CVR Energy Reports Fourth Quarter and Full-Year Results
SUGAR LAND, Texas, March 1 /PRNewswire-FirstCall/ -- CVR Energy, Inc. (NYSE: CVI) today reported net income of $69.4 million for the full year of 2009, or $0.80 per fully diluted share, and net income of $9.5 million for the fourth quarter 2009, or $0.11 per fully diluted share, on full-year net sales of $3,136.3 million and fourth quarter net sales of $921.9 million.
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The 2009 results compare to net income for the full year 2008 of $163.9 million, or $1.90 per fully diluted share, and fourth quarter 2008 net income of $11.1 million, or $0.13 per fully diluted share. The 2008 results came on net sales of $5,016.1 million for the full year and net sales of $699.7 million in the fourth quarter.
Operating income for the full year in 2009 was $208.2 million, compared to $148.7 million in 2008. The company reported a fourth quarter 2009 operating income of $19.6 million, compared to an operating loss of $133.6 million for the fourth quarter 2008.
"We are pleased with our fourth quarter results in a difficult environment. Refining margins remain under pressure because of the current economic downturn, with demand for transportation fuels down as people drive fewer miles and manufacturers ship fewer goods," said Chief Executive Officer Jack Lipinski. "However, nitrogen fertilizer prices continue a healthy improvement from their low point last June.
"Because of the investments we have made in the past, we are in a good position to weather the current downturn and expect to emerge a stronger company when the economy more fully recovers."
Several items affected fourth quarter and full year 2009 and 2008 net income and earnings per share. These items included expenses or reversals thereof for share-based compensation and the impact of "unrealized gain or loss from cash flow swap." The cash flow swap agreement was terminated effective October 2009.
In addition, the 2008 results were affected by the costs of a planned turnaround at the nitrogen fertilizer facility and a goodwill impairment loss of $42.8 million taken in the fourth quarter of that year resulting from the application of impairment testing criteria under accounting policies. No impairment charges occurred in 2009.
Also, results for the full year and fourth quarter of 2009 were favorably impacted by our use of first-in/first-out (FIFO) accounting in the amounts of $67.9 million and $20.5 million respectively, as compared to unfavorable impacts in 2008 of $102.5 million and $117.1 million for the full year and fourth quarter, respectively.
Revised to include the above items net of tax impact, adjusted net income for the full year 2009 was $60.4 million, or $0.70 per share, and an adjusted net loss for the fourth quarter of $13.8 million, or a loss of $0.16 per share. The 2009 results compare to adjusted net income of $85.4 million, or $0.99 per share, for the full year 2008, and $11.5 million, or $0.13 per share, for the fourth quarter 2008.
Petroleum Business
The petroleum business reported operating income for the full year 2009 of $170.2 million on net sales of $2,934.9 million and for the fourth quarter 2009 posted operating income of $9.0 million on net sales of $883.2 million. This compares to operating income of $31.9 million for the full year 2008 on net sales of $4,774.3 million and an operating loss in the fourth quarter 2008 of $153.8 million on net sales of $636.4 million. The 2009 fourth quarter net income was favorably impacted by FIFO accounting in the amount of $20.5 million compared to an unfavorable FIFO impact of $117.1 million in the fourth quarter 2008.
Crude throughput for the full year of 2009 averaged 108,226 barrels per day (bpd), and for the fourth quarter 2009 crude throughput averaged 113,576 bpd. These figures compare to an average crude throughput of 105,837 bpd for the full year in 2008. Including all feedstocks and blendstocks, total throughput in 2009 averaged 120,239 bpd for the full year and 125,966 bpd for the fourth quarter.
Gross profit per barrel was $5.42 for the full year 2009 and $1.09 in the fourth quarter. Refining margin per barrel adjusted for FIFO impact, a non-GAAP measure, was $8.93 for the full year 2009 and $4.21 for the fourth quarter (see footnote 6 in the accompanying tables).
Direct operating expenses per barrel (exclusive of depreciation and amortization) were $3.58 for the full year 2009, down from $3.91 for the full year 2008. For the fourth quarter 2009, direct operating expenses were $3.53 per barrel, compared to $3.49 per barrel in the fourth quarter of 2008.
Nitrogen Fertilizer Business
Nitrogen fertilizer operations reported 2009 full year operating income of $48.9 million on net sales of $208.4 million, compared to full year operating income of $116.8 million in 2008 on net sales of $263.0 million. For the fourth quarter 2009, operating income was $7.0 million on net sales of $39.3 million compared to operating income of $21.2 million on net sales of $67.4 million in the fourth quarter of 2008.
The nitrogen fertilizer plant produced 156,600 net tons of ammonia available for sale during 2009, compared to 112,500 net tons in 2008, and for the fourth quarter of 2009 produced 39,300 net tons of ammonia available for sale compared to 29,200 net tons in the fourth quarter of 2008. The plant produced 677,700 tons of UAN during the full year of 2009 compared to 599,200 tons in 2008, and 176,600 tons of UAN in the fourth quarter 2009 compared to 137,200 tons in the fourth quarter of 2008.
For the full year 2009, average realized sales prices for ammonia and UAN were $314 per ton and $198 per ton respectively, compared to $557 per ton and $303 per ton respectively in 2008. For the fourth quarter 2009, average realized sales prices for ammonia and UAN were $303 per ton and $132 per ton respectively, compared to $536 and $324 per ton for the same period in 2008.
For the year, the gasification unit had an on-stream rate of 97.4 percent, ammonia was on stream 96.5 percent, and UAN 94.1 percent. For the quarter, on-stream rates were 98.9 percent for gasification, 98.1 percent for ammonia, and 96.7 percent for UAN.
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, 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 and other disclosures included in our annual reports on Form 10-K and quarterly reports on Form 10-Q filed with the Securities Exchange Commission. 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.'s subsidiary and affiliated businesses include an independent refiner that operates a 115,000 barrel per day refinery in Coffeyville, Kan., and markets high value transportation fuels supplied to customers through tanker trucks and pipeline terminals; a crude oil gathering system serving central Kansas, Oklahoma, eastern Colorado, western Missouri and southwest Nebraska; an asphalt and refined fuels storage and terminal business in Phillipsburg, Kan.; and through a limited partnership, an ammonia and urea ammonium nitrate fertilizer business located in Coffeyville, Kan.
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 Energy and our two operating segments for the three and
twelve months ended December 31, 2009 and 2008. Select balance sheet data
is as of December 31, 2009 and 2008. The summary financial data for our
two operating segments does not include certain selling, general and
administrative expenses and depreciation and amortization related to our
corporate offices.
Three Months Ended Twelve Months Ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
(in millions, except share data)
(unaudited) (unaudited)
Consolidated Statement
of Operations Data:
Net sales $921.9 $699.7 $3,136.3 $5,016.1
Cost of product sold* 825.7 697.8 2,547.7 4,461.8
Direct operating expenses* (1) 56.9 58.0 226.0 237.5
Selling, general and
administrative expenses* (1) (1.5) 14.8 68.9 35.2
Net costs associated with flood - (1.0) 0.6 7.9
Depreciation and amortization 21.2 20.9 84.9 82.2
Goodwill impairment (2) - 42.8 - 42.8
--- ---- --- ----
Operating income (loss) 19.6 (133.6) 208.2 148.7
Interest expense and other
financing costs (10.6) (10.2) (44.2) (40.3)
Gain (loss) on derivatives, net (2.3) 175.8 (65.3) 125.3
Loss on extinguishment of debt (1.4) (10.0) (2.1) (10.0)
Other income, net (1) 0.5 1.7 2.0 4.1
--- --- --- ----
Income before income tax
(expense) benefit 5.8 23.7 98.6 227.8
Income tax (expense) benefit 3.7 (12.6) (29.2) (63.9)
--- ----- ----- -----
Net income $9.5 $11.1 $69.4 $163.9
* Amounts shown are exclusive of depreciation and amortization.
Basic earnings per share $0.11 $0.13 $ 0.80 $1.90
Diluted earnings per share $0.11 $0.13 $ 0.80 $1.90
Weighted average common shares
outstanding:
Basic 86,260,539 86,158,206 86,248,205 86,145,543
Diluted 86,369,127 86,236,872 86,342,433 86,224,209
As of December 31, As of December 31,
------------------ ------------------
2009 2008
---- ----
(in millions)
(unaudited)
Balance Sheet Data:
Cash and cash equivalents $36.9 $8.9
Working capital 235.4 128.5
Total assets 1,614.5 1,610.5
Total debt, including current portion 491.3 495.9
Total CVR Stockholders' equity 653.8 579.5
Three Months Ended Twelve Months Ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
(in millions)
(unaudited) (unaudited)
Other Financial Data:
Cash flows provided by
(used in) operating activities $(32.9) $(21.6) $85.3 $83.2
Cash flows used in investing
activities (11.8) (19.0) (48.3) (86.5)
Cash flows used in financing
activities (5.3) (10.3) (9.0) (18.3)
Non-GAAP Measures:
Reconciliation of Net Income
to Adjusted Net Income (Loss):
Net income $9.5 $11.1 $69.4 $163.9
Less:
Unrealized gain (loss) from
Cash Flow Swap, net of
taxes (3) (2.1) 111.0 (24.7) 152.7
---- ----- ----- -----
Net income (loss) adjusted for
unrealized gain or loss from
Cash Flow Swap (3) $11.6 $(99.9) $94.1 $11.2
Adjustments:
Goodwill impairment (2) - 42.8 - 42.8
Share-based compensation,
net of taxes (1) (13.0) (4.0) 7.3 (32.4)
FIFO impact (favorable)
unfavorable, net of taxes (4) (12.4) 70.6 (41.0) 61.8
Major scheduled turnaround,
net of taxes - 2.0 - 2.0
--- --- --- ---
Adjusted net income (loss)
(5) $(13.8) $11.5 $60.4 $85.4
Adjusted net income (loss) per
diluted share $(0.16) $0.13 $0.70 $0.99
Three Months Ended Twelve Months Ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
(in millions, except operating statistics)
(unaudited) (unaudited)
Petroleum Business Financial
Results:
Net Sales $883.2 $636.4 $2,934.9 $4,774.3
Cost of product sold* 818.8 691.0 2,514.3 4,449.4
Direct operating expenses* (1) 36.9 31.3 141.6 151.4
Net costs associated with flood - (1.5) 0.6 6.4
Depreciation and amortization 16.1 15.9 64.4 62.7
---- ---- ---- ----
Gross profit (loss) $11.4 $(100.3) $214.0 $104.4
Plus direct operating expenses* (1) 36.9 31.3 141.6 151.4
Plus net costs associated with flood - (1.5) 0.6 6.4
Plus depreciation and amortization 16.1 15.9 64.4 62.7
---- ---- ---- ----
Refining margin (6) $64.4 $(54.6) $420.6 $324.9
FIFO impact (favorable)
unfavorable (4) (20.5) 117.1 (67.9) 102.5
----- ----- ----- -----
Refining margin adjusted for
FIFO impact (7) $43.9 $62.5 $352.7 $427.4
Operating income (loss) $9.0 $(153.8) $170.2 $31.9
Goodwill impairment (2) - 42.8 - 42.8
Share-based compensation (1) (5.1) (1.3) (3.7) (10.8)
FIFO impact (favorable)
unfavorable (4) (20.5) 117.1 (67.9) 102.5
----- ----- ----- -----
Adjusted operating income
(loss) (8) $(16.6) $4.8 $98.6 $166.4
Petroleum Key Operating Statistics:
Per crude oil throughput barrel:
Refining margin (6) $6.17 $(6.08) $10.65 $8.39
FIFO impact (favorable)
unfavorable (4) (1.96) 13.03 (1.72) 2.64
Refining margin adjusted for
FIFO impact (7) 4.21 6.95 8.93 11.03
Gross profit (loss) 1.09 (11.17) 5.42 2.69
Direct operating expenses* (1) 3.53 3.49 3.58 3.91
* Amounts shown are exclusive of depreciation and amortization
Three Months Ended
December 31,
------------
2009 2008
---- ----
Refining Throughput and (unaudited)
Production Data
(barrels per day)
Throughput:
Sweet 82,862 65.8% 70,034 63.2%
Light/medium sour 17,768 14.1% 17,448 15.8%
Heavy sour 12,946 10.3% 10,175 9.2%
------ ---- ------ ---
Total crude oil throughput 113,576 90.2% 97,657 88.2%
All other feed and blendstocks 12,390 9.8% 13,074 11.8%
------ --- ------ ----
Total throughput 125,966 100.0% 110,731 100.0%
Production:
Gasoline 65,865 51.7% 55,833 50.2%
Distillate 50,111 39.3% 44,526 40.0%
Other (excluding internally
produced fuel) 11,462 9.0% 10,843 9.8%
------ --- ------ ---
Total refining production
(excluding internally
produced fuel) 127,438 100.0% 111,202 100.0%
Product price (dollars per gallon):
Gasoline $1.94 $1.36
Distillate $2.00 $1.87
Market Indicators (dollars per barrel):
West Texas Intermediate (WTI)
NYMEX $76.13 $59.08
Crude Oil Differentials:
WTI less WTS (light/medium sour) 2.23 3.53
WTI less WCS (heavy sour) 10.33 14.56
NYMEX Crack Spreads:
Gasoline 5.20 (2.71)
Heating Oil 7.46 18.35
NYMEX 2-1-1 Crack Spread 6.33 7.82
PADD II Group 3 Basis:
Gasoline (0.62) 1.41
Ultra Low Sulfur Diesel (0.45) 3.00
PADD II Group 3 Product Crack:
Gasoline 4.58 (1.30)
Ultra Low Sulfur Diesel 7.01 21.36
PADD II Group 3 2-1-1 5.80 10.03
Twelve Months Ended
December 31,
------------
2009 2008
---- ----
Refining Throughput and (unaudited)
Production Data
(barrels per day)
Throughput:
Sweet 82,598 68.7% 77,315 65.7%
Light/medium sour 15,602 13.0% 16,795 14.3%
Heavy sour 10,026 8.3% 11,727 10.0%
------ --- ------ ----
Total crude oil throughput 108,226 90.0% 105,837 90.0%
All other feed and blendstocks 12,013 10.0% 11,882 10.0%
------ ---- ------ ----
Total throughput 120,239 100.0% 117,719 100.0%
Production:
Gasoline 62,309 51.6% 56,852 48.0%
Distillate 46,909 38.8% 48,257 40.7%
Other (excluding internally
produced fuel) 11,549 9.6% 13,422 11.3%
------ --- ------ ----
Total refining production
(excluding internally
produced fuel) 120,767 100.0% 118,531 100.0%
Product price (dollars per gallon):
Gasoline $1.68 $2.50
Distillate $1.68 $3.00
Market Indicators (dollars
per barrel):
West Texas Intermediate
(WTI) NYMEX $62.09 $99.75
Crude Oil Differentials:
WTI less WTS (light/medium sour) 1.70 3.44
WTI less WCS (heavy sour) 7.82 18.72
NYMEX Crack Spreads:
Gasoline 9.05 4.76
Heating Oil 8.03 20.25
NYMEX 2-1-1 Crack Spread 8.54 12.50
PADD II Group 3 Basis:
Gasoline (1.25) 0.12
Ultra Low Sulfur Diesel 0.03 4.22
PADD II Group 3 Product Crack:
Gasoline 7.81 4.88
Ultra Low Sulfur Diesel 8.06 24.47
PADD II Group 3 2-1-1 7.93 14.68
Three Months Ended Twelve Months Ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
(in millions, except as noted)
(unaudited) (unaudited)
Nitrogen Fertilizer Business
Financial Results:
Net sales $39.3 $67.4 $208.4 $263.0
Cost of product sold* 7.5 10.7 42.2 32.6
Direct operating expenses* (1) 20.1 26.7 84.5 86.1
Net cost associated with flood - - - -
Depreciation and amortization 4.7 4.5 18.7 18.0
Operating Income $7.0 $21.2 $48.9 $116.8
Share-based compensation (1) (2.6) (1.6) 3.2 (10.6)
Major scheduled turnaround - 3.3 - 3.3
--- --- --- ----
Adjusted operating income (8) $4.4 $22.9 $52.1 $109.5
Nitrogen Fertilizer Key Operating
Statistics:
Production (thousand tons):
Ammonia (gross produced) (9) 111.8 85.6 435.2 359.1
Ammonia (net available for
sale) (9) 39.3 29.2 156.6 112.5
UAN 176.6 137.2 677.7 599.2
Petroleum coke consumed
(thousand tons) 123.1 102.1 483.5 451.9
Petroleum coke (cost per ton) $15 $33 $27 $31
Sales (thousand tons):
Ammonia 34.4 34.2 159.9 99.4
UAN 177.1 132.2 686.0 594.2
----- ----- ----- -----
Total sales 211.5 166.4 845.9 693.6
Product pricing (plant gate)
(dollars per ton) (10):
Ammonia $303 $536 $314 $557
UAN $132 $324 $198 $303
On-stream factors (11):
Gasification 98.9% 78.0% 97.4% 87.8%
Ammonia 98.1% 76.4% 96.5% 86.2%
UAN 96.7% 74.7% 94.1% 83.4%
Reconciliation to net sales
(dollars in millions):
Freight in revenue $5.3 $5.3 $21.3 $18.9
Hydrogen revenue 0.2 1.0 0.8 9.0
Sales net plant gate 33.8 61.1 186.3 235.1
---- ---- ----- -----
Total net sales $39.3 $67.4 $208.4 $263.0
Market Indicators:
Natural gas NYMEX (dollars
per MMBtu) $4.93 $6.40 $4.16 $8.91
Ammonia - Southern Plains
(dollars per ton) $302 $619 $306 $707
UAN - Mid Cornbelt (dollars
per ton) $198 $397 $218 $422
(1) The Company has two classifications for share-based compensation
awards. Phantom Unit Plan awards are accounted for as liability
based awards. In accordance with Financial Accounting Standards
Board ("FASB") Accounting Standards Codification ("ASC") ASC 718,
Compensation – Stock Compensation, the expense associated with
these awards is based on the current fair value of the awards. These
awards are remeasured at each reporting date until the awards are
settled in their entirety. Override unit awards are accounted for as
equity-classified awards using the guidance for non-employee awards
prescribed by FASB ASC 323. ASC 323 includes guidance for the proper
accounting by an investor for stock-based compensation granted to
employees of an equity method investee. In addition, guidance set
forth in FASB ASC 505, provides the treatment related to accounting
for equity investments that are issued to other than employees for
acquiring, or in conjunction with selling goods or services. In
accordance with that guidance, the expense associated with these
awards is based on the current fair value of the awards. These awards
are remeasured at each reporting date until the awards are vested
(when the performance commitment is reached). The value of all of
these awards can fluctuate significantly between periods.
The compensation expense associated with our Phantom Unit Plan and
override units is recorded in direct operating expenses, selling,
general and administrative expenses, and other income. Below is a
breakdown of the expense by statement of operations caption and by
business segment.
Three Months Ended Twelve Months Ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
(in millions)
Share-based compensation
recorded in direct operating (unaudited) (unaudited)
expenses:
Petroleum $(0.4) $(0.3) $(0.3) $(4.6)
Nitrogen (0.4) (0.2) 0.2 (1.6)
Corporate - - - -
--- --- --- ---
(0.8) (0.5) (0.1) (6.2)
Share-based compensation recorded in
selling, general and administrative
expenses:
Petroleum (4.7) (1.0) (3.4) (6.2)
Nitrogen (2.2) (1.4) 3.0 (9.0)
Corporate (8.9) (3.0) 9.3 (21.1)
---- ---- --- -----
(15.8) (5.4) 8.9 (36.3)
Share-based compensation recorded
in other income - 0.3 - -
--- --- --- ---
Total share-based compensation $(16.6) $(5.6) $8.8 $(42.5)
Income tax expense (benefit) of
share-based compensation 3.6 1.6 (1.5) 10.1
--- --- ---- ----
Share-based compensation,
net of taxes $(13.0) $(4.0) $7.3 $(32.4)
(2) Upon applying the goodwill impairment testing criteria under
existing accounting rules during the fourth quarter of 2008, we
determined that the goodwill of the petroleum segment was impaired,
which resulted in a goodwill impairment loss of $42.8 million in the
fourth quarter. This goodwill impairment is included in the
petroleum segment operating income (loss) adjusted for special items
but is excluded in the refining margin and the refining margin per
crude oil throughput barrel data.
(3) The unrealized gain (loss) from Cash Flow Swap related to 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 &
Company, 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 absolute (i.e., in dollar terms, not a percentage of crude
oil prices) crack spreads fell below the fixed level, J. Aron agreed
to pay the difference to us, and if crack spreads rose above the
fixed level, we agreed to pay the difference to J. Aron. Based upon
expected crude oil capacity of 115,000 bpd, the Cash Flow Swap
represented approximately 14% of crude oil capacity for the period
from July 1, 2009 through June 30, 2010.
We have determined that the Cash Flow Swap did not qualify as a hedge
for hedge accounting purposes under current U.S. generally accepted
accounting principles ("GAAP"). As a result, our periodic Statements
of Operations reflected 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 are
accounted for as an asset (receivable from swap counterparty) or
liability (payable to swap counterparty) on our balance sheet, as
applicable. As the absolute crack spreads increased, we were required
to record an increase in the liability account with a corresponding
expense entry to be made to our Statement of Operations. Conversely,
as absolute crack spreads decline, we were 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 unrealized gains and losses, and given the significant
periodic fluctuations in the amounts of unrealized gains and losses,
management utilized net income (loss) 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 consider our GAAP net income
results as well as net income (loss) adjusted for unrealized gain or
loss from Cash Flow Swap. We believe that net income (loss) 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 gain or loss from Cash Flow Swap net of its related tax
effect.
Net income (loss) adjusted for unrealized gain or loss from Cash Flow
Swap is not a recognized financial measure 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 in evaluating our business. Our presentation of this non-
GAAP measure may not be comparable to similarly titled measures of
other companies. We believe that net income (loss) adjusted for
unrealized gain or loss from Cash Flow Swap is important to enable
investors to better understand and evaluate our ongoing operating
results and allows for greater transparency in the review of our
overall financial, operational and economic performance.
The Cash Flow Swap terminated effective October 8, 2009. The
termination resulted in a settlement whereby J. Aron paid Coffeyville
Resources, LLC approximately $3.9 million. The Company was permitted
to terminate the Cash Flow Swap pursuant to an amendment to the
company's credit agreement entered into on October 2, 2009.
(4) First-in, first-out (FIFO) is the Company's basis for determining
inventory value on a GAAP basis. Changes in crude oil prices can
cause fluctuations in the inventory valuation of our crude oil, work
in process and finished goods thereby resulting in favorable FIFO
impacts when crude oil prices increase and unfavorable FIFO impacts
when crude oil prices decrease. The FIFO 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 FIFO
impact per crude oil throughput barrel, we utilize the total dollar
figures for the FIFO impact and divide by the number of crude oil
throughput barrels for the period. Below is the gross and tax
affected FIFO impacts for the applicable periods:
Three Months Ended Twelve Months Ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
(in millions)
(unaudited) (unaudited)
Petroleum:
FIFO impact (favorable)
unfavorable $(20.5) $117.1 $(67.9) $102.5
Income tax expense (benefit)
of FIFO 8.1 (46.5) 26.9 (40.7)
--- ----- ---- -----
FIFO impact, (favorable)
unfavorable net of taxes $(12.4) $70.6 $(41.0) $61.8
(5) Net income (loss) adjusted for unrealized gain or loss from Cash Flow
Swap and other items results from adjusting net income for items that
the Company believes are needed in order to evaluate results in a
more comparative analysis from period to period. For the three and
twelve months ended December 31, 2009 and 2008, these items included
the unrealized gain (loss) from Cash Flow Swap, share-based
compensation expense, goodwill impairment, the Company's impact of
the accounting for its inventory under FIFO and major scheduled
turnaround expenses. Adjusted net income (loss) is not a recognized
term under GAAP and should not be substituted for net income (loss)
as a measure of our performance but rather should be utilized as a
supplemental measure of financial performance in evaluating our
business. Management believes that adjusted net income (loss)
provides relevant and useful information that enables investors to
better understand and evaluate our ongoing operating results and
allow for greater transparency in the review of our overall
financial, operational and economic performance.
(6) Refining margin is a measurement calculated as the difference between
net sales and cost of product 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 product sold
that we are able to sell refined products. Each of the components
used in this calculation (net sales and cost of product 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.
In order to derive the refining margin per crude oil throughput
barrel, we utilize the total dollar figures for refining margin as
derived above and divide by the applicable number of crude oil
throughput barrels for the period. We believe that refining margin is
important to enable investors to better understand and evaluate our
ongoing operating results and allow for greater transparency in the
review of our overall financial, operational and economic
performance.
(7) Refining margin adjusted for FIFO impact is a measurement calculated
as the difference between net sales and cost of product sold
(exclusive of depreciation and amortization) adjusted for FIFO
impacts. Under our FIFO accounting method, changes in crude oil
prices can cause fluctuations in the inventory valuation of our crude
oil, work in process and finished goods, thereby resulting in
favorable FIFO impacts when crude oil prices increase and unfavorable
FIFO impacts when crude oil prices decrease. Refining margin adjusted
for FIFO impact 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 product sold (taking into
account the impact of our utilization of FIFO) that we are able to
sell refined products. Our calculation of refining margin adjusted
for FIFO impact may differ from calculations of other companies in
our industry, thereby limiting its usefulness as a comparative
measure.
(8) Adjusted operating income (loss), adjusted for impacts of other items
is a non-GAAP measure that we believe is important in evaluating the
on-going operations of our segments. This calculation is made in
order to adjust for what the Company believes are significant non-
operating items such as the impact of our share-based compensation,
major scheduled turnaround costs and the impacts of our accounting
under FIFO for the petroleum segment. In addition, management \
evaluates operating income adjusted for non-recurring events, such as
the goodwill impairment recognized in the Petroleum segment in 2008.
Adjusted operating income (loss) is not a recognized term under GAAP
and should not be substituted for operating income as a measure of
our performance but instead should be utilized as a supplemental
measure of financial performance in evaluating our business. We
believe that adjusted operating income (loss) is important to enable
investors to better understand and evaluate our ongoing operating
results and allow for greater transparency in the review of our
overall financial, operational and economic performance.
(9) The gross tons produced for ammonia represent the total ammonia
produced, including ammonia produced that was upgraded into UAN. The
net tons available for sale represent the ammonia available for sale
that was not upgraded into UAN.
(10) Plant gate sales per ton represent net sales less freight and
hydrogen revenue divided by product sales volume in tons in the
reporting period. Plant gate pricing per ton is shown in order to
provide a pricing measure that is comparable across the fertilizer
industry.
(11) On-stream factor is the total number of hours operated divided by the
total number of hours in the reporting period. Excluding the impact
of the Linde air separation unit outage in 2009 and the major
scheduled turnaround in 2008, (i) the on-stream factors for the
three months ended December 31, 2009 would not have changed, (ii) the
on-stream factors for the twelve months ended December 31, 2009
adjusted for the Linde air separation unit outage would have been
99.3% for gasifier, 98.4% for ammonia and 96.1% for UAN, (iii) the
on-stream factors for the three months ended December 31, 2008
adjusted for turnaround would have been 93.8% for gasifier, 92.1% for
ammonia and 90.4% for UAN, and (iv) the on-stream factors for the
twelve months ended December 31, 2008 adjusted for turnaround would
have been 91.7% for gasifier, 90.2% for ammonia and 87.4% for UAN.
Use of Non-GAAP Financial Measures
To supplement the actual results in accordance with GAAP for the applicable periods, the Company also uses non-GAAP measures as discussed above, which are adjusted for GAAP-based results. The use of non-GAAP adjustments are not in accordance with or an alternate for GAAP. The adjustments are provided to enhance an overall understanding of the Company's financial performance for the applicable periods and are indicators management believes are relevant and useful for planning and forecasting future periods.
SOURCE CVR Energy, Inc.
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