Filed Pursuant to Rule 424(b)(3)

Registration No. 333-170390      

 

Subject to Completion, dated September 7, 2011

 

PROSPECTUS SUPPLEMENT

(To Prospectus dated November 22, 2010)

 

 

 

Calumet Specialty Products Partners, L.P.

 

11,000,000 Common Units

 

Representing Limited Partner Interests

 

 

 

We are offering 11,000,000 common units representing limited partner interests, including approximately 84,000 common units to be offered to certain directors of our general partner.

 

Our common units are traded on the NASDAQ Global Select Market under the symbol “CLMT.” The last reported sale price of our common units on September 6, 2011 was $19.95 per common unit.

 

Investing in our common units involves risks. See “Risk Factors” beginning on page S-16 of this prospectus supplement and on page 5 of the accompanying prospectus.

 

 

 

 

We have granted the underwriters a 30-day option to purchase up to an additional 1,650,000 common units from us on the same terms and conditions as set forth above if the underwriters sell more than 11,000,000 common units in this offering.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus supplement or the accompanying base prospectus. Any representation to the contrary is a criminal offense.

 

The underwriters expect to deliver the common units on or about September   , 2011.

 

 

Joint Book-Running Managers

 

 

Senior Co-Managers

 

Co-Manager

 

Oppenheimer & Co.

 

Prospectus Supplement dated September   , 2011

 

TABLE OF CONTENTS

 

Prospectus Supplement

 

 

 

 

 

This document is in two parts. The first part is the prospectus supplement, which describes the specific terms of this offering of common units. The second part is the accompanying base prospectus, which gives more general information, some of which may not apply to this offering of common units. Generally, when we refer only to the “prospectus,” we are referring to both this prospectus supplement and the accompanying base prospectus combined. If the information relating to the offering varies between this prospectus supplement and the accompanying base prospectus, you should rely on the information in this prospectus supplement.

 

Any statement made in this prospectus or in a document incorporated by reference into this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent

that a statement contained in this prospectus supplement or in any other subsequently filed document that is also incorporated by reference into this prospectus modifies or supersedes that statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus. Please read “Incorporation of Documents by Reference” on page S-37 of this prospectus supplement.

 

You should rely only on the information contained in or incorporated by reference in this prospectus supplement, the accompanying base prospectus and any free writing prospectus prepared by or on behalf of us relating to this offering of common units. We have not, and the underwriters have not, authorized anyone to provide you with additional or different information. If anyone provides you with additional, different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where an offer or sale is not permitted. You should not assume that the information contained in this prospectus supplement, the accompanying base prospectus or any free writing prospectus is accurate as of any date other than the dates on the front of these documents or that any information we have incorporated by reference is accurate as of any date other than the date of the document incorporated by reference. Our business, financial condition, results of operations or prospects may have changed since such dates.

 

Please read “Forward-Looking Statements” on page S-39 of this prospectus supplement.

 

SUMMARY

	•	Princeton Refinery. Our Princeton refinery, located in northwest Louisiana and acquired in 1990, produces specialty lubricating oils, including process oils, base oils, transformer oils and refrigeration oils that are used in a variety of industrial and automotive applications. The Princeton refinery has aggregate crude oil throughput capacity of approximately 10,000 barrels per day (bpd) and had average daily crude oil throughput of approximately 6,100 bpd in 2010 and approximately 6,600 bpd for the six months ended June 30, 2011.
	•	Cotton Valley Refinery. Our Cotton Valley refinery, located in northwest Louisiana and acquired in 1995, produces specialty solvents that are used principally in the manufacture of paints, cleaners, automotive products and drilling fluids. The Cotton Valley refinery has aggregate crude oil throughput capacity of approximately 13,500 bpd and had average daily

		crude oil throughput of approximately 5,500 bpd in 2010 and approximately 5,700 bpd for the six months ended June 30, 2011.

	•	Shreveport Refinery. Our Shreveport refinery, located in northwest Louisiana and acquired in 2001, produces specialty lubricating oils and waxes, as well as fuel products such as gasoline, diesel and jet fuel. The Shreveport refinery has aggregate crude oil throughput capacity of approximately 60,000 bpd and had an average daily crude oil throughput of approximately 36,000 bpd in 2010 and approximately 38,900 bpd for the six months ended June 30, 2011.
	•	Karns City Facility. Our Karns City facility, located in western Pennsylvania and acquired in 2008, produces white mineral oils, petrolatums, solvents, gelled hydrocarbons, cable fillers, and natural petroleum sulfonates. The Karns City facility has aggregate feedstock throughput capacity of approximately 5,500 bpd.
	•	Dickinson Facility. Our Dickinson facility, located in southeastern Texas and acquired in 2008, produces white mineral oils, compressor lubricants and natural petroleum sulfonates. The Dickinson facility has aggregate feedstock throughput capacity of approximately 1,300 bpd.
	•	Distribution and Logistics Assets. We own and operate a terminal in Burnham, Illinois with a storage capacity of approximately 150,000 barrels that facilitates the distribution of products in the Upper Midwest and East Coast regions of the United States and in Canada. In addition, we use approximately 1,875 leased railcars to receive crude oil or distribute our products throughout the United States and Canada. We also have approximately 6.0 million barrels of aggregate storage capacity at our facilities and leased storage locations.
	•	LyondellBasell Agreements. In November 2009, we entered into agreements with Houston Refining LP, a wholly owned subsidiary of LyondellBasell (“Houston Refining”), to form a long-term specialty products affiliation. The initial term of the agreements expires on October 31, 2014, after which it is automatically extended for additional one-year terms until either party terminates with 24 months notice. Under the terms of the agreements, (i) we are required to purchase at least a minimum volume of 3,100 bpd of naphthenic lubricating oils produced at Houston Refining’s Houston, Texas refinery, and we have a right of first refusal to purchase any additional naphthenic lubricating oils produced at the refinery, and (ii) Houston Refining is required to process a minimum of 800 bpd of white mineral oil for us at its Houston, Texas refinery, which supplements the white mineral oil production at our Karns City and Dickinson facilities. LyondellBasell also granted us rights to use certain registered trademarks and tradenames, including Tufflo, Duoprime, Duotreat, Crystex, Ideal and Aquamarine.

	•	Concentrate on Stable Cash Flows. We intend to continue to focus on generating stable cash flows from our business and assets. For the year ended December 31, 2010 and the six months ended June 30, 2011, approximately 64.3% and 64.5%, respectively, of our sales and 94.3% and 109.0%, respectively, of our gross profit were generated by the sale of specialty products, a segment of our business that is characterized by stable customer relationships due to our customers’ requirements for the highly specialized products that we provide. In addition, we manage our exposure to crude oil price fluctuations in this segment by passing on incremental feedstock costs to our specialty products customers and, historically, by maintaining a shorter-term crude oil hedging program. In our fuel products segment, we seek to mitigate our exposure to fuel products margin volatility by maintaining a longer-term fuel products hedging program. For the year ended December 31, 2010 and the six months ended June 30, 2011, we hedged the crack spread for approximately 80% of our fuel products sales

		volumes, respectively, and we realized $11.0 million in gains and $48.4 million in losses, respectively, from this program. We believe the diversity of our products, our broad customer base and our hedging activities help contribute to the stability of our cash flows.

	•	Develop and Expand Our Customer Relationships. Due to the specialized nature of, and the long lead-time associated with, the development and production of many of our specialty products, our customers are incentivized to continue their relationships with us. We believe that our larger competitors do not work with customers as we do from product design to delivery for smaller volume specialty products like ours. We intend to continue to assist our existing customers in their efforts to expand their product offerings as well as marketing specialty product formulations to new customers. By striving to maintain our long-term relationships with our broad base of existing customers and by adding new customers, we seek to limit our dependence on any one portion of our customer base.
	•	Enhance Profitability of Our Existing Assets. We continue to evaluate opportunities to improve our existing asset base to increase our throughput, profitability and cash flows. Following each of our asset acquisitions, we have undertaken projects designed to maximize the profitability of our acquired assets. We intend to further increase the profitability of our existing asset base through various measures which may include changing the product mix of our processing units, debottlenecking and expanding units as necessary to increase throughput, restarting idle assets and reducing costs by improving operations. For example, in late 2004 at the Shreveport refinery, we recommissioned certain of its previously idled fuels production units, refurbished existing fuels production units, converted existing units to improve gasoline blending profitability and expanded capacity to approximately 42,000 bpd to increase lubricating oil and fuels production. Also, in December 2006, we commenced construction of an expansion project at our Shreveport refinery that was completed and operational in May 2008, to increase its aggregate crude oil throughput capacity from 42,000 bpd to approximately 60,000 bpd. We also continue to focus on optimizing current operations through energy savings initiatives, product quality enhancements, and product yield improvements. We intend to continue this approach with our existing assets.
	•	Pursue Strategic and Complementary Acquisitions. Since 1990, our management team has demonstrated the ability to identify opportunities to acquire assets and product lines where we can enhance operations and improve profitability. We will continue to consider strategic acquisitions of assets or agreements with third parties that offer the opportunity for operational efficiencies, the potential for increased utilization and expansion of facilities, or the expansion of product offerings in our fuels and specialty products segments. In addition, we may pursue selected acquisitions in new geographic or product areas to the extent we perceive similar opportunities. For example, in 2008, we acquired Penreco from ConocoPhillips Company and M.E. Zukerman Specialty Oil Corporation, and, in 2009, we entered into sales and processing agreements with Houston Refining related to naphthenic lubricating and white mineral oils. We recently agreed to acquire from Murphy Oil Corporation (“Murphy Oil”) its Superior, Wisconsin refinery and other related assets. We expect this acquisition to close by the end of the third quarter of 2011, subject to customary closing conditions. Please read “— Recent Developments — Superior Acquisition” and “Superior Acquisition” for more information about this acquisition.

	•	We Offer Our Customers a Diverse Range of Specialty Products. We offer a wide range of over 1,000 specialty products. We believe that our ability to provide our customers with a more diverse selection of products than our competitors generally gives us an advantage in

		competing for new business. We believe that we are the only specialty products manufacturer that produces all four of naphthenic lubricating oils, paraffinic lubricating oils, waxes and solvents. A contributing factor in our ability to produce numerous specialty products is our ability to ship products between our facilities for product upgrading in order to meet customer specifications.

	•	We Have Strong Relationships with a Broad Customer Base. We have long-term relationships with many of our customers, and we believe that we will continue to benefit from these relationships. Our customer base includes over 2,600 active accounts, and we are continually seeking new customers. No single customer accounted for more than 10% of our consolidated sales in each of the years ended December 31, 2010 and 2009 or for the six months ended June 30, 2011.
	•	Our Facilities Have Advanced Technology. Our facilities are equipped with advanced, flexible technology that allows us to produce high-grade specialty products and to produce fuel products that comply with low sulfur fuel regulations. For example, our Shreveport and Cotton Valley refineries have the capability to make ultra low sulfur diesel (“ULSD”), and all of the Shreveport refinery’s gasoline production meets federally mandated low sulfur standards and newly implemented Mobile Source Air Toxic Rule II (“MSAT II”) standards set by the U.S. Environmental Protection Agency (“EPA”) requiring the reduction of benzene levels in gasoline. Also, unlike larger refineries, which lack some of the equipment necessary to achieve the narrow distillation ranges associated with the production of specialty products, our operations are capable of producing a wide range of products tailored to our customers’ needs.
	•	We Have an Experienced Management Team. Our management has a proven track record of enhancing value through the acquisition, exploitation and integration of refining assets and the development and marketing of specialty products. Our senior management team, the majority of whom have been working together since 1990, has an average of approximately 25 years of industry experience. Our team’s extensive experience and contacts within the refining industry provide a strong foundation and focus for managing and enhancing our operations, accessing strategic acquisition opportunities and constructing and enhancing the profitability of new assets.

	•	a refinery (the “Superior Refinery”) with crude oil throughput capacity of approximately 45,000 bpd that produces gasoline, diesel, asphalt, bunker fuel and specialty petroleum products that are marketed in the Midwest region of the United States, including the surrounding border states, and Canada;
	•	a distribution network for fuel and asphalt products (the “Superior Wholesale Fuel and Asphalt Business”) operated through various owned and leased terminals located in Wisconsin, Minnesota, Nebraska and Utah and associated inventories and logistics assets located at each of the terminals; and
	•	Murphy Oil’s “SPUR” branded gasoline wholesale franchise business.

Common units offered		11,000,000 common units.
		1,650,000 common units, if the underwriters exercise their option to purchase additional common units in full.
Common units outstanding after this offering		50,779,778 common units, representing a 98.0% limited partner interest in us.
		52,429,778 common units, representing a 98.0% limited partner interest in us, if the underwriters exercise their option to purchase additional common units in full.
Use of proceeds		We estimate that we will receive net proceeds from this offering of approximately $      million, including our general partner’s proportionate capital contribution of approximately $      million to maintain its 2% general partner interest in us and after deducting underwriting discounts and commissions and estimated offering expenses. If the underwriters exercise their option to purchase the 1,650,000 additional common units in full, we expect to receive additional net proceeds of approximately $      million.
		We expect to use the net proceeds from this offering, including any net proceeds from the underwriters’ exercise of their option to purchase additional common units, if exercised prior to the closing of the Superior Acquisition, to fund a portion of the purchase price of the Superior Acquisition and related expenses. Pending the closing of the Superior Acquisition, we will use approximately $      million of the net proceeds from this offering to repay borrowings outstanding under our revolving credit facility and invest the remainder of the net proceeds from this offering in short-term liquid investment grade securities. At the closing of the Superior Acquisition, we will re-borrow such amounts under our revolving credit facility and liquidate the short-term investments to fund a portion of the purchase price and related expenses. If the Superior Acquisition does not close, or if the underwriters’ option to purchase additional common units is exercised after the closing of the Superior Acquisition, we intend to use the net proceeds from this offering allocated for investment in short-term liquid investment grade securities for general partnership purposes, including working capital, capital expenditures and acquisitions.
		Affiliates of certain of the underwriters participating in this offering are lenders under our revolving credit facility and, in such capacity, will receive a portion of the proceeds from this offering through the repayment of borrowings outstanding.
		Please read “Use of Proceeds” on page S-20 and “Underwriting (Conflicts of Interest)” on page S-31.

Cash distributions		We paid a quarterly cash distribution of $0.495 per unit for the quarter ended June 30, 2011, or $1.98 per unit on an annualized basis, on August 12, 2011.
		Within 45 days after the end of each quarter, we distribute our available cash to unitholders of record on the applicable record date.
		In general, we will pay any cash distributions we make each quarter in the following manner:
		•  first, 98.0% to the holders of common units, pro rata, and 2.0% to our general partner, until each common unit has received a minimum quarterly distribution of $0.45 per unit; and
		•  second, 98.0% to the holders of common units, pro rata, and 2.0% to our general partner, until each common unit has received a target distribution of $0.495 per unit.
		If cash distributions to our unitholders exceed $0.495 per unit in any quarter, our general partner will receive a higher percentage of the cash we distribute in excess of that amount, in increasing percentages up to 50%. We refer to the amount of these distributions in excess of the 2.0% general partner interest as “incentive distributions.”
Estimated ratio of taxable income to distributions		We estimate that if you own the common units you purchase in this offering through the record date for distributions for the period ending December 31, 2013, you will be allocated, on a cumulative basis, a net amount of federal taxable income for that period that will be approximately 25% of the cash distributed to you with respect to that period. For example, if you receive an annual distribution of $1.98 per unit, we estimate that your average allocable federal taxable income per year will be approximately $0.495 per unit. Please read “Tax Considerations” in this prospectus supplement.
Material tax consequences		For a discussion of other material U.S. federal income tax consequences that may be relevant to prospective unitholders who are individual citizens or residents of the United States, please read “Tax Considerations” in this prospectus supplement and “Material U.S. Federal Income Tax Consequences” in the accompanying base prospectus.
Trading		Our common units are traded on the NASDAQ Global Select Market under the symbol “CLMT.”

Summary Historical and Pro Forma Consolidated Financial and Operating Data

 

The summary historical consolidated financial and operating data as of and for the years ended December 31, 2010, 2009 and 2008 set forth below are derived from our audited consolidated financial statements and are qualified in their entirety by, and should be read in conjunction with, our consolidated financial statements and the notes related thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, 2010.

 

The summary historical consolidated financial and operating data as of June 30, 2011 and for the six months ended June 30, 2011 set forth below are derived from our unaudited consolidated financial statements and are qualified in their entirety by, and should be read in conjunction with, our consolidated financial statements and the notes related thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2011.

 

The summary pro forma consolidated financial data as of June 30, 2011 and for the year ended December 31, 2010 and for the six months ended June 30, 2011 are derived from, and that information should be read together with and is qualified in its entirety by reference to, our unaudited pro forma consolidated financial statements and the notes related thereto contained in this prospectus supplement. The pro forma adjustments have been prepared as if the Superior Acquisition had taken place on June 30, 2011, in the case of the pro forma balance sheet, or as of January 1, 2010, in the case of the pro forma statements of operations for the year ended December 31, 2010 and for the six months ended June 30, 2011. The pro forma financial data give pro forma effect to (i) the sale of 4,500,000 common units on February 24, 2011 (at an offering price of $21.45 per common unit) and the receipt of approximately $92.3 million in net proceeds therefrom and our general partner’s proportionate capital contribution of $2.0 million; (ii) the sale of the Original 2019 Notes and the receipt of approximately $389.0 million in net proceeds therefrom; (iii) the sale of 11,000,000 common units in this offering (at an offering price of $20.00 per unit) and the receipt of approximately $210.4 million in net proceeds therefrom and the sale of 224,490 general partner units and the receipt of our general partner’s proportionate capital contribution of approximately $4.5 million; (iv) our concurrent private placement of the New 2019 Senior Notes and the receipt of approximately $194.0 million in net proceeds therefrom; (v) additional borrowing of approximately $88.6 million under our revolving credit facility; and (vi) the completion of the transactions contemplated by the Superior Acquisition, including the payment of a purchase price and related expenses of approximately $494.5 million. You should carefully review the audited and unaudited financial statements for the Superior Business and the notes related thereto and our unaudited pro forma financial statements and the notes related thereto included in this prospectus supplement.

 

 

 

Non-GAAP Financial Measures

 

Partnership and Pro Forma Financial Information

 

We include in this prospectus supplement the non-GAAP financial measures EBITDA, Adjusted EBITDA and Distributable Cash Flow of the Partnership, and provide reconciliations of EBITDA, Adjusted EBITDA and Distributable Cash Flow of the Partnership to net income (loss) and net cash provided by (used in) operating activities of the Partnership, the most directly comparable financial performance and liquidity measures calculated and presented in accordance with GAAP.

 

EBITDA, Adjusted EBITDA and Distributable Cash Flow are used as supplemental financial measures by our management and by external users of our financial statements such as investors, commercial banks, research analysts and others, to assess:

 

 

We believe that these non-GAAP measures are useful to analysts and investors as they exclude transactions not related to our core cash operating activities and provide metrics to analyze our ability to pay distributions. We believe that excluding these transactions allows investors to meaningfully trend and analyze the performance of our core cash operations.

 

We define EBITDA for any period as net income (loss) plus interest expense (including debt issuance and extinguishment costs), income taxes and depreciation and amortization.

 

We define Adjusted EBITDA for any period as: (1) net income (loss) plus (2)(a) interest expense (including debt issuance and extinguishment costs); (b) income taxes; (c) depreciation and amortization; (d) unrealized losses from mark to market accounting for hedging activities; (e) realized gains under derivative instruments excluded from the determination of net income (loss); (f) non-cash equity based compensation expense and other non-cash items (excluding items such as accruals of cash expenses in a future period or amortization of prepaid cash expenses) that were deducted in computing net income (loss); (g) debt refinancing fees, premiums and penalties and (h) all extraordinary, unusual or non-recurring items of gain or loss, or revenue or expense; minus (3)(a) unrealized gains from mark to market accounting for hedging activities; (b) realized losses under derivative instruments excluded from the determination of net income (loss) and (c) other non-

recurring expenses and unrealized items that reduced net income (loss) for a prior period, but represent a cash item in the current period.

 

We define Distributable Cash Flow for any period as Adjusted EBITDA less replacement capital expenditures, turnaround costs, cash interest expense (consolidated interest expense less non-cash interest expense) and income tax expense. Distributable Cash Flow is used by us and our investors to analyze our ability to pay distributions to our unitholders.

 

The definitions of Adjusted EBITDA and Distributable Cash Flow that are presented in this prospectus supplement reflect the calculation of “Consolidated Cash Flow” contained in the indenture governing our Original 2019 Notes. We are required to report Consolidated Cash Flow to the holders of our Original 2019 Notes and Adjusted EBITDA to the lenders under our revolving credit facility, and these measures are used by them to determine our compliance with certain covenants governing those debt instruments. Please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Debt and Credit Facilities” in our Annual Report on Form 10-K for the year ended December 31, 2010 and in our Quarterly Reports for the quarters ended March 31, 2011 and June 30, 2011 and refer to our Current Report on Form 8-K filed on June 30, 2011 for additional details regarding our revolving credit agreement and the indenture governing our Original 2019 Notes.

 

EBITDA, Adjusted EBITDA and Distributable Cash Flow should not be considered alternatives to net income, operating income, net cash provided by operating activities or any other measure of financial performance presented in accordance with GAAP. In evaluating our performance as measured by EBITDA, Adjusted EBITDA and Distributable Cash Flow, management recognizes and considers the limitations of these measurements. EBITDA, Adjusted EBITDA and Distributable Cash Flow do not reflect our obligations for the payment of income taxes, interest expense or other obligations such as capital expenditures. Accordingly, EBITDA, Adjusted EBITDA and Distributable Cash Flow are only three of the measurements that management utilizes. Moreover, our EBITDA, Adjusted EBITDA and Distributable Cash Flow may not be comparable to similarly titled measures of another company because all companies may not calculate EBITDA, Adjusted EBITDA and Distributable Cash Flow in the same manner.

The following tables present a reconciliation of both net income (loss) of the Partnership to EBITDA, Adjusted EBITDA and Distributable Cash Flow of the Partnership, and Distributable Cash Flow, Adjusted EBITDA and EBITDA of the Partnership to net cash provided by (used in) operating activities of the Partnership, the most directly comparable GAAP financial performance and liquidity measures, for each of the periods indicated.

 

 

 

 

 

 

 

Superior Business Financial Information

 

We include in this prospectus supplement the non-GAAP financial measures of EBITDA and Adjusted EBITDA of the Superior Business (using the definitions of EBITDA and Adjusted EBITDA of the Partnership), and provide a reconciliation of net income of the Superior Business to EBITDA and Adjusted EBITDA of the Superior Business, the most directly comparable financial performance and liquidity measure calculated and presented in accordance with GAAP. The following table presents a reconciliation of net income of the Superior Business to EBITDA and Adjusted EBITDA of the Superior Business for the periods indicated:

 

 

An investment in our common units involves risks. Limited partner interests are inherently different from capital stock of a corporation, although many of the business risks to which we are subject are similar to those that would be faced by a corporation engaged in a similar business. In addition to the risk factors below, you should carefully read the risk factors included under the caption “Risk Factors” on page 5 of the accompanying base prospectus, the risk factors described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2010 and the risk factors described under “Risk Factors” in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2011 and June 30, 2011, together with all of the other information included or incorporated by reference in this prospectus supplement. If any of these risks were to occur, our business, financial condition, results of operations or prospects could be materially adversely affected. In such case, the trading price of our common units could decline, and you could lose all or part of your investment.

 

The risks described below are not the only ones that we face. Additional risks not presently known to us or that we currently deem immaterial individually or in the aggregate may also impair our business operations.

 

This prospectus supplement and the documents we have incorporated by reference into this prospectus supplement also contain forward-looking statements that involve risks and uncertainties, some of which are described in the documents incorporated by reference into this prospectus supplement. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including the risks and uncertainties faced by us described below or incorporated by reference into this prospectus supplement.

 

Risks Related to the Superior Acquisition

 

The pending Superior Acquisition may not close as anticipated.

 

The Superior Acquisition is expected to close by the end of the third quarter of 2011, subject to certain customary closing conditions. If these conditions are not satisfied or waived, the Superior Acquisition will not be consummated. Certain of the conditions that remain to be satisfied include, but are not limited to:

 

 

In addition, we and Murphy Oil can mutually agree to terminate the Acquisition Agreement without completing the Superior Acquisition. Further, we or Murphy Oil could unilaterally terminate the Acquisition Agreement without the other party’s agreement and without completing the Superior Acquisition if:

 

 

 

Although in the event of a termination of the Acquisition Agreement, neither we nor Murphy Oil will be required to pay a termination fee, if a party terminates the Acquisition Agreement because of a willful and knowing breach by the other party of any of its obligations, representations, warranties, agreements or covenants, the breaching party may be liable for any and all damages of the terminating party arising from such breach.

 

We cannot assure you that the pending Superior Acquisition will close on our expected timeframe, or at all, or close without material adjustment. In addition, the closing of this common units offering is not conditioned on, nor is it a condition to, the closing of the Superior Acquisition. The closing of this common units offering is also not conditioned on the closing of our concurrent private placement of the New 2019 Senior Notes. Accordingly, if you decide to purchase common units in this offering, you should be willing to do so whether or not we complete the Superior Acquisition or obtain related debt financing through our concurrent private placement of the New 2019 Senior Notes.

 

We may fail to successfully integrate the Superior Business with our existing business in a timely manner, which could have a material adverse effect on our business, financial condition, results of operations or cash flows, or fail to realize all of the expected benefits of the Superior Acquisition, which could negatively impact our future results of operations.

 

Integration of the Superior Business with our existing business will be a complex, time-consuming and costly process, particularly given that the Superior Acquisition will significantly increase our size, and diversify the geographic areas in which we operate. A failure to successfully integrate the Superior Business with our existing business in a timely manner may have a material adverse effect on our business, financial condition, results of operations or cash flows. The difficulties of combining the Superior Business include, among other things:

 

 

 

If we consummate the Superior Acquisition and if any of these risks or unanticipated liabilities or costs were to materialize, then any desired benefits of the Superior Business may not be fully realized, if at all, and our future results of operations could be negatively impacted. In addition, the Superior Business may actually perform at levels below the forecasts we used to evaluate the Superior Business, due to factors that are beyond our control, such as competition in the Superior Refinery’s region, market demand for the products the Superior Refinery produces and regulatory requirements for maintenance and improvement projects at the Superior Refinery. If the Superior Business performs at levels below the forecasts we used to evaluate the Superior Acquisition, then our future results of operations could be negatively impacted.

 

The Superior Acquisition could expose us to potential significant liabilities.

 

In connection with the Superior Acquisition, we will assume certain liabilities, including unknown and contingent liabilities, associated with the Superior Business, including certain environmental liabilities, employee benefit plan liabilities and obligations arising in connection with or relating to the business, purchased assets, facilities or real property of the Superior Business. We have performed a certain level of due diligence in connection with the Superior Acquisition and have attempted to verify the representations of Murphy Oil and of its management, but there may be pending, threatened, contemplated or contingent claims against the assets we acquire related to environmental, title, regulatory, litigation or other matters of which we are unaware. We have not yet obtained title policies or title insurance on the acquired assets. Although Murphy Oil agreed to indemnify us on a limited basis against some of these liabilities, a significant portion of these indemnification obligations will expire within specified time periods after the date the Superior Acquisition is completed without any claims having been asserted by us, and these obligations are subject to limits. In general, Murphy Oil will not be liable for any misrepresentation or breach of warranty where the amount of damages with respect to such misrepresentation or breach of warranty does not exceed $0.1 million. In addition, Murphy Oil will not be liable unless the aggregate amount of damages with respect to such misrepresentation or breach of warranty exceeds $6.6 million and then only to the extent of such excess, and Murphy Oil’s maximum liability for all such misrepresentations and breaches of warranties may not exceed $22.0 million. We may not be able to collect on such indemnification because of disputes with Murphy Oil or its inability to pay. Moreover, there is a risk that we could ultimately be liable for unknown obligations related to the Superior Acquisition, which could materially adversely affect our financial condition, results of operations or cash flows.

 

We may incur significant costs to operate the Superior Refinery in compliance with applicable environmental laws and commitments.

 

The Superior Refinery, if acquired, will require us to operate that facility in compliance with applicable environmental laws and other commitments, for which we may incur significant costs. While we believe that we will be able to operate the Superior Refinery in compliance with all such

requirements as well as our own voluntary standards, the costs to do so may be substantial. The following description is intended to be illustrative but not exhaustive.

 

The Superior Refinery is the subject of a consent decree with the U.S. Environmental Protection Agency (“EPA”) and the Wisconsin Department of Natural Resources (“WDNR”), which requires (among other things) reductions in air emissions and the reporting of certain emissions to EPA and WDNR. We will become party to this consent decree in connection with the Superior Acquisition. Equipment upgrades, other discrete tasks and annual penalties to comply with the consent decree are expected to cost about $4.0 million, but compliance with other aspects of the consent decree could result in additional, substantial expenditures. Failure to comply with the consent decree, as well as certain emissions from the facility, will also subject us to stipulated penalties, which could be substantial.

 

We may incur substantial costs for performance of additional environmental and safety-related projects at the Superior Refinery including, but not limited to:

 

 

Any failure to comply with applicable environmental and safety requirements could result in the assessment of significant penalties as well as substantial costs to cure any identified conditions, which penalties and costs could have a material adverse effect on our financial condition, results of operation or cash flows.

 

Financing the Superior Acquisition will substantially increase our outstanding indebtedness.

 

We intend to fund the Superior Acquisition with net proceeds from this offering of common units and a proportionate capital contribution by our general partner (allowing our general partner to maintain its 2.0% general partner interest in the Partnership), net proceeds from a concurrent private placement of the New 2019 Senior Notes, and borrowings under our revolving credit facility. We also intend to increase the maximum availability under our revolving credit facility from $550 million to $850 million, subject to borrowing base limitations, at the closing of the Superior Acquisition. After giving effect to these transactions, including the payment of the Superior Acquisition purchase price and related expenses, we expect our outstanding indebtedness to increase from $429.4 million as of June 30, 2011 to $718.0 million. This increase in our indebtedness may reduce our flexibility to respond to changing business and economic conditions or to fund capital expenditure or working capital needs because we will require additional funds to service our outstanding indebtedness and may not be able to obtain additional financing. For a discussion about the risks posed by leverage generally and by the covenants in our revolving credit facility, please read “Risk Factors—Our credit agreements contain operating and financial restrictions that may restrict our business and financing activities” in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2010.

 

We expect to use the net proceeds from this offering of approximately $      million, including our general partner’s proportionate capital contribution of approximately $      million to maintain its 2% general partner interest in us and after deducting underwriting discounts and commissions and estimated offering expenses, to fund a portion of the purchase price of the Superior Acquisition and related expenses. The underwriters will receive no discount or commission on the sale of an aggregate of approximately 84,000 common units in this offering to certain directors of our general partner. If the underwriters exercise their option to purchase additional common units in full, we expect to receive additional net proceeds of approximately $      million.

 

Pending the closing of the Superior Acquisition, we expect to use approximately $34.7 million of the net proceeds from this offering to repay borrowings outstanding under our revolving credit facility and invest the remainder of the net proceeds from this offering in short-term liquid investment grade securities. At the closing of the Superior Acquisition, we expect to borrow such repaid amounts under our revolving credit facility and liquidate such short-term investments to fund a portion of the purchase price and related expenses. If the Superior Acquisition does not close, or if the underwriters’ option to purchase additional common units is exercised after the Superior Acquisition closes, then we intend to use the net proceeds from this offering allocated for investment in short-term liquid investment grade securities for general partnership purposes, including working capital, capital expenditures and acquisitions.

 

The closing of this common units offering is not conditioned on, nor is it a condition to, the closing of the Superior Acquisition, nor is it conditioned on the closing of our concurrent private placement of the New 2019 Senior Notes. However, we expect to close the Superior Acquisition after the closing of this common units offering and our concurrent private placement of the New 2019 Senior Notes, assuming that all other conditions to closing the Superior Acquisition have been satisfied. Please read “Summary — Recent Developments— Superior Acquisition” and “— Concurrent Private Placement of Senior Notes.”

 

As of September 6, 2011, we had approximately $34.7 million of borrowings outstanding under our revolving credit facility, which were used primarily to fund capital expenditures, working capital requirements and debt service costs. As of September 6, 2011, borrowings under our revolving credit facility had a weighted average interest rate of approximately 4.5%. Our revolving credit facility matures on June 24, 2016.

 

Affiliates of certain of the underwriters participating in this offering are lenders under our revolving credit facility and will, in such capacity, receive a portion of the proceeds from this offering through the repayment of borrowings outstanding under our revolving credit facility. Please read “Underwriting (Conflicts of Interest).”

 

The following table sets forth our cash and cash equivalents and our capitalization as of June 30, 2011:

 

 

 

 

 

 

We derived this table from, and it should be read in conjunction with and is qualified in its entirety by reference to, our historical consolidated financial statements and the notes related thereto included in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2011. You should also read this table in conjunction with the “Use of Proceeds” section of this prospectus supplement.

 

 

 

On July 25, 2011, we entered into a definitive agreement (the “Acquisition Agreement”) with Murphy Oil Corporation (“Murphy Oil”) to acquire (the “Superior Acquisition”) its refinery in Superior, Wisconsin and certain associated operating assets and inventories and related businesses. The assets to be acquired (collectively, the “Superior Business”) include:

 

 

The aggregate purchase price for the Superior Acquisition is $214 million, plus the market value of the Superior Business’ hydrocarbon inventories at closing (estimated to be approximately $275 million as of June 30, 2011 and approximately $250 million as of July 31, 2011), the reimbursement of certain capital expenditures to be incurred by Murphy Oil before the closing of the Superior Acquisition (estimated to be approximately $4 million as of June 30, 2011 and July 31, 2011), and the assumption of certain liabilities. The purchase price is subject to customary purchase price adjustments. We expect the Superior Acquisition to close by the end of the third quarter of 2011, subject to customary closing conditions.

 

On a historical basis for the year ended December 31, 2010 and the six months ended June 30, 2011, the Superior Business generated sales of approximately $1,091 million and $669 million, respectively, and Adjusted EBITDA of approximately $56 million and $41 million, respectively. Please read “Summary—Summary Historical and Pro Forma Consolidated Financial and Operating Data—Non-GAAP Financial Measures—Partnership and Pro Forma Financial Information” and “—Superior Business Financial Information” for our definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA of the Superior Business to its most comparable GAAP financial measure.

 

We intend to fund the Superior Acquisition with net proceeds from this offering of common units and a proportionate capital contribution by our general partner (allowing our general partner to maintain its 2.0% general partner interest in the Partnership), net proceeds from a concurrent private placement of the New 2019 Senior Notes, and borrowings under our revolving credit facility. The closing of this common units offering is not conditioned on, nor is it a condition to, the closing of the Superior Acquisition. Accordingly, if you decide to purchase common units in this offering, you should be willing to do so whether or not we complete the Superior Acquisition or obtain related debt financing through our concurrent private placement of the New 2019 Senior Notes.

 

The Superior Business

 

Superior Refinery

 

The Superior Refinery is located on approximately 245 acres of land, approximately 4 miles southeast of the Saint Louis River and 2.5 miles southwest of Lake Superior near Superior, Wisconsin, in the U.S. Petroleum Administration for Defense District II (PADD II) region. It is the only refinery located in Wisconsin, giving it access to a niche market in the United States. The Superior Refinery is geographically advantaged to receive Canadian and North Dakota (Bakken) crude oil, allowing it to take advantage of the lower-priced heavy crudes and provide more reliable access to high quality asphalt blends. Crude oil is received at the Superior Refinery by pipeline through the Enbridge

Pipeline System and is adjacent to one of Enbridge’s first crude oil holding facilities after crossing the Canadian border into the U.S.

 

The Superior Refinery has historically received a majority of its crude oil supply from Murphy Oil. At the closing of the Superior Acquisition, we will enter into a crude oil supply agreement (the “Crude Oil Supply Agreement”) with Murphy Oil, pursuant to which we will purchase from Murphy Oil (subject to certain customary conditions) up to 10,000 bpd of crude oil, which currently represents approximately 30% of the supply required at the Superior Refinery. The term of the Crude Oil Supply Agreement will be month-to-month but, except under certain customary circumstances, Murphy Oil may not terminate the agreement until the fifth anniversary of its effective date. Under the Crude Oil Supply Agreement, we will pay Murphy Oil for such crude oil and services on a cost-plus basis and provide to Murphy Oil a standby letter of credit of up to $75.0 million, the amount of which will be subject to adjustment from time to time based on changes in crude oil prices. The remainder of the Superior Refinery’s crude oil supply is currently purchased in the spot market from several regular suppliers of crude oil, with fluid rotation of the supplier base. We currently intend to purchase the remainder of the Superior Refinery’s crude oil supply requirements on the spot market. However, from time to time, we may enter into just-in-time crude oil supply arrangements with one or more counterparties.

 

The Superior Refinery includes hydrotreating, catalytic reforming, fluid catalytic cracking and alkylation units and has a Solomon Associates Refinery Configuration Factor of 8.9. The Superior Refinery can process a wide range of crude oils, including Bakken and Canadian crude oil (e.g., North Dakota Sweet, Lloydminster and Syncrude). The facility operates in a block operation running heavy Canadian asphalt-producing crude oils for the production of asphalt, and running lighter, sweeter crude oils for higher yields of diesel, gasoline and bunker fuel. In 2010, the Superior Refinery processed approximately 21,500 bpd of sweet crude oils and 13,100 bpd of heavy crude oils. The Superior Refinery has the ability to run up to 45,000 bpd of crude oil depending upon the types of crude oil run. Historically during the winter months (December through February) when gasoline and asphalt demand in the region is lower, throughput is reduced and the Superior Refinery operates to winter fill tanks for the upcoming asphalt season in the summer months. The Superior Refinery’s year-round asphalt storage capability of 2 million barrels provides flexibility to manage market seasonality.

 

 

The Superior Refinery is fully compliant with federal regulations for ultra low sulfur diesel (“ULSD”) and low sulfur gasoline production, but was qualified as a small refiner under the on-road ULSD federal regulations, and currently produces a mix of both ULSD and low sulfur diesel, the latter of which the Superior Refinery is allowed to produce until 2012.

 

Superior Wholesale Fuel and Asphalt Business

 

The Superior Wholesale Fuel and Asphalt Business sells finished fuels products produced at the Superior Refinery primarily through several Magellan pipeline terminals in Minnesota, Wisconsin, Iowa, North Dakota and South Dakota. The Superior Refinery’s gasoline is primarily sold through its own leased and owned product terminals located in Superior and Rhinelander, Wisconsin; Duluth and

Crookston, Minnesota; and Toole, Utah. The Superior Refinery also exports finished fuel products by rail service and truck. Finished fuel products sales are primarily made through spot agreements and short-term contracts. Asphalt production is primarily sold at leased and owned product terminals located in Rhinelander, Wisconsin; Crookston, Minnesota; and Toole, Utah, and through spot agreements and short-term contracts with asphalt customers primarily located in and around the upper Midwest (including Minnesota, Wisconsin and Michigan), North Dakota, South Dakota and Utah.

 

The Superior Refinery and Superior Wholesale Fuel and Asphalt Business terminals have total storage capacity of approximately 4.3 million barrels. The following map and table illustrate the location and storage capacity of the Superior Refinery and the Superior Wholesale Fuel and Asphalt Business terminals.

 

 

 

SPUR-Branded Business

 

The SPUR-branded business sells gasoline wholesale to SPUR-branded gas stations, which are owned and operated by independent franchisees. In 2010, these stations purchased approximately 87 million gallons of gasoline and diesel fuel from the Superior Refinery, or 24% of its gasoline and diesel fuel production.

 

Competitive Advantages

 

We believe the Superior Business has the following competitive advantages:

 

 

 

 

 

 

Value Enhancement Opportunities

 

We have a track record of increasing the profitability of assets we acquire, and have identified several potential value enhancement opportunities related to the Superior Acquisition. The following represents a partial list of our potential value enhancement initiatives:

 

 

You should carefully review the audited and unaudited financial statements for the Superior Business and the notes related thereto and our unaudited pro forma consolidated financial statements and the notes related thereto included in this prospectus supplement. Please also read “Risk Factors” beginning on page S-16 of this prospectus supplement.

 

Other Provisions of the Acquisition Agreement

 

The Acquisition Agreement requires us to enter into a transition services agreement (the “Transition Services Agreement”) with Murphy Oil at the closing of the Superior Acquisition pursuant to which Murphy Oil will provide us with certain administrative and support services related to tax and accounting, human resources and information technology for the operation of the Superior Business for periods of time per service varying from three months to six months. We will pay Murphy Oil for such services on a cost-plus basis. The Transition Services Agreement may be terminated with

respect to one or more services, among other circumstances, by mutual agreement of the parties, by unilateral termination by us upon 30 days notice, and by unilateral termination by us or Murphy Oil upon an uncured or incurable material breach by, or insolvency of, the other party.

 

The Acquisition Agreement also requires us to (1) make offers of employment (effective as of the consummation of the Superior Acquisition) or, with respect to employees on certain types of leave, upon their return to active employment) to all Murphy Oil employees who work exclusively in the Superior Business, (2) assume and agree to be bound by a collective bargaining agreement covering certain of those employees (including the terms regarding compensation and benefits required under the terms of the collective bargaining agreement) and (3) provide or maintain certain levels of compensation and benefits to those employees not covered by the collective bargaining agreement for 12 months following closing. At June 30, 2011, the Superior Refinery employed 157 employees, including 114 employees represented by the Union of Operating Engineers, Local 317. The union’s current collective bargaining agreement began on July 1, 2009 and will expire on July 1, 2012.

 

We and Murphy Oil have made customary representations and warranties and have agreed to customary covenants in the Acquisition Agreement, including the agreement of Murphy Oil, subject to certain exceptions, to conduct the Superior Business in the ordinary course, to use commercially reasonable efforts to preserve the Superior Business’ assets and to refrain from engaging in certain activities before the closing of the Superior Acquisition. Additionally, we have agreed to assume certain of Murphy Oil’s environmental compliance requirements for nitrogen oxide reductions at the Superior Refinery. The consummation of the Superior Acquisition is subject to the satisfaction of customary closing conditions, the receipt of specified third-party consents and approvals, the satisfaction of certain required notice periods, the absence of legal impediments prohibiting the Superior Acquisition and the absence of a material adverse effect on the Superior Business. The Acquisition Agreement provides that the closing will occur as soon as possible after satisfaction or waiver of all conditions to closing but, in any case, no earlier than the first to occur of (1) the 30th day after Murphy Oil delivered certain financial statements to us (such delivery having occurred on August 25, 2011) and (2) the business day after we complete our financing of the Superior Acquisition. There is no assurance that all of the conditions to the consummation of the Superior Acquisition will be satisfied.

 

The Acquisition Agreement contains certain customary termination rights for both us and Murphy Oil, including, among others, the right of either party to terminate the Acquisition Agreement if, subject to certain exceptions, the Superior Acquisition is not consummated by January 25, 2012. In the event of a termination of the Acquisition Agreement, neither we nor Murphy Oil will be required to pay a termination fee. However, in the event a party terminates the Acquisition Agreement because of a willful and knowing breach by the other party of any of its obligations, representations, warranties, agreements or covenants, the breaching party may be liable for any and all damages of the terminating party arising from such breach.

 

The foregoing description of the Acquisition Agreement provides only a summary of the Acquisition Agreement and the transactions contemplated thereunder, does not purport to be complete and is subject to, and qualified in its entirety by, reference to the full text of the Acquisition Agreement, a copy of which will be filed as an exhibit to our Quarterly Report on Form 10-Q for the three months ended September 30, 2011.

 

Our common units are traded on the NASDAQ Global Select Market under the symbol “CLMT.” As of September 6, 2011, we had 39,779,778 common units outstanding, and there were approximately 26 holders of record of our common units.

 

The following table shows the low and high sales prices per common unit, as reported by the NASDAQ Global Select Market, for the periods indicated. Cash distributions presented below represent amounts declared subsequent to each respective quarter end based on the results of that quarter. For all periods, an identical cash distribution was paid on all outstanding units with the minimum quarterly distribution being met for all periods. The last reported sales price of the common units on the NASDAQ Global Select Market on September 6, 2011, was $19.95.

 

 

 

 

The tax consequences to you of an investment in our common units will depend in part on your own tax circumstances. Although this section updates information related to certain tax considerations, it should be read in conjunction with “Material U.S. Federal Income Tax Consequences” in the accompanying base prospectus discussing the principal federal income tax considerations associated with our operations and the purchase, ownership and disposition of our common units and “Risk Factors — Tax Risks to Common Unitholders” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2010. You are urged to consult with your own tax advisor about the federal, state, local and foreign tax consequences peculiar to your circumstances.

 

Ratio of Taxable Income to Distributions

 

We estimate that if you purchase common units in this offering and own them through the record date for the distribution for the period ending December 31, 2013, then you will be allocated, on a cumulative basis, a net amount of federal taxable income for that period that will be approximately 25% of the cash distributed to you with respect to that period. Thereafter, we anticipate that the ratio of allocable taxable income to cash distributions to the unitholders will increase. These estimates are based upon the assumption that our available cash for distribution will be sufficient for us to make the current quarterly distributions to the holders of our common units, and other assumptions with respect to capital expenditures, cash flow and anticipated cash distributions. These estimates and assumptions are subject to, among other things, numerous business, economic, regulatory, competitive and political uncertainties beyond our control. Further, the estimates are based on current tax law and certain tax reporting positions that we have adopted with which the Internal Revenue Service could disagree. Accordingly, we cannot assure you that the estimates will correspond with actual results. The actual ratio of taxable income to distributions could be higher or lower, and any differences could be material and could materially affect the value of the common units. For example, the ratio of taxable income to distributions to a purchaser of common units in this offering will be higher, and perhaps substantially higher, than our estimate with respect to the period described above if:

 

 

Please read “Material U.S. Federal Income Tax Consequences — Tax Consequences of Unit Ownership” in the accompanying base prospectus.

 

Tax Rates

 

Under current law, the highest marginal U.S. federal income tax rate applicable to ordinary income of individuals is 35% and the highest marginal U.S. federal income tax rate applicable to long-term capital gains (generally, capital gains on certain assets held for more than one year) of individuals is 15%. However, absent new legislation extending the current rates, beginning January 1, 2013, the highest marginal U.S. federal income tax rate applicable to ordinary income and long-term capital gains of individuals will increase to 39.6% and 20%, respectively. Moreover, these rates are subject to change by new legislation at any time.

Nominee Reporting

 

Persons who hold an interest in us as a nominee for another person are required to furnish to us:

 

 

(2) a statement regarding whether the beneficial owner is:

 

(a) a non-U.S. person;

 

(b) a non-U.S. government, an international organization or any wholly owned agency or instrumentality of either of the foregoing; or

 

(c) a tax-exempt entity;

 

(3) the amount and description of units held, acquired or transferred for the beneficial owner; and

 

(4) specific information including the dates of acquisitions and transfers, means of acquisitions and transfers, and acquisition cost for purchases, as well as the amount of net proceeds from sales.

 

Brokers and financial institutions are required to furnish additional information, including whether they are U.S. persons and specific information on units they acquire, hold or transfer for their own account. A penalty of $100 per failure, up to a maximum of $1.5 million per calendar year, is imposed by the Internal Revenue Code for failure to report that information to us. The nominee is required to supply the beneficial owner of the units with the information furnished to us.

 

Tax-Exempt Organizations and Other Investors

 

Ownership of common units by tax-exempt entities, regulated investment companies and non-U.S. investors raises issues unique to such persons. Please read “Material U.S. Federal Income Tax Consequences — Tax-Exempt Organizations and Other Investors” in the accompanying base prospectus.

 

We and the underwriters named below have entered into an underwriting agreement with respect to the common units being offered. Subject to certain conditions, each underwriter has severally agreed to purchase the number of common units indicated in the following table. Barclays Capital Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC are the representatives of the underwriters and joint book-running managers of this offering.

 

 

Certain of the directors of our general partner expect to purchase an aggregate of approximately 84,000 of our common units in this offering directly from the underwriters at a price equal to the public offering price. The underwriters will not receive any discount or commission on the sale of these common units.

 

The underwriters are committed to take and pay for all of the common units being offered, if any are taken, other than the common units covered by the option described below unless and until this option is exercised.

 

If the underwriters sell more common units than the total number set forth in the table above, the underwriters have an option to buy up to an additional 1,650,000 common units from us. They may exercise that option for 30 days. If any common units are purchased pursuant to this option, the underwriters will severally purchase common units in approximately the same proportion as set forth in the table above.

 

The following table shows the per common unit and total underwriting discounts to be paid to the underwriters by us. Such amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase 1,650,000 additional common units.

 

 

Common units sold by the underwriters to the public will initially be offered at the initial offering price set forth on the cover of this prospectus supplement. Any common units sold by the underwriters to securities dealers may be sold at a discount of up to $      per common unit from the initial offering price. If all the common units are not sold at the initial offering price, the representatives may change the offering price and the other selling terms. The offering of the common units by the underwriters is subject to receipt and acceptance and subject to the underwriters’ right to reject any order in whole or in part.

 

We, Fred M. Fehsenfeld, Jr. and certain related trusts, F. William Grube and certain related trusts, The Heritage Group, our general partner and the directors and executive officers of our general partner, have agreed with the underwriters, subject to certain exceptions, not to offer, sell, hedge,

contract to sell, pledge, grant an option to purchase, make any short sale or otherwise dispose of any of their common units or securities convertible into or exchangeable for common units during the period from the date of this prospectus continuing through the date that is 60 days after the date of this prospectus, except with the prior written consent of Barclays Capital Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated or pursuant to our long-term incentive plan.

 

Our common units are traded on the NASDAQ Global Select Market under the symbol “CLMT.”

 

In connection with the offering, the underwriters may engage in passive market making transactions in the common units on the NASDAQ Global Select Market in accordance with Rule 103 of Regulation M under the Securities Exchange Act of 1934 during the period before the commencement of offers or sales of common units and extending through the completion of distribution. A passive market maker must display its bids at a price not in excess of the highest independent bid of the security. However, if all independent bids are lowered below the passive market maker’s bid that bid must be lowered when specified purchase limits are exceeded.

 

In connection with the offering, the underwriters may purchase and sell common units in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of common units than they are required to purchase in the offering. “Covered” short sales are sales made in an amount not greater than the underwriters’ option to purchase additional common units from us in the offering. The underwriters may close out any covered short position by either exercising their option to purchase additional common units or purchasing common units in the open market. In determining the source of common units to close out the covered short position, the underwriters will consider, among other things, the price of common units available for purchase in the open market as compared to the price at which they may purchase additional common units pursuant to the option granted to them. “Naked” short sales are any sales in excess of such option. The underwriters must close out any naked short position by purchasing common units in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common units in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of common units made by the underwriters in the open market prior to the completion of the offering.

 

The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the underwriters have repurchased common units sold by or for the account of such underwriter in stabilizing or short covering transactions.

 

Purchases to cover a short position and stabilizing transactions may have the effect of preventing or retarding a decline in the market price of the common units, and, together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of the common units. As a result, the price of the common units may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued at any time. These transactions may be effected on the NASDAQ Global Select Market, in the over-the-counter market or otherwise.

 

Because the Financial Industry Regulatory Authority, Inc. views the common units offered under this prospectus as interests in a direct participation program, the offering is being made in compliance with Rule 2310 of FINRA Rules. Investor suitability with respect to the common units should be judged similarly to the suitability with respect to other securities that are listed on the NASDAQ Global Select Market or another national securities exchange.

 

A prospectus in electronic format may be made available on the website maintained by the representatives and may also be made available on websites maintained by other underwriters. The representatives may agree to allocate a number of common units to underwriters for sale to their

online brokerage account holders. Internet distributions will be allocated by the representative to underwriters that may make Internet distributions on the same basis as other allocations.

 

We estimate that the total expenses of the offering, excluding underwriting discounts and commissions, will be approximately $0.5 million.

 

We and our general partner have agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act.

 

The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for us, for which they received or will receive customary fees and expenses. Affiliates of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC are lenders under our revolving credit facility, and in such capacity, will receive a portion of the net proceeds from this offering from repayment of borrowings outstanding under our revolving credit facility and fees for any of their respective increased commitments in connection with the increase in the maximum availability under our revolving credit facility. In addition, an affiliate of Barclays Capital Inc. will become a lender under our revolving credit facility at the closing of the Superior Acquisition and will receive a fee for its commitment under our revolving credit facility. We have also entered into, in the ordinary course of business, various derivative financial instrument transactions related to our crude oil and natural gas purchases and sales of finished fuel products, including diesel and gasoline crack spread hedges, with Merrill Lynch Commodities, Inc. and Bank of America, N.A., each an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated. We may enter into similar arrangements with these entities or their affiliates in the future. Certain of the underwriters are serving as initial purchasers in our private placement of the New 2019 Senior Notes.

 

Certain of the underwriters or their affiliates that have a lending relationship with us routinely hedge their credit exposure to us consistent with their customary risk management policies. Typically, such underwriters and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities, including potentially the common units offered hereby. Any such short positions could adversely affect future trading prices of the common units offered hereby.

 

In addition, in the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers and such investments and securities activities may involve securities and/or instruments of the issuer. The underwriters and their respective affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

 

Notice to Prospective Investors in the European Economic Area

 

In relation to each member state of the European Economic Area that has implemented the Prospectus Directive (each, a “Relevant Member State”), with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State, an offer of securities described in this prospectus may not be made to the public in that Relevant Member State other than:

 

 

 

provided, that no such offer of securities shall require us or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Directive.

 

For purposes of this provision, the expression an “offer of securities to the public” in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe for the securities, as the expression may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State, and the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State. The expression “2010 PD Amending Directive” means Directive 2010/73/EU.

 

We have not authorized and do not authorize the making of any offer of securities through any financial intermediary on their behalf, other than offers made by the underwriters with a view to the final placement of the securities as contemplated in this prospectus. Accordingly, no purchaser of the securities, other than the underwriters, is authorized to make any further offer of the securities on behalf of us or the underwriters.

 

Notice to Prospective Investors in the United Kingdom

 

Our partnership may constitute a “collective investment scheme” as defined by section 235 of the Financial Services and Markets Act 2000 (FSMA) that is not a “recognized collective investment scheme” for the purposes of FSMA (CIS) and that has not been authorized or otherwise approved. As an unregulated scheme, it cannot be marketed in the United Kingdom to the general public, except in accordance with FSMA. This prospectus is only being distributed in the United Kingdom to, and is only directed at:

 

(1) if our partnership is a CIS and is marketed by a person who is an authorized person under FSMA, (a) investment professionals falling within Article 14(5) of the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001, as amended (the CIS Promotion Order) or (b) high net worth companies and other persons falling within Article 22(2)(a) to (d) of the CIS Promotion Order; or

 

(2) otherwise, if marketed by a person who is not an authorized person under FSMA, (a) persons who fall within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the Financial Promotion Order) or (b) Article 49(2)(a) to (d) of the Financial Promotion Order; and

 

(3) in both cases (1) and (2) to any other person to whom it may otherwise lawfully be made (all such persons together being referred to as “relevant persons”).

 

Our partnership’s common units are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such common units will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.

 

An invitation or inducement to engage in investment activity (within the meaning of Section 21 of FSMA) in connection with the issue or sale of any common units which are the subject of the offering contemplated by this prospectus will only be communicated or caused to be communicated in circumstances in which Section 21(1) of FSMA does not apply to our partnership.

Notice to Prospective Investors in Switzerland

 

This prospectus is being communicated in Switzerland to a small number of selected investors only. Each copy of this prospectus is addressed to a specifically named recipient and may not be copied, reproduced, distributed or passed on to third parties. Our common units are not being offered to the public in Switzerland, and neither this prospectus, nor any other offering materials relating to our common units may be distributed in connection with any such public offering. We have not been registered with the Swiss Financial Market Supervisory Authority FINMA as a foreign collective investment scheme pursuant to Article 120 of the Collective Investment Schemes Act of June 23, 2006 (CISA). Accordingly, our common units may not be offered to the public in or from Switzerland, and neither this prospectus, nor any other offering materials relating to our common units may be made available through a public offering in or from Switzerland. Our common units may only be offered and this prospectus may only be distributed in or from Switzerland by way of private placement exclusively to qualified investors (as this term is defined in the CISA and its implementing ordinance).

 

Notice to Prospective Investors in Germany

 

This document has not been prepared in accordance with the requirements for a securities or sales prospectus under the German Securities Prospectus Act (Wertpapierprospektgesetz), the German Sales Prospectus Act (Verkaufsprospektgesetz), or the German Investment Act (Investmentgesetz). Neither the German Federal Financial Services Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht—BaFin) nor any other German authority has been notified of the intention to distribute our common units in Germany. Consequently, our common units may not be distributed in Germany by way of public offering, public advertisement or in any similar manner and this document and any other document relating to the offering, as well as information or statements contained therein, may not be supplied to the public in Germany or used in connection with any offer for subscription of our common units to the public in Germany or any other means of public marketing. Our common units are being offered and sold in Germany only to qualified investors which are referred to in Section 3, paragraph 2 no. 1, in connection with Section 2, no. 6, of the German Securities Prospectus Act, Section 8f paragraph 2 no. 4 of the German Sales Prospectus Act, and in Section 2 paragraph 11 sentence 2 no. 1 of the German Investment Act. This document is strictly for use of the person who has received it. It may not be forwarded to other persons or published in Germany.

 

The offering does not constitute an offer to sell or the solicitation or an offer to buy our common units in any circumstances in which such offer or solicitation is unlawful.

 

Notice to Prospective Investors in the Netherlands

 

Our common units may not be offered or sold, directly or indirectly, in the Netherlands, other than to qualified investors (gekwalificeerde beleggers) within the meaning of Article 1:1 of the Dutch Financial Supervision Act (Wet op het financieel toezicht).

 

The validity of the common units will be passed upon for us by Vinson & Elkins L.L.P., Houston, Texas. Certain legal matters in connection with the common units offered hereby will be passed upon for the underwriters by Baker Botts L.L.P., Houston, Texas.

 

Ernst & Young LLP, independent registered public accounting firm, has audited the consolidated financial statements of Calumet Specialty Products Partners, L.P. at December 31, 2010 and 2009 and for each of the three years in the period ended December 31, 2010 and the consolidated balance sheet of Calumet GP, LLC included in our Annual Report on Form 10-K for the year ended December 31, 2010 as set forth in their reports, which are incorporated by reference in this prospectus and elsewhere in the registration statement. The consolidated financial statements of Calumet Specialty Products Partners, L.P. and the balance sheet of Calumet GP, LLC are incorporated by reference in reliance on Ernst & Young LLP’s reports, given on their authority as experts in accounting and auditing.

 

The financial statements of the Superior Business as of December 31, 2010 and 2009, and for each of the years in the three-year period ended December 31, 2010, have been included herein in reliance upon the report of KPMG LLP, independent auditors, which report has also been incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.

 

We file annual, quarterly and current reports and other information with the SEC. You may read and copy any document we file with the SEC at the SEC’s Public Reference Room, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Copies of such materials can be obtained by mail at prescribed rates from the Public Reference Room. Please call 1-800-SEC-0330 for further information about the operation of the Public Reference Room. Materials also may be obtained from the SEC’s website (http://www.sec.gov), which contains reports, proxy and information statements and other information regarding companies that file electronically with the SEC.

 

We “incorporate by reference” information into this prospectus supplement, which means that we disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is deemed to be part of this prospectus supplement, except for any information superseded by information contained expressly in this prospectus supplement, and the information that we file later with the SEC will automatically supersede this information. You should not assume that the information in this prospectus supplement is current as of any date other than the date on the front page of this prospectus supplement.

 

We incorporate by reference the documents listed below and any documents subsequently filed with the SEC by us pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (excluding any information furnished pursuant to Item 2.02 or 7.01 on any Current Report on Form 8-K, or corresponding information furnished under Item 9.01 or included as an exhibit) from the date of this prospectus supplement until we have sold all of the common units to which this prospectus supplement relates or the offering is otherwise terminated:

 

 

You may request a copy of these filings at no cost, by making written or telephone requests for such copies to:

 

Calumet Specialty Products Partners, L.P.
Attention: Investor Relations
2780 Waterfront Pkwy E. Drive
Suite 200
Indianapolis, Indiana 46214
(317) 328-5660

 

You should rely only on the information contained in or incorporated by reference in this prospectus supplement, the accompanying base prospectus and any free writing prospectus prepared by us. If information in incorporated documents conflicts with information in this prospectus supplement you should rely on the most recent information. If information in an incorporated document conflicts with information in another incorporated document, you should rely on the most recent incorporated document. You should not assume that the information in this prospectus supplement or the accompanying base prospectus or any free writing prospectus prepared by us or any document incorporated by reference is accurate as of any date other than the date of those documents. We have not authorized anyone else to provide you with any information.

 

The information in this prospectus supplement and in the documents incorporated by reference includes certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements can be identified by the use of forward-looking terminology including “may,” “intend,” “believe,” “expect,” “anticipate,” “estimate,” “continue,” or other similar words. The statements discussed in this prospectus supplement and in the documents we incorporate by reference that are not purely historical data are forward-looking statements. These statements discuss future expectations or state other “forward-looking” information and involve risks and uncertainties. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements included in this prospectus supplement and the documents we incorporate by reference. Please read “Risk Factors” on page S-16 of this prospectus supplement and in the documents incorporated by reference herein. The risk factors and other factors noted throughout this prospectus supplement and in the documents incorporated by reference could cause our actual results to differ materially from those contained in any forward-looking statement. These factors include, but are not limited to, the following:

 

 

 

Other factors described in this prospectus supplement and in the documents incorporated by reference, or factors that are unknown or unpredictable, could also have a material adverse effect on future results. Our forward-looking statements are not guarantees of future performance, and actual results and future performance may differ materially from those suggested in any forward-looking statement. We will not update these statements unless securities laws require us to do so.

 

All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the foregoing. We undertake no obligation to publicly release the results of any revisions to any such forward-looking statements that may be made to reflect events or circumstances after the date of this prospectus supplement or to reflect the occurrence of unanticipated events.

 

SUPERIOR REFINING BUSINESS

 

Independent Auditors’ Report

 

The Board of Directors

Murphy Oil USA, Inc.:

 

We have audited the accompanying balance sheets of the Superior Refining Business as of December 31, 2010 and 2009, and the related statements of income and comprehensive income, changes in net parent investment, and cash flows for each of the years in the three-year period ended December 31, 2010. These financial statements are the responsibility of management of the Superior Refining Business. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Superior Refining Business’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Superior Refining Business as of December 31, 2010 and 2009, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.

 

/s/ KPMG LLP

 

June 29, 2011

SUPERIOR REFINING BUSINESS

 

BALANCE SHEETS

(Thousands of dollars)

 

 

See accompanying notes to financial statements.

SUPERIOR REFINING BUSINESS

 

STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Thousands of dollars)