Revenue

12 Months Ended

Dec. 31, 2019

Revenue from Contract with Customer [Abstract]

(6) Revenue

The following table presents the Partnership’s revenue, disaggregated by major product:


	Year Ended December 31,
(in thousands)	2019		2018
Ammonia	$	94,467	$	66,254
UAN	251,199		222,329
Urea products	17,430		20,633
Net sales, exclusive of freight and other	363,096		309,216
Freight revenue	33,436		33,567
Other revenue	7,645		8,299
Net sales	$	404,177	$	351,082

The Partnership sells its products on a wholesale basis under a contract or by purchase order. The Partnership’s contracts with customers generally contain fixed pricing and most have terms of less than one year. The Partnership recognizes revenue at the point in time at which the customer obtains control of the product, which is generally upon delivery and acceptance by the customer. The customer acceptance point is stated in the contract and may be at one of the Partnership’s manufacturing facilities, at one of the Partnership’s off-site loading facilities, or at the customer’s designated facility. Freight revenue recognized by the Partnership represents the pass-through finished goods delivery costs incurred prior to customer acceptance and is reimbursed by customers. An offsetting expense for freight is included in cost of materials and other. Qualifying taxes collected from customers and remitted to governmental authorities are not included in reported revenues.

Depending on the product sold and the type of contract, payments from customers are generally either due prior to delivery or within 15 to 30 days of product delivery.

The Partnership generally provides no warranty other than the implicit promise that goods delivered are free of liens and encumbrances and meet the agreed upon specifications. Product returns are rare, and as such, the Partnership does not record a specific warranty reserve or consider activities related to such warranty, if any, to be a separate performance obligation.

The Partnership has an immaterial amount of variable consideration for contracts with an original duration of less than a year. A small portion of the Partnership’s revenue includes contracts extending beyond one year, some of which contain variable pricing in which the majority of the variability is attributed to the market-based pricing. The Partnership’s contracts do not contain a significant financing component.

The Partnership has an immaterial amount of fee-based revenue, included in other revenue in the table above, that is recognized based on the net amount of the proceeds received.

Transaction price allocated to remaining performance obligations

As of December 31, 2019, the Partnership had approximately $9.0 million of remaining performance obligations for contracts with an original expected duration of more than one year. The Partnership expects to recognize approximately $4.0 million of these performance obligations as revenue by the end of 2020, an additional $2.9 million in 2021, and the remaining balance thereafter. The Partnership has elected to not disclose the amount of transaction price allocated to remaining

performance obligations for contracts with an original expected duration of less than one year. The Partnership has elected to not disclose variable consideration allocated to wholly unsatisfied performance obligations that are based on market prices that have not yet been determined.

Contract balances

The Partnership’s deferred revenue is a contract liability that primarily relates to 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, $18.7 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 Partnership.

A summary of the deferred revenue activity during the year ended December 31, 2019 is presented below:


(in thousands)
Balance at December 31, 2018	$	68,804
Add:
New prepay contracts entered into during the period (1)	45,538
Less:
Revenue recognized that was included in the contract liability balance at the beginning of the period	67,824
Revenue recognized related to contracts entered into during the period	18,004
Other changes	673
Balance at December 31, 2019	$	27,841

(1)Includes $26.8 million where payment associated with prepaid contracts was collected.

Major Customers

CVR Partners has two customers who comprise 28%, 20%, and 16% of net sales for the years ended December 31, 2019, 2018, and 2017, respectively.