Rentech Nitrogen Partners, L.P. (NYSE: RNF) today announced its
results for the three months ended December 31, 2011.
Rentech Nitrogen Partners, L.P. (Rentech Nitrogen), located in
East Dubuque, IL, manufactures and sells nitrogen fertilizer
products including ammonia, urea ammonia nitrate (UAN) and liquid
and granular urea in the Mid Corn Belt region of the United
States.
For the three months ended December 31, 2011, Rentech Nitrogen
generated net income of $10.5 million, which included $10.3 million
of loss on extinguishment of debt. This compares to net income of
$4.3 million for the three months ended December 31, 2010, which
included $4.6 million of loss on extinguishment of debt.
Rentech Nitrogen generated net income subsequent to its initial
public offering (November 9, 2011 through December 31, 2011) of
$11.3 million or $0.30 per common unit. Excluding loss on
extinguishment of debt, net income for the same period was $21.6
million or $0.56 per common unit. Further explanation of net income
excluding non-recurring items, a non-GAAP financial measure, and a
reconciliation of consolidated net income excluding non-recurring
items to net income have been included below in this press
release.
During the three months ended December 31, 2011, Rentech
Nitrogen generated operating income of $22.6 million as compared to
$14.6 million during the comparable period in the prior year.
Rentech Nitrogen generated $25.9 million of EBITDA for the three
months ended December 31, 2011, as compared to $17.2 million in the
comparable period in the prior year. Further explanation of EBITDA,
a non-GAAP financial measure, and a reconciliation of Rentech
Nitrogen’s EBITDA to operating income have been included below in
this press release.
Rentech Nitrogen completed a scheduled bi-annual plant
turnaround in the fall of 2011 which included approximately 15.5
days of plant downtime in October 2011. This reduced EBITDA during
the three months ended December 31, 2011, due to lost production
and $3.0 million in turnaround expenses.
Commenting on the results for the period, D. Hunt Ramsbottom,
CEO of Rentech Nitrogen, stated, “Rentech Nitrogen reported
exceptional results which benefitted from strong product pricing.
We continue to see robust fundamentals driving nitrogen demand,
especially in our core market of the Mid Corn Belt region. We
expect natural gas prices to remain at low levels which will
continue to positively impact product margins.” Mr. Ramsbottom
added, “We implemented several production efficiency-related
improvements at the plant during the last bi-annual turnaround,
which resulted in record production rates and lower natural gas
usage. We are focused on maximizing margins and maintaining high
on-stream times at the plant.”
Rentech Nitrogen produced 63,000 tons of ammonia during the
three months ended December 31, 2011, of which 30,000 tons were
available for sale as ammonia, 28,000 tons were upgraded into UAN
and 5,000 tons were upgraded into other nitrogen products. In the
comparable period in the prior year, Rentech Nitrogen produced
75,000 tons of ammonia, of which 34,000 tons were available for
sale as ammonia, 35,000 tons were upgraded into UAN and 6,000 tons
were upgraded into other nitrogen products. Production figures are
rounded to the nearest thousand.
On-stream factors during the period were 83.7% for the ammonia
synthesis loop and 84.8% for the UAN conversion facility. On-stream
rates reflect downtime related to the scheduled bi-annual plant
turnaround.
During the three months ended December 31, 2011, Rentech
Nitrogen’s average prices for ammonia and UAN, its primary
products, were $684 per ton and $307 per ton, respectively,
compared to $512 per ton and $193 per ton, respectively, for the
comparable period in the prior year.
Rentech Nitrogen delivered 55,000 tons of ammonia, 65,000 tons
of UAN and 10,000 tons of other nitrogen products during the three
months ended December 31, 2011 as compared to 44,000 tons of
ammonia, 79,000 tons of UAN and 10,000 tons of other nitrogen
products during the comparable period in the prior year. Delivered
tons are rounded to the nearest thousand.
Revenues for the three months ended December 31, 2011 were $63.0
million, as compared to $43.0 million for the comparable period in
the prior year. Current period revenues benefitted from higher
sales prices caused by a combination of low levels of grain and
fertilizer inventories and expectations of higher corn acreage in
2012.
Gross profit margin on product shipments was 46% for the period,
up from 38% for the comparable period in the prior year. The
increase was primarily due to higher sales prices, partially offset
by lower margins received on the sale of approximately 12,000 tons
of purchased ammonia sold at a profit margin lower than that for
manufactured product, and higher natural gas costs included in cost
of sales for delivered product.
In the three months ended December 31, 2011, $10.3 million was
recorded as loss on debt extinguishment as compared to $4.6 million
recorded in the comparable period in the prior year.
Company Outlook
The Company provided the following summary of progress against
the forecast that was contained in its prospectus dated November 3,
2011:
Prospectus Forecast for 12
Months Ending 9/30/121
Locked-in and/or Delivered
(as of 1/31/12)
Average Required to Meet
Forecast
Average Price per ton:
Ammonia
UAN
$663
$328
$701$342 $588
$313
Natural Gas in Cost of Sales
Consumed (million MMBtus)
Average Cost per MMBtu
10.4
$4.95
8.8
$4.37
$8.06
Tons Sold:
Ammonia
UAN
140,534
273,806
93,472 or 67%142,117 or 52%
Total Revenue($ in million)
$203.8 Ammonia: 70%
UAN: 54%
Adjusted EBITDA2
($ in million)
$96.9
Cash Available for Distribution
(excludes interest expense)
$2.34
1The forecast for the 12 months ending September 30, 2012
reflects costs and lost profits of scheduled downtime for the
bi-annual turnaround during October 2011. Forecast is as presented
in the Rentech Nitrogen Partners, L.P. prospectus dated November 3,
2011.
2A reconciliation of forecasted Cash Available for Distribution
and Adjusted EBITDA is available in the Rentech Nitrogen Partners,
L.P. prospectus dated November 3, 2011.
The Company has secured 84% of the natural gas required for
product forecasted to be delivered during the twelve months ending
September 30, 2012. The Company has entered into gas purchase
commitments for approximately 3.5 million MMBtus in excess of its
needs to produce product sold under pre-paid sales contracts at an
average price of $3.19, excluding transportation costs. Over half
of these forward natural gas commitments were purchased below $2.90
per MMBtu.
Rentech Nitrogen has secured strong product pricing in its
spring forward sales book. The Company believes it properly gauged
the market and sold a significant portion of its spring book during
the September/October window last year when pricing for spring
deliveries was at a premium. The Company sold limited additional
tonnage in late December through February when product prices were
softer. The premium pricing Rentech Nitrogen captured is reflected
in the average pre-sold product prices for spring delivery, of $741
per ton for ammonia and $386 per ton for UAN, which are well above
prices offered during last December through February. Product
prices have strengthened recently, and the Company anticipates
further nitrogen price appreciation as the spring season develops.
Rentech Nitrogen sees factors such as record forecasted planted
acres and high corn prices as positive indicators to support its
view.
Expansion Projects
Ammonia Capacity Expansion: The expansion project currently
underway at the Company’s plant remains within budget and on
schedule, to be completed by the end of 2013. The expansion project
is designed to increase ammonia production capacity by
approximately 23%, or 70,000 tons annually, and includes the
addition of a 20,000 ton ammonia storage tank. The expansion will
bring Rentech Nitrogen’s annual ammonia production capacity to
approximately 370,000 tons, and will increase on-site ammonia
storage capacity to 60,000 tons. Rentech Nitrogen also has access
to 15,000 tons of leased ammonia storage in Niota, IL. The
additional ammonia production is expected to be sold primarily as
ammonia, but could also be available for upgrade to other products.
Rentech Nitrogen continues to expect the expansion project to
generate a return of greater than 20%, given current expectations
for pricing of products and costs of natural gas.
In February 2012, Rentech Nitrogen secured a $100 million
multiple draw term loan (Capital Expenditures Facility) to finance
the entire projected cost of the ammonia production and storage
capacity expansion. GE Capital served as administrative agent and
GE Capital Markets served as sole lead arranger and book-runner on
the financing which also included a $35 million working capital
credit facility (Working Capital Facility). Simultaneously with the
closing of the Capital Expenditures Facility and the Working
Capital Facility, Rentech Nitrogen Partners terminated the bridge
loan facility provided by Rentech, Inc., which was put in place in
December 2011 to continue the expansion project while the Capital
Expenditures Facility was being negotiated and finalized. The
Company has drawn approximately $8.5 million on the Capital
Expenditures Facility to repay the outstanding principal under the
bridge loan facility and to pay fees associated with the new credit
facility.
Urea Expansion and Diesel Exhaust Fluid Build-Out (DEF): The
expansion project to increase urea production capacity by
approximately 13%, or 17,500 tons annually, remains within budget
and on schedule, to be completed by the end of 2012. The additional
urea could be marketed as liquid urea or upgraded into UAN, both of
which typically sell at a premium to ammonia per unit of nitrogen.
As a part of this project, mixing, storage and load-out equipment
will be installed that would enable the production and sale of DEF
from urea produced at the facility. The project is expected to
generate a return of greater than 20%, given current expectations
for pricing of products and costs of natural gas.
The plant has begun a new scoping study to evaluate the
possibility of increasing product upgrading capacity at the
facility.
Change in Fiscal Year
Rentech Nitrogen previously announced that the Board of
Directors has approved a change of the Company’s fiscal year end to
December 31st from September 30th. With this change, Rentech
Nitrogen’s 2012 fiscal year began on January 1, 2012 and will end
on December 31, 2012.
Conference Call with Management
The Company will hold a conference call on Friday, March 16,
2012 at 10:00 a.m. PDT, during which time senior management will
review the Company's financial results for this period and provide
an update on corporate developments. Callers may listen to the live
presentation, which will be followed by a question and answer
segment, by dialing 800-920-6941 or 212-231-2900. An audio webcast
of the call will be available at www.rentechnitrogen.com within the
Investor Relations portion of the site under the Presentations
section. A replay will be available by audio webcast and
teleconference from 12:00 p.m. PDT on March 16 through 12:00 p.m.
PDT on March 23. The replay teleconference will be available by
dialing 800-633-8284 or 402-977-9140 and the reservation number
21575040.
RENTECH NITROGEN PARTNERS, L.P.
STATEMENTS OF OPERATIONS
(Stated in thousands, except per unit
data)
For the Three
Months Ended December 31, 2011 2010
Total Revenues $ 63,014 $ 42,962
Cost of Sales 37,460 26,835
Gross Profit 25,554 16,127
Operating
Expenses 2,906 1,543
Operating Profit 22,648 14,584
Interest Income 14 13 Interest Expense (1,947 ) (2,912 )
Loss on Debt Extinguishment (10,263 ) (4,593 ) Other Income, Net
3 4
Total Other Expenses
(12,193 ) (7,488 )
Income before income taxes 10,455
7,096
Income tax expense - 2,772
Net Income $ 10,455 $ 4,324
Net Income Subsequent to Initial
Public
Offering (November 9, 2011 through
December 31, 2011)
$ 11,331
Net Income per Common Unit – Basic $ 0.30
Net Income per Common Unit – Diluted $ 0.30
Weighted
Average Units: Basic 38,250 Diluted 38,255
RENTECH
NITROGEN PARTNERS, L.P.
For the Three Months Ended December 31,
2011 2010
Nitrogen Fertilizer Key Operating
Statistics for Primary Products:
Delivered Tons (in thousands)
Ammonia
55 44 UAN 65 79
Average Price per Delivered Ton
Ammonia $ 684 $ 512 UAN $ 307 $ 193
Natural Gas
Natural Gas Used in Production
(Million MMBtu)
2.3 2.8 Average Natural Gas Cost per MMBtu $ 4.71 $ 4.82
On Stream Rates:
Ammonia Synthesis Loop
83.7 % 100.0 % UAN Conversion Facility 84.8 % 100.0 %
Disclosure Regarding Non-GAAP Financial Measures
To supplement Rentech Nitrogen’s financial information presented
in accordance with GAAP, management uses EBITDA, an additional
measure that is known as a “non-GAAP financial measure,” in its
evaluation of past performance.
Management believes that the presentation of such additional
financial measure provides useful information to investors
regarding Rentech Nitrogen’s performance and results of operations
because this measure, when used in conjunction with related GAAP
financial measures, provides investors with additional information
about Rentech Nitrogen’s core operating performance and the
financial analytical framework upon which management bases
financial, operational and planning decisions.
Net income excluding non-recurring items is a presentation of
net income attributable to Rentech Nitrogen adjusted for
non-recurring items, such as loss on extinguishment of debt.
EBITDA is a presentation of earnings before interest, taxes,
depreciation and amortization. Note that the majority of Rentech
Nitrogen’s depreciation expense is booked to cost of sales.
Management believes that EBITDA can be a useful indicator of the
fundamental operating performance of Rentech Nitrogen’s business
and fertilizer production facility. Management believes that EBITDA
can help investors evaluate Rentech Nitrogen’s operating
performance by eliminating the effects of depreciation and
amortization, which are non-cash expenses, and of interest and
taxes, which are non-operating expenses. Management believes that
its investors may use EBITDA as a measure of the operating
performance of Rentech Nitrogen.
Rentech Nitrogen recommends that investors carefully: review the
GAAP financial information (including its Statements of Cash Flows)
included as part of its Annual Report on Form 10-K, and its
earnings release; compare GAAP financial information with the
non-GAAP financial measures disclosed in its earnings release and
investor call; and read the reconciliation below.
Calculation of Net Income Excluding Non-Recurring Items
(Stated in thousands, except per unit data)
For the Three Months Ended December
31, 2011
2010 Net Income
$
10,455
$
4,324
Loss on Debt Extinguishment 10,263 4,593 Net Income
Excluding Non-Recurring Items $ 20,718 $ 8,917 Net Income
Subsequent to Initial Public Offering (IPO)
$
11,331
Loss on Debt Extinguishment 10,263 Net Income Subsequent to
IPO Excluding Non-Recurring Items $ 21,594 Net Income per Unit
$
0.30
Loss on Debt Extinguishment per Unit 0.26 Net Income per
Unit Excluding Non-Recurring Items $ 0.56
Rentech
Nitrogen EBITDA Reconciliation (Stated in thousands)
For the Three Months
Ended December 31, 2011 2010
Operating Income
$
22,648
$
14,584
Depreciation and Amortization 3,287 2,601 EBITDA $
25,935 $ 17,185
About Rentech Nitrogen, L.P.
Rentech Nitrogen (www.rentechnitrogen.com) was formed by Rentech, Inc. to own, operate and
expand its nitrogen fertilizer business. Rentech Nitrogen’s assets
consist of a nitrogen fertilizer facility located in East Dubuque,
Illinois, owned by Rentech Nitrogen, LLC, its operating subsidiary.
The facility is located in the Mid Corn Belt in the northwestern
corner of Illinois, adjacent to the Iowa and Wisconsin state lines,
and produces primarily anhydrous ammonia and urea ammonium nitrate
solution, using natural gas as its primary feedstock, for sale to
customers in the Mid Corn Belt.
Safe Harbor Statement
This press release contains forward-looking statements as
defined in the Private Securities Litigation Reform Act of 1995
about matters such as: our forecasted cash available for
distribution and EBITDA for the twelve months ending September 30,
2012 (please see pages 69-76 of the Rentech Nitrogen prospectus
dated November 3, 2011 as filed pursuant to Rule 424(b)(4) with the
Securities and Exchange Commission on November 7, 2011 for further
details on the cash forecast); the outlook for our nitrogen
fertilizer businesses during the twelve months ending September 30,
2012; and the costs and projected performance of our expansion
projects. These statements are based on management’s current
expectations and actual results may differ materially as a result
of various risks and uncertainties. Other factors that could cause
actual results to differ from those reflected in the
forward-looking statements are set forth in Rentech Nitrogen’s
prior press releases and periodic public filings with the
Securities and Exchange Commission, which are available via Rentech
Nitrogen’s website at www.rentechnitrogen.com. The forward-looking
statements in this press release are made as of the date of this
press release and Rentech Nitrogen does not undertake to revise or
update these forward-looking statements, except to the extent that
it is required to do so under applicable law.
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