UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended June 30, 2006.

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                    TO                    .

Calumet Specialty Products Partners, L.P.

Delaware (State or Other Jurisdiction of Incorporation or Organization)		37-1516132 (I.R.S. Employer Identification Number)
2780 Waterfront Pkwy E. Drive, Suite 200 Indianapolis, Indiana (Address of principal executive officers)		46214 (Zip code)

Registrant’s telephone number including area code (317) 328-5660

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

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o          Accelerated filer o          Non-accelerated filer þ

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

     At August 11, 2006, there were 16,366,000 common units and 13,066,000 subordinated units outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
NONE.

 

 

CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.
FORM 10-Q — JUNE 30, 2006 QUARTERLY REPORT

Table of Contents

		Page
Part I
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets			5
Unaudited Condensed Consolidated Statements of Operations			6
Unaudited Condensed Consolidated Statements of Partners’ Capital			7
Unaudited Condensed Consolidated Statements of Cash Flows			8
Notes to Unaudited Condensed Consolidated Financial Statements			9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			19
Item 3. Quantitative and Qualitative Disclosures About Market Risk			31
Item 4. Controls and Procedures			36
Part II
Item 1. Legal Proceedings			36
Item 1A. Risk Factors			36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			37
Item 3. Defaults Upon Senior Securities			37
Item 4. Submission of Matters to a Vote of Security Holders			37
Item 5. Other Information			37
Item 6. Exhibits			38
Section 302 Certification
Section 302 Certification
Section 1350 Certification

FORWARD-LOOKING STATEMENTS

          This Quarterly Report on Form 10-Q includes certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements can be identified by the use of forward-looking terminology including “may,” “believe,” “expect,” “anticipate,” “estimate,” “continue,” or other similar words. The statements regarding (i) the Shreveport refinery expansion project’s expected completion date, the estimated cost, and the resulting increases in production levels, (ii) expected settlements with the Louisiana Department of Environmental Quality (“LDEQ”) or other environmental liabilities, and (iii) the estimated date for obtaining the air permit for the Shreveport refinery expansion project, as well as other matters discussed in this Form 10-Q that are not purely historical data, are forward-looking statements. These statements discuss future expectations or state other “forward-looking” information and involve risks and uncertainties. When considering these forward-looking statements, unitholders should keep in mind the risk factors and other cautionary statements included in this quarterly report and in our Annual Report on Form 10-K filed on March 20, 2006. These risk factors and cautionary statements noted throughout this Form 10-Q could cause our actual results to differ materially from those contained in any forward-looking statement. These factors include, but are not limited to:

	•		the overall demand for specialty hydrocarbon products, fuels and other refined products;
	•		our ability to produce specialty products and fuels that meet our customers’ unique and precise specifications;
	•		the results of our hedging activities;
	•		the availability of, and our ability to consummate, acquisition or combination opportunities;
	•		our access to capital to fund expansions or acquisitions and our ability to obtain debt or equity financing on satisfactory terms;
	•		successful integration and future performance of acquired assets or businesses;
	•		environmental liabilities or events that are not covered by an indemnity, insurance or existing reserves;
	•		maintenance of our credit rating and ability to receive open credit from our suppliers;
	•		demand for various grades of crude oil and resulting changes in pricing conditions;
	•		fluctuations in refinery capacity;
	•		the effects of competition;
	•		continued creditworthiness of, and performance by, counterparties;
	•		the impact of crude oil price fluctuations;
	•		the impact of current and future laws, rulings and governmental regulations;
	•		shortages or cost increases of power supplies, natural gas, materials or labor;
	•		weather interference with business operations or project construction;
	•		fluctuations in the debt and equity markets; and
	•		general economic, market or business conditions.

          Other factors described herein, or factors that are unknown or unpredictable, could also have a material adverse effect on future results. Please read Item 1A “Risk Factors” and Item 2 “Quantitative and Qualitative Disclosures About Market Risk.” Except as required by applicable securities laws, we do not intend to update these forward-looking statements and information.

          References in this Form 10-Q to “Calumet,” “the Company,” “we,” “our,” “us” or like terms refer to Calumet Specialty Products Partners, L.P. and its subsidiaries. References to “Predecessor” in this Form 10-Q refer to Calumet Lubricants Co., Limited

Partnership. The results of operations for the six months ended June 30, 2006 for Calumet include the results of operations of the Predecessor for the period of January 1, 2006 through January 31, 2006.

PART I

Item 1. Financial Statements

CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS

		Calumet				Predecessor
		June 30, 2006				December 31, 2005
		(unaudited)
		(In thousands)
ASSETS
Current assets:
Cash		$	563			$	12,173
Accounts receivable:
Trade, less allowance for doubtful accounts of $850 and $750, respectively			129,623				109,757
Other			4,032				5,537
			133,655				115,294
Inventories			104,576				108,431
Prepaid expenses			3,206				10,799
Derivative assets			791				3,359
Deposits and other current assets			1,942				8,851
Total current assets			244,733				258,907
Property, plant and equipment, net			144,278				127,846
Other noncurrent assets, net			3,814				12,964
Total assets		$	392,825			$	399,717
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Accounts payable		$	87,602			$	44,759
Accrued salaries, wages and benefits			3,141				8,164
Turnaround costs			3,869				2,679
Taxes payable			5,136				4,209
Other current liabilities			3,409				2,418
Current portion of long-term debt			500				500
Derivative liabilities			69,197				30,449
Total current liabilities			172,854				93,178
Long-term debt, less current portion			58,493				267,485
Total liabilities			231,347				360,663
Commitments and contingencies
Partners’ capital:
Predecessor’s partners’ capital		$	—			$	38,557
Common unitholders (13,066,000 units issued and outstanding)			154,867				—
Subordinated unitholders (13,066,000 units issued and outstanding)			27,698				—
General partner’s interest			1,270				—
Accumulated other comprehensive (loss) income			(22,357	)			497
Total partners’ capital			161,478				39,054
Total liabilities and partners’ capital		$	392,825			$	399,717

See accompanying notes to unaudited condensed consolidated financial statements.

CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

		Calumet				Predecessor				Calumet				Predecessor
		For the Three Months Ended								For the Six Months Ended
		June 30,								June 30,
		(In thousands except per unit data)
		2006				2005				2006				2005
Sales		$	429,925			$	301,562			$	827,619			$	531,111
Cost of sales			371,850				271,026				718,594				474,459
Gross profit			58,075				30,536				109,025				56,652
Operating costs and expenses:
Selling, general and administrative			5,209				5,006				10,138				8,398
Transportation			14,595				9,271				28,502				19,994
Taxes other than income taxes			903				748				1,817				1,480
Other			168				175				284				332
Restructuring, decommissioning and asset impairments			—				1,797				—				2,165
Operating income			37,200				13,539				68,284				24,283
Other income (expense):
Interest expense			(2,157	)			(5,091	)			(6,133	)			(9,955	)
Debt extinguishment costs			—				—				(2,967	)			—
Realized (loss) gain on derivative instruments			(12,741	)			3,655				(15,821	)			603
Unrealized (loss) gain on derivative instruments			874				6,559				(16,841	)			3,563
Other			31				55				230				94
Total other income (expense)			(13,993	)			5,178				(41,532	)			(5,695	)
Net income before income taxes			23,207				18,717				26,752				18,588
Income tax expense			52				—				66				—
Net income		$	23,155			$	18,717			$	26,686			$	18,588
Allocation of net income:
Net income applicable to Predecessor for the period through January 31, 2006			—								4,408
Net income applicable to Calumet			23,155								22,278
Minimum quarterly distribution to common unitholders			(5,880	)							(9,765	)
General partner’s incentive distribution rights			(3,271	)							(3,271	)
General partner’s interest in net income			(264	)							(246	)
Common unitholders’ share of income in excess of minimum quarterly distribution			(3,930	)							(3,930	)
Limited partners’ interest in net income			9,810								5,066
Basic and diluted net income per limited partner unit:
Common		$	0.75							$	1.05
Subordinated		$	0.75							$	0.39
Weighted average limited partner common units outstanding – basic and diluted			13,066								13,007
Weighted average limited partner subordinated units outstanding – basic and diluted			13,066								13,066

See accompanying notes to unaudited condensed consolidated financial statements.

CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

						Accumulated Other								Partners' Capital
		Predecessor				Comprehensive				Comprehensive				General				Limited Partners
		Partners' Capital				Income (Loss)				Income (Loss)				Partner				Common				Subordinated				Total
		(In thousands)
Balance at December 31, 2005		$	38,557			$	497							$	—			$	—			$	—			$	39,054
Comprehensive income through January 31, 2006:
Net income through January 31, 2006			4,408								4,408																4,408
Hedge (gain)/loss reclassified to net income							(497	)																			(497	)
Change in fair value of cash flow hedges through January 31, 2006							1,578				1,578																1,578
Comprehensive income through January 31, 2006:											5,986
Distributions to Predecessor partners			(6,900	)																							(6,900	)
Assets and liabilities not contributed to Calumet			(5,626	)																							(5,626	)
Allocation of Predecessor’s capital			(30,439	)											609				9,128				20,702				—
Proceeds from initial public offering, net																			138,743								138,743
Contribution from Calumet GP, LLC															375												375
Comprehensive loss from February 1, 2006 through June 30, 2006:
Net income from February 1, 2006 through June 30, 2006											22,278				446				10,916				10,916				22,278
Change in fair value of cash flows hedges from February 1, 2006 through June 30, 2006			—				(23,935	)			(23,935	)			—				—				—				(23,935	)
Comprehensive loss from February 1, 2006 through June 30, 2006:											(1,657	)
Total comprehensive income											4,329
Distributions to partners															(160	)			(3,920	)			(3,920	)			(8,000	)
Balance at June 30, 2006		$	—			$	(22,357	)						$	1,270			$	154,867			$	27,698			$	161,478

See accompanying notes to unaudited condensed consolidated financial statements.

CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

		Calumet				Predecessor
		For the Six Months Ended
		June 30,
		(In thousands)
		2006				2005
Operating activities
Net income		$	26,686			$	18,588
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization			5,634				5,615
Provision for doubtful accounts			202				162
Loss on disposal of property, plant and equipment			50				5
Restructuring, decommissioning and asset impairments			—				1,718
Unrealized loss (gain) on derivative instruments			16,841				(3,563	)
Debt extinguishment costs			2,967				—
Changes in assets and liabilities:
Accounts receivable			(18,713	)			(36,252	)
Inventories			3,855				(21,594	)
Prepaid expenses			7,593				4,934
Derivative activity			1,621				1,662
Deposits and other current assets			6,909				(830	)
Other noncurrent assets			3,955				(153	)
Accounts payable			42,799				(32,535	)
Accrued salaries, wages and benefits			(5,023	)			1,543
Turnaround costs			1,190				221
Taxes payable			1,060				4,423
Other current liabilities			1,169				(939	)
Net cash provided by (used in) operating activities			98,795				(56,995	)
Investing activities
Additions to property, plant and equipment			(22,453	)			(8,332	)
Proceeds from disposal of property, plant and equipment			80				11
Net cash used in investing activities			(22,373	)			(8,321	)
Financing activities
(Repayment of) proceeds from borrowings — credit agreements with third parties, net			(208,992	)			46,822
Proceeds from borrowings — credit agreement with Predecessor limited partners, net			—				3,923
Proceeds from initial public offering, net			138,743				—
Contribution from Calumet GP, LLC			375				—
Cash distribution to Calumet Holding, LLC			(3,258	)			—
Distributions to Predecessor partners			(6,900	)
Distributions to partners			(8,000	)			—
Net cash provided by (used in) financing activities			(88,032	)			50,745
Net decrease in cash			(11,610	)			(14,571	)
Cash at beginning of period			12,173				18,087
Cash at end of period		$	563			$	3,516
Supplemental disclosure of cash flow information
Interest paid		$	5,958			$	9,477
Taxes paid		$	15			$	—

See accompanying notes to unaudited condensed consolidated financial statements.

CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except operating, unit and per unit data)

1. Partnership Organization and Basis of Presentation

          Calumet Specialty Products Partners, L.P. (Calumet, Partnership, or the Company) is a Delaware limited partnership. The general partner is Calumet GP, LLC, a Delaware limited liability company. On January 31, 2006, the Partnership completed the initial public offering of its common units. See Note 7 for further discussion of the units sold and proceeds of our initial public offering. As of June 30, 2006, we have 13,066,000 common units, 13,066,000 subordinated units, and 533,306 general partner equivalent units outstanding. The general partner owns 2% of Calumet while the remaining 98% is owned by limited partners. Calumet is engaged in the production and marketing of crude oil-based specialty lubricating oils, fuels, solvents and waxes. Calumet owns refineries located in Princeton, Louisiana, Cotton Valley, Louisiana, and Shreveport, Louisiana, and a terminal located in Burnham, Illinois.

          The unaudited condensed consolidated financial statements of the Company as of June 30, 2006 and for the three and six months ended June 30, 2006 and 2005 included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the following disclosures are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary to present fairly the results of operations for the interim periods presented. All adjustments are of a normal nature, unless otherwise disclosed. The results of operations for the three and six months ended June 30, 2006 are not necessarily indicative of the results that may be expected for the year ended December 31, 2006. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 filed on March 20, 2006.

2. Inventory

          The cost of inventories is determined using the last-in, first-out (LIFO) method. Inventories are valued at the lower of cost or market value.

          Inventories consist of the following:

		Calumet				Predecessor
		June 30,				December 31,
		2006				2005
Raw materials		$	36,781			$	28,299
Work in process			29,620				29,737
Finished goods			38,175				50,395
		$	104,576			$	108,431

          The replacement cost of these inventories, based on current market values, would have been $64,404 and $47,763 higher at June 30, 2006 and December 31, 2005, respectively.

3. Shreveport Refinery Expansion

          The Company commenced an expansion project at its Shreveport refinery during the second quarter of 2006. As of June 30, 2006, the Company had capital expenditures of $17,501 related to this expansion project, which is recorded to construction-in-progress, which is a component of property, plant and equipment. Construction is expected to begin in the fourth quarter of 2006. The Company expects to incur approximately $60,000 and $50,000 of capital expenditures in 2006 and 2007, respectively, related to the expansion project.

4. Derivatives

          The Company uses derivative instruments to minimize its price risk and volatility of cash flows associated with the purchase of crude oil and natural gas, the sale of diesel, gasoline and jet fuel, and payment of interest. In accordance with Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, the Company

recognizes all derivative transactions as either assets or liabilities at fair value on the balance sheet. To the extent a derivative instrument is designated effective as a cash flow hedge of an exposure to changes in the fair value of a future transaction, the change in fair value of the derivative is deferred in accumulated other comprehensive income (loss), a component of partners’ capital. The Company accounts for certain derivatives hedging purchases of crude oil and natural gas, the sale of gasoline, diesel and jet fuel and the payment of interest as cash flow hedges. The derivatives hedging purchases and sales are recorded to cost of sales and sales in the statement of operations, respectively, upon recording the related hedged transaction in sales or cost of sales. For the quarter ended June 30, 2006, the Company has recorded a derivative loss of $7,656 to sales and a derivative gain of $3,013 to cost of sales. An interest rate swap loss of $6 for the quarter ended June 30, 2006 was recorded to interest expense. For the derivative instruments not designated as cash flow hedges and the portion of any cash flow hedge that is determined to be ineffective, the change in fair value of the derivative asset or liability for the period is recorded to unrealized (loss) gain on derivative instruments in the statements of operations. The Company does not account for fuel products margin swap or collar contracts (“crack spread swaps or collars”) as cash flow hedges. Upon the settlement of derivatives not designated as hedges, the gain or loss for the period is recorded to realized (loss) gain on derivative instruments in the statements of operations.

          The Company assesses, both at inception of the hedge and on an on-going basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items. The Company’s estimate of the ineffective portion of the hedges for the six months ended June 30, 2006, was a loss of $3,786 which was recorded to unrealized (loss) gain on derivative instruments. The effective portion of the hedges classified in accumulated other comprehensive income (loss) is $22,357 and, absent a change in the fair market value of the underlying transactions, will be reclassified to earnings by December 31, 2010 with balances being recognized as follows:

Year
2006		$	(6,440	)
2007			(12,853	)
2008			(1,501	)
2009			(1,683	)
2010			120
Total		$	(22,357	)

          The Company is exposed to credit risk in the event of nonperformance with our counterparties on these derivative transactions. The Company does not expect nonperformance on any derivative contract.

     Crude Oil Collar Contracts

          The Company utilizes combinations of options to manage crude price risk and volatility of cash flows in its specialty products segment. These combinations of options are designated as cash flow hedges under SFAS 133 of the future purchase of crude oil. The Company’s policy is generally to enter into crude oil derivative contracts for a period no greater than three to six months forward and for 50% to 75% of anticipated crude oil purchases related to our specialty products production. At June 30, 2006, the Company had the following derivatives related to crude oil purchases.

						Average				Average				Average				Average
						Lower Put				Upper Put				Lower Call				Upper Call
Crude Oil Put/Call Spread Contracts Expiration Dates		Barrels				($/Bbl)				($/Bbl)				($/Bbl)				($/Bbl)
July 2006			248,000			$	57.60			$	67.60			$	77.60			$	87.60
August 2006			248,000				57.76				67.76				77.76				87.76
September 2006			240,000				58.44				68.44				78.44				88.44
Totals			736,000
Average price						$	57.93			$	67.93			$	77.93			$	87.93

          At December 31, 2005, the Company had the following derivatives related to crude oil purchases.

						Average				Average				Average				Average
						Lower Put				Upper Put				Lower Call				Upper Call
Crude Oil Put/Call Spread Contracts Expiration Dates		Barrels				($/Bbl)				($/Bbl)				($/Bbl)				($/Bbl)
January 2006			248,000			$	46.02			$	55.57			$	65.57			$	75.57
February 2006			224,000				46.13				55.71				65.71				75.71
March 2006			248,000				45.64				55.41				65.41				75.41
April 2006			240,000				45.85				55.58				65.58				75.58
Totals			960,000
Average price						$	45.90			$	55.56			$	65.56			$	75.56

     Crude Oil Swap Contracts

          The Company utilizes swap contracts to manage crude oil price risk and volatility of cash flows in its fuel products segment. The Company’s policy is generally to enter into crude oil swap contracts for a period no greater than five years forward and for no more than 75% of crude purchases used in fuels production. Effective April 1, 2006, these contracts were designated as cash flow hedges under SFAS 133 of the future purchase of crude oil. At June 30, 2006, the Company had the following derivatives related to crude oil purchases in its fuel products segment.

						Crude
Crude Oil Swap Contracts Expiration Dates		Barrels				($/Bbl)
Third Quarter 2006			1,043,000			$	52.88
Fourth Quarter 2006			818,000				54.51
First Quarter 2007			1,710,000				65.14
Second Quarter 2007			1,728,000				64.68
Third Quarter 2007			1,742,000				65.51
Fourth Quarter 2007			1,742,000				65.51
Calendar Year 2008			5,124,000				65.67
Calendar Year 2009			4,745,000				64.79
Calendar Year 2010			4,015,000				67.74
Totals			22,667,000
Average price						$	64.72

      Fuels Product Swap Contracts

           The Company utilizes swap contracts to manage diesel and gasoline price risk and volatility of cash flows in its fuel products segment. The Company’s policy is generally to enter into diesel and gasoline swap contracts for a period no greater than five years forward and for no more than 75% of fuels production.

     Diesel Swap Contracts

           Effective April 1, 2006, these contracts were designated as cash flow hedges under SFAS 133 of the future sale of diesel and jet fuel. At June 30, 2006, the Company had the following derivatives related to diesel sales in its fuel products segment.

						Diesel
Diesel Swap Contracts Expiration Dates		Barrels				($/Bbl)
Third Quarter 2006			521,500			$	61.48
Fourth Quarter 2006			409,000				63.09
First Quarter 2007			1,080,000				81.10
Second Quarter 2007			1,092,000				80.74
Third Quarter 2007			1,102,000				81.36
Fourth Quarter 2007			1,102,000				81.36
Calendar Year 2008			2,562,000				79.92
Calendar Year 2009			2,372,500				78.75
Calendar Year 2010			2,007,500				82.26
Totals			12,248,500
Average price						$	79.17

     Gasoline Swap Contracts

          Effective April 1, 2006, these contracts were designated as cash flow hedges under SFAS 133 of the future sale of gasoline. At June 30, 2006, the Company had the following derivatives related to gasoline sales in its fuel products segment.

						Gasoline
Gasoline Swap Contracts Expiration Dates		Barrels				($/Bbl)
Third Quarter 2006			521,500			$	61.48
Fourth Quarter 2006			409,000				63.09
First Quarter 2007			630,000				72.09
Second Quarter 2007			636,000				71.38
Third Quarter 2007			640,000				72.67
Fourth Quarter 2007			640,000				72.67
Calendar Year 2008			2,562,000				74.41
Calendar Year 2009			2,372,500				72.72
Calendar Year 2010			2,007,500				75.56
Totals			10,418,500
Average price						$	72.62

     Fuels Product Margin (Crack Spread) Swap Contracts

          Additionally, the Company utilizes combinations of options and forward swap contracts to manage fuels product margin (crack spread) price risk and volatility of cash flows. These contracts are not designated as hedges under SFAS 133. For purposes of these swap contracts, crack spread is defined as the difference between the selling price of one barrel of refined product (gasoline or diesel) less the price of one barrel of crude oil, with all component pricing based on standard market indices as defined in the contracts. The Company enters into various combinations of these swap contracts to achieve an approximate 2/1/1 crack spread ratio, which means two barrels of crude oil and one barrel each of gasoline and diesel. At June 30, 2006, the Company had the following fuels product margin derivatives related to its fuel products segment.

						Crack Spread
Crack Spread Swap Contracts Expiration Dates		Barrels				($/Bbl)
Fourth Quarter 2006			225,000			$	7.05
Totals			225,000
Average price						$	7.05

          At December 31, 2005, the Company had the following derivative positions related its fuel products segment. These derivatives have been restructured as of March 31, 2006 as discussed above.

						Crack Spread
Crack Spread Swap Contracts Expiration Dates		Barrels				($/Bbl)
First Quarter 2006			1,035,000			$	9.00
Second Quarter 2006			1,039,000				8.98
Third Quarter 2006			1,043,000				8.65
Fourth Quarter 2006			1,043,000				8.28
First Quarter 2007			1,260,000				11.59
Second Quarter 2007			1,273,000				11.56
Third Quarter 2007			1,282,000				11.60
Fourth Quarter 2007			1,282,000				11.60
Totals			9,257,000
Average price						$	10.30

     Fuels Product Margin (Crack Spread) Collar Contracts

          The Company enters into fuels product margin (crack spread) collar contracts with counterparties whereby the Company purchases a crack spread put option while simultaneously selling a crack spread call option. These crack spread collar contracts require no net premium to be paid by the Company to the counterparties as the premium for the purchased crack spread put option is offset by the premium for the sold crack spread call option. These contracts are not designated as hedges under SFAS 133.

          Fuels product margin collar contracts consisted of the following at June 30, 2006:

						Put Option				Call Option
						Strike Price				Strike Price
Crack Spread Collar Contracts Expiration Dates		Barrels				($/Bbl)				($/Bbl)
Third Quarter 2006			685,000				7.59				9.59
Fourth Quarter 2006			685,000				6.30				8.30
Totals			1,370,000
Average price						$	6.95			$	8.95

          Fuels product margin collar contracts consisted of the following at December 31, 2005:

						Put Option				Call Option
						Strike Price				Strike Price
Crack Spread Collar Contracts Expiration Dates		Barrels				($/Bbl)				($/Bbl)
First Quarter 2006			675,000			$	7.29			$	9.62
Second Quarter 2006			680,000				7.82				10.15
Third Quarter 2006			685,000				7.59				9.59
Fourth Quarter 2006			685,000				6.30				8.30
Totals			2,725,000
Average price						$	7.25			$	9.41

Natural Gas Swap Contracts

          The Company utilizes forward swap contracts to manage natural gas price risk and volatility of cash flows. These swap contracts are designated as cash flow hedges under SFAS 133 of the future purchase of natural gas. The Company’s policy is generally to enter into natural gas derivative contracts to hedge approximately 50% or more of the upcoming fall and winter months’ anticipated natural gas requirements. At June 30, 2006, the Company had the following derivatives related to natural gas purchases.

Natural Gas Swap Contracts Expiration Dates		MMbtu				$/MMbtu
Third Quarter 2006			600,000			$	8.09
Fourth Quarter 2006			600,000			$	8.87
First Quarter 2007			600,000			$	8.87
Totals			1,800,000
Average price						$	8.61

          At December 31, 2005, the Company had the following derivatives related to natural gas purchases.

Natural Gas Swap Contracts Expiration Dates		MMbtu				$/MMbtu
First Quarter 2006			600,000			$	9.84
Totals			600,000
Average price						$	9.84

Interest Rate Swap Contracts

          The Company has entered into a forward swap contract to manage interest rate risk related to its variable priced term loan. The Company hedges 85% of its future interest payments related to this term loan indebtedness. This swap contract is designated as a cash flow hedge under SFAS 133 of the future interest payments. The interest rate swap contract is for 85% of the outstanding term loan balance over its remaining term, with LIBOR fixed at 5.44% per annum. The Company’s term loan facility requires quarterly interest payments at LIBOR plus 3.50% per annum.

5. Contingencies

          From time to time, the Company is a party to certain claims and litigation incidental to its business. Management is of the opinion that the ultimate resolution of any known claims, either individually or in the aggregate, will not have a material adverse impact on the Company’s financial position or results of operations.

     Environmental

          The Company operates crude oil and specialty hydrocarbon refining and terminal operations, which are subject to stringent and complex federal, state, and local laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. These laws and regulations can impair the Company’s operations that affect the environment in many ways, such as requiring the acquisition of permits to conduct regulated activities; restricting the manner in which the Company can release materials into the environment; requiring remedial activities or capital expenditures to mitigate pollution from former or current operations; and imposing substantial liabilities for pollution resulting from its operations. Certain environmental laws impose joint and several, strict liability for costs required to remediate and restore sites where petroleum hydrocarbons, wastes, or other materials have been released or disposed.

          Failure to comply with environmental laws and regulations may result in the triggering of administrative, civil and criminal measures, including the assessment of monetary penalties, the imposition of remedial obligations, and the issuance of injunctions limiting or prohibiting some or all of the Company’s operations. On occasion, the Company receives notices of violation, enforcement and other complaints from regulatory agencies alleging non-compliance with applicable environmental laws and regulations. In particular, the Louisiana Department of Environmental Quality (“LDEQ”) has proposed penalties and supplemental projects totaling $191 for the following alleged violations: (i) a May 2001 notification received by the Cotton Valley refinery from the LDEQ regarding several alleged violations of various air emission regulations, as identified in the course of the Company’s Leak Detection and Repair program, and also for failure to submit various reports related to the facility’s air emissions; (ii) a December 2002 notification received by the Company’s Cotton Valley refinery from the LDEQ regarding alleged violations for excess emissions, as identified in the LDEQ’s file review of the Cotton Valley refinery; and (iii) a December 2004 notification received by the Cotton Valley refinery from the LDEQ regarding alleged violations for the construction of a multi-tower pad and associated pump pads without a permit issued by the agency. The Company is currently in settlement negotiations with the LDEQ to resolve these matters, as well as a number of similar matters at the Princeton refinery, for which no penalty has yet been proposed. Management is of the opinion that the ultimate resolution of this matter will not have a material adverse impact on the Company’s financial position or results of operations.

          The Company has recently entered into discussions on a voluntary basis with the LDEQ regarding the Company’s participation in that agency’s “Small Refinery and Single Site Refinery Initiative.” This state initiative is patterned after the EPA’s “National Petroleum Refinery Initiative,” which is a coordinated, integrated compliance and enforcement strategy to address federal Clean Air Act compliance issues at the nation’s largest petroleum refineries. The Company expects that the LDEQ’s primary focus under the state initiative will be on four compliance and enforcement concerns: (i) Prevention of Significant Deterioration/New Source Review; (ii) New Source Performance Standards for fuel gas combustion devices, including flares, heaters and boilers; (iii) Leak Detection and Repair requirements; and (iv) Benzene Waste Operations National Emission Standards for Hazardous Air Pollutants. The Company is only in the beginning stages of discussion with the LDEQ and, consequently, while no significant compliance and enforcement expenditures have been requested as a result of the Company’s discussions, the Company anticipates that it will ultimately be required to make emissions reductions requiring capital investments and/or increased operating expenditures at the Company’s three Louisiana refineries.

          On July 31, 2006, the Company filed a permit application requesting an air quality permit from the LDEQ which the Company must obtain prior to commencing construction of the Shreveport refinery expansion. Based upon its analysis, the Company expects that it can obtain the state air quality permit by the fourth quarter of 2006 and commence construction at the Shreveport refinery. However, if the Company is unable to obtain the state air quality permit, it will be required to obtain a federal Prevention of Significant Deterioration (“PSD”) permit and it expects that the start of construction would be significantly delayed.

          The Company is indemnified by Shell Oil Company, as successor to Pennzoil-Quaker State Company and Atlas Processing Company, for specified environmental liabilities arising from the operations of the Shreveport refinery prior to its acquisition of the facility. The indemnity is unlimited in amount and duration, but requires the Company to contribute up to $1.0 million of the first $5.0 million of indemnified costs for certain of the specified environmental liabilities.

     Standby Letters of Credit

          The Company has agreements with various financial institutions for standby letters of credit which have been issued to domestic vendors. As of June 30, 2006 and December 31, 2005, the Company had outstanding standby letters of credit of $68,252 and $37,746, respectively. As discussed in Note 6 below, as of June 30, 2006 the Company also had a $50,000 letter of credit outstanding under the letter of credit facility for its fuels hedging program.

6. Long-Term Debt

          Long-term debt consisted of the following:

		Calumet				Predecessor
		June 30,				December 31,
		2006				2005
Borrowings under revolving credit agreement with third-party lenders, interest at prime (8.25% and 7.25%, respectively), interest payments monthly, borrowings due December 2010		$	9,243			$	92,985
Borrowings under term loan credit agreement with third-party lenders, interest at LIBOR plus 3.50% (8.78% and 7.99%, respectively), interest payments quarterly, borrowings due December 2012			49,750				175,000
Total long-term debt			58,993				267,985
Less current portion of long-term debt			500				500
		$	58,493			$	267,485

          On December 9, 2005, the Predecessor paid off its existing indebtedness by entering into a $225,000 senior secured revolving credit facility due December 2010 and a $225,000 senior secured first lien credit facility consisting of a $175,000 term loan facility and a $50,000 letter of credit facility to support fuels hedging, which bears interest at 3.50%. These facilities contain financial covenants including a fixed charge coverage ratio and a consolidated leverage ratio. The revolving credit facility borrowings are limited by advance rates of percentages of eligible accounts receivable and inventory as defined by the revolving credit agreement. The maximum borrowing capacity at June 30, 2006 was $210,875, with $133,381 available for additional borrowings based on collateral and specified availability limitations. The term loan facility borrowings are secured by a first lien on the property, plant and equipment of the Company and its subsidiaries. The net proceeds of our initial public offering (see Note 7) were used to repay indebtedness and accrued interest under the first lien term loan facility in the amount of approximately $125,700 and repay indebtedness under the secured revolving credit facility in the amount of approximately $13,100. After these repayments, the term loan requires quarterly principal payments of $125 through December 2011 and quarterly principal payments of approximately $11,800 thereafter until maturing in December 2012. The Company is in compliance with all covenants and restrictions defined in these credit agreements. As of June 30, 2006, the Company had issued the entire $50,000 letter of credit under the fuels hedging facility.

          As of June 30, 2006, maturities of the Company’s long-term debt are as follows:

Year		Maturity
2006		$	250
2007			500
2008			500
2009			500
2010			9,743
2011 and thereafter		$	47,500
Total		$	58,993

          On June 19, 2006 and June 22, 2006, the Company amended its credit agreements to increase the amount of permitted capital expenditures with respect to the Shreveport refinery expansion project as well as annual capital expenditure limitations.

7. Partners’ Capital

          On January 31, 2006, the Partnership completed the initial public offering of its common units and sold 5,699,900 of those units to the underwriters in the initial public offering at a price to the public of $21.50 per common unit. The Partnership also sold a total of 750,100 common units to certain relatives of the chairman of our general partner (the “Fehsenfeld Investors”) at a price of $19.995 per common unit. In addition, on February 8, 2006, the Partnership sold an additional 854,985 common units to the underwriters at a price to the public of $21.50 per common unit pursuant to the underwriters’ over-allotment option. Each of these issuances was made pursuant to the Partnership’s Registration Statement on Form S-1 (File No. 333-128880) declared effective by the Securities and Exchange Commission on January 29, 2006. The proceeds received by the Partnership (net of underwriting discounts and structuring fees and before expenses) from the sale of an aggregate of 7,304,985 units were approximately $144,400. The net proceeds were used to: (i) repay indebtedness and accrued interest under the first lien term loan facility in the amount of approximately $125,700, (ii) repay indebtedness under the secured revolving credit facility in the amount of approximately $13,100 and (iii) pay transaction fees and expenses in the amount of approximately $5,600. Underwriting discounts totaled approximately $11,600 (including certain structuring fees paid to certain of the underwriters of approximately $2,400).

          The Predecessor’s policy was that distributions were limited to the amount necessary to pay each partner’s federal income tax and any state income tax on their share of partnership income. However, additional distributions to the partners could be made at the sole discretion of the general partner. During the year ended December 31, 2005, distributions of $7,300 were made to the Predecessor partners. In January 2006, the Predecessor made its final distribution of $6,900 to its partners. Subsequent to January 31, 2006, Calumet’s distribution policy is as defined in the Partnership Agreement. For the quarter ended June 30, 2006, the Company made distributions of $8,000 to its partners.

8. Earnings per Unit

          The Partnership calculates earnings per unit in accordance with SFAS 128, Earnings per Share, as interpreted by Emerging Issues Task Force Issue No. 03-06, Participating Securities and the Two-Class Method under FASB Statement No. 128. Under this approach, common and subordinated limited units represent separate classes of limited partner units that require two-class presentation under SFAS No. 128. Therefore, the Partnership calculates basic and diluted earnings per unit on a discrete quarterly basis assuming the minimum quarterly distribution, prorated if necessary, is paid on all common units outstanding and that all undistributed earnings or losses in the period are fully allocated to limited partner units based on their contractual participation rights as if all of the earnings or losses for the period had been distributed.

9. Segments and Related Information

     a. Segment Reporting

          Under the provisions of SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, the Company has two reportable segments: Specialty Products and Fuel Products. The Specialty Products segment produces a variety of lubricating oils, solvents and waxes. These products are sold to customers who purchase these products primarily as raw material components for basic automotive, industrial and consumer goods. The Fuel Products segment produces a variety of fuel and fuel-related products including gasoline, diesel and jet fuel.

          The accounting policies of the segments are the same as those described in the summary of significant accounting policies except that the Company evaluates segment performance based on income from operations. The Company accounts for intersegment sales and transfers at cost plus a specified mark-up. Reportable segment information is as follows (in thousands):

		Specialty				Fuel				Combined								Consolidated
Three Months Ended June 30, 2006 (Calumet)		Products				Products				Segments				Eliminations				Total
Sales:
External customers		$	245,331			$	184,594			$	429,925			$	—			$	429,925
Intersegment sales			173,935				11,355				185,290				(185,290	)			—
Total sales		$	419,266			$	195,949			$	615,215			$	(185,290	)		$	429,925
Depreciation and amortization			2,961				—				2,961				—				2,961
Income from operations			22,390				14,810				37,200				—				37,200
Reconciling items to net income:
Interest expense																			(2,157	)
Debt extinguishment costs																			—
Loss on derivative instruments																			(11,867	)
Other																			31
Income tax expense																			(52	)
Net income																			23,155
Capital expenditures		$	19,478			$	—			$	19,478			$	—			$	19,478

		Specialty				Fuel				Combined								Consolidated
Three Months Ended June 30, 2005 (Predecessor)		Products				Products				Segments				Eliminations				Total
Sales:
External customers		$	167,497			$	134,065			$	301,562			$	—			$	301,562
Intersegment sales			134,426				2,544				136,970				(136,970	)			—
Total sales		$	301,923			$	136,609			$	438,532			$	(136,970	)		$	301,562
Depreciation and amortization			3,011				—				3,011				—				3,011
Income from operations			4,319				9,220				13,539				—				13,539
Reconciling items to net income:
Interest expense																			(5,091	)
Debt extinguishment costs																			—
Gain on derivative instruments																			10,214
Other																			55
Net income																			18,717
Capital expenditures		$	1,399			$	—			$	1,399			$	—			$	1,399

		Specialty				Fuel				Combined								Consolidated
Six Months Ended June 30, 2006 (Calumet)		Products				Products				Segments				Eliminations				Total
Sales:
External customers		$	474,988			$	352,631			$	827,619			$	—			$	827,619
Intersegment sales			340,112				20,906				361,018				(361,018	)			—
Total sales		$	815,100			$	373,537			$	1,188,637			$	(361,018	)		$	827,619
Depreciation and amortization			5,634				—				5,634				—				5,634
Income from operations			41,977				26,307				68,284				—				68,284
Reconciling items to net income:
Interest expense																			(6,133	)
Debt extinguishment costs																			(2,967	)
Loss on derivative instruments																			(32,662	)
Other																			230
Income tax expense																			(66	)
Net income																			26,686
Capital expenditures		$	22,453			$	—			$	22,453			$	—			$	22,453

		Specialty				Fuel				Combined								Consolidated
Six Months Ended June 30, 2005 (Predecessor)		Products				Products				Segments				Eliminations				Total
Sales:
External customers		$	309,316			$	221,795			$	531,111			$	—			$	531,111
Intersegment sales			228,485				3,558				232,043				(232,043	)			—
Total sales		$	537,801			$	225,353			$	763,154			$	(232,043	)		$	531,111
Depreciation and amortization			5,615				—				5,615				—				5,615
Income from operations			7,116				17,167				24,283				—				24,283
Reconciling items to net income:
Interest expense																			(9,955	)
Debt extinguishment costs																			—
Gain on derivative instruments																			4,166
Other																			94
Net income																			18,588
Capital expenditures		$	8,332			$	—			$	8,332			$	—			$	8,332

		Calumet				Predecessor
		June 30,				December 31,
		2006				2005
Segment assets:
Specialty products		$	656,849			$	606,023
Fuel products			455,322				375,153
Combined segments			1,112,171				981,176
Eliminations			(719,346	)			(581,459	)
Total assets		$	392,825			$	399,717

     b. Geographic Information

          International sales accounted for less than 10% of consolidated sales in each of the three and six months ended June 30, 2006 and 2005.

     c. Product Information

          The Company offers products primarily in four general categories consisting of fuels, lubricants, waxes and solvents. Other includes asphalt and other by-products. The following table sets forth the major product category sales (dollars in thousands):

		Three Months Ended June 30,
		2006				2005
Fuels		$	196,104			$	143,666
Lubricants			136,066				88,500
Solvents			52,031				34,967
Waxes			16,294				11,092
Other			29,430				23,337
Total sales		$	429,925			$	301,562

		Six Months Ended June 30,
		2006				2005
Fuels		$	374,707			$	239,320
Lubricants			268,975				167,535
Solvents			104,391				62,495
Waxes			31,748				19,597
Other			47,798				42,164
Total sales		$	827,619			$	531,111

     d. Major Customers

          No customer represented 10% or greater of consolidated sales in each of the three and six months ended June 30, 2006 and 2005.

10. Subsequent Events

          On July 5, 2006, the Partnership completed a follow-on public offering of its common units in which it sold 3,300,000 common units to the underwriters of the offering at a price to the public of $32.94 per common unit. This issuance was made pursuant to the Partnership’s Registration Statement on Form S-1 (File No. 333-134993) declared effective by the Securities and Exchange Commission on June 28, 2006. The proceeds received by the Partnership (net of underwriting discounts, commissions and expenses but before its general partner’s capital contribution) from the sale of an aggregate of 3,300,000 units were $103,519. The use of proceeds from the offering was to: (i) repay all of its borrowings under its revolving credit facility, which were approximately $9,243 as of June 30, 2006, (ii) fund the future construction and other start-up costs of the planned expansion project at the Shreveport refinery and (iii) to the extent available, for general partnership purposes. Underwriting discounts totaled $4,620. The general partner contributed $2,218 to retain its 2% general partner interest.

          On July 21, 2006, the Company declared a quarterly cash distribution of $0.45 per unit, or $13,515, for the quarter ended June 30, 2006. The distribution will be paid on August 14, 2006 to the general partner as well as common and subordinated unitholders of record as of the close of business on August 4, 2006. This quarterly distribution of $0.45 equates to $1.80 per unit on an annualized basis.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

          The historical consolidated financial statements included in this Quarterly Report on Form 10-Q reflect all of the assets, liabilities and results of operations of Calumet Specialty Products Partners, L.P. (“Calumet”) and Calumet Lubricants Co., Limited Partnership (“Predecessor) where applicable. The following discussion analyzes the financial condition and results of operations of Calumet for the three and six months ended June 30, 2006, which includes the financial condition and results of operation of the Predecessor through January 31, 2006. For the three and six months ended June 30, 2005, the analysis of the financial condition and results of operations are of the Predecessor. Unitholders should read the following discussion of the financial condition and results of operations for Calumet and the Predecessor in conjunction with the historical consolidated financial statements and notes of Calumet and the Predecessor included elsewhere in this Quarterly Report on Form 10-Q.

Overview

          We are a leading independent producer of high-quality, specialty hydrocarbon products in North America. Our business is organized into two segments: specialty products and fuel products. In our specialty products segment, we process crude oil into a wide variety of customized lubricating oils, solvents 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 unleaded gasoline, diesel fuel and jet fuel. In connection with our production of specialty products and fuel products, we also produce asphalt and a limited number of other by-products. The asphalt and other by-products produced in connection with the production of specialty products at the Princeton, Cotton Valley and Shreveport refineries are included in our specialty products segment. The asphalt and other by-products produced in connection with the production of fuel products at the Shreveport refinery are included in our fuel products segment. The fuels produced in connection with the production of specialty products at the Princeton and Cotton Valley refineries are included in our specialty products segment. For the three and six months ended June 30, 2006, approximately 69.8% and 71.2%, respectively, of our gross profit was generated from our specialty products segment and approximately 30.2% and 28.8%, respectively, of our gross profit was generated from our fuel products segment.

          Our fuel products segment began operations in 2004, as we substantially completed the approximately $39.7 million reconfiguration of the Shreveport refinery to add motor fuels production, including gasoline, diesel and jet fuel, to its existing specialty products production as well as to increase overall feedstock throughput. The project was fully completed in February 2005. The reconfiguration was undertaken to capitalize on strong fuels refining margins, or crack spreads, relative to historical levels, to utilize idled assets, and to enhance the profitability of the Shreveport refinery’s specialty products segment by increasing overall refinery throughput. As of June 30, 2006, we have hedged 22.9 million barrels of fuel products selling prices through December 2010 at an average refining margin of $10.76 per barrel and average refining margins range from a low of $8.25 in the fourth quarter of 2006 to a high of $12.66 in the third and fourth quarter of 2007. Please refer to Item 3 “Quantitative and Qualitative Disclosures About Market Risk” for a detailed listing of our hedge positions.

          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 material is crude oil and our primary outputs are specialty petroleum and fuel products. The prices of crude oil, specialty 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 product prices. We enter into derivative contracts for future periods in quantities which do not exceed our projected purchases of crude oil and fuels production. Please read Item 3 “Quantitative and Qualitative Disclosures about Market Risk — Commodity Price Risk.”

          Our management uses several financial and operational measurements to analyze our performance. These measurements include the following:

	•		Sales volumes;
	•		Production yields; and
	•		Specialty products and fuel products gross profit.

          Sales volumes. We view the volumes of specialty and fuels 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 refineries. Higher volumes improve profitability through the spreading of fixed costs over greater volumes.

          Production yields. We seek the optimal product mix for each barrel of crude oil we refine in order to maximize our gross profit and minimize lower margin by-products, which we refer to as production yield.

          Specialty products and fuel products gross profit. Specialty products and fuel products gross profit are an important measure of our ability to maximize the profitability of our specialty products and fuel products segments. We define specialty products and fuel products gross profit as sales less the cost of crude oil and other feedstocks and other production-related expenses, the most significant portion of which include labor, fuel, utilities, contract services, maintenance and processing materials. Also, included in our sales and cost of sales is the derivative gain or loss on our cash flow hedges related to our fuel products sales and crude oil and natural gas purchases. We use specialty products and fuel products gross profit as an indicator 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 the maintenance and turnaround activities performed during a specific period. Maintenance expense includes accruals for turnarounds and other maintenance expenses.

          On January 31, 2006, we completed the initial public offering of our common units and sold 5,699,900 of those units to the underwriters in the initial public offering at a price to the public of $21.50 per common unit. We also sold a total of 750,100 common units to the Fehsenfeld Investors at a price of $19.995 per common unit. In addition, on February 8, 2006, we sold an additional 854,985 common units to the underwriters at a price to the public of $21.50 per common unit pursuant to the underwriters’ over-allotment option. Each of these issuances was made pursuant to the our Registration Statement on Form S-1 (File No. 333-128880) declared effective by the Securities and Exchange Commission on January 29, 2006. The proceeds received by us (net of underwriting discounts and structuring fees and before expenses) from the sale of an aggregate of 7,304,985 units were approximately $144.4 million. Please read “—Liquidity and Capital Resources” for additional discussion of our use of the proceeds from our initial public offering.

          On July 5, 2006, we completed a follow-on public offering of our common units in which we sold 3,300,000 common units to the underwriters of this offering at a price to the public of $32.94 per common unit. This issuance was made pursuant to the Partnership’s Registration Statement on Form S-1 (File No. 333-134993) declared effective by the Securities and Exchange Commission on June 28, 2006. The proceeds received by the Partnership (net of underwriting discounts, commissions and expenses but before our general partner’s capital contribution) from the sale of these units were $103.5 million. The general partner contributed an additional $2.2 million to retain its 2% general partner interest. Please read “—Liquidity and Capital Resources” for additional discussion of our use of the proceeds from our follow-on public offering.

Second Quarter 2006 and Six Months Ended June 30, 2006 Results of Operations

          The following table sets forth information about our combined refinery operations. Refining production volume differs from sales volume due to changes in inventory.

		Calumet				Predecessor				Calumet				Predecessor
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2006				2005				2006				2005
Total sales volume (bpd)(1)			50,747				49,077				51,425				43,773
Total feedstock runs (bpd)(2)			53,363				51,913				52,869				47,013
Refinery production (bpd)(3):
Specialty products:
Lubricating oils			12,101				11,230				11,899				10,666
Solvents			5,671				5,112				5,012				4,271
Waxes			1,226				849				1,186				867
Asphalt and other by-products			7,911				7,467				6,742				6,484
Fuels			2,612				2,769				2,561				2,583
Total			29,521				27,427				27,400				24,871
Fuel products:
Gasoline			8,987				7,990				9,491				7,200
Diesel			7,018				9,898				7,369				8,851
Jet fuel			6,581				4,778				6,942				4,278
Asphalt and other by-products			604				773				452				433
Total			23,190				23,439				24,254				20,762
Total refinery production			52,711				50,866				51,654				45,633