cvi-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)
☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	June 30, 2022
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to .

Commission file number: 001-35120

CVR PARTNERS, LP

(Exact name of registrant as specified in its charter)

Delaware

56-2677689

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

2277 Plaza Drive, Suite 500, Sugar Land, Texas 77479

(Address of principal executive offices) (Zip Code)

(281) 207-3200

(Registrant’s telephone number, including area code)

_____________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common units representing limited partner interests	UAN	The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☑

Non-Accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

There were 10,569,637 common units representing limited partner interests of CVR Partners, LP (“common units”) outstanding at July 29, 2022.

Table of Contents

TABLE OF CONTENTS

CVR PARTNERS, LP - Quarterly Report on Form 10-Q

June 30, 2022

PART I. Financial Information

PART II. Other Information

Condensed Consolidated Balance Sheets - June 30, 2022 and December 31, 2021 (unaudited)

Item 1A.

Risk Factors

Condensed Consolidated Statements of Operations - Three and Six Months Ended June 30, 2022 and 2021 (unaudited)

Item 5.

Other Information

Condensed Consolidated Statements of Partners’ Capital - Three and Six Months Ended June 30, 2022 and 2021 (unaudited)

Item 6.

Exhibits

Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2022 and 2021 (unaudited)

Signatures

Notes to the Condensed Consolidated Financial Statements (unaudited)

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

This Quarterly Report on Form 10-Q (including documents incorporated by reference herein) contains statements with respect to our expectations or beliefs as to future events. These types of statements are “forward-looking” and subject to uncertainties. See “Important Information Regarding Forward-Looking Statements” section of this filing.

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Important Information Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements including, but not limited to, those under Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. All statements other than statements of historical fact, including without limitation, statements regarding future operations, financial position, estimated revenues and losses, growth, capital projects, unit repurchases, impacts of legal proceedings, projected costs, prospects, plans, and objectives of management are forward-looking statements. The words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “continue,” “predict,” “potential,” “project,” and similar terms and phrases are intended to identify forward-looking statements.

Although we believe our assumptions concerning future events are reasonable, a number of risks, uncertainties and other factors could cause actual results and trends to differ materially from those projected or forward-looking. Forward-looking statements, as well as certain risks, contingencies, or uncertainties that may impact our forward-looking statements, include, but are not limited to, the following:

•our ability to generate distributable cash or make cash distributions on our common units, including reserves and future uses of cash;

•the ability of our general partner to modify or revoke our distribution policy at any time;

•the volatile nature of our business and the variable nature of our distributions;

•the severity, magnitude, duration, and impact of the novel coronavirus 2019 and any variants thereof (collectively, “COVID-19”) pandemic and of businesses’ and governments’ responses to such pandemic on our operations, personnel, commercial activity, and supply and demand across our and our customers’ and suppliers’ businesses;

•changes in market conditions and market volatility arising from the COVID-19 pandemic or inflation, including fertilizer, natural gas, and other commodity prices and the impact of such changes on our operating results and financial position;

•the cyclical and seasonal nature of our business;

•the impact of weather on our business, including our ability to produce, market, sell, transport or deliver fertilizer products profitably or at all, and on commodity supply and/or pricing;

•the dependence of our operations on a few third-party suppliers, including providers of transportation services, and equipment;

•our reliance on, or our ability to procure economically or at all, pet coke we purchase from CVR Energy, Inc. (together with its subsidiaries, but excluding the Partnership and its subsidiaries, “CVR Energy”) and other third-party suppliers;

•our reliance on the natural gas, electricity, oxygen, nitrogen, sulfur processing, compressed dry air and other products that we purchase from third parties;

•the supply, availability, and prices of essential raw materials and the effects of inflation thereupon;

•our production levels, including the risk of a material decline in those levels, including our ability to upgrade ammonia to UAN;

•product pricing, including contracted sales and our ability to realize market prices, in full or at all;

•accidents or other unscheduled shutdowns or interruptions affecting our facilities, machinery, or equipment, or those of our suppliers or customers;

•potential operating hazards from accidents, fire, severe weather, tornadoes, floods or other natural disasters;

•our ability to obtain, retain, or renew permits, licenses and authorizations to operate our business;

•competition in the nitrogen fertilizer business and foreign wheat and coarse grain production, including impacts thereto as a result of farm planting acreage, domestic and global supply and demand, and domestic or international duties tariffs or similar costs;

•capital expenditures;

•existing and future laws, rulings and regulations, including but not limited to those relating to the environment, climate change, and/or the transportation or production of hazardous chemicals like ammonia, including potential liabilities or capital requirements arising from such laws, rulings, or regulations;

•Environmental, Social and Governance (“ESG”) including but not limited to compliance with ESG-related recommendations or directives and risks or impacts relating thereto, whether from regulators, rating agencies, lenders, investors, litigants, customers, vendors, the public or others;

•alternative energy or fuel sources and impacts on corn prices (ethanol), and the end-use and application of fertilizers;

•risks of terrorism, cybersecurity attacks, the security of chemical manufacturing facilities and other matters beyond our control;

•political disturbances, geopolitical instability and tensions, and associated changes in global trade policies and economic sanctions, including, but not limited to, in connection with Russia’s invasion of Ukraine in February 2022 and any ongoing conflicts in the region;

•our lack of asset diversification;

•our dependence on significant customers and the creditworthiness and performance by counterparties;

•our potential loss of transportation cost advantage over our competitors;

•risks associated with third party operation of or control over important facilities necessary for operation of our nitrogen fertilizer facilities;

•the volatile nature of ammonia, potential liability for accidents involving ammonia including damage or injury to persons, property, the environment or human health and increased costs related to the transport or production of ammonia;

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•our potential inability to successfully implement our business strategies, including the completion of significant capital programs or projects;

•our reliance on CVR Energy’s senior management team and conflicts of interest they may face operating each of CVR Partners and CVR Energy;

•control of our general partner by CVR Energy;

•our ability to continue to license the technology used in our operations;

•the potential inability to successfully implement our business strategies at all or on time and within our anticipated budgets, including significant capital programs or projects and turnarounds at our fertilizer facilities;

•restrictions in our debt agreements;

•asset impairments and impacts thereof;

•asset useful life;

•realizable inventory value;

•the number of investors willing to hold or acquire our common units;

•our ability to issue securities or obtain financing;

•changes in tax and other law, regulations and policies;

•ability to qualify for and receive the benefit of 45Q tax credits;

•changes in our treatment as a partnership for U.S. federal income or state tax purposes;

•rulings, judgments or settlements in litigation, tax or other legal or regulatory matters;

•instability and volatility in the capital, credit and commodities markets and in the global economy, including due to the ongoing Russia-Ukraine conflict;

•competition with CVR Energy and its affiliates;

•transactions and/or conflicts with CVR Energy’s controlling shareholder;

•the value of payouts under our equity and non-equity incentive plans; and

•our ability to recover under our insurance policies for damages or losses in full or at all; and

•the factors described in greater detail under “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021 and our other filings with the U.S. Securities and Exchange Commission (the “SEC”).

All forward-looking statements included in this Report are based on information available to us on the date of this Report. Except as required by law, we undertake no obligation to revise or update any forward-looking statements as a result of new information, future events or otherwise.

Information About Us

Investors should note that we make available, free of charge on our website at cvrenergy.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. We also post announcements, updates, events, investor information and presentations on our website in addition to copies of all recent news releases. We may use the Investor Relations section of our website to communicate with investors. It is possible that the financial and other information posted there could be deemed to be material information. Documents and information on our website are not incorporated by reference herein.

The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers, including us, that file electronically with the SEC.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CVR PARTNERS, LP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)


(in thousands)	June 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	156,312	$	112,516
Accounts receivable	35,998		88,351
Inventories	85,402		52,270
Prepaid expenses and other current assets	5,659		9,108
Total current assets	283,371		262,245
Property, plant, and equipment, net	820,940		850,462


Other long-term assets	14,489		14,351
Total assets	$	1,118,800	$	1,127,058

LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Accounts payable	$	49,928	$	41,504
Accounts payable to affiliates	11,713		8,895
Deferred revenue	4,196		87,060
Other current liabilities	29,960		24,401
Total current liabilities	95,797		161,860
Long-term liabilities:
Long-term debt, net	546,558		610,642
Other long-term liabilities	15,259		12,358
Total long-term liabilities	561,817		623,000
Commitments and contingencies (See Note 11)
Partners’ capital:
Common unitholders, 10,569,637 and 10,681,332 units issued and outstanding at June 30, 2022 and December 31, 2021, respectively	461,185		342,197
General partner interest	1		1
Total partners’ capital	461,186		342,198
Total liabilities and partners’ capital	$	1,118,800	$	1,127,058

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CVR PARTNERS, LP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per unit data)	2022		2021		2022		2021
Net sales	$	244,000	$	138,025	$	466,874	$	198,945
Operating costs and expenses:
Cost of materials and other	40,984		26,094		71,230		43,860
Direct operating expenses (exclusive of depreciation and amortization)	48,767		53,291		109,084		90,366
Depreciation and amortization	21,220		21,119		40,686		35,242
Cost of sales	110,971		100,504		221,000		169,468
Selling, general and administrative expenses	7,008		6,802		15,752		12,692
Loss on asset disposal	93		405		267		477

Operating income	125,928		30,314		229,855		16,308
Other (expense) income:
Interest expense, net	(8,308)		(23,334)		(18,343)		(39,251)

Other income, net	81		40		108		4,598
Income (loss) before income tax expense	117,701		7,020		211,620		(18,345)
Income tax expense	119		—		377		19
Net income (loss)	$	117,582	$	7,020	$	211,243	$	(18,364)

Basic and diluted earnings (loss) per unit	$	11.12	$	0.66	$	19.90	$	(1.72)
Distributions declared per common unit	$	2.26	$	—	$	7.50	$	—

Weighted-average common units outstanding:
Basic and Diluted	10,570		10,681		10,617		10,688

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CVR PARTNERS, LP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

(unaudited)


	Common Units			General Partner Interest		Total Partners’ Capital
(in thousands, except unit data)	Issued	Amount
Balance at December 31, 2021	10,681,332	$	342,197	$	1	$	342,198
Cash distributions to common unitholders - Affiliates	—	(20,394)		—		(20,394)
Cash distributions to common unitholders - Non-affiliates	—	(35,576)		—		(35,576)

Repurchase of common units	(111,695)	(12,398)		—		(12,398)
Net income	—	93,661		—		93,661
Balance at March 31, 2022	10,569,637	367,490		$	1	367,491
Cash distributions to common unitholders - Affiliates	—	(8,796)		—		(8,796)
Cash distributions to common unitholders - Non-affiliates	—	(15,091)		—		(15,091)

Net income	—	117,582		—		117,582
Balance at June 30, 2022	10,569,637	$	461,185	$	1	$	461,186


	Common Units			General Partner Interest		Total Partners’ Capital
(in thousands, except unit data)	Issued	Amount
Balance at December 31, 2020	10,705,710	$	314,240	$	1	$	314,241


Repurchase of common units	(24,378)	(529)		—		(529)

Net loss	—	(25,384)		—		(25,384)
Balance at March 31, 2021	10,681,332	288,327		$	1	288,328



Net income	—	7,020		—		7,020
Balance at June 30, 2021	10,681,332	$	295,347	$	1	$	295,348

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CVR PARTNERS, LP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Six Months Ended June 30,
(in thousands)	2022		2021
Cash flows from operating activities:
Net income (loss)	$	211,243	$	(18,364)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	40,686		35,242

Share-based compensation	11,353		9,971
Loss on extinguishment of debt	628		7,763
Other adjustments	958		2,808
Change in assets and liabilities:
Current assets and liabilities	(48,892)		(15,852)
Non-current assets and liabilities	(365)		1,411
Net cash provided by operating activities	215,611		22,979
Cash flows from investing activities:
Capital expenditures	(13,771)		(5,386)
Proceeds from sale of assets	41		42
Net cash used in investing activities	(13,730)		(5,344)
Cash flows from financing activities:
Repurchase of common units	(12,398)		(529)
Proceeds from issuance of senior secured notes	—		550,000
Principal payments on senior secured notes	(65,000)		(552,240)

Cash distributions to common unitholders - Affiliates	(29,190)		—
Cash distributions to common unitholders - Non-affiliates	(50,667)		—
Payment of deferred financing costs	(830)		(

SEC Form 10-Q filed by CVR Partners LP