodiesel from Argentina, which would allow for the imposition of duties on imports that enter the U.S. prior to preliminary determinations of subsidization and dumping. The Coalition found that imports of biodiesel from Argentina had jumped 144.5% since the March 2017 petition was filed. In December 2017, the USITC voted 4-0 affirming countervailing duty rates of 34% to 72%. The Department of Commerce issued a final determination effective March 1, 2018 affirming the agency’s earlier preliminary determination that Argentina and Indonesia had dumped biodiesel imports into the U.S. Final anti-dumping rates were set at 60% to 267%.

A final vote by the USITC was held on April 3, 2018, which concluded these proceedings. The USITC determined that a U.S. industry is materially injured by reason of imports of biodiesel from Argentina and Indonesia that the U.S. Department of Commerce has determined are sold in the United States at less than fair value. As a result of the USITC’s affirmative determinations, the U.S. Department of Commerce issued antidumping duty orders on imports of this product from Argentina and Indonesia. The USITC also made a negative finding concerning critical circumstances with regard to imports of this product from Argentina. As a result, imports of biodiesel from Argentina are not subject to retroactive antidumping duties. If the import duties are reduced or eliminated and imports are to return, our business and profitability could be harmed.

Technological advances and changes in production methods in the biomass-based diesel industry and renewable chemical industry could render our plants obsolete and adversely affect our ability to compete.

It is expected that technological advances in biomass-based diesel production methods will continue to occur and new technologies for biomass-based diesel production may develop. For example, some petroleum refiners are pursuing plans to co-process renewable feedstocks with petroleum crude oil in conventional petroleum refineries. Advances in the process of converting oils and fats into biodiesel and renewable diesel, including co-processing, could allow our competitors to produce biomass-based diesel and/or advanced biofuels more efficiently and at a substantially lower cost. In addition, we currently produce biomass-based diesel to conform to or exceed standards established by the American Society for Testing and Materials ("ASTM"). ASTM standards for biomass-based diesel and biomass-based diesel blends may be modified in response to new technologies from the industries involved with diesel fuel.

New standards or production technologies may require us to make additional capital investments in, or modify, plant operations to meet these standards. 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. 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, and our ability to sell biomass-based diesel may be harmed, negatively impacting our revenues and profitability.

Our intellectual property is integral to our business. If we are unable to protect our intellectual property, or others assert that our operations violate their intellectual property, our business could be adversely affected.

Our success depends in part upon our ability to protect and prevent others from using our intellectual property. Failure to obtain or maintain adequate intellectual property protection could adversely affect our competitive business position. We rely on a combination of intellectual property rights, including patents, copyrights, trademarks and trade secrets in the United States and in select foreign countries. Effective patent, copyright, trademark and trade secret protection may be unavailable, limited or not applied for in some countries.

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. Despite the existence of these agreements, third parties may independently develop substantially equivalent proprietary information and techniques.

It may be difficult for us to protect and enforce our intellectual property. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights. If we pursue litigation to assert our intellectual property rights, an adverse judicial decision in any legal action could limit our ability to assert our intellectual property rights, limit our ability to develop new products, limit the value of our technology or otherwise negatively impact our business, financial condition and results of operations.

A competitor could seek to enforce intellectual property claims against us. Defending intellectual property rights claims asserted against us, regardless of merit, could be time-consuming, expensive to litigate or settle, divert management resources and attention and force us to acquire intellectual property rights and licenses, which may involve substantial royalty payments. Further, a party making such a claim, if successful, could secure a judgment that requires us to pay substantial damages.

Increases in our transportation costs or disruptions in our transportation services could have a material adverse effect on our business.

Our business depends on transportation services to deliver raw materials to us and finished products to our customers. The costs of these transportation services are affected by the volatility in fuel prices or other factors. For example, from January 2015 to mid-2016 we saw huge drops in diesel prices in the U.S. However, the last half of 2016 diesel started to trend upward. These movements can be drastic and unpredictable. In addition, U.S. oil production in the Bakkens has had a significant impact on tank car availability and prices. If the production from this area increases, the demand for railcars increase and will significantly increase rail car prices. We have not been able in the past, and may not be able in the future, to pass along part or all of any of these price increases to customers. If we continue to be unable to increase our prices as 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 other personnel whereby the loss of any of these persons could adversely affect our results of operations.

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 are highly dependent upon key members of our relatively small management team and employee base that possess unique technical skills for the execution of our business plan. There can be no assurance that any individual will continue in his or her capacity for any particular period of time or that replacement personnel with comparable skills could be found. The inability to retain our management team and employee base or attract suitably qualified replacements and additional staff could adversely affect our business. The loss of 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 have not generated significant revenues from sales of renewable chemicals to date and we expect to incur additional costs and face significant challenges to develop this business.

In January 2014, we entered the market for renewable chemicals through the acquisition of a development stage company. To date, we have incurred significant costs for this business. In order to generate revenue from our renewable chemicals, there must be a willing market for the products and we must be able to produce sufficient quantities of our products, which we have not done to date and our ability to find a willing production partner. There are multiple options for how we could pursue generating revenue from our renewable chemicals business. Some options would require additional capital expenditures prior to generating revenue.

In this market, we would still be selling renewable chemicals as an alternative to chemicals currently in use, and in some cases the chemicals that we seek to replace have been used for many years. The potential customers for our renewable chemical products generally have well developed manufacturing processes and arrangements with suppliers of the chemical components

of their products and may resist changing these processes and components. These potential customers frequently impose lengthy and complex product qualification procedures on their suppliers. Factors that these potential customers consider during the product qualification process include consumer preference, manufacturing considerations such as process changes and capital, other costs associated with transitioning to alternative components, supplier operating history, regulatory issues, product liability and other factors, many of which are unknown to, or not well understood by, us. Some of our products may also require regulatory registrations and approvals from governmental authorities. The requirements for obtaining regulatory registrations and approvals may change or may take longer than we anticipate. Satisfying these processes may take many months or years.

If we are unable to convince these potential customers that our products are comparable to the chemicals that they currently use, or that the use of our products produce benefits to them, we will not be successful in these markets and our business will be adversely affected. In addition, in contrast to the tax incentives relating to biofuels, tax credits and subsidies are not currently available in the United States for consumer products or chemical companies who use renewable chemical products. We do not expect meaningful revenue from the sale of renewable chemicals in the near term.

The evaluation of strategic alternatives for our life sciences unit may adversely affect our business and may not result in any specific action or transaction.

In November 2016, we announced that our board of directors had authorized a review of strategic alternatives for our life sciences business to enhance value for stockholders. We pursued a range of activities as part of our strategic review and have determined that we will focus our efforts on finalizing joint development agreements on the most attractive projects. If we are not able to negotiate, enter into joint development agreements or find production partners, our business may be adversely affected.

We may encounter difficulties in effectively integrating the businesses we acquire, including our international businesses where we have limited operating history.

We may face significant challenges in effectively integrating entities and businesses that we acquire, and we may not realize the benefits anticipated from such acquisitions. Achieving the anticipated benefits of our acquired businesses will depend in part upon whether we can integrate our businesses in an efficient and effective manner. Our integration of acquired businesses involves a number of risks, including:


•	difficulty in integrating the operations and personnel of the acquired company;


•	difficulty in effectively integrating the acquired technologies, products or services with our current technologies, products or services;


•	demands on management related to the increase in our size after the acquisition;


•	the diversion of management’s attention from daily operations to the integration of acquired businesses and personnel;


•	failure to achieve expected synergies and costs savings;


•	difficulties in the assimilation and retention of employees;


•	difficulties in the assimilation of different cultures and practices, as well as in the assimilation of broad and geographically dispersed personnel and operations;


•	difficulties in the integration of departments, systems, including accounting systems, technologies, books and records and procedures, as well as in maintaining uniform standards and controls, including internal control over financial reporting, and related procedures and policies;


•	incurring acquisition-related costs or amortization costs for acquired intangible assets that could impact our operating results;


•	the need to fund significant working capital requirements of any acquired production facilities;

•

potential failure of the due diligence processes to identify significant problems, liabilities or other shortcomings or challenges of an 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.

Our ability to recognize the benefit of our acquisition of two biodiesel production facilities in Germany and associated business operations, or any other international operations we may invest in the future, will require the attention of management

and is subject to a number of risks. Our experience operating a biorefinery and other business operations outside of the United States is limited. In addition, while the biodiesel market in Europe benefits from regulations that encourage the use of biodiesel, these regulations are subject to political and public opinion and may be changed. In addition, expanding our operations internationally subjects us to the following risks:


•	recruiting and retaining talented and capable management and employees in foreign countries;


•	challenges caused by distance, language and cultural differences;


•	protecting and enforcing our intellectual property rights;


•	difficulties in the assimilation and retention of employees;


•	the inability to extend proprietary rights in our technology into new jurisdictions;


•	currency exchange rate fluctuations;


•	general economic and political conditions in foreign jurisdictions;


•	foreign tax consequences;


•	foreign exchange controls or changes to U.S. tax laws in respect of repatriating income earned in countries outside the United States;


•	compliance with the U.S.'s Foreign Corrupt Practices Act and other similar anti-bribery and anti-corruption regulations;


•	political, economic and social instability;


•	higher costs associated with doing business internationally; and


•	export or import regulations as well as trade and tariff restrictions.

Our failure to successfully manage and integrate our acquisitions could have an adverse effect on our operating results, ability to recognize international revenue, and our overall financial condition.

We incur significant expenses to maintain and upgrade our operating equipment and plants, and any interruption in the operation of our facilities may harm our operating performance.

We regularly incur significant expenses to maintain and upgrade our equipment and facilities. The machines and equipment that we use to produce our products are complex, have many parts and some are run on a continuous basis. We must perform routine maintenance on our equipment and will have to periodically replace a variety of parts such as motors, pumps, pipes and electrical parts. In addition, our facilities require periodic shutdowns to perform major maintenance and upgrades. These scheduled shutdowns of facilities result in decreased sales and increased costs in the periods in which a shutdown occurs and could result in unexpected operational issues in future periods as a result of changes to equipment and operational and mechanical processes made during the shutdown period.

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 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.

Risks related to the potential permanent idling of our facilities.

We perform strategic reviews of our business, which may include evaluating each of our facilities to assess their viability and strategic benefits. As part of these reviews, we may idle--whether temporarily or permanently--development or operations of certain of our facilities in order to reduce participation in markets where we determine that our returns are not acceptable.

We have three partially constructed plants, one near New Orleans, Louisiana, one in Emporia, Kansas and one in Clovis, New Mexico. We also own one non-operational plant near Atlanta, Georgia. If we decide to abandon development of these facilities or any other facilities or assets, we are likely to incur significant cash expenses, as well as substantial non-cash charges for impairment of those assets. In the fourth quarter of 2016 we recorded an impairment charge of $15.6 million, reflecting the difference between the carrying amount associated with the partially constructed Emporia facility and the estimated salvage value due to the probability that construction of this facility will not be completed in the near term. For the

same reason, in the fourth quarter of 2017, we recorded an impairment charge of $44.6 million, reflecting the difference between the carrying amount associated with the partially constructed New Orleans facility and the estimated salvage value.

We operate in a highly competitive industry and competition in our industry would increase if new participants enter the biomass-based diesel or advanced biofuels business.

We operate in a very competitive environment. The biomass-based diesel industry primarily comprises 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, Cargill, and Louis Dreyfus Commodities. In addition, petroleum refiners are increasingly entering into biomass-based diesel production. Such petroleum refiners include Neste Oil with approximately 882 million gallons of global renewable diesel production capacity in Asia and Europe, Valero Energy Corporation with its Diamond Green joint venture that operates an approximate 275 million gallon renewable diesel facility and British Petroleum, which has begun co-processing renewable diesel at its Cherry Point refinery in Washington state. These and other competitors that are divisions of larger enterprises may have greater financial resources than we do.

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

A volatile regulatory environment, lack of debt or equity investments and volatile biofuel prices and feedstock costs have likely contributed to the necessity of bankruptcy filings by biofuel producers. We may encounter new competition from buyers of distressed biodiesel properties that enter the industry at a lower cost than original plant investors or from competitors consolidating or otherwise growing. 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. Our business and prospects may be significantly and adversely affected if we are unable to similarly increase our scale.

Our business is subject to seasonal fluctuations, which are likely to cause our revenues and operating results to fluctuate.

Our operating results are influenced by seasonal fluctuations in the price of and demand for biodiesel. Seasonal fluctuations may be based on both the weather and the status of both the BTC and RVO. Demand may be higher in the quarters leading up to the expiration of the BTC as customers seek to purchase biodiesel when they can benefit from the agreed upon value sharing of the BTC with producers of biodiesel. Seasonal fluctuation also occurs in the colder months when historically there has been reduced demand for biodiesel in northern and eastern United States markets, which are the primary markets in which we currently operate.

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 eventually gels, leading to 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. 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.

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. Higher cloud point biodiesel may have other performance problems, including the possibility of particulate formation above the cloud point which may 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.

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

The biomass-based diesel industry is subject to extensive federal, state and local laws and regulations. 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, and regardless of whether current or prior operations were conducted consistent with accepted standards of practice. Many of our assets and

plants were acquired from third parties and we may incur costs to remediate property contamination caused by previous owners. 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.

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.

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 continuously evolving, requiring us to periodically update our compliance systems. In 2014, the EPA issued a final rule to establish a quality assurance program and the EPA also implemented regulations related to the generation and sale of biomass-based diesel RINs. Compliance with these or any new regulations or Obligated Party verification procedures under RFS2 could require significant expenditures to attain and maintain compliance. Any violation of these regulations by us, 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.

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 300 million gallon per year plant in Singapore, a 300 million gallon per year plant in Rotterdam, Netherlands, and two 60 million gallon per year plants in Porvoo, Finland. In the United States, Diamond Green Diesel, LLC operates a 275 million gallon per year renewable diesel plant in Norco, Louisiana. Several refiners appear to be actively considering co-processing renewable feedstocks with petroleum crude oil at their refineries, including BP at its Cherry Point refinery. 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 requirements. Co-processed renewable diesel qualifies as advanced biofuels. Under RFS2, renewable diesel and co-processed renewable diesel may receive up to 1.7 RINs per gallon, whereas biodiesel currently receives 1.5 RINs per gallon. As the value of RINs increases, this 0.2 RIN advantage makes renewable diesel more cost-effective, both as a petroleum-based diesel substitute and for meeting RFS2 requirements. If renewable diesel, including co-processed renewable diesel, proves to be more cost-effective than biodiesel, revenues from our biodiesel plants and our results of operations would be adversely impacted.

In addition, the EPA may allow other fuels to satisfy the RFS2 requirements and allow RINs to be generated upon the production of these fuels. For example, the EPA adopted regulations to amend the definition of “Home Heating Oil” under RFS2, which expands the scope of fuels eligible to generate RINs.

The biomass-based diesel industry will also face increased competition resulting from the advancement of technology by automotive, industrial and 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 biomass-based diesel industry may not be able to compete effectively with these technologies and government requirements for the use of biofuels may be discontinued.

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 compared with petroleum diesel, research on biodiesel use in automobiles is ongoing. While most heavy duty automobile manufacturers have approved blends of up to 20% biodiesel, 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 biomass-based diesel may increase the cost of food, as some feedstocks such as soybean oil used to make biomass-based diesel can also be used for food products. This debate is often referred to as “food vs. fuel.” This is

a concern to the biomass-based diesel industry because biomass-based diesel 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 biomass-based diesel. 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 biomass-based diesel production could affect public policy which could impair our ability to operate at a profit and substantially harm our revenues and operating margins.

Under the Energy Independence and Security Act of 2007 ("EISA") 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 biofuel production and use has resulted in, or could in the future result in, adverse environmental impacts, such findings could also negatively impact public perception and acceptance of biofuel as an alternative fuel, which also could result in the loss of political support. To the extent that state or federal laws are modified or public perception turns against biomass-based diesel, use requirements such as RFS2 and state tax incentives may not continue, which could materially harm our ability to operate profitably.

Nitrogen oxide emissions from biodiesel may harm its appeal as a renewable fuel and increase costs.

In some instances, biodiesel may increase emissions of nitrogen oxide as compared to petroleum-based diesel fuel, which could harm air quality. Nitrogen oxide is a contributor to ozone and smog. New technology diesel engines are believed to eliminate any such increase. Emissions from older vehicles while the fleet turns over 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 recently adopted regulations that limit the volume of biodiesel that can be used or requires an additive to reduce potential emissions. In states where such an additive is required to sell biodiesel, 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.

We are dependent upon one supplier to provide hydrogen necessary to execute our renewable diesel production process

and the loss of this supplier could disrupt our production process.

Our Geismar facility relies on one supplier to provide hydrogen necessary to execute the production process. Any disruptions to the hydrogen supply during production from this supplier will result in the shutdown of our Geismar plant operations. We are currently seeking additional hydrogen suppliers for our Geismar facility.

RISKS RELATED TO OUR INDEBTEDNESS

We and certain subsidiaries have indebtedness, which subjects us to potential defaults, that 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 biomass-based diesel industry.

At September 30, 2018, our total term debt before debt issuance costs was $208.0 million. This includes $91.5 million aggregate carrying value on our $117.5 million face amount, 4.00% convertible senior notes due in June 2036, the "2036 Convertible Senior Notes", and $65.7 million aggregate carrying value on our $67.5 million face value, 2.75% convertible senior notes due in June 2019, the "2019 Convertible Senior Notes". In accordance with the indenture governing such Notes, we have elected to settle all conversions of each $1,000 principal amount of Notes being converted on or after October 23, 2018, with $1,000 in cash and any conversion value in excess of that amount in shares of our common stock.

We also have short-term debt obligations under revolving credit agreements provided by certain banks. At September 30, 2018, borrowings of $4.4 million had been made under our revolving lines of credit. See "Note 8 - Debt" to our Condensed Consolidated Financial Statements for a description of our indebtedness.

Our indebtedness could:


•	require us to dedicate a substantial portion of our cash flow from operations to payments of principal, interest on, and other fees related to 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 biomass-based diesel industry conditions, including interest rate fluctuations, because a portion of our revolving credit facilities are and will continue to be at variable rates of interest;


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


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

Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including the 2036 Convertible Senior Notes and 2019 Convertible Senior Notes, depends on our future financial performance, which is subject to several factors including economic, financial, competitive and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to satisfy our obligations under our indebtedness or any future indebtedness we may incur as well as our ability to make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as reducing or delaying investments or capital expenditures, selling assets, refinancing or obtaining additional capital on terms that may be onerous or highly dilutive. Our ability to refinance the 2036 Convertible Senior Notes, the 2019 Convertible Senior Notes or our other existing indebtedness or future indebtedness will depend on conditions in capital markets and our financial condition prior to maturity of the indebtedness.

Despite our current indebtedness levels, we may still incur significant additional indebtedness. Incurring more indebtedness could increase the risks associated with our substantial indebtedness.

We and our subsidiaries may be able to incur substantial additional indebtedness, including additional secured indebtedness, in the future. As of September 30, 2018, we had $114.7 million of undrawn availability under our lines of credit, subject to borrowing base limitations. In addition, the indentures governing our convertible notes do not prevent us from incurring additional indebtedness or other liabilities that constitute indebtedness. If new debt or other liabilities are added to our current debt levels, the related risks that we and our subsidiaries now face could intensify.

We are subject to counterparty risk with respect to the capped call transactions that we entered into in connection with the issuance of our 2019 Convertible Senior Notes.

In connection with the issuance of our 2019 Convertible Senior Notes, we entered into privately-negotiated capped call transactions with various counterparties. The counterparties to the capped call transactions are financial institutions, and we will be subject to the risk that they might default under the capped call transactions. Our exposure to the credit risk of the option counterparties will not be secured by any collateral. Recent global economic conditions have resulted in the actual or perceived failure or financial difficulties of many financial institutions. If any option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings, with a claim equal to our exposure at that time under our transactions with such option counterparty. Our exposure will depend on many factors, but generally, an increase in our exposure will be correlated to an increase in the market price and volatility of shares of our common stock. In addition, upon a default by any option counterparty, we may suffer more dilution than we currently anticipate with respect to our common stock. We can provide no assurances as to the financial stability or viability of the option counterparties.

We may not have the ability to raise the funds necessary to settle conversions of our convertible notes in cash or to repurchase the convertible notes for cash upon a fundamental change or on a repurchase date, and our future debt may contain limitations on our ability to repurchase the convertible notes.

Holders of the 2019 or 2036 Convertible Senior Notes will have the right to require us to repurchase their 2019 or 2036 Convertible Senior Notes upon the occurrence of a fundamental change at a repurchase price generally equal to 100% of their principal amount, plus accrued and unpaid interest, if any.

Holders of the 2036 Convertible Senior Notes will also have the right to require us to repurchase their notes on each of June 15, 2021, June 15, 2026 and June 15, 2031 at a repurchase price generally equal to 100% of their principal amount, plus accrued and unpaid interest, if any.

In addition, holders of the 2019 and 2036 Convertible Senior Notes have the right to convert their notes during any calendar quarter when the last reported sale price of our common stock for 20 trading days during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the applicable conversion price, or $16.02 in the case of the 2019 Convertible Senior Notes and $14.01 in the case of the 2036 Senior Convertible Notes. Both series of notes became convertible during the quarters ending June 30, 2018 and September 30, 2018 due to the trading price of our common stock.

In accordance with the indenture governing the 2019 Convertible Senior Notes, we have elected to settle all conversions of each $1,000 principal amount of notes being converted on or after October 23, 2018, with $1,000 in cash and any conversion value in excess of that amount in shares of our common stock. For the 2036 Convertible Senior Notes, our current intent is to settle conversions using cash for the principal amount of convertible senior notes converted, with the remaining value satisfied at the Company’s option in cash, stock or a combination of cash and stock. However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of the 2019 or 2036 Convertible Senior Notes upon a fundamental change or to settle conversion of the 2019 or 2036 Convertible Senior Notes in cash.

In addition, our ability to repurchase the 2019 or 2036 Convertible Senior Notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness. Our failure to repurchase 2019 or 2036 Convertible Senior Notes at a time when the repurchase is required by the indenture would constitute a default under the indenture governing the 2019 or 2036 Convertible Senior Notes. A default under the indenture or the fundamental change itself could also lead to a default under agreements governing our other indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the convertible notes.

Certain provisions in the indenture governing the 2019 or 2036 Convertible Senior Notes could delay or prevent an otherwise beneficial takeover or takeover attempt of us.

Certain provisions in the 2019 or 2036 Convertible Senior Notes and the indenture could make it more difficult or more expensive for a third party to acquire us. For example, if a takeover would constitute a fundamental change, holders of the 2019 or 2036 Convertible Senior Notes will have the right to require us to repurchase their 2019 or 2036 Convertible Senior Notes in cash. In addition, if a takeover constitutes a make-whole fundamental change, we may be required to increase the conversion rate for holders who convert their 2019 or 2036 Convertible Senior Notes in connection with such takeover. In either case, and in other cases, our obligations under the 2019 or 2036 Convertible Senior Notes and the indenture could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing incumbent management.

We are a holding company and there are limitations on our ability to receive dividends and distributions from our subsidiaries.

All of our principal assets, including our biomass-based diesel production facilities, are owned by subsidiaries and some of these subsidiaries are subject 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 debt agreements impose significant operating and financial restrictions on our subsidiaries, which may prevent us from capitalizing on business opportunities.

Certain of our revolving and term credit agreements, including our M&L and Services Revolver, impose significant operating and financial restrictions on certain of our subsidiaries. These restrictions limit certain of our subsidiaries’ ability, among other things, to:

•incur additional indebtedness or issue certain disqualified stock and preferred stock;

•place restrictions on the ability of certain of our subsidiaries to pay dividends or make other payments to us;

•engage in transactions with affiliates;

•sell certain assets or merge with or into other companies;

•guarantee indebtedness; and

•create liens.

When (and for as long as) the availability under the M&L and Services Revolver is less than a specified amount for a certain period of time, funds deposited into deposit accounts used for collections will be transferred on a daily basis into a blocked account with the administrative agent and applied to prepay loans under the M&L and Services Revolver.

As a result of these covenants and restrictions, we may be limited in how we conduct our business and we may be unable to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness we may incur could include more restrictive covenants. There is no assurance that we will be able to maintain compliance with these covenants in the future and, if we fail to do so, that we will be able to obtain waivers from the lenders and/or amend the covenants.

There are limitations on our ability to incur the full $150.0 million of commitments under the M&L and Services Revolver. Borrowings under our M&L and Services Revolver are limited by a specified borrowing base consisting of a

percentage of eligible accounts receivable and inventory, less customary reserves. In addition, under the M&L and Services Revolver, a monthly fixed charge coverage ratio would become applicable if excess availability under the M&L and Services Revolver is less than 10% of the total $150 million of current revolving loan commitments, or $15 million. As of September 30, 2018, availability under the M&L and Services Revolver was approximately $114.7 million. However, it is possible that excess availability under the Revolving Credit could fall below the 10% threshold in a future period. If the covenant trigger were to occur, our subsidiaries, who are the borrowers under M&L and Services Revolver, would be required to satisfy and maintain on the last day of each month a fixed charge coverage ratio of at least 1.0x for the preceding twelve month period.

As of September 30, 2018 , our consolidated fixed charge coverage ratio was 0.09 which was below the minimum amount required for compliance with this ratio, however, as noted above, we are not required to comply with the minimum fixed charge covenant of 1.0x unless availability under the M&L and Services Revolver drops below the agreed threshold. Our ability to meet the required fixed charge coverage ratio can be affected by events beyond our control, and we cannot assure you that we will meet this ratio. A breach of any of these covenants would result in a default under the M&L and Services Revolver.

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 BTC;


•	other regulatory developments in our industry affecting us, our customers or our competitors;


•	announcements of technological innovations by us or our competitors;


•	announcement or expectation of additional financing efforts, including sales or expected sales of additional common stock;


•	additions or departures of key management or other personnel;


•	litigation;


•	inadequate trading volume;


•	general market conditions in our industry; and


•	general economic and market conditions, including continued dislocations and downward pressure in the capital markets.

In addition, stock markets experience significant price and volume fluctuations from time to time that are not related to the operating performance 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. Our stockholders could suffer significant dilution, from our issuances of equity or convertible debt securities. Any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. The amount of our common stock or securities convertible into or exchangeable for our common stock issued in connection with an investment or acquisition could constitute a material portion of our then outstanding common stock.

If we fail to maintain effective internal controls 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 September 30, 2018 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.

Delaware law and our amended and restated certificate of incorporation and bylaws 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 ("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.

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

Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

There were no share repurchase transactions under the 2017 Program during the three months ended September 30, 2018.

Under the 2018 Program, during the three months ended September 30, 2018, the Company used $16.1 million to repurchase $9.1 million principal amount of the 2036 Convertible Senior Notes. There were no share repurchase transactions under the 2018 Program during the three months ended September 30, 2018.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

(A) Exhibits:



Exhibit No.		Description
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 7, 2018	By:	/s/ Randolph L. Howard
			Randolph L. Howard
			President and Chief Executive Officer (Principal Executive Officer)

Dated:	November 7, 2018	By:	/s/ Chad Stone
			Chad Stone
			Chief Financial Officer (Principal Financial Officer)

Dated:	November 7, 2018	By:	/s/ Todd M. Samuels
			Todd M. Samuels
			Chief Accounting Officer (Principal Accounting Officer)