CVI CVR Energy Inc

SUGAR LAND, Texas, Nov. 1, 2010 /PRNewswire-FirstCall/ -- CVR Energy, Inc. (NYSE: CVI), a refiner and marketer of petroleum fuels and a nitrogen fertilizer products manufacturer, today reported third quarter 2010 net income of $23.2 million, or $0.27 per fully diluted share, on net sales of $1,031.2 million.

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The 2010 third quarter results compared to a net loss of $13.4 million, or a loss of $0.16 per share, for the same quarter of 2009 on net sales of $811.7 million.  For the first nine months of 2010, the company reported net income of $12.0 million, or $0.14 per fully diluted share, on net sales of $2,931.6 million, compared to net income of $59.9 million, or $0.69 per fully diluted share, for the nine months period in 2009, on net sales of $2,214.4 million.

Adjusting on an after-tax basis for a $2.1 million favorable impact from the use of First-In-First-Out (FIFO) accounting, a $3.3 million share-based compensation expense, and a small loss on disposition of certain assets, the company had an adjusted net income of $24.6 million, or $0.28 per share, for the quarter.

"The story of the third quarter was strong operational performance by our petroleum segment coinciding with improved product prices and margins," said Chief Executive Officer Jack Lipinski.  "Complementing the petroleum segment, our fertilizers business also maintained solid on-stream operations.

"As a result, we generated strong cash flows during the quarter, which serves us well as we continue to strengthen our balance sheet."  

Petroleum Business

The petroleum business reported third quarter 2010 operating income of $46.6 million on net sales of $986.2 million compared to operating income of $0.3 million on net sales of $766.4 million in the third quarter of 2009.  For the first nine months of 2010, the petroleum segment had operating income of $44.1 million compared to operating income of $161.2 million for the first nine months in 2009.

For the third quarter, the refinery had record total crude oil throughput of 118,351 barrels per day, compared with 101,530 barrels per day of crude during the third quarter of 2009.  Including all other feedstocks and blendstocks, the refinery had record total throughput of 128,789 barrels per day for the third quarter of 2010.

Refining margin per crude oil throughput barrel (see footnote 9) was $9.84 in the third quarter of 2010, an increase from $7.52 during the same period in 2009.  Gross profit per crude oil throughput barrel (see footnote 8) was $5.05 in the third quarter of 2010, up from $1.72 per crude oil throughput barrel during the same period in 2009.

Direct operating expense, exclusive of depreciation and amortization, for the third quarter 2010 was $3.01 per barrel of product sold, as compared to $3.59 per barrel sold in the third quarter of 2009.  Operating costs decreased partly due to higher throughputs but more importantly due to increased efficiencies.

Nitrogen Fertilizers Business

The nitrogen fertilizers business reported third quarter 2010 operating income of $10.6 million on net sales of $46.4 million, compared to an operating loss of $3.9 million on net sales of $45.9 million during the equivalent period in 2009.

On-stream factors were 99.2 percent for the gasifier, 99.0 percent for the ammonia synthesis loop, and 96.9 percent for the UAN facility during the third quarter of 2010.

For the third quarter 2010, average realized plant gate prices for ammonia and UAN were $317   per ton and $168 per ton respectively, compared to $247 per ton and $133 per ton respectively for the equivalent period in 2009.

The nitrogen fertilizers business produced 112,600 tons of ammonia during the third quarter of 2010, of which 41,000 net tons were available for sale while the rest was upgraded to 173,800 tons of UAN.  In the 2009 third quarter, the plant produced 112,000 tons of ammonia with 39,500 net tons available for sale and the remainder upgraded to 175,400 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 nine months ended September 30, 2010 and 2009.  Select balance sheet data is as of September 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) 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. Certain override unit awards became fully vested in the second quarter of 2010; therefore, no expense was recognized for these awards in the third quarter of 2010.  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.  Below is the gross and tax affected impact of share-based compensation expense for the applicable periods:

(3) 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: