Calumet Specialty Products Partners, L.P. Reports Fourth Quarter 2008 Earnings
Posted on: Wednesday, 18 February 2009, 05:00 CST
Net income in 2008 was
The Partnership's net income for the quarter ended
Gross profit by segment for the fourth quarter of 2008 for specialty
products and fuel products was
Total specialty products segment sales volume for the fourth quarter of 2008 was 21,848 barrels per day ("bpd") as compared to 21,674 bpd for the same period in 2007, an increase of 174 bpd or 0.8%.
Total fuel products segment sales volume for the fourth quarter of 2008 was 26,325 bpd as compared to 26,664 bpd in the same period in 2007, a decrease of 339 bpd, or 1.3%.
Our sales volumes in both segments were consistent with the prior year due
to increased sales volume from the Penreco acquisition and
"We are pleased with our overall performance as we manage through this
period of unprecedented crude oil price volatility and economic uncertainty
which impacted customer demand during the later part of the fourth quarter.
During the fourth quarter, we achieved increased gross profit in our specialty
products segment, settled a significant portion of our outstanding crude oil
derivative instruments and completed scheduled turnarounds at our
Strategic Initiatives
Increased Flexibility in Our Crude Oil Price Hedging for Specialty Products Segment
We remain committed to an active hedging program to manage commodity price
risk in both our specialty products and fuel products segments. Due to the
volatility of the price of crude oil and the impact such volatility has had on
our short-term cash flows, we modified our hedging strategy to allow increased
flexibility in the overall portion of input prices for specialty products we
may hedge, the time horizon we may hedge and the types of derivative
instruments we may use. Specifically, we have targeted the use of derivative
instruments, primarily combinations of options, to mitigate our exposures to
crude oil prices for up to 75% of our specialty products production as
conditions warrant. Generally, we believe that a time horizon of hedging crude
oil purchases ranging from 3 to 9 months forward for our specialty products
segment is appropriate given our general ability to manage our specialty
products prices. We continue to consider current crude oil prices, specialty
products gross profit expectations and liquidity as the primary factors
assessed to determine the volume, time horizon and type of derivative
instrument we may execute. We plan to continue to use derivative instruments
to achieve our goal of limiting crude oil price volatility on our operations.
Due to the current economic environment and the complexities around derivative
instruments, we intend to maintain flexibility in the manner in which we
hedge. At
During the last five fiscal quarters,
Working Capital Management
We continue to implement strategies to reduce our working capital
requirements across all of our operations and we expect to maintain prudent
levels of working capital to enhance liquidity given our plans for higher
Credit Agreement Covenant Compliance
As previously discussed, we have experienced adverse financial conditions
primarily attributable with historically high crude oil price volatility,
which negatively affected our operations during 2008. Also contributing to
these adverse financial conditions were higher borrowings required to fund the
completion of the
While assurances cannot be made regarding our future compliance with these covenants and being cognizant of the general uncertain economic environment, we anticipate that our strategic initiatives discussed above will allow us to maintain compliance with such financial covenants and improve our Adjusted EBITDA, liquidity and distributable cash flows.
Revolving Credit Facility Capacity
On
Labor Agreement
On
Quarterly Distribution
As announced on
Operations Summary
The following table sets forth unaudited information about our combined operations. Production volume differs from sales volume due to changes in inventory. Three Months Ended Year Ended December 31, December 31, -------------------- -------------------- 2008 2007 2008 2007 ------- ------- ------- ------- Sales volume (bpd): Specialty products sales volume 21,848 21,674 28,112 23,041 Fuel products sales volume 26,325 26,664 28,120 24,622 ------- ------- ------- ------- Total (1) 48,173 48,338 56,232 47,663 Total feedstock runs (bpd) (2) 51,055 47,146 56,243 48,354 Production (bpd): Specialty products: Lubricating oils 10,540 10,578 12,462 10,734 Solvents 7,062 4,932 8,130 5,104 Waxes 1,395 1,181 1,736 1,177 Fuels 1,360 1,853 1,208 1,951 Asphalt and other by-products 5,880 5,867 6,623 6,157 ------- ------- ------- ------- Total 26,237 24,411 30,159 25,123 ------- ------- ------- ------- Fuel products: Gasoline 8,000 8,961 8,476 7,780 Diesel 9,891 6,059 10,407 5,736 Jet fuel 5,407 7,234 5,918 7,749 By-products 447 546 370 1,348 ------- ------- ------- ------- Total 23,745 22,800 25,171 22,613 ------- ------- ------- ------- Total production (3) 49,982 47,211 55,330 47,736 ======= ======= ======= ======= (1) Total sales volume includes sales from the production of our facilities and sales of inventories. (2) Total feedstock runs represents the barrels per day of crude oil and other feedstocks processed at our facilities. The increase in feedstock runs for 2008 is primarily due to the acquisition of the Karns City, PA and the Dickinson, TX facilities as part of the Penreco acquisition and the completion of the Shreveport refinery expansion in May 2008. These increases were offset by decreases in production rates in the fourth quarter of 2008 due to scheduled turnarounds at our Princeton, Cotton Valley and Shreveport refineries. (3) Total production represents the barrels per day of specialty products and fuel products yielded from processing crude oil and other feedstocks at our facilities. The difference between total 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.About the Company
The Partnership is a leading independent producer of high-quality,
specialty hydrocarbon products in
A conference call is scheduled for
The telephonic replay of the conference call is available in
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,
but are not limited to 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 crude oil and crack spread price fluctuations and rapid
increases or decreases including the impact on our liquidity; the results of
our hedging and other risk management activities; difficulties in successfully
integrating the operations and employees of Penreco and the timing of such
integration; our ability to comply with the financial covenants contained in
our credit agreements; the availability of, and our ability to consummate,
acquisition or combination opportunities; 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 or businesses;
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 from our suppliers and hedging counterparties; 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
and other weather interference with business operations; fluctuations in the
debt and equity markets; accidents or other unscheduled shutdowns;; 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 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. The
statements regarding (i) the
Non-GAAP Financial Measures
We include in this release the non-GAAP financial measures of EBITDA, Adjusted EBITDA and Distributable Cash Flow, and provide reconciliations of net income to EBITDA, Adjusted EBITDA and Distributable Cash Flow and (in the case of EBITDA and Adjusted EBITDA) to net cash provided by operating activities, our most directly comparable financial performance and liquidity measures calculated and presented in accordance with GAAP.
EBITDA and Adjusted EBITDA are used as supplemental financial measures by our management and by external users of our financial statements such as investors, commercial banks, research analysts and others to assess:
-- the financial performance of our assets without regard to financing methods, capital structure or historical cost basis;
-- the ability of our assets to generate cash sufficient to pay interest costs and support our indebtedness;
-- our operating performance and return on capital as compared to those of other companies in our industry, without regard to financing or capital structure; and
-- the viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities.
We define EBITDA as net income plus interest expense (including debt extinguishment costs), taxes and depreciation and amortization. We define Adjusted EBITDA to be Consolidated EBITDA as defined in our credit facility agreements. Consistent with that definition, Adjusted EBITDA, for any period, equals: (1) net income plus (2)(a) interest expense; (b) taxes; (c) depreciation and amortization; (d) unrealized losses from mark to market accounting for derivative activities; (e) unrealized items decreasing net income (including the non-cash impact of restructuring; decommissioning and asset impairments in the periods presented); (f) other non-recurring expenses reducing net income which do not represent a cash item for such period; and (g) all non-recurring restructuring charges associated with the Penreco acquisition minus (3)(a) tax credits; (b) unrealized items increasing net income (including the non-cash impact of restructuring, decommissioning and asset impairments in the periods presented); (c) unrealized gains from mark to market accounting for derivative activities; and (d) other non-cash recurring expenses and unrealized items that reduced net income for a prior period, but represent a cash item in the current period. We are required to report Adjusted EBITDA to our lenders under our credit facilities and it is used to determine our compliance with the consolidated leverage and interest coverage tests thereunder.
We believe that Distributable Cash Flow provides additional information for investors to evaluate the Partnership's ability to declare and pay distributions to unitholders.
We define Distributable Cash Flow as Adjusted EBITDA less maintenance capital expenditures, cash interest paid (excluding capitalized interest) and income tax expense.
CALUMET SPECIALTY PRODUCTS PARTNERS, L.P. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per unit data) For the Three Months Ended For the Year Ended December 31, December 31, -------------------------- ------------------ 2008 2007 2008 2007 ------ ------ ------ ------ Unaudited Unaudited Unaudited Sales $498,680 $436,925 $ 2,488,994 $1,637,848 Cost of sales 417,487 408,950 2,235,111 1,456,492 --------- --------- --------- --------- Gross profit 81,193 27,975 253,883 181,356 Operating costs and expenses: Selling, general and administrative 4,601 3,545 34,267 19,614 Transportation 18,017 13,191 84,702 54,026 Taxes other than income taxes 1,213 943 4,598 3,662 Other 618 292 1,576 2,854 --------- --------- --------- --------- Operating income 56,744 10,004 128,740 101,200 --------- --------- --------- --------- Other income (expense): Interest expense (9,566) (1,243) (33,938) (4,717) Interest income 43 95 388 1,944 Debt extinguishment costs - (5) (898) (352) Realized loss on derivative instruments (45,861) (2,826) (58,833) (12,484) Unrealized gain (loss) on derivative instruments 17,320 2,641 3,454 (1,297) Gain on sale of mineral rights - - 5,770 - Other (194) (774) 11 (919) --------- --------- --------- --------- Total other expense (38,258) (2,112) (84,046) (17,825) --------- --------- --------- --------- Net income before income taxes 18,486 7,892 44,694 83,375 Income tax (benefit) expense (50) 101 257 501 --------- --------- --------- --------- Net income $18,536 $7,791 $44,437 $82,874 ========= ========= ========= ========= Allocation of net income: Minimum quarterly distribution to common unitholders $(8,625) $(7,926) $(34,500) $(30,021) General partner's incentive distribution rights (338) - (10,996) (14,102) General partner's interest in net income (326) (156) (334) (939) Common unitholders' share of income in excess of minimum quarterly distribution (2,002) - (11,706) (13,592) --------- --------- --------- --------- Subordinated partners' interest in net income (loss) $7,245 $(291) $(13,099) $24,220 ========= ========= ========= ========= Basic and diluted net income (loss) per limited partner unit: Common $0.55 $0.45 $2.41 $2.63 Subordinated $0.55 $ (0.02) $(1.00) $1.86 Weighted average limited partner common units outstanding - basic 19,166 17,614 19,166 16,678 Weighted average limited partner common units outstanding - diluted 19,166 17,615 19,166 16,680 Weighted average limited partner subordinated units outstanding - basic and diluted 13,066 13,066 13,066 13,066 CALUMET SPECIALTY PRODUCTS PARTNERS, L.P. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) December 31, December 31, 2008 2007 ----------- ----------- Unaudited ASSETS Current assets: Cash $48 $ 35 Accounts receivable, net 109,556 113,997 Inventories 118,524 107,664 Derivative assets 71,199 - Prepaid expenses and other current assets 5,824 7,588 --------- --------- Total current assets 305,151 229,284 Property, plant and equipment, net 659,684 442,882 Goodwill 48,335 - Other intangible assets, net 49,502 2,460 Other noncurrent assets, net 18,390 4,231 --------- --------- Total assets $1,081,062 $678,857 ========= ========= LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Accounts payable $93,855 $167,977 Other current liabilities 23,360 13,842 Current portion of long-term debt 4,811 943 Derivative liabilities 15,827 57,503 --------- --------- Total current liabilities 137,853 240,265 Pension and postretirement benefit obligations 9,717 - Long-term debt, less current portion 460,280 38,948 --------- --------- Total liabilities 607,850 279,213 Partners' capital: Partners' capital 417,646 439,285 Accumulated other comprehensive income (loss) 55,566 (39,641) --------- --------- Total partners' capital 473,212 399,644 --------- --------- Total liabilities and partners' capital $1,081,062 $678,857 ========= ========= CALUMET SPECIALTY PRODUCTS PARTNERS, L.P. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) For the Year Ended December 31, ------------------- 2008 2007 ------ ------ Unaudited Operating activities Net income $44,437 $82,874 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 59,261 14,585 Amortization of turnaround costs 2,468 3,190 Provision for doubtful accounts 1,448 41 Non-cash debt extinguishment costs 898 352 Unrealized gain on derivative instruments (3,454) 1,297 Gain on sale of mineral rights (5,770) - Other non-cash activities 1,712 358 Changes in assets and liabilities: Accounts receivable 45,042 (15,038) Inventories 55,532 3,321 Prepaid expenses and other current assets 1,834 (4,121) Derivative activity 41,757 2,121 Intangible assets (1,438) (1,430) Other noncurrent assets (8,773) (5,080) Accounts payable (103,136) 89,225 Other current liabilities (1,284) (4,149) Pension and postretirement benefit obligations (193) - --------- --------- Net cash provided by operating activities 130,341 167,546 Investing activities Additions to property, plant and equipment (167,702) (261,015) Acquisition of Penreco, net of cash acquired (269,118) - Settlement of derivative instruments (49,746) - Proceeds from sale of mineral rights 6,065 - Proceeds from disposal of property, plant and equipment 40 140 --------- --------- Net cash used in investing activities (480,461) (260,875) Financing activities Proceeds from borrowings - revolving credit facility 1,424,732 303,380 Repayments of borrowings - revolving credit facility (1,329,150) (296,423) Repayment of borrowings - prior term loan credit facility (30,099) (19,401) Proceeds from borrowings - new term loan credit facility 385,000 - Discount on new term loan (17,400) - Debt issuance costs (9,633) (369) Repayment of borrowings - new term loan facility (9,915) - Payments on capital lease obligation (618) (906) Proceeds from public offerings, net - 98,206 Contributions from Calumet GP, LLC - 2,113 Change in bank overdraft 3,471 2,854 Purchase of common units for unit grants (115) - Distributions to partners (66,140) (77,045) --------- --------- Net cash provided by financing activities 350,133 12,409 --------- --------- Net increase (decrease) in cash 13 (80,920) Cash at beginning of period 35 80,955 --------- --------- Cash at end of period $48 $35 ========= ========= Supplemental disclosure of cash flow information Interest paid $33,667 $4,080 ========= ========= Income taxes paid $30 $150 ========= ========= Supplemental disclosure of noncash financing and investing activities Equipment acquired under capital lease $- $3,565 ========= ========= CALUMET SPECIALTY PRODUCTS PARTNERS, L.P. RECONCILIATION OF NET INCOME TO EBITDA, ADJUSTED EBITDA, AND DISTRIBUTABLE CASH FLOW (In thousands) Three Months Ended Year Ended December 31, December 31, ------------------ ------------------ 2008 2007 2008 2007 ------ ------ ------ ------ Unaudited Unaudited Unaudited Unaudited Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Distributable Cash Flow: Net income $18,536 $7,791 $ 44,437 $82,874 Add: Interest expense and debt extinguishment costs 9,566 1,248 34,836 5,069 Depreciation and amortization 16,177 3,591 56,045 14,275 Income tax expense (50) 101 257 501 ------- ------- ------- ------- EBITDA $44,229 $12,731 $135,575 $102,719 ------- ------- ------- ------- Add: Unrealized (gain) loss from mark to market accounting for hedging activities $(26,693) $(1,530) $(11,509) $3,487 Prepaid non-recurring expenses and accrued non-recurring expenses, net of cash outlays (3,897) (3,207) 4,009 (1,934) ------- ------- ------- ------- Adjusted EBITDA $13,639 $7,994 $128,075 $104,272 ------- ------- ------- ------- Less: Maintenance capital expenditures (1) (887) (2,557) (6,304) (12,007) Cash interest expense (2) (9,662) (1,128) (27,000) (4,080) Income tax expense 50 (101) (257) (501) ------- ------- ------- ------- Distributable Cash Flow $3,140 $4,208 $94,514 $87,684 ======= ======= ======= ======= (1) Maintenance capital expenditures are defined as those capital expenditures which do not increase operating capacity or sales from existing levels. (2) Represents cash interest paid by the Partnership, excluding capitalized interest. CALUMET SPECIALTY PRODUCTS PARTNERS, L.P. RECONCILIATION OF ADJUSTED EBITDA AND EBITDA TO NET CASH PROVIDED BY OPERATING ACTIVITIES (In thousands) Year Ended December 31, ------------------ 2008 2007 ------ ------ Unaudited Unaudited Reconciliation of Adjusted EBITDA and EBITDA to net cash provided by operating activities: Adjusted EBITDA $128,075 $104,272 Add: Unrealized gain (loss) from mark to market accounting for hedging activities 11,509 (3,487) Prepaid non-recurring expenses and accrued non-recurring expenses, net of cash outlays (4,009) 1,934 ------- ------- EBITDA $135,575 $102,719 ======= ======= Add: Interest expense and debt extinguishment costs, net (31,440) (4,638) Unrealized (gain) loss on derivative instruments (3,454) 1,297 Income tax expense (257) (501) Provision for doubtful accounts 1,448 41 Non-cash debt extinguishment costs 898 352 Changes in assets and liabilities: Accounts receivable 45,042 (15,038) Inventory 55,532 3,321 Other current assets 1,834 (4,121) Derivative activity 41,757 2,121 Accounts payable (103,136) 89,225 Other current liabilities (1,284) (4,150) Other, including changes in noncurrent assets and liabilities (12,174) (3,082) ------- ------- Net cash provided by operating activities $130,341 $167,546 ======= ======= CALUMET SPECIALTY PRODUCTS PARTNERS, L.P. UPDATE ON EXISTING COMMODITY DERIVATIVE INSTRUMENTS As of
The following table provides a summary of our outstanding derivatives and
implied crack spreads for our crude oil, diesel and gasoline swaps in our fuel
products segment as of
At
The above derivative instruments to purchase the crack spread have
effectively locked in a gain of
The following tables provide information about our derivative instruments
related to our specialty products segment as of
At
At
At
As of
The above derivative instruments to purchase the crack spread have
effectively locked in a gain of
SOURCE Calumet Specialty Products Partners, L.P.
Source: PR Newswire
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