CVR Energy Inc (CVI) 2017 Q2 法說會逐字稿

Greetings and welcome to the CVR Energy Second Quarter 2017 Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jay Finks, Vice President of Finance. Please go ahead, Jay.

Thank you, Kevin, and good afternoon, everyone. We very much appreciate you joining us this afternoon for our CVR Energy Second Quarter 2017 Earnings Call. With me today are Jack Lipinski, our Chief Executive Officer; and Susan Ball, our Chief Financial Officer.

Prior to discussing our 2017 second 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 outlook, 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, our 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, except to the extent required by law.

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 2017 second quarter earnings release that we filed with the SEC this morning prior to the opening of the market.

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

Thank you, Jay. Good afternoon, everyone, and thank you for joining us. Hopefully, you had the opportunity to listen to the CVR Partners and CVR Refining earnings calls earlier today.

This morning, we reported CVR Energy's second quarter consolidated net loss of $10.5 million, which compares to a net income of $28.4 million in the second quarter of last year. Adjusted net loss for the 2017 second quarter was $3.3 million or $0.04 per diluted share, and that compares to adjusted net income of $17.1 million or $0.20 per diluted share in the second quarter of 2016. In a few minutes, Susan will provide you more details on the financials we reported this morning.

We also announced today a quarterly cash dividend of $0.50 per share that will be paid on August 14 to stockholders of record on August 7.

Now let me talk to the highlights of our different business segments. In the Petroleum business, CVR Refining's 2017 second quarter adjusted EBITDA was $43.1 million, and that compares to $84.7 million a year ago. CVR Refining continue to post good operational results. Coffeyville processed 133,800 barrels a day of crude, and the combined throughput to the quarter for both refineries was 213,800 barrels a day. CVR Refining announced today that it will not pay a cash distribution for the 2017 second quarter.

Now turning to the Nitrogen Fertilizer business. CVR Partners announced a 2017 second quarter adjusted EBITDA of $32.3 million, and that compares to $29.1 million in the second quarter of 2016. Operationally, CVR Partners continues to post high onstream rates. In the second quarter, the East Dubuque facility had its best quarterly operational performance in its history. The East Dubuque ammonia plant ran at 100%, and the UAN plant operated at 99%. Coffeyville's gas fire unit ran at 99%. The ammonia unit ran at 98%, the UAN plant ran at 87%. CVR Partners announced today that it will not pay a cash distribution to the second quarter of 2017.

Now let me turn the call over to Susan and let her talk about financial highlights.

Thank you, Jack, and good afternoon, everyone. As Jack previously mentioned, net loss attributable to the CVR Energy stockholders was $10.5 million as compared to net income of $28.4 million in the prior year quarter in 2016. Adjusted net loss for the 2017 second quarter was $3.3 million or $0.04 per diluted share as compared to adjusted net income of $17.1 million or $0.20 per diluted share in the second quarter of 2016. We believe adjusted net income is a meaningful metric for analyzing our performance as it does eliminate the impact of noncash and any other unusual items inherent in our business and provides a more transparent view to market expectations. The more significant adjustments to net income during the 2017 second quarter to drive our adjusted net income were an unfavorable impact as a result of our accounting under first-in, first-out or FIFO inventory accounting method of $15.4 million and major scheduled turnaround expenses of $2.9 million. The adjustments for the 2016 second quarter were a favorable FIFO impact of $46.2 million, loss under it is not settled during that period of $9 million, major scheduled turnaround expenses of $8.7 million, loss on extinguishment of debt of $5.1 million and expenses associated with the East Dubuque merger of $1.2 million. These adjusted -- these gross adjustments to net income are reduced for the portion that's attributable to the noncontrolling interest and are further reduced for the net tax impact associated with the (inaudible).

The second quarter of 2017 effective tax rate was approximately 25% as compared to 33% in the second quarter of 2016. Our 2017 effective tax rate varies from the expected statutory rate, primarily due to the reduction of income subject to tax associated with the noncontrolling ownership interest in CVR Refining's and CVR Partners' earnings or losses and the benefits related to state income tax credits.

I will now turn to the specific performance of our 2 business segments impacting our overall quarterly results. As Jack mentioned earlier, CVR Refining's adjusted EBITDA for the 2017 second quarter was $43.1 million as compared to $84.7 million in the same period in 2016. The decrease was primarily driven by a significant increase in RINs expense, which is partially offset by an overall improvement period-over-period of the Group 3 crack spreads and also the increased crude throughput. In the second quarter of 2017, CVR Refining's realized refining margin adjusted for FIFO was $7.48 per barrel as compared to $9.56 in the same quarter of 2016. The NYMEX 2-1-1 crack spread averaged $16.59 per barrel in the second quarter of 2017 as compared to $15.98 per barrel in the same period of 2016. PADD II Group 3 2-1-1 crack spread averaged $14.30 per barrel in the second quarter of 2017 as compared to $12.64 in the second quarter of 2016.

Now turning to our Fertilizer segment. As previously mentioned, CVR Partners' second quarter adjusted EBITDA was $32.3 million as compared to $29.1 million in the same period last year. The increase in adjusted EBITDA over the periods was primarily attributable to impacts associated with the turnaround that occurred in East Dubuque in the second quarter of 2016 as well as increased cost in 2016 as a result of inventory being recorded at fair value through the purchase accounting upon the East Dubuque acquisition. These decreased costs in 2017 were then partially offset by lower fertilizer pricing. The UAN average product price at the plant gate for the second quarter of 2017 was $174 per ton as compared to $199 per ton in the prior year second quarter. Ammonia average product price at the plant gate was $333 per ton in the second quarter of 2017 as compared to $417 per ton in the second quarter of 2016.

Our cash position remained strong as we ended the quarter with cash and cash equivalents of approximately $830 million on a consolidated basis. Total consolidated gross debt as of June 30 was approximately $1.2 billion as compared to $1.2 billion level at December 31, 2016. CVR Energy has no debt exclusive of the debt that resides at CVR Refining and CVR Partners. As of June 30, CVR Refining's debt approximated $546 million and CVR Partners' debt approximated $647 million.

With that, Jack, I will turn the call back to you.

Okay, thank you, Susan. Listen, I urge you to go back and listen to the CVR Partners and CVR Refining calls, which are available on our website. And seeing that there are no questions, Jay, would you like to end the call?

Yes. Thank you, Jack. I'd like to thank again, everyone, for joining us today. And if you have any additional questions or follow-up, please contact Investor Relations or visit our website, cvrenergy.com. Thank you.

Thank you. That does conclude today's teleconference. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.