cvi-20210331

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	March 31, 2021
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 10,681,332 common units representing limited partner interests of CVR Partners, LP (“common units”) outstanding at April 30, 2021.

Table of Contents

TABLE OF CONTENTS

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

March 31, 2021

PART I. Financial Information

PART II. Other Information

Condensed Consolidated Balance Sheets - March 31, 2021 and December 31, 2020 (unaudited)

Item 1A.

Risk Factors

Condensed Consolidated Statements of Operations - Three Months Ended March 31, 2021 and 2020 (unaudited)

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Condensed Consolidated Statements of Partners’ Capital - Three Months Ended March 31, 2021 and 2020 (unaudited)

Item 5.

Other Information

Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2021 and 2020 (unaudited)

Item 6.

Exhibits

Notes to the Condensed Consolidated Financial Statements (unaudited)

Signatures

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;

•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 (“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, 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;

•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;

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

•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 businesses including potential impacts of domestic and global supply and demand; and/or domestic or international duties, tariffs, or similar costs;

•foreign wheat and coarse grain production, including increases thereto and farm planting acreage;

•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;

•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;

•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;

•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;

•restrictions in our debt agreements;

•asset impairments and impacts thereof;

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•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;

•the possibility of changes in tax and other law, regulations and policies;

•ability to qualify for 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 and credit markets;

•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;

•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, 2020 and our other filings with the 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)	March 31, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	52,561	$	30,559
Accounts receivable	15,491		36,896
Inventories	57,184		42,349
Prepaid expenses and other current assets	7,494		8,410
Total current assets	132,730		118,214
Property, plant, and equipment, net	883,336		897,847


Other long-term assets	15,816		16,819
Total assets	$	1,031,882	$	1,032,880

LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Accounts payable	$	20,603	$	19,544
Accounts payable to affiliates	1,061		5,217
Deferred revenue	40,383		30,631
Other current liabilities	37,781		20,949
Total current liabilities	99,828		76,341
Long-term liabilities:
Long-term debt, net of current portion	634,946		633,942
Other long-term liabilities	8,780		8,356
Total long-term liabilities	643,726		642,298
Commitments and contingencies (See Note 11)
Partners’ capital:
Common unitholders, 10,681,332 and 10,705,710 units issued and outstanding at March 31, 2021 and December 31, 2020, respectively	288,327		314,240
General partner interest	1		1
Total partners’ capital	288,328		314,241
Total liabilities and partners’ capital	$	1,031,882	$	1,032,880

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 March 31,
(in thousands, except per unit data)		2021		2020
Net sales		$	60,921	$	75,080
Operating costs and expenses:
Cost of materials and other		17,766		23,991
Direct operating expenses (exclusive of depreciation and amortization)		37,075		35,123
Depreciation and amortization		14,123		15,597
Cost of sales		68,964		74,711
Selling, general and administrative expenses		5,891		5,354
Loss (gain) on asset disposal		72		(13)

Operating loss		(14,006)		(4,972)
Other (expense) income:
Interest expense, net		(15,916)		(15,783)
Other income, net		4,557		27
Loss before income tax expense		(25,365)		(20,728)
Income tax expense		19		7
Net loss		$	(25,384)	$	(20,735)

Basic and diluted loss per unit		$	(2.37)	$	(1.83)


Weighted-average common units outstanding:
Basic and Diluted		10,695		11,328

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, 2020	10,705,710	$	314,240	$	1	$	314,241



Unit repurchases	(24,378)	(529)		—		(529)
Net loss	—	(25,384)		—		(25,384)
Balance at March 31, 2021	10,681,332	$	288,327	$	1	$	288,328


	Common Units			General Partner Interest		Total Partners’ Capital
(in thousands, except unit data)	Issued	Amount
Balance at December 31, 2019	11,328,297	$	419,543	$	1	$	419,544


Land exchange with affiliate	—	(116)		—		(116)
Net loss	—	(20,735)		—		(20,735)
Balance at March 31, 2020	11,328,297	$	398,692	$	1	$	398,693

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)


	Three Months Ended March 31,
(in thousands)	2021		2020
Cash flows from operating activities:
Net loss	$	(25,384)	$	(20,735)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	14,123		15,597

Share-based compensation	3,592		(477)
Other adjustments	1,259		1,262
Change in assets and liabilities:
Current assets and liabilities	33,782		32,645
Non-current assets and liabilities	(1,821)		(585)
Net cash provided by operating activities	25,551		27,707
Cash flows from investing activities:
Capital expenditures	(2,994)		(6,710)
Proceeds from sale of assets	—		48
Net cash used in investing activities	(2,994)		(6,662)
Cash flows from financing activities:
Repurchase of common units	(529)		—



Other financing activities	(26)		(25)
Net cash used in financing activities	(555)		(25)
Net increase in cash and cash equivalents	22,002		21,020
Cash and cash equivalents, beginning of period	30,559		36,994
Cash and cash equivalents, end of period	$	52,561	$	58,014

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

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(1) Organization and Nature of Business

CVR Partners, LP (“CVR Partners” or the “Partnership”) is a Delaware limited partnership formed by CVR Energy, Inc. (together with its subsidiaries, but excluding the Partnership and its subsidiaries, “CVR Energy”) to own, operate and grow its nitrogen fertilizer business. The Partnership produces nitrogen fertilizer products at two manufacturing facilities, which are located in Coffeyville, Kansas (the “Coffeyville Facility”) and East Dubuque, Illinois (the “East Dubuque Facility”). Both facilities manufacture ammonia and are able to further upgrade to other nitrogen fertilizer products, principally urea ammonium nitrate (“UAN”). Nitrogen fertilizer is used by farmers to improve the yield and quality of their crops, primarily corn and wheat. The Partnership’s products are sold on a wholesale basis in the United States of America. As used in these financial statements, references to CVR Partners, the Partnership, “we”, “us”, and “our” may refer to consolidated subsidiaries of CVR Partners or one or both of the facilities, as the context may require.

Interest Holders

As of March 31, 2021, public common unitholders held approximately 64% of the Partnership’s outstanding limited partner interests; CVR Services, LLC (“CVR Services”), a wholly-owned subsidiary of CVR Energy, held approximately 36% of the Partnership’s outstanding limited partner interests; and CVR GP, LLC (“CVR GP” or the “general partner”), a wholly owned subsidiary of CVR Energy, held 100% of the Partnership’s general partner interest. As of March 31, 2021, Icahn Enterprises L.P. (“IEP”) and its affiliates owned approximately 71% of the common stock of CVR Energy.

Unit Repurchase Program

On May 6, 2020, the board of directors of the Partnership’s general partner (the “Board”), on behalf of the Partnership, authorized a unit repurchase program (the “Unit Repurchase Program”). The Unit Repurchase Program enables the Partnership to repurchase up to $10 million of the Partnership’s common units. On February 22, 2021, the Board authorized an additional $10 million for the Unit Repurchase Program. During the three months ended March 31, 2021, the Partnership repurchased 24,378 common units on the open market, in accordance with a repurchase agreement under Rules 10b5-1 and 10b-18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), at a cost of $0.5 million, inclusive of transaction costs, or an average price of $21.70 per common unit. As of March 31, 2021, the Partnership had $12.4 million in authority remaining under the Unit Repurchase Program. This Unit Repurchase Program does not obligate the Partnership to acquire any common units and may be cancelled or terminated by the Board at any time.

Management and Operations

The Partnership, including CVR GP, is managed by a combination of the Board, the general partner’s executive officers, CVR Services (as sole member of the general partner), and certain officers of CVR Energy, pursuant to the Partnership Agreement, as well as a number of agreements between the Partnership, CVR GP, CVR Energy, and certain of their respective subsidiaries, including a services agreement. See Part II, Item 8 of CVR Partners’ Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”) for further discussion. Common unitholders have limited voting rights on matters affecting the Partnership and have no right to elect the general partner’s directors or officers, whether on an annual or continuing basis or otherwise.

(2) Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). These condensed consolidated financial statements should be read in conjunction with the December 31, 2020 audited consolidated financial statements and notes thereto included in the 2020 Form 10-K.

In the opinion of the Partnership’s management, the accompanying condensed consolidated financial statements reflect all adjustments that are necessary for fair presentation of the financial position and results of operations of the Partnership for the periods presented. Such adjustments are of a normal recurring nature, unless otherwise disclosed.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. Results of operations and cash flows for the interim periods presented are not necessarily indicative of the results that will be realized for the year ending December 31, 2021 or any other interim or annual period.

(3) Recent Accounting Pronouncements

Recent Accounting Pronouncements - Adoption of Income Taxes Standard

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2019-12, Income Taxes (Topic 740). The ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and modifies other areas of the topic to clarify the application of GAAP. Certain amendments within the standard are required to be applied on a retrospective basis and others on a prospective basis. Effective January 1, 2021, we adopted this ASU with no material impact on the Partnership’s consolidated financial position or results of operations.

Recent Accounting Pronouncements - Adoption of Codification Improvements Standard

In October 2020, the FASB issued ASU 2020-10, Codification Improvements. The ASU amends various sections of the codification in the Boards ongoing efforts to simplify and improve guidance. Effective January 1, 2021, we adopted this ASU with no material impact on the Partnership’s consolidated financial position or results of operations.

Recent Accounting Pronouncements - New Accounting Standards Issued But Not Yet Implemented

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). This ASU was issued because, by the end of 2021, banks will no longer be required to report information that is used to determine London Interbank Offered Rate (“LIBOR”), which is used globally by all types of entities. As a result, LIBOR could be discontinued, as well as other interest rates used globally. ASU 2020-04 provides companies with optional expedients for contract modifications under Topics 310, 470, 842, and 815-15, excluded components of certain hedging relationships, fair value hedges, and cash flow hedges, as well as certain exceptions, which are intended to help ease the potential accounting burden associated with transitioning away from these reference rates. ASU 2021-01 clarifies certain optional expedients and exceptions for contract modifications and hedge accounting. Companies can apply the ASU immediately. However, the guidance will only be available for a limited time (generally through December 31, 2022). The Partnership is currently evaluating the impact that adopting this new accounting standard will have on its consolidated financial statements and related disclosures.

(4) Inventories

Inventories consisted of the following:


(in thousands)	March 31, 2021		December 31, 2020
Finished goods	$	24,490	$	9,815
Raw materials	100		152
Parts, supplies and other	32,594		32,382
Total inventories	$	57,184	$	42,349

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(5) Property, Plant and Equipment

Property, plant and equipment consisted of the following:


(in thousands)	March 31, 2021		December 31, 2020
Machinery and equipment	$	1,392,503	$	1,388,735
Buildings and improvements	17,598		17,598
Automotive equipment	16,608		16,608
Land and improvements	14,132		14,132


Construction in progress	10,746		12,098
Other	2,027		1,721
	1,453,614		1,450,892
Less: Accumulated depreciation and amortization	570,278		553,045
Total property, plant and equipment, net	$	883,336	$	897,847

As of March 31, 2021, the Partnership had not identified the existence of an impairment indicator for our long-lived asset groups as outlined under ASC Topic 360, Property, Plant, and Equipment.

(6) Leases

Lease Overview

We lease railcars and certain facilities to support the Partnership’s operations. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to 20 years or more. The exercise of lease renewal options is at our sole discretion. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Certain of our lease agreements include rental payments which are adjusted periodically for factors such as inflation. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Additionally, we do not have any material lessor or sub-leasing arrangements.

Balance Sheet Summary as of March 31, 2021 and December 31, 2020

The following tables summarize the ROU asset and lease liability balances for the Partnership’s operating and finance leases at March 31, 2021 and December 31, 2020:


	March 31, 2021				December 31, 2020
(in thousands)	Operating Leases		Finance Leases		Operating Leases		Finance Leases
ROU asset, net

Railcars	$	6,558	$	—	$	7,327	$	—
Real estate and other	2,944		95		3,040		101
Lease liability

Railcars	$	6,931	$	—	$	7,696	$	—
Real estate and other	817		70		867		105

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Lease Expense Summary for the Three Months Ended March 31, 2021 and 2020

We recognize lease expense on a straight-line basis over the lease term and short-term lease expense within Direct operating expenses (exclusive of depreciation and amortization). For the three months ended March 31, 2021 and 2020, we recognized lease expense comprised of the following components:


	Three Months Ended March 31,
(in thousands)	2021		2020
Operating lease expense	$	916	$	1,111
Finance lease expense:
Amortization of ROU asset	$	22	$	27
Interest expense on lease liability	1		2
Short-term lease expense	$	160	$	77

Lease Terms and Discount Rates

The following outlines the remaining lease terms and discount rates used in the measurement of the Partnership’s ROU assets and liabilities at March 31, 2021 and December 31, 2020:


	March 31, 2021				December 31, 2020
	Operating Leases		Finance Leases		Operating Leases		Finance Leases
Weighted-average remaining lease term	2.7 years		1.1 years		2.9 years		1.3 years
Weighted-average discount rate	5.1	%	3.9	%	5.1	%	4.0	%

Maturities of Lease Liabilities

The following summarizes the remaining minimum lease payments through maturity of the Partnership’s ROU assets and liabilities at March 31, 2021:


(in thousands)	Operating Leases		Finance Leases
Remainder of 2021	$	2,754	$	71
2022	3,236		—
2023	1,367		—
2024	684		—
2025	263		—
Thereafter	—		—
Total lease payments	8,304		71
Less: imputed interest	(556)		(1)
Total lease liability	$	7,748	$	70

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(7) Other Current Liabilities

Other current liabilities consisted of the following:


(in thousands)	March 31, 2021		December 31, 2020
Accrued interest	$	17,470	$	2,506
Personnel accruals	5,287		7,475
Operating lease liabilities	3,356		3,309
Sales incentives	2,954		2,215
Share-based compensation	2,313		442
Current portion of long-term debt and finance lease obligations	2,310		2,240
Prepaid revenue contracts	138		197
Other accrued expenses and liabilities	3,953		2,565
Total other current liabilities	$	37,781	$	20,949

(8) Long-Term Debt

Long-term debt consists of the following:


(in thousands)	March 31, 2021		December 31, 2020
9.25% Senior Secured Notes, due June 2023 (1)	$	645,000	$	645,000


Unamortized discount and debt issuance costs (2)	(10,054)		(11,058)
Total long-term debt and finance lease obligations, net of current portion	634,946		633,942
Current portion of long-term debt and finance lease obligations (3)(4)	2,310		2,240
Total long-term debt and finance lease obligations, including current portion	$	637,256	$	636,182

(1)The estimated fair value of long-term debt outstanding was approximately $650.6 million and $645.7 million as of March 31, 2021 and December 31, 2020, respectively. This estimate of fair value is a Level 2 measurement as it was determined by quotations obtained from a broker-dealer who makes a market in these and similar securities. The call price of the 2023 Notes decreases to par on June 15, 2021.

(2)For the three months ended March 31, 2021 and 2020, amortization of the discount on debt and amortization of deferred financing costs reported as Interest expense, net totaled approximately $1.0 million and $0.9 million, respectively.

(3)The 6.50% Notes, due April 2021, mature within 12 months, and, therefore, the outstanding balance of $2.2 million has been classified as short-term debt as of March 31, 2021 and December 31, 2020. Amounts are reported in Other current liabilities. On April 15, 2021, the 2021 Notes matured, and the Partnership paid the outstanding balance, plus accrued and unpaid interest.

(4)Current portion of finance lease obligations recognized was approximately $0.1 million as of March 31, 2021. Amounts reported in Other current liabilities.

Credit Agreements



(in thousands)	Total Available Borrowing Capacity		Amount Borrowed as of March 31, 2021		Outstanding Letters of Credit		Available Capacity as of March 31, 2021		Maturity Date
ABL Credit Agreement (1)(2)	$	24,609	$	—	$	—	$	24,609	September 30, 2022

(1)Beginning January 1, 2021, loans under the Partnership’s ABL Credit Agreement (the “ABL Credit Agreement”) bear interest at an annual rate equal to (i) (a) 2.00% plus LIBOR, to the extent available, or (b) 1.00% plus a base rate, if our quarterly excess availability is greater than 50% and (ii) (a) 2.50% plus LIBOR, to the extent available, or (b) 1.50% plus a base rate, otherwise.

(2)Amortization expense was $0.1 million and $0.1 million for the three months ended March 31, 2021 and 2020, respectively.

Covenant Compliance

The Partnership and its subsidiaries were in compliance with all covenants under their respective debt instruments as of March 31, 2021.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(9) Revenue

The following table presents the Partnership’s revenue, disaggregated by major product:


	Three Months Ended March 31,
(in thousands)		2021		2020
Ammonia		$	9,534	$	14,147
UAN		38,062		47,014
Urea products		4,758		3,533
Net sales, exclusive of freight and other		52,354		64,694
Freight revenue		6,114		7,722
Other revenue		2,453		2,664
Net sales		$	60,921	$	75,080

Transaction Price Allocated to Remaining Performance Obligations

As of March 31, 2021, the Partnership had approximately $6.1 million of remaining performance obligations for contracts with an original expected duration of more than one year. The Partnership expects to recognize approximately $3.5 million of these performance obligations as revenue by the end of 2021, an additional $2.3 million in 2022, and the remaining balance thereafter.

Contract Balances

The Partnership’s deferred revenue is a contract liability that primarily relates to nitrogen fertilizer sales contracts requiring customer prepayment prior to product delivery to guarantee a price and supply of nitrogen fertilizer. Deferred revenue is recorded at the point in time in which a prepaid contract is legally enforceable and the associated right to consideration is unconditional prior to transferring product to the customer. An associated receivable is recorded for uncollected prepaid contract amounts. Contracts requiring prepayment are generally short-term in nature and, as discussed above, revenue is recognized at the point in time in which the customer obtains control of the product.

A summary of the deferred revenue activity for the three months ended March 31, 2021 is presented below:


(in thousands)
Balance at December 31, 2020	$	30,631
Add:
New prepay contracts entered into during the period (1)	20,094
Less:
Revenue recognized that was included in the contract liability balance at the beginning of the period	(7,505)
Revenue recognized related to contracts entered into during the period	(2,800)
Other changes	(37)
Balance at March 31, 2021	$	40,383

(1) Includes $18.6 million where payment associated with prepaid contracts was collected as of March 31, 2021.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(10) Share-Based Compensation

A summary of compensation expense for the three months ended March 31, 2021 and 2020 is presented below:


	Three Months Ended March 31,
(in thousands)		2021		2020
Phantom Units		$	3,145	$	(259)
Other Awards (1)		447		(218)
Total share-based compensation expense		$	3,592	$	(477)

(1)Other awards include the allocation of compensation expense for certain employees of CVR Energy and certain of its subsidiaries who perform services for the Partnership under the services agreement with CVR Energy and the Limited Partnership Agreement, respectively, and participate in equity compensation plans of CVR Partners’ affiliates.

(11) Commitments and Contingencies

There have been no material changes in the Partnership’s commitments and contingencies disclosed in the 2020 Form 10-K. In the ordinary course of business, the Partnership may become party to lawsuits, administrative proceedings, and governmental investigations, including environmental, regulatory, and other matters. The outcome of these matters cannot always be predicted accurately, but the Partnership accrues liabilities for these matters if the Partnership has determined that it is probable a loss has been incurred and the loss can be reasonably estimated. While it is not possible to predict the outcome of such proceedings, if one or more of them were decided against us, the Partnership believes there would be no material impact on its consolidated financial statements.

The Partnership continues to monitor its contractual arrangements and customer, vendor, and supplier relationships to determine whether and to what extent, if any, the impacts of the COVID-19 pandemic or recent price volatility will impair or excuse the performance of the Partnership or its subsidiaries or their customers, vendors, or suppliers under existing agreements. As of March 31, 2021, the Partnership had not experienced a material financial impact from any actual or threatened impairment of or excuse in its or others’ performance under such agreements.

(12) Supplemental Cash Flow Information

Cash flows related to income taxes, interest, leases, and capital expenditures included in accounts payable are as follows:


	Three Months Ended March 31,
(in thousands)	2021		2020
Supplemental disclosures:
Cash paid for interest	$	45	$	49
Cash paid, net of refunds (received, net of payments) for income taxes	—		(1)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	918		1,118
Operating cash flows from finance leases	1		2
Financing cash flows from finance leases	26		25
Non-cash investing activities:
Change in capital expenditures included in accounts payable	131		(1,117)

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(13) Related Party Transactions

Activity associated with the Partnership’s related party arrangements for the three months ended March 31, 2021 and 2020 is summarized below.

Related Party Activity


	Three Months Ended March 31,
(in thousands)		2021		2020
Sales to related parties (1)		$	219	$	540
Purchases from related parties (2)		6,693		5,938


	March 31, 2021	December 31, 2020

Due to related parties (3)	902	1,446

(1)Sales to related parties, included in Net sales, consist primarily of sales of feedstocks and services to Coffeyville Resources Refining & Marketing, LLC (“CRRM”) under the Master Service Agreement with Coffeyville Resources Nitrogen Fertilizers, LLC (the “Coffeyville MSA”).

(2)Purchases from related parties, included in Cost of materials and other, Direct operating expenses (exclusive of depreciation and amortization), and Selling, general and administrative expenses, consist primarily of pet coke and hydrogen purchased from CRRM under the Coffeyville MSA.

(3)Due (from) to related parties, included in Accounts payable to affiliates, Other current liabilities, and Other long-term liabilities, consist primarily of amounts to be received or payable for feedstocks and other supplies and services provided by CRRM and CVR Services under the Coffeyville MSA and Corporate MSA.

Distributions to CVR Partners’ Unitholders

Distributions, if any, including the payment, amount, and timing thereof, are subject to change at the discretion of the Board. There were no distributions declared or paid by the Partnership during the three months ended March 31, 2021 related to the fourth quarter of 2020, and no distributions were paid during 2020. No distributions were declared for the first quarter of 2021.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition, results of operations, and cash flows should be read in conjunction with the unaudited condensed consolidated financial statements and related notes and with the statistical information and financial data appearing in this Report, as well as our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission (“SEC”) on February 23, 2021 (the “2020 Form 10-K”). Results of operations for the three months ended March 31, 2021 and cash flows for the three months ended March 31, 2021 are not necessarily indicative of results to be attained for any other period. See “Important Information Regarding Forward-Looking Statements.”

Reflected in this discussion and analysis is how management views the Partnership’s current financial condition and results of operations along with key external variables and management actions that may impact the Partnership. Understanding significant external variables, such as market conditions, weather, and seasonal trends, among others, and management actions taken to manage the Partnership, address external variables, among others, which will increase users’ understanding of the Partnership, its financial condition and results of operations. This discussion may contain forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this Report.

Partnership Overview

CVR Partners, LP (“CVR Partners” or the “Partnership”) is a Delaware limited partnership formed in 2011 by CVR Energy, Inc. (“CVR Energy”) to own, operate, and grow its nitrogen fertilizer business. The Partnership produces and distributes nitrogen fertilizer products, which are used by farmers to improve the yield and quality of their crops. The Partnership produces these products at two manufacturing facilities, which are located in Coffeyville, Kansas (the “Coffeyville Facility”) and East Dubuque, Illinois (the “East Dubuque Facility”). Our principal products are ammonia and urea ammonium nitrate (“UAN”). All of our products are sold on a wholesale basis. References to CVR Partners, the Partnership, “we”, “us”, and “our” may refer to consolidated subsidiaries of CVR Partners or one or both of the facilities, as the context may require. Additionally, as the context may require, references to CVR Energy may refer to CVR Energy and its consolidated subsidiaries which include its petroleum refining, marketing, and logistics operations.

Strategy and Goals

Mission and Core Values

Our Mission is to be a top tier North American nitrogen-based fertilizer company as measured by safe and reliable operations, superior performance and profitable growth. The foundation of how we operate is built on five core Values:

•Safety - We always put safety first. The protection of our employees, contractors and communities is paramount. We have an unwavering commitment to safety above all else. If it’s not safe, then we don’t do it.

•Environment - We care for our environment. Complying with all regulations and minimizing any environmental impact from our operations is essential. We understand our obligation to the environment and that it’s our duty to protect it.

•Integrity - We require high business ethics. We comply with the law and practice sound corporate governance. We only conduct business one way—the right way with integrity.

•Corporate Citizenship - We are proud members of the communities where we operate. We are good neighbors and know that it’s a privilege we can’t take for granted. We seek to make a positive economic and social impact through our financial donations and the contributions of time, knowledge and talent of our employees to the places where we live and work.

•Continuous Improvement - We believe in both individual and team success. We foster accountability under a performance-driven culture that supports creative thinking, teamwork, diversity and personal development so that

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employees can realize their maximum potential. We use defined work practices for consistency, efficiency and to create value across the organization.

SEC Form 10-Q filed by CVR Partners, LP