Terra Nitrogen Company, L.P. (TNCLP) (NYSE: TNH) today reported
net earnings of $49.4 million on net sales of
$97.5 million for the quarter ended December 31, 2017.
This compares to net earnings of $44.1 million on net sales of
$93.4 million for the 2016 fourth quarter. Net earnings
allocable to common units was $26.6 million ($1.44 per common
unit) and $34.3 million ($1.85 per common unit) for the 2017
and 2016 fourth quarters, respectively. The fourth quarter of 2017
included a gain of $14.3 million on the sale of TNCLP's 50% joint
venture interest in Oklahoma CO2 Partnership (OKCO2), which added
$0.42 to fourth quarter 2017 earnings per common unit. Results for
the fourth quarter of 2017 also included an unrealized net
mark-to-market loss on natural gas derivatives of $0.9 million
compared to a gain of $13.6 million in the fourth quarter of
2016. The derivative portfolio at December 31, 2017 includes
natural gas derivatives that hedge a portion of natural gas
purchases through December 2018.
For the full year 2017, TNCLP reported net earnings of $153.9
million on net sales of $397.2 million. This compares to net
earnings of $209.3 million on net sales of $418.3 million for the
full year 2016. Net earnings allocable to common units was $109.8
million ($5.93 per common unit) and $139.9 million ($7.56 per
common unit) for the full year 2017 and 2016, respectively. Results
for the full year 2017 included a gain of $14.3 million on the sale
of OKCO2, which added $0.55 to the full year 2017 earnings per
common unit. Results for the full year 2017 included an unrealized
net mark-to-market loss on natural gas derivatives of
$10.6 million compared to an unrealized net mark-to-market
gain of $35.3 million for the full year 2016.
On February 7, 2018, Terra Nitrogen Company, L.P. announced
that, in accordance with Section 17.1 of TNCLP’s First Amended and
Restated Agreement of Limited Partnership, as amended (the
“Partnership Agreement”), Terra Nitrogen GP Inc., a Delaware
corporation and the sole general partner of TNCLP (“TNGP”), has
elected to exercise the right, assigned to TNGP by TNCLP, to
purchase all of the issued and outstanding common units
representing limited partner interests in TNCLP not already owned
by TNGP or its affiliates (the “Units”). TNGP will purchase the
Units on April 2, 2018 for a cash purchase price of $84.033 per
Unit. The purchase price was determined in accordance with Section
17.1 of the Partnership Agreement.
Analysis of Results
Net sales for the fourth quarter of 2017 totaled
$97.5 million, compared to $93.4 million for the fourth
quarter of 2016, due to higher ammonia sales volumes and higher UAN
selling prices that were partially offset by lower ammonia selling
prices and lower UAN sales volume.
Comparing the fourth quarter of 2017 to the fourth quarter of
2016, TNCLP’s:
- Ammonia sales volume increased by 16
percent and UAN sales volume decreased by 2 percent;
- Ammonia average selling prices
decreased by 10 percent and UAN average selling prices increased by
7 percent; and
- Realized natural gas cost per MMBtu
decreased by 8 percent.
On October 2, 2017, TNCLP sold its 50% interest in OKCO2, a
joint venture that owns a carbon dioxide liquefaction and
purification facility to the joint venture partner. Prior to the
sale, TNCLP had accounted for this interest as an equity method
investment. TNCLP received proceeds of $16.3 million for the sale
and recorded a gain of $14.3 million after the completion of
certain customary closing requirements and working capital
adjustments in the fourth quarter of 2017.
Cash Distribution
Cash distributions are based on Available Cash for the quarter
and depend on TNCLP’s earnings as well as cash requirements for
working capital needs and capital and other expenditures. For the
full year 2017, capital expenditures were $27.2 million as
compared to $33.1 million for the full year 2016. Cash
distributions per common unit also vary based on increasing amounts
allocable to the General Partner when cumulative distributions
exceed targeted levels. TNCLP reported on February 7, 2018,
the declaration of a cash distribution for the quarter ended
December 31, 2017, of $2.03 per common unit payable
February 28, 2018 to holders of record as of February 16,
2018. With this distribution, TNCLP cumulative distributions
continue to exceed targeted levels. This compares to a cash
distribution of $1.22 per common unit for the quarter ended
December 31, 2016. The proceeds from the sale of the joint
venture interest were included in the determination of Available
Cash for the fourth quarter of 2017 and added $0.45 per common unit
to the distribution.
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. (CF Industries),
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 December 31,
December 31, 2017 2016 (in millions, except
for units) ASSETS Current assets: Cash and cash
equivalents $ 81.5 $ 39.5 Due from affiliates of the General
Partner 17.1 4.0 Accounts receivable 0.9 0.6 Inventories 5.3 8.6
Prepaid expenses and other current assets 0.3 7.9 Total
current assets 105.1 60.6 Property, plant and equipment—net 290.2
301.3 Other assets 8.6 11.4 Total assets $ 403.9 $
373.3
LIABILITIES AND PARTNERS' CAPITAL Current liabilities:
Accounts payable and accrued expenses $ 27.4 $ 27.8 Due to
affiliates of the General Partner 4.2 4.1 Other current liabilities
3.2 — Total current liabilities 34.8 31.9 Other
liabilities 1.0 2.6 Partners' capital: Limited partners' interests,
18,501,576 common units authorized, issued and outstanding 301.2
286.7 Limited partners' interests, 184,072 Class B common units
authorized, issued and outstanding 2.1 1.8 General partner's
interest 64.8 50.3 Total partners' capital 368.1
338.8 Total liabilities and partners' capital $ 403.9 $
373.3
TERRA NITROGEN COMPANY, L.P. CONSOLIDATED
STATEMENTS OF OPERATIONS Three months
ended Twelve months ended December
31, December 31, 2017 2016
2017 2016 (in millions, except per unit
amounts) Net sales: Product sales to affiliates of the General
Partner $ 96.8 $ 93.2 $ 396.1 $ 417.7 Other income from an
affiliate of the General Partner 0.2 0.2 0.6 0.6 Other income 0.5
— 0.5 — Total 97.5 93.4 397.2 418.3 Cost of
goods sold: Materials, supplies and services 50.9 38.6 212.6 163.6
Services provided by affiliates of the General Partner 7.2
6.6 27.9 27.9 Gross margin 39.4 48.2 156.7 226.8
Selling, general and administrative services provided by affiliates
of the General Partner 4.0 3.9 15.9 15.7 Other general and
administrative expenses 0.6 0.2 1.7 1.9 Gain on sale of equity
method investment (14.3 ) — (14.3 ) — Earnings from
operations 49.1 44.1 153.4 209.2 Interest income 0.3 —
0.5 0.1 Net earnings $ 49.4 $ 44.1 $
153.9 $ 209.3 Allocation of net earnings: General Partner $
22.3 $ 9.4 $ 42.6 $ 67.4 Class B common units 0.5 0.4 1.5 2.0
Common units 26.6 34.3 109.8 139.9 Net
earnings $ 49.4 $ 44.1 $ 153.9 $ 209.3 Net
earnings per common unit $ 1.44 $ 1.85 $ 5.93
$ 7.56
TERRA NITROGEN COMPANY, L.P. SUMMARIZED
OPERATING INFORMATION Three months
ended Twelve months ended December
31, December 31, 2017 2016
2017 2016 Sales volume (tons in thousands):
Ammonia 119 103 480 409 UAN(1) 516 528 1,909 1,759 Average
selling prices (dollars per ton): Ammonia $ 227 $ 253 $ 258 $ 323
UAN(1) $ 136 $ 127 $ 142 $ 162 Cost of natural gas (dollars
per MMBtu): Purchased natural gas costs(2) $ 2.49 $ 2.83 $ 2.71 $
2.32 Realized derivatives loss(3) 0.15 0.05 0.07
0.40 Cost of natural gas $ 2.64 $ 2.88 $ 2.78 $ 2.72
_________________________________________________
(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
Terra Nitrogen Company . (NYSE:TNH)
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