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8-K - 8-K - TERRA NITROGEN CO L P /DEa14-18380_18k.htm

Exhibit 99.1

 

 

FOR MORE INFORMATION, CONTACT:

Dan Swenson
Senior Director, Investor Relations &
Corporate Communications

847/405-2515

dswenson@cfindustries.com

 

Terra Nitrogen Company, L.P. Reports Second Quarter 2014 Results and Announces Cash Distribution

 

DEERFIELD, IL (August 6, 2014)—Terra Nitrogen Company, L.P. (TNCLP) (NYSE: TNH) today reported net earnings of $100.1 million on sales of $167.5 million for the quarter ended June 30, 2014.  This compares to net earnings of $149.3 million on sales of $215.4 million for the 2013 second quarter.  Net income allocable to Common Units was $58.4 million ($3.16 per Common Unit) and $84.0 million ($4.54 per Common Unit) for the 2014 and 2013 second quarters, respectively.

 

Results for the second quarter of 2014 included an unrealized net mark-to-market loss on natural gas derivatives of $4.9 million compared to a loss of $2.9 million in the second quarter of 2013.

 

For the first six months of 2014, TNCLP reported net earnings of $203.0 million on net sales of $345.2 million.  This compares to net earnings of $316.1 million on net sales of $439.5 million for the first six months of 2013.  Net earnings allocable to Common Units was $118.8 million ($6.42 per Common Unit) and $176.2 million ($9.52 per Common Unit) for the first six months of 2014 and 2013, respectively.  Results for the first six months of 2014 included an $8.9 million unrealized net mark-to-market loss on natural gas derivatives compared to a gain of $0.8 million for the first six months of 2013.

 

Analysis of Results
Net sales for the 2014 second quarter totaled $167.5 million, compared to sales of $215.4 million for the 2013 second quarter.  This decrease was due to lower average selling prices and sales volume.  The decrease in overall prices was due to lower global nitrogen prices driven by increased international supply.  Ammonia prices also were lower than in the prior year period due to high industry-wide North American ammonia inventory levels coming into 2014 while UAN prices also decreased due to customers’ reluctance to hold inventory. The decrease in ammonia sales volume was due to the company having lower available inventory to sell due to strong shipments in the first quarter of 2014.  UAN sales volume declined due to farmers’ preference for ammonia over UAN.

 

Net earnings for the 2014 second quarter totaled $100.1 million, compared to net earnings of $149.3 million for the 2013 second quarter.  This decrease was due to lower revenue and higher realized natural gas costs.

 

Comparing the 2014 to the 2013 second quarter, TNCLP’s:

·                  Ammonia and UAN average selling prices decreased by 23 and 14 percent, respectively;

·                  Ammonia and UAN sales volume decreased by 14 and 5 percent, respectively; and

·                  Realized natural gas costs per MMBtu increased by 3 percent.

 



 

Cash Distribution
TNCLP reported today the declaration of a cash distribution for the quarter ended June 30, 2014, of $3.11 per common limited partnership unit payable August 29, 2014, to holders of record as of August 18, 2014.

 

Cash distributions depend on TNCLP’s earnings as well as cash requirements for working capital needs and capital expenditures. In 2014, TNCLP is expected to have capital expenditures in the range of $70 million to $90 million.  A turnaround of approximately 50 percent of the complex is anticipated to occur in the first quarter of 2015 and is expected to have an impact on cash available to fund distributions.

 

Cash distributions are made 99.975% to common and Class B common unitholders and 0.025% to the General Partner except when cumulative distributions of available cash exceed specified target levels above the minimum quarterly distributions of $0.605 per unit. Under such circumstances, the General Partner is entitled to receive Incentive Distribution Rights.  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.

 

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 cyclical nature of TNCLP’s business;

·                  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;

 



 

·                  reliance on third party transportation providers;

·                  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;

·                  risks associated with cyber security;

·                  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;

·                  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 unit holders 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’ web site. 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,

 

 

 

2014

 

2013

 

 

 

(in millions, except for units)

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

115.9

 

$

86.9

 

Due from affiliates of the General Partner

 

28.0

 

29.0

 

Accounts receivable

 

0.6

 

1.0

 

Inventories, net

 

7.8

 

5.9

 

Prepaid expenses and other current assets

 

0.7

 

7.8

 

Total current assets

 

153.0

 

130.6

 

 

 

 

 

 

 

Property, plant and equipment, net

 

228.8

 

214.1

 

Other assets

 

6.0

 

5.1

 

Total assets

 

$

387.8

 

$

349.8

 

 

 

 

 

 

 

LIABILITIES AND PARTNERS’ CAPITAL

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

25.5

 

$

27.9

 

Due to affiliates of the General Partner

 

5.0

 

3.7

 

Other current liabilities

 

0.5

 

8.0

 

Total current liabilities

 

31.0

 

39.6

 

 

 

 

 

 

 

Noncurrent liabilities

 

0.9

 

1.2

 

 

 

 

 

 

 

Partners’ capital:

 

 

 

 

 

Limited partners’ interests, 18,501,576 Common Units authorized, issued and outstanding

 

288.7

 

264.5

 

Limited partners’ interests, 184,072 Class B Common Units authorized, issued and outstanding

 

2.0

 

1.5

 

General Partner’s interest

 

65.2

 

43.0

 

Total partners’ capital

 

355.9

 

309.0

 

Total liabilities and partners’ capital

 

$

387.8

 

$

349.8

 

 



 

TERRA NITROGEN COMPANY, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three months ended
June 30,

 

Six months ended 
June 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

(in millions, except per unit amounts)

 

Net sales:

 

 

 

 

 

 

 

 

 

Product sales to an Affiliate of the General Partner

 

$

167.2

 

$

215.0

 

$

344.5

 

$

438.7

 

Other income from an Affiliate of the General Partner

 

0.2

 

0.2

 

0.3

 

0.3

 

Other income

 

0.1

 

0.2

 

0.4

 

0.5

 

Total

 

167.5

 

215.4

 

345.2

 

439.5

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold:

 

 

 

 

 

 

 

 

 

Materials, supplies and services

 

57.4

 

55.6

 

122.0

 

102.2

 

Services provided by the affiliates of the General Partner

 

5.9

 

6.1

 

11.5

 

11.7

 

Gross margin

 

104.2

 

153.7

 

211.7

 

325.6

 

Selling, general and administrative services provided by the affiliates of the General Partner

 

3.8

 

3.7

 

7.7

 

7.5

 

Other general and administrative expenses

 

0.3

 

0.7

 

1.0

 

2.0

 

 

 

 

 

 

 

 

 

 

 

Earnings from operations

 

100.1

 

149.3

 

203.0

 

316.1

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

100.1

 

$

149.3

 

$

203.0

 

$

316.1

 

 

 

 

 

 

 

 

 

 

 

Allocation of net earnings:

 

 

 

 

 

 

 

 

 

General Partner

 

$

40.7

 

$

63.8

 

$

82.2

 

$

136.8

 

Class B Common Units

 

1.0

 

1.5

 

2.0

 

3.1

 

Common Units

 

58.4

 

84.0

 

118.8

 

176.2

 

Net earnings

 

$

100.1

 

$

149.3

 

$

203.0

 

$

316.1

 

 

 

 

 

 

 

 

 

 

 

Net earnings per Common Unit

 

$

3.16

 

$

4.54

 

$

6.42

 

$

9.52

 

 



 

TERRA NITROGEN COMPANY, L.P.

SUMMARIZED OPERATING INFORMATION

(Unaudited)

 

 

 

Three months ended

 

Six months ended

 

 

 

June 30,

 

June 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

Sales volumes by product (tons in thousands)

 

 

 

 

 

 

 

 

 

Ammonia

 

71

 

83

 

169

 

169

 

UAN (1)

 

470

 

495

 

1,000

 

1,035

 

 

 

 

 

 

 

 

 

 

 

Average selling prices (dollars per ton)

 

 

 

 

 

 

 

 

 

Ammonia

 

$

488

 

$

631

 

$

445

 

$

644

 

UAN

 

282

 

327

 

269

 

318

 

 

 

 

 

 

 

 

 

 

 

Natural gas costs/MMBtu (2)

 

$

3.87

 

$

3.74

 

$

3.95

 

$

3.58

 

 


(1)             The nitrogen content of UAN is 32% by weight.

(2)             Includes the cost of natural gas purchases and realized gains and losses on natural gas derivatives.