CVR Partners(UAN) - 2024 Q1 - Quarterly Report

PART I. Financial Information Item 1. Financial Statements Q1 2024 unaudited financial statements show significant declines in net sales and income, with stable assets and reduced operating cash flow Condensed Consolidated Balance Sheets As of March 31, 2024, total assets were $972.2 million, with minor shifts in cash, liabilities, and partners' capital Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $64,622 | $45,279 | | Total current assets | $182,469 | $165,869 | | Total assets | $972,215 | $975,332 | | Liabilities & Partners' Capital | | | | Total current liabilities | $79,528 | $75,473 | | Long-term debt, net | $547,440 | $547,308 | | Total liabilities | $674,513 | $672,452 | | Total partners' capital | $297,702 | $302,880 | Condensed Consolidated Statements of Operations Q1 2024 saw a sharp decline in performance, with net sales falling to $127.7 million and net income dropping significantly Consolidated Statements of Operations Highlights (in thousands, except per unit data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net sales | $127,665 | $226,261 | | Operating income | $20,059 | $109,352 | | Net income | $12,579 | $101,870 | | Basic and diluted EPS | $1.19 | $9.64 | Condensed Consolidated Statements of Cash Flows Net cash from operations significantly decreased to $42.4 million in Q1 2024, with shifts in investing and reduced financing cash outflow Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $42,417 | $130,443 | | Net cash (used in) provided by investing activities | $(5,317) | $15,562 | | Net cash used in financing activities | $(17,757) | $(110,981) | | Net increase in cash and cash equivalents | $19,343 | $35,024 | Notes to the Condensed Consolidated Financial Statements Notes detail business operations, accounting policies, revenue disaggregation, debt, and Q1 2024 cash distributions Revenue by Major Product (in thousands) | Product | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Ammonia | $36,901 | $37,499 | | UAN | $75,771 | $164,341 | | Urea products | $5,142 | $8,170 | | Total Revenue | $127,665 | $226,261 | - The Partnership has $550 million in 6.125% Senior Secured Notes due June 2028. As of March 31, 2024, the company was in compliance with all debt covenants[49][51] - A cash distribution of $1.92 per common unit for the first quarter of 2024 was declared on April 29, 2024, payable in May 2024. This totals approximately $20.3 million[62] - The Unit Repurchase Program, which had nominal authority remaining, was terminated by the Board on February 20, 2024. No units were repurchased in Q1 2024 or Q1 2023[30] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q1 2024's financial decline to lower sales prices and UAN volumes, while maintaining a positive long-term outlook Industry Factors and Market Indicators Nitrogen fertilizer markets are influenced by grain demand, feedstock costs, and geopolitical risks, with USDA projecting shifts in crop acres - The USDA estimates farmers will plant 90.0 million corn acres in spring 2024 (down 4.9% YoY) and 86.5 million soybean acres (up 3.5% YoY)[81] - Lower natural gas prices have led to a significant reduction in nitrogen fertilizer prices from their peaks. Pet coke prices have also declined into 2024[86] - Geopolitical risks from the conflicts in the Middle East and Ukraine could disrupt the production and trade of fertilizer, grains, and feedstock[77] Results of Operations Q1 2024 operating income significantly declined to $20.1 million due to lower product pricing and reduced UAN sales volumes Product Pricing at Gate ($ per ton) | Product | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Ammonia | $519 | $879 | -41% | | UAN | $261 | $451 | -42% | Sales Volumes (thousands of tons) | Product | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Ammonia | 69 | 41 | | UAN | 256 | 332 | Feedstock Costs | Feedstock | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Petroleum coke ($ per ton) | $75.71 | $77.24 | | Natural gas ($ per MMBtu) | $3.10 | $5.76 | - Consolidated ammonia utilization decreased to 90% in Q1 2024 from 105% in Q1 2023, primarily due to a 14-day planned downtime at the Coffeyville Facility[93] Non-GAAP Reconciliations Non-GAAP measures show Q1 2024 EBITDA sharply decreased to $39.5 million, with Available Cash for Distribution at $20.3 million Reconciliation of Net Income to EBITDA (in thousands) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net income | $12,579 | $101,870 | | Interest expense, net | $7,665 | $7,173 | | Income tax (benefit) expense | $(25) | $44 | | Depreciation and amortization | $19,291 | $15,211 | | EBITDA | $39,510 | $124,298 | | Available cash for distribution | $20,345 | $110,293 | Liquidity and Capital Resources As of March 31, 2024, total liquidity was $107.6 million, with stable long-term debt and projected 2024 capital expenditures of $46-49 million - Total liquidity as of March 31, 2024, was $107.6 million, including $64.6 million in cash and $43.0 million in ABL Credit Facility availability[125] 2024 Capital Expenditure Outlook (in thousands) | Category | Estimated Full Year 2024 | | :--- | :--- | | Maintenance capital | $33,000 - $35,000 | | Growth capital | $13,000 - $14,000 | | Total capital expenditures | $46,000 - $49,000 | - The next planned major turnarounds are scheduled for 2025 at the Coffeyville Facility and 2026 at the East Dubuque Facility[128] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes to market risks were reported for Q1 2024 compared to the 2023 Annual Report on Form 10-K - There have been no material changes to market risks as of March 31, 2024, compared to those disclosed in the 2023 Form 10-K[139] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal controls - The Partnership's management concluded that disclosure controls and procedures were effective as of March 31, 2024[140] - No material changes occurred in the Partnership's internal control over financial reporting during the first quarter of 2024[141] PART II. Other Information Item 1. Legal Proceedings Information on legal proceedings is incorporated by reference from Note 11 of the financial statements, with no new material disclosures - For information on legal proceedings, the report refers to Note 11 ("Commitments and Contingencies") in Part I, Item 1[143] Item 1A. Risk Factors No material changes from previously disclosed risk factors were reported in Q1 2024 compared to the 2023 Form 10-K - There have been no material changes from the risk factors previously disclosed in the 2023 Form 10-K[144] Item 5. Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the first quarter of 2024 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended March 31, 2024[145] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including the 2024 Performance-Based Bonus Plan, officer certifications, and XBRL data - Exhibits filed include the CVR Partners, LP and Subsidiaries 2024 Performance-Based Bonus Plan, certifications by principal officers (Rule 13a-14(a)/15d-14(a) and Section 1350), and Inline XBRL financial data[146]