Terra Nitrogen Company, L.P. (TNCLP) (NYSE: TNH) today reported
net earnings of $59.0 million on sales of $126.6 million
for the quarter ended March 31, 2015. This compares to net
earnings of $102.9 million on sales of $177.7 million for
the 2014 first quarter. Net income allocable to Common Units was
$37.5 million ($2.03 per Common Unit) and $60.4 million
($3.26 per Common Unit) for the 2015 and 2014 first quarters,
respectively.
Results for the first quarter of 2015 included an unrealized net
mark-to-market gain on natural gas derivatives of $3.9 million
compared to a loss of $4.0 million in the first quarter of
2014.
Analysis of Results
Sales for the 2015 first quarter totaled $126.6 million,
compared to $177.7 million for the 2014 first quarter. The
decrease in revenues was primarily due to lower sales volume as a
result of a planned shutdown and turnaround of an ammonia and UAN
plant during the first quarter of 2015. The ammonia plant
turnaround took approximately nine weeks and was completed in the
first quarter of 2015. The UAN plant turnaround took approximately
eleven weeks and was completed during the second week of April
2015. The turnaround did not impact ammonia volume as significantly
as it impacted UAN volume. The sales of existing inventory and the
shorter ammonia turnaround, which resulted in the ammonia plant
returning to production before the UAN plant, together mitigated
some of the impact on ammonia sales during the first quarter.
Ammonia average selling price increased due to tighter overall
industry supply conditions compared to the prior year period, while
UAN average selling prices decreased modestly.
Net earnings for the 2015 first quarter totaled
$59.0 million, compared to net earnings of $102.9 million
for the 2014 first quarter. The decrease in net earnings was
primarily driven by lower production volume in 2015 compared to
2014 and other manufacturing costs including costs associated with
the turnaround activities, partially offset by a reduction in
realized natural gas costs.
Comparing the first quarter 2015 to 2014, TNCLP’s:
- Ammonia average selling prices
increased by 21 percent and UAN average selling prices decreased by
2 percent;
- Ammonia sales volume decreased by 3
percent and UAN sales volume decreased by 42 percent; and
- Realized natural gas cost per MMBtu
decreased by 13 percent.
Cash Distribution
Cash distributions depend on TNCLP’s earnings as well as cash
requirements for working capital needs and capital expenditures. In
the first quarter of 2015, capital expenditures were
$47.8 million as compared to $16.4 million in 2014, with
the increase primarily due to plant turnaround activities. For the
full year 2015, TNCLP is expected to have capital expenditures in
the range of $70 million to $90 million.
TNCLP reported on May 6, 2015 the declaration of a cash
distribution for the quarter ended March 31, 2015, of $2.08
per common limited partnership unit payable May 29, 2015 to
holders of record as of May 18, 2015.
Cash distributions per limited partnership 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 the Partnership’s
distributions to foreign investors are attributable to income that
is effectively connected with a United States trade or business.
Accordingly, the Partnership’s distributions to foreign investors
are subject to federal income tax withholding at the highest
effective tax rate.
Subsequent Event
On May 6, 2015, the Internal Revenue Service (“IRS”) issued
proposed regulations on the types of income and activities which
constitute qualified income of a Master Limited Partnership
(“MLP”). The proposed regulations would have the effect of limiting
the types of income and activities which qualify under the MLP
rules, subject to certain transition provisions. The IRS proposal
specifically highlights companies that perform chemical processing
and transformation activities as one of the focuses of the proposed
changes, but the proposed regulations do not contain specific
proposals regarding fertilizer related activities. The proposed
regulations reserve on the provisions relating to fertilizer
activities.
TNCLP’s tax treatment for federal income tax purposes depends on
its status as an MLP. Currently, no federal income taxes are paid
by TNCLP due to its MLP status. Any change in the tax treatment of
qualified income of fertilizer related activities could have a
material impact on the taxation of TNCLP and could have a material
adverse impact on unit holder distributions. TNCLP will continue to
monitor the IRS regulatory activities.
About TNCLP
Terra Nitrogen Company, L.P. is a leading manufacturer of
nitrogen fertilizer products.
TNCLP is the sole limited partner of Terra Nitrogen, Limited
Partnership (TNLP), owner of the Verdigris, Oklahoma manufacturing
facility and related assets. Terra Nitrogen GP Inc., an indirect,
wholly-owned subsidiary of CF Industries Holdings, Inc., is the
General Partner of TNCLP and exercises full control over all of
TNCLP’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 volatility of natural gas prices in
North America;
- 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;
- difficulties in securing the delivery,
or delays or interruptions in the delivery of raw materials such as
natural gas;
- 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 and health and safety laws and
regulations;
- future regulatory restrictions and
requirements related to greenhouse gas emissions or other
environmental items;
- TNCLP’s inability to predict seasonal
demand for its products accurately;
- 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)
March 31, 2015
December 31,2014
(in millions, except for units) ASSETS Current
assets: Cash and cash equivalents $ 60.0 $ 113.0 Due from
affiliates of the General Partner 25.0 25.2 Accounts receivable 0.3
0.4 Inventories 6.0 9.6 Prepaid expenses and other current assets
1.4 0.3 Total current assets 92.7 148.5 Property, plant and
equipment, net 312.3 259.4 Other assets 6.8 7.9 Total assets
$ 411.8 $ 415.8
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities: Accounts payable and accrued expenses $ 43.4 $
32.4 Due to affiliates of the General Partner 8.2 4.2 Other current
liabilities 1.3 3.6 Total current liabilities 52.9
40.2 Noncurrent liabilities 1.1 0.7 Partners' capital: Limited
partners' interests, 18,501,576 Common Units authorized, issued and
outstanding 293.9 302.7 Limited partners' interests, 184,072 Class
B Common Units authorized, issued and outstanding 2.1 2.2 General
partner's interest 61.8 70.0 Total partners' capital 357.8
374.9 Total liabilities and partners' capital $ 411.8
$ 415.8
TERRA NITROGEN
COMPANY, L.P.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(unaudited)
Three months ended March
31, 2015 2014 (in millions,
except per unit amounts) Net sales: Product sales to an
affiliate of the General Partner $ 126.3 $ 177.3 Other income from
an affiliate of the General Partner 0.1 0.1 Other income 0.2 0.3
Total 126.6 177.7 Cost of goods sold: Materials, supplies and
services 54.0 64.6 Services provided by affiliates of the General
Partner 7.6 5.6 Gross margin 65.0 107.5 Selling, general and
administrative services provided by affiliates of the General
Partner 3.9 3.9 Other general and administrative expenses 2.1 0.7
Net earnings $ 59.0 $ 102.9 Allocation of net earnings: General
Partner $ 20.9 $ 41.5 Class B Common Units 0.6 1.0 Common Units
37.5 60.4 Net earnings $ 59.0 $ 102.9 Net earnings per Common Unit
$ 2.03 $ 3.26
TERRA NITROGEN
COMPANY, L.P.
SUMMARIZED OPERATING
INFORMATION
Three months ended March
31, 2015 2014 (in millions,
except as noted) Sales volumes by products (tons in thousands)
Ammonia 95 98 UAN (1) 309 530 Average selling prices
(dollars per ton) Ammonia $ 499 $ 413 UAN 254 258 Natural
gas costs: Purchased natural gas costs (per MMBtu)(2) $ 2.88 $ 4.95
Realized derivatives (gain) loss (per MMBtu)(3) 0.63 (0.93 )
Natural gas costs (per MMBtu) $ 3.51 $ 4.02
_________________________________________________ (1) The
nitrogen content of UAN is 32% by weight. (2) Includes the cost of
natural gas purchased during the period for use in production. (3)
Includes realized gains and losses on natural gas derivatives
settled during the period. Excludes unrealized mark-to-market gains
and losses on natural gas derivatives.
Terra Nitrogen Company, L.P.Dan
SwensonTreasurer847/405-2515dswenson@cfindustries.com
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