INDIANAPOLIS, March 7, 2019 /PRNewswire/ -- 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:
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."
"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
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
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.
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.
- 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.
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.
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:
About the Partnership
Calumet Specialty Products Partners, L.P. (NASDAQ: CLMT) is a master limited partnership and 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 and waxes used in consumer, industrial and automotive products as well as produces fuel products including gasoline, diesel and jet fuel. Calumet is based in Indianapolis, Indiana, and operates eleven manufacturing facilities located in northwest Louisiana, northern Montana, western Pennsylvania, Texas, New Jersey and eastern Missouri.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements and information in this press release, 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. The statements discussed in this press release that are not purely historical data are forward-looking statements, including, but not limited to, the statements regarding (i) our expectation regarding our business outlook and cash flows, (ii) our expectation regarding anticipated capital expenditures and strategic initiatives, (iii) our ability to meet our financial commitments, debt service obligations, contingencies and anticipated capital expenditures, and (iv) estimated capital expenditures. 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 sales 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 our actual results to differ materially from our historical experience and our present expectations or projections. Known material 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; the level of foreign and domestic production of crude oil and refined products; our ability to produce specialty products and fuels products 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 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; the costs of complying with the Renewable Fuel Standard, including the prices paid for RINs; 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 the Securities and Exchange Commission ("SEC"), including our latest Annual Report on Form 10-K 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
Our management uses certain non-GAAP performance measures to analyze operating segment performance and non-GAAP financial measures to evaluate past performance and prospects for the future to supplement our GAAP financial information presented in accordance with U.S. GAAP. These financial and operational non-GAAP measures are important factors in assessing our operating results and profitability and include performance and liquidity measures along with certain key operating metrics.
We use the following performance and liquidity measures:
EBITDA: We define EBITDA for any period as net income (loss) plus interest expense (including debt issuance costs), income taxes and depreciation and amortization.
Adjusted EBITDA: We define Adjusted EBITDA for any period as: EBITDA adjusted for (a) impairment; (b) unrealized gains and losses from mark to market accounting for hedging activities; (c) realized gains and losses under derivative instruments excluded from the determination of net income (loss); (d) 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); (e) debt refinancing fees, premiums and penalties; (f) any net loss realized in connection with an asset sale that was deducted in computing net income (loss) and (g) all extraordinary, unusual or non-recurring items of gain or loss, or revenue or expense.
Distributable Cash Flow: We define Distributable Cash Flow for any period as Adjusted EBITDA less replacement and environmental capital expenditures, turnaround costs, cash interest expense (consolidated interest expense less non-cash interest expense), income (loss) from unconsolidated affiliates, net of cash distributions and income tax expense (benefit).
Adjusted EBITDA Margin: We define Adjusted EBITDA Margin for any period as Adjusted EBITDA divided by sales.
Adjusted net income (loss): We define Adjusted net income (loss) for any period as: net income (loss) adjusted for (a) impairment; (b) unrealized losses from mark to market accounting for hedging activities; (c) realized gains under derivative instruments excluded from the determination of net income (loss); (d) 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); (e) debt refinancing fees, premiums and penalties; (f) any net loss realized in connection with an asset sale that was deducted in computing net income (loss) and (g) all extraordinary, unusual or non-recurring items of gain or loss, or revenue or expense; (h) lower of cost or market ("LCM") inventory adjustments and (i) the impact of liquidation of LIFO inventory layers.
Adjusted earnings (loss) per unit: We define Adjusted earnings (loss) per unit for any period as Adjusted net income (loss) divided by average limited partner units (diluted).
Adjusted EBITDA (excluding LCM/LIFO): We define Adjusted EBITDA (excluding LCM/LIFO) for any period as Adjusted EBITDA excluding the impact of LCM inventory adjustments and the impact of liquidation of LIFO inventory layers.
Specialty products segment gross profit (excluding LCM/LIFO): We define Specialty products segment gross profit (excluding LCM/LIFO) for any period as Specialty products segment gross profit excluding the impact of LCM inventory adjustments and the impact of liquidation LIFO inventory layers.
Fuel products segment gross profit (excluding LCM/LIFO): We define fuels products segment gross profit (excluding LCM/LIFO) for any period as Fuel products segment gross profit excluding the impact of LCM inventory adjustments and the impact of liquidation of LIFO inventory layers.
The definitions of Adjusted EBITDA and Distributable Cash Flow that are presented in this press release are consistent with the calculation of "Consolidated Cash Flow" contained in the indentures governing our 7.625% senior notes due January 15, 2022, that were issued in November 2013 (the "2022 Notes"), our 6.50% senior notes due April 15, 2021, that were issued in March 2014 (the "2021 Notes") and our 7.75% senior notes due April 15, 2023 (the "2023 Notes"), that were issued in March 2015. We are required to report Consolidated Cash Flow to the holders of our 2021 Notes, 2022 Notes and 2023 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. Please see our filings with the SEC, including our most recent Annual Report on Form 10-K and Current Reports on Form 8-K, for additional details regarding the covenants governing our debt instruments.
These non-GAAP measures 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;
- the viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities; and
- our operating performance excluding the non-cash impact of LCM and LIFO inventory adjustments.
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 and interest costs. We believe that excluding these transactions allows investors to meaningfully analyze trends and performance of our core cash operations.
EBITDA, Adjusted EBITDA, Distributable Cash Flow, Adjusted net income (loss), Adjusted earnings (loss) per unit, Adjusted EBITDA (excluding LCM/LIFO) and segment gross profit (excluding LCM/LIFO) should not be considered alternatives to Net loss, Operating income (loss), Net cash provided by (used in) operating activities, gross profit or any other measure of financial performance presented in accordance with GAAP. In evaluating our performance as measured by EBITDA, Adjusted EBITDA, Distributable Cash Flow, Adjusted net income (loss), Adjusted earnings (loss) per unit, Adjusted EBITDA (excluding LCM/LIFO) and segment gross profit (excluding LCM/LIFO) management recognizes and considers the limitations of these measurements. EBITDA, Adjusted EBITDA and Adjusted EBITDA (excluding LCM/LIFO) do not reflect our obligations for the payment of income taxes, interest expense or other obligations such as capital expenditures. Accordingly, EBITDA, Adjusted EBITDA, Distributable Cash Flow and Adjusted net income (loss), Adjusted earnings (loss) per unit, Adjusted EBITDA (excluding LCM/LIFO) and segment gross profit (excluding LCM/LIFO) are only a few of several measurements that management utilizes. Moreover, our EBITDA, Adjusted EBITDA, Distributable Cash Flow, Adjusted net income (loss), Adjusted earnings (loss) per unit, Adjusted EBITDA (excluding LCM/LIFO) and segment gross profit (excluding LCM/LIFO) may not be comparable to similarly titled measures of another company because all companies may not calculate EBITDA, Adjusted EBITDA, Distributable Cash Flow, Adjusted net income (loss), Adjusted earnings (loss) per unit, Adjusted EBITDA (excluding LCM/LIFO) and segment gross profit (excluding LCM/LIFO) in the same manner. Please see the section of this release entitled "Non-GAAP Reconciliations" for tables that present reconciliations of EBITDA, Adjusted EBITDA, Distributable Cash Flow and Adjusted net income (loss) to Net income (loss), our most directly comparable GAAP financial performance measure; Distributable Cash Flow to net cash provided by (used in) operating activities, our most directly comparable GAAP liquidity measure, for each of the periods indicated; and segment gross profit (excluding LCM/LIFO) to segment gross profit, our most directly comparable GAAP financial performance measure.
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SOURCE Calumet Specialty Products Partners, L.P.