Credit Suisse MLP Conference
description
Transcript of Credit Suisse MLP Conference
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Credit Suisse MLP and
Energy Logistics Conference
June 10-11, 2014
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1Forward-Looking Statements
This Presentation has been prepared by Calumet Specialty Products Partners, L.P. (the Company or Calumet) as of June 10, 2014. The information inthis Presentation includes certain forward-looking statements. These statements can be identified by the use of forward-looking terminology includingmay, intend, believe, expect, anticipate, estimate, forecast, continue or other similar words. The statements discussed in this Presentation thatare not purely historical data are forward-looking statements. These forward-looking statements discuss future expectations or state other forward-lookinginformation and involved risks and uncertainties. When considering forward-looking statements, you should keep in mind the risk factors and othercautionary statements included in our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. The risk factors and other factorsnoted in our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q could cause our actual results to differ materially from thosecontained in any forward-looking statement.
Our forward-looking statements are not guarantees of future performance, and actual results and future performance may differ materially from thosesuggested in any forward-looking statement. All subsequent written and oral forward-looking statements attributable to us or to persons acting on ourbehalf are expressly qualified in their entirety by the foregoing. Existing and prospective investors are cautioned not to place undue reliance on suchforward-looking statements, which speak only as of the date of this Presentation. We undertake no obligation to publicly release the results of any revisionsto any such forward-looking statements that may be made to reflect events or circumstances after the date of this Presentation or to reflect the occurrenceof unanticipated events.
The information in this Presentation is strictly confidential and may not be reproduced or redistributed, in whole or in part, to any other person. Theinformation contained herein has been prepared to assist interested parties in making their own evaluation of the Company and does not purport to containall of the information that an interested party may desire. In all cases, interested parties should conduct their own investigation and analysis of theCompany, its assets, financial condition and prospects and of the data set forth in this Presentation. This Presentation shall not be deemed an indication ofthe state of affairs of the Company, or its businesses described herein, at any time after the date of this Presentation nor an indication that there has beenno change in such matters since the date of this Presentation.
This Presentation and any other information which you may be given at the time of presentation, in whatever form, do not constitute or form part of any offeror invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any securities of the Company, nor shall it or any part of it form thebasis of, or be relied upon in connection with, any contract or commitment whatsoever. Neither this Presentation nor any information included hereinshould be construed as or constitute a part of a recommendation regarding the securities of the Company. Furthermore, no representation or warranty(express or implied) is made as to, and no reliance should be placed on, any information, including projections, estimates, targets and opinions containedherein, and no liability whatsoever is accepted as to any errors, omissions or misstatements contained herein. Neither the Company nor any of its officersor employees accepts any liability whatsoever arising directly or indirectly from the use of this Presentation.
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2Our Competitive Advantages
Experienced management team
senior managers average
approximately 30 years of
industry experience
Location of fuels products assets
(near crude oil reserves,
pipelines and customers)
Strong relationships with a broad
customer base more than
6,000 active accounts
One-stop shop for approximately
6,000 name-brand specialty
products
Strong culture of safety and
reliability nine locations have
operated more than six years
without a lost-time injury
Well positioned in specialty
products markets with very high
barriers to entry (specialized
formulations, regulatory
permitting, etc.)
One of the top six producers of
paraffinic and naphthenic base
oils in North America
Vertically integrated producer and
distributor of specialty products
and fuel products
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3We Are An Integrated Producer Of Specialty Hydrocarbons
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4We Own Niche, Location-Advantaged Fuel Products Refineries
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5We Own Integrated Specialty Products Facilities
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6Our 6,000+ Specialty Products Have A Wide Array Of Applications
Note: While Calumet does not produce or sell the consumer products pictured above, its finished products are components of such products.
The logos, trademarks and other intellectual property associated with the products pictured above are the intellectual property of those who
own or license rights therein.
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7We Have A History Of Consistent, Profitable Growth
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8Specialty Products Brands Contribute Significant Unitholder Value
Manufacturer of high-performance
lubricants primarily for
automotive, industrial and racing
applications
Sole mission is to develop
products that significantly
outperform other synthetic and
mineral-based oils
Royal Purple brand is well
respected around the world,
including in the U.S., Canada,
Mexico, Australia, China, Italy,
Japan and the U.K.
Manufacturer of a wide array of
high-end specialty lubricants and
greases for food-grade industrial,
mining and power sport
Globally recognized specialty
lubricants products are sold in
more than 100 countries across
six continents
Leading provider of drilling fluid
solutions, completion fluids and
production chemicals to the oil
and gas industry
More than 30 manufacturing,
mixing, storage and distribution
facilities in 13 states
Sells more than 160 products
through more than 50 distributors
with sales in 35 states nationally
Sells products into the passenger
car, heavy-duty truck, farming and
industrial end-markets through its
distribution partners
Quantum has become one of the
most recognized new lubricants
brands in recent years
Ready-to-use fuel engineered
specifically for outdoor power
equipment available for 4- and
2-cycle engines
Precise fuel-to-oil blend assures
correct ratio every time
Ethanol-free fuel protects small
engines from corrosion while
ensuring peak performance
Proprietary formulation and re-
sealable cap ensure shelf life
greater than 2 years after opening
Unique line of petrolatums,
waxes, white mineral oils and
gelled hydrocarbons
System for thickening and gelling
hydrocarbons creates gels for
cosmetics, pharmaceuticals and
personal care
Petrolatums in multiple viscosity
ranges comply with USP and
FDA standards
Extreme-purity mineral oils are
highly suitable for pharmaceuticals,
cosmetics, plastics and food
processing applications
Agricultural spray oils combat a
broad range of insects, diseases
and weeds that impact agricultural
and crop production and profitability
Products pose little or no hazard to
people or animals, and, when used
properly, have minimal effect on
beneficial insects
Products are EPA-registered
and can be configured to also
meet European Union
compliance requirements
Calumet, through its network of
owned refineries, is a wholesale
supplier of fuel to approximately
100 Calumet-branded retail locations
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9Acquisitions Further Wellhead to Retail Strategy
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Why Invest in Calumet Specialty Products Partners, L.P.?
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Attractive Distribution Yield Coupled With Improving Fundamentals
CLMT Yield vs. Variable Distribution Refiner Sector Yield and Alerian MLP Index Yield(1)
(1) Distribution yield calculated by taking the trailing four quarters of cash distributions to unitholders divided by the intraday price on
5/16/14. The Variable Distribution Refining Sector is inclusive of Northern Tier Energy, CVR Refining and ALON USA Partners. The
Alerian MLP Index is the leading gauge of large- and mid-cap energy Master Limited Partnerships (MLPs). This float-adjusted,
capitalization-weighted index includes 50 prominent companies and captures approximately 75% of available MLP market
capitalization.
0%
2%
4%
6%
8%
10%
12%
Variable Distribution MLP Refining Sector Fixed Distribution MLP - CLMT Alerian MLP Index
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Recent Developments
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A Successful Start To 2014
Record 1Q results reflect improvement in Adjusted EBITDA on both a q/q and y/y basis. Adjusted EBITDA hasimproved for three consecutive quarters to $82.7 million in 1Q14 vs. $80.0 million in 1Q13 and $53.2 million in 4Q13.
Excluding $89.6 million in debt extinguishment costs, 1Q14 adjusted net income was $39.8 million, or $0.50 per diluted unit.
Improved distribution coverage ratio - approaching 1.0x. The distribution coverage ratio was 0.94x for 1Q14 versus0.51x for 1Q13.
Completed 6.5% $900 million senior unsecured notes offering. Completed largest notes offering and lowest printedcoupon in company history in March 2014.
Improved liquidity position. As of 3/31/14, we had $714 million in combined cash and availability under our revolvingcredit facility, providing ample funding support for organic growth projects and general partnership purposes.
Acquired Anchor Drilling Fluids. Acquisition further establishes us a specialty products supplier to the rapid-growthdomestic oilfield services market; 2013 results for Anchor estimated at more than $30 million EBITDA.
Acquired United Petroleum. Acquisition expands our portfolio of premium branded lubricants solutions; further bolsterssales, marketing and distribution capabilities of Specialty Products segment.
San Antonio refinery operated at record levels during 1Q14. Following the completion of a 3,000 bpd crude oil unitexpansion during 4Q13, the San Antonio refinery operated at record throughput rates during 1Q14.
Royal Purple sales into Wal-Mart exceeding internally forecasted expectations. Continued the roll-out of Royal Purpleproducts; receiving replenishment orders; sales to Wal-Mart are ahead of internal forecast.
Continued to make progress on multi-year organic growth projects. Dakota Prairie Refinery remains on-schedule forstart-up during 4Q14; Missouri esters plant expansion scheduled for completion during 2Q15; Montana refinery expansion
on-schedule for completion during 1Q16.
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Generated Record Adjusted EBITDA In 1Q14
Adjusted EBITDA ($MM) steadily improving, with no major fuel refinery turnarounds expected until 2018
Reported record first quarter Adjusted EBITDA in 1Q14 ($MM)
$20.8
$34.7
$69.7
$80.0 $82.7
1Q10 1Q11 1Q12 1Q13 1Q14
$80.0 $70.0
$38.3
$53.2
$82.7
1Q13 2Q13 3Q13 4Q13 1Q14
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Consistently Elevated Specialty Gross Profit Per Barrel
$32.49
$34.45
$42.22
$8.25
$3.81 $3.66
1Q13 (Prior Year) 4Q13 (Prior Quarter) 1Q14 (Current Quarter)
Specialty Products Segment Gross Profit Per Barrel Fuel Products Segment Gross Profit Per Barrel (Ex-Hedging)
Specialty Products Segment Gross Profit Increased by 16% y/y in 1Q14
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Announced Organic Growth Projects
Montana Refinery Expansion
Dakota Prairie Refinery (JV)
Missouri Esters Plant Expansion
- Final engineering assessment completed; applying for permits
- Anticipated completion date of the first quarter 2016
- Est. cost = $400 mm; Est. annual Adj. EBITDA = $130-140 mm
- Focused on construction of refinery foundations and tanks
- Anticipated completion date of the fourth quarter 2014
- Est. (CLMT) cost = $75 mm; Est. annual Adj. EBITDA = $35-45 mm
- Increasing esters production capacity from 35 to 75 mm lbs./yr.
- Anticipated completion date of the second quarter 2015
- Est. cost = $40 mm; Est. annual Adj. EBITDA = $10 mm
Total Estimated CAPEX and Est. Adjusted Annual EBITDA Contributions (2013-2016) ($MM) (1)
(1) Includes estimated Adjusted EBITDA that the Partnership expects to generate from its 50/50 joint venture with MDU Resources
for the Dakota Prairie (North Dakota) refinery that is scheduled to come online during the fourth quarter 2014.
Total Estimated Growth CAPEX (2013-2015)
2013 (Actual)
~$100 mm
2014 (Est.)
$270 to $300 mm
2015 (Est.)
$130 to $150 mm
Total (2013-2015)
$500 to $550 mm
Total Est. Annual Adj. EBITDA Contribution From All Projects
Total (2013-2016)
$190-$215 mm
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Financial Overview
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Key Credit Statistics
Debt to Capital Ratio Debt to LTM Adjusted EBITDA (Leverage) Ratio(1)
Revolver Availability ($MM) Fixed Charge Coverage Ratio
45%49%
45%50% 52%
60%
YE 2009 YE 2010 YE 2011 YE 2012 YE 2013 3/31/2014
$107$145
$341 $355
$472
$534
YE 2009 YE 2010 YE 2011 YE 2012 YE 2013 3/31/2014
4.4 x 4.3 x 4.3 x4.7 x
2.4 x 2.5 x
YE 2009 YE 2010 YE 2011 YE 2012 YE 2013 3/31/2014
2.7 x 2.7 x 2.8 x2.2 x
4.7 x5.5x
YE 2009 YE 2010 YE 2011 YE 2012 YE 2013 3/31/2014
(1) Debt to LTM Adjusted EBITDA as of March 31, 2014 includes estimated LTM EBITDA contribution from Anchor Drilling Fluids
acquisition of $31.6 million.
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Access To Capital Markets Funding
Recent Debt Offering
ATM Equity Program
$900 million Senior Notes Offering
March 2014
- $900 million 6.50% senior unsecured notes due April 2021
- Offering upsized from $850 to $900 million
- Uses: Redemption of $500 million of 9.375% senior unsecured notes due
2019; Anchor Drilling Fluids acquisition; general partnership purposes
$300 million ATM Program
Announced March 2014
- CLMT may sell up to $300 million of common units representing limited
partner interests at the market, as market conditions warrant- Under no obligation to sell units under the ATM program
- We sold no units under the program during 1Q14
Senior Secured Revolving Credit Facility
$850 million Revolving Credit Facility
Matures June 2016
- Primary source of short-term funding (together with cash on hand and cash
flow from operations)
- Can be accessed for general partnership purposes, including acquisitions
- More than $530 million of availability as of 3/31/14; No maintenance covenants
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Balanced Capital Structure
Actual Actual Actual Pro Forma ( 1)
$ Millions 12/31/11 12/31/12 12/31/13 3/31/14
Cash 0.1$ 32.2$ 121.1$ 179.6$
ABL Revolver Borrowings -$ -$ -$ -$
9.375% Senior Notes due 2019 600.0$ 600.0$ 500.0$ -$
9.625% Senior Notes due 2020 -$ 275.0$ 275.0$ 275.0$
7.625% Senior Notes due 2022 -$ -$ 350.0$ 350.0$
6.50% Senior Notes due 2021 -$ -$ 900.0$
Capital Leases 0.8$ 5.5$ 4.8$ 4.2$
Total Debt 600.8$ 880.5$ 1,129.8$ 1,529.2$
Partners Capital 728.9$ 889.8$ 1,062.8$ 1,003.6$
Total Capitalization 1,329.7$ 1,770.3$ 2,192.6$ 2,532.8$
LTM Adjusted EBITDA $211.1 $404.6 $241.5 $275.8 (1)
Total Debt / LTM Adjusted EBITDA 2.8x 2.2x 4.7x 5.5x
Total Debt / Total Capitalization 45% 50% 52% 60%
(1) Includes estimated LTM EBITDA contribution from Anchor Drilling Fluids acquisition of $31.6 million.
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Ample Liquidity To Support Growth
Combined cash and availability on our revolving credit facility were more than $700 million at 3/31/14 ($MM)
$121
$472
$593
$180
$534
$714
Cash Revolver Availability Total Available Liquidity (Cash + Revolver)
As of 12/31/13 As of 3/31/14
Q/Q Increase
+$59 million
Q/Q Increase
+$62 million
Q/Q Increase
+$120 million
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Hedging Program Helps To Mitigate Market Volatility
(1) Various other diesel collars, gasoline collars, natural gas and crude oil basis swaps are disclosed in more detail in the Partnershipslatest filings with the U.S. Securities and Exchange Commission.
Have Hedged Half of Forecasted 2014 Fuels Production Hedged Volumes and Avg. Strike Price Per Barrel ($)(1)
2Q14-4Q14 2015 2016
Gasoline Diesel Jet
Gasoline = 3.7 mm barrels @ $14.53
Diesel = 4.0 mm barrels @ $27.57
Jet = 0.8 mm barrels @ $24.82
Diesel = 5.8 mm barrels @ $26.59
Jet = 1.0 mm barrels @ $28.10
Diesel = 1.8 mm barrels @ $27.27
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Capital Spending Distribution (Historical & Forecast)
Replacement, Environmental, Turnaround and Growth Capital Spending ($MM)
$28
$64 $50-60
$15
$69
$20-25 $29
$110
$270-300
2012 2013 2014 (Est.)
Replacement & Environmental Turnarounds Growth projects
2012 Total CAPEX
$72 million
2013 Total CAPEX
$243 million
Est. 2014 Total CAPEX
$340-385 million
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APPENDIX
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EXHIBIT A: Adj. EBITDA and Distributable Cash Flow Reconciliation
(1) Replacement capital expenditures are defined as those capital expenditures which do not increase operating capacity or reduce
operating costs and exclude turnaround costs. Environmental capital expenditures include asset additions that meet or exceed
environmental and operating regulations. Investors may refer to our quarterly reports on form 10-Q for a reconciliation of
distributable cash flow to net cash provided by operating activities. Note: Sum of individual line items may not equal subtotal or total
amounts due to rounding.
$ in millions 3/31/13 6/30/13 9/30/13 12/31/13 3/31/14
Sales 1,319$ 1,534$ 1,506$ 1,243$ 1,341$
Cost of sales 1,184 1,253 1,443 1,131 1,217
Gross profit 134 101 62 113 125
Selling, general and administrative 41 36 30 38 45
Transportation 35 34 35 39 40
Taxes other than income taxes 3 3 4 5 2
Other 1 1 13 2 2
Total operating expenses 80 74 82 84 90 27
Operating income (loss) 54 27 (19) 29 35
Other expenses (income) (8) (19) (16) (45) 85
Income tax expense - - - - -
Net income (loss) 46$ 8$ (35)$ (16)$ (50)$
Interest expense and debt extinguishment costs 25 25 24 38 116
Depreciation and amortization 29 30 29 30 30
Income tax expense - - - - -
EBITDA 100$ 62$ 19$ 52$ 96$
Hedging adjustments - non-cash (26) 4 2 (8) (23)
6 3 18 9 9
Adjusted EBITDA 80$ 70$ 38$ 53$ 83$
Replacement and environmental capital expenditures (1)
(16) (16) (16) (16) (6)
Cash interest expense (23) (23) (23) (21) (24)
Turnaround costs (14) (33) (16) (6) (3)
Income tax expense - - - - - -
Distributable Cash Flow 26$ (3)$ (16)$ 11$ 49$
Amortization of turnaround costs and non-cash equity based
compensation and other non-cash items
Quarter Ended
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EXHIBIT B: Adjusted Net Income Reconciliation
(In millions, except unit data) 2014 2013
Net income (loss) (50)$ 46$
Debt extinguishment costs 90
Adjusted net income 40$ 46$
Allocation of adjusted net income:
Adjusted net income 40$ 46$
Less:
General partners interest in adjusted net income 1 1
General partners incentive distribution rights 4 3
Non-vested share based payments 0 0
Adjusted net income available to limited partners 35$ 42$
Weighted average limited partner units outstanding:
Basic 69,622,884 62,831,155
Diluted 69,702,987 63,017,869
Limited partners interest basic adjusted net income per unit 0.50$ 0.67$
Limited partners interest diluted adjusted net income per unit 0.50$ 0.66$
Three Months Ended March 31,
(Unaudited)
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EXHIBIT C: Steady Resurgence In Distributable Cash Flow(1,2)
Distributable Cash Flow Nearly Doubled Year-Over-Year in 1Q14
Reconciliation of Distributable Cash Flow ($MM): Y/Y Change Between 1Q13 and 1Q14
(1) Distributable Cash Flow (DCF) is calculated by taking Adjusted EBITDA less replacement/environmental CAPEX, cash interestexpense, turnaround costs and income tax expense. Replacement capital expenditures are defined as those capital expenditures
which do not increase operating capacity or reduce operating costs and exclude turnaround costs. Environmental capital
expenditures include asset additions to meet or exceed environmental and operating regulations. Cash interest expense represents
consolidated interest expense less non-cash interest expense.
(2) Income tax expense was $0.2 million in 1Q13 and 1Q14
$2.7 y/y increase
($10.6) y/y decrease$1.2 y/y increase
($10.9) y/y decrease
= $23.0 y/y increase
Adjusted EBITDA Replacement/EnvironmentalCAPEX
Cash Interest Expense Turnaround Costs Distributable Cash flow
$26.4
($2.5) ($16.0)
$10.6
$49.4
1Q13 2Q13 3Q13 4Q13 1Q14
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EXHIBIT D: Improving Distribution Coverage
5-Year Compounded Annual Distribution Growth of Approximately 9%
Improved Distribution Coverage Supported By Less Planned Maintenance, Recovery In Adjusted EBITDA
$1.81 per unit $1.84 per unit$2.00 per unit
$2.42 per unit$2.74 per unit $2.74 per unit
2009 2010 2011 2012 2013 1Q14 (Annualized)
1.24 x
0.51x
-0.05 x -0.30 x
0.20 x
0.94x
Avg. DistributionCoverage (2008-2013)
1Q13 2Q13 3Q13 4Q13 1Q14
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Noel Ryan
Vice President, Investor & Media Relations
Direct | 720.583.0099
Email | [email protected]
Investor Relations Contact