Segments and Related Information

9 Months Ended

Sep. 30, 2024

Segments and Related Information

Segments and Related Information

12. Segments and Related Information

Segment Reporting

The Company determines its reportable segments based on how the business is managed internally for the products sold to customers, including how results are reviewed and resources are allocated by the chief operating decision maker (“CODM”). The Company’s operations are managed by the CODM using the following reportable segments:

● Specialty Products and Solutions. The Specialty Products and Solutions segment consists of our customer-focused solutions and formulations businesses, covering multiple specialty product lines, anchored by our unique integrated complex in Northwest Louisiana. In this segment, we manufacture and market a wide variety of solvents, waxes, customized lubricating oils, white oils, petrolatums, gels, esters, and other products. Our specialty products are sold to domestic and international customers who purchase them primarily as raw material components for consumer-facing and industrial products.

● Montana/Renewables. The Montana/Renewables segment is composed of our Great Falls specialty asphalt facility and our Montana Renewables facility. At our Montana Renewables facility, we process a variety of geographically advantaged renewable feedstocks into renewable diesel, sustainable aviation fuel, renewable hydrogen, renewable natural gas, renewable propane, and renewable naphtha that are distributed into renewable markets in the western half of North America. At our Montana specialty asphalt facility, we process Canadian crude oil into conventional gasoline, diesel, jet fuel and specialty grades of asphalt, with production sized to serve local markets.

● Performance Brands. The Performance Brands segment includes our fast-growing portfolio of high-quality, high-performing brands. In this segment, we blend, package, and market high performance products through our Royal Purple, Bel-Ray, and TruFuel brands.

● Corporate. The Corporate segment primarily consists of general and administrative expenses not allocated to the Montana/Renewables, Specialty Products and Solutions, or Performance Brands segments.

The accounting policies of the reporting segments are the same as those described in the summary of significant accounting policies as disclosed in Note 2 — “Summary of Significant Accounting Policies,” of the 2023 Annual Report, except that the disaggregated financial results for the reporting segments have been prepared using a management approach, which is consistent with the basis and manner in which management internally disaggregates financial

information for the purposes of assisting internal operating decisions. The Company accounts for inter-segment sales and transfers using market-based transfer pricing. The Company will periodically refine its expense allocation methodology for its segment reporting as more specific information becomes available and the industry or market changes. The Company evaluates performance based upon Adjusted EBITDA (a non-GAAP financial measure). The Company defines Adjusted EBITDA for any period as EBITDA adjusted for (a) impairment; (b) unrealized gains and losses from mark-to-market accounting for hedging activities; (c) realized gains and losses under derivative instruments excluded from the determination of net income (loss); (d) 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); (e) debt refinancing fees, extinguishment costs, premiums and penalties; (f) any net gain or loss realized in connection with an asset sale that was deducted in computing net income (loss); (g) amortization of turnaround costs; (h) LCM inventory adjustments; (i) the impact of liquidation of inventory layers calculated using the LIFO method; (j) RINs mark-to-market adjustments; and (k) all extraordinary, unusual or non-recurring items of gain or loss, or revenue or expense.

Reportable segment information for the three and nine months ended September 30, 2024 and 2023, is as follows (in millions):

	Specialty
	Products and		Performance		Montana/						Consolidated
Three Months Ended September 30, 2024	Solutions		Brands		Renewables		Corporate		Eliminations		Total
Sales:
External customers	$	714.0	$	80.3	$	306.1	$	—	$	—	$	1,100.4
Inter-segment sales		6.3		0.1		—		—		(6.4)		—
Total sales	$	720.3	$	80.4	$	306.1	$	—	$	(6.4)	$	1,100.4
Adjusted EBITDA	$	42.6	$	13.6	$	12.7	$	(19.1)	$	—	$	49.8
Reconciling items to net loss:
Depreciation and amortization		17.4		2.2		25.5		0.2		—		45.3
LCM / LIFO loss		4.2		0.8		4.4		—		—		9.4
Interest expense		5.6		—		15.7		36.4		—		57.7
Unrealized gain on derivatives		(13.6)		—		—		—		—		(13.6)
RINs mark-to-market loss		22.6		—		10.2		—		—		32.8
Other non-recurring expenses												12.1
Equity-based compensation and other items												7.0
Income tax expense												0.7
Noncontrolling interest adjustments												(1.0)
Net loss											$	(100.6)
Capital expenditures	$	9.4	$	0.2	$	8.9	$	0.9	$	—	$	19.4
PP&E, net	$	355.7	$	32.0	$	1,061.1	$	4.5	$	—	$	1,453.3

	Specialty
	Products and		Performance		Montana/						Consolidated
Three Months Ended September 30, 2023 (As Restated)	Solutions (1)		Brands (2)		Renewables		Corporate		Eliminations		Total
Sales:
External customers	$	745.7	$	75.2	$	328.5	$	—	$	—	$	1,149.4
Inter-segment sales		2.5		0.1		—		—		(2.6)		—
Total sales	$	748.2	$	75.3	$	328.5	$	—	$	(2.6)	$	1,149.4
Adjusted EBITDA	$	38.6	$	13.2	$	38.2	$	(14.6)	$	—	$	75.4
Reconciling items to net income:
Depreciation and amortization		19.0		2.5		21.9		0.2		—		43.6
LCM / LIFO (gain) loss		(4.4)		0.1		(0.2)		—		—		(4.5)
Interest expense		7.1		—		18.4		33.2		—		58.7
Debt extinguishment costs		—		—		—		0.3		—		0.3
Unrealized loss on derivatives		26.2		—		10.1		—		—		36.3
RINs mark-to-market gain		(118.3)		—		(55.1)		—		—		(173.4)
Other non-recurring expenses												2.5
Equity-based compensation and other items												13.8
Income tax expense												0.5
Noncontrolling interest adjustments												(2.2)
Net income											$	99.8
Capital expenditures	$	25.4	$	0.4	$	22.1	$	0.1	$	—	$	48.0
PP&E, net	$	375.7	$	33.2	$	1,116.0	$	2.0	$	—	$	1,526.9

	Specialty
	Products and		Performance		Montana/						Consolidated
Nine Months Ended September 30, 2024	Solutions		Brands		Renewables		Corporate		Eliminations		Total
Sales:
External customers	$	2,141.8	$	256.1	$	842.0	$	—	$	—	$	3,239.9
Inter-segment sales		18.3		0.3		—		—		(18.6)		—
Total sales	$	2,160.1	$	256.4	$	842.0	$	—	$	(18.6)	$	3,239.9
Adjusted EBITDA	$	150.2	$	41.1	$	5.8	$	(58.9)	$	—	$	138.2
Reconciling items to net loss:
Depreciation and amortization		53.1		6.5		76.3		0.7		—		136.6
LCM / LIFO loss		1.3		0.8		6.8		—		—		8.9
Interest expense		17.3		0.1		48.7		109.2		—		175.3
Debt extinguishment costs		0.1		—		—		0.2		—		0.3
Unrealized gain on derivatives		(52.3)		—		—		—		—		(52.3)
RINs mark-to-market gain		(16.9)		—		(9.2)		—		—		(26.1)
Other non-recurring expenses												72.1
Equity-based compensation and other items												4.4
Income tax expense												1.4
Noncontrolling interest adjustments												(1.1)
Net loss											$	(181.3)
Capital expenditures	$	41.0	$	0.8	$	25.1	$	2.7	$	—	$	69.6
PP&E, net	$	355.7	$	32.0	$	1,061.1	$	4.5	$	—	$	1,453.3

	Specialty
	Products and		Performance		Montana/						Consolidated
Nine Months Ended September 30, 2023 (As Restated)	Solutions (1)		Brands (2)		Renewables (3)		Corporate		Eliminations		Total
Sales:
External customers	$	2,168.5	$	239.5	$	796.5	$	—	$	—	$	3,204.5
Inter-segment sales		13.1		0.2		—		—		(13.3)		—
Total sales	$	2,181.6	$	239.7	$	796.5	$	—	$	(13.3)	$	3,204.5
Adjusted EBITDA	$	175.6	$	41.8	$	56.0	$	(52.6)	$	—	$	220.8
Reconciling items to net income:
Depreciation and amortization		54.2		7.4		61.3		0.8		—		123.7
LCM / LIFO (gain) loss		(1.7)		2.2		8.9		—		—		9.4
Interest expense		20.4		0.1		48.3		94.9		—		163.7
Debt extinguishment costs		—		—		—		5.5		—		5.5
Unrealized (gain) loss on derivatives		(22.6)		—		3.8		—		—		(18.8)
RINs mark-to-market gain		(146.9)		—		(69.0)		—		—		(215.9)
Other non-recurring expenses												35.5
Equity-based compensation and other items												21.0
Income tax expense												1.4
Noncontrolling interest adjustments												(0.8)
Net income											$	96.1
Capital expenditures	$	65.4	$	1.4	$	202.0	$	0.4	$	—	$	269.2
PP&E, net	$	375.7	$	33.2	$	1,116.0	$	2.0	$	—	$	1,526.9

(1) For the three and nine months ended September 30, 2023, Adjusted EBITDA for the Specialty Products and Solutions segment included a $7.1 million and $9.5 million gain, respectively, recorded in cost of sales in the unaudited condensed consolidated statements of operations for proceeds received under the Company’s property damage insurance policy.

(2) For the three and nine months ended September 30, 2023, Adjusted EBITDA for the Performance Brands segment included a $3.2 million and $8.2 million gain recorded in cost of sales in the unaudited condensed consolidated statements of operations for proceeds received under the Company’s business interruption insurance policy.

(3) For the nine months ended September 30, 2023, Adjusted EBITDA for the Montana/Renewables segment excluded a $28.4 million charge to cost of sales in the unaudited condensed consolidated statements of operations for losses under firm purchase commitments.

Geographic Information

International sales accounted for less than ten percent of consolidated sales in the three and nine months ended September 30, 2024 and 2023.

Product Information

The Company offers specialty, fuels, renewable fuels and packaged products primarily in categories consisting of lubricating oils, solvents, waxes, gasoline, diesel, jet fuel, asphalt, heavy fuel oils, renewable fuels, high-performance branded products, and other specialty and fuels products. The following table sets forth the major product category sales for each segment for the three months ended September 30, 2024 and 2023 (dollars in millions):

	Three Months Ended September 30,
	2024				2023
					(As Restated)
Specialty Products and Solutions:
Lubricating oils	$	192.5	17.5	%	$	175.8	15.3	%
Solvents		106.1	9.6	%		92.1	8.0	%
Waxes		38.8	3.5	%		40.1	3.5	%
Fuels, asphalt and other by-products		376.6	34.3	%		437.7	38.1	%
Total	$	714.0	64.9	%	$	745.7	64.9	%
Montana/Renewables:
Gasoline	$	40.8	3.7	%	$	47.9	4.2	%
Diesel		31.0	2.8	%		39.9	3.5	%
Jet fuel		5.3	0.5	%		5.9	0.5	%
Asphalt, heavy fuel oils and other		51.3	4.7	%		50.2	4.3	%
Renewable fuels		177.7	16.1	%		184.6	16.1	%
Total	$	306.1	27.8	%	$	328.5	28.6	%
Performance Brands:	$	80.3	7.3	%	$	75.2	6.5	%
Consolidated sales	$	1,100.4	100.0	%	$	1,149.4	100.0	%

	Nine Months Ended September 30,
	2024				2023
					(As Restated)
Specialty Products and Solutions:
Lubricating oils	$	598.1	18.5	%	$	577.2	18.0	%
Solvents		318.0	9.8	%		294.9	9.2	%
Waxes		117.9	3.6	%		124.5	3.9	%
Fuels, asphalt and other by-products		1,107.8	34.2	%		1,171.9	36.6	%
Total	$	2,141.8	66.1	%	$	2,168.5	67.7	%
Montana/Renewables:
Gasoline	$	110.0	3.4	%	$	131.6	4.1	%
Diesel		87.9	2.7	%		108.7	3.4	%
Jet fuel		14.8	0.5	%		16.5	0.5	%
Asphalt, heavy fuel oils and other		118.5	3.7	%		108.3	3.3	%
Renewable fuels		510.8	15.7	%		431.4	13.5	%
Total	$	842.0	26.0	%	$	796.5	24.8	%
Performance Brands:	$	256.1	7.9	%	$	239.5	7.5	%
Consolidated sales	$	3,239.9	100.0	%	$	3,204.5	100.0	%

Major Customers

During the three and nine months ended September 30, 2024 and 2023, the Company had no customer that represented 10% or greater of consolidated sales.

Major Suppliers

During the three and nine months ended September 30, 2024, the Company had three suppliers that supplied approximately 90.8% and 83.8%, respectively, of its crude oil supply. During the three and nine months ended September 30, 2023, the Company had two suppliers that supplied approximately 89.0% and 91.4%, respectively, of its crude oil supply.