Calumet Inc DE

Previous wording

The historical unaudited condensed consolidated financial statements included in this Quarterly Report reflect all of the assets, liabilities and results of operations of Calumet Specialty Products Partners, L.P. (“Calumet,” the “Company,” “we,” “our,” or “us”). The following discussion analyzes the financial condition and results of operations of the Company for the three and six months ended June 30, 2024. Unitholders should read the following discussion and analysis of our financial condition and results of operations in conjunction with our 2023 Annual Report and our historical unaudited condensed consolidated financial statements and notes included elsewhere in this Quarterly Report.

Current wording

The historical unaudited condensed consolidated financial statements included in this Quarterly Report reflect all of the assets, liabilities and results of operations of Calumet, Inc. (“Calumet,” the “Company,” “we,” “our,” or “us”). The following discussion analyzes the financial condition and results of operations of the Company for the three and nine months ended September 30, 2024. Stockholders should read the following discussion and analysis of our financial condition and results of operations in conjunction with our 2023 Annual Report and our historical unaudited condensed consolidated financial statements and notes included elsewhere in this Quarterly Report.

Previous wording

On July 10, 2024, the Company completed the previously announced conversion transaction contemplated by the Conversion Agreement, dated as of February 9, 2024 (as amended, the “Conversion Agreement”), by and among the Company, the General Partner, Calumet, Inc. (“New Calumet”), Calumet Merger Sub I LLC (“Merger Sub I”), Calumet Merger Sub II LLC (“Merger Sub II”) and the other parties thereto, including The Heritage Group (the “Sponsor Parties”). Pursuant to the Conversion Agreement, (a) Merger Sub II merged with and into the Company, with the Company continuing as the surviving entity and a wholly owned subsidiary of New Calumet, and all of the common units were exchanged into the right to receive an equal number of shares of common stock, par value $0.01 per share, of New Calumet (“Common Stock”) and (b) Merger Sub I merged with and into the General Partner, with the General Partner continuing as the surviving entity and a wholly owned subsidiary of New Calumet, and all outstanding equity interests of the General Partner were exchanged into the right to receive an aggregate of 5,500,000 shares of Common Stock and 2,000,000 warrants to purchase Common Stock.

Current wording

On July 10, 2024, the Company completed the previously announced conversion transaction contemplated by the Conversion Agreement, dated as of February 9, 2024 (as amended, the “Conversion Agreement”), by and among the Company, the General Partner, Calumet, Inc. (“New Calumet”), Calumet Merger Sub I LLC (“Merger Sub I”), Calumet Merger Sub II LLC (“Merger Sub II”) and the other parties thereto, including The Heritage Group (the “Sponsor Parties”). Pursuant to the Conversion Agreement, (a) Merger Sub II merged with and into the Company, with the Company continuing as the surviving entity and a wholly owned subsidiary of New Calumet, and all of the common units were exchanged into the right to receive an equal number of shares of common stock, par value $0.01 per share, of New Calumet (“Common Stock”) and (b) Merger Sub I merged with and into the General Partner, with the General Partner continuing as the surviving entity and a wholly owned subsidiary of New Calumet, and all outstanding equity interests of the General Partner (1,640,583 general partner units) were exchanged into the right to receive an aggregate of 5,500,000 shares of Common Stock and 2,000,000 warrants to purchase common stock at an exercise price of $20.00 per share (subject to adjustment).

Previous wording

During the second quarter of 2024, our business continued to benefit from an attractive margin environment in our Specialty Products and Solutions and Performance Brands segments. Demand for our products in these businesses remained strong in comparison to historical averages and we continue to leverage the benefits of our fully integrated specialty business in this market. As expected, margins continue to normalize relative to the record highs experienced in the second half of 2022 and early 2023, which we expect to continue for the remainder of the year, particularly for our fuel

Current wording

In our Specialties Products and Solutions and Performance Brands segments, we continue to benefit from an attractive specialty product margin environment, which has proved resilient despite the weakened commodity margin environment which has hampered results for our fuel based products. Demand for our products in these businesses remained strong in comparison to historical averages and we continue to leverage the benefits of our fully integrated specialty business in this market. As expected, margins continue to normalize relative to the record highs experienced in the second half of 2022 and early 2023. We expect the current margin environment for both specialty products and fuel based products to continue for the remainder of the year. Further, we believe low unemployment and stabilizing raw material and packaging costs point to a continuation of healthy demand for the majority of our products. While the risk of recession and inflation continue to be monitored, our plants and the industry are expected to operate at high rates to meet market demand.

Previous wording

In our Montana/Renewables segment, we continue to see strong demand for our renewable fuel products. We maintain our outlook of strong demand for renewable fuel products, including those we produce at our Montana Renewables facility. We believe demand for renewable fuel products will only continue to grow as a result of the rapid expansion of corporate decarbonization targets, broad sustainability initiatives, and governmental mandates and incentives that have been passed or announced by national, state, and provincial jurisdictions across the globe. In light of the global decarbonization initiatives, forecasts of future availability still fall short of the necessary emissions reductions that would be required to reach established net-zero goals, as adequate supply does not exist yet. For example, our Montana Renewables facility is one of the only facilities in Norh America capable of SAF production at scale in North America today. We believe that our position as a first-mover makes us the key producer for potential offtake partners to help them reach their announced targets. Despite periodic WCS inflationary pressure, our Montana specialty asphalt facility remains strategically advantaged due to its local access to cost-advantaged Canadian conventional crude oil, while producing additional fuels and refined products for delivery into the regional market. Due to its strategic location and logistical capabilities, we believe that our Montana specialty asphalt facility is well-positioned to continue to serve long-standing customers in the regional market.

Current wording

In our Montana/Renewables segment, we continue to see strong demand for our renewable fuel products. We maintain our outlook of strong demand for renewable fuel products, including those we produce at our Montana Renewables facility. We believe demand for renewable fuel products will only continue to grow as a result of the rapid expansion of corporate decarbonization targets, broad sustainability initiatives, and governmental mandates and incentives that have been passed or announced by national, state, and provincial jurisdictions across the globe. In light of the global decarbonization initiatives, forecasts of future availability still fall short of the necessary emissions reductions that would be required to reach established net-zero goals, as adequate supply does not exist yet. For example, our Montana Renewables facility is one of the only facilities in Norh America capable of SAF production at scale in North America today. We believe that our position as a first-mover makes us the key producer for potential offtake partners to help them reach their announced targets. The Great Falls facility expects to conduct a planned turnaround in November to change catalyst. This timing allows completion prior to the winter season and was planned to coincide with a period of margin uncertainty as the blender tax credit is expected to change to the production tax credit.

Previous wording

We reported a net loss of $39.1 million in the second quarter 2024 versus a net loss of $22.3 million in the second quarter 2023. We reported Adjusted EBITDA (as defined in Note 12 — “Segments and Related Information” under Part I, Item 1 “Financial Statements - Notes to Unaudited Condensed Consolidated Financial Statements”) of $66.8 million in the second quarter 2024 versus $68.1 million in the second quarter 2023. We generated cash from operating activities of $66.5 million in the second quarter 2024 versus using cash from operating activities of $25.9 million in the second quarter of 2023.

Current wording

We reported a net loss of $100.6 million in the third quarter 2024 versus net income of $99.8 million in the third quarter 2023. We reported Adjusted EBITDA (as defined in Note 12 — “Segments and Related Information” under Part I, Item 1 “Financial Statements — Notes to Unaudited Condensed Consolidated Financial Statements”) of $49.8 million in the third quarter 2024 versus $75.4 million in the third quarter 2023. We used cash from operating activities of $15.5

Previous wording

Please read Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures” for a reconciliation of EBITDA, Adjusted EBITDA and Distributable Cash Flow to Net income (loss), our most directly comparable financial performance measure calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”).

Current wording

Please read Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures” for a reconciliation of EBITDA and Adjusted EBITDA to Net income (loss), our most directly comparable financial performance measure calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”).

Previous wording

Specialty Products and Solutions segment Adjusted EBITDA was $65.8 million in the second quarter 2024 versus $61.0 million in the second quarter 2023. Compared to the second quarter of 2023, Specialty Products and Solutions second quarter 2024 segment Adjusted EBITDA was favorably impacted by higher throughput volumes as a result of improved operational performance and the absence of the planned turnaround completed at our Cotton Valley facility during the prior year period. Current period results in our fuels business were unfavorably impacted by a lower commodity margin environment.

Current wording

Specialty Products and Solutions segment Adjusted EBITDA was $42.6 million in the third quarter 2024 versus $38.6 million in the third quarter 2023. Compared to the third quarter of 2023, Specialty Products and Solutions third quarter 2024 segment Adjusted EBITDA was favorably impacted by higher throughput volumes as a result of improved operational performance and the absence of maintenance activities that were completed at our Shreveport facility during the prior year period. Current period production volumes increased in comparison to the prior year period, despite experiencing unplanned downtime in July as a result of Hurricane Beryl. Current period results in our fuels business were unfavorably impacted by the lower commodity margin environment that has impacted the broader industry.

Previous wording

Performance Brands segment Adjusted EBITDA was $14.1 million in the second quarter 2024 versus $12.2 million in the second quarter 2023. Results in our Performance Brands segment were favorably impacted from the strong volume growth across high performance products, in particular our TruFuel product line and our integrated industrial business. This segment continues to benefit from strong unit margins, reflective of stabilized input costs in our branded and consumer markets.

Current wording

Performance Brands segment Adjusted EBITDA was $13.6 million in the third quarter 2024 versus $13.2 million in the third quarter 2023. Results in our Performance Brands segment were favorably impacted from the strong volume growth across high performance products, in particular our TruFuel product line and our integrated industrial business. This segment continues to benefit from strong unit margins, reflective of stabilized input costs in our branded and consumer markets and a focus on growing our presence in industrial markets.

Previous wording

Total Corporate costs represented a loss of $20.7 million of Adjusted EBITDA in the second quarter 2024 versus a loss of $18.1 million of Adjusted EBITDA in the second quarter 2023 due to higher labor and benefits related expenses.

Current wording

Total Corporate costs represented a loss of $19.1 million of Adjusted EBITDA in the third quarter 2024 versus a loss of $14.6 million of Adjusted EBITDA in the third quarter 2023 due to higher labor and benefits related expenses.

Previous wording

As of June 30, 2024, we had total liquidity of $218.5 million comprised of $7.0 million of unrestricted cash and $211.5 million of availability under our credit facilities. As of June 30, 2024, our revolving credit facilities had a $575.3 million borrowing base, $42.3 million in outstanding standby letters of credit and other reserves and $321.5 million of outstanding borrowings. We believe we will continue to have sufficient liquidity from cash on hand, projected cash flow from operations, borrowing capacity and other means by which to meet our financial commitments, debt service obligations, contingencies, and anticipated capital expenditures for at least the next 12 months. Please read Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for additional information.

Current wording

As of September 30, 2024, we had total liquidity of $289.8 million comprised of $34.6 million of unrestricted cash and $255.2 million of availability under our credit facilities. As of September 30, 2024, our revolving credit facilities had a $508.4 million borrowing base, $27.3 million in outstanding standby letters of credit and $225.9 million of outstanding borrowings. We believe we will continue to have sufficient liquidity from cash on hand, projected cash flow from operations, borrowing capacity and other means by which to meet our financial commitments, debt service obligations, contingencies, and anticipated capital expenditures for at least the next 12 months. Please read Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for additional information.

Previous wording

During the second quarter 2024, we recorded an accrued expense of $20.2 million for RINs, as compared to an accrued expense of $20.5 million for RINs in the second quarter 2023. Our gross RINs Obligation, which includes RINs that are required to be secured through either our own blending or through the purchase of RINs in the open market, is spread across four compliance categories (D3, D4, D5 and D6). The gross RINs obligations may be satisfied by our own renewables blending, RIN purchases, or receipt of small refinery exemptions.

Current wording

During the third quarter 2024, we recorded an accrued expense of $42.8 million for RINs, as compared to a gain of $157.3 million for RINs in the third quarter 2023. Our gross RINs Obligation, which includes RINs that are required to be secured through either our own blending or through the purchase of RINs in the open market, is spread across four compliance categories (D3, D4, D5 and D6). The gross RINs obligations may be satisfied by our own renewables blending, RIN purchases, or receipt of small refinery exemptions.

Previous wording

Sales volumes. We view the volumes of Specialty Products and Solutions products, Montana/Renewables products and Performance Brands products sold as an important measure of our ability to effectively utilize our operating assets. Our ability to meet the demands of our customers is driven by the volumes of feedstocks that we run at our facilities. Higher volumes improve profitability both through the spreading of fixed costs over greater volumes and the additional gross profit achieved on the incremental volumes.

Current wording

Our ability to meet the demands of our customers is driven by the volumes of feedstocks that we run at our facilities. Higher volumes improve profitability both through the spreading of fixed costs over greater volumes and the additional gross profit achieved on the incremental volumes.

Previous wording

activities and provide metrics to analyze our ability to pay interest to our noteholders. Adjusted EBITDA allows us to meaningfully analyze the trends and performance of our core cash operations as well as to make decisions regarding the allocation of resources to segments. Corporate Adjusted EBITDA primarily reflects general and administrative costs.

Current wording

*Segment Adjusted EBITDA.*We believe that Specialty Products and Solutions, Montana/Renewables and Performance Brands segment Adjusted EBITDA measures are useful as they exclude transactions not related to our core cash operating activities and provide metrics to analyze our ability to pay interest to our noteholders. Adjusted EBITDA allows us to meaningfully analyze the trends and performance of our core cash operations as well as to make decisions regarding the allocation of resources to segments. Corporate Adjusted EBITDA primarily reflects general and administrative costs.

Previous wording

The following table reflects our unaudited condensed consolidated results of operations and includes the non-GAAP financial measures EBITDA, Adjusted EBITDA and Distributable Cash Flow. For a reconciliation of EBITDA, Adjusted EBITDA and Distributable Cash Flow to Net income (loss), our most directly comparable financial performance measure calculated and presented in accordance with GAAP, please read “— Non-GAAP Financial Measures.”

Current wording

The following table reflects our unaudited condensed consolidated results of operations and includes the non-GAAP financial measures EBITDA and Adjusted EBITDA. For a reconciliation of EBITDA and Adjusted EBITDA to Net income (loss), our most directly comparable financial performance measure calculated and presented in accordance with GAAP, please read “— Non-GAAP Financial Measures.”

Previous wording

We include in this Quarterly Report the non-GAAP financial measures EBITDA, Adjusted EBITDA and Distributable Cash Flow. We provide reconciliations of EBITDA, Adjusted EBITDA and Distributable Cash Flow to Net income (loss), our most directly comparable financial performance measure.

Current wording

We include in this Quarterly Report the non-GAAP financial measures EBITDA and Adjusted EBITDA. We provide reconciliations of EBITDA and Adjusted to Net income (loss), our most directly comparable financial performance measure.

Previous wording

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:

Current wording

EBITDA and Adjusted EBITDA 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:

Previous wording

EBITDA, Adjusted EBITDA and Distributable Cash Flow should not be considered alternatives to Net income (loss) or Operating income (loss) 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 and Adjusted EBITDA do not reflect our liabilities 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 several 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.

Current wording

EBITDA and Adjusted EBITDA should not be considered alternatives to Net income (loss) or Operating income (loss) or any other measure of financial performance presented in accordance with GAAP. In evaluating our performance as measured by EBITDA and Adjusted EBITDA, management recognizes and considers the limitations of these measurements. EBITDA and Adjusted EBITDA do not reflect our liabilities for the payment of income taxes, interest expense or other obligations such as capital expenditures. Accordingly, EBITDA and Adjusted EBITDA are only two of several measurements that management utilizes. Moreover, our EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of another company because all companies may not calculate EBITDA and Adjusted EBITDA in the same manner.

Previous wording

The following tables present a reconciliation of Net income (loss), our most directly comparable GAAP financial performance measure to EBITDA, Adjusted EBITDA and Distributable Cash Flow, for each of the periods indicated.

Current wording

The following tables present a reconciliation of Net income (loss), our most directly comparable GAAP financial performance measure to EBITDA and Adjusted EBITDA for each of the periods indicated.

Previous wording

*Sales.*Sales increased $115.9 million, or 11.4%, to $1,133.7 million in the three months ended June 30, 2024, from $1,017.8 million in the same period in 2023. Sales for each of our principal product categories in these periods were as follows:

Current wording

*Sales.*Sales decreased $49.0 million, or 4.3%, to $1,100.4 million in the three months ended September 30, 2024, from $1,149.4 million in the same period in 2023. Sales for each of our principal product categories in these periods were as follows:

Previous wording

Specialty Products and Solutions segment sales increased period over period, primarily due to an increase in sales volumes as a result of strong market demand. This impact was partially offset by moderately lower prices as result of product mix.

Current wording

Specialty Products and Solutions segment sales decreased period over period, primarily due to lower prices as a result of product mix. This impact was partially offset by an increase in volumes as a result of strong market demand.

Previous wording

Montana/Renewables segment sales increased primarily due to improved production volumes at our Montana Renewables facility during the quarter compared to lower volumes in the prior year comparative period during the start-up of the facility. This impact was partially offset by the weaker price environment in the current year period.

Current wording

Montana/Renewables segment sales decreased primarily due to the weaker price environment in both our Montana Renewables and specialty asphalt businesses during the current year in comparison to the prior year period. This impact was partially offset by an increase in volumes as a result of improved production volumes at our Montana Renewables facility during the quarter compared to lower volumes in the prior year comparative period.

Previous wording

Performance Brands segment sales increased primarily due to increases in sales volumes as a result of strong market demand, partially offset by the decrease in sales price.

Current wording

Performance Brands segment sales increased primarily due to increases in sales volumes as a result of strong market demand and a continued focus on growing our presence in certain industrial markets, partially offset by the decrease in sales price.

Previous wording

Gross Profit. Gross profit decreased $7.7 million, or 10.8%, to $63.8 million in the three months ended June 30, 2024, from $71.5 million in the same period in 2023. Gross profit for our business segments were as follows:

Current wording

Gross Profit. Gross profit decreased $256.6 million, or 98.1%, to $4.9 million in the three months ended September 30, 2024, from $261.5 million in the same period in 2023. Gross profit for our business segments were as follows:

Previous wording

The decrease in Montana/Renewables segment gross profit for the three months ended June 30, 2024, as compared to the same period in 2023, was primarily due to an increase in operating expenses as a result of operating the feedstock pre-treatment unit for the duration of the current quarter. The feedstock pre-treatment unit was commissioned mid-quarter during the prior year comparative period. The unfavorable impact associated with margins was the result of negative product mix. These impacts were partially offset by higher volumes as a result of improved operational performance at our Montana Renewables facility, as the facility operated essentially at nameplate capacity in the current year period.

Current wording

The decrease in Montana/Renewables segment gross profit for the three months ended September 30, 2024, as compared to the same period in 2023, was primarily due to the impact of RINs prices. While RINs prices decreased in the current period in comparison to the prior year period, the mark-to-market impact of RINs prices resulted in a RINs expense of $12.0 million in the current period, as compared to a benefit of $52.9 million in the prior year period. The unfavorable impact associated with margins was the result of feedstock price lag in Montana Renewables due to an abrupt drop in feedstock industry prices, as well as lower index margins during the current period. These impacts were partially offset by higher volumes as a result of improved operational performance at our Montana Renewables facility, which essentially operated at nameplate capacity in the current year period. Refer to Note 2 — “Summary of Significant Accounting Policies” under Part I, Item 1 “Financial Statements — Notes to Unaudited Condensed Consolidated Financial Statements” for additional information related to our accounting for RINs.

Previous wording

Changes in Results of Operations for the Six Months Ended June 30, 2024 and 2023

Current wording

Changes in Results of Operations for the Nine Months Ended September 30, 2024 and 2023

Previous wording

*Sales.*Sales increased $84.4 million, or 4.1%, to $2,139.5 million in the six months ended June 30, 2024, from $2,055.1 million in the same period in 2023. Sales for each of our principal product categories in these periods were as follows:

Current wording

*Sales.*Sales increased $35.4 million, or 1.1%, to $3,239.9 million in the nine months ended September 30, 2024, from $3,204.5 million in the same period in 2023. Sales for each of our principal product categories in these periods were as follows:

Previous wording

Specialty Products and Solutions segment sales increased period over period, primarily due to an increase in sales volumes as a result of strong market demand. This impact was partially offset by the lower commodity price environment in the current year period.

Current wording

Specialty Products and Solutions segment sales decreased period over period due to the lower commodity price environment in the current year period. This impact was partially offset by an increase in sales volumes as a result of strong market demand.

Previous wording

Montana/Renewables segment sales increased primarily due to stabilized production volumes at our Montana Renewables facility during the current year period in comparison to lower volumes in the prior year comparative period as a result of the start-up of the facility. This impact was partially offset by the weaker price environment in the current year period.

Current wording

Montana/Renewables segment sales increased primarily due to stabilized production volumes at our Montana Renewables facility during the current year period in comparison to lower volumes in the prior year comparative period as a result of the start-up of the facility. This impact was partially offset by the weaker price environment in both our Montana Renewables and specialty asphalt businesses during the current year in comparison to the prior year period.

Previous wording

Performance Brands segment sales increased primarily due to increases in sales volumes as a result of strong market demand.

Current wording

Performance Brands segment sales increased primarily due to increases in sales volumes as a result of strong market demand and a continued focus on growing our presence in certain industrial markets.

Previous wording

Gross Profit. Gross profit decreased $25.8 million, or 15.3%, to $142.3 million in the six months ended June 30, 2024, from $168.1 million in the same period in 2023. Gross profit for our business segments were as follows:

Current wording

Gross Profit. Gross profit decreased $282.4 million, or 65.7%, to $147.2 million in the nine months ended September 30, 2024, from $429.6 million in the same period in 2023. Gross profit for our business segments were as follows:

Previous wording

The increase in Performance Brands segment gross profit for the six months ended June 30, 2024, as compared to the same period in 2023, was primarily due to an increase in industrial volumes. The unfavorable impact for operating costs was due to the partial receipt of proceeds from the Company’s business interruption insurance policy included in the prior year period results. This segment continues to benefit from strong unit margins, reflective of stabilized input costs in our branded and consumer markets.

Current wording

The increase in Performance Brands segment gross profit for the nine months ended September 30, 2024, as compared to the same period in 2023, was primarily due to an increase in industrial volumes. The unfavorable impact for operating costs was due to the partial receipt of proceeds from the Company’s business interruption insurance policy included in the prior year period results. This segment continues to benefit from strong unit margins, reflective of stabilized input costs in our branded and consumer markets.

Previous wording

*Interest expense.*Interest expense increased $12.6 million, or 12.0%, to $117.6 million in the six months ended June 30, 2024, from $105.0 million in the same period in 2023. The increase was primarily due to higher borrowings on our revolving credit facility during the current year period in comparison to the prior year.

Current wording

*Interest expense.*Interest expense increased $11.6 million, or 7.1%, to $175.3 million in the nine months ended September 30, 2024, from $163.7 million in the same period in 2023. The increase was primarily due to higher borrowings on our revolving credit facility during the current year period in comparison to the prior year.

Previous wording

*Gain (loss) on derivative instruments.*There was a $5.6 million loss on derivative instruments in the six months ended June 30, 2024, compared to a $39.8 million gain in the same period in 2023. The $44.3 million realized loss on derivative instruments in the current year period was primarily due to the realized loss on the embedded derivative recognized at the termination of the Shreveport inventory financing arrangement with Macquarie in the current period. The unrealized gain on derivative instruments was primarily related to the unrealized gain on the inventory financing embedded derivative of $46.6 million in the current year period, compared to an unrealized gain of $3.6 million in the prior year comparative period.

Current wording

*Gain (loss) on derivative instruments.*There was a $9.6 million gain on derivative instruments in the nine months ended September 30, 2024, compared to a $14.5 million loss in the same period in 2023. The $52.3 million unrealized gain on derivative instruments in the current year period was primarily related to the unrealized gain on the inventory financing embedded derivative. The $42.7 million realized loss on derivative instruments in the current year period was primarily due to the realized loss on the embedded derivative recognized at the termination of the Shreveport inventory financing arrangement with Macquarie. The $33.3 million realized loss on derivative instruments in the prior year period was due to the settlement of crack spread swaps positions during the period. The $18.8 million unrealized gain on derivative instruments in the prior year period was primarily the result of a $39.7 million unrealized gain on crack spread

Previous wording

There have been no material changes in that information other than as discussed below. Also, see Note 7 — “Inventory Financing Agreements” and Note 8 — “Long-Term Debt” under Part I, Item 1 “Financial Statements — Notes to Unaudited Condensed Consolidated Financial Statements” in this Quarterly Report for additional discussions related to our Supply and Offtake Agreements and our long-term debt.

Current wording

The following should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” included under Part II, Item 7 in our 2023 Annual Report. There have been no material changes in that information other than as discussed below. Also, see Note 7 — “Inventory Financing Agreements” and Note 8 — “Long-Term Debt” under Part I, Item 1 “Financial Statements — Notes to Unaudited Condensed Consolidated Financial Statements” in this Quarterly Report for additional discussions related to our Supply and Offtake Agreements and our long-term debt.

Previous wording

Operating Activities. Operating activities used cash of $27.5 million during the six months ended June 30, 2024 compared to using cash of $52.6 million during the same period in 2023. The change was primarily driven by a decrease in the cash required for working capital during the current year period.

Current wording

Operating Activities. Operating activities used cash of $43.0 million during the nine months ended September 30, 2024 compared to using cash of $7.4 million during the same period in 2023. The change was primarily driven by a decrease in unit margins as a result of the weaker margin environment experienced during the current year period. This impact was partially offset by a decrease in the cash required for working capital during the current year period.

Previous wording

Investing Activities. Investing activities used cash of $35.0 million during the six months ended June 30, 2024 compared to a use of cash of $208.2 million during the same period in 2023. The change is related to a decrease in cash expenditures for additions to property, plant and equipment in the current year period in comparison to the prior year. The cash expenditures for additions to property, plant and equipment in the prior year period were primarily related to our Montana Renewables project.

Current wording

Investing Activities. Investing activities used cash of $51.7 million during the nine months ended September 30, 2024 compared to a use of cash of $240.3 million during the same period in 2023. The change is related to a decrease in cash expenditures for additions to property, plant and equipment in the current year period in comparison to the prior year. The cash expenditures for additions to property, plant and equipment in the prior year period were primarily related to our Montana Renewables project.

Previous wording

Financing Activities. Financing activities provided cash of $62.4 million in the six months ended June 30, 2024 compared to providing cash of $268.2 million during the same period in 2023. The change is primarily due to the borrowings we received in the prior year period from the issuance of the 2028 Notes and the MRL Term Loan Credit Agreement, partially offset by an increase in net borrowings on our revolving credit facility in the current year period compared to the same period in 2023.

Current wording

due to the borrowings we received in the prior year period from the issuance of the 2028 Notes and the MRL Term Loan Credit Agreement. This was partially offset by the proceeds we received in the current year from the issuance of the 2029 Notes, borrowings from the Montana terminal asset financing arrangement and the Montana refinery asset financing arrangement, and the increase in net borrowings on our revolving credit facility in the current year period compared to the same period in 2023.

Previous wording

Our property, plant and equipment capital expenditure requirements consist of capital improvement expenditures, replacement capital expenditures, environmental capital expenditures and turnaround capital expenditures. Capital improvement expenditures include the acquisition of assets to grow our business, facility expansions, or capital initiatives that reduce operating costs. Replacement capital expenditures replace worn out or obsolete equipment or parts.

Current wording

Our property, plant and equipment capital expenditure requirements consist of capital improvement expenditures, replacement capital expenditures, environmental capital expenditures and turnaround capital expenditures. Capital improvement expenditures include the acquisition of assets to grow our business, facility expansions, or capital initiatives that reduce operating costs. Replacement capital expenditures replace worn out or obsolete equipment or parts. Environmental capital expenditures include asset additions to meet or exceed environmental and operating regulations. Turnaround capital expenditures represent capitalized costs associated with our periodic major maintenance and repairs.

Previous wording

availability of credit under the revolving credit facility of $650.0 million, including a FILO tranche, subject to borrowing base limitations, and includes a $500.0 million incremental uncommitted expansion feature. Lenders under the revolving credit facility have a first priority lien on, among other things, the Company’s accounts receivable and inventory and substantially all of its cash (collectively, the “Credit Agreement Collateral”). Please refer to Note 8 — “Long-Term Debt” in Part I, Item 1 “Financial Statements — Notes to Unaudited Condensed Consolidated Financial Statements” for additional information.

Current wording

On January 17, 2024, the Company entered into the Fourth Amendment to its revolving credit facility (the “Credit Agreement”) governing its senior secured revolving credit facility maturing in January 2027, which provides maximum availability of credit under the revolving credit facility of $650.0 million, including a FILO tranche, subject to borrowing base limitations, and includes a $500.0 million incremental uncommitted expansion feature. Lenders under the revolving credit facility have a first priority lien on, among other things, the Company’s accounts receivable and inventory and substantially all of its cash (collectively, the “Credit Agreement Collateral”). Please refer to Note 8 — “Long-Term Debt” in Part I, Item 1 “Financial Statements — Notes to Unaudited Condensed Consolidated Financial Statements” for additional information.

Previous wording

The borrowing base on our credit facilities increased from approximately $486.9 million as of June 30, 2023, to approximately $575.3 million at June 30, 2024. Our borrowing availability decreased from approximately $365.5 million at June 30, 2023, to approximately $211.5 million at June 30, 2024. Total liquidity, consisting of unrestricted cash and available funds under our credit facilities, decreased from $401.5 million at June 30, 2023 to $218.5 million at June 30, 2024.

Current wording

The borrowing base on our credit facilities increased from approximately $453.7 million as of September 30, 2023, to approximately $508.4 million at September 30, 2024. Our borrowing availability decreased from approximately $363.9 million at September 30, 2023, to approximately $255.2 million at September 30, 2024. Total liquidity, consisting of unrestricted cash and available funds under our credit facilities, decreased from $377.6 million at September 30, 2023 to $289.8 million at September 30, 2024.