SEC Filing | CVR Energy, Inc.

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cvi-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)
☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended	September 30, 2023

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: 001-33492

CVR ENERGY, INC.

(Exact name of registrant as specified in its charter)

Delaware

https://cdn.kscope.io/2082550b3d1b272b59d1aaf81226ca11-Image2.gif

61-1512186

(State or other jurisdiction of

incorporation or organization)

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

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

(Address of principal executive offices) (Zip Code)

(281) 207-3200

(Registrant’s telephone number, including area code)

_____________________________________________________________

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	CVI	The New York Stock Exchange

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

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

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

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

There were 100,530,599 shares of the registrant’s common stock outstanding at October 27, 2023.

Table of Contents

TABLE OF CONTENTS

CVR Energy, Inc. - Quarterly Report on Form 10-Q

September 30, 2023

PART I. Financial Information

PART II. Other Information

Condensed Consolidated Balance Sheets - September 30, 2023 and December 31, 2022 (unaudited)

Item 1A.

Risk Factors

Condensed Consolidated Statements of Operations - Three and Nine Months Ended September 30, 2023 and 2022 (unaudited)

Item 5.

Other Information

Condensed Consolidated Statements of Changes in Equity - Three and Nine Months Ended September 30, 2023 and 2022 (unaudited)

Item 6.

Exhibits

Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2023 and 2022 (unaudited)

Signatures

Notes to the Condensed Consolidated Financial Statements (unaudited)

Item 2.

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

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

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

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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, stock or unit repurchases, impacts of legal proceedings, projected costs, prospects, plans and objectives of management are forward looking statements. The words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “continue,” “predict,” “potential,” “project,” and similar terms and phrases are intended to identify forward-looking statements.

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

•volatile margins in the refining industry and exposure to the risks associated with volatile crude oil, refined product and feedstock prices;

•the availability of adequate cash and other sources of liquidity for the capital needs of our businesses;

•the effects arising out of the Russia-Ukraine and Israel-Hamas conflicts, including with respect to impacts to commodity prices and other markets;

•the effects of changes in market conditions and market volatility, crude oil and other commodity prices, demand for those commodities, storage and transportation capacities, including inflation, and the impact of such changes on our operating results and financial condition;

•the ability to forecast our future financial condition, results of operations, revenues and expenses;

•the effects of transactions involving forward or derivative instruments;

•changes in laws, regulations and policies with respect to the export of crude oil, refined products, other hydrocarbons or renewable feedstocks or products including, without limitation, the actions of the Biden Administration that impact oil and gas operations in the United States;

•interruption in pipelines supplying feedstocks or distributing the petroleum business’ products;

•competition in the petroleum and 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;

•changes in our or our segments’ credit profiles;

•the cyclical and seasonal nature of the petroleum and nitrogen fertilizer businesses;

•the supply, availability and price levels of essential raw materials and feedstocks;

•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;

•existing and future laws, regulations or rulings, including but not limited to those relating to the environment, climate change, emissions, including tailpipe emission standards that could impact the future viability of internal combustion engines, renewables, safety, security and/or the transportation of production of hazardous chemicals like ammonia, including potential liabilities or capital requirements arising from such laws, regulations or rulings;

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

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

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

•the dependence of the nitrogen fertilizer business on customers and distributors including to transport goods and equipment and providers of feedstocks;

•the reliance on, or the ability to procure economically or at all, petroleum coke (“pet coke”) our nitrogen fertilizer business purchases from our subsidiaries and third-party suppliers or the natural gas, electricity, oxygen, nitrogen, sulfur processing and compressed dry air and other products purchased from third parties by the nitrogen fertilizer and petroleum businesses;

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

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

•our lack of diversification of assets or operating and supply areas;

•the petroleum business’ and nitrogen fertilizer business’ dependence on significant customers and the creditworthiness and performance by counterparties;

•the potential loss of the nitrogen fertilizer business’ transportation cost advantage over its competitors;

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•the potential inability to successfully implement our business strategies at all or on time and within our anticipated budgets, including significant capital programs or projects, turnarounds or renewable or carbon reduction initiatives at our refineries and fertilizer facilities, including pretreater, carbon sequestration, segregation of our renewables business and other projects;

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

•our petroleum business’ purchase of, or ability to purchase, renewable identification numbers (“RINs”) on a timely and cost effective basis or at all;

•the impact of refined product demand and declining inventories on refined product prices and crack spreads;

•Organization of Petroleum Exporting Countries’ and its allies’ (“OPEC+”) production levels and pricing;

•the impact of RINs pricing, our blending and purchasing activities and governmental actions, including by the U.S. Environmental Protection Agency (the “EPA”) on our RIN obligation, open RINs positions, small refinery exemptions, and our estimated consolidated cost to comply with our Renewable Fuel Standard (“RFS”) obligations;

•operational upsets or changes in laws that could impact the amount and receipt of credits (if any) under Section 45Q of the Internal Revenue Code of 1986, as amended;

•ability to meet certain carbon oxide capture and sequestration milestones;

•our businesses’ ability to obtain, retain or renew environmental and other governmental permits, licenses or authorizations necessary for the operation of its business;

•our ability to issue securities or obtain financing at favorable rates or at all;

•bank failures or other events affecting financial institutions;

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

•refinery and nitrogen fertilizer facilities’ operating hazards and interruptions, including unscheduled maintenance or downtime and the availability of adequate insurance coverage;

•risks related to services provided by or competition among our subsidiaries, including conflicts of interests and control of CVR Partners, LP’s general partner, and control of CVR Energy, Inc. by its controlling shareholder;

•instability and volatility in the capital and credit markets;

•risks related to the conclusion of a potential spin-off of our nitrogen fertilizer segment or potential future reconsideration thereof;

•restrictions in our debt agreements;

•our ability to refinance our debt on acceptable terms or at all;

•asset impairments and impacts thereof;

•the outcome of any legal proceedings involving or investigations of our controlling shareholder or his affiliates;

•our controlling shareholder’s intentions regarding ownership of our common stock, including any dispositions of our common stock;

•the severity, magnitude, duration, and impact of the COVID-19 pandemic, or any future pandemic or breakout of infectious disease, 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’ business;

•the variable nature of CVR Partners, LP’s distributions, including the ability of its general partner to modify or revoke its distribution policy, or to cease making cash distributions on its common units;

•changes in tax and other laws, regulations and policies, including, without limitation, actions of the Biden Administration that impact conventional fuel operations or favor renewable energy projects in the U.S.;

•changes in CVR Partners, LP’s treatment as a partnership for U.S. federal income or state tax purposes;

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

•labor supply shortages, labor difficulties, labor disputes or strikes;

•impacts of any decision to return a unit back to hydrocarbon processing following renewable conversion; 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, 2022 and our other filings with the U.S. Securities and Exchange Commission (“SEC”).

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

Information About Us

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

September 30, 2023 | 4

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

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CVR ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)


(in millions)	September 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents (including $89 and $86, respectively, of consolidated variable interest entity (“VIE”))	$	889	$	510
Accounts receivable (including $36 and $90, respectively, of VIE)	316		358

Inventories (including $74 and $78, respectively, of VIE)	610		624
Prepaid expenses and other current assets (including $4 and $11, respectively, of VIE)	72		101


Total current assets	1,887		1,593
Property, plant and equipment, net (including $770 and $811, respectively, of VIE)	2,227		2,247



Other long-term assets (including $46 and $24, respectively, of VIE)	307		279
Total assets	$	4,421	$	4,119

LIABILITIES AND EQUITY
Current liabilities:


Accounts payable (including $37 and $51, respectively, of VIE)	$	566	$	497



Other current liabilities (including $77 and $75, respectively, of VIE)	745		942
Total current liabilities	1,311		1,439
Long-term liabilities:
Long-term debt and finance lease obligations, net of current portion (including $547 and $547, respectively, of VIE)	1,583		1,585

Deferred income taxes	276		249
Other long-term liabilities (including $49 and $16, respectively, of VIE)	99		55
Total long-term liabilities	1,958		1,889
Commitments and contingencies (See Note 12)
CVR Energy stockholders’ equity:
Common stock, $0.01 par value per share; 350,000,000 shares authorized; 100,629,209 and 100,629,209 shares issued as of September 30, 2023 and December 31, 2022, respectively	1		1
Additional paid-in-capital	1,508		1,508
Accumulated deficit	(550)		(976)
Treasury stock, 98,610 shares at cost	(2)		(2)

Total CVR stockholders’ equity	957		531
Noncontrolling interest	195		260
Total equity	1,152		791
Total liabilities and equity	$	4,421	$	4,119

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

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CVR ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions, except per share data)	2023		2022		2023		2022
Net sales	$	2,522	$	2,699	$	7,045	$	8,216
Operating costs and expenses:
Cost of materials and other	1,787		2,267		5,211		6,619
Direct operating expenses (exclusive of depreciation and amortization)	170		218		503		545
Depreciation and amortization	80		74		217		210
Cost of sales	2,037		2,559		5,931		7,374

Selling, general and administrative expenses (exclusive of depreciation and amortization)	38		35		109		110
Depreciation and amortization	1		1		4		5
Loss on asset disposal	1		1		1		1


Operating income	445		103		1,000		726
Other (expense) income:
Interest expense, net	(11)		(19)		(44)		(67)



Other income (expense), net	4		3		10		(81)

Income before income tax expense	438		87		966		578
Income tax expense	84		7		185		106
Net income	354		80		781		472
Less: Net income (loss) attributable to noncontrolling interest	1		(13)		103		121
Net income attributable to CVR Energy stockholders	$	353	$	93	$	678	$	351

Basic and diluted earnings per share	$	3.51	$	0.92	$	6.74	$	3.49



Weighted-average common shares outstanding:
Basic and diluted	100.5		100.5		100.5		100.5

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

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CVR ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(unaudited)


	Common Stockholders
(in millions, except share data)	Shares Issued	$0.01 Par Value Common Stock		Additional Paid-In Capital		Accumulated Deficit		Treasury Stock		Total CVR Stockholders’ Equity		Noncontrolling Interest		Total Equity
Balance at December 31, 2022	100,629,209	$	1	$	1,508	$	(976)	$	(2)	$	531	$	260	$	791
Net income	—	—		—		195		—		195		64		259
Dividends paid to CVR Energy stockholders	—	—		—		(50)		—		(50)		—		(50)
Distributions from CVR Partners to its public unitholders	—	—		—		—		—		—		(70)		(70)

Other	—	—		—		(1)		—		(1)		—		(1)
Balance at March 31, 2023	100,629,209	1		1,508		(832)		(2)		675		254		929
Net income	—	—		—		130		—		130		38		168
Dividends paid to CVR Energy stockholders	—	—		—		(50)		—		(50)		—		(50)
Distributions from CVR Partners to its public unitholders	—	—		—		—		—		—		(70)		(70)


Balance at June 30, 2023	100,629,209	1		1,508		(752)		(2)		755		222		977
Net income	—	—		—		353		—		353		1		354
Dividends paid to CVR Energy stockholders	—	—		—		(151)		—		(151)		—		(151)
Distributions from CVR Partners to its public unitholders	—	—		—		—		—		—		(28)		(28)


Balance at September 30, 2023	100,629,209	$	1	$	1,508	$	(550)	$	(2)	$	957	$	195	$	1,152


	Common Stockholders
(in millions, except share data)	Shares Issued	$0.01 Par Value Common Stock		Additional Paid-In Capital		Accumulated Deficit		Treasury Stock		Total CVR Stockholders’ Equity		Noncontrolling Interest		Total Equity
Balance at December 31, 2021	100,629,209	$	1	$	1,510	$	(956)	$	(2)	$	553	$	217	$	770
Net income	—	—		—		94		—		94		59		153

Distributions from CVR Partners to its public unitholders	—	—		—		—		—		—		(36)		(36)


Changes in equity due to CVR Partners’ common unit repurchases	—	—		(2)		—		—		(2)		(9)		(11)
Other	—	—		—		(1)		—		(1)		1		—
Balance at March 31, 2022	100,629,209	1		1,508		(863)		(2)		644		232		876
Net income	—	—		—		165		—		165		74		239
Dividends paid to CVR Energy stockholders	—	—		—		(40)		—		(40)		—		(40)
Distributions from CVR Partners to its public unitholders	—	—		—		—		—		—		(15)		(15)


Balance at June 30, 2022	100,629,209	1		1,508		(738)		(2)		769		291		1,060
Net income (loss)	—	—		—		93		—		93		(13)		80
Dividends paid to CVR Energy stockholders	—	—		—		(302)		—		(302)		—		(302)
Distributions from CVR Partners to its public unitholders	—	—		—		—		—		—		(67)		(67)



Balance at September 30, 2022	100,629,209	$	1	$	1,508	$	(947)	$	(2)	$	560	$	211	$	771

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

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CVR ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Nine Months Ended September 30,
(in millions)	2023		2022
Cash flows from operating activities:
Net income	$	781	$	472
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	221		215






Deferred income taxes	31		(22)
Loss on asset disposal	1		1

Share-based compensation	30		49
Unrealized (gain) loss on derivatives, net	35		(5)


Other items	1		4
Changes in assets and liabilities:
Current assets and liabilities	(105)		157









Non-current assets and liabilities	(11)		(3)

Net cash provided by operating activities	984		868
Cash flows from investing activities:
Capital expenditures	(150)		(145)

Turnaround expenditures	(53)		(74)

Return of equity method investment	21		—



Other investing activities	1		2

Net cash used in investing activities	(181)		(217)
Cash flows from financing activities:


Principal payments on senior secured notes	—		(65)

Repurchase of common units by CVR Partners	—		(12)

Dividends to CVR Energy’s stockholders	(251)		(342)
Distributions to CVR Partners’ noncontrolling interest holders	(168)		(118)
Other financing activities	(5)		(6)
Net cash used in financing activities	(424)		(543)
Net increase in cash, cash equivalents and restricted cash	379		108
Cash, cash equivalents and restricted cash, beginning of period	517		517
Cash, cash equivalents and restricted cash, end of period	$	896	$	625

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

Organization

CVR Energy, Inc. (“CVR Energy,” “CVR,” “we,” “us,” “our,” or the “Company”) is a diversified holding company primarily engaged in the petroleum refining and marketing industry (the “Petroleum Segment”) and the nitrogen fertilizer manufacturing industry through its interest in CVR Partners, LP, a publicly traded limited partnership (the “Nitrogen Fertilizer Segment” or “CVR Partners”). The Petroleum Segment refines and markets high value transportation fuels primarily in the form of gasoline and diesel fuels. CVR Partners produces and markets nitrogen fertilizers primarily in the form of urea ammonium nitrate (“UAN”) and ammonia. We also produce and market renewable diesel. CVR’s common stock is listed on the New York Stock Exchange under the symbol “CVI.” Icahn Enterprises L.P. and its affiliates (“IEP”) owned approximately 66% of the Company’s outstanding common stock as of September 30, 2023.

Stock Repurchase Program - On October 23, 2019, CVR Energy’s board of directors (the “Board”) authorized a stock repurchase program (the “Stock Repurchase Program”), which would enable the Company to repurchase up to $300 million of the Company’s common stock. As of September 30, 2023, the Company had not repurchased any of the Company’s common stock under the Stock Repurchase Program, which expired, in accordance with its terms, on October 22, 2023.

CVR Partners, LP

Interest Holders - As of September 30, 2023, public common unitholders held approximately 63% of CVR Partners’ outstanding common units and CVR Services, LLC (“CVR Services”), a wholly-owned subsidiary of CVR Energy, held the remaining approximately 37% of CVR Partners’ outstanding common units. In addition, CVR Services held 100% of the interest in CVR Partners’ general partner, CVR GP, LLC (“CVR GP”), which held a non-economic general partner interest in CVR Partners as of September 30, 2023. The noncontrolling interest reflected on the condensed consolidated balance sheets of CVR is only impacted by the results of, distributions from, and unit repurchases by CVR Partners.

Unit Repurchase Program - On May 6, 2020, the board of directors of CVR Partners’ general partner (the “UAN GP Board”), on behalf of CVR Partners, authorized a unit repurchase program (the “Unit Repurchase Program”), which was increased on February 22, 2021. The Unit Repurchase Program, as increased, authorized CVR Partners to repurchase up to $20 million of the CVR Partners’ common units. During the three and nine months ended September 30, 2023 and the three months ended September 30, 2022, CVR Partners did not repurchase any common units. During the nine months ended September 30, 2022, CVR Partners repurchased 111,695 common units on the open market in accordance with a repurchase agreement under Rules 10b5-1 and 10b-18 of the Securities Exchange Act of 1934, as amended, at a cost of $12 million, exclusive of transaction costs, or an average price of $110.98 per common unit. As of September 30, 2023, CVR Partners, considering all repurchases made since inception of the Unit Repurchase Program, had a nominal authorized amount remaining under the Unit Repurchase Program. This Unit Repurchase Program does not obligate CVR Partners to acquire any common units and may be cancelled, modified, or terminated by the UAN GP Board at any time. As a result of these repurchases, and the resulting change in CVR Energy’s ownership of CVR Partners while maintaining control, CVR Energy recognized a decrease of $2 million to additional paid-in capital from the reduction of noncontrolling interests totaling $3 million and the related reduction of a deferred tax liability totaling $1 million from changes in its book versus tax basis in CVR Partners as of December 31, 2022.

(2) Basis of Presentation

The accompanying condensed consolidated financial statements, 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 (“SEC”), include the accounts of the Company and its majority-owned direct and indirect subsidiaries. All intercompany accounts and transactions have been eliminated. Certain notes and other information have been condensed or omitted from the condensed consolidated financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with the December 31, 2022 audited consolidated financial statements and notes thereto included in CVR Energy’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”).

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Our condensed consolidated financial statements include the consolidated results of CVR Partners, which is defined as a variable interest entity (“VIE”).

In the opinion of the Company’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 Company for the periods presented. Such adjustments are of a normal recurring nature, unless otherwise disclosed.

The condensed consolidated financial statements are prepared in conformity with GAAP, which requires management to make certain estimates and assumptions that affect the reported amounts and disclosure of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. 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, 2023 or any other interim or annual period.

(3) Inventories

Inventories consisted of the following:


(in millions)	September 30, 2023		December 31, 2022
Finished goods	$	278	$	297
Raw materials	214		206
In-process inventories	25		35
Parts, supplies and other	93		86
Total inventories	$	610	$	624

(4) Property, Plant and Equipment

Property, plant and equipment consisted of the following:


(in millions)	September 30, 2023		December 31, 2022
Machinery and equipment	$	4,265	$	4,194
Buildings and improvements	87		86
ROU finance leases	81		79
Land and improvements	73		72
Furniture and fixtures	37		37
Construction in progress	215		143
Other	15		15




	4,773		4,626
Less: Accumulated depreciation and amortization	(2,546)		(2,379)
Total property, plant and equipment, net	$	2,227	$	2,247

During the nine months ended September 30, 2023, the Company did not identify the existence of an impairment indicator for our long-lived asset groups as outlined under the FASB ASC Topic 360, Property, Plant, and Equipment. The depreciation and amortization expense related to property, plant and equipment was $59 million and $57 million for the three months ended September 30, 2023 and 2022, respectively, and $165 million and $167 million for the nine months ended September 30, 2023 and 2022, respectively.

(5) Equity Method Investments

In January 2023, CVR Partners and its subsidiary, Coffeyville Resources Nitrogen Fertilizer, LLC (“CRNF”), entered into a series of agreements with CapturePoint LLC, an unaffiliated Texas limited liability company, and certain unaffiliated third-party investors intended to qualify under the Internal Revenue Service (“IRS”) safe harbor described in Revenue Procedure 2020-12 for certain joint ventures that are eligible to claim certain tax credits available to joint ventures under Section 45Q of the Internal Revenue Code of 1986, as amended (“Section 45Q Credits”) and allow us to monetize Section 45Q Credits we

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

expect to generate from January 6, 2023 until March 31, 2030 (the “45Q Transaction”). Among other items, the 45Q Transaction resulted in the creation of CVR-CapturePoint Parent LLC, which was accounted for by CVR Partners as an equity-method investment.

We have the following investments which have applied the equity method of accounting and are presented within Other long-term assets on our condensed consolidated financial statements:

•CVR-CapturePoint Parent, LLC (“CVRP JV”) - Through our subsidiaries, and in connection with the 45Q Transaction, we received a 50% interest in CVRP JV in connection with a modification to a carbon oxide contract (“CO Contract”) with a customer. We applied the VIE model under FASB ASC Topic 810, Consolidation, to our variable interest in CVRP JV and determined that CVRP JV is a VIE. While we concluded we are not the primary beneficiary of CVRP JV, we do have significant influence over CVRP JV’s operating and financial policies and, therefore, applied the equity method of accounting for our investment in CVRP JV.

We deferred the recognition of the noncash consideration received and expect to recognize such revenue as the performance obligation associated with the CO Contract is satisfied. Refer to Note 9 (“Revenue”) for further discussion. We have elected to record our share of the earnings or loss of CVRP JV one quarter in arrears. Distributions received from CVRP JV will reduce our equity method investment and will be recorded in the period in which they are received.

•Enable South Central Pipeline, LLC (“Enable JV”) - Through our subsidiaries, we own a 40% interest in Enable JV, which operates a 12-inch 26-mile crude oil pipeline with a capacity of approximately 20,000 barrels per day that is connected to the Wynnewood Refinery. The remaining interest in Enable JV is owned by a subsidiary of Energy Transfer LP, which also serves as the operator of the pipeline owned by the Enable JV.

•Midway Pipeline, LLC (“Midway JV”) - Through our subsidiaries, we own a 50% interest in Midway JV, which operates a 16-inch 99-mile crude oil pipeline with a capacity of approximately 131,000 barrels per day which connects the Coffeyville Refinery to the Cushing, Oklahoma oil hub. The remaining interest in Midway JV is owned by Plains Pipeline, L.P.


(in millions)	CVRP JV		Enable JV		Midway JV		Total
Balance at December 31, 2022	$	—	$	5	$	71	$	76
CVRP JV inception	46		—		—		46

Cash distributions (1)	(19)		(1)		(2)		(22)
Equity income	—		1		2		3
Balance at March 31, 2023	27		5		71		103
Cash distributions	(1)		(1)		(2)		(4)
Equity income	—		1		2		3
Balance at June 30, 2023	26		5		71		102
Cash distributions	(1)		(1)		(2)		(4)
Equity income	—		1		2		3
Balance at September 30, 2023	$	25	$	5	$	71	$	101

(1)Of the CVRP JV amount, approximately $1 million related to incremental costs associated with obtaining the CO Contract were capitalized and included in Prepaid expenses and other current assets and Other long-term assets in our condensed consolidated financial statements.

(6) Leases

Lease Overview

We lease certain pipelines, storage tanks, railcars, office space, land, and equipment across our refining, fertilizer, and corporate operations. Most of our leases include one or more renewal options to extend the lease term, which can be exercised at our sole discretion. Certain leases also include options to purchase the leased property. 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.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Balance Sheet Summary as of September 30, 2023 and December 31, 2022

The following tables summarize the right-of-use (“ROU”) asset and lease liability balances for the Company’s operating and finance leases at September 30, 2023 and December 31, 2022:


	September 30, 2023				December 31, 2022
(in millions)	Operating Leases		Finance Leases		Operating Leases		Finance Leases
ROU assets, net
Pipeline and storage	$	13	$	18	$	16	$	20
Railcars	9		—		11		—
Real estate and other	16		14		13		15
Lease liability
Pipelines and storage	12		29		16		32
Railcars	9		—		11		—
Real estate and other	15		17		13		16

Lease Expense Summary for the Three and Nine Months Ended September 30, 2023 and 2022

We recognize operating lease expense on a straight-line basis over the lease term within Direct operating expenses (exclusive of depreciation and amortization) and Cost of materials and other and finance lease expense on a straight-line basis over the lease term within Depreciation and amortization. For the three and nine months ended September 30, 2023 and 2022, we recognized lease expense comprised of the following components:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2023		2022		2023		2022
Operating lease expense	$	4	$	4	$	13	$	12
Finance lease expense:
Amortization of ROU asset	1		2		4		5
Interest expense on lease liability	1		1		3		4
Short-term lease expense	3		3		8		7

Lease Terms and Discount Rates

The following outlines the remaining lease terms and discount rates used in the measurement of the Company’s ROU assets and lease liabilities:


	September 30, 2023				December 31, 2022
	Operating Leases		Finance Leases		Operating Leases		Finance Leases
Weighted-average remaining lease term	3.9 years		5.5 years		4.1 years		6.3 years
Weighted-average discount rate	5.6	%	9.0	%	5.2	%	9.0	%

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(unaudited)

Maturities of Lease Liabilities

The following summarizes the remaining minimum lease payments through maturity of the Company’s lease liabilities at September 30, 2023:


(in millions)	Operating Leases		Finance Leases
Remainder of 2023	$	5	$	4
2024	14		11
2025	9		11
2026	7		11
2027	3		10
Thereafter	3		12
Total lease payments	41		59
Less: imputed interest	(5)		(13)
Total lease liability	$	36	$	46

The Company has entered into the following material lease commitments that have not yet commenced:

•On February 21, 2022, CRNF entered into the First Amendment to the On-Site Product Supply Agreement with Messer LLC (“Messer”), which amended the July 31, 2020 On-Site Product Supply Agreement (as amended, the “Messer Agreement”). Under the Messer Agreement, among other obligations, Messer is obligated to supply oxygen and make certain capital improvements during the term of the Messer Agreement, and CRNF is obligated to take as available and pay for oxygen from Messer’s facility. This arrangement for CRNF’s purchase of oxygen from Messer does not meet the definition of a lease under FASB ASC Topic 842, Leases (“Topic 842”), as CRNF does not expect to receive substantially all of the output, which includes oxygen, nitrogen, and compressed air, of Messer’s on-site production from its air separation unit over the life of the Messer Agreement. The Messer Agreement also obligates Messer to install a new oxygen storage vessel, related equipment and infrastructure (“Oxygen Storage Vessel” or “Vessel”) to be used solely by the Coffeyville Fertilizer Facility. The arrangement for the use of the Oxygen Storage Vessel meets the definition of a lease under Topic 842, as CRNF will receive all output associated with the Vessel. Based on terms outlined in the Messer Agreement, the Company expects the lease of the Oxygen Storage Vessel to be classified as a finance lease with an estimated amount within the range of $20 million to $25 million being capitalized upon lease commencement when the Vessel is placed in service, which is currently expected to occur in the first quarter of 2024.

•On July 14, 2022, the Company entered into the Sixth Amendment to the Sugar Land Plaza Office Building Agreement with LCFRE Sugar Land Town Square, LLC (“LCFRE”), which amends the Sugar Land Plaza Office Building Agreement dated 2016 (as amended, the “LCFRE Agreement”). Under the LCFRE Agreement, LCFRE will provide office space to the Company which will continue to serve as the Company’s corporate office in Sugar Land, Texas with the lease term start date of October 1, 2023. Based on the terms outlined in the LCFRE Agreement, the Company expects the lease to be classified as an operating lease under Topic 842, with an estimated amount within the range of $8 million to $12 million being capitalized upon lease commencement.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(7) Other Current Liabilities

Other current liabilities were as follows:


(in millions)	September 30, 2023		December 31, 2022
Accrued Renewable Fuel Standards (“RFS”) obligation	$	413	$	692
Share-based compensation	52		31
Accrued taxes other than income taxes	47		51
Personnel accruals	45		47
Accrued income taxes	44		—
Derivatives	37		4
Deferred revenue	39		48
Accrued interest	19		24
Operating lease liabilities	13		15
Current portion of finance lease obligations	7		6
Other accrued expenses and liabilities	29		24
Total other current liabilities	$	745	$	942

(8) Long-Term Debt and Finance Lease Obligations

Long-term debt and finance lease obligations consisted of the following:


(in millions)	September 30, 2023		December 31, 2022
CVR Partners:
6.125% Senior Secured Notes, due June 2028	$	550	$	550

Unamortized discount and debt issuance costs	(3)		(3)
Total CVR Partners debt	547		547

CVR Refining, LP (“CVR Refining”):

Finance lease obligations, net of current portion	39		42


Total CVR Refining finance lease obligations, net of current portion	39		42

CVR Energy:
5.25% Senior Notes, due February 2025	600		600
5.75% Senior Notes, due February 2028	400		400
Unamortized debt issuance costs	(3)		(4)
Total CVR Energy debt	997		996
Total long-term debt and finance lease obligations, net of current portion	1,583		1,585
Current portion of finance lease obligations	7		6
Total long-term debt and finance lease obligations, including current portion	$	1,590	$	1,591

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Credit Agreements


(in millions)	Total Available Borrowing Capacity		Amount Borrowed as of September 30, 2023		Outstanding Letters of Credit		Available Capacity as of September 30, 2023		Maturity Date
CVR Partners:
Asset Based (“Nitrogen Fertilizer ABL”) Credit Agreement	$	48	$	—	$	—	$	48	September 26, 2028
CVR Refining:
Amended and Restated Asset Based (“Petroleum ABL”) Credit Agreement	$	275	$	—	$	24	$	251	June 30, 2027

CVR Partners

Nitrogen Fertilizer ABL - On September 26, 2023, CVR Partners and certain of its subsidiaries entered into Amendment No. 1 to the Credit Agreement (the “ABL Amendment”). The ABL Amendment amended that certain Credit Agreement, dated as of September 30, 2021, to, among other things, (i) increase the aggregate principal amount available under the credit facility by an additional $15 million to a total of $50 million in the aggregate, with an incremental facility of an additional $15 million in the aggregate subject to additional lender commitments and certain other conditions, and (ii) extend the maturity date by an additional four years to September 26, 2028. The foregoing description of the ABL Amendment does not purport to be complete and is qualified in its entirety by the terms of the ABL Amendment, which is filed as an exhibit to this Report.

Covenant Compliance

The Company and its subsidiaries were in compliance with all covenants under their respective debt instruments as of September 30, 2023.

(9) Revenue

The following tables present the Company’s revenue disaggregated by major product, which include a reconciliation of the disaggregated revenue by the Company’s reportable segments:


	Three Months Ended September 30, 2023								Nine Months Ended September 30, 2023
(in millions)	Petroleum Segment (1)		Nitrogen Fertilizer Segment		Other / Elimination		Consolidated		Petroleum Segment (1)		Nitrogen Fertilizer Segment		Other / Elimination		Consolidated
Gasoline	$	1,186	$	—	$	—	$	1,186	$	3,287	$	—	$	—	$	3,287
Distillates (2)	1,057		—		67		1,124		2,806		—		150		2,956
Ammonia	—		22		—		22		—		116		—		116
UAN	—		86		—		86		—		354		—		354
Urea products	—		8		—		8		—		23		—		23
Freight revenue (3)	5		10		—		15		13		32		—		45
Other (4)	42		5		26		73		123		15		65		203
Revenue from product sales	2,290		131		93		2,514		6,229		540		215		6,984
Crude oil sales	8		—		—		8		60		—		—		60
Other revenue	—		—		—		—		1		—		—		1
Total revenue	$	2,298	$	131	$	93	$	2,522	$	6,290	$	540	$	215	$	7,045

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)


	Three Months Ended September 30, 2022								Nine Months Ended September 30, 2022
(in millions)	Petroleum Segment (1)		Nitrogen Fertilizer Segment		Other / Elimination		Consolidated		Petroleum Segment (1)		Nitrogen Fertilizer Segment		Other / Elimination		Consolidated
Gasoline	$	1,207	$	—	$	—	$	1,207	$	3,732	$	—	$	—	$	3,732
Distillates (2)	1,202		—		50		1,252		3,513		—		76		3,589
Ammonia	—		22		—		22		—		125		—		125
UAN	—		119		—		119		—		438		—		438
Urea products	—		6		—		6		—		26		—		26
Freight revenue (3)	4		7		—		11		13		27		—		40
Other products (4)	49		2		19		70		209		7		20		236
Revenue from product sales	2,462		156		69		2,687		7,467		623		96		8,186
Crude oil sales	12		—		—		12		29		—		—		29
Other revenue	—		—		—		—		1		—		—		1
Total revenue	$	2,474	$	156	$	69	$	2,699	$	7,497	$	623	$	96	$	8,216

(1)The Petroleum Segment may incur broker commissions or transportation costs prior to the transfer on certain sales. The broker costs are expensed since the contract durations are less than one year. Transportation costs are accounted for as fulfillment costs and are expensed as incurred.

(2)Distillates consist primarily of diesel fuel, kerosene, jet fuel, and renewable fuels activity.

(3)Freight revenue recognized by the Petroleum Segment is primarily tariff and line loss charges rebilled to customers to reimburse the Petroleum Segment for expenses incurred from a pipeline operator. Freight revenue recognized by the Nitrogen Fertilizer Segment represents the pass-through finished goods delivery costs incurred prior to customer acceptance and are reimbursed by customers. An offsetting expense for freight is included in Cost of materials and other.

(4)Other products for the Petroleum Segment consists primarily of (i) feedstock, heavy oils, and liquified petroleum gas sales, (ii) sulfur credits, and (iii) pipeline and processing fees. For the Nitrogen Fertilizer Segment, other products consists of sales of (i) nitric acid and (ii) carbon oxide, including sales made in connection with the 45Q Transaction and the noncash consideration received, which is recognized as the performance obligation associated with the CO Contract is satisfied over its term of 7 years, 3 months. Revenue from the CO Contract is recognized over time based on carbon oxide volumes measured at delivery. The Other/Elimination columns include certain credits related to renewable fuel activity and eliminations of intercompany transactions.

Remaining Performance Obligations

We have spot and term contracts with customers and the transaction prices are either fixed or based on market indices (variable consideration). We do not disclose remaining performance obligations for contracts that have terms of one year or less and for contracts where the variable consideration was entirely allocated to an unsatisfied performance obligation. As of September 30, 2023, these contracts have a remaining duration of less than three years.

As of September 30, 2023, the Nitrogen Fertilizer Segment had approximately $2 million of remaining performance obligations for contracts with an original expected duration of more than one year. The Nitrogen Fertilizer Segment expects to recognize the majority of these performance obligations as revenue by the end of 2023 and the remaining nominal balance during 2024.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Contract Balances

A summary of the Nitrogen Fertilizer Segment’s deferred revenue activity during the nine months ended September 30, 2023 is presented below:


(in millions)
Balance at December 31, 2022	$	48
Add:
New prepay contracts entered into during the period	44
Noncash consideration received as part of the 45Q Transaction	46
Less:
Revenue recognized that was included in the contract liability balance at the beginning of the period	(46)
Revenue recognized related to contracts entered into during the period	(11)
Revenue recognized related to noncash consideration	(5)
Other changes	(1)
Total deferred revenue	74
Less: Current portion of deferred revenue	(39)
Total long-term deferred revenue	$	35

(10) Derivative Financial Instruments and Fair Value Measurements

Derivative Financial Instruments

The following outlines the net notional buy (sell) position of our commodity derivative instruments held as of September 30, 2023 and December 31, 2022:

(in thousands of barrels)

Commodity

September 30, 2023

December 31, 2022

Forwards

Crude