CVR Partners Reports Third Quarter 2020 Results
“CVR Partners achieved strong production during the 2020 third quarter, with the
“In addition, farm economics have significantly improved since the summer,” Pytosh said. “Corn and soybean prices have increased by 30 percent since July and harvest weather conditions have been favorable. Looking ahead, we anticipate strong customer demand for both the fall 2020 and spring 2021 fertilizer applications.”
Consolidated Operations
For the third quarter of 2020, CVR Partners’ average realized gate prices for UAN showed a reduction over the prior year, down 23 percent to
CVR Partners’ fertilizer facilities produced a combined 215,000 tons of ammonia during the third quarter of 2020, of which 71,000 net tons were available for sale while the rest was upgraded to other fertilizer products, including 330,000 tons of UAN. In the third quarter of 2019, the fertilizer facilities produced 196,000 tons of ammonia, of which 56,000 net tons were available for sale while the remainder was upgraded to other fertilizer products, including 318,000 tons of UAN.
The Partnership’s ABL Credit Agreement was amended on
NYSE Listing Requirements and Reverse Split
The Partnership’s common units are listed on the
On
The Board determined the 1-for-10 ratio to be appropriate to meet the Partnership’s goals of improving the marketability of its common units, regaining compliance with NYSE listing requirements, and reducing the risk of future noncompliance with such listing requirements.
The Partnership’s common units are expected to begin trading on a split-adjusted basis when markets open on
Holders of certificates representing pre-split common units must surrender such certificates, together with a Letter of Transmittal, to our transfer agent,
Distributions
Third Quarter 2020 Earnings Conference Call
The third quarter 2020 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/69saujds. A repeat of the call also can be accessed for 14 days by dialing (877) 660-6853, conference ID 13712215.
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: farm economics including improvement thereof; impacts of COVID-19 including the duration thereof; distributions including the timing, payment and amount (if any) thereof; reverse unit split, including the amount, timing and impact thereof; operating performance, finished product pricing, costs and capital expenditures including management thereof, cash flow, use of cash and reserves; purchases under the Unit Repurchase Program (if any); demand for nitrogen fertilizer application; planted corn acreage; ammonia utilization rates; turnarounds and the impacts and expenses thereof; weather conditions; corn, soybean and feedstock pricing; direct operating expenses; depreciation and amortization; inventories; continued safe and reliable operations; timing of delivery; compliance with the NYSE’s listing requirements; 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) 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
About
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For further information, please contact:
Investor Relations:
(281) 207-3205
InvestorRelations@CVRPartners.com
Media Relations:
(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
Effective
The following are non-GAAP measures that continue to be presented for the period ended
EBITDA - Net income (loss) before (i) interest expense, net, (ii) income tax expense (benefit) and (iii) depreciation and amortization expense.
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.
Major Scheduled Turnaround Activities
On
Goodwill Impairment
As of
(all information in this release is unaudited)
Financial and Operational Data
Three Months Ended |
Nine Months Ended |
||||||||||||||||||
(in thousands, except per unit data) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||
Consolidated Statement of Operations Data | |||||||||||||||||||
Net sales (1) | $ | 79,482 | $ | 88,582 | $ | 259,654 | $ | 318,115 | |||||||||||
Operating costs and expenses: | |||||||||||||||||||
Cost of materials and other | 21,736 | 21,617 | 67,675 | 71,347 | |||||||||||||||
Direct operating expenses (exclusive of depreciation and amortization) | 38,555 | 47,554 | 113,686 | 128,004 | |||||||||||||||
Depreciation and amortization | 18,029 | 18,418 | 56,997 | 60,032 | |||||||||||||||
Cost of sales | 78,320 | 87,589 | 238,358 | 259,383 | |||||||||||||||
Selling, general and administrative expenses | 4,232 | 6,326 | 14,038 | 19,637 | |||||||||||||||
Loss on asset disposals | 39 | 2,184 | 120 | 2,629 | |||||||||||||||
— | — | 40,969 | — | ||||||||||||||||
Operating (loss) income | (3,109 | ) | (7,517 | ) | (33,831 | ) | 36,466 | ||||||||||||
Other (expense) income: | |||||||||||||||||||
Interest expense, net | (15,877 | ) | (15,621 | ) | (47,550 | ) | (46,870 | ) | |||||||||||
Other income, net | 57 | 174 | 122 | 229 | |||||||||||||||
Loss before income taxes | (18,929 | ) | (22,964 | ) | (81,259 | ) | (10,175 | ) | |||||||||||
Income tax expense (benefit) | 23 | 12 | 40 | (88 | ) | ||||||||||||||
Net loss | $ | (18,952 | ) | $ | (22,976 | ) | $ | (81,299 | ) | $ | (10,087 | ) | |||||||
Basic and diluted loss per unit data | $ | (0.17 | ) | $ | (0.20 | ) | $ | (0.72 | ) | $ | (0.09 | ) | |||||||
Distributions declared per unit data | — | 0.14 | — | 0.33 | |||||||||||||||
EBITDA* | $ | 14,977 | $ | 11,075 | $ | 23,288 | $ | 96,727 | |||||||||||
Available Cash for Distribution* | (5,878 | ) | 8,047 | (11,797 | ) | 31,192 | |||||||||||||
Weighted-average common units outstanding - basic and diluted | 111,294 | 113,283 | 112,577 | 113,283 |
∗ See “Non-GAAP Reconciliations” section below for a reconciliation of these amounts.
(1) Below are the components of net sales:
Three Months Ended |
Nine Months Ended |
||||||||||||||
(in thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Components of net sales: | |||||||||||||||
Fertilizer sales | $ | 67,422 | $ | 77,655 | $ | 227,709 | $ | 288,243 | |||||||
Freight in revenue | 9,545 | 8,752 | 24,222 | 23,909 | |||||||||||
Other | 2,515 | 2,175 | 7,723 | 5,963 | |||||||||||
Total net sales | $ | 79,482 | $ | 88,582 | $ | 259,654 | $ | 318,115 |
Selected Balance Sheet Data
(in thousands) | |||||||
Cash and cash equivalents | $ | 48,285 | $ | 36,994 | |||
Working capital | 47,502 | 49,429 | |||||
Total assets | 1,046,941 | 1,137,955 | |||||
Total debt, including current portion | 635,202 | 632,406 | |||||
Total liabilities | 711,089 | 718,411 | |||||
Total partners’ capital | 335,852 | 419,544 |
Selected Cash Flow Data
Three Months Ended |
Nine Months Ended |
||||||||||||||||||
(in thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||
Net cash flow provided by (used in): | |||||||||||||||||||
Operating activities | $ | 22,439 | $ | 33,991 | $ | 29,217 | $ | 68,672 | |||||||||||
Investing activities | (4,969 | ) | (3,730 | ) | (15,126 | ) | (9,398 | ) | |||||||||||
Financing activities | (1,742 | ) | (15,860 | ) | (2,800 | ) | (37,383 | ) | |||||||||||
Net increase in cash and cash equivalents | $ | 15,728 | $ | 14,401 | $ | 11,291 | $ | 21,891 |
Capital Expenditures
Three Months Ended |
Nine Months Ended |
||||||||||||||
(in thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Maintenance capital expenditures | $ | 3,086 | $ | 6,261 | $ | 9,445 | $ | 10,763 | |||||||
Growth capital expenditures | 2,576 | 508 | 4,318 | 811 | |||||||||||
Total capital expenditures | $ | 5,662 | $ | 6,769 | $ | 13,763 | $ | 11,574 |
Key Operating Data
Ammonia Utilization (1) | |||||
Two Years Ended |
|||||
(capacity utilization) | 2020 | 2019 | |||
Consolidated | 94 | % | 93 | % | |
Coffeyville Facility | 95 | % | 95 | % | |
East Dubuque Facility | 94 | % | 91 | % |
(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 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 |
Nine Months Ended |
||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Consolidated sales (thousand tons): | |||||||||||||||
Ammonia | 54 | 33 | 218 | 179 | |||||||||||
UAN | 365 | 340 | 986 | 968 | |||||||||||
Consolidated product pricing at gate (dollars per ton) (1): | |||||||||||||||
Ammonia | $ | 242 | $ | 337 | $ | 293 | $ | 416 | |||||||
UAN | 140 | 182 | 156 | 206 | |||||||||||
Consolidated production volume (thousand tons): | |||||||||||||||
Ammonia (gross produced) (2) | 215 | 196 | 631 | 586 | |||||||||||
Ammonia (net available for sale) (2) | 71 | 56 | 228 | 168 | |||||||||||
UAN | 330 | 318 | 968 | 969 | |||||||||||
Feedstock: | |||||||||||||||
Petroleum coke used in production (thousand tons) | 129 | 137 | 393 | 404 | |||||||||||
Petroleum coke used in production (dollars per ton) | $ | 35.11 | $ | 37.75 | $ | 36.77 | $ | 36.68 | |||||||
Natural gas used in production (thousands of MMBtu) (3) | 2,136 | 1,700 | 6,408 | 5,210 | |||||||||||
Natural gas used in production (dollars per MMBtu) (3) | $ | 2.10 | $ | 2.40 | $ | 2.15 | $ | 2.88 | |||||||
Natural gas in cost of materials and other (thousands of MMBtu) (3) | 2,026 | 1,294 | 6,660 | 5,487 | |||||||||||
Natural gas in cost of materials and other (dollars per MMBtu) (3) | $ | 2.01 | $ | 2.46 | $ | 2.25 | $ | 3.22 |
- 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 |
Nine Months Ended |
||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Ammonia - Southern plains (dollars per ton) | $ | 216 | $ | 298 | $ | 249 | $ | 369 | |||||||
Ammonia - Corn belt (dollars per ton) | 299 | 363 | 336 | 452 | |||||||||||
UAN - Corn belt (dollars per ton) | 159 | 196 | 170 | 217 | |||||||||||
Natural gas NYMEX (dollars per MMBtu) | $ | 2.12 | $ | 2.38 | $ | 1.92 | $ | 2.59 |
Q4 2020 Outlook
The table below summarizes our outlook for certain operational statistics and financial information for the fourth quarter of 2020. See “Forward-Looking Statements” above.
Q4 2020 | |||||||
Low | High | ||||||
Ammonia utilization rates (1) | |||||||
Consolidated | 95 | % | 100 | % | |||
95 | % | 100 | % | ||||
95 | % | 100 | % | ||||
Direct operating expenses (2) (in millions) | $ | 37 | $ | 42 | |||
Total capital expenditures (3) (in millions) | $ | 5 | $ | 8 |
- Ammonia utilization rates exclude the impact of Turnarounds.
- Direct operating expenses are shown exclusive of depreciation and amortization, turnaround expenses, and impacts of inventory adjustments.
- Capital expenditures are disclosed on an accrual basis.
Non-GAAP Reconciliations
Reconciliation of Net (Loss) Income to EBITDA
Three Months Ended |
Nine Months Ended |
||||||||||||||||||
(in thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||
Net loss | $ | (18,952 | ) | 0 | $ | (22,976 | ) | $ | (81,299 | ) | $ | (10,087 | ) | ||||||
Add: | |||||||||||||||||||
Interest expense, net | 15,877 | 15,621 | 47,550 | 46,870 | |||||||||||||||
Income tax expense (benefit) | 23 | 12 | 40 | (88 | ) | ||||||||||||||
Depreciation and amortization | 18,029 | 18,418 | 56,997 | 60,032 | |||||||||||||||
EBITDA | $ | 14,977 | $ | 11,075 | $ | 23,288 | $ | 96,727 |
Reconciliation of Net Cash Provided By Operating Activities to EBITDA
Three Months Ended |
Nine Months Ended |
||||||||||||||||||
(in thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||
Net cash provided by operating activities | $ | 22,439 | $ | 33,991 | $ | 29,217 | $ | 68,672 | |||||||||||
Non-cash items: | |||||||||||||||||||
— | — | (40,969 | ) | — | |||||||||||||||
Other | (1,757 | ) | (3,900 | ) | (3,968 | ) | (8,226 | ) | |||||||||||
Add: | |||||||||||||||||||
Interest expense, net | 15,877 | 15,621 | 47,550 | 46,870 | |||||||||||||||
Income tax expense (benefit) | 23 | 12 | 40 | (88 | ) | ||||||||||||||
Change in assets and liabilities | (21,605 | ) | (34,649 | ) | (8,582 | ) | (10,501 | ) | |||||||||||
EBITDA | $ | 14,977 | $ | 11,075 | $ | 23,288 | $ | 96,727 |
Reconciliation of EBITDA to Available Cash for Distribution
Three Months Ended |
Nine Months Ended |
||||||||||||||||||
(in thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||
EBITDA | $ | 14,977 | $ | 11,075 | $ | 23,288 | $ | 96,727 | |||||||||||
Non-cash items: | |||||||||||||||||||
— | — | 40,969 | — | ||||||||||||||||
Current reserves for amounts related to: | |||||||||||||||||||
Debt service | (15,000 | ) | (14,833 | ) | (44,998 | ) | (44,525 | ) | |||||||||||
Maintenance capital expenditures | (3,086 | ) | (6,594 | ) | (9,445 | ) | (11,409 | ) | |||||||||||
Common units repurchased | (1,269 | ) | — | (2,277 | ) | — | |||||||||||||
Other (reserves) releases: | |||||||||||||||||||
Reserve for future turnaround | (1,500 | ) | — | (3,000 | ) | — | |||||||||||||
Reserve for repayment of current portion of long-term debt | — | — | (2,240 | ) | — | ||||||||||||||
Reserve for recapture of prior negative available cash | — | — | (5,917 | ) | — | ||||||||||||||
Cash reserves for future operating needs | — | — | (10,744 | ) | (28,000 | ) | |||||||||||||
Release of previously established cash reserves | — | 18,399 | 2,567 | 18,399 | |||||||||||||||
Available Cash for distribution (1) (2) | $ | (5,878 | ) | $ | 8,047 | $ | (11,797 | ) | $ | 31,192 | |||||||||
Common units outstanding | 110,989 | 113,283 | 110,989 | 113,283 |
- 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.
- The Partnership paid no cash distributions for the fourth quarter of 2019 and the first and second quarter of 2020, and no distribution was declared for the third quarter of 2020.
Source: CVR Partners, LP