Calumet Specialty Products Partners, L.P. Reports First Quarter 2019 Results

Source Press Release
Company Calumet Specialty Products Partners, L.P. 
Tags Capital Spending, Guidance, Strategy - Corporate, Financial & Operating Data
Date May 10, 2019

 Calumet Specialty Products Partners, L.P. (NASDAQ: CLMT) (the "Partnership," "Calumet," the "Company," "we," "our" or "us"), a leading independent producer of specialty hydrocarbon and fuel products, today reported results for the first quarter ended March 31, 2019, as follows:

  Three Months Ended March 31, 
  2019    2018 
  (Dollars in millions, except per unit data) 
Net income (loss)  16.4    (4.8) 
Adjusted net loss  (0.7)    (2.8) 
Earnings (loss) per unit  0.20    (0.06) 
Adjusted loss per unit  (0.01)    (0.04) 
Adjusted EBITDA  97.7    75.0 
Adjusted EBITDA (excluding LCM/LIFO)  59.7    71.9 

The Partnership's $16.4 million of Net income and $0.20 of Earnings per unit for the first quarter 2019 included, among other items, a $38.0 million favorable 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, as well as an $11.7 million asset disposal and impairment loss. Excluding the impact of LCM, LIFO, asset disposal and impairment losses, and other non-cash items, Adjusted net loss and Adjusted loss per unit were $0.7 million and $0.01 per unit, respectively. The Partnership's $97.7 million of Adjusted EBITDA for the first quarter 2019 included a $38.0 million favorable net impact related to the non-cash LCM inventory adjustments and the liquidation of LIFO inventory layers. Excluding these impacts, Adjusted EBITDA (excluding-LCM/LIFO) was $59.7 million.

For detailed information on the non-GAAP measures presented in this release 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"

Calumet delivered another strong quarter to start the year, as good execution against our strategy drove the best first quarter results for our core Specialty business that we've had in three years, including Net Income of $16.4 million and Adjusted EBITDA of $97.7 million, or $59.7 million after excluding favorable non-cash inventory adjustments," said Tim Go, Chief Executive Officer of Calumet. "Our core business profitability continues to grow, our operational execution is improving, and our operating cash flows and liquidity are strengthening. The Partnership's improved first quarter results reflect the benefits of the new strategic plans implemented across our core Specialty business last year which, in turn, are helping drive the meaningful sequential and year-over-year improvements to both our Gross Profit and Adjusted EBITDA. During the quarter, our Fuels business also made positive contributions to our consolidated results despite weaker market conditions. In addition, our Self-Help Phase II program captured over $13 million in Adjusted EBITDA. These self-help gains were achieved by the new general managers of our business lines leveraging data driven insights from our new enterprise resource planning system, which is allowing us to better identify opportunities to lower costs, improve margins and identify potential growth opportunities."

Go concluded, "During the quarter, our liquidity position improved by $9 million, to $460 million, driven by $27.4 million of cash flow from operations. This improvement in liquidity came despite repurchasing approximately $23 million face amount of 2021 Notes in the open market during the first quarter. Since the start of the year, we have repurchased a total of $50 million face amount of 2021 Notes through the end of April. Calumet's net debt/EBITDA leverage has improved to 4.9x, and I am pleased to report that we extended the term on our inventory financing arrangement with our third-party lender to 2023, demonstrating the Partnership's access to capital. Improving the Partnership's capital structure continues to be our most important strategic goal, and while we are pleased with the advancements made during the quarter, we remain committed to delevering our balance sheet further as we continue our transformation to be the premiere specialty petroleum products company in the world."

Three Months Ended March 31, 
  2019    2018 
  (Dollars in millions, except per barrel data) 
Specialty products segment gross profit  92.9      69.6   
Specialty products segment gross profit (excluding LCM/LIFO)  87.2      67.4   
Specialty products segment Adjusted EBITDA  56.3      37.7   
Specialty products segment Adjusted EBITDA (excluding LCM/LIFO)  50.6      35.5   
Specialty products segment gross profit per barrel  38.07      33.11   
Specialty products segment gross profit per barrel (excluding LCM/LIFO)  35.73      32.06   
Specialty products quarterly Adjusted EBITDA Margin  16.0    14.1 
Specialty products segment Adjusted EBITDA Margin (excluding LCM/LIFO)  14.4    11.0 

During the first quarter, Specialty products segment gross profit was $92.9 million and Adjusted EBITDA was $56.3 million, which included $5.7 million of net favorable LCM and LIFO adjustments. Excluding these non-cash adjustments, first quarter segment gross profit was $87.2 million and Adjusted EBITDA was $50.6 million, which is an improvement of 29% and 43%, respectively, versus the first quarter of 2018. Specialty products segment gross profit per barrel grew more than 11% compared to the year-ago period. Strong segment performance was driven in part by the contributions from the business unit profitability plans implemented last year, as well strong sales volume across lubricating oils and solvents products. The Adjusted EBITDA Margin improved significantly compared to the year-ago period, as the rationalization of low-margin products and sales mix upgrading more than offset the negative impacts of the significant  rise in crude costs during the quarter.

Fuel Products Segment | Results Summary

  Three Months Ended March 31, 
  2019    2018 
  (Dollars in millions, except per barrel data) 
Fuel products segment gross profit  43.1    43.6 
Fuel products segment gross profit (excluding LCM/LIFO)  10.8    42.7 
Fuel products segment Adjusted EBITDA  41.4    38.7 
Fuel products segment Adjusted EBITDA (excluding LCM/LIFO)  9.1    37.8 
Fuel products segment gross profit per barrel  5.85    7.49 
Fuel products segment gross profit per barrel (excluding LCM/LIFO)  1.47    7.34 

During the first quarter, Fuel products segment gross profit of $43.1 million decreased compared to results of $43.6 millionin the year-ago period, while Adjusted EBITDA of $41.4 million increased compared to $38.7 million in last year's comparable quarter. Excluding the favorable impact of $32.3 million of non-cash LCM and LIFO inventory adjustments this quarter, Adjusted EBITDA was $9.1 million, down from $37.8 million in the year-ago period, primarily due to the absence of Renewable Identification Numbers ("RINs") hardship exemptions this quarter. Excluding the impact of RINs hardship exemptions, segment profitability results grew significantly year-over-year, due to improved utilization and higher product realizations at our Shreveport, Great Falls and San Antonio refineries. Gross profit per barrel decreased compared to the year-ago period, primarily due to the absence of RINs hardship exemptions and unfavorable crude differentials for heavy Canadian crude.

Partnership Liquidity

As of March 31, 2019, the Partnership had total liquidity of $459.6 million, comprised of $152.9 million of cash and availability under the revolving credit facility of $306.7 million. As of March 31, 2019, Calumet had a $342.4 millionborrowing base, $35.7 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 capitalexpenditures.

Financial Guidance

Full-Year 2019 Capital Spending Forecast

Through the first quarter of 2019, total capital spending was $11.2 million, primarily related to growth capital and maintenance and turnaround activity. For the full-year 2019 the Partnership's capital expenditures are expected to come within the range of $80.0 million and $90.0 million.

Operations Summary

The following table sets forth information about the Partnership's combined 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 the Partnership's fuel products segment.

  Three Months Ended March 31, 
  2019    2018 
  (In bpd) 
Total sales volume (1)  109,022    88,033 
Total feedstock runs (2)  105,434    84,492 
Facility production: (3)       
Specialty products:       
Lubricating oils  12,357    10,031 
Solvents  7,935    7,984 
Waxes  1,379    1,239 
Packaged and synthetic specialty products (4)  1,874    2,438 
Other  1,172    1,706 
Total  24,717    23,398 
       
Fuel products:       
Gasoline  24,610    17,848 
Diesel  30,477    23,049 
Jet fuel  2,629    3,747 
Asphalt, heavy fuel oils and other  19,329    16,929 
Total  77,045    61,573 
Total facility production (3)  101,762    84,971 

(1)  Total sales volume includes sales from the production at the Partnership's 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 the Partnership's fuel products segment sales. 
   
  The increase in total sales volume for the three months ended March 31, 2019, as compared to the same period in 2018, is due
primarily to improved plant utilization in the first quarter of 2019. 
   
(2)  Total feedstock runs represent the barrels per day ("bpd") of crude oil and other feedstocks processed at the Partnership's
facilities and at certain third-party facilities pursuant to supply and/or processing agreements. 
   
  The increase in total feedstock runs for the three months ended March 31, 2019, as compared to the same period in 2018, is
due primarily to improved plant utilization in the first quarter of 2019. In the first quarter of 2018, turnaround activities at the
Shreveport refinery and certain third-party processing facilities and maintenance activities negatively impacted our sales
volumes. 
   
(3)  Total facility production represents the bpd of specialty products and fuel products yielded from processing crude oil and other
feedstocks at the Partnership's 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 production of finished products and volume loss. 
   
  The change in total facility production for the three months ended March 31, 2019, as compared to the same period in 2018, is
due primarily to the operational items discussed above in footnote 2. 
   
(4)  Represents production of finished lubricants and chemicals specialty 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 unaudited condensed consolidated statements of operations and unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2019and 2018:

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  Three Months Ended March 31, 
  2019    2018 
  (In millions) 
Realized gain (loss) on derivative instruments  11.7    (2.1) 
Unrealized gain (loss) on derivative instruments    (2.6)      2.0 
Total derivative gain (loss) reflected in the unaudited condensed consolidated statements of
operations 
9.1    (0.1) 
Total gain (loss) on commodity derivative settlements  11.7   

Webcast Information

A conference call is scheduled for 9:00 a.m. ET on May 10, 2019 to discuss the financial and operational results for the first quarter of 2019. Investors, analysts and members of the media interested in listening to the live presentation are encouraged to join a webcast of the call with accompanying presentation slides, available on the Partnership's website at . Interested parties may also participate in the call by dialing (866) 584-9671 and entering the passcode 9294516. A replay of the conference call will be available a few hours after the event on the investor relations section of the Company's website, under the events and presentations section and will remain available for at least 90 days.

Source: EvaluateEnergy® ©2019 EvaluateEnergy Ltd