Calumet Specialty Products Partners' Management Discusses Q4 2011 Results - Earnings Call Transcript

Calumet Specialty Products Partners, L.P. (

CLMT

)

Q4 2011 Earnings Call

February 15, 2012 1:00 p.m. ET

Executives

Bill Anderson - VP, Sales and Marketing

Jennifer Straumins – President and COO

Pat Murray – CFO

Analysts

Darren Horowitz – Raymond James

Brian Zarahn – Barclays

Kelly Krenger – Bank of America Merrill Lynch

Eric Seeve – GoldenTree

Peter Madsen - Drakkar Capital

[Nick Coleridge - B2 Investments]

Eric Udoff – Appaloosa

Presentation

Operator

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Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2011 Calumet Specialty Products Partners, L.P. Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will facilitate a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I’d now like to turn the call over to Bill Anderson. You may proceed.

Bill Anderson

Thank you, operator. Good afternoon, and welcome to Calumet Specialty Products Partners investors call to discuss our fourth quarter 2011 financial results. During this call, Calumet Specialty Products Partners, L.P. will be referred to as the Partnership or Calumet. Also participating in this call will be Jennifer Straumins, our President and COO, 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 Section 21E 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 the 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 and 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.

I will now turn the call over to Jennifer Straumins.

Jennifer Straumins

Thank you, Bill. We are very pleased with our results for the fourth quarter of 2011. On net income of $26.9 million, we have reported quarterly adjusted EBITDA of $65 million and quarterly distributable cash flow of $33.1 million. We continue our focus on our operations in order to meet demand for our specialty products and to better benefit from current fuel products crack spreads.

As a result of the Superior refinery successful integration and contribution to our results, we increased our quarterly distribution for the fourth quarter to $0.53 per unit, a $0.03 per unit increase from the third quarter. On January 3, 2012, we completed an acquisition of an aviation and refrigerant synthetic lubricants business from Hercules Incorporated, a subsidiary of Ashland, for an aggregate consideration of approximately $19.6 million, excluding certain customary post-closing purchase price adjustments. The acquisition includes a manufacturing facility located in Louisiana, Missouri.

On January 6, 2012, we completed the acquisition of all of the outstanding membership interests of TruSouth Oil, LLC, a specialty petroleum packaging and distribution company, located in Shreveport, Louisiana and a related party for an aggregate consideration of approximately $25.5 million.

On January 23, 2012, we declared a quarterly cash distribution of $0.53 per unit for the quarter ended December 31, 2011 on all outstanding units. The distribution was paid on February 14 to unitholders of record as of the close of business on February 3.

I will now turn the call over to Pat Murray for a review of our financial results.

Pat Murray

Thank you, Jennifer. Net income for the fourth quarter of 2011 was $26.9 million compared to $9.5 million for the same period in 2010. These results include $13.5 million of non-cash unrealized derivative gains as compared to $2 million of non-cash unrealized derivative losses for the fourth quarter of 2010. 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 in our debt instruments were $64.6 million and $65 million respectively for the fourth quarter of 2011, as compared to $33.6 million and $42.2 million respectively for the same quarter last year.

The partnership’s distributable cash flow for the fourth quarter of 2011 was $33.1 million as compared to $31 million for the same period in 2010. The increase in adjusted EBITDA quarter-over-quarter was due primarily to a $24.8 million increase in gross profit, partially offset by decreased realized derivative gains, a $2.7 million increase in transportation expense and a $3.4 million increase in selling, general and administrative expenses.

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

Gross profit by segment for the fourth quarter of 2011 for Specialty Products and Fuel Products was $64.7 million and $15.4 million respectively, compared to gross profit of $56.7 million and a loss of $1.4 million respectively for the same period in 2010.

The increase in Specialty Products segment gross profit of $7.9 million quarter-over-quarter was due primarily to a 13.4% increase in the average selling price per barrel for specialty products, partially offset by a 20.8% increase in the average cost of crude oil per barrel and higher operating costs, primarily repairs and maintenance.

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