Calumet Specialty Products Partners(CLMT) - 2024 Q1 - Quarterly Results

First Quarter 2024 Financial and Operational Highlights Calumet reported a net loss and reduced Adjusted EBITDA in Q1 2024, while advancing strategic initiatives and improving MRL operations Overview of Q1 2024 Results Calumet reported a net loss of $41.6 million and an Adjusted EBITDA of $21.6 million for the first quarter of 2024, a significant decrease from the prior year's net income of $18.6 million and Adjusted EBITDA of $77.3 million Q1 2024 Key Financial Metrics (in millions, except per unit data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net income (loss) | $(41.6) | $18.6 | | Limited partners' interest basic net income (loss) per unit | $(0.51) | $0.23 | | Adjusted EBITDA | $21.6 | $77.3 | - The plan to convert the company's structure from a Master Limited Partnership (MLP) to a C-Corp is reported to be on track[17] - The Shreveport facility turnaround was completed successfully during the first quarter[17] - Montana Renewables (MRL) showed sequential improvement, achieving positive EBITDA in March 2024 and maintaining planned production levels in April[40][41] CEO Commentary CEO Todd Borgmann highlighted the strategic importance of the upcoming C-Corp conversion and demonstrating the competitive advantages of Montana Renewables - The company anticipates an exciting spring and summer, focusing on the C-Corp conversion and demonstrating Montana Renewables' competitive advantages[41] - The Department of Energy (DOE) loan process and the MaxSAF project are progressing well[41] - Q1 financial results were negatively affected by a sharp increase in crude prices, which compressed specialty and wholesale asphalt margins, and the seasonal closure of the Montana retail asphalt rack[41] Segment Performance Analysis All operating segments reported a year-over-year decline in Adjusted EBITDA for the first quarter of 2024 Segment Adjusted EBITDA (in millions) | Segment | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Specialty Products and Solutions | $41.8 | $76.0 | | Performance Brands | $13.4 | $16.4 | | Montana/Renewables | $(14.5) | $4.8 | Specialty Products and Solutions (SPS) The SPS segment generated Adjusted EBITDA of $41.8 million, a significant decrease from $76.0 million in the prior-year quarter - SPS segment Adjusted EBITDA was $41.8 million in Q1 2024, down from $76.0 million in Q1 2023[22] - The primary reason for the decline was the fuel market returning to near mid-cycle levels[22] Performance Brands (PB) The PB segment reported Adjusted EBITDA of $13.4 million, compared to $16.4 million in the first quarter of 2023 - PB segment Adjusted EBITDA was $13.4 million in Q1 2024, compared to $16.4 million in Q1 2023[42] - The Q1 2023 result included a $5.0 million insurance claim, making the year-over-year comparison less direct[42] Montana/Renewables (MR) The MR segment reported an Adjusted EBITDA loss of $14.5 million, a sharp reversal from the $4.8 million in Adjusted EBITDA in the prior year - MR segment reported an Adjusted EBITDA loss of $(14.5) million in Q1 2024, versus a gain of $4.8 million in Q1 2023[19] - The loss was attributed to high-priced inventory at Montana Renewables and seasonal weakness in the specialty asphalt refinery, where margins were compressed by rising crude costs[19] Corporate Corporate costs, represented as a negative contribution to Adjusted EBITDA, were $19.1 million for the first quarter of 2024 - Corporate costs were $(19.1) million of Adjusted EBITDA in Q1 2024, slightly lower than the $(19.9) million in Q1 2023[23] Financing Activities In March 2024, the company executed a significant financing transaction by issuing $200.0 million of new 9.25% Senior Secured First Lien Notes due 2029 - On March 7, 2024, the company issued $200.0 million of 9.25% Senior Secured First Lien Notes due 2029[43] - Net proceeds were used to redeem all outstanding 9.25% notes due 2024 and $50.0 million of the 11.00% notes due 2025[43] Operations Summary Total sales volume increased to 83,602 barrels per day (bpd) in Q1 2024 from 76,856 bpd in the prior year Key Operational Volumes (in bpd) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total sales volume | 83,602 | 76,856 | | Total feedstock runs | 71,548 | 71,559 | | Total facility production | 72,266 | 73,222 | | - Specialty Products and Solutions | 51,688 | 54,466 | | - Montana/Renewables | 18,995 | 16,825 | | - Performance Brands | 1,583 | 1,931 | - The increase in Montana/Renewables production was driven by a significant rise in renewable fuels output, which grew to 8,243 bpd from 5,030 bpd year-over-year[44] Financial Statements The financial statements reflect a Q1 2024 net loss, a slight asset decrease, and increased cash usage from operations Condensed Consolidated Statements of Operations The company reported a net loss of $41.6 million for Q1 2024, a stark contrast to the $18.6 million net income in Q1 2023 Q1 2024 vs Q1 2023 Statement of Operations (in millions) | Line Item | Q1 2024 | Q1 2023 (Restated) | | :--- | :--- | :--- | | Sales | $1,005.8 | $1,037.3 | | Gross profit | $78.5 | $96.6 | | Operating income | $36.3 | $43.0 | | Total other expense | $(77.7) | $(23.9) | | Net income (loss) | $(41.6) | $18.6 | | Limited partners' interest basic net loss per unit | $(0.51) | $0.23 | Condensed Consolidated Balance Sheets As of March 31, 2024, total assets were $2,731.6 million, a slight decrease from $2,751.3 million at year-end 2023 Balance Sheet Summary (in millions) | Account | March 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total current assets | $811.7 | $794.7 | | Total assets | $2,731.6 | $2,751.3 | | Total current liabilities | $824.4 | $1,112.7 | | Long-term debt, less current portion | $2,055.6 | $1,829.7 | | Total liabilities | $3,015.7 | $2,996.0 | | Total partners' capital (deficit) | $(529.7) | $(490.3) | Condensed Consolidated Statements of Cash Flows For the three months ended March 31, 2024, net cash used in operating activities was $94.0 million, a significant increase from $26.7 million in the prior year Cash Flow Summary (in millions) | Activity | Q1 2024 | Q1 2023 (Restated) | | :--- | :--- | :--- | | Net cash used in operating activities | $(94.0) | $(26.7) | | Net cash used in investing activities | $(20.0) | $(130.4) | | Net cash provided by financing activities | $130.7 | $133.1 | | Net increase (decrease) in cash | $16.7 | $(24.0) | | Cash and cash equivalents at end of period | $23.9 | $11.2 | Non-GAAP Financial Measures and Reconciliations This section defines non-GAAP measures like Adjusted EBITDA and provides their reconciliation to GAAP net income Definition of Non-GAAP Measures The company uses non-GAAP measures such as EBITDA, Adjusted EBITDA, and Distributable Cash Flow to supplement its GAAP financial information - EBITDA is defined as net income (loss) plus interest expense, income taxes, and depreciation and amortization[53] - Adjusted EBITDA further adjusts EBITDA for items like impairment, hedging gains/losses, non-cash compensation, inventory adjustments (LCM, LIFO, RINs), and other non-recurring expenses[2] - Distributable Cash Flow is defined as Adjusted EBITDA less replacement/environmental capital expenditures, turnaround costs, cash interest expense, and income tax expense[36] - Management uses these non-GAAP measures to analyze segment performance, evaluate past performance, and assess future prospects[35][37] Reconciliation of Net Income (Loss) to Adjusted EBITDA The company reconciled its Q1 2024 GAAP net loss of $41.6 million to a non-GAAP Adjusted EBITDA of $21.6 million Reconciliation of Net Income (Loss) to Adjusted EBITDA (in millions) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net income (loss) | $(41.6) | $18.6 | | Interest expense | $60.8 | $49.2 | | Depreciation and amortization | $36.0 | $29.5 | | EBITDA | $55.4 | $97.8 | | Adjustments (net) | $(33.8) | $(20.5) | | Adjusted EBITDA | $21.6 | $77.3 | | Distributable Cash Flow | $(59.6) | $4.8 | - Significant adjustments in Q1 2024 included a $71.1 million gain from RINs mark-to-market and $60.8 million in other non-recurring expenses, which included a $51.9 million realized loss on derivatives for inventory financing[58][7] Other Information This section details Calumet's business, corporate conversion, and important forward-looking statement disclaimers About the Partnership & Corporate Conversion Calumet Specialty Products Partners, L.P. manufactures and markets specialty branded products and renewable fuels, operating twelve facilities in North America - Calumet manufactures, formulates, and markets specialty branded products and renewable fuels, with headquarters in Indianapolis and twelve facilities across North America[47] - The company is pursuing a corporate reorganization to convert from an MLP to a new C-Corporation named Calumet, Inc. ("New Calumet")[48] - The proposed conversion requires unitholder approval, and the company has filed a registration statement (Form S-4) and a proxy statement/prospectus with the SEC[48] Forward-Looking Statements This press release contains forward-looking statements regarding business outlook, cash flows, capital expenditures, and the anticipated completion and benefits of the C-Corp conversion - The report includes forward-looking statements concerning demand, business outlook, capital expenditures, and the expected benefits and timing of the C-Corp Conversion[51] - These statements are based on current assumptions that are subject to significant business, economic, and competitive risks[34] - Material factors that could cause different results include crude oil price volatility, demand for refined products, ability to comply with debt covenants, and the costs of complying with the Renewable Fuel Standard (RFS)[51]