CVR Partners, LP (NYSE:UAN), a manufacturer of ammonia and urea
ammonium nitrate (UAN) solution fertilizer products, today
announced a second quarter 2018 net loss of $16 million, or 15
cents per common unit, on net sales of $93 million, compared to a
net loss of $4 million, or 3 cents per common unit, on net sales of
$98 million for the second quarter a year earlier. Adjusted EBITDA,
a non-GAAP financial measure, was $26 million for the second
quarter of 2018, compared to adjusted EBITDA of $32 million for the
second quarter of 2017.
For the first six months of 2018, CVR Partners had a net loss of
$36 million, or 31 cents per common unit, on net sales of $173
million, compared to a net loss of $14 million, or 12 cents per
common unit, on net sales of $183 million for the comparable period
a year earlier. Adjusted EBITDA for the first six months of 2018
was $39 million, compared to adjusted EBITDA of $53 million for the
first six months of 2017.
“Production levels in the second quarter were negatively
impacted by both planned and unplanned downtime at the Coffeyville,
Kansas, and East Dubuque, Illinois, fertilizer facilities,” said
Mark Pytosh, Chief Executive Officer of CVR Partners’ general
partner. “The lost opportunity associated with these outages was
approximately 80,000 tons of UAN.
“While the 2018 spring planting season was delayed, demand for
nitrogen fertilizer became strong as the weather improved and the
season ended well,” Pytosh said. “The fall fill season for ammonia
and UAN is now complete and market pricing was approximately 20
percent higher than last season. We believe that the U.S. nitrogen
fertilizer market has finally adjusted to the new production
capacity that has come on-stream during the past three years.”
Consolidated Operations
For the second quarter of 2018, consolidated average realized
gate prices for UAN and ammonia were $191 per ton and $348 per ton,
respectively. Consolidated average realized gate prices for UAN and
ammonia were $174 per ton and $333 per ton, respectively, for the
same period in 2017.
CVR Partners’ fertilizer facilities produced a combined 174,000
tons of ammonia during the second quarter of 2018, of which 66,000
net tons were available for sale while the rest was upgraded to
other fertilizer products, including 241,000 tons of UAN. In the
2017 second quarter, the fertilizer facilities produced 215,000
tons of ammonia, of which 78,000 net tons were available for sale
while the remainder was upgraded to other fertilizer products,
including 314,000 tons of UAN.
Distributions
CVR Partners will not pay a cash distribution for the 2018
second quarter. CVR Partners is a variable distribution master
limited partnership. As a result, its distributions, if any, will
vary from quarter to quarter due to several factors, including, but
not limited to, its operating performance, fluctuations in the
prices received for its finished products, maintenance capital
expenditures, and cash reserves deemed necessary or appropriate by
the board of directors of its general partner.
2018 Second Quarter Earnings Conference
Call
CVR Partners previously announced that it will host its 2018
second quarter Earnings Conference Call for analysts and investors
on Thursday, July 26, at 11 a.m. Eastern. The Earnings Conference
Call may also include discussion of the partnership’s developments,
forward-looking information and other material information about
business and financial matters.
The Earnings Conference Call will be broadcast live over the
Internet athttps://edge.media-server.com/m6/p/sqifk8wg. For
investors or analysts who want to participate during the call, the
dial-in number is (877) 407-8029.
For those unable to listen live, the webcast will be archived
and available for 14 days
athttps://edge.media-server.com/m6/p/sqifk8wg. A repeat of the
conference call can be accessed by dialing (877) 660-6853,
conference ID 13681417.
Qualified NoticeThis release serves as a
qualified notice to nominees and brokers as provided for under
Treasury Regulation Section 1.1446-4(b). Please note that 100
percent of CVR Partners’ distributions to foreign investors are
attributable to income that is effectively connected with a United
States trade or business. Accordingly, CVR Partners’ distributions
to foreign investors are subject to federal income tax withholding
at the highest effective tax rate.
Forward-Looking StatementsThis news release
contains forward-looking statements. Statements concerning current
estimates, expectations and projections about future results,
performance, prospects, opportunities, plans, actions and events
and other statements, concerns, or matters that are not historical
facts are “forward-looking statements,” as that term is defined
under the federal securities laws. These forward-looking
statements include, but are not limited to, statements regarding
future: ammonia and UAN pricing; distributions including variations
therein; operating performance; reserves and other matters. You can
generally identify forward-looking statements by our use of
forward-looking terminology such as “outlook,” “anticipate,”
“believe,” “continue,” “could,” “estimate,” “expect,” “intend,”
“may,” “might,” “plan,” “potential,” “predict,” “seek,” “should,”
or “will,” or the negative thereof or other variations thereon or
comparable terminology. These forward-looking statements are only
predictions and involve known and unknown risks and uncertainties,
many of which are beyond our control. Investors are cautioned that
various factors may affect these forward-looking statements,
including (among others) impacts of planting season on our
business, general economic and business conditions and other risks.
For additional discussion of risk factors which may affect our
results, please see the risk factors and other disclosures included
in our most recent Annual Report on Form 10-K, any
subsequently filed Quarterly Reports on Form 10-Q and our other SEC
filings. These risks may cause our actual results, performance or
achievements to differ materially from any future results,
performance or achievements expressed or implied by these
forward-looking statements. Given these risks and uncertainties,
you are cautioned not to place undue reliance on such
forward-looking statements. The forward-looking statements included
in this news release are made only as of the date hereof. CVR
Partners disclaims any intention or obligation to update publicly
or revise its forward-looking statements, whether as a result of
new information, future events or otherwise, except to the extent
required by law.
About CVR Partners, LPHeadquartered in Sugar
Land, Texas, CVR Partners, LP is a Delaware limited partnership
focused on the production, marketing and distribution of nitrogen
fertilizer products. It primarily produces urea ammonium nitrate
(UAN) and ammonia, which are predominantly used by farmers to
improve the yield and quality of their crops. CVR Partners’
Coffeyville, Kansas, nitrogen fertilizer manufacturing facility
includes a 1,300 ton-per-day ammonia unit, a 3,000 ton-per-day UAN
unit and a dual-train gasifier complex having a capacity of 89
million standard cubic feet per day of hydrogen. CVR Partners’ East
Dubuque, Illinois, nitrogen fertilizer manufacturing facility
includes a 1,075 ton-per-day ammonia unit and a 1,100 ton-per-day
UAN unit.
For further information, please contact:
Investor Contact:
Jay FinksCVR Partners, LP
(281) 207-3588
InvestorRelations@CVRPartners.com
Media Relations:Brandee StephensCVR Partners,
LP(281) 207-3516MediaRelations@CVRPartners.com
CVR Partners, LP
Financial and Operational Data (all
information in this release is unaudited other than the balance
sheet data as of December 31, 2017).
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
(in millions, except unit
data) |
Consolidated
Statements of Operations Data: |
|
|
|
|
|
|
|
Net sales (1) |
$ |
93.2 |
|
|
$ |
97.9 |
|
|
$ |
173.1 |
|
|
$ |
183.2 |
|
|
|
|
|
|
|
|
|
Cost of materials and
other |
19.1 |
|
|
22.1 |
|
|
41.6 |
|
|
43.9 |
|
Direct operating
expenses (2) |
47.4 |
|
|
37.8 |
|
|
86.1 |
|
|
73.7 |
|
Depreciation and
amortization |
20.4 |
|
|
20.0 |
|
|
36.8 |
|
|
35.4 |
|
Cost of
sales |
86.9 |
|
|
79.9 |
|
|
164.5 |
|
|
153.0 |
|
Selling, general and
administrative expenses |
6.9 |
|
|
5.8 |
|
|
12.6 |
|
|
12.7 |
|
Loss on asset
disposals |
0.1 |
|
|
— |
|
|
0.1 |
|
|
— |
|
Operating
income (loss) |
(0.7 |
) |
|
12.2 |
|
|
(4.1 |
) |
|
17.5 |
|
Interest expense,
net |
(15.7 |
) |
|
(15.7 |
) |
|
(31.4 |
) |
|
(31.4 |
) |
Other income, net |
— |
|
|
— |
|
|
— |
|
|
0.1 |
|
Net
loss |
$ |
(16.4 |
) |
|
$ |
(3.5 |
) |
|
$ |
(35.5 |
) |
|
$ |
(13.8 |
) |
|
|
|
|
|
|
|
|
Net loss per common
unit - basic and diluted |
$ |
(0.15 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.31 |
) |
|
$ |
(0.12 |
) |
|
|
|
|
|
|
|
|
Adjusted EBITDA* |
$ |
26.0 |
|
|
$ |
32.3 |
|
|
$ |
39.0 |
|
|
$ |
53.1 |
|
Available cash for
distribution* |
$ |
— |
|
|
$ |
— |
|
|
$ |
(4.2 |
) |
|
$ |
1.8 |
|
|
|
|
|
|
|
|
|
Weighted average common
units outstanding - basic and diluted (in thousands) |
113,283 |
|
|
113,283 |
|
|
113,283 |
|
|
113,283 |
|
________________________________* See "Use of Non-GAAP Financial
Measures" below.
(1) Below are the
components of net sales:
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
(in millions) |
Reconciliation
to net sales: |
|
|
|
|
|
|
|
Fertilizer sales, exclusive of freight |
$ |
84.7 |
|
|
$ |
87.6 |
|
|
$ |
154.0 |
|
|
$ |
163.6 |
|
Freight
in revenue |
6.4 |
|
|
8.2 |
|
|
15.1 |
|
|
15.3 |
|
Other |
2.1 |
|
|
2.1 |
|
|
4.0 |
|
|
4.3 |
|
Total net
sales |
$ |
93.2 |
|
|
$ |
97.9 |
|
|
$ |
173.1 |
|
|
$ |
183.2 |
|
(2) Direct operating expenses are reflected exclusive
of depreciation and amortization.
|
As of June 30, 2018 |
|
As of December 31, 2017 |
|
|
|
(audited) |
|
(in millions) |
Balance Sheet
Data: |
|
|
|
Cash and cash
equivalents |
$ |
28.3 |
|
|
$ |
49.2 |
|
Working capital |
54.9 |
|
|
62.8 |
|
Total assets |
1,199.6 |
|
|
1,234.3 |
|
Total debt, net of
current portion |
627.4 |
|
|
625.9 |
|
Total partners’
capital |
514.3 |
|
|
549.9 |
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
(in millions) |
Cash Flow
Data: |
|
|
|
|
|
|
|
Net cash flow provided
by (used in): |
|
|
|
|
|
|
|
Operating
activities |
$ |
(27.0 |
) |
|
$ |
(23.0 |
) |
|
$ |
(12.5 |
) |
|
$ |
7.0 |
|
Investing
activities |
(5.8 |
) |
|
(4.5 |
) |
|
(8.4 |
) |
|
(8.6 |
) |
Financing
activities |
— |
|
|
(2.3 |
) |
|
— |
|
|
(2.3 |
) |
Net decrease in cash
and cash equivalents |
$ |
(32.8 |
) |
|
$ |
(29.8 |
) |
|
$ |
(20.9 |
) |
|
$ |
(3.9 |
) |
|
|
|
|
|
|
|
|
Capital expenditures
for property, plant and equipment: |
|
|
|
|
|
|
|
Maintenance capital expenditures |
$ |
4.1 |
|
|
$ |
4.4 |
|
|
$ |
6.4 |
|
|
$ |
8.4 |
|
Growth
capital expenditures |
1.7 |
|
|
0.1 |
|
|
2.2 |
|
|
0.2 |
|
Total capital
expenditures |
$ |
5.8 |
|
|
$ |
4.5 |
|
|
$ |
8.6 |
|
|
$ |
8.6 |
|
Operating Data
The following tables set forth information about our
consolidated operations.
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Key Operating
Statistics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated sales
(thousand tons): |
|
|
|
|
|
|
|
Ammonia |
81.6 |
|
|
74.6 |
|
|
117.6 |
|
|
136.5 |
|
UAN |
269.6 |
|
|
330.9 |
|
|
615.0 |
|
|
652.5 |
|
|
|
|
|
|
|
|
|
Consolidated product
pricing at gate (dollars per ton) (1): |
|
|
|
|
|
|
|
Ammonia |
$ |
348 |
|
|
$ |
333 |
|
|
$ |
340 |
|
|
$ |
322 |
|
UAN |
$ |
191 |
|
|
$ |
174 |
|
|
$ |
169 |
|
|
$ |
167 |
|
|
|
|
|
|
|
|
|
Consolidated production
volume (thousand tons): |
|
|
|
|
|
|
|
Ammonia
(gross produced) (2) |
173.7 |
|
|
215.3 |
|
|
372.8 |
|
|
434.5 |
|
Ammonia
(net available for sale) (2) |
65.5 |
|
|
77.5 |
|
|
124.4 |
|
|
157.5 |
|
UAN |
240.9 |
|
|
313.8 |
|
|
580.2 |
|
|
655.7 |
|
|
|
|
|
|
|
|
|
Feedstock: |
|
|
|
|
|
|
|
Petroleum
coke used in production (thousand tons) |
89.8 |
|
|
124.0 |
|
|
208.0 |
|
|
256.6 |
|
Petroleum
coke used in production (dollars per ton) |
$ |
25 |
|
|
$ |
21 |
|
|
$ |
21 |
|
|
$ |
17 |
|
Natural
gas used in production (thousands of MMBtus) (3) |
1,964.1 |
|
|
2,134.0 |
|
|
3,814.4 |
|
|
4,225.3 |
|
Natural
gas used in production (dollars per MMBtu) (3) |
$ |
2.78 |
|
|
$ |
3.18 |
|
|
$ |
3.00 |
|
|
$ |
3.29 |
|
Natural
gas in cost of materials and other (thousands of MMBtus) (3) |
2,571.4 |
|
|
2,487.4 |
|
|
3,829.1 |
|
|
3,963.4 |
|
Natural
gas in cost of materials and other (dollars per MMBtu) (3) |
$ |
2.84 |
|
|
$ |
3.24 |
|
|
$ |
3.05 |
|
|
$ |
3.37 |
|
|
|
|
|
|
|
|
|
Coffeyville Facility
on-stream factors (4): |
|
|
|
|
|
|
|
Gasification |
72.8 |
% |
|
98.8 |
% |
|
86.3 |
% |
|
98.8 |
% |
Ammonia |
70.2 |
% |
|
98.2 |
% |
|
84.9 |
% |
|
98.3 |
% |
UAN |
67.0 |
% |
|
87.3 |
% |
|
83.0 |
% |
|
92.0 |
% |
|
|
|
|
|
|
|
|
East Dubuque Facility
on-stream factors (4): |
|
|
|
|
|
|
|
Ammonia |
93.3 |
% |
|
100.0 |
% |
|
90.0 |
% |
|
99.8 |
% |
UAN |
93.6 |
% |
|
99.4 |
% |
|
90.3 |
% |
|
98.8 |
% |
|
|
|
|
|
|
|
|
Market
Indicators: |
|
|
|
|
|
|
|
Ammonia - Southern
plains (dollars per ton) |
$ |
343 |
|
|
$ |
316 |
|
|
$ |
362 |
|
|
$ |
352 |
|
Ammonia - Corn belt
(dollars per ton) |
$ |
396 |
|
|
$ |
365 |
|
|
$ |
412 |
|
|
$ |
395 |
|
UAN - Corn belt
(dollars per ton) |
$ |
211 |
|
|
$ |
196 |
|
|
$ |
211 |
|
|
$ |
205 |
|
Natural gas NYMEX
(dollars per MMBtu) |
$ |
2.83 |
|
|
$ |
3.14 |
|
|
$ |
2.84 |
|
|
$ |
3.10 |
|
______________________________
(1) |
|
Product
pricing at gate (also referred to as "netback") represents net
sales less freight revenue divided by product sales volume in tons
and is shown in order to provide a pricing measure that is
comparable across the fertilizer industry. |
|
|
|
(2) |
|
Gross tons
produced for ammonia represent total ammonia produced, including
ammonia produced that was upgraded into other fertilizer products.
Net tons available for sale represent ammonia available for sale
that was not upgraded into other fertilizer products. |
|
|
|
(3) |
|
The
feedstock natural gas shown above does not include natural gas used
for fuel. The cost of fuel natural gas is included in direct
operating expenses (exclusive of depreciation and
amortization). |
|
|
|
(4) |
|
On-stream
factor is the total number of hours operated divided by the total
number of hours in the reporting period and is included as a
measure of operating efficiency. Coffeyville FacilityExcluding
the impact of the full facility turnaround at the Coffeyville
Facility, the on-stream factors at the Coffeyville Facility would
have been 89.2% for gasification, 87.1% for ammonia and 84.0% for
UAN for the three months ended June 30, 2018.Excluding the impact
of the full facility turnaround at the Coffeyville Facility, the
on-stream factors at the Coffeyville Facility would have been 94.6%
for gasification, 93.4% for ammonia and 91.6% for UAN for the six
months ended June 30, 2018.The Linde air separation unit
experienced a shut down during the second quarter of 2017.
Following the Linde outage, the Coffeyville Facility UAN unit
experienced a number of operational challenges, resulting in
approximately 11 days of UAN downtime during the three months ended
June 30, 2017. Excluding the impact of the Linde air separation
unit outage at the Coffeyville Facility, the UAN unit on-stream
factors at the Coffeyville Facility would have been 99.5% and
98.1%, respectively, for the three and six months ended June 30,
2017. |
|
|
|
Use of Non-GAAP Financial Measures
To supplement our actual results calculated in accordance with
GAAP for the applicable periods, the Partnership also uses the
non-GAAP performance measures noted above, which are reconciled to
our GAAP based results below. These non-GAAP financial measures
should not be considered as an alternative to GAAP results.
EBITDA is defined as net income (loss) before (i) interest
(income) expense, (ii) income tax expense and (iii) depreciation
and amortization expense.
Adjusted EBITDA is defined as EBITDA further adjusted for the
impact of major turnaround expenses, gain or loss on extinguishment
of debt and business interruption insurance recovery, when
applicable.
We present EBITDA because we believe it allows users of our
financial statements, such as investors and analysts, to assess our
financial performance without regard to financing methods, capital
structure or historical cost basis. We present Adjusted
EBITDA because we have found it helpful to consider an operating
measure that excludes amounts, such as major turnaround expenses,
gain or loss on extinguishment of debt, and business interruption
insurance recovery, relating to transactions not reflective of our
core operations. When applicable, each of these amounts is
discussed in the Management’s Discussion and Analysis of Financial
Condition and Results of Operations section of our SEC reports, so
that investors have complete information about these amounts. We
also present Adjusted EBITDA because it is the starting point used
by the board of directors of our general partner when calculating
our available cash for distribution.
EBITDA and Adjusted EBITDA are not recognized terms under GAAP
and should not be substituted for net income (loss) or cash flows
from operations. Management believes that EBITDA and Adjusted
EBITDA enable investors and analysts to better understand our
ability to make distributions to common unitholders, help investors
and analysts evaluate our ongoing operating results and allow for
greater transparency in reviewing our overall financial,
operational and economic performance by allowing investors to
evaluate the same information used by management. EBITDA and
Adjusted EBITDA presented by other companies may not be comparable
to our presentation, since each company may define these terms
differently.
Available cash for distribution is not a recognized term under
GAAP. Available cash for distribution should not be considered in
isolation or as an alternative to net income (loss) or operating
income, or any other measure of financial performance or operating
performance. In addition, available cash for distribution is not
presented as, and should not be considered, an alternative to cash
flows from operations or as a measure of liquidity. Available cash
for distribution as reported by the Partnership may not be
comparable to similarly titled measures of other entities, thereby
limiting its usefulness as a comparative measure.
Available cash begins with Adjusted EBITDA reduced for cash
needed for (i) net cash interest expense (excluding
capitalized interest) and debt service and other contractual
obligations; (ii) maintenance capital expenditures; and
(iii) to the extent applicable, major turnaround expenses and
reserves for future operating or capital needs that the board of
directors of the general partner deems necessary or appropriate, if
any. Available cash for distribution may be increased by the
release of previously established cash reserves, if any, at the
discretion of the board of directors of our general partner, and
available cash is increased by the business interruption insurance
proceeds.
A reconciliation of consolidated Net loss to consolidated EBITDA
and consolidated Adjusted EBITDA is as follows:
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
(in millions) |
Net loss |
$ |
(16.4 |
) |
|
$ |
(3.5 |
) |
|
$ |
(35.5 |
) |
|
$ |
(13.8 |
) |
Add: |
|
|
|
|
|
|
|
Interest
expense, net |
15.7 |
|
|
15.7 |
|
|
31.4 |
|
|
31.4 |
|
Depreciation and amortization |
20.4 |
|
|
20.0 |
|
|
36.8 |
|
|
35.4 |
|
EBITDA |
$ |
19.7 |
|
|
$ |
32.2 |
|
|
$ |
32.7 |
|
|
$ |
53.0 |
|
Add: |
|
|
|
|
|
|
|
Major
turnaround expenses |
6.3 |
|
|
0.1 |
|
|
6.3 |
|
|
0.1 |
|
Adjusted
EBITDA |
$ |
26.0 |
|
|
$ |
32.3 |
|
|
$ |
39.0 |
|
|
$ |
53.1 |
|
A reconciliation of consolidated Adjusted EBITDA to Available
cash for distribution is as follows:
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
(in millions, except units and per unit
data) |
Adjusted EBITDA |
|
$ |
26.0 |
|
|
$ |
32.3 |
|
|
$ |
39.0 |
|
|
$ |
53.1 |
|
Adjustments: |
|
|
|
|
|
|
|
|
Less: |
|
|
|
|
|
|
|
|
Net cash interest expense (excluding capitalized interest) and debt
service |
|
(14.9 |
) |
|
(14.9 |
) |
|
(29.8 |
) |
|
(29.9 |
) |
Maintenance capital expenditures |
|
(4.1 |
) |
|
(4.4 |
) |
|
(6.4 |
) |
|
(8.4 |
) |
Major turnaround expenses |
|
(6.3 |
) |
|
(0.1 |
) |
|
(6.3 |
) |
|
(0.1 |
) |
Cash reserves for future operating needs |
|
(0.7 |
) |
|
(12.9 |
) |
|
(0.7 |
) |
|
(12.9 |
) |
Available cash for distribution |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(4.2 |
) |
|
$ |
1.8 |
|
Distribution declared, per common unit |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
0.02 |
|
Common units outstanding (in thousands) |
|
113,283 |
|
|
113,283 |
|
|
113,283 |
|
|
113,283 |
|
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