CVR Partners, LP (“CVR Partners” or the “Partnership”) (NYSE: UAN),
a manufacturer of ammonia and urea ammonium nitrate (“UAN”)
solution fertilizer products, today announced net income of $102
million, or $9.64 per common unit, on net sales of $226 million for
the first quarter of 2023, compared to net income of $94 million,
or $8.78 per common unit, on net sales of $223 million for the
first quarter of 2022. EBITDA was $124 million for the first
quarter of 2023, compared to EBITDA of $123 million for the first
quarter of 2022.
“CVR Partners achieved solid results for the
2023 first quarter led by record production, including a combined
ammonia utilization rate of 105 percent, offset somewhat by lower
fertilizer pricing during the quarter,” said Mark Pytosh, Chief
Executive Officer of CVR Partners’ general partner. “The
maintenance work that was completed during last year’s turnarounds
has improved reliability at both nitrogen fertilizer facilities and
we plan to continue to invest in additional reliability projects
during the next two to three years.
“The spring pre-planting season is off to a
robust start and the U.S. Department of Agriculture estimates that
planted corn acres will increase approximately 4 percent this
spring compared to a year ago, driving strong demand for nitrogen
fertilizer,” Pytosh said. “Our focus for the remainder of the year
is on safe, reliable operations while maximizing our free cash
generation.”
Consolidated Operations
For the first quarter of 2023, CVR Partners’
average realized gate prices for UAN showed a reduction over the
prior year, down 8 percent to $457 per ton, and ammonia was down 16
percent over the prior year to $888 per ton. Average realized
gate prices for UAN and ammonia were $496 and $1,055 per ton,
respectively, for the first quarter of 2022.
CVR Partners’ fertilizer facilities produced a
combined 224,000 tons of ammonia during the first quarter of 2023,
of which 62,000 net tons were available for sale while the rest was
upgraded to other fertilizer products, including 366,000 tons of
UAN. In the first quarter of 2022, the fertilizer facilities
produced 187,000 tons of ammonia, of which 52,000 net tons were
available for sale while the remainder was upgraded to other
fertilizer products, including 317,000 tons of UAN. These increases
were due to operating reliability after completing the planned
turnarounds at both fertilizer facilities during the third quarter
of 2022.
In January 2023, CVR Partners and one of its
subsidiaries entered into a series of agreements to allow the
Partnership to monetize certain tax credits available to joint
ventures under Section 45Q of the Internal Revenue Code of 1986, as
amended, expected to be generated from January 6, 2023, until March
31, 2030 (the “45Q Transaction”). In connection with these
agreements, the Partnership received an initial distribution, net
of expenses, of approximately $18.1 million and could receive
up to an additional $60 million in payments through March 31,
2030, if certain carbon oxide capture and sequestration milestones
are met, subject to the terms of the applicable agreements. Among
other items, the 45Q Transaction resulted in the creation of
CVR-CapturePoint Parent LLC, a joint venture in which the
Partnership indirectly holds a 50 percent interest.
Distributions
CVR Partners also announced that on May 1,
2023, the Board of Directors of the Partnership’s general partner
(the “Board”) declared a first quarter 2023 cash distribution of
$10.43 per common unit, which will be paid on May 22, 2023, to
common unitholders of record as of May 15, 2023.
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, use of cash and cash reserves deemed necessary or
appropriate by the Board.
First Quarter
2023 Earnings Conference Call
CVR Partners previously announced that it will
host its first quarter 2023 Earnings Conference Call on Tuesday,
May 2, 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 first quarter 2023 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 for 14 days at
https://edge.media-server.com/mmc/p/8nwfybak. A repeat of the call
also can be accessed for 14 days by dialing (877) 660-6853,
conference ID 13737893.
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: production levels; utilization rates;
nitrogen fertilizer pricing; timing of turnaround and reliability
projects and the impact thereof on operating rates and results;
reliability of our plants, including the impacts thereon; global
fertilizer industry conditions, including the strength, drivers and
duration thereof; planting season strength, farm economics and
nitrogen fertilizer pricing and demand, including the drivers
thereof; Partnership focus; shipments of nitrogen fertilizer;
nitrogen fertilizer demand; realized gate prices for ammonia and
UAN; ammonia production levels, including volumes upgraded to other
fertilizer products such as UAN; Section 45Q credits and future
payments arising under the 45Q Transaction (if any), including the
amount, timing and receipt thereof; distributions, including the
timing, payment and amount (if any) thereof; our evaluation of
opportunities to reduce our carbon footprint; continued safe and
reliable operations; operating performance, finished product
pricing, costs and capital expenditures, including management
thereof; cash flow, use of cash and reserves; EBITDA and Adjusted
EBITDA; weather conditions, including the impact thereof on our
business; natural gas and global energy costs; exports; CVR Energy,
Inc.’s consideration of a potential spin-off of the interests it
owns in CVR Partners and the nitrogen fertilizer business; 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,” “explore,” “evaluate,” “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) the rate of any economic improvement,
impacts of the planting season on our business, the health and
economic effects of COVID-19 and any variants thereof, 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 Securities and Exchange
Commission (“SEC”) filings. These and other 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
3,100 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 950 ton-per-day UAN unit.
Investors and others should note that CVR
Partners may announce material information using SEC filings, press
releases, public conference calls, webcasts, and the Investor
Relations page of its website. CVR Partners may use these channels
to distribute material information about the Partnership and to
communicate important information about the Partnership, corporate
initiatives and other matters. Information that CVR Partners posts
on its website could be deemed material; therefore, CVR Partners
encourages investors, the media, its customers, business partners
and others interested in the Partnership to review the information
posted on its website.
For further information, please contact:
Investor RelationsRichard
RobertsCVR Partners, LP (281)
207-3205InvestorRelations@CVRPartners.com
Media RelationsBrandee
StephensCVR Partners, LP(281)
207-3516MediaRelations@CVRPartners.com
Non-GAAP Measures
Our management uses certain non-GAAP performance
measures, and reconciliations to those measures, to evaluate
current and past performance and prospects for the future to
supplement our financial information presented in accordance with
accounting principles generally accepted in the United States
(“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.
The following are non-GAAP measures we present
for the period ended March 31, 2023:
EBITDA - Net income (loss) before (i) interest
expense, net, (ii) income tax expense (benefit) and (iii)
depreciation and amortization expense.
Adjusted EBITDA - EBITDA adjusted for certain
significant non-cash items and items that management believes are
not attributable to or indicative of our on-going operations or
that may obscure our underlying results and trends.
Reconciliation of Net Cash Provided By Operating
Activities to EBITDA - Net cash provided by operating activities
reduced by (i) interest expense, net, (ii) income tax expense
(benefit), (iii) change in working capital, and (iv) other non-cash
adjustments.
Available Cash for Distribution - EBITDA for the
quarter excluding non-cash income or expense items (if any), for
which adjustment is deemed necessary or appropriate by the Board in
its sole discretion, less (i) reserves for maintenance capital
expenditures, debt service and other contractual obligations, and
(ii) reserves for future operating or capital needs (if any), in
each case, that the Board deems necessary or appropriate in its
sole discretion. 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.
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 GAAP results, including, but not limited to, our operating
performance as compared to other publicly traded companies in the
fertilizer 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 GAAP financial measures. Refer to the “Non-GAAP
Reconciliations” included herein for reconciliation of these
amounts. Due to rounding, numbers presented within this section may
not add or equal to numbers or totals presented elsewhere within
this document.
CVR Partners, LP(all information
in this release is unaudited)
Consolidated Statement of Operations
Data
|
Three Months EndedMarch 31, |
(in thousands, except per unit
data) |
|
2023 |
|
|
|
2022 |
|
Net sales (1) |
$ |
226,261 |
|
|
$ |
222,873 |
|
Operating costs and
expenses: |
|
|
|
Cost of materials and other |
|
36,579 |
|
|
|
30,246 |
|
Direct operating expenses (exclusive of depreciation and
amortization) |
|
57,543 |
|
|
|
60,318 |
|
Depreciation and amortization |
|
15,211 |
|
|
|
19,465 |
|
Cost of sales |
|
109,333 |
|
|
|
110,029 |
|
Selling, general and
administrative expenses |
|
7,384 |
|
|
|
8,744 |
|
Loss on asset disposal |
|
192 |
|
|
|
173 |
|
Operating income |
|
109,352 |
|
|
|
103,927 |
|
Other (expense) income: |
|
|
|
Interest expense, net |
|
(7,173 |
) |
|
|
(10,036 |
) |
Other (expense) income, net |
|
(265 |
) |
|
|
28 |
|
Income before income tax expense |
|
101,914 |
|
|
|
93,919 |
|
Income tax expense |
|
44 |
|
|
|
258 |
|
Net income |
$ |
101,870 |
|
|
$ |
93,661 |
|
|
|
|
|
Basic and diluted earnings per
common unit |
$ |
9.64 |
|
|
$ |
8.78 |
|
Distributions declared per
common unit |
|
10.05 |
|
|
|
5.24 |
|
|
|
|
|
EBITDA* |
$ |
124,298 |
|
|
$ |
123,420 |
|
Available Cash for
Distribution* |
|
110,293 |
|
|
|
23,835 |
|
|
|
|
|
Weighted-average common units
outstanding: |
|
|
|
Basic and Diluted |
|
10,570 |
|
|
|
10,665 |
|
______________________________
* See “Non-GAAP Reconciliations” section below for a
reconciliation of these amounts.(1) Below are the
components of net sales:
|
Three Months EndedMarch 31, |
(in thousands) |
2023 |
|
2022 |
Components of net sales: |
|
|
|
Fertilizer sales |
$ |
210,010 |
|
$ |
210,841 |
Freight in revenue |
|
10,936 |
|
|
9,214 |
Other |
|
5,315 |
|
|
2,818 |
Total net sales |
$ |
226,261 |
|
$ |
222,873 |
|
|
|
|
|
|
Selected Balance Sheet Data
(in
thousands) |
March 31, 2023 |
|
December 31, 2022 |
Cash and cash equivalents |
$ |
121,363 |
|
$ |
86,339 |
Working capital |
|
157,308 |
|
|
139,647 |
Total assets |
|
1,116,279 |
|
|
1,100,402 |
Total debt, including current
portion |
|
546,924 |
|
|
546,800 |
Total liabilities |
|
713,579 |
|
|
688,591 |
Total partners’ capital |
|
402,700 |
|
|
411,811 |
|
|
|
|
|
|
Selected Cash Flow Data
|
Three Months EndedMarch 31, |
(in thousands) |
|
2023 |
|
|
|
2022 |
|
Net cash flow provided by
(used in): |
|
|
|
Operating activities |
$ |
130,443 |
|
|
$ |
166,927 |
|
Investing activities |
|
15,562 |
|
|
|
(7,899 |
) |
Financing activities |
|
(110,981 |
) |
|
|
(134,197 |
) |
Net increase in cash and cash equivalents |
$ |
35,024 |
|
|
$ |
24,831 |
|
|
|
|
|
|
|
|
|
Capital Expenditures
|
Three Months EndedMarch 31, |
(in
thousands) |
2023 |
|
2022 |
Maintenance |
$ |
3,500 |
|
$ |
5,128 |
Growth |
|
25 |
|
|
521 |
Total capital expenditures |
$ |
3,525 |
|
$ |
5,649 |
|
|
|
|
|
|
Key Operating Data
Ammonia Utilization (1) |
|
|
|
|
Three Months EndedMarch 31, |
(percent of capacity
utilization) |
2023 |
|
2022 |
Consolidated |
105 |
% |
|
88 |
% |
______________________________
(1) 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 for the three
months ended March 31, 2023 and 2022 and take into account the
impact of our current turnaround cycles on any specific period.
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 EndedMarch 31, |
|
2023 |
|
2022 |
Consolidated sales (thousand
tons): |
|
|
|
Ammonia |
|
42 |
|
|
40 |
UAN |
|
359 |
|
|
322 |
|
|
|
|
Consolidated product pricing
at gate (dollars per ton): (1) |
|
|
|
Ammonia |
$ |
888 |
|
$ |
1,055 |
UAN |
|
457 |
|
|
496 |
|
|
|
|
Consolidated production volume
(thousand tons): |
|
|
|
Ammonia (gross produced) (2) |
|
224 |
|
|
187 |
Ammonia (net available for sale) (2) |
|
62 |
|
|
52 |
UAN |
|
366 |
|
|
317 |
|
|
|
|
Feedstock: |
|
|
|
Petroleum coke used in production (thousand tons) |
|
131 |
|
|
108 |
Petroleum coke used in production (dollars per ton) |
$ |
77.24 |
|
$ |
56.46 |
Natural gas used in production (thousands of MMBtu) (3) |
|
2,102 |
|
|
1,761 |
Natural gas used in production (dollars per MMBtu) (3) |
$ |
5.76 |
|
$ |
5.54 |
Natural gas in cost of materials and other (thousands of MMBtu)
(3) |
|
1,315 |
|
|
1,528 |
Natural gas in cost of materials and other (dollars per MMBtu)
(3) |
$ |
7.79 |
|
$ |
5.62 |
______________________________
(1) 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.(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
expense.
Key Market Indicators
|
Three Months EndedMarch 31, |
|
2023 |
|
2022 |
Ammonia — Southern plains (dollars per ton) |
$ |
739 |
|
$ |
1,277 |
Ammonia — Corn belt (dollars
per ton) |
|
894 |
|
|
1,376 |
UAN — Corn belt (dollars per
ton) |
|
373 |
|
|
615 |
|
|
|
|
Natural gas NYMEX (dollars per
MMBtu) |
$ |
2.76 |
|
$ |
4.59 |
|
|
|
|
|
|
Q2 2023 Outlook
The table below summarizes our outlook for
certain operational statistics and financial information for the
second quarter of 2023. See “Forward-Looking Statements” above.
|
Q2 2023 |
|
Low |
|
High |
Ammonia utilization rates |
|
|
|
Consolidated |
|
95 |
% |
|
|
100 |
% |
Coffeyville Facility |
|
95 |
% |
|
|
100 |
% |
East Dubuque Facility |
|
95 |
% |
|
|
100 |
% |
|
|
|
|
Direct operating expenses (in
millions) (1) |
$ |
50 |
|
|
$ |
55 |
|
Capital expenditures (in
millions) (2) |
$ |
7 |
|
|
$ |
12 |
|
______________________________
(1) Direct operating expenses
are shown exclusive of depreciation and amortization, turnaround
expenses, and impacts of inventory
adjustments.(2) Capital expenditures are disclosed
on an accrual basis.
Non-GAAP Reconciliations:
Reconciliation of Net
Income to EBITDA and Adjusted EBITDA
|
Three Months EndedMarch 31, |
(in thousands) |
2023 |
|
2022 |
Net income |
$ |
101,870 |
|
$ |
93,661 |
Interest expense, net |
|
7,173 |
|
|
10,036 |
Income tax expense |
|
44 |
|
|
258 |
Depreciation and amortization |
|
15,211 |
|
|
19,465 |
EBITDA and Adjusted EBITDA |
$ |
124,298 |
|
$ |
123,420 |
|
|
|
|
|
|
Reconciliation of Net Cash Provided By
Operating Activities to EBITDA and Adjusted
EBITDA
|
Three Months EndedMarch 31, |
(in thousands) |
|
2023 |
|
|
|
2022 |
|
Net cash provided by
operating activities |
$ |
130,443 |
|
|
$ |
166,927 |
|
Non-cash items: |
|
|
|
Loss on extinguishment of debt |
|
— |
|
|
|
(628 |
) |
Share-based compensation |
|
(1,933 |
) |
|
|
(12,074 |
) |
Other |
|
(502 |
) |
|
|
(613 |
) |
Adjustments: |
|
|
|
Interest expense, net |
|
7,173 |
|
|
|
10,036 |
|
Income tax expense |
|
44 |
|
|
|
258 |
|
Change in assets and liabilities |
|
(10,927 |
) |
|
|
(40,486 |
) |
EBITDA and Adjusted EBITDA |
$ |
124,298 |
|
|
$ |
123,420 |
|
|
|
|
|
|
|
|
|
Reconciliation of EBITDA to Available Cash for
Distribution
|
Three Months EndedMarch 31, |
(in thousands) |
|
2023 |
|
|
|
2022 |
|
EBITDA |
$ |
124,298 |
|
|
$ |
123,420 |
|
Current (reserves) adjustments
for amounts related to: |
|
|
|
Net cash interest expense (excluding capitalized interest) |
|
(8,466 |
) |
|
|
(9,334 |
) |
Debt service |
|
— |
|
|
|
(65,000 |
) |
Financing fees |
|
— |
|
|
|
(815 |
) |
Maintenance capital expenditures |
|
(3,500 |
) |
|
|
(5,128 |
) |
Utility pass-through |
|
(675 |
) |
|
|
(675 |
) |
Common units repurchased |
|
— |
|
|
|
(12,397 |
) |
Net cash proceeds from the 45Q Transaction |
|
18,052 |
|
|
|
— |
|
Other (reserves) releases: |
|
|
|
Reserve for recapture of prior negative available cash |
|
— |
|
|
|
— |
|
Future turnaround |
|
(3,166 |
) |
|
|
(6,875 |
) |
Reserve for maintenance capital expenditures |
|
(16,250 |
) |
|
|
639 |
|
Available Cash for distribution (1)
(2) |
$ |
110,293 |
|
|
$ |
23,835 |
|
|
|
|
|
Common units outstanding |
|
10,570 |
|
|
|
10,570 |
|
______________________________
(1) Amount represents the
cumulative available cash based on quarter-to-date and year-to-date
results. However, available cash for distribution is calculated
quarterly, with distributions (if any) being paid in the period
following declaration.(2) The Partnership declared
and paid a $10.50 cash distribution related to the fourth quarter
of 2022 and declared a cash distribution of $10.43 per common unit
related to the first quarter of 2023 to be paid in May 2023.
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