CVR Partners Reports 2013 Third Quarter Results And Announces Cash Distribution of 36 Cents

CVR Partners, LP

Financial and Operational Data (all information in this release is unaudited except as otherwise noted).

Three months ended September 30,

Nine months ended September 30,

2013

2012

2013

2012

(in millions, except per unit data)

Consolidated Statement of Operations Data:

Net sales (1)

$

69.2

$

75.0

$

239.4

$

234.7

Cost of product sold - Affiliates

2.5

3.2

8.4

8.7

Cost of product sold - Third parties

10.5

8.1

30.8

25.9

Direct operating expenses - Affiliates

1.1

0.4

3.3

1.2

Direct operating expenses - Third parties

22.6

20.7

67.4

65.2

Selling, general and administrative expenses - Affiliates

3.6

3.9

12.0

12.9

Selling, general and administrative expenses - Third parties

1.0

1.2

3.8

5.2

Depreciation and amortization

6.6

5.2

18.5

15.8

Operating income

21.3

32.3

95.2

99.8

Interest expense and other financing costs

(1.6)

(0.9)

(4.6)

(3.1)

Interest income

—

0.1

—

0.2

Other income (expense), net

—

0.1

0.1

0.1

Income before income tax expense

19.7

31.6

90.7

97.0

Income tax expense

—

—

—

0.1

Net income

$

19.7

$

31.6

$

90.7

$

96.9

Net income per common unit - basic

$

0.27

$

0.43

$

1.24

$

1.32

Net income per common unit - diluted

$

0.27

$

0.43

$

1.24

$

1.32

Adjusted EBITDA*

$

28.2

$

39.0

$

116.1

$

121.1

Available cash for distribution*

$

26.5

$

36.2

$

113.7

$

118.3

Weighted average, number of common units outstanding (in thousands):

Basic

73,076

73,045

73,070

73,037

Diluted

73,225

73,191

73,229

73,193

(1) Below are the components of Net sales:

Three Months Ended
September 30,

Nine Months Ended
September 30,

2013

2012

2013

2012

Reconciliation to net sales (dollars in millions):

Sales net plant gate

$

60.4

$

68.2

$

212.9

$

211.1

Freight in revenue

7.8

6.5

21.6

17.6

Hydrogen revenue

0.8

0.3

4.7

6.0

Other

0.2

—

0.2

—

Total net sales

$

69.2

$

75.0

$

239.4

$

234.7

* See "Use of Non-GAAP Financial Measures" below.

As of September 30, 2013

As of December 31, 2012

(audited)

(in millions)

Balance Sheet Data:

Cash and cash equivalents

$

87.2

$

127.8

Working capital

104.3

116.6

Total assets

594.0

623.0

Total debt

125.0

125.0

Partners' capital

438.5

446.2

Three Months Ended
September 30,

Nine Months Ended
September 30,

2013

2012

2013

2012

(in millions)

Cash Flow Data:

Net cash flow provided by (used in):

Operating activities

$

21.9

$

44.9

$

96.5

$

124.8

Investing activities

(4.0)

(17.2)

(35.8)

(56.4)

Financing activities

(42.6)

(43.8)

(101.4)

(125.1)

Net cash flow

$

(24.7)

$

(16.1)

$

(40.7)

$

(56.7)

Other Financial Data:

Capital expenditures

$

4.0

$

18.2

$

35.8

$

57.4

Three Months Ended
September 30,

Nine Months Ended
September 30,

2013

2012

2013

2012

Key Operating Statistics:

Production (thousand tons):

Ammonia (gross produced) (1)

100.4

104.2

303.0

302.3

Ammonia (net available for sale) (1)(2)

3.4

29.4

36.3

89.3

UAN

239.3

181.9

660.6

516.5

Petroleum coke consumed (thousand tons)

116

126.9

360.2

377.7

Petroleum coke (cost per ton)

$

30

$

30

$

30

$

34

Sales (thousand tons):

Ammonia

3.3

30.2

37.9

89.5

UAN

226.7

175.1

638.1

510.5

Product pricing plant gate (dollars per ton) (3):

Ammonia

$

505

$

578

$

654

$

586

UAN

$

259

$

290

$

295

$

311

On-stream factors (4):

Gasification

91.2

%

99.1

%

94.1

%

97.2

%

Ammonia

90.1

%

98.4

%

92.6

%

96.0

%

UAN

89.5

%

96.9

%

89.6

%

92.4

%

Market Indicators:

Ammonia - Southern Plains (dollars per ton)

$

498

$

677

$

611

$

616

UAN - Mid Corn Belt (dollars per ton)

$

302

$

356

$

352

$

372

(1)

Gross tons produced for ammonia represent total ammonia produced, including ammonia produced that was upgraded into UAN. As a result of the completed UAN expansion project in February 2013, we now upgrade substantially all of the ammonia we produce into UAN. Net tons available for sale represent ammonia available for sale that was not upgraded into UAN.

(2)

In addition to the produced ammonia, the Partnership acquired approximately 1,000 and 5,000 tons of ammonia, which was upgraded to UAN during the three and nine months ended September 30, 2013.

(3)

Plant gate sales per ton represent net sales less freight and hydrogen revenue divided by product sales volume in tons in the reporting period, and is shown in order to provide a pricing measure that is comparable across the fertilizer industry.

(4)

On-stream factor is the total number of hours operated divided by the total number of hours in the reporting period and is included as a measure of operating efficiency. Excluding the impact of planned downtime associated with replacement of damaged catalyst, the on-stream factors for the three months ended September 30, 2013 would have been 98.7% for gasifier, 98.2% for ammonia and 97.8% for UAN.
Excluding the impact of the UAN expansion coming on-line, the planned downtime associated with replacement of damaged catalyst, the unplanned Linde air separation unit outages and the unplanned downtime associated with weather issues, the on-stream factors for the nine months ended September 30, 2013 would have been 99.3% for gasifier, 98.7% for ammonia and 97.7% for UAN.

Use of Non-GAAP Financial Measures
To supplement our actual results calculated in accordance with GAAP for the applicable periods, the Partnership also uses the financial non-GAAP measures noted above, which are reconciled to our GAAP-based results below. These non-GAAP financial measures should not be considered as an alternative to GAAP results. The adjustments are provided to enhance an overall understanding of the Partnership's financial performance for the applicable periods and are indicators management believes are relevant and useful for planning and forecasting future periods.
EBITDA is defined as net income before (i) net interest (income) expense; (ii) income tax expense; and (iii) depreciation and amortization expense, which are items management believes affect the comparability of operating results.
Adjusted EBITDA is defined as EBITDA further adjusted for the impact of share-based compensation, non-cash and, where applicable, major scheduled turnaround expense and loss on disposition of assets. We present Adjusted EBITDA because it is a key measure used in material covenants in our credit facility and because it is the starting point for our available cash for distribution. EBITDA and Adjusted EBITDA are not recognized terms under GAAP and should not be substituted for net income or cash flows from operations. Management believes that EBITDA and Adjusted EBITDA enable investors and analysts to better understand our ability to make distributions to our common unitholders and our compliance with the covenants contained in our credit facility. EBITDA and Adjusted EBITDA presented by other companies may not be comparable to our presentation, since each company may define these terms differently.
A reconciliation of Net Income to EBITDA and Adjusted EBITDA is as follows:

Three Months Ended
September 30,

Nine Months Ended
September 30,

2013

2012

2013

2012

(in millions)

Reconciliation of Net income to EBITDA and to Adjusted EBITDA:

Net income

$

19.7

$

31.6

$

90.7

$

96.9

Add:

Interest expense, net

1.6

0.8

4.6

2.9

Income tax expense

—

—

—

0.1

Depreciation and amortization

6.6

5.2

18.5

15.8

EBITDA

$

27.9

$

37.6

$

113.8

$

115.7

Major scheduled turnaround expenses

—

0.2

—

0.2

Share-based compensation, non-cash

0.3

1.2

2.3

5.2

Adjusted EBITDA

$

28.2

$

39.0

$

116.1

$

121.1

Available cash for distribution is not a recognized term under GAAP. Available cash should not be considered in isolation or as an alternative to net income or operating income, as a measure of operating performance. In addition, available cash for distribution is not presented as, and should not be considered an alternative to cash flows from operations or as a measure of liquidity. Available cash as reported by the Partnership may not be comparable to similarly titled measures of other entities; thereby limiting its usefulness as a comparative measure.
The Partnership announced a cash distribution of 36 cents per common unit for the third quarter of 2013. The distribution was based on the Partnership's available cash, beginning with Adjusted EBITDA reduced for cash needed for (i) net interest expense (excluding capitalized interest) and debt service and other contractual obligations; (ii) maintenance capital expenditures and (iii) to the extent applicable, major scheduled turnaround expense incurred and reserves for future operating or capital needs that the board of directors of the general partner deems necessary or appropriate, if any. Available cash for distribution may be increased by previously established cash reserves, if any, at the discretion of the board of directors of our general partner. Actual distributions are set by the board of directors of our general partner. The board of directors of our general partner may modify our cash distribution policy at any time, and our partnership agreement does not require us to make distributions at all.

Three Months Ended
September 30, 2013

(in millions, except per unit data)

Reconciliation of Adjusted EBITDA to Available cash for distribution

Adjusted EBITDA

$

28.2

Adjustments:

Less:

Net cash interest expense (excluding capitalized interest) and debt service

(1.4)

Maintenance capital expenditures

(0.8)

Plus:

Other non-cash adjustments

0.5

Available cash for distribution

26.5

Available cash for distribution, per unit

$

0.36

Common units outstanding (in thousands)

73,078