Rentech, Inc. (NASDAQ: RTK) today announced its results for the
three and nine months ended September 30, 2013. Rentech owns and
operates wood fibre processing and nitrogen fertilizer businesses.
Rentech also owns technologies designed to produce certified
synthetic fuels and renewable power, when integrated with
third-party technologies, that it is seeking to license or
sell.
Rentech’s financial results reflect the consolidated results of
Rentech, Inc. and its subsidiaries, including its wood fibre
processing business and Rentech Nitrogen Partners, L.P. (Rentech
Nitrogen). The results of the wood fibre processing business are
reported as two operating segments: Fulghum Fibres (wood chipping)
and wood pellets. The results of Rentech Nitrogen are reported as
the nitrogen products manufacturing subsidiary of Rentech, which
includes two operating segments: the East Dubuque Facility and the
Pasadena Facility. Results of the energy technologies business are
reported in a separate segment.
D. Hunt Ramsbottom, President and CEO of Rentech, said, “We are
extremely pleased with the performance in our wood fibre processing
business, as Fulghum Fibres generated solid gross margin of 19% and
progress continues to be made on our two wood pellet production
facilities. Fulghum remains on track to generate annualized
revenues and EBITDA of $95 million and $20 million, respectively.
Construction of the Atikokan and Wawa pellet facilities in Eastern
Ontario commenced in August, and we remain on schedule to meet our
pellet delivery obligations to OPG and Drax next year.”
Mr. Ramsbottom continued, “The nitrogen fertilizer business
reported cash distributions that were in line with our expectations
reflected in our guidance of August 8. Although prices for our
products, and all nitrogen products, have declined significantly
from earlier in the year, we expect the nitrogen market to improve
during the fourth quarter as we believe buyers are deferring
additional purchases until this year’s late harvest is completed.
This could lead to improved pricing and volumes as we move into
fall and spring application periods.” Mr. Ramsbottom added, “The
turnaround at the East Dubuque Facility was completed safely and on
time. We’re now in the commissioning phase of our ammonia
production and storage capacity expansion project at the facility.
We expect to commence the ammonium sulfate expansion and
reliability enhancement projects at our Pasadena Facility next
month. The additional volume from these expansion projects should
position us well in 2014.”
Financial Highlights
Three months ended September 30,
2013
Consolidated revenues for the three months ended September 30,
2013 increased by $55.6 million to $115.8 million compared to the
prior-year period, comprised of:
- $22.4 million from Fulghum Fibres;
and
- An increase of $33.2 million from the
nitrogen products manufacturing subsidiary, which reflected $42.7
million of revenues from the Pasadena Facility, partially offset by
a 16% decline in revenues from the East Dubuque Facility.
Gross profit for the three months ended September 30, 2013 was
$21.2 million, a decrease of $13.8 million compared to the
prior-year period, and which included the following:
- 19% gross margin at Fulghum Fibres;
and
- A decline in gross margin at the
nitrogen products manufacturing subsidiary to 18% from 58% in the
prior-year period, primarily due to the acquisition of the Pasadena
Facility, which typically realizes lower gross margin than the East
Dubuque Facility. Gross margin at the Pasadena Facility was
negative, reflecting write-downs of inventory, during the
period.
Operating loss for the three months ended September 30, 2013 was
$20.2 million, compared to operating income of $16.6 million in the
prior-year period, comprised of the following:
- Contribution of $1.8 million from
Fulghum Fibres, which included $3.4 million of depreciation and
amortization expense;
- Operating loss of $2.4 million from the
wood pellets segment, which reflected selling, general and
administrative (SG&A) costs associated with developing the
business, and non-capitalized costs associated with early work on
acquiring and converting the wood fibre mills at Atikokan and Wawa
for pellet production;
- Operating loss of $18.3 million from
the nitrogen products manufacturing subsidiary, which reflected a
loss on goodwill impairment of $30.0 million for the Pasadena
Facility;
- Operating income of $4.5 million from
energy technologies, which reflected a gain on sale of the Natchez
site of $6.3 million, partially offset by costs associated with
decommissioning the Product Demonstration Unit (PDU); taxes,
insurance, security and other administrative costs of the Company’s
energy technology facilities and sites; protecting patents; and
efforts to sell and seek partners for its energy technologies and
related assets; and
- Corporate and unallocated expenses
recorded as operating expenses of $5.9 million, which included $0.7
million in transaction costs related to the acquisition of Fulghum
Fibres.
Consolidated Adjusted EBITDA for the three months ended
September 30, 2013 was $11.5 million, a decline of $9.4 million
compared to the prior-year period, which included the
following:
- Contribution of $5.2 million from
Fulghum Fibres; and
- $16.1 million of Adjusted EBITDA from
the nitrogen products manufacturing subsidiary.
Net loss for the three months ended September 30, 2013 was $14.6
million or ($0.06) per basic share. Excluding the loss on goodwill
impairment, gain on fair value adjustment to earn-out
consideration, gain on sale of the Natchez property, and an income
tax benefit, net income allocated to common shareholders for the
current period was $7.6 million or $0.03 per basic share. A
reconciliation of net income exclusive of these items is provided
below. This compares to net income of $4.3 million or $0.02 per
basic share for the same period last year.
Fulghum FibresFulghum Fibres generated revenues of $22.4
million for the three months ended September 30, 2013. Gross profit
was $4.3 million for the period. SG&A and interest expenses for
the period were $1.3 million and $0.7 million, respectively.
Wood PelletsThe wood pellets segment incurred SG&A
expenses of $2.4 million for the three months ended September 30,
2013, which included acquisition-related and development costs
associated with the Company’s two previously announced pellet
projects in Eastern Canada, as well as other costs for the
development of the Company’s wood pellet business.
Nitrogen Products ManufacturingThe nitrogen products
manufacturing business generated revenues of $93.3 million,
compared to $60.1 million for the comparable period in the prior
year. Revenues increased due to the contribution of $42.7 million
from the Pasadena Facility, partially offset by a 16% decline in
revenues from the East Dubuque Facility. Product prices in the
current period were lower than in the prior year, having been
negatively affected by a delayed spring application season and
significantly higher urea exports from China offered at competitive
prices. Lower ammonia volumes in the third quarter were partly a
consequence of holding a portion of inventory to meet the expected
increase in demand for the fall 2013 application season, as
production was restricted due to the October turnaround of the East
Dubuque Facility. Deliveries of UAN were higher than expected,
shifting revenue from the fourth quarter to the current period.
During the three months ended September 30, 2013, Rentech
Nitrogen generated an operating loss of $18.3 million, compared to
$29.2 million of operating income during the comparable period in
the prior year. The primary cause of the operating loss in the
current period was a loss of $30.0 million due to the impairment of
goodwill related to the Pasadena Facility. The operating loss was
also increased by lower gross profits at the East Dubuque Facility,
negative gross margin at the Pasadena Facility that reflected a
write-down of product inventories, and the addition of SG&A
expenses and depreciation and amortization expenses for the
Pasadena Facility.
Adjusted EBITDA for the three months ended September 30, 2013
was $16.1 million, compared to $32.9 million in the corresponding
period in 2012. Adjusted EBITDA excluding Partnership level
expenses totaled $18.0 million for the current period. The East
Dubuque Facility and the Pasadena Facility reported $25.8 million
and ($7.8) million in EBITDA, respectively, during the three months
ended September 30, 2013. Further explanation of Adjusted EBITDA, a
non-GAAP financial measure, has been included below in this press
release.
Gross margin for the three months ended September 30, 2013 was
18%, compared to 58% for the same period last year. Gross margin at
the East Dubuque Facility was 50% for the current period, compared
to 58% for the prior-year period, due to lower product prices and
higher natural gas prices, partially offset by lower depreciation
expense. Gross loss margin at the Pasadena Facility was 19% for the
current period, which reflected inventory write-downs and lower
margins on sales of products that were produced from higher-cost
raw materials purchased earlier in the year. During the quarter,
the Partnership incurred a write-down of ammonium sulfate
inventories of approximately $5.0 million because the costs of raw
materials purchased in prior months and reflected in inventory were
higher than current and projected market prices. Gross loss margin
excluding the inventory write-down at the Pasadena Facility was 8%,
while gross margin at Rentech Nitrogen excluding the inventory
write-down was 23%.
SG&A expenses were $4.1 million for the three months ended
September 30, 2013, compared to $5.5 million for the prior-year
period. The decrease was primarily due to a $2.0 million decline in
Partnership level expenses for business development and unit-based
compensation, and lower fees for professional services and unused
credit facility fees at the East Dubuque Facility, partially offset
by the addition of $1.2 million of SG&A expenses from the
Pasadena Facility.
Due to a reduced outlook for profitability at the Pasadena
Facility compared to projections made when the Partnership acquired
Agrifos, Rentech Nitrogen performed an impairment test for goodwill
and determined that the carrying amount of the reporting unit
exceeded its fair value. As a result, the Partnership recorded a
loss due to goodwill impairment of $30.0 million at its Pasadena
Facility during the period. The $30.0 million charge is the
Partnership’s best estimate of the probable loss and is subject to
further adjustments as the goodwill impairment analysis is
finalized at fiscal year-end.
Interest expense was $4.0 million for the three months ended
September 30, 2013, compared to $0 for the prior-year period. The
increase was attributable to debt incurred for the purchase of the
Pasadena Facility and to fund expansion projects at the East
Dubuque and Pasadena Facilities.
Rentech Nitrogen realized a non-cash gain of $0.3 million for
the three months ended September 30, 2013 as a result of a decrease
in the potential earn-out consideration related to the acquisition
of Agrifos. The reduction in fair value was primarily due to lower
results in 2013 caused by a delayed and abbreviated spring
application season and higher levels of urea exports from China,
suppressing product prices, and reduced expectations for profits
from the Pasadena Facility.
Energy TechnologiesThe energy technologies segment
includes SG&A (including costs formerly booked as research and
development (R&D) expenses) related to the Company’s
technologies that are designed to convert carbon-bearing solids or
gases into hydrocarbons and electric power. The segment incurred
SG&A expenses of $1.8 million during the current period,
compared to $0.7 million for the prior-year period. SG&A
expenses increased primarily due to the inclusion of $1.1 million
of costs for activities that were previously reported as R&D
expenses. These former research and development expenses include
costs in support of de-commissioning the PDU, costs associated with
efforts to sell and obtain partners for the PDU and the Company’s
energy technologies, patent protection expenses, taxes, insurance
costs, security and other administrative costs of energy technology
facilities and sites. R&D expenses for the energy technologies
segment were zero for the three months ended September 30, 2013,
since all R&D activity ceased in the first quarter of 2013.
R&D expenses for the prior-year period were $5.6 million, which
were entirely related to the Company’s alternative energy
technologies. During the three months ended September 30, 2013, the
segment sold the Natchez site for proceeds of $8.6 million and
realized gains of $6.3 million.
Nine months ended September 30,
2013
Consolidated revenues for the nine months ended September 30,
2013 increased by $126.1 million to $295.6 million compared to the
prior-year period, comprised of:
- $38.5 million from Fulghum Fibres;
and
- An increase of $87.6 million from the
nitrogen products manufacturing subsidiary, which reflected $110.0
million of revenues from the Pasadena Facility, partially offset by
a 13% decline in revenues from the East Dubuque Facility.
Gross profit for the nine months ended September 30, 2013 was
$86.3 million, a decrease of $17.0 million compared to the
prior-year period, and which included the following:
- 18% gross profit margin at Fulghum
Fibres; and
- A decline in gross margin at the
nitrogen products manufacturing subsidiary to 31% from 61% in the
prior-year period, primarily due to the acquisition of the Pasadena
Facility, which typically realizes lower gross margin than the East
Dubuque Facility. Gross margin at the Pasadena Facility was
negative during the period.
Operating income for the nine months ended September 30, 2013
was $6.9 million, a decline of $45.7 million compared to the
prior-year period, comprised of the following:
- Contribution of $2.7 million from
Fulghum Fibres, which included $5.7 million of depreciation and
amortization expense;
- Operating loss of $4.2 million from the
wood pellets segment, which reflected SG&A costs associated
with developing the business and non-capitalized costs associated
with early work on acquiring and converting the wood fibre mills at
Atikokan and Wawa;
- Contribution of $32.7 million from the
nitrogen products manufacturing subsidiary, which included a loss
on goodwill impairment of $30.0 million for the Pasadena
Facility;
- Operating loss of $5.0 million from
energy technologies, which reflected costs associated with R&D,
decommissioning the PDU; taxes, insurance, security and other
administrative costs of the Company’s energy technology facilities
and sites; protecting patents; efforts to sell and seek partners
for its energy technologies and related assets; partially offset by
a $6.3 million gain on the sale of the Natchez site; and
- Corporate and unallocated expenses
recorded as operating expenses of $19.2 million, which included
$1.8 million in transaction costs for the acquisition of Fulghum
Fibres.
Consolidated Adjusted EBITDA for the nine months ended September
30, 2013 was $49.3 million, compared to $63.8 million for the
prior-year period, which included the following:
- Contribution of $8.3 million from
Fulghum Fibres; and
- $75.1 million of Adjusted EBITDA from
the nitrogen products manufacturing subsidiary.
For the nine months ended September 30, 2013, the Company
recorded a net income tax benefit of approximately $26.7 million
which is comprised of an income tax benefit for Rentech of
approximately $27.1 million and an income tax expense for Rentech
Nitrogen of approximately $0.4 million. The income tax benefit for
Rentech was due to the release of a valuation allowance of $27.2
million that had been recorded against Rentech’s net operating loss
carryforwards. The release of the valuation allowance resulted from
the recording of deferred tax liabilities related to the Fulghum
Fibres acquisition.
Net income for the nine months ended September 30, 2013 was
$13.0 million or $0.06 per basic share. Excluding loss on goodwill
impairment, loss on debt extinguishment, the gain on fair value
adjustment to earn-out consideration, the gain on sale of the
Natchez property, and the income tax benefit, net income allocated
to common shareholders for the current period was $10.5 million or
$0.05 per basic share. This compares to net income of $10.5 million
or $0.05 per basic share for the same period last year.
Fulghum FibresFulghum Fibres generated revenues of $38.5
million from May 1, 2013 through September 30, 2013. Gross profit
was $6.7 million for the period. SG&A and interest expenses for
the period were $2.1 million and $1.3 million, respectively.
Wood PelletsThe wood pellets segment incurred SG&A
expenses of $4.2 million for the nine months ended September 30,
2013, which included acquisition-related and development costs
associated with the Company’s two previously announced pellet
projects in Eastern Canada as well as other costs for the
development of the Company’s wood fibre processing business.
Nitrogen Products ManufacturingThe nitrogen products
manufacturing business generated revenues of $256.8 million,
compared to $169.2 million for the comparable period in the prior
year. Revenues increased due to the contribution of $110.0 million
of revenues from the Pasadena Facility, partially offset by a 13%
decline in revenues from the East Dubuque Facility. Results in the
current period were significantly impacted by unfavorable weather.
In the spring of this year, product deliveries from both facilities
were reduced and delayed by wet weather which caused a delayed and
abbreviated planting season and lower product demand and prices.
Significant increases in exports of urea from China also
contributed to the downward pressure on nitrogen pricing.
Furthermore, in anticipation of lower production due to the October
turnaround of the East Dubuque Facility, a portion of ammonia
inventory was held to meet the expected increase in demand for the
fall 2013 application season. These effects were partially offset
by higher deliveries of UAN in the third quarter of 2013, shifting
expected revenue from the fourth quarter to the current period.
During the nine months ended September 30, 2013, Rentech
Nitrogen generated operating income of $32.7 million compared to
$90.3 million during the comparable period in the prior year.
Operating income in the current period was reduced by lower gross
profits at the East Dubuque Facility, negative gross margin that
reflected write-downs of product inventories and loss on goodwill
impairment at the Pasadena Facility, and the addition of SG&A
expenses and depreciation and amortization expenses for the
Pasadena Facility.
Adjusted EBITDA for the nine months ended September 30, 2013 was
$75.1 million, compared to $99.7 million in the corresponding
period in 2012. Adjusted EBITDA excluding Partnership level
expenses, totaled $81.6 million for the current period. The East
Dubuque Facility and the Pasadena Facility reported $84.2 million
and ($2.6) million in Adjusted EBITDA, respectively, during the
nine months ended September 30, 2013. Further explanation of
Adjusted EBITDA, a non-GAAP financial measure, has been included
below in this press release.
Gross margin for the nine months ended September 30, 2013 was
31%, compared to 61% for the same period last year. Gross margin at
the East Dubuque Facility was 55% for the current period, compared
to 61% for the prior-year period, primarily due to lower ammonia
sales volume and prices, and higher natural gas costs, partially
offset by lower depreciation expense. Gross loss margin at the
Pasadena Facility was 2% for the current period, which reflected
inventory write-downs and sales of products that were produced from
higher-cost raw materials. During the nine months ended September
30, 2013, the Partnership incurred write-downs of sulfur and
sulfuric acid inventories of approximately $0.5 million, and of
ammonium sulfate inventories of approximately $6.8 million due to
lower market prices. Gross margin excluding the inventory
write-down at the Pasadena Facility was 5%, while gross margin at
Rentech Nitrogen excluding the inventory write-down was 34%.
SG&A expenses were $13.7 million for the nine months ended
September 30, 2013, compared to $12.0 million for the prior-year
period. The increase was primarily due to the addition of $3.8
million of SG&A expenses from the Pasadena Facility, partially
offset by a $1.0 million decrease in Partnership level expenses and
a $1.1 million decline in expenses at the East Dubuque Facility
primarily due to lower unused credit facility fees and legal
expenses.
Due to a reduced outlook for profitability at the Pasadena
Facility compared to projections made when the Partnership acquired
Agrifos, Rentech Nitrogen performed an impairment test for goodwill
and determined that the carrying amount of the reporting unit
exceeded its fair value. As a result, the Partnership recorded a
loss due to goodwill impairment of $30.0 million at its Pasadena
Facility during the period. The $30.0 million charge is the
Partnership’s best estimate of the probable loss and is subject to
further adjustments as the goodwill impairment analysis is
finalized at fiscal year-end.
Interest expense was $9.7 million for the nine months ended
September 30, 2013, compared to $0.2 million for the prior-year
period. The increase was attributable to debt incurred for the
purchase of the Pasadena Facility and expansion projects at the
East Dubuque and Pasadena Facilities.
Rentech Nitrogen realized a non-cash gain of $4.9 million for
the nine months ended September 30, 2013 as a result of a decrease
in the potential earn-out consideration related to the acquisition
of Agrifos. The reduction in fair value was primarily due to lower
results in 2013 caused by a delayed and abbreviated spring
application season and higher levels of urea exports from China,
suppressing product prices, and reduced expectations for profits
from the Pasadena Facility.
Energy TechnologiesThe segment incurred SG&A expenses
of $5.5 million during the current period, compared to $3.3 million
for the prior-year period. SG&A expenses increased primarily
due to the inclusion of $3.1 million in costs for activities that
were previously reported as R&D expenses, partially offset by a
decrease in project development costs of approximately $0.9
million. These former R&D expenses included costs in support of
de-commissioning the PDU, costs associated with efforts to sell and
obtain partners for the PDU and the Company’s energy technologies,
patent protection expenses, taxes, insurance costs, security and
other administrative costs of energy technology facilities and
sites. R&D expenses for the energy technologies segment were
$5.7 million for the nine months ended September 30, 2013, all of
which were incurred in the first three months of the year. R&D
expenses for the prior-year period were $14.7 million. During the
nine months ended September 30, 2013, the segment sold the Natchez
site for proceeds of $8.6 million and realized gains of $6.3
million.
Wood Fibre Processing Business Update
Update on Pellet Projects
At the inception of the projects in 2012, Rentech retained two
affiliated firms, AgriRecycle and EAD, who together have 27 years
of experience designing and building 11 pellet plants, to perform
engineering and project design. After the joint venture (JV) with
Graanul Invest (Graanul) was formed in May of this year, Graanul
reviewed the engineering and project plans. Rentech and Graanul
then jointly decided that AgriRecycle and EAD would continue their
work, while the resources of the JV and Graanul would be focused on
other projects under development. Since Graanul would not be
providing EPC services, the Wawa and Atikokan projects would not be
financed and owned by the JV. Rentech will continue to own the
projects outright and be responsible for construction. The Rentech
team includes the former plant manager, wood yard manager, and
manager of capital projects at the Wawa facility, all of whom
worked at the plant when it was operated by Weyerhaeuser as an OSB
mill processing nearly 750,000 green metric tons of logs
annually.
Rentech began construction of the Atikokan and Wawa wood pellet
facilities in August and remains on schedule to begin producing
wood pellets from these facilities in 2014. Demolition work at the
sites has been completed within budget. Rentech has placed orders
or received bids for all major equipment, with costs consistent
with the budget. The Company has decided to increase capital costs
at the Wawa facility, by installing two electric 170 foot radial
log cranes, to be purchased from Fulghum Industries, rather than
using diesel-powered mobile equipment to manage the wood yard,
offloading and feeding. It is expected that the project cost will
increase by approximately $8 million due to this decision. Cranes
are typically more reliable, safer, reduce emissions, and are
significantly less expensive to operate for large capacity
facilities such as the Wawa plant. The use of these cranes should
result in annual operating cost savings of at least $1 million,
with an expected useful life of 20 years or more.
The design of the facilities has been further modified to add
capacity, which will increase capital costs. The expected
production of the Wawa plant has increased to approximately 450,000
tonnes. The Wawa plant is now expected to supply the entire 400,000
tonnes of annual pellet deliveries to Drax, with 50,000 tonnes
available for sale to Drax or other customers. The production of
the Atikokan facility is now expected to be approximately 100,000
tonnes, which will fulfill the existing contract with OPG for
45,000 tonnes, with the remaining 55,000 tonnes available for sale
to OPG or other customers. When the increased output anticipated
from the design changes and the operating efficiencies anticipated
from the cranes are balanced against higher capital costs, the
expected return profile of the projects remains unchanged, with
stabilized annual EBITDA now projected in the range of $17 to $20
million. The projected EBITDA is based on estimated operating
income in the range of $8 to $11 million. Further explanation of
EBITDA, a non-GAAP financial measure, has been included below in
this press release.
Rentech entered the wood fibre processing business to create
value by investing in high return projects with stable cash flows
and long-term contracts, diversifying the Company’s exposure to
commodity fluctuations in the nitrogen business. The Company is
pursuing specific opportunities in both wood chipping and pellet
operations that could lead to substantial growth. Some of the
opportunities depend on the consummation of transactions, the
success and timing of which are unpredictable. Rentech believes
that an IPO of the fibre business as an MLP is possible, depending
on market conditions, and could best be accomplished at a scale
somewhat larger than that of the Wawa and Atikokan projects
combined with Fulghum Fibres. If the wood fibre processing business
is able to achieve a larger scale through development and
transactions, Rentech believes that it could accomplish an IPO in
approximately 2 years or less.
Revolving Loan FacilityIn September 2013, Rentech, Inc.
entered into a $100 million revolving loan facility. Proceeds from
the facility are intended to be used to fund growth in Rentech’s
wood fibre processing business. The facility is collateralized by a
portion of the units of Rentech Nitrogen Partners, L.P. owned by a
subsidiary of Rentech, Inc. The revolving loan facility has a
maturity of three years and an interest rate on outstanding loan
amounts of LIBOR plus 4.0% per annum. Rentech drew down $50 million
of the facility upon closing of the transaction, with the remaining
$50 million of capacity available for future borrowings, so long as
certain conditions are satisfied at the time of borrowing. The
facility is secured by 15.4 million of the 23.25 million common
units of Rentech Nitrogen currently owned by Rentech as initial
collateral. Under certain circumstances, up to 19.4 million units
may be pledged as collateral. Depending on the market price of the
units, among other things, Rentech may be restricted from borrowing
the full $100 million maximum amount. Rentech will continue to
receive all cash distributions paid on the common units and retain
the right to sell units not held as collateral as long as certain
conditions outlined in the loan facility are met. Rentech, Inc. is
the guarantor of the revolving loan facility.
2013 Outlook
RentechRentech reiterated
expectations for Fulghum Fibres for the full year 2013, of
approximately $95 million of pro forma revenue and $20 million of
pro forma EBITDA, of which Rentech would recognize eight months of
results since the acquisition. For the twelve months ending
December 31, 2013, Rentech reiterated its guidance of total cash
operating expenses for Rentech, including Fulghum Fibres and
excluding the nitrogen products manufacturing business, of
approximately $34 million.
Rentech NitrogenIn its press
release dated November 7, 2013, Rentech Nitrogen indicated that
cash available for distribution for the fourth quarter of 2013
could be as low as zero, and provided an updated outlook.
Based on Rentech Nitrogen’s current guidance, and assuming
Rentech’s current ownership of 23.25 million units of Rentech
Nitrogen, Rentech’s cash distributions could total approximately
$38 million for 2013, assuming that the distribution related to
fourth quarter results is zero.
Conference Call with ManagementThe Company will hold a
conference call today, November 7, 2013, at 3:00 p.m. PST, during
which Rentech's 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 888-517-2513 or 847-619-6533 and the pass code
9069023#. An audio webcast of the call will be available at
www.rentechinc.com within the Investor Relations portion of the
site under the Presentations section. A replay will be available by
audio webcast and teleconference from 5:30 p.m. PST on November 7
through 11:59 p.m. PST on November 17. The replay teleconference
will be available by dialing 888-843-7419 or 630-652-3042 and the
audience passcode 9069023#.
Rentech, Inc. Consolidated Statements of
Operations
(Amounts in Thousands, Except per Share
Data)
For the Three Months For the
Nine Months Ended September 30, Ended September
30, 2013 2012 2013 2012 (unaudited)
(unaudited) (unaudited) (unaudited)
Revenues $ 115,762 $
60,170 $ 295,582 $ 169,465
Cost of Sales 94,563
25,130 209,297 66,134
Gross
Profit 21,199 35,040 86,285 103,331
Operating Expenses
Selling, general and administrative expense 15,195 12,058 44,363
33,832 Research and development - 5,563 5,747 14,675 Depreciation
and amortization 2,454 670 5,455 2,486 Loss on goodwill impairment
30,029 - 30,029 - Other (6,263 ) 145 (6,235 ) (292 )
Total Operating Expenses 41,415 18,436 79,359
50,701
Operating Income (Loss) (20,216
) 16,604 6,926 52,630
Other Income (Expense), Net Interest
expense (4,753 ) (828 ) (11,020 ) (5,288 ) Loss on debt
extinguishment - - (6,001 ) - Gain on fair value adjustment to
earn-out consideration 586 - 5,197 - Other expense, net (68 ) (265
) (179 ) (652 )
Total Other Expenses, Net (4,235 )
(1,093 ) (12,003 ) (5,940 )
Income (Loss) from
Continuing Operations Before Income Taxes and Equity in Loss of
Investee (24,451 ) 15,511 (5,077 ) 46,690 Income tax (benefit)
expense (976 ) 68 (26,729 ) 1,243
Income
(Loss) from Continuing Operations Before Equity in Loss of
Investee (23,475 ) 15,443 21,652 45,447 Equity in Loss of
Investee 103 - 138 -
Income
(Loss) from Continuing Operations (23,578 ) 15,443 21,514
45,447 Income from discontinued operations, net of tax - 134
- 134
Net Income (Loss) (23,578
) 15,577 21,514 45,581 Net (income) loss attributable to
noncontrolling interests 8,985 (11,307 ) (8,515 )
(35,056 )
Net Income (Loss) Attributable to Rentech Common
Shareholders $ (14,593 ) $ 4,270 $ 12,999 $
10,525
Net Income (Loss) per Common Share
Allocated
to Rentech Common Shareholders:
Basic: Continuing operations $ (0.06 ) $ 0.02 $ 0.06
$ 0.05 Discontinued operations 0.00 0.00
0.00 0.00
Net Income (Loss) $ (0.06 ) $
0.02 $ 0.06 $ 0.05
Diluted: Continuing operations $
(0.06 ) $ 0.02 $
0.05
$ 0.04 Discontinued operations 0.00 0.00
0.00 0.00
Net Income (Loss) $ (0.06 ) $
0.02 $
0.05
$ 0.04
Weighted-Average Shares Used to Compute
Net Income (Loss) per Common
Share:
Basic 226,305 220,063 225,840
223,572
Diluted 226,305
229,815 232,171 232,773
Rentech, Inc. Statements of Operations by Business
Segment
(Stated in Thousands)
For the Three Months For the Nine
Months Ended September 30, Ended September 30,
2013 2012
2013 2012 Revenues East
Dubuque $ 50,572 $ 60,112 $ 146,838 $ 169,228 Pasadena 42,707 -
109,961 - Fulghum Fibres 22,378 - 38,483 - Energy Technologies
105 58 300 237
Total Revenues $ 115,762 $ 60,170 $
295,582 $ 169,465
Gross Profit (Loss)
East Dubuque $ 25,114 $ 35,035 $ 81,353 $ 103,253 Pasadena (8,294 )
- (1,966 ) - Fulghum Fibres 4,324 - 6,749 - Energy Technologies
55 5 149 78
Total Gross Profit $ 21,199 $ 35,040 $ 86,285
$ 103,331
Selling, General and
Administrative Expense East Dubuque $ 981 $ 1,661 $ 3,423 $
4,480 Pasadena 1,227 - 3,811 - Fulghum Fibres 1,250 - 2,109 - Wood
Pellets 2,350 518 4,233 839 Energy Technologies 1,782
738 5,544 3,252
Total
Selling, General and Administrative Expense $ 7,590 $
2,917 $ 19,120 $ 8,571
Research and
Development Energy Technologies $ - $ 5,563 $
5,747 $ 14,675
Total Research and Development
$ - $ 5,563 $ 5,747 $ 14,675
Depreciation and Amortization East Dubuque $ 46 $ 90 $ 152 $
726 Pasadena 972 - 2,722 - Fulghum Fibres 1,266 - 1,984 - Energy
Technologies 18 389 122
1,168
Total Depreciation and Amortization Recorded
in Operating Expenses $ 2,302 $ 479 $ 4,980
$ 1,894 East Dubuque $ 1,666 $ 3,589 $ 6,348 $ 8,730
Pasadena 1,702 - 3,159 - Fulghum Fibres 2,150
- 3,707 -
Total Depreciation
and Amortization Recorded in Cost of Sales $ 5,518 $
3,589 $ 13,214 $ 8,730
Total Depreciation
and Amortization $ 7,820 $ 4,068 $ 18,194
$ 10,624
Other Operating (Income) Expenses
East Dubuque $ 28 $ 237 $ 36 $ 284 Pasadena 30,029 - 30,029 -
Fulghum Fibres (4 ) - (1 ) - Wood Pellets - - - - Energy
Technologies (6,287 ) (93 ) (6,270 )
(577 )
Total Other Operating (Income) Expenses $ 23,766
$ 144 $ 23,794 $ (293 )
For the Three Months For the Nine
Months Ended September 30, Ended September 30,
2013 2012
2013 2012 Operating Income
(Loss) East Dubuque $ 24,059 $ 33,047 $ 77,742 $ 97,763
Pasadena (40,522 ) - (38,528 ) - Fulghum Fibres 1,812 - 2,657 -
Wood Pellets (2,350 ) (518 ) (4,233 ) (839 ) Energy Technologies
4,542 (6,592 ) (4,994 ) (18,440
)
Total Operating Income (Loss) $ (12,459 ) $ 25,937
$ 32,644 $
78,484
Interest Expense East Dubuque $ - $ 39 $ - $ 181
Pasadena - - 6 - Fulghum Fibres 714 - 1,250 - Energy Technologies
(4 ) (1,582 ) (3 ) (1,582 )
Total
Interest Expense $ 710 $
(1,543
) $ 1,253 $ (1,401 )
Net Income (Loss)
East Dubuque $ 24,069 $ 33,022 $ 77,383 $ 97,625 Pasadena (40,765 )
- (38,915 ) - Fulghum Fibres 813 - 941 - Wood Pellets (2,058 ) (518
) (3,941 ) (839 ) Energy Technologies 4,568
(5,010 ) (4,903 ) (16,854 )
Total Net Income
(Loss) $ (13,373 ) $ 27,494 $ 30,565 $ 79,932
Reconciliation of Segment Net Income
(Loss) to Consolidated Net Income (Loss): Segment net income
(loss) $ (13,373 ) $ 27,494 $ 30,565 $ 79,932 Partnership and
unallocated expenses recorded as selling, general and
administrative expenses (1,872 ) (3,847 ) (6,488 ) (7,502 )
Partnership and unallocated income (expenses) recorded as other
expenses, net 309 - (1,081 ) 232 Unallocated interest expense and
loss on interest rate swaps (3,996 ) (327 ) (9,726 ) (907 ) Income
tax benefit - - 302 - Corporate and unallocated expenses recorded
as selling, general and administrative expenses (5,733 ) (5,294 )
(18,755 ) (17,759 ) Corporate and unallocated depreciation and
amortization expense (152 ) (191 ) (475 ) (592 ) Corporate and
unallocated expenses recorded as other expense 7 47 (19 ) (25 )
Corporate and unallocated interest expenses (47 ) (2,370 ) (47 )
(6,688 ) Corporate income tax benefit (expense) 1,279 (69 ) 27,238
(1,244 ) Income from Discontinued Operations -
134 - 134
Consolidated Net
Income (Loss) $ (23,578 ) $ 15,577 $ 21,514 $
45,581
Rentech, Inc. and
Subsidiaries Selected Balance Sheet Data (Stated in
Thousands) Consolidated Balance Sheet
Data
As ofSeptember
30,2013
As ofDecember
31,2012
Cash and Cash Equivalents $ 180,418 $ 141,736 Working Capital $
148,715 $ 107,059 Construction in Progress $ 119,615 $ 61,417 Total
Assets $ 734,082 $ 479,202 Total Debt $ 426,675 $ 193,290 Total
Rentech Stockholders' Equity $ 172,169 $ 157,987
As ofSeptember
30,2013
As ofDecember
31,2012
Cash and Cash Equivalents – Rentech Nitrogen Partners $ 85,321 $
55,799
Cash and Cash Equivalents Excluding
Rentech Nitrogen Partners
95,097 85,937
Total Cash and Cash Equivalents
$ 180,418 $ 141,736
As ofSeptember
30,2013
As ofDecember
31,2012
Debt – Rentech Nitrogen Partners $ 320,000 $ 193,290
Debt Excluding Rentech Nitrogen
Partners
106,675 -
Total Debt $ 426,675 $ 193,290
Disclosure Regarding Non-GAAP Financial MeasuresNet
income (loss) excluding loss on goodwill impairment, loss on debt
extinguishment, gain on sale of Natchez, gain on fair value
adjustment to earn-out contingent consideration and income tax
benefit is included to provide management and investors with net
income results for Rentech that are more easily compared to the
prior year period.
Consolidated Adjusted EBITDA for Rentech and Adjusted EBITDA for
Rentech Nitrogen are defined as net income (loss) plus, as
applicable, interest expense and other financing costs, loss on
goodwill impairment, loss on debt extinguishment, loss on interest
rate swaps, income tax expense (benefit), depreciation and
amortization, net of gain in fair value adjustment to earn-out
consideration, and gain on sale of Natchez. Adjusted EBITDA for
Fulghum Fibres is defined as net income (loss) plus net interest
expense, depreciation and amortization and other adjustments. The
non-GAAP financial measures described above are used as
supplemental financial measures by management and by external users
of our financial statements, such as investors and commercial
banks, to assess:
- the financial performance of our assets
without regard to financing methods, capital structure or
historical cost basis; and
- our operating performance and return on
invested capital compared to those of other publicly traded limited
partnerships and other public companies, without regard to
financing methods and capital structure.
These non-GAAP financial measures should not be considered an
alternative to net income, operating income, net cash provided by
operating activities or any other measure of financial performance
or liquidity presented in accordance with GAAP. These non-GAAP
financial measures may have material limitations as performance
measures because they exclude items that are necessary elements of
Rentech’s costs and operations. In addition, EBITDA and Adjusted
EBITDA presented by other companies may not be comparable to
Rentech’s presentation of those measures, since each company may
define these terms differently.
The table below reconciles net income attributable to Rentech
excluding loss on goodwill impairment, loss on debt extinguishment,
gain on sale of Natchez, gain on fair value adjustment to earn-out
contingent consideration and income tax benefit to net income
(loss) attributable to Rentech for the three and nine months ended
September 30, 2013 (stated in thousands, except per share
data).
For the Three Months For the Nine
Months Ended September 30, Ended September 30,
2013 2013 Net Income (Loss) Attributable to Rentech
Common Shareholders $ (14,593 ) $ 12,999 Less: Income Attributable
to Unvested Restricted Stock - 348 Net
Income (Loss) Attributable to Common Shareholders $ (14,593 ) $
12,651 Loss on Goodwill Impairment $ 30,029 $ 30,029 Loss on
Debt Extinguishment - 6,001 Gain on Sale of Natchez (6,275 ) (6,275
) Gain on Fair Value Adjustment to Earn-out Consideration (586 )
(5,197 ) Income Tax Benefit (976 ) (26,729 )
Net Income Attributable to Common
Shareholders Excluding Loss on Goodwill Impairment, Loss on Debt
Extinguishment, Gain on Sale of Natchez and Gain on Fair Value
Adjustment to Earn-out Consideration
$
7,599
$ 10,480 Net Income (Loss) per Share
Attributable to Rentech Common Shareholders $ (0.06 ) $ 0.06 Loss
per Share on Goodwill Impairment 0.13 0.13 Loss per Share on Debt
Extinguishment - 0.03
Gain per Share on Sale of Natchez
(0.03 ) (0.02 ) Gain per Share on Fair Value Adjustment to Earn-out
Consideration - (0.02 ) Income Tax Benefit per Share -
(0.12 )
Net Income per Share Attributable to
Rentech Common Shareholders Excluding Loss on Goodwill Impairment,
Loss on Debt Extinguishment, Gain on Sale of Natchez and Gain on
Fair Value Adjustment to Earn-out Consideration
$ 0.03 $ 0.05 Weighted-Average Common Shares
Outstanding 226,305 225,840
The table below reconciles Rentech’s consolidated Adjusted
EBITDA to net income (loss) for the three and nine months ended
September 30, 2013 (stated in thousands)
For the Three Months For the Nine
Months
Ended September 30,2013
Ended September 30,2013
Net Income (Loss) $ (23,578 ) $ 21,514 Add: Interest Expense
4,753 11,020 Income Tax Benefit (976 ) (26,729 ) Depreciation and
Amortization 7,972 18,669 Loss on Goodwill Impairment 30,029 30,029
Loss on Debt Extinguishment - 6,001 Gain on Sale of Natchez (6,275
) (6,275 )
Gain on Fair Value Adjustment to Earn-out
Consideration
(586 ) (5,197 ) Other 171 317
Adjusted EBITDA $ 11,510 $ 49,349
The table below reconciles Fulghum Fibres’ Adjusted EBITDA to
net income (loss) for the three and nine months ended September 30,
2013 (stated in thousands)
For the Three MonthsEnded
September 30,2013
For the Nine MonthsEnded
September 30,2013
Net Income (Loss) $ (23,578 ) $ 21,514 Less: Non-Fulghum
(Income) Loss 24,391 (20,573 ) Fulghum Net
Income 813 941 Add Fulghum Items: Net Interest Expense 692 1,226
Depreciation and Amortization 3,416 5,691 Other 307
490
Fulghum's Adjusted EBITDA $ 5,228 $
8,348
The table below reconciles forecasted EBITDA from combined Wawa
and Atikokan projects to forecasted operating income for the upper
and lower ends of the range of EBITDA at full operations for both
facilities (stated in millions).
Stabilized
Operations
In
2016
Operating Income $ 8 - $ 11 Plus: Depreciation and
Amortization 9 - 9
EBITDA $ 17 - $ 20
The table below reconciles consolidated Adjusted EBITDA to net
income (loss) for Rentech Nitrogen for the three months ended
September 30, 2013 (stated in thousands).
For the Three Months Ending September 30, 2013
East DubuqueFacility
PasadenaFacility
PartnershipLevel Consolidated Net
Income (Loss) $ 24,068 $ (40,764 ) $ (5,559 ) $ (22,255 ) Plus: Net
Interest Expense - - 3,996 3,996 Plus: Loss on Goodwill Impairment
- 30,029 - 30,029
Less: Gain on Fair Value Adjustment to
Earn-out Consideration
- -
(309
)
(309
)
Plus: Income Tax Expense
(9
)
242
- 233 Plus: Depreciation and Amortization 1,712
2,674 - 4,386 Adjusted
EBITDA $
25,771
$
(7,819
) $ (1,872 ) $ 16,080
The table below reconciles consolidated Adjusted EBITDA to net
income (loss) for Rentech Nitrogen for the nine months ended
September 30, 2013 (stated in thousands).
For the Nine Months Ended September 30, 2013
East DubuqueFacility
PasadenaFacility
PartnershipLevel Consolidated Net
Income (Loss) $ 77,383 $ (38,915 ) $ (16,993 ) $ 21,475 Plus:
Net Interest Expense - 6 9,719 9,725 Plus: Loss on Goodwill
Impairment - 30,029 - 30,029 Plus: Loss on Debt Extinguishment - -
6,001 6,001
Less: Gain on Fair Value Adjustment to
Earn-Out Consideration
-
-
(4,920
)
(4,920
)
Plus: Loss on Interest Rate Swaps - - 7 7 Plus: Income Tax Expense
(Benefit)
360
380
(302 ) 438 Plus: Depreciation and Amortization 6,500
5,881 - 12,381
Adjusted
EBITDA $
84,243
$
(2,619
) $ (6,488 ) $ 75,136
The table below reconciles consolidated Adjusted EBITDA to net
income for Rentech Nitrogen for the three and nine months ended
September 30, 2012 (stated in thousands).
For Three MonthsEnded September
30,2012
For the Nine MonthsEnded
September 30,2012
Net Income $ 28,848 $ 89,448 Add:
Net Interest Expense
25 138 Income Tax Expense - - Depreciation and Amortization 3,679
9,456 Loss on Debt Extinguishment - - Loss on Interest Rate Swaps
327 907
Gain on Fair Value Adjustment to Earn-out
Consideration
- - Other - (232 )
Adjusted EBITDA $ 32,879 $
99,717
About Rentech, Inc.Rentech, Inc. (www.rentechinc.com)
owns and operates wood fibre processing and nitrogen fertilizer
manufacturing businesses. The wood fibre processing business
consists of the provision of wood chipping services and the
manufacture and sale of wood chips, through a wholly-owned
subsidiary, Fulghum Fibres, Inc., and the development of wood
pellet production facilities. Rentech’s nitrogen fertilizer
business consists of the manufacture and sale of nitrogen
fertilizer through its publicly-traded subsidiary, Rentech Nitrogen
Partners, L.P. (NYSE: RNF). Rentech also owns the intellectual
property including patents, pilot and demonstration data, and
engineering designs for a number of clean energy technologies
designed to produce certified synthetic fuels and renewable power
when integrated with third-party technologies.
Safe Harbor StatementThis press release contains
forward-looking statements as defined in the Private Securities
Litigation Reform Act of 1995 about matters such as: projected
revenues and EBITDA for Fulghum Fibres; our ability to complete the
wood pellet mills on a timely basis, or at all; as well as
projected EBITDA and capital costs for the pellet mills; the
outlook for our wood processing, nitrogen fertilizer and energy
businesses; growth opportunities for the wood fibre business and
the possibility of a MLP IPO for that business; and projected cash
available for distribution for Rentech Nitrogen. 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 the Company’s prior press releases and periodic public
filings with the Securities and Exchange Commission, which are
available via Rentech’s website at www.rentechinc.com. The forward-looking statements
in this press release are made as of the date of this press release
and Rentech 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.
Rentech, Inc.Julie Dawoodjee CafarellaVice President of
Investor Relations and Communications310-571-9800ir@rentk.com
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