CVR Energy(CVI) - 2022 Q2 - Quarterly Report

PART I. Financial Information Item 1. Financial Statements Presents CVR Energy's unaudited consolidated financial statements, including balance sheets, operations, equity, cash flows, and detailed notes Condensed Consolidated Balance Sheets Total assets increased from $3,906 million to $4,671 million, driven by cash, receivables, and inventories, with total liabilities also rising due to increased current liabilities Balance Sheet Summary | Metric | June 30, 2022 (in millions) | December 31, 2021 (in millions) | | :-------------------------------- | :-------------------------- | :---------------------------- | | ASSETS | | | | Cash and cash equivalents | $893 | $510 | | Accounts receivable | $418 | $299 | | Inventories | $722 | $484 | | Total current assets | $2,119 | $1,369 | | Property, plant and equipment, net | $2,252 | $2,273 | | Total assets | $4,671 | $3,906 | | LIABILITIES AND EQUITY | | | | Accounts payable | $666 | $409 | | Other current liabilities | $1,029 | $747 | | Total current liabilities | $1,695 | $1,156 | | Long-term debt and finance lease obligations, net of current portion | $1,588 | $1,654 | | Total liabilities | $3,611 | $3,136 | | Total equity | $1,060 | $770 | | Total liabilities and equity | $4,671 | $3,906 | Condensed Consolidated Statements of Operations CVR Energy reported a significant turnaround, with net income attributable to stockholders surging to $165 million for Q2 2022 and $258 million for H1 2022, driven by higher net sales and operating income Statements of Operations Summary | Metric | Three Months Ended June 30, 2022 (in millions) | Three Months Ended June 30, 2021 (in millions) | Six Months Ended June 30, 2022 (in millions) | Six Months Ended June 30, 2021 (in millions) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net sales | $3,144 | $1,783 | $5,517 | $3,246 | | Operating income (loss) | $402 | $6 | $623 | $(129) | | Income (loss) before income tax expense | $305 | $(8) | $491 | $(105) | | Net income (loss) | $239 | $(2) | $392 | $(57) | | Net income (loss) attributable to CVR Energy stockholders | $165 | $(6) | $258 | $(45) | | Basic and diluted earnings (loss) per share | $1.64 | $(0.06) | $2.57 | $(0.45) | | Dividends declared per share | $0.40 | $4.89 | $0.40 | $4.89 | Condensed Consolidated Statements of Changes in Equity Total equity increased from $770 million to $1,060 million, primarily due to net income, partially offset by dividends paid to CVR Energy stockholders and distributions to CVR Partners' public unitholders Changes in Equity Summary | Metric | Balance at Dec 31, 2021 (in millions) | Balance at June 30, 2022 (in millions) | | :------------------------------------ | :------------------------------------ | :----------------------------------- | | Total CVR Stockholders' Equity | $553 | $769 | | Noncontrolling Interest | $217 | $291 | | Total Equity | $770 | $1,060 | - Net income contributed $94 million in Q1 2022 and $165 million in Q2 2022 to equity, while dividends paid to CVR Energy stockholders totaled $40 million in Q2 2022[23] Condensed Consolidated Statements of Cash Flows Net cash from operating activities significantly increased to $712 million for H1 2022, driving a $383 million net increase in cash and cash equivalents, despite cash used in investing and financing activities Cash Flow Summary | Metric | Six Months Ended June 30, 2022 (in millions) | Six Months Ended June 30, 2021 (in millions) | | :---------------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net cash provided by operating activities | $712 | $243 | | Net cash used in investing activities | $(156) | $(141) | | Net cash used in financing activities | $(173) | $(250) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $383 | $(148) | | Cash, cash equivalents and restricted cash, end of period | $900 | $526 | Notes to the Condensed Consolidated Financial Statements The notes detail the company's organization, accounting policies, and specific financial line items, covering inventories, property, leases, liabilities, debt, revenue, derivatives, share-based compensation, and contingencies (1) Organization and Nature of Business CVR Energy is a diversified holding company in petroleum refining and nitrogen fertilizer manufacturing, with Icahn Enterprises L.P. holding approximately 71% of its common stock - CVR Energy operates in petroleum refining (CVR Refining) and nitrogen fertilizer manufacturing (CVR Partners)[27] - Icahn Enterprises L.P. and its affiliates owned approximately 71% of the Company's outstanding common stock as of June 30, 2022[27] - CVR Partners repurchased 111,695 common units for $12 million during the six months ended June 30, 2022, at an average price of $110.98 per unit[29] (2) Basis of Presentation The condensed consolidated financial statements are prepared in accordance with GAAP and SEC rules, consolidating CVR Partners as a variable interest entity, with all necessary adjustments made - Financial statements are prepared in accordance with GAAP and SEC rules, consolidating CVR Partners as a variable interest entity[31][32] (3) Recent Accounting Pronouncements and Accounting Changes The company is assessing ASU 2020-04, Reference Rate Reform (Topic 848), which provides optional guidance for accounting for reference rate reform - The company is evaluating ASU 2020-04 (Reference Rate Reform) but has not yet utilized its optional expedients or exceptions[36] (4) Inventories Total inventories increased from $484 million to $722 million, primarily driven by increases in finished goods and raw materials Inventory Breakdown | Inventory Type | June 30, 2022 (in millions) | December 31, 2021 (in millions) | | :--------------- | :-------------------------- | :---------------------------- | | Finished goods | $345 | $215 | | Raw materials | $262 | $177 | | In-process | $31 | $20 | | Parts, supplies and other | $84 | $72 | | Total inventories | $722 | $484 | (5) Property, Plant and Equipment Net property, plant and equipment slightly decreased from $2,273 million to $2,252 million, with construction in progress also decreasing Property, Plant and Equipment Summary | Category | June 30, 2022 (in millions) | December 31, 2021 (in millions) | | :------------------------------------ | :-------------------------- | :---------------------------- | | Machinery and equipment | $4,161 | $4,033 | | Construction in progress | $104 | $142 | | Less: Accumulated depreciation and amortization | $(2,305) | $(2,194) | | Total property, plant and equipment, net | $2,252 | $2,273 | (6) Leases The company leases various assets, with operating lease expense stable at $4 million for Q2 2022, and a new $25 million finance lease for an Oxygen Storage Vessel expected to be capitalized Lease Expense Components | Lease Expense Component | Three Months Ended June 30, 2022 (in millions) | Three Months Ended June 30, 2021 (in millions) | | :------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Operating lease expense | $4 | $4 | | Finance lease expense: Amortization of ROU asset | $1 | $1 | | Finance lease expense: Interest expense on lease liability | $1 | $2 | | Short-term lease expense | $2 | $2 | - A new finance lease for an Oxygen Storage Vessel, approximately $25 million, is expected to be capitalized upon lease commencement[45] (7) Other Current Liabilities Other current liabilities significantly increased from $747 million to $1,029 million, primarily due to a substantial rise in accrued RFS obligations and other accrued expenses Other Current Liabilities Breakdown | Liability Type | June 30, 2022 (in millions) | December 31, 2021 (in millions) | | :---------------------------------------------------- | :-------------------------- | :---------------------------- | | Accrued Renewable Fuel Standards ("RFS") obligation | $708 | $494 | | Accrued taxes other than income taxes | $49 | $45 | | Share-based compensation | $37 | $15 | | Personnel accruals | $33 | $46 | | Accrued interest | $24 | $24 | | Accrued income taxes | $22 | $0 | | Derivatives | $20 | $2 | | Operating lease liabilities | $14 | $13 | | Current portion of long-term debt and finance lease obligations | $6 | $6 | | Deferred revenue | $4 | $87 | | Other accrued expenses and liabilities | $112 | $15 | | Total other current liabilities | $1,029 | $747 | (8) Long-Term Debt and Finance Lease Obligations Total long-term debt and finance lease obligations decreased from $1,654 million to $1,588 million, following CVR Partners' redemption of 2023 UAN Notes and CVR Refining's ABL Credit Agreement amendment Long-Term Debt and Finance Lease Obligations Summary | Debt Type | June 30, 2022 (in millions) | December 31, 2021 (in millions) | | :-------------------------------------------------------------------- | :-------------------------- | :---------------------------- | | CVR Partners: 9.25% Senior Secured Notes, due June 2023 | $0 | $65 | | CVR Partners: 6.125% Senior Secured Notes, due June 2028 | $550 | $550 | | CVR Energy: 5.25% Senior Notes, due February 2025 | $600 | $600 | | CVR Energy: 5.75% Senior Notes, due February 2028 | $400 | $400 | | Total long-term debt and finance lease obligations, net of current portion | $1,588 | $1,654 | - CVR Partners redeemed all outstanding 2023 UAN Notes at par on February 22, 2022, recognizing a $1 million loss on extinguishment of debt[51] - CVR Refining amended its ABL Credit Agreement, establishing a senior secured revolving credit facility of up to $275 million, maturing on June 30, 2027[53] (9) Revenue Consolidated net sales significantly increased to $3,144 million for Q2 2022 and $5,517 million for H1 2022, driven by strong performance in both the Petroleum and Nitrogen Fertilizer segments Revenue by Segment and Product | Segment/Product | Three Months Ended June 30, 2022 (in millions) | Three Months Ended June 30, 2021 (in millions) | Six Months Ended June 30, 2022 (in millions) | Six Months Ended June 30, 2021 (in millions) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Petroleum Segment | | | | | | Gasoline | $1,421 | $908 | $2,524 | $1,657 | | Distillates | $1,350 | $685 | $2,312 | $1,273 | | Other Revenue from product sales | $81 | $41 | $160 | $73 | | Crude oil sales | $12 | $8 | $17 | $37 | | Nitrogen Fertilizer Segment | | | | | | Ammonia | $61 | $32 | $103 | $42 | | UAN | $159 | $87 | $319 | $126 | | Other urea products | $11 | $7 | $20 | $11 | | Other Revenue from product sales | $3 | $3 | $6 | $5 | | Total Revenue | $3,144 | $1,783 | $5,517 | $3,246 | - The Nitrogen Fertilizer Segment has $8 million in remaining performance obligations, with $4 million expected to be recognized as revenue by the end of 2022[65] (10) Derivative Financial Instruments, Investments and Fair Value Measurements The Petroleum Segment uses commodity derivatives, recognizing a total net loss of $68 million for Q2 2022 and $66 million for H1 2022, while the company divested its remaining investment in Delek US Holdings, Inc. Derivative Financial Instruments Net Loss | Metric | Three Months Ended June 30, 2022 (in millions) | Three Months Ended June 30, 2021 (in millions) | Six Months Ended June 30, 2022 (in millions) | Six Months Ended June 30, 2021 (in millions) | | :--------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Forwards | $(4) | $4 | $6 | $22 | | Swaps | $(49) | $(5) | $(48) | $(55) | | Futures | $(15) | $(1) | $(24) | $(1) | | Total loss on derivatives, net | $(68) | $(2) | $(66) | $(34) | - The company divested its remaining nominal investment in Delek US Holdings, Inc. on January 18, 2022, and recognized no investment income on marketable securities for the three and six months ended June 30, 2022[73] (11) Share-Based Compensation Total share-based compensation expense was $11 million for Q2 2022 and $36 million for H1 2022, primarily driven by Incentive Unit Awards Share-Based Compensation Expense | Compensation Type | Three Months Ended June 30, 2022 (in millions) | Three Months Ended June 30, 2021 (in millions) | Six Months Ended June 30, 2022 (in millions) | Six Months Ended June 30, 2021 (in millions) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Performance Unit Awards | $0 | $0 | $0 | $(3) | | CVR Partners - Phantom Unit Awards | $(3) | $7 | $11 | $12 | | Incentive Unit Awards | $14 | $5 | $25 | $11 | | Total share-based compensation expense | $11 | $12 | $36 | $20 | (12) Commitments and Contingencies The company faces significant commitments and contingencies, including a $708 million RFS obligation for the Petroleum Segment, an expected $79 million settlement for Call Option Lawsuits, and ongoing RFS disputes with the EPA - The Petroleum Segment's RFS obligation was approximately $708 million as of June 30, 2022, recorded in Other current liabilities[82] - The company expects to settle Call Option Lawsuits for $79 million, recognized within Other current liabilities and Other (expense) income, net as of June 30, 2022[84] - The EPA denied 36 small refinery exemptions (SREs) for 2018 and WRC's SREs for 2017, 2019, 2020, and 2021, leading WRC to file petitions challenging these denials[86] (13) Business Segments CVR Energy operates two segments, Petroleum and Nitrogen Fertilizer, both showing significant improvements in net sales and operating income for Q2 and H1 2022, with Petroleum Segment assets increasing to $4,280 million Segment Performance Highlights | Metric | Three Months Ended June 30, 2022 (in millions) | Three Months Ended June 30, 2021 (in millions) | Six Months Ended June 30, 2022 (in millions) | Six Months Ended June 30, 2021 (in millions) | | :----------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net sales: | | | | | | Petroleum | $2,868 | $1,648 | $5,022 | $3,052 | | Nitrogen Fertilizer | $244 | $138 | $467 | $199 | | Total net sales | $3,144 | $1,783 | $5,517 | $3,246 | | Operating income (loss): | | | | | | Petroleum | $297 | $(20) | $427 | $(136) | | Nitrogen Fertilizer | $126 | $30 | $230 | $16 | | Total operating income (loss) | $402 | $6 | $623 | $(129) | | Capital expenditures: | | | | | | Petroleum | $19 | $9 | $38 | $19 | | Nitrogen Fertilizer | $9 | $4 | $14 | $7 | | Total capital expenditures | $41 | $83 | $91 | $151 | Segment Assets | Segment | June 30, 2022 (in millions) | December 31, 2021 (in millions) | | :-------------------------------- | :-------------------------- | :---------------------------- | | Petroleum | $4,280 | $3,368 | | Nitrogen Fertilizer | $1,119 | $1,127 | | Other, including intersegment eliminations | $(728) | $(589) | | Total assets | $4,671 | $3,906 | (14) Supplemental Cash Flow Information Cash paid for income taxes was $60 million for H1 2022, while cash paid for interest was $49 million, and non-cash capital expenditures included in accounts payable significantly decreased Supplemental Cash Flow Details | Metric | Six Months Ended June 30, 2022 (in millions) | Six Months Ended June 30, 2021 (in millions) | | :-------------------------------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Cash paid for income taxes, net of refunds | $60 | $0 | | Cash paid for interest | $49 | $65 | | Operating cash flows from operating leases | $9 | $8 | | Operating cash flows from finance leases | $2 | $3 | | Financing cash flows from finance leases | $3 | $3 | | Change in capital expenditures included in accounts payable | $3 | $25 | | Non-cash dividends to CVR Energy stockholders | $0 | $251 | (15) Related Party Transactions Related party expenses for the Enable Joint Venture Transportation Agreement were $2 million for Q2 2022 and $5 million for H1 2022, with dividends paid to IEP totaling $28 million for both periods Related Party Transaction Summary | Metric | Three Months Ended June 30, 2022 (in millions) | Three Months Ended June 30, 2021 (in millions) | Six Months Ended June 30, 2022 (in millions) | Six Months Ended June 30, 2021 (in millions) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Expenses from Related Parties: Enable Joint Venture Transportation Agreement | $2 | $3 | $5 | $6 | | Payments made: Dividends to IEP | $28 | $348 | $28 | $348 | - For Q2 2022, CVR Energy declared a cash dividend of $0.40 per share ($40 million total) and a special dividend of $2.60 per share ($261 million total), with IEP receiving $28 million and $185 million, respectively[105][106] - CVR Partners declared a distribution of $10.05 per common unit for Q2 2022, totaling $106 million, of which CVR Energy will receive approximately $39 million[109] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on CVR Energy's financial performance, condition, and outlook, highlighting improved operating and net income across segments, market impacts, strategic initiatives, liquidity, capital resources, and non-GAAP measures Company Overview CVR Energy is a diversified holding company in petroleum refining and nitrogen fertilizer manufacturing, currently restructuring to segregate its renewables operations, with completion expected in Q1 2023 - CVR Energy is a diversified holding company in petroleum refining (CVR Refining) and nitrogen fertilizer manufacturing (CVR Partners)[111] - The company is restructuring to segregate its renewables business, forming 16 new indirect, wholly owned subsidiaries in Q1 2022, with completion expected in Q1 2023[113] Strategy and Goals CVR Energy aims to be a top-tier North American renewable fuels, petroleum refining, and nitrogen-based fertilizer company, guided by core values and strategic objectives focused on EH&S, utilization rates, market capture, and financial discipline - Mission: To be a top-tier North American renewable fuels, petroleum refining, and nitrogen-based fertilizer company, measured by safe and reliable operations, superior performance, and profitable growth[116] - Core Values: Safety, Environment, Integrity, Corporate Citizenship, and Continuous Improvement[116][117][118][119] - Strategic Objectives: Continuous improvement in EH&S, industry-leading utilization rates, maximizing market capture, and financial discipline[121][122][123] - Achievements in H1 2022 include reductions in environmental events (13%), process safety management tier 1 incidents (70%), and total recordable incident rate (92%) compared to H1 2021[124] - Completed the conversion of the Wynnewood hydrocracker to renewable diesel service and safely completed the planned turnaround at the Wynnewood Refinery on time and on budget[124] - Achieved record UAN production volumes at the Coffeyville Fertilizer Facility in March 2022 and completed CVR Partners' $95 million debt reduction plan[124] Industry Factors and Market Indicators The global economy faces volatility from the COVID-19 pandemic and Russia-Ukraine conflict, impacting oil, fertilizer, and natural gas markets, leading to significant RFS compliance costs for Petroleum and benefits from tight supply for Nitrogen Fertilizer - The Russia-Ukraine conflict has disrupted global oil, fertilizer, and agriculture markets, leading to higher oil and natural gas prices and increased commodity price volatility[127] - The Petroleum Segment's RFS compliance costs remain significant, with an estimated open position of approximately 440 million RINs (excluding commitments) and a potential liability of $708 million as of June 30, 2022[136] - The Wynnewood Refinery's hydrocracker conversion to a renewable diesel unit (RDU) was completed in April 2022, expected to produce up to 100 million gallons of renewable diesel per year and generate 170-180 million RINs annually[135] - The NYMEX 2-1-1 crack spread averaged $41.31 per barrel during H1 2022, up from $18.10 per barrel in H1 2021, while the Group 3 2-1-1 crack spread averaged $35.56 per barrel, up from $17.76 per barrel[140] - The Nitrogen Fertilizer Segment benefits from tight global supply conditions due to the Russia-Ukraine conflict and increased grain prices, with UAN and ammonia prices rising[151] - The USDA estimates a 3.7% decrease in planted corn acres and a 1.3% increase in planted soybean acres in spring 2022 compared to 2021, supporting corn prices[156] Results of Operations CVR Energy experienced significant improvement in consolidated operating and net income for Q2 and H1 2022, driven by strong refining margins and higher product sales prices in both the Petroleum and Nitrogen Fertilizer segments Consolidated Financial Highlights Consolidated operating income surged to $402 million in Q2 2022 and $623 million in H1 2022, with net income attributable to CVR Energy stockholders also substantially increasing to $165 million in Q2 2022 and $258 million in H1 2022 Consolidated Financial Performance | Metric | Three Months Ended June 30, 2022 (in millions) | Three Months Ended June 30, 2021 (in millions) | Six Months Ended June 30, 2022 (in millions) | Six Months Ended June 30, 2021 (in millions) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Operating income (loss) | $402 | $6 | $623 | $(129) | | Net income (loss) attributable to CVR Energy stockholders | $165 | $(6) | $258 | $(45) | | EBITDA | $401 | $102 | $679 | $102 | | Basic and diluted earnings (loss) per share | $1.64 | $(0.06) | $2.57 | $(0.45) | - Other expense, net, was $74 million for Q2 2022 and $84 million for H1 2022, primarily due to the expected settlement of litigation[173] Petroleum Segment The Petroleum Segment's operating income significantly improved to $297 million in Q2 2022 and $427 million in H1 2022, driven by improved crack spreads and higher net sales, despite decreased total throughput due to turnaround and RDU conversion Petroleum Segment Financial Performance | Metric | Three Months Ended June 30, 2022 (in millions) | Three Months Ended June 30, 2021 (in millions) | Six Months Ended June 30, 2022 (in millions) | Six Months Ended June 30, 2021 (in millions) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net Sales | $2,868 | $1,648 | $5,022 | $3,052 | | Operating Income (Loss) | $297 | $(20) | $427 | $(136) | | Net Income (Loss) | $306 | $(13) | $432 | $(123) | | EBITDA | $347 | $33 | $514 | $(29) | Petroleum Segment Throughput Data | Throughput Data (in bpd) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total throughput | 201,246 | 216,626 | 199,306 | 201,444 | - Refining margin increased by $345 million in Q2 2022 compared to Q2 2021, primarily due to a $29.35 per barrel increase in the Group 3 2-1-1 crack spread[188] - RFS compliance costs (excluding revaluation) decreased in 2022 due to a lower renewable volume obligation and decreased RINs prices[188][189] - Direct operating expenses (exclusive of depreciation and amortization) increased to $6.12 per barrel in Q2 2022 (from $4.23) and $5.85 per barrel in H1 2022 (from $4.99), driven by higher natural gas, repairs, maintenance, and personnel costs[194] Nitrogen Fertilizer Segment The Nitrogen Fertilizer Segment's operating income increased to $126 million in Q2 2022 and $230 million in H1 2022, driven by significantly higher product sales prices for UAN and ammonia, despite decreased ammonia utilization due to unplanned downtime Nitrogen Fertilizer Financial Performance | Metric | Three Months Ended June 30, 2022 (in millions) | Three Months Ended June 30, 2021 (in millions) | Six Months Ended June 30, 2022 (in millions) | Six Months Ended June 30, 2021 (in millions) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net Sales | $244 | $138 | $467 | $199 | | Operating Income | $126 | $30 | $230 | $16 | | Net Income (Loss) | $118 | $7 | $211 | $(18) | | EBITDA | $147 | $51 | $271 | $56 | Nitrogen Fertilizer Production and Sales Metrics | Production/Sales Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Consolidated Ammonia Utilization | 89% | 98% | 88% | 93% | | Ammonia (gross produced, thousand tons) | 193 | 217 | 380 | 404 | | Ammonia (net available for sale, thousand tons) | 50 | 70 | 102 | 140 | | UAN (thousand tons) | 331 | 334 | 648 | 606 | | Ammonia product pricing at gate ($/ton) | $1,182 | $403 | $1,127 | $373 | | UAN product pricing at gate ($/ton) | $555 | $237 | $524 | $206 | - The increase in net sales was primarily due to favorable UAN and ammonia pricing conditions, contributing $131 million in Q2 2022 and $262 million in H1 2022, partially offset by decreased sales volumes[210][214] - Cost of materials and other increased due to higher natural gas pricing and usage, increased purchases of nitrogen and ammonia, and higher distribution costs[216] Non-GAAP Reconciliations This section defines and reconciles various non-GAAP financial measures, including EBITDA, Adjusted EBITDA, Refining Margin, and Free Cash Flow, to their most directly comparable GAAP measures, providing insights into performance Non-GAAP Financial Measures | Metric | Three Months Ended June 30, 2022 (in millions) | Three Months Ended June 30, 2021 (in millions) | Six Months Ended June 30, 2022 (in millions) | Six Months Ended June 30, 2021 (in millions) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net income (loss) | $239 | $(2) | $392 | $(57) | | EBITDA | $401 | $102 | $679 | $102 | | Adjusted EBITDA | $511 | $66 | $666 | $93 | | Basic and diluted earnings (loss) per share | $1.64 | $(0.06) | $2.57 | $(0.45) | | Adjusted earnings (loss) per share | $2.45 | $(0.32) | $2.47 | $(0.51) | | Net cash provided by operating activities | $390 | $147 | $712 | $243 | | Free cash flow | $275 | $54 | $556 | $115 | Petroleum and Nitrogen Fertilizer Non-GAAP Metrics | Metric | Three Months Ended June 30, 2022 (in millions) | Three Months Ended June 30, 2021 (in millions) | Six Months Ended June 30, 2022 (in millions) | Six Months Ended June 30, 2021 (in millions) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Petroleum EBITDA | $347 | $33 | $514 | $(29) | | Petroleum Adjusted EBITDA | $383 | $18 | $431 | $45 | | Refining margin | $478 | $133 | $775 | $184 | | Refining margin, adjusted for inventory valuation impacts | $441 | $97 | $605 | $82 | | Refining margin per total throughput barrel | $26.10 | $6.72 | $21.50 | $5.04 | | Refining margin adjusted for inventory valuation impact per total throughput barrel | $24.08 | $4.92 | $16.77 | $2.25 | | Direct operating expenses per total throughput barrel | $6.12 | $4.23 | $5.85 | $4.99 | | Nitrogen Fertilizer EBITDA and Adjusted EBITDA | $147 | $51 | $271 | $56 | Debt and EBITDA Ratios | Metric | Twelve Months Ended June 30, 2022 (in millions) | | :-------------------------------------------------------------------- | :---------------------------------------------- | | Total debt and finance lease obligations | $1,594 | | Nitrogen Fertilizer debt and finance lease obligations | $547 | | Total debt and finance lease obligations exclusive of Nitrogen Fertilizer | $1,047 | | EBITDA exclusive of Nitrogen Fertilizer | $611 | | Total debt and finance lease obligations to EBITDA exclusive of Nitrogen Fertilizer | 1.71 | | Consolidated cash and cash equivalents | $893 | | Nitrogen Fertilizer cash and cash equivalents | $156 | | Cash and cash equivalents exclusive of Nitrogen Fertilizer | $737 | | Net debt and finance lease obligations exclusive of Nitrogen Fertilizer | $310 | | Net debt and finance lease obligations to EBITDA exclusive of Nitrogen Fertilizer | 0.51 | Factors Affecting Comparability of Our Financial Results Comparability of financial results is affected by significant capital projects and planned turnarounds, including the Wynnewood Refinery's major turnaround and RDU conversion, and upcoming turnarounds for the Coffeyville and East Dubuque fertilizer facilities - The Wynnewood Refinery's major planned turnaround began in late February 2022 and was completed in early April 2022, with $67 million capitalized for the six months ended June 30, 2022[230] - A planned turnaround at the Coffeyville Fertilizer Facility commenced in July 2022 and is expected to be completed in early to mid-August 2022, with an estimated cost of $12 to $15 million[232][260] - The next planned turnaround at the East Dubuque Fertilizer Facility is expected to commence during August 2022, with an estimated cost of $19 to $21 million[233][260] Liquidity and Capital Resources The company's liquidity is primarily driven by improved cash from operations in H1 2022, supported by strategic financial discipline, including deferred growth capital and focused maintenance, and reflected in declared cash and special dividends for Q2 2022 - Principal sources of liquidity are cash from operations, which improved due to better market conditions in 2021 and 2022[240][242] - The Board declared a $0.40 cash dividend and a $2.60 special cash dividend for Q2 2022, payable August 22, 2022[243][265][266] - Strategic measures include deferring most growth capital (except RDU and pretreater projects), focusing maintenance capital, and disciplined cost management[243] Capital Spending Estimates | Capital Spending Category | Six Months Ended June 30, 2022 (in millions) | 2022 Low Estimate (in millions) | 2022 High Estimate (in millions) | | :------------------------ | :------------------------------------------- | :------------------------------ | :------------------------------- | | Petroleum Maintenance | $37 | $85 | $95 | | Petroleum Growth | $1 | $4 | $8 | | Renewables (RDU project) | $38 | $56 | $66 | | Nitrogen Fertilizer Maintenance | $13 | $43 | $45 | | Nitrogen Fertilizer Growth | $1 | $1 | $2 | | Total Capital Expenditures | $91 | $195 | $224 | - CVR Partners repurchased 111,695 common units for $12 million during H1 2022 under its Unit Repurchase Program[272] Cash Flow Activity Summary | Cash Flow Activity | Six Months Ended June 30, 2022 (in millions) | Six Months Ended June 30, 2021 (in millions) | Change (in millions) | | :------------------------- | :------------------------------------------- | :------------------------------------------- | :------------------- | | Operating activities | $712 | $243 | $469 | | Investing activities | $(156) | $(141) | $(15) | | Financing activities | $(173) | $(250) | $77 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $383 | $(148) | $531 | Critical Accounting Estimates No modifications were made to the critical accounting estimates disclosed in the 2021 Form 10-K during the three and six months ended June 30, 2022 - No modifications were made to critical accounting estimates during the three and six months ended June 30, 2022[278] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes to the company's market risks as of and for the three and six months ended June 30, 2022, compared to those discussed in the 2021 Form 10-K - No material changes to market risks as of and for the three and six months ended June 30, 2022, compared to the 2021 Form 10-K[279] Item 4. Controls and Procedures The company's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2022, with no material changes in internal control over financial reporting during the fiscal quarter - Disclosure controls and procedures were effective as of June 30, 2022[280] - No material changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2022[281] PART II. Other Information Item 1. Legal Proceedings This section refers to Note 12 of Part I, Item 1 for a description of certain litigation, legal, administrative proceedings, and environmental matters - Legal proceedings are detailed in Note 12 ('Commitments and Contingencies') to Part I, Item 1 of this Report[283] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the 2021 Form 10-K, though these could be affected by the potential impacts of the Russia-Ukraine conflict - No material changes to risk factors from the 2021 Form 10-K, but potential effects of the Russia-Ukraine conflict could impact them[284] Item 5. Other Information This section states that there is no other information to report Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including supplemental indentures, joinder agreements, amendments to credit agreements, and certifications, along with a disclaimer regarding their purpose and limitations - Exhibits include supplemental indentures, joinder agreements, and amendments to the ABL Credit Agreement, reflecting changes related to CVR Renewables and other subsidiaries[286] - The section includes certifications from the President and CEO, CFO, and Chief Accounting Officer[286] SIGNATURES Signatures The report is duly signed on behalf of CVR Energy, Inc. by Dane J. Neumann (Principal Financial Officer) and Jeffrey D. Conaway (Principal Accounting Officer) on August 2, 2022 - The report was signed by Dane J. Neumann (Principal Financial Officer) and Jeffrey D. Conaway (Principal Accounting Officer) on August 2, 2022[294]