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Calumet Specialty Products Partners LP Q2 2010 Earnings Call Transcript

Calumet Specialty Products Partners LP Q2 2010 Earnings Call Transcript

Calumet Specialty Products Partners LP (CLMT)

Q2 2010 Earnings Call

August 4, 2010 01:00 pm ET


Jennifer Straumins - EVP

Bill Grube - President and CEO

Pat Murray - VP and CFO


Darren Horowitz - Raymond James



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Welcome to the second quarter 2010 Calumet Specialty Products earnings conference call. At this time, all participants are in a listen-only mode. (Operator Instructions) I would now turn the call over to Jennifer Straumins, Executive Vice President. Please proceed.

Jennifer Straumins

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Thank you operator. Good afternoon and welcome to the Calumet Specialty Products Partners investors call to discuss our second quarter 2010 financial results. During this call, Calumet Specialty Products Partners will be referred to as the Partnership or Calumet. Also participating in this call will be Bill Grube, our President and CEO and Pat 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 the Section 21A 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 comments 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. We are very pleased with our results for the second quarter considering that our largest facility, our Shreveport refinery was down for an extended turnaround during the entire month of April. Since the completion of the turnaround, we had continued to focus on increased run rates and the higher demand for our specialty products, and to take advantage of higher fuel products margins during the summer months.

We elected not to proceed with our unsecured notes offering in July 2010 due market conditions. We view this offering as an opportunity and not a requirement to refinance our existing term loan facility with longer term unsecured notes. We intend to continue monitoring the debt market for the opportunity to complete a debt refinancing transaction under appropriate market conditions.

We are also continuing our fuels products and crude oil hedging programs. These programs continue to help protect us against rapid changes and pricing levels, for both fuel products and crude oil. And finally as announced on July 9th, 2010, the Partnership declared a quarterly cash distribution of $44.05 per unit for the quarter ended June 30th, 2010 on all outstanding units. The distribution we paid August 13th to unit holders of record as of the close of business on August 3rd, 2010.

I’ll now turn the call over to Pat Murray to review our financial results.

Pat Murray

Thanks Jennifer. Net loss for the second quarter of 2010 was $0.9 million, compared to a net loss of $26 million for the same period in 2009. Future results include non-cash, unrealized derivative losses of $8.0 million and $17.6 million for the quarters ended June 30th, 2010 and 2009 respectively. The partnership improved its quarter-over-quarter results by $25.1 million, due primarily to an increase of 31.3 million in gross profit, partially offset by increased realized derivative losses of $12.9 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 $21.7 million and $27.8 million respectively for the second quarter of 2010 as compared to the negative $1.9 million and $26.6 million respectively for the same period in 2009.

The partnerships distributable cash flow for the second quarter of 2010 was $10.7 million as compared to $14.3 million for the same period last year. The increase in adjusted EBITDA quarter-over-quarter was primarily due to an increasing gross profit which was partially offset by an increase in realized losses on derivative instruments and an increase in cash outlays for prepaid and accrued expenses.

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

Gross profit by segment for the second quarter of 2010 for specialty products and fuel products was $46.4 million and $3.2 million respectively, compared to $20.7 million and negative $2.4 million respectively for the same period in 2009. The increase of $25.7 million in specialty products segment gross profit was primarily due to an increase of 41.5% in the average selling price per barrel of specialty products, while the average cost of crude oil per barrel increased by only 32.3%. Also, our specialty products sales volumes increased 4.7%, due primarily to improvements in overall specialty products demand and the addition of sales volumes under our specialty product segment agreements with LyondellBasell, which we entered into during the fourth quarter of 2009.

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