CVR Partners, LP — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparison is with Q1 2020. CVR Partners produces and sells wholesale nitrogen fertilizer, principally ammonia and UAN, from facilities in Coffeyville, Kansas, and East Dubuque, Illinois.
Financial and operating performance
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Net sales | $60.9 million | $75.1 million |
| Operating loss | $14.0 million | $5.0 million |
| Net loss | $25.4 million | $20.7 million |
| Loss per common unit | $2.37 | $1.83 |
| EBITDA (non-GAAP) | $4.7 million | $10.7 million |
| Cash from operating activities | $25.6 million | $27.7 million |
| Capital expenditures | $3.0 million | $6.7 million |
Sales declined 18.9% year over year. Lower sales volumes accounted for most of the decrease; management attributed reduced production and shipments primarily to downtime associated with the Messer air separation plant and Winter Storm Uri. Ammonia pricing improved versus weak Q1 2020 conditions, while UAN pricing was slightly lower, partly reflecting forward sales made before market prices rose. Gross loss was $8.0 million, compared with gross profit of $0.4 million a year earlier. Net loss widened despite $4.6 million of other income, mainly from natural gas sales during the February storm.
Ammonia gross production was 188,000 tons versus 201,000; UAN production was 272,000 tons versus 317,000. Natural gas used in production cost $3.10/MMBtu versus $2.42/MMBtu. Cash and equivalents were $52.6 million at quarter-end, including $39.0 million of customer advances. The ABL facility had $24.6 million available and no borrowings, for reported total liquidity of $77.2 million. Debt, including the current portion, was approximately $637.3 million, principally $645 million face value of 9.25% senior secured notes due June 2023. The Partnership reported compliance with debt covenants.
Changes, outlook, and material matters
- Operating loss increased by $9.0 million and net loss by $4.7 million year over year; EBITDA declined by $6.0 million. Higher personnel and utility costs partly offset lower materials costs and storm-related operating-cost reductions.
- Management said fertilizer prices had risen significantly since January, supported by strong crop prices, expected spring planting, and supply outages associated with Winter Storm Uri. It also cited continuing uncertainty around COVID-19, feedstock availability and prices, weather, and market volatility.
- Management expected cash from operations, existing cash, and potential ABL borrowings to cover anticipated operating needs for at least 12 months, while noting that future cash needs could exceed estimates. The East Dubuque turnaround was deferred from 2021 to 2022; a Coffeyville turnaround was planned for fall 2021, with estimated cost of $8–10 million.
- Estimated 2021 capital expenditures were $22–26 million: $18–20 million maintenance and $4–6 million growth. The filing states estimates may change with project scope, costs, and timing.
- No distribution was declared for Q1 2021, and none was declared or paid for Q4 2020. Available cash for distribution was negative $9.5 million for the quarter under the Partnership’s non-GAAP measure.
- The Partnership repurchased 24,378 units for approximately $0.5 million, at an average $21.70 per unit; $12.4 million of authorization remained. On April 15, 2021, after quarter-end, it paid the $2.2 million balance of its 6.50% notes upon maturity.
- The filing reported no material changes in commitments, contingencies, risk factors, or market risks from the 2020 Form 10-K. Management said it had not experienced a material financial impact from COVID-related contract-performance issues and expected no material financial statement impact from pending proceedings if decided against the Partnership.
Key facts for investors to verify
- Whether plant reliability and production recover from the Messer-related downtime and Winter Storm Uri impacts, and whether the planned Coffeyville turnaround proceeds on schedule and within its estimated cost.
- Whether fertilizer selling prices and feedstock costs support improved margins, particularly given UAN forward sales and natural gas price volatility.
- Liquidity quality: $39.0 million of reported cash consisted of customer advances, while the Partnership also had substantial debt service obligations and 2023 notes.
- Actual 2021 capital spending versus the $22–26 million estimate, and the effect of the deferred East Dubuque turnaround on future operating results.
- Board decisions on distributions and unit repurchases; both remain discretionary, and the filing declared no Q1 distribution.