Rentech Announces Results for First Quarter 2013
Rentech Announces Results for First Quarter 2013
LOS ANGELES--(BUSINESS WIRE)-- Rentech, Inc. (NYSE MKT: RTK) today announced its results for the three months ended March 31, 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.
Rentech's financial results reflect the consolidated results of Rentech, Inc. and its subsidiaries, including Rentech Nitrogen Partners, L.P. 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.
D. Hunt Ramsbottom, President and CEO of Rentech, said, "We continue to focus on disciplined capital allocation and maximizing shareholder returns. Our entry into the wood fibre processing business is expected to produce immediate cash flow, attractive returns, and significant growth." Mr. Ramsbottom continued, "In the quarter, the nitrogen fertilizer business achieved solid product margins, although the year got off to a slow start due to bad weather. We are on track in reducing our spending in the alternative energy segment."
Mr. Ramsbottom added, "With last week's announcements, we've charted a path for growth at the parent company, with a stable margin profile in a business that is not subject to agricultural cycles. We expect Fulghum Fibres to generate annualized EBITDA of $20 million in 2013, and our announced pellet projects to begin generating EBITDA next year. At the same time, we continue the growth in our fertilizer business, with the ammonia expansion at the East Dubuque Facility on schedule and on budget, and our growth projects at the Pasadena Facility well underway."
Consolidated revenues for the three months ended March 31, 2013 were $59.7 million, compared to $38.6 million for the same period last year. Revenues were derived almost entirely from sales of nitrogen fertilizer products through Rentech Nitrogen. Revenues increased due to the contribution of $25.0 million of revenues from the Pasadena Facility and higher UAN volume, partially offset by lower ammonia volumes and UAN product prices at the East Dubuque Facility. Ammonia volumes in the current period were lower than in the prior year, which benefitted from an early spring ammonia application. Excessive moisture delayed application of ammonia in the current period which delayed shipments of products that were scheduled to be delivered in March 2013. UAN volumes were higher as a result of shipments in the current period that were scheduled for the fourth quarter of 2012 but could not be shipped in that quarter due to a plant outage.
Consolidated operating income for the three months ended March 31, 2013 was $2.1 million, compared to operating income of $6.6 million for the three months ended March 31, 2012. Operating income in the current period was reduced by higher selling, general and administrative (SG&A) expenses and depreciation and amortization expenses attributable to the Pasadena Facility.
During the three months ended March 31, 2013, Rentech's nitrogen products manufacturing subsidiary generated operating income of $17.0 million, compared to $19.5 million during the prior year period. EBITDA for Rentech's nitrogen products manufacturing business was $20.6 million for the period, compared to $21.9 million in the corresponding period in 2012. EBITDA for the current period, excluding Partnership level expenses, totaled $22.8 million. The East Dubuque Facility and the Pasadena Facility contributed $19.6 million and $3.2 million in EBITDA, respectively, during the three months ended March 31, 2013. Further explanation of EBITDA, a non-GAAP financial measure, and a reconciliation of EBITDA to net income for Rentech's nitrogen products manufacturing subsidiary have been included below in this press release.
Gross margins for the nitrogen products manufacturing business were 38% for the three months ended March 31, 2013, compared to 59% for the same period last year, primarily due to the acquisition of the Pasadena Facility, which realizes lower gross margin than does the East Dubuque Facility.
For the three months ended March 31, 2013, Rentech reported a consolidated net loss of $5.2 million, or $0.02 per basic share. This compares to a net loss of $3.3 million, or $0.01 per basic share, reported in the comparable period in the prior year.
Consolidated SG&A expenses were $13.7 million for the three months ended March 31, 2013, compared to $10.4 million for the comparable period in the prior year. SG&A expenses were comprised of $8.9 million for the alternative energy segment and $4.7 million, including Partnership level expenses, for the nitrogen fertilizer business, compared to $7.8 million and $2.6 million, respectively, for the prior-year period. The increase in SG&A expenses in the alternative energy segment was primarily due to approximately $0.6 million of severance expense associated with ceasing operations and reducing staffing at the Company's Product Demonstration Unit (PDU), and increases of approximately $1.0 million in legal and consulting expenses primarily related to the Company's recently announced wood fibre processing business and $0.3 million in audit and tax fees. These increases were partially offset by a net decrease of approximately $1.0 million in equity-based compensation. The increase in SG&A expenses for the nitrogen products manufacturing business was primarily due to the addition of SG&A expenses from the Pasadena Facility.
Research and development (R&D) expenses in the alternative energy segment during the three months ended March 31, 2013 were $5.7 million, compared $5.0 million for the comparable period in the prior year. The increase in R&D expenses was primarily due to severance and other costs associated with ceasing operations of, reducing staffing at, and mothballing the Company's PDU.
As noted below, total R&D and SG&A expenses associated with the Company's alternative energy technologies remain in line with expectations for approximately $10 million for the full year 2013.
Wood Fibre Processing Business
On May 2, 2013, Rentech announced its entry into the wood fibre processing business through the acquisition of Georgia-based Fulghum Fibres, Inc. (Fulghum Fibres) and agreements to acquire two facilities for conversion to the production of wood pellets in Ontario, Canada. The Company also announced contracts for the sale and transport of more than four million metric tons of wood pellets over ten years, and a joint venture agreement with Graanul Invest for equity investment, development and construction of wood pellet projects in the U.S. and Canada. These steps position Rentech to develop a leading wood processing business for production of high-quality wood chips and pellets. Rentech funded the Fulghum Fibres acquisition price with cash on hand and expects to fund the acquisition and construction of its announced wood pellet facilities from cash on hand, expected distributions from Rentech Nitrogen, cash flow from Fulghum Fibres, and investments from Graanul Invest, its joint venture partner.
In its press release dated May 9, 2013, Rentech Nitrogen reiterated guidance for cash available for distribution for the twelve months ending December 31, 2013 of approximately $2.60 per unit. The 2013 guidance includes the impact of two previously announced scheduled outages at its facilities during 2013, and the impact of lost revenue in 2013 due to the unscheduled outage at the East Dubuque Facility in December 2012. Excluding the effects of these outages, the forecast for 2013 cash available for distribution would be higher by approximately $0.65 per unit.
Based on Rentech Nitrogen's current guidance of $2.60 per unit, and assuming Rentech's current ownership of 23.25 million units of Rentech Nitrogen, Rentech would receive approximately $60 million in cash distributions.
For the twelve months ending December 31, 2013, Rentech reiterated the following guidance provided on May 2, 2013 as part of its wood fibre processing business announcement:
|Cash SG&A Expenses|
|Former R&D Expenses1||~5||-||~5||-||~5|
|Total Cash SG&A Expenses|
|Cash R&D Expenses|
|Pro Forma Adjusted EBITDA3|
|1||Expenses that would have been recorded as R&D absent the decision announced on February 28, 2013 to cease operations at Rentech's PDU.|
|2||Adjusted for non-cash compensation expenses.|
Excludes $7 million in R&D expenses based on annualized run rate of $3 million in former R&D costs assuming the PDU has not been sold or Rentech continues to incur expenses to protect its patents or seek partners.
Fulghum Fibres is forecasted to have revenues of approximately $95 million, operating income of approximately $10 million and EBITDA of approximately $20 million in calendar year 2013, which are consistent with Fulghum Fibres' stable historical financial performance. Further explanation of EBITDA, a non-GAAP financial measure, and a reconciliation of Fulghum Fibres' forecasted EBITDA to operating income have been included below in this press release. Fulghum Fibres' results will be included in the results of Rentech starting on May 1, 2013.
Wood Pellet Facilities
The Company's two announced wood pellet projects, Atikokan and Wawa, located in Ontario, Canada, are expected to generate revenues and EBITDA beginning in 2014, with a ramp-up to approximately 80% of stabilized EBITDA in 2015 and forecasted stabilized operating income of $3 million and stabilized EBITDA of $15 million in 2016. Further explanation of EBITDA, a non-GAAP financial measure, and a reconciliation of the forecasted EBITDA to operating income for the pellet facilities have been included below in this press release.
Conference Call with Management
The Company will hold a conference call today, May 9, 2013, at 3:00 p.m. PDT, during which Rentech's senior management will review the Company's financial results for this period and provide an update on corporate developments. Callers may listen to the live presentation, which will be followed by a question and answer segment, by dialing 866-294-4838 or 847-944-7303 and the audience passcode 5088586#. An audio webcast of the call will be available at www.rentechinc.com within the Investor Relations portion of the site under the Presentations section. A replay will be available by audio webcast and teleconference from 5:30 p.m. PDT on May 9 through 9:00 p.m. PDT on May 19. The replay teleconference will be available by dialing 888-843-7419 or 630-652-3042 and the audience passcode 5088586#.
Rentech, Inc. and Subsidiaries
Consolidated Statements of Income
(Stated in Thousands, Except per Share Data)
|For the Three Months|
|Ended March 31,|
|Total Revenues||$ 59,667||$ 38,588|
|Cost of Sales||36,895||15,953|
|Selling, general and administrative expense||13,652||10,413|
|Research and development||5,747||5,022|
|Depreciation and amortization||1,185||1,139|
|Loss on impairments||88||20|
|Advance for equity investment||-||-|
|Other Expense, Net|
|Other income (expense), net||(110)||62|
|Total Other Expenses, Net||(1,914)||(2,252)|
|Income Before Income Taxes||154||4,326|
|Income tax benefit||(632)||-|
Net income attributable to non-controlling interests
|Net Loss Attributable to Rentech||$ (5,240)||$ (3,264)|
|Net Loss per Common Share Attributed to Rentech:|
Basic and Diluted
|$ (0.02)||$ (0.01)|
|Basic and Diluted||225,222||225,865|
Statements of Income by Business Segment
(Stated in Thousands, Except per Unit Data)
|For the Three Months|
|Ended March 31,|
|East Dubuque Facility||$||34,549||$||38,473|
|East Dubuque Facility||$||18,746||$||22,572|
|Total Gross Profit||$||22,772||$||22,635|
|Selling, General and Administrative Expenses|
|East Dubuque Facility||$||1,345||$||1,289|
|Total Selling, General and Administrative Expenses||$||11,498||$||9,112|
|Research and Development Expenses|
|East Dubuque Facility||$||-||$||-|
|Total Research and Development Expenses||$||5,747||$||5,022|
|Depreciation and Amortization|
|East Dubuque Facility||$||73||$||553|
|Total Depreciation and Amortization Recorded in Operating|
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