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Calumet Specialty Products Partners, L.P. (NASDAQ:CLMT)

Analyst & Investor Day Conference Call

June 10, 2013, 02:00 pm ET

Executives

Jennifer Straumins - President & COO

Pat Murray - SVP & CFO

Tim Barnhart - SVP, Operations

Bryan Yourdon - VP, Packaging & Branded Products

Analysts

Jennifer Straumins

Good afternoon. I am Jennifer Straumins, President and COO of Calumet Specialty Products Partners and we've got several members of our senior management team here today. We are pleased to come back to NASDAQ for the second year in a row to host our Investor Day. I also want to thank everyone for taking time to come out in the rain and brave the weather and coming here we've got to say.

We have got a pretty interesting story to tell everyone. We've got it set up a little bit differently than we did last year. We've got a new Director of Investor Relations who is convinced that we need to be a little bit more open in our forward-looking statements. So we are excited to tell you about a lot of the growth opportunities that we have going on and what our investment strategy continues to be. That being said, nothing we say that are forward-looking we can’t to be used against us.

I would like to introduce the people here with me today. In addition to myself we've got Pat Murray, our CFO; Tim Barnhart, our Senior Vice President of Operations; Bryan Yourdon, our Vice President of Branded & Packaged Products, and Noel Ryan, stand up Noel and say hi, you are going to get to know people very well. Noel is the most recent addition to the Calumet team. He joined about a month ago as Director of Investor Relations and came from Delek and QEP, so we are very pleased to have someone with the experience of refining knowledge on Board.

I would like to talk a little bit about our corporate overview. Calumet has been around since 1990. It was started by two Indianapolis families, the Fehsenfeld family, and Fred Fehsenfeld, the Chairman of our Board and my father Bill Grube who is Vice Chairman of the Board and CEO and he is sitting in the back of the room today. So I am very pleased for your time to come to New York and join us here for this really special event. The two founding families still control a 100% of our General Partners’ interest and about 26% of our Limited Partners interest.

Really for the first 16 years of our existence, our business strategy was to develop (inaudible) with major oil companies and find under utilized assets that really had value off of them and were being realized and we’ve bought assets off of the major oil companies several times in the past; nothing, prior to going public, nothing we've ever acquired that’s making money at the time of assets and the management team at Calumet play in time. You know, most importantly, my father really had a knack for finding these assets, adding products, reconfiguring them and adding tremendous amount of value.

2006 to ’10 around and we had missed out on several strategic acquisitions and we decided to take the company public as a Master Limited Partnership. Since that point in time, our investment thesis has really been forced to change, but we as a public company, we need to find accretive acquisitions and since then we've been very active both organically and through third-party acquisitions to continue to grow the company.

We have one of the most diverse specialty products companies in the United States. We currently have 11 manufacturing sites that are strategically located throughout the United States and our specialty business consist of over 3,500 specialty products that we sell to about 5,000 customers. Our strategy is to have a balanced mix between specialty products and niche fuels products and in 2012 our specialty products consisted of about 60% of our gross profit and our fuels products was about 40%.

The last few years have been very transformational for Calumet. We really strive to have stability in our growth; we want to have a balance between specialty products and niche refining. We need, we recognize as refineries and MLP, we do need to have very stable cash flows from operations so that we continue to maintain and grow our distribution. And we have really proven that we can do that, our adjusted EBITDA has grown over 26% a year on a compounded annual growth rate over the last several years and we doubled it last year to over $400 million.

We have our acquisition strategy forces us to look for complementary acquisitions and throughout the course of this presentation we will demonstrate how may be on surface these acquisitions don't look like they relate at all, but they are really, really, and they are very inter-dependent. And we are also always very open to exploring growth opportunities outside of our core business, really anything that’s qualifying income, we’ll be happy to look at.

We also have multiple organic growth opportunities that we are pursuing and Tim is going to be talking about those a little bit later in the presentation. We have invested more than $760 million as CapEx in our assets since 2003. So we are very committed to not only growing our assets, but investing a large amount of money in maintenance in environmental CapEx to make sure that we have got stable safe and reliable operation.

We have several of our facilities that have over 1 million hours of uninterrupted work-time and what this means for besides the plants that we have is really up to about five years without a loss-time injury, so we are very pleased and proud of our facilities that continue to achieve these goals.

We have very strong balance sheet stronger than we’ve ever had and we have been able to successfully maintain our debt to adjusted EBITDA of less then 2.5 times at the end of the first quarter and we have almost $500 million of availability at the end of the first quarter, on our revolving credit facility.

As an MLP, we are committed to growth and our distributions as always maintaining a strong distribution coverage ratio. We are growing for distribution for the past 11 consecutive quarters and are at the high end of our target coverage ratios 1.2, 1.5 times and on a trailing 12 month basis we are at 1.6 times coverage.

We have got a multi faceted growth strategy; we have grown and plan to continue to grow through both strategic specialty acquisitions and niche fuel acquisitions as well as organically. And as I mentioned, we will continue to explore acquisitions that help us grow vertically and to move into other areas in the energy and chemical businesses. Our goal for acquisitions is two to five times EBITDA target depending on the type of assets that we are acquiring, obviously for the niche fuel refineries those are more and three to four times EBITDA where the specialty assets would be more like 6 to 8 times.

We have a balance niche asset portfolio and we have got assets really spread out all over the United States. One of our stated goals over the last couple of years is then to have an asset in every shale play in United States and we have been very successful in executing that strategy. And at the end of March of this year, we did break grounds on Dakota Prairie Refinery in North Dakota and this is the first (inaudible) refinery to be started in the United Stated since 1976. This is a joint venture between us and MDU Resources and we’re very pleased that projects going and expect to be operational in the fourth quarter of 2014 and that’s a 20,000 barrel a day refinery.

Currently, our total refining capacity at the 160,000 barrels a day; again a very nice balance between specialty and fuels products; we also have six distribution and terminaling assets located throughout the United States and mostly in conjunction with our fuel and asphalt businesses, but we also have our Burnham terminal in Chicago which distributes all of our specialty products throughout the Midwest and into Canada.

Mid-Continent refinery is very popular right now and we’ve been very active in the Mid-Continent you can see from the map here that 28% of our production comes out of the Mid-Continent and about 62% out of Gulf Coast with very little exposure on either the West Coast or the East Coast.

Slide here shows again a little bit of our balance production slate, really balanced between fuels and specialty products and as you look inside each of those areas, we’re balanced within those segments. On the specialty products side of the segment, we’re very balanced between lubricating oils which include naphthenic and paraffinic based oils and processes oils as well as our full line of technical grade of fuel grade white mineral oil. Our solvent segment includes our aliphatic and Isoparaffinic solvents and our asphalt also comprise about a third of our production and those areas being between consisting of paving grade asphalt, polymer modified and emulsion product. So, we’ve got try to again even with the commodity like asphalt focus on the specialty side of the business. While Waxes make up a small a percentage of our business, they are very, very high margins and take a lot of tremendous amount of effort and focus as we are branded and packaged products which are somewhat new for us.

We've got seven key distribution centers throughout the United States, again Burnham, Illinois distributes all of our specialty products, solvents, (inaudible) waxes throughout the Midwest and in to Canada and then the other six facilities there came with the Superior Refinery acquisition. The [Louis] facility out in Tooele, Utah really is a nice strategic fit with our Montana plant and we can start asphalt from either Superior or Montana in that location.

We've had a very strong growth in our adjusted EBITDA; our adjusted EBITDA doubled between 2011 and 2012 to over $400 million in 2012 and really from the acquisitions and the favorable refining economics that has contributed greatly to this amount of growth. We've also been able to raise our cash distributions dramatically to our unit holders. So you take the distribution increases as well as our rate of appreciation of our unit price and we've really been able to deliver a lot of value and a lot of return to our unit holders.

We've been able to as I said grow our distributions every quarter for the last 11 quarters and our current annualized distribution is $2.72 per unit and that's up from $1.80 per unit just about 12 quarters ago, so a huge amount of growth and our yield remains one of the best in LTE space at 7%, over 7% that's again a nice return to the unit holders. Our yield does outpace almost everyone in the MLP sector. These charts compare Calumet to the Alerian Index and you can see every year for the last three years, we've been comfortable and well in excess of cash distribution growth compared to top 10 companies in the Alerian. From 2011 to 2012, we did grow our distributions over 20% and from an investor standpoint our yield also remains very attractive, most recently at 7.9% when compared to the Alerian Index yield of 5.7%.

I would like to now talk a little bit about what makes Calumet Specialty Products so special and that really comes down to the unique offering of specialty products that we produce at our facilities. I think what I enjoy talking to investors most about is that, refining is not just gasoline and diesel fuels. Calumet can take streams that other refiners would turn into gasoline or diesel and we further process and treat those streams to make a very wide variety of specialty products that go into a multitude of consumer, industrial and automotive end use applications and you can see from the pictures on the screen here that we have a lot of consumer product focused. You walk through the isles of your local target, (inaudible) you are going to see a lot of products, the Calumet products go into and these are growing markets for us and we continue to focus on not only growing here in the United States, but growing our focus internationally as well.

And we’ve got a very diverse specialty product customer base. No one customer accounts more than just a few percentage for our sales; with over 3,500 products and almost 5,000 customers, you can tell that no one can buy very much from us and that’s one of the things that differentiates us from a larger refiner and you can see from the names on the list here. Everyone from multi-national oil companies to multi-national consumer products companies and distributors and industrial companies that we are very proud of our customer base. Our customer base really lend itself for acquisition ideas as well, a lot of our customers we’ve had for decades and our small family owned businesses that may not and one of the family owned business that we have (inaudible) one of our more recent acquisition was actually a customer of ours.

Now a little bit about the competitive dynamics in the specialty products space, if you go back several years, all of the major oil companies were participating in these spaces and many have left or scale back their operations over the years, because these are really technical sales there, high level of customer service, we’ve got over 90 people in our organization that sell, provide technical service and provide customer service to our customers and that was just. As you look at the major oil companies, they are more interested in selling fuels and exploration and production. These products are very high barriers to entry; approval processes can take many years at times get your product approved, and once your product has been approved, you tend to have a lot of pricing flexibility.

There has been some talk lately about the capacity additions with Chevron expanding their Pascagoula, Mississippi refinery; Chevron has been working on this $1.4 billion expansion for the last several years, I know they studied it for many years prior to making the decisions to do the expansion and if you look at the chart on the left, this slide here, it shows the Group II Paraffinic base oil capacity in 2007, prior to a lot of the major oil company shutting down Group I capability and if you look at 2012, you can see that there is really a lack of supply in the United States; we saw imports coming in, the recession helped dampen some of the impact as not having our production online, so really with Chevron’s expansion is going and is really taking U.S. Group C base oil production back to 2007 type of levels.

And one other focus that Calumet is having is a significant focus on our international space; we are really adding to our special part of our international business, we have added people, we have added key executives that will help may Calumet and international company over the next several quarters, if not a couple of years.

One thing, we do have a picture of barrel crude down here, our lubricating oils are half a gallon out of the 42 gallon barrel of crude itself; again not a lot of volume, its small niche markets that were participating, so not a lot of attraction for major oil companies that want to come into this space like this. And as we continue with our international focus, we were leading on our multinational customers so that we can become their global suppliers.

We are also benefiting from the rise in synthetic lubricant demand and that’s one thing that the Louisiana Missouri expand acquisition did for us. As you see, motor oils and aviation fluids, refrigeration oils all move away from traditional mineral oils in to the synthetic, Calumet is positioning itself to be a real player in this space, not only through the acquisition of Royal Purple brand, but through the acquisition of the manufacturing assets in Louisiana, Missouri.

This slide here shows the base oil market production capacity by region and then also inside North America and you can see Calumet participates in all of these markets and the majority of these markets, we are a price leader and a market leader.

I mentioned wax early on in the presentation, Wax is a small volume of what we do, but it’s very high margin. And if you look at as a lot of the people have left the market, we’ve seen a lot of decrease in wax supply; over 20% of the market as a supply for wax is less the market over the last several years and as people move to our (inaudible) waxes again Calumet is trying to figure out how we can position ourselves to be a key player in this space.

And moving from specialty products into our fuel products now I’ll talk a little bit about that and how our strategic niche refineries really help benefit us; we’ve seen very strong fuel product margin, the 221 crack spread which is really the best crack to use while Calumet remains in excess of $30 a barrel on a year to date 2013 basis and you can see from the chart here how substantially it has grown over the last several years.

The strategic location of our assets also helps Calumet benefit from very wide crude differentials. All of the crude that Calumet process is price linked to WTI with the exception of the San Antonio Refinery and the Eagle Ford barrels are price linked to LLS at this point in time. At our Montana refinery, our Superior refinery and our Shreveport facilities we do benefit from being exposed to the LLS, BRENT, Bakken, Canadian differentials. And you can see even how strong those have remained on a year to date basis.

Calumet does, again recognized as a refinery and an MLP structure; hedging is a very important part of our fuel strategy if you will, our goal is to hedge about 50% of our planned field production looking forward two years down into the market. We've talked a lot about how our 2013 hedges were $5 a barrel better than our 2012 hedges, and you can see both an outright dollar amount and the volume standpoint, we got a lot of visibility out into 2014, 2015 and even into 2016. The values shown here are as of March 31 and we continue to be active in the hedging program obviously since the end of March when we reported these numbers.

Our assets are all located strategically and they are crude advantage locations. We've done a lot. We've got a lot of flexibility to be able to move crude from facility to facility with the rail project that we completed in November out of Superior. Superior and Montana both run Canadian crudes. Superior runs about half Bakken, half Canadian and we've even run some Canadian crude of our Princeton, Louisiana naphthenic refinery. Again trying to access local crude markets in all cases to take advantage of price differentials, also being a small niche player in the fields business we can take advantage of local market premiums because we are not really moving our fields very far out of the markets in which we are located.

And as you look at the production growth in the Shale plays, we should be well set up for many years to come to have price advantage crude. If you look at the Bakken and all the rig count there and the increased capacity there as well as Eagle Ford shale barrel, you know today Eagle Ford’s price at a less everything that I'm seeing in here and reading does that as Eagle Ford continues to extend production takeaway capacity will fall very short of where it needs to be and we expect to see very favorable crude pricing coming out of the San Antonio refinery in the years to come. We are also seeing a tremendous amount of growth in the Canadian oil production and again the feeds are superior in our Montana refinery.

As we look towards the futures market which is what we really use as we prepare all of our forecast and put together our growth plans, again this gives our investors visibility and to what our returns and what our EBITDA should be as we look out many, many years and from all intent and purposes and indications, Calumet is well positioned to have very strong economic for years and years to come.

I can talk a little bit now about how far we've come over the last 10 years. You know really going public gave us a vehicles to achieve the growth that we had dreamed about. We've thrown up the 2004 numbers compared to 2012 and sure these numbers in a employee newsletters a few months ago and the response that we received was so tremendous that we decided to talk a little bit about it here. If you look at it from a revenue standpoint, we've grown from $500 million in revenue to just under $5 billion last year and again that really takes in to account just one quarter of Montana, half a year Royal Purple, but again a lot of growth still to come for 2013.

Our adjusted EBITDA again was over $400 million last year. We've grown from about 350 employees in 2004 to over 1,250 employees at this point in time and our number of our customers has grown from around 800 to over 5,000. So we've seen huge amount of growth and we've built up a really nice management team to be able to capitalize on all that growth. Our production has grown from 26,000 barrels a day to 110,000 barrels a day and our total assets are growing from $300 million to $2.5 billion and we were ranked [No. 513] on the Fortune 500 list this year, so hopefully next year with the full year of all the acquisitions we will break that Fortune 500 barrier.

And I know a lot of people in this room referred me to talk a lot about the acquisitions that we were able to do over the last two years, acquiring a Superior refinery from Murphy Oil was a transformational activity for Calumet, not only did it gave us a large EBITDA base to build ourselves, but it gave us exposure to a lot more opportunities and a lot more bankers than we probably would had if we had not done that. I know when Goldman sold this Murphy asset they said, why would Calumet even be interested in something like that, our interest with specialty products company, but I think we have shown people that we can be more than just a specialty products company while continuing to grow our footprint in specialty products.

Of the $1.1 billion in acquisitions that we have done over the last year 18 months, it's been about half-and-half between fuels and specialty, so again really focusing on that balanced portfolio. And as we look at our acquisition criteria, a lot of people say first and foremost shouldn’t there be something synergies between them and in my perspective, my goal has been to build a solid base for Calumet. As we continue to grow, we can then start to look at the synergies.

And you look at Montana, you look at Superior, [Welford], those were all very profitable standalone businesses that may or may not have synergies with the base Calumet and really in all cases they had that synergies, but that’s not necessarily criteria for us. Again, we are looking for solid assets that will give us strong returns for years and years to come. We look more to geographic diversity, the feedstock diversity, and the specialty nature of the products coming out of those assets as we look at acquisitions and in all the most recent acquisitions. We’ve been very, very pleased with the employees that we’ve required, the assets that we’ve acquired. In all cases the prior management teams have invested heavily in the assets both from a human resource and a CapEx standpoint.

Our acquisitions have given us systems -- synergies across the Calumet systems. We have increased our feedstock optionality. We do have assets in every shale play in the United States which gives us flexibility as well as knowledge of what is going on. We have cross refinery feedstock sales that allow to optimize every stream coming out of every assets and we are vertically integrated. If you look at our white petrolatum, (inaudible) facilities, our packaging facilities, we can if we choose to source those almost the 100% from our refineries, which is not to because we prefer to buy on the open market, but we do have that flexibility. We are moving crude back and forth from Superior down to our Louisiana plants and we move asphalt through across the countries to different storage facilities to maximize and optimize markets.

We also have very diversified production slate with again a 50-50 balance between fuels and specialty products with over 3,500 specialty products that we produce at this point in time and the flexibility really to give our customers anything that they would want. We have got distributions throughout the Gulf Coast, Mid-continent in Canada and sell into wide variety of niche and used applications. We do have access to the enterprise product pipeline in the Magellan pipeline to service our fuel markets coming out of Shreveport and Superior.

As we look forward from an acquisition standpoint, we have got a huge amount of growth CapEx that we are going to be doing over the next few years. The Calumet is always looking for that next strategic outside acquisitions.

Looking at a lot of specialty products opportunities at this point in time and as I mentioned with 5,000 customers, a lot of those are family owned private businesses gives us really a limitless supply of people to target and relationships to build that people who aren’t interested in being acquired today you never know what might happen in a few years. And from a specialty product standpoint as we look at accretiveness of an acquisition, typically we look at between a six and eight times EBITDA multiple as we look at those acquisitions.

And our net fuels acquisition not sure there is many small refineries left to be acquired in the United States that maybe why we’re building one, but I think there is few left out there. In fact, I know there are few left out there. And these from a fuel standpoint, we look at about 2 to 4 times from an EBITDA multiple standpoint. And always again looking non-traditional for Calumet assets anything in the energy space are going to disclose by an income, we will be pursuing. And at this point in time, I’d like to turn the presentation over to Tim Barnhart and he can talk about our organic growth opportunities.

Tim Barnhart

Thank you, Jennifer. Good afternoon. In an efforts hopefully build at least a little of what Jennifer talks about early on, I’m going to spend some time here this afternoon discussing organic growth in Calumet. Jennifer has talked about the volume of M&A activity we done in last 24 month and she also discussed very early in her discussions the Calumet’s philosophy of buying a very early owners of private entity buying underutilized assets and reproducing those assets to make them profitable. I don’t think any of the projects I’m going to talk about today our assets that were unprofitable or potentially underutilized. I don't think you get too far from your rooms and even though we spent 24 months (inaudible) M&A activity, each piece of business that we acquired we spent an awful lot of time and energy trying to understand how we could optimize it inside our portfolio.

With that we will try one of these buttons. Here we got. This slide talks a little bit about capital spending, you can see the historical numbers. We've been the last couple of years averaged probably $40 million in environmental and maintenance CapEx. You can see in 2013 that's jumped to $127 million. That $127 million includes planned turnarounds at Superior and Montana that were on a -- they are on a five-year cycle so that's a significant portion of the $127 million. I would also point out Jennifer talked about environmental and maintenance spending kind of in general. The $127 million also includes a lot of one-time one-off (HSE) kind of items that we are doing proactively in this environment.

I did want to make one other point, you see the bullet no major regulatory environmental or mandates on the back, and it discusses EPA proposed territory standards. I will point out with one of all our sites today meet Tier III standards with the exception of Montana and we are going to talk about Montana project in a little bit that we are going for a growth reasons, but one of the outcomes of that growth project will be the Montana, will make Tier III standard gasoline.

Growth CapEx, currently underway right now. You can see the $275 million Montana refinery expansion, the Dakota Prairie, and expansion of the Louisiana, Missouri site, Superior dock loading and San Antonio expansion. I'll discuss all these in turn. I think it’s particularly appropriate to notice we anticipate between two years and four years simple pay back on these investments.

The Great Falls, Montana refinery, purchased last October, nameplate data 10,000 barrels a day, the current plans in this project is currently underway to expand the plant to 20,000 barrels a day. We will build 20,000 barrels of crude unit. That crude unit will be muddled up to run higher pay crudes than Montana can currently run today. We have purchased a 25,000 barrel a day hydrotreater] underground in [Boxes] in California from [Alon]. Montana will continue to be a fuels refinery, manufacturing primarily gasoline, diesel, jet fuel (inaudible) for the Canadian market and asphalt.

As the slide said, we expect this project to be approximately $275 million to be completed by the third quarter of ‘15, with some elements of construction starting late this year. We also forecast the annual adjusted EBITDA between $130 million and $140 million a year. We've also discussed briefly the Dakota Prairie refinery, a diesel refinery in Dickinson, North Dakota, joint venture with MDU Resources, 20,000 barrels a day. We’ll run local crude. The crude will be delivered by both pipeline and truck. The plant will run all Bakken crude. The investment premise North Dakota is extremely short diesel, a huge net importer of diesel, at this point will provide just a small portion of the total net inputs to North Dakota.

You will see the location of the new refinery on the map just west of Dickinson, North Dakota. As far as slide selection goes, you can also see that we have reasonable access to both rail, pipeline and highway access. Dickinson, North Dakota is located in the southwestern portion of (inaudible). It is one thing considered on the edge, on the southern edge of the Bakken development. One might also ask, why would you build a refinery in Dickinson, North Dakota as opposed Williston. I think when we started this process, this area was just starting to build out. If any of you have been to Williston, the public slightly call the zoo up there a lot days. It’s just phenomenal. The activity is going on. We selected this area this region of North Dakota in particular as we wanted to be an early mover in this region, we want to become an impact we had an else projects, we wanted to be ahead, so I think we’ve been relatively successful in that regard.

In Louisiana, Missouri esters plant, we acquired this plant last year. When we acquired the plant, the plant was very much sold out there with a little bit incremental capacity gain that we had and it had an extraordinary limited customer base. In our very early marketing efforts we have identified a lot of additional asphalt products, a lot of additional industry that we could be selling into. We think there is a huge opportunity for growth in this area, so we said about to double the plant size and frankly the engineering is being done in such a way, these future expansion can also be brought it onto this, so this plant once it reaches 75 million tons a year.

Lake Superior crude oil, we have announced this, we have got an awful lot of interest from an awful lot of potential customers. We have the conceptual design in place. We are attempting to get permits from the state of Wisconsin. We have feed quality estimates for this project. This project uses some new assets. It does give you some existing assets that are owned by the Superior refinery that are currently not being utilized. We have checked those assets. Those assets are fine. They are ready to use. So should we are able to get permits and move forward periodically with the crude oil loading on Lake Superior we are all ready to go.

Obviously this is up. This business is somewhat of a spot business depending on the [UHCWPI LLS] differentials. Jennifer mentioned earlier the fact that we do have the ability to trek through between sites, a big piece of that is this recently completely crude logistics project at Superior Wisconsin. We will see we have 500 railcars that we can load, Bakken crude of Superior and either shift to our refineries in the south or we can shift the third parties. The differential is about $10 a barrel in shipping cost from Superior to Gulf Coast. So to a certain extent there is some opportunity business there and the North Dakota sweet is a buyable barrel actually a Shreveport as it displace some relatively expensive [LLS] price barrels, Shreveport is just close enough to the Coast with the LLS influence on crude pricing can be problematic at times.

San Antonio, our latest, the greatest acquisition, two major projects ongoing there as we speak. The first project is a fuels upgrade project, we purchased a San Antonio refinery, we purchased a facility that did not make formulated gasoline. San Antonio does make reformate, they fractionate reformate into a light rich reformate and a heavy reformate, both of which are sold to burners and compounders to move into the fuels market. This project in particular is to upgrade our capacity to be able to blend, store and ship finished gasoline. We will be able to begin shipping finished gasoline out of San Antonio in a limited way in late August of this year.

The second project is a crude expansion, which centers primarily around the prefract tower and some of our equipment in the crude unit. Additionally, this project will allow us to upgrade or reformate fractionation capability and allow us to expand our gasoline offering to about 4000 barrels a day to allow us to increase our crude unit capacity to 73,500 barrels a day and we anticipate this project will be completed by the end of the year and it’s actually all the major equipments ordered right now so we should be in pretty good shape.

We continue to spend a significant amount of time and effort to understand how Calumet can capitalize along the disconnect between natural gas pricing and crude pricing. We partnered with Ventech, an engineering company, and Velocys, a catalyst technology provider to help us through a feed quote estimate for a modular plant in our current EPA facility. We are also working with Velocys and Ventech to fully understand how we can leverage this technology throughout the Calumet organization. We spent quite a bit of time actually last week at a conference trying to be sure that we understand the long-term GTL ramifications in the United States and what price as well. We haven't committed to actually build this project yet but we are pretty committed to understanding and I think at the end of the day we are going to be pretty committed to planning the game somewhat.

And with that I believe I'm going to turn this over to Bryan Yourdon to talk about marketing.

Bryan Yourdon

Thank you. I am just going to spend a little bit of time talking about our initiatives on the branded and packaged products primarily focusing on Royal Purple, our synthetic product that service both the industrial and retail as well as commercial markets and the TruFuel product which is produced in our tailored packaging facility in Shreveport.

As acquisitions, they were both kind of diamonds in the rough. They were very small as far as their application of the technologies that they have, Royal Purple is very strong in their Texas region, very strong in several specific industries, well completion, as well as had a strong following in the automotive market. However, we saw a tremendous opportunity to grow outside both geographically and through product expansion. So some of the things that we're going to talk about touch on the products that we're going to expand, how we're going to leverage the brand that we have in both Royal Purple and in TruFuel and moving in to these new areas.

As mentioned, we currently have limited exposure domestically. We do have coast-to-coast distribution but it's something that we know that we can continue to grow in each one of those segments; specifically, in the international markets where Royal Purple has had some success, but almost without trying. We had been very receptive and we would receive increase for products to ship domestically but we did not actively go after and we are very excited about Calumet’s commitment to both leveraging international markets for Royal Purple as well as for the products we produce at packaging.

The three areas that we tend to focus on in this group are the commercial, retail and industrial almost in reverse order. Commercial is a market that we see tremendous opportunity and we have limited exposure to it now, but we know that as that market continues to grow, the product slate that we have available to us at both to those facilities is very strong and can be applied significantly in that market. Retail, we have a very, very loyal following for both sets of products, with the TruFuel product line and Royal Purple; our focus on that needs to be getting more products on the shelf and that’s where our focus is on the retail. We're expanding the relationships we already have in order to put more products in front of the consumer. And last industrial, that’s the heart and soul of Royal Purple’s business; is serving industrial markets. We've had tremendous opportunity and success in several different areas within industrial, whether it would be energy and power, well completion, pulp and paper even extending into the mining industry.

I think it's important to note the power that we have in both of those brands. Royal purple is one that once it is used, it's a very technical product. We have the best product in the market head-to-head and we can talk about why we do it, because most of the sales people that we have are certified lubrication specialists. That group of individuals goes in and we had a great story with one of our own refineries before we had actually purchase Superior Wisconsin, Royal Purple had gone in and overtime continued to sell them on the value of our product.

Royal Purple is, as I mentioned the best products in the market. But it's also the most expensive, and that’s a position that we plan to maintain. So part of our sale has to be convincing our customer, why overtime it is the best value for their application. Not something that we are able to do with a very sceptical customer and Superior in showing that we would be able to actually save them energy, where they would be afford energy savings overtime by simply changing the lubrication that we are using to Royal Purple. So we have a very strong brand within that application.

TruFuel is not too different; TruFuel is also a technical product that meets the specific need that we simply have to engage the consumer as to why they should use it, we are meeting a problem at many times because the customer doesn’t even know they have, and so they are not too dissimilar from their sales process. Our strategy is primarily focused on the application of resources. The resources that we have to apply first and foremost is human resources; we are not production constrained, we are sales force limited and so as the (inaudible) at Calumet and at Royal Purple, we are hiring, we are significantly expanding our focus through multiple channels to identify personnel who can help carry out these products into the market place.

And we do it through two tiers, first is our front line sales organization that works from a top-down sales perspective that works with the purchasing agents and buyers who control multiple facilities, but also we are looking to grow our technical support functions. These are the guys who boost on the ground or boost at the well head making sure that our customers have the product that they need, that they are constantly servicing their equipment properly, that they are leveraging the services that we provide in order to continue to up sell those customers, so they are leveraging more and more of that customer relationship.

We are also going to expand into new products, the slide notes that we are going to sell or launch more new products in the next six months than we have in the last three years and that’s not an understatement. We have a tremendous brand, with two tremendous brands in Royal Purple TruFuel and we are ready to leverage those brands and take the equity that we have earned from TruFuel our customer based in order to get into new areas, so that we can leverage the channels that we have already got in place.

So that point we want to add, identify add on product offerings, some of the products that we are going to leverage are going to be ones that we already call on that customer, well completion is an easy example. We can produce and we are launching rock drill oil that we will sell to the same customers who are currently purchasing our lubrications for the rotating equipment at the well heads. Additionally the products that we sell under retail, we have got one of the products that we are launching into the fastest growing segment of the (inaudible) motor oil, the high mileage for oil geared specifically engineered for cars that have more than 75,000 miles, the fastest growing segment in the PCMO market and Royal Purple did not have a product in the marketplace. Now that we have got buying from lots of our customers, we have leverage our technology team and have produce the best performing high mileage oil in the market and that we’ll be launching here in the next couple of months.

We also want to expand our grass-roots marketing efforts. Royal Purple’s marketing team have been very effective with the budget that they have been given. We are continuing to invest, we’ve grown our budgets this first year and taking advantage of last minute opportunities at reduced rates for increased exposure by over 17% this year. We’re going to continue to leverage the marketing partners as well as our channel partners on the TruFuel side when we start talking about OEMs in just a moment.

We’re also going to identify and exploit cross selling opportunities. One of the benefits of Calumet sales team is that we all call on about 5,000 customers. So one, as an example of what we’ve been able to do Royal Purple is looking to get into the do-it-for-me segment, selling to dealers and quick lube change facilities, perfect setup for a product offering. We’ve struggled with being able to afford or to provide enough resources to go after that market.

Calumet Packaging our facility in Shreveport has sales people directly tied in with organizations that sell into that market and so over the last two months we’ve trained our individuals at Calumet Packaging on the Royal Purple product offering. We’ve met with distributors as part of an organization called an AIOD and are now launching Royal Purple through Calumet Packaging out into the market to take advantage of the do-it-for-me segment that we have not been able to do previously.

Just a little bit we’re going to talk for just a moment on North American demand primarily on the industrial side, we have a value sell product; people are always going to look on how they connect send out the life of their equipment. We provide significant services surrounding oil analysis, detailed support showing how they can save energy by using proper change over time. So, the industrial demand in the United States will continue to grow as people continue to invest in the lubrication versus new equipment.

Other growth, as cars get older people are going to continue to utilize more maintenance program, the lubrication, sale of Royal Purple into that market is incredibly strong because cars tend to last longer when they are properly maintained. Royal Purple provides the best product in the marketplace for that. In engineered field this was something that was brought from the increase in ethanol and or gasoline. Right now for small engines it’s the bane of the small engine market. I just recently bought a lawnmower and on the gas cover it said your warranty will be void if you use gasoline that has a greater ethanol content than 10%. So as we migrate to E15 the need for an engineered fuel specifically formulated for small engines will continue to grow and that's exactly what TruFuel is. Some of the research that we've done indicates that if we can get a 20% conversion rate of those interested in engineered fuel, it turns it into a multi billion dollar opportunity.

As we continue to grow in the Royal Purple segment the balance between our product offerings and the percentage that they make up of our total business will remain roughly the same. We see just as much opportunity in our circulating fluid that address rotating equipment our greases all of those are going to grow at about the same rate. We are just going to continue to push to grow them faster.

On the automotive side its not too different. We are going to continue to grow within those same areas; the only thing that we might mention is that the other as we continue to expand that product offering into additional product focused on automotive chemicals and that that might grow even a little faster. Throughout that entire growth process however we are going to maintain our gross margins anywhere between 40% and 70% which is where we are our currently.

On TruFuel it was kind of difficult to explain the future opportunity that we have for TruFuel and so what we did was we showed when we first started the product it was primarily it was [50Fuel] TruFuel had started off and we created the category. There was not an identified need in the marketplace from a consumer standpoint. However, all of the OEMs had identified that this ethanol and gas and the problems that it was going to cause for all of their small engines was going to be a huge issue. TruFuel takes that issue and turns it in to an opportunity and so what we've shown how we've been able to engage the different OEMs overtime. So in addition to producing the primary brand known for engineered fuel in the marketplace, we also produce and partner with all of the OEMs focused on that space.

So in addition, when you walk in to a store and you see, lets say you walk in a Lowe’s or Home Depot, you will see TruFuel everywhere in the store. Everyone is very excited about the new category and because the product sales have grown significantly, they are continuing to give us more shelf space. You will also start to see our OEM partners; (inaudible) you won't see steel in a store you will in a dealer, Echo, (inaudible). Each have come to us to engineer and produce the product and engineered fuel for their brand as well. So what we're able to do is leverage warranty programs. So if you were to walk in by steel, chainsaw today, if you purchase four cans of the Motomix, it will extend your warranty an additional year. Each one of the OEMs are putting an additional focus on the use of engineered fuel and so as this market continues to grow, we will grow right along with it as we're the producers of both TruFuel branded products as well as our OEM partners.

As an example of some of the growth that we've seen, this represents year-on-year weekly growth at retail from a couple of our retail partners. So this is simply TruFuel. This does not include our OEM partners. And you can see on a weekly basis, the increase that we're having year-on-year, simply as more customers become aware of those problems, but also alter the TruFuel solution.

Our goals are pretty clear, in the industrial market we are looking to double our sales, 2018 is our stated goal I think our team feels is very possible and probably that we will be able to do that before then. In order to do that we are going to continue to dig in deeper to the markets that we are already strong in by applying more human resources, by getting more sales people into the market. We are going to continue with the advantages that we have, we’re exploring the advantages as we have in the fuel and oil best market. We are going to be able to go into and use the relationships we have of some of our customers like Baker Hughes and expand our relationships to take on, or to take advantage of the continued expansion of the well completion program. We are going to continue to focus on the core energy market and especially in the international realm, we are going to have opportunities to take Royal Purple product and put it into refining and petrochemical processing plants around the globe.

Natural gas and power generation; we’ve had significant success throughout the United States, and we are waiting, we are about to make some significant announcements regarding wind energy and the use of our lubrication in some of that equipment as well. And then international expansion is something that has been a huge focus for us, and the benefit that we have there is we are going to be able to identify and work with the product base that Calumet have across its entire operation. So we can work with the international team at Calumet to sell not only the base oil products, but also the mineral oil, transform oil products as well as the finished good products that Royal Purple produces in the international market. It affords a significant benefit, when we go in, in order to identify specific areas of distribution and specific industries that we can target.

In the retail growth markets there are three particular areas I am going to talk about, the do it yourself market which is our retail focus for Royal Purple. Our primary focus for the next six months to a year is to drive shelf growth. We have been, based on the commitment that Calumet has made and our continued press in Royal Purple’s growth we have great feedback from our customers in fact we had one of our national partners provided with the opportunity and to put every single one of our retail products into their store be either warehouse distribution. So you can now purchase every Royal Purple consumer product at this particular retail and another will come out here in another month or so. So we are going to continue to put more purple on the show that continued exposure is going to grow through our marketing campaigns as well as to the promotions that we are going to do at the shelf level.

To do formally market is obviously something that we are focused on; we mentioned our cross-selling opportunities with our friend Calumet Packaging, but we are also going to be able to leverage some of the marketing and promotion that we have done else where as well. Finally, TruFuel, is a multi-billion dollar opportunity and thankfully we will be able to partner with our channels, we will be able to work with our channel partners in order to educate the customer base on the need and the purpose of this fuel. Going after that market under the banner of TruFuel is one thing, having the support of (inaudible) to help growth that category going, only going to grow at that much more.

And with that I am going to turn it over to Pat Murray, (inaudible).

Pat Murray

Thanks, Bryan and thanks everyone for coming today. We’ve heard a lot of exciting themes in the conversations so far and Jennifer talked a lot about the transformation of the company, and Tim has talked about what to be served as next wag of transformation and events into M&A opportunities and lot of organic growth and then and Bryan just as a slice of all the different initiatives that are going on across the company to try to grow.

But the real cloud of where we are from a financial perspective, our financials have never been stronger, we build a business in a disciplined way, we’ve used leverage cautiously, but we’ve been able to deliver a lot of value. So, I think the future remains very bright and as stories becoming more and more seasoned, I think no one else is going to do a great job for all of you in terms of expanding the story and this is a first a lot of interesting to tales about the company I am sure.

Really, we’ve grown in all these important categories over the last couple of years and as we said with the acquisitions and the strength of the base business, we’ve doubled adjusted EBITDA which for us is the most important non-GAAP measurement of our performance and at the end of the first quarter on an LTM basis we were at $415 million of adjusted EBITDA and our distributable cash flows has grown accordingly.

But I think in terms of the theme of being disciplined about managing the capital structure, you can see our distribution coverage is really high relative to the sector and we think that’s important because of our structure, the assets that we have playing in the space and there is some volatility to be certain in the business. But we handle that in a few different ways as we’ll talk about but maintaining coverage, which we think is prudent in the business is now at 1.2 times and 1.5 times around is important and you can see here at 1.6 at the end of the first quarter, but meanwhile, in maintaining that coverage ratio, we still been able to grow our distribution significantly 37% on a CAGR basis since 2009.

In terms of credit statistics, again, we’re starting to get the recognition we think we deserve from people like the ratings agencies as we move forward here, but maintaining a disciplined approach of being very balanced in our way in which we raise capital. Our goal is to be very balanced, about 50-50 between debt and equity and we've maintained that ratio over time. As you can see about 46% debt to equity at the end of the first quarter and then our leverage has really come down over time as we enjoyed the benefits of successful integration of acquisitions, making sure we pay the right amount for each acquisition and that we finance it prudently and then we find ways to continue to grow the business. At the end of the first quarter we were 2.2 times leverage, our goal is to be under 3.5 times. So you can see we still have room for growth, but we look at this leverage we like operating at this realm and you can see we've walked it down from 2008 when we were at 3.7 times down more than a [2.5], very proud of that.

And in terms of availability in the business, I don't think anything illustrative this. The challenges are running these assets, we are in 2008 when we saw commodity prices more than tripled in terms of commodity prices on the oil side. So what we were able to do is really that started through a full scale analysis of a working capital how it behaves the different crude oil prices and so we are not even concerned about what the outright price of crude oil is because we know we can adjust our product prices to customers, but through this period we learned a lot about how you manage the business in times of volatile commodity prices. But you can see we've been able to grow availability and that's critical in our operation, we have more than $750 million engaged in working capital between inventory and receivables, but our availability is at the highest point its ever been almost $500 million on revolver and that's before an equity offering, a opportunistic equity offering that closed at the beginning of April for another $220 million. So the partnership remains very liquid, very important to stay that way to also take advantage of the next opportunity and help fund a lot of the capital growth projects that Tim talked about.

Jennifer touched on our hedging program and those of you who are familiar with our story know that this is become, it's one of the pillars of sort of risk management. It's a way we can sleep at night knowing that we’ve got a lot of years out hedged in some of these more volatile commodity markets and we remain committed to hedging on the fuel product side as a business primarily, that’s why we're hedging the crack spread because of course as, even though we're selling in local markets on the fuel side where we often enjoy a local market premium and of course Jennifer talked about our exposure and leverage to the Midcon, it's been very favorable. It's still an area where we think it's important to take native positions on the crack spread.

So on the fuel product side, we’ve got a strategy that where we're employing hedges out in to 2016 on the crack spread side and we want to look at about half of our production. We like to have exposure in the out years. So we never want to hedge everything. If you don’t hedge everything, then you don’t have the risk of not producing to match the pay for transaction which we think is of course important, but that’s a longer-term program and we've been involved in that since 2004 when we got involved in fuels production at Shreveport. We started hedging crack spread. So we will continue to do that. We don’t speculate. We look at our anticipated production of fuels and then think about how do we fill those positions over time. We're able to be opportunistic.

As Jennifer mentioned, our strike price of this year is about $5 high than they were last year. We're still seeing lots of liquidity in the market out in to 2016 and one of the evolutions of our capital structure is moving from a secured form of debt financing in a term loan to unsecured notes and what that allowed us to do, which provide our fixed assets as collateral in a collateral trust agreement, so that we are able to expand a number of counterparties that we have who we were hedging with and at the same time allow them to give us very large credit lines, which allows us to cover the right way risk in their minds in terms of the value of our assets as crack spreads move up and down, but also allows us to extend out a position into 2015, any given time at more than 20 million barrels hedge. That can create a lot of volatility in a mark-to-market environment.

But this is how we manage a program, but now we are getting better execution under hedging with more counterparties and we also don't have the liquidity risk in a program because of our crack spread exposure relative to all of these credit lines. We are also -- we have historically done natural gas hedging. We continue to evaluate opportunities to hedge natural gas. This is one of the more significant cost in our operating cost structure and here historically we locked in winter prices through swaps, swaps through 75% of our interstate required. I think in today’s market we are looking at it more broadly in terms of looking at the full year and seeing opportunities to hedge natural gas. So this is a very important part of that discipline approach I talked about.

In terms of our debt profile, again 2.2 leverage at the end of first quarter and we are seeing through to our goals as being less than 50% debt to total book. And so our debt today is comprised very little drawn under the revolver, as I mentioned about $500 million available under the revolver at the end of the first quarter and our long-term financing is in the form of three series of unsecured notes, two maturing in 2019 and one maturing in 2020. This is really the right capital structure for us unsecured notes combined with an ABL revolver that moves as commodity prices move and gives us the flexibility that we need. We have $850 million revolving credit facility, about 13 lenders involved, certainly more always welcome and ultimately will probably be joining the group we serve today. This is a good structure for us as our working capital assets increase in value. We are able to borrow additional amounts under the revolver.

Our availability increased between the fourth quarter and first quarter by about 36%. So again this is through prudent management of debt, prudent management of working capital and you can see just clear we come from where in the business really in 2008 where commodity prices had risen dramatically and fell dramatically. It was a challenging seems to be honest, but really what we have done over time is we built that base level of liquidity up to point where we can sustain some fluctuation in commodity prices, but this is really closer to where we want to operate and it also provides opportunities at the beginning of the year of the San Antonio acquisition. We have through draw in our revolver, it’s about $115 million, that is where we want to be, we want to be able to be opportunistic with capital and rising it, but we do see the revolver as primarily working capital facility, it does have function in M&A activities.

We have been very busy in finding all the growth and maintaining balanced capital structure. You can see here we’ve raised about $1.3 billion since the IPO on the equity side and about $1.3 billion since the IPO on the debt side. And again we moved into unsecured notes structure which creates a lot more flexibility for our business. Really we’ve done in the larger acquisitions. We tried to fund them with 50% debt, 50% equity. We combined equity offerings with that offerings to keep leverage within target. And we’ve been able to see an increasing ability to raise equity on an opportunistic phases, I think people are giving us credit that we will be able to put the capital to work in pretty short order.

We’ve been very busy in 2011 forward. As Jennifer mentioned the acquisition of Murphy really was our largest financing effort and we combined an equity raise and a debt raise there. And then we look forward in 2012, here we did more debt, but we also raised equity, prospectively did an equity offering ahead of Royal Purple and then we’ve been active this year in really to clean down the revolver beginning of the year and then an opportunistic equity raise at beginning of April to further enhance our liquidity.

We remain focused on reducing the cost of capital. The yields on the equity has come down as we continue to increase distributions, get out story out there more, that’s been an important part of this familiarity of the story of work flow. And then we’ve got a I think a very nice following with our bondholders in terms of follow though, but we said we’re going to be able staying within targets, staying within leverage target and we’ve had good experience in continuing to dialogue with them and raise capital as we need to.

This really tells a story of increased investor awareness, I think in Noel’s job will be to further increase investor awareness, nut we’ve seen additional leverage pick up from several banks, we’ve got several in the work and really broadening up the story by frankly becoming big enough where people can’t really ignore us anymore. There is space now that in the MLP space that that has other refining assets, but again just our own sheer size and getting bigger has increased awareness and you can see this is the market capitalization has grown, the flow has grown of course in terms of daily transaction volumes and that becomes very important as we continue to talk about the story.

We have positive news I referenced earlier just a couple of weeks ago Moody’s increased our family rating up from B2 you to B1 and our notes were a notch higher from B3 to B2. And again I think this is a further progression of explaining our story, explaining to people that the footprint is much larger that we’ve balanced in not only raising acquisitions in specialty side but also on the fuel side and maintaining leverage. So those types of strategies have paid off in terms of acknowledgements from the ratings agencies and those are important and also they maintained the positive outlook on the rating which certainly was an upgrade, sometimes they can move to stable, so we took that all as a favorable news and really acknowledgement that the company has indeed reached a new level.

Then to just touch briefly on couple of public policy related items, Tim referenced earlier, I can't really add too much on the Tier III that really we don't think that that's a material impact to the company and that certainly is good in terms of getting ready for requirements that come to the fore in 2017 and then on the (RINs) issue, we have publicly stated what we think our expectation is around our annual purchased cost of RINs in $32 million to $40 million range. We do have ways to mitigate RINs. We do have a biodiesel plants at [Dickinson] facility that we can use and of course we don't blend on a merchant level a huge plugged inventory sold on the distribution system or at the lab. But those are two recent policy issues that we want to make sure everyone kind of knows where we are on those.

And I'll invite Jennifer back up and we’d be happy to take questions from the group. Thank you.

Question-and-Answer Session

Jennifer Straumins

Thank you, guys. I appreciate everyone’s time and attention today. And in conclusion, we’d just like to say that I really feel like we've been successful on executing our growth strategies and providing strong returns to our unit holders. [Speak up] with our hedging program, the growth in our organic assets and the growth in our marketing programs, we're again well poised as we look forward three and four years in the future to continue to provide this really strong return to our unit holders. I want to take a moment just to thank all of Calumet’s employees, all of our customers, our Board of Directors, all of our suppliers who are continuing to support us in our current endeavors and our future endeavors. Just as a point of logistics, we're going to hosting a cocktail reception in the back room there as we a few of us go down to close the market and then we will be back up to share cocktail with you and I believe we’ve got about 20 minutes or so for questions at this point in time if anyone has any.

Unidentified Analyst

What can you do, what can’t you do and how does it affect your ability to pay powers of distribution?

Jennifer Straumins

Sure. The question was as we continue or as we focus on growing internationally, how does that impact us from a tax standpoint as an MLP. If we look at the straight outright sales of products produced here in the U.S., we sell to our multinational customers typically on a FOB U.S. basis. So that would not impact us at all. As we look at acquiring assets, packaged or distribution in other countries, we would have to look at the tax impact so that obviously we would have to pay tax on the repatriation of any income into the U.S. There is ways around that from a cost loading strategy, keeping the investment in country and continuing to grow. There is a variety of different things that people do.

Unidentified Analyst

And then quickly on the RINs issue, you mentioned obviously there are certain things you can do to mitigate including use of biofuels plants so forth, is there not the you want to make an investment decision based purely on regulatory dictates, but is there a way that you could work yourself out of this annual cost of complying and also in a profitable way?

Jennifer Straumins

Unfortunately I think the answer to that is no. As we look at our biofuels plant, as we look at blending ethanol all you are doing really is moving the cost from one area to the next. Our cost structure for biodiesel right now is in that $5.5 to $6 a gallon basis, and as you’re willing 10% in biodiesel, really as you do the math across really all through of your opportunities whether it's blending ethanol, producing and selling biodiesel RINs or buying RINs on the open market. The economics are all fairly comparable.

Unidentified Analyst

A quick question. The MLP in the general partner, will there be a plant timer, is there a thought process that eventually buying back to JP?

Jennifer Straumins

Honestly, we do have to look at that Calumet. As an MLP we do have distribution right to our general partner level. The most recent distribution increase that put us into the 50-50 split for the general partner and the LT units, so that’s something that we have been working with our bankers and our advisors on how do we go about making sure that LP can continue to grow in a very efficient manner.

Unidentified Analyst

I guess just back on the international opportunity something that you guys have talked about for some time. Maybe if you could just discuss a little bit more kind of the barriers that you see to grow internationally, is that just a function of people and marketing and more bandwidth that you have or what do you think it takes to get traction in markets there were maybe the products on as well known and how long the process is that?

Jennifer Straumins

Sure. As we look at growing internationally, we have taken several steps towards being successful in that area. We’ve hired the new Vice President of International Sales and Business Development, Harji Gill who is sitting right across premise, say, hi, Harji. Harji’s got over 20 years in the refining space and brings a lot of international experience to the table that Calumet really did not have previously. Royal Purple also brings some international experience to the table that Calumet did not have prior to that acquisitions. We are looking, we are doing as we see our multinational customers move to more towards one global suppliers.

We are really trying to think outside the box and it stands how we look at going into the market. And I think now that we are bigger with the stronger balance sheet, we can afford to store products outside of U.S. whereas we couldn’t have done not a few years ago. And as you look at partnering with people in other countries, there is a huge amount of opportunity. If you look at some of our biggest product lines, waxes and electrical insulating oils and oils, we’re one of the leading premier supplies of the transformer oil and that demand is growing, lifts imbalance in Asia as Asia continues to become industrialize. Again, a large amount of opportunities. We’ve always really focused on domestic sales because of production limitation. But as we continue to add to our team and continue to expand capacity, we want to turn our international business into a ratable long-term business relevant than just to partners it.

One more example of that is a branded testify business that we bought out of Exxon in 2003 for the oil check. We are working towards getting that product license on a global basis rather than just focusing on U.S sales at this point in time. So a lot of opportunities, everything people take longer than you hope it well and you’re launching initiative, but we’re really to get retraction with edition of how it’s working.

Unidentified Analyst

And then what about acquisitions in the specialty products business, obviously you’ve had success with [inaudible] there, and you talked about other customers that were potentially being targets just any kind of traction that you see?

Jennifer Straumins

Speak that a little bit louder.

Unidentified Analyst

Just acquisitions on the specialty product side, what kind of opportunities that looks like and how you view kind of growth through acquisitions versus about the organic opportunities that you’ve laid out here?

Jennifer Straumins

As long as the capital markets remain open to us, we can explore both organic and acquisition growth opportunities and those markets have been open and continue to remain very strong from our perspective. From a specialty product standpoint, we’re continuing to look at geographic diversification and the branded and packaged business. We’re continuing to look at different brands. There are a lot of small niche brands out there that complement our production slide and we’re approaching a lot of these companies, while we've been out doing a lot of module investor roadshows, we've also been doing a lot of acquisition roadshows where we've been going around with our business development team and visiting customers and businesses and laying the ground work to doing some of those acquisitions.

Unidentified Analyst

Last one for me just you mentioned outside of the fuels and specialty products the midstream, are there kind of growth opportunities, maybe if you could just expand on that what you've done internally to be able to evaluate some of those opportunities in Michigan business beyond just your core businesses right now?

Jennifer Straumins

Sure. We've added some key players to our crude development department and we've also really expanded our business development area as we look at midstream assets to me that involves some of the anything natural gas really whether that's NGL, LNG or GTL and those are three areas that Calumet is very interested in growing in. I don't see any more.

Unidentified Analyst

If you would walk through the issues that you had in the first quarter with the turnaround and maybe give us some confidence that that's behind us next three quarters will be less problematic.

Jennifer Straumins

Sure. Again as a specialty products, we were only specialty products company, our turnaround on an annual basis some part of every plant was being turnaround, so it’s really smoothed out from an earnings perspective. See more in the fuels business now our turnaround will come once every four to five years and be larger and more intense in nature. We are just now -- Superior was down for four to five weeks on a full refinery turnaround. So we see as in the second quarter it will be impacted by that and we've been very clear with people really since the acquisition of Superior that we're having this between $30 million and $40 million turnaround that is going to hurt the [staff] in the second quarter.

If you look back to some of the activities that impacted our first quarter, you go back to late 2012, we had some operational issues that impacted production, volume and quality out of our TruSouth refinery and really we went in to our turnaround at that site, running with below plant rates and that plant did have a turnaround in the first quarter. So the investment for that impacted [DCS] but also the reduced production over the course of the first quarter impacted DCS from that standpoint. We don’t really release or even talk about plant by plant economics, but looking across all other segments of the business, everyone has performed according to plan, according to our budget. It was really the unintended, unplanned downtime throughput impacted our first quarter number as well as the RIN purchases.

We spent $11 million buying RINs in the first quarter. So today I think all of that should give you confidence that while the second quarter as we projected will have a lower DCS than it would if we didn’t have to down for turnaround. Looking in to the third and fourth quarter, we expect to return to more normalized DCS rate.

We really appreciate everyone’s time and interest today and look forward to visiting with you. Please, go enjoy.

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Source: Calumet Specialty Products Partners' Management Hosts Analyst & Investor Day Conference (Transcript)
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