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What changed in CVR PARTNERS, LP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of CVR PARTNERS, LP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+313 added−307 removedSource: 10-K (2024-02-21) vs 10-K (2023-02-22)

Top changes in CVR PARTNERS, LP's 2023 10-K

313 paragraphs added · 307 removed · 226 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

66 edited+13 added−10 removed38 unchanged
Biggest changeSee “Management’s Discussion and Analysis” in Part II, Item 7 of this Report for further discussion on our core Values. Workforce & Benefits As of December 31, 2022, we had 300 employees across both Facilities and related marketing and logistics operations, all of which are located in the United States.
Biggest changeThe efforts of our employees in support of this Mission are guided each and every day by these core Values as we strive to achieve excellence for all of our key stakeholders – employees, communities and stockholders. See “Management’s Discussion and Analysis” in Part II, Item 7 of this Report for further discussion on our Mission and core Values.
Our East Dubuque Facility is generally able to purchase natural gas at competitive prices due to its connection to the Northern Natural Gas interstate pipeline system, which is within one mile of the facility, and a third-party owned and operated pipeline.
East Dubuque Facility - Our East Dubuque Facility is generally able to purchase natural gas at competitive prices due to its connection to the Northern Natural Gas interstate pipeline system, which is within one mile of the facility, and a third-party owned and operated pipeline.
Various standards and programs specific to our operations have been implemented, such as the National Emission Standard for Hazardous Air Pollutants, the New Source Performance Standards, and the New Source Review. The U.S. Environmental Protection Agency (the “EPA”) regulates greenhouse gas (“GHG”) emissions under the CAA.
Various standards and programs specific to our operations have been implemented, such as the National Emission Standard for Hazardous Air Pollutants, the New Source Performance Standards, and the New Source Review. The U.S. Environmental Protection Agency (“EPA”) regulates greenhouse gas (“GHG”) emissions under the CAA.
Both facilities manufacture ammonia and are able to further upgrade such ammonia to other nitrogen fertilizer products, principally urea ammonium nitrate (“UAN”). Nitrogen fertilizer is used by farmers to improve the yield and quality of their crops, primarily corn and wheat. The Partnership’s products are sold on a wholesale basis in the United States.
Both facilities manufacture ammonia and are able to further upgrade such ammonia to other nitrogen fertilizer products, principally urea ammonium nitrate (“UAN”). Nitrogen fertilizer is used by farmers to improve the yield and quality of their crops, primarily corn and wheat. The Partnership’s products are sold on a wholesale basis in the United States of America.
We periodically audit our programs and seek to continually improve our management systems. Our Facilities are subject to the Chemical Facility Anti-Terrorism Standards (“CFATS”), a regulatory program designed to ensure facilities have security measures in place to reduce the risk that certain hazardous chemicals are weaponized by terrorists.
We periodically audit our programs and seek to continually improve our management systems. Our Facilities were subject to the Chemical Facility Anti-Terrorism Standards (“CFATS”), a regulatory program designed to ensure facilities have security measures in place to reduce the risk that certain hazardous chemicals are weaponized by terrorists.
Subject to location and other considerations, our major competitors in the nitrogen fertilizer business generally includes CF Industries Holdings, Inc., which sells significantly more nitrogen fertilizers in the United States than other industry participants; Nutrien Ltd.; Koch Fertilizer Company, LLC; OCI N.V.; and LSB Industries, Inc.
Subject to location and other considerations, our major domestic competitors in the nitrogen fertilizer business generally includes CF Industries Holdings, Inc., which sells significantly more nitrogen fertilizers in the United States than other industry participants; Nutrien Ltd.; Koch Fertilizer Company, LLC; OCI N.V.; and LSB Industries, Inc.
The Partnership produces nitrogen fertilizer products at two manufacturing facilities, one located in Coffeyville, Kansas operated by our wholly owned subsidiary, Coffeyville Resources Nitrogen Fertilizers, LLC (“CRNF” or the “Coffeyville Facility”) and one located in East Dubuque, Illinois operated by our wholly owned subsidiary, East Dubuque Nitrogen Fertilizers, LLC (“EDNF” or the “East Dubuque Facility”).
The Partnership produces nitrogen fertilizer products at two manufacturing facilities, one located in Coffeyville, Kansas operated by our wholly owned subsidiary, Coffeyville Resources Nitrogen Fertilizers, LLC (“CRNF”) (the “Coffeyville Facility”) and one located in East Dubuque, Illinois operated by our wholly owned subsidiary, East Dubuque Nitrogen Fertilizers, LLC (“EDNF”) (the “East Dubuque Facility”).
This insurance provides coverage due to named perils for claims involving pollutants where the discharge is sudden and accidental and first commences at a specific day and time during the policy period.
This insurance generally provides coverage due to named perils for claims involving pollutants where the discharge is sudden and accidental and first commences at a specific day and time during the policy period.
The Coffeyville Facility has contracts in place to receive water during certain water shortage conditions, but these conditions could change over time depending on the scarcity of water. In January 2021, the U. S. Environmental Protection Agency (the “EPA”) announced that is undertaking a plan to review, and update effluent standards for many industries.
The Coffeyville Facility has contracts in place to receive water during certain water shortage conditions, but these conditions and contracts could change over time depending on the scarcity of water. In January 2021, the U. S. Environmental Protection Agency (the “EPA”) announced it is undertaking a plan to review and update effluent standards for many industries.
December 31, 2022 | 7 Table of Contents Facilities Coffeyville Facility - We own and operate a nitrogen fertilizer production facility in Coffeyville, Kansas that includes a gasifier complex having a capacity of 89 million standard cubic feet per day of hydrogen, a 1,300 ton per day capacity ammonia unit and a 3,100 ton per day capacity UAN unit.
December 31, 2023 | 7 Table of Contents Facilities Coffeyville Facility - We own and operate a nitrogen fertilizer production facility in Coffeyville, Kansas that includes a gasifier complex having a capacity of 89 million standard cubic feet per day of hydrogen, a 1,300 ton per day capacity ammonia unit and a 3,100 ton per day capacity UAN unit.
Raw Material Supply Coffeyville Facility - During the past five years, approximately 44% of the Coffeyville Facility’s pet coke requirements, on average, were supplied by CVR Energy’s adjacent Coffeyville, Kansas refinery pursuant to a supply agreement between one of our subsidiaries and a subsidiary of CVR Energy (the “Coffeyville MSA”).
Raw Material Supply Coffeyville Facility - During the past five years, approximately 41% of the Coffeyville Facility’s pet coke requirements, on average, were supplied by CVR Energy’s adjacent Coffeyville, Kansas refinery pursuant to a supply agreement between one of our subsidiaries and a subsidiary of CVR Energy (the “Coffeyville MSA”).
Information on our website is not a part of, and is not incorporated into, this Report or any other report we may file with or furnish to the SEC, whether before or after the date of this Report and irrespective of any general incorporation language therein. December 31, 2022 | 15 Table of Contents
Information on our website is not a part of, and is not incorporated into, this Report or any other report we may file with or furnish to the SEC, whether before or after the date of this Report and irrespective of any general incorporation language therein. December 31, 2023 | 15 Table of Contents
Under the rule, facilities already subject to the PSD and Title V programs that increase their emissions of GHGs by a significant amount are required to undergo PSD review and to evaluate and implement air pollution control technology, known as “best available control technology,” to reduce GHG emissions.
Under the rule, facilities already subject to the PSD and Title V programs that increase their emissions of GHGs by a significant amount are required to undergo PSD review and to evaluate and implement air pollution control technology, known as “best available control technology”, to reduce GHG emissions.
Item 1. Business Overview CVR Partners, LP (referred to as “CVR Partners” or the “Partnership”) is a Delaware limited partnership formed in 2011 by CVR Energy, Inc. (together with its subsidiaries, but excluding the Partnership and its subsidiaries, “CVR Energy”) to own, operate and grow its nitrogen fertilizer business.
Item 1. Business Overview CVR Partners, LP (“CVR Partners” or the “Partnership”) is a Delaware limited partnership formed in 2011 by CVR Energy, Inc. (together with its subsidiaries, but excluding the Partnership and its subsidiaries, “CVR Energy”) to own, operate and grow its nitrogen fertilizer business.
As used in these financial statements, references to CVR Partners, the Partnership, “we”, “us”, and “our” may refer to consolidated subsidiaries of CVR Partners or one or both of the facilities, as the context may require. Organizational Structure and Related Ownership The following chart illustrates the organizational structure of the Partnership as of December 31, 2022.
As used in these financial statements, references to CVR Partners, the Partnership, “we”, “us”, and “our” may refer to consolidated subsidiaries of CVR Partners or one or both of the facilities, as the context may require. Organizational Structure and Related Ownership The following chart illustrates the organizational structure of the Partnership as of December 31, 2023.
Based on Fertecon Limited’s (“Fertecon”) 2022 estimates, the United States is the world’s third largest consumer and importer of nitrogen fertilizer. Fertecon is an agency which provides market information and analysis on fertilizers and fertilizer raw materials for fertilizer and related industries, as well as international agencies.
Based on Fertecon Limited’s (“Fertecon”) 2023 estimates, the United States is the world’s third largest consumer and importer of nitrogen fertilizer. Fertecon is an agency which provides market information and analysis on fertilizers and fertilizer raw materials for fertilizer and related industries, as well as international agencies.
In January 2023, we entered into a series of agreements with CapturePoint and certain unaffiliated third-party investors intended to qualify under the Internal Revenue Service safe harbor described in Revenue Procedure 2020-12 for certain joint ventures that are eligible to claim Section 45Q Credits and allow us to monetize Section 45Q Credits we expect to generate from January 6, 2023 until March 31, 2030.
In January 2023, we entered into a series of agreements with CapturePoint and certain unaffiliated third-party investors intended to qualify under the IRS safe harbor described in Revenue Procedure 2020-12 for certain joint ventures that are eligible to claim Section 45Q Credits and allow us to monetize Section 45Q Credits we expect to generate from January 6, 2023 until March 31, 2030.
On January 27, 2021, the White House issued another climate-related Executive Order, titled “Tackling the Climate Crisis at Home and Abroad.” On April 22, 2021, the Biden Administration announced a new target for the United States to achieve a 50 to 52 percent reduction from 2005 levels in economy-wide net GHG emissions in 2030.
On January 27, 2021, the White House issued another climate-related Executive Order, titled “Tackling the Climate Crisis at Home and Abroad”. On April 22, 2021, the Biden Administration announced a new target for the United States to achieve a 50 to 52 percent reduction from 2005 levels in economy-wide net GHG emissions in 2030.
Our operations require numerous permits, licenses, and authorizations. Failure to comply with these permits or environmental laws and regulations could result in fines, penalties, or other sanctions or a revocation of our permits, licenses, or authorizations.
Our operations require numerous permits, licenses, and authorizations. Failure to comply with these permits or environmental laws, rules, and regulations could result in fines, penalties, or other sanctions or liabilities or a revocation of our permits, licenses, or authorizations.
In May 2010, the EPA finalized the “Greenhouse Gas Tailoring Rule,” which established GHG emissions thresholds that determine when stationary sources, such as the nitrogen fertilizer facilities, must obtain permits under the Prevention of Significant Deterioration (“PSD”) and Title V programs of the CAA.
In May 2010, the EPA finalized the “Greenhouse Gas Tailoring Rule”, which established GHG emissions thresholds that determine when stationary sources, such as the nitrogen fertilizer facilities, must obtain permits under the Prevention of Significant Deterioration (“PSD”) and Title V programs of the CAA.
Historically, our Coffeyville Facility has obtained the remainder of its pet coke requirements through third-party contracts typically priced at a discount to the spot market. In 2022, 2021, and 2020, our supply of pet coke from the Coffeyville refinery was approximately 47%, 43%, and 33%, respectively.
In 2023, 2022, and 2021, our supply of pet coke from the Coffeyville refinery was approximately 43%, 47%, and 43%, respectively. Historically, our Coffeyville Facility has obtained the remainder of its pet coke requirements through third-party contracts typically priced at a discount to the spot market.
The Coffeyville Facility is the only nitrogen fertilizer plant in North America that utilizes a pet coke gasification process to produce nitrogen fertilizer. The Coffeyville Facility’s largest raw material cost used in the production of ammonia is pet coke, which it purchases from CVR Energy and third parties.
The Coffeyville Facility is the only nitrogen fertilizer plant in North America that utilizes a pet coke gasification process to produce nitrogen fertilizer. The Coffeyville Facility’s largest raw material cost used in the production of ammonia is pet coke, which is purchased from CVR Energy and third parties.
The cleanup provisions of our agreement with KDHE are held in abeyance so long as CRRM conducts corrective action for these comingled historical releases in accordance with its Resource Conservation and Recovery Act (“RCRA”) Permit.
The cleanup provisions of our agreement with KDHE are held in abeyance so long as the Coffeyville Refinery conducts corrective action for these comingled historical releases in accordance with its Resource Conservation and Recovery Act (“RCRA”) Permit.
Marketing and Distribution We primarily market UAN products to agricultural customers and ammonia products to agricultural and industrial customers. UAN and ammonia, including freight, accounted for approximately 70% and 24%, respectively, of total net sales for the year ended December 31, 2022. UAN and ammonia are primarily distributed by truck or railcar.
Marketing and Distribution We primarily market UAN products to agricultural customers and ammonia products to agricultural and industrial customers. UAN and ammonia, including freight, accounted for approximately 69% and 24%, respectively, of total net sales for the year ended December 31, 2023. UAN and ammonia are primarily distributed by truck or railcar.
Contracts with customers generally contain fixed pricing and have terms of less than one year. Our top two customers represented 30% and 26% of net sales for the years ended December 31, 2022 and 2020, respectively, and our top customer represented 13% of net sales for the year ended December 31, 2021.
Contracts with customers generally contain fixed pricing and have terms of less than one year. Our top two customers represented 25% and 30% of net sales for the years ended December 31, 2023 and 2022, respectively, and our top customer represented 13% of net sales for the year ended December 31, 2021.
These laws and regulations and the enforcement thereof impact us by imposing: • restrictions on operations or the need to install enhanced or additional control and monitoring equipment; December 31, 2022 | 10 Table of Contents • liability for the investigation and remediation of contaminated soil and groundwater at current and former facilities (if any) and for off-site waste disposal locations; and • specifications for the products we market, primarily UAN and ammonia.
These laws and regulations and the enforcement thereof impact us by imposing: • restrictions on operations or the need to install enhanced or additional control and monitoring equipment; • liability for the investigation and remediation of contaminated soil and groundwater at current and former facilities (if any) and for off-site waste disposal locations; and • specifications for the products we market, primarily UAN and ammonia.
There is no assurance that CRRM will comply with its Permit conditions in the future, which may trigger enforcement of the cleanup provisions of our agreement with KDHE.
There is no assurance that the Coffeyville Refinery will comply with its Permit conditions in the future, which may trigger enforcement of the cleanup provisions of our agreement with KDHE.
December 31, 2022 | 12 Table of Contents Environmental Remediation As is the case with all companies engaged in similar industries, we face potential exposure from claims and lawsuits involving environmental matters, including soil and water contamination and personal injury or property damage allegedly caused by hazardous substances that we manufactured, handled, used, stored, transported, spilled, disposed of, or released.
Environmental Remediation As is the case with all companies engaged in similar industries, we face potential exposure from claims and lawsuits involving environmental matters, including soil and water contamination and personal injury or property damage allegedly caused by hazardous substances that we manufactured, handled, used, stored, transported, spilled, disposed of, or released.
As an example, China’s wheat and coarse grains production is estimated to have increased 40% between 2011 and 2022, but still failed to keep pace with increases in demand, prompting China to grow its wheat and coarse grain imports by more than 1,307% over the same period, according to the United States Department of Agriculture (“USDA”).
As an example, China’s wheat and coarse grains production is estimated to have increased 42% between 2011 and 2023, but still failed to keep pace with increases in demand, prompting China to grow its wheat and coarse grain imports by more than 1,167% over the same period, according to the United States Department of Agriculture (“USDA”).
December 31, 2022 | 8 Table of Contents The United States is the world’s largest exporter and producer of coarse grains, accounting for 24% of world exports and 25% of world production for the fiscal year ended December 31, 2022, according to the USDA. A substantial amount of nitrogen is consumed in production of these crops to increase yield.
December 31, 2023 | 8 Table of Contents The United States is the world’s largest exporter of coarse grains, accounting for 25% of world exports and 27% of world production for the fiscal year ended December 31, 2023, according to the USDA. A substantial amount of nitrogen is consumed in production of these crops to increase yield.
For the years ended December 31, 2022, 2021, and 2020, the East Dubuque Facility incurred approximately $46.0 million, $31.8 million, and $19.9 million for feedstock natural gas used in production, respectively, which equaled an average cost of $6.66, $3.95, and $2.31 per MMBtu, respectively. Commodities The nitrogen products we produce are globally traded commodities and are subject to price competition.
For the years ended December 31, 2023, 2022, and 2021, the East Dubuque Facility incurred approximately $29.0 million, $46.0 million, and $31.8 million for feedstock natural gas used in production, respectively, which equaled an average cost of $3.42, $6.66, and $3.95 per MMBtu, respectively. Commodities The nitrogen products we produce are globally traded commodities and are subject to price competition.
Additionally, our East Dubuque Facility has direct access to a barge dock on the Mississippi River, as well as a nearby rail spur serviced by the Canadian National Railway Company, both of which are used from time to time to sell and distribute our products.
Additionally, our East Dubuque Facility has direct access to a barge dock on the Mississippi River, as well as a nearby rail spur serviced by the Canadian National Railway Company, both of which are utilized occasionally to sell and distribute our products.
The East Dubuque Facility’s largest raw material cost used in the production of ammonia is natural gas, which it purchases from third parties.
The East Dubuque Facility’s largest raw material cost used in the production of ammonia is natural gas, which is purchased from third parties.
Customers Retailers and distributors are the main customers for UAN, and, more broadly, the industrial and agricultural sectors are the primary recipients of our ammonia products. Given the nature of our business, and consistent with industry practice, we sell our products on a wholesale basis under a contract or by purchase order.
December 31, 2023 | 9 Table of Contents Customers Retailers and distributors are the main customers for UAN, and, more broadly, the industrial and agricultural sectors are the primary recipients of our ammonia products. Given the nature of our business, and consistent with industry practice, we sell our products on a wholesale basis under a contract or by purchase order.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge through our website under “Investor Relations,” as soon as reasonably practicable after the electronic filing or furnishing of these reports is made with the Securities and Exchange December 31, 2022 | 14 Table of Contents Commission (the “SEC”) at www.sec.gov.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge through our website under “Investor Relations”, as soon as reasonably practicable after the electronic filing or furnishing of these reports is made with the Securities and Exchange Commission (the “SEC”) at www.sec.gov.
Fertecon estimates indicate that the United States represented 11% of total global nitrogen fertilizer consumption for 2022, with China and India as the top consumers representing 22% and 17% of total global nitrogen fertilizer consumption, respectively. North American nitrogen fertilizer producers predominantly use natural gas as their primary feedstock.
Fertecon estimates indicate that the United States represented 11% of total global nitrogen fertilizer consumption for 2023, with China and India as the top consumers representing 23% and 18% of total global nitrogen fertilizer consumption, respectively. North American nitrogen fertilizer producers predominantly use natural gas as their primary feedstock.
Our health and safety management system provides a comprehensive approach to injury, illness and incident prevention, risk assessment and mitigation, and emergency management. Despite our efforts to achieve excellence in our health and safety performance, there can be no assurances that there will not be accidents resulting in injuries or even fatalities.
Our health and safety management system provides a comprehensive approach to injury, illness and incident prevention, risk assessment and mitigation, and emergency management. Despite our efforts to achieve excellence in our health and safety performance, there can be no assurances that there will not be accidents resulting in losses, injuries, or fatalities that could materially adversely impact our business.
Competition Nitrogen fertilizer production is a global market with competitors in every region of the world. The industry is dominated by price considerations, which are driven by raw material and transportation costs, currency fluctuations, trade barriers, and regulators.
Competition Nitrogen fertilizer production is a global market with competitors in every region of the world, with barge and rail distribution fostering healthy competition throughout the United States. The industry is dominated by price considerations, which are driven by raw material and transportation costs, currency fluctuations, trade barriers, and regulators.
The Partnership also sequesters carbon dioxide that is not utilized for urea production at its Coffeyville Facility by capturing and purifying the CO 2 as part of its manufacturing process and then transfers it to CapturePoint LLC, an unaffiliated third-party (“CapturePoint”), which then compresses and ships the CO 2 for sequestration through Enhanced Oil Recovery (“EOR”).
The Partnership also sequesters carbon dioxide that is not utilized for urea production at its Coffeyville Facility by capturing and purifying the CO 2 as part of its manufacturing process and then transfers it to CapturePoint LLC, an unaffiliated third-party (“CapturePoint”), which then compresses and ships the CO 2 for sequestration through Enhanced Oil Recovery December 31, 2023 | 11 Table of Contents (“EOR”) under an EPA-approved monitoring, reporting, and verification plan.
For the years ended December 31, 2022, 2021, and 2020, the Partnership purchased approximately $22.5 million, $23.0 million, and $18.4 million, respectively, of pet coke, which equaled an average cost per ton of $52.88, $44.69, and $35.25, respectively.
For the years ended December 31, 2023, 2022, and 2021, the Partnership purchased approximately $40.5 million, $22.5 million, and $23.0 million, respectively, of pet coke, which equaled an average cost per ton of $78.14, $52.88, and $44.69, respectively.
As of December 31, 2022, we had commitments to purchase approximately 0.7 million and 0.6 million MMBtus of natural gas supply for planned use in our East Dubuque Facility in January and February of 2023, respectively, at a weighted average rate per MMBtu of approximately $9.50 and $9.72, respectively, exclusive of transportation costs.
As of December 31, 2023, we had commitments to purchase approximately 0.7 million MMBtus of natural gas supply for planned use in our East Dubuque Facility in January of 2024, at a weighted average rate per MMBtu of approximately $3.03, exclusive of transportation costs.
If delivered by truck, products are most commonly sold on a shipping point basis, and freight is normally arranged by the customer. We also utilize a fleet of railcars for use in product December 31, 2022 | 9 Table of Contents delivery.
If delivered by truck, products are most commonly sold on a shipping point basis, and freight is normally arranged by the customer. We also utilize a fleet of railcars for use in product delivery. If delivered by railcar, products are most commonly sold on a destination point basis, and we typically arrange the freight.
The Federal Clean Air Act (“CAA”) The CAA and its implementing regulations, as well as state laws and regulations governing air emissions, affect us both directly and indirectly.
December 31, 2023 | 10 Table of Contents The Federal Clean Air Act (“CAA”) The CAA and its implementing regulations, as well as state laws and regulations governing air emissions, affect us both directly and indirectly.
According to the IFA, from 1976 to 2020, global fertilizer demand grew 2% annually. Global fertilizer use, consisting of nitrogen, phosphate, and potash, is projected to increase by 3% through 2023 to meet global food demand according to a study funded by the Food and Agricultural Organization of the United Nations.
Global fertilizer use, consisting of nitrogen, phosphate, and potash, is projected to increase by 2% through 2024 to meet global food demand according to a study funded by the Food and Agricultural Organization of the United Nations.
Our East Dubuque Facility primarily sells product to customers located within 200 miles of the facility. In most instances, customers take delivery of nitrogen products at our East Dubuque Facility and arrange to transport them to their final destinations by truck.
In most instances, customers take delivery of nitrogen products at our East Dubuque Facility and arrange to transport them to their final destinations by truck.
The Coffeyville Facility has entered into an agreement with the Kansas Department of Health and Environment (“KDHE”) to address certain historical releases of UAN located on our property and comingled with legacy groundwater contamination from the adjacent Coffeyville Resources Refining & Marketing, LLC (“CRRM”) refinery.
The Coffeyville Facility has entered into an agreement with the Kansas Department of Health and Environment (“KDHE”) to address certain historical releases of UAN located on our property and comingled with legacy groundwater contamination from the adjacent Coffeyville refinery operated by a subsidiary of CVR Energy (the “Coffeyville Refinery”).
In addition, the East Dubuque Facility is regulated under the Maritime Transportation Security Act (the “MTSA”). We implement and maintain comprehensive security programs designed to comply with regulatory requirements and protect our assets and employees. We periodically assess risk and conduct audits of our programs and seek to continually improve our health, safety, and security management systems.
We implement and maintain comprehensive security programs designed to comply with regulatory requirements and protect our assets and employees. We periodically assess risk and conduct audits of our programs and seek to continually improve our health, safety, and security management systems.
The Biden Administration has signaled that it will pursue regulations intended to address climate change. On January 20, 2021, the White House issued its Executive Order titled “Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis,” as well as a formal notification re-accepting entry of the United States into the Paris Agreement.
On January 20, 2021, the White House issued an Executive Order titled “Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis”, as well as a formal notification re-accepting entry of the United States into the Paris Agreement.
For the years ended December 31, 2022, 2021, and 2020, we upgraded approximately 94%, 87%, and 87%, respectively, of our ammonia production into UAN, a product that generated greater profit per ton than ammonia for both 2022 and 2021, but not for 2020.
For the years ended December 31, 2023, 2022, and 2021, we upgraded approximately 92%, 94%, and 87%, respectively, of our ammonia production into UAN, a product that generated greater profit per ton than ammonia. When the economics are favorable, we expect to continue upgrading substantially all of our ammonia production into UAN.
We believe that our future success largely depends upon our continued ability to attract and retain highly skilled employees. We are committed to providing wages and benefits that are competitive with a market-based, pay-for-performance compensation philosophy. We provide paid time off and paid holidays, a 401(k) Company match program, dependent care flexible spending accounts, and an employee assistance program.
Compensation & Benefits We believe that our future success largely depends upon our continued ability to attract and retain highly skilled employees. We are committed to providing wages and benefits that are competitive with a market-based, pay-for-performance compensation philosophy.
When the economics are favorable, we expect to continue upgrading substantially all of our ammonia production into UAN. East Dubuque Facility - We own and operate a nitrogen fertilizer production facility in East Dubuque, Illinois that includes a 1,075 ton per day capacity ammonia unit and a 950 ton per day capacity UAN unit.
East Dubuque Facility - We own and operate a nitrogen fertilizer production facility in East Dubuque, Illinois that includes a 1,075 ton per day capacity ammonia unit and a 950 ton per day capacity UAN unit.
We accomplish this through strict compliance with applicable laws and regulations regarding workplace safety, engaging employee input, and maintaining robust training and emergency response and disaster recovery plans. We monitor and assess our safety performance by measuring and evaluating injuries, process safety incidents, environmental events, and other events, as well as by performing compliance audits and risk assessments.
We accomplish this through compliance with applicable workplace safety and environmental laws and regulations, seeking employee input, learning from any events, and maintaining comprehensive audit and training programs and emergency response and disaster recovery plans. To assess our safety performance, we monitor workplace injuries, process safety incidents, and environmental events, and perform compliance audits and risk assessments.
In addition, our Corporate Governance Guidelines, Codes of Ethics and Business Conduct, and the charters of the Audit Committee, the Compensation Committee, and the Environmental, Health and Safety Committee of the Board of Directors of our general partner are available on our website. These guidelines, policies, and charters are also available in print without charge to any unitholder requesting them.
In addition, our Corporate Governance Guidelines, Codes of Ethics and Business December 31, 2023 | 14 Table of Contents Conduct, and the charters of the Audit Committee, the Compensation Committee, and the Environmental, Health and Safety Committee of the Board of Directors of our general partner are available on our website.
Environmental Insurance We are covered by CVR Energy’s site pollution legal liability insurance policies, which include business interruption coverage. The policies insure any location owned, leased, rented, or operated by the Partnership, including our Facilities. The policies insure certain pollution conditions at, or migrating from, a covered location, certain waste transportation and disposal activities, and business interruption.
December 31, 2023 | 12 Table of Contents Environmental Insurance We are covered by CVR Energy’s site pollution legal liability insurance policies, which include business interruption coverage, subject to applicable retentions and exclusions. The policies insure any location owned, leased, rented, or operated by the Partnership, including our Facilities.
However, during 2020, UAN commanded a discount price to urea and premium to ammonia, on a nitrogen equivalent basis. Demand Global demand for fertilizers is driven primarily by grain demand and prices, which, in turn, are driven by population growth, farmland per capita, dietary changes in the developing world, and increased consumption of bio-fuels.
Demand Global demand for fertilizers is driven primarily by grain demand and prices, which, in turn, are driven by population growth, farmland per capita, dietary changes in the developing world, and increased consumption of bio-fuels. According to the IFA, from 1976 to 2021, global fertilizer demand grew 2% annually.
Should the oxygen volume fall below a specified level, the on-site vendor is contractually obligated to provide excess oxygen through its own mechanism or through third-party purchases. East Dubuque Facility - Our East Dubuque Facility uses natural gas to produce nitrogen fertilizer.
Should the oxygen volume fall below a specified level, the on-site vendor is contractually obligated to provide excess oxygen through its own mechanism or through third-party purchases. The reliability of the air separation plant can have a significant impact on our Coffeyville Facility’s operations.
In addition to the site pollution legal liability insurance policy, we maintain umbrella and excess casualty insurance policies which include sudden and accidental pollution coverage policies maintained by CVR Energy.
The policies insure certain pollution conditions at, or migrating from, a covered location, certain waste transportation and disposal activities, and business interruption. In addition to the site pollution legal liability insurance policies, we maintain umbrella and excess casualty insurance policies which include sudden and accidental pollution coverage policies maintained by CVR Energy, subject to applicable retentions and exclusions.
CVR Partners’ N 2 O abatement projects are registered with the Climate Action Reserve (the “Reserve”), a carbon offset registry for the North American market. The Reserve employs high-quality standards and an independent third-party verification process to issue its carbon credits, known as Climate Reserve Tonnes.
The Reserve employs high-quality standards and an independent third-party verification process to issue its carbon credits, known as Climate Reserve Tonnes.
We believe these efforts reinforce our safety culture; promote a safe workplace, accountability, and stronger community relations; and reduce impact to personal safety, process safety, and the environment. Available Information Our website address is www.CVRPartners.com.
We believe these efforts reinforce our safety culture; promote a safe workplace, accountability, and stronger community relations; help guard against complacency; and ultimately, enhance our safety performance and help us manage risk and reduce impact to personal health and safety and the environment.
The Partnership has similar nitrous oxide abatement efforts at its East Dubuque Facility. According to the EPA, nitrous oxide represents approximately 7% of carbon dioxide-equivalent (“CO 2 e”) emissions in the United States.
In 2021, according to the EPA, nitrous oxide accounted for approximately 6% of carbon dioxide-equivalent (“CO 2 e”) emissions in the United States.
In furtherance of our core Value of continuous improvement, we also offer programs for tuition reimbursement and dependent scholarships. We also offer a remote work policy for eligible employees to provide our employees with the flexibility that is key to a work-life balance.
We offer a remote work policy to provide eligible employees with the flexibility that is key to a work-life balance.
The EPA’s approach to regulating GHG emissions may change, including under future administrations. Therefore, the impact on our Facilities due to GHG regulation is unknown. Recent Greenhouse Gas Footprint Reduction Efforts In October 2020, the Partnership announced that it generated its first carbon offset credits from voluntary nitrous oxide abatement at its Coffeyville Facility.
Recent Greenhouse Gas Footprint Reduction Efforts In October 2020, the Partnership announced that it generated its first carbon offset credits from voluntary nitrous oxide abatement at its Coffeyville Facility. The Partnership has similar nitrous oxide abatement efforts at its East Dubuque Facility.
If delivered by railcar, products are most commonly sold on a destination point basis, and we typically arrange the freight. The nitrogen fertilizer products leave our Coffeyville Facility either in railcars for destinations located principally on the Union Pacific or Burlington Northern Santa Fe railroads or in trucks for direct shipment to customers.
The nitrogen fertilizer products leave our Coffeyville Facility either in railcars for destinations located principally on the Union Pacific or Burlington Northern Santa Fe railroads or in trucks for direct shipment to customers. Our East Dubuque Facility primarily sells product to customers located within 200 miles of the facility.
The N 2 O abatement systems at the East Dubuque December 31, 2022 | 11 Table of Contents Facility’s two nitric acid plants have abated, on average, the annual release of approximately 265,000 metric tons of CO 2 e during the past five years.
From 2018 to 2022, the N 2 O abatement systems at the East Dubuque Facility’s two nitric acid plants have abated, on average, the annual release of approximately 256,000 metric tons of CO 2 e. CVR Partners’ N 2 O abatement projects are registered with the Climate Action Reserve (the “Reserve”), a carbon offset registry for the North American market.
Over the last five years, U.S. oil and natural gas reserves have increased significantly due to, among other factors, advances in extracting shale oil and gas, as well as relatively high oil and gas prices. During February 2022, Russia invaded Ukraine, tightening global supply conditions for nitrogen fertilizers as economies began to recover from the global COVID-19 pandemic.
Over the last five years, U.S. oil and natural gas reserves have increased significantly due to, among other factors, advances in extracting shale oil and gas, as well as improvements in drilling efficiencies and reduced production costs. As a result, North America has been a low-cost region for nitrogen fertilizer production.
Our commitment to diversity and inclusion helps us attract and retain the best talent, enables employees to realize their full potential, and drives high performance through innovation and collaboration. We offer diversity training that focuses on unconscious bias where employees learn to recognize and address the effects thereof by encouraging diversity of experience and opinion.
Our recruiting efforts that include focus on veteran and diverse college populations, support our diverse and inclusive environment, as do the activities of our Diversity & Inclusion Committee. We provide diversity and inclusion training that includes focus on unconscious bias where employees learn to recognize and address the effects thereof by encouraging diversity of experience and opinion.
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Following the invasion of Ukraine, Russia also began restricting supplies of natural gas to Europe in response to European sanctions against Russia. As a result, costs for natural gas as a feedstock in Europe increased significantly and caused multiple fertilizer plant shut-ins.
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These orders could negatively impact our business and lead to increased costs that could be material. The EPA’s approach to regulating GHG emissions, as well as executive orders, may change, including under future administrations, which may have impacts on our Facilities.
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Certain European countries also curtailed industrial natural gas usage, resulting in deteriorated economics for producing fertilizers in the region. In addition, China and Russia restricted exports of fertilizers for much of 2022 in order to ensure domestic availability. In North America, natural gas prices also increased throughout 2022, but decreased in January 2023.
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In June 2023, authorization for CFATS was allowed to expire, but it’s possible that Congress will reauthorize CFATS. Despite the expiration for CFATS, our Facilities continue to comply with its requirements. In addition, the East Dubuque Facility is regulated under the Maritime Transportation Security Act.
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However, higher nitrogen fertilizer prices more than offset the rise in natural gas costs throughout 2022. As a result, North America continues to be a low-cost region for nitrogen fertilizer production.
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Human Capital Our employees are the most important part of our business and help us work to achieve our Mission to be a top-tier North American nitrogen-based fertilizer company as measured by safe and reliable operations, superior financial performance and profitable growth. CVR Partners’ culture is defined by our core Values: Safety, Environment, Integrity, Corporate Citizenship and Continuous Improvement .
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The reliability of the air separation plant can have a significant impact on our Coffeyville Facility’s operations. In 2020, we executed a new product supply agreement that obligates the counterparty to invest funds to upgrade its facility to reduce downtime over the next several years.
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Workforce Profile As of December 31, 2023, CVR Partners and its subsidiaries had 310 employees, all of which are located in the United States. Of these, 95 employees are covered by a collective bargaining agreement.
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In January 2023, we received an initial upfront payment, net of expenses, of approximately $18.1 million and could receive up to an additional $60 million in payments through March 31, 2030, if certain carbon oxide capture and sequestration milestones are met, subject to the terms of the applicable agreements.
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December 31, 2023 | 13 Table of Contents Safety & Health We are committed to providing a safe and healthy workplace and striving to protect our employees, contractors and communities.
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The foregoing summaries of the agreements do not purport to be complete and are qualified in their entirety by the terms of the relevant agreements, which will be filed with the Partnership’s Quarterly Report on Form 10-Q for the period ended March 31, 2023.
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Our performance bonus program is an important component of our compensation program, rewarding high-performing employees for CVR Partners’ performance against pre-defined safety and health, operational reliability, and financial measures.
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December 31, 2022 | 13 Table of Contents Human Capital Core Values At CVR Partners, our core Values define the way we do business every day. We put Safety first, care for our Environment, and require high business ethics and Integrity consistent with our Code of Ethics and Business Conduct.
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Senior employees may also receive long-term incentive awards that currently vest ratably over a three-year period, subject to the terms and conditions of the applicable award agreement, aligning employee compensation with the interests of our shareholders and promoting employee retention.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAs of December 31, 2022, approximately 29% of our employees were represented by labor unions under collective bargaining agreements. We may not be able to renegotiate our collective bargaining agreements when they expire on satisfactory terms or at all. A failure to do so may increase our costs.
Biggest changeWe may not be able to renegotiate our collective bargaining agreements when they expire on satisfactory terms or at all. A failure to do so may increase our costs. For example, a labor union representing approximately 90 employees at our East Dubuque Facility went on strike in October 2023, after its collective bargaining agreement expired.
Public health crises such as the COVID-19 pandemic have had, and may continue to have, adverse impacts on our business, financial condition, results of operations, and liquidity. The economic effects from the COVID-19 pandemic on our business were and may again be significant.
Public health crises such as the COVID-19 pandemic have had, and may continue to have, adverse impacts on our business, financial condition, results of operations and liquidity. The economic effects from public health crises such as the COVID-19 pandemic on our business were and may again be significant.
Operations at our plant could be curtailed, limited or completely shut down for an extended period of time as the result of one or more unforeseen events and circumstances, which may not be within our control, including: major unplanned maintenance requirements; catastrophic events caused by mechanical breakdown, electrical injury, pressure vessel rupture, explosion, contamination, fire, or natural disasters, including floods, windstorms, and other similar events; labor supply shortages or labor difficulties that result in a work stoppage or slowdown; cessation or suspension of a plant or specific operations dictated by environmental authorities; acts of terrorism or other deliberate malicious acts; and an event or incident involving a large clean-up, decontamination, or the imposition of laws and ordinances regulating the cost and schedule of demolition or reconstruction, which can cause significant delays in restoring property to its pre-event condition.
Operations at our plant could be curtailed, limited or completely shut down for an extended period of time as the result of one or more unforeseen events and circumstances, which may not be within our control, including: major unplanned maintenance requirements; catastrophic events caused by mechanical breakdown, electrical injury, pressure vessel rupture, explosion, contamination, fire, or natural disasters, including floods, windstorms, and other similar events; labor supply shortages or labor difficulties that result in a work stoppage or slowdown; cessation or suspension of a plant or specific operations dictated by environmental authorities; acts of terrorism, cyberattacks or other deliberate malicious acts; and an event or incident involving a large clean-up, decontamination, or the imposition of laws and ordinances regulating the cost and schedule of demolition or reconstruction, which can cause significant delays in restoring property to its pre-event condition.
For example: our partnership agreement (i) permits our general partner to make a number of decisions in its individual capacity, as opposed to its capacity as general partner, which entitles our general partner to consider only the interests and factors that it desires and means that it has no duty or obligation to give any consideration to any interest of, or factors affecting, any limited partner; (ii) provides that our general partner will not have any liability to unitholders for decisions made in its capacity as general partner so long as it acted in good faith, meaning it believed the decision was in our best interest; (iii) provides that our general partner and the officers and directors of its general partner will not be liable for monetary damages to common unitholders, including us, for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that the general partner or its officers or directors acted in bad faith or engaged in fraud or willful misconduct, or in the case of a criminal matter, acted with knowledge that the conduct was criminal; (iv) generally provides that affiliated transactions and resolutions of conflicts of interest not approved by the conflicts committee of the board of directors of its general partner and not involving a vote of unitholders must be on terms no less favorable to us than those generally being provided to or available from unrelated third parties or be “fair and reasonable” to us, as determined by its general partner in good faith, and that, in determining whether a transaction or resolution is “fair and reasonable,” the general partner may consider the totality of the relationships between the parties involved, including other transactions that may be particularly advantageous or beneficial to affiliated parties, including us; and (v) provides that in resolving conflicts of interest, it will be presumed that in making its decision, the general partner or its conflicts committee acted in good faith, and in any proceeding brought by or on behalf of any holder of common units, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption.
For example: our partnership agreement (i) permits our general partner to make a number of decisions in its individual capacity, as opposed to its capacity as general partner, which entitles our general partner to consider only the interests and factors that it desires and means that it has no duty or obligation to give any consideration to any interest of, or factors affecting, any limited partner; (ii) provides that our general partner will not have any liability to unitholders for decisions made in its capacity as general partner so long as it acted in good faith, meaning it believed the decision was in our best interest; (iii) provides that our general partner and the officers and directors of its general partner will not be liable for monetary damages to common unitholders, including us, for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that the general partner or its officers or directors acted in bad faith or engaged in fraud or willful misconduct, or in the case of a criminal matter, acted with knowledge that the conduct was criminal; (iv) generally provides that affiliated transactions and resolutions of conflicts of interest not approved by the conflicts committee of the board of directors of its general partner and not involving a vote of unitholders must be on terms no less favorable to us than those generally being provided to or available from unrelated third parties or be “fair and reasonable” to us, as determined by its general partner in good faith, and that, in determining whether a transaction or resolution is “fair and reasonable”, the general partner may consider the totality of the relationships between the parties involved, including other transactions that may be particularly advantageous or beneficial to affiliated parties, including us; and (v) provides that in resolving conflicts of interest, it will be presumed that in making its decision, the general partner or its conflicts committee acted in good faith, and in any proceeding brought by or on behalf of any holder of common units, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption.
Risks Related to Our Business Our business is, and nitrogen fertilizer prices are, cyclical and highly volatile, which could have a material adverse effect on our results of operations, financial condition and cash flows. Demand for nitrogen fertilizer products is dependent on fluctuating demand for crop nutrients by the global agricultural industry.
Risks Related to Our Business Our business is, and nitrogen fertilizer and feedstock prices are, cyclical and highly volatile, which could have a material adverse effect on our results of operations, financial condition and cash flows. Demand for nitrogen fertilizer products is dependent on fluctuating demand for crop nutrients by the global agricultural industry.
The extent to which the pandemic and its effects may adversely impact our future business, financial, and operating results, and for what duration and magnitude, depends on factors that are continuing to evolve, are difficult to predict and, in many instances, are beyond our control.
The extent to which the pandemic and its ongoing effects may adversely impact our future business, financial, and operating results, and for what duration and magnitude, depends on factors that are continuing to evolve, are difficult to predict and, in many instances, are beyond our control.
Icahn’s interests in CVR Energy to an unrelated party or group, a change of control could be deemed to have occurred under the terms of the indenture governing our 6.125% Senior Secured Notes, which could require us to offer to repurchase all outstanding notes at 101% of their principal amount plus accrued interest to the date of repurchase, and an event of default could be deemed to have occurred under our ABL Credit Facility, which could allow lenders to accelerate indebtedness owed to them.
Icahn’s interests in CVR Energy to an unrelated party or group, a change of control could be deemed to have occurred under the terms of the indenture governing our 6.125% Senior Secured Notes, due 2028 which could require us to offer to repurchase all outstanding notes at 101% of their principal amount plus accrued interest to the date of repurchase, and an event of default could be deemed to have occurred under our ABL Credit Facility, which could allow lenders to accelerate indebtedness owed to them.
Icahn indirectly controls approximately 71% of the voting power of CVR Energy’s common stock and, by virtue of such ownership, is able to control the Partnership through CVR Energy’s ownership of our general partner and its sole member, including: the election and appointment of directors; business strategy and policies; mergers or other business combinations; acquisition or disposition of assets; future issuances of common stock, common units, or other securities; incurrence of debt or obtaining other sources of financing; and the payment of distributions on our common units.
Icahn indirectly controls approximately 66% of the voting power of CVR Energy’s common stock and, by virtue of such ownership, is able to control the Partnership through CVR Energy’s ownership of our general partner and its sole member, including: the election and appointment of directors; business strategy and policies; mergers or other business combinations; acquisition or disposition of assets; future issuances of common stock, common units, or other securities; incurrence of debt or obtaining other sources of financing; and the payment of distributions on our common units.
The potential conflicts of interest include, among others, the following: (i) neither our partnership agreement nor any other agreement requires the owners of our general partner, including CVR Energy, to pursue a business strategy that favors us and the affiliates of our general partner, including CVR Energy, have fiduciary duties to make decisions in their own best interests and in the best interest of holders of CVR Energy’s common stock, which may be contrary to our interests (ii) our general partner is allowed to take into account the interests of parties other than us or our common unitholders, such as its owners or CVR Energy, in resolving conflicts of interest, which has the effect of limiting its fiduciary duty to our common unitholders; (iii) our general partner has limited its liability and reduced its fiduciary duties under our partnership agreement and has also restricted the remedies available to our common unitholders for actions that, without the limitations, might constitute breaches of fiduciary duty; (iv) the Board determines the amount and timing of asset purchases and sales, capital expenditures, borrowings, repayment of indebtedness, and issuances of additional partnership interests, each of which can affect the amount of cash that is available for distribution to our common unitholders; (v) our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with any of these entities on our behalf and there is no limitation on the amounts that can be paid; (vi) our general partner controls the enforcement of obligations owed to us by it and its affiliates, and decides whether to retain separate counsel or others to perform services for us; (vii) our general partner determines which costs incurred by it and its affiliates are reimbursable by us; and (viii) certain of the executive officers of our general partner also serve as executive officers of CVR Energy, including our executive chairman, who will face conflicts of interest when making decisions which may benefit either us or CVR Energy.
The potential conflicts of interest include, among others, the following: (i) neither our partnership agreement nor any other agreement requires the owners of our general partner, including CVR Energy, to pursue a business strategy that favors us and the affiliates of our general partner, including CVR Energy, have fiduciary duties to make decisions in their own best interests and in the best interest of holders of CVR Energy’s common stock, which may be contrary to our interests (ii) our general partner is allowed to take into account the interests of parties other than us or our common unitholders, such as its owners or CVR Energy, in resolving conflicts of interest, which has the effect of limiting its fiduciary duty to our common unitholders; December 31, 2023 | 26 Table of Contents (iii) our general partner has limited its liability and reduced its fiduciary duties under our partnership agreement and has also restricted the remedies available to our common unitholders for actions that, without the limitations, might constitute breaches of fiduciary duty; (iv) the Board determines the amount and timing of asset purchases and sales, capital expenditures, borrowings, repayment of indebtedness, and issuances of additional partnership interests, each of which can affect the amount of cash that is available for distribution to our common unitholders; (v) our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with any of these entities on our behalf and there is no limitation on the amounts that can be paid; (vi) our general partner controls the enforcement of obligations owed to us by it and its affiliates, and decides whether to retain separate counsel or others to perform services for us; (vii) our general partner determines which costs incurred by it and its affiliates are reimbursable by us; and (viii) certain of the executive officers of our general partner also serve as executive officers of CVR Energy, including our executive chairman, who will face conflicts of interest when making decisions which may benefit either us or CVR Energy.
We may enter into agreements limiting our exposure to higher interest rates, but any such agreements may not offer complete protection from this risk. Mr. Carl C. Icahn exerts significant influence over the Partnership through his controlling ownership of CVR Energy, and his interests may conflict with the interests of the Partnership and our unitholders. Mr. Carl C.
We may enter into agreements limiting our exposure to higher interest rates, but any such agreements may not offer complete protection from this risk. Mr. Carl C. Icahn exerts significant influence over the Partnership through his controlling ownership of CVR Energy, and his interests or those of CVR Energy may conflict with the interests of the Partnership and our unitholders.
Our level of indebtedness could have important consequences, such as: (i) limiting our ability to obtain additional financing to fund our working capital needs, capital expenditures, debt service requirements, acquisitions, or other purposes; (ii) requiring us to utilize a significant portion of our cash flows to service our indebtedness, thereby reducing available cash and our ability to make distributions on our common units; (iii) limiting our ability to use operating cash flow in other areas of the business because we must dedicate a substantial portion of additional funds to service debt; (iv) limiting our ability to compete with other companies who are not as highly leveraged, as we may be less capable of responding to adverse economic and industry conditions; (v) limiting our ability to make certain payments on debt that is subordinated or secured on a junior basis; (vi) restricting the way in which we conduct business because of financial and operating covenants, including regarding borrowing additional funds, disposing of assets, and the ability of subsidiaries to pay dividends or make other distributions; (vii) limiting our ability to enter into certain transactions with our affiliates; (viii) limiting our ability to designate our subsidiaries as unrestricted subsidiaries; (ix) exposing us to potential events of default (if not cured or waived) under financial and operating covenants contained in our or our respective subsidiaries’ debt instruments; and (x) limiting our ability to react to changing market conditions.
Our level of indebtedness December 31, 2023 | 23 Table of Contents could have important consequences, such as: (i) limiting our ability to obtain additional financing to fund our working capital needs, capital expenditures, debt service requirements, acquisitions, or other purposes; (ii) requiring us to utilize a significant portion of our cash flows to service our indebtedness, thereby reducing available cash and our ability to make distributions on our common units; (iii) limiting our ability to use operating cash flow in other areas of the business because we must dedicate a substantial portion of additional funds to service debt; (iv) limiting our ability to compete with other companies who are not as highly leveraged, as we may be less capable of responding to adverse economic and industry conditions; (v) limiting our ability to make certain payments on debt that is subordinated or secured on a junior basis; (vi) restricting the way in which we conduct business because of financial and operating covenants, including regarding borrowing additional funds, disposing of assets, and the ability of subsidiaries to pay dividends or make other distributions; (vii) limiting our ability to enter into certain transactions with our affiliates; (viii) limiting our ability to designate our subsidiaries as unrestricted subsidiaries; (ix) exposing us to potential events of default (if not cured or waived) under financial and operating covenants contained in our or our respective subsidiaries’ debt instruments; and (x) limiting our ability to react to changing market conditions.
Regional occurrences, such as energy shortages or increases in commodity prices, and natural disasters, could also have a material adverse effect on our business, financial condition and results of operations. The physical effects of adverse weather conditions have the potential to directly affect our operations and result in increased costs related to our operations.
Regional occurrences, such as energy shortages or increases in commodity prices, geological hazards and natural disasters, could also have a material adverse effect on our business, financial condition and results of operations. The physical effects of adverse weather conditions have the potential to directly affect our operations and result in increased costs related to our operations.
Inflation in the United States increased beginning in the second half of 2021 and has continued into 2023, due to a substantial increase in money supply, a stimulative fiscal policy, a significant rebound in consumer demand as COVID-19 restrictions were relaxed, the Russia-Ukraine conflict, and worldwide supply chain disruptions resulting from the economic contraction caused by COVID-19 and lockdowns followed by a rapid recovery.
Inflation in the United States increased beginning in the second half of 2021 and continued into the beginning of 2023, due to a substantial increase in money supply, a stimulative fiscal policy, a significant rebound in consumer demand as COVID-19 restrictions were relaxed, the Russia-Ukraine war and worldwide supply chain disruptions resulting from the economic contraction caused by COVID-19 and lockdowns followed by a rapid recovery.
It is unclear the impact of the new federal administration will have on the laws and regulations applicable to us, however, measures to address climate change and reduce GHG emissions (including carbon dioxide, methane and nitrous oxides) are in various phases of discussion or implementation and could affect our operations by requiring increased operating and capital costs and/or increasing taxes on GHG emissions.
It is unclear the impact the Biden Administration will have on the laws and regulations applicable to us, however, measures to address climate change and reduce GHG emissions (including carbon dioxide, methane and nitrous oxides) are in various phases of discussion or implementation and could affect our operations by requiring increased operating and capital costs and/or increasing taxes on GHG emissions.
Operations of our Coffeyville Facility depend in large part on the performance of third-party suppliers, including the adjacent third-party air separation plant under a contract through 2035 and a third-party electric service provider under a contract through June 30, 2029.
Operations of our Coffeyville Facility depend in large part on the performance of third-party suppliers, including the adjacent third-party air separation plant under a contract through 2039 and a third-party electric service provider under a contract through June 30, 2029.
However, our deduction for “business interest” is limited to the sum of our business interest income and 30% of our “adjusted taxable income.” For the purposes of this limitation, our adjusted taxable income is computed without regard to any business interest expense or business interest income.
However, our deduction for “business interest” is limited to the sum of our business interest income and 30% of our “adjusted taxable income”. For the purposes of this limitation, our adjusted taxable income is computed without regard to any business interest expense or business interest income.
Likewise, upon the winding up of the partnership, in the event that (i) we do not distribute assets in the following order: (a) to creditors in December 31, 2022 | 27 Table of Contents satisfaction of their liabilities; (b) to partners and former partners in satisfaction of liabilities for distributions owed under our partnership agreement; (c) to partners for the return of their contribution; and finally (d) to the partners in the proportions in which the partners share in distributions; and (ii) a common unitholder knows at the time of such circumstances, then such common unitholder will be liable for a period of three years from the impermissible distribution to repay the distribution under Section 17-807 of the Delaware Act.
Likewise, upon the winding up of the partnership, in the event that (i) we do not distribute assets in the following order: (a) to creditors in satisfaction of their liabilities; (b) to partners and former partners in satisfaction of liabilities for distributions owed under our partnership agreement; (c) to partners for the return of their contribution; and finally (d) to the partners in the proportions in which the partners share in distributions; and (ii) a common unitholder knows at the time of such circumstances, then such common unitholder will be liable for a period of three years from the impermissible distribution to repay the distribution under Section 17-807 of the Delaware Act.
If we are unable to conclude that an activity would not affect our treatment as a partnership for U.S. federal income tax purposes and are unable or unwilling to obtain an IRS ruling, we may choose to acquire such business or develop such expansion project in a corporate subsidiary, which would subject the income December 31, 2022 | 30 Table of Contents related to such activity to entity-level taxation, which would reduce the amount of cash available for distribution to our common unitholders and could likely cause a substantial reduction in the value of our common units.
If we are unable to conclude that an activity would not affect our treatment as a partnership for U.S. federal income tax purposes and are unable or unwilling to obtain an IRS ruling, we may choose to acquire such business or develop such expansion project in a corporate subsidiary, which would subject the income related to such activity to entity-level taxation, which would reduce the amount of cash available for distribution to our common unitholders and could likely cause a substantial reduction in the value of our common units.
Violations of applicable environmental laws and regulations, or of the conditions of permits issued thereunder, can result in December 31, 2022 | 19 Table of Contents substantial penalties, injunctive orders compelling installation of additional controls, civil and criminal sanctions, operating restrictions, injunctive relief, permit revocations and/or facility shutdowns, which may have a material adverse effect on our ability to operate our facilities and accordingly our financial performance.
Violations of applicable environmental laws and regulations, or of the conditions of permits issued thereunder, can result in substantial penalties, injunctive orders compelling installation of additional controls, civil and criminal sanctions, operating restrictions, injunctive relief, permit revocations and/or facility shutdowns, which may have a material adverse effect on our ability to operate our facilities and accordingly our financial performance.
Our partnership agreement restricts common unitholders’ voting rights by providing that any units held by a person that owns 20% or more of any class of units then outstanding, other than our general partner, its affiliates, their transferees, and persons who acquired such units with the prior approval of the Board, may not vote on any matter.
Our December 31, 2023 | 27 Table of Contents partnership agreement restricts common unitholders’ voting rights by providing that any units held by a person that owns 20% or more of any class of units then outstanding, other than our general partner, its affiliates, their transferees, and persons who acquired such units with the prior approval of the Board, may not vote on any matter.
However, should CVR Energy’s Coffeyville refinery fail to perform in accordance with the existing agreement or to the extent pet coke from CVR Energy’s Coffeyville refinery is insufficient, we would need to purchase pet coke from third parties on the open market, which could negatively December 31, 2022 | 18 Table of Contents impact our results of operations to the extent third-party pet coke is unavailable or available only at higher prices.
However, should CVR Energy’s Coffeyville refinery fail to perform in accordance with the existing agreement or to the extent pet coke from CVR Energy’s Coffeyville refinery is insufficient, we would need to purchase pet coke from third parties on the open market, which could negatively impact our results of operations to the extent third-party pet coke is unavailable or available only at higher prices.
If, as a result of any such audit adjustment, we are required to make payments of taxes, penalties, and interest, our cash available for distribution to our common unitholders might be substantially reduced and our current and former unitholders may be required to indemnify us for any taxes (including any applicable penalties and interest) resulting from such audit adjustments that were paid on such unitholders behalf.
December 31, 2023 | 28 Table of Contents If, as a result of any such audit adjustment, we are required to make payments of taxes, penalties, and interest, our cash available for distribution to our common unitholders might be substantially reduced and our current and former unitholders may be required to indemnify us for any taxes (including any applicable penalties and interest) resulting from such audit adjustments that were paid on such unitholders behalf.
Any damage December 31, 2022 | 20 Table of Contents or injury to persons, equipment, or property or other disruption of our ability to produce or distribute products could result in a significant decrease in operating revenues and significant additional costs to replace or repair and insure our assets, which could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions.
Any damage or injury to persons, equipment, or property or other disruption of our ability to produce or distribute products could result in a significant decrease in operating revenues and significant additional costs to replace or repair and insure our assets, which could have a material adverse effect on our results of operations, financial condition and ability to make cash distributions.
Our Coffeyville Facility has historically obtained a majority of its pet coke from CVR Energy’s Coffeyville refinery over the past five years, although this percentage has decreased to 47% in 2022.
Our Coffeyville Facility has historically obtained a majority of its pet coke from CVR Energy’s Coffeyville refinery over the past five years, although this percentage has decreased to 43% in 2023.
December 31, 2022 | 25 Table of Contents As permitted under Delaware law, our partnership agreement, which applies to and binds common unitholders, limits the liability and replaces the fiduciary duties of our general partner, while also restricting the remedies available to our common unitholders for actions that, without these limitations and reductions, might constitute breaches of fiduciary duty.
As permitted under Delaware law, our partnership agreement, which applies to and binds common unitholders, limits the liability and replaces the fiduciary duties of our general partner, while also restricting the remedies available to our common unitholders for actions that, without these limitations and reductions, might constitute breaches of fiduciary duty.
If we are unable to maintain sales of our products at a price that reflects such increased costs or have to increase the prices of our products because of such increased costs, there could be a material adverse effect on our business, financial condition, results of operations and cash flows.
If we are unable to maintain sales of our products December 31, 2023 | 17 Table of Contents at a price that reflects such increased costs or have to increase the prices of our products because of such increased costs, there could be a material adverse effect on our business, financial condition, results of operations and cash flows.
To protect our facilities and systems against and mitigate cyber risk, we have implemented several programs, including externally performed cyber risk monitoring, audits and penetration testing and an information security training program, and we are actively engaged in evaluating the implementation of applicable Cybersecurity and Infrastructure Security Agency security standard guidelines.
To protect our facilities and systems against and mitigate cyber risk, we have implemented several programs, including externally performed cyber risk monitoring, audits and penetration testing and an information security training program, and we completed the implementation of applicable Cybersecurity and Infrastructure Security Agency security standard guidelines in 2023.
Current and prospective Non-U.S. common unitholders should consult their tax advisors regarding the impact of these rules on an investment in our common units. Tax-exempt entities face unique tax issues from owning our common units that may result in adverse tax consequences.
Current and prospective Non-U.S. common unitholders should consult their tax advisors regarding the impact of these rules on an investment in our common units. December 31, 2023 | 29 Table of Contents Tax-exempt entities face unique tax issues from owning our common units that may result in adverse tax consequences.
Due to the dangerous and potentially hazardous nature of the cargo we carry, in particular ammonia, a railcar accident may result in fires, explosions, and releases of material which could lead to sudden, severe damage or injury to property, the environment, and human health.
Due to the dangerous and potentially hazardous nature of the cargo we carry, in particular ammonia, a railcar accident may result in fires, explosions, and releases of material which could lead to sudden, December 31, 2023 | 20 Table of Contents severe damage or injury to property, the environment, and human health.
In addition, our existing labor agreements may not prevent a strike or work stoppage at any of our facilities in the future, and any work stoppage could negatively affect our results of operations, financial condition and cash flows. December 31, 2022 | 22 Table of Contents In addition, there continues to be a tight labor market.
In addition, our existing labor agreements may not prevent a strike or work stoppage at any of our facilities in the future, and any work stoppage could negatively affect our results of operations, financial condition and cash flows. In addition, there continues to be a tight labor market.
As a publicly traded partnership we qualify for certain exemptions from many of the NYSE’s corporate governance requirements.
As a publicly traded partnership we qualify for and rely upon certain exemptions from many of the NYSE’s corporate governance requirements.
Similarly, taking advantage of opportunities to reduce our existing debt, such as debt exchanges, debt repurchases, or modifications of our existing debt could result in December 31, 2022 | 28 Table of Contents “cancellation of indebtedness income” being allocated to our common unitholders as taxable income without any increase in our cash available for distribution.
Similarly, taking advantage of opportunities to reduce our existing debt, such as debt exchanges, debt repurchases, or modifications of our existing debt could result in “cancellation of indebtedness income” being allocated to our common unitholders as taxable income without any increase in our cash available for distribution.
We are subject to the requirements of OSHA and comparable state statutes that regulate the protection of the health and safety of workers, the proper design, operation, and maintenance of our equipment, and require us to provide information about hazardous materials used in our operations.
December 31, 2023 | 22 Table of Contents We are subject to the requirements of OSHA and comparable state statutes that regulate the protection of the health and safety of workers, the proper design, operation, and maintenance of our equipment, and require us to provide information about hazardous materials used in our operations.
Further, our ABL Credit Facility bears interest at variable rates and other debt we incur could likewise be variable-rate debt. If market interest rates increase, variable-rate debt will create higher debt service requirements, which could adversely affect our ability to fund our liquidity needs, capital investments, and distributions to our unitholders.
Further, our ABL Credit Facility bears interest at variable rates and other debt we incur could likewise be variable-rate debt. If market interest rates increase, variable-rate debt will create higher debt service requirements, which could adversely December 31, 2023 | 24 Table of Contents affect our ability to fund our liquidity needs, capital investments, and distributions to our unitholders.
Additionally, the compensation of such executive officers is set by CVR Energy, and we have no control over the amount paid to such officers. December 31, 2022 | 26 Table of Contents CVR Energy has the power to elect all of the members of the Board. Our general partner has control over all decisions related to our operations.
Additionally, the compensation of such executive officers is set by CVR Energy, and we have no control over the amount paid to such officers. CVR Energy has the power to elect all of the members of the Board. Our general partner has control over all decisions related to our operations.
The current policy of the board of directors of our general partner (“Board”) is to distribute an amount equal to the available cash generated by our business each quarter to our common unitholders.
The current policy of the Board is to distribute an amount equal to the available cash generated by our business each quarter to our common unitholders.
If such an event were to occur, it is possible that we will not have sufficient funds at the time of the change of control to make the required repurchase of notes or repay amounts outstanding under our ABL Credit Facility, if any.
If such an event were to occur, it is possible that we will not have sufficient funds at the time of the change of control to make the required repurchase of notes or repay amounts outstanding under our ABL Credit Facility, if any. An increase in interest rates will cause our debt service obligations to increase.
Such inclement weather conditions or other unforeseen developments could damage our facilities or logistics assets. If such weather conditions prevail near our facilities or logistics assets, they could interrupt or undermine our ability to produce and transport products or to manage our business.
If such weather conditions prevail near our facilities or logistics assets, they could interrupt or undermine our ability to produce and transport products or to manage our business.
Risks Related to Our Limited Partnership Structure We may not have sufficient “available cash” to pay any quarterly distribution on common units or the Board may elect to distribute less than all of our available cash.
Risks Related to Our Limited Partnership Structure We may not have sufficient “available cash” to pay any quarterly distribution on common units, or the board of directors of the Partnership’s general partner (the “Board”) may elect to take reserves or distribute less than all of our available cash.
December 31, 2022 | 29 Table of Contents Our proration methods may be challenged by the IRS, which could change the allocation of items of income, gain, loss, and deduction among our common unitholders.
Our proration methods may be challenged by the IRS, which could change the allocation of items of income, gain, loss, and deduction among our common unitholders.
On an as needed basis, but no less than quarterly, we brief the Audit Committee of the Board on information security matters.
On an as needed basis, but no less than quarterly, we brief the Audit Committee of the board of directors of the Partnership’s general partner “(Board”) on information security matters.
The ultimate outcome of these and other factors may result in many adverse consequences including, but not limited to, reduced availability of critical staff, disruption or delays to supply chains for critical equipment or feedstock, inflation, increased interest rates, reduced economic activity that negatively impacts demand for our products, and increased administrative, compliance, and operational costs.
The ultimate outcome of these and other factors may result in many adverse consequences including, but not limited to, disruption or delays to supply chains for critical equipment or feedstock, inflation, increased interest rates, and increased administrative, compliance, and operational costs.
We are subject to cybersecurity risks and other cyber incidents resulting in disruption to our business. We depend on internal, related-party, and third-party information technology systems to manage and support our operations, and we collect, process, and retain sensitive and confidential customer information in the normal course of business.
We depend on internal, related-party, and third-party information technology systems to manage and support our operations, and we collect, process, and retain sensitive and confidential customer information in the normal course of business.
Compliance with and changes in environmental laws and regulations, including those related to climate change, could require us to make substantial capital expenditures and adversely affect our performance.
Compliance with and changes in environmental laws and regulations, including those related to climate change, could result in increased operating costs and capital expenditures and adversely affect our performance.
Any disruption in the supply of natural gas to our East Dubuque Facility could restrict our ability to continue to make products at the facility and have a material adverse effect on our results of operations and financial condition. If licensed technology were no longer available, our business may be adversely affected.
Any disruption in the supply of natural gas to our East Dubuque Facility could restrict our ability to continue to make products at the facility and have a material adverse effect on our results of operations and financial condition.
Accordingly, distributions to a Non-U.S. common unitholder that are made through a broker will be subject to a combined withholding tax rate equal to the sum of the highest applicable effective tax rate and 10%. These withholding obligations will apply to transfers of our common units occurring on or after January 1, 2023.
Accordingly, distributions to a Non-U.S. common unitholder that are made through a broker will be subject to a combined withholding tax rate equal to the sum of the highest applicable effective tax rate and 10%.
Decreased demand for our products may have a material adverse effect on our results of operations, financial condition and cash flows. Our operations are dependent on third-party suppliers, which could have a material adverse effect on our results of operations, financial condition and cash flows.
Any of the foregoing could have a material adverse effect on our competitive position, results of operations, financial condition and cash flows. Our operations are dependent on third-party suppliers, which could have a material adverse effect on our results of operations, financial condition and cash flows.
Given the nature of our business, and consistent with industry practice, we do not have long-term minimum purchase contracts with our customers. The loss of several of these significant customers, or a significant reduction in purchase volume by several of them, could have a material adverse effect on our results of operations, financial condition, and cash flows.
The loss of several of these significant customers, or a significant reduction in purchase volume by several of them, could have a material adverse effect on our results of operations, financial condition and cash flows.
The adverse impacts of the COVID-19 pandemic had, and may continue to have, the effect of precipitating or heightening many of the other risks described in this section.
The adverse impacts of the COVID-19 pandemic had, and may continue to have, the effect of precipitating or heightening many of the other risks described in this section. We are subject to cybersecurity risks and may experience cyber incidents resulting in disruption or harm to our business.
The regions in which our facilities are located and in which our customers operate are susceptible to severe storms, including hurricanes, thunderstorms, tornadoes, floods, extended periods of rain, ice storms and snow, some of which we or our December 31, 2022 | 21 Table of Contents customers have experienced in recent years.
The regions in which our facilities are located and in which our customers operate are susceptible to severe storms, including hurricanes, thunderstorms, tornadoes, floods, extended periods of rain, ice storms and snow, some of which we or our customers have experienced in recent years. Such inclement weather conditions or other unforeseen developments could damage our facilities or logistics assets.
In addition, imports of fertilizer from other countries may be unfairly subsidized, as was found to be the case on November 30, 2021 by the U.S. Department of Commerce (the “USDOC”) with respect to UAN imports from Russia and Trinidad.
In addition, imports of fertilizer from other countries may be unfairly subsidized, as determined by the U.S. Department of Commerce on June 24, 2022 with respect to UAN imports from Russia and Trinidad and Tobago. On July 18, 2022, the U.S.
If the supply of commercial insurance is curtailed, we may not be able to continue our present limits of insurance coverage or obtain sufficient insurance capacity to adequately insure our risks.
If the supply of commercial insurance is curtailed, we may not be able to continue our present limits of insurance coverage or obtain sufficient insurance capacity to adequately insure our risks or we may determine that premium costs, in our judgement, do not justify such expenditures and instead increase our self-insurance.
We typically purchase natural gas from third parties on a spot basis and, from time to time, may enter into fixed-price forward purchase contracts.
We have two agreements for pipeline transportation of natural gas with expiration dates in 2025. We typically purchase natural gas from third parties on a spot basis and, from time to time, may enter into fixed-price forward purchase contracts.
December 31, 2022 | 16 Table of Contents Our business is geographically concentrated and is therefore subject to regional economic downturns and seasonal variations, which may affect our production levels, transportation costs and inventory and working capital levels. Our sales to agricultural customers are concentrated in the Great Plains and Midwest states, and nitrogen fertilizer demand is seasonal.
December 31, 2023 | 16 Table of Contents Our business is geographically concentrated and is therefore subject to regional economic downturns and seasonal variations for us or our customers, which may affect our production levels, transportation costs and inventory and working capital levels.
Any interruption in the supply of natural gas to our East Dubuque Facility could have a material adverse effect on our results of operations and financial condition. Our East Dubuque Facility depends on the availability of natural gas. We have two agreements for pipeline transportation of natural gas with expiration dates in 2023 and 2025.
The terms of these agreements currently end in December 2024. Any interruption in the supply of natural gas to our East Dubuque Facility could have a material adverse effect on our results of operations and financial condition. Our East Dubuque Facility depends on the availability of natural gas.
Under our partnership agreement, we are authorized to issue an unlimited number of additional interests without a vote of the common unitholders. The issuance by us of additional common units or other equity interests of equal or senior rank would reduce the proportionate ownership interest of common unitholders immediately prior to the issuance.
The issuance by us of additional common units or other equity interests of equal or senior rank would reduce the proportionate ownership interest of common unitholders immediately prior to the issuance.
End user demand for our products may also be adversely impacted by climate change legislation and other changes to or new interpretations of environmental laws, due to increased costs or application restrictions. From time to time, various state legislatures have proposed bans or other limitations on fertilizer products.
End user demand for our products may also be adversely impacted by climate change legislation and other changes to or new interpretations of environmental laws, due to increased costs or application restrictions. Decreased demand for our products may have a material adverse effect on our results of operations, financial condition and cash flows.
Our operating segments’ results may not be sufficient to service existing indebtedness or to fund other expenditures, and we may not be able to obtain financing to meet these requirements.
In addition, a default under existing debt facilities and instruments could trigger a cross default under other agreements and could trigger a cross default under the agreements governing future indebtedness. Our operating segments’ results may not be sufficient to service existing indebtedness or to fund other expenditures, and we may not be able to obtain financing to meet these requirements.
As a result, the chemical industry is subject to security regulations relating to physical and cyber security. The costs of compliance therewith may have a material adverse effect on our financial condition. Adverse weather conditions or other unforeseen developments could damage our facilities or logistics assets and impair our ability to produce and deliver our nitrogen fertilizer products.
As a result, the chemical industry is subject to security regulations relating to physical and cyber security. The costs of compliance therewith may have a material adverse effect on our financial condition.
General Risks Related to the Partnership The acquisition and expansion strategy of our business involves significant risks that could have a material adverse effect on our results of operations, financial condition and cash flows. From time to time, we may consider pursuing acquisitions and expansion projects (“Expansion Projects”) to continue to grow and increase profitability.
December 31, 2023 | 30 Table of Contents General Risks Related to the Partnership The acquisition and expansion strategy of our business involves significant risks that could have a material adverse effect on our results of operations, financial condition and cash flows.
Failure to comply with these requirements may result in significant fines or compliance costs, which could have a material adverse effect on our results of operations, financial condition and cash flows. A portion of our workforce is unionized, and we are subject to the risk of labor disputes, slowdowns or strikes, which may disrupt our business and increase our costs.
Failure to comply with these requirements may result in significant fines or compliance costs, which could have a material adverse effect on our results of operations, financial condition and cash flows. Our business may suffer due to the departure of any of our key senior executives or other key employees.
Our quarterly results may vary significantly from one year to the next due to weather-related shifts in planting schedules and purchase patterns. Because we build inventory during low demand periods, the accumulation of inventory to be available for seasonal sales creates significant seasonal working capital and storage capacity requirements.
Because we build inventory during low demand periods, the accumulation of inventory to be available for seasonal sales creates significant seasonal working capital and storage capacity requirements. The degree of seasonality can change significantly from year-to-year due to conditions in the agricultural industry and other factors.
We have licensed, and may in the future license, a combination of patent, trade secret, and other intellectual property rights of third parties for use in our plant operations.
If licensed technology were no longer available or able to be licensed economically or at all, our business may be adversely affected. We have licensed a combination of patent, trade secret, and other intellectual property rights of third parties for use in our plant operations.
In addition, an increase in interest rates could adversely affect our future ability to obtain financing or materially increase the cost of any additional financing. The potential spin-off of CVR Energy’s nitrogen fertilizer business may result in disruptions to, and negatively impact our relationships with, our customers and other business partners.
In addition, an increase in interest rates could adversely affect our future ability to obtain financing or materially increase the cost of any additional financing.
Furthermore, the Federal Reserve has signaled that additional rate increases are likely to occur for the foreseeable future. An increase in the interest rates associated with our floating rate debt would increase our debt service costs and affect our results of operations and cash flow available for payments of our debt obligations.
Since March 2022, the Federal Reserve has raised its target range for the federal funds rate by 525 basis points through January 31, 2024. An increase in the interest rates associated with our floating rate debt would increase our debt service costs and affect our results of operations and cash flow available for payments of our debt obligations.
A breach could also originate from or compromise our customers’, vendors’, suppliers’, or other third-party networks outside of our control that could impact our business and operations. Although we implement controls on third-party connectivity to our systems, we have limited control in ensuring their systems consistently enforce strong cybersecurity controls.
Although we implement controls on third-party connectivity to our systems, we have limited control in ensuring their systems consistently enforce strong cybersecurity controls.
Our sales volumes depend on significant customers, and the loss of several significant customers may have a material adverse impact on our results of operations, financial condition and cash flows. We have a significant concentration of customers. Our two largest customers represented approximately 30% of net sales for the year ended December 31, 2022.
As a consequence of this seasonality, distributions of available cash, if any, may be volatile and may vary quarterly and annually. Our sales volumes depend on significant customers, and the loss of several significant customers may have a material adverse impact on our results of operations, financial condition and cash flows. We have a significant concentration of customers.
Risks Related to Our Plant Operations Failure by CVR Energy’s Coffeyville refinery to continue to supply us with pet coke could negatively impact our results of operations.
In addition, inflation may adversely affect our customers’ financing costs, cash flows and profitability, which could adversely impact their operations and our ability to offer credit and collect receivables. Risks Related to Our Plant Operations Failure by CVR Energy’s Coffeyville refinery or other third parties to continue to supply us with pet coke could negatively impact our results of operations.
We may be unable to pass along such higher costs to our customers. In addition, inflation may adversely affect our customers’ financing costs, cash flows, and profitability, which could adversely impact their operations and our ability to offer credit and collect receivables.
An increase in inflation rates could negatively affect our profitability and cash flows, due to higher wages, higher operating costs, higher financing costs and/or higher supplier prices. We may be unable to pass along such higher costs to our customers.
Inflation rose from 5.4% in June 2021 to 7.0% in December 2021 to 8.2% in September 2022. As of December 31, 2022, inflation was at 6.5%. An increase in inflation rates could negatively affect our profitability and cash flows, due to higher wages, higher operating costs, higher financing costs, and/or higher supplier prices.
According to the Consumer Price Index, inflation rose from 5.4% in June 2021 to 7.0% in December 2021 to 8.2% in September 2022. As of December 2022 and December 2023, inflation was at 6.5% and 3.4%, respectively.
Regulations concerning the transportation, storage and handling of hazardous chemicals, materials or substances, risks of terrorism, and the security of chemical manufacturing facilities could result in higher operating and/or capital costs. Critical infrastructure such as chemical manufacturing facilities may be at greater risk of terrorist attacks than other businesses in the United States.
For example, the conflict between Israel and Hamas, which began in October 2023, and the ongoing Russia-Ukraine war, pose significant geopolitical risks to global fertilizer and agriculture markets. Critical infrastructure such as chemical manufacturing facilities may be at greater risk of terrorist attacks than other businesses in the United States.
An increase in inflation could have adverse effects on our results of operations.
Our compliance with emerging privacy/security laws, as well as any associated inquiries or investigations or any other government actions related to these laws, may increase our operating costs. An increase in inflation could have adverse effects on our results of operations.
Removed
The degree of seasonality can change significantly from year-to-year due to conditions in the agricultural industry and other factors. As a consequence of this seasonality, distributions of available cash, if any, may be volatile and may vary quarterly and annually.
Added
International Trade Commission ultimately voted against imposing import tariffs on UAN from Russia and Trinidad and Tobago and, accordingly, the U.S. Department of Commerce will not issue countervailing duty orders and anti-dumping duty orders on UAN imports from the same countries.
Removed
December 31, 2022 | 17 Table of Contents Any previous or future pandemic, and actions taken in response thereto, could materially adversely affect our business, operations, financial condition, liquidity, and results of operations. The COVID-19 pandemic and actions of governments and others in response thereto continues to negatively impact worldwide economic and commercial activity and financial markets.
Added
Our sales to agricultural customers are concentrated in the Great Plains and Midwest states, and nitrogen fertilizer demand is seasonal. Our quarterly results may vary significantly from one year to the next due to weather-related shifts in planting schedules and purchase patterns.
Removed
The COVID-19 pandemic has also resulted in significant business and operational disruptions, including closures, supply chain disruptions, travel restrictions, stay-at-home orders, and limitations on the availability and effectiveness of the workforce. Further, if general economic conditions continue to remain uncertain for an extended period of time, our liquidity and ability to repay our outstanding debt may be harmed.
Added
Our two largest customers represented approximately 25% of net sales for the year ended December 31, 2023. Given the nature of our business, and consistent with industry practice, we do not have long-term minimum purchase contracts with our customers.
Removed
The full impact of the COVID-19 pandemic is unknown and is continuously evolving.
Added
On January 26, 2024, EPA issued a proposed rule to implement the methane emissions reduction program. Public comments on the proposal are due March 11, 2024.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Refer to Part I, Item 1, “Facilities” of this Report for more information on our core business properties. CVR Energy also leases property for our executive and marketing offices in Sugar Land, Texas and Kansas City, Kansas, respectively.
Biggest changeItem 2. Properties Refer to Part I, Item 1, “Facilities” of this Report for more information on our core business properties. CVR Energy also leases property for our executive and marketing offices in Sugar Land, Texas and Kansas City, Kansas, respectively. December 31, 2023 | 32 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeNot applicable. December 31, 2022 | 31 Table of Contents PART II
Biggest changeNot applicable. December 31, 2023 | 33 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

1 edited+5 added−3 removed2 unchanged
Biggest changeThe graph assumes that the value of the investment in common units and each index was $100 on December 31, 2017 and that all distributions were reinvested. Investment is weighted on the basis of market capitalization. The unit price performance shown on the graph is not necessarily indicative of future price performance.
Biggest changeThe graph assumes that the value of the investment in common units and each index was $100 on December 31, 2018 and that all distributions were reinvested. Investment is weighted on the basis of market capitalization. The unit price performance shown on the graph is not necessarily indicative of future price performance.
Removed
The Partnership has 30 holders of record of the outstanding units as of December 31, 2022. Equity Compensation Plan The CVR Partners Long-Term Incentive Plan (“CVR Partners LTIP”) provides for the grant of options, unit appreciation rights, distribution equivalent rights, restricted units, phantom units and other unit-based awards, each in respect of common units.
Added
The Partnership has 30 holders of record of the outstanding units as of December 31, 2023. Purchases of Equity Securities by the Issuer On May 6, 2020, the board of directors of the Partnership’s general partner (the “Board”), on behalf of the Partnership, authorized a unit repurchase program (the “Unit Repurchase Program”), which was increased on February 22, 2021.
Removed
Individuals who are eligible to receive awards under the CVR Partners LTIP include employees, officers, consultants and directors of CVR Partners and the general partner and their respective subsidiaries and parents. A maximum of 500,000 common units are issuable under the CVR Partners LTIP.
Added
The Unit Repurchase Program, as increased, authorized the Partnership to repurchase up to $20 million of the Partnership’s common units.
Removed
December 31, 2022 | 32 Table of Contents The table below contains information about securities authorized for issuance under the CVR Partners LTIP as of December 31, 2022: Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans Equity compensation plans approved by security holders: CVR Partners, LP Long-Term Incentive Plan — — 482,022 (1) Equity compensation plans not approved by security holders: None — — — Total — — 482,022 (1) Represents units that remain available for future issuance pursuant to the CVR Partners LTIP in connection with awards of options, unit appreciation rights, distribution equivalent rights, restricted units, and phantom units.
Added
Through December 31, 2023, the Partnership, considering all repurchases made since inception of the Unit Repurchase Program, repurchased 759,250 common units, 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, 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.
Added
As of December 31, 2023, the Partnership had a nominal authorized amount remaining under the Unit Repurchase Program. The Unit Repurchase Program does not obligate the Partnership to acquire any common units and may be cancelled, modified, or terminated by the Board at December 31, 2023 | 34 Table of Contents any time.
Added
On February 20, 2024, the Board, on behalf of the Partnership, terminated the nominal authority remaining under the Unit Repurchase Program. Item 6. [Reserved]

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. [Reserved] 33 Item 16. Form 10-K Summary 111 Item 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations 33 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 50 Item 8. Financial Statements and Supplementary Data 51
Biggest changeItem 6. [Reserved] 35 Item 16. Form 10-K Summary 114 Item 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations 35 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 51 Item 8. Financial Statements and Supplementary Data 52

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

81 edited+35 added−46 removed36 unchanged
Biggest changeNon-GAAP Reconciliations Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA Year Ended December 31, (in thousands) 2022 2021 2020 Net income (loss) $ 286,801 $ 78,155 $ (98,181) Interest expense, net 34,065 60,978 63,428 Income tax expense 160 57 30 Depreciation and amortization 82,137 73,480 76,077 EBITDA 403,163 212,670 41,354 Goodwill impairment — — 40,969 Adjusted EBITDA $ 403,163 $ 212,670 $ 82,323 December 31, 2022 | 44 Table of Contents 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) Adjustments: 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 Available cash for distribution (1) (2) $ 259,735 $ 96,557 $ (11,795) Common units outstanding 10,570 10,681 10,706 (1) Amount represents the cumulative available cash based on full year results.
Biggest changeDecember 31, 2023 | 45 Table of Contents Non-GAAP Reconciliations Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Available Cash for Distribution Year Ended December 31, (in thousands) 2023 2022 2021 Net income $ 172,433 $ 286,801 $ 78,155 Interest expense, net 28,653 34,065 60,978 Income tax expense 289 160 57 Depreciation and amortization 79,720 82,137 73,480 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) $ 188,193 $ 259,735 $ 96,557 Common units outstanding 10,570 10,570 10,681 (1) Includes reserves for debt service (interest expense) and other future operating needs.
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.
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 production primarily focused on ammonia upgrade capabilities, we believe this measure provides a meaningful view of how we operate.
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.
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.
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.
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.
The chart presented below summarizes our ammonia utilization rates on a consolidated basis for the years ended December 31, 2023, 2022, and 2021. 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.
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.
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.
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. This discussion and analysis covers the years ended December 31, 2022 and 2021 and discusses year-to-year comparisons between such periods.
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. This discussion and analysis covers the years ended December 31, 2023 and 2022 and discusses year-to-year comparisons between such periods.
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”) through December 31, 2022. (2) Information used within this chart was obtained from the USDA, National Agricultural Statistics Services as of December 31, 2022.
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”) through December 31, 2023. (2) Information used within this chart was obtained from the USDA, National Agricultural Statistics Services as of December 31, 2023.
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.
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 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.
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 years ended December 31, 2022 and December 31, 2021, there were no adjustments.
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. There were no inventory adjustments recognized during the years ended December 31, 2023, 2022, and 2021.
Of this amount, CVR Energy will receive approximately $40.9 million, with the remaining amount payable to public unitholders. Capital Structure 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.
Of this amount, CVR Energy will receive approximately $6.5 million, with the remaining amount payable to public unitholders. Capital Structure 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 discussions of the year ended December 31, 2020 and year-to-year comparisons between the years ended December 31, 2021 and 2020 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed on February 23, 2022, and such discussions are incorporated by reference into this Report.
The discussions of the year ended December 31, 2021 and year-to-year comparisons between the years ended December 31, 2022 and 2021 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed on February 22, 2023, and such discussions are incorporated by reference into this Report.
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.
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.
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.
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.
The table below presents these metrics for the years ended December 31, 2022, 2021, and 2020: Year Ended December 31, (in thousands of tons) 2022 2021 2020 Ammonia (gross produced) 703 807 852 Ammonia (net available for sale) 213 275 303 UAN 1,140 1,208 1,303 Feedstock - Our Coffeyville Facility utilizes a pet coke gasification process to produce nitrogen fertilizer.
The table below presents these metrics for the years ended December 31, 2023, 2022, and 2021: Year Ended December 31, (in thousands of tons) 2023 2022 2021 Ammonia (gross produced) 864 703 807 Ammonia (net available for sale) 270 213 275 UAN 1,369 1,140 1,208 Feedstock - Our Coffeyville Facility utilizes a pet coke gasification process to produce nitrogen fertilizer.
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.
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.
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.
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.
December 31, 2022 | 39 Table of Contents 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.
December 31, 2023 | 41 Table of Contents 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.
We have an unwavering commitment to safety above all else. If it’s not safe, then we don’t do it. • Environment - We care for our environment. Complying with all regulations and minimizing any environmental impact from our operations is essential.
We have an unwavering commitment to safety above all else. If it’s not safe, then we don’t do it. December 31, 2023 | 35 Table of Contents • Environment - We care for our environment. Complying with all regulations and minimizing any environmental impact from our operations is essential.
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 Table of Contents which there are identifiable cash flows that are largely independent of the cash flows of other assets (for example, at a fertilizer facility level).
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.
December 31, 2023 | 36 Table of Contents 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 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.
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): Quarterly Distributions Paid (in thousands) Related Period Date Paid Quarterly Distributions Per Common Unit Public Unitholders CVR Energy Total 2022 - 4th Quarter March 13, 2023 $ 10.5 $ 70,115 $ 40,866 $ 110,981 2023 - 1st Quarter May 22, 2023 10.43 69,647 40,594 110,241 2023 - 2nd Quarter August 21, 2023 4.14 27,646 16,113 43,759 2023 - 3rd Quarter November 20, 2023 1.55 10,350 6,033 16,383 Total 2023 quarterly distributions $ 26.62 $ 177,759 $ 103,605 $ 281,364 December 31, 2023 | 48 Table of Contents 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.
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.
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.
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.
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.
Available cash for distribution December 31, 2022 | 47 Table of Contents 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.
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.
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.
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.
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.
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 | 37 Table of Contents 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.
The charts below show relevant market indicators by month through December 31, 2023: Ammonia and UAN 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.
The table below presents these feedstocks for both facilities for the years ended December 31, 2022, 2021, and 2020: Year Ended December 31, 2022 2021 2020 Petroleum coke used in production (thousand tons) 425 514 523 Petroleum coke (dollars per ton) $ 52.88 $ 44.69 $ 35.25 Natural gas used in production (thousands of MMBtu) (1) 6,905 8,049 8,611 Natural gas used in production (dollars per MMBtu) (1) $ 6.66 $ 3.95 $ 2.31 Natural gas in cost of materials and other (thousands of MMBtu) (1) 6,701 7,848 9,349 Natural gas in cost of materials and other (dollars per MMBtu) (1) $ 6.37 $ 3.83 $ 2.35 (1) The feedstock natural gas shown above does not include natural gas used for fuel.
The table below presents these feedstocks for both facilities for the years ended December 31, 2023, 2022, and 2021: Year Ended December 31, 2023 2022 2021 Petroleum coke used in production (thousands of tons) 518 425 514 Petroleum coke used in production (dollars per ton) $ 78.14 $ 52.88 $ 44.69 Natural gas used in production (thousands of MMBtus) (1) 8,462 6,905 8,049 Natural gas used in production (dollars per MMBtu) (1) $ 3.42 $ 6.66 $ 3.95 Natural gas in cost of materials and other (thousands of MMBtus) (1) 8,671 6,701 7,848 Natural gas in cost of materials and other (dollars per MMBtu) (1) $ 3.84 $ 6.37 $ 3.83 (1) The feedstock natural gas shown above does not include natural gas used for fuel.
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 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.
Strategic Objectives We have outlined the following strategic objectives to drive the accomplishment of our mission: 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.
Strategic Objectives We have outlined the following strategic objectives to drive the accomplishment of our mission: • 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.
Cash and Other Liquidity As of December 31, 2022, we had cash and cash equivalents of $86.3 million, including $13.7 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.
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. nitrogen fertilizer industry remain intact.
December 31, 2023 | 37 Table of Contents Market Indicators 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.
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.
December 31, 2023 | 38 Table of Contents 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.
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.
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.
(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.
(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.
These December 31, 2022 | 35 Table of Contents 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.
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.
Actual results could differ from the estimates and assumptions used. December 31, 2022 | 49 Table of Contents 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.
Actual results could differ from the estimates and assumptions used. Inventory Valuation 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.
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.
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.
December 31, 2022 | 38 Table of Contents 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.
December 31, 2023 | 40 Table of Contents Consolidated Ammonia Utilization On a consolidated basis, utilization increased 19% to 100% for the year ended December 31, 2023 compared to the year ended December 31, 2022.
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.
General Business Environment 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.
December 31, 2022 | 48 Table of Contents Cash Flows The following table sets forth our cash flows for the periods indicated below: Year Ended December 31, (in thousands) 2022 2021 2020 Net cash provided by (used in): Operating activities $ 301,464 $ 188,725 $ 19,740 Investing activities (44,623) (20,342) (18,550) Financing activities (283,018) (86,426) (7,625) 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, 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.
Cash Flows The following table sets forth our cash flows for the periods indicated below: Year Ended December 31, (in thousands) 2023 2022 2021 Net cash provided by (used in): Operating activities $ 243,526 $ 301,464 $ 188,725 Investing activities (2,722) (44,623) (20,342) Financing activities (281,864) (283,018) (86,426) Net (decrease) increase in cash and cash equivalents $ (41,060) $ (26,177) $ 81,957 December 31, 2023 | 49 Table of Contents Operating Activities 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.
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.
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.
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.
Financial Highlights 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.
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.
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.
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: EBITDA - Net income (loss) before (i) interest expense, net, (ii) income tax expense (benefit) and (iii) depreciation and amortization expense.
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.
The Unit Repurchase Program, as increased, authorized the Partnership to repurchase up to $20 million of the Partnership’s common units.
The Unit Repurchase Program, as increased, authorized the Partnership to repurchase up to $20 million of the Partnership’s common units. During the year ended December 31, 2023, CVR Partners did not repurchase any common units.
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 as efficient as possible by maintaining low operating costs and disciplined deployment of capital.
We are focusing on improvements in day-to-day plant operations, identifying alternative sources for plant inputs to reduce lost time due to third-party operational constraints, and optimizing our commercial and marketing functions to maintain plant operations at their highest level. • 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 as efficient as possible by maintaining low operating costs and disciplined deployment of capital.
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.
Financing Activities 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.
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.
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. Capital spending for CVR Partners is determined by the Board.
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.
Liquidity and Capital Resources Our principal source of liquidity has historically been and continues to be cash from operations, which can include cash advances from customers resulting from prepay contracts. 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.
December 31, 2022 | 36 Table of Contents 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.
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.
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.
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. 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.
Net Sales Operating Income (Loss) December 31, 2022 | 40 Table of Contents Net Income (Loss) EBITDA (1) (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.
These variances were primarily driven by decreased product sales prices, offset by increased production and sales volumes, compared to 2022. Net Sales Operating Income December 31, 2023 | 42 Table of Contents Net Income EBITDA (1) (1) See “Non-GAAP Reconciliations” section below for reconciliations of the non-GAAP measures shown above.
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.
As a result, future operating results and current and long-term financial conditions could be negatively impacted if economic conditions decline and remain volatile. 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.
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.
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.
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.
Selling, General, and Administrative Expenses and Loss on Asset Disposal - Selling, general and administrative expenses and Loss on asset disposal, combined, decreased approximately $1.4 million for the year ended December 31, 2023 compared December 31, 2023 | 44 Table of Contents to the year ended December 31, 2022.
December 31, 2022 | 43 Table of Contents Factors Affecting Comparability of Our Financial Results Our historical results of operations for the periods presented may not be comparable with prior periods or to our results of operations in the future for the reasons discussed below.
Factors Affecting Comparability of Our Financial Results Major Scheduled Turnaround Activities Our results of operations for the periods presented may not be comparable with prior periods or to our results of operations in the future due to expenses incurred as part of planned turnarounds.
Sales (thousand tons) Product Pricing at Gate ($ 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.
Sales (thousand tons) Product Pricing at Gate ($ per ton) 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.
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.
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.
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.
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.
Capital Spending We divide capital spending needs into two categories: maintenance and growth. Maintenance capital spending includes non-discretionary maintenance projects and projects required to comply with environmental, health, and safety regulations. Growth capital projects generally involve an expansion of existing capacity and/or a reduction in direct operating expenses.
Refer to Part II, Item 8, Note 8 (“Long-Term Debt”) of this Report for further information. Capital Spending We divide capital spending needs into two categories: maintenance and growth. Maintenance capital spending includes non-discretionary maintenance projects and projects required to comply with environmental, health, and safety regulations.
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.
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.
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. U.S.
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. U.S.
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.
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.
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.
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.
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 Table of Contents 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.
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.
We undertake growth capital spending based on the expected return on incremental capital employed.
Growth capital projects generally involve an expansion of existing capacity and/or a reduction in direct operating expenses. We undertake growth capital spending based on the expected return on incremental capital employed.
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, 2022 compared to the year ended December 31, 2021: (in thousands) Price Variance Volume Variance UAN $ 254,225 $ (13,708) Ammonia 93,521 (40,138) 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.
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: (in thousands) Price Variance Volume Variance UAN $ (246,954) $ 121,886 Ammonia (126,590) 88,071 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.
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.
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.
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.
Investing Activities 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.
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.
Long-term debt consists of the following: December 31, (in thousands) 2023 2022 6.125% Senior Secured Notes, due June 2028 550,000 550,000 Unamortized debt issuance costs (2,692) (3,200) Total long-term debt $ 547,308 $ 546,800 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.
December 31, 2022 | 41 Table of Contents Cost of Materials and Other Direct Operating Expenses (1) (1) Exclusive of depreciation and amortization expense. 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.
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. December 31, 2023 | 43 Table of Contents Cost of Materials and Other Direct Operating Expenses (1) (1) Exclusive of depreciation and amortization expense.
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.
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.
Our total capital expenditures for the years ended December 31, 2022 and 2021, along with our estimated expenditures for 2023 are as follows: Year Ended December 31, Estimated (1) (in thousands) 2022 2021 2023 Maintenance capital $ 40,793 $ 16,226 $31,000 - 33,000 Growth capital 653 9,460 2,000 - 3,000 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 total capital expenditures for the years ended December 31, 2023 and 2022, along with our estimated expenditures for 2024 are as follows: Year Ended December 31, Estimated (in thousands) 2023 2022 2024 Maintenance capital $ 28,025 $ 40,793 $32,000 - 35,000 Growth capital 1,056 653 12,000 - 13,000 Total capital expenditures $ 29,081 $ 41,446 $44,000 - 48,000 Our estimated capital expenditures are subject to change due to changes in the cost, scope, and completion time for capital projects.
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.
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.
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.
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.
As of December 31, 2021, we had $112.5 million in cash and cash equivalents, including $34.2 million of customer advances.
We do not have any “off-balance sheet arrangements” as such term is defined within the rules and regulations of the SEC. Cash and Other Liquidity As of December 31, 2023, we had cash and cash equivalents of $45.3 million, including $2.5 million of customer advances.
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.
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIn the opinion of our management, there is no derivative financial instrument that correlates effectively with, and has a trading volume sufficient to hedge, our firm commitments and forecasted commodity sales transactions. December 31, 2022 | 50 Table of Contents
Biggest changeIn the opinion of our management, there are no financial instruments that correlate with our firm commitments and forecasted commodity sales transactions and could be used to effectively reduce commodity price risk. December 31, 2023 | 51 Table of Contents
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Commodity Price Risk We are exposed to significant market risk due to potential changes in prices for fertilizer products and natural gas. Natural gas is the primary raw material used in the production of various nitrogen-based products manufactured at our East Dubuque Facility.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Commodity Price Risk We are exposed to significant market risk due to potential changes in prices for fertilizer products, pet coke, and natural gas. Natural gas is the primary raw material used in the production of various nitrogen-based products manufactured at our East Dubuque Facility.
The value of fertilizer product inventory is subject to market risk due to fluctuations in the relevant commodity prices. Prices of nitrogen fertilizer products can be volatile. We believe that market prices of nitrogen products are affected by changes in grain prices, demand, natural gas prices, and other factors.
The value of fertilizer product inventory is subject to market risk due to fluctuations in the relevant commodity prices. Prices of nitrogen fertilizer products can be volatile, and we believe they are affected by changes in grain prices, demand, natural gas prices, and other factors.

Other UAN 10-K year-over-year comparisons