3Program Agenda1Solution Overview & Demo Development Update and Roadmap Strategic Planning at CVR Energy23
4Strategic Financial Planning Measure Financial Impact of Key Business StrategiesCorporate DevelopmentTreasuryCFOFinanceSpeaker Notes:Leading edge organizations are integrating strategic financial planning across groups with Strategic Financial Planning software like Hyperion Strategic Finance. This application provides out of the box support for complex financial modeling, in a packaged application that provides a common platform that can be leveraged across multiple departments. With integrated financial statements and purpose-built features, this application can be deployed quickly, can improve user productivity, and ensure accuracy and integrity of the financial models used across groups.Long Range PlanningInternal Investment DecisionsStrategy ScreeningCovenant/Ratio AnalysisCredit RatingsShareholder PolicyMergers & AcquisitionsValuation AnalysisDivestitures
5How Effective is Your Strategic Planning Process? CFOFinanceTreasuryCorporateDevelopmentSo, when we talk about the Strategic Plan, it is typically run through the CFO’s office by 3 key departments:Corporate Finance : Responsible for running the long range planTreasury : Responsible for maintaining a strong balance sheet and ensuring that funding is available when neededM&A (aka Corporate Development) : Looks for opportunities to acquire companies or assets from another companyOften, these departments will run their own set of spreadsheets, leading to inefficiencies in the process where each model might not be updated with the most recent scenarios from the other departments. We’ll get into more detail in later slides.
6Challenges in Strategic Planning CFOs Long for Growth But Hesitate to InvestFinance chiefs are focused on growth, but they're holding back on makingthe moves that actually drive sustained expansion, according to Ernst & Young.Marielle SegarraJanuary 23, 2014 | CFO.com | USOECD Admits It Flubbed Growth ForecastsThe Organization for Economic Cooperation and Development says it overestimated economic growth worldwide in the years following the financial crisis.Vincent RyanFebruary 11, 2014 | CFO.com | USSource : EY Capital Confidence Barometer April 2014 | ey.com/ccb
7Risks to Global Economic Growth Source : McKinsey Global Survey results, Economic Conditions Snapshot, September 2014
8Key Market Trends – April 2014 Executive SurveySource : EY Capital Confidence Barometer April 2014 | ey.com/ccb
9Key Market Trends – December 2013 Executive SurveySource : EY Capital Confidence Barometer December 2013| ey.com/ccb
10“A company will find great value in understanding the financial profile it would need in order to maintain a particular rating .”Gurdip Dhami, How to Work With Credit Rating Agencies, Treasury & Risk, August 18, 2014Tips :Understand the key financial ratios that the agency uses and how the ratios impacted the rating decisionModel expected rating, current, and projected financial profile
11Statistical Tools Improve Forecast Accuracy and Understand Plan Risk Speaker Notes:Once the driver relationships are created, time-series forecasting can be used to analyze historical trends in these drivers and more accurately predict future results, as well as best and worst case outcomes.In addition, Monte Carlo simulations can be run on the plan to account for a range of possible outcomes and better assess the probabilities of success and failure for key decisions, as well as to establish a confidence level for hitting plan targets.Calculate certainty of hitting plan targetsUnderstand the full range of outcomes and overall riskAssign probability distributions to uncertain assumptionsSource : EY Capital Confidence Barometer April 2014 | ey.com/ccb
12The HSF Customer Experience …Develop strategies for retaining current customer base and to plan for continued growth in expanding markets….…Run stress tests for a proposed budget and long term plan……Analysis of new product lines and acquisition targets…....We successfully executed a sale of the unit after the market crashed, at the price we had established before the market crashed……Over the course of one month, over 1,200 scenarios were run to review ability to service debt, capital adequacy, and capital structure….…Better understand the impact of raising debt and equity…
13Reduce Scenario Analysis From Days to Hours AVG. HOURS FOR FINANCIAL MODELINGThe Hyperion Strategic Finance solution is designed to streamline the strategic planning process and eliminate the inefficiencies of spreadsheet models. Based on an April 2009 North American study, our customers have been able to reduce their financial modeling turnaround time from days to hours by implementing Hyperion Strategic Finance.
1440% Link Strategy with Budgets Source: Palladium Group Speaker Notes: A recent survey from Palladium Group revealed that only 40% of organizations link their long-term business strategy with the annual financial budgets. This is critical to ensuring alignment across the organization and optimal use of resources.But, companies face many challenges in trying to link strategy with budgets and monitoring progress along the wayLink Strategy with BudgetsSource: Palladium Group
15Aligned Objectives Budget/ Strategic Operating Plan Plan Rolling ForecastStrategicPlanBudget/Operating PlanEnterprisePlanningAllocate Strategic Targets to Broader Community of Departmental ManagersBuild Individual Department Plans Aligned to Allocated Strategic TargetsOnce Oracle’s World Class Planning system is deployed, all of these various departments, plans, and forecasts are now in alignment. This allows :Strategic Targets to be communicated to a broader community of departmental managers, who can build their plans in a collaborative, driver-based environment aligned to the strategic targets.Accurate forecasts to be created with the latest information and linked to the latest plans so that appropriate actions can be taken.Perform Variance Analysis,Analyze Historical Trends,Update Plans
16Oracle Hyperion Enterprise Planning Solutions Predictive Modeling and SimulationStrategic Financial PlanningProfitability and Cost ManagementSpecialized ModulesWorkforce PlanningCapital Asset PlanningProject Financial PlanningPlan for Profitable GrowthPlanning, Budgeting and ForecastingMiddlewareDatabaseSystems and Hardware
17HOW – MUCH SAVINGSProductive Hours Spent for Implementation680340100200300400500600700800Hyperion Strategic FinancePlatformHoursProductive Hours Spent for Multi-Year Plan (per version)11440206080100120Hyperion Strategic FinancePlatformHoursExcel & Multi-Year ScenarioExcel & Multi-Year ScenarioImplementation Savings – In dollars, application and installation costs totaled less than 77% of building a “multi-year” scenario in Hyperion Planning (which did not have all the functionality of Strategic Finance)Each version created has approximately a $6,000 savings in labor hours. Considering, each of our five-year plans has had at least 5 versions, that is a savings of $30,000 per year (over the last 3 years).
18Scorecard and Strategy Management Thursday, October 2 11:30 AMStrategyStrategy Maps and TreesCause and Effect MapsContribution WheelWatchlistsCustom VisualizationsScorecardsSupports all methods and custom methodsCollaborationInitiativesThreaded DiscussionsRelated DocumentsAction Links and AgentsSpeaker Notes:Many types of visualizations to communicate the status of strategy and KPIs:Strategy maps and trees – to organize objectives, sub-objectives and measures and easily view the statusCause and effect maps – to understand the impact one KPI has on another, on an objective or on the overall organizational goalsContribution wheel – to understand which pieces of the strategy and which KPIs have the most impact, and therefore deserve the most attentionWatchlists – to keep track of day-to-day KPIs to enable you to do your job better, or to watch/monitor initiatives as they progressCustom visualizations – to resemble visualizations that currently exist within the organization for a level of comfortScorecards – can make use of any methodology (means of organization), existing or custom – or use no method at all. Scorecards are a tabular way to monitor the progress of strategy and/or KPIsInitiatives - a method of documenting the intention to change (a project or other) and monitoring that changeThreaded discussions - documenting exchanges of information about a KPI or initiative or objectiveRelated documents - links to any on-line document that will suppliment information about any object (KPI, initative or objective) in the applicationAction links and agents - enable an organization to watch for conditions 24 hours a day, 7 days a week, and then suggest appropriate actions based on those conditionsOracle Confidential – Internal/Restricted/Highly Restricted
19Program Agenda1Solution Overview & Demo Development Update and Roadmap Strategic Planning at CVR Energy23
20Oracle Hyperion Strategic Finance: What’s New & What’s Coming…. Past 18 months: HighlightsStrategic Finance releaseSmartView FeaturesDepreciation SchedulerDebt SchedulerActual/Deal PeriodsChange Fiscal Year EndEntity StructuresEntity/Account Change ManagerClient Side ConsolidationPast 18 months: HighlightsOffice bit SupportBatch import/export to ASO cubesAutomatic export to Essbase and HFM after consolidationPerformance improvements for Excel based ReportsStabilization
21This is a Safe Harbor Front slide, one of two Safe Harbor Statement slides included in this template.One of the Safe Harbor slides must be used if your presentation covers material affected by Oracle’s Revenue Recognition PolicyTo learn more about this policy,For internal communication, Safe Harbor Statements are not required. However, there is an applicable disclaimer (Exhibit E) that should be used, found in the Oracle Revenue Recognition Policy for Future Product Communications. Copy and paste this link into a web browser, to find out more information. For all external communications such as press release, roadmaps, PowerPoint presentations, Safe Harbor Statements are required. You can refer to the link mentioned above to find out additional information/disclaimers required depending on your audience.
22Oracle Hyperion Strategic Finance: What’s New & What’s Coming…. Next 12 months: HighlightsFlat file import/export – facilitate DRM integrationFDMEE integration for automated data loads to HSFCrystal Ball integration in SmartViewEnhanced logging and error reportingDistributed deployment supportImproved SmartView display performance for Accounts and Reports
23Oracle Hyperion Strategic Finance: What’s New & What’s Coming…. Next 18 months: HighlightsEnterprise ReadinessLinux DeploymentWeb User InterfaceUnified Application CreationProject Financial Planning Integration for Funding AnalysisLife Cycle Management for HSFREST based Web ServicesNext 18 months: HighlightsProduct FeaturesConsolidation of Business cases with import and exportHierarchical Accounts and Sub Accounts – Essbase/Planning like Accounts dimension treeMonthly Depreciation SchedulerImproved Consolidation performance – Multi-threaded ConsolidationMultiple Days Audit Transactions
24Integrating the Long-Range Planning Process CVR EnergyBluestone – a Huron Consulting Group solutionIntegrating the Long-Range Planning ProcessSeptember 29, 2014Presented by:Scott Leshinski Scott Song Ray MettetalManaging Director Director Director-FP&AHuron Consulting Group Huron Consulting Group CVR Energy
25Petroleum Refining and Nitrogen Fertilizer Manufacturing About CVR EnergyPetroleum Refining and Nitrogen Fertilizer Manufacturing About CVR EnergyHeadquartered in Sugar Land, Texas, CVR Energy is a diversified holding company primarily engaged in the petroleum refining and nitrogen fertilizer manufacturing industries through its holdings in two limited partnerships, CVR Refining, LP and CVR Partners, LP. CVR Energy subsidiaries serve as the general partner and own a majority of the common units representing limited partner interests of CVR Refining and CVR Partners.The CVR Energy portfolio of companies employs more than 1,200 employees and generated approximately $9 billion in net sales in CVR Energy’s common stock is listed for trading on the New York Stock Exchange under the symbol "CVI." Limited PartnershipsIn 2007, CVR Energy formed CVR Partners, LP to own, operate and grow its nitrogen fertilizer business. CVR Partners completed its Initial Public Offering in April 2011 and trades on the New York Stock Exchange under the symbol "UAN." In 2012, CVR Energy formed another limited partnership, CVR Refining, LP, to own, operate and grow its petroleum refining and related logistics businesses. CVR Refining completed its Initial Public Offering in January 2013 and trades on the New York Stock Exchange under the symbol “CVRR.”CVR Energy subsidiaries serve as the general partner and own a majority of the common units of both CVR Refining and CVR Partners.
26About CVR Refining Petroleum Refining Headquartered in Sugar Land, Texas, CVR Refining is an independent downstream energy limited partnership formed by CVR Energy, Inc., to own, operate and grow our refining and related logistics businesses.Our petroleum business includes a complex full coking, medium-sour crude oil refinery with a rated capacity of 115,000 barrels per calendar day operated by Coffeyville Resources Refining & Marketing in Coffeyville, Kan., and a medium complexity crude oil refinery with a rated capacity of 70,000 barrels per calendar day operated by Wynnewood Refining Company in Wynnewood, Okla. CVR Refining's subsidiaries also operate approximately 336 miles of owned and leased pipelines, more than 150 crude oil transports, a network of strategically located crude oil gathering tank farms, and more than six million barrels of owned and leased crude oil storage capacity.CVR Refining, LP is traded on the New York Stock Exchange under the ticker symbol “CVRR.” CVR Energy subsidiaries serve as the general partner of CVR Refining and own the majority of the common units representing limited partner interests of CVR Refining.
27Nitrogen Fertilizer Manufacturing About CVR PartnersNitrogen Fertilizer ManufacturingHeadquartered in Sugar Land, TX,CVR Partners is a growth-oriented limited partnership formed by CVR Energy, Inc. to own, operate and grow our nitrogen fertilizer business. Our nitrogen fertilizer manufacturing facility, which produces ammonia and urea ammonium nitrate (UAN) fertilizers, is located in Coffeyville, Kan. Coffeyville Resources Nitrogen Fertilizers, LLC is a wholly-owned subsidiary of CVR Partners, and directly owns and operates the CVR Partners nitrogen fertilizer plant.The CVR Partners nitrogen fertilizer plant is the only such operation in North America that uses a petroleum coke gasification process to make hydrogen, a key ingredient in its manufacturing process, and produces about 5 percent of total UAN demand in the United States. In 2013, Coffeyville Resources Nitrogen Fertilizers produced 402,000 tons of ammonia, of which 37,900 net tons were available for sale, and also produced 930,600 tons of UAN.CVR Partners, LP is traded on the New York Stock Exchange under the ticker symbol “UAN.” CVR Energy subsidiaries serve as the general partner of CVR Partners and own a majority of the common units representing limited partner interests of CVR Partners.
28CVR Energy - History Why EPM was needed… Timeline of Major Events 1906 – The Coffeyville refinery began operations; the fertilizer plant was builtMarch 3, Both assets were acquired by Coffeyville Resources through bankruptcy court from Farmland IndustriesJune 24, Coffeyville was purchased by funds of Kelso & Company, L.P. (subsidiary of Goldman Sachs & Co.)October 26, 2007, CVR Energy consummated its IPOFebruary and May of 2011, Kelso and Goldman completely sold their ownership interestApril 13, 2011, CVR Partners, LP completed it’s IPODecember 15, 2011, CVR Energy acquired a 70,000 bpd refinery in Wynnewood, OklahomaApril 18, 2012, CVR Energy entered into a transaction agreement with IEPMay 2012, IEP acquired 82% of the common stock of CVR EnergyJanuary 23, 2013, CVR Refining, LP completed it’s IPOSummary of Major Events3 separate IPO’s2 different private equity owners1 major acquisitionCVR Energy 2009 Full Year Adjusted EBITDA $206.8 millionCVR Energy 2012 Full Year Adjusted EBITDA $1,264.5 millionGrowth and multiple transactions led the need for an EPM suite and Hyperion was purchased in December 2012
29CVR Energy – Hyperion Implementation Phased ApproachPhase I – Kicked off April 2013Phase I Mantra – “replicate current state”Shorten close cycleAcquisition readinessImprove reportingReduce dependency on ExcelCrawl, walk, runApril 2013AugSeptNovAugust 2014Hyperion KickoffHP OpEx/SG&AWorkforce PlanningHyperion Strategic Finance (HSF)Centralized Essbase CubeData Relationship Manager (DRM)
30CVR Energy – Hyperion Implementation Phased ApproachPhase I+Driven by a general ledger optimization projectOracle EBS General Ledger String was improvedAll Hyperion Applications needed to be updated due to the change in account structureGreat opportunity to improve reporting within Hyperion Essbase and go beyond “current state” with the powerful EPM suite that had been implementedPhase IIThis is what’s nextTime for an even better and more powerful state
31Existing Pain Points – Current Forecasting State Understanding the needs of the businessForecasting and the refining businessDriven by volatile commodity pricesPrices can move quickly and unexpectedly in unforeseen directionsChanges in prices have material impacts on expected earningsPlant operations can be interrupted due to unplanned down timePlants go down, sometimes a partial shut down, sometimes it isn't known how long a plant will be down until engineers dig into the process unitsTo meet management expectationsForecast must be updated frequently and scenarios storedAs prices move, the forecast model needs to be flexedAs changes in unexpected downtime assumptions are updated, forecast model needs to be flexedVery difficult to integrate actual statistical and financial data with forecasted data using excelVariance of scenarios becomes keyDifficult to maintain all of the scenarios and the assumptions used in excelDifficult to compare assumptions used in the various scenarios in excelDifficult to “trust” excel and the multitude of spreadsheets
32Understanding the needs of the business Solutions DevelopedUnderstanding the needs of the businessHyperion Strategic Finance, Hyperion Planning, and Hyperion EssbaseHyperion Strategic Finance – brains of the operationHSF contains the complex logic to calculate sales and cost of sales for the refining businessHSF calculates the forecasted balance sheet and cash flowHSF calculates the variety of scenarios required by managementHyperion PlanningHP is used to update operating, SG&A, and a few other select itemsHP is used to calculate the sales and cost of sales of the simpler nitrogen businessHP is used to marry the data from HP and HSF and contains a few reports used for a first pass reviewHyperion EssbaseEssbase is used to tie everything togetherHouses up to six different versions within a given scenarioCombines actuals and forecast with easeStores all scenarios that can be called up and analyzed against other scenarios in very short orderRequires strong collaboration among all parties involved
33Benefits Achieved Improving the Process Structured process allows for weekly Flash update instead of just monthlyAutomated vs. manual reportingCentralized environment; data readiness allows for deeper analyticsIntegrated financials and operating statistics paired with driver-based forecastingStandardization of metadata leading to improved variance analysis and cross functional communication
34Understanding the needs of the business Current ArchitectureUnderstanding the needs of the businessSales and COGSBalance SheetCash FlowHyperion Strategic FinanceHyperion Financial ManagementHyperion PlanningHyperion EssbaseInput Operating ExpensesInput SG&AInput Fertilizer ModelActualsBudgetFlashActuals
35Changing the flow of data Phase II HSFChanging the flow of dataSpecialized Reporting CubeSmartview / FRDirect integration with HSFAuto-export to EB upon check-in and consolidationAbility to consume data across all EB usersSlice and dice information / adhoc reportingHyperion EssbaseFor HSFPlayground for Strategic AnalysisFlex prices, business combinationsFlex changes in working capitalFlex changes due to secondariesFlex changes due to crude ratesScenario ModelingM&A ModelingCapital Structure and Value AnalysisHyperion Strategic FinanceHyperion EssbaseActualBudgetFlashSmartview / FRHyperion Financial ManagementHyperion PlanningSelf contained detail for flash and budgetActuals
36Playground for strategic analysis Goals of HSF Phase IIPlayground for strategic analysisChange the flow of dataHyperion Strategic Finance – brains of the operationScenario AnalysisLayer Multiple ScenariosHigh-level, but accurate and important driversData will flow into HSF where it can be flexed and analyzedM&A ModelingCapital Structure AnalysisStrategic PlanHyperion PlanningHP is used to handle the nuts and bolts of the detail forecast and budgetHyperion EssbaseExisting Essbase is used to tie everything togetherHSF Essbase will be used to report on the special scenarios and analysis
37Be flexible, anticipate change Lessons LearnedBe flexible, anticipate changePeople and knowledgeThere are many people who understand Hyperion Planning and Hyperion EssbaseThere are not as many people who understand Hyperion Strategic FinanceTypically, the people who understand HSF also understand Planning and EssbaseIt is important to understand all three when designing a systemTraining upfront pays dividends in the futureDataIt takes time and effort to validate dataIt takes patience and team work to validate dataIt takes more work than anticipatedTimeKeeping current processes going while creating new processes and developing a system takes timeRemember that one day it will work for you instead of you working for it
38Please Join Us!Date: Monday, September 29thTime: 6:30 – 9:30pmLocation:B Restaurant & Bar720 Howard St.San Francisco, CA 94103
39Contact InfoRay Mettetal III, CPADirector of FP&A, CVR EnergyHouston, Texas I USAMobileScott LeshinskiManaging Director, Huron Consulting GroupChicago, Illinois I USAMobileScott SongDirector, Huron Consulting GroupChicago, Illinois I USAMobile