The following dialogue and evaluation of our monetary situation, outcomes of
operations and money stream must be learn along side our consolidated
monetary statements and associated notes and with the statistical data and
monetary information included elsewhere on this Report. References to "CVR Partners",
the "Partnership", "we", "us", and "our" might consult with consolidated subsidiaries
of CVR Partners or one or each of the services, because the context might require.This dialogue and evaluation covers the years ended December 31, 2022 and 2021
and discusses year-to-year comparisons between such durations. The discussions of
the 12 months ended December 31, 2020 and year-to-year comparisons between the years
ended December 31, 2021 and 2020 that aren't included on this Annual Report on
Form 10-Ok may be present in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Part II, Item 7 of the Partnership's
Annual Report on Form 10-Ok for the fiscal 12 months ended December 31, 2021 filed on
February 23, 2022, and such discussions are integrated by reference into this
Report. Reflected on this dialogue and evaluation is how administration views the
Partnership's present monetary situation and outcomes of operations together with
key exterior variables and administration actions which will affect the Partnership.
Understanding vital exterior variables, akin to market circumstances,
climate, and seasonal traits, amongst others, and administration actions taken to
handle the Partnership, handle exterior variables, amongst others, which is able to
improve customers' understanding of the Partnership, its monetary situation and
outcomes of operations. This dialogue might include ahead wanting statements
that mirror our plans, estimates and beliefs. Our precise outcomes might differ
materially from these mentioned within the ahead wanting statements. Factors that
might trigger or contribute to such variations embody, however aren't restricted to
these mentioned under and elsewhere on this Report.
Partnership Overview
CVR Partners is a Delaware restricted partnership shaped in 2011 by CVR Energy,
Inc. ("CVR Energy") to personal, function, and develop its nitrogen fertilizer business.
The Partnership produces and distributes nitrogen fertilizer merchandise, that are
utilized by farmers to enhance the yield and high quality of their crops. The Partnership
produces these merchandise at two manufacturing services, one positioned in
Coffeyville, Kansas operated by its wholly owned subsidiary, Coffeyville
Resources Nitrogen Fertilizers, LLC ("CRNF") (the "Coffeyville Facility") and
one positioned in East Dubuque, Illinois operated by its wholly owned subsidiary,
East Dubuque Nitrogen Fertilizers, LLC ("EDNF") (the "East Dubuque Facility").
Our principal merchandise are ammonia and urea ammonium nitrate ("UAN"). All of our
merchandise are offered on a wholesale foundation. References to CVR Partners, the
Partnership, "we", "us", and "our" might consult with consolidated subsidiaries of CVR
Partners or one or each of the services, because the context might require.
Additionally, because the context might require, references to CVR Energy might consult with
CVR Energy and its consolidated subsidiaries which embody its petroleum and
renewables refining, advertising, and logistics operations. December 31, 2022
| 33
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Strategy and Goals
The Partnership has adopted Mission and Values, which articulate the
Partnership’s expectations for the way it and its staff do business every and
daily.
Mission and Core Values Our Mission is to be a prime tier North American nitrogen-based fertilizer firm
as measured by protected and dependable operations, superior efficiency and worthwhile
progress. The basis of how we function is constructed on 5 core Values:
•Safety – We at all times put security first. The safety of our staff,
contractors and communities is paramount. We have an unwavering dedication to
security above all else. If it is not protected, then we do not do it.
•Environment - We take care of the environment. Complying with all laws and
minimizing any environmental affect from our operations is important. We
perceive our obligation to the surroundings and that it is our obligation to guard
it.
•Integrity – We require excessive business ethics. We adjust to the legislation and
apply sound company governance. We solely conduct business one way-the proper
means with integrity.
•Corporate Citizenship - We are proud members of the communities the place we
function. We are good neighbors and know that it is a privilege we won't take for
granted. We search to make a constructive financial and social affect via our
monetary donations and the contributions of time, data and expertise of our
staff to the locations the place we dwell and work. •Continuous Improvement - We imagine in each particular person and crew success. We
foster accountability beneath a performance-driven tradition that helps inventive
pondering, teamwork, range and private growth in order that staff can
notice their most potential. We use outlined work practices for consistency,
effectivity and to create worth throughout the organization.
Our core Values are pushed by our folks, inform the way in which we do business every and
daily and improve our potential to perform our mission and associated
strategic aims.
Strategic Objectives
We have outlined the next strategic aims to drive the accomplishment
of our mission:
Environmental, Health & Safety (“EH&S”) – We intention to attain steady
enchancment in all EH&S areas via guaranteeing our folks’s dedication to
environmental, well being and security comes first, the refinement of present
insurance policies, steady coaching, and enhanced monitoring procedures.
Reliability - Our objective is to attain industry-leading utilization charges at each
of our services via protected and dependable operations. We are specializing in
enhancements in day-to-day plant operations, figuring out different sources for
plant inputs to scale back misplaced time attributable to third-party operational constraints, and
optimizing our business and advertising capabilities to keep up plant operations
at their highest degree.
Market Capture – We repeatedly consider alternatives to enhance the
services’ realized pricing on the gate and cut back variable prices incurred in
manufacturing to maximise our seize of market alternatives.
Financial Discipline – We try to be as environment friendly as potential by sustaining
low working prices and disciplined deployment of capital.
December 31, 2022 | 34
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Achievements
From the start of the fiscal 12 months via the date of submitting, we
efficiently executed numerous achievements in help of our strategic
aims proven under:
Safety Reliability Market Capture Financial Discipline
Achieved reductions in course of security tier 1
incident price and whole recordable harm price ü
ü
of 37% and 86%, respectively, in comparison with 2021
Safely accomplished the deliberate turnarounds at
each services on time and on finances, as effectively ü ü ü ü
as inspected, repaired and changed main
tools as mandatory throughout this downtime
Achieved file UAN manufacturing volumes on the ü ü
Coffeyville Facility in March 2022
Achieved file ammonia manufacturing on the East ü ü
Dubuque Facility in December 2022
Completed transaction meant to monetize 45Q
tax credit and obtained an preliminary upfront ü
cost, internet of bills, of $18.1 million in
January 2023
Declared money distribution of $10.50 per widespread
unit for the fourth quarter of 2022, bringing ü ü
cumulative distributions declared so far of
$24.58 per widespread unit associated to 2022
Achieved common discount in CO2e emissions of ü
over 1 million metric tons per 12 months since 2020
Completed focused $95 million debt discount
plan with the compensation of the remaining $65
million steadiness of the 9.25% Senior Secured
Notes, due 2023 (the "2023 Notes") within the first ü
quarter of 2022 for a complete discount in annual
money curiosity expense of roughly $9
million
Repurchased over 111,000 widespread items for $12.4 ü
million
Environmental, Social & Governance (“ESG”) Highlights
In the previous 12 months, we achieved quite a few milestones via our dedication to
sustainability, together with environmental and security stewardship, range and
inclusion, neighborhood outreach and sound company governance. In December 2022,
CVR Energy revealed its first public report based mostly on the Sustainability
Accounting Standards Board requirements, which incorporates data concerning our
ESG accomplishments. CVR Energy's 2021 Environmental, Social & Governance Report
("2021 ESG Report") is obtainable at CVR Partner's web site at
www.CVRPartners.com. CVR Energy's 2021 ESG Report doesn't represent part of,
and isn't integrated by reference into, this Annual Report on Form 10-Ok or
every other report we file with (or furnish to) the SEC, whether or not made earlier than or
after the date of this Annual Report on Form 10-Ok.
Industry Factors and Market Indicators
Within the nitrogen fertilizer business, earnings and money flows from operations
are primarily affected by the connection between nitrogen fertilizer product
costs, utilization, and working prices and bills, together with pet coke and
pure gasoline feedstock prices. The worth at which nitrogen fertilizer merchandise are finally offered depends upon
quite a few elements, together with the worldwide provide and demand for nitrogen fertilizer
merchandise which, in flip, depends upon, amongst different elements, world grain demand and
manufacturing ranges, modifications in world inhabitants, the cost and availability of
fertilizer transportation infrastructure, climate circumstances, the provision
of imports, the provision and worth of feedstocks to provide nitrogen
fertilizer, and the extent of presidency intervention in agriculture markets. Nitrogen fertilizer costs are additionally affected by native elements, together with native
market circumstances and the working ranges of competing services. An growth
or upgrade of opponents' services, new facility growth, political and
financial developments, and different elements are more likely to proceed to play an
necessary function in nitrogen fertilizer {industry} economics. These December 31, 2022
| 35
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elements can affect, amongst different issues, the extent of inventories out there,
leading to worth volatility and a discount in product margins. Moreover, the
{industry} sometimes experiences seasonal fluctuations in demand for nitrogen
fertilizer merchandise.
General Business Environment
Russia-Ukraine Conflict - In February 2022, Russia invaded Ukraine,
considerably impacting world fertilizer and agriculture markets. The Black Sea
is a significant export level for nitrogen fertilizer and grains from Russia and
Ukraine. Since the invasion started, the Black Sea has been closed to exports
which prompted tightening world provide circumstances for nitrogen fertilizer in
advance of spring planting and wheat and corn availability, as Russia and
Ukraine are main wheat exporters and Ukraine is a significant corn exporter. In 2022,
grain harvested in Ukraine was roughly 40% decrease than 2021 attributable to lack of
planting inputs, gas, and staff to finish the planting of crops. The
potential to export grains from Ukraine, notably wheat, have improved however
proceed to be restricted attributable to lack of entry to export terminals within the Black
Sea and restricted rail or trucking capability. Additionally, many international locations have
formally or informally adopted sanctions on numerous Russian exports and
people affiliated with Russian authorities management. While fertilizers
haven't been formally sanctioned by international locations, many shoppers are both
unwilling to buy Russian fertilizers or logistics make it too pricey to
import Russian fertilizers. Additionally, pure gasoline provided from Russia to
Western Europe has been constrained and pure gasoline costs have remained
elevated since September 2021, inflicting a good portion of European
nitrogen fertilizer manufacturing capability to be curtailed or prices to be elevated
in comparison with opponents in different areas of the world. Overall, these occasions
have prompted grain and fertilizer costs to rise, and we at present anticipate these
circumstances to persist via the spring of 2023. The final final result of the
Russia-Ukraine battle and any related market disruptions are tough to
predict and should have an effect on our business in unexpected methods. COVID-19 - The financial results from the COVID-19 pandemic on our business had been
and should once more be vital. Although our business has recovered for the reason that
onset of the pandemic in March 2020, there continues to be uncertainty and
unpredictability concerning the lingering impacts to the worldwide economic system, together with
in reference to the unfold of variants of COVID-19 and ensuing
restrictions, that would negatively have an effect on our business, monetary situation,
outcomes of operations , and liquidity in future durations. The Partnership believes the final business surroundings wherein it operates
will proceed to stay unstable, pushed by uncertainty across the availability
and costs of its feedstocks, demand for its merchandise, inflation, and world
provide disruptions. As a end result, future working outcomes and present and
long-term monetary circumstances may very well be negatively impacted if financial
circumstances decline and stay unstable. Due to the uncertainty of the worldwide
restoration, together with its length, timing, and power, the Partnership isn't
in a position at the moment to foretell the extent to which these occasions might have a
materials, or any, impact on its monetary or operational leads to future
durations.
Market Indicators While there's threat of shorter-term volatility given the inherent nature of the
commodity cycle, the Partnership believes the long-term fundamentals for the
U.S. nitrogen fertilizer {industry} stay intact. The Partnership views the
anticipated mixture of (i) growing world inhabitants, (ii) lowering
arable land per capita, (iii) continued evolution to extra protein-based diets in
creating international locations, (iv) sustained use of corn and soybeans as feedstock for
the home manufacturing of ethanol and different renewable fuels, and (v)
positioning on the decrease finish of the worldwide cost curve ought to present a strong
basis for nitrogen fertilizer producers within the United States over the
long term. Corn and soybeans are two main crops planted by farmers in North America. Corn
crops end result within the depletion of the quantity of nitrogen inside the soil wherein
it's grown, which in flip, leads to the necessity for this nutrient to be
replenished after every rising cycle. Unlike corn, soybeans are capable of receive
most of their very own nitrogen via a course of often called "N fixation." As such,
upon harvesting of soybeans, the soil retains a specific amount of nitrogen which
leads to decrease demand for nitrogen fertilizer for the next corn planting
cycle. Due to those elements, nitrogen fertilizer shoppers typically function a
balanced corn-soybean rotational planting cycle as evident by the chart
introduced under for 2022, 2021, and 2020. The relationship between the full acres planted for each corn and soybeans has
a direct affect on the general demand for nitrogen merchandise, because the market and
demand for nitrogen will increase with elevated corn acres and reduces with
elevated soybean acres. Additionally, an estimated 11.6 billion kilos of
soybean oil is predicted for use in producing cleaner renewables in advertising
12 months 2022/2023. Multiple refiners have introduced renewable diesel growth
initiatives for 2023 and past, which is able to solely improve the demand for soybeans
and probably for corn and canola. December 31, 2022
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The United States Department of Agriculture ("USDA") estimates that in spring
2022 farmers planted 88.6 million acres of corn, representing a lower of 5.1%
in corn acres planted as in comparison with 93.4 million corn acres in 2021. Planted
soybean acres had been estimated to be 87.5 million acres, representing a 0.3%
improve in soybean acres planted as in comparison with 87.2 million soybean acres in
2021. The estimated mixed corn and soybean planted acres of 176.1 million in
2022 is a 2.5% lower from the full acreage planted in 2021, which was the
highest in historical past. Due to larger enter prices for corn planting and elevated
demand for soybeans, notably for renewable diesel manufacturing, it was extra
favorable for farmers to plant soybeans in comparison with corn. The decrease planted corn
acres in 2022 and decrease corn manufacturing are anticipated to be supportive of corn
costs for 2023. Ethanol is mixed with gasoline to fulfill renewable gas customary necessities
and for its octane worth. Since 2006, ethanol manufacturing has consumed
roughly 36% of the U.S. corn crop, so demand for corn typically rises and
falls with ethanol demand, as evidenced within the charts under.
U.S. Plant Production of Fuel Ethanol (1) Corn and Soybean Planted Acres (2)
[[Image Removed: cvi-20221231_g4.jpg]][[Image Removed: cvi-20221231_g5.jpg]]
(1)Information used inside this chart was obtained from the U.S. Energy
Information Administration (“EIA”) via December 31, 2022.
(2)Information used inside this chart was obtained from the USDA, National
Agricultural Statistics Services as of December 31, 2022.
Weather continues to be a important variable for crop manufacturing. Even with excessive
planted acres and trendline yields per acre, within the United States, stock
ranges for corn and soybeans stay under historic ranges and costs have
remained elevated. With tight grain and fertilizer stock ranges pushed by
the Russia-Ukraine battle, costs for grains and fertilizers are anticipated to
stay elevated via the spring of 2023. While the climate circumstances had been
tough early in spring 2022, farmers had been capable of full the crop planting
later than regular. Demand for nitrogen fertilizer, in addition to different crop inputs,
was robust for the spring 2022 planting season. During the summer time 2022 rising
season, extreme drought circumstances had been skilled in Asia, Europe, and elements of
the U.S. As a end result, crop yields are projected to be under expectations and
grain inventories are projected to be on the low finish of historic ranges,
inflicting grain costs to rise. We anticipate tight grain inventories to positively
affect planted acreage for the spring of 2023 and increase the demand for nitrogen
fertilizer. On June 30, 2021, CF Industries Nitrogen, L.L.C., Terra Nitrogen, Limited
Partnership, and Terra International (Oklahoma) LLC filed petitions with the
U.S. Department of Commerce ("USDOC") and the U.S. International Trade
Commission (the "ITC") requesting the initiation of antidumping and
countervailing obligation investigations on imports of UAN from Russia and Trinidad
and Tobago ("Trinidad"). On July 18, 2022, the ITC made a damaging ultimate harm
dedication regarding its investigation of imports from Russia and Trinidad
regardless of USDOC's ultimate dedication in June that UAN is sponsored and dumped in
the U.S. market by producers in each international locations. Since the choice in July 2022,
we've noticed minimal affect on the availability or demand for nitrogen fertilizer
on account of these actions. December 31, 2022 | 37
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The charts under present related market indicators by month via December 31,
2022:
Ammonia and UAN Market Pricing (1) Natural Gas and Pet Coke Market Pricing (1)
[[Image Removed: cvi-20221231_g6.jpg]][[Image Removed: cvi-20221231_g7.jpg]]
(1)Information used inside these charts was obtained from varied third-party
sources together with Green Markets (a Bloomberg Company), Pace Petroleum Coke
Quarterly, and the EIA, amongst others.
Results of Operations
The following must be learn along side the knowledge outlined within the
earlier sections of this Part II, Item 7 and the monetary statements and
associated notes thereto in Part II, Item 8 of this Report.
The chart introduced under summarizes our ammonia utilization charges on a
consolidated foundation for the years ended December 31, 2022, 2021, and 2020.
Utilization is a vital measure utilized by administration to evaluate operational
output at every of the Partnership's services. Utilization is calculated as
precise tons of ammonia produced divided by capability. Utilization is introduced solely on ammonia manufacturing, somewhat than every nitrogen
product, because it offers a comparative baseline in opposition to {industry} friends and
eliminates the disparity of facility configurations for upgrade of ammonia into
different nitrogen merchandise. With manufacturing primarily targeted on ammonia upgrade
capabilities, we imagine this measure offers a significant view of how we
function. December 31, 2022 | 38
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Consolidated Ammonia Utilization[[Image Removed: cvi-20221231_g8.jpg]] On a consolidated foundation, utilization decreased 11% to 81% for the 12 months ended
December 31, 2022 in comparison with the 12 months ended December 31, 2021. This lower
was primarily because of the completion of deliberate turnarounds at each services in
the third quarter of 2022, together with unplanned downtime in 2022 related to
the Messer air separation plant (the "Messer Outages") on the Coffeyville
Facility and varied items of apparatus on the East Dubuque Facility, in contrast
to unplanned downtime on the Coffeyville Facility and the East Dubuque Facility
in July and September 2021, respectively, attributable to externally pushed energy outages
and downtime on the East Dubuque Facility in October 2021 for tools restore. Sales and Pricing per Ton - Two of our key working metrics are whole gross sales
volumes for ammonia and UAN, together with the product pricing per ton realized at
the gate. Product pricing on the gate represents internet gross sales much less freight income
divided by product gross sales quantity in tons and is proven with a purpose to present a
pricing measure comparable throughout the fertilizer {industry}. Sales (thousand tons) Product Pricing at Gate ($ per ton) [[Image Removed: cvi-20221231_g9.jpg]][[Image Removed: cvi-20221231_g10.jpg]]
For the 12 months ended December 31, 2022, whole product gross sales volumes had been
unfavorable pushed by decrease manufacturing at each services because of the deliberate
turnarounds within the third quarter of 2022, in addition to elevated downtime from the
Messer Outages on the Coffeyville Facility and varied items of apparatus at
the East Dubuque Facility in 2022, as in comparison with 2021. For the 12 months ended
December 31, 2022, whole product gross sales had been favorable pushed by gross sales worth
will increase of 88% for ammonia and 84% for UAN. Ammonia and UAN gross sales costs had been
favorable primarily attributable to continued tight market circumstances attributable to decrease
fertilizer provide pushed by ongoing impacts from the Russia-Ukraine battle,
together with lowered manufacturing from Europe on account of the excessive power worth
surroundings, and better crop pricing. December 31, 2022
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Production Volumes - Gross tons produced for ammonia characterize the full ammonia
produced, together with ammonia produced that was upgraded into different fertilizer
merchandise. Net tons obtainable on the market characterize the ammonia obtainable on the market
that was not upgraded into different fertilizer merchandise. Production for the 12 months
ended December 31, 2022 was impacted by unplanned downtime related to the
Messer Outages on the Coffeyville Facility and varied items of apparatus at
the East Dubuque Facility in 2022, together with the completion of the deliberate
turnarounds at each services through the third quarter of 2022. The desk under
presents these metrics for the years ended December 31, 2022, 2021, and 2020:
Year Ended December 31,
(in 1000's of tons) 2022 2021 2020
Ammonia (gross produced) 703 807 852
Ammonia (internet obtainable on the market) 213 275 303
UAN 1,140 1,208 1,303 Feedstock - Our Coffeyville Facility makes use of a pet coke gasification course of to
produce nitrogen fertilizer. Our East Dubuque Facility makes use of pure gasoline in its
manufacturing of ammonia. The desk under presents these feedstocks for each
services for the years ended December 31, 2022, 2021, and 2020:
Year
Ended December 31,
2022 2021 2020
Petroleum coke utilized in manufacturing (thousand tons) 425 514 523
Petroleum coke ({dollars} per ton) $ 52.88 $ 44.69 $ 35.25
Natural gasoline utilized in manufacturing (1000's of 6,905 8,049 8,611
MMBtu) (1)
Natural gasoline utilized in manufacturing ({dollars} per MMBtu) $ 6.66 $ 3.95 $ 2.31
(1)
Natural gasoline in cost of supplies and different 6,701 7,848 9,349
(1000's of MMBtu) (1)
Natural gasoline in cost of supplies and different $ 6.37 $ 3.83 $ 2.35
({dollars} per MMBtu) (1)
(1)The feedstock pure gasoline proven above doesn’t embody pure gasoline used for
gas. The cost of gas pure gasoline is included in Direct working bills
(unique of depreciation and amortization).
Financial Highlights
Overview - For the 12 months ended December 31, 2022, the Partnership's working
earnings and internet earnings had been $319.9 million and $286.8 million, respectively, a
$185.4 million improve in working earnings and a $208.6 million improve in internet
earnings, respectively, in comparison with the 12 months ended December 31, 2021. These
will increase had been primarily pushed by larger product gross sales costs for UAN and
ammonia in 2022, partially offset by lowered gross sales volumes, elevated prices
related to the 2 deliberate turnarounds through the third quarter of 2022,
and elevated feedstock costs in 2022.
Net Sales Operating Income (Loss) [[Image Removed: cvi-20221231_g11.jpg]][[Image Removed: cvi-20221231_g12.jpg]] December 31, 2022 | 40
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Table of ContentsNet Income (Loss) EBITDA (1)
[[Image Removed: cvi-20221231_g13.jpg]][[Image Removed: cvi-20221231_g14.jpg]]
(1)See “Non-GAAP Reconciliations” part under for reconciliations of the
non-GAAP measures proven above.
Net Sales - Net gross sales elevated by $303.0 million to $835.6 million for the 12 months
ended December 31, 2022 in comparison with the 12 months ended December 31, 2021. This
improve was primarily attributable to favorable UAN and ammonia pricing circumstances which
contributed $347.7 million in larger revenues, partially offset by decreased
gross sales volumes which lowered revenues by $53.8 million in comparison with the 12 months ended
December 31, 2021. For the years ended December 31, 2022 and 2021, internet gross sales
included $34.8 million and $31.4 million in freight income, respectively, and
$11.3 million and $10.3 million in different income, respectively.
The following desk demonstrates the affect of modifications in gross sales volumes and
pricing for the first parts of internet gross sales, excluding urea merchandise,
freight, and different income, for the 12 months ended December 31, 2022 in comparison with the
12 months ended December 31, 2021:
Price Volume
(in 1000's) Variance Variance
UAN $ 254,225 $ (13,708)
Ammonia 93,521 (40,138)For the 12 months ended December 31, 2022 in comparison with the 12 months ended December 31,
2021, ammonia and UAN gross sales costs had been favorable primarily attributable to continued
tight market circumstances attributable to decrease fertilizer provide pushed by ongoing impacts
from the Russia-Ukraine battle, together with lowered manufacturing from Europe as a
results of the excessive power worth surroundings, and better crop pricing. Total
product gross sales volumes had been unfavorable pushed by decrease manufacturing attributable to
unplanned downtime related to the Messer Outages on the Coffeyville
Facility and varied items of apparatus on the East Dubuque Facility in 2022,
together with the completion of the deliberate turnarounds at each services throughout
the third quarter of 2022. December 31, 2022 | 41
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Cost of Materials and Other Direct Operating Expenses (1)
[[Image Removed: cvi-20221231_g15.jpg]][[Image Removed: cvi-20221231_g16.jpg]]
(1)Exclusive of depreciation and amortization expense.
Cost of Materials and Other – For the 12 months ended December 31, 2022, cost of
supplies and different was $130.9 million in comparison with $98.3 million for the 12 months
ended December 31, 2021. The $32.6 million improve was pushed primarily by
will increase in purchases of nitrogen and ammonia of $16.8 million, elevated
pure gasoline prices of $14.3 million, and better distribution prices of
$3.8 million. These will increase had been partially offset by a list build
contributing $2.3 million.
Direct Operating Expenses (unique of depreciation and amortization) - For the
12 months ended December 31, 2022, direct working bills (unique of
depreciation and amortization) had been $270.2 million in comparison with $198.7 million
for the 12 months ended December 31, 2021. The $71.5 million variance was primarily
attributable to larger turnaround prices incurred through the deliberate turnarounds at each
services throughout 2022, which elevated turnaround bills by $30.5 million,
elevated restore and upkeep bills by $14.9 million, and elevated
personnel prices by $2.7 million. In addition to those turnaround associated
will increase, there have been $14.2 million of upper costs for pure gasoline for gas
functions, $4.0 million of elevated working supplies and workplace prices,
$3.5 million associated to larger electrical energy pricing, and $2.6 million of upper
insurance coverage prices. These will increase had been partially offset by a list build
contributing $2.7 million.
Depreciation and Amortization Selling, General, and Administrative Expenses and
Other[[Image Removed: cvi-20221231_g17.jpg]][[Image Removed: cvi-20221231_g18.jpg]]
Depreciation and Amortization Expense - Depreciation and amortization expense
elevated $8.6 million for the 12 months ended December 31, 2022 in comparison with the 12 months
ended December 31, 2021, primarily on account of $8.2 million of accelerated December 31, 2022 | 42
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depreciation associated to varied belongings scheduled for retirement throughout our 2022
deliberate turnarounds, in addition to depreciation on new initiatives positioned into service
throughout these turnarounds.Selling, General, and Administrative Expenses, and Other - Selling, basic, and
administrative bills and different elevated roughly $4.9 million for the
12 months ended December 31, 2022 in comparison with the 12 months ended December 31, 2021. The
improve was primarily associated to elevated personnel prices in 2022, largely
attributable to share-based compensation, contributing $3.6 million and
elevated bills for outdoor companies, public relations, and insurance coverage
contributing $1.7 million, partially offset by a lower in loss on asset
disposals of $0.7 million. Other Income, Net - Other earnings, internet for the 12 months ended December 31, 2022 was
$1.1 million, in comparison with $4.7 million for the 12 months ended December 31, 2021. The
lower was attributable to gross sales of pure gasoline on the East Dubuque Facility in
February 2021, partially offset by a $0.9 million settlement obtained in 2022
associated to an outage on the Coffeyville Facility in July 2021.
Non-GAAP Measures
Our administration makes use of sure non-GAAP efficiency measures, and reconciliations
to these measures, to guage present and previous efficiency and prospects for
the longer term to complement our monetary data introduced in accordance with
accounting ideas typically accepted within the United States ("GAAP"). These
non-GAAP monetary measures are necessary elements in assessing our working
outcomes and profitability and embody the efficiency and liquidity measures
outlined under.
The following are non-GAAP measures we current for the 12 months ended December 31,
2022:
EBITDA – Net earnings (loss) earlier than (i) curiosity expense, internet, (ii) earnings tax
expense (profit) and (iii) depreciation and amortization expense.
Adjusted EBITDA – EBITDA adjusted for sure vital non-cash gadgets and
gadgets that administration believes aren’t attributable to or indicative of our
on-going operations or which will obscure our underlying outcomes and traits.
Reconciliation of Net Cash Provided By Operating Activities to EBITDA - Net money
supplied by working actions lowered by (i) curiosity expense, internet, (ii)
earnings tax expense (profit), (iii) change in working capital, and (iv) different
non-cash changes. Available Cash for Distribution - EBITDA for the quarter excluding non-cash
earnings or expense gadgets (if any), for which adjustment is deemed mandatory or
acceptable by the board of administrators of our basic accomplice (the "Board") in
its sole discretion, much less (i) reserves for upkeep capital expenditures,
debt service and different contractual obligations and (ii) reserves for future
working or capital wants (if any), in every case, that the Board deems
mandatory or acceptable in its sole discretion. Available money for distribution
could also be elevated by the discharge of beforehand established money reserves, if any,
and different extra money, on the discretion of the Board. We current these measures as a result of we imagine they could assist buyers, analysts,
lenders, and scores businesses analyze our outcomes of operations and liquidity in
conjunction with our GAAP outcomes, together with, however not restricted to, our working
efficiency as in comparison with different publicly traded corporations within the fertilizer
{industry}, with out regard to historic cost foundation or financing strategies, and our
potential to incur and repair debt and fund capital expenditures. Non-GAAP
measures have necessary limitations as analytical instruments as a result of they exclude
some, however not all, gadgets that have an effect on internet earnings and working earnings. These
measures shouldn't be thought of substitutes for his or her most immediately comparable
GAAP monetary measures. Refer to the "Non-GAAP Reconciliations" included herein
for reconciliation of those quantities. Due to rounding, numbers introduced inside
this part might not add or equal to numbers or totals introduced elsewhere
inside this doc. December 31, 2022 | 43
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Factors Affecting Comparability of Our Financial Results
Our historic outcomes of operations for the durations introduced is probably not
comparable with prior durations or to our outcomes of operations sooner or later for
the explanations mentioned under.
Major Scheduled Turnaround Activities
Coffeyville Facility - A deliberate turnaround on the Coffeyville Facility
commenced in July 2022 and was accomplished in mid-August 2022. For the 12 months ended
December 31, 2022, we incurred turnaround expense of $12.1 million. For the 12 months
ended December 31, 2021, we incurred turnaround expense of $0.3 million associated
to planning for the Coffeyville Facility's turnaround accomplished through the third
quarter of 2022. During the planning and execution of this turnaround, the
Partnership up to date the estimated helpful lives of sure belongings, which resulted
in extra depreciation expense of $6.2 million through the 12 months ended
December 31, 2022. Additionally, the Coffeyville Facility had deliberate downtime
through the fourth quarter of 2021 at a cost of $2.0 million. East Dubuque Facility - A deliberate turnaround on the East Dubuque Facility
commenced in August 2022 and was accomplished in mid-September 2022. For the 12 months
ended December 31, 2022, we incurred turnaround expense of $21.3 million. For
the 12 months ended December 31, 2021, we incurred turnaround expense of $0.6 million
associated to planning for the East Dubuque Facility's turnaround accomplished throughout
the third quarter of 2022. During the planning and execution of this turnaround,
the Partnership up to date the estimated helpful lives of sure belongings, which
resulted in extra depreciation expense of $6.4 million and $4.5 million
through the years ended December 31, 2022 and 2021, respectively.
Non-GAAP Reconciliations
Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA
Year Ended December 31,
(in 1000's) 2022 2021 2020
Net earnings (loss) $ 286,801 $ 78,155 $ (98,181)
Interest expense, internet 34,065 60,978 63,428
Income tax expense 160 57 30
Depreciation and amortization 82,137 73,480 76,077
EBITDA 403,163 212,670 41,354Goodwill impairment - - 40,969 Adjusted EBITDA $ 403,163 $ 212,670 $ 82,323 December 31, 2022 | 44
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Reconciliation of Net Cash Provided By Operating Activities to EBITDA and
Adjusted EBITDA
Year Ended December 31,
(in 1000's) 2022 2021 2020
Net money supplied by working actions $ 301,464 $ 188,725 $ 19,740
Non-cash gadgets:
Loss on extinguishment of debt (628) (8,462) -
Share-based compensation (25,264) (23,069) (1,035)
Goodwill impairment - - (40,969)
Other (977) (3,889) (5,595)
Adjustments:
Interest expense, internet 34,065 60,978 63,428
Income tax expense 160 57 30
Change in belongings and liabilities 94,343 (1,670) 5,755
EBITDA 403,163 212,670 41,354
Goodwill impairment - - 40,969
Adjusted EBITDA $ 403,163 $ 212,670 $ 82,323
Reconciliation of EBITDA to Available Cash for Distribution
Year Ended December 31,
(in 1000's) 2022 2021 2020
EBITDA $ 403,163 $ 212,670 $ 41,354
Non-cash gadgets:
Goodwill impairment - - 40,969
Current (reserves) changes for quantities associated to:
Net money curiosity expense (excluding capitalized
curiosity) (34,733) (50,562) (59,995)
Debt service (65,000) (30,000) -
Financing charges (815) (4,627) -
Maintenance capital expenditures (40,793) (16,226) (11,649)
Utility pass-through (2,700) 4,013 -
Common items repurchased (12,398) (529) (7,076)
Other (reserves) releases:
Reserve for recapture of prior damaging obtainable money - (14,980) (5,917)
Future turnaround (16,750) (10,750) (4,500)
Reserve for compensation of present portion of long-term
debt
- - (2,240)
Cash reserves for future working wants - 5,308 (5,308)
Major scheduled expenditures 29,761 2,240 2,567Available money for distribution (1) (2) $ 259,735
$ 96,557 $ (11,795)
Common items excellent 10,570 10,681 10,706 (1)Amount represents the cumulative obtainable money based mostly on full 12 months outcomes.
However, obtainable money for distribution is calculated quarterly, with
distributions (if any) being paid within the interval following declaration.
(2)The Partnership declared and paid money distributions of $5.24, $2.26, $10.05,
and $1.77 per widespread unit associated to the fourth quarter of 2021, and first,
second, and third quarters of 2022, respectively, and declared a money
distribution of $10.50 per widespread unit associated to the fourth quarter of 2022, to
be paid in March 2023. December 31, 2022 | 45
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Liquidity and Capital ResourcesOur principal supply of liquidity has traditionally been and continues to be money
from operations, which might embody money advances from prospects ensuing from
prepay contracts. Our principal makes use of of money are for working capital, capital
expenditures, funding our debt service obligations, and paying distributions to
our unitholders, as additional mentioned under. Fertilizer market circumstances improved steadily all through 2021 and into 2022
pushed by a mix of elevated demand for merchandise amid a collection of provide
disruptions that led to tight fertilizer inventories and issues round
availability of product. In the primary quarter of 2022 following the Russian
invasion of Ukraine, fertilizer costs elevated additional and have been unstable
over issues of a discount in world provide of fertilizers attributable to restrictions
on provide of Russian fertilizers and Russia's choice to limit fertilizer
exports via the top of 2022. Further, the disruption in pure gasoline flows to
Europe following the shutdown of the Nordstream pipeline in the summertime of 2022
resulted in a spike in European pure gasoline and electrical energy costs, inflicting many
nitrogen fertilizer manufacturing services in Europe to stop or curtail
operations. As a end result nitrogen fertilizer exports from the U.S. to Europe have
elevated, thereby decreasing the home availability of nitrogen fertilizers in
the United States and inflicting costs to maneuver larger. Despite the volatility in
current commodity pricing, the rise in fertilizer product pricing has had a
favorable affect to our business and has not considerably impacted our main
supply of liquidity. While we imagine demand for our fertilizer merchandise is
steady, there's nonetheless uncertainty on the horizon as international locations weigh potential
impacts of the continuing Russia-Ukraine battle. In executing monetary
self-discipline, we're persevering with to focus upkeep capital expenditures to solely
embody these initiatives that are a precedence to help persevering with protected and
dependable operations, or that are thought of important to help future
actions. When contemplating the market circumstances and actions described above, we at present
imagine that our money from operations and present money and money equivalents,
together with borrowings, as mandatory, will likely be adequate to fulfill anticipated
money necessities related to our present operations for not less than the subsequent
12 months. However, our future capital expenditures and different money necessities
may very well be larger than we at present anticipate on account of varied elements
together with, however not restricted to, rising materials and labor prices and different
inflationary pressures. Additionally, our potential to generate adequate money
from our working actions and safe extra financing depends upon our
future efficiency, which is topic to basic financial, political, monetary,
aggressive, and different elements, a few of which can be past our management. Depending on the wants of our business, contractual limitations, and market
circumstances, we might once in a while search to problem fairness securities, incur
extra debt, problem debt securities, or redeem, repurchase, refinance, or
retire our excellent debt via privately negotiated transactions, open
market repurchases, redemptions, exchanges, tender gives or in any other case, however we
are beneath no obligation to take action. There may be no assurance that we are going to search to
do any of the foregoing or that we will do any of the foregoing on
phrases acceptable to us or in any respect. On February 22, 2022, the Partnership redeemed the remaining $65 million in
mixture principal quantity of its 9.25% Senior Secured Notes, due June 2023 (the
"2023 Notes") at par, plus accrued and unpaid curiosity. This transaction
represents a major and favorable change within the Partnership's money stream and
liquidity place with annual financial savings of roughly $6.0 million in future
curiosity expense, as in comparison with our 2021 Form 10-Ok. Refer to Part II, Item 8,
Note 5 ("Long-Term Debt") of this Report for additional data. The
Partnership and its subsidiaries had been in compliance with all relevant
covenants beneath their respective debt devices as of December 31, 2022 and
via the date of submitting.
We shouldn’t have any “off-balance sheet preparations” as such time period is outlined
inside the guidelines and laws of the SEC.
Cash and Other Liquidity
As of December 31, 2022, we had money and money equivalents of $86.3 million,
together with $13.7 million of buyer advances. Combined with $35.0 million
obtainable beneath our ABL Credit Agreement, we had whole liquidity of $121.3
million as of December 31, 2022. As of December 31, 2021, we had $112.5 million
in money and money equivalents, together with $34.2 million of buyer advances.
December 31, 2022
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December 31,
(in 1000's) 2022
2021
9.25% Senior Secured Notes, due June 2023 (1) $ – $ 65,000
6.125% Senior Secured Notes, due June 2028 550,000 550,000
Unamortized low cost and debt issuance prices (3,200) (4,358)
Total long-term debt $ 546,800 $
610,642
(1)The $65 million excellent steadiness of the 2023 Notes was paid in full on
February 22, 2022 at par, plus accrued and unpaid curiosity.
As of December 31, 2022, the Partnership had the 2028 Notes and the ABL Credit
Facility, the proceeds of which can be used to fund working capital, capital
expenditures, and for different basic company functions. Refer to Part II, Item
8, Note 5 ("Long-Term Debt") of this Report for additional data.
Capital Spending
We divide capital spending wants into two classes: upkeep and progress.
Maintenance capital spending contains non-discretionary upkeep initiatives and
initiatives required to adjust to environmental, well being, and security laws.
Growth capital initiatives typically contain an growth of present capability
and/or a discount in direct working bills. We undertake progress capital
spending based mostly on the anticipated return on incremental capital employed.
Our whole capital expenditures for the years ended December 31, 2022 and 2021,
together with our estimated expenditures for 2023 are as follows:
Year Ended December 31, Estimated (1)
(in 1000's) 2022 2021 2023
Maintenance capital $ 40,793 $ 16,226 $31,000 - 33,000
Growth capital 653 9,460 2,000 - 3,000
Total capital expenditures $ 41,446 $ 25,686
$33,000 - 36,000
(1)Total 2023 estimated capitalized prices embody roughly $0.5 million of
progress associated initiatives that may require extra approvals earlier than
graduation.
Our estimated capital expenditures are topic to alter attributable to unanticipated
modifications within the cost, scope, and completion time for capital initiatives. For
instance, we might expertise surprising modifications in labor or tools prices
essential to adjust to authorities laws or to finish initiatives that
maintain or enhance the profitability of the nitrogen fertilizer services. We
may speed up or defer some capital expenditures once in a while.
Capital spending for CVR Partners is decided by the Board. We will proceed
to watch market circumstances and make changes, if wanted, to our present
capital spending or turnaround plans. The deliberate turnaround on the Coffeyville Facility commenced in July 2022 and
was accomplished in mid-August 2022. The deliberate turnaround on the East Dubuque
Facility commenced in August 2022 and was accomplished in mid-September 2022. For
the years ended December 31, 2022 and 2021, we incurred turnaround expense of
$12.1 million and $0.3 million, respectively, on the Coffeyville Facility and
$21.3 million and $0.6 million, respectively, on the East Dubuque Facility.
Additionally, the Coffeyville Facility had deliberate downtime for sure
upkeep actions through the fourth quarter of 2021 at a cost of
$2.0 million.
Distributions to Unitholders
The present coverage of the Board is to distribute all Available Cash, as
decided by the Board in its sole discretion, the Partnership generated on a
quarterly foundation. Available Cash for every quarter will likely be decided by the Board
following the top of such quarter. Available Cash for every quarter is calculated
as EBITDA for the quarter excluding non-cash earnings or expense gadgets (if any),
for which adjustment is deemed mandatory or acceptable by the Board in its sole
discretion, much less (i) reserves for upkeep capital expenditures, debt service
and different contractual obligations, and (ii) reserves for future working or
capital wants (if any), in every case, that the Board deems mandatory or
acceptable in its sole discretion. Available money for distribution December 31, 2022
| 47
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could also be elevated by the discharge of beforehand established money reserves, if any,
and different extra money, on the discretion of the Board.Distributions, if any, together with the cost, quantity, and timing thereof, are
topic to alter on the discretion of the Board. The following tables current
quarterly distributions paid by the Partnership to CVR Partners' unitholders,
together with quantities paid to CVR Energy, throughout 2022 and 2021 (quantities introduced in
the desk under might not add to totals introduced attributable to rounding):
Quarterly Distributions Paid (in 1000's)
Quarterly
Distributions
Related Period Date Paid Per
Common Unit Public Unitholders CVR Energy Total
2021 - 4th Quarter March 14, 2022 $ 5.24 $ 35,576 $ 20,394 $ 55,970
2022 - 1st Quarter May 23, 2022 2.26 15,091 8,796 23,887
2022 - 2nd Quarter August 22, 2022 10.05 67,109 39,115 106,225
2022 - third Quarter November 21, 2022 1.77 11,819 6,889 18,708
Total 2022 quarterly distributions $ 19.32 $ 129,597 $ 75,193 $ 204,790Quarterly Distributions Paid (in 1000's)
Quarterly
Distributions
Related Period Date Paid Per Common Unit Public Unitholders CVR Energy Total
2021 - 2nd Quarter August 23, 2021 $ 1.72 $ 11,678 $ 6,694 $ 18,372
2021 - third Quarter November 22, 2021 2.93 19,893 11,404 31,297
Total 2021 quarterly distributions $
4.65 $ 31,571 $ 18,098 $ 49,669
There had been no quarterly distributions declared or paid by the Partnership
associated to the primary quarter of 2021 and the fourth quarter of 2020. During the
12 months ended December 31, 2020, there have been no quarterly distributions declared or
paid by the Partnership. For the fourth quarter of 2022, the Partnership, upon approval by the Board on
February 21, 2023, declared a distribution of $10.50 per widespread unit, or $111.0
million, which is payable March 13, 2023 to unitholders of file as of March 6,
2023. Of this quantity, CVR Energy will obtain roughly $40.9 million, with
the remaining quantity payable to public unitholders.
Capital Structure
On May 6, 2020, the Board, on behalf of the Partnership, approved a unit
repurchase program (the "Unit Repurchase Program"), which was elevated on
February 22, 2021. The Unit Repurchase Program, as elevated, approved the
Partnership to repurchase as much as $20 million of the Partnership's widespread items.
During the years ended December 31, 2022 and 2021, the Partnership repurchased
111,695 and 24,378 widespread items, respectively, on the open market in accordance
with a repurchase settlement beneath Rules 10b5-1 and 10b-18 of the Securities
Exchange Act of 1934, as amended, at a cost of $12.4 million and $0.5 million,
respectively, unique of transaction prices, or a median worth of $110.98 and
$21.69 per widespread unit, respectively. As of December 31, 2022, the Partnership
had a nominal approved quantity remaining beneath the Unit Repurchase Program.
This Unit Repurchase Program doesn't obligate the Partnership to accumulate any
widespread items and could also be cancelled or terminated by the Board at any time. December 31, 2022 | 48
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Cash FlowsThe following desk units forth our money flows for the durations indicated under:
Year Ended December 31,
(in 1000's) 2022 2021 2020
Net money supplied by (utilized in):
Operating actions $ 301,464 $ 188,725 $ 19,740
Investing actions (44,623) (20,342) (18,550)
Financing actions (283,018) (86,426) (7,625)
Net (lower) improve in money and money equivalents $ (26,177) $ 81,957 $ (6,435)
Operating Activities The change in internet money flows from working actions for the 12 months ended
December 31, 2022 as in comparison with the 12 months ended December 31, 2021 is primarily
attributable to a $209 million improve in internet earnings in 2022 on account of stronger
gross sales associated to the upper worth surroundings wherein our merchandise had been offered in
2022 in comparison with 2021, and a $2.2 million internet improve in non-cash share based mostly
compensation on account of larger market costs for CVR Partners' items. This
is partially offset by an unfavorable change in working capital of $90.9 million
primarily attributable to lowering deferred revenues in 2022 in comparison with growing
deferred revenues in 2021 and growing accounts payable in 2021 in preparation
for the 2022 deliberate turnarounds as in comparison with 2022, and a $7.8 million
discount within the loss on extinguishment of debt primarily related to the
partial redemption of the 2023 Notes in June 2021.
Investing Activities
The change in internet money utilized in investing actions for the 12 months ended December
31, 2022 in comparison with the 12 months ended December 31, 2021 was attributable to elevated
capital expenditures throughout 2022 of $24.1 million ensuing from mounted asset
additions associated to each services' turnarounds in 2022.
Financing Activities
The change in internet money utilized in financing actions for the 12 months ended December
31, 2022 in comparison with the 12 months ended December 31, 2021 was primarily attributable to an
improve of $155.1 million in money distributions paid in 2022 in comparison with 2021,
a change of $32.8 million within the redemption of the remaining steadiness of the 2023
Notes throughout 2022 in comparison with the partial redemption of the 2023 Notes and the
6.5% Notes due April 2021 throughout 2021, and a rise of $11.9 million for unit
repurchases in 2022 in comparison with 2021. These are partially offset by a $3.1
million lower in deferred financing prices paid in 2022 in comparison with 2021.
Additionally, in June 2021, the Partnership accomplished a non-public providing of
$550.0 million mixture principal quantity of the 2028 Notes and used the
proceeds, plus money readily available, to redeem a portion of the 2023 Notes.
Recent Accounting Pronouncements
Refer to Part II, Item 8, Note 2 ("Summary of Significant Accounting Policies")
of this Report for a dialogue of current accounting pronouncements relevant
to the Partnership. Critical Accounting Estimates We put together our consolidated monetary statements in accordance with GAAP
requiring administration to make judgments, assumptions, and estimates based mostly on the
finest obtainable data on the time. Accounting estimates are thought of to
be important if (1) the character of the estimates and assumptions is materials due
to the degrees of subjectivity and judgment essential to account for extremely
unsure issues or the susceptibility of such issues to alter; and (2) the
affect of the estimates and assumptions on monetary situation or working
efficiency is materials. Actual outcomes might differ from the estimates and
assumptions used.December 31, 2022 | 49
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Inventory ValuationThe cost of our fertilizer product inventories is decided beneath the first-in,
first-out (FIFO) methodology. Our FIFO inventories are carried on the decrease of cost
or internet realizable worth. We evaluate the estimated realizable worth of
inventories to their cost by product at every of our services. Depending on
stock ranges, the per-ton realizable worth of our fertilizer merchandise is
estimated utilizing pricing on in-transit orders, pricing for open, fixed-price
orders that haven't shipped, and, if volumes stay unaccounted for, present
administration pricing estimates for fertilizer merchandise. Management's estimate for
present pricing displays up-to-date pricing in every facility's market as of the
finish of every reporting interval. Reductions to promoting costs for unreimbursed
freight prices are included to reach at internet realizable worth, as relevant.
During the years ended December 31, 2022 and December 31, 2021, there have been no
changes. For the 12 months ended December 31, 2020, we acknowledged a lack of
$0.7 million in stock to mirror its internet realizable worth. Due to the quantity
and variability in quantity of fertilizer product inventories maintained, modifications
in manufacturing prices, and the volatility of market pricing for fertilizer
merchandise, losses acknowledged to mirror fertilizer product inventories on the
decrease of cost or internet realizable worth might have a fabric affect on the
Partnership's outcomes of operations.
Impairment of Long-lived Assets
Long-lived belongings utilized in operations are assessed for impairment at any time when
modifications in info and circumstances point out a potential vital deterioration
in future anticipated money flows. If the sum of the undiscounted anticipated future
money flows of an asset group is lower than the carrying worth, together with
relevant liabilities, the carrying worth is written all the way down to its estimated honest
worth. Individual belongings are grouped for impairment functions based mostly on a
judgmental evaluation of the bottom degree for which there are identifiable money
flows which are largely impartial of the money flows of different belongings (for
instance, at a fertilizer facility degree). In addition, when getting ready the
anticipated future money flows or estimating the honest worth of impaired belongings, we
make a number of estimates that embody subjective assumptions associated to future
gross sales volumes, commodity costs, working prices, low cost charges, and capital
expenditures, amongst others.
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