What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-22 compared with 2022-02-23 · 197 added, 203 removed, 236 unchanged (63% of the section changed)

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Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this Report.

Partnership Overview

CVR Partners is a Delaware limited partnership formed in 2011 by CVR Energy, Inc.

(“CVR Energy”) to own, operate, and grow its nitrogen fertilizer business.

The Partnership produces and distributes nitrogen fertilizer products, which are used by farmers to improve the yield and quality of their crops.

The Partnership produces these products at two manufacturing facilities, one located in Coffeyville, Kansas operated by its wholly owned subsidiary, Coffeyville Resources Nitrogen Fertilizers, LLC (“CRNF”) (the “Coffeyville Facility”) and one located in East Dubuque, Illinois operated by its wholly owned subsidiary, East Dubuque Nitrogen Fertilizers, LLC (“EDNF”) (the “East Dubuque Facility”).

Our principal products are ammonia and urea ammonium nitrate (“UAN”).

All of our products are sold on a wholesale basis.

References to CVR Partners, the Partnership, “we”, “us”, and “our” may refer to consolidated subsidiaries of CVR Partners or one or both of the facilities, as the context may require.

Additionally, as the context may require, references to CVR Energy may refer to CVR Energy and its consolidated subsidiaries which include its petroleum and renewables refining, marketing, and logistics operations.

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Strategy and Goals

The Partnership has adopted Mission and Values, which articulate the Partnership’s expectations for how it and its employees do business each and every day.

Mission and Core Values

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If it’s not safe, then we don’t do it.

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• Environment - We care for our environment.

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We have outlined the following strategic objectives to drive the accomplishment of our mission:

Safety - We aim to achieve continuous improvement in all environmental, health, and safety areas through ensuring our people’s commitment to environmental, health and safety comes first, the refinement of existing policies, continuous training, and enhanced monitoring procedures.

Environmental, Health & Safety (“EH&S”) - We aim to achieve continuous improvement in all EH&S areas through ensuring our people’s commitment to environmental, health and safety comes first, the refinement of existing policies, continuous training, and enhanced monitoring procedures.

Reliability - Our goal is to achieve industry-leading utilization rates at both of our facilities through safe and reliable operations.

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Market Capture - We continuously evaluate opportunities to improve the facilities’ realized pricing at the gate and reduce variable costs incurred in production to maximize our capture of market opportunities.

Financial Discipline - We strive to be efficient as possible by maintaining low operating costs and disciplined deployment of capital.

We successfully executed a number of achievements in support of our strategic objectives shown below through the date of this filing despite the challenges experienced by the industry during 2021 as a result of the continuing COVID-19 pandemic:

Safety Reliability Market Capture Financial Discipline

Operated both facilities safely and reliably and at high utilization rates ü ü ü

Achieved reductions in environmental events and process safety management tier 1 incidents of 67% and 73%, respectively, compared to 2020 ü

Achieved record truck shipments from the Coffeyville Facility in March 2021 ü ü ü

Achieved record ammonia production at the Coffeyville Facility in September 2021 and at the East Dubuque Facility in November 2021 ü ü

Financial Discipline - We strive to be as efficient as possible by maintaining low operating costs and disciplined deployment of capital.

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From the beginning of the fiscal year through the date of filing, we successfully executed a number of achievements in support of our strategic objectives shown below:

Safety Reliability Market Capture Financial Discipline

Utilized downtime throughout the year to proactively complete maintenance work at the Coffeyville Facility, enabling the deferral of the planned turnaround from Fall 2021 to Summer 2022 ü ü ü

Increased UAN production capacity at Coffeyville by 100 tons per day through the installation of a CO2 compressor and ammonia pump ü

Reduced CVR Partners’ annual cash interest expense by over 33% through refinancing a substantial portion of the 2023 Notes and subsequently redeeming $30 million of the remaining balance of the 2023 Notes ü

Declared total cash distributions of $9.89 per common unit related to 2021

Achieved reductions in process safety tier 1 incident rate and total recordable injury rate of 37% and 86%, respectively, compared to 2021

Safely completed the planned turnarounds at both facilities on time and on budget, as well as inspected, repaired and replaced major equipment as necessary during this downtime ü ü ü ü

Achieved record UAN production volumes at the Coffeyville Facility in March 2022 ü ü

Achieved record ammonia production at the East Dubuque Facility in December 2022 ü ü

Completed transaction intended to monetize 45Q tax credits and received an initial upfront payment, net of expenses, of $18.1 million in January 2023

Declared cash distribution of $10.50 per common unit for the fourth quarter of 2022, bringing cumulative distributions declared to date of $24.58 per common unit related to 2022

Achieved average reduction in CO 2 e emissions of over 1 million metric tons per year since 2020

Completed targeted $95 million debt reduction plan with the repayment of the remaining $65 million balance of the 9.25% Senior Secured Notes, due 2023 (the “2023 Notes”) in the first quarter of 2022 for a total reduction in annual cash interest expense of approximately $9 million

Repurchased over 111,000 common units for $12.4 million

Environmental, Social & Governance (“ESG”) Highlights

In the past year, we achieved numerous milestones through our commitment to sustainability, including environmental and safety stewardship, diversity and inclusion, community outreach and sound corporate governance.

We have also established our ESG priorities, which will serve as a guide to the development of our ESG strategy and our first ESG report, which we target for publication in 2022 based on the Sustainability Accounting Standards Board standards.

The following highlights some key achievements of 2021:

Environmental & Safety Stewardship ü Mitigated >1mm metric tons of carbon dioxide equivalents (CO 2 e)/year

ü Manufactured hydrogen and ammonia that qualifies as “blue” with carbon capture and sequestration through enhanced oil recovery

ü Reduced process safety Tier 1 incident rate by 73%

Communities ü Diversity is key component of our Mission & Values

ü Site-Level Community Impact Committees steer local contributions, sponsorships and volunteer activities

ü Paid time off pursuant to Volunteerism Policy

ü Launched Company-wide Diversity & Inclusion training

ü Implemented Remote Work Policy supporting employee engagement and retention

Accountability ü Board-level ESG oversight

ü Average tenure of directors is less than 8 years

ü Standing EH&S Committee with a majority of independent members

ü Annual Code of Ethics & Business Conduct Acknowledgement

ü More than 75% of CEO compensation is variable and tied to the Partnership’s performance

We make modern life possible through the products we manufacture while contributing to the economic well-being of our employees and the communities where we operate.

Industry Factors and Market Conditions

In December 2022, CVR Energy published its first public report based on the Sustainability Accounting Standards Board standards, which includes information regarding our ESG accomplishments.

CVR Energy’s 2021 Environmental, Social & Governance Report (“2021 ESG Report”) is available at CVR Partner’s website at www.CVRPartners.com.

CVR Energy’s 2021 ESG Report does not constitute a part of, and is not incorporated by reference into, this Annual Report on Form 10-K or any other report we file with (or furnish to) the SEC, whether made before or after the date of this Annual Report on Form 10-K.

Industry Factors and Market Indicators

Within the nitrogen fertilizer business, earnings and cash flows from operations are primarily affected by the relationship between nitrogen fertilizer product prices, utilization, and operating costs and expenses, including pet coke and natural gas feedstock costs.

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production levels, changes in world population, the cost and availability of fertilizer transportation infrastructure, weather conditions, the availability of imports, and the extent of government intervention in agriculture markets.

The price at which nitrogen fertilizer products are ultimately sold depends on numerous factors, including the global supply and demand for nitrogen fertilizer products which, in turn, depends on, among other factors, world grain demand and production levels, changes in world population, the cost and availability of fertilizer transportation infrastructure, weather conditions, the availability of imports, the availability and price of feedstocks to produce nitrogen fertilizer, and the extent of government intervention in agriculture markets.

Nitrogen fertilizer prices are also affected by local factors, including local market conditions and the operating levels of competing facilities.

An expansion or upgrade of competitors’ facilities, new facility development, political and economic developments, and other factors are likely to continue to play an important role in nitrogen fertilizer industry economics.

These factors can impact, among other things, the level of inventories in the market, resulting in price volatility and a reduction in product margins.

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factors can impact, among other things, the level of inventories in the market, resulting in price volatility and a reduction in product margins.

Moreover, the industry typically experiences seasonal fluctuations in demand for nitrogen fertilizer products.

General Business Environment

Throughout 2020, the COVID-19 pandemic and actions taken by governments and others in response thereto negatively impacted the worldwide economy, financial markets, and the agricultural industry, resulting in significant business and operational disruptions.

Consequently, the U.S.

demand for liquid transportation fuels, including ethanol (the production of which is a significant driver of demand for corn), declined, causing many refineries and plants to reduce production or idle.

During 2021, government restrictions eased, vaccines became available, and demand for transportation fuels increased.

Demand for ethanol for fuels blending has largely recovered to pre-COVID-19 levels, although an increase in outbreaks of any variant of COVID-19 could reverse this recovery .

Concerns over the long-term negative effects of the COVID-19 pandemic on economic and business prospects across the world have contributed to increased market and grain price volatility and have diminished expectations for the global economy.

The Partnership believes the general business environment in which it operates will continue to remain volatile into 2022, driven by uncertainty around the availability and prices of its feedstocks, demand for its products, and global supply disruptions.

As a result, future operating results and current and long-term financial conditions could be negatively impacted if economic conditions decline, remain volatile, and do not return to pre-pandemic levels.

Russia-Ukraine Conflict - In February 2022, Russia invaded Ukraine, significantly impacting global fertilizer and agriculture markets.

The Black Sea is a major export point for nitrogen fertilizer and grains from Russia and Ukraine.

Since the invasion began, the Black Sea has been closed to exports which prompted tightening global supply conditions for nitrogen fertilizer in advance of spring planting and wheat and corn availability, as Russia and Ukraine are major wheat exporters and Ukraine is a major corn exporter.

In 2022, grain harvested in Ukraine was approximately 40% lower than 2021 due to lack of planting inputs, fuel, and workers to complete the planting of crops.

The ability to export grains from Ukraine, particularly wheat, have improved but continue to be restricted due to lack of access to export terminals in the Black Sea and limited rail or trucking capacity.

Additionally, many countries have formally or informally adopted sanctions on a number of Russian exports and individuals affiliated with Russian government leadership.

While fertilizers have not been formally sanctioned by countries, many customers are either unwilling to purchase Russian fertilizers or logistics make it too costly to import Russian fertilizers.

Additionally, natural gas supplied from Russia to Western Europe has been constrained and natural gas prices have remained elevated since September 2021, causing a significant portion of European nitrogen fertilizer production capacity to be curtailed or costs to be elevated compared to competitors in other regions of the world.

Overall, these events have caused grain and fertilizer prices to rise, and we currently expect these conditions to persist through the spring of 2023.

The ultimate outcome of the Russia-Ukraine conflict and any associated market disruptions are difficult to predict and may affect our business in unforeseen ways.

COVID-19 - The economic effects from the COVID-19 pandemic on our business were and may again be significant.

Although our business has recovered since the onset of the pandemic in March 2020, there continues to be uncertainty and unpredictability about the lingering impacts to the worldwide economy, including in connection with the spread of variants of COVID-19 and resulting restrictions, that could negatively affect our business, financial condition, results of operations , and liquidity in future periods.

The Partnership believes the general business environment in which it operates will continue to remain volatile, driven by uncertainty around the availability and prices of its feedstocks, demand for its products, inflation, and global supply disruptions.

As a result, future operating results and current and long-term financial conditions could be negatively impacted if economic conditions decline and remain volatile.

Due to the uncertainty of the global recovery, including its duration, timing, and strength, the Partnership is not able at this time to predict the extent to which these events may have a material, or any, effect on its financial or operational results in future periods.

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nitrogen fertilizer industry remain intact.

The Partnership views the anticipated combination of (i) increasing global population, (ii) decreasing arable land per capita, (iii) continued evolution to more protein-based diets in developing countries, (iv) sustained use of corn and soybeans as feedstock for the domestic production of ethanol and other renewable fuels, and (v) positioning at the lower end of the global cost curve should provide a solid foundation for nitrogen fertilizer producers in the U.S.

over the longer term.

Corn and soybeans are two major crops planted by farmers in North America.

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Unlike corn, soybeans are able to obtain most of their own nitrogen through a process known as “N fixation.” As such, upon harvesting of soybeans, the soil retains a certain amount of nitrogen which results in lower demand for nitrogen fertilizer for the following corn planting cycle.

Due to these factors, nitrogen fertilizer consumers generally operate a balanced corn-soybean rotational planting cycle as evident through the chart presented below for 2021, 2020, and 2019.

The relationship between the total acres planted for both corn and soybean has a direct impact on the overall demand for nitrogen products, as the market and demand for nitrogen increases with increased corn acres and decreases with increased soybean acres.

Additionally, an estimated 11 billion pounds of soybean oil is expected to be used in producing cleaner biodiesel in marketing year 2021/2022.

Due to these factors, nitrogen fertilizer consumers generally operate a balanced corn-soybean rotational planting cycle as evident by the chart presented below for 2022, 2021, and 2020.

The relationship between the total acres planted for both corn and soybeans has a direct impact on the overall demand for nitrogen products, as the market and demand for nitrogen increases with increased corn acres and decreases with increased soybean acres.

Additionally, an estimated 11.6 billion pounds of soybean oil is expected to be used in producing cleaner renewables in marketing year 2022/2023.

Multiple refiners have announced renewable diesel expansion projects for 2023 and beyond, which will only increase the demand for soybeans and potentially for corn and canola.

Due to the uncertainty of how these factors will truly affect the grain markets, it is not yet known how the nitrogen business will be impacted.

The 2021 United States Department of Agriculture (“USDA”) reports on corn and soybean acres planted indicated farmers planted 93.4 million acres of corn, representing an increase of 3.0% in corn acres planted as compared to 90.7 million corn acres in 2020.

Planted soybean acres are estimated to be 87.2 million acres, representing a 4.6% increase in soybean acres planted as compared to 83.4 million soybean acres in 2020.

The combined corn and soybean planted acres of 180.6 million is

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the highest in history.

Based on current grain inventories and crop prices, farm economics are expected to continue to be very attractive in 2022.

The United States Department of Agriculture (“USDA”) estimates that in spring 2022 farmers planted 88.6 million acres of corn, representing a decrease of 5.1% in corn acres planted as compared to 93.4 million corn acres in 2021.

Planted soybean acres were estimated to be 87.5 million acres, representing a 0.3% increase in soybean acres planted as compared to 87.2 million soybean acres in 2021.

The estimated combined corn and soybean planted acres of 176.1 million in 2022 is a 2.5% decrease from the total acreage planted in 2021, which was the highest in history.

Due to higher input costs for corn planting and increased demand for soybeans, particularly for renewable diesel production, it was more favorable for farmers to plant soybeans compared to corn.

The lower planted corn acres in 2022 and lower corn production are expected to be supportive of corn prices for 2023.

Ethanol is blended with gasoline to meet renewable fuel standard requirements and for its octane value.

Ethanol production has historically consumed approximately 35% of the U.S.

corn crop, so demand for corn generally rises and falls with ethanol demand.

There was a decline in ethanol demand that began in 2020 and continued through 2021 due to decreased demand for transportation fuels as a result of the COVID-19 pandemic.

However, the lower ethanol demand did not alter the spring 2021 planting decisions by farmers as evidenced in the charts below.

Since 2006, ethanol production has consumed approximately 36% of the U.S.

corn crop, so demand for corn generally rises and falls with ethanol demand, as evidenced in the charts below.

Plant Production of Fuel Ethanol (1)

Corn and Soybean Planted Acres (2)

(1) Information used within this chart was obtained from the U.S.

Energy Information Administration (“EIA”).

(2) Information used within this chart was obtained from the USDA, National Agricultural Statistics Services.

Energy Information Administration (“EIA”) through December 31, 2022.

(2) Information used within this chart was obtained from the USDA, National Agricultural Statistics Services as of December 31, 2022.

Weather continues to be a critical variable for crop production.

Grain prices rose significantly from the summer of 2020 into the spring of 2021, leading to higher planted acreage for corn and soybeans.

Even with higher planted acres and trendline yields per acre, inventory levels for corn and soybeans remain below historical levels and prices have remained elevated.

The higher grain prices and historically low crop inventories are leading to strong farm economics in advance of spring 2022.

These conditions are expected to drive strong demand for nitrogen fertilizer, as well as other crop inputs.

Fertilizer prices have risen significantly since January 1, 2021 due to strong grain prices, the strong spring 2021 planting season, and lower fertilizer supply due to nitrogen fertilizer production outages during Winter Storm Uri and Hurricane Ida and significant escalation in global feedstock costs for nitrogen fertilizer production.

While natural gas prices were at historical lows across the world in 2020, they have escalated significantly since the summer of 2021, causing nitrogen fertilizer production to be reduced or shut-in in Europe.

In addition to escalating coal and LNG prices in China, nitrogen fertilizer exports have been reduced significantly in the second half of 2021 and are expected to continue to be reduced through the first half of 2022.

Even with high planted acres and trendline yields per acre, in the United States, inventory levels for corn and soybeans remain below historical levels and prices have remained elevated.

With tight grain and fertilizer inventory levels driven by the Russia-Ukraine conflict, prices for grains and fertilizers are expected to remain elevated through the spring of 2023.

While the weather conditions were difficult early in spring 2022, farmers were able to complete the crop planting later than normal.

Demand for nitrogen fertilizer, as well as other crop inputs, was strong for the spring 2022 planting season.

During the summer 2022 growing season, severe drought conditions were experienced in Asia, Europe, and parts of the U.S.

As a result, crop yields are projected to be below expectations and grain inventories are projected to be at the low end of historical levels, causing grain prices to rise.

We expect tight grain inventories to positively impact planted acreage for the spring of 2023 and boost the demand for nitrogen fertilizer.

On June 30, 2021, CF Industries Nitrogen, L.L.C., Terra Nitrogen, Limited Partnership, and Terra International (Oklahoma) LLC filed petitions with the U.S.

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International Trade Commission (the “ITC”) requesting the initiation of antidumping and countervailing duty investigations on imports of UAN from Russia and Trinidad and Tobago (“Trinidad”).

In August 2021, USDOC decided to pursue an investigation to determine the extent of dumping and unfair subsidies associated with imports from Russia and Trinidad, and the ITC initiated a concurrent investigation to determine whether such imports materially injure the U.S.

On November 30, 2021, USDOC determined that UAN imports from Russia are unfairly subsidized at rates ranging from 9.66% to 9.84% and UAN imports from Trinidad are unfairly subsidized at a rate of 1.83%.

On January 27, 2022, USDOC found that Russian UAN imports are sold at less than fair value into the U.S.

market at rates ranging from 9.15% to 127.19% and that Trinidadian UAN imports at a rate of 63.08%.

As a result of these determinations, USDOC will impose cash deposit requirements on imports of UAN from Russia and Trinidad based on the preliminary rates of antidumping duties.

We believe that if the antidumping and countervailing duty preliminary determinations are confirmed by USDOC, there will likely be lower amounts of imported UAN from Russia and Trinidad.

On July 18, 2022, the ITC made a negative final injury determination concerning its investigation of imports from Russia and Trinidad despite USDOC’s final determination in June that UAN is subsidized and dumped in the U.S.

market by producers in both countries.

Since the decision in July 2022, we have observed minimal impact on the supply or demand for nitrogen fertilizer as a result of these actions.

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The tables below show relevant market indicators by month through December 31, 2021:

The charts below show relevant market indicators by month through December 31, 2022:

Ammonia and UAN Market Pricing (1)

Natural Gas and Pet Coke Market Pricing (1)

(1) Information used within these charts was obtained from various third-party sources including Green Markets (a Bloomberg Company), Pace Petroleum Coke Quarterly, and the EIA, amongst others.

Results of Operations

The following should be read in conjunction with the information outlined within the previous sections of this Part II, Item 7, and the financial statements and related notes thereto in Part II, Item 8 of this Report.

The following should be read in conjunction with the information outlined in the previous sections of this Part II, Item 7 and the financial statements and related notes thereto in Part II, Item 8 of this Report.

The chart presented below summarizes our ammonia utilization rates on a consolidated basis for the years ended December 31, 2022, 2021, and 2020.

Utilization is an important measure used by management to assess operational output at each of the Partnership’s facilities.

Utilization is calculated as actual tons of ammonia produced divided by capacity adjusted for planned maintenance and turnarounds.

Utilization is calculated as actual tons of ammonia produced divided by capacity.

Utilization is presented solely on ammonia production, rather than each nitrogen product, as it provides a comparative baseline against industry peers and eliminates the disparity of facility configurations for upgrade of ammonia into other nitrogen products.

With efforts primarily focused on ammonia upgrade capabilities, we believe this measure provides a meaningful view of how well we operate.

With production primarily focused on ammonia upgrade capabilities, we believe this measure provides a meaningful view of how we operate.

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Consolidated Ammonia Utilization

On a consolidated basis, utilization decreased 11% to 81% for the year ended December 31, 2022 compared to the year ended December 31, 2021.

This decrease was primarily due to downtime associated with the Messer air separation plant at the Coffeyville Facility in January, June, August, October, and November of 2021 (the “Messer Outages”), downtime at the East Dubuque Facility due to Winter Storm Uri in February 2021, downtime at the Coffeyville Facility and East Dubuque Facility in July and September 2021, respectively, due to externally driven power outages (the “Power Outages”), and downtime at the East Dubuque Facility in October 2021 for an R2 repair (the “R2 Outage”).

This decrease was primarily due to the completion of planned turnarounds at both facilities in the third quarter of 2022, along with unplanned downtime in 2022 associated with the Messer air separation plant (the “Messer Outages”) at the Coffeyville Facility and various pieces of equipment at the East Dubuque Facility, compared to unplanned downtime at the Coffeyville Facility and the East Dubuque Facility in July and September 2021, respectively, due to externally driven power outages and downtime at the East Dubuque Facility in October 2021 for equipment repair.

Sales and Pricing per Ton - Two of our key operating metrics are total sales volumes for ammonia and UAN, along with the product pricing per ton realized at the gate.

Total product sales volumes were unfavorable, driven by lower production due to the Messer Outages, Winter Storm Uri, Power Outages, and the R2 Outage.

For the year ended December 31, 2021, the lower sales volumes were more than offset by improved prices of 92% for ammonia and 74% for UAN.

Ammonia and UAN sales prices were favorable primarily due to higher crop pricing coupled with lower fertilizer supply driven by production outages from Winter Storm Uri in February 2021 and Hurricane Ida in August and September 2021, as well as increased industry turnaround activity and lower global fertilizer production due to higher natural gas prices in Europe and Asia.

Product pricing at the gate represents net sales less freight revenue divided by product sales volume in tons and is shown in order to provide a pricing measure comparable across the fertilizer industry.

Sales (thousand tons)

Product Pricing at Gate ($ per ton)

For the year ended December 31, 2022, total product sales volumes were unfavorable driven by lower production at both facilities due to the planned turnarounds in the third quarter of 2022, as well as increased downtime from the Messer Outages at the Coffeyville Facility and various pieces of equipment at the East Dubuque Facility in 2022, as compared to 2021.

For the year ended December 31, 2022, total product sales were favorable driven by sales price increases of 88% for ammonia and 84% for UAN.

Ammonia and UAN sales prices were favorable primarily due to continued tight market conditions due to lower fertilizer supply driven by ongoing impacts from the Russia-Ukraine conflict, including reduced production from Europe as a result of the high energy price environment, and higher crop pricing.

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Production Volumes - Gross tons produced for ammonia represent the total ammonia produced, including ammonia produced that was upgraded into other fertilizer products.

Net tons available for sale represent the ammonia available for sale that was not upgraded into other fertilizer products.

Production for the year ended December 31, 2021 was impacted by the Messer Outages, Winter Storm Uri, the Power Outages, and the R2 Outage.

Production for the year ended December 31, 2022 was impacted by unplanned downtime associated with the Messer Outages at the Coffeyville Facility and various pieces of equipment at the East Dubuque Facility in 2022, along with the completion of the planned turnarounds at both facilities during the third quarter of 2022.

The table below presents these metrics for the years ended December 31, 2022, 2021, and 2020:

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The table below presents these feedstocks for both facilities for the years ended December 31, 2022, 2021, and 2020:

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Year Ended December 31,

2022 2021 2020

Pet coke used in production (thousand tons)

Pet coke (dollars per ton)

Petroleum coke used in production (thousand tons)

Petroleum coke (dollars per ton)

$ 52.88 $ 44.69 $ 35.25

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(1) The feedstock natural gas shown above does not include natural gas used for fuel.

The cost of natural gas used for fuel is included in Direct operating expenses (exclusive of depreciation and amortization).

The cost of fuel natural gas is included in Direct operating expenses (exclusive of depreciation and amortization).

Financial Highlights

Overview - For the year ended December 31, 2021, the Partnership’s operating income and net income were $134.5 million and $78.2 million, respectively, a $169.4 million increase from an operating loss and a $176.4 million increase from a net loss, respectively, compared to the year ended December 31, 2020.

Beyond the goodwill impairment of $41.0 million negatively impacting the 2020 period, these income improvements were driven primarily by higher ammonia and UAN sales prices in 2021, partially offset by higher feedstock costs and operating expenses.

(1) See “Non-GAAP Reconciliations” section below for reconciliations of the non-GAAP measure shown above.

Overview - For the year ended December 31, 2022, the Partnership’s operating income and net income were $319.9 million and $286.8 million, respectively, a $185.4 million increase in operating income and a $208.6 million increase in net income, respectively, compared to the year ended December 31, 2021.

These increases were primarily driven by higher product sales prices for UAN and ammonia in 2022, partially offset by reduced sales volumes, increased costs associated with the two planned turnarounds during the third quarter of 2022, and increased feedstock prices in 2022.

Net Sales Operating Income (Loss)

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Net Income (Loss)

(1) See “Non-GAAP Reconciliations” section below for reconciliations of the non-GAAP measures shown above.

Net Sales - Net sales increased by $303.0 million to $835.6 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.

This increase was primarily due to favorable sales pricing contributing $205.1 million in higher revenue, offset by decreased sales volumes resulting in $35.4 million of lower revenue as compared to the year ended December 31, 2020.

This increase was primarily due to favorable UAN and ammonia pricing conditions which contributed $347.7 million in higher revenues, partially offset by decreased sales volumes which reduced revenues by $53.8 million compared to the year ended December 31, 2021.

For the years ended December 31, 2022 and 2021, net sales included $34.8 million and $31.4 million in freight revenue, respectively, and $11.3 million and $10.3 million in other revenue, respectively.

The following table demonstrates the impact of changes in sales volumes and pricing for the primary components of net sales, excluding urea products, freight, and other revenue, for the year ended December 31, 2021 as compared to the year ended December 31, 2020.

(in thousands) Price

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Ammonia 93,521 (40,138)

For the year ended December 31, 2021 compared to the year ended December 31, 2020, ammonia and UAN sales prices were favorable primarily due to higher crop pricing coupled with lower fertilizer supply driven by production outages from Winter Storm Uri in February 2021 and Hurricane Ida in August and September 2021, as well as increased industry turnaround activity and lower global fertilizer production due to higher natural gas prices in Europe and Asia during 2021.

Total product sales volumes were unfavorable driven by lower production due to the Messer Outages, Winter Storm Uri, the Power Outages, and the R2 Outage.

For the year ended December 31, 2022 compared to the year ended December 31, 2021, ammonia and UAN sales prices were favorable primarily due to continued tight market conditions due to lower fertilizer supply driven by ongoing impacts from the Russia-Ukraine conflict, including reduced production from Europe as a result of the high energy price environment, and higher crop pricing.

Total product sales volumes were unfavorable driven by lower production due to unplanned downtime associated with the Messer Outages at the Coffeyville Facility and various pieces of equipment at the East Dubuque Facility in 2022, along with the completion of the planned turnarounds at both facilities during the third quarter of 2022.

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Cost of Materials and Other Direct Operating Expenses (1)

(1) Exclusive of depreciation and amortization expense.

Cost of Materials and Other - Cost of materials and other for the year ended December 31, 2021 was $98.3 million, compared to $91.1 million for the year ended December 31, 2020.

The $7.2 million increase was comprised primarily of a $12.0 million increase in natural gas costs at our East Dubuque Facility due to higher natural gas prices, $4.5 million increase in pet coke costs at our Coffeyville Facility related to higher third-party coke pricing caused by higher crude oil prices and higher related party pet coke pricing due to the UAN-indexed pricing formula, and $1.5 million increase in purchases of hydrogen.

These increases were offset by a decrease in freight expenses and distribution costs of $4.0 million due to downtime in October and November 2021 and a discontinuation of the Gavilon Railcar Lease in April 2021, a decrease related to a build in our ammonia and UAN inventories contributing $3.5 million, and a decrease in ammonia purchases of $3.3 million.

Direct Operating Expenses (exclusive of depreciation and amortization) - For the year ended December 31, 2021, direct operating expenses (exclusive of depreciation and amortization) were $198.7 million as compared to $157.9 million for the year ended December 31, 2020.

The $40.8 million increase was primarily due to higher personnel costs for labor of $4.6 million and share-based compensation expenses of $15.6 million as a result of higher market prices for CVR Partners’ units, higher electrical provider pricing and usage of $13.7 million, higher natural gas prices of $9.9 million, higher insurance costs of $2.4 million, and increased turnaround expenses of $2.2 million.

These costs were partially offset by a decrease related to a build in ammonia and UAN inventories of $7.8 million.

Cost of Materials and Other - For the year ended December 31, 2022, cost of materials and other was $130.9 million compared to $98.3 million for the year ended December 31, 2021.

The $32.6 million increase was driven primarily by increases in purchases of nitrogen and ammonia of $16.8 million, increased natural gas costs of $14.3 million, and higher distribution costs of $3.8 million.

These increases were partially offset by an inventory build contributing $2.3 million.

Direct Operating Expenses (exclusive of depreciation and amortization) - For the year ended December 31, 2022, direct operating expenses (exclusive of depreciation and amortization) were $270.2 million compared to $198.7 million for the year ended December 31, 2021.

The $71.5 million variance was primarily due to higher turnaround costs incurred during the planned turnarounds at both facilities during 2022, which increased turnaround expenses by $30.5 million, increased repair and maintenance expenses by $14.9 million, and increased personnel costs by $2.7 million.

In addition to these turnaround related increases, there were $14.2 million of higher prices for natural gas for fuel purposes, $4.0 million of increased operating materials and office costs, $3.5 million related to higher electricity pricing, and $2.6 million of higher insurance costs.

These increases were partially offset by an inventory build contributing $2.7 million.

Depreciation and Amortization Selling, General, and Administrative Expenses and Other

Depreciation and Amortization Expense - Depreciation and amortization expense increased $8.6 million for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily as a result of $8.2 million of accelerated

December 31, 2022 | 42

Depreciation and Amortization Expense - Depreciation and amortization expense decreased $2.6 million for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily as a result of inventory changes offset by increases in accelerated depreciation related to projects to be completed by 2025 that will retire assets earlier than their original expected useful life.

depreciation related to various assets scheduled for retirement during our 2022 planned turnarounds, as well as depreciation on new projects placed into service during these turnarounds.

Selling, General, and Administrative Expenses, and Other - Selling, general, and administrative expenses and other increased approximately $4.9 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.

The increase was primarily related to higher personnel costs in 2021 due to an increase in share-based compensation expenses resulting from the increase in CVR Partners’ unit price.

The increase was primarily related to increased personnel costs in 2022, mostly attributable to share-based compensation, contributing $3.6 million and increased expenses for outside services, public relations, and insurance contributing $1.7 million, partially offset by a decrease in loss on asset disposals of $0.7 million.

Other Income, Net - Other income, net for the year ended December 31, 2022 was $1.1 million, compared to $4.7 million for the year ended December 31, 2021.

The increase was due to sales of natural gas volumes at the East Dubuque Facility in February 2021.

The decrease was due to sales of natural gas at the East Dubuque Facility in February 2021, partially offset by a $0.9 million settlement received in 2022 related to an outage at the Coffeyville Facility in July 2021.

Non-GAAP Measures

Our management uses certain non-GAAP performance measures, and reconciliations to those measures, to evaluate current and past performance and prospects for the future to supplement our financial information presented in accordance with U.S.

These non-GAAP financial measures are important factors in assessing our operating results and profitability and include the performance and liquidity measures defined below.

Beginning with the second quarter of 2021, management began reporting Adjusted EBITDA, as defined below.

We believe the presentation of this non-GAAP measure is meaningful to compare our operating results between periods and peer companies.

All prior periods presented have been conformed to the definition below.

The following are non-GAAP measures we present for the year ended December 31, 2022:

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Adjusted EBITDA - EBITDA adjusted for certain significant non-cash items and items that management believes are not attributable to or indicative of our on-going operations or that may obscure our underlying results and trends.

Reconciliation of Net Cash Provided By Operating Activities to EBITDA and Adjusted EBITDA - Net cash provided by operating activities reduced by (i) interest expense, net, (ii) income tax expense (benefit), (iii) change in working capital, and (iv) other non-cash adjustments.

Reconciliation of Net Cash Provided By Operating Activities to EBITDA - Net cash provided by operating activities reduced by (i) interest expense, net, (ii) income tax expense (benefit), (iii) change in working capital, and (iv) other non-cash adjustments.

Available Cash for Distribution - EBITDA for the quarter excluding non-cash income or expense items (if any), for which adjustment is deemed necessary or appropriate by the board of directors of our general partner (the “Board”) in its sole discretion, less (i) reserves for maintenance capital expenditures, debt service and other contractual obligations and (ii) reserves for future operating or capital needs (if any), in each case, that the Board deems necessary or appropriate in its sole discretion.

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Available cash for distribution may be increased by the release of previously established cash reserves, if any, and other excess cash, at the discretion of the Board.

We present these measures because we believe they may help investors, analysts, lenders, and ratings agencies analyze our results of operations and liquidity in conjunction with our U.S.

GAAP results, including, but not limited to, our operating performance as compared to other publicly traded companies in the fertilizer industry, without regard to historical cost basis or financing methods, and our ability to incur and service debt and fund capital expenditures.

We present these measures because we believe they may help investors, analysts, lenders, and ratings agencies analyze our results of operations and liquidity in conjunction with our GAAP results, including, but not limited to, our operating performance as compared to other publicly traded companies in the fertilizer industry, without regard to historical cost basis or financing methods, and our ability to incur and service debt and fund capital expenditures.

Non-GAAP measures have important limitations as analytical tools because they exclude some, but not all, items that affect net earnings and operating income.

These measures should not be considered substitutes for their most directly comparable U.S.

GAAP financial measures.

These measures should not be considered substitutes for their most directly comparable GAAP financial measures.

Refer to the “Non-GAAP Reconciliations” included herein for reconciliation of these amounts.

Due to rounding, numbers presented within this section may not add or equal to numbers or totals presented elsewhere within this document.

December 31, 2022 | 43

Factors Affecting Comparability of Our Financial Results

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Major Scheduled Turnaround Activities

Coffeyville Facility - The next planned turnaround at the Coffeyville Facility is expected to commence in the summer of 2022.

Additionally, the Coffeyville Facility had planned downtime which was completed during the fourth quarter of 2021 at a cost of $2.0 million.

For the year ended December 31, 2021, we also incurred turnaround expense of $0.3 million, related to planning for the Coffeyville Facility’s expected turnaround in the summer of 2022.

East Dubuque Facility - The next planned turnaround at the East Dubuque Facility is expected to occur in the summer of 2022.

For the year ended December 31, 2021, we incurred turnaround expense of $0.6 million, related to planning for the East Dubuque Facility’s expected turnaround in the summer of 2022.

Goodwill Impairment

As a result of lower expectations for market conditions in the fertilizer industry during 2020, the market performance of the Partnership’s common units, a qualitative analysis, and additional risks associated with the business, the Partnership performed an interim quantitative impairment assessment of goodwill for the Coffeyville Facility reporting unit as of June 30, 2020.

The results of the impairment test indicated the carrying amount of this reporting unit exceeded the estimated fair value, and a full, non-cash impairment charge of $41.0 million was required.

Coffeyville Facility - A planned turnaround at the Coffeyville Facility commenced in July 2022 and was completed in mid-August 2022.

For the year ended December 31, 2022, we incurred turnaround expense of $12.1 million.

For the year ended December 31, 2021, we incurred turnaround expense of $0.3 million related to planning for the Coffeyville Facility’s turnaround completed during the third quarter of 2022.

During the planning and execution of this turnaround, the Partnership updated the estimated useful lives of certain assets, which resulted in additional depreciation expense of $6.2 million during the year ended December 31, 2022.

Additionally, the Coffeyville Facility had planned downtime during the fourth quarter of 2021 at a cost of $2.0 million.

East Dubuque Facility - A planned turnaround at the East Dubuque Facility commenced in August 2022 and was completed in mid-September 2022.

For the year ended December 31, 2022, we incurred turnaround expense of $21.3 million.

For the year ended December 31, 2021, we incurred turnaround expense of $0.6 million related to planning for the East Dubuque Facility’s turnaround completed during the third quarter of 2022.

Non-GAAP Reconciliations

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Interest expense, net 34,065 60,978 63,428

Income tax expense (benefit) 57 30 (18)

Income tax expense 160 57 30

Depreciation and amortization 82,137 73,480 76,077

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Loss on extinguishment of debt (628) (8,462) —

Share-based compensation (25,264) (23,069) (1,035)

Goodwill impairment — — (40,969)

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Interest expense, net 34,065 60,978 63,428

Income tax expense (benefit) 57 30 (18)

Income tax expense 160 57 30

Change in assets and liabilities 94,343 (1,670) 5,755

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Future turnaround (16,750) (10,750) (4,500)

Previously established cash reserves — — 25,433

Reserve for repayment of current portion of long-term debt — — (2,240)

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However, available cash for distribution is calculated quarterly, with distributions (if any) being paid in the period following declaration.

(2) The Partnership did not declare a cash distributions for the first quarter of 2021, declared and paid a $1.72 and $2.93 cash distribution related to the second and third quarter of 2021, respectively, and declared a cash distribution of $5.24 per common unit related to the fourth quarter of 2021.

(2) The Partnership declared and paid cash distributions of $5.24, $2.26, $10.05, and $1.77 per common unit related to the fourth quarter of 2021, and first, second, and third quarters of 2022, respectively, and declared a cash distribution of $10.50 per common unit related to the fourth quarter of 2022, to be paid in March 2023.

December 31, 2022 | 45

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Our principal uses of cash are for working capital, capital expenditures, funding our debt service obligations, and paying distributions to our unitholders, as further discussed below.

The effects of the COVID-19 pandemic resulted in a reduction in U.S.

economic activity in 2020 and 2021.

These effects caused significant volatility and disruption of the financial markets, and we have observed adverse impacts to our business and financial performance, of which the nature and extent of such impacts remains uncertain.

In early 2021, as the impacts of the COVID-19 pandemic started to recover, Winter Storm Uri and Hurricane Ida caused unprecedented disruptions to natural gas and electricity supply throughout the Midwest and Gulf Coast regions, leading to lower fertilizer supply due to production outages which increased the price of fertilizer.

This period of extreme economic disruption may continue to have an impact on our business, results of operations, and access to sources of liquidity.

While we believe demand for our fertilizer products is stable, there is still uncertainty on the horizon as COVID-19 vaccines are distributed and countries and states continue to monitor their efforts against the virus, and variants thereof, and weigh further lock-down measures.

In executing financial discipline, we have successfully implemented and are maintaining the following measures:

• Taking advantage of downtime to perform maintenance activities which enabled us to defer the East Dubuque Facility turnaround from 2021 to 2022;

• Reducing the amount of maintenance capital expenditures to only include those projects which are a priority to support continuing safe and reliable operations, or which we consider are critical to support future activities.

When paired with the actions outlined above, we believe that our cash from operations and existing cash and cash equivalents, along with borrowings, as necessary, will be sufficient to satisfy anticipated cash requirements associated with our existing operations for at least the next 12 months.

Fertilizer market conditions improved steadily throughout 2021 and into 2022 driven by a combination of increased demand for products amid a series of supply disruptions that led to tight fertilizer inventories and concerns around availability of product.

In the first quarter of 2022 following the Russian invasion of Ukraine, fertilizer prices increased further and have been volatile over concerns of a reduction in global supply of fertilizers due to restrictions on supply of Russian fertilizers and Russia’s decision to restrict fertilizer exports through the end of 2022.

Further, the disruption in natural gas flows to Europe following the shutdown of the Nordstream pipeline in the summer of 2022 resulted in a spike in European natural gas and electricity prices, causing many nitrogen fertilizer production facilities in Europe to cease or curtail operations.

As a result nitrogen fertilizer exports from the U.S.

to Europe have increased, thereby reducing the domestic availability of nitrogen fertilizers in the United States and causing prices to move higher.

Despite the volatility in recent commodity pricing, the increase in fertilizer product pricing has had a favorable impact to our business and has not significantly impacted our primary source of liquidity.

While we believe demand for our fertilizer products is stable, there is still uncertainty on the horizon as countries weigh potential impacts of the ongoing Russia-Ukraine conflict.

In executing financial discipline, we are continuing to focus maintenance capital expenditures to only include those projects which are a priority to support continuing safe and reliable operations, or which are considered critical to support future activities.

When considering the market conditions and actions described above, we currently believe that our cash from operations and existing cash and cash equivalents, along with borrowings, as necessary, will be sufficient to satisfy anticipated cash requirements associated with our existing operations for at least the next 12 months.

However, our future capital expenditures and other cash requirements could be higher than we currently expect as a result of various factors including, but not limited to, rising material and labor costs and other inflationary pressures.

Additionally, our ability to generate sufficient cash from our operating activities and secure additional financing depends on our future performance, which is subject to general economic, political, financial, competitive, and other factors, some of which may be beyond our control.

Depending on the needs of our business, contractual limitations, and market conditions, we may from time to time seek to issue equity securities, incur additional debt, issue debt securities, or redeem, repurchase, refinance, or retire our outstanding debt through privately negotiated transactions, open market repurchases, redemptions, exchanges, tender offers or otherwise, but we are under no obligation to do so.

There can be no assurance that we will seek to do any of the foregoing or that we will be able to do any of the foregoing on terms acceptable to us or at all.

On June 23, 2021, the Partnership and certain of its subsidiaries completed a private offering of $550.0 million aggregate principal amount of 6.125% Senior Unsecured Notes due June 2028 (the “2028 Notes”), which mature on June 15, 2028, and partially redeemed the Partnership’s 9.25% Senior Notes due June 2023 (the “2023 Notes”) in the amount of $550.0 million.

On September 23, 2021 and December 22, 2021, the Partnership redeemed an additional $15.0 million and $15.0 million, respectively, in aggregate principal of the 2023 Notes.

On February 22, 2022, the Partnership redeemed the remaining $65 million in aggregate principal amount of the 2023 Notes.

Collectively, these transactions represent a significant and favorable change in the Partnership’s cash flow and liquidity position, with an annual savings of approximately $26.0 million in future interest expense, as compared to our 2020 Form 10-K.

Additionally, on September 30, 2021, the Partnership entered into a new credit agreement with an aggregate principal amount of up to $35.0 million with a maturity date of September 30, 2024 (the “ABL Credit Facility”) and terminated its $35.0 million ABL Credit Agreement, dated as of September 30, 2016, as amended (the “2016 ABL Credit Agreement”).

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

On February 22, 2022, the Partnership redeemed the remaining $65 million in aggregate principal amount of its 9.25% Senior Secured Notes, due June 2023 (the “2023 Notes”) at par, plus accrued and unpaid interest.

This transaction represents a significant and favorable change in the Partnership’s cash flow and liquidity position with annual savings of approximately $6.0 million in future interest expense, as compared to our 2021 Form 10-K.

Refer to Part II, Item 8, Note 5 (“Long-Term Debt”) of this Report for further information.

The Partnership and its subsidiaries were in compliance with all applicable covenants under their respective debt instruments as of December 31, 2022 and through the date of filing.

We do not have any “off-balance sheet arrangements” as such term is defined within the rules and regulations of the SEC.

December 31, 2021 | 40

Cash and Other Liquidity

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As of December 31, 2021, we had $112.5 million in cash and cash equivalents, including $34.2 million of customer advances.

December 31, 2022 | 46

(in thousands) 2022 2021

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

6.125% Senior Secured Notes, due June 2028

550,000 550,000

6.125% Senior Notes, due June 2028

Unamortized discount and debt issuance costs (3,200) (4,358)

Total long-term debt $ 546,800 $ 610,642

Current portion of long-term debt (2)

Total long-term debt, including current portion $ 610,642 $ 636,182

(1) The call price of the 9.25% Senior Secured Notes due June 2023 (the “2023 Notes”) decreased to par on June 15, 2021.

On June 23, 2021, September 23, 2021, and December 22, 2021, the Partnership redeemed $550 million, $15 million, and $15 million, respectively, of the 2023 Notes, at par, plus accrued and unpaid interest.

The remaining balance of $65 million was outstanding as of December 31, 2021.

(1) The $65 million outstanding balance of the 2023 Notes was paid in full on February 22, 2022 at par, plus accrued and unpaid interest.

(2) The $2.2 million outstanding balance of the 6.5% Notes, due April 2021 (the “2021 Notes”) was paid in full on April 15, 2021.

On June 23, 2021, the Partnership and its subsidiary, CVR Nitrogen Finance Corporation (“Finance Co.” and, together with CVR Partners, the “Issuers”), completed a private offering of $550 million aggregate principal amount of 6.125% Senior Secured Notes due 2028 (the “2028 Notes”).

The net proceeds from the 2028 Notes, plus cash on hand, were used to redeem $550 million aggregate principal amount of the 2023 Notes.

On September 23, 2021 and December 22, 2021, the Partnership redeemed $15 million and $15 million aggregate principal amount of the outstanding 2023 Notes, respectively.

On September 30, 2021, the Partnership entered into the ABL Credit Agreement and terminated its 2016 ABL Credit Agreement.

As of December 31, 2021, the Partnership had the remaining portion of the 2023 Notes, the 2028 Notes, and the ABL Credit Agreement, the proceeds of which may be used to fund working capital, capital expenditures, and for other general corporate purposes.

On February 22, 2022, the Partnership redeemed the remaining $65 million in aggregate principal amount of the 2023 Notes.

As of December 31, 2022, the Partnership had the 2028 Notes and the ABL Credit Facility, the proceeds of which may be used to fund working capital, capital expenditures, and for other general corporate purposes.

Refer to Part II, Item 8, Note 5 (“Long-Term Debt”) of this Report for further information.

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Total capital expenditures $ 41,446 $ 25,686 $33,000 - 36,000

(1) Total 2023 estimated capitalized costs include approximately $0.5 million of growth related projects that will require additional approvals before commencement.

Our estimated capital expenditures are subject to change due to unanticipated changes in the cost, scope, and completion time for capital projects.

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We may also accelerate or defer some capital expenditures from time to time.

Capital spending for CVR Partners is determined

December 31, 2021 | 41

by the Board.

We will continue to monitor market conditions and make adjustments, if necessary, to our current capital spending or turnaround plans.

The next planned turnaround is at the Coffeyville Facility and is expected to occur in the summer of 2022, with an estimated cost of $10 to $13 million.

The turnaround at our East Dubuque Facility is expected to commence in the summer of 2022, with an estimated cost of $13 to $15 million.

Additionally, the Coffeyville Facility had planned downtime for certain maintenance activities, which was completed in the fourth quarter of 2021 at a cost of $2.0 million.

For the year ended December 31, 2021, we also incurred approximately $0.3 million and $0.6 million, in turnaround expense related to planning for the Coffeyville Facility’s and East Dubuque Facility’s expected turnarounds in 2022, respectively.

Capital spending for CVR Partners is determined by the Board.

We will continue to monitor market conditions and make adjustments, if needed, to our current capital spending or turnaround plans.

The planned turnaround at the Coffeyville Facility commenced in July 2022 and was completed in mid-August 2022.

The planned turnaround at the East Dubuque Facility commenced in August 2022 and was completed in mid-September 2022.

For the years ended December 31, 2022 and 2021, we incurred turnaround expense of $12.1 million and $0.3 million, respectively, at the Coffeyville Facility and $21.3 million and $0.6 million, respectively, at the East Dubuque Facility.

Additionally, the Coffeyville Facility had planned downtime for certain maintenance activities during the fourth quarter of 2021 at a cost of $2.0 million.

Distributions to Unitholders

The current policy of the Board is to distribute all Available Cash the Partnership generated on a quarterly basis.

The current policy of the Board is to distribute all Available Cash, as determined by the Board in its sole discretion, the Partnership generated on a quarterly basis.

Available Cash for each quarter will be determined by the Board following the end of such quarter.

Available Cash for each quarter is calculated as EBITDA for the quarter excluding non-cash income or expense items (if any), for which adjustment is deemed necessary or appropriate by the Board in its sole discretion, less (i) reserves for maintenance capital expenditures, debt service and other contractual obligations, and (ii) reserves for future operating or capital needs (if any), in each case, that the Board deems necessary or appropriate in its sole discretion.

Available cash for distribution may be increased by the release of previously established cash reserves, if any, and other excess cash, at the discretion of the Board.

Available cash for distribution

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may be increased by the release of previously established cash reserves, if any, and other excess cash, at the discretion of the Board.

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

The following table presents distributions paid by the Partnership to CVR Partners’ unitholders, including amounts paid to CVR Energy, as of December 31, 2021.

Distributions Paid (in thousands)

Related Period Date Paid Distribution Per

Common Unit Public Unitholders CVR Energy Total

2021 - 2nd Quarter August 23, 2021 $ 1.72 $ 11,678 $ 6,694 $ 18,372

2021 - 3rd Quarter November 22, 2021 2.93 19,893 11,404 31,297

Total distributions $ 4.65 $ 31,571 $ 18,098 $ 49,669

There were no distributions declared or paid by the Partnership related to the first quarter of 2021 and fourth quarter of 2020, and no distributions were declared or paid during 2020.

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

Of these distributions, CVR Energy received $15.6 million.

The following tables present quarterly distributions paid by the Partnership to CVR Partners’ unitholders, including amounts paid to CVR Energy, during 2022 and 2021 (amounts presented in the table below may not add to totals presented due to rounding):

Quarterly Distributions Paid (in thousands)

Related Period Date Paid Quarterly Distributions

Per Common Unit Public Unitholders CVR Energy Total

2021 - 4th Quarter

March 14, 2022 $ 5.24 $ 35,576 $ 20,394 $ 55,970

2022 - 1st Quarter

May 23, 2022 2.26 15,091 8,796 23,887

2022 - 2nd Quarter

August 22, 2022 10.05 67,109 39,115 106,225

2022 - 3rd Quarter

November 21, 2022 1.77 11,819 6,889 18,708

Total 2022 quarterly distributions

$ 19.32 $ 129,597 $ 75,193 $ 204,790

Quarterly Distributions Paid (in thousands)

Related Period Date Paid Quarterly Distributions

Per Common Unit Public Unitholders CVR Energy Total

2021 - 2nd Quarter

August 23, 2021 $ 1.72 $ 11,678 $ 6,694 $ 18,372

2021 - 3rd Quarter

November 22, 2021 2.93 19,893 11,404 31,297

Total 2021 quarterly distributions

$ 4.65 $ 31,571 $ 18,098 $ 49,669

There were no quarterly distributions declared or paid by the Partnership related to the first quarter of 2021 and the fourth quarter of 2020.

During the year ended December 31, 2020, there were no quarterly distributions declared or paid by the Partnership.

For the fourth quarter of 2022, the Partnership, upon approval by the Board on February 21, 2023, declared a distribution of $10.50 per common unit, or $111.0 million, which is payable March 13, 2023 to unitholders of record as of March 6, 2023.

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Capital Structure

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.

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

During the year ended December 31, 2021, the Partnership repurchased 24,378 common units on the open market in accordance with a repurchase agreement under Rules 10b5-1 and 10b-18 of the Securities Exchange Act of 1934, as amended, at a cost of $0.5 million, inclusive of transaction costs, or an average price of $21.70 per common unit.

During the year ended December 31, 2020, as adjusted to reflect the impact of the 1-for-10 reverse unit split of the Partnership’s common units that was effective as of November 23, 2020, the Partnership repurchased 623,177 common units, respectively, at a cost of $7.1 million, inclusive of transaction costs, or an average price of $11.35 per common unit.

As of December 31, 2021, the Partnership had $12.4 million in authority remaining under the Unit Repurchase Program.

On May 6, 2020, the Board, on behalf of the Partnership, authorized a unit repurchase program (the “Unit Repurchase Program”), which was increased on February 22, 2021.

The Unit Repurchase Program, as increased, authorized the Partnership to repurchase up to $20 million of the Partnership’s common units.

During the years ended December 31, 2022 and 2021, the Partnership repurchased 111,695 and 24,378 common units, respectively, on the open market in accordance with a repurchase agreement under Rules 10b5-1 and 10b-18 of the Securities Exchange Act of 1934, as amended, at a cost of $12.4 million and $0.5 million, respectively, exclusive of transaction costs, or an average price of $110.98 and $21.69 per common unit, respectively.

As of December 31, 2022, the Partnership had a nominal authorized amount remaining under the Unit Repurchase Program.

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

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Financing activities (283,018) (86,426) (7,625)

Net increase (decrease) in cash and cash equivalents and restricted cash $ 81,957 $ (6,435) $ (24,782)

Net (decrease) increase in cash and cash equivalents $ (26,177) $ 81,957 $ (6,435)

Operating Activities

The change in net cash flows from operating activities for the year ended December 31, 2021 as compared to the year ended December 31, 2020 is primarily due to a $171.3 million increase in EBITDA, a $22.0 million net increase in non-cash share based compensation as a result of higher market prices for CVR Partners’ units, favorable changes in working capital of $6.7 million, and a $8.5 million loss on extinguishment of debt primarily associated with the partial redemption of the 2023 Notes in June 2021.

This activity is partially offset by a non-cash impairment of goodwill of $41.0 million recognized in 2020.

The change in net cash flows from operating activities for the year ended December 31, 2022 as compared to the year ended December 31, 2021 is primarily due to a $209 million increase in net income in 2022 as a result of stronger sales related to the higher price environment in which our products were sold in 2022 compared to 2021, and a $2.2 million net increase in non-cash share based compensation as a result of higher market prices for CVR Partners’ units.

This is partially offset by an unfavorable change in working capital of $90.9 million primarily due to decreasing deferred revenues in 2022 compared to increasing deferred revenues in 2021 and increasing accounts payable in 2021 in preparation for the 2022 planned turnarounds as compared to 2022, and a $7.8 million reduction in the loss on extinguishment of debt primarily associated with the partial redemption of the 2023 Notes in June 2021.

Investing Activities

The change in net cash used in investing activities for the year ended December 31, 2021 compared to the year ended December 31, 2020 was due to increased capital expenditures during 2021 of $2.0 million due to deferring certain capital projects from 2020 to 2021.

The change in net cash used in investing activities for the year ended December 31, 2022 compared to the year ended December 31, 2021 was due to increased capital expenditures during 2022 of $24.1 million resulting from fixed asset additions related to both facilities’ turnarounds in 2022.

Financing Activities

The change in net cash used in financing activities for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily due to the partial redemptions of the 2023 Notes of $580.0 million, cash distributions paid of $49.7 million, the payment of $3.9 million in deferred financing costs during the second and third quarters of 2021 related to the offering of the 2028 Notes and the ABL Credit Facility, and the redemption of the remaining 2021 Notes of $2.2 million.

These decreases were partially offset by the Partnership’s June 2021 offering of $550.0 million of the 2028 Notes, coupled with a reduction of $6.5 million in repurchases of the Partnership’s common units in 2021 compared to 2020.

The change in net cash used in financing activities for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to an increase of $155.1 million in cash distributions paid in 2022 compared to 2021, a change of $32.8 million in the redemption of the remaining balance of the 2023 Notes during 2022 compared to the partial redemption of the 2023 Notes and the 6.5% Notes due April 2021 during 2021, and an increase of $11.9 million for unit repurchases in 2022 compared to 2021.

These are partially offset by a $3.1 million decrease in deferred financing costs paid in 2022 compared to 2021.

Additionally, in June 2021, the Partnership completed a private offering of $550.0 million aggregate principal amount of the 2028 Notes and used the proceeds, plus cash on hand, to redeem a portion of the 2023 Notes.

Recent Accounting Pronouncements

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Actual results could differ from the estimates and assumptions used.

December 31, 2022 | 49

Inventory Valuation

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We compare the estimated realizable value of inventories to their cost by product at each of our facilities.

Depending on inventory levels, the per-ton realizable value of our fertilizer

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products is estimated using pricing on in-transit orders, pricing for open, fixed-price orders that have not shipped, and, if volumes remain unaccounted for, current management pricing estimates for fertilizer products.

Depending on inventory levels, the per-ton realizable value of our fertilizer products is estimated using pricing on in-transit orders, pricing for open, fixed-price orders that have not shipped, and, if volumes remain unaccounted for, current management pricing estimates for fertilizer products.

Management’s estimate for current pricing reflects up-to-date pricing in each facility’s market as of the end of each reporting period.

Reductions to selling prices for unreimbursed freight costs are included to arrive at net realizable value, as applicable.

During the year ended December 31, 2021 and December 31, 2019, there was no adjustment.

For the year ended December 31, 2020, we recognized a loss on inventory to reflect net realizable value of $0.7 million.

During the years ended December 31, 2022 and December 31, 2021, there were no adjustments.

For the year ended December 31, 2020, we recognized a loss of $0.7 million in inventory to reflect its net realizable value.

Due to the amount and variability in volume of fertilizer product inventories maintained, changes in production costs, and the volatility of market pricing for fertilizer products, losses recognized to reflect fertilizer product inventories at the lower of cost or net realizable value could have a material impact on the Partnership’s results of operations.

Impairment of Long-lived Assets and Goodwill

Impairment of Long-lived Assets

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.

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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 on November 1 of each year, or more frequently if events or changes in circumstances indicate the asset might be impaired.

One of our 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 our near-term economic recovery assumptions, including management’s revised forecasts for product pricing in 2020 and beyond, and market price performance of our common units, we concluded an impairment indicator was present and a triggering event under Accounting Standards Codification (“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, we recorded a non-cash impairment charge of $41.0 million during 2020.

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

We performed our annual impairment reviews of goodwill for 2019, on November 1 and concluded no impairments.

For the period ended December 31, 2019, we 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 reporting unit, 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 our quantitative goodwill impairment test.

In addition, when preparing the expected future cash flows or estimating the fair value of impaired assets, we make several estimates that include subjective assumptions related to future sales volumes, commodity prices, operating costs, discount rates, and capital expenditures, among others.

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What changed 10-K

Item 7. Management’s Discussion and Analysis