Rentech, Inc. (RTK)

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Rentech (RTK)

Q3 2011 Earnings Call

August 10, 2011 1:00 pm ET


Julie Dawoodjee - Vice President of Investor Relations & Communications

Unknown Speaker -

Dan Cohrs - Chief Financial officer, Executive Vice President and Treasurer

D. Ramsbottom - Chief Executive Officer, President and Executive Director


Pavel Molchanov - Raymond James & Associates, Inc.

Matthew Farwell - Imperial Capital, LLC

Unknown Analyst -

Jeremy Sussman - Brean Murray, Carret & Co., LLC



Ladies and gentlemen, thank you for standing by. Welcome to the Rentech Third Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, Wednesday, August 10 of 2011. I would now like to turn the conference over to Julie Dawoodjee, Vice President of Investor Relations. Please go ahead, ma'am.

Julie Dawoodjee

Thank you. Welcome to Rentech's 2011 Fiscal Third Quarter Conference Call for the quarter ended June 30, 2011. During this call, Hunt Ramsbottom, President and CEO of Rentech, will summarize our company's progress during the quarter. Dan Cohrs, our Chief Financial Officer, will give a financial review of the fiscal period and provide comments on Rentech's financial position. We will then open the lines for questions. [Operator Instructions]

Please be advised that certain information discussed on this conference call will contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. They can be identified by the use of terminology such as may, will, believe, expect and other comparable terms. You are cautioned that while forward-looking statements reflect our 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 and risk factors detailed from time to time in the company's periodic reports and registration statements filed with the Securities and Exchange Commission. The forward-looking statements in this call are made as of August 10, 2011, and Rentech does not undertake to revise or update these forward-looking statements, except to the extent that it is required to do so under applicable laws.

Now, I would like to turn the call over to Hunt Ramsbottom, President and CEO of Rentech.

D. Ramsbottom

Thank you, Julie. Good morning, everyone, and thank you for joining us today. During this call, I'd like to discuss how we have taken recent steps to unlock the value of REMC, secure a source of ongoing capital to fund our alternative energy business, restructure our balance sheet to further strengthen our liquidity, adopt frameworks for R&D and project development that are intended to reduce our potential needs for capital and ensure we'll create value with our capital spending, and seek accretive acquisitions in the alternative energy space to gain more immediate access to cash flows in this business segment.

I'd like to walk you through each one of these initiatives. Unlocking the value of REMC. Last week Rentech's nitrogen partners filed a registration statement with the SEC for initial public offering of the REMC fertilizer business. We're excited about the opportunity this presents us with, although we're very limited as to what we can say about the proposed IPO while the registration statement is in the normal SEC review process. The completion of the IPO is subject to numerous factors, including market conditions and we can assure you that this will be successfully completed.

But I wanted to give you a brief overview of what the offering could mean for Rentech's shareholders. In July, we formed a new limited partnership called Rentech Nitrogen Partners to hold our fertilizer assets upon the successful completion of initial public offering. On August 5, Rentech Nitrogen Partners filed an S-1 registration statement proposing to become a publicly traded limited partnership, commonly referred to as master limited partnership or MLP. The MLP structure provides tax advantages, because MLPs are not subject to entity-level federal income taxes. The MLP will be managed and controlled by a general partner, which would be owned exclusively by Rentech and Rentech will select the general partners' board members.

We intend to apply to the New York Stock Exchange for a listing of the MLP's common units, representing limited partner interests under the symbol RNF. There are a number of publicly traded fertilizer companies today, but there are only 2 other pure-play public nitrogen fertilizer companies in the Americas and Western Europe, CBR Partners and Terra Nitrogen, both of which are also structured as MLPs. We currently intend to maintain majority ownership of Rentech Nitrogen Partners upon the closing of the IPO. The S-1 lists the proposed maximum aggregate offering price as $250 million, but that number is subject to change and all decisions regarding this transaction size and valuation are subject to market conditions at the time of the offering.

As stated in the S-1, we plan to grow the fertilizer business organically, as well as through selective acquisitions of similar assets. In response to increased demand for ammonia in RMC's market over the last 10 years. We commenced an expansion project at our facility that's designed to increase ammonia production capacity. We've begun work on certain long lead time items, and we are continuing to evaluate the market to determine the benefits of the expansion project. The completion of the project requires a finalization of a budget, ongoing engineering work and additional funding, which could come from IPO proceeds or from capital raised at the plant level.

A successful IPO would mean -- would help us secure a source of ongoing capital to fund our alternative energy business. We believe that the public MLP structure of our fertilizer assets would provide value to Rentech shareholders if the IPO is completed, by giving us access to capital for our businesses on attractive terms, without issuing Rentech's stock. The MLP will distribute cash generated in each quarter, as described in the S-1, following the IPO cash distributions received by Rentech from the MLP would be in proportion to its ownership. As an expected majority owner, we'd receive the majority of the distributions.

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