CVR Energy (NYSE:CVI)
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SUGAR LAND, Texas, Dec. 5 /PRNewswire-FirstCall/ -- CVR Energy, Inc. (NYSE:CVI) today reported third quarter 2007 net income of $13.4 million, compared to net income of $129.0 million for the third quarter of 2006.
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Adjusted for the unrealized gain from the company's cash flow swap, the company reported a net loss for the third quarter 2007 of $40.8 million, which compares to net income (as so adjusted) of $21.7 million for the same quarter in 2006.
These results reflect lost revenues, lost profits and increased costs incurred due to a record flood that shut down and damaged the company's refinery and nitrogen fertilizer operations in Coffeyville, Kan., this past summer. The company has since resumed full operations.
Net income (loss) for the nine months ended Sept. 30, 2007, was $(40.9) million compared to $170.8 million for the same period in 2006.
For the nine months of 2007, net income (adjusted for the unrealized loss from the cash flow swap) was $18.2 million, compared to net income (as so adjusted) of $122.5 million for the same period in 2006. Nine-month results for 2007 reflect the effects of the flood and a period of several months in the spring during which the refinery was shut down for a turnaround, or periodic maintenance.
Third quarter operating income was $38.7 million in 2007, compared with $52.1 million for the same period in 2006, and for the nine months ended Sept. 30, 2007, operating income was $162.5 million compared with $267.0 million in the same period of 2006.
"Our refinery and nitrogen fertilizer facilities in Coffeyville, Kan., recovered rapidly from the devastating floods which swept across the area beginning June 30, and in fact, our refinery is now operating significantly above pre-flood rates," said Jack Lipinski, chief executive officer. "In addition, the nitrogen fertilizer plant, which was less affected by the flood and therefore lost only 18 days production, continues to perform well. It is the lowest-cost nitrogen fertilizer producer in North America."
"CVR Energy's rapid recovery from the flood is the direct result of a committed effort by our employees and the dedication of our contractors and suppliers," he said. "Our return to normal operations so quickly demonstrates the phenomenal talents in this organization."
On Oct. 26, 2007, the company consummated an initial public offering (IPO) of 23 million shares of its common stock. The initial public offering price was $19 per share. The net proceeds to CVR Energy from the sale of common stock were $408.5 million before offering costs of approximately $11.4 million. The net proceeds were used to repay $380 million of debt, including $50 million of outstanding indebtedness under CVR Energy's revolving credit facility.
The variance from operating income guidance provided in CVR Energy's IPO prospectus results from accelerating the recognition of expenses associated with the flood and related crude oil discharge into the third quarter. These expenses are within the original total estimate of flood related expenditures. The company believes it is fully insured for these expenses and will record any additional insurance proceeds as collection becomes more imminent.
Petroleum Business
Petroleum operations reported operating income in the third quarter of 2007 of $26.5 million on sales of $545.9 million, compared with third quarter 2006 operating income of $55.5 million on sales of $747.3 million. For the nine months, petroleum operations operating income was $129.4 million on sales of $1.7 billion in 2007, compared with $233.5 million in 2006 on sales of $2.2 billion in 2006.
Refining margins in the mid-continent region were among the highest in the United States for the most recently completed quarter. The gasoline crack spread in the Platt's Group 3 region averaged $20.48 per barrel for the third quarter 2007 compared to $15.20 for the same period in 2006. The distillate crack spread averaged $22.49 per barrel for the quarter ended Sept. 30, 2007, compared to $23.20 for the third quarter 2006.
Crude oil throughput for the third quarter 2007 decreased to 52,497 barrels per day compared to 94,019 per day for the third quarter 2006 primarily as a result of downtime associated with the flood.
Nitrogen Fertilizer Business
Nitrogen fertilizer operations reported third quarter 2007 operating income of $13.8 million on sales of $40.8 million, compared with a loss of $3.0 million on sales of $32.5 million during the same period in 2006. For the nine month period in 2007, the nitrogen fertilizer operations reported operating income of $34.9 million on sales of $115.1 million, compared with operating income of $34.1 million on sales of $128.2 million during the equivalent nine month period of 2006.
Nitrogen fertilizer operations benefited from significantly improved pricing from prior year levels for all products, reflecting a positive outlook for North American agricultural markets and a favorable supply/demand situation in world markets. For the third quarter of 2007, nitrogen fertilizer operations reported increases in average plant gate prices of 28 percent and 66 percent for ammonia and urea ammonium nitrate (UAN), respectively, as compared to the third quarter of 2006.
On-stream factors for the gasification and ammonia units for the third quarter 2007 improved from the comparable period in 2006 despite approximately eighteen days of downtime associated with the flood. Third quarter 2006 on- stream factors were negatively impacted by a major scheduled turnaround at the Coffeyville nitrogen plant. On-stream factors for the UAN plant for the third quarter 2007 were lower than the comparable period of 2006 primarily due to downtime associated with the flood and other unscheduled repair and maintenance activities during the third quarter 2007.
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. You can generally identify forward-looking statements by our use of forward-looking terminology such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "potential," "predict," "seek," "should," or "will," or the negative thereof or other variations thereon or comparable terminology. These forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. For a discussion of risk factors which may affect our results, please see the risk factors disclosed in our SEC filings, including our Form 10-Q for the quarter ended September 30, 2007. These risks may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this press release are made only as of the date hereof. The Company undertakes no duty to update its forward-looking statements.
About CVR Energy, Inc.
Headquartered in Sugar Land, Texas, CVR Energy, Inc. is an independent refiner and marketer of high value transportation fuels and, through a limited partnership, a producer of ammonia and urea ammonia nitrate fertilizers. CVR Energy's petroleum business includes a 113,500 barrel per day, complex, full- coking sour crude refinery in Coffeyville, Kan., In addition, CVR Energy's supporting businesses include a crude oil gathering system serving central Kansas, northern Oklahoma and southwest Nebraska; storage and terminal facilities for asphalt and refined fuels in Phillipsburg, Kan.; and a rack marketing division supplying product to customers through tanker trucks and at throughput terminals.
For further information, please contact:
Investor Relations: Media Relations:
Stirling Pack, Jr. Steve Eames
CVR Energy, Inc. CVR Energy, Inc.
281-207-3464 281-207-3550
CVR Energy, Inc.
The following tables summarize the financial data and key operating statistics for CVR and our two operating segments for the three and nine months ended September 30, 2006 and 2007. The summary financial data for our two operating segments does not include certain SG&A expenses and depreciation and amortization related to our corporate offices. The following data should be read in conjunction with our condensed consolidated financial statements and the notes thereto included in our Form 10-Q.
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2007 2006 2007
(unaudited)
(in millions, except as otherwise indicated)
Consolidated Statement
of Operations Data:
Net sales $778.6 $586.0 $2,329.2 $1,819.9
Cost of product sold
(exclusive of
depreciation and
amortization) 644.7 446.2 1,848.1 1,319.5
Direct operating
expense (exclusive
of depreciation and
amortization) 56.7 44.4 144.5 218.8
Selling, general and
administrative expense
(exclusive of
depreciation and
amortization) 12.3 14.0 32.8 42.1
Net costs associated
with flood(1) - 32.2 - 34.3
Depreciation and
amortization (2) (3) 12.8 10.5 36.8 42.7
Operating income $52.1 $38.7 $267.0 $162.5
Other income (expense) 1.7 0.2 3.1 0.9
Interest (expense) (10.7) (18.3) (33.0) (46.0)
Gain (loss) on
derivatives 171.2 40.5 44.7 (251.9)
Income (loss) before
income taxes and
minority interest in
subsidiaries $214.3 $61.1 $281.8 $(134.5)
Income tax (expense)
benefit (85.3) (47.6) (111.0) 93.4
Minority interest in
(income) loss of
subsidiaries - (0.1) - 0.2
Net income (loss) (4) $129.0 $13.4 $170.8 $(40.9)
Pro forma earnings
per share, basic $1.50 $0.16 $1.98 $(0.47)
Pro forma earnings
per share, diluted $1.50 $0.16 $1.98 $(0.47)
Pro forma weighted
average shares,
basic 86,141,291 86,141,291 86,141,291 86,141,291
Pro forma weighted
average shares,
diluted 86,158,791 86,158,791 86,158,791 86,141,291
Balance Sheet Data:
Cash and cash
equivalents $38.1 $27.3
Working capital 173.4 (27.0)
Total assets 1,397.7 1,848.6
Total debt, including
current portion 527.8 847.0
Minority interest in
subsidiaries - 5.2
Management units
subject to compromise 9.0 8.7
Members' equity 303.1 34.5
Stockholders' equity - -
Other Financial Data:
Depreciation and
amortization (3) $12.8 $10.5 $36.8 $42.7
Net Income (loss)
adjusted for unrealized
gain or loss from
Cash Flow Swap (5) 21.7 (40.8) 122.5 18.2
Cash flows (used in)
provided by operating
activities (22.4) 3.9 97.9 161.5
Cash flows (used in)
investing activities (86.8) (25.6) (173.0) (239.7)
Cash flows provided by
financing activities 19.4 26.0 48.5 63.6
Capital expenditures for
property, plant
and equipment 86.8 25.6 173.0 239.7
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2007 2006 2007
Key Operating Statistics:
Petroleum Business
Production (barrels
per day) (6) 107,094 58,382 106,975 71,454
Crude oil throughput
(barrels per day) (6) 94,019 52,497 94,061 64,829
Nitrogen Fertilizer
Business
Production Volume:
Ammonia (tons in
thousands) 78.3 75.9 283.9 244.9
UAN (tons in
thousands) 136.7 128.0 465.0 432.6
(1) Represents the write-off of approximate net costs associated with the
flood and oil spill that are not probable of recovery.
(2) Depreciation and amortization is comprised of the following
components as excluded from cost of products sold, direct operating
expense and selling, general and administrative expense:
Three Months Nine Months
Ended September 30, Ended September 30,
2006 2007 2006 2007
(unaudited)
(in millions)
Depreciation and
amortization included
in cost of product sold $0.5 $0.6 $1.6 $1.8
Depreciation and
amortization included
in direct operating
expense 11.7 9.6 34.5 40.2
Depreciation and
amortization included
in selling, general
and administrative
expense 0.6 0.3 0.7 0.7
Total depreciation
and amortization $12.8 $10.5 $36.8 $42.7
(3) Depreciation and amortization does not include approximately $7.6
million for both the three and nine months ended September 30, 2007
which is included in net costs associated with flood due to the
facilities being temporarily idled.
(4) The following are certain charges and costs incurred in each of the
relevant periods that are meaningful to understanding our net income
(loss) and in evaluating our performance due to their unusual or
infrequent nature:
Three Months Nine Months
Ended September 30, Ended September 30,
2006 2007 2006 2007
(unaudited)
(in millions)
Funded letter of credit
expense and interest
rate swap not included
in interest
expense (a) $(0.4) $0.7 $0.2 $0.9
Major scheduled
turnaround expense (b) 4.1 - 4.4 76.8
Unrealized (gain) loss
from Cash Flow Swap (178.5) (90.2) (80.3) 98.3
(a) Consists of fees which are expensed to selling, general and
administrative expense in connection with the funded letter of
credit facility of $150.0 million issued in support of the Cash
Flow Swap. We consider these fees to be equivalent to interest
expense and the fees are treated as such in the calculation of
EBITDA in the Credit Facility.
(b) Represents expenses associated with a major scheduled turnaround at
the nitrogen fertilizer plant and our refinery.
(5) Net income adjusted for unrealized gain or loss from Cash Flow Swap
results from adjusting for the derivative transaction that was
executed in conjunction with the acquisition of Coffeyville Group
Holdings, LLC by Coffeyville Acquisition LLC on June 24, 2005. On
June 16, 2005, Coffeyville Acquisition LLC entered into the Cash Flow
Swap with J. Aron, a subsidiary of The Goldman Sachs Group, Inc.,
and a related party of ours. The Cash Flow Swap was subsequently
assigned from Coffeyville Acquisition LLC to Coffeyville Resources,
LLC on June 24, 2005. The derivative took the form of three NYMEX
swap agreements whereby if crack spreads fall below the fixed level,
J. Aron agreed to pay the difference to us, and if crack spreads rise
above the fixed level, we agreed to pay the difference to J. Aron.
With crude oil capacity expected to reach 115,000 bpd by the end of
2007, the Cash Flow Swap represents approximately 58% and 14% of
crude oil capacity for the periods January 1, 2008 through June 30,
2009 and July 1, 2009 through June 30, 2010, respectively. Under the
terms of our Credit Facility and upon meeting specific requirements
related to our leverage ratio and our credit ratings, we may reduce
the Cash Flow Swap to 35,000 bpd, or approximately 30% of executed
crude oil capacity, for the period from April 1, 2008 through
December 31, 2008 and terminate the Cash Flow Swap in 2009 and 2010.
We have determined that the Cash Flow Swap does not qualify as a
hedge for hedge accounting purposes under current GAAP. As a result,
our periodic statements of operations reflect in each period material
amounts of unrealized gains and losses based on the increases or
decreases in market value of the unsettled position under the swap
agreements which is accounted for as a liability on our balance
sheet. As the crack spreads increase we are required to record an
increase in this liability account with a corresponding expense entry
to be made to our statement of operations. Conversely, as crack
spreads decline we are required to record a decrease in the swap
related liability and post a corresponding income entry to our
statement of operations. Because of this inverse relationship
between the economic outlook for our underlying business (as
represented by crack spread levels) and the income impact of the
unrecognized gains and losses, and given the significant periodic
fluctuations in the amounts of unrealized gains and losses,
management utilizes Net income adjusted for unrealized gain or loss
from Cash Flow Swap as a key indicator of our business performance.
In managing our business and assessing its growth and profitability
from a strategic and financial planning perspective, management and
our board of directors considers our U.S. GAAP net income results as
well as Net income adjusted for unrealized gain or loss from Cash
Flow Swap. We believe that Net income adjusted for unrealized gain
or loss from Cash Flow Swap enhances the understanding of our results
of operations by highlighting income attributable to our ongoing
operating performance exclusive of charges and income resulting from
mark to market adjustments that are not necessarily indicative of the
performance of our underlying business and our industry. The
adjustment has been made for the unrealized loss from Cash Flow Swap
net of its related tax benefit.
Net income adjusted for unrealized gain or loss from Cash Flow Swap
is not a recognized term under GAAP and should not be substituted for
net income as a measure of our performance but instead should be
utilized as a supplemental measure of financial performance or
liquidity in evaluating our business. Because Net income adjusted
for unrealized gain or loss from Cash Flow Swap excludes mark to
market adjustments, the measure does not reflect the fair market
value of our Cash Flow Swap in our net income. As a result, the
measure does not include potential cash payments that may be required
to be made on the Cash Flow Swap in the future. Also, our
presentation of this non-GAAP measure may not be comparable to
similarly titled measures of other companies.
The following is a reconciliation of Net income (loss) adjusted for
unrealized gain or loss from Cash Flow Swap to Net income:
Three Months Nine Months
Ended September 30, Ended September 30,
2006 2007 2006 2007
(unaudited)
(in millions)
Net income (loss)
adjusted for unrealized
gain or loss from
Cash Flow Swap $21.7 $(40.8) $122.5 $18.2
Plus:
Unrealized gain
(loss) from Cash
Flow Swap, net of
taxes 107.3 54.2 48.3 (59.1)
Net income (loss) $129.0 $13.4 $170.8 $(40.9)
(6) Barrels per day is calculated by dividing the volume in the period by
the number of calendar days in the period. Barrels per day as shown
here is impacted by plant down-time and other plant disruptions and
does not represent the capacity of the facility's continuous
operations.
Three Months Nine Months
Ended September 30, Ended September 30,
2006 2007 2006 2007
(unaudited)
Petroleum Business: (in millions, except as otherwise indicated)
Net sales $747.3 $545.9 $2,205.0 $1,707.3
Cost of product sold
(exclusive of
depreciation and
amortization) 637.5 443.1 1,828.1 1,312.2
Direct operating
expense (exclusive of
depreciation and
amortization) 38.2 29.5 97.3 170.7
Net costs associated
with flood - 28.6 - 30.6
Depreciation and
amortization 7.9 6.6 23.6 29.7
Gross profit $63.7 $38.1 $256.0 $164.1
Plus direct operating
expense (exclusive of
depreciation and
amortization) 38.2 29.5 97.3 170.7
Plus Net costs
associated with flood - 28.6 - 30.6
Plus depreciation and
amortization 7.9 6.6 23.6 29.7
Refining margin (1) $109.8 $102.8 $376.9 $395.1
Refining margin per
crude oil throughput
barrel $12.69 $21.28 $14.68 $22.32
Gross profit per crude
oil throughput barrel $7.36 $7.89 $9.97 $9.27
Direct operating expense
(exclusive of
depreciation and
amortization) per crude
oil throughput barrel $4.42 $6.11 $3.79 $9.64
Operating income (loss) 55.5 26.5 233.5 129.4
(1) Refining margin is a measurement calculated as the difference between
net sales and cost of products sold (exclusive of depreciation and
amortization).Refining margin is a non-GAAP measure that we believe
is important to investors in evaluating our refinery's performance as
a general indication of the amount above our cost of products sold
that we are able to sell refined products. Each of the components
used in this calculation (net sales and cost of products sold
exclusive of depreciation and amortization) can be taken directly
from our statement of operations. Our calculation of refining margin
may differ from similar calculations of other companies in our
industry, thereby limiting its usefulness as a comparative measure.
Three Months Ended Nine Months Ended
September 30, September 30,
Market Indicators 2006 2007 2006 2007
(dollars per barrel)
West Texas Intermediate
(WTI) crude oil $70.54 $75.15 $68.26 $66.19
NYMEX 2-1-1 Crack
Spread 10.85 12.12 11.63 15.45
Crude Oil Differentials:
WTI less WTS (sour) 4.54 5.30 5.43 4.69
WTI less Maya (heavy
sour) 14.89 12.34 15.55 11.56
WTI less Dated Brent
(foreign) 0.99 0.52 1.33 0.89
PADD II Group 3 versus
NYMEX Basis:
Gasoline 4.00 8.93 1.82 4.74
Heating Oil 12.49 9.97 7.90 9.54
Three Months Ended Nine Months Ended
September 30, September 30,
Company Operating 2006 2007 2006 2007
Statistics (unaudited)
(dollars per barrel)
Per barrel profit,
margin and expense
of crude oil
throughput:
Refining margin $12.69 $21.28 $14.68 $22.32
Gross profit 7.36 7.89 9.97 9.27
Direct operating expense
(exclusive of
depreciation and
amortization) 4.42 6.11 3.79 9.64
Per gallon sales price:
Gasoline 2.11 2.28 1.99 2.14
Distillate 2.20 2.35 2.04 2.12
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2007 2006 2007
Barrels Barrels Barrels Barrels
Per Day % Per Day % Per Day % Per Day %
Selected
Company
Volumetric
Data
Production:
Total
gasoline 41,980 39.2 25,971 44.4 46,137 43.1 29,949 41.9
Total
distillate 39,682 37.1 23,448 40.2 41,401 38.7 29,511 41.3
Total
other 25,432 23.7 8,963 15.4 19,437 18.2 11,994 16.8
Total all
produ-
ction 107,094 100.0 58,382 100.0 106,975 100.0 71,454 100.0
Crude oil
throughput 94,019 92.3 52,497 93.9 94,061 92.6 64,829 94.7
All other
inputs 7,831 7.7 3,403 6.1 7,463 7.4 3,643 5.3
Total
feed-
stocks 101,850 100.0 55,900 100.0 101,524 100.0 68,472 100.0
Three Months Ended
September 30,
2006 2007
Total Total
Barrels % Barrels %
Crude oil throughput
by crude type:
Sweet 5,466,637 63.2 2,835,032 58.7
Light/medium sour 3,105,258 35.9 1,168,786 24.2
Heavy sour 77,848 0.9 825,878 17.1
Total crude oil throughput 8,649,743 100.0 4,829,696 100.0
Nine Months Ended
September 30,
2006 2007
Total Total
Barrels % Barrels %
Crude oil throughput
by crude type:
Sweet 12,916,402 50.3 11,203,099 63.3
Light/medium sour 12,685,293 49.4 5,256,430 29.7
Heavy sour 77,036 0.3 1,238,889 7.0
Total crude oil throughput 25,678,731 100.0 17,698,418 100.0
Three Months Nine Months
Ended September 30, Ended September 30,
2006 2007 2006 2007
Nitrogen Fertilizer (unaudited)
Business: (in millions, except as otherwise indicated)
Net sales $32.5 $40.8 $128.2 $115.1
Cost of product
sold (exclusive of
depreciation and
amortization) 8.3 3.7 23.8 9.9
Direct operating
expense (exclusive of
depreciation and
amortization) 18.5 14.9 47.2 48.1
Net costs associated
with flood - 1.9 - 2.0
Depreciation and
amortization 4.3 3.6 12.7 12.4
Operating income (loss) (3.0) 13.8 34.1 34.9
Three Months Ended Nine Months Ended
September 30, September 30,
Company Operating 2006 2007 2006 2007
Statistics (unaudited)
Production (thousand tons):
Ammonia 78.3 75.9 283.9 244.9
UAN 136.7 128.0 465.0 432.6
Total 215.0 203.9 748.9 677.5
Sales (thousand tons) (1):
Ammonia 30.6 24.7 96.8 58.8
UAN 138.4 120.6 477.7 414.2
Total 169.0 145.3 574.5 473.0
Product pricing (plant
gate) (dollars per
ton) (1):
Ammonia $283 $363 $346 $358
UAN 141 234 169 203
Three Months Ended Nine Months Ended
September 30, September 30,
Company Operating 2006 2007 2006 2007
Statistics (unaudited)
On-stream factor (2):
Gasification 80.7% 81.3% 91.7% 87.4%
Ammonia 74.2% 80.4% 87.8% 84.6%
UAN 76.2% 71.8% 87.9% 78.5%
Reconciliation to net
sales (dollars in
thousands):
Freight in revenue $4,420 $3,581 $13,860 $10,011
Sales net plant gate 28,103 37,175 114,295 105,080
Total net sales 32,523 40,756 128,155 115,091
(1) Plant gate sales per ton represents net sales less freight revenue
divided by sales tons. Plant gate pricing per ton is shown in order
to provide industry comparability.
(2) On-stream factor is the total number of hours operated divided by the
total number of hours in the reporting period.
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DATASOURCE: CVR Energy, Inc.
CONTACT: Investor Relations, Stirling Pack, Jr., +1-281-207-3464,
; or Media Relations, Steve Eames,
+1-281-207-3550, , both of CVR Energy, Inc.
Web site: http://www.cvrenergy.com/