CVI CVR Energy Inc

SUGAR LAND, Texas, Aug. 4 /PRNewswire-FirstCall/ -- CVR Energy, Inc. (NYSE: CVI), a refiner and marketer of petroleum fuels and a nitrogen fertilizer products manufacturer, today reported second quarter 2010 net income of $1.2 million, or $0.01 per fully diluted share, on net sales of $1,005.9 million.

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The 2010 second quarter results compared to net income of $42.7 million, or $0.49 per share, on sales of $793.3 million for the same quarter in 2009.  For the first six months of 2010, the company reported an $11.2 million loss, or a loss of $0.13 per share, on net sales of $1,900.4 million, as compared to net income of $73.3 million in the first six months of 2009, or $0.85 per share, on net sales of $1,402.7 million.

The second quarter results included a number of one-time items.  On a pre-tax basis, the company expensed $14.6 million related to extinguishment of debt and other costs associated with the restructuring of the company's long-term debt and incurred a one-time $1.3 million write-off of a capital project.  In addition, the company's results for the quarter were affected by continued volatility of commodity prices, which resulted in a negative $17.5 million pre-tax First-In-First-Out (FIFO) impact.  

In the aggregate, the elimination of these items using a 39.7 percent statutory tax rate would have resulted in an adjusted Net Income for the quarter of $21.3 million or $0.25 per fully diluted share.  

"The highlight of the quarter was our extension of our long-term debt through the successful high-yield bond transactions," said Chief Executive Officer Jack Lipinski.  "This restructuring of older term debt with new financing leaves us well positioned for the future.  While the charges associated with the bonds had a one-time negative affect on our quarterly results, we now have greater financial stability and flexibility going forward that will allow us to better handle the volatility in our business."

Petroleum Business

The petroleum business reported second quarter 2010 operating income of $4.6 million on net sales of $951.3 million compared to operating income of $96.2 million on sales of $740.0 million in the second quarter of 2009.  The results for the second quarter 2010 reflected an unfavorable impact from FIFO accounting of $17.5 million, compared to a favorable impact of $67.3 million in the same period of 2009.  For the first six months of 2010, the petroleum segment had an operating loss of $2.4 million compared to operating income of $160.9 million for the first six months in 2009.

For the second quarter, the refinery had total crude oil throughput of 113,431 barrels per day, compared with 111,620 barrels per day of crude during the second quarter of 2009.  Including all other feedstocks and blendstocks, the refinery had total throughput of 121,867 barrels per day.

Refining margin per crude oil throughput barrel (see footnote 8) was $6.70 in the second quarter of 2010, a decrease from $15.58 during the same period in 2009.  Gross profit per crude oil throughput barrel (see footnote 7) was $1.13 in the second quarter of 2010, down from $10.77 per crude oil throughput barrel during the same period in 2009.

Direct operating expense, exclusive of depreciation and amortization, for the second quarter 2010 was $3.63 per barrel sold, as compared to $2.90 per barrel sold in the second quarter of 2009.  This increase was primarily attributable to higher natural gas usage and higher prices in 2010 as well as unplanned maintenance costs related to the outages at the catalytic cracker and coker during the quarter.

Nitrogen Fertilizers Business

The nitrogen fertilizer business reported second quarter 2010 operating income of $16.5 million on net sales of $56.3 million, compared to operating income of $16.5 million on net sales of $55.3 million during the equivalent period in 2009.

Excluding the impact of a third party air separation unit outage, the nitrogen fertilizer plant on-stream factors were 97.8 percent for the gasifier, 96.8 percent for the ammonia synthesis loop, and 95.3 percent for the UAN facility.

For the second quarter 2010, average realized plant gate prices for ammonia and UAN were $312   per ton and $205 per ton respectively, compared to $351 per ton and $249 per ton respectively for the equivalent period in 2009.

Nitrogen Fertilizers produced 105,200 tons of ammonia during the second quarter of 2010, of which 38,700 net tons were available for sale while the rest was upgraded to 162,900 tons of more highly valued UAN.  In the 2009 second quarter, the plant produced 103,300 tons of ammonia with 38,900 net tons available for sale and the remainder upgraded to 156,100 tons of 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 Report on Form 10-K for the year ended Dec. 31, 2009, and any subsequently filed quarterly reports on Form 10-Q.  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 Kansas, northern Oklahoma, western Missouri and southwestern 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.

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 six months ended June 30, 2010 and 2009.  Select balance sheet data is as of June 30, 2010 and December 31, 2009.  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.

(1) First-in, first-out ("FIFO") is the Company's basis for determining inventory value on a Generally Accepted Accounting Principles ("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 impact for the applicable periods:

(2)  In January 2010, we made a voluntary unscheduled principal payment of $20.0 million on our tranche D term loans.  In addition, we made a second voluntary unscheduled principal payment of $5.0 million in February 2010.  In connection with these voluntary prepayments, we paid a 2.0% premium totaling $0.5 million to the lenders of our first priority credit facility.  The premiums paid are reflected as a loss on extinguishment of debt in our Consolidated Statements of Operations.  In April 2010, we paid off the remaining $453.0 million tranche D term loans. This payoff was made possible by the issuance of $275.0 million aggregate principal amount of 9.0% First Lien Senior Secured Notes due 2015 (the "First Lien Notes") and $225.0 million aggregate principal amount of 10.875% Second Lien Senior Secured Notes due 2017 (the "Second Lien Notes" and together with the First Lien Notes, the "Notes").  In connection with the payoff, we paid a 2.0% premium totaling approximately $9.1 million.  In addition, previously deferred borrowing costs totaling approximately $5.4 million associated with the first priority credit facility term debt were also written off at that time.  The Company also recognized approximately $0.1 million of third party costs at the time the Notes were issued.  Other third party costs incurred at the time were deferred and will be amortized over the respective terms of the Notes.  The premiums paid, previously deferred borrowing costs subject to write-off and immediately recognized third party expenses are reflected as a loss on extinguishment of debt in our Condensed Consolidated Statements of Operations.  Below is the gross and tax affected loss on extinguishment of debt for the applicable periods:

(3) During the second quarter of 2010, the Company wrote-off an amount associated with a capital project.  Below is the gross and tax affected impact of the write-off for the applicable periods: