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Calumet Specialty Products Partners, L.P. Reports Fourth Quarter and Annual 2012 Results
Significant items to report are as follows:
By: PR Newswire
Feb. 13, 2013 06:31 AM
INDIANAPOLIS, Feb. 13, 2013 /PRNewswire/ -- Calumet Specialty Products Partners, L.P. (NASDAQ: CLMT) (the "Partnership," the "Company," "Calumet," "we," "our" or "us") reported net income for the quarter ended December 31, 2012 of $45.7 million compared to $26.9 million for the same quarter in 2011. These results include $7.6 million of noncash unrealized derivative gains as compared to $13.5 million of noncash unrealized derivative gains in the fourth quarter of 2011. For the year ended December 31, 2012, Calumet reported net income of $205.7 million compared to net income of $43.0 million in 2011. Fiscal year 2012 results include $3.8 million of noncash unrealized derivative losses as compared to both $10.4 million of noncash unrealized derivative losses and $15.1 million of debt extinguishment costs ($14.4 million of which were noncash) in 2011.
Adjusted EBITDA (as defined below in the section of this press release titled "Non-GAAP Financial Measures") was $91.3 million for the quarter ended December 31, 2012 as compared to $65.0 million for the same quarter in 2011. Distributable Cash Flow (as defined below in the section of this press release titled "Non-GAAP Financial Measures") for the quarter ended December 31, 2012 was $54.6 million compared to $33.1 million for the same quarter in 2011. The $26.3 million increase in Adjusted EBITDA quarter over quarter was primarily due to a $61.6 million increase in gross profit partially offset by an $18.8 million increase in total in selling and general and administrative expenses ($6.3 million of which was noncash amortization expense) and an $8.9 million increase in realized derivative losses. Adjusted EBITDA resulting from acquisitions consummated in 2012 was $10.1 million for the quarter, while Calumet's legacy assets generated increased Adjusted EBITDA of $16.2 million quarter over quarter. See the section of this press release titled "Non-GAAP Financial Measures" and the included tables for a discussion of EBITDA, Adjusted EBITDA, Distributable Cash Flow and other non-generally accepted accounting principles ("non-GAAP") financial measures, definitions of these measures and reconciliations of such measures to the comparable U.S. generally accepted accounting principles ("GAAP") measures.
"Our fourth quarter results reflect an increase in gross profit as compared to the prior year period from both our legacy business and from our acquisitions completed in 2012. We continue to benefit from the Canadian heavy crude oil differentials at both our Superior and Montana refineries. Also, we have started to increase the supply of Bakken crude oil to our Shreveport refinery," said Bill Grube, Calumet's Chief Executive Officer. "We are pleased to add the San Antonio refinery and its employees to Calumet starting in the first quarter of 2013. This acquisition further diversifies our niche refining portfolio," added Grube.
Net income for the quarter ended December 31, 2012 increased $18.9 million quarter over quarter primarily due to a $61.6 million increase in gross profit, as discussed below, partially offset by a $10.9 million increase in selling expenses ($6.3 million of which was noncash amortization expense), a $7.9 million increase in general and administrative expenses, a $6.2 million increase in interest expense and an $8.9 million increase in realized derivative losses. Included in general and administrative expenses were $3.5 million of nonrecurring professional fees related to acquisition activities.
Gross profit by segment for the three months and years ended December 31, 2012 and 2011 are as follows:
Gross Profit Comparison of Quarters Ended December 31, 2012 and December 31, 2011
The decrease in specialty products segment gross profit of $1.7 million, or 2.6%, quarter over quarter was due primarily to a decrease in sales volumes for solvents and waxes as well as a decrease in the average sales price per barrel (excluding the impact of our 2012 acquisitions) of lubricating oils, which declined more than the average cost of crude oil. These reductions to gross profit were substantially offset by the additional gross profit generated from our 2012 acquisitions.
The increase in fuel products segment gross profit of $63.3 million quarter over quarter was due primarily to a 23.3% increase in sales volume, mostly as a result of the Montana acquisition as well as higher sales volume from our legacy operations and a 113.1% increase in the gross profit per barrel due to increased crack spreads. Legacy Calumet operations provided $50.0 million of the increase in gross profit, while newly acquired operations provided gross profit of $13.3 million in the quarter. Total loss on settled derivative instruments reflected in gross profit, as discussed above, and realized loss on derivative instruments was $27.3 million for the fourth quarter of 2012, an increased loss of $2.5 million quarter over quarter.
Gross Profit Comparison of Quarters Ended December 31, 2012 and September 30, 2012
Specialty products segment gross profit declined $27.6 million, or 30.5%, due primarily to a 10.4% decrease in sales volumes as well as a decrease in the average sales price per barrel of lubricating oils, which declined more than the average cost of crude oil, and less favorable product mix.
The increase in fuel products segment gross profit of $10.9 million was due primarily to $13.3 million of gross profit from our newly acquired operations, partially offset by lower crack spreads realized in our legacy Calumet operations.
Gross Profit Comparison of Years Ended December 31, 2012 and December 31, 2011
The increase in specialty products segment gross profit of $50.0 million year over year was due primarily to increased gross profit from newly acquired operations of $16.3 million and an increase in lubricating oils sales volume.
The increase in fuel products segment gross profit of $189.1 million year over year was due primarily to a 69.2% increase in sales volume, mostly as a result of the Superior and Montana acquisitions and an 83.3% increase in gross profit per barrel partially offset by increased realized losses on derivatives of $50.8 million. Legacy Calumet assets provided $37.0 million of the increase in gross profit while newly acquired operations increased gross profit by $152.1 million. Total loss on settled derivative instruments reflected in gross profit and realized gain (loss) on derivative instruments was $144.6 million for the year ended December 31, 2012, an increased loss of $33.4 million year over year.
On January 14, 2013, the Company declared a quarterly cash distribution of $0.65 per unit ($2.60 on an annualized basis) on all outstanding units, or $44.3 million, for the fourth quarter of 2012. The distribution will be paid on February 14, 2013 to unitholders of record as of the close of business on February 4, 2013. This quarterly distribution represents an increase of 4.8% over the third quarter of 2012 and a 22.6% increase over the fourth quarter of 2011.
The following table sets forth unaudited information about Calumet's 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 in the fuel products segment. The tables include the results of operations at the Superior refinery commencing October 1, 2011, Missouri facility commencing January 3, 2012, TruSouth facility commencing January 6, 2012, Royal Purple facility commencing July 3, 2012 and Montana refinery commencing October 1, 2012.
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, 2012 and 2011.
Revolving Credit Facility Capacity
On December 31, 2012, Calumet had availability under its revolving credit facility of $355.1 million, based on a $577.5 million borrowing base, $222.4 million in outstanding standby letters of credit and no outstanding borrowings. Calumet believes it will continue to 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.
About the Partnership
Calumet is a master limited partnership and is a leading independent producer of high-quality, specialty hydrocarbon products in North America. Calumet processes crude oil and other feedstocks into customized lubricating oils, solvents, waxes and asphalt used in consumer, industrial and automotive products. Calumet also produces fuel products including gasoline, diesel and jet fuel. Calumet is based in Indianapolis, Indiana and has eleven facilities located in northwest Louisiana, northwest Wisconsin, northern Montana, western Pennsylvania, Texas and eastern Missouri.
A conference call is scheduled for 1:00 p.m. ET (12:00 p.m. CT) on Wednesday, February 13, 2013, to discuss the financial and operational results for the fourth quarter of 2012. Anyone interested in listening to the presentation may call 800-215-2410 and enter passcode 30352716. For international callers, the dial-in number is 617-597-5410 and the passcode is 30352716.
The telephonic replay of the conference call is available in the United States by calling 888-286-8010 and entering passcode 83503566. International callers can access the replay by calling 617-801-6888 and entering passcode 83503566. The replay will be available beginning Wednesday, February 13, 2013, at approximately 3:00 p.m. ET (2:00 p.m. CT) until Wednesday, February 27, 2013.
The information contained in this press release is available on Calumet's website at http://www.calumetspecialty.com.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements and information in this press release concerning results for the three months and year ended December 31, 2012 may constitute "forward-looking statements." The words "believe," "expect," "anticipate," "plan," "intend," "foresee," "should," "would," "could" or other similar expressions are intended to identify forward-looking statements, which are generally not historical in nature. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenues and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. Important factors that could cause actual results to differ materially from those in the forward-looking statements 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 or decreases in crude oil and crack spread prices, including the resulting impact on our liquidity; the results of our hedging and other risk management activities; our ability to comply with financial covenants contained in our debt instruments; the availability of, and our ability to consummate, acquisition or combination opportunities and the impact of any completed acquisitions; labor relations; our access to capital to fund expansions, acquisitions and our working capital needs and our ability to obtain debt or equity financing on satisfactory terms; successful integration and future performance of acquired assets, businesses or third-party product supply and processing relationships; our ability to timely and effectively integrate the operations of recently acquired businesses or assets, particularly those in new geographic areas or in new lines of business; environmental liabilities or events that are not covered by an indemnity, insurance or existing reserves; maintenance of our credit ratings and ability to receive open credit lines from our suppliers; demand for various grades of crude oil and resulting changes in pricing conditions; fluctuations in refinery capacity; our ability to access sufficient crude oil supply through long-term or month-to-month evergreen contracts and on the spot market; the effects of competition; continued creditworthiness of, and performance by, counterparties; the impact of current and future laws, rulings and governmental regulations, including guidance related to the Dodd-Frank Wall Street Reform and Consumer Protection Act; shortages or cost increases of power supplies, natural gas, materials or labor; hurricane or other weather interference with business operations; our ability to access the debt and equity markets; accidents or other unscheduled shutdowns; and general economic, market or business conditions.
For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see our filings with Securities and Exchange Commission ("SEC"), including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date they are made. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise.
Non-GAAP Financial Measures
We include in this press release the non-GAAP financial measures EBITDA, Adjusted EBITDA and Distributable Cash Flow, and provide reconciliations of EBITDA, Adjusted EBITDA and Distributable Cash Flow to net income (loss) and net cash provided by (used in) 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:
We believe that these non-GAAP measures are useful to 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" for any period as net income (loss) plus interest expense (including debt issuance and extinguishment costs), income taxes and depreciation and amortization.
We define "Adjusted EBITDA" for any period as: (1) net income (loss) plus; (2)(a) interest expense, (b) income taxes, (c) depreciation and amortization, (d) unrealized losses from mark to market accounting for hedging activities, (e) realized gains under derivative instruments excluded from the determination of net income (loss), (f) non-cash equity based compensation expense and other non-cash items (excluding items such as accruals of cash expenses in a future period or amortization of a prepaid cash expense) that were deducted in computing net income (loss), (g) debt refinancing fees, premiums and penalties and (h) all extraordinary, unusual or non-recurring items of gain or loss, or revenue or expense; minus (3)(a) unrealized gains from mark to market accounting for hedging activities, (b) realized losses under derivative instruments excluded from the determination of net income and (c) other non-recurring expenses and unrealized items that reduced net income (loss) for a prior period, but represent a cash item in the current period.
We define "Distributable Cash Flow" for any period as Adjusted EBITDA less replacement capital expenditures, turnaround costs, cash interest expense (consolidated interest expense less non-cash interest expense) and income tax expense. Distributable Cash Flow is used by us, our investors and analysts to analyze our ability to pay distributions.
The definitions of Adjusted EBITDA and Distributable Cash Flow that are presented in this release have been updated to reflect the calculation of "Consolidated Cash Flow" contained in the indentures governing our 9 3/8% senior notes due May 1, 2019 that were issued in April and September 2011 (the "2019 Notes") and the indenture governing our 9 5/8% senior notes due August 1, 2020 that were issued in June 2012 (the "2020 Notes"). We are required to report Consolidated Cash Flow to our holders of the 2019 Notes and 2020 Notes and Adjusted EBITDA to the lenders under our revolving credit facility, and these measures are used by them to determine our compliance with certain covenants governing those debt instruments. Adjusted EBITDA and Distributable Cash Flow that are presented in this press release for prior periods have been updated to reflect the use of the new calculations. Please see our filings with the SEC, including our 2011 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, for additional details regarding the covenants governing our debt instruments.
EBITDA, Adjusted EBITDA and Distributable Cash Flow should not be considered alternatives to net income, operating income, net cash provided by (used in) 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 these measurements. 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, EBITDA, 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.
Fuel Products Segment
The following table provides a summary of Calumet's derivatives and implied crack spreads for its crude oil, diesel, jet and gasoline swaps, as well as Calumet's Canadian heavy crude oil versus NYMEX WTI crude oil basis swaps as of December 31, 2012.
The following table provides a summary of Calumet's Canadian heavy crude oil versus NYMEX WTI crude oil basis swaps as of December 31, 2012.
SOURCE Calumet Specialty Products Partners, L.P.
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