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EX-23.1 - EX-23.1 - RENTECH, INC.d466634dex231.htm
EX-99.1 - EX-99.1 - RENTECH, INC.d466634dex991.htm
EX-99.2 - EX-99.2 - RENTECH, INC.d466634dex992.htm
8-K/A - FORM 8-K/A - RENTECH, INC.d466634d8ka.htm

Exhibit 99.3

RENTECH, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The unaudited pro forma condensed combined balance sheet as of September 30, 2012 and the unaudited pro forma condensed combined statements of operations for the fiscal year ended September 30, 2011, the three months ended December 30, 2011 and nine months ended September 30, 2012 have been adjusted to give effect to the transactions described in Note 1 to the unaudited pro forma condensed combined financial statements.

The unaudited pro forma condensed combined financial statements are not necessarily indicative of the results that Rentech, Inc. (the “Company” or “Rentech”) would have achieved had the transactions described herein actually taken place at the dates indicated, and do not purport to be indicative of future financial position or operating results. The unaudited pro forma condensed combined financial statements should be read in conjunction with (i) the Company’s audited consolidated financial statements and accompanying notes as of and for the three months ended December 31, 2011, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Transition Report on Form 10-K for the three-month transition period ended December 31, 2011, which was filed with the Securities and Exchange Commission (“SEC”) on March 15, 2012, (ii) the Company’s audited consolidated financial statements and accompanying notes as of and for the year ended September 30, 2011, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2011, which was filed with the SEC on December 14, 2011, (iii) the Company’s unaudited consolidated financial statements and accompanying notes as of and for the nine months ended September 30, 2012, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012, which was filed with the SEC on November 8, 2012, (iv) the restated, audited financial statements of Agrifos Fertilizer L.L.C. (“Agrifos Fertilizer”) for the years ended December 31, 2011, 2010 and 2009, included in this Form 8-K/A as Exhibit 99.1, and (v) Agrifos Fertilizer’s restated, unaudited financial statements for the nine months ended September 30, 2012 and 2011, included in this Form 8-K/A as Exhibit 99.2.

The pro forma adjustments are based on available information and certain assumptions that the Company believes are reasonable. The pro forma adjustments and certain assumptions are described in the accompanying notes. Pro forma adjustments are those that are directly attributable to the transaction, are factually supportable and, with respect to the unaudited pro forma condensed combined statements of operations, are expected to have a continuing impact on the consolidated results. The final purchase price related to the Acquisition, as defined in Note 1, and the allocation thereof may differ from that reflected in the pro forma condensed combined financial statements after the valuation is finalized by the Company, final working capital adjustments are performed and a determination of the earn-out consideration is known. The pro forma condensed combined financial statements do not include adjustments relating to any possible revenue enhancements, expense efficiencies, or other actions that may result from this transaction. In addition to those for the Acquisition, pro forma adjustments include the adjustments relating to the Offering, as defined in Note 1.

The pro forma financial information has been prepared using the acquisition method of accounting. Accordingly, the assets and liabilities of Agrifos Fertilizer are adjusted to their estimated fair values as of September 30, 2012. The estimates of fair value are preliminary and are dependent upon certain valuations and other studies that have not progressed to a stage where there is sufficient information to make a definitive valuation. Accordingly, actual adjustments to the consolidated balance sheet and statements of operations will differ, perhaps materially, from those reflected in the pro forma financial information because the assets and liabilities of Agrifos Fertilizer will be recorded at their respective fair values on the date the acquisition described below was consummated and the preliminary assumptions used to estimate these fair values may change.


RENTECH, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED

BALANCE SHEET

AS OF SEPTEMBER 30, 2012

 

     Actual as of September 30, 2012      Pro Forma
   

Pro Forma

As of

September 30,

 
     Rentech     Agrifos Fertilizer      Adjustments     2012  
     (in thousands)  
           (Restated)               
ASSETS          

Current assets:

         

Cash

   $ 238,506      $ 1,333       $ (30,300 )(a)    $ 253,541   
          (27,317 )(b)   
          184,490 (c)   
          (6,931 )(d)   
          (98,893 )(e)   
          (7,347 )(f)   

Accounts receivable

     6,264        8,932         —          15,196   

Inventories

     6,741        13,717         99 (g)      16,595   
          (3,962 )(h)   

Prepaid expenses and other current assets

     5,036        260         —          5,296   

Deferred income taxes

     4,069        61         (61 )(i)      4,069   

Other receivables, net

     3,835        63         —          3,898   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total current assets

     264,451        24,366         9,778        298,595   

Property, plant and equipment, net

     64,064        43,763         33,795 (e)      145,584   
          3,962 (h)   

Construction in progress

     45,734        8,085         82 (e)      53,901   

Other assets:

         

Deposits and other assets

     1,205        334         (173 )(e)      1,257   
          (109 )(j)   

Patents, net

     8,839        —           —          8,839   

Goodwill

     7,209        —           52,510 (e)      59,719   

Intangible assets

     —          —           24,336 (e)      24,336   

Debt issuance costs

     3,787        410         (410 )(a)      7,156   
          (1,645 )(b)   
          5,014 (d)   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total other assets

     21,040        744         79,523        101,307   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total assets

   $ 395,289      $ 76,958       $ 127,140      $ 599,387   
  

 

 

   

 

 

    

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY          

Current liabilities:

         

Accounts payable

   $ 7,904      $ 11,223       $ —        $ 19,127   

Accrued payroll and benefits

     6,009        —           —          6,009   

Accrued liabilities

     15,242        3,478         (128 )(a)      18,401   
          (191 )(b)   

Deferred revenue

     25,949        4,161         —          30,110   

Accrued interest

     1,223        —           (136 )(b)      1,087   

Interest rate swaps

     88        —           —          88   

Credit facilities/term loan

     —          10,027         (10,027 )(a)      5,813   
          5,813 (c)   

Convertible debt

     53,658        —           —          53,658   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total current liabilities

     110,073        28,889         (4,669     134,293   

Long-term liabilities:

         

Credit facilities/term loan

     26,990        20,145         (20,145 )(a)      178,677   
          (26,990 )(b)   
          178,677 (c)   

Deferred income taxes

     4,069        1,854         (1,854 )(i)      4,069   

Interest rate swaps

     815        —           —          815   

Other

     501        3,294         6,207 (e)      10,002   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total long-term liabilities

     32,375        25,293         135,895        193,563   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total liabilities

     142,448        54,182         131,226        327,856   
  

 

 

   

 

 

    

 

 

   

 

 

 

Stockholders’ equity:

         

Common stock

     2,203        —           —          2,203   

Additional paid-in capital

     568,506        —           12,479 (e)      582,335   
          1,350 (k)   

Accumulated deficit

     (359,282     —           (986 )(b)      (361,417
          (1,149 )(d)   

Member’s equity

     —          22,776         (410 )(a)      —     
          (14,550 )(e)   
          (7,347 )(f)   
          99 (g)   
          1,793 (i)   
          (109 )(j)   
          (2,252 )(k)   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total Rentech stockholders’ and member’s equity

     211,427        22,776         (11,082     223,121   

Noncontrolling interests

     41,414        —           (659 )(b)      48,410   
          (768 )(d)   
          7,521 (e)   
          902 (k)   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total equity

     252,841        22,776         (4,086     271,531   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total liabilities and stockholders’ and member’s equity

   $ 395,289      $ 76,958       $ 127,140      $ 599,387   
  

 

 

   

 

 

    

 

 

   

 

 

 

The accompanying notes are an integral part of these unaudited

pro forma condensed combined financial statements.


RENTECH, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED

STATEMENT OF OPERATIONS

FOR THE YEAR ENDED SEPTEMBER 30, 2011

 

     Actual Fiscal
Year Ended
September 30,
2011

Rentech
    Pro Forma IPO
Adjustments
    Subtotal     Actual Fiscal
Year Ended
December 31,
2011

Agrifos
Fertilizer
    Pro Forma
Adjustments
    Pro Forma
Fiscal Year
Ended
September 30,
2011
 
     (in thousands, except per share data)  
                       (Restated)              

Revenues

            

Product sales

   $ 179,857      $ —        $ 179,857      $ 146,897      $ —        $ 326,754   

Service revenues

     206        —          206        —          —          206   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     180,063        —          180,063        146,897        —          326,960   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cost of sales

            
    

 

 

       

 

 

   

Product

     103,286        —          103,286        150,912        (188 )(g)      257,202   
             (1,521 )(h)   
             4,713 (i)   

Service

     200        —          200        —          —          200   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of sales

     103,486        —          103,486        150,912        3,004        257,402   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit (loss)

     76,577        —          76,577        (4,015     (3,004     69,558   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

            

Selling, general and administrative expense

     28,004        149 (a)      30,072        7,826        1,521 (h)      40,228   
       1,997 (b)          809 (j)   
       (78 )(c)         

Research and development

     30,009        —          30,009        —          —          30,009   

Depreciation

     2,225        —          2,225        —          —          2,225   

Loss on impairments

     58,742        —          58,742        —          —          58,742   

Advance for equity investment

     (7,892     —          (7,892     —          —          (7,892

(Gain) loss on disposal of property, plant and equipment

     523        —          523        (159     —          364   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     111,611        2,068        113,679        7,667        2,330        123,676   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating (loss)

     (35,034     (2,068     (37,102     (11,682     (5,334     (54,118
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense), net

            

Interest income

     134        —          134        —          —          134   

Interest expense

     (16,666     13,737 (d)      (2,929     (705     (6,117 )(k)      (10,198
             (1,152 )(l)   
             705 (m)   

Loss on debt extinguishment

     (13,816     13,816 (e)      —          —          —          —     

Other income (expense), net

     3        —          3        —          —          3   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense, net

     (30,345     27,553        (2,792     (705     (6,564     (10,061
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     (65,379     25,485        (39,894     (12,387     (11,898     (64,179

Income tax (benefit) expense

     3        —          3        (450     536 (n)      89   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     (65,382     25,485        (39,897     (11,937     (12,434     (64,268

Net (income) loss attributable to noncontrolling interests

     1,099        (26,303 )(f)      (25,204     —          9,191 (f)      (16,013
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to Rentech

   $ (64,283   $ (818   $ (65,101   $ (11,937   $ (3,243   $ (80,281
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per common share attributable to Rentech:

            

Basic

   $ (0.29           $ (0.36

Diluted

   $ (0.29           $ (0.36

Weighted-average units used to compute net loss per common share:

            

Basic

     222,664                222,664   

Diluted

     222,664                222,664   

The accompanying notes are an integral part of these unaudited

pro forma condensed combined financial statements.


RENTECH, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED

STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED DECEMBER 31, 2011

 

     Actual Three
Months Ended
December 31,
2011

Rentech
    Pro Forma IPO
Adjustments
    Subtotal     Actual Three
Months Ended
December 31,
2011

Agrifos
Fertilizer
    Pro Forma
Adjustments
    Pro Forma
Three Months
Ended
December 31,
2011
 
     (in thousands, except per share data)  
                       (Restated)              

Revenues

            

Product sales

   $ 63,014      $ —        $ 63,014      $ 37,293      $ —        $ 100,307   

Service revenues

     52        —          52        —          —          52   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     63,066        —          63,066        37,293        —          100,359   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cost of sales

            
    

 

 

       

 

 

   

Product

     37,460        —          37,460        40,968        (161 )(g)      78,739   
             (410 )(h)   
             882 (i)   

Service

     50        —          50        —          —          50   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of sales

     37,510        —          37,510        40,968        311        78,789   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit (loss)

     25,556        —          25,556        (3,675     (311     21,570   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

            

Selling, general and administrative expense

     10,498        19 (a)      10,953        1,803        410 (h)      13,370   
       436 (b)          204 (j)   

Research and development

     4,202        —          4,202        —          —          4,202   

Depreciation

     566        —          566        —          —          566   

Loss on impairments

     583        —          583        —          —          583   

Gain loss on disposal of property, plant and equipment

     (507     —          (507     (399     —          (906
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     15,342        455        15,797        1,404        614        17,815   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     10,214        (455     9,759        (5,079     (925     3,755   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense), net

            

Interest income

     49        —          49        —          —          49   

Interest expense

     (4,098     1,941 (d)      (2,157     (169     (1,484 )(k)      (3,922
             (281 )(l)   
             169 (m)   

Loss on debt extinguishment

     (10,263     10,263 (e)      —          —          —          —     

Other income (expense), net

     2        —          2        —          —          2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense, net

     (14,310     12,204        (2,106     (169     (1,596     (3,871
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     (4,096     11,749        7,653        (5,248     (2,521     (116

Income tax (benefit) expense

     2        —          2        (853     875 (n)      24   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     (4,098     11,749        7,651        (4,395     (3,396     (140

Net (income) loss attributable to noncontrolling interests

     (4,433     (4,227 )(f)      (8,660     —          2,932 (f)      (5,728
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to Rentech

   $ (8,531   $ 7,522      $ (1,009   $ (4,395   $ (464   $ (5,868
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per common share attributable to Rentech:

            

Basic

   $ (0.04           $ (0.03

Diluted

   $ (0.04           $ (0.03

Weighted-average units used to compute net income (loss) per common share:

            

Basic

     224,414                224,414   

Diluted

     224,414                224,414   

The accompanying notes are an integral part of these unaudited

pro forma condensed combined financial statements.


RENTECH, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED

STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

 

     Actual Nine
Months Ended
September 30,
2012

Rentech
    Actual Nine
Months Ended
September 30,
2012

Agrifos
Fertilizer
    Pro Forma
Adjustments
    Pro Forma
Nine Months
Ended
September 30,
2012
 
     (in thousands, except per share data)  
           (Restated)              

Revenues

        
      

 

 

   

Product sales

   $ 169,311      $ 119,916      $ —        $ 289,227   

Service revenues

     154        —          —          154   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     169,465        119,916        —          289,381   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of sales

        

Product

     65,984        112,263        89 (g)      180,603   
         (1,268 )(h)   
         3,535 (i)   

Service

     150        —          —          150   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of sales

     66,134        112,263        2,356        180,753   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit (loss)

     103,331        7,653        (2,356     108,628   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

        

Selling, general and administrative expense

     33,832        7,141        1,268 (h)      40,692   
         607 (j)   
         (2,156 )(o)   

Research and development

     14,675        —          —          14,675   

Depreciation

     2,486        —          —          2,486   

Other

     (292     —          —          (292
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     50,701        7,141        (281     57,561   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating (loss)

     52,630        512        (2,075     51,067   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense), net

        

Interest income

     196        —          —          196   

Interest expense

     (5,288     (864     173 (d)      (10,220
         (4,288 )(k)   
         (817 )(l)   
         864 (m)   

Loss on interest rate swaps

     (907     —          —          (907

Other income (expense), net

     59        1,000        —          1,059   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense, net

     (5,940     136        (4,068     (9,872
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     46,690        648        (6,143     41,195   

Income tax (benefit) expense

     1,243        3,047        (2,949 )(n)      1,341   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations

     45,447        (2,399     (3,194     39,854   

Income from discontinued operations, net of tax

     134        —          —          134   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     45,581        (2,399     (3,194     39,988   

Net (income) loss attributable to noncontrolling interests

     (35,056     —          1,473 (f)      (33,583
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to Rentech

   $ 10,525      $ (2,399   $ (1,721   $ 6,405   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per common share attributable to Rentech:

        

Basic:

        

Continuing operations

   $ 0.05          $ 0.03   

Discontinued operations

     0.00            0.00   
  

 

 

       

 

 

 

Net income (loss)

   $ 0.05          $ 0.03   
  

 

 

       

 

 

 

Diluted:

        

Continuing operations

   $ 0.04          $ 0.03   

Discontinued operations

     0.00            0.00   
  

 

 

       

 

 

 

Net income (loss)

   $ 0.04          $ 0.03   
  

 

 

       

 

 

 

Weighted-average units used to compute net income (loss) per common share:

        

Basic

     223,572            223,572   

Diluted

     232,773            232,773   

The accompanying notes are an integral part of these unaudited

pro forma condensed combined financial statements.


RENTECH, INC.

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED

FINANCIAL STATEMENTS

(1) Organization and Basis of Presentation

Rentech Nitrogen Partners, L.P. (the “Partnership”) is an indirect majority-owned subsidiary of the Company. On November 1, 2012, the Partnership acquired (the “Acquisition”) 100% of the membership interest of Agrifos LLC (“Agrifos”). The purchase price for Agrifos and its subsidiaries consisted of an initial purchase price of approximately $138.6 million in cash and $20.0 million in common units representing limited partnership interests in the Partnership (the “Common Units”), as well as potential earn-out consideration of up to $50.0 million to be paid in Common Units or cash at the Partnership’s option. Earn-out consideration would be calculated based on the amount by which the two-year Adjusted EBITDA (as defined in the purchase agreement) of the Partnership’s facility in Pasadena, Texas that was acquired in the Acquisition (the “Pasadena Facility”) exceeds certain Adjusted EBITDA thresholds. The potential additional consideration would be paid after April 30, 2015 and computation of the relevant calculations.

On November 1, 2012, in connection with the Acquisition, the Partnership entered into a $300.0 million credit agreement (the “Credit Agreement”) which amended and restated in its entirety the Partnership’s existing $135.0 million credit agreement. The Credit Agreement consists of (i) a $155.0 million term loan facility used to fund the cash purchase price of the Acquisition (the “Term Loan Facility”), (ii) a $110.0 million multiple draw term loan (the “Capital Expenditures Facility”) of which (a) $100.0 million can be used to finance capital expenditures related to an ammonia production and storage capacity expansion project at the Partnership’s facility in East Dubuque, Illinois (the “East Dubuque Facility”) and (b) $10.0 million can be used to finance capital expenditures related to the Pasadena Facility and (iii) a $35.0 million revolving facility that can be used for seasonal working capital needs, letters of credit and for general corporate purposes (the “Working Capital Facility”).

The Credit Agreement has a maturity date of October 31, 2017. Borrowings under the Credit Agreement bear interest at a rate equal to an applicable margin plus, at the borrowers’ option, either (a) in the case of base rate borrowings, a rate equal to the highest of (1) the prime rate, (2) the federal funds rate plus 0.5% or (3) LIBOR for an interest period of three months plus 1.00% or (b) in the case of LIBOR borrowings, the offered rate per annum for deposits of dollars for the applicable interest period on the day that is two business days prior to the first day of such interest period. The applicable margin for borrowings under the Credit Agreement will be 2.75% with respect to base rate borrowings and 3.75% with respect to LIBOR borrowings. Additionally, the borrowers are required to pay a fee to the lenders under the Capital Expenditures Facility on the undrawn portion available at a rate of 0.75% per annum and a fee to the lenders under the Working Capital Facility on the undrawn portion available at a rate of 0.50% per annum. The borrowers are also required to pay customary letter of credit fees on issued letters of credit.

On November 9, 2011, the Partnership completed its initial public offering (the “Offering”) of 15,000,000 Common Units at a public offering price of $20.00 per common unit. The Common Units sold to the public in the Offering represented 39.2% of the Common Units outstanding as of the closing of the Offering. Rentech Nitrogen Holdings, Inc. (“RNHI”), the Company’s indirect wholly-owned subsidiary, retained the remaining 60.8% of the Common Units and Rentech Nitrogen GP, LLC (the “General Partner”), RNHI’s wholly-owned subsidiary, owns 100% of the non-economic general partner interest in the Partnership. The Partnership’s assets at the closing of the Offering consisted of all of the equity interests of Rentech Energy Midwest Corporation (“REMC”), which owns the East Dubuque Facility. At the Offering, REMC was converted into a limited liability company.

The unaudited pro forma condensed combined financial statements have been derived from the audited and unaudited historical financial statements of the Company and Agrifos Fertilizer. Agrifos is a pass-through entity with no operations which owns 100% of Agrifos Fertilizer. Agrifos Fertilizer owns and operates the Pasadena Facility. Agrifos Fertilizer’s statement of operations for the three months ended December 31, 2011 was derived by deducting the statement of operations for the nine months ended September 30, 2011 from the statement of operations for the year ended December 31, 2011.


The unaudited pro forma condensed combined statement of operations for the year ended September 30, 2011 includes Agrifos Fertilizer’s statement of operations for the year ended December 31, 2011. SEC regulations allow the combining of statements of operations with different year ends when the fiscal year ends for such statements of operations differ by no more than 93 days.

The pro forma adjustments have been prepared as if the transactions described above had taken place on September 30, 2012 in the case of the unaudited pro forma condensed combined balance sheet, or as of October 1, 2010 in the case of the unaudited pro forma condensed combined statements of operations.

The Acquisition is reflected in the unaudited pro forma condensed combined financial statements as being accounted for under the acquisition method. Under the acquisition method, the total estimated purchase price of the acquired company is allocated to the assets acquired and the liabilities assumed based on their fair values. The Company has made estimates and assumptions in determining the preliminary allocation of the purchase price in the unaudited pro forma condensed combined financial statements. These estimates are based on key assumptions of the Acquisition. Due to the fact that the unaudited pro forma condensed combined financial statements have been prepared based on preliminary estimates, the final amounts recorded may differ materially from the information presented. The allocation of purchase consideration is subject to change based on further review of the fair value of the assets acquired and liabilities assumed. A final determination of fair values will be based on Agrifos Fertilizer’s assets acquired and liabilities assumed at the consummation of the Acquisition.

(2) Preliminary Allocation of Purchase Price and Calculation of Goodwill

As discussed in note 1, the Company has made a preliminary allocation of the purchase price to the tangible and intangible assets acquired and liabilities assumed based on various preliminary estimates and valuations. Since these unaudited pro forma condensed combined financial statements have been prepared based on preliminary estimates of fair values attributable to the Acquisition, the actual amounts recorded for the Acquisition may differ materially from the information presented. A final determination of fair values will be based on the assets acquired and the liabilities assumed of Agrifos Fertilizer at the consummation of the Acquisition.

The preliminary purchase price consisted of the following (amounts in thousands):

 

Cash (through borrowings under the Credit Agreement)

   $ 138,564   

Fair market value of Common Units issued

     20,000   

Estimate of potential earn-out consideration

     6,207   
  

 

 

 

Total preliminary purchase price

   $ 164,771   
  

 

 

 

The Company’s preliminary purchase price allocation as of September 30, 2012 is as follows (amounts in thousands):

 

Cash

   $ 1,333   

Accounts receivable

     8,932   

Inventories

     9,755   

Prepaid expenses and other current assets

     259   

Other receivables, net

     63   

Property, plant and equipment

     81,520   

Construction in progress

     8,167   

Intangible assets (Technology - $21,313 and Marketing Agreement - $3,023)

     24,336   

Goodwill

     52,510   

Other assets

     52   

Accounts payable

     (11,223

Accrued liabilities

     (3,478

Deferred revenue

     (4,161

Asset retirement obligation

     (1,662

Other long-term liabilities

     (1,632
  

 

 

 

Total preliminary purchase price

   $ 164,771   
  

 

 

 


(3) Pro Forma Condensed Combined Balance Sheet Adjustments and Assumptions

(a) Reflects the repayment in full of Agrifos Fertilizer’s existing credit facilities and term loan, including accrued interest, in the amount of $30.3 million and write-off of debt issuance costs of $0.7 million.

(b) Reflects the repayment in full of the Partnership’s existing credit facilities, including accrued interest, in the amount of $27.1 million and write-off of debt issuance costs of $1.6 million.

(c) Reflects borrowings under the Credit Agreement which consisted of $155.0 million under the Term Loan Facility and approximately $29.5 million under the Capital Expenditures Facility.

(d) Reflects expenses related to the Acquisition of $1.9 million, deferred financing costs of $5.0 million associated with the Credit Agreement and immaterial syndication expenses.

(e) Reflects the increase in historical cost of certain assets acquired and liabilities assumed to reflect their fair value, plus estimated earn-out consideration which would be paid after April 30, 2015 and the completion of the relevant calculations in either Common Units or cash at the option of the Partnership, and the issuance of 538,793 Common Units in connection with the Acquisition valued at $20.0 million based on the 30-day volume-weighted average price of the Common Units prior to signing the acquisition agreement.

(f) Reflects bonus payments to certain Agrifos Fertilizer executives.

(g) Reflects adjustment to Agrifos’ inventories due to changing from standard costing for inventories to first-in first-out method to conform with the Partnership’s method of reporting.

(h) Reclassification of Agrifos Fertilizer spare parts from inventories to property, plant and equipment to conform with the Partnership’s method of reporting.

(i) Reflects the elimination of historical deferred income taxes.

(j) Reflects the elimination of historical note receivable and deposit recorded on Agrifos Fertilizer’s books which were excluded from the Acquisition.

(k) Reflects the elimination of historical member’s equity in Agrifos Fertilizer.

(4) Pro Forma Condensed Combined Statement of Operations Adjustments and Assumptions

(a) Reflects increase in salaries for named executive officers who provide services to the Company and the Partnership and named executive officers who provide services to the Partnership.

(b) Reflects stock-based compensation expense on grants of Partnership phantom units.

(c) Reflects the elimination of a historical fee related to REMC’s term loan that was terminated in connection with the Offering.

(d) Reflects the elimination of historical interest expense related to the term loan that was repaid in connection with the Offering and previous term loans.

(e) Reflects the elimination of historical loss on debt extinguishment.

(f) Reflects net income attributable to noncontrolling interests, which represents the portion of results of operations in the Partnership not attributable, directly or indirectly, to the Company.

(g) Reflects adjustment to Agrifos Fertilizer’s inventories due to changing from standard costing for inventories to first-in first-out method.


(h) Reclassification of certain Agrifos Fertilizer department expenses from cost of sales to selling, general and administrative expense to conform with the Partnership’s presentation of costs.

(i) Reflects increase in depreciation and amortization expense due to increase in values of property, plant and equipment and intangible assets.

(j) Reflects the estimated commitment fee of 0.75% on the estimated unused portion of the $110.0 million Capital Expenditures Facility and 0.5% on the estimated unused portion of the $35.0 million Working Capital Facility.

(k) Reflects estimated interest expense on outstanding borrowings under the Credit Agreement. Interest was determined based on a rate of 3.96%.

(l) Reflects the estimated amortization of related debt issuance costs of the Credit Agreement over a five year period.

(m) Reflects the elimination of historical interest expense related to Agrifos Fertilizer’s credit facility and term loan.

(n) Reflects the elimination of historical income tax expense, except for Texas franchise tax.

(o) Reflects the elimination of transaction costs for the Acquisition incurred through September 30, 2012.

(5) Pro Forma Net Income Per Common Share Attributable to Rentech

Basic pro forma income (loss) per common share attributable to Rentech is calculated by dividing net income (loss) attributable to Rentech by the weighted average number of common shares outstanding for the period. Diluted pro forma net income (loss) per common share attributable to Rentech is calculated by dividing net income (loss) attributable to Rentech by the weighted average number of common shares outstanding plus the dilutive effect, calculated using the “treasury stock” method for the unvested restricted stock units, outstanding stock options and warrants and using the “if converted” method for the convertible debt.