Terra Nitrogen Company, L.P. (TNCLP) (NYSE: TNH) today reported
net earnings of $39.5 million on net sales of
$96.1 million for the quarter ended June 30, 2017. This
compares to net earnings of $98.7 million on net sales of
$126.7 million for the 2016 second quarter. Net earnings
allocable to common units was $27.4 million ($1.48 per common
unit) and $59.7 million ($3.22 per common unit) for the 2017
and 2016 second quarters, respectively. Results for the second
quarter of 2017 included an unrealized net mark-to-market loss on
natural gas derivatives of $2.9 million compared to a gain of
$27.3 million in the second quarter of 2016. The derivative
portfolio at June 30, 2017 includes natural gas derivatives
that hedge a portion of natural gas purchases through December
2018.
For the first six months of 2017, TNCLP reported net earnings of
$81.7 million on net sales of $215.1 million. This compares to net
earnings of $136.4 million on net sales of $234.7 million for the
first six months of 2016. Net earnings allocable to common units
was $66.2 million ($3.58 per common unit) and $86.4 million ($4.66
per common unit) for the first six months of 2017 and 2016,
respectively. Results for the first six months of 2017 included an
unrealized net mark-to-market loss on natural gas derivatives of
$10.8 million compared to an unrealized net mark-to-market
gain of $25.0 million for the first six months of 2016.
Analysis of Results
Net sales for the second quarter of 2017 totaled
$96.1 million, compared to $126.7 million for the second
quarter of 2016, due to lower average selling prices for both
ammonia and urea ammonium nitrate (UAN) as well as lower sales
volume for UAN compared to the prior period.
Sales volumes for ammonia were flat year-over year while sales
volumes for UAN decreased 10 percent as flooding on the Arkansas
River limited shipments and unfavorable weather resulted in late
planting and delayed UAN purchases and applications, exacerbated by
customers increasingly favoring just-in-time deliveries rather than
carrying inventory. Ammonia and UAN average selling prices declined
in the second quarter of 2017 compared to the second quarter of
2016 due to greater global nitrogen supply availability.
Comparing the second quarter of 2017 to the second quarter of
2016, TNCLP’s:
- Ammonia sales volume was flat and UAN
sales volume decreased by 10 percent;
- Ammonia average selling prices
decreased by 18 percent and UAN average selling prices decreased by
19 percent; and
- Realized natural gas cost per MMBtu
increased by 15 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 first six months of 2017, capital
expenditures were $21.4 million as compared to
$20.2 million in 2016.
For the full year 2017, TNCLP expects capital expenditures to be
in the range of $30 million to $40 million. TNCLP previously
announced that it expected to make capital expenditures for the
full year 2017 in the range of $75 million to $85 million, with
approximately $40 million of the projected capital expenditures
related to a plant turnaround scheduled to start in the third
quarter of 2017. Subsequent to that announcement, TNCLP postponed
the turnaround due to a delay in receiving certain equipment. TNCLP
anticipates the plant turnaround will occur in the third quarter of
2018 and expects it to cost approximately $40 million. The
calculation of Available Cash for the three months ended June 30,
2017, included a reserve of approximately one-half of that
amount.
TNCLP reported on August 2, 2017, the declaration of a cash
distribution for the quarter ended June 30, 2017, of $1.60 per
common unit payable August 29, 2017 to holders of record as of
August 15, 2017. This compares to a cash distribution of $2.58
per common unit for the quarter ended June 30, 2016.
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 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;
- The volatility of natural gas prices in
North America;
- 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 (unaudited) June 30,
December 31, 2017 2016 (in millions, except
for units) ASSETS Current assets: Cash and cash
equivalents $ 67.1 $ 39.5 Due from affiliates of the General
Partner 12.9 4.0 Accounts receivable 0.4 0.6 Inventories 11.4 8.6
Prepaid expenses and other current assets 0.5 7.9 Total
current assets 92.3 60.6 Property, plant and equipment—net 297.5
301.3 Other assets 10.0 11.4 Total assets $ 399.8 $
373.3
LIABILITIES AND PARTNERS' CAPITAL Current liabilities:
Accounts payable and accrued expenses $ 19.7 $ 27.8 Due to
affiliates of the General Partner 3.0 4.1 Other current liabilities
2.5 —
Total current liabilities
25.2 31.9 Other liabilities 2.2 2.6 Partners' capital:
Limited partners' interests, 18,501,576 common units authorized,
issued and outstanding 312.4 286.7 Limited partners' interests,
184,072 Class B common units authorized, issued and outstanding 2.1
1.8 General partner's interest 57.9 50.3 Total partners'
capital 372.4 338.8 Total liabilities and partners' capital
$ 399.8 $ 373.3
TERRA NITROGEN COMPANY, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three months ended Six months ended
June 30, June 30, 2017 2016
2017 2016 (in millions, except per unit
amounts) Net sales: Product sales to affiliates of the General
Partner $ 95.9 $ 126.5 $ 214.8 $ 234.4 Other income from an
affiliate of the General Partner 0.2 0.2 0.3
0.3 Total 96.1 126.7 215.1 234.7 Cost of goods sold: Materials,
supplies and services 45.8 17.1 111.2 74.8 Services provided by
affiliates of the General Partner 6.8 6.9 13.8
14.1 Gross margin 43.5 102.7 90.1 145.8 Selling, general and
administrative services provided by affiliates of the General
Partner 4.0 3.9 7.9 7.8 Other general and administrative expenses
0.1 0.2 0.6 1.7 Earnings from operations 39.4
98.6 81.6 136.3 Interest income 0.1 0.1 0.1
0.1 Net earnings $ 39.5 $ 98.7 $ 81.7 $ 136.4
Allocation of net earnings: General Partner $ 11.7 $ 38.1 $ 14.7 $
48.7 Class B common units 0.4 0.9 0.8 1.3 Common units 27.4
59.7 66.2 86.4 Net earnings $ 39.5 $ 98.7
$ 81.7 $ 136.4 Net earnings per common unit $ 1.48
$ 3.22 $ 3.58 $ 4.66
TERRA NITROGEN
COMPANY, L.P. SUMMARIZED OPERATING INFORMATION
(unaudited) Three months ended Six
months ended June 30, June 30, 2017
2016 2017 2016 Sales volume (tons in
thousands): Ammonia 112 112 239 203 UAN(1) 407 454 939 816
Average selling prices (dollars per ton): Ammonia $ 303 $ 371 $ 294
$ 372 UAN(1) 152 187 $ 154 $ 194 Cost of natural gas
(dollars per MMBtu): Purchased natural gas costs(2) $ 2.77 $ 1.74 $
2.92 $ 1.85 Realized derivatives loss(3) 0.04 0.70 —
0.78 Cost of natural gas $ 2.81 $ 2.44 $ 2.92 $ 2.63
_________________________________________________
(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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Terra Nitrogen Company, L.P.Martin JarosickVice President,
Investor Relations847-405-2045mjarosick@cfindustries.com
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