Calumet Specialty Products Partners LP
NASDAQ:CLMT
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Calumet Specialty Products Partners LP
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Good day, ladies and gentlemen, and welcome to the Q1 2019 Calumet Specialty Products Partners LP Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session and instructions will follow at that time [Operator Instructions].
I would now like to introduce your host for this conference call, Mr. Joe Caminiti. You may begin sir.
Thank you, Kevin. Good morning everyone and thank you for joining us today for our first quarter earnings results call. With us on today's call are Tim Go, CEO; and West Griffin, CFO.
Before we proceed, allow me remind everyone that during the course of this call, we may provide various forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Such statements are based on the beliefs of our management as well as assumptions made by them, and in each case, based on information currently available to them.
Although our management believes that expectations are affected in such forward-looking statements are reasonable, neither the partnership, external partner, nor the management can provide any assurances that the expectations will prove to be correct.
Please refer to the partnership's press release that was issued this morning as well as our latest filings with the Securities and Exchange Commission for a list of factors that may affect our actual results could cause them to differ from our forward-looking statements made on this call.
As a reminder, you may now download a PDF presentation slides that will accompany the remarks made on today's conference call as indicated in the press release we issued earlier today. You may access these slides in the Investor Relations section of our website at www.calumetspecialty.com.
Also, a webcast replay of this call will also be available on our site within a few hours, and you may contact Alpha IR group for Investor Relations support at 312-445-2870.
As we begin the call, I would like to remind you that last quarter, we took a few extra steps in our presentation materials in highlighting the non-cash inventory adjustments for lower cost to market and first-in -- I'm sorry, last-in/first-out inventory layers.
We did this to our investors have a clear picture of comparability of our operating performance and we have included these levels additional discussion in our materials again this quarter.
With that, I'll hand the call to Tim. Tim?
Good morning everyone. I'm pleased to report that Calumet produced another strong quarter of operating and financial performance. We are encouraged by the progress made against our strategic initiatives today. These results serve as confirmation that our strategy is working and our transformation is on track.
Turning to slide 3, our quarterly adjusted EBITDA totaled $98 million or $60 million excluding the impacts of non-cash inventory adjustments. This strong performance allowed us to deliver $27 million in positive cash flow from operations and $16 million in net income, reflecting the structural improvements we have made to our business operations and also the changes we have made regarding working capital and inventory management.
Our strong start to the year has been driven by improving results in our core specialty products business, which generated $56 million in adjusted EBITDA in the first quarter.
The specialty results continue to benefit from the strategic plans put in place across our business units last year and have helped us overcome market headwinds, like the sharp rise in crude cost we experienced this quarter.
As I've said, improving our balance sheet and reducing our leverage are top priorities for Calumet. Our leverage, calculated as net debt over trailing 12 months EBITDA is now down to 4.9 times. We expect to continue to drive our leverage lower across the year, as last year's turnaround impacted quarters rolled out of our trailing 12 month results.
During the first quarter, we saw the opportunity to repurchase $23 million of unsecured notes in the open market. After the quarter, we saw more opportunity and have now repurchased a total of $50 million of unsecured notes since the start of the year.
Despite using some of our cash on hand to repurchase debt, our liquidity position improved in the first quarter by $9 million to $460 million, supported by positive cash flow from operations and a somewhat larger borrowing base.
On slide 4, you will see our headline results for the first quarter as well as a chart that shows the continued favorable trend line that our profitability has taken over the last few years.
On a GAAP basis, the partnership produced positive net income of $16.4 million or $0.20 per common unit. Our consolidated adjusted EBITDA results came in at $97.7 million for the quarter or $59.7 million after excluding the positive impacts of non-cash inventory adjustments. On a comparable basis, our business generated $59.7 million of EBITDA, excluding LCM and LIFO, versus $71.9 million last year. It's worth noting, the results this quarter did not benefit from any RINs hardship exemption.
Our core business continues to strengthen each year, which reflects the success of our self-help program. You can see this progress clearly when looking at our trailing 12-month adjusted EBITDA trend on the chart on the bottom of the slide. This trend demonstrates a structural continuous improvement in the business over the last 10 quarters, and our goal remains to keep this momentum moving up into the right.
With that, I will turn the call over to West to talk to the segment results. West?
Thanks, Tim. Our stronger adjusted EBITDA this quarter was driven by stronger volumes in both our specialties and fuels businesses. Slide 5 shows the adjusted EBITDA waterfall reconciled in the first quarter results to last year's comparable quarter.
Starting from a baseline of roughly $76 million, the stronger volumes across both the specialty and fuel segments helped drive gains versus last year's turnaround impacted first quarter. These gains were somewhat offset by smaller declines in margins in both segments, stemming from weaker fuels market conditions year-over-year, and the effect of an oversupply of weaker base oil market versus last year.
Next, the single biggest offset to our year-over-year adjusted EBITDA results is captured by the $45 million change in operating cost compared to last year's first quarter, which is primarily driven by the absence of RINs hardship exemptions that positively impacted the results in last year's first quarter, but is still pending for 2019.
Next, you'll see that our SG&A expenses were down roughly $7 million, primarily as a result of lower ERP cost as we stabilized the platform. Our self-help program contributed $13.5 million through a combination of data-driven cost-savings and margin growth initiatives.
And lastly, non-cash lower of cost or market inventory adjustments also had an outsized effect in the quarter. As Joe mentioned at the outset, we are highlighting the $34.9 million of favorable LCM impact so that our investors have a clear picture of underlying operating performance.
Slide 6 details the quarterly results of our core specialty products segment, which produced $56.3 million in adjusted EBITDA. After excluding the impacts of favorable inventories investments, our specialty products adjusted EBITDA totaled $50.6 million, a 43% increase versus last year's first quarter. This marks the strongest first quarter results for the specialty business since 2016 as well as the strongest single quarter for the segment since a record-setting second quarter of 2017.
Our improved performance came despite the weaker base oil market, and was driven in large part with the early success of the strategic plans our general managers put in place across our business units last year, which emphasize identifying and executing our profitable growth opportunities. We also made the strategic decision to monetize our biosynthetic technologies investment. While commercialization remains very promising, we sold the technology and patent portfolio at a small profit in order to concentrate our resources on near-term initiatives and growth opportunities with shorter time horizons.
Another contributing factor driving our year-over-year profitability improvement has been the strong rebound in our specialty sales volumes, which grew 16%, driven in part by double-digit growth across our solvents business as well as strong base oil sales. The strength in base oil sales volumes marks the continuation of an encouraging trend dating back to the second half of last year, as our sales staff has been able to drive strong volumes despite a very challenging market backdrop.
Our quarterly gross profit per barrel, measured after excluding impacts of LCM and LIFO adjustments came in at almost $16 -- I'm sorry, $36 a barrel, an 11% improvement versus the first quarter of 2018. This gross profit improvement was driven primarily through our ongoing self-help initiatives, which are helping the business to offset the negative impacts of the rapidly rising crude cost we encountered in the first quarter.
Our adjusted EBITDA margin, which after excluding favorable LCM and LIFO impacts, was 14.4%, up significantly from the 11% seen in last year's first quarter. This margin expansion is a function of our efforts to upgrade our product mix through the rationalization of lower-margin SKUs and products in our finished lubricants, base oils and white oils businesses.
You'll get a better sense of the specialty products' adjusted EBITDA margin overtime on slide 7. As you may -- can recall, the first three quarters of 2018 include the effects of both planned and unplanned downtime across our specialty plants, which depressed our year-over-year margin results.
As each prior year quarters roll out of our trailing 12 months results and our current efforts to drive margin expansion gain traction, our adjusted EBITDA margin performance should continue to advance back towards 13% to 15% range that we believe is indicative of our core business.
Slide 8 details the quarterly results in our Fuel Products segment. Historically, the first quarter is one of the fuels business most challenging quarters. In spite of being traditionally seasonally weak quarter, the fuels business generated $41 million in adjusted EBITDA, or $9 million excluding favorable non-cash inventory adjustments.
These results overcame weaker market conditions, such as tightened crude differentials and low gasoline margins, to make a positive contribution to our consolidated results. Clearly, our self-help program in the fuels business is improving the results year-over-year, in spite of the more challenging WTI, WCS crude differentials. In addition, our fuels results are benefiting from improved operational execution and increased throughput across our fuels refining facilities.
Our plant utilization rate marks the healthy improvement of both year-over-year and sequentially, despite the Great Falls event that occurred in March. This better utilization and greater throughput, helped drive a 27% increase in our sales volume compared to last year's first quarter.
Excluding the favorable impact of non-cash LCM and LIFO adjustments, gross profit per barrel results of $1.47 were down versus last year. This was due primarily to the absence of RINs hardship exemptions that were captured in last year's first quarter and the impacts of the weaker market conditions, specifically tighter crude differentials and weaker gasoline frac spreads.
Our strategy has emphasized utilizing roughly 25,000 barrels per day of cost-advantaged heavy Canadian crude, and the WCS to WTI differential tightened over $16 per barrel versus last year's first quarter, negatively impacting year-over-year results.
Turning to slide 9. We show the discipline we have exercised in capital spending, which totaled roughly $11.2 million in the quarter. We continue to forecast capital expenditures between $80 million to $90 million for the full year, in line with the total capital expenditures in the last few years.
As a reminder, we have made a deliberate effort to be more discerning about the growth projects we are committing capital to, and we expect better project development and execution through our improved project management process.
We are prioritizing opportunities with payback periods to be less than two years and relatively low nominal outlays. This has been a successful formula thus far, and we will continue to focus on being efficient and disciplined in our use of capital, while still opportunistically identifying areas for investment that will help us drive growth in our EBITDA and cash flows.
Slide 10 bridges our cash position to last year. As you can see, our opening cash position of $156 million held relatively flat at $153 million ending cash. However, this marginal change came after spending $11 million in CapEx during the quarter, as well as $23 million that was deployed to buy back unsecured notes in the open market.
Absent the cash that we spent chipping away at our debt, our cash balance marked a healthy improvement versus the fourth quarter of 2018, driven by positive operating cash flow of $24 million and over $4 million benefit from changes in net working capital.
We will look to utilize our improving operating cash flows to opportunistically reduce our debt burden to the extent that we have excess cash available after providing for capital spending needs and funding forward in capital. While this was only the second quarter of positive cash flow from operations, excluding the interest impact from the secured notes that we retired last year, Calumet generated positive cash flow from operations in four of the last five quarters.
Slide 11 outlines our credit metrics, which has steadily improved dating back to the beginning of 2017. Our liquidity position, as measured by undrawn availability on the revolving credit facility and cash on hand, increased to $460 million, up from $451 million at the end of last quarter. Again, this improvement to our liquidity came despite utilizing $23 million of cash to buy back bonds during the first quarter.
Our leverage, as determined by net debt to trailing 12-months adjusted EBITDA, currently sits at 4.9 times, down from 5.6 times as of the end of the last quarter. Since we announced our self-help program three years ago, our net debt to adjusted EBITDA has declined from over 22 times to 4.9 times. Our ongoing focus on self-help continues to deliver results.
It is worth noting that these trailing 12-month adjusted EBITDA totals are as reported and not pro forma, and thus, the increase to our leverage that we observed last year, which we highlighted on the chart with the yellow box, was driven by the prior the investments of EBITDA-producing assets alongside the negative impacts of the downtime we experienced last year, which hampered our adjusted EBITDA capture.
We've made meaningful progress on leverage reduction and are encouraged by the positive trend our leverage has taken in recent quarters. Improving our balance sheet is one of Calumet's most significant strategic imperatives, and as the year progresses, we expect to continue to drive this figure even lower as we grow our trailing 12-month adjusted EBITDA and further reduced net debt.
In addition to improving our leverage multiples and liquidity position, another significant strategic goal is to maintain strong access to capital. During the quarter, we were able to extend our existing inventory financing agreement out to June 2023, beyond the majority of all of our unsecured notes. The inventory supply and update agreement is valuable in derisking our liquidity position from swings in commodity pricing.
Importantly, we believe the extension of the term beyond that of our unsecured maturities sends a positive signal that the capital markets are open to Calumet, and that providers of our financing recognized material changes we've made to improve our balance sheet and business.
With that, I'll turn the call back to Tim, to discuss the status of our self-help program and our forward outlook for the coming quarter.
Thanks, West. Moving to slide 12, we show the results of the first quarter under Phase 2 of our self-help program. During the quarter, Calumet captured over $13.5 million in EBITDA, with the majority of the benefits centered around our Shreveport and San Antonio refineries. Our totals also captured more value due to rationalization of lower-margin SKUs and products across our specialty business.
Much of the self-help opportunities are being enabled by the data-driven insights from our ERP system. We are driving meaningful cost savings across our supply chain management and our procurement functions, which is helping improve our raw material cost and our transportation cost.
Lastly, we have improved our profitability from greater net backs on our products after completing loading rack extension projects and emphasizing more local placements of our fuels products.
Looking ahead to the full year, we expect to capture between $25 million to $40 million of EBITDA from our self-help program. For example, in April, we started up our new Versagel unit at our Karns City plant, which expands our production capability for the high-value proprietary specialty gels.
As we progressed through the year, we expect to continue capturing benefits from further SKU rationalization and ongoing supply chain optimization efforts as we execute our business strategies.
Slide 13 covers our outlook for the coming quarter. In our core specialty business, we expect to see sequentially improving sales volumes and expanding profitability along typical seasonal trends. Our trailing 12-month EBITDA margins should continue to benefit as we high-grade our products late. We completed a 10-day catalyst change out at our Shreveport facility in April, which will incrementally reduce paraffinic base oil production.
In our fuels business, we expect to benefit from seasonal improvement and crack spreads, and also from wider differentials on our advantaged crude oil feedstocks. Specifically, WCS and Midland differentials to WTI have shown modest improvement compared to the levels seen in the first quarter.
We expect to see year-over-year improvement in our throughput performance at our refineries, and we would expect to hear from the EPA on the status of our RINs hardship applications.
On the corporate and strategic side, we expect to capture additional carrying benefit to our base business from our ongoing self-help efforts, including the capital projects we completed in the second half of last year. And lastly, we will continue to look for opportunities to repurchase our bonds.
With that, I would like a turn the call over to the operator to open up the lines for Q&A. Kevin?
[Operator Instructions] Our first question comes from Neil Mehta with Goldman Sachs.
Good morning, guys. Thanks for taking the questions. So the first question I just have is around deleveraging. As you said, West, you’ve gone from 22 times levered to 4.9 times net debt-to-EBITDA, [no] [ph] market improvement. Where's the ultimate journey? Where are you targeting as the [indiscernible] capital structure? And how do you think about under a reasonable margin regime, best case margin regime, the timeline to getting to that goal?
Yeah, and that's a great question, Neil. We've always had a -- or the Board always had a target of below four times on our net debt-to-EBITDA. And so what we said we would do is based upon the assets we had at the time, et cetera. As we get closer, we'll establish and reconsider what our target should be. But then we have a lot of wood to chop.
And we still believe that there's a fair bit of wood to chop in terms of getting our leverage down below that four times. So are we going to see that this year? That would be very, very bullish perspective, but we're clearly making progress there, and we're going to continue to get there over the next couple of years through our continued efforts in our self-help program.
And you do not see asset sales as necessary to achieve that level?
Neil, this is Tim. We don't see asset sales as necessary. We have been driving our self-help program in a way that we believe organically can continue to grow our EBITDA. And as you can see from the cash flow that we generated in the first quarter, we believe that we can continue to reduce our debt that way.
Now having said that, that's not the only solution, and that’s what you've pointed out, we will continue to look for opportunities to accelerate that. Asset sale is certainly one of the options that we can consider, and I would say, just like we said all along, that all options are on the table. And so we'll just continue to look for those opportunities. So in the meantime, our organic self-help program is our base strategy.
That's great. And then the follow-up question, Tim, is just how do we think about the margin environment that we should expect in 2019? Obviously, the oil prices have a big move off bottom. I actually would've thought you would have seen more margin compression in the specialty's business and appeared to have materialized in the first quarters. So, as you think about where we are versus normal, and given the oil price level that we're at right now, how should we think about that go forward for that specialty margin on a per barrel basis?
Yeah, Neil. We definitely saw margin compression in the first quarter. So crude prices rose $15 a barrel across the quarter. The market definitely compressed that 15 barrels -- $15 a barrel, and we saw it in our pricing, we saw it in our margins.
I think what you see counteracting that is the strategy that our GMs have been implementing since September of last year. West talked about that on the prepared remarks. But as we continue to implement those strategies, some of the strategies, for example, involve rationalizing some of our lower-margin products that we have been able to identify and basically eliminate. Some of that is some of the third-party tolling arrangements that we had in our portfolio in the past that were high grading, ending some of those low margin agreements, and again, moving into what we consider to be more of a higher margin tiers that we've been focusing on.
And a lot of it is just improved operations excellence and being able to -- reliability across our assets. So make no mistake about it, we're seeing compression in our margins. We're just proud of our employees for being able to implement the strategies and try to counteract those headwinds like they did here in the first quarter.
And in the second quarter, are you seeing 2Q margins further compress relative to 1Q margins?
No, Neil. We're seeing second quarter margin starting to recover. In April, we saw quite a few market corrections that were adjusting for the higher crude prices throughout our business, base oils, solvents, white oils, we saw some correction happening. So we do see that the second quarter should be a little bit better from that standpoint.
Thanks guys.
Our next question comes from Roger Read with Wells Fargo.
Thanks. Good morning.
Good morning Roger.
Okay, good. I just wanted to dive in a little bit, maybe on -- you mentioned in the last commentary there, the part about moving out of products in the specialty side that have weaker margins and moving into ones with better. I was just curious, as you look at commentary about lubricating oils, I think in general, being a weaker margin. Package synthetics, we think of is higher up sequentially on package synthetics, but actually -- I'm sorry, down sequentially year-over-year, up sequentially quarter-to-quarter, is that what we're seeing? But then I'm a little off -- thrown off, because lubricating oils were actually up sequentially. So I'm just trying to understand, as you're rationalizing where is that margin better, where is the margin may be weaker and how that's kind of flowing through the various pieces there?
Yes, you're right, Roger. It is complicated, and there is a lot of moving parts, but let me just give you a few examples. Like in our finished lubes business, which we do say is our highest margin business that we have. We have some simplification and rationalization efforts. I think, in the last call, we said, we went from, I think, it was something like 3,500 SKUs down to 900 SKUs as we try to simplify and take cost out of our business. And so that is definitely something that you're seeing. That's contributing something in the range of 600 barrels a day of less volumes that you're going to see in that finished loops business as a result of that.
But it's taking out some of the low margin; some of the tolling businesses that we had that weren't bringing a lot of the margin. And that's why you're seeing, for example, the EBITDA margin percent that West talked about, a nice rebound in the first quarter to that 14.4%. But we're not just doing that in finished lubes. We're doing that in our white oils business, for example.
As we look at some third-party arrangements and again some of the low-margin tiers, we've taken volume out of their, roughly 2,000 barrels a day, that we believe are unattractive volumes that we're not going to pursue. But instead, we've been backfilling them with our strategy of trying to find our niche markets and place those into our niche markets.
We're doing the same thing in base oils. As we continue to look for opportunities to improve our net backs in our base oils, and I would just say, as you read and see these -- the length on the base oil market, I'll just point out that, you've got group 1, you've got group 2, you've got group 3, and those 3 different markets are being impacted -- they're all being impacted, but they're being impacted by different levels. And we certainly see group 3 and group 2 under significantly more pressure than group 1 at this point. Now that's not to say group 1 is not under pressure too, so I don't want to give you the wrong impression, but we are seeing that difference in the way those base oil markets are responding.
Thanks for that. Yes, we are hearing consistent commentary on the group 2 and group 3 across the board. All right, switching here West, I have maybe an evolved question here. Clearly, you did well on the cash generation, cash balance looks good. You've bought back some debt.
But as we look at the balance sheet, kind of total debt number went up. We're guessing that's where this IFRS kind of regulation on lease is, but I wanted to make sure that?
And then going to your question – your commentary about the capital markets being open and then improving overall metric year performance, how are we thinking about structuring or timing on any sort of change in the overall balance sheet as we go forward?
So Roger, I think you've put your finger right on it with respect to the total liabilities and assets. The accounting change to capitalized leases put a lot of additional assets on our balance sheet as well as some liabilities, $130 million, $140 million.
And then the one thing that you always have to keep in mind though is that the accounting pronouncement is really sort of a one-sided affair. If you're going to treat the liability and treat it effectively as a capital lease, you really need to go back and give some credit to the additional operational EBITDA that you would have generated.
But this accounting pronouncement is very punitive in that you don't get any of that benefit associated with it. So you're still deducting from your EBITDA, the full operating cost associated with the lease expense -- operating lease expense. And so we're just picking up the liabilities and not making the adjustment to the EBITDA. So if you take that into consideration, our results are actually especially impressive in all of our quarter-over-quarter results.
As to your other question with respect to refinancing, yes, we are very focused on refinancing our 2021 notes. The market clearly, since the last quarter has improved significantly. At the same time, Calumet has made huge strides in improving its business.
So we're seeing that in the -- in our own bonds in terms of the overall improvement in our bonds. The supply and offtake extension, I think, is really also another sign that the markets are open to Calumet, and they are supportive of everything that we're doing.
But at the same time, we don't have to do anything right away. We've got until -- our bounds aren't going to be reported as hard in our financials until the second quarter of 2020. So in August 2020, is the first time you're going to hear us say, hey, the 2021 is hard on our balance sheet.
I feel very comfortable that some time between now and then, we're going to have a good opportunity to refinance our bonds in the unsecured market. And that really is our focus is refinancing our debt in the unsecured market.
Okay. And as a quick follow-up -- yes, I am sorry. Go ahead, Tim.
Yes, Roger, I was just going to say that our focus has been to improve our core business, grow our earnings, grow our profitability and generate cash. And we know, as we continue to deliver on that objective, that the right options will continue to be open to us. And so that's what we're focused on.
We're going to continue to improve our business, we're going to continue to generate cash and we know what West was just referring to, that will lead to the right options that we're going to look at for the -- to maximize shareholder value and what we'll do with our refinancing our 2020 notes.
Okay, and then just kind of as a follow-up to what Niel asked earlier about the need of an asset sale, and you said you don't need that. As we think about refinancing, say, roughly between now and August of next year, thoughts on using equity as part of that, whether necessity or flexibility or option?
Yeah. So, what we look at any and all options all the time, but that said, given where the unit price is, there's a strong dislike by our board and management to issue equity. We've had tremendous success on our self-help program. The slide that Tim showed early on that year-over-year continued improvement just through self-help and then accelerated to some degree by the deleveraging events associated with the sales period. We think that we continue to just -- continue just using our self-help to continue to drive our leverage down and improve things. We don't need to resort to issuing any equity or – and we don't need to necessarily sell any particular assets.
Appreciate that. Thank you.
Our next question comes from Sean Sneeden with Guggenheim.
Tim, I know you guys called out the better volumes kind of across the lubricating oils and solvents. Can you talk a little bit more about that? And you guys, do you have – do you think that Q1 is there were kind of catch-up just given some of the lighter purchases that went on from customers in Q4? Or was this more kind of sustainable and kind of a healthier volume we should think about going forward?
Yeah, I mean, I think both certainly have impacts, Sean. I would say, we had a heavier turnaround and even unplanned downtime a year last year, especially in the first quarter of last year. And so a lot of the volume improvement is associated with our production capability being able to produce more volume. And we believe that will continue into this -- into the following quarters as we continued to improve our operational excellence across our assets.
Having said that, we are a specialty business. It's not a commodity mindset where you can make the barrels and just dump them in the market. We've got to find the right sales outlet, as you're pointing to. And what I would tell you is, if you look at our EBITDA margin percent that we were able to grow, the gross profit per barrel that we're able to grow in the first quarter compared to last first quarter and even compared to the fourth quarter sequentially, that we are doing a better job of pricing those products in the right markets as well. And that is directly attributable to the strategic initiatives of general managers, as we've talked about a lot in the last couple quarters, have taken as their personal challenge here as part of our business reorganization that we did last year.
Got it. That's helpful. And I know, I think West was mentioning that the new baseload volumes themselves were stronger. I know a bunch of your competitors have talked about the weakness in that market, could you – it sounds like part of the benefit that you're seeing there has been – just kind of what you're just talking about, Tim, the better placement of products and local markets. Is there anything else that you guys are doing differently? Or is it really kind of just given your footprint and what you can the GMs to do that's really the differentiator?
Well, I'll just mention, Sean, we don't get into a lot of detail on the self-help program, but we're also improving the efficiency of how we are producing these specialty products through better yields, through better reliability, taking out operating cost, through reducing the transportation cost, that end up shrinking the overall material margin. So it's all of that. It's not just the end price that you see in the market, but it's really the whole value chain, the whole supply chain that the GMs are focused on, including raw material cost and trying to continue to find lower cost of raw materials to make these specialty products, right? So I would say it's a combination of all of those, Sean, that's leading to the higher EBITDA margin and gross profit per barrel.
Got it. I appreciate that. And lastly, West, you mentioned you wanted to refinance in unsecured markets, and I know you guys have talked about trying to get below four times. When we think about kind of reconciling those two, does the -- in your mind, does total debt need to come down from where we are today? Or is it just a function of growing EBITDA as we go forward.
It's a combination of both. So we're focused on continued improvement year-over-year in terms of the trailing 12-month EBITDA, and we want to continue to be going up into the right. The way we kind of drive that, you can kind of think about it big picture. Calumet did 10 acquisitions in three years in the past. And really, what Tim has done with his team, is we're really focused on Self-Help, which in large part is integrating the businesses that wasn't done before to get all the synergies that we can realized out of the business. So, conceptually, that's what we're doing to continue to drive our results.
At the same time, we clearly have too much debt, more debt than what we'd like to have. So you're going to see us continue to work to reduce our leverage over time. So we bought back some bonds, bought $50 million worth of bonds to date. We're looking across the whole spectrum of our bonds in terms of when is it appropriate and which bonds to potentially buy in the market to further reduce our leverage.
Yeah. And Sean, I would just jump in too, I think West hit it on the head there. When you look at the leverage calculation, EBITDA is the denominator, right? So we can influence our leverage of the most by continuing to grow our EBITDA, and that chart we showed on the first slide of the prepared remarks, over the last 10 quarters, as we continue to drive our EBITDA in that kind of secular trend upwards. I mean. that is, by far, the best thing we can do for ourselves is to continue to drive that core EBITDA up.
Now West said, we've got too much debt, and we all agree we've got too much debt. So, there are options to accelerate this deleveraging process. You guys talked about asset sales on some of the previous questions as well and that is certainly an option that could help accelerate the process. But it's got to be accretive to our deleveraging effort, and it's got to make sense from our core business standpoint. And so, there is no mandate to do that. I think our base program continues to generate the results that we needed to in the last two quarters in particular. I think you guys are seeing when we don't have the turnarounds, what our business is starting to look like. But as West said earlier, we do look at all options and we're continuing to evaluate what's going to be best for our shareholders.
Got it. I appreciate all that. And just West, can you remind me the $50 million of repurchases on the 6.5, is that all at par, and just remind us if there are any limitations in your ability to repurchase more?
Yeah. So, obviously, the 2021 are gullible at this stage. So, if we wanted to -- we can culled however, many we want to culled, but they have great -- we purchased them at modest discounts relative to market. There is basically a little over $1 million in change discount relative to base amount that we bought amount.
Great. Thanks a lot, guys.
Our next question comes from Jason Gabelman with Cowen.
Yeah. Hi. Thanks for taking the question. I just wanted to drill down a bit more on Self-Help program at $13.5 million that you reported this quarter on Phase 2. I was wondering if you could split out all these comments that is consistent with kind of the target of having two-thirds of that self-help program accrued in the specialties business? And also I know there was going to be some benefit from refining projects that came online late last year. I was wondering what, if any amount from those projects is reflected in that $13.5 million? And I have a follow-up? Thanks.
Yes, it is consistent, Jason, with what we've been -- what we've been projecting. The majority of the self-help in the first quarter was at our Shreveport and San Antonio refineries that we reported two-thirds. And to the extent that it's impacting the Shreveport refinery, that's directly tied into our specialties business. So that is a large factor in terms of what we're trying to drive. I think the -- some of the projects that we've completed last year, that's the ISOM project and San Antonio, that's the Naphtha project that we put in Great Falls, that's the TruFuel expansion lines that we build in the finished lubes business. Those are performing -- those were up and running last year and those are performing well. What we do is we track a year's worth of benefits associated with projects like this, and then when the year rolls out, that becomes part of base. And so the carry-in that we had in this year so far it's related to those projects and are performing well.
Okay. Thanks. And if I could just switch and ask a question about CapEx for the year, obviously, it was low in 1Q. I believe you have maintenance plan later in the year at Shreveport. So I'm imagining there will be, at some point, a larger quarter of capital spend. But I'm wondering, is there any contingency spend contemplated within that range? And if you have any other planned maintenance activities on the year that you could comment on? Thanks.
Yes. Okay, Jason, you're right. So we've talked about a turnaround in the third quarter with Shreveport. That's still being plan and as you mentioned on CapEx, that includes turnarounds. It is going to be really more of a timing issue, first quarter maybe a little bit behind ratability, but we will definitely catch up when we do those turnarounds and we're still forecasting that $80 million to $90 million CapEx-type level. We had some additional smaller outages, we just didn't care to call those out in the original guidance.
But here in the second quarter, we had some small planned outages at Princeton, five days, it's complete. Great Falls, we had some units down for one week. Shreveport, I mentioned earlier, we had a canvas change out. So those are -- but those are smaller, and they're not total refinery outages, and so we didn't choose to pull that out. But I think you'll see in the second quarter, we'll have a little bit more CapEx spend as we get little bit more outages there too.
Great. Thanks a lot for the details.
Our last question comes from Gregg Brody with Bank of America.
Good morning, guys. Good morning. You mentioned on refining business that, in the second quarter, you may expect the -- your finance a year after RINs exemption, what type of financial impact do that potentially have in the company?
Greg, I know a lot of folks are interested in at this days because of the wider program that's been more in the news lately. But we would hope to hear from the EPA in the second quarter. They have missed the normal first quarter deadline, so we're hoping they're going to be able to make a decision and let us know here in the second quarter. Look, the RINs pricing itself has dropped significantly over the last six months, even three months. And so a lot of the liabilities associated with RINs have actually been captured already because the RINs pricing, whatever, $0.15, $0.16 of RIN right now.
What I can tell you is, our obligation, we still believe our RVO is about $80 million, $82 million RVO a year. And so, you're going to have to make your own assumption for what the RINs prices are going to be.
But if you use $82 million RVO, in terms of our obligation, you can kind of get a feel for what the magnitude that would be.
Thank you.
Yeah. And then keep in mind,…
Thank you very much.
…keep in mind of those RVOs that we -- that we an obligation that we have, we make about half of that. And then we have to buy the other half.
That's helpful. And then you talked to improve performance at the refinery, in the fuels product segment. And you pointed to higher utilization. Is that -- do you think there's potential to improve further?
Oh! Yeah. I mean Gregg, I mean, that's what our focused and our mindset is all about. We have the highest utilization, amongst our plants here in the first quarter, over the last three years, I mean, since early 2016 that we have a higher utilization.
So, it's definitely a good sign. And we're all, wanting to celebrate small successes here. But we've got a long way to go. And, we believe there's additional opportunity. Not just on a reliability and utilization standpoint, but even on a yields and efficiency standpoint, in each of the plants. And that's really what's driving our whole, again, self-help program.
And so we can -- we're not going to talk about it on the conference call here. But we capture lost opportunity, across our plans, for each of these quarters. And so we know, there's still a lot of low-hanging fruit out there for us to go get.
And we've got to put our plans together. Prioritize and then implement the strategies that we have to go out and capture that. So yeah, we believe there's more to go.
Great, and just switching over to the specialty side, these catalyst changeout of Shreveport, do you expect that will have an impact on volumes it produces this quarter? Or are you prepared for that in terms of -- or have you -- as you're preparing product, the impacting numbers or not impacting numbers?
Yeah. No, I think, Gregg, I think the reason we do the catalyst changeout, is because the catalyst decays over time. And when we do make the changeout, we do get a yield impact back to start of run conditions.
So we've definitely baked that into our plans. We did a small catalyst changeout here in the first quarter, so I wouldn't bake in too much of an impact but we have a bigger catalyst change out in the third quarter. We do expect that to have a bigger impact on our yield profile at that point.
Got it, thank you very much for your time, guys.
Ladies and gentlemen, that concludes the Q&A session of today's call. I'll turn it back to Tim for closing remarks.
I'd like to close by thanking our employees, for their hard work this quarter, and helped us get off to a very successful start of the year. I'd also like to thank our board for their oversight, and all of you, our investors, for your continued support.
Have a great day, everyone.
Ladies and gentlemen, this concludes today's presentation. You may now disconnect. And have a wonderful day.