Calumet, Inc. /DE [CLMT] Filings

10-Q 1 clmt-20240630x10q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED June 30, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 001-42172

Calumet, Inc.

(Exact Name of Registrant as Specified in Its Charter)


Delaware		36-5098520
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

2780 Waterfront Parkway East Drive, Suite 200
Indianapolis, IN		46214
(Address of Principal Executive Offices)		(Zip Code)

(317) 328-5660

(Registrant’s Telephone Number, Including Area Code)

None

(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

Securities Registered Pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	CLMT	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

On August 9, 2024, the registrant had 85,893,687 shares of common stock outstanding.

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CALUMET, INC.

QUARTERLY REPORT

For the Three and Six Months Ended June 30, 2024

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	Page
Part I
Item 1. Financial Statements	4
Calumet, Inc.	4
Unaudited Balance Sheet as of June 30, 2024	4
Notes to Unaudited Balance Sheet	4
Calumet Specialty Products Partners, L.P.	6
Condensed Consolidated Balance Sheets	6
Unaudited Condensed Consolidated Statements of Operations	7
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)	8
Unaudited Condensed Consolidated Statements of Partners’ Capital (Deficit)	9
Unaudited Condensed Consolidated Statements of Cash Flows	11
Notes to Unaudited Condensed Consolidated Financial Statements	12
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
Item 3. Quantitative and Qualitative Disclosures About Market Risk	60
Item 4. Controls and Procedures	63

Part II
Item 1. Legal Proceedings	64
Item 1A. Risk Factors	64
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 3. Defaults Upon Senior Securities	66
Item 4. Mine Safety Disclosures	66
Item 5. Other Information	66
Item 6. Exhibits	67

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) includes certain “forward-looking statements.” These statements can be identified by the use of forward-looking terminology including “will,” “may,” “intend,” “believe,” “expect,” “outlook,” “anticipate,” “estimate,” “continue,” “plan,” “should,” “could,” “would,” or other similar words. The statements regarding (i) demand for finished products in markets we serve; (ii) estimated capital expenditures as a result of required audits or required operational changes or other environmental and regulatory liabilities; (iii) our anticipated levels of, use and effectiveness of derivatives to mitigate our exposure to crude oil price changes, natural gas price changes and fuel products price changes; (iv) estimated costs of complying with the U.S. Environmental Protection Agency’s (“EPA”) Renewable Fuel Standard (“RFS”), including the prices paid for Renewable Identification Numbers (“RINs”) and the amount of RINs we may be required to purchase in any given compliance year, and the outcome of any litigation concerning our existing small refinery exemption (“SRE”) petitions; (v) our ability to meet our financial commitments, debt service obligations, debt instrument covenants, contingencies and anticipated capital expenditures; (vi) our access to capital to fund capital expenditures and our working capital needs and our ability to obtain debt or equity financing on satisfactory terms; (vii) our access to inventory financing under our supply and offtake agreements; (viii) the effect, impact, potential duration or other implications of supply chain disruptions and global energy shortages on our business and operations; (ix) general economic and political conditions, including inflationary pressures, instability in financial institutions, the prospect of a shutdown of the U.S. federal government, general economic slowdown or a recession, political tensions, conflicts and war (such as the ongoing conflicts in Ukraine and the Middle East and their regional and global ramifications); (x) the future effectiveness of our enterprise resource planning system to further enhance operating efficiencies and provide more effective management of our business operations; (xi) our expectation regarding our business outlook with respect to the Montana Renewables business; and (xii) the expected benefits of the Conversion (as defined herein) to us and our stockholders, as well as other matters discussed in this Quarterly Report that are not purely historical data, are forward-looking statements. These forward-looking statements are based on our expectations and beliefs as of the date hereof concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our current expectations for future sales and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisition or disposition transactions. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. Factors that could cause our actual results to differ from those in the forward-looking statements include those described in Part I, Item 1A “Risk Factors — Risks Related to our Business” and “—Risks Related to Montana Renewables” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (“2023 Annual Report”). Certain public statements made by us and our representatives on the date hereof may also contain forward-looking statements, which are qualified in their entirety by the cautionary statements contained in this paragraph. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise.

References in this Quarterly Report to “Calumet,” the “Company,” “we,” “our,” “us” or like terms refer to (i) Calumet Specialty Products Partners, L.P. and its subsidiaries before the completion of the Conversion and (ii) Calumet, Inc. and its subsidiaries as of the completion of the Conversion and thereafter. References in this Quarterly Report to “our general partner” refer to Calumet GP, LLC, the general partner of Calumet Specialty Products Partners, L.P.

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PART I

Item 1. Financial Statements

CALUMET, INC.

BALANCE SHEET

AS OF JUNE 30, 2024

(In whole dollars)

(Unaudited)


	June 30, 2024
ASSETS
Current assets:
Cash	$	100.0
Total current assets		100.0
Total assets	$	100.0
LIABILITIES AND STOCKHOLDER'S EQUITY
Total liabilities:	$	—
Commitments and contingencies
Stockholder's equity:
Common Stock, $0.01 par value; 10,000 shares authorized, issued and outstanding at June 30, 2024	$	100.0
Total stockholder's equity:		100.0
Total liabilities and stockholder's equity	$	100.0

See accompanying notes to balance sheet.

(1) Organization and Background of Business

Calumet, Inc. was incorporated on January 8, 2024 as a Delaware corporation.

Calumet, Inc. was formed for the purpose of effecting the corporate conversion (the “Conversion”) of Calumet Specialty Products Partners, L.P. (the “Partnership”). On July 10, 2024, Calumet, Inc. became the parent holding company of the Partnership and its subsidiaries.

The balance sheet has been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Separate Statements of Operations, Changes in Stockholder’s Equity and Cash Flows have not been presented because Calumet, Inc. had no business transactions or activities as of June 30, 2024, except for the initial capitalization of Calumet, Inc. which was funded by an affiliate. In this regard, general and administrative costs associated with the formation and daily management of Calumet, Inc. have been determined by Calumet, Inc. to be insignificant.

(2) Summary of Significant Accounting Policies

(a) Estimates

The preparation of the balance sheet, in accordance with GAAP, requires management to make estimates and assumptions that affect the amounts reported in the balance sheet and accompanying notes. Actual results could differ from those estimates.

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(b) Income Taxes

Calumet, Inc. is a corporation and is subject to U.S. federal and state income taxes. Income taxes are accounted for under the asset and liability method. Calumet, Inc. recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts and income tax basis of assets and liabilities and the expected benefits of utilizing net operating loss and tax credit carryforwards, using enacted tax rates in effect for the taxing jurisdiction in which Calumet, Inc. operates for the year in which those temporary differences are expected to be recovered or settled. Calumet, Inc. recognizes the financial statement effects of a tax position when it is more-likely-than-not, based on technical merits, that the position will be sustained upon examination. Net deferred tax assets are then reduced by a valuation allowance if Calumet, Inc. believes it is more-likely-than-not such net deferred tax assets will not be realized. As of June 30, 2024, there are no income tax related balances reflected in our balance sheet.

(3) Stockholder’s Equity

As of June 30, 2024, Calumet, Inc. had authorized share capital of 10,000 shares of common stock with a par value of $0.01 per share. On January 8, 2024, all 10,000 shares were issued and acquired by an affiliate for consideration of $100. Each share had one voting right.

On July 10, 2024, Calumet, Inc.’s certificate of incorporation was amended and restated pursuant to which Calumet, Inc. is authorized to issue up to 800,000,000 shares of stock, classified as follows:

●

700,000,000 shares of common stock, par value $0.01 per share; and

●

100,000,000 shares of preferred stock, par value $0.01 per share.

(4) Subsequent Events

On July 10, 2024, Calumet, Inc. completed the Conversion pursuant to which it became the parent holding company of the Partnership and its subsidiaries. In connection with the Conversion, Calumet, Inc. issued (i) approximately 80.4 million shares of common stock to holders of the common units representing limited partner interests in the Partnership (ii) 5.5 million shares of common stock and 2.0 million warrants to the former owners of Calumet GP, LLC, the general partner of the Partnership.

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CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS


	June 30, 2024		December 31, 2023
	(Unaudited)
	(In millions, except unit data)
ASSETS
Current assets:
Cash and cash equivalents	$	7.0	$	7.9
Accounts receivable, net:
Trade, less allowance for credit losses of $1.8 million and $1.2 million, respectively		306.9		252.4
Other		32.7		33.8
		339.6		286.2
Inventories		394.8		439.4
Derivative assets		3.7		9.6
Prepaid expenses and other current assets		50.5		51.6
Total current assets		795.6		794.7
Property, plant and equipment, net		1,467.2		1,506.3
Other noncurrent assets, net		408.1		450.3
Total assets	$	2,670.9	$	2,751.3
LIABILITIES AND PARTNERS’ CAPITAL (DEFICIT)
Current liabilities:
Accounts payable	$	342.3	$	322.0
Accrued interest payable		49.5		48.7
Accrued salaries, wages and benefits		73.0		87.1
Obligations under inventory financing agreements		34.9		190.4
Current portion of RINs obligation		232.9		277.3
Other current liabilities		97.1		131.5
Current portion of long-term debt		390.4		55.7
Total current liabilities		1,220.1		1,112.7
Other long-term liabilities		146.5		53.6
Long-term debt, less current portion		1,625.1		1,829.7
Total liabilities	$	2,991.7	$	2,996.0
Commitments and contingencies
Redeemable noncontrolling interest	$	245.6	$	245.6
Partners’ capital (deficit):
Limited partners’ interest (80,388,555 units and 79,967,363 units, issued and outstanding at June 30, 2024 and December 31, 2023, respectively)	$	(559.0)	$	(484.4)
General partner’s interest		(0.3)		1.3
Accumulated other comprehensive loss		(7.1)		(7.2)
Total partners’ capital (deficit)		(566.4)		(490.3)
Total liabilities and partners’ capital (deficit)	$	2,670.9	$	2,751.3

See accompanying notes to unaudited condensed consolidated financial statements.

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CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

	(In millions, except unit and per unit data)
				(As Restated)				(As Restated)
Sales	$	1,133.7	$	1,017.8	$	2,139.5	$	2,055.1
Cost of sales		1,069.9		946.3		1,997.2		1,887.0
Gross profit		63.8		71.5		142.3		168.1
Operating costs and expenses:
Selling		15.1		15.5		28.8		29.0
General and administrative		37.5		25.7		60.8		62.8
Other operating expense		5.0		5.2		10.2		8.2
Operating income		6.2		25.1		42.5		68.1

Other income (expense):
Interest expense		(56.8)		(55.8)		(117.6)		(105.0)
Gain (loss) on derivative instruments		11.3		14.3		(5.6)		39.8
Other income (expense)		0.7		(5.5)		0.7		(5.7)
Total other expense		(44.8)		(47.0)		(122.5)		(70.9)
Net loss before income taxes		(38.6)		(21.9)		(80.0)		(2.8)
Income tax expense		0.5		0.4		0.7		0.9
Net loss	$	(39.1)	$	(22.3)	$	(80.7)	$	(3.7)
Allocation of net loss to partners:
Net loss attributable to partners	$	(39.1)	$	(22.3)	$	(80.7)	$	(3.7)
Less:
General partners’ interest in net loss		(0.8)		(0.5)		(1.6)		(0.1)
Net loss available to limited partners	$	(38.3)	$	(21.8)	$	(79.1)	$	(3.6)
Weighted average limited partner units outstanding:
Basic and diluted		80,555,587		80,152,648		80,453,995		79,992,637
Limited partners’ interest basic and diluted net loss per unit:
Limited partners’ interest	$	(0.48)	$	(0.27)	$	(0.98)	$	(0.05)

See accompanying notes to unaudited condensed consolidated financial statements.

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CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

	(In millions)
				(As Restated)				(As Restated)
Net loss	$	(39.1)	$	(22.3)	$	(80.7)	$	(3.7)
Other comprehensive income:
Defined benefit pension and retiree health benefit plans		—		0.1		0.1		0.1
Total other comprehensive income		—		0.1		0.1		0.1
Comprehensive loss attributable to partners’ capital (deficit)	$	(39.1)	$	(22.2)	$	(80.6)	$	(3.6)

See accompanying notes to unaudited condensed consolidated financial statements.

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CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL (DEFICIT)


	Accumulated
	Other		Partners’ Capital (Deficit)
	Comprehensive		General		Limited
	Loss		Partner		Partners		Total

		(In millions)
Balance at March 31, 2024	$	(7.1)	$	0.5	$	(523.1)	$	(529.7)
Net loss attributable to partners		—		(0.8)		(38.3)		(39.1)
Settlement of tax withholdings on equity-based incentive compensation		—		—		(1.7)		(1.7)
Settlement of phantom units		—		—		4.1		4.1
Balance at June 30, 2024	$	(7.1)	$	(0.3)	$	(559.0)	$	(566.4)


	Accumulated
	Other		Partners’ Capital (Deficit)
	Comprehensive		General		Limited
	Loss		Partner		Partners		Total

		(In millions)
Balance at December 31, 2023	$	(7.2)	$	1.3	$	(484.4)	$	(490.3)
Other comprehensive income		0.1		—		—		0.1
Net loss attributable to partners		—		(1.6)		(79.1)		(80.7)
Settlement of tax withholdings on equity-based incentive compensation		—		—		(5.2)		(5.2)
Settlement of phantom units		—		—		9.7		9.7
Balance at June 30, 2024	$	(7.1)	$	(0.3)	$	(559.0)	$	(566.4)


	Accumulated
	Other		Partners’ Capital (Deficit)
	Comprehensive		General		Limited
	Loss		Partner		Partners		Total

	(In millions)
Balance at March 31, 2023 (As Restated)	$	(8.3)	$	0.7	$	(515.7)	$	(523.3)
Other comprehensive income		0.1		—		—		0.1
Net loss attributable to partners		—		(0.5)		(21.8)		(22.3)
Settlement of tax withholdings on equity-based incentive compensation		—		—		(1.7)		(1.7)
Settlement of phantom units		—		—		3.7		3.7
Amortization of phantom units		—		—		0.1		0.1
Balance at June 30, 2023 (As Restated)	$	(8.2)	$	0.2	$	(535.4)	$	(543.4)

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	Accumulated
	Other		Partners’ Capital (Deficit)
	Comprehensive		General		Limited
	Loss		Partner		Partners		Total

	(In millions)
Balance at December 31, 2022 (As Restated)	$	(8.3)	$	0.3	$	(525.3)	$	(533.3)
Other comprehensive income		0.1		—		—		0.1
Net loss attributable to partners		—		(0.1)		(3.6)		(3.7)
Settlement of tax withholdings on equity-based incentive compensation		—		—		(9.6)		(9.6)
Settlement of phantom units		—		—		2.7		2.7
Amortization of phantom units		—		—		0.4		0.4
Balance at June 30, 2023 (As Restated)	$	(8.2)	$	0.2	$	(535.4)	$	(543.4)

See accompanying notes to unaudited condensed consolidated financial statements.

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CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Six Months Ended June 30,
	2024		2023

	(In millions)
Operating activities			(As Restated)
Net loss	$	(80.7)	$	(3.7)
Non-cash RINs (gain) expense		(44.4)		23.4
Unrealized (gain) loss on derivative instruments		14.6		(55.1)
Other non-cash activities		84.5		100.7
Changes in assets and liabilities		(1.5)		(117.9)
Net cash used in operating activities		(27.5)		(52.6)
Investing activities
Additions to property, plant and equipment		(35.0)		(208.2)
Net cash used in investing activities		(35.0)		(208.2)
Financing activities
Proceeds from borrowings — revolving credit facility		1,077.7		1,084.8
Repayments of borrowings — revolving credit facility		(899.3)		(1,101.0)
Proceeds from borrowings — MRL revolving credit agreement		32.0		37.2
Repayments of borrowings — MRL revolving credit agreement		(38.6)		(18.7)
Proceeds from borrowings — senior notes		200.0		325.0
Repayments of borrowings — senior notes		(229.0)		(121.0)
Proceeds from inventory financing		408.1		791.2
Payments on inventory financing		(462.6)		(796.6)
Proceeds from other financing obligations		—		95.8
Payments on other financing obligations		(25.9)		(28.5)
Net cash provided by financing activities		62.4		268.2
Net increase (decrease) in cash, cash equivalents and restricted cash		(0.1)		7.4
Cash, cash equivalents and restricted cash at beginning of period		14.7		35.2
Cash, cash equivalents and restricted cash at end of period	$	14.6	$	42.6
Cash and cash equivalents	$	7.0	$	36.0
Restricted cash	$	7.6	$	6.6
Supplemental disclosure of non-cash investing activities
Non-cash property, plant and equipment additions	$	26.1	$	41.7

See accompanying notes to unaudited condensed consolidated financial statements.

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CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Description of the Business

As of June 30, 2024, Calumet Specialty Products Partners, L.P. (the “Company” or “Calumet”) was a publicly traded Delaware limited partnership. Its common units were listed on the Nasdaq Global Select Market under the ticker symbol “CLMT.” The general partner of the Company is Calumet GP, LLC, a Delaware limited liability company (the “General Partner”). As of June 30, 2024, the Company had 80,388,555 limited partner common units and 1,640,583 general partner equivalent units outstanding. The General Partner owned 2% of the Company and all of the incentive distribution rights (as defined in the Company’s partnership agreement as of June 30, 2024), while the remaining 98% were owned by limited partners. The General Partner employed the Company’s employees and the Company reimbursed the General Partner for certain of its expenses.

The Company manufactures, formulates, and markets a diversified slate of specialty branded products and renewable fuels to customers in various consumer-facing and industrial markets. Calumet is headquartered in Indianapolis, Indiana and operates twelve facilities throughout North America.

The unaudited condensed consolidated financial statements of the Company as of June 30, 2024 and for the three and six months ended June 30, 2024 and 2023, included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in the consolidated financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) in the U.S. have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the following disclosures are adequate to make the information presented not misleading. The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These unaudited condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary to present fairly the results of operations for the interim periods presented. All adjustments are of a normal nature, unless otherwise disclosed. The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (“2023 Annual Report”).

2. Summary of Significant Accounting Policies

Reclassifications

Certain amounts in the prior years’ unaudited condensed consolidated financial statements have been reclassified to conform to the current year presentation.

Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash include all highly liquid investments with a maturity of three months or less at the time of purchase.

Restricted cash represents cash that is legally restricted under the Montana Renewables, LLC (“MRL”) Term Loan Credit Agreement, and it is included in prepaid expenses and other current assets in the condensed consolidated balance sheets because it is only available to make principal and interest payments under the terms of the agreement.

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Renewable Identification Numbers (“RINs”) Obligation

The Company’s RINs volume obligation (“RVO” or “RINs Obligation”) is an estimated provision if future purchase of RINs were to be required in order to satisfy the U.S. Environmental Protection Agency’s (“EPA”) requirement to blend renewable fuels into certain transportation fuel products pursuant to the Renewable Fuel Standard (“RFS”) of the Clean Air Act (“CAA”). The Company has historically not been obligated to make these purchases. A RIN is a 38-character number assigned to each physical gallon of renewable fuel produced in or imported into the United States. The EPA sets annual volume obligations for the percentage of renewable fuels that must be blended into transportation fuels consumed in the U.S. Compliance is demonstrated by tendering RINs to the EPA documenting that blending has been accomplished or by obtaining a Small Refinery Exemption (“SRE”) as provided in the Clean Air Act. Prior to 2018, the Company historically received the Small Refinery Exemption after qualifying on the merits. The Company’s petitions for the Small Refinery Exemption for compliance years 2018-2022 were included in blanket denial by EPA across the entire industry. EPA’s denials of Calumet’s 2018-2020 petitions have been overturned in litigation, as described below. The 2021, 2022, 2023 and 2024 petitions remain pending with EPA. The RIN obligation is a non-financial instrument representing a quantity that cannot be settled financially.

The Company accounts for its current period RVO by multiplying the quantity of RINs shortage (based on actual results) by the period end RINs spot price, which is recorded as a current liability in the condensed consolidated balance sheets. These liabilities are revalued at the end of each subsequent accounting period, which produces non-cash mark-to-market adjustments that are reflected in cost of sales in the unaudited condensed consolidated statements of operations (with the exception of RINs for compliance year 2019 related to the San Antonio refinery, which amount is reflected in other operating expense in the unaudited condensed consolidated statements of operations). RINs generated by blending may be sold or held to offset future RVO. Any gains or losses from RINs sales are recorded in cost of sales in the unaudited condensed consolidated statements of operations.

2018 RVO. In April 2022, EPA issued new decisions denying 36 petitions from small refineries seeking SREs for program year 2018 that had been remanded by the U.S. Court of Appeals for the D.C. Circuit to EPA. EPA had previously granted 31 of these 36 petitions in August 2019, including petitions from the Company. Concurrent with the April 2022 denial action, EPA provided an alternate compliance approach to allow these 31 small refineries to meet their 2018 compliance obligations without purchasing or redeeming additional RINs. In April 2022, the Company filed a petition for review of EPA’s denial of the 2018 SRE petition for the Shreveport refinery in the U.S. Court of Appeals for the Fifth Circuit. In June 2022, the Company filed a petition for review of EPA’s denial of the 2018 SRE petition for the Montana refinery in the U.S. Court of Appeals for the Ninth Circuit and filed a protective petition for review in the U.S. Court of Appeals for the D.C. Circuit challenging the EPA’s denials of both the Shreveport and Montana refineries’ petitions. Upon a motion made by EPA, the Ninth Circuit dismissed the Company’s appeal of the denial of the Montana refinery’s 2018 SRE petition for improper venue in favor of the D.C. Circuit appeal. EPA filed a similar motion to dismiss or transfer in the Fifth Circuit; however, the Fifth Circuit denied EPA’s motion and ordered the merits panel to consider both the merits of the appeal and the venue question raised by EPA. These 2018 RVO appeals were consolidated with the 2019-2020 RVO appeals described below.

2019-2020 RVO. In June 2022, EPA issued final decisions denying 69 pending petitions from small refineries seeking SREs for compliance years 2016 to 2021, including petitions submitted by the Company seeking exemptions for program years 2019 and 2020, based on an across-the-board determination that no small refinery suffers disproportionate economic hardship from the RFS program, a contention which was subsequently rejected by the Government Accountability Office. In September 2022, EPA finalized an alternative RIN retirement schedule for small refineries. The alternative RIN retirement schedule allows the use of RINs generated in post-2020 compliance years to meet the 2020 RFS obligations. The Company’s small refineries are eligible to use this alternative schedule. In August 2022, the Company filed a petition for review of EPA’s denial of the 2019 and 2020 SRE petitions for the Shreveport refinery in the U.S. Court of Appeals for the Fifth Circuit, and a petition for review of EPA’s denial of the 2019 and 2020 SRE petitions for the Montana refinery in the U.S. Court of Appeals for the Ninth Circuit. The Company again filed a protective petition for review in the U.S. Court of Appeals for the D.C. Circuit challenging both of the EPA’s denials. These appeals have been consolidated with the applicable program year 2018 appeals. Upon a motion made by EPA, the Ninth Circuit transferred the Company’s Montana appeal to the D.C. Circuit. The Fifth Circuit denied EPA’s request to dismiss or transfer the appeal, ruling that merits panel would also consider EPA’s argument that the Shreveport refinery appeals

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should be transferred to the D.C. Circuit. The Company filed motions asking the circuit courts to stay the Company’s 2019 and 2020 RFS obligations while the merits appeals are pending. In January 2023, the Fifth Circuit granted the Company’s motion for stay relating to the Shreveport refinery, and in March 2023, the D.C. Circuit granted the Company’s motion for stay relating to the Montana refinery. The stays granted by each of the respective circuits hold that the Company is likely to be successful on the merits of its appeals. In November 2023, the Fifth Circuit issued its decision and found that venue for the appeal is proper in the Fifth Circuit and that EPA’s denial of the Shreveport refinery’s petitions for program years 2018-2020 was improper. The Fifth Circuit vacated the EPA’s denials of those petitions and remanded the petitions to EPA. In May 2024, the EPA filed a petition for writ of certiorari with the U.S. Supreme Court with respect to only the venue portion of the Fifth Circuit’s decision. The Supreme Court has not yet granted or denied certiorari. In July 2024, the D.C. Circuit issued its decision and found that EPA’s denial of the Montana Refinery’s petitions for program years 2018-2020 was improper and remanded the petitions to EPA.

2021-2022 RVO. In October 2022, Calumet applied for SREs for 2021 and 2022 compliance years. In April 2023, the Company filed for injunctive relief in both the District Court of Montana and the Western District Court of Louisiana to force EPA to make a decision on the Montana and Shreveport refineries’ joint 2021 and 2022 SRE applications. In July 2023, EPA issued final decisions denying 26 pending petitions from small refineries seeking SREs for compliance years 2016 to 2023, including petitions submitted by the Company seeking exemptions for program years 2021 and 2022, based on the same approach and analysis described by EPA in the June 2022 denials. EPA’s denial decision renders the district court actions moot, and the Company voluntarily dismissed those actions. The Company then filed appeals of the denials with the Fifth Circuit and D.C. Circuit. In September 2023, the Fifth Circuit granted the Company’s motion for stay relating to the Shreveport refinery for its appeal of the denial for program years 2021 and 2022, and in October 2023, the D.C. Circuit granted the Company’s motion for stay relating to the Montana refinery’s appeal of the denial for program years 2021 and 2022. The Company’s appeals of the denial of the Shreveport and Great Falls refinery petitions for program years 2021 and 2022 remain pending in the Fifth Circuit and D.C. Circuit, respectively.

Expenses related to RFS compliance have the potential to remain a significant expense for the Specialty Products and Solutions and Montana/Renewables segments. If legal or regulatory changes occur that have the effect of increasing the RINs Obligation, increasing the market price of RINs, or eliminating or narrowing the availability of SREs, the Company could be required to purchase additional RINs in the open market, which may materially increase the costs related to RFS compliance and could have a material adverse effect on the results of operations and liquidity.

As of June 30, 2024 and December 31, 2023, the Company had a RINs Obligation recorded on the condensed consolidated balance sheets of $232.9 million and $277.3 million, respectively.

3. Revenue Recognition

The following is a description of principal activities from which the Company generates revenue. Revenues are recognized when control of the promised goods are transferred to the customer, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods promised within each contract and determines the performance obligations and assesses whether each promised good is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Products

The Company manufactures, formulates, and markets a diversified slate of specialty branded products to customers in various consumer-facing and industrial markets. In addition, the Company produces fuel and fuel related products, including gasoline, diesel, jet fuel, asphalt, and other fuels products. At our Montana Renewables facility, we process a variety of geographically advantaged renewable feedstocks into renewable fuels, including: renewable diesel, sustainable

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aviation fuel (“SAF”), renewable hydrogen, renewable natural gas, renewable propane, and renewable naphtha. These renewable fuels are distributed into renewable markets in the western half of North America. The Company also blends, packages and markets high-performance branded specialty products through its Royal Purple, Bel-Ray, and TruFuel brands.

The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with a customer. For each contract, the Company considers the promise to transfer products, each of which are distinct, to be the identified performance obligations. In determining the transaction price, the Company evaluates whether the price is subject to variable consideration such as product returns, rebates or other discounts to determine the net consideration to which the Company expects to be entitled. The Company transfers control and recognizes revenue upon shipment to the customer or, in certain cases, upon receipt by the customer in accordance with contractual terms.

Revenue is recognized when obligations under the terms of a contract with a customer are satisfied and control of the promised goods are transferred to the customer. The contract with the customer states the final terms of the sale, including the description, quantity and price of each product or service purchased. For fuel products, payment is typically due in full between 2 to 30 days of delivery or the start of the contract term, such that payment is typically collected 2 to 30 days subsequent to the satisfaction of performance obligations. For renewable fuel products, payment is typically due in full between 7 to 14 days of delivery or the start of the contract term, such that payment is typically collected 7 to 14 days subsequent to the satisfaction of performance obligations. For specialty products, payment is typically due in full between 30 to 90 days of delivery or the start of the contract term, such that payment is typically collected 30 to 90 days subsequent to the satisfaction of performance obligations. In the normal course of business, the Company does not accept product returns unless the item is defective as manufactured. The expected costs associated with a product assurance warranty continue to be recognized as expense when products are sold. The Company does not offer promised services that could be considered warranties that are sold separately or provide a service in addition to assurance that the related product complies with agreed upon specifications. The Company establishes provisions based on the methods described in ASC 606 for estimated returns as variable consideration when determining the transaction price.

Excise and Sales Taxes

The Company assesses, collects and remits excise taxes associated with the sale of certain of its fuel products. Furthermore, the Company collects and remits sales taxes associated with certain sales of its products to non-exempt customers. The Company excludes excise taxes and sales taxes that are collected from customers from the transaction price in its contracts with customers. Accordingly, revenue from contracts with customers is net of sales-based taxes that are collected from customers and remitted to taxing authorities.

Shipping and Handling Costs

Shipping and handling costs are deemed to be fulfillment activities rather than a separate distinct performance obligation.

Cost of Obtaining Contracts

The Company may incur incremental costs to obtain a sales contract, which under ASC 606 should be capitalized and amortized over the life of the contract. The Company has elected to apply the practical expedient in ASC 340-40-50-5 allowing the Company to expense these costs since the contracts are short-term in nature with a contract term of one year or less.

Contract Balances

Under product sales contracts, the Company invoices customers for performance obligations that have been satisfied, at which point payment is unconditional. Accordingly, a product sales contract does not give rise to contract assets or liabilities under ASC 606. The Company’s receivables, net of allowance for expected credit losses from contracts with customers as of June 30, 2024 and December 31, 2023 were $306.9 million and $252.4 million, respectively.

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Transaction Price Allocated to Remaining Performance Obligations

The Company’s product sales are short-term in nature with a contract term of one year or less. The Company has utilized the practical expedient in ASC 606-10-50-14 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less. Additionally, each unit of product generally represents a separate performance obligation; therefore, future volumes are wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations is not required.

4. Inventories

The cost of inventory is recorded using the last-in, first-out (“LIFO”) method. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs and are subject to the final year-end LIFO inventory valuation. In certain circumstances, the Company may decide not to replenish inventory for certain products or product lines during an interim period, in which case, the Company may record interim LIFO adjustments during that period. During the three and six months ended June 30, 2024 and 2023, the Company recorded no activity (exclusive of lower of cost or market (“LCM”) adjustments) in cost of sales in the unaudited condensed consolidated statements of operations due to the permanent liquidation of inventory layers.

Costs include crude oil and other feedstocks, labor, processing costs and refining overhead costs. Inventories are valued at the LCM value. The replacement cost of these inventories, based on current market values, would have been $72.8 million and $67.8 million higher than the carrying value of inventory as of June 30, 2024 and December 31, 2023, respectively.

For the three and six months ended June 30, 2024 and 2023, the Company sold inventory comprised of crude oil, refined products and renewable feedstocks under Supply and Offtake Agreements as described in Note 7 — “Inventory Financing Agreements” related to the Great Falls, Shreveport and Montana Renewables facilities.

Inventories consist of the following (in millions):


	June 30, 2024						December 31, 2023
			Supply and						Supply and
	Titled		Offtake				Titled		Offtake
	Inventory		Agreements ⁽¹⁾		Total		Inventory		Agreements ⁽¹⁾		Total
Raw materials	$	40.4	$	43.6	$	84.0	$	61.6	$	27.6	$	89.2
Work in process		64.1		27.0		91.1		72.3		36.7		109.0
Finished goods		150.7		69.0		219.7		162.1		79.1		241.2
	$	255.2	$	139.6	$	394.8	$	296.0	$	143.4	$	439.4

(1)	Amounts represent LIFO value and do not necessarily represent the value at which the inventory was sold. Please read Note 7 — “Inventory Financing Agreements” for further information.

In addition, the use of the LIFO inventory method may result in increases or decreases to cost of sales in years that inventory volumes decline as the result of charging cost of sales with LIFO inventory costs generated in prior periods. In periods of rapidly declining prices, LIFO inventories may have to be written down to market value due to the higher costs assigned to LIFO layers in prior periods. During the three months ended June 30, 2024 and 2023, the Company recorded a decrease in cost of sales in the unaudited condensed consolidated statements of operations of $9.5 million and $5.8 million, respectively. During the six months ended June 30, 2024, the Company recorded a decrease in cost of sales in the unaudited condensed consolidated statements of operations of $0.5 million. During the six months ended June 30, 2023, the Company recorded an increase in cost of sales in the unaudited condensed consolidated statements of operations of $13.9 million.

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5. Leases

The Company has various operating and finance leases primarily for the use of land, storage tanks, railcars, equipment, precious metals and office facilities that have remaining lease terms of greater than one year to 16 years, some of which include options to extend the lease for up to 31 years, and some of which include options to terminate the lease within one year.

Supplemental balance sheet information related to the Company’s leases for the periods presented were as follows (in millions):


		June 30,		December 31,
Assets:	Classification:	2024		2023
Operating lease assets	Other noncurrent assets, net ⁽¹⁾	$	83.0	$	114.4
Finance lease assets	Property, plant and equipment, net ⁽²⁾		2.2		2.4
Total leased assets		$	85.2	$	116.8
Liabilities:
Current
Operating	Other current liabilities	$	49.2	$	75.6
Finance	Current portion of long-term debt		1.0		1.1
Non-current
Operating	Other long-term liabilities