UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2014
Or
¨ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from
to
Commission File No. 001-15795
RENTECH, INC.
(Exact name of registrant as specified in its charter)
|
|
|
Colorado |
|
84-0957421 |
(State or other jurisdiction of
incorporation or organization) |
|
(I.R.S. Employer
Identification No.) |
10877 Wilshire Boulevard, 10th Floor
Los Angeles, California 90024
(Address of principal executive offices)
(310) 571-9800
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
|
|
|
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|
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Large accelerated filer |
|
¨ |
|
Accelerated filer |
|
x |
|
|
|
|
Non-accelerated filer |
|
¨ (Do not check if a smaller reporting company) |
|
Smaller reporting company |
|
¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ¨ No x
The number of shares of the Registrants common stock outstanding as of October 31, 2014 was 228,485,033.
RENTECH, INC.
Form 10-Q
Table of Contents
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RENTECH, INC.
Consolidated Balance Sheets
(Amounts in thousands, except per share data)
|
|
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|
|
|
|
|
|
|
|
As of |
|
|
|
September 30, 2014 |
|
|
December 31, 2013 |
|
|
|
(Unaudited) |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash |
|
$ |
70,060 |
|
|
$ |
106,369 |
|
Accounts receivable |
|
|
27,775 |
|
|
|
14,227 |
|
Inventories |
|
|
35,493 |
|
|
|
35,376 |
|
Prepaid expenses and other current assets |
|
|
11,854 |
|
|
|
8,309 |
|
Deferred income taxes |
|
|
1,126 |
|
|
|
1,140 |
|
Other receivables |
|
|
14,184 |
|
|
|
7,432 |
|
Assets of discontinued operations |
|
|
604 |
|
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|
19 |
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
161,096 |
|
|
|
172,872 |
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|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
359,044 |
|
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|
334,654 |
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|
|
|
|
|
|
|
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|
Construction in progress |
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|
184,391 |
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|
60,136 |
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|
|
|
|
|
|
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Other assets |
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|
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|
|
|
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Goodwill |
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|
39,193 |
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|
57,134 |
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Intangible assets |
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|
62,812 |
|
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|
59,730 |
|
Debt issuance costs |
|
|
9,511 |
|
|
|
9,321 |
|
Deposits and other assets |
|
|
5,076 |
|
|
|
5,092 |
|
Assets of discontinued operations |
|
|
4,626 |
|
|
|
4,651 |
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|
|
|
|
|
|
|
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|
Total other assets |
|
|
121,218 |
|
|
|
135,928 |
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|
|
|
|
|
|
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Total assets |
|
$ |
825,749 |
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|
$ |
703,590 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities |
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Accounts payable |
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$ |
28,611 |
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$ |
19,875 |
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Accrued payroll and benefits |
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|
8,119 |
|
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|
9,155 |
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Accrued liabilities |
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32,963 |
|
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|
33,953 |
|
Deferred revenue |
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|
50,453 |
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21,643 |
|
Current portion of long term debt |
|
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15,911 |
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|
9,916 |
|
Accrued interest |
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11,228 |
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|
5,490 |
|
Other |
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|
1,322 |
|
|
|
1,015 |
|
Liabilities of discontinued operations |
|
|
2,167 |
|
|
|
2,003 |
|
|
|
|
|
|
|
|
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Total current liabilities |
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150,774 |
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|
103,050 |
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|
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Long-term liabilities |
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Debt |
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431,961 |
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|
412,063 |
|
Earn-out consideration |
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|
5,589 |
|
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|
1,544 |
|
Asset retirement obligation |
|
|
4,328 |
|
|
|
2,995 |
|
Deferred income taxes |
|
|
9,539 |
|
|
|
9,271 |
|
Other |
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|
4,404 |
|
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|
6,711 |
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|
|
|
|
|
|
|
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Total long-term liabilities |
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|
455,821 |
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432,584 |
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Total liabilities |
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606,595 |
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535,634 |
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Commitments and contingencies (Note 12) |
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Mezzanine equity |
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Series E convertible preferred stock: $10 par value; 100,000 shares authorized, issued and outstanding; 4.5% dividend
rate |
|
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94,866 |
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Stockholders equity |
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Preferred stock: $10 par value; 1,000 shares authorized; 90 series A convertible preferred shares authorized and issued;
no shares outstanding and $0 liquidation preference |
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Series C participating cumulative preferred stock: $10 par value; 500 shares authorized; no shares issued and
outstanding |
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Series D junior participating preferred stock: $10 par value; 45 shares authorized; no shares issued and
outstanding |
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Common stock: $.01 par value; 450,000 shares authorized; 228,222 and 227,512 shares issued and outstanding at
September 30, 2014 and December 31, 2013, respectively |
|
|
2,282 |
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|
2,275 |
|
Additional paid-in capital |
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|
544,040 |
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|
541,254 |
|
Accumulated deficit |
|
|
(422,148 |
) |
|
|
(385,339 |
) |
Accumulated other comprehensive loss |
|
|
(2,567 |
) |
|
|
(117 |
) |
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|
3
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As of |
|
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|
September 30, 2014 |
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December 31, 2013 |
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|
(Unaudited) |
|
Total Rentech stockholders equity |
|
|
121,607 |
|
|
|
158,073 |
|
Noncontrolling interests |
|
|
2,681 |
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|
9,883 |
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|
|
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Total equity |
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|
124,288 |
|
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|
167,956 |
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Total liabilities and stockholders equity |
|
$ |
825,749 |
|
|
$ |
703,590 |
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|
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|
See Accompanying Notes to Consolidated Financial Statements.
4
RENTECH, INC.
Consolidated Statements of Operations
(Amounts in thousands, except per share data)
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For the Three Months Ended September 30, |
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For the Nine Months Ended September 30, |
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2014 |
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|
2013 |
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|
2014 |
|
|
2013 |
|
|
|
(Unaudited) |
|
Revenues |
|
|
|
|
|
|
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|
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|
|
|
|
|
Product sales |
|
$ |
106,802 |
|
|
$ |
96,621 |
|
|
$ |
295,154 |
|
|
$ |
262,890 |
|
Service revenues |
|
|
17,955 |
|
|
|
18,608 |
|
|
|
53,342 |
|
|
|
30,340 |
|
Other revenues |
|
|
547 |
|
|
|
428 |
|
|
|
1,529 |
|
|
|
2,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
125,304 |
|
|
|
115,657 |
|
|
|
350,025 |
|
|
|
295,282 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Cost of sales |
|
|
|
|
|
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|
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|
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|
|
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Product |
|
|
97,880 |
|
|
|
80,272 |
|
|
|
244,019 |
|
|
|
185,371 |
|
Service |
|
|
14,455 |
|
|
|
14,241 |
|
|
|
43,703 |
|
|
|
23,775 |
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
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|
Total cost of sales |
|
|
112,335 |
|
|
|
94,513 |
|
|
|
287,722 |
|
|
|
209,146 |
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|
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|
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|
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|
|
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|
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|
Gross profit |
|
|
12,969 |
|
|
|
21,144 |
|
|
|
62,303 |
|
|
|
86,136 |
|
|
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|
Operating expenses |
|
|
|
|
|
|
|
|
|
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|
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|
|
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|
Selling, general and administrative expenses |
|
|
15,550 |
|
|
|
13,413 |
|
|
|
48,764 |
|
|
|
38,819 |
|
Depreciation and amortization |
|
|
1,418 |
|
|
|
2,436 |
|
|
|
2,488 |
|
|
|
5,333 |
|
Pasadena goodwill impairment |
|
|
|
|
|
|
30,029 |
|
|
|
27,202 |
|
|
|
30,029 |
|
Other expense |
|
|
313 |
|
|
|
24 |
|
|
|
209 |
|
|
|
35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
17,281 |
|
|
|
45,902 |
|
|
|
78,663 |
|
|
|
74,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(4,312 |
) |
|
|
(24,758 |
) |
|
|
(16,360 |
) |
|
|
11,920 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(5,346 |
) |
|
|
(4,757 |
) |
|
|
(16,682 |
) |
|
|
(11,022 |
) |
Loss on debt extinguishment |
|
|
(635 |
) |
|
|
|
|
|
|
(1,485 |
) |
|
|
(6,001 |
) |
Gain (loss) on fair value adjustment to earn-out consideration |
|
|
59 |
|
|
|
586 |
|
|
|
(268 |
) |
|
|
5,197 |
|
Other income (expense), net |
|
|
311 |
|
|
|
(88 |
) |
|
|
355 |
|
|
|
(267 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses, net |
|
|
(5,611 |
) |
|
|
(4,259 |
) |
|
|
(18,080 |
) |
|
|
(12,093 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes and equity in loss of investee |
|
|
(9,923 |
) |
|
|
(29,017 |
) |
|
|
(34,440 |
) |
|
|
(173 |
) |
Income tax (benefit) expense |
|
|
425 |
|
|
|
(1,984 |
) |
|
|
1,260 |
|
|
|
(26,656 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before equity in loss of investee |
|
|
(10,348 |
) |
|
|
(27,033 |
) |
|
|
(35,700 |
) |
|
|
26,483 |
|
Equity in loss of investee |
|
|
97 |
|
|
|
103 |
|
|
|
334 |
|
|
|
138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
(10,445 |
) |
|
|
(27,136 |
) |
|
|
(36,034 |
) |
|
|
26,345 |
|
Income (loss) from discontinued operations, net of tax |
|
|
(1,242 |
) |
|
|
3,558 |
|
|
|
(4,280 |
) |
|
|
(4,831 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
(11,687 |
) |
|
|
(23,578 |
) |
|
|
(40,314 |
) |
|
|
21,514 |
|
Net (income) loss attributable to noncontrolling interests |
|
|
1,311 |
|
|
|
8,985 |
|
|
|
3,505 |
|
|
|
(8,515 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Rentech common shareholders |
|
$ |
(10,376 |
) |
|
$ |
(14,593 |
) |
|
$ |
(36,809 |
) |
|
$ |
12,999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share allocated to Rentech common shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
(0.05 |
) |
|
$ |
(0.08 |
) |
|
$ |
(0.15 |
) |
|
$ |
0.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations |
|
$ |
(0.01 |
) |
|
$ |
0.02 |
|
|
$ |
(0.02 |
) |
|
$ |
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(0.05 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.17 |
) |
|
$ |
0.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
(0.05 |
) |
|
$ |
(0.08 |
) |
|
$ |
(0.15 |
) |
|
$ |
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
(Unaudited) |
|
Discontinued operations |
|
$ |
(0.01 |
) |
|
$ |
0.02 |
|
|
$ |
(0.02 |
) |
|
$ |
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(0.05 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.17 |
) |
|
$ |
0.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used to compute net income (loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
228,072 |
|
|
|
226,305 |
|
|
|
228,651 |
|
|
|
225,840 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
228,072 |
|
|
|
226,305 |
|
|
|
228,651 |
|
|
|
232,171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Accompanying Notes to Consolidated Financial Statements.
6
RENTECH, INC.
Consolidated Statements of Comprehensive Income (Loss)
(Amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
(Unaudited) |
|
Net income (loss) |
|
$ |
(11,687 |
) |
|
$ |
(23,578 |
) |
|
$ |
(40,314 |
) |
|
$ |
21,514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and postretirement plan adjustments |
|
|
(11 |
) |
|
|
(5 |
) |
|
|
(36 |
) |
|
|
3 |
|
Foreign currency translation |
|
|
(4,440 |
) |
|
|
|
|
|
|
(2,429 |
) |
|
|
(30 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss |
|
|
(4,451 |
) |
|
|
(5 |
) |
|
|
(2,465 |
) |
|
|
(27 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
|
|
(16,138 |
) |
|
|
(23,583 |
) |
|
|
(42,779 |
) |
|
|
21,487 |
|
Less: net (income) loss attributable to noncontrolling interests |
|
|
1,311 |
|
|
|
8,985 |
|
|
|
3,505 |
|
|
|
(8,515 |
) |
Less: other comprehensive (income) loss attributable to noncontrolling interests |
|
|
5 |
|
|
|
2 |
|
|
|
15 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to Rentech |
|
$ |
(14,822 |
) |
|
$ |
(14,596 |
) |
|
$ |
(39,259 |
) |
|
$ |
12,971 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Accompanying Notes to Consolidated Financial Statements.
7
RENTECH, INC.
Consolidated Statements of Stockholders Equity
(Amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
Additional Paid-in Capital |
|
|
Accumulated Deficit |
|
|
Accumulated Other Comprehensive Income (Loss) |
|
|
Total Rentech Stockholders Equity |
|
|
Noncontrolling Interests |
|
|
Total Stockholders Equity |
|
|
|
Shares |
|
|
Amount |
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
Balance, December 31, 2012 |
|
|
224,121 |
|
|
$ |
2,241 |
|
|
$ |
539,448 |
|
|
$ |
(383,807 |
) |
|
$ |
105 |
|
|
$ |
157,987 |
|
|
$ |
43,081 |
|
|
$ |
201,068 |
|
Noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000 |
|
|
|
4,000 |
|
Acquisition of additional interest in subsidiary |
|
|
|
|
|
|
|
|
|
|
(536 |
) |
|
|
|
|
|
|
|
|
|
|
(536 |
) |
|
|
(1,964 |
) |
|
|
(2,500 |
) |
Common stock issued for services |
|
|
178 |
|
|
|
2 |
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for stock options exercised |
|
|
313 |
|
|
|
3 |
|
|
|
126 |
|
|
|
|
|
|
|
|
|
|
|
129 |
|
|
|
|
|
|
|
129 |
|
Payment of stock issuance costs |
|
|
|
|
|
|
|
|
|
|
(48 |
) |
|
|
|
|
|
|
|
|
|
|
(48 |
) |
|
|
|
|
|
|
(48 |
) |
Distributions to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(33,075 |
) |
|
|
(33,075 |
) |
Equity-based compensation expense |
|
|
|
|
|
|
|
|
|
|
5,113 |
|
|
|
|
|
|
|
|
|
|
|
5,113 |
|
|
|
556 |
|
|
|
5,669 |
|
Restricted stock units |
|
|
1,756 |
|
|
|
18 |
|
|
|
(3,465 |
) |
|
|
|
|
|
|
|
|
|
|
(3,447 |
) |
|
|
|
|
|
|
(3,447 |
) |
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,999 |
|
|
|
|
|
|
|
12,999 |
|
|
|
8,515 |
|
|
|
21,514 |
|
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(28 |
) |
|
|
(28 |
) |
|
|
1 |
|
|
|
(27 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2013 |
|
|
226,368 |
|
|
$ |
2,264 |
|
|
$ |
540,636 |
|
|
$ |
(370,808 |
) |
|
$ |
77 |
|
|
$ |
172,169 |
|
|
$ |
21,114 |
|
|
$ |
193,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2013 |
|
|
227,512 |
|
|
$ |
2,275 |
|
|
$ |
541,254 |
|
|
$ |
(385,339 |
) |
|
$ |
(117 |
) |
|
$ |
158,073 |
|
|
$ |
9,883 |
|
|
$ |
167,956 |
|
Common stock issued for stock options exercised |
|
|
213 |
|
|
|
2 |
|
|
|
91 |
|
|
|
|
|
|
|
|
|
|
|
93 |
|
|
|
|
|
|
|
93 |
|
Dividends preferred stock |
|
|
|
|
|
|
|
|
|
|
(2,521 |
) |
|
|
|
|
|
|
|
|
|
|
(2,521 |
) |
|
|
|
|
|
|
(2,521 |
) |
Distributions to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,118 |
) |
|
|
(4,118 |
) |
Equity-based compensation expense |
|
|
|
|
|
|
|
|
|
|
5,438 |
|
|
|
|
|
|
|
|
|
|
|
5,438 |
|
|
|
466 |
|
|
|
5,904 |
|
Restricted stock units |
|
|
497 |
|
|
|
5 |
|
|
|
(206 |
) |
|
|
|
|
|
|
|
|
|
|
(201 |
) |
|
|
|
|
|
|
(201 |
) |
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36,809 |
) |
|
|
|
|
|
|
(36,809 |
) |
|
|
(3,505 |
) |
|
|
(40,314 |
) |
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,450 |
) |
|
|
(2,450 |
) |
|
|
(15 |
) |
|
|
(2,465 |
) |
Other |
|
|
|
|
|
|
|
|
|
|
(16 |
) |
|
|
|
|
|
|
|
|
|
|
(16 |
) |
|
|
(30 |
) |
|
|
(46 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2014 |
|
|
228,222 |
|
|
$ |
2,282 |
|
|
$ |
544,040 |
|
|
$ |
(422,148 |
) |
|
$ |
(2,567 |
) |
|
$ |
121,607 |
|
|
$ |
2,681 |
|
|
$ |
124,288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Accompanying Notes to Consolidated Financial Statements.
8
RENTECH, INC.
Consolidated Statements of Cash Flows
(Amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
|
(Unaudited) |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(40,314 |
) |
|
$ |
21,514 |
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
25,693 |
|
|
|
18,669 |
|
Utilization of spare parts |
|
|
5,162 |
|
|
|
2,377 |
|
Write-down of inventory |
|
|
4,557 |
|
|
|
7,334 |
|
Non-cash interest expense |
|
|
597 |
|
|
|
315 |
|
Net loss (gain) on sale of fixed assets |
|
|
245 |
|
|
|
(6,220 |
) |
Pasadena goodwill impairment |
|
|
27,202 |
|
|
|
30,029 |
|
Loss on debt extinguishment |
|
|
1,485 |
|
|
|
6,001 |
|
Equity-based compensation |
|
|
5,904 |
|
|
|
5,669 |
|
Other |
|
|
1,846 |
|
|
|
(195 |
) |
Changes in operating assets and liabilities, net of amounts acquired: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(10,632 |
) |
|
|
(15,279 |
) |
Other receivables |
|
|
(5,558 |
) |
|
|
6,054 |
|
Inventories |
|
|
(1,594 |
) |
|
|
(15,654 |
) |
Prepaid expenses and other current assets |
|
|
(3,719 |
) |
|
|
(75 |
) |
Other assets |
|
|
205 |
|
|
|
|
|
Accounts payable |
|
|
4,770 |
|
|
|
(7,710 |
) |
Deferred revenue |
|
|
28,865 |
|
|
|
4,745 |
|
Accrued interest |
|
|
5,360 |
|
|
|
7,753 |
|
Accrued liabilities, accrued payroll and other |
|
|
(4,548 |
) |
|
|
(38,440 |
) |
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
45,526 |
|
|
|
26,887 |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(134,794 |
) |
|
|
(60,450 |
) |
Payment for acquisitions, net of cash received |
|
|
(31,582 |
) |
|
|
(65,583 |
) |
Proceeds from disposal of fixed assets |
|
|
(135 |
) |
|
|
9,146 |
|
Other items |
|
|
610 |
|
|
|
(665 |
) |
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(165,901 |
) |
|
|
(117,552 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Proceeds from debt and credit facilities |
|
|
54,979 |
|
|
|
385,600 |
|
Proceeds from preferred stock, net of discount and issuance costs |
|
|
94,495 |
|
|
|
|
|
Payments of debt |
|
|
(8,202 |
) |
|
|
(7,425 |
) |
Payments to retire credit facility and term loan |
|
|
(50,000 |
) |
|
|
(205,015 |
) |
Payment of debt issuance costs |
|
|
(2,544 |
) |
|
|
(9,827 |
) |
Payment of offering costs |
|
|
(16 |
) |
|
|
(972 |
) |
Dividends to preferred stockholders |
|
|
(650 |
) |
|
|
|
|
Distributions to noncontrolling interests |
|
|
(4,118 |
) |
|
|
(33,075 |
) |
Other |
|
|
92 |
|
|
|
81 |
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
84,036 |
|
|
|
129,367 |
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate on cash |
|
|
30 |
|
|
|
(20 |
) |
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash |
|
|
(36,309 |
) |
|
|
38,682 |
|
Cash, beginning of period |
|
|
106,369 |
|
|
|
141,736 |
|
|
|
|
|
|
|
|
|
|
Cash, end of period |
|
$ |
70,060 |
|
|
$ |
180,418 |
|
|
|
|
|
|
|
|
|
|
See Accompanying Notes to Consolidated Financial Statements.
9
RENTECH, INC.
Consolidated Statements of Cash Flows
(Amounts in thousands)
(Continued from previous page)
The following effects of certain non-cash investing and financing activities were excluded
from the consolidated statements of cash flows for the nine months ended September 30, 2014 and 2013:
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
|
(Unaudited) |
|
Purchase of property, plant, equipment and construction in progress in accounts payable and accrued liabilities |
|
$ |
20,534 |
|
|
$ |
18,067 |
|
Restricted stock units and RNP units surrendered for withholding taxes payable |
|
|
201 |
|
|
|
3,447 |
|
Fair value of assets in acquisition |
|
|
55,642 |
|
|
|
174,032 |
|
Fair value of liabilities assumed in acquisition |
|
|
16,367 |
|
|
|
106,728 |
|
Contingent consideration |
|
|
3,840 |
|
|
|
1,850 |
|
Increase in QS Construction Facility obligation |
|
|
17,775 |
|
|
|
|
|
See Accompanying Notes to Consolidated Financial Statements.
10
RENTECH, INC.
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 Basis of Presentation
The accompanying unaudited consolidated financial statements of Rentech, Inc. (Rentech) and its consolidated
subsidiaries (collectively, the Company) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and in compliance with the instructions to Form 10-Q and Article
10 of Regulation S-X. Neither authority requires all of the information and footnotes required by GAAP for complete financial statements. Accordingly, the accompanying financial statements do not include all of the information and footnotes required
by GAAP for complete financial statements. In the opinion of management, the unaudited consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair statement of the
Companys financial position as of September 30, 2014, and the results of operations and cash flows for the periods presented. The accompanying consolidated financial statements include the accounts of Rentech, its wholly owned
subsidiaries and all subsidiaries in which Rentech directly or indirectly owns a controlling financial interest. All significant intercompany accounts and transactions have been eliminated in consolidation. Operating results for the three and nine
months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014 or any other reporting period. The information included in this Form 10-Q should be read in
conjunction with the consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2013 filed with the Securities and Exchange Commission (the SEC) on
March 17, 2014 (the Annual Report).
The Company, through its indirect majority-owned subsidiary, Rentech Nitrogen
Partners, L.P. (RNP), owns and operates two fertilizer facilities: the Companys East Dubuque Facility and the Companys Pasadena Facility, referred to collectively as the Fertilizer Facilities. Our East Dubuque
Facility is located in East Dubuque, Illinois and owned by Rentech Nitrogen, LLC (RNLLC). Our Pasadena Facility is located in Pasadena, Texas and owned by Rentech Nitrogen Pasadena, LLC (RNPLLC). The noncontrolling interests
reflected on the Companys consolidated balance sheets are affected by the net income of, and distributions from, RNP.
On
May 1, 2013, the Company acquired all of the capital stock of Fulghum Fibres, Inc. (Fulghum). Upon the closing of this transaction (the Fulghum Acquisition), Fulghum became a wholly owned subsidiary of the Company.
Fulghum provides wood yard operations services and high-quality wood chipping services, and produces and sells wood chips to the pulp, paper and packaging industry. Fulghum operates 32 wood chipping mills, of which 26 are located in the United
States, five are located in Chile and one is located in Uruguay. The noncontrolling interests reflected on the Companys consolidated balance sheets also represent the non-acquired ownership interests in the subsidiaries located in Chile and
Uruguay. Fulghum currently owns 88% of the equity interests in the subsidiaries located in Chile and 87% of equity interests in the subsidiary in Uruguay. For information on the final purchase price allocation for the Fulghum Acquisition, refer to
Note 4 Fulghum Acquisition.
The Company is developing two facilities in Eastern Canada to produce and sell wood
pellets for use as renewable fuel to generate electricity. In 2013, the Company acquired an idled oriented strand board processing mill in Wawa, Ontario, Canada. The Company is in the process of converting the mill to a wood pellet facility with the
intent to produce approximately 450,000 metric tons of wood pellets annually (the Wawa Project). Also, in 2013, the Company acquired a former particle board processing mill in Atikokan, Ontario, Canada. The Company is in the process of
converting the mill to a wood pellet facility with the intent to produce approximately 100,000 metric tons of wood pellets annually (the Atikokan Project). See Note 12 Commitments and Contingencies for major
contracts and commitments for this business segment.
In the first quarter of 2014, the Company decided to exit the energy technologies
business. This was a direct result of the high projected cost to further develop the technologies and deploy them at commercial scale. It was also due to lower projected returns on such investments. Many factors led to the lower projected returns.
One factor was the decrease in energy prices in the United States due to the proliferation of hydraulic fracturing and other factors. Another factor was the failure of, and reductions in, government incentives and regulations intended to support the
development of alternative energy, particularly within the United States. See Note 6 Discontinued Operations.
On May 1, 2014, the Company acquired all of the equity interests of New England Wood Pellet, LLC (NEWP), pursuant to a Unit
Purchase Agreement (the Purchase Agreement). Upon the closing of the transaction (the NEWP Acquisition), NEWP became a wholly owned subsidiary of the Company. NEWP is one of the largest producers of wood pellets for the
United States residential and commercial heating markets. NEWP operates three wood pellet processing facilities with a combined annual production capacity of 240,000 tons. The facilities are located in Jaffrey, New Hampshire; Deposit, New York; and
Schuyler, New York. For information on the NEWP Acquisition, refer to Note 3 NEWP Acquisition.
11
The preparation of consolidated financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.
Fair values of cash, receivables, deposits, other
current assets, accounts payable, accrued liabilities and other current liabilities were assumed to approximate carrying value since they are short term and can be settled on demand. These items meet the definition of Level 1 financial instruments
as defined in Note 7 Fair Value.
Accounting guidance establishes accounting and reporting requirements for
derivative instruments and hedging activities. This guidance requires recognition of all derivative instruments as assets or liabilities on the Companys consolidated balance sheets and measurement of those instruments at fair value. The
accounting treatment of changes in fair value is dependent upon whether or not a derivative instrument is designated as a hedge and if so, the type of hedge. The Company currently does not designate any of its derivatives as hedges for financial
accounting purposes. Gains and losses on derivative instruments not designated as hedges are currently included in earnings and reported under cash flows from operating activities. The Company does not have any master netting agreements or
collateral relating to these derivatives.
The Company recognizes the unrealized gains or losses related to the commodity-based derivative
instruments in its consolidated financial statements. Rentech uses commodity-based derivatives to minimize its exposure to the fluctuations in natural gas prices. For interest rate swaps, the Company reflected the instruments at fair value and any
change in value was recorded in other income (expense), net on the consolidated statements of operations.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in a business combination. The
Company tests goodwill for impairment annually, or more often if an event or circumstance indicates that an impairment may have occurred. The analysis of the potential impairment of goodwill is a two-step process. Step one of the impairment test
consists of comparing the fair value of the reporting unit with the aggregate carrying value, including goodwill. If the carrying value of a reporting unit exceeds the reporting units fair value, step two must be performed to determine the
amount, if any, of the goodwill impairment.
There are significant assumptions involved in performing a goodwill impairment test, which
include discount rates, terminal growth rates, future sales prices of end products, raw material costs, and sales volumes. The various valuation methods used (income approach, replacement cost and market approach) are weighted in determining fair
value. Changes to any of these assumptions could increase or decrease the fair value of the Fulghum and NEWP reporting units. See Note 10 Goodwill.
The Company has evaluated events that occurred between September 30, 2014 and the date of these financial statements to ensure that such
events are properly reflected in these statements.
Note 2 Recent Accounting Pronouncements
In July 2013, the Financial Accounting Standards Board (the FASB) issued guidance as to when an unrecognized tax
benefit should be classified as a reduction of a deferred tax asset or when it should be classified as a liability in the consolidated balance sheets. This guidance is effective for fiscal years, and interim periods within those years, beginning
after December 15, 2013, and thus became effective for the Companys interim period beginning on January 1, 2014. The adoption of this guidance did not have any impact on the Companys consolidated financial position, results of
operations or disclosures.
In April 2014, the FASB issued guidance that provides a narrower definition of discontinued operations than
under previous guidance. It requires that only disposals of components of an entity (or groups of components) that represent a strategic shift that has or will have a major effect on the reporting entitys operations are to be reported in the
financial statements as discontinued operations. It also provides guidance on the financial statement presentations and disclosures of discontinued operations. This guidance is effective prospectively for disposals (or classifications of
held-for-sale) of components of an entity that occur in annual or interim periods beginning after December 15, 2014. The adoption of this guidance is not expected to have a material impact on the Companys consolidated financial position,
results of operations or disclosures.
In May 2014, the FASB issued guidance that will significantly enhance comparability of revenue
recognition practices across entities, industries, jurisdictions, and capital markets. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early application is not permitted.
The Company is evaluating the provisions of this guidance and the potential impact, if any, on the Companys consolidated financial position, results of operations and disclosures.
In June 2014, the FASB issued guidance on accounting for share-based payments when the terms of an award provide that a performance target
could be achieved after the requisite service period. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. The Company is evaluating the provisions of this guidance and the
potential impact, if any, on the Companys consolidated financial position, results of operations and disclosures.
12
In August 2014, the FASB issued guidance on presentation of financial statements going
concern, which applies to all companies. It requires management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entitys ability to continue as a going concern within one
year after the date that the financial statements are issued. This guidance is effective for the annual periods ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is evaluating the provisions of
this guidance and the potential impact, if any, on its consolidated financial position, results of operations and disclosure.
Note 3 NEWP Acquisition
On May 1, 2014, the Company acquired all of the equity interests of NEWP. This acquisition is consistent with the
Companys strategy of expanding its wood fibre business. The preliminary purchase price consisted of $35.4 million of cash as well as potential earn-out consideration of up to $5.0 million to be paid in cash. The earn-out consideration would be
earned ratably if NEWPs 2014 EBITDA, as defined in the Purchase Agreement, is between $7.3 million and $8.0 million. The earn-out consideration would not increase if NEWPs 2014 EBITDA were to exceed $8.0 million. The amount of the
purchase price is subject to certain potential post-closing adjustments set forth in the Purchase Agreement.
This business combination
has been accounted for using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date.
The preliminary purchase price recognized in our financial statements consisted of the following (amounts in thousands):
|
|
|
|
|
Cash plus working capital adjustments of $0.1 million |
|
$ |
35,434 |
|
Estimate of expected earn-out consideration(1) |
|
|
3,840 |
|
|
|
|
|
|
Total preliminary purchase price |
|
$ |
39,274 |
|
|
|
|
|
|
(1) |
The amount of earn-out consideration reflected in the table above reflects the Companys estimate, as of May 1, 2014, of the amount of the earn-out consideration it will be required to pay pursuant to the
Purchase Agreement. The earn-out consideration will be measured at each reporting date; changes in its fair value will be recognized in the consolidated statements of operations. |
The Companys preliminary purchase price allocation is as follows (amounts in thousands):
|
|
|
|
|
Cash |
|
$ |
3,852 |
|
Accounts receivable |
|
|
2,927 |
|
Inventories |
|
|
2,239 |
|
Prepaid expenses and other current assets |
|
|
437 |
|
Property, plant and equipment |
|
|
30,625 |
|
Intangible assets (Trade name - $5,000, Customer relationships - $1,100, and Non-compete agreements - $200) |
|
|
6,300 |
|
Goodwill |
|
|
9,261 |
|
Accounts payable |
|
|
(1,641 |
) |
Accrued liabilities |
|
|
(442 |
) |
Customer deposits |
|
|
(882 |
) |
Loans |
|
|
(12,600 |
) |
Interest rate swaps |
|
|
(802 |
) |
|
|
|
|
|
Total preliminary purchase price |
|
$ |
39,274 |
|
|
|
|
|
|
Intangible assets consist primarily of customer relationships, trade names and non-competition agreements with
former owners. The estimated useful life of each of the trade names is 20 years, 13 years for customer relationships and three years for non-competition agreements.
The goodwill recorded reflects the value to Rentech of NEWPs market position, of entry into the residential and commercial heating
markets, and of the increases in Rentechs products offerings, customer bases and geographic markets. The goodwill recorded as part of this acquisition is amortizable for tax purposes.
The final purchase price and the allocation thereof will not be known until the valuation of intangible assets is completed.
13
The operations of NEWP are included in the consolidated statements of operations as of
May 1, 2014. During the three months ended September 30, 2014, the Company recorded revenue of $13.9 million and net income of $2.0 million related to NEWP. During the nine months ended September 30, 2014, from May 1, 2014 to
September 30, 2014, the Company recorded revenue of $19.6 million and net income of $2.8 million related to NEWP. Acquisition related costs for this acquisition were $0 during the three months ended September 30, 2014, but totaled $1.1
million for the nine months ended September 30, 2014, and have been included in the consolidated statements of operations within selling, general and administrative expenses. See Note 5 Pro Forma Information for unaudited pro
forma information relating to the NEWP Acquisition.
Note 4 Fulghum Acquisition
On May 1, 2013, the Company acquired all of the capital stock of Fulghum. The purchase price consisted of $64.2 million
of cash, including $3.3 million used to retire certain debt of Fulghum at closing.
This business combination has been accounted for using
the acquisition method of accounting. The Companys final purchase price allocation is as follows (amounts in thousands):
|
|
|
|
|
Cash |
|
$ |
10,137 |
|
Accounts receivable |
|
|
3,936 |
|
Inventories |
|
|
2,389 |
|
Prepaid expenses and other current assets |
|
|
952 |
|
Other receivables, net |
|
|
5,435 |
|
Property, plant and equipment |
|
|
94,382 |
|
Intangible assets (Trade name - $5,496 and Processing agreements - $29,765) |
|
|
35,261 |
|
Goodwill |
|
|
29,932 |
|
Other assets |
|
|
2,974 |
|
Accounts payable |
|
|
(6,547 |
) |
Accrued liabilities |
|
|
(5,823 |
) |
Customer deposits |
|
|
(1,059 |
) |
Asset retirement obligation |
|
|
(178 |
) |
Credit facility and loans |
|
|
(61,865 |
) |
Unfavorable processing agreements |
|
|
(6,496 |
) |
Deferred income taxes |
|
|
(35,262 |
) |
Noncontrolling interests |
|
|
(4,000 |
) |
|
|
|
|
|
Total purchase price |
|
$ |
64,168 |
|
|
|
|
|
|
Long-term deferred tax liabilities and other tax liabilities result from fair value adjustments to
identifiable tangible and intangible assets. These adjustments create book basis higher than the tax basis. The excess is multiplied by the statutory tax rate for the jurisdiction and period in which the deferred taxes are expected to be realized.
As part of purchase accounting for Fulghum, we recorded additional deferred tax liabilities of $15.8 million attributable to identifiable tangible and intangible assets.
The goodwill recorded reflects the value to Rentech of Fulghums market position, of entry into the wood chipping business, and of the
increases in Rentechs products offerings, customer bases and geographic markets. The goodwill recorded as part of this acquisition is not amortizable for tax purposes.
The operations of Fulghum are included in the consolidated statements of operations as of May 1, 2013. During the three months ended
September 30, 2013, the Company recorded revenue of $22.4 million and net income of $0.8 million related to Fulghum. During the nine months ended September 30, 2013, the Company recorded revenue of $38.5 million and net income of $0.9
million related to Fulghum. See Note 5 Pro Forma Information for unaudited pro forma information relating to the Fulghum Acquisition.
Note 5 Pro Forma Information
The unaudited pro forma information has been prepared as if the NEWP Acquisition and the Fulghum Acquisition had taken place
on January 1, 2013. The unaudited pro forma information is not necessarily indicative of the results that the Company would have achieved had the transactions actually taken place on January 1, 2013, and the unaudited pro forma information
does not purport to be indicative of future financial operating results.
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, 2014 |
|
|
|
As Reported |
|
|
Pro Forma Adjustments |
|
|
Pro Forma |
|
|
|
(in thousands) |
|
Revenues |
|
$ |
350,025 |
|
|
$ |
14,329 |
|
|
$ |
364,354 |
|
Net income (loss) |
|
$ |
(40,314 |
) |
|
$ |
2,367 |
|
|
$ |
(37,947 |
) |
Net income (loss) attributable to Rentech |
|
$ |
(36,809 |
) |
|
$ |
2,367 |
|
|
$ |
(34,442 |
) |
Basic and diluted net income (loss) from continuing operations per common share allocated to Rentech |
|
$ |
(0.15 |
) |
|
$ |
0.01 |
|
|
$ |
(0.14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, 2013 |
|
|
|
As Reported |
|
|
Pro Forma Adjustments |
|
|
Pro Forma |
|
|
|
(in thousands) |
|
Revenues |
|
$ |
295,282 |
|
|
$ |
66,076 |
|
|
$ |
361,358 |
|
Net income |
|
$ |
21,514 |
|
|
$ |
3,813 |
|
|
$ |
25,327 |
|
Net income attributable to Rentech |
|
$ |
12,999 |
|
|
$ |
3,678 |
|
|
$ |
16,677 |
|
Basic net income from continuing operations per common share allocated to Rentech |
|
$ |
0.08 |
|
|
$ |
0.01 |
|
|
$ |
0.09 |
|
Diluted net income from continuing operations per common share allocated to Rentech |
|
$ |
0.07 |
|
|
$ |
0.02 |
|
|
$ |
0.09 |
|
Note 6 Discontinued Operations
On March 5, 2014, the Company announced that it had entered into a definitive agreement with Sunshine Kaidi New Energy
Group Co., Ltd. (Kaidi) (the Kaidi Agreement) to sell its alternative energy technologies and certain pieces of equipment at its decommissioned Product Demonstration Unit (the PDU) located in Commerce City,
Colorado. The transaction would provide the Company at closing with an initial cash purchase price for its technology and equipment of $15.3 million, and the possibility of a success payment of up to $16.2 million. At December 31, 2013, the
Company had classified the PDU as property held for sale on its consolidated balance sheets. As a result of the Kaidi Agreement, the Company has reclassified its consolidated balance sheets and consolidated statements of operations for all periods
presented in this report to reflect the energy technologies segment as discontinued operations. In the consolidated statements of cash flows, the cash flows of discontinued operations are not separately classified or aggregated, and are reported in
the respective categories with those of continuing operations.
All discussions and amounts in the consolidated financial statements and
related notes, except for cash flows, for all periods presented relate to continuing operations only, unless otherwise noted.
The
following table summarizes the components of assets and liabilities of discontinued operations.
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
|
September 30, 2014 |
|
|
December 31, 2013 |
|
|
|
(in thousands) |
|
Prepaid expenses and other current assets |
|
$ |
59 |
|
|
$ |
19 |
|
Other receivables |
|
|
545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
$ |
604 |
|
|
$ |
19 |
|
|
|
|
|
|
|
|
|
|
Property held for sale |
|
|
4,626 |
|
|
|
4,647 |
|
Deposits and other assets |
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
Total other assets |
|
$ |
4,626 |
|
|
$ |
4,651 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
5,230 |
|
|
$ |
4,670 |
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
59 |
|
|
$ |
151 |
|
Accrued payroll and benefits |
|
|
302 |
|
|
|
356 |
|
Accrued liabilities |
|
|
976 |
|
|
|
1,496 |
|
Deferred revenue |
|
|
55 |
|
|
|
|
|
Other |
|
|
775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
2,167 |
|
|
$ |
2,003 |
|
|
|
|
|
|
|
|
|
|
15
The following table summarizes the results of discontinued operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
(in thousands) |
|
Revenues |
|
$ |
56 |
|
|
$ |
105 |
|
|
$ |
267 |
|
|
$ |
300 |
|
Operating income (loss) |
|
$ |
(1,242 |
) |
|
$ |
4,542 |
|
|
$ |
(4,333 |
) |
|
$ |
(4,994 |
) |
Income (loss) from discontinued operations, net of tax |
|
$ |
(1,242 |
) |
|
$ |
3,558 |
|
|
$ |
(4,280 |
) |
|
$ |
(4,831 |
) |
Note 7 Fair Value
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date in a principal or most advantageous market. Fair value is a market-based measurement that is determined based on inputs, which refer broadly to assumptions that market participants use
in pricing assets or liabilities. These inputs can be readily observable, market corroborated or generally unobservable inputs. The Company makes certain assumptions it believes that market participants would use in pricing assets or liabilities,
including assumptions about risk, and the risks inherent in the inputs to valuation techniques. Credit risk of the Company and its counterparties is incorporated in the valuation of assets and liabilities. The Company believes it uses valuation
techniques that maximize the use of observable market-based inputs and minimize the use of unobservable inputs.
Accounting guidance
provides for a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value in three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for
identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). In some cases, the inputs used to measure fair value might fall in different levels of the fair value hierarchy. All assets and liabilities are
required to be classified in their entirety based on the lowest level of input that is significant to the fair value measurement in its entirety. Assessing the significance of a particular input may require judgment in considering factors specific
to the asset or liability, and may affect the valuation of the asset or liability and its placement within the fair value hierarchy. The Company classifies fair value balances based on the fair value hierarchy, defined as follows:
|
|
|
Level 1 Consists of unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the reporting date. |
|
|
|
Level 2 Consists of inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market
data. |
|
|
|
Level 3 Consists of unobservable inputs for assets or liabilities whose fair value is estimated based on internally developed models or methodologies using inputs that are generally less readily observable
and supported by little, if any, market activity at the measurement date. Unobservable inputs are developed based on the best available information and subject to cost-benefit constraints. |
The following table presents the financial instruments that were accounted for at fair value by level as of September 30, 2014 (in
thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Forward gas contracts |
|
$ |
|
|
|
$ |
811 |
|
|
$ |
|
|
Interest rate swaps |
|
|
|
|
|
|
688 |
|
|
|
|
|
Earn-out consideration |
|
|
|
|
|
|
|
|
|
|
5,589 |
|
16
The following table presents the financial instrument that was accounted for at fair value by
level as of December 31, 2013 (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Earn-out consideration |
|
$ |
|
|
|
$ |
|
|
|
$ |
1,544 |
|
The following table presents the fair value and carrying value of the Companys borrowings by level as of
September 30, 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value |
|
|
Carrying Value |
|
|
|
(in thousands) |
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RNP Notes |
|
$ |
318,400 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
320,000 |
|
Fulghum debt |
|
|
|
|
|
|
47,205 |
|
|
|
|
|
|
|
46,665 |
|
GSO Credit Agreement |
|
|
|
|
|
|
49,092 |
|
|
|
|
|
|
|
49,092 |
|
NEWP debt |
|
|
|
|
|
|
11,744 |
|
|
|
|
|
|
|
11,722 |
|
QS Construction Facility |
|
|
|
|
|
|
20,393 |
|
|
|
|
|
|
|
20,393 |
|
The following table presents the fair value and carrying value of the Companys borrowings by level as of
December 31, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value |
|
|
Carrying Value |
|
|
|
(in thousands) |
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RNP Notes |
|
$ |
318,400 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
320,000 |
|
Fulghum debt |
|
|
|
|
|
|
45,970 |
|
|
|
|
|
|
|
47,452 |
|
RNHI Revolving Loan |
|
|
|
|
|
|
50,000 |
|
|
|
|
|
|
|
50,000 |
|
QS Construction Facility |
|
|
|
|
|
|
4,527 |
|
|
|
|
|
|
|
4,527 |
|
Forward Gas Contracts
Our East Dubuque Facility enters into forward gas purchase contracts to reduce its exposure to the fluctuations in natural gas prices. The
forward gas contracts are deemed to be Level 2 financial instruments because the measurement is based on observable market data. The fair value of such contracts had been determined based on market prices. Gain or loss associated with forward gas
contracts is recorded in cost of sales in the consolidated statements of operations. The amount of unrealized loss recorded was $0.3 million for the three months ended September 30, 2014 and $0.8 million for the nine months ended
September 30, 2014. These forward gas contracts are recorded in accrued liabilities on the consolidated balance sheets.
Interest Rate Swaps
NEWP entered into three interest rate swaps in notional amounts that cover the borrowings under its two industrial revenue bonds
and a real estate mortgage loan. Through the three interest rate swaps, NEWP is essentially fixing the variable interest rate to be paid on its borrowings.
Under the interest rate swaps, NEWP pays interest at a fixed rate of 5.29% on the outstanding balance of one of the industrial revenue bonds,
5.05% on the outstanding balance of the other industrial revenue bond and 7.53% on the outstanding balance of the real estate mortgage loan. NEWP receives interest at the variable interest rates specified in the various swap agreements.
The interest rate swaps are designated as derivatives for accounting purposes. The interest rate swaps are deemed to be Level 2 financial
instruments because the measurements are based on observable market data. The Company used a standard swap contract valuation method to value its interest rate derivatives, and the inputs it uses for present value discounting included forward
one-month LIBOR rates, risk-free interest rates and an estimate of credit risk. The fair value of the interest rate swaps at September 30, 2014 represents the unrealized loss of $0.7 million. Any adjustments to the fair value of the interest
rate swaps from the date of the NEWP Acquisition will be recorded in consolidated statements of operations. Interest rate swaps are recorded in other liabilities on the consolidated balance sheets.
17
Earn-out Consideration
At September 30, 2014, the earn-out consideration reflected in our financial statements includes $4.6 million relating to the NEWP
Acquisition. The earn-out consideration is deemed to be a Level 3 financial instrument because the measurement is based on unobservable inputs. The fair value of earn-out consideration was determined based on the Companys analysis of various
scenarios for the achievement of certain levels of EBITDA, as defined in the Purchase Agreement related to the NEWP Acquisition. The scenarios, which included a weighted probability factor, involved assumptions relating to product profitability and
production.
At September 30, 2014, the earn-out consideration includes $0.9 million of potential earn-out consideration relating to
the Atikokan Project. This consideration is deemed to be a Level 3 financial instrument because the measurement is based on unobservable inputs. The fair value of earn-out consideration was determined based on the Companys analysis of various
scenarios involving the achievement of certain levels of EBITDA, as defined in the asset purchase agreement related to the Atikokan Project, over a ten-year period. The scenarios, which included a weighted probability factor, involved assumptions
relating to product profitability and production levels. The earn-out consideration will be measured at each reporting date with changes in its fair value recognized in the consolidated statements of operations. Assuming the minimum required EBITDA
level is achieved, an increase or decrease of $1.0 million in EBITDA would result in an increase or decrease in earn-out consideration of $0.1 million. The Company provided a loan to the sellers in the Atikokan Project of $0.9 million, which will be
repayable from any earn-out consideration. The collectibility of the loan is tied to the amount of earn-out consideration the sellers receive from the Company. Therefore, at September 30, 2014, the loan receivable was reduced to $0.7 million
with $0.2 million being recorded to other expense.
The earn-out consideration also includes potential additional consideration the
Company may be required to pay under the purchase agreement relating to the acquisition of Agrifos, LLC (Agrifos). Agrifos, through a subsidiary, previously owned the Pasadena Facility.
A reconciliation of the change in the carrying value of the earn-out consideration is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2014 |
|
|
|
Atikokan |
|
|
NEWP |
|
|
Total |
|
|
|
(in thousands) |
|
Balance at December 31, 2013 |
|
$ |
1,544 |
|
|
$ |
|
|
|
$ |
1,544 |
|
Add: Earn-out consideration |
|
|
|
|
|
|
3,840 |
|
|
|
3,840 |
|
Add: Unrealized (gain) loss |
|
|
(532 |
) |
|
|
800 |
|
|
|
268 |
|
Add: Unrealized gain on foreign currency translation |
|
|
(63 |
) |
|
|
|
|
|
|
(63 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2014 |
|
$ |
949 |
|
|
$ |
4,640 |
|
|
$ |
5,589 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2013 |
|
|
|
Agrifos |
|
|
Atikokan |
|
|
Total |
|
|
|
(in thousands) |
|
Balance at December 31, 2012 |
|
$ |
4,920 |
|
|
$ |
|
|
|
$ |
4,920 |
|
Add: Earn-out consideration |
|
|
|
|
|
|
1,850 |
|
|
|
1,850 |
|
Add: Unrealized gain |
|
|
(4,920 |
) |
|
|
(277 |
) |
|
|
(5,197 |
) |
Add: Unrealized gain on foreign currency translation |
|
|
|
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2013 |
|
$ |
|
|
|
$ |
1,571 |
|
|
$ |
1,571 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RNP Notes
The $320.0 million of 6.5% second lien senior secured notes due 2021 (the RNP Notes) are deemed to be Level 1 financial instruments
because there was an active market for such debt. The fair value of such debt was determined based on market prices.
Fulghum Debt
Fulghum debt is deemed to be Level 2 financial instruments because the measurement is based on observable market data. The Companys
valuation reflects discounted expected future cash flows, which incorporate yield curves for instruments with similar characteristics, such as credit ratings, weighted average lives and maturity dates.
GSO Credit Agreement
The GSO
Credit Agreement, as defined in Note 11 Debt, is deemed to be a Level 2 financial instrument because the measurement is based on observable market data. The Companys valuation reflects discounted expected future cash flows,
which incorporate yield curves for instruments with similar characteristics, such as credit ratings, weighted average lives and maturity dates.
18
NEWP Debt
NEWP debt is deemed to be Level 2 financial instruments because the measurement is based on observable market data. The Companys
valuation reflects discounted expected future cash flows, which incorporate yield curves for instruments with similar characteristics, such as credit ratings, weighted average lives and maturity dates.
The levels within the fair value hierarchy at which the Companys financial instruments have been evaluated have not changed for any of
the Companys financial instruments during the three and nine months ended September 30, 2014 and 2013.
QS Construction Facility
The Companys financing obligation with respect to the construction of assets by Quebec Stevedoring Company Limited (the
QS Construction Facility) is deemed to be a Level 2 financial instrument because the measurement is based on observable market data. To determine the fair value, the Company reviewed the current market interest rates of similar borrowing
arrangements. It was concluded that the carrying value of the QS Construction Facility approximates the fair value of the obligation at September 30, 2014 because the Companys credit worthiness has not changed since the QS Construction
Facility was established.
Note 8 Inventories
Inventories consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
|
September 30, 2014 |
|
|
December 31, 2013 |
|
|
|
(in thousands) |
|
Finished goods |
|
$ |
27,151 |
|
|
$ |
27,638 |
|
Raw materials |
|
|
8,170 |
|
|
|
7,448 |
|
Other |
|
|
172 |
|
|
|
290 |
|
|
|
|
|
|
|
|
|
|
Total inventory |
|
$ |
35,493 |
|
|
$ |
35,376 |
|
|
|
|
|
|
|
|
|
|
During the three months ended September 30, 2014, RNP wrote down the value of the Pasadena
Facilitys ammonium sulfate inventory by $1.8 million to market value. During the nine months ended September 30, 2014, RNP wrote down the value of the Pasadena Facilitys ammonium sulfate inventory by $4.6 million to market value.
During the three months ended September 30, 2013, RNP wrote down the value of the Pasadena Facilitys ammonium sulfate inventory by $5.0 million to market value. During the nine months ended September 30, 2013, RNP wrote down the
value of the Pasadena Facilitys ammonium sulfate, sulfur and sulfuric acid inventory by $7.3 million to market value. The various write-downs were reflected in cost of goods sold for the applicable periods.
Note 9 Property, Plant and Equipment
Property, plant and equipment consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
|
September 30, 2014 |
|
|
December 31, 2013 |
|
|
|
(in thousands) |
|
Land and land improvements |
|
$ |
27,482 |
|
|
$ |
26,149 |
|
Buildings and building improvements |
|
|
44,609 |
|
|
|
33,096 |
|
Machinery and equipment |
|
|
366,188 |
|
|
|
334,645 |
|
Furniture, fixtures and office equipment |
|
|
1,583 |
|
|
|
1,123 |
|
Computer equipment and computer software |
|
|
9,678 |
|
|
|
7,977 |
|
Vehicles |
|
|
5,612 |
|
|
|
4,624 |
|
Leasehold improvements |
|
|
2,370 |
|
|
|
2,348 |
|
Other |
|
|
1,453 |
|
|
|
210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
458,975 |
|
|
|
410,172 |
|
Less: Accumulated depreciation |
|
|
(99,931 |
) |
|
|
(75,518 |
) |
|
|
|
|
|
|
|
|
|
Total property, plant and equipment, net |
|
$ |
359,044 |
|
|
$ |
334,654 |
|
|
|
|
|
|
|
|
|
|
In connection with the restructuring of the Pasadena Facility, the Company tested the long-lived assets for
impairment. As of September 30, 2014, the undiscounted future cash flows from the Pasadena Facility exceeded its net book value by approximately 10%. If there are further declines in commodity prices or increases in future costs at the Pasadena
Facility, the Company may need to record a material impairment charge to reduce the carrying cost of the plant to fair value.
19
Construction in progress consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
|
September 30, 2014 |
|
|
December 31, 2013 |
|
|
|
(in thousands) |
|
East Dubuque Facility |
|
$ |
10,195 |
|
|
$ |
2,195 |
|
Pasadena Facility |
|
|
55,438 |
|
|
|
31,335 |
|
Fulghum Fibres |
|
|
11,445 |
|
|
|
273 |
|
Atikokan Project |
|
|
31,307 |
|
|
|
8,458 |
|
Wawa Project |
|
|
52,412 |
|
|
|
11,809 |
|
Construction under QS Construction Facility |
|
|
22,988 |
|
|
|
5,198 |
|
Other |
|
|
606 |
|
|
|
868 |
|
|
|
|
|
|
|
|
|
|
Total construction in progress |
|
$ |
184,391 |
|
|
$ |
60,136 |
|
|
|
|
|
|
|
|
|
|
The construction in progress balance includes $5.3 million of capitalized interest costs at September 30,
2014, and $0.8 million at December 31, 2013.
Note 10 Goodwill
A reconciliation of the change in the carrying value of goodwill is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pasadena |
|
|
Fulghum |
|
|
NEWP |
|
|
Total |
|
|
|
(in thousands) |
|
Balance at December 31, 2013 |
|
$ |
27,202 |
|
|
$ |
29,932 |
|
|
$ |
|
|
|
$ |
57,134 |
|
Add: Acquisition |
|
|
|
|
|
|
|
|
|
|
9,261 |
|
|
|
9,261 |
|
Less: Impairment |
|
|
(27,202 |
) |
|
|
|
|
|
|
|
|
|
|
(27,202 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2014 |
|
$ |
|
|
|
$ |
29,932 |
|
|
$ |
9,261 |
|
|
$ |
39,193 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company tests goodwill assets for impairment annually, or more often if an event or circumstances indicate
an impairment may have occurred. Between annual goodwill impairment tests, the Company qualitatively assesses whether or not it is necessary to perform the two-step goodwill impairment test for each reporting unit. If based on the results of
its qualitative assessment, it is more likely than not that the fair value of the reporting unit exceeds its carrying value, then the two-step goodwill impairment test is not required.
During the three months ended June 30, 2014, the Company wrote down the value of the Pasadena Facilitys ammonium sulfate inventory
by $2.8 million to market value. Management considered this inventory impairment, negative gross margin and negative EBITDA in the second quarter of 2014, as well as revised cash flow projections developed during the second quarter of 2014, taken
together as indicators that a potential impairment of the goodwill related to the Pasadena Facility may have occurred. Factors that affect cash flow include, but are not limited to: product prices; product sales volumes; feedstock prices, labor,
maintenance, and other operating costs; required capital expenditures; and plant productivity.
20
Cash flow projections decreased primarily because of a decline in forecasted product margins. The
reduction of prices in the forecast was the result of an evaluation of many factors, including recent deterioration in reported margins. A global decline in nitrogen prices, along with higher exports of ammonium sulfate from China, put downward
pressure on ammonium sulfate prices. The additional supplies from China originate from new plants that produce ammonium sulfate as a by-product of manufacturing caprolactam. Current prices for ammonia and sulfur, key inputs for ammonium sulfate, had
increased significantly during the second quarter. Global ammonia supplies were tight, supported by production issues in Egypt, Algeria, Trinidad and Qatar, as well as political issues in Libya and Ukraine.
The analysis of the potential impairment of goodwill is a two-step process. Step one of the impairment test consists of comparing the fair
value of the reporting unit with the aggregate carrying value, including goodwill. If the carrying value of a reporting unit exceeds the reporting units fair value, step two must be performed to determine the amount, if any, of the goodwill
impairment. Step one of the goodwill impairment test involves a high degree of judgment and consists of a comparison of the fair value of a reporting unit with its book value. The fair value of the Pasadena reporting unit was based upon various
assumptions and was based primarily on the discounted cash flows that the business could be expected to generate in the future (the Income Approach). The Income Approach valuation method required the Company to make projections of
revenue and costs over a multi-year period. Additionally, the Company made an estimate of a weighted average cost of capital that a market participant would use as a discount rate. The Company also considered other valuation methods including the
replacement cost and market approach. Based upon its analysis of the fair value of the Pasadena reporting unit, the Company believed it was probable that the Pasadena reporting unit had a carrying value in excess of its fair value at June 30,
2014. The inputs utilized in the analyses were classified as Level 3 inputs within the fair value hierarchy as defined in accounting guidance.
Step two of the goodwill impairment test consists of comparing the implied fair value of the reporting units goodwill against the
carrying value of the goodwill. The estimated difference between the fair value of the entire reporting unit as determined in step one and the net fair value of all identifiable assets and liabilities represents the implied fair value of goodwill.
The valuation of assets and liabilities in step two is performed only for purposes of assessing goodwill for impairment and the Company did not adjust the net book value of the assets and liabilities on its consolidated balance sheets other than
goodwill as a result of this process. Completion of step two of the goodwill impairment test indicated no remaining residual value of goodwill and resulted in the Company recording an impairment charge of $27.2 million. The goodwill impairment was
primarily the result of a decrease in the implied fair value of the Pasadena reporting unit. A deterioration in projected cash flows and an increase in the rate used to discount such cash flows contributed to this decrease. In addition, the implied
residual value of goodwill decreased because of an increase in the amount of invested capital at the Pasadena Facility, which primarily was the result of capital expenditures for the power generation project and expenditures to replace the sulfuric
acid converter.
Note 11 Debt
RNP Credit Agreement
On April 12, 2013, RNP and Rentech Nitrogen Finance Corporation, a wholly owned subsidiary of RNP (Finance Corporation),
entered into a credit agreement (the RNP Credit Agreement). The RNP Credit Agreement consisted of a $35.0 million senior secured revolving credit facility. As of December 31, 2013, there were no outstanding borrowings under the
RNP Credit Agreement. The RNP Credit Agreement was terminated on July 22, 2014 and replaced with the GE Credit Agreement (defined below). The termination of the RNP Credit Agreement resulted in a loss on debt extinguishment of $0.6 million for
the three and nine months ended September 30, 2014.
RNHI Revolving Loan
On September 23, 2013, Rentech Nitrogen Holdings, Inc. (RNHI), an indirect wholly owned subsidiary of Rentech, obtained a
$100.0 million revolving loan facility (RNHI Revolving Loan) by entering into a credit agreement (the RNHI Credit Agreement) among RNHI, Credit Suisse AG, Cayman Islands Branch, as administrative agent and each other lender
from time to time party thereto. On September 24, 2013, the Company borrowed $50.0 million under the facility.
On April 9,
2014, the Company paid off the outstanding balance under the facility and terminated the RNHI Credit Agreement. The payoff of the RNHI Revolving Loan resulted in a loss on debt extinguishment of $0.9 million for the nine months ended
September 30, 2014.
21
BMO Credit Agreement
On November 25, 2013, the Company entered into a credit agreement with Bank of Montreal (the BMO Credit Agreement). The BMO
Credit Agreement initially consisted of a $3.0 million revolving credit facility, which can be utilized as letters of credit.
On
April 8, 2014, the BMO Credit Agreement was amended to increase the amount available under the revolving credit facility from $3.0 million to $10.0 million.
Borrowings bear a letter of credit fee of 3.75% per annum on the daily average face amount of the letters of credits outstanding during
the preceding calendar quarter. The Company also is required to pay a commitment fee on the average daily undrawn portion of the credit facility at a rate equal to 0.75% per annum. This commitment fee is payable quarterly in arrears on the last
day of each calendar quarter and on the termination date. The BMO Credit Agreement will terminate on November 25, 2015. At September 30, 2014, letters of credit totaling $9.7 million had been issued. At December 31, 2013, letters of
credit totaling $1.1 million had been issued.
GSO Credit Agreement
On April 9, 2014, RNHI (the Borrower), entered into a Term Loan Credit Agreement (the GSO Credit Agreement) among
the Borrower, certain funds managed by or affiliated with GSO Capital Partners LP (GSO Capital), as lenders, Credit Suisse AG, Cayman Islands Branch, as administrative agent and each lender from time to time party thereto. The Company
expects that borrowings from the facility will be used to fund the acquisition and development of its wood fibre business, which consists of its wood chipping and wood pellet businesses, and for general corporate purposes.
The facility consists of a $50.0 million term loan facility, with a five-year maturity. The obligations of the Borrower under the facility are
unconditionally guaranteed by the Company and are secured by 2,762,431 common units of RNP owned by the Borrower. The term loan facility was subject to a 2.00% original issue discount.
Borrowings under the facility bear interest at a rate equal to LIBOR (with a floor of 1.00%) plus 7.00% per annum. In the event the
Company prepays the facility prior to its first anniversary from funds other than those generated through certain sales of assets and under certain conditions, it will be required to pay a prepayment fee equal to 1.00% of the amount of the
prepayment.
The GSO Credit Agreement provides for a $75.0 million incremental term loan facility (the Accordion Facility).
The Accordion Facility allows the Company, at any time before April 9, 2019, to borrow additional funds under the terms of the GSO Credit Agreement from any of the lenders, if such lenders agree to lend any additional amounts.
GE Credit Agreement
On
July 22, 2014, RNP replaced the RNP Credit Agreement by entering into a new credit agreement (the GE Credit Agreement) by and among RNP and Finance Corporation as borrowers (the GE Borrowers), certain subsidiaries of
RNP, as guarantors, General Electric Capital Corporation, for itself as agent for the lenders party thereto, the other financial institutions party thereto, and GE Capital Markets, Inc., as sole lead arranger and bookrunner.
The GE Credit Agreement consists of a $50.0 million senior secured revolving credit facility (the GE Credit Facility) with a $10.0
million letter of credit sublimit. RNP expects that the GE Credit Agreement will be used to fund growth projects, working capital needs, letters of credit and for other general partnership purposes.
Borrowings under the GE Credit Agreement bear interest at a rate equal to an applicable margin plus, at the GE Borrowers option, either
(a) in the case of base rate borrowings, a rate equal to the highest of (1) the prime rate, (2) the federal funds rate plus 0.5% or (3) LIBOR for an interest period of one month plus 1.00% or (b) in the case of LIBOR
borrowings, the offered rate per annum for deposits of dollars for the applicable interest period on the day that is two business days prior to the first day of such interest period. The applicable margin for borrowings under the GE Credit Agreement
is 2.25% with respect to base rate borrowings and 3.25% with respect to LIBOR borrowings.
The GE Borrowers are required to pay a fee to
the lenders under the GE Credit Agreement on the average undrawn available portion of the GE Credit Facility at a rate equal to 0.50% per annum. If letters of credit are issued, the GE Borrowers will also pay a fee to the lenders under the GE
Credit Agreement at a rate equal to the product of the average daily undrawn face amount of all letters of credit issued, guaranteed or supported by risk participation agreements multiplied by a per annum rate equal to the applicable margin with
respect to LIBOR borrowings. The GE Borrowers are also required to pay customary letter of credit fees on issued letters of credit. In the event the GE Borrowers reduce or terminate the commitments under the GE Credit Facility on or prior to the
18-month anniversary of the closing date, the GE Borrowers shall pay a prepayment fee equal to 1.0% of the amount of the commitment reduction.
The GE Credit Agreement terminates on July 22, 2019. The GE Borrowers may voluntarily prepay their utilization and/or permanently cancel
all or part of the available commitments under the GE Credit Agreement in minimum increments of $5.0 million (subject to the prepayment fee described above). Amounts repaid may be reborrowed. Borrowings under the GE Credit Agreement will be
subject to mandatory prepayment under certain circumstances, with customary exceptions, from the proceeds of permitted dispositions of assets and from certain insurance and condemnation proceeds.
22
RNLLC, RNPLLC and Rentech Nitrogen Pasadena Holdings, LLC guarantee the GE Credit Agreement. The
obligations under the GE Credit Agreement and the subsidiary guarantees thereof are secured by the same collateral securing the RNP Notes, which includes substantially all the assets of RNP and its subsidiaries. After the occurrence and during the
continuation of an event of default, proceeds of any collection, sale, foreclosure or other realization upon any collateral will be applied to repay obligations under the GE Credit Agreement and the subsidiary guarantees thereof to the extent
secured by the collateral before any such proceeds are applied to repay obligations under the RNP Notes.
The GE Credit Agreement contains
a number of customary representations and warranties, affirmative and negative covenants and events of default. The covenants include, among other things, compliance with environmental laws, limitations on the incurrence of indebtedness and liens,
the making of investments, the sale of assets and the making of restricted payments. In the event that, on a pro forma basis, less than 30% of the commitment amount is available for borrowing on any distribution date, then in order to make a
distribution on such date (a) RNP must maintain a first lien leverage ratio no greater than 1.0 to 1 on a pro forma basis and (b) the sum of (i) the undrawn amount under the GE Credit Facility and (ii) cash maintained by RNP and
its subsidiaries in collateral deposit accounts must be at least $5 million (after giving effect to the distribution). In addition, before RNP can make distributions, there cannot be any default under the GE Credit Agreement. The GE Credit Agreement
also contains a requirement that RNP maintain a first lien leverage ratio not to exceed 1.0 to 1 at the end of each fiscal quarter where less than 30% of the commitment is available for drawing under the GE Credit Facility or a default has occurred
and is continuing.
As of September 30, 2014, the Company had no outstanding borrowings under the GE Credit Agreement.
NEWP Debt
NEWPs debt
consists of two industrial revenue bonds and a real estate mortgage loan with each loan collateralized by specific property and equipment. The debt has maturity dates ranging from 2016 through 2021. As of September 30, 2014, NEWPs debt,
factoring in the interest rate swaps, had a weighted average interest rate of 5.0%.
NEWP debt at September 30, 2014 consisted of the
following (in thousands):
|
|
|
|
|
Outstanding debt |
|
$ |
11,334 |
|
Plus: Unamortized premium |
|
|
388 |
|
|
|
|
|
|
Total outstanding debt |
|
$ |
11,722 |
|
Less: Current portion |
|
|
1,872 |
|
|
|
|
|
|
Long-term credit facilities and term loans |
|
$ |
9,850 |
|
|
|
|
|
|
Future maturities of the NEWP debt are as follows (in thousands):
|
|
|
|
|
For the Three Months Ending December 31, 2014 and Thereafter the Years
Ending December 31, |
|
|
|
2014 |
|
$ |
457 |
|
2015 |
|
|
1,888 |
|
2016 |
|
|
2,424 |
|
2017 |
|
|
1,954 |
|
2018 |
|
|
2,032 |
|
2019 |
|
|
1,498 |
|
Thereafter |
|
|
1,469 |
|
|
|
|
|
|
|
|
$ |
11,722 |
|
|
|
|
|
|
23
Total Debt
As of September 30, 2014, the Company was in compliance with all covenants under the RNP Notes, Fulghum debt, GSO Credit Agreement, NEWP
debt, RNP Credit Agreement, GE Credit Agreement and BMO Credit Agreement. Total debt consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
|
September 30, 2014 |
|
|
December 31, 2013 |
|
|
|
(in thousands) |
|
RNP Notes |
|
$ |
320,000 |
|
|
$ |
320,000 |
|
Fulghum debt(1) |
|
|
46,665 |
|
|
|
47,452 |
|
GSO Credit Agreement |
|
|
49,092 |
|
|
|
|
|
NEWP debt |
|
|
11,722 |
|
|
|
|
|
QS Construction Facility |
|
|
20,393 |
|
|
|
4,527 |
|
RNHI Revolving Loan |
|
|
|
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
Total debt |
|
$ |
447,872 |
|
|
$ |
421,979 |
|
Less: Current portion |
|
|
15,911 |
|
|
|
9,916 |
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
$ |
431,961 |
|
|
$ |
412,063 |
|
|
|
|
|
|
|
|
|
|
(1) |
Includes unamortized premium of $1.7 million as of September 30, 2014 and $2.2 million as of December 31, 2013. |
Note 12 Commitments and Contingencies
Natural Gas Forward Purchase Contracts
The Companys policy and practice are to enter into fixed-price forward purchase contracts for natural gas in conjunction with contracted
nitrogen fertilizer product sales in order to substantially fix gross margin on those product sales contracts. The Company may also enter into a limited amount of additional fixed-price forward purchase contracts for natural gas in order to reduce
monthly and seasonal gas price volatility. The Company occasionally enters into index-price contracts for the purchase of natural gas. The Company has entered into multiple natural gas forward purchase contracts for various delivery dates through
April 30, 2015. Commitments for natural gas purchases consist of the following:
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
|
September 30, 2014 |
|
|
December 31, 2013 |
|
|
|
(in thousands, except weighted average rate) |
|
MMBtus under fixed-price contracts |
|
|
4,945 |
|
|
|
2,071 |
|
MMBtus under index-price contracts |
|
|
757 |
|
|
|
81 |
|
|
|
|
|
|
|
|
|
|
Total MMBtus under contracts |
|
|
5,702 |
|
|
|
2,152 |
|
|
|
|
|
|
|
|
|
|
Commitments to purchase natural gas |
|
$ |
26,185 |
|
|
$ |
8,571 |
|
Weighted average rate per MMBtu based on the fixed rates and the indexes applicable to each contract |
|
$ |
4.59 |
|
|
$ |
3.98 |
|
During October 2014, the Company entered into additional fixed-quantity forward purchase contracts at fixed
and indexed prices for various delivery dates through October 31, 2014. The total MMBtus associated with these additional forward purchase contracts are 0.1 million and the total amount of the purchase commitments is $0.5 million,
resulting in a weighted average rate per MMBtu of $3.97 in these new commitments. The Company is required to make additional prepayments under these forward purchase contracts in the event that market prices fall below the purchase prices in the
contracts.
Contractual Obligations
Pasadena
On
April 17, 2013, RNPLLC entered into an engineering, procurement and construction contract (the EPC Contract) with Abeinsa Abener Teyma General Partnership (Abeinsa). The EPC Contract provides for Abeinsa to be the
contractor on the power generation project at the Pasadena Facility. The value of the contract is $25.0 million and the project is expected to be completed by late 2014. As of September 30, 2014, RNP has paid $22.7 million and accrued an
additional $1.2 million under the EPC contract.
Wood Pellets
On April 30, 2013, Rentechs subsidiary that owns the Wawa Project entered into a ten-year take-or-pay contract (the
Drax Contract) with Drax Power Limited (Drax). Under the Drax Contract, such subsidiary is required to sell to Drax the first 400,000 metric tonnes of wood pellets per year produced from the Wawa Project, with the first
delivery under the contract scheduled for the end of year 2014. In the event that it does not deliver wood pellets as required under the Drax Contract, the Rentech subsidiary that owns the Wawa Project is required to pay Drax an amount equal to the
positive difference, if any, between the contract price for the wood pellets and the price of any wood pellets Drax purchases in replacement. Rentech has guaranteed this obligation in an amount
24
not to exceed $20.0 million. The Company is in discussions with Drax to amend the Drax Contract to postpone the delivery of wood pellets to Drax required in 2014 and 2015. The Company does not
expect any penalties or payments associated with shortfalls or postponement to be material.
Rentechs subsidiary that owns the
Atikokan Project entered into a ten-year take-or-pay contract (the OPG Contract) with Ontario Power Generation (OPG) under which such subsidiary is required to deliver 45,000 metric tonnes of wood pellets annually starting in
2014, prorated in the first year based on the successful commissioning date of OPGs Atikokan power station. OPG has the option to increase required delivery of wood pellets from the Atikokan Project to up to 90,000 metric tonnes annually. The
Company expects that wood pellets produced at the Atikokan Project not purchased by OPG may be sold to Drax or marketed elsewhere. The Company also expects that its initial deliveries to OPG will consist of wood pellets purchased from third party
suppliers and wood pellets produced at the Atikokan Project during its early commissioning phase. The Atikokan Project made its first delivery of wood pellets to OPG in May 2014 using wood pellets supplied by a third-party wood pellet producer.
The contracts with Drax and OPG are each designed to minimize exposure to variable costs over the ten-year term. This exposure is minimized,
in the case of the Drax agreement, by passing through to Drax increased costs resulting from certain changes in input prices, including general inflation, the price of fuel, and prices of wood supplied to the mills, and in the case of OPG by tying a
portion of the price of wood pellets to a Canadian inflation index. However, such indexation and pass throughs may not fully offset increases or decreases in the prices of inputs and the cost of transporting and handling wood pellets.
A Rentech subsidiary has contracted with Canadian National Railway Company (the Canadian National Contract) for all rail
transportation of wood pellets from the Atikokan Project and the Wawa Project to the Port of Quebec. The Atikokan Project is located 1,300 track miles and the Wawa Project is located 1,100 track miles from the Port of Quebec.
Under the Canadian National Contract, such subsidiary has committed to transport a minimum of 1,500 rail carloads during the months of January
2014 through December 2014, and 3,600 rail carloads annually thereafter for the duration of the long-term contract. Delivery shortfalls would result in a $1,000 per rail car penalty. Under the Drax Contract, a Rentech subsidiary is responsible for
the transportation of the wood pellets to the Port of Quebec. Drax is obligated to take delivery of the wood pellets on a FOB shipping point basis. Under the OPG Contract, OPG is obligated to take delivery of the Atikokan Projects product on a
FOB basis at the Companys Atikokan facility.
Litigation
The Company is party to litigation from time to time in the normal course of business. The Company accrues liabilities related to litigation
only when it concludes that it is probable that it will incur costs related to such litigation, and can reasonably estimate the amount of such costs. In cases where the Company determines that it is not probable, but reasonably possible that it has
a material obligation, it discloses such obligations and the possible loss or range of loss, if such estimate can be made. The outcome of the Companys current litigation matters are not estimable or probable. The Company maintains insurance to
cover certain actions and believes that resolution of its current litigation matters will not have a material adverse effect on the Companys financial statements.
Regulation
The Companys
business is subject to extensive and frequently changing federal, state and local, environmental, health and safety regulations in the jurisdictions in which it has operations governing a wide range of matters, including the emission of air
pollutants, the release of hazardous substances into the environment, the treatment and discharge of waste water and the storage, handling, use and transportation of the Companys fertilizer products, raw materials, and other substances that
are part of our operations. These laws include the Clean Air Act (the CAA), the federal Water Pollution Control Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act,
the Toxic Substances Control Act, and various other federal, state and local laws and regulations. The laws and regulations to which the Company is subject are complex, change frequently and have tended to become more stringent over time. The
ultimate impact on the Companys business of complying with existing laws and regulations is not always clearly known or determinable due in part to the fact that the Companys operations may change over time and certain implementing
regulations for laws, such as the CAA, have not yet been finalized, are under governmental or judicial review or are being revised. These laws and regulations could result in increased capital, operating and compliance costs.
Gain and Loss Contingencies
As
indicated in Note 6 Discontinued Operations, the Company is in the process of selling its alternative energy business, which is based in Colorado. During the third quarter, the Company paid a 2013 county property tax
assessment in Colorado in the amount of $1.3 million, which was accrued in 2013. However, the Company did not agree with the assessed property value and appealed to the Board of Assessment Appeals State of Colorado (Board of
Assessment). In August 2014, the Company won its appeal and the Company is owed a refund of $1.2 million. Adams County has appealed to the Colorado Court of Appeals. The Company has not recorded the receivable related to the overpayment as it
represents a gain contingency.
25
For 2014, the Company has accrued the Colorado property taxes based on the property value
approved by the Board of Assessment. However, the county has assessed the Company a higher property value than it did in 2013, which would require a property tax payment by the Company of $1.7 million. This amount is $1.6 million in excess of what
the Company accrued. Because it won its appeal for 2013, the Company believes that the assessment of $1.7 million is not probable and has not reflected an accrual for the excess amount of $1.6 million.
In 2013, the Company sold its property located in Natchez, Mississippi (Natchez) for $8.6 million. The Company continues to own an
approximately 18 mile-long natural gas pipeline that runs from Tensas Parish, Louisiana to the site in Natchez, Mississippi. The Company is working with the Federal Energy Regulatory Commission to abandon the natural gas pipeline. The Company
expects the abandonment costs to be $0.7 million, which has been recorded in discontinued operations during the three months ended September 30, 2014. As part of the Natchez property sale, the Company is entitled to reimbursement from the buyer
of Natchez for its costs relating to the pipeline abandonment. The Company has not recorded the receivable related to the reimbursement of abandonment costs as it represents a gain contingency.
A fire at our mill in Maine during the first quarter disrupted operations, causing lower processing volumes and higher than typical processing
costs at the facility during the six months ended June 30, 2014. The mills customer has indicated it incurred unspecified losses related to the production disruptions caused by the fire. The Company is unable at this time, to estimate any
potential liability from this contingency.
Note 13 Preferred Stock
On April 9, 2014, the Company entered into a Subscription Agreement (the Subscription Agreement) with funds
managed by or affiliated with GSO Capital (the Series E Purchasers), pursuant to which the Company sold 100,000 shares of its Series E Convertible Preferred Stock (the 2014 Preferred Stock or Series E Preferred
Stock) to the Series E Purchasers. The shares have an aggregate original issue price of $100.0 million and were purchased for an aggregate purchase price of $98.0 million (reflecting an issuance discount of 2%). Dividends on the 2014 Preferred
Stock accrue and are cumulative, whether or not declared by the Board of Directors of the Company, at the rate of 4.5% per annum on the sum of the original issue price plus all unpaid accrued and accumulated dividends thereon. The 2014
Preferred Stock is convertible into up to 45,045,045 shares of Rentechs common stock (Common Stock) at a conversion price of $2.22 per share, subject to adjustment. In certain circumstances, the 2014 Preferred Stock is redeemable
by the Series E Purchasers for a price equal to the original issue price plus all accrued and unpaid dividends (including dividends accruing from the last dividend payment date).
On April 9, 2014, a newly formed wholly owned subsidiary of the Company, DSHC, LLC (DSHC), and each of the Series E
Purchasers entered into a Put Option Agreement (the Put Option Agreements). Under the Put Option Agreements, each Series E Purchaser has the right to cause DSHC to purchase any of the 2014 Preferred Stock for the original issue price
plus all accrued and unpaid dividends (including dividends accruing from the last dividend payment date) upon certain put trigger events, including the failure of the Company to redeem the 2014 Preferred Stock when required. All obligations of DSHC
under the Put Option Agreements are secured by 5,524,862 common units of RNP owned by DSHC. DSHC is a special purpose entity referred to as a bankruptcy-remote entity whose operations are limited. DSHC is a separate and distinct legal entity from
Rentech and its assets are not available to Rentechs creditors.
The 2014 Preferred Stock is accounted for as mezzanine equity in
the consolidated balance sheets. However, dividends are recorded in the consolidated statements of stockholders equity and consist of the 4.5% dividend plus the amortization of issuance costs and accretion of discount. Dividends are paid on
the first business day of June and December of each year.
Mezzanine equity at September 30, 2014 consisted of the following (in
thousands):
|
|
|
|
|
Original issue price of 2014 Preferred Stock |
|
$ |
100,000 |
|
Less: Issuance costs |
|
|
(3,267 |
) |
Less: Unamortized discount |
|
|
(1,867 |
) |
|
|
|
|
|
Total mezzanine equity |
|
$ |
94,866 |
|
|
|
|
|
|
Note 14 Income Taxes
For the three months ended September 30, 2014, the Company recorded an income tax expense of $0.4 million. For the nine
months ended September 30, 2014, the Company recorded income tax expense of $1.3 million. The Companys effective income tax rate (income tax (benefit) expense as a percentage of loss before income taxes) was 4% for the three and nine
months ended September 30, 2014. The differences between the United States federal statutory rate of 35% and the effective rate were primarily attributable to basis difference in foreign subsidiary, impact of foreign earnings and impact of
state taxes. The Company has considered results of operations and concluded that it is more likely than not that the deferred tax assets will not be realized.
Note 15 Segment Information
The Company operates in five business segments, as described below. The operations of Fulghum are included in the
Companys historical results of operations only from the closing date of the Fulghum Acquisition, which was May 1, 2013. The operations of NEWP are included only from the closing date of the NEWP Acquisition, which was May 1, 2014.
Results of the
26
energy technologies segment are included in discontinued operations for the three and nine months ended September 30, 2014 and 2013. The Companys five segments are:
|
|
|
East Dubuque The operations of the East Dubuque Facility, which produces primarily ammonia and urea ammonium nitrate solution (UAN). |
|
|
|
Pasadena The operations of the Pasadena Facility, which produces primarily ammonium sulfate. |
|
|
|
Fulghum Fibres The operations of Fulghum, which provides wood yard operations services and wood fibre processing services, sells wood chips to the pulp, paper and packaging industry, and owns and manages
forestland and sells bark to industrial consumers in South America. |
|
|
|
Wood Pellets: Industrial This segment includes wood pellet projects owned by the Company, currently the Atikokan Project and Wawa Project, equity in Rentechs joint venture with Graanul Invest AS, a European
producer of wood pellets (the Rentech/Graanul JV) and other wood pellet development activities. The wood pellet development activities represent the Companys personnel costs for employees dedicated to the wood pellet business
infrastructure and administration costs and other third party costs. |
|
|
|
Wood Pellets: NEWP The operations of NEWP, which produces wood pellets for the residential and commercial heating markets. |
The Companys reportable operating segments have been determined in accordance with the Companys internal management structure,
which is organized based on operating activities. The Company evaluates performance based upon several factors, of which the primary financial measure is segment operating income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
(in thousands) |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East Dubuque |
|
$ |
46,021 |
|
|
$ |
50,572 |
|
|
$ |
148,455 |
|
|
$ |
146,838 |
|
Pasadena |
|
|
38,142 |
|
|
|
42,707 |
|
|
|
105,597 |
|
|
|
109,961 |
|
Fulghum Fibres |
|
|
25,273 |
|
|
|
22,378 |
|
|
|
73,660 |
|
|
|
38,483 |
|
Wood Pellets: Industrial |
|
|
2,011 |
|
|
|
|
|
|
|
2,678 |
|
|
|
|
|
Wood Pellets: NEWP |
|
|
13,857 |
|
|
|
|
|
|
|
19,635 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
125,304 |
|
|
$ |
115,657 |
|
|
$ |
350,025 |
|
|
$ |
295,282 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East Dubuque |
|
$ |
14,159 |
|
|
$ |
24,059 |
|
|
$ |
56,991 |
|
|
$ |
77,742 |
|
Pasadena |
|
|
(10,186 |
) |
|
|
(40,522 |
) |
|
|
(44,464 |
) |
|
|
(38,528 |
) |
Fulghum Fibres |
|
|
1,083 |
|
|
|
1,812 |
|
|
|
4,039 |
|
|
|
2,657 |
|
Wood Pellets: Industrial |
|
|
(2,453 |
) |
|
|
(2,350 |
) |
|
|
(7,459 |
) |
|
|
(4,233 |
) |
Wood Pellets: NEWP |
|
|
1,995 |
|
|
|
|
|
|
|
2,789 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment operating income (loss) |
|
$ |
4,598 |
|
|
$ |
(17,001 |
) |
|
$ |
11,896 |
|
|
$ |
37,638 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East Dubuque |
|
$ |
14,139 |
|
|
$ |
24,069 |
|
|
$ |
56,926 |
|
|
$ |
77,383 |
|
Pasadena |
|
|
(10,213 |
) |
|
|
(40,765 |
) |
|
|
(44,545 |
) |
|
|
(38,915 |
) |
Fulghum Fibres |
|
|
(56 |
) |
|
|
813 |
|
|
|
609 |
|
|
|
941 |
|
Wood Pellets: Industrial |
|
|
(1,997 |
) |
|
|
(2,058 |
) |
|
|
(6,804 |
) |
|
|
(3,941 |
) |
Wood Pellets: NEWP |
|
|
2,014 |
|
|
|
|
|
|
|
2,756 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment net income (loss) |
|
$ |
3,887 |
|
|
$ |
(17,941 |
) |
|
$ |
8,942 |
|
|
$ |
35,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of segment net income (loss) to consolidated net income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment net income (loss) |
|
$ |
3,887 |
|
|
$ |
(17,941 |
) |
|
$ |
8,942 |
|
|
$ |
35,468 |
|
RNP partnership and unallocated expenses recorded as selling, general and administrative expenses |
|
|
(1,792 |
) |
|
|
(1,872 |
) |
|
|
(6,277 |
) |
|
|
(6,488 |
) |
RNP partnership and unallocated expenses recorded as other expense |
|
|
(635 |
) |
|
|
309 |
|
|
|
(635 |
) |
|
|
(1,081 |
) |
RNP unallocated interest expense and loss on interest rate swaps |
|
|
(4,604 |
) |
|
|
(3,996 |
) |
|
|
(14,373 |
) |
|
|
(9,726 |
) |
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
(in thousands) |
|
RNP income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
302 |
|
Corporate and unallocated expenses recorded as selling, general and administrative expenses |
|
|
(6,963 |
) |
|
|
(5,733 |
) |
|
|
(21,544 |
) |
|
|
(18,755 |
) |
Corporate and unallocated depreciation and amortization expense |
|
|
(154 |
) |
|
|
(152 |
) |
|
|
(419 |
) |
|
|
(475 |
) |
Corporate and unallocated income (expense) recorded as other income (expense) |
|
|
(96 |
) |
|
|
7 |
|
|
|
(1,279 |
) |
|
|
(19 |
) |
Corporate and unallocated interest expense |
|
|
(54 |
) |
|
|
(47 |
) |
|
|
(378 |
) |
|
|
(47 |
) |
Corporate income tax benefit (expense) |
|
|
(34 |
) |
|
|
2,289 |
|
|
|
(71 |
) |
|
|
27,166 |
|
Income (loss) from discontinued operations, net of tax |
|
|
(1,242 |
) |
|
|
3,558 |
|
|
|
(4,280 |
) |
|
|
(4,831 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income (loss) |
|
$ |
(11,687 |
) |
|
$ |
(23,578 |
) |
|
$ |
(40,314 |
) |
|
$ |
21,514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
|
September 30, 2014 |
|
|
December 31, 2013 |
|
|
|
(in thousands) |
|
Total assets |
|
|
|
|
|
|
|
|
East Dubuque |
|
$ |
186,069 |
|
|
$ |
175,430 |
|
Pasadena |
|
|
189,904 |
|
|
|
188,836 |
|
Fulghum Fibres |
|
|
190,187 |
|
|
|
188,397 |
|
Wood Pellets: Industrial |
|
|
133,813 |
|
|
|
42,089 |
|
Wood Pellets: NEWP |
|
|
57,797 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment assets |
|
$ |
757,770 |
|
|
$ |
594,752 |
|
|
|
|
|
|
|
|
|
|
Reconciliation of segment total assets to consolidated total assets: |
|
|
|
|
|
|
|
|
Segment total assets |
|
$ |
757,770 |
|
|
$ |
594,752 |
|
RNP partnership and other |
|
|
48,513 |
|
|
|
42,078 |
|
Corporate and other |
|
|
14,236 |
|
|
|
62,090 |
|
Discontinued operations |
|
|
5,230 |
|
|
|
4,670 |
|
|
|
|
|
|
|
|
|
|
Consolidated total assets |
|
$ |
825,749 |
|
|
$ |
703,590 |
|
|
|
|
|
|
|
|
|
|
The Companys revenues by geographic area, based on where the customer takes title to the product, were
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
(in thousands) |
|
United States |
|
$ |
113,833 |
|
|
$ |
108,743 |
|
|
$ |
318,313 |
|
|
$ |
282,113 |
|
Canada |
|
|
2,011 |
|
|
|
|
|
|
|
2,678 |
|
|
|
|
|
Other |
|
|
9,460 |
|
|
|
6,914 |
|
|
|
29,034 |
|
|
|
13,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
125,304 |
|
|
$ |
115,657 |
|
|
$ |
350,025 |
|
|
$ |
295,282 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
The following table sets forth assets by geographic area:
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
|
September 30, 2014 |
|
|
December 31, 2013 |
|
|
|
(in thousands) |
|
United States |
|
$ |
660,716 |
|
|
$ |
633,886 |
|
Canada |
|
|
133,749 |
|
|
|
42,089 |
|
Other |
|
|
31,284 |
|
|
|
27,615 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
825,749 |
|
|
$ |
703,590 |
|
|
|
|
|
|
|
|
|
|
Note 16 Net Income (Loss) Per Common Share Allocated to Rentech
Basic income (loss) per common share allocated to Rentech is calculated by dividing net income (loss) allocated to Rentech
by the weighted average number of common shares outstanding for the period. Diluted net income (loss) per common share allocated to Rentech is calculated by dividing net income (loss) allocated to Rentech by the weighted average number of common
shares outstanding plus the dilutive effect, calculated using the treasury stock method for the unvested restricted stock units, outstanding stock options and warrants and using the if converted method for the preferred stock
if their inclusion would not have been anti-dilutive.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations attributable to Rentech common shareholders |
|
$ |
(9,134 |
) |
|
$ |
(18,151 |
) |
|
$ |
(32,529 |
) |
|
$ |
17,830 |
|
Less: Dividends and accretion on 2014 Preferred Stock |
|
|
1,321 |
|
|
|
|
|
|
|
2,521 |
|
|
|
|
|
Less: Income from continuing operations allocated to participating securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations allocated to common shareholders |
|
$ |
(10,455 |
) |
|
$ |
(18,151 |
) |
|
$ |
(35,050 |
) |
|
$ |
17,337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations attributable to Rentech common shareholders |
|
$ |
(1,242 |
) |
|
$ |
3,558 |
|
|
$ |
(4,280 |
) |
|
$ |
(4,831 |
) |
Less: Income from discontinued operations allocated to participating securities |
|
|
|
|
|
|
94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations allocated to common shareholders |
|
$ |
(1,242 |
) |
|
$ |
3,464 |
|
|
$ |
(4,280 |
) |
|
$ |
(4,831 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Rentech common shareholders |
|
$ |
(10,376 |
) |
|
$ |
(14,593 |
) |
|
$ |
(36,809 |
) |
|
$ |
12,999 |
|
Less: Dividends and accretion on 2014 Preferred Stock |
|
|
1,321 |
|
|
|
|
|
|
|
2,521 |
|
|
|
|
|
Less: Income allocated to participating securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
348 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) allocated to common shareholders |
|
$ |
(11,697 |
) |
|
$ |
(14,593 |
) |
|
$ |
(39,330 |
) |
|
$ |
12,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
228,072 |
|
|
|
226,305 |
|
|
|
228,651 |
|
|
|
225,840 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
945 |
|
Common stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,752 |
|
Restricted stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares outstanding |
|
|
228,072 |
|
|
|
226,305 |
|
|
|
228,651 |
|
|
|
232,171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
(0.05 |
) |
|
$ |
(0.08 |
) |
|
$ |
(0.15 |
) |
|
$ |
0.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
Discontinued operations |
|
$ |
(0.01 |
) |
|
$ |
0.02 |
|
|
$ |
(0.02 |
) |
|
$ |
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per common share |
|
$ |
(0.05 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.17 |
) |
|
$ |
0.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
(0.05 |
) |
|
$ |
(0.08 |
) |
|
$ |
(0.15 |
) |
|
$ |
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations |
|
$ |
(0.01 |
) |
|
$ |
0.02 |
|
|
$ |
(0.02 |
) |
|
$ |
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per common share |
|
$ |
(0.05 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.17 |
) |
|
$ |
0.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended September 30, 2014, 60.7 million shares and, for the same period last
year, 13.8 million shares, of Common Stock issuable pursuant to stock options, stock warrants, restricted stock units and preferred stock were excluded from the calculation of diluted income (loss) per share because their inclusion would have
been anti-dilutive. For the nine months ended September 30, 2014, 60.7 million shares and, for the same period last year, 3.5 million shares, of Common Stock issuable pursuant to stock options, stock warrants, restricted stock units
and preferred stock were excluded from the calculation of diluted income (loss) per share because their inclusion would have been anti-dilutive.
Note 17 Subsequent Events
Agrifos Settlement
On October 28, 2014, RNP reached an agreement to settle all existing and future indemnity claims it may have under the Membership Interest
Purchase Agreement dated October 31, 2012, as amended, pursuant to which RNP acquired the Pasadena Facility from Agrifos Holdings Inc. The parties agreed to distribute $5.0 million of cash and 59,186 RNP common units to RNP held in escrow
accounts established at the closing of the acquisition from a portion of the initial purchase price to satisfy potential indemnity claims. The remaining approximately $0.9 million of cash and 264,090 RNP common units held in escrow will be
released to Agrifos Holdings Inc.
Discontinued Operations
On October 31, 2014, the Company closed the previously announced sale of its alternative energy technologies under the Kaidi Agreement.
See Note 6 Discontinued Operations for further information. The Company received a cash payment of $14.4 million from Kaidi, which is in addition to $0.5 million in cash payments previously received. Kaidi will pay an additional
$0.4 million to the Company to purchase various equipment currently located at the Companys PDU, resulting in $15.3 million of total proceeds to the Company from these transactions, which does not include the possibility of a further success
payment of up to $16.2 million. A gain of approximately $15.0 million will be recognized in the fourth quarter.
Distributions
On November 4, 2014, the board of directors of RNPs general partner declared a cash distribution to RNPs common unitholders
for the period June 1, 2014 through and including September 30, 2014 of $0.05 per unit, which will result in total distributions in the amount of $1.9 million, including payments to phantom unitholders. The Company will receive a
distribution of $1.2 million, representing its share of distributions based on its ownership of common units. The cash distribution will be paid on November 28, 2014 to unitholders of record at the close of business on November 21, 2014.
30
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition, results of operations and cash
flows in conjunction with our consolidated financial statements and the related notes presented in this report and in our Annual Report.
FORWARD-LOOKING STATEMENTS
Certain
information included in this report contains, and other reports or materials filed or to be filed by us with the SEC (as well as information included in oral statements or other written statements made or to be made by us or our management) contain
or will contain, forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, Section 27A of the Securities Act of 1933, as amended, and pursuant to the
Private Securities Litigation Reform Act of 1995. The forward-looking statements may relate to financial results and plans for future business activities, and are thus prospective. The forward-looking statements are subject to risks, uncertainties
and other factors that could cause actual results to differ materially from future results expressed or implied by the forward-looking statements. They can be identified by the use of terminology such as may, will,
expect, believe, intend, plan, estimate, anticipate, should and other comparable terms or the negative of them. You are cautioned that, while forward-looking
statements reflect managements good faith belief and best judgment based upon current information, they are not guarantees of future performance and are subject to known and unknown risks and uncertainties. Factors that could affect our
results include the risk factors detailed in Part IItem 1A. Risk Factors in the Annual Report, in Part IIItem 1A. Risk Factors in the Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2014 filed with the SEC on August 18, 2014, in Part IIItem 1A. Risk Factors of this report and from time to time in our periodic reports and registration statements filed with the SEC. Such risks and
uncertainties include, among other things:
|
|
|
our ability to realize the benefits of the Fulghum Acquisition, the NEWP Acquisition and the Atikokan and Wawa Projects and to successfully execute our new wood fibre processing business strategy; |
|
|
|
our ability to successfully implement our restructuring plan and improve results of operations at our Pasadena Facility; |
|
|
|
the volatile nature of our nitrogen fertilizer business and its ability to remain profitable; |
|
|
|
our ability to recover the costs of our raw materials through sales of products made from such raw materials, considering the volatility in the prices of our products and raw materials; |
|
|
|
a decline in demand for crops such as corn, soybeans, potatoes, cotton, canola, alfalfa and wheat or their prices or the use of nitrogen fertilizer for agricultural purposes; |
|
|
|
adverse weather conditions, which can affect demand for, and delivery and production of, our nitrogen fertilizer and wood pellet products; |
|
|
|
any interruption in the supply, or rise in the price levels, of natural gas, ammonia, sulfur, and other essential raw materials; |
|
|
|
our dependence on our customers and distributors to purchase and transport goods purchased from us; |
|
|
|
our ability to identify and consummate acquisitions in related businesses, our ability to complete capital projects on schedule and on budget and the risk that any such acquisitions or capital projects do not perform as
anticipated; |
|
|
|
planned or unplanned shutdowns, or any operational difficulties, at our facilities; |
|
|
|
intense competition from other nitrogen fertilizer or wood fibre processors; |
|
|
|
risks associated with projects located in rural areas outside of the United States; |
|
|
|
risks arising from changes in existing laws or regulations, or their interpretation, or the imposition of new restrictions relating to emissions of greenhouse gases, carbon dioxide or energy production;
|
|
|
|
any loss of Agrium Inc., or Agrium, as a distributor or customer of our nitrogen fertilizer products, loss of storage rights at Agriums terminal in Niota, Illinois or decline in sales of products through or to
Agrium; |
|
|
|
any loss of Interoceanic Corporation, or IOC, as a distributor of our ammonium sulfate fertilizer products or decline in sales volume or sales price of products sold through IOC; |
|
|
|
potential operating hazards from accidents, fire, severe weather, floods or other natural disasters; |
|
|
|
our ability and the associated cost to comply with laws and regulations regarding employee and process safety; |
|
|
|
risks associated with the expansion and other projects at our facilities, including any disruption to operations at our facilities during construction and our ability to sell the incremental products resulting from such
projects; and |
|
|
|
risks associated with doing business outside of the United States, including foreign currency exposure and economic conditions in other countries impacting our demand for our products and our customers ability to
pay us. |
31
You should not place undue reliance on our forward-looking statements. Although forward-looking
statements reflect our good faith beliefs, forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially from anticipated future
results, performance or achievements expressed or implied by such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed
circumstances or otherwise, unless required by law.
As used in this report, references to Rentech refer to Rentech, Inc., a
Colorado corporation, and the terms we, our, us and the Company mean Rentech and its consolidated subsidiaries, unless the context indicates otherwise.
OVERVIEW OF OUR BUSINESS
We are a
leading provider of wood fibre processing services and high-quality wood chips. We are also developing into a leading provider of wood pellets. Fulghum operates 32 wood chipping mills. It provides wood yard operations services and wood fibre
processing services, and sells wood chips to the pulp, paper and packaging industry. Fulghum also owns and manages forestland and sells bark to industrial consumers in South America. Our wood pellet business includes facilities under construction at
the Atikokan and Wawa Projects, which are expected to have a combined annual production capacity of 550,000 metric tons. Wood pellets from the Atikokan and Wawa facilities will be used for commercial power generation in Canada and the United
Kingdom. NEWP is one of the largest producers of wood pellets for the United States residential and commercial heating markets, operating three wood pellet facilities with a combined annual production capacity of 240,000 tons. The facilities are
located in Jaffrey, New Hampshire, Deposit, New York and Schuyler, New York.
We own the general partner interest and 59.8% of the common
units representing limited partner interests in RNP, a publicly traded master limited partnership. Through its wholly owned subsidiary, RNLLC, RNP manufactures natural-gas-based nitrogen fertilizer products at its East Dubuque Facility. It also
sells its products to customers located in the Mid Corn Belt region of the United States. Through its wholly owned subsidiary, RNPLLC, RNP manufactures ammonium sulfate fertilizer, sulfuric acid and ammonium thiosulfate fertilizer at its Pasadena
Facility. The Pasadena Facility purchases ammonia as a feedstock at contractual prices based on the monthly Tampa Index market, while the East Dubuque Facility sells ammonia at prevailing prices in the Mid Corn Belt region. Ammonia prices are
typically significantly higher in the Mid Corn Belt than in Tampa.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Managements Discussion and Analysis of Financial Condition and Results of Operations are based upon our consolidated financial
statements, which have been prepared in accordance with GAAP. Preparing our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related
disclosure of contingent assets and liabilities. The most significant estimates and judgments relate to revenue recognition, inventories, valuation of long-lived assets and intangible assets, recoverability of goodwill, and the acquisition method of
accounting. Actual amounts could differ significantly from these estimates. No material change has occurred to our critical accounting policies and estimates from the information provided in the Annual Report.
FACTORS AFFECTING COMPARABILITY OF FINANCIAL INFORMATION
Our historical results of operations for the periods presented may not be comparable with our results of operations for the subsequent periods
for the reasons discussed below.
Acquired Operations
Fulghums operations are included in our historical operating results from the closing date of the Fulghum Acquisition, which was
May 1, 2013. Fulghum provides wood yard operations services and wood fibre processing services. It sells wood chips to the pulp, paper and packaging industry. It also owns and manages forestland and sells bark to industrial consumers in South
America. NEWPs operations are included in our historical operating results from the closing date of the NEWP Acquisition, which was May 1, 2014. NEWP is one of the largest producers of wood pellets for the United States residential and
commercial heating markets. For periods after the closing of each acquisition: (i) our general and administrative expenses as well as sales-related expenses have increased due to the addition of the acquired operations; (ii) our
depreciation and amortization expenses have increased due to the increase in tangible and definite lived intangible assets, which were recorded at fair value on the date of the acquisition; and (iii) our interest expense has increased due to
the debt assumed with the acquisitions that continues to be outstanding. Due to these factors, our operating results for the periods prior to and after the closing dates of the Fulghum Acquisition and NEWP Acquisition may not be comparable.
Expansion Projects and Other Significant Capital Projects
We have commenced additional projects and are evaluating other potential projects to expand our production capabilities and product offerings.
We expect to incur significant costs and expenses developing and building such projects. Our depreciation expense has increased and we expect our depreciation expense to further increase as we place additional assets into service. Consequently, our
operating results may not be comparable for periods before, during and after the construction of any expansion project or other significant capital project.
32
Restructuring of Pasadenas Operations
Starting in the third quarter of 2014, we have begun to restructure operations at our Pasadena Facility. We expect to complete the
restructuring by the end of 2014. As part of the restructuring, our Pasadena Facility will reduce annual production of ammonium sulfate by approximately 25 percent, to 500,000 tons. We intend to sell approximately 70 percent of the 500,000 tons in
the domestic market and the remaining tons in New Zealand and Australia, which are the international markets with the highest net prices for ammonium sulfate. Our sales plan eliminates typically low-margin sales to Brazil, other than modest amounts
expected during peak seasons when higher margins may be achievable. The restructuring plan provides the flexibility to increase ammonium sulfate production above the 500,000 ton rate for limited periods. The restructuring plan also includes a
reduction of the number of contractors and employees, which is expected to reduce the full-time equivalent workforce by approximately 20 percent. Severance and other one-time employee-related expenses of $0.1 million were recorded for the nine
months ended September 30, 2014 in connection with these reductions in the workforce.
We expect the restructuring to reduce
operating and selling, general and administrative expenses. and annual maintenance capital expenditures. This should enable our Pasadena Facilitys operations, including the results from our power generation project, to generate positive EBITDA
in 2015, based on our current outlook for input costs and prices of ammonium sulfate. We cannot assure you that we will obtain these anticipated benefits from the restructuring. If we do not obtain the anticipated benefits, this would have a
material adverse effect on us.
Acquisitions
One of our business strategies is to pursue acquisitions in related businesses. We are pursuing acquisitions related to our wood fibre
processing business. We may also pursue acquisitions of assets and businesses that generate qualifying income for RNP. If completed, acquisitions could have significant effects on our business, financial condition and results of operations. We
cannot assure you that we will enter into any definitive acquisition agreements on satisfactory terms, or at all. Costs associated with potential acquisitions are expensed as incurred, and could be significant.
Seasonality
Our East Dubuque Facility
Our and our customers businesses are seasonal, based on planting, growing and harvesting cycles. Consequently, operating results for the
interim periods do not necessarily indicate expected results for the year. The following table shows product tonnage (in thousands) shipped by our East Dubuque Facility by quarter for the nine months ended September 30, 2014 and for each
comparable quarter in the years ended December 31, 2013, 2012 and 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
2011 |
|
Quarter ended March 31 |
|
|
92 |
|
|
|
110 |
|
|
|
92 |
|
|
|
89 |
|
Quarter ended June 30 |
|
|
193 |
|
|
|
144 |
|
|
|
160 |
|
|
|
213 |
|
Quarter ended September 30 |
|
|
146 |
|
|
|
176 |
|
|
|
180 |
|
|
|
125 |
|
Quarter ended December 31 |
|
|
n/a |
|
|
|
70 |
|
|
|
133 |
|
|
|
145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Tons Shipped |
|
|
431 |
|
|
|
500 |
|
|
|
565 |
|
|
|
572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We typically ship the highest volume of tons from our East Dubuque Facility during the spring planting season,
which occurs during the quarter ending June 30 of each year. The next highest volume of tons shipped is typically after the fall harvest during the quarter ending December 31 of each year. However, as reflected in the table above, the
seasonal patterns may change substantially from year to year due to various circumstances, including timing of or changes in weather. These seasonal increases and decreases in demand can also cause fluctuations in sales prices. In winter seasons
with warmer weather, early planting may shift significant ammonia sales into the quarter ending March 31. Wet or cold weather during the normal spring application season can delay deliveries that would normally occur in the spring. Weather
conditions can also affect the mix of demand for our products at various times in the year. Certain weather and soil conditions favor the application of ammonia, while other conditions favor the application of UAN solution.
As a result of the seasonality of shipments and sales, we experience significant fluctuations in our East Dubuque Facilitys revenues,
income, net working capital levels and cash available for distribution from quarter to quarter. Weather conditions can significantly impact quarterly results by affecting the timing and amount of product deliveries. Our receivables and deferred
revenues are seasonal and relatively unpredictable. Significant amounts of our East Dubuque Facilitys products are typically sold for later
33
shipment under product prepayment contracts. The timing of these sales and the amount of down payment as a percentage of the total contract price may vary with market conditions. The variation in
the timing of these sales and contract terms may add to the seasonality of our cash flows and working capital.
Our Pasadena Facility
Significant seasonality and weather factors have affected demand for and timing of deliveries for our Pasadena Facilitys domestic
agricultural products. Domestic prices for ammonium sulfate and ammonium thiosulfate normally reach their highest point in the spring, decrease in the summer, and increase again in the fall. Sales prices of these products are adjusted seasonally in
order to facilitate distribution of the products throughout the year. Sales to Brazil and New Zealand may partially offset this domestic seasonal pattern because they are in the southern hemisphere. The ammonium sulfate plant at our Pasadena
Facility operates throughout the year to the extent that there is available storage capacity for this product. We have 60,000 tons of storage capacity for ammonium sulfate at the facility. We also have an arrangement with IOC that permits us to
store approximately 60,000 tons of ammonium sulfate at IOC-controlled terminals, which are located near our end customers. Storage capacity is managed by distributing the product through IOC to customers in both domestic and offshore markets
throughout the year. If storage capacity were to be insufficient, we would be forced to cease or reduce production of the product until capacity became available. Our Pasadena Facilitys fertilizer products are typically sold on the spot market
for immediate delivery and, to a much lesser extent, under product prepayment contracts for future delivery at fixed prices. The following table shows product tonnage (in thousands) shipped by our Pasadena Facility by quarter for the nine months
ended September 30, 2014 and for each quarter in the year ended December 31, 2013.
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
Quarter ended March 31 |
|
|
155 |
|
|
|
110 |
|
Quarter ended June 30 |
|
|
215 |
|
|
|
178 |
|
Quarter ended September 30 |
|
|
205 |
|
|
|
202 |
|
Quarter ended December 31 |
|
|
n/a |
|
|
|
140 |
|
|
|
|
|
|
|
|
|
|
Total Tons Shipped |
|
|
575 |
|
|
|
630 |
|
|
|
|
|
|
|
|
|
|
Our Wood Fibre Processing Business
Wood Chipping Business Fulghum Fibres
Our wood chipping mills typically operate continuously throughout the year; however, there may be quarter-to-quarter fluctuations in processing
revenue at individual mills. These fluctuations are usually due to variations in customer-controlled deliveries of logs, production levels at customers mills and/or weather-related events. Our customer contracts stipulate minimum volume
requirements and shortfall fees. This mitigates the variation in revenues of our United States mills. Under our processing agreements, the customer generally has the opportunity to make up for any shortfall below minimum volume requirements with
additional volumes in subsequent months before it is required to pay a shortfall fee. If heavy rain is expected to prevent deliveries or make deliveries of logs to the mills difficult, we frequently coordinate delivery schedules with our customers.
Building sufficient inventory of logs at our mill sites enable the mills to process more continuously during the rainy season. Based on our customers expected relatively continuous wood chip requirements, the terms of our processing agreements
and our focus on maintaining proper log inventories, we do not expect to experience material seasonality in Fulghums United States or Uruguayan operations. However, two of our mills in Chile, typically cease wood chip processing operations for
one to two months during their winter season due to the customers inability to harvest and deliver logs to our facilities. Since a significant portion of the revenue in Fulghums South American operations is derived from the sale of wood
chips, primarily for export from Chile, the mill closures affect revenue. This portion of revenue, and the associated profits, may be more variable than the revenue and profits derived from processing fees pursuant to long-term contracts.
Wood Pellet Business Industrial
We have entered into long-term off-take contracts with Drax and OPG, which are utility companies that operate throughout the year. Once we
complete the Atikokan and Wawa Projects, we intend to produce wood pellets from these facilities year-round to meet these contractual demands. Ground conditions during the wet season referred to as spring break-up or snow
melt, may prevent or curtail the harvesting of wood to supply pellet production. We expect that our wood pellet mills will build sufficient wood inventory on site through the autumn and winter months to mitigate this potential interruption of
wood supply. This inventory build-up may increase our working capital requirements. The Port of Quebec typically remains ice-free during the winter months, which we expect will reduce the risk of interruptions in shipments to Drax.
34
Wood Pellet Business NEWP
All of our NEWP facilities and customers are located in the Northeastern United States. Since NEWPs wood pellets are used for heating,
its sales are seasonal. For the last three years, over 60% of NEWPs annual sales have taken place from September through February. As a result of the seasonality of shipments and sales, we expect to experience significant fluctuations in
NEWPs revenues, income and net working capital levels from quarter to quarter. Weather conditions can significantly impact quarterly results by affecting the timing and amount of product deliveries. To accommodate NEWPs seasonal sales,
we build up NEWPs finished goods inventory from March through August of each year. This inventory build-up typically increases our working capital requirements.
Business Segments
We operate in five
business segments, which are East Dubuque, Pasadena, Fulghum Fibres, Wood Pellets: Industrial, and Wood Pellets: NEWP. See Note 15 Segment Information in Part IItem 1. Financial Statements in this
report for more information on the description of the segments. Fulghums and NEWPs operations are included in our historical operating results only from the closing date of the Fulghum Acquisition, which was May 1, 2013, and the
NEWP Acquisition, which was May 1, 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
(in thousands) |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East Dubuque |
|
$ |
46,021 |
|
|
$ |
50,572 |
|
|
$ |
148,455 |
|
|
$ |
146,838 |
|
Pasadena |
|
|
38,142 |
|
|
|
42,707 |
|
|
|
105,597 |
|
|
|
109,961 |
|
Fulghum Fibres |
|
|
25,273 |
|
|
|
22,378 |
|
|
|
73,660 |
|
|
|
38,483 |
|
Wood Pellets: Industrial |
|
|
2,011 |
|
|
|
|
|
|
|
2,678 |
|
|
|
|
|
Wood Pellets: NEWP |
|
|
13,857 |
|
|
|
|
|
|
|
19,635 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
125,304 |
|
|
$ |
115,657 |
|
|
$ |
350,025 |
|
|
$ |
295,282 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East Dubuque |
|
$ |
15,466 |
|
|
$ |
25,114 |
|
|
$ |
60,816 |
|
|
$ |
81,353 |
|
Pasadena |
|
|
(8,778 |
) |
|
|
(8,294 |
) |
|
|
(12,145 |
) |
|
|
(1,966 |
) |
Fulghum Fibres |
|
|
3,429 |
|
|
|
4,324 |
|
|
|
9,579 |
|
|
|
6,749 |
|
Wood Pellets: Industrial |
|
|
366 |
|
|
|
|
|
|
|
480 |
|
|
|
|
|
Wood Pellets: NEWP |
|
|
2,486 |
|
|
|
|
|
|
|
3,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross profit |
|
$ |
12,969 |
|
|
$ |
21,144 |
|
|
$ |
62,303 |
|
|
$ |
86,136 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East Dubuque |
|
$ |
956 |
|
|
$ |
981 |
|
|
$ |
3,177 |
|
|
$ |
3,423 |
|
Pasadena |
|
|
1,071 |
|
|
|
1,227 |
|
|
|
4,147 |
|
|
|
3,811 |
|
Fulghum Fibres |
|
|
1,368 |
|
|
|
1,250 |
|
|
|
4,420 |
|
|
|
2,109 |
|
Wood Pellets: Industrial |
|
|
2,776 |
|
|
|
2,350 |
|
|
|
8,184 |
|
|
|
4,233 |
|
Wood Pellets: NEWP |
|
|
624 |
|
|
|
|
|
|
|
1,015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment selling, general and administrative expenses |
|
$ |
6,795 |
|
|
$ |
5,808 |
|
|
$ |
20,943 |
|
|
$ |
13,576 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East Dubuque |
|
$ |
47 |
|
|
$ |
46 |
|
|
$ |
122 |
|
|
$ |
152 |
|
Pasadena |
|
|
337 |
|
|
|
972 |
|
|
|
970 |
|
|
|
2,722 |
|
Fulghum Fibres |
|
|
970 |
|
|
|
1,266 |
|
|
|
1,111 |
|
|
|
1,984 |
|
Wood Pellets: Industrial |
|
|
43 |
|
|
|
|
|
|
|
97 |
|
|
|
|
|
Wood Pellets: NEWP(1) |
|
|
(133 |
) |
|
|
|
|
|
|
(231 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment depreciation and amortization recorded in operating expenses |
|
|
1,264 |
|
|
|
2,284 |
|
|
|
2,069 |
|
|
|
4,858 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East Dubuque |
|
|
4,333 |
|
|
|
1,666 |
|
|
|
11,655 |
|
|
|
6,348 |
|
Pasadena |
|
|
2,153 |
|
|
|
1,702 |
|
|
|
5,056 |
|
|
|
3,159 |
|
Fulghum Fibres |
|
|
1,810 |
|
|
|
2,150 |
|
|
|
5,386 |
|
|
|
3,707 |
|
Wood Pellets: NEWP |
|
|
830 |
|
|
|
|
|
|
|
1,108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation and amortization expense recorded in cost of sales |
|
|
9,126 |
|
|
|
5,518 |
|
|
|
23,205 |
|
|
|
13,214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation and amortization |
|
$ |
10,390 |
|
|
$ |
7,802 |
|
|
$ |
25,274 |
|
|
$ |
18,072 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East Dubuque |
|
$ |
14,139 |
|
|
$ |
24,069 |
|
|
$ |
56,926 |
|
|
$ |
77,383 |
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
(in thousands) |
|
Pasadena |
|
|
(10,213 |
) |
|
|
(40,765 |
) |
|
|
(44,545 |
) |
|
|
(38,915 |
) |
Fulghum Fibres |
|
|
(56 |
) |
|
|
813 |
|
|
|
609 |
|
|
|
941 |
|
Wood Pellets: Industrial |
|
|
(1,997 |
) |
|
|
(2,058 |
) |
|
|
(6,804 |
) |
|
|
(3,941 |
) |
Wood Pellets: NEWP |
|
|
2,014 |
|
|
|
|
|
|
|
2,756 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment net income (loss) |
|
$ |
3,887 |
|
|
$ |
(17,941 |
) |
|
$ |
8,942 |
|
|
$ |
35,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of segment net income (loss) to consolidated net income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment net income (loss) |
|
$ |
3,887 |
|
|
$ |
(17,941 |
) |
|
$ |
8,942 |
|
|
$ |
35,468 |
|
RNP partnership and unallocated expenses recorded as selling, general and administrative expenses |
|
|
(1,792 |
) |
|
|
(1,872 |
) |
|
|
(6,277 |
) |
|
|
(6,488 |
) |
RNP partnership and unallocated income (expense) recorded as other income (expense) |
|
|
(635 |
) |
|
|
309 |
|
|
|
(635 |
) |
|
|
(1,081 |
) |
RNP unallocated interest expense and loss on interest rate swaps |
|
|
(4,604 |
) |
|
|
(3,996 |
) |
|
|
(14,373 |
) |
|
|
(9,726 |
) |
RNP income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
302 |
|
Corporate and unallocated expenses recorded as selling, general and administrative expenses |
|
|
(6,963 |
) |
|
|
(5,733 |
) |
|
|
(21,544 |
) |
|
|
(18,755 |
) |
Corporate and unallocated depreciation and amortization expense |
|
|
(154 |
) |
|
|
(152 |
) |
|
|
(419 |
) |
|
|
(475 |
) |
Corporate and unallocated income (expense) recorded as other income (expense) |
|
|
(96 |
) |
|
|
7 |
|
|
|
(1,279 |
) |
|
|
(19 |
) |
Corporate and unallocated interest expense |
|
|
(54 |
) |
|
|
(47 |
) |
|
|
(378 |
) |
|
|
(47 |
) |
Corporate income tax benefit (expense) |
|
|
(34 |
) |
|
|
2,289 |
|
|
|
(71 |
) |
|
|
27,166 |
|
Income(loss) from discontinued operations, net of tax |
|
|
(1,242 |
) |
|
|
3,558 |
|
|
|
(4,280 |
) |
|
|
(4,831 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income (loss) |
|
$ |
(11,687 |
) |
|
$ |
(23,578 |
) |
|
$ |
(40,314 |
) |
|
$ |
21,514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Amortization of customer relationships resulted in a credit in the current reporting period. |
Partnership and unallocated expenses recorded as other expense during the three and nine months ended September 30, 2014 represent a loss
on debt extinguishment. Partnership and unallocated expenses recorded as other income during the three months ended September 30, 2013 represented a gain on fair value adjustment to earn-out consideration of $0.3 million. Partnership and
unallocated expenses recorded as other expense during the nine months ended September 30, 2013 represent a loss on debt extinguishment of $6.0 million partially offset by gain on fair value adjustment to earn-out consideration of $4.9 million.
Unallocated interest expense represents interest expense on the RNP Notes, which were issued in April 2013.
Corporate and unallocated
expenses recorded as other expense for the nine months ended September 30, 2014 consist primarily of a loss on debt extinguishment of $0.9 million caused by the payoff of the RNHI Revolving Loan, and the loss on fair value adjustments due to an
increase in the expected earn-out consideration of $0.8 million related to the NEWP Acquisition, partially offset by the $0.4 million gain from the settlement of an indemnity claim related to the Fulghum Acquisition. During the nine months ended
September 30, 2013, we recognized a corporate income tax benefit of $27.2 million related to the release of a valuation allowance resulting from recording of deferred tax liabilities related to the Fulghum Acquisition.
36
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013:
Continuing Operations
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
(in thousands) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East Dubuque |
|
$ |
46,021 |
|
|
$ |
50,572 |
|
|
$ |
148,455 |
|
|
$ |
146,838 |
|
Pasadena |
|
|
38,142 |
|
|
|
42,707 |
|
|
|
105,597 |
|
|
|
109,961 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total RNP |
|
|
84,163 |
|
|
|
93,279 |
|
|
|
254,052 |
|
|
|
256,799 |
|
Fulghum Fibres |
|
|
25,273 |
|
|
|
22,378 |
|
|
|
73,660 |
|
|
|
38,483 |
|
Wood Pellets: Industrial |
|
|
2,011 |
|
|
|
|
|
|
|
2,678 |
|
|
|
|
|
Wood Pellets: NEWP |
|
|
13,857 |
|
|
|
|
|
|
|
19,635 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
125,304 |
|
|
$ |
115,657 |
|
|
$ |
350,025 |
|
|
$ |
295,282 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East Dubuque
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2014 |
|
|
For the Three Months Ended September 30, 2013 |
|
|
|
Tons |
|
|
Revenue |
|
|
Tons |
|
|
Revenue |
|
|
|
(in thousands) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ammonia |
|
|
27 |
|
|
$ |
14,641 |
|
|
|
24 |
|
|
$ |
12,543 |
|
UAN |
|
|
83 |
|
|
|
22,146 |
|
|
|
117 |
|
|
|
31,472 |
|
Urea (liquid and granular) |
|
|
13 |
|
|
|
5,918 |
|
|
|
11 |
|
|
|
4,681 |
|
Carbon dioxide (CO2) |
|
|
19 |
|
|
|
645 |
|
|
|
21 |
|
|
|
714 |
|
Nitric acid |
|
|
4 |
|
|
|
1,182 |
|
|
|
3 |
|
|
|
1,162 |
|
Other |
|
|
N/A |
|
|
|
1,489 |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total East Dubuque |
|
|
146 |
|
|
$ |
46,021 |
|
|
|
176 |
|
|
$ |
50,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, 2014 |
|
|
For the Nine Months Ended September 30, 2013 |
|
|
|
Tons |
|
|
Revenue |
|
|
Tons |
|
|
Revenue |
|
|
|
(in thousands) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ammonia |
|
|
106 |
|
|
$ |
57,882 |
|
|
|
76 |
|
|
$ |
51,033 |
|
UAN |
|
|
214 |
|
|
|
60,499 |
|
|
|
237 |
|
|
|
70,985 |
|
Urea (liquid and granular) |
|
|
40 |
|
|
|
18,647 |
|
|
|
37 |
|
|
|
18,117 |
|
Carbon dioxide (CO2) |
|
|
61 |
|
|
|
2,080 |
|
|
|
68 |
|
|
|
2,338 |
|
Nitric acid |
|
|
10 |
|
|
|
3,223 |
|
|
|
12 |
|
|
|
4,292 |
|
Other |
|
|
N/A |
|
|
|
6,124 |
|
|
|
N/A |
|
|
|
73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total East Dubuque |
|
|
431 |
|
|
$ |
148,455 |
|
|
|
430 |
|
|
$ |
146,838 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We generate revenue from sales of nitrogen fertilizer products manufactured at our East Dubuque Facility. Our
East Dubuque Facility produces ammonia, UAN, liquid and granular urea, which are nitrogen fertilizers, as well as nitric acid and CO2, using natural gas as a feedstock. These nitrogen
fertilizer products are used primarily in the production of corn. Revenues are seasonal based on the planting, growing, and harvesting cycles of customers who use nitrogen fertilizer.
Revenues for the three months ended September 30, 2014 were $46.0 million, compared to $50.6 million for the same period last year. The
decrease was due to lower deliveries and sales prices of UAN, partially offset by higher deliveries and sales prices for ammonia. Revenues for the nine months ended September 30, 2014 were $148.5 million, compared to $146.8 million for the same
period last year. The increase was due to higher natural gas sales and ammonia sales volumes, partially offset by lower UAN sales volumes and sales prices for ammonia and UAN.
During the three months ended September 30, 2013, deliveries of UAN occurred earlier than is typical, which pulled revenue from the
fourth quarter of 2013 into the third quarter of 2013. This is the primary reason for the lower UAN sales volumes during the three and nine month periods ending September 30, 2014 periods as compared to the same periods in 2013. Ammonia
production increased after we completed the ammonia expansion project in December 2013. This additional ammonia available for sale resulted in higher ammonia deliveries during the three and nine months ended September 30, 2014.
37
Average sales prices per ton for the three months ended September 30, 2014 were 1% higher
for ammonia and relatively flat for UAN, as compared with the same period last year. These two products comprised 80% of our East Dubuque Facilitys revenues for the three months ended September 30, 2014 and 87% for the same period last
year. The increase in ammonia sales prices was consistent with the increase in global nitrogen fertilizer prices between the two periods. The improvement in global ammonia prices during the three months ended September 30, 2014 was caused by
lower supplies of urea from China, geopolitical events resulting in the shut down of significant nitrogen fertilizer plants in Libya and Ukraine, and the reduction in natural gas supplies in other parts of the world. However, UAN prices did not
benefit from the improvement in the ammonia market due to more UAN production being brought on line in North America. Since most of the UAN consumed in North America is produced in North America, the recent changes in the international nitrogen
markets did not positively impact UAN as it did the other nitrogen product lines.
Average sales prices per ton for the nine months ended
September 30, 2014 were 19% lower for ammonia and 5% lower for UAN, as compared with the same period last year. These two products comprised 80% of our East Dubuque Facilitys revenues for the nine months ended September 30, 2014 and
83% for the same period last year. The decreases in our sales prices for ammonia and UAN were consistent with the decline in global nitrogen fertilizer prices in the earlier portions of the respective periods, partially offset by increases in the
three months ended in September of the respective years. These decreases were caused by significantly higher levels of low-priced urea in the global market, particularly from China. Prices were also affected by additional nitrogen fertilizer
production brought on line in North America over the last 12 months.
Other revenues consist primarily of natural gas sales. We
occasionally sell natural gas when purchase commitments exceed production requirements and/or storage capacities, or when the margin from selling natural gas exceeds the margin from producing additional ammonia. During the third quarter of 2014, we
recorded $1.1 million in natural gas sales and $0.4 million in nitrous oxide emission reduction credit sales. On rare occasions, we have also purchased natural gas with the specific intent of immediately reselling it when local market anomalies
create low-risk opportunities for gain. During the first quarter of 2014, temporary operational problems with a natural gas pipeline in the Midwest caused a significant spike in the local price of natural gas. This created a unique opportunity to
purchase natural gas from other locations at lower prices for the purpose of reselling it at significantly higher prices. We also sold natural gas originally purchased for production at a gross profit that exceeded the expected gross profits from
additional production using that natural gas. During the first quarter of 2014, we sold, at an average price of $29.90 per MMBtu, 151,000 MMBtus of natural gas that cost an average of $9.42 per MMBtu. Almost half of the natural gas sold had been
intended for production. The total $4.5 million in natural gas sales resulted in a gross profit of $3.1 million, which was significantly higher than the profit we would likely have realized on the 2,900 tons of lost ammonia production.
Pasadena
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2014 |
|
|
For the Three Months Ended September 30, 2013 |
|
|
|
Tons |
|
|
Revenue |
|
|
Tons |
|
|
Revenue |
|
|
|
(in thousands) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ammonium sulfate |
|
|
172 |
|
|
$ |
33,776 |
|
|
|
162 |
|
|
$ |
38,609 |
|
Sulfuric acid |
|
|
20 |
|
|
|
1,894 |
|
|
|
39 |
|
|
|
3,347 |
|
Ammonium thiosulfate |
|
|
13 |
|
|
|
1,925 |
|
|
|
1 |
|
|
|
322 |
|
Other |
|
|
N/A |
|
|
|
547 |
|
|
|
N/A |
|
|
|
429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Pasadena |
|
|
205 |
|
|
$ |
38,142 |
|
|
|
202 |
|
|
$ |
42,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, 2014 |
|
|
For the Nine Months Ended September 30, 2013 |
|
|
|
Tons |
|
|
Revenue |
|
|
Tons |
|
|
Revenue |
|
|
|
(in thousands) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ammonium sulfate |
|
|
458 |
|
|
$ |
90,244 |
|
|
|
330 |
|
|
$ |
88,784 |
|
Sulfuric acid |
|
|
61 |
|
|
|
5,567 |
|
|
|
119 |
|
|
|
11,240 |
|
Ammonium thiosulfate |
|
|
56 |
|
|
|
8,257 |
|
|
|
41 |
|
|
|
7,883 |
|
Other |
|
|
N/A |
|
|
|
1,529 |
|
|
|
N/A |
|
|
|
2,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Pasadena |
|
|
575 |
|
|
$ |
105,597 |
|
|
|
490 |
|
|
$ |
109,961 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38
We generate revenue from sales of nitrogen fertilizer and other products manufactured at our
Pasadena Facility. The facility produces ammonium sulfate and ammonium thiosulfate, which are nitrogen fertilizers, as well as sulfuric acid. These fertilizer products are used in growing corn, soybeans, potatoes, cotton, canola, alfalfa and wheat.
Revenues for the three months ended September 30, 2014 were $38.1 million, compared to $42.7 million for the same period last year.
Lower sales prices for ammonium sulfate and ammonium thiosulfate, and lower sales volume for sulfuric acid were partially offset by higher sales volumes for ammonium sulfate and ammonium thiosulfate. Revenues for the nine months ended
September 30, 2014 were $105.6 million, compared to $110.0 million for the same period last year. Lower sales prices for all products were partially offset by higher ammonium sulfate sales volumes.
Ammonium sulfate production increased after we completed the debottlenecking project in December 2013. Demand increased due to favorable
weather during the planting season and an increase in international orders; increased production enabled additional sales to meet that demand. We produce ammonium sulfate by combining ammonia and sulfuric acid, which we also produce to make ammonium
sulfate or to sell to the industrial market. After expanding ammonium sulfate production capacity, less sulfuric acid was available for sale. This was the reason for the decline in sulfuric acid sales volume during the three and nine months ended
September 30, 2014 as compared to the same periods last year. During 2014, international sales of ammonium sulfate were significantly higher than for the comparable period last year.
Average sales prices per ton decreased by 17% for ammonium sulfate and increased by 10% for sulfuric acid for the three months ended
September 30, 2014, as compared with the same period last year. These two products comprised 94% of our Pasadena Facilitys revenues for the three months ended September 30, 2014 and 98% for the same period last year. A higher
proportion of export sales, priced lower than domestic sales, contributed to the decline in average product price. Furthermore, higher exports of ammonium sulfate from China, put downward pressure on ammonium sulfate prices. The additional supplies
from China originated from new plants that produce ammonium sulfate as a by-product of manufacturing caprolactam. Average sales prices per ton decreased by 27% for ammonium sulfate and by 3% for sulfuric acid for the nine months ended
September 30, 2014 as compared with the same period last year. These two products comprised 91% of our Pasadena Facilitys revenues for each of the nine months ended September 30, 2014 and 2013. A higher proportion of export sales,
priced lower than domestic sales, contributed to the decline in average product price.
Fulghum Fibres
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
(in thousands) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services |
|
$ |
17,954 |
|
|
$ |
18,608 |
|
|
$ |
53,341 |
|
|
$ |
30,340 |
|
Product |
|
|
7,319 |
|
|
|
3,770 |
|
|
|
20,319 |
|
|
|
8,143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues Fulghum |
|
$ |
25,273 |
|
|
$ |
22,378 |
|
|
$ |
73,660 |
|
|
$ |
38,483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We generate revenues at Fulghum Fibres from providing wood yard operation and wood fibre processing services,
and selling wood chips to the pulp, paper and packaging industry. Fulghum also owns and manages forestland and sells bark to industrial consumers in South America.
Revenues were $25.3 million for the three months ended September 30, 2014 compared to $22.4 million for the same period last year. The
increase was primarily due to higher South America product sales caused by strong demand from a European customer that increased its production capacity. For the three months ended September 30, 2014, $15.9 million of revenues were generated
from operations in the United States, while $9.4 million of revenues were from South America. For the same period last year, $15.5 million of revenues were generated from United States operations; $6.9 million of revenues were from
South America. Service revenues are those earned under agreements for wood yard operations services and wood fibre processing services. Product revenues are those earned by our Chilean operations from the sale of wood chips and bark. During the
three months ended September 30, 2014, our mills in the United States processed 3.3 million green metric tons, or GMT, of logs into wood chips and residual fuels; our mills in South America processed 0.6 million GMT of logs into wood
chips and residual fuels. One of Fulghums customers experienced an outage at its production facility to which our mill supplies chips, causing lower than expected processing volumes for Fulghum for the period. During the customers
downtime, Fulghum performed maintenance and repairs at this mill, which increased operating costs during the quarter. Fulghum continues to experience lower services revenues at our mill in Maine due to constraints resulting from operating the mill
with temporary equipment following a fire earlier in the year.
39
Revenues were $73.7 million for the nine months ended September 30, 2014 compared to $38.5
million for the same period last year. The increase was due to our ownership of Fulghum for the full nine months ended September 30, 2014 as compared to five months during the same period last year. For the nine months ended September 30,
2014, $44.7 million of revenues were generated from operations in the United States, while $29.0 million of revenues were from South America. For the same period last year, $25.3 million of revenues were generated from operations in United States;
$13.2 million of revenues were from South America. During the nine months ended September 30, 2014, our mills in the United States processed 9.4 million GMT of logs into wood chips and residual fuels; our mills in South America processed
1.9 million GMT of logs. While revenues increased from the prior year due to our ownership of Fulghum for the full nine months ended September 30, 2014, several of Fulghums customers experienced outages at their production facilities
to which our mills supply chips, causing lower than expected processing volumes for Fulghum for the period. During the customers downtime, Fulghum performed maintenance and repairs at these mills, which increased operating costs during the
period. Fulghum continues to experience lower services revenues at our mill in Maine due to constraints resulting from operating the mill with temporary equipment following a fire earlier in the year.
Wood Pellets: Industrial
We
generate revenues from sales of wood pellets to industrial customers, specifically utilities generating electricity. Revenues were $2.0 million at the Atikokan Project for the three months ended September 30, 2014, generated by delivering to OPG
9,000 metric tons of wood pellets sourced from a third-party wood pellet producer. Revenues were $2.7 million at the Atikokan Project for the nine months ended September 30, 2014, generated by delivering to OPG 12,000 metric tons of wood pellets
sourced from a third-party wood pellet producer.
We expect the Atikokan Project to produce wood pellets during the fourth quarter of this
year. The existing arrangement of delivering a third partys wood pellets to OPG will be curtailed as the Atikokan Project ramps up production. Commissioning and start-up of the Wawa Project are expected to begin in November 2014 and continue
through the end of 2014, with production to follow. The first shipment of wood pellets to Drax is expected to occur in the second quarter of 2015, in accordance with Draxs ship schedule.
Wood Pellets: NEWP
We generate
revenues at NEWP from sales of wood pellets for the United States residential and commercial heating markets. Revenues were $13.9 million for the three months ended September 30, 2014 on deliveries of 71,000 tons of wood pellets. Revenues were
$19.6 million from May 1, 2014 through September 30, 2014 on deliveries of 100,000 tons of wood pellets. Sales early in the year were higher than usual due to cold weather in the spring. In addition, retailers purchases of products to be sold this winter commenced earlier than usual this summer. These factors resulted in higher deliveries and revenues this year than are typical through the third
quarter. Consequently, finished product inventories are lower than is typical for this time of year. We expect deliveries to be lower than typical during the fourth quarter of this year for the same reason. However, we expect NEWP to sell its full
production this year and for deliveries and sales to be as expected for the full year.
Cost of Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
(in thousands) |
|
Cost of sales: |
|
|
|
|
|
|
|
|
East Dubuque |
|
$ |
30,555 |
|
|
$ |
25,458 |
|
|
$ |
87,639 |
|
|
$ |
65,485 |
|
Pasadena |
|
|
46,920 |
|
|
|
51,001 |
|
|
|
117,742 |
|
|
|
111,927 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total RNP |
|
$ |
77,475 |
|
|
$ |
76,459 |
|
|
$ |
205,381 |
|
|
$ |
177,412 |
|
Fulghum Fibres |
|
|
21,844 |
|
|
|
18,054 |
|
|
|
64,081 |
|
|
|
31,734 |
|
Wood Pellets: Industrial |
|
|
1,645 |
|
|
|
|
|
|
|
2,198 |
|
|
|
|
|
Wood Pellets: NEWP |
|
|
11,371 |
|
|
|
|
|
|
|
16,062 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of sales |
|
$ |
112,335 |
|
|
$ |
94,513 |
|
|
$ |
287,722 |
|
|
$ |
209,146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East Dubuque
Cost of sales primarily consists of the cost of natural gas (East Dubuques primary feedstock), labor, depreciation and electricity. Cost
of sales for the three months ended September 30, 2014 was $30.6 million, compared to $25.5 million for the same period last year. The increase in the cost of sales was primarily due to an increase in depreciation and costs of natural gas and
electricity. Increased natural gas costs were due to an overall market increase in the cost of natural gas. Natural gas comprised 45% and labor costs comprised 12% of cost of sales on product shipments for the three months ended September 30,
2014. For the same
40
period last year, natural gas was 49% and labor was 15% of cost of sales. Depreciation expense included in cost of sales was $4.3 million for the three months ended September 30, 2014 and
$1.7 million for the same period last year. The increase in depreciation expense is primarily due to the completion of the ammonia expansion project in late 2013. Increased electricity costs were due to an increase in electricity usage and rates.
The electricity usage increased due to the new compressors installed as part of the ammonia expansion project.
Cost of sales for the nine
months ended September 30, 2014 was $87.6 million, compared to $65.5 million for the same period last year. The increase in the cost of sales was primarily due to an increase in depreciation and costs of natural gas and electricity. Increased
natural gas costs were due to an overall market increase in the cost of natural gas and additional natural gas purchased for resale. The cost of natural gas sold was $2.8 million higher in 2014 than in 2013 for the nine months ended
September 30, 2014. Natural gas comprised 48% and labor costs comprised 14% of cost of sales on product shipments for the nine months ended September 30, 2014. For the same period last year, natural gas was 46% and labor was 15% of cost of
sales. Depreciation expense included in cost of sales was $11.7 million for the nine months ended September 30, 2014 and $6.3 million for the same period last year. The increase in depreciation expense is primarily due to the completion of the
ammonia expansion project in late 2013. Increased electricity costs were due to an increase in electricity usage and rates. The electricity usage increased due to the new compressors installed as part of the ammonia expansion project.
Pasadena
Cost of sales primarily
consists of the cost of ammonia and sulfur, labor, depreciation and electricity. Cost of sales for the three months ended September 30, 2014 was $46.9 million, compared to $51.0 million for the same period last year. Ammonia and sulfur together
comprised 60% of cost of sales for the three months ended September 30, 2014, compared to 55% for the same period last year. Labor costs comprised 7% of cost of sales for the three months ended September 30, 2014 and 8% for the same period
last year. During the quarter ended September 30, 2014, we incurred turnaround expenses of $2.1 million and other nonrecurring unanticipated maintenance expenses of $1.3 million. Turnaround expenses represent maintenance costs incurred during
planned shut-downs. The duration of the 2014 turnaround was extended by 13 days, as compared to the duration of a typical turnaround, to undertake activities necessary to tie-in the new sulfuric acid converter and cogeneration projects. During
the extended outage, we conducted a comprehensive examination of other components within the sulfuric acid plant. This examination resulted in the discovery and repair of previously unidentified items. The incremental cost of these items
and the extended downtime was approximately $1.3 million. These one-time activities are not expected to recur in the future. For the three months ended September 30, 2014, we wrote down our ammonium sulfate inventory by $1.8 million, because
production costs exceeded market prices. During the same period last year, we wrote down our ammonium sulfate inventory by $5.0 million. Current prices for ammonia and sulfur, key inputs for ammonium sulfate, have increased significantly. Global
ammonia supplies are lower than normal, and are compounded by production issues in Egypt, Algeria, Trinidad and Qatar, as well as political issues in Libya and Ukraine. Also, our sulfuric acid plant was down during the turnaround period. In order to
continue producing ammonium sulfate and meet sales demand for sulfuric acid, we needed to purchase sulfuric acid, which increased the cost of sales for the three months ended September 30, 2014.
Depreciation expense included in cost of sales was $2.2 million for the three months ended September 30, 2014 and $1.7 million for
the same period last year. The increase in depreciation expense was primarily due to an increase in property, plant and equipment resulting from the completion of the debottlenecking project in late 2013, and the increase in ammonium sulfate sold in
2014 compared to 2013.
Cost of sales for the nine months ended September 30, 2014 was $117.7 million, compared to $111.9 million for
the same period last year. The increase in cost of sales was primarily due to selling a higher volume of ammonium sulfate and higher unit prices for inputs. Ammonia and sulfur together comprised 60% of cost of sales for the nine months ended
September 30, 2014 and 55% for the same period last year. Labor costs comprised 7% of cost of sales for each of the nine months ended September 30, 2014 and 2013. For the nine months ended September 30, 2014, we wrote down our
ammonium sulfate inventory by $4.6 million, because production costs exceeded market prices. During the same period last year, we wrote down our ammonium sulfate, sulfur and sulfuric acid inventory by $7.3 million due to lower market prices of
ammonium sulfate and sulfuric acid. During the nine months ended September 30, 2014, we incurred turnaround expenses of $2.1 million and other nonrecurring unanticipated maintenance expenses of $1.3 million.
Depreciation expense included in cost of sales was $5.1 million for the nine months ended September 30, 2014 and $3.2 million for
the same period last year. The increase in depreciation expense was primarily due to an increase in property, plant and equipment resulting from the completion of the debottlenecking project in late 2013, and the increase in ammonium sulfate sold in
2014 compared to 2013.
Fulghum Fibres
Costs for our wood chipping mill operations include (i) service costs, which primarily consist of costs for labor, repairs and
maintenance, depreciation and utilities, and (ii) product costs relating to our operations in South America, which consist of costs to purchase, process and export forestry products. Cost of sales for the three months ended September 30,
2014 was $21.8 million, compared to $18.1 million for the same period last year. The increase in cost of sales was primarily due to the increase in product
41
sales. For the three months ended September 30, 2014, service costs represented 66% of our cost of sales, while product costs represented 34%. For the same period last year, service costs
represented 79% and product costs represented 21%. Labor costs comprised 26% of the cost of sales for the three months ended September 30, 2014 and 28% for the same period last year. Repairs and maintenance and utilities comprised 26% of cost
of sales for the three-month period ended September 30, 2014 and 32% for the same period last year. Depreciation expense included in cost of sales was $1.8 million during the three-month period ended September 30, 2014 and $2.1 million for
the same period last year.
Cost of sales for the nine months ended September 30, 2014 was $64.1 million, compared to $31.7 million
for the same period last year. The increase in cost of sales was primarily due to our owning Fulghum for the full nine months ended September 30, 2014 as compared to five months during the same period last year. For the nine months ended
September 30, 2014, service costs represented 68% of our cost of sales, while product costs represented 32%. For the nine months ended September 30, 2013, service costs represented 75% of our cost of sales, while product costs represented
25%. Labor costs comprised 25% of the cost of sales for the nine months ended September 30, 2014 and 26% for the same period last year. Repairs and maintenance and utilities comprised 28% of cost of sales for the nine months ended
September 30, 2014 and 31% for the same period last year. Depreciation expense included in cost of sales was $5.4 million during the nine month ended September 30, 2014 and $3.7 million for the same period last year.
A fire at our mill in Maine during the first quarter of 2014 disrupted operations, causing lower processing volumes and higher than typical
processing costs at the facility during the nine months ended September 30, 2014. Recoveries from our insurance policies offset a significant portion of these additional operating costs.
Wood Pellets: Industrial
We have
not yet begun producing wood pellets at either the Atikokan or Wawa Projects. As a result, cost of sales primarily consists of purchasing and transporting wood pellets. Cost of sales for the three months ended September 30, 2014 was
$1.6 million and $2.2 million for the nine months ended September 30, 2014. Wood pellet purchases in cost of sales were $1.0 million during the three months ended September 30, 2014 and $1.3 million for the nine months ended
September 30, 2014. Transportation costs were $0.5 million during the three months ended September 30, 2014 and $0.7 million for the nine months ended September 30, 2014.
Wood Pellets: NEWP
Cost of sales
primarily consists of expenses for wood fibre feedstock, packaging, labor, electricity, freight and depreciation. Cost of sales for the three months ended September 30, 2014 was $11.4 million and $16.1 million for the nine months ended
September 30, 2014. For the three months ended September 30, 2014, wood fibre feedstock comprised 48% of cost of sales, while packaging accounted for 12%, labor 7%, electricity 6% and freight 3%. For the nine months ended
September 30, 2014, wood fibre feedstock comprised 48% of cost of sales, while packaging accounted for 12%, labor 7%, electricity 6% and freight 4%. Depreciation expense included in the cost of sales was $0.8 million for three months ended
September 30, 2014 and $1.1 million for the nine months ended September 30, 2014. Cost of sales for the nine months ended September 30, 2014 also included a $0.2 million write-up of inventory to fair value as part of the NEWP
Acquisition.
Gross Profit (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
(in thousands) |
|
Gross profit (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East Dubuque |
|
$ |
15,466 |
|
|
$ |
25,114 |
|
|
$ |
60,816 |
|
|
$ |
81,353 |
|
Pasadena |
|
|
(8,778 |
) |
|
|
(8,294 |
) |
|
|
(12,145 |
) |
|
|
(1,966 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total RNP |
|
$ |
6,688 |
|
|
$ |
16,820 |
|
|
$ |
48,671 |
|
|
$ |
79,387 |
|
Fulghum Fibres |
|
|
3,429 |
|
|
|
4,324 |
|
|
|
9,579 |
|
|
|
6,749 |
|
Wood Pellets: Industrial |
|
|
366 |
|
|
|
|
|
|
|
480 |
|
|
|
|
|
Wood Pellets: NEWP |
|
|
2,486 |
|
|
|
|
|
|
|
3,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross profit |
|
$ |
12,969 |
|
|
$ |
21,144 |
|
|
$ |
62,303 |
|
|
$ |
86,136 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East Dubuque
Gross profit was $15.5 million for the three months ended September 30, 2014, compared to $25.1 million for the same period last year.
Gross profit margin for the three months ended September 30, 2014 was 34%, compared to 50% for the same period last year. Gross profit was $60.8 million for the nine months ended September 30, 2014, compared to $81.4 million for the same
period
42
last year. Gross profit margin for the nine months ended September 30, 2014 was 41%, compared to 55% for the same period last year. The decreases in gross profit and gross margin were
primarily due to lower product pricing, and increased costs of natural gas, depreciation and electricity.
Gross profit margin can vary
significantly from period to period. Nitrogen fertilizer and natural gas are both commodities, the prices of which can vary significantly from period to period and do not always move in the same direction. In addition, certain fixed costs of
operating our East Dubuque Facility are recorded in cost of sales. Their impact on gross profit and gross margins varies as product sales volumes vary seasonally.
During October 2014, our East Dubuque Facilitys ammonia plant was shut down for seven days due to a leaking flange on the ammonia
synthesis converter. This shut-down is expected to have a negative impact on the results of operations for the three months ended December 31, 2014 due to lost profits during the seven day shut-down.
Pasadena
Gross loss was $8.8
million for the three months ended September 30, 2014, compared to a gross loss of $8.3 million for the same period last year. Gross loss margin for the three months ended September 30, 2014 was 23%, compared to gross loss margin of 19%
for the same period last year. The decreases in gross profit and gross profit margin were primarily due to declines in average sales prices for ammonium sulfate, increases in the unit prices of raw materials, and turnaround expenses and other
nonrecurring maintenance expenses.
Gross loss was $12.1 million for the nine months ended September 30, 2014, compared to a gross
loss of $2.0 million for the same period last year. Gross loss margin for the nine months ended September 30, 2014 was 12%, compared to gross loss margin of 2% for the same period last year. The decreases in gross profit and gross profit margin
were primarily due to declines in average sales prices for ammonium sulfate, increases in the unit prices of raw materials, and turnaround expenses and other nonrecurring maintenance expenses.
Gross profit margin at our Pasadena Facility can vary significantly from period to period due to changes in the prices of nitrogen fertilizer,
ammonia and sulfur, which are all commodities. The prices of these commodities can vary significantly from period to period and do not always move in the same direction. In addition, certain fixed costs of operating our Pasadena Facility are
recorded in cost of sales. Their impact on gross profit and gross margins varies as product sales volumes vary seasonally. Moreover, forward sales contracts have not developed for ammonium sulfate to the extent that they have for other nitrogen
fertilizer products, so it is not possible to lock in product prices and input prices at the same time, as has been our practice for a portion of the sales of the significant products of our East Dubuque Facility. Since input prices for ammonium
sulfate are typically fixed several months before the corresponding product sales prices are known, margins may be compressed during a declining commodity market. See Note 10 Goodwill to the consolidated financial statements
included in Part I Item 1. Financial Statements in this report.
Fulghum Fibres
Gross profit was $3.4 million for the three months ended September 30, 2014 compared to $4.3 million for the same period last year. Gross
profit margin for the three months ended September 30, 2014 was 14% compared to 19% for the same period last year. The decrease in gross profit and gross profit margin was primarily due to lower processing volumes and increased processing and
maintenance costs at various mills, including those resulting from the fire at our mill in Maine.
Gross profit was $9.6 million for the
nine months ended September 30, 2014 compared to $6.7 million for the same period last year. Gross profit margin for the nine months ended September 30, 2014 was 13% compared to 18% for the same period last year. The increase in gross
profit was primarily due to our owning Fulghum for the full nine months ended September 30, 2014 compared to five months during the same period last year. The decrease in gross profit margin was primarily due to lower processing volumes and
increased processing and maintenance costs at various mills, including those resulting from the fire at our mill in Maine.
Wood Pellets: Industrial
Gross profit for the three months ended September 30, 2014 was $0.4 million. Gross profit for the nine months ended
September 30, 2014 was $0.5 million. Gross profit margin was 18% for each of the three and nine months ended September 30, 2014.
Wood
Pellets: NEWP
Gross profit for the three months ended September 30, 2014 was $2.5 million. Gross profit for the nine months
ended September 30, 2014 was $3.6 million. Gross profit margin was 18% for each of the three and nine months ended September 30, 2014.
43
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
(in thousands) |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East Dubuque |
|
$ |
1,307 |
|
|
$ |
1,055 |
|
|
$ |
3,825 |
|
|
$ |
3,611 |
|
Pasadena |
|
|
1,408 |
|
|
|
32,228 |
|
|
|
32,319 |
|
|
|
36,562 |
|
RNP partnership and unallocated expenses |
|
|
1,792 |
|
|
|
1,872 |
|
|
|
6,277 |
|
|
|
6,488 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total RNP |
|
|
4,507 |
|
|
|
35,155 |
|
|
|
42,421 |
|
|
|
46,661 |
|
Fulghum Fibres |
|
|
2,346 |
|
|
|
2,512 |
|
|
|
5,540 |
|
|
|
4,092 |
|
Wood Pellets: Industrial |
|
|
2,819 |
|
|
|
2,350 |
|
|
|
7,939 |
|
|
|
4,233 |
|
Wood Pellets: NEWP |
|
|
491 |
|
|
|
|
|
|
|
784 |
|
|
|
|
|
Corporate and unallocated expenses |
|
|
7,118 |
|
|
|
5,885 |
|
|
|
21,979 |
|
|
|
19,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
$ |
17,281 |
|
|
$ |
45,902 |
|
|
$ |
78,663 |
|
|
$ |
74,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East Dubuque
Operating expenses consist primarily of selling, general and administrative expenses, depreciation expense and asset disposal costs. Selling,
general and administrative expenses for each of the three-month periods ended September 30, 2014 and 2013 were $1.0 million. The majority of depreciation expense incurred was a manufacturing cost and was distributed between cost of sales
and finished goods inventory, based on product volumes. However, a portion of depreciation expense was associated with assets supporting general and administrative functions and was recorded in operating expense. Asset disposal costs were $0.3
million related to the removal of a prill tower.
Selling, general and administrative expenses for the nine-month period ended
September 30, 2014 were $3.2 million, compared to $3.4 million for the same period last year. Depreciation expense included in operating expense was $0.1 million for the nine months ended September 30, 2014 compared to $0.2 million
for the same period last year. Asset disposal costs were $0.5 million related to the removal of a prill tower and closure of wells no longer in service.
Pasadena
Operating expenses were
comprised primarily of selling, general and administrative expenses, depreciation and amortization expense and goodwill impairment. Selling, general and administrative expenses for the three months ended September 30, 2014 were $1.1 million,
compared to $1.2 million for the same period last year. Depreciation and amortization expense included in operating expense was $0.3 million for the three months ended September 30, 2014 compared to $1.0 million for the same period
last year. These amounts represent primarily amortization of intangible assets. The decrease was primarily due to an intangible asset having been fully amortized at December 31, 2013. The majority of depreciation expense incurred was a
manufacturing cost and was distributed between cost of sales and finished goods inventory, based on product volumes. During the three months ended September 30, 2013, the Company recorded a goodwill impairment of $30.0 million.
Selling, general and administrative expenses for the nine months ended September 30, 2014 were $4.1 million, compared to
$3.8 million for the same period last year. The increase was primarily due to an increase in personnel costs of $0.8 million, including severance costs of $0.2 million, and software maintenance of $0.2 million, partially offset by
lower professional fees of $0.6 million. Depreciation and amortization expense included in operating expense was $1.0 million for the nine months ended September 30, 2014 compared to $2.7 million for the same period last year. These
amounts represent primarily amortization of intangible assets. The decrease was primarily due to an intangible asset having been fully amortized at December 31, 2013. Goodwill impairment was $27.2 million for the nine months ended
September 30, 2014 and $30.0 million for the same period last year. See Note 10 Goodwill to the consolidated financial statements included in Part IItem 1. Financial Statements in this report.
RNP Partnership and Unallocated Expenses
Partnership and unallocated expenses represent costs that relate directly to RNP and its subsidiaries but are not allocated to a segment.
Partnership and unallocated expenses recorded in selling, general and administrative expenses consist primarily of business development expenses for RNP; unit-based compensation expense for executives of RNP; services from Rentech for executive,
legal, finance, accounting, human resources and investor relations support in accordance with the services agreement between RNP and Rentech; audit and tax fees; legal fees; compensation for RNP partnership level personnel; certain insurance costs;
and board expense. Partnership and unallocated expenses recorded in selling, general and administrative expenses for the three months ended September 30, 2014 were $1.8 million, compared to $1.9 million for the same period last year.
Non-cash unitbased compensation expense, recorded in selling, general and administrative expenses, was $0.3 million for the three months ended September 30, 2014, compared to $0.2 million for the same period last year.
44
Partnership and unallocated expenses recorded in selling, general and administrative expenses
were $6.3 million for the nine months ended September 30, 2014 and $6.5 million for the same period last year. Non-cash unitbased compensation expense was $1.2 million for the nine months ended September 30, 2014, compared to $1.4
million for the same period last year.
Fulghum Fibres
Operating expenses were comprised primarily of selling, general and administrative expenses and depreciation and amortization expense. Selling,
general and administrative expenses for the three months ended September 30, 2014 were $1.4 million compared to $1.3 million for the same period last year. These expenses were for general administrative purposes, such as general management
salaries and travel, legal, consulting, and information technology. Depreciation and amortization expense included in operating expense for the three months ended September 30, 2014 was $1.0 million compared to $1.3 million for the same period
last year.
Selling, general and administrative expenses for the nine months ended September 30, 2014 were $4.4 million compared to
$2.1 million for the same period last year. These expenses were for general administrative purposes, such as general management salaries and travel, legal, consulting, and information technology. The increase was due to our ownership of Fulghum
for the full nine months ended September 30, 2014 as compared to five months during the same period last year. Depreciation and amortization expense included in operating expense for the nine months ended September 30, 2014 was $1.1
million and $2.0 million for the same period last year. The majority of depreciation expense relates to wood chip processing assets and was recorded in cost of sales.
Wood Pellets: Industrial
Operating expenses consist primarily of selling, general and administrative expenses, which include personnel costs, travel,
acquisition-related and development costs associated with the Atikokan and Wawa Projects, and other business development costs. Our operating expenses are not indicative of the amount of operating expenses we expect after the Atikokan and Wawa
Projects are commissioned and operating. Once we begin producing and selling wood pellets, certain expenses currently recorded as operating expenses will be capitalized to product inventory and included in cost of sales when the inventories are
sold.
Operating expenses were $2.8 million for the three months ended September 30, 2014 compared to $2.4 million for the same
period last year.
Operating expenses were $7.9 million for the nine months ended September 30, 2014 compared to $4.2 million for the
same period last year. The increase was primarily due to increases in plant personnel costs of $1.2 million, utilities and other plant start-up costs of $1.1 million, rail car delivery and lease expenses of $1.0 million and professional and
consulting services of $0.5 million.
Wood Pellets: NEWP
Operating expenses consist primarily of selling, general and administrative expenses and depreciation and amortization expense. Selling,
general and administrative expenses for the three months ended September 30, 2014 were $0.6 million and $1.0 million for the nine months ended September 30, 2014.
Depreciation and amortization expense included in operating expense for the three months ended September 30, 2014 was $(0.1) million and
$(0.2) million for the nine months ended September 30, 2014. At the time of the NEWP Acquisition, we recorded customer relationships at their fair values as part of purchase accounting for the acquisition. Amortization of these customer
relationships in the three and nine months ended September 30, 2014 resulted in a negative amortization expense. The majority of depreciation expense relates to wood pellet processing assets and was recorded in cost of sales.
Corporate and Unallocated Expenses
Operating expenses consist of selling, general and administrative expenses and depreciation and amortization expense. Selling, general and
administrative expenses include cash and non-cash personnel costs, acquisition related expenses, insurance costs, facilities expenses, information technology costs and professional services fees for legal, audit, tax and investor relations
activities. Selling, general and administrative expenses were $7.0 million for the three-month period ended September 30, 2014 compared to $5.7 million for the same period last year. The increase was primarily due to $0.5 million in
software and system upgrades, expenses for consultants who were studying our cost structure, and an increase in non-cash equity-based compensation of $0.5 million. Non-cash equity-based compensation expense was $1.9 million for the three months
ended September 30, 2014 compared to $1.4 million for the same period last year.
Selling, general and administrative expenses
were $21.5 million for the nine month period ended September 30, 2014 compared to $18.8 million for the same period last year. The increase was primarily due to $1.8 million in costs associated with evaluating shareholder proposals,
completing settlements with shareholders and conducting cost studies, $1.1 million in transaction costs related to the NEWP Acquisition, $0.7 million in non-capitalizable software upgrade costs and an increase in non-cash equity-based
45
compensation of $0.4 million. These increases were partially offset by a decrease of $1.4 million in personnel costs. Non-cash equity-based compensation expense was $4.7 million for the nine
months ended September 30, 2014 compared to $4.3 million for the same period last year.
Operating Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
(in thousands) |
|
Operating income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East Dubuque |
|
$ |
14,159 |
|
|
$ |
24,059 |
|
|
$ |
56,991 |
|
|
$ |
77,742 |
|
Pasadena |
|
|
(10,186 |
) |
|
|
(40,522 |
) |
|
|
(44,464 |
) |
|
|
(38,528 |
) |
RNP- partnership and unallocated expenses |
|
|
(1,792 |
) |
|
|
(1,872 |
) |
|
|
(6,277 |
) |
|
|
(6,488 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total RNP |
|
|
2,181 |
|
|
|
(18,335 |
) |
|
|
6,250 |
|
|
|
32,726 |
|
Fulghum Fibres |
|
|
1,083 |
|
|
|
1,812 |
|
|
|
4,039 |
|
|
|
2,657 |
|
Wood Pellets: Industrial |
|
|
(2,453 |
) |
|
|
(2,350 |
) |
|
|
(7,459 |
) |
|
|
(4,233 |
) |
Wood Pellets: NEWP |
|
|
1,995 |
|
|
|
|
|
|
|
2,789 |
|
|
|
|
|
Corporate and unallocated expenses |
|
|
(7,118 |
) |
|
|
(5,885 |
) |
|
|
(21,979 |
) |
|
|
(19,230 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income (loss) |
|
$ |
(4,312 |
) |
|
|
(24,758 |
) |
|
$ |
(16,360 |
) |
|
$ |
11,920 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
East Dubuque
Operating income was $14.2 million for the three months ended September 30, 2014 compared to $24.1 million for the same period last year.
The decrease was primarily due to lower UAN product pricing and deliveries, and higher cost of sales as described above. Operating income was $57.0 million for the nine months ended September 30, 2014 compared to $77.7 million for the same
period last year. The decrease was primarily due to lower product pricing and UAN deliveries, and higher cost of sales as described above.
Pasadena
Operating loss was $10.2 million for the three months ended September 30, 2014 compared to an operating loss of
$40.5 million for the same period last year. The decrease was primarily due to the goodwill impairment of $30.0 million, which was recorded in 2013. Operating loss was $44.5 million for the nine months ended September 30, 2014 compared to
an operating loss of $38.5 million for the same period last year. The increase was primarily due to the decline in average sales prices for ammonium sulfate, increases in the unit price of raw materials, and turnaround expenses, partially
offset by lower a goodwill impairment, inventory write-down, and depreciation and amortization expense as described above.
RNP Partnership
and Unallocated Expenses
Operating loss was $1.8 million for the three months ended September 30, 2014 and $1.9 million for
the same period last year. Operating loss was $6.3 million for the nine months ended September 30, 2014 and $6.5 million for the same period last year.
Fulghum Fibres
Operating income
was $1.1 million for the three months ended September 30, 2014 compared to $1.8 million for the same period last year. The decrease in operating income was due to lower processing volumes and increased processing costs as described above.
Operating income was $4.0 million for the nine months ended September 30, 2014 and $2.7 million for the same period last year. The increase in operating income was due to our ownership of Fulghum for the full nine months ended
September 30, 2014 as compared to five months during the same period last year, partially offset by lower processing volumes and higher processing costs as described above.
Wood Pellets: Industrial
Operating loss was $2.5 million for the three months ended September 30, 2014 compared to $2.4 million for the same period last year.
Operating loss was $7.5 million for the nine months ended September 30, 2014 compared to $4.2 million for the same period last year. This increase was due to costs in 2014 related to the Atikokan and Wawa Projects that were not capitalizable
and management, development and operating costs as described above being incurred prior to start up of the projects.
46
Wood Pellets: NEWP
Operating income was $2.0 million for the three months ended September 30, 2014, and $2.8 million for the nine months ended
September 30, 2014, which reflects gross profit and operating expenses as described above.
Corporate and Unallocated Expenses
Operating loss was $7.1 million for the three months ended September 30, 2014 compared to $5.9 million for the same period last year. The
increase was primarily due to software and system upgrades, expenses for consultants who were studying our cost structure, and an increase in non-cash equity-based compensation as described above. Operating loss was $22.0 million for the nine months
ended September 30, 2014 compared to $19.2 million for the same period last year. The increase was primarily due to evaluation of shareholder proposals, completing settlement agreements with shareholders and conducting cost studies, transaction
costs related to the NEWP Acquisition, software upgrades and an increase in non-cash equity-based compensation, partially offset by a decrease in personnel costs as described above.
Discontinued Operations
Loss from
discontinued operations, our former energy technologies segment, for the three months ended September 30, 2014 was $1.2 million, compared to income from discontinued operations of $3.6 million for the same period last year. During the
three and nine months ended September 30, 2013, we sold Natchez, which resulted in a gain of $6.3 million. There was also a reduction in expenses of $1.4 million and a reduction in income tax expense of $1.0 million between the periods, which
was partially offset by Natchez abandonment costs of $0.7 million.
Loss from discontinued operations for the nine months ended
September 30, 2014 was $4.3 million, compared to $4.8 million for the same period last year. The decrease of $0.5 million between the periods was due to the elimination of expenses associated with research and development and business
development activities, and to costs of terminating our alternative energy operations in 2013, which was partially offset by the gain on sale of Natchez in 2013 and the Natchez abandonment costs of $0.7 million. The loss during the nine months ended
September 30, 2014 included $1.3 million of transaction costs related to the sale of our alternative energy technologies and decommissioned PDU.
ADJUSTED EBITDA
RNPs Adjusted
EBITDA is defined as RNPs net income (loss) plus interest expense and other financing costs, Pasadena goodwill impairment, loss on debt extinguishment, income tax expense, depreciation and amortization and fair value adjustment to earn-out
consideration, net of loss on interest rate swaps. Fulghums Adjusted EBITDA is defined as Fulghums net income (loss) plus interest expense and other financing costs, depreciation and amortization, and income tax (benefit) expense.
NEWPs Adjusted EBITDA is defined as NEWPs net income plus interest expense and other financing costs, 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 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.
|
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 RNPs Adjusted EBITDA, which is a non-GAAP financial measure, to net income (loss) for RNP for the periods
presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
(in thousands) |
|
Net income (loss) |
|
$ |
(11,687 |
) |
|
$ |
(23,578 |
) |
|
$ |
(40,314 |
) |
|
$ |
21,514 |
|
Add back (deduct): Non-RNP (income) loss |
|
|
8,582 |
|
|
|
1,323 |
|
|
|
31,410 |
|
|
|
(39 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RNP net income (loss) |
|
$ |
(3,105 |
) |
|
$ |
(22,255 |
) |
|
$ |
(8,904 |
) |
|
$ |
21,475 |
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
(in thousands) |
|
Add RNP items : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest expense |
|
|
4,624 |
|
|
|
3,996 |
|
|
|
14,437 |
|
|
|
9,725 |
|
Pasadena goodwill impairment |
|
|
|
|
|
|
30,029 |
|
|
|
27,202 |
|
|
|
30,029 |
|
Loss on debt extinguishment |
|
|
635 |
|
|
|
|
|
|
|
635 |
|
|
|
6,001 |
|
Gain on fair value adjustment to earn-out consideration |
|
|
|
|
|
|
(309 |
) |
|
|
|
|
|
|
(4,920 |
) |
Loss on interest rate swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7 |
|
Income tax expense |
|
|
27 |
|
|
|
233 |
|
|
|
82 |
|
|
|
438 |
|
Depreciation and amortization |
|
|
6,870 |
|
|
|
4,386 |
|
|
|
17,803 |
|
|
|
12,381 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RNPs Adjusted EBITDA |
|
$ |
9,051 |
|
|
$ |
16,080 |
|
|
$ |
51,255 |
|
|
$ |
75,136 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below reconciles Fulghums Adjusted EBITDA, which is a non-GAAP financial measure, to segment
net income (loss) for Fulghum.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
(in thousands) |
|
Fulghum net income (loss) per segment disclosure |
|
$ |
(56 |
) |
|
$ |
813 |
|
|
$ |
609 |
|
|
$ |
941 |
|
Add Fulghum items : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest expense |
|
|
546 |
|
|
|
692 |
|
|
|
1,662 |
|
|
|
1,226 |
|
Depreciation and amortization |
|
|
2,780 |
|
|
|
3,416 |
|
|
|
6,497 |
|
|
|
5,691 |
|
Income tax expense |
|
|
320 |
|
|
|
69 |
|
|
|
1,050 |
|
|
|
69 |
|
Other |
|
|
273 |
|
|
|
238 |
|
|
|
718 |
|
|
|
421 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fulghums Adjusted EBITDA |
|
$ |
3,863 |
|
|
$ |
5,228 |
|
|
$ |
10,536 |
|
|
$ |
8,348 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below reconciles NEWPs Adjusted EBITDA, which is a non-GAAP financial measure, to segment net
income for NEWP.
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
|
2014 |
|
|
2014 |
|
|
|
(in thousands) |
|
NEWP net income per segment disclosure |
|
$ |
2,014 |
|
|
$ |
2,756 |
|
Add NEWP Items: |
|
|
|
|
|
|
|
|
Net interest expense |
|
|
111 |
|
|
|
191 |
|
Depreciation and amortization |
|
|
697 |
|
|
|
877 |
|
Income tax expense |
|
|
44 |
|
|
|
53 |
|
Other |
|
|
(174 |
) |
|
|
(211 |
) |
|
|
|
|
|
|
|
|
|
NEWPs Adjusted EBITDA |
|
$ |
2,692 |
|
|
$ |
3,666 |
|
|
|
|
|
|
|
|
|
|
48
CASH FLOWS
The following table summarizes our consolidated statements of cash flows:
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
|
(in thousands) |
|
Net cash provided by (used in): |
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
45,526 |
|
|
$ |
26,887 |
|
Investing activities |
|
|
(165,901 |
) |
|
|
(117,552 |
) |
Financing activities |
|
|
84,036 |
|
|
|
129,367 |
|
Effect of exchange rate on cash |
|
|
30 |
|
|
|
(20 |
) |
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash |
|
$ |
(36,309 |
) |
|
$ |
38,682 |
|
|
|
|
|
|
|
|
|
|
Operating Activities
Revenues were $350.0 million for the nine months ended September 30, 2014 compared to $295.3 million for the same period last year. The
increase in revenue for the nine months ended September 30, 2014 was primarily due to the Fulghum Acquisition and NEWP Acquisition. Deferred revenue increased $28.9 million during the nine months ended September 30, 2014, compared to an
increase of $4.7 million during the same period last year. The increase in deferred revenue was due to timing of receiving cash under product prepayment contracts.
Net cash provided by operating activities for the nine months ended September 30, 2014 was $45.5 million. We had a net loss of $40.3
million for the nine months ended September 30, 2014 and a goodwill impairment of $27.2 million in connection with our Pasadena Facility. Accounts receivable increased by $10.6 million due primarily to higher ammonia deliveries at our East
Dubuque Facility and collections timing at our Pasadena Facility.
Net cash provided by operating activities for the nine months ended
September 30, 2013 was $26.9 million. We had net income of $21.5 million for the nine months ended September 30, 2013 and a goodwill impairment of $30.0 million in connection with our Pasadena Facility. Accrued liabilities decreased by
$38.4 million of which $27.2 million was due primarily to the release of valuation allowance resulting from recording of deferred tax liabilities related to the Fulghum Acquisition. Inventories increased by $15.7 million during this period,
which was primarily due to lower than normal sales volume at our Fertilizer Facilities and higher natural gas prices at our East Dubuque Facility.
Investing Activities
Net cash used in
investing activities was $165.9 million for the nine months ended September 30, 2014, compared to $117.6 million for the same period last year. Net cash used in investing activities for the nine months ended September 30, 2014
was primarily related to the capital expenditures to construct the Atikokan and Wawa Projects, to upgrade a nitric acid compressor train and complete our urea expansion project at our East Dubuque Facility, and to construct the power generation
project and replace the sulfuric acid converter at our Pasadena Facility. During the period, we also completed the NEWP Acquisition. Net cash used in investing activities for the nine months ended September 30, 2013 was primarily related to
acquiring Fulghum, and construction of the Atikokan Project and the Wawa Project. During the period, we also made expenditures relating to the ammonia production and storage capacity expansion project at our East Dubuque Facility, the ammonium
sulfate debottlenecking and production capacity project and the power generation project at our Pasadena Facility.
Financing Activities
Net cash provided by financing activities was $84.0 million for the nine months ended September 30, 2014, compared to $129.4 million
for the same period last year. During the nine month period ended September 30, 2014, we issued the 2014 Preferred Stock for an aggregate purchase price of $98.0 million (reflecting an issuance discount of 2%) and entered into the GSO Credit
Agreement, borrowing $50.0 million under the facility. During the period, we also paid off the outstanding balance of $50.0 million under the RNHI Credit Agreement. During the nine months ended September 30, 2014, we made debt payments of
$8.2 million, and RNP made cash distributions to holders of noncontrolling interests of $4.1 million. During the nine months ended September 30, 2013, we issued the RNP Notes for $320.0 million and paid off borrowings under a credit
agreement in the amount of $205.0 million. RNP made cash distributions to noncontrolling interests of $33.1 million.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2014, our current assets totaled $161.1 million. Current assets included cash of $70.1 million, of which
$44.1 million was held at RNP, accounts receivable of $27.8 million and inventories of $35.5 million. At September 30, 2014, our current liabilities were $150.8 million. We had long-term liabilities of $455.8 million, comprised primarily
of the RNP Notes, Fulghum debt, GSO Credit Agreement, NEWP debt, and the QS Construction Facility.
49
RNP Activities
Sources of Capital
Our
principal sources of capital at RNP have historically been cash from operations, the proceeds of RNPs initial public offering, and borrowings.
RNPs current debt facilities are the RNP Notes and the GE Credit Agreement. For a description of the terms of the RNP Notes, see
Note 11 Debt to the consolidated financial statements included in Part IIItem 8. Financial Statements and Supplementary Data in the Annual Report. For a description of the terms of the GE Credit Agreement, see
Note 11 Debt to the consolidated financial statements included in Part IItem 1. Financial Statements in this report.
We expect to be able to fund RNPs operating needs, including maintenance capital expenditures, from RNPs operating cash flow, cash
on hand at RNP and borrowings under the GE Credit Agreement, for at least the next 12 months. We expect to fund our announced expansion projects through borrowings under the GE Credit Agreement. If additional expansion projects were to exceed the
capacity available under the GE Credit Agreement, we would need to fund them with new capital at RNP.
Capital markets have experienced
periods of significant volatility in the recent past, and access to those markets may become difficult. If we need to access capital markets, we cannot assure you that we will be able to do so on acceptable terms, or at all.
Uses of Capital
Our
primary uses of cash at RNP have been, and are expected to continue to be, for operating expenses, capital expenditures, debt service and cash distributions to common unitholders.
We divide our capital expenditures into two categories: maintenance and expansion. Maintenance capital expenditures include those for
improving, replacing or adding to our assets, as well as expenditures for acquiring, constructing or developing new assets to maintain our operating capacity, or to comply with environmental, health, safety or other regulations. Maintenance capital
expenditures that are required to comply with regulations may also improve the output, efficiency or reliability of our facility. Expansion capital expenditures are those incurred for acquisitions or capital improvements that we expect will increase
our operating capacity or operating income over the long-term.
At our East Dubuque Facility, we are upgrading a nitric acid compressor
train, completing our urea expansion project and replacing the ammonia synthesis converter. The board of directors of RNPs General Partner recently approved the ammonia synthesis converter project, which is expected to increase reliability,
production and plant efficiency. The project is expected to cost approximately $30.0 million and be completed by the end of 2016. These expansion projects will be funded initially with borrowings under the GE Credit Agreement.
At our Pasadena Facility, we recently began operating our new sulfuric acid converter, and are nearing completion of our power generation
project. These projects have been funded with cash that was borrowed as proceeds of the RNP Notes.
Maintenance capital expenditures for
our East Dubuque Facility totaled $6.2 million in the nine months ended September 30, 2014 and $5.6 million for the same period last year. Maintenance capital expenditures for our East Dubuque Facility are expected to be approximately $9.5
million for the year ending December 31, 2014. Expansion capital expenditures for our East Dubuque Facility totaled $7.6 million in the nine months ended September 30, 2014 and $36.3 million for the same period last year. Expansion capital
expenditures for our East Dubuque Facility are expected to be approximately $16.8 million for the year ending December 31, 2014, primarily related to our nitric acid expansion, our urea expansion, our ammonia converter replacement, and the
purchase of spare parts related to the expansion of our ammonia production and storage capacity.
Maintenance capital expenditures for our
Pasadena Facility totaled $21.4 million in the nine months ended September 30, 2014 and $4.6 million for the same period last year. Maintenance capital expenditures for our Pasadena Facility are expected to be approximately $22.9 million for
the year ending December 31, 2014. The maintenance capital expenditures expected in 2014 include $14.8 million to complete the replacement of the sulfuric acid converter at our Pasadena Facility. Expansion capital expenditures for our Pasadena
Facility totaled $12.5 million in the nine months ended September 30, 2014 and $16.9 million for the same period last year. Expansion capital expenditures for our Pasadena Facility are expected to be approximately $14.5 million for the year
ending December 31, 2014, primarily related to the power generation project.
Our forecasted capital expenditures are subject to
change due to unanticipated increases in the cost, scope and completion time for our capital projects. For example, we may experience increases in labor or equipment costs necessary to comply with government regulations or to complete projects that
sustain or improve the profitability of our facilities.
50
Wood Fibre Processing and Corporate Activities
Sources of Capital
During
the nine months ended September 30, 2014, we funded development activities, operations and investments in our wood fibre processing business and corporate activities primarily through cash on hand, and proceeds from the RNHI Credit Agreement,
the GSO Credit Agreement, and the 2014 Preferred Stock. Capital expenditures at one of our mills in Chile were funded with Chilean bank debt.
Our debt facilities used to support our wood fibre processing business and corporate activities are the Fulghum Debt, the QS Construction
Facility, the BMO Credit Agreement, the GSO Credit Agreement, and the NEWP Debt. For a description of the terms of the Fulghum debt and the QS Construction Facility, see Note 11 Debt to the consolidated financial statements
included in Part IIItem 8. Financial Statements and Supplementary Data in the Annual Report. For a description of the terms of the BMO Credit Agreement, GSO Credit Agreement and NEWP debt, see Note 11 Debt
to the consolidated financial statements included in Part IItem 1. Financial Statements in this report.
On
April 9, 2014, we issued the 2014 Preferred Stock in the aggregate purchase price of $98.0 million (reflecting an issuance discount of 2%). For a description of the terms of the 2014 Preferred Stock, see Note 13 Preferred
Stock to the consolidated financial statements included in Part IItem 1. Financial Statements in this report.
We expect quarterly distributions from RNP to be a source of liquidity for our non-RNP activities. Cash distributions from RNP may vary
significantly from quarter to quarter and from year to year, and could be as low as zero for any quarter. We will receive 59.8% of any quarterly distributions made to RNPs common unitholders based on our current ownership interest in RNP.
However, our ownership interest may be reduced over time if we elect to sell any of our common units or if additional common units were to be issued by RNP. The Indenture governing the RNP Notes and the GE Credit Agreement contain important
restrictions on RNPs ability to make distributions to its common unitholders (including us), as discussed in Part IIItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity
and Capital Resources in the Annual Report, and Note 11 Debt to the consolidated financial statements included in Part I Item 1. Financial Statements in this report.
On October 31, 2014, we closed the previously announced sale of our alternative energy technologies under the Kaidi Agreement. See Note
6 Discontinued Operations and Note 17 Subsequent Events to the consolidated financial statements included in Part IItem 1. Financial Statements in this report. We
received a cash payment of $14.4 million from Kaidi at the closing, which is in addition to $0.5 million in cash payments previously received.
During the next 12 months, we expect the liquidity needs of our wood fibre processing business, including announced construction projects, and
of our corporate activities to be met from: (i) cash on hand, including the proceeds received under the Kaidi Agreement, (ii) distributions from RNP, (iii) cash generated by our wood fibre processing business, and (iv) in the
case of capital expenditures in Chile, Chilean bank debt financing. We may need to seek additional funds from our investors or in the capital markets and/or obtain funding through the Rentech/Graanul JV under certain circumstances. These
circumstances may include: (i) the sources of funds summarized in this paragraph are less than expected, (ii) our expenses, including capital expenditures, are higher than expected, or (iii) we approve projects, enter into additional
commitments or acquire assets in addition to those that could be funded from the sources identified above. We cannot assure you that capital markets, Chilean bank debt or other sources of external financing will be available on satisfactory terms or
at all.
Uses of Capital
Our primary uses of cash have been, and are expected to continue to be, for operating expenses, capital expenditures, acquisitions and debt
service.
We estimate the total cost to acquire and convert the Atikokan and Wawa Projects to be approximately $105.0 million with
approximately $78.0 million to be spent in 2014. We expect to fund the costs of these projects with cash on hand. For the nine months ended September 30, 2014, capital expenditures related to the Atikokan and Wawa Projects totaled $62.0
million. This amount excludes interest and insurance expense during construction, and spending related to capitalized assets under construction pursuant to our agreement with Quebec Stevedoring Company Limited to construct assets at the Port of
Quebec. We expect the Atikokan Project to produce wood pellets during the fourth quarter of this year. Commissioning and start-up of the Wawa Project are expected to begin in November 2014 and continue through the end of 2014, with production to
follow.
We installed a second debarking line at one of our mills in Chile. We expect the project to increase debarking capacity at the
mill from 120,000 to 240,000 BDMTs per year. Construction of this project was completed during the third quarter of 2014, at a cost of $2.5 million. This project was funded with Chilean bank debt financing.
We are also constructing a new chipping line at the same mill in Chile. We expect the project to increase chipping capacity from 180,000 to
400,000 BDMTs per year. The cost of this project is expected to be approximately $6.1 million, with funding provided by Chilean bank debt financing. We expect this new chipping line to be commissioned and operating in early 2015.
51
CONTRACTUAL OBLIGATIONS
We have entered into various contractual obligations as detailed in the Annual Report and the Quarterly Reports on Form 10-Q for the three
months ended March 31, 2014 and June 30, 2014. During the normal course of business between January 1, 2014 and the date of this report, the amount of our contractual obligations changed, as we made scheduled payments and entered into
new contracts. During such period, our contractual obligations changed as described in the Quarterly Reports on Form 10-Q for the three months ended March 31, 2014 and June 30, 2014 and as described below. The following updates supersede
and replace the discussion of contractual obligations in the Annual Report and the Quarterly Reports on Form 10-Q for the three months ended March 31, 2014 and June 30, 2014 to the extent that the following is inconsistent with such
discussion.
|
|
|
As of September 30, 2014, purchase obligations totaled $32.7 million, which represent certain open purchase orders with our vendors. Not all of our open purchase orders are purchase obligations, since some of the
orders are not enforceable or legally binding on us until the goods are received or the services are provided. |
|
|
|
Our obligations under natural gas forward purchase contracts increased by $3.6 million to $5.7 million. As of September 30, 2014 the natural gas forward purchase contracts include delivery dates through
April 30, 2015. During October 2014, we entered into additional fixed quantity forward purchase contracts at fixed and indexed prices for various delivery dates through October 31, 2014. The total MMBtu associated with these additional
forward purchase contracts are 0.1 million and the total amount of purchase commitments is $0.5 million, resulting in a weighted average rate per MMBtu of $3.97 in these new commitments |
OFF-BALANCE SHEET ARRANGEMENTS
We have
no material off-balance sheet arrangements.
RECENTLY ISSUED ACCOUNTING STANDARDS
Refer to Note 2 Recent Accounting Pronouncements to the consolidated financial statements, included in Part I
Item 1. Financial Statements of this report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
For a quantitative and qualitative discussion about market risk, see Part II Item 7A.
Quantitative and Qualitative Disclosures about Market Risk, in our Annual Report, and Part I Item 3. Quantitative and Qualitative Disclosures about Market Risk, in our Quarterly Reports on Form 10-Q for the three
months ended March 31, 2014 and June 30, 2014. As of September 30, 2014, there have been no material changes in the type or nature of market risk.
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures (DCP) that are designed to ensure that information required to be
disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to the
Companys management, including its Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), as appropriate, to allow for timely decisions regarding required disclosure. In designing and
evaluating DCP, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Management is required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
The Company, under the supervision and with the
participation of the Companys management, including the Companys Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Companys DCP as of the end of the period covered
by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our DCP were not effective as of September 30, 2014, due to material weaknesses in internal control over financial reporting
(ICFR) identified by management in Part I Item 4. Controls and Procedures in our Quarterly Report on Form 10-Q for the period ended June 30, 2014 that still existed as of September 30, 2014.
Material Weaknesses in Internal Control over Financial Reporting
A material weakness is a deficiency, or combination of deficiencies, in ICFR, such that there is a reasonable possibility that a material
misstatement of the Companys annual or interim financial statements will not be prevented or detected on a timely basis. Management identified the following control deficiencies that constituted material weaknesses in our ICFR as reported in
our
52
Quarterly Report on Form 10-Q for the period ended June 30, 2014, which material weaknesses had not yet been remediated as of September 30, 2014:
The Company did not design and maintain effective internal controls over the review of the cash flow forecasts used in the accounting for
business combinations and goodwill, and the determination of the goodwill impairment charge in accordance with generally accepted accounting principles. Specifically, the Company did not design and maintain effective internal controls related to
determining the carrying value and fair value of reporting units for the purpose of performing goodwill impairment testing, documenting managements review of assumptions used in the forecasts, verifying that data contained in reports provided
by specialists reconcile to the information provided to those specialists, and documenting managements review regarding the identification of events and changes in circumstances that indicate it is more likely than not that a goodwill
impairment has occurred between annual impairment tests.
These material weaknesses did not result in a material misstatement to the Companys
consolidated financial statements for the quarter ended September 30, 2014. However, these material weaknesses, if unremediated, could, in a future reporting period, result in a material misstatement to the annual or interim consolidated financial
statements that would not be prevented or detected by the controls.
Material Weaknesses Plan for Remediation and Remediation Activities Taken
During the third quarter of 2014, we have implemented and will continue to implement a number of measures to address the material
weaknesses identified. Specifically, we are designing and have begun implementing additional controls over documentation and review of the inputs and results of our cash flow forecasts, the use of the work of specialists and the identification of
events and changes in circumstances that may indicate potential impairment of goodwill. These controls are expected to include the implementation of additional review activities by qualified personnel and additional documentation and support of
conclusions with regard to forecasts used in the accounting for business combinations and goodwill impairment calculations. These controls are also expected to include documentation and the development and use of checklists and procedures related to
accounting for business combinations and goodwill impairment calculations. The Company is in the process of implementing its remediation plan, and expects the control weaknesses to be remediated in the coming reporting periods. However, the Company
is unable at this time to estimate when the remediation will be completed.
The process of designing and implementing an effective
financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is
adequate to satisfy our reporting obligations. As we continue to evaluate and take actions to improve our ICFR, we may determine to take additional actions to address control deficiencies or determine to modify certain of the remediation measures
described above. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to remediate the material weaknesses we have identified or avoid potential future material weaknesses.
Changes in Internal Control Over Financial Reporting
As discussed in the Material Weaknesses Plan for Remediation and Remediation Activities Taken above, there were changes in our ICFR
during the quarter ended September
30, 2014 that have materially affected, or are reasonably likely to materially affect, our ICFR.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
A description of the legal proceedings to which the Company and its subsidiaries are a party is contained in Note 12
Commitments and Contingencies Litigation to the consolidated financial statements included in Part I Item 1. Financial Statements of this Quarterly Report on Form 10-Q.
ITEM 1A. RISK FACTORS
The risks described in the Annual Report, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 and this report are not
the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may materially adversely affect our business and cash flow. The risk factor set forth below updates, and should be read
together with, the risk factors disclosed in Part I Item 1A. Risk Factors of the Annual Report and the risk factors disclosed in Part II Item 1A. Risk Factors on Form 10-Q for
the quarter ended June 30, 2014.
53
We could be required to record material impairment charges and write-downs with respect to our Pasadena
Facility in the future.
The future profitability of our Pasadena Facility will be significantly affected by, among other things,
nitrogen fertilizer product prices and the prices of the inputs to its production processes. As of September 30, 2014, the undiscounted future cash flows from the Pasadena Facility exceeded its net book value by approximately 10%. It is
possible that adverse changes to supply and demand factors relating to the Pasadena Facilitys nitrogen fertilizer products could require us to lower further our expectations for the profitability of the facility in the future. If this were to
occur, we could be required to record material impairment charges and write-downs, which could have a material adverse effect on our results of operations, the trading price of our common stock and our reputation.
54
ITEM 6. EXHIBITS.
Exhibit Index
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3.2 |
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First Plan Amendment to Second Amendment and Restated 2009 Incentive Award Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by Rentech on July 2, 2014). |
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4.1 |
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Amendment to Tax Benefit Preservation Plan, dated as of August 1, 2014, between Rentech, Inc. and Computershare Trust Company, N.A., as Rights Agent (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed
by Rentech on August 1, 2014). |
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10.1 |
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Credit Agreement, dated as of July 22, 2014, among Rentech Nitrogen Partners, L.P. and Rentech Nitrogen Finance Corporation, as borrowers, Rentech Nitrogen LLC, Rentech Nitrogen Pasadena Holdings, LLC and Rentech Nitrogen Pasadena,
LLC, as subsidiary guarantors, and General Electric Capital Corporation, as administrative agent, GE Capital Markets, Inc. as sole lead arranger and bookrunner, and the other lender parties thereto (incorporated by reference to Exhibit 10.1 to
the Current Report on Form 8-K filed by RNP on July 25, 2014). |
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10.2 |
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Waiver to Term Loan Credit Agreement and Guaranty Agreement, dated as of August 14, 2014, among Rentech Nitrogen Holdings, Inc., the Lenders party thereto, and Credit Suisse AG Cayman Islands Branch (incorporated by reference to
Exhibit 10.1 to the Current Report on Form 8-K filed by Rentech on August 18, 2014). |
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10.3 |
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First Amendment to Credit Agreement, dated as of August 13, 2014, among Rentech Nitrogen Partners, L.P. and Rentech Nitrogen Finance Corporation, as borrowers, Rentech Nitrogen LLC, Rentech Nitrogen Pasadena Holdings, LLC and
Rentech Nitrogen Pasadena, LLC, as subsidiary guarantors, and General Electric Capital Corporation, as agent, and the lenders parties thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by RNP on August 18,
2014). |
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10.4 |
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Letter Agreement Re: MIPSA Purchase Price, dated as of August 28, 2014, between Rentech, Inc. and Sunshine Kaidi New Energy Group Co., Ltd. |
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10.5 |
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Letter Agreement Re: MIPSA Closing Date, dated as of September 30, 2014, between Rentech, Inc. and Sunshine Kaidi New Energy Group Co., Ltd. |
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31.1 |
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Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Exchange Act. |
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31.2 |
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Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Exchange Act. |
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32.1 |
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Certification of President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002. |
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32.2 |
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Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002. |
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101 |
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The following financial information from the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2014 formatted in Extensible Business Reporting Language (XBRL) includes: (i) the Consolidated
Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Stockholders Equity, (v) the Consolidated Statements of Cash Flows and (vi)
the Notes to Consolidated Financial Statements (Unaudited), detailed tagged. |
55
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
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RENTECH, INC. |
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Dated: November 10, 2014 |
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/s/ D. Hunt Ramsbottom |
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D. Hunt Ramsbottom, |
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President and Chief Executive Officer |
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Dated: November 10, 2014 |
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/s/ Dan J. Cohrs |
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Dan J. Cohrs |
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Chief Financial Officer |
56
Exhibit 10.4
August 28, 2014
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Sunshine Kaidi New Energy Group Co., Ltd.
Attn: Mr. Chen T1 Jiangxia Avenue
Eastlake Newtech Development Zone, Wuhan, China |
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Dear Mr. Chen:
Reference is hereby made to that certain Membership Interest Purchase and Sale Agreement (the MIPSA) dated as of February 28,
2014, by and among Rentech, Inc. (Seller), Sunshine Kaidi New Energy Group Co., Ltd. (Buyer), and RES USA, LLC (the Company). All capitalized terms shall have the same meaning as ascribed to them in the MIPSA
unless otherwise defined herein.
1. Amendment of the MIPSA Purchase Price. Upon execution of this letter agreement, Seller and
Buyer hereby agree that Section 1.1 of the MIPSA is hereby amended by deleting the clause for a purchase price of Eleven Million Eight Hundred Thousand Dollars ($11,800,000) (the Purchase Price), and
replacing it with the clause for a purchase price of Fourteen Million Nine Hundred Fifty Thousand Dollars ($14,950,000) (the Purchase Price).
2. No Waiver. This letter agreement shall in no way be considered, nor is it intended to be, a waiver by any party hereto of any
condition precedent to its obligation to perform under the MIPSA.
3. Continuing Effect. Subject only to the amendments,
modifications or stipulations herein contained, the terms, conditions, stipulations and provisions of the MIPSA shall remain valid and binding on the parties thereto. In the event of any inconsistency between the MIPSA and this letter agreement, the
provisions set forth herein shall prevail.
4. Governing Law. This letter agreement is governed by and is to be construed in
accordance with the laws of Hong Kong.
10877 Wilshire
Boulevard, Suite 600 Los Angeles, CA 90024 T: 310.571.9800 F: 310.571.9799
www.rentechinc.com
This letter agreement shall become valid and binding upon the execution by Seller and Buyer on
the date first above written. This letter agreement may be executed in any number of counterparts, and by any party on separate counterparts, each of which as so executed and delivered shall be deemed an original, but all of which together shall
constitute one and the same instrument.
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Very truly yours, |
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RENTECH, INC. |
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By: |
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/s/ Harold A. Wright |
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Title: |
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SVP and Chief Technology Officer |
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Acknowledged and Agreed: |
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SUNSHINE KAIDI NEW ENERGY GROUP CO., LTD. |
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By: |
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/s/ Chen Yilong |
10877 Wilshire
Boulevard, Suite 710 Los Angeles, CA 90024 T: 310.571.9800 F: 310.571.9799
www.rentechinc.com
Exhibit 10.5
September 30, 2014
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Sunshine Kaidi New Energy Group Co., Ltd. Attn:
Mr. Chen T1 Jiangxia Avenue Eastlake Newtech Development
Zone, Wuhan, China |
Dear Mr. Chen:
Reference is hereby made to that certain Membership Interest Purchase and Sale Agreement (the MIPSA) dated as of February 28,
2014, by and among Rentech, Inc. (Seller), Sunshine Kaidi New Energy Group Co., Ltd. (Buyer), and RES USA, LLC (the Company), as amended. All capitalized terms shall have the same meaning as ascribed to them in
the MIPSA unless otherwise defined herein.
1. Amendment of the MIPSA Closing Date. Section 2.1 of the MIPSA is hereby deleted
in its entirety and replaced with the following:
The closing of the Sale provided for in Article 1 (the Closing) shall
take place by facsimile, electronic mail, or overnight courier delivery as the Parties may mutually determine, commencing at 9:00 a.m. Pacific Standard Time, as soon as possible, but in no event later than October 31, 2014 (subject to the
satisfaction or waiver of the conditions set forth in Article 9 and Article 10 that by their nature are to be satisfied at Closing) or such other date or time as Buyer and Seller mutually determine (the Closing Date).
Notwithstanding anything to the contrary herein or in the MIPSA, in the event that the Closing does not take place by October 31, 2014 and such failure
is not caused by Seller, Seller shall not be deemed to have waived, and expressly reserves, any remedies available to Seller due to Purchasers failure close by September 30, 2014, including without limitation any damages suffered between
September 30, 2014 and October 31, 2014.
2. No Waiver. This letter agreement shall in no way be considered, nor is it
intended to be, a waiver by any party hereto of any condition precedent to its obligation to perform under the MIPSA.
3. Continuing
Effect. Subject only to the amendments, modifications or stipulations herein contained, the terms, conditions, stipulations and provisions of the MIPSA shall remain valid and binding on the parties thereto. In the event of any inconsistency
between the MIPSA and this letter agreement, the provisions set forth herein shall prevail.
10877 Wilshire
Boulevard, Suite 600 Los Angeles, CA 90024 T: 310.571.9800 F: 310.571.9799
www.rentechinc.com
4. Governing Law. This letter agreement is governed by and is to be construed in
accordance with the laws of Hong Kong.
10877 Wilshire
Boulevard, Suite 710 Los Angeles, CA 90024 T: 310.571.9800 F: 310.571.9799
www.rentechinc.com
This letter agreement shall become valid and binding upon the execution by Seller and Buyer on
the date first above written. This letter agreement may be executed in any number of counterparts, and by any party on separate counterparts, each of which as so executed and delivered shall be deemed an original, but all of which together shall
constitute one and the same instrument.
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Very truly yours, |
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RENTECH, INC. |
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By: |
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/s/ Harold A. Wright |
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Title: |
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SVP and Chief Technology Officer |
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Acknowledged and Agreed: |
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SUNSHINE KAIDI NEW ENERGY GROUP CO., LTD. |
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By: |
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/s/ Chen Yilong |
10877 Wilshire
Boulevard, Suite 710 Los Angeles, CA 90024 T: 310.571.9800 F: 310.571.9799
www.rentechinc.com
Exhibit 31.1
RENTECH, INC.
Certification of President and Chief Executive Officer
I, D. Hunt Ramsbottom, certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of Rentech, Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report; |
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4. |
The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluations; and |
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(d) |
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter
in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
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5. |
The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the
registrants board of directors (or persons performing the equivalent functions): |
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(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record,
process, summarize and report financial information; and |
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(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
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Dated: November 10, 2014 |
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/s/ D. Hunt Ramsbottom |
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D. Hunt Ramsbottom |
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President and Chief Executive Officer |
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(Principal Executive Officer) |
Exhibit 31.2
RENTECH, INC.
Certification of Chief Financial Officer
I, Dan J. Cohrs, certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of Rentech, Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report; |
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4. |
The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluations; and |
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(d) |
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter
in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
|
5. |
The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the
registrants board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record,
process, summarize and report financial information; and |
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(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
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Dated: November 10, 2014 |
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/s/ Dan J. Cohrs |
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Dan J. Cohrs |
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Chief Financial Officer |
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(Principal Financial Officer) |
Exhibit 32.1
RENTECH, INC.
CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Quarterly Report of Rentech, Inc., (the Company) on Form 10-Q for the period ended September 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, D. Hunt
Ramsbottom, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
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(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act); and |
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(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.
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Dated: November 10, 2014 |
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/s/ D. Hunt Ramsbottom |
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D. Hunt Ramsbottom |
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President and Chief Executive Officer |
This certification accompanies the report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be
deemed filed by the Company for purposes of Section 18 of the Exchange Act. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the
extent that the Company specifically incorporates it by reference.
Exhibit 32.2
RENTECH, INC.
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Quarterly Report of Rentech, Inc., (the Company) on Form 10-Q for the period ended September 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Dan J.
Cohrs, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
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(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act); and |
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(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.
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Dated: November 10, 2014 |
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/s/ Dan J. Cohrs |
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Dan J. Cohrs |
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Chief Financial Officer |
This certification accompanies the report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be
deemed filed by the Company for purposes of Section 18 of the Exchange Act. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the
extent that the Company specifically incorporates it by reference.
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