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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
þ

QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended
September 30, 2018
2019
OR
¨

TRANSITION REPORT PURSUANT TOSECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period fromto               .

Commission file number: 001-35120

CVR PARTNERS, LP

CVR Partners, LP
(Exact name of registrant as specified in its charter)
Delaware
uanlogoa21.gif
56-2677689
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
2277 Plaza Drive, Suite 500, Sugar Land, Texas77479
(Address of principal executive offices) (Zip Code)
(281207-3200
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Delaware56-2677689
(State or other jurisdictionTitle of
incorporation or organization)
each class
(I.R.S. Employer
Identification No.)
Trading Symbol(s)
Name of each exchange on which registered
2277 Plaza Drive, Suite 500Common units representing limited partner interests
Sugar Land, Texas
(Address of principal executive offices)
UAN
77479
(Zip Code)
The New York Stock Exchange
(281) 207-3200
(Registrant’s telephone number, including area code)

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. Yesþ     No o


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). Yesþ     No o


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 filero
Accelerated filerþ
Non-accelerated
Non-Accelerated filero

Smaller reporting companyo
Emerging growth companyo 


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. o


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


There were 113,282,973 common units representing limited partner interests of CVR partnersPartners, LP (“common units”) outstanding at October 23, 2018.22, 2019.
 






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TABLE OF CONTENTS
CVR PARTNERS, LP AND SUBSIDIARIES

INDEX TO QUARTERLY REPORT ON FORM- Quarterly Report on Form 10-Q
For The Quarter Ended September 30, 20182019




PART I. Financial Information
  
PART II. Other Information
 
       
 Item 1.
  
  
  
  
  
uanlogoa21.gif
 
 
 

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.


  Page No.
September 30, 2019 | 2

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Important Information Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), 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, impacts of legal proceedings, projected costs, prospects, plans and objectives 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, including but not limited to:

our ability to make cash distributions on our common units;
the ability of our general partner to modify or revoke our distribution policy at any time;
volatile margins in the nitrogen fertilizer industry and exposure to risks associated with the pricing and availability of feedstocks, pet coke, utilities, urea ammonium nitrate (“UAN”), ammonia, natural gas and other products;
the availability of adequate cash, credit and other sources of liquidity including volatility in the capital and credit markets and changes to our capital requirements;
changes in the expected value of, benefits derived from, and our ability to successfully implement, business strategies, transactions, turnarounds, maintenance and capital projects;
changes in (and in the application of) local, state and federal laws, rules, regulations and policies, including with respect to environmental matters (including climate change), health and safety, exports, transportation (including pipeline and trucking transportation), the end-use and application of fertilizers and taxes (including the tax status of CVR Partners);
changes in economic conditions impacting our business and the business of our suppliers, customers, counterparties and lenders;
interruption of or changes in the cost, availability or regulation of pipelines, vessels, trucks and other means of transporting feedstocks, pet coke, UAN, ammonia and other products relating to our business;
changes in competition in the nitrogen fertilizer business including to our competitive advantages;
the cyclical and/or seasonal nature of the nitrogen fertilizer business;
weather conditions, fires, tornadoes, floods or other natural disasters affecting our operations or the areas in which our feedstocks and fertilizers are marketed or sold;
risks associated with governmental policies affecting the agricultural industry;
direct or indirect effects from actual or threatened terrorist incidents, security or cyber-security breaches or acts of war;
dependence on significant customers and suppliers and the creditworthiness and performance by counterparties;
our ability to license the technology used in or secure permits required for our operations;
adverse rulings, judgments or settlements in litigation or other legal or tax matters, including unexpected environmental remediation costs in excess of any reserves;
competition with CVR Energy, Inc. and its affiliates (“CVR Energy”), control of our general partner by CVR Energy and our reliance on CVR Energy’s senior management team including conflicts of interest they face operating each of CVR Partners and CVR Energy;
operating hazards and interruptions or production declines, including unscheduled maintenance or downtime and the availability and recoverability of adequate insurance coverage; 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, 2018 and our other filings with the Securities and Exchange Commission.

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.

September 30, 2019 | 3

Condensed Consolidated Balance Sheets - September 30, 2018 and December 31, 2017
3
Condensed Consolidated Statements of Operations - Three and Nine Months Ended September 30, 2018 and 2017
4
Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2018 and 2017
5
Notes to the Condensed Consolidated Financial Statements - September 30, 2018
6
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
14
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
24
Item 4.
Controls and Procedures
24
Part II. Other Information
Item 1.
Legal Proceedings
25
Item 1A.
Risk Factors
25
Item 5.
Other Information
25
Item 6.
Exhibits
26
Signatures
27

Table of Contents


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements


CVR PARTNERS, LP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(In thousands)September 30, 2018 December 31, 2017
(in thousands)September 30, 2019 December 31, 2018
ASSETS
Current assets:      
Cash and cash equivalents$61,441
 $49,173
$83,667
 $61,776
Accounts receivable, net of allowance for doubtful accounts20,564
 9,855
Accounts receivable14,909
 61,662
Inventories56,905
 54,097
56,864
 63,554
Prepaid expenses and other current assets4,817
 5,793
4,608
 6,989
Total current assets143,727
 118,918
160,048
 193,981
Property, plant, and equipment, net of accumulated depreciation1,029,402
 1,069,526
Property, plant, and equipment, net964,502
 1,015,240
Goodwill40,969
 40,969
40,969
 40,969
Other long-term assets4,414
 4,863
14,803
 4,198
Total assets$1,218,512
 $1,234,276
$1,180,322
 $1,254,388
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:      
Accounts payable$20,019
 $21,295
$29,389
 $26,789
Accounts payable to Affiliates2,170
 2,223
Accrued expenses and other current liabilities64,015
 32,577
Accounts payable to affiliates2,131
 2,976
Deferred revenue16,448
 68,804
Other current liabilities36,687
 24,066
Total current liabilities86,204
 56,095
84,655
 122,635
Long-term liabilities:   
Long-term debt, net of current portion628,192
 625,904
Long-term debt631,520
 628,989
Other long-term liabilities2,919
 2,424
11,791
 2,938
Total long-term liabilities631,111
 628,328
643,311
 631,927
Commitments and contingencies (see Note 9)

 

Partners’ capital501,197
 549,853
Commitments and contingencies (see Note 11)


 


Partners’ capital:   
Common unitholders, 113,282,973 units issued and outstanding at September 30, 2019 and December 31, 2018452,355
 499,825
General partner interest1
 1
Total partners’ capital452,356
 499,826
Total liabilities and partners’ capital$1,218,512
 $1,234,276
$1,180,322
 $1,254,388


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

September 30, 2019 | 4

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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,Three Months Ended
September 30,
 Nine Months Ended
September 30,
(In thousands, except per unit data)2018 2017 2018 2017
(in thousands, except unit data)2019 2018 2019 2018
Net sales$79,909
 $69,393
 $252,965
 $252,610
$88,582
 $79,909
 $318,115
 $252,965
Operating costs and expenses:              
Cost of materials and other19,590
 19,495
 61,198
 63,373
21,617
 19,590
 71,347
 61,198
Direct operating expenses (exclusive of depreciation and amortization)35,334
 40,249
 121,468
 113,941
47,554
 35,334
 128,004
 121,468
Depreciation and amortization16,035
 19,483
 52,866
 54,877
18,418
 16,035
 60,032
 52,866
Cost of sales70,959
 79,227
 235,532
 232,191
87,589
 70,959
 259,383
 235,532
Selling, general and administrative expenses6,393
 6,083
 18,955
 18,750
6,326
 6,393
 19,637
 18,955
Loss on asset disposals28
 19
 160
 58
2,184
 28
 2,629
 160
Operating income (loss)2,529
 (15,936) (1,682) 1,611
Operating (loss) income(7,517) 2,529
 36,466
 (1,682)
Other (expense) income:       
Interest expense, net(15,693) (15,723) (47,080) (47,111)(15,621) (15,693) (46,870) (47,080)
Other income, net30
 22
 100
 81
174
 30
 229
 100
Loss before income tax(13,134) (31,637) (48,662) (45,419)
Net loss before income taxes(22,964) (13,134) (10,175) (48,662)
Income tax expense (benefit)12
 (35) (6) (36)12
 12
 (88) (6)
Net loss$(13,146) $(31,602) $(48,656) $(45,383)$(22,976) $(13,146) $(10,087) $(48,656)
              
Net loss per common unit — basic and diluted$(0.12) $(0.28) $(0.43) $(0.40)
Weighted-average common units outstanding — basic and diluted113,283
 113,283
 113,283
 113,283
Basic and diluted loss per unit data$(0.20) $(0.12) $(0.09) $(0.43)
Distributions declared per unit$0.14
 $
 $0.33
 $
       
Weighted-average common units outstanding:       
Basic and Diluted113,283
 113,283
 113,283
 113,283


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 CASH FLOWSPARTNERS’ CAPITAL
(unaudited)
 Nine Months Ended September 30,
(In thousands)2018 2017
Cash flows from operating activities:   
Net loss$(48,656) $(45,383)
Adjustments to reconcile net loss to net cash provided by operating activities:   
Depreciation and amortization52,866
 54,877
Share-based compensation2,695
 1,748
Other non-cash items2,640
 2,314
Change in assets and liabilities:   
Current assets and liabilities16,490
 14,272
Non-current assets and liabilities1,083
 276
Net cash provided by operating activities27,118
 28,104
Cash flows from investing activities:   
Capital expenditures(15,022) (11,456)
Proceeds from sale of assets172
 
Net cash used in investing activities(14,850) (11,456)
Cash flows from financing activities:   
Cash distributions to common unitholders – Affiliates
 (778)
Cash distributions to common unitholders – Non-affiliates
 (1,488)
Net cash used in financing activities
 (2,266)
Net increase in cash and cash equivalents12,268
 14,382
Cash and cash equivalents, beginning of period49,173
 55,595
Cash and cash equivalents, end of period$61,441
 $69,977
 Common Units  
General
Partner
Interest
 Total Partners’ Capital
(in thousands, except unit data)Issued Amount 
Balance at December 31, 2018113,282,973
 $499,825
 $1
 $499,826
Cash distributions to common unitholders - Affiliates
 (4,670) 
 (4,670)
Cash distributions to common unitholders - Non-affiliates
 (8,924) 
 (8,924)
Net loss
 (6,079) 
 (6,079)
Balance at March 31, 2019113,282,973
 $480,152
 $1
 $480,153
Cash distributions to common unitholders - Affiliates
 (2,724) 
 (2,724)
Cash distributions to common unitholders - Non-affiliates
 (5,205) 
 (5,205)
Net income
 18,968
 
 18,968
Balance at June 30, 2019113,282,973
 $491,191
 $1
 $491,192
Cash distributions to common unitholders - Affiliates
 (5,449) 
 (5,449)
Cash distributions to common unitholders - Non-affiliates
 (10,411) 
 (10,411)
Net loss
 (22,976) 
 (22,976)
Balance at September 30, 2019113,282,973
 $452,355
 $1
 $452,356


 Common Units  General
Partner
Interest
 Total Partners’ Capital
(in thousands, except unit data)Issued Amount 
Balance at December 31, 2017113,282,973
 $549,852
 $1
 $549,853
Net loss
 (19,051) 
 (19,051)
Balance at March 31, 2018113,282,973
 $530,801
 $1
 $530,802
Net loss
 (16,459) 
 (16,459)
Balance at June 30, 2018113,282,973
 $514,342
 $1
 $514,343
Net loss
 (13,146) 
 (13,146)
Balance at September 30, 2018113,282,973
 $501,196
 $1
 $501,197

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





September 30, 2019 | 6

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CVR PARTNERS, LP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 Nine Months Ended September 30,
(in thousands)2019 2018
Cash flows from operating activities:   
Net loss$(10,087) $(48,656)
Adjustments to reconcile net loss to net cash provided by operating activities:   
Depreciation and amortization60,032
 52,866
Share-based compensation2,970
 2,695
Other adjustments5,256
 2,640
Change in assets and liabilities:   
Current assets and liabilities9,283
 16,490
Non-current assets and liabilities1,218
 1,083
Net cash provided by operating activities68,672
 27,118
Cash flows from investing activities:   
Capital expenditures(9,487) (15,022)
Proceeds from sale of assets89
 172
Net cash used in investing activities(9,398) (14,850)
Cash flows from financing activities:   
Cash distributions to common unitholders - Affiliates(12,843) 
Cash distributions to common unitholders - Non-affiliates(24,540) 
Net cash used in financing activities(37,383) 
Net increase in cash and cash equivalents21,891
 12,268
Cash and cash equivalents, beginning of period61,776
 49,173
Cash and cash equivalents, end of period$83,667
 $61,441

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


September 30, 2019 | 7

Table of Contents

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)






(1) Organization and Nature of Business


CVR Partners, LP (referred to as “CVR Partners” or the “Partnership”) is a Delaware limited partnership formed by CVR Energy, Inc. (“CVR(together with its subsidiaries, but excluding the Partnership and its subsidiaries, “CVR Energy”) to own, operate and grow its nitrogen fertilizer business. CVR Energy is a publicly traded company listedThe Partnership produces nitrogen fertilizer products at 2 manufacturing facilities, which are located in Coffeyville, Kansas (the “Coffeyville Facility”) and East Dubuque, Illinois (the “East Dubuque Facility”). The Coffeyville Facility sells and distributes products to destinations located principally on the New York Stock Exchange underUnion Pacific railroad, the ticker symbol “CVI”BNSF Railway railroad, or as direct shipments to customers, while the East Dubuque Facility primarily sells to customers located within 200 miles of the facility. As used in these financial statements, references to CVR Partners, the Partnership, “we”, which indirectly owns our general partner“us”, and “our” may refer to consolidated subsidiaries of CVR Partners or one or both of the common units owned by Coffeyville Resources, LLC (“CRLLC”). facilities, as the context may require.

As of September 30, 2018,2019, public security holders held approximately 66% of the Partnership’s outstanding limited partner interests and CRLLC,Coffeyville Resources, LLC (“CRLLC”), a wholly-owned subsidiary of CVR Energy, held approximately 34% of the Partnership’s outstanding limited partner interests and 100% of the noneconomicPartnership’s general partner interest.interest is held by CVR GP, LLC (“CVR GP” or the “general partner”), a wholly owned subsidiary of CVR Energy. As of September 30, 2018,2019, Icahn Enterprises L.P. (“IEP”) and its affiliates owned approximately 71% of the sharescommon stock of CVR Energy.

The Partnership produces nitrogen fertilizer products at two manufacturing facilities, which are located in Coffeyville, Kansas (the “Coffeyville Facility”) and East Dubuque, Illinois (the “East Dubuque Facility”). Both facilities manufacture ammonia and are able to further upgrade to other nitrogen fertilizer products, principally urea ammonium nitrate (“UAN”). Nitrogen fertilizer is used by farmers to improve the yield and quality of their crops, primarily corn and wheat. Ammonia is a direct application fertilizer and is primarily used as a building block for other nitrogen products for industrial applications and finished fertilizer products. UAN is an aqueous solution of urea and ammonium nitrate. The Partnership’s products are sold on a wholesale basis in North America.


Management and Operations


The Partnership, including CVR GP, LLC (“is party to a number of agreements with CVR GP” orEnergy and its subsidiaries to manage certain business relationships between the “general partner”)Partnership and the other parties thereto. The various rights and responsibilities of the Partnership, and its partners, are set forth in the Partnership’s limited partnership agreement and, as applicable, those agreements with CVR Energy. CVR GP manages and operates the Partnership and is a wholly-owned subsidiary of CRLLC. Common unitholders have only limited voting rights on matters affecting the Partnership. In addition, common unitholders have no right to elect the general partner’s directors on an annual or continuing basis.

The Partnership is operated byvia a combination of the general partner’s senior management team and CVR Energy’s senior management team pursuant to a services agreement among CVR Energy, CVR GP and the Partnership. The variousSee Note 13 (“Related Party Transactions”) for further discussion. Common unitholders have limited voting rights and responsibilities of the Partnership’s partners are set forth in the limited partnership agreement. The Partnership is also party to a number of agreements with CVR Energy, CVR Refining, LP (“CVR Refining”), an indirect subsidiary of CVR Energy, and CVR GP to regulate certain business relations betweenon matters affecting the Partnership and have no right to elect the other parties thereto. The Partnership also has agreements with a subsidiary of CVR Refining under which the Partnership purchases petroleum coke and hydrogen for the Coffeyville Facility. Additionally, the two parties provide feedstock and other services to one another at the Coffeyville Facility. See Note 12 ("Related Party Transactions") for further discussion.general partner’s directors on an annual or continuing basis.


(2) Basis of Presentation


The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”). These condensed consolidated financial statements should be read in conjunction with the December 31, 20172018 audited consolidated financial statements and notes thereto included in CVR Partners’ Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on February 23, 2018 (the “2017“2018 Form 10-K”).


In the opinion of the Partnership’s management, the accompanying condensed consolidated financial statements reflect all adjustments that are necessary to fairly presentfor fair presentation of the financial position of the Partnership as of September 30, 2018 and December 31, 2017, the results of operations of the Partnership for the three and nine month periods ended September 30, 2018 and 2017 and the cash flows of the Partnership for the nine month periods ended September 30, 2018 and 2017.presented. Such adjustments are of a normal recurring nature, unless otherwise disclosed.

Certain information hasreclassifications have been reclassifiedmade within the condensed consolidated statements of operations for the three and nine months ended September 30, 2018 to present historical information in a manner consistentconform with current presentation.


The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. Results of operations and cash flows for the interim periods presented are not necessarily indicative of the results that will be realized for the year ending December 31, 20182019 or any other interim or annual period.
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)


Planned Major Maintenance Costs

The Coffeyville Facility completed a 15-day major scheduled turnaround in the second quarter of 2018. Exclusive of the impacts due to the lost production, costs of approximately $0.0 million and $6.4 million were included in direct operating expenses (exclusive of depreciation and amortization) in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2018, respectively. During the third quarter of 2017, the East Dubuque Facility completed a major schedule turnaround. Exclusive of the impacts due to lost production, costs of approximately $2.5 million and $2.6 million were included in direct operating expenses (exclusive of depreciation and amortization) in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2017, respectively.


(3) Recent Accounting Pronouncements


Recent Accounting Pronouncement - Adoption of New RevenueLease Standard


On January 1, 2018, the Partnership adoptedIn February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards CodificationStandard Update (“ASC”ASU”) Topic 606, “Revenue from Contracts with Customers” (“ASC 606” or the “new revenue standard”) using the modified retrospective method applied to contracts which were not completed as of January 1, 2018. The new revenue standard was applied prospectively and the comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Partnership did not identify any material differences in its existing revenue recognition methods that require modification under the new revenue standard. However, the Partnership did identify a balance sheet presentation change discussed below. The Partnership’s Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Cash Flows were not impacted due to the adoption of ASC 606 for the nine months ended September 30, 2018.

The Partnership identified a balance sheet presentation change associated with contracts requiring customer prepayment prior to delivery. Prior to adoption of ASC 606, deferred revenue, a type of contract liability, was recorded upon customer prepayment. Under the new revenue standard, a receivable and associated deferred revenue is recorded at the point in time in which a prepaid contract is legally enforceable and the associated right to consideration is unconditional. The adoption of the new revenue standard resulted in a $21.4 million increase to deferred revenue and accounts receivable as of January 1, 2018. After the effect of adoption of the new revenue standard, deferred revenue and accounts receivable were $34.3 million and $31.2 million, respectively, as of January 1, 2018.

The following table displays the effect of the adoption of ASC 606 to the Condensed Consolidated Balance Sheet as of September 30, 2018:
 September 30, 2018
(In thousands)As Reported Balances without adoption of ASC 606 Effect of Change
Assets     
Accounts receivable$20,564
 $13,791
 $6,773
Liabilities     
Deferred revenue$31,611
 $24,838
 $6,773

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)

New Accounting Standards Issued But Not Yet Implemented

In February 2016, the FASB issued ASU No. 2016-02, “Leases” (“ASU 2016-02”), creating a new topic, FASB ASC Topic 842, “Leases” (“Topic 842842”), which supersedes lease requirements in FASB ASC Topic 840, Leases”.Leases.” The new standard revises accounting for operating leases by a lessee,

September 30, 2019 | 8

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

among other changes, and requires a lessee to recognize a liability related to future lease payments and ana right-of-use (“ROU”) asset representing its right to use of the underlying asset for the lease term on the balance sheet. QuantitativeThe ROU asset is classified as Other long-term assets on the condensed consolidated balance sheet. The current and qualitative disclosures, including disclosures regarding significant judgments made by management, will be required. In July 2018,long-term lease liabilities are classified as Other current liabilities and Other long-term liabilities, respectively, on the FASB issued updated guidance which provides entities with an additionalcondensed consolidated balance sheet.
We adopted Topic 842 as of January 1, 2019, electing the option to apply the transition method to adopt Topic 842. Under the new transition method, an entity initially applies the new leases standardprovisions at the adoption date versus at the beginninginstead of the earliest comparative period presented and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Partnership expects to elect this transition method atfinancial statements. In connection with the adoption date of January 1, 2019.  The Partnership also plans to electTopic 842, we made the following elections:

Under the short-term lease exception provided for in the standard and therefore willTopic 842, only recognize right-of-useROU assets and the related lease liabilities for leases with aan initial term greater than one year. year were recognized;
The Partnership continuesaccounting treatment for existing land easements was carried forward;
Lease and non-lease components were not, and will not, be bifurcated for all of the Partnership’s asset groups; and
The portfolio approach was, and will continue to focus its implementation efforts on accounting policybe, used in the selection of the discount rate used to calculate minimum lease payments and disclosure updates along with the system implementation necessary to meet the standard’s requirements. Based on information available to date, the Partnership estimates therelated ROU asset and operating lease rightliability amounts.

The adoption of use asset and lease liability may approximate $13.0 - $17.0 million upon adoption. This preliminary estimate of the effect on the Partnership’s Consolidated Balance Sheets as a result of implementing the standardTopic 842 on January 1, 2019 could differ materially dependingincrementally impacted the Partnership’s condensed consolidated balance sheet as of that date. The following presents the financial statement line items impacted by the Partnership’s Topic 842 adoption.

Effect of Topic 842 Adoption on guidance changes fromthe Condensed Consolidated Balance Sheet as of January 1, 2019
(in thousands)
December 31, 2018
As Stated
 
Effect of Adoption of
Topic 842 - Leases (Unaudited)
 
January 1, 2019
As Adjusted
Current assets:     
Prepaid expenses and other current assets$6,989
 $(2,650)(1)$4,339
     Total currents assets193,981
 (2,650) 191,331
Other long-term assets4,198
 16,923
(2)21,121
Total assets$1,254,388
 $14,273
 $1,268,661
Current liabilities:     
Other current liabilities$24,066
 $3,462
(3)$27,528
Total current liabilities122,635
 3,462
 126,097
Long-term liabilities:     
Other long-term liabilities2,938
 10,811
(3)13,749
Total long-term liabilities631,927
 10,811
 642,738
Equity:     
Total liabilities and partners’ capital$1,254,388
 $14,273
 $1,268,661
(1)Represents lease prepayments reclassified to ROU assets.
(2)Represents recognition of initial ROU assets for operating leases, including the reclassification of certain lease prepayments.
(3)Represents the initial recognition of lease liabilities.

New Accounting Standards Issued But Not Yet Implemented

In August 2018, the FASB changes in outstanding leases, final verificationissued ASU 2018-13, Fair Value Measurement (Topic 820). The ASU eliminates such disclosures as the amount of, and reasons for, transfers between Level 1 and Level 2 of the Partnership’s lease accounting estimates,fair value hierarchy. Certain disclosures are required to be applied on a retrospective basis and any changes inothers on a prospective basis. This ASU is effective for the Partnership’s plans to elect certain practical expedients.Partnership beginning January 1, 2020, with early adoption permitted. The Partnership is evaluating the effect of adopting this ASU, but does not currently expect the adoption of this standard towill have a material impact on the recognition, measurement or presentation of amounts within the Condensed Consolidated Statements of Operations and the Condensed Consolidated Statements of Cash Flows.Partnership’s disclosures.


In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40). This ASU addresses customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service

September 30, 2019 | 9

Table of Contents

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

contract and also adds certain disclosure requirements related to implementation costs incurred for internal-use software and cloud computing arrangements. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This standard is effective for the Partnership beginning January 1, 2020 with early adoption permitted. The amendments in this standard can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Partnership is evaluating the effect of adopting this new accounting guidance on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820). The ASU eliminates such disclosures as the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy. Certain disclosures are required to be applied on a retrospective basis and others on a prospective basis. This standard is effective for the Partnership beginning January 1, 2020, with early adoption permitted. The Partnership is evaluating the effect of adopting this new accounting guidance,statements, but does not currently expect adoption will have a material impact on the Partnership's disclosures.Partnership’s consolidated financial position or results of operations. 


(4) Inventories


Inventories consisted of the following:
(in thousands)September 30, 2019 December 31, 2018
Finished goods$19,919
 $25,136
Raw materials362
 439
Parts, supplies and other36,583
 37,979
Total inventories$56,864
 $63,554


(5) Property, Plant and Equipment

Property, plant and equipment consisted of the following:
(in thousands)September 30, 2019 December 31, 2018
Machinery and equipment$1,360,019
 $1,362,965
Buildings and improvements17,116
 17,116
Automotive equipment16,719
 16,773
Land and improvements13,751
 13,250
Construction in progress17,299
 15,126
Other1,654
 2,753
 1,426,558
 1,427,983
Less: Accumulated depreciation462,056
 412,743
Total property, plant and equipment, net$964,502
 $1,015,240

On October 22, 2019, the Audit Committee of CVR Energy and the Conflicts Committee of the Board of Directors of the general partner of CVR Partners each agreed to authorize the exchange of certain parcels of property owned by subsidiaries of CVR Energy with an equal number of parcels owned by subsidiaries of CVR Partners, all located in Coffeyville, Kansas (the “Property Swap”). This Property Swap will enable each such subsidiary to create a more usable contiguous parcel of land near its own operating footprint. The Partnership will account for this transaction in accordance with the ASC 805-50 guidance on transferring assets between entities under common control.

(6) Leases

Lease Overview

We lease railcars and certain facilities to support the Partnership’s operations. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to 20 years or more. The exercise of lease renewal options is at our sole discretion. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Certain of our lease agreements include rental payments which are adjusted periodically for factors such as inflation. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Additionally, we do not have any material lessor or sub-leasing arrangements.


(In thousands)September 30, 2018 December 31, 2017
Raw materials and precious metals$5,362
 $6,333
Finished goods19,911
 13,594
Parts and supplies31,632
 34,170
Total inventories$56,905
 $54,097
September 30, 2019 | 10




NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)


(5) Property, PlantEffect of Initial Adoption of New Lease Standard - January 1, 2019

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

(in thousands)
January 1, 2019
(initial recognition)
Railcar leases$14,255
Real Estate and other leases18
Total ROU assets$14,273


Lease Liabilities. Upon initial recognition, our lease liabilities for operating and finance leases were comprised of the following:
(in thousands)
January 1, 2019
(initial recognition)
Current liabilities: 
Operating leases$3,462
Long-term liabilities: 
Operating leases10,811
Total lease liabilities$14,273


Balance Sheet Summary for the Period Ended September 30, 2019

The following tables summarize the ROU asset and lease liability balances for the Partnership’s operating and finance leases at September 30, 2019:
(In thousands)September 30, 2018 December 31, 2017
Land and improvements$13,092
 $13,092
Buildings and improvements16,707
 16,990
Machinery and equipment1,362,014
 1,352,573
Other31,411
 28,101
 1,423,224
 1,410,756
Less: Accumulated depreciation393,822
 341,230
Total property, plant and equipment, net$1,029,402
 $1,069,526
(in thousands)September 30, 2019
Operating Leases: 
ROU asset, net 
Railcars$11,454
Real estate and other2,396
Lease liability 
Railcars$11,666
  
Financing Leases: 
ROU asset, net 
Real estate and other$226
Lease liability 
Real estate and other$229


Capitalized interest recognized as a reduction in interest expense was $0.1 million and $0.0 million for the three months ended
September 30, 2018 and 2017, respectively. Capitalized interest recognized as a reduction in interest expense was $0.5 million and $0.2 million for the nine months ended September 30, 2018 and 2017, respectively.

(6) Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities were as follows:
2019 | 11
(In thousands)September 30, 2018 December 31, 2017
Deferred revenue$31,611
 $12,895
Share-based compensation3,077
 3,928
Personnel accruals6,520
 7,533
Accrued interest17,635
 2,683
Other accrued expenses and liabilities5,172
 5,538
Total accrued expenses and other current liabilities$64,015
 $32,577

Accrued expenses and other current liabilities include amounts owed by the Partnership to CVR Energy under the shared services agreement and affiliate balances of $3.8 million and $4.7 million at September 30, 2018 and December 31, 2017, respectively. Refer to Note 12 ("Related Party Transactions") for additional discussion.

(7) Debt

Debt Balance, Net of Current Maturities and Unamortized Discount and Issuance Costs   
(In thousands)September 30, 2018 December 31, 2017
9.250% senior secured notes, due 2023$645,000
 $645,000
6.500% notes, due 20212,240
 2,240
Total long-term debt, before debt issuance costs and discount (a)647,240
 647,240
Less:   
Unamortized discount and debt issuance costs19,048
 21,336
Total long-term debt, net of current portion$628,192
 $625,904



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)


Lease Expense Summary for the Three and Nine months ended September 30, 2019

We recognize lease expense on a straight-line basis over the lease term. For the three and nine months ended September 30, 2019, we recognized lease expense comprised of the following components:
(in thousands)Three Months Ended
September 30, 2019
 Nine Months Ended
September 30, 2019
Operating lease expense$1,023
 $3,069
Financing lease expense:   
Amortization of ROU asset$25
 $297
Interest expense on lease liability2
 17


Short-term lease expense, recognized within direct operating expenses, was $0.2 million and $0.3 million for the three and nine months ended September 30, 2019, respectively.

Lease Terms and Discount Rates

The following outlines the remaining lease terms and discount rates used in the measurement of the Partnership’s ROU assets and liabilities:
 September 30, 2019 
January 1, 2019
(initial recognition)
Weighted-average remaining lease term (years)   
Operating Leases3.7
 4.3
Finance Leases2.5
 0.5
Weighted-average discount rate   
Operating Leases5.1% 5.1%
Finance Leases3.9% 8.0%


Maturities of Lease Liabilities

The following summarizes the remaining minimum lease payments through maturity of the Partnership’s ROU assets and liabilities at September 30, 2019:
(in thousands)Operating Leases Financing Leases
Remainder of 2019$1,023
 $27
20203,602
 107
20213,430
 107
20222,990
 
20231,133
 
Thereafter648
 
Total lease payments12,826
 241
Less: imputed interest(1,160) (12)
Total lease liability$11,666
 $229



September 30, 2019 | 12


NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(7) Other Current Liabilities

Other current liabilities consisted of the following:
(in thousands)September 30, 2019 December 31, 2018
Accrued interest$17,470
 $2,516
Personnel accruals7,099
 7,993
Share-based compensation4,959
 2,667
Operating lease liabilities3,220
 
Sales incentives613
 1,727
Prepaid revenue contracts459
 5,863
Other accrued expenses and liabilities2,867
 3,300
Total other current liabilities$36,687
 $24,066


Other current liabilities include amounts accrued by the Partnership and owed to CVR Energy and its affiliates of $4.7 million and $3.5 million at September 30, 2019 and December 31, 2018, respectively. See Note 13 (“Related Party Transactions”) for additional discussion.

(8) Long-Term Debt

Long-term debt consists of the following:
(in thousands)September 30, 2019 December 31, 2018
9.25% Senior Secured Notes, due 2023 (1)$645,000
 $645,000
6.50% Notes, due 20212,240
 2,240
Unamortized discount and debt issuance costs(15,720) (18,251)
Total long-term debt$631,520
 $628,989



(a)(1)The estimated fair value of total long-term debt outstanding was approximately $683.7$672.4 million and $694.2$670.8 million as of September 30, 20182019 and December 31, 2017,2018, respectively.


Credit Facility
Credit Facilities Outstanding         
(In thousands)Total Capacity Amount Borrowed as of September 30, 2018 Outstanding Letters of Credit Available Capacity as of September 30, 2018 Maturity Date
Asset based credit facility (b)$50,000
 $
 $
 $50,000
��September 30, 2021
(in thousands)Total Capacity Amount Borrowed as of September 30, 2019 Outstanding Letters of Credit Available Capacity as of September 30, 2019 Maturity Date
Asset Based (“AB”) Credit Facility (2)$47,517
 $
 $
 $47,517
 September 30, 2021
 
(b)(2)At the option of the borrowers, loans under the asset based credit facilityAB Credit Facility initially bear interest at an annual rate equal to (i) 2.00% plus LIBOR or (ii) 1.00% plus a base rate, subject to a 0.50% step-down based on the previous quarter’s excess availability.


Covenant Compliance

The Partnership is in compliance with all covenants of the asset based credit facilityAB Credit Facility, the 9.25% Senior Secured Notes, and the 9.250% senior secured notes and 6.500% notes6.50% Notes as of September 30, 2018.2019.



September 30, 2019 | 13

(8) Supplemental Cash Flow Information

Cash flows related to interest and construction in process were as follows:

 Nine Months Ended September 30,
(In thousands)2018 2017
Supplemental disclosures:   
Cash paid for interest$30,244
 $30,123
Non-cash investing and financing activities:   
Construction in process additions included in accounts payable1,920
 608
Change in accounts payable related to construction in process additions1,032
 (3,263)

(9) Commitments and Contingencies

There have been no material changes in the Partnership’s commitments and contingencies disclosed in the 2017 Form 10-K. In the ordinary course of business, the Partnership may become party to lawsuits, administrative proceedings and governmental investigations, including environmental, regulatory and other matters. The outcome of these matters cannot always be predicted accurately, but the Partnership accrues liabilities for these matters if the Partnership has determined that it is probable a loss has been incurred and the loss can be reasonably estimated. While it is not possible to predict the outcome of such proceedings, if one or more of them were decided against us, the Partnership believes there would be no material impact on its consolidated financial statements.

In 2018, the Partnership submitted a business interruption claim for losses under its insurance policies, related to damage and resulting reduced equipment production rates experienced during the second half of 2017 and early 2018. At this time, the Partnership cannot estimate either the outcome of this claim or the timing of any potential recoveries.

In September 2018, the Kansas Court of Appeals upheld property tax determinations by the Kansas Board of Tax Appeals in connection with the Partnership’s dispute with Montgomery County, Kansas over prior year property tax payments as previously disclosed. The Partnership continues to monitor this matter.



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)


(10)(9) Revenue


The following table presents the Partnership’s revenue, disaggregated by major product:
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
(in thousands)2019 2018 2019 2018
Ammonia$11,110
 $11,391
 $74,416
 $51,361
UAN61,970
 52,681
 199,576
 156,838
Urea products4,575
 4,987
 14,251
 14,834
Net sales, exclusive of freight and other77,655
 69,059
 288,243
 223,033
Freight revenue8,752
 8,805
 23,909
 23,908
Other revenue2,175
 2,045
 5,963
 6,024
Net sales$88,582
 $79,909
 $318,115
 $252,965

(In thousands)Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018
Ammonia$11,391
 $51,361
UAN52,681
 156,838
Urea products4,987
 14,834
Fertilizer sales, exclusive of freight69,059
 223,033
Freight revenue8,805
 23,908
Other revenue2,045
 6,024
Total net sales$79,909
 $252,965


The Partnership sells its products, on a wholesale basis, under a contract or by purchase order. The Partnership’s contracts with customers including purchase orders, generally contain fixed pricing and most have terms of less than one year. The Partnership recognizes revenue at the point in time at which the customer obtains control of the product, which is generally upon delivery and acceptance by the customer. The customer acceptance point is stated in the contract and may be at one of the Partnership’s manufacturing facilities, at one of the Partnership’s off-site loading facilities or at the customer’s designated facility. Freight revenue recognized by the Partnership represents the pass-through finished goods delivery costs incurred prior to customer acceptance and is reimbursed by customers. An offsetting expense for freight is included in costCost of materials and other. Qualifying taxes collected from customers and remitted to governmental authorities are not included in reported revenues.


Depending on the product sold and the type of contract, payments from customers are generally either due prior to delivery or within 15 to 30 days of product delivery.


The Partnership generally provides no warranty other than the implicit promise that goods delivered are free of liens and encumbrances and meet the agreed upon specifications. Product returns are rare, and as such, the Partnership does not record a specific warranty reserve or consider activities related to such warranty, if any, to be a separate performance obligation.


The Partnership has an immaterial amount of variable consideration for contracts with an original duration of less than a year. A small portion of the Partnership’s revenue includes contracts extending beyond one year, some of which contain variable pricing in which the majority of the variability is attributed to the market-based pricing. The Partnership’s contracts do not contain a significant financing component.


The Partnership has an immaterial amount of fee-based revenue, included in other revenue in the table above, that is recognized based on the net amount of the proceeds received.


Transaction price allocated to remaining performance obligations


As of September 30, 2018,2019, the Partnership had approximately $11.9$7.3 million of remaining performance obligations for contracts with an original expected duration of more than one year. The Partnership expects to recognize approximately 51%20% of these performance obligations as revenue by the end of 2019, an additional 25% by40% in 2020, and the remaining balance thereafter. The Partnership has elected to not disclose the amount of transaction price allocated to remaining performance obligations for contracts with an original expected duration of less than one year. The Partnership has elected to not disclose variable consideration allocated to wholly unsatisfied performance obligations that are based on market prices that have not yet been determined.


Contract balances


The Partnership’s deferred revenue is a contract liability that primarily relates to fertilizer sales contracts requiring customer prepayment prior to product delivery to guarantee a price and supply of nitrogen fertilizer. Deferred revenue is recorded at the point in time in which a prepaid contract is legally enforceable and the associated right to consideration is unconditional prior to transferring

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)

product to the customer. An associated receivable is recorded for uncollected prepaid contract amounts. Contracts

September 30, 2019 | 14


NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

requiring prepayment are generally short-term in nature and, as discussed above, revenue is recognized at the point in time in which the customer obtains control of the product. At September 30, 2019, $0.4 million of the deferred revenue balance pertained to prepaid contracts where the associated receivable was recognized as it had not yet been collected by the Partnership.


A summary of the deferred revenue activity duringfor the nine months ended September 30, 20182019 is presented below:
(in thousands) 
Balance at December 31, 2018$68,804
Add: 
New prepay contracts entered into during the period (1)24,121
Less: 
Revenue recognized that was included in the contract liability balance at the beginning of the period67,823
Revenue recognized related to contracts entered into during the period8,174
Other changes480
Balance at September 30, 2019$16,448

(In thousands)Nine Months Ended September 30, 2018
Balance at January 1, 2018$34,270
Add: 
New prepay contracts entered into during the period35,665
Less: 
Revenue recognized that was included in the contract liability balance at the beginning of the period33,761
Revenue recognized related to contracts entered into during the period4,321
Other changes242
Balance at September 30, 2018$31,611

(1) Includes $23.7 million where payment associated with prepaid contracts was collected.

(11)(10) Share-Based Compensation


A summary of compensation expense duringfor the three and nine months ended September 30, 20182019 and 20172018 is presented below:
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
(in thousands)2019 2018 2019 2018
Phantom Units$544
 $710
 $2,089
 $1,663
Other Awards (1)
208
 486
 881
 1,032
Total share-based compensation expense$752
 $1,196
 $2,970
 $2,695


(1)Other awards include the allocation of compensation expense for certain employees of CVR Energy and certain of its subsidiaries who perform services for the Partnership under the services agreement with CVR Energy and the Limited Partnership Agreement, respectively, and participate in equity compensation plans of CVR Partners’ affiliates.

(11) Commitments and Contingencies

Except as noted below, there have been no material changes in the Partnership’s commitments and contingencies disclosed in the 2018 Form 10-K. In the ordinary course of business, the Partnership may become party to lawsuits, administrative proceedings, and governmental investigations, including environmental, regulatory, and other matters. The outcome of these matters cannot always be predicted accurately, but the Partnership accrues liabilities for these matters if the Partnership has determined that it is probable a loss has been incurred and the loss can be reasonably estimated. While it is not possible to predict the outcome of such proceedings, if one or more of them were decided against us, the Partnership believes there would be no material impact on its consolidated financial statements.

Litigation

In 2008, Coffeyville Resources Nitrogen Fertilizer LLC (“CRNF”), a subsidiary of CVR Partners LP, protested the reclassification and reassessment by Montgomery County, Kansas (the “County”) of CRNF’s nitrogen fertilizer plant following expiration of its ten year property tax abatement that expired on December 31, 2007, which reclassification and reassessment resulted in an increase in CRNF’s annual property tax expense in excess of $10 million per year for the 2008 through 2012 tax years. Despite its protest, CRNF fully accrued and paid these property taxes.  In February 2013, the County and CRNF agreed to a settlement for tax years 2009 through 2012 which resulted in decreased property taxes through 2017, leaving 2008 in dispute. In 2013, the Kansas Court of Appeals overturned an adverse ruling of the Kansas Board of Tax Appeals (“BOTA”) and instructed BOTA to classify each CRNF asset on an asset-by-asset basis. In March 2015, BOTA concluded its classification and determined a substantial majority of CRNF’s assets in dispute were personal property for the 2008 tax year. In September 2018, the Kansas

 Three Months Ended September 30, Nine Months Ended September 30,
(In thousands)2018 2017 2018 2017
Phantom Units$710
 $268
 $1,663
 $684
Other Awards (a)486
 367
 1,032
 1,064
Total Share-Based Compensation Expense$1,196
 $635
 $2,695
 $1,748
September 30, 2019 | 15


NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Court of Appeals upheld BOTA’s property tax determinations in CRNF’s favor.  In October 2018, the County petitioned the Kansas Supreme Court to review the Court of Appeals determination.  Subsequent briefs were filed by CRNF and the County.  In April 2019, CRNF and the County executed an agreement under which the County agreed to withdraw its petition to the Kansas Supreme Court and CRNF is expected to recover $7.9 million through favorable property tax assessments from 2019 through 2028, subject to the terms of the settlement agreement.

(12) Supplemental Cash Flow Information

Cash flows related to interest, leases, and capital expenditures included in accounts payable are as follows:
 Nine Months Ended September 30,
(in thousands)2019 2018
Supplemental disclosures:   
Cash paid for interest$30,102
 $30,244
Cash paid for amounts included in the measurement of lease liabilities (1):   
Operating cash flows from operating leases3,069
  
Operating cash flows from finance leases17
  
Financing cash flows from finance leases297
  
Non-cash investing activities:   
Change in capital expenditures included in accounts payable2,087
 734

 
(a)(1)Other awards includeThe lease standard was adopted on January 1, 2019 on a prospective basis. Therefore only 2019 disclosures are applicable to be included within the allocation of compensation expense for certain employees of CVR Energy who perform services for the Partnership under the services agreement with CVR Energy and participate in equity compensation plans of CVR Partners’ affiliates.table above.


Table of Contents

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)

(12)(13) Related Party Transactions


Activity associated with the Partnership’s related party arrangements for the three and nine month periodsmonths ended September 30, 20182019 and 20172018 is summarized below:below.


Sales to related parties
Expenses from related parties         
   Three Months Ended September 30, Nine Months Ended September 30,
(In thousands)Related Party 2018 2017 2018 2017
Cost of materials and other         
Coke Supply AgreementCRRM (a) $1,057
 $586
 $2,133
 $1,566
Hydrogen Purchase and Sale AgreementCRRM 1,072
 933
 3,157
 3,042
Railcar Lease AgreementsARI (b) 361
 236
 1,082
 683
          
Direct operating expenses (exclusive of depreciation and amortization)         
Services AgreementCVR Energy $761
 $766
 $2,145
 $2,158
Limited Partnership AgreementCVR GP 242
 127
 572
 428
          
Selling, general and administrative expenses         
Services AgreementCVR Energy $3,595
 $3,239
 $10,353
 $9,398
Limited Partnership AgreementCVR GP 626
 677
 1,920
 2,001
   Three Months Ended
September 30,
 Nine Months Ended
September 30,
(in thousands)Related Party 2019 2018 2019 2018
Net Sales         
Feedstock and Shared Services AgreementCRRM (1) $113
 $
 $115
 $292


September 30, 2019 | 16


NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Expenses from related parties
   Three Months Ended
September 30,
 Nine Months Ended
September 30,
(in thousands)Related Party 2019 2018 2019 2018
Cost of materials and other         
Coke Supply AgreementCRRM (1) $705
 $1,057
 $3,255
 $2,133
Hydrogen Purchase and Sale AgreementCRRM (1) 984
 1,072
 3,719
 3,157
          
Direct operating expenses (exclusive of depreciation and amortization)         
Services AgreementCVR Energy $797
 $761
 $2,586
 $2,145
Limited Partnership AgreementCVR GP 219
 242
 595
 572
          
Selling, general and administrative expenses         
Services AgreementCVR Energy $3,915
 $3,595
 $11,724
 $10,353
Limited Partnership AgreementCVR GP 651
 626
 2,191
 1,920

Amounts due to related parties
(in thousands)Related Party September 30, 2019 December 31, 2018
Prepaid expenses and other current assets     
Feedstock and Shared Services AgreementCRRM (1) $128
 $
      
Accounts payable to affiliates     
Feedstock and Shared Services AgreementCRRM (1) $681
 $1,106
Hydrogen Purchase and Sale Agreement and otherCRRM (1) 348
 324
Coke Supply AgreementCRRM (1) 132
 138
Services AgreementCVR GP 970
 1,372
      
Other current liabilities     
Limited Partnership AgreementCVR GP $1,697
 $1,179
Services AgreementCVR Energy 3,009
 2,352
      
Other long-term liabilities     
Limited Partnership AgreementCVR Energy $530
 $503

 

(a)(1)Coffeyville Resources Refining & Marketing, LLC, aan indirect, wholly-owned subsidiary of CVR RefiningEnergy


(b)ARI Leasing, LLC, a company controlled by IEP

Amounts due to related parties     
      
(In thousands)Related Party September 30, 2018 December 31, 2017
Accounts payable     
Feedstock and Shared Services AgreementCRRM $747
 $1,020
Hydrogen Purchase and Sale AgreementCRRM 313
 324
Limited Partnership Agreement:

CVR GP 955
 771
      
Accrued expenses and other current liabilities     
Limited Partnership AgreementCVR GP $1,346
 $1,521
Services AgreementCVR Energy 2,497
 3,221
September 30, 2019 | 17





NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)


Distributions to CVR Partners’ Unitholders

The following table presents distributions paid by the Partnership to CVR Partners’ unitholders, including amounts paid to CVR Energy, as of September 30, 2019.
      Dividends Paid (in thousands)
Related Period Date Paid Dividend Per Common Unit Unitholders CVR Energy Total
2018 - 4th Quarter March 11, 2019 $0.12
 $8,924
 $4,670
 $13,594
2019 - 1st Quarter May 13, 2019 0.07
 5,205
 2,724
 7,929
2019 - 2nd Quarter August 12, 2019 0.14
 10,411
 5,449
 15,860
Total   $0.33
 $24,540
 $12,843
 $37,383


For the third quarter of 2019, the Partnership, upon approval by the Board of Directors of CVR Partners’ general partner on October 22, 2019, declared a distribution of $0.07 per common unit, or $7.9 million, which is payable November 12, 2019 to unitholders of record as of November 4, 2019. Of this amount, CVR Energy will receive approximately $2.7 million, with the remaining amount payable to public unitholders.

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

September 30, 2019 | 18


Item 2. Management’s Discussion and Analysis of Financial Condition andResults of Operations


The following discussion and analysis of our financial condition, results of operations, and cash flows should be read in conjunction with the unaudited condensed consolidated financial statements and related notes and with the statistical information and financial data appearing in this Report, as well as our Annual Report on Form 10-K for the year ended December 31, 20172018 filed with the Securities and Exchange Commission (“SEC”) on February 21, 2019 (the “2017“2018 Form 10-K”). Results of operations for the three and nine months ended September 30, 20182019 and cash flows for the nine months ended September 30, 20182019 are not necessarily indicative of results to be attained for any other period. Refer to the section entitled “Forward-LookingSee “Important Information Regarding Forward Looking Statements” below..

Partnership Overview

CVR Partners, LP (“CVR Partners,”Partners” or the “Partnership,” “we,” “us” or “our”“Partnership”) is a Delaware limited partnership formed in 2011 by CVR Energy, Inc. (“CVR Energy”) to own, operate, and grow our nitrogen fertilizer business. We produce and distribute nitrogen fertilizer products, which are used by farmers to improve the yield and quality of their crops. The Partnership produces these products at two manufacturing facilities, which are located in Coffeyville, Kansas and East Dubuque, Illinois. Our principal products are ammonia and urea ammonium nitrate (“UAN”). Ammonia is a direct application fertilizer and is primarily used as a building block for other nitrogen products for industrial applications and finished fertilizer products. UAN is an aqueous solution of urea and ammonium nitrate. All of our products are sold on a wholesale basis. We produce our nitrogen fertilizer products at two manufacturing facilities, which are located in Coffeyville, Kansas (the “Coffeyville Facility”)References to CVR Partners, the Partnership, “we”, “us”, and East Dubuque, Illinois (the “East Dubuque Facility”).

Our Coffeyville Facility includes a 1,300 ton-per-day capacity ammonia unit, a 3,000 ton-per-day capacity UAN unit, and a gasifier complex having a capacity“our” may refer to consolidated subsidiaries of 89 million standard cubic feet per day of hydrogen. Our gasifier is a dual-train facility, with each gasifier able to function independentlyCVR Partners or one or both of the other, thereby providing redundancy and improving our reliability. Strategically located adjacentfacilities, as the context may require. Additionally, as the context may require, references to a refinery owned by CVR Refining, LP (“CVR Refining”) in Coffeyville, Kansas, our Coffeyville Facility is the only operation in North America that utilizes a petroleum coke, or pet coke, gasification process to produce nitrogen fertilizer.

Our East Dubuque Facility includes a 1,075 ton-per-day capacity ammonia unit and a 1,100 ton-per-day capacity UAN unit. The facility is located on a bluff above the Mississippi River, with access to the river for loading certain products. The East Dubuque Facility uses natural gas as its primary feedstock. The East Dubuque Facility has the flexibility to significantly vary its product mix. This enables us to upgrade our ammonia production into varying amounts of UAN, nitric acid and liquid and granulated urea each season, depending on market demand, pricing and storage availability. Product sales are heavily weighted toward sales of ammonia and UAN.

CVR Energy may refer to CVR Energy and its consolidated subsidiaries which indirectly owns CVR GP, LLC (our “general partner”)include its petroleum refining, marketing, and approximately 34% of our outstanding common units, also indirectly owns approximately 81% of the outstanding common units of CVR Refining at September 30, 2018.

logistics operations.
Major InfluencesStrategy and Goals

Mission and Core Values

Our mission is to be a top tier North American nitrogen-based fertilizer company as measured by safe and reliable operations, superior performance and profitable growth. The foundation of how we operate is built on Resultsfive core values:

Safety - We always put safety first. The protection of our employees, contractors and communities is paramount. 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 understand our obligation to the environment and that it’s our duty to protect it.

Integrity - We require high business ethics. We comply with the law and practice sound corporate governance. We only conduct business one way—the right way with integrity.

Corporate Citizenship - We are proud members of the communities where we operate. We are good neighbors and know that it’s a privilege we can’t take for granted. We seek to make a positive economic and social impact through our financial donations and the contributions of time, knowledge and talent of our employees to the places where we live and work.

Continuous Improvement - We believe in both individual and team success. We foster accountability under a performance-driven culture that supports creative thinking, teamwork and personal development so that employees can realize their maximum potential. We use defined work practices for consistency, efficiency and to create value across the organization.

Our core values are driven by our people, inform the way we do business each and every day and enhance our ability to accomplish our mission and related strategic objectives.

Strategic Objectives

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


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


September 30, 2019 | 19


Reliability - Our goal is to achieve industry-leading utilization rates at both of our facilities through safe and reliable operations. 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 efficient as possible by maintaining low operating costs and disciplined deployment of capital.

Achievements

During 2019, we successfully executed a number of achievements in support of our strategic objectives shown below through the date of this filing:
SafetyReliabilityMarket CaptureFinancial Discipline
Safely completed the East Dubuque turnaroundü
Maintained high asset reliability and utilization at both facilities through the third quarter of 2019üüü
Achieved monthly record ammonia volumes at the East Dubuque nitrogen fertilizer facility for April 2019ü
Generated positive cash available for distribution for three consecutive quarters in 2019üüü
Declared cash distributions of 40 cents per unit in 2019ü

Industry Factors and Market Conditions
Within the nitrogen fertilizer business, earnings and cash flows from operations are primarily affected by the relationship between nitrogen fertilizer product prices, on-stream factorsutilization, and operating costs and expenses.expenses, including petroleum coke and natural gas feedstock costs.


The price at which ournitrogen 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, and the extent of government intervention in agriculture markets.
Nitrogen fertilizer prices are also affected by local factors, including local market conditions, weather patterns, and the operating levels of competing facilities. An expansion or upgrade of competitors’ facilities, new facility development, political and economic developments, and other factors are likely to continue to play an important role in nitrogen fertilizer industry economics. These factors can impact, among other things, the level of inventories in the market, resulting in price volatility and a reduction in product margins. Moreover, the industry typically experiences seasonal fluctuations in demand for nitrogen fertilizer products.

Consistent, safe2019 Market Conditions

While there is risk of shorter-term volatility given the inherent nature of the commodity cycle, the Partnership believes the longer-term fundamentals for the U.S. nitrogen fertilizer industry remain intact. The Partnership views the anticipated combination of (i) increasing global population, (ii) decreasing arable land per capita, (iii) continued evolution to more protein-based diets in developing countries, (iv) sustained use of corn as feedstock for the domestic production of ethanol, and reliable operations are critical to our financial performance and results of operations. In addition, operations(v) positioning at the Linde air separation unit, which supplies oxygen,lower end of the global cost curve should continue to provide a solid foundation for nitrogen fertilizer producers in the U.S. over the longer term.


September 30, 2019 | 20


During 2019, weather impacted the business by causing delays in the planting conditions. Increased amounts of rain led to ineffective planting of corn and compressed dry air to our Coffeyville Facility, is critical to our financial performancesoybean crops, resulting in an anticipated lower yield per planted acre in 2019. Furthermore, the severe flooding in Kansas and results of operations. Downtime at either of our facilities or at the Linde facility may result in lost margin opportunity, increased maintenance expense and a temporary increase in working capital investment and related inventory position. Unplanned downtime at the East Dubuque Facility during the periods presented included a reformer repairOklahoma curtailed UAN rail shipments in the second quarterquarter. Despite these conditions, there was still strong demand for nitrogen due to the catchup from the poor fall application and late start to spring. The late planting season extended well into July and fertilizer consumption brought customer inventories to very low levels by the end of 2018 and a boiler feed water coil leakthe season, creating strong demand for fertilizer in the first quarter of 2018. Unplanned downtime at the Coffeyville Facility during the periods presented included gasifier repairs during the second quarter of 2018 and UAN unit downtime during the second quarter of 2017.third quarter.

The table below shows relevant market indicators by month through September 30, 2019:

chart-7a4ce72a14525e25916.jpgchart-c0eb64f452a856cc9df.jpg

(1)Information used in the charts was obtained from various third-party sources, including Pace Petroleum Coke Quarterly, Green Markets (a Bloomberg Company) and the U.S. Energy Information Administration.
Historically, our facilities have each undergone a full facility turnaround approximately every two to three years. The Coffeyville Facility underwent a full facility turnaround in the second quarter of 2018, and the East Dubuque Facility underwent a full facility turnaround during the third quarter of 2017. See Note 2 ("Basis of Presentation") to Part I, Item 1 of this Report for further information.

Our largest raw material expense used in the production of ammonia at our East Dubuque Facility is natural gas, which we purchase from third parties. Pet coke is required to operate the Coffeyville Facility. We purchase the majority of our pet coke from CVR Refining, typically at a discount when compared to pet coke purchased from third parties. The price and availability of natural gas and pet coke can significantly impact our profitability.


Non-GAAP Measures


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

We useprofitability and include the following performance and liquidity measures:measures defined below.


The following are non-GAAP measures presented for the period ended September 30, 2019:

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


Adjusted EBITDA. - EBITDA adjusted to exclude turnaround expenses and other significant, nonrecurring items which management believes are material to an investor’s understanding of the Partnership’s underlying operating results.

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

September 30, 2019 | 21


Available Cash for Distribution - Adjusted EBITDA is defined as EBITDA further adjustedreduced for the impact of (i) major scheduled turnaround expenses, (ii) gain or loss on extinguishment of debt and (iii) business interruption insurance recovery, when applicable. Adjusted EBITDA represents the starting point usedcash reserves established by the board of directors of our general partner when calculating our available cash for distribution.

Available cash for distribution. This performance and liquidity measure is equal to Adjusted EBITDA reduced for cash needed for (i) net cash interest expense (excluding capitalized interest) and debt service, and other contractual obligations; (ii) maintenance capital expenditures;expenditures, (iii) turnaround expenses and, (iii) to the extent applicable, major scheduled turnaround expenses and(iv) reserves for future operating or capital needs that the board of directors of theour general partner deems necessary or appropriate, if any.any, in its sole discretion. Available cash for distribution (if any) may be increased by the release of previously established cash reserves, if any, and other excess cash, at the discretion of the board of directors of our general partner,partner.

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 reason discussed below.

Major Scheduled Turnaround Activities

On September 14, 2019, the East Dubuque facility began a major scheduled turnaround and available cash is increased by the business interruption insurance proceeds when applicable.ammonia and UAN units were down for approximately 17 days during the quarter. This turnaround was completed in October. Overall, quarterly results were negatively impacted due to the lost production during the downtime that resulted in lost sales and certain reduced variable expenses included in Cost of materials and other and Direct operating expenses (exclusive of depreciation and amortization). Exclusive of the impacts due to the lost production during the turnaround downtime, costs of approximately $6.8 million and $7.0 million are included in Direct operating expenses (exclusive of depreciation and amortization) in the Consolidated Statements of Operations for the three and nine months ended September 30, 2019, respectively.



Results of Operations
 Three Months Ended September 30, Nine Months Ended September 30,
(In thousands)2018 2017 2018 2017
Consolidated Statements of Operations Data:       
Net sales$79,909
 $69,393
 $252,965
 $252,610
        
Cost of materials and other19,590
 19,495
 61,198
 63,373
Direct operating expenses (exclusive of depreciation and amortization)35,334
 40,249
 121,468
 113,941
Depreciation and amortization16,035
 19,483
 52,866
 54,877
Cost of sales70,959
 79,227
 235,532
 232,191
Selling, general and administrative expenses6,393
 6,083
 18,955
 18,750
Loss on asset disposals28
 19
 160
 58
Operating income (loss)2,529
 (15,936) (1,682) 1,611
Interest expense, net(15,693) (15,723) (47,080) (47,111)
Other income, net30
 22
 100
 81
Loss before income tax(13,134) (31,637) (48,662) (45,419)
Income tax expense (benefit)12
 (35) (6) (36)
Net loss$(13,146) $(31,602) $(48,656) $(45,383)
        
EBITDA (1)$18,594
 $3,569
 $51,284
 $56,569
Adjusted EBITDA (1)$18,594
 $5,005
 $57,689
 $58,094
Available cash for distribution (1)$(130) $(1,252) $(4,274) $557
        
Reconciliation to net sales:       
Fertilizer sales, exclusive of freight$69,059
 $59,422
 $223,033
 $223,002
Freight in revenue8,805
 8,313
 23,908
 23,638
Other2,045
 1,658
 6,024
 5,970
Total net sales$79,909
 $69,393
 $252,965
 $252,610


(1) See “Non-GAAP Reconciliations” section below for further information regarding this non-GAAP financial measure.


The following table shows selectedsections should be read in conjunction with the information aboutoutlined in Part I, Item 2 and the financial statements and related notes thereto in Part I, Item 1 of this Report.
Key Operating Data
Utilization - The following charts summarize our ammonia utilization rates on a consolidated basis and at each of our facilities. 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 produced divided by capacity adjusted for planned turnarounds.

We present our utilization on a two-year rolling average to take into account the impact of our planned and unplanned outages on any specific period. We believe the two-year rolling average is a more useful presentation of the long-term utilization performance of our plants.

We present utilization solely on ammonia production rather than each nitrogen product as it provides a comparative baseline against industry peers and eliminates the disparity of plant configurations for upgrade of ammonia into other nitrogen products. With our efforts being primarily focused on ammonia upgrade capabilities, we believe this measure provides a meaningful view of how well we operate.

September 30, 2019 | 22


chart-e05a2a24f44f5126bc0.jpgchart-03fb282a9f6a5f1b8b9.jpg
Consolidated Ammonia Utilization - The consolidated ammonia utilization decreased 2% to 93% for the two years ended September 30, 2019 compared to the two years ended September 30, 2018. This decrease was primarily a result of ammonia storage capacity constraints at the East Dubuque facility in the first quarter of 2019 due to inclement weather impacting customers’ ability to apply ammonia.

Sales and Pricing per Ton - Two of our key operating statisticsmetrics are total sales for ammonia and market indicatorsUAN along with the product pricing per ton realized at the gate. Product pricing at the gate represents net sales less freight revenue divided by product sales volume in tons and is shown in order to provide a pricing measure that is comparable across the fertilizer industry.

Operating Highlights (three months ended September 30, 2019 versus September 30, 2018)

chart-89f6f640fbb55fdca15.jpgchart-a8a2a6972fd251b78d3.jpg

September 30, 2019 | 23


chart-845b2da0ea975ee696c.jpgchart-ed1d87932dae5379b41.jpg
Operating Highlights (nine months ended September 30, 2019 versus September 30, 2018)

chart-2cd9160855fa599b8da.jpgchart-947e66f5f5085765b32.jpg
chart-b5b9d2d34e5753bdaf4.jpgchart-0d8a2ab1ddd1550e881.jpg

September 30, 2019 | 24


Production Volumes -Gross tons produced for our business:

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.
 Three Months Ended September 30, Nine Months Ended September 30,
 2018 2017 2018 2017
Key Operating Statistics:       
Consolidated sales (thousand tons):       
Ammonia38
 65
 156
 202
UAN310
 299
 925
 952
Consolidated product pricing at gate (dollars per ton) (1):       
Ammonia$297
 $214
 $329
 $287
UAN$170
 $138
 $169
 $158
Consolidated production volume (thousand tons):       
Ammonia (gross produced) (2)212
 181
 584
 615
Ammonia (net available for sale) (2)63
 46
 187
 204
UAN338
 307
 919
 962
Feedstock:       
Petroleum coke used in production (thousand tons)117
 114
 325
 371
Petroleum coke used in production (dollars per ton)$26
 $18
 $23
 $18
Natural gas used in production (thousands of MMBtu) (3)(4)2,118
 1,555
 5,933
 5,781
Natural gas used in production (dollars per MMBtu) (3)(4)$3.03
 $3.12
 $3.01
 $3.25
Natural gas in cost of materials and other (thousands of MMBtu) (3)1,439
 1,935
 5,268
 5,898
Natural gas in cost of materials and other (dollars per MMBtu) (3)$2.98
 $3.15
 $3.03
 $3.30
Coffeyville Facility on-stream factors (4):       
Gasification100% 96% 91% 98%
Ammonia100% 94% 90% 97%
UAN97% 94% 88% 93%
East Dubuque Facility on-stream factors (4):       
Ammonia99% 76% 93% 92%
UAN98% 77% 93% 92%
        
Market Indicators:       
Ammonia - Southern plains (dollars per ton)$337
 $238
 $354
 $314
Ammonia - Corn belt (dollars per ton)$398
 $303
 $407
 $364
UAN - Corn belt (dollars per ton)$203
 $165
 $208
 $192
Natural gas - NYMEX (dollars per MMBtu)$2.87
 $2.95
 $2.85
 $3.05
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
(in thousands of tons)2019 2018 2019 2018
Ammonia (gross produced)196
 212
 586
 584
Ammonia (net available for sale)56
 63
 168
 187
UAN318
 338
 969
 919


 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 2019 2018 2019 2018
Petroleum coke used in production (thousand tons)137
 117
 404
 325
Petroleum coke (dollars per ton)$37.75
 $25.65
 $36.68
 $22.89
Natural gas used in production (thousands of MMBtu) (1)1,700
 2,118
 5,210
 5,933
Natural gas used in production (dollars per MMBtu) (1)$2.40
 $3.03
 $2.88
 $3.01
Natural gas in cost of materials and other (thousands of MMBtu) (1)1,294
 1,439
 5,487
 5,268
Natural gas in cost of materials and other (dollars per MMBtu) (1)$2.46
 $2.98
 $3.22
 $3.03
(1)Product pricing at gate (also referred to as “netback”) represents net sales less freight revenue divided by product sales volume in tons and is shown in order to provide a pricing measure that is comparable across the fertilizer industry.
(2)Gross tons produced for ammonia represent total ammonia produced, including ammonia produced that was upgraded into other fertilizer products. Net tons available for sale represent ammonia available for sale that was not upgraded into other fertilizer products.
(3)The feedstock natural gas shown above does not include natural gas used for fuel. The cost of fuel natural gas is included in direct operating expensesexpense (exclusive of depreciation and amortization).



Financial Highlights (three months ended September 30, 2019 versus September 30, 2018)



chart-1a3e6744485c5ee7b92.jpgchart-677cc1bcc4b15ebf998.jpgchart-517adb86f5f05b0591f.jpg
chart-5bd9886ef88151d09fe.jpgchart-009e0e87460452208ed.jpgchart-69d328c9b808598a9b2.jpg

September 30, 2019 | 25



Financial Highlights (nine months ended September 30, 2019 versus September 30, 2018)

chart-b368e4b4c4805494b9d.jpgchart-10797b4d7ecf58f4874.jpgchart-06d1bfe835355305938.jpg
chart-0e450f3af1f95391a75.jpgchart-f6be0a7a33a5561f8fd.jpgchart-20e11eceac9c5534b3b.jpg
(4)(1)On-stream factor isSee “Non-GAAP Reconciliations” section below for reconciliations of the total number of hours operated divided by the total number of hours in the reporting period and is included as a measure of operating efficiency.non-GAAP measures shown above.

Coffeyville Facility
Excluding the impact of the full facility turnaround at the Coffeyville Facility, the on-stream factors at the Coffeyville Facility would have been 96% for gasification, 96% for ammonia and 94% for UAN for the nine months ended September 30, 2018.

The Linde air separation unit experienced a shut down during the second quarter of 2017. Following the Linde outage, the Coffeyville Facility UAN unit experienced a number of operational challenges, resulting in approximately 11 days of UAN downtime during the second quarter of 2017. Excluding the impact of the Linde air separation unit outage at the Coffeyville Facility, the UAN unit on-stream factors at the Coffeyville Facility would have been 97% for the nine months ended September 30, 2017.

East Dubuque Facility
Excluding the impact of approximately 14 days of downtime associated with the 2017 full facility turnaround at the East Dubuque Facility, the on-stream factors at the East Dubuque Facility would have been 91% for ammonia and 92% for UAN for the three months ended September 30, 2017 and 97% for ammonia and 96% for UAN for the nine months ended September 30, 2017.


Three Months Ended September 30, 20182019 Compared to the Three Months Ended September 30, 20172018


Net Sales.Net sales were $79.9increased by $8.7 million to $88.6 million for the three months ended September 30, 20182019compared to $69.4 million for the three months ended September 30, 2017. For the three months ended September 30, 2018, UAN2018. This increase was primarily due to favorable pricing and ammonia made up $60.8volume conditions which contributed $5.5 million and $12.0$3.5 million, of our consolidated net sales, respectively, including freight. Forin higher revenues in the three months ended September 30, 2017, UAN and ammonia made up $48.8 million and $14.9 million of our consolidated net sales, respectively, including freight.current period as compared to 2018.


The following table demonstrates the impact of changes in sales volumes and pricing for the primary components of net sales, excluding freight, for the three months ended September 30, 20182019 as compared to the three months ended September 30, 2017:2018:
(In thousands)
Price
 Variance
 
Volume
 Variance
(in thousands)
Price
 Variance
 
Volume
 Variance
UAN$10,229
 $1,835
$4,188
 $5,100
Ammonia$3,292
 $(6,131)$1,321
 $(1,602)


The increase in UAN and ammonia sales pricespricing for the three months ended September 30, 20182019 as compared to the three months ended September 30, 20172018 was primarily attributable to favorable market conditions. The decreaseinclement weather throughout the region in ammoniathe first quarter of 2019, delaying the crop cycle and also continuing nitrogen demand during the three months ended September 30, 2019. As a result of the aforementioned delay in the crop cycle, UAN sales volumes increased for the three months ended September 30, 20182019 as compared to the three months ended September 30, 2017 was primarily attributable to less inventory available for sale at the beginning of the third quarter of 2018 as compared to the same quarter in the prior year. There was more inventory available for sale at the beginning of the third quarter in 2017 due to relatively bad weather conditions which drove a lower application of ammonia in 2017 in addition to an outage at the Coffeyville Facility in the second quarter of 2017.2018.


Cost of Materialsmaterials and Other. other. Cost of materials and other for the three months ended September 30, 2019 was consistent at$21.6 million compared to $19.6 million and $19.5 million for the three months ended September 30, 20182018. The $2.0 million increase was comprised of a $2.1 million increase in pet coke costs at our Coffeyville facility, a $0.6 million increase in freight costs representing additional shipments made to our off-premise storage facilities, and a $1.5 million increase due to a draw in inventory resulting from increased demand. These amounts were partially offset by favorable natural gas pricing at our East Dubuque facility, contributing $2.3 million for the three months ended September 30, 2017, respectively.2019.


September 30, 2019 | 26


Direct Operating Expenses (Exclusiveoperating expenses (exclusive of Depreciationdepreciation and Amortization)amortization).Direct operating expenses (exclusive of depreciation and amortization) for the three months ended September 30, 20182019were $35.3$47.6 million as compared to $40.2$35.3 million for the three months ended September 30, 2017.2018. The $4.9 million decreaseincrease was primarily due to the third quarter 2017 turnaround costs at the East Dubuque Facility, which resulted in turnaround expensesfacility of $2.5$6.8 million coupled with decreasesan inventory draw contributing $3.8 million due to increased sales in repairs and maintenance costs and personnel costs as a resultthe third quarter of turnaround activities.2019.


Nine Months Ended September 30, 20182019 Compared to the Nine Months Ended September 30, 20172018


Net Sales.Net sales were $253.0increased by $65.2 million to $318.1 million for the nine months ended September 30, 20182019 compared to $252.6 million for the nine months ended September 30, 2017. For the nine months ended September 30, 2018, UAN2018. This increase wasprimarily due to favorable pricing and ammonia made up $178.5volume conditions which contributed $51.0 million and $53.5$14.7 million, of our consolidated net sales, respectively, including freight. Forin higher revenues in the nine months ended September 30, 2017, UAN and ammonia made up $171.7 million and $60.2 million of our consolidated net sales, respectively, including freight.current period as compared to 2018.






The following table demonstrates the impact of changes in sales volumes and pricing for the primary components of net sales, excluding freight, for the nine months ended September 30, 20182019 as compared to the nine months ended September 30, 2017:2018:
(In thousands)
Price
 Variance
 
Volume
 Variance
(in thousands)
Price
 Variance
 
Volume
 Variance
UAN$12,029
 $(4,725)$35,499
 $7,234
Ammonia$6,865
 $(13,687)$15,546
 $7,509


The decreaseincrease in UAN and ammonia sales pricing for the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018 was primarily attributable to a shift in the timing of demand from the fourth quarter of 2018 to the second quarter of 2019, as customers delayed receipt of nitrogen products due to continued inclement weather. As a result, customer demand for ammonia increased in the second quarter of 2019 as customers attempted to make up for the missed application. In addition, the aforementioned ammonia application coupled with freezing temperatures and flooding throughout the Midwest and Southern Plains in the current period shifted the demand for ammonia, resulting in increased sales volumes for the nine months ended September 30, 20182019 compared to the nine months ended September 30, 2017 was primarily attributable to lower production resulting from planned and unplanned downtime during the nine months ended September 30, 2018. The decrease in ammonia sales volumes for the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017 was also attributable to less product available from lower inventory as of December 31, 2017 due to a strong Fall 2017 application as compared to December 31, 2016 and downtime for the nine months ended September 30, 2018. The increase in UAN and ammonia sales prices for the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017 was primarily attributable to more favorable market conditions in the current quarter.


Cost of Materialsmaterials and Other. other. Cost of materials and other for the nine months ended September 30, 20182019 was $61.2$71.3 million, compared to $63.4$61.2 million for the nine months ended September 30, 2017.2018. The $2.2$10.1 million decreaseincrease was comprised primarily due to an overall decreaseof a $6.3 million increase in pet coke costs from lower sales volumes as wellat our Coffeyville facility, coupled with a draw in ammonia inventories as a $1.0 million decrease in distribution costs to offsite inventory locations.result of increased sales contributing $4.5 million.


Direct Operating Expenses (Exclusive(exclusive of Depreciationdepreciation and Amortization)amortization).Direct operating expenses (exclusive of depreciation and amortization) for the nine months ended September 30, 20182019were $121.5$128.0 million as compared to $113.9$121.5 million for the nine months ended September 30, 2017.2018. The $7.6$6.5 million increase was primarily due to an increase in turnaround expenses of $3.8spare part inventory write-offs totaling $1.3 million, higherincreased personnel costs of $2.4$1.9 million, attributableand an inventory draw contributing $3.3 million due to higher workloads along with inventory overhead allocations during downtime, higher repair and maintenance costsincreased sales in the second quarter of $1.6 million resulting from outages during the 2018 period and $1.1 million in business interruption recovery received during the 2017 period. Additionally, we experienced lower utility costs of $1.8 million primarily associated with the 2018 downtime and lower natural gas prices.2019.


Non-GAAP Reconciliations


Our management uses certain non-GAAP performance measuresReconciliation of Net Loss to evaluate past performance and prospects for the future to supplement our GAAP financial information presented in accordance with U.S. GAAP. These financial non-GAAP measures are important factors in assessing our operating results and profitability.

A reconciliation of consolidated net loss to consolidated EBITDA and consolidated Adjusted EBITDA is as follows:
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended
September 30,
 Nine Months Ended
September 30,
(In thousands)2018 2017 2018 2017
(in thousands)2019 2018 2019 2018
Net loss$(13,146) $(31,602) $(48,656) $(45,383)$(22,976) $(13,146) $(10,087) $(48,656)
Add:              
Interest expense, net15,693
 15,723
 47,080
 47,111
15,621
 15,693
 46,870
 47,080
Income tax expense (benefit)12
 (35) (6) (36)12
 12
 (88) (6)
Depreciation and amortization16,035
 19,483
 52,866
 54,877
18,418
 16,035
 60,032
 52,866
EBITDA$18,594
 $3,569
 $51,284
 $56,569
$11,075
 $18,594
 $96,727
 $51,284
Add:              
Major scheduled turnaround expenses$
 $2,497
 $6,405
 $2,586
Less:       
Insurance recovery - business interruption
 (1,061) 
 (1,061)
Turnaround expenses6,805
 
 6,956
 6,405
Adjusted EBITDA$18,594
 $5,005
 $57,689
 $58,094
$17,880
 $18,594
 $103,683
 $57,689

September 30, 2019 | 27







A reconciliationReconciliation of consolidated available cash for distribution is as follows:Net Cash Provided By Operating Activities to EBITDA
 Three Months Ended September 30, Nine Months Ended September 30,
(in thousands, except per unit data)2018 2017 2018 2017
Adjusted EBITDA$18,594
 $5,005
 $57,689
 $58,094
Adjustments:       
Net cash interest expense (excluding capitalized interest) and debt service(14,873) (14,967) (44,664) (44,882)
Maintenance capital expenditures(4,526) (2,716) (10,894) (11,130)
Major scheduled turnaround expenses
 (2,497) (6,405) (2,586)
Add:       
Insurance recovery - business interruption
 1,061
 
 1,061
Release of previously established cash reserves, net675
 12,862
 
 
Available cash for distribution$(130) $(1,252) $(4,274) $557
Distribution declared, per common unit$
 $
 $
 $0.02
Common units outstanding113,283
 113,283
 113,283
 113,283
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
(in thousands)2019 2018 2019 2018
Net cash provided by operating activities$33,991
 $39,588
 $68,672
 $27,118
Add:       
Interest expense, net15,621
 15,693
 46,870
 47,080
Income tax expense (benefit)12
 12
 (88) (6)
Change in assets and liabilities(34,649) (34,615) (10,501) (17,573)
Other non-cash adjustments(3,900) (2,084) (8,226) (5,335)
EBITDA$11,075
 $18,594
 $96,727
 $51,284


Reconciliation of Adjusted EBITDA to Available Cash for Distribution
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
(in thousands)2019 2018 2019 2018
Adjusted EBITDA$17,880
 $18,594
 $103,683
 $57,689
Current reserves for amounts related to:       
Debt service(14,833) (14,873) (44,525) (44,664)
Maintenance capital expenditures(6,594) (4,526) (11,409) (10,894)
Turnaround expenses(6,805) 
 (6,956) (6,405)
Other:       
Future cash reserves
 
 (28,000) 
Release of previously established cash reserves18,399
 675
 18,399
 
Available Cash for distribution (1) (2)$8,047
 $(130) $31,192
 $(4,274)
        
Common units outstanding113,283
 113,283
 113,283
 113,283
(1)Amount represents the cumulative Available Cash based on quarter-to-date and year-to-date results, respectively. Available Cash for distribution is calculated quarterly, with distributions (if any) being paid in the following period.
(2)The Partnership declared and paid cash distributions totaling $0.21 per common unit related to the first two quarters of 2019 for a total of $23.8 million.

Liquidity and Capital Resources

Our principal source of liquidity has historically been cash from operations, which can include cash advances from customers resulting from forward sales.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.

We believe that our cash from operations and existing cash and cash equivalents, along with borrowings, as necessary, under our asset based credit facilitythe AB Credit Facility, will be sufficient to satisfy anticipated cash commitmentsrequirements associated with our existing operations for at least the next 12 months. However, our future capital expenditures and other cash requirements could be higher than we currently expect as a result of various factors. 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, outsidesome of which may be beyond our control.
Depending on the needs of our control.business, contractual limitations, and market conditions, we may from time to time seek to issue equity securities, incur additional debt, issue debt securities, or otherwise refinance our existing debt. There can be no assurance that we will seek to do any of the foregoing or that we will be able to do any of the foregoing on terms acceptable to us or at all.



September 30, 2019 | 28


There have been no material changes in liquidity from our 2017 10-K.for the three months ended September 30, 2019. The Partnership was in compliance with all covenants under its debt instruments as of September 30, 2018.2019.


Cash and Other Liquidity




As of September 30, 2018,2019, we had cash and cash equivalents of $61.4$83.7 million, including $24.8$16.0 million from customer advances and $50.0advances. Combined with $47.5 million available under our asset based credit facility forAB Credit Facility less $25.0 million in cash included in our borrowing base, we had total liquidity of $86.4 million.$106.2 million as of September 30, 2019.

Debt, including current maturitiesSeptember 30, 2019 December 31, 2018
(in thousands)
9.25% Senior Notes due 2023$645,000
 $645,000
6.50% Senior Notes due 20212,240
 2,240
Unamortized discount and debt issuance costs(15,720) (18,251)
Total debt$631,520
 $628,989

AB Credit Facility - The Partnership has an AB Credit Facility, the proceeds of which may be used to fund working capital, capital expenditures and for other general corporate purposes. The AB Credit Facility is a senior secured asset-based revolving credit facility with an aggregate principal amount of availability of up to $50 million with an incremental facility, which permits an increase in borrowings of up to $25 million in the aggregate subject to additional lender commitments and certain other conditions. The AB Credit Facility matures in September 2021.

2023 Notes - CVR Partners issued $645 million aggregate principal amount of 9.25% Senior Secured Notes due 2023 (the “2023 Notes”) in 2016. The 2023 Notes are guaranteed on a senior secured basis by all of the Partnership’s existing subsidiaries. On or after June 15, 2019, we may on any one or more occasions, redeem all or part of the 2023 Notes at the redemption prices set forth below expressed as a percentage of the principal amount of the 2023 Notes plus accrued and unpaid interest to the applicable redemption date.
12-month period beginning June 15,Percentage
2019104.625%
2020102.313%
2021 and thereafter100.000%

Upon the occurrence of certain change of control events as defined in the 2023 Indenture (including the sale of all or substantially all of the properties or assets of the Partnership and its subsidiaries taken as a whole), each holder of the 2023 Notes will have the right to require that the Partnership repurchase all or a portion of such holder’s 2023 Notes in cash at a purchase price equal to 101% of the aggregate principal amount thereof plus any accrued and unpaid interest to the date of repurchase.

Capital Spending


We divide our capital spending needs into two categories: maintenance and growth. Maintenance capital spending includes only non-discretionary maintenance projects and projects required to comply with environmental, health, and safety regulations. We also treat maintenance capital spending as a reduction of cash available for distribution to unitholders. Growth capital projects generally involve an expansion of existing capacity improvement in product yields and/or a reduction in direct operating expenses. We undertake growth capital spending based on the expected return on incremental capital employed. Our total capital expenditures for the nine months ended September 30, 2018 were approximately $15.0 million, including $10.9 million of maintenance capital spending2019 and the remainderour estimated expenditures for growth capital projects.

2019 are as follows:
 Nine Months Ended September 30, Estimated full year
(in thousands)2019 2019
Maintenance capital$10,763
 $ 18,000 - 20,000
Growth capital811
 2,000 - 5,000
Total capital expenditures$11,574
 $ 20,000 - 25,000


September 30, 2019 | 29






Capital spending for our business has been and will be determined by the Board of Directors of our general partner. Our estimated maintenance and growth capital expenditures are expected to be approximately $17.0 to $20.0 million and $3.0 to $5.0 million, respectively, for the year ending December 31, 2018. Our estimated capital expenditures are subject to change due to unanticipated changes in the cost, scope and completion time for our 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 refineries or nitrogen fertilizer plants. We may also accelerate or defer some capital expenditures from time to time. Capital spending is determined by the board of directors of the Partnership’s general partner.

On September 14, 2019, the East Dubuque facility began a major scheduled turnaround, which was completed in October. We have incurred $7.0 million in the nine months ended September 30, 2019 related to this turnaround and estimate total costs of approximately $9.3 million, with the remaining costs to be incurred in the fourth quarter of 2019.
Distributions to Unitholders
The current policy of the board of directors of the Partnership’s general partner is to distribute all Available Cash the Partnership generated on a quarterly basis. Available Cash for each quarter will be determined by the board of directors of the Partnership’s general partner following the end of such quarter. Available Cash for each quarter is calculated as Adjusted EBITDA reduced for cash needed for (i) debt service, (ii) maintenance capital expenditures, (iii) turnaround expenses, and, to the extent applicable, (iv) reserves for future operating or capital needs that the board of directors of our facilities.general partner deems necessary or appropriate, if any, in its sole discretion. Available Cash for distribution may be increased by the release of previously established cash reserves, if any, and other excess cash, at the discretion of the board of directors of our general partner.


The following table presents distributions paid by the Partnership to CVR Partners’ unitholders, including amounts paid to CVR Energy, as of September 30, 2019.
      Dividends Paid (in thousands)
Related Period Date Paid Dividend Per Common Unit Unitholders CVR Energy Total
2018 - 4th Quarter March 11, 2019 $0.12
 $8,924
 $4,670
 $13,594
2019 - 1st Quarter May 13, 2019 0.07
 5,205
 2,724
 7,929
2019 - 2nd Quarter August 12, 2019 0.14
 10,411
 5,449
 15,860
Total   $0.33
 $24,540
 $12,843
 $37,383

For the third quarter of 2019, the Partnership, upon approval by the Board of Directors of CVR Partners’ general partner on October 22, 2019, declared a distribution of $0.07 per common unit, or $7.9 million, which is payable November 12, 2019 to unitholders of record as of November 4, 2019. Of this amount, CVR Energy will receive approximately $2.7 million, with the remaining amount payable to public unitholders.

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

Cash Flows


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


Nine Months Ended September 30,Nine Months Ended September 30,
(In thousands)2018 2017
(in thousands)2019 2018 Change
Net cash flow provided by (used in):        
Operating activities$27,118
 $28,104
$68,672
 $27,118
 $41,554
Investing activities(14,850) (11,456)(9,398) (14,850) 5,452
Financing activities
 (2,266)(37,383) 
 (37,383)
Net increase in cash and cash equivalents$12,268
 $14,382
$21,891
 $12,268
 $9,623



September 30, 2019 | 30


Cash Flows Provided by Operating Activities


NetThe change in net cash flows provided byfrom operating activities for the nine months ended September 30, 2018 were approximately $27.1 million compared to net cash provided by operating activities of $28.1 million for the nine months ended September 30, 2017. Net cash flows from our operating activities decreased from the nine months ended September 30, 20172019 as compared to the nine months ended September 30, 2018 is primarily due to decreasedimproved operating results leading to a net income offset by changesloss of $10.1 million in working capital.2019 compared to a net loss of $48.7 million in 2018.


Cash Flows Used in Investing Activities


NetThe change in net cash used in investing activities for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018, was $14.9 million comparedprimarily due to $11.5 milliondecreased capital expenditures during 2019 of $5.5 million.

Cash Flows Used in Financing Activities

The change in net cash used in financing activities for the nine months ended September 30, 2017, and the increase between these periods was due2019 compared to increased capital expenditures in 2018.

Cash Flows Used in Financing Activities

Net cash used in financing activities was $0.0 million for the nine months ended September 30, 2018 compared to $2.3was the result of cash distributions totaling $37.4 million forpaid during the nine months ended September 30, 2017 and the decrease between these periods was the result of quarterly cash2019, compared to no distributions paid in 2017 with none being paid induring 2018.


Table of Contents

Off-Balance Sheet Arrangements




Forward-Looking Statements

This Report, including this Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains “forward-looking statements”We do not have any “off-balance sheet arrangements” as such term is defined bywithin the SEC, including statements concerning contemplated transactions and strategic plans, expectations and objectives for future operations. Forward-looking statements include, without limitation:

statements, other than statements of historical fact, that address activities, events or developments that we expect, believe or anticipate will or may occur in the future;

statements relating to future financial or operational performance, future distributions, future capital sources and capital expenditures; and

any other statements preceded by, followed by or that include the words “anticipates,” “believes,” “expects,” “plans,” “intends,” “estimates,” “projects,” “could,” “should,” “may” or similar expressions.

Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this Report, including this Management’s Discussion and Analysis of Financial Condition and Results of Operations, are reasonable, we give no assurance that such plans, intentions or expectations will be achieved. These statements are based on assumptions made by us based on our experience and perception of historical trends, current conditions, expected future developments and other factors that we believe are appropriate in the circumstances. Such statements are subject to a number of risks and uncertainties, many of which are beyond our control. You are cautioned that any such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements as a result of various factors, including but not limited to those set forth under the section captioned “Risk Factors” in the 2017 Form 10-K, filed with the SEC on February 23, 2018. Such factors include, among others:

our ability to make cash distributions on the common units;

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

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

the cyclical nature of our business;

the seasonal nature of our business;

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

our reliance on pet coke that we purchase from CVR Refining;
our reliance on the natural gas, electricity, oxygen, nitrogen and compressed dry air that we purchase from third parties;

the supply and price levels of essential raw materials;

the risk of a material decline in production at our nitrogen fertilizer plants;

accidents or other unscheduled shutdowns or distributions 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 or renew permits to operating our business.;

competition in the nitrogen fertilizer businesses;





capital expenditures and potential liabilities arising from environmental laws and regulations;

existing and proposed laws, rulingsrules and regulations including but not limited to those relating to climate change, alternative energy or fuel sources, and the end-use and application of fertilizers;

new regulations concerning the transportation of hazardous chemicals, risks of terrorism, the security of chemical manufacturing facilities and other matters beyond our control;

the risk of security breaches;

our lack of asset diversification;

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

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

our partial dependence on customer and distributor transportation of purchased goods;

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

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

the risk of labor disputes and adverse employee relations;

risks relating to our relationships with CVR Energy and CVR Refining;

control of our general partner by CVR Energy;

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

restrictions in our debt agreements;
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; and

our ability to recover under our insurance policies for damages or losses in full or at all.

All forward-looking statements contained in this Report speak only as of the date of this Report. We undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that occur after the date of this Report, or to reflect the occurrence of unanticipated events, except to the extent required by law.SEC.






Item 3. Quantitative and Qualitative Disclosures About Market Risk


There have been no material changes to our market risks as of September 30, 2018 and for the three and nine months ended September 30, 2018 from2019 as compared to the risks discussed in Part II, Item 7A of our 20172018 Form 10-K.


Item 4. Controls and Procedures


Evaluation of Disclosure Controls and Procedures


As of September 30, 2018,2019, we have evaluated, under the direction of our Executive Chairman, Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e). Based upon and as of the date of that evaluation, our Executive Chairman, Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Partnership’s management, including our Executive Chairman, Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer as appropriate, to allow timely decisions regarding required disclosure.


Changes in Internal Control Over Financial Reporting


There hashave been no material changechanges in the Partnership’s internal controlcontrols over financial reporting required by Rule 13a-15 of the Exchange Act that occurred during the fiscal quarter ended September 30, 20182019 that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.





Part II. Other Information


PART II. OTHER INFORMATION

Item 1. Legal Proceedings


See Note 9 ("11 (“Commitments and Contingencies"Contingencies”) to Part I, Item 1 of this Report, which is incorporated by reference into this Part II, Item 1, for a description of certain litigation, legal, and administrative proceedings and environmental matters.




September 30, 2019 | 31


Item 1A. Risk Factors


There have been no material changes from theto our risk factors previously disclosedas of and for the three and nine months ended September 30, 2019 as compared to the risks discussed in the “Risk Factors” sectionPart I, Item 1A of our 20172018 Form 10-K.


Item 5. Other Information


None.On October 22, 2019, the Audit Committee of CVR Energy and the Conflicts Committee of the Board of Directors of the general partner of CVR Partners each agreed to authorize the exchange of certain parcels of property owned by subsidiaries of CVR Energy with an equal number of parcels owned by subsidiaries of CVR Partners, all located in Coffeyville, Kansas (the “Property Swap”). This Property Swap will enable each such subsidiary to create a more usable contiguous parcel of land near its own operating footprint. The Partnership will account for this transaction in accordance with the ASC 805-50 guidance on transferring assets between entities under common control.





Item 6. Exhibits

EXHIBIT INDEX
Exhibit
Number
 


Exhibit Description
   
 
 
 
 
 
101* The following financial information for CVR Partners, LP’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018,2019, formatted in XBRL (“Extensible Business Reporting Language”) includes: (1) Condensed Consolidated Balance Sheets (unaudited), (2) Condensed Consolidated Statements of Operations (unaudited), (3) Condensed Consolidated Statements of Partners’ Capital (unaudited), (4) Condensed Consolidated Statements of Cash Flows (unaudited) and (4)(5) the Notes to Condensed Consolidated Financial Statements (unaudited), tagged in detail.
 

*Filed herewith.
Furnished herewith.



PLEASE NOTE: Pursuant to the rules and regulations of the SEC, we may file or incorporate by reference agreements referenced as exhibits to the reports that we file with or furnish to the SEC. The agreements are filed to provide investors with information regarding their respective terms. The agreements are not intended to provide any other factual information about the Partnership, its business or operations. In particular, the assertions embodied in any representations, warranties and covenants contained in the agreements may be subject to qualifications with respect to knowledge and materiality different from those applicable to investors and may be qualified by information in confidential disclosure schedules not included with the exhibits. These disclosure schedules may contain information that modifies, qualifies and creates exceptions to the representations, warranties and covenants set forth in the agreements. Moreover, certain representations, warranties and covenants in the agreements may have been used for the purpose of allocating risk between the parties, rather than establishing matters as facts. In addition, information concerning the subject matter of the representations, warranties and covenants may have changed after the date of the respective agreement, which subsequent information may or may not be fully reflected in the Partnership’s public disclosures. Accordingly, investors should not rely on the representations, warranties and covenants in the agreements as characterizations of the actual state of facts about the Partnership, its business or operations on the date hereof.


September 30, 2019 | 32






SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

  CVR Partners, LP
  
By:CVR GP, LLC, its general partner
    
October 25, 201824, 2019 By:/s/ TRACYTracy D. JACKSONJackson
  

Executive Vice President and Chief Financial Officer
  

(Principal Financial Officer)
    
October 25, 201824, 2019 By:/s/ MATTHEWMatthew W. BLEYBley
   Chief Accounting Officer and Corporate Controller
   (Principal Accounting Officer)
    





27
September 30, 2019 | 33