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Rentech Announces Results for First Quarter 2017

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Rentech, Inc. (NASDAQ:RTK) today announced results for the first
quarter ended March 31, 2017.

Summary of Results

The consolidated results consist of Fulghum Fibres (Fulghum), New
England Wood Pellet (NEWP), Industrial Wood Pellets and unallocated
corporate expenses. The former Rentech Nitrogen Pasadena and East
Dubuque facilities are classified as discontinued operations. The
Pasadena and East Dubuque facilities were sold on March 14, 2016 and
April 1, 2016, respectively. Rentech's energy technologies business is
also classified as discontinued operations.

Consolidated revenues from continuing operations for the first quarter
of 2017 were $32.2 million, as compared to $39.9 million in the prior
year period.

Gross loss from continuing operations for the first quarter of
2017 was $(0.7) million, as compared to gross profit of $0.1 million in
the prior year period.

During the first quarter of 2017, Rentech recorded impairment charges of
$20.9 million relating to Fulghum Fibres.

Operating loss from continuing operations for the first quarter of 2017
was $(31.0) million, as compared to $(10.0) million in the prior year
period.

Consolidated Adjusted EBITDA loss from continuing operations for the
first quarter of 2017 was $(6.1) million, as compared to $(3.9) million
in 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 2017 was $(34.3) million, or net loss of $(1.48) per basic
share, of which $(1.48) per basic share was contributed by continuing
operations and $0.00 per basic share was generated by discontinued
operations. This compared to a net loss of $(10.2) million, or a net
loss of $(0.44) per basic share, of which $(0.54) per basic share was
generated by continuing operations and $0.10 per basic share was
contributed by discontinued operations, for the same period last year.

Fulghum Fibres

Revenues were $19.9 million for the first quarter of 2017, as compared
to $27.4 million for the same period last year. Revenues from operations
in the United States were $12.6 million for the first quarter of 2017,
as compared to $13.7 million in the prior year period. Revenues from
operations in South America were $7.3 million for the first quarter of
2017, as compared to $13.7 million in the prior year period. The
decrease in revenues from the United States operations is primarily due
to the sale of a mill in April 2016. The decrease in South America
revenues was primarily due to significantly fewer chip sales to Asia in
2017 as compared to 2016. We expect export chip sales to pick-up
throughout the year but to be lower than in 2016. Lower in-country
biomass product sales also contributed to the decline in South America
revenues.

For the first quarter of 2017, our mills in the United States processed
2.5 million green metric tons, or GMT, of logs into wood chips and
residual fuels; our mills in South America processed 0.8 million GMT of
logs. For the first quarter of 2016, our mills in the United States
processed 3.2 million GMT of logs into wood chips and residual fuels;
our mills in South America processed 0.9 million GMT of logs.

Gross profit was $2.3 million for the first quarter of 2017, as compared
to $4.7 million for the same period last year. Gross profit margin for
the first quarter of 2017 was 11%, as compared to 17% for the same
period in the prior year. The decreases in gross profit and gross margin
were due primarily to lower revenues as a result of a decrease in
biomass product sales in South America, a decrease in chip sales to
Asia, the sale of a mill in the United States in April 2016, and an
increase in repairs and maintenance expenses at the mills in South
America.

Fulghum recorded impairments totaling $20.9 million in the first quarter
of 2017, consisting of $13.1 million in goodwill impairment and $7.8
million in asset impairments.

Operating loss for the first quarter of 2017 was $(20.4) million, as
compared to operating income of $2.9 million in the first quarter of
2016.

Adjusted EBITDA for the first quarter of 2017 was $2.8 million. This
compares to Adjusted EBITDA of $5.4 million for the same period in 2016.

Net loss for the first quarter of 2017 was $(20.9) million. This
compares to net income of $1.7 million for the same period in 2016.

New England Wood Pellet

Revenues were $4.1 million for the first quarter of 2017 on deliveries
of approximately 22,000 tons of wood pellets. Revenues were $2.6 million
for the first quarter of 2016 on deliveries of approximately 13,000 tons
of wood pellets. Although sales volumes increased between the periods,
revenues were significantly lower than historical levels. Demand
continued to be negatively impacted by relatively warm weather and
continuing depressed prices for competing heating fuels such as heating
oil and propane. Sales prices for the first quarter of 2017 were also
lower than in the prior year period.

The plants produced at approximately 43% of capacity during the first
quarter of 2017, as compared to 77% of capacity in the prior year
period. NEWP is monitoring market demand and inventory levels and will
adjust production accordingly.

Gross profit was $0.4 million for each of the first quarters of 2017 and
2016. Gross profit margin was 9% for the first quarter of 2017, as
compared to 16% for the same period in the prior year. Gross profit
margin was lower because of lower sales prices and charges relating to
scaling back production at the facilities during the first quarter of
2017.

Operating loss was ($0.4) million for each of the first quarters of 2017
and 2016.

Adjusted EBITDA for the first quarter of 2017 was $0.3 million. This
compares to Adjusted EBITDA of $0.0 million for the same period in 2016.

Net loss for the first quarter of 2017 was $(0.5) million. This compares
to net loss of $(0.6) million for the same period in 2016.

Wood Pellets: Industrial

Revenues were $8.1 million for the first quarter of 2017, earned by
delivering approximately 57,000 metric tons of wood pellets. Revenues
were $9.9 million for the first quarter of 2016, earned by delivering
approximately 64,000 metric tons of wood pellets.

Prior to our decision to idle the Wawa facility in February 2017, we
agreed to deliver approximately 336,000 metric tons of pellets to Drax
in 2017. In January 2017, we shipped approximately 48,000 metric tons to
Drax. In March 2017, Drax agreed to cancel the next two shipments for
2017 without any penalties, leaving us with an obligation to deliver
approximately 193,000 metric tons for this year. In April 2017, we
shipped most of Wawa's remaining inventory of approximately 12,000
metric tons of pellets to Drax pursuant to an amendment to the Drax
contract; this shipment does not affect our delivery obligations for
2017. Further amendments to the delivery schedule under the Drax
contract will most likely occur as a result of the continued idling of
the facility. At this time, we cannot make a determination if any
penalties will be associated with future changes to the contract.
Rentech, Inc. has guaranteed the payment obligations of the Drax
contract up to a maximum amount of CAD$20 million.

Gross loss for the first quarter of 2017 was $(3.4) million, as compared
to $(5.0) million for the same period in the prior year. Gross loss
margin was (42)% for the first quarter of 2017, as compared to (50)% for
the same period in the prior year. The decrease in gross loss was
primarily due to a $2.7 million reduction in inventory write-downs.

Operating loss for the first quarter of 2017 was $(5.9) million, as
compared to an operating loss of ($6.3) million in the same period in
2016. The decrease was primarily due to lower inventory write-downs and
the absence of allocations of corporate overhead to the wood pellets
industrial segment. These reductions were partially offset by $1.9
million of estimated liabilities for rail car and rail transportation
obligations. These obligations consist of an estimated remaining
liability under the TrinityRail lease of $1.3 million and one-fourth, or
$0.6 million, of the estimated shortfall penalties for 2017 under the
Canadian National Railway contract. We may record additional shortfall
penalties for 2017 under the Canadian National Railway contract as a
result of idling the Wawa facility.

Adjusted EBITDA loss for the first quarter of 2017 was $(5.0) million.
This compared to Adjusted EBITDA loss of $(3.3) million for the same
period last year.

Net loss for the first quarter of 2017 was $(6.4) million. This compares
to net loss of $(6.7) million for the same period in 2016.

Corporate and Unallocated Expenses

Selling, general and administrative (SG&A) expenses were $4.2 million
for the first quarter of 2017, as compared to $6.0 million for the same
period last year. The decrease was a result of the Company's cost saving
efforts, including decreases in personnel costs of $1.0 million,
software costs of $0.5 million, professional fees of $0.4 million, and
insurance, rent and non-cash equity-based compensation expenses of $0.2
million each. These savings were partially offset by the absence of
allocating a portion of corporate overhead to the wood pellets
industrial segment, which totaled $0.9 million for the first quarter of
2016. Non-cash equity-based compensation expense was $0.3 million for
the first quarter of 2017, as compared to $0.5 million for the same
period in the prior year.

Conference Call with Management

Rentech will hold a conference call today, May 11, 2017, at 10:00 a.m.
ET to discuss its results for the first quarter of 2017. Callers may
listen to the live presentation, which will be followed by a question
and answer segment, by dialing (888) 517-2513 or (847) 619-6533 and the
passcode 9780245#. 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 12:30 p.m. ET on May 11 through 11:59 p.m. ET on May
17. The replay teleconference will be available by dialing (888)
843-7419 or (630) 652-3042 and the passcode 9780245#

Rentech, Inc.
Consolidated Financial Results

(Stated in Thousands)

 
  For the Three Months Ended
March 31,
  2017       2016  
(Unaudited)
Revenues $ 32,221 $ 39,937
Cost of sales   32,966     39,806  
Gross profit (loss)   (745 )   131  
Operating expenses
Selling, general and administrative expense 8,684 9,114
Depreciation and amortization 624 1,008
Asset impairment 7,759
Goodwill impairment 13,125
Other expense, net   13     13  
Total operating expenses   30,205     10,135  
Operating loss   (30,950 )   (10,004 )
Other expense, net
Interest expense (2,397 ) (3,572 )
Other income (expense)   (1,344 )   146  
Total other expenses, net   (3,741 )   (3,426 )

Loss from continuing operations before income taxes and equity
in loss of investee

(34,691 ) (13,430 )
Income tax benefit   (1,224 )   (2,402 )

Loss from continuing operations before equity in loss of
investee

(33,467 ) (11,028 )
Equity in loss of investee   918      
Loss from continuing operations (34,385 ) (11,028 )

Income from discontinued operations, net of tax

  96     5,574  
Net loss (34,289 ) (5,454 )
Net (income) loss attributable to noncontrolling interests 11 (3,406 )
Preferred stock dividends       (1,320 )

Net loss attributable to Rentech common shareholders

$ (34,278 ) $ (10,180 )

Net income (loss) per common share allocated to Rentech common
shareholders:

Basic:
Continuing operations $ (1.48 ) $ (0.54 )
Discontinued operations $ 0.00   $ 0.10  
Net loss $ (1.48 ) $ (0.44 )
Diluted:
Continuing operations $ (1.48 ) $ (0.54 )
Discontinued operations $ 0.00   $ 0.10  
Net loss $ (1.48 ) $ (0.44 )

Weighted-average shares used to compute net income (loss) per
common share:

Basic   23,202     23,036  
Diluted   23,202     23,036  
 
Rentech, Inc.
Financial Results by Business Segment

(Stated in Thousands)

 
  For the Three Months
Ended March 31,
  2017       2016  
(in thousands)
Revenues
Fulghum Fibres $ 19,935 $ 27,436
Wood Pellets: Industrial 8,147 9,861
Wood Pellets: NEWP   4,139     2,640  
Total revenues $ 32,221   $ 39,937  
Gross profit (loss)
Fulghum Fibres $ 2,285 $ 4,666
Wood Pellets: Industrial (3,387 ) (4,969 )
Wood Pellets: NEWP   357     434  
Total gross profit (loss) $ (745 ) $ 131  
Selling, general and administrative expenses
Fulghum Fibres $ 1,457 $ 1,201
Wood Pellets: Industrial 2,504 1,308
Wood Pellets: NEWP   500     561  
Total segment selling, general and administrative expenses $ 4,461   $ 3,070  
Depreciation and amortization
Fulghum Fibres $ 293 $ 541
Wood Pellets: Industrial 12 47
Wood Pellets: NEWP   241     295  

Total segment depreciation and amortization recorded in operating
expenses

$ 546   $ 883  
Net income (loss)
Fulghum Fibres $ (20,862 ) $ 1,653
Wood Pellets: Industrial (6,354 ) (6,738 )
Wood Pellets: NEWP   (500 )   (555 )
Total segment net loss $ (27,716 ) $ (5,640 )
Reconciliation of segment net loss to consolidated net loss:
Segment net loss $ (27,716 ) $ (5,640 )

Corporate and unallocated expenses recorded as selling, general
and administrative expenses

(4,222 ) (6,045 )

Corporate and unallocated depreciation and amortization expense

(78 ) (125 )

Corporate and unallocated income (expenses) recorded as other
income (expense)

2 4
Corporate and unallocated interest expense (1,313 ) (2,423 )
Corporate income tax benefit (expense) (140 ) 3,201
Equity in loss of CVR (918 )

Income from discontinued operations, net of tax

  96     5,574  
Consolidated net loss $ (34,289 ) $ (5,454 )
 
Rentech, Inc.
Selected Balance Sheet

(Stated in Thousands)

 
  As of March 31, 2017
(unaudited)
Cash(1) $ 23,699
Accounts receivable 6,241
Inventories 26,936
Other current assets   7,835
Total current assets $ 64,711
Accounts payable $ 10,731
Accrued liabilities 15,120
Debt 13,250
Other current liabilities   7,343
Total current liabilities $ 46,444
 
GSO Credit Agreement $ 52,250

Fulghum debt(2)

36,883

NEWP debt(3)

14,124
QS Construction Facility   13,472
Total debt $ 116,729
 
(1)   Amount includes cash of $8.1 million and $0.1 million at Fulghum and
NEWP, respectively.
(2) Fulghum debt consists primarily of 13 term loans and three short
term lines of credit with various financial institutions with each
loan secured by specific property and equipment.
(3) The NEWP debt consists primarily of four term loans with each term
loan secured by specific property and equipment.

Disclosure Regarding Non-GAAP Financial Measures

Adjusted EBITDA, which is a non-GAAP financial measure, is defined as
operating income (loss) from continuing operations plus net interest
expense, income tax (benefit) expense, depreciation and amortization and
unusual items like impairment charges. 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 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.

Adjusted 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. Adjusted EBITDA may have material limitations as a
performance measure because it excludes items that are necessary
elements of our costs and operations. In addition, Adjusted EBITDA
presented by other companies may not be comparable to our presentation,
since each company may define these terms differently.

The table below reconciles Rentech's consolidated Adjusted EBITDA
(excluding equity in loss of CVR and discontinued operations) to loss
from continuing operations for the first quarters of 2017 and 2016.

  For the Three Months
Ended March 31,
  2017       2016  
(in thousands)
Loss from continuing operations $ (34,385 ) $ (11,028 )
Add items:
Net interest expense 2,521 3,571
Asset impairment 7,759
Goodwill impairment 13,125
Income tax (benefit) expense (1,224 ) (2,402 )
Depreciation and amortization 4,007 6,056
Equity in loss of investee 918
Other(1)   1,221     (145 )
Consolidated Adjusted EBITDA $ (6,058 ) $ (3,948 )
 
(1)   Includes an expense of $1.4 million for the first quarter of 2017
that represents the release of certain indemnifications from the
previous owners of Fulghum.

The table below reconciles Fulghum's Adjusted EBITDA to segment net
income (loss) for Fulghum for the first quarters of 2017 and 2016.

  For the Three Months
Ended March 31,
  2017       2016  
(in thousands)
Fulghum net income (loss) $ (20,862 ) $ 1,653
Add Fulghum items:
Net interest expense 496 569
Asset impairment 7,759
Goodwill impairment 13,125
Income tax (benefit) expense (1,383 ) 779
Depreciation and amortization 2,261 2,427

Other(1)

  1,397     (78 )
Fulghum's Adjusted EBITDA $ 2,793   $ 5,350  
 
(1)   Includes an expense of $1.4 million for the first quarter of 2017
that represents the release of certain indemnifications from the
previous owners of Fulghum.

The table below reconciles NEWP's Adjusted EBITDA to segment net loss
for NEWP for the first quarters of 2017 and 2016.

  For the Three Months
Ended March 31,
  2017       2016  
(in thousands)
NEWP net loss $ (500 ) $ (555 )
Add NEWP items:
Net interest expense 136 141
Income tax expense 19 20
Depreciation and amortization 723 463
Other   (50 )   (40 )
NEWP's Adjusted EBITDA $ 328   $ 29  

The table below reconciles Wood Pellets: Industrial's Adjusted EBITDA to
segment net loss for Wood Pellets: Industrial for the first quarters of
2017 and 2016.

  For the Three Months
Ended March 31,
  2017       2016  
(in thousands)
Wood Pellets: Industrial net loss $ (6,354 ) $ (6,738 )
Add Wood Pellets: Industrial items:
Net interest expense 576 438
Income tax expense
Depreciation and amortization 945 3,041
Other   (124 )   (23 )
Wood Pellets: Industrial Adjusted EBITDA $ (4,957 ) $ (3,282 )

About Rentech, Inc.

Rentech, Inc. (NASDAQ:RTK) owns and operates wood fibre processing and
wood pellet production 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's
industrial wood pellet facilities are designed to produce wood pellets
used as fuel for power generation. Please visit www.rentechinc.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
expectations for the operations, results, and contractual obligations of
the Fulghum Fibres, NEWP, and Industrial Wood Pellets businesses. 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 at www.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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