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| 8-K - 8-K - CVR ENERGY INC | cvi8-kq42017earningspresen.htm |
4th Quarter 2017 Earnings Report
February 22, 2018
This presentation should be reviewed in conjunction with CVR Energy, Inc.’s Fourth Quarter earnings conference
call held on February 22, 2018. The following information contains forward-looking statements based on
management’s current expectations and beliefs, as well as a number of assumptions concerning future events.
These statements are subject to risks, uncertainties, assumptions and other important factors. You are cautioned
not to put undue reliance on such forward-looking statements (including forecasts and projections regarding our
future performance) because actual results may vary materially from those expressed or implied as a result of
various factors, including, but not limited to (i) those set forth under “Risk Factors” in CVR Energy, Inc.’s Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q and any other filings CVR Energy, Inc. makes with the
Securities and Exchange Commission, (ii) those set forth under “Risk Factors” in CVR Refining, LP’s Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q and any other filings CVR Refining, LP makes with the
Securities and Exchange Commission, and (iii) those set forth under “Risk Factors” in the CVR Partners, LP
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and any other filings CVR Partners, LP makes
with the Securities and Exchange Commission. CVR Energy, Inc. assumes no obligation to, and expressly
disclaims any obligation to, update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except to the extent required by law.
All information in this earnings report is unaudited other than the consolidated statement of operations data for the
year ended December 31, 2016 and the balance sheet data as of December 31, 2014 through 2016.
Forward Looking Statements
2
Consolidated Results
Fourth Quarter Year to Date
(In millions, except for EPS/EPU/Distributions)
12/31/2017 12/31/2016 12/31/2017 12/31/2016
Net income attributable to CVR Energy stockholders $ 200.5 $ 7.1 $ 234.4 $ 24.7
Diluted earnings per share $ 2.31 $ 0.08 $ 2.70 $ 0.28
Adjusted net income per diluted share(1)(2) $ 0.28 $ 0.05 $ 0.87 $ 0.48
EBITDA(1)(3) $ 10.0 $ 27.2 $ 189.3 $ 153.9
Adjusted EBITDA(1)(3) $ 49.4 $ 22.8 $ 258.4 $ 181.6
Adjusted Petroleum EBITDA(1)(4) $ 76.4 $ 27.7 $ 372.6 $ 222.8
CVR Refining Distributions $ 0.45 $ — $ 1.39 $ —
Adjusted Nitrogen Fertilizer EBITDA(1)(5) $ 7.7 $ 18.3 $ 65.8 $ 92.7
CVR Partners Distributions(6) $ — $ — $ 0.02 $ 0.44
(1) Definition on slide 7
(2) Non-GAAP reconciliation on slide 10
(3) Non-GAAP reconciliation on slide 11
(4) Non-GAAP reconciliation on slide 12
(5) Non-GAAP reconciliation on slide 13
(6) On April 1, 2016, CVR Partners completed the merger (the "East Dubuque Merger") whereby CVR Partners acquired a nitrogen fertilizer manufacturing facility located in East Dubuque, Illinois (the "East Dubuque Facility").
Prior to the East Dubuque Merger, CVR Partners had 73.1 million units outstanding, and post-merger it has 113.3 million units outstanding. Available cash for distribution, per common unit for the three months and year
ended December 31, 2017 is calculated on the post-merger common units outstanding.
3
Capital Structure
$800
$600
$400
$200
$0
-$200
2014 2015 2016 2017
Note: Refer to slide 8 for metrics used in calculation
(1) Amounts presented are gross debt, not net of unamortized debt issuance costs or unamortized discount.
Financial Metrics 2014 2015 2016 2017
w Debt to Capital 41% 41% 58% 56%
w Debt to Adj. EBITDA 1.4 1.4 6.6 4.6
w Net Debt to Adj. EBITDA (0.2) (0.2) 2.5 2.7
As of 12/31/2017
Consolidated Cash and cash equivalents $ 481.8
CVR Refining
$400mm ABL —
$150mm Revolver —
Capital Lease Obligations 45.0
6.5% Unsecured Notes due 2022 500.0
Total CVR Refining Debt(1) $ 545.0
CVR Partners
$50mm ABL —
9.25% Senior Secured Notes due 2023 645.0
6.5% Unsecured Noted due 2021 2.2
Total CVR Partners Debt(1) $ 647.2
CVR Energy Loan to CVR Refining —
Total Debt $ 1,192.2
CVR Stockholders' Equity 918.8
Total Capitalization $ 2,111.0
Capitalization
($ in millions)
4
Consolidated Net Debt (Cash)
($ in millions)
(78.8) (91.6)
458.3
710.4
Appendix
Non-GAAP Financial Measures
To supplement the actual results in accordance with GAAP for the applicable periods, the Company also uses non-GAAP
financial measures as discussed below, which are reconciled to GAAP-based results. These non-GAAP financial measures
should not be considered an alternative for GAAP results. 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.
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Non-GAAP Financial Measures (cont'd)
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 external users of our financial statements, such as industry analysts, investors, lenders and rating agencies, 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. Adjusted
net income (loss) per diluted share represents adjusted net income (loss) divided by weighted-average diluted shares outstanding. Adjusted net income represents net
income, as adjusted, that is attributable to CVR Energy stockholders.
EBITDA and Adjusted EBITDA. EBITDA represents net income attributable to CVR Energy stockholders before consolidated (i) interest expense and other financing
costs, net of interest income, (ii) income tax expense (benefit) and (iii) depreciation and amortization, less the portion of these adjustments attributable to non-controlling
interest. Adjusted EBITDA represents EBITDA adjusted for consolidated (i) FIFO impact (favorable) unfavorable, (ii) loss on extinguishment of debt, (iii) major
scheduled turnaround expenses (that many of our competitors capitalize and thereby exclude from their measures of EBITDA and Adjusted EBITDA),(iv) (gain) loss
on derivatives, net, (v) current period settlements on derivative contracts, (vi) flood insurance recovery, (vii) business interruption insurance recovery and (viii) expenses
associated with the East Dubuque Merger, less the portion of these adjustments attributable to non-controlling interest. EBITDA and Adjusted EBITDA are not
recognized terms under GAAP and should not be substituted for net income or cash flow from operations. Management believes that EBITDA and Adjusted EBITDA
enable investors to better understand and evaluate our ongoing operating results and allows for greater transparency in reviewing our overall financial, operational
and economic performance. EBITDA and Adjusted EBITDA presented by other companies may not be comparable to our presentation, since each company may define
these terms differently. Prior to 2016, EBITDA was also adjusted for share-based compensation expense in calculating Adjusted EBITDA. Beginning in 2016, share-
based compensation expense is no longer utilized as an adjustment to derive Adjusted EBITDA as no equity-settled awards remain outstanding for CVR Energy or
any of its subsidiaries, and CVR Partners and CVR Refining are responsible for reimbursing CVR Energy for their allocated portion of all outstanding awards.
Management believes, based on the nature, classification and cash settlement feature of the currently outstanding awards, that it is no longer necessary to adjust
EBITDA for share-based compensation expense to derive Adjusted EBITDA. EBITDA and Adjusted EBITDA represent EBITDA and Adjusted EBITDA that is attributable
to CVR Energy stockholders.
Petroleum and Nitrogen Fertilizer EBITDA and Adjusted EBITDA. EBITDA by operating segment represents net income (loss) before (i) interest expense and other
financing costs, net of interest income, (ii) income tax expense and (iii) depreciation and amortization. Adjusted EBITDA by operating segment represents EBITDA
by operating segment adjusted for, as applicable (i) FIFO impact (favorable) unfavorable; (ii) share-based compensation, non-cash; (iii) loss on extinguishment of
debt; (iv) major scheduled turnaround expenses (that many of our competitors capitalize and thereby exclude from their measure of EBITDA and adjusted EBITDA);
(v) (gain) loss on derivatives, net; (vi) current period settlements on derivative contracts; (vii) flood insurance recovery; (viii) expenses associated with the East
Dubuque Merger and (ix) business interruption insurance recovery. We present Adjusted EBITDA by operating segment because it is the starting point for CVR
Refining’s and CVR Partners' calculation of available cash for distribution. EBITDA and Adjusted EBITDA by operating segment are not recognized terms under
GAAP and should not be substituted for net income (loss) as a measure of performance. Management believes that EBITDA and Adjusted EBITDA by operating segment
enable investors to better understand CVR Refining’s and CVR Partners' ability to make distributions to their common unitholders, help investors evaluate our ongoing
operating results and allow for greater transparency in reviewing our overall financial, operational and economic performance. EBITDA and Adjusted EBITDA
presented by other companies may not be comparable to our presentation, since each company may define these terms differently.
7
Capital Structure
Financials Full Year
($ in millions) 2014 2015 2016 2017
n Cash $ 753.7 $ 765.1 $ 735.8 $ 481.8
n Total Debt, including current portion(1) 674.9 673.5 1,194.1 1,192.2
n Net Debt (Cash) (78.8) (91.6) 458.3 710.4
n CVR Stockholder's Equity 988.1 984.1 858.1 918.8
n Adjusted EBITDA(2)(3) $ 473.5 $ 498.8 $ 181.6 $ 258.4
Note: Includes cash and debt of CVR Partners and CVR Refining
(1) Amounts presented are gross debt, not net of unamortized debt issuance costs or unamortized discount
(2) Definition on slide 7
(3) Non-GAAP reconciliation on slide 9
8
Consolidated Non-GAAP Financial Measures
Financials Full Year
($ in millions) 2014 2015 2016 2017
Net income attributable to CVR Energy stockholders $ 173.9 $ 169.6 $ 24.7 $ 234.4
Interest expense and other financing costs, net of interest income 39.1 47.4 83.2 109.0
Income tax expense (benefit) 97.7 84.5 (19.8) (216.9)
Depreciation and amortization 154.4 164.1 193.1 214.0
FIFO impact, (favorable) unfavorable 160.8 60.3 (52.1) (29.6)
Share-based compensation(1) 12.3 12.8 — —
Major scheduled turnaround expenses 6.8 109.2 38.1 83.0
Loss on extinguishment of debt(2) — — 4.9 —
(Gain) loss on derivatives, net (185.6) 28.6 19.4 69.8
Current period settlements on derivative contracts(3) 122.2 (26.0) 36.4 (16.6)
Flood insurance recovery(4) — (27.3) — —
Expenses associated with the East Dubuque Merger(5) — 2.3 3.1 —
Insurance recovery - business interruption(6) — — (2.1) (1.1)
Adjusted EBITDA and EBITDA adjustments attributable to noncontrolling
interest (108.1) (126.7) (147.3) (187.6)
Adjusted EBITDA(7) $ 473.5 $ 498.8 $ 181.6 $ 258.4
(1) Beginning in 2016, share-based compensation expense is no longer utilized as an adjustment to derive Adjusted EBITDA as no equity-settled awards remain outstanding for CVR Energy or any of its subsidiaries, and
CVR Partners and CVR Refining are responsible for reimbursing CVR Energy for their allocated portion of all outstanding awards. Management believes, based on the nature, classification and cash settlement feature
of the currently outstanding awards, that it is no longer necessary to adjust for share-based compensation expense to derive Adjusted EBITDA. Adjusted EBITDA for the years ended December 31, 2014 and 2015
would have been $461.2 million and $486.0 million, respectively, without adjusting for share-based compensation expense of $12.3 million and $12.8 million, respectively.
(2) Represents a gain (loss) on extinguishment of debt incurred by CVR Partners in June 2016 in connection with the repurchase of senior notes assumed in the East Dubuque Merger, which includes a prepayment
premium and write-off of the unamortized purchase accounting adjustment.
(3) Represents the portion of gain (loss) on derivatives, net related to contracts that matured during the respective periods and settled with counterparties. There are no premiums paid or received at inception of the
derivative contracts and upon settlement, there is no cost recovery associated with these contracts.
(4) Represents an insurance recovery from insurance carriers as a result of the flood and crude oil discharge at the Coffeyville refinery in June/July 2007.
(5) On April 1, 2016, CVR Partners completed the East Dubuque Merger. CVR Partners incurred legal and other professional fees and other merger related expenses for the years ended December 31, 2016
and 2015 that are referred to herein as expenses associated with the East Dubuque Merger, which are included in selling, general and administrative expenses.
(6) CVR Partners received business interruption insurance recoveries of $1.1 million and $2.1 million in the third quarter of 2017 and 2016, respectively.
(7) Definition on slide 7
9
Consolidated Non-GAAP Financial Measures
Financials Fourth Quarter Year to Date
($ in millions, except per share data) 12/31/2017 12/31/2016 12/31/2017 12/31/2016
Income (loss) before income tax benefit $ (61.6) $ (28.1) $ — $ (10.9)
FIFO impact, favorable (30.4) (22.4) (29.6) (52.1)
Major scheduled turnaround expenses 43.0 — 83.0 38.1
Loss on derivatives, net 65.0 14.6 69.8 19.4
Current period settlement on derivative contracts(1) (17.7) 1.2 (16.6) 36.4
(Gain) loss on extinguishment of debt(2) — (0.2) — 4.9
Expenses associated with the East Dubuque Merger(3) — — — 3.1
Insurance recovery - business interruption(4) — — (1.1) (2.1)
Adjusted net income (loss) before income tax benefit and noncontrolling interest (1.7) (34.9) 105.5 36.8
Adjusted net income (loss) attributed to noncontrolling interest 7.5 15.5 (18.8) (4.1)
Income tax benefit, as adjusted 218.8 23.8 189.7 8.8
Net tax benefit related to the TCJA(5) (200.5) — (200.5) —
Adjusted net income(6) $ 24.1 $ 4.4 $ 75.9 $ 41.5
Adjusted net income per diluted share $ 0.28 $ 0.05 $ 0.87 $ 0.48
(1) Represents the portion of gain (loss) on derivatives, net related to contracts that matured during the respective periods and settled with counterparties. There are no premiums paid or received at inception of
the derivative contracts and upon settlement, there is no cost recovery associated with these contracts.
(2) Represents a gain (loss) on extinguishment of debt incurred by CVR Partners in June 2016 in connection with the repurchase of senior notes assumed in the East Dubuque Merger, which includes a
prepayment premium and write-off of the unamortized purchase accounting adjustment.
(3) On April 1, 2016, CVR Partners completed the East Dubuque Merger. CVR Partners incurred legal and other professional fees and other merger related expenses for the three months ended December 31,
2015 and the years ended December 31, 2016 and 2015 that are referred to herein as expenses associated with the East Dubuque Merger, which are included in selling, general and administrative expenses.
(4) CVR Partners received business interruption insurance recoveries of $1.1 million and $2.1 million in the third quarter of 2017 and 2016, respectively.
(5) Represents a one-time benefit related to the remeasurement of our net deferred tax liabilities as a result of the Tax Cuts and Jobs Act (“TCJA”) legislation being signed into law in December 2017 with the
reduction of the federal income tax rate from 35% to 21% beginning in 2018. Our net deferred tax liabilities at December 31, 2017 were remeasured to reflect the lower tax rate that will be in effect for the
years in which the deferred tax assets and liabilities will be realized. A benefit of approximately $200.5 million was recognized as a result of the remeasurement.
(6) Definition on slide 7
10
Consolidated Non-GAAP Financial Measures
Financials Fourth Quarter Year to Date
($ in millions) 12/31/2017 12/31/2016 12/31/2017 12/31/2016
Net income attributable to CVR Energy stockholders $ 200.5 $ 7.1 $ 234.4 $ 24.7
Interest expense and other financing costs, net of interest income 27.5 26.9 109.0 83.2
Income tax benefit (234.3) (22.1) (216.9) (19.8)
Depreciation and amortization 54.8 52.3 214.0 193.1
Adjustments attributable to noncontrolling interest (38.5) (37.0) (151.2) (127.3)
EBITDA(1) 10.0 27.2 189.3 153.9
FIFO impact, favorable (30.4) (22.4) (29.6) (52.1)
Major scheduled turnaround expenses 43.0 — 83.0 38.1
Loss on derivatives, net 65.0 14.6 69.8 19.4
Current period settlements on derivative contracts(2) (17.7) 1.2 (16.6) 36.4
(Gain) loss on extinguishment of debt(3) — (0.2) — 4.9
Expenses associated with the East Dubuque Merger(4) — — — 3.1
Insurance recovery - business interruption(5) — — (1.1) (2.1)
Adjustments attributable to noncontrolling interest (20.5) 2.4 (36.4) (20.0)
Adjusted EBITDA(1) $ 49.4 $ 22.8 $ 258.4 $ 181.6
(1) Definition on slide 7
(2) Represents the portion of gain (loss) on derivatives, net related to contracts that matured during the respective periods and settled with counterparties. There are no premiums paid or received at inception of the
derivative contracts and upon settlement, there is no cost recovery associated with these contracts.
(3) Represents a gain (loss) on extinguishment of debt incurred by CVR Partners in June 2016 in connection with the repurchase of senior notes assumed in the East Dubuque Merger, which includes a prepayment
premium and write-off of the unamortized purchase accounting adjustment.
(4) On April 1, 2016, CVR Partners completed the East Dubuque Merger. CVR Partners incurred legal and other professional fees and other merger related expenses that are referred to herein as expenses associated with
the East Dubuque Merger, which are included in selling, general and administrative expenses.
(5) CVR Partners received business interruption insurance recoveries of $1.1 million and $2.1 million in the third quarter of 2017 and 2016, respectively.
11
Petroleum Non-GAAP Financial Measures
Financials Fourth Quarter Year to Date
($ in millions) 12/31/2017 12/31/2016 12/31/2017 12/31/2016
Petroleum net income (loss) $ (29.0) $ (10.7) $ 88.8 $ 15.3
Interest expense and other financing cost, net of interest income 11.9 11.6 46.7 43.3
Income tax expense — — — —
Depreciation and amortization 33.6 33.4 133.1 129.0
Petroleum EBITDA(1) 16.5 34.3 268.6 187.6
FIFO impact, favorable (30.4) (22.4) (29.6) (52.1)
Major scheduled turnaround expenses 43.0 — 80.4 31.5
Loss on derivatives, net 65.0 14.6 69.8 19.4
Current period settlements on derivative contracts(2) (17.7) 1.2 (16.6) 36.4
Adjusted Petroleum EBITDA(1) $ 76.4 $ 27.7 $ 372.6 $ 222.8
(1) Definition on slide 7
(2) Represents the portion of gain (loss) on derivatives, net related to contracts that matured during the respective periods and settled with counterparties. There are no premiums paid or received at inception
of the derivative contracts and upon settlement, there is no cost recovery associated with these contracts.
12
Fertilizer Non-GAAP Financial Measures
Financials Fourth Quarter Year to Date
($ in millions)
12/31/2017 12/31/2016 12/31/2017 12/31/2016
Nitrogen Fertilizer net loss $ (27.4) $ (14.5) $ (72.8) $ (26.9)
Interest expense and other financing costs, net 15.8 15.8 62.9 48.6
Income tax expense 0.2 — 0.2 0.3
Depreciation and amortization 19.1 17.2 74.0 58.2
Nitrogen Fertilizer EBITDA(1) 7.7 18.5 64.3 80.2
Major scheduled turnaround expenses — — 2.6 6.6
(Gain) loss on extinguishment of debt(2) — (0.2) — 4.9
Expenses associated with the East Dubuque Merger(3) — — — 3.1
Insurance recovery - business interruption(4) — — (1.1) (2.1)
Adjusted Nitrogen Fertilizer EBITDA(1) $ 7.7 $ 18.3 $ 65.8 $ 92.7
(1) Definition on slide 7
(2) Represents a gain (loss) on extinguishment of debt incurred by CVR Partners in June 2016 in connection with the repurchase of senior notes assumed in the East Dubuque Merger, which includes a
prepayment premium and write-off of the unamortized purchase accounting adjustment.
(3) On April 1, 2016, CVR Partners completed the East Dubuque Merger. CVR Partners incurred legal and other professional fees and other merger related expenses for the three months ended December 31,
2015 and the years ended December 31, 2016 and 2015 that are referred to herein as expenses associated with the East Dubuque Merger, which are included in selling, general and administrative expenses.
(4) CVR Partners received business interruption insurance recoveries of $1.1 million and $2.1 million in the third quarter of 2017 and 2016, respectively.
13