Acquisitions and Equity Transactions | 9 Months Ended |
Sep. 30, 2014 |
Business Combinations [Abstract] | ' |
Acquisitions and Equity Transactions | ' |
ACQUISITIONS AND EQUITY TRANSACTIONS |
LS9, Inc. |
On January 22, 2014, REG Life Sciences, a wholly-owned subsidiary of the Company, acquired substantially all of the assets and certain liabilities of LS9. The Company has completed its initial accounting for this business combination in the second quarter when the valuation of the contingent consideration, in-process research & development intangible assets and goodwill acquired was finalized. The following table summarizes the consideration paid for LS9 and the amounts of assets acquired and liabilities assumed at the acquisition date: |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| January 22, 2014 | | | | | | | | | | | | |
Consideration at fair value: | | | | | | | | | | | | | |
Cash | $ | 15,275 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Common stock | 26,254 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Contingent consideration | 17,050 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Total | $ | 58,579 | | | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| 22-Jan-14 | | | | | | | | | | | | |
Assets (liabilities) acquired: | | | | | | | | | | | | | | |
| | | | | | | | | | | |
Property, plant and equipment | $ | 8,215 | | | | | | | | | | | | | |
| | | | | | | | | | | |
In-process research & development intangible assets | 15,956 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Goodwill | 34,846 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Other noncurrent liabilities | (438 | ) | | | | | | | | | | | | |
Total | $ | 58,579 | | | | | | | | | | | | | |
| | | | | | | | | | | |
The fair value of the 2,230,559 shares of Common Stock issued as part of the consideration paid for LS9 was determined on the basis of the closing market price of the Company's common shares at the date of acquisition. |
Subject to achievement of certain milestones related to the development and commercialization of products from LS9’s technology, LS9 may receive contingent consideration of up to $21,500 (Earnout Payments) over a five-year period after the acquisition. The Earnout Payments will be payable in cash, the Company's stock or a combination of cash and stock at the Company's election. As of September 30, 2014, the Company has recorded a contingent liability of $15,474, all of which has been classified as non-current on the Condensed Consolidated Balance Sheets. |
The goodwill acquired is included in the Biodiesel segment, a portion of which is expected to be deductible for tax purposes. |
REG Life Sciences had no revenues for the three and nine months ended September 30, 2014. The net loss generated by REG Life Sciences for the three and nine months ended September 30, 2014, included in the Condensed Consolidated Statements of Operations was $3,863 and $8,527, respectively. |
Syntroleum Corporation/Dynamic Fuels, LLC |
On June 3, 2014, REG Synthetic Fuels, a wholly-owned subsidiary of the Company included in the Biodiesel segment, acquired substantially all the assets of Syntroleum, which consisted of a 50% limited liability company membership interest in Dynamic Fuels, as well as intellectual property and other assets. Dynamic Fuels owns a 75 million gallon per year nameplate capacity renewable hydrocarbon diesel biorefinery located in Geismar, Louisiana. The Company has not completed its initial accounting for this business combination as the valuation of the intangible assets and goodwill acquired has not been finalized. The following table summarizes the consideration paid for Syntroleum. |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| June 3, 2014 | | | | | | | | | | | | |
Consideration at fair value for Syntroleum: | | | | | | | | | | | | | |
Common stock | $ | 34,831 | | | | | | | | | | | | | |
| | | | | | | | | | | |
The fair value of the 3,493,613 shares of Common Stock issued to Syntroleum was determined on the basis of the closing market price of the Company's common shares at the date of acquisition. |
The fair value of the Syntroleum renewable hydrocarbon diesel technology was determined using the relief from royalty method, or RFR, which reflects the savings realized by owning the intangible assets. The value under RFR method is dependent upon the following factors for an asset: royalty rate, discount rate, expected life and projected revenue. |
On June 6, 2014, REG Synthetic Fuels acquired the remaining 50% ownership interest in Dynamic Fuels, from Tyson Foods. The Company renamed Dynamic Fuels to REG Geismar, LLC, which is included in the Biodiesel segment. The Company has not completed its initial accounting for this business combination as the valuation of the real and personal property, contingent consideration, intangible assets and goodwill acquired has not been finalized. |
The following table summarizes the consideration paid to Tyson Foods for Dynamic Fuels: |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| June 6, 2014 | | | | | | | | | | | | |
Consideration at fair value for Dynamic Fuels: | | | | | | | | | | | | | |
Cash | $ | 16,447 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Contingent consideration | 28,900 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Total | $ | 45,347 | | | | | | | | | | | | | |
| | | | | | | | | | | |
The following table summarizes the amount of assets acquired and liabilities assumed at the acquisition date for the combined acquisition of Syntroleum and Dynamic Fuels: |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| 6-Jun-14 | | | | | | | | | | | | |
Assets (liabilities) acquired of Syntroleum and Dynamic Fuels: | | | | | | | | | | | | | | |
| | | | | | | | | | | |
Cash | $ | 253 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Other current assets | 4,666 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Property, plant and equipment | 122,827 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Goodwill | 55,762 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Intangible assets | 8,900 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Other noncurrent assets | 10,281 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Other current liabilities | (1,180 | ) | | | | | | | | | | | | |
Deferred tax liabilities | (7,278 | ) | | | | | | | | | | | | |
Debt | (113,553 | ) | | | | | | | | | | | | |
Other noncurrent liabilities | (500 | ) | | | | | | | | | | | | |
Total | $ | 80,178 | | | | | | | | | | | | | |
| | | | | | | | | | | |
Subsequent to the closing of the Tyson Foods transaction, REG Geismar paid off the debt owed to Tyson Foods in the amount of $13,553. |
Subject to achievements related to the sale of renewable hydrocarbon diesel at the REG Geismar production facility, Tyson Foods may receive contingent consideration of up to $35,000. The Company will pay contingent consideration, if and when, the Company achieves certain sales volumes. The agreement calls for periodic payments based on pre-determined payments per gallon of product sold. The probability weighted contingent payments were discounted using a risk adjusted discount rate of 5.8%. The contingent payments will be payable in cash. As of September 30, 2014, the Company has recorded a contingent liability of $29,033, of which $5,096 has been classified in accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets. |
The goodwill acquired is included in the Biodiesel segment, a portion of which is expected to be deductible for tax purposes. |
REG Synthetic Fuels, including its wholly-owned subsidiary REG Geismar, had $262 and $312 in revenues for the three and nine months ended September 30, 2014, respectively. The net loss generated by REG Synthetic Fuels for the three and nine months ended September 30, 2014 included in the Condensed Consolidated Statement of Operations was $4,766 and $9,617, respectively, which includes $3,004 of income tax expense for the nine months ended September 30, 2014, resulting from the recording of a valuation allowance offsetting their deferred tax assets. |
The following pro forma condensed combined results of operations assume that LS9, Syntroleum and Dynamic Fuels acquisitions were completed as of January 1, 2013: |
|
| | | | | | | | | | | | | | | |
| Three Months | | Three Months | | Nine Months | | Nine Months |
Ended | Ended | Ended | Ended |
September 30, | September 30, | September 30, | September 30, |
2014 | 2013 | 2014 | 2013 |
Revenues | $ | 384,258 | | | $ | 458,463 | | | $ | 936,759 | | | $ | 1,135,692 | |
|
Net income (loss) | 4,504 | | | 67,746 | | | (497 | ) | | 131,688 | |
|
Basic net income (loss) per share | $ | 0.11 | | | $ | 1.77 | | | $ | (0.01 | ) | | $ | 3.54 | |
|
416 S. Bell, LLC |
Prior to July 25, 2014, the Company had a 50% ownership in 416 S Bell, LLC (Bell, LLC), a variable interest entity (VIE) joint venture that owned and leased to the Company its corporate office building in Ames, Iowa. Commencing January 1, 2011, the Company had the right to execute a call option with the joint venture member, Dayton Park, LLC (Dayton Park), to purchase Bell, LLC and commencing on January 1, 2013, Dayton Park had the right to execute a put option with the Company to sell Bell, LLC. The Company determined it was the primary beneficiary of Bell, LLC and had consolidated Bell, LLC into the Company’s financial statements since January 1, 2011. |
On July 25, 2014, the Company completed the acquisition of the remaining 50% interest in Bell, LLC in exchange for $1,423 cash. The Company determined that this transaction did not result in a change of control and as such has accounted for it as an equity transaction. Neither goodwill nor a gain/loss was recognized in conjunction with the acquisition. |