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Calumet Specialty Products Partners, L.P. (NASDAQ: CLMT) (the "Partnership" or "Calumet") reported net income for the three months ended September 30, 2006 of $35.7 million compared to net loss of $39.4 million for the same period in 2005. Earnings before interest, taxes, depreciation and amortization ("EBITDA") and Adjusted EBITDA (as defined by the Partnership's credit agreements) were $40.3 million and $25.7 million, respectively, for the three months ended September 30, 2006 as compared to $(30.1) million and $23.3 million, respectively, for the comparable period in 2005. Distributable Cash Flow for the three months ended September 30, 2006 was $22.2 million.
Net income for the nine months ended September 30, 2006 was $62.4 million compared to net loss of $20.8 million for the comparable period in 2005. EBITDA and Adjusted EBITDA were $81.7 million and $81.2 million, respectively, for the nine months ended September 30, 2006 as compared to $3.4 million and $57.6 million, respectively, for the same period in 2005. Distributable Cash Flow for the period of February 1, 2006 to September 30, 2006 was $66.9 million. (See the section of this release titled "Non-GAAP Financial Measures" and the attached tables for discussion of EBITDA, Adjusted EBITDA, Distributable Cash Flow and other non-generally accepted accounting principles ("non-GAAP") financial measures, definitions of such measures, and reconciliations of such measures to the comparable GAAP measures.)
The financial results for the nine months ended September 30, 2006 include the financial results of Calumet Lubricants Co., L.P. (the "Predecessor") through January 31, 2006. For the period from January 1, 2006 to January 31, 2006, the Predecessor generated net income of $4.4 million, EBITDA of $9.8 million, and Adjusted EBITDA of $4.5 million. Substantially all of the assets and operations of the Predecessor and its consolidated subsidiaries were contributed to the Partnership in connection with the closing of the Partnership's initial public offering during the first quarter of 2006 (the "IPO").
"During the third quarter of 2006, we maintained our strong performance within the specialty products segment," said Bill Grube, Calumet's President and CEO. "We have made significant capital expenditures related to the Shreveport capacity expansion project, which we still expect to be completed and operational in the third quarter of 2007."
Net income for the three months ended September 30, 2006 of $35.7 million compared to a net loss of $39.4 million for the same period in 2005 was significantly impacted by an unrealized gain on derivative instruments of $16.8 million in 2006 as compared to an unrealized loss of $52.0 million for the same period in 2005. Effective April 1, 2006, the mark to market change on the effective portion of those derivative instruments designated as hedges is recorded to other comprehensive income, a component of partners' capital. Further, the Partnership's performance for the third quarter of 2006 as compared to the third quarter of 2005 was positively impacted by widened specialty products margins, partially offset by less favorable fuel products margins due to both lower crack spreads and costs associated with plant operations, due primarily to increases in other material costs from the use of certain gasoline blendstocks in the third quarter of 2006 to maintain compliance with certain environmental regulations, partially offset by lower plant operating costs, including plant fuel and maintenance. The Company does not anticipate that such gasoline blendstock usage will be required beyond the fourth quarter of 2006. The increase in overall gross profit was also offset by increased transportation expenses in our specialty products segment due to higher rail service costs and higher sales volume.
Total Specialty Products segment sales volume for the third quarter of 2006 was 26,380 barrels per day (bpd) as compared to 25,152 bpd for the same period in the prior year, an increase of 1,228 bpd, or 4.9%.
Total Fuel Products segment sales volume for the third quarter of 2006 was 24,783 bpd as compared to 23,696 bpd in the same period for the prior year, an increase of 1,087 bpd, or 4.6%.
Gross profit by segment for the third quarter of 2006 for the Specialty Products and Fuel Products segments was $38.8 million and $12.3 million, respectively, compared to $13.0 million and $25.8 million, respectively, for the same period in 2005. In the second quarter of 2006, Calumet began accounting for certain derivatives hedging our fuel products sales and crude oil purchases as cash flow hedges and thus a portion of the settlement impact of such hedges is reflected in gross profit in our fuel products segment. The activity associated with derivative instruments not qualifying for hedge accounting is recorded to realized and unrealized gain or loss on derivative instruments in other income (expense) in the statements of operations.
As previously announced on September 28, 2006, the Partnership declared a quarterly cash distribution of $0.55 per unit on all outstanding units for the quarter ended September 30, 2006, an increase of approximately 22% over the prior quarter. The distribution will be paid on November 14, 2006 to unitholders of record on November 4, 2006.
The following table sets forth information about our combined refinery operations. Refining production volume differs from sales volumes due to changes in inventory.
Calumet Predecessor Calumet(1) Predecessor
------- ----------- --------- -----------
Three Months Ended Nine Months Ended
------------------------------------------
September 30, September 30,
------------------------------------------
2006 2005 2006 2005
------- ------ ------ --------
Sales volume (bpd):
Specialty Products sales volume 26,380 25,152 26,681 24,410
Fuel Products sales volume 24,783 23,696 24,656 21,074
-----------------------------------------
Total(2) 51,163 48,848 51,337 45,484
==========================================
------------------------------------------
Total feedstock runs (bpd)(3) 53,330 52,594 53,025 48,876
------------------------------------------
Refinery production (bpd)(4)
Specialty Products:
Lubricating oils 11,241 12,962 11,677 11,439
Solvents 6,049 4,743 5,361 4,430
Waxes 1,083 1,021 1,151 919
Asphalt and other by-products 7,664 6,497 7,053 6,489
Fuels 1,753 2,258 2,288 2,474
------------------------------------------
Total 27,790 27,481 27,530 25,751
------------------------------------------
Fuel Products (bpd):
Gasolines 9,538 8,320 9,507 7,577
Diesel fuels 6,752 8,906 7,161 8,870
Jet fuels 6,899 4,930 6,928 4,498
By-products 627 692 511 520
------------------------------------------
Total 23,816 22,848 24,107 21,465
------------------------------------------
Total refinery production 51,606 50,329 51,637 47,216
==========================================
(1) Includes the period of January 1, 2006 through January 31, 2006 for the Predecessor.
(2) Total sales volume includes sales from the production of the Partnership's refineries and sales of inventories.
(3) Feedstock runs represents the barrels per day of crude oil and other feedstocks processed at the Partnership's refineries.
(4) Total refinery production represents the barrels per day of specialty products and fuel products yielded from processing crude oil and other refinery feedstocks at the Partnership's refineries. The difference between total refinery production and total feedstock runs is primarily a result of the time lag between the input of feedstock and production of end products and volume loss.
Update on Calumet's Internal Growth Project at its Shreveport Refinery ----------------------------------------------------------------------
As previously announced, the Partnership has commenced a major capital improvement project at the Shreveport refinery, which we still expect to be completed and fully operational in the third quarter of 2007 and should increase this refinery's crude oil throughput capacity by approximately 40% over current levels. Since the second quarter of 2006, we have purchased significant operating equipment for the project and spent a total of $32.5 million in capital expenditures related to the project. In July 2006, we completed a follow-on public offering of 3.3 million common units to help fund the project. We have now either acquired or contracted for the purchase of all key operating equipment for the expansion project. We currently estimate the total cost of the Shreveport refinery expansion project will be approximately $150 million. The increase in the estimated cost of the expansion project is due primarily to escalation in construction costs.
About the Company -----------------
The Partnership is a leading independent producer of high-quality, specialty hydrocarbon products in North America. The Partnership processes crude oil into customized lubricating oils, solvents and waxes used in consumer, industrial and automotive products. The Partnership also produces fuel products including gasoline, diesel fuel and jet fuel. The Partnership is based in Indianapolis, Indiana and has three refineries located in northwest Louisiana.
A conference call is scheduled for 1:30 p.m. ET (12:30 p.m. CT) Thursday, November 9, 2006, to discuss the financial and operational results for the third quarter of 2006. Anyone interested in listening to the presentation may call 866-314-9013 and enter passcode 36041378. For international callers, the dial-in number is 617-213-8053, passcode 36041378. The live Internet webcast and the replay can be accessed on Calumet's website, http://www.calumetspecialty.com/
The telephonic replay is available in the United States by calling 888-286-8010 and entering passcode 46260671. International callers can access the replay by calling 617-801-6888, passcode 46260671. The replay will be available beginning Thursday, November 9, 2006, at approximately 3:30 p.m. until Thursday, November 23, 2006.
The information contained in this press release is available on the Partnership's website at http://www.calumetspecialty.com/ .
Cautionary Statement Regarding Forward-Looking Statements ---------------------------------------------------------
Some of the information in this release may contain forward-looking statements. These statements can be identified by the use of forward-looking terminology including "may," "believe," "expect," "anticipate," "estimate," "continue," or other similar words. These statements discuss future expectations, contain projections of results of operations or of financial condition, or state other "forward-looking" information. These forward- looking statements involve risks and uncertainties that are difficult to predict and may be beyond our control. These risks and uncertainties include the success of the Partnership's risk management activities; the availability of, and the Partnership's ability to consummate, acquisition or combination opportunities; the Partnership's access to capital to fund acquisitions and its ability to obtain debt or equity financing on satisfactory terms; successful integration and future performance of acquired assets or businesses; environmental liabilities or events that are not covered by an indemnity; insurance or existing reserves; maintenance of the Partnership's credit rating and ability to receive open credit from its suppliers; demand for various grades of crude oil and resulting changes in pricing conditions; fluctuations in refinery capacity; the effects of competition; continued creditworthiness of, and performance by, counter parties; the impact of crude oil price fluctuations; the impact of current and future laws, rulings and governmental regulations; shortages or cost increases of power supplies, natural gas, materials or labor; weather interference with business operations or project construction; fluctuations in the debt and equity markets; and general economic, market or business conditions. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements included in this release as well as the Partnership's most recent Form 10-K and Form 10-Q filed with the Securities and Exchange Commission, which could cause the Partnership's actual results to differ materially from those contained in any forward-looking statement. The statements regarding the Shreveport expansion project's expected completion date, the Shreveport refinery expansion project's expected costs, the resulting increases in production levels from the Shreveport expansion project, and the estimate of when our increased costs associated with the usage of certain gasoline blendstocks will end, as well as other matters discussed in this news release that are not purely historical data, are forward-looking statements.
Non-GAAP Financial Measures ---------------------------
We include in this release the non-GAAP financial measures of EBITDA, Adjusted EBITDA, and Distributable Cash Flow, and provide reconciliations of EBITDA, Adjusted EBITDA, and Distributable Cash Flow to net income and (in the case of EBITDA and Adjusted EBITDA) cash flow from operating activities, our most directly comparable financial performance and liquidity measures calculated and presented in accordance with GAAP.
EBITDA and Adjusted EBITDA are used as supplemental financial measures by our management and by external users of our financial statements such as investors, commercial banks, research analysts and others, to assess:
* the financial performance of our assets without regard to financing methods, capital structure or historical cost basis;
* the ability of our assets to generate cash sufficient to pay interest costs and support our indebtedness;
* our operating performance and return on capital as compared to those of other companies in our industry, without regard to financing or capital structure; and
* the viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities.
We define EBITDA as net income plus interest expense, taxes and depreciation and amortization. We define Adjusted EBITDA to be Consolidated EBITDA as defined in our credit facilities. Consistent with that definition, Adjusted EBITDA, for any period, equals: (1) net income plus (2)(a) interest expense; (b) taxes; (c) depreciation and amortization; (d) unrealized losses from mark to market accounting for derivative activities; (e) unrealized items decreasing net income (including the non-cash impact of restructuring; decommissioning and asset impairments in the periods presented); and (f) other non-recurring expenses reducing net income which do not represent a cash item for such period; minus (3)(a) tax credits; (b) unrealized items increasing net income (including the non-cash impact of restructuring, decommissioning and asset impairments in the periods presented); (c) unrealized gains from mark to market accounting for derivative activities; and (d) other non-cash recurring expenses and unrealized items that reduced net income for a prior period, but represent a cash item in the current period. We are required to report Adjusted EBITDA to our lenders under our credit facilities and it is used to determine our compliance with the consolidated leverage test thereunder.
We believe that Distributable Cash Flow provides additional information for investors to evaluate the Partnership's ability to declare and pay distributions to unitholders.
We define Distributable Cash Flow as Adjusted EBITDA less maintenance capital expenditures, cash interest expense and income tax expense.
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per unit data)
Calumet Predecessor Calumet Predecessor
------- ----------- ------- -----------
Three Months Ended Nine Months Ended
------------------ -----------------
September 30, September 30,
------------- -------------
2006 2005 2006 2005
------ ------ ------ ------
Sales $444,747 $363,870 $1,272,366 $894,981
Cost of sales 393,601 325,116 1,112,195 799,574
--------------------------------------------------
Gross profit 51,146 38,754 160,171 95,407
--------------------------------------------------
Operating costs and expenses:
Selling, general and
administrative 4,752 3,600 14,891 11,998
Transportation 16,002 13,550 44,504 33,544
Taxes other than income
taxes 957 557 2,774 2,037
Other 313 286 597 618
Restructuring, decommissioning
and asset impairments - (6) - 2,159
--------------------------------------------------
Operating income 29,122 20,767 97,405 45,051
--------------------------------------------------
Other income (expense):
Interest expense (1,705) (6,816) (7,838) (16,771)
Interest income 1,369 29 1,614 106
Debt extinguishment costs - - (2,967) -
Realized loss on derivative
instruments (9,810) (1,415) (25,630) (812)
Unrealized gain (loss) on
derivative instruments 16,780 (51,975) (61) (48,412)
Other (19) 4 (35) 21
--------------------------------------------------
Total other income
(expense) 6,615 (60,173) (34,917) (65,868)
--------------------------------------------------
Net income (loss) before
income taxes 35,737 (39,406) 62,488 (20,817)
Income tax expense 64 - 128 -
--------------------------------------------------
Net income (loss) $35,673 $(39,406) $62,360 $(20,817)
==================================================
Allocation of net income:
Less: Net income applicable to
Predecessor for the period
through January 31, 2006 - 4,408
--------- ---------
Net income applicable to
Calumet 35,673 57,952
Minimum quarterly distribution
to common unitholders,
prorated (7,365) (17,130)
General partner's incentive
distribution rights (8,481) (11,752)
General partner's interest
in net income (297) (543)
Common unitholders' share
of income in excess of
minimum quarterly
distribution (7,590) (11,521)
--------- ---------
Subordinated partners'
interest in net income 11,940 17,006
========= =========
Basic and diluted net income
per limited partners' unit:
Common $0.92 $1.97
========= =========
Subordinated $0.91 $1.30
========= =========
Weighted average limited
partner common units
outstanding - basic
and dilutive 16,187 14,068
Weighted average limited
partner subordinated units
outstanding - basic and
dilutive 13,066 13,066
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
Calumet Predecessor
------- -----------
September 30, 2006 December 31, 2005
------------------ -----------------
Assets Unaudited Audited
Current assets:
Cash $100,282 $12,173
Accounts receivable, net 121,720 115,294
Inventories 98,422 108,431
Derivative assets 15,932 3,359
Prepaid expenses and other current assets 8,112 19,650
---------- ----------
Total current assets 344,468 258,907
---------- ----------
Property, plant and equipment, net 158,889 127,846
Other noncurrent assets, net 3,485 12,964
---------- ----------
Total assets $506,842 $399,717
========== ==========
Liabilities and partners' capital
Current liabilities:
Accounts payable $81,485 $44,759
Other current liabilities 20,248 17,470
Current portion of long-term debt 500 500
Distribution payable 16,771 -
Derivative liabilities 9,490 30,449
---------- ----------
Total current liabilities 128,494 93,178
Long-term debt, less current portion 49,159 267,485
Total liabilities 177,653 360,663
---------- ----------
Partners' capital 294,920 38,557
Other comprehensive income 34,269 497
---------- ----------
Total Partner's capital 329,189 39,054
---------- ----------
Total liabilities and partners' capital $506,842 $399,717
========== ==========
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Calumet Predecessor
------- -----------
Nine Months Ended September,
----------------------------
2006 2005
---------- ----------
Unaudited Unaudited
Operating activities
Net income (loss) $62,360 $(20,817)
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 8,456 7,414
Provision for doubtful accounts 122 195
Loss on disposal of property and equipment 78 (16)
Restructuring, decommissioning and asset
impairments - 1,693
Unrealized loss on derivative instruments 61 48,412
Debt extinguishment costs 2,967 -
Changes in assets and liabilities:
Accounts receivable (6,639) (65,077)
Inventories 10,009 (50,114)
Prepaid expenses and other current
assets 11,538 (14,622)
Derivative activity 178 2,606
Other noncurrent assets 4,113 (1,387)
Accounts payable 36,726 (12,333)
Other current liabilities 3,089 6,277
----------------------------
Net cash provided by (used in) operating
activities 133,058 (97,769)
----------------------------
Investing activities
Additions to property, plant and equipment (39,923) (9,575)
Proceeds from disposal of property, plant
and equipment 158 11
----------------------------
Net cash used in investing activities (39,765) (9,564)
----------------------------
Financing activities
Net proceeds (payments) on borrowings (218,326) 99,329
Debt issuance costs - (44)
Proceeds from initial public offering 138,743 -
Proceeds from follow-on public offering 103,479 -
Contributions from Calumet GP, LLC 2,593 -
Cash distribution to Calumet Holding, LLC (3,258) -
Distributions to Predecessor partners (6,900) (7,285)
Distributions to partners (21,515) -
----------------------------
Cash provided by (used in) financing
activities (5,184) 92,000
----------------------------
Net increase (decrease) in cash 88,109 (15,333)
Cash at beginning of period 12,173 18,087
----------------------------
Cash at end of period $100,282 $2,754
============================
Supplemental disclosure of cash flow
information
Interest paid $9,933 $13,933
Taxes paid $116 $-
============================
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.
RECONCILIATION OF NET INCOME TO EBITDA, ADJUSTED EBITDA, AND DISTRIBUTABLE
CASH FLOW
(in thousands)
Calumet Predecessor Calumet Predecessor
------- ----------- ------- -----------
Three Months Ended Nine Months Ended
------------------ -----------------
September 30, September 30,
------------- -------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
Unaudited
Net income $35,673 $(39,406) $62,360 $(20,817)
Add:
Interest expense and
debt extinguishment
costs 1,705 6,816 10,805 16,771
Depreciation and
amortization 2,822 2,506 8,456 7,414
Income tax expense 64 - 128 -
-------------------------------------------------
EBITDA 40,264 (30,084) 81,749 3,368
-------------------------------------------------
Add:
Unrealized losses (gains)
from mark to market
accounting for
derivative activities (18,290) 51,975 (743) 48,412
Non-cash impact of
restructuring,
decommissioning and
asset impairments - (6) - 1,593
Prepaid non-recurring
expenses and accrued
non-recurring expenses,
net of cash outlays 3,680 1,421 146 4,264
-------------------------------------------------
Adjusted EBITDA $25,654 $23,306 $81,152 $57,637
-------------------------------------------------
Less:
Adjusted EBITDA
attributable to
Predecessor - (4,494)
Maintenance capital
expenditures (a) (1,769) (3,634)
Cash interest
expense (b) (1,660) (5,995)
Income tax expense (64) (128)
---------- ----------
Distributable Cash Flow 22,161 $66,901
========== ==========
(a) Maintenance capital expenditures are defined as those capital
expenditures which do not increase operating capacity or revenues
from existing levels.
(b) Cash interest expense is net of amortization charges associated with
deferred debt issuance costs and capitalized interest.
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P. RECONCILIATION OF ADJUSTED EBITDA AND EBITDA TO NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
(in thousands)
Calumet Predecessor
------- -----------
Nine Months Ended
-----------------
September 30, 2006
------------------
2006 2005
---------- ----------
Unaudited
Adjusted EBITDA $81,152 $57,637
Add:
Unrealized losses from mark to
market accounting for derivative
activities 743 (48,412)
Non-cash impact of restructuring,
decommissioning and asset impairments - (1,593)
Prepaid non-recurring expenses and
accrued non-recurring expenses, net
of cash outlays (146) (4,264)
----------------------------
EBITDA 81,749 3,368
----------------------------
Add:
Interest expense (7,838) (16,771)
Income tax expense (128) -
Provision for doubtful accounts 122 195
Unrealized losses from mark to market
accounting for derivative activities 61 48,412
Restructuring, decommissioning and asset
impairments - 1,693
Changes in operating working capital:
Accounts receivable (6,639) (65,077)
Inventory 10,009 (50,114)
Other current assets 11,538 (14,622)
Derivative activity 178 2,606
Accounts payable 36,726 (12,333)
Accrued liabilities 3,089 6,277
Other, including changes in non current
assets and liabilities 4,191 (1,403)
----------------------------
Net cash provided by (used in) operating
activities $133,058 $(97,769)
----------------------------
First Call Analyst:
FCMN Contact: john.krutz@calumetspecialty.com
SOURCE: Calumet Specialty Products Partners, L.P.
CONTACT: Jennifer Straumins, Investor Relations of Calumet Specialty
Products Partners, L.P., +1-317-328-5660
Web site: http://www.calumetspecialty.com/