INDIANAPOLIS, Nov. 3, 2010 /PRNewswire-FirstCall/ -- Calumet Specialty Products Partners, L.P. (Nasdaq: CLMT) (the "Partnership" or "Calumet") reported net income for the quarter ended September 30, 2010 of $21.2 million compared to $4.0 million for the quarter ended September 30, 2009. For the nine months ended September 30, 2010, Calumet reported net income of $7.2 million compared to $53.6 million for the same period in 2009. These results include noncash unrealized derivative losses of $13.8 million and gains of $17.7 million for the nine months ended September 30, 2010 and 2009, respectively. Calumet reported net cash provided by operating activities of $87.7 million for the nine months ended September 30, 2010 as compared to $110.6 million for the same period in 2009.
Earnings before interest expense, taxes, depreciation and amortization ("EBITDA") and Adjusted EBITDA (as defined by the Partnership's credit agreements) were $44.1 million and $40.9 million, respectively, for the quarter ended September 30, 2010 as compared to $27.7 million and $42.5 million, respectively, for the same quarter in 2009. Distributable Cash Flow (as defined below) for the quarter ended September 30, 2010 was $28.6 million as compared to $30.2 million for the same quarter in 2009. The decrease in Adjusted EBITDA quarter over quarter was primarily due to increased realized losses on derivatives and increased transportation expense partially offset by higher gross profit, discussed below. (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 measures and reconciliations of such measures to the comparable GAAP measures.)
"We are pleased with our results for the third quarter. Our production levels and gross profit have continued to improve in each quarter this year. We continue to focus on increased run rates to meet higher demand for our specialty products," said Bill Grube, Calumet's Chief Executive Officer and President. "As a result of our third quarter results, we have raised our distribution to $0.46 per unit, a $0.005 per unit increase over the prior quarter," said Grube.
The $17.2 million improvement in net income quarter over quarter was due primarily to an increase of $21.0 million in gross profit, partially offset by increased realized derivative losses of $6.3 million and higher transportation expense of $4.7 million due to increased sales volume. These results include noncash unrealized derivative gains of $1.9 million and losses of $4.5 million for the quarters ended September 30, 2010 and 2009, respectively, which may or may not be realized in the future as the derivatives are settled.
Gross profit by segment is as follows for the three and nine months ended September 30, 2010 and 2009:
Three Months
Ended Nine Months Ended
September 30, September 30,
2010 2009 2010 2009
---- ---- ---- ----
(In thousands) (In thousands)
Specialty products $60,880 $33,523 $130,706 $114,080
Fuel products 1,226 7,633 12,695 24,414
----- ----- ------ ------
Total gross profit (1) $62,106 $41,156 $143,401 $138,494
======= ======= ======== ========
Specialty products gross
profit per barrel $20.58 $13.96 $16.56 $16.34
====== ====== ====== ======
Fuel products gross
profit per barrel $0.48 $2.55 $1.79 $2.82
===== ===== ===== =====
(1) We define specialty products and fuel products gross profit as sales less the cost of crude oil and other feedstocks and other production-related expenses, the most significant portion of which include labor, plant fuel, utilities, contract services, maintenance, depreciation and processing materials.
The increase of $27.4 million in specialty products segment gross profit quarter over quarter was primarily due to an increase of 19.7% in the average selling price per barrel, while the average cost of crude oil per barrel increased by only 12.6%. Also, specialty products sales volumes increased 23.1%, due primarily to improvements in overall specialty products demand as a result of improved economic conditions and the addition of sales volumes under our specialty products agreements with LyondellBasell which we entered into during the fourth quarter of 2009 (the "LyondellBasell Agreements").
The decrease of $6.4 million in fuel products segment gross profit quarter over quarter was negatively impacted by the 13.9% decrease in fuel products sales volume as a result of lower overall throughput rates at our Shreveport refinery to facilitate the balancing of inventory levels subsequent to the extended turnaround completed in April 2010. Partially offsetting this decrease in sales volume was a slight improvement in crack spreads as the average selling price per barrel of our fuel products increased by 14.8% driven by market conditions including a 12.5% increase in the average cost of crude oil per barrel, combined with a net $2.5 million increase in derivative gains on our fuel products crack spread cash flow hedges.
Quarterly Distribution
On October 13, 2010, the Partnership declared a quarterly cash distribution of $0.46 per unit for the quarter ended September 30, 2010 on all outstanding units. The distribution will be paid on November 12, 2010 to unitholders of record as of the close of business on November 2, 2010. This distribution represents an increase of $0.005 per unit from the second quarter of 2010.
Operations Summary
The following table sets forth unaudited information about our combined operations. Facility production volume differs from sales volume due to changes in inventory.
Three Months Nine Months
Ended September Ended
30, September 30,
---------------- -------------
2010 2009 2010 2009
---- ---- ---- ----
Sales volume (bpd):
Specialty products 32,152 26,108 28,916 25,579
Fuel products 28,011 32,522 25,945 31,718
--- ------ ------ ------
Total (1) 60,163 58,630 54,861 57,297
Total feedstock runs
(bpd) (2) 61,678 59,949 55,774 61,069
Facility production
(bpd): (3)
Specialty products:
Lubricating oils 14,707 13,118 13,268 11,481
Solvents 10,715 7,923 9,240 7,868
Waxes 1,307 1,274 1,157 1,082
Fuels 942 941 1,023 811
Asphalt and other by-
products 8,079 7,667 6,649 7,694
----- ----- ----- -----
Total 35,750 30,923 31,337 28,936
------ ------ ------ ------
Fuel products:
Gasoline 8,538 9,144 8,674 9,841
Diesel 11,883 12,079 10,592 12,662
Jet fuel 5,336 7,328 5,306 7,184
By-products 735 562 586 529
--- --- --- ---
Total 26,492 29,113 25,158 30,216
------ ------ ------ ------
Total facility
production (3) 62,242 60,036 56,495 59,152
====== ====== ====== ======
(1) Total sales volume includes sales from the production of our facilities and certain third-party facilities pursuant to supply and/or processing agreements and sales of inventories.
(2) Total feedstock runs represent the barrels per day of crude oil and other feedstocks processed at our facilities and certain third-party facilities pursuant to supply and/or processing agreements. The increase in feedstock runs for the three months ended September 30, 2010 compared to the same period in 2009 is due primarily to higher throughput rates at our Princeton and Cotton Valley refineries and the addition of volumes under the LyondellBasell Agreements. These improvements were partially offset by lower overall throughput rates at our Shreveport refinery to facilitate the balancing of inventory levels subsequent to the completion of our April 2010 turnaround discussed below.
The decrease in feedstock runs for the nine months ended September 30, 2010 compared to the same period in 2009 is primarily due to our decision to reduce crude oil run rates at our facilities during the entire first quarter of 2010 because of the poor economics of running additional barrels, the extended turnaround and reduced throughput rates at our Shreveport refinery during April 2010, and the lower subsequent throughput rates at our Shreveport refinery during the third quarter of 2010 as discussed above. These decreases were partially offset by higher throughput rates at our Cotton Valley refinery and the addition of volumes under the LyondellBasell Agreements.
(3) Total facility production represents the barrels per day of specialty products and fuel products yielded from processing crude oil and other feedstocks at our facilities and certain third-party facilities pursuant to supply and/or processing agreements, including the LyondellBasell Agreements. The difference between total facility production and total feedstock runs is primarily a result of the time lag between the input of feedstock and production of finished products and volume loss. The increase in the production of specialty products for the three months ended September 30, 2010 compared to the same period in 2009 is primarily the result of the addition of volumes under the LyondellBasell Agreements and increased feedstock runs during those periods at our Princeton and Cotton Valley refineries. This increase was partially offset by reduced facility production levels as a result of reduced feedstock runs at our Shreveport refinery during the period as discussed above in footnote 2 of this table. The reduction in production of fuel products for the three months ended September 30, 2010 as compared to the same period in 2009 was also due to reduced feedstock runs at our Shreveport refinery during the current period as discussed in footnote 2 of this table.
The increase in the production of specialty products for the nine months ended September 30, 2010 compared to the same period in 2009 is primarily the result of the addition of volumes under the LyondellBasell Agreements and improved throughput rates at our Cotton Valley refinery as discussed in footnote 2 of this table. The reduction in production of fuel products for the nine months ended September 30, 2010 as compared to the same period in 2009 is due to reduced feedstock runs at our Shreveport refinery during the current period as discussed in footnote 2 of this table.
Credit Agreement Covenant Compliance
Compliance with the financial covenants under Calumet's credit agreements is measured quarterly based upon performance over the most recent four fiscal quarters. As of September 30, 2010, Calumet continued to be in compliance with all financial covenants under its credit agreements.
While assurances cannot be made regarding our future compliance with these financial covenants and subject to the inherent uncertainty of the crude oil pricing environment and general economic conditions, Calumet believes that it will continue to maintain compliance with such financial covenants.
Revolving Credit Facility Capacity
On September 30, 2010, Calumet had availability under its revolving credit facility of $143.8 million, based on a $251.1 million borrowing base, $75.4 million in outstanding standby letters of credit, and outstanding borrowings of $31.9 million. Calumet believes that it will have sufficient cash flow from operations and borrowing capacity to meet its financial commitments, minimum quarterly distributions to unitholders, debt service obligations, contingencies and anticipated capital expenditures. However, Calumet is subject to business and operational risks that could materially adversely affect its cash flows. A material decrease in Calumet's cash flow from operations or a significant, sustained decline in crude oil prices would likely produce a corollary material adverse effect on Calumet's borrowing capacity under its revolving credit facility and potentially Calumet's ability to comply with the covenants under Calumet's credit facilities. Substantial declines in crude oil prices, if sustained, may materially diminish Calumet's borrowing base, which is based in part on the value of Calumet's crude oil inventory, which could result in a material reduction in Calumet's borrowing capacity under Calumet's revolving credit facility. A significant increase in crude oil prices, if sustained, would likely result in increased working capital funded by borrowings under its revolving credit facility.
About the Partnership
The Partnership is a leading independent producer of high-quality, specialty hydrocarbon products in North America. The Partnership processes crude oil and other feedstocks into customized lubricating oils, white oils, solvents, petrolatums, waxes and other specialty products 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 five facilities located in northwest Louisiana, western Pennsylvania and southeastern Texas.
A conference call is scheduled for 1:00 p.m. ET (12:00 p.m. CT) on Wednesday, November 3, 2010, to discuss the financial and operational results for the third quarter of 2010. Anyone interested in listening to the presentation may call 866-730-5764 and enter passcode 35701361. For international callers, the dial-in number is 857-350-1588 and the passcode is 35701361.
The telephonic replay of the conference call is available in the United States by calling 888-286-8010 and entering passcode 41866668. International callers can access the replay by calling 617-801-6888 and entering passcode 41866668. The replay will be available beginning Wednesday, November 3, 2010, at approximately 4:00 p.m. until Wednesday, November 17, 2010.
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 overall demand for specialty hydrocarbon products, fuels and other refined products; our ability to produce specialty products and fuels that meet our customers' unique and precise specifications; the impact of fluctuations and rapid increases and decreases in crude oil and crack spread prices, including the impact on our liquidity; the results of the Partnership's hedging and risk management activities; the availability of, and the Partnership's ability to consummate, acquisition or combination opportunities; labor relations; the ability of the Partnership to comply with the financial covenants contained in its credit facilities; 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 ratings 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, counterparties; the impact of current and future laws, rulings and governmental regulations; shortages or cost increases of power supplies, natural gas, materials or labor; hurricane or other weather interference with business operations; 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 2010 Forms 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.
Non-GAAP Financial Measures
We include in this release the non-GAAP financial measures of EBITDA, Adjusted EBITDA and Distributable Cash Flow, and provide quarterly and annual reconciliations of net income to EBITDA, Adjusted EBITDA and Distributable Cash Flow and an annual reconciliation of EBITDA, Adjusted EBITDA and Distributable Cash Flow to net cash provided by operating activities, our most directly comparable financial performance and liquidity measures calculated and presented in accordance with GAAP.
EBITDA, Adjusted EBITDA and Distributable Cash Flow 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, support our indebtedness and meet minimum quarterly
distributions;
-- 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 believe that these non-GAAP measures are useful to our analysts and investors as they exclude transactions not related to our core cash operating activities and provide metrics to analyze our ability to pay distributions. We believe that excluding these transactions allows investors to meaningfully trend and analyze the performance of our core cash operations.
We define EBITDA as net income plus interest expense (including debt issuance and extinguishment costs), 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 means, for any period: (1) net income plus (2)(a) interest expense; (b) taxes; (c) depreciation and amortization; (d) unrealized losses from mark to market accounting for hedging 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 hedging activities; and (d) other non-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 and consolidated interest coverage tests thereunder.
We define Distributable Cash Flow as Adjusted EBITDA less replacement capital expenditures, cash interest paid (excluding capitalized interest) and income tax expense. Distributable Cash Flow is used by us and our investors to analyze our ability to pay distributions.
EBITDA, Adjusted EBITDA and Distributable Cash Flow should not be considered alternatives to net income, operating income, net cash provided by operating activities or any other measure of financial performance presented in accordance with GAAP. In evaluating our performance as measured by EBITDA, Adjusted EBITDA and Distributable Cash Flow, management recognizes and considers the limitations of this measurement. EBITDA, Adjusted EBITDA and Distributable Cash Flow do not reflect our obligations for the payment of income taxes, interest expense or other obligations such as capital expenditures. Accordingly, EDITDA, Adjusted EBITDA and Distributable Cash Flow are only three of the measurements that management utilizes. Moreover, our EBITDA, Adjusted EBITDA and Distributable Cash Flow may not be comparable to similarly titled measures of another company because all companies may not calculate EBITDA, Adjusted EBITDA and Distributable Cash Flow in the same manner. The following tables present a reconciliation of both net income to EBITDA, Adjusted EBITDA and Distributable Cash Flow, and Distributable Cash Flow Adjusted EBITDA and EBITDA to net cash provided by operating activities, our most directly comparable GAAP financial performance and liquidity measures, for each of the periods indicated.
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data)
Three Months Ended
September 30,
-------------
2010 2009
---- ----
Sales $595,273 $492,431
Cost of sales 533,167 451,275
------- -------
Gross profit 62,106 41,156
---- ------
Operating costs and expenses:
Selling, general and administrative 7,403 7,437
Transportation 23,258 18,519
Taxes other than income taxes 1,308 1,167
Other 565 191
--- ---
Operating income 29,572 13,842
------ ------
Other income (expense):
Interest expense (7,794) (8,243)
Realized gain (loss) on derivative
instruments (2,288) 4,045
Unrealized gain (loss) on derivative
instruments 1,931 (4,485)
Other (121) (1,271)
---- ------
Total other expense (8,272) (9,954)
------ ------
Net income before income taxes 21,300 3,888
Income tax expense (benefit) 79 (79)
--- ---
Net income $21,221 $3,967
======= ======
Allocation of net income
Net income $21,221 $3,967
Less:
General partner's interest in net income 424 79
--- ---
Net income available to limited partners $20,797 $3,888
======= ======
Weighted average limited partner units
outstanding - basic 35,337 32,232
====== ======
Weighted average limited partner units
outstanding - diluted 35,352 32,232
====== ======
Common and subordinated unitholders' basic
and diluted net income per unit $0.59 $0.12
===== =====
Cash distributions declared per common and
subordinated unit $0.46 $0.45
===== =====
Nine Months Ended
September 30,
-------------
2010 2009
---- ----
Sales $1,594,542 $1,350,735
Cost of sales 1,451,141 1,212,241
--------- ---------
Gross profit 143,401 138,494
------- -------
Operating costs and expenses:
Selling, general and administrative 22,894 23,697
Transportation 63,460 49,761
Taxes other than income taxes 3,431 3,156
Other 1,373 888
----- ---
Operating income 52,243 60,992
------ ------
Other income (expense):
Interest expense (22,505) (25,333)
Realized gain (loss) on derivative
instruments (8,147) 3,213
Unrealized gain (loss) on derivative
instruments (13,835) 17,672
Other (170) (2,856)
---- ------
Total other expense (44,657) (7,304)
------- ------
Net income before income taxes 7,586 53,688
Income tax expense (benefit) 339 70
--- ---
Net income $7,247 $53,618
====== =======
Allocation of net income
Net income $7,247 $53,618
Less:
General partner's interest in net income 145 1,070
- --
Net income available to limited partners $7,102 $52,548
====== =======
Weighted average limited partner units
outstanding - basic 35,332 32,232
====== ======
Weighted average limited partner units
outstanding - diluted 35,351 32,232
====== ======
Common and subordinated unitholders' basic
and diluted net income per unit $0.20 $1.63
===== =====
Cash distributions declared per common and
subordinated unit $1.37 $1.35
===== =====
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, December 31,
2010 2009
-------------- -------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $88 $49
Accounts receivable, net 164,698 122,768
Inventories 150,214 137,250
Derivative assets - 30,904
Prepaid expenses and other
current assets 5,008 8,672
----- -----
Total current assets 320,008 299,643
Property, plant and equipment,
net 618,408 629,275
Goodwill 48,335 48,335
Other intangible assets, net 31,487 38,093
Other noncurrent assets, net 20,381 16,510
------ ------
Total assets $1,038,619 $1,031,856
========== ==========
LIABILITIES AND PARTNERS'
CAPITAL
Current liabilities:
Accounts payable $181,641 $109,976
Other current liabilities 22,028 20,165
Current portion of long-term
debt 4,840 5,009
Derivative liabilities 20,099 4,766
------ -----
Total current liabilities 228,608 139,916
Pension and postretirement
benefit obligations 8,720 9,433
Other long-term liabilities 1,090 1,111
Long-term debt, less current
portion 386,103 396,049
------- -------
Total liabilities 624,521 546,509
Partners' capital:
Partners' capital 432,484 472,703
Accumulated other comprehensive
income (loss) (18,386) 12,644
------- ------
Total partners' capital 414,098 485,347
------- -------
Total liabilities and partners'
capital $1,038,619 $1,031,856
========== ==========
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Ended
September 30,
-------------
2010 2009
---- ----
Operating activities
Net income $7,247 $53,618
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 47,289 48,890
Amortization of turnaround costs 6,639 5,692
Provision for doubtful accounts 74 (766)
Unrealized (gain) loss on derivative instruments 13,835 (17,672)
Other non-cash activities 1,467 3,561
Changes in assets and liabilities:
Accounts receivable (42,004) (17,937)
Inventories (12,964) (13,184)
Prepaid expenses and other current assets 3,664 3,047
Derivative activity 849 6,680
Other assets (10,311) (4,539)
Accounts payable 70,265 38,298
Other liabilities 1,842 3,945
Pension and postretirement benefit obligations (190) 945
---- ---
Net cash provided by operating activities 87,702 110,578
Investing activities
Additions to property, plant and equipment (27,310) (20,718)
Proceeds from disposal of property, plant and
equipment 201 793
--- ---
Net cash used in investing activities (27,109) (19,925)
Financing activities
Repayments of borrowings - revolving credit
facility (8,027) (33,435)
Repayment of borrowings - term loan credit
facility (2,888) (2,888)
Payments on capital lease obligation (1,023) (875)
Proceeds from public offerings, net 793 -
Contribution from Calumet GP, LLC 18 -
Change in bank overdraft - (6,325)
Common units repurchased for vested phantom unit
grants (248) (164)
Distributions to partners (49,179) (44,447)
------- -------
Net cash used in financing activities (60,554) (88,134)
------- -------
Net increase in cash and cash equivalents 39 2,519
Cash and cash equivalents at beginning of period 49 48
--- ---
Cash and cash equivalents at end of period $88 $2,567
=== ======
Supplemental disclosure of cash flow information
Interest paid $19,635 $23,124
Income taxes paid $138 $91
==== ===
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.
RECONCILIATION OF NET INCOME TO EBITDA, ADJUSTED EBITDA, AND
DISTRIBUTABLE CASH FLOW
(In thousands)
Three Months
Ended
------------
September 30,
-------------
2010 2009
---- ----
(Unaudited)
Reconciliation of Net Income to EBITDA,
Adjusted EBITDA and Distributable Cash Flow:
Net income $21,221 $3,967
Add:
Interest expense 7,794 8,243
Depreciation and amortization 15,031 15,578
Income tax expense (benefit) 79 (79)
--- ---
EBITDA $44,125 $27,709
------- -------
Add:
Unrealized (gain) loss from mark to market
accounting for hedging activities $(2,525) $11,365
Prepaid non-recurring expenses and accrued
non-recurring expenses, net of cash outlays (655) 3,449
---- -----
Adjusted EBITDA $40,945 $42,523
------- -------
Less:
Replacement capital expenditures (1) (5,751) (4,995)
Cash interest expense (2) (6,561) (7,423)
Income tax (expense) benefit (79) 79
--- ---
Distributable Cash Flow $28,554 $30,184
======= =======
Nine Months Ended
-----------------
September 30,
-------------
2010 2009
---- ----
(Unaudited)
Reconciliation of Net Income to EBITDA,
Adjusted EBITDA and Distributable Cash Flow:
Net income $7,247 $53,618
Add:
Interest expense 22,505 25,333
Depreciation and amortization 44,824 46,396
Income tax expense (benefit) 339 70
--- ---
EBITDA $74,915 $125,417
------- --------
Add:
Unrealized (gain) loss from mark to market
accounting for hedging activities $14,683 $(10,430)
Prepaid non-recurring expenses and accrued
non-recurring expenses, net of cash outlays (33) 4,271
--- -----
Adjusted EBITDA $89,565 $119,258
------- --------
Less:
Replacement capital expenditures (1) (22,090) (12,739)
Cash interest expense (2) (19,635) (23,124)
Income tax (expense) benefit (339) (70)
---- ---
Distributable Cash Flow $47,501 $83,325
======= =======
(1) Replacement capital expenditures are defined as those capital
expenditures which do not increase operating capacity or reduce
operating costs.
(2) Represents cash interest paid by the Partnership, excluding
capitalized interest.
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.
RECONCILIATION OF DISTRIBUTABLE CASH FLOW, ADJUSTED EBITDA AND EBITDA
TO NET CASH PROVIDED BY OPERATING ACTIVITIES
(In thousands)
Nine Months Ended
September 30,
-------------
2010 2009
---- ----
(Unaudited) (Unaudited)
Reconciliation of Distributable Cash
Flow, Adjusted EBITDA and EBITDA to
net cash provided by operating
activities:
Distributable Cash Flow $47,501 $83,325
Less:
Replacement capital expenditures (1) 22,090 12,739
Cash interest expense (2) 19,635 23,124
Income tax expense 339 70
--- ---
Adjusted EBITDA $89,565 $119,258
======= ========
Add:
Unrealized gain (loss) from mark to
market accounting for hedging
activities (14,683) 10,430
Prepaid non-recurring expenses and
accrued non-recurring expenses, net
of cash outlays 33 (4,271)
--- ------
EBITDA $74,915 $125,417
======= ========
Add:
Interest expense, net of amortization (19,626) (22,597)
Unrealized (gain) loss on derivative
instruments 13,835 (17,672)
Income tax expense (339) (70)
Provision for doubtful accounts 74 (766)
Changes in assets and liabilities:
Accounts receivable (42,004) (17,937)
Inventory (12,964) (13,184)
Other current assets 3,664 3,047
Derivative activity 849 6,680
Accounts payable 70,265 38,298
Other liabilities 1,863 2,829
Other, including changes in noncurrent
assets and liabilities (2,830) 6,533
------ -----
Net cash provided by operating
activities $87,702 $110,578
======= ========
(1) Replacement capital expenditures are defined as those capital
expenditures which do not increase operating capacity or reduce
operating costs.
(2) Represents cash interest paid by the Partnership, excluding
capitalized interest.
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.
UPDATE ON EXISTING COMMODITY DERIVATIVE INSTRUMENTS
September 30, 2010
Fuel Products Segment
The following tables provide information about our derivative instruments related to our fuel products segment as of September 30, 2010:
Barrels Average
Crude Oil Swap Contracts by Expiration Dates Purchased BPD Swap
-------------------------------------------- --------- --- ($/Bbl)
-------
Fourth Quarter 2010 1,840,000 20,000 $67.29
Calendar Year 2011 5,888,000 16,132 76.81
Calendar Year 2012 4,661,000 12,735 85.56
--------- -----
Totals 12,389,000
Average price $78.69
Barrels
Diesel Swap Contracts by Expiration Dates Sold BPD Average
----------------------------------------- ------- --- Swap
($/Bbl)
-------
Fourth Quarter 2010 1,196,000 13,000 $80.41
Calendar Year 2011 2,371,000 6,496 90.58
Calendar Year 2012 1,238,000 3,383 97.62
--------- -----
Totals 4,805,000
Average price $89.86
Barrels
Jet Fuel Swap Contracts by Expiration Dates Sold BPD Average
------------------------------------------- ------- --- Swap
($/Bbl)
-------
Calendar Year 2011 2,788,000 7,638 $89.08
Calendar Year 2012 3,286,500 8,980 98.92
--------- -----
Totals 6,074,500
Average price $94.40
Barrels
Gasoline Swap Contracts by Expiration Dates Sold BPD Average
------------------------------------------- ------- --- Swap
($/Bbl)
-------
Fourth Quarter 2010 644,000 7,000 $75.28
Calendar Year 2011 729,000 1,997 83.53
Calendar Year 2012 136,500 373 89.04
------- -----
Totals 1,509,500
Average price $80.51
The following table provides a summary of these derivatives and implied crack spreads for the crude oil, diesel and gasoline swaps disclosed above, all of which are designated as hedges.
Barrels Implied
Swap Contracts by Expiration Dates Purchased BPD Crack
---------------------------------- --------- --- Spread
------
($/Bbl)
-------
Fourth Quarter 2010 1,840,000 20,000 $11.32
Calendar Year 2011 5,888,000 16,132 12.19
Calendar Year 2012 4,661,000 12,735 12.71
--------- -----
Totals 12,389,000
Average price $12.26
At September 30, 2010, the Partnership had the following derivatives related to crude oil sales and gasoline purchases in its fuel products segment, none of which are designated as hedges.
Barrels
Crude Oil Swap Contracts by Expiration Dates Sold BPD Average
-------------------------------------------- ------- --- Swap
($/Bbl)
-------
Fourth Quarter 2010 138,000 1,500 $58.25
------- ------
Totals 138,000
Average price $58.25
Barrels Average
Gasoline Swap Contracts by Expiration Dates Purchased BPD Swap
------------------------------------------- --------- --- ($/Bbl)
-------
Fourth Quarter 2010 138,000 1,500 $58.42
------- ------
Totals 138,000
Average price $58.42
To summarize, at September 30, 2010, the Partnership had the following crude oil and gasoline derivative instruments not designated as hedges in its fuel products segment. These trades were used to economically lock in a portion of the mark-to-market valuation gain for the above crack spread trades.
Barrels Implied
Swap Contracts by Expiration Dates Purchased BPD Crack
Spread
---------------------------------- --------- --- ($/Bbl)
-------
Fourth Quarter 2010 138,000 1,500 $0.17
------- -----
Totals 138,000
Average price $0.17
At September 30, 2010, the Partnership had the following put options related to jet fuel crack spreads in its fuel products segment, none of which are designated as hedges.
Average Average
Sold Bought
Put Put
Jet Fuel Put Option Crack Spread
Contracts by Expiration Dates Barrels BPD ($/Bbl) ($/Bbl)
-------------------------------- ------- --- ------- -------
Calendar Year 2011 814,000 2,230 $4.17 $6.23
------- ----- -----
Totals 814,000
Average price $4.17 $6.23
Specialty Products Segment
The following tables provide information about our derivatives related to our specialty products segment as of September 30, 2010, none of which are designated as hedges:
Average Average Average
Bought Sold
Put Swap Call
Crude Oil Put/Swap/Call Contracts
by Expiration Dates Barrels BPD ($/Bbl) ($/Bbl) ($/Bbl)
--------------------------------- ------- --- ------- ------- -------
October 2010 186,000 6,000 $62.48 $78.44 $88.44
------- ------ ------ ------
Totals 186,000
Average price $62.48 $78.44 $88.44
Crude Oil Swap Contracts by Expiration Dates Barrels BPD Average
-------------------------------------------- Purchased --- Swap
(Sold) ($/Bbl)
------ -------
October 2010 155,000 5,000 $79.77
December 2010 (62,000) (2,000) (77.70)
January 2011 62,000 2,000 79.25
------ -----
Totals 155,000
Average price $80.39
Natural Gas Swap Contracts by Expiration Dates MMBtus Average
---------------------------------------------- ------ Swap
($/MMBtu)
---------
Fourth Quarter 2010 220,000 $5.06
---- -----
Totals 220,000
Average price $5.06
SOURCE Calumet Specialty Products Partners, L.P.
SOURCE: Calumet Specialty Products Partners, L.P.
PR Newswire
INDIANAPOLIS, Nov. 3, 2010
INDIANAPOLIS, Nov. 3, 2010 /PRNewswire-FirstCall/ -- Calumet Specialty Products Partners, L.P. (Nasdaq: CLMT) (the "Partnership" or "Calumet") reported net income for the quarter ended September 30, 2010 of $21.2 million compared to $4.0 million for the quarter ended September 30, 2009. For the nine months ended September 30, 2010, Calumet reported net income of $7.2 million compared to $53.6 million for the same period in 2009. These results include noncash unrealized derivative losses of $13.8 million and gains of $17.7 million for the nine months ended September 30, 2010 and 2009, respectively. Calumet reported net cash provided by operating activities of $87.7 million for the nine months ended September 30, 2010 as compared to $110.6 million for the same period in 2009.
Earnings before interest expense, taxes, depreciation and amortization ("EBITDA") and Adjusted EBITDA (as defined by the Partnership's credit agreements) were $44.1 million and $40.9 million, respectively, for the quarter ended September 30, 2010 as compared to $27.7 million and $42.5 million, respectively, for the same quarter in 2009. Distributable Cash Flow (as defined below) for the quarter ended September 30, 2010 was $28.6 million as compared to $30.2 million for the same quarter in 2009. The decrease in Adjusted EBITDA quarter over quarter was primarily due to increased realized losses on derivatives and increased transportation expense partially offset by higher gross profit, discussed below. (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 measures and reconciliations of such measures to the comparable GAAP measures.)
"We are pleased with our results for the third quarter. Our production levels and gross profit have continued to improve in each quarter this year. We continue to focus on increased run rates to meet higher demand for our specialty products," said Bill Grube, Calumet's Chief Executive Officer and President. "As a result of our third quarter results, we have raised our distribution to $0.46 per unit, a $0.005 per unit increase over the prior quarter," said Grube.
The $17.2 million improvement in net income quarter over quarter was due primarily to an increase of $21.0 million in gross profit, partially offset by increased realized derivative losses of $6.3 million and higher transportation expense of $4.7 million due to increased sales volume. These results include noncash unrealized derivative gains of $1.9 million and losses of $4.5 million for the quarters ended September 30, 2010 and 2009, respectively, which may or may not be realized in the future as the derivatives are settled.
Gross profit by segment is as follows for the three and nine months ended September 30, 2010 and 2009:
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
2010 | 2009 | 2010 | 2009 | ||||
(In thousands) | (In thousands) | ||||||
Specialty products | $ 60,880 | $ 33,523 | $130,706 | $114,080 | |||
Fuel products | 1,226 | 7,633 | 12,695 | 24,414 | |||
Total gross profit (1) | $ 62,106 | $ 41,156 | $ 143,401 | $138,494 | |||
Specialty products gross profit per barrel | $ 20.58 | $ 13.96 | $ 16.56 | $ 16.34 | |||
Fuel products gross profit per barrel | $ 0.48 | $ 2.55 | $ 1.79 | $ 2.82 | |||
(1) We define specialty products and fuel products gross profit as sales less the cost of crude oil and other feedstocks and other production-related expenses, the most significant portion of which include labor, plant fuel, utilities, contract services, maintenance, depreciation and processing materials.
The increase of $27.4 million in specialty products segment gross profit quarter over quarter was primarily due to an increase of 19.7% in the average selling price per barrel, while the average cost of crude oil per barrel increased by only 12.6%. Also, specialty products sales volumes increased 23.1%, due primarily to improvements in overall specialty products demand as a result of improved economic conditions and the addition of sales volumes under our specialty products agreements with LyondellBasell which we entered into during the fourth quarter of 2009 (the "LyondellBasell Agreements").
The decrease of $6.4 million in fuel products segment gross profit quarter over quarter was negatively impacted by the 13.9% decrease in fuel products sales volume as a result of lower overall throughput rates at our Shreveport refinery to facilitate the balancing of inventory levels subsequent to the extended turnaround completed in April 2010. Partially offsetting this decrease in sales volume was a slight improvement in crack spreads as the average selling price per barrel of our fuel products increased by 14.8% driven by market conditions including a 12.5% increase in the average cost of crude oil per barrel, combined with a net $2.5 million increase in derivative gains on our fuel products crack spread cash flow hedges.
Quarterly Distribution
On October 13, 2010, the Partnership declared a quarterly cash distribution of $0.46 per unit for the quarter ended September 30, 2010 on all outstanding units. The distribution will be paid on November 12, 2010 to unitholders of record as of the close of business on November 2, 2010. This distribution represents an increase of $0.005 per unit from the second quarter of 2010.
Operations Summary
The following table sets forth unaudited information about our combined operations. Facility production volume differs from sales volume due to changes in inventory.
Three Months Ended September 30, | Nine Months Ended September 30, | ||||
2010 | 2009 | 2010 | 2009 | ||
Sales volume (bpd): | |||||
Specialty products | 32,152 | 26,108 | 28,916 | 25,579 | |
Fuel products | 28,011 | 32,522 | 25,945 | 31,718 | |
Total (1) | 60,163 | 58,630 | 54,861 | 57,297 | |
Total feedstock runs (bpd) (2) | 61,678 | 59,949 | 55,774 | 61,069 | |
Facility production (bpd): (3) | |||||
Specialty products: | |||||
Lubricating oils | 14,707 | 13,118 | 13,268 | 11,481 | |
Solvents | 10,715 | 7,923 | 9,240 | 7,868 | |
Waxes | 1,307 | 1,274 | 1,157 | 1,082 | |
Fuels | 942 | 941 | 1,023 | 811 | |
Asphalt and other by-products | 8,079 | 7,667 | 6,649 | 7,694 | |
Total | 35,750 | 30,923 | 31,337 | 28,936 | |
Fuel products: | |||||
Gasoline | 8,538 | 9,144 | 8,674 | 9,841 | |
Diesel | 11,883 | 12,079 | 10,592 | 12,662 | |
Jet fuel | 5,336 | 7,328 | 5,306 | 7,184 | |
By-products | 735 | 562 | 586 | 529 | |
Total | 26,492 | 29,113 | 25,158 | 30,216 | |
Total facility production (3) | 62,242 | 60,036 | 56,495 | 59,152 | |
(1) Total sales volume includes sales from the production of our facilities and certain third-party facilities pursuant to supply and/or processing agreements and sales of inventories.
(2) Total feedstock runs represent the barrels per day of crude oil and other feedstocks processed at our facilities and certain third-party facilities pursuant to supply and/or processing agreements. The increase in feedstock runs for the three months ended September 30, 2010 compared to the same period in 2009 is due primarily to higher throughput rates at our Princeton and Cotton Valley refineries and the addition of volumes under the LyondellBasell Agreements. These improvements were partially offset by lower overall throughput rates at our Shreveport refinery to facilitate the balancing of inventory levels subsequent to the completion of our April 2010 turnaround discussed below.
The decrease in feedstock runs for the nine months ended September 30, 2010 compared to the same period in 2009 is primarily due to our decision to reduce crude oil run rates at our facilities during the entire first quarter of 2010 because of the poor economics of running additional barrels, the extended turnaround and reduced throughput rates at our Shreveport refinery during April 2010, and the lower subsequent throughput rates at our Shreveport refinery during the third quarter of 2010 as discussed above. These decreases were partially offset by higher throughput rates at our Cotton Valley refinery and the addition of volumes under the LyondellBasell Agreements.
(3) Total facility production represents the barrels per day of specialty products and fuel products yielded from processing crude oil and other feedstocks at our facilities and certain third-party facilities pursuant to supply and/or processing agreements, including the LyondellBasell Agreements. The difference between total facility production and total feedstock runs is primarily a result of the time lag between the input of feedstock and production of finished products and volume loss. The increase in the production of specialty products for the three months ended September 30, 2010 compared to the same period in 2009 is primarily the result of the addition of volumes under the LyondellBasell Agreements and increased feedstock runs during those periods at our Princeton and Cotton Valley refineries. This increase was partially offset by reduced facility production levels as a result of reduced feedstock runs at our Shreveport refinery during the period as discussed above in footnote 2 of this table. The reduction in production of fuel products for the three months ended September 30, 2010 as compared to the same period in 2009 was also due to reduced feedstock runs at our Shreveport refinery during the current period as discussed in footnote 2 of this table.
The increase in the production of specialty products for the nine months ended September 30, 2010 compared to the same period in 2009 is primarily the result of the addition of volumes under the LyondellBasell Agreements and improved throughput rates at our Cotton Valley refinery as discussed in footnote 2 of this table. The reduction in production of fuel products for the nine months ended September 30, 2010 as compared to the same period in 2009 is due to reduced feedstock runs at our Shreveport refinery during the current period as discussed in footnote 2 of this table.
Credit Agreement Covenant Compliance
Compliance with the financial covenants under Calumet's credit agreements is measured quarterly based upon performance over the most recent four fiscal quarters. As of September 30, 2010, Calumet continued to be in compliance with all financial covenants under its credit agreements.
While assurances cannot be made regarding our future compliance with these financial covenants and subject to the inherent uncertainty of the crude oil pricing environment and general economic conditions, Calumet believes that it will continue to maintain compliance with such financial covenants.
Revolving Credit Facility Capacity
On September 30, 2010, Calumet had availability under its revolving credit facility of $143.8 million, based on a $251.1 million borrowing base, $75.4 million in outstanding standby letters of credit, and outstanding borrowings of $31.9 million. Calumet believes that it will have sufficient cash flow from operations and borrowing capacity to meet its financial commitments, minimum quarterly distributions to unitholders, debt service obligations, contingencies and anticipated capital expenditures. However, Calumet is subject to business and operational risks that could materially adversely affect its cash flows. A material decrease in Calumet's cash flow from operations or a significant, sustained decline in crude oil prices would likely produce a corollary material adverse effect on Calumet's borrowing capacity under its revolving credit facility and potentially Calumet's ability to comply with the covenants under Calumet's credit facilities. Substantial declines in crude oil prices, if sustained, may materially diminish Calumet's borrowing base, which is based in part on the value of Calumet's crude oil inventory, which could result in a material reduction in Calumet's borrowing capacity under Calumet's revolving credit facility. A significant increase in crude oil prices, if sustained, would likely result in increased working capital funded by borrowings under its revolving credit facility.
About the Partnership
The Partnership is a leading independent producer of high-quality, specialty hydrocarbon products in North America. The Partnership processes crude oil and other feedstocks into customized lubricating oils, white oils, solvents, petrolatums, waxes and other specialty products 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 five facilities located in northwest Louisiana, western Pennsylvania and southeastern Texas.
A conference call is scheduled for 1:00 p.m. ET (12:00 p.m. CT) on Wednesday, November 3, 2010, to discuss the financial and operational results for the third quarter of 2010. Anyone interested in listening to the presentation may call 866-730-5764 and enter passcode 35701361. For international callers, the dial-in number is 857-350-1588 and the passcode is 35701361.
The telephonic replay of the conference call is available in the United States by calling 888-286-8010 and entering passcode 41866668. International callers can access the replay by calling 617-801-6888 and entering passcode 41866668. The replay will be available beginning Wednesday, November 3, 2010, at approximately 4:00 p.m. until Wednesday, November 17, 2010.
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 overall demand for specialty hydrocarbon products, fuels and other refined products; our ability to produce specialty products and fuels that meet our customers' unique and precise specifications; the impact of fluctuations and rapid increases and decreases in crude oil and crack spread prices, including the impact on our liquidity; the results of the Partnership's hedging and risk management activities; the availability of, and the Partnership's ability to consummate, acquisition or combination opportunities; labor relations; the ability of the Partnership to comply with the financial covenants contained in its credit facilities; 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 ratings 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, counterparties; the impact of current and future laws, rulings and governmental regulations; shortages or cost increases of power supplies, natural gas, materials or labor; hurricane or other weather interference with business operations; 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 2010 Forms 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.
Non-GAAP Financial Measures
We include in this release the non-GAAP financial measures of EBITDA, Adjusted EBITDA and Distributable Cash Flow, and provide quarterly and annual reconciliations of net income to EBITDA, Adjusted EBITDA and Distributable Cash Flow and an annual reconciliation of EBITDA, Adjusted EBITDA and Distributable Cash Flow to net cash provided by operating activities, our most directly comparable financial performance and liquidity measures calculated and presented in accordance with GAAP.
EBITDA, Adjusted EBITDA and Distributable Cash Flow 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, support our indebtedness and meet minimum quarterly distributions;
- 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 believe that these non-GAAP measures are useful to our analysts and investors as they exclude transactions not related to our core cash operating activities and provide metrics to analyze our ability to pay distributions. We believe that excluding these transactions allows investors to meaningfully trend and analyze the performance of our core cash operations.
We define EBITDA as net income plus interest expense (including debt issuance and extinguishment costs), 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 means, for any period: (1) net income plus (2)(a) interest expense; (b) taxes; (c) depreciation and amortization; (d) unrealized losses from mark to market accounting for hedging 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 hedging activities; and (d) other non-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 and consolidated interest coverage tests thereunder.
We define Distributable Cash Flow as Adjusted EBITDA less replacement capital expenditures, cash interest paid (excluding capitalized interest) and income tax expense. Distributable Cash Flow is used by us and our investors to analyze our ability to pay distributions.
EBITDA, Adjusted EBITDA and Distributable Cash Flow should not be considered alternatives to net income, operating income, net cash provided by operating activities or any other measure of financial performance presented in accordance with GAAP. In evaluating our performance as measured by EBITDA, Adjusted EBITDA and Distributable Cash Flow, management recognizes and considers the limitations of this measurement. EBITDA, Adjusted EBITDA and Distributable Cash Flow do not reflect our obligations for the payment of income taxes, interest expense or other obligations such as capital expenditures. Accordingly, EDITDA, Adjusted EBITDA and Distributable Cash Flow are only three of the measurements that management utilizes. Moreover, our EBITDA, Adjusted EBITDA and Distributable Cash Flow may not be comparable to similarly titled measures of another company because all companies may not calculate EBITDA, Adjusted EBITDA and Distributable Cash Flow in the same manner. The following tables present a reconciliation of both net income to EBITDA, Adjusted EBITDA and Distributable Cash Flow, and Distributable Cash Flow Adjusted EBITDA and EBITDA to net cash provided by operating activities, our most directly comparable GAAP financial performance and liquidity measures, for each of the periods indicated.
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per unit data) | |||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||
2010 | 2009 | 2010 | 2009 | ||
Sales | $ 595,273 | $ 492,431 | $ 1,594,542 | $ 1,350,735 | |
Cost of sales | 533,167 | 451,275 | 1,451,141 | 1,212,241 | |
Gross profit | 62,106 | 41,156 | 143,401 | 138,494 | |
Operating costs and expenses: | |||||
Selling, general and administrative | 7,403 | 7,437 | 22,894 | 23,697 | |
Transportation | 23,258 | 18,519 | 63,460 | 49,761 | |
Taxes other than income taxes | 1,308 | 1,167 | 3,431 | 3,156 | |
Other | 565 | 191 | 1,373 | 888 | |
Operating income | 29,572 | 13,842 | 52,243 | 60,992 | |
Other income (expense): | |||||
Interest expense | (7,794) | (8,243) | (22,505) | (25,333) | |
Realized gain (loss) on derivative instruments | (2,288) | 4,045 | (8,147) | 3,213 | |
Unrealized gain (loss) on derivative instruments | 1,931 | (4,485) | (13,835) | 17,672 | |
Other | (121) | (1,271) | (170) | (2,856) | |
Total other expense | (8,272) | (9,954) | (44,657) | (7,304) | |
Net income before income taxes | 21,300 | 3,888 | 7,586 | 53,688 | |
Income tax expense (benefit) | 79 | (79) | 339 | 70 | |
Net income | $ 21,221 | $ 3,967 | $ 7,247 | $ 53,618 | |
Allocation of net income | |||||
Net income | $ 21,221 | $ 3,967 | $ 7,247 | $ 53,618 | |
Less: | |||||
General partner's interest in net income | 424 | 79 | 145 | 1,070 | |
Net income available to limited partners | $ 20,797 | $ 3,888 | $ 7,102 | $ 52,548 | |
Weighted average limited partner units outstanding – basic | 35,337 | 32,232 | 35,332 | 32,232 | |
Weighted average limited partner units outstanding – diluted | 35,352 | 32,232 | 35,351 | 32,232 | |
Common and subordinated unitholders' basic and diluted net income per unit | $ 0.59 | $ 0.12 | $ 0.20 | $ 1.63 | |
Cash distributions declared per common and subordinated unit | $ 0.46 | $ 0.45 | $ 1.37 | $ 1.35 | |
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) | |||
September 30, 2010 | December 31, 2009 | ||
(Unaudited) | |||
ASSETS | |||
Current assets: | |||
Cash and cash equivalents | $ 88 | $ 49 | |
Accounts receivable, net | 164,698 | 122,768 | |
Inventories | 150,214 | 137,250 | |
Derivative assets | — | 30,904 | |
Prepaid expenses and other current assets | 5,008 | 8,672 | |
Total current assets | 320,008 | 299,643 | |
Property, plant and equipment, net | 618,408 | 629,275 | |
Goodwill | 48,335 | 48,335 | |
Other intangible assets, net | 31,487 | 38,093 | |
Other noncurrent assets, net | 20,381 | 16,510 | |
Total assets | $ 1,038,619 | $ 1,031,856 | |
LIABILITIES AND PARTNERS' CAPITAL | |||
Current liabilities: | |||
Accounts payable | $ 181,641 | $ 109,976 | |
Other current liabilities | 22,028 | 20,165 | |
Current portion of long-term debt | 4,840 | 5,009 | |
Derivative liabilities | 20,099 | 4,766 | |
Total current liabilities | 228,608 | 139,916 | |
Pension and postretirement benefit obligations | 8,720 | 9,433 | |
Other long-term liabilities | 1,090 | 1,111 | |
Long-term debt, less current portion | 386,103 | 396,049 | |
Total liabilities | 624,521 | 546,509 | |
Partners' capital: | |||
Partners' capital | 432,484 | 472,703 | |
Accumulated other comprehensive income (loss) | (18,386) | 12,644 | |
Total partners' capital | 414,098 | 485,347 | |
Total liabilities and partners' capital | $ 1,038,619 | $ 1,031,856 | |
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) | |||
Nine Months Ended September 30, | |||
2010 | 2009 | ||
Operating activities | |||
Net income | $ 7,247 | $ 53,618 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 47,289 | 48,890 | |
Amortization of turnaround costs | 6,639 | 5,692 | |
Provision for doubtful accounts | 74 | (766) | |
Unrealized (gain) loss on derivative instruments | 13,835 | (17,672) | |
Other non-cash activities | 1,467 | 3,561 | |
Changes in assets and liabilities: | |||
Accounts receivable | (42,004) | (17,937) | |
Inventories | (12,964) | (13,184) | |
Prepaid expenses and other current assets | 3,664 | 3,047 | |
Derivative activity | 849 | 6,680 | |
Other assets | (10,311) | (4,539) | |
Accounts payable | 70,265 | 38,298 | |
Other liabilities | 1,842 | 3,945 | |
Pension and postretirement benefit obligations | (190) | 945 | |
Net cash provided by operating activities | 87,702 | 110,578 | |
Investing activities | |||
Additions to property, plant and equipment | (27,310) | (20,718) | |
Proceeds from disposal of property, plant and equipment | 201 | 793 | |
Net cash used in investing activities | (27,109) | (19,925) | |
Financing activities | |||
Repayments of borrowings – revolving credit facility | (8,027) | (33,435) | |
Repayment of borrowings – term loan credit facility | (2,888) | (2,888) | |
Payments on capital lease obligation | (1,023) | (875) | |
Proceeds from public offerings, net | 793 | — | |
Contribution from Calumet GP, LLC | 18 | — | |
Change in bank overdraft | — | (6,325) | |
Common units repurchased for vested phantom unit grants | (248) | (164) | |
Distributions to partners | (49,179) | (44,447) | |
Net cash used in financing activities | (60,554) | (88,134) | |
Net increase in cash and cash equivalents | 39 | 2,519 | |
Cash and cash equivalents at beginning of period | 49 | 48 | |
Cash and cash equivalents at end of period | $ 88 | $ 2,567 | |
Supplemental disclosure of cash flow information | |||
Interest paid | $ 19,635 | $ 23,124 | |
Income taxes paid | $ 138 | $ 91 | |
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P. RECONCILIATION OF NET INCOME TO EBITDA, ADJUSTED EBITDA, AND DISTRIBUTABLE CASH FLOW (In thousands) | |||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||
2010 | 2009 | 2010 | 2009 | ||||||
(Unaudited) | (Unaudited) | ||||||||
Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Distributable Cash Flow: | |||||||||
Net income | $ 21,221 | $ 3,967 | $ 7,247 | $ 53,618 | |||||
Add: | |||||||||
Interest expense | 7,794 | 8,243 | 22,505 | 25,333 | |||||
Depreciation and amortization | 15,031 | 15,578 | 44,824 | 46,396 | |||||
Income tax expense (benefit) | 79 | (79) | 339 | 70 | |||||
EBITDA | $ 44,125 | $ 27,709 | $ 74,915 | $ 125,417 | |||||
Add: | |||||||||
Unrealized (gain) loss from mark to market accounting for hedging activities | $ (2,525) | $ 11,365 | $ 14,683 | $(10,430) | |||||
Prepaid non-recurring expenses and accrued non-recurring expenses, net of cash outlays | (655) | 3,449 | (33) | 4,271 | |||||
Adjusted EBITDA | $ 40,945 | $ 42,523 | $ 89,565 | $ 119,258 | |||||
Less: | |||||||||
Replacement capital expenditures (1) | (5,751) | (4,995) | (22,090) | (12,739) | |||||
Cash interest expense (2) | (6,561) | (7,423) | (19,635) | (23,124) | |||||
Income tax (expense) benefit | (79) | 79 | (339) | (70) | |||||
Distributable Cash Flow | $ 28,554 | $ 30,184 | $ 47,501 | $ 83,325 | |||||
(1) Replacement capital expenditures are defined as those capital expenditures which do not increase operating capacity or reduce operating costs. (2) Represents cash interest paid by the Partnership, excluding capitalized interest. | |||||||||
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P. RECONCILIATION OF DISTRIBUTABLE CASH FLOW, ADJUSTED EBITDA AND EBITDA TO NET CASH PROVIDED BY OPERATING ACTIVITIES (In thousands) | |||
Nine Months Ended September 30, | |||
2010 | 2009 | ||
(Unaudited) | (Unaudited) | ||
Reconciliation of Distributable Cash Flow, Adjusted EBITDA and EBITDA to net cash provided by operating activities: | |||
Distributable Cash Flow | $ 47,501 | $ 83,325 | |
Less: | |||
Replacement capital expenditures (1) | 22,090 | 12,739 | |
Cash interest expense (2) | 19,635 | 23,124 | |
Income tax expense | 339 | 70 | |
Adjusted EBITDA | $ 89,565 | $ 119,258 | |
Add: | |||
Unrealized gain (loss) from mark to market accounting for hedging activities | (14,683) | 10,430 | |
Prepaid non-recurring expenses and accrued non-recurring expenses, net of cash outlays | 33 | (4,271) | |
EBITDA | $ 74,915 | $ 125,417 | |
Add: | |||
Interest expense, net of amortization | (19,626) | (22,597) | |
Unrealized (gain) loss on derivative instruments | 13,835 | (17,672) | |
Income tax expense | (339) | (70) | |
Provision for doubtful accounts | 74 | (766) | |
Changes in assets and liabilities: | |||
Accounts receivable | (42,004) | (17,937) | |
Inventory | (12,964) | (13,184) | |
Other current assets | 3,664 | 3,047 | |
Derivative activity | 849 | 6,680 | |
Accounts payable | 70,265 | 38,298 | |
Other liabilities | 1,863 | 2,829 | |
Other, including changes in noncurrent assets and liabilities | (2,830) | 6,533 | |
Net cash provided by operating activities | $ 87,702 | $ 110,578 | |
(1) Replacement capital expenditures are defined as those capital expenditures which do not increase operating capacity or reduce operating costs. (2) Represents cash interest paid by the Partnership, excluding capitalized interest. | |||
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.
UPDATE ON EXISTING COMMODITY DERIVATIVE INSTRUMENTS
September 30, 2010
Fuel Products Segment
The following tables provide information about our derivative instruments related to our fuel products segment as of September 30, 2010:
Crude Oil Swap Contracts by Expiration Dates | Barrels Purchased | BPD | Average Swap ($/Bbl) | |
Fourth Quarter 2010 | 1,840,000 | 20,000 | $ 67.29 | |
Calendar Year 2011 | 5,888,000 | 16,132 | 76.81 | |
Calendar Year 2012 | 4,661,000 | 12,735 | 85.56 | |
Totals | 12,389,000 | |||
Average price | $ 78.69 | |||
Diesel Swap Contracts by Expiration Dates | Barrels Sold | BPD | Average Swap ($/Bbl) | |
Fourth Quarter 2010 | 1,196,000 | 13,000 | $ 80.41 | |
Calendar Year 2011 | 2,371,000 | 6,496 | 90.58 | |
Calendar Year 2012 | 1,238,000 | 3,383 | 97.62 | |
Totals | 4,805,000 | |||
Average price | $ 89.86 | |||
Jet Fuel Swap Contracts by Expiration Dates | Barrels Sold | BPD | Average Swap ($/Bbl) | |
Calendar Year 2011 | 2,788,000 | 7,638 | $ 89.08 | |
Calendar Year 2012 | 3,286,500 | 8,980 | 98.92 | |
Totals | 6,074,500 | |||
Average price | $ 94.40 | |||
Gasoline Swap Contracts by Expiration Dates | Barrels Sold | BPD | Average Swap ($/Bbl) | |
Fourth Quarter 2010 | 644,000 | 7,000 | $ 75.28 | |
Calendar Year 2011 | 729,000 | 1,997 | 83.53 | |
Calendar Year 2012 | 136,500 | 373 | 89.04 | |
Totals | 1,509,500 | |||
Average price | $ 80.51 | |||
The following table provides a summary of these derivatives and implied crack spreads for the crude oil, diesel and gasoline swaps disclosed above, all of which are designated as hedges.
Swap Contracts by Expiration Dates | Barrels Purchased | BPD | Implied Crack Spread ($/Bbl) | |
Fourth Quarter 2010 | 1,840,000 | 20,000 | $ 11.32 | |
Calendar Year 2011 | 5,888,000 | 16,132 | 12.19 | |
Calendar Year 2012 | 4,661,000 | 12,735 | 12.71 | |
Totals | 12,389,000 | |||
Average price | $ 12.26 | |||
At September 30, 2010, the Partnership had the following derivatives related to crude oil sales and gasoline purchases in its fuel products segment, none of which are designated as hedges.
Crude Oil Swap Contracts by Expiration Dates | Barrels Sold | BPD | Average Swap ($/Bbl) | |
Fourth Quarter 2010 | 138,000 | 1,500 | $ 58.25 | |
Totals | 138,000 | |||
Average price | $ 58.25 | |||
Gasoline Swap Contracts by Expiration Dates | Barrels Purchased | BPD | Average Swap ($/Bbl) | |
Fourth Quarter 2010 | 138,000 | 1,500 | $ 58.42 | |
Totals | 138,000 | |||
Average price | $ 58.42 | |||
To summarize, at September 30, 2010, the Partnership had the following crude oil and gasoline derivative instruments not designated as hedges in its fuel products segment. These trades were used to economically lock in a portion of the mark-to-market valuation gain for the above crack spread trades.
Swap Contracts by Expiration Dates | Barrels Purchased | BPD | Implied Crack Spread ($/Bbl) | |
Fourth Quarter 2010 | 138,000 | 1,500 | $ 0.17 | |
Totals | 138,000 | |||
Average price | $ 0.17 | |||
At September 30, 2010, the Partnership had the following put options related to jet fuel crack spreads in its fuel products segment, none of which are designated as hedges.
Jet Fuel Put Option Crack Spread Contracts by Expiration Dates | Barrels | BPD | Average Sold Put ($/Bbl) | Average Bought Put ($/Bbl) | |
Calendar Year 2011 | 814,000 | 2,230 | $ 4.17 | $ 6.23 | |
Totals | 814,000 | ||||
Average price | $ 4.17 | $ 6.23 | |||
Specialty Products Segment
The following tables provide information about our derivatives related to our specialty products segment as of September 30, 2010, none of which are designated as hedges:
Crude Oil Put/Swap/Call Contracts by Expiration Dates | Barrels | BPD | Average Bought Put ($/Bbl) | Average Swap ($/Bbl) | Average Sold Call ($/Bbl) | |
October 2010 | 186,000 | 6,000 | $ 62.48 | $ 78.44 | $ 88.44 | |
Totals | 186,000 | |||||
Average price | $ 62.48 | $ 78.44 | $ 88.44 | |||
Crude Oil Swap Contracts by Expiration Dates | Barrels Purchased (Sold) | BPD | Average Swap ($/Bbl) | |
October 2010 | 155,000 | 5,000 | $ 79.77 | |
December 2010 | (62,000) | (2,000) | (77.70) | |
January 2011 | 62,000 | 2,000 | 79.25 | |
Totals | 155,000 | |||
Average price | $ 80.39 | |||
Natural Gas Swap Contracts by Expiration Dates | MMBtus | Average Swap ($/MMBtu) | |
Fourth Quarter 2010 | 220,000 | $ 5.06 | |
Totals | 220,000 | ||
Average price | $ 5.06 | ||
SOURCE Calumet Specialty Products Partners, L.P.
CONTACT: Jennifer Straumins, Investor Relations of Calument Specialty Products Partners, L.P., +1-317-328-5660
Web Site: http://www.calumetspecialty.com