UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): November 3, 2009
(November 2, 2009)
CVR ENERGY, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-33492 | 61-1512186 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (I.R.S. Employer Identification Number) |
2277 Plaza Drive, Suite 500
Sugar Land, Texas 77479
Sugar Land, Texas 77479
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: (281) 207-3200
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (see General Instruction
A.2. below):
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
On November 2, 2009, CVR Energy, Inc. (the “Company”) issued a press release announcing
information regarding its results of operations and financial condition for the quarter and the
nine months ended September 30, 2009, the text of which is attached hereto as Exhibit 99.1 and is
incorporated herein by reference.
The information in this Current Report on Form 8-K and Exhibit 99.1 attached hereto is being
“furnished” pursuant to Item 2.02 of Form 8-K and is not deemed “filed” by the Company for purposes
of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the
liabilities of that Section, nor is it deemed incorporated by reference into any filing under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
The following exhibit is being “furnished” as part of this Current Report on Form 8-K:
| 99.1 | Press release dated November 2, 2009, issued by CVR Energy, Inc. pertaining to its results of operations and financial condition for the quarter and the nine months ended September 30, 2009. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: November 2, 2009
| CVR ENERGY, INC. | ||||||
| By: | /s/ Edward Morgan
|
|||||
| Chief Financial Officer and Treasurer | ||||||
CVR Energy Reports Third Quarter Results
SUGAR
LAND, Texas (Nov. 2, 2009) — 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.
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 in 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 | |
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 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 September 30, | As of 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 | Nine Months Ended | |||||||||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||||||
Refining Throughput and Production Data: |
||||||||||||||||||||||||||||||||
(barrels per day) |
||||||||||||||||||||||||||||||||
Throughput: |
||||||||||||||||||||||||||||||||
Sweet |
84,851 | 76.7 | % | 92,222 | 72.9 | % | 82,509 | 69.7 | % | 79,759 | 66.4 | % | ||||||||||||||||||||
Light/medium sour |
7,780 | 7.0 | % | 11,256 | 8.9 | % | 14,872 | 12.6 | % | 16,576 | 13.8 | % | ||||||||||||||||||||
Heavy sour |
8,899 | 8.0 | % | 11,202 | 8.9 | % | 9,042 | 7.7 | % | 12,249 | 10.2 | % | ||||||||||||||||||||
Total crude oil throughput |
101,530 | 91.7 | % | 114,680 | 90.7 | % | 106,423 | 90.0 | % | 108,584 | 90.4 | % | ||||||||||||||||||||
All other feed and blendstocks |
9,124 | 8.3 | % | 11,753 | 9.3 | % | 11,887 | 10.0 | % | 11,480 | 9.6 | % | ||||||||||||||||||||
Total throughput |
110,654 | 100.0 | % | 126,433 | 100.0 | % | 118,310 | 100.0 | % | 120,064 | 100.0 | % | ||||||||||||||||||||
Production: |
||||||||||||||||||||||||||||||||
Gasoline |
55,928 | 50.3 | % | 59,864 | 47.1 | % | 61,111 | 51.6 | % | 57,195 | 47.3 | % | ||||||||||||||||||||
Distillate |
43,149 | 38.8 | % | 51,744 | 40.7 | % | 45,831 | 38.7 | % | 49,509 | 40.9 | % | ||||||||||||||||||||
Other (excluding internally produced fuel) |
12,051 | 10.9 | % | 15,503 | 12.2 | % | 11,577 | 9.7 | % | 14,289 | 11.8 | % | ||||||||||||||||||||
Total refining production
(excluding internally produced fuel) |
111,128 | 100.0 | % | 127,111 | 100.0 | % | 118,519 | 100.0 | % | 120,933 | 100.0 | % | ||||||||||||||||||||
Product price (dollars per gallon): |
||||||||||||||||||||||||||||||||
Gasoline |
$ | 1.83 | $ | 3.06 | $ | 1.59 | $ | 2.87 | ||||||||||||||||||||||||
Distillate |
$ | 1.82 | $ | 3.45 | $ | 1.57 | $ | 3.33 | ||||||||||||||||||||||||
Market Indicators (dollars per barrel): |
||||||||||||||||||||||||||||||||
West Texas Intermediate (WTI) NYMEX |
$ | 68.24 | $ | 118.22 | $ | 57.32 | $ | 113.52 | ||||||||||||||||||||||||
Crude Oil Differentials: |
||||||||||||||||||||||||||||||||
WTI less WTS (light/medium sour) |
1.81 | 2.31 | 1.44 | 3.84 | ||||||||||||||||||||||||||||
WTI less WCS (heavy sour) |
9.21 | 18.69 | 6.79 | 20.58 | ||||||||||||||||||||||||||||
NYMEX Crack Spreads: |
||||||||||||||||||||||||||||||||
Gasoline |
9.77 | 5.91 | 10.37 | 7.28 | ||||||||||||||||||||||||||||
Heating Oil |
5.99 | 20.75 | 8.22 | 20.89 | ||||||||||||||||||||||||||||
NYMEX 2-1-1 Crack Spread |
7.88 | 13.33 | 9.30 | 14.09 | ||||||||||||||||||||||||||||
PADD II Group 3 Basis: |
||||||||||||||||||||||||||||||||
Gasoline |
(1.81 | ) | 2.62 | (1.40 | ) | (0.81 | ) | |||||||||||||||||||||||||
Ultra Low Sulfur Diesel |
1.97 | 4.68 | 0.26 | 4.17 | ||||||||||||||||||||||||||||
PADD II Group 3 Product Crack: |
||||||||||||||||||||||||||||||||
Gasoline |
7.96 | 8.52 | 8.97 | 6.47 | ||||||||||||||||||||||||||||
Ultra Low Sulfur Diesel |
7.96 | 25.43 | 8.48 | 25.07 | ||||||||||||||||||||||||||||
PADD II Group 3 2-1-1 |
7.96 | 16.98 | 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) | ||||||||||||||||
| (unaudited) | ||||||||||||||||
Share-based compensation 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.