Calumet Specialty Products Partners, L.P. Reports Fourth Quarter and Year end 2018 Results

Source Press Release
Company Calumet Specialty Products Partners, L.P. 
Tags Hedging, Production/Development, Upstream Activities, Financial & Operating Data
Date March 07, 2019

Highest fourth quarter net income since 2012 driven by strong quarterly performance in both Specialty and Fuels

Calumet Specialty Products Partners, L.P. (NASDAQ: CLMT) (the "Partnership," "Calumet," "we," "our" or "us"), a leading independent producer of petroleum-based specialty products, today reported results for the quarter and year ended December 31, 2018, as follows:

  Three Months Ended December 31,    Year Ended December 31, 
  2018    2017    2018    2017 
  (Dollars in millions, except per unit data) 
Net income (loss)  18.1    (83.6)    (55.1)    (103.8) 
Adjusted net income (loss)  42.9    (55.2)    26.5    (60.2) 
Earnings (loss) per unit  0.23    (1.06)    (0.69)    (1.31) 
Adjusted earnings (loss) per unit  0.55    (0.71)    0.34    (0.78) 
Adjusted EBITDA  55.7    41.2    263.9    317.2 
Adjusted EBITDA (excluding LCM/LIFO)  107.0    30.0    300.8    290.3 

The Partnership's $18.1 million Net income, $0.23 of Earnings per unit, and Adjusted EBITDA of $55.7 million for the fourth quarter 2018 included a $51.3 million unfavorable net impact related to the non-cash lower of cost or market ("LCM") inventory adjustments and the liquidation of last-in, first-out ("LIFO") inventory layers. Excluding the impact of LCM, LIFO and other non-cash items, Adjusted net income, Adjusted earnings per unit, and Adjusted EBITDA (excluding LCM/LIFO) were $42.9 million, $0.55 per unit, and $107.0 million, respectively.

Investors are advised to review the Partnership's annual report on Form 10-K that will be filed today for further details on the 2018 results, as well as the investor relations section of the website where updated investor presentation for the fourth quarter 2018 has been provided. For detailed information on Adjusted net income (loss), Adjusted earnings (loss) per unit, Adjusted EBITDA, Adjusted EBITDA (excluding LCM/LIFO), Adjusted EBITDA margin, Adjusted earnings (loss) per unit, Specialty products segment gross profit (excluding LCM/LIFO), Fuel products segment gross profit (excluding LCM/LIFO) and a reconciliation of such measures to the nearest comparable GAAP measure for the periods presented above, please see the sections of this release entitled "Non-GAAP Financial Measures" and "Non-GAAP Reconciliations."

Management Commentary"

I am pleased to report record profitability results on a pro forma basis, which included over $107 million in Adjusted EBITDA for the fourth quarter and $301 million in Adjusted EBITDA for the fiscal year, after adjusting for non-cash inventory adjustments," said Tim Go, Chief Executive Officer of Calumet. "Our strong fourth quarter results were driven by gains across both our Specialty Products and Fuel Products segments, despite the seasonally weaker demand that is more typical for both businesses at the end of the year. As the year progressed, Calumet delivered improved execution and focus, as we implemented the strategic growth plans developed by our business teams earlier in the year. These plans were particularly impactful in our Specialty Products segment during the fourth quarter, as the segment benefited from improved utilization and enhanced performance in several key product categories. Additionally, the Fuel Products segment benefited from strong execution as it processed record volumes of discounted heavy Canadian crudes and had record diesel sales at our Great Falls refinery. Calumet's leverage has declined to 4.9x, after excluding the impact of non-cash inventory adjustments."

Go concluded, "These record results are directly tied to the hard work and commitment of our employees to reposition the Partnership for long-term success. We will remain steadfast in our efforts to improve our operational and financial performance through a culture focused on continuous improvement and by executing against our Self-Help initiatives. Phase I of our Self-Help program was completed in the fourth quarter after generating $182 million in incremental Adjusted EBITDA, successfully meeting its three-year goal. Phase II of the program is more focused on our Specialty Products business and seeks to capture another $100 million in Adjusted EBITDA over the coming three years, through recently completed improvement projects, new quick hit projects, and other supply chain initiatives. These programs are central to our efforts to both grow our profitability and to delever our balance sheet as Calumet continues its transformation to become the premier specialty petroleum products company in the world."

Specialty Products Segment | Results Summary

  Three Months Ended December 31,    Year Ended December 31, 
  2018    2017    2018    2017 
  (Dollars in millions, except per barrel data) 
Specialty products segment gross profit  61.2      64.2      291.1      319.2   
Specialty products segment gross profit (excluding 
     LCM/LIFO) 
72.9      63.8      297.2      311.3   
Specialty products segment Adjusted EBITDA  31.8      30.8      160.2      186.5   
Specialty products segment Adjusted EBITDA (excluding 
LCM/LIFO) 
44.1      30.4      166.3      178.6   
Specialty products segment gross profit per barrel  28.43      30.07      33.30      33.93   
Specialty products segment gross profit per barrel 
(excluding LCM/LIFO) 
33.86      29.88      34.00      33.09   
Specialty products segment Adjusted EBITDA Margin  9.7    9.8    11.6    14.3 
Specialty products segment Adjusted EBITDA Margin 
(excluding LCM/LIFO) 
13.4    9.7    12.0    13.7 

During the fourth quarter 2018, Specialty Products segment gross profit was $61.2 million and Adjusted EBITDA was $31.8 million, which included $12.3 million of unfavorable impact related to LCM and LIFO adjustments. Excluding these non-cash charges, fourth quarter segment gross profit (excluding LCM/LIFO) of $72.9 million, and Adjusted EBITDA (excluding LCM/LIFO) of $44.1 million improved 14% and 45%, respectively, versus fourth quarter 2017. Improved results were driven by strong operating performance across the business, which allowed the segment to capture higher margins on Solvent products and drive improved base oil volumes, despite ongoing weakness in the Paraffinic base oil market.

Fuel Products Segment | Results Summary

  Three Months Ended December 31,    Year Ended December 31, 
  2018    2017    2018    2017 
  (Dollars in millions, except per barrel data) 
Fuel products segment gross profit  34.6      33.1      145.6      179.0   
Fuel products segment gross profit (excluding 
     LCM/LIFO) 
71.4      22.3      176.4      160.0   
Fuel products segment Adjusted EBITDA  21.9      10.7      103.7      127.8   
Fuel products segment Adjusted EBITDA (excluding 
     LCM/LIFO) 
60.9      (0.1)      134.5      108.8   
Fuel products segment gross profit per barrel (excluding 
     hedging activities) 
5.11      4.07      5.45      4.61   
Fuel products segment gross profit per barrel (excluding 
     hedging activities, LCM/LIFO) 
10.55      2.74      6.60      4.12   

During the fourth quarter 2018, Fuel Products segment gross profit of $34.6 million and Adjusted EBITDA of $21.9 million both increased compared to the year-ago period, despite $39.0 million of unfavorable non-cash LCM and LIFO adjustments. After adjusting for these non-cash impacts, segment gross profit (excluding LCM/LIFO) performance increased by 220% to $71.4 million year-over-year, and Adjusted EBITDA (excluding LCM/LIFO) increased to $60.9 million versus fourth quarter 2017. Strong operating performance and execution against the Company's strategic plan drove these strong results and positioned the segment to capture expanded crude differentials and healthy diesel crack spreads, which were partially offset by a 6% year-over-year decrease in the benchmark Gulf Coast 2/1/1 crack spread. Quarterly Adjusted EBITDA excluding LCM and LIFO adjustments was $60.9 million, which increased significantly compared to the year-ago results for Adjusted EBITDA of $(0.1) million, which also included $16.8 million Adjusted EBITDA contribution from the previously divested Superior refinery. Segment gross profit per barrel also improved significantly, driven by widening WCS-WTI and Midland-WTI crude differentials and the year-over-year increase in refined product margins, which were partially offset by slightly lower volumes.

Partnership Liquidity

As of December 31, 2018, the Partnership had total liquidity of $451.4 million, comprised of $155.7 million of cash on hand, plus approximately $295.7 million of availability under its revolving credit facility. The borrowing base under the revolving credit facility was approximately $330.8 million and the company had $35.1 million in outstanding standby letters of credit and no outstanding borrowings. The Partnership believes it will continue to have sufficient liquidity from cash on hand, cash flow from operations, borrowing capacity and other means by which to meet its financial commitments, debt service obligations, contingencies and anticipated capital expenditures.

2019 Outlook

  • For fiscal 2019, total capital spending is expected to be between $80 million and $90 million. Included in the forecast is maintenance capital, expected turnaround activity and smaller growth capital projects.
  • The Partnership recently announced Phase II of its self-help operations excellence initiative, with the goal of achieving roughly $100 million in Adjusted EBITDA by the year-end of 2021. The Company anticipates spending between $25 million and $45 million in capital over the three-year period to achieve these results. The Partnership is unable to provide a reconciliation of these projected Adjusted EBITDA amounts to projected net income (loss), the most comparable financial measure calculated in accordance with GAAP, due to the unknown effect, timing and potential significance of certain income statement items.

Operations Summary

The following table sets forth information about our combined operations, excluding the results of discontinued operations. Facility production volume differs from sales volume due to changes in inventories and the sale of purchased fuel product blendstocks such as ethanol and biodiesel and the resale of crude oil in our fuel products segment.

  Three Months Ended December 31,    Year Ended December 31, 
  2018    2017    2018    2017 
  (In bpd)    (In bpd) 
Total sales volume (1)  96,967    111,522    97,104    132,082 
Total feedstock runs (2)  91,972    108,415    94,137    128,624 
Facility production: (3)               
Specialty products:               
Lubricating oils  12,202    13,155    11,931    14,606 
Solvents  7,166    7,589    7,649    7,761 
Waxes  1,596    1,381    1,279    1,423 
Packaged and synthetic specialty products (4)  1,581    1,720    2,129    2,206 
Other  1,544    1,177    2,113    1,811 
Total  24,089    25,022    25,101    27,807 
               
Fuel products:               
Gasoline  20,751    29,461    20,323    35,713 
Diesel  27,522    28,985    27,367    33,277 
Jet fuel  2,084    4,054    2,895    5,368 
Asphalt, heavy fuel oils and other  19,433    22,550    19,612    29,396 
Total  69,790    85,050    70,197    103,754 
Total facility production (3)  93,879    110,072    95,298    131,561 

________________ 
 
(1)  Total sales volume includes sales from the production at our facilities and certain third-party facilities pursuant to supply and/or processing agreements, sales of inventories and the resale of crude oil to third party customers. Total sales volume includes the sale of purchased fuel product blendstocks, such as ethanol and biodiesel, as components of finished fuel products in our fuel products segment sales. 
   
(2)  Total feedstock runs represent the barrels per day of crude oil and other feedstocks processed at our facilities and at certain third-party facilities pursuant to supply and/or processing 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 at certain third-party facilities pursuant to supply and/or processing agreements. The difference between total facility production and total feedstock runs is primarily a result of the time lag between the input of feedstocks and the production of finished products and volume loss. 
   
(4)  Represents production of finished lubricants and specialty chemicals products, including the products from the Royal Purple, Bel-Ray and Calumet Packaging facilities. 

Derivatives Summary

The following table summarizes the derivative activity reflected in the consolidated statements of operations and consolidated statements of cash flows for the three months and years ended December 31, 2018 and 2017:

  Three Months Ended December 31,    Year Ended December 31, 
  2018    2017    2018    2017 
  (In millions)    (In millions) 
Realized gain (loss) on derivative instruments  6.0    (6.0)    3.6    (13.2) 
Unrealized gain on derivative instruments  29.8    1.4    30.2    3.6 
Total derivative gain (loss) reflected in the consolidated statements of operations  35.8    (4.6)    33.8    (9.6) 
Total gain (loss) on commodity derivative settlements  6.0    (6.0)    3.6    (13.2) 

CALUMET SPECIALTY PRODUCTS PARTNERS, L.P. 
CONSOLIDATED STATEMENTS OF OPERATIONS 
(In millions, except unit and per unit data) 
 
       
  Three Months Ended December 31,    Year Ended December 31, 
  2018    2017    2018    2017 
  (Unaudited)           
Sales  848.0    883.8    3,497.5    3,763.8 
Cost of sales  752.2    786.5    3,060.8    3,265.6 
Gross profit  95.8    97.3    436.7    498.2 
Operating costs and expenses:               
Selling  21.2    19.9    58.2    65.7 
General and administrative  19.3    35.4    122.5    138.7 
Transportation  37.5    35.7    137.2    137.1 
Taxes other than income taxes  4.9    7.3    18.1    24.1 
Asset impairment  —    206.9    —    207.3 
Gain on the sale of business, net  —    (236.0)    (4.8)    (236.0) 
Other  (3.5)    (3.5)    (17.4)    3.3 
Operating income  16.4    31.6    122.9    158.0 
Other income (expense):               
Interest expense  (35.1)    (47.3)    (155.5)    (183.1) 
Debt extinguishment costs  —    —    (58.8)    — 
Gain (loss) on derivative instruments  35.8    (4.6)    33.8    (9.6) 
Loss from unconsolidated affiliates  —    —    (3.7)    — 
Gain on sale of unconsolidated affiliates  —    —    0.2    — 
Other  1.7    1.7    10.8    3.3 
Total other income (expense)  2.4    (50.2)    (173.2)    (189.4) 
Net income (loss) before income taxes from continuing operations  18.8    (18.6)    (50.3)    (31.4) 
Income tax expense (benefit) from continuing operations  (0.3)    0.1    0.7    (0.1) 
Net income (loss) from continuing operations  19.1    (18.7)    (51.0)    (31.3) 
Net loss from discontinued operations, net of taxes  (1.0)    (64.9)    (4.1)    (72.5) 
Net income (loss)  18.1    (83.6)    (55.1)    (103.8) 
Allocation of net income (loss):               
Net income (loss)  18.1    (83.6)    (55.1)    (103.8) 
Less:               
General partner's interest in net income (loss)  0.4    (1.7)    (1.1)    (2.1) 
Net income (loss) available to limited partners  17.7    (81.9)    (54.0)    (101.7) 
Weighted average limited partner units outstanding:               
Basic  78,086,357    77,784,534    77,943,992    77,598,950 
Diluted  78,218,831    77,784,534    77,943,992    77,598,950 
               
Limited partners' interest basic and diluted net income (loss) per unit:               
From continuing operations  0.24    (0.24)    (0.64)    (0.40) 
From discontinued operations  (0.01)    (0.82)    (0.05)    (0.91) 
Limited partners' interest  0.23    (1.06)    (0.69)    (1.31) 

CALUMET SPECIALTY PRODUCTS PARTNERS, L.P. 
CONSOLIDATED BALANCE SHEETS 
(In millions) 
 
 
  December 31, 
  2018    2017 
ASSETS       
Current assets:       
Cash and cash equivalents  155.7    164.3 
Restricted cash  —    350.0 
Accounts receivable, net  198.0    354.1 
Inventories  284.1    314.4 
Derivative assets  18.3    — 
Prepaid expenses and other current assets  13.9    8.7 
Total current assets  670.0    1,191.5 
Property, plant and equipment, net  1,098.1    1,159.2 
Investment in unconsolidated affiliates  25.4    35.0 
Goodwill  171.4    171.4 
Other intangible assets, net  88.0    107.9 
Other noncurrent assets, net  34.6    23.8 
Total assets  2,087.5    2,688.8 
LIABILITIES AND PARTNERS' CAPITAL       
Current liabilities:       
Accounts payable  200.6    282.3 
Accrued interest payable  30.7    52.5 
Accrued salaries, wages and benefits  25.7    35.9 
Other taxes payable  15.2    16.1 
Obligations under inventory financing agreements  105.3    103.1 
Other current liabilities  33.8    73.7 
Current portion of long-term debt  3.8    354.1 
Derivative liabilities  —    6.0 
Discontinued operations, current liabilities  —    2.0 
Total current liabilities  415.1    925.7 
Pension and postretirement benefit obligations  4.5    3.1 
Other long-term liabilities  1.5    1.9 
Long-term debt, less current portion  1,600.7    1,638.2 
Total liabilities  2,021.8    2,568.9 
Commitments and contingencies       
Partners' capital:       
Partners' capital  74.4    127.1 
Accumulated other comprehensive loss  (8.7)    (7.2) 
Total partners' capital  65.7    119.9 
Total liabilities and partners' capital  2,087.5    2,688.8 

CALUMET SPECIALTY PRODUCTS PARTNERS, L.P. 
CONSOLIDATED STATEMENTS OF CASH FLOWS 
(In millions) 
 
 
  Year Ended December 31, 
  2018    2017 
       
Operating activities       
Net loss  (55.1)    (103.8) 
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:       
Net loss from discontinued operations  4.1    72.5 
Depreciation and amortization  118.1    154.8 
Amortization of turnaround costs  12.8    24.3 
Non-cash interest expense  7.9    10.2 
Loss on debt extinguishment costs  58.8    — 
Unrealized gain on derivative instruments  (30.2)    (3.6) 
Asset impairment  —    207.3 
Equity based compensation  (1.2)    11.6 
Lower of cost or market inventory adjustment  30.6    (30.6) 
Loss from unconsolidated affiliates  3.7    — 
Gain on sale of unconsolidated affiliates  (0.2)    — 
Gain on sale of business, net  (4.8)    (236.0) 
Other non-cash activities  6.8    10.2 
Changes in assets and liabilities:       
Accounts receivable  109.8    (158.9) 
Inventories  (0.3)    (8.5) 
Prepaid expenses and other current assets  (4.5)    (0.8) 
Derivative activity  (0.5)    (0.5) 
Turnaround costs  (27.9)    (14.5) 
Other assets  —    (0.5) 
Accounts payable  (78.2)    70.6 
Accrued interest payable  (21.8)    0.9 
Accrued salaries, wages and benefits  (5.6)    18.0 
Other taxes payable  (0.9)    0.9 
Other liabilities  (45.4)    (24.2) 
Pension and postretirement benefit obligations  (0.1)    (2.7) 
Net cash used in discontinued operating activities  (0.7)    (23.2) 
Net cash provided (used in) by operating activities  75.2    (26.5) 
Investing activities       
Additions to property, plant and equipment  (49.8)    (70.0) 
Investment in unconsolidated affiliates  (3.8)    — 
Proceeds from sale of unconsolidated affiliates  9.9    — 
Proceeds from sale of property, plant and equipment  0.4    0.3 
Proceeds from sale of business, net  44.8    484.5 
Net cash provided by discontinued investing activities  6.8    38.6 
Net cash provided by investing activities  8.3    453.4 
Financing activities       
Proceeds from borrowings — revolving credit facility  174.5    901.2 
Repayments of borrowings — revolving credit facility  (174.7)    (911.2) 
Repayments of borrowings — senior notes  (400.0)    — 
Payments on capital lease obligations  (1.6)    (2.5) 
Proceeds from inventory financing agreements  1,135.3    671.6 
Payments on inventory financing agreements  (1,128.3)    (571.5) 
Proceeds from other financing activities  4.7    — 
Payments on other financing obligations  (2.5)    (2.3) 
Payments on extinguishment of debt  (46.6)    — 
Debt issuance costs  (3.0)    (2.2) 
Contributions from Calumet GP, LLC  0.1    0.1 
Net cash provided (used in) by financing activities  (442.1)    83.2 
Net increase (decrease) in cash, cash equivalents and restricted cash  (358.6)    510.1 
Cash, cash equivalents and restricted cash at beginning of period  514.3    4.2 
Cash, cash equivalents and restricted cash at end of period  155.7    514.3 

CALUMET SPECIALTY PRODUCTS PARTNERS, L.P. 
RECONCILIATION OF NET INCOME (LOSS) 
TO EBITDA, ADJUSTED EBITDA AND DISTRIBUTABLE CASH FLOW 
(In millions) 
 
 
  Three Months Ended December 31,    Year Ended December 31, 
  2018    2017    2018    2017 
Reconciliation of Net income (loss) to EBITDA, Adjusted EBITDA and Distributable Cash Flow:  (Unaudited) 
Net income (loss)  18.1    (83.6)    (55.1)    (103.8) 
Add:               
Interest expense  35.1    47.3    155.5    183.1 
Depreciation and amortization  29.3    37.9    118.1    168.5 
Income tax expense (benefit)  (0.3)    —    0.7    (1.1) 
EBITDA  82.2    1.6    219.2    246.7 
Add:               
Unrealized gain on derivative instruments  (29.8)    (1.4)    (30.2)    (3.6) 
Realized loss on derivatives, not included in net income (loss) or settled in a prior period  (2.8)    —    —    — 
Debt extinguishment costs  —    —    58.8    — 
Amortization of turnaround costs  4.1    3.9    12.8    24.3 
Impairment charges (1)  —    206.9    —    207.3 
(Gain) loss on sale of business  2.9    (173.4)    (0.7)    (173.4) 
Equity based compensation and other non-cash items  (0.9)    3.6    4.0    15.9 
Adjusted EBITDA  55.7    41.2    263.9    317.2 
Less:               
Replacement and environmental capital expenditures (2)  8.4    20.9    24.4    42.0 
Cash interest expense (3)  33.3    44.7    147.6    172.9 
Turnaround costs  16.8    3.2    27.9    14.5 
Loss from unconsolidated affiliates  —    —    (3.7)    (0.4) 
Income tax expense (benefit)  (0.3)    —    0.7    (1.1) 
Distributable Cash Flow  (2.5)    (27.6)    67.0    89.3 

________________ 
 
(1)  Impairment charges for 2017 primarily relate to $59.2 million of long-lived asset impairment charges related to the specialty products segment and $147.0 million of long-lived asset impairment charges related to the fuel products segment. 
   
(2)  Replacement capital expenditures are defined as those capital expenditures which do not increase operating capacity or reduce operating costs and exclude turnaround costs. Environmental capital expenditures include asset additions to meet or exceed environmental and operating regulations. 
   
(3)  Represents consolidated interest expense less non-cash interest expense. 

CALUMET SPECIALTY PRODUCTS PARTNERS, L.P. 
RECONCILIATION OF DISTRIBUTABLE CASH FLOW, ADJUSTED EBITDA AND EBITDA 
TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 
(In millions) 
 
 
  Year Ended December 31, 
  2018    2017 
Reconciliation of Distributable Cash Flow, Adjusted EBITDA and EBITDA to Net cash provided by (used in) operating activities:  (Unaudited) 
Distributable Cash Flow  67.0    89.3 
Add:       
Replacement and environmental capital expenditures (1)  24.4    42.0 
Cash interest expense (2)  147.6    172.9 
Turnaround costs  27.9    14.5 
Loss from unconsolidated affiliates  (3.7)    (0.4) 
Income tax benefit (expense)  0.7    (1.1) 
Adjusted EBITDA  263.9    317.2 
Less:       
Unrealized gain on derivative instruments  (30.2)    (3.6) 
Debt extinguishment costs  58.8    — 
Amortization of turnaround costs  12.8    24.3 
Impairment charges (3)  —    207.3 
Loss on sale of unconsolidated affiliate  —    — 
Gain on the sale of businesses, net  (0.7)    (173.4) 
Non-cash equity-based compensation and other items  4.0    15.9 
EBITDA  219.2    246.7 
Add:       
Unrealized gain on derivative instruments  (30.2)    (3.6) 
Cash interest expense (2)  (147.6)    (172.9) 
Gain on the sale of businesses, net  (0.7)    (173.4) 
Asset impairment  —    207.3 
Lower of cost or market inventory adjustment  30.6    (30.6) 
Equity-based compensation  (1.2)    11.6 
Loss from unconsolidated affiliates  3.7    0.4 
Amortization of turnaround costs  12.8    24.3 
Income tax benefit  (0.7)    1.1 
Debt extinguishment costs  58.8    — 
Changes in assets and liabilities:       
Accounts receivable  109.8    (200.7) 
Inventories  (0.3)    (18.1) 
Other current assets  (4.5)    (0.5) 
Turnaround costs  (27.9)    (14.5) 
Derivative activity  (0.5)    (0.5) 
Other assets  —    (0.5) 
Accounts payable  (78.2)    94.1 
Accrued interest payable  (21.8)    0.9 
Other current liabilities  (51.9)    (5.3) 
Other  5.8    7.7 
Net cash provided by (used in) operating activities  75.2    (26.5) 

_________________ 
 
(1)     Replacement capital expenditures are defined as those capital expenditures which do not increase operating capacity or reduce operating costs and exclude turnaround costs. Environmental capital expenditures include asset additions to meet or exceed environmental and operating regulations. 
   
(2)     Represents consolidated interest expense less non-cash interest expense. 
   
(3)     Impairment charges for 2017 primarily relate to $59.2 million of long-lived asset impairment charges related to the specialty products segment and $147.0 million of long-lived asset impairment charges related to the fuel products segment. 

CALUMET SPECIALTY PRODUCTS PARTNERS, L.P. 
RECONCILIATION OF SEGMENT ADJUSTED EBITDA TO NET INCOME (LOSS) 
(In millions) 
 
 
  Three Months Ended December 31,    Year Ended December 31, 
  2018    2017    2018    2017 
Reconciliation of Segment Adjusted EBITDA to Net income (loss):  (Unaudited) 
Segment Adjusted EBITDA:               
Specialty products Adjusted EBITDA  31.8    30.8    160.2    186.5 
Fuel products Adjusted EBITDA  21.9    10.7    103.7    127.8 
Discontinued operations Adjusted EBITDA  2.0    (0.3)    —    2.9 
Total segment and discontinued operations Adjusted EBITDA  55.7    41.2    263.9    317.2 
Less:               
Unrealized gain on derivative instruments  (29.8)    (1.4)    (30.2)    (3.6) 
Realized loss on derivatives, not included in net loss or settled in a prior period  (2.8)    —    —    — 
Debt extinguishment costs  —    —    58.8    — 
Amortization of turnaround costs  4.1    3.9    12.8    24.3 
Impairment charges (1)  —    206.9    —    207.3 
(Gain) loss on sale of businesses, net  2.9    (173.4)    (0.7)    (173.4) 
Equity-based compensation and other items  (0.9)    3.6    4.0    15.9 
EBITDA  82.2    1.6    219.2    246.7 
Less:               
Interest expense  35.1    47.3    155.5    183.1 
Depreciation and amortization  29.3    37.9    118.1    168.5 
Income tax benefit  (0.3)    —    0.7    (1.1) 
Net income (loss)  18.1    (83.6)    (55.1)    (103.8) 

_________________ 
 
(1)     Impairment charges for 2017 primarily relate to $59.2 million of long-lived asset impairment charges related to the specialty products segment and $147.0 million of long-lived asset impairment charges related to the fuel products segment. 

CALUMET SPECIALTY PRODUCTS PARTNERS, L.P. 
RECONCILIATION OF SEGMENT METRICS EXCLUDING LCM/LIFO 
(In millions) 
 
 
    Three Months Ended December 31,    Year Ended December 31, 
    2018    2017    2018    2017 
Reconciliation of Segment Metrics Excluding LCM/LIFO:    (Unaudited) 
Specialty Adjusted EBITDA    31.8    30.8    160.2    186.5 
LCM inventory adjustments    9.7    (2.5)    3.4    (10.9) 
LIFO inventory layer adjustments    2.6    2.1    2.7    3.0 
Specialty Adjusted EBITDA (excluding LCM/LIFO)    44.1    30.4    166.3    178.6 
                 
                 
Fuels Adjusted EBITDA    21.9    10.7    103.7    127.8 
LCM inventory adjustments    35.7    (11.6)    27.2    (19.7) 
LIFO inventory layer adjustments    3.3    0.8    3.6    0.7 
Fuels Adjusted EBITDA (excluding LCM/LIFO)    60.9    (0.1)    134.5    108.8 
                 
                 
Total Adjusted EBITDA    55.7    41.2    263.9    317.2 
LCM inventory adjustments    45.4    (14.1)    30.6    (30.6) 
LIFO inventory layer adjustments    5.9    2.9    6.3    3.7 
Total Adjusted EBITDA (excluding LCM/LIFO)    107.0    30.0    300.8    290.3 
                 
                 
Specialty products segment gross profit    61.2    64.2    291.1    319.2 
LCM inventory adjustments    9.1    (2.5)    3.4    (10.9) 
LIFO inventory layer adjustments    2.6    2.1    2.7    3.0 
Specialty products segment gross profit (excluding LCM/LIFO)    72.9    63.8    297.2    311.3 
                 
                 
Fuel products segment gross profit    34.6    33.1    145.6    179.0 
LCM inventory adjustments    33.5    (11.6)    27.2    (19.7) 
LIFO inventory layer adjustments    3.3    0.8    3.6    0.7 
Fuel products segment gross profit (excluding LCM/LIFO)    71.4    22.3    176.4    160.0 
                 
                 
Reported Specialty gross profit per barrel    28.43    30.07    33.30    33.93 
LCM/LIFO inventory adjustments per barrel    5.43    (0.19)    0.70    (0.84) 
Specialty gross profit per barrel (excluding LCM/LIFO)    33.86    29.88    34.00    33.09 
                 
                 
Reported Fuels gross profit per barrel    5.11    4.07    5.45    4.61 
LCM/LIFO inventory adjustments per barrel    5.44    (1.33)    1.15    (0.49) 
Fuels gross profit per barrel (excluding LCM/LIFO)    10.55    2.74    6.60    4.12 

CALUMET SPECIALTY PRODUCTS PARTNERS, L.P. 
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME (LOSS) 
(In millions) 
 
 
         
    Three Months Ended December 31,    Year Ended December 31, 
    2018    2017    2018    2017 
Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss)    (Unaudited) 
Net income (loss)    18.1    (83.6)    (55.1)    (103.8) 
Add:                 
LCM inventory adjustments    45.4    (14.1)    30.6    (30.6) 
LIFO inventory layer adjustments    5.9    2.9    6.3    3.7 
Unrealized gain on derivative instruments    (29.8)    (1.4)    (30.2)    (3.6) 
Realized loss on derivatives, not included in net income (loss) or settled in a prior period    (2.8)    —    —    — 
Debt extinguishment costs    —    —    58.8    — 
Amortization of turnaround costs    4.1    3.9    12.8    24.3 
Impairment charges (1)    —    206.9    —    207.3 
(Gain) loss on sale of business    2.9    (173.4)    (0.7)    (173.4) 
Equity based compensation and other non-cash items    (0.9)    3.6    4.0    15.9 
Adjusted net income (loss)    42.9    (55.2)    26.5    (60.2) 
                 
Adjusted net income (loss) per unit    0.55    (0.71)    0.34    (0.78) 
                 
Average limited partner units - diluted    78,218,831    77,784,534    77,943,992    77,598,950 

_________________ 
 
(1)     Impairment charges for 2017 primarily relate to $59.2 million of long-lived asset impairment charges related to the specialty products segment and $147.0 million of long-lived asset impairment charges related to the fuel products segment. 

Source: EvaluateEnergy® ©2019 EvaluateEnergy Ltd