Calumet Specialty Products Partners, L.P. (NASDAQ: CLMT) (the "Partnership" or "Calumet") reported net income for the three months ended June 30, 2007 of $37.4 million compared to $23.5 million for the same period in 2006. Earnings before interest expense, taxes, depreciation and amortization ("EBITDA") and Adjusted EBITDA (as defined by the Partnership's credit agreements) were $42.5 million and $43.5 million, respectively, for the three months ended June 30, 2007 as compared to $28.7 million and $29.4 million, respectively, for the comparable period in 2006. Distributable Cash Flow for the three months ended June 30, 2007 was $37.9 million as compared to $26.3 million for the same period in 2006. (See the section of this release entitled "Non-GAAP Financial Measures" and the attached tables for a 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.)
Net income for the six months ended June 30, 2007 was $65.6 million compared to net income of $27.4 million for the same period in 2006. EBITDA and Adjusted EBITDA were $75.3 million and $75.9 million, respectively, for the six months ended June 30, 2007 as compared to $42.2 million and $55.5 million, respectively, for the same period in 2006. Distributable Cash Flow for the six months ended June 30, 2007 was $66.2 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.)
Financial results for the six months ended June 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 initial public offering of 6,450,000 common units representing limited partnership interests in the Partnership that closed on January 31, 2006.
"We improved upon our overall performance in the second quarter of 2007 compared to the second quarter of 2006 primarily through increased gross profit in our Fuel Products segment," said Bill Grube, Calumet's President and CEO. "Progress continues on our Shreveport refinery capacity expansion project, which we expect to be substantially completed in the third quarter of 2007, with production ramping up during the fourth quarter of 2007."
Net income for the three months ended June 30, 2007 was $37.4 million as compared to $23.5 million for the same period in 2006. The Partnership's performance for the second quarter of 2007 as compared to the second quarter of 2006 was positively impacted primarily by improvements in both specialty and fuel products margins per barrel, partially offset by decreased sales volume of specialty products. The decrease in sales volume compared to the same period in the prior year was primarily due to unscheduled downtime on certain operating units at our Shreveport refinery during the quarter.
Specialty Products segment sales volume for the second quarter of 2007 was 24,692 barrels per day (bpd) as compared to 26,813 bpd for the same period in the prior year, a decrease of 2,121 bpd or 7.9%, primarily due to unscheduled downtime on certain operating units at the Shreveport refinery during the second quarter of 2007.
Fuel Products segment sales volume for the second quarter of 2007 was 25,044 bpd as compared to 23,934 bpd in the same period for the prior year, an increase of 1,110 bpd, or 4.6%, primarily due to increased sales of by- products as well as an increase in sales of purchased fuel products resulting from unscheduled downtime on certain operating units at the Shreveport refinery during the second quarter of 2007.
Gross profit by segment for the second quarter of 2007 for Specialty Products and Fuel Products was $40.6 million and $19.9 million, respectively, compared to $40.9 million and $17.6 million, respectively, for the same period in 2006.
As announced on July 13, 2007, the Partnership declared an increased quarterly cash distribution of $0.63 per unit on all outstanding units for the three months ended June 30, 2007. The distribution will be paid on August 14, 2007 to unitholders of record as of the close of business on August 4, 2007.
The following table sets forth unaudited information about our combined refinery operations. Refining production volume differs from sales volume due to changes in inventory.
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ------------------
2007 2006(1) 2007 2006(1)
------ ------- ------ -------
Sales volume (bpd):
Specialty Products sales volume 24,692 26,813 23,862 26,834
Fuel Products sales volume 25,044 23,934 22,724 24,591
------- ------- ------- -------
Total (2) 49,736 50,747 46,586 51,425
Total feedstock runs
(bpd) (3) (4) 49,488 53,363 47,465 52,869
Refinery production (bpd):
Specialty products:
Lubricating oils 11,495 12,101 10,795 11,899
Solvents 4,994 5,671 5,095 5,012
Waxes 1,337 1,226 1,121 1,186
Fuels 2,022 2,612 2,080 2,561
Asphalt and other by-products 6,723 7,911 5,885 6,742
------- ------- ------- -------
Total 26,571 29,521 24,976 27,400
------- ------- ------- -------
Fuel products (bpd):
Gasoline 6,660 8,987 7,245 9,491
Diesel 5,433 7,018 5,281 7,369
Jet fuel 7,962 6,581 7,563 6,942
By-products 2,255 604 1,724 452
------- ------- ------- -------
Total 22,310 23,190 21,813 24,254
------- ------- ------- -------
Total refinery production (4) 48,881 52,711 46,789 51,654
======= ======= ======= =======
(1) Includes the period of January 1, 2006 through January 31, 2006 of
the Predecessor.
(2) Total sales volume includes sales from the production of our
refineries, sales of purchased products and sales of inventories.
(3) Feedstock runs represents the barrels per day of crude oil and other
feedstocks processed at our refineries. The decrease in feedstock
runs for the three and six months ended June 30, 2007 was partially
due to unscheduled operating unit downtime at our Shreveport refinery
in the second quarter of 2007, with no comparable activities in the
second quarter of 2006. Feedstock runs for the six months ended June
30, 2007 were also negatively affected by turnarounds performed at
our Shreveport and Princeton refineries in the first quarter of 2007,
with no similar activities in the comparable period in 2006.
(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 our 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 Expansion Project at its Shreveport Refinery
Progress continues on the major capital improvement project at our Shreveport refinery, which we still expect to be substantially completed in the third quarter of 2007, with production ramping up during the fourth quarter of 2007. The expansion project should increase the Shreveport refinery's crude oil throughput capacity by approximately 40% over current levels, from approximately 42,000 bpd to approximately 57,000 bpd. We have spent a total of $155.0 million in capital expenditures related to the project as of June 30, 2007. We continue to estimate the total cost of the Shreveport refinery expansion project will be approximately $200.0 million.
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 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) Wednesday August 8, 2007, to discuss the financial and operational results for the second quarter of 2007. Anyone interested in listening to the presentation may call 800-561-2601 and enter passcode 52957163. For international callers, the dial-in number is 617-614-3518 and the passcode is 52957163.
The telephonic replay is available in the United States by calling 888- 286-8010 and entering passcode 11311424. International callers can access the replay by calling 617-801-6888 and entering passcode 11311424. The replay will be available beginning Wednesday, August 8, 2007, at approximately 3:30 p.m. until Wednesday, August 22, 2007.
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's 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 and the resulting increases in throughput and production levels, 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 net income to EBITDA, Adjusted EBITDA and Distributable Cash Flow and (in the case of EBITDA and Adjusted EBITDA) to 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 (including debt extinguishment costs), taxes and depreciation and amortization. We define Adjusted EBITDA to be Consolidated EBITDA as defined in our credit facility agreements. 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 paid (excluding capitalized interest) and income tax expense.
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
--------------------- ----------------------
2007 2006 2007 2006
------ ------ ------ ------
As As
adjusted (1) adjusted (1)
Unaudited Unaudited Unaudited Unaudited
Sales $421,726 $429,925 $772,839 $827,619
Cost of sales 361,255 371,465 657,333 717,910
-------- -------- -------- --------
Gross profit 60,471 58,460 115,506 109,709
Operating costs and expenses:
Selling, general and
administrative 6,435 5,209 11,834 10,138
Transportation 14,048 14,595 27,617 28,502
Taxes other than income taxes 884 903 1,796 1,817
Other 162 168 342 284
-------- -------- -------- --------
Operating income 38,942 37,585 73,917 68,968
-------- -------- -------- --------
Other income (expense):
Interest expense (1,113) (2,157) (2,128) (6,133)
Interest income 569 51 1,559 245
Debt extinguishment costs - - - (2,967)
Realized loss on
derivative instruments (4,052) (12,741) (5,788) (15,821)
Unrealized gain (loss)
on derivative instruments 3,285 874 (1,492) (16,841)
Other 42 (20) (136) (15)
-------- -------- -------- --------
Total other income (expense) (1,269) (13,993) (7,985) (41,532)
-------- -------- -------- --------
Net income before income taxes 37,673 23,592 65,932 27,436
Income tax expense 255 52 305 66
-------- -------- -------- --------
Net income $37,418 $23,540 $65,627 $27,370
======== ======== ======== ========
Allocation of net income:
Net income applicable to Predecessor
for the period through
January 31, 2006 - - - 4,408
-------- -------- -------- --------
Net income applicable
to Calumet 37,418 23,540 65,627 22,962
Minimum quarterly distribution
to common unitholders (7,365) (5,880) (14,730) (9,765)
General partner's incentive
distribution rights (9,353) (3,463) (14,102) (3,463)
General partner's interest
in net income (297) (264) (594) (252)
Common unitholders' share
of income in excess of
minimum quarterly
distribution (8,076) (4,027) (13,592) (4,027)
-------- -------- -------- --------
Subordinated partners'
interest in net income $12,327 $9,906 $22,609 $5,455
======== ======== ======== ========
Basic and diluted net income
per limited partner unit:
Common $0.94 $0.76 $1.73 $1.06
Subordinated $0.94 $0.76 $1.73 $0.42
Weighted average limited
partner common units
outstanding - basic 16,366 13,066 16,366 13,007
Weighted average limited
partner subordinated units
outstanding - basic 13,066 13,066 13,066 13,066
Weighted average limited
partner common units
outstanding - diluted 16,368 13,066 16,368 13,007
Weighted average limited
partner subordinated units
outstanding - diluted 13,066 13,066 13,066 13,066
(1) The Company adopted FASB Staff Position No. AUG AIR-1, Accounting for
Planned Major Maintenance Activities, on January 1, 2007 and elected
to capitalize and amortize overhaul costs to the next overhaul date
rather than accruing for these costs in advance of the overhaul. As a
result, Company recorded an adjustment to reduce cost of sales by $385
and $684, respectively, for the three and six months ended June 30,
2006 and an increase in basic and diluted earnings per limited partner
unit of $0.01 and $0.02, respectively, for the three months
ended June 30, 2006.
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31,
2007 2006
---------- -------------
Unaudited As adjusted(1)
ASSETS
Current assets:
Cash $22,442 $80,955
Accounts receivable, net 128,787 99,000
Inventories 102,451 110,985
Derivative assets - 40,802
Prepaid expenses and other current assets 2,629 3,467
-------- --------
Total current assets 256,309 335,209
Property, plant and equipment, net 291,784 191,732
Other noncurrent assets, net 6,169 4,710
-------- --------
Total assets $554,262 $531,651
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable $109,944 $78,752
Other current liabilities 14,116 15,137
Current portion of long-term debt 1,903 500
Derivative liabilities 52,906 2,995
-------- --------
Total current liabilities 178,869 97,384
Long-term debt, less current portion 50,935 49,000
-------- --------
Total liabilities 229,804 146,384
Partners' capital:
Partners' capital 361,327 333,016
Accumulated other comprehensive income (loss) (36,869) 52,251
-------- --------
Total partners' capital 324,458 385,267
-------- --------
Total liabilities and partners' capital $554,262 $531,651
======== ========
(1) As a result of the adoption of FASB Staff Position No. AUG AIR-1,
Accounting for Planned Major Maintenance Activities, on January 1,
2007, the Company recorded an adjustment as of January 1, 2005 to
increase partners' capital by $3.3 million.
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Six Months Ended
June 30,
---------------------------
2007 2006
------ ------
As adjusted (1)
Unaudited Unaudited
Operating activities
Net income $65,627 $27,370
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 7,454 5,634
Amortization of turnaround costs 1,862 1,514
Debt extinguishment costs - 2,967
Other non-cash activities 47 252
Changes in assets and liabilities:
Accounts receivable (29,787) (18,713)
Inventories 8,534 3,855
Prepaid expenses and other current assets 838 14,502
Derivative activity 1,593 18,462
Other noncurrent assets (4,238) 2,947
Accounts payable 31,207 42,799
Other current liabilities (1,021) (2,794)
--------- ---------
Net cash provided by operating activities 82,116 98,795
Investing activities
Additions to property, plant and equipment (103,109) (22,453)
Proceeds from disposal of property,
plant and equipment 49 80
--------- ---------
Net cash used in investing activities (103,060) (22,373)
Financing activities
Repayment of borrowings, net - credit
agreements with third parties (223) (208,992)
Proceeds from initial public offering, net - 138,743
Contributions from Calumet GP, LLC - 375
Cash distribution to Calumet Holding, LLC - (3,258)
Distributions to Predecessor partners - (6,900)
Distributions to partners (37,346) (8,000)
--------- ---------
Net cash used in financing activities (37,569) (88,032)
--------- ---------
Net decrease in cash (58,513) (11,610)
Cash at beginning of period 80,955 12,173
--------- ---------
Cash at end of period $22,442 $563
========= =========
Supplemental disclosure of cash flow information
Interest paid $4,087 $5,958
========= =========
Income taxes paid $100 $15
========= =========
(1) The adoption and retrospective application of FASB Staff Position No.
AUG AIR-1, Accounting for Planned Major Maintenance Activities, on
January 1, 2007, did not result in a net change in cash provided by
operating activities in the six months ended June 30, 2006.
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.
RECONCILIATION OF NET INCOME TO EBITDA, ADJUSTED EBITDA, AND DISTRIBUTABLE
CASH FLOW
(In thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ------------------
2007 2006(1) 2007 2006(1)
------ ------- ------ -------
Unaudited Unaudited Unaudited Unaudited
Reconciliation of Net Income
to EBITDA and Adjusted EBITDA:
Net income $37,418 $23,540 $65,627 $27,370
Add:
Interest expense and debt
extinguishment costs 1,113 2,157 2,128 9,100
Depreciation and
amortization 3,714 2,961 7,191 5,634
Income tax expense 255 52 305 66
------- ------- ------- -------
EBITDA $42,500 $28,710 $75,251 $42,170
------- ------- ------- -------
Add:
Unrealized (gain) loss
from mark to market
accounting for hedging
activities $(2,214) $(168) $1,592 $17,547
Prepaid non-recurring
expenses and accrued
non-recurring expenses,
net of cash outlays 3,190 848 (898) (4,218)
------- ------- ------- -------
Adjusted EBITDA $43,476 $29,390 $75,945 $55,499
------- ------- ------- -------
Less:
Adjusted EBITDA attributable
to Predecessor - - - (4,494)
Maintenance capital
expenditures (2) (4,375) (967) (7,536) (1,865)
Cash interest expense (3) (984) (2,024) (1,867) (4,335)
Income tax expense (255) (52) (305) (66)
------- ------- ------- -------
Distributable Cash Flow $37,862 $26,347 $66,237 $44,739
======= ======= ======= =======
(1) The adoption and application of FASB Staff Position No. AUG AIR-1,
Accounting for Planned Major Maintenance Activities, on January 1,
2007, did not result in a change in Adjusted EBITDA in the three and
six months ended June 30, 2006.
(2) Maintenance capital expenditures are defined as those capital
expenditures which do not increase operating capacity or sales from
existing levels.
(3) Represents cash interest paid by the Partnership, excluding
capitalized interest.
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.
RECONCILIATION OF ADJUSTED EBITDA AND EBITDA TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
(In thousands)
Six Months Ended June 30,
------------------------
2007 2006 (1)
--------- ---------
Unaudited Unaudited
Reconciliation of Adjusted EBITDA and EBITDA
to Net cash provided by operating activities:
Adjusted EBITDA $75,945 $55,499
Add:
Unrealized loss from mark to market accounting
for hedging activities $(1,592) $(17,547)
Prepaid non-recurring expenses and accrued
non-recurring expenses, net of cash outlays 898 4,218
------- -------
EBITDA $75,251 $42,170
======= =======
Add:
Interest expense and debt extinguishment
costs, net (1,900) (9,100)
Income tax expense (305) (66)
Provision for doubtful accounts - 202
Debt extinguishment costs - 2,967
Changes in assets and liabilities:
Accounts receivable (29,787) (18,713)
Inventory 8,534 3,855
Other current assets 838 14,502
Derivative activity 1,593 18,462
Accounts payable 31,207 42,799
Other current liabilities (1,021) (2,794)
Other, including changes in noncurrent assets
and liabilities (2,294) 4,511
------- -------
Net cash provided by operating activities $82,116 $98,795
======= =======
(1) The adoption and application of FASB Staff Position No. AUG AIR-1,
Accounting for Planned Major Maintenance Activities, on January 1,
2007, did not result in a change in Adjusted EBITDA in the six months
ended June 30, 2006.
First Call Analyst:
FCMN Contact: eric.smith@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/