Inventories at March 31, 2012 were $77.6 million, an increase of $35.5 million from December 31, 2011. The increase in inventories was largely attributable to the five million gallons of biodiesel production shipped under three contracts in January and February to customers who intend to sell the product in Q2. Although the biodiesel was in storage at a third party terminal site sub-leased by our customers as of March 31, 2012, the gallons cannot be recognized in revenue in accordance with GAAP revenue recognition rules until the second quarter.

In connection with our IPO in January, we converted the Series A Preferred that was on our balance sheet at $147.8 million at year end, and certain common stock warrants into 7,660,612 shares of newly issued Class A Common Stock and 2,999,493 shares of $75.0 million stated value aggregate Series B Preferred with a 4.5% annual dividend. This conversion resulted in a recapitalization gain of $39.1 million.

Adjusted EBITDA Reconciliation

REG presents Adjusted EBITDA because the company believes it assists investors in analyzing its performance across reporting periods on a consistent basis. In addition, REG uses Adjusted EBITDA to evaluate, assess and benchmark its financial performance on a consistent and comparable basis. REG excludes non-cash stock-based compensation and other non-cash other income (expense) items because it does not believe that they are indicative of the company’s ongoing operating performance. REG’s measure of Adjusted EBITDA might be different than similar financial measures used by other companies. Non-GAAP metrics are not determined in accordance with GAAP and are not a substitute for or superior to financial measures determined in accordance with GAAP. Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA by Revenues.
Three Months Ended
March 31,
(In thousands) 2012     2011
Net income $ 14,017 $ 3,736
Loss from equity investments - 65
Income tax expense 1,363 -
Interest expense 1,053 1,708
Other income (expense), net (37 ) (275 )
Change in fair value of Seneca Holdco liability (349 ) (727 )
Change in fair value of preferred stock conversion
feature embedded derivatives (11,975 ) (2,557 )
Stock issued for glycerin agreement termination 1,898 -
Straight-line lease expense (102 ) 798
Depreciation 2,026 1,689
Amortization (139 ) (130 )
Non-cash stock compensation   4,964     990  
Adjusted EBITDA $ 12,719   $ 5,297  

First Quarter Conference Call

REG will sponsor a conference call to discuss results today at 4:30 p.m. EDT/3:30 p.m. CDT. Daniel J. Oh, President and Chief Executive Officer, and Chad Stone, Chief Financial Officer, will host the call.

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