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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________________________
Form 10-K
(Mark One)
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2019
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
(State or Other Jurisdiction of
Incorporation or Organization)
61-1512186
(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
Ticker 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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
Securities registered pursuant to Section 12(g) of the Act: None
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
Smaller reporting company
☑
☐
Accelerated filer
Emerging growth company
☐
☐
Non-accelerated filer
☐
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 in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
At June 28, 2019, the aggregate market value of the voting common stock held by non-affiliates of the registrant was approximately $1,466 million based upon the
closing price of its common stock on the New York Stock Exchange Composite tape. As of February 18, 2020, there were 100,530,599 shares of the registrant’s common
stock outstanding.
Documents Incorporated By Reference
Portions of the registrant’s Proxy Statement to be filed pursuant to Regulation 14A pertaining to the 2020 Annual Meeting of Stockholders are incorporated by
reference into Part III hereof. The Company intends to file such Proxy Statement no later than 120 days after the end of the fiscal year covered by this Form 10-K.
TABLE OF CONTENTS
CVR Energy
Annual Report on Form 10-K
PART I
PART III
Item 1.
Business
6
Item 10. Directors, Executive Officers and
Corporate Governance
Item 1A. Risk Factors
20
Item 11. Executive Compensation
Item 1B. Unresolved Staff Comments
37
Item 12.
Security Ownership of Certain Beneficial
Owners and Management and Related
Stockholder Matters
Item 2.
Properties
37
Item 13. Certain Relationships and Related
Transactions, and Director Independence
Item 3.
Legal Proceedings
37
Item 14.
Principal Accounting Fees and Services
104
104
104
104
104
Item 4. Mine Safety Disclosures
38
PART II
PART IV
Item 5. Market For Registrant's Common Equity,
39
Item 15. Exhibits, Financial Statement Schedules
105
Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Item 6.
40
Item 16.
Form 10-K Summary
109
Item 7. Management's Discussion and Analysis of
41
Financial Condition and Results of
Operations
Item 7A. Quantitative and Qualitative Disclosures
64
About Market Risk
Item 8.
Financial Statements and Supplementary
Data
Item 9.
Changes in and Disagreements With
Accountants on Accounting and Financial
Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
65
103
103
103
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GLOSSARY OF SELECTED TERMS
The following are definitions of certain terms used in this Annual Report on Form 10-K for the year ended December 31,
2019 (this “Report”).
2-1-1 crack spread — The approximate gross margin resulting from processing two barrels of crude oil to produce one
barrel of gasoline and one barrel of distillate. The 2-1-1 crack spread is expressed in dollars per barrel and is a proxy for the per
barrel margin that a sweet crude oil refinery would earn assuming it produced and sold the benchmark production of gasoline
and distillate.
Ammonia — Ammonia is a direct application fertilizer and is primarily used as a building block for other nitrogen
products for industrial applications and finished fertilizer products.
Blendstocks — Various compounds that are combined with gasoline or diesel from the crude oil refining process to make
finished gasoline and diesel fuel; these may include natural gas liquids, ethanol, or reformate, among others.
Bpd — Abbreviation for barrels per day.
Bulk sales — Volume sales through third-party pipelines, in contrast to tanker truck quantity rack sales.
Capacity — Capacity is defined as the throughput a process unit is capable of sustaining, either on a calendar or stream
day basis. The throughput may be expressed in terms of maximum sustainable, nameplate or economic capacity. The maximum
sustainable or nameplate capacities may not be the most economical. The economic capacity is the throughput that generally
provides the greatest economic benefit based on considerations such as crude oil and other feedstock costs, product values,
regulatory compliance costs and downstream unit constraints.
Catalyst — A substance that alters, accelerates, or instigates chemical changes, but is neither produced, consumed nor
altered in the process.
Corn belt —The primary corn producing region of the United States, which includes Illinois, Indiana, Iowa, Minnesota,
Missouri, Nebraska, Ohio and Wisconsin.
Crack spread — A simplified calculation that measures the difference between the price for light products and crude oil.
Distillates — Primarily diesel fuel, kerosene and jet fuel.
Ethanol — A clear, colorless, flammable oxygenated hydrocarbon. Ethanol is typically produced chemically from
ethylene, or biologically from fermentation of various sugars from carbohydrates found in agricultural crops and cellulosic
residues from crops or wood. It is used in the United States as a gasoline octane enhancer and oxygenate.
FCCU — Refers to the fluid catalytic cracking unit.
Feedstocks — Petroleum products, such as crude oil or FCCU gasoline, that are processed and blended into refined
products, such as gasoline, diesel fuel, and jet fuel during the refining process.
GHG — Greenhouse gas.
Group 3 — A geographic subset of the PADD II region comprising refineries in the midcontinent portion of the United
States, specifically Oklahoma, Kansas, Missouri, Nebraska, Iowa, Minnesota, North Dakota, and South Dakota.
Heavy crude oil — A relatively inexpensive crude oil characterized by high relative density and viscosity. Heavy crude
oils require greater levels of processing to produce high value products such as gasoline and diesel fuel.
Light crude oil — A relatively expensive crude oil characterized by low relative density and viscosity. Light crude oils
require lower levels of processing to produce high value products such as gasoline and diesel fuel.
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Liquid volume yield — A calculation of the total liquid volumes produced divided by total throughput.
MMBtu — One million British thermal units, or Btu: a measure of energy. One Btu of heat is required to raise the
temperature of one pound of water one degree Fahrenheit.
Natural gas liquids — Natural gas liquids, often referred to as NGLs, are blendstocks used in the manufacture of refined
fuels, as well as products of the refining process. Common NGLs used include propane, isobutane, normal butane, and natural
gasoline.
Petroleum coke (pet coke) — A coal-like substance that is produced during the refining process.
Product pricing at gate — Product pricing at gate represents net sales less freight revenue divided by product sales
volume in tons. Product pricing at gate is also referred to as netback.
Rack sales — Sales which are made at terminals into third-party tanker trucks or railcars.
RBOB — Reformulated blendstocks for oxygenate blending.
Refined products — Petroleum products, such as gasoline, diesel fuel, and jet fuel, that are produced by a refinery.
Sour crude oil — A crude oil that is relatively high in sulfur content, requiring additional processing to remove the sulfur.
Sour crude oil is typically less expensive than sweet crude oil.
Spot market — A market in which commodities are bought and sold for cash and delivered immediately.
Sweet crude oil — A crude oil that is relatively low in sulfur content, requiring less processing to remove the sulfur. Sweet
crude oil is typically more expensive than sour crude oil.
Throughput — The quantity of crude oil and other feedstocks processed at a refinery measured in barrels per day.
Turnaround — A periodically required standard procedure to inspect, refurbish, repair, and maintain the refinery or
nitrogen fertilizer plant assets. This process involves the shutdown and inspection of major processing units and occurs every
four to five years for the refineries and every two to three years for the nitrogen fertilizer facilities. A turnaround will typically
extend the operating life of a facility and return performance to desired operating levels.
UAN — An aqueous solution of urea and ammonium nitrate used as a fertilizer.
ULSD — Ultra low sulfur diesel.
Utilization — Measurement of the annual production of UAN and Ammonia expressed as a percentage of each facilities
nameplate production capacity.
WCS —Western Canadian Select crude oil, a medium to heavy, sour crude oil, characterized by an American Petroleum
Institute gravity (“API gravity”) of between 20 and 22 degrees and a sulfur content of approximately 3.3 weight percent.
WTI — West Texas Intermediate crude oil, a light, sweet crude oil, characterized by an API gravity between 39 and 41
degrees and a sulfur content of approximately 0.4 weight percent that is used as a benchmark for other crude oils.
WTS — West Texas Sour crude oil, a relatively light, sour crude oil characterized by an API gravity of between 30 and 32
degrees and a sulfur content of approximately 2.0 weight percent.
Yield — The percentage of refined products that is produced from crude oil and other feedstocks.
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Important Information Regarding Forward Looking Statements
This Annual Report on Form 10-K (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 1. Business, Item 1A. Risk Factors, and Item 7.
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 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:
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to the export of crude oil, refined products or other
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 ability to forecast our future financial condition, results of operations, revenues and expenses;
the effects of transactions involving forward and derivative instruments;
changes in laws, regulations and policies with respect
hydrocarbons;
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;
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 out facilities, machinery, or equipment, or thise of
our suppliers or customers;
existing and future laws, ruling and regulations, including but not limited to those relating to the environment, climate
change and/or the transportation of production of hazardous chemicals like ammonia, including potential liabilities or
capital requirements arising from such laws, rulings or regulations;
potential operating hazards from accidents, fire, severe weather, tornadoes, floods, or other natural disasters;
the impact of weather on the nitrogen fertilizer business including our ability to produce, market or sell fertilizer
products profitability or at all;
rulings, judgements 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;
the reliance on, or the ability to procure economically or at all, pet coke our nitrogen fertilizer business purchases from
CVR Refining 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 the 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;
the potential inability to successfully implement our business strategies, including the completion of significant capital
programs or projects;
December 31, 2019 | 4
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•
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licenses or
our ability to continue to license the technology used for our operations;
our petroleum business’ ability to purchase RINs on a timely and cost effective basis;
our businesses’ ability to obtain, retain or renew environmental and other governmental permits,
authorizations necessary for the operation of its business;
existing and proposed laws, rulings, and regulations, 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’ general partner;
instability and volatility in the capital and credit markets;
restrictions in our debt agreements;
the variable nature of CVR Partners’ 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 CVR Partners’ treatment as a partnership for U.S. federal income or state tax purposes; and
our ability to recover under our insurance policies for damages or losses in full or at all.
All forward looking statements contained in this Report 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.
December 31, 2019 | 5
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Part I should be read in conjunction with Management’s Discussion and Analysis in Item 7 and our consolidated financial
statements and related notes thereto in Item 8.
PART I
Item 1. Business
Overview
CVR Energy, Inc. is a diversified holding company formed in September 2006 which is primarily engaged in the petroleum
refining and nitrogen fertilizer manufacturing industries through its holdings in CVR Refining, LP (the “Petroleum Segment” or
“CVR Refining”) and CVR Partners, LP (the “Nitrogen Fertilizer Segment” or “CVR Partners”). CVR Refining is an
independent petroleum refiner and marketer of high value transportation fuels. CVR Partners produces and markets nitrogen
fertilizers in the form of UAN and ammonia. As used in this Annual Report on Form 10-K, the terms “CVR Energy”, the
“Company”, “we”, “us”, or “our” generally include CVR Refining, CVR Partners, the Company’s publicly traded limited
partnership, and their respective subsidiaries, as consolidated subsidiaries of the Company with certain exceptions where there
are transactions or obligations between and among CVR Refining, CVR Partners, and CVR Energy,
including their
subsidiaries. Refer to “Petroleum” and “Nitrogen Fertilizer” below for further details on our two business segments.
Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “CVI,” and CVR Partners’
common units are listed on the NYSE under the symbol “UAN.” As of December 31, 2019, Icahn Enterprises L.P. and its
affiliates (“IEP”) owned approximately 71% of our outstanding common stock.
As of December 31, 2019, we owned the general partner and approximately 34% of the outstanding common units
representing limited partner interests in CVR Partners, with the public owning the remaining outstanding common units of CVR
Partners.
On January 17, 2019, the general partner of CVR Refining assigned to the Company its right to purchase all of the issued
and outstanding CVR Refining common units not already owned by CVR Refining’s general partner or its affiliates. On
January 29, 2019, the Company purchased all remaining CVR Refining common units not already owned by the Company or
its affiliates (the “Public Unit Purchase”). In conjunction with the Public Unit Purchase, the Company purchased all CVR
Refining common units owned by IEP and its subsidiary, American Entertainment Properties Corporation (“AEP”) (the
“Affiliate Unit Purchase,” and together with the Public Unit Purchase, the “CVRR Unit Purchase”). As a result of the CVRR
Unit Purchase, CVR Refining’s common units were delisted effective January 29, 2019, and its reporting obligations under
Sections 13(a) and 15(d) of the Exchange Act were suspended as of February 8, 2019. Refer to Item 8, Note 1 (“Organization
and Nature of Business”) for further discussion of the CVRR Unit Purchase.
Our History
The following graphic depicts the Company’s history and key events that have occurred since the Company’s formation.
Petroleum
Our Petroleum Segment is comprised of the assets and operations of CVR Refining, including two refineries located in
Coffeyville, Kansas and Wynnewood, Oklahoma and supporting logistics assets in the region.
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Facilities
Coffeyville Refinery - We own a complex full coking medium-sour crude oil refinery in southeast Kansas, approximately
100 miles from Cushing, Oklahoma (“Cushing”) with a name plate crude oil capacity of 132,000 bpd (the “Coffeyville
Refinery”). The major operations of the Coffeyville Refinery include fractionation, catalytic cracking, hydrotreating, reforming,
coking, isomerization, alkylation, sulfur recovery, and propane and butane recovery operating units. The Coffeyville Refinery
benefits from significant refining unit redundancies, which include two crude oil distillation and vacuum towers, three sulfur
recovery units, and four hydrotreating units. These redundancies allow the Coffeyville Refinery to continue to receive and
process crude oil even if one tower requires maintenance without having to shut down the entire refinery. In addition, the
Coffeyville Refinery has a redundant supply of hydrogen pursuant to its feedstock and shared services agreement with a
subsidiary of CVR Partners.
Wynnewood Refinery - We own a complex crude oil refinery in Wynnewood, Oklahoma approximately 65 miles south of
Oklahoma City, Oklahoma and approximately 130 miles from Cushing with a name plate crude oil capacity of 74,500 bpd
capable of processing 20,000 bpd of light sour crude oil (the “Wynnewood Refinery” and together with the Coffeyville
Refinery,
the Wynnewood Refinery include fractionation, hydrotreating,
hydrocracking, reforming, solvent deasphalting, alkylation, sulfur recovery, and propane and butane recovery operating units.
Similar to the Coffeyville Refinery, the Wynnewood Refinery benefits from unit redundancies, including two crude oil
distillation and vacuum towers and four hydrotreating units.
the “Refineries”). The major operations of
Throughput by Refinery
(in bpd)
Coffeyville
Wynnewood
Total
Year Ended December 31, 2019
Total crude throughput
All other feedstock and blendstock
Total throughput
129,878
9,160
139,038
73,180
3,753
76,933
203,058
12,913
215,971
Year Ended December 31, 2018
(in bpd)
Coffeyville
Wynnewood
Total
Total crude throughput
All other feedstock and blendstock
Total throughput
Production by Refinery
(in bpd)
Gasoline
Diesel fuels
Other refined products
Total production
124,489
8,369
132,858
74,669
5,068
79,737
199,158
13,437
212,595
Year Ended December 31, 2019
Coffeyville
Wynnewood
Total
71,817
57,549
10,383
139,749
38,864
32,380
3,253
74,497
110,681
89,929
13,636
214,246
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(in bpd)
Gasoline
Diesel fuels
Other refined products
Total production
Supply
Year Ended December 31, 2018
Coffeyville
Wynnewood
Total
67,091
56,307
10,927
134,325
40,291
33,442
4,066
77,799
107,382
89,749
14,993
212,124
The Coffeyville Refinery has the capability to process blends of a variety of crude oil ranging from heavy sour to light
sweet crude oil. Currently, the Coffeyville Refinery crude oil slate consists of a blend of mid-continent domestic grades and
various Canadian medium and heavy sours and other similarly sourced crudes. Other blendstocks include normal butane,
natural gasoline, alkylation feeds, naphtha, gas oil, and vacuum tower bottoms. The Wynnewood Refinery has the capability to
process blends of a variety of crude oil ranging from medium sour to light sweet crude oil. Isobutane, gasoline components, and
normal butane blendstocks are also typically used.
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In addition to the use of third-party pipelines, we have an extensive gathering system consisting of logistics assets that are
owned, leased, or part of a joint venture operation. These assets include the following:
Pipeline Segment
Length (miles)
Capacity (bpd)
As of December 31, 2019
Joint Ventures:
Midway Pipeline LLC (“Midway JV”) (1)(4)
Enable South Central Pipeline (“Enable JV”) (1)
100
26
Owned Pipelines:
Valley to Hooser 6” (2)
Valley to Hooser 8”
Hooser to Broome 8”
Broome to East Tank Farm 12” (3)
Broome to East Tank Farm 16” (3)
East Tank Farm to Refinery 16” (3)
Shidler to Hooser 4”
Plainville to Phillipsburg 6”
Plainville to Natoma 6”
Cushing to Payson 10” (Red River)
Payson to Enable tie 8” (Red River)
Leased Pipelines:
Humboldt to Broome 8”
Kelley to Barnsdall 8”
Barnsdall to Caney 8”
46
20
43
19
18
2
23
36
10
30
73
62
31
36
120,000
115,000
9,600
9,600
22,800
52,000
120,000
160,000
6,500
6,000
6,500
40,000
40,000
7,000
3,600
3,600
(1) CVR Refining owns a 50% interest in the Midway JV and a 40% interest in the Enable JV. CVR Refining has the ability to exercise
influence through its participation on the board of directors of each of the Midway JV and the Enable JV and does not serve as the day-
to-day operator. We have determined that these entities should not be consolidated and apply the equity method of accounting. Refer to
Item 8, Note 3 (“Equity Method Investments”) for further discussion of these investments.
(2) This pipeline is in the process of being taken out of service.
(3)
In support of our Coffeyville Refinery, we own and operate a tank storage facility in close proximity to the Coffeyville Refinery (the
“East Tank Farm”).
(4) The Midway JV pipeline will have an estimated 150,000 bpd capacity resulting from expanded pumping capacity which is planned to be
completed during the Coffeyville Refinery turnaround in the spring of 2020.
For the acquisition of crude oil within close proximity of the Refineries, we operate a fleet of approximately 140 trucks and
have contracts with third-party trucking fleets to acquire and deliver crude oil to our pipeline system or directly to the
Refineries for consumption or resale. For the year ended December 31, 2019, the gathering system, which includes the pipelines
outlined above and our trucking operations, supplied approximately 53% and 85% of the Coffeyville and Wynnewood
Refineries’ crude oil demand, respectively. Regionally-sourced crude oils delivered to the Refineries usually have a
transportation cost advantage compared to other domestic or international crudes given the Refineries’ proximity to the
producing areas. However, sometimes slightly heavier and more sour crudes may offer good economics to the Refineries,
including the higher cost of transportation. The regionally-sourced crude oils we purchase are light and sweet enough to allow
the Refineries to blend higher percentages of lower cost crude oils, such as heavy Canadian sour, to optimize economics within
operational constraints.
Crude oils sourced outside of our gathering system are delivered to Cushing by various third-party pipelines, including the
Keystone and Spearhead pipelines on which we can be subject to proration, and subsequently to the Broome Station facility via
the Midway JV pipeline. Our current contracted capacity includes the Pony Express and White Cliffs pipelines, respectively.
From the Broome Station facility, crude oil is delivered to the Coffeyville Refinery via the Petroleum Segment’s 170,000 bpd
proprietary pipeline system. Crude oils are delivered to the Wynnewood Refinery through third-party and joint venture
December 31, 2019 | 9
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pipelines and received into storage tanks at terminals located on or near the refinery. We also lease tank storage totaling 2.1
million barrels, including 1.9 million barrels at Cushing.
The Coffeyville Refinery is connected to the mid-continent natural gas liquid commercial hub at Conway, Kansas by the
inbound Enterprise Pipeline Blue Line. Natural gas liquid blendstocks such as butanes and natural gasoline are sourced and
delivered directly into the refinery. In addition, Coffeyville Refinery’s proximity to Conway provides access to the natural gas
liquid and liquid petroleum gas fractionation and storage capabilities.
Through the crude oil and other feedstock supply operations outlined above, and the associated markets available to it, we
are able to source and refine crude oils from different locations and of different compositions when it is economically
advantageous to do so. The tables below present the total crude throughput by refinery for the years ended December 31, 2019
and 2018:
(in bpd)
Regional Crude
WTI
WTL
Midland WTI
Condensate
Heavy Canadian
Year Ended December 31, 2019
Coffeyville
49,093
67,382
473
3,888
4,331
4,711
38 %
52 %
— %
3 %
3 %
4 %
Wynnewood
53,848
3
668
10,995
7,666
—
74 %
— %
1 %
15 %
10 %
— %
Total
102,941
67,385
1,141
14,883
11,997
4,711
51 %
33 %
1 %
7 %
6 %
2 %
Total crude throughput
129,878
100 %
73,180
100 %
203,058
100 %
(in bpd)
Regional Crude
WTI
Midland WTI
Condensate
Heavy Canadian
Year Ended December 31, 2018
Coffeyville
Wynnewood
31,350
66,952
15,893
4,992
5,302
25 %
54 %
13 %
4 %
4 %
54,746
2,354
10,332
7,237
—
73 %
3 %
14 %
10 %
— %
Total
86,096
69,306
26,225
12,229
5,302
43 %
35 %
13 %
6 %
3 %
Total crude throughput
124,489
100 %
74,669
100 %
199,158
100 %
December 31, 2019 | 10
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Marketing and Distribution
Our Coffeyville product marketing efforts are focused in the central mid-continent area through rack marketing, which is
the supply of product through tanker trucks and railcars directly to customers located in close geographic proximity to the
refinery and to customers at terminals on third-party refined products distribution systems; and bulk sales into the mid-continent
markets and other destinations utilizing third-party product pipeline networks.
The Wynnewood Refinery ships its finished product via pipeline, railcar, and truck, focusing its efforts in Oklahoma and
parts of Arkansas, as well as eastern Missouri. The pipeline system is capable of multi-directional flow, providing access to
Texas markets as well as adjoining states with pipeline connections. The Wynnewood Refinery also sells jet fuel to the U.S.
Department of Defense via its segregated truck rack.
Customers
Customers for the Refineries’ petroleum products primarily include retailers, railroads, and farm cooperatives and other
refiners/marketers in Group 3 of the PADD II region because of their relative proximity to the Refineries and pipeline access.
We typically sell bulk products to long-standing customers at spot market prices based on a Group 3 basis differential to prices
quoted on the New York Mercantile Exchange (“NYMEX”), which are reported by industry market-related indices such as
Platts and Oil Price Information Service (“OPIS”).
Rack sales are at posted prices that are influenced by the competitive forces in the Group 3 market. In addition, the
Coffeyville Refinery sells hydrogen and by-products of its refining operations, such as pet coke, to an affiliate, CVR Partners,
pursuant to multi-year agreements. For the year ended December 31, 2019, the top two customers accounted for 25% of the
Petroleum Segment’s net sales.
Competition
Our Petroleum Segment competes primarily on the basis of price, reliability of supply, availability of multiple grades of
products, and location. The principal competitive factors affecting its refining operations are cost of crude oil and other
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feedstocks, refinery complexity, refinery efficiency, refinery product mix, and product distribution and transportation costs. The
location of the Refineries provides us with a reliable supply of crude oil and a transportation cost advantage over our
competitors. We primarily compete against five refineries in the mid-continent region. In addition to these refineries, we
compete against trading companies, as well as other refineries located outside the region that are linked to the mid-continent
market through an extensive product pipeline system. These competitors include refineries located near the Gulf Coast, the
Great Lakes, and the Texas panhandle region.
Seasonality
Our Petroleum Segment operations experience seasonal fluctuations as demand for gasoline products is generally higher
during the summer months than during the winter months due to seasonal increases in highway traffic and road construction
work. Demand for diesel fuel is higher during the planting and harvesting seasons. As a result, its results of operations for the
first and fourth calendar quarters are generally lower compared to its results for the second and third calendar quarters. In
addition, unseasonably cool weather in the summer months and/or unseasonably warm weather in the winter months in the
markets in which we sell petroleum products can impact the demand for gasoline and diesel fuel.
Nitrogen Fertilizer
Our Nitrogen Fertilizer Segment is comprised of the assets and operations of CVR Partners, including two nitrogen
fertilizer manufacturing facilities located in Coffeyville, Kansas and East Dubuque, Illinois.
Facilities
Coffeyville Fertilizer Facility - We own and operate a nitrogen fertilizer production facility in Coffeyville, Kansas that
includes a gasifier complex having a capacity of 89 million standard cubic feet per day of hydrogen, a 1,300 ton per day
capacity ammonia unit, and a 3,000 ton per day capacity UAN unit (the “Coffeyville Fertilizer Facility”). The Coffeyville
Fertilizer Facility is the only nitrogen fertilizer plant in North America that utilizes a pet coke gasification process to produce
nitrogen fertilizer. The Coffeyville Fertilizer Facility’s largest raw material expense used in the production of ammonia is pet
coke, which it purchases from our Coffeyville Refinery and third parties. For the years ended December 31, 2019, 2018, and
2017, the Coffeyville Fertilizer Facility purchased approximately $20 million, $13 million, and $8 million, respectively, of pet
coke, which equaled an average cost per ton of $37.47, $28.41, and $16.56, respectively. For the years ended December 31,
2019, 2018, and 2017, we upgraded approximately 90%, 93%, and 88%, respectively, of our ammonia production into UAN, a
product that presently generates greater profit than ammonia. We upgrade substantially all of our ammonia production at the
Coffeyville Facility into UAN and expect to continue to do so when the economics are favorable.
East Dubuque Fertilizer Facility - We own and operate a nitrogen fertilizer production facility in East Dubuque, Illinois
that includes a 1,075 ton per day capacity ammonia unit and a 1,100 ton per day capacity UAN unit (the “East Dubuque
Fertilizer Facility”). The East Dubuque Fertilizer Facility has the flexibility to vary its product mix enabling it to upgrade a
portion of ammonia production into varying amounts of UAN, nitric acid, and liquid and granulated urea, depending on market
demand, pricing, and storage availability. The East Dubuque Fertilizer Facility’s largest raw material expense used in the
production of ammonia is natural gas, which it purchases from third parties. For the years ended December 31, 2019, 2018, and
2017, the East Dubuque Facility incurred approximately $21 million, $23 million, and $26 million for feedstock natural gas,
respectively, which equaled an average cost of $3.08, $3.15, and $3.26 per MMBtu, respectively.
Commodities
The nitrogen products we produce are globally traded commodities and are subject to price competition. The customers for
its products make their purchasing decisions principally on the basis of delivered price and, to a lesser extent, on customer
service and product quality. The selling prices of its products fluctuate in response to global market conditions and changes in
supply and demand.
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Agriculture
The three primary forms of nitrogen fertilizer used in the United States of America are ammonia, urea, and UAN. Unlike
ammonia and urea, UAN can be applied throughout the growing season and can be applied in tandem with pesticides and
herbicides, providing farmers with flexibility and cost savings. As a result of these factors, UAN typically commands a
premium price to urea and ammonia, on a nitrogen equivalent basis.
Nutrients are depleted in soil over time and, therefore, must be replenished through fertilizer use. Nitrogen is the most
quickly depleted nutrient and must be replenished every year, whereas phosphate and potassium can be retained in soil for up to
three years. Plants require nitrogen in the largest amounts and it accounts for approximately 59% of primary fertilizer
consumption on a nutrient ton basis, per the International Fertilizer Industry Association (“IFIA”).
Demand
Global demand for fertilizers is driven primarily by grain demand and prices, which, in turn, are driven by population
growth, farmland per capita, dietary changes in the developing world and increased consumption of bio-fuels. According to the
IFIA, from 1975 to 2017, global fertilizer demand grew 2% annually. Global fertilizer use, consisting of nitrogen, phosphate
and potassium, is projected to increase by 34% between 2010 and 2030 to meet global food demand according to a study
funded by the Food and Agricultural Organization of the United Nations. Currently, the developed world uses fertilizer more
intensively than the developing world, but sustained economic growth in emerging markets is increasing food demand and
fertilizer use. In addition, populations in developing countries are shifting to more protein-rich diets as their incomes increase,
with such consumption requiring more grain for animal feed. As an example, China’s wheat and coarse grains production is
estimated to have increased 36% between 2009 and 2019, but still failed to keep pace with increases in demand, prompting
China to grow its wheat and coarse grain imports by more than 552% over the same period, according to the United States
Department of Agriculture (“USDA”).
The United States is the world’s largest exporter of coarse grains, accounting for 25% of world exports and 27% of world
production for the fiscal year ended September 30, 2019, according to the USDA. A substantial amount of nitrogen is consumed
in production of these crops to increase yield. Based on Fertecon Limited’s (“Fertecon”) 2019 estimates, the United States is the
world’s third largest consumer of nitrogen fertilizer and the world’s largest importer of nitrogen fertilizer. Fertecon is a
reputable agency which provides market information and analysis on fertilizers and fertilizer raw materials for fertilizer and
related industries, and international agencies. Fertecon estimates indicate that the United States represented 11% of total global
nitrogen fertilizer consumption for 2019, with China and India as the top consumers representing 23% and 15% of total global
nitrogen fertilizer consumption, respectively.
North American nitrogen fertilizer producers predominantly use natural gas as their primary feedstock. Over the last five
years, U.S. oil and natural gas reserves have increased significantly due to, among other factors, advances in extracting shale oil
and gas, as well as relatively high oil and gas prices. More recently, global demand has slowed with production staying steady
even as oil and gas prices have declined substantially over the past two years. This has led to significantly reduced natural gas
and oil prices as compared to historical prices. As a result, North America has become a low-cost region for nitrogen fertilizer
production.
Raw Material Supply
Coffeyville Fertilizer Facility - During the past five years, just under 61% of the Coffeyville Fertilizer Facility’s pet coke
requirements on average were supplied by our adjacent Coffeyville Refinery pursuant to a multi-year agreement. Historically,
the Coffeyville Fertilizer Facility has obtained the remainder of its pet coke requirements through third-party contracts typically
priced at a discount to the spot market. In 2019, our supply of pet coke from the Coffeyville refinery declined to approximately
40%, generally attributable to increased processing of shale crude oil, which reduced the amount of pet coke produced by the
refinery and increased the amount of third-party purchases made at spot prices. Additionally, the Coffeyville Fertilizer Facility
relies on a third-party air separation plant at its location that provides contract volumes of oxygen, nitrogen, and compressed
dry air to the Coffeyville Fertilizer Facility gasifiers.
East Dubuque Fertilizer Facility - The East Dubuque Fertilizer Facility uses natural gas to produce nitrogen fertilizer. We
are generally able to purchase natural gas at competitive prices due to the facilities’ connection to the Northern Natural Gas
interstate pipeline system, which is within one mile of the facility, and a third-party owned and operated pipeline. The pipelines
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are connected to a third-party distribution system at the Chicago Citygate receipt point and at the Hampshire interconnect from
which natural gas is transported to the East Dubuque Fertilizer Facility. As of December 31, 2019, we had commitments to
purchase approximately 1 million MMBtus of natural gas supply for planned use in our East Dubuque Fertilizer Facility in both
January and February of 2020 at a weighted average rate per MMBtu of approximately $2.67 and $2.66, respectively, exclusive
of transportation cost.
Marketing and Distribution
Our Nitrogen Fertilizer Segment primarily markets UAN products to agricultural customers and ammonia products to
agricultural and industrial customers. UAN and ammonia, including freight, accounted for approximately 70% and 24%,
respectively, of our Nitrogen Fertilizer Segment’s net sales for the year ended December 31, 2019.
UAN and ammonia are primarily distributed by truck or by railcar. If delivered by truck, products are most commonly sold
on a free-on-board (“FOB”) shipping point basis, and freight is normally arranged by the customer. We operate a fleet of
railcars for use in product delivery. If delivered by railcar, the products are most commonly sold on a FOB destination point
basis, and we typically arrange the freight.
The nitrogen fertilizer products leave the Coffeyville Fertilizer Facility either in railcars for destinations located principally
on the Union Pacific or Burlington Northern Santa Fe railroads or in trucks for direct shipment to customers. The East Dubuque
Fertilizer Facility primarily sells product to customers located within 200 miles of the facility. In most instances, customers take
delivery of nitrogen products at the East Dubuque Fertilizer Facility and arrange to transport them to their final destinations by
truck. Additionally, the East Dubuque Fertilizer Facility has direct access to a barge dock on the Mississippi River, as well as a
nearby rail spur serviced by the Canadian National Railway Company.
Customers
We sell UAN products to retailers and distributors. In addition, we sell ammonia to agricultural and industrial customers.
Given the nature of the nitrogen fertilizer business, and consistent with industry practice, most of our contracts with customers
are for a term of 12-month or less. Some of our industrial sales include long-term purchase contracts. For the year ended
December 31, 2019, the top two customers in the aggregate represented 28% of the Nitrogen Fertilizer Segment’s net sales.
Competition
Our Nitrogen Fertilizer Segment has experienced and expects to continue to meet significant levels of competition from
current and potential competitors, many of whom have significantly greater financial and other resources. Competition in the
nitrogen fertilizer industry is dominated by price considerations. However, during the spring and fall application seasons,
farming activities intensify and delivery capacity is a significant competitive factor. We seasonally adjust inventory to enhance
manufacturing and distribution operations.
Our major competitors in the nitrogen fertilizer business include CF Industries Holdings, Inc., including its majority owned
subsidiary Terra Nitrogen Company, L.P.; LSB Industries, Inc.; Koch Fertilizer Company, LLC; and Nutrien Ltd. (formerly
known as Agrium, Inc. and Potash Corporation of Saskatchewan, Inc.). Domestic competition is intense due to customers’
sophisticated buying tendencies and competitor strategies that focus on cost and service. We also encounter competition from
producers of fertilizer products manufactured in foreign countries, including the threat of increased production capacity. In
certain cases, foreign producers of fertilizer who export to the United States may be subsidized by their respective governments.
Seasonality
Because the Nitrogen Fertilizer Segment primarily sells agricultural commodity products, its business is exposed to
seasonal fluctuations in demand for nitrogen fertilizer products in the agricultural industry. In addition, the demand for
fertilizers is affected by the aggregate crop planting decisions and fertilizer application rate decisions of individual farmers who
make planting decisions based largely on the prospective profitability of a harvest. The specific varieties and amounts of
fertilizer they apply depend on factors like crop prices, farmers’ current liquidity, soil conditions, weather patterns, and the
types of crops planted. The Nitrogen Fertilizer Segment typically experiences higher net sales in the first half of the calendar
year, which is referred to as the planting season, and its net sales tend to be lower during the second half of each calendar year,
which is referred to as the fill season.
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Environmental Matters
Our petroleum and nitrogen fertilizer businesses are subject to extensive and frequently changing federal, state, and local,
environmental, health and safety laws and regulations governing the emission and release of hazardous substances into the
environment, the transportation, storage, and disposal of waste, the treatment and discharge of waste water, the storage,
handling, use and transportation of petroleum and nitrogen products, and the characteristics and composition of gasoline, diesel
fuels, UAN and ammonia. These laws and regulations and the enforcement thereof impact our segments and their operations by
imposing:
•
•
•
restrictions on operations or the need to install enhanced or additional controls;
liability for the investigation and remediation of contaminated soil and groundwater at current and former
facilities (if any) and for off-site waste disposal locations; and
specifications for the products marketed by the Petroleum and Nitrogen Fertilizer Segments, primarily gasoline,
diesel fuel, UAN, and ammonia.
Our operations require numerous permits,
licenses, and authorizations. Failure to comply with these permits or
environmental laws and regulations could result in fines, penalties, or other sanctions or a revocation of our permits. In
addition, the laws and regulations to which we are subject are often evolving and many of them have or could become more
stringent or have or could become subject to more stringent interpretation or enforcement by federal or state agencies. These
laws and regulations could result in increased capital, operating, and compliance costs.
The Federal Clean Air Act (“CAA”)
The CAA and its implementing regulations, as well as corresponding state laws and regulations governing air emissions,
affect the Petroleum and Nitrogen Fertilizer Segments both directly and indirectly. Direct impacts may occur through the
CAA’s permitting requirements and/or emission control requirements relating to specific air pollutants, as well as the
requirement to maintain a risk management program to help prevent accidental releases of certain regulated substances. The
CAA affects the Petroleum and Nitrogen Fertilizer Segments by extensively regulating the air emissions of sulfur dioxide
(“SO2”), volatile organic compounds, nitrogen oxides, and other substances, including those emitted by mobile sources, which
are direct or indirect users of our products. Some or all of the regulations promulgated pursuant to the CAA, or any future
promulgations of regulations, may require the installation of controls or changes to the petroleum facilities and/or the nitrogen
fertilizer facilities (collectively referred to as the “Facilities”) to maintain compliance. If new controls or changes to operations
are needed, the costs could be material.
The regulation of air emissions under the CAA requires that we obtain various construction and operating permits and
incur capital expenditures for the installation of certain air pollution control devices at our operations. Various standards and
programs specific to our operations have been implemented, such as the National Emission Standard for Hazardous Air
Pollutants, the New Source Performance Standards, and the New Source Review.
The Federal Clean Water Act (“CWA”)
The CWA and its implementing regulations, as well as the corresponding state laws and regulations that govern the
discharge of pollutants into the water, affect the Petroleum and Nitrogen Fertilizer Segments. The CWA’s permitting
requirements establish discharge limitations that may be based on technology standards, water quality standards, and
restrictions on the total maximum daily load of pollutants allowed to enter a particular water body based on its use. In addition,
water resources are becoming and in the future may become more scarce, and many refiners, including us, are subject to use
restrictions in the event of low availability conditions. Our Refineries and the Coffeyville Fertilizer Facility have contracts in
place to receive water during certain water shortage conditions, but these conditions could change over time depending on the
scarcity of water.
Renewable Fuel Standards
Pursuant to the Energy Policy Act of 2005 and Energy Independence and Security Act of 2007 (“EISA”), the EPA has
promulgated the Renewable Fuel Standard (“RFS”). The RFS requires refiners to either blend “renewable fuels,” such as
ethanol and biofuels, into their transportation fuels or purchase renewable fuel credits, known as renewable identification
numbers (“RINs”), in lieu of blending. Under the RFS, the volume of renewable fuels that refineries like Coffeyville and
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Wynnewood are obligated to blend into their finished transportation fuel is adjusted annually by the EPA based on fuel supply
and other conditions to meet the statutory mandates that increase annually, but which may be waived by the EPA under certain
conditions. The volume of renewable fuels required by EISA increased from 9 billion gallons in 2008 to 22 billion gallons in
2016 and increases to 36 billion gallons in 2022. The EPA has statutory authority to determine RFS volumes after 2022. In
addition to the total renewable fuel volume mandate, there are sub-mandates for advanced biofuels, cellulosic biofuel, and
biomass-based diesel. Under the cellulosic waiver authority provided to the EPA by the CAA, if the EPA’s projected volume of
cellulosic biofuel for a calendar year is less than its statutory mandate, the EPA must reduce the required volume of cellulosic
biofuel accordingly and provide obligated parties the opportunity to purchase cellulosic waiver credits. The EPA also has the
discretion to reduce the total renewable fuel and advanced biofuel requirements by the same amount as it reduced the cellulosic
biofuel volume. The Petroleum Segment (like many refiners) is not able to meet its annual renewable volume obligation
(“RVO”) through blending, so it has had to purchase RINs on the open market as well as obtain cellulosic waiver credits from
the EPA, in order to comply with the RFS. The cost of purchasing RINs and cellulosic waiver credits fluctuates and can be
significant. The price of RINs has been extremely volatile as the EPA’s proposed renewable fuel volume mandates approached
and exceeded the “blend wall.” The blend wall refers to the point at which the amount of ethanol blended into the transportation
fuel supply exceeds the demand for transportation fuel containing such levels of ethanol. The blend wall is generally considered
to be reached when more than 10% ethanol by volume (“E10 gasoline”) is blended into transportation fuel.
In May 2019, the EPA finalized regulatory changes to allow gasoline blended with up to 15 percent ethanol (“E15”) to take
advantage of a waiver during the summer months that previously only applied to E10. Because E15 can now be sold year-round
rather than just eight months of the year, a higher percentage of transportation fuels can be blended with renewable fuels. The
E15 rule, however, is the subject of legal challenges in the District of Columbia Circuit (“D.C. Circuit”), which could lead to
the rule being overturned. Also, in December 2019, the EPA published the final renewable fuel volumes for 2020, and the
biomass-based diesel volume for 2021 (the “2020 RFS Final Rule”). As in past years, the volumes increased from the previous
year, but with the exception of the volume for biomass-based diesel, are lower than the CAA statutory volume targets. The EPA
set a lower volume for cellulosic biofuel based on the projected volume available for 2020 and used its cellulosic waiver
authority under the CAA to set volumes below the statutory targets for advanced biofuel and total renewable fuel. In the rule,
the EPA also finalized changes to the percentage standard calculations to account for volumes of gasoline and diesel that the
EPA projects will be exempted from the renewable volume obligations moving forward.
Additional RFS-related rulemakings may occur in 2020. One relates to a lawsuit in the U.S. Court of Appeals for the D.C.
Circuit in which several biofuels groups challenged the EPA’s final renewable fuels volumes for 2014 through 2016. In July
2017, the D.C. Circuit vacated the EPA’s decision to reduce the 2016 volumes under its “inadequate domestic supply” waiver
authority and remanded the rule to the EPA for further reconsideration. In its proposed rule for the 2020 renewable fuel
volumes, the EPA responded to the remand by proposing that the 2016 volume requirement for total renewable fuel should not
be changed. In its final rule, however, the EPA noted that it was still actively considering this issue and did not expect to take
final agency action until early 2020. When the EPA re-proposes the 2016 renewable volume obligations, there could be an
increase in the volume mandates for 2016 and, as a result, the Coffeyville Refinery and the Wynnewood Refinery could be
required to purchase more RINs for 2016 compliance.
Another rulemaking that was previously anticipated but has since been withdrawn involves the CAA “reset” provision.
Under the reset provision, if the EPA waives the statutory volumes for any of the four fuel categories by at least 20% for two
consecutive years or by at least 50% for a single year, then the EPA must modify the statutory volumes for all subsequent years
for that fuel category. The reset has been triggered in previous years for both advanced biofuel and cellulosic biofuel and, most
recently, the rules setting the 2019 renewable fuel volume requirements triggered the reset provision for total renewable fuel. In
October 2018, the EPA reported that it would begin rulemaking in 2019 to reset the volumes for cellulosic biofuel, advanced
biofuel, and total renewable fuel for compliance years 2020-2022. In May 2019, the EPA delivered its proposed “reset” rule to
the Office of Management and Budget (“OMB”), which is the final step before the EPA can release a proposed rule for public
review. Then, in December 2019, the agency withdrew its draft proposal. The EPA has not indicated how it will address the
reset requirement moving forward, but if the EPA does pursue a reset rulemaking, it may modify the volumes, in either case
impacting the Coffeyville Refinery’s and the Wynnewood Refinery’s obligations under the RFS.
Greenhouse Gas Emissions (“GHG”)
The EPA regulates GHG emissions under the Clean Air Act. In October 2009, the EPA finalized a rule requiring certain
large emitters of GHGs to inventory and report their GHG emissions to the EPA. In accordance with the rule, our Facilities
monitor and report our GHG emissions to the EPA. In May 2010, the EPA finalized the “Greenhouse Gas Tailoring Rule,”
which established GHG emissions thresholds that determine when stationary sources, such as the Refineries and the nitrogen
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fertilizer facilities, must obtain permits under Prevention of Significant Deterioration (“PSD”) and Title V programs of the
federal Clean Air Act. Under the rule, facilities already subject to the PSD and Title V programs that increase their emissions of
GHGs by a significant amount are required to undergo PSD review and to evaluate and implement air pollution control
technology, known as “best available control technology,” to reduce GHG emissions.
In December 2010, the EPA reached a settlement agreement with numerous parties under which it agreed to promulgate
New Source Performance Standards (“NSPS”) to regulate GHG emissions from petroleum refineries and electric utilities by
November 2012. In September 2014, the EPA indicated that the petroleum refining sector risk rule, proposed in June 2014 to
address air toxics and volatile organic compounds from refineries, may make it unnecessary for the EPA to regulate GHG
emissions from petroleum refineries at this time. The final rule, which was published in the Federal Register on December 1,
2015, addresses air toxics and volatile organic compounds and places additional emission control requirements and work
practice standards on FCCUs, storage tanks, flares, coking units, and other equipment at petroleum refineries. Therefore, we do
not currently expect the EPA to issue regulations on GHG emissions from petroleum refineries at this time, but that it may do
so in the future.
In October 2015, the EPA published the Clean Power Plan, which established NSPS for carbon dioxide emissions from
electric utilities. However, since the change in administration in 2017, the EPA has shifted its regulatory approach of GHG
emissions. In December 2018, the EPA proposed amendments to the Clean Power Plan that, among other things, would replace
the determination of the best system of emission reduction (“BSER”) with a less costly and burdensome BSER determination
for new coal-fired units. In June 2019, the EPA issued the final Affordable Clean Energy (“ACE”) Rule to replace the 2015
Clean Power Plan, which represented the Obama administration’s signature policy to regulate GHGs. The ACE rule establishes
new emission guidelines for states to address GHGs from existing coal-fired power plants and update the BSER for those
facilities. The ACE rule is being challenged in the courts by multiple states and a coalition of environmental organizations.
The EPA’s approach to regulating GHG emissions may change again under future administrations. Therefore, the impact
on our Facilities due to future GHG regulation is unknown.
Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) and the Emergency Planning
and Community Right-to-Know Act (“EPCRA”)
The release of hazardous substances or extremely hazardous substances into the environment is subject to release reporting
requirements under federal and state environmental laws. Our Facilities also periodically experience releases of hazardous and
extremely hazardous substances from their equipment and periodically have excess emission events. From time to time, the
EPA has conducted inspections and issued information requests to us with respect
to our compliance with reporting
requirements under the CERCLA and the EPCRA. If we fail to timely or properly report a release, or if a release violates the
law or our permits, we could become the subject of a governmental enforcement action or third-party claims. Government
enforcement or third-party claims relating to releases of hazardous or extremely hazardous substances could result in significant
expenditures and liability.
Resource Conservation and Recovery Act (“RCRA”)
Our facilities are subject to the RCRA requirements for the generation, transportation, treatment, storage, and disposal of
solid and hazardous wastes. When feasible, RCRA-regulated materials are recycled instead of being disposed of on-site or off-
site. RCRA establishes standards for the management of solid and hazardous wastes. Besides governing current waste disposal
practices, RCRA also addresses the environmental effects of certain past waste disposal practices, the recycling of wastes, and
the regulation of underground storage tanks containing regulated substances.
Impacts of Past Manufacturing - In March 2004, two of our subsidiaries entered into a Consent Decree (“2004 Consent
Decree”) with the EPA and the Kansas Department of Health and Environment (the “KDHE”) which required us to assume two
RCRA corrective action orders issued to Farmland, the prior owner of the Coffeyville Refinery. We are subject to a 1994 EPA
administrative order related to investigation of possible past releases of hazardous materials to the environment at the
Coffeyville Refinery. In accordance with the order, we have conducted the required investigation and interim remediation
projects and documented existing soil and groundwater conditions. In June 2017, the Coffeyville Refinery submitted an
amended RCRA post-closure permit application to the KDHE to complete closure of former hazardous waste management units
at the Coffeyville Refinery and to perform corrective action at the site. The KDHE approved the permit application report in
July 2019, and we anticipate that the RCRA permit will be issued in 2020. The now-closed Phillipsburg terminal is subject to a
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1996 EPA administrative order related to investigation of releases of hazardous materials to the environment at the Phillipsburg
terminal, which operated as a refinery until 1991. The Phillipsburg terminal investigation is complete and corrective measures
are in place implementing the EPA’s Statement of Basis and Final Remedy Decision issued in July 2018. The Wynnewood
Refinery operates under a RCRA permit. A RCRA facility investigation has been completed in accordance with the terms of the
permit. Based on the facility investigation and other available information, Wynnewood Refining Company, LLC (“WRC”)
entered into a consent order with the Oklahoma Department of Environmental Quality (“ODEQ”) requiring further
investigations of groundwater conditions and enhancements of existing remediation systems. We have completed the
groundwater investigation at the Wynnewood Refinery and the ODEQ has approved our ongoing corrective actions. The
consent order was terminated by the ODEQ in July 2019.
Financial Assurance - We are required, under the 2004 Consent Decree, to establish financial assurance to secure the
current projected clean-up costs of $6 million for the Coffeyville Refinery and $5 million for the now-closed Phillipsburg
terminal in the event we fail to fulfill our clean-up obligations. In accordance with the 2004 Consent Decree, as modified by a
2010 agreement between Coffeyville Resources Refining and Marketing, LLC (“CRRM”), Coffeyville Resources Terminal,
LLC (“CRT”), the EPA, and the KDHE, this financial assurance is currently provided by a bond in the amount of $2 million for
clean-up obligations at the Phillipsburg terminal and a letter of credit in the amount of $0.3 million for estimated costs to close
regulated hazardous waste management units at the Coffeyville Refinery. Additional self-funded financial assurance of
approximately $6 million and $3 million is required to meet our RCRA financial assistance obligations for the Coffeyville
Refinery and Phillipsburg terminal, respectively. The $2 million bond amount
is reduced each year based on actual
expenditures for corrective actions and the letter of credit and the self-funded mechanisms are re-evaluated and adjusted on an
annual basis. Current RCRA financial assurance requirements for the Wynnewood Refinery total $0.2 million for hazardous
waste storage tank closure and post-closure monitoring of a closed storm water retention pond.
Waste Management - There are two closed hazardous waste units at the Coffeyville Refinery and fourteen other solid waste
management units in the process of being closed pending state agency approval. There is one closed hazardous waste unit and
one active hazardous waste storage tank at the Wynnewood Refinery. In addition, one closed, interim status, hazardous waste
landfarm located at the now-closed Phillipsburg terminal is under long-term post-closure care.
Environmental Remediation
As is the case with all companies engaged in similar industries, we face potential exposure from future claims and lawsuits
involving environmental matters, including soil and water contamination and personal injury or property damage allegedly
caused by crude oil or hazardous substances that we manufactured, handled, used, stored, transported, spilled, disposed of, or
released. There is no assurance that we will not become involved in future proceedings related to the release of hazardous or
extremely hazardous substances or crude oil for which we have potential liability or that, if we were held responsible for
damages in any existing or future proceedings, such costs would be covered by insurance or would not be material.
Environmental Insurance
We are covered by a site pollution legal liability insurance policy. The policy includes business interruption coverage. The
policy insures any location owned, leased or rented or operated by the Company, including the Refineries and the nitrogen
fertilizer facilities. The policy insures certain pollution conditions at or migrating from a covered location, certain waste
transportation and disposal activities, and business interruption.
In addition to the site pollution legal liability insurance policy, we maintain umbrella and excess casualty insurance policies
which include sudden and accidental pollution coverage. This insurance provides coverage due to named perils for claims
involving pollutants where the discharge is sudden and accidental and first commences at a specific day and time during the
policy period.
The site pollution legal liability policy and the pollution coverage provided in the casualty insurance policies are subject to
retentions and deductibles and contain discovery requirements, reporting requirements, exclusions, definitions, conditions, and
limitations that could apply to a particular pollution claim, and there can be no assurance such claim will be adequately insured
for all potential damages.
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Health, Safety and Security Matters
We are subject to a number of federal and state laws and regulations related to safety, including the Occupational Safety
and Health Act (“OSHA”) and comparable state statutes, the purpose of which are to protect the health and safety of workers.
We also are subject to Process Safety Management regulations, which are designed to prevent or minimize the consequences of
catastrophic releases of toxic, reactive, flammable, or explosive chemicals.
We operate a comprehensive safety, health, and security program, with participation by employees, consultants, and
advisors at all levels of the organization. We have developed comprehensive safety programs aimed at preventing OSHA
recordable incidents. Despite our efforts to achieve excellence in our safety and health performance, there can be no assurances
that there will not be accidents resulting in injuries or even fatalities. We routinely audit our programs and seek to continually
improve our management systems.
Refer to Part II, Item 8, Note 11 (“Commitments and Contingencies”), “Wynnewood Refinery Incident” of this Report for
further discussion of OSHA.
Employees
As of December 31, 2019, the Company had approximately 1,486 employees including those employed by CVR Refining,
CVR Partners, and the Company and its other subsidiaries’ corporate support functions. Our Petroleum Segment had
approximately 971 employees at December 31, 2019 across both of its refineries and its logistics operations, including
approximately 511 employees covered by collective bargaining agreements that expire on various dates ranging from June 2021
to March 2023. Our Nitrogen Fertilizer Segment had approximately 286 employees at December 31, 2019 across both of its
facilities and its marketing and logistics operations, including approximately 90 employees covered by collective bargaining
agreements that expire in October 2023.
Available Information
Our website address is www.cvrenergy.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and all amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), are available free of charge through our website under “Investor
Relations,” as soon as reasonably practicable after the electronic filing or furnishing of these reports is made with the Securities
and Exchange Commission (the “SEC”) at www.sec.gov. In addition, our Corporate Governance Guidelines, Codes of Ethics
and Business Conduct, and Charters of the Audit Committee, the Nominating and Corporate Governance Committee, and the
Compensation Committee of the Board of Directors are available on our website. These guidelines, policies, and charters are
also available in print without charge to any stockholder requesting them. We do not intend for information contained in our
website to be part of this Report.
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Item 1A. Risk Factors
The following risks should be considered together with the other information contained in this Report and all of the
information set forth in our filings with the SEC. If any of the following risks or uncertainties develops into actual events, our
petroleum and/or nitrogen fertilizer businesses, financial conditions, or results of operations could be materially adversely
affected. References to CVR Energy, the Company, “we”, “us”, and “our” may refer to consolidated subsidiaries of CVR
Energy, including CVR Refining or CVR Partners, as the context may require.
Risks Related to Our Entire Business
Our petroleum and nitrogen fertilizer businesses are, and commodity prices are, cyclical and highly volatile, which could
have a material adverse effect on our results of operations, financial condition and cash flows.
Our Petroleum Segment’s financial results are primarily affected by margin between refined product prices and the prices
for crude oil and other feedstocks. Historically, refining margins have been volatile, and we believe they will continue to be
volatile in the future. Our cost to acquire feedstocks and the price at which we can ultimately sell refined products depend upon
several factors beyond our control, including regional and global supply of and demand for crude oil, gasoline, diesel, and other
feedstocks and refined products. These in turn depend on, among other things, the availability and quantity of imports, the
production levels of U.S. and international suppliers, levels of refined petroleum product inventories, productivity and growth
(or the lack thereof) of U.S. and global economies, U.S. relationships with foreign governments, political affairs, and the extent
of governmental regulation.
Some of these factors can vary by region and may change quickly, adding to market volatility, while others may have
longer-term effects on refining and marketing margins, which are uncertain. We do not produce crude oil and must purchase all
of the crude oil we refine long before we refine it and sell the refined products. Price level changes during the period between
purchasing feedstocks and selling the refined petroleum products from these feedstocks could have a significant effect on our
financial results. A decline in market prices may negatively impact the carrying value of our inventories.
Our Petroleum Segment profitability is also impacted by the ability to purchase crude oil at a discount to benchmark crude
oils, such as WTI. Crude oil differentials can fluctuate significantly based upon overall economic and crude oil market
conditions. Adverse changes in crude oil differentials can adversely impact refining margins, earnings and cash flows. In
addition, the Petroleum Segment’s purchases of crude oil, although based on WTI prices, have historically been at a discount to
WTI because of the proximity of the refineries to the sources, existing logistics infrastructure, and quality differences. Any
changes to these factors could result in a reduction of the discount to WTI and may result in a reduction of the Petroleum
Segment’s cost advantage.
Our Nitrogen Fertilizer Segment is exposed to fluctuations in nitrogen fertilizer demand in the agricultural industry. These
fluctuations historically have had and could in the future have significant effects on prices across all nitrogen fertilizer products
and, in turn, our results of operations, financial condition and cash flows.
Nitrogen fertilizer products are commodities, the price of which can be highly volatile. The prices of nitrogen fertilizer
products depend on a number of factors, including general economic conditions, cyclical trends in end-user markets, supply and
demand imbalances, governmental policies, and weather conditions, which have a greater relevance because of the seasonal
nature of fertilizer application. If seasonal demand exceeds the projections on which we base our production levels, customers
may acquire nitrogen fertilizer products from competitors, and our profitability may be negatively impacted. If seasonal demand
is less than expected, we may be left with excess inventory that will have to be stored or liquidated.
Demand for nitrogen fertilizer products is dependent on demand for crop nutrients by the global agricultural industry. The
international market for nitrogen fertilizers is influenced by such factors as the relative value of the U.S. dollar and its impact
upon the cost of importing nitrogen fertilizers, foreign agricultural policies, the existence of, or changes in, import or foreign
currency exchange barriers in certain foreign markets, changes in the hard currency demands of certain countries, and other
regulatory policies of foreign governments, as well as the laws and policies of the United States affecting foreign trade and
investment. Nitrogen-based fertilizers remain solidly in demand, driven by a growing world population, changes in dietary
habits, and an expanded use of corn for the production of ethanol. Supply is affected by available capacity and operating rates,
raw material costs, government policies, and global trade. A decrease in nitrogen fertilizer prices would have a material adverse
effect on our nitrogen fertilizer business and cash flow, including CVR Partners’ ability to make distributions.
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Additionally, volatile prices for natural gas and electricity affect both segments’ manufacturing and operating costs.
Natural gas and electricity prices have been, and will continue to be, affected by supply and demand for fuel and utility services
in both local and regional markets.
Petroleum and nitrogen fertilizer products are global commodities, and our businesses face intense competition from
other refining and marketing companies and nitrogen fertilizer producers, which may have more resources and scale.
The refining industry is highly competitive with respect to both crude oil and other feedstock supply and refined petroleum
product markets. We compete with many companies for available supplies of crude oil and other feedstocks and for sites for our
refined petroleum products. Our Petroleum Segment may be unable to compete effectively with competitors within and outside
of the industry, which could result in reduced profitability. We do not have a retail business and therefore are dependent upon
others for outlets for our refined products, and we do not have arrangements exceeding a twelve-month period for much of our
petroleum output. Many of our competitors, however, obtain a significant portion of their feedstocks from company-owned
production and some have extensive retail sites. Such competitors are at times able to offset losses from refining operations
with profits from producing or retailing operations and may be better positioned to withstand periods of depressed refining
margins or feedstock shortages. Some of our competitors also have materially greater financial and other resources than we
have. Such competitors have a greater ability to bear the economic risks inherent in all phases of our industry.
In addition, our Petroleum Segment competes with other industries that provide alternative means to satisfy the energy and
fuel requirements of its industrial, commercial, and individual customers. There are presently significant governmental
incentives and consumer pressures to increase the use of alternative fuels in the United States. The more successful these
alternatives become as a result of governmental incentives or regulations, technological advances, consumer demand, improved
pricing, or otherwise, the greater the negative impact on pricing and demand for our products and profitability.
Our Nitrogen Fertilizer Segment is subject to intense price competition from both U.S. and foreign sources. Fertilizers are
global commodities, with little or no product differentiation, and customers make their purchasing decisions principally on the
basis of delivered price and availability of the product. Increased global supply or decreases in transportation costs for foreign
sources of fertilizer may put downward pressure on fertilizer prices. Furthermore, in recent years, the price of nitrogen fertilizer
in the United States has been substantially driven by pricing in the global fertilizer market. We compete with a number of U.S.
producers and producers in other countries, including state-owned and government-subsidized entities. Some competitors have
greater total resources and are less dependent on earnings from fertilizer sales, which make them less vulnerable to industry
downturns and better positioned to pursue new expansion and development opportunities. Additionally, our competitors
utilizing different corporate structures may be better able to withstand lower cash flows than our Nitrogen Fertilizer Segment
can as a limited partnership. Our competitive position could suffer to the extent we are unable to expand resources either
through investments in new or existing operations or through acquisitions, joint ventures, or partnerships. An inability to
compete successfully could result in a loss of customers, which could adversely affect our sales, profitability, and cash flows
and, therefore, have a material adverse effect on our results of operations, financial condition and cash flows.
Our businesses are geographically concentrated and are, therefore, subject to regional economic downturns and seasonal
variations, which may affect our production levels, transportation costs, and inventory and working capital levels.
Our Refineries are both located in the southern portion of Group 3 of the PADD II region, and we primarily market refined
products in a relatively limited geographic area. As a result, our Petroleum Segment is more susceptible to regional economic
conditions than the operations of more geographically diversified competitors, and any unforeseen events or circumstances that
affect its operating area could also materially adversely affect its revenues and cash flows. These factors include, among other
things, changes in the economy, weather conditions, demographics and population, increased supply of refined products from
competitors, and reductions in the supply of crude oil. In addition, if we deliver refined products to customers outside of the
region, we may incur considerably higher transportation costs, resulting in lower refining margins, if any.
Our Nitrogen Fertilizer Segment’s sales to agricultural customers are concentrated in the Great Plains and Midwest states,
and nitrogen fertilizer demand is seasonal. Our quarterly results may vary significantly from one year to the next due largely to
weather-related shifts in planting schedules and purchase patterns. Farmers tend to apply nitrogen fertilizer during two short
application periods, one in the spring and the other in the fall. In contrast, we, along with other nitrogen fertilizer producers,
generally produce products throughout the year. As a result, we and our customers generally build inventories during the low
demand periods of the year to ensure timely product availability during peak sales seasons. Variations in the proportion of
product sold through prepaid sales contracts and the terms of such contracts can increase the seasonal volatility of our cash
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flows and cause changes in the patterns of seasonal volatility from year-to-year. Additionally, the accumulation of inventory to
be available for seasonal sales creates significant seasonal working capital and storage capacity requirements. The degree of
seasonality can change significantly from year-to-year due to conditions in the agricultural industry and other factors. As a
consequence of this seasonality, distributions by our Nitrogen Fertilizer Segment of available cash, if any, may be volatile and
may vary quarterly and annually.
Both the Petroleum and Nitrogen Fertilizer Segments depend on significant customers, and the loss of several significant
customers may have a material adverse impact on our results of operations, financial condition and cash flows.
The Petroleum and Nitrogen Fertilizer Segments both have a significant concentration of customers. The two largest
customers of our Petroleum Segment represented 25% of its net sales for the year ended December 31, 2019. The two largest
customers of the Nitrogen Fertilizer Segment represented approximately 28% of its net sales for the same period. Given the
nature of our businesses, and consistent with industry practice, we do not have long-term minimum purchase contracts with our
customers. The loss of several of these significant customers, or a significant reduction in purchase volume by several of them,
could have a material adverse effect on our results of operations, financial condition and cash flows.
Compliance with and changes in environmental laws and regulations, including those related to climate change, could
require us to make substantial capital expenditures and adversely affect our performance.
Our operations are subject to extensive federal, state, and local environmental laws and regulations relating to the
protection of the environment, including those governing the emission or discharge of pollutants into the environment, product
use and specifications, and the generation, treatment, storage, transportation, disposal, and remediation of solid and hazardous
wastes.
Violations of applicable environmental laws and regulations or of the conditions of permits issued thereunder can result in
substantial penalties, injunctive orders compelling installation of additional controls or other injunctive relief, civil and criminal
sanctions, operating restrictions, permit revocations, and/or facility shutdowns, which may have a material adverse effect on our
ability to operate our facilities and accordingly our financial performance. Capital expenditures and operating costs for current
and future environmental compliance may be substantial and could have a material adverse effect on our segments’ results of
operations, financial condition and profitability.
In addition, new environmental laws and regulations, new interpretations of existing laws and regulations, increased
governmental enforcement of laws and regulations, or other developments could require us to make additional unforeseen
expenditures. These laws and regulations are generally expected to impose increasingly stringent, and costly requirements over
time. Various legislative and regulatory measures to address climate change and GHG emissions (including carbon dioxide,
methane, and nitrous oxides) are in various phases of discussion or implementation and could affect our operations. They
include proposed and enacted federal regulation and state actions to develop statewide, regional, or nationwide programs
designed to control and reduce GHG emissions from fixed sources, such as our refineries and fertilizer facilities, and
transportation fuels. Many states and regions have implemented, or are in the process of implementing, measures to reduce
emissions of GHGs, but other than Kansas, we do not currently operate in states that have their own GHG reduction programs.
Although it is not possible to predict the requirements of any GHG legislation that may be enacted, any laws or regulations
that have been or may be adopted to restrict or reduce GHG emissions will likely require us to incur increased operating and
capital costs and/or increased taxes on GHG emissions. If we are unable to maintain sales of our products at a price that reflects
such increased costs, there could be a material adverse effect on our business, financial condition and results of operations.
In addition, climate change legislation and regulations may result in increased costs not only for us but also users of our
fertilizer products, thereby potentially decreasing demand for our products. Further, changes in environmental laws and
regulations or their interpretation relating to the end-use and application of fertilizers could cause changes in demand for our
products or limit our ability market and sell products to end users. From time to time, various state legislatures have proposed
bans or other limitations on fertilizer products. Decreased demand for our products may have a material adverse effect on our
results of operations, financial condition and cash flows.
Our facilities face significant risks due to physical damage hazards, environmental liability risk exposure, and unplanned
or emergency partial or total plant shutdowns resulting in business interruptions. We could incur potentially significant
costs to the extent there are unforeseen events which cause property damage and a material decline in production which are
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not fully insured. The commercial insurance industry engaged in underwriting energy industry risk is specialized and there
is finite capacity; therefore, the industry may limit or curtail coverage, may modify the coverage provided, or may
substantially increase premiums in the future.
If any of our facilities, logistics assets, or key suppliers sustains a catastrophic loss and operations are shutdown or
significantly impaired, it would have a material adverse impact on our operations, financial condition and cash flows. In
addition, the risk exposures we have at the Coffeyville, Kansas plant complex are greater due to production facilities, as well as
distribution and storage, for petroleum and nitrogen fertilizer being in relatively close proximity and potentially exposed to
damage from one incident. Operations at either or both of the facilities could be curtailed, limited, or completely shut down for
an extended period of time as the result of one or more unforeseen events and circumstances, which may not be within our
control, including:
• major unplanned maintenance requirements;
•
•
•
•
•
catastrophic events caused by mechanical breakdown, electrical
contamination, fire, or natural disasters, including floods, windstorms, and other similar events;
injury, pressure vessel
rupture, explosion,
labor supply shortages or labor difficulties that result in a work stoppage or slowdown;
cessation or suspension of a plant or specific operations dictated by environmental authorities;
acts of terrorism or other deliberate malicious acts; and
an event or incident involving a large clean-up, decontamination, or the imposition of laws and ordinances regulating
the cost and schedule of demolition or reconstruction, which can cause significant delays in restoring property to its
pre-loss condition.
We have sustained losses over the past ten-year period at our facilities, which are illustrative of the types of risks and
hazards that exist. These losses or events resulted in costs assumed by us that were not fully insured due to policy retentions or
applicable exclusions. We are insured under casualty, environmental, property, and business interruption insurance policies.
The property and business interruption policies insure real and personal property, including property located at our facilities.
There is potential for a common occurrence to impact both our Coffeyville Refinery and Coffeyville Fertilizer Facility, in which
case the insurance limits and applicable sub-limits would apply to all damages combined. These policies are subject to limits,
sub-limits, retention (financial and time-based), and deductibles. The application of these and other policy conditions could
materially impact insurance recoveries and potentially cause us to assume losses which could impair earnings.
There is finite capacity in the commercial insurance industry engaged in underwriting energy industry risk, and there are
risks associated with the commercial insurance industry reducing capacity, changing the scope of insurance coverage offered,
and substantially increasing premiums, deductibles, or retainers, and/or waiting periods, resulting from highly adverse loss
experience or other financial circumstances. Factors that impact insurance cost and availability include, but are not limited to:
losses in our industries, natural disasters, specific losses incurred by us, and low or inadequate investment returns earned by the
insurance industry. If the supply of commercial insurance is curtailed due to highly adverse financial results, we may not be
able to continue our present limits of insurance coverage or obtain sufficient insurance capacity to adequately insure our risks
for property damage or business interruption.
We could incur significant costs in cleaning up contamination at our refineries, terminals, fertilizer facilities, and off-site
locations.
Our businesses handle petroleum and hazardous substances, and as a result, spills, discharges, or other releases of
petroleum or hazardous substances into the environment may occur. Past or future spills related to any of our current or former
operations, including refineries, pipelines, product terminals, and fertilizer facilities, or transportation of products or hazardous
substances from those facilities, may give rise to liability (including strict liability, or liability without fault, and potential
cleanup responsibility) to governmental entities or private parties under federal, state, or local environmental laws, as well as
under common law. For example, we could be held strictly liable under CERCLA and similar state statutes for past or future
spills without regard to fault or whether our actions were in compliance with the law at the time of the spills. Pursuant to
CERCLA and similar state statutes, we could be held liable for contamination associated with facilities we currently own or
operate (whether such contamination occurred prior to or during our ownership), facilities we formerly owned or operated, and
facilities to which we transported or arranged for the transportation of wastes or byproducts containing hazardous substances
for treatment, storage, or disposal. If significant unknown contamination is identified at or migrating from any of our facilities,
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the associated liability could have a material adverse effect on our results of operations, financial condition and cash flows and
may not be covered by insurance.
The potential penalties and cleanup costs for past or future releases or spills, liability to third parties for damage to their
property or exposure to hazardous substances, or the need to address newly discovered information or conditions that may
require response actions could be significant and could have a material adverse effect on our results of operations, financial
condition and cash flows. In addition, we may incur liability for alleged personal injury or property damage due to exposure to
chemicals or other hazardous substances located at or released from our facilities. We may also face liability for personal injury,
property damage, natural resource damage, or for cleanup costs for the alleged migration of contamination or other hazardous
substances from our facilities to adjacent and other nearby properties.
Remedial activities to address known environmental contamination are underway at three of our facilities, including the
Coffeyville Refinery, the now-closed Phillipsburg terminal (which operated as a refinery until 1991), and the Wynnewood
Refinery. We also have assumed the previous owner’s responsibilities under certain administrative orders under RCRA related
to contamination at or that originated from the Coffeyville Refinery and the Phillipsburg terminal. We continue to work with
the applicable governmental authorities to implement remediation of these three sites on a timely basis. As of December 31,
2019, we have established an accrual of approximately $6 million for probable and reasonably estimable obligations associated
with these sites.
We may incur future liability relating to the off-site disposal of solid and hazardous waste from our facilities. Companies
that dispose of, or arrange for the treatment, transportation, or disposal of, hazardous substances at off-site locations may be
held jointly and severally liable for the costs of investigation and remediation of contamination at those off-site locations,
regardless of fault. We could become involved in litigation or other proceedings involving off-site waste disposal and the
damages or costs associated with any such proceedings could be material.
New regulations concerning the transportation, storage, and handling of hazardous chemicals, risks of terrorism, and the
security of refineries and chemical manufacturing facilities could result in higher operating costs.
The costs of complying with future regulations relating to the transportation, storage, and handling of hazardous chemicals
and security associated with the refining and nitrogen fertilizer facilities may have a material adverse effect on our results of
operations, financial condition and cash flows. Targets such as refining and chemical manufacturing facilities may be at greater
risk of future terrorist attacks than other targets in the United States. As a result, the petroleum and chemical industries are
subject to regulatory initiatives relating to the security of petroleum and chemical industry facilities and the transportation of
hazardous chemicals in the United States. Future terrorist attacks could lead to even stronger, more costly initiatives that could
result in a material adverse effect on our results of operations, financial condition and cash flows.
We may be unable to obtain or renew permits or approvals necessary for our operations, which could inhibit our ability to
do business.
Our businesses hold numerous environmental and other governmental permits and approvals authorizing operations at our
facilities. Future expansion of our operations is predicated upon securing the necessary environmental and other permits or
approvals. A decision by a government agency to deny or delay issuing a new or renewed material permit or approval, or to
revoke or substantially modify an existing permit or approval, could have a material adverse effect on our ability to continue
operations and on our financial condition, results of operations and cash flows.
We are subject to strict laws and regulations regarding employee and process safety, and failure to comply with these laws
and regulations could have a material adverse effect on our results of operations, financial condition and profitability.
We are subject to the requirements of OSHA and comparable state statutes that regulate the protection of the health and
safety of workers, the proper design, operation, and maintenance of our equipment, and require us to provide information about
hazardous materials used in our operations. Failure to comply with these requirements may result in significant fines or
compliance costs, which could have a material adverse effect on our results of operations, financial condition and cash flows.
A significant portion of our workforce is unionized, and we are subject to the risk of labor disputes and adverse employee
relations, which may disrupt our business and increase our costs.
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As of December 31, 2019, approximately 53% and 31% of our petroleum and nitrogen fertilizer employees, respectively,
were represented by labor unions under collective bargaining agreements. We may not be able to renegotiate our collective
bargaining agreements when they expire on satisfactory terms or at all. A failure to do so may increase our costs. In addition,
our existing labor agreements may not prevent a strike or work stoppage at any of our facilities in the future, and any work
stoppage could negatively affect our results of operations, financial condition and cash flows.
We are subject to cybersecurity risks and other cyber incidents resulting in disruption.
We depend on internal and third-party information technology systems to manage and support our operations. In addition,
we collect, process, and retain sensitive and confidential customer information in the normal course of business. Despite the
security measures we have in place and any additional measures we may implement in the future, our facilities and these
systems could be vulnerable to security breaches, computer viruses, lost or misplaced data, programming errors, human errors,
acts of vandalism, or other events. Any disruption of these systems or security breach or event resulting in the misappropriation,
loss, or other unauthorized disclosure of confidential information, whether by us directly or our third-party service providers,
could damage our reputation, expose us to the risks of litigation and liability, disrupt our business, or otherwise affect our
results of operations. In addition, new laws and regulations governing data privacy and the unauthorized disclosure of
confidential information pose increasingly complex compliance challenges and potentially elevate our costs. Any failure to
comply with these laws and regulations, including as a result of a security or privacy breach, could result in significant penalties
and liabilities for us.
The acquisition and expansion strategy of our businesses involves significant risks.
From time to time, we may consider pursuing acquisitions and expansion projects to continue to grow and increase
profitability. However, we may not be able to consummate such acquisitions or expansions, due to intense competition for
suitable acquisition targets, the potential unavailability of financial resources necessary to consummate acquisitions and
expansions, difficulties in identifying suitable acquisition targets and expansion projects or in completing any transactions
identified on sufficiently favorable terms, and the failure to obtain requisite regulatory or other governmental approvals. In
addition, any future acquisitions and expansions may entail significant transaction costs and risks associated with entry into new
markets and lines of business, including but not limited to new regulatory obligations and risks.
Even when acquisitions are completed, integration of acquired entities can involve significant difficulties, such as:
•
•
•
•
•
•
•
•
Unforeseen difficulties in the integration of the acquired operations and disruption of the ongoing operations of our
business;
Failure to achieve cost savings or other financial or operating objectives contributing to the accretive nature of an
acquisition;
Strain on the operational and managerial controls and procedures and the need to modify systems or to add
management resources;
Difficulties in the integration and retention of customers or personnel and the integration and effective deployment of
operations or technologies;
Assumption of unknown material liabilities or regulatory non-compliance issues;
Amortization of acquired assets, which would reduce future reported earnings;
Possible adverse short-term effects on our cash flows or operating results; and
Diversion of management’s attention from the ongoing operations of our business.
In addition, in connection with any potential acquisition or expansion project specific to CVR Partners (our Nitrogen
Fertilizer Segment), we will need to consider whether a business we intend to acquire or expansion project we intend to pursue
could affect CVR Partners’ tax treatment as a partnership for federal income tax purposes. If CVR Partners is otherwise unable
to conclude that the activities of the business being acquired or the expansion project would not affect its treatment as a
partnership for federal income tax purposes, it may elect to seek a ruling from the Internal Revenue Service (“IRS”). Seeking
such a ruling could be costly or, in the case of competitive acquisitions, place the business in a competitive disadvantage
compared to other potential acquirers who do not seek such a ruling. If CVR Partners is otherwise unable to conclude that an
activity would not affect its treatment as a partnership for federal income tax purposes and is unable or unwilling to obtain an
IRS ruling, we may choose to acquire such business or develop such expansion project in a corporate subsidiary of CVR
Partners, which would subject the income related to such activity to entity-level taxation, which would reduce the amount of
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cash available for distribution to CVR Partners’ common unitholders and could likely cause a substantial reduction in the value
of its common units.
Failure to manage these acquisition and expansion growth risks could have a material adverse effect on our results of
operations, financial condition and cash flows. Our joint ventures involve similar risks. There can be no assurance that we will
be able to consummate any acquisitions or expansions, successfully integrate acquired entities, or generate positive cash flow at
any acquired company or expansion project.
Risks Related to the Petroleum Segment
If our Petroleum Segment is required to obtain its crude oil supply without the benefit of a crude oil supply agreement, its
exposure to the risks associated with volatile crude oil prices may increase and its liquidity may be reduced.
Our Petroleum Segment obtains substantially all of its crude oil supply for the Coffeyville Refinery, other than the crude
oil it gathers, through the Vitol Agreement. The Vitol Agreement also includes the provision of crude oil intermediation
services to the Wynnewood Refinery. The agreement, which currently extends through December 31, 2020, minimizes the
amount of in-transit inventory and mitigates crude oil pricing risk by ensuring pricing takes place close to the time the crude oil
is refined and the yielded products are sold. If we were required to obtain our crude oil supply without the benefit of a supply
intermediation agreement, our Petroleum Segment’s exposure to crude oil pricing risk may increase, despite any hedging
activity in which it may engage, and its liquidity could be negatively impacted due to increased inventory, potential need to post
letters of credit, and negative impacts of market volatility. There is no assurance that we will be able to renew or extend the
Vitol Agreement beyond December 31, 2020.
Disruption of the Petroleum Segment’s ability to obtain an adequate supply of crude oil could reduce its liquidity and
increase its costs.
In addition to the crude oil purchased under the Vitol Agreement, our Petroleum Segment gathered and purchased
primarily in Kansas, Oklahoma, and Texas. The Wynnewood Refinery has historically acquired most of its crude oil from our
gathering operations in Oklahoma and Texas, with smaller amounts purchased from other regions. In 2019, the Coffeyville
Refinery obtained approximately 4% of its non-gathered crude oil from Canada. The actual amount of Canadian crude oil we
purchase is dependent on market conditions and will vary from year-to-year. Disruption of production for any reason could
have a material impact on the Petroleum Segment. In the event that one or more of its traditional suppliers becomes unavailable,
we may be unable to obtain an adequate supply of crude oil, or we may only be able to obtain crude oil at unfavorable prices.
As a result, we may experience a reduction in liquidity and our results of operations could be materially adversely affected.
If our access to the pipelines on which the Petroleum Segment relies for the supply of its crude oil and the distribution of
its products is interrupted, its inventory and costs may increase and it may be unable to efficiently distribute its products.
If one of the pipelines on which either of the Refineries relies for supply of crude oil becomes inoperative, the Petroleum
Segment would be required to obtain crude oil through alternative pipelines or from additional tanker trucks, which could
increase its costs and result in lower production levels and profitability. Similarly, if a major refined fuels pipeline becomes
inoperative, we would be required to keep refined fuels in inventory or supply refined fuels to its customers through an
alternative pipeline or by additional tanker trucks, which could increase the Petroleum Segment’s costs and result in a decline in
profitability.
Compliance with the U.S. Environmental Protection Agency Renewable Fuel Standard could adversely affect our
performance.
The U.S. Environmental Protection Agency (“EPA”) has promulgated and implemented a Renewable Fuel Standard
(“RFS”) pursuant to the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007. Under the RFS
program, a Renewable Identification Number (“RIN”) is assigned to each gallon of renewable fuel produced in or imported into
the U.S. The RFS program sets annual mandates for the volume of renewable fuels (such as ethanol and biodiesel) that must be
blended into a refiner’s transportation fuels. If a refiner of petroleum-based transportation fuels is unable to meet its renewable
fuel mandate though blending, it must purchase RINs in the open market to meet its obligations under the RFS program.
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Our Petroleum Segment is exposed to the volatility in the market price of RINs, which can be extreme. We cannot predict
the future prices of RINs. RIN prices are dependent upon a variety of factors, including EPA regulations, the availability of
RINs for purchase, and levels of transportation fuels produced, the mix of the petroleum business’ petroleum products, as well
as the fuel blending performed at the Refineries and downstream terminals, all of which can vary significantly from period to
period. Additionally, because the petroleum business does not produce renewable fuels, increasing the volume of renewable
fuels that must be blended into its products displaces an increasing volume of the Refineries’ product pool, potentially resulting
in lower earnings and materially adversely affecting the petroleum business’ cash flows. If sufficient RINs are unavailable for
purchase, if the Petroleum Segment has to pay a significantly higher price for RINs, or if the Petroleum Segment is otherwise
unable to meet the EPA’s RFS mandates or is unable to participate in programs relieving compliance with RFS obligations, our
business, financial condition and results of operations could be materially adversely affected. For the years ended December 31,
2019, 2018, and 2017, we recognized expense totaling $43 million, $60 million, and $249 million, respectively, to comply with
RFS. Based upon recent market prices of RINs and current estimates related to the other variable factors, our estimated cost to
comply with RFS in 2020 is $100 to $110 million.
Changes in CVR Refining’s credit profile may affect its relationship with its suppliers, which could have a material
adverse effect on our liquidity and ability to operate the Refineries at full capacity.
Changes in CVR Refining’s credit profile may affect the way crude oil suppliers view our ability to make payments and
may induce them to shorten the payment terms for purchases or require it to post security prior to payment. Given the large
dollar amounts and volume of our crude oil and other feedstock purchases, a burdensome change in payment terms may have a
material adverse effect on liquidity and our ability to make payments to suppliers. This, in turn, could cause us to be unable to
operate the Refineries at full capacity. A failure to operate at full capacity could adversely affect our profitability and cash
flows.
The Petroleum Segment’s commodity derivative contracts may limit potential gains, exacerbate potential losses, and
involve other risks.
We may enter into commodity derivatives contracts to mitigate crack spread risk with respect to a portion of expected
refined products production. However, hedging arrangements, if we are able to procure them, may fail to fully achieve this
objective for a variety of reasons, including its failure to have adequate hedging contracts, if any, in effect at any particular time
and the failure of hedging arrangements to produce the anticipated results. Moreover, such transactions may limit our ability to
benefit from favorable changes in margins. In addition, our hedging activities may expose us to the risk of financial loss in
certain circumstances, including instances in which:
•
•
•
•
the volumes of its actual use of crude oil or production of the applicable refined products is less than the volumes
subject to the hedging arrangement;
accidents,
otherwise adversely affect a refinery, suppliers, or customers;
interruptions in transportation,
inclement weather, or other events cause unscheduled shutdowns or
the counterparties to its futures contracts fail to perform under the contracts; or
a sudden, unexpected event materially impacts the commodity or crack spread subject to the hedging arrangement.
As a result, the effectiveness of our risk mitigation strategy could have a material adverse impact on our financial results
and cash flows.
Additionally, since we do not apply hedge accounting to its commodity derivative contracts, gains and losses are charged to
its earnings based on the increase or decrease in the market value of derivative positions. Such gains and losses are reflected in
its income statement in periods that differ from when the underlying hedged items (i.e., gross margin) are reflected in our
income statement. Such derivative gains or losses in earnings may produce significant period-to-period earnings volatility that
is not necessarily reflective of our Petroleum Segment’s operational performance.
We must make substantial capital expenditures in the Refineries and other facilities to maintain their reliability and
efficiency. If we are unable to complete capital projects at their expected costs and/or in a timely manner, or if the market
conditions assumed in project economics deteriorate, our financial condition, results of operations or cash flows could be
adversely affected.
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Our Refineries have been in operation for many years. Equipment, even if properly maintained, may require significant
capital expenditures and expenses to keep operating at optimum efficiency. These refineries generally require facility
turnaround every four to five years. Delays or cost increases related to the engineering, procurement, and construction of new
facilities, or improvements and repairs to existing facilities and equipment, could have a material adverse effect on our financial
condition, results of operations or cash flows. Such delays or cost increases may arise as a result of unpredictable factors in the
marketplace, many of which are beyond our control, including:
•
•
•
•
•
denial or delay in obtaining regulatory approvals and/or permits;
unplanned increases in the cost of equipment, materials, or labor;
disruptions in transportation of equipment and materials;
severe adverse weather conditions, natural disasters, or other events (such as equipment malfunctions, explosions,
fires, or spills) affecting our facilities, or those of vendors and suppliers;
shortages of sufficiently skilled labor or labor disagreements resulting in unplanned work stoppages;
• market-related increases in a project’s debt or equity financing costs; and/or
•
non-performance or force majeure by, or disputes with, the Petroleum Segment’s vendors, suppliers, contractors, or
sub-contractors.
Any one or more of these occurrences noted above could have a significant impact on our petroleum business. If we are
unable to make up for the delays or to recover the related costs, or if market conditions change, we could materially and
adversely affect our financial position, results of operations or cash flows.
More stringent trucking regulations may increase our petroleum business’ costs and negatively impact results of
operations.
In connection with the trucking operations conducted by our crude gathering division, our petroleum business operates as a
motor carrier and, therefore, is subject to regulation by federal and various state agencies. These regulatory authorities exercise
broad powers, governing activities such as the authorization to engage in motor carrier operations and regulatory safety, and
hazardous materials labeling, placarding, and marking. There are additional regulations specifically relating to the trucking
industry, including testing and specification of equipment and product handling requirements. The trucking industry is subject
to possible regulatory and legislative changes that may affect the economics of the industry. Some of these possible changes
include increasingly stringent fuel-economy environmental regulations, changes in the hours of service regulations that govern
the amount of time a driver may drive in any specific period, onboard black box recorder or electronic logging devices, or limits
on vehicle weight and size.
To a large degree, intrastate motor carrier operations are subject to state safety regulations that mirror federal regulations.
Furthermore, from time to time, various legislative proposals are introduced, such as proposals to increase federal, state or local
taxes, including taxes on motor fuels, which may increase our costs or adversely impact the recruitment of drivers. We cannot
predict whether, or in what form, any increase in such taxes will be enacted or the extent to which they will apply to our
Petroleum Segment and its operations.
Risks Related to the Nitrogen Fertilizer Segment
Any decline in U.S. agricultural production or limitations on the use of nitrogen fertilizer for agricultural purposes could
have a material adverse effect on the sales of nitrogen fertilizer, and on our results of operations, financial condition and
cash flows.
Conditions in the U.S. agricultural industry significantly impact our operating results. The U.S. agricultural industry can be
affected by a number of factors, including weather patterns and field conditions, current and projected grain inventories and
prices, domestic and international population changes, demand for U.S. agricultural products, and U.S. and foreign policies
regarding trade in agricultural products. For example, a major factor underlying the solid level of demand for nitrogen-based
fertilizer products we produce is the use of corn for the production of ethanol in the U.S. Changes in governmental incentives
for ethanol production could affect future ethanol demand and production.
State and federal governmental policies, including farm and biofuel subsidies and commodity support programs, as well as
the prices of fertilizer products, may also directly or indirectly influence the number of acres planted, the mix of crops planted,
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and the use of fertilizers for particular agricultural applications. Developments in crop technology could also reduce the use of
chemical fertilizers and adversely affect the demand for nitrogen fertilizer. In addition, from time to time various state
legislatures have considered limitations on the use and application of chemical fertilizers due to concerns about the impact of
these products on the environment. Unfavorable state and federal governmental policies could negatively affect nitrogen
fertilizer prices and therefore have a material adverse effect on our results of operations, financial condition and cash flows.
Ethanol production in the United States is highly dependent upon a myriad of federal statutes and regulations, and is made
significantly more competitive by various federal and state incentives and mandated usage of renewable fuels pursuant to the
EPA’s RFS. To date, the RFS has been satisfied primarily with corn-based fuel ethanol blended into gasoline. However, a
number of factors, including the continuing “food versus fuel” debate and studies showing that expanded ethanol usage may
increase the level of GHGs in the environment, cause harmful conversion of uncultivated land for biofuel crop productions, and
be unsuitable for small engine use, have resulted in calls to reduce subsidies for ethanol, allow increased ethanol imports, and to
repeal or waive (in whole or in part) the current RFS. Changes within the RFS program also could affect future ethanol demand
and production. Further, while most ethanol is currently produced from corn and other raw grains, such as milo or sorghum, the
RFS requires that a portion of the overall RFS renewable fuel mandate come from advanced biofuels, including cellulose-based
biomass, such as agricultural waste, forest residue, and municipal solid waste. In addition, there is a continuing trend to
encourage the use of products other than corn and raw grains for ethanol production. The repeal of, or reduction in the benefits
to ethanol producers under, ethanol incentive programs, an increase in ethanol imports, a substantial decrease in future RVOs
under the RFS program, or a significant increase in the use of products other than corn and raw grains for ethanol production
could affect the demand for corn-based ethanol and result in a decrease in planted corn acreage and in the demand for nitrogen
fertilizer products and have a material adverse effect on our results of operations, financial condition and cash flows.
Our Coffeyville Facility may be adversely affected by the supply and price levels of pet coke. Failure by CVR Energy’s
Coffeyville Refinery to continue to supply us with pet coke and the availability of third-party pet coke at higher prices could
negatively impact our results of operations.
Unlike our competitors, whose primary costs are related to the purchase of natural gas and whose costs are therefore largely
variable, our Coffeyville Fertilizer Facility uses a pet coke gasification process to produce nitrogen fertilizer. Our profitability is
directly affected by the price and availability of pet coke obtained from our Coffeyville Refinery pursuant to a long-term
agreement. Our Coffeyville Fertilizer Facility has obtained the majority of its pet coke from our Coffeyville Refinery over the
past five years, although has decreased to 40% in 2019. However, should our Coffeyville Refinery fail to perform in accordance
with the existing agreement or to the extent pet coke from the Coffeyville Refinery is insufficient, we would need to purchase
pet coke from third parties on the open market, which could negatively impact our results of operations to the extent third-party
pet coke is unavailable or available only at higher prices. Currently, we purchase 100% of the pet coke our Coffeyville Refinery
produces. However, we are still required to procure additional pet coke from third parties to maintain our production rates. We
are currently party to pet coke supply agreements with multiple third-party refineries to provide a significant amount of pet coke
at fixed prices. The terms of these agreements currently end in December 2020.
The market for natural gas has been volatile, and fluctuations in natural gas prices could affect our competitive position.
Low natural gas prices benefit our competitors that rely on natural gas as their primary feedstock and disproportionately
impact our operations at our Coffeyville Fertilizer Facility by making us less competitive with natural gas-based nitrogen
fertilizer manufacturers. Continued low natural gas prices could result in nitrogen fertilizer pricing drops and impair the ability
of the Coffeyville Fertilizer Facility to compete with other nitrogen fertilizer producers who use natural gas as their primary
feedstock, which, therefore, would have a material adverse impact on the Nitrogen Fertilizer Segment’s results of operations,
financial condition and ability to make cash distributions.
The East Dubuque Fertilizer Facility uses natural gas as its primary feedstock, and as such, the profitability of operating the
East Dubuque Fertilizer Facility is significantly dependent on the cost of natural gas. An increase in natural gas prices could
make it less competitive with producers who do not use natural gas as their primary feedstock. In addition, an increase in
natural gas prices in the United States relative to prices of natural gas paid by foreign nitrogen fertilizer producers may
negatively affect our competitive position in the corn belt, and such changes could have a material adverse effect on our results
of operations, financial condition and cash flows.
We expect to purchase a portion of our natural gas for use in the East Dubuque Fertilizer Facility on the spot market. As a
result, we remain susceptible to fluctuations in the price of natural gas in general and in local markets in particular. We may use
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fixed supply, fixed price forward purchase contracts to lock in pricing for a portion of its natural gas requirements, but we may
not be able to enter into such agreements on acceptable terms or at all. Without forward purchase contracts for the supply of
natural gas, we would need to purchase natural gas on the spot market, which would impair its ability to hedge exposure to risk
from fluctuations in natural gas prices. If we enter into forward purchase contracts for natural gas, and natural gas prices
decrease, then its cost of sales could be higher than it would have been in the absence of the forward purchase contracts.
Any interruption in the supply of natural gas to our East Dubuque Fertilizer Facility could have a material adverse effect
on our results of operations and financial condition.
Our East Dubuque Fertilizer Facility depends on the availability of natural gas. We have an agreement with Nicor Gas
(“Nicor”) pursuant to which we access natural gas from the ANR Pipeline Company and Northern Natural Gas pipelines. Our
access to satisfactory supplies of natural gas through Nicor could be disrupted due to a number of causes, including volume
limitations under the agreement, pipeline malfunctions, service interruptions, mechanical failures or other reasons. The
agreement currently extends through February 29, 2020. Upon expiration of the agreement, we may be unable to extend the
service under the terms of the existing agreement or renew the agreement on satisfactory terms, or at all. Any disruption in the
supply of natural gas to our East Dubuque Fertilizer Facility could restrict our ability to continue to make products at the
facility. In the event we need to obtain natural gas from another source, we may need to build a new connection from that
source to the East Dubuque Fertilizer Facility and negotiate related easement rights, which would be costly, disruptive and/or
may be unfeasible. As a result, any interruption in the supply of natural gas through Nicor could have a material adverse effect
on our results of operations and financial condition.
If licensed technology were no longer available, our business may be adversely affected.
We have licensed, and may in the future license, a combination of patent, trade secret, and other intellectual property rights
of third parties for use in our plant operations. If any license agreement on which our operations rely were to be terminated,
licenses to alternative technology may not be available, or may only be available on terms that are not commercially reasonable
or acceptable. In addition, any substitution of new technology for currently-licensed technology may require substantial
changes to manufacturing processes or equipment and may have a material adverse effect on our results of operations, financial
condition and cash flows.
Additionally, we may face claims of infringement that could interfere with our ability to use technology that is material to
our plant operations. Any litigation of this type related to third-party intellectual property rights could result in substantial costs
and diversions of resources, either of which could have a material adverse effect on our results of operations, financial
condition and cash flows. In the event a claim of infringement against us is successful, we may be required to pay royalties or
license fees for past or continued use of the infringing technology, or we may be prohibited from using the infringing
technology altogether. If we are prohibited from using any technology as a result of such a claim, we may not be able to obtain
licenses to alternative technology adequate to substitute for the technology we can no longer use, or licenses for such alternative
technology may only be available on terms that are not commercially reasonable or acceptable. In addition, any substitution of
new technology for currently-licensed technology may require us to make substantial changes to its manufacturing processes or
equipment or to our products, and could have a material adverse effect on our results of operations, financial condition and cash
flows.
Our operations are dependent on third-party suppliers, which could have a material adverse effect on our results of
operations, financial condition and cash flows.
Operations of our Coffeyville Fertilizer Facility depend in large part on the performance of third-party suppliers, and the
operations of the Coffeyville Fertilizer Facility could be adversely affected if the operation of the third-party air separation plant
located adjacent to it were disrupted. Additionally, this air separation plant has experienced numerous short-term interruptions
in the past, causing interruptions in our gasifier operations. With respect to electricity, we are party to an electric services
agreement with a third-party supplier through June 30, 2029.
Our East Dubuque Fertilizer Facility operations also depend in large part on the performance of third-party suppliers,
including for the purchase of electricity. We entered into a utility service agreement, which terminates on June 1, 2022 and will
continue year-to-year thereafter unless either party provides 12-month advance written notice of termination.
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Should any of our other third-party suppliers fail to perform in accordance with existing contractual arrangements, or
should we otherwise lose the service of any third-party suppliers, our operations (or a portion thereof) could be forced to halt.
Alternative sources of supply could be difficult to obtain. Any shutdown of our operations (or a portion thereof), even for a
limited period, could have a material adverse effect on our results of operations, financial condition and ability to make cash
distributions.
We rely on third-party providers of transportation services and equipment, which subjects the Nitrogen Fertilizer Segment
to risks and uncertainties beyond its control that may have a material adverse effect on its results of operations, financial
condition and ability to make distributions.
Our business relies on railroad and trucking companies to ship finished products to customers of the Coffeyville Fertilizer
Facility. We also lease railcars from railcar owners to ship its finished products. Additionally, although customers of the East
Dubuque Fertilizer Facility generally pick up products at the facility, the facility occasionally relies on barge, truck and railroad
companies to ship products to customers. These transportation operations, equipment and services are subject to various
hazards, including extreme weather conditions, work stoppages, delays, spills, derailments and other accidents, and other
operating hazards. Further, the limited number of towing companies and barges available for ammonia transport may also
impact the availability of transportation for our Nitrogen Fertilizer Segment’s products. These transportation operations,
equipment and services are also subject to environmental, safety and other regulatory oversight. Due to concerns related to
terrorism or accidents, local, state and federal governments could implement new regulations affecting the transportation of our
finished products. In addition, new regulations could be implemented affecting the equipment used to ship its finished products.
Any delay in our ability to ship its finished products as a result of these transportation companies’ failure to operate
properly,
the implementation of new and more stringent regulatory requirements affecting transportation operations or
equipment, or significant increases in the cost of these services or equipment could have a material adverse effect on our results
of operations, financial condition and ability to make cash distributions.
Ammonia can be very volatile and extremely hazardous. Any liability for accidents involving ammonia or other products
we produce or transport that cause severe damage to property or injury to the environment and human health could have a
material adverse effect on our results of operations, financial condition and ability to make cash distributions. In addition,
the costs of transporting ammonia could increase significantly in the future.
Our business manufactures, processes, stores, handles, distributes and transports ammonia, which can be very volatile and
extremely hazardous. Major accidents or releases involving ammonia could cause severe damage or injury to property, the
environment, and human health, as well as a possible disruption of supplies and markets. Such an event could result in civil
lawsuits, fines, penalties and regulatory enforcement proceedings, all of which could lead to significant liabilities. Any damage
or injury to persons, equipment or property or other disruption of our ability to produce or distribute products could result in a
significant decrease in operating revenues and significant additional costs to replace or repair and insure our assets, which could
have a material adverse effect on our results of operations, financial condition and ability to make cash distributions. Our
facilities periodically experience minor releases of ammonia related to leaks from our facilities’ equipment. Similar events may
occur in the future.
In addition, we may incur significant losses or costs relating to the operation of railcars used for the purpose of carrying
various products, including ammonia. Due to the dangerous and potentially hazardous nature of the cargo, in particular
ammonia, a railcar accident may result in fires, explosions, and releases of material which could lead to sudden, severe damage
or injury to property, the environment, and human health. In the event of contamination, under environmental law, we may be
held responsible even if we are not at fault, and we complied with the laws and regulations in effect at the time of the accident.
Litigation arising from accidents involving ammonia and other products we produce or transport may result in us being named
as a defendant in lawsuits asserting claims for substantial damages, which could have a material adverse effect on our results of
operations, financial condition and ability to make cash distributions.
Risks Related to Our Capital Structure
Internally generated cash flows and other sources of liquidity may not be adequate for the capital needs of our businesses.
Our businesses are capital intensive, and working capital needs may vary significantly over relatively short periods of time.
For instance, crude oil price volatility can significantly impact working capital on a week-to-week and month-to-month basis. If
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we cannot generate adequate cash flow or otherwise secure sufficient liquidity to meet our working capital needs or support our
short-term and long-term capital requirements, we may be unable to meet our debt obligations, pursue our business strategies,
or comply with certain environmental standards, which would have a material adverse effect on our business and results of
operations.
Instability and volatility in the capital, credit, and commodity markets in the global economy could negatively impact our
business, financial condition, results of operations and cash flows.
Our business, financial condition and results of operations could be negatively impacted by difficult conditions and
volatility in the capital, credit, and commodities markets and in the global economy. For example:
•
Although we believe CVR Refining has sufficient liquidity under its Amended and Restated ABL Credit Facility to
operate the Refineries and CVR Partners has sufficient liquidity under its AB Credit Facility to run the Nitrogen
Fertilizer Segment, there can be no assurance that such funds would be available or sufficient, and in such a case, we
may not be able to successfully obtain additional financing on favorable terms, or at all.
• Market volatility could exert downward pressure on the price of CVR Partners’ common units, which may make it
more difficult for us to raise additional capital and thereby limit its ability to grow, which could in turn cause CVR
Energy’s stock and/or CVR Partners’ unit price to drop.
• Market conditions could result in significant customers experiencing financial difficulties. We are exposed to the credit
risk of our customers, and their failure to meet their financial obligations when due because of bankruptcy, lack of
liquidity, operational failure, or other reasons could result in decreased sales and earnings for us.
CVR Energy, CVR Refining, and CVR Partners’ level of indebtedness may increase and affect our ability to operate their
respective businesses. In addition, this may have a material adverse effect on our and their financial flexibility, financial
condition and results of operations.
As of December 31, 2019, we had total indebtedness outstanding of $1,195 million, including CVR Partners’ $647 million
of senior notes and CVR Refining’s $500 million of senior notes. We had approximately $50 million in availability under CVR
Partners’ AB Credit Facility and $393 million in availability under CVR Refining’s Amended and Restated ABL Credit
Facility, which includes a $7 million reduction in availability for issued letters of credit. On January 27, 2020, CVR Energy
issued $600 million and $400 million of senior notes due 2025 and 2028, respectively, and redeemed CVR Refining’s
outstanding $500 million of senior notes due 2022. As of January 31, 2020, our total indebtedness was $1,691 million,
including CVR Partners’ $647 million of senior notes and CVR Energy’s $1,000 million of senior notes.
We may be able to incur substantially more debt in the future, including secured indebtedness. Although existing credit
facilities contain restrictions on the occurrence of additional indebtedness, these restrictions are subject to a number of
qualifications and exceptions and, under certain circumstances, indebtedness incurred in compliance with these restrictions
could be substantial. Also, these restrictions may not prevent incurring new obligations that do not constitute indebtedness. To
the extent such new debt or new obligations are added to existing indebtedness, the risks described below could substantially
increase. The level of indebtedness could have important consequences, including the following:
•
•
•
•
•
•
•
limiting our ability to obtain additional financing to fund working capital needs, capital expenditures, debt service
requirements, acquisitions, general corporate, or other purposes;
requiring us to utilize a significant portion of cash flows to service indebtedness, thereby reducing our funds available
for operations, future business opportunities, and distributions to us and public common unitholders of CVR Partners;
limiting our ability to use operating cash flow in other areas of our business because we must dedicate a substantial
portion of these funds to service debt;
limiting our ability to compete with other companies who are not as highly leveraged, as we may be less capable of
responding to adverse economic and industry conditions;
limiting our ability to make certain payments on debt that is subordinated or secured on a junior basis;
restricting us from making strategic acquisitions or investments, introducing new technologies or exploiting business
opportunities;
restricting the way in which we conduct business because of financial and operating covenants in the agreements
governing existing and future indebtedness, including borrowing additional funds, disposing of assets, and in the case
of certain indebtedness of subsidiaries, restricting the ability of subsidiaries to pay dividends or make distributions;
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•
•
•
•
•
•
limiting our ability to enter into certain transactions with our affiliates;
limiting our ability to designate our subsidiaries as unrestricted subsidiaries;
exposing us to potential events of default (if not cured or waived) under financial and operating covenants contained in
their or their respective subsidiaries’ debt instruments that could have a material adverse effect on our business,
financial condition and operating results;
increasing our vulnerability to general adverse economic and industry conditions or adverse pricing of products;
increasing the likelihood for a reduction in the borrowing base under CVR Refining’s Amended and Restated ABL
Credit Facility following a periodic redetermination could require us to repay a portion of our then-outstanding bank
borrowings; and
limiting our ability to react to changing market conditions in our industries and in respective customers’ industries.
Covenants in our debt agreements could limit our ability to incur additional indebtedness and engage in certain
transaction, as well as limit the flexibility in operating the respective business, which could adversely affect our liquidity and
ability to pursue our business strategies. In the case of CVR Partners, this may also limit the ability to make distributions to
unitholders.
Our debt facilities and instruments contain, and any instruments governing future indebtedness would likely contain, a
number of covenants that impose significant operating and financial restrictions on us and our subsidiaries and may limit our
ability to engage in acts that may be in our long-term best interest, including restrictions on the ability, among other things, to:
•
•
•
•
incur, assume, or guarantee additional indebtedness or issue redeemable or preferred stock;
pay dividends or distributions in respect of equity securities or make other restricted payments;
prepay, redeem, or repurchase certain debt;
enter into agreements that restrict distributions from restricted subsidiaries
• make certain payments on debt that is subordinated or secured on a junior basis;
• make certain investments;
•
•
•
•
•
sell or otherwise dispose of assets, including capital stock of subsidiaries;
create liens on certain assets;
consolidate, merge, sell, or otherwise dispose of all or substantially all assets;
enter into certain transactions with affiliates; and
designate subsidiaries as unrestricted subsidiaries.
Any of these restrictions could limit our ability to plan for or react to market conditions and could otherwise restrict
operating activities. Any failure to comply with these covenants could result in a default under existing debt facilities and
instruments. Upon a default, unless waived, the lenders under such debt facilities and instruments would have all remedies
available to a secured lender and could elect to terminate their commitments, cease making further loans, institute foreclosure
proceedings against assets, and force bankruptcy or liquidation, subject to any applicable intercreditor agreements. In addition,
a default under existing debt facilities and instruments would trigger a cross default under other agreements and could trigger a
cross default under the agreements governing future indebtedness. Our operating segments’ results may not be sufficient to
service existing indebtedness or to fund other expenditures, and we may not be able to obtain financing to meet these
requirements.
CVR Energy and the Nitrogen Fertilizer Segment may not be able to generate sufficient cash to service existing
indebtedness and may be forced to take other actions to satisfy debt obligations that may not be successful.
CVR Energy’s and the Nitrogen Fertilizer Segment’s ability to satisfy existing debt obligations will depend upon, among
other things:
•
•
future financial and operating performance, which will be affected by prevailing economic conditions and financial,
business, regulatory, and other factors, many of which are beyond our control;
future ability to borrow under CVR Refining’s Amended and Restated ABL Credit Facility and CVR Partners’ AB
Credit Facility, the availability of which depends on, among other things, complying with the covenants in the
applicable facility; and
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•
future ability to obtain other financing.
We cannot offer any assurance that our businesses will generate sufficient cash flow from operations, that our Petroleum
Segment will be able to draw under its Amended and Restated ABL Credit Facility or that our Nitrogen Fertilizer Segment will
be able to draw under its AB Credit Facility or otherwise, or from other sources of financing, in an amount sufficient to fund
respective liquidity needs. In addition, our board of directors may in the future elect to pursue other strategic options including
acquisitions of other businesses or asset purchases, which would reduce cash available to service our debt obligations.
If cash flows and capital resources are insufficient to service existing indebtedness, we may be forced to reduce or delay
capital expenditures, sell assets, seek additional capital, restructure or refinance existing indebtedness, or seek bankruptcy
protection. These alternative measures may not be successful and may not permit the meeting of scheduled debt service and
other obligations. Our ability to restructure or refinance debt will depend on the condition of the capital markets and our
financial condition, including that of our operating segments, at such time. Any refinancing of existing debt could be at higher
interest rates and may require compliance with more onerous covenants, which could further restrict business operations.
The borrowings under CVR Refining’s Amended and Restated ABL Credit Facility and CVR Partners’ AB Credit Facility
bear interest at variable rates and other debt we or they incur could likewise be variable-rate debt. If market interest rates
increase, variable-rate debt will create higher debt service requirements, which could adversely affect our cash flow and/or
distributions to us. Although we may enter into agreements limiting exposure to higher interest rates, any such agreements may
not offer complete protection from this risk.
We are authorized to issue up to a total of 350 million shares of our common stock and 50 million shares of preferred
stock, potentially diluting equity ownership of current holders and the share price of our common stock.
We maintain a sufficient number of available authorized shares of our common stock and preferred stock to provide us
with the flexibility to issue common stock or preferred stock for business purposes that may arise as deemed advisable by our
board of directors, including (i) future stock dividends or stock splits, which may increase the liquidity of our shares; (ii) the
sale of stock to obtain additional capital or to acquire other companies or businesses, which could enhance our growth strategy
or allow us to reduce debt, if needed; (iii) for use in additional stock incentive programs; and (iv) for other bona fide purposes.
Our board of directors may authorize us to issue the available authorized shares of common stock or preferred stock without
notice to, or further action by, our stockholders, unless stockholder approval is required by law or the rules of the NYSE. The
issuance of additional shares of common stock or preferred stock may significantly dilute the equity ownership of the current
holders of our common stock.
Our ability to pay dividends on our common stock is subject to market conditions and numerous other factors.
In January 2013, our board of directors adopted a quarterly dividend policy. We began paying regular quarterly dividends
in the second quarter of 2013. Dividends are subject to change at the discretion of the board of directors and may change from
quarter to quarter. Our ability to continue paying dividends is subject to our ability to continue to generate sufficient cash flow
from our operating segments, and the amount of dividends we are able to pay each year may vary, possibly substantially, based
on market conditions, crack spreads, our capital expenditure and other business needs, covenants contained in any debt
agreements we may enter into in the future, covenants contained in existing debt agreements, and the amount of distributions
we receive from CVR Partners. We may not be able to continue paying dividends at the rate we currently pay dividends or at
all. If the amount of our dividends decreases, the trading price of our common stock could be materially adversely affected as a
result.
Risks Related to Our Corporate Structure
We are a holding company and depend upon our subsidiaries for our cash flow.
We are a holding company, and our subsidiaries conduct substantially all of our operations and own substantially all of our
assets. Consequently, our cash flow and our ability to meet our obligations or to pay dividends or make other distributions in
the future will depend upon the cash flow of our subsidiaries and the payment of funds by our subsidiaries to us in the form of
distributions. The ability of CVR Partners to make any payments to us will depend on, among other things, their earnings, the
terms of existing indebtedness (including the terms of any debt facilities and instruments), tax considerations, and legal
restrictions.
December 31, 2019 | 34
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Mr. Carl C. Icahn exerts significant influence over the Company, and his interests may conflict with the interests of the
Company’s other stockholders.
Mr. Carl C. Icahn indirectly controls approximately 71% of the voting power of our common stock and, by virtue of such
stock ownership, is able to control or exert substantial influence over the Company, including:
•
•
the election and appointment of directors;
business strategy and policies;
• mergers or other business combinations;
•
•
•
•
acquisition or disposition of assets;
future issuances of common stock, common units, or other securities;
occurrence of debt or obtaining other sources of financing; and
the payment of dividends on the Company’s common stock and distributions on the common units of CVR Partners.
The existence of a controlling stockholder may have the effect of making it difficult for, or may discourage or delay, a
third-party from seeking to acquire a majority of the Company’s outstanding common stock, which may adversely affect the
market price of the Company’s common stock.
Mr. Icahn’s interests may not always be consistent with the Company’s interests or with the interests of the Company’s
other stockholders. Mr. Icahn and entities controlled by him may also pursue acquisitions or business opportunities in industries
in which we compete, and there is no requirement that any additional business opportunities be presented to us. We also have
and may in the future enter into transactions to purchase goods or services with affiliates of Mr. Icahn. To the extent that
conflicts of interest may arise between the Company and Mr. Icahn and his affiliates, those conflicts may be resolved in a
manner adverse to the Company or its other stockholders.
In addition, if Mr. Icahn were to sell, or otherwise transfer, some or all of his interests in us to an unrelated party or group,
a change of control could be deemed to have occurred under the terms of the indenture governing CVR Energy’s 5.250% and
5.750% Senior Notes, which would require it to offer to repurchase all outstanding notes at 101% of their principal amount plus
accrued interest to the date of repurchase, and an event of default could be deemed to have occurred under CVR Refining’s
Amended and Restated ABL Credit Facility, which would allow lenders to accelerate indebtedness owed to them. However, it
is possible that we will not have sufficient funds at the time of the change of control to make the required repurchase of notes or
repay amounts outstanding under CVR Refining’s Amended and Restated ABL Credit Facility, if any.
Our stock price may decline due to sales of shares by Mr. Carl C. Icahn.
Sales of substantial amounts of the Company’s common stock, or the perception that these sales may occur, may adversely
affect the price of the Company’s common stock and impede its ability to raise capital through the issuance of equity securities
in the future. Mr. Icahn could elect in the future to request that the Company file a registration statement to him to sell shares of
the Company’s common stock. If Mr. Icahn were to sell a large number of shares into the public markets, Mr. Icahn could cause
the price of the Company’s common stock to decline.
We are a “controlled company” within the meaning of the NYSE rules and, as a result, qualify for, and are relying on,
exemptions from certain corporate governance requirements.
A company of which more than 50% of the voting power is held by an individual, a group, or another company is a
“controlled company” within the meaning of the NYSE rules and may elect not to comply with certain corporate governance
requirements of the NYSE, including:
•
•
•
the requirement that a majority of our board of directors consist of independent directors;
the requirement that we have a nominating/corporate governance committee that is composed entirely of independent
directors; and
the requirement that we have a compensation committee that is composed entirely of independent directors.
December 31, 2019 | 35
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We are relying on all of these exemptions as a controlled company. Accordingly, you may not have the same protections
afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE. In
addition, CVR Partners is relying on exemptions from the same NYSE corporate governance requirements described above.
We have various mechanisms in place to discourage takeover attempts, which may reduce or eliminate our stockholders’
ability to sell their shares for a premium in a change of control transaction.
Various provisions of our amended certificate of incorporation and second amended and restated bylaws and of Delaware
corporate law may discourage, delay, or prevent a change in control or takeover attempt of our Company by a third-party that
our management and board of directors determines is not in the best interest of our Company and its stockholders. Public
stockholders who might desire to participate in such a transaction may not have the opportunity to do so. These anti-takeover
provisions could substantially impede the ability of public stockholders to benefit from a change of control or change in our
management and board of directors. These provisions include:
•
•
•
•
preferred stock that could be issued by our board of directors to make it more difficult for a third-party to acquire, or to
discourage a third-party from acquiring, a majority of our outstanding voting stock;
limitations on the ability of stockholders to call special meetings of stockholders;
limitations on the ability of stockholders to act by written consent in lieu of a stockholders’ meeting; and
advance notice requirements for nominations of candidates for election to our board of directors or for proposing
matters that can be acted upon by our stockholders at stockholder meetings.
Compliance with and changes in the tax laws could adversely affect our performance.
We are subject to extensive tax liabilities, including United States and state income taxes and transactional taxes such as
excise, sales/use, payroll, franchise, and withholding taxes. New tax laws and regulations are continuously being enacted or
proposed that could result in increased expenditures for tax liabilities in the future.
Risks Related to Our Ownership in CVR Partners
If CVR Partners were to be treated as a corporation for U.S. federal income tax purposes or if it becomes subject to entity-
level taxation for state tax purposes, its cash available for distribution to its common unitholders, including to us, would be
substantially reduced, likely causing a substantial reduction in the value of its common units, including the common units
held by us.
The anticipated after-tax economic benefit of an investment in common units of CVR Partners depends largely on it being
treated as a partnership for U.S. federal income tax purposes. Despite the fact that CVR Partners is organized as a limited
partnership under Delaware law, it would be treated as a corporation for U.S. federal income tax purposes unless it satisfies a
“qualifying income” requirement. CVR Partners may not find it possible to meet this qualifying income requirement, may
inadvertently fail to meet this qualifying income requirement, or a change in current law could cause CVR Partners to be treated
as a corporation for U.S. federal income tax purposes or otherwise subject CVR Partners to entity-level taxation.
If CVR Partners were to be treated as a corporation for U.S. federal income tax purposes, it would pay U.S. federal income
tax on all of its taxable income at the corporate tax rate. Distributions to its common unitholders (including us) would generally
be taxed again as corporate distributions, and no income, gains, losses, or deductions would flow through to such common
unitholders. Because a tax would be imposed upon CVR Partners as a corporation, its cash available for distribution to its
common unitholders would be substantially reduced. Therefore, treatment of CVR Partners as a corporation would result in a
material reduction in the anticipated cash flow and after-tax return to its common unitholders (including us), likely causing a
substantial reduction in the value of such common units.
We may have liability to repay distributions that are wrongfully distributed to us.
Under certain circumstances, we may, as a holder of common units in CVR Partners, have to repay amounts wrongfully
returned or distributed to us. Under the Delaware Revised Uniform Limited Partnership Act, a partnership may not make
distributions to its unitholders if the distribution would cause its liabilities to exceed the fair value of its assets. Delaware law
provides that for a period of three years from the date of an impermissible distribution, limited partners who received the
December 31, 2019 | 36
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distribution and who knew at the time of the distribution that it violated Delaware law will be liable to the company for the
distribution amount.
Public investors own approximately 66% of the Nitrogen Fertilizer Segment through CVR Partners. Although we own the
general partner of CVR Partners, the general partner owes a duty of good faith to public unitholders, which could cause
them to manage their respective businesses differently than if there were no public unitholders.
Public investors own approximately 66% of CVR Partners’ common units. We are not entitled to receive all of the cash
generated by CVR Partners or freely transfer money to finance operations at the Petroleum Segment. Furthermore, although we
own the general partner of CVR Partners, the general partner is subject to certain fiduciary duties, which may require the
general partner to manage its business in a way that may differ from our best interests.
CVR Partners is managed by the executive officers of its general partner, some of whom are employed by and serve as part
of the senior management team of the Company. Conflicts of interest could arise as a result of this arrangement.
CVR Partners is managed by the executive officers of its general partner, some of whom are employed by and serve as part
of the senior management team of the Company. Furthermore, although CVR Partners has entered into services agreements
with the Company under which it compensates the Company for the services of its management, our management is not
required to devote any specific amount of time to the Nitrogen Fertilizer Segment and may devote a substantial majority of their
time to other business of the Company. Moreover, the Company may terminate the services agreement with CVR Partners at
any time, in each case subject to a 180-day notice period. In addition, key executive officers of the Company, including its
president and chief executive officer, chief financial officer, and general counsel, will face conflicts of interest if decisions arise
in which CVR Partners and the Company have conflicting points of view or interests.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Refer to Item 1, “Petroleum” and “Nitrogen Fertilizer” for more information on our core business properties. We also lease
property for our executive office which is located in Sugar Land, Texas.
Item 3. Legal Proceedings
In the ordinary course of business, we may become party to lawsuits, administrative proceedings, and governmental
investigations, including environmental, regulatory, and other matters. Large, and sometimes unspecified, damages or penalties
may be sought from us in some matters and certain matters may require years to resolve. Although we cannot provide
assurance, we believe that an adverse resolution of the matters described below would not have a material impact on our
liquidity, consolidated financial position, or consolidated results of operations.
Unresolved Matters
The U.S. Attorney’s office for the Southern District of New York contacted CVR Energy in September 2017 seeking
production of information pertaining to CVR Refining’s, CVR Energy’s and Mr. Carl C. Icahn’s activities relating to the RFS
and Mr. Icahn’s former role as an advisor to the President. CVR Energy cooperated with the request and provided information
in response to the subpoena. The U.S. Attorney’s office has not made any claims or allegations against CVR Energy or Mr.
Icahn. CVR Energy believes it maintains a strong compliance program and, while no assurances can be made, CVR Energy
does not believe this inquiry will have a material impact on its business, financial condition, results of operations or cash flows.
On August 21, 2018, CRRM received a letter from the United States Department of Justice (“DOJ”) on behalf of the EPA
and KDHE alleging violations of the CAA and a 2012 Consent Decree between CRRM, the United States (on behalf of EPA)
and KDHE at CRRM’s Coffeyville refinery. In September 2018, CRRM executed a tolling agreement with the DOJ and KDHE
extending time for negotiation regarding the agencies’ allegations through April 30, 2020. At this time the Company cannot
reasonably estimate the potential penalties, costs, fines or other expenditures that may result from this matter or any subsequent
December 31, 2019 | 37
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enforcement or litigation relating thereto and, therefore, the Company cannot determine if the ultimate outcome of this matter
will have a material impact on the Company’s financial position, results of operations or cash flows.
During 2019, the Company, CVR Refining and its general partner, CVR Refining Holdings, IEP, and certain directors and
affiliates have been named in at least one of nine lawsuits filed in the Court of Chancery of the State of Delaware by purported
former unitholders of CVR Refining, on behalf of themselves and an alleged class of similarly situated unitholders (the “Call
Option Lawsuits”). The Call Option Lawsuits primarily allege breach of contract, tortious interference and breach of the
implied covenant of good faith and fair dealing and seek monetary damages and attorneys’ fees, among other remedies, relating
to the Company’s exercise of the call option under the CVR Refining Amended and Restated Agreement of Limited Partnership
assigned to it by CVR Refining’s general partner. In January 2020, the court dismissed CVR Holdings and certain former
directors of CVR Refining’s general partner from the Call Option Lawsuits, though permitted some or all of the claims to
proceed against each remaining defendant. The Company believes the Call Option Lawsuits are without merit and intends to
vigorously defend against them. The Call Option Lawsuits remain in the early stages of litigation. Accordingly the Company
cannot determine at this time the outcome of the Call Option Lawsuits, including whether the outcome of this matter would
have a material impact on the Company’s financial position, results of operations, or cash flows.
During 2019, WRC intervened in a lawsuit filed by four ethanol and biofuels trade associations against the EPA, claiming
the EPA exceeded its authority in granting Wynnewood’s 2017 small refinery exemption (“SRE”) under the RFS program
under the CAA, as well as the SREs of two other unrelated refineries. In January 2020, the 10th Circuit Court of Appeals
vacated the three SREs and remanded the matter to the EPA for further proceedings, holding, in part, that the “extension”
language in the CAA requires a small refinery to have received an SRE continuously in every year since inception of the
program to be eligible. As the EPA has not yet acted following remand by the court, and as Wynnewood intends to appeal this
ruling, we cannot currently estimate the outcome, impact, or timing of the resolution of this matter.
Resolved Matters
In September 2018, the Kansas Court of Appeals upheld property tax determinations by the Kansas Board of Tax Appeals
in connection with Coffeyville Resources Nitrogen Fertilizer, LLC’s (“CRNF”) dispute with Montgomery County, Kansas (the
“County”) over prior year property tax payments as previously disclosed. On October 29, 2018, the County petitioned the
Kansas Supreme Court to review the Court of Appeals’ determination. Subsequent briefs were filed by CRNF and the County.
In April 2019, CRNF and the County executed an agreement which the County agrees to withdraw its petition to the Kansas
Supreme Court and CRNF is expected to recover approximately $8 million through favorable property tax assessments from
2019 through 2028, subject to the terms of the settlement agreement.
Item 4. Mine Safety Disclosures
Not applicable.
December 31, 2019 | 38
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PART II
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Performance Graph
The performance graph below compares the cumulative total return of our common stock to (a) the cumulative total return
of the S&P 500 Composite Index and (b) a composite peer group (“Peer Group”) consisting of Delek US Holdings, Inc.,
HollyFrontier Corporation, Marathon Petroleum Corp., PBF Energy and Valero Energy Corporation. The graph assumes that
the value of the investment in common stock and each index was $100 on December 31, 2014 and that all dividends were
reinvested. Investment is weighted on the basis of market capitalization.
The share price performance shown on the graph is not necessarily indicative of future price performance. Information used
in the graph was obtained from Yahoo! Finance (finance.yahoo.com). The performance graph above is furnished and not filed
for purposes of the Securities Act and the Exchange Act. The performance graph is not soliciting material subject to Regulation
14A.
Market Information
Our common stock is listed under the symbol “CVI” on the New York Stock Exchange.
CVR Energy, Inc. - Exchange Offer
In August 2018, CVR Energy completed an exchange offer whereby public unitholders tendered a total of 21,625,106
CVR Refining common units in exchange for a total of 13,699,549 shares of CVR Energy common stock. Following the
exchange offer, Icahn Enterprises L.P. and its affiliates (“IEP”) owned approximately 71% of the Company’s outstanding
shares. Refer to Note 1 (“Organization and Nature of Business”) in Item 8 for further information.
Purchases of Equity Securities by the Issuer
On October 23, 2019, the Board of Directors of the Company authorized a stock repurchase program (the “Stock
Repurchase Program”). The Stock Repurchase Program would enable the Company to repurchase up to $300 million of the
Company’s common stock. Repurchases under the Stock 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.
December 31, 2019 | 39
CVR EnergyS&P 500Peer Group12/31/1412/31/1512/31/1612/31/1712/31/1812/31/19$50$100$150$200$250 Table of Contents
The timing, price and amount of repurchases (if any) will be made at the discretion of management and are subject to market
conditions as well as corporate, regulatory and other considerations. While the Stock Repurchase Program currently has a
duration of four years, it does not obligate the Company to acquire any stock and may be terminated by the Company’s Board
of Directors at any time.
We did not repurchase any of our common stock during the year ended December 31, 2019.
Item 6. Selected Financial Data
The following table sets forth certain selected consolidated financial data as of and for each year in the five-year period
ended December 31, 2019. The selected consolidated financial information presented below has been derived from our
historical consolidated financial statements. The following table should be read in conjunction with Item 7 and our consolidated
financial statements and related notes thereto in Item 8.
(in millions)
Statements of Operations
Net sales
Net income attributable to CVR Energy
stockholders
Basic and diluted earnings per share
Dividends declared per share
(in millions)
Balance Sheet
Cash and cash equivalents
Total assets
Long-term debt and finance lease
obligations, net of current portion
Total liabilities
Total CVR stockholders’ equity
Total equity
$
$
$
$
2019
2018
2017
2016
2015
Year Ended December 31,
6,364
$
7,124
$
5,988
$
4,782
$
5,433
380
259
263
25
3.78
3.05
$
$
2.80
2.50
$
$
3.03
2.00
$
$
0.29
2.00
$
$
197
2.27
2.00
2019
2018
2017
2016
2015
December 31,
652
$
668
$
482
$
736
$
3,905
1,190
2,237
1,393
1,668
4,000
1,167
2,057
1,286
1,943
3,953
1,164
2,130
988
1,823
4,159
1,165
2,371
899
1,788
765
3,413
667
1,736
1,025
1,677
December 31, 2019 | 40
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction
with our consolidated financial statements and related notes included elsewhere in this Report. References to CVR Energy, the
Company, “we,” “us,” and “our” may refer to consolidated subsidiaries of CVR Energy, including CVR Refining or CVR
Partners, as the context may require.
This discussion and analysis generally discusses the years ended December 31, 2019 and 2018 and year-to-year
comparisons between such periods. The discussions of the year ended December 31, 2017 and year-to-year comparisons
between the years ended December 31, 2018 and 2017 that are not included in this Annual Report on Form 10-K can be found
in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of Exhibit
99.1 to the Company’s Current Report on Form 8-K filed on June 12, 2019, and such discussion are incorporated by reference
into this Report.
Strategy and Goals
Mission and Core Values
Our mission is to be a top tier North American petroleum refining and nitrogen-based fertilizer company as measured by
safe and reliable operations, superior performance and profitable growth. The foundation of how we operate is built on five core
values:
•
•
•
•
•
Safety - We always put safety first. The protection of our employees, contractors and communities is paramount. We
have an unwavering commitment to safety above all else. If it’s not safe, then we don’t do it.
Environment - We care for our environment. Complying with all regulations and minimizing any environmental
impact from our operations is essential. We understand our obligation to the environment and that it’s our duty to
protect it.
Integrity - We require high business ethics. We comply with the law and practice sound corporate governance. We
only conduct business one way—the right way with integrity.
Corporate Citizenship - We are proud members of the communities where we operate. We are good neighbors and
know that it’s a privilege we can’t take for granted. We seek to make a positive economic and social impact through
our financial donations and the contributions of time, knowledge and talent of our employees to the places where we
live and work.
Continuous Improvement - We believe in both individual and team success. We foster accountability under a
performance-driven culture that supports creative thinking, teamwork and personal development so that employees can
realize their maximum potential. We use defined work practices for consistency, efficiency and to create value across
the organization.
Our core values are driven by our people, inform the way we do business each and every day and enhance our ability to
accomplish our mission and related strategic objectives.
Strategic Objectives
We have outlined the following strategic objectives to drive the accomplishment of our mission:
Safety - We aim to achieve continuous improvement in all environmental, health and safety areas through ensuring our
people’s commitment to environmental, health and safety comes first, the refinement of existing policies, continuous training,
and enhanced monitoring procedures.
Reliability - Our goal is to achieve industry-leading utilization factors at our facilities through safe and reliable operations.
We are focusing on improvements in day-to-day plant operations, identifying alternative sources for plant inputs to reduce lost
December 31, 2019 | 41
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time due to third-party operational constraints, and optimizing our commercial and marketing functions to maintain plant
operations at their highest level.
Market Capture - We continuously evaluate opportunities to improve the facilities’ netbacks and reduce variable costs
incurred in production to maximize our capture of market opportunities.
Financial Discipline - We strive to be as efficient as possible by maintaining low operating costs and a disciplined
deployment of capital.
Achievements
We successfully executed a number of achievements in support of our strategic objectives shown below through the date of
this filing:
Corporate:
Safety
Reliability
Market
Capture
Financial
Discipline
Achieved year over year environment, health, and safety
improvements related to total recordable incident rate, environmental
events, and project safety management of 11%, 14%, and 50%,
respectively.
Declared cash dividends of $3.05 per share in 2019.
Announced $300 million share repurchase authorization.
Issued $1.0 billion in Senior Notes due 2025 and 2028 and the
associated funding of the redemption of the CVR Refining Senior
Notes due 2022 in January 2020.
Petroleum Segment:
Completed the Wynnewood turnaround safely, on time and under
budget.
Increased throughput of regional crudes and condensate by 37% and
58%, respectively, while reducing reliance on WTI Cushing common
crude oil by 35% for the fourth quarter 2019 as compared to the
fourth quarter 2018.
Completed the Wynnewood refinery’s BenFree repositioning project
enabling increased premium gasoline production.
Completed the sale of the Cushing, Oklahoma crude oil terminal.
Maintained high utilization at both facilities through the fourth
quarter of 2019.
Received Board approval for the Isomerization project at the
Wynnewood Refinery, intended to improve liquid yields.
Nitrogen Fertilizer:
Safely completed the East Dubuque turnaround.
Maintained high asset reliability and utilization at both facilities
through the fourth quarter of 2019 (adjusted for turnaround at East
Dubuque).
Paid cash distributions of 40 cents per unit in 2019.
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
December 31, 2019 | 42
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Industry Factors and Market Conditions
Petroleum Segment
The earnings and cash flows of the Petroleum Segment are primarily affected by the relationship between refined product
prices and the prices for crude oil and other feedstocks that are processed and blended into refined products. The cost to acquire
crude oil and other feedstocks and the price for which refined products are ultimately sold depend on factors beyond the
Petroleum Segment’s control, including the supply of and demand for crude oil, as well as, gasoline and other refined products
which, in turn, depend on, among other factors, changes in domestic and foreign economies, weather conditions, domestic and
foreign political affairs, production levels, the availability of imports, the marketing of competitive fuels and the extent of
government regulation. Because the Petroleum Segment applies first-in first-out accounting to value its inventory, crude oil
price movements may impact net income in the short term because of changes in the value of its unhedged inventory. The effect
of changes in crude oil prices on the Petroleum Segment results of operations is partially influenced by the rate at which the
process of refined products adjust to reflect these changes.
The prices of crude oil and other feedstocks and refined products are also affected by other factors, such as product pipeline
capacity, system inventory local market conditions and the operating levels of competing refineries. Crude oil costs and the
to wide fluctuations. Widespread expansion or upgrades of
prices of refined products have historically been subject
competitors’ facilities, price volatility, international political and economic developments and other factors are likely to
continue to play an important role in refining industry economics. These factors can impact, among other things, the level of
inventories in the market, resulting in price volatility and a reduction in product margins. Moreover, the refining industry
typically experiences seasonal fluctuations in demand for refined products, such as increases in the demand for gasoline during
the summer driving season and for volatile seasonal exports of diesel from the United States Gulf Coast markets.
In addition to current market conditions, there are long-term factors that may impact the demand for refined products.
These factors include mandated renewable fuels standards, proposed climate change laws and regulations and increased mileage
standards for vehicles. The petroleum business is also subject to the renewable fuel standards (“RFS”) of the EPA, which
requires blending “renewable fuels” with transportation fuels or purchase renewable identification numbers (“RINs”), in lieu of
blending, by March 31, 2019 or otherwise be subject to penalties. Our cost to comply with RFS is dependent upon a variety of
factors, which include the availability of RINs for purchase, the price at which RINs can be purchased, transportation fuel
production levels, the mix of our products, as well as the fuel blending performed at our refineries and downstream terminals,
all of which can vary significantly from period to period. Based upon recent market prices of RINs and current estimates related
to the other variable factors, our estimated cost to comply with RFS is $100 to $110 million for 2020.
2019 Market Conditions
NYMEX WTI crude oil is an industry wide benchmark that is utilized in the market pricing of a barrel of crude oil. Other
crude oils that are compared to WTI, known as differentials, show how the market for other crude oils such as WCS, White
Cliffs (“Condensate”), Brent Crude (“Brent”), and Midland WTI (“Midland”) are trending. During 2019, there were price
fluctuations within these differentials due to the continued curtailments imposed by the Alberta government, therefore,
tightening the WCS to WTI differential. Additionally, there have been start-up and line fill of new pipelines from West Texas to
the Gulf Coast further tightening the domestic differentials against WTI.
As a performance benchmark and a comparison with other industry participants, we utilize the NYMEX and the Mid-
Continent crack spreads. These crack spreads are a measure of the difference between market prices for crude oil and refined
products and is a commonly used proxy within the industry to estimate or identify trends in refining margins. Crack spreads can
fluctuate significantly over time as a result of market conditions and supply and demand balances. The NYMEX 2-1-1 crack
spread is calculated using two barrels of WTI producing one barrel of NYMEX RBOB Gasoline (“RBOB”) and one barrel of
NYMEX NY Harbor ULSD (“HO”). The Mid-Continent 2-1-1 crack spread is calculated using two barrels of WTI crude oil
producing one barrel of Group 3 gasoline and one barrel of Group 3 diesel.
NYMEX 2-1-1 crack spreads increased during 2019 compared to 2018 while the Mid-Continent 2-1-1 crack spreads
showed a reduction. The NYMEX 2-1-1 crack spread averaged $19.93 per barrel in 2019 compared to $19.42 per barrel in
2018. The Mid-Continent 2-1-1 crack spread averaged $18.22 per barrel in 2019 compared to $18.63 per barrel in 2018.
December 31, 2019 | 43
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The tables below are presented, on a per barrel basis, for the years ended December 31, 2019, 2018, and 2017:
(1) For December 2019, the average differentials for Midland and Condensate were $0.97 and $(0.15), respectively.
December 31, 2019 | 44
Crude Oil Differentials against WTI (2) (3)Monthly Average$(21.29)$5.37(1)WCS (heavy sour)BrentMidlandCondensate201920182017$(50)$(40)$(30)$(20)$(10)$0$10NYMEX Crack Spreads (3)Quarterly Average$12.14$24.82$18.48GasolineHeating OilNYMEX 2-1-1 Crack Spread201920182017$10$20$30 Table of Contents
(2) The change over time in NYMEX - WTI, as reflected in the charts above, is illustrated below.
(in $/bbl)
WTI
Average 2017
Average
December 2017
Average 2018
Average
December 2018
Average 2019
Average
December 2019
$
50.95
$
57.95
$
64.77
$
48.98
$
57.03
$
61.06
(3)
Information used within these charts was obtained from MarketView.
Nitrogen Fertilizer Segment
Within the Nitrogen Fertilizer Segment, earnings and cash flows from operations are primarily affected by the relationship
between nitrogen fertilizer product prices, utilization rates, and operating costs and expenses, including pet coke and natural gas
feedstock costs.
The price at which nitrogen fertilizer products are ultimately sold depends on numerous factors, including the global supply
and demand for nitrogen fertilizer products which, in turn, depends on, among other factors, world grain demand and
production levels, changes in world population, the cost and availability of fertilizer transportation infrastructure, weather
conditions, the availability of imports, and the extent of government intervention in agriculture markets.
Nitrogen fertilizer prices are also affected by local factors, including local market conditions and the operating levels of
competing facilities. An expansion or upgrade of competitors’ facilities, new facility development, political and economic
developments and other factors are likely to continue to play an important role in nitrogen fertilizer industry economics. These
factors can impact, among other things, the level of inventories in the market, resulting in price volatility and a reduction in
product margins. Moreover, the industry typically experiences seasonal fluctuations in demand for nitrogen fertilizer products.
2019 Market Conditions
While there is risk of short-term volatility given the inherent nature of the commodity cycle, the Company believes the long-
term fundamentals for the U.S. nitrogen fertilizer industry remain intact. The Nitrogen Fertilizer Segment views the anticipated
combination of (i) increasing global population, (ii) decreasing arable land per capita, (iii) continued evolution to more protein-
based diets in developing countries, (iv) sustained use of corn as feedstock for the domestic production of ethanol and (v)
positioning at the lower end of the global cost curve should continue to provide a solid foundation for nitrogen fertilizer
producers in the U.S. over the longer term.
During 2019, weather significantly impacted the demand for UAN and ammonia due to lack of extended dry conditions
required for planting, caused by excessive rain delaying planting of corn and soybean crops. However, as a result of this delay,
there was additional demand for UAN and ammonia due to the catch up from the late start to 2019 application season, but the
fall season also had excessive moisture, which limited the ability to apply nitrogen. Consistent with the past 18 months,
December 31, 2019 | 45
PADD II Group 3 Product CrackSpread (3) ($/bbl)Quarterly Average$10.87$22.41$16.64GasolineUltra-Low Sulfur DieselPADD II Group 3 2-1-1201920182017$5$10$15$20$25$30Group 3 Differential against NYMEXWTI (2) (3) ($/bbl)Quarterly Average$(1.27)$(2.41)GasolineDistillate201920182017$(5)$(4)$(3)$(2)$(1)$0$1 Table of Contents
customers have been purchasing fertilizers more ratably and the expectations that harvest will be later than normal has led
customers to stage their buying. Weather (i.e., heavy rains, flooding, etc.) is going to dictate the timing of harvest and the
available window for ammonia application.
Corn and soybean are two major crops planted by farmers in the U.S. Corn crop has shown to deplete the amount of
nitrogen and ammonia within the soil it is grown in, which in turn, results in a need for these nutrients to be replenished after
each growing cycle. Unlike corn, soybean is able to obtain its own nitrogen through a process known as “N fixation”. As such,
upon harvesting of soybean, the soil retains a certain amount of nitrogen which results in lower demand for nitrogen for the
pursuing corn planting cycle. Due to these factors, nitrogen fertilizer consumers generally follow a balanced corn-soybean
rotational planting cycle as evident through the chart presented below for 2018 and 2017. Due to the significant weather
conditions discussed above, the 2019 planting cycle relied more heavily on corn planting to obtain sufficient crop harvests,
which slightly adjusted this balance.
The relationship between the total acres planted for both corn and soybean has a direct impact on the overall demand for
UAN and ammonia products. As the number of “corn” acres increases, the market and demand for UAN and ammonia also
increases. Correspondingly, as the number of “soybean” acres increases the market and demand for UAN and ammonia
decreases.
The table below shows relevant market indicators for the Nitrogen Fertilizer Segment by month through December 31,
2019:
(1)
Information used within this chart was obtained from the United States Department of Agriculture, National Agricultural Statistics
Service.
December 31, 2019 | 46
Corn and Soybean Grown Acres (1)54%50%50%46%50%50%CornSoybean20192018201750%100%$ (per ton)Ammonia and UAN Market Pricing (2)$267$387$177Ammonia — Southern PlainsAmmonia — Corn beltUAN — Corn belt201920182017250500Natural Gas ($ per MMBtu)Pet Coke ($ per ton)Natural Gas and Pet Coke Market Pricing (2)$2.22$55.68Natural gas NYMEXPet coke2019201820171234520406080 Table of Contents
(2)
Information used within these charts was obtained from various third-party sources including Green Markets (a Bloomberg Company),
Pace Petroleum Coke Quarterly, and the U.S. Energy Information Administration (“EIA”), amongst others.
Results of Operations
Consolidated
The following sections should be read in conjunction with the information outlined within the previous sections of this Part
II, Item 7, and the consolidated financial statements and related notes thereto in Part II, Item 8 of this Report. Our consolidated
results of operations include certain other unallocated corporate activities and the elimination of intercompany transactions and
therefore do not equal the sum of the operating results of the Petroleum and Nitrogen Fertilizer Segments.
Consolidated Financial Highlights
(1) See “Non-GAAP Reconciliations” section below for reconciliations of the non-GAAP measures shown below.
Overview - The Petroleum Segment’s operating income and net income were $574 million and $559 million, respectively,
for the year ended December 31, 2019. The increases of $30 million and $48 million, respectively, are driven primarily by
higher refining margins when compared to the year ended December 31, 2018. Refining margin was $1,203 million, or $15.26
per throughput barrel, for the year ended December 31, 2019, as compared to $1,178 million, or $15.18 per throughput barrel
for the year ended December 31, 2018. The increase in refining margin of $25 million is primarily due to increased throughput
volumes and lower RINs expense due to a reduction in market prices. Further, there was a gain on the sale of the Cushing,
Oklahoma crude oil terminal of $9 million (occurred in the second quarter of 2019), positively impacting the Petroleum
Segment. For the year ended December 31, 2019, the Nitrogen Fertilizer Segment net sales increased by $53 million to $404
December 31, 2019 | 47
$ (in millions)Operating Income$580$532$1452019201820170200400600$ (in millions)Net Income Attributable to CVR EnergyStockholders$380$259$2632019201820170200400$ (per share)Earnings per Share$3.78$2.80$3.0320192018201701234$ (in millions)EBITDA (1)$880$821$405201920182017200400600800 Table of Contents
million as a result of favorable pricing and higher volumes. The increase in volumes was primarily attributable to a shift in
demand from the fourth quarter 2018 to the second quarter of 2019 due to inclement weather.
Income Tax Expense - Income tax expense for the year ended December 31, 2019 was $129 million, or 26.2% of income
before income taxes, as compared to income tax expense for the year ended December 31, 2018 of $79 million, or 17.8% of
income before income taxes. The fluctuation in income tax expense was due primarily to the decrease in non-controlling
interest from the year ended December 31, 2018 to the year ended December 31, 2019. The decrease in non-controlling interest
is due to the Company’s January 29, 2019 purchase of all issued and outstanding CVR Refining common units not already
owned by the Company. Refer to Note 1 (“Organization and Nature of Business”) for a further discussion of this transaction.
The effective income tax rate varies from the federal statutory income tax rate primarily as a result of the decrease in non-
controlling interest and the benefits of state income tax credits.
Segment Financial Highlights and Results of Operations
Petroleum Segment
The Petroleum Segment utilizes certain inputs within its refining operations. These inputs include crude oil, butanes,
natural gasoline, ethanol, and bio-diesel (these are also known as “throughputs”).
Refining Throughput and Production Data by Refinery
Throughput Data
(in bpd)
Coffeyville
Regional crude
WTI
WTL
Midland WTI
Condensate
Heavy Canadian
Other feedstocks and blendstocks
Wynnewood
Regional crude
WTI
WTL
Midland WTI
Condensate
Other feedstocks and blendstocks
Total throughput
Year Ended December 31,
2019
2018
2017
49,093
67,382
473
3,888
4,331
4,711
9,160
53,848
3
668
10,995
7,666
3,753
31,350
66,952
—
15,893
4,992
5,302
8,369
54,746
2,354
—
10,332
7,237
5,068
34,805
84,460
—
—
2,169
10,135
9,921
27,750
15,251
—
29,045
1,134
3,511
215,971
212,595
218,181
December 31, 2019 | 48
Table of Contents
Production Data
(in bpd)
Coffeyville
Gasoline
Distillate
Other liquid products
Solids
Wynnewood
Gasoline
Distillate
Other liquid products
Solids
Total production
Liquid volume yield
Financial Highlights
Year Ended December 31,
2019
2018
2017
71,817
57,549
5,810
4,573
38,864
32,380
3,223
30
67,091
56,307
5,737
5,190
40,291
33,442
4,025
41
72,778
59,593
4,704
6,631
38,311
30,816
5,429
54
214,246
212,124
218,316
97.1 %
97.3 %
96.9 %
Overview - Petroleum Segment operating income and net income for the year ended December 31, 2019 was $574 million
and $559 million, a $30 million and $48 million increase respectively over the year ended December 31, 2018, driven primarily
by higher refining margins and increased throughput volumes.
December 31, 2019 | 49
$ (in millions)Net Sales$5,968$6,780$5,6642019201820174,0005,0006,0007,000$ (in millions)Operating Income$574$544$1722019201820170200400600
Table of Contents
(1) See “Non-GAAP Reconciliations” section below for reconciliations of the non-GAAP measures shown below.
Net sales for the Petroleum Segment decreased by $812 million for the year ended December 31, 2019, when compared to
the year ended December 31, 2018, primarily due to lower gasoline and distillate prices. However, the Petroleum Segment's
EBITDA improved by $40 million from 2018 mainly due to decreased raw materials costs and favorable inventory impact.
(2) See “Non-GAAP Reconciliations” section below for reconciliations of the non-GAAP measures shown below.
Refining Margin - Refining margin was $1,203 million, or $15.26 per throughput barrel, for the year ended December 31,
2019, as compared to $1,178 million, or $15.18 per throughput barrel, for the year ended December 31, 2018, primarily due to
increased throughput volumes and lower RINs expense resulting from a reduction in market prices, partially offset by decreased
gains on derivatives in the current period. Total throughput averaged 215,971 bpd for the year ended December 31, 2019 as
compared to 212,595 bpd for the same period in 2018. Derivative gains decreased by $127 million during 2019 compared to
2018.
December 31, 2019 | 50
$ (in millions)Net Income$559$511$1272019201820170200400600$ (in millions)EBITDA (1)$788$748$3512019201820170200400600800$ (in millions)$ (per total throughput barrel)Refining Margin (2)$1,203$1,178$789$15.26$15.18$9.98per total throughput barrel2019201820176009001,2008.0012.0016.00$ (in millions)$ (per total throughput barrel)Refining Margin (excluding Inventory ValuationImpacts) (2)$1,160$1,211$760$14.71$15.60$9.61per total throughput barrel2019201820176009001,2008.0012.0016.00 Table of Contents
(1) Exclusive of depreciation and amortization expense.
Direct Operating Expenses (Exclusive of Depreciation and Amortization) - Direct operating expenses on a total throughput
barrel basis decreased to $4.56 per barrel from $4.62 per barrel largely due to the increased throughput volumes. Direct
operating expenses (exclusive of depreciation and amortization) were $359 million for the year ended December 31, 2019
compared to $356 million for the year ended December 31, 2018. The increase of approximately $3 million was primarily due
to increased personnel costs, partially offset by lower natural gas prices.
Depreciation and Amortization Expense - Depreciation and amortization expense increased approximately $6 million for
the year ended December 31, 2019 compared to the year ended December 31, 2018, as a result of net additions during the
current year. Capitalization of turnaround expense along with adoption of ASC 842 also contributed to this increase.
Selling, General, and Administrative Expenses, and Other - Selling, general and administrative expenses and other was
$68 million for the year ended December 31, 2019 compared to $82 million for the year ended December 31, 2018. The
$14 million decrease was primarily a result of a $9 million gain on the sale of the Cushing, Oklahoma crude oil terminal in the
second quarter of 2019 and a decrease in project write-offs in 2019 compared to 2018.
Nitrogen Fertilizer Segment
The following tables summarize the ammonia utilization at the Coffeyville and East Dubuque facilities. Utilization is an
important measure used by management to assess operational output at each of the Nitrogen Fertilizer Segment’s facilities.
Utilization is calculated as actual tons produced divided by capacity adjusted for planned maintenance and turnarounds.
December 31, 2019 | 51
$ (in millions)$ (per total throughput barrel)Direct Operating Expenses (1)$359$356$361$4.56$4.62$4.55per total throughput barrel2019201820173503553603654.004.505.005.506.00$ (in millions)Depreciation and Amortization Expense$202$196$177201920182017150175200225$ (in millions)Selling, General and AdministrativeExpenses, and Other$68$82$7920192018201760708090 Table of Contents
The presentation of our utilization is on a two-year rolling average which takes into account the impact of our planned and
unplanned outages on any specific period. We believe the two-year rolling average is a more useful presentation of the long-
term utilization performance of the Nitrogen Fertilizer Segment’s facilities.
Utilization is presented solely on ammonia production, rather than each nitrogen product, as it provides a comparative
baseline against industry peers and eliminates the disparity of facility configurations for upgrade of ammonia into other
nitrogen products. With efforts primarily focused on ammonia upgrade capabilities, we believe this measure provides a
meaningful view of how well we operate.
On a consolidated basis, the Nitrogen Fertilizer Segment’s utilization decreased 2% to 93% for the two years ended
December 31, 2019 compared to the two years ended December 31, 2018. This decrease was primarily a result of ammonia
storage capacity constraints at the East Dubuque Facility in the first quarter of 2019 due to inclement weather impacting
customers’ ability to apply ammonia and the turnaround at the East Dubuque Facility in the fourth quarter of 2019.
Sales and Pricing per Ton - Two of the Nitrogen Fertilizer Segment’s key operating metrics are total sales for ammonia
and UAN along with the product pricing per ton realized at the gate. Product pricing at gate represents net sales less freight
revenue divided by product sales volume in tons and is shown in order to provide a pricing measure comparable across the
fertilizer industry.
Production Volumes - Gross tons produced for ammonia represent the total ammonia produced, including ammonia
produced, that was upgraded into other fertilizer products. Net tons available for sale represent the ammonia available for sale
that was not upgraded into other fertilizer products. The table below presents these Nitrogen Fertilizer Segment metrics for the
years ended December 31, 2019, 2018 and 2017:
December 31, 2019 | 52
Two Years Ended December 31,% of CapacityConsolidated Ammonia Utilization93%95%2019201880%90%100%Two Years Ended December 31,% of CapacityAmmonia Utilization - by Facility91%95%94%95%EDNFCRNF2019201880%90%100%Ammonia Sales TonsUAN Sales TonsSales (thousand tons)2412022861,2611,2891,255AmmoniaUAN2019201820171002003001,0001,2501,500Ammonia PriceUAN PriceProduct Pricing at Gate ($ per ton)$392$328$280$199$173$152AmmoniaUAN201920182017250300350400450125150175200225 Table of Contents
(in thousands of tons)
Ammonia (gross produced)
Ammonia (net available for sale)
Year Ended December 31,
2019
2018
2017
766
223
794
246
815
268
UAN
1,268
Feedstock - Our Coffeyville Facility utilizes a pet coke gasification process to produce nitrogen fertilizer. Our East
Dubuque Facility uses natural gas in its production of ammonia. The table below presents these feedstocks for both facilities
within the Nitrogen Fertilizer Segment for the years ended December 31, 2019, 2018, and 2017:
1,276
1,255
Petroleum coke used in production (thousand tons)
Petroleum coke (dollars per ton)
Natural gas used in production (thousands of MMBtu) (1)
Natural gas used in production (dollars per MMBtu) (1)
Natural gas cost of materials and other (thousands of MMBtu) (1)
Natural gas cost of materials and other (dollars per MMBtu) (1)
Year Ended December 31,
2019
2018
2017
535
37.47
6,856
2.88
6,961
3.08
$
$
$
463
28.41
7,933
3.28
7,122
3.15
$
$
$
488
16.56
7,620
3.24
8,052
3.26
$
$
$
(1) The feedstock natural gas shown above does not include natural gas used for fuel. The cost of fuel natural gas is included in Direct
operating expenses (exclusive of depreciation and amortization).
Financial Highlights
Overview - For the year ended December 31, 2019, Nitrogen Fertilizer Segment operating income and net loss were $27
million and $35 million, a $21 million increase and $15 million decrease, respectively, over the year ended December 31, 2018
driven primarily by increased sales volumes and pricing.
December 31, 2019 | 53
$ (in millions)Net Sales$404$351$331201920182017300350400$ (in millions)Operating Income (Loss)$27$6$(10)201920182017(10)0102030 Table of Contents
(1) See “Non-GAAP Reconciliations” section below for reconciliations of the non-GAAP measures shown below.
Net Sales - The Nitrogen Fertilizer Segment’s net sales increased by $53 million to $404 million for the year ended
December 31, 2019 compared to the year ended December 31, 2018. This increase was primarily due to favorable pricing
conditions which contributed $49 million in higher revenues coupled with increased sales volumes contributing $8 million as
compared to the year ended December 31, 2018. The increase in net sales was partially offset by a $3 million decrease in Urea
sales. For the years ended December 31, 2019 and 2018, net sales included $33 million and $34 million in freight revenues,
respectively, and $8 million and $8 million in other revenue, respectively.
The following table demonstrates the impact of changes in sales volumes and pricing for the primary components of net
sales, excluding freight, for the year ended December 31, 2019 as compared to the year ended December 31, 2018:
(in millions)
UAN
Ammonia
Price
Variance
Volume
Variance
$
$
34
15
(5)
13
The increase in UAN and ammonia sales pricing for the year ended December 31, 2019 compared to the year ended
December 31, 2018 was primarily attributable to a shift in the timing of demand from the fourth quarter of 2018 to the second
quarter of 2019, as customers delayed receipt of nitrogen products due to continued inclement weather. As a result, customer
demand for ammonia increased in the second quarter of 2019 as customers attempted to make up for the missed application. In
addition, the aforementioned ammonia application, coupled with freezing temperatures and flooding throughout the Midwest
and Southern Plains in 2019, shifted the demand for ammonia, resulting in increased sales volumes for the year ended
December 31, 2019 compared to the year ended December 31, 2018. The decrease in Urea sales for the year ended December
31, 2019 compared to the year ended December 31, 2018 was a result of the turnaround at our East Dubuque Facility.
December 31, 2019 | 54
$ (in millions)Net Loss$(35)$(50)$(73)201920182017(80)(60)(40)(20)0$ (in millions)EBITDA (1)$107$84$642019201820176080100120 Table of Contents
(1) Exclusive of depreciation and amortization expense.
Cost of Materials and Other - Cost of materials and other for the year ended December 31, 2019 was $94 million,
compared to $88 million for the year ended December 31, 2018. The $6 million increase was comprised primarily of a
$5 million increase in pet coke costs at our Coffeyville Facility and a $6 million increase related to a draw in our ammonia and
UAN inventories offset by decreased natural gas costs at our East Dubuque facility contributing $5 million.
Direct Operating Expenses (exclusive of depreciation and amortization) - For the year ended December 31, 2019, direct
operating expenses (exclusive of depreciation and amortization) were $174 million as compared to $159 million for the year
ended December 31, 2018. The $15 million increase was primarily due to increased turnaround costs of $3 million, increased
repairs and maintenance costs of $1 million, and an inventory draw contributing $10 million.
Depreciation and Amortization Expense - Depreciation and amortization expense increased $8 million for the year ended
December 31, 2019 compared to the year ended December 31, 2018, as a result of accelerated depreciation of certain assets,
coupled with additions to property, plant, and equipment during the current year.
Selling, General, and Administrative Expenses, and Other - Selling, general and administrative expenses and other
increased approximately $4 million for the year ended December 31, 2019 compared to the year ended December 31, 2018.
The increase was primarily related to asset write offs in the period contributing $3 million, coupled with increased personnel
costs contributing $1 million.
December 31, 2019 | 55
$ (in millions)Cost of Materials and Other$94$88$85201920182017708090100$ (in millions)Direct Operating Expenses (1)$174$159$156201920182017125150175200$ (in millions)Depreciation and Amortization$80$72$7420192018201760708090$ (in millions)Selling, General and AdministrativeExpense, and Other$29$25$262019201820171015202530 Table of Contents
Non-GAAP Measures
Our management uses certain non-GAAP performance measures to evaluate current and past performance and prospects
for the future to supplement our GAAP financial information presented in accordance with U.S. GAAP. These non-GAAP
financial measures are important factors in assessing our operating results and profitability and include the performance and
liquidity measures defined below.
Effective January 1, 2019, the Company revised its accounting policy method for the costs of planned major maintenance
activities (turnarounds) specific to the Petroleum Segment from being expensed as incurred (the direct expensing method) to the
deferral method. Refer to Part II, Item 8, Note 2 (“Summary of Significant Accounting Policies”) for a further discussion of the
impacts of this change in accounting policy. As a result of this change in accounting policy, the non-GAAP measures of
Adjusted EBITDA, Petroleum Adjusted EBITDA, Nitrogen Fertilizer Adjusted EBITDA, Adjusted Net Income (Loss), and
Direct Operating Expenses per Total Throughput Barrel net of Turnaround Expense are no longer being presented.
The following are non-GAAP measures we present for the year ended December 31, 2019:
EBITDA - Consolidated net income (loss) before (i) interest expense, net, (ii) income tax expense (benefit) and (iii)
depreciation and amortization expense.
Petroleum EBITDA and Nitrogen Fertilizer EBITDA - Segment net income (loss) before segment (i) interest expense, net,
(ii) income tax expense (benefit), and (iii) depreciation and amortization.
Refining Margin - The difference between our Petroleum Segment net sales and cost of materials and other.
Refining Margin adjusted for Inventory Valuation Impacts - Refining Margin adjusted to exclude the impact of current
period market price and volume fluctuations on crude oil and refined product inventories recognized in prior periods. We record
our commodity inventories on the first-in-first-out basis. As a result, significant current period fluctuations in market prices and
the volumes we hold in inventory can have favorable or unfavorable impacts on our refining margins as compared to similar
metrics used by other publicly-traded companies in the refining industry.
Refining Margin and Refining Margin adjusted for Inventory Valuation Impacts, per Throughput Barrel - Refining Margin
divided by the total throughput barrels during period, which is calculated as total throughput barrels per day times the number
of days in the period.
Direct Operating Expenses per Throughput Barrel - Direct operating expenses for our Petroleum Segment divided by total
throughput barrels for the period, which is calculated as total throughput barrels per day times the number of days in the period.
We present these measures because we believe they may help investors, analysts, lenders and ratings agencies analyze our
results of operations and liquidity in conjunction with our U.S. GAAP results, including but not limited to our operating
performance as compared to other publicly-traded companies in the refining industry, without regard to historical cost basis or
financing methods and our ability to incur and service debt and fund capital expenditures. Non-GAAP measures have important
limitations as analytical tools, because they exclude some, but not all, items that affect net earnings and operating income.
These measures should not be considered substitutes for their most directly comparable U.S. GAAP financial measures. See
“Non-GAAP Reconciliations” included herein for reconciliation of these amounts. Due to rounding, numbers presented within
this section may not add or equal to numbers or totals presented elsewhere within this document.
December 31, 2019 | 56
Table of Contents
Factors Affecting Comparability of Our Financial Results
Refer to the “Non-GAAP Measures” section above for discussion of the changes made to the Company’s definition of
certain non-GAAP measures.
Petroleum Segment
Coffeyville Refinery - During the fourth quarter of 2019, our Coffeyville Refinery incurred costs of $15 million related to
preparations for the planned turnaround scheduled to be completed in the spring of 2020. During the first quarter of 2018, our
Coffeyville Refinery experienced an outage with its fluid catalytic cracking unit (“FCCU”) lasting 48 days. The FCCU outage
had a significant negative impact on production and sales during that period.
Wynnewood Refinery - During the first quarter of 2017, the Wynnewood Refinery underwent a turnaround on its
hydrocracking unit at a cost of $13 million. In addition, the first phase of its planned facility turnaround was completed in the
fourth quarter of 2017 at a cost of $43 million. The second phase of this turnaround was completed in the first quarter of 2019
at a cost of $24 million.
Nitrogen Fertilizer Segment
During the fourth quarter of 2018, the Partnership recognized a $6 million business interruption insurance recovery
associated with an outage at its Coffeyville Fertilizer Facility during 2017. The recovery is recorded in Other income, net.
Coffeyville Fertilizer Facility - During 2018, the Coffeyville Fertilizer Facility had a planned, full facility turnaround
lasting 15 days and incurred approximately $6 million in turnaround expense in the second quarter of 2018. During 2017, the
Coffeyville Fertilizer Facility’s third-party air separation unit experienced a shut down. Paired with this shut down and
subsequent operational challenges, the Coffeyville Fertilizer Facility experienced unplanned UAN downtime of 11 days during
the second quarter of 2017.
East Dubuque Fertilizer Facility - During 2019, the East Dubuque Fertilizer Facility had a planned, full facility turnaround
lasting 32 days and cost approximately $10 million in the third and fourth quarters of 2019. During 2017, the East Dubuque
Fertilizer Facility had a planned, full facility turnaround lasting 14 days and incurred approximately $3 million in turnaround
expense in the third quarter of 2017. Additionally, during the fourth quarter of 2017, the East Dubuque Fertilizer Facility
experienced unplanned downtime totaling 12 days.
Non-GAAP Reconciliations
Reconciliation of Net Income to EBITDA
(in millions)
Net income
Add:
Interest expense, net
Income tax expense (benefit)
Depreciation and amortization
EBITDA
Year Ended December 31,
2019
2018
2017
362
$
366
$
258
102
129
287
880
$
102
79
274
821
$
109
(220)
258
405
$
$
December 31, 2019 | 57
Table of Contents
Reconciliation of Petroleum Segment Net Income to EBITDA
(in millions)
Petroleum net income
Add:
Interest expense, net
Depreciation and amortization
Petroleum EBITDA
Year Ended December 31,
2019
2018
2017
559
$
511
$
27
202
788
$
41
196
748
$
127
47
177
351
$
$
Reconciliation of Petroleum Segment Gross Profit to Refining Margin and Refining Margin Adjusted for Inventory
Valuation Impact
(in millions)
Net sales
Cost of materials and other
Direct operating expenses (exclusive of depreciation and amortization as
reflected below)
Depreciation and amortization
Gross profit
Add:
Direct operating expenses (exclusive of depreciation and amortization as
reflected below)
Depreciation and amortization
Refining margin
Inventory valuation impact, unfavorable (favorable) (1)
Year Ended December 31,
2019
2018
2017
$
5,968
$
6,780
$
4,765
5,602
359
199
645
359
199
1,203
(43)
356
192
630
356
192
1,178
33
5,664
4,875
361
173
255
361
173
789
(29)
760
Refining margin, excluding inventory valuation impacts
$
1,160
$
1,211
$
(1) The Petroleum Segment’s basis for determining inventory value under GAAP is First-In, First-Out (“FIFO”). Changes in crude oil prices
can cause fluctuations in the inventory valuation of crude oil, work in process and finished goods, thereby resulting in a favorable
inventory valuation impact when crude oil prices increase and an unfavorable inventory valuation impact when crude oil prices decrease.
The inventory valuation impact is calculated based upon inventory values at the beginning of the accounting period and at the end of the
accounting period. In order to derive the inventory valuation impact per total throughput barrel, we utilize the total dollar figures for the
inventory valuation impact and divide by the number of total throughput barrels for the period.
Reconciliation of Petroleum Segment Total Throughput Barrels
Total throughput barrels per day
Days in the period
Total throughput barrels
Year Ended December 31,
2019
2018
2017
215,971
365
212,595
365
218,181
365
78,829,441
77,597,175
79,636,065
Reconciliation of Petroleum Segment Refining Margin per Total Throughput Barrel
(in millions, except per total throughput barrel)
2019
2018
2017
Refining margin
Divided by: total throughput barrels
Refining margin per total throughput barrel
$
$
1,203
79
15.26
$
$
1,178
78
15.18
$
$
789
80
9.98
Year Ended December 31,
December 31, 2019 | 58
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Reconciliation of Petroleum Segment Refining Margin Adjusted for Inventory Valuation Impact per Total Throughput
Barrel
(in millions, except per total throughput barrel)
2019
2018
2017
Refining margin, excluding inventory valuation impact
Divided by: total throughput barrels
Refining margin per total throughput barrel
$
$
1,160
79
14.71
$
$
1,211
78
15.60
$
$
Year Ended December 31,
Reconciliation of Petroleum Segment Direct Operating Expenses per Total Throughput Barrel
(in millions, except per total throughput barrel)
2019
2018
2017
Year Ended December 31,
Direct operating expenses (exclusive of depreciation and amortization)
Divided by: total throughput barrels
Direct operating expenses per total throughput barrel
Reconciliation of Nitrogen Fertilizer Segment Net Loss to EBITDA
(in millions)
Nitrogen fertilizer net loss
Add:
Interest expense, net
Depreciation and amortization
Nitrogen fertilizer EBITDA
Liquidity and Capital Resources
$
$
$
$
359
79
4.56
$
$
356
78
4.62
$
$
Year Ended December 31,
2019
2018
2017
(35) $
(50) $
(73)
62
80
107
$
62
72
84
$
63
74
64
760
80
9.61
361
80
4.55
Our principal source of liquidity has historically been cash from operations. Our principal uses of cash are for working
capital, capital expenditures, funding our debt service obligations and paying dividends to our stockholders, as further discussed
below.
We believe that our cash from operations and existing cash and cash equivalents, along with borrowings, as necessary,
under CVR Partners’ AB Credit Facility and CVR Refining’s Amended and Restated ABL Credit Facility, will be sufficient to
satisfy anticipated cash requirements associated with our existing operations for at least the next 12 months. However, our
future capital expenditures and other cash requirements could be higher than we currently expect as a result of various factors.
Additionally, our ability to generate sufficient cash from our operating activities and secure additional financing depends on our
future operational performance, which is subject to general economic, political, financial, competitive, and other factors, some
of which may be beyond our control.
Depending on the needs of our business, contractual limitations, and market conditions, we may from time to time seek to
issue equity securities, incur additional debt, issue debt securities, or otherwise refinance our existing debt. There can be no
assurance that we will seek to do any of the foregoing or that we will be able to do any of the foregoing on terms acceptable to
us or at all.
The Company, and its subsidiaries, were in compliance with all covenants under their respective debt instruments as of
December 31, 2019, as applicable.
December 31, 2019 | 59
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Cash Balances and Other Liquidity
As of December 31, 2019, we had consolidated cash and cash equivalents of $652 million, $393 million available under
CVR Refining’s Amended and Restated ABL Credit Facility and $50 million available under CVR Partners’ AB Credit
Facility.
(in millions)
CVR Partners:
9.25% Senior Secured Notes due June 2023
6.50% Senior Notes due April 2021
Unamortized discount and debt issuance costs
Total CVR Partners debt
CVR Refining:
6.50% Senior Notes due November 2022 (1)
Unamortized debt issuance cost
Total CVR Refining debt
Total long-term debt
December 31, 2019
December 31, 2018
$
$
$
$
645
$
2
(15)
632
500
(3)
497
$
$
645
2
(18)
629
500
(3)
497
1,129
$
1,126
(1) On January 27, 2020, the Company redeemed all of the 6.50% Senior Notes due November 2022 for a redemption price equal to
101.083%, plus accrued and unpaid interest, on the redeemed notes.
CVR Partners
The Nitrogen Fertilizer Segment has a 9.25% Senior Secured Notes due 2023, 6.50% Senior Notes due 2021, and an AB
Credit Facility, the proceeds of which may be used to fund working capital, capital expenditures, and for other general
corporate purposes. Refer to Note 6 (“Long-Term Debt and Finance Lease Obligations”) for further discussion.
CVR Refining
As of December 31, 2019, the Petroleum Segment had a 6.50% Senior Secured Notes due 2022 (the “2022 Notes”) and an
Amended and Restated ABL Credit Facility, the proceeds of which may be used to fund working capital, capital expenditures,
and for other general corporate purposes. As discussed above, the Company redeemed all of the 2022 Notes in January 2020.
Refer to Note 6 (“Long-Term Debt and Finance Lease Obligations”) for further discussion.
CVR Energy
On January 27, 2020, CVR Energy issued $600 million in aggregate principal amount of 5.25% senior unsecured notes due
2025, (the “2025 Notes”), which mature on February 15, 2025, and $400 million in aggregate principal amount of 5.75% senior
unsecured notes due 2028 (the “2028 Notes”), which mature on February 15, 2028. A portion of the net proceeds from the 2025
Notes and 2028 Notes were used to fund the redemption of the 2022 Notes. The remaining net proceeds will be used for general
corporate purposes, which may include funding (i) acquisitions, (ii) capital projects, and/or (iii) share repurchases or other
distributions to our stockholders. Refer to Note 6 (“Long-Term Debt and Finance Lease Obligations”) for further discussion of
the issuance of these new notes and the redemption of the 2022 Notes.
Capital Spending
We divide capital spending needs into two categories: maintenance and growth. Maintenance capital spending includes
non-discretionary maintenance projects and projects required to comply with environmental, health, and safety regulations.
Growth capital projects generally involve an expansion of existing capacity and/or a reduction in direct operating expenses. We
undertake growth capital spending based on the expected return on incremental capital employed.
December 31, 2019 | 60
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Our total capitalized costs for the year ended December 31, 2019, along with our estimated expenditures for 2020, by
segment, are as follows:
(in millions)
Petroleum
Nitrogen Fertilizer
Other
Total
2019 Actual
2020 Estimate (1)
Maintenance
Growth
Total
Maintenance
Growth
Total
Low
High
Low
High
Low
High
$
$
79 $
10 $
18
5
2
—
89
20
5
$
55 $
60 $
50 $
55 $
105 $
115
19
5
21
8
4
—
6
—
23
5
27
8
102 $
12 $
114
$
79 $
89 $
54 $
61 $
133 $
150
(1) Total 2020 estimated capitalized costs include approximately $45 to 55 million of growth related projects that will require additional
approvals before commencement.
Our estimated capital expenditures are subject to change due to unanticipated changes in the cost, scope, and completion
time for capital projects. For example, we may experience unexpected changes in labor or equipment costs necessary to comply
with government regulations or to complete projects that sustain or improve the profitability of the refineries or nitrogen
fertilizer facilities. We may also accelerate or defer some capital expenditures from time to time. Capital spending for CVR
Partners is determined by the board of directors of its general partner.
In the Petroleum Segment, we capitalized $38 million and $8 million of turnaround expenditures incurred during the years
ended December 31, 2019 and 2018, respectively. The next planned major turnaround within the Petroleum Segment is at the
Coffeyville refinery commencing in the first quarter of 2020 with total estimated expenditures of $145 million to $155 million,
of which $130 million to $140 million is expected to be incurred and capitalized in the spring of 2020. As to the Nitrogen
Fertilizer Segment, the East Dubuque facility began a major scheduled turnaround on September 14, 2019, which was
completed in October. We incurred $10 million during the year ended December 31, 2019 related to this turnaround.
Dividends to CVR Energy Stockholders
IEP, through its ownership of the Company’s common shares, is entitled to receive dividends that are declared and paid by
the Company based on the number of shares held at each record date. The following presents dividends paid to the Company's
stockholders, including IEP, during the years ended December 31, 2019:
Date Paid
Dividend Per Share
Stockholders
IEP
Total
Dividends Paid (in millions)
Related Period
2018 - 4th Quarter
2019 - 1st Quarter
March 11, 2019
May 13, 2019
2019 - 2nd Quarter
August 12, 2019
2019 - 3rd Quarter
November 11, 2019
Total
$
$
$
$
$
0.75
0.75
0.75
0.80
3.05
$
$
22
21
21
24
88
$
$
$
53
54
54
57
218
$
75
75
75
81
306
On February 19, 2020, the Company’s Board of Directors declared a cash dividend for the fourth quarter of 2019 to the
Company’s stockholders of $0.80 per share, or $80 million in the aggregate. The dividend will be paid on March 9, 2020 to
stockholders of record at the close of business on March 2, 2020. IEP will receive approximately $57 million in respect of its
ownership interest in the Company’s shares.
Dividends, if any, including the payment, amount and timing thereof, are subject to change at the discretion of the
Company’s Board of Directors.
During the years ended December 31, 2018 and 2017, the Company paid dividends totaling $2.50 and $2.00 per common
unit, or $238 million and $174 million, respectively. Of these dividends, IEP received $179 million and $142 million,
respectively, for the same periods.
December 31, 2019 | 61
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Distributions to CVR Partners’ Unitholders
The following table presents distributions paid by CVR Partners to CVR Partners’ unitholders, including amounts received
by the Company, as of December 31, 2019.
Related Period
Date Paid
2018 - 4th Quarter
2019 - 1st Quarter
March 11, 2019
$
May 13, 2019
2019 - 2nd Quarter
August 12, 2019
2019 - 3rd Quarter
November 11, 2019
Total
$
Distribution Per
Common Unit
Public
Unitholders
CVR Energy
Total
Distributions Paid (in millions)
0.12
0.07
0.14
0.07
0.40
$
$
9
5
11
5
30
$
$
$
5
3
5
3
16
$
14
8
16
8
46
Distributions, if any, including the payment, amount, and timing thereof, are subject to change at the discretion of the board
of directors of CVR Partners’ general partner. No distributions were declared for the fourth quarter of 2019.
The Partnership did not pay distributions during the year ended December 31, 2018, while during the year ended December
31, 2017, it paid a distribution of $0.02 per common unit, or $2 million. Of this distribution, CVR Energy received $1 million.
Capital Structure
On October 23, 2019, the Board of Directors of the Company authorized a stock repurchase program (the “Stock
Repurchase Program”). The Stock Repurchase Program would enable the Company to repurchase up to $300 million of the
Company’s common stock. Repurchases under the Stock 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 and are subject to market
conditions as well as corporate, regulatory and other considerations. While the Stock Repurchase Program currently has a
duration of four years, it does not obligate the Company to acquire any stock and may be terminated by the Company’s Board
of Directors at any time. We did not repurchase any of our common stock during the year ended December 31, 2019.
Cash Flows
The following table sets forth our consolidated cash flows for the periods indicated below:
(in millions)
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Net (decrease) increase in cash and cash equivalents
Operating Activities
Year Ended December 31,
2019
2018
2017
$
$
747
$
628
$
(121)
(642)
(108)
(334)
(16) $
186
$
248
(276)
(226)
(254)
The change in operating activities for the year ended December 31, 2019, as compared to the year ended December 31,
2018, was primarily due to favorable changes in working capital of $152 million, partially offset by a reduction in operating
results, excluding non-cash items, of $22 million and unfavorable changes in non-current assets and liabilities of $11 million.
Investing Activities
The change in investing activities for the year ended December 31, 2019, as compared to the year ended December 31,
2018, was primarily due to the receipt of $36 million of proceeds from the sale of Cushing assets net of carrying value of
inventory sold as part of the divestment. These net proceeds were partially offset by capital expenditures of $19 million and an
increase in turnaround expenditures of $30 million primarily relating to preparations in the fourth quarter of 2019 for the
December 31, 2019 | 62
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Coffeyville refinery turnaround scheduled for completion in 2020 and completion of the Wynnewood refinery turnaround in the
second quarter of 2019.
Financing Activities
The change in financing activities for the year ended December 31, 2019, as compared to the year ended December 31,
2018, was primarily due to $301 million in funds used to acquire the remaining CVR Refining common units not otherwise
owned by us, along with increases in CVR Energy dividends and CVR Partners distributions paid to public unitholders of $68
million and $30 million, respectively, compared to 2018, partially offset by a decrease in distributions to CVR Refining public
unitholders of $93 million.
Long-Term Commitments
In addition to long-term debt, we are required to make payments relating to various types of obligations. The following
table summarizes our minimum payments as of December 31, 2019 relating to contractual obligations and other commercial
commitments for the five-year period following December 31, 2019 and thereafter.
2020
2021
2022
2023
2024
Thereafter
Total
Payments Due by Period
(in millions)
Contractual Obligations
Long-term debt (1)
Operating leases (2)
Finance lease obligations (3)
Unconditional purchase obligations (4)
Interest payments (5)
Other long-term liabilities (6)
$
— $
16
5
95
100
1
2
14
6
80
99
1
$
500
$
645
$
— $
— $
1,147
11
6
77
93
2
7
6
75
34
—
4
7
71
3
—
85
—
35
375
8
2
52
65
773
337
6
$
420
$
2,380
Total contractual obligations
$
217
$
202
$
689
$
767
$
(1) Consists of the 2021 Notes, 2022 Notes and 2023 Notes. Subsequent to December 31, 2019, and excluded from the table above, the
Company issued the 2025 Notes and 2028 Notes and redeemed the 2022 Notes. Refer to Part II, Item 8, Note 6 (“Long-Term Debt and
Finance Lease Obligations”) for further discussion of the issuance of the 2025 Notes and 2028 Notes and the associated redemption of
the 2022 Notes.
(2) We lease railcars, pipelines, storage, real estate, and other assets.
(3) The amount includes commitments under finance lease arrangements for three leases which include a pipeline lease, a storage and
terminal equipment lease, and a bundled truck lease.
(4) The amount includes (i) commitments for petroleum products storage and petroleum transportation, (ii) electricity supply agreement,
(iii) a product supply agreement, (iv) a pet coke supply agreement, (v) commitments related to our biofuels blending obligation, and (vi)
various agreements for gas and gas transportation.
Interest payments for our long-term debt outstanding and finance lease obligations as of December 31, 2019 and commitment fees on the
unutilized commitments of the AB Credit Facility.
(5)
(6) The amount includes environmental liabilities. Environmental liabilities represents our estimated payments required by federal and/or
state environmental agencies. See Part I, Item 1, “Environmental Matters.”
Off-Balance Sheet Arrangements
We do not have any “off-balance sheet arrangements” as such term is defined within the rules and regulations of the SEC.
Recent Accounting Pronouncements
Refer to Part II, Item 8, Note 2 (“Summary of Significant Accounting Policies”), of this Report for a discussion of recent
accounting pronouncements applicable to us.
Critical Accounting Policies
We prepare our consolidated financial statements in accordance with GAAP. In order to apply these principles,
management must make judgments, assumptions, and estimates based on the best available information at the time. Actual
December 31, 2019 | 63
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results may differ based on the accuracy of the information utilized and subsequent events. Our accounting policies are
described in the notes to our audited consolidated financial statements included elsewhere in this Report. Our critical
accounting policies, which are listed below, could materially affect the amounts recorded in our consolidated financial
statements.
•
•
•
•
•
•
Derivative instruments and fair value of financial instruments;
Goodwill impairment;
Impairment of long-lived assets;
Income taxes;
Inventory finished goods valuation; and
Lease standard adopted by the Company for ASC 842, Leases.
Refer to Part II, Item 8, Note 2 (“Summary of Significant Accounting Policies”), of this Report for a discussion of these,
and other, accounting policies.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our market risk sensitive instruments and positions have inherent risks including potential loss from adverse changes in
commodity prices, RINs prices, and interest rates.
Commodity Price Risk
The Petroleum Segment, as a manufacturer of refined petroleum products, and the nitrogen fertilizer segment, as a
manufacturer of nitrogen fertilizer products, all of which are commodities, have exposure to market pricing for products sold in
the future. In order to realize value from our processing capacity, a positive spread between the cost of raw materials and the
value of finished products must be achieved (i.e., gross margin or crack spread). The physical commodities that comprise our
raw materials and finished goods are typically bought and sold at a spot or index price that can be highly variable.
The Petroleum Segment uses a crude oil purchasing intermediary, Vitol, to purchase the majority of its non-gathered crude
oil inventory for the refineries, which allows it to take title to and price its crude oil at locations in close proximity to the
refineries, as opposed to the crude oil origination point, reducing its risk associated with volatile commodity prices by
shortening the commodity conversion cycle time. The commodity conversion cycle time refers to the time elapsed between raw
material acquisition and the sale of finished goods. In addition, the Petroleum Segment seeks to reduce the variability of
commodity price exposure by engaging in hedging strategies and transactions that will serve to protect gross margin as
forecasted in the annual operating plan. With regard to its hedging activities, the Petroleum Segment may enter into, or has
entered into, derivative instruments which serve to (1) lock in or fix a percentage of the anticipated or planned gross margin in
future periods when the derivative market offers commodity spreads that generate positive cash flows, (2) hedge the value of
inventories in excess of minimum required inventories, and (3) manage existing derivative positions related to a change in
anticipated operations and market conditions.
Compliance Program Price Risk
As a producer of transportation fuels from petroleum, the Petroleum Segment is required to blend biofuels into the products
it produces or to purchase RINs in the open market in lieu of blending to meet the mandates established by the EPA. The
Petroleum Segment is exposed to market risk related to volatility in the price of RINs needed to comply with the RFS that are
not otherwise generated through blending of renewable fuels in our refining and marketing operations. To mitigate the impact
of this risk on the Petroleum Segment’s results of operations and cash flows, the Petroleum Segment purchases RINs when
prices are deemed favorable. Refer to Part II, Item 8, Note 11 (“Commitments and Contingencies”), of this Report for further
discussion about compliance with the RFS.
December 31, 2019 | 64
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Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of CVR Energy, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of CVR Energy, Inc. (a Delaware corporation) and subsidiaries
(the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of operations, changes in equity, and
cash flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as
the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position
of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States
of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in
the 2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”), and our report dated February 20, 2020 expressed an unqualified opinion.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on
the accounts or disclosures to which they relate.
Petroleum Segment’s Inventory Finished Goods Valuation
As described in Note 2 to the consolidated financial statements, the Company utilizes the ability-to-bear process to determine
the valuation of its Petroleum Segment’s finished goods inventories, which was $160 million at December 31, 2019.
Management makes certain estimates based on observable inputs, including monthly sales prices and current market prices to
determine how much raw materials and production costs are capitalized into Inventories. Changes in these estimates could have
a significant impact on the Company’s valuation of finished goods inventory.
We identified the Company’s Petroleum Segment’s finished goods inventory valuation process as a critical audit matter. The
principal consideration for our determination that the inventory valuation process is a critical audit matter is the degree of
complexity and subjectivity inherent in determining management’s estimates.
December 31, 2019 | 65
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Our audit procedures to evaluate the valuation of the Company’s valuation of finished goods inventory, included the following
procedures to test management’s process, among others:
• We tested the design and operating effectiveness of management’s processes and controls for determining the
valuation of finished goods inventory.
• We obtained a sample of invoices to verify the accuracy of the production costs used in estimates.
• We tested or evaluated the reasonableness of inputs including sales volumes, monthly sales prices and current market
prices for each product by obtaining third-party market prices and a sample of sales transactions by product to verify
the accuracy of the information used by management.
Change in the Petroleum Segment’s Turnaround Activities Accounting
As described in Note 2 to the consolidated financial statements, effective January 1, 2019, the accounting policy for turnaround
activities was changed to the deferral method for the Petroleum Segment due to its preferability as compared to the direct-
expense method. This accounting policy was changed on a retrospective basis. Management made certain assumptions in
determining that the deferral method was preferable; such assumptions had a significant impact on the Petroleum Segment’s
determination of which accounting method was preferable for its turnaround activities.
We identified the change in accounting policy for turnaround activities as a critical audit matter. The principal consideration for
our determination that the change in the Petroleum Segment’s turnaround accounting policy is a critical audit matter is due to
the degree of auditor subjectivity given the limited authoritative guidance and the nature of evidence obtained in determining
which method is preferable.
Our audit procedures to evaluate the Company’s determination that the deferral method was preferable, included the following
procedures, among others:
• We evaluated management’s assumptions in their preferability determination, including analysis of consistency to its
peer companies and management’s conclusion that the deferral method better reflects the economic substance of the
benefits earned from turnaround activities. Such evaluation included consultations with our national office resources.
• We analyzed the applicable accounting guidance in assessing whether the deferral method was preferable.
• We tested the design and operating effectiveness of management’s process and controls for evaluating unique
accounting conclusions and the impact to the Company’s financial statements.
• We selected a sample of turnaround invoices from current and historical periods that were used in management’s
retrospective application of the change in accounting policy and inspected the invoices to determine the amounts were
accurately recorded and subsequently amortized in accordance with the change to the deferral method.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2013.
Houston, Texas
February 20, 2020
December 31, 2019 | 66
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Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of CVR Energy, Inc.
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of CVR Energy, Inc. (a Delaware corporation) and subsidiaries
(the “Company”) as of December 31, 2019, based on criteria established in the 2013 Internal Control — Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on
criteria established in the 2013 Internal Control - Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2019, and our
report dated February 20, 2020 expressed an unqualified opinion on those financial statements.
Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report
on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ GRANT THORNTON LLP
Houston, Texas
February 20, 2020
December 31, 2019 | 67
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(in millions)
Current assets:
CVR Energy, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31,
2019
2018
Cash and cash equivalents (including $37 and $415, respectively, of consolidated variable
interest entities (VIEs))
Accounts receivable (including $34 and $169, respectively, of VIEs)
$
Inventories (including $54 and $380, respectively, of VIEs)
Prepaid expenses and other current assets (including $5 and $56, respectively, of VIEs)
Total current assets
Property, plant and equipment, net (including $952 and $2,414, respectively, of VIEs)
Other long-term assets (including $55 and $270, respectively, of VIEs)
Total assets
Current liabilities:
LIABILITIES AND EQUITY
Note payable and finance lease obligations (including $0 and $3, respectively, of VIEs)
Accounts payable (including $24 and $317, respectively, of VIEs)
Other current liabilities (including $52 and $154, respectively, of VIEs)
Total current liabilities
Long-term liabilities:
Long-term debt and finance lease obligations, net of current portion (including $632 and
$1,167, respectively of VIEs)
Deferred income taxes
Other long-term liabilities (including $10 and $7, respectively, of VIEs)
$
$
Total long-term liabilities
Commitments and contingencies (See Note 11)
Equity:
CVR 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 December 31, 2019 and 2018, respectively
Additional paid-in-capital
Retained deficit
Treasury stock, 98,610 shares at cost
Total CVR stockholders’ equity
Noncontrolling interest
Total equity
Total liabilities and equity
$
652
182
390
67
1,291
2,336
278
3,905
$
5
$
412
179
596
1,190
396
55
1,641
1
1,507
(113)
(2)
1,393
275
1,668
668
169
380
76
1,293
2,430
277
4,000
3
320
173
496
1,167
380
14
1,561
1
1,474
(187)
(2)
1,286
657
1,943
4,000
$
3,905
$
The accompanying notes are an integral part of these consolidated financial statements.
December 31, 2019 | 68
Table of Contents
CVR Energy, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
Net sales
Operating costs and expenses:
Cost of materials and other
Direct operating expenses (exclusive of depreciation and amortization as
reflected below)
Depreciation and amortization
Cost of sales
Selling, general and administrative expenses (exclusive of depreciation
and amortization as reflected below)
Depreciation and amortization
(Gain) loss on asset disposals
Operating income
Other (expense) income:
Interest expense, net
Other income, net
Income before income taxes
Income tax expense (benefit)
Net income
Less: Net (loss) income attributable to non-controlling interest
Net income attributable to CVR Energy stockholders
Basic and diluted earnings per share
Dividends declared per share
Weighted-average common shares outstanding:
Basic and Diluted
$
$
$
Year Ended December 31,
2019
2018
2017
$
6,364
$
7,124
$
5,988
4,851
533
278
5,662
117
9
(4)
580
(102)
13
491
129
362
(18)
380
3.78
3.05
$
$
$
5,683
517
263
6,463
112
11
6
532
(102)
15
445
79
366
107
259
2.80
2.50
$
$
$
4,953
516
247
5,716
113
11
3
145
(109)
2
38
(220)
258
(5)
263
3.03
2.00
100.5
92.5
86.8
The accompanying notes are an integral part of these consolidated financial statements.
December 31, 2019 | 69
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CVR Energy, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Common Stockholders
(in millions, except share data)
Shares
Issued
Common
Stock
Additional
Paid-In
Capital
Retained
Deficit
Treasury
Stock
Total CVR
Stockholders’
Equity
Noncontrolling
Interest
Total
Equity
Balance at December 31, 2016
86,929,660
$
1
$
1,197
$ (297) $
(2) $
899
$
889
$ 1,788
Dividends paid to CVR Energy
stockholders
Distributions from CVR Partners to
public unitholders
Distributions from CVR Refining to
public unitholders
Net income (loss)
Balance at December 31, 2017
Exchange offer impact
Dividends paid to CVR Energy
stockholders
Distributions from CVR Refining to
public unitholders
Other
Net income
—
—
—
—
86,929,660
13,699,549
—
—
—
—
Balance at December 31, 2018
100,629,209
Dividends paid to CVR Energy
stockholders
Distributions from CVR Partners to
public unitholders
Acquisition of CVR Refining non-
controlling interest
Effect of turnaround accounting
change
Net income (loss)
—
—
—
—
—
—
—
—
—
1
—
—
—
—
—
1
—
—
—
—
—
—
—
—
—
1,197
276
—
—
1
—
1,474
—
—
(2)
35
—
(174)
—
—
263
(208)
—
(238)
—
—
259
(187)
(306)
—
—
—
380
—
—
—
—
(2)
—
—
—
—
—
(2)
—
—
—
—
—
(174)
—
(174)
—
—
263
988
276
(2)
(2)
(47)
(5)
(47)
258
835
1,823
(192)
84
(238)
—
(238)
—
1
259
1,286
(93)
—
107
657
(93)
1
366
1,943
(306)
—
(306)
—
(2)
35
380
(30)
(30)
(334)
(336)
—
(18)
35
362
Balance at December 31, 2019
100,629,209
$
1
$
1,507
$ (113) $
(2) $
1,393
$
275
$ 1,668
The accompanying notes are an integral part of these consolidated financial statements.
December 31, 2019 | 70
CVR Energy, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Year Ended December 31,
2019
2018
2017
$
362
$
366
$
258
Depreciation and amortization
Deferred income taxes
(Gain) loss on asset disposals
Share-based compensation
Other non-cash items
Changes in assets and liabilities:
Accounts receivable
Inventories
Prepaid expenses and other current assets
Due to (from) parent
Accounts payable
Deferred revenue
Other current liabilities
Other long-term assets and liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Capital expenditures
Turnaround expenditures
Proceeds from sale of assets
Investment in affiliates, net of return of investment
Other investing activities
Net cash used in investing activities
Cash flows from financing activities:
Acquisition of CVR Refining common units
Dividends to CVR Energy’s stockholders
Distributions to CVR Refining’s noncontrolling interest holders
Distributions to CVR Partners’ noncontrolling interest holders
Other financing activities
Net cash used in financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
$
287
24
(4)
17
6
(40)
(10)
16
4
94
(15)
9
(3)
747
(121)
(38)
37
—
1
(121)
(301)
(306)
—
(30)
(5)
(642)
(16)
668
652
$
274
49
6
16
3
56
(9)
(29)
2
(21)
11
(104)
8
628
(102)
(8)
1
—
1
(108)
—
(238)
(93)
—
(3)
(334)
186
482
668
$
258
(220)
3
19
7
(27)
(40)
34
(16)
85
1
(113)
(1)
248
(120)
(80)
—
(76)
—
(276)
—
(174)
(47)
(2)
(3)
(226)
(254)
736
482
The accompanying notes are an integral part of these consolidated financial statements.
December 31, 2019 | 71
Table of Contents
CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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 nitrogen fertilizer manufacturing industries through its holdings in CVR
Refining, LP (the “Petroleum Segment” or “CVR Refining”) and CVR Partners, LP (the “Nitrogen Fertilizer Segment” or
“CVR Partners”). CVR Refining is an independent petroleum refiner and marketer of high value transportation fuels. CVR
Partners produces and markets nitrogen fertilizers in the form of urea ammonium nitrate (“UAN”) and ammonia. CVR’s
common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “CVI.” Icahn Enterprises L.P. and its
affiliates (“IEP”) owned approximately 71% of the Company’s outstanding common shares as of December 31, 2019.
CVR Refining, LP
On January 17, 2019, the general partner of CVR Refining assigned to the Company its right to purchase all of the issued
and outstanding CVR Refining common units not already owned by CVR Refining’s general partner or its affiliates. On
January 29, 2019, the Company purchased all remaining CVR Refining common units not already owned by the Company or
its affiliates for a cash purchase price of $10.50 per unit (the “Call Price”), or approximately $241 million in the aggregate (the
“Public Unit Purchase”). In conjunction with the exercise of its call right for all CVR Refining common units not already
owned by the Company or its affiliates, the Company entered into a purchase agreement with American Entertainment
Properties Corporation (“AEP”) and IEP, pursuant to which, on January 29, 2019, all of the Common Units held by AEP and
IEP were purchased by the Company for a cash price per unit equal to the Call Price, or approximately $60 million in the
aggregate (the “Affiliate Unit Purchase” together with the Public Unit Purchase, the “CVRR Unit Purchase”). The total
purchase price of $301 million was funded with approximately $105 million in borrowings under a new credit agreement
entered into by the Company on January 29, 2019, with the remaining amount being funded from the Company’s cash on hand.
Amounts drawn under the new credit agreement were fully repaid in February 2019. See Note 6 (“Long-Term Debt and Finance
Lease Obligations”) for further information on the credit agreement. The consolidated results of operations and financial
position of CVR Refining are reflected as CVR’s Petroleum Segment. Following this transaction, CVR Refining became a
wholly-owned subsidiary of the Company and, therefore, is no longer accounted for as a variable interest entity (“VIE”).
Effective February 8, 2019, CVR Refining’s reporting obligations under the Exchange Act were suspended.
CVR Partners, LP
As of December 31, 2019, public security holders held approximately 66% of CVR Partners’ outstanding common units,
and Coffeyville Resources, LLC (“CRLLC”), a wholly-owned subsidiary of CVR Energy, held approximately 34% of CVR
Partners’ outstanding common units. In addition, CRLLC owns 100% of CVR Partners’ general partner, CVR GP, LLC, which
holds a non-economic general partner interest in CVR Partners. Following the acquisition of the non-controlling interest in
CVR Refining in January 2019, the non-controlling interest reflected on the consolidated balance sheets of CVR is only
impacted by the net income of, and distributions from, CVR Partners.
Stock Repurchase Program
On October 23, 2019, the Board of Directors of the Company authorized a stock repurchase program (the “Stock
Repurchase Program”). The Stock Repurchase Program would enable the Company to repurchase up to $300 million of the
Company’s common stock. Repurchases under the Stock 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 and are subject to market
conditions as well as corporate, regulatory and other considerations. While the Stock Repurchase Program currently has a
duration of four years, it does not obligate the Company to acquire any stock and may be terminated by the Company’s Board
of Directors at any time. We did not repurchase any of our common stock during the year ended December 31, 2019.
December 31, 2019 | 72
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Subsequent Events
CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Company evaluated subsequent events, if any, that would require an adjustment to the Company’s consolidated
financial statements or require disclosure in the notes to the consolidated financial statements through the date of issuance of the
consolidated financial statements. Where applicable, the notes to these consolidated financial statements have been updated to
discuss all significant subsequent events which have occurred.
(2) Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its majority-owned direct
and indirect subsidiaries. All intercompany accounts and transactions have been eliminated. The ownership interests of
noncontrolling investors in the Company’s subsidiaries are recorded as noncontrolling interests. CVR Energy has not
recognized any other comprehensive income for the periods ended December 31, 2019, 2018, and 2017.
CVR Partners is considered a VIE. As the 100% owner of the general partner of CVR Partners, the Company has the sole
ability to direct the activities that most significantly impact the economic performance of the partnership and is considered to be
the primary beneficiary. In January 2019, following the CVRR Unit Purchase, CVR Refining was no longer considered a VIE
and is accounted for as a wholly-owned subsidiary.
Investments in entities over which the Company has significant influence, but not control, are accounted for using the
equity method of accounting. Income from equity method investments represents CVR Energy’s proportionate share of net
income generated by the equity method investees and is recorded in Other income, net on the Company’s Consolidated
Statements of Operations.
Reclassifications
Certain reclassifications have been made within the consolidated financial statements for the years ended December 31,
2018 and 2017 to conform with current presentation.
Use of Estimates
These consolidated financial statements are prepared in conformity with accounting principles generally accepted in the
United States of America (“GAAP”), which requires management to make 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. Estimates are reviewed on an ongoing basis, based on currently available information.
Changes in facts and circumstances may result in revised estimates, and actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and on deposit, investments in highly liquid money market accounts, and
debt instruments with original maturities of three months or less.
Accounts Receivable, net
Accounts receivable primarily consist of customer accounts receivable recorded at the invoiced amounts and generally do
not bear interest. Also included within accounts receivable of the Nitrogen Fertilizer Segment are unbilled fixed price contracts
which is further discussed within Note 7 (“Revenue”).
Allowances for doubtful accounts are generally recorded when it becomes probable the receivable will not be collected and
is booked to bad debt expense. The largest concentration of credit for any one customer at December 31, 2019 and 2018 was
approximately 11% and 12%, respectively, of the net accounts receivable balance. As of December 31, 2019 and 2018, the
allowance for doubtful accounts balances were immaterial.
December 31, 2019 | 73
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Inventories
CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Inventories consist primarily of domestic and foreign crude oil, blending stock and components, work-in-progress, fertilizer
products, and refined fuels and by-products. All inventories are valued at the lower of the first-in, first-out (“FIFO”) cost, or net
realizable value. The Petroleum Segment’s unfinished and finished products inventory values were determined using the
ability-to-bear methodology. Other inventories in the Petroleum and Nitrogen Fertilizer Segments, including other raw
materials, spare parts, and supplies, are valued at the lower of moving-average cost, which approximates FIFO, or net realizable
value. The cost of inventories includes inbound freight costs. At December 31, 2019 and 2018, inventories related to the
Nitrogen Fertilizer Segment included depreciation of approximately $5 million and $6 million, respectively.
Inventories consisted of the following:
(in millions)
Raw materials
In-process inventories
Finished goods
Parts and supplies
Total Inventories
Property, Plant and Equipment
December 31,
2019
2018
112
$
18
177
83
390
$
101
12
186
81
380
$
$
Additions to property, plant and equipment, including capitalized interest and certain costs allocable to construction and
property purchases, are recorded at cost. Expenditures for improvements that increase economic benefit or returns and/
or extend useful life are capitalized. Depreciation is computed using the straight-line method over the estimated useful lives of
the various classes of depreciable assets. The lives used in computing depreciation for significant asset classes are as follows:
Asset
Land and improvements
Buildings and improvements
Machinery and equipment
Furniture and fixtures
ROU finance leases
Other
Range of Useful
Lives, in Years
15 to 30
20 to 30
5 to 30
3 to 10
1 to 25
5 to 30
Property, plant and equipment consisted of the following:
(in millions)
Machinery and equipment (1)
Buildings and improvements
Land and improvements
Furniture and fixtures
ROU finance leases
Construction in progress
Other
Less: Accumulated depreciation
Total Property, plant and equipment, net
December 31,
2019
2018
$
3,859
$
3,785
87
46
35
27
95
14
4,163
1,827
$
2,336
$
87
43
33
—
102
17
4,067
1,637
2,430
(1)
Includes $29 million in leases classified as finance leases under ASC Topic 842 (Leases) as of December 31, 2019 and $32 million in
leases classified as capital leases under the superseded ASC Topic 840 (Leases) as of December 31, 2018.
December 31, 2019 | 74
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CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Leasehold improvements and assets held under finance leases are depreciated or amortized on the straight-line method over
the shorter of the contractual lease term or the estimated useful life of the asset. Expenditures for routine maintenance and repair
costs are expensed when incurred. Such expenses are reported in Direct operating expenses (exclusive of depreciation and
amortization) in the Company’s Consolidated Statements of Operations.
On May 21, 2019, a subsidiary of CVR Energy sold its crude oil storage terminal located in Cushing, Oklahoma and
related assets (the "Terminal"). As part of this transaction, the Company received cash consideration of $43 million for the
Terminal and related crude oil inventories resulting in a recognition of a gain on sale of $9 million. The carrying value of the
inventory sold as part of this transaction has been presented on a net basis, with the proceeds on sale, within the net cash used in
investing section of the Consolidated Statements of Cash Flows.
Leases
At inception, the Company determines whether an arrangement is a lease and the appropriate lease classification. Operating
leases are included as operating lease right-of-use (“ROU”) assets within Other long-term assets and lease liabilities within
Other current liabilities and Other long-term liabilities on our Consolidated Balance Sheets. Finance leases are included as ROU
finance leases within Property, plant, and equipment, net, and finance lease liabilities within Other current liabilities and Long-
term debt and finance lease obligations, net of current portion on our Consolidated Balance Sheets. Leases with an initial
expected term of 12 months or less are considered short-term and are not recorded on our Consolidated Balance Sheets. The
Company recognizes lease expense for these leases on a straight-line basis over the expected lease term.
ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the
obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the commencement date
based on the present value of minimum lease payments over the lease term. The lease term is modified to reflect options to
extend or terminate the lease when it is reasonably certain we will exercise such option. The depreciable life of assets and
leasehold improvements is limited by the expected lease term, unless there is a transfer of title or purchase option reasonably
certain of exercise, in which case the depreciation policy in the “Property, Plant and Equipment” section above is applicable.
The periodic lease payments are treated as payments of the lease obligation and interest is recorded as interest expense. See
“Recent Accounting Pronouncements - Adoption of Lease Standard” within this Note for a further discussion on the impacts of
adopting the lease standard.
Deferred Financing Costs
Lender and other third-party costs associated with debt issuances are deferred and amortized to interest expense and other
financing costs using the effective-interest method over the life of the debt. Deferred financing costs related to line-of-credit
arrangements are amortized using the straight-line method through the termination date of the facility. The deferred financing
costs are included net within long-term debt and in other long-term assets for the line-of-credit arrangements where no debt
balance exists.
Impairment of Long-Lived Assets
Long-lived assets (excluding goodwill, intangible assets with indefinite lives, and deferred tax assets) are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated
undiscounted future net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its
estimated undiscounted future net cash flows, an impairment charge is recognized for the amount by which the carrying amount
of the asset exceeds their fair value. Assets to be disposed of are reported at the lower of their carrying value or fair value less
cost to sell.
Goodwill represents the excess of the cost of an acquired entity over the fair value of the assets acquired less liabilities
assumed. Intangible assets are assets that lack physical substance (excluding financial assets). Goodwill acquired in a business
combination and intangible assets with indefinite useful lives are not amortized, while intangible assets with finite useful lives
are amortized. Goodwill and intangible assets not subject to amortization are tested for impairment annually or more frequently
if events or changes in circumstances indicate the asset might be impaired. The Company uses November 1 of each year as its
annual valuation date for its goodwill impairment test.
December 31, 2019 | 75
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CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Company performed its annual impairment review of goodwill for 2019, 2018, and 2017 associated with CVR
Partners’ Coffeyville, Kansas Nitrogen Fertilizer (the “Coffeyville Fertilizer Facility”) reporting unit and concluded there were
no impairments. For the period ended December 31, 2019, no events or circumstances were identified which would trigger the
performance of a quantitative analysis after reviewing all qualitative factors impacting the reporting unit including improved
market conditions, financial results, and financial forecasts from those used in the fair value analysis at December 31, 2018. For
the periods ended December 31, 2018 and 2017, the fair value of the Coffeyville Fertilizer Facility reporting unit exceeded its
carrying value by approximately 36% and 12%, respectively, based upon the results of the reporting unit’s goodwill impairment
test.
Loss Contingencies
In the ordinary course of business,
the Company may become party to lawsuits, administrative proceedings, and
governmental investigations, including environmental, regulatory, and other matters. The outcome of these matters cannot
always be predicted accurately, but the Company accrues liabilities for these matters if the Company has determined that it is
probable a loss has been incurred and the loss can be reasonably estimated.
Environmental, Health & Safety (“EHS”) Matters
The Petroleum and Nitrogen Fertilizer Segments are subject to various federal, state, and local EHS rules and regulations.
Liabilities related to EHS matters are recognized when the related costs are probable and can be reasonably estimated.
Estimates of these costs are based upon currently available facts, internal and third-party assessments of contamination,
available remediation technology, site-specific costs, and currently enacted laws and regulations. In reporting environmental
liabilities, no offset is made for potential recoveries. Loss contingency accruals, including those for environmental remediation,
are subject to revision as further information develops or circumstances change and such accruals can take into account the
legal liability of other parties. Environmental expenditures are capitalized at the time of the expenditure when such costs
provide future economic benefits.
Revenue Recognition
The Company recognizes revenue based on consideration specified in contracts or agreements with customers when
performance obligations are satisfied by transferring control over products or services to a customer. The Company’s revenue
recognition patterns are described below by reportable segment:
•
•
Petroleum Segment - The vast majority of Petroleum Segment contracts contain pricing that is based on the market
price for the product at the time of delivery. Obligations to deliver product volumes are typically satisfied and revenue
is recognized when control of the product transfers to customers. Concurrent with the transfer of control, the right to
payment for the delivered product is received, the customer accepts the product, and the customer has significant risks
and rewards of ownership of the product. Payment terms require customers to pay shortly after delivery and do not
contain significant financing components. Any pass-through finished goods delivery costs reimbursed by customers
are reported in Net sales, while an offsetting expense is included in Cost of materials and other. Non-monetary product
exchanges and certain buy/sell transactions which are entered into in the normal course of business are included on a
net cost basis in Cost of materials and other on the Consolidated Statements of Operations.
Nitrogen Fertilizer Segment - Revenue is recognized when our customers receive control of the product. The adoption
of ASC 606 resulted in the recognition of deferred revenue and related receivables, on a gross basis, associated with
contracts that guarantee a price and supply of nitrogen fertilizer products in quantities expected to be delivered in the
normal course of business.
Other considerations - For both segments, excise and other taxes collected from customers and remitted to governmental
authorities are excluded from reported revenues.
December 31, 2019 | 76
Table of Contents
Cost Classifications
CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Cost of materials and other includes cost of crude oil, other feedstocks, blendstocks, purchased refined products, pet coke
expenses, Renewable Identification Number (“RIN”) expenses, derivative gains or losses, and freight and distribution costs.
Direct operating expenses (exclusive of depreciation and amortization) consist primarily of energy and other utility costs, direct
costs of labor, including applicable share-based compensation expense, property taxes, plant-related maintenance services, and
environmental and safety compliance costs, as well as catalyst and chemical costs. Selling, general and administrative expenses
(exclusive of depreciation and amortization) consist primarily of labor and other direct expenses associated with the Company’s
corporate activities,
legal, and other related
administrative functions. For the Company’s Nitrogen Fertilizer Segment, each of these financial statement line items are also
impacted by changes in inventory balances.
information technology, human resources,
including accounting, finance,
Derivatives and Fair Value of Financial Instruments
The Petroleum Segment uses futures contracts, swaps, and forward contracts primarily to reduce exposure to changes in
crude oil and finished goods product prices to provide economic hedges of inventory positions. These derivative instruments do
not qualify as hedges for hedge accounting purposes under ASC Topic 815, Derivatives and Hedging, and accordingly are
recorded at fair value at the end of each reporting period based on quoted market prices. The Nitrogen Fertilizer Segment may
enter into forward contracts with fixed delivery prices to purchase portions of its natural gas requirements. These natural gas
contracts are not treated as derivatives under normal purchase and normal sale exclusions. Accordingly, the fair value of these
contracts are not recorded at the end of each reporting period. Refer to Note 8 (“Derivative Financial Instruments”) for further
discussion of the Company’s derivative activity.
Other financial instruments consisting of cash and cash equivalents, accounts receivable, and accounts payable are carried
at cost, which approximates fair value, as a result of the short-term nature of the instruments. Refer to Note 8 (“Derivative
Financial Instruments”) for further fair value disclosures.
Turnaround Expenses
Turnarounds represent major maintenance activities that require the shutdown of significant parts of a plant to perform
necessary inspection, cleaning, repairs, and replacements of assets. Costs incurred for routine repairs and maintenance or
unplanned outages at our facilities are expensed as incurred. Planned turnaround activities for the Petroleum Segment vary in
frequency dependent on refinery units, but generally occur every four to five years, while the frequency of turnarounds in the
Nitrogen Fertilizer Segment is every two to three years. Further details of each segment’s turnaround expensing method are
discussed below.
Petroleum Segment - Effective January 1, 2019, the Company revised its accounting policy method for the costs of planned
major maintenance activities (turnarounds) specific to the Petroleum Segment from being expensed as incurred (the direct-
expense method) to the deferral method. Under the deferral method, the costs of turnarounds are deferred and amortized on a
straight-line basis over a four-year period of time, which represents the estimated time until the next turnaround occurs. The
new method of accounting for turnarounds is considered preferable as it is more consistent with the accounting policy of our
peer companies and better reflects the economic substance of the benefits earned from turnaround expenditures. The
Consolidated Balance Sheets for the period ended December 31, 2018, the related Consolidated Statements of Operations,
Consolidated Statements of Changes in Equity, and Consolidated Statements of Cash Flows for each of the two years in the
period ended December 31, 2018 have been recast to reflect our new accounting policy. Turnaround costs, and related
accumulated amortization, are included in the Consolidated Balance Sheets as Other long-term assets. The amortization expense
related to turnaround costs is included in Depreciation and amortization in the Consolidated Statements of Operations. During
the years ended December 31, 2019, 2018, and 2017, the Petroleum Segment capitalized $38 million, $8 million, and $87
million, respectively.
Nitrogen Fertilizer Segment - The Nitrogen Fertilizer Segment follows the direct-expense method of accounting for
turnaround activities. Costs associated with these turnaround activities were included in Direct operating expenses (exclusive of
depreciation and amortization) in the Consolidated Statements of Operations. During the years ended December 31, 2019, 2018,
and 2017,
incurred turnaround expenses of $10 million, $6 million, and $3 million,
respectively.
the Nitrogen Fertilizer Segment
December 31, 2019 | 77
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CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following presents the financial statement line items impacted by the Petroleum Segment turnaround accounting
change for each of the periods presented within these consolidated financial statements.
Effect of Turnaround Accounting Change on Consolidated Balance Sheet as of December 31, 2018
(in millions)
Property, plant and equipment, net of accumulated depreciation
Other long-term assets (1)
Total assets
Long-term liabilities:
Deferred income taxes (2)
Total long-term liabilities
Equity:
CVR stockholders’ equity:
Additional paid-in-capital
Retained deficit
Total CVR stockholders’ equity
Noncontrolling interest
Total equity
Total liabilities and equity
December 31, 2018
Effect of
Turnaround
Accounting
Change
As Previously
Reported
As Stated
$
$
$
$
2,445
$
169
3,907
$
362
$
1,543
(15) $
108
93
$
$
18
18
1,473
$
1
$
(226)
1,246
622
1,868
$
3,907
$
39
40
35
75
93
$
2,430
277
4,000
380
1,561
1,474
(187)
1,286
657
1,943
4,000
(1) This represents the capitalized turnaround asset recognized due to the turnaround policy change.
(2) This represents the increase in deferred tax liability due to the recognition of the capitalized turnaround asset.
Effect of Turnaround Accounting on Consolidated Statement of Operations and Consolidated Statement of Cash Flows
for the Years Ended December 31, 2018 and 2017
(in millions)
Consolidated Statement of
Operations
Direct operating expenses
Depreciation and amortization
Income tax expense (benefit)
Net income (loss)
Less: Net income attributable to
noncontrolling interest
Net income attributable to CVR
Energy stockholders
Consolidated Statement of Cash
Flows
Net cash provided by operating
activities
Net cash used by investing
activities
2018
Effect of
Turnaround
Accounting
Change
As Previously
Reported
Year Ended December 31,
As Stated
As Previously
Reported
2017
Effect of
Turnaround
Accounting
Change
As Stated
$
$
$
$
$
523
202
89
$
(6) $
61
(10)
$
517
263
79
598
203
(217)
$
(82) $
44
(3)
411
$
(45) $
366
$
217
$
41
$
122
(15)
107
(18)
13
289
$
(30) $
259
$
235
$
28
$
516
247
(220)
258
(5)
263
620
$
8
$
628
$
168
$
80
$
248
(100) $
(8) $
(108) $
(196) $
(80) $
(276)
December 31, 2019 | 78
Table of Contents
CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Share-Based Compensation
The Company accounts for share-based compensation in accordance with ASC Topic 718, Compensation — Stock
Compensation (“ASC 718”). Currently, all of the Company’s share-based compensation awards, including those issued by CVR
Refining and CVR Partners, are liability-classified and are measured at fair value at the end of each reporting period based on
the applicable closing unit price. Compensation expense will fluctuate based on changes in the applicable share or unit prices
and expense reversals resulting from employee terminations prior to award vesting. Additionally, the Company has issued
certain performance unit awards. The fair value of these performance unit awards is recognized as compensation expense only
if the attainment of the performance conditions is considered probable. Uncertainties involved in this estimate include continued
employment requirements and whether or not the performance conditions will be attained. The performance objectives are set
in accordance with approved levels of the business plan for the fiscal year during the performance cycle and, therefore, are
considered reasonably possible of being achieved. If this assumption proves not to be true and the awards do not vest,
compensation expense recognized during the performance cycle will be reversed. See Note 9 (“Share-Based Compensation”)
for further discussion.
Income Taxes
Income taxes are accounted for utilizing the asset and liability approach. Under this method, deferred tax assets and
liabilities are recognized for the anticipated future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax basis. Deferred amounts are measured using enacted
tax rates expected to apply to taxable income in the year those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the
enactment date. In assessing the realizability of the deferred income tax assets, including net operating loss and state tax credit
carryforwards, management considers whether it is more likely than not that some portion or all of the deferred tax assets will
not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become deductible. Management considers the scheduled
reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this
assessment. Further, the Company recognizes interest expense (income) and penalties on uncertain tax positions and income tax
deficiencies (refunds) in Income tax expense (benefit).
Earnings Per Share
There were no dilutive awards outstanding during the years ended December 31, 2019, 2018, and 2017.
Recent Accounting Pronouncements - Adoption of Lease Standard
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.
2016-02, “Leases” (“ASU 2016-02”), creating a new topic, FASB ASC Topic 842, “Leases” (“Topic 842”), which supersedes
lease requirements in FASB ASC Topic 840, “Leases.” The new standard revises accounting for operating leases by a lessee,
among other changes, and requires a lessee to recognize a liability related to future lease payments and a right-of-use (“ROU”)
asset representing its right to use of the underlying asset for the lease term on the consolidated balance sheets.
We adopted Topic 842 as of January 1, 2019, electing the option to apply the transition provisions at the adoption date
instead of the earliest comparative period presented in the financial statements. In connection with the adoption of Topic 842,
we made the following elections:
•
•
•
•
Only ROU assets and related lease liabilities for leases with an initial term greater than one year were and will be
recognized;
The accounting treatment for existing land easements was carried forward;
Lease and non-lease components were and will not be bifurcated for all of the Company’s asset groups, respectively;
and
The portfolio approach was, and will be, used in the selection of the discount rate used to calculate minimum lease
payments and the related ROU asset and operating lease liability amounts.
The Company’s adoption of Topic 842 resulted in the recognition of additional ROU assets and lease liabilities of
approximately $56 million as of January 1, 2019, in addition to the recognition of a finance lease asset of $26 million with an
December 31, 2019 | 79
Table of Contents
CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
obligation of $23 million. There were no impacts to our consolidated statements of operations or cash flows. See Note 4
(“Leases”) for further discussion.
(in millions)
Current assets:
Prepaid expenses and other current assets
Total currents assets
Property, plant and equipment, net
Other long-term assets
Total assets
Current liabilities:
Other current liabilities
Total current liabilities
Long-term debt and finance lease obligations
Other long-term liabilities
Total long-term liabilities
Equity:
December 31, 2018
As Stated (1)
Effect of Adoption
of Topic 842
January 1, 2019
As Adjusted
$
$
$
$
$
$
76
1,293
2,430
277
4,000
176
496
1,167
14
1,561
(3) (2) $
(3)
26 (3)
56 (4)
79
$
16 (5) $
16
23 (3)
40 (5)
63
73
1,290
2,456
333
4,079
192
512
1,190
54
1,624
Total liabilities and equity
$
4,000
$
79
$
4,079
(1) Represents the retrospectively adjusted balance sheet amounts upon reflection of the turnaround accounting change, for which the Recast
Form 8-K for 2018 was filed on June 12, 2019, prior to the adoption of Topic 842.
(2) Represents lease prepayments reclassified to ROU assets.
(3) The additional $26 million ROU asset and $23 million in lease liability represents a lease with a third-party that met the definition of a
finance lease under ASC 842 as compared to an operating lease under ASC 840.
(4) Represents recognition of initial ROU assets for operating leases, including the reclassification of certain lease prepayments as noted
above.
(5) Represents the initial recognition of lease liabilities.
Recent Accounting Pronouncements - Adoption of Internal-Use Software Standard
In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic
350-40). This ASU better aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is
also a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use
software. Effective January 1, 2019, we adopted this ASU and chose to apply the prospective approach for all implementation
costs incurred after the date of adoption. We evaluated the effects of adopting this new accounting guidance and concluded it
did not have a material impact on the Company’s consolidated financial position or results of operations.
Recent Accounting Pronouncements - New Accounting Standards Issued But Not Yet Implemented
In June 2016, the FASB issued 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, the Company adopted this ASU and evaluated the effects of adopting this new accounting guidance. The adoption will
not have a material impact on the Company’s consolidated financial position or results of operations.
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 and evaluated the effects of adopting this new accounting guidance. The adoption did not have a material
impact on the Company’s disclosures.
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
December 31, 2019 | 80
Table of Contents
CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
and others on a prospective basis. This standard is effective for the company beginning January 1, 2021, with early adoption
permitted. The Company 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 Company’s consolidated financial position
or results of operations.
(3) Equity Method Investments
For each of the following investments, CVR Refining has the ability to exercise influence through its participation in the
management committees, which make all significant decisions. However, since CVR Refining has equal or proportionate
influence over each committee as a joint partner without regard to its economic interest and does not serve as the day-to-day
operator, we have determined that these entities should not be consolidated and have applied the equity method of accounting.
•
Enable South Central Pipeline, LLC (“Enable JV”, formerly Velocity Pipeline Partners, LLC) - CVR Refining owns a
40% interest in Enable JV, which operates a 12-inch 26-mile crude oil pipeline with a capacity of approximately 115,000
barrels per day that is connected to the Wynnewood Refinery. The remaining interest in Enable JV is owned by Enable
Midstream Partners, LP.
• Midway Pipeline, LLC (“Midway JV”) - CVR Refining owns a 50% interest in Midway JV, which operates a 16-inch
100 mile crude oil pipeline with a capacity of approximately 120,000 barrels per day which connects the Coffeyville
Refinery to the Cushing Oklahoma oil hub.
(in millions)
Balance at December 31, 2017
Cash Distributions
Equity income
Balance at December 31, 2018
Cash Distributions
Equity income
Balance at December 31, 2019
$
(4) Leases
Lease Overview
Enable JV
Midway JV
Total
6
(2)
2
6
(4)
4
6
$
77
(5)
6
78
(9)
6
75
$
83
(7)
8
84
(13)
10
81
We lease certain pipelines, storage tanks, railcars, office space, land, and equipment across our refining, fertilizer, and
corporate 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 is 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.
The adoption of Topic 842 impacted our January 1, 2019 consolidated balance sheet, as shown below, only for those line
items impacted.
December 31, 2019 | 81
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CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Effect of Initial Adoption of Topic 842 - January 1, 2019
ROU Assets. Upon initial recognition, our ROU assets for operating and finance leases were comprised of the following:
(in millions)
Pipeline and storage agreements (1)
Railcar leases (2)
Real Estate and other leases (3)
Total ROU assets
January 1, 2019
(initial recognition)
$
$
29
15
35
79
(1)
(2)
(3)
Includes finance leased assets of $1 million as of January 1, 2019.
Includes $14 million of railcar leases recognized by CVR Partners.
Includes finance leased assets of $25 million recognized upon adoption of Topic 842 as of January 1, 2019.
Lease Liabilities. Upon initial recognition, our lease liabilities for operating and finance leases were comprised of the
following:
(in millions)
Current liabilities:
Operating leases
Finance leases
Long-term liabilities:
Operating leases
Finance leases
Total lease liabilities
January 1, 2019
(initial recognition)
$
$
14
2
40
23
79
Balance Sheet Summary as of December 31, 2019
The following tables summarize the right of use asset and lease liability balances for the Company’s operating and finance
leases at December 31, 2019:
(in millions)
Operating Leases:
ROU assets, net
Pipeline and storage
Railcars
Real estate and other
Lease liability
Pipelines and storage
Railcars
Real estate and other
(in millions)
Finance Leases:
ROU assets, net
Pipeline and storage
Real estate and other
Lease liability
Pipelines and storage
Real estate and other
December 31, 2019
$
$
$
$
20
12
16
22
12
14
December 31, 2019
29
24
40
25
December 31, 2019 | 82
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CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Lease Expense Summary for the Year Ended December 31, 2019
We recognize lease expense on a straight-line basis over the lease term. For the year ended December 31, 2019, we
recognized lease expense comprised of the following components:
(in millions)
Operating lease expense
Finance lease expense:
Amortization of ROU
Interest expense on lease liability
December 31, 2019
$
$
12
7
6
Short-term lease expense, recognized within Direct operating expenses (exclusive of depreciation and amortization), was
$8 million for the year ended December 31, 2019.
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 liabilities:
Weighted-average remaining lease term (years)
Operating Leases
Finance Leases
Weighted-average discount rate
Operating Leases
Finance Leases
Maturities of Lease Liabilities
December 31, 2019
January 1, 2019
(initial recognition)
3.7
9.0
5.6 %
8.9 %
4.4
10.3
5.8 %
9.8 %
The following summarizes the remaining minimum lease payments through maturity of the Company’s right-of-use assets
and liabilities at December 31, 2019:
(in millions)
2020
2021
2022
2023
2024
Thereafter
Total lease payments
Less: imputed interest
Total lease liability
Operating Leases
Finance Leases
$
$
$
16
14
11
7
4
—
52
(4)
48
$
11
11
11
10
10
43
96
(31)
65
December 31, 2019 | 83
Table of Contents
CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(5) Other Current Liabilities
Other current liabilities were as follows:
(in millions)
Personnel accruals
Accrued taxes other than income taxes
Deferred revenue
Accrued income taxes
Operating lease liabilities (1)
Accrued interest
Accrued derivatives
Accrued Renewable Fuel Standards (“RFS”) obligation
Share-based compensation
Other accrued expenses and liabilities
Total other current liabilities
December 31,
2019
2018
$
$
47
28
28
24
14
9
7
7
6
9
$
179
$
40
28
69
—
—
9
—
4
5
18
173
(1) The lease standard was adopted on January 1, 2019 on a prospective basis. Therefore, only 2019 disclosures are applicable to be included
within the table above.
(6) Long-Term Debt and Finance Lease Obligations
(in millions)
CVR Partners:
9.25% Senior Secured Notes due June 2023 (1)
6.50% Senior Notes due April 2021
Unamortized discount and debt issuance costs
Total CVR Partners debt
CVR Refining:
6.50% Senior Notes due November 2022 (2)
Finance lease obligations, net of current portion (3)
Unamortized debt issuance cost
Total CVR Refining debt
Total long-term debt and finance lease obligations
December 31,
2019
2018
645
$
$
$
2
(15)
632
500
61
(3)
558
1,190
$
645
2
(18)
629
500
41
(3)
538
1,167
$
$
$
$
(1) This debt was issued at a $16 million discount which is being amortized, as interest expense, over the remaining term of the debt. Debt
issuance costs associated with this debt totaled $9 million.
(2) Debt issuance costs associated with this debt totaled $9 million. On January 29, 2019, the 2022 Notes were amended such that CVR
Energy was included as the primary guarantor, on a senior unsecured basis, of the 2022 Notes. The CVR Energy guarantee is full and
unconditional and joint and several. On January 27, 2020, the Company redeemed all of the 2022 Notes for a redemption price equal to
101.083%, plus accrued and unpaid interest, on the redeemed notes.
(3) Current portion of finance lease obligations was approximately $5 million and $3 million as of December 31, 2019 and 2018,
respectively.
December 31, 2019 | 84
Table of Contents
Credit Facilities
(in millions)
CVR Partners:
CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Asset Based (“AB”) Credit Facility (1)
CVR Refining:
Amended and Restated Asset Based
(“Amended and Restated ABL”)
Credit Facility (2)
Amount
Borrowed as of
December 31,
2019
Outstanding
Letters of
Credit
Available
Capacity as of
December 31,
2019
Total Capacity
Maturity Date
50
—
—
50
September 30, 2021
$
400
$
— $
7
$
393
November 14, 2022
(1) 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.
(2) Loans under the Amended and Restated ABL Credit Facility initially bear interest at an annual rate equal to (i) 1.50% plus LIBOR or (ii)
0.50% plus a base rate, subject to quarterly excess availability.
The Company is in compliance with all covenants of the AB credit facilities, Amended and Restated ABL, and the senior
notes as of December 31, 2019.
CVR Partners
AB Credit Facility - On September 30, 2016, CVR Partners entered into a senior secured asset based revolving credit
facility (the “AB Credit Facility”) with a group of lenders and UBS AG (“UBS”), as administrative agent and collateral agent.
The AB Credit Facility has an aggregate principal amount of availability of up to $50 million with an incremental facility,
which permits an increase in borrowings of up to $25 million in the aggregate subject to additional lender commitments and
certain other conditions. The AB Credit Facility is scheduled to mature on September 30, 2021.
2023 Notes - On June 10, 2016, CVR Partners and CVR Nitrogen Finance Corporation (“CVR Nitrogen Finance”), an
indirect wholly-owned subsidiary of CVR Partners (together the “2023 Notes Issuers”), certain subsidiary guarantors named
therein and Wilmington Trust, National Association, as trustee and as collateral trustee, completed a private offering of $645
million aggregate principal amount of 9.25% Senior Secured Notes due 2023 (the “2023 Notes”). The 2023 Notes mature on
June 15, 2023, unless earlier redeemed or repurchased by the issuers. Interest on the 2023 Notes is payable semi-annually in
arrears on June 15 and December 15 of each year. The 2023 Notes are guaranteed on a senior secured basis by all of the
Nitrogen Fertilizer Partnership’s existing subsidiaries.
On or after June 15, 2019, the 2023 Notes Issuers may on any one or more occasions, redeem all or part of the 2023 Notes
at the redemption prices set forth below expressed as a percentage of the principal amount of the 2023 Notes plus accrued and
unpaid interest to the applicable redemption date.
12-month period beginning June 15,
2019
2020
2021 and thereafter
Percentage
104.625%
102.313%
100.000%
The 2023 Notes contain customary covenants for a financing of this type that, among other things, restrict CVR Partners’
ability and the ability of certain of its subsidiaries to: (i) sell assets; (ii) pay distributions on, redeem or repurchase the Nitrogen
Fertilizer Partnership’s units or redeem or repurchase its subordinated debt; (iii) make investments; (iv) incur or guarantee
additional indebtedness or issue preferred units; (v) create or incur certain liens; (vi) enter into agreements that restrict
distributions or other payments from the CVR Partners’ restricted subsidiaries to CVR Partners; (vii) consolidate, merge or
transfer all or substantially all of the CVR Partners’ assets; (viii) engage in transactions with affiliates; and (ix) create
unrestricted subsidiaries. In addition, the indenture contains customary events of default, the occurrence of which would result
in or permit the trustee or the holders of at least 25% of the 2023 Notes to cause the acceleration of the 2023 Notes, in addition
to the pursuit of other available remedies.
December 31, 2019 | 85
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CVR Refining
CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Amended and Restated ABL Credit Facility - On November 14, 2017, CRLLC, CVR Refining, its wholly-owned
subsidiary, CVR Refining, LLC (“Refining LLC”) and each of the operating subsidiaries of Refining LLC (collectively, the
“Credit Parties”) entered into Amendment No. 1 to the Amended and Restated ABL Credit Agreement (the “Amendment”) with
a group of lenders and Wells Fargo Bank, National Association (“Wells Fargo”), as administrative agent and collateral agent.
The Amended and Restated ABL is a $400 million asset-based revolving credit facility, with sub-limits for letters of credit and
swingline loans of $60 million and $40 million, respectively. The Amended and Restated ABL also includes a $200 million
uncommitted incremental facility.
2022 Notes - On October 23, 2012, CVR Refining, LLC (“Refining LLC”) and Coffeyville Finance Inc. (“Coffeyville
Finance”) completed a private offering of $500 million aggregate principal amount of 6.50% Second Lien Senior Notes due
2022 (the “2022 Notes”). The 2022 Notes mature on November 1, 2022, unless earlier redeemed or repurchased by the issuers.
Interest is payable on the 2022 Notes semi-annually on May 1 and November 1 of each year, commencing on May 1, 2013. The
2022 Notes are unsecured and fully and unconditionally guaranteed by CVI, CVR Refining and each of Refining LLC’s
existing domestic subsidiaries (other than the co-issuer, Coffeyville Finance) on a joint and several basis. CVR Refining has no
independent assets or operations and Refining LLC is a 100% owned finance subsidiary of CVR Refining. On January 29,
2019, the Company, and certain of the Company’s subsidiaries, executed a full and unconditional guarantee of the 2022 Notes.
On January 27, 2020,
the Company redeemed all of the outstanding 2022 Notes and settled accrued interest of
approximately $8 million through the date of redemption. The redeemed notes were repurchased for approximately
$505 million, or 101.083% of par value. Previously deferred financing charges related to the 2022 Notes totaled approximately
$3 million. As a result of this transaction, the Company will recognize a $8 million loss on extinguishment of debt in the first
quarter of 2020, which includes the total premiums paid of $5 million and the write-off of previously deferred financing charges
of $3 million.
CVR Energy
2025 Notes and 2028 Notes - On January 27, 2020, CVR Energy completed a private offering of $600 million aggregate
principal amount of 5.25% Senior Unsecured Notes due 2025 (the “2025 Notes”) and $400 million aggregate principal amount
of 5.75% Senior Unsecured Notes due 2028 (the “2028 Notes” and, collectively with the 2025 Notes, the “Notes”). Interest on
the Notes is payable semi-annually in arrears on February 15 and August 15 each year, commencing on August 15, 2020. The
2025 Notes mature on February 15, 2025, unless earlier redeemed or repurchased by the issuers. The 2028 Notes mature on
February 15, 2028, unless earlier redeemed or repurchased by the issuers. The Notes are jointly and severally guaranteed on a
senior unsecured basis by the wholly-owned subsidiaries of CVR Energy with the exception of CVR Partners and its
subsidiaries and certain immaterial wholly-owned subsidiaries of CVR Energy.
In relation to the issuance of the Notes, the Company received $993 million of net cash proceeds, net of underwriting fees
and other third-party fees and expenses associated with the offering. The debt issuance costs of the Notes totaled approximately
$7 million and are being amortized over the terms of the respective notes as interest expense using the effective-interest
amortization method.
On or after February 15, 2022 and February 15, 2023, we may on any one or more occasions, redeem all or part of the 2025
Notes and 2028 Notes, respectively, at the redemption prices set forth below expressed as a percentage of the principal amount
of the respective notes, plus accrued and unpaid interest to the applicable redemption date.
2025 Notes
2028 Notes
12-month period beginning February 15,
Percentage
12-month period beginning February 15,
Percentage
2022
2023
2024 and thereafter
102.625%
101.313%
100.000%
2023
2024
2025
2026 and thereafter
102.875%
101.917%
100.958%
100.000%
The indenture governing the Notes imposes covenants that will, among other things, limit our ability and the ability of our
restricted subsidiaries to: (i) incur additional indebtedness or issue certain disqualified equity; (ii) create liens on certain assets
December 31, 2019 | 86
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
to secure debt; (iii) pay dividends or make other equity distributions; (iv) purchase or redeem capital stock; (v) make certain
investments; (vi) sell assets; (vii) agree to certain restrictions on the ability of restricted subsidiaries to make distributions,
loans, or other asset transfers to us; (viii) consolidate, merge, sell, or otherwise dispose of all or substantially all of our assets;
(ix) engage in transactions with affiliates; and (x) designate our restricted subsidiaries as unrestricted subsidiaries. In addition,
the indenture contains customary events of default, the occurrence of which would result in or permit the trustee or the holders
of at least 25% of the 2025 Notes and 2028 Notes to cause, amongst other available remedies, the acceleration of the respective
notes.
Credit Agreement - On January 29, 2019, the Company entered into a credit agreement (the “Credit Agreement”) with
Jefferies Finance LLC to provide a term loan credit facility with a maturity date of March 10, 2019. The borrowings under the
Credit Agreement of $105 million were used to fund a portion of the CVRR Unit Purchase. All amounts were repaid on
February 11, 2019. As the original maturity was less than three months from the issuance date, the borrowings and repayments
under the credit agreement qualified for net reporting on the Consolidated Statements of Cash Flows.
(7) Revenue
The following tables present the Company’s revenue disaggregated by major product. The following tables include a
reconciliation of the disaggregated revenue by product and other revenue components for the Company’s reportable segments.
(in millions)
Gasoline
Distillates (1)
Ammonia
UAN
Other urea products
Freight revenue
Other (2)
Revenue from product sales
Crude oil sales
Other revenue (2)
Total revenue
Year Ended December 31, 2019
Petroleum
Nitrogen
Fertilizer
Other /
Eliminations
Consolidated
$
3,050
$
— $
— $
2,705
—
—
—
23
129
5,907
58
3
—
94
251
18
33
8
404
—
—
—
—
—
—
—
(8)
(8)
—
—
3,050
2,705
94
251
18
56
129
6,303
58
3
$
5,968
$
404
$
(8) $
6,364
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CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(in millions)
Gasoline
Distillates (1)
Ammonia
UAN
Other urea products
Freight revenue
Other (2)
Revenue from product sales
Crude oil sales
Other revenue (2)
Total revenue
Year Ended December 31, 2018
Petroleum
Nitrogen
Fertilizer
Other /
Eliminations
Consolidated
$
3,383
$
— $
— $
3,083
—
—
—
23
190
6,679
96
5
—
66
222
21
34
8
351
—
—
—
—
—
—
—
(7)
(7)
—
—
3,383
3,083
66
222
21
57
191
7,023
96
5
$
6,780
$
351
$
(7) $
7,124
(1) Distillates consist primarily of diesel fuel, kerosene, and jet fuel.
(2) Other revenue consists primarily of feedstock and asphalt sales and Cushing, OK storage tank lease revenue. See Note 2 (“Summary of
Significant Accounting Policies”) for further discussion on the Cushing, OK storage tanks.
Petroleum Segment
The Petroleum Segment’s revenue from product sales is recorded upon delivery to customers, which is the point at which
title is transferred and the customer has assumed the risk of loss. This generally takes place as product passes into the pipeline,
as a product transfer order occurs within a pipeline system, or as product enters equipment or locations supplied or designated
by the customer. Qualifying excise and other taxes collected from the Petroleum Segment’s customers and remitted to
governmental authorities are not included in reported revenues.
Many of the Petroleum Segment’s contracts have index-based pricing which is considered variable consideration that
should be estimated in determining the transaction price. The Petroleum Segment determined that it does not need to estimate
the variable consideration because the uncertainty related to the consideration is resolved on the pricing date or the date when
the product is delivered.
The Petroleum Segment may incur broker commissions or transportation costs prior to product transfer on some of its
sales. The Petroleum Segment expenses these broker costs, since the contract durations are less than a year. Transportation costs
are accounted for as fulfillment costs and are expensed as incurred since they do not meet the requirement for capitalization.
The Petroleum Segment’s contracts with its customers state the terms of the sale, including the description, quantity, and
price of each product sold. Depending on the product sold, payment from customers is generally due in full within 2 to 32 days
of product delivery or invoice date. The Petroleum Segment generally provides no warranty other than the implicit promise that
goods delivered are free of liens and encumbrances and meet the agreed upon specification. The Petroleum Segment has
determined that product returns or refunds are very rare and will account for them as they occur.
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. An offsetting expense is included in Cost of
materials and other.
Nitrogen Fertilizer Segment
The Nitrogen Fertilizer Segment sells its products on a wholesale basis under a contract or by purchase order. The Nitrogen
Fertilizer Segment’s contracts with customers generally contain fixed pricing and most have terms of less than one year. The
Nitrogen Fertilizer Segment 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
December 31, 2019 | 88
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CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
at one of the Nitrogen Fertilizer Segment’s manufacturing facilities, at one of the Nitrogen Fertilizer Segment’s off-site loading
facilities, or at the customer’s designated facility. Freight revenue recognized by the Nitrogen Fertilizer Segment 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 excise and other taxes collected from the Nitrogen
Fertilizer Segment’s 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 Nitrogen Fertilizer Segment 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 Nitrogen
Fertilizer Segment does not record a specific warranty reserve or consider activities related to such warranty, if any, to be a
separate performance obligation.
The Nitrogen Fertilizer Segment has an immaterial amount of variable consideration for contracts with an original duration
of less than a year. A small portion of the Nitrogen Fertilizer Segment’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
Nitrogen Fertilizer Segment’s contracts do not contain a significant financing component.
The Nitrogen Fertilizer Segment 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, consistent with prior accounting practice.
Remaining performance obligations
As of December 31, 2019, the Nitrogen Fertilizer Segment had approximately $9 million of remaining performance
obligations for contracts with an original expected duration of more than one year. The Nitrogen Fertilizer Segment expects to
recognize approximately $4 million of these performance obligations as revenue by the end of 2020, an additional $3 million
by 2021, and the remaining balance thereafter.
Contract balances
The Nitrogen Fertilizer Segment’s deferred revenue is a contract liability that primarily relates to fertilizer sales contracts
requiring customer prepayment prior to product delivery to guarantee a price and supply of nitrogen fertilizer. Deferred revenue
is recorded at the point in time in which a prepaid contract is legally enforceable and the associated right to consideration is
unconditional prior to transferring product to the customer. An associated receivable is recorded for uncollected prepaid
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. At December 31, 2019, $19 million of the
deferred revenue balance pertained to prepaid contracts where the associated receivable was recognized as it had not yet been
collected by the Nitrogen Fertilizer Segment.
A summary of the Nitrogen Fertilizer Segment’s deferred revenue activity during the year ended December 31, 2019 is
presented below:
(in millions)
Balance at December 31, 2018
Add:
New prepay contracts entered into during the period (1)
Less:
Revenue recognized that was included in the contract liability balance at the beginning of the period
Revenue recognized related to contracts entered into during the period
Other changes
Balance at December 31, 2019
(1)
Includes $27 million where the payment associated with prepaid contracts was collected.
$
$
69
46
68
18
1
28
December 31, 2019 | 89
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Major Customers
CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Petroleum Segment - The Petroleum Segment has two customers who comprise 25%, 25%, and 27% of petroleum net sales
for the years ended December 31, 2019, 2018, and 2017, respectively.
Nitrogen Fertilizer Segment - The Nitrogen Fertilizer Segment has two customers who comprised 28%, 20%, and 16% of
nitrogen fertilizer net sales for the years ended December 31, 2019, 2018, and 2017, respectively.
(8) Derivative Financial Instruments
Our segments are subject to price fluctuations caused by supply conditions, weather, economic conditions, interest rate
fluctuations, and other factors. To manage price risk on crude oil and other inventories and to fix margins on certain future
production, the Petroleum Segment from time to time enters into various commodity derivative transactions. On a regular basis,
the Company enters into commodity contracts with counterparties for the purchases or sale of crude oil, blendstocks, various
finished products, and RINs. The contracts usually qualify for the normal purchase normal sale exception and follow the accrual
method of accounting. All other derivative instruments are recorded at fair value using mark-to-market accounting on a periodic
basis utilizing third-party pricing.
The Petroleum Segment holds derivative instruments, such as exchange-traded crude oil futures and certain over-the-
counter forward swap agreements, which it believes provide an economic hedge on future transactions, but such instruments are
not designated as hedges under GAAP. There are no premiums paid or received at inception of the derivative contracts or upon
settlement. The Petroleum Segment may enter into forward purchase or sale contracts associated with RINs. As of
December 31, 2019, the Petroleum Segment had open fixed-price commitments to purchase 20 million RINs.
Commodity derivatives include commodity swaps and forward purchase and sale commitments. There were no outstanding
commodity swap positions as of December 31, 2019 and 2018. There were approximately 3 million and 1 million in forward
purchase commitments as of December 31, 2019 and 2018, respectively, and 1 million and 1 million in forward sale
commitments as of December 31, 2019 and 2018, respectively.
The following outlines the gains (losses) recognized on the Company’s derivative activities, all of which are recorded in
Cost of materials and other on the Consolidated Statements of Operations:
Gain (Loss) on Derivatives
(in millions)
Forward purchases and sales, net
Swaps
Futures
Total gain (loss) on derivatives, net
Year Ended December 31,
2019
2018
2017
$
$
20
—
(1)
19
$
$
103
44
(1)
146
$
$
(26)
(43)
(1)
(70)
The following outlines our open commodity derivative instruments, which are classified as Prepaid expenses and other
current assets and Other current liabilities on the Consolidated Balance Sheets:
Open Commodity Derivative Instruments
(in millions of barrels)
Forward Contracts:
Canadian crude oil
Year Ended December 31,
2019
2018
5
2
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CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Offsetting Assets and Liabilities
The Company elected to offset the fair value amounts recognized for multiple derivative contracts executed with the same
counterparty. These amounts are recognized as current assets and current liabilities within the Prepaid expenses and other
current assets and Other current liabilities financial statement line items, respectively, in the Consolidated Balance Sheets as
follows:
Derivative Assets
December 31,
Derivative Liabilities
December 31,
(in millions)
Commodity Derivatives
Less: Counterparty Netting
Total Net Fair Value of Derivatives
2019
2018
2019
2018
$
$
3
$
(3)
— $
8
(1)
7
$
$
(11) $
3
(8) $
1
(1)
—
In accordance with FASB ASC Topic 820 — Fair Value Measurements and Disclosures (“ASC 820”), the Company
utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and
other relevant information generated by market transactions involving identical or comparable assets, liabilities, or a group of
assets or liabilities, such as a business.
ASC 820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into
three broad levels. The following is a brief description of those three levels:
•
•
•
Level 1 — Quoted prices in active markets for identical assets or liabilities
Level 2 — Other significant observable inputs (including quoted prices in active markets for similar assets or
liabilities)
Level 3 — Significant unobservable inputs (including the Company’s own assumptions in determining the fair value)
The following table sets forth the assets and liabilities measured or disclosed at fair value on a recurring basis, by input
level, as of December 31, 2019 and 2018:
(in millions)
Location and Description
Other current liabilities (commodity derivatives)
Other current liabilities (RFS obligation)
Long-term debt
Total Liabilities
(In millions)
Location and Description
Cash equivalents
Other current assets (derivative agreements)
Total Assets
Other current liabilities (RFS obligation)
Long-term debt
Total Liabilities
Level 1
Level 2
Level 3
Total
December 31, 2019
— $
(8) $
— $
—
—
(7)
(1,180)
—
—
— $
(1,195) $
— $
(8)
(7)
(1,180)
(1,195)
Level 1
Level 2
Level 3
Total
December 31, 2018
50
—
50
—
—
$
— $
— $
7
7
(2)
(1,163)
—
—
—
—
— $
(1,165) $
— $
50
7
57
(2)
(1,163)
(1,165)
$
$
$
$
As of December 31, 2019 and 2018, the only financial assets and liabilities that are measured at fair value on a recurring
basis are the Company’s cash equivalents, derivative instruments, and the RFS obligation. The Petroleum Segment’s
commodity derivative contracts and RFS obligation, which use fair value measurements and are valued using broker quoted
December 31, 2019 | 91
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CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
market prices of similar instruments, are considered Level 2 inputs. The Company had no transfers of assets or liabilities
between any of the above levels during the year ended December 31, 2019.
(9) Share-Based Compensation
Overview
CVR Energy, CVR Refining, and CVR Partners all have a Long-Term Incentive Plans (collectively, the “LTIPs”) which
permit the granting of options, stock and unit appreciation rights (“SARs”), restricted shares, restricted stock units, phantom
units, unit awards, substitute awards, other unit-based awards, cash awards, dividend and distribution equivalent rights, share
awards, and performance awards (including performance share units, performance units, and performance-based restricted
stock). Individuals who are eligible to receive awards and grants under the LTIPs include the employees, officers, and directors
of the Company, CVR Refining, and CVR Partners. The Company had 6.8 million shares or units, as applicable, available for
future grants under our plans at December 31, 2019.
Incentive and Phantom Unit Awards
Incentive and phantom unit awards have been granted to officers, employees, and directors (collectively, the “Share-Based
Awards”) under the LTIPs. As a result, Share-Based Awards that reflect the value and dividend or distributions of CVR Energy,
CVR Refining, or CVR Partners have been granted and remain outstanding as of December 31, 2019. Each Share-Based Award
and the related dividend or distribution equivalent right represents the right to receive, upon vesting, a cash payment equal to
(i) the average fair market value of one share or unit, as applicable, in accordance with the award agreement, plus (ii) the per
share or unit cash value of all dividends or distributions declared and paid, as applicable, from the grant date through the
vesting date. The Share-Based Awards are generally graded-vesting awards, which are expected to vest over three years with
one-third of the award vesting each year the grantee remains employed by the Company or its subsidiaries. Compensation
expense is recognized ratably, based on service provided to the Company and its subsidiaries, with the amount recognized
fluctuating as a result of the Share-Based Awards being re-measured to fair value at the end of each reporting period due to
their liability-award classification.
A summary of activity for the Company’s Share-Based Awards for the year ended December 31, 2019 is presented below:
Shares or Units
Weighted-Average
Grant-Date Fair Value
(per share or unit)
Aggregate Intrinsic
Value
(in millions)
Non-vested at December 31, 2018
2,432,073
$
12.13
$
Granted
Vested
Forfeited
1,317,661
(1,142,021)
(154,026)
16.21
10.98
11.94
Non-vested at December 31, 2019
2,453,687
$
14.88
$
24
33
Performance Unit Awards
Pursuant to an employment agreement with the Company’s current chief executive officer, the Company entered into two
performance award agreements on November 1, 2017. In connection with the performance period of January 1, 2018 to
December 31, 2018, a performance award was granted with a target value of $1.5 million (the “2018 CEO Performance
Award”). The payout of $1.9 million, paid in February 2019, under the 2018 CEO Performance Award was based on the
Company’s performance against certain safety, operating, and financial measures. Additionally, the Company entered into a
performance award agreement (the “CEO Performance Award”). The CEO Performance Award represents the right to receive
upon vesting, a cash payment equal to $10 million if the average closing price of the Company’s common stock over the 30-
trading day period from January 4, 2022 to February 15, 2022 is equal to or greater than $60 per share.
December 31, 2019 | 92
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CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Compensation Expense
A summary of total share based compensation expense and unrecognized compensation expense related to the Share-Based
Awards and the Company’s performance awards, the amounts allocated to each of the Company’s segments, and the amounts
that were not allocated to segments during the years ended December 31, 2019, 2018, and 2017 is presented below:
(in millions)
Share based awards
Incentive Units
Phantom Units
Performance awards
CEO Performance Award
2018 CEO Performance Award
Former CEO Performance Award
Total expense
$
$
Expenses
For the year ended December 31,
Unrecognized Expense
At December 31, 2019
2019
2018
2017
Amount
Weighted-
Average
Remaining Years
12
5
—
—
—
17
$
$
$
4
8
2
2
—
16
$
$
7
8
—
—
4
19
$
22
5
7
—
—
34
2.4
2.3
2.0
0.0
0.0
The total tax benefit recognized during the years ended December 31, 2019, 2018, and 2017 related to compensation
expense was $4 million, $4 million and $7 million respectively. For the years ended December 31, 2019, 2018, and 2017, the
Company paid cash of $23 million, $17 million, and $16 million, respectively, to settle liability-classified awards upon vesting.
Other Benefit Plans
The Company sponsors and administers two defined-contribution 401(k) plans, the CVR Energy 401(k) Plan and the CVR
Energy 401(k) Plan for Represented Employees (the “Plans”), in which the Company’s employees may participate. Participants
in the Plans may elect to contribute a designated percentage of their eligible compensation in accordance with the Plans, subject
to statutory limits. The Company provides a matching contribution of 100% of the first 6% of eligible compensation
contributed by participants. Participants in both Plans are immediately vested in their individual contributions. The Plans
provide for a three-year vesting schedule for the Company’s matching contributions and contain a provision to count service
with predecessor organizations. The Company’s contributions under the Plans were approximately $9 million, $9 million, and
$9 million for the years ended December 31, 2019, 2018, and 2017, respectively.
(10) Income Taxes
Tax Allocation Agreement
Prior to the CVRR Unit Exchange, CVR Energy was a member of the consolidated federal tax group of AEP, an affiliate of
IEP, and party to a tax allocation agreement with AEP (the “Tax Allocation Agreement”). The Tax Allocation Agreement
provides that AEP will pay all consolidated federal income taxes on behalf of the consolidated tax group. As a result, CVR
Energy was required to make payments to AEP in an amount equal to the tax liability, if any, that it would have had paid if it
were to file as a consolidated group separate and apart from AEP.
Following the CVRR Unit Exchange, IEP and affiliates’ ownership of CVR Energy was reduced below 80% and, since that
time, CVR Energy is no longer eligible to file as a member of the AEP consolidated federal income tax group. Beginning with
the tax period after the exchange, CVR Energy became the parent of a new consolidated group for U.S. federal income tax
purposes and will file and pay its federal income tax obligations directly to the IRS. Pursuant to the terms of the Tax Allocation
Agreement, however, CVR Energy may be required to make payments in respect of taxes owed by AEP for periods prior to the
exchange. Similar principles may apply for state or local income tax purposes where CVR Energy filed combined, consolidated
or unitary tax returns with AEP. AEP has been notified by the IRS that its income tax return for the period ended December 31,
2017 will be examined.
December 31, 2019 | 93
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CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
As of December 31, 2019 and 2018, the Company recognized a nominal payable and $4 million receivable for income
taxes due to or from AEP. The receivable is recognized as Prepaid expenses and other current assets in the Consolidated
Balance Sheets. As of December 31, 2019 and 2018, the Company’s Consolidated Balance Sheets also reflected a payable of
$20 million to and receivable of $12 million from, respectively, the IRS and certain state jurisdictions.
Income Tax Expense (Benefit)
Income tax expense (benefit) is comprised of the following:
(in millions)
Current:
Federal
State
Total current
Deferred:
Federal
State
Total deferred
Year Ended December 31,
2019
2018
2017
$
$
96
5
101
3
25
28
31
$
(7)
24
39
16
55
79
$
(1)
(22)
(23)
(186)
(11)
(197)
(220)
Total income tax expense (benefit)
$
129
$
The following is a reconciliation of total income tax expense (benefit) to income tax expense (benefit) computed by
applying the statutory federal income tax rate to pretax income:
Year Ended December 31,
2019
2018
2017
(in millions)
Tax computed at federal statutory rate
State income taxes, net of federal tax benefit
State tax incentives, net of federal tax expense
Noncontrolling interest
Other, net
Adjustment to deferred tax assets and liabilities for enacted change in
federal tax rate (1)
$
103
$
29
(4)
4
(3)
—
Total income tax expense (benefit)
$
129
$
94
12
(4)
(23)
—
—
79
$
$
14
(14)
(7)
1
—
(214)
(220)
(1) The income tax benefit for the year ended December 31, 2017 was favorably impacted as a result of the Tax Cuts and Jobs Act
legislation that was signed into law in December 2017, reducing the federal income tax rate from 35% to 21% beginning in 2018. As a
result, the Company’s net deferred tax liabilities at December 31, 2017 were remeasured to reflect the lower tax rate in effect for the
years in which the deferred tax assets and liabilities will be realized.
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CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Deferred Tax Assets and Liabilities
The income tax effect of temporary differences that give rise to the Deferred income tax assets and Deferred income tax
liabilities at December 31, 2019 and 2018 are as follows:
(in millions)
Deferred income tax assets:
State tax credit carryforward, net
Total gross deferred income tax assets
Deferred income tax liabilities:
Investment in CVR Partners
Investment in CVR Refining
Other
Total gross deferred income tax liabilities
Net deferred income tax liabilities
December 31,
2019
2018
$
$
7
7
(61)
(341)
(1)
(403)
$
(396) $
11
11
(59)
(327)
(5)
(391)
(380)
Although realization is not assured, management believes that it is more likely than not that all of the Deferred income tax
assets will be realized, and therefore, no valuation allowance was recognized as of December 31, 2019 and 2018.
As of December 31, 2019, CVR Energy has state tax credits of approximately $16 million, which are available to reduce
future state income taxes. These credits can be carried forward indefinitely.
Uncertain Tax Positions
A reconciliation of unrecognized tax benefits is as follows:
(in millions)
Balance, beginning of year
Increase in current year tax positions (interest expense)
Reductions related to expirations from statute of limitations
Balance, end of year
Year Ended December 31,
2019
2018
2017
$
$
$
23
2
(3)
22
$
$
29
—
(6)
23
$
44
—
(15)
29
Included in the balance of unrecognized tax benefits as of December 31, 2019, 2018, and 2017 are $15 million, $18
million, and $23 million, respectively, of tax benefits that, if recognized, would affect the effective tax rate. Approximately $5
million, $6 million, and $15 million of the unrecognized tax positions relating to state income tax credits were recognized in
2019, 2018, and 2017, respectively, as a result of expirations from statute of limitations. Additionally, the Company believes
that it is reasonably possible that approximately $3 million of its unrecognized tax positions related to state income tax credits
may be recognized by the end of 2020 as a result of the expiration of statute of limitations. Approximately $10 million and $22
million of unrecognized tax benefits were netted with Deferred income tax asset carryforwards as of December 31, 2019 and
2018, respectively. The remaining unrecognized tax benefits are included in Other long-term liabilities in the Consolidated
Balance Sheets.
CVR Energy recognized nominal interest benefit and nominal liability for interest as of December 31, 2019, interest benefit
of approximately $1 million and a nominal liability for interest as of December 31, 2018, and interest expense of approximately
$7 million and recognized a liability for interest of approximately $1 million as of December 31, 2017. No penalties were
recognized during 2019, 2018, or 2017.
At December 31, 2019, the Company’s tax filings are generally open to examination in the United States for the tax years
ended December 31, 2016 through December 31, 2018 and in various individual states for the tax years ended December 31,
2015 through December 31, 2018.
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CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(11) Commitments and Contingencies
Supply Commitments
The minimum required payments for unconditional purchase obligations are as follows:
Year Ended December 31,
(in millions)
2020
2021
2022
2023
2024
Thereafter
Unconditional
Purchase
Obligations
$
$
95
80
77
75
71
375
773
Supply Commitments - The Company is a party to various supply agreements with both related and third parties which
commit the Company to purchase minimum volumes of crude oil, hydrogen, oxygen, nitrogen, pet coke, and natural gas to run
its facilities’ operations. For the years ended December 31, 2019, 2018, and 2017, amounts purchased under these supply
agreements totaled approximately $167 million, $214 million, and $209 million, respectively.
Crude Oil Supply Agreement
On August 31, 2012, an indirect, wholly-owned subsidiary of CVR Refining entered into an Amended and Restated Crude
Oil Supply Agreement (as amended, the “Crude Oil Supply Agreement”) with Vitol Inc. (“Vitol”). Under the Crude Oil Supply
Agreement, Vitol supplies the Petroleum Segment with crude oil and intermediation logistics helping to reduce the amount of
inventory held at a certain locations and mitigate crude oil pricing risk. Volumes contracted under the Crude Oil Supply
Agreement, as a percentage of the total crude oil purchases (in barrels), was approximately 36%, 42% and 55% for the years
ended December 31, 2019, 2018, and 2017, respectively. The Crude Oil Supply Agreement, which currently extends through
December 31, 2020, automatically renews for successive one-year terms (each such term, a “Renewal Term”) unless either
party provides the other with notice of nonrenewal at least 180 days prior to expiration of any Renewal Term.
Contingencies
CVRR Unit Purchase - During 2019, the Company, CVR Refining and its general partner, CVR Refining Holdings, IEP,
and certain directors and affiliates have been named in at least one of nine lawsuits filed in the Court of Chancery of the State of
Delaware by purported former unitholders of CVR Refining, on behalf of themselves and an alleged class of similarly situated
unitholders (the “Call Option Lawsuits”). The Call Option Lawsuits primarily allege breach of contract, tortious interference
and breach of the implied covenant of good faith and fair dealing and seek monetary damages and attorneys’ fees, among other
remedies, relating to the Company’s exercise of the call option under the CVR Refining Amended and Restated Agreement of
Limited Partnership assigned to it by CVR Refining’s general partner. In January 2020, the court dismissed CVR Holdings and
certain former directors of CVR Refining’s general partner from the Call Option Lawsuits, although permitted some or all of
the claims to proceed against each remaining defendant. The Company believes the Call Option Lawsuits are without merit and
intends to vigorously defend against them. The Call Option Lawsuits remain in the early stages of litigation. Accordingly the
Company cannot determine at this time the outcome of the Call Option Lawsuits, including whether the outcome of this matter
would have a material impact on the Company’s financial position, results of operations, or cash flows.
Property Tax Matter - In September 2018, the Kansas Court of Appeals upheld property tax determinations by the Kansas
Board of Tax Appeals in connection with Coffeyville Resources Nitrogen Fertilizer, LLC’s (“CRNF”) dispute with
Montgomery County, Kansas (the “County”) over prior year property tax payments as previously disclosed. On October 29,
2018, the County petitioned the Kansas Supreme Court to review the Court of Appeals’ determination. Subsequent briefs were
filed by CRNF and the County. In April 2019, CRNF and the County executed an agreement which the County agrees to
withdraw its petition to the Kansas Supreme Court and CRNF is expected to recover approximately $8 million through
favorable property tax assessments from 2019 through 2028, subject to the terms of the settlement agreement.
December 31, 2019 | 96
Table of Contents
CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Wynnewood Small Refinery Exemption - During 2019, Wynnewood Refining Company, LLC (“WRC”) intervened in a
lawsuit filed by four ethanol and biofuels trade associations against the EPA, claiming the EPA exceeded its authority in
granting Wynnewood’s 2017 small refinery exemption (“SRE”) under the RFS program under the CAA, as well as the SREs of
two other unrelated refineries. In January 2020, the 10th Circuit Court of Appeals vacated the three SREs and remanded the
matter to the EPA for further proceedings, holding, in part, that the “extension” language in the CAA requires a small refinery
to have received an SRE continuously in every year since inception of the program to be eligible. As the EPA has not yet acted
following remand by the court, and as Wynnewood intends to appeal this ruling, we cannot currently estimate the outcome,
impact, or timing of the resolution of this matter.
Environmental, Health, and Safety (“EHS”) Matters
Clean Air Act Matter - On August 21, 2018, Coffeyville Resources Refining and Marketing (“CRRM”), a subsidiary of
CVR Refining, received a letter from the United States Department of Justice (“DOJ”) on behalf of the EPA and Kansas
Department of Health and Environment (“KDHE”) alleging violations of the Clean Air Act (“CAA”) and a 2012 Consent
Decree between CRRM, the United States (on behalf of EPA), and KDHE at CRRM’s Coffeyville refinery. In September 2018,
CRRM executed a tolling agreement with the DOJ and KDHE extending time for negotiation regarding the agencies’
allegations through March 2019, and this tolling agreement was extended through April 30, 2020. At this time the Company
cannot reasonably estimate the potential penalties, costs, fines or other expenditures that may result from this matter or any
subsequent enforcement or litigation relating thereto and, therefore, the Company cannot determine if the ultimate outcome of
this matter will have a material impact on the Company’s financial position, results of operations or cash flows.
Renewable Fuel Standards - The Company’s Petroleum Segment is subject to the RFS of the Environmental Protection
Agency (“EPA”) that require refiners to either blend renewable fuels in with their transportation fuels or purchase renewable
fuel credits, known as RINs, in lieu of blending. The Petroleum Segment is not able to blend the substantial majority of its
transportation fuels and has to purchase RINs on the open market, and may have to obtain waiver credits for cellulosic biofuels
from the EPA, in order to comply with the RFS.
The Company recognized an expense of approximately $43 million, $60 million, and $249 million for the years ended
December 31, 2019, 2018, and 2017, respectively, for the Petroleum Segment’s compliance with the RFS. The recognized
amounts are included within Cost of materials and other in the Consolidated Statements of Operations. The Company’s costs to
comply with the RFS include the purchased cost of RINs acquired, the impact of recognizing the Petroleum Segment’s
uncommitted biofuel blending obligation at fair value based on market prices at each reporting date, and the valuation change of
RINs acquired in excess of its RFS obligation as of the reporting date. During the year ended December 31, 2019, the
Company’s cost to comply with RFS was favorably impacted by a reduction in CVR Refining’s RFS obligation and reduced
market pricing. As of December 31, 2019 and 2018, the Petroleum Segment’s RFS obligation was approximately $7 million
and $4 million, respectively, which is recorded in Other current liabilities in the Consolidated Balance Sheets.
Environmental Remediation - As of December 31, 2019 and 2018, environmental accruals representing estimated costs for
future remediation efforts at certain Petroleum Segment sites totaled approximately $6 million and $8 million, respectively.
These amounts are reflected in Other current liabilities or Other long-term liabilities depending on when the Company expects
to expend such amounts.
Wynnewood Refinery Incident - On September 28, 2012, the Petroleum Segment’s Wynnewood refinery, owned and
operated by WRC, an indirect wholly-owned subsidiary of CVR Refining, experienced an explosion in a boiler unit during
startup after a short outage as part of the turnaround process. Two employees were fatally injured. Damage at the refinery was
limited to the boiler. Additionally, there was no environmental impact. The refinery was in the final stages of shutdown for
turnaround maintenance at the time of the incident. The Company completed an internal investigation of the incident and
cooperated with the Occupational Safety and Health Administration (“OSHA”) in its investigation. OSHA also conducted a
general inspection of the facility during the boiler incident investigation. In March 2013, OSHA completed its investigation,
communicated its citations, and placed WRC in its Severe Violators Enforcement Program (“SVEP”). The Company is
vigorously contesting the citations and OSHA’s placement of WRC in the SVEP. Any penalties associated with OSHA’s
citations are not expected to have a material adverse effect on the consolidated financial statements.
December 31, 2019 | 97
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CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(12) Business Segments
The Company has two operating segments: Petroleum and Nitrogen Fertilizer. These operating segments are also the
Company’s reportable segments. As discussed in Note 1 (“Organization and Nature of Business”), the Petroleum Segment is
comprised entirely of the consolidated operations of CVR Refining and its subsidiaries, while the Nitrogen Fertilizer Segment is
comprised entirely of the consolidated operations of CVR Partners and its subsidiaries. The other amounts reflect intercompany
eliminations, corporate cash and cash equivalents, income tax activities, and other corporate activities that are not allocated to
the operating segments. All operations of the segments are located within the United States.
The following tables summarize operating results, capital expenditures, and total asset information by segment:
(in millions)
Net sales
Petroleum
Nitrogen Fertilizer
Other
Total
Operating income (loss)
Petroleum
Nitrogen Fertilizer
Other
Total
Interest expense, net
Other income, net
Income before income taxes
Depreciation and amortization
Petroleum
Nitrogen Fertilizer
Other
Total
Capital expenditures (1)
Petroleum
Nitrogen fertilizer
Other
Total
Year Ended December 31,
2019
2018
2017
5,968
$
6,780
$
404
(8)
6,364
574
27
(21)
580
(102)
13
491
202
80
5
287
89
20
5
$
$
$
$
$
$
351
(7)
7,124
544
6
(18)
532
(102)
15
445
196
72
6
274
89
19
3
$
$
$
$
$
$
114
$
111
$
5,664
331
(7)
5,988
172
(10)
(17)
145
(109)
2
38
177
74
7
258
103
12
—
115
$
$
$
$
$
$
$
$
The following table summarizes total assets by segment:
(in millions)
Petroleum
Nitrogen Fertilizer
Other (2)
Total assets
(1) Capital expenditures are shown exclusive of capitalized turnaround and capitalized software costs.
(2)
Includes elimination of intercompany assets.
December 31,
2019
2018
$
$
3,187
$
1,138
(420)
3,905
$
2,453
1,254
293
4,000
December 31, 2019 | 98
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CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(13) Supplemental Cash Flow Information
Cash flows related to income taxes, interest, leases, and capital expenditures included in accounts payable were as follows:
(in millions)
Supplemental disclosures:
Cash paid for income taxes, net of refunds
Cash paid for interest
Cash paid for amounts included in the measurement of lease liabilities (1):
Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases
Non-cash investing and financing activities:
Change in construction in progress included in accounts payable (2)
Year Ended December 31,
2019
2018
2017
$
69
$
31
$
104
103
15
106
16
6
5
(7)
9
(5)
(1) The lease standard was adopted on January 1, 2019 on a prospective basis. Therefore, only 2019 disclosures are applicable to be included
within the table above. See Note 2 (“Summary of Significant Accounting Policies”).
(2) Capital expenditures are shown exclusive of capitalized turnaround expenditures and capitalized software.
(14) Related Party Transactions
Activity associated with the Company’s related party arrangements for the years ended December 31, 2019, 2018, and
2017 is summarized below:
Expenses with related parties
(in millions)
Cost of materials and other
Joint Venture Transportation Agreement:
Enable JV
Payments (received) made
Dividends (1)
Tax Allocation Agreement:
American Entertainment Properties Corporation
Amounts due from related parties
(in millions)
Tax Allocation Agreement:
Year Ended December 31,
2019
2018
2017
$
12
$
8
$
2
218
(3)
179
12
142
15
December 31, 2019
December 31, 2018
American Entertainment Properties Corporation
$
— $
4
(1) See below for a summary of the dividends paid to IEP for the years ended December 31, 2019, 2018, and 2017.
Enable Joint Venture Agreement
CVR Refining is party to a transportation agreement as part of the Enable JV for an initial term of 20 years under which
Enable provides transportation services for crude oil purchased within a defined geographic area. Additionally, CVR Refining
entered into a terminalling services agreement with Enable JV under which it receives access to Enable JV’s terminal in
Lawrence, Oklahoma to unload and pump crude oil into Enable JV’s pipeline for an initial term of 20 years.
December 31, 2019 | 99
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CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Midway Joint Venture
For the years ended December 31, 2019, 2018, and 2017, CRRM incurred costs of $21 million, $18 million, and
$3 million, respectively, from crude oil transportation services incurred on the Midway JV through Vitol as the intermediary
purchasing agent.
Property Exchange
On October 18, 2019, the audit committee of CVR Energy and the Conflicts Committee of the board of directors of CVR
GP each agreed to authorize the exchange of certain parcels of property owned by subsidiaries of CVR Energy with an equal
number of parcels owned by subsidiaries of CVR Partners, all located in Coffeyville, Kansas (the “Property Exchange”). On
February 19, 2020, a subsidiary of CVR Energy and a subsidiary of CVR Partners executed the Property Exchange agreement.
This Property Exchange will enable each such subsidiary to create a more usable, contiguous parcel of land near its own
operating footprint. CVR Energy and the Partnership accounted for this transaction in accordance with the ASC 805-50
guidance on transferring assets between entities under common control. This transaction had a net impact to the Partnership’s
partners’ capital of approximately $0.1 million.
Dividends to CVR Energy Stockholders
IEP, through its ownership of the Company’s common shares, is entitled to receive dividends that are declared and paid by
the Company based on the number of shares held at each record date. The following presents dividends paid to the Company's
stockholders, including IEP, during the years ended December 31, 2019:
Date Paid
Dividend Per Share
Stockholders
IEP
Total
Dividends Paid (in millions)
Related Period
2018 - 4th Quarter
2019 - 1st Quarter
March 11, 2019
$
May 13, 2019
2019 - 2nd Quarter
August 12, 2019
2019 - 3rd Quarter
November 11, 2019
Total
$
0.75
0.75
0.75
0.80
3.05
$
$
22
21
21
24
88
$
$
$
53
54
54
57
218
$
75
75
75
81
306
On February 19, 2020, the Company’s Board of Directors declared a cash dividend for the fourth quarter of 2019 to the
Company’s stockholders of $0.80 per share, or $80 million in the aggregate. The dividend will be paid on March 9, 2020 to
stockholders of record at the close of business on March 2, 2020. IEP will receive approximately $57 million in respect of its
ownership interest in the Company’s shares.
Dividends, if any, including the payment, amount and timing thereof, are subject to change at the discretion of the
Company’s Board of Directors.
During the years ended December 31, 2018 and 2017, the Company paid dividends totaling $2.50 and $2.00 per common
unit, or $238 million and $174 million, respectively. Of these dividends, IEP received $179 million and $142 million,
respectively, for the same periods.
December 31, 2019 | 100
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CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Distributions to CVR Partners’ Unitholders
The following table presents distributions paid by CVR Partners to CVR Partners’ unitholders, including amounts received
by the Company, as of December 31, 2019.
Related Period
Date Paid
2018 - 4th Quarter
2019 - 1st Quarter
March 11, 2019
$
May 13, 2019
2019 - 2nd Quarter
August 12, 2019
2019 - 3rd Quarter
November 11, 2019
Total
$
Distribution Per
Common Unit
Public
Unitholders
CVR Energy
Total
Distributions Paid (in millions)
0.12
0.07
0.14
0.07
0.40
$
$
9
5
11
5
30
$
$
$
5
3
5
3
16
$
14
8
16
8
46
Distributions, if any, including the payment, amount, and timing thereof, are subject to change at the discretion of the board
of directors of CVR Partners’ general partner. No distributions were declared for the fourth quarter of 2019.
The Partnership did not pay distributions during the year ended December 31, 2018, while during the year ended December
31, 2017, it paid a distribution of $0.02 per common unit, or $2 million. Of this distribution, CVR Energy received $1 million.
Affiliate Pension Obligations
Prior to the exchange offer discussed in Note 1 (“Organization and Nature of Business”), Mr. Carl C. Icahn, through certain
affiliates, owned approximately 82% of the Company’s capital stock. Applicable pension and tax laws make each member of a
“controlled group” of entities, generally defined as entities in which there is at least an 80% common ownership interest, jointly
and severally liable for certain pension plan obligations of any member of the controlled group. These pension obligations
include ongoing contributions to fund the plan, as well as liability for any unfunded liabilities that may exist at the time the plan
is terminated. As a result of the historical ownership interest in CVR Energy by Mr. Icahn’s affiliates (prior to the exchange
offer), the Company was subject to the pension liabilities of all entities in which Mr. Icahn had a direct or indirect ownership
interest of at least 80%. Two such entities, ACF Industries LLC (“ACF”) and Federal-Mogul, are the sponsors of several
pension plans. As members of the controlled group, CVR Energy would be liable for any failure of ACF and Federal-Mogul to
make ongoing pension contributions or to pay the unfunded liabilities upon a termination of their respective pension plans. The
unfunded plan balances for these sponsors was $435 million and $424 million as of June 30, 2018 and December 31, 2017,
respectively. These results are based on the information provided by Mr. Icahn’s affiliates based on information from the plans’
actuaries. As of December 31, 2019 and 2018, and following the exchange offer, Mr. Icahn’s affiliates owned approximately
71% of the Company’s capital stock, and therefore, the Company is no longer considered to be liable for the aforementioned
pension obligations of the controlled group. On October 1, 2018, Federal-Mogul was sold by Mr. Icahn’s affiliates to a third-
party.
December 31, 2019 | 101
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CVR Energy, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(15) Selected Quarterly Financial Information
Summarized quarterly financial data for December 31, 2019 and 2018 is as follows:
(in millions)
Net sales
Cost of materials and other (1)
Direct operating expenses (1)
Operating income
Net income
Net income (loss) attributable to noncontrolling interest
Net income attributable to CVR Energy stockholders
Basic and diluted earnings per share
Dividends declared per share
Year Ended December 31, 2019
Quarter
First
Second
Third
Fourth
$
1,486
$
1,687
$
1,622
$
1,101
1,267
1,221
126
160
102
1
101
1.00
0.75
$
$
$
132
192
128
12
116
1.16
0.75
$
$
$
139
159
104
(15)
119
1.18
0.75
$
$
$
$
$
$
1,569
1,262
136
69
28
(16)
44
0.44
0.80
Weighted-average common shares outstanding - basic
and diluted
100.5
100.5
100.5
100.5
(in millions)
Net sales
Cost of materials and other (1)
Direct operating expenses (1)
Operating income
Net income
Net income attributable to noncontrolling interest
Net income attributable to CVR Energy stockholders
Basic and diluted earnings per share
Dividends declared per share
Year Ended December 31, 2018
Quarter
First
Second
Third
Fourth
$
1,536
$
1,915
$
1,935
$
1,179
1,560
1,556
130
136
93
33
60
0.69
0.50
$
$
$
140
108
70
24
46
0.53
0.50
$
$
$
120
164
108
28
80
0.85
0.75
$
$
$
$
$
$
1,738
1,388
127
124
95
22
73
0.73
0.75
Weighted-average common shares outstanding - basic
and diluted
86.8
86.8
95.8
100.5
(1) Excludes depreciation and amortization expenses.
December 31, 2019 | 102
Table of Contents
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. As of December 31, 2019, the Company has evaluated, under the
direction of the Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, the effectiveness of our
disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e). There are inherent limitations to the
including the possibility of human error and the
effectiveness of any system of disclosure controls and procedures,
circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can
only provide reasonable assurance of achieving their control objectives. Based upon, and as of the date of that evaluation, the
Company’s Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer concluded that disclosure controls
and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports filed or
submitted under the Exchange Act is accurately recorded, processed, summarized and reported within the time periods specified
in the SEC’s rules and forms. Such information is accumulated and communicated to the Company’s management, including
the Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, as appropriate, to allow accurate and timely
decisions regarding required disclosure.
Management’s Report on Internal Control Over Financial Reporting. The Company’s management is responsible for
establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act
Rule 13a-15(f). Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of management, we conducted an evaluation of the effectiveness of its internal
control over financial reporting based on the framework in the 2013 Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on that evaluation, the Company’s
Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer have concluded that internal control over
financial reporting was effective as of December 31, 2019. The Company’s independent registered public accounting firm, that
audited the consolidated financial statements included herein under Item 8, has issued a report on the effectiveness of the
Company’s internal control over financial reporting. This report can be found under Item 8.
Changes in Internal Control Over Financial Reporting. There has been no change in the Company’s internal control
over financial reporting required by Rule 13a-15 of the Exchange Act that occurred during the fiscal quarter ended December
31, 2019 that has materially affected or is reasonably likely to materially affect, the Company’s internal control over financial
reporting.
Item 9B. Other Information
None.
December 31, 2019 | 103
Table of Contents
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The information required by Items 401, 405, 406, and 407(c)(3), (d)(4), and (d)(5) of Regulation S-K in response to this
item will be set forth in our definitive proxy statement for our 2020 annual meeting of stockholders.
Item 11. Executive Compensation
The information required by Items 402 and 407(e)(4) and (e)(5) of Regulation S-K in response to this item will be set forth
in our definitive proxy statement for our 2020 annual meeting of stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The equity compensation plan information required by Items 201(d) and the information required by Item 403 of
Regulation S-K in response to this item will be set forth in our definitive proxy statement for our 2020 annual meeting of
stockholders.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by Items 404 and 407(a) of Regulation S-K in response to this item will be set forth in our
definitive proxy statement for our 2020 annual meeting of stockholders.
Item 14. Principal Accounting Fees and Services
The information required by Items 9(e) of Schedule 14A in response to this item will be set forth in our definitive proxy
statement for our 2020 annual meeting of stockholders.
December 31, 2019 | 104
Table of Contents
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a)(1) Financial Statements - See Part II, Item 8 of this Annual Report on Form 10-K.
(a)(2) Financial Statement Schedules - All schedules for which provision is made in the applicable accounting regulations
of the Securities and Exchange Commission (the “SEC”) are not required under the related instructions or are inapplicable and
therefore have been omitted.
(a)(3) Exhibits
Exhibit
Number
2.1**
3.1**
3.2**
4.1*
4.2**
4.3**
4.4**
4.5**
4.6**
4.7**
4.8**
4.9**
Exhibit Description
Transaction Agreement among CVR Energy, Inc., IEP Energy LLC and each of the other Offeror Parties
(as defined therein) dated as of April 18, 2012 (incorporated by reference to Exhibit 2.1 to the Company's
Form 8-K filed on April 23, 2012).
Amended and Restated Certificate of Incorporation of CVR Energy, Inc. (incorporated by reference to
Exhibit 3.1 to the Company’s Form 8-K filed on June 15, 2018).
Second Amended and Restated Bylaws of CVR Energy, Inc. (incorporated by reference to Exhibit 3.2 to
the Company’s Form 8-K filed on June 15, 2018).
Description of Common Stock.
Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-1/A, File No. 333-137588, filed on June 5, 2007).
Indenture, dated June 10, 2016, by and among CVR Partners, LP, CVR Nitrogen Finance Corporation, the
Guarantors (as defined therein) and Wilmington Trust, National Association, as Trustee and Collateral
Trustee (incorporated by reference to Exhibit 4.1 of the Form 8-K filed by CVR Partners, LP on June 16,
2016 (Commission File No. 001-35120)).
Form of 9.250% Senior Secured Note due 2023 (included within the Indenture filed as Exhibit 4.4 and
incorporated by reference to Exhibit 4.1 to the Form 8-K filed by CVR Partners, LP on June 16, 2016
(Commission File No. 001-35120)).
Indenture, dated as of April 12, 2013, among Rentech Nitrogen Partners, L.P., Rentech Nitrogen Finance
Corporation, the guarantors named therein, Wells Fargo Bank, National Association, as Trustee, and
Wilmington Trust, National Association, as Collateral Trustee (incorporated by reference to Exhibit 4.1 to
the Form 8-K filed by Rentech Nitrogen Partners, L.P. on April 16, 2013 (Commission File No.
001-35334)).
Forms of 6.5% Second Lien Senior Secured Notes due 2021 (incorporated by reference to Exhibit 4.1 to
the Form 8-K filed by Rentech Nitrogen Partners, L.P. on April 16, 2013 (Commission File No.
001-35334)).
First Supplemental Indenture, dated as of June 10, 2016, among CVR Nitrogen, LP, CVR Nitrogen
Finance Corporation, the guarantors party thereto, Wells Fargo Bank, National Association, as Trustee,
and Wilmington Trust, National Association, as Collateral Trustee (incorporated by reference to Exhibit
10.3 of the Form 8-K filed by CVR Partners, LP on June 16, 2016 (Commission File No. 001-35120)).
First Supplemental Indenture, dated as of January 29, 2019, among CVR Energy, Inc., CVR Refining,
LLC, Coffeyville Finance Inc., the guarantors named therein and Wells Fargo Bank, National Association
(incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on January 29, 2019).
Indenture, dated as of January 27, 2020, among CVR Energy, Inc., the guarantors named therein and
Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Form
8-K filed on January 27, 2020).
4.10**
Form of 5.250% Senior Notes due 2025 (incorporated by reference to Exhibit 4.2 to the Form 8-K filed on
January 27, 2020).
December 31, 2019 | 105
Table of Contents
4.11**
10.1**
10.1.1**
10.1.2*
10.2**
10.3**
10.4*
10.5*
10.6**
10.7**
10.7.1**
10.8**+
10.9**+
Form of 5.750% Senior Notes due 2028 (incorporated by reference to Exhibit 4.3 to the Form 8-K filed on
January 27, 2020).
Amended and Restated ABL Credit Agreement, dated as of December 20, 2012, among Coffeyville
Resources, LLC, CVR Refining, LP, CVR Refining, LLC, Coffeyville Resources Refining & Marketing,
LLC, Coffeyville Resources Pipeline, LLC, Coffeyville Resources Crude Transportation, LLC,
Coffeyville Resources Terminal, LLC, Wynnewood Energy Company, LLC, Wynnewood Refining
Company, LLC and certain of their affiliates, the lenders from time to time party thereto, Wells Fargo
Bank, National Association, as collateral agent and administrative agent (incorporated by reference to
Exhibit 1.1 to the Company's Form 8-K filed on December 27, 2012).
Amendment No. 1 to Amended and Restated ABL Credit Agreement, dated November 14, 2017, by and
among CVR Refining, LP, Coffeyville Finance Inc., CVR Refining, LLC, Coffeyville Resources Refining
& Marketing, LLC, Coffeyville Resources Pipeline, LLC, Coffeyville Resources Crude Transportation,
LLC, Coffeyville Resources Terminal, LLC, Wynnewood Energy Company, LLC, Wynnewood Refining
Company, LLC, CVR Logistics, LLC, a group of lenders and Wells Fargo, National Association, as
administrative agent and collateral agent (incorporated by reference as Exhibit 10.1 to the Form 8-K filed
by CVR Refining, LP on November 17, 2017).
Amendment No. 2 to Amended and Restated ABL Credit Agreement, dated as of December 23, 2019, and
effective December 31, 2019, by and among CVR Refining, LP, Coffeyville Finance Inc., CVR Refining,
LLC, Coffeyville Resources Refining & Marketing, LLC, Coffeyville Resources Pipeline, LLC,
Coffeyville Resources Crude Transportation, LLC, Coffeyville Resources Terminal, LLC, Wynnewood
Energy Company, LLC, Wynnewood Refining Company, LLC, CVR Logistics, LLC, a group of lenders
and Wells Fargo Bank, National Association, as collateral agent and administrative agent.
Amended and Restated ABL Pledge and Security Agreement, dated as of December 20, 2012, among
CVR Refining, LP, CVR Refining, LLC, Coffeyville Resources Refining & Marketing, LLC, Coffeyville
Resources Pipeline, LLC, Coffeyville Resources Crude Transportation, LLC, Coffeyville Resources
Terminal, LLC, Wynnewood Energy Company, LLC, Wynnewood Refining Company, LLC and certain
of their affiliates, and Wells Fargo Bank, National Association, as collateral agent (incorporated by
reference to Exhibit 1.2 to the Company’s Form 8-K filed on December 27, 2012).
Hydrogen Purchase and Sale Agreement, dated as of January 1, 2017, by and between Coffeyville
Resources Refining & Marketing, LLC and Coffeyville Resources Nitrogen Fertilizers, LLC
(incorporated by reference to Exhibit 10.1 to CVR Partners, LP’s Form 10-Q filed on April 27, 2017
(Commission File No. 001-35120)).
Master Service Agreement among Coffeyville Resources Refining & Marketing, LLC and Coffeyville
Resources Nitrogen Fertilizers, LL, dated February 19, 2020.
Master Service Agreement among CVR Services, LLC and subsidiaries of CVR Energy, dated February
19, 2020.
Purchase Agreement, by and among CVR Energy, Inc., American Entertainment Properties Corp., and
Icahn Enterprises Holdings L.P. (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K
filed on January 17, 2019).
Amended and Restated Crude Oil Supply Agreement, dated August 31, 2012, by and between Vitol Inc.
and Coffeyville Resources Refining & Marketing, LLC (incorporated by reference to Exhibit 10.2 to the
Company’s Form 10-Q filed on November 6, 2012) (Certain portions of this exhibit have been omitted
and separately filed with the SEC pursuant to a request for confidential treatment which has been granted
by the SEC).
First Amendment to Amended and Restated Crude Oil Supply Agreement, dated as of June 8, 2015, by
and between Vitol Inc. and Coffeyville Resources Refining & Marketing, LLC (incorporated by reference
to Exhibit 10.1 to the Company’s Form 10-Q filed on July 30, 2015).
Employment Agreement, dated as of November 1, 2017, by and between CVR Energy, Inc. and David L.
Lamp (incorporated by reference as Exhibit 10.20 to the Form 10-K filed by CVR Partners, LP on
February 23, 2018 (Commission File No. 001-35120)).
Performance Unit Award Agreement, dated as of November 1, 2017, by and between CVR Energy, Inc.
and David L. Lamp (incorporated by reference as Exhibit 10.22 to the Form 10-K filed by CVR Partners,
LP on February 23, 2018 (Commission File No. 001-35120)).
10.10**
Second Amended and Restated Agreement of Limited Partnership of CVR Partners, LP, dated April 13,
2011 (incorporated by reference to Exhibit 10.7 to the Company’s Form 8-K/A filed on May 23, 2011).
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10.11**
Amended and Restated Contribution, Conveyance and Assumption Agreement, dated as of April 7, 2011,
among Coffeyville Resources, LLC, CVR GP, LLC, Coffeyville Acquisition III LLC, CVR
Special GP, LLC and CVR Partners, LP (incorporated by reference to Exhibit 10.1 to the Company’s
Form 8-K/A filed on May 23, 2011).
10.12**
Environmental Agreement, dated as of October 25, 2007, by and between Coffeyville Resources
Refining & Marketing, LLC and Coffeyville Resources Nitrogen Fertilizers, LLC (incorporated by
reference to Exhibit 10.7 to the Company's Form 10-Q filed on December 6, 2007).
10.12.1**
10.12.2**
10.13**
Supplement to Environmental Agreement, dated as of February 15, 2008, by and between Coffeyville
Resources Refining and Marketing, LLC and Coffeyville Resources Nitrogen Fertilizers, LLC
(incorporated by reference to Exhibit 10.17.1 to the Company's Form 10-K filed on March 28, 2008).
Second Supplement to Environmental Agreement, dated as of July 23, 2008, by and between Coffeyville
Resources Refining and Marketing, LLC and Coffeyville Resources Nitrogen Fertilizers, LLC
(incorporated by reference to Exhibit 10.1 to the Company's Form 10-Q filed on August 14, 2008).
Second Amended and Restated Feedstock and Shared Services Agreement, dated as of January 1, 2017,
by and between Coffeyville Resources Refining & Marketing, LLC and Coffeyville Resources Nitrogen
Fertilizers, LLC (incorporated by reference to Exhibit 10.2 to the Form 10-Q filed by CVR Partners, LP
on April 27, 2017).
10.13.1** Amendment to the Second Amended and Restated Feedstock and Shared Services Agreement, dated as of
November 1, 2017, by and between Coffeyville Resources Refining & Marketing, LLC and Coffeyville
Resources Nitrogen Fertilizers, LLC (incorporated by reference to Exhibit 10.7.1 to the Form 10-K filed
by CVR Partners, LP on February 23, 2018).
10.14**
10.15**
10.16**
10.17**
10.18**
10.19**
Raw Water and Facilities Sharing Agreement, dated as of October 25, 2007, by and between Coffeyville
Resources Refining & Marketing, LLC and Coffeyville Resources Nitrogen Fertilizers, LLC
(incorporated by reference to Exhibit 10.9 to the Company's Form 10-Q filed on December 6, 2007).
Third Amended and Restated Services Agreement, dated as of January 1, 2017, among CVR Partners, LP,
CVR GP, LLC and CVR Energy, Inc. (incorporated by reference to Exhibit 10.3 to the Form 10-Q filed
by CVR Partners, LP on April 27, 2017).
Amended and Restated Omnibus Agreement, dated as of April 13, 2011, among CVR Energy, Inc.,
CVR GP, LLC and CVR Partners, LP (incorporated by reference to Exhibit 10.2 to the Company’s
Form 8-K/A filed on May 23, 2011).
Coke Supply Agreement, dated as of October 25, 2007, by and between Coffeyville Resources
Refining & Marketing, LLC and Coffeyville Resources Nitrogen Fertilizers, LLC (incorporated by
reference to Exhibit 10.5 to the Company's Form 10-Q filed on December 6, 2007).
Amended and Restated Cross-Easement Agreement, dated as of April 13, 2011, by and between
Coffeyville Resources Refining & Marketing, LLC and Coffeyville Resources Nitrogen Fertilizers, LLC
(incorporated by reference to Exhibit 10.5 to the Company’s Form 8-K/A filed on May 23, 2011).
GP Services Agreement, dated as of November 29, 2011, by and between CVR Partners, LP,
CVR GP, LLC and CVR Energy, Inc. (incorporated by reference to Exhibit 10.22 to the Form 10-K filed
by CVR Partners, LP on February 24, 2012 (Commission File No. 001-35120)).
10.19.1** Amendment to GP Services Agreement, dated as of June 27, 2014, by and between CVR Partners, LP,
CVR GP, LLC and CVR Energy, Inc. (incorporated by reference to Exhibit 10.1 to the Company's Form
10-Q filed on August 1, 2014).
10.20**
10.21**
Trademark License Agreement, dated as of April 13, 2011, by and between CVR Energy, Inc. and CVR
Partners, LP (incorporated by reference to Exhibit 10.9 to the Company’s Form 8-K/A filed on May 23,
2011).
Lease and Operating Agreement, dated as of May 4, 2012, by and between Coffeyville Resources
Terminal, LLC and Coffeyville Resources Nitrogen Fertilizers, LLC (incorporated by reference to
Exhibit 10.2 to the Company’s Form 10-Q filed on August 2, 2012).
10.22**
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.49 to the Company's
Form 10-K for the year ended December 31, 2008, filed on March 13, 2009).
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10.23**+
Amended and Restated CVR Energy, Inc. 2007 Long Term Incentive Plan, dated as of December 26,
2013 (incorporated by reference to Exhibit 10.32 to the Company’s Form 10-K filed on February 26,
2014).
10.24**+
Form of Incentive Unit Agreement (incorporated by reference to Exhibit 10.30.7 to the Company’s Form
10-K filed on February 21, 2018.)
10.25**+
Form of CVR Energy, Inc. Incentive Unit Agreement (incorporated by reference to Exhibit 10.31 to the
Company’s Form 10-K filed on February 21, 2019).
10.25.1**+
Form CVR Energy, Inc. Incentive Unit Agreement (Executive) (incorporated by reference to Exhibit
10.31.1 to the Company’s Form 10-K filed on February 21, 2019).
10.26**+
CVR Energy, Inc. Change in Control and Severance Plan (incorporated by reference to Exhibit 10.1 of
CVR Energy, Inc.’s Form 10-Q filed on October 25, 2018).
10.27**+
CVR Energy, Inc. Performance-Based Bonus Plan, approved March 19, 2019 (incorporated by reference
to Exhibit 10.1 to the Form 10-Q filed on April 25, 2019).
10.28**+
CVR Partners, LP Performance-Based Bonus Plan, approved March 19, 2019 (incorporated by reference
to Exhibit 10.2 to the Form 10-Q filed on April 25, 2019).
10.29**+
CVR Refining, LP Performance-Based Bonus Plan, approved March 19, 2019 (incorporated by reference
to Exhibit 10.3 to the Form 10-Q filed on April 25, 2019).
10.30**+
CVR Partners, LP Long-Term Incentive Plan (adopted March 16, 2011) (incorporated by reference to
Exhibit 10.1 to the Form S-8 filed by CVR Partners, LP on April 12, 2011).
10.30.1**+
Form of CVR Partners, LP Long-Term Incentive Plan Employee Phantom Unit Agreement (incorporated
by reference to Exhibit 10.38.3 to the Company’s Form 10-K filed on February 20, 2015).
10.30.2*+
Form of CVR Partners, LP Long-Term Incentive Plan Employee Phantom Unit Agreement (Executive).
10.30.3*+
Form of CVR Partners, LP Long-Term Incentive Plan Employee Phantom Unit Agreement.
10.31**+
CVR Refining, LP Long-Term Incentive Plan (incorporated by reference to Exhibit 10.2 to the
Partnership’s Form 8-K filed on January 23, 2013 (Commission File No. 001-35781)).
10.31.1**+
Form of CVR Refining, LP Long-Term Incentive Plan Employee Phantom Unit Agreement (incorporated
by reference to Exhibit 10.44.2 to the Company’s Form 10-K filed on February 20, 2015).
10.32**
10.33**
10.34**
10.35**
10.36**
Registration Rights Agreement, dated as of August 9, 2015, by and among CVR Partners, Coffeyville
Resources, LLC, Rentech Nitrogen Holdings, Inc., and DSHC, LLC (incorporated by reference to Exhibit
4.1 to the Form 8-K filed by CVR Partners, LP on August 13, 2015 (Commission File No. 001-35120)).
Collateral Trust Agreement, dated as of June 10, 2016, among CVR Partners, LP, CVR Nitrogen Finance
Corporation, the Guarantors (as defined therein) and Wilmington Trust, National Association, as Trustee
and Collateral Trustee (incorporated by reference to Exhibit 10.1 of the Form 8-K filed by CVR Partners
on June 16, 2016 (Commission File No. 001-35120)).
Parity Lien Security Agreement, dated as of June 10, 2016, among CVR Partners, LP, CVR Nitrogen
Finance Corporation, the Guarantors (as defined therein) and Wilmington Trust, National Association, as
Trustee and Collateral Trustee(incorporated by reference to Exhibit 10.2 of the Form 8-K filed by CVR
Partners on June 16, 2016 (Commission File No. 001-35120)).
ABL Credit Agreement, dated as of September 30, 2016, among CVR Partners, LP, CVR Nitrogen, LP,
East Dubuque Nitrogen Fertilizers, LLC, Coffeyville Resources Nitrogen Fertilizers, LLC, CVR Nitrogen
Holdings, LLC, CVR Nitrogen Finance Corporation, CVR Nitrogen GP, LLC, certain of their affiliates
from time to time party thereto, the lenders from time to time party thereto, UBS AG, Stamford Branch,
as administrative agent and collateral agent (incorporated by reference to Exhibit 10.1 of the Form 8-K
filed by CVR Partners, LP on October 6, 2016 (Commission File No. 001-35120)).
Security Agreement, dated as of September 30, 2016, among CVR Partners, LP, CVR Nitrogen, LP, East
Dubuque Nitrogen Fertilizers, LLC, Coffeyville Resources Nitrogen Fertilizers, LLC, CVR Nitrogen
Holdings, LLC, CVR Nitrogen Finance Corporation, CVR Nitrogen GP, LLC, certain of their affiliates
from time to time party thereto, and UBS AG, Stamford Branch, as administrative agent and collateral
agent (incorporated by reference to Exhibit 10.2 of the Form 8-K filed by CVR Partners, LP on October 6,
2016 (Commission File No. 001-35120)).
December 31, 2019 | 108
Table of Contents
10.37**
Intercreditor Agreement, dated as of September 30, 2016, among CVR Partners, LP, CVR Nitrogen, LP,
East Dubuque Nitrogen Fertilizers, LLC, Coffeyville Resources Nitrogen Fertilizers, LLC, CVR Nitrogen
Holdings, LLC, CVR Nitrogen Finance Corporation, CVR Nitrogen GP, LLC, certain of their affiliates
from time to time party thereto, UBS AG, Stamford Branch, as administrative agent and collateral agent
for the secured parties, Wilmington Trust, National Association, as trustee and collateral trustee for the
secured parties in respect of the outstanding senior secured notes and other parity lien obligations and
other parity lien representative from time to time party thereto (incorporated by reference to Exhibit 10.3
of the Form 8-K filed by CVR Partners, LP on October 6, 2016 (Commission File No. 001-35120)).
10.38*+
CVR Energy, Inc. 2020 Performance-Based Bonus Plan, approved February 19, 2020.
10.39*+
CVR Partners, LP 2020 Performance-Based Bonus Plan, approved February 19, 2020.
10.40*+
CVR Refining, LP 2020 Performance-Based Bonus Plan, approved February 19, 2020.
21.1*
23.1*
31.1*
31.2*
31.3*
32.1†
101*
List of Subsidiaries of CVR Energy, Inc.
Consent of Grant Thornton LLP.
Rule 13a-14(a)/15d-14(a) Certification of President and Chief Executive Officer.
Rule 13a-14(a)/15d-14(a) Certification of Executive Vice President, Chief Financial Officer
Rule 13a-14(a)/15d-14(a) Certification of Chief Accounting Officer and Corporate Controller
Section 1350 Certification of President and Chief Executive Officer and Executive Vice President, Chief
Financial Officer, and Chief Accounting Officer and Corporate Controller
The following financial information for CVR Energy, Inc.’s Annual Report on Form 10-K for the year
ended December 31, 2019, formatted in XBRL (“Extensible Business Reporting Language”) includes:
(i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements
of Comprehensive Income, (iv) Consolidated Statements of Changes in Equity, (v) Consolidated
Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements, tagged in detail. The
instance document does not appear in the Interactive Data File because its XBRL tags are embedded
within the Inline XBRL document.
104*
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
*
**
†
+
Filed herewith.
Previously filed.
Furnished herewith.
Denotes management contract or compensatory plan or arrangement.
PLEASE NOTE: Pursuant to the rules and regulations of the SEC, we may file or incorporate by reference agreements as
exhibits to the reports that we file with or furnish to the SEC. The agreements are filed to provide investors with information
regarding their respective terms. The agreements are not intended to provide any other factual information about the Company
or its business or operations. In particular, the assertions embodied in any representations, warranties and covenants contained
in the agreements may be subject to qualifications with respect to knowledge and materiality different from those applicable to
investors and may be qualified by information in confidential disclosure schedules not included with the exhibits. These
disclosure schedules may contain information that modifies, qualifies and creates exceptions to the representations, warranties
and covenants set forth in the agreements. Moreover, certain representations, warranties and covenants in the agreements may
have been used for the purpose of allocating risk between the parties, rather than establishing matters as facts. In addition,
information concerning the subject matter of the representations, warranties and covenants may have changed after the date of
the respective agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.
Accordingly, investors should not rely on the representations, warranties and covenants in the agreements as characterizations
of the actual state of facts about the Company or its business or operations on the date hereof.
Item 16. Form 10-K Summary
None.
December 31, 2019 | 109
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
CVR Energy, Inc.
By:
/s/ DAVID L. LAMP
David L. Lamp
President and Chief Executive Officer
Date: February 20, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report had been signed below by the following
persons on behalf of the registrant and in the capacity and on the dates indicated.
Signature
Title
Date
/s/ DAVID L. LAMP
David L. Lamp
/s/ TRACY D. JACKSON
Tracy D. Jackson
/s/ MATTHEW W. BLEY
Matthew W. Bley
/s/ SUNGHWAN CHO
SungHwan Cho
/s/ BOB G. ALEXANDER
Bob G. Alexander
/s/ JONATHAN FRATES
Jonathan Frates
/s/ STEPHEN MONGILLO
Stephen Mongillo
/s/ PATRICIA AGNELLO
Patricia Agnello
/s/ HUNTER C. GARY
Hunter C. Gary
/s/ JAMES M. STROCK
James M. Strock
President, Chief Executive Officer, and Director
(Principal Executive Officer)
February 20, 2020
Executive Vice President, Chief Financial Officer
(Principal Financial Officer)
February 20, 2020
Chief Accounting Officer and Corporate Controller
(Principal Accounting Officer)
February 20, 2020
Chairman of the Board of Directors
February 20, 2020
Director
Director
Director
Director
Director
Director
February 20, 2020
February 20, 2020
February 20, 2020
February 20, 2020
February 20, 2020
February 20, 2020
December 31, 2019 | 110