Solid Results in Wood Fibre Processing Offset
by Challenges in Nitrogen Products
Company Provides Outlook for Growth in Wood
Fibre Processing
Rentech, Inc. (NASDAQ: RTK) today announced financial and
operating results for the three and twelve months ended December
31, 2013.
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. (NYSE: RNF)
(Rentech Nitrogen), of which Rentech owns the general partner and
approximately 60% of the common units representing limited partner
interests. 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 include two
operating segments: the East Dubuque Facility and the Pasadena
Facility. Results of the Company’s energy technologies business are
reported in a separate segment.
Rentech today posted a presentation on the Investor Relations
section of its website, to provide additional detail on the
Company’s financial results and wood fibre processing business.
D. Hunt Ramsbottom, President and CEO of Rentech, said, “We made
a strong entry into the wood fibre processing business this year.
Our wood chipping business, Fulghum Fibres, is generating solid
revenues and EBITDA. Our two industrial wood pellet projects in
Canada are on schedule, on budget and on track to provide the
returns we expect, based on long-term contracts. We are also
pleased that our facilities at both Fulghum Fibres and Rentech
Nitrogen have exceeded our safety goals.”
“Although we made significant strategic progress in 2013, our
fourth quarter and full year financial results were muted by
challenges at Rentech Nitrogen. We saw significant industry-wide
declines in nitrogen product prices, as well as downtime at both of
our facilities that reduced production and sales volumes. Both
facilities are currently operating exceptionally well and at
increased operating rates, due to investments we made in capacity
expansion and improvements. We continue to see higher prices for
nitrogen products compared to the lows we witnessed during the
second half of last year, and we are confident that the higher
prices and expanded capacity will lead to improved financial and
operating results for Rentech Nitrogen in 2014.”
Mr. Ramsbottom continued, “Overall, 2013 was a significant year
for Rentech, as we wound down our energy technology business and
entered the wood fibre processing industry, strategically
re-positioning the company around opportunities with significant
revenue growth and strong shareholder returns. We see specific
opportunities to invest capital at attractive and predictable
returns. We can leverage our existing fibre team and assets to
create a fibre business that could generate an annual EBITDA
run-rate of approximately $55 million by the end of next year, and
$150 million in four to five years. We also see a compelling
opportunity for an IPO of the wood fibre business as an MLP as
early as next year. We believe execution of this plan for the wood
fibre processing business would create substantial value for our
shareholders, due to its strong business model, the value of a
successful IPO, and the benefits of an MLP structure.”
Wood Fibre Processing Business Strategy Highlights
Rentech plans to build on the foundation established with the
acquisition of Fulghum Fibres to invest in the wood chips and
pellets sectors of the wood fibre processing industry. These
sectors are projected to exceed $25 billion of revenue by 2020.
Rentech has identified specific investment opportunities in the
industry to create significant value for Rentech shareholders.
Specifically identified opportunities to invest with unlevered
returns of mid-teens or higher could lead to an annual EBITDA
run-rate of about $55 million by the end of 2015, which the Company
believes is adequate scale for an IPO of the business as an MLP.
Those opportunities would require approximately $100 million of
investment beyond the investment required for the Atikokan and Wawa
wood pellet projects. Additional similar opportunities representing
up to $600 million of investments could lead in four to five years
to annual revenues exceeding $600 million, and EBITDA above $150
million.
Financial Highlights
Three months ended December 31,
2013
The financial results of Fulghum Fibres are included in 2013
results of operations only since the date of acquisition, which was
May 1, 2013. The financial results for the three months ended
December 31, 2013 and 2012 include three months of operating
results for the Pasadena Facility in 2013 and two months in
2012.
Consolidated revenues for the three months ended December 31,
2013 were $79.3 million compared to $92.5 million in the prior-year
period, comprised primarily of:
- $24.5 million from Fulghum Fibres;
and
- $54.6 million from Rentech Nitrogen
which represents a decrease of $37.8 million from the prior year.
Current year results reflect a 37% decline in revenues from the
Pasadena Facility and a 44% decline in revenues from the East
Dubuque Facility, due to industry-wide declines in nitrogen product
prices, plant outages and lower production and sales volumes.
Gross loss for the three months ended December 31, 2013 was $2.6
million, compared to gross profit of $28.6 million in the
prior-year period, comprised primarily of:
- Contribution of $5.3 million in gross
profits at Fulghum Fibres; which was more than offset by
- Gross loss of $8.0 million at Rentech
Nitrogen, which decreased from a gross profit of $28.6 million in
the prior-year period primarily due to lower sales volumes and
higher input costs.
Operating loss for the three months ended December 31, 2013 was
$15.8 million, compared to operating loss of $9.3 million in the
prior-year period, comprised primarily of the following:
- Operating loss of $13.6 million from
Rentech Nitrogen, which reflected a loss of $9.7 million at the
Pasadena Facility and costs associated with downtime at both
facilities;
- Operating income of $7.3 million from
Fulghum Fibres;
- Operating loss of $1.3 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 constructing
the wood pellet mills at Atikokan and Wawa;
- Operating loss of $2.0 million from
energy technologies, which reflected taxes, insurance, security and
other administrative costs related to 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 $6.2 million, including non-cash
compensation of $1.7 million.
Consolidated Adjusted EBITDA for the three months ended December
31, 2013 was ($13.3) million, a decline of $23.6 million compared
to the prior-year period, which included the following:
- Contribution of $4.7 million from
Fulghum Fibres; and
- ($8.6) million of Adjusted EBITDA from
Rentech Nitrogen.
Further explanation of Adjusted EBITDA, a non-GAAP financial
measure, has been included below in this press release.
Net loss for the three months ended December 31, 2013 was $14.5
million or ($0.06) per basic share, compared to net loss of $24.5
million or ($0.11) per basic share for the same period last
year.
Fulghum Fibres
Fulghum Fibres processed 3.8 million green metric tons of wood
during the three months ended December 31, 2013. Fulghum Fibres’
revenues were $24.5 million for the current period, of which
approximately $15.4 million and $9.1 million were generated from
the U.S. and South American operations, respectively. Gross profit
for the period was $5.3 million on margins of 22%. SG&A and
interest expenses for three months ended December 31, 2013 were
$1.6 million and $0.5 million, respectively.
Wood Pellets
Wood pellets segment SG&A expenses were $1.2 million for the
three months ended December 31, 2013, compared to $1.1 million in
the prior period. SG&A expenses include costs associated with
developing the business, and non-capitalized costs associated with
converting the wood pellet mills at Atikokan and Wawa.
Nitrogen Products Manufacturing
The financial results for the three months ended December 31,
2013 and 2012 include three months of operating results for the
Pasadena Facility in 2013 and two months in 2012.
Revenues for the three months ended December 31, 2013 were $54.6
million, compared to $92.4 million for the comparable period in the
prior year. Revenues for the fourth quarter of 2013 declined 44%
year-over-year at the East Dubuque Facility and by 37% at the
Pasadena Facility, due to industry-wide declines in nitrogen
product prices, plant outages and lower production and sales
volumes.
Production was reduced at both facilities during the quarter due
to scheduled and unscheduled downtime, which totaled 60 days at the
East Dubuque Facility and 37 days at the Pasadena Facility. The
East Dubuque Facility was out of commission for 31 days during the
quarter for work related to the bi-annual turnaround. Production at
the East Dubuque Facility was also halted for 29 days in late
November and much of December to accommodate repairs following a
fire at the ammonia converter. Additionally, the East Dubuque
Facility operated at reduced rates for 45 days, 27 of which were
during the quarter following the turnaround, as a result of the
need to replace the foundation underneath one of four syngas
compressors, rendering the compressor out of service. The
replacement of the compressor foundation took 84 days to complete,
most of which occurred while the plant was down due to the fire.
The Pasadena Facility experienced several small, unplanned
disruptions during the quarter, and also was offline for 23 days in
December to conduct the scheduled ammonium sulfate expansion and
reliability improvement project as well as other turnaround
maintenance.
Limited production volume reduced deliveries of UAN from the
East Dubuque Facility in the fourth quarter of 2013, resulting in
the postponement of 19,000 tons of scheduled UAN deliveries until
the first quarter of 2014. Ammonia demand for the quarter was
limited due to an abbreviated fall application period as a result
of wet weather. Sales volume at the Pasadena Facility was reduced
by the delay into the first quarter of 2014 of a 27,000 metric ton
vessel shipment of ammonium sulfate (AS), caused by the late
arrival of the vessel.
Gross loss margin was 15% for the three months ended December
31, 2013, compared to gross profit margin of 31% for the same
period last year. Lower product prices and higher fixed costs per
ton in cost of sales reduced margins for both facilities, as fixed
production costs, including those incurred during the downtime that
would normally be included in product inventory costs but were
expensed as cost of sales, were spread across lower sales volumes.
Gross loss margin at the East Dubuque Facility was 2% for the
current period, compared to gross profit margin of 55% for the
prior-year period, partially due to lower sales prices, higher
natural gas prices and repair costs. Gross loss margin at the
Pasadena Facility was 32% for the current period, compared to 5%
for the prior-year period, due primarily to lower product pricing
relative to the cost of inputs, and a write-down of inventories.
Downtime in the fourth quarter lowered nitrogen production by an
aggregate of approximately 191,000 tons at both facilities and
increased per-ton costs, as fixed production costs, including those
incurred during the downtime that would normally be included in
product inventory costs but were expensed as cost of sales, were
spread across lower sales volumes. Scheduled and unscheduled
downtime at both facilities resulted in turnaround and related
costs of $15.5 million reflected in cost of sales. Natural gas
costs were 37% of the East Dubuque Facility’s cost of sales, while
ammonia and sulfur costs were 57% of the Pasadena Facility’s cost
of sales.
SG&A expenses were $3.6 million for the three months ended
December 31, 2013, compared to $6.4 million for the prior-year
period. The reduction in SG&A expenses was primarily the result
of a $2.2 million reduction in business development expenses and
unit based compensation at the Partnership level, and lower payroll
expenses at the East Dubuque Facility.
During the three months ended December 31, 2013, operating loss
was $13.6 million, compared to operating income of $21.3 million
during the comparable period in the prior year. The operating loss
in the quarter was primarily due to costs associated with scheduled
and unscheduled downtime at both facilities, lower sales volume
resulting from reduced production and limited demand during the
shortened fall application season, as well as lower sales
prices.
Adjusted EBITDA for the three months ended December 31, 2013 was
($8.6) million, or $6.9 million excluding costs related to planned
and unplanned outages, which compares to $24.3 million in the
corresponding period in 2012. The East Dubuque Facility reported
$0.3 million in Adjusted EBITDA, or $14.1 million excluding costs
related to planned and unplanned outages. The Pasadena Facility
reported ($7.5) million in Adjusted EBITDA, or ($5.8) million
excluding costs related to planned and unplanned outages. Further
explanation of Adjusted EBITDA, a non-GAAP financial measure, has
been included below in this press release.
Interest expense was $4.4 million for the three months ended
December 31, 2013, compared to $1.3 million for the prior-year
period. The increase was due to additional borrowings to finance
expansions, major maintenance projects, and the acquisition of the
Pasadena Facility.
Energy Technologies
The energy technologies segment includes SG&A expenses
(including costs formerly recorded 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 Company has been actively winding down its alternative
energies business since announcing in the first quarter of 2013
plans to cease operations, reduce staffing at, and mothball its
Product Demonstration Unit (PDU), in Commerce City, CO, and to
eliminate all related R&D activities. Recently, the Company
entered into a definitive agreement with Sunshine Kaidi New Energy
Group Co., Ltd (Kaidi) to sell its alternative energy technologies
and decommissioned PDU, in Commerce City, Colorado for an initial
cash payment of $15.3 million, with another $16.2 million if Kaidi
successfully constructs and operates its demonstration-scale plant
in China. The sale is expected to close in mid-2014 subject to
customary conditions, including regulatory approvals in the United
States and the People’s Republic of China.
The segment incurred SG&A expenses of $2.2 million, compared
to $1.3 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 R&D expenses include personnel and other costs
associated with efforts to sell the Company’s energy technologies,
its decommissioned PDU and site in Commerce City, Colorado, patent
protection expenses, taxes, insurance costs, security and other
administrative costs. R&D expenses for the energy technologies
segment were zero for the three months ended December 31, 2013,
since all R&D activity ceased in the first quarter of 2013.
R&D expenses for the prior-year period were $6.3 million.
Year ended December 31, 2013
The financial results of Fulghum Fibres are included in 2013
results of operations only since the date of acquisition, which was
May 1, 2013. The financial results for the twelve months ended
December 31, 2013 and 2012 include twelve months of operating
results for the Pasadena Facility in 2013 and two months in
2012.
Consolidated revenues for the year ended December 31, 2013 were
$374.9 million, compared to $261.9 million in the prior-year
period, comprised primarily of:
- $63.0 million from Fulghum Fibres;
and
- The inclusion of the Pasadena
Facility’s results for the full twelve months of 2013 in comparison
to two months of results for 2012, partially offset by a 21%
decline in revenues from the East Dubuque Facility.
Gross profit for the year ended December 31, 2013 was $83.7
million compared to $131.9 million in the prior-year period,
comprised primarily of:
- Contribution of $12.0 million in gross
profits at Fulghum Fibres; and
- $71.4 million in gross profits at
Rentech Nitrogen which was negatively affected by lower nitrogen
product prices, higher input costs and lower sales volume.
Operating loss for the year ended December 31, 2013 was $8.9
million, compared to operating income of $43.3 million in the
prior-year period, comprised primarily of the following:
- Contribution of $9.9 million from
Fulghum Fibres;
- Operating loss of $5.5 million from the
wood pellets segment, which reflected SG&A costs associated
with developing the business and acquisition-related and
non-capitalized costs associated with constructing the wood pellet
mills at Atikokan and Wawa;
- Contribution of $19.2 million from
Rentech Nitrogen, which included a goodwill impairment of $30.0
million for the Pasadena Facility and costs associated with
downtime at the both facilities;
- Operating loss of $7.0 million from
energy technologies, which reflected costs associated with R&D
and decommissioning of the PDU; administrative costs related to the
Company’s energy technologies, facilities and sites; efforts to
sell and seek partners for the energy technologies and related
assets; partially offset by a $6.3 million gain on the sale of
property the Company owned in Natchez, Mississippi; and
- Corporate and unallocated expenses
recorded as operating expenses of $25.4 million, which included
$1.5 million in transaction costs related to the acquisition of
Fulghum Fibres and non-cash compensation of $5.9 million.
Consolidated Adjusted EBITDA for the year ended December 31,
2013 was $36.1 million, compared to $74.1 million for the
prior-year period, which included the following:
- $13.0 million contribution from Fulghum
Fibres; and
- $66.5 million of Adjusted EBITDA from
Rentech Nitrogen.
Further explanation of Adjusted EBITDA, a non-GAAP financial
measure, has been included below in this press release.
For the year ended December 31, 2013, the Company recorded a net
income tax benefit of approximately $26.6 million which was
comprised of a net income tax benefit for Rentech of approximately
$26.5 million and an income tax benefit for Rentech Nitrogen of
approximately $0.1 million. The income tax benefit for Rentech was
due to the release of a valuation allowance of $27.6 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 loss for the year ended December 31, 2013 was $1.5 million
or ($0.01) per basic share. Excluding the Agrifos goodwill
impairment, loss on debt extinguishment, fair value adjustment to
earn-out consideration, gain on sale of the site in Natchez, and
income tax benefit, net loss allocated to common shareholders for
the current period was $16.0 million or ($0.07) per basic share.
This compares to net loss of $14.0 million or ($0.06) per basic
share for the same period last year. Further explanation of net
income excluding these items, a non-GAAP financial measure, has
been included below in this press release.
Fulghum Fibres
Fulghum Fibres processed approximately 9.9 million green metric
tons of wood from May 1, 2013 through December 31, 2013. The
segment generated revenues of $63.0 million from May 1, 2013
through December 31, 2013, of which approximately $40.7 million and
$22.3 million were generated from the U.S. and South American
operations, respectively. Gross profit for the period was $12.0
million on margins of 19%. SG&A and interest expenses for the
period were $3.8 million and $1.8 million, respectively.
Wood Pellets
Rentech achieved several key milestones with respect to the
Company’s two industrial wood pellet projects in Eastern Canada.
The majority of outside civil and concrete construction work and
all remaining detailed engineering packages were completed, and
nearly 80% of all required equipment and materials have been
procured. The Company has also received rail cars at the Wawa
facility and the first delivery of logs at the Atikokan
facility.
Wood pellets segment SG&A expenses were $5.5 million for the
twelve months ended December 31, 2013, compared to $1.9 million for
the comparable period in the prior year. The increased SG&A was
due to acquisition-related and development costs associated with
the wood pellet projects as well as other costs for the development
of the Company’s wood fibre processing business, and
non-capitalized project costs of $0.7 million.
Nitrogen Products Manufacturing
The financial results for the year ended December 31, 2013 and
2012 include twelve months of operating results for the Pasadena
Facility in 2013 and two months in 2012.
Revenues for the year ended December 31, 2013 were $311.4
million, compared to $261.6 million for the prior year. Revenues
increased due to the inclusion of the Pasadena Facility’s results
for the full twelve months of 2013 in comparison to two months of
results for 2012, partially offset by a 21% decline in revenues
from the East Dubuque Facility as the result of declines in
nitrogen prices and lower production and sales volumes.
Gross profit margin for the year ended December 31, 2013 was
23%, compared to 50% for the same period last year. Gross profit
margin at the East Dubuque Facility was 46% for the current period,
compared to 60% for the prior-year period. Gross loss margin at the
Pasadena Facility was 7% for the current period, compared to 5% for
the prior-year period. Gross margin at both facilities was reduced
by downtime, which reduced production and sales volumes and
increased costs in the fourth quarter of 2013. In addition, gross
margin for both facilities was reduced by lower nitrogen product
prices, higher input costs and allocation of fixed production
costs, including those incurred during downtime that would normally
be included in product inventory costs, which were expensed as cost
of sales and were spread across lower sales volume. Gross loss
margin at the Pasadena Facility was further reduced by
approximately $5.0 million in inventory write-downs of product that
had not been delivered and remained in inventory at the end of the
year.
SG&A expenses were $17.3 million for the year ended December
31, 2013, down from $18.4 million in the prior-year period. The
decrease was primarily due to a decline of $3.5 million in
Partnership level business development expenses and a $1.7 million
decline in unused credit facility fees and professional service
expenses. These declines were partially offset by the inclusion of
the Pasadena Facility’s SG&A for the full twelve months of 2013
compared to two months of 2012.
During the year ended December 31, 2013, operating income was
$19.2 million compared to $111.6 million during the comparable
period in the prior year. The year-over-year decline in operating
income was a result of lower gross profits at the East Dubuque
Facility due to lower sales volumes and product prices of ammonia
and UAN and a result of negative gross profits at the Pasadena
Facility. In addition, operating income in 2013 was reduced by a
$30.0 million non-cash charge for impairment of goodwill related to
the Pasadena Facility. The impairment was the result of a reduced
outlook for profitability at the Pasadena Facility compared to
projections at the time of the acquisition.
Adjusted EBITDA for the twelve months ended December 31, 2013
was $66.5 million, or $82.0 million excluding costs related to
planned and unplanned outages, which compares to $124.0 million in
the corresponding period in 2012. The East Dubuque Facility
reported $84.5 million in Adjusted EBITDA, or $98.4 million
excluding costs related to planned and unplanned outages. The
Pasadena Facility reported ($10.1) million in Adjusted EBITDA, or
($8.4) million excluding costs related to planned and unplanned
outages. Further explanation of Adjusted EBITDA, a non-GAAP
financial measure, has been included below in this press
release.
Interest expense was $14.1 million for the year ended December
31, 2013, compared to $1.5 million for the prior-year. The increase
was due to additional borrowings to finance expansions, major
maintenance projects, and the acquisition of the Pasadena
Facility.
Rentech Nitrogen realized a non-cash gain of $4.9 million for
the year ended December 31, 2013 as a result of a decrease in the
potential earn-out consideration related to the acquisition of the
Pasadena Facility. The reduction was caused by a decline since the
time of the acquisition in the outlook for profitability in 2013
and 2014, primarily due to lower levels of nitrogen fertilizer
prices.
Energy Technologies
The segment incurred SG&A expenses of $7.7 million during
the current period, compared to $4.5 million for the prior-year
period. SG&A expenses increased primarily due to the inclusion
of $4.4 million in costs for activities that were previously
recorded 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 2013, all of which were incurred in the first
three months of the year. R&D expenses for the prior-year
period were $20.9 million. In 2013, the segment sold the Natchez
site for proceeds of $8.6 million and a gain of $6.3 million.
2014 Outlook
Rentech
Rentech provided the following guidance for 2014, excluding
Rentech Nitrogen:
RTK Guidance (excludes RNF) (Financial metrics in $U.S.
million)
2014Guidance
Revenues Fulghum Fibres $ 95 Wood Pellets (1) 20
Total Revenues $ 115
Cash SG&A Fulghum Fibres $ 5
Wood Pellets (2) 7 Energy Technologies (3) (4) 5 Unallocated
15 Total Cash SG&A $ 32
EBITDA Fulghum Fibres $
20
Wood Pellets - Atikokan & Wawa (1)
(5)
$ 2
Maintenance Capital Expenditures Fulghum Fibres $
3 Wood Pellets $ -
Production (in 000 tonnes)
Fulghum Fibres – Logs Processed (GMT) 15,000 Wood Pellets
(MT) 80,000 (1) Assumes first shipment to Drax in December
2014. (2) Includes assumed plant related start-up costs of
approximately $1 million. (3) Assumes sale of technology and PDU
closes 6/30/14. (4) Q1-Q3 includes Kaidi sale related transaction
& closing costs; Q4 SG&A, post closing, is approximately $
0.2 million. (5) Atikokan & Wawa Plant EBITDA only.
Rentech Nitrogen
The Company expects that a number of factors may contribute to
improved operating and financial results in 2014 compared to 2013
at Rentech Nitrogen. Completed capacity expansion projects have
increased production rates, and should increase production for the
year at both facilities. Projects to improve reliability have been
completed at the Pasadena Facility. Both facilities are forecasted
to operate at increased capacity in 2014, with no scheduled
down-time for the East Dubuque Facility and no scheduled
interruptions to the production of AS, other than normal scheduled
maintenance for the Pasadena Facility. The sulfuric acid plant is
scheduled to be down for approximately 20 days beginning in
mid-July to install a new converter and to complete final tie-ins
for the co-generation power project. AS production should not be
impacted during this period as we plan to purchase sulfuric acid in
the open market. The Partnership currently expects positive EBITDA
at the Pasadena Facility for the year due to increased production,
improved margins and higher operating rates.
Recent increases in prices for nitrogen products from the lower
levels experienced late in 2013 are encouraging. However, the
current market environment is different this year relative to early
2013, with lower corn prices and somewhat lower, albeit strong,
anticipated corn plantings. These factors and the dynamics that
affect input prices could rapidly change based on weather patterns
and other conditions, and could positively or negatively affect
product prices, margins, deliveries and cash distributions. Cash
distributions in 2014 may be less than cash available for
distribution if the Board of Directors elects to reduce
distributions in order to replenish working capital reserves that
were diminished by $20 million of negative cash available for
distribution in the fourth quarter of 2013.
Conference Call with Management
The Company will hold a conference call today, March 11, 2014,
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 March 11
through 11:59 p.m. PST on March 21. 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 Year
Ended December 31, Ended December 31, 2013
2012 2013 2012
(unaudited) (unaudited)
Revenues $ 79,273 $ 92,459 $ 374,855
$ 261,925
Cost of Sales 81,867
63,872 291,164 130,006
Gross Profit (Loss) (2,594 ) 28,587 83,691 131,919
Operating Expenses Selling, general and administrative
expense 14,713 14,409 59,076 48,240 Research and development -
6,270 5,747 20,944
Depreciation and amortization 1
2,342
1,268
3,113
3,754 Agrifos goodwill impairment - - 30,029 - Loss on impairments
- 15,965 - 15,965 (Gain) loss on sale of assets 840 272 (5,379 )
272 Other 1 (309 ) (15 ) (600 )
Total Operating Expenses
13,212
37,875
92,571
88,575
Operating Income (Loss)
(15,806
) (9,288 )
(8,880
) 43,344
Other Income (Expense), Net Interest expense
(5,362 ) (3,661 ) (16,382 ) (8,949 ) Loss on debt extinguishment -
(4,801 ) (6,001 ) (4,801 ) Fair value adjustment to earn-out
consideration (75 ) - 5,122 - Other income (expense), net 9
(39 ) (170 ) (693 )
Total
Other Expenses, Net (5,428 ) (8,501 )
(17,431 ) (14,443 )
Income (Loss) from Continuing
Operations Before Income Taxes and Equity in Loss of Investee
(21,234
) (17,789 )
(26,311
) 28,901 Income tax (benefit) expense
138
122
(26,591
) 1,364
Income (Loss) from Continuing
Operations Before Equity in Loss of Investee
(21,372
) (17,911 )
(280
) 27,537 Equity in Loss of Investee 104 -
242 -
Income (Loss)
from Continuing Operations
(21,476
) (17,911 )
38
27,537 Income from discontinued operations, net of tax -
16 - 150
Net Income (Loss)
(21,476
) (17,895 )
38
27,687 Net loss (income) attributable to noncontrolling interests
6,945
(6,630 ) (1,570 ) (41,687 )
Net Loss Attributable to Rentech Common Shareholders $
(14,531
) $ (24,525 ) $
(1,532
) $ (14,000 )
Net Loss per Common Share Allocated to
Rentech Common Shareholders: Basic and Diluted:
Continuing operations
(0.06
) (0.11 )
(0.01
) (0.06 ) Discontinued operations 0.00 0.00
0.00 0.00
Net Loss
(0.06
) (0.11 )
(0.01
) (0.06 )
Weighted-Average Shares Used to Compute
Net Loss per Common Share: Basic and Diluted
227,026 221,757 226,139
223,189
1 Amortization of unfavorable agreements exceeds amortization of
favorable agreements resulting in a credit in depreciation and
amortization for Fulghum Fibres.
Rentech, Inc. Statements of Operation by Business
Segment (Stated in Thousands)
For the Three Months For the Year Ended
December 31, Ended December 31, 2013
2012 2013 2012 (unaudited) (unaudited)
Revenues East Dubuque $ 30,862 $ 54,977 $ 177,700 $ 224,205
Pasadena 23,714 37,430 133,675 37,430 Fulghum Fibres 24,491 -
62,974 - Energy Technologies 206 52
506 290
Total Revenues $ 79,273
$ 92,459 $ 374,855 $ 261,925
Gross Profit (Loss) East Dubuque $ (470 ) $ 30,290 $ 80,883 $
133,543 Pasadena (7,563 ) (1,704 ) (9,529 ) (1,704 ) Fulghum Fibres
5,283 - 12,032 - Energy Technologies 156 1
305 80
Total Gross Profit
(Loss) $ (2,594 ) $ 28,587 $ 83,691 $ 131,919
Selling, General and Administrative Expense East
Dubuque $ 1,153 $ 1,762 $ 4,576 $ 6,242 Pasadena 953 361 4,764 361
Fulghum Fibres 1,645 - 3,754 - Wood Pellets 1,246 1,080 5,479 1,919
Energy Technologies 2,165 1,262
7,709 4,514
Total Selling, General and
Administrative Expense $ 7,162 $ 4,465 $ 26,282
$ 13,036 Research and Development Energy
Technologies $ - $ 6,270 $ 5,747 $ 20,944
Total Research and Development $ - $ 6,270
$ 5,747 $ 20,944 Depreciation and
Amortization East Dubuque $ 39 $ 81 $ 191 $ 807 Pasadena 1,164 583
3,886 583
Fulghum Fibres 1
(3,692
)
-
(1,708
)
- Wood Pellets 26 26 - Energy Technologies -
405 122 1,573
Total
Depreciation and Amortization Recorded in Operating Expenses $
(2,463
)
$ 1,069 $
2,517
$ 2,963 Other Operating (Income) Expenses East
Dubuque $ 770 $ 226 $ 806 $ 510 Pasadena - - 30,029 -
Fulghum Fibres
73 - 72 - Energy Technologies (2 ) 15,703
(6,272 ) 15,126
Total Other Operating
Expenses $ 841 $ 15,929 $ 24,635 $ 15,636
Operating Income (Loss) East Dubuque $ (2,432 ) $
28,221 $ 75,310 $ 125,984 Pasadena (9,680 ) (2,648 ) (48,208 )
(2,648 ) Fulghum Fibres
7,257
-
9,914
- Wood Pellets (1,272 ) (1,080 ) (5,505 ) (1,919 ) Energy
Technologies (2,007 ) (23,637 ) (7,001 )
(42,077 )
Total Operating Income (Loss) $
(8,134
) $ 856 $
24,510
$ 79,340 Interest (Income) Expense East
Dubuque $ - $ 13 $ - $ 194 Pasadena 2 - 8 - Fulghum Fibres 505 -
1,755 - Energy Technologies - 6
(3 ) (1,576 )
Total Interest (Income) Expense $ 507
$ 19 $ 1,760 $ (1,382 ) Net Income
(Loss) East Dubuque $ (2,139 ) $ 26,095 $ 75,244 $ 123,721 Pasadena
(9,442 ) (2,648 ) (48,357 ) (2,648 ) Fulghum Fibres
6,026
-
6,967
- Wood Pellets (1,239 ) (1,080 ) (5,180 ) (1,919 ) Energy
Technologies (1,988 ) (23,644 ) (6,891 )
(40,498 )
Total Net Income (Loss) $
(8,782
) $ (1,277 ) $
21,783
$ 78,656
Reconciliation of Segment Net
Income (Loss) to Consolidated Net Income (Loss): Segment net
income (loss) $
(8,782
) $ (1,277 ) $
21,783
$ 78,656 RNF – Partnership and unallocated expenses recorded as
selling, general and administrative expenses (1,457 ) (4,271 )
(7,945 ) (11,773 ) RNF – Partnership and unallocated income
(expenses) recorded as other income (expense) - - (1,081 ) 232 RNF
– Unallocated interest expense and loss on interest rate swaps
(4,370 ) (1,319 ) (14,096 ) (2,226 ) RNP – Income tax benefit
(expense) 1 (303 ) 303 (303 ) Corporate and unallocated expenses
recorded as selling, general and administrative expenses (6,094 )
(5,673 ) (24,849 ) (23,432 ) Corporate and unallocated depreciation
and amortization expense (121 ) (199 ) (596 ) (791 ) Corporate and
unallocated income (expenses) recorded as other income (expense) 38
(2,683 ) 19 (2,708 ) Corporate and unallocated interest expense
(485 ) (2,367 ) (532 ) (9,055 ) Corporate income tax benefit
(expense)
(206
) 181
27,032
(1,063 ) Income from Discontinued Operations -
16 - 150
Consolidated Net
Income (Loss) $
(21,476
) $ (17,895 ) $
38
$ 27,687
1 Amortization of unfavorable agreements exceeds amortization of
favorable agreements resulting in a credit in depreciation and
amortization for Fulghum Fibres.
Rentech, Inc. Selected Balance Sheet Data
As of As of Consolidated
Balance Sheet Data December 31, 2013 December 31,
2012 Cash $ 106,369 $ 141,736 Working Capital
69,822
107,059 Construction in Progress 60,136 61,417 Total Assets
703,590
479,202 Total Debt 421,979 193,290 Total Rentech Stockholders'
Equity
158,073
157,987
As of As of December 31, 2013
December 31, 2012 Cash - Rentech Nitrogen Partners $ 34,060
$ 55,799 Cash excluding Rentech Nitrogen Partners 72,309
85,937
Total Cash $ 106,369 $ 141,736
As
of As of December 31, 2013 December 31,
2012 Debt - Rentech Nitrogen Partners $ 320,000 $ 193,290 Debt
excluding Rentech Nitrogen Partners 101,979 -
Total Debt $ 421,979 $ 193,290
Disclosure Regarding Non-GAAP Financial Measures
Net income (loss) excluding Agrifos goodwill impairment, loss on
debt extinguishment, gain on sale of Natchez, fair value adjustment
to earn-out consideration and income tax (benefit) expense 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, Agrifos
goodwill impairment, loss on debt extinguishment, loss on interest
rate swaps, income tax expense (benefit), depreciation and
amortization, gain on fair value adjustment to earn-out
consideration and gain on sale of Natchez. Adjusted EBITDA for
Fulghum Fibres is defined as net income plus net interest expense,
depreciation and amortization and other adjustments. Pro-Forma
Adjusted EBITDA is Adjusted EBITDA plus turnaround expenses, the
cost to repair the foundation underneath one of our syngas
compressors, the insurance deductible on equipment damaged by the
fire that occurred in November 2013 and fixed costs incurred during
downtime for repairs related to the fire.
Cash selling, general and administrative expenses exclude
non-cash compensation expenses.
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 loss attributable to Rentech
excluding Agrifos goodwill impairment, loss on debt extinguishment,
gain on sale of Natchez, gain on fair value adjustment to earn-out
consideration and income tax benefit to net loss attributable to
Rentech for the year ended December 31, 2013 (stated in thousands,
except per share data).
For the Year Ended December 31,
2013 Net Loss Attributable to Common Shareholders $
(1,532
) Agrifos Goodwill Impairment 17,957 Loss on Debt Extinguishment
3,589 Gain on Sale of Natchez (6,275 ) Fair Value Adjustment to
Earn-out consideration (3,144 ) Income Tax Benefit
(26,591
)
Net Loss Attributable to Common
Shareholders ExcludingAgrifos Goodwill Impairment, Loss on
DebtExtinguishment and Fair Value Adjustment to
Earn-outConsideration
$
15,996
Net Loss per Share Attributable to Rentech Common
Shareholders $
(0.01
) Loss per Share on Agrifos Goodwill Impairment 0.08 Loss per Share
on Debt Extinguishment 0.02 Gain per share on Sale of Natchez (0.03
) Per Share Fair Value Adjustment to Earn-out Consideration (0.01 )
Income Tax Benefit per Share
(0.12
)
Net Loss per Share Attributable to Rentech
CommonShareholders Excluding Agrifos Goodwill Impairment,Loss on
Debt Extinguishment and Fair Value Adjustmentto Earn-out
Consideration
$
(0.07
) Weighted-Average Common Shares Outstanding 226,139
The table below reconciles Rentech’s consolidated Adjusted
EBITDA from net income (loss) for the three months ended and year
ended December 31, 2013 (stated in thousands).
For the Three Months
For the Year
Ended December 31, Ended December 31,
2013 2013
Net Income (Loss)
$
(21,476
) $
38
Add: Interest Expense 5,362 16,382
Income Tax Expense
138
(26,591
) Depreciation and Amortization
2,515
21,184
Agrifos Goodwill Impairment - 30,029 Loss on Debt Extinguishment -
6,001 Gain on Sale of Natchez - (6,275 ) Fair Value Adjustment to
Earn-out Consideration 75 (5,122 ) Other 95
412
Adjusted EBITDA $ (13,291 ) $ 36,058
The table below reconciles Fulghum Fibres’ Adjusted EBITDA from
net income for Fulghum for the three months and year ended December
31, 2013 (stated in thousands)
For the Three Months For the
Year Ended December 31, Ended December 31,
2013 2013 Fulghum Net Income $
6,026
$
6,967
Add Fulghum Items: Interest Expense 505 1,755
Depreciation and Amortization 1
(2,563
)
3,128
Other
726
1,192
Fulghum's Adjusted EBITDA $ 4,694 $ 13,042
1Amortization of unfavorable agreements exceeds amortization of
favorable agreements resulting in a credit in depreciation and
amortization for Fulghum Fibres.
The table below reconciles consolidated Adjusted EBITDA from net
loss for Rentech Nitrogen for the three months ended December 31,
2013. The table also presents Pro-Forma Adjusted EBITDA that
reverses the impact of turnaround expenses at both plants and the
impacts of the compressor foundation replacement and fire at the
East Dubuque Facility for the period (stated in thousands, except
per unit data).
For the Three Months Ended December 31,
2013 (Stated in thousands, except per unit data) East
Dubuque
Facility
Pasadena
Facility
Partnership
Level
Consolidated Net Loss $ (2,139 ) $ (9,442 ) $
(5,826 ) $ (17,407 ) Plus: Interest expense - 2
4,371
4,373
Less: Income tax benefit
(294 ) (240 ) - (534 ) Plus: Depreciation and amortization 2,739
2,192 - 4,931 Less: Other - - (1
) (1 )
Adjusted EBITDA $ 306 $ (7,488 ) $
(1,456
) $
(8,638
) Plus: Turnaround expense 7,754 1,709 - 9,463 Plus: Syngas
compressor foundation crack expense 776 - - 776 Plus: Insurance
deductible on equipment damaged by fire 1,000 - - 1,000 Plus: Fixed
costs during downtime for fire(1) 4,279 -
- 4,279
Pro-Forma Adjusted
EBITDA $ 14,115 $ (5,779 ) $ (1,456 ) $
6,880
(1) Represents fixed plant costs incurred during the
fire-related downtime that are recorded to cost of sales rather
than capitalized into inventory and recorded as cost of sales when
the volume produced during the period of the fire is subsequently
delivered. GAAP requires that fixed costs incurred during a plant
interruption such as the fire at the East Dubuque Facility are
expensed as incurred as opposed to inventoried.
The table below reconciles consolidated Adjusted EBITDA from net
income (loss) for Rentech Nitrogen for the twelve months ended
December 31, 2013. The table also presents Pro-Forma Adjusted
EBITDA that reverses the impact of turnaround expenses at both
plants and the impacts of the compressor foundation replacement and
fire at the East Dubuque Facility for the period (stated in
thousands, except per unit data).
For the Year Ended December 31, 2013
(Stated in thousands, except per unit data) East
Dubuque
Facility
Pasadena
Facility
Partnership
Level
Consolidated Net income (loss) $ 75,244 $
(48,357 ) $ (22,819 ) $ 4,068 Plus: Interest expense - 8 14,090
14,098 Plus: Agrifos goodwill impairment - 30,029 - 30,029 Plus:
Loss on debt extinguishment - - 6,001 6,001 Less: Fair value
adjustment to earn-out consideration - - (4,920 ) (4,920 ) Plus:
Loss on interest rate swaps - - 7 7 Plus: Income tax (benefit)
expense 66 141 (303 ) (96 ) Plus: Depreciation and amortization
9,239 8,073 - 17,312 Less: Other - - (1
) (1 )
Adjusted EBITDA $ 84,549 $ (10,106 ) $ (7,945
) $ 66,498 Plus: Turnaround expense 7,754 1,709 - 9,463 Plus:
Syngas compressor foundation crack expense 776 - - 776 Plus:
Insurance deductible on equipment damaged by fire 1,000 - - 1,000
Plus: Fixed costs during downtime for fire(1) 4,279 -
- 4,279
Pro-Forma Adjusted
EBITDA $ 98,358 $ (8,397 ) $ (7,945 ) $
82,016
(1) Represents fixed plant costs incurred during the
fire-related downtime that are recorded to cost of sales rather
than capitalized into inventory and recorded as cost of sales when
the volume produced during the period of the fire is subsequently
delivered. GAAP requires that fixed costs incurred during a plant
interruption such as the fire at the East Dubuque Facility are
expensed as incurred as opposed to inventoried.
The table below reconciles consolidated Adjusted EBITDA to net
income for Rentech Nitrogen for the three months and year ended
December 31, 2012 (stated in thousands).
For the Three Months For the
Year Ended December 31, Ended December 31,
2012 2012 Net income $ 17,554 $ 107,003
Add: Interest Expense 1,287 1,424 Income Tax Expense 303 303
Depreciation and Amortization 3,004 12,460 Loss on Debt
Extinguishment 2,114 2,114 Loss on Interest Rate Swaps 44 951 Other
- (232 )
Adjusted EBITDA $ 24,306 $ 124,023
The tables below reconcile forecasted EBITDA to net income for
Fulghum Fibres and the Atikokan and Wawa pellet facilities for the
year ending December 31, 2014 (stated in millions).
Fulghum Fibres EBITDA 2014
Guidance Fulghum Fibres Net Income $
6
Add: Interest Expense
2
Depreciation and Amortization
11
Other 1
Fulghum Fibres Adjusted EBITDA $ 20
Wawa & Atikokan Pellet Facilities
2014 Guidance Wawa & Atikokan Operating
Income $ - Add: Depreciation and Amortization 2
Facility
Level Adjusted EBITDA $ 2
The table below reconciles cash selling, general and
administration expenses for Rentech, excluding Rentech Nitrogen,
for 2012, 2013 and 2014 (stated in thousands).
2012 Actual 2013 Actual
2014 Guidance Total Cash SG&A $ 21,842 $ 35,851 $
32,000 Add: Non-Cash Compensation Expenses 8,023
5,940 7,000 GAAP SG&A $ 29,865 $ 41,791 $ 39,000
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 Statement
This press release contains forward-looking statements as
defined in the Private Securities Litigation Reform Act of 1995
about matters such as: potential investment opportunities,
including projected revenues and EBITDA for the wood fibre
business; the possibility of a MLP IPO for the wood fibre
business; our ability to complete the wood pellet mills on a timely
basis and on budget; the outlook for our wood processing and
nitrogen fertilizer businesses and our ability to close on the sale
of our energy technologies business. 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.
References to an initial public offering of our wood fibre
business in this press release are being made solely to advise
Rentech’s investors regarding the Company’s current business plan.
This press release does not constitute an offer to sell or a
solicitation of an offer to buy any securities. Any such offer or
solicitation will be made only by means of a prospectus.
Rentech, Inc.Julie Dawoodjee CafarellaVice President of
Investor Relations and Communications310-571-9800ir@rentk.com
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