Rentech meets EBITDA goals in 2009, restates earnings, adjusts accounting

Rentech Inc. reports that its wholly-owned nitrogen producer, Rentech Energy Midwest Corp. (REMC), reported EBITDA of $65.5 million for the fiscal year ending Sept. 30, 2009, compared to the year-ago $53.8 million. This was in line with expectations; however, EBITDA would have been higher, at $71.5 million, had Rentech not had to make a $6 million restatement regarding natural gas purchases. The restatement had the effect of adding $6 million to fiscal 2008 EBITDA and operating earnings and deducting it from 2009 totals. The restatements impact results going back to 2007. REMC operating income for fiscal 2009 was $57 million, versus 2008’s $52.7 million.

Rentech told analysts that as of Dec. 15 REMC has shipped and/or pre-sold slightly more than half of its ammonia shipments and slightly more than a quarter of its UAN shipments for fiscal 2010. Rentech expects 2010 volumes from its East Dubuque, Ill., plant to be at normal levels. Capacity utilization is expected to be good, and gas prices low. Beyond that, Rentech had no 2010 predictions for REMC EBITDA; however, according to the company, EBITDA must be around $25 million to meet recently adjusted credit covenants. The company said when it adjusted the covenants it gave itself plenty of room to be sure it could hit them in a downside case.

As for the fourth quarter ending Sept. 30, 2009, the drop in REMC revenues was due to economic weakness and weak demand for fertilizer products. It also reflects a significantly lower price for fertilizer products than in the year-ago quarter. In the year-ago period, REMC was still delivering very high priced tons that had been pre-sold when the market was strong.

Rentech uses REMC’s cash flow to fund the development of its alternative energy technology. Company-wide, fiscal 2009 net income was $3 million ($.02 per diluted share) on sales of $183 million, versus fiscal 2008’s loss of $56.9 million ($.34 per share) and $211 million. Operating income was $13.9 million, versus the year-ago loss of $50.5 million.

For the fourth quarter ending Sept. 30, Rentech had a net loss of $6.35 million ($.03 per share) on sales of $24.7 million, versus the year-ago loss of $2.9 million ($.01 per share) and $74.6 million.

REMC’s average ammonia price actually increased 37 percent in fiscal 2009, while UAN was off 13 percent. This was because most of the spring 2009 ammonia shipments were on product prepayment contracts, most of which were entered into when fertilizer prices were at their peak. However, REMC entered into only about half of its spring 2009 UAN prepayment contracts after prices started to decline.

Rentech has changed its balance sheet treatment of pre-sale contracts, which will have no impact on the statement of operations. The company previously recorded the entire amount of firm take-or-pay pre-sale contracts as deferred revenue, and recorded accounts receivable for the difference between the total contract amount and the cash deposits received. It will now record deferred revenue only to the extent of cash deposits received, and will record no accounts receivable until products have been shipped.

Rentech has recently announced news on its energy technology business, including the fact that some 13 airlines have signed a Memorandum of Understanding for a future definitive supply agreement for certified jet fuel from Rentech’s Natchez Project, a proposed synthetic fuels and power facility in Adams County, Miss.

In other technology news, Rentech and ClearFuels Technology Inc. report that they have been selected to receive up to $23 million as a grant from the U.S. Department of Energy to construct a biomass gasifier at Rentech’s Energy Technology Center in Denver. The gasifier will be integrated with Rentech’s Product Development Unit for the production of renewable synthetic fuels from biomass. Rentech has a 25 percent strategic ownership interest in ClearFuels.

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