Calumet Specialty Products Partners, L.P. Q1 2010 Earnings Call Transcript

Calumet Specialty Products Partners, L.P. Q1 2010 Earnings Call Transcript
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Calumet Specialty Products Partners, L.P. (CLMT)

Q1 2010 Earnings Call

May 5, 2010 1:00 pm ET

Executives

William Grube – President & CEO

Patrick Murray – CFO

Jennifer Straumins - EVP

Analysts

Darren Horowitz – Raymond James

[Brad Kelly – Magellan Financial]

[Ray Thisby] – PineBridge Investments

Unspecified Analyst

Presentation

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Good day ladies and gentlemen and welcome to the first quarter 2010 Calumet Specialty Products earnings conference call. (Operator Instructions) I would now like to turn the call over to Ms. Jennifer Straumins, Executive Vice President; please proceed.

Jennifer Straumins

Good afternoon and welcome to the Calumet Specialty Products Partners investors call to discuss our first quarter 2010 financial results. During this call Calumet Specialty Products Partners will be referred to as the Partnership or Calumet.

Also participating in the call will be William Grube, our President and CEO and Patrick Murray, our CFO. Following the presentation we will hold the line open for a question-and-answer session.

During the course of this call we will make various forward-looking statements within the meaning of Section 21(E) of the Securities Exchange Act of 1934. Such statements are based on the beliefs of our management, as well as assumptions made by them and in each case based on information currently available to them.

Although our management believes that the expectations reflected in such forward-looking statements are reasonable, neither the Partnership, its general partner nor our management, can provide any assurances that such expectations will prove to be correct.

Please refer to the Partnership’s press release that was issued this morning, as well as our latest filings with the Securities & Exchange Commission for a list of factors that may affect our actual results and could cause them to differ from our forward-looking statements made on this call.

The first quarter of 2010 was a challenging quarter for Calumet, as it was for most independent refiners. We saw a continued weakness in our fuels products, 211 crack spreads which averaged approximately $7.50 per barrel over the quarter.

Because of these weak refining economics we chose to operate our facilities especially our Shreveport refinery at reduced rates during the first quarter of 2010. The Gulf Coast 211 crack spread is currently almost $15.00 per barrel so we’ve restarted our idle [inaudible] at Shreveport and expect to have much higher production rates during the second quarter at all of our facilities.

We continue to see specialty products demand increase. We sold on average approximately 13,000 barrels per day more during the first quarter than we did during the fourth quarter of 2009 and almost 3,000 bpd more than the first quarter of 2009.

Crude oil which is our primary feedstock increased a little more than $6.00 per barrel during the quarter. We have announced several price increases across all of our specialty product lines and continue our efforts to increase our specialty products margins.

We’re very pleased with how our LyondellBasell specialty products relationship is going. Our sales team continues in its efforts to place all of the production out of that facility. We are also continuing our fuels products and crude oil hedging programs.

These programs continue to help protect us against rapid changes in pricing levels for both fuels products and crude oil. While we were discouraged by the weak refining margins during the first quarter we are very pleased and encouraged with today’s margins.

I’d also like to announce that our collective bargaining employees have ratified a new labor agreement at our Cotton Valley refinery effective March 31 and at the Shreveport refinery effective April 30. Both of these agreements have three year terms.

And finally as announced on April 12, 2010 the Partnership declared a quarterly cash distribution of $0.455 per unit for the quarter ended March 31, on all outstanding units. The distribution will be paid on May 14, to unit holders of record at the close of business on May 4.

I’d now like to turn the call over to Patrick Murray for a review of our financial results.

Patrick Murray

Thank you Jennifer, net loss for the first quarter of 2010 was $13.1 million compared to net income of $75.6 million for the same period in 2009. The Partnership’s net income decreased by $88.7 million due primarily to both the decrease of $47.3 million in gross profit and decreased unrealized non-cash derivative gains of $47.5 million.

We believe the non-GAAP measures of EBITDA, adjusted EBITDA and distributable cash flow are important financial performance measures for the Partnership. EBITDA and adjusted EBITDA as defined by our credit agreements were $9.1 million and $20.8 million respectively for the first quarter of 2010, as compared to $99.7 million and $50.1 million respectively for the same period in the prior year.

The Partnership’s distributable cash flow for the quarter ended March 31, 2010 was $8.2 million as compared to $38.9 million for the same period in 2009. The decrease in adjusted EBITDA quarter over quarter was primarily due to the decrease in gross profit, partially offset by a decrease in realized loss on derivatives instruments of $7.9 million for the quarter as compared to the same period in 2009.

We encourage investors to review the section of the earnings press release found on our website entitled, non-GAAP financial measures in the attached tables for discussion and definitions of EBITDA, adjusted EBITDA, and distributable cash flow financial measures and reconciliation of those non-GAAP measures to the comparable GAAP measures.

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