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Rentech Acquires Largest Producer of Wood Pellets

Los Angeles, California, USA 01 May 2014 -- Rentech, Inc. (RTK) today announced that it has acquired New England Wood Pellet (NEWP), the largest producer of wood pellets for the U.S. heating market. A slide presentation regarding today's announcement appears on Rentech’s website, www.rentechinc.com. The Company’s management will discuss the acquisition on its first quarter earnings conference call, which is scheduled for May 13, 2014.

NEWP, established in 1992, operates three wood pellet facilities with a combined annual production capacity of 240,000 tons. The facilities are strategically located in the U.S. Northeast, which is the largest domestic market for consumption of wood pellets for heating. NEWP generated EBITDA of approximately $7.4 million in 2013. Further explanation of EBITDA, a non-GAAP financial measure, and a reconciliation of NEWP’s EBITDA to operating income have been included below in this press release.

“NEWP is the leader in the growing U.S. market for wood pellets used in heating applications. The acquisition brings additional cash flows and profitability to our wood fibre business. In addition, NEWP’s business broadens our product offerings, customer base and geographic markets,” said D. Hunt Ramsbottom, president and chief executive officer of Rentech.

Acquisition Highlights

NEWP is the leader in a well-established and growing market

Known for its high quality products, NEWP commands an approximate 15% share of the market for heating pellets in the U.S. Northeast. The company is one of the largest suppliers of wood pellets to major retailers including Home Depot, Lowe’s, Tractor Supply and Wal-Mart.

Wood pellets burned in modern heating appliances are a clean and convenient source of economical heating. Prices for wood pellets are competitive with delivered retail prices for natural gas, and lower than prices for heating oil, propane, or electricity. Wood pellet prices have historically been more stable than prices of heating oil or natural gas. Low population density in NEWP’s markets makes the distribution of natural gas inefficient and expensive.

Approximately 1.5 million tons of wood pellets are consumed annually in the U.S. Northeast. According to independent forecasts, wood pellet consumption in the region is expected to increase at an annual growth rate of 7% through 2018. Customer demand for wood pellets in this market exceeds available regional production.

NEWP diversifies Rentech’s wood pellet business

By providing access to the domestic heating market, the acquisition broadens Rentech’s wood pellet product offerings, expands its customer base, and opens up new geographic markets.

NEWP has a strong financial profile

The acquisition is immediately accretive to Rentech’s wood fibre processing business. Consistent with its 2013 performance, NEWP’s business is forecasted to have revenues of approximately $44.8 million, operating income of approximately $4.6 million and EBITDA of approximately $7.6 million for the twelve months ending December 31, 2014. A reconciliation of forecasted EBITDA to operating income for NEWP is included below.

Financial Highlights of the Acquisition

Rentech acquired all of the equity interests of NEWP for $34.5 million in cash, funded from proceeds of Blackstone/GSO’s recent $150 million investment in Rentech. Rentech will assume NEWP’s cash of $2.4 million and debt of approximately $13 million, for a total initial purchase price of $45.1 million. The initial acquisition price equals 6.1 times NEWP’s 2013 EBITDA. Rentech expects an after-tax return on the acquisition in the mid-teens.

The purchase agreement provides for up to $5 million of potential earn-out consideration, to be paid in cash to the sellers. The earn-out consideration would be earned ratably if NEWP’s 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 NEWP’s 2014 EBITDA were to exceed $8 million.

Disclosure Regarding Non-GAAP Financial Measures

EBITDA is defined as operating income plus depreciation expense. EBITDA is used as a supplemental financial measure by management and by external users of Rentech’s financial statements, such as investors and commercial banks, to assess:

  • The financial performance of Rentech’s assets without regard to financing methods, capital structure or historical cost basis; and
  • Rentech’s operating performance and return on invested capital compared to those of other companies, without regard to financing methods and capital structure.

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

The table below reconciles NEWP’s 2013 EBITDA to operating income for the twelve months ended December 31, 2013. The table also reconciles NEWP’s forecasted EBITDA to operating income for the twelve months ending December 31, 2014.

(in millions of dollars)            

Twelve Months
December 31, 2013


Twelve Months
December 31, 20141

Operating Income             $ 4.4         $ 4.6
Plus: Depreciation & Amortization             $ 3.0         $ 3.0
EBITDA             $ 7.4         $ 7.6

1In 2014, Rentech will recognize EBITDA from the date of the acquisition through December 31, 2014.

About Rentech, Inc.

Rentech, Inc. (RTK) owns and operates wood fibre processing, wood pellet production and nitrogen fertilizer manufacturing businesses. Rentech offers a full range of integrated wood fibre services for commercial and industrial customers around the world, including wood chipping services, operations, marketing, trading and vessel loading, through its subsidiary, Fulghum Fibres. The Company’s New England Wood Pellet subsidiary is a leading producer of bagged wood pellets for the U.S. heating market. Rentech is developing wood pellet facilities in East Canada to supply pellets to utilities. Rentech manufactures and sells nitrogen fertilizer through its publicly traded subsidiary, Rentech Nitrogen Partners, L.P. (RNF). Please visit www.rentechinc.com and www.rentechnitrogen.com for more information.

Forward Looking Statements

This news release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 about matters such as: expected growth in wood pellet consumption in the Northeast; NEWP’s expected financial performance and the return on the Company’s investment; and the Company’s wood fibre processing business. These statements are based on management’s current expectations and actual results may differ materially as a result of various risks and uncertainties. Factors that could cause actual results to differ from those reflected in the forward-looking statements are set forth in Rentech’s press releases and periodic reports filed with the Securities and Exchange Commission, which are available via Rentech’s website at www.rentechinc.com. The forward-looking statements in this news release are made as of the date of this release and Rentech does not undertake to revise or update these forward-looking statements, except to the extent that it is required to do so under applicable law.


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