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Hyperion Strategic Finance Introduction and Update Will Kaffenberger, Director, Business Analytics Suren Seshadri, Director, Software Development Ray.

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Presentation on theme: "Hyperion Strategic Finance Introduction and Update Will Kaffenberger, Director, Business Analytics Suren Seshadri, Director, Software Development Ray."— Presentation transcript:

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2 Hyperion Strategic Finance Introduction and Update Will Kaffenberger, Director, Business Analytics Suren Seshadri, Director, Software Development Ray Mettetal III, Director of FP&A, CVR Energy September 29, 2014 Copyright © 2014, Oracle and/or its affiliates. All rights reserved. |

3 Program Agenda Solution Overview & Demo Development Update and Roadmap Strategic Planning at CVR Energy 1 2 3

4 Copyright © 2014, Oracle and/or its affiliates. All rights reserved. | Measure Financial Impact of Key Business Strategies Strategic Financial Planning Long Range Planning Internal Investment Decisions Strategy Screening Covenant/Ratio Analysis Credit Ratings Shareholder Policy Mergers & Acquisitions Valuation Analysis Divestitures Corporate Development Treasury CFO Finance

5 Copyright © 2014, Oracle and/or its affiliates. All rights reserved. | How Effective is Your Strategic Planning Process? Finance Corporate Development Treasury CFO

6 Copyright © 2014, Oracle and/or its affiliates. All rights reserved. | Challenges in Strategic Planning OECD Admits It Flubbed Growth Forecasts The Organization for Economic Cooperation and Development says it overestimated economic growth worldwide in the years following the financial crisis. Vincent Ryan February 11, 2014 | CFO.com | US CFOs Long for Growth But Hesitate to Invest Finance chiefs are focused on growth, but they're holding back on making the moves that actually drive sustained expansion, according to Ernst & Young. Marielle Segarra January 23, 2014 | CFO.com | US Source : EY Capital Confidence Barometer April 2014 | ey.com/ccb

7 Copyright © 2014, Oracle and/or its affiliates. All rights reserved. | Risks to Global Economic Growth Source : McKinsey Global Survey results, Economic Conditions Snapshot, September 2014

8 Copyright © 2014, Oracle and/or its affiliates. All rights reserved. | Executive Survey Key Market Trends – April 2014 Source : EY Capital Confidence Barometer April 2014 | ey.com/ccb

9 Copyright © 2014, Oracle and/or its affiliates. All rights reserved. | Executive Survey Key Market Trends – December 2013 Source : EY Capital Confidence Barometer December 2013| ey.com/ccb

10 Copyright © 2014, Oracle and/or its affiliates. All rights reserved. | “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, 2014 Tips : Understand the key financial ratios that the agency uses and how the ratios impacted the rating decision Model expected rating, current, and projected financial profile

11 Copyright © 2014, Oracle and/or its affiliates. All rights reserved. | Statistical Tools Improve Forecast Accuracy and Understand Plan Risk  Calculate certainty of hitting plan targets  Understand the full range of outcomes and overall risk  Assign probability distributions to uncertain assumptions Source : EY Capital Confidence Barometer April 2014 | ey.com/ccb

12 Copyright © 2014, Oracle and/or its affiliates. All rights reserved. | The 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…

13 Copyright © 2014, Oracle and/or its affiliates. All rights reserved. | AVG. HOURS FOR FINANCIAL MODELING Reduce Scenario Analysis From Days to Hours

14 Copyright © 2014, Oracle and/or its affiliates. All rights reserved. | 40% Link Strategy with Budgets Source: Palladium Group

15 Copyright © 2014, Oracle and/or its affiliates. All rights reserved. | Aligned Objectives Rolling Forecast Strategic Plan Budget/ Operating Plan Enterprise Planning Allocate Strategic Targets to Broader Community of Departmental Managers Build Individual Department Plans Aligned to Allocated Strategic Targets Perform Variance Analysis, Analyze Historical Trends, Update Plans

16 Copyright © 2014, Oracle and/or its affiliates. All rights reserved. | Oracle Hyperion Enterprise Planning Solutions Profitability and Cost Management Strategic Financial Planning Planning, Budgeting and Forecasting Plan for Profitable Growth Predictive Modeling and Simulation Specialized Modules Workforce Planning Systems and Hardware Middleware Database Capital Asset Planning Project Financial Planning

17 Copyright © 2014, Oracle and/or its affiliates. All rights reserved. | HOW – MUCH SAVINGS 1. Implementation 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) 2. 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). Productive Hours Spent for Implementation Hyperion Strategic Finance Platform Hours Productive Hours Spent for Multi-Year Plan (per version) Hyperion Strategic Finance Platform Hours Excel & Multi-Year Scenario

18 Copyright © 2014, Oracle and/or its affiliates. All rights reserved. | Scorecard and Strategy Management Strategy – Strategy Maps and Trees – Cause and Effect Maps – Contribution Wheel – Watchlists – Custom Visualizations Scorecards – Supports all methods and custom methods Collaboration – Initiatives – Threaded Discussions – Related Documents – Action Links and Agents Oracle Confidential – Internal/Restricted/Highly Restricted18 Thursday, October 2 11:30 AM

19 Copyright © 2014, Oracle and/or its affiliates. All rights reserved. | Program Agenda Solution Overview & Demo Development Update and Roadmap Strategic Planning at CVR Energy 1 2 3

20 Copyright © 2014, Oracle and/or its affiliates. All rights reserved. | Past 18 months: Highlights Strategic Finance release SmartView Features – Depreciation Scheduler – Debt Scheduler – Actual/Deal Periods – Change Fiscal Year End – Entity Structures – Entity/Account Change Manager – Client Side Consolidation Past 18 months: Highlights Office bit Support Batch import/export to ASO cubes Automatic export to Essbase and HFM after consolidation Performance improvements for Excel based Reports Stabilization Oracle Hyperion Strategic Finance: What’s New & What’s Coming….

21 Copyright © 2014, Oracle and/or its affiliates. All rights reserved. | Safe Harbor Statement The following is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for Oracle’s products remains at the sole discretion of Oracle.

22 Copyright © 2014, Oracle and/or its affiliates. All rights reserved. | Oracle Hyperion Strategic Finance: What’s New & What’s Coming…. Next 12 months: Highlights Flat file import/export – facilitate DRM integration FDMEE integration for automated data loads to HSF Crystal Ball integration in SmartView Enhanced logging and error reporting Distributed deployment support Improved SmartView display performance for Accounts and Reports

23 Copyright © 2014, Oracle and/or its affiliates. All rights reserved. | Next 18 months: Highlights Enterprise Readiness Linux Deployment Web User Interface Unified Application Creation Project Financial Planning Integration for Funding Analysis Life Cycle Management for HSF REST based Web Services Next 18 months: Highlights Product Features Consolidation of Business cases with import and export Hierarchical Accounts and Sub Accounts – Essbase/Planning like Accounts dimension tree Monthly Depreciation Scheduler Improved Consolidation performance – Multi-threaded Consolidation Multiple Days Audit Transactions Oracle Hyperion Strategic Finance: What’s New & What’s Coming….

24 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 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 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 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 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 – The Coffeyville refinery began operations; the fertilizer plant was built March 3, Both assets were acquired by Coffeyville Resources through bankruptcy court from Farmland Industries June 24, 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 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 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 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 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 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 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 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 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 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 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 39 Scott Leshinski Managing Director, Huron Consulting Group Chicago, Illinois I USA Mobile Contact Info Scott Song Director, Huron Consulting Group Chicago, Illinois I USA Mobile Ray Mettetal III, CPA Director of FP&A, CVR Energy Houston, Texas I USA Mobile

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