CVR Partners(UAN) - 2019 Q2 - Quarterly Report

PART I. Financial Information Financial Statements This section presents the unaudited condensed consolidated financial statements for periods ended June 30, 2019, covering balance sheets, operations, partners' capital, and cash flows Condensed Consolidated Balance Sheet Highlights (unaudited) | (in thousands) | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Total current assets | $153,966 | $193,981 | | Total assets | $1,190,405 | $1,254,388 | | Total current liabilities | $56,211 | $122,635 | | Long-term debt | $630,655 | $628,989 | | Total partners' capital | $491,192 | $499,826 | Condensed Consolidated Statements of Operations Highlights (unaudited) | (in thousands, except per unit data) | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $137,660 | $93,197 | $229,533 | $173,056 | | Operating income (loss) | $34,544 | $(790) | $43,983 | $(4,211) | | Net income (loss) | $18,968 | $(16,459) | $12,889 | $(35,510) | | Basic and diluted earnings (loss) per unit | $0.17 | $(0.15) | $0.11 | $(0.31) | Condensed Consolidated Statements of Cash Flows Highlights (unaudited) | (in thousands) | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $34,681 | $(12,470) | | Net cash used in investing activities | $(5,668) | $(8,451) | | Net cash used in financing activities | $(21,523) | — | | Net increase (decrease) in cash and cash equivalents | $7,490 | $(20,921) | - The Partnership adopted the new lease standard, Topic 842, on January 1, 2019, resulting in the recognition of Right-of-Use (ROU) assets of $14.3 million and corresponding lease liabilities on the balance sheet[30][31] - In April 2019, CRNF settled a property tax dispute with Montgomery County, Kansas, expecting to recover $7.9 million through favorable property tax assessments from 2019 through 2028[60] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the Partnership's financial performance, highlighting significant increases in net sales and operating income driven by favorable pricing and volumes Strategy and Market Conditions The Partnership aims to be a top-tier North American nitrogen fertilizer company, focusing on strategic objectives and strong long-term market fundamentals - The Partnership's strategic objectives are centered on achieving excellence in Safety, Reliability, Market Capture, and Financial Discipline[73][74][75] - A long-term positive outlook for the U.S. nitrogen fertilizer industry is based on increasing global population, decreasing arable land per capita, and sustained demand for corn as ethanol feedstock[80] - Key achievements include maintaining high asset reliability, generating positive cash available for distribution despite weather delays, and declaring cash distributions of $0.33 per unit in 2019[76] Results of Operations The Partnership's financial performance significantly improved in Q2 and H1 2019, driven by higher net sales and operating income from favorable pricing and volumes Financial Highlights Comparison (Q2 2019 vs Q2 2018) | (in thousands) | Q2 2019 | Q2 2018 | | :--- | :--- | :--- | | Net Sales | $137,660 | $93,197 | | Operating Income (Loss) | $34,544 | $(790) | | Net Income (Loss) | $18,968 | $(16,459) | | Adjusted EBITDA | $59,760 | $25,979 | Financial Highlights Comparison (Six Months 2019 vs 2018) | (in thousands) | Six Months 2019 | Six Months 2018 | | :--- | :--- | :--- | | Net Sales | $229,533 | $173,056 | | Operating Income (Loss) | $43,983 | $(4,211) | | Net Income (Loss) | $12,889 | $(35,510) | | Adjusted EBITDA | $85,803 | $39,095 | - The increase in net sales for Q2 2019 was driven by favorable pricing ($19.8 million) and volume ($24.7 million) conditions, primarily due to a shift in demand from Q1 to Q2 because of inclement weather[102][103] Production Volumes (in thousands of tons) | Product | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Ammonia (gross produced) | 211 | 174 | 390 | 373 | | UAN | 316 | 241 | 651 | 580 | Non-GAAP Reconciliations This section reconciles non-GAAP financial measures like EBITDA, Adjusted EBITDA, and Available Cash for Distribution, used to evaluate performance Reconciliation of Net Income (Loss) to Adjusted EBITDA | (in thousands) | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $18,968 | $(16,459) | $12,889 | $(35,510) | | EBITDA | $59,609 | $19,642 | $85,652 | $32,691 | | Adjusted EBITDA | $59,760 | $25,979 | $85,803 | $39,095 | Reconciliation of Adjusted EBITDA to Available Cash for Distribution | (in thousands) | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | | :--- | :--- | :--- | | Adjusted EBITDA | $59,760 | $25,979 | | Less: Debt Service | $(14,865) | $(14,870) | | Less: Maintenance capital expenditures | $(1,447) | $(4,098) | | Less: Turnaround expenses | $(151) | $(6,337) | | Adjustments (Reserves) | $(28,000) | $(674) | | Available Cash for distribution | $15,297 | $— | Liquidity and Capital Resources As of June 30, 2019, the Partnership reported $92.6 million in liquidity, $630.7 million in debt, and projected 2019 capital expenditures of $20-25 million - As of June 30, 2019, total liquidity was $92.6 million, comprising $69.3 million in cash and cash equivalents and $48.3 million available under the AB Credit Facility (net of certain cash balances)[117] 2019 Capital Expenditure Outlook | (in thousands) | Estimated full year 2019 | | :--- | :--- | | Maintenance capital | $18,000 - $20,000 | | Growth capital | $2,000 - $5,000 | | Total capital expenditures | $20,000 - $25,000 | - A major turnaround is planned for the East Dubuque facility in the second half of 2019, expected to take 28 days and cost $7 million[124] - For the second quarter of 2019, a distribution of $0.14 per common unit ($15.9 million total) was declared, payable in August 2019[127] Cash Flows For H1 2019, net cash from operating activities significantly improved to $34.7 million, while investing and financing activities used $5.7 million and $21.5 million respectively Cash Flow Summary | (in thousands) | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | | Operating activities | $34,681 | $(12,470) | | Investing activities | $(5,668) | $(8,451) | | Financing activities | $(21,523) | — | - The $47.2 million positive change in operating cash flow was primarily due to a shift from a net loss of $35.5 million in 2018 to net income of $12.9 million in 2019[130] Quantitative and Qualitative Disclosures About Market Risk No material changes to the Partnership's market risks were reported for the periods ended June 30, 2019, compared to the 2018 Form 10-K - There have been no material changes to the company's market risks as of June 30, 2019, compared to those disclosed in the 2018 Form 10-K[134] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2019, with no material changes to internal controls - The Partnership's management concluded that disclosure controls and procedures were effective as of June 30, 2019[135] - There were no material changes in the Partnership's internal control over financial reporting during the quarter ended June 30, 2019[136] PART II. Other Information Legal Proceedings This section incorporates by reference legal proceedings information from Note 11 of the financial statements, detailing a property tax dispute settlement - Information regarding legal proceedings is incorporated by reference from Note 11 ("Commitments and Contingencies") of the financial statements[138] Risk Factors No material changes to the Partnership's risk factors were reported compared to those disclosed in the 2018 Form 10-K - There have been no material changes from the risk factors previously disclosed in the 2018 Form 10-K[139] Other Information No information is reported under this item - None[140] Exhibits This section lists exhibits filed with the Form 10-Q, including officer certifications and XBRL-formatted financial statements List of Exhibits | Exhibit | Exhibit Description | | :--- | :--- | | 31.1 - 31.4 | Rule 13a-14(a)/15d-14(a) Certifications of various officers | | 32.1 | Section 1350 Certification of various officers | | 101 | Financial information formatted in XBRL |