Calumet Specialty Products Partners, L.P.
www.calumetspecialty.com
© 2012 Calumet Specialty Products Partners, L.P.
2011 Annual Report
Calumet Specialty Products Partners, L.P. (“Calumet”) is a publicly traded master limited partnership (“MLP”) engaged in
the production and sale of specialty hydrocarbon products.
We are a leading independent producer of high-quality, specialty hydrocarbon products in North America. We are
headquartered in Indianapolis, Indiana and own plants primarily located in Louisiana, Wisconsin and Pennsylvania. We
own and lease additional facilities, primarily related to production and distribution of specialty products, throughout
the United States. Our business is organized into two segments: specialty products and fuel products. In our specialty
products segment, we process crude oil and other feedstocks into a wide variety of customized lubricating oils, white
mineral oils, solvents, petrolatums, asphalt and waxes. Our specialty products are sold to domestic and international
customers who purchase them primarily as raw material components for basic industrial, consumer and automotive
goods. In our fuel products segment, we process crude oil into a variety of fuel and fuel related products including
gasoline, diesel, jet fuel and heavy fuel oils.
As an MLP, we expect to make quarterly distributions of available cash, as defined by our Partnership Agreement, to our
unitholders. Our goal is to increase distributions to our unitholders over time through a combination of organic growth
projects and accretive acquisitions.
Executive Officers:
F. William Grube - Chief Executive Officer and Vice Chairman of the Board
Jennifer G. Straumins - President and Chief Operating Officer
R. Patrick Murray, II - Vice President, Chief Financial Officer and Secretary
William A. Anderson - Vice President — Sales and Marketing
Timothy R. Barnhart - Vice President — Operations
Robert M. Mills - Vice President — Crude Oil Supply
Jeffrey D. Smith - Vice President — Planning and Economics
Directors:
Fred M. Fehsenfeld, Jr. – Chairman of the Board, Calumet Specialty Products Partners, L.P.
Managing Trustee, The Heritage Group
F. William Grube – Chief Executive Officer and Vice Chairman of the Board
James S. Carter – Retired U.S. Regional Director, ExxonMobil Fuels Company
William S. Fehsenfeld – Vice President and Secretary, Schuler Books, Inc.
Robert E. Funk – Retired Vice President of Corporate Planning and Economics, Citgo Petroleum Corp.
George C. Morris III – President, Morris Energy Advisors, Inc.
Nicholas J. Rutigliano – President, Tobias Insurance Group, Inc.
Common Unit Listing:
NASDAQ Global Select Market
Symbol: CLMT
Independent Registered Public Accounting Firm:
Ernst & Young LLP
Indianapolis, IN
Stock Transfer Agent:
BNY Mellon Shareowner Services
Investor Relations:
Shareholders, securities analysts or portfolio managers
seeking information are welcome to contact Investor
Relations at 317-328-5660.
For more information, please visit our website at
http://www.calumetspecialty.com
To Our Unitholders
As we review our company’s progress this past year, we
are very pleased with our results for 2011. On net income of
$43.0 million, we reported Adjusted EBITDA of $211.0 million
and distributable cash flow of $127.2 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.
Our 2011 total facility production increased by 8.9% year
over year, excluding the impact of the Superior Acquisition,
due primarily to our decision to increase production
run rates at our facilities overall to take advantage of
strengthened fuel products crack spreads and continued
strength in demand for specialty products in a favorable
margin environment.
On September 30, 2011, we completed the acquisition of
the Superior Refinery and associated operating assets and
inventories and related business of Murphy Oil Corporation
for aggregate consideration of approximately $413.2 million
(“the Superior Acquisition”). The Superior refinery, with
crude oil throughput capacity of approximately 45,000
bpd, produces gasoline, diesel, asphalt, heavy fuel oils and
specialty petroleum products that are primarily marketed
in the Upper Midwest region of the U.S. and in Canada.
We believe the Superior Acquisition provides greater
scale, geographic diversity and development potential to
our refining business, increasing our current total refining
throughput capacity by 50% to 135,000 bpd.
We generated $63.8 million in cash flow from operations
during the year. We paid distributions of $82.7 million to our
unitholders in 2011, an increase of $17.0 million over 2010.
We plan to continue focusing our efforts on generating
positive cash flows from operations which we expect will
be used to (i) improve our liquidity position, (ii) pay quarterly
distributions to our unitholders, (iii) service our debt
obligations and (iv) provide funding for general partnership
purposes.
On January 3, 2012, we completed an acquisition of an
aviation and refrigerant synthetic lubricants business
from Hercules Incorporated, a subsidiary of Ashland, for
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.
As a result of the Superior refinery’s successful integration
and contribution to our results, we increased our most recent
quarterly distribution
for the fourth quarter
of 2011 to $0.53 per
unit, a $0.03 per unit
increase
the
third quarter of 2011.
For the year ended
December 31, 2011
94.4% of our gross
profit was generated from our specialty products segment
while, approximately 5.6% of our gross profit was generated
from our fuel products segment.
from
We paid distributions of $82.7 million
to our unitholders in 2011, an increase
of $17.0 million over 2010.
On January 6, 2012,
the
we completed
acquisition
all
of
of
the outstanding
membership interests
of TruSouth Oil, LLC,
a specialty petroleum packaging and distribution company
and related party, located in Shreveport, Louisiana and for
aggregate consideration of approximately $25.5 million.
We continued to see strength in product demand in our
specialty products segment throughout the year. We noted a
4.9% increase in barrels of specialty products sold, including
the impact of incremental sales in the fourth quarter of
2011 from the Superior Acquisition. Our specialty products
segment generated a gross profit margin of 14.3% as
specialty products sales pricing kept pace with fluctuations
in crude oil prices.
Higher sales and production volume in our fuel products
segment during 2011 allowed us to take advantage of
higher market crack spreads. We noted a 34.4% increase
in barrels of fuel products sold in 2011 compared to 2010
including the impact of incremental sales from the Superior
Acquisition. The fuel products segment generated a gross
profit margin of 1.2% in 2011 compared to 1.4% in 2010
despite the recognition of realized derivative losses of
$103.3 million during 2011 compared to the recognition of
realized derivative gains of $14.0 million in 2010 due to the
strength of current market crack spreads compared to our
hedged crack spreads.
We believe each of these 2012 acquisitions provides greater
diversity to our specialty products segment.
Since 1990, our management team has demonstrated
the ability to identify opportunities to acquire assets and
product lines where we can enhance operations and
improve profitability. In the future, we intend to continue
to consider strategic acquisitions of assets or agreements
with third parties that offer the opportunity for operational
efficiencies, the potential for increased utilization and
expansion of facilities, or the expansion of product offerings
in our specialty products segment. In addition, we may
pursue selected acquisitions in new geographic or product
areas to the extent we perceive similar opportunities.
We would like to thank you for your continued support. We
would also like to thank our employees for their dedication
and support as we continue to grow our company.
F. William Grube
Chief Executive Officer and Vice Chairman of the Board
Financial Highlights (in thousands)
Sales
$3,500,000
$3,000,000
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$0
2007
2008
2009
2010
2011
Net Income
$100,000
$80,000
$60,000
$40,000
$20,000
$0
Adjusted EBITDA(1)
$250,000
$200,000
$150,000
$100,000
$50,000
$0
2007
2008
2009
2010
2011
Distributable Cash Flow(1)
$150,000
$120,000
$90,000
$60,000
$30,000
$0
2007
2008
2009
2010
2011
2007
2008
2009
2010
2011
(1) See definition of Non-GAAP measures in our Annual Report on Form 10-K. See reconciliations to GAAP measures in this report.
Operational Highlights (in barrels per day “bpd”)
Total Sales Volume
Feedstock Runs
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
2007
2008
2009
2010
2011
2007
2008
2009
2010
2011
Specialty Products
- Facility Production Volume
Fuel Products
- Facility Production Volume
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
2007
2008
2009
2010
2011
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
2007
2008
2009
2010
2011
Calumet Specialty Products Partners, L.P.
Reconciliation of Net Income to EBITDA,
Adjusted EBITDA and Distributable Cash Flow
Year Ended December 31,
2011
2010
2009
2008
2007
(In thousands)
Reconciliation of Net income to EBITDA,
Adjusted EBITDA and Distributable Cash Flow:
Net income
Add:
Interest expense
Debt extinguishment costs
Depreciation and amortization
Income tax expense
$ 43,036 $ 16,701 $ 61,785 $ 44,437 $ 82,874
48,747
15,130
63,009
929
30,497
—
60,287
598
33,573
—
61,735
151
33,938
898
55,866
257
4,717
352
14,157
501
EBITDA
$ 170,851 $ 108,083 $ 157,244 $ 135,396
$ 102,601
Add:
Unrealized (gain) loss on derivatives
Realized gain (loss) on derivatives, not included in
net income
Amortization of turnaround costs
Non-cash equity based compensation and other
non-cash items
$ 10,383 $ 15,843 $ (23,736) $
(3,454) $
1,297
10,996
11,384
2,990
10,006
9,278
7,256
(8,055)
2,468
2,190
3,190
7,406
1,540
1,075
179
121
Adjusted EBITDA
$ 211,020 $ 138,462 $ 151,117 $ 126,534 $ 109,399
Less:
Replacement capital expenditures (1)
Cash interest expense (2)
Turnaround costs
Income tax expense
23,862
45,019
14,052
929
24,345
26,633
10,684
598
15,508
29,901
6,890
151
6,304
30,543
11,277
257
12,175
4,289
2,395
501
Distributable Cash Flow
$ 127,158 $ 76,202 $ 98,667 $ 78,153 $ 90,039
(1) Replacement capital expenditures are defined as those capital expenditures which do not increase operating capacity or reduce operating costs
and exclude turnaround costs.
(2) Represents consolidated interest expense less non-cash interest expense.
Calumet Facilities
Shreveport Refinery
Our refinery located in Shreveport, Louisiana and acquired in 2001 produces specialty lubricating oils and
waxes, as well as fuel products such as gasoline, diesel and jet fuel. The Shreveport refinery has aggregate
crude oil throughput capacity of approximately 60,000 bpd.
Superior Refinery
Our refinery located in Superior, Wisconsin and acquired on September 30, 2011, produces gasoline, diesel,
asphalt, heavy fuel oils and specialty petroleum products. The Superior refinery has aggregate crude oil
throughput capacity of approximately 45,000 bpd.
Cotton Valley Refinery
Our refinery located in Cotton Valley, Louisiana and acquired in 1995 produces specialty solvents that are used
principally in the manufacture of paints, cleaners, automotive products and drilling fluids. The Cotton Valley
refinery has aggregate crude oil throughput capacity of approximately 13,500 bpd.
Princeton Refinery
Our refinery located in Princeton, Louisiana and acquired in 1990 produces specialty lubricating oils, including
process oils, base oils, transformer oils and refrigeration oils that are used in a variety of industrial and
automotive applications. The Princeton refinery has aggregate crude oil throughput capacity of approximately
10,000 bpd.
Karns City Facility
Our facility located in Karns City, Pennsylvania and acquired in 2008 produces white mineral oils, petrolatums,
solvents, gelled hydrocarbons, cable fillers and natural petroleum sulfonates. The Karns City facility has
aggregate feedstock throughput capacity of approximately 5,500 bpd.
Dickinson Facility
Our facility located in Dickinson, Texas and acquired in 2008 produces white mineral oils, compressor lubricants
and natural petroleum sulfonates. The Dickinson facility currently has aggregate feedstock throughput capacity
of approximately 1,300 bpd.
Storage, Distribution and Logistics Assets
We own and operate terminals in Burnham, Illinois, Rhinelander, Wisconsin, Crookston, Minnesota and Proctor,
Minnesota with aggregate storage capacities of approximately 150,000, 166,000, 156,000, and 200,000 barrels,
respectively. These terminals, as well as additional owned and leased facilities throughout the U.S., facilitate
the distribution of products in the Upper Midwest and East Coast regions of the U.S. and Canada. We also
use approximately 2,550 leased railcars to receive crude oil or distribute our products throughout the U.S. and
Canada. In total, we have approximately 10.7 million barrels of aggregate storage capacity at our facilities and
leased storage locations.
Recent Acquisitions
Hercules Synthetic Lubricants Business
On January 3, 2012, we completed the acquisition of the aviation and refrigerant lubricants business (a
polyolester based synthetic lubricants business) from Hercules Incorporated, a subsidiary of Ashland, Inc., for
aggregate consideration of approximately $19.6 million, excluding certain customary post-closing purchase price
adjustments. We also acquired a manufacturing facility located in Louisiana, Missouri.
TruSouth Oil
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 and related party, located in Shreveport,
Louisiana for aggregate consideration of approximately $25.5 million.
We believe these acquisitions provide greater diversity to our specialty products segment.
Calumet Specialty Products Partners, L.P.
www.calumetspecialty.com
© 2012 Calumet Specialty Products Partners, L.P.
2011 Annual Report
Calumet Specialty Products Partners, L.P. (“Calumet”) is a publicly traded master limited partnership (“MLP”) engaged in
the production and sale of specialty hydrocarbon products.
We are a leading independent producer of high-quality, specialty hydrocarbon products in North America. We are
headquartered in Indianapolis, Indiana and own plants primarily located in Louisiana, Wisconsin and Pennsylvania. We
own and lease additional facilities, primarily related to production and distribution of specialty products, throughout
the United States. Our business is organized into two segments: specialty products and fuel products. In our specialty
products segment, we process crude oil and other feedstocks into a wide variety of customized lubricating oils, white
mineral oils, solvents, petrolatums, asphalt and waxes. Our specialty products are sold to domestic and international
customers who purchase them primarily as raw material components for basic industrial, consumer and automotive
goods. In our fuel products segment, we process crude oil into a variety of fuel and fuel related products including
gasoline, diesel, jet fuel and heavy fuel oils.
As an MLP, we expect to make quarterly distributions of available cash, as defined by our Partnership Agreement, to our
unitholders. Our goal is to increase distributions to our unitholders over time through a combination of organic growth
projects and accretive acquisitions.
Executive Officers:
F. William Grube - Chief Executive Officer and Vice Chairman of the Board
Jennifer G. Straumins - President and Chief Operating Officer
R. Patrick Murray, II - Vice President, Chief Financial Officer and Secretary
William A. Anderson - Vice President — Sales and Marketing
Timothy R. Barnhart - Vice President — Operations
Robert M. Mills - Vice President — Crude Oil Supply
Jeffrey D. Smith - Vice President — Planning and Economics
Directors:
Fred M. Fehsenfeld, Jr. – Chairman of the Board, Calumet Specialty Products Partners, L.P.
Managing Trustee, The Heritage Group
F. William Grube – Chief Executive Officer and Vice Chairman of the Board
James S. Carter – Retired U.S. Regional Director, ExxonMobil Fuels Company
William S. Fehsenfeld – Vice President and Secretary, Schuler Books, Inc.
Robert E. Funk – Retired Vice President of Corporate Planning and Economics, Citgo Petroleum Corp.
George C. Morris III – President, Morris Energy Advisors, Inc.
Nicholas J. Rutigliano – President, Tobias Insurance Group, Inc.
Common Unit Listing:
NASDAQ Global Select Market
Symbol: CLMT
Independent Registered Public Accounting Firm:
Ernst & Young LLP
Indianapolis, IN
Stock Transfer Agent:
BNY Mellon Shareowner Services
Investor Relations:
Shareholders, securities analysts or portfolio managers
seeking information are welcome to contact Investor
Relations at 317-328-5660.
For more information, please visit our website at
http://www.calumetspecialty.com