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Rentech announces Q1 2015 results

May 11, 2015 - Rentech, Inc. recently announced its financial and operating results for the three months ended March 31, 2015.


May 11, 2015
By Rentech Inc.

“Results for the first quarter were generally in line with our expectations for improved profits,” said Keith Forman, president and CEO of Rentech. “At Rentech Nitrogen, margins improved in the first quarter from last year, due to robust demand for ammonia and ammonium sulfate, higher ammonium sulfate prices and lower natural gas prices.

“At Fulghum, our cost controls are working and EBITDA margins have improved. We are also seeing strong demand for NEWP’s pellet products in the U.S. Northeast.

“Our two Canadian wood pellet facilities are in commissioning. The Atikokan facility is supplying all of the required volume to OPG from its own production, and the pellets we are producing exceed the contract’s requirements for quality and energy content. Commissioning of the Wawa facility is going better than forecasted. We have completed integrated production runs, and we have run all 12 pellet mills at the plant. We loaded our first rail cars with pellets at Wawa, and they are ready to be transported to the port.”

Summary of results
The consolidated results of Rentech, Inc. include its wood fibre processing business and Rentech Nitrogen Partners, L.P. (Rentech Nitrogen). The wood fibre processing business consists of Fulghum Fibres (Fulghum); New England Wood Pellet (NEWP), which includes the recently purchased mill from Allegheny Pellet Corporation (Allegheny); and Industrial Wood Pellets, which includes the company’s Canadian pellet plants, business development for industrial pellets, and senior management of the fibre business and corporate allocations. Rentech owns the general partner and approximately 60 per cent of the limited partner interests of Rentech Nitrogen. Rentech Nitrogen’s operating segments are the East Dubuque, Illinois facility and the Pasadena, Texas facility.

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Rentech Nitrogen’s results for the first quarter of 2015 benefitted from improved prices for ammonium sulfate and lower natural gas prices. Sales volumes for ammonia were significantly higher than in the first quarter last year. At Fulghum, lower South American product sales and reduced volumes at our U.S. and South American chipping facilities negatively affected results in the first quarter compared to the same quarter last year. Our two Canadian wood pellet facilities are in commissioning. Since the beginning of February, we have been satisfying all of our required deliveries to Ontario Power Generation (OPG) with pellets produced by our Atikokan facility. NEWP had a seasonally strong quarter due to good demand for wood pellets in the U.S. Northeast. During the first quarter, we paid $5 million in earn-out consideration to the previous owners of NEWP based on NEWP’s 2014 performance. We acquired the assets of Allegheny in January. In April, we borrowed an additional $7.5 million under the Tranche B term loan from GSO Capital to fund the Canadian operations.

NEWP’s and Allegheny’s operations are included in our operating results from May 1, 2014 and January 23, 2015, respectively, the closing dates of the acquisitions. Prior period revenues and cost of sales for Fulghum’s South American operations have been revised. Please refer to Note 2 in the Form 10-Q for the period ended March 31, 2015 for further explanation.

Three months ended March 31, 2015
Consolidated revenues for the first quarter of 2015 were $105.6 million, compared to $82.3 million in the prior year period. These revenues were comprised of:

•$22.7 million from Fulghum, a decrease of $3.4 million from the prior year period;

•$12.1 million from NEWP;

•$1.7 million from Wood Pellets: Industrial; and

•$69.2 million from Rentech Nitrogen, an increase of $12.9 million from the prior year period.

Gross profit for the first quarter of 2015 was $24.3 million, compared to $17.9 million in the prior year period. Gross profit was comprised of:

•$3.7 million from Fulghum, which was a decrease of $0.4 from the prior year period;

•$2.2 million from NEWP;

•($0.4) million from Wood Pellets: Industrial; and

•$18.8 million from Rentech Nitrogen, an increase of $5.0 million from the prior year period.

Consolidated Adjusted EBITDA for the first quarter of 2015 was $17.6 million, an improvement of $11.6 million compared to the prior year period. Consolidated Adjusted EBITDA included the following:

•$4.0 million from Fulghum, a decrease of $0.5 million from the prior year period;

•$2.3 million from NEWP;

•($3.9) million from Wood Pellets: Industrial, an increase in losses of $2.2 million from the prior year period; and

•$19.2 million from Rentech Nitrogen, an increase of $7.7 million from the prior year period.

Further explanation of Adjusted EBITDA, a non-GAAP financial measure, as used here and throughout this press release, appears below.

Net loss attributable to Rentech common shareholders for the first quarter of 2015 was ($4.9) million, or ($0.02) per basic share, compared to a net loss of ($7.0) million, or a loss of ($0.03) per basic share, for the same period last year.

Fulghum Fibres
Revenues were $22.7 million for the first quarter of 2015, compared to $26.0 million for the same period last year. Revenues from operations in the U.S. were $13.6 million for the first quarter of 2015, as compared to $14.2 million in the prior year period. Volumes and revenues at a number of our U.S. mills were down due to wet and protracted winter weather. Revenues from operations in South America were $9.1 million for the first quarter of 2015, as compared to $11.8 million in the prior year period. The decrease in South American revenues was primarily due to lower biomass product sales domestically and to Asia in the first quarter of 2015 as compared to the first quarter of 2014. In addition, revenues from our South American processing mills were lower because of reduced volumes during the start-up of the new chipping line at our PAC mill, fibre transportation issues from our customer to our Valdivia mill, and discontinued services at the Los Sauces mill.

Fulghum’s mills in the U.S. and South America processed a total of 3.7 million green metric tons, or GMT, of logs into wood chips and residual fuels for the first quarter of 2015, compared to 3.8 million GMT in the first quarter last year.

Gross profit was $3.7 million for the first quarter of 2015, compared to $4.1 million for the same period last year. Gross profit margin for the first quarter of 2015 was 16%, which was essentially flat compared to the prior year period. The decrease in gross profit was primarily due to higher depreciation and amortization and to lower volumes processed and sold during the first quarter of 2015.

Adjusted EBITDA for the first quarter of 2015 was $4.0 million. This compares to Adjusted EBITDA of $4.5 million for the same period in 2014.

Net loss was ($1.1) million for the first quarter of 2015, compared to net income of $1.7 million for the same period last year.

New England Wood Pellet
Revenues were $12.1 million, including $1.2 million from the Allegheny mill, for the first quarter of 2015 on deliveries of 63,000 tons of wood pellets. Gross profit was $2.2 million and gross profit margin was 18%. Adjusted EBITDA was $2.3 million, and net income was $1.1 million.

Wood Pellets: Industrial
Revenues were $1.7 million for the Atikokan mill in the first quarter on deliveries of 9,100 metric tons of wood pellets to OPG. Gross loss was ($0.4) million and gross loss margin was (24%) due to operating at partial capacity at the Atikokan mill during commissioning.

Adjusted EBITDA loss, including operating losses at the Wawa facility, business development for industrial wood pellets, senior management of the fibre business and corporate allocations, was ($3.9) million for the first quarter of 2015, compared to an Adjusted EBITDA loss of ($1.7) million for the same period in 2014. Net loss for the first quarter of 2015 was ($4.7) million, compared to a net loss of ($1.6) million for the same period in 2014.

Nitrogen Product Manufacturing
Revenues for the first quarter of 2015 were $69.2 million, compared to $56.3 million in the first quarter of 2014. Gross profit for the first quarter of 2015 was $18.8 million, compared to $13.8 million for the same period last year. Adjusted EBITDA for the first quarter of 2015 was $19.2 million, compared to $11.5 million in the corresponding 2014 period. Net income for the first quarter of 2015 was $9.0 million, compared to net income of $3.1 million for the prior year period.

East Dubuque facility
Revenues for the first quarter of 2015 were $36.8 million, compared to $28.5 million for the same period last year. The increase was due to higher sales volumes for ammonia, partially offset by lower sales prices for ammonia and urea.

Ammonia deliveries increased due to strong demand from agricultural and industrial customers. Volumes were low in the first quarter of 2014 because production was interrupted by a planned turnaround and a fire in the fourth quarter of 2013, and production was purposely reduced in order to sell natural gas at high prices in the first quarter of 2014.

Average sales prices per ton for the first quarter of 2015 were four per cent lower for ammonia and one per cent higher for UAN, as compared with the same period last year. These two products comprised 78 per cent of the East Dubuque facility’s revenues for the first quarter of 2015 and 58 per cent for the same period last year.

Gross profit was $17.4 million for the first quarter of 2015; this compares to a gross profit of $12.4 million for the same period last year. Gross profit margin for the first quarter of 2015 was 47 per cent, compared to 44 per cent for the prior year period. Gross profit and margin benefited from higher sales volumes for ammonia and a $2.6 million unrealized gain on natural gas derivatives, partially offset by lower sales prices for ammonia and urea, lower natural gas sales, and increased labor costs and depreciation expense.

Adjusted EBITDA for the first quarter of 2015 was $19.3 million, compared to $13.5 million in the corresponding period in 2014.

Net income was $16.0 million for the first quarter of 2015, compared to $11.2 million for the same period last year.

Pasadena facility
Revenues for the first quarter of 2015 were $32.4 million, compared to $27.8 million for the same period last year. The increase was due to higher sales prices for ammonium sulfate and sulfuric acid, and higher sales volumes for sulfuric acid, partially offset by lower sales volumes for ammonium sulfate and lower sales prices for ammonium thiosulfate.

Average sales prices per ton increased for ammonium sulfate by 28 per cent and by two per cent for sulfuric acid for the first quarter of 2015, as compared with the same period last year. Factors contributing to higher sales prices for ammonium sulfate include a larger proportion of higher-priced domestic sales and more favorable supply and demand conditions. Ammonium sulfate and sulfuric acid comprised 88 per cent of the Pasadena facility’s revenues for the first quarter of 2015 and 83 per cent for the same period last year.

Gross profit was $1.3 million for the first quarter of 2015, compared to $1.4 million for the same period last year. Gross profit margin for the first quarter of 2015 was four per cent, compared to five per cent for the same period last year.

Adjusted EBITDA for the first quarter of 2015 was $2.0 million, compared to $0.3 million in the corresponding period in 2014.

Net income was $0.2 million for the first quarter of 2015, compared to a net loss of $0.8 million for the same period last year.

Corporate unallocated expenses
Corporate unallocated expenses, recorded as selling, general and administrative (SG&A) expenses, were $3.9 million for the first quarter of 2015, compared to $6.8 million in the corresponding period in 2014.

Disclosure regarding Non-GAAP Financial Measures
Rentech’s Adjusted EBITDA is defined as Rentech’s new income (loss) plus interest expense, income tax expense, depreciation and amortization. Rentech Nitrogen’s Adjusted EBITDA is defined as Rentech Nitrogen’s net income (loss) plus interest expense and other financing costs, income tax expense, depreciation and amortization. Fulghum’s Adjusted EBITDA is defined as Fulghum’s net income (loss) plus interest expense and other financing costs, depreciation and amortization, and income tax expense. NEWP’s Adjusted EBITDA is defined as NEWP’s net income plus interest expense and other financing costs, depreciation and amortization, and income tax expense. Wood Pellets: Industrial’s Adjusted EBITDA is defined as Wood Pellets: Industrial’s net loss plus interest expense, depreciation and amortization and income tax expense. Adjusted EBITDA is used as a supplemental financial measure by management and by external users of our consolidated financial statements, such as investors and commercial banks, to assess:

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 any 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 our businesses’ costs and operations. In addition, EBITDA and Adjusted EBITDA presented by other companies may not be comparable to our presentation of those measures, since each company may define these terms differently.

About Rentech, Inc.
Rentech, Inc. (NASDAQ: RTK) owns and operates wood fibre processing, wood pellet production and nitrogen fertilizer manufacturing businesses. Rentech offers a full range of integrated wood fibre services for commercial and industrial customers around the world, including wood chipping services, operations, marketing, trading and vessel loading, through its subsidiary, Fulghum Fibres. The Company’s New England Wood Pellet subsidiary is a leading producer of bagged wood pellets for the U.S. heating market. Rentech manufactures and sells nitrogen fertilizer through its publicly-traded subsidiary, Rentech Nitrogen Partners, L.P. (NYSE: RNF). Please visit www.rentechinc.com and www.rentechnitrogen.com for more information.

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 the performance of our Canadian wood pellet plants. 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 atwww.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.


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