fourth quarter 2017calumetspecialty.investorroom.com/.../4q17+clmt+eps+presentati… · 3q15 4q15...
TRANSCRIPT
Fourth Quarter 2017
Review of Financial Results
March 8, 2018
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Forward-Looking Statements
This Presentation has been prepared by Calumet Specialty Products Partners, L.P. (the “Company” or “Calumet”) as of March 8, 2017. Theinformation in this Presentation includes certain “forward-looking statements.” These statements can be identified by the use of forward-lookingterminology including “may,” “intend,” “believe,” “expect,” “anticipate,” “estimate,” “forecast,” “continue” or other similar words. The statementsdiscussed in this Presentation that are not purely historical data are forward-looking statements. These forward-looking statements discuss futureexpectations or state other “forward-looking” information and involved risks and uncertainties. When considering forward-looking statements, youshould keep in mind the risk factors and other cautionary statements included in our most recent Annual Report on Form 10-K and Quarterly Reportson Form 10-Q. The risk factors and other factors noted in our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q couldcause our actual results to differ materially from those contained 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 anyrevisions to any such forward-looking statements that may be made to reflect events or circumstances after the date of this Presentation or to reflectthe occurrence of unanticipated events.
The information contained herein has been prepared to assist interested parties in making their own evaluation of the Company and does not purportto contain all of the information that an interested party may desire. In all cases, interested parties should conduct their own investigation and analysisof the Company, its assets, financial condition and prospects and of the data set forth in this Presentation. This Presentation shall not be deemed anindication of the state of affairs of the Company, or its businesses described herein, at any time after the date of this Presentation nor an indication thatthere has been no 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 anyoffer or 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 itform the basis of, or be relied upon in connection with, any contract or commitment whatsoever. Neither this Presentation nor any information includedherein should be construed as or constitute a part of a recommendation regarding the securities of the Company. Furthermore, no representation orwarranty (express or implied) is made as to, and no reliance should be placed on, any information, including projections, estimates, targets andopinions contained herein, and no liability whatsoever is accepted as to any errors, omissions or misstatements contained herein. Neither theCompany nor any of its officers or employees accepts any liability whatsoever arising directly or indirectly from the use of this Presentation.
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2017 Highlights: A Year of Execution
2016: Reset 2017: Execute
� Successfully turned the corner
Strong execution throughout 2017 led to five straight quarters of TTM Adjusted EBITDA growth
Completed two non-core asset divestitures for a total consideration of ~$600 million
Improved capital structure & reduced leverage profile
Called 11.5% Senior Secured Notes today
Extended corporate revolver for new 5 year term
� Focused on what Calumet does best – creating premium, specialty products
Set record for annual throughput at Cotton Valley, which produces specialty solvents
Achieved record volume and earnings contribution from Branded Products for
second year in a row
Introduced several new major products (Group III synthetic base oil,
Uninhibited Transformer Oil)
2018& Beyond:
Transform
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4Q17 Financial Result Highlights
� 4Q17 total company Adjusted EBITDA of $60.1 million, up
117% compared to $27.7 million in 4Q16
� FY17 Adjusted EBITDA of $336.1, more than doubled versus
$158.2 million in FY16
� Self-Help capture of $10 million in 4Q17 and $54 million for
FY17
� Maintained strong capital discipline with $80 million in total
capital spending, below prior $85-95 million forecast
� Net Debt/TTM Adjusted EBITDA of 4.5x, down 65% from the
year-ago period and lowest level in over two years
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4Q17 Segment Highlights: Specialty Products
� 4Q17 Adjusted EBITDA of $38.6 million, up 38% versus $28.0
million in 4Q16
– 4Q17 Adjusted EBITDA margin of 12.3% and FY17 was 14.9%
� 4Q17 gross profit per barrel of $33.07, up year-over-year versus
$25.30, despite $9/bbl increase in WTI
– Improvement reflects better sales mix, with growth in higher-
margin Branded Products
� Sales volumes lower Y/Y
– Still working off backlog related to 3Q17 supply chain issues
� Anticipate incremental contribution from the expanded packaging
lines in our Branded Products business and from the new
products launched in 2017
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4Q17 Segment Highlights: Fuel Products
� 4Q17 Adjusted EBITDA of $21.8 million, versus $3.2 million last
year
� Gross Profit/bbl of $5.29 increased significantly against $1.19 in
4Q16
� Improved segment results were driven by:
– 41% improvement of benchmark GC 2:1:1 crack spread Y/Y
– Better mix and better distribution channels
� Annual Records: WCS crude runs, premium gasoline sales and
Great Falls refinery throughput
� Fuels segment sales volumes decreased year-over-year due to
the sale of the Superior, WI refinery
� Self-help initiatives translating into improved performance at the
Shreveport, LA refinery
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Five Consecutive Quarters of Improved Results
$139.4$114.4
$92.9
$158.2
$230.3
$261.9
$303.7
$336.1
$0
$50
$100
$150
$200
$250
$300
$350
$400
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Trailing Twelve Months Adjusted EBITDA ($MM)
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Historical Adjusted EBITDA by Segment ($MM)
($0.5) ($7.1) ($5.9) ($7.9)($3.3) ($3.5) ($3.7)
$0.5 $6.4
($0.3)
$47.6 $29.3
$58.5 $59.0 $43.4
$28.0
$45.6
$67.1
$43.0
$38.6
$28.3
($59.8) ($46.0)
$18.9
$13.8
$3.2
$36.8
$34.0
$46.3
$21.8
3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Discontinued Operations: Oilfield Services Specialty Products Segment Fuel Products Segment
$6.6
$78.7
$101.6
$27.7
$53.9
$70.0
($37.6)
$75.4
$95.7
$60.1
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Specialty Product Segment Adjusted EBITDA Margins
0%
5%
10%
15%
20%
25%
TTM
Margin %
Quarterly
Margin %
$27.7
$52.7
$26.6 $5.2
$2.3
($37.1)
($12.1)
($9.0)($4.6)
($1.7)
$10.1 $60.1
4Q16 AdjEBITDA
Fuels Margin LIFO+LCM SpecialtyMargin
OFS AdjEBITDA
OperatingCosts
Volume Divestitures SG&A Other "Self-Help"ProgramBenefit
4Q17 AdjEBITDA
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Adjusted EBITDA Bridge: 4Q16 vs. 4Q17 ($MM)
(1) Includes higher RINs costs for 4Q17(2) Includes specialty products and fuel products only(3) SG&A includes ERP related spending during period
(1) (3)(2)
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Annual Adjusted EBITDA Bridge: 2016 vs. 2017 ($MM)
$158.2
$108.3
$35.0
$22.6
$18.2 $10.8
$8.4 $3.9
($37.2)
($23.7)
($13.4) ($9.0)
$54.0 $336.1
YTD 2016Adj EBITDA
Fuels Margin OperatingCosts
OFSAdj EBITDA
JointVenture(Loss)
Hedging Other LIFO+LCM Volume SG&A SpecialtyMargin
Divestitures "Self-Help"ProgramBenefit
YTD 2017Adj EBITDA
(1) Includes lower RINs costs(2) Includes specialty products and fuel products only(3) SG&A includes ERP related spending during period
(1) (2) (3)
1.9x
1.0x0.8x
0.6x
1.0x
1.3x1.5x
1.7x1.8x
12/31/15 3/31/16 6/30/16 9/30/16 12/31/16 3/31/2017 6/30/2017 9/30/17 12/31/17
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Business Stability Improving
(1) Includes restricted cash (2) Proforma, includes proceeds of the 2021 Senior Secured Notes(3) Excludes $350mm of restricted cash(4) Fixed Charge Coverage Ratio is defined as Adjusted EBITDA divided by consolidated interest expense (plus capitalized interest), neither of which has been pro-forma adjusted for acquisitions or refinancing activity
7.0x
14.2x
17.7x
21.8x
12.9x
9.0x7.6x
6.6x4.5x
12/31/15 3/31/16 6/30/16 9/30/16 12/31/16 3/31/17 6/30/17 9/30/17 12/31/17
$239
$470
$388 $365 $363 $369 $413 $415 (3)
12/31/2015 3/31/2016 6/30/2016 9/30/2016 12/31/2016 3/31/2017 6/30/2017 9/30/17 12/31/17
$109
� Leverage ratio continues to decline and committed to further reducing it through debt reduction efforts
� Fixed charge coverage ratio showing continued improvement
� Liquidity improving
$492 (2)
NET DEBT TO LTM ADJUSTED EBITDA (LEVERAGE) RATIO (1)
FIXED CHARGE COVERAGE RATIO (4)LIQUIDITY AVAILABILITY ($MM)
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Historical and Projected Capital Spending ($MM)
$450 $425
$122
$80
$80to$90
2014 CapitalSpending
2015 CapitalSpending
2016 CapitalSpending
2017 Capital SpendingSpending
2018 Forecast CapitalSpending
(1) Includes $36 million of contributions to DPR and $29 million of proceeds related to the sale of unconsolidated affiliates
� 2018 CapEx forecast of $80-$90MM
� CapEx guidance includes budget for planned turnaround activity
(1)
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Pro-Forma SG&A: Controlling Costs in Base Business ($MM)
Base
$197 Base
$163
Base
$183
ERP $1
ERP $13
ERP $19
$0
$50
$100
$150
$200
$250
2015 2016 2017
NOTE: Excludes SG&A related to Superior Refinery and Anchor Drilling divestitures
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Pro-Forma Changes: Ex-Superior & Anchor
2017 2018 Notes
RINs ~ 128 MM ~ 85 MMSuperior RVO ~ 40 MM RINs per year prior to blending and other RINs mitigation
Capital Spending $80 million $80 - 90 MMAvoided over $100 MM in planned Superior CapEx for 2018
Heavy Canadian Crude ~ 40-45K bpd ~ 25K bpdGreat Falls capacity of 25K bpd of cost advantaged crude
2017Pro-Forma Adjustment
2017Pro-Forma
Sales $3,992 ($898) $3,094
Adjusted EBITDA $336 ($94) $242
Net Debt/Adjusted EBITDA 4.5x - 6.3x
(1) Excludes 2016 Superior RINs exemption
(2) Net Debt = $2,025.9 MM Long-Term Debt - $163.8 MM Cash - $350 MM Restricted Cash = $1,512.1 MM
(1)
(2)
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� Shreveport contributed significantly to 2017 self-help gains
New crude pipeline agreement significantly lowered raw
material costs
Improved reliability and utilization lowered operating costs
Product upgrades helped to expand gross margins
� Projecting $40MM - $50MM of additional “Self-Help” in 2018
Opportunistic growth projects
• New Isomerate unit at San Antonio
• Naphtha upgrade project at Great Falls
Continued growth expected in Branded Products business
Additional raw material and supply chain initiatives, many
driven by new ERP system
Self-Help in Action: Delivering Results
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Investing In Our Future: New Product Innovation Center
� Grand Opening October, 2017 in Indianapolis, IN
� Advanced R&D facility focused on:
Value-driven problem solving
Customer driven needs
� State-of-the-art Lubricants Lab provides:
– Critical customer support
– New product innovation
– Proprietary brand formulations
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Q1’18 Outlook
� Specialty products segment
– Expect sales volumes to be impacted due to Lubes turnaround at Shreveport
– Implemented recent price adjustments to align with rising raw material costs
– Expect Branded Products to continue to grow, including benefits from the expansion projects for Royal
Purple and TruFuel
– Still catching up on third quarter supply chain backlog and reducing ERP costs
� Fuels products segment
– Expect normal seasonality, but will look to capture the benefit of widening WTI/WCS differentials
– Expect lower sales volumes due to maintenance activities at Shreveport and Great Falls refineries
– Less asphalt build post Superior divestment
� Strategic initiatives
– Called Senior Secured Notes, expect completion within next few weeks
– Remain focused on driving further Self-Help initiatives, goal of $40 - $50MM for fiscal 2018
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APPENDIX
Supplemental Financial Data
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Our Strategy & Roadmap for Growth
� Focus portfolio on high-return, niche specialty markets where
we are competitively advantaged
� Capture one-to-two-year payouts with low capital
investment requirements
� Reduce costs, optimize raw materials and
enhance margins
StrategicM&A
Opportunistic Growth Projects
Operations Excellence
OUR VISION To be the premier specialty petroleum products company in the world.
OUR MISSION We build high-return niche businesses through innovation, unmatched customer service and best-in-class operations to deliver quality products that meet the unique needs and specifications of our customers. We capture attractive opportunities where others do not.
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Cash Bridge – 2016 vs. 2017 ($MM)
$4.2
$523.3
$135.9
$97.9
($125.0)
($84.5)($23.6) ($4.4)
$513.8
12-31-16Cash Balance
Net Proceedsfrom Asset
Sales
OperatingCash Flow
InventoryFinancing
WorkingCapital
Cap Ex DiscontinuedOperations
RevolverBorrowings
Other 12-31-17Cash Balance
($10.8)
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EXHIBIT A: Capital Structure Overview
Actual Actual Actual Actual Actual Actual Actual Actual
($ in millions) 3/31/16 6/30/16 9/30/16 12/31/16 3/31/17 6/30/17 9/30/17 12/31/17
Cash $ 7.2 $ 32.2 $ 17.8 $ 4.2 $ 4.6 $ 26.6 $ 26.5 $ 513.8
ABL Revolver Borrowings $ 294.9 $ 0.1 $ 0.1 $ 10.2 $ 39.2 $ 0.4 $ 0.1 $ 0.2
7.625% Senior Notes due 2022 $ 350.0 $ 350.0 $ 350.0 $ 350.0 $ 350.0 $ 350.0 $ 350.0 $ 350.0
6.50% Senior Notes due 2021 $ 900.0 $ 900.0 $ 900.0 $ 900.0 $ 900.0 $ 900.0 $ 900.0 $ 900.0
7.75% Senior Notes due 2023 $ 325.0 $ 325.0 $ 325.0 $ 325.0 $ 325.0 $ 325.0 $ 325.0 $ 325.0
11.50% Senior Secured Notes due 2021 $ - $ 400.0 $ 400.0 $ 400.0 $ 400.0 $ 400.0 $ 400.0 $ 400.0
Note Payable - related party $ 73.4 $ 40.7 $ 19.6 $ - $ - $ - $ - $ -
Capital Leases $ 46.1 $ 45.6 $ 47.5 $ 46.5 $ 45.9 $ 45.2 $ 44.7 $ 44.1
Other $ - $ - $ 4.6 $ 8.0 $ 7.6 $ 7.3 $ 6.9 $ 6.6
Total Debt $ 1,989.4 $ 2,061.4 $ 2,046.8 $ 2,039.7 $ 2,067.7 $ 2,027.9 $ 2,026.7 $ 2,025.9
Partners’ Capital $ 478.5 $ 331.5 $ 294.2 $ 218.7 $ 213.3 $ 224.0 $ 201.6 $ 138.6
Total Capitalization $ 2,467.9 $ 2,392.9 $ 2,341.0 $ 2, 258.4 $ 2, 281.0 $ 2,251.9 $ 2,228.3 $ 2,164.5
LTM Adjusted EBITDA (as reported) $ 139.4 $ 114.4 $ 92.9 $ 158.2 $ 230.3 $ 261.9 $ 303.7 $ 336.1
Net Debt / LTM Adjusted EBITDA (as reported) 14.2 x 17.7 x 21.8 x 12.9 x 9.0 x 7.6 x 6.6 x 4.5 x
Net Debt / Total Capitalization 80% 85% 87% 90% 90% 89% 90% 92%
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EXHIBIT B: Reconciliation of Segment Adjusted EBITDA to Net Income (Loss)
9/30/15 12/31/15 3/31/16 6/30/16 9/30/16 12/31/16 3/31/17 6/30/17 9/30/17 12/31/17
($ in millions)
Segment Adjusted EBITDA
Specialty products Adjusted EBITDA $ 47.6 $ 29.3 $ 58.5 $ 59.0 $ 43.4 $ 28.0 $ 45.6 $ 67.1 $ 43.0 $ 38.6
Fuel products Adjusted EBITDA 28.3 (59.8) (46.0) 18.9 13.8 3.2 36.8 34.0 46.3 21.8
Discontinued operations Adjusted EBITDA (0.5) (7.1) (5.9) (7.9) (3.3) (3.5) (3.7) 0.5 6.4 (0.3)
Total segment Adjusted EBITDA $ 75.4 $ (37.6) $ 6.6 $ 70.0 $ 53.9 $ 27.7 $ 78.7 $ 101.6 $ 95.7 $ 60.1
Less:
Unrealized (gain) loss on derivative
Instruments $ 5.0 $ 11.8 $ (4.6) $ (23.8) $ 4.9 $ 3.6 $ (10.6) $ (1.3) $ - $ (1.4)
Realized gain (loss) on derivatives, not
included in net income (loss) or settled in
a prior period (1.9) (1.6) (2.1) (2.3) (4.8) 2.8 - - 9.7 -
Amortization of turnaround costs 6.7 9.6 9.1 8.3 7.9 8.0 7.4 6.6 6.4 3.9
Gain on the sale of businesses, net - - - - - - - - - (172.2)
Impairment charges 58.1 - - 33.4 - 2.5 0.4 - - 205.7
Loss on sale of unconsolidated affiliate - - - 113.9 - - - - - -
Non-cash equity based compensation and
other non-cash items 2.8 3.0 2.6 1.5 (2.2) 3.1 2.8 2.2 7.3 3.8
EBITDA $ 4.7 $ (60.4) $ 1.6 $ (61.0) $ 48.1 $ 7.8 $ 78.7 $ 94.1 $ 72.3 $ 20.3
Less:
Interest expense $ 25.5 $ 25.0 $ 30.3 $ 42.8 $ 44.6 $ 44.0 $ 43.9 $ 44.5 $ 47.4 $ 47.3
Depreciation and amortization 36.0 38.0 38.8 43.8 44.5 44.0 41.1 40.9 48.6 37.9
Income tax expense (benefit) (7.9) (6.6) 0.2 0.3 (7.6) (0.6) (0.1) (0.9) (0.1) -
Net income (loss) $ (48.9) $ (116.8) $ (67.7) $ (147.9) $ (33.4) $ (79.6) $ (6.2) $ 9.6 $ (23.6) $ (64.9)
