CVR Energy Inc (CVI) 2013 Q1 法說會逐字稿

Greetings and welcome to the CVR Energy first-quarter 2013 conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.

(Operator Instructions)

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jay Finks, Director of Finance. Thank you, sir. You may now begin.

Thank you, Jesse. Good afternoon, everyone. We are very much appreciate you joining us this afternoon for our CVR Energy first-quarter 2013 earnings call. With me are Jack Lipinski, our Chief Executive Officer; Susan Ball, our Chief Financial Officer; and Stan Riemann, our Chief Operating Officer.

Prior to discussing our 2013 first-quarter results, let me remind you that this conference call may contain forward-looking statements, as that term is defined under Federal Securities laws. For this purpose, any statements made during this call that are not statements of historical facts may be deemed to be forward-looking statements. Without limiting the foregoing, the words believes, anticipates, plans, expects, and similar expressions are intended to identify forward-looking statements. You are cautioned that these statements may be affected by important factors set forth in our filings with the Securities and Exchange Commission and in our latest earnings release. As a result, actual operations or results may differ materially from the results discussed in the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise.

This call also includes various non-GAAP financial measures. The disclosures related to such non-GAAP measures, including reconciliation to the most directly comparable GAAP financial measures, are included in our 2013 first-quarter earnings release that we filed with the SEC this morning prior to the open of the market.

With that said, I'll turn the call over to Jack Lipinski, our Chief Executive Officer. Jack?

Thank you, Jay.

As reported this morning, both our business segments reported very strong earnings, that's CVR Partners LP and CVR Refining LP. And both those entities had their respective earnings conference calls earlier today. For the first quarter of 2013, CVR Energy's consolidated adjusted net income was $156.8 million, or $1.81 per diluted share, as compared to $67.1 million, or $0.76 per diluted share, in the first quarter a year ago. Like prior quarters, we adjust net income for the impact of FIFO, share-based compensation, loss on the extinguishment of debt, major turnaround expenses, and the impact of unrealized derivative gains or losses, and other one-time expenses. The first quarter also represents the first quarter when we received distributions, we being CVR Energy, received distribution from both business segments. Both our fertilizer and petroleum segments reported exceptional distributions. We continue to return cash to shareholders through special and recurring dividends. As you know, on January 24, CVR Energy declared a $5.50 special dividend, which was paid on February 19. Our Board of Directors also adopted a regular quarterly cash dividend of $0.75 per share, which was announced this morning and will be paid on May 17 to shareholders of record on May the 10.

Let me talk a little bit about some of the highlights in each of our business segments. Talking about petroleum first, and this was also discussed on CVR Refining's call earlier. On January 23, we closed our initial public offering of CVR Refining LP. Our business petroleum segment set new operating records for crude throughput and for gathering in our logistics business -- crude gathering in our logistics business. Post-IPO, CVR Refining's first-quarter distribution of $1.58 per common unit exceeds the previously announced IPO distribution outlook of $1.10 to $1.35 per common unit. The $1.58 distribution will be paid on May 17 to unit holders of record on May 10. CVR Energy owns approximately 81% of the common units of CVR Refining, and therefore, receives a proportional amount of the distributions from CVR Refining. CVR Refining's 2013 first-quarter consolidated adjusted EBITDA was $309.9 million, as compared to $143 million in the same period last year. In the first quarter, we ran 194,816 barrels of crude. That breaks down to 123,639 barrels a day at Coffeyville and 71,177 barrels at Wynnewood. Our consolidated actual results were at the high end of our previously disclosed guidance as far as run rates.

On the nitrogen business, on April 26, 2013, CVR Partners announced a 2013 first-quarter cash dividend of $0.61 per common unit. And that compares to $0.52 per common unit distributed a year ago. CVR Energy owns approximately 70% of the common units of CVR Partners, and again, receives a proportional amount of distributions from CVR Partners. CVR Partners' first-quarter adjusted EBITDA was $43.8 million, and that compares to $38 million in the prior year. And also during the first quarter, CVR Partners completed the UAN plant expansion, and it's running very, very well.

I'll turn the call over to Susan now to talk about the financial's, and then I'll have a few brief closing remarks. Susan?

Thank you, Jack, and good afternoon, everyone.

As Jack previously mentioned, we posted strong quarterly financial results. Our net income attributable to CVR Energy stockholders was $165 million in the first-quarter 2013 as compared to a net loss of $25.2 million in the prior year. Non-controlling interest reducing the 2013 first-quarter net income, attributable to the stockholders of CVR Energy, was $47.7 million for 2013 as compared to $9.2 million for the first quarter of 2012. Adjusted net income for the quarter was $156.8 million, as compared to $67.1 million in the first quarter of 2012. As mentioned on previous calls, adjusted net income is a meaningful metric for analyzing our performance, as it does eliminate the impact of unusual accounting impacts inherent in our business and in other unique events. And we believe it provides more transparency for a better comparison to market expectations. The significant adjustments utilized to derive the adjusted net income were a loss on extinguishment of debt of $26.1 million for the first quarter of 2013, as well as and unrealized derivative gain of $32.5 million. Other adjustments related to or to drive our adjusted net income relate to our FIFO accounting, which was a $4.7 million favorable impact for 2013, as well as share-based compensation, which was $6 million in the first quarter of 2013.

On a consolidated, realized refining-margin basis, we posted a strong quarterly result of $26.44 for crude oil throughput barrel, which is adjusted for the favorable FIFO impact, as compared to $18.62 per barrel in the first-quarter 2012, adjusted as well. As at the plant level, Coffeyville's refining margin adjusted for FIFO impact, was $26.12 per barrel in the first quarter of 2013, as compared to $17.94 per barrel for the same period a year ago. Wynnewood's refining margin adjusted for FIFO impact was $26.87 per barrel in the first quarter of 2013, as compared to $19.57 per barrel for the same period a year ago. Our fertilizer segment, ran by CVR Partners, reported another solid quarter. Adjusted EBITDA for the quarter was $43.8 million, as compared to $38 million in the first quarter of 2012. As Jack mentioned, the UAN expansion went online in the first quarter. The increase associated with adjusted EBITDA was primarily attributable to the higher UAN sales volumes due to this UAN expansion and higher prices for ammonia during the first quarter of 2013.

We ended the quarter with cash and cash equivalents of over $1 billion on a consolidated basis. Our fertilizer business ended the first quarter with $153.2 million. The petroleum segment, ran by CVR Refining, ended the first quarter with $525.1 million. Excluding the amounts residing at CVR Refining and CVR Partners for cash, we held $362.5 million as of March 31, 2013. Total consolidated debt, including current debt as of March 31, was $677 million. All debt does reside at either CVR Refining or CVR Partners. $125 million of debt does reside at CVR Partners and $552 million at CVR Refining. Both of our segments have strong balance sheets and are positioned well for growth.

With that, I'll turn the call back over to Jack.

Okay. Thank you, Susan. And I'd like to once again, remind everyone that each of our business segments reported earnings this morning. I would recommend that you look at our press releases and our Qs. And if you were not able to attend the earlier conference calls, again, I strongly recommend that you go to our website. And those calls we're recording can be replayed for the next 14 days. So with that, perhaps the best thing to do is just turn it over to questions at this point. Jay?

Thank you, Jack. Jesse, we are now ready for questions.

(Operator Instructions) Chi Chow, Macquarie.

I got a question on cash usage and your dividend policy. Obviously, you're a little bit different than typical C-corps within the industry, given your structure. How are you and the Board thinking about dividend distributions longer term? And can investors expect ongoing large, special dividends like you declared earlier this year?

Well, Chi, obviously, that's a full discussion for the Board, but CVR Energy at this point is a whole-co, effectively. We announced basically a $3 annual dividend, $0.75 a quarter, have made a special dividend in the past. And unless there's some major acquisition that would tie up cash at the parent that could be dropped down to one of the subs, I think our view is it's intended to be a yield vehicle.

What do you think is the appropriate yield? There's no real comp, per se, right, to this?

No, and it's very hard to say, because that's not really -- it's really the purview of the Board. But our discussions were that we intend to be very shareholder-friendly. You can see our majority shareholder likes people to be shareholder-friendly. So I can't answer it in any more depth than that, but it's -- again, lacking a major acquisition of some sort that would eventually be dropped down to one of the subs, uses of cash would more than likely be used for dividend.

On the acquisition front, it seemed like it would be more efficient at the MLP level to make the acquisition, but is that something you'd consider at the CVI level?

It depends on size. If you take a look at -- you would do something at CVI if it was larger than the MLP could do in a bite-sized chunk. And then drop it down in pieces, so that it doesn't disrupt the financing and the structure of the underlying MLP. And when we were on our road show for CVR Refining, in particular, one of the points we made was that the parent is providing a $150-million credit facility to CVR Refining to do regular, smaller growth -- organic growth projects. Or we could use it for small acquisitions. The interesting thing about where we sit up at CVR Energy is that we could do JVs with other enterprises in the icon organization if they got large. So having a parent that has access to a pretty big balance sheet could -- I'm not saying will, but could provide us the ability to do larger acquisitions.

Are you committed to staying within refining and fertilizer, those industries? Or would you consider branching out to other business segments?

For us, obviously, Icahn Enterprises is diversified across many different business lines. Obviously, within CVR Energy, I don't think we'd go far afield from our netting.

Rakesh Advani, Credit Suisse.

Just a quick one, I know in the past you guys have given us some help in terms of looking at the tax basis for UAN. Is there anything you could share about how we should look at the CVR stake?

CVR Energy, meaning not CVR Refining, right?

Well, you've given on the UAN stake before, when you are trying to calculate what the value could be over there. I'm wondering can you share anything on CVRR, CVR perspective.

Rakesh, this is Susan. We haven't really provided detail as far as the basis that we have in CVR Refining. I will point out we did acquire Gary Williams in December of 2011, and that purchase price is disclosed in our 10-K and our financials. Additionally, we are making adjustments, and you can look at the 10-Q as far as our basis difference in book and tax. And impacts did occur within this quarter and the financials. So I think looking at that and those two items might help get you there without providing specific details.

I'll take a look there. Thank you.

(Operator Instructions) It appears there are no further questions at this time. I would like to turn the floor back over to Mr. Finks for any closing comments.

Thank you, Jessie. Again, we'd like to thank everyone for joining us today to review our first-quarter results, and we wish everyone a good day.

Thank you all. Thanks for joining us.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.