CVR Partners Reports Second Quarter 2021 Results and Announces a Cash Distribution of $1.72
“CVR Partners experienced a solid 2021 second quarter, led by a combined ammonia utilization rate of 98 percent,” said
“So far in the third quarter, farm economics remain robust with grain prices nearing a 10-year high and demand for all crop inputs, including nitrogen fertilizer, remaining strong,” Pytosh said. “Nitrogen fertilizer pricing also continues to remain firm due to supply constraints resulting from Winter Storm Uri-related production outages and the planned major plant turnarounds scheduled across the industry for the second half of the year.
“In addition, we are pleased to announce a second quarter 2021 cash distribution of
Consolidated Operations
For the second quarter of 2021, CVR Partners’ average realized gate prices for UAN showed an improvement over the prior year, up 44 percent to
CVR Partners’ fertilizer facilities produced a combined 217,000 tons of ammonia during the second quarter of 2021, of which 70,000 net tons were available for sale while the rest was upgraded to other fertilizer products, including 334,000 tons of UAN. In the second quarter of 2020, the fertilizer facilities produced 216,000 tons of ammonia, of which 79,000 net tons were available for sale while the remainder was upgraded to other fertilizer products, including 321,000 tons of UAN.
Capital Structure
On
On
Distributions
Second Quarter 2021 Earnings Conference Call
The second quarter 2021 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/s9bw32pq. A repeat of the call also can be accessed for 14 days by dialing (877) 660-6853, conference ID 13721549.
Qualified Notice
This 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
Forward-Looking Statements
This 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 utilization rates; planting conditions; shipments of nitrogen fertilizer; farm economics including improvement thereof; nitrogen fertilizer demand, including the strength thereof; the impact of Winter Storm Uri outages and plant turnarounds on nitrogen fertilizer supply and pricing; distributions, including the timing, payment and amount (if any) thereof; realized gate prices for ammonia and UAN; ammonia production levels including volumes upgraded to other fertilizer products including UAN; impact of the issuance of the 2028 Notes and partial redemption of the 2023 Notes on liquidity and interest expense; purchases under the Unit Repurchase Program (if any), including the cost thereof; continued safe and reliable operations; operating performance, finished product pricing, costs and capital expenditures including management thereof, cash flow, use of cash and 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,” “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 health and economic effects of the COVID-19 pandemic and any variant thereof, the rate of any economic improvements, 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
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Investors and others should note that
For further information, please contact:
Investor Relations:
(281) 207-3205
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(281) 207-3516
MediaRelations@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 GAAP financial information presented in accordance with
Beginning with the second quarter of 2021, management began reporting Adjusted EBITDA, as defined below. We believe the presentation of this non-GAAP measure is meaningful to compare our operating results between periods and peer companies. All prior periods presented have been conformed to the definition below. The following are non-GAAP measures we present for the period ended
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
Factors Affecting Comparability of Our Financial Results
Our historical results of operations for the periods presented may not be comparable with prior periods or to our results of operations in the future for the reason discussed below.
Goodwill Impairment
As a result of lower expectations for market conditions in the fertilizer industry during 2020, the market performance of the Partnership’s common units, a qualitative analysis, and additional risks associated with the business, the Partnership performed an interim quantitative impairment assessment of goodwill for the Coffeyville Facility reporting unit as of
(all information in this release is unaudited)
Financial and Operational Data
Three Months Ended |
Six Months Ended |
||||||||||||||
(in thousands, except per unit data) | 2021 | 2020 | 2021 | 2020 | |||||||||||
Consolidated Statement of Operations Data | |||||||||||||||
Net sales (1) | $ | 138,025 | $ | 105,091 | $ | 198,945 | $ | 180,172 | |||||||
Operating costs and expenses: | |||||||||||||||
Cost of materials and other | 26,094 | 21,948 | 43,860 | 45,939 | |||||||||||
Direct operating expenses (exclusive of depreciation and amortization) | 53,291 | 40,008 | 90,366 | 75,131 | |||||||||||
Depreciation and amortization | 21,119 | 23,371 | 35,242 | 38,968 | |||||||||||
Cost of sales | 100,504 | 85,327 | 169,468 | 160,038 | |||||||||||
Selling, general and administrative expenses | 6,802 | 4,451 | 12,692 | 9,806 | |||||||||||
Loss on asset disposal | 405 | 94 | 477 | 81 | |||||||||||
— | 40,969 | — | 40,969 | ||||||||||||
Operating income (loss) | 30,314 | (25,750 | ) | 16,308 | (30,722 | ) | |||||||||
Other (expense) income: | |||||||||||||||
Interest expense, net | (23,334 | ) | (15,890 | ) | (39,251 | ) | (31,673 | ) | |||||||
Other income, net | 40 | 38 | 4,598 | 65 | |||||||||||
Income (loss) before income tax expense | 7,020 | (41,602 | ) | (18,345 | ) | (62,330 | ) | ||||||||
Income tax expense | — | 10 | 19 | 17 | |||||||||||
Net income (loss) | $ | 7,020 | $ | (41,612 | ) | $ | (18,364 | ) | $ | (62,347 | ) | ||||
Basic and diluted earnings (loss) per unit | $ | 0.66 | $ | (3.68 | ) | $ | (1.72 | ) | $ | (5.51 | ) | ||||
EBITDA* | $ | 51,473 | $ | (2,341 | ) | $ | 56,148 | $ | 8,311 | ||||||
Adjusted EBITDA* | 51,473 | 38,628 | 56,148 | 49,280 | |||||||||||
Available Cash for Distribution* | 18,411 | — | 9,308 | (5,918 | ) | ||||||||||
Weighted-average common units outstanding - basic and diluted | 10,681 | 11,317 | 10,688 | 11,323 |
__________________
* See “Non-GAAP Reconciliations” section below for a reconciliation of these amounts.
(1) Below are the components of net sales:
Three Months Ended |
Six Months Ended |
||||||||||||||
(in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||
Components of net sales: | |||||||||||||||
Fertilizer sales | $ | 126,502 | $ | 95,594 | $ | 178,855 | $ | 160,287 | |||||||
Freight in revenue | 8,870 | 6,954 | 14,985 | 14,677 | |||||||||||
Other | 2,653 | 2,543 | 5,105 | 5,208 | |||||||||||
Total net sales | $ | 138,025 | $ | 105,091 | $ | 198,945 | $ | 180,172 |
Selected Balance Sheet Data
(in thousands) | |||||||
Cash and cash equivalents | $ | 42,819 | $ | 30,559 | |||
Working capital | 64,767 | 41,873 | |||||
Total assets | 1,019,160 | 1,032,880 | |||||
Total debt, including current portion | 640,474 | 636,182 | |||||
Total liabilities | 723,812 | 718,639 | |||||
Total partners’ capital | 295,348 | 314,241 |
Selected Cash Flow Data
Three Months Ended |
Six Months Ended |
||||||||||||||
(in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||
Net cash flow (used in) provided by: | |||||||||||||||
Operating activities | $ | (2,572 | ) | $ | (20,929 | ) | $ | 22,979 | $ | 6,778 | |||||
Investing activities | (2,350 | ) | (3,495 | ) | (5,344 | ) | (10,157 | ) | |||||||
Financing activities | (4,820 | ) | (1,033 | ) | (5,375 | ) | (1,058 | ) | |||||||
Net (decrease) increase in cash and cash equivalents | $ | (9,742 | ) | $ | (25,457 | ) | $ | 12,260 | $ | (4,437 | ) |
Capital Expenditures
Three Months Ended |
Six Months Ended |
||||||||||||||
(in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||
Maintenance capital expenditures | $ | 2,855 | $ | 2,220 | $ | 4,939 | $ | 6,358 | |||||||
Growth capital expenditures | 876 | 288 | 1,917 | 1,742 | |||||||||||
Total capital expenditures | $ | 3,731 | $ | 2,508 | $ | 6,856 | $ | 8,100 |
Key Operating Data
Ammonia Utilization (1) | |||||||||||
Three Months Ended |
Six Months Ended |
||||||||||
(capacity utilization) | 2021 | 2020 | 2021 | 2020 | |||||||
Consolidated | 98 | % | 100 | % | 93 | % | 96 | % |
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(1) | Reflects our ammonia utilization rates on a consolidated basis. 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 and six months ended |
|
Sales and Production Data
Three Months Ended |
Six Months Ended |
||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||
Consolidated sales (thousand tons): | |||||||||||||||
Ammonia | 80 | 111 | 112 | 164 | |||||||||||
UAN | 370 | 337 | 609 | 621 | |||||||||||
Consolidated product pricing at gate (dollars per ton) (1): | |||||||||||||||
Ammonia | $ | 403 | $ | 332 | $ | 373 | $ | 310 | |||||||
UAN | 237 | 165 | 206 | 166 | |||||||||||
Consolidated production volume (thousand tons): | |||||||||||||||
Ammonia (gross produced) (2) | 217 | 216 | 404 | 417 | |||||||||||
Ammonia (net available for sale) (2) | 70 | 79 | 140 | 157 | |||||||||||
UAN | 334 | 321 | 606 | 638 | |||||||||||
Feedstock: | |||||||||||||||
Petroleum coke used in production (thousand tons) | 134 | 138 | 262 | 263 | |||||||||||
Petroleum coke used in production (dollars per ton) | $ | 36.69 | $ | 31.13 | $ | 39.73 | $ | 37.59 | |||||||
Natural gas used in production (thousands of MMBtu) (3) | 2,154 | 2,131 | 4,036 | 4,272 | |||||||||||
Natural gas used in production (dollars per MMBtu) (3) | $ | 3.04 | $ | 1.94 | $ | 3.07 | $ | 2.18 | |||||||
Natural gas in cost of materials and other (thousands of MMBtu) (3) | 2,711 | 3,216 | 3,650 | 4,633 | |||||||||||
Natural gas in cost of materials and other (dollars per MMBtu) (3) | $ | 3.06 | $ | 2.17 | $ | 3.03 | $ | 2.36 |
__________________
(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 Ended |
Six Months Ended |
||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||
Ammonia - Southern plains (dollars per ton) | $ | 569 | $ | 261 | $ | 503 | $ | 266 | |||||||
Ammonia - Corn belt (dollars per ton) | 622 | 346 | 560 | 355 | |||||||||||
UAN - Corn belt (dollars per ton) | 341 | 183 | 299 | 176 | |||||||||||
Natural gas NYMEX (dollars per MMBtu) | $ | 2.98 | $ | 1.75 | $ | 2.85 | $ | 1.81 |
Q3 2021 Outlook
The table below summarizes our outlook for certain operational statistics and financial information for the third quarter of 2021. See “Forward-Looking Statements” above.
Q3 2021 | |||||||
Low | High | ||||||
Ammonia utilization rates (1) | |||||||
Consolidated | 95 | % | 100 | % | |||
Coffeyville Facility | 95 | % | 100 | % | |||
East Dubuque Facility | 95 | % | 100 | % | |||
Direct operating expenses (2) (in millions) | $ | 38 | $ | 43 | |||
Total capital expenditures (3) (in millions) | $ | 9 | $ | 12 |
__________________
(1) | Ammonia utilization rates exclude the impact of turnarounds. | |
(2) | Direct operating expenses are shown exclusive of depreciation and amortization, turnaround expenses, and impacts of inventory adjustments. | |
(3) | Capital expenditures are disclosed on an accrual basis. | |
Non-GAAP Reconciliations
Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA
Three Months Ended |
Six Months Ended |
||||||||||||||
(in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||
Net income (loss) | $ | 7,020 | $ | (41,612 | ) | $ | (18,364 | ) | $ | (62,347 | ) | ||||
Interest expense, net | 23,334 | 15,890 | 39,251 | 31,673 | |||||||||||
Income tax expense | — | 10 | 19 | 17 | |||||||||||
Depreciation and amortization | 21,119 | 23,371 | 35,242 | 38,968 | |||||||||||
EBITDA | 51,473 | (2,341 | ) | 56,148 | 8,311 | ||||||||||
Adjustments: | |||||||||||||||
— | 40,969 | — | 40,969 | ||||||||||||
Adjusted EBITDA | $ | 51,473 | $ | 38,628 | $ | 56,148 | $ | 49,280 |
Reconciliation of Net Cash Provided By Operating Activities to EBITDA and Adjusted EBITDA
Three Months Ended |
Six Months Ended |
||||||||||||||
(in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||
Net cash provided by operating activities | $ | (2,572 | ) | $ | (20,929 | ) | $ | 22,979 | $ | 6,778 | |||||
Non-cash items: | |||||||||||||||
Loss on extinguishment of debt | (7,763 | ) | — | (7,763 | ) | — | |||||||||
— | (40,969 | ) | — | (40,969 | ) | ||||||||||
Other | (7,928 | ) | (1,426 | ) | (12,779 | ) | (2,211 | ) | |||||||
Add: | |||||||||||||||
Interest expense, net | 23,334 | 15,890 | 39,251 | 31,673 | |||||||||||
Income tax expense | — | 10 | 19 | 17 | |||||||||||
Change in assets and liabilities | 46,402 | 45,083 | 14,441 | 13,023 | |||||||||||
EBITDA | 51,473 | (2,341 | ) | 56,148 | 8,311 | ||||||||||
— | 40,969 | — | 40,969 | ||||||||||||
Adjusted EBITDA | $ | 51,473 | $ | 38,628 | $ | 56,148 | $ | 49,280 |
Reconciliation of EBITDA to Available Cash for Distribution
Three Months Ended |
Six Months Ended |
||||||||||||||
(in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||
EBITDA | $ | 51,473 | $ | (2,341 | ) | $ | 56,148 | $ | 8,311 | ||||||
Non-cash items: | |||||||||||||||
— | 40,969 | — | 40,969 | ||||||||||||
Current (reserves) adjustments for amounts related to: | |||||||||||||||
Debt service | (14,725 | ) | (14,999 | ) | (29,721 | ) | (29,998 | ) | |||||||
Financing fees | (3,244 | ) | — | (3,244 | ) | — | |||||||||
Maintenance capital expenditures | (2,855 | ) | (2,220 | ) | (4,939 | ) | (6,358 | ) | |||||||
Utility pass-through | 4,145 | — | 4,145 | — | |||||||||||
Common units repurchased | — | (1,008 | ) | (529 | ) | (1,008 | ) | ||||||||
Other (reserves) releases: | |||||||||||||||
Reserve for recapture of prior negative available cash | (14,980 | ) | (5,917 | ) | (14,980 | ) | (5,917 | ) | |||||||
Future turnaround | (1,403 | ) | (1,500 | ) | (2,880 | ) | (1,500 | ) | |||||||
Previously established cash reserves | — | — | 5,308 | 2,567 | |||||||||||
Reserve for repayment of current portion of long-term debt | — | (2,240 | ) | — | (2,240 | ) | |||||||||
Cash reserves for future operating needs | — | (10,744 | ) | — | (10,744 | ) | |||||||||
Available Cash for distribution (1) (2) | $ | 18,411 | $ | — | $ | 9,308 | $ | (5,918 | ) | ||||||
Common units outstanding | 10,681 | 11,239 | 10,681 | 11,239 |
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(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 paid no cash distributions related to the first quarter of 2021, and declared a cash distribution of |
Source: CVR Partners, LP