What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-21 compared with 2023-02-22 · 175 added, 202 removed, 231 unchanged (62% of the section changed)

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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

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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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• 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

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

Following good faith bargaining by East Dubuque Nitrogen Fertilizers, LLC (“EDNF”), the United Automobile Workers Union and its Local 1391 representing approximately 90 employees at the East Dubuque Facility went on strike on October 18, 2023 after its collective bargaining agreement expired the previous day.

The East Dubuque Facility has continued to operate and is currently expected to continue normal operations during the strike.

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.

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.

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

In December 2023, we published a 2022 Environmental, Social & Governance Report (“2022 ESG Report”) which is based on the Sustainability Accounting Standards Board standards and is available at CVR Partner’s website at www.CVRPartners.com.

The 2022 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 Securities and Exchange Commission (the “SEC”), whether made before or after the date of this Annual Report on Form 10-K.

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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.

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.

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 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, among other factors.

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.

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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.

These factors can impact, among other things, the level of inventories in the markets, resulting in price and product margin volatility.

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

General Business Environment

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.

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.

Regulatory Environment - Certain governmental regulations and incentives associated with the automobile transportation and agricultural industries, including the ones related to corn-based ethanol and sustainable aviation fuel production or consumption can directly impact our business.

In August 2022, the Inflation Reduction Act was passed and introduced the Clean Fuel Production Credit incentivizing lower Carbon Intensity feedstocks, including corn oil, which may increase demand for corn planting.

In June 2023, the United States Environmental Protection Agency (“EPA”) announced the renewable volume obligations for 2023, 2024, and 2025 which maintained the conventional biofuel blending level at 15 billion gallons.

These actions lead us to believe that the demand on food, in particular corn, for fuel will remain strong for the foreseeable future and support farmer economics that incentivize the use of nitrogen-based fertilizers.

In contrast, in April 2023, the EPA announced the proposed federal vehicle emission standards for 2027 through 2032, which, if finalized, would significantly reduce the use of internal combustion engine vehicles and the demand for liquid fuels including ethanol.

In 2023, production of ethanol consumed approximately 37% of the annual United States corn crop used by the market.

Geopolitical Matters - The conflict between Israel and Hamas, which began in October 2023, and the ongoing Russia-Ukraine war, could significantly impact global fertilizer and agriculture markets.

These conflicts pose significant geopolitical risks to global markets, raise concerns of major implications, such as the enforcement of sanctions, and could disrupt the production and trade of fertilizer, grains, and feedstock through several means, such as trade restrictions.

The ultimate outcome of these conflicts and any associated market disruptions are difficult to predict and may affect our business, operations, and cash flows in unforeseen ways.

Partnership Initiatives

The Partnership has been conducting engineering studies on the potential to utilize natural gas as an optional feedstock to pet coke at its Coffeyville Facility.

Based on these studies, CVR Partners subsidiaries could utilize either natural gas or pet coke to produce nitrogen fertilizer by making certain modifications to the plant.

If this project is approved by the board of directors of our general partner (the “Board”) and successfully implemented, it could allow the Partnership to choose the lowest cost feedstock for production and would make the Coffeyville Facility the only nitrogen fertilizer plant in the U.S.

with that feedstock flexibility.

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Market Indicators

While there is risk of shorter-term volatility given the inherent nature of the commodity cycle, the Partnership believes the long-term fundamentals for the U.S.

While there is risk of shorter-term volatility given the inherent nature of the commodity cycle and governmental and geopolitical risks, the Partnership believes the long-term fundamentals for the U.S.

nitrogen fertilizer industry remain intact.

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Corn crops result in the depletion of the amount of nitrogen within the soil in which it is grown, which in turn, results in the need for this nutrient to be replenished after each growing cycle.

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 by the chart presented below for 2022, 2021, and 2020.

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 shown by the chart presented below for 2023, 2022, and 2021.

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.

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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.

Additionally, an estimated 12.8 billion pounds of soybean oil is expected to be used in producing cleaner renewable fuels in marketing year 2023/2024.

Multiple refiners have announced renewable diesel expansion projects for 2024 and beyond, which should only increase the demand for soybeans and potentially for corn and canola.

The United States Department of Agriculture (“USDA”) data shows that in spring 2023 farmers planted 94.6 million corn acres, representing an increase of 6.8% as compared to 88.6 million corn acres in 2022.

Planted soybean acres for spring 2023 are 83.6 million, representing a decrease of 4.5% as compared to 87.5 million soybean acres in 2022.

The combined corn and soybean planted acres of 178.2 million in 2023 is an increase of 1.2% compared to the acreage planted in 2022.

Due to lower input costs in 2023 for corn planting and the relative grain prices of corn versus soybeans, economics favored planting corn compared to soybeans in 2023.

Lower inventory levels of corn and soybeans are expected to be supportive of grain prices into the spring of 2024.

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

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.

Since 2010, ethanol production has historically consumed 37% of the U.S.

corn crop used by the market, so demand for corn generally rises and falls with ethanol demand, as shown by the charts below, through December 31, 2023.

Plant Production of Fuel Ethanol (1)

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(2) Information used within this chart was obtained from the USDA, National Agricultural Statistics Services as of December 31, 2023.

Weather continues to be a critical variable for crop production.

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.

Department of Commerce (“USDOC”) and the U.S.

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”).

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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Weather continues to be a critical variable for crop production.

Even with high planted acres and trendline yields per acre in the U.S., global 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 conflict in Ukraine, prices for grains remained elevated through 2023, although below the elevated prices experienced in the spring of 2022.

Demand for nitrogen fertilizer, as well as other crop inputs, was strong for the spring 2023 planting season and fall 2023 ammonia application, primarily due to elevated grain prices and favorable weather conditions for planting and fertilizer application.

Fertilizer input costs have been volatile since the fall of 2021.

Natural gas prices were elevated in the fall of 2022 due to shortages in Europe and demand being driven by building natural gas storage for winter.

Winter 2022/2023 weather was warmer than average in Europe and when combined with natural gas conservation measures caused demand and prices for natural gas in Europe to fall significantly in the first quarter of 2023 and remain below the 2021/2022 price levels.

The decline in natural gas prices has led to a significant reduction in the price for nitrogen fertilizer globally due to lower input costs.

While we expect that natural gas prices might remain below the elevated levels experienced in 2022 in the near term, we believe that the structural shortage of natural gas in Europe will continue to be a source of volatility into 2024.

Although pet coke prices remain elevated compared to historical levels, third-party pet coke prices have declined into 2024.

The charts below show relevant market indicators by month through December 31, 2023:

Ammonia and UAN Market Pricing (1)

Natural Gas and Pet Coke Market Pricing (1)

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

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Natural Gas Market Pricing (1)

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.

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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.

Utilization is presented solely on ammonia production, rather than on 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 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 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.

On a consolidated basis, utilization increased 19% to 100% for the year ended December 31, 2023 compared to the year ended December 31, 2022.

This increase was primarily due to reduced production volumes and utilization during the planned turnarounds at both facilities in the third quarter of 2022, which subsequently improved operational reliability.

In addition, there was increased unplanned downtime in 2022 associated with the Messer air separation plant (the “Messer Outages”) at the Coffeyville Facility and various pieces of equipment being down at the East Dubuque Facility.

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.

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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.

For the year ended December 31, 2023, total product sales volumes were favorable driven by reduced production volumes and utilization during the planned turnarounds at both facilities in the third quarter of 2022, which subsequently improved operational reliability.

In addition, the facilities experienced minimal unplanned downtime in 2023 compared to 2022 due to the Messer Outages at the Coffeyville Facility and various pieces of equipment being down at the East Dubuque Facility in 2022.

For the year ended December 31, 2023, total product sales were unfavorable driven by sales price decreases of 44% for ammonia and 36% for UAN during the year.

Ammonia and UAN sales prices were unfavorable primarily due to lower natural gas prices and increased global supplies of nitrogen fertilizers.

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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, 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.

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

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

The table below presents these metrics for the years ended December 31, 2023, 2022, and 2021:

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2023 2022 2021

Petroleum coke used in production (thousand tons)

Petroleum coke (dollars per ton)

Petroleum coke used in production (thousands of tons)

Petroleum coke used in production (dollars per ton)

$ 78.14 $ 52.88 $ 44.69

Natural gas used in production (thousands of MMBtu) (1)

Natural gas used in production (thousands of MMBtus) (1)

8,462 6,905 8,049

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$ 3.42 $ 6.66 $ 3.95

Natural gas in cost of materials and other (thousands of MMBtu) (1)

Natural gas in cost of materials and other (thousands of MMBtus) (1)

8,671 6,701 7,848

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Financial Highlights

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)

Overview - For the year ended December 31, 2023, the Partnership’s operating income and net income were $201.4 million and $172.4 million, respectively, representing declines of $118.5 million and $114.4 million, respectively, compared to operating income and net income of $319.9 million and $286.8 million, respectively, for the year ended December 31, 2022.

These variances were primarily driven by decreased product sales prices, offset by increased production and sales volumes, compared to 2022.

Net Sales Operating Income

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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 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.

Net Sales - Net sales decreased by $154.1 million to $681.5 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.

This decrease was primarily due to unfavorable UAN and ammonia pricing conditions which reduced revenue by $373.5 million, partially offset by increased sales volumes which contributed $210.0 million in higher revenue compared to the year ended December 31, 2022.

For the years ended December 31, 2023 and 2022, net sales included $42.1 million and $34.8 million in freight revenue and $18.2 million and $11.3 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, 2023 compared to the year ended December 31, 2022:

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Ammonia (126,590) 88,071

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.

For the year ended December 31, 2023 compared to the year ended December 31, 2022, ammonia and UAN sales prices were unfavorable primarily due to lower natural gas prices and increased global supplies of nitrogen fertilizers in the current year.

Total product sales volumes were favorable driven by reduced production volumes and utilization during the planned turnarounds at both facilities in the third quarter of 2022, which subsequently improved operational reliability.

In addition, there was minimal unplanned downtime in 2023 compared to 2022 due to the Messer Outages at the Coffeyville Facility and various pieces of equipment being down at the East Dubuque Facility in 2022.

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Cost of Materials and Other - For the year ended December 31, 2023, cost of materials and other was $134.4 million compared to $130.9 million for the year ended December 31, 2022.

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.

The $3.5 million increase was driven primarily by higher third-party pet coke feedstock costs, partially offset by lower natural gas feedstock costs in the current period.

Direct Operating Expenses (exclusive of depreciation and amortization) - For the year ended December 31, 2023, direct operating expenses (exclusive of depreciation and amortization) were $234.9 million compared to $270.2 million for the year ended December 31, 2022.

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

The $35.3 million decrease was primarily due to turnaround expenses in the prior period associated with the planned turnarounds taking place at both facilities in the third quarter of 2022, coupled with decreased personnel costs from share-based compensation and lower natural gas and electricity costs in the current period.

Depreciation and Amortization Selling, General, and Administrative Expenses and Loss on Asset Disposal

Depreciation and Amortization Expense - Depreciation and amortization expense decreased $2.4 million for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily as a result of various assets being fully depreciated in the prior period, as well as fluctuations in depreciation capitalized to inventory.

Selling, General, and Administrative Expenses and Loss on Asset Disposal - Selling, general and administrative expenses and Loss on asset disposal, combined, decreased approximately $1.4 million for the year ended December 31, 2023 compared

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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 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 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.

to the year ended December 31, 2022.

The decrease was primarily related to lower share-based compensation due to a decrease in market prices for CVR Partners’ common units in the current period.

Non-GAAP Measures

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

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

The following are non-GAAP measures we present for the years ended December 31, 2023, 2022, and 2021:

EBITDA - Net income (loss) before (i) interest expense, net, (ii) income tax expense (benefit) and (iii) depreciation and amortization expense.

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 - 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.

Adjusted EBITDA - EBITDA adjusted for certain significant noncash 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.

Available Cash for Distribution - EBITDA for the quarter excluding noncash 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.

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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

Our historical results of operations for the periods presented may not be comparable with prior periods or to our results of operations in the future for the reasons discussed below.

Major Scheduled Turnaround Activities

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.

Our results of operations for the periods presented may not be comparable with prior periods or to our results of operations in the future due to expenses incurred as part of planned turnarounds.

We incurred turnaround expenses of $1.8 million, $33.4 million, and $2.9 million during the years ended December 31, 2023, 2022, and 2021, respectively.

The next planned turnarounds are currently scheduled to take place in 2025 at the Coffeyville Facility and in 2026 at the East Dubuque Facility.

December 31, 2023 | 45

Non-GAAP Reconciliations

Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA

Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Available Cash for Distribution

Year Ended December 31,

(in thousands) 2023 2022 2021

Net income (loss) $ 286,801 $ 78,155 $ (98,181)

Net income $ 172,433 $ 286,801 $ 78,155

Interest expense, net 28,653 34,065 60,978

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Depreciation and amortization 79,720 82,137 73,480

EBITDA 403,163 212,670 41,354

Goodwill impairment — — 40,969

Adjusted EBITDA $ 403,163 $ 212,670 $ 82,323

December 31, 2022 | 44

Reconciliation of Net Cash Provided By Operating Activities to EBITDA and Adjusted EBITDA

Year Ended December 31,

(in thousands) 2022 2021 2020

Net cash provided by operating activities $ 301,464 $ 188,725 $ 19,740

Non-cash items:

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

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

Goodwill impairment — — (40,969)

Other (977) (3,889) (5,595)

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

Income tax expense 160 57 30

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

EBITDA 403,163 212,670 41,354

Goodwill impairment — — 40,969

Adjusted EBITDA $ 403,163 $ 212,670 $ 82,323

Reconciliation of EBITDA to Available Cash for Distribution

Year Ended December 31,

(in thousands) 2022 2021 2020

EBITDA $ 403,163 $ 212,670 $ 41,354

Non-cash items:

Goodwill impairment — — 40,969

Current (reserves) adjustments for amounts related to:

Net cash interest expense (excluding capitalized interest) (34,733) (50,562) (59,995)

Debt service (65,000) (30,000) —

Financing fees (815) (4,627) —

Maintenance capital expenditures (40,793) (16,226) (11,649)

Utility pass-through (2,700) 4,013 —

Common units repurchased (12,398) (529) (7,076)

Other (reserves) releases:

Reserve for recapture of prior negative available cash — (14,980) (5,917)

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

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

Cash reserves for future operating needs — 5,308 (5,308)

Major scheduled expenditures 29,761 2,240 2,567

EBITDA and Adjusted EBITDA 281,095 403,163 212,670

Current (reserves) adjustments for operating activities (1)

(40,235) (37,433) (56,221)

Current (reserves) adjustments for investing activities (2)

(52,167) (27,783) (24,736)

Current (reserves) adjustments for financing activities (3)

(500) (78,212) (35,156)

Available cash for distribution (4) (5)

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Common units outstanding 10,570 10,570 10,681

(1) Includes reserves for debt service (interest expense) and other future operating needs.

(2) Includes reserves for future capital expenditures, including turnarounds, and other future investing activities, as well as cash impacts from equity method investments.

(3) Includes reserves for debt financing, repurchase of common units and other future financing activities.

(4) Amount represents the cumulative available cash based on full year results.

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

(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

(5) The Partnership declared and paid cash distributions of $10.50, $10.43, $4.14, and $1.55 per common unit related to the fourth quarter of 2022, and the first, second, and third quarters of 2023, respectively, and declared a cash distribution of $1.68 per common unit related to the fourth quarter of 2023, to be paid in March 2024.

Liquidity and Capital Resources

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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.

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.

Current geopolitical matters, such as the conflict between Israel and Hamas and the ongoing Russia-Ukraine war, have contributed to the volatile fertilizer and agricultural market conditions, driving uncertainty around the availability and prices of feedstocks, demand for products, inflation, and global supply disruptions.

Despite the volatility in commodity pricing, nitrogen fertilizer product pricing remains above the recent 5-year average and has not significantly impacted our primary source of liquidity.

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 and reserves, 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.

Additionally, our ability to generate sufficient cash from our operating activities and secure additional financing depends on our future performance, which is subject to operating performance, as well as 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 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.

December 31, 2023 | 46

On September 26, 2023, CVR Partners and certain of its subsidiaries entered into Amendment No.

1 to the Credit Agreement (the “ABL Amendment”) with Wells Fargo Bank, National Association, a national banking associate (“Wells Fargo”), as administrative agent, collateral agent and a lender.

The ABL Amendment amended that certain Credit Agreement, dated as of September 30, 2021 (as amended, the “ABL Credit Facility”), by and among the credit parties thereto and Wells Fargo, as administrative agent, collateral agent and a lender, to, among other things, (i) increase the aggregate principal amount available under the credit facility by an additional $15.0 million to a total of $50.0 million in the aggregate, with an incremental facility of an additional $15.0 million in the aggregate subject to additional lender commitments and certain other conditions, and (ii) extend the maturity date by an additional four years to September 26, 2028.

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

The Partnership and its subsidiaries were in compliance with all covenants under their respective debt instruments as of December 31, 2023 and through the date of filing, as applicable.

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

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As of December 31, 2023, we had cash and cash equivalents of $45.3 million, including $2.5 million of customer advances.

Combined with $35.0 million available under our ABL Credit Agreement, we had total liquidity of $121.3 million as of December 31, 2022.

Combined with $39.0 million available under our ABL Credit Facility, we had total liquidity of $84.3 million as of December 31, 2023.

As of December 31, 2022, we had $86.3 million in cash and cash equivalents, including $13.7 million of customer advances.

December 31, 2022 | 46

Long-term debt consists of the following:

(in thousands) 2023 2022

6.125% Senior Secured Notes, due June 2028

550,000 550,000

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

Unamortized debt issuance costs (2,692) (3,200)

Total long-term debt $ 547,308 $ 546,800

(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.

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.

As of December 31, 2023, the Partnership had the 6.125% Senior Secured Notes, due June 2028 (the “2028 Notes”) and the ABL Credit Facility, the proceeds of which may be used to fund working capital and capital expenditures, and for other general corporate purposes.

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

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Total capital expenditures $ 29,081 $ 41,446 $44,000 - 48,000

(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.

For example, we may experience unexpected changes in labor or equipment costs necessary to comply with government regulations or to complete projects that sustain or improve the profitability of the nitrogen fertilizer facilities.

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

For example, we may experience changes in labor or equipment costs necessary to comply with government regulations or to complete projects that sustain or improve the profitability of the nitrogen fertilizer facilities.

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

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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, 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

December 31, 2023 | 47

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.

We incurred turnaround expenses of $1.8 million, $33.4 million, and $2.9 million during the years ended December 31, 2023, 2022, and 2021, respectively.

The next planned turnarounds are currently scheduled to take place in 2025 at the Coffeyville Facility and in 2026 at the East Dubuque Facility.

Cash Requirements

The following table summarizes our known contractual obligations and other commercial commitments as of December 31, 2023 that are expected to be paid within the next year and thereafter:

Payments Due by Period

(in thousands) Short-Term Long-Term Total

Debt obligations (1)

$ — $ 550,000 $ 550,000

Interest payments related to debt obligations (2)

33,941 118,856 152,797

Operating lease liabilities (3)

3,816 10,151 13,967

Purchase commitments (4)

48,166 81,324 129,490

Transportation agreements (5)

6,665 9,070 15,734

Total cash requirements $ 92,588 $ 769,401 $ 861,989

(1) Debt obligations consist of the 2028 Notes as of December 31, 2023.

(2) Interest payments related to debt obligations consist of interest payments for our long-term debt outstanding as of December 31, 2023 and commitment fees on the unutilized commitments of the ABL Credit Facility.

(3) Operating lease liabilities are described in Part II, Item 8, Note 6 (“Leases”) of this Report.

(4) Consists primarily of purchase obligations for pet coke and other feedstocks, as well as water and utilities usage.

(5) Includes purchase obligations related to the transportation of feedstocks.

Distributions to Unitholders

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

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

Available Cash for Distribution for each quarter is calculated as EBITDA for the quarter excluding noncash 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.

Distributions, if any, including the payment, amount, and timing thereof, and the Board’s distribution policy, including the definition of Available Cash for Distribution, are subject to change at the discretion of the Board.

The following tables present quarterly distributions paid by the Partnership to CVR Partners’ unitholders, including amounts paid to CVR Energy, during 2023 and 2022 (amounts presented in the table below may not add to totals presented due to rounding):

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$ 26.62 $ 177,759 $ 103,605 $ 281,364

December 31, 2023 | 48

Quarterly Distributions Paid (in thousands)

1 unchanged sentence

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

4 unchanged sentences

$ 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 2023, the Partnership, upon approval by the Board on February 20, 2024, declared a distribution of $1.68 per common unit, or $17.8 million, which is payable March 11, 2024 to unitholders of record as of March 4, 2024.

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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.

During the year ended December 31, 2023, CVR Partners did not repurchase any common units.

During the years ended December 31, 2022 and 2021, CVR Partners 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, 2023, considering all repurchases made since inception of the Unit Repurchase Program, CVR Partners 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.

December 31, 2022 | 48

On February 20, 2024, the Board, on behalf of the Partnership, terminated the nominal authority remaining under the Unit Repurchase Program.

The following table sets forth our cash flows for the periods indicated below:

6 unchanged sentences

Net (decrease) increase in cash and cash equivalents $ (41,060) $ (26,177) $ 81,957

December 31, 2023 | 49

Operating Activities

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.

The change in net cash flows from operating activities for the year ended December 31, 2023 as compared to the year ended December 31, 2022 is primarily due to a $114.4 million decrease in net income as a result of lower product prices, partially offset by increased sales volumes and a $17.0 million decrease in noncash share-based compensation as a result of lower market prices for CVR Partners’ units.

This is partially offset by an increase in working capital of $70.6 million primarily due to increases in accounts receivable and inventories, partially offset by decreases in accounts payable and deferred revenue.

Investing Activities

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.

The change in net cash used in investing activities for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to distributions received from CVR Partners’ equity method investment of $21.5 million associated with the 45Q Transaction in 2023 and a decrease in capital expenditures of $20.5 million during 2023 resulting from reduced spending on capital projects compared to 2022.

Financing Activities

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.

The change in net cash used in financing activities for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to an increase of $76.6 million in cash distributions paid in 2023 compared to 2022.

This is partially offset by decreases of $65.0 million and $12.4 million used for the redemption of the remaining balance of the 2023 Notes and unit repurchases of the Partnership’s common units in 2022, respectively, with no corresponding amounts in 2023.

Recent Accounting Pronouncements

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Actual results could differ from the estimates and assumptions used.

December 31, 2022 | 49

Inventory Valuation

The cost of our fertilizer product inventories is determined under the first-in, first-out (FIFO) method.

Our FIFO inventories are carried at the lower of cost or net realizable value.

The cost of our fertilizer product inventories is determined under the first-in, first-out (“FIFO”) method and our FIFO inventories are carried at the lower of cost or net realizable value.

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

2 unchanged sentences

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

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.

There were no inventory adjustments recognized during the years ended December 31, 2023, 2022, and 2021.

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.

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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).

Individual assets are grouped for impairment purposes based on a judgmental assessment of the lowest level for

December 31, 2023 | 50

which there are identifiable cash flows that are largely independent of the cash flows of other assets (for example, at a fertilizer facility level).

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis