Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2013 |
Basis of Consolidation | ' |
Basis of Consolidation |
The accompanying condensed consolidated financial statements include the accounts of the Company, consolidated with the accounts of all of its subsidiaries and affiliates in which the Company holds a controlling financial interest as of the financial statement date. Normally, a controlling financial interest reflects ownership of a majority of the voting interests. Other factors considered in determining whether a controlling financial interest is held include whether the Company possesses the authority to purchase or sell assets or make other operating decisions that significantly affect the entity’s results of operations and whether the Company is the primary beneficiary of the economic benefits and financial risks of the entity. Intercompany accounts and transactions have been eliminated. |
Inventories | ' |
Inventories |
Inventories consist of raw materials, work in process and finished goods and are valued at the lower of cost or market. As of September 30, 2013 and December 31, 2012, there were no adjustments to reduce inventory to the lower of cost or market. Cost is determined based on the first-in, first-out method. |
Renewable Identification Numbers (RINs) | ' |
Renewable Identification Numbers (RINs) |
When the Company produces a gallon of biodiesel, 1.5 RINs per gallon are generated. RINs are used to track compliance with Renewable Fuel Standards (RFS2). RFS2 allows the Company to attach between zero and 2.5 RINs to any gallon of biodiesel. When the Company sells a gallon of biodiesel, 1.5 RINs are generally attached. As a result, a portion of the selling price for a gallon of biodiesel is generally attributable to RFS2 compliance. However, RINs that the Company generates are a form of government incentive and not a result of the physical attributes of the biodiesel production. Therefore, no cost is allocated to the RIN when it is generated, regardless whether the RIN is transferred with the biodiesel produced or held by the Company pending attachment to other biodiesel production sales. In addition, the Company also obtains RINs from third parties who have separated the RINs from gallons of biomass-based diesel by blending the biomass-based diesel with at least 80% petroleum diesel fuel. From time to time, the Company holds varying amounts of these separated RINs for resale. RINs obtained from third parties are initially recorded at their cost at the time we acquire them and are subsequently revalued at the lower of cost or market as of the last day of each accounting period and the resulting adjustments are reflected in costs of goods sold for the period. The value of RINs obtained from third parties is reflected in “Prepaid expenses and other assets” on the consolidated balance sheet. The cost of goods sold related to the sale of these RINs is determined using the average cost method, while market prices are determined by RIN values, as reported by the Oil Price Information Service (OPIS). |
Preferred Stock Accretion | ' |
Preferred Stock Accretion |
On January 24, 2012, in connection with the IPO, the Series A Preferred Stock was converted into a combination of shares of Series B Preferred Stock and Class A Common Stock. Accretion of the Series A Preferred Stock was terminated at the time of the conversion. The Company recorded the Series B Preferred Stock at fair value, which was a premium over its redemption value; therefore no accretion is recorded for the Series B Preferred Stock (ASC Topic 480-10-S99). |
Accretion of $0 for the three and nine months ended September 30, 2013 and $0 and $1,808 for the three and nine months ended September 30, 2012, respectively, has been recognized as a reduction to income available to common stockholders in accordance with paragraph 15 of ASC Topic 480-10-S99, Classification and Measurement of Redeemable Securities (ASC Topic 480-10-S99). |
Goodwill | ' |
Goodwill |
The Company accounts for goodwill in accordance with ASC Topic 350, Intangibles – Goodwill and Other. The Company reviews the carrying value of goodwill for impairment annually on July 31 or when impairment indicators exist. Goodwill is allocated and reviewed for impairment by reporting units. The Company’s reporting units consist of its two operating segments, the biodiesel operating segment and services operating segment. The analysis is based on a comparison of the carrying value of the reporting unit to its fair value, determined utilizing a discounted cash flow methodology. Additionally, the Company reviews the carrying value of goodwill whenever events or changes in business circumstances indicate that the carrying value of the assets may not be recoverable. Changes in estimates of future cash flows caused by items such as unforeseen events or sustained unfavorable changes in market conditions could negatively affect the fair value of the reporting unit’s goodwill asset and result in an impairment charge. The annual impairment test determined that the fair value of the biodiesel operating segment exceeded its carrying value by approximately 43% and the services operating segment exceeded its carrying value by approximately 20%. There was no impairment of goodwill recorded in the periods presented. |
Revenue Recognition | ' |
Revenue Recognition |
The Company recognizes revenues from the following sources: |
| • | | the sale of biodiesel and its co-products, as well as Renewable Identification Numbers (RINs) and raw material feedstocks, purchased or produced by the Company at owned and leased manufacturing facilities and manufacturing facilities with which the Company has tolling arrangements; | | | | | | | | | | | | |
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| • | | the resale of biodiesel, RINs and raw material feedstocks acquired from third parties; | | | | | | | | | | | | |
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| • | | fees received under toll manufacturing agreements with third parties; | | | | | | | | | | | | |
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| • | | incentives received from federal and state programs for renewable fuels; and | | | | | | | | | | | | |
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| • | | fees received for the marketing and sales of biodiesel produced by third parties and from managing operations of third party facilities. | | | | | | | | | | | | |
Biodiesel, including RINs, and raw material feedstock revenues are recognized where there is persuasive evidence of an arrangement, delivery has occurred, the price has been fixed or is determinable and collectability can be reasonably assured. |
Fees received under toll manufacturing agreements with third parties are generally established as an agreed upon amount per gallon of biodiesel produced. The fees are recognized where there is persuasive evidence of an arrangement, delivery has occurred, the price has been fixed or is determinable and collectability can be reasonably assured. |
Revenues associated with the governmental incentive programs are recognized when the amount to be received is determinable, collectability is reasonably assured, and the sale of product giving rise to the incentive has been recognized. |
While in general the Company has not historically offered sales incentives to customers, the uncertainty around the reinstatement of the federal blenders’ tax credit led to the introduction of such an incentive during 2012. Specifically, during 2012 the Company negotiated contracts with certain customers to allow such customers to share in the value of federal blenders tax payments if the law were to be reinstated. The federal blenders tax credit was reinstated on January 2, 2013 and the Company recognized $69,534 of cash payments owed to customers as a reduction of Biodiesel sales revenue. Before 2012, the Company did not have similar contracts and none of its sales subsequent to December 31, 2012 contain such provisions. |
Fees for managing ongoing operations of third party plants, marketing biodiesel produced by third party plants and from other services are recognized as services are provided. The Company also has performance-based incentive agreements that are included as management service revenues. These performance incentives are recognized as revenues when the amount to be received is determinable and collectability is reasonably assured. |
Stock-Based Compensation | ' |
Stock-Based Compensation |
On August 31, 2011, the Company’s Board of Directors (Company Board) approved the Amended and Restated 2009 Stock Incentive Plan, which was then approved by the Company’s shareholders on October 26, 2011. Eligible award recipients are employees, non-employee directors and advisors who provide service to the Company. The Company accounts for stock-based compensation in accordance with ASC Topic 718, Stock Compensation (ASC Topic 718). Compensation expense is measured at the grant-date fair value of the award and recognized as compensation expense over the vesting period. Compensation expense of $1,483 and $3,869 for the three and nine months ended September 30, 2013, respectively, and $2,965 and $12,687 for the three and nine months ended September 30, 2012, respectively, was recorded for restricted stock units and stock appreciation rights awarded to employees and non-employee directors in return for services. During January 2013, the Company granted 20,000 shares of stock appreciation rights to an employee for services with a vesting period of four years. During February 2013, the Company granted 50,000 shares of restricted stock units to an employee that vested and converted to common stock immediately based upon meeting certain performance requirements. During May 2013, the Company granted 84,921 shares of restricted stock units and 313,482 shares of stock appreciation rights to employees with vesting periods of three and four years, respectively. During the third quarter 2013, the Company granted 50,000 shares of restricted stock units which will vest on December 31, 2013 and 19,262 shares of restricted stock units which will cliff vest in three to four years. Also during the third quarter 2013, the Company grated 1,575 shares of stock appreciation rights to various employees which have a vesting period of four years. |
Recapitalization Policy Text Block | ' |
Recapitalization |
In connection with the Company’s IPO on January 24, 2012, the Company gave effect to the one-time conversion of Series A Preferred Stock and certain common stock warrants into 7,660,612 shares of newly-issued Common Stock and 2,999,493 shares of $74,987 aggregate liquidation preference Series B Preferred Stock with cumulative dividends of 4.5% per annum. All Series A Preferred Stock was converted and no Series A Preferred Stock remains outstanding. The Company recorded the effects from the exchange of Series A Preferred Stock for Series B Preferred Stock and Common Stock as an extinguishment in accordance with ASC 260-10-S99-2. |
Accordingly, the Company recognized an addition to the income available to common shareholders in the amount of $39,107. This amount was determined by comparing the fair value of the Series B Preferred Stock and Common Stock issued of $152,327 to the carrying amount of the Series A preferred shares that were redeemed of $191,434. The excess of the carrying amount of Series A Preferred Stock that were redeemed over the fair value of the Series B Preferred Stock and Common Stock that were issued was recorded as an increase to additional paid-in capital and was added to net earnings available to common shareholders of $39,107. The Series B Preferred Stock fair value was determined using Monte Carlo simulation methodology with the assistance of external third-party experts to calculate the fair-value using the Company’s common stock at time of conversion. The significant assumptions included the volatility rate and risk-free rate based upon the yield of the U.S. Industrials B curve. |
Net Income Per Share | ' |
Net Income (Loss) Per Share |
Basic and diluted net income (loss) per common share are presented in conformity with the two-class method required for participating securities. The two-class method includes an earnings allocation formula that determines earnings for each class of common stock according to dividends declared and undistributed earnings for the period. |
The holders of the Series B Preferred Stock accrue dividends at a rate of $1.125 per share per annum. Dividends are cumulative, accrue on a daily basis from the date of issuance and compound annually from the date of issuance. If dividends on the Series B Preferred Stock have not been paid or declared, the deficiency shall be paid or declared before any dividend is declared for Common Stock. Dividends in arrears do not bear interest. Holders of the Series B Preferred Stock are allowed to participate in the dividends to common stockholders in the event that dividends on Common Stock exceed that of the Series B Preferred Stock as if the Series B Preferred Stock had been converted to Common Stock at the beginning of the year. |
The Company calculates the effects of the Series B Preferred Stock on diluted EPS under the “if-converted” method unless the conversion of the convertible preferred stock is anti-dilutive to basic EPS. The effects of Common Stock options, warrants, restricted stock units and stock appreciation rights on diluted EPS are calculated using the treasury stock method unless the effects are anti-dilutive to EPS. |
The following potentially dilutive weighted average securities were excluded from the calculation of diluted net income (loss) per share attributable to common stockholders during the periods presented as the effect was anti-dilutive: |
| Three Months | | | Three Months | | | Nine Months | | | Nine Months | |
Ended | Ended | Ended | Ended |
September 30, | September 30, | September 30, | September 30, |
2013 | 2012 | 2013 | 2012 |
Options to purchase common stock | | 87,026 | | | | 87,026 | | | | 87,026 | | | | 87,026 | |
Restricted stock units | | — | | | | 1,134,421 | | | | — | | | | 1,409,659 | |
Stock appreciation rights | | 314,036 | | | | 1,043,693 | | | | 1,194,477 | | | | 655,762 | |
Warrants to purchase common stock | | — | | | | 17,916 | | | | — | | | | 42,054 | |
Redeemable preferred shares | | — | | | | 5,998,986 | | | | — | | | | — | |
Total | | 401,062 | | | | 8,282,042 | | | | 1,281,503 | | | | 2,194,501 | |
The following table presents the calculation of diluted net income per share for the three and nine months ended September 30, 2013 and for the nine months ended September 30 2012. For the three months ended September 30, 2012, the effect from all convertible securities was anti-dilutive (in thousands, except share and per share data): |
| | Three Months | | | | Nine Months | | | | Nine Months | | |
Ended | Ended | Ended | |
September 30, | September 30, | September 30, | |
2013 | 2013 | 2012 | |
Net income attributable to the Company’s common stockholders | $ | | 78,462 | | | $ | | 133,958 | | | $ | | 44,457 | | |
Less: effects of recapitalization | | — | | | | — | | | | (39,107 | ) | |
Plus: change in undistributed dividends allocated to preferred stockholders | | 147 | | | | 147 | | | | 1,685 | | |
Plus: distributed dividends to Preferred Stockholders | | 258 | | | | 1,848 | | | | 1,470 | | |
Plus: accretion of Series A Preferred Stock to redemption value | | — | | | | — | | | | 1,808 | | |
Plus: (gain) loss due to change in fair value of Series A Preferred Stock conversion feature embedded derivatives | | — | | | | — | | | | (11,975 | ) | |
Plus: effect of participating securities | | 7,836 | | | | 20,283 | | | | 12,097 | | |
Net income available to common stockholders | | 86,703 | | | | 156,236 | | | | 10,435 | | |
Less: effect of participating securities | | (8,191 | ) | | | (22,275 | ) | | | (1,108 | ) | |
Net income attributable to the Company’s common stockholders after dilutive effects | $ | | 78,512 | | | $ | | 133,961 | | | $ | | 9,327 | | |
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Shares: | | | | | | | | | | | | |
Weighted-average shares used to compute basic net income per share | | 33,790,034 | | | | 31,918,951 | | | | 27,729,676 | | |
Adjustment to reflect conversion of preferred stock | | — | | | | — | | | | 5,947,023 | | |
Adjustment to reflect stock appreciation right conversions | | 221,909 | | | | 4,977 | | | | — | | |
Adjustment to reflect warrants to purchase common stock | | 4,533 | | | | 269 | | | | — | | |
Weighted-average shares used to compute diluted net income per share | | 34,016,476 | | | | 31,924,197 | | | | 33,676,699 | | |
Net income per share attributable to common stockholders | | | | | | | | | | | | |
Diluted | $ | | 2.31 | | | $ | | 4.20 | | | $ | | 0.28 | | |
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Variable Interest Entities | ' |
Variable Interest Entities |
The Company uses both quantitative and qualitative analysis when evaluating its variable interest entities (VIE) and determining the primary beneficiary (PB) of a VIE. The Company consolidates a VIE if it has both (a) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and (b) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. |
New Accounting Pronouncements | ' |
New Accounting Pronouncements |
In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (Topic 740). The amendments in ASU 2013-11 provide guidance on the financial statement presentation of unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU 2013-11 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The Company will reflect the impact of these amendments beginning with the Company’s Quarterly Report on Form 10-Q for the period ending March 31, 2014. The Company does not anticipate a material impact to the Company’s financial position, results of operations or cash flows as a result of this change. |