News Column

Rentech Announces Results for First Quarter 2014

May 14, 2014



ENP Newswire - 14 May 2014

Release date- 13052014 - LOS ANGELES - Rentech, Inc. (NASDAQ: RTK) today announced financial and operating results for the three months ended March 31, 2014.

D. Hunt Ramsbottom, president and CEO of Rentech, said, 'One year ago, we announced our wood fibre strategy when we acquired Fulghum Fibres. Fulghum Fibres' cash flow has proven to be stable and the business is running as expected. Our Canadian wood pellet projects are progressing on schedule and on budget.' Mr. Ramsbottom continued, 'We have just acquired New England Wood Pellet, which strengthens and diversifies our fibre portfolio. With the recent investment from Blackstone/GSO, we are well positioned to further expand our fibre business.'

Mr. Ramsbottom added, 'Our nitrogen fertilizer facilities have improved their operating and financial performance compared to last quarter. Both facilities are producing at or above new nameplate production capacity. We are focused on continued operational excellence at all of our facilities worldwide.'

Summary of Results

Rentech's financial statements 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). Rentech owns the general partner and approximately 60% of the common units representing limited partner interests of Rentech Nitrogen. The results of the wood fibre processing business are reported as two operating segments: Fulghum Fibres (wood chipping) and wood pellets. Rentech Nitrogen's results include two operating segments: the East Dubuque Facility and the Pasadena Facility. Results of the Company's energy technologies business were reported as discontinued operations for the first time this quarter. Prior-year earnings from this segment were also reclassified as discontinued operations.

The financial results of Fulghum Fibres were included in 2013 results of operations only since the date of acquisition, which was May 1, 2013. Results for the three months ended March 31, 2014 are summarized below:

Consolidated revenues were $84.8 million, compared to $59.6 million in the prior-year period. These revenues were comprised primarily of:

$28.6 million from Fulghum Fibres; and

$56.3 million from Rentech Nitrogen, which represents a decrease of $3.3 million from the prior-year period.

Gross profit was $17.9 million, compared to $22.7 million in the prior-year period. Gross profit was comprised of:

$4.1 million from Fulghum Fibres; and

$13.8 million from Rentech Nitrogen, which represents a decrease of $9.0 million from the prior-year period

Consolidated Adjusted EBITDA was $6.0 million, an increase of $0.3 million compared to the prior-year period. EBITDA included the following:

$4.5 million from Fulghum Fibres; and

$11.5 million from Rentech Nitrogen, which represents a decrease of $9.2 million from the prior-year period.

Further explanation of Adjusted EBITDA, a non-GAAP financial measure, has been included below in this press release.

Net loss was $7.0 million or ($0.03) per basic share, compared to net loss of $5.2 million or ($0.02) per basic share for the same period last year.

Fulghum Fibres

Fulghum Fibres' revenues were $28.6 million for the three months ended March 31, 2014, of which $14.2 million were generated from U.S. and $14.4 million from South American operations. Gross profit for the period was $4.1 million on margin of 14%. Selling, general, and administrative (SG&A) expenses for the three months ended March 31, 2014 were $1.4 million. During the three months ended March 31, 2014, Fulghum Fibres' mills in the U.S. and South America processed approximately 3.0 million green metric tons (GMT) and approximately 0.8 million GMT of logs, respectively, into wood chips and residual fuels.

Wood Pellets

Operating expenses were $1.7 million for the three months ended March 31, 2014 compared to $1.1 million for the same period last year. The increase was due to $0.7 million of costs in 2014 related to the Atikokan and Wawa projects that were not capitalized and $0.2 million in management and development costs not directly related to the projects in Canada. These expenses were offset by a $0.3 million gain on disposal of assets. Results for the first quarter of 2014 were consistent with Rentech's guidance for the full year.

Nitrogen Products Manufacturing

Revenues for the three months ended March 31, 2014 were $56.3 million for Rentech's nitrogen products manufacturing segment. This compares to $59.6 million for the same period in the prior year. Revenues for the first quarter of 2014 declined 18% from the prior-year quarter at the East Dubuque Facility and increased 11% over the prior-year quarter at the Pasadena Facility.

Gross margin for the three months ended March 31, 2014 was 24%, compared to 38% for the same period last year.

Adjusted EBITDA for the three months ended March 31, 2014 was $11.5 million, which compares to $20.6 million in the corresponding period in 2013. A further explanation of Adjusted EBITDA, a non-GAAP financial measure, appears below in this press release.

Net income was $3.1 million for the three months ended March 31, 2014, compared to $15.0 million for the same period last year.

Rentech Nitrogen announced today a cash distribution for the first quarter of 2014 of $0.08 per unit, to be paid on May 30, 2014. The calculation of the cash distribution is included below in this press release.

East Dubuque Facility

Revenues for the three months ended March 31, 2014 were $28.5 million, compared to $34.5 million for the same period last year. The decrease was primarily the result of lower ammonia and UAN deliveries, and lower sales prices for all fertilizer products. Lower revenues from fertilizer products were partially offset by an increase in sales of natural gas that were recorded in other revenue. The decrease in 2014 ammonia and UAN sales volume was due to unusually high sales volumes for the first quarter of 2013. Two unexpected outages at the ammonia plant during the fourth quarter of 2012 affected revenues in early 2013. The outages reduced production of ammonia and UAN. Deliveries of both products that had been expected in late 2012 were shifted into the first quarter of 2013. These two products comprised approximately 58% of the total revenues for the three months ended March 31, 2014 and 77% of total revenues for the first quarter of 2013.

Average sales prices per ton for the three months ended March 31, 2014 were approximately 27% lower for ammonia and 12% lower for UAN, as compared with the same period last year. The decrease in average sales prices for ammonia and UAN were consistent with the decline in global nitrogen fertilizer prices between the two periods. Significantly higher levels of low-priced urea on the market, particularly from China, contributed to this decline.

Gross profit was approximately $12.4 million for the three months ended March 31, 2014 compared to approximately $18.7 million for the same period last year. Gross profit margin for the three months ended March 31, 2014 was 44%, compared to 54% for the same period last year. The decline in revenues associated with lower deliveries and product pricing, in addition to increased natural gas costs, contributed to these decreases. During the three months ended March 31, 2014, temporary operational problems with a natural gas pipeline in the Midwest caused a significant spike in the local price of natural gas. This created a unique opportunity to purchase natural gas from other locations at lower prices and resell it at significantly higher prices. The East Dubuque facility also sold natural gas originally purchased for production at a gross profit that exceeded the expected gross profit from additional production using that natural gas. Approximately 151,000 MMBtus of natural gas that cost an average of $9.42 per MMBtu were sold at an average price of $29.90 per MMBtu. Approximately half of the natural gas sold had been intended for production of 2,900 tons of ammonia. The total of $4.5 million in natural gas sales generated a gross profit of approximately $3.1 million.

Adjusted EBITDA for the three months ended March 31, 2014 for the East Dubuque facility was $13.5 million. This compares to $19.6 million in the corresponding period in 2013. A further explanation of Adjusted EBITDA, a non-GAAP financial measure, has been included below in this press release.

Net income was $11.2 million for the three months ended March 31, 2014, compared to $17.3 million for the same period last year.

Pasadena Facility

Revenues for the three months ended March 31, 2014 were $27.8 million compared to $25.0 million for the same period last year. The increase was primarily the result of higher ammonium sulfate (AS) sales volumes, which were almost completely offset by a decrease in ammonium sulfate sales prices. Both domestic and international sales increased as a result of higher ammonium sulfate production following the completion of the AS debottlenecking project in December 2013. Production of ammonium sulfate increased by approximately 14% during the first quarter as compared to the same period last year. Ammonium sulfate comprised approximately 77% of revenues from the Pasadena facility for the first quarter of 2014 and 69% for the same period last year.

Average AS sales prices per ton dropped by 40% for the three months ended March 31, 2014 as compared with the same period last year, largely due to the global decline in nitrogen pricing. Additional supply of AS produced by new caprolactam plants coming online in China also affected prices for ammonium sulfate, which is a byproduct of caprolactam. The average sales price for ammonium sulfate also declined this quarter due to a higher proportion of export sales as compared to the same period last year. Export sales are typically priced lower than domestic sales.

Gross profit was approximately $1.4 million for the three months ended March 31, 2014 compared to approximately $4.0 million for the same period last year. Gross profit margin for the first quarter was 5% compared to 16% for the same period last year. The decline in ammonium sulfate sales prices led to these decreases.

Adjusted EBITDA for the three months ended March 31, 2014 for the Pasadena facility was $0.3 million. This compares to $3.2 million in the corresponding period in 2013. A further explanation of Adjusted EBITDA, a non-GAAP financial measure, appears below in this press release.

Net loss was $0.8 million for the three months ended March 31, 2014, compared to net income of $1.8 million for the same period last year.

Corporate Unallocated Expenses

Corporate unallocated expenses included in SG&A were $6.8 million for each of the three-month periods ended March 31, 2014 and 2013. Non-cash equity-based compensation expenses were $1.4 million for the three months ended March 31, 2014 and $1.3 million for the same period in 2013. SG&A expenses for the three months ended March 31, 2014 included $0.8 million of costs related to the acquisition of New England Wood Pellet, evaluation of shareholder proposals and settlement agreements with shareholders.

Discontinued Operations (Formerly the Energy Technologies segment)

Loss from discontinued operations for the three months ended March 31, 2014 was $1.5 million compared to $6.9 million for the same period last year. The decrease of $5.4 million was due to the elimination of expenses associated with research and development and business development activities, and to costs incurred in 2013 as the Company began to terminate alternative energy operations. The loss during the three months ended March 31, 2014 included $0.4 million of transaction costs related to the sale of the alternative energy technologies and decommissioned Product Demonstration Unit.

Business Updates

$150 Million Blackstone/GSO Capital Partners Investment

On April 9, 2014, GSO Capital Partners (GSO), the credit investment arm of Blackstone, invested $150 million in Rentech in the form of $100 million of convertible preferred stock and a $50 million term loan. The proceeds from the Blackstone/GSO investment will fund, among other things, identified growth opportunities in Rentech's wood fibre processing business, including the Company's recent acquisition of New England Wood Pellet (NEWP).

New England Wood Pellet Acquisition

On May 1, 2014, Rentech acquired NEWP, the largest producer of wood pellets for the U.S. heating market. The acquisition adds EBITDA and cash flow to Rentech's wood pellet segment. NEWP broadens the Company's product offerings, expands its operations and customer base, and opens up new geographic markets. It also positions Rentech for further growth in the home-heating market. NEWP is forecasted to have revenues of $31 million, operating income of $3 million and EBITDA of $5 million for the eight month period after the acquisition, ending December 31, 2014.

Atikokan and Wawa Pellet Facilities

The Company's Canadian pellet projects are progressing on schedule and on budget. Rentech is targeting first delivery of pellets from the Atikokan facility to Ontario Power Generation this summer. Installation of equipment at the Wawa facility is proceeding on time, and the first shipment of pellets from the Wawa facility to Drax is expected in the fourth quarter of this year. The new pellet storage handling and loading facility that QSL is constructing at the Port of Quebec will be ready to begin receiving pellets this summer.

Updated 2014 Outlook: See Full Press Release at:

http://phx.corporate-ir.net/phoenix.zhtml?c=66629&p=irol-newsArticle&ID=1930174&highlight=

Source: Rentech, Inc.

Rentech, Inc.

Julie Dawoodjee Cafarella

Vice President of Investor Relations and Communications

310-571-9800

ir@rentk.com


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Source: ENP Newswire


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