Q4 2011 Earnings Call
December 15, 2011 2:30 pm ET
Julie Dawoodjee - Vice President of Investor Relations & Communications
Dan J. Cohrs - Chief Financial officer, Executive Vice President and Treasurer
D. Hunt Ramsbottom - Chief Executive Officer, President and Executive Director
Lucas Pipes - Brean Murray, Carret & Co., LLC, Research Division
Pavel Molchanov - Raymond James & Associates, Inc., Research Division
Matthew Farwell - Imperial Capital, LLC, Research Division
Previous Statements by RTK
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I would now like to turn the conference over to Julie Dawoodjee, Vice President of Investor Relations. Please go ahead, ma'am.
Thank you. Welcome to Rentech's 2011 Fiscal Fourth Quarter and Full Year Conference Call for the period ended September 30, 2011. During this call, Hunt Ramsbottom, President and CEO of Rentech, will summarize our company's activities during the year. 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, expect, believe 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 December 15, 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 law.
Now, I would like to turn the call over to Hunt Ramsbottom, President and CEO of Rentech.
D. Hunt Ramsbottom
Thank you, Julie. Good morning, everyone, and thank you for joining us today. We're ending 2011 as a financially strong company with a solid balance sheet and we're well positioned in both our energy and fertilizer businesses. Today, we have a strong cash position, we own 61% of Rentech Nitrogen valued at approximately $400 million.
We expect to receive cash distributions of approximately $54 million from Rentech Nitrogen in fiscal 2012. We are significantly reducing our operating and project costs. We expect to build on our cash position during this coming fiscal year. We're currently expanding our fertilizer business and seeking further expansions and growth opportunities in that segment. And we have changed our approach to energy project development, looking only at high return investments that do not require significant spending from us before all the financing and/or partners are in place.
On November 9, we closed the initial public offering of Rentech Nitrogen Partners, which is a Master Limited Partnership we formed to own, operate and expand our nitrogen fertilizer business. We own 100% of the general partner of Rentech Nitrogen, which means that we will continue to manage that business. In the IPO, we priced 15 million common units at $20 per unit, raising $300 million in gross proceeds and establishing an initial market value of $765 million.
We completed the IPO process within 3 months of the filing of the registration statement. We believe that we're able to have a successful IPO during a challenging market due to strong sector fundamentals and our position within the market. We believe that, that asset was undervalued under the previous structure as a wholly-owned subsidiary of Rentech and the current valuation of the fertilizer business now supports that view.
Prior to the announcement of the contemplated IPO, the market cap of Rentech as a consolidated company was $218 million. As of yesterday, the market capitalization of Rentech, which now owns approximately 61% of Rentech Nitrogen was approximately $365 million and the market capitalization of Rentech Nitrogen is about $665 million.
A portion of the net proceeds of the IPO were used to repay the plant's debt removing the restrictions that had previously limited our access to the cash flows from the plant. Now, under the current structure, we're entitled to receive approximately 61% of the plant's cash available for distribution. Our expected distribution for 2012 is forecasted to be approximately $54 million. We received approximately $137 million in connection with the close of the IPO, which brought our cash position to roughly $200 million at that time.
Based on our current forecast, we expect to build cash as we receive distributions from Rentech Nitrogen in fiscal 2012 absent any unplanned investments, debt repayments or acquisitions. We're on the path to reduce our cash spend outside the fertilizer business by approximately 40% from fiscal year 2011 with the expectation of further reductions.
Our balance sheet is the strongest it's ever been. We intend to maintain our strong liquidity position by being very cautious and deliberate about any capital deployment with a focus on relatively small projects and attractive returns for any investments that we may make. In August, we started to implement a business strategy to reduce the amount of capital we're willing to invest in order to deploy our technologies and commercial projects and to be much more open to partners and their technologies.