UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
___________________________________
Date of Report (Date of earliest event reported): November 20, 2019
CVR PARTNERS, LP
(Exact name of registrant as specified in its charter)
Delaware | 001-35120 | 56-2677689 | ||||||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) | ||||||
2277 Plaza Drive, Suite 500
Sugar Land, Texas 77479
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: (281) 207-3200
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| Common units representing limited partner interests | UAN | New York Stock Exchange | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 7.01. Regulation FD Disclosure.
Beginning November 20, 2019, CVR Partners, LP (the “Partnership”) will begin using the attached slides (the “Slide Presentation”), which contains forward-looking statements, in meetings with certain current and potential investors and analysts. The Slide Presentation, available on the Investor Relations page of the Partnership’s website at www.CVRPartners.com, is furnished as Exhibit 99.1 to this Current Report on Form 8-K (“Current Report”) and is incorporated herein by reference.
The information in this Current Report and Exhibit 99.1 is being furnished, not filed, pursuant to Items 7.01 and 9.01 of Form 8-K. Accordingly, the information in Items 7.01 and 9.01 of this Current Report, including Exhibit 99.1, will not be subject to liability under Section 18 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and will not be incorporated by reference into any registration statement or other document filed by the Partnership under the Securities Act of 1933, as amended, or the Exchange Act, unless specifically identified therein as being incorporated by reference. The furnishing of information in this report and Exhibit 99.1 is not intended to, and does not, constitute a determination of admission by the Partnership that the information in this Current Report is material or complete, or that investors should consider this information before making an investment decision with respect to any security of the Partnership or its affiliates.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
The following exhibit is being “furnished” as part of this Current Report on Form 8-K:
| Exhibit Number | Exhibit Description | ||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: November 20, 2019
| CVR Partners, LP | |||||
| By: CVR GP, LLC, its general partner | |||||
| By: | /s/ Tracy D. Jackson | ||||
| Tracy D. Jackson | |||||
Executive Vice President and Chief Financial Officer | |||||
CVR Partners, LP Investor Presentation November 2019
Safe Harbor Statement and Non-GAAP Financial Measures Forward Looking Statements; Safe Harbor This presentation contains forward-looking statements (“FLS”) based on management’s current expectations and beliefs, as well as a number of assumptions concerning future events. The assumptions and estimates underlying FLS are inherently uncertain and are subject to a wide variety of significant business, economic, and competitive risks and uncertainties that could cause actual results to differ materially from those contained in the prospective information. Accordingly, there can be no assurance we will achieve the future results we expect or that actual results will not differ materially from expectations. 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 FLS and include, but are not limited to, statements regarding future: distributions; improving industry fundamentals; imports; input, logistics and distribution (including costs thereof); stock ratios; market position; utilization rates; geographic footprint; netbacks; customer optionality; rail access and delivery points; marketing agreements; demand growth and supply/demand imbalance; population; biofuel consumption; diets in developing countries; nitrogen consumption; corn demand, stocks, uses, pricing, consumption, production, planting and yield; farming activities and the timing thereof; and financial performance. The assumptions and estimates underlying FLS are inherently uncertain, many of which are beyond our control, and are subject to a wide variety of significant business, economic, and competitive risks and uncertainties that could cause actual results to differ materially from those contained in the prospective information. Accordingly, there can be no assurance that we will achieve the future results we expect or that actual results will not differ materially from expectations. The FLS included in this presentation are made only as of the date hereof. You are cautioned not to put undue reliance on such FLS (including forecasts and projections regarding our future performance) because actual results may vary materially from those expressed or implied as a result of various factors, including, but not limited to those set forth under “Risk Factors” in CVR Partners, LP’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and any other filings CVR Partners, LP makes with the Securities and Exchange Commission. CVR Partners, LP assumes no obligation to, and expressly disclaims any obligation to, update or revise any FLS, whether as a result of new information, future events or otherwise, except as required by law. Non-GAAP Financial Measures Certain financial information in this presentation (including EBITDA, Adjusted EBITDA and Free Cash Flow) are not presentations made in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) and use of such terms varies from others in the same industry. Non-GAAP financial measures should not be considered as alternatives to income from continuing operations, income from operations or any other performance measures derived in accordance with GAAP. Non-GAAP financial measures have important limitations as analytical tools, and you should not consider them in isolation or as substitutes for results as reported under GAAP. This presentation includes a reconciliation of certain non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP. 1
Key Investment Highlights ➢ CVR Partners, LP (NYSE: UAN) is a leading North American producer and distributor of nitrogen fertilizer products - Delivered ~1.6MM tons of nitrogen products during LTM November 2019 - Structured as a publicly-traded master limited partnership • General Partner does not receive Incentive Distribution Rights (IDRs) - Adjusted LTM November 2019 EBITDA of $136.5 million ➢ Experienced management team ➢ Fundamentals are improving in the nitrogen fertilizer industry - Imports are down due to high raw material and logistics costs versus U.S. producers - Domestic supply and demand is more balanced with no new supply coming online near-term - Sustained demand for corn and consistent 90+ million planted acres - Anticipated increase in corn planting acreage in 2020 ➢ Attractive market position - Plants are strategically located in the corn belt - Low cost logistics - High utilization rates at production facilities 2
Strategically Located Assets Well-positioned in premium pricing regions ➢ Large geographic footprint serving the Southern Plains and Corn Belt region ➢ Well positioned to minimize distribution costs and maximize net back pricing ➢ New rail loading rack at Coffeyville increases logistics optionality west of the Mississippi River due to access to both UP and BNSF delivery points ➢ Production sustainability due to storage capabilities at the plants and offsite locations ➢ Marketing agreement with LSB Industries Pryor, OK, facility’s UAN production 3
Key Operating Statistics Consistent high utilization at both facilities Consolidated Production Volumes Ammonia Utilization(1) Consolidated Feedstocks Costs(2) Consolidated Sales Revenue(2)(3) (1) Adjusted by planned turnarounds. (2) For the last twelve months ended September 30, 2019. 4 (3) Excludes freight.
Solid Trends in Fertilizer Demand Growth Global and domestic demand for nitrogen remains strong Global nitrogen consumption increased by 15% Global Nitrogen Consumption between 2008 and 2018 driven by: 140 ➢ Population growth 130 ➢ Decrease in arable farmland per capita 120 110 ➢ Biofuel consumption 100 ➢ Continued evolution to more protein-based diets 90 in developing countries Million Tonnes 80 70 60 50 2010 2011 2012 2013 2016 2017 2018 2019 2022 2023 2024 2025 2028 2029 2030 2014 2015 2020 2021 2026 2027 Global Arable Land per Capita US Nitrogen Consumption 14.0 13.5 13.0 12.5 12.0 11.5 Million Million Tonnes 11.0 10.5 10.0 2012 2013 2014 2016 2017 2018 2020 2021 2022 2024 2025 2026 2028 2029 2030 2010 2011 2015 2019 2023 2027 5 Source: Fertecon, World Bank
U.S Nitrogen Supply and Demand Domestic supply and demand picture is more balanced Corn Stocks to Use Compared to Netback Fertilizer Pricing US Nitrogen Supply ➢ Nitrogen fertilizers represent approximately 15% of farmers’ cost structure and significantly improves yields ➢ YTD UAN prices increased $36/ton through September 30, or 21% Y/Y ➢ Major global nitrogen capacity build cycle largely complete in 2017/2018. Additional tons have been absorbed by the market ➢ Product demand currently expected to exceed new supply for the next several years 6 Source: NPK Fertilizer Consultant, USDA, Blue Johnson and Associates, Inc.
Strong Demand for Corn in the U.S. Increasing corn consumption is positive for Nitrogen demand U.S. Domestic Corn Use ➢ Corn has a variety of uses and applications, 14.0 including feed grains, ethanol for fuel and 12.0 food, seed and industrial (FSI) 10.0 8.0 6.0 ➢ Feed grains 4.0 (Bushels (Bushels billions) in ▪ ~96% of domestic feed grains are 2.0 supplied by corn 0.0 (1) ▪ Consumes ~37% of annual corn crop Feed / Residual Use Ethanol Seed & Industrial Domestic Corn Planted Acres and Yield per Acre ➢ Ethanol ▪ Consumes ~37% of annual corn crop(1) ➢ Corn production driven more by yield than acres planted ➢ Nitrogen is low on the cost curve for farmers Source: USDA Economic Research Service and USDA WASDE. 7 (1) Based on 2014 – 2018 average.
CVR Partners’ 2019 3Q Results YTD results have significantly improved versus 2018 Three Months Ended Nine Months Ended In millions, except product price at gate per ton and per unit data September 30, September 30, CVR Partners, L.P. 2019 2018 2019 2018 UAN Product Price Per Ton at Gate (1) $182 $170 $206 $169 Ammonia Product Price Per Ton at Gate (1) $337 $297 $416 $329 Net Sales $88.6 $79.9 $318.1 $253.0 Net Income (Loss) ($23.0) ($13.1) ($10.1) ($48.7) EBITDA (2) $11.1 $18.6 $96.7 $51.3 Adjusted EBITDA(2) $17.9 $18.6 $103.7 $57.7 Available Cash for Distribution (2) $8.0 ($0.1) $31.2 ($4.3) Distribution Declared Per Unit $0.14 $0.00 $0.33 $0.00 Common Units Outstanding 113.3 113.3 113.3 113.3 (1) Product pricing at gate represents net sales less freight revenue divided by product sales volumes in tons and is show in order to provide a pricing measure that is comparable across the fertilizer industry. (2) See page 16 for reconciliation of Net Income (Loss) to EBITDA, Adjusted EBITDA and Available Cash for Distribution 8
Solid Financial Profile Ample liquidity and decreasing leverage with increased EBITDA Unaudited Selected Balance Sheet Data As of September 31, 2019 (in millions) Cash and Cash Equivalents $ 83.7 Working Capital $ 75.4 Total Assets $ 1,180.3 Total Debt $ 631.5 (1) Total Partners' Capital $ 452.4 Unaudited Selected Income Statement Data For the Twelve Months Ended March 31, 2019 (in millions, except per unit data) Net Sales $ 416.2 EBITDA $ 129.5 Adjusted EBITDA $ 136.5 Net Loss $ (11.5) EPU - Diluted $ (0.10) Weighted Average Diluted Units Outstanding 113.3 Unaudited Selected Credit Metrics Total Debt to Adjusted EBITDA 4.6 x Net Debt to Adjusted EBITDA 4.0 x (2) Total Debt to Capital 58% Net Debt to Capital 55% (2) (1) (1) Gross debt not net of unamortized debt issuance costs or unamortized discount (2) (2) Net Debt defined as Total Debt Less Cash and Cash Equivalents 9
Capital Expenditures and Turnaround Expenses Primarily focused on maintenance spending East Dubuque Merger on 2019 Total Capex budget of $20M - $25M $30 April 1, 2016 $25 Environmental and Maintenance spending $20 planned at $18M - $20M $15 $M Growth capex budgeted at $2M - $5M $10 ➢ Growth capex budget comprised of a number of $5 smaller projects $0 2014 2015 2016 2017 2018 2019e Maintenance Growth East Dubuque Merger on 2019 Turnaround spending planned at $9M $10.0 April 1, 2016 $8.0 East Dubuque turnaround completed in October 2019 $6.0 $M Coffeyville and East Dubuque are on $4.0 alternating two-year turnaround schedules $2.0 Turnarounds have historically lasted two to $0.0 three weeks and cost approximately $7M 2014 2015 2016 2017 2018 2019e Turnaround spending 10 Note: As of September 30, 2019
Key Investment Highlights ➢ Leading North American producer and distributor of nitrogen fertilizer products ➢ Experienced management team ➢ Early stages of recovery in the nitrogen fertilizer industry - Imports are down due to high input and logistics costs - Strong corn demand and lower stock to use ratio - Anticipated increase in corn planting acreage in 2020 ➢ Attractive market position - Plants are strategically located in the heart and near the corn belt - Low cost logistics - High utilization rates at production facilities 11
Management Team Experienced in Refining and Fertilizer Industries Dave Lamp: Executive Chairman – 37 years Mark Pytosh: CEO & President – 32 years Tracy Jackson: CFO & EVP – 26 years Melissa Buhrig: EVP, General Counsel & Secretary – 19 years Neal Barkley: VP & Facility GM Coffeyville – 37 years Marc Gilbertson: VP & Facility GM East Dubuque – 26 years Matt Green: VP Marketing – 34 years 12
Appendix
Non-GAAP Financial Measures EBITDA represents net income (loss) before (i) interest expense, net, (ii) income tax expense (benefit) and (iii) depreciation and amortization expense. Adjusted EBITDA represents EBITDA adjusted to exclude consolidated turnaround expense and other non-recurring items which management believes are material to an investor’s understanding of the Company’s underlying operating results. Available Cash for Distribution represents 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. Note: Due to rounding, numbers presented within this section may not add or equal to numbers or totals presented elsewhere within this document. 14
Typical Farming Activities & Seasons January-March April-June July-September October-December Dealer/Distributor Fill Dealer/Distributor Fill Dealer/Distributor Fill Season Orders & Wheat Spring Planting Orders Orders & Fall Planting Topdress Wheat Planting Crop No Planting Corn Planting Wheat Planting (Southern Territories) Nitrogen Need Fill Orders & Topdress Topdress & Sidedress Fill Orders Fill Orders & Topdress Prompt Pricing & Prompt Pricing & Shipments Shipments Prompt Pricing & Prompt Pricing & Forward Pricing for Forward Pricing for Shipments Shipments Prepay Orders for Pricing & Shipments Prepay Orders for Next Year Q1 & Q2 Q2 Delivery Delivery of Prior Year Forward Pricing for Fill Delivery & Q1 Prepay Orders Orders for Q4 Delivery Delivery of Prior Year Delivery of Q3 Fill Prepay Orders Orders Note: Activities and timing exclusive of weather and other impacts 15
Reconciliation of Consolidated Net Income (Loss) to Adjusted EBITDA, Free Cash Flow and Cash Available for Distribution FY Ended December 31, Q4 Q1 Q2 Q3 LTM Q3 ($ in millions) 2015 2016 2017 2018 2018 2019 2019 2019 2019 Net Income (Loss) $ 62.0 $ (26.9) $ (72.8) $ (50.0) $ (1.4) $ (6.1) $ 19.0 $ (23.0) $ (11.5) (+) Interest expense and other financing costs, net 7.0 48.6 62.9 62.6 15.5 15.7 15.6 15.6 62.4 (+) Depreciation and amortization 28.4 58.2 74.0 71.6 18.7 16.6 25.0 18.4 78.7 (+) Income tax expense - 0.3 0.2 (0.0) (0.0) (0.1) 0.0 0.0 (0.1) EBITDA $ 97.4 $ 80.2 $ 64.3 $ 84.1 $ 32.8 $ 26.0 $ 59.6 $ 11.1 $ 129.5 (+) Major scheduled turnaround expense 7.0 6.6 2.6 6.4 - - 0.2 6.8 7.0 (+) Share-based compensation, non-cash 0.1 - - - - - - - - (+) Loss on extinguishment of debt - 4.9 - - - - - - - (+) Expenses associated with the merger 2.3 3.1 - - - - - - - Adjusted EBITDA $ 106.8 $ 94.8 $ 66.9 $ 90.5 $ 32.8 $ 26.0 $ 59.8 $ 17.9 $ 136.5 (-) Maintenance capital expenditures (9.6) (13.7) (14.1) (14.9) (4.0) (3.4) (1.4) (6.6) (15.4) Free Cash Flow (1) $ 97.2 $ 81.1 $ 52.8 $ 75.6 $ 28.8 $ 22.7 $ 58.3 $ 11.3 $ 121.1 Adjusted EBITDA $ 106.8 $ 94.8 $ 66.9 $ 90.5 $ 32.8 $ 26.0 $ 59.8 $ 17.9 $ 136.5 (-) Debt service (6.0) (46.1) (59.9) (59.4) (14.7) (14.8) (14.9) (14.8) (59.2) (-) Maintenance capital expenditures (9.6) (13.7) (14.1) (14.9) (4.0) (3.4) (1.4) (6.6) (15.4) (-) Turnaround expenses (7.0) (6.6) (2.6) (6.4) - - (0.2) (6.8) (7.0) (-) Cash reserves for future operating needs - - - - - - (21.0) - (21.0) (-) Cash reserves for future turnaround expenses (7.9) - - - - - (7.0) - (7.0) (-) Expenses associated with East Dubuque Facility acquisition (2.3) (3.2) - - - - - - - (+) Impact of purchase accounting - 13.0 - - - - - - - (+) Available cash associated with East Dubuque 2016 first quarter - 6.3 - - - - - - - (+) Release of previously established cash reserves 7.0 - - - - - - 18.4 18.4 Available Cash for Distribution $ 81.0 $ 44.6 $ (9.7) $ 9.8 $ 14.1 $ 7.8 $ 15.3 $ 8.0 $ 45.3 (1) Free cash flow defined as Adjusted EBITDA less maintenance capital expenditures. 16