LOS ANGELES--August 11, 2012: Rentech, Inc. (NYSE MKT:RTK) today announced its results for the three and six months ended June 30, 2012. Rentech owns and develops technologies that enable the production of certified synthetic fuels, renewable power and hydrogen. The Company also owns the general partner interest and a majority of the common units of Rentech Nitrogen Partners, L.P. which operates a nitrogen fertilizer plant in East Dubuque, IL. Rentech's financial results reflect the consolidated results of Rentech, Inc. and its subsidiaries, including Rentech Nitrogen. The results of Rentech Nitrogen are reported as the nitrogen products manufacturing segment of Rentech.
“We expect strong results this year, driven by positive market dynamics in the nitrogen fertilizer industry and continued focus on conservative capital deployment in the alternative energy business.”
Financial Highlights
Three months ended June 30, 2012
Consolidated revenues for the three months ended June 30, 2012 were $70.7 million, compared to $74.4 million for the comparable period last year. Revenues were derived almost entirely from sales of nitrogen fertilizer products through Rentech Nitrogen.
Consolidated operating income for the three months ended June 30, 2012 was $29.4 million, compared to $20.8 million for the comparable period last year. During the three months ended June 30, 2012, Rentech's nitrogen products manufacturing segment generated operating income of $41.6 million, compared to $35.9 million during the comparable period in the prior year. EBITDA for Rentech's nitrogen products manufacturing segment was $44.9 million for the period, compared to $39.3 million in the corresponding period in 2011. Further explanation of EBITDA, a non-GAAP financial measure, and a reconciliation of EBITDA to net income for Rentech's nitrogen products manufacturing segment have been included below in this press release.
For the three months ended June 30, 2012, Rentech reported consolidated net income of $9.5 million, or $0.04 per basic share. This compares to net income of $7.9 million, or $0.04 per basic share, reported in the comparable period in the prior year.
Commenting on results for the period, D. Hunt Ramsbottom, President and CEO of Rentech, said, "The solid results we reported today were driven by strong product pricing and low natural gas costs at Rentech Nitrogen, as well as reduced R&D spending in our alternative energy segment." Mr. Ramsbottom continued, "We expect strong results this year, driven by positive market dynamics in the nitrogen fertilizer industry and continued focus on conservative capital deployment in the alternative energy business."
Consolidated selling, general and administrative (SG&A) expenses were $11.4 million for the three months ended June 30, 2012, compared to $8.2 million for the comparable period in the prior year. Current period SG&A expenses were comprised of $7.5 million for the alternative energy business and $3.9 million for the nitrogen fertilizer business, compared to $6.7 million and $1.5 million, respectively, for the prior-year period. The net increase in SG&A expenses for the alternative energy segment was primarily attributable to an increase in non-cash compensation expense of $1.7 million; net cash SG&A expenses declined by $0.9 million. The $2.4 million increase in SG&A expenses for the nitrogen products manufacturing segment was primarily due to costs associated with Rentech Nitrogen having become a publicly traded limited partnership and included an increase in non-cash unit-based compensation expense of $0.7 million.
Research and development (R&D) expenses incurred in the alternative energy segment during the three months ended June 30, 2012 were $4.1 million, compared to $8.0 million for the comparable period in the prior year. The decrease in R&D expenses resulted primarily from a decrease in costs related to the Rentech-ClearFuels gasifier of approximately $5.9 million, which was partially offset by a decrease in reimbursements of costs related to the gasifier from the U.S. Department of Energy (DOE) of approximately $2.7 million.
For Rentech Nitrogen, favorable weather conditions in March allowed farmers in its core market area of the Mid Corn Belt to apply spring ammonia earlier than is typical. This shifted meaningful volumes of ammonia deliveries into the first quarter that had been anticipated to occur in the second quarter of 2012. This also reduced the demand for UAN since more nitrogen was applied as ammonia during this longer ammonia application period. In addition, the hot, dry weather resulted in poor soil and crop conditions which led to reduced UAN application.
Rentech Nitrogen continues to benefit from relatively low North American natural gas prices, which, when coupled with strong nitrogen product prices, contributed to gross profit margin of 65% for the period, up from 50% for the comparable period in the prior year.
Six months ended June 30, 2012
Consolidated revenues for the six months ended June 30, 2012 were $109.3 million, compared to $98.4 million for the comparable period last year. Revenues were derived almost entirely from sales of nitrogen fertilizer products through Rentech Nitrogen.
Consolidated operating income for the six months ended June 30, 2012 was $36.0 million, compared to $16.3 million for the comparable period last year. During the six months ended June 30, 2012, Rentech's nitrogen products manufacturing segment generated operating income of $61.1 million, compared to $44.9 million during the comparable period in the prior year. EBITDA for Rentech's nitrogen products manufacturing segment was $66.8 million for the period, compared to $49.8 million in the corresponding period in 2011. Further explanation of EBITDA, a non-GAAP financial measure, and a reconciliation of EBITDA to net income for Rentech's nitrogen products manufacturing segment have been included below in this press release.
For the six months ended June 30, 2012, Rentech reported consolidated net income of $6.3 million, or $0.03 per share. This compares to net income of $0.3 million, or $0.00 per share, reported in the comparable period in the prior year.
Consolidated SG&A expenses were $21.8 million for the six months ended June 30, 2012, compared to $15.9 million for the comparable period in the prior year. Current period SG&A expenses were comprised of $15.3 million for the alternative energy business and $6.5 million for the nitrogen fertilizer business, compared to $13.3 million and $2.6 million, respectively, for the prior-year period. The net increase in SG&A expenses for the alternative energy segment was primarily attributable to an increase in non-cash compensation expense of $3.1 million; net cash SG&A expenses declined by $1.1 million. The $3.9 million increase in SG&A expenses for the nitrogen products manufacturing segment was primarily due to costs associated with Rentech Nitrogen having become a publicly traded limited partnership and included an increase in non-cash unit-based compensation expense of $1.1 million.
R&D expenses incurred in the alternative energy segment during the six months ended June 30, 2012 were $9.1 million, compared to $14.4 million for the comparable period in the prior year. The decrease in R&D expenses resulted primarily from a decrease in costs related to the Rentech-ClearFuels gasifier of approximately $5.8 million, which was partially offset by a decrease in reimbursements of costs related to the gasifier from the DOE of approximately $1.6 million.
Average sales price per ton for Rentech Nitrogen's primary products, ammonia and UAN, increased 9% and 25%, respectively, over the same period last year. Higher product prices were partially offset by decreased sales volume for UAN as described above.
Gross profit margin was 63% for the six months ended June 30, 2012, up from 48% for the comparable period in the prior year.
Outlook
Rentech previously issued guidance of cash operating and capital expenses to be slightly higher than $42-$44 million for the twelve months ending September 30, 2012. This guidance also applies to the calendar year 2012. Included in the 2012 guidance are costs to conclude the Integrated Biorefinergy Refinery Project at the Company's demonstration facility at the end of the year. The project, which began in December 2009, is estimated to cost a total of $45 million upon conclusion, approximately $23 million of which will have been reimbursed by the DOE. For 2013, Rentech continues to expect R&D expenses to be less than $10 million.
In its press release dated August 10, 2012, Rentech Nitrogen increased its guidance for the twelve months ending December 31, 2012.
Cash Distributions from Rentech Nitrogen
Rentech Nitrogen declared its second quarter cash distribution of $1.17 per unit, payable on August 14, 2012 to unit holders of record as of August 7. Rentech will receive approximately $27.2 million, based on its ownership of 23.25 million units of Rentech Nitrogen as of the record date.
Share Repurchases
In the second quarter of 2012, Rentech repurchased approximately 9.1 million shares at an average price of $1.81 per share, for an aggregate purchase price of $16.4 million. Approximately $8.6 million worth of shares can still be repurchased under the existing $25 million share repurchase plan.
Conference Call with Management
The Company will hold a conference call on Friday, August 10, 2012 at 12:00 p.m. PDT, during which time 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 800-909-4195 or 212-231-2934. 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 2:00 p.m. PDT on August 10 through 2:00 p.m. PDT on August 17. The replay teleconference will be available by dialing 800-633-8284 or 402-977-9140 and the reservation number 21598522.
| Rentech, Inc. and Subsidiaries | ||||||||||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||||||||||
|
(Stated in Thousands, Except per Share Data) |
||||||||||||||||||||||||
| For the Three Months | For the Six Months | |||||||||||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||||||
| Total Revenues | $ | 70,707 | $ | 74,436 | $ | 109,295 | $ | 98,430 | ||||||||||||||||
| Cost of Sales | 25,052 | 37,008 | 41,005 | 50,800 | ||||||||||||||||||||
| Gross Profit | 45,655 | 37,428 | 68,290 | 47,630 | ||||||||||||||||||||
| Selling, general and administrative expense | 11,361 | 8,161 | 21,774 | 15,909 | ||||||||||||||||||||
| Research and development | 4,089 | 7,988 | 9,112 | 14,359 | ||||||||||||||||||||
| Depreciation and amortization | 677 | 547 | 1,816 | 1,106 | ||||||||||||||||||||
| Vendor settlement | - | - | (509 | ) | - | |||||||||||||||||||
| Other | 80 | (26 | ) | 72 | (70 | ) | ||||||||||||||||||
| Operating Expenses | 16,207 | 16,670 | 32,265 | 31,304 | ||||||||||||||||||||
| Operating Income | 29,448 | 20,758 | 36,025 | 16,326 | ||||||||||||||||||||
| Other Income (Expense), Net | ||||||||||||||||||||||||
| Interest and dividend income | 60 | 21 | 126 | 58 | ||||||||||||||||||||
| Interest expense | (2,147 | ) | (3,844 | ) | (4,460 | ) | (7,556 | ) | ||||||||||||||||
| Loss on debt extinguishment | - | (9,223 | ) | - | (9,223 | ) | ||||||||||||||||||
| Loss on interest rate swaps | (580 | ) | - | (580 | ) | - | ||||||||||||||||||
| Other income (expense), net | 73 | (16 | ) | 68 | 4 | |||||||||||||||||||
| Total Other Expenses, Net | (2,594 | ) | (13,062 | ) | (4,846 | ) | (16,717 | ) | ||||||||||||||||
| Income (loss) before income taxes | 26,854 | 7,696 | 31,179 | (391 | ) | |||||||||||||||||||
| Income tax expense | 1,175 | - | 1,175 | - | ||||||||||||||||||||
| Net Income (Loss) | 25,679 | 7,696 | 30,004 | (391 | ) | |||||||||||||||||||
| Net (income) loss attributable to noncontrolling interests | (16,159 | ) | 192 | (23,749 | ) | 714 | ||||||||||||||||||
| Net Income Attributable to Rentech | $ | 9,520 | $ | 7,888 | $ | 6,255 | $ | 323 | ||||||||||||||||
| Net Income per Common Share Attributed to Rentech: | ||||||||||||||||||||||||
| Basic | $ | 0.04 | $ | 0.04 | $ | 0.03 | $ | 0.00 | ||||||||||||||||
| Diluted | $ | 0.04 | $ | 0.03 | $ | 0.03 | $ | 0.00 | ||||||||||||||||
| Weighted-Average Shares: | ||||||||||||||||||||||||
| Basic | 225,119 | 223,110 | 225,492 | 222,666 | ||||||||||||||||||||
| Diluted | 233,737 | 228,456 | 233,812 | 228,850 | ||||||||||||||||||||
| Rentech, Inc. and Subsidiaries | ||||||||||
| Balance Sheet Data | ||||||||||
| (Stated in Thousands) | ||||||||||
| As of | As of | |||||||||
| June 30, 2012 | December 31, 2011 | |||||||||
| Cash and Cash Equivalents | $ | 208,684 | $ | 237,478 | ||||||
| Working Capital | 157,209 | 206,434 | ||||||||
| Construction in Progress | 35,182 | 9,809 | ||||||||
| Total Assets | 365,603 | 360,528 | ||||||||
| Total Long-Term Liabilities | 25,310 | 53,475 | ||||||||
| Total Rentech Stockholders' Equity | 204,211 | 208,848 | ||||||||
Disclosure Regarding Non-GAAP Financial Measures
EBITDA is defined as net income plus interest expense and other financing costs, loss on debt extinguishment, loss on interest rate swaps, income tax expense and depreciation and amortization, net of interest income. EBITDA is used as a supplemental financial measure 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 public companies, without regard to financing methods and capital structure.
EBITDA 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. EBITDA may have material limitations as a performance measure because it excludes items that are necessary elements of our costs and operations. In addition, EBITDA presented by other companies may not be comparable to our presentation, since each company may define these terms differently.
The table below reconciles EBITDA to net income for our nitrogen products manufacturing segment for the three and six months ended June 30, 2012 and 2011 (stated in thousand).
| Three Months | Six Months | |||||||||||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||||
| Net income | $ | 41,228 | $ | 13,757 | $ | 60,601 | $ | 17,290 | ||||||||||||||||
| Add: | ||||||||||||||||||||||||
| Interest income | (14 | ) | (10 | ) | (30 | ) | (27 | ) | ||||||||||||||||
| Interest expense | 42 | 3,280 | 142 | 6,319 | ||||||||||||||||||||
| Loss on debt extinguishment | €” | 9,223 | €” | 9,223 | ||||||||||||||||||||
| Loss on interest rate swaps | 580 | €” | 580 | €” | ||||||||||||||||||||
| Income tax expense | €” | 9,620 | €” | 12,090 | ||||||||||||||||||||
| Depreciation and amortization | 3,312 | 3,431 | 5,777 | 4,905 | ||||||||||||||||||||
| Other | (232 | ) | 12 | (232 | ) | (1 | ) | |||||||||||||||||
| EBITDA | $ | 44,916 | $ | 39,313 | $ | 66,838 | $ | 49,799 | ||||||||||||||||