Presentation on theme: "Hyperion Strategic Finance Introduction and Update Will Kaffenberger, Director, Business Analytics Suren Seshadri, Director, Software Development Ray."— Presentation transcript:
CVR Energy Bluestone – a Huron Consulting Group solution Integrating the Long-Range Planning Process September 29, 2014 Presented by: Scott Leshinski Scott Song Ray Mettetal Managing Director Director Director-FP&A Huron Consulting Group Huron Consulting Group CVR Energy
25 About CVR Energy Petroleum Refining and Nitrogen Fertilizer Manufacturing About CVR Energy Headquartered 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 2013. CVR Energy’s common stock is listed for trading on the New York Stock Exchange under the symbol "CVI." Limited Partnerships In 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.
26 About 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.
27 About CVR Partners Nitrogen Fertilizer Manufacturing Headquartered 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.
28 1906 – The Coffeyville refinery began operations; 2000 - the fertilizer plant was built March 3, 2004 - Both assets were acquired by Coffeyville Resources through bankruptcy court from Farmland Industries June 24, 2005 - Coffeyville was purchased by funds of Kelso & Company, L.P. (subsidiary of Goldman Sachs & Co.) October 26, 2007, CVR Energy consummated its IPO February and May of 2011, Kelso and Goldman completely sold their ownership interest April 13, 2011, CVR Partners, LP completed it’s IPO December 15, 2011, CVR Energy acquired a 70,000 bpd refinery in Wynnewood, Oklahoma April 18, 2012, CVR Energy entered into a transaction agreement with IEP May 2012, IEP acquired 82% of the common stock of CVR Energy January 23, 2013, CVR Refining, LP completed it’s IPO CVR Energy - History Why EPM was needed… Timeline of Major Events Summary of Major Events 3 separate IPO’s 2 different private equity owners 1 major acquisition CVR Energy 2009 Full Year Adjusted EBITDA $206.8 million CVR Energy 2012 Full Year Adjusted EBITDA $1,264.5 million Growth and multiple transactions led the need for an EPM suite and Hyperion was purchased in December 2012
29 Phase I Mantra – “replicate current state” Shorten close cycle Acquisition readiness Improve reporting Reduce dependency on Excel Crawl, walk, run CVR Energy – Hyperion Implementation Phased Approach Phase I – Kicked off April 2013 April 2013 Aug Sept Nov August 2014 Hyperion Kickoff HP OpEx/SG&A Workforce Planning Hyperion Strategic Finance (HSF) Centralized Essbase Cube Data Relationship Manager (DRM)
30 CVR Energy – Hyperion Implementation Phased Approach Phase I+ Driven by a general ledger optimization project Oracle EBS General Ledger String was improved All Hyperion Applications needed to be updated due to the change in account structure Great opportunity to improve reporting within Hyperion Essbase and go beyond “current state” with the powerful EPM suite that had been implemented Phase II This is what’s next Time for an even better and more powerful state
31 Existing Pain Points – Current Forecasting State Understanding the needs of the business Forecasting and the refining business Driven by volatile commodity prices Prices can move quickly and unexpectedly in unforeseen directions Changes in prices have material impacts on expected earnings Plant operations can be interrupted due to unplanned down time Plants 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 units To meet management expectations Forecast must be updated frequently and scenarios stored As prices move, the forecast model needs to be flexed As changes in unexpected downtime assumptions are updated, forecast model needs to be flexed Very difficult to integrate actual statistical and financial data with forecasted data using excel Variance of scenarios becomes key Difficult to maintain all of the scenarios and the assumptions used in excel Difficult to compare assumptions used in the various scenarios in excel Difficult to “trust” excel and the multitude of spreadsheets
32 Solutions Developed Understanding the needs of the business Hyperion Strategic Finance, Hyperion Planning, and Hyperion Essbase Hyperion Strategic Finance – brains of the operation HSF contains the complex logic to calculate sales and cost of sales for the refining business HSF calculates the forecasted balance sheet and cash flow HSF calculates the variety of scenarios required by management Hyperion Planning HP is used to update operating, SG&A, and a few other select items HP is used to calculate the sales and cost of sales of the simpler nitrogen business HP is used to marry the data from HP and HSF and contains a few reports used for a first pass review Hyperion Essbase Essbase is used to tie everything together Houses up to six different versions within a given scenario Combines actuals and forecast with ease Stores all scenarios that can be called up and analyzed against other scenarios in very short order Requires strong collaboration among all parties involved
33 Benefits Achieved Improving the Process Structured process allows for weekly Flash update instead of just monthly Automated vs. manual reporting Centralized environment; data readiness allows for deeper analytics Integrated financials and operating statistics paired with driver-based forecasting Standardization of metadata leading to improved variance analysis and cross functional communication
34 Current Architecture Understanding the needs of the business Hyperion Strategic Finance Hyperion Planning Hyperion Essbase Hyperion Financial Management Sales and COGS Balance Sheet Cash Flow Actuals Budget Flash Actuals Input Operating Expenses Input SG&A Input Fertilizer Model
35 Phase II HSF Changing the flow of data Hyperion Strategic Finance Hyperion Planning Hyperion Essbase Hyperion Financial Management Hyperion Essbase For HSF Hyperion Essbase For HSF Self contained detail for flash and budget Actuals Actual Budget Flash Smartview / FR Scenario Modeling M&A Modeling Capital Structure and Value Analysis Specialized Reporting Cube Smartview / FR Playground for Strategic Analysis Flex prices, business combinations Flex changes in working capital Flex changes due to secondaries Flex changes due to crude rates Direct integration with HSF Auto-export to EB upon check-in and consolidation Ability to consume data across all EB users Slice and dice information / adhoc reporting
36 Goals of HSF Phase II Playground for strategic analysis Change the flow of data Hyperion Strategic Finance – brains of the operation Scenario Analysis Layer Multiple Scenarios High-level, but accurate and important drivers Data will flow into HSF where it can be flexed and analyzed M&A Modeling Capital Structure Analysis Strategic Plan Hyperion Planning HP is used to handle the nuts and bolts of the detail forecast and budget Hyperion Essbase Existing Essbase is used to tie everything together HSF Essbase will be used to report on the special scenarios and analysis
37 Lessons Learned Be flexible, anticipate change People and knowledge There are many people who understand Hyperion Planning and Hyperion Essbase There are not as many people who understand Hyperion Strategic Finance Typically, the people who understand HSF also understand Planning and Essbase It is important to understand all three when designing a system Training upfront pays dividends in the future Data It takes time and effort to validate data It takes patience and team work to validate data It takes more work than anticipated Time Keeping current processes going while creating new processes and developing a system takes time Remember that one day it will work for you instead of you working for it
38 Please Join Us! Date: Monday, September 29th Time: 6:30 – 9:30pm Location: B Restaurant & Bar 720 Howard St. San Francisco, CA 94103
39 Scott Leshinski Managing Director, Huron Consulting Group Chicago, Illinois I USA Mobile+1 312 560 5556 Emailsleshinski@huronconsultinggroup.com Contact Info Scott Song Director, Huron Consulting Group Chicago, Illinois I USA Mobile+1 312 375 3706 Emailssong@huronconsultinggroup.com Ray Mettetal III, CPA Director of FP&A, CVR Energy Houston, Texas I USA Mobile+1 312 560 5556 Emailrmettetal@cvrenergy.com