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Market Overview

Rentech Announces Record Results for Fiscal Year 2009


Rentech, Inc. (NYSE AMEX: RTK) today announced results for its fiscal 2009 fourth quarter and fiscal year ended September 30, 2009. Reported results for fiscal year 2009 were reduced by accounting changes that resulted in a restatement of previously reported annual and quarterly results for fiscal year 2008 and quarterly results for fiscal year 2009, as discussed below.

2009 Financial Results

For the fourth quarter of fiscal year 2009, Rentech reported revenue of $24.7 million, compared to $74.6 million for the comparable quarter in the prior year. The decline in revenue was attributable to lower fertilizer shipments than for the same quarter in fiscal 2008, due to weaker economic conditions and lower corn prices. Rentech reported a net loss of $6.4 million, or $0.03 per share, for the quarter ended September 30, 2009. This compares to a net loss of $2.9 million, or $0.01 per share, for the comparable period in fiscal year 2008.

For the fiscal year ended September 30, 2009, Rentech reported revenue of $183.0 million compared to $211.0 million for the prior fiscal year. Sales volume decreased primarily due to reduced shipments in the first and fourth quarters of fiscal year 2009 due to unfavorable weather and weaker economic conditions. Rentech reported full year net income, for the first time in the company’s history, of $3.0 million, or $0.02 per share, for the fiscal year ended September 30, 2009, a significant improvement over the net loss of $56.9 million, or $0.34 per share, for the comparable period in fiscal year 2008. Operating income for the Company’s wholly-owned nitrogen fertilizer facility, Rentech Energy Midwest Corporation (REMC), for fiscal year 2009 was $57.0 million as compared to $52.7 million in fiscal year 2008.

Rentech generated EBITDA of $23.6 million on a consolidated basis, and $65.5 million at REMC for fiscal year 2009. EBITDA, operating income, and net income for fiscal year 2009 were each reduced by approximately $6 million due to the impact on the cost of goods sold of restatements related to the accounting treatment of forward purchases of natural gas that had no impact on cash flow, and are further described below. Further explanation of EBITDA, a non-GAAP measure, a computation of both consolidated and REMC EBITDA, and the impacts of the accounting changes are shown below in this press release

Selling, general and administrative (SG&A) expenses were $24.1 million for the fiscal year ended September 30, 2009, down from $33.4 million for the prior year. Reductions in staff, travel and information technology expenditures accounted for a majority of the decline in SG&A expenses. Research and development (R&D) expenses for the fiscal year ended September 30, 2009 were $21.4 million, significantly lower than the $64.5 million reported for fiscal year 2008. The decrease in R&D expenses was primarily due to the completion of construction of the Company’s Product Demonstration Unit (PDU), the cost of which was expensed, in the prior fiscal year. Current period R&D expenses were for operation of the PDU, and for work on catalyst and process improvements.

As of September 30, 2009, Rentech had cash and cash equivalents of $69.1 million on a consolidated basis.

Commenting on the fiscal year 2009 financial results, D. Hunt Ramsbottom, President and CEO of Rentech, stated, “Fiscal year 2009 was an exceptional year for our Company. For the first time in Rentech’s history, we generated positive net income and consolidated EBITDA.” Mr. Ramsbottom continued, “Disciplined cost management and record cash flow generation at REMC enabled us to make significant advances in our alternative fuels business in a challenging economic environment when many companies were retrenching or failing. As a result, we made considerable commercial progress such as advancing our renewable energy project in Rialto, CA and enhancing our technology portfolio with biomass gasification technologies.”

Accounting Changes; Restatement

The Company announced that it has corrected its accounting treatment of forward gas purchase contracts and inventory valuation. This correction required restatements of the annual and quarterly consolidated financial statements for fiscal year 2008, and for the first three quarters of fiscal year 2009. The restated financial statements and the impacts of the accounting correction are included in the Company’s Form 10-K for the fiscal year ended September 30, 2009, which was filed today.

The restatement corrects a prior incorrect classification of cash deposits required by forward gas purchase contracts as inventory, and reclassifies them as deposits on gas purchase contracts within current assets on the balance sheet. The Company previously recorded impairments of the inventory components represented by those deposits due to declines in the market price of the natural gas covered by the contracts and increased margin and deposit requirements, recognizing those impairments through cost of goods sold prior to delivery of products produced with the gas. As the Company discussed at the time the inventory impairments were reported, cost of goods sold in periods following the impairments benefited to the extent of the impairments, as gas costs in the subsequent periods were recognized at the lower post-impairment cost. The corrected accounting treatment instead recognizes gas costs at contracted prices. Finished goods inventory will be tested for impairment, but no impairments will be recognized for specific components of inventory (such as natural gas under contract). The restatement reverses the impairments and the subsequent benefits to cost of goods sold. These corrections change the timing, but not the total amount, of the recognition of expenses for purchases of natural gas and have no impact on cash flow.

The restatements had the effect of increasing operating earnings and EBITDA in fiscal 2008 by approximately $6 million, and caused a reduction in reported operating earnings and EBITDA in fiscal 2009 of approximately $6 million due to changes in the timing of expense recognition. The guidance that the Company had previously provided regarding expected full year fiscal 2009 results did not give effect to this accounting change or the related downward adjustment in reported fiscal 2009 results caused by the restatement.

Additional detail about the effects of the restatement adjustments are provided below in this press release.

Rentech has also changed its balance sheet treatment of product pre-sale contracts, which has no impact on the statement of operations. The Company previously recorded the entire amount of firm take-or-pay pre-sale contracts as deferred revenue, and recorded accounts receivable for the difference between the total contract amount and the cash deposits received. The new accounting treatment will record deferred revenue only to the extent of cash deposits received, and will record no accounts receivable until products have been shipped. The impact on the September 30, 2008 balance sheet was to reduce deferred revenue and accounts receivable by approximately $58 million. There was no impact on the September 30, 2009 balance sheet, as all product pre-sale contracts at that date were fully paid.

Additional Information

For additional information, see Rentech’s Form 10-K for the fiscal year ended September 30, 2009 available on the Company’s website at

Conference Call with Management and Availability of Investor Presentation

The Company will hold a conference call tomorrow. December 15, at 10:00 a.m. PST, during which time Rentech's senior management will review the Company's financial results for these periods and will 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: 800-786-6104 or 212-231-2903. An audio webcast of the call will be available at within the News and Events portion of the site under the Presentations section. A replay will be available by audio webcast and teleconference from 1:00 p.m. PST on December 16 through 1:00 p.m. PST on December 23. The replay teleconference will be available by dialing 800-633-8284 or 402-977-9140 and the reservation number 21443843.

A presentation on the Company’s Rialto Renewable Energy Center will be available prior to the conference call at within the Investor Relations portion of the site under the Presentations section.



(Stated in thousands, except per share data)

For the Three Months For the Twelve Months
Ended September 30, Ended September 30,
2009 2008 2009 2008
Total Revenues $ 24,717 $ 74,604 $ 183,000 $ 210,971
Cost of Sales   17,256     53,815     122,204     154,420  
Gross Profit 7,461 20,789 60,796 56,551
Operating Expenses   10,677     18,377     46,920     107,022  
Operating Income (Loss) (3,216 ) 2,412 13,876 (50,471 )
Total Other Expenses   (3,100 )   (5,335 )   (10,859 )   (6,489 )
Income (Loss) from Continuing Operations
before Income Taxes (6,316 ) (2,923 ) 3,017 (56,960 )
Income tax expense   43     7     61     13  
Income (Loss) from Continuing Operations (6,359 ) (2,930 ) 2,956 (56,973 )
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