Third Quarter 2018calumetspecialty.investorroom.com/download/3Q18... · Q316 Q416 Q117 Q217 Q317...

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Third Quarter 2018 Financial Results Conference Call

November 9, 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 November 9, 2018. The informationin this Presentation includes certain “forward-looking statements.” These statements can be identified by the use of forward-looking terminology including“may,” “intend,” “believe,” “expect,” “anticipate,” “estimate,” “forecast,” “continue” or other similar words. The statements discussed in this Presentationthat are not purely historical data are forward-looking statements. These forward-looking statements discuss future expectations or state other “forward-looking” information and involved risks and uncertainties. When considering forward-looking statements, you should keep in mind the risk factors andother cautionary statements included in our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. The risk factors and otherfactors noted in our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q could cause our actual results to differ materially fromthose 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 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.

Non-GAAP Financial Measures

Adjusted EBITDA, Pro forma Adjusted EBITDA, and Adjusted EBITDA margin are non-GAAP financial measures provided in this presentation.Reconciliations to the nearest GAAP financial measures are included in the Exhibit B and Exhibit C to this presentation. These non-GAAP financialmeasures are not defined by GAAP and should not be considered in isolation or as an alternative to net income (loss) or other financial measuresprepared in accordance with GAAP. We do not provide reconciliation of non-GAAP financial measures on a forward-looking basis as it is impractical todo so without unreasonable effort.

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3Q18 Financial Results Highlights

▪ 3Q18 total company Adjusted EBITDA(*) of $54.3 million; $59.9 million excluding unfavorable LCMadjustment ($2.3 million), ERP expenses ($3.0 million) and hedging losses ($0.3 million)

– Wider crude differentials offset by declining crack spreads and increased turnaround activity

– Princeton Naphthenic Base Oil facility turnaround: ~40 days

– Great Falls fuels refinery turnaround: ~32 days

▪ Net loss from continuing operations was $16.0 million or $0.20 per unit

▪ Self-Help capture of $10.8 million in EBITDA in 3Q18; Launching new three-year Self-Help program in 2019

Trailing Twelve Months Adjusted EBITDA

Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318

$223 $238 $244 $235

$93

$158

$230$262

$304 $317

Pro forma as of Q417

(*) See Appendix to this presentation for GAAP to Non-GAAP Reconciliation

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Adjusted EBITDA(*) Bridge – 3Q17 vs. 3Q18 ($MM)

(1) Includes plant operating and maintenance costs including RINs costs.

(2) Includes transportation costs, and hedging activities


3Q17 AdjEBITDA

Divestitures LCM FuelsMargin

SpecialtyMargin

FuelsVolume

SpecialtyVolume

OperatingCosts (1)

Other (2) SG&A "Self Help"Benefit

3Q18 AdjEBITDA

$95.7

$(32.2)

$(14.6) $(0.8)

$10.7

$(6.3)$(8.3) $(4.5) $(3.4)

$7.2$10.8 $54.3

3Q18 Specialty Products Segment Highlights

▪ Adjusted EBITDA(*) of $37.0 million down versus $43.0 million in 3Q17 and downsequentially versus $53.7 million in 2Q18

– Specialty Adjusted EBITDA negatively impacted by turnaround activity atthe Princeton facility

– Paraffinic base oil market experienced supply-driven price weakness atthe end of 3Q18, but has improved in October

▪ Gross Profit per barrel of $34.17, up versus $30.81 in 3Q17, but downsequentially vs. $37.12 in 2Q18

– Higher-margin Finished Lubricants(1) continues to be a solid contributor toconsolidated performance

– Steadily rising crude prices continue to work against margin

▪ Adjusted EBITDA margin of 10.6% down compared to 14.1% in 3Q17 and14.0% in 2Q18

– Turnarounds decreased volumes, which more than offset increase toGross Margin

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Q317 TTMAdj EBITDA*

Margin/Mix Volume Other Q318 TTMAdj EBITDA

$183.7

$32.7

$(47.7)$(9.5)

$159.2

Underlying Specialties Business Remains Solid Despite Headwinds

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Includes investmentsin Biosynthetic

Technologies plusincremental expenses

related to our ERPimplementation

Lower volume largelydriven by maintenance

at Princeton andShreveport YTD

Self-Help and margin/mix have more than

offset impact of highercrude prices


25%

20%

15%

10%

5%

0%

Adj

uste

dEB

ITD

A

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18

QuarterlyMargin %

TTM Margin %

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Specialty Product Margins Impacted by Turnarounds

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3Q18 Fuel Products Segment Highlights

▪ Adjusted EBITDA(*) of $17.5 million, down vs. $46.3 million in 3Q17 which included

Superior refinery

– Driven by Great Falls turnaround activity and the year-over-year decline in Hurricane-impactedcrack spreads

▪ Gross Profit per barrel of $4.47, down (13.7)% year-over-year versus $5.18 in 3Q17, and downsequentially compared to $5.09 in 2Q18

– Benchmark GC 2/1/1 crack spread down approximately 10% year-over-year; offset by wideningcrude differentials:

– Average WCS/WTI diff of ($29/bbl) vs. ($10/bbl) in 3Q17

– Average Midland/WTI diff of ($14/bbl) vs. ($1/bbl) in 3Q17

– Processed ~19,000 bpd vs. ~10,500 bpd of Midland-WTI in 2Q18

– Expect to process more than 20,000 bpd of Midland-WTI by YE'18


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Historical and Projected Capital Spending ($MM)

2015 CapitalSpending



2018 Forecast

▪ Capital spending YTD of ~$55 million

▪ Lowering FY'18 capital guidance; expectedrange between $70-$80 million

▪ ~70% of YTD capital spending tied toturnaround, maintenance, and EHS

$425

$122

$80 $70 - $80

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Hedged a Portion of WCS and Midland Purchases & Diesel Sales

WCS ULSD Crack(1) ULSD - WCS DifferentialBPD

BPD

6,0005,0004,0003,0002,0001,000

01Q19 2Q19 3Q19 4Q19

3,000

2,000

1,000

04Q18 1Q19 2Q19 3Q19 4Q19

12,000

10,000

8,000

6,000

4,000

2,000

04Q18 1Q19 2Q19

WTI Cushing - Midland Differential

$15.54 $13.01 $11.74

BPD

$50.88

$49.00 $49.00 $49.00 $49.00

(1) (ULSD-WCS)/WTINote: Hedge positions as of September 30, 2018.

72.1% 72.1% 72.1% 72.1%

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Stable Credit Metrics

(1) 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

(2) Excludes $350 million of restricted cash

▪ Liquidity improved; up $24 million QoQ▪ Credit Ratings Improvement

– S&P credit rating upgraded to B-– Fitch initiated at credit rating of B-– Moody's upgraded outlook to 'Stable'

NET DEBT TO LTM ADJUSTED EBITDA (LEVERAGE) RATIO(*AS REPORTED)

4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18

12.9x

9.0x7.6x

6.6x4.8x 4.9x 5.4x 6.2x

LIQUIDITY AVAILABILITY ($MM)

4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18

$365 $363 $369$413 $416

$458$382 $406

FIXED CHARGE COVERAGE RATIO

4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18

1.0x1.3x

1.5x1.7x 1.7x 1.7x 1.6x 1.5x

(1)

(2)(2)

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▪ Delivered $10.8 million of EBITDA(*) in “Self-Help” during 3Q18,driven by:

– Savings from consolidated procurement contracts inLouisiana

– Isomerate project at San Antonio and Naphtha upgradeproject at Great Falls

– Contributions from Finished Lubricants(1) expansion

▪ Self-Help program captured $170 million EBITDA since inception,vs. original three-year goal of $150 - $200 million

▪ New three-year Self-Help program to begin in 2019 with $100MEBITDA goal

Self-Help in Action: Delivering Results


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Self-Help Program: Phase II (2019-2021)

▪ Launching Self-Help Phase II to deliver an additional $100 million in EBITDA over the next three years

▪ New opportunities from reorganization - business units have 5-year plans to enhance profitability anddrive growth

▪ Program will be primarily focused on:

– Transportation & logistics/supply chain efficiencies

– Improved reliability/utilization in base oils with projects at Shreveport and Princeton

– Continued growth in Finished Lubricants while rationalizing low margin SKU's

– New product development in Specialty Oils & Waxes, including the introduction of Versastique™and Biosynthetic Technologies® applications

– Increased material margin in Solvents with raw material flexibility projects

– Upgrading intermediate feedstocks into higher-margin finished products at our fuels plants

– Reduced SG&A, enabled by the ERP implementation

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4Q18 Outlook

▪ Expect typical seasonality in specialty products, improved base oil volumes, and continuedFinished Lubricants performance

– Quarter to reflect pricing adjustments from 3Q18

– Minor planned maintenance for Shreveport in 4Q18

▪ Anticipate typical seasonal patterns for fuels, with continued benefit from wider crude differentials

– Planning roughly 24K bpd of advantaged crude tied to WCS

– Planning more than 20K bpd of advantaged crude tied to Midland-WTI during by YE'18

▪ Expected benefits from the final quarter of original Self-Help initiative

▪ Company is well-positioned to capture benefits from upcoming IMO 2020 regulatory change

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APPENDIXSupplemental 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

“Sel

f Hel

p”

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Adjusted EBITDA(*) Bridge – YTD 3Q17 vs. YTD 3Q18 ($MM)

3Q17 AdjEBITDA

Divestitures FuelsMargin

SpecialtyMargin

FuelsVolume

SpecialtyVolume

OperatingCosts (1)

Other (2) SG&A "Self Help"Benefit

3Q18 AdjEBITDA

$276.0

$(80.1)

$55.6 $7.5

$(15.2)

$(39.2)

$(44.9)

$16.5 $5.1$26.9 $208.2

(1) Includes plant operating and maintenance costs including RINs costs.(2) Includes LCM, acquisition costs, transportation costs, hedging activities, and 2017 Superior Renewable Identification Numbers (“RINs”)

exemption received in 2018. (*) See Appendix to this presentation for GAAP to Non-GAAP Reconciliation

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Cash Bridge – 2Q18 vs. 3Q18 ($MM)

2Q18 Cash OperatingCash Flow

Proceeds From Saleof Businesses and JV

WorkingCapital

CapitalExpenditures

Other (1) 3Q18 Cash

$38.8

$20.0

$16.6

$(11.8)

$(22.2)

$24.1 $65.5

(1) Includes proceeds from inventory financing obligations.

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What We Do

• Manufacture and sell finished lubricant, chemical andengineered fuel products to consumer, commercial andindustrial trade channels

• Private label packaging

Business Strategy

Applications

Specialty Products – Finished Lubricants & Chemicals

Automotive Landscape EquipmentMining

Marine Powersports Racing

Specialty LubricantsPerformanceAdditivesMotor Oils/FiltersTransmission fluidsGear Oil

Rust PreventivesSynthetic LubricantsBearing GreasesGear LubricantsPropel LubricantsHydraulic Oil

Precision-engineeredpremixed fuel withsynthetic lubricants andadvanced stabilizers

• Royal Purple is a premium, highperformance brand withproprietary technology

• Bel-Ray has a rich heritage inperformance greases, oils &chemicals

• TruFuel is a category innovatorthat delivers superiorperformance and convenience

• Continue to be market leader inengineered fuels and continue todevelop this key market

• Focus efforts on SKU's in growthmarkets

• Focus on U.S. market andcapture further distribution andcost advantages

• Refocus on high value sales ingrowth market segments

• Simplify by shedding lowmargin business (tolling, etc.)

Strategic InitiativesHow We Compete

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What We Do

• Provide superior customer service in meeting needs ofcustomers

• Develop custom blends and other products for customer’sunique needs

• Products include:▪ Penreco white oils, petrolatums and gels▪ Waxes▪ Esters ▪ Biosynthetic Technologies (BST)

Business Strategy

Customer Relationships

Specialty Products – Specialty Oils & Waxes

Marine Powersports Racing

• Leverage unique new products forcustomers (e.g. Versastique™)

• Capitalize on our R&D and customblends to sell the value of product

• Provide superior customer focusand experience

• Penreco brand recognition sincelate 1800s

• Leverage backwards integrationwith other assets

• Use system capacity to grow estersbusiness & develop Biosyntheticmarket

• Innovation & new products(Versastique™)

• Debottleneck Versagel• Improve supply chain in white oils

business


20*All logos and brands are property of their respective owners

What We Do

• Offer a wide range of solvents for the following markets:▪ Aluminum rolling oils; Mining extraction; Oil Field

applications; Water Treatment; Consumer goods (autoaftermarket); Paints & Coatings

• Primary products include specialty aliphatic solvents, andother branded solvents such as Conosol®, Drakesol®, andMatgiesol®

• Calumet solvents can be found in many household brands:

Business Strategy

Key End Markets

Specialty Products – Solvents


• Cotton Valley is only dedicatedsolvents facility in US (others runbatch production inside largerrefineries)

• Competitively advantaged as ourCotton Valley facility uses crudeoil instead of diesel as afeedstock

• Target high value-add marketswhere there is less supply andhigher barriers to entry

• Improve raw material flexibilityfor advantaged crudes andfeedstocks

• Improve products with productsegregation projects


Aluminum Mining Oil & Gas

Water Treatment Consumer Paints & Coatings


What We Do

• Offer extensive product line of both naphthenic base oils andparaffinic base oils for the following markets:▪ Passenger car engine oils; Heavy duty engine oils; Other

automotive oils; Marine oils; Rail oils; Industrial oils;Greases; Process oils; Shock absorber oils

• Refined in-house and are used in a wide variety ofapplications ranging from aviation hydraulic fluids and heattransfer fluids to industrial lubricants

• Calumet base oils can be found in many well-known brands:

Business Strategy

Key End Markets

Specialty Products – Base Oils


• Deliver product in size/containerand labeling that customerdesires

• High grade sales into marketsthat value higher solvency andbroad viscosity ranges whichtend to have stickier customerrelationships

• Debottleneck paraffinic andnaphthenic capacity

• Improve raw material flexibilityfor advantaged crudes

• Reduce costs through betterutilization and supply chainefficiency


White oils upgrade Hydraulic oils

Industrial oils

Conversion togreases

Railroad engine oils

Shock absorber oils

Cutting oils

Motor oils


What We Do

• Have one pure-play fuels plant (Great Falls) and twointegrated fuels/specialties plants (Shreveport and SanAntonio)

• Focused on cost-advantaged crude supplies• 25k bpd of WCS price linked crude (Great Falls)• 20k bpd of Midland WTI-priced crude supplied to

Shreveport via pipeline• Additional Midland WTI-priced crude supplied to San

Antonio via truck

Business Strategy

Key Products

Fuels

• Cost-advantaged crude• Smaller markets

• Increase advantaged cruderuns (WCS, Midland-WTI)

• Debottleneck crudeprocessing

• Isomerization project (SanAntonio) to producepremium gasoline

• Increase product placementinto local areas


• Diesel

• Gasoline

• Jet Fuel

• Asphalt

• Intermediate Feedstocks

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EXHIBIT A: Capital Structure Overview

Actual Actual Actual Actual Actual Actual Actual Actual

($ in millions) 12/31/16 3/31/17 6/30/17 9/30/17 12/31/17 3/31/18 6/30/18 09/30/18

Cash $ 4.2 $ 4.6 $ 26.6 $ 26.5 $ 514.3 $ 496.6 $ 38.8 $ 65.5

ABL Revolver Borrowings $ 10.2 $ 39.2 $ 0.4 $ 0.1 $ 0.2 $ — $ 0.1 $ 0.1

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 — —

Note Payable - related party — — — — — — — —

Capital Leases 46.5 45.9 45.2 44.7 44.0 43.7 42.2 41.8

Other 8.0 7.6 7.3 6.9 6.6 6.3 5.9 5.5

Total Debt $ 2,039.7 $ 2,067.7 $ 2,027.9 $ 2,026.7 $ 2,025.8 $ 2,025.0 $ 1,623.2 $ 1,622.4

Partners’ Capital $ 218.7 $ 213.3 $ 224.0 $ 201.6 $ 119.9 $ 115.4 $ 66.6 $ 51.2

Total Capitalization $ 2, 258.4 $ 2, 281.0 $ 2,251.9 $ 2,228.3 $ 2,145.7 $ 2,140.4 $ 1,689.8 $ 1,673.6

LTM Adjusted EBITDA (as reported) $ 158.2 $ 230.3 $ 261.9 $ 303.7 $ 317.2 $ 313.5 $ 290.8 $ 249.4

Net Debt / LTM Adjusted EBITDA (as reported) 12.9x 9.0x 7.6x 6.6x 4.8x 4.9x 5.4 x 6.2 x

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EXHIBIT B: Reconciliation of Segment Adjusted EBITDA to NetIncome (Loss)

($ in millions) 6/30/16 9/30/16 12/31/16 3/31/17 6/30/17 9/30/17 12/31/17 3/31/18 06/30/18 09/30/18

Segment Adjusted EBITDA

Specialty products Adjusted EBITDA $ 59.0 $ 43.4 $ 28.0 $ 45.6 $ 67.1 $ 43.0 $ 30.8 $ 37.7 $ 53.7 $ 37.0

Fuel products Adjusted EBITDA 18.9 13.8 3.2 36.8 34.0 46.3 10.7 38.7 25.6 17.5

Discontinued operations Adjusted EBITDA (7.9) (3.3) (3.5) (3.7) 0.5 6.4 (0.3) (1.4) (0.4) (0.2)

Total segment Adjusted EBITDA $ 70.0 $ 53.9 $ 27.7 $ 78.7 $ 101.6 $ 95.7 $ 41.2 $ 75.0 $ 78.9 $ 54.3

Less:

Unrealized (gain) loss on derivative Instruments

$ (23.8) $ 4.9 $ 3.6 $ (10.6) $ (1.3) $ — $ (1.4) $ (2.0) $ (0.8) $ 2.4

Realized (gain) loss derivative activities, not included in net income (loss) or settled in a prior period

(2.3) (4.8) 2.8 — — 9.7 — — 2.1 0.7

Amortization of turnaround costs 8.3 7.9 8.0 7.4 6.6 6.4 3.9 3.3 2.7 2.7

Debt extinguishment costs — — — — — — — 0.6 58.2 —

(Gain) loss on the sale of businesses, net — — — — — — (173.4) — — —

Impairment charges 33.4 — 2.5 0.4 — — 206.9 — — —

Loss on sale of unconsolidated affiliate 113.9 — — — — — — — — —

Equity based compensation and other items 1.5 (2.2) 3.1 2.8 2.2 7.3 3.6 3.2 0.8 (2.7)

EBITDA $ (61.0) $ 48.1 $ 7.8 $ 78.7 $ 94.1 $ 72.3 $ 1.6 $ 69.9 $ 15.9 $ 51.2

Less:

Interest expense $ 42.8 $ 44.6 $ 44.0 $ 43.9 $ 44.5 $ 47.4 $ 47.3 $ 45.2 $ 37.5 $ 37.7

Depreciation and amortization 43.8 44.5 44.0 41.1 40.9 48.6 37.9 29.7 29.5 29.6

Income tax expense (benefit) 0.3 (7.6) (0.6) (0.1) (0.9) (0.1) — (0.2) 0.8 0.4

Net income (loss) $ (147.9) $ (33.4) $ (79.6) $ (6.2) $ 9.6 $ (23.6) $ (83.6) $ (4.8) $ (51.9) $ (16.5)

($ in millions) 6/30/16 9/30/16 12/31/16 3/31/17 6/30/17 9/30/17 12/31/17 3/31/18 06/30/18 09/30/18

Pro Forma Adjusted EBITDA

Adjusted EBITDA $ 70.0 $ 53.9 $ 27.7 $ 78.7 $ 101.6 $ 95.7 $ 41.2 $ 75.0 $ 78.9 $ 54.3

Less: Superior Adjusted EBITDA 24.5 26.1 6.3 21.3 27.9 25.6 16.8 — — —

Less: Oilfiled services Adjusted EBITDA (1) (7.9) (3.3) (3.5) (3.7) 0.5 6.4 (0.3) (1.4) (0.4) (0.2)

Total pro forma Adjusted EBITDA $ 53.4 $ 31.1 $ 24.9 $ 61.1 $ 73.2 $ 63.7 $ 24.7 $ 76.4 $ 79.3 $ 54.5

Superior Adjusted EBITDA $ 24.5 $ 26.1 $ 6.3 $ 21.3 $ 27.9 $ 25.6 $ 16.8 $ — $ — $ —

Less:

Unrealized (gain) loss on derivative Instruments

$ — $ — $ — $ — $ — $ — $ — $ — $ — $ —

Realized (gain) loss derivative activities, not included in net income (loss) or settled in a prior period

— — — — — — — — — —

Amortization of turnaround costs 2.1 2.2 2.2 2.1 2.1 2.3 — — — —

Debt extinguishment costs — — — — — — — — — —

(Gain) loss on the sale of businesses, net — — — — — — — — — —

Impairment charges — — — — — — — — — —

Loss on sale of unconsolidated affiliate — — — — — — — — — —

Non-cash equity based compensation andother items

— — — — — 2.2 — — — —

Superior EBITDA $ 22.4 $ 23.9 $ 4.1 $ 19.2 $ 25.8 $ 23.3 $ 16.8 $ — $ — $ —

Less:

Interest expense $ — $ — $ — $ — $ — $ — $ — $ — $ — $ —

Depreciation and amortization 4.4 4.4 4.1 4.1 4.1 4.0 0.1

Income tax expense — — — — — — — — — —

Superior Net income (1) $ 18.0 $ 19.5 $ — $ 15.1 $ 21.7 $ 19.3 $ 16.7 $ — $ — $ —

(1) Anchor Drilling Fluids USA, LLC was sold in November 2017, and its results of operations have been classified as discontinued operations since Anchor was the Company's onlyoperations in the oilfield services segment.

(2) Q2 2017 excludes a non-recurring gain of $28.7 million.

EXHIBIT C: Reconciliation of Pro Forma Adjusted EBITDA toSuperior Net Income

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CONTACT INFORMATIONJoe Caminiti or Chris HodgesAlpha IR312-445-2870Email: [email protected]

Third Quarter 2018calumetspecialty.investorroom.com/download/3Q18... · Q316 Q416 Q117 Q217 Q317...

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