The downtime at the East Dubuque facility did not affect the timing of the expected completion of the urea and ammonia capacity expansions that are underway at the facility. Rentech Nitrogen noted that construction for the urea capacity expansion is now complete and the commissioning and start-up phase of the project to increase urea production capacity by 19,250 annual tons is underway. The Partnership continues to expect full production of the additional 19,250 annual tons of urea to come on-line by the end of this year. In addition, the Partnership accelerated certain work related to the ammonia capacity expansion during the recent plant downtime that was scheduled to be performed during the 2013 plant turnaround.
Outages recently occurred at the Pasadena facility’s sulfuric acid plant to repair and upgrade the lining of a sulfuric acid storage tank, replace a cooling tower fan, and make repairs to the tail gas heat recovery system. All repairs and upgrades are complete and the sulfuric acid plant is now in full operation. The outages are estimated to reduce 2012 operating income by approximately $2.9 million, while items related to the Agrifos acquisition are expected to reduce operating income by approximately $6.5 million in 2012. These items include approximately $4.2 million of non-capitalized transaction costs related to the Agrifos acquisition and an approximately $2.3 million reduction in 2012 operating income recognized by the Pasadena facility as a result of certain changes the Partnership is implementing to conform accounting policy at the Pasadena facility with Rentech Nitrogen’s accounting practices. As a result of the combined effect of the outages of the Pasadena facility and the other items, 2012 EBITDA for the Pasadena facility is expected to be approximately negative $5.4 million. Excluding these items, expected 2012 EBITDA for the Pasadena facility during the period since Rentech Nitrogen’s acquisition of the plant would be approximately $1.1 million.
Disclosure Regarding Non-GAAP Financial Measures
EBITDA is defined as net income plus interest expense and other financing costs, loss on debt extinguishment, loss on interest rate swaps, income tax expense and depreciation and amortization, net of interest income. Adjusted EBITDA is defined as EBITDA plus acquisition transaction costs and the effect of accounting policy changes. The Partnership calculates cash available for distribution as EBITDA, or Adjusted EBITDA when applicable, plus non-cash compensation expense, change in cash reserves for working capital and less maintenance capital expenditures, net cash interest expense and other financing costs. The Partnership presents EBITDA and Adjusted EBITDA because they are material components in its calculation of cash available for distribution. EBITDA, Adjusted EBITDA and cash available for distribution are used as supplemental financial measures by management and by external users of its financial statements, such as investors and commercial banks, to assess:
- the financial performance of the Partnership’s assets without regard to financing methods, capital structure, historical cost basis, acquisition transaction costs or accounting policy changes; and
- Rentech Nitrogen’s 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.
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