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. Objective We are one ofNorth America's largest producers of advanced biofuels focusing on providing cleaner, lower carbon transportation fuels. 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 believe our fully integrated approach, which includes acquiring feedstock, operating biorefineries, distributing fuel through a network of terminals, and managing biorefinery facility construction and upgrades, positions us to serve the market for cleaner transportation fuels. In addition to our acquisition of Keck Energy inSeptember 2018 , we opened our first REG branded fueling station inJuly 2019 adjacent to our biorefinery inSeneca, Illinois to serve a variety of customers from trucking fleets to local diesel vehicle owners. InJune 2020 , we entered into an agreement with a third party pursuant to which it agreed to exclusively sell REG branded fuels at certain of its cardlock locations. InOctober 2021 , we entered into a long-term agreement with GoodFuels, a leading supplier of sustainable marine biofuels and global producer and supplier of renewable fuels, for the supply and development of sustainable marine biofuel solutions for the global shipping industry. InNovember 2021 , we entered into a partnership withCanadian Northern Railway to test bio and renewable diesel blends for their locomotive fleet. These are the initial parts of our downstream strategy, which is focused on three important objectives: margin expansion across the value chain, including by directing production to the most profitable geographies; realization of higher biodiesel values through blends of biodiesel into petroleum and renewable diesel; and increased demand for our biodiesel via sales of 100% pure biodiesel, or B100, to end consumers. 26 -------------------------------------------------------------------------------- InOctober 2020 , we announced that we plan to expand the effective capacity of ourGeismar, Louisiana biorefinery. TheGeismar project brings together the improvement project for the existing site as well as the planned expansion. TheGeismar project is expected to take total site production capacity from 90 million to 340 million gallons, enhance existing operations and improve operational reliability and logistics. The expansion is expected to be mechanically complete in 2023 with full operations in early 2024. The capital cost for theGeismar project is estimated to be$950 million . We have received all required permits to proceed with construction and recently obtained funding to begin the project with a combination of cash on hand, marketable securities, borrowings under our credit facilities, and proceeds from our public offering of common stock that closed inMarch 2021 and our Green Bonds that closed onMay 20, 2021 , as discussed below, or from other sources. In addition, we have agreed upon a long-term marine terminal lease for terminal and logistics services. We have also agreed to construction contracts for large parts of the work associated with the improvements and expansion. There can be no guarantee that we will be able to complete this project in a timely manner or increase the capacity of our biorefinery atGeismar, Louisiana on time, at our estimated budget, or at all. The improvements and expansion is subject to a number of conditions and risks. OnMarch 19, 2021 , we completed an equity offering pursuant to which we sold 5,750,000 shares of common stock to various underwriters at a price of$67.00 per share before underwriting discounts and commissions. The net proceeds from the offering were$365.3 million . We currently intend to use the net proceeds from this offering for working capital and other general corporate purposes, which may include the repayment of our existing indebtedness and the funding of capital expenditures, including capital expenditures related to the improvements and expansion of ourGeismar, Louisiana biorefinery. We may also use a portion of the net proceeds from this offering to finance potential strategic transactions, although we currently have no binding commitments or agreements to complete any such transaction. OnMay 20, 2021 , we completed the sale and issuance of$550.0 million aggregate principal amount of our 5.875% Green Bonds due 2028. We recorded$14.6 million in legal, professional and underwriting fees related to the issuance of the Green Bonds. We currently intend to use the net proceeds from this offering for capital expenditures related to the improvements and expansion of itsGeismar, Louisiana biorefinery. We believe that the execution of these strategies will enable us to expand our margins, diversify sources of profitability, manage our business through varying market conditions, and increase shareholder value. We currently own and operate a network of twelve biorefineries. Ten biorefineries are located inthe United States and two inGermany . Eleven biorefineries produce biodiesel and one produces renewable diesel ("RD"). Our twelve bio-based diesel production facilities have an aggregate nameplate production capacity of 505 million gallons per year ("mmgy"). InSeptember 2021 , the Company announced the closure of theHouston, Texas biorefinery, expected to be completed inJanuary 2022 . TheHouston plant's nameplate capacity is 35 mmgy which will reduce the Company's overall nameplate capacity to 470 mmgy. We are a lower carbon bio-based diesel producer. We primarily produce our bio-based diesel from a wide variety of low carbon feedstocks, including distillers corn oil, used cooking oil and inedible animal fat. We also produce bio-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 at most of our facilities provides us with a cost advantage over many bio-based diesel producers, particularly those that rely primarily on virgin vegetable oils. We also sell petroleum-based heating oil and diesel fuel, which enables us to offer a variety of fuel products to a broader customer base. We sell heating oil and ultra-low sulfur diesel, or ULSD, at terminals throughout the northeasternUnited States , as well as BioHeat® blended heating fuel at one of these terminal locations. In 2018, we expanded our sales of biofuel blends to Midwest andWest Coast terminal locations and look to potentially expand in other areas acrossNorth America and internationally. 27 --------------------------------------------------------------------------------
The table below reflects our gallons sold during the three and nine months ended
Gallons sold (millions) Three months ended Three months ended Nine months
ended Nine months ended
September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 REG-produced Bio-based Diesel: Biodiesel - U.S. 105.2 108.6 274.9 293.4 Biodiesel - International 10.4 13.6 31.4 37.6 Renewable diesel 25.1 18.3 53.2 56.0 140.7 140.6 359.5 387.0
Third party Bio-based Diesel:
Biodiesel 6.1 7.2 17.5 15.4 Renewable diesel 14.3 12.3 40.3 30.2 20.3 19.5 57.8 45.6 Petroleum-based diesel 15.4 16.2 56.4 66.5 Total 176.3 176.2 473.7 499.1 During 2020, we sold 651 million gallons of fuel, which included 502 million bio-based diesel gallons produced at REG facilities, 61 million bio-based diesel gallons we purchased from third parties and 88 million petroleum-based diesel gallons. Our businesses are organized into three reportable segments - the Bio-based Diesel segment, the Services segment and Corporate and Other. Bio-based Diesel Segment (formerly known as Biomass-based Diesel segment) Our Bio-based Diesel segment includes: •the operations of the following bio-based diesel production refineries: •a 30 mmgy nameplate capacity biodiesel production facility located inRalston, Iowa ; •a 35 mmgy nameplate capacity biodiesel production facility located nearHouston, Texas (this facility is expected to be closedJanuary 2022 ); •a 45 mmgy nameplate capacity biodiesel production facility located inDanville, Illinois ; •a 30 mmgy nameplate capacity biodiesel production facility located inNewton, Iowa ; •a 60 mmgy nameplate capacity biodiesel production facility located inSeneca, Illinois ; •a 30 mmgy nameplate capacity biodiesel production facility located nearAlbert Lea, Minnesota ; •a 30 mmgy nameplate capacity biodiesel production facility located inMason City, Iowa ; •a 75 mmgy nameplate capacity renewable diesel production facility located inGeismar, Louisiana ; •a 27 mmgy nameplate capacity biodiesel production facility located inEmden ,Germany ; •a 23 mmgy nameplate capacity biodiesel production facility located in Oeding,Germany ; •a 100 mmgy nameplate capacity biodiesel production facility located inGrays Harbor, Washington ; and •a 20 mmgy nameplate capacity biodiesel production facility located in DeForest,Wisconsin . •purchases and resales of bio-based diesel, the renewable portion of sales of biodiesel and renewable diesel blended with petroleum-based diesel, RINs and LCFS credits (each as defined herein), and raw material feedstocks acquired from third parties; and •incentives received from federal and state programs for renewable fuels. 28 -------------------------------------------------------------------------------- The nameplate capacity listed above, which is based on original plant design, is distinguished from a facility's effective capacity, which represents the maximum average throughput that satisfies certain defined technical constraints. We derive a small portion of our revenues from the sale of co-products of the bio-based diesel production process. For the three and nine months endedSeptember 30, 2021 and 2020, our revenues from the sale of co-products were less than 5% of our total Bio-based Diesel segment revenues. For the three and nine months endedSeptember 30, 2021 and 2020, 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 by our facilities or purchased from third parties, were approximately 3% and 5% for the respective periods for 2021 and 3% and 5% for the same periods in 2020, of our total revenues. In accordance with EPA regulations, we generate 1.5 to 1.7 RINs for each gallon of bio-based diesel we produce and sell inthe United States . RINs are used to track compliance with RFS2, using the EPA moderated transaction system, or EMTS. RFS2 allows us to attach between zero and 2.5 RINs to any gallon of bio-based diesel we sell. When we attach RINs to a sale of bio-based diesel gallons, a portion of our selling price for a gallon of bio-based diesel is generally attributable to RFS2 compliance; but no cost is allocated to the RINs generated by our bio-based diesel production because RINs are a form of government incentive and not a result of the physical attributes of the bio-based diesel production. In addition, RINs, once obtained through the production and sale of gallons of bio-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 bio-based diesel production, fluctuations in the value of our RIN inventory represent fluctuations in the value of RINs we have obtained from third parties. The table below summarizes our RINs balances available to be sold and the median closing price per RIN atSeptember 30, 2021 andDecember 31, 2020 according to OPIS: Quantity OPIS Median Closing Price per RIN September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020 Bio-based diesel RINs 26,848,183 3,962,710 $ 1.42 $ 1.02 Advanced biofuels RINs 3,105,625 817,464 $ 1.42 $ 1.02 We generate Low Carbon Fuel Standard, or LCFS, credits for our low carbon fuels when our qualified low carbon fuels are imported into states that have adopted an LCFS program and sold for qualifying purposes. As a result, a portion of the selling price for a gallon of bio-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 bio-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 bio-based diesel produced or held by us. In general, the value of LCFS credits fluctuates with the price and demand for fuel. In the first nine months of 2021, the value of LCFS credits decreased from$199 per credit onJanuary 4, 2021 to$159 per credit onSeptember 30, 2021 . The below table summarizes approximate amounts of our LCFS credits available to be sold and the median closing price per LCFS credit atSeptember 30, 2021 andDecember 31, 2020 according to OPIS: Quantity OPIS Median Closing Price per LCFS Credit September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020 California LCFS 37,259 2,618 $ 158.75 $ 199.00 Oregon LCFS 2,026 8,967 $ 125.50 $ 123.00 Services Segment Our Services segment, which primarily provides services to our Bio-based Diesel segment, includes: •bio-based diesel facility management and operational services, whereby we provide day-to-day management and operational services to bio-based diesel production facilities; and •construction management services, whereby we act as the construction management and general contractor for the construction of bio-based diesel production facilities. 29 -------------------------------------------------------------------------------- Corporate and Other Segment Our Corporate and Other segment includes: •trading activities related to petroleum-based heating oil and diesel fuel, including the petroleum portion of sales of biodiesel and renewable diesel blended with petroleum-based diesel; •corporate activities, which consist of corporate office expenses such as compensation, benefits, occupancy and other administrative costs, including management service expenses; and •income/(expense) activities not associated with the reportable segments, such as corporate general and administrative expenses and shared service expense. Impact of COVID-19 on Our Business InMarch 2020 , theWorld Health Organization declared COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. The COVID-19 pandemic has negatively impacted the global economy, disrupted consumer spending and global supply chains, and created significant volatility and disruption of financial markets. In response to the outbreak and business disruption, first and foremost, we have prioritized the health and safety of our employees. We established aCOVID-19 Emergency Response Team ("ERT") to monitor the health of our employees and mitigate the infection risk of our employees. Based on input from the ERT, we have implemented several initiatives in response to the COVID-19 pandemic, such as remote workplace requirements for all office and administrative employees, social distancing protocols for our production employees and any visitors to our facilities, and additional paid time off for employees as needed in order to deal with health or family issues related to COVID-19. As more states, counties and schools have been re-opening and with the continued successful distribution of COVID-19 vaccines, we do not anticipate having to curtail or cease our operations due to COVID-19 in the foreseeable future. Market demand for fuels was significantly impacted by COVID-19 in 2020, with significant signs of recovery in the first nine months of 2021. There continues to be more economic activity and loosening of restrictions as more of theU.S. population gets vaccinated. We are optimistic that theU.S. economy is rebounding from the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on our business remains uncertain and difficult to predict, as the duration and severity of the global pandemic evolves and variant strains of COVID-19 arise. We cannot reasonably estimate the duration and severity of the COVID-19 pandemic, or its overall impact on our business. We continue to monitor the impact of the COVID-19 pandemic and will adjust our operations, as necessary. We believe our cash on hand, our investments in short-term marketable securities and the cash available to us under our line of credit will allow us to manage the anticipated impact of COVID-19 on our business operations for the foreseeable future. We do not currently plan or anticipate any changes to our workforce due to COVID-19. For a further discussion of the uncertainties and business risks associated with the COVID-19 pandemic, see Part II, Item 1A, "Risk Factors." Factors Influencing Our Results of Operations The principal factors affecting our results of operations and financial conditions are the market prices for bio-based diesel and the prices for the feedstocks used to produce bio-based diesel, as well as governmental programs designed to create incentives for the production and use of cleaner renewable fuels. Governmental programs favoring bio-based diesel production and use Bio-based diesel has historically been more expensive to produce than petroleum-based diesel. The bio-based diesel industry's growth has largely been the result of federal and state programs that require or incentivize the production and use of bio-based diesel, which allows bio-based diesel to be price-competitive with petroleum-based diesel. The RFS2 bio-based diesel requirement was implemented in 2010, stipulating volume requirements for the amount of bio-based diesel and other advanced biofuels that must be utilized inthe 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 satisfy three categories of anObligated Party's annual renewable fuel required volume obligation, or RVO-bio-based diesel, advanced biofuel, and renewable fuel. The final RVO targets for the bio-based diesel and advanced biofuels volumes for the years 2016 to 2021 as set by the EPA are as follows: 30 --------------------------------------------------------------------------------
2016 2017 2018 2019 2020 2021 1.90 billion 2.00 billion 2.10 billion 2.10 billion 2.43 billion 2.43 billion Bio-based diesel gallons gallons gallons gallons gallons gallons 3.61 billion 4.28 billion 4.29 billion 4.92 billion 5.04 billion Total Advanced biofuels RINs* RINs* RINs* RINs* RINs* N/A *Ethanol equivalent gallons (defined as 1 RIN per gallon based on the RIN production of ethanol, where biodiesel equates to 1.5 RINs per gallon and renewable diesel equates to 1.7 RINs per gallon) As of the date of this report, the EPA has not issued the 2021 RVO for Total Advanced biofuels and it is uncertain when the EPA will issue the RVO and at what level the 2021 RVO will be. 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 bio-based diesel with petroleum-based diesel fuel. The BTC became effectiveJanuary 1, 2005 , but sinceJanuary 1, 2010 it has been allowed to lapse and then been reinstated a number of times. The BTC was retroactively reinstated onDecember 20, 2019 for the fiscal years 2018 and 2019. The BTC was also extended throughDecember 31, 2022 . As a result of this history of retroactive reinstatement of the BTC, we and many other bio-based diesel industry producers have adopted contractual arrangements with customers and vendors specifying the allocation and sharing of any retroactively reinstated incentive. The BTC net benefit was allocated to our corresponding quarterly adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") when the business giving rise to the retroactive credit was conducted. Bio-based diesel and feedstock price fluctuations Our operating results generally reflect the relationship between the price of bio-based diesel, including credits and incentives, and the price of feedstocks used to produce bio-based diesel. Bio-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. Bio-based diesel prices have historically been heavily influenced by petroleum-based diesel fuel prices. Accordingly, bio-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 bio-based diesel. LCFS credits, established by the California Low Carbon Fuel Standard regulation, which is a rule designed to reduce greenhouse gas emissions associated with transportation fuels used inCalifornia and the Oregon Clean Fuel Program, have had an increasing impact on our bio-based diesel pricing in those states. In addition, bio-based diesel RIN pricing, a value component that was introduced via RFS2 inJuly 2010 , has had a significant impact on our bio-based diesel pricing in theU.S. The following table shows for 2019, 2020 and the first nine months of 2021 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 OPIS, in terms of dollars per gallon. 31 -------------------------------------------------------------------------------- [[Image Removed: regi-20210930_g1.jpg]] At the beginning of 2021, the value of RINs, as reported by OPIS, to the average B100 spot price of a gallon of biodiesel was$1.48 per gallon. The value of RINs to the average B100 spot price of a gallon of biodiesel increased to$2.12 per gallon at the end ofSeptember 2021 . It reached a high of$3.07 per gallon of biodiesel inJune 2021 and a low of$1.40 per gallon inJanuary 2021 . D4 RIN values trended higher throughout the first nine months of 2021, supported by D6 RIN values in which the D4 category can be used to satisfy anObligated Party's D6 RIN obligation along with an increase in feedstock pricing relative to ULSD as seen in the heating oil to soybean oil ("HOBO") spread. During 2020, RINs were negatively impacted by the overall decrease in demand for transportation fuels due to COVID-19, which translates into reduced volume obligations for Obligated Parties under the RFS. We enter into forward contracts to sell RINs and we use risk management position limits that are intended to manage RIN exposure. During the full year 2020 and the first nine months of 2021, feedstock expense accounted for 80% and 86%, respectively, of our production cost, while methanol and chemical catalysts expense accounted for 3% each in the full year 2020 and 3% and 2%, respectively, in the first nine months of 2021 of our costs of goods sold. Feedstocks for bio-based diesel production, such as distillers corn 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 bio-based diesel and petroleum-based diesel. There are a number of factors that influence the supply and price of our feedstocks, such as the following: bio-based diesel demand; export demand; government policies and subsidies; weather conditions; ethanol production; cooking habits and eating habits; number of restaurants near collection facilities; hog/beef/poultry supply and demand; palm oil supply; soybean meal demand and/or production, and crop production both in theU.S. andSouth America . Increasing production of bio-based diesel and, particularly recent prospective expansion of RD capacity, and the development of alternative fuels and renewable chemicals also put pressure on feedstock supply and availability to the bio-based diesel industry. The bio-based diesel industry may have difficulty procuring feedstocks at economical prices if competition for bio-based diesel feedstocks increases due to newly added production capacity. During 2020 and the first nine months of 2021, 65% and 77%, respectively, of the feedstocks used in our operations were comprised of distillers corn oil, used cooking oil and inedible animal fats, with the remainder coming from virgin vegetable oils. The recent increase in CME Soyoil Futures price has correlated with an increase in price for all of our feedstocks. This has increased the cost of producing bio-based diesel at our refineries. 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 the specified low carbon feedstock for the periodJanuary 2019 to 32 --------------------------------------------------------------------------------September 2021 . 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 low carbon feedstock from the cost of producing one gallon of biodiesel made from soybean oil. [[Image Removed: regi-20210930_g2.jpg]] (1)Used cooking oil ("UCO") prices are based on the monthly average of the daily low sales price of C.I. adjustedGulf of Mexico yellow grease as reported by TheJacobson for the period ofJanuary 1, 2019 throughJune 30, 2019 . The prices fromJuly 1, 2019 throughSeptember 30, 2021 are based on the monthly average of the daily low sales price ofGulf of Mexico used cooking oil as reported by The Jacobsen (based on 8.5 pounds per gallon). (2)Distillers corn oil ("DCO") prices are reported as the monthly average of the daily distillers corn oil market values delivered toIllinois as reported by The Jacobsen (based on 8.2 pounds per gallon). (3)Choice white grease ("CWG") prices are based on the monthly average of the daily low prices ofMissouri River choice white grease as reported by The Jacobsen (based on 8.0 pounds per gallon). (4)Soybean oil (crude) ("SBO") prices are based on the monthly average of the daily closing sale price of the nearby soybean oil contract as reported by CME (based on 7.5 pounds per gallon). Our results of operations generally will benefit when the spread between bio-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, fromJanuary 2019 toSeptember 2021 . 33 -------------------------------------------------------------------------------- [[Image Removed: regi-20210930_g3.jpg]] (1)Biodiesel prices are based on the monthly average of the midpoint of the high and low prices of B100 (Chicago SME) as reported by OPIS. (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 CME (based on 7.5 pounds per gallon). (3)Choice white grease prices are based on the monthly average of the daily low price ofMissouri River choice white grease as reported by The Jacobsen (based on 8.0 pounds per gallon). (4)Distillers corn oil prices are based on based on the monthly average of the daily low price ofIllinois distillers corn oil as reported by The Jacobsen (based on 8.2 pounds per gallon). (5)Spread between biodiesel price and choice white grease price. (6)Spread between biodiesel price and soybean oil (crude) price. (7)Spread between biodiesel price and distillers corn oil price. During the first nine months of 2021, the average NY Harbor ULSD price was$1.96 per gallon, up$0.71 from the fourth quarter of 2020 average of$1.25 per gallon. NY Harbor ULSD prices increased during the first nine months of 2021, from a high of$2.34 per gallon inSeptember 2021 to a low of$1.46 per gallon inJanuary 2021 . Improving demand stemming from the easing of lockdown measures inthe United States and internationally supported the recover in energy prices. In late August, the impact of Hurricane Ida caused energy market prices to increase due to depressed supply as significant crude oil production and refinery capacity were taken offline for an extended period of time. Energy stocks have continued to draw down over the first nine months of 2021 to the lower end of the 5-year range withOPEC and other crude oil producers remaining cautious to ramp up crude oil production. Commodity prices have broadly rallied through the first nine months of the year as increasing interest rates and relatively higher levels of inflation have supported the broader commodity asset class. TheU.S. biodiesel price increased significantly during the first nine months of 2021. The averageU.S. biodiesel price, as indicated by the Chicago SME B100 price reported by OPIS, was$5.15 per gallon for the first nine months of 2021. During the first nine months of 2021, B100 reached a high of$6.15 inJune 2021 and a low of$3.72 inJanuary 2021 . Biodiesel prices increased primarily due to the increase in RIN, energy and agricultural commodity prices. The average soybean oil price for the first nine months of 2021 was$0.58 per pound. Soybean oil prices ranged from a high of$0.72 per pound inJune 2021 to a low of$0.42 per pound inJanuary 2021 . The soybean complex moved lower in the third quarter after peaking in June on improving crop yields and projected carryout levels for the upcoming crop year. 34 -------------------------------------------------------------------------------- Risk Management The profitability of producing bio-based diesel largely depends on the spread between prices for feedstocks and bio-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 are intended to mitigate the impact on our margins from price volatility in feedstocks and bio-based diesel. We create offsetting positions by using a combination of forward fixed-price physical purchases and sales contracts on feedstock and bio-based diesel and risk management futures contracts, swaps and options primarily on theNew York Mercantile Exchange ("NYMEX") NY Harbor ULSD and CME 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. Distillers corn oil, used cooking oil, inedible animal fat, canola oil and soybean oil were the primary feedstocks we used to produce bio-based diesel in 2020 and the first nine months of 2021. 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 low carbon feedstocks. The purchase prices for low carbon feedstocks are generally set on a negotiated flat price basis or spread to a prevailing market price reported by theUSDA price sheet or The Jacobsen. Our efforts to risk manage against changing prices for distillers corn oil, used cooking oil and inedible animal fat have involved entering into futures contracts, swaps or options on other commodity products, such as CME soybean oil and NYMEX NY Harbor ULSD. However, these products do not always experience the same price movements as low carbon feedstocks, making risk management for these feedstocks challenging. We manage feedstock supply risks related to bio-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 CME 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 bio-based diesel prices is limited. We have entered into forward contracts to supply bio-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 derivative market for bio-based diesel inthe United States . Our efforts to hedge against falling bio-based diesel prices generally involve entering into futures contracts, swaps and options on other commodity products, such as diesel fuel and NYMEX NY Harbor ULSD. However, price movements on these products are not highly correlated to price movements of all of the contract components in aggregate of bio-based diesel. We generate 1.5 to 1.7 bio-based diesel RINs for each gallon of bio-based diesel we produce and sell inthe United States . We also obtain RINs from third-party transactions which we hold for resale. There is no established futures market for bio-based diesel 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, however, pricing under those forward contracts generally has been indexed to prevailing market prices as fixed price contracts for long periods have generally not been available. 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 bio-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 which may be in the same or later periods. Our results of operations are impacted when there is a period mismatch of recognized gains or losses associated with the change in fair value of derivative instruments used for risk management purposes at the end of the reporting period but the purchase or sale of feedstocks or bio-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$11.6 million and$0.4 million from our derivative financial instrument activity for the three and nine months endedSeptember 30, 2021 , respectively, compared to a gain of$7.5 million and$56.3 million for the three and nine months endedSeptember 30, 2020 , respectively. Changes in the value of these futures, swaps or options instruments are recognized in current income or loss. 35 -------------------------------------------------------------------------------- Increasing importance of renewable diesel Renewable diesel is made from the same renewable resources as biodiesel but uses a different production process. The result is a renewable fuel that is chemically similar to, and a drop-in replacement for, petroleum diesel. Renewable diesel is a relatively new fuel but has quickly become popular because it reduces emissions and delivers strong performance. Renewable diesel can also be blended with biodiesel. Our proprietary blend of renewable diesel and biodiesel, which we call REG Ultra Clean®, is designed to capture the best properties of the two fuels. Renewable diesel has become an increasingly significant part of our business. Renewable diesel carries a premium price to biodiesel as a result of a variety of factors including the ability to blend it with petroleum diesel seamlessly, better cold weather performance, and its generation of more RINs on a per gallon basis. Our renewable diesel production facility inGeismar, Louisiana generated a significant portion of our adjusted EBITDA in 2020 and in the nine months endedSeptember 30, 2021 . We experienced two fires at this facility in 2015 that each resulted in the plant being shut down for a period of time. If production at this facility were interrupted again due to a fire, a global pandemic such as COVID-19 or for any other reason, it would have a disproportionately significant and material adverse impact on our results of operations and financial condition. 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, renewable diesel, or lower cloud point biodiesel made from soybean oil, canola oil or distillers 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 biodiesel 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 geographies during winter. To mitigate some of these seasonal fluctuations, we upgraded ourNewton andDanville biorefineries in 2018 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 only 20% of the annual RVO of anObligated 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 the market is undersupplied. The table below provides a comparison between actual RIN generation and RVO level for Advanced Biofuel as set by the EPA, together with the impact of the SREs. RIN Generation Finalized RVO
level for Estimated Advanced Biofuel
Period (Advanced Biofuel) Advanced Biofuel RVO Exempted due to SREs 2018 4.34 billion RINs 4.29 billion RINs* 0.34 billion RINs 2019 4.87 billion RINs 4.92 billion RINs* 0.04 billion RINs 2020 5.28 billion RINs 5.04 billion RINs* ** Q3 2021 3.92 billion RINs ** ** *Ethanol equivalent gallons **Not yet determined 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. Bio-based diesel production and/or imports, as reported by EMTS, were 2.65 billion gallons for 2019. The amount of bio-based diesel produced and/or imported into theU.S. in 2020 was 2.88 billion gallons. In the first nine months of 2021, according to EMTS data, 2.16 billion gallons of bio-based diesel were produced and/or imported into theU.S. , compared to the equivalent 2.13 billion gallons over the same period in 2020. 36 -------------------------------------------------------------------------------- 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 inthe 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 endedDecember 31, 2020 the critical accounting policies which materially affect our financial statements. There have been no material changes from the critical accounting policies previously disclosed. You should carefully consider the critical accounting policies set forth in our Annual Report on Form 10-K. Results of Operations Three and nine months endedSeptember 30, 2021 and 2020 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 Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Gallons sold 176.3 176.2 473.7 499.1
Average bio-based diesel price per gallon
Revenues from continuing operations
$ 2,362,305 $ 1,589,220 Cost of goods sold from continuing operations 917,434 498,402 2,076,083 1,387,147 Gross profit 88,908 73,956 286,222 202,073 Selling, general and administrative expenses 34,354 31,059 100,546 86,971 Gain on disposal of property, plant and equipment - - (39) (187) Impairment of assets 3,498 19,256 5,236 19,256 Income from operations 51,056 23,641 180,479 96,033 Other income (expense), net (7,937) 68 (14,739) 3,619 Income tax expense (652) (1,046) (4,535) (4,007) Net income$ 42,467 $ 22,663 $ 161,205 $ 95,645 Effect of participating share-based awards 334 440 1,735 1,895 Net income available to the Company's common stockholders$ 42,133 $ 22,223 $ 159,470 $ 93,750 Results of Operations: Revenues. Even though our gallons sold was flat to slightly down in the three and nine months endedSeptember 30, 2021 , our revenues for these periods increased significantly by$434.0 million and$773.1 million , or 76% and 49%, compared to the respective periods in 2020. The significant increase in revenue was primarily attributable to a substantial increase in the average bio-based diesel price per gallon. In the first nine months of 2021, ULSD prices averaged$1.96 per gallon compared to$1.24 per gallon in the same period in 2020. The significant increase in ULSD prices resulted from general market optimism and improving demand stemming from the easing of lockdown measures inthe United States and internationally, particularly when compared to the third quarter of 2020 where prices were slowly starting to rebound from historical lows due to the onset of the COVID-19 pandemic and strict lockdowns. RIN values trended higher throughout the first nine months of 2021 along with an increase in feedstock pricing relative to ULSD values as seen in the heating oil to soybean oil ("HOBO") spread. As a result of these factors, our average selling price significantly increased by$1.85 and$1.48 , or 64% and 52%, respectively, in the three and nine months endedSeptember 30, 2021 , compared to the same periods in 2020. The increase in our revenues for the nine months endedSeptember 30, 2021 was partially offset by a decrease of 25.4 million, or 5%, in total gallons sold for the same period as a result of our focus on product mix and optimization of gallons sold. 37 -------------------------------------------------------------------------------- The increase in the average sales price contributed to a$326.0 million and$738.7 million increase in revenues for the three and nine months endedSeptember 30, 2021 , respectively, when applied to the number of gallons sold in the comparable 2020 periods. The increase in RIN prices also positively affected separated RIN sales resulting in revenue increases of$114.9 million and$169.4 million , or an increase of 418% and 242%, respectively, for the three and nine months endedSeptember 30, 2021 compared to the same periods in 2020. The decrease in gallons sold for the three and nine months endedSeptember 30, 2021 accounted for a revenue decrease of$0.5 million and$110.5 million , using the average selling price for bio-based diesel for the applicable periods. Also negatively affecting revenues was the$15.7 million decrease in government incentives revenue in the nine months endedSeptember 30, 2021 , caused by lower BTC revenues due to lower gallons sold. Costs of goods sold. Our costs of goods sold increased$419.0 million and$688.9 million , or 84% and 50%, respectively, for the three and nine months endedSeptember 30, 2021 , compared to the same periods in 2020. Costs of goods sold as a percentage of revenues were 91% and 87%, respectively, for the three and nine months endedSeptember 30, 2021 , and 87% for each of the three and nine months endedSeptember 30, 2020 . The increase in costs of goods sold was primarily driven by significantly higher feedstock costs in the quarter and the first nine months endedSeptember 30, 2021 compared to same periods in 2020, as described below. The increase was driven up by risk management losses of$11.6 million and$0.4 million , respectively, in the three and nine months endedSeptember 30, 2021 compared to gains of$7.5 million and$56.3 million in the same periods in 2020. For the three months endedSeptember 30, 2021 , risk management losses resulted primarily from significant increases in ULSD prices. For the nine months endedSeptember 30, 2021 , risk management losses stemming from significant ULSD price increases were largely offset by risk management gains related to significant soybean oil price increases. In 2020, the historically low level of energy prices due to the COVID-19 pandemic resulted in risk management gains. We experienced significantly higher costs across all of our feedstocks in the three and nine months endedSeptember 30, 2021 . Average prices for low carbon feedstocks used in our production were$0.58 and$0.49 , respectively, per pound for the three and nine months endedSeptember 30, 2021 , as compared to$0.29 per pound for both the three and nine months endedSeptember 30, 2020 . Average soybean oil costs were$0.71 and$0.58 , respectively, per pound for the three and nine months endedSeptember 30, 2021 , as compared to$0.30 per pound for both the three and nine months endedSeptember 30, 2020 . Average canola oil costs were$0.72 and$0.61 , respectively, per pound for the three and nine months endedSeptember 30, 2021 , as compared to$0.31 per pound for both the three and nine months endedSeptember 30, 2020 . Average distillers corn oil costs were$0.59 and$0.50 , respectively, per pound for the three and nine months endedSeptember 30, 2021 , as compared to$0.26 per pound for both the three and nine months endedSeptember 30, 2020 . Selling, general and administrative expenses. Our selling, general and administrative expenses were$34.4 million and$100.5 million , respectively, for the three and nine months endedSeptember 30, 2021 , or 3% and 4%, respectively, of total revenue for the periods, and$31.1 million and$87.0 million , respectively, or 5% for both periods, of total revenue, compared to the same periods in 2020. The increases of$3.3 million and$13.6 million , or 11% and 16%, respectively, resulted primarily from higher employee related compensation and benefits and legal and professional expenses. Impairment of assets. During the three and nine months endedSeptember 30, 2021 , we recorded impairment charges of$3.5 million and$5.2 million related to certain equipment and intangible assets deemed not recoverable given the assets' economic obsolescence. During the same periods of 2020, we recorded impairment charges of$19.3 million related to certain equipment resulting from the probability that the assets will no longer be utilized in future renewable diesel production expansions or are deemed not recoverable given the assets' deteriorating physical conditions. Other income (expense), net. Other expense was$7.9 million and$14.7 million , respectively for the three and nine months endedSeptember 30, 2021 , compared to other income of$0.1 million and$3.6 million , respectively, for the same periods in 2020. Other income (expense) is primarily comprised of gain (loss) on debt extinguishment, interest expense, interest income and other non-operating items. The change in other expense for the three and nine months endedSeptember 30, 2021 was mainly due to interest expense of$8.6 million and$14.0 million , respectively, primarily due to the issuance of our Green Bonds, compared to interest expense of$1.5 million and$6.2 million for the same respective periods in 2020. There was also no gain on lease termination for the three and nine months of 2021 compared to the gain of$4.5 million on lease termination in the first nine months in 2020. The increase in expense was also due to the loss on debt extinguishment in the nine months endedSeptember 30, 2021 of$4.4 million , compared to gains on debt extinguishment of$1.8 million , for the same period in 2020. Income tax expense. We recognized an income tax expense of$0.7 million and$4.5 million , respectively, for the three and nine months endedSeptember 30, 2021 , as compared to an income tax expense of$1.0 million and$4.0 million , respectively, for the same periods in 2020. Our tax provision for an interim period is determined using an estimate of our annual effective tax rate, adjusted for discrete items arising in that period. Our effective tax rate differs from the statutory tax rate primarily due to the fact that we have a valuation allowance on our domestic deferred tax assets and most of our foreign deferred tax assets. 38 --------------------------------------------------------------------------------
Effects of participating share-based awards. Effects of participating
share-based awards was
Non-GAAP Financial Measures: Adjusted EBITDA Earnings before interest, taxes, depreciation and amortization ("EBITDA") and adjusted EBITDA are not measures of financial performance under GAAP. We use EBITDA and EBITDA adjusted for certain additional items, identified in the table below, or Adjusted EBITDA, as a supplemental performance measure. We present EBITDA and Adjusted EBITDA because we believe they assist investors in analyzing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Adjusted EBITDA to evaluate, assess and benchmark our financial performance on a consistent and a comparable basis and as a factor in determining incentive compensation for our executives. Three months Three months Nine months Nine months ended September ended September ended September ended September (In thousands) 30, 2021 30, 2020 30, 2021 30, 2020 Net income$ 42,467 $ 22,663 $ 161,205 $ 95,645 Adjustments: Income tax expense 652 1,046 4,535 4,007 Interest expense 8,619 1,545 14,007 6,154 Depreciation 11,098 9,388 33,100 27,425 Amortization of intangible and other assets 876 591 2,467 1,262 EBITDA$ 63,712 $
35,233
Gain on sale of assets - - (39) (187) (Gain) loss on debt extinguishment - (18) 4,449 (1,809) Gain on lease termination - - - (4,459) Interest income (1,420) (777) (3,916) (1,327) Other (income) expense, net 738 (818) 199 (2,178) Impairment of assets 3,498 19,256 5,236 19,256 Executive severance - - 663 - Stock compensation 1,964 1,811 5,770 5,789 Adjusted EBITDA$ 68,492 $ 54,687 $ 227,676 $ 149,578 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 (loss) 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 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 our industry, may calculate these measures differently than we do, limiting their usefulness as a comparative measure. 39 -------------------------------------------------------------------------------- Liquidity and Capital Resources Our principal sources of liquidity are existing cash balances, marketable securities, cash generated by our operations and our ability to borrow under our revolving credit facilities, or such credit facilities as we may be able to obtain from time to time. Our principal uses of liquidity are paying the costs and expenses associated with our operations, servicing outstanding indebtedness and making capital expenditures. Our cash requirements will also depend on capital expenditures in connection with future facility projects, such as our announced capacity expansion of ourGeismar, Louisiana biorefinery and expenditures in connection with future acquisitions of assets or businesses that are complementary to our operations or part of our growth strategies. OnMarch 19, 2021 , the Company completed an equity offering pursuant to which it sold 5,750,000 shares of common stock to various underwriters at a price of$67.00 per share before underwriting discounts and commissions. The net proceeds from the offering were$365.3 million . We currently intend to use the net proceeds from this offering for working capital and other general corporate purposes, which may include the repayment of our existing indebtedness and the funding of capital expenditures, including capital expenditures related to the improvements and expansion of ourGeismar, Louisiana biorefinery. We may also use a portion of the net proceeds from this offering to finance potential strategic transactions, although we currently have no binding commitments or agreements to complete any such transaction. OnMay 20, 2021 , the Company completed the sale and issuance of$550.0 million aggregate principal amount of our Green Bonds due 2028. The Company recorded$14.6 million in legal, professional and underwriting fees related to the issuance of the Green Bonds. The Company currently intends to use the net proceeds from the Green Bonds for capital expenditures related to the improvements and expansion of itsGeismar, Louisiana biorefinery. Sources of liquidity. AtSeptember 30, 2021 , the total of our cash and cash equivalents and marketable securities was$1,044.5 million , compared to$354.0 million atDecember 31, 2020 . AtSeptember 30, 2021 , we had total assets of$2,444.2 million , compared to$1,461.4 million atDecember 31, 2020 . AtSeptember 30, 2021 , we had term debt before debt issuance costs of$550.0 million , compared to term debt of$67.0 million atDecember 31, 2020 . Our debt is subject to various financial covenants. We were in compliance with all financial covenants associated with our borrowings as ofSeptember 30, 2021 . Our term debt (in thousands) is as follows: September 30, 2021 December 31, 2020 5.875% Senior Secured Green Bonds, due 2028 $ 550,000 $ - 4.00% Convertible Senior Notes - 47,057 REG Capital term loan - 6,665 REG Ralston term loan - 13,241 Other 3 14 Total term debt before debt issuance costs $ 550,003 $ 66,977 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 endedDecember 31, 2020 . 2036 Convertible Senior Notes In the first half of 2021, the Company received notices of conversions related to the 2036 Convertible Senior Note in total principal amounts of$59.6 million . We elected to settle the respective principal balance of$59.6 million in cash and settle the conversion premium by issuing 4,684,263 shares of common stock from treasury stock. The 2036 Convertible Senior Notes were fully converted as ofJune 2021 and all obligations thereto have been satisfied and discharged. During the three and nine months endedSeptember 30, 2020 , we used$18.1 million and$75.9 million to repurchase$5.0 million and$30.0 million principal amount of the 2036 Convertible Senior Notes, respectively.
In addition, we had revolving debt (in thousands) as follows:
September 30, 2021 December 31, 2020 Amount outstanding under line of credit $ - $ -
Maximum available to be borrowed under line of credit $ 249,666 $ 149,666
40 -------------------------------------------------------------------------------- OnSeptember 30, 2021 , the Company amended its Credit Agreement withWells Fargo Capital Finance, LLC , as agent, in order to increase the maximum commitment under the M&L and Services Revolver from$150.0 million to$250.0 million . Availability under this is subject to a borrowing base and if availability is less than 10% of the maximum commitment, ($15.0 million prior to giving effect to the amendment and$25.0 million after giving effect to the amendment), then the subsidiary borrowers are required to maintain a fixed charge coverage ratio of at least 1.0 to 1.0. Prior to giving effect to this amendment, as ofDecember 31, 2020 , the subsidiary borrowers would not have been able to satisfy that fixed charge coverage ratio if availability was less than 10% of the maximum commitment. Cash flows. The following table presents information regarding our cash flows and cash and cash equivalents for the nine months endedSeptember 30, 2021 and 2020 (in thousands): Nine Months September 30, 2021 2020 Cash provided by (used in) operating activities$ (43,405) $ 554,384 Cash used in investing activities (256,549) (333,484) Cash provided by financing activities 802,269 (174,229) Net change in cash, cash equivalents and restricted cash 502,315 46,671
Cash, cash equivalents and restricted cash end of period
In the first nine months of 2021, we used$43.4 million of cash in operations, compared to cash generated from operations of$554.4 million in the first nine months of 2020. The increase in cash used was largely driven by a decrease in collection of receivables of$724.7 million due to the partial collection of the 2019 and 2018 BTC in 2020, combined with an increase in inventory build in the first nine months of 2021 of$164.8 million compared to inventory draw in the first nine months of 2020 of$15.4 million , mainly due to the increase of feedstock costs. These increases in cash used in operations were partially offset by a smaller decrease in outstanding accounts payable for the first nine months of 2021 of$17.8 million compared to a decrease in accounts payable in the same period of 2020 of$228.7 million , largely due to the payment of amounts due to customers for BTC sharing, and an increase in net income ($161.2 million for the nine months endedSeptember 30, 2021 as compared to a net income of$95.6 million for the nine months endedSeptember 30, 2020 ). The increase in the net income for the nine months endedSeptember 30, 2021 was primarily due to better margins. We used$256.5 million of cash in investing activity in the first nine months of 2021, compared to$333.5 million of cash used in investing activities in the first nine months of 2020. The decrease in cash used by investing activities was primarily due to net investments of$191.9 million in high quality marketable securities, compared to net investments of$286.7 million in marketable securities in 2020, partially offset by our use of$63.1 million of cash for property, plant and equipment purchases and plant upgrades in 2021 compared to purchases of property, plant, and equipment of$46.9 million in 2020. Cash flows provided by financing activities for the nine months endedSeptember 30, 2021 was$802.3 million compared to cash used in financing activities of$174.2 million for the nine months endedSeptember 30, 2020 . The$976.5 million increase was primarily due to the net proceeds of$535.1 million from the Green Bonds issuance inMay 2021 and of$365.3 million from the equity offering inMarch 2021 . There were no net borrowings on the revolving line of credit in the first nine months of 2021 compared to a net repayments of$77.0 million in the same period in 2020. Capital expenditures. During the nine months endedSeptember 30, 2021 , our capital expenditures were$63.1 million involving various plant optimization projects and theGeismar expansion. During 2020, our total capital expenditures were$63.6 million involving various projects, the majority of which were at theEmden (Germany ),Seneca , andGeismar facilities. InOctober 2020 , we announced that we plan to expand the effective capacity of ourGeismar, Louisiana biorefinery. TheGeismar project brings together the improvement project for the existing site and planned expansion . TheGeismar project is expected to take total site production capacity from 90 million to 340 million gallons, enhance existing operations and improve operational reliability and logistics. The improvement and expansion project is expected to be mechanically complete in 2023 with full operations in early 2024. The capital cost for theGeismar project is estimated to be$950 million . We have recently broke ground to proceed with construction, which is funded through a combination of cash on hand and marketable securities resulting from our offerings of common stock that closed inMarch 2021 and our Green Bonds that closed inMay 2021 or from borrowings under our credit facilities and other sources. In connection with the planned improvements and expansion, we have entered into construction and marine terminal lease agreements with total commitments as ofSeptember 30, 2021 of$430 million . There can be no guarantee that we will be able to increase the capacity of our biorefinery atGeismar, Louisiana on time, at our estimated budget, or at all. The improvements and expansion are subject to a number of conditions and risks. 41
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We estimate that the capital spending for the project will be approximately 15% in 2021, 45% in 2022, with the remainder of spend slated for 2023. At the end ofOctober 2021 , we had ordered over 80% of long lead equipment for the project. For capital spend beyondGeismar , we remain on track with our board-approved plan which included approximately$20 million for safety, reliability and asset integrity and approximately$30 million for high return/rapid payback projects. 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.
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