eastunder
11 years ago
Earnings for 2012
(reported on the 19th but updating board for future reference)
Rentech Reports 2012 Activities and Financial Results; Provides 2013 Guidance
Tuesday , March 19, 2013 07:00ET
LOS ANGELES--(BUSINESS WIRE)-- Rentech, Inc. (NYSE MKT: RTK) today announced its results for the three and twelve months ended December 31, 2012 and provided financial guidance for 2013. Rentech owns the general partner and approximately 60% of the common units representing limited partner interests in Rentech Nitrogen Partners, L.P. (NYSE: RNF). Rentech Nitrogen manufactures and sells nitrogen fertilizer products. 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.
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 subsidiary of Rentech, which includes two operating segments: the East Dubuque Facility and the Pasadena Facility.
Commenting on results for the period, D. Hunt Ramsbottom, President and CEO of Rentech, said, "We reported solid results for the year as we re-position the Company, reflecting reduced R&D expenses and strong nitrogen prices and demand. We are confident about our future, with Rentech Nitrogen positioned to expand as it benefits from strong nitrogen fundamentals, and Rentech benefiting from reduced corporate spending and potentially entering a new business line with immediate global growth opportunities and attractive returns."
Mr. Ramsbottom continued, "Beginning with the successful IPO of Rentech Nitrogen in late 2011, we have taken deliberate, thoughtful actions which have resulted in significant shareholder returns. We continue to focus on further value creation, recently announcing the elimination of R&D activities and pursuing a new business line with immediate or near-term profitability. We are excited about the potential for growth and returns from a new business and are optimistic about announcing our entry into the new business line in the coming months."
Special Cash Distribution and Share Repurchases
As a result of Rentech's successful execution of its strategy and the Board's ongoing evaluation of the best steps to utilize its capital and create shareholder value, Rentech returned $58.6 million of cash to shareholders in 2012. Rentech paid a special cash distribution to shareholders of $0.19 per common share, which represented approximately $42.2 million in payments to holders, on December 27, 2012. Approximately 75% of the distribution was a return of capital. In addition to this cash distribution, Rentech repurchased approximately 9.1 million shares in 2012, at an average price of $1.81 per share.
Redemption of Convertible Notes
Rentech redeemed all of its 4.00% convertible senior notes with principal amount of $57.5 million on December 31, 2012, in advance of their April 15, 2013 maturity. The early redemption resulted in interest savings of approximately $0.7 million. Upon redemption of the notes, Rentech, Inc. has no outstanding debt obligations, but those of Rentech Nitrogen Partners continue to appear on the Company's consolidated balance sheets.
R&D Facility Closure and Elimination of R&D Costs
Rentech has decided to eliminate spending on research and development (R&D) activities and significantly reduce other expenses related to alternative energy technologies for the foreseeable future. On February 28, 2013, Rentech announced its decision to cease operations, reduce staffing at, and mothball its research and development Product Demonstration Unit (PDU), a demonstration-scale plant located in Commerce City, Colorado, and to eliminate all related research and development activities. Any ongoing activities related to the Company's alternative energy technologies will be to protect patents, to maintain the Commerce City site if efforts to sell the site are unsuccessful, to continue low-cost efforts to seek partners who would provide funding to deploy Rentech's technologies or to sell or license the technologies to third parties who are developing projects.
Strategy
Rentech Nitrogen
Given Rentech Nitrogen's structure as a master limited partnership, management is focused on increasing cash available for distribution. Three growth projects are underway at Rentech Nitrogen's facilities, which are expected to be accretive to per unit cash distributions in the beginning of 2014 or sooner. A fourth growth project is being planned to produce approximately 15 megawatts of power from waste steam at the Pasadena Facility, to reduce the facility's electricity expenses and to create an additional revenue stream by exporting the remaining power for sale in the deregulated Texas power market. If financing for this project is obtained on schedule, this project is anticipated to begin contributing to cash distributions upon completion in the fall of 2014. Beyond these growth projects, Rentech Nitrogen has an active M&A team working on a prioritized list of opportunities to further enhance the Partnership's growth prospects.
Rentech
As previously disclosed, Rentech is focused on immediate growth opportunities that meet the following criteria: unlevered, after-tax returns in the mid-teens or higher; certainty of revenue with long-term contracts for off-take, providing stability of cash flows; no reliance on new technology; and opportunities to leverage Rentech's expertise and resources.
Rentech is continuing low-cost efforts to seek partners who would provide funding to deploy its alternative energy technologies or to sell or license the technologies to third parties who are developing projects. The Company will attempt to sell the PDU, as well as approximately 450 acres of land in Natchez, Mississippi acquired for the development of an alternative energy facility.
2013 Outlook
Rentech Nitrogen
In its press release dated March 19, 2013, Rentech Nitrogen issued 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 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 have been approximately $0.65 per unit higher.
Assuming product and input prices equal to those expected in 2013, Rentech Nitrogen noted that the increased annual production from its expansion projects scheduled to come online by the end of 2013 would be expected to add approximately $0.90 per unit of cash distributions and approximately $41 million of EBITDA.
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 in 2013.
Rentech
Rentech provided the following guidance for cash selling, general and administrative (Cash SG&A) and R&D expenses for 2013, excluding Rentech Nitrogen:
%
2012 Actual 2013 Guidance
Change
Cash SG&A Expenses $21.4 million Approximately $20 million based on current run rate
Plus: Former R&D Expenses1 N/A Approximately $5 million, to be incurred over the second through fourth quarters
Total Cash SG&A Expenses $21.4 million Approximately $25 million
Total Cash R&D Expenses $21.0 million Approximately $5 million, to be incurred in the first quarter
Total Cash Operating Expenses $42.4 million Approximately $30 million (30%)
1 Expenses that would have been recorded as R&D absent the decision announced on February 28, 2013, to cease operations, reduce staffing at, and mothball Rentech's research and development Product Demonstration Unit.
In addition to the above guidance, Rentech indicated that former R&D expenses classified as SG&A are anticipated to be at an annualized run rate of $2-3 million by the end of 2013. Any ongoing costs would be to protect patents covering Rentech's alternative energy technologies, to maintain the Commerce City site if efforts to sell the site are unsuccessful or to continue low-cost efforts to seek partners who would provide funding to deploy its technologies. Additionally, Rentech expects to incur no R&D expenses in 2014.
Financial Highlights
The financial statements for the periods ended December 31, 2012 include results of the Pasadena Facility segment from the date of the closing of the acquisition of Agrifos LLC, which was November 1, 2012.
Three months ended December 31, 2012
Consolidated revenues for the three months ended December 31, 2012 were $92.5 million, compared to $63.1 million for the comparable period last year. Revenues were derived almost entirely from sales of nitrogen fertilizer products through Rentech Nitrogen. The increase in revenues at Rentech Nitrogen was due to the contribution of $37.4 million of revenues from the Pasadena Facility, which was partially offset by decreased sales prices and volumes for most products at the East Dubuque Facility. Ammonia and UAN sales volumes declined in the current period as a result of production lost during plant outages at the East Dubuque Facility that occurred in the fourth quarter of 2012. This delayed UAN shipments scheduled for the fourth quarter of 2012 into the first quarter of 2013.
Consolidated operating income for the three months ended December 31, 2012 was a loss of $9.3 million, compared to operating income of $10.2 million for the three months ended December 31, 2011. During the current year period, $16.0 million was recorded for impairments primarily relating to the write-off of capitalized SilvaGas patents and goodwill from the acquisition of ClearFuels, in the amounts of approximately $8.5 million and $7.2 million, respectively. Current period operating income for the nitrogen products manufacturing business was negatively impacted by $4.1 million of acquisition costs at the Pasadena Facility.
During the three months ended December 31, 2012, Rentech's nitrogen products manufacturing subsidiary generated operating income of $21.3 million, compared to $22.6 million during the prior-year period. EBITDA for Rentech's nitrogen products manufacturing business was $24.3 million for the period, compared to $25.9 million in the corresponding period in 2011. EBITDA for the current period, excluding Partnership level expenses and non-recurring items related to the Pasadena Facility, totaled $28.6 million. The East Dubuque Facility and the Pasadena Facility contributed $30.3 million and ($1.7) million in EBITDA, respectively, during the three months ended December 31, 2012. As part of purchase accounting adjustments related to the acquisition of Agrifos, the value of inventory was increased to fair value as of the closing date, which resulted in an approximately $3.4 million increase in the cost of product sold by the Pasadena Facility during the two-month period ended December 31, 2012. 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 31% for the three months ended December 31, 2012, compared to 41% for the same period last year due to the absorption of fixed costs on lower volumes resulting from plant outages in the fourth quarter of 2012, lower prices for most products at the East Dubuque Facility and the contribution of gross profits from the Pasadena Facility, which were lower gross margin sales than those from the East Dubuque Facility. Average natural gas costs in cost of sales for the East Dubuque Facility were $3.44 per MMBtu for the three months ended December 31, 2012, compared to $4.75 per MMBtu for the prior-year period. Average ammonia and sulfur costs in cost of sales for the Pasadena Facility were $658 per ton and $154 per ton, respectively, for the current period.
For the three months ended December 31, 2012, Rentech reported a consolidated net loss of $24.5 million, or $0.11 per basic share. Included in these results are $16.0 million of impairments and a $4.8 million loss for debt extinguishment expenses. Excluding these items, Rentech would have generated a net loss of $0.02 per basic share. This compares to a net loss of $8.5 million, or $0.04 per basic share, reported in the comparable period in the prior year. Excluding non-recurring items, the Company generated net income of $0.01 per share for the prior-year period.
Consolidated SG&A expenses were $14.4 million for the three months ended December 31, 2012, compared to $10.5 million for the comparable period in the prior year, comprised of $8.0 million for the alternative energy segment and $6.4 million for the nitrogen fertilizer business, compared to $7.2 million and $3.3 million, respectively, for the prior-year period. The increase in SG&A expenses for the alternative energy segment was partly attributable to an increase in non-cash compensation expense of $0.4 million. Cash SG&A expenses for the alternative energy segment increased by $0.4 million. The increase in SG&A expenses for the nitrogen products manufacturing business was primarily due to business development expenses of approximately $2.4 million, including $2.3 million related to the acquisition of the Pasadena Facility. In addition, non-cash unit-based compensation was approximately $0.4 million higher in the current period than in the prior-year period. Current period expenses also include $0.4 million in SG&A expenses at the Pasadena Facility. Partially offsetting the increase in SG&A expenses was a $1.1 million reduction in audit and tax fees which were higher in the prior-year period due to the additional audit and tax work required for the initial public offering (IPO) and change in fiscal year.
R&D expenses incurred in the alternative energy segment during the three months ended December 31, 2012 were $6.3 million, up from $4.2 million for the comparable period in the prior year. The increase in R&D expenses resulted primarily from approximately $3.6 million of lower reimbursements from the U.S. Department of Energy (DOE) for costs related to the Rentech-ClearFuels gasifier. These R&D expenditures were partially offset by lower property taxes related to the PDU of $1.2 million in 2012, which were recorded as R&D expense.
Twelve months ended December 31, 2012
Consolidated revenues for the twelve months ended December 31, 2012 were $261.9 million, compared to $200.1 million for 2011. Revenues were derived almost entirely from sales of nitrogen fertilizer products through Rentech Nitrogen. The increase in revenues at Rentech Nitrogen was primarily due to the contribution of $37.4 million of revenues from the Pasadena Facility, increased sales prices for all products from the East Dubuque Facility and higher sales volume for ammonia at the East Dubuque Facility. UAN sales volume declined in the current year as a result of production lost during plant outages at the East Dubuque Facility that occurred in the fourth quarter of 2012. This delayed UAN shipments scheduled for the fourth quarter of 2012 into the first quarter of 2013.
Consolidated operating income for the twelve months ended December 31, 2012 was $43.3 million, compared to an operating loss of $27.2 million in 2011. During the twelve months ended December 31, 2012, Rentech reported $16.0 million of impairments related to the Company's capitalized SilvaGas patents and goodwill from the acquisition of ClearFuels, in the approximate amounts of $8.5 million and $7.2 million, respectively. During the year ended December 31, 2011, Rentech recorded a loss on impairment of $59.3 million relating to canceled alternative energy projects.
During the twelve months ended December 31, 2012, Rentech's nitrogen products manufacturing business generated operating income of $111.6 million, compared to $77.9 million in 2011. EBITDA for Rentech's nitrogen manufacturing business was $124.0 million for the current period, compared to $88.6 million in 2011. EBITDA for the current period, excluding Partnership level expenses and non-recurring items related to the Pasadena Facility, totaled $135.8 million. The East Dubuque Facility and the Pasadena Facility contributed $137.5 million and ($1.7) million in EBITDA, respectively, during the twelve months ended December 31, 2012. As part of purchase accounting adjustments related to the acquisition of Agrifos, the value of inventory was increased to fair value as of the closing date, which resulted in an approximately $3.4 million increase in the cost of product sold by the Pasadena Facility during the two-month period ended December 31, 2012. Further explanation of EBITDA, a non-GAAP financial measure, and a reconciliation of EBITDA to net income for Rentech's nitrogen products manufacturing business have been included below in this press release.
Gross margins for the nitrogen products manufacturing business were 50% for the twelve months ended December 31, 2012, compared to 43% for 2011. The increase in gross margins was primarily attributable to an increase in revenues and lower natural gas costs. Average natural gas costs in cost of sales for the East Dubuque Facility were $3.59 per MMBtu for the twelve months ended December 31, 2012, compared to $4.76 per MMBtu for the prior year. Average ammonia and sulfur costs in cost of sales for the Pasadena Facility were $658 per ton and $154 per ton, respectively for the current period.
For the twelve months ended December 31, 2012, Rentech reported consolidated net loss of $14.0 million, or $0.06 per share. This compares to a net loss of $67.3 million, or $0.30 per share, reported in the prior year. Excluding loss on debt extinguishment and non-recurring items, the Company generated net income of $0.03 per share for the twelve months ended December 31, 2012 and net income of $0.05 per share for the prior-year period. Further explanation of net income excluding loss on debt extinguishment and non-recurring items, a non-GAAP financial measure, and a reconciliation of consolidated net income excluding loss on debt extinguishment and non-recurring items to net income have been included below in this press release.
For the twelve months ended December 31, 2012, total cash operating and capital expenditures for Rentech's alternative energy segment were $42.1 million, which was below the Company's previous guidance of approximately $45 million.
Consolidated SG&A expenses were $48.2 million for the twelve months ended December 31, 2012, compared to $30.8 million for the prior year. Current period SG&A expenses were comprised of $29.8 million for the alternative energy segment and $18.4 million for Rentech Nitrogen, compared to $23.1 million and $7.7 million, respectively, for the prior-year period. The majority of the increase in SG&A expenses for the alternative energy segment relates to an increase in non-cash compensation of $6.5 million as compared to the prior period. The increase in SG&A expenses for the nitrogen products manufacturing business was primarily due to business development expenses of approximately $4.5 million, including approximately $4.1 million for the Agrifos acquisition. In addition, Rentech Nitrogen was a publicly traded limited partnership for twelve full months in 2012 as compared to 52 days in 2011, which resulted in increases in non-cash unit-based compensation of approximately $2.6 million, payroll costs of approximately $1.3 million, approximately $1.0 million in professional and other fees related to being a publicly-traded partnership, and $0.7 million of fees on the unused credit facility. Current period expenses also include $0.4 million in SG&A expenses at the Pasadena Facility. The increase in SG&A expenses was partially offset by a $0.7 million reduction in audit and tax fees due to additional audit and tax work in 2011 required for the IPO and change in fiscal year.
R&D expenses incurred in the alternative energy segment during the twelve months ended December 31, 2012 were $20.9 million, down from $28.8 million for the prior year. The decrease in R&D expenses resulted primarily from a reduction in the engineering, procurement and construction activities associated with the Rentech-ClearFuels gasifier at the PDU of approximately $17.6 million and a savings from property tax and sales and use tax of approximately $3.3 million. This reduction in expense was partially offset by an increase in the start-up and operations costs of the gasifier of approximately $6.5 million and a reduction in DOE reimbursements of $7.0 million
Continued at: http://www.knobias.com/story.htm?eid=3.1.e173aad6638de87d2c63274a9228693cf4245f992deb647e966cdbb804db74ec
eastunder
11 years ago
Rentech Nitrogen Partners Forecasts Smaller Dividend, Buy On Dips For Future Growth
(NOTE: aside from one little mistake on a company comparison - this is a pretty good article - East)
Mar 24 2013, 02:35 |by: Tim Plaehn
http://seekingalpha.com/article/1296861-rentech-nitrogen-partners-forecasts-smaller-dividend-buy-on-dips-for-future-growth?source=yahoo
The three nitrogen fertilizer plant MLP stocks have always been of interest to me, but, in my opinion, over the last couple of years the shares have gotten pricey in relation to the variable nature of product and input pricing. Although it outran the competition in total return for 2012, Rentech Nitrogen Partners LP (RNF) offers interesting prospects for 2013 and into 2014.
Note: MLP companies such as Rentech Nitrogen Partners have units and pay distributions. The words stock, shares and dividends may be used here with the understanding that the rules of MLP units apply including the tax consequences of investing in MLP units.
The fertilizer MLP companies, Rentech Nitrogen, Terra Nitrogen LP (TNH) and CVR Partners LP (UAN) all own production facilities that use natural gas as a feedstock to produce nitrogen-based fertilizer products such as ammonia and UAN. Terra Nitrogen and CVR Partners each have a single production plant, while Rentech Nitrogen Partners made an acquisition in 2012 to double its locations to two.
Producing nitrogen based fertilizers is very profitable if natural gas prices are low and fertilizer prices are high. Fertilizer prices go up when grain - corn and wheat - prices are up. The last couple of years have been very good for these companies with low gas prices, high grain prices and tremendous profit margins. Investors should always bear in mind that if natural gas prices ever increase significantly, profits for these companies could be severely squeezed.
These companies all have a distribution policy of a full payout of the quarterly distributable cash flow. These distributions can and do vary significantly from quarter to quarter. The dividend volatility can be seen in this chart of the Terra Nitrogen quarterly distributions:
TNH Dividend data by YCharts
Rentech Nitrogen Grow Through Acquisition and Expansion
Breaking out of the mold of living off the production of a single production facility, Rentech Nitrogen acquired a second fertilizer plant in late 2012. The Pasadena, Texas plant acquired through the purchase of Agrifos Holdings is the third largest producer of ammonium sulfate fertilizer. According to the press release announcing the acquisition the product margins and seasonality of sales of the added product lines are generally less variable than those of ammonia.
Rentech Nitrogen plans to complete expansion projects at both plants in 2013, increasing capacity on several products by about 20%. For 2014 and 2015, the company is planning to add a 15 megawatt steam turbine at the Pasadena plant that will use steam producing by production to provide power for the plant and to sell into the power grid.
A Word on Rentech, Inc.
Rentech, Inc. (RTK) owns the general partner and 60% of the limited partner units of Rentech Nitrogen. The company does not receive incentive distribution rights from Nitrogen. The other businesses of Rentech, Inc. were attempts to produce viable operations from clean fuels and renewable energy technologies. For 2013, Rentech has all but shutdown its other operations and is currently just a cash collector of the Rentech Nitrogen distributions. The company is looking for ways to possibly sell some of its technology intellectual property and real estate and then find some new lines of business. At this point in time, I do not see any added value in Rentech, Inc. compared to Rentech Nitrogen Partners.
Buy On News of Lower 2013 Distribution
Rentech Nitrogen has provided guidance of $2.60 per unit in distributions for 2013, down from the $3.30 paid for 2012. A big part of the decline is due to a planned turnaround of the company's original East Dubuque, Illinois fertilizer plant. As of the March 19 year-end earnings report the company has orders for and hedged raw material costs for about 40% of the 2013 production.
Once the turnaround is complete and expansion projects completed, Rentech Nitrogen has the potential to generate $4.00 or better in distributable cash flow, assuming fertilizer and natural gas prices stay near their current levels. As a result, investors can expect to earn about a 7.5% distribution yield this year and look forward to potentially much higher payouts in future years.
Right now, Rentech Nitrogen shows an 8.4% to 11% yield - depending on the source, based on past distributions. When future, lower quarterly payouts are announced, it is very possible that the share price will drop on the news. The year 2013 should be viewed as an accumulation year for this fertilizer MLP, pick up units on the dips and profit from higher distributions in future years.
Register for Free to get streaming real-time quotes, interactive charts, live options flow, and more.
Timothy Smith
9 years ago
Belek
10 years ago
Hot Features
Premium
