CVR Partners(UAN) - 2023 Q4 - Annual Results

Financial & Operational Highlights CVR Partners experienced a significant decline in 2023 financial results due to lower fertilizer prices, yet maintained strong operational reliability and strengthened its capital structure Fourth Quarter & Full-Year 2023 Financial Performance CVR Partners reported a significant year-over-year decline in financial performance for both the fourth quarter and full-year 2023. Net income, net sales, and EBITDA all decreased substantially compared to 2022, primarily driven by lower average realized prices for its fertilizer products Q4 2023 vs Q4 2022 Financial Results (in millions) | Metric | Q4 2023 | Q4 2022 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $142 | $212 | -33.0% | | Net Income | $10 | $95 | -89.5% | | Earnings per Unit | $0.94 | $9.02 | -89.6% | | EBITDA | $38 | $122 | -68.7% | Full-Year 2023 vs Full-Year 2022 Financial Results (in millions) | Metric | Full-Year 2023 | Full-Year 2022 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $681 | $836 | -18.6% | | Net Income | $172 | $287 | -40.1% | | Earnings per Unit | $16.31 | $27.07 | -39.7% | | EBITDA | $281 | $403 | -30.3% | Operational Performance & Market Commentary Despite weaker pricing, the company achieved excellent operational reliability with a 100% combined ammonia utilization rate for the full year. Management observed strong fall ammonia demand and anticipates continued strength into the spring planting season, supported by favorable farmer economics - Achieved a combined ammonia production utilization rate of 100% for the full-year 2023, indicating safe and reliable operations[4][8] - The CEO noted that fall application ammonia demand was one of the strongest in recent years and expects strong nitrogen fertilizer demand for the upcoming spring planting season[4][5] Year-over-Year Average Realized Gate Price Changes | Product | Q4 2023 vs Q4 2022 | FY 2023 vs FY 2022 | | :--- | :--- | :--- | | UAN | -47% | -36% | | Ammonia | -52% | -44% | Distributions and Capital Structure The Partnership declared a fourth-quarter 2023 cash distribution of $1.68 per common unit, bringing the cumulative total for 2023 to $17.80 per unit. Additionally, the company strengthened its liquidity by amending its ABL Credit Facility, increasing its capacity to $50 million and extending the maturity to 2028 - Declared a Q4 2023 cash distribution of $1.68 per common unit, payable on March 11, 2024. The cumulative cash distributions declared for 2023 totaled $17.80 per common unit[8][10] - Amended the ABL Credit Facility to increase the aggregate principal amount by $15.0 million to a total of $50.0 million and extended the maturity date by four years to September 26, 2028[9] Detailed Financial Statements The company's detailed financial statements for 2023 reflect a decline in net sales and income, alongside reduced capital expenditures and a strengthened liquidity position Consolidated Statement of Operations For the full year 2023, net sales decreased to $681.5 million from $835.6 million in 2022. Despite lower cost of sales, operating income fell to $201.4 million from $319.9 million. Consequently, net income for 2023 was $172.4 million, or $16.31 per unit, compared to $286.8 million, or $27.07 per unit, in the prior year Full-Year Statement of Operations (in thousands) | Line Item | 2023 | 2022 | | :--- | :--- | :--- | | Net sales | $681,477 | $835,584 | | Cost of sales | $449,013 | $483,217 | | Operating income | $201,408 | $319,912 | | Net income | $172,433 | $286,801 | | Basic and diluted EPS | $16.31 | $27.07 | - Fertilizer sales constituted the vast majority of net sales, totaling $621.2 million for the full year 2023, down from $789.5 million in 2022[29] Selected Balance Sheet & Cash Flow Data As of December 31, 2023, the company's balance sheet showed total assets of $975.3 million and total debt of $547.3 million. Cash and cash equivalents stood at $45.3 million, a decrease from $86.3 million at year-end 2022. For the full year 2023, net cash provided by operating activities was $243.5 million, while financing activities used $281.9 million, primarily for distributions Selected Balance Sheet Data (in thousands) | Account | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $45,279 | $86,339 | | Total assets | $975,332 | $1,100,402 | | Total debt | $547,308 | $546,800 | | Total partners' capital | $302,880 | $411,811 | Full-Year Selected Cash Flow Data (in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Operating activities | $243,526 | $301,464 | | Investing activities | $(2,722) | $(44,623) | | Financing activities | $(281,864) | $(283,018) | Capital Expenditures Total capital expenditures for the full year 2023 were $29.1 million, a significant decrease from $41.4 million in 2022. The reduction was driven by lower maintenance spending, which fell to $28.0 million in 2023 from $40.8 million in 2022. The next planned turnarounds are scheduled for 2025 and 2026 Full-Year Capital Expenditures (in thousands) | Type | 2023 | 2022 | | :--- | :--- | :--- | | Maintenance | $28,025 | $40,793 | | Growth | $1,056 | $653 | | Total | $29,081 | $41,446 | - The next planned major turnarounds are scheduled for 2025 at the Coffeyville Facility and 2026 at the East Dubuque Facility[25] Operational Metrics and Market Indicators Operational metrics for 2023 show increased production volumes and improved utilization rates, despite a significant decline in average realized product prices and natural gas costs Production and Sales Data For the full year 2023, gross ammonia production increased to 864,000 tons from 703,000 tons in 2022, and UAN production rose to 1,369,000 tons from 1,140,000 tons. Despite higher volumes, average realized prices fell sharply: ammonia dropped to $573/ton from $1,024/ton, and UAN fell to $309/ton from $486/ton. Natural gas feedstock costs also decreased significantly year-over-year Full-Year Production Volume (thousands of tons) | Product | 2023 | 2022 | | :--- | :--- | :--- | | Ammonia (gross produced) | 864 | 703 | | UAN | 1,369 | 1,140 | Full-Year Product Pricing and Feedstock Cost | Indicator | 2023 | 2022 | | :--- | :--- | :--- | | Ammonia Price ($/ton) | $573 | $1,024 | | UAN Price ($/ton) | $309 | $486 | | Natural Gas Cost ($/MMBtu) | $3.42 | $6.66 | Key Operating & Market Indicators Operational efficiency improved markedly in 2023, with the consolidated ammonia utilization rate reaching 100% for the full year, up from 81% in 2022. This reflects enhanced plant reliability. Market prices for key products saw a significant downturn, with Corn Belt UAN prices averaging $308/ton in 2023 compared to $580/ton in 2022, and NYMEX natural gas prices falling to an average of $2.67/MMBtu from $6.54/MMBtu Consolidated Ammonia Utilization Rate | Period | 2023 | 2022 | | :--- | :--- | :--- | | Q4 | 94% | 96% | | Full Year | 100% | 81% | Full-Year Key Market Indicators | Indicator | 2023 | 2022 | | :--- | :--- | :--- | | UAN — Corn belt ($/ton) | $308 | $580 | | Natural gas NYMEX ($/MMBtu) | $2.67 | $6.54 | Forward-Looking Information & Other Disclosures The company provides Q1 2024 guidance, details its use of non-GAAP financial measures, and addresses shareholder information regarding distributions and tax packages Q1 2024 Outlook For the first quarter of 2024, CVR Partners anticipates a consolidated ammonia utilization rate between 86% and 91%. Direct operating expenses are projected to be in the range of $52 million to $57 million, while total capital expenditures are expected to be between $9 million and $13 million Q1 2024 Guidance | Metric | Low | High | | :--- | :--- | :--- | | Consolidated Ammonia Utilization | 86% | 91% | | Direct Operating Expenses | $52 million | $57 million | | Total Capital Expenditures | $9 million | $13 million | Non-GAAP Financial Measures & Reconciliations The company utilizes non-GAAP metrics such as EBITDA and Available Cash for Distribution to assess performance. For the full year 2023, EBITDA was $281.1 million and Available Cash for Distribution was $188.2 million. These figures represent a decline from 2022 levels of $403.2 million and $259.7 million, respectively. The report provides a detailed reconciliation from GAAP Net Income to these non-GAAP measures - Management uses non-GAAP measures including EBITDA, Adjusted EBITDA, and Available Cash for Distribution to supplement GAAP financial information for performance evaluation[21][22][23] Reconciliation of Net Income to EBITDA (Full Year, in thousands) | Line Item | 2023 | 2022 | | :--- | :--- | :--- | | Net income | $172,433 | $286,801 | | Interest expense, net | $28,653 | $34,065 | | Income tax expense | $289 | $160 | | Depreciation and amortization | $79,720 | $82,137 | | EBITDA | $281,095 | $403,163 | Shareholder Information The company announced its Q4 and full-year 2023 earnings call for February 21, 2024. A qualified notice was issued, stating that 100% of distributions to foreign investors are subject to U.S. federal income tax withholding. Additionally, the release of 2023 K-1 tax packages may be delayed pending the outcome of proposed H.R. 7024 tax legislation - The company hosted its Q4 and full-year 2023 earnings conference call on February 21, 2024[12] - A qualified notice was provided to nominees and brokers, indicating that distributions to foreign investors are subject to federal income tax withholding at the highest effective rate[14] - The availability of 2023 K-1 tax packages is contingent on the U.S. Congress's actions regarding the proposed H.R. 7024 legislation, which could retroactively lower the Partnership's 2023 taxable income[15]