CVR Partners, LP (NYSE: UAN), a manufacturer of ammonia and urea
ammonium nitrate (UAN) fertilizer products, today announced a
fourth quarter 2018 net loss of $1 million, or 1 cent per common
unit, on net sales of $98 million, compared to a net loss of $27
million, or 24 cents per common unit, on net sales of $78 million
for the prior year period. Adjusted EBITDA was $33 million for the
fourth quarter of 2018, compared to $8 million for the fourth
quarter of 2017.
For full year 2018, CVR Partners had a net loss of $50 million,
or 44 cents per common unit, on net sales of $351 million, compared
to a net loss of $73 million, or 64 cents per common unit, on net
sales of $331 million for full year 2017. Adjusted EBITDA for full
year 2018 was $90 million, compared to $67 million for the previous
year.
“Higher netback pricing and increased utilization rates led to
improved 2018 fourth quarter and full-year results for CVR
Partners,” said Mark Pytosh, Chief Executive Officer of CVR
Partners’ general partner. “We also are pleased to report that CVR
Partners generated positive distributable cash in the 2018 fourth
quarter and declared a 12 cent per unit distribution.
“While a wet fall created unfavorable application conditions for
nitrogen fertilizer, we currently expect the missed tonnage will be
applied in the spring,” Pytosh said. “In addition, we anticipate
the corn planted this spring should increase by 3 million to 5
million acres, leading to strong nitrogen fertilizer demand.”
Consolidated Operations
For the fourth quarter of 2018, consolidated average realized
gate prices for UAN and ammonia were $180 per ton and $324 per ton,
respectively. Consolidated average realized gate prices for UAN and
ammonia were $132 per ton and $264 per ton, respectively, for the
same period in 2017.
CVR Partners’ fertilizer facilities produced a combined 209,000
tons of ammonia during the fourth quarter of 2018, of which 59,000
net tons were available for sale while the rest was upgraded to
other fertilizer products, including 357,000 tons of UAN. In the
2017 fourth quarter, the fertilizer facilities produced 200,000
tons of ammonia, of which 64,000 net tons were available for sale
while the remainder was upgraded to other fertilizer products,
including 306,000 tons of UAN.
Distributions
CVR Partners also announced that, on Feb. 20, 2019, the Board of
Directors of its general partner declared a fourth quarter 2018
cash distribution of 12 cents per common unit, which will be paid
on March 11, 2019 to common unitholders of record on March 4,
2019.
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.
Fourth Quarter 2018 Earnings Conference
Call
CVR Partners previously announced that it will host its fourth
quarter and full-year 2018 Earnings Conference Call on Thursday,
Feb. 21, at 11 a.m. Eastern. This 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 fourth quarter and full-year 2018 Earnings Conference Call
will be webcast live and can be accessed on the Investor Relations
section of CVR Partners’ website at www.CVRPartners.com. For
investors or analysts who want to participate during the call, the
dial-in number is (877) 407-8029. The webcast will be archived and
available through March 7 at
https://edge.media-server.com/m6/p/xbygitmc. A repeat of the call
can be accessed through March 7 by dialing (877) 660-6853,
conference ID 13687295.
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; distributable cash and distributions
including the amounts and timing thereof; application of tonnage in
the spring; increasing in corn planted this spring by 3 million to
5 million acres or at all; strong nitrogen fertilizer demand;
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
Non-GAAP Measures
Our management uses certain non-GAAP performance measures to
evaluate current and past performance and prospects for the future
to supplement our GAAP financial information presented in
accordance with U.S. GAAP. These non-GAAP financial measures are
important factors in assessing our operating results and
profitability and include the performance and liquidity measures
defined below.
During the fourth quarter of 2018, management revised its
internal and external use of non-GAAP measures to eliminate
adjustments to earnings before interest, tax, depreciation and
amortization (“EBITDA”) for business interruption insurance
recoveries. Refer to the revised definition below for further
information.
EBITDA - Net income (loss) before (i) interest expense, net,
(ii) income tax expense (benefit) and (iii) depreciation and
amortization expense.
Adjusted EBITDA - EBITDA adjusted to exclude turnaround expense
and other non-recurring items which management believes are
material to an investor’s understanding of the Partnership’s
underlying operating results.
Available Cash for Distribution - Adjusted EBITDA reduced for
cash reserves established by the board of directors of our general
partner for (i) debt service, (ii) maintenance capital
expenditures, (iii) turnaround expenses and, to the extent
applicable, (iv) reserves for future operating or capital needs
that the board of directors of our 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, and other excess cash, at the discretion of the board of
directors of our general partner.
We present these measures because we believe they may help
investors, analysts, lenders and ratings agencies analyze our
results of operations and liquidity in conjunction with our U.S.
GAAP results, including but not limited to our operating
performance as compared to other publicly traded companies in the
refining industry, without regard to historical cost basis or
financing methods and our ability to incur and service debt and
fund capital expenditures. Non-GAAP measures have important
limitations as analytical tools, because they exclude some, but not
all, items that affect net earnings and operating income. These
measures should not be considered substitutes for their most
directly comparable U.S. GAAP financial measures. See “Non-GAAP
Reconciliations” section included herein for reconciliation of
these amounts.
Items or Events Impacting Comparability
During the fourth quarter of 2018, the Partnership recognized a
$6.1 million business interruption insurance recovery associated
with prior period outages at its Coffeyville, Kansas (the
“Coffeyville Facility”). The recovery is recorded in the Other
Income (Expense) line item. Prior year amounts, which were not
material, were conformed to the current year presentation.
Refer to the “Non-GAAP Measures” section above for discussion of
the change made during the fourth quarter of 2018 to the
Partnership’s definition of Adjusted EBITDA.
Coffeyville Facility
During 2018, we had a planned, full facility turnaround lasting
15 days and incurred approximately $6.4 million in turnaround
expense in the second quarter of 2018.
During 2017, our third-party air separation unit experienced a
shut down. Paired with this shut down and subsequent operational
challenges, we experienced unplanned UAN downtime of 11 days during
the second quarter of 2017.
East Dubuque Facility
During 2017, we had a planned, full facility turnaround lasting
14 days and incurred approximately $2.6 million in turnaround
expense in the third quarter of 2017. Additionally, during the
fourth quarter of 2017, we experienced unplanned downtime totaling
12 days.
CVR Partners,
LPConsolidated Statements of
Operations(Unaudited)
|
|
Three Months EndedDecember 31, |
|
Year
Ended December 31, |
(in thousands, except
per unit amounts) |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
Net sales (1) |
|
$ |
98,118 |
|
|
$ |
78,192 |
|
|
$ |
351,082 |
|
|
$ |
330,802 |
|
Operating costs and
expenses: |
|
|
|
|
|
|
|
|
Cost of
materials and other (exclusive of depreciation and
amortization) |
|
27,263 |
|
|
21,501 |
|
|
88,461 |
|
|
84,874 |
|
Direct
operating expenses (exclusive of depreciation and
amortization) |
|
37,851 |
|
|
41,566 |
|
|
159,319 |
|
|
156,357 |
|
Depreciation and amortization |
|
18,709 |
|
|
19,109 |
|
|
71,575 |
|
|
73,986 |
|
Cost of
sales |
|
83,823 |
|
|
82,176 |
|
|
319,355 |
|
|
315,217 |
|
Selling,
general and administrative expenses |
|
6,069 |
|
|
6,880 |
|
|
25,023 |
|
|
25,630 |
|
Loss on
asset disposals |
|
230 |
|
|
(36 |
) |
|
390 |
|
|
233 |
|
Operating
income (loss) |
|
7,996 |
|
|
(10,828 |
) |
|
6,314 |
|
|
(10,278 |
) |
Other income
(expense): |
|
|
|
|
|
|
|
|
Interest
expense, net |
|
(15,507 |
) |
|
(15,735 |
) |
|
(62,588 |
) |
|
(62,845 |
) |
Other
income (expense), net |
|
6,100 |
|
|
(586 |
) |
|
6,201 |
|
|
555 |
|
Loss
before income tax expense |
|
(1,411 |
) |
|
(27,149 |
) |
|
(50,073 |
) |
|
(72,568 |
) |
Income tax expense
(benefit) |
|
(40 |
) |
|
256 |
|
|
(46 |
) |
|
220 |
|
Net
loss |
|
$ |
(1,371 |
) |
|
$ |
(27,405 |
) |
|
$ |
(50,027 |
) |
|
$ |
(72,788 |
) |
|
|
|
|
|
|
|
|
|
Net loss
per common unit - basic and diluted |
|
$ |
(0.01 |
) |
|
$ |
(0.24 |
) |
|
$ |
(0.44 |
) |
|
$ |
(0.64 |
) |
Distributions declared per common unit |
|
— |
|
|
— |
|
|
— |
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
EBITDA * |
|
$ |
32,805 |
|
|
$ |
7,695 |
|
|
$ |
84,090 |
|
|
$ |
64,263 |
|
Adjusted EBITDA* |
|
$ |
32,805 |
|
|
$ |
7,695 |
|
|
$ |
90,489 |
|
|
$ |
66,848 |
|
Available cash for
distribution* |
|
$ |
14,119 |
|
|
$ |
(10,231 |
) |
|
$ |
9,843 |
|
|
$ |
(9,675 |
) |
|
|
|
|
|
|
|
|
|
Weighted-average common units outstanding: |
|
|
|
|
|
|
|
|
Basic and
Diluted |
|
113,283 |
|
|
113,283 |
|
|
113,283 |
|
|
113,283 |
|
________________________________* See “Non-GAAP Reconciliations”
section below reconciliation of these amounts.
(1) Below are the
components of net sales:
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
(in thousands) |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
Reconciliation to net
sales: |
|
|
|
|
|
|
|
|
Fertilizer sales |
|
$ |
86,182 |
|
|
$ |
67,264 |
|
|
$ |
309,216 |
|
|
$ |
290,401 |
|
Freight
in revenue |
|
9,658 |
|
|
9,150 |
|
|
33,567 |
|
|
32,788 |
|
Other |
|
2,278 |
|
|
1,778 |
|
|
8,299 |
|
|
7,613 |
|
Total net
sales |
|
$ |
98,118 |
|
|
$ |
78,192 |
|
|
$ |
351,082 |
|
|
$ |
330,802 |
|
Selected Balance Sheet Data:
(in thousands) |
As of December 31, 2018 |
|
As of December 31, 2017 |
|
|
|
|
Cash and cash
equivalents |
$ |
61,776 |
|
|
$ |
49,173 |
|
Working capital |
71,346 |
|
|
61,895 |
|
Total assets |
1,254,388 |
|
|
1,234,276 |
|
Total long-term
debt |
628,989 |
|
|
625,904 |
|
Total liabilities |
754,562 |
|
|
684,423 |
|
Total partners’
capital |
499,826 |
|
|
549,853 |
|
Selected Cash Flow Data:
|
Three Months Ended December 31, |
|
Year Ended December 31, |
(in thousands) |
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
Net cash flow provided
by (used in): |
|
|
|
|
|
|
|
Operating
activities |
$ |
5,116 |
|
|
$ |
(17,704 |
) |
|
$ |
32,234 |
|
|
$ |
10,400 |
|
Investing
activities |
(4,781 |
) |
|
(3,100 |
) |
|
(19,631 |
) |
|
(14,556 |
) |
Financing
activities |
— |
|
|
— |
|
|
— |
|
|
(2,266 |
) |
Net increase (decrease)
in cash and cash equivalents |
$ |
335 |
|
|
$ |
(20,804 |
) |
|
$ |
12,603 |
|
|
$ |
(6,422 |
) |
Capital Expenditures:
|
Three Months Ended December 31, |
|
Year Ended December 31, |
(in thousands) |
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
Maintenance capital
expenditures |
$ |
3,854 |
|
|
$ |
2,960 |
|
|
$ |
15,526 |
|
|
$ |
14,089 |
|
Growth capital
expenditures |
138 |
|
|
141 |
|
|
4,280 |
|
|
467 |
|
Total
capital expenditures |
$ |
3,992 |
|
|
$ |
3,101 |
|
|
$ |
19,806 |
|
|
$ |
14,556 |
|
Key Operating Data:
Ammonia Utilization Rates
(1)
|
Two Years Ended December 31, |
(percent of capacity
utilization) |
2018 |
|
2017 |
|
|
|
|
Consolidated |
93% |
|
92% |
Coffeyville |
92% |
|
94% |
East Dubuque |
93% |
|
89% |
______________________________
- Reflects our ammonia utilization rates on a consolidated basis
and at each of our facilities. Utilization is an important measure
used by management to assess operational output at each of the
Partnership’s facilities. Utilization is calculated as actual tons
produced divided by capacity. We present our utilization on a
two-year rolling average to take into account the impact of our
current turnaround cycles on any specific period. The two-year
rolling average is a more useful presentation of the long-term
utilization performance of our plants. Additionally, we present
utilization solely on ammonia production rather than each nitrogen
product as it provides a comparative baseline against industry
peers and eliminates the disparity of plant configurations for
upgrade of ammonia into other nitrogen products. With our efforts
being primarily focused on ammonia upgrade capabilities, this
measure provides a meaningful view of how well we operate.
Sales and Production
Data
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Consolidated sales
(thousand tons): |
|
|
|
|
|
|
|
Ammonia |
46 |
|
|
84 |
|
|
202 |
|
|
286 |
|
UAN |
364 |
|
|
303 |
|
|
1,289 |
|
|
1,255 |
|
|
|
|
|
|
|
|
|
Consolidated product
pricing at gate (dollars per ton) (2): |
|
|
|
|
|
|
|
Ammonia |
$ |
324 |
|
|
$ |
264 |
|
|
$ |
328 |
|
|
$ |
280 |
|
UAN |
$ |
180 |
|
|
$ |
132 |
|
|
$ |
173 |
|
|
$ |
152 |
|
|
|
|
|
|
|
|
|
Consolidated production
volume (thousand tons): |
|
|
|
|
|
|
|
Ammonia
(gross produced) (3) |
209 |
|
|
200 |
|
|
794 |
|
|
815 |
|
Ammonia
(net available for sale) (3) |
59 |
|
|
64 |
|
|
246 |
|
|
268 |
|
UAN |
357 |
|
|
306 |
|
|
1,276 |
|
|
1,268 |
|
|
|
|
|
|
|
|
|
Feedstock: |
|
|
|
|
|
|
|
Petroleum
coke used in production (thousand tons) |
139 |
|
|
117 |
|
|
463 |
|
|
488 |
|
Petroleum
coke used in production (dollars per ton) |
$ |
41 |
|
|
$ |
13 |
|
|
$ |
28 |
|
|
$ |
17 |
|
Natural
gas used in production (thousands of MMBtus) (4) |
2,000 |
|
|
1,839 |
|
|
7,933 |
|
|
7,620 |
|
Natural
gas used in production (dollars per MMBtu) (4) |
$ |
4.06 |
|
|
$ |
3.24 |
|
|
$ |
3.28 |
|
|
$ |
3.24 |
|
Natural
gas in cost of materials and other (thousands of MMBtus) (4) |
1,854 |
|
|
2,153 |
|
|
7,122 |
|
|
8,052 |
|
Natural
gas in cost of materials and other (dollars per MMBtu) (4) |
$ |
3.50 |
|
|
$ |
3.17 |
|
|
$ |
3.15 |
|
|
$ |
3.26 |
|
______________________________
- Product pricing at gate represents 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.
- 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.
- 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 expense.
Key Market Indicators
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Ammonia - Southern
plains (dollars per ton) |
$ |
423 |
|
|
$ |
315 |
|
|
$ |
370 |
|
|
$ |
314 |
|
Ammonia - Corn belt
(dollars per ton) |
479 |
|
|
340 |
|
|
424 |
|
|
358 |
|
UAN - Corn belt
(dollars per ton) |
255 |
|
|
190 |
|
|
219 |
|
|
192 |
|
|
|
|
|
|
|
|
|
Natural gas NYMEX
(dollars per MMBtu) |
$ |
3.75 |
|
|
$ |
2.92 |
|
|
$ |
3.08 |
|
|
$ |
3.02 |
|
Non-GAAP Reconciliations:
Reconciliation of Net Loss to
EBITDA and Adjusted EBITDA
|
Three Months Ended December 31, |
|
Year Ended December 31, |
(in thousands) |
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
Net loss |
$ |
(1,371 |
) |
|
$ |
(27,405 |
) |
|
$ |
(50,027 |
) |
|
$ |
(72,788 |
) |
Add: |
|
|
|
|
|
|
|
Interest
expense, net |
15,507 |
|
|
15,735 |
|
|
62,588 |
|
|
62,845 |
|
Income
tax expense (benefit) |
(40 |
) |
|
256 |
|
|
(46 |
) |
|
220 |
|
Depreciation and amortization |
18,709 |
|
|
19,109 |
|
|
71,575 |
|
|
73,986 |
|
EBITDA |
$ |
32,805 |
|
|
$ |
7,695 |
|
|
$ |
84,090 |
|
|
$ |
64,263 |
|
Add: |
|
|
|
|
|
|
|
Turnaround expenses |
— |
|
|
— |
|
|
6,399 |
|
|
2,585 |
|
Adjusted
EBITDA |
$ |
32,805 |
|
|
$ |
7,695 |
|
|
$ |
90,489 |
|
|
$ |
66,848 |
|
Reconciliation of Net Cash Provided
By (Used In) Operating Activities to EBITDA
|
Three Months Ended December 31, |
|
Year Ended December
31, |
(in thousands) |
2018 |
|
2017 |
|
2018 |
|
2017 |
Net cash provided by
(used in) operating activities |
$ |
5,116 |
|
|
$ |
(17,704 |
) |
|
$ |
32,234 |
|
|
$ |
10,400 |
|
Adjustments: |
|
|
|
|
|
|
|
Less: |
|
|
|
|
|
|
|
Interest
expense, net |
15,507 |
|
|
15,735 |
|
|
62,588 |
|
|
62,845 |
|
Income
tax expense (benefit) |
(40 |
) |
|
256 |
|
|
(46 |
) |
|
220 |
|
Change in
working capital |
15,317 |
|
|
13,908 |
|
|
(2,256 |
) |
|
(640 |
) |
Other
non-cash adjustments |
(3,095 |
) |
|
(4,500 |
) |
|
(8,430 |
) |
|
(8,562 |
) |
EBITDA |
$ |
32,805 |
|
|
$ |
7,695 |
|
|
$ |
84,090 |
|
|
$ |
64,263 |
|
Reconciliation of Adjusted EBITDA
to Available Cash for Distribution
|
Three Months Ended December 31, |
|
Year Ended December 31, |
(in thousands) |
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
Adjusted EBITDA |
$ |
32,805 |
|
|
$ |
7,695 |
|
|
$ |
90,489 |
|
|
$ |
66,848 |
|
Less: |
|
|
|
|
|
|
|
Debt
service |
(14,708 |
) |
|
(14,967 |
) |
|
(59,372 |
) |
|
(59,849 |
) |
Maintenance capital expenditures |
(3,978 |
) |
|
(2,959 |
) |
|
(14,870 |
) |
|
(14,089 |
) |
Turnaround expenses |
— |
|
|
— |
|
|
(6,404 |
) |
|
(2,585 |
) |
Available cash for distribution |
$ |
14,119 |
|
|
$ |
(10,231 |
) |
|
$ |
9,843 |
|
|
$ |
(9,675 |
) |
|
|
|
|
|
|
|
|
Available cash for distribution, per common unit |
$ |
0.12 |
|
|
$ |
(0.09 |
) |
|
$ |
0.09 |
|
|
$ |
(0.09 |
) |
|
|
|
|
|
|
|
|
Common
units outstanding (in thousands) |
113,283 |
|
|
113,283 |
|
|
113,283 |
|
|
113,283 |
|
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