Attached files
file | filename |
---|---|
EX-23.2 - EX-23.2 - CVR ENERGY INC | y93739exv23w2.htm |
EX-23.1 - EX-23.1 - CVR ENERGY INC | y93739exv23w1.htm |
EX-99.1 - EX-99.1 - CVR ENERGY INC | y93739exv99w1.htm |
EX-99.3 - EX-99.3 - CVR ENERGY INC | y93739exv99w3.htm |
EX-99.2 - EX-99.2 - CVR ENERGY INC | y93739exv99w2.htm |
EX-99.4 - EX-99.4 - CVR ENERGY INC | y93739exv99w4.htm |
EX-99.6 - EX-99.6 - CVR ENERGY INC | y93739exv99w6.htm |
8-K - FORM 8-K - CVR ENERGY INC | y93739e8vk.htm |
Exhibit 99.5
CVR ENERGY,
INC.
Introduction
Presented below are our pro forma condensed consolidated
statements of operations for the year ended December 31,
2010 and the nine and twelve months ended September 30,
2011 and the pro forma condensed consolidated balance sheet as
of September 30, 2011. The pro forma condensed consolidated
statements of operations give effect to this offering and the
Acquisition (including the acquisition of GWECs working
capital) as if they had occurred at the beginning of the periods
presented, and the pro forma condensed consolidated balance
sheet as of September 30, 2011 gives effect to this
offering and the Acquisition (including the acquisition of
GWECs working capital) as if they had occurred on
September 30, 2011. We describe the assumptions underlying
the pro forma adjustments in the accompanying notes, which
should be read in conjunction with these unaudited pro forma
condensed consolidated financial statements.
The pro forma adjustments are based upon available information
and certain assumptions that we believe are reasonable. The pro
forma adjustments described in the accompanying notes will be
made as of the closing date of the Acquisition and may differ
from those reflected in these unaudited pro forma condensed
consolidated financial statements. Revisions to the pro forma
adjustments which may be required by final purchase price
allocations
and/or
pre-closing or post-closing price adjustments, if any, may have
a significant impact on the total assets, total liabilities and
stockholders equity, depreciation and amortization and
interest expense. The unaudited pro forma condensed consolidated
financial information is for informational purposes only and
does not purport to represent what our results of operation or
financial position actually would have been if the Acquisition
had occurred at any date, and such data does not purport to
project our financial position as of any future date or our
results of operations for any future period. The unaudited pro
forma condensed consolidated financial information should be
read in conjunction with the financial statements and related
notes of GWEC and CVR Energy and the Managements Discussion and
Analysis of Financial Condition and Results of Operations
for CVR Energy.
1
CVR ENERGY,
INC.
UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER
30, 2011
Adjustments |
||||||||||||||||
Historical |
Historical |
for the |
Total |
|||||||||||||
CVR Energy | GWEC | Transactions | Pro Forma | |||||||||||||
(in thousands, except share data) | ||||||||||||||||
ASSETS
|
||||||||||||||||
Current assets:
|
||||||||||||||||
Cash and cash equivalents
|
$ | 898,456 | $ | 28,956 | $ | 209,000 | (a) | $ | 438,581 | |||||||
(5,200 | ) (b) | |||||||||||||||
(3,900 | ) (c) | |||||||||||||||
(2,600 | ) (d) | |||||||||||||||
(602,794 | ) (e) | |||||||||||||||
(3,000 | ) (f) | |||||||||||||||
(151 | ) (g) | |||||||||||||||
(50,070 | ) (h) | |||||||||||||||
255 | (i) | |||||||||||||||
(30,371 | ) (j) | |||||||||||||||
Restricted cash
|
| 125 | | 125 | ||||||||||||
Accounts receivable, net of allowance for doubtful accounts of
$912 for CVR Energy, $839 for GWEC and $912 on a pro forma basis
|
83,370 | 137,288 | | 220,658 | ||||||||||||
Accounts receivable, affiliates
|
| 198 | (198 | ) (i) | | |||||||||||
Note receivablerelated party
|
| 57 | (57 | ) (i) | | |||||||||||
Investments
|
| 322 | | 322 | ||||||||||||
Inventories
|
308,929 | 177,213 | 19,500 | (k) | 516,819 | |||||||||||
11,177 | (l) | |||||||||||||||
Prepaid expenses and other current assets
|
45,723 | 8,910 | 1,600 | (b) | 54,580 | |||||||||||
700 | (d) | |||||||||||||||
(2,353 | ) (m) | |||||||||||||||
Deferred income taxes
|
17,643 | | | 17,643 | ||||||||||||
Income taxes receivable
|
9,340 | | | 9,340 | ||||||||||||
Total current assets
|
1,363,461 | 353,069 | (458,462 | ) | 1,258,068 | |||||||||||
| | | ||||||||||||||
Property, plant, and equipment, net of accumulated depreciation
|
1,079,601 | 280,354 | 308,198 | (n) | 1,654,601 | |||||||||||
(1,709 | ) (o) | |||||||||||||||
(666 | ) (p) | |||||||||||||||
(11,177 | ) (l) | |||||||||||||||
Deferred turnaround costs, net
|
| 14,208 | (14,208 | ) (p) | | |||||||||||
Intangible assets, net
|
320 | 1,090 | | 1,410 | ||||||||||||
Goodwill
|
40,969 | | | 40,969 | ||||||||||||
Deferred financing costs, net
|
15,194 | | 3,600 | (b) | 20,846 | |||||||||||
1,900 | (d) | |||||||||||||||
3,495 | (q) | |||||||||||||||
(3,343 | )(m) | |||||||||||||||
Insurance receivable
|
4,076 | | | 4,076 | ||||||||||||
Other assets, net
|
| 3,495 | (3,495 | )(q) | | |||||||||||
Other long-term assets
|
4,674 | | | 4,674 | ||||||||||||
Total assets
|
$ | 2,508,295 | $ | 652,216 | $ | (175,867 | ) | $ | 2,984,644 | |||||||
2
CVR ENERGY,
INC.
UNAUDITED PRO
FORMA CONDENSED CONSOLIDATED BALANCE SHEET(Continued)
AS OF SEPTEMBER
30, 2011
Adjustments |
||||||||||||||||
Historical |
Historical |
for the |
Total |
|||||||||||||
CVR Energy | GWEC | Transactions | Pro Forma | |||||||||||||
(in thousands, except share data) | ||||||||||||||||
LIABILITIES AND EQUITY | ||||||||||||||||
Current liabilities:
|
||||||||||||||||
Current portion of long-term debt
|
| 46,401 | (45,647 | ) (h) | | |||||||||||
(754 | ) (r) | |||||||||||||||
Note payable and capital lease obligations, current portion
|
165 | | 754 | (r) | 919 | |||||||||||
Accounts payable
|
185,553 | 197,723 | | 383,276 | ||||||||||||
Personnel accruals
|
16,260 | | 3,479 | (s) | 19,739 | |||||||||||
Accrued taxes other than income taxes
|
20,399 | | 14,491 | (t) | 34,890 | |||||||||||
Tax dividend obligation to parent
|
| 30,371 | (30,371 | ) (j) | | |||||||||||
Deferred revenue
|
20,565 | | | 20,565 | ||||||||||||
Derivative liabilities
|
| 7,435 | (7,435 | ) (u) | | |||||||||||
Other current liabilities
|
61,148 | 19,050 | (151 | ) (g) | 69,512 | |||||||||||
(3,479 | ) (s) | |||||||||||||||
(14,491 | ) (t) | |||||||||||||||
7,435 | (u) | |||||||||||||||
Total current liabilities
|
304,090 | 300,980 | (76,169 | ) | 528,901 | |||||||||||
Long-term liabilities:
|
||||||||||||||||
Long-term debt, net of current portion and discount
|
591,662 | 53,823 | 209,000 | (a) | 800,662 | |||||||||||
(4,423 | ) (h) | |||||||||||||||
(49,400 | ) (r) | |||||||||||||||
Note payable and capital lease obligations
|
| | 49,400 | (r) | 49,400 | |||||||||||
Accrued environmental liabilities, net of current portion
|
1,600 | | | 1,600 | ||||||||||||
Deferred income taxes
|
360,122 | | | 360,122 | ||||||||||||
Other long-term liabilities
|
19,256 | 38 | | 19,294 | ||||||||||||
Total long-term liabilities
|
972,640 | 53,861 | 204,577 | 1,231,078 | ||||||||||||
Commitments and contingencies
|
||||||||||||||||
Equity:
|
||||||||||||||||
CVR stockholders equity:
|
||||||||||||||||
Common Stock $0.01 par value per share,
350,000,000 shares authorized, 86,634,651 shares issued
|
866 | 1 | (1 | ) (v) | 866 | |||||||||||
Additional
paid-in-capital
|
584,339 | 36,358 | (36,358 | ) (v) | 584,339 | |||||||||||
Retained earnings
|
500,997 | 261,016 | (3,900 | ) (c) | 494,097 | |||||||||||
(3,000 | ) (f) | |||||||||||||||
(5,696 | ) (m) | |||||||||||||||
(14,874 | ) (p) | |||||||||||||||
(238,737 | ) (v) | |||||||||||||||
(1,709 | ) (o) | |||||||||||||||
Treasury stock, 61,153 at cost
|
(1,605 | ) | | | (1,605 | ) | ||||||||||
Accumulated other comprehensive income, net of tax
|
(1,016 | ) | | | (1,016 | ) | ||||||||||
Total CVR stockholders equity
|
1,083,581 | 297,375 | (304,275 | ) | 1,076,681 | |||||||||||
Noncontrolling interest
|
147,984 | | | 147,984 | ||||||||||||
Total equity
|
1,231,565 | 297,375 | (304,275 | ) | 1,224,665 | |||||||||||
Total liabilities and equity
|
$ | 2,508,295 | $ | 652,216 | $ | (175,867 | ) | $ | 2,984,644 | |||||||
The accompanying notes are an integral part of these unaudited
pro forma condensed consolidated financial statements.
3
CVR ENERGY,
INC.
UNAUDITED PRO
FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR
ENDED DECEMBER 31, 2010
Adjustments |
||||||||||||||||
Historical |
Historical |
for the |
Total |
|||||||||||||
CVR Energy | GWEC | Transactions | Pro Forma | |||||||||||||
(in thousands except share data) | ||||||||||||||||
Net sales
|
$ | 4,079,768 | $ | 2,141,043 | $ | | $ | 6,220,811 | ||||||||
Operating costs and expenses:
|
||||||||||||||||
Operating expenses
|
| 2,086,819 | (2,086,819 | ) (a) | | |||||||||||
Cost of product sold (exclusive of depreciation and amortization)
|
3,568,118 | | 1,968,559 | (a) | 5,536,677 | |||||||||||
Direct operating expenses (exclusive of depreciation and
amortization)
|
239,791 | | 118,260 | (a) | 329,895 | |||||||||||
(13,716 | ) (b) | |||||||||||||||
(14,440 | ) (c) | |||||||||||||||
Insurance recoverybusiness interruption
|
| | | | ||||||||||||
Selling, general and administrative expenses (exclusive of
depreciation and amortization)
|
92,034 | 15,768 | (289 | ) (c) | 106,897 | |||||||||||
(616 | ) (d) | |||||||||||||||
Depreciation and amortization
|
86,761 | | 30,263 | (c) | 117,024 | |||||||||||
Total operating costs and expenses
|
3,986,704 | 2,102,587 | 1,202 | 6,090,493 | ||||||||||||
Operating income
|
93,064 | 38,456 | (1,202 | ) | 130,318 | |||||||||||
Other income (expense):
|
||||||||||||||||
Interest expense and other financing costs
|
(50,268 | ) | (22,432 | ) | (2,218 | ) (e) | (74,918 | ) | ||||||||
Interest income
|
2,211 | 41 | | 2,252 | ||||||||||||
Gain (loss) on derivatives, net
|
(1,505 | ) | | | (1,505 | ) | ||||||||||
Loss on extinguishment of debt
|
(16,647 | ) | | | (16,647 | ) | ||||||||||
Other income, net
|
1,218 | 80 | | 1,298 | ||||||||||||
Total other income (expense)
|
(64,991 | ) | (22,311 | ) | (2,218 | ) | (89,520 | ) | ||||||||
Income before income tax expense
|
28,073 | 16,145 | (3,420 | ) | 40,798 | |||||||||||
Income tax expense
|
13,783 | | 5,049 | (f) | 18,832 | |||||||||||
Net income
|
14,290 | 16,145 | (8,469 | ) | 21,966 | |||||||||||
Less: Net income attributable to noncontrolling interest
|
| | | | ||||||||||||
Net income attributable to CVR Energy stockholders
|
$ | 14,290 | $ | 16,145 | $ | (8,469 | ) | $ | 21,966 | |||||||
The accompanying notes are an integral part of these unaudited
pro forma condensed consolidated financial statements.
4
CVR ENERGY,
INC.
UNAUDITED PRO
FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 2011
Adjustments |
||||||||||||||||
Historical |
Historical |
for the |
Total |
|||||||||||||
CVR Energy | GWEC | Transactions | Pro Forma | |||||||||||||
(in thousands, except share data) | ||||||||||||||||
Net sales
|
$ | 3,966,945 | $ | 2,041,264 | | $ | 6,008,209 | |||||||||
Operating costs and expenses:
|
||||||||||||||||
Operating expenses
|
| 1,857,186 | (1,857,186 | ) (a) | | |||||||||||
Cost of product sold (exclusive of depreciation and amortization)
|
3,086,237 | | 1,699,329 | (a) | 4,785,566 | |||||||||||
Direct operating expenses (exclusive of depreciation and
amortization)
|
209,256 | | 97,106 | (a) | 284,288 | |||||||||||
(9,200 | ) (b) | |||||||||||||||
(12,874 | ) (c) | |||||||||||||||
Insurance recoverybusiness interruption
|
(3,360 | ) | | | (3,360 | ) | ||||||||||
Selling, general and administrative expenses (exclusive of
depreciation and amortization)
|
69,017 | 13,903 | (259 | ) (c) | 82,102 | |||||||||||
(559 | ) (d) | |||||||||||||||
Depreciation and amortization
|
66,079 | | 22,697 | (c) | 88,776 | |||||||||||
Total operating costs and expenses
|
3,427,229 | 1,871,089 | (60,946 | ) | 5,237,372 | |||||||||||
Operating income
|
539,716 | 170,175 | 60,946 | 770,837 | ||||||||||||
Other income (expense):
|
||||||||||||||||
Interest expense and other financing costs
|
(41,152 | ) | (22,900 | ) | 4,455 | (e) | (59,597 | ) | ||||||||
Interest income
|
578 | 89 | | 667 | ||||||||||||
Gain (loss) on derivatives, net
|
(25,099 | ) | | (60,751 | ) (a) | (85,850 | ) | |||||||||
Loss on extinguishment of debt
|
(2,078 | ) | | | (2,078 | ) | ||||||||||
Other income, net
|
720 | (114 | ) | | 606 | |||||||||||
Total other income (expense)
|
(67,031 | ) | (22,925 | ) | (56,296 | ) | (146,252 | ) | ||||||||
Income before income tax expense
|
472,685 | 147,250 | 4,650 | 624,585 | ||||||||||||
Income tax expense
|
172,460 | | 60,274 | (f) | 232,734 | |||||||||||
Net income
|
300,225 | 147,250 | (55,624 | ) | 391,851 | |||||||||||
Less: Net income attributable to noncontrolling interest
|
20,307 | | | 20,307 | ||||||||||||
Net income attributable to CVR Energy stockholders
|
$ | 279,918 | $ | 147,250 | $ | (55,624 | ) | $ | 371,544 | |||||||
The accompanying notes are an integral part of these unaudited
pro forma condensed consolidated financial statements.
5
CVR ENERGY,
INC.
UNAUDITED PRO
FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE
MONTHS ENDED SEPTEMBER 30, 2011
Historical |
Adjustments |
|||||||||||||||||||
CVR |
Historical |
for the |
Total Pro |
|||||||||||||||||
Energy | GWEC | Transactions | Forma | |||||||||||||||||
(in thousands except share data) | ||||||||||||||||||||
Net sales
|
$ | 5,115,129 | $ | 2,640,334 | $ | | $ | 7,755,463 | ||||||||||||
Operating costs and expenses:
|
||||||||||||||||||||
Operating expenses
|
| 2,431,776 | (2,431,776 | ) (a) | | |||||||||||||||
Cost of product sold (exclusive of depreciation and amortization)
|
4,069,963 | | 2,243,141 | (a) | 6,313,104 | |||||||||||||||
Direct operating expenses (exclusive of depreciation and
amortization)
|
273,472 | | 127,884 | (a) | 371,992 | |||||||||||||||
| | (12,468 | ) (b) | |||||||||||||||||
| | (16,896 | ) (c) | |||||||||||||||||
Insurance recoverybusiness interruption
|
(3,360 | ) | | | (3,360 | ) | ||||||||||||||
Selling, general and administrative expenses (exclusive of
depreciation and amortization)
|
112,467 | 17,616 | (336 | ) (c) | 129,113 | |||||||||||||||
(634 | ) (d) | |||||||||||||||||||
Depreciation and amortization
|
88,084 | | 30,263 | (c) | 118,347 | |||||||||||||||
Total operating costs and expenses
|
4,540,626 | 2,449,392 | (60,822 | ) | 6,929,196 | |||||||||||||||
Operating income
|
574,503 | 190,942 | 60,822 | 826,267 | ||||||||||||||||
Other income (expense):
|
||||||||||||||||||||
Interest expense and other financing costs
|
(54,869 | ) | (28,684 | ) | 4,083 | (e) | (79,470 | ) | ||||||||||||
Interest income
|
1,181 | 100 | | 1,281 | ||||||||||||||||
Gain (loss) on derivatives, net
|
(34,419 | ) | | (60,751 | ) (a) | (95,170 | ) | |||||||||||||
Loss on extinguishment of debt
|
(3,673 | ) | | | (3,673 | ) | ||||||||||||||
Other income, net
|
1,237 | (772 | ) | | 465 | |||||||||||||||
Total other income (expense)
|
(90,543 | ) | (29,356 | ) | (56,668 | ) | (176,567 | ) | ||||||||||||
Income before income tax expense
|
483,960 | 161,586 | 4,154 | 649,700 | ||||||||||||||||
Income tax expense
|
181,441 | | 65,765 | (f) | 247,206 | |||||||||||||||
Net income
|
302,519 | 161,586 | (61,611 | ) | 402,494 | |||||||||||||||
Less: Net income attributable to noncontrolling interest
|
20,307 | | | 20,307 | ||||||||||||||||
Net income attributable to CVR Energy stockholders
|
$ | 282,212 | $ | 161,586 | $ | (61,611 | ) | $ | 382,187 | |||||||||||
The accompanying notes are an integral part of these unaudited
pro forma condensed consolidated financial statements.
6
CVR ENERGY,
INC.
NOTES TO THE
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED
FINANCIAL STATEMENTS
(1) | Organization and Basis of Presentation |
The unaudited pro forma condensed consolidated financial
statements have been prepared based upon the audited and
unaudited historical consolidated financial statements of CVR
Energy, Inc. and Gary-Williams Energy Corporation.
The unaudited pro forma condensed consolidated balance sheets
give effect to the following, as if they had occurred at the end
of the respective reporting period:
| the consummation of the Acquisition, including the payment of $525.0 million plus working capital to the Seller; | |
| adjustments to the fair value of the tangible and intangible assets; | |
| our issuance of $200.0 million of aggregate principal amount of notes offered hereby, including the estimated payment of associated deferred financing fees of $5.2 million; | |
| the payment of approximately $6.5 million for fees associated with a bridge loan commitment and the $150.0 million increase to the ABL Credit Facility; | |
| the distribution by GWEC to its shareholders, prior to the consummation of the Acquisition, of the airplane owned by it and the associated debt; | |
| the repayment of the GWECs historical term debt and associated accrued interest prior to the consummation of the Acquisition; | |
| the payment of approximately $3.0 million of fees associated with the Acquisition; and | |
| conformity of presentation of GWECs consolidated financial statements to CVR Energys consolidated financial statements. |
The unaudited pro forma condensed consolidated statement of
operations give effect to the following, as if they had occurred
at the beginning of the respective reporting period:
| adjustments to depreciation and amortization based upon the estimated fair value of tangible and intangible property acquired; | |
| adjustments to reflect (1) the estimated tax impact of the pro forma adjustments and (2) the effect of income tax on the historical net income of GWEC (which was not subject to income tax), in both cases at the statutory rate of approximately 39.7% during the period presented; and | |
| conformity of presentation of GWECs consolidated financial statements to CVR Energys consolidated financial statements. |
The Acquisition will be accounted for under the purchase method
of accounting as described in Accounting Standards Codification
(ASC) Topic 805, Business Combinations.
As part of the preparation of the unaudited pro forma condensed
consolidated financial statements, we have performed a
preliminary review of tangible and intangible assets to be
acquired in the Acquisition, and we have based certain
assumptions upon that preliminary review. A formal valuation
will be completed following the consummation of the Acquisition
to assist us in identifying and valuing all tangible and
intangible assets and their respective lives. We have not fully
identified all of the adjustments that would result from
conforming GWECs critical accounting policies to those of
CVR Energy. Accordingly, actual results will differ from
7
CVR ENERGY,
INC.
NOTES TO THE
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED
FINANCIAL STATEMENTS(Continued)
those reflected in the unaudited pro forma condensed
consolidated financial statements once we have determined the
final purchase price for GWEC, completed the valuation analyses
necessary to finalize the required purchase price allocations
and identified all necessary conforming accounting changes and
other acquisition-related adjustments. There can be no assurance
that such finalization will not result in material changes to
the unaudited pro forma condensed consolidated financial
statements.
We expect the Acquisition to generate annual cost savings
associated with synergies by combining overlapping corporate
functions, optimizing purchasing of crude oil, and through
greater economies of scale of other procurement and purchasing
functions.
However, the unaudited pro forma condensed consolidated
financial statements do not reflect any cost savings from
operating efficiencies or synergies.
We expect to incur significant costs to integrate the
businesses, including costs in conjunction with the Transition
Services Agreement entered into with GWEC. The unaudited pro
forma condensed consolidated financial statements do not reflect
anticipated future costs associated with the integration of the
businesses or the costs expected under the Transition Services
Agreement. The effect of the cost of integrating the businesses
could materially impact the pro forma financial statements.
(2) | Pro Forma Balance Sheet Adjustments and Assumptions |
(a) Reflects the issuance of $200.0 million principal
amount of new notes at a premium. These are recorded at their
face amount, adjusted for the premium received.
(b) Reflects the estimated deferred financing costs,
including professional fees incurred, of approximately
$5.2 million associated with the issuance of the new notes.
(c) Reflects fees and associated financing costs of
approximately $3.9 million associated with the bridge loan
that was committed but undrawn. These amounts are immediately
expensed and not deferred.
(d) Reflects deferred financing fees of approximately
$2.6 million associated with the $150.0 million
incremental ABL facility.
(e) Reflects the payment for the stock of GWEC at a
purchase price of $525.0 million plus working capital.
(f) Reflects an approximate $3.0 million decrease to
cash and retained earnings to reflect the estimated transaction
costs associated with the Acquisition. These represent estimated
legal, audit, and other professional fees. Additionally, these
costs are not included in the Unaudited Pro Forma Condensed
Consolidated Statement of Operations as they are nonrecurring
expenses.
(g) Reflects the elimination of accrued interest associated
with historical debt that is being repaid by GWEC prior to the
closing of the Acquisition.
(h) Reflects the elimination of historical debt of GWEC
that is being repaid by GWEC prior to closing the Acquisition.
(i) Reflects the settlement of affiliate receivables and
note receivables prior to the closing of the Acquisition.
8
CVR ENERGY,
INC.
NOTES TO THE
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED
FINANCIAL STATEMENTS(Continued)
(j) Reflects the tax distribution made by GWEC to its
parent prior to the closing of the Acquisition.
(k) GWEC inventory will be purchased by CVR Energy at
market value. The inventory has historically been carried at the
lower of
first-in,
first-out (FIFO) cost, or market. The estimated
increase in crude oil and refined products inventory value of
approximately $19.5 million is reflected to adjust to
estimated pro forma inventories to the initial market value at
acquisition.
(l) Reflects the reclassification of GWECs catalysts
and precious metals to conform the presentation in GWECs
consolidated financial statements to the presentation in CVR
Energys consolidated financial statements.
(m) Reflects the elimination of the deferred financing fees
associated with the historical debt of GWEC that is being repaid
prior to closing.
(n) Pro forma Adjustment to record the estimated fair value
of GWECs owned properties, plant and equipment including
property and equipment recorded under capital leases. This
estimated value is preliminary and is subject to further
adjustments based on the final fair value determination to be
completed subsequent to the acquisition closing date.
(o) Reflects the distribution of GWECs airplane and
the associated airplane hangar sublease prior to the closing.
(p) GWECs deferred turnaround costs are eliminated as
these costs previously incurred by GWEC relate to periodic
overhauls and refurbishments to GWECs Wynnewood refinery.
These costs are implicit in the estimated fair value assigned to
GWECs refining facilities as they contribute to the
physical and operating condition of the refineries and have been
factored into the estimated fair value of the GWECs
refinery. Approximately $14.2 million relates to the 2008
turnaround and approximately $0.7 million eliminated from
property, plant and equipment related to costs incurred for the
upcoming turnaround in 2012. Also, CVR Energys expenses
turnaround costs as they are incurred. This adjustment also is
to conform accounting methods of GWEC to CVR Energy.
(q) Reflects the reclassification of GWECs deferred
financing fees to conform the presentation in GWECs
consolidated financial statements to the presentation in CVR
Energys consolidated financial statements.
(r) Reflects reclassification of GWECs presentation
of current and long-term capital leases to conform the
presentation in GWECs consolidated financial statements to
the presentation in CVR Energys consolidated financial
statements.
(s) Reflects reclassification of GWECs presentation
of personnel accruals to conform the presentation in GWECs
consolidated financial statements to the presentation in CVR
Energys consolidated financial statements.
(t) Reflects reclassification of GWECs presentation
of accrued taxes other than income taxes to conform the
presentation in GWECs consolidated financial statements to
the presentation in CVR Energys consolidated financial
statements.
(u) Reflects reclassification of GWECs presentation
of derivative liabilities to conform the presentation in
GWECs consolidated financial statements to the
presentation in CVR Energys consolidated financial
statements.
(v) Reflects the elimination of all of GWECs
stockholders equity.
9
CVR ENERGY,
INC.
NOTES TO THE
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED
FINANCIAL STATEMENTS(Continued)
(3) | Pro Forma Statement of Operations Adjustments and Assumptions |
(a) Reflects the reclassification of operating
expenses, cost of product sold, and gain (loss) on derivatives,
net from operating expenses to conform GWECs consolidated
financial statement presentation to CVR Energys
consolidated financial statement presentation.
(b) To eliminate the turnaround expense for GWEC as
amortized in 2010 and to expense deferred turnaround expense
incurred during the period associated with the 2012 turnaround.
This adjustment conforms the accounting method of GWEC to CVR
Energys accounting method of expensing as incurred.
(c) Depreciation and amortization has been increased to
reflect the estimated additional depreciation expense related to
the increase in property, plant, and equipment based on the
estimated fair market value of the acquired assets. The
estimated incremental depreciation expense for the twelve months
ended December 31, 2010, nine months ended
September 30, 2011, and twelve months ended
September 30, 2011 is approximately $15.5 million,
$9.6 million and $13.0 million respectively, based
upon average lives of 19 years.
Nine Months |
Twelve Months |
|||||||||||
Year Ended |
Ended |
Ended |
||||||||||
December 31, |
September 30, |
September 30, |
||||||||||
2011 | 2011 | 2011 | ||||||||||
(in millions) | ||||||||||||
Pro forma depreciation and amortization expense
|
$ | 30,263 | $ | 22,697 | $ | 30,263 | ||||||
Elimination of depreciation and amortization of GWEC
|
(14,729 | ) | (13,133 | ) | (17,232 | ) | ||||||
Estimated incremental annual increase to depreciation and
amortization
|
$ | 15,534 | $ | 9,564 | $ | 13,031 | ||||||
GWEC recorded depreciation and amortization of approximately
$14.4 million and $0.3 million in operating
expenses and selling, general and administrative expenses
(SG&A), respectively for the twelve months ended
December 31, 2010; depreciation and amortization of
approximately $12.9 million and $0.3 million in cost
of operating expenses, and SG&A, respectively for
the nine months ended September 30, 2011; and amortization
of approximately $16.9 million and $0.3 million in
operating expenses and SG&A expenses, respectively
for the twelve months ended September 30, 2011. CVR Energy
records cost of product sold, operating expenses and
SG&A expenses, exclusive of depreciation and amortization.
The pro forma adjustment conforms the classification.
(d) Reflects the annual costs of the airplane that will not
be ongoing expenses as the airplane will be distributed to
GWECs stockholders prior to the close of the Acquisition
(exclusive of depreciation).
(e) GWECs historical interest expense for its term
debt has been eliminated, and this adjustment adds interest in
respect of the additional borrowings of CVR Energy to fund the
Acquisition. The amortization of debt issuance costs is
$2.3 million, $1.7 million, and $2.3 million
respectively for the year ended December 31, 2010, nine
months ended September 30, 2011, and twelve months ended
September 30, 2011.
10
CVR ENERGY,
INC.
NOTES TO THE
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED
FINANCIAL STATEMENTS(Continued)
Twelve Months |
||||||||||||
Year Ended |
Nine Months Ended |
Ended |
||||||||||
December 31, |
September 30, |
September 30, |
||||||||||
2010 | 2011 | 2011 | ||||||||||
(in millions) | ||||||||||||
Elimination of interest, amortization of deferred financing
fees, on historical GWEC debt, excluding the capital lease and
financing obligation
|
$ | (16,828 | ) | $ | (18,740 | ) | $ | (23,129 | ) | |||
Estimated net interest on additional borrowings to fund the
Acquisition
|
15,300 | 11,475 | 15,300 | |||||||||
Amortization of new debt issuance costs
|
2,256 | 1,692 | 2,256 | |||||||||
Additional annual commitment fees estimated under the current
ABL of CVR
|
1,490 | 1,118 | 1,490 | |||||||||
Total adjustment to interest expense
|
$ | 2,218 | $ | (4,455 | ) | $ | (4,083 | ) | ||||
(f) Income tax has been adjusted (1) to reflect the
effect of income tax on the GWECs financials (as GWEC was
an entity not subject to income tax) and (2) to reflect the
tax impact of the pro forma adjustments at the statutory rate of
approximately 39.7% during the period presented.
11