CVR ENERGY INC 10-K

Item 8. Financial Statements and Supplementary Data CVR Energy, Inc. and Subsidiaries INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248 ) 71 Consolidated Balance Sheets as of December 31, 2021 and 2020 74 Consolidated Statements of Operations for the Years Ended December 31, 2021, 2020 and 2019 75 Consolidated Statements of Changes in Equity for the Years Ended December 31, 2021, 2020 and 2019 76 Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019 77 Notes to the Consolidated Financial Statements 78 December 31, 2021 | 70 Table of Contents Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders of CVR Energy, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of CVR Energy, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, changes in equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in the 2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 22, 2022 expressed an unqualified opinion. Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical audit matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Petroleum Segment’s Inventory Finished Goods Valuation As described in Note 2 to the financial statements, the Company utilizes the ability-to-bear methodology to determine the valuation of its Petroleum Segment’s finished goods inventories, which was $198 million at December 31, 2021. Management makes certain estimates based on observable inputs, including monthly sales prices and current market prices to determine how much raw materials and production costs are capitalized into inventories. Management then assesses if a lower of cost or net realizable value adjustment is required. Changes in these estimates could have a significant impact on the Company’s valuation of finished goods inventory. We identified the Company’s Petroleum Segment’s finished goods inventory valuation process as a critical audit matter. The principal consideration for our determination that the inventory valuation process is a critical audit matter is the degree of complexity and subjectivity inherent in determining management’s valuation estimates. December 31, 2021 | 71 Table of Contents Our audit procedures to evaluate the Company’s valuation of finished goods inventory included the following procedures to test management’s process, among others: • We tested the design and operating effectiveness of management’s processes and controls for determining the valuation of finished goods inventory. • We obtained a sample of invoices to verify the accuracy of the production costs used in estimates. • We tested or evaluated the reasonableness of inputs including sales volumes, monthly sales prices, and current market prices for each product by obtaining third-party market prices and a sample of sales transactions by product to verify the accuracy of the information used by management. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2013. Dallas, Texas February 22, 2022 December 31, 2021 | 72 Table of Contents Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders of CVR Energy, Inc. Opinion on internal control over financial reporting We have audited the internal control over financial reporting of CVR Energy, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in the 2013 Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in the 2013 Internal Control - Integrated Framework issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2021, and our report dated February 22, 2022 expressed an unqualified opinion on those financial statements. Basis for opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and limitations of internal control over financial reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ GRANT THORNTON LLP Dallas, Texas February 22, 2022 December 31, 2021 | 73 Table of Contents CVR Energy, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS December 31, (in millions) 2021 2020 ASSETS Current assets: Cash and cash equivalents (including $ 113 and $ 31 , respectively, of consolidated variable interest entity (VIE)) $ 510 $ 667 Accounts receivable (including $ 88 and $ 37 , respectively, of VIE) 299 178 Inventories (including $ 52 and $ 42 , respectively, of VIE) 484 298 Prepaid expenses and other current assets (including $ 9 and $ 8 , respectively, of VIE) 76 259 Total current assets 1,369 1,402 Property, plant and equipment, net (including $ 850 and $ 898 , respectively, of VIE) 2,273 2,240 Other long-term assets (including $ 14 and $ 17 , respectively, of VIE) 264 336 Total assets $ 3,906 $ 3,978 LIABILITIES AND EQUITY Current liabilities: Note payable and finance lease obligations (including $ 0 and $ 2 , respectively, of VIE) $ 6 $ 8 Accounts payable (including $ 50 and $ 25 , respectively, of VIE) 409 282 Other current liabilities (including $ 111 and $ 49 , respectively, of VIE) 741 369 Total current liabilities 1,156 659 Long-term liabilities: Long-term debt and finance lease obligations, net of current portion (including $ 611 and $ 634 , respectively, of VIE) 1,654 1,683 Deferred income taxes 268 368 Other long-term liabilities (including $ 12 and $ 8 , respectively, of VIE) 58 49 Total long-term liabilities 1,980 2,100 Commitments and contingencies (See Note 11) CVR stockholders’ equity: Common stock $ 0.01 par value per share, 350,000,000 shares authorized, 100,629,209 and 100,629,209 shares issued as of December 31, 2021 and 2020, respectively 1 1 Additional paid-in-capital 1,510 1,510 Retained deficit ( 956 ) ( 490 ) Treasury stock, 98,610 shares at cost ( 2 ) ( 2 ) Total CVR stockholders’ equity 553 1,019 Noncontrolling interest 217 200 Total equity 770 1,219 Total liabilities and equity $ 3,906 $ 3,978 The accompanying notes are an integral part of these consolidated financial statements. December 31, 2021 | 74 Table of Contents CVR Energy, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, (in millions, except per share data) 2021 2020 2019 Net sales $ 7,242 $ 3,930 $ 6,364 Operating costs and expenses: Cost of materials and other 6,185 3,373 4,851 Direct operating expenses (exclusive of depreciation and amortization) 569 478 533 Depreciation and amortization 270 268 278 Cost of sales 7,024 4,119 5,662 Selling, general and administrative expenses (exclusive of depreciation and amortization) 119 86 117 Depreciation and amortization 9 10 9 Loss (gain) on asset disposal 3 7 ( 4 ) Goodwill impairment — 41 — Operating income (loss) 87 ( 333 ) 580 Other (expense) income: Interest expense, net ( 117 ) ( 130 ) ( 102 ) Investment income on marketable securities 81 41 — Other income, net 15 7 13 Income (loss) before income tax expense 66 ( 415 ) 491 Income tax (benefit) expense ( 8 ) ( 95 ) 129 Net income (loss) 74 ( 320 ) 362 Less: Net income (loss) attributable to noncontrolling interest 49 ( 64 ) ( 18 ) Net income (loss) attributable to CVR Energy stockholders $ 25 $ ( 256 ) $ 380 Basic and diluted earnings (loss) per share $ 0.25 $ ( 2.54 ) $ 3.78 Dividends declared per share $ 4.89 $ 1.20 $ 3.05 Weighted-average common shares outstanding: Basic and diluted 100.5 100.5 100.5 The accompanying notes are an integral part of these consolidated financial statements. December 31, 2021 | 75 Table of Contents CVR Energy, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Common Stockholders (in millions, except share data) Shares Issued Common Stock Additional Paid-In Capital Retained Deficit Treasury Stock Total CVR Stockholders’ Equity Noncontrolling Interest Total Equity Balance at December 31, 2018 100,629,209 $ 1 $ 1,474 $ ( 187 ) $ ( 2 ) $ 1,286 $ 657 $ 1,943 Dividends paid to CVR Energy stockholders — — — ( 306 ) — ( 306 ) — ( 306 ) Distributions from CVR Partners to public unitholders — — — — — — ( 30 ) ( 30 ) Acquisition of CVR Refining non-controlling interest — — ( 2 ) — — ( 2 ) ( 334 ) ( 336 ) Effect of turnaround accounting change — — 35 — — 35 — 35 Net income (loss) — — — 380 — 380 ( 18 ) 362 Balance at December 31, 2019 100,629,209 1 1,507 ( 113 ) ( 2 ) 1,393 275 1,668 Dividends paid to CVR Energy stockholders — — — ( 121 ) — ( 121 ) — ( 121 ) Changes in equity due to CVR Partners’ common unit repurchases — — 3 — — 3 ( 11 ) ( 8 ) Net loss — — — ( 256 ) — ( 256 ) ( 64 ) ( 320 ) Balance at December 31, 2020 100,629,209 1 1,510 ( 490 ) ( 2 ) 1,019 200 1,219 Dividends paid to CVR Energy stockholders — — — ( 492 ) — ( 492 ) — ( 492 ) Distributions from CVR Partners to public unitholders — — — — — — ( 31 ) ( 31 ) Changes in equity due to CVR Partners’ common unit repurchases — — — — — — ( 1 ) ( 1 ) Other — — — 1 — 1 — 1 Net income — — — 25 — 25 49 74 Balance at December 31, 2021 100,629,209 $ 1 $ 1,510 $ ( 956 ) $ ( 2 ) $ 553 $ 217 $ 770 The accompanying notes are an integral part of these consolidated financial statements. December 31, 2021 | 76 CVR Energy, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, (in millions) 2021 2020 2019 Cash flows from operating activities: Net income (loss) $ 74 $ ( 320 ) $ 362 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 279 278 287 Loss on lower of cost or net realizable value adjustments — 59 — Goodwill impairment — 41 — Deferred income taxes ( 98 ) ( 30 ) 24 (Gain) loss on marketable securities ( 81 ) ( 34 ) — Loss (gain) on asset disposal 3 7 ( 4 ) (Gain) loss on derivatives ( 16 ) 10 14 Share-based compensation 46 4 17 Other non-cash items 12 10 6 Changes in assets and liabilities: Accounts receivable ( 91 ) 31 ( 40 ) Inventories ( 182 ) 9 ( 10 ) Prepaid expenses and other current assets 12 ( 28 ) 16 Accounts payable 122 ( 121 ) 94 Deferred revenue 27 ( 2 ) ( 15 ) Other current liabilities 290 178 ( 1 ) Other long-term assets and liabilities ( 1 ) ( 2 ) ( 3 ) Net cash provided by operating activities 396 90 747 Cash flows from investing activities: Capital expenditures ( 224 ) ( 124 ) ( 121 ) Turnaround expenditures ( 5 ) ( 159 ) ( 38 ) Proceeds from sale of assets 7 1 37 Acquisition of pipeline assets ( 20 ) — — Investment in marketable securities 3 ( 140 ) — Other investing activities 1 ( 1 ) 1 Net cash used in investing activities ( 238 ) ( 423 ) ( 121 ) Cash flows from financing activities: Proceeds from issuance of senior secured notes 550 1,000 — Principal payments on senior secured notes ( 582 ) ( 500 ) — Call premium on extinguishment of debt — ( 5 ) — Repurchase of CVR Partners common units ( 1 ) ( 7 ) — Acquisition of CVR Refining common units — — ( 301 ) Dividends to CVR Energy’s stockholders ( 241 ) ( 121 ) ( 306 ) Distributions to CVR Partners’ noncontrolling interest holders ( 31 ) — ( 30 ) Other financing activities ( 10 ) ( 12 ) ( 5 ) Net cash (used in) provided by financing activities ( 315 ) 355 ( 642 ) Net (decrease) increase in cash and cash equivalents and restricted cash ( 157 ) 22 ( 16 ) Cash and cash equivalents and restricted cash, beginning of period 674 652 668 Cash and cash equivalents and restricted cash, end of period $ 517 $ 674 $ 652 The accompanying notes are an integral part of these consolidated financial statements. December 31, 2021 | 77 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Organization and Nature of Business Organization CVR Energy, Inc. (“CVR Energy,” “CVR,” “we,” “us,” “our,” or the “Company”) is a diversified holding company primarily engaged in the petroleum refining and nitrogen fertilizer manufacturing industries through its holdings in CVR Refining, LP (the “Petroleum Segment” or “CVR Refining”) and CVR Partners, LP (the “Nitrogen Fertilizer Segment” or “CVR Partners”). CVR Refining is an independent petroleum refiner and marketer of high value transportation fuels. CVR Partners produces and markets nitrogen fertilizers in the form of urea ammonium nitrate (“UAN”) and ammonia. CVR’s common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “CVI.” Icahn Enterprises L.P. and its affiliates (“IEP”) owned approximately 71 % of the Company’s outstanding common shares as of December 31, 2021. Stock Repurchase Program On October 23, 2019, the Board of Directors authorized a stock repurchase program (the “Stock Repurchase Program”). The Stock Repurchase Program enables the Company to repurchase up to $ 300 million of the Company’s common stock. Repurchases under the Stock Repurchase Program may be made from time-to-time through open market transactions, block trades, privately negotiated transactions or otherwise in accordance with applicable securities laws. The timing, price and amount of repurchases (if any) will be made at the discretion of management and are subject to market conditions as well as corporate, regulatory and other considerations. While the Stock Repurchase Program currently has a duration of four years , it does not obligate the Company to acquire any stock and may be terminated by the Board of Directors at any time. We did no t repurchase any of our common stock during the years ended December 31, 2021, 2020, and 2019. CVR Refining, LP On January 17, 2019, the general partner of CVR Refining assigned to the Company its right to purchase all of the issued and outstanding CVR Refining common units not already owned by CVR Refining’s general partner or its affiliates. On January 29, 2019, the Company purchased all remaining CVR Refining common units not already owned by the Company or its affiliates for a cash purchase price of $ 10.50 per unit (the “Call Price”), or approximately $ 241 million in the aggregate (the “Public Unit Purchase”). In conjunction with the exercise of its call right for all CVR Refining common units not already owned by the Company or its affiliates, the Company entered into a purchase agreement with American Entertainment Properties Corporation (“AEP”) and IEP, pursuant to which, on January 29, 2019, all of the Common Units held by AEP and IEP were purchased by the Company for a cash price per unit equal to the Call Price, or approximately $ 60 million in the aggregate (the “Affiliate Unit Purchase” together with the Public Unit Purchase, the “CVRR Unit Purchase”). The total purchase price of $ 301 million was funded with approximately $ 105 million in borrowings under a new credit agreement entered into by the Company on January 29, 2019, with the remaining amount being funded from the Company’s cash on hand. Amounts drawn under the new credit agreement were fully repaid in February 2019. The consolidated results of operations and financial position of CVR Refining are reflected as CVR’s Petroleum Segment. Following this transaction, CVR Refining became a wholly-owned subsidiary of the Company and, therefore, is no longer accounted for as a variable interest entity (“VIE”). Effective February 8, 2019, CVR Refining’s reporting obligations under the Exchange Act were suspended. CVR Partners, LP Interest Holders - As of December 31, 2021, public common unitholders held approximately 64 % of CVR Partners’ outstanding common units, and CVR Services, LLC (“CVR Services”), a wholly-owned subsidiary of CVR Energy, held approximately 36 % of CVR Partners’ outstanding common units. In addition, CVR Services held 100 % of CVR Partners’ general partner, CVR GP, LLC (“CVR GP”), which held a non-economic general partner interest in CVR Partners as of December 31, 2021. Following the acquisition of the non-controlling interest in CVR Refining in January 2019, the non-controlling interest reflected on the Consolidated Balance Sheets of CVR is only impacted by the net income of, and distributions from, CVR Partners. Unit Repurchase Program - On May 6, 2020, CVR Partners announced that the board of directors of its general partner (the “UAN GP Board”), on behalf of CVR Partners, authorized a unit repurchase program (the “Unit Repurchase Program”). December 31, 2021 | 78 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The Unit Repurchase Program enabled CVR Partners to repurchase up to $ 10 million of its common units. On February 22, 2021, the UAN GP Board authorized an additional $ 10 million for the Unit Repurchase Program. During the year ended December 31, 2021, CVR Partners 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, at a cost of $ 1 million, inclusive of transaction costs, or an average price of $ 21.70 per common unit. During the year ended December 31, 2020, as adjusted to reflect the impact of the 1-for-10 reverse unit split of CVR Partners’s common units that was effective as of November 23, 2020, CVR Partners repurchased 623,177 common units, respectively, at a cost of $ 7 million, inclusive of transaction costs, or an average price of $ 11.35 per common unit. As of December 31, 2021, CVR Partners had $ 12 million in authority remaining under the Unit Repurchase Program. This Unit Repurchase Program does not obligate CVR Partners to acquire any common units and may be cancelled or terminated by the UAN GP Board at any time. As a result of these repurchases, and the resulting change in CVR Energy’s ownership of CVR Partners while maintaining control, CVR Energy recognized a no minal increase to additional paid-in capital from the reduction of non-controlling interests totaling $ 0.1 million and the recognition of a deferred tax liability totaling $ 0.1 million from changes in its book versus tax basis in CVR Partners as of December 31, 2021. CVR Energy recognized an increase of $ 3 million to additional paid-in capital from the non-cash reduction of non-controlling interests totaling $ 4 million and the recognition of a deferred tax liability totaling $ 1 million from changes in its book versus tax basis in CVR Partners as of December 31, 2020. Subsequent Events The Company evaluated subsequent events, if any, that would require an adjustment to the Company’s consolidated financial statements or require disclosure in the notes to the consolidated financial statements through the date of issuance of the consolidated financial statements. Where applicable, the notes to these consolidated financial statements have been updated to discuss all significant subsequent events which have occurred. (2) Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements, prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”), include the accounts of the Company and its majority-owned direct and indirect subsidiaries. All intercompany accounts and transactions have been eliminated. The ownership interests of noncontrolling investors in the Company’s subsidiaries are recorded as noncontrolling interests. CVR Energy has no t recognized any other comprehensive income for the periods ended December 31, 2021, 2020, and 2019. CVR Partners is considered a VIE. As the 100% owner of the general partner of CVR Partners, the Company has the sole ability to direct the activities that most significantly impact the economic performance of CVR Partners and is considered to be the primary beneficiary. In January 2019, following the CVRR Unit Purchase, CVR Refining was no longer considered a VIE and is accounted for as a wholly-owned subsidiary. Investments in entities over which the Company has significant influence, but not control, are accounted for using the equity method of accounting. Income from equity method investments represents CVR Energy’s proportionate share of net income generated by the equity method investees and is recorded in Other income, net on the Company’s Consolidated Statements of Operations. Reclassifications Certain reclassifications have been made within the consolidated financial statements for prior periods to conform with current presentation. Use of Estimates The consolidated financial statements are prepared in conformity with GAAP, which requires management to make estimates and assumptions that affect the reported amounts and disclosure of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are reviewed on an December 31, 2021 | 79 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) ongoing basis, based on currently available information. Changes in facts and circumstances may result in revised estimates, and actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents include cash on hand and on deposit, investments in highly liquid money market accounts, and debt instruments with original maturities of three months or less. Restricted Cash Restricted cash consists of cash that must be maintained in a commercial escrow account pending resolution of certain litigation matters and is discussed further in Note 11 (“Commitments and Contingencies”). Accounts Receivable, net Accounts receivable, net primarily consist of customer accounts receivable recorded at the invoiced amounts and generally do not bear interest. Also included within accounts receivable of the Nitrogen Fertilizer Segment are unbilled fixed price contracts which is discussed further within Note 7 (“Revenue”). Allowances for doubtful accounts are generally recorded when it becomes probable the receivable will not be collected and is booked to bad debt expense. The largest concentration of credit for any one customer was approximately 8 % and 11 % of the net accounts receivable balance at December 31, 2021 and 2020, respectively. During the year ended December 31, 2021, 2020 and 2019, the Company had no minal bad debt expense. Inventories Inventories consist primarily of domestic and foreign crude oil, blending stock and components, work-in-progress, fertilizer products, and refined fuels and by-products. All inventories are valued at the lower of GAAP First-In, First-Out (“FIFO”) cost, or net realizable value. The Petroleum Segment’s unfinished and finished products inventory values were determined using the ability-to-bear methodology. Other inventories in the Petroleum and Nitrogen Fertilizer Segments, including other raw materials, spare parts, and supplies, are valued at the lower of moving-average cost, which approximates FIFO, or net realizable value. The cost of inventories includes inbound freight costs. The carrying amounts of the Petroleum Segment’s inventories exceeded their net realizable value (market value) by $ 58 million resulting in the recognition of a lower of cost or net realizable value adjustment as of March 31, 2020. The $ 58 million loss represents the difference between the carrying value of the Petroleum Segment’s inventories accounted for using the FIFO method and selling prices for refined products subsequent to March 31, 2020. No adjustment was necessary as of December 31, 2021 or December 31, 2020. Inventories consisted of the following: December 31, (in millions) 2021 2020 Finished goods $ 215 $ 133 Raw materials 177 83 In-process inventories 20 16 Parts and supplies 72 66 Total inventories $ 484 $ 298 At December 31, 2021 and 2020, inventories related to the Nitrogen Fertilizer Segment included depreciation of approximately $ 3 million and $ 2 million, respectively. December 31, 2021 | 80 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Property, Plant and Equipment, net Additions to property, plant and equipment, including capitalized interest and certain costs allocable to construction and property purchases, are recorded at cost. Expenditures for improvements that increase economic benefit or returns and/or extend useful life are capitalized. Depreciation is computed using the straight-line method over the estimated useful lives of the various classes of depreciable assets. The lives used in computing depreciation for significant asset classes are as follows: Asset Range of Useful Lives, in Years Land and improvements 10 to 30 Buildings and improvements 1 to 30 Machinery and equipment 1 to 30 Furniture and fixtures 3 to 10 Right-of-use (“ROU”) finance leases 3 to 18 Other 5 to 30 Property, plant and equipment, net consisted of the following: December 31, (in millions) 2021 2020 Machinery and equipment $ 4,033 $ 3,881 Buildings and improvements 88 88 ROU finance leases 81 80 Land and improvements 71 47 Furniture and fixtures 37 38 Construction in progress 142 100 Other 15 15 4,467 4,249 Less: Accumulated depreciation ( 2,194 ) ( 2,009 ) Total property, plant and equipment, net $ 2,273 $ 2,240 Leasehold improvements and assets held under finance leases are depreciated or amortized on the straight-line method over the shorter of the contractual lease term or the estimated useful life of the asset. Expenditures for routine maintenance and repair costs are expensed when incurred. Such expenses are reported in Direct operating expenses (exclusive of depreciation and amortization) in the Company’s Consolidated Statements of Operations. On May 21, 2019, a subsidiary of CVR Energy sold its crude oil storage terminal located in Cushing, Oklahoma and related assets (the “Terminal”). As part of this transaction, the Company received cash consideration of $ 43 million for the Terminal and related crude oil inventories resulting in a recognition of a gain on sale of $ 10 million. The carrying value of the inventory sold as part of this transaction has been presented on a net basis, with the proceeds on sale, within the net cash used in investing section of the Consolidated Statements of Cash Flows. As of December 31, 2021, the Company had not identified the existence of an impairment indicator for its long-lived asset groups as outlined under Accounting Standards Codification (“ASC”) Topic 360, Property, Plant, and Equipment . Leases At inception, the Company determines whether an arrangement is a lease and the appropriate lease classification. Operating leases are included as operating lease ROU assets within Other long-term assets and lease liabilities within Other current liabilities and Other long-term liabilities on our Consolidated Balance Sheets. Finance leases are included as ROU finance leases within Property, plant, and equipment, net, and finance lease liabilities within Note payable and finance lease obligations and Long-term debt and finance lease obligations, net of current portion on our Consolidated Balance Sheets. Leases with an December 31, 2021 | 81 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) initial expected term of 12 months or less are considered short-term and are not recorded on our Consolidated Balance Sheets. The Company recognizes lease expense for these leases on a straight-line basis over the expected lease term. ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the commencement date based on the present value of minimum lease payments over the lease term using an incremental borrowing rate with a maturity similar to the lease term, as our leases do not generally provide an implicit rate. The lease term is modified to reflect options to extend or terminate the lease when it is reasonably certain we will exercise such option. The depreciable life of assets and leasehold improvements is limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise, in which case the depreciation policy in the “Property, Plant and Equipment, net” section above is applicable. The periodic lease payments are treated as payments of the lease obligation and interest is recorded as interest expense. Deferred Financing Costs Lender and other third-party costs associated with debt issuances are deferred and amortized to interest expense and other financing costs using the effective-interest method over the life of the debt. Deferred financing costs related to line-of-credit arrangements are amortized using the straight-line method through the maturity date of the facility. The deferred financing costs are included net within Long-term debt and finance lease obligations, net of current portion and in Other long-term liabilities for the line-of-credit arrangements where no debt balance exists. Impairment of Long-Lived Assets and Goodwill Long-lived assets (excluding goodwill, intangible assets with indefinite lives, and deferred tax assets) are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future net cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds their fair value. Assets to be disposed of are reported at the lower of their carrying value or fair value less cost to sell. Goodwill represents the excess of the cost of an acquired entity over the fair value of the assets acquired less liabilities assumed. Intangible assets are assets that lack physical substance (excluding financial assets). Goodwill acquired in a business combination and intangible assets with indefinite useful lives are not amortized, while intangible assets with finite useful lives are amortized. Goodwill and intangible assets not subject to amortization are tested for impairment annually or more frequently if events or changes in circumstances indicate the asset might be impaired. The Company uses November 1 of each year as its annual valuation date for its goodwill impairment test. One of the reporting units associated with our Nitrogen Fertilizer Segment’s Coffeyville, Kansas facility (the “Coffeyville Fertilizer Facility”) had a goodwill balance of $ 41 million at December 31, 2019. During the second quarter of 2020, following the completion of the spring planting season, the market pricing for ammonia and UAN, the Nitrogen Fertilizer Segment’s two primary products, experienced significant pricing declines driven by updated market expectations around supply and demand fundamentals which were expected to continue into the second half of 2020. Additionally, significant uncertainty remained as to the nature and extent of impacts to be seen on the overall demand for corn and soybean given reduced ethanol production and broader economic conditions which may negatively impact demand. Therefore in connection with the preparation of the financial statements for the three months ended June 30, 2020, given the pricing declines experienced in the second quarter of 2020, further muting of our near-term economic recovery assumptions, and market price performance of CVR Partners’ common units, the Company concluded an impairment indicator was present and a triggering event under ASC Topic 350, Intangibles-Goodwill and Other , had occurred as of June 30, 2020. Significant assumptions inherent in the valuation methodologies for goodwill are employed and include, but are not limited to, prospective financial information, growth rates, discount rates, inflationary factors, and cost of capital. Based on the interim quantitative analysis, it was determined that the estimated fair value of the Coffeyville Fertilizer Facility reporting unit did not exceed its carrying value. As a result, the Company recorded a full, non-cash impairment charge of $ 41 million during the year ended December 31, 2020. As there was no goodwill balance at December 31, 2021 or 2020, no annual impairment review was performed. The Company performed its annual impairment review of goodwill for 2019 associated with the Coffeyville Fertilizer Facility December 31, 2021 | 82 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) reporting unit and concluded there were no impairments. For the period ended December 31, 2019, no events or circumstances were identified which would trigger the performance of a quantitative analysis after reviewing all qualitative factors impacting the reporting unit including improved market conditions, financial results, and financial forecasts from those used in the fair value analysis for December 31, 2018, which resulted in the fair value of the Coffeyville Fertilizer Facility reporting unit exceeding its carrying value by approximately 36 %. Loss Contingencies In the ordinary course of business, the Company 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 Company accrues liabilities for these matters if the Company has determined that it is probable a loss has been incurred and the loss can be reasonably estimated. Accrued amounts are reflected in Other current liabilities or Other long-term liabilities depending on when the Company expects to expend such amounts. Refer to Note 11 (“Commitments and Contingencies”) for further discussion. Environmental, Health & Safety (“EHS”) Matters The Petroleum Segment and Nitrogen Fertilizer Segment are subject to various federal, state, and local environmental, health, and safety rules and regulations. Liabilities related to future remediation costs of past environmental contamination of properties are recognized when the related costs are considered probable and can be reasonably estimated. Estimates of these costs are based upon currently available facts, internal and third-party assessments of contamination, available remediation technology, site-specific costs, and currently enacted laws and regulations. In reporting environmental liabilities, no offset is made for potential recoveries. Loss contingency accruals, including those for environmental remediation, are subject to revision as further information develops or circumstances change, and such accruals can take into account the legal liability of other parties. Management periodically reviews and, as appropriate, revises its environmental accruals. Environmental expenditures for capital assets are capitalized at the time of the expenditure when such costs provide future economic benefits. Accrued amounts are reflected in Other current liabilities or Other long-term liabilities depending on when the Company expects to expend such amounts. Refer to Note 11 (“Commitments and Contingencies”) for further discussion. Revenue Recognition The Company recognizes revenue based on consideration specified in contracts or agreements with customers when performance obligations are satisfied by transferring control over products or services to a customer. The Company’s revenue recognition patterns are described below by reportable segment. • Petroleum Segment - The vast majority of Petroleum Segment contracts contain pricing that is based on the market price for the product at the time of delivery. Obligations to deliver product volumes are typically satisfied and revenue is recognized when control of the product transfers to customers. Concurrent with the transfer of control, the right to payment for the delivered product is received, the customer accepts the product, and the customer has significant risks and rewards of ownership of the product. Payment terms require customers to pay shortly after delivery and do not contain significant financing components. Any pass-through finished goods delivery costs reimbursed by customers are reported in Net sales, while an offsetting expense is included in Cost of materials and other. Non-monetary product exchanges and certain buy/sell transactions which are entered into in the normal course of business are included on a net cost basis in Cost of materials and other on the Consolidated Statements of Operations. • Nitrogen Fertilizer Segment - Revenue is recognized based on consideration specified in contracts or agreements with customers when performance obligations are satisfied by transferring control over products or services to a customer. The adoption of ASC Topic 606, Revenue from Contracts with Customers , resulted in the recognition of deferred revenue and related receivables, on a gross basis, associated with contracts that guarantee a price and supply of nitrogen fertilizer products in quantities expected to be delivered in the normal course of business. Other considerations - For both segments, excise and other taxes collected from customers and remitted to governmental authorities are excluded from reported revenues. December 31, 2021 | 83 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Cost Classifications Cost of materials and other includes cost of crude oil, other feedstocks, blendstocks, purchased refined products, purchased ammonia, purchased hydrogen, pet coke expenses, Renewable Identification Number (“RIN”) expenses, derivative gains or losses, and freight and distribution costs. Direct operating expenses (exclusive of depreciation and amortization) consist primarily of energy and other utility costs, direct costs of labor, including applicable share-based compensation expense, property taxes, plant-related maintenance services, including turnaround, and environmental and safety compliance costs, as well as catalyst and chemical costs. Selling, general and administrative expenses (exclusive of depreciation and amortization) consist primarily of labor and other direct expenses associated with the Company’s corporate activities, including accounting, finance, information technology, human resources, legal, and other related administrative functions. For the Company’s Nitrogen Fertilizer Segment, each of these financial statement line items are also impacted by changes in inventory balances. Derivatives and Fair Value of Financial Instruments The Petroleum Segment uses futures contracts, swaps, and forward contracts primarily to reduce exposure to changes in crude oil and finished goods product prices to provide economic hedges of inventory positions. These derivative instruments do not qualify as hedges for hedge accounting purposes under ASC Topic 815, Derivatives and Hedging , and accordingly are recorded at fair value at the end of each reporting period based on quoted market prices. The Nitrogen Fertilizer Segment may enter into forward contracts with fixed delivery prices to purchase portions of its natural gas requirements. These natural gas contracts are not treated as derivatives under normal purchase and normal sale exclusions. Accordingly, the fair value of these contracts are not recorded at the end of each reporting period. Refer to Note 8 (“Derivative Financial Instruments, Investments and Fair Value Measurements”) for further discussion of the Company’s derivative activity. Other financial instruments consisting of cash and cash equivalents, restricted cash, accounts receivable, and accounts payable are carried at cost, which approximates fair value, as a result of the short-term nature of the instruments. Refer to Note 8 (“Derivative Financial Instruments, Investments and Fair Value Measurements”) for further fair value disclosures. Turnaround Expenses Turnarounds represent major maintenance activities that require the shutdown of significant parts of a plant to perform necessary inspection, cleaning, repairs, and replacements of assets. Costs incurred for routine repairs and maintenance or unplanned outages at our facilities are expensed as incurred. Planned turnaround activities for the Petroleum Segment vary in frequency dependent on refinery units, but generally occur every four to five years , while the frequency of turnarounds in the Nitrogen Fertilizer Segment is every two to three years . Further details of each segment’s turnaround expensing method are discussed below. Petroleum Segment - The Petroleum Segment follows the deferral method of accounting for turnaround activities. Under the deferral method, the costs of turnarounds are deferred and amortized on a straight-line basis over a four-year period of time, which represents the estimated time until the next turnaround occurs. The deferral method of accounting for turnarounds is considered preferable as it is more consistent with the accounting policy of our peer companies and better reflects the economic substance of the benefits earned from turnaround expenditures. Turnaround costs, and related accumulated amortization, are included in the Consolidated Balance Sheets as Other long-term assets. The amortization expense related to turnaround costs is included in Depreciation and amortization in the Consolidated Statements of Operations. During the years ended December 31, 2021, 2020, and 2019, the Petroleum Segment capitalized $ 8 million, $ 155 million, and $ 38 million, respectively. Nitrogen Fertilizer Segment - The Nitrogen Fertilizer Segment follows the direct-expense method of accounting for turnaround activities. Costs associated with these turnaround activities were included in Direct operating expenses (exclusive of depreciation and amortization) in the Consolidated Statements of Operations. During the years ended December 31, 2021, 2020, and 2019, the Nitrogen Fertilizer Segment incurred turnaround expenses of $ 3 million, $ 1 million, and $ 10 million, respectively. Share-Based Compensation The Company accounts for share-based compensation in accordance with ASC Topic 718, Compensation — Stock Compensation (“ASC 718”). Currently, all of the Company’s share-based compensation awards, including those issued by CVR Refining and CVR Partners, are liability-classified and are measured at fair value at the end of each reporting period based on December 31, 2021 | 84 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) the applicable closing unit price. Compensation expense will fluctuate based on changes in the applicable share or unit prices and expense reversals resulting from employee terminations prior to award vesting. Additionally, the Company has issued certain performance unit awards. The fair value of these performance unit awards is recognized as compensation expense only if the attainment of the performance conditions is considered probable. Uncertainties involved in this estimate include continued employment requirements and whether or not the performance conditions will be attained. The performance objectives are set in accordance with approved levels of the business plan for the fiscal year during the performance cycle and, therefore, are considered reasonably possible of being achieved. If this assumption proves not to be true and the awards do not vest, compensation expense recognized during the performance cycle will be reversed. See Note 9 (“Share-Based Compensation”) for further discussion. Income Taxes Income taxes are accounted for utilizing the asset and liability approach. Under this method, deferred tax assets and liabilities are recognized for the anticipated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred amounts are measured using enacted tax rates expected to apply to taxable income in the year those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In assessing the realizability of the deferred income tax assets, including net operating loss and state tax credit carryforwards, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Further, the Company recognizes interest expense (income) and penalties on uncertain tax positions and income tax deficiencies (refunds) in Income tax (benefit) expense. Earnings Per Share There were no dilutive awards outstanding during the years ended December 31, 2021, 2020, and 2019. Recent Accounting Pronouncements - Adoption of Income Tax 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 Company’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 FASB’s ongoing efforts to simplify and improve guidance. Effective January 1, 2021, we adopted this ASU with no material impact on the Company’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 2022, 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. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), which 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 Company is currently evaluating the impact of adopting this new accounting standard, but does not expect it to have a material impact on its consolidated financial statements and related disclosures. December 31, 2021 | 85 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (3) Equity Method Investments For each of the following investments, CVR Refining has the ability to exercise influence through its participation in the management committees, which make all significant decisions. However, since CVR Refining has equal or proportionate influence over each committee as a joint partner without regard to its economic interest and does not serve as the day-to-day operator, we have determined that these entities should not be consolidated and have applied the equity method of accounting. • Enable South Central Pipeline, LLC (“Enable JV”) - CVR Refining owns a 40 % interest in Enable JV, which operates a 12-inch 26 -mile crude oil pipeline with a capacity of approximately 115,000 barrels per day that is connected to the Wynnewood Refinery. The remaining interest in Enable JV is owned by Enable Midstream Partners, LP, which was merged with Energy Transfer LP in December 2021. • Midway Pipeline, LLC (“Midway JV”) - CVR Refining owns a 50 % interest in Midway JV, which operates a 16-inch 99 -mile crude oil pipeline with a capacity of approximately 150,000 barrels per day which connects the Coffeyville Refinery to the Cushing Oklahoma oil hub. The remaining interest in Midway JV is owned by Plains Pipeline, L.P. (in millions) Enable JV Midway JV Total Balance at December 31, 2019 6 75 81 Cash Distributions ( 4 ) ( 6 ) ( 10 ) Equity income 4 5 9 Balance at December 31, 2020 6 74 80 Cash Distributions ( 3 ) ( 8 ) ( 11 ) Equity income 3 7 10 Balance at December 31, 2021 $ 6 $ 73 $ 79 (4) Leases Lease Overview We lease certain pipelines, storage tanks, railcars, office space, land, and equipment across our refining, fertilizer, and corporate 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. 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 December 31, 2021 and 2020 The following table summarizes the right of use asset and lease liability balances for the Company’s operating and finance leases at December 31, 2021 and 2020: December 31, 2021 December 31, 2020 (in millions) Operating Leases Finance Leases Operating Leases Finance Leases ROU assets, net Pipeline and storage $ 17 $ 23 $ 15 $ 26 Railcars 6 — 8 — Real estate and other 14 18 14 21 Lease liability Pipelines and storage $ 17 $ 35 $ 16 $ 38 Railcars 6 — 8 — Real estate and other 14 19 14 22 December 31, 2021 | 86 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Lease Expense Summary for the Year Ended December 31, 2021, 2020 and 2019 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 year ended December 31, 2021, 2020, and 2019, we recognized lease expense comprised of the following components: Year Ended December 31, (in millions) 2021 2020 2019 Operating lease expense $ 15 $ 17 $ 12 Finance lease expense: Amortization of ROU asset $ 6 $ 6 $ 7 Interest expense on lease liability 5 6 6 Short-term lease expense $ 7 $ 8 $ 8 Lease Terms and Discount Rates The following outlines the remaining lease terms and discount rates used in the measurement of the Company’s ROU assets and liabilities: December 31, 2021 December 31, 2020 Operating Leases Finance Leases Operating Leases Finance Leases Weighted-average remaining lease term 4.1 years 7.2 years 3.1 years 8.1 years Weighted-average discount rate 5.4 % 9.0 % 5.5 % 9.0 % Maturities of Lease Liabilities The following summarizes the remaining minimum lease payments through maturity of the Company’s right-of-use assets and liabilities at December 31, 2021: (in millions) Operating Leases Finance Leases Year Ended December 31, 2022 $ 14 $ 11 2023 12 10 2024 8 10 2025 3 10 2026 1 10 Thereafter 4 23 Total lease payments 42 74 Less: imputed interest ( 5 ) ( 20 ) Total lease liability $ 37 $ 54 On July 31, 2020, Coffeyville Resources Nitrogen Fertilizers, LLC (“CRNF”), a subsidiary of CVR Partners, and Messer LLC (“Messer”) entered into an On-Site Product Supply Agreement (the “Messer Agreement”). On February 21, 2022, CRNF entered into the First Amendment to the On-Site Product Supply Agreement (the “Messer Amendment”, and collectively, the “Amended Messer Agreement”) with Messer. Under the Amended Messer Agreement, among other obligations, Messer is obligated to supply and make certain capital improvements during the term of the Amended Messer Agreement, and CRNF is obligated to take as available and pay for, oxygen, nitrogen, and compressed dry air from Messer’s facility. This arrangement for CRNF’s purchase of oxygen, nitrogen, and dry air from Messer does not meet the definition of a lease under FASB Accounting Standards Codification (“ASC”) Topic 842, Leases, (“Topic 842”), as CRNF does not expect to receive substantially all of the output of Messer’s on-site production from its air separation unit over the life of the Amended Messer Agreement. The Amended Messer Agreement also obligates Messer to install a new oxygen storage vessel, related equipment and infrastructure (“Oxygen Storage Vessel” or “Vessel”) to be used solely by the Coffeyville Fertilizer Facility. This arrangement for the use of the Oxygen Storage Vessel meets the definition of a lease under Topic 842, as CRNF will receive all December 31, 2021 | 87 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) output associated with the Vessel. Based on terms outlined in the Amended Messer Agreement, the Company expects the lease of the Oxygen Storage Vessel to be classified as a financing lease with an amount of approximately $ 25 million being capitalized upon lease commencement when the Vessel is placed in service. (5) Other Current Liabilities Other current liabilities were as follows: December 31, (in millions) 2021 2020 Accrued Renewable Fuel Standards (“RFS”) obligation $ 494 $ 214 Deferred revenue 87 31 Personnel accruals 46 23 Accrued taxes other than income taxes 45 32 Accrued interest 24 25 Share-based compensation 15 4 Operating lease liabilities 13 14 Accrued derivatives 2 17 Other accrued expenses and liabilities 15 9 Total other current liabilities $ 741 $ 369 (6) Long-Term Debt and Finance Lease Obligations December 31, (in millions) 2021 2020 CVR Partners: 9.25 % Senior Secured Notes, due June 2023 (1) $ 65 $ 645 6.125 % Senior Notes, due June 2028 550 — Unamortized discount and debt issuance costs ( 4 ) ( 11 ) Total CVR Partners debt $ 611 $ 634 CVR Refining: Finance lease obligations, net of current portion (2) 48 55 Total CVR Refining debt 48 55 CVR Energy: 5.250 % Senior Notes, due February 2025 $ 600 $ 600 5.750 % Senior Notes, due February 2028 400 400 Unamortized debt issuance cost ( 5 ) ( 6 ) Total CVR Energy debt 995 994 Total long-term debt and finance lease obligations $ 1,654 $ 1,683 Current portion of long-term debt and finance lease obligations (2) (3) 6 8 Total long-term debt and finance lease obligations, including current portion $ 1,660 $ 1,691 (1) The call price of the 9.25 % Senior Secured Notes due June 2023 (the “2023 UAN Notes”) decreased to par on June 15, 2021. On June 23, 2021, September 23, 2021, and December 22, 2021, CVR Partners redeemed $ 550 million, $ 15 million, and $ 15 million, respectively, of the 2023 UAN Notes, at par, plus accrued and unpaid interest on the redeemed portion. The remaining balance of $ 65 million was outstanding as of December 31, 2021. The $ 65 million outstanding balance of the 2023 UAN Notes was paid in full on February 22, 2022 at par, plus accrued and unpaid interest. (2) Current portion of finance lease obligations was approximately $ 6 million and $ 6 million as of December 31, 2021 and 2020, respectively. (3) The $ 2 million outstanding balance of the 6.50 % Notes, due April 2021, was paid in full on April 15, 2021. December 31, 2021 | 88 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Credit Agreements (in millions) Total Capacity Amount Borrowed as of December 31, 2021 Outstanding Letters of Credit Available Capacity as of December 31, 2021 Maturity Date CVR Partners: Asset Based (“Nitrogen Fertilizer ABL”) Credit Agreement (1) (2) $ 35 $ — $ — $ 35 September 30, 2024 CVR Refining: Amended and Restated Asset Based (“Petroleum ABL”) Credit Agreement (3) $ 400 $ — $ 39 $ 361 November 14, 2022 (1) On September 30, 2021, CVR Partners entered into a senior secured asset based ABL Credit Facility with an aggregate principal amount of up to $ 35 million with a maturity date of September 30, 2024 (the “Nitrogen Fertilizer ABL”) and terminated its $ 35 million ABL Credit Agreement , dated as of September 30, 2016, as amended (the “UAN 2016 ABL Credit Agreement”). (2) Beginning September 30, 2021, loans under the Nitrogen Fertilizer ABL bear interest at an annual rate equal to, at the option of the borrowers, (i) (a) 1.615 % plus the daily simple Secured Overnight Financing Rate (“SOFR”) or (b) 0.615 % plus a base rate, if our quarterly excess availability is greater than or equal to 75%, (ii) (a) 1.865 % plus SOFR or (b) 0.865 % plus a base rate, if our quarterly excess availability is greater than or equal to 50% but less than 75%, or (iii) (a) 2.115 % plus SOFR or (b) 1.115 % plus a base rate, otherwise. (3) Loans under the Petroleum ABL bear interest at an annual rate equal to (i) (a) 1.50 % plus LIBOR, to the extent available, or (b) 0.50 % plus a base rate, if our quarterly excess availability is greater than 50%, and (ii) (a) 1.75 % plus LIBOR, to the extent available, or (b) 0.75 % plus a base rate, otherwise. CVR Partners 2028 UAN Notes - On June 23, 2021, CVR Partners and its subsidiary, CVR Nitrogen Finance Corporation (“Finance Co.” and, together with CVR Partners, the “Issuers”), completed a private offering of $ 550 million aggregate principal amount of 6.125 % Senior Secured Notes due 2028 (the “2028 UAN Notes”). Interest on the 2028 UAN Notes is payable semi-annually in arrears on June 15 and December 15 each year, commencing on December 15, 2021. The 2028 UAN Notes mature on June 15, 2028, unless earlier redeemed or repurchased by the Issuers. The 2028 UAN Notes are jointly and severally guaranteed on a senior secured basis by all the existing domestic subsidiaries of CVR Partners, excluding Finance Co. In relation to the issuance of the 2028 UAN Notes, CVR Partners received $ 547 million of net cash proceeds, net of underwriting fees and other third-party fees and expenses associated with the offering. The debt issuance costs of the 2028 UAN Notes totaled approximately $ 4 million and are being amortized over the term of the 2028 UAN Notes as interest expense using the effective-interest amortization method. The Issuers may, at their option, at any time and from time to time prior to June 15, 2024, on any one or more occasions, redeem all or part of the 2028 UAN Notes, at a price equal to 100 % of the principal amount plus a “make whole” premium, plus accrued and unpaid interest. On or after June 15, 2024, the Issuers may, on any one or more occasions, redeem all or part of the 2028 UAN Notes at the redemption prices set forth below, expressed as a percentage of the principal amount of the respective notes, plus accrued and unpaid interest to the applicable redemption date. 12-month period beginning June 15, Percentage 2024 103.063 % 2025 101.531 % 2026 and thereafter 100.000 % The indenture governing the 2028 UAN Notes contains covenants that are substantially the same as the indenture governing the 2023 UAN Notes. However, the 2028 UAN Notes contain a permitted investment activity carveout that allows for the transfer of certain carbon capture assets to a joint venture for the purpose of monetizing potential tax credits. 2023 UAN Notes - On June 10, 2016, CVR Partners and Finance Co. (together the “2023 Notes Issuers”), certain subsidiary guarantors named therein and Wilmington Trust, National Association, as trustee and as collateral trustee, completed a private offering of $ 645 million aggregate principal amount of 9.25 % Senior Secured Notes due 2023 (the “2023 UAN Notes”). The December 31, 2021 | 89 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 2023 UAN Notes mature on June 15, 2023, unless earlier redeemed or repurchased by the issuers. Interest on the 2023 UAN Notes is payable semi-annually in arrears on June 15 and December 15 of each year. The 2023 UAN Notes are guaranteed on a senior secured basis by all of the Nitrogen Fertilizer Partnership’s existing subsidiaries. On or after June 15, 2021, the 2023 Notes Issuers may redeem all or part of the 2023 UAN Notes at a price equal to 100 % of the principal amount plus accrued and unpaid interest to the applicable redemption date. The 2023 UAN Notes contain customary covenants for a financing of this type that, among other things, restrict CVR Partners’ ability and the ability of certain of its subsidiaries to: (i) sell assets; (ii) pay distributions on, redeem or repurchase the Nitrogen Fertilizer Partnership’s units or redeem or repurchase its subordinated debt; (iii) make investments; (iv) incur or guarantee additional indebtedness or issue preferred units; (v) create or incur certain liens; (vi) enter into agreements that restrict distributions or other payments from CVR Partners’ restricted subsidiaries to CVR Partners; (vii) consolidate, merge or transfer all or substantially all of CVR Partners’ assets; (viii) engage in transactions with affiliates; and (ix) create unrestricted subsidiaries. In addition, the indenture contains customary events of default, the occurrence of which would result in or permit the trustee or the holders of at least 25 % of the 2023 UAN Notes to cause the acceleration of the 2023 UAN Notes, in addition to the pursuit of other available remedies. On June 23, 2021, CVR Partners redeemed $ 550 million aggregate principal amount of the outstanding 2023 UAN Notes at par and settled accrued interest of approximately $ 1 million through the date of redemption. As a result of the redemption, CVR Partners recognized in Interest expense, net an $ 8 million loss on extinguishment of debt in the second quarter of 2021, which includes the write-off of unamortized deferred financing costs and discount of $ 3 million and $ 5 million, respectively. On September 23, 2021 and December 22, 2021, CVR Partners redeemed $ 15 million and $ 15 million respectively, in aggregate principal amount of the outstanding 2023 UAN Notes at par and settled accrued interest of less than $ 1 million through the date of each redemption. As a result of these redemptions and for the year ended December 31, 2021, CVR Partners recognized in Interest expense, net a loss on extinguishment of debt of less than $ 1 million in 2021, which includes the write-off of unamortized deferred financing costs and discount. On February 22, 2022, CVR Partners redeemed all of the outstanding 2023 UAN Notes at par and settled accrued interest of approximately $ 1 million through the date of redemption. As a result of this transaction, CVR Partners will recognize a loss on extinguishment of debt of $ 1 million in the first quarter of 2022, which includes the write-off of unamortized deferred financing costs and discount of less than $ 1 million each. Nitrogen Fertilizer ABL - On September 30, 2021, CVR Partners, LP and its subsidiaries, CVR Nitrogen, LP, East Dubuque Nitrogen Fertilizers, LLC, Coffeyville Resources Nitrogen Fertilizers, LLC, CVR Nitrogen Holdings, LLC, Finance Co. and CVR Nitrogen GP, LLC, entered into the Nitrogen Fertilizer ABL with Wells Fargo Bank National Association, a national banking association (“Wells Fargo”), as administrative agent, collateral agent, and lender. The Nitrogen Fertilizer ABL has an aggregate principal amount of availability of up to $ 35 million with an incremental facility, which permits an increase in borrowings of up to $ 15 million in the aggregate subject to additional lender commitments and certain other conditions. The proceeds of the loans may be used for general corporate purposes of CVR Partners and its subsidiaries. The Nitrogen Fertilizer ABL provides for loans and letters of credit, subject to meeting certain borrowing base conditions, with sub-limits of $ 4 million for swingline loans and $ 10 million for letters of credit. The Nitrogen Fertilizer ABL is scheduled to mature on September 30, 2024. Loans under the Nitrogen Fertilizer ABL initially bear interest at an annual rate equal to, at the option of the borrowers, (i) 1.615 % plus SOFR or (ii) 0.615 % plus a base rate. Based on the previous quarter’s excess availability, such annual rate could increase to, at the option of the borrowers, (i) 2.115 % plus SOFR or (ii) 1.115 % plus a base rate. The borrowers must also pay a commitment fee on the unutilized commitments and also pay customary letter of credit fees. The Nitrogen Fertilizer ABL contains customary covenants for a financing of this type and requires CVR Partners in certain circumstances to comply with a minimum fixed charge coverage ratio test and contains other restrictive covenants that limit the ability of CVR Partners and its subsidiaries ability to, among other things, incur liens, engage in a consolidation, merger, purchase or sale of assets, pay dividends, incur indebtedness, make advances, investments and loans, enter into affiliate transactions, issue certain equity interests, create subsidiaries and unrestricted subsidiaries, and create certain restrictions on the ability to make distributions, loans, and asset transfers among CVR Partners or its subsidiaries. December 31, 2021 | 90 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) In connection with the Nitrogen Fertilizer ABL, CVR Partners incurred lender and other third-party costs of $ 1 million, which have been deferred in Prepaid expenses and other current assets and Other long-term assets and are being amortized as interest expense over the term of the Nitrogen Fertilizer ABL using the straight-line amortization method. CVR Refining Petroleum ABL - On November 14, 2017, CVR Services, CVR Refining, its wholly-owned subsidiary, CVR Refining, LLC (“Refining LLC”) and each of the operating subsidiaries of Refining LLC (collectively, the “Credit Parties”) entered into Amendment No. 1 to the Amended and Restated ABL Credit Agreement (the “Amendment”, and collectively, the “Petroleum ABL”) with a group of lenders and Wells Fargo, as administrative agent and collateral agent. The Petroleum ABL is a $ 400 million asset-based revolving credit facility, with sub-limits for letters of credit and swingline loans of $ 60 million and $ 40 million, respectively. The Petroleum ABL also includes a $ 200 million uncommitted incremental facility. CVR Energy 2025 Notes and 2028 Notes - On January 27, 2020, CVR Energy completed a private offering of $ 600 million aggregate principal amount of 5.25 % Senior Unsecured Notes due 2025 (the “2025 Notes”) and $ 400 million aggregate principal amount of 5.75 % Senior Unsecured Notes due 2028 (the “2028 Notes” and, collectively with the 2025 Notes, the “Notes”). Interest on the Notes is payable semi-annually in arrears on February 15 and August 15 each year, commencing on August 15, 2020. The 2025 Notes mature on February 15, 2025, unless earlier redeemed or repurchased by the issuers. The 2028 Notes mature on February 15, 2028, unless earlier redeemed or repurchased by the issuers. The Notes are jointly and severally guaranteed on a senior unsecured basis by the wholly-owned subsidiaries of CVR Energy with the exception of CVR Partners and its subsidiaries and certain immaterial wholly-owned subsidiaries of CVR Energy. In relation to the issuance of the Notes, the Company received $ 993 million of net cash proceeds, net of underwriting fees and other third-party fees and expenses associated with the offering. The debt issuance costs of the Notes totaled approximately $ 7 million and are being amortized over the terms of the respective notes as interest expense using the effective-interest amortization method. On or after February 15, 2022 and February 15, 2023, we may on any one or more occasions, redeem all or part of the 2025 Notes and 2028 Notes, respectively, at the redemption prices set forth below expressed as a percentage of the principal amount of the respective notes, plus accrued and unpaid interest to the applicable redemption date. 2025 Notes 2028 Notes 12-month period beginning February 15, Percentage 12-month period beginning February 15, Percentage 2022 102.625 % 2023 102.875 % 2023 101.313 % 2024 101.917 % 2024 and thereafter 100.000 % 2025 100.958 % 2026 and thereafter 100.000 % The indenture governing the Notes imposes covenants that will, among other things, limit our ability and the ability of our restricted subsidiaries to: (i) incur additional indebtedness or issue certain disqualified equity; (ii) create liens on certain assets to secure debt; (iii) pay dividends or make other equity distributions; (iv) purchase or redeem capital stock; (v) make certain investments; (vi) sell assets; (vii) agree to certain restrictions on the ability of restricted subsidiaries to make distributions, loans, or other asset transfers to us; (viii) consolidate, merge, sell, or otherwise dispose of all or substantially all of our assets; (ix) engage in transactions with affiliates; and (x) designate our restricted subsidiaries as unrestricted subsidiaries. In addition, the indenture contains customary events of default, the occurrence of which would result in or permit the trustee or the holders of at least 25 % of the 2025 Notes and 2028 Notes to cause, amongst other available remedies, the acceleration of the respective notes. Covenant Compliance The Company is in compliance with all covenants of the Nitrogen Fertilizer ABL, the Petroleum ABL, and the senior notes as of December 31, 2021. December 31, 2021 | 91 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (7) Revenue The following tables present the Company’s revenue disaggregated by major product, which include a reconciliation of the disaggregated revenue by product and other revenue components for the Company’s reportable segments. Year Ended December 31, 2021 (in millions) Petroleum Nitrogen Fertilizer Other / Eliminations Consolidated Gasoline $ 3,679 $ — $ — $ 3,679 Distillates (1) 2,809 — — 2,809 Ammonia — 146 — 146 UAN — 316 — 316 Other urea products — 29 — 29 Freight revenue 21 31 — 52 Other (2) 163 11 ( 12 ) 162 Revenue from product sales 6,672 533 ( 12 ) 7,193 Crude oil sales 47 — — 47 Other revenue (2) 2 — — 2 Total revenue $ 6,721 $ 533 $ ( 12 ) $ 7,242 Year Ended December 31, 2020 (in millions) Petroleum Nitrogen Fertilizer Other / Eliminations Consolidated Gasoline $ 1,882 $ — $ — $ 1,882 Distillates (1) 1,543 — — 1,543 Ammonia — 94 — 94 UAN — 198 — 198 Other urea products — 15 — 15 Freight revenue 18 33 — 51 Other (2) 79 10 ( 6 ) 83 Revenue from product sales 3,522 350 ( 6 ) 3,866 Crude oil sales 63 — — 63 Other revenue (2) 1 — — 1 Total revenue $ 3,586 $ 350 $ ( 6 ) $ 3,930 December 31, 2021 | 92 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Year Ended December 31, 2019 (in millions) Petroleum Nitrogen Fertilizer Other / Eliminations Consolidated Gasoline $ 3,050 $ — $ — $ 3,050 Distillates (1) 2,705 — — 2,705 Ammonia — 94 — 94 UAN — 251 — 251 Other urea products — 18 — 18 Freight revenue 23 33 — 56 Other (2) 129 8 ( 8 ) 129 Revenue from product sales 5,907 404 ( 8 ) 6,303 Crude oil sales 58 — — 58 Other revenue (2) 3 — — 3 Total revenue $ 5,968 $ 404 $ ( 8 ) $ 6,364 (1) Distillates consist primarily of diesel fuel, kerosene, and jet fuel. (2) Other revenue consists primarily of feedstock and asphalt sales and Cushing, OK storage tank lease revenue. See Note 2 (“Summary of Significant Accounting Policies”) for further discussion on the Cushing, OK storage tanks. Petroleum Segment The Petroleum Segment’s revenue from product sales is recorded upon delivery to customers, which is the point at which title is transferred and the customer has assumed the risk of loss. This generally takes place as product passes into the pipeline, as a product transfer order occurs within a pipeline system, or as product enters equipment or locations supplied or designated by the customer. Qualifying excise and other taxes collected from the Petroleum Segment’s customers and remitted to governmental authorities are not included in reported revenues. Many of the Petroleum Segment’s contracts have index-based pricing which is considered variable consideration that should be estimated in determining the transaction price. The Petroleum Segment determined that it does not need to estimate the variable consideration because the uncertainty related to the consideration is resolved on the pricing date or the date when the product is delivered. The Petroleum Segment may incur broker commissions or transportation costs prior to product transfer on some of its sales. The Petroleum Segment expenses these broker costs, since the contract durations are less than a year. Transportation costs are accounted for as fulfillment costs and are expensed as incurred since they do not meet the requirement for capitalization. The Petroleum Segment’s contracts with its customers state the terms of the sale, including the description, quantity, and price of each product sold. Depending on the product sold, payment from customers is generally due in full within 2 to 30 days of product delivery or invoice date. The Petroleum Segment generally provides no warranty other than the implicit promise that goods delivered are free of liens and encumbrances and meet the agreed upon specification. The Petroleum Segment has determined that product returns or refunds are very rare and will account for them as they occur. Freight revenue recognized by the Petroleum Segment is primarily tariff and line loss charges rebilled to customers to reimburse the Petroleum Segment for expenses incurred from a pipeline operator. An offsetting expense is included in Cost of materials and other. Nitrogen Fertilizer Segment The Nitrogen Fertilizer Segment sells its products on a wholesale basis under a contract or by purchase order. The Nitrogen Fertilizer Segment’s contracts with customers generally contain fixed pricing and most have terms of less than one year. The Nitrogen Fertilizer Segment recognizes revenue at the point in time at which the customer obtains control of the product, which is generally upon delivery and acceptance by the customer. The customer acceptance point is stated in the contract and may be December 31, 2021 | 93 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) at one of the Nitrogen Fertilizer Segment’s manufacturing facilities, at one of the Nitrogen Fertilizer Segment’s off-site loading facilities, or at the customer’s designated facility. Freight revenue recognized by the Nitrogen Fertilizer Segment represents the pass-through finished goods delivery costs incurred prior to customer acceptance and is reimbursed by customers. An offsetting expense for freight is included in Cost of materials and other. Qualifying excise and other taxes collected from the Nitrogen Fertilizer Segment’s customers and remitted to governmental authorities are not included in reported revenues. Depending on the product sold and the type of contract, payments from customers are generally either due prior to delivery or within 15 to 30 days of product delivery. The Nitrogen Fertilizer Segment generally provides no warranty other than the implicit promise that goods delivered are free of liens and encumbrances and meet the agreed upon specifications. Product returns are rare, and as such, the Nitrogen Fertilizer Segment does not record a specific warranty reserve or consider activities related to such warranty, if any, to be a separate performance obligation. The Nitrogen Fertilizer Segment has an immaterial amount of variable consideration for contracts with an original duration of less than a year. A small portion of the Nitrogen Fertilizer Segment’s revenue includes contracts extending beyond one year, some of which contain variable pricing in which the majority of the variability is attributed to the market-based pricing. The Nitrogen Fertilizer Segment’s contracts do not contain a significant financing component. The Nitrogen Fertilizer Segment has an immaterial amount of fee-based revenue, included in other revenue in the table above, that is recognized based on the net amount of the proceeds received, consistent with prior accounting practice. Remaining Performance Obligations As of December 31, 2021, the Nitrogen Fertilizer Segment had approximately $ 10 million of remaining performance obligations for contracts with an original expected duration of more than one year. The Nitrogen Fertilizer Segment expects to recognize approximately $ 6 million of these performance obligations as revenue by the end of 2022, an additional $ 4 million by 2023, and the remaining balance thereafter. Contract Balances The Nitrogen Fertilizer Segment’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 Nitrogen Fertilizer Segment’s deferred revenue activity during the year ended December 31, 2021 is presented below: (in millions) Balance at December 31, 2020 $ 31 Add: New prepay contracts entered into during the period (1) 147 Less: Revenue recognized that was included in the contract liability balance at the beginning of the period ( 30 ) Revenue recognized related to contracts entered into during the period ( 60 ) Other changes ( 1 ) Balance at December 31, 2021 $ 87 (1) Includes $ 94 million where the payment associated with prepaid contracts was collected. December 31, 2021 | 94 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Major Customers Petroleum Segment - The Petroleum Segment had one customer who comprised 16 % of petroleum net sales for the year ended December 31, 2021 and two customers who comprised 26 % and 25 % of petroleum net sales for the years ended December 31, 2020 and 2019, respectively. Nitrogen Fertilizer Segment - The Nitrogen Fertilizer Segment had one customer who comprised 13 % for the year ended December 31, 2021 and two customers who comprised 26 % and 28 % of nitrogen fertilizer net sales for the years ended December 31, 2020 and 2019, respectively. (8) Derivative Financial Instruments, Investments and Fair Value Measurements Derivative Financial Instruments Our segments are subject to price fluctuations caused by supply conditions, weather, economic conditions, interest rate fluctuations, and other factors. To manage price risk on crude oil and other inventories and to fix margins on certain future production, the Petroleum Segment from time to time enters into various commodity derivative transactions. On a regular basis, the Company enters into commodity contracts with counterparties for the purchases or sale of crude oil, blendstocks, various finished products, and RINs. The contracts usually qualify for the normal purchase normal sale exception and follow the accrual method of accounting. All other derivative instruments are recorded at fair value using mark-to-market accounting on a periodic basis utilizing third-party pricing. The Petroleum Segment holds derivative instruments, such as exchange-traded crude oil futures and over-the-counter forward swap agreements, which it believes provide an economic hedge on future transactions, but such instruments are not designated as hedges under GAAP. There are no premiums paid or received at inception of the derivative contracts or upon settlement. The Petroleum Segment may enter into forward purchase or sale contracts associated with RINs. As of December 31, 2021, the Petroleum Segment had open fixed-price commitments to purchase a net 2 million RINs. Commodity derivatives include commodity swaps and forward purchase and sale commitments. There were no outstanding commodity swap positions as of December 31, 2021 compared to 7 million barrels in outstanding commodity swap positions as of December 31, 2020. As of December 31, 2021 and 2020, there were approximately 1 million and 4 million barrels in forward purchase commitments, respectively, and 1 million and 2 million barrels in forward sale commitments, respectively. The following outlines the gains (losses) recognized on the Company’s derivative activities, all of which are recorded in Cost of materials and other on the Consolidated Statements of Operations: Year Ended December 31, (in millions) 2021 2020 2019 Forward purchases and sales contracts, net $ 25 $ 53 $ 20 Commodity swap instruments ( 68 ) ( 8 ) — Futures contracts ( 1 ) 10 ( 1 ) Total (loss) gain on derivatives, net $ ( 44 ) $ 55 $ 19 Offsetting Assets and Liabilities The Company elected to offset the fair value amounts recognized for multiple derivative contracts executed with the same counterparty. These amounts are recognized as current assets and current liabilities within the Prepaid expenses and other December 31, 2021 | 95 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) current assets and Other current liabilities financial statement line items, respectively, in the Consolidated Balance Sheets as follows: Derivative Assets Derivative Liabilities December 31, December 31, (in millions) 2021 2020 2021 2020 Commodity derivatives $ 5 $ 1 $ ( 7 ) $ ( 5 ) Less: Counterparty netting ( 5 ) ( 1 ) 5 1 Total net fair value of derivatives $ — $ — $ ( 2 ) $ ( 4 ) Investments Investments consist of equity securities, which are reported at fair value in our Consolidated Balance Sheets. These investments are considered trading securities. Investment income on marketable securities consists of the following: Year Ended December 31, (in millions) 2021 2020 2019 Dividend income $ — $ 7 $ — Gain on marketable securities 81 34 — Investment income on marketable securities $ 81 $ 41 $ — On June 10, 2021, the Company distributed its investment of 10,539,880 shares of common stock of Delek US Holdings, Inc. (“Delek”) in the form of a special dividend to its stockholders (the “Stock Distribution”). Following the Stock Distribution, the Company continued to hold a nominal investment in other marketable securities of Delek as of December 31, 2021. See further discussion of the distribution in Note 14 (“Related Party Transactions”). Fair Value Measurements In accordance with FASB ASC Topic 820 — Fair Value Measurements and Disclosures (“Topic 820”), the Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities, or a group of assets or liabilities, such as a business. Topic 820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels: • Level 1 — Quoted prices in active markets for identical assets or liabilities • Level 2 — Other significant observable inputs (including quoted prices in active markets for similar assets or liabilities) • Level 3 — Significant unobservable inputs (including the Company’s own assumptions in determining the fair value) December 31, 2021 | 96 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following tables set forth the assets and liabilities measured or disclosed at fair value on a recurring basis, by input level, as of December 31, 2021 and 2020: December 31, 2021 (in millions) Level 1 Level 2 Level 3 Total Location and Description Other current assets (commodity derivatives) $ — $ 1 $ — $ 1 Total Assets $ — $ 1 $ — $ 1 Other current liabilities (commodity derivatives) $ — $ ( 2 ) $ — $ ( 2 ) Other current liabilities (RFS obligation) — ( 494 ) — ( 494 ) Long-term debt and finance lease obligations, net of current portion (long-term debt) — ( 1,620 ) — ( 1,620 ) Total Liabilities $ — $ ( 2,116 ) $ — $ ( 2,116 ) December 31, 2020 (in millions) Level 1 Level 2 Level 3 Total Location and Description Prepaid expenses and other current assets (investments) $ 173 $ — $ — $ 173 Total Assets $ 173 $ — $ — $ 173 Note payable and finance lease obligations (current portion of long-term debt) $ — $ ( 2 ) $ — $ ( 2 ) Other current liabilities (commodity derivatives) — ( 17 ) — ( 17 ) Other current liabilities (RFS obligation) — ( 214 ) — ( 214 ) Long-term debt and finance lease obligations, net of current portion (long-term debt) — ( 1,604 ) — ( 1,604 ) Total Liabilities $ — $ ( 1,837 ) $ — $ ( 1,837 ) As of December 31, 2021 and 2020, the only financial assets and liabilities that are measured at fair value on a recurring basis are the Company’s investments, derivative instruments, long-term debt, and the RFS obligation. The estimated fair value of cash equivalents, included amounts invested in short-term money market funds, and restricted cash approximate their carrying amounts. The Petroleum Segment’s commodity derivative contracts and RFS obligation, which use fair value measurements and are valued using broker quoted market prices of similar instruments, are considered Level 2 inputs. The Company had no transfers of assets or liabilities between any of the above levels during the year ended December 31, 2021. (9) Share-Based Compensation Overview CVR Energy, CVR Refining, and CVR Partners all have Long-Term Incentive Plans (collectively, the “LTIPs”) that permit the granting of options, stock and unit appreciation rights, restricted shares, restricted stock units, phantom units, unit awards, substitute awards, other unit-based awards, cash awards, dividend and distribution equivalent rights, share awards, and performance awards (including performance share units, performance units, and performance-based restricted stock). Individuals who are eligible to receive awards and grants under or in connection with the LTIPs include the employees, officers, and directors of the Company, CVR Refining, and CVR Partners. The Company had 6.8 million shares or units, as applicable, available for future grants under our plans at December 31, 2021. Incentive and Phantom Unit Awards Incentive and phantom unit awards have been granted to officers, employees, and directors (collectively, the “Share-Based Awards”). As a result, Share-Based Awards that reflect the value and dividends or distributions of CVR Energy or CVR Partners, as applicable, have been granted and remain outstanding as of December 31, 2021. Each Share-Based Award and the related dividend or distribution equivalent right represents the right to receive, upon vesting, a cash payment equal to (i) the December 31, 2021 | 97 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) average fair market value of one share or unit, as applicable, in accordance with the award agreement, plus (ii) the per share or unit cash value of all dividends or distributions declared and paid, as applicable, from the grant date through the vesting date. The Share-Based Awards are generally graded-vesting awards, which vest over three years with one-third of the award vesting each year the grantee remains employed by the Company or its subsidiaries. Compensation expense is recognized ratably, based on service provided to the Company and its subsidiaries, with the amount recognized fluctuating as a result of the Share-Based Awards being re-measured to fair value at the end of each reporting period due to their liability-award classification. A summary of activity for the Company’s Share-Based Awards for the year ended December 31, 2021 is presented below: Shares or Units (1) Weighted-Average Grant-Date Fair Value (per share or unit) Aggregate Intrinsic Value (in millions) Non-vested at December 31, 2020 2,454,641 $ 19.01 $ 37 Granted 950,744 19.46 Vested ( 857,901 ) 21.14 Forfeited ( 254,379 ) 19.66 Non-vested at December 31, 2021 2,293,105 $ 18.23 $ 62 (1) As of December 31, 2021, there are no outstanding awards under the LTIPs, and the only outstanding and unvested awards are issued in connection with and not under the LTIPs. Performance Unit Awards Pursuant to an employment agreement with the Company’s current chief executive officer, the Company entered into two performance award agreements on November 1, 2017. In connection with the performance period of January 1, 2018 to December 31, 2018, a performance award was granted with a target value of $ 1.5 million (the “2018 CEO Performance Award”). The payout of $ 1.9 million, paid in February 2019, under the 2018 CEO Performance Award was based on the Company’s performance against certain safety, operating, and financial measures. Additionally, the Company entered into a performance award agreement (the “CEO Performance Award”). The CEO Performance Award represents the right to receive upon vesting, a cash payment equal to $ 10 million if the average closing price of the Company’s common stock over the 30 -trading day period from January 4, 2022 to February 15, 2022 is equal to or greater than $ 60 per share. Effective as of December 22, 2021, the Company entered into an amendment to the CEO Performance Award, which extended the end of the performance period thereunder to December 31, 2024, and changed the 30 day trading period on which the average closing price of the Company’s common stock is based to January 6, 2025 through February 20, 2025. Compensation Expense A summary of total share based compensation expense and unrecognized compensation expense related to the Share-Based Awards and the Company’s performance awards, the amounts allocated to each of the Company’s segments, and the amounts that were not allocated to segments during the years ended December 31, 2021, 2020, and 2019 is presented below: Expenses Unrecognized Expense For the year ended December 31, At December 31, 2021 (in millions) 2021 2020 2019 Amount Weighted-Average Remaining Years Share based awards: Incentive Units $ 22 $ 3 $ 12 $ 27 2.4 Phantom Units 27 1 5 19 2.0 Performance awards: CEO Performance Award (1) ( 3 ) — — 10 3.0 Total expense $ 46 $ 4 $ 17 $ 56 (1) All expenses, recognized and unrecognized, related to the CEO Performance Award are contingent upon whether the performance parameters are probable of being met. If the performance parameters are not met, no expense will be recognized. December 31, 2021 | 98 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The total tax benefit recognized during the years ended December 31, 2021, 2020, and 2019 related to compensation expense was $ 12 million, $ 1 million and $ 4 million respectively. As of December 31, 2021 and 2020, the Company had a liability of $ 23 million and $ 5 million, respectively, for cash settled non-vested Share-Based Awards and associated dividend and distribution equivalent rights. For the years ended December 31, 2021, 2020, and 2019, the Company paid cash of $ 30 million, $ 8 million, and $ 23 million, respectively, to settle liability-classified awards upon vesting. Other Benefit Plans The Company sponsors and administers two defined-contribution 401(k) plans, the CVR Energy 401(k) Plan and the CVR Energy 401(k) Plan for Represented Employees (the “Plans”), in which the Company’s employees may participate. Participants in the Plans may elect to contribute a designated percentage of their eligible compensation in accordance with the Plans, subject to statutory limits. The Company provides a matching contribution of 100 % of the first 6 % of eligible compensation contributed by participants. Participants in both Plans are immediately vested in their individual contributions. The Plans provide for a three-year vesting schedule for the Company’s matching contributions and contain a provision to count service with predecessor organizations. The Company did no t have contributions under the Plans for the year ended December 31, 2021, as the Company matching contributions for the Plans were suspended effective January 1, 2021, and had approximately $ 10 million and $ 9 million for the years ended December 31, 2020 and 2019, respectively. The Company matching contributions for the Plans resumed effective January 1, 2022. (10) Income Taxes Tax Allocation Agreement In August 2018, CVR Energy completed an exchange offer whereby public unitholders tendered a total of 21,625,106 CVR Refining common units in exchange for a total of 13,699,549 shares of CVR Energy common stock (the “CVRR Unit Exchange”). Prior to the CVRR Unit Exchange, CVR Energy was a member of the consolidated federal tax group of AEP, an affiliate of IEP, and party to a tax allocation agreement with AEP (the “Tax Allocation Agreement”). The Tax Allocation Agreement provided that AEP would pay all consolidated federal income taxes on behalf of the consolidated tax group. As a result, CVR Energy was required to make payments to AEP in an amount equal to the tax liability, if any, that it would have had paid if it were to file as a consolidated group separate and apart from AEP. Following the CVRR Unit Exchange, IEP and affiliates’ ownership of CVR Energy was reduced below 80 % and, since that time, CVR Energy is no longer eligible to file as a member of the AEP consolidated federal income tax group. On August 2, 2018, CVR Energy became the parent of a new consolidated group for U.S. federal income tax purposes, filing and paying its federal income tax obligations directly to the IRS. Pursuant to the terms of the Tax Allocation Agreement, however, CVR Energy may be required to make payments in respect of taxes owed by AEP for periods prior to the exchange. Similar principles may apply for state or local income tax purposes where CVR Energy filed combined, consolidated or unitary tax returns with AEP. AEP’s federal income tax return for the periods ended December 31, 2017 and 2018 are currently under examination by the IRS. As of December 31, 2021 and 2020, the Company recognized a no minal payable for state income taxes due to AEP. The payable is recognized in Other current liabilities in the Consolidated Balance Sheets. As of December 31, 2021 and 2020, the Company’s Consolidated Balance Sheets reflected a receivable of $ 26 million and $ 44 million, respectively, from the IRS and certain state jurisdictions. December 31, 2021 | 99 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Income Tax (Benefit) Expense Income tax (benefit) expense is comprised of the following: Year Ended December 31, (in millions) 2021 2020 2019 Current: Federal $ 84 $ ( 63 ) $ 96 State 7 ( 5 ) 5 Total current 91 ( 68 ) 101 Deferred: Federal ( 76 ) ( 1 ) 3 State ( 23 ) ( 26 ) 25 Total deferred ( 99 ) ( 27 ) 28 Total income tax (benefit) expense $ ( 8 ) $ ( 95 ) $ 129 The following is a reconciliation of total income tax (benefit) expense to income tax (benefit) expense computed by applying the statutory federal income tax rate to pretax income (loss): Year Ended December 31, (in millions) 2021 2020 2019 Tax computed at federal statutory rate $ 14 $ ( 87 ) $ 103 State income taxes, net of federal tax benefit 3 ( 18 ) 29 Changes in enacted state tax rates, net of federal tax benefit ( 10 ) — — State tax incentives, net of federal tax expense ( 6 ) ( 7 ) ( 4 ) Noncontrolling interest ( 10 ) 13 4 Goodwill impairment — 3 — Other, net 1 1 ( 3 ) Total income tax (benefit) expense $ ( 8 ) $ ( 95 ) $ 129 Deferred Tax Assets and Liabilities The income tax effect of temporary differences that give rise to the Deferred income tax assets and Deferred income tax liabilities at December 31, 2021 and 2020 are as follows: December 31, (in millions) 2021 2020 Deferred income tax assets: Personnel accruals $ 6 $ 2 State tax credit carryforward, net 17 20 Net operating loss carryforward 2 9 Total gross deferred income tax assets 25 31 Deferred income tax liabilities: Unrealized gain — ( 9 ) Investment in CVR Partners ( 70 ) ( 67 ) Investment in CVR Refining ( 222 ) ( 320 ) Other ( 1 ) ( 3 ) Total gross deferred income tax liabilities ( 293 ) ( 399 ) Net deferred income tax liabilities $ ( 268 ) $ ( 368 ) December 31, 2021 | 100 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Although realization is not assured, management believes that it is more likely than not that all of the deferred income tax assets will be realized, and therefore, no valuation allowance was recognized as of December 31, 2021 and 2020. As of December 31, 2021, CVR Energy has state tax credits of approximately $ 26 million, which are available to reduce future state income taxes. These credits, if not used, will begin expiring in 2036. Uncertain Tax Positions A reconciliation of unrecognized tax benefits is as follows: Year Ended December 31, (in millions) 2021 2020 2019 Balance, beginning of year $ 17 $ 22 $ 23 Decrease based on prior year tax position — ( 2 ) — Increase in current year tax positions — — 2 Reductions related to expirations from statute of limitations — ( 3 ) ( 3 ) Balance, end of year $ 17 $ 17 $ 22 Included in the balance of unrecognized tax benefits as of December 31, 2021, 2020, and 2019 are $ 13 million, $ 13 million, and $ 15 million, respectively, of tax benefits that, if recognized, would affect the effective tax rate. Additionally, the Company reasonably believes that $ 5 million unrecognized tax positions related to state income tax credits will be recognized by the end of 2022 as a result of the expiration of statute of limitations. Approximately $ 7 million and $ 8 million of unrecognized tax benefits were netted with Deferred income tax asset carryforwards as of December 31, 2021 and 2020, respectively. The remaining unrecognized tax benefits are included in Other long-term liabilities in the Consolidated Balance Sheets. CVR Energy recognized $ 1 million interest expense and $ 2 million liability for interest as of December 31, 2021, no minal interest expense and $ 1 million liability for interest as of December 31, 2020, and a no minal interest benefit and a no minal liability for interest as of December 31, 2019. No penalties were recognized during 2021, 2020, or 2019. At December 31, 2021, the Company’s tax filings are generally open to examination in the United States for the tax years ended December 31, 2018 through December 31, 2020 and in various individual states for the tax years ended December 31, 2017 through December 31, 2020. (11) Commitments and Contingencies Supply Commitments The minimum required payments for unconditional purchase obligations are as follows: (in millions) Unconditional Purchase Obligations Year Ended December 31, 2022 $ 136 2023 85 2024 82 2025 82 2026 77 Thereafter 252 $ 714 Supply Commitments - The Company is a party to various supply agreements with both related and third parties which commit the Company to purchase minimum volumes of crude oil, hydrogen, oxygen, nitrogen, pet coke, and natural gas to run December 31, 2021 | 101 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) its facilities’ operations. For the years ended December 31, 2021, 2020, and 2019, amounts purchased under these supply agreements totaled approximately $ 176 million, $ 153 million, and $ 167 million, respectively. Crude Oil Supply Agreement Effective on August 4, 2021, an indirect, wholly-owned subsidiary of CVR Refining entered into the Second Amended and Restated Crude Oil Supply Agreement (the “2021 Supply Agreement”) with Vitol Inc. (“Vitol”) which superseded, in its entirety, the August 31, 2012 Amended and Restated Crude Oil Supply Agreement (the “2012 Supply Agreement” and collectively with the 2021 Supply Agreement, the “Crude Oil Supply Agreement”) between the parties. The 2021 Supply Agreement is on substantially similar terms as the 2012 Supply Agreement, other than revisions to certain inventory turnover and insurance provisions. Under the Crude Oil Supply Agreement, Vitol supplies the Petroleum Segment with crude oil and intermediation logistics helping to reduce the amount of inventory held at certain locations and mitigate crude oil pricing risk. Volumes contracted under the Crude Oil Supply Agreement, as a percentage of the total crude oil purchases (in barrels), was approximately 42 %, 33 %, and 36 % for the years ended December 31, 2021, 2020, and 2019, respectively. The Crude Oil Supply Agreement, which currently extends through December 31, 2022, automatically renews for successive one-year terms (each such term, a “Renewal Term”) unless either party provides the other with notice of nonrenewal at least 180 days prior to expiration of any Renewal Term. Contingencies The U.S. Attorney’s office for the Southern District of New York contacted CVR Energy in September 2017 seeking production of information pertaining to CVR Refining’s, CVR Energy’s and Mr. Carl C. Icahn’s activities relating to the RFS and Mr. Icahn’s former role as an advisor to former President Trump. CVR Energy cooperated with the request and provided information in response to the subpoena. The U.S. Attorney’s office has not made any claims or allegations against CVR Energy or Mr. Icahn. CVR Energy believes it maintains a strong compliance program and, while no assurances can be made, CVR Energy does not believe this inquiry will have a material impact on its business, financial condition, results of operations or cash flows. Call Option Lawsuits - In 2019, the Company, CVR Refining and its general partner, CVR Refining Holdings, IEP, and certain directors and affiliates (collectively, the “Call Defendants”) were named in at least one of nine now consolidated lawsuits filed in the Delaware Court of Chancery by purported former unitholders of CVR Refining, on behalf of themselves and an alleged class of similarly situated unitholders relating to the Company’s exercise of the call option (“Call Option”) under the CVR Refining Amended and Restated Agreement of Limited Partnership assigned to it by CVR Refining’s general partner (collectively, the “Call Option Lawsuits”). The Call Option Lawsuits primarily allege breach of contract, tortious interference and breach of the implied covenant of good faith and fair dealing and seek monetary damages and attorneys’ fees, among other remedies. In January 2020, the court dismissed CVR Holdings and certain former directors of CVR Refining’s general partner from the Call Option Lawsuits, though permitted some or all of the claims to proceed against each remaining defendant. Trial of the Call Option Lawsuits concluded in July 2021, and the parties are currently in post-trial proceedings. The Company believes the Call Option Lawsuits are without merit and is vigorously defending against them. The plaintiffs filed their Opening Post-Trial Brief on December 22, 2021, now quantifying alleged damages in excess of $ 300 million; the Call Defendants strongly dispute the plaintiffs’ claims and are preparing responsive briefings. Accordingly, the Company cannot determine at this time the outcome of the Call Option Lawsuits, including whether such outcome would have a material impact on the Company’s financial position, results of operations, or cash flows. However, while we firmly believe this matter is without merit, if it is concluded in a manner adverse to the Company, it could have a material effect on the Company’s financial position, results of operations, or cash flows. The Call Defendants are also parties to two lawsuits relating to insurance coverage for the Call Option Lawsuits, one filed on January 27, 2021, in the 434th Judicial District Court of Fort Bend County, Texas by the Call Defendants’ primary and excess insurers (the “Insurers”) seeking a declaratory judgment determining that they owe no indemnity coverage for the Call Option Lawsuits in relation to insurance policies that have coverage limits of $ 50 million, and another filed on January 30, 2022 in the Superior Court of the State of Delaware by the Call Defendants against the Insurers for anticipatory breach of contract and breach of the implied covenant of good faith and fair dealing (the “Delaware Coverage Case”). On November 23, 2021, the court in the Delaware Coverage Case granted partial summary judgment in favor of the Call Defendants relating to the amount of the deductible. As both lawsuits are in their early stages, the Company cannot determine at this time the outcome of these lawsuits, including whether the outcome would have a material impact on the Company’s financial position, results of operations, or cash flows. December 31, 2021 | 102 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Renewable Fuel Standards - The Company’s Petroleum Segment is subject to the RFS, implemented by the Environmental Protection Agency (the “EPA”), which requires refiners to either blend renewable fuels into their transportation fuels or purchase renewable fuel credits, known as RINs, in lieu of blending. The Petroleum Segment is not able to blend the substantial majority of its transportation fuels and must either purchase RINs on the open market or obtain waiver credits for cellulosic biofuels, or other exemptions from the EPA, in order to comply with the RFS. For the years ended December 31, 2021, 2020, and 2019, the Company recognized an expense of approximately $ 435 million, $ 190 million, and $ 43 million, respectively, for the Petroleum Segment’s compliance with the RFS (based on the 2020 renewable volume obligation (“RVO”) and proposed preliminary 2021 RVO range, for the respective periods, excluding the impacts of any exemptions or waivers to which the Petroleum Segment may be entitled). The recognized amounts are included within Cost of materials and other in the Consolidated Statements of Operations and represent costs to comply with the RFS obligation through purchasing of RINs not otherwise reduced by blending of ethanol or biodiesel. At each reporting period, to the extent RINs purchased and generated through blending are less than the RFS obligation (excluding the impact of exemptions or waivers to which the Petroleum Segment may be entitled), the remaining position is marked-to-market using RIN market prices at period end. As of December 31, 2021 and 2020, the Petroleum Segment’s RFS position was approximately $ 494 million and $ 214 million, respectively, which is recorded in Other current liabilities in the Consolidated Balance Sheets. RFS Disputes - On June 25, 2021, the Supreme Court of the United States (the “Supreme Court”) overturned a decision of the 10 th Circuit Court of Appeals (“10 th Circuit”) vacating three small refinery exemptions (“SREs”) under the RFS, including one issued to the Wynnewood Refinery for 2017, to the extent such SREs were vacated based on failure to have continuously received an SRE in all applicable preceding years. Following the Supreme Court ruling, the Environmental Protection Agency (the “EPA”) notified WRC that it would reconsider WRC’s 2017 SRE on other grounds referenced in the 10th Circuit decision. On July 20, 2021, after remand from the Supreme Court, the 10th Circuit vacated its prior judgment, recalled its previous mandate denying WRC’s 2017 SRE, entered a new judgment and issued a new mandate transferring jurisdiction back to the EPA. On August 26, 2021, the EPA filed a Motion for Clarification asking the 10th Circuit whether the alternative holdings that supported the 10th Circuit’s prior judgment remain in effect and whether the new mandate returns the agency actions back to the EPA, which Motion for Clarification was denied. On September 15, 2021, WRC advised the EPA it considered its 2017 SRE intact and demanded that the EPA return the status of WRC’s 2017 SRE to “granted.” The EPA has not yet responded to WRC’s demand. Given the EPA’s failure to respond, we cannot currently estimate the outcome, impact or timing of resolution of this matter. WRC and CRRM are also involved in or expected to be involved in several lawsuits relating to the RFS, including a lawsuit filed in 2019 in the D.C. Circuit by four ethanol and biofuels trade associations against the EPA claiming the EPA exceeded its authority in granting SREs for the 2018 compliance year, including the 2018 SRE granted to WRC’s Wynnewood Refinery (the “2018 SRE Lawsuit”), which 2018 SRE petitions were remanded by the court back to the EPA on December 8, 2021, with instructions to act on such petitions by April 7, 2022; a lawsuit by WRC against the EPA relating to damages sustained by WRC as a result of the EPA’s failure to timely issue WRC’s 2018 SRE (the “WRC 2018 SRE Lawsuit”); and a Petition for Review of the EPA’s February 2, 2022, final rule changing compliance deadlines under the RFS filed by WRC and CRRM with the D.C. Circuit on February 4, 2022 (the “Deadline Lawsuit”). The Company anticipates additional litigation to be filed in the future relating to the RFS, including one or more lawsuits by WRC against the EPA should it finalize the position set forth in its Proposed RFS Small Refinery Exemption Decision dated December 7, 2021 (the “Proposed Denial”), in which the EPA announced its intention to change its statutory interpretation of the CAA and deny 65 pending SRE petitions, including those submitted by WRC for 2019, 2020, and 2021, through which the Proposed Denial by the EPA has informed WRC it intends to also apply to deny all 2018 SREs previously approved by the EPA, including for WRC’s Wynnewood Refinery. These matters are in their early stages, and the Company cannot determine at this time the outcomes of these matters, including whether such outcomes would have a material impact on the Company’s financial position, results of operations, or cash flows. Environmental, Health, and Safety (“EHS”) Matters Clean Air Act Matter - On August 21, 2018, CRRM received a letter from the United States Department of Justice (“DOJ”) on behalf of the EPA and KDHE alleging violations of the CAA and a 2012 Consent Decree (the “CD”) between Coffeyville Resources Refining & Marketing, LLC (“CRRM”), the United States (on behalf of the EPA) and the Kansas Department of Health and Environment (“KDHE”) at CRRM’s Coffeyville refinery, primarily relating to flares. In June 2020, a tolling agreement between the parties relating to such allegations expired, and the DOJ and KDHE sent demand letters relating to the December 31, 2021 | 103 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) allegations (the “Stipulated Claims”) and seeking stipulated penalties under the CD. In February 2021, the DOJ and KDHE sent CRRM a statement of position under the CD regarding its demand for Stipulated Claims. As CRRM disputes most claims asserted by the government, in accordance with the CD, CRRM deposited funds into a commercial escrow account pending resolution of disputed claims. The escrowed funds are legally restricted for use and are included within Prepaid expenses and other current assets on the consolidated balance sheets. In April 2021, CRRM filed a petition for judicial review of the Stipulated Claims with the United States District Court for the District of Kansas (“D. Kan.”), in accordance with the dispute resolution provisions of the CD. On September 23, 2021, the court ordered briefing on CRRM’s petition, which was completed in December 2021. Separately, in December 2020, the DOJ and KDHE filed a supplement complaint in the D. Kan asserting nine counts for alleged violations of the CAA, the Kansas State Implementation Plan and Kansas law seeking civil penalties, injunctive and related relief, which they sought leave to amend on February 10, 2022, to add an additional eight counts under Part 63 of the National Emission Standards for Hazardous Air Pollutants from Petroleum Refineries Subparts CC and R (“NESHAP”), Kansas law, and CRRM’s permits relating to flares, heaters, and related matters (collectively, the “Statutory Claims”). In March 2021, CRRM filed a partial motion to dismiss certain Statutory Claims, which is still pending with the D. Kan. Negotiations relating to the Stipulated Claims and the Statutory Claims are ongoing and the Company cannot determine at this time the outcome of these matters, including whether such outcome, or any subsequent enforcement or litigation relating thereto would have a material impact on the Company’s financial position, results of operations, or cash flows. Environmental Remediation - As of December 31, 2021 and 2020, environmental accruals representing estimated costs for future remediation efforts at certain Petroleum Segment sites totaled approximately $ 12 million and $ 11 million, respectively. These amounts are reflected in Other current liabilities or Other long-term liabilities depending on when the Company expects to expend such amounts. (12) Business Segments The Company has two operating segments: Petroleum and Nitrogen Fertilizer. These operating segments are also the Company’s reportable segments. As discussed in Note 1 (“Organization and Nature of Business”), the Petroleum Segment is comprised entirely of the consolidated operations of CVR Refining and its subsidiaries, while the Nitrogen Fertilizer Segment is comprised entirely of the consolidated operations of CVR Partners and its subsidiaries. The other amounts reflect intercompany eliminations, corporate cash and cash equivalents, income tax activities, and other corporate activities that are not allocated to the operating segments. All operations of the segments are located within the United States. December 31, 2021 | 104 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following tables summarize operating results, capital expenditures, and total asset information by segment: Year Ended December 31, (in millions) 2021 2020 2019 Net sales: Petroleum $ 6,721 $ 3,586 $ 5,968 Nitrogen Fertilizer 533 350 404 Other ( 12 ) ( 6 ) ( 8 ) Total net sales $ 7,242 $ 3,930 $ 6,364 Operating income (loss): Petroleum $ ( 27 ) $ ( 281 ) $ 574 Nitrogen Fertilizer 134 ( 35 ) 27 Other ( 20 ) ( 17 ) ( 21 ) Total operating income (loss) 87 ( 333 ) 580 Interest expense, net ( 117 ) ( 130 ) ( 102 ) Investment income from marketable securities 81 41 — Other income, net 15 7 13 Income (loss) before income tax expense $ 66 $ ( 415 ) $ 491 Depreciation and amortization: Petroleum $ 203 $ 202 $ 202 Nitrogen Fertilizer 73 76 80 Other (2) 3 — 5 Total depreciation and amortization $ 279 $ 278 $ 287 Capital expenditures: (1) Petroleum $ 50 $ 90 $ 89 Nitrogen fertilizer 26 16 20 Other (2) 150 15 5 Total capital expenditures $ 226 $ 121 $ 114 The following table summarizes total assets by segment: December 31, (in millions) 2021 2020 Petroleum $ 3,368 $ 2,991 Nitrogen Fertilizer 1,127 1,033 Other, including intersegment eliminations ( 589 ) ( 46 ) Total assets $ 3,906 $ 3,978 (1) Capital expenditures are shown exclusive of capitalized turnaround expenditures and business combinations. (2) Other includes expenses related to and amounts incurred for the Wynnewood renewable diesel unit project. December 31, 2021 | 105 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (13) Supplemental Cash Flow Information Cash flows related to income taxes, interest, leases, capital expenditures and deferred financing costs included in accounts payable, and non-cash dividends were as follows: Year Ended December 31, (in millions) 2021 2020 2019 Supplemental disclosures: Cash paid, net of refunds (received, net of payments) for income taxes $ 72 $ ( 2 ) $ 69 Cash paid for interest 114 107 104 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases 15 17 16 Operating cash flows from finance leases 5 6 6 Financing cash flows from finance leases 6 5 5 Non-cash investing and financing activities: Change in construction in progress included in accounts payable (1) 2 ( 3 ) ( 7 ) Change in deferred financing costs included in accounts payable 1 — — Non-cash dividends to CVR Energy stockholders 251 — — (1) Capital expenditures are shown exclusive of capitalized turnaround expenditures. Cash, cash equivalents and restricted cash consisted of the following: December 31, (in millions) 2021 2020 Cash and cash equivalents $ 510 $ 667 Restricted cash (2) 7 7 Cash, cash equivalents and restricted cash $ 517 $ 674 (2) The restricted cash balance is included within Prepaid expenses and other current assets on the Consolidated Balance Sheets. (14) Related Party Transactions Activity associated with the Company’s related party arrangements for the years ended December 31, 2021, 2020, and 2019 is summarized below: Expenses with related parties Year Ended December 31, (in millions) 2021 2020 2019 Cost of materials and other: Enable Joint Venture Transportation Agreement $ 11 $ 11 $ 12 Payments (received) made: Dividends (1) 348 85 218 AEP Tax Allocation Agreement — — ( 3 ) (1) See below for a summary of the dividends paid to IEP for the years ended December 31, 2021, 2020, and 2019 . Enable Joint Venture Agreement CVR Refining is party to a transportation agreement as part of the Enable JV for an initial term of 20 years under which Enable provides transportation services for crude oil purchased within a defined geographic area. Additionally, CVR Refining December 31, 2021 | 106 Table of Contents CVR Energy, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) entered into a terminalling services agreement with Enable JV under which it receives access to Enable JV’s terminal in Lawrence, Oklahoma to unload and pump crude oil into Enable JV’s pipeline for an initial term of 20 years. Midway Joint Venture For the years ended December 31, 2021, 2020, and 2019, CRRM incurred costs, which are included in Cost of materials and other, of $ 20 million, $ 17 million, and $ 21 million, respectively, from crude oil transportation services incurred on the Midway JV through Vitol as the intermediary purchasing agent. Dividends to CVR Energy Stockholders Dividends, if any, including the payment, amount and timing thereof, are determined in the discretion of CVR Energy’s board of directors (the “Board”). IEP, through its ownership of the Company’s common stock, is entitled to receive dividends that are declared and paid by the Company based on the number of shares held at each record date. No dividends were declared related to the fourth quarter of 2021, and there were no quarterly dividends declared or paid during 2021 related to the first, second, and third quarters of 2021 and fourth quarter of 2020. During the years ended December 31, 2020 and 2019, the Company paid dividends totaling $ 1.20 and $ 3.05 per common share, or $ 121 million and $ 306 million, respectively. Of these dividends, IEP received $ 85 million and $ 218 million, respectively, for the same periods. On May 26, 2021, the Company announced a special dividend of approximately $ 492 million, or equivalent to $ 4.89 per share of the Company’s common stock, to be paid in a combination of cash (the “Cash Distribution”) and the Stock Distribution. On June 10, 2021, the Company distributed an aggregate amount of approximately $ 241 million, or $ 2.40 per share of the Company’s common stock, pursuant to the Cash Distribution, and approximately 10,539,880 shares of Delek common stock, which represented approximately 14.3 % of the outstanding shares of Delek common stock, pursuant to the Stock Distribution. IEP received approximately 7,464,652 shares of common stock of Delek and $ 171 million in cash. The Stock Distribution was recorded as a reduction to equity through a derecognition of our investment in Delek, and the Company recognized a gain of $ 112 million from the initial investment in Delek through the date of the Stock Distribution. Distributions to CVR Partners ’ Unitholders Distributions, if any, including the payment, amount and timing thereof, are subject to change at the discretion of the UAN GP Board. The following table presents distributions paid by CVR Partners to CVR Partners’ unitholders, including amounts received by the Company, as of December 31, 2021. Distributions Paid (in millions) Related Period Date Paid Distribution Per Common Unit Public Unitholders CVR Energy Total 2021 - 2nd Quarter August 23, 2021 $ 1.72 $ 11 $ 7 $ 18 2021 - 3rd Quarter November 22, 2021 2.93 20 11 31 Total dividends $ 4.65 $ 31 $ 18 $ 49 There were no distributions declared or paid by CVR Partners related to the first quarter of 2021 and fourth quarter of 2020, and no distributions were declared or paid during 2020. During the year ended December 31, 2019, CVR Partners paid distributions totaling $ 4.00 per common unit on a split-adjusted basis, or $ 45 million. Of these distributions, CVR Energy received $ 16 million. For the fourth quarter of 2021, CVR Partners, upon approval by the UAN GP Board on February 21, 2022, declared a distribution of $ 5.24 per common unit, or $ 56 million, which is payable March 14, 2022 to unitholders of record as of March 7, 2022. Of this amount, CVR Energy will receive approximately $ 20 million, with the remaining amount payable to public unitholders. December 31, 2021 | 107 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.