Acquisition of Agrifos LLC
November 1, 2012
Forward-Looking Statements
This press release contains forward-looking statements about matters such as:
forecasted EBITDA, operating income and accretion; the outlook for the
business; our ability to consummate the acquisition of Agrifos and the related
financing; successful integration and future performance of acquired assets or
businesses; and successful implementation and execution of potential internal
growth projects. These statements are based on management’s current
expectations and actual results may differ materially as a result of various risks
and uncertainties. Other factors that could cause actual results to differ from
those reflected in the forward-looking statements are set forth in Rentech
Nitrogen’s prior press releases and periodic public filings with the Securities
and Exchange Commission, which are available via Rentech Nitrogen’s website
at www.rentechnitrogen.com. The forward-looking statements in this press
release are made as of the date of this press release and Rentech Nitrogen 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.
2
Transaction Overview
Acquisition Overview
Rentech Nitrogen Partners signed a definitive agreement to acquire
Agrifos’ fertilizer production facility in Pasadena, TX
Acquisition is expected to be accretive to cash
distributions per unit beginning in 2013
•
3rd largest producer of ammonium sulfate (AS) fertilizer in North America
•
Largest producer of synthetic granulated AS in North America
•
Other products include ammonium thiosulfate (ATS) fertilizer and sulfuric acid (SA)
•
Ammonia and sulfur used as raw materials
•
Relatively stable product margins
•
Premium pricing for superior quality AS product
•
Majority of sales within U.S. and Brazil
•
Strategically located on Houston Ship Channel, with access to vessels, barge, rail, and
highways
•
Several organic growth opportunities identified for multi-year growth
•
Diversifies Rentech Nitrogen’s products, markets, location, and raw materials
•
Acquisition financing commitments provided by lender group led by GE Capital Markets
4
Transaction Highlights
Consideration
•
$158 million initial consideration at close
˗
•
$138 million in cash from amended credit facility and $20 million in RNF common units
Maximum earn-out potential of $50 million paid in RNF common units or cash at RNF’s
option based on Adjusted EBITDA during two years after closing
˗
Earn-out calculated as 2x the amount of cumulative Adjusted EBITDA earned over the 2 year
period in excess of $55 million; earn-out capped at $50 million
Financial Impact
•
•
•
•
Expected to be accretive to cash distributions per unit beginning in 2013
No material impact anticipated to 2012 projected cash available for distribution per unit
Forecasted 2013 EBITDA of approximately $25 million1
Initial purchase price equals 6.3x forecasted 2013 EBITDA; Maximum purchase price
equals 5.2x trailing EBITDA
Timeline
•
•
1An
Subject to customary closing conditions
Expected to close within 1 week
explanation of EBITDA, a non-GAAP financial measure, and a reconciliation of projected EBITDA to operating income is included on slide 37.
5
Strategic Rationale
Strategic Rationale
•
Ammonia Hedge for
East Dubuque Facility
•
˗ Agrifos purchases ammonia based on lower Tampa prices and East
Dubuque sells ammonia at higher Corn Belt prices
•
Margin Stability
•
•
Diversifies Crop &
Market Concentration
The Pasadena facility buys approximately the same amount of
ammonia as East Dubuque sells
Captures ammonia premium between Tampa and Corn Belt
AS prices and product margins generally have lower volatility than
principal product prices and margins at East Dubuque
AS prices historically correlate with prices of ammonia and sulfur
AS is used for multiple crops such as soybeans, potatoes, cotton,
canola, alfalfa, wheat & corn
˗ East Dubuque’s products are mostly applied to corn
•
Agrifos’ customers span across U.S. & Brazil
˗ East Dubuque’s customers are within the Corn Belt
Reduces Single
Location Risk
•
•
Mitigates impact of any site-specific events
Provides alternative revenue stream
•
AS is applied to multiple crops in the U.S. and Brazil which are
grown throughout the year
Reduces Seasonality
of Sales
Future Accretive Growth
Opportunities
˗ East Dubuque’s products are heavily weighted toward fall and spring
application periods
•
•
•
20% increase in AS capacity through debottlenecking project
Cogeneration opportunity
Terminalling opportunity
7
Assets and Products
Plant & Location Advantages
Agrifos plant site is located on approximately 85 acres in Pasadena, Texas
•
Sulfuric acid plant and granulated ammonium sulfate plant
•
6,200 feet of Houston Ship Channel frontage
•
2 deep-water docks, providing access for international deliveries
˗
˗
˗
•
Low-cost barge access to the Mississippi waterway system
Access to key waterways for international deliveries
Significant supply of raw materials in the immediate vicinity
Rail service by BNSF and Union Pacific
˗
˗
Advantage for distributing product west of the Mississippi
Ability to load unit trains, which allows for favorable transportation costs
•
Easy access to several interstate highways
•
Assets include solid fertilizer warehouses, ammonia dock and tank and product storage facilities
and tanks
9
Production and Storage
Products
Approximate
Production (TPY)
Storage (Tons)
Ammonium Sulfate
575,000
80,000
Sulfuric Acid
570,000
27,000
Ammonium Thiosulfate
57,000
14,000
10
Agrifos Products Overview
Primary Product: Ammonium Sulfate (~82% of revenue)
•
AS is a heavily utilized dual-nutrient fertilizer product
˗ Ammonium Sulfate = 21% nitrogen / 24% sulfur
•
•
•
High quality solid fertilizer sold at premium pricing for multiple crop application including soybeans, wheat,
corn, potatoes, cotton, canola and alfalfa
Granular fertilizer with less seasonal variability as compared to our existing nitrogen compounds
Usually applied via broadcast blended application
Secondary Products: Sulfuric Acid and Ammonium Thiosulfate
Sulfuric Acid (~12% of revenue)
•
Chemical intermediate with wide variety of uses
˗ Sulfuric Acid = 33% sulfur / 65% hydrogen
•
Made directly from elemental sulfur and suitable for most industrial applications
Ammonium Thiosulfate (~6% of revenue)
•
Co-product of the sulfuric acid production process
˗ Ammonium Thiosulfate= 12% nitrogen / 26% sulfur
•
•
•
Liquid fertilizer, typically combined with UAN
Helps increase nitrogen use efficiency in crops
Typically applied via spraying or drip system
Note: Revenue represents year to date sales
11
Growing Demand for Sulfur – “The Fourth Nutrient”
•
Without adequate sulfur, crops cannot reach full potential in terms of yield, quality or
protein content; a lack of sulfur also makes the crops inefficient in utilizing nitrogen and
phosphate
•
Throughout the 1980s & 1990s, few farmers included sulfur in their fertilizer programs,
primarily because of adequate sulfur concentration in the soil from “acid rain”
•
Today, progressive farmers are evaluating their need for sulfur; or what many agronomists
are calling “the fourth major nutrient”
•
The sulfate form of sulfur, which is found in Agrifos’ ammonium sulfate, is the most
available form of sulfur for the plant
“With fertilizer, we’re generally glad to get a $3 return on every
dollar we put in. In many cases with sulfur, it’s not uncommon to
get – and this is a conservative estimate – a $9 to $10 return,
particularly on wheat or irrigated corn.”
- Dr. Bill Segars
University of Georgia, Crop and Soil Sciences
Source: “Sulphur: Do Crops in the South Get Enough?,” The Sulphur Institute
12
What is Ammonium Sulfate?
• Ammonium sulfate is a heavily utilized dual nutrient fertilizer product
˗ Combines the supply of nitrogen and sulfur into one product
• Most readily available form of sulfur for crops once applied to the soil
˗ Sulfur content provides benefit to high pH alkaline soil environments
• Ammonium sulfate is generally blended with other nitrogen, phosphate, potassium
and potash granular fertilizers
˗ Can be mixed with many commonly applied fertilizers such as DAP, MAP and granular urea
• Granular sizing is extremely important for blending and application purposes
• Relative to urea, ammonium sulfate has:
˗
Lower volatilization
˗
More stability in the soil once applied
˗
Much longer shelf life
Agrifos’ Ammonium Sulfate
13
Agrifos’ High Quality AS Product
• Ammonium sulfate diversifies Rentech Nitrogen’s product offerings, crop reliance and customer base
• Agrifos produces and sells a premium product in an industry dominated by lower quality material
˗ Agrifos’ synthetic granulated AS product combines sulfuric acid and ammonia
˗ Majority of AS produced worldwide is a lower grade by-product of the caprolactam production process
• Only 21% and 25% of AS produced worldwide and in NA, respectively, is of similar quality to Agrifos’
• Physical characteristics and benefits of Agrifos’ products include:
˗ Sized to the specifications of other nitrogen, phosphate, potash and potassium fertilizer products
˗ Designed to result in less segregation during the blending process
˗ Improved stability and enhanced shelf life
˗ Reduced caking during transportation and storage
Ammonium Sulfate as By-Product of
Caprolactam Production Process
Agrifos’ Ammonium Sulfate
Granular Material
14
Direct Application Coarse (Mid-Granularity)
Agrifos: Major AS Producer in North America
Top 5 Ammonium Sulfate Producers in North America:
Synthetic AS Production
in North America
Company
1
2
3
4
5
Total AS Production
(synthetically produced & produced
as by-product)
Annual
Production (tpy)
Company
~575
Annual Production
(tpy)
1
~1,850
2
~725
3
~575
4
~385
5
~315
~385
~215
~140
~25
Source: Blue Johnson, except for Agrifos’ production, which is stated at nameplate capacity.
All producers listed produce ammonium sulfate for agricultural sale except for GAC Chemical Corporation which produces ammonium sulfate for industrial use.
15
Acquisition Allows RNF to Expand Geographic Footprint
RNF’s Existing Core
Market1
Agrifos AS Sales2
Color
Volume Range (st)
10,600 to 67,500
8,400 to 10,600
5,100 to 8,400
1,000 to 5,100
0 to 1,000
Leased warehouse locations from marketers
1RNF’s
core market is within a 200 mile radius of the East Dubuque facility.
on historical sales at the Pasadena facility.
Low-cost Gulf access to
Southwest and Central
U.S. as well as export
markets
2Based
16
Raw Materials and Product Marketing & Distribution
•
Raw materials
˗
Ammonia:
• Provided by large ammonia producer under contract
• Dedicated, time-chartered barge
• Rail can be used as secondary transportation method
• Based on Tampa index pricing1
˗
Sulfur:
• Provided by major refineries in the area
• Delivered mostly by truck
• Based on Tampa index pricing1
•
Products
˗
˗
˗
1Plus
Each of the plant’s 3 products is distributed under long-term contracts with 3 major
distributors, one for each product
Most product is distributed by water and rail
Access to both domestic and international markets
assumed transportation and logistics costs and negotiated discounts.
17
Growth in AS Consumption for Key Regions
Historical World Consumption (MMT)1
Historical Brazil Consumption (MMT)1
2.8
27.0
2.0
1.8
20.2
17.9
16.9
16.6
17.7 17.7
19.1
18.6 18.8
2.4
2.4
25.4
1.5
21.1
2.1
1.8
1.9
1.7
1.6
1.8
1.4
1.2
19.0 19.5
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2015 2020
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2015 2020
Source: IFA, CRU
1Apparent consumption calculated as production plus imports less exports
Source: IFA, CRU
1Apparent consumption calculated as production plus imports less exports
Historical North America Consumption (MMT)1
Top Ammonium Sulfate Consuming Countries (MMT)
~55% of 2012 worldwide consumption
2.3
2.9
2.7
2.4
2.4
2.6
3.1
2.9
2.8
2.4
2.1
2.2
3.2
2.5
2.5
1.3
2.2
1.3
1.1
Brazil
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2015 2020
Source: IFA, CRU
1Apparent consumption calculated as production plus imports less exports
Source: CRU
18
U.S.
Indonesia
Mexico
Turkey
1.1
China
1.0
Malaysia
0.9
0.9
Vietnam
Germany
0.8
Canada
Operating History
and
Future Growth Opportunities
History of Agrifos’ Facility
19491951
1953
1960
1979
1996
1998
Plant owned • NPK
• DAP
• Mobil Oil • Tolling • Agrifos •
by Mathieson production production
(later
agreement purchases
(later Olin
starts
starts
ExxonMobil) with Agrifos the plant
from Exxon
Industries)
purchases
begins
Mobil Corp.
and produced
plant
sulfuric acid
and
ammonium
sulfate
•
2011
2011
Phosphate • Plant
production conversion,
ceases in ammonium
April
sulfate
production
commences
in May
Plant Conversion to Ammonium Sulfate Production in 2011
•
Between 1960 and 2011, the facility produced phosphate fertilizers under various ownership groups
•
Phosphate fertilizer production required the disposal of phosphogypsum in dedicated, on-site phosphogypsum stacks
•
In anticipation of the last phosphogypsum stack becoming full in 2011, Agrifos decided to convert the existing facility
to produce ammonium sulfate
•
The conversion utilized much of the existing equipment including the sulfuric acid plant, the granulator, ammonia
storage and warehouses
•
ExxonMobil has executed a consent order and agreement with the environmental regulating agencies requiring it to
manage and fund the closure of the phosphogypsum stacks at the site
20
Ammonium Sulfate: Producing at Nameplate Capacity
Agrifos’ performance in bringing up the AS plant has steadily improved since start-up
•
AS plant operations commenced in June 2011
•
Within months, the plant was averaging production of 1,200 tpd
•
Plant has run at instantaneous rates of 1,600 tpd on a prolonged basis1
•
Plant achieved nameplate daily production rate of 1,750 tpd in September and is now running at
this rate
1Instaneous
rate is the rate at one given moment which does not include down time.
21
Multi-Year Growth – Future Projects
Acquisition provides multiple opportunities for future organic growth to increase incremental
cash distributions
Identified near-term opportunities:
•
Ammonium Sulfate Debottlenecking Project: Pre-financed through new debt capacity1
˗
•
•
Engineering studies completed
•
Additional production should contribute to distributions in 2H14
•
SA available for sale (lowest margin product) will decline by over 50% to increase AS production (highest margin product)
Potential Cogeneration Project: May be financed through accordion feature of new debt
facilities2
˗
˗
•
Plan to begin work in 2013 to increase AS capacity by 20% from 1,750 tpd to 2,100 tpd
Can install steam turbine and use steam currently being vented from SA plant to produce baseload power
Facility could consume some of the power generated (electricity expense declines) with remaining power
exported and sold in deregulated TX market (revenue generation)
Potential terminalling of fertilizer or other products using existing assets, deep water docks
and bulk solid and liquid storage capacity
1Included
in our financing package for this transaction
feature of debt financing package for this transaction requires additional lending commitments
2Accordion
22
Plant Economics
Consolidated RNF Pro Forma Revenue & Gross Profit by
Major Product
Revenue by Major Product
Gross Profit by Major Product
Ammonium Thiosulfate
Ammonium Thiosulfate
Sulfuric Acid
Sulfuric
Acid
Nitric Acid
Ammonium
Sulfate
Ammonia
Ammonia
UREA - Granulated &
Liquor
Ammonium Sulfate
UAN
UAN
UREA Granulated &
Liquor
Nitric Acid
24
24
Production Flow Diagram & Upgrading Rates
Sulfur in Sulfuric Acid: 0.328
Sulfur in ATS: 0.271
Sulfur
Ammonia in AS: 0.250
Ammonia in ATS: 0.151
Sulfuric Acid
Plant
Sulfuric Acid
- Liquid -
Ammonia
Ammonium
Thiosulfate
(ATS)
- Liquid -
Granulation Plant
Ammonium
Sulfate
(AS)
- Solid -
Sulfuric Acid in AS: 0.750
Upgrading Rates (tons)
Sulfur to Sulfuric Acid
Ammonia to Ammonium Thiosulfate
Sulfur to Ammonium Thiosulfate
Ammonia to Ammonium Sulfate
Sulfuric Acid to Ammonium Sulfate
Sulfur to Ammonium Sulfate (by way of Sulfuric Acid)
25
0.328
0.151
0.271
0.250
0.750
0.246
Production Summary
Estimated Production & Consumption – Current (1)
(tons rounded to nearest 1,000)
Consumption
Production Available for Sale
Production
1,650 TPD (2)
95% On-stream (3)
1,750 TPD (2)
90% On-stream (3)
570,000 TPY
575,000 TPY
All SA produced in
excess of upgrade
requirements is sold
170 TPD (2)
95% On-stream (3)
202,000 TPY
Sulfur
152,000 TPY
Ammonia
57,000 TPY
139,000 TPY
Sulfuric Acid
Ammonium Sulfate
Sulfuric Acid
Ammonium Thiosulfate
Projected Production & Consumption – Post-debottlenecking (1st Half 2014)
(tons rounded to nearest 1,000)
Consumption
Production
Production Available for Sale
2,100 TPD (2)
90% On-stream (3)
1,650 TPD (2)
95% On-stream (3)
690,000 TPY
570,000 TPY
170 TPD (2)
95% On-stream (3)
202,000 TPY
181,000 TPY
Sulfur
Ammonia
Sulfuric Acid
Ammonium Sulfate
Note: Next bi-annual sulfuric acid plant turnaround expected to occur in 2014.
(1) Assumes current nameplate production capacity on an annualized basis.
(2) TPD represents nameplate capacity rate.
(3) Assumes standard on-stream rates.
26
53,000 TPY
57,000 TPY
Sulfuric Acid
Ammonium Thiosulfate
Historical Ammonium Sulfate Pricing & Margin
Ammonium Sulfate Prices and Margin Over Raw Materials
($ per short ton)
$500
$450
$400
$350
$300
$250
$200
$150
$100
$50
$0
1/3/2005
1/3/2006
1/3/2007
1/3/2008
1/3/2009
Ammonium Sulfate (Southern Plains)
1/3/2010
1/3/2011
1/3/2012
Margin over raw materials
Source: Green Markets
Notes on margin over raw materials calculation:
• Includes 25% of the indexed price of ammonia and 25% of the indexed price of sulfur.
• Reflects Tampa Ammonia and Central Florida sulfur indexed prices.
A $1/ton increase in ammonia pricing results in a $0.25/ton increase in ammonium sulfate raw materials cost
27
Ammonium Sulfate Raw Materials Margin
Illustrative Ammonium Sulfate Raw Materials Margin Calculation
Ammonia - Delivered ($/st) (1)(2)
Ammonia in AS
Ammonia cost in AS ($/st)
x
Sulfur - Delivered ($/st) (1)(3)
Sulfur in AS
Sulfur cost in AS ($/st)
Current Market
Pricing
$669
0.250
$167
x
Ammonium Sulfate netback pricing ($/st) (4)
Less: Ammonia cost in AS ($/st)
Less: Sulfur cost in AS ($/st)
Ammonium Sulfate raw materials margin ($/st)
+
(1) Per Green Markets plus assumed transportation and logistics costs and negotiated discounts.
(2) Ammonia - Tampa indexed pricing generally shown in $/metric ton (0.907 x $/metric ton = $/short ton).
(3) Sulfur - Tampa indexed pricing generally shown in $/long ton (0.893 x $/long ton = $/short ton).
(4) Per Green Markets Ammonium Sulfate - Southern Plains index.
28
$162
0.246
$40
$315
(167)
(40)
$108
Ammonium Thiosulfate Raw Materials Margin
Illustrative Ammonium Thiosulfate Raw Materials Margin Calculation
Ammonia - Delivered ($/st) (1)(2)
Ammonia in ATS
Ammonia cost in ATS ($/st)
x
Sulfur - Delivered ($/st) (1)(3)
Sulfur in ATS
Sulfur cost in ATS ($/st)
Current Market
Pricing
$669
0.151
$101
x
Ammonium Thiosulfate pricing ($/st) (4)
Less: Ammonia cost in ATS ($/st)
Less: Sulfur cost in ATS ($/st)
Ammonium Thiosulfate raw materials margin ($/st)
+
(1) Per Green Markets plus assumed transportation and logistics costs and negotiated discounts.
(2) Ammonia - Tampa indexed pricing generally shown in $/metric ton (0.907 x $/metric ton = $/short ton).
(3) Sulfur - Tampa indexed pricing generally shown in $/long ton (0.893 x $/long ton = $/short ton).
(4) Implied pricing at an assumed raw materials margin of $67/st, which approximates recent historical levels.
29
$162
0.271
$44
$212
(101)
(44)
$67
Sulfuric Acid Raw Materials Margin
Illustrative Sulfuric Acid Raw Materials Margin Calculation
Sulfur - Delivered ($/st) (1)(2)
Sulfur in SA
Sulfur cost in SA ($/st)
x
Sulfuric Acid pricing ($/st) (3)
Less: Sulfur cost in SA ($/st)
Sulfuric Acid raw materials margin ($/st)
Current Market
Pricing
$162
0.328
$53
+
(1) Per Green Markets plus assumed transportation and logistics costs and negotiated discounts.
(2) Sulfur - Tampa indexed pricing generally shown in $/long ton (0.893 x $/long ton = $/short ton).
(3) Implied pricing at an assumed raw materials margin of $41/st, which approximates recent historical levels.
30
$94
(53)
$41
Total Raw Materials Margins
Total Annualized Raw Materials Margins – Current
($ in 000’s)
$70,000
$108 / st
$60,000
$62,124
$50,000
$40,000
$30,000
$20,000
$10,000
$67 / st
$3,819
$5,624
Ammonium
Thiosulfate
Sulfuric Acid
$-
Ammonium
Sulfate
$41 / st
Note: Assumes 575K, 57K, and 139K tons available for sale for ammonium sulfate, ammonium thiosulfate, and sulfuric acid, respectively, and annualized
margins at current market pricing as shown on slides 28-30.
31
Other Cash Operating Costs
Other Cash Operating Costs
Projected Run
Rate Annualized
$46,100
($ in 000's)
Cash Operating Costs and SG&A
(1)(2)
Cash Operating Costs include:
• Fixed costs
- Plant labor
- Maintenance
- Other fixed costs associated with general operations
•
Variable costs (dependent on production rates and on-stream factor)
- Marketing & distribution incentive fees
- Electricity
- Reagents used in AS production process (coating)
SG&A includes:
• Sales and marketing expense not included in cost of sales
• General overhead
• Bonuses for plant management
(1) Assumes operation at current nameplate production capacity on an annualized basis.
(2) Excludes depreciation & amortization and excludes corporate costs.
32
Illustrative Example of EBITDA Calculation
EBITDA Calculation Using Assumptions on Previous Slides
($ in 000's)
AS Raw Materials Margin
ATS Raw Materials Margin
SA Raw Materials Margin
Total Raw Materials Margin
Raw Materials
Margin per Ton
$108
$67
$41
Less: Cash Operating Costs & SG&A
Pro Forma EBITDA
Total Annual
Production
x
575,000
x
57,000
x
138,750
Total Raw
Materials Margin
$62,124
=
3,819
=
=
5,624
$71,567
(46,100)
$25,467
33
Forecasted 2013 EBITDA: Approximately $25 Million
Assumptions:
• 2013 product margins expected to be slightly better than current product
margins
• Slightly higher cash operating costs than current run rate for identified operating
improvements
• Excludes one-time costs associated with transition and integration
An explanation of EBITDA, a non-GAAP financial measure, and a reconciliation of
projected EBITDA to operating income is included on slide 37
34
Forecasted Capital Expenditures
Maintenance Capex:
•
Long-term annual maintenance capex expected to be $3-$5 million
•
For several years, we expect capex to be at levels sufficient to fund capacity
increases, safety and environmental improvements, and reliability and efficiency
projects
-
We have pre-financed approximately $16 million of capex through excess proceeds from the
transaction term loan and the $10 million upsize of the capex facility
-
We expect maintenance capex funded from cash generated by operations to average $5-$7 million
for several years after the acquisition
35
Consolidated RNF Pro Forma Balance Sheet
Pro Forma Changes to 6/30/12 Balance Sheet
Pre Closing (1)
$44,441
$20,190
$135,000
($ in 000's)
Cash (2)
Debt
Debt Capacity
(3)
Post Closing
$51,441
$175,190
$300,000
(1) Per RNF 10-Q for the period ending 6/30/12.
(2) Post closing adjustments include proceeds from transaction debt net of $138M cash portion of purchase price and $10M in
estimated closing costs and fees.
(3) Post closing debt capacity includes $100M multiple draw term loan capex facility for ammonia and storage capacity expansion
project at East Dubuque, $35M working capital facility, $155M transaction term loan, and $10M upsize of capex facility to prefinance capex at the Pasadena site, each of which is available subject to customary conditions and funding.
36
Disclosure Regarding Non-GAAP Financial Measures
Disclosure Regarding Non-GAAP Financial Measures:
EBITDA is defined as operating income plus depreciation expense. EBITDA is used as a supplemental financial measure by
management and by external users of our financial statements, such as investors and commercial banks, to assess:
•
The financial performance of our assets without regard to financing methods, capital structure or historical cost basis; and
•
Our operating performance and return on invested capital compared to those of other publicly traded limited partnerships and
other public companies, without regard to financing methods and capital structure.
EBITDA should not be considered an alternative to net income, operating income, net cash provided by operating activities or any
other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA may have material limitations as a
performance measure because it excludes items that are necessary elements of our costs and operations. In addition, EBITDA
presented by other companies may not be comparable to our presentation, since each company may define these terms differently.
The table below reconciles forecasted EBITDA to operating income for the twelve months ended December 31, 2013.
Reconciliation from Operating Income:
($ in millions)
Operating Income
Plus: Depreciation & Amortization
2013E EBITDA
$20
(1)
5
$25
(1) Depreciation does not reflect any step-up in asset basis resulting from purchase price allocation.
37
Financing Terms
Indicative Terms of Amended Credit Facility
Total Committed Facilities:
Facilities:
$300M
Committed Senior Secured Credit Facilities
$155M
New Term Loan for acquisition of Agrifos and transaction expenses
$100M
Existing Multiple Draw Term Loan Capex Facility for ammonia and
storage expansion project at East Dubuque
$10M
Capex facility for Agrifos projects
$35M
Existing Revolving Credit Facility available for consolidated business
$35M
Accordion facility may provide additional capacity
(requires additional lending commitments)
Use of Proceeds:
$138M purchase price; $10M deal costs; $6M pre-funded capex at Agrifos;
$1M operating expenses
Tenor:
5 year maturity
Interest Rate:
LIBOR + 375
Co-borrowers and Guarantor may enter into interest rate swap agreements to fix
interest cost
Amortization:
Term Loan: 5% per annum;
Capex Facility: 2.5% per quarter beginning April 2014 to CY 2015, and 6.25% per
quarter thereafter;
Balloon payment at maturity
Sole-Lead Arranger and
Book-Runner:
GE Capital Markets
39
Attractive Acquisition
Leveraging Rentech Nitrogen’s Expertise
Hunt Ramsbottom
CEO
John Diesch
President
Dan Cohrs
CFO
Marc Wallis
SVP Sales & Marketing
John Ambrose
COO
East Dubuque Site
Plant Manager
Pasadena Site
General Manager
East Dubuque Site
Operations Staff
Pasadena Site
Operations Staff
Pro-Forma
Employees and Full Time Equivalents:
˗
˗
1Includes
East Dubuque Site: 147
Pasadena Site1:
132
contract employees.
41
Key to Success: Rentech Nitrogen’s Management
•
Operating Expertise
˗
•
Sales and Marketing Expertise
˗
•
Rentech acquired and successfully integrated the facility in East Dubuque in 2006
Experienced at Managing Multiple Locations
˗
•
Rentech Nitrogen can leverage its existing relationships across the fertilizer industry to improve Agrifos’
product sales and distribution
Integration Experience
˗
•
Consistently operated the East Dubuque facility, a more complicated plant of a similar age, at onstream rates above 95%
Rentech Nitrogen’s management team has experience managing multiple site locations
Excellent Maintenance and Safety Record
˗
The East Dubuque facility’s maintenance and safety teams have consistently improved the plant’s
performance and safety record since Rentech’s acquisition
0
•
Expansion Expertise
˗
Completed several expansions at the East Dubuque facility, most recently completing the DEF/urea
expansion and managing the $100 million ammonia production and storage capacity expansion
projects
42
Transaction Highlights
•
Expected to be accretive to cash flow per unit
˗
˗
˗
•
EBITDA1 expected to be approx. $25 million in 2013
Initial purchase price of 6.3x forecasted 2013 EBITDA
Maximum purchase price with earnout of 5.2x trailing EBITDA
Agrifos well-positioned in market for Ammonium Sulfate
˗
˗
˗
˗
•
Largest producer of synthetic granulated AS in North America
Differentiated, high-quality product in a growing market
Logistical advantages vs. key competitors
Strategic location with expansion possibilities
Diversification of risk for Rentech Nitrogen
˗
˗
˗
˗
•
Agrifos’ ammonia purchases approximately equal ammonia sales at East Dubuque
Adds geographic diversity and reduces single location risk and seasonality of sales
Product and geographic market diversity
Ammonium sulfate prices and margins less volatile than ammonia and UAN
Identified near-term growth opportunities
˗
˗
˗
•
Debottlenecking of ammonium sulfate plant to increase capacity from 1,750 tpd to 2,100 tpd
Cogeneration project using steam currently being vented
Terminalling of fertilizer or other products using existing assets
Leveraging management’s operations and marketing expertise
1An
explanation of EBITDA, a non-GAAP financial measure, and a reconciliation of projected EBITDA to operating income is included on slide 37.
43
Acquisition of Agrifos LLC
November 1, 2012