What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-02-23 compared with 2020-02-20 · 307 added, 388 removed, 483 unchanged (59% of the section changed)

16 unchanged sentences

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 supporting the amounts and disclosures in the financial statements.

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.

Goodwill Impairment Assessment

As described in Note 2 to the consolidated financial statements, annually or as facts or circumstances may dictate, management performs a valuation of the Coffeyville Facility reporting unit to determine if a goodwill impairment exists.

During the second quarter of 2020 following the completion of the spring planting season and observation of certain market and other conditions described in Note 2, the Partnership concluded a triggering event occurred and performed an interim quantitative impairment assessment.

The identification of a triggering event and the determination of the fair value of the reporting unit required management to make significant estimates and develop assumptions related to cash flow forecasts using estimates of future nitrogen fertilizer product pricing, volumes to be sold, costs to be incurred for key process inputs and other operating expenses

December 31, 2020 | 46

as well as estimating appropriate discount rates and growth rates for future periods.

Changes in these assumptions could have had a significant impact on the identification of a triggering event as well as the reporting unit’s estimated fair value.

As a result of the quantitative impairment assessment, a full goodwill impairment of $41.0 million was recorded during the year ended December 31, 2020.

We identified the goodwill impairment assessment of the Coffeyville Facility reporting unit as a critical audit matter.

The principal consideration for our determination that the goodwill impairment assessment is a critical audit matter was the degree of complexity and subjectivity inherent in determining management’s estimates.

Our audit procedures related to the Coffeyville Facility reporting unit’s goodwill impairment assessment included the following, among others:

• We tested the design and operating effectiveness of management’s processes and controls over the identification of a triggering event and the fair value assessment of the Coffeyville reporting unit.

• We evaluated the reasonableness of a triggering event by considering the current market conditions following the completion of the spring planting season as well as the economic uncertainty surrounding the COVID-19 pandemic.

• We evaluated the reasonableness of future nitrogen fertilizer pricing assumptions by comparing the prices used by management to current industry and economic trends considering the impacts of the COVID-19 pandemic as well as comparing those prices to the historical performance of the Coffeyville reporting unit, performed sensitivity analyses to evaluate the change in the fair value estimates that would result from changes in those price assumptions, and recalculated management’s estimates.

• We compared forecasted sales volumes and expenses to historical operating results.

• We utilized valuation professionals with specialized skills and knowledge to assist in evaluating the Coffeyville Facility’s discounted cash flow model and guideline public company methods and certain significant assumptions, including the discount rate, terminal growth rate, and cost of capital.

• We evaluated whether the assumptions used were consistent with evidence obtained in other areas of the audit.

/s/ GRANT THORNTON LLP

47 unchanged sentences

16,819 20,067

$ 1,032,880 $ 1,137,955

LIABILITIES AND PARTNERS’ CAPITAL

Current liabilities:

Current portion of long-term debt

Accounts payable

1 unchanged sentence

Accounts payable to affiliates

Other current liabilities

24,043 24,066

Deferred revenue

30,631 27,841

Other current liabilities

18,709 24,043

Total current liabilities

8 unchanged sentences

Partners’ capital:

Common unitholders, 113,282,973 units issued and outstanding as of December 31, 2019 and 2018, respectively

Common unitholders, 10,705,710 and 11,328,297 units issued and outstanding as of December 31, 2020 and 2019, respectively

314,240 419,543

22 unchanged sentences

582 3,397 390

Operating income (loss) 27,380 6,314 ( 10,278 )

Other income (expense):

Goodwill impairment 40,969 — —

Operating (loss) income ( 34,882 ) 27,380 6,314

Other (expense) income:

Interest expense, net

3 unchanged sentences

Loss before income taxes ( 98,151 ) ( 34,987 ) ( 50,073 )

Income tax (benefit) expense ( 18 ) ( 46 ) 220

Income tax expense (benefit) 30 ( 18 ) ( 46 )

Net loss $ ( 98,181 ) $ ( 34,969 ) $ ( 50,027 )

1 unchanged sentence

$ ( 8.77 ) $ ( 3.09 ) $ ( 4.42 )

Distributions declared and paid per common unit

Distributions declared per common unit

Weighted-average common units outstanding:

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Balance at December 31, 2017 11,328,297 $ 549,852 $ 1 $ 549,853

— ( 50,027 ) — ( 50,027 )

Balance at December 31, 2018 11,328,297 499,825 1 499,826

Cash distributions to common unitholders – Affiliates

5 unchanged sentences

— ( 98,181 ) — ( 98,181 )

Balance at December 31, 2018 113,282,973 499,825 1 499,826

Cash distributions to common unitholders – Affiliates

— ( 15,568 ) — ( 15,568 )

Cash distributions to common unitholders – Non-affiliates

— ( 29,745 ) — ( 29,745 )

Repurchase of common units

( 623,177 ) ( 7,076 ) — ( 7,076 )

Fractional unit impact of reverse unit split

Other — ( 46 ) — ( 46 )

Balance at December 31, 2020 10,705,710 $ 314,240 $ 1 $ 314,241

10 unchanged sentences

Amortization of deferred financing costs and original issue discount 4,049 3,666 3,333

Goodwill impairment 40,969 — —

Loss on asset disposals 582 3,397 390

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Cash flows from financing activities:

Repurchase of common units ( 7,076 ) — —

Cash distributions to common unitholders – Affiliates

1 unchanged sentence

Cash distribution to common unitholders – Non-affiliates — ( 29,745 ) —

Payment of deferred financing costs ( 448 ) — —

Other financing activities ( 101 ) ( 97 ) —

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(1) Organization and Nature of Business

CVR Partners, LP (referred to as “CVR Partners” or the “Partnership”) is a Delaware limited partnership formed by CVR Energy, Inc.

CVR Partners, LP (“CVR Partners” or the “Partnership”) is a Delaware limited partnership formed by CVR Energy, Inc.

(together with its subsidiaries, but excluding the Partnership and its subsidiaries, “CVR Energy”) to own, operate and grow its nitrogen fertilizer business.

The Partnership produces nitrogen fertilizer products at two manufacturing facilities, which are located in Coffeyville, Kansas (the “Coffeyville Facility”) and East Dubuque, Illinois (the “East Dubuque Facility”).

As used in these financial statements, references to CVR Partners, the Partnership, “we”, “us”, and “our” may refer to consolidated subsidiaries of CVR Partners or one or both of the facilities, as the context may require.

Both facilities manufacture ammonia and are able to further upgrade to other nitrogen fertilizer products, principally urea ammonium nitrate (“UAN”).

Nitrogen fertilizer is used by farmers to improve the yield and quality of their crops, primarily corn and wheat.

The Partnership’s product sales are sold on a wholesale basis in the United States of America.

As of December 31, 2019 and 2018, public security holders held approximately 66 % of the Partnership’s outstanding limited partner interests and Coffeyville Resources, LLC (“CRLLC”), a wholly-owned subsidiary of CVR Energy, held approximately 34 % of the Partnership’s outstanding limited partner interests and 100 % of the general partner interest held by CVR GP, LLC (“CVR GP” or the “general partner”).

As of both December 31, 2019 and 2018, Icahn Enterprises L.P.

(“IEP”) and its affiliates owned approximately 71 % of the shares of CVR Energy.

The Partnership’s products are sold on a wholesale basis in the United States of America.

NYSE Listing Requirements and Reverse Unit Split

The Partnership’s common units are listed on the New York Stock Exchange (the “NYSE”) under the symbol “UAN.” On April 20, 2020, the average closing price of the Partnership’s common units over a 30 consecutive trading-day period fell below $1.00 per common unit, resulting in noncompliance with the continued listing standards in Section 802.01C of the NYSE Listed Company Manual.

The Partnership received written notification of this noncompliance from the NYSE on April 22, 2020, and had until January 1, 2021 to regain compliance or be subject to the NYSE’s suspension and delisting procedures.

On November 2, 2020, the Partnership announced that the board of directors of its general partner (the “Board”) had approved a 1-for-10 reverse split of the Partnership’s common units that was completed on November 23, 2020, pursuant to which each ten common units of the Partnership were converted into one common unit of the Partnership (the “Reverse Unit Split”).

In accordance with the Partnership’s Agreement of Limited Partnership, as amended (the “Partnership Agreement”), following the Reverse Unit Split, any fractional units of record holders were rounded up or down, as applicable, to the nearest whole common unit, with any fraction equal to or above 0.5 common units rounding up to the next higher common unit.

Following the Reverse Unit Split, the number of common units outstanding decreased from approximately 111 million common units to approximately 11 million common units, with proportionate adjustments to the common units under the Partnership’s long-term incentive plan and outstanding awards thereunder.

The Partnership’s common units began trading on a split-adjusted basis when markets opened on November 24, 2020, under the symbol “UAN” and a new CUSIP number.

As of November 30, 2020, the Reverse Unit Split enabled the Partnership to regain compliance with NYSE listing requirements ahead of the January 1, 2021 deadline.

All references to common units and per unit amounts in the consolidated financial statements and notes related thereto have been retrospectively adjusted to reflect the effect of the Reverse Unit Split for all periods presented.

Interest Holders

As of December 31, 2020, public common unit holders held approximately 64 % of the Partnership’s outstanding limited partner interests;

CVR Services, LLC (“CVR Services”) (formerly Coffeyville Resources, LLC), a wholly-owned subsidiary of CVR Energy, held approximately 36 % of the Partnership’s outstanding limited partner interests;

and CVR GP, LLC (“CVR GP” or the “general partner”), a wholly owned subsidiary of CVR Energy, held 100 % of the Partnership’s general partner interest.

As of December 31, 2020, Icahn Enterprises L.P.

(“IEP”) and its affiliates owned approximately 71 % of the common stock of CVR Energy.

Unit Repurchase Program

On May 6, 2020, the Board, on behalf of the Partnership, authorized a unit repurchase program (the “Unit Repurchase Program”).

The Unit Repurchase Program enables the Partnership to repurchase up to $ 10 million of the Partnership’s common units.

Repurchases under the Unit 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 of our general partner and are subject to market conditions, as well as corporate, regulatory, and other considerations.

During the year ended December 31, 2020, adjusted to reflect the impact of the Reverse Unit Split, the Partnership repurchased 623,177 common units on the open market

December 31, 2020 | 53

CVR Partners, LP and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

in accordance with a repurchase agreement under Rules 10b5-1 and 10b-18 of the Exchange Act at a cost of $ 7.1 million, inclusive of transaction costs, or an average price of $ 11.35 per common unit.

At December 31, 2020, the Partnership had $ 2.9 million in authority remaining under the Unit Repurchase Program.

On February 22, 2021, the Board authorized an additional $ 10 million for the Unit Repurchase Program.

This Unit Repurchase Program does not obligate the Partnership to acquire any common units and may be cancelled or terminated by the Board at any time.

Management and Operations

The Partnership, including CVR GP, also is party to a number of agreements with CVR Energy and its subsidiaries, including CVR GP, to manage certain business relations between the Partnership and the other parties thereto.

The various rights and responsibilities of the Partnership’s partners are set forth in the Partnership’s limited partnership agreement and, as applicable, those agreements with CVR Energy.

CVR GP manages and operates the Partnership via a combination of the general partner’s senior management team and CVR Energy’s senior management team pursuant to a services agreement among CVR Energy, CVR GP, and the Partnership.

The Partnership, including CVR GP, is led by the Board, and its committees and managed by the general partner’s executive officers, CVR Services (as sole member of the general partner), and certain officers of CVR Energy and its subsidiaries, pursuant to the Partnership Agreement, as well as a number of agreements between the Partnership, CVR GP, CVR Energy, and certain of their respective subsidiaries, including a service agreement.

See Note 9 (“Related Party Transactions”) for further discussion.

Common unitholders have limited voting rights on matters affecting the Partnership and have no right to elect the general partner’s directors on an annual or continuing basis.

Common unitholders have limited voting rights on matters affecting the Partnership and have no right to elect the general partner’s directors or officers, whether on an annual or continuing basis or otherwise.

Subsequent Events

The Partnership evaluated subsequent events, if any, that would require an adjustment to the Partnership’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.

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Principles of Consolidation

The accompanying Partnership consolidated financial statements, prepared in accordance with U.S.

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 CVR Partners and its wholly-owned subsidiaries.

2 unchanged sentences

Certain reclassifications have been made within the consolidated financial statements for the years ended December 31, 2019 and 2018 to conform with current presentation.

December 31, 2019 | 49

CVR Partners, LP and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Catalyst inventory with a value of $ 5.6 million as of December 31, 2019 was reclassified in the first quarter of 2020 to Other long-term assets to conform to current presentation.

Use of Estimates

We prepare our consolidated financial statements 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.

We review our estimates on an ongoing basis, based on currently available information.

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 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.

1 unchanged sentence

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.

Accounts Receivable

Our receivables primarily consist of customer accounts receivable recorded at the invoiced amounts and generally do not bear interest.

Also included within Accounts Receivable are unbilled fixed price contracts which is further discussed within Note 6 (“Revenue”).

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 are unbilled fixed price contracts which is discussed further within Note 6 (“Revenue”).

December 31, 2020 | 54

CVR Partners, LP and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 18 % and 25 %, respectively, of the accounts receivable balance at December 31, 2019 and 2018.

Inventories consist of fertilizer products which are valued at the lower of first-in, first-out (“FIFO”) cost, or net realizable value.

The largest concentration of credit for any one customer was approximately 20 % and 18 % of the net accounts receivable balance at December 31, 2020 and 2019, respectively.

Bad debt expense was $ 0.1 million and $ 0.1 million for the years ended December 31, 2020 and 2019, respectively.

A recovery was recognized during the year ended 2018 of $ 1.1 million related to bad debt expense previously written off.

Inventories consist of fertilizer products which are valued at the lower of FIFO cost, or net realizable value.

Inventories also include raw materials (primarily gauze, natural gas, and pet coke) and parts and supplies that are valued at the lower of moving-average cost, which approximates FIFO, or net realizable value.

7 unchanged sentences

At December 31, 2020 and 2019, inventories included depreciation of approximately $ 2.0 million and $ 4.5 million, respectively.

Property, Plant and Equipment

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.

9 unchanged sentences

Other 3 to 10

December 31, 2019 | 50

CVR Partners, LP and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Property, plant and equipment consisted of the following:

Property, plant and equipment, net consisted of the following:

(in thousands) 2020 2019

8 unchanged sentences

Total Property, plant and equipment, net $ 897,847 $ 951,959

December 31, 2020 | 55

CVR Partners, LP and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

1 unchanged sentence

Such expenses are reported in Direct operating expenses (exclusive of depreciation and amortization) in the Partnership’s Consolidated Statements of Operations.

As of December 31, 2020, the Partnership had not identified the existence of an impairment indicator for our long-lived asset groups as outlined under Accounting Standards Codification (“ASC”) Topic 360, Property, Plant, and Equipment .

At inception, the Partnership determines whether an arrangement is a lease and the appropriate lease classification.

6 unchanged sentences

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” section above is applicable.

The periodic lease payments are treated as payments of the lease obligation and interest is recorded as interest expense.

See “Recent Accounting Pronouncements - Adoption of Lease Standard” within this Note for a further discussion on the impacts of adopting the lease standard.

Impairment of Long-Lived Assets

The Partnership reviews long-lived assets (excluding goodwill, intangible assets with indefinite lives, and deferred tax assets) 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 its 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.

Goodwill is not amortized but is tested for impairment annually or more frequently if events or changes in circumstances indicate the asset might be impaired.

The Partnership uses November 1 of each year as its annual valuation date for its goodwill impairment test.

Impairment of Long-Lived Assets and Goodwill

Long-lived assets used in operations are assessed for impairment whenever changes in facts and circumstances indicate a possible significant deterioration in future expected cash flows.

If the sum of the undiscounted expected future cash flows of an asset group is less than the carrying value, including applicable liabilities, the carrying value is written down to its estimated fair value.

Individual assets are grouped for impairment purposes based on a judgmental assessment of the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other assets (for example, at a fertilizer facility level).

The Partnership tests goodwill for impairment annually impairment annually on November 1 of each year, or more frequently if events or changes in circumstances indicate the asset might be impaired.

One of the Partnership’s reporting units, the Coffeyville Facility, had a goodwill balance of $ 41.0 million at December 31, 2019.

During the second quarter of 2020, following completion of the spring planting season, the market pricing for ammonia and UAN, which are the facility’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 had negatively impacted 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 the Partnership’s near-term economic recovery assumptions, including revised forecasts for product pricing in 2020 and beyond, and market price performance of the Partnership’s common units, the Partnership 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 and an interim quantitative impairment assessment was performed.

Significant assumptions inherent in the valuation methodologies for goodwill included, 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 Facility reporting unit did not exceed its carrying value.

As a result, the Partnership recorded a full non-cash impairment charge of $ 41.0 million during the three months ended June 30, 2020.

There was no goodwill remaining as of December 31, 2020.

December 31, 2020 | 56

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Partnership performed its annual impairment review of goodwill for 2019, 2018, and 2017 and concluded there were no impairments.

For the period ended December 31, 2019, the Partnership determined there were no events or circumstances 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 at December 31, 2018.

For the periods ended December 31, 2018 and 2017, the fair value of the Coffeyville reporting unit exceeded its carrying value by approximately 36 % and 12 %, respectively, based upon the results of the Partnership’s goodwill impairment test.

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 termination date of the facility.

The deferred financing costs are included, net, within long-term debt and in other long-term assets for the line-of-credit arrangements where no debt balance exists.

The Partnership performed the annual impairment reviews of goodwill for 2019 and 2018 and concluded no impairments.

For the period ended December 31, 2019, the Partnership performed a qualitative assessment and concluded there were no events or circumstances which would trigger the performance of a quantitative analysis after reviewing all factors impacting the Coffeyville Facility, including improved market conditions and financial results in 2019 as compared to the financial forecasts from those used in the fair value analysis at December 31, 2018 where the estimated fair value of the Coffeyville Facility reporting unit exceeded its carrying value by approximately 36 % based upon the results of the Partnership’s quantitative goodwill impairment test.

Loss Contingencies

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The outcome of these matters cannot always be predicted accurately, but the Partnership accrues liabilities for these matters if the Partnership has determined that it is probable a loss has been incurred and the loss can be reasonably estimated.

Environmental, Health & Safety (“EHS”) Matters

As of December 31, 2020 and 2019, there are no matters or contingencies that require recognition or disclosure.

The Partnership is subject to various stringent federal, state, and local environmental, health, and safety rules and regulations.

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Revenue Recognition

We recognize revenue based on consideration specified in contracts or agreements with customers when we satisfy our performance obligations by transferring control over products or services to a customer.

The adoption of ASC 606 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.

The Partnership 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 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 accounting policies relevant to revenue include:

• Excise and other taxes collected from customers and remitted to governmental authorities are excluded from reported revenues;

• Revenue transactions that pass control at customers’ designated facilities;

2 unchanged sentences

Other considerations - Excise and other taxes collected from customers and remitted to governmental authorities are excluded from reported revenues.

December 31, 2019 | 52

CVR Partners, LP and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Cost Classifications

3 unchanged sentences

Direct operating expenses also include allocated share-based compensation from CVR Energy and its subsidiaries, as discussed in Note 7 (“Share-Based Compensation”).

Selling, general and administrative expenses consist primarily of legal expenses, treasury, accounting, marketing, human resources, information technology, and maintaining the corporate and administrative offices in Texas and Kansas.

Turnaround Expenses

The direct-expense method of accounting is used for turnaround activities.

Turnarounds represent major maintenance activities that require for the shutdown of significant parts of a plant to perform necessary inspection, cleaning, repairs, and replacements of assets.

Planned turnaround activities for the nitrogen facilities generally occur every two to three years .

Costs associated with these turnaround activities were included in Direct operating expenses (exclusive of depreciation and amortization) in the Consolidated Statements of Operations.

Costs incurred for routine repairs and maintenance or unplanned outages at the two facilities are expensed as incurred.

During the years ended December 31, 2019, 2018, and 2017, the Nitrogen Fertilizer Segment incurred turnaround expenses of $ 9.8 million, $ 6.4 million, and $ 2.6 million, respectively.

Selling, general and

December 31, 2020 | 57

CVR Partners, LP and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

administrative expenses consist primarily of legal expenses, treasury, accounting, marketing, human resources, information technology, and maintaining the corporate and administrative offices in Texas and Kansas.

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 are liability-classified and are measured at fair value at the end of each reporting period based on the applicable closing unit price.

The Partnership accounts for share-based compensation in accordance with ASC Topic 718, Compensation — Stock Compensation (“ASC 718”).

Currently, all of the Partnership’s share-based compensation awards are liability-classified and are measured at fair value at the end of each reporting period based on the applicable closing unit price.

Compensation expense will fluctuate based on changes in the applicable unit price value and expense reversals resulting from employee terminations prior to award vesting.

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See Note 9 (“Related Party Transactions”) for a detailed discussion of the billing procedures and the basis for calculating the charges for specific products and services.

Recent Accounting Pronouncements - Adoption of Lease Standard

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No.

2016-02, “Leases” (“ASU 2016-02”), creating a new topic, FASB ASC Topic 842, “Leases” (“Topic 842”), which supersedes lease requirements in FASB ASC Topic 840, “Leases.” The new standard revises accounting for operating leases by a lessee, among other changes, and requires a lessee to recognize a liability related to future lease payments and a right-of-use (“ROU”) asset representing its right to use the underlying asset for the lease term on the balance sheet.

December 31, 2019 | 53

CVR Partners, LP and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

We adopted Topic 842 as of January 1, 2019, electing the option to apply the transition provisions at the adoption date instead of the earliest comparative period presented in the financial statements.

In connection with the adoption of Topic 842, we made the following elections:

• Only ROU assets and the related lease liabilities for leases with an initial term greater than one year were and will be recognized;

• The accounting treatment for existing land easements was carried forward;

• Lease and non-lease components were not, and will not, be bifurcated for all of the Partnership’s asset groups;

• The portfolio approach was, and will continue to be, used in the selection of the discount rate used to calculate minimum lease payments and the related ROU asset and operating lease liability amounts.

The adoption of Topic 842 on January 1, 2019 incrementally impacted the Partnership’s condensed consolidated balance sheet as of that date.

The following table presents the financial statement line items impacted by the Partnership’s adoption of Topic 842.

(in thousands) December 31, 2018

Effect of Adoption of

Topic 842 January 1, 2019

Current assets:

Prepaid expenses and other current assets $ 6,989 $ ( 2,650 ) (1) $ 4,339

Total currents assets 193,981 ( 2,650 ) 191,331

Other long-term assets

4,198 16,923 (2) 21,121

Total assets $ 1,254,388 $ 14,273 $ 1,268,661

Current liabilities:

Other current liabilities

$ 24,066 $ 3,462 (3) $ 27,528

Total current liabilities 122,635 3,462 126,097

Long-term liabilities:

Other long-term liabilities 2,938 10,811 (3) 13,749

Total long-term liabilities 631,927 10,811 642,738

Total liabilities and partners’ capital $ 1,254,388 $ 14,273 $ 1,268,661

(1) Represents lease prepayments reclassified to ROU assets.

(2) Represents recognition of initial ROU assets for operating leases, including the reclassification of certain lease prepayments.

(3) Represents the initial recognition of lease liabilities.

Recent Accounting Pronouncements - Adoption of Internal-Use Software Standard

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40).

This ASU better aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that’s also a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

Effective January 1, 2019, we adopted this ASU and chose to apply the prospective approach for all implementation costs incurred after the date of adoption.

We evaluated the effects of adopting this new accounting guidance and concluded it did not have a material impact on the Partnership’s consolidated financial position or results of operations.

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

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326).

Recent Accounting Pronouncements - Adoption of Credit Losses Standard

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326).

The ASU replaces the incurred loss model with a current expected credit loss model for more timely recognition of expected impairment losses for most financial assets and certain other instruments that are not measured at fair value through net income.

Effective January 1, 2020, we adopted this ASU and evaluated the effects of adopting this new accounting guidance.

The adoption will not have a material impact on the Partnership’s consolidated financial position or results of operations.

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Effective January 1, 2020, we adopted this ASU with no material impact on the Partnership’s consolidated financial position or results of operations.

Recent Accounting Pronouncements - Adoption of Fair Value Measurement Standard

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820).

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Certain disclosures are required to be applied on a retrospective basis and others on a prospective basis.

Effective January 1, 2020, we adopted this ASU and evaluated the effects of adopting this new accounting guidance.

The adoption will not have a material impact on the Partnership’s disclosures.

Effective January 1, 2020, we adopted this ASU with no material impact on the Partnership’s disclosures.

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

In December 2019, the FASB issued 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.

This standard is effective for the Partnership beginning January 1, 2021, with early adoption permitted.

The Partnership is evaluating the effect of adopting this new accounting guidance on its consolidated financial

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statements, but does not currently expect adoption will have a material impact on the Partnership’s consolidated financial position or results of operations.

The Partnership does not intend to early adopt this ASU.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848).

This ASU was issued because, by the end of 2021, banks will no longer be required to report information that is used to determine London Interbank Offered Rate (“LIBOR”), which is used globally by all types of entities.

As a result, LIBOR could be discontinued, as well as other interest rates used globally.

ASU 2020-04 provides companies with optional expedients for contract modifications under Topics 310, 470, 842, and 815-15, excluded components of certain hedging relationships, fair value hedges, and cash flow hedges, as well as certain exceptions, which are intended to help ease the potential accounting burden associated with transitioning away from these reference rates.

Companies can apply the ASU immediately.

However, the guidance will only be available for a limited time (generally through December 31, 2022).

The Partnership is currently evaluating the impact that adopting this new accounting standard will have on its consolidated financial statements and related disclosures.

In October 2020, the FASB issued ASU 2020-10, Codification Improvements.

The ASU amends various sections of the codification in the Boards ongoing efforts to simplify and improve guidance.

This standard is effective for the Partnership beginning January 1, 2021, with early adoption permitted.

The Partnership is evaluating the effect of adopting this new accounting guidance on its consolidated financial statements, but does not currently expect adoption will have a material impact on the Partnership’s consolidated financial position or results of operations.

The Partnership does not intend to early adopt this ASU.

Lease Overview

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Certain leases also include options to purchase the leased property.

The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

Certain of our lease agreements include rental payments which are adjusted periodically for factors such as inflation.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Additionally, we do not have any material lessor or sub-leasing arrangements.

Effect of Initial Adoption of New Lease Standard - January 1, 2019

Upon initial recognition, our ROU assets for operating and finance leases were comprised of the following:

(in thousands) January 1, 2019

(initial recognition)

Railcar leases $ 14,255

Real Estate and other leases (1) 243

Total ROU assets $ 14,498

(1) Includes $ 0.2 million of finance leases for operating equipment as of January 1, 2019.

Lease Liabilities .

Upon initial recognition, our lease liabilities for operating and finance leases were comprised of the following:

(in thousands) January 1, 2019

(initial recognition)

Current liabilities:

Operating leases $ 3,462

Finance leases 225

Long-term liabilities:

Operating leases 10,811

Total lease liabilities $ 14,498

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Balance Sheet Summary at December 31, 2019

The following tables summarize the ROU asset and lease liability balances for the Partnership’s operating and finance leases at December 31, 2019:

(in thousands) December 31, 2019

Additionally, we do not have any lessor or sub-leasing arrangements.

Balance Sheet Summary at December 31, 2020 and 2019

The following tables summarize the ROU asset and lease liability balances for the Partnership’s operating and finance leases at December 31, 2020 and 2019:

(in thousands) 2020 2019

Operating Leases:

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Real estate and other $ 105 $ 205

Lease Expense Summary for the year ended December 31, 2019

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Lease Expense Summary for the Year Ended December 31, 2020 and 2019

We recognize lease expense on a straight-line basis over the lease term.

For the year ended December 31, 2019, we recognized lease expense comprised of the following components:

(in thousands) December 31, 2019

For the year ended December 31, 2020 and 2019, we recognized lease expense comprised of the following components:

Year Ended December 31,

(in thousands) 2020 2019

Operating lease expense $ 4,113 $ 3,122

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Interest expense on lease liability 6 10

Short-term lease expense, recognized within Direct operating expenses (exclusive of depreciation and amortization), was $ 0.4 million for the year ended December 31, 2019.

Short-term lease expense, recognized within Direct operating expenses (exclusive of depreciation and amortization), was $ 0.4 million and $ 0.4 million for the year ended December 31, 2020 and 2019, respectively.

Lease Terms and Discount Rates

The following outlines the remaining lease terms and discount rates used in the measurement of the Partnership’s ROU assets and liabilities:

December 31, 2019 January 1, 2019

(initial recognition)

Year Ended December 31,

Weighted-average remaining lease term (years)

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Finance Leases 4.0 % 3.9 %

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Maturities of Lease Liabilities

The following summarizes the remaining minimum lease payments through maturity of the Partnership’s ROU assets and liabilities at December 31, 2020:

(in thousands) Operating Leases Financing Leases

2020 $ 4,019 $ 107

(in thousands) Operating Leases Finance Leases

2021 $ 3,672 $ 107

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Total lease liability $ 8,563 $ 105

On July 31, 2020, the Partnership and Messer LLC (“Messer”) entered into an On-Site Product Supply Agreement (the “Messer Agreement”).

Under the Messer Agreement, among other obligations, Messer is obligated to supply and make certain capital improvements during the term of the Messer Agreement, and the Partnership is obligated to take as available and pay for, oxygen, nitrogen, and compressed dry air from Messer’s facility.

This arrangement for the Partnership’s purchase of oxygen, nitrogen, and dry air from Messer does not meet the definition of a lease under FASB ASC Topic 842, Leases, (“Topic 842”), as the Partnership 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 Messer Agreement.

The Messer Agreement also obligates Messer to install a new oxygen

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storage vessel and related equipment to be used solely by the Coffeyville Facility.

The arrangement for the use of the oxygen storage vessel and related equipment meets the definition of a lease under Topic 842, as the Partnership will receive all output associated with the vessel.

Based on terms outlined in the Messer Agreement, the Partnership expects the lease of the oxygen storage vessel to be classified as a financing lease with an amount between $ 20 and $ 25 million being capitalized upon lease commencement when the oxygen storage vessel is placed in service.

(4) Other Current Liabilities

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Personnel accruals $ 7,475 $ 8,187

Share-based compensation 5,011 2,667

Operating lease liabilities 3,309 3,523

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Sales incentives 2,215 1,614

Share-based compensation 442 5,011

Prepaid revenue contracts 197 277

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Total other current liabilities $ 18,709 $ 24,043

(1) The lease standard was adopted on January 1, 2019 on a prospective basis.

Therefore, only 2019 disclosures are applicable to be included within the table above.

Other current liabilities include amounts accrued by the Partnership and owed to CVR Energy and its affiliates under the shared services agreement of $ 5.4 million and $ 3.5 million at December 31, 2019 and 2018, respectively.

Other current liabilities include amounts accrued by the Partnership and owed to CVR Energy and its affiliates of $ 5.4 million at December 31, 2019.

The Partnership had no separate affiliate liabilities owed to CVR Energy and its affiliates at December 31, 2020, as allocation of affiliate accruals is part of the amount charged to the Partnership under the new Corporate Master Service Agreement, which became effective January 1, 2020 (the “Corporate MSA”).

Refer to Note 9 (“Related Party Transactions”) for additional discussion.

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(in thousands) 2020 2019

9.25 % Senior Secured Notes, due 2023 (1)(2)

$ 645,000 $ 645,000

6.50 % Senior Notes, due 2021

9.25 % Senior Secured Notes, due June 2023 (1)(2)

$ 645,000 $ 645,000

6.50 % Senior Notes, due April 2021, net of current portion (3)

Unamortized discount and debt issuance costs (4) ( 11,058 ) ( 14,834 )

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633,942 632,406

Current portion of long-term debt (3) 2,240 —

Total long-term debt, including current portion

$ 636,182 $ 632,406

(1) This debt was issued at a $ 16.1 million discount which is being amortized, as interest expense, over the remaining term of the debt.

Debt issuance costs associated with this debt totaled $ 9.4 million.

(2) The estimated fair value of total long-term debt outstanding was approximately $ 645.7 million and $ 673.8 million as of December 31, 2020 and 2019, respectively.

This estimate of fair value is a Level 2 measurement as it was determined by quotations obtained from a broker-dealer who makes a market in these and similar securities.

(3) The 6.50 % Senior Notes, due April 2021, mature within 12 months, and, therefore, the outstanding balance of $ 2.2 million has been classified as short-term as of December 31, 2020.

(4) For the years ended December 31, 2020, 2019, and 2018, amortization of the discount on debt and amortization of deferred financing costs reported as Interest expense, net totaled approximately $ 3.8 million, $ 3.4 million, and $ 3.1 million, respectively.

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(2) The estimated fair value of total long-term debt outstanding was approximately $ 673.8 million and $ 670.8 million as of December 31, 2019 and 2018, respectively.

This estimate of fair value is Level 2 as it was determined by quotations obtained from a broker-dealer who makes a market in these and similar securities.

(3) For the years ended December 31, 2019, 2018, and 2017, amortization of the discount on debt and amortization of deferred financing costs reported as Interest expense, net totaled approximately $ 3.7 million, $ 3.3 million, and $ 3.0 million, respectively.

Credit Facilities Outstanding

Credit Agreements

(in thousands) Total Capacity Amount borrowed as of December 31, 2020 Outstanding Letters of Credit Available capacity as of December 31, 2020 Maturity Date

Asset Based (AB) Credit Facility (1)

ABL Credit Agreement (1)(2)

$ 20,146 $ — $ — $ 20,146 September 30, 2022

(1) At the option of the borrowers, loans under the asset based credit facility initially bear interest at an annual rate equal to (i) 2.00 % plus LIBOR or (ii) 1.00 % plus a base rate, subject to a 0.50 % step-down based on the previous quarter’s excess availability.

(1) At the option of the borrowers, loans under the ABL Credit Agreement initially bear interest at an annual rate equal to (i) 1.00 % plus a base rate, Thereafter, loans will bear interest (i) at such rates if our quarterly excess availability is greater than 50% and (ii) 1.50 % plus a base rate, otherwise.

(2) The ABL Credit Agreement was amended on September 29, 2020 to, among other things, reduce the commitments thereunder to $ 35 million and extended the maturity date to September 30, 2022.

Deferred financing costs of $ 0.4 million were capitalized related to this amendment and will be amortized from Prepaid expenses and other current assets and Other long-term assets over the remaining term of the ABL Credit Agreement.

Amortization expense was $ 0.2 million for the years ended December 31, 2020, 2019, and 2018.

9.25 % Senior Secured Notes due 2023

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2020 102.313 %

2021 and thereafter 100 %

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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 Notes to cause the acceleration of the 2023 Notes, in addition to the pursuit of other available remedies.

6.50 % Senior Notes, due 2021

The Partnership issued $ 320 million aggregate principal amount of 6.50 % Senior Notes due 2021 (the “2021 Notes”) in April 2016, prior to the East Dubuque merger.

The 2021 Notes bear interest at a rate 6.50 % per annum, payable semi-annually in arrears on April 15 and October 15 of each year.

The 2021 Notes are scheduled to mature April 15, 2021, unless repurchased or redeemed earlier in accordance with their terms.

The substantial majority of the 2021 Notes were repurchased in June 2016.

As of December 31, 2019, 2018, and 2017, $ 2.2 million of principal amount of the 2021 Notes remained outstanding.

ABL Credit Agreement

On September 29, 2020, CVR Partners amended the ABL Credit Agreement, a senior secured asset based revolving credit facility (the “ABL Credit Facility”) with a group of lenders and UBS AG (“UBS”), as administrative agent and collateral agent.

The ABL Credit Amendment amended the aggregate principal amount of availability of up to $ 35 million with an incremental facility, which permits an increase in borrowings of up to $ 25 million in the aggregate subject to additional lender commitments and certain other conditions.

The ABL Credit Amendment is scheduled to mature on September 30, 2022.

The Partnership is in compliance with all covenants of the 9.25 % Senior Secured Notes, the 6.50 % Senior Notes, and the ABL Credit Agreement as of December 31, 2020.

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Asset Based (AB) Credit Facility

On September 30, 2016, CVR Partners entered into a senior secured asset based revolving credit facility (the “AB Credit Facility”) with a group of lenders and UBS AG (“UBS”), as administrative agent and collateral agent.

The AB Credit Facility has an aggregate principal amount of availability of up to $ 50 million with an incremental facility, which permits an increase in borrowings of up to $ 25 million in the aggregate subject to additional lender commitments and certain other conditions.

The AB Credit Facility is scheduled to mature on September 30, 2021.

The Partnership is in compliance with all covenants of the 9.25 % Senior Secured Notes, the 6.50 % Senior Notes, and the AB Credit Facility as of December 31, 2019.

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

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The Partnership 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.

Transaction price allocated to remaining performance obligations

Transaction Price - Allocation to Remaining Performance Obligations

As of December 31, 2020, the Partnership had approximately $ 6.1 million of remaining performance obligations for contracts with an original expected duration of more than one year.

The Partnership expects to recognize approximately $ 3.5 million of these performance obligations as revenue by the end of 2021, an additional $ 2.3 million in 2022, and the remaining balance thereafter.

The Partnership has elected to not disclose the amount of transaction price allocated to remaining

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performance obligations for contracts with an original expected duration of less than one year.

The Partnership has elected to not disclose the amount of transaction price allocated to remaining performance obligations for contracts with an original expected duration of less than one year.

The Partnership has elected to not disclose variable consideration allocated to wholly unsatisfied performance obligations that are based on market prices that have not yet been determined.

Contract Balances

The Partnership’s deferred revenue is a contract liability that primarily relates to fertilizer sales contracts requiring customer prepayment prior to product delivery to guarantee a price and supply of nitrogen fertilizer.

The Partnership’s deferred revenue is a contract liability that primarily relates to nitrogen fertilizer sales contracts requiring customer prepayment prior to product delivery to guarantee a price and supply of nitrogen fertilizer.

Deferred revenue is recorded at the point in time in which a prepaid contract is legally enforceable and the associated right to consideration is unconditional prior to transferring product to the customer.

An associated receivable is recorded for uncollected prepaid contract amounts.

An associated receivable is recorded for uncollected prepaid

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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.

At December 31, 2019, $ 18.7 million of the deferred revenue balance pertained to prepaid contracts where the associated receivable was recognized as it had not yet been collected by the Partnership.

A summary of the deferred revenue activity during the year ended December 31, 2020 is presented below:

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Major Customers

CVR Partners has two customers who comprise 28 %, 20 %, and 16 % of net sales for the years ended December 31, 2019, 2018, and 2017, respectively.

CVR Partners has two customers who comprised 26 %, 28 %, and 20 % of net sales for the years ended December 31, 2020, 2019, and 2018, respectively.

(7) Share-Based Compensation

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Individuals who are eligible to receive awards and grants under the LTIP include CVR Energy’s and the Partnership’s employees, officers, consultants, advisors, and directors.

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A summary of phantom unit award activity and changes under the LTIP during the year ended December 31, 2020 is presented below:

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For the years ended December 31, 2020, 2019, and 2018, the Partnership paid cash of $ 0.8 million, $ 1.7 million, and $ 1.7 million, respectively, to settle liability-classified awards upon vesting.

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Incentive Unit Awards — CVR Energy

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Costs related to these incentive unit awards are allocated to the Partnership based on time spent on Partnership business.

As of December 31, 2019 and 2018, the Partnership had liabilities related to these incentive unit awards of $ 1.4 million and $ 0.4 million, respectively, which is recorded in Other current liabilities.

For the year ended December 31, 2019, the Partnership had no reimbursements and $ 0.8 million, and $ 1.0 million for the years ended December 31, 2018 and 2017, respectively, related to its allocated portion of CVR Energy’s incentive unit awards payments.

Total compensation expense for the years ended December 31, 2019, 2018, and 2017 related to the incentive units was $ 1.0 million, $ 0.5 million and $ 1.4 million, respectively.

Total compensation expense allocated to the Partnership for the years ended December 31, 2020, 2019, and 2018 related to the incentive units was $ 0.4 million, $ 1.0 million and $ 0.5 million, respectively.

The Partnership had no separate liabilities related to these incentive unit awards as of December 31, 2020, as the allocation of compensation expense for incentive unit awards is part of the amount charged to the Partnership under the Corporate MSA.

The Partnership had a liability of $ 1.4 million as of December 31, 2019, which is recorded in Other current liabilities.

For the years ended December 31, 2020 and 2018, the Partnership made reimbursements to CVR Energy of $ 2.2 million and $ 0.8 million, respectively, and no reimbursements for the year ended December 31, 2019 related to its allocated portion of CVR Energy’s incentive unit awards payments.

See Note 9 (“Related Party Transactions”) for further discussion of the Corporate MSA.

Performance Unit Awards

In connection with an employment agreement dated November 1, 2017, the Partnership’s executive chairman received two performance unit awards:

A performance unit award was granted for the performance cycle from January 1, 2018 to December 31, 2018 (the “2018 Performance Unit Award”) that vested and was paid in February 2019.

Compensation cost for the 2018 Performance Unit Award of $ 0.1 million was allocated to the Partnership and was recorded within Other current liabilities on the Consolidated Balance Sheets as of December 31, 2018.

The Partnership reimbursed CVR Energy for this allocated portion of the performance unit award in 2019.

Additionally, on November 1, 2017, CVR Energy entered into a performance unit award agreement (the “2017 Performance Unit Award Agreement”) with our executive chairman representing the right to receive upon vesting, a cash payment equal to $ 10.0 million if the average closing price of CVR Energy’s common stock over the 30 day trading period from January 4, 2022 to February 15, 2022 is equal to or greater than $ 60 per share.

Compensation costs recognized for the years ended December 31, 2019, 2018, and 2017 were $ 0.0 million, $ 0.4 million, and $ 0.5 million, respectively.

As of December 31, 2019 and 2018, the Partnership had an outstanding liability of $ 0.4 million and $ 0.4 million, which was recorded in Other current liabilities on the Consolidated Balance Sheets.

In connection with an employment agreement with the Partnership’s Executive Chairman dated November 1, 2017, CVR Energy entered into a performance unit award agreement (the “2017 Performance Unit Award Agreement”) on November 1, 2017, with our Executive Chairman representing the right to receive upon vesting, a cash payment equal to $ 10.0 million if the average closing price of CVR Energy’s common stock over the 30 day trading period from January 4, 2022 to February 15, 2022 is equal to or greater than $ 60 per share.

There were no compensation costs recognized for the years ended December 31, 2020 and 2019 under the 2017 Performance Unit Award Agreement.

Compensation costs recognized for the year ended December 31, 2018 were $ 0.4 million.

Under the 2017 Performance Unit Award Agreement, as of December 31, 2020, the Partnership had no outstanding liability, and an outstanding liability of $ 0.4 million as of December 31, 2019, which was recorded in Other current liabilities on the Consolidated Balance Sheets.

At December 31, 2020, there was approximately $ 2.3 million of total unrecognized compensation costs related to the 2017 Performance Unit Award Agreement.

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Other Benefit Plans

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The Partnership’s contributions under the Plans were approximately $ 1.9 million, $ 1.8 million, and $ 1.8 million for the years ended December 31, 2020, 2019, and 2018, respectively.

(8) Commitments and Contingencies

Effective January 1, 2021, the matching contributions for the Plans have been suspended.

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(8) Commitments

Supply Commitments

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Supply Commitments - The Partnership is a party to various supply agreements with both related and third parties which commit the Partnership to purchase minimum volumes of hydrogen, oxygen, nitrogen, pet coke, and natural gas to run its plants’ operations.

The Partnership is also party to a natural gas supply agreement with a third-party that renews annually.

The Partnership is also party to a natural gas supply agreement with various third-parties.

Natural gas expense for the years ended December 31, 2020, 2019, and 2018 totaled approximately $ 32.4 million, $ 33.1 million, and $ 42.4 million, respectively, and is included in Cost of materials and other and Direct operating expenses (exclusive of depreciation and amortization).

The Coffeyville Facility has a hydrogen purchase and sale agreement with CVR Energy’s Coffeyville refinery, pursuant to which it agrees to pay a monthly fixed fee.

Additionally, the Coffeyville Facility purchases pet coke under a coke supply agreement.

See Note 9 (“Related Party Transactions”) for further discussion of and amounts incurred for the hydrogen purchase and sale agreement and pet coke supply agreement.

The Coffeyville Facility is also party to the Amended and Restated On-Site Product Supply Agreement with a third-party, pursuant to which, it is required to take as available and pay for the supply of oxygen and nitrogen to the plant.

This agreement expires in April 2020.

The Partnership entered into the Coffeyville Master Service Agreement (“Coffeyville MSA”) with Coffeyville Resources Refining & Marketing, LLC, an indirect, wholly-owned subsidiary of CVR Energy (“CRRM”), pursuant to which, it agrees to pay a monthly fee for pet coke purchases.

The Partnership’s Coffeyville Facility obtains a significant amount ( 60 % on average during last five years , 33 % in 2020) of the pet coke it needs from the Coffeyville MSA.

Any remaining pet coke needs are required to be purchased from various third parties.

The price paid pursuant to the Coffeyville MSA is based on the lesser of a pet coke price derived from the price received for UAN (the “UAN-based Price”) or a pet coke price index.

The UAN-based Price begins with a pet coke price of $ 25 per ton based on a price per ton for UAN that excludes transportation cost (“netback price”) of $ 205 per ton, and adjusts up or down $ 0.50 per ton for every $ 1.00 change in the netback price.

The UAN-based price has a ceiling of $ 40 per ton and a floor of $ 5 per ton.

See Note 9 (“Related Party Transactions”) for further discussion of the Coffeyville MSA.

Pursuant to the Coffeyville MSA, the Partnership agreed, with respect to the Coffeyville Facility, to pay CRRM for hydrogen purchases.

The committed hydrogen volume pricing is based on a monthly fixed fee (based on the fixed and capital charges associated with producing the committed volume) and a monthly variable fee (based on the natural gas price associated with hydrogen actually received).

In the event the Coffeyville Facility fails to take delivery of the full committed volume in a month, the Partnership remains obligated to pay CRRM for the monthly fixed fee and the monthly variable fee based upon the actual hydrogen volume received, if any.

In the event CRRM fails to deliver any portion of the committed volume for the applicable month for any reason other than planned repairs and maintenance, the Partnership will be entitled to a pro-rata reduction of the monthly fixed fee.

See Note 9 (“Related Party Transactions”) for further discussion.

The Partnership, with respect to the Coffeyville Facility, is also party to the Messer Agreement, pursuant to which, it is required to take as available and pay for the supply of oxygen and nitrogen to the plant.

This agreement was renewed and commenced in July 2020 for an initial term of 15 years with annual renewals thereafter.

Expenses associated with this agreement are included in Direct operating expenses (exclusive of depreciation and amortization), and, for the years ended December 31, 2020, 2019, and 2018, totaled approximately $ 4.2 million, $ 4.2 million, and $ 3.8 million, respectively.

In addition to the related party coke supply agreement, the Coffeyville Facility has pet coke supply agreements with multiple third-party refineries to purchase 300,000 tons of pet coke at a fixed price through the end of the terms, currently ending in December 2020.

The Coffeyville Facility has historically purchased third-party pet coke based on spot purchases and supply agreements in place at the time.

The delivered cost of third-party pet coke purchases is included in Cost of materials and

In addition to the related party Coffeyville MSA, the Coffeyville Facility has pet coke supply agreements with multiple third-party refineries to purchase approximately 275,000 tons of pet coke at a fixed price for delivery at different dates through December 2021.

The Coffeyville Facility has historically purchased third-party pet coke based on spot purchases and supply

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other and totaled approximately $ 10.3 million, $ 4.8 million, and $ 4.0 million for the years ended December 31, 2019, 2018, and 2017, respectively.

The East Dubuque Facility has a utility service agreement with a third-party energy cooperative.

The term of this agreement ends in June 2022 and includes certain charges on a take-or-pay basis.

The cost of utilities, including natural gas purchases, is included in Direct operating expenses (exclusive of depreciation and amortization) and amounts associated with this agreement totaled approximately $ 3.7 million, $ 10.6 million, and $ 10.4 million for the years ended December 31, 2019, 2018, and 2017, respectively.

Contingencies

We do not have any pending litigation or contingencies as of December 31, 2019.

agreements in place at the time.

The delivered cost of third-party pet coke purchases is included in Cost of materials and other and totaled approximately $ 17.9 million, $ 10.3 million, and $ 4.8 million for the years ended December 31, 2020, 2019, and 2018, respectively.

During 2019, the Partnership, with respect to the East Dubuque Facility, entered into a utility service agreement with a new third-party energy cooperative.

The new utility service agreement does not contain purchase commitments.

The cost of utilities, including natural gas purchases, is included in Direct operating expenses (exclusive of depreciation and amortization).

Prior to entering into the new utility service agreement, the East Dubuque Facility had a utility service agreement with a third-party energy cooperative which included certain charges on a take-or-pay basis and amounts associated with this agreement totaled approximately $ 3.7 million and $ 10.6 million for the years ended December 31, 2019 and 2018, respectively.

(9) Related Party Transactions

Activity associated with the Partnership’s related party arrangements for the years ended December 31, 2019, 2018, and 2017 is summarized below:

Sales to related parties

Year Ended December 31,

(in thousands) Related Party 2019 2018 2017

Feedstock and Shared Services Agreement CRRM (1) $ 119 $ 371 $ 405

Expenses from related parties

Year Ended December 31,

(in thousands) Related Party 2019 2018 2017

Cost of materials and other

Hydrogen Purchase and Sale Agreement CRRM (1) $ 4,648 $ 4,218 $ 4,167

Coke Supply Agreement CRRM (1) 3,628 2,630 1,985

Terminal and Operating Agreement CRT (2) 84 31 61

Direct operating expenses (exclusive of depreciation and amortization)

Services Agreement CVR Energy $ 3,390 $ 2,990 $ 3,061

Limited Partnership Agreement CVR GP 728 756 580

Lease Agreement CRRM (1) 117 114 112

Selling, general and administrative expenses

Services Agreement CVR Energy $ 15,755 $ 14,157 $ 12,924

Limited Partnership Agreement CVR GP 2,526 2,419 2,691

Limited Partnership Agreement

The Partnership’s general partner manages the Partnership’s operations and activities as specified in CVR Partners’ limited partnership agreement.

The general partner of the Partnership, CVR GP, is managed by its board of directors.

The partnership agreement provides that the Partnership will reimburse CVR GP for all direct and indirect expenses it incurs or payments it makes on behalf of the Partnership, including salary, bonus, incentive compensation, and other amounts paid to any person to perform services for the Partnership or for its general partner in connection with operating the Partnership.

Omnibus Agreement

We are party to an omnibus agreement with CVR Energy and our general partner, pursuant to which we have agreed that CVR Energy will have a preferential right to acquire any assets or group of assets that do not constitute assets used in a fertilizer restricted business.

In determining whether to exercise any preferential right under the omnibus agreement, CVR Energy will be permitted to act in its sole discretion, without any fiduciary obligation to us or the unitholders whatsoever.

These obligations will continue so long as CVR Energy owns at least 50% of our general partner.

There was no activity reported under this agreement during the years ended 2020, 2019, and 2018.

Coffeyville MSA

Effective January 1, 2020, the Conflicts Committee of the Board and the audit committee of CVR Energy approved, and CRNF and CRRM entered into the Coffeyville MSA which is comprised of various supply and service agreements effectively replacing, on substantially equivalent terms, other related party agreements in place during 2019 and 2018 as (the “Replaced Coffeyville Agreements”).

In addition to affirming the terms and services described in the Replaced Coffeyville Agreements and resetting the durations thereof, as applicable, commencing January 1, 2020, the Coffeyville MSA provides for monthly payments, subject to netting, for all goods and services supplied under the Coffeyville MSA.

The Coffeyville MSA will continue in effect until terminated in writing, in whole or in part, by either party, or until terminated automatically in the event a party falls out of common control with the other party.

The Coffeyville MSA provides the following services:

• Cross Easements - Both CRNF and CRRM can access and utilize each other’s land in certain circumstances in order to operate their respective businesses.

• Hydrogen Purchase and Sale - CRRM agrees to sell and deliver a committed hydrogen volume of 90,000 mscf per month to CRNF and CRNF agrees to purchase and receive the committed volume.

CRNF also has the option to purchase excess volume from CRRM, if available.

• Raw Water and Facilities Sharing - CRNF and CRRM are each owners of an undivided one-half interest in and to the water rights and agree to (i) allocate raw water resources between CVR Energy’s Coffeyville Refinery and our Coffeyville Facility and (ii) provide for the management of the water intake system which draws raw water from the Verdigris River for both our Coffeyville Facility and CVR Energy’s Coffeyville Refinery.

• Coke Supply - Our Coffeyville Facility purchases pet coke from CVR Energy’s Coffeyville Refinery which provides that CRRM must deliver, and the Coffeyville Facility must purchase, during each calendar year an annual required amount of pet coke equal to the lesser of (i) 100 percent of the pet coke or (ii) 500,000 tons of pet coke.

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Amounts due to related parties

(in thousands) Related Party 2019 2018

Prepaid expenses and other current assets

Feedstock and Shared Services Agreement:

CRRM (1) $ 249 $ 208

Accounts payable to affiliates

Feedstock and Shared Services Agreement CRRM (1) $ 788 $ 1,106

Hydrogen Purchase and Sale Agreement CRRM (1) 271 324

Coke Supply Agreement CRRM (1) 15 138

GP Services Agreement CVR GP 1,182 1,372

Other current liabilities

Limited Partnership Agreement CVR GP $ 1,327 $ 1,179

Services Agreement CVR Energy 4,124 2,352

Other long-term liabilities

Limited Partnership Agreement CVR GP $ 119 $ 503

(1) “CRRM” is Coffeyville Resources Refining and Marketing, LLC, an indirect wholly-owned subsidiary of CVR Energy.

(2) “CRT” is Coffeyville Resources Terminal, LLC, an indirect wholly-owned subsidiary of CVR Energy.

Feedstock and Shared Services Agreement

Our Coffeyville Facility operates under a feedstock and shared services agreement, as amended, (the “Feedstock Agreement”) with CRRM under which the two parties provide feedstock and other services to one another.

calendar month, more than 41,667 tons of pet coke is produced and available for purchase, then the Coffeyville Facility will have the option to purchase the excess at the purchase price provided for in the agreement.

If the option is declined, CRRM may sell the excess to a third-party.

• Feedstock and Shared Services - CRNF and CRRM provide feedstock and other services to one another.

These feedstocks and services are utilized in the respective production processes of CRRM’s Coffeyville Refinery and our Coffeyville Facility.

Feedstocks provided under the agreement include, among others, hydrogen, high-pressure steam, nitrogen, instrument air, oxygen, and natural gas.

The Feedstock Agreement has an initial term of 20 years, ending in 2031, which will be automatically extended for successive five -year renewal periods.

Either party may terminate the Feedstock Agreement, effective upon the last day of a term, by giving notice no later than three years prior to a renewal date.

Coke Supply Agreement

Our Coffeyville Facility purchases pet coke from CVR Energy’s Coffeyville refinery under a coke supply agreement (the “Coke Supply Agreement”), which provides that CRRM must deliver, and the Coffeyville Facility must purchase, during each calendar year an annual required amount of pet coke equal to the lesser of (i) 100 percent of the pet coke or (ii) 500,000 tons of pet coke.

If during a calendar month, more than 41,667 tons of pet coke is produced and available for purchase, then the Coffeyville Facility will have the option to purchase the excess at the purchase price provided for in the agreement.

If the option is declined, CRRM may sell the excess to a third-party.

The Partnership’s Coffeyville Facility obtains a significant amount ( 61 % on average during last five years , 40 % in 2019) of the pet coke it needs from the Coke Supply Agreement.

Any remaining pet coke needs are required to be purchased from various third-parties.

See Note 8 (“Commitments and Contingencies”) for further discussion of third-party pet coke supply commitments.

The price paid pursuant to the Coke Supply Agreement is based on the lesser of a pet coke price derived from the price received for UAN (the “UAN-based Price”) or a pet coke price index.

The UAN-based price has a ceiling of $ 40 per ton and a floor of $ 5 per ton.

The Coke Supply Agreement has an initial term of 20 years, ending in 2027, which will be automatically extended for successive five -year renewal periods.

Either party may terminate the agreement by giving notice no later than three years prior

• Lease - CRNF leases certain office and laboratory space from CRRM.

Corporate MSA

Also effective January 1, 2020, the Conflicts Committee of the Board and the audit committee of CVR Energy approved, and the parties entered into the Corporate MSA between CVR Services and certain of its affiliates, including CVR Energy, CVR GP and the Partnership and its subsidiaries, which is comprised of various management and service agreements effectively replacing other related party agreements, on substantially equivalent terms, in place for 2019 and 2018 as (the “Replaced Corporate Agreements”).

In addition to affirming the terms and services described in the Replaced Corporate Agreements and resetting the durations thereof, as applicable, commencing January 1, 2020, the Corporate MSA provides for payment by each service recipient under the Corporate MSA of a monthly fee for goods and services supplied under the Corporate MSA, subject to netting and an annual true up, as well as pass-through of any direct costs incurred on behalf of a service recipient without markup.

Under the Corporate MSA, CVR GP and the Partnership and its subsidiaries obtain certain management and other professional services from CVR Services, including the following, among others:

• services from CVR Services’ employees in capacities equivalent to the capacities of corporate executive officers, except that those who serve in such capacities under the agreement will serve the Partnership on a shared, part-time basis only, unless the Partnership and CVR Services agree otherwise;

• administrative and professional services, including legal, accounting, SOX compliance, financial reporting, human resources, information technology, communications, insurance, tax, credit, finance, corporate compliance, enterprise risk management, consulting, and government and regulatory affairs;

• recommendations on capital raising activities to the board of directors of the general partner, including the issuance of debt or equity interests, the entry into credit facilities, and other capital market transactions;

• managing or overseeing litigation and administrative or regulatory proceedings, investigations and other reviews in the ordinary course of business or operations, establishing appropriate insurance policies for the Partnership, and providing safety and environmental advice;

• recommending the payment of distributions;

• managing or providing advice for other projects, including acquisitions, as may be agreed by the general partner and CVR Services from time to time.

• permitting the use of the CVR Energy and CVR Partners trademarks by CVR GP and the Partnership at no cost.

For services performed in connection with the services agreement, the Partnership recognized personnel costs, excluding amounts related to share based compensation (refer to Note 7 (“Share-Based Compensation”)), of $ 6.6 million, $ 7.3 million, and $ 6.6 million, respectively, for the years ended December 31, 2020, 2019, and 2018.

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to a renewal date.

The agreement is also terminable by mutual consent of the parties or if a party breaches the agreement and does not cure within applicable cure periods.

Additionally, the agreement may be terminated in some circumstances if substantially all of the operations at the Coffeyville Facility or CVR Energy’s Coffeyville refinery are permanently terminated, or if either party is subject to a bankruptcy proceeding or otherwise becomes insolvent.

Hydrogen Purchase and Sale Agreement

Our Coffeyville Facility and CRRM are parties to a hydrogen purchase and sale agreement (the “Hydrogen Agreement”) pursuant to which CRRM agrees to sell and deliver a committed hydrogen volume of 90,000 mscf per month to the facility.

The committed volume pricing is based on a monthly fixed fee (based on the fixed and capital charges associated with producing the committed volume) and a monthly variable fee (based on the natural gas price associated with hydrogen actually received).

The Partnership also has the option to purchase excess volume of up to 60,000 mscf per month, or more upon mutual agreement, from CRRM, if available for purchase.

The agreement has an initial term of 20 years and will be automatically extended following the initial term for additional successive five -year renewal terms unless either party gives 180 days’ written notice.

Certain fees under the agreement are subject to modification after this initial term.

The agreement contains customary terms related to indemnification, as well as termination for breach, by mutual consent, or due to insolvency or cessation of operations.

Water and Facilities Sharing Agreement

Our Coffeyville Facility is party to a raw water and facilities sharing agreement with CRRM (the “Water Agreement”) which (i) provides for the allocation of raw water resources between CVR Energy’s Coffeyville refinery and our Coffeyville Facility and (ii) provides for the management of the water intake system (consisting primarily of a water intake structure, water pumps, meters, and a short run of piping between the intake structure and the origin of the separate pipes that transport the water to each facility) which draws raw water from the Verdigris River for both our Coffeyville Facility and CVR Energy’s Coffeyville refinery.

Related Party Activity

Activity associated with the Partnership’s related party arrangements for the years ended December 31, 2020, 2019, and 2018 is summarized below:

Year Ended December 31,

(in thousands) 2020 2019 2018

Sales to related parties (1) $ 993 $ 119 $ 371

Purchases from related parties (2) 22,365 30,876 27,315

Prepaid expenses (3) $ — $ 249

Due to related parties (4) 1,446 7,826

(1) Sales to related parties, included in Net sales, consist primarily of sales of feedstocks and services to CRRM under the Coffeyville MSA.

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

(3) Prepaid expenses, included in Prepaid expenses and other current assets, are amounts paid for feedstocks and services provided by CRRM under the Coffeyville MSA.

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

Environmental Agreement

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No liability under this agreement was recorded as of December 31, 2020 and 2019.

Real Estate Transactions

Cross-Easement Agreement.

Our Coffeyville Facility is party to a cross-easement agreement (the “Easement Agreement”) with CRRM so that both CRNF and CRRM can access and utilize each other’s land in certain circumstances in order to operate their respective businesses.

Terminal and Operating Agreement

Our Coffeyville Facility entered into a lease and operating agreement with CRT, under which it leases the premises located at Phillipsburg, Kansas to be utilized as a UAN terminal.

Our Coffeyville Facility entered into a lease and operating agreement with Coffeyville Resources Terminal, LLC, an indirect wholly owned subsidiary of CVR Energy (“CRT”), under which it leases the premises located at Phillipsburg, Kansas to be utilized as a UAN terminal.

The initial term of the agreement will expire in May 2032, provided, however, we may terminate the lease at any time during the initial term by providing 180 days prior written notice.

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We will pay CRT $ 1.00 per year for rent, $ 4.00 per ton of UAN placed into the terminal, and $ 4.00 per ton of UAN taken out of the terminal.

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Lease Agreement.

Our Coffeyville Facility is party to a lease agreement (the “Lease Agreement”) with CRRM entered into in October 2007 under which we lease certain office and laboratory space.

The initial term of the lease was extended an additional year and will expire in October 2020, provided, however, that we may terminate the lease at any time during the initial term by providing 180 days’ prior written notice.

In addition, we have the option to renew the lease agreement for up to two additional one -year periods by providing CRRM with notice of renewal at least 60 days prior to the expiration of the then-existing term.

Services Agreement

CVR Partners obtains certain management and other services from CVR Energy and certain of CVR Energy’s subsidiaries pursuant to a services agreement (the “Services Agreement”) between the Partnership, CVR GP, and CVR Energy.

CVR Partners is also party to a Trademark License Agreement with CVR Energy which permits the use of trademarks at no cost.

Under the Services Agreement, the general partner has engaged CVR Energy to provide certain services, including the following, among others:

• services from CVR Energy’s employees in capacities equivalent to the capacities of corporate executive officers, except that those who serve in such capacities under the agreement will serve the Partnership on a shared, part-time basis only, unless the Partnership and CVR Energy agree otherwise;

• administrative and professional services, including legal, accounting, financial reporting, human resources, information technology, communications, insurance, tax, credit, finance, and government and regulatory affairs;

• managing or overseeing litigation and administrative or regulatory proceedings, establishing appropriate insurance policies for the Partnership, and providing safety and environmental advice;

• recommending the payment of distributions;

• managing or providing advice for other projects, including acquisitions, as may be agreed by the general partner and CVR Energy from time to time.

As payment for services provided under the agreement, the Partnership, its general partner, or its subsidiaries must pay CVR Energy (i) all costs incurred by CVR Energy or its affiliates in connection with the employment of its employees who provide the Partnership services under the agreement on a full-time basis;

(ii) a prorated share of costs incurred by CVR Energy or its affiliates in connection with the employment of its employees who provide the Partnership services under the agreement on a part-time basis, but excluding certain share-based compensation, and such prorated share shall be determined by CVR Energy on a commercially reasonable basis, based on the percentage of total working time that such shared personnel are engaged in performing services for the Partnership;

(iii) a prorated share of certain administrative costs, including office costs, services by outside vendors, other sales, general and administrative costs, and depreciation and amortization;

and (iv) various other administrative costs in accordance with the terms of the agreement, including travel, insurance, legal and audit services, government and public relations, and bank charges.

For services performed in connection with the services agreement, the Partnership recognized personnel costs, excluding amounts related to share based compensation (refer to Note 7 (“Share-Based Compensation”)), of $ 7.3 million, $ 6.6 million, and $ 6.5 million, respectively, for the years ended December 31, 2019, 2018, and 2017.

Limited Partnership Agreement

The Partnership’s general partner manages the Partnership’s operations and activities as specified in CVR Partners’ limited partnership agreement.

The general partner of the Partnership, CVR GP, is managed by its board of directors.

GP Services Agreement

We are a party to a GP services agreement, as amended, (the “GP Services Agreement”) by and among CVR GP and CVR Energy.

This agreement allows CVR Energy to engage CVR GP, in its capacity as our general partner, to provide CVR Energy

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with (i) business development and related services and (ii) advice or recommendations for such other projects as may be agreed between the Partnership’s general partner and CVR Energy from time to time.

As payment for certain specific services provided under the agreement, CVR Energy must pay a prorated share of costs incurred by us or our general partner in connection with the employment of the certain employees who provide CVR Energy services on a part-time basis, as determined by our general partner on a commercially reasonable basis based on the percentage of total working time that such shared personnel are engaged in performing services for CVR Energy.

Omnibus Agreement

These obligations will continue so long as CVR Energy owns at least 50% of our general partner.

There was no activity reported under this agreement during the years ended 2019, 2018, and 2017.

Replacement Agreements

Coffeyville MSA.

Effective February 19, 2020, the Conflicts Committee of the board of directors of CVR GP and the audit committee of CVR Energy approved, and CRNF and CRRM entered into, a new Coffeyville Master Service Agreement (the “Coffeyville MSA”) which replaced and consolidated the Feedstock Agreement, the Coke Supply Agreement, the Hydrogen Agreement, the Water Agreement, the Easement Agreement, and the Lease Agreement (collectively, the “Replaced Coffeyville Agreements”) on substantially equivalent terms as the Replaced Coffeyville Agreements.

In addition to affirming the terms and services described in the Replaced Coffeyville Agreements and resetting the durations thereof, as applicable, commencing February 19, 2020, the Coffeyville MSA provides for monthly payments, subject to netting, for all goods and services supplied under the Coffeyville MSA.

Corporate MSA.

Also effective February 19, 2020, the Conflicts Committee of the board of directors of CVR GP and the audit committee of CVR Energy approved, and the parties entered into, a new Corporate Master Service Agreement (the “Corporate MSA”) between CRLLC and certain of its affiliates, including CVR GP and the Partnership and its subsidiaries, which replaced and consolidated the Services Agreement, the GP Services Agreement, and the Trademark License Agreement (collectively, the “Replaced Corporate Agreements”) on substantially equivalent terms as the Replaced Corporate Agreements.

In addition to affirming the terms and services described in the Replaced Corporate Agreements and resetting the durations thereof, as applicable, commencing February 19, 2020, the Corporate MSA provides for payment by each service recipient under the Corporate MSA of a monthly fee for goods and services supplied under the Corporate MSA, subject to netting and an annual true up, as well as pass-through of any direct costs incurred on behalf of a service recipient without markup.

Property Exchange

On October 18, 2019, the audit committee of CVR Energy and the Conflicts Committee of the board of directors of CVR GP each agreed to authorize the exchange of certain parcels of property owned by subsidiaries of CVR Energy with an equal number of parcels owned by subsidiaries of CVR Partners, all located in Coffeyville, Kansas (the “Property Exchange”).

On October 18, 2019, the Conflicts Committee of the Board and on October 22, 2019, the audit committee of CVR Energy, each agreed to authorize the exchange of certain parcels of property owned by subsidiaries of CVR Energy with an equal number of parcels owned by subsidiaries of CVR Partners, all located in Coffeyville, Kansas (the “Property Exchange”).

On February 19, 2020, a subsidiary of CVR Energy and a subsidiary of CVR Partners executed the Property Exchange agreement.

This Property Exchange will enable each such subsidiary to create a more usable, contiguous parcel of land near its own operating footprint.

CVR Energy and the Partnership accounted for this transaction in accordance with the ASC 805-50 guidance on transferring assets between entities under common control.

This transaction had a net impact to the Partnership’s partners’ capital of approximately $ 0.1 million.

Distributions to CVR Partners’ Unitholders

The board of directors of the Partnership’s general partner has a policy for the Partnership to distribute all available cash generated on a quarterly basis.

Cash distributions are made to the common unitholders of record on the applicable record date, generally within 60 days after the end of each quarter.

Available cash for each quarter is determined by the board of directors of the general partner following the end of such quarter.

CVR Energy and the Partnership accounted for this transaction in accordance with the ASC Topic 805-50, Business Combinations (“ Topic 805-50”), guidance on transferring assets between entities under common control.

This transaction had a net impact to the Partnership’s partners’ capital of less than $ 0.1 million.

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The following table presents distributions paid by the Partnership to CVR Partners’ unitholders, including amounts paid to CVR Energy, as of December 31, 2019.

Distributions Paid (in thousands)

Related Period Date Paid Distribution Per

Common Unit Public Unitholders CVR Energy Total

2018 - 4th Quarter March 11, 2019 $ 0.12 $ 8,924 $ 4,670 $ 13,594

2019 - 1st Quarter May 13, 2019 0.07 5,205 2,724 7,929

2019 - 2nd Quarter August 12, 2019 0.14 10,411 5,449 15,860

2019 - 3rd Quarter November 11, 2019 0.07 5,205 2,724 7,930

Total distributions $ 0.40 $ 29,745 $ 15,567 $ 45,313

Distributions, if any, including the payment, amount, and timing thereof, are subject to change at the discretion of the Board of Directors of CVR Partners’ general partner.

Distributions to CVR Partners’ Unitholders

The Board has a policy for the Partnership to distribute all available cash generated on a quarterly basis.

Cash distributions are made to the common unitholders of record on the applicable record date, generally within 60 days after the end of each quarter.

Available cash for each quarter is determined by the Board following the end of such quarter.

Distributions, if any, including the payment, amount, and timing thereof, are subject to change at the discretion of the Board.

There were no distributions declared or paid by the Partnership during the year ended December 31, 2020 related to the fourth quarter of 2019 or the first, second, and third quarters of 2020.

No distributions were declared for the fourth quarter of 2020.

The Partnership did not pay distributions during the year ended December 31, 2018, while during the year ended December 31, 2017, it paid a distribution of $ 0.02 per common unit, or $ 2.3 million.

Of this distribution, CVR Energy received $ 0.8 million.

The Partnership paid distributions totaling $ 4.00 per common unit on a split-adjusted basis, or $ 45.3 million during the year ended December 31, 2019.

Of these distributed amounts, CVR Energy received $ 15.6 million.

During the year ended December 31, 2018, the Partnership did no t pay distributions.

(10) Supplemental Cash Flow Information

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

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

Year Ended December 31,

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Supplemental disclosures:

Cash paid for income taxes, net of refunds (received, net of payments) $ 40 $ 26 $ ( 195 )

Cash paid for income taxes, net of refunds $ 69 $ 40 $ 26

Cash paid for interest 59,850 60,057 60,168

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(1) The lease standard was adopted on January 1, 2019 on a prospective basis.

Therefore, only 2019 disclosures are applicable to be included within the table above.

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(11) Selected Quarterly Financial Information

Summarized quarterly financial data for the years ended December 31, 2019 and 2018 is as follows:

Year Ended December 31, 2019

(in thousands) First Second Third Fourth

Net sales $ 91,873 $ 137,660 $ 88,582 $ 86,062

Cost of materials and other (1) 23,730 26,000 21,617 22,756

Direct operating expenses (1) 34,820 45,630 47,557 45,622

Operating income (loss) 9,439 34,544 ( 7,517 ) ( 9,086 )

Net (loss) income ( 6,079 ) 18,968 ( 22,976 ) ( 24,882 )

Basic and diluted (loss) income per common unit $ ( 0.05 ) $ 0.17 $ ( 0.20 ) $ ( 0.22 )

Basic and diluted weighted-average common units outstanding 113,283 113,283 113,283 113,283

Year Ended December 31, 2018

(in thousands) First Second Third Fourth

Net sales $ 79,859 $ 93,197 $ 79,909 $ 98,117

Cost of materials and other (1) 22,469 19,139 19,590 27,263

Direct operating expenses (1) 38,669 47,465 35,334 37,851

Operating income (loss) ( 3,421 ) ( 790 ) 2,529 7,996

Net loss ( 19,051 ) ( 16,459 ) ( 13,146 ) ( 1,371 )

Basic and diluted loss per common unit $ ( 0.17 ) $ ( 0.15 ) $ ( 0.12 ) $ ( 0.01 )

Basic and diluted weighted-average common units outstanding 113,283 113,283 113,283 113,283

(1) Excludes depreciation and amortization expenses.

Therefore, only 2020 and 2019 are applicable to be included within the table above.

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What changed 10-K

Item 8. Financial Statements and Supplementary Data