SUGAR LAND, Texas, March 1 /PRNewswire-FirstCall/ -- CVR Energy,
Inc. 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. (Logo:
http://www.newscom.com/cgi-bin/prnh/20071203/CVRLOGO) 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 InvestorRelations@CVREnergy.com
MediaRelations@CVREnergy.com 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. DATASOURCE: CVR Energy, Inc. CONTACT:
Investor Relations, Stirling Pack, Jr.,
+1-281-207-3464,InvestorRelations@CVREnergy.com, or Media
Relations, Steve Eames,+1-281-207-3550,
MediaRelations@CVREnergy.com, both of CVR Energy, Inc. Web Site:
http://www.cvrenergy.com/
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