Overview
We are a leading independent producer of high-quality, specialty hydrocarbon products in North America. We are headquartered in Indianapolis, Indiana and own plants primarily located in Louisiana, Wisconsin, Montana, Texas and Pennsylvania. We own and lease additional facilities, primarily related to production and distribution of specialty products throughout the U.S. Our business is organized into two segments: specialty products and fuel products. In our specialty products segment, we process crude oil and other feedstocks into a wide variety of customized lubricating oils, white mineral oils, solvents, petrolatums, asphalt and waxes. Our specialty products are sold to domestic and international customers who purchase them primarily as raw material components for basic industrial, consumer and automotive goods. In our fuel products segment, we process crude oil into a variety of fuel and fuel-related products, including gasoline, diesel, jet fuel and heavy fuel oils.

Third Quarter 2012 Update
We saw slight softening in product demand in our specialty products segment in the third quarter of 2012 compared to the second quarter of 2012. We noted a 32.6% increase in barrels of specialty products sold for the quarter ended September 30, 2012 compared to the same period in 2011, including the impact of incremental sales in the third quarter of 2012 from the Superior, Missouri, TruSouth and Royal Purple Acquisitions. Excluding incremental sales volume associated with the Superior, Missouri, TruSouth and Royal Purple Acquisitions, our specialty products sales volume decreased 5.0% compared to the same period in 2011 primarily due to the reduced production levels at our Shreveport refinery resulting from the April 28, 2012 shutdown by ExxonMobil of a crude oil pipeline serving the Shreveport refinery for a portion of its crude oil requirements. Our specialty products segment generated a gross profit margin of 15.4% for the three months ended September 30, 2012 as compared to a gross profit margin of 18.4% in the same period of 2011, as specialty products sales pricing decreased slightly while crude oil costs remained fairly constant throughout the third quarter of 2012.
Higher sales and production volume in our fuel products segment during the third quarter of 2012 allowed us to take advantage of higher market crack spreads. We noted a 76.4% increase in barrels of fuel products sold in the third quarter of 2012 compared to the same period in 2011, driven primarily by incremental fuel products sales from the Superior refinery partially offset by reduced production levels at our Shreveport refinery resulting from the April 28, 2012 shutdown by ExxonMobil of a crude oil pipeline serving the refinery for a portion of its crude oil requirements. As a result of the ExxonMobil pipeline shutdown, our Shreveport refinery run rates decreased by an average of approximately 8,000 bpd for the third quarter of 2012 compared to the first quarter of 2012, our most recent quarterly period with normalized run rates. We expect these decreased run rates will remain in effect until the ExxonMobil pipeline service is restored or our ability to receive crude oil by rail from other suppliers at our Shreveport refinery is expanded, which we expect to be completed in the fourth quarter of 2012. The fuel products segment generated a gross profit margin of 11.4% during the third quarter of 2012 compared to 2.9% in the same period of 2011. During the third quarter of 2012, we entered into additional derivative instruments, excluding a crude oil basis swap, due to the strength in forward crack spreads, adding 6.2 million barrels of derivative instruments for calendar years 2013 through 2015 at an average crack spread of $25.84 per barrel.
During the third quarter of 2012, the WCS heavy crude oil differential to NYMEX WTI averaged $15.41 per barrel below NYMEX WTI. In addition to the benefit from this Canadian heavy crude oil differential, our Superior refinery fuel products sales benefited from improved average Group 3 fuel products differentials. For example, the Group 3 diesel differential to U.S. Gulf Coast diesel widened $4.14 per barrel compared to the average differential in the second quarter of 2012. As we currently use U.S. Gulf Coast fuel products swaps to hedge our Group 3 fuel products selling price exposure we have benefited from this Group 3 strength relative to U.S. Gulf Coast pricing.
On October 1, 2012, we completed the acquisition from Connacher Oil and Gas Limited ("Connacher") of all the shares of common stock of Montana Refining Company, Inc., which was converted into a Delaware limited liability company, Calumet Refining, LLC, ("Montana") at closing, and an insignificant affiliated company for estimated aggregate consideration of approximately $224.8 million, net of cash acquired, including an estimated $40.0 million of income taxes to be paid in the

fourth quarter of 2012 due to the conversion to a Delaware limited liability company and excluding certain purchase price adjustments ("Montana Acquisition"). Montana produces gasoline, middle distillates and asphalt, which is marketed primarily into local markets in Washington, Montana, Idaho and Alberta, Canada. The Montana Acquisition was funded primarily with cash on hand with balance through borrowings under our revolving credit facility. We generated $244.9 million in cash flow from operations during the third quarter of 2012. We generated distributable cash flow (as defined below in "Non-GAAP Financial Measures") of $92.5 million and $50.5 million for the third quarter of 2012 and 2011, respectively, and paid distributions of $35.9 million to our unitholders in the third quarter of 2012, an increase of $15.8 million over the same period in the prior year. We plan to continue focusing our efforts on generating positive cash flows from operations which we expect will be used to (i) improve our liquidity position, (ii) pay quarterly distributions to our unitholders, (iii) service our debt obligations and (iv) provide funding for general partnership purposes.
Key Performance Measures
Our sales and net income are principally affected by the price of crude oil, demand for specialty and fuel products, prevailing crack spreads for fuel products, the price of natural gas used as fuel in our operations and our results from derivative instrument activities.
Our primary raw materials are crude oil and other specialty feedstocks and our primary outputs are specialty petroleum and fuel products. The prices of crude oil, specialty products and fuel products are subject to fluctuations in response to changes in supply, demand, market uncertainties and a variety of additional factors beyond our control. We monitor these risks and enter into financial derivatives designed to mitigate the impact of commodity price fluctuations on our business. The primary purpose of our commodity risk management activities is to economically hedge our cash flow exposure to commodity price risk so that we can meet our cash distribution, debt service and capital expenditure requirements despite fluctuations in crude oil and fuel products prices. We enter into derivative contracts for future periods in quantities that do not exceed our projected purchases of crude oil and natural gas and sales of fuel products. Please read Part I Item 3 "Quantitative and Qualitative Disclosures About Market Risk-Commodity Price Risk." As of September 30, 2012, we have derivative instruments for approximately 17.9 million barrels of fuel products through December 2015 at an average refining margin of $25.30 per barrel with average refining margins ranging from a low of $20.85 per barrel in the fourth quarter of 2012 to a high of $26.21 per barrel in 2015. Please refer to Note 8 under Part I Item 1 "Financial Statements-Notes to Unaudited Condensed Consolidated Financial Statements" and Part I Item 3 "Quantitative and Qualitative Disclosures About Market Risk-Existing Commodity Derivative Instruments" and "-Interest Rate Risk" and "-Commodity Price Risk" for detailed information regarding our derivative instruments.
Our management uses several financial and operational measurements to analyze our performance. These measurements include the following:
• sales volumes;

• production yields; and

• gross profit.

Sales volumes. We view the volumes of specialty products and fuel products sold as an important measure of our ability to effectively utilize our refining assets. Our ability to meet the demands of our customers is driven by the volumes of crude oil and feedstocks that we run at our facilities. Higher volumes improve profitability both through the spreading of fixed costs over greater volumes and the gross profit achieved on the incremental volumes. Production yields. In order to maximize our gross profit and minimize lower margin by-products, we seek the optimal product mix for each barrel of crude oil we refine, which we refer to as production yield.
Specialty products and fuel products gross profit. Gross profit is an important measure of our ability to maximize the profitability. We define gross profit for our segments as sales less the cost of crude oil and other feedstocks and other production-related expenses, the most significant portion of which includes labor, plant fuel, utilities, contract services, maintenance, depreciation and processing materials. We use gross profit as indicators of our ability to manage our business during periods of crude oil and natural gas price fluctuations, as the prices of our specialty products and fuel products generally do not change immediately with changes in the price of crude oil and natural gas. The increase in selling prices typically lags behind the rising costs of crude oil feedstocks for specialty products. Other than plant fuel, production-related expenses generally remain stable across broad ranges of throughput volumes, but can fluctuate depending on maintenance activities performed during a specific period.

Our fuel products segment gross profit may differ from a standard U.S. Gulf Coast and a Group 3 2/1/1 or 3/2/1 market crack spread due to many factors, including derivative activities to hedge both our fuel products segment revenues and the cost

of crude oil reflected in gross profit, our fuel products mix as shown in our production table being different than the ratios used to calculate such market crack spreads, the allocation of by-product (primarily asphalt) losses to the fuel products segment, operating costs including fixed costs and actual crude oil costs differing from market indices and our local market pricing differentials for fuel products in the Shreveport, Louisiana and Superior, Wisconsin vicinities as compared to U.S. Gulf Coast and Group 3 postings, respectively.
In addition to the foregoing measures, we also monitor our selling, general and administrative expenditures, substantially all of which are incurred through our general partner.

Results of Operations for the Three and Nine Months Ended September 30, 2012 and 2011
Production Volume. The following table sets forth information about our combined operations. Facility production volume differs from sales volume due to changes in inventories and the sale of purchased fuel product blendstocks such as ethanol and biodiesel in our fuel products segment. The table includes the results of operations at our Superior refinery commencing October 1, 2011, Missouri facility commencing on January 3, 2012, TruSouth facility commencing January 6, 2012 and Royal Purple facility commencing July 3, 2012.

                                  Three Months Ended September 30,      Nine Months Ended September 30,
                                     2012         2011     % Change       2012         2011     % Change
                                        (In bpd)                              (In bpd)
Total sales volume (1)               96,620     62,337       55.0  %      95,117     58,546       62.5  %
Total feedstock runs (2)             95,708     63,567       50.6  %      95,079     60,529       57.1  %
Facility production: (3)
Specialty products:
Lubricating oils                     14,966     15,017       (0.3 )%      14,773     14,316        3.2  %
Solvents                              9,066     10,963      (17.3 )%       9,445     10,717      (11.9 )%
Waxes                                 1,294      1,434       (9.8 )%       1,268      1,234        2.8  %
Packaged and synthetic specialty
products                              1,584          -      100.0  %       1,342          -      100.0  %
Fuels                                   531        491        8.1  %         630        519       21.4  %
Asphalt and other by-products        12,805      8,984       42.5  %      13,729      8,660       58.5  %
Total                                40,246     36,889        9.1  %      41,187     35,446       16.2  %
Fuel products:
Gasoline                             23,565      9,741      141.9  %      23,018      9,660      138.3  %
Diesel                               21,625     13,470       60.5  %      21,641     11,896       81.9  %
Jet fuel                              4,481      4,872       (8.0 )%       4,321      4,495       (3.9 )%
Heavy fuel oils and other             3,406        492      592.3  %       3,373        704      379.1  %
Total                                53,077     28,575       85.7  %      52,353     26,755       95.7  %
Total facility production (3)        93,323     65,464       42.6  %      93,540     62,201       50.4  %


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(2) Total feedstock runs represent the barrels per day of crude oil and other feedstocks processed at our facilities and at certain third-party facilities pursuant to supply and/or processing agreements. The increase in the total feedstock runs for the three and nine months ended September 30, 2012 compared to the same periods in 2011 is due primarily to incremental feedstock runs from the Superior, Missouri, TruSouth and Royal Purple Acquisitions partially offset by decreased run rates at our Shreveport refinery during the 2012 period due to the April 28, 2012 shutdown of the ExxonMobil pipeline serving this refinery for a portion of its crude oil requirements.

(3) Total facility production represents the barrels per day of specialty products and fuel products yielded from processing crude oil and other feedstocks at our facilities and at certain third-party facilities, pursuant to supply and/or processing agreements, including such agreements with LyondellBasell. The difference between total facility production and total feedstock runs is primarily a result of the time lag between the input of feedstock and production of finished products and volume loss. The increase in total facility production for three and nine months ended September 30, 2012 compared to the same periods in 2011 is due primarily to the operational items discussed above in footnote 2 of this table.

The following table reflects our 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 and net cash provided by (used in) operating activities, our most directly comparable financial performance and liquidity measures calculated in accordance with GAAP, please read "-Non-GAAP Financial Measures."

                                         Three Months Ended September 30,          Nine Months Ended September 30,
                                             2012                  2011                2012                 2011
                                                  (In thousands)                           (In thousands)
Sales                                $       1,179,818       $      777,780     $      3,436,400       $  2,116,790
Cost of sales                                1,021,412              681,179            3,064,942          1,922,760
Gross profit                                   158,406               96,601              371,458            194,030
Operating costs and expenses:
Selling                                         15,002                2,809               26,668              8,220
General and administration                      12,810               11,339               41,333             26,923
Transportation                                  28,404               23,696               80,903             69,462
Taxes other than income taxes                    1,723                1,683                5,371              4,246
Insurance recoveries                                 -                    -                    -             (8,698 )
Other                                            1,613                  543                4,856              1,781
Operating income                                98,854               56,531              212,327             92,096
Other income (expense):
Interest expense                               (24,271 )            (12,577 )            (61,247 )          (30,602 )
Debt extinguishment costs                            -                    -                    -            (15,130 )
Realized gain (loss) on derivative
instruments                                    (10,156 )             (3,814 )             20,486             (5,798 )
Unrealized loss on derivative
instruments                                    (22,101 )            (20,335 )            (11,337 )          (23,876 )
Other                                              268                   45                  382                148
Total other expense                            (56,260 )            (36,681 )            (51,716 )          (75,258 )
Net income before income taxes                  42,594               19,850              160,611             16,838
Income tax expense                                 178                  236                  610                674
Net income                           $          42,416       $       19,614     $        160,001       $     16,164
EBITDA                               $          91,407       $       47,107     $        285,686       $    106,214
Adjusted EBITDA                      $         121,389       $       70,548     $        313,350       $    146,042
Distributable Cash Flow              $          92,527       $       50,487     $        226,557       $     94,076

Non-GAAP Financial Measures
We include in this Quarterly Report the non-GAAP financial measures EBITDA, Adjusted EBITDA and Distributable Cash Flow, and provide reconciliations of EBITDA, Adjusted EBITDA and Distributable Cash Flow to net income and net cash provided by (used in) operating activities, our 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:
• the financial performance of our assets without regard to financing methods, capital structure or historical cost basis;

• the ability of our assets to generate cash sufficient to pay interest costs and support our indebtedness;

• our operating performance and return on capital as compared to those of other companies in our industry, without regard to financing or capital structure; and

• the viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities.

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; (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 a prepaid cash expense) 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 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, our investors and analysts to analyze our ability to pay distributions. The definitions of Adjusted EBITDA and Distributable Cash Flow that are presented in this Quarterly Report have been updated to reflect the calculation of "Consolidated Cash Flow" contained in the indentures governing our 2019 Notes and 2020 Notes (as defined in this Quarterly Report). We are required to report Consolidated Cash Flow to the holders of our 2019 Notes and 2020 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. Adjusted EBITDA and Distributable Cash Flow that are presented in this Quarterly Report for prior periods have been updated to reflect the use of the new calculations. Please refer to "Liquidity and Capital Resources" within this item for additional details regarding the covenants governing our debt instruments. EBITDA, Adjusted EBITDA and Distributable Cash Flow should not be considered alternatives to net income, operating income, net cash provided by (used in) 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 to EBITDA, Adjusted EBITDA and Distributable Cash Flow, and Distributable Cash Flow, Adjusted EBITDA and EBITDA to net cash provided by (used in) operating activities, our most directly comparable GAAP financial performance and liquidity measures, for each of the periods indicated.

                                     Three Months Ended September
                                                 30,                 Nine Months Ended September 30,
                                         2012            2011              2012              2011
                                            (In thousands)                   (In thousands)
Reconciliation of Net Income to
EBITDA, Adjusted EBITDA and
Distributable Cash Flow:
Net income                           $    42,416     $   19,614     $        160,001     $   16,164
Add:
Interest expense                          24,271         12,577               61,247         30,602
Debt extinguishment costs                      -              -                    -         15,130
Depreciation and amortization             24,542         14,680               63,828         43,644
Income tax expense                           178            236                  610            674
EBITDA                               $    91,407     $   47,107     $        285,686     $  106,214
Add:
Unrealized loss on derivatives       $    22,101     $   20,335     $         11,337     $   23,876
Realized gain (loss) on derivatives,
not included in net income                 1,494           (771 )                904          4,366
Amortization of turnaround costs           3,154          2,542               10,315          8,288
Non-cash equity based compensation         3,233          1,335                5,108          3,298
Adjusted EBITDA                      $   121,389     $   70,548     $        313,350     $  146,042
Less:
Replacement capital expenditures (1) $     6,063     $    6,608     $         15,204     $   14,204
Cash interest expense (2)                 22,621         11,869               56,838         28,239
Turnaround costs                               -          1,348               14,141          8,849
Income tax expense                           178            236                  610            674
Distributable Cash Flow              $    92,527     $   50,487     $        226,557     $   94,076


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