SUGAR LAND, Texas, Nov. 2 /PRNewswire-FirstCall/ -- CVR Energy,
Inc. (NYSE:CVI), a refiner and marketer of petroleum fuels and a
nitrogen fertilizer manufacturer, today reported a third quarter
2009 net loss of $13.4 million, or a loss of $0.16 per share,
resulting in net income for the nine months of $59.9 million, or
net income of $0.69 per share. (Logo:
http://www.newscom.com/cgi-bin/prnh/20071203/CVRLOGO) In 2008, the
company reported net income in the third quarter of $99.7 million,
or $1.16 per share, with net income for the nine months of $152.9
million, or $1.77 per share. The 2009 third quarter results came on
net sales of $811.7 million versus net sales in the third quarter
of 2008 of $1,580.9 million. For the nine months in 2009 net sales
were $2,214.4 million versus $4,316.4 million for the similar
period in 2008. "Besides lower commodity prices that affected our
industries, the company was particularly impacted by unexpected
production interruptions at the refinery during the third quarter,
especially problems involving our Fluid Catalytic Cracking Unit and
our Continuous Catalytic Reformer," said Chief Executive Officer
Jack Lipinski. "This lost production and related maintenance costs
resulted in operating income being reduced by an estimated $19
million for the quarter. "While restoring refinery operations to
full capacity during the third quarter, we were able to make a
number of improvements that should contribute to future earnings,"
Lipinski said. "In addition, we are now seeing modest improvements
in both nitrogen fertilizer prices and refining margins, and we
believe these positive trends will continue." Operating loss for
the third quarter 2009 was $10.8 million compared to operating
income of $72.0 million for the same quarter in 2008. For the nine
months 2009, operating income was $188.6 million compared to $282.3
million for the same period in 2008. Net income adjusted for
unrealized gain or loss from Cash Flow Swap was a loss of $15.0
million in the third quarter of 2009 compared to income of $40.2
million for the same period in 2008. For the first nine months,
comparable numbers were $82.4 million in 2009 versus $111.4 million
in 2008. CVR Energy subsidiary Coffeyville Resources LLC and the
swap counter-party J Aron & Company mutually agreed to
terminate the Cash Flow Swap entirely effective Oct. 8, 2009. The
termination resulted in a net settlement whereby J. Aron paid
Coffeyville Resources approximately $3.9 million. Results for the
third quarter 2009 were unfavorably impacted by the significant
increase in non-cash share-based compensation expense of $15.9
million on a pre-tax basis (see footnote 1 in the accompanying
tables) as compared to the 2008 third quarter impact of a reversal
of non-cash share-based compensation expense of $25.8 million on a
pre-tax basis. The increase of the third quarter 2009 share-based
compensation expense of $41.7 million on a pre-tax basis primarily
resulted from the increase of the company's stock share price
during the third quarter of 2009 as compared to the decrease of the
company's stock share price during the third quarter of 2008.
Petroleum Business The petroleum business reported third quarter
2009 operating income of $0.3 million on net sales of $766.4
million, compared to operating income for the same period in 2008
of $20.2 million on net sales of $1,510.3 million. For the first
nine months of 2009, the petroleum business reported operating
income of $161.2 million on net sales of $2,051.7 million compared
to operating income of $185.7 million on net sales of $4,137.9
million for the first three quarters of 2008. The results for the
third quarter of 2009 reflect a favorable impact from first-in,
first-out (FIFO) accounting of $7.3 million compared with an
unfavorable FIFO impact of $59.3 million for the third quarter of
2008. For the first nine months of 2009, the favorable FIFO impact
was $51.2 million compared to a favorable $25.9 million in the
first three quarters of 2008. Crude oil throughput for the third
quarter 2009 averaged 101,530 barrels per day compared with 114,680
barrels per day for the same period in 2008. Total throughput
including other feed and blend stocks averaged 110,654 barrels per
day in the third quarter of 2009 compared to 126,433 barrels per
day for the same period in 2008. Refining margin per barrel
adjusted for FIFO impact, a non-GAAP measure (see footnote 6 in the
accompanying tables), was $6.74 in the third quarter of 2009, a
decrease from $12.50 during the same period in 2008. Gross profit
per crude oil throughput barrel was $1.72 in the third quarter of
2009, compared to $1.98 per crude oil throughput barrel during the
same period in 2008. Direct operating expenses for the third
quarter of 2009 were $3.97 per crude oil throughput barrel compared
to $3.52 per crude oil throughput barrel for the same period in
2008, both amounts reported exclusive of depreciation and
amortization. Direct operating expenses per crude oil throughput
barrel for the third quarter of 2009 were negatively impacted by
the unexpected production interruptions at the refinery, the
related maintenance costs and the correlated reduction in crude
throughputs. On an absolute dollar basis, direct operating expenses
per crude oil throughput barrel would have remained flat for the
third quarter of 2009 had the petroleum business not incurred this
down time and related maintenance. Nitrogen Fertilizers Business
Nitrogen fertilizers operations reported a third quarter 2009
operating loss of $3.9 million on net sales of $45.9 million,
compared to operating income of $46.5 million on net sales of $74.2
million during the equivalent period in 2008. For the first three
quarters of 2009, operating income was $41.9 million on net sales
of $169.0 million compared to $95.6 million on net sales of $195.6
million in the first nine months of 2008. For the third quarter
2009, average plant sale prices for ammonia and UAN were $247 per
ton and $133 per ton respectively, compared to $685 per ton and
$324 per ton respectively for the equivalent period in 2008.
Nitrogen fertilizers operations produced 112,000 tons of ammonia,
including ammonia subsequently upgraded to UAN, and 175,400 tons of
UAN during the third quarter of 2009, compared to 110,300 tons of
ammonia and 172,800 tons of UAN in the equivalent period of 2008.
On-stream factors in the third quarter of 2009 exceeded the 2008
results in all areas. Gasification operations had a third quarter
2009 on-stream factor of 98.8 percent compared to 98.5 percent in
the third quarter of 2008; the ammonia operations were on-stream
98.3 percent of the time in the third quarter of 2009 versus 97.8
percent during the third quarter 2008; and UAN production ran 96.3
percent of the time in the third quarter 2009 versus 94.8 percent
of the time in the same quarter during 2008. 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 Report on Form 10-K for the year
ended December 31, 2008. 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, northern 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 nine months
ended September 30, 2009 and 2008. Select balance sheet data is as
of September 30, 2009 and December 31, 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
Nine Months Ended September 30, September 30,
---------------------- ---------------------- 2009 2008 2009 2008
---------- ---------- ---------- ---------- (in millions, except
share data) (unaudited) Consolidated Statement of Operations Data:
Net sales $811.7 $1,580.9 $2,214.4 $4,316.4 Cost of product sold*
712.7 1,440.3 1,722.0 3,764.0 Direct operating expenses* (1) 58.4
56.6 169.1 179.5 Selling, general and administrative expenses* (1)
29.3 (7.8) 70.4 20.5 Net costs associated with flood 0.5 (0.8) 0.6
8.8 Depreciation and amortization 21.6 20.6 63.7 61.3 ----------
---------- ---------- ---------- Operating income (loss) (10.8)
72.0 188.6 282.3 Interest expense and other financing costs (10.9)
(9.3) (33.6) (30.1) Gain (loss) on derivatives, net 3.1 76.7 (63.0)
(50.5) Loss on extinguishment of debt - - (0.7) - Other income, net
(1) 0.6 0.7 1.5 2.5 ---------- ---------- ---------- ----------
Income before income tax (expense) benefit (18.0) 140.1 92.8 204.2
Income tax (expense) benefit 4.6 (40.4) (32.9) (51.3) ----------
---------- ---------- ---------- Net income (loss) $(13.4) $99.7
$59.9 $152.9
--------------------------------------------------------------------
*Amounts shown are exclusive of depreciation and amortization.
Basic earnings (loss) per share $(0.16) $1.16 $0.69 $1.77 Diluted
earnings (loss) per share $(0.16) $1.16 $0.69 $1.77 Weighted
average common shares outstanding Basic 86,244,245 86,141,291
86,244,049 86,141,291 Diluted 86,244,245 86,158,791 86,333,437
86,158,791 As of As of September 30, December 31, 2009 2008
------------- ------------ (in millions) (unaudited) Balance Sheet
Data: Cash and cash equivalents $86.9 $8.9 Unrealized receivable
associated with Cash Flow Swap (current) (2) 3.5 35.3 Unrealized
receivable associated with Cash Flow Swap (non-current) (2) - 5.6
Working capital 243.9 128.5 Total assets 1,646.6 1,610.5 Total
debt, including current portion 494.9 495.9 Total CVR stockholders'
equity 652.1 579.5 Three Months Ended Nine Months Ended September
30, September 30, ------------------ ------------------ 2009 2008
2009 2008 ------ ----- ------ ------ (in millions) (unaudited)
Other Financial Data: Cash flows provided by operating activities
$26.6 $81.5 $118.1 $104.8 Cash flows used in investing activities
(11.9) (17.8) (36.5) (67.4) Cash flows used in financing activities
(1.2) (24.4) (3.7) (8.0) Non-GAAP Measures: Reconciliation of Net
Income (Loss) to Adjusted Net Income (Loss): Net income (loss)
$(13.4) $99.7 $59.9 $152.9 Less: Unrealized gain (loss) from Cash
Flow Swap, net of taxes (2) 1.6 59.5 (22.5) 41.5 ------ -----
------ ------ Net income (loss) adjusted for unrealized gain or
loss from Cash Flow Swap (2) $(15.0) $40.2 $82.4 $111.4
Adjustments: Share-based compensation, net of taxes (1) 12.7 (18.6)
20.4 (28.4) FIFO impact (favorable) unfavorable, net of taxes (3)
(4.4) 35.6 (30.9) (15.6) ------ ----- ----- ----- Adjusted net
income (loss) (4) $(6.7) $57.2 $71.9 $67.4 Adjusted net income
(loss) per diluted share $(0.08) $0.66 $0.83 $0.78 Three Months
Ended Nine Months Ended September 30, September 30,
----------------- ------------------- 2009 2008 2009 2008 ------
-------- -------- -------- (in millions, except operating
statistics) (unaudited) Petroleum Business Financial Results: Net
Sales $766.4 $1,510.3 $2,051.7 $4,137.9 Cost of product sold* 696.2
1,437.7 1,695.5 3,758.4 Direct operating expenses* (1) 37.1 37.1
104.7 120.1 Net costs associated with flood 0.5 (1.0) 0.6 7.9
Depreciation and amortization 16.5 15.6 48.3 46.8 ------ --------
-------- -------- Gross profit $16.1 $20.9 $202.6 $204.7 Plus
direct operating expenses* (1) 37.1 37.1 104.7 120.1 Plus net costs
associated with flood 0.5 (1.0) 0.6 7.9 Plus depreciation and
amortization 16.5 15.6 48.3 46.8 ------ -------- -------- --------
Refining margin (5) $70.2 $72.6 $356.2 $379.5 FIFO impact
(favorable) unfavorable (3) (7.3) 59.3 (51.2) (25.9) ------
-------- -------- -------- Refining margin adjusted for FIFO impact
(6) 62.9 131.9 305.0 353.6 Operating income $0.3 $20.2 $161.2
$185.7 Share-based compensation (1) 1.2 (7.1) 1.4 (9.4) FIFO impact
(favorable) unfavorable (3) (7.3) 59.3 (51.2) (25.9) ------
-------- -------- -------- Adjusted operating income (loss) (7)
$(5.8) $72.4 $111.4 $150.4 Petroleum Key Operating Statistics: Per
crude oil throughput barrel: Refining margin (5) $7.52 $6.88 $12.26
$12.75 FIFO impact (favorable) unfavorable (3) (0.78) 5.62 (1.76)
(0.87) Refining margin adjusted for FIFO impact (6) 6.74 12.50
10.50 11.88 Gross profit 1.72 1.98 6.97 6.88 Direct operating
expenses* (1) 3.97 3.52 3.60 4.04 * Amounts shown are exclusive of
depreciation and amortization Three Months Ended September 30,
--------------------------------------------------- 2009 2008
---------------------- --------------------- Refining Throughput
and (unaudited) Production Data: (barrels per day) Throughput:
Sweet 84,851 76.7% 92,222 72.9% Light/medium sour 7,780 7.0% 11,256
8.9% Heavy sour 8,899 8.0% 11,202 8.9% ------- ----- ------- -----
Total crude oil throughput 101,530 91.7% 114,680 90.7% All other
feed and blendstocks 9,124 8.3% 11,753 9.3% ------- ----- -------
----- Total throughput 110,654 100.0% 126,433 100.0% Production:
Gasoline 55,928 50.3% 59,864 47.1% Distillate 43,149 38.8% 51,744
40.7% Other (excluding internally produced fuel) 12,051 10.9%
15,503 12.2% ------- ----- ------- ----- Total refining production
(excluding internally produced fuel) 111,128 100.0% 127,111 100.0%
Product price (dollars per gallon): Gasoline $1.83 $3.06 Distillate
$1.82 $3.45 Market Indicators (dollars per barrel): West Texas
Intermediate (WTI) NYMEX $68.24 $118.22 Crude Oil Differentials:
WTI less WTS (light/medium sour) 1.81 2.31 WTI less WCS (heavy
sour) 9.21 18.69 NYMEX Crack Spreads: Gasoline 9.77 5.91 Heating
Oil 5.99 20.75 NYMEX 2-1-1 Crack Spread 7.88 13.33 PADD II Group 3
Basis: Gasoline (1.81) 2.62 Ultra Low Sulfur Diesel 1.97 4.68 PADD
II Group 3 Product Crack: Gasoline 7.96 8.52 Ultra Low Sulfur
Diesel 7.96 25.43 PADD II Group 3 2-1-1 7.96 16.98 Nine Months
Ended September 30,
--------------------------------------------------- 2009 2008
--------------------------------------------------- Refining
Throughput and (unaudited) Production Data: (barrels per day)
Throughput: Sweet 82,509 69.7% 79,759 66.4% Light/medium sour
14,872 12.6% 16,576 13.8% Heavy sour 9,042 7.7% 12,249 10.2%
------- ---- ------- ----- Total crude oil throughput 106,423 90.0%
108,584 90.4% All other feed and blendstocks 11,887 10.0% 11,480
9.6% ------- ---- ------- ----- Total throughput 118,310 100.0%
120,064 100.0% Production: Gasoline 61,111 51.6% 57,195 47.3%
Distillate 45,831 38.7% 49,509 40.9% Other (excluding internally
produced fuel) 11,577 9.7% 14,289 11.8% ------- ---- ------- -----
Total refining production (excluding internally produced fuel)
118,519 100.0% 120,933 100.0% Product price (dollars per gallon):
Gasoline $1.59 $2.87 Distillate $1.57 $3.33 Market Indicators
(dollars per barrel): West Texas Intermediate (WTI) NYMEX $57.32
$113.52 Crude Oil Differentials: WTI less WTS (light/medium sour)
1.44 3.84 WTI less WCS (heavy sour) 6.79 20.58 NYMEX Crack Spreads:
Gasoline 10.37 7.28 Heating Oil 8.22 20.89 NYMEX 2-1-1 Crack Spread
9.30 14.09 PADD II Group 3 Basis: Gasoline (1.40) (0.81) Ultra Low
Sulfur Diesel 0.26 4.17 PADD II Group 3 Product Crack: Gasoline
8.97 6.47 Ultra Low Sulfur Diesel 8.48 25.07 PADD II Group 3 2-1-1
8.72 15.77 Three Months Ended Nine Months Ended September 30,
September 30, -------------- ---------------- 2009 2008 2009 2008
----- ----- ------ ------ (in millions, except as noted)
(unaudited) Nitrogen Fertilizer Business Financial Results: Net
sales $45.9 $74.2 $169.0 $195.6 Cost of product sold* 17.7 6.2 34.6
21.9 Net costs associated with flood - - - - Direct operating
expenses* (1) 21.3 19.4 64.4 59.4 Depreciation and amortization 4.7
4.5 14.0 13.4 Operating income (loss) $(3.9) $46.5 $41.9 $95.6
Share-based compensation (1) 3.9 (6.1) 5.8 (9.0) ----- ----- ------
------ Adjusted operating income (7) $- $40.4 $47.7 $86.6 * Amounts
shown are exclusive of depreciation and amortization. Nitrogen
Fertilizer Key Operating Statistics: Production (thousand tons):
Ammonia (gross produced) (8) 112.0 110.3 323.4 273.5 Ammonia (net
available for sale) (8) 39.5 39.0 117.3 83.3 UAN 175.4 172.8 501.2
462.0 Petroleum coke consumed (thousand tons) 120.7 125.7 360.3
349.9 Petroleum coke (cost per ton) $24 $32 $30 $31 Sales (thousand
tons): Ammonia 50.1 21.9 125.5 65.2 UAN 204.1 165.4 508.9 462.0
----- ----- ------ ------ Total sales 254.2 187.3 634.4 527.2
Product pricing (plant gate) (dollars per ton) (9): Ammonia $247
$685 $318 $568 UAN $133 $324 $221 $296 On-stream factors (10):
Gasification 98.8% 98.5% 96.8% 91.1% Ammonia 98.3% 97.8% 95.9%
89.6% UAN 96.3% 94.8% 93.3% 86.4% Reconciliation to net sales
(dollars in millions): Freight in revenue $6.3 $5.6 $16.0 $13.7
Hydrogen revenue - - 0.7 7.9 Sales net plant gate 39.6 68.6 152.3
174.0 ----- ----- ------ ------ Total net sales $45.9 $74.2 $169.0
$195.6 Market Indicators: Natural gas NYMEX (dollars per MMBtu)
$3.44 $8.99 $3.90 $9.75 Ammonia - Southern Plains (dollars per ton)
$276 $936 $307 $735 UAN - Mid Cornbelt (dollars per ton) $177 $506
$224 $429 (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 FASB ASC 505, 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. Override unit awards are
accounted for as equity-classified awards using the guidance for
non-employee awards prescribed by FASB ASC 323, Accounting by an
Investor for Stock-Based Compensation Granted to Employees of an
Equity Method Investee and FASB ASC 505, 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 Plans 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 Nine Months Ended September
30, September 30, ------------ -------------- 2009 2008 2009 2008
---- ----- ---- ----- (in millions) Share-based compensation
(unaudited) recorded in direct operating expenses Petroleum $0.4
$(2.7) $0.1 $(4.3) Nitrogen 0.4 (0.7) 0.6 (1.4) Corporate - - - -
---- ----- ---- ----- 0.8 (3.4) 0.7 (5.7) Share-based compensation
recorded in selling, general and administrative expenses Petroleum
0.8 (4.4) 1.3 (5.1) Nitrogen 3.5 (5.4) 5.2 (7.6) Corporate 10.8
(12.3) 18.2 (18.2) ---- ----- ---- ----- 15.1 (22.1) 24.7 (30.9)
Share-based compensation recorded in other income - (0.3) - (0.3)
---- ----- ---- ----- Total share-based compensation $15.9 $(25.8)
$25.4 $(36.9) Income tax expense (benefit) of share-based
compensation (3.2) 7.2 (5.0) 8.5 ---- ----- ---- ----- Share-based
compensation, net of taxes 12.7 (18.6) 20.4 (28.4) (2) The
unrealized gain (loss) from Cash Flow Swap relates 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 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. Based upon expected crude oil capacity of 115,000 bpd,
the Cash Flow Swap represents 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 does 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 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 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
increase, we are 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 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 unrealized gains
and losses, and given the significant periodic fluctuations in the
amounts of unrealized gains and losses, management utilizes 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.
Because Net income (loss) 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.
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 allow for
greater transparency in the review of our overall financial,
operational and economic performance. The unrealized receivable
associated with the Cash Flow Swap, current and non-current,
represents the unsettled position resulting from unrealized gains
and losses on the Cash Flow Swap. Historically, the unrealized
position has been subject to significant fluctuations due to the
volatility of the underlying quoted market prices used to
mark-to-market our commodity derivatives. The unrealized balance is
also impacted by the length of the remaining term of the Cash Flow
Swap. 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. (3) 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 Nine Months Ended September 30,
September 30, ------------------ ---------------- 2009 2008 2009
2008 ----- ----- ------ ------ (in millions) (unaudited) Petroleum:
FIFO impact (favorable) unfavorable $(7.3) $59.3 $(51.2) $(25.9)
Income tax expense (benefit) of FIFO 2.9 (23.7) 20.3 10.3 -----
----- ------ ------ FIFO impact, (favorable) unfavorable net of
taxes (4.4) 35.6 (30.9) (15.6) (4) 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 nine months ended
September 30, 2009 and 2008, these items included the unrealized
gain (loss) from Cash Flow Swap, share-based compensation expense
and the Company's impact of the accounting for its inventory under
FIFO. 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. (5) 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. (6) 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. (7) 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 and the impacts of our accounting
under FIFO for the petroleum segment. 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. (8) 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. (9) 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. (10) On-stream factor is
the total number of hours operated divided by the total number of
hours in the reporting period. 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
alternative 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.
http://www.newscom.com/cgi-bin/prnh/20071203/CVRLOGO
http://photoarchive.ap.org/ 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/
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