CVR ENERGY INC - FORM 8-K/A - EX-99.1

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8-K/A - 8-K/A - CVR ENERGY INC	y91429ae8vkza.htm

Exhibit 99.1

CVR ENERGY, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The unaudited pro forma consolidated financial statements of CVR Energy, Inc. have been derived from the unaudited historical financial statements of CVR Energy, Inc. for the three months ended and as of March 31, 2011, which are included in CVR Energy, Inc.’s Form 10-Q for the three months ended March 31, 2011.

The pro forma consolidated balance sheet as of March 31, 2011 and the pro forma consolidated statement of operations for the three months ended March 31, 2011 have been adjusted to give effect to the following transactions:


	•	The interests of Coffeyville Resources, LLC (“CRLLC”) and CVR Special GP, LLC (“Special GP”) in CVR Partners, LP (“CVR Partners”) were converted into 50,920 and 50,869,080 common units, respectively, and Special GP, a wholly-owned subsidiary of CRLLC, was merged with and into CRLLC, with CRLLC continuing as the surviving entity;

	•	CVR Partners offered and sold 22,080,000 common units to the public at a public offering price of $16.00 per unit and paid related commissions and expenses;

	•	CVR Partners’ general partner sold its incentive distribution rights, or lDRs, to CVR Partners for $26.0 million in cash (representing fair market value), and CVR Partners extinguished such IDRs;

	•	CVR GP, LLC, the general partner of CVR Partners (“CVR GP”) and CRLLC, entered into a second amended and restated agreement of limited partnership;

	•	CVR Partners entered into a new credit facility, which included a $125.0 million term loan and a $25.0 million revolving credit facility both due in 2016, drew the $125.0 million term loan in full, and paid associated financing costs; and

	•	Coffeyville Acquisition III LLC, the then-owner of CVR GP, sold CVR GP and its non-economic general partner interest to CRLLC for nominal consideration.

The pro forma adjustments have been prepared as if the transactions described above had taken place on March 31, 2011, in the case of the pro forma balance sheet, or as of January 1, 2011 in the case of the pro forma statement of operations.

The unaudited pro forma consolidated financial statements are not necessarily indicative of the results that we would have achieved had the transactions described herein actually taken place at the dates indicated, and do not purport to be indicative of future financial position or operating results. The unaudited pro forma consolidated financial statements do not reflect the repurchase of $2.7 million of CRLLC and Coffeyville Finance’s outstanding notes that were tendered pursuant to the offer to purchase dated April 14, 2011. The unaudited pro forma consolidated financial statements should be read in conjunction with the unaudited financial statements of CVR Energy, Inc., the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations“ included in CVR Energy, Inc.’s Form 10-Q for the three months March 31, 2011.

The pro forma adjustments are based on available information and certain assumptions that we believe are reasonable. The pro forma adjustments and the assumptions included therein are described in the accompanying notes.

CVR Energy, Inc. and Subsidiaries

Unaudited Pro Forma Consolidated Balance Sheet

As of March 31, 2011


	Actual as of			Pro Forma			Pro Forma as of
	March 31, 2011			Adjustments			March 31, 2011
	(In thousands)

ASSETS
Current assets:
Cash and cash equivalents	$	165,896		$	353,280	(a)	$	586,923
					(26,441	) (b)
					125,000	(c)
					(4,812	) (d)
					(26,000	) (e)
Accounts receivable, net of allowance for doubtful accounts of $845		113,988			—			113,988
Inventories		395,076			—			395,076
Prepaid expenses and other current assets		51,061			(3,673	) (b)		47,388
Deferred income taxes		39,825			(2,250	) (f)		37,575

Total current assets		765,846			415,104			1,180,950
Property, plant, and equipment, net of accumulated depreciation		1,063,831			—			1,063,831
Intangible assets, net		336			—			336
Goodwill		40,969			—			40,969
Deferred financing costs, net		12,949			4,812	(d)		17,761
Insurance receivable		3,570			—			3,570
Other long-term assets		4,461			—			4,461

Total assets	$	1,891,962		$	419,916		$	2,311,878


LIABILITIES AND EQUITY
Current liabilities:
Note payable and capital lease obligations	$	1,495		$	—		$	1,495
Accounts payable		226,073			(1,384	) (b)		224,689
Personnel accruals		19,451			—			19,451
Accrued taxes other than income taxes		24,919			—			24,919
Income taxes payable		23,141			38,655	(f)		61,796
Deferred revenue		26,726			—			26,726
Other current liabilities		41,840			—			41,840

Total current liabilities		363,645			37,271			400,916
Long-term liabilities:
Long-term debt, net of current portion		469,075			125,000	(c)		594,075
Accrued environmental liabilities, net of current portion		2,344			—			2,344
Deferred income taxes		299,177			(40,905	) (f)		326,367
					68,095	(g)
Other long-term liabilities		3,898			—			3,898

Total long-term liabilities		774,494			152,190			926,684
Commitments and contingencies
Equity:
CVR stockholders’ equity:
Common stock $0.01 par value per share, 350,000,000 shares authorized, 86,435,672 shares issued		864			—			864
Additional paid-in-capital		475,732			215,740	(a)		579,247
					(28,730	) (b)
					(15,400	) (e)
					(68,095	) (g)
Retained earnings		266,867			—			266,867
Treasury stock, 21,891, at cost		(243	)		—			(243	)
Accumulated other comprehensive income, net of tax		3			—			3

Total CVR stockholders’ equity		743,223			103,515			846,738

Noncontrolling interest		10,600			137,540	(a)		137,540
					(10,600	) (e)

Total equity		753,823			230,455			984,278

Total liabilities and equity	$	1,891,962		$	419,916		$	2,311,878

The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.

CVR Energy, Inc. and Subsidiaries

Unaudited Pro Forma Consolidated Statement of Operations

As of March 31, 2011


	Actual as of			Pro Forma			Pro Forma as of
	March 31, 2011			Adjustments			March 31, 2011

				(in thousands)
Net sales	$	1,167,265		$	—		$	1,167,265
Operating costs and expenses:
Cost of product sold (exclusive of depreciation and amortization)		936,822			—			936,822
Direct operating expenses (exclusive of depreciation and amortization)		68,326			—			68,326
Insurance recovery — business interruption		(2,870	)		—			(2,870	)
Selling, general and administrative expenses (exclusive of depreciation and amortization)		33,262			—			33,262
Net costs associated with flood		108			—			108
Depreciation and amortization		22,011			—			22,011

Total operating costs and expenses		1,057,659			—			1,057,659

Operating Income		109,606			—			109,606
Other income (expense):
Interest expense and other financing costs		(13,190	)		(1,250	) (a)		(14,712	)
					(241	) (b)
					(31	) (c)
Interest income		274			163	(d)		437
Gain (loss) on derivatives, net		(22,106	)		—			(22,106	)
Loss on extinguishment of debt		(1,908	)		—			(1,908	)
Other income		231			—			231

Total other income		(36,699	)		(1,359	)		(38,058	)

Income (loss) before income taxes and noncontrolling interest		72,907			(1,359	)		71,548
Income tax expense		27,119			(3,637	) (e)		23,482

Net income		45,788			2,278			48,066
Less: Net income attributable to noncontrolling interest		—			4,651	(f)		4,651

Net income attributable to CVR Energy, Inc.	$	45,788		$	(2,373	)	$	43,415

Basic earnings per share	$	0.53					$	0.50
Diluted earnings per share	$	0.52					$	0.49
Weighted-average common shares outstanding:
Basic		86,413,781						86,413,781
Diluted		87,783,857						87,783,857

The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.

CVR ENERGY, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED PRO FORMA

CONSOLIDATED FINANCIAL STATEMENTS


(1)	Pro Forma Balance Sheet Adjustments and Assumptions

(a) Reflects (1) the issuance by CVR Partners, LP (CVR Partners) of 19,200,000 common units to the public at an initial public offering price of $16.00 per common unit resulting in aggregate gross proceeds of $307.2 million and (2) the exercise by the underwriters of their option to sell 2,880,000 common units at $16.00 per common unit to cover over-allotments resulting in aggregate gross proceeds of $46.1 million, for a total of $353.3 million. Associated with this transaction is the entry to record the noncontrolling interest at approximately 30.2% of the total partners’ capital carrying value at CVR Partners, with the excess recorded to additional paid-in-capital for CVR Energy.

(b) Reflects the payment of underwriting commissions of $24.7 million and other estimated offering expenses of $4.0 million for a total of $28.7 million which will be allocated to the newly issued public common units of CVR Partners and recorded in additional paid-in-capital for CVR Energy. Of the $4.0 million in estimated offering costs, $2.3 million had been prepaid and $1.4 million had been accrued.

(d) Reflects the estimated deferred financing costs of $3.0 million paid to the lenders and approximately $1.8 million paid for third party costs associated with the new credit facility of CVR Partners.

(e) Reflects the purchase of the incentive distribution rights of the managing general partner interest of CVR Partners for $26.0 million which represents the fair market value.

(f) Reflects an increase to income taxes payable primarily due to the estimated taxable gain on distributions from CVR Partners to CRLLC in excess of CRLLC’s allocable tax basis in CVR Partners. The change in deferred tax assets and deferred tax liabilities is due to the reclassification of the net book versus tax basis difference associated with the investment in CVR Partners to a noncurrent deferred tax liability in conjunction with the initial public offering of CVR Partners. Deferreds historically were recorded based upon each separate component of the book versus tax basis difference of CVR Partners’ assets and liabilities.

(g) Reflects the deferred tax liability recorded associated with the difference between the book carrying value of CVR Energy’s investment in CVR Partners and the tax basis resulting from gains recorded in additional paid-in-capital.


(2)	Pro Forma Statement of Operations Adjustments and Assumptions

(a) Reflects the inclusion of interest expense relating to the new credit facility of CVR Partners at an assumed rate of 4.0% with no balance outstanding under the revolver.

(b) Reflects the amortization of related debt issuance costs of the new credit facility of CVR Partners over a five year term.

(c) Reflects the commitment fee of 0.50% on the estimated unused portion of the $25.0 million revolving credit facility of CVR Partners.

(d) Reflects the inclusion of interest income earned on the average cash balance of CVR Partners.

CVR ENERGY, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED PRO FORMA

CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(e) Reflects adjustments attributable to the noncontrolling interest and the reduction in pre-tax income.

(f) Reflects the removal of net income attributable to the noncontrolling interest.


(3)	Pro Forma Net Income per Common Share

Pro forma net income per common share is determined by dividing the pro forma net income that has been adjusted for adjustments of interest expense, interest income, income tax expense and income attributable to the noncontrolling interest by the weighted average common shares outstanding to determine both the basic and diluted net income per common share. The pro forma adjustments do not impact the weighted average shares outstanding.


(4)	Incremental Post-IPO Costs

CVR Partners anticipates incurring incremental general and administrative expenses subsequent to the initial public offering, as a result of being a publicly traded limited partnership, such as costs associated with SEC reporting requirements, including annual and quarterly reports to unitholders, tax return and Schedule K-1 preparation and distribution, independent auditor fees, investor relations activities and registrar and transfer agent fees. It is estimated that these incremental general and administrative expenses will be approximately $3.5 million per year. The unaudited pro forma consolidated financial statements do not reflect the $3.5 million in incremental expenses.

CVR ENERGY INC - FORM 8-K/A - EX-99.1 - May 23, 2011

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CVR ENERGY INC Reports