CVR Partners(UAN) - 2022 Q2 - Quarterly Report

PART I. Financial Information Financial Statements The unaudited condensed consolidated financial statements for Q2 2022 reflect significant increases in net income and cash from operations, alongside improved liquidity and reduced debt Condensed Consolidated Balance Sheets As of June 30, 2022, total assets slightly decreased to $1.119 billion, while cash and partners' capital increased, and total liabilities significantly decreased Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $156,312 | $112,516 | | Total current assets | $283,371 | $262,245 | | Total assets | $1,118,800 | $1,127,058 | | Liabilities & Partners' Capital | | | | Deferred revenue | $4,196 | $87,060 | | Total current liabilities | $95,797 | $161,860 | | Long-term debt, net | $546,558 | $610,642 | | Total liabilities | $657,614 | $784,860 | | Total partners' capital | $461,186 | $342,198 | Condensed Consolidated Statements of Operations The Partnership reported a significant increase in profitability for Q2 and H1 2022, with net sales and net income substantially rising year-over-year Statement of Operations Highlights (in thousands, except per unit data) | Metric | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $244,000 | $138,025 | $466,874 | $198,945 | | Operating income | $125,928 | $30,314 | $229,855 | $16,308 | | Net income (loss) | $117,582 | $7,020 | $211,243 | $(18,364) | | Basic and diluted EPS | $11.12 | $0.66 | $19.90 | $(1.72) | | Distributions declared per unit | $2.26 | $— | $7.50 | $— | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities significantly increased to $215.6 million for H1 2022, while cash was primarily used for debt repayment and distributions Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $215,611 | $22,979 | | Net cash used in investing activities | $(13,730) | $(5,344) | | Net cash used in financing activities | $(158,085) | $(5,375) | | Net increase in cash | $43,796 | $12,260 | Notes to the Condensed Consolidated Financial Statements Key notes detail the Partnership's business, debt structure, and revenue recognition, highlighting debt redemption and significant distribution declarations - On February 22, 2022, the Partnership redeemed all outstanding 9.25% Senior Secured Notes due 2023 at par, paying the $65 million balance and recognizing a $0.6 million loss on extinguishment of debt[43][47] Disaggregated Revenue by Product (in thousands) | Product | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | Ammonia | $60,942 | $32,097 | $102,953 | $41,630 | | UAN | $159,399 | $87,585 | $319,006 | $125,647 | - For Q2 2022, the Partnership declared a distribution of $10.05 per common unit, totaling $106.2 million, payable in August 2022[64] - During the six months ended June 30, 2022, the Partnership repurchased 111,695 common units for $12.4 million under its Unit Repurchase Program[27] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the significant financial improvement in H1 2022 to strong nitrogen fertilizer pricing and global supply disruptions, despite some operational downtime Industry Factors and Market Indicators Global events, including the Russia-Ukraine conflict and high European natural gas prices, have significantly impacted the nitrogen fertilizer market, tightening supply and raising prices - The Russia-Ukraine conflict has significantly impacted global fertilizer and agriculture markets by restricting exports from the Black Sea, tightening supply, and causing grain and fertilizer prices to rise[80] - The USDA estimates 89.9 million corn acres planted in spring 2022, a 3.7% decrease from 2021, while soybean acres increased 1.3% to 88.3 million[86] - On July 18, 2022, the ITC made a negative final injury determination regarding UAN imports from Russia and Trinidad, meaning anti-dumping and countervailing duties will not be imposed, normalizing trade flows[90] Results of Operations Operating income significantly increased in Q2 and H1 2022, driven by substantially higher product pricing for ammonia and UAN, offsetting lower sales volumes and higher feedstock costs Product Pricing at Gate ($ per ton) | Product | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | Ammonia | $1,183 | $404 | $1,157 | $403 | | UAN | $554 | $236 | $492 | $174 | Feedstock Costs | Feedstock | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | Petroleum coke ($/ton) | $49.91 | $36.69 | $53.06 | $39.73 | | Natural gas ($/MMBtu) | $7.34 | $3.04 | $6.48 | $3.07 | - Consolidated ammonia utilization decreased to 89% in Q2 2022 from 99% in Q2 2021, primarily due to unplanned downtime at both facilities[97][98] - For H1 2022, net sales increased by $268.0 million, primarily due to a $262.3 million positive impact from favorable pricing, partially offset by a $7.6 million negative impact from lower sales volumes[113] Non-GAAP Reconciliations The company utilizes non-GAAP measures like EBITDA and Available Cash for Distribution, both showing significant increases for Q2 and H1 2022 Reconciliation of Net Income to EBITDA (in thousands) | Metric | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $117,582 | $7,020 | $211,243 | $(18,364) | | Interest expense, net | $8,308 | $23,334 | $18,343 | $39,251 | | Depreciation & amortization | $21,220 | $21,119 | $40,686 | $35,242 | | EBITDA | $147,229 | $51,473 | $270,649 | $56,148 | - Available Cash for Distribution for the second quarter of 2022 was determined to be $106.2 million, leading to a declared distribution of $10.05 per common unit[135][136] Liquidity and Capital Resources As of June 30, 2022, total liquidity stood at $191.3 million, bolstered by debt redemption and projected capital expenditures for facility turnarounds - Total liquidity as of June 30, 2022 was $191.3 million, including $156.3 million in cash and $35.0 million available under the ABL Credit Facility[143] - The company redeemed the remaining $65 million of its 2023 Notes in February 2022, which will save approximately $6 million in annual cash interest expense[141] - Total capital expenditures for 2022 are estimated to be between $44 million and $47 million, with planned turnarounds at Coffeyville and East Dubuque facilities scheduled for July/August 2022 costing $12-$15 million and $19-$21 million, respectively[147][148] Quantitative and Qualitative Disclosures About Market Risk No material changes to market risks were reported as of June 30, 2022, compared to those disclosed in the 2021 Annual Report on Form 10-K - There have been no material changes to market risks as of and for the three and six months ended June 30, 2022, compared to those discussed in the 2021 Form 10-K[159] Controls and Procedures Management concluded that the Partnership's disclosure controls and procedures were effective as of June 30, 2022, with no material changes in internal control over financial reporting - Management concluded that the Partnership's disclosure controls and procedures were effective as of June 30, 2022[160] - No material changes in internal controls over financial reporting occurred during the fiscal quarter ended June 30, 2022[161] PART II. Other Information Legal Proceedings This section refers to Note 11 for legal proceedings, indicating no material changes in commitments or contingencies and no expected material financial impact - For information on legal proceedings, the report refers to Note 11 ("Commitments and Contingencies")[163] - Note 11 indicates no material changes in commitments and contingencies and no expected material impact from ongoing proceedings[55] Risk Factors No material changes from previously disclosed risk factors were reported, though the Russia-Ukraine conflict could potentially affect them - There have been no material changes from the risk factors previously disclosed in the 2021 Form 10-K, although they could be affected by the Russia-Ukraine conflict[165] Other Information No other information is reported for this period - None[166] Exhibits This section lists exhibits filed with the Form 10-Q, including required certifications by executive officers and Inline XBRL financial data - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 31.3, 31.4, 32.1) and financial statements in Inline XBRL format (101, 104)[168]