cvi-20210930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)
☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	September 30, 2021
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to .

Commission file number: 001-35120

CVR PARTNERS, LP

(Exact name of registrant as specified in its charter)

Delaware

56-2677689

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

2277 Plaza Drive, Suite 500, Sugar Land, Texas 77479

(Address of principal executive offices) (Zip Code)

(281) 207-3200

(Registrant’s telephone number, including area code)

_____________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common units representing limited partner interests	UAN	The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☑

Non-Accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

There were 10,681,332 common units representing limited partner interests of CVR Partners, LP (“common units”) outstanding at October 29, 2021.

Table of Contents

TABLE OF CONTENTS

CVR PARTNERS, LP - Quarterly Report on Form 10-Q

September 30, 2021

PART I. Financial Information

PART II. Other Information

Condensed Consolidated Balance Sheets - September 30, 2021 and December 31, 2020 (unaudited)

Item 1A.

Risk Factors

Condensed Consolidated Statements of Operations - Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)

Item 5.

Other Information

Condensed Consolidated Statements of Partners’ Capital - Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)

Item 6.

Exhibits

Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2021 and 2020 (unaudited)

Signatures

Notes to the Condensed Consolidated Financial Statements (unaudited)

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

This Quarterly Report on Form 10-Q (including documents incorporated by reference herein) contains statements with respect to our expectations or beliefs as to future events. These types of statements are “forward-looking” and subject to uncertainties. See “Important Information Regarding Forward-Looking Statements” section of this filing.

September 30, 2021 | 2

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Important Information Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements including, but not limited to, those under Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. All statements other than statements of historical fact, including without limitation, statements regarding future operations, financial position, estimated revenues and losses, growth, capital projects, unit repurchases, impacts of legal proceedings, projected costs, prospects, plans, and objectives of management are forward-looking statements. The words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “continue,” “predict,” “potential,” “project,” and similar terms and phrases are intended to identify forward-looking statements.

Although we believe our assumptions concerning future events are reasonable, a number of risks, uncertainties and other factors could cause actual results and trends to differ materially from those projected or forward-looking. Forward-looking statements, as well as certain risks, contingencies, or uncertainties that may impact our forward-looking statements, include, but are not limited to, the following:

•our ability to generate distributable cash or make cash distributions on our common units, including reserves and future uses of cash;

•the ability of our general partner to modify or revoke our distribution policy at any time;

•the volatile nature of our business and the variable nature of our distributions;

•the severity, magnitude, duration, and impact of the novel coronavirus 2019 and any variants thereof (collectively, “COVID-19”) pandemic and of businesses’ and governments’ responses to such pandemic on our operations, personnel, commercial activity, and supply and demand across our and our customers’ and suppliers’ businesses;

•changes in market conditions and market volatility arising from the COVID-19 pandemic, including fertilizer, natural gas, and other commodity prices and the impact of such changes on our operating results and financial position;

•the cyclical and seasonal nature of our business;

•the impact of weather on our business, including our ability to produce, market, sell, transport or deliver fertilizer products profitably or at all, and on commodity supply and/or pricing;

•the dependence of our operations on a few third-party suppliers, including providers of transportation services, and equipment;

•our reliance on, or our ability to procure economically or at all, petroleum coke (“pet coke”) we purchase from CVR Energy, Inc. (together with its subsidiaries, but excluding the Partnership and its subsidiaries, “CVR Energy”) and other third-party suppliers;

•our reliance on the natural gas, electricity, oxygen, nitrogen, sulfur processing, compressed dry air and other products that we purchase from third parties;

•the supply, availability, and prices of essential raw materials;

•our production levels, including the risk of a material decline in those levels, including our ability to upgrade ammonia to UAN;

•product pricing, including contracted sales and our ability to realize market prices, in full or at all;

•accidents or other unscheduled shutdowns or interruptions affecting our facilities, machinery, or equipment, or those of our suppliers or customers;

•potential operating hazards from accidents, fire, severe weather, tornadoes, floods or other natural disasters;

•our ability to obtain, retain, or renew permits, licenses and authorizations to operate our business;

•competition in the nitrogen fertilizer businesses including potential impacts of domestic and global supply and demand; and/or domestic or international duties, tariffs, or similar costs;

•foreign wheat and coarse grain production, including increases thereto and farm planting acreage;

•capital expenditures;

•existing and future laws, rulings and regulations, including but not limited to those relating to the environment, climate change, and/or the transportation or production of hazardous chemicals like ammonia, including potential liabilities or capital requirements arising from such laws, rulings, or regulations;

•alternative energy or fuel sources and impacts on corn prices (ethanol), and the end-use and application of fertilizers;

•risks of terrorism, cybersecurity attacks, the security of chemical manufacturing facilities and other matters beyond our control;

•our lack of asset diversification;

•our dependence on significant customers and the creditworthiness and performance by counterparties;

•our potential loss of transportation cost advantage over our competitors;

•risks associated with third party operation of or control over important facilities necessary for operation of our nitrogen fertilizer facilities;

•the volatile nature of ammonia, potential liability for accidents involving ammonia including damage or injury to persons, property, the environment or human health and increased costs related to the transport or production of ammonia;

•our potential inability to successfully implement our business strategies, including the completion of significant capital programs or projects;

•our reliance on CVR Energy’s senior management team and conflicts of interest they may face operating each of CVR Partners and CVR Energy;

•control of our general partner by CVR Energy;

September 30, 2021 | 3

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•our ability to continue to license the technology used in our operations;

•restrictions in our debt agreements;

•asset impairments and impacts thereof;

•asset useful life;

•realizable inventory value;

•the number of investors willing to hold or acquire our common units;

•our ability to issue securities or obtain financing;

•changes in tax and other law, regulations and policies;

•ability to qualify for and receive the benefit of 45Q tax credits;

•changes in our treatment as a partnership for U.S. federal income or state tax purposes;

•rulings, judgments or settlements in litigation, tax or other legal or regulatory matters;

•instability and volatility in the capital and credit markets;

•competition with CVR Energy and its affiliates;

•transactions and/or conflicts with CVR Energy’s controlling shareholder;

•the value of payouts under our equity and non-equity incentive plans;

•our ability to recover under our insurance policies for damages or losses in full or at all; and

•the factors described in greater detail under “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020 and our other filings with the Securities and Exchange Commission (the “SEC”).

All forward-looking statements included in this Report are based on information available to us on the date of this Report. Except as required by law, we undertake no obligation to revise or update any forward-looking statements as a result of new information, future events or otherwise.

Information About Us

Investors should note that we make available, free of charge on our website at cvrenergy.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. We also post announcements, updates, events, investor information and presentations on our website in addition to copies of all recent news releases. We may use the Investor Relations section of our website to communicate with investors. It is possible that the financial and other information posted there could be deemed to be material information. Documents and information on our website are not incorporated by reference herein.

The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers, including us, that file electronically with the SEC.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CVR PARTNERS, LP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)


(in thousands)	September 30, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	100,669	$	30,559
Accounts receivable	32,928		36,896
Inventories	59,026		42,349
Prepaid expenses and other current assets	3,127		8,410
Total current assets	195,750		118,214
Property, plant, and equipment, net	856,686		897,847


Other long-term assets	15,868		16,819
Total assets	$	1,068,304	$	1,032,880

LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Accounts payable	$	38,807	$	19,544
Accounts payable to affiliates	6,409		5,217
Deferred revenue	33,754		30,631
Other current liabilities	36,219		20,949
Total current liabilities	115,189		76,341
Long-term liabilities:
Long-term debt, net of current portion	625,234		633,942
Other long-term liabilities	15,876		8,356
Total long-term liabilities	641,110		642,298
Commitments and contingencies (See Note 11)
Partners’ capital:
Common unitholders, 10,681,332 and 10,705,710 units issued and outstanding at September 30, 2021 and December 31, 2020, respectively	312,004		314,240
General partner interest	1		1
Total partners’ capital	312,005		314,241
Total liabilities and partners’ capital	$	1,068,304	$	1,032,880

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CVR PARTNERS, LP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per unit data)	2021		2020		2021		2020
Net sales	$	144,715	$	79,482	$	343,660	$	259,654
Operating costs and expenses:
Cost of materials and other	26,114		21,736		69,974		67,675
Direct operating expenses (exclusive of depreciation and amortization)	48,260		38,555		138,626		113,686
Depreciation and amortization	17,406		18,029		52,648		56,997
Cost of sales	91,780		78,320		261,248		238,358
Selling, general and administrative expenses	6,619		4,232		19,310		14,038
Loss on asset disposal	—		39		477		120
Goodwill impairment	—		—		—		40,969
Operating income (loss)	46,316		(3,109)		62,625		(33,831)
Other (expense) income:
Interest expense, net	(11,313)		(15,877)		(50,564)		(47,550)

Other income, net	26		57		4,623		122
Income (loss) before income tax expense	35,029		(18,929)		16,684		(81,259)
Income tax expense	—		23		19		40
Net income (loss)	$	35,029	$	(18,952)	$	16,665	$	(81,299)

Basic and diluted earnings (loss) per unit	$	3.28	$	(1.70)	$	1.56	$	(7.22)
Distributions declared per common unit	$	1.72	$	—	$	1.72	$	—

Weighted-average common units outstanding:
Basic and Diluted	10,681		11,129		10,686		11,258

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CVR PARTNERS, LP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

(unaudited)


	Common Units			General Partner Interest		Total Partners’ Capital
(in thousands, except unit data)	Issued	Amount
Balance at December 31, 2020	10,705,710	$	314,240	$	1	$	314,241



Unit repurchases	(24,378)	(529)		—		(529)
Net loss	—	(25,384)		—		(25,384)
Balance at March 31, 2021	10,681,332	$	288,327	$	1	$	288,328



Net income	—	7,020		—		7,020
Balance at June 30, 2021	10,681,332	$	295,347	$	1	$	295,348
Cash distributions to common unitholders - Affiliates	—	(6,694)		—		(6,694)
Cash distributions to common unitholders - Non-affiliates	—	(11,678)		—		(11,678)

Net income	—	35,029		—		35,029
Balance at September 30, 2021	10,681,332	$	312,004	$	1	$	312,005

Common Units

General
Partner
Interest

Total Partners’ Capital

(in thousands, except unit data)

Issued

Amount

Balance at December 31, 2019

11,328,297