Terra Nitrogen Company, L.P. (TNCLP) (NYSE: TNH) today reported
net earnings of $44.1 million on net sales of
$93.4 million for the quarter ended December 31, 2016.
This compares to net earnings of $79.2 million on net sales of
$151.3 million for the 2015 fourth quarter. Net earnings
allocable to common units was $34.3 million ($1.85 per common
unit) and $46.2 million ($2.49 per common unit) for the 2016
and 2015 fourth quarters, respectively. Results for the fourth
quarter of 2016 included an unrealized net mark-to-market gain on
natural gas derivatives of $13.6 million compared to a loss of
$12.6 million in the fourth quarter of 2015. The derivative
portfolio at December 31, 2016 includes natural gas
derivatives that hedge a portion of natural gas purchases through
2018.
For the full year 2016, TNCLP reported net earnings of $209.3
million on net sales of $418.3 million. This compares to net
earnings of $306.9 million on net sales of $581.7 million for the
full year 2015. Net earnings allocable to common units was $139.9
million ($7.56 per common unit) and $186.2 million ($10.06 per
common unit) for the full year 2016 and 2015, respectively. Results
for the full year 2016 included an unrealized net mark-to-market
gain on natural gas derivatives of $35.3 million compared to
an unrealized net mark-to-market loss of $23.1 million for the
full year 2015.
Analysis of Results
Net sales for the fourth quarter of 2016 totaled
$93.4 million, compared to $151.3 million for the fourth
quarter of 2015, as lower average realized selling prices for
ammonia and UAN and decreased sales volumes of ammonia were
partially offset by increased sales volumes of UAN. Ammonia and UAN
average selling prices declined in the fourth quarter of 2016
compared to the fourth quarter of 2015 due to excess global
nitrogen supply. Ammonia sales volume decreased 16 percent in the
fourth quarter of 2016 compared to the fourth quarter of 2015 as
unfavorable weather and farm level economic considerations,
including declining year-over-year farmer disposable income and
crop futures prices favoring soybeans over corn, led many farmers
to delay fertilizer application and planting decisions until
spring. UAN sales volume increased 15 percent in the fourth quarter
of 2016 compared to the fourth quarter of 2015 as customers built
inventories in preparation for spring after delaying purchases
earlier in the year.
Comparing the fourth quarter of 2016 to 2015, TNCLP’s:
- Ammonia average selling prices
decreased by 43 percent and UAN average selling prices decreased by
40 percent;
- Ammonia sales volume decreased by 16
percent and UAN sales volume increased by 15 percent; and
- Realized natural gas cost per MMBtu
increased by 12 percent.
Cash Distribution
Cash distributions depend on TNCLP’s earnings as well as cash
requirements for working capital needs and capital and other
expenditures. For the full year 2016, capital expenditures were
$33.1 million as compared to $87.8 million in 2015, with
the decrease primarily due to the large plant turnaround activities
in 2015 that did not recur in 2016. In 2017, TNCLP expects to make
capital expenditures in the range of $75 million to $85 million.
Approximately $40 million of the projected capital expenditures
relate to a plant turnaround scheduled to start in the third
quarter of 2017 and continuing into the fourth quarter of 2017, and
the calculation of available cash for the fourth quarter of 2016
included a reserve of approximately one-third of that amount. The
plant turnaround will result in lower ammonia and UAN production,
lower sales and lower profitability during the period, which will
reduce available cash for distributions to unitholders.
Additionally, planned maintenance, capital expenditures, and
turnarounds are subject to change due to delays in regulatory
approvals, and/or permitting, unanticipated increases in cost,
changes in scope and completion time, performance of third parties,
adverse weather, defects in materials, workmanship, labor or
material shortages, transportation constraints, and other
unforeseen difficulties. Capital expenditures also reduce the
available cash for unitholder distributions.
TNCLP reported on February 6, 2017, the declaration of a
cash distribution for the quarter ended December 31, 2016, of
$1.22 per common unit payable February 28, 2017 to holders of
record as of February 17, 2017. This compares to a cash
distribution of $2.88 per common unit for the quarter ended
December 31, 2015.
Cash distributions per common unit also vary based on increasing
amounts allocable to the General Partner when cumulative
distributions exceed targeted levels. With this distribution, TNCLP
cumulative distributions continue to exceed targeted levels.
This release serves as a qualified notice to nominees and
brokers as provided for under Treasury Regulation Section
1.1446-4(b). Please note that 100 percent of TNCLP’s distributions
to foreign investors are attributable to income that is effectively
connected with a United States trade or business. Accordingly,
TNCLP’s distributions to foreign investors are subject to federal
income tax withholding at the highest effective tax rate.
About TNCLP
Terra Nitrogen Company, L.P. is a leading manufacturer of
nitrogen fertilizer products.
Terra Nitrogen, Limited Partnership (TNLP), owner of the
Verdigris, Oklahoma manufacturing facility and related assets, is a
subsidiary of TNCLP. Terra Nitrogen GP Inc., an indirect, wholly
owned subsidiary of CF Industries Holdings, Inc., is the General
Partner of TNCLP and TNLP and exercises full control over all of
TNCLP’s and TNLP's business affairs.
Forward-Looking Statements
All statements in this communication, other than those relating
to historical facts, are forward-looking statements. These
forward-looking statements are not guarantees of future performance
and are subject to a number of assumptions, risks and
uncertainties, many of which are beyond TNCLP’s control, which
could cause actual results to differ materially from such
statements. Important factors that could cause actual results to
differ materially from expectations include, among others:
- Risks related to TNCLP’s reliance on
one production facility;
- The cyclical nature of TNCLP’s business
and the agricultural sector;
- The volatility of natural gas prices in
North America;
- The global commodity nature of TNCLP’s
fertilizer products, the impact of global supply and demand on
TNCLP’s selling prices, and the intense global competition from
other fertilizer producers;
- Conditions in the U.S. agricultural
industry;
- Difficulties in securing the supply and
delivery of raw materials, increases in their costs or delays or
interruptions in their delivery;
- Reliance on third party providers of
transportation services and equipment;
- The significant risks and hazards
involved in producing and handling TNCLP's products against which
it may not be fully insured;
- Risks associated with cyber
security;
- Weather conditions;
- Potential liabilities and expenditures
related to environmental, health and safety laws and regulations,
and permitting requirements;
- Future regulatory restrictions and
requirements related to greenhouse gas emissions;
- The seasonality of the fertilizer
business;
- Risks involving derivatives and the
effectiveness of TNCLP’s risk measurement and hedging
activities;
- Limited access to capital;
- Acts of terrorism and regulations to
combat terrorism;
- Risks related to TNCLP’s dependence on
and relationships with CF Industries;
- Deterioration of global market and
economic conditions;
- Risks related to TNCLP's partnership
structure and control of TNCLP’s General Partner by CF
Industries;
- Changes in TNCLP’s available cash for
distribution to its unitholders, due to, among other things,
changes in its earnings, the amount of cash generated by its
operations and the amount of cash reserves established by its
General Partner for operating, capital and other requirements;
- The conflicts of interest that may be
faced by the executive officers of TNCLP’s General Partner, who
operate both TNCLP and CF Industries; and
- Tax risks to TNCLP's common unitholders
and changes in TNCLP’s treatment as a partnership for U.S. or state
income tax purposes.
More detailed information about factors that may affect TNCLP’s
performance may be found in its filings with the Securities and
Exchange Commission, including its most recent periodic reports
filed on Form 10-K and Form 10-Q, which are available through CF
Industries’ website. Forward-looking statements are given only as
of the date of this release and TNCLP disclaims any obligation to
update or revise the forward-looking statements, whether as a
result of new information, future events or otherwise, except as
required by law.
Terra Nitrogen Company, L.P. news announcements are also
available on CF Industries’ website, www.cfindustries.com.
TERRA NITROGEN
COMPANY, L.P.
CONSOLIDATED BALANCE SHEETS
December 31, 2016
December 31,
2015
(in millions, except for units) ASSETS Current
assets: Cash and cash equivalents $ 39.5 $ 106.4 Due from
affiliates of the General Partner 4.0 10.4 Accounts receivable 0.6
0.8 Inventories 8.6 10.7 Other current assets 7.9 — Total
current assets 60.6 128.3 Property, plant and equipment—net 301.3
307.0 Other assets 11.4 8.4 Total assets $ 373.3 $
443.7
LIABILITIES AND PARTNERS' CAPITAL Current liabilities:
Accounts payable and accrued expenses $ 27.8 $ 23.5 Due to
affiliates of the General Partner 4.1 4.5 Other current liabilities
— 15.9 Total current liabilities 31.9 43.9 Other
liabilities 2.6 12.8 Partners' capital: Limited partners'
interests, 18,501,576 Common Units authorized, issued and
outstanding 286.7 308.5 Limited partners' interests, 184,072 Class
B Common Units authorized, issued and outstanding 1.8 2.3 General
partner's interest 50.3 76.2 Total partners' capital 338.8
387.0 Total liabilities and partners' capital $ 373.3
$ 443.7
TERRA NITROGEN
COMPANY, L.P.
CONSOLIDATED STATEMENTS OF
OPERATIONS
Three months ended December 31,
Twelve months ended December 31, 2016
2015 2016 2015 (in millions, except
per unit amounts) Net sales: Product sales to affiliates of the
General Partner $ 93.2 $ 150.9 $ 417.7 $ 580.2 Other income from an
affiliate of the General Partner 0.2 0.2 0.6 0.6 Other income —
0.2 — 0.9 Total 93.4 151.3 418.3 581.7 Cost of
goods sold: Materials, supplies and services 38.6 61.1 163.6 228.0
Services provided by affiliates of the General Partner 6.6
7.2 27.9 27.9 Gross margin 48.2 83.0 226.8 325.8
Selling, general and administrative services provided by affiliates
of the General Partner 3.9 3.9 15.7 15.7 Other general and
administrative expenses 0.2 (0.1 ) 1.9 3.2 Earnings
from operations 44.1 79.2 209.2 306.9 Interest income — —
0.1 — Net earnings $ 44.1 $ 79.2 $
209.3 $ 306.9 Allocation of net earnings: General Partner $
9.4 $ 32.2 $ 67.4 $ 117.7 Class B Common Units 0.4 0.8 2.0 3.0
Common Units 34.3 46.2 139.9 186.2 Net
earnings $ 44.1 $ 79.2 $ 209.3 $ 306.9 Net
earnings per Common Unit $ 1.85 $ 2.49 $ 7.56
$ 10.06
TERRA NITROGEN
COMPANY, L.P.
SUMMARIZED OPERATING
INFORMATION
Three months ended December 31,
Twelve months ended December 31, 2016
2015 2016 2015 Sales volume (tons in
thousands) Ammonia 103 122 409 418 UAN(1) 528 461 1,759 1,668
Average selling prices (per ton) Ammonia $ 253 $ 443 $ 323 $
477 UAN(1) 127 210 162 227 Cost of natural gas (per MMBtu):
Purchased natural gas costs(2) $ 2.83 $ 2.17 $ 2.32 $ 2.49 Realized
derivatives loss(3) 0.05 0.41 0.40 0.26 Cost
of natural gas $ 2.88 $ 2.58 $ 2.72 $ 2.75
_________________________________________________
(1)
The nitrogen content of UAN is 32% by weight.
(2)
Represents the cost of natural gas purchased during the period for
use in production.
(3)
Represents realized gains and losses on natural gas derivatives
settled during the period. Excludes unrealized mark-to-market gains
and losses on natural gas derivatives.
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version on businesswire.com: http://www.businesswire.com/news/home/20170215006320/en/
Terra Nitrogen Company, L.P.Martin JarosickVice President,
Investor Relations847-405-2045mjarosick@cfindustries.com
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