CVR Partners(UAN) - 2025 Q2 - Quarterly Report

Preliminary Information Form 10-Q Filing Details This section provides CVR Partners, LP's basic filing information for its Quarterly Report on Form 10-Q for the period ended June 30, 2025, including registrant details and compliance status - CVR Partners, LP filed its Quarterly Report on Form 10-Q for the period ended June 30, 2025[2] Condensed Consolidated Balance Sheets (in thousands) | Indicator | Value | | :--- | :--- | | Commission file number | 001-35120 | | Registrant's telephone number | (281) 207-3200 | | Common units outstanding (July 25, 2025) | 10,569,637 | | Filer status | Accelerated filer | Important Information Regarding Forward-Looking Statements This section outlines the report's forward-looking statements, emphasizing that actual results may differ materially due to various risks and uncertainties beyond the company's control - The report contains forward-looking statements subject to risks and uncertainties, including future operations, financial position, estimated revenues, growth, capital projects, and impacts of legal proceedings[9] - Key risks include volatility in business, market conditions, fertilizer/natural gas prices, weather impacts, dependence on third-party suppliers, production levels, product pricing, and operational accidents[10] - Regulatory changes, political uncertainty, climate change initiatives, and geopolitical conflicts (e.g., Russia-Ukraine war, Middle East conflicts) are also significant factors[11] - The company does not undertake to publicly update or revise any forward-looking statements except as required by law[12] Information About Us CVR Partners, LP provides access to its SEC filings and other investor information free of charge on its website, www.CVRPartners.com, and notes the SEC also maintains a website for public filings - CVR Partners makes its annual, quarterly, and current reports, along with other investor information, available on its website (www.CVRPartners.com) and through the SEC's website (www.sec.gov)[13](index=13&type=chunk)[14] PART I. Financial Information Item 1. Financial Statements This section presents CVR Partners, LP's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, partners' capital, and cash flows, with detailed notes for the periods ended June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $242,197 | $233,541 | | Total assets | $997,996 | $1,018,724 | | Total current liabilities | $70,273 | $111,349 | | Total long-term liabilities | $611,182 | $614,305 | | Total partners' capital | $316,541 | $293,070 | | Total liabilities and partners' capital | $997,996 | $1,018,724 | - Total assets decreased by approximately $20.7 million from December 31, 2024, to June 30, 2025, while total partners' capital increased by approximately $23.5 million[17] Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations (in thousands, except per unit data) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $168,559 | $132,901 | $311,425 | $260,565 | | Operating income | $46,318 | $33,564 | $80,908 | $53,623 | | Net income | $38,768 | $26,219 | $65,856 | $38,798 | | Basic and diluted EPS | $3.67 | $2.48 | $6.23 | $3.67 | - Net sales increased by $35.6 million (26.8%) for the three months ended June 30, 2025, compared to the same period in 2024[19] - Net sales increased by $50.8 million (19.5%) for the six months ended June 30, 2025, compared to the same period in 2024[19] - Net income increased by $12.5 million (47.7%) for the three months ended June 30, 2025, compared to the same period in 2024[19] - Net income increased by $27.1 million (69.8%) for the six months ended June 30, 2025, compared to the same period in 2024[19] Condensed Consolidated Statements of Partners' Capital Condensed Consolidated Statements of Partners' Capital (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Partners' Capital | $316,541 | $293,070 | - Partners' capital increased by $23.5 million from December 31, 2024, to June 30, 2025, primarily due to net income, partially offset by cash distributions[22] - Cash distributions to common unitholders (affiliates and non-affiliates) totaled $45.26 million for the six months ended June 30, 2025, compared to $38.05 million for the same period in 2024[22][25] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $79,493 | $51,025 | | Net cash used in investing activities | $(10,690) | $(10,730) | | Net cash used in financing activities | $(45,260) | $(38,050) | | Net increase in cash and cash equivalents | $23,543 | $2,245 | | Cash and cash equivalents, end of period | $114,400 | $47,524 | - Net cash provided by operating activities increased by $28.5 million, driven by higher net income[25] - Net cash used in financing activities increased by $7.2 million, primarily due to higher cash distributions and capital lease obligation payments[25][140][142] Notes to the Condensed Consolidated Financial Statements - CVR Partners, LP is a Delaware limited partnership formed in 2011 by CVR Energy, Inc. to operate its nitrogen fertilizer business, producing ammonia and urea ammonium nitrate (UAN) at facilities in Coffeyville, Kansas, and East Dubuque, Illinois[27] Ownership Structure as of June 30, 2025 | Interest Holder | Percentage of Limited Partner Interests | | :--- | :--- | | Public common unitholders | ~60% | | CVR Energy (through subsidiaries) | ~37% | | Icahn Enterprises L.P. (IEP) and affiliates | ~3% | - The One Big Beautiful Bill Act, signed July 4, 2025, permanently extended several TCJA provisions, which the Partnership anticipates will benefit future income tax balances[31] - Total revenue for the six months ended June 30, 2025, was $311.4 million, with UAN sales contributing $195.7 million and Ammonia sales contributing $67.2 million[47] - Share-based compensation expense increased significantly, totaling $4.3 million for the six months ended June 30, 2025, compared to $2.7 million in the prior year, driven by higher market prices for common units[51] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, results of operations, and cash flows, highlighting key external variables and management actions Partnership Overview - CVR Partners, LP, a Delaware limited partnership formed by CVR Energy, Inc., operates two nitrogen fertilizer manufacturing facilities in Coffeyville, Kansas, and East Dubuque, Illinois, producing ammonia and urea ammonium nitrate (UAN) for wholesale distribution[66] Strategy and Goals - The Partnership's mission is to be a top-tier North American nitrogen-based fertilizer company, focusing on safe and reliable operations, superior performance, and profitable growth[68] - Core Values: Safety, Environment, Integrity, Corporate Citizenship, and Continuous Improvement[68] - Strategic Objectives: Continuous improvement in Environmental, Health & Safety (EH&S), achieving industry-leading utilization rates, maximizing market capture through optimized pricing and reduced variable costs, and maintaining financial discipline with low operating costs and disciplined capital deployment[69][74] Industry Factors and Market Indicators - Earnings and cash flows are primarily affected by nitrogen fertilizer product prices, utilization, and operating costs (pet coke and natural gas)[70][71] - The general business environment is expected to remain volatile due to feedstock availability/prices, product demand/prices, inflation, and global supply disruptions[73] - The One Big Beautiful Bill Act, signed July 4, 2025, permanently extended several 2017 Tax Cuts and Jobs Act (TCJA) provisions, which the Partnership anticipates will benefit future income tax balances[74] - Geopolitical matters (Russia-Ukraine war, Middle East conflicts) continue to pose significant risks to global markets, potentially disrupting fertilizer, agriculture, and feedstock trade[76] - Regulatory environment changes, including EPA's conventional biofuel volume limits (15 billion gallons for 2023-2027) and shifting climate-related rules, impact the business[77] - Long-term fundamentals for the U.S. nitrogen fertilizer industry remain strong, driven by increasing global population, decreasing arable land, evolving diets, and sustained use of corn/soybeans for renewable fuels[79] - USDA estimates 95.2 million corn acres planted in spring 2025 (up 4.9% YoY) and 83.4 million soybean acres (down 4.3% YoY), favoring corn planting due to lower input costs and relative grain prices[83] - Pet coke prices declined in 2024 and further into 2025, while natural gas prices are expected to remain volatile due to structural shortages in Europe[88] - The Coffeyville Facility is exploring utilizing natural gas as an optional feedstock and increasing ammonia production, aiming for dual feedstock flexibility[89] - The Partnership is also executing projects to improve reliability, expand diesel exhaust fluid production, and install nitrous oxide abatement units[90][91] Results of Operations Ammonia Utilization Rate | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended June 30 | 91% | 102% | | Six Months Ended June 30 | 96% | 96% | - Consolidated ammonia utilization decreased to 91% for Q2 2025 (vs. 102% in Q2 2024) due to planned downtime for control systems upgrades and minor unplanned outages at the East Dubuque Facility[100] - Net sales for the three months ended June 30, 2025, increased by $35.6 million to $168.6 million, primarily driven by favorable UAN sales volumes and prices (+$21.0 million) and ammonia sales volumes and prices (+$11.7 million)[109] - Net sales for the six months ended June 30, 2025, increased by $50.8 million to $311.4 million, driven by favorable UAN sales (+$31.3 million) and ammonia sales (+$8.0 million)[110] - UAN and ammonia sales prices were favorable in 2025 due to improved market conditions, tight inventory levels from increased planting acreage, and domestic/international production outages[111] - Cost of materials and other increased to $32.5 million (Q2 2025) and $60.4 million (YTD 2025), primarily due to increased sales volumes, higher natural gas prices, and increased distribution costs, partially offset by lower pet coke prices[115] - Direct operating expenses (exclusive of depreciation and amortization) increased to $60.5 million (Q2 2025) and $115.0 million (YTD 2025), mainly due to increased sales volumes, higher utility costs (natural gas and electricity), and increased personnel costs[116] - Selling, general, and administrative expenses increased to $8.0 million (Q2 2025) and $15.9 million (YTD 2025), primarily due to higher share-based compensation from increased market prices for CVR Partners' common units[118] Production Volumes (in thousands of tons) | Product | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Ammonia (gross produced) | 197 | 221 | 413 | 414 | | Ammonia (net available for sale) | 54 | 69 | 117 | 130 | | UAN | 321 | 337 | 668 | 643 | Feedstock Usage and Cost | Feedstock | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Petroleum coke used (thousands of tons) | 130 | 133 | 261 | 261 | | Petroleum coke cost (dollars per ton) | $56.68 | $62.96 | $49.54 | $69.21 | | Natural gas used (thousands of MMBtus) | 1,897 | 2,213 | 4,057 | 4,361 | | Natural gas cost (dollars per MMBtu) | $3.29 | $1.93 | $4.00 | $2.51 | Non-GAAP Measures Management uses non-GAAP measures like EBITDA, Adjusted EBITDA, and Available Cash for Distribution to evaluate performance and liquidity, providing insights into operating performance and debt servicing ability - Management uses non-GAAP measures like EBITDA, Adjusted EBITDA, and Available Cash for Distribution to evaluate performance and liquidity, providing insights into operating performance and debt servicing ability[119][122] Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Available Cash for Distribution (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income | $38,768 | $26,219 | $65,856 | $38,798 | | EBITDA and Adjusted EBITDA | $67,209 | $53,769 | $120,065 | $93,279 | | Available cash for distribution | $41,102 | $20,113 | $65,027 | $40,425 | - EBITDA and Adjusted EBITDA increased by $13.4 million (24.9%) for Q2 2025 and $26.8 million (28.7%) for YTD 2025[123] - Available Cash for Distribution significantly increased by $20.9 million (103.9%) for Q2 2025 and $24.6 million (60.9%) for YTD 2025[123] Liquidity and Capital Resources The primary sources of liquidity are cash from operations and existing cash/cash equivalents, supplemented by borrowings and reserves, with principal uses including working capital, capital expenditures, debt service, and unitholder distributions - The primary sources of liquidity are cash from operations and existing cash/cash equivalents, supplemented by borrowings and reserves[127] Liquidity Position (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $114,400 | $90,857 | | Available under ABL Credit Facility | $47,274 | $38,900 | | Total liquidity | $161,674 | $129,757 | - Total liquidity increased by $31.9 million from December 31, 2024, to June 30, 2025[131] - The Partnership was in compliance with all debt covenants as of June 30, 2025[130] - Total capital expenditures for the six months ended June 30, 2025, were $16.7 million, with estimated full-year 2025 expenditures between $55.0 million and $65.0 million[134] - A planned turnaround at the Coffeyville Facility is scheduled for Q4 2025, estimated to cost $15 million and last 30 days, funded by cash reserves[135] Quarterly Distributions Paid (in thousands) | Related Period | Distributions Per Common Unit | Public Unitholders | IEP | CVR Energy | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | 2024 - 4th Quarter (Paid March 10, 2025) | $1.75 | $11,381 | $305 | $6,811 | $18,497 | | 2025 - 1st Quarter (Paid May 19, 2025) | $2.26 | $14,477 | $615 | $8,796 | $23,888 | | Total 2025 quarterly distributions | $4.01 | $25,858 | $920 | $15,607 | $42,385 | - For Q2 2025, a distribution of $3.89 per common unit (approx. $41.1 million total) was declared, payable August 18, 2025[138] Cash Flows Cash Flow Summary (Six Months Ended June 30, in thousands) | Activity | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Operating activities | $79,493 | $51,025 | $28,468 | | Investing activities | $(10,690) | $(10,730) | $40 | | Financing activities | $(45,260) | $(38,050) | $(7,210) | | Net increase in cash and cash equivalents | $23,543 | $2,245 | $21,298 | - Operating cash flows increased by $28.5 million, primarily due to a $27.1 million increase in net income from favorable UAN and ammonia pricing and sales volumes[140] - Investing cash flows remained relatively stable, with a slight increase in distributions from equity method investment offset by higher capital expenditures[141] - Financing cash flows decreased by $7.2 million, mainly due to increased cash distributions paid and payments related to capital lease obligations[142] Critical Accounting Estimates - No material modifications were made to the critical accounting estimates disclosed in the 2024 Form 10-K during the three and six months ended June 30, 2025[143] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there have been no material changes to the company's market risks as of and for the three and six months ended June 30, 2025, compared to those previously disclosed in the 2024 Form 10-K - No material changes to market risks were identified for the periods ended June 30, 2025, compared to the 2024 Form 10-K[144] Item 4. Controls and Procedures This section details the evaluation of the Partnership's disclosure controls and procedures and reports on any changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures - The Executive Chairman, CEO, and CFO concluded that the Partnership's disclosure controls and procedures were effective as of June 30, 2025[145] Changes in Internal Control Over Financial Reporting - There were no material changes in the Partnership's internal control over financial reporting during the fiscal quarter ended June 30, 2025[146] PART II. Other Information Item 1. Legal Proceedings This section refers to Note 10 ('Commitments and Contingencies') in Part I, Item 1 for a description of legal, administrative, and environmental proceedings - Information on legal proceedings is incorporated by reference from Note 10 ('Commitments and Contingencies') in the financial statements[148] Item 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the 2024 Form 10-K, but acknowledges that additional unknown or immaterial risks could still adversely affect the business - No material changes to risk factors were reported from the 2024 Form 10-K[149] Item 5. Other Information This section provides updates on corporate governance and executive management, including changes to the Board of Directors and employment agreements for key executives Board of Directors - On July 28, 2025, the Board of Directors increased its size from six to seven members and appointed Kevan Vick as an independent director, effective August 1, 2025[151] Executive Management - An amendment to David L. Lamp's employment agreement allows him to resign with five months' notice[154] - David L. Lamp notified CVR Energy of his intention to resign as President and CEO of CVR Energy and its subsidiaries (except as a Director of the General Partner and CVR Energy) effective December 31, 2025[157] - Mark A. Pytosh's employment agreement was approved, appointing him as President and CEO and a Director of CVR Energy, effective January 1, 2026, with a base salary of $1,100,000 and eligibility for annual bonuses and long-term incentive awards[158] - Mr. Pytosh is eligible for transaction bonuses of $10 million for a Significant CVI Transaction and $2.5 million for a Significant UAN Transaction[159] - The agreement also outlines severance payments for a Qualifying Termination, including a cash payment of 1.5 times salary plus average annual bonus, a pro-rata bonus, and accelerated vesting of unvested incentive awards[160] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including incentive plans, employment agreements, and certifications, and provides a disclaimer regarding the nature of information contained in these exhibits - The report includes various exhibits such as the 2025 Long-Term Incentive Plan, performance-based bonus plan, and amendments to employment agreements for key executives[166] - Exhibit 10.6: Amendment to Employment Agreement with David L. Lamp[166] - Exhibit 10.7: Employment Agreement with Mark A. Pytosh[166] - Certifications under Rule 13a-14(a)/15d-14(a) and Section 1350 are also filed[166]