Company Quick10K Filing
CVR Partners
Price3.99 EPS-0
Shares113 P/E-39
MCap452 P/FCF7
Net Debt548 EBIT-12
TEV1,000 TEV/EBIT-87
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-06-30 Filed 2020-08-04
10-Q 2020-03-31 Filed 2020-05-07
10-K 2019-12-31 Filed 2020-02-20
10-Q 2019-09-30 Filed 2019-10-24
10-Q 2019-06-30 Filed 2019-07-25
10-Q 2019-03-31 Filed 2019-04-25
10-K 2018-12-31 Filed 2019-02-21
10-Q 2018-09-30 Filed 2018-10-25
10-Q 2018-06-30 Filed 2018-07-26
10-Q 2018-03-31 Filed 2018-04-26
10-K 2017-12-31 Filed 2018-02-23
10-Q 2017-09-30 Filed 2017-11-02
10-Q 2017-06-30 Filed 2017-07-27
10-Q 2017-03-31 Filed 2017-04-27
10-K 2016-12-31 Filed 2017-02-21
10-Q 2016-09-30 Filed 2016-10-28
10-Q 2016-06-30 Filed 2016-07-29
10-Q 2016-03-31 Filed 2016-04-29
10-K 2015-12-31 Filed 2016-02-18
10-Q 2015-09-30 Filed 2015-10-29
10-Q 2015-06-30 Filed 2015-07-30
10-Q 2015-03-31 Filed 2015-05-01
10-K 2014-12-31 Filed 2015-02-20
10-Q 2014-09-30 Filed 2014-10-31
10-Q 2014-06-30 Filed 2014-08-01
10-Q 2014-03-31 Filed 2014-05-02
10-K 2013-12-31 Filed 2014-02-26
10-Q 2013-09-30 Filed 2013-11-04
10-Q 2013-06-30 Filed 2013-08-01
10-Q 2013-03-31 Filed 2013-05-02
10-K 2012-12-31 Filed 2013-03-01
10-Q 2012-09-30 Filed 2012-11-06
10-Q 2012-06-30 Filed 2012-08-02
10-Q 2012-03-31 Filed 2012-05-04
10-K 2011-12-31 Filed 2012-02-24
10-Q 2011-09-30 Filed 2011-11-04
10-Q 2011-06-30 Filed 2011-08-08
10-Q 2011-03-31 Filed 2011-05-11
8-K 2020-08-03 Earnings, Regulation FD, Exhibits
8-K 2020-05-06
8-K 2020-04-20
8-K 2020-02-19
8-K 2019-11-20
8-K 2019-10-23
8-K 2019-07-24
8-K 2019-05-14
8-K 2019-04-24
8-K 2019-02-20
8-K 2018-11-13
8-K 2018-10-24
8-K 2018-09-28
8-K 2018-09-18
8-K 2018-07-25
8-K 2018-05-02
8-K 2018-04-26
8-K 2018-03-23
8-K 2018-02-22
8-K 2018-02-22

UAN 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 5. Other Information
Item 6. Exhibits
EX-10.1 uanq22020exhibit101.htm
EX-31.1 uanq22020exhibit311.htm
EX-31.2 uanq22020exhibit312.htm
EX-31.3 uanq22020exhibit313.htm
EX-31.4 uanq22020exhibit314.htm
EX-32.1 uanq22020exhibit321.htm

CVR Partners Earnings 2020-06-30

Balance SheetIncome StatementCash Flow
1.41.10.80.60.30.02012201420172020
Assets, Equity
0.20.10.10.0-0.0-0.12012201420172020
Rev, G Profit, Net Income
0.10.10.0-0.0-0.1-0.12012201420172020
Ops, Inv, Fin

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedJune 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from               to               .
Commission file number: 001-35120
______________________________________________
CVR PARTNERS, LP
(Exact name of registrant as specified in its charter)
Delaware
cvi-20200630_g1.gif
56-2677689
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
2277 Plaza Drive, Suite 500, Sugar Land, Texas 77479
(Address of principal executive offices) (Zip Code)
(281207-3200
(Registrant’s telephone number, including area code)
_____________________________________________________________
          Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common units representing limited partner interestsUANThe New York Stock Exchange

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

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

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

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

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

There were 111,244,971 common units representing limited partner interests of CVR Partners, LP (“common units”) outstanding at July 31, 2020.



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 TABLE OF CONTENTS
CVR PARTNERS, LP - Quarterly Report on Form 10-Q
June 30, 2020


PART I. Financial Information
PART II. Other Information
Item 1.
Condensed Consolidated Statements of Partners’ Capital - Three and Six Months Ended June 30, 2020 and 2019 (unaudited)
Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2020 and 2019 (unaudited)
cvi-20200630_g1.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.

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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, unit repurchases, 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. Forward-looking statements, as well as certain risks, contingencies, or uncertainties that may impact our forward-looking statements, include, but are not limited to, the following:
our ability to generate distributable cash or make cash distributions on our common units;
the volatile nature of our business and the variable nature of our distributions;
the severity, magnitude, duration, and impact of the novel coronavirus 2019 (“COVID-19”) pandemic and of businesses’ and governments’ responses to such pandemic on our operations, personnel, commercial activity, and supply and demand across our and our customers’ and suppliers’ businesses;
changes in market conditions and market volatility arising from the COVID-19 pandemic, including fertilizer, natural gas, and other commodity prices and the impact of such changes on our operating results and financial position;
the ability of our general partner to modify or revoke our distribution policy at any time;
the cyclical and seasonal nature of our business;
the impact of weather on our business including our ability to produce, market, or sell fertilizer products profitably or at all;
the dependence of our operations on a few third-party suppliers, including providers of transportation services, and equipment;
our reliance on, or our ability to procure economically or at all, pet coke we purchase from CVR Energy, Inc. (together with its subsidiaries, but excluding the Partnership and its subsidiaries, “CVR Energy”) and third-party suppliers;
our reliance on the natural gas, electricity, oxygen, nitrogen, sulfur processing, compressed dry air and other products that we purchase from third parties;
the supply, availability, and prices of essential raw materials;
our production levels, including the risk of a material decline in those levels;
accidents or other unscheduled shutdowns or interruptions affecting our facilities, machinery, or equipment, or those of our suppliers or customers;
potential operating hazards from accidents, fire, severe weather, tornadoes, floods or other natural disasters;
our ability to obtain, retain, or renew permits, licenses and authorizations to operate our business;
competition in the nitrogen fertilizer businesses including potential impacts of domestic and global supply and demand and/or domestic or international duties, tariffs, or similar costs;
capital expenditures;
existing and future laws, rulings and regulations, including but not limited to those relating to the environment, climate change, and/or the transportation or production of hazardous chemicals like ammonia, including potential liabilities or capital requirements arising from such laws, rulings, or regulations;
alternative energy or fuel sources, and the end-use and application of fertilizers;
risks of terrorism, cybersecurity attacks, the security of chemical manufacturing facilities and other matters beyond our control;
our lack of asset diversification;
our dependence on significant customers and the creditworthiness and performance by counterparties;
our potential loss of transportation cost advantage over our competitors;
our partial dependence on customers and distributors, including to transport goods and equipment;
risks associated with third party operation of or control over important facilities necessary for operation of our nitrogen fertilizer facilities;
the volatile nature of ammonia, potential liability for accidents involving ammonia including damage or injury to persons, property, the environment, or human health and increased costs related to the transport or production of ammonia;
our potential inability to successfully implement our business strategies, including the completion of significant capital programs or projects;
our reliance on CVR Energy’s senior management team and conflicts of interest they may face operating each of CVR Partners and CVR Energy;
control of our general partner by CVR Energy;
our ability to continue to license the technology used in our operations;
restrictions in our debt agreements;
June 30, 2020 | 3

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asset impairments and impacts thereof;
risks associated with noncompliance with continued listing standards of the New York Stock Exchange (“NYSE”) including potential suspension or delisting and the impacts thereof on our common unit price, valuation, access to capital, liquidity, the number of investors willing to hold or acquire our common units, and our ability to issue securities or obtain financing;
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;
our ability to recover under our insurance policies for damages or losses in full or at all; and
the factors described in greater detail under “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019 and this Report and our other filings with the Securities and Exchange Commission (the “SEC”).
All forward-looking statements included in this Report are based on information available to us on the date of this Report. Except as required by law, we undertake no obligation to revise or update any forward-looking statements as a result of new information, future events or otherwise.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

CVR PARTNERS, LP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)June 30, 2020December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents$32,557  $36,994  
Accounts receivable15,062  34,264  
Inventories46,668  48,296  
Prepaid expenses and other current assets5,307  5,406  
Total current assets99,594  124,960  
Property, plant, and equipment, net924,586  951,959  
Goodwill  40,969  
Other long-term assets18,896  20,067  
Total assets$1,043,076  $1,137,955  
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Accounts payable$20,968  $21,069  
Accounts payable to affiliates3,044  2,578  
Deferred revenue2,666  27,841  
Other current liabilities18,833  24,043  
Total current liabilities45,511  75,531  
Long-term liabilities:
Long-term debt632,007  632,406  
Other long-term liabilities9,432  10,474  
Total long-term liabilities641,439  642,880  
Commitments and contingencies (See Note 12)
Partners’ capital:
Common unitholders, 112,392,755 and 113,282,973 units issued and outstanding at June 30, 2020 and December 31, 2019, respectively
356,125  419,543  
General partner interest1  1  
Total partners’ capital356,126  419,544  
Total liabilities and partners’ capital$1,043,076  $1,137,955  

The accompanying notes are an integral part of these condensed consolidated financial statements.
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CVR PARTNERS, LP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands, except unit data)2020201920202019
Net sales
$105,091  $137,660  $180,172  $229,533  
Operating costs and expenses:
Cost of materials and other
21,948  26,000  45,939  49,730  
Direct operating expenses (exclusive of depreciation and amortization)
40,008  45,630  75,131  80,450  
Depreciation and amortization
23,371  25,030  38,968  41,614  
Cost of sales
85,327  96,660  160,038  171,794  
Selling, general and administrative expenses
4,451  6,465  9,806  13,311  
Loss (gain) on asset disposals
94  (9) 81  445  
Goodwill impairment
40,969    40,969    
Operating (loss) income
(25,750) 34,544  (30,722) 43,983  
Other (expense) income:
Interest expense, net
(15,890) (15,599) (31,673) (31,249) 
Other income, net
38  35  65  55  
(Loss) income before income taxes
(41,602) 18,980  (62,330) 12,789  
Income tax expense (benefit)
10  12  17  (100) 
Net (loss) income
$(41,612) $18,968  $(62,347) $12,889  
Basic and diluted (loss) earnings per common unit
$(0.37) $0.17  $(0.55) $0.11  
Distributions declared and paid per common unit
$  $0.07  $  $0.19  
Weighted-average common units outstanding:
Basic and Diluted
113,170  113,283  113,226  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 PARTNERS’ CAPITAL
(unaudited)
Common Units General
Partner
Interest
Total Partners’ Capital
(in thousands, except unit data)IssuedAmount
Balance at December 31, 2019113,282,973  $419,543  $1  $419,544  
Land exchange with affiliate—  (116) —  (116) 
Net loss—  (20,735) —  (20,735) 
Balance at March 31, 2020113,282,973  $398,692  $1  $398,693  
Repurchase of common units(890,218) (955) —  (955) 
Net loss
—  (41,612) —  (41,612) 
Balance at June 30, 2020112,392,755  $356,125  $1  $356,126  

Common Units General
Partner
Interest
Total Partners’ Capital
(in thousands, except unit data)IssuedAmount
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  

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 FLOWS
(unaudited)
Six Months Ended June 30,
(in thousands)20202019
Cash flows from operating activities:
Net (loss) income$(62,347) $12,889  
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization38,968  41,614  
Goodwill impairment40,969    
Share-based compensation(169) 2,218  
Other adjustments2,380  2,108  
Change in assets and liabilities:
Current assets and liabilities(13,026) (24,822) 
Non-current assets and liabilities3  674  
Net cash provided by operating activities6,778  34,681  
Cash flows from investing activities:
Capital expenditures (10,204) (5,757) 
Proceeds from sale of assets 47  89  
Net cash used in investing activities(10,157) (5,668) 
Cash flows from financing activities:
Repurchase of common units(1,008)   
Cash distributions to common unitholders - Affiliates  (7,394) 
Cash distributions to common unitholders - Non-affiliates  (14,129) 
Other financing activities(50)   
Net cash used in financing activities(1,058) (21,523) 
Net (decrease) increase in cash and cash equivalents(4,437) 7,490  
Cash and cash equivalents, beginning of period 36,994  61,776  
Cash and cash equivalents, end of period $32,557  $69,266  

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

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(1) Organization and Nature of Business

CVR Partners, LP (“CVR Partners” or the “Partnership”) is a Delaware limited partnership formed by CVR Energy, Inc. (together with its subsidiaries, but excluding the Partnership and its subsidiaries, “CVR Energy”) to own, operate and grow its nitrogen fertilizer business. 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. The Partnership’s product sales are sold on a wholesale basis in the United States of America. As used in these financial statements, references to CVR Partners, the Partnership, “we”, “us”, and “our” may refer to consolidated subsidiaries of CVR Partners or one or both of the facilities, as the context may require.

The Partnership’s common units are listed on the New York Stock Exchange (the “NYSE”) under the symbol “UAN.” On April 20, 2020, the average closing price of the Partnership’s common units over a 30 consecutive trading-day period fell below $1.00 per common unit, resulting in noncompliance with the continued listing compliance standards in Section 802.01C of the NYSE Listing Company Manual. The Partnership received written notification of this noncompliance from the NYSE on April 22, 2020, and currently has until January 1, 2021 to regain compliance or be subject to the NYSE’s suspension and delisting procedures. As of June 30, 2020, the average closing price of the Partnership’s common units over a consecutive 30 trading-day period has remained below $1.00 per common unit. The Partnership currently intends to monitor the closing price of its common units and consider available options if its common units do not trade at a level likely to result in the Partnership regaining compliance with Section 802.01C by January 1, 2021. These options could include, but are not limited to, additional repurchases of common units, reverse unit splits, or other actions.

As of June 30, 2020, public security holders held approximately 65% of the Partnership’s outstanding limited partner interests; CVR Services, LLC (“CVR Services”) (formerly Coffeyville Resources, LLC), a wholly-owned subsidiary of CVR Energy, held approximately 35% of the Partnership’s outstanding limited partner interests; and CVR GP, LLC (“CVR GP” or the “general partner”), a wholly owned subsidiary of CVR Energy, held 100% of the Partnership’s general partner interest. As of June 30, 2020, Icahn Enterprises L.P. (“IEP”) and its affiliates owned approximately 71% of the common stock of CVR Energy.

Unit Repurchase Program

On May 6, 2020, the board of directors of the Partnership’s general partner (the “Board”), on behalf of the Partnership, authorized a unit repurchase program (the “Unit Repurchase Program”). The Unit Repurchase Program enables the Partnership to repurchase up to $10 million of the Partnership’s common units. Repurchases under the Unit Repurchase Program may be made from time-to-time through open market transactions, block trades, privately negotiated transactions, or otherwise in accordance with applicable securities laws. The timing, price, and amount of repurchases (if any) will be made at the discretion of management of our general partner and are subject to market conditions, as well as corporate, regulatory, and other considerations. This Unit Repurchase Program does not obligate the Partnership to acquire any common units and may be cancelled or terminated by our general partner’s board of directors at any time. On May 20, 2020, the Partnership entered into a common unit repurchase agreement (the “Repurchase Agreement”), pursuant to Rules 10b5-1 and 10b-18 of the Exchange Act, to facilitate the repurchase of its common units and which the Partnership may terminate at any time by providing written notice. During the three and six months ended June 30, 2020, the Partnership repurchased 890,218 common units on the open market at a cost of $1.0 million, inclusive of transaction costs, or an average price of $1.07 per common unit. At June 30, 2020, the Partnership had $9.0 million in authority remaining under the Unit Repurchase Program.

Management and Operations

The Partnership, including CVR GP, is party to a number of agreements with CVR Energy and its subsidiaries to manage certain business relationships between the Partnership and the other parties thereto. The various rights and responsibilities of the Partnership, and its general partner, are set forth in the Partnership’s limited partnership agreement, as amended, and, as applicable, those agreements with CVR Energy. CVR GP manages and operates the Partnership via 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. See Part II, Item 8 of CVR Partners’ Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”) for further discussion. Common unitholders have limited voting rights
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
on matters affecting the Partnership and have no right to elect the general partner’s directors or officers, whether on an annual or continuing basis or otherwise.

(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, 2019 audited consolidated financial statements and notes thereto included in the 2019 Form 10-K.

In the opinion of the Partnership’s management, the accompanying condensed consolidated financial statements reflect all adjustments that are necessary for fair presentation of the financial position and results of operations of the Partnership for the periods presented. Such adjustments are of a normal recurring nature, unless otherwise disclosed.

Certain reclassifications have been made within the condensed consolidated balance sheets as of December 31, 2019 and the condensed consolidated statements of operations for the three and six months ended June 30, 2019. Catalyst inventory with a value of $5.6 million as of December 31, 2019 was reclassified in the first quarter of 2020 to Other long-term assets to conform to 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, 2020 or any other interim or annual period.

(3) Recent Accounting Pronouncements

Recent Accounting Pronouncements - Adoption of Credit Losses Standard

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326). The ASU replaces the incurred loss model with a current expected credit loss model for more timely recognition of expected impairment losses for most financial assets and certain other instruments that are not measured at fair value through net income. Effective January 1, 2020, we adopted this ASU with no material impact on the Partnership’s consolidated financial position or results of operations.

Recent Accounting Pronouncements - Adoption of Fair Value Measurement Standard

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. Effective January 1, 2020, we adopted this ASU with no material impact on the Partnership’s disclosures.

Recent Accounting Pronouncements - New Accounting Standards Issued But Not Yet Implemented

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740). The ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and modifies other areas of the topic to clarify the application of GAAP. Certain amendments within the standard 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, 2021, with early adoption permitted. The Partnership is evaluating the effect of adopting this new accounting guidance on its consolidated financial statements, but does not currently expect adoption will have a material impact on the Partnership’s consolidated financial position or results of operations. The Partnership does not intend to early adopt this ASU.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). This ASU was issued because, by the end of 2021, banks will no longer be required to report information that is used to determine London Interbank Offered Rate (“LIBOR”), which is used globally by all types of entities. As a result, LIBOR could be discontinued, as well as other interest
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
rates used globally. ASU 2020-04 provides companies with optional expedients for contract modifications under Topics 310, 470, 842, and 815-15, excluded components of certain hedging relationships, fair value hedges, and cash flow hedges, as well as certain exceptions, which are intended to help ease the potential accounting burden associated with transitioning away from these reference rates. Companies can apply the ASU immediately. However, the guidance will only be available for a limited time (generally through December 31, 2022). The Partnership is currently evaluating the impact that adopting this new accounting standard will have on its consolidated financial statements and related disclosures.

(4) Inventories

Inventories consisted of the following:
(in thousands)June 30, 2020December 31, 2019
Finished goods$17,362  $17,612  
Raw materials177  243  
Parts, supplies and other29,129  30,441  
Total inventories
$46,668  $48,296  

(5) Property, Plant and Equipment

Property, plant and equipment consisted of the following:
(in thousands)June 30, 2020December 31, 2019
Machinery and equipment $1,386,140  $1,378,651  
Buildings and improvements 17,534  17,221  
Automotive equipment 16,637  16,691  
Land and improvements 14,058  14,075  
Construction in progress 7,047  5,198  
Other1,791  1,752  
1,443,207  1,433,588  
Less: Accumulated depreciation 518,621  481,629  
Total property, plant and equipment, net
$924,586  $951,959  

As of June 30, 2020, the Partnership had not identified the existence of an impairment indicator for our long-lived asset groups as outlined under ASC 360.

(6) Goodwill

One of the Partnership’s reporting units, the Coffeyville Facility, had a goodwill balance of $41.0 million at December 31, 2019. During the second quarter of 2020, following completion of the spring planting season, the market pricing for ammonia and UAN, the Partnership’s two primary products, experienced significant pricing declines driven by updated market expectations around supply and demand fundamentals which are currently expected to continue into the second half of 2020. Additionally, significant uncertainty remains as to the nature and extent of impacts to be seen on the overall demand for corn and soybean given reduced ethanol production and broader economic conditions which may negatively impact demand. Therefore, in connection with the preparation of the financial statements for the three months ended June 30, 2020, given the pricing declines experienced in the second quarter of 2020, further muting of our near-term economic recovery assumptions, and market price performance of the Partnership’s common units, the Partnership concluded an impairment indicator was present and a triggering event under ASC 350 had occurred as of June 30, 2020, requiring an interim quantitative impairment assessment to be performed. Significant assumptions inherent in the valuation methodologies for goodwill include, but are not limited to, prospective financial information, growth rates, discount rates, inflationary factors, and cost of capital. Based on the interim quantitative analysis, it was determined that the estimated fair value of the Coffeyville Facility reporting unit did not exceed its carrying value. As a result, the Partnership recorded a non-cash impairment charge of $41.0 million during the three months ended June 30, 2020.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(7) 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.

Balance Sheet Summary as of June 30, 2020 and December 31, 2019

The following tables summarize the ROU asset and lease liability balances for the Partnership’s operating and finance leases at June 30, 2020 and December 31, 2019:
(in thousands)June 30, 2020December 31, 2019
Operating Leases:
ROU asset, net
Railcars$8,994  $10,826  
Real estate and other2,769  2,581  
Lease liability
Railcars$9,327  $11,088  
Real estate and other504  288  
Finance Leases:
ROU asset, net
Real estate and other$151  $201  
Lease liability
Real estate and other$155  $205  

Lease Expense Summary for the Three and Six Months Ended June 30, 2020 and 2019

We recognize lease expense on a straight-line basis over the lease term. For the three and six months ended June 30, 2020 and 2019, we recognized lease expense comprised of the following components:
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands)2020201920202019
Operating lease expense$1,033  $1,023  $2,144  $2,046  
Finance lease expense:
Amortization of ROU asset$23  $167  $50  $272  
Interest expense on lease liability2  9  4  15  

Short-term lease expense, recognized within Direct operating expenses (exclusive of depreciation and amortization), was $0.1 million and $0.2 million for the three and six months ended June 30, 2020, respectively, and $0.1 million and $0.1 million for the three and six months ended June 30, 2019, respectively.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
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 at June 30, 2020 and December 31, 2019:
June 30, 2020December 31, 2019
Weighted-average remaining lease term (years)
Operating Leases3.13.4
Finance Leases1.82.3
Weighted-average discount rate
Operating Leases5.1 %5.1 %
Finance Leases3.9 %3.9 %

Maturities of Lease Liabilities

The following summarizes the remaining minimum lease payments through maturity of the Partnership’s ROU assets and liabilities at June 30, 2020:
(in thousands)Operating LeasesFinancing Leases
Remainder of 2020$1,938  $53  
20213,567  107  
20223,131    
20231,262    
2024579    
Thereafter193    
Total lease payments 10,670  160  
Less: imputed interest(839) (5) 
Total lease liability$9,831  $155  

On July 31, 2020, the Partnership and Messer LLC (“Messer”) entered into an On-Site Product Supply Agreement (the “Agreement”). Under the Agreement, among other obligations, Messer is obligated to supply and make certain capital improvements during the term of the Agreement, and the Partnership is obligated to take as available and pay for, oxygen, nitrogen, and compressed dry air from Messer’s facility. This arrangement for the Partnership’s purchase of oxygen, nitrogen, and dry air from Messer does not meet the definition of a lease under ASC 842, as the Partnership does not expect to receive substantially all of the output of Messer’s on-site production from its air separation unit over the life of the Agreement. The Agreement also obligates Messer to install a new oxygen storage vessel and related equipment to be used solely by the Coffeyville Facility. The arrangement for the use of the oxygen storage vessel and related equipment meets the definition of a lease under ASC 842, as the Partnership will receive all output associated with the vessel. Based on terms outlined in the Agreement, the Partnership expects the lease of the oxygen storage vessel to be classified as a financing lease with an amount between $20 and $25 million being capitalized upon lease commencement when the oxygen storage vessel is placed in service.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(8) Other Current Liabilities

Other current liabilities consisted of the following:
(in thousands)June 30, 2020December 31, 2019
Personnel accruals$4,398  $8,187  
Sales incentives3,737  1,614  
Operating lease liabilities3,292  3,523  
Accrued interest2,517  2,518  
Current portion of long-term debt2,240    
Share-based compensation303  5,011  
Prepaid revenue contracts223  277  
Other accrued expenses and liabilities 2,123  2,913  
Total other current liabilities
$18,833  $24,043  

Other current liabilities include amounts accrued by the Partnership and owed to CVR Energy and its affiliates of $5.5 million at December 31, 2019. The Partnership had a receivable of $0.6 million at June 30, 2020 with these entities, which is included within Accounts receivable. See Note 14 (“Related Party Transactions”) for additional discussion.

(9) Long-Term Debt

Long-term debt consists of the following:
(in thousands)June 30, 2020December 31, 2019
9.25% Senior Secured Notes, due June 2023 (1)
$645,000  $645,000  
6.50% Notes, due April 2021, net of current portion (2)
  2,240  
Unamortized discount and debt issuance costs(12,993) (14,834) 
Total long-term debt, net of current portion$632,007  $632,406  
Current portion of long-term debt (3)2,240    
Total long-term debt, including current portion$634,247  $632,406  

(1)The estimated fair value of long-term debt outstanding was approximately $632.1 million and $673.8 million as of June 30, 2020 and December 31, 2019, respectively.
(2)The 6.50% Notes, due April 2021, mature within 12 months, and, therefore, the outstanding balance of $2.2 million has been classified as short-term as of June 30, 2020.
(3)Amounts reported in Other current liabilities.

Credit Facility
(in thousands)Total CapacityAmount Borrowed as of June 30, 2020Outstanding Letters of CreditAvailable Capacity as of June 30, 2020Maturity Date
Asset Based (AB) Credit Facility (4)$45,550  $  $  $45,550  September 30, 2021

(4)At the option of the borrowers, loans under the AB 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, and its subsidiaries, were in compliance with all covenants under their respective debt instruments as of June 30, 2020.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(10) Revenue

The following table presents the Partnership’s revenue, disaggregated by major product:
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands)2020201920202019
Ammonia$36,765  $49,954  $50,911  $63,306  
UAN 55,294  73,542  102,308  137,606  
Urea products3,535  5,006  7,068  9,677  
Net sales, exclusive of freight and other95,594  128,502  160,287  210,589  
Freight revenue6,954  7,139  14,677  15,157  
Other revenue2,543  2,019  5,208  3,787  
Net sales$105,091  $137,660  $180,172  $229,533  

The Partnership sells its products, on a wholesale basis, under a contract or by purchase order. The Partnership’s contracts with customers 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 Cost 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 June 30, 2020, the Partnership had approximately $7.5 million of remaining performance obligations for contracts with an original expected duration of more than one year. The Partnership expects to recognize approximately $1.4 million of these performance obligations as revenue by the end of 2020, an additional $3.5 million in 2021, 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 nitrogen 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 product to the customer. An associated receivable is recorded for uncollected prepaid
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
contract amounts. Contracts 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.

A summary of the deferred revenue activity for the six months ended June 30, 2020 is presented below:
(in thousands)
Balance at December 31, 2019$27,841  
Add:
New prepay contracts entered into during the period (1)18,025  
Less:
Revenue recognized that was included in the contract liability balance at the beginning of the period26,949  
Revenue recognized related to contracts entered into during the period15,943  
Other changes308  
Balance at June 30, 2020$2,666  

(1) Includes $16.6 million where payment associated with prepaid contracts was collected as of June 30, 2020.

(11) Share-Based Compensation

A summary of compensation expense for the three and six months ended June 30, 2020 and 2019 is presented below:
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands)2020201920202019
Phantom Units$59  $755  $(198) $1,545  
Other Awards (1)
248  355  29  673  
Total share-based compensation expense$307  $1,110  $(169) $