CVR Energy(US:CVI)2025-07-31 20:51PART I. Financial Information Financial Statements The company's financial statements for the period ended June 30, 2025, show a decrease in total assets to $3.98 billion from $4.26 billion at year-end 2024, primarily due to a reduction in cash and cash equivalents, with a net loss of $195 million for the six months ended June 30, 2025, a significant shift from a net income of $128 million in the same period of 2024 Condensed Consolidated Balance Sheets As of June 30, 2025, total assets were $3.98 billion, a decrease from $4.26 billion at December 31, 2024, mainly driven by a drop in cash and cash equivalents from $987 million to $596 million, while total liabilities increased slightly to $3.32 billion from $3.37 billion, and total equity decreased from $888 million to $666 million Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $596 | $987 | | Total current assets | $1,392 | $1,824 | | Total assets | $3,984 | $4,263 | | Liabilities & Equity | | | | Total current liabilities | $1,191 | $1,098 | | Long-term debt and finance lease obligations | $1,849 | $1,907 | | Total liabilities | $3,318 | $3,375 | | Total equity | $666 | $888 | Condensed Consolidated Statements of Operations For the second quarter of 2025, CVR Energy reported a net loss of $90 million, compared to a net income of $38 million in Q2 2024, with the six-month net loss at $195 million versus a net income of $128 million year-over-year, driven by a significant drop in operating income to a $103 million loss in Q2 2025 from a $27 million income in Q2 2024, and declining net sales to $1.76 billion in Q2 2025 from $1.97 billion in Q2 2024 Statement of Operations Highlights (in millions, except per share data) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $1,761 | $1,967 | $3,407 | $3,829 | | Operating (loss) income | $(103) | $27 | $(235) | $149 | | Net (loss) income | $(90) | $38 | $(195) | $128 | | Net (loss) income attributable to CVR | $(114) | $21 | $(237) | $103 | | Basic and diluted (loss) earnings per share | $(1.14) | $0.21 | $(2.36) | $1.02 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash used in operating activities was $19 million, a significant downturn from the $258 million provided in the same period of 2024, while net cash used in investing activities increased to $267 million from $129 million due to higher turnaround expenditures, and net cash used in financing activities decreased to $105 million from $729 million primarily due to a $600 million debt repayment in the prior year Cash Flow Summary (in millions) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(19) | $258 | | Net cash used in investing activities | $(267) | $(129) | | Net cash used in financing activities | $(105) | $(729) | | Net decrease in cash and cash equivalents | $(391) | $(600) | - The significant decrease in operating cash flow was mainly due to a net loss of $195 million in 2025 compared to a net income of $128 million in 2024, and unfavorable changes in working capital28243 - Investing cash outflow increased due to turnaround expenditures of $191 million in 2025, compared to $44 million in 202428 Notes to the Condensed Consolidated Financial Statements The notes detail the company's structure, accounting policies, and financial components, with CVR Energy operating in Petroleum, Renewables, and Nitrogen Fertilizer segments, noting a key subsequent event of the One Big Beautiful Bill Act signing on July 4, 2025, expected to benefit future income tax balances, and a significant increase in the accrued Renewable Fuel Standard (RFS) obligation to $548 million as of June 30, 2025, from $323 million at year-end 2024, alongside a $70 million prepayment of its Term Loan principal on June 30, 2025 - The company operates through three reportable segments: Petroleum, Renewables, and Nitrogen Fertilizer. As of June 30, 2025, IEP owned approximately 70% of the company's common stock30 - The accrued Renewable Fuel Standard (RFS) obligation increased to $548 million as of June 30, 2025, up from $323 million at December 31, 20244873 - On June 30, 2025, the company prepaid $70 million in principal of its senior secured term loan facility51 - The company's crude oil supply agreement with Gunvor was amended on July 29, 2025, extending its term through January 31, 202969 - No quarterly dividends were declared or paid during Q4 2024, Q1 2025, or Q2 202590 Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the significant operating and net losses in the first half of 2025 primarily to challenges in the Petroleum segment, including a major turnaround at the Coffeyville Refinery and increased RFS compliance costs, with the Petroleum segment's operating income swinging from a $128 million profit to a $295 million loss year-over-year for the six-month period, while the Renewables segment's loss narrowed slightly, and the Nitrogen Fertilizer segment showed improved performance with operating income rising to $81 million from $54 million, and the company has taken steps to improve liquidity, including suspending dividends, deferring growth capital, and prepaying debt, ending the quarter with $920 million in total liquidity Consolidated Financial Highlights (in millions) | Metric | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | | Operating (loss) income | $(235) | $149 | | Net (loss) income | $(195) | $128 | | Net (loss) income attributable to CVR | $(237) | $103 | | EBITDA | $(85) | $306 | - The company's total liquidity as of June 30, 2025, was approximately $920 million, consisting of $596 million in cash and $324 million in available credit229 - To enhance liquidity, the Board suspended cash dividends in October 2024, deferred new growth capital spending, and reduced 2025 capital expenditures224234 Company Overview, Strategy, and Market Factors CVR Energy is a diversified holding company with segments in Petroleum, Renewables, and Nitrogen Fertilizer, focusing its strategy on safe and reliable operations, market capture, and financial discipline, while the business environment is influenced by geopolitical risks, a shifting U.S. regulatory landscape under a new administration, and volatile commodity markets, with the Petroleum segment facing mid-cycle crack spreads and significant RFS compliance costs, the Renewables segment's profitability highly dependent on government credits like RINs and LCFS with uncertainty around the new PTC, and the Nitrogen Fertilizer segment benefiting from strong agricultural demand driven by favorable corn planting economics - The company's mission is to be a top-tier North American renewable fuels, petroleum refining, and nitrogen-based fertilizer company, focusing on safety, environment, integrity, corporate citizenship, and continuous improvement9798 - Key market factors include geopolitical tensions, changes in U.S. trade and climate policy under the new administration, and significant costs and volatility associated with RFS regulations99100 - The Petroleum segment's outlook is shaped by oversupplied refined product markets, low diesel inventories, and declining global refining capacity additions104 - The Renewables segment's profitability is highly dependent on government incentives, with the expiration of the Biodiesel Blenders' Tax Credit (BTC) and uncertainty around the Production Tax Credit (PTC) creating volatility124126 - The Nitrogen Fertilizer segment sees a positive outlook due to a 5% increase in planted corn acres for 2025 and strong farmer economics140144 Results of Operations by Segment For the first six months of 2025, segment performance varied significantly, with the Petroleum segment reporting an operating loss of $295 million, a stark reversal from a $128 million income in the prior year, due to a major turnaround and higher RFS costs, while the Renewables segment narrowed its operating loss to $11 million from $21 million, benefiting from higher production volumes and RIN prices, which offset the loss of the BTC, and the Nitrogen Fertilizer segment's operating income grew to $81 million from $54 million, driven by higher sales volumes and prices for UAN and ammonia Segment Operating (Loss) Income (YTD 2025 vs YTD 2024, in millions) | Segment | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | | Petroleum | $(295) | $128 | | Renewables | $(11) | $(21) | | Nitrogen Fertilizer | $81 | $54 | - The Petroleum segment's refining margin fell to $1.14 per barrel for YTD 2025 from $13.68 in YTD 2024, primarily due to unfavorable sales volume from the 2025 Turnaround and a $309 million increase in RFS-related expenses174175 - The Renewables segment's margin improved due to increased production volumes and higher D4 RIN prices, which helped offset the negative impact from the expiration of the BTC and lower CARB ULSD prices189191192 - The Nitrogen Fertilizer segment's net sales increased to $311 million for YTD 2025 from $261 million in YTD 2024, driven by favorable sales volumes and pricing for both UAN and ammonia205 Non-GAAP Reconciliations This section provides reconciliations of non-GAAP measures like EBITDA, Adjusted EBITDA, and segment-specific margins to their most directly comparable GAAP figures, showing consolidated Adjusted EBITDA for the six months ended June 30, 2025, was $122 million, down from $186 million in the prior-year period, with key adjustments including a $200 million unfavorable revaluation of the RFS liability, and Petroleum Adjusted EBITDA for the first half of 2025 was $7 million, a sharp decline from $104 million in 2024 Reconciliation of Net (Loss) Income to Adjusted EBITDA (YTD, in millions) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net (loss) income | $(195) | $128 | | EBITDA | $(85) | $306 | | Revaluation of RFS liability | $200 | $(91) | | Inventory valuation impacts | $8 | $(36) | | Adjusted EBITDA | $122 | $186 | Petroleum Segment Adjusted EBITDA (YTD, in millions) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Petroleum net (loss) income | $(297) | $145 | | Petroleum EBITDA | $(202) | $227 | | Petroleum Adjusted EBITDA | $7 | $104 | Nitrogen Fertilizer Segment EBITDA (YTD, in millions) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Nitrogen Fertilizer net income | $66 | $39 | | Nitrogen Fertilizer EBITDA | $120 | $93 | Liquidity and Capital Resources As of June 30, 2025, the company had total liquidity of $920 million, and due to unfavorable market conditions and a major turnaround, management took actions to preserve cash, including suspending dividends, deferring growth capital, and reducing 2025 capital expenditures, which allowed the company to prepay $90 million of its Term Loan in mid-2025, with estimated capital spending for 2025 between $165 million and $202 million, and no dividends paid by the company in 2025, while CVR Partners continued its distributions - Total liquidity was $920 million as of June 30, 2025, down from $1.3 billion at year-end 2024229 - The company prepaid a total of $90 million on its Term Loan in Q2 and Q3 2025, reflecting improved cash balances following cost-control measures225237 2025 Estimated Capital Expenditures (in millions) | Segment | Maintenance (Low-High) | Growth (Low-High) | Total (Low-High) | | :--- | :--- | :--- | :--- | | Petroleum | $70 - $80 | $30 - $40 | $100 - $120 | | Renewables | $3 - $5 | $1 - $3 | $4 - $8 | | Nitrogen Fertilizer | $40 - $45 | $15 - $20 | $55 - $65 | | Total | $118 - $137 | $47 - $65 | $165 - $202 | - No dividends were declared or paid to CVR Energy stockholders in Q4 2024 or the first half of 2025. The Board suspended dividend payments in October 2024234238 Quantitative and Qualitative Disclosures About Market Risk The company states that there have been no material changes to its market risks as of June 30, 2025, compared to those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024 - There were no material changes in market risks from those disclosed in the 2024 Form 10-K247 Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025, with no material changes made to the internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025248 - No material changes occurred in internal controls over financial reporting during the quarter ended June 30, 2025249 PART II. Other Information Legal Proceedings This section incorporates by reference the discussion of legal proceedings from Note 12 of the financial statements, with key ongoing litigation relating to the Renewable Fuel Standard (RFS), including challenges to the EPA's denial of small refinery exemptions, and a guaranty dispute with Exxon Mobil - The company is involved in ongoing litigation concerning the Renewable Fuel Standard, specifically challenging the EPA's denial of small refinery hardship exemptions74251 Risk Factors The company reports no material changes from the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no material changes from the risk factors disclosed in the 2024 Form 10-K252 Other Information This section details significant corporate governance and management changes, including the expansion of the Board to nine members with the appointment of Brett Icahn on July 28, 2025, and CEO David L. Lamp's announced resignation effective December 31, 2025, with Mark A. Pytosh expected to be appointed as the new President and CEO effective January 1, 2026, under a new three-year employment agreement, and the company also amended its crude oil supply agreement with Gunvor, extending the term to January 31, 2029 - On July 28, 2025, Brett Icahn was appointed to the Board of Directors, increasing its size to nine members254 - President and CEO David L. Lamp notified the company of his intention to resign effective December 31, 2025. He is expected to remain on the Board258 - Mark A. Pytosh is expected to be appointed as the new President and CEO, effective January 1, 2026, with a new employment agreement including a base salary of $1.1 million and target bonus of 150%259 - The company amended its crude oil supply agreement with Gunvor, extending the term to January 31, 2029267 Exhibits This section provides an index of all exhibits filed with the Form 10-Q, including management compensation plans, employment agreements for executives, and required certifications - Exhibits filed include the employment agreement for incoming CEO Mark A. Pytosh and the amendment to the employment agreement for outgoing CEO David L. Lamp269271