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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 3, 2011 (November 2, 2011)
CVR ENERGY, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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001-33492
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61-1512186 |
(State or other
jurisdiction of incorporation)
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(Commission File Number)
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(I.R.S. Employer
Identification Number) |
2277 Plaza Drive, Suite 500
Sugar Land, Texas 77479
(Address of principal executive offices, including zip code)
Registrants telephone number, including area code: (281) 207-3200
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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TABLE OF CONTENTS
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Item 1.01. |
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Entry into a Material Definitive Agreement |
On November 2, 2011, CVR Energy, Inc., a Delaware corporation (the Company), and
Coffeyville Resources, LLC, a Delaware limited liability company and a wholly-owned subsidiary of
the Company (Buyer) entered into a Stock Purchase and Sale Agreement (the Purchase
Agreement) with The Gary-Williams Company, Inc., a Delaware corporation (Seller
Parent), GWEC Holding Company, Inc., a Delaware corporation and a wholly-owned subsidiary of
Seller Parent (Seller), and Gary-Williams Energy Corporation, a Delaware corporation and
a wholly-owned subsidiary of Seller (GWEC), pursuant to which Buyer agreed to acquire
from Seller all of the issued and outstanding shares of GWEC, subject to the terms and conditions
contained therein (the Transaction).
Summary of the Terms of the Agreement
Consideration. Upon signing of the Purchase Agreement, Buyer delivered a $26,250,000 deposit to
Seller by wire transfer of immediately available funds (Purchase Price Deposit). Under
the terms of the Purchase Agreement, at the closing of the Transaction, Buyer will pay Seller a
purchase price of $525,000,000 in cash (less the Purchase Price Deposit), subject to certain
adjustments based on the working capital of GWEC at the closing, as of now estimated to be
$100,000,000 (the Purchase Price). $10,500,000 of the Purchase Price will be held in
escrow to secure Sellers obligations to indemnify Buyer.
Representations, Warranties, Covenants and Indemnifications. The Purchase Agreement contains
various representations, warranties, covenants and indemnification obligations of Buyer and Seller.
The representations and warranties of each party set forth in the Purchase Agreement have been
made solely for the benefit of the other parties to the Purchase Agreement and such representations
and warranties should not be relied on by any other person. In addition, such representations and
warranties (i) have been qualified by disclosures made to the other party in connection with the
Purchase Agreement, (ii) are subject to the materiality standards contained in the Purchase
Agreement which may differ from what may be viewed as material by investors and (iii) were made
only as of the date of the Purchase Agreement or such other date as is specified in the Purchase
Agreement.
Closing Conditions. The closing of the Transaction is subject to the satisfaction or waiver of
certain customary conditions to closing including, among others, expiration or termination of the
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the
absence of any law, regulation, order or injunction prohibiting the Transaction. Each partys
obligation to consummate the Transaction is subject to certain other conditions, including the
material accuracy of the representations and warranties of the other party (generally subject to a
material adverse change standard); in the case of Buyers obligation, there being no material
adverse change to GWEC after the signing of the Purchase Agreement; material compliance by the
other party with its obligations under the Purchase Agreement. The closing of the Transaction is
not subject to approval by the stockholders of Buyer or to any financing condition.
Termination. The Agreement contains certain customary termination rights for both Buyer and
Seller, including the right of either party to terminate in the event that the transaction has not
been completed by March 31, 2012.
Bridge Facility
On November 2, 2011, the Buyer entered into a commitment letter with affiliates of Deutsche Bank
(DB), The Royal Bank of Scotland (RBS) and Barclays (Barclays and,
together with DB and RBS, the Agents) regarding a senior secured one year bridge loan
facility (the Bridge Facility). Subject to the terms and conditions of the commitment
letter, if the Bridge Facility is entered into, the Bridge Facility would provide Buyer with up to
$275.0 million in aggregate principal amount of senior secured bridge loans (the Bridge
Loans) on the closing of the Transaction (the Closing Date). The minimum draw under
the Bridge Facility is $150.0 million.
The Bridge Loans will be the Buyers senior secured obligation and rank pari passu with the Buyers
existing 9% first lien senior secured notes due 2015 (the Existing Notes). The interest
rate per annum will be equal to the Existing Notes yield to maturity, reset quarterly, plus a
spread that increases on certain dates after the Closing Date, up to a cap. The Bridge Loans will
be prepayable, at the Buyers option, for one year without penalty. If the Bridge Loans are not
paid in full on the one year anniversary of the Closing Date, amounts outstanding will be converted
into a senior secured term loan facility (the Extended Term Loans) with a four year term.
Funding of the Senior Secured Bridge Loans will be subject to certain conditions including, among
others: the accuracy of certain representations made by GWEC; no Material Adverse Effect (as
defined in the Purchase Agreement) having occurred with respect to GWEC; no material amendments or
waivers under the Purchase Agreement that would be materially adverse to the lenders; no change to
debt contemplated to be outstanding on a pro forma basis with limited exceptions; provision of
required financial statements and projections; and delivery of a confidential information
memorandum for the Senior Secured Bridge Loan at least ten business days before the Closing Date.
The Credit Documentation will contain customary representations and warranties. The affirmative
covenants, negative covenants, and events of default will be substantially identical to those
contained in the indenture governing the Existing Notes. Additionally, there will be an
affirmative covenant to use commercially reasonable efforts to assist the lenders in refinancing
the Senior Secured Bridge Loans. There will not be any financial covenants.
The commitments under the commitment letter expire on March 31, 2012.
ABL Facility
On November 2, 2011, Borrower entered into a commitment letter (the ABL Incremental Commitment
Letter) pursuant to which Deutsche Bank Trust Company Americas, Barclays, RBS and SunTrust
Bank have committed to provide $150.0 million in aggregate incremental commitments under the
Buyers existing ABL credit facility dated February 22,
2011 and filed as Exhibit 1.1 to the Companys Current Report on Form 8-K dated February 28, 2011 (the Existing
ABL Credit Facility), in accordance with and subject to the terms of the Existing ABL Credit
Facility. The commitments are subject to various conditions including, among others, certain
requirements under the Existing ABL Credit Facility, no Material Adverse Effect
(as defined in the
Purchase Agreement) having occurred with respect to GWEC; no material amendments or waivers under
the Purchase Agreement that would be materially adverse to the lenders, no change to debt
contemplated to be outstanding on a pro forma basis with limited exceptions, provision of required
financial statements and projections; delivery of a confidential information memorandum at least
fifteen business days prior to effectiveness of the incremental commitments, a minimum excess
availability requirement and the other closing conditions set forth in the ABL Incremental
Commitment Letter.
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Item 7.01. |
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Regulation FD Disclosure. |
On November 2, 2011, the Company announced the execution of the Purchase Agreement to acquire GWEC.
The press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K. On November 2,
2011, the Company also posted an investor presentation related to the acquisition to its website at
www.cvrenergy.com under the tab Investor Relations. The presentation provides information on the
Wynnewood refinery and an overview of the strategic rationale for the acquisition. The presentation
is furnished as Exhibit 99.2 to this Current Report on Form 8-K.
In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report
on Form 8-K and Exhibits 99.1 and 99.2 attached hereto are being furnished pursuant to Item 7.01 of
Form 8-K and will not, except to the extent required by applicable law or regulation, be deemed
filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended,
or otherwise subject to the liabilities of that Section, nor will any of such information or
exhibits be deemed incorporated by reference into any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, except as expressly set forth by
specific reference in such filing.
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Item 9.01. |
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Financial Statements and Exhibits. |
(d) Exhibits.
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Exhibit Number |
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Description |
99.1 |
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Press release, dated November 2, 2011 |
99.2 |
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Slides from Management Presentation related to the
Acquisition of Gary-Williams Energy Corporation, dated
November 3, 2011 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Date: November 3, 2011 |
CVR ENERGY, INC.
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By: |
/s/ Edward A. Morgan
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Edward A. Morgan |
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Chief Financial Officer and Treasurer |
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exv99w1
Exhibit 99.1
CVR Energy to Purchase Wynnewood, Okla., Refinery
SUGAR LAND, Texas (Nov. 2, 2011) CVR Energy, Inc. (NYSE: CVI) today announced a definitive
agreement to acquire Gary-Williams Energy Corporation and its Wynnewood, Okla., refinery and
related assets for $525 million, plus working capital currently estimated at approximately $100
million.
CVR Energy will fund the acquisition with cash and approximately $250 million of additional debt
financing to be put in place prior to closing. The transaction is expected to close by year end,
subject to regulatory approvals.
With 70,000 bpd in crude throughput capacity and a complexity rating of 9.3, the Wynnewood refinery
will provide an immediate and meaningful increase in the scale and diversity of CVR Energys
refining operations. Following the close of the transaction, CVR Energy will have more than
185,000 bpd of processing capacity at two locations in the attractive, highly fragmented, and
historically underserved Group III, PADD 2 region. Both facilities have access to a variety of
cost advantaged WTI price-linked crudes.
The acquisition of these high-quality and recently upgraded refinery assets is compelling for CVR
Energy in strategic, financial and operational terms, and will create shareholder value both in the
near term and for years to come, said Chief Executive Officer Jack Lipinski. The transaction is
not only accretive but the purchase price multiple paid on a trailing twelve month EBITDA basis is
less than the implied multiple for our refining assets today.
Given Wynnewood refinerys complementary geography and logistical footprint, we anticipate using
the capabilities of our storage in Cushing, Okla., together with our crude oil gathering business
to obtain near-term crude oil purchase savings. We also expect to benefit from processing
synergies between both plants.
Building on our track record of operational improvement at Coffeyville, we will have the
opportunity to undertake a range of relatively low cost enhancement initiatives with attractive
returns.
Gary-Williams Energy Corporation is headquartered in Denver with marketing and operations in
Oklahoma. CVR Energy will transition out of the Denver office but will retain all Oklahoma
facilities and operations.
For the acquisition, Barclays Capital served as financial advisor and Fried, Frank, Harris, Shriver
& Jacobson LLP as legal advisor to CVR Energy. Deutsche Bank Securities served as financial advisor
and Davis Graham & Stubbs as legal advisor to Gary-Williams Energy.
About CVR Energy, Inc.
Headquartered in Sugar Land, Texas, CVR Energy, Inc.s subsidiary and affiliated businesses
include an independent refiner that operates a 115,000 barrel per day refinery in Coffeyville,
Kan., and markets high value transportation fuels supplied to customers through tanker trucks and
pipeline terminals, and a crude oil gathering system serving central Kansas, Oklahoma, western
Missouri and southwest Nebraska. In addition, CVR Energy subsidiaries own a majority interest in
and serve as the general partner of CVR Partners, LP, a producer of ammonia and urea ammonium
nitrate, or UAN, fertilizers.
For further information, please contact:
Investor Relations:
Jay Finks
CVR Energy, Inc.
281-207-3588
InvestorRelations@CVREnergy.com
Media Relations:
Steve Eames
CVR Energy, Inc.
281-207-3550
MediaRelations@CVREnergy.com
exv99w2
Exhibit 99.2
CVR Energy, Inc.
Acquisition of Gary-Williams Energy Corporation
November 3, 2011
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Forward-Looking Statements
The following information contains forward-looking statements based on
management's current expectations and beliefs, as well as a number of assumptions
concerning future events. These statements are subject to risks, uncertainties,
assumptions and other important factors. You are cautioned not to put undue reliance
on such forward-looking statements (including forecasts and projections regarding
our future performance) because actual results may vary materially from those
expressed or implied as a result of various factors, including, but not limited to those
set forth under "Risk Factors" in CVR Energy, Inc.'s Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q and any other filings CVR Energy, Inc. makes with the
Securities and Exchange Commission. CVR Energy, Inc. assumes no obligation to,
and expressly disclaims any obligation to, update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
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Transaction Overview
CVR Energy, Inc. has agreed to acquire Gary-Williams Energy Corporation
for $525 million in cash plus working capital
Gary-Williams' primary asset is a 70,000 barrels-per-day ("bpd") refinery
located in Wynnewood, Oklahoma
Complexity rating of 9.3
CVR Energy will also acquire associated working capital, as determined at
closing
Currently estimated to be approximately $100 million as of September 30,
2011
We expect to fund the transaction primarily with cash, combined with
approximately $250 million of additional debt financing
$643 million in balance sheet cash at Coffeyville Resources as of
September 30, 2011
We plan to increase our existing asset based credit facility to $400 million
Transaction expected to be completed by year end, subject to
receipt of regulatory approval
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Strategic Rationale
High quality assets increase our scale and operational diversity
Pro forma company will have more than 185,000 bpd of crude throughput capacity
Wynnewood refinery is in excellent operating condition after significant recent capital
improvements
Fully compliant with ULSD and ULSG regulations
Strategically positioned in attractive Mid-Continent region
Located in Group III, PADD II region
Access to a variety of cost-advantaged (WTI price-linked) crude sources
Strong product netbacks supported by transportation cost advantages
Significant opportunities to enhance consolidated operations
Over $30 million in annual synergies identified
Ability to expand CVR's existing crude oil gathering business
Ability to optimize crude slate (sweet vs. sour)
Diversifies customer base
Enhances financial strength and flexibility
Improves credit profile by expanding processing capacity and diversifying asset base
Expected to contribute significant operating cash flow
Meaningful EPS accretion compared to analyst consensus estimates
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Deals
Sweet Crude 0.77
Sour Crude 0.18
Butane 0.02
Isobutane 0.02
Mixed butane 0.01
Wynnewood Refinery Overview
70,000 bpd of crude throughput capacity
9.3 complexity
Produces a full slate of gasoline, diesel,
asphalt, jet fuel, LPG and specialty
products
97% liquid product yield
Strategically located in Group III of PADD II
Access to cost-advantaged, WTI price-
linked crude oils
55-60% of products sold directly into the
local Oklahoma market
Approximately 12,000 bpd of gasoline
and ULSD sold via truck rack
Approximately 4,000 bpd of JP-8 sold via
truck rack
Remaining volumes distributed
throughout Mid-Continent region via
Magellan Pipeline
Over $100 million invested to upgrade and
optimize the facility since 2007
Asset Map
LTM Feedstock Slate
Summary
Source: Company presentation.
Note: LTM as of 9/30/2011.
Source: GWEC.
LTM Product Slate
Deals
Gasoline 0.55
Diesel 0.28
Jet Fuel 0.06
Asphalt 0.09
LPG 0.02
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PADD II Consolidated Refinery Statistics - By Owner (1)
"Top Quartile" Consolidated Asset Profile
PADD II Refiners (1)
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Source: EIA and Wall Street research.
100% of capacity in Wood River, IL refinery JV consolidated (50% ownership interest).
Includes 50% interest in JV in Toledo, OH refinery,
Well Positioned to Compete in Underserved PADD II Region
NCRA
CMC
SR
Median
Capacity:
185.0
Median
Complexity:
9.7
NCRA
CMC
SR
Capacity: 185 kbpd (Coffeyville & Wynnewood)
Complexity: 11.5 (blended average)
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
0
50
100
150
200
250
300
350
400
450
500
550
600
650
700
Crude Unit Processing Capacity (000's bpd)
Complexity Index
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Bakken Crude Production Series 3 Series 4 Series 5 Series 6 Series 7 Series 8
2006 87.63 233 3961 2876 1297 466 267
2007 102.11 269 3691 2876 1027 1333 303
2008 132.72
2009 142.25
2010 201.77
2011 262.9
2012 313.06
2013 340
2014 362.43
Access to WTI Priced Crudes
WTI price-linked crudes are currently trading at a
historically wide discount to crudes, such as Brent
and LLS
Growing production from the U.S. Bakken and
Canada flowing into Cushing, OK is contributing to
this differential
Pipeline capacity necessary to move production
from Cushing to the U.S. Gulf Coast is not
expected until 2013 / 2014
Historical WTI-Brent Spread (U.S.$/bbl)
Historical & Projected Canadian Production (1)
Historical & Projected Bakken Crude Production (2)
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Source: Canadian Association of Petroleum Producers June 2011 publication.
Source: Wood Mackenzie Upstream Service database.
(thousand barrels per day)
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Extensive Crude Oil Supply and Product Distribution Network
Consolidated Supply Network
Consolidated Marketing Network
Major Canadian Crude Oil Pipelines
Terminals
Third-Party Refined Product Pipelines
Wynnewood Refinery
Coffeyville Resources Refining &
Marketing and Nitrogen Fertilizer
Wynnewood Exchange Terminals
CVR Crude Oil Pipelines
Third-Party Crude Oil Pipelines
Wynnewood Related Pipelines
CVR Headquarters
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Expected Wynnewood EPS Contribution
Assumptions
Projections based on adjusted NYMEX 2-1-1 forward curve as of 10/19/2011
Includes synergies, anticipated operational efficiencies and cost savings
Assumes U.S. marginal tax rate of 38%
Includes approximately $27.5 million in additional annual interest expense, including $22.1 million from new debt and
approximately $5.4 million of annual capitalized lease expenses
In 2012, CVR expects to incur approximately $20 million in pre-tax, non recurring costs associated with this
transaction that are not included in this analysis
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Assumes 87.8 million shares outstanding.
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Post-Closing Value Enhancement Initiatives
Integrate and optimize operations with existing businesses
Expand existing crude oil gathering business to supply lower cost, local
crude to Wynnewood refinery
Proximity of plant is a benefit to managing feedstocks
Increase ability to optimize Sour / Heavy Sour processing
CVR has 35,000 barrels per day capacity on pipelines from Canada
Ability to substitute Heavy Sour for Domestic Sour
All crudes priced off WTI
SG&A synergies exist
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Comparative Valuation Overview
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Note: Market data as of 10/28/2011. Balance Sheet data as of 9/30/2011. Please see Appendix for GAAP reconciliation of Adjusted EBITDA.
Represents: (i) CVI's book minority interest at 9/30/2011, plus (ii) 69.8% (tax effected at 38%) of (A) UAN's equity value, based on UAN's 90-day
average trading price as of 10/28/2011 and (B) UAN's net debt at 9/30/2011.
Represents the estimated associated working capital of $100 million to be acquired at closing.
Represents the purchase price of the Wynnewood Refinery.
Comparative Valuation Overview
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Summary
High quality assets
Enhances position in attractive Mid-Continent region
Access to advantageously priced WTI-linked feedstocks
Significant near-term synergies with our existing businesses
Additional opportunities to build long-term value
Enhances financial strength and flexibility
Accretive on both an EPS and CFPS basis
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Wynnewood Refinery Configuration
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To supplement the actual results in accordance with U.S. generally accepted
accounting principles (GAAP), for the applicable periods, the Company also uses
certain non-GAAP financial measures as discussed below, which are adjusted for
GAAP-based results. The use of non-GAAP adjustments are not in accordance with
or an alternative for GAAP. The adjustments are provided to enhance the overall
understanding of the Company's financial performance for the applicable periods
and are also indicators that management utilizes for planning and forecasting future
periods. The non-GAAP measures utilized by the Company are not necessarily
comparable to similarly titled measures of other companies.
The Company believes that the presentation of non-GAAP financial measures
provides useful information to investors regarding the Company's financial
condition and results of operations because these measures, when used in
conjunction with related GAAP financial measures (i) together provide a more
comprehensive view of the Company's core operations and ability to generate cash
flow, (ii) provide investors with the financial analytical framework upon which
management bases financial and operational planning decisions, and (iii) presents
measurements that investors and rating agencies have indicated to management are
useful to them in assessing the Company and its results of operations.
Non-GAAP Financial Measures
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EBITDA: EBITDA represents net income before the effect of interest expense, interest income,
income tax expense (benefit) and depreciation and amortization. EBITDA is not a calculation
based upon GAAP; however, the amounts included in EBITDA are derived from amounts
included in the consolidated statement of operations of the Company. Adjusted EBITDA by
operating segment results from operating income by segment adjusted for items that the
company believes are needed in order to evaluate results in a more comparative analysis from
period to period. Additional adjustments to EBITDA include major scheduled turnaround
expense, the impact of the Company's use of accounting for its inventory under first-in, first-out
(FIFO), net unrealized gains/losses on derivative activities, share-based compensation expense,
loss on extinguishment of debt, and other income (expense). Adjusted EBITDA is not a
recognized term under GAAP and should not be substituted for operating income or net income
as a measure of performance but should be utilized as a supplemental measure of financial
performance in evaluating our business.
First-in, first-out (FIFO): The Company's basis for determining inventory value on a GAAP basis.
Changes in crude oil prices can cause fluctuations in the inventory valuation of our crude oil, work
in process and finished goods, thereby resulting in favorable FIFO impacts when crude oil prices
increase and unfavorable FIFO impacts when crude oil prices decrease. The FIFO impact is
calculated based upon inventory values at the beginning of the accounting period and at the end
of the accounting period.
Non-GAAP Financial Measures (cont'd)
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Non-GAAP Financial Measures (cont'd)
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