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

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

Commission File number 000-51734

Calumet Specialty Products Partners, L.P.

(Exact Name of Registrant as Specified in Its Charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)		37-1516132 (I.R.S. Employer Identification Number)
2780 Waterfront Parkway East 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Registration S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

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

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

     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 May 5, 2010, there were 22,213,778 common units and 13,066,000 subordinated units outstanding.

 

 

CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.
QUARTERLY REPORT
For the Three Months Ended March 31, 2010

Table of Contents

		Page
Part I
Item 1. Financial Statements
Condensed Consolidated Balance Sheets			1
Unaudited Condensed Consolidated Statements of Operations			2
Unaudited Condensed Consolidated Statements of Partners’ Capital			3
Unaudited Condensed Consolidated Statements of Cash Flows			4
Notes to Unaudited Condensed Consolidated Financial Statements			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			23
Item 3. Quantitative and Qualitative Disclosures About Market Risk			35
Item 4. Controls and Procedures			36
Part II
Item 1. Legal Proceedings			37
Item 1A. Risk Factors			37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			37
Item 3. Defaults Upon Senior Securities			37
Item 4. Reserved			37
Item 5. Other Information			38
Item 6. Exhibits			38
Exhibit 10.22
Exhibit 10.23
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
EX-10.22
EX-10.23
EX-31.1
EX-31.2
EX-32.1

FORWARD-LOOKING STATEMENTS

     This Quarterly Report on Form 10-Q (this “Quarterly Report”) 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. Some of the information in this Quarterly Report may contain forward-looking statements. 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) expected settlements with the Louisiana Department of Environmental Quality (“LDEQ”) or other environmental and regulatory liabilities, (ii) our anticipated levels of use of derivatives to mitigate our exposure to crude oil price changes and fuel products price changes, (iii) future compliance with our debt covenants, (iv) expected increases in crude oil run rates at our facilities, and (v) future activities associated with our contractual arrangements with LyondellBasell, as well as other matters discussed in this Quarterly Report 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 with the Securities and Exchange Commission (the “SEC”) on February 26, 2010 (our “2009 Annual Report”). The risk factors in these documents and other factors noted throughout this Quarterly Report 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 impact of fluctuations and rapid increases or decreases in crude oil and crack spread prices, including the impact on our liquidity;
	•		the results of our hedging and other risk management activities;
	•		our ability to comply with financial covenants contained in our credit agreements;
	•		the availability of, and our ability to consummate, acquisition or combination opportunities;
	•		labor relations;
	•		our access to capital to fund expansions, acquisitions and our working capital needs and our ability to obtain debt or equity financing on satisfactory terms;
	•		successful integration and future performance of acquired assets, businesses or third-party product supply and processing relationships;
	•		environmental liabilities or events that are not covered by an indemnity, insurance or existing reserves;
	•		maintenance of our credit ratings and ability to receive open credit lines 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 current and future laws, rulings and governmental regulations;

	•		shortages or cost increases of power supplies, natural gas, materials or labor;
	•		hurricane or other weather interference with business operations;
	•		fluctuations in the debt and equity markets;
	•		accidents or other unscheduled shutdowns; 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. Our forward looking statements are not guarantees of future performance, and actual results and future performance may differ materially from those suggested in any forward looking statement. Please read Part I Item 3 “Quantitative and Qualitative Disclosures About Market Risk.” We will not update these statements unless securities laws require us to do so.

     All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the foregoing. We undertake no obligation to publicly release the results of any revisions to any such forward-looking statements that may be made to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

     References in this Quarterly Report to the “Company,” “we,” “our,” “us” or like terms refer to Calumet Specialty Products Partners, L.P. and its subsidiaries. References in this Quarterly Report to “our general partner” refer to Calumet GP, LLC, the general partner of the Company.

PART I

Item 1. Financial Statements

CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS

		March 31, 2010				December 31, 2009
		(Unaudited)
		(In thousands, except unit data)
ASSETS
Current assets:
Cash and cash equivalents		$	37			$	49
Accounts receivable:
Trade			137,719				116,914
Other			2,578				5,854
			140,297				122,768
Inventories			110,994				137,250
Derivative assets			10,150				30,904
Prepaid expenses and other current assets			1,498				1,811
Deposits			1,613				6,861
Total current assets			264,589				299,643
Property, plant and equipment, net			622,620				629,275
Goodwill			48,335				48,335
Other intangible assets, net			35,891				38,093
Other noncurrent assets, net			14,922				16,510
Total assets		$	986,357			$	1,031,856
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Accounts payable		$	119,680			$	92,110
Accounts payable — related party			18,762				17,866
Accrued salaries, wages and benefits			5,870				6,500
Taxes payable			6,906				7,551
Other current liabilities			6,912				6,114
Current portion of long-term debt			4,924				5,009
Derivative liabilities			4,670				4,766
Total current liabilities			167,724				139,916
Pension and postretirement benefit obligations			9,189				9,433
Other long-term liabilities			1,105				1,111
Long-term debt, less current portion			362,462				396,049
Total liabilities			540,480				546,509
Commitments and contingencies Partners’ capital:
Common unitholders (22,213,778 units and 22,166,000 units, issued and outstanding at March 31, 2010 and December 31, 2009, respectively)			402,115				418,902
Subordinated unitholders (13,066,000 units issued and outstanding)			24,026				34,714
General partner’s interest			18,516				19,087
Accumulated other comprehensive income			1,220				12,644
Total partners’ capital			445,877				485,347
Total liabilities and partners’ capital		$	986,357			$	1,031,856

See accompanying notes to unaudited condensed consolidated financial statements.

CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

		For the Three Months Ended
		March 31,
		2010				2009
		(In thousands, except per unit data)
Sales		$	484,616			$	414,264
Cost of sales			452,941				335,293
Gross profit			31,675				78,971
Operating costs and expenses:
Selling, general and administrative			7,170				9,322
Transportation			20,246				15,155
Taxes other than income taxes			1,025				1,125
Other			327				418
Operating income			2,907				52,951
Other income (expense):
Interest expense			(7,434	)			(8,644	)
Realized loss on derivative instruments			(561	)			(8,470	)
Unrealized gain (loss) on derivative instruments			(7,758	)			39,739
Other			(59	)			144
Total other income (expense)			(15,812	)			22,769
Net income (loss) before income taxes			(12,905	)			75,720
Income tax expense			162				82
Net income (loss)		$	(13,067	)		$	75,638
Allocation of net income (loss):
Net income (loss)		$	(13,067	)		$	75,638
Less:
General partner’s interest in net income (loss)			(261	)			1,510
Holders of incentive distribution rights			—				—
Net income (loss) available to limited partners		$	(12,806	)		$	74,128
Weighted average limited partner units outstanding – basic and diluted			35,351				32,232
Common and subordinated unitholders’ basic and diluted net income (loss) per unit		$	(0.36	)		$	2.30
Cash distributions declared per common and subordinated unit		$	0.455			$	0.45

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
		Comprehensive				General				Limited Partners
		Income				Partner				Common				Subordinated				Total
		(In thousands)
Balance at December 31, 2009		$	12,644			$	19,087			$	418,902			$	34,714			$	485,347
Comprehensive income (loss):
Net loss							(261	)			(8,063	)			(4,743	)			(13,067	)
Cash flow hedge gain reclassified to net income			(5,730	)															(5,730	)
Change in fair value of cash flow hedges			(6,099	)															(6,099	)
Defined benefit pension and retiree health benefit plans			405																405
Comprehensive loss																			(24,491	)
Proceeds from public equity offering, net											793								793
Contribution from Calumet GP, LLC							18												18
Units repurchased for phantom unit grants											(248	)							(248	)
Amortization of vested phantom units											855								855
Distributions to partners							(328	)			(10,124	)			(5,945	)			(16,397	)
Balance at March 31, 2010		$	1,220			$	18,516			$	402,115			$	24,026			$	445,877

CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

		For the Three Months Ended
		March 31,
		2010				2009
		(In thousands)
Operating activities
Net income (loss)		$	(13,067	)		$	75,638
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization			15,351				16,135
Amortization of turnaround costs			2,140				1,597
Provision for doubtful accounts			(91	)			240
Unrealized (gain) loss on derivative instruments			7,758				(39,739	)
Other non-cash activity			935				106
Changes in assets and liabilities:
Accounts receivable			(17,438	)			6,998
Inventories			26,256				(30,452	)
Prepaid expenses and other current assets			313				684
Derivative activity			1,071				(7,228	)
Deposits			5,248				4,000
Other assets			(939	)			(76	)
Accounts payable			28,466				2,785
Accrued salaries, wages and benefits			(630	)			(92	)
Taxes payable			(645	)			2,009
Other liabilities			2,442				(287	)
Pension and postretirement benefit obligations			161				315
Net cash provided by operating activities			57,331				32,633
Investing activities
Additions to property, plant and equipment			(5,669	)			(4,945	)
Proceeds from disposal of property and equipment			89				—
Net cash used in investing activities			(5,580	)			(4,945	)
Financing activities
Repayments of borrowings— revolving credit facility			(32,944	)			(9,569	)
Repayments of borrowings, term loan credit facility			(963	)			(963	)
Payments on capital lease obligations			(372	)			(309	)
Proceeds from public equity offering, net			793				—
Contribution from Calumet GP, LLC			18				—
Change in bank overdraft			(1,650	)			(1,944	)
Common units repurchased for vested phantom unit grants			(248	)			(105	)
Distributions to partners			(16,397	)			(14,818	)
Net cash used in financing activities			(51,763	)			(27,708	)
Net decrease in cash and cash equivalents			(12	)			(20	)
Cash and cash equivalents at beginning of period			49				48
Cash and cash equivalents at end of period		$	37			$	28
Supplemental disclosure of cash flow information
Interest paid		$	6,944			$	7,917
Income taxes paid		$	8			$	—

CALUMET SPECIALTY PRODUCTS PARTNERS, L.P.

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

1. Description of the Business

     Calumet Specialty Products Partners, L.P. (the “Company”) is a Delaware limited partnership. The general partner of the Company is Calumet GP, LLC, a Delaware limited liability company. As of March 31, 2010, the Company had 22,213,778 common units, 13,066,000 subordinated units, and 719,995 general partner equivalent units outstanding. The general partner owns 2% of the Company while the remaining 98% is owned by limited partners. the Company is engaged in the production and marketing of crude oil-based specialty lubricating oils, white mineral oils, solvents, petrolatums, waxes and fuels. the Company owns facilities located in Shreveport, Louisiana (“Shreveport”), Princeton, Louisiana (“Princeton”), Cotton Valley, Louisiana (“Cotton Valley”), Karns City, Pennsylvania (“Karns City”), and Dickinson, Texas (“Dickinson”), and a terminal located in Burnham, Illinois (“Burnham”).

     The unaudited condensed consolidated financial statements of the Company as of March 31, 2010 and for the three months ended March 31, 2010 and 2009 included herein have been prepared, without audit, pursuant to the rules and regulations of the SEC. 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 months ended March 31, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s 2009 Annual Report. We issued these unaudited condensed consolidated financial statements by filing with the SEC and have evaluated subsequent events up to the time of filing.

2. New Accounting Pronouncements

     In January 2010, the FASB issued ASU No. 2010-06, “Disclosures About Fair Value Measurements”, which amends ASC No. 820, “Fair Value Measurements and Disclosures” to add new requirements for disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements. The ASU also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. This ASU is effective for the first reporting period (including interim periods) beginning after December 15, 2009. The Company has adopted this standard effective January 1, 2010, however, adoption of this amendment did not have a material effect on the Company’s financial position, results of operations, or cash flows.

3. Inventories

     The cost of inventories is determined using the last-in, first-out (LIFO) method. Inventory costs include crude oil and other feedstocks, labor, processing costs and refining overhead costs. Inventories are valued at the lower of cost or market value.

     Inventories consist of the following:

		March 31,				December 31,
		2010				2009
Raw materials		$	9,680			$	1,323
Work in process			42,936				51,304
Finished goods			58,378				84,623
		$	110,994			$	137,250

     The replacement cost of these inventories, based on current market values, would have been $43,934 and $30,420 higher as of March 31, 2010 and December 31, 2009, respectively.

4. LyondellBasell Agreements

     Effective November 4, 2009, the Company entered into agreements (the “LyondellBasell Agreements”) with Houston Refining LP, a wholly-owned subsidiary of LyondellBasell (“Houston Refining”), to form a long-term exclusive specialty products affiliation. The initial term of the LyondellBasell Agreements lasts until October 31, 2014. After October 31, 2014 the agreements are automatically extended for additional one-year terms unless either party provides 24 months’ notice of a desire to terminate either the initial term or any renewal term. Under the terms of the LyondellBasell Agreements, (i) the Company is the exclusive purchaser of Houston Refining’s naphthenic lubricating oil production at its Houston, Texas refinery and is required to purchase a minimum of approximately 3,000 barrels per day (“bpd”), and (ii) Houston Refining will process a minimum of approximately 800 bpd of white mineral oil for the Company at its Houston, Texas refinery, which will supplement the existing white mineral oil production at the Company’s Karns City and Dickinson facilities. The Company’s annual purchase commitment under these agreements is approximately $120,000. The Company also has exclusive rights to use certain LyondellBasell registered trademarks and tradenames including Tufflo, Duoprime, Duotreat, Crystex, Ideal and Aquamarine.

5. Commitments and Contingencies

     From time to time, the Company is a party to certain claims and litigation incidental to its business, including claims made by various taxing and regulatory authorities, such as the Louisiana Department of Environmental Quality (“LDEQ”), U.S. Environmental Protection Agency (“EPA”), Internal Revenue Service (“IRS”) and Occupational Safety and Health Administration (“OSHA”), as the result of audits or reviews of the Company’s 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, results of operations or cash flows.

Labor Matters

     The Company entered into a new Cotton Valley collective bargaining agreement with the International Union of Operating Engineers that will expire on March 31, 2013. In addition, a new Shreveport collective bargaining agreement with the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied-Industrial, and Service Workers International Union has been ratified by the local union and will expire on April 30, 2013.

     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 LDEQ has proposed penalties totaling approximately $400 and supplemental environmental capital projects 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; (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; and (iv) an August 2005 notification received by the Princeton refinery from the LDEQ regarding alleged violations of air emissions regulations, as identified by the LDEQ following performance of a compliance review, due to excess emissions and failures to continuously monitor and record air emissions levels. The Company anticipates that any penalties that may be assessed due to the alleged violations will be consolidated in a settlement agreement that the Company anticipates executing with the LDEQ in connection with the agency’s “Small Refinery and Single Site Refinery Initiative” described below. The Company has recorded a liability for the proposed penalties within other current liabilities on the unaudited condensed consolidated balance sheets. Environmental expenses are recorded within other expenses in the unaudited condensed consolidated statements of operations. In addition, the Company’s Shreveport refinery experienced the failure of an environmental operating unit in February 2010 and the refinery is operating under a variance from the LDEQ until the environmental operating unit is replaced, which the Company expects to occur at the beginning of the third quarter of 2010.

     The Company is party to ongoing 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 in discussions with the LDEQ regarding its participation in this regulatory initiative and the Company anticipates that it will be entering into a settlement agreement with the LDEQ pursuant to which the Company will be required to make emissions reductions requiring capital investments between approximately $1,000 and $3,000 in total over a three to five year period at its three Louisiana refineries. Because the settlement agreement is also expected to resolve the aforementioned alleged air emissions issues and other violations at the Company’s Cotton Valley and Princeton refineries and consolidate any penalties associated with such issues, the Company further anticipates that a penalty of approximately $400 will be assessed in connection with this settlement agreement.

     Voluntary remediation of subsurface contamination is in process at each of the Company’s refinery sites. The remedial projects are being overseen by the appropriate state environmental regulatory agencies. Based on current investigative and remedial activities, the Company believes that the groundwater contamination at these refineries can be controlled or remedied without having a material adverse effect on the Company’s financial condition. However, such costs are often unpredictable and, therefore, there can be no assurance that the future costs will not become material. The Company estimates that it will incur approximately $1,000 of external costs during 2010 at its Cotton Valley refinery in connection with continued remediation of groundwater impacts at that site.

     The Company is indemnified by Shell Oil Company (“Shell”), 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 the Company’s acquisition of the facility. The indemnity is unlimited in amount and duration, but requires the Company to contribute up to $1,000 of the first $5,000 of indemnified costs for certain of the specified environmental liabilities.

Health and Safety

     The Company is subject to various laws and regulations relating to occupational health and safety, including OSHA and comparable state laws. These laws and the implementing regulations strictly govern the protection of the health and safety of employees. In addition, OSHA’s hazard communication standard requires that information be maintained about hazardous materials used or produced in the Company’s operations and that this information be provided to employees, state and local government authorities and customers. The Company maintains safety, training, and maintenance programs as part of its ongoing efforts to ensure compliance with applicable laws and regulations. The Company’s compliance with applicable health and safety laws and regulations has required, and continues to require, substantial expenditures.

     The Company has completed studies to assess the adequacy of its process safety management practices at its Shreveport refinery with respect to certain consensus codes and standards. The Company expects to incur between $5,000 and $8,000 of capital expenditures in total over the next three years to address OSHA compliance issues identified in these studies. The Company expects these capital expenditures will enhance its equipment to maintain compliance with applicable requirements at the Shreveport refinery. The Company believes that operations are in substantial compliance with OSHA and similar state laws.

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 March 31, 2010 and December 31, 2009, the Company had outstanding standby letters of credit of $61,215 and $46,859, respectively, under its senior secured revolving credit facility. The maximum amount of letters of credit the Company can issue is limited to its availability under its revolving credit facility or $300,000, whichever is lower. As of March 31, 2010 and December 31, 2009, the Company had availability to issue letters of credit of $141,241 and $107,285, respectively, under its revolving credit facility. As discussed in Note 6, as of March 31, 2010 the Company also had a prefunded $50,000 letter of credit outstanding under its senior secured first lien letter of credit facility to support crack spread hedging, which bears interest at 4.0%.

6. Long-Term Debt

     Long-term debt consisted of the following:

		March 31,				December 31,
		2010				2009
Borrowings under senior secured first lien term loan with third-party lenders, interest at rate of three-month LIBOR plus 4.00% (4.25% and 4.27% at March 31, 2010 and December 31, 2009, respectively), interest and principal payments quarterly through September 30, 2014 with remaining borrowings due January 2015, effective interest rate of 4.75% and 6.00% for the periods ended March 31, 2010 and December 31, 2009, respectively		$	370,273			$	371,235
Borrowings under senior secured revolving credit agreement with third-party lenders, interest at prime plus 0.25% (3.50% and 3.75% at March 31, 2010 and December 31, 2009, respectively), interest payments monthly, borrowings due January 2013			6,956				39,900
Capital lease obligations, interest at 8.25%, interest and principal payments quarterly through January 2012			2,613				2,938
Less unamortized discount on senior secured first lien term loan with third-party lenders			(12,456	)			(13,015	)
Total long-term debt			367,386				401,058
Less current portion of long-term debt			4,924				5,009
		$	362,462			$	396,049

     The Company’s $435,000 senior secured first lien term loan facility includes a $385,000 term loan and a $50,000 prefunded letter of credit facility to support crack spread hedging, which bears interest at 4.0%. The term loan bears interest at a rate equal to (i) with respect to a LIBOR Loan, the LIBOR Rate plus 400 basis points (the Applicable Rate defined in the term loan credit agreement) and (ii) with respect to a Base Rate Loan, the Base Rate plus 300 basis points (as defined in the term loan credit agreement).

     Lenders under the term loan facility have a first priority lien on the Company’s fixed assets and a second priority lien on its cash, accounts receivable, inventory and other personal property. The term loan facility requires quarterly principal payments of $963 until maturity on September 30, 2014, with the remaining balance due at maturity on January 3, 2015.

     The Company’s senior secured revolving credit facility has a maximum availability of up to $375,000, subject to borrowing base limitations. The revolving credit facility, which is the Company’s primary source of liquidity for cash needs in excess of cash generated from operations, currently bears interest at a rate equal to prime plus a basis points margin or LIBOR plus a basis points margin, at the Company’s option. As of March 31, 2010, the margin is 25 basis points for prime and 175 basis points for LIBOR; however, the margin fluctuates based on quarterly measurement of the Company’s Consolidated Leverage Ratio (as defined in the credit agreement). The senior secured revolving credit facility matures on January 3, 2013.

     The borrowing capacity at March 31, 2010 under the revolving credit facility was $209,412 with $141,241 available for additional borrowings based on collateral and specified availability limitations. Lenders under the revolving credit facility have a first priority lien on the Company’s cash, accounts receivable and inventory and a second priority lien on the Company’s fixed assets.

     Compliance with the financial covenants pursuant to the Company’s credit agreements is tested quarterly based upon performance over the most recent four fiscal quarters and as of March 31, 2010 the Company was in compliance with all financial covenants under its credit agreements.

     As of March 31, 2010, maturities of the Company’s long-term debt are as follows:

Year		Maturity
2010			3,719
2011			4,844
2012			4,401
2013			11,042
2014			3,850
Thereafter			351,986
Total		$	379,842

7. Derivatives

     The Company utilizes 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 fuel products and interest payments. The Company employs various hedging strategies, which are further discussed below. The Company does not hold or issue derivative instruments for trading purposes.

     The Company recognizes all derivative instruments at their fair values (see Note 8) as either assets or liabilities on the condensed consolidated balance sheets. Fair value includes any premiums paid or received and unrealized gains and losses. Fair value does not include any amounts receivable from or payable to counterparties, or collateral provided to counterparties. Derivative asset and liability amounts with the same counterparty are netted against each other for financial reporting purposes. The Company had recorded the following derivative assets and liabilities at fair value as of March 31, 2010 and December 31, 2009:

		Derivative Assets								Derivative Liabilities
		March 31, 2010				December 31, 2009				March 31, 2010				December 31, 2009
Derivative instruments designated as hedges:
Fuel products segment:
Crude oil swaps		$	150,194			$	134,587			$	—			$	—
Gasoline swaps			(39,294	)			(6,147	)			—				—
Diesel swaps			(70,144	)			(67,731	)			—				—
Jet fuel swaps			(34,579	)			(26,926	)			—				—
Specialty products segment:
Crude oil collars			—				—				—				—
Crude oil swaps			—				—				—				—
Natural gas swaps			—				—				—				—
Interest rate swaps:			—				—				(2,917	)			(2,752	)
Total derivative instruments designated as hedges			6,177				33,783				(2,917	)			(2,752	)
Derivative instruments not designated as hedges:
Fuel products segment:
Crude oil swaps (1)			(10,951	)			13,062				—				—
Gasoline swaps (1)			13,798				(16,165	)			—				—
Diesel swaps			—				—				—				—
Jet fuel crack spread collars (4)			249				375				—				—
Specialty products segment:
Crude oil collars (2)			825				(151	)			—				—
Crude oil swaps (2)			52				—								—
Natural gas swaps (2)			—				—				—				—
Interest rate swaps: (3)			—				—				(1,753	)			(2,014	)
Total derivative instruments not designated as hedges			3,973				(2,879	)			(1,753	)			(2,014	)
Total derivative instruments		$	10,150			$	30,904			$	(4,670	)		$	(4,766	)

     To the extent a derivative instrument is determined to be 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, a component of partners’ capital in the condensed consolidated balance sheets, until the underlying transaction hedged is recognized in the unaudited condensed consolidated statements of operations. The Company accounts for certain derivatives hedging purchases of crude oil and natural gas, sales of gasoline, diesel and jet fuel and the payment of interest as cash flow hedges. The derivatives hedging sales and purchases are recorded to sales and cost of sales, respectively, in the unaudited condensed consolidated statements of operations upon recording the related hedged transaction in sales or cost of sales. The derivatives hedging payments of interest are recorded in interest expense in the unaudited condensed consolidated statements of operations upon payment of interest. The Company assesses, both at inception of the hedge and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items.

     For 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 asset or liability for the period is recorded to unrealized gain (loss) on derivative instruments in the unaudited condensed consolidated statements of operations. Upon the settlement of a derivative not designated as a cash flow hedge, the gain or loss at settlement is recorded to realized gain (loss) on derivative instruments in the unaudited condensed consolidated statements of operations.

     The Company recorded the following amounts in its condensed consolidated balance sheets, unaudited condensed consolidated statements of operations and its unaudited condensed consolidated statements of partners’ capital as of, and for the three months ended, March 31, 2010 and 2009 related to its derivative instruments that were designated as cash flow hedges:

		Amount of Gain (Loss)
		Recognized in
		Accumulated Other								Amount of (Gain) Loss Reclassified from
		Comprehensive Income								Accumulated Other Comprehensive										Amount of Gain (Loss) Recognized in Net
		on Derivatives (Effective								Income into Net Income (Loss) (Effective										Income (Loss) on Derivatives (Ineffective
		Portion)								Portion)										Portion)
												Three Months Ended										Three Months Ended
		March 31,								Location of (Gain)		March 31,								Location of Gain		March 31,
Type of Derivative		2010				2009				Loss		2010				2009				(Loss)		2010				2009
Fuel products segment:
Crude oil swaps		$	16,481			$	(142,869	)		Cost of sales		$	(17,508	)		$	36,410			Unrealized/ Realized		$	(6,473	)		$	13,005
Gasoline swaps			(5,841	)			85,542			Sales			5,184				(20,667	)		Unrealized/ Realized			(1,535	)			2,644
Diesel swaps			(8,566	)			101,381			Sales			5,808				(18,482	)		Unrealized/ Realized			(1,181	)			7,745
Jet fuel swaps			(7,224	)			—			Sales			—				—			Unrealized/ Realized			—				—
Specialty products segment:
Crude oil collars			—				—			Cost of sales			—				—			Unrealized/ Realized			—				—
Crude oil swaps			—				—			Cost of sales			—				—			Unrealized/ Realized			—				—
Natural gas swaps			—				—			Cost of sales			—				1,428			Unrealized/ Realized			—				—
Interest rate swaps:			(949	)			(3,647	)		Interest expense			786				—			Unrealized/ Realized			—				—
Total		$	(6,099	)		$	40,407					$	(5,730	)		$	(1,311	)				$	(9,189	)		$	23,394

     The Company recorded the following gains (losses) in its unaudited condensed consolidated statements of operations for the three months ended March 31, 2010 and 2009 related to its derivative instruments not designated as cash flow hedges:

		Amount of Gain (Loss) Recognized in								Amount of Gain (Loss) Recognized
		Realized Loss on Derivatives								in Unrealized Gain (Loss) on Derivatives
		Three Months Ended								Three Months Ended
		March 31,								March 31,
Type of Derivative		2010				2009				2010				2009
Fuel products segment:
Crude oil swaps		$	(2,235	)		$	11,510			$	1,572			$	(8,989	)
Gasoline swaps			3,394				(5,736	)			(2,042	)			13,829
Diesel swaps			(325	)			(1,664	)			325				1,664
Jet fuel swaps			—				—				—				—
Jet fuel collars			—				—				(126	)			(159	)
Specialty products segment:
Crude oil collars			(771	)			(14,261	)			977				12,172
Crude oil swaps			24				—				51				—
Natural gas swaps			(35	)			(1,507	)			—				1,223
Interest rate swaps:			(200	)			(204	)			261				(3	)
Total		$	(148	)		$	(11,862	)		$	1,018			$	19,737

     The Company is exposed to credit risk in the event of nonperformance by its counterparties on these derivative transactions. The Company does not expect nonperformance on any derivative instruments, however, no assurances can be provided. The Company’s credit exposure related to these derivative instruments is represented by the fair value of contracts reported as derivative assets. To manage credit risk, the Company selects and periodically reviews counterparties based on credit ratings. The Company executes all of its derivative instruments with large financial institutions that have ratings of at least A2 and A by Moody’s and S&P, respectively. In the event of default, the Company would potentially be subject to losses on derivative instruments with mark to market gains. The Company requires collateral from its counterparties when the fair value of the derivatives exceeds agreed upon thresholds in its contracts with these counterparties. The Company’s contracts with these counterparties allow for netting of derivative instrument positions executed under each contract. Collateral held by, or received from, counterparties is reported in deposits and other current liabilities, respectively, on the Company’s condensed consolidated balance sheets and not netted against derivative assets or liabilities. As of March 31, 2010, the Company had provided its counterparties with no cash collateral or letters of credit above the $50,000 prefunded letter of credit provided to one counterparty to support crack spread hedging. For financial reporting purposes, the Company does not offset the collateral provided to a counterparty against the fair value of its obligation to that counterparty. Any outstanding collateral is released to the Company upon settlement of the related derivative instrument liability.

     Certain of the Company’s outstanding derivative instruments are subject to credit support agreements with the applicable counterparties which contain provisions setting certain credit thresholds above which the Company may be required to post agreed-upon collateral, such as cash or letters of credit, with the counterparty to the extent that the Company’s mark-to-market net liability, if any, on all outstanding derivatives exceeds the credit threshold amount per such credit support agreement. In certain cases, the Company’s credit threshold is dependent upon the Company’s maintenance of certain corporate credit ratings with Moody’s and S&P. In the event that the Company’s corporate credit rating was lowered below its current level by either Moody’s or S&P, such counterparties would have the right to reduce the applicable threshold to zero and demand full collateralization of the Company’s net liability position on outstanding derivative instruments. As of March 31, 2010, there is no net liability associated with the Company’s outstanding derivative instruments subject to such requirements. In addition, the majority of the credit support agreements covering the Company’s outstanding derivative instruments also contain a general provision stating that if the Company experiences a material adverse change in its business, in the reasonable discretion of the counterparty, the Company’s credit threshold could be lowered by such counterparty. The Company does not expect that it will experience a material adverse change in its business.

     The effective portion of the hedges classified in accumulated other comprehensive income is $5,523 as of March 31, 2010, and absent a change in the fair market value of the underlying transactions, will be reclassified to earnings by December 31, 2012 with balances being recognized as follows:

		Accumulated Other
		Comprehensive
Year		Income (Loss)
2010		$	15,552
2011			(5,079	)
2012			(4,950	)
Total		$	5,523

     Based on fair values as of March 31, 2010, the Company expects to reclassify $14,063 of net gains on derivative instruments from accumulated other comprehensive income to earnings during the next twelve months due to actual crude oil purchases, gasoline, diesel and jet fuel sales, and the payment of variable interest associated with floating rate debt. However, the amounts actually realized will be dependent on the fair values as of the date of settlements.

Crude Oil Swap and Collar Contracts — Specialty Products Segment

     The Company is exposed to fluctuations in the price of crude oil, its principal raw material. The Company utilizes combinations of options and swaps to manage crude oil price risk and volatility of cash flows in its specialty products segment. These derivatives may be designated as cash flow hedges of the future purchase of crude oil if they meet the hedge criteria. The Company’s general policy is to enter into crude oil derivative contracts that mitigate the Company’s exposure to price risk associated with crude oil purchases related to specialty products production (for up to 70% of expected purchases). As of March 31, 2010, the Company has hedged at levels approximating 16.5% of its expected specialty products production for the next quarter. While the Company’s policy generally requires that these positions be short term in nature and expire within three to nine months from execution, the Company may execute derivative contracts for up to two years forward, if a change in the risks supports lengthening the Company’s position. As of March 31, 2010, the Company had the following crude oil derivatives related to crude oil purchases in its specialty products segment, none of which are designated as hedges.

										Average				Average				Average
										Bought Put				Swap				Sold Call
Crude Oil Put/Swap/Call Contracts by Expiration Dates		Barrels				BPD				($/Bbl)				($/Bbl)				($/Bbl)
April 2010			90,000				3,000			$	61.47			$	76.93			$	87.00
May 2010			155,000				5,000				67.68				82.66				92.66
June 2010			120,000				4,000				68.21				82.96				92.96
Totals			365,000
Average price										$	66.32			$	81.35			$	91.36

Crude Oil Swap Contracts by Expiration Dates		Barrels				BPD				$/Bbl
April 2010			45,000				1,500			$	82.74

     At December 31, 2009, the Company had the following crude oil derivatives related to crude oil purchases in its specialty products segment, none of which were designated as hedges.

										Average				Average				Average
										Bought Put				Swap				Sold Call
Crude Oil Put/Swap/Call Contracts by Expiration Dates		Barrels				BPD				($/Bbl)				($/Bbl)				($/Bbl)
January 2010			186,000				6,000			$	68.32			$	80.43			$	90.43
Totals			186,000
Average price										$	68.32			$	80.43			$	90.43

Crude Oil Swap Contracts — Fuel Products Segment

     The Company is exposed to fluctuations in the price of crude oil, its principal raw material. 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 oil purchases used in fuels production. At March 31, 2010, the Company had the following derivatives related to crude oil purchases in its fuel products segment, all of which are designated as hedges.

		Barrels
Crude Oil Swap Contracts by Expiration Dates		Purchased				BPD				($/Bbl)
Second Quarter 2010			1,820,000				20,000			$	67.29
Third Quarter 2010			1,840,000				20,000				67.29
Fourth Quarter 2010			1,840,000				20,000				67.29
Calendar Year 2011			5,614,000				15,381				76.54
Calendar Year 2012			1,685,500				4,605				86.25
Totals			12,799,500
Average price										$	73.84

     At March 31, 2010, the Company had the following derivatives related to crude oil sales in its fuel products segment, none of which are designated as hedges.

		Barrels
Crude Oil Swap Contracts by Expiration Dates		Sold				BPD				($/Bbl)
Second Quarter 2010			136,500				1,500			$	58.25
Third Quarter 2010			138,000				1,500				58.25
Fourth Quarter 2010			138,000				1,500				58.25
Totals			412,500
Average price										$	58.25

     At December 31, 2009, the Company had the following derivatives related to crude oil purchases in its fuel products segment, all of which were designated as hedges.

		Barrels
Crude Oil Swap Contracts by Expiration Dates		Purchased				BPD				($/Bbl)
First Quarter 2010			1,800,000				20,000			$	67.29
Second Quarter 2010			1,820,000				20,000				67.29
Third Quarter 2010			1,840,000				20,000				67.29
Fourth Quarter 2010			1,840,000				20,000				67.29
Calendar Year 2011			5,614,000				15,381				76.54
Totals			12,914,000
Average price										$	71.31

     At December 31, 2009, the Company had the following derivatives related to crude oil sales in its fuel products segment, none of which are designated as hedges.

Crude Oil Swap Contracts by Expiration Dates		Barrels Sold				BPD				($/Bbl)
First Quarter 2010			135,000				1,500			$	58.25
Second Quarter 2010			136,500				1,500				58.25
Third Quarter 2010			138,000				1,500				58.25
Fourth Quarter 2010			138,000				1,500				58.25
Totals			547,500
Average price										$	58.25

Fuel Products Swap Contracts

     The Company is exposed to fluctuations in the prices of gasoline, diesel, and jet fuel. The Company utilizes swap contracts to manage diesel, gasoline and jet fuel 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 forecasted fuel sales.

Diesel Swap Contracts

     At March 31, 2010, the Company had the following derivatives related to diesel and jet fuel sales in its fuel products segment, all of which are designated as hedges.

Diesel Swap Contracts by Expiration Dates		Barrels Sold				BPD				($/Bbl)
Second Quarter 2010			1,183,000				13,000			$	80.41
Third Quarter 2010			1,196,000				13,000				80.41
Fourth Quarter 2010			1,196,000				13,000				80.41
Calendar Year 2011			2,371,000				6,496				90.58
Totals			5,946,000
Average price										$	84.47

     At December 31, 2009, the Company had the following derivatives related to diesel and jet fuel sales in its fuel products segment, all of which were designated as hedges.

Diesel Swap Contracts by Expiration Dates		Barrels Sold				BPD				($/Bbl)
First Quarter 2010			1,170,000				13,000			$	80.41
Second Quarter 2010			1,183,000				13,000				80.41
Third Quarter 2010			1,196,000				13,000				80.41
Fourth Quarter 2010			1,196,000				13,000				80.41
Calendar Year 2011			2,371,000				6,496				90.58
Totals			7,116,000
Average price										$	83.80

Jet Fuel Swap Contracts

     At March 31, 2010, the Company had the following derivatives related to diesel and jet fuel sales in its fuel products segment, all of which are designated as hedges.

Jet Fuel Swap Contracts by Expiration Dates		Barrels Sold				BPD				($/Bbl)
Calendar Year 2011			2,514,000				6,888			$	88.51
Calendar Year 2012			1,549,000				4,232				98.62
Totals			4,063,000
Average price										$	92.36

     At December 31, 2009, the Company had the following derivatives related to diesel and jet fuel sales in its fuel products segment, all of which are designated as hedges.

Jet Fuel Swap Contracts by Expiration Dates		Barrels Sold				BPD				($/Bbl)
Calendar Year 2011			2,514,000				6,888			$	88.51
Totals			2,514,000
Average price										$	88.51

Gasoline Swap Contracts

     At March 31, 2010, the Company had the following derivatives related to gasoline sales in its fuel products segment, all of which are designated as hedges.

Gasoline Swap Contracts by Expiration Dates		Barrels Sold				BPD				($/Bbl)
Second Quarter 2010			637,000				7,000			$	75.28
Third Quarter 2010			644,000				7,000				75.28
Fourth Quarter 2010			644,000				7,000				75.28
Calendar Year 2011			729,000				1,997				83.53
Calendar Year 2012			136,500				373				89.04
Totals			2,790,500
Average price										$	78.11

     At March 31, 2010, the Company had the following derivatives related to gasoline purchases in its fuel products segment, none of which are designated as hedges.

		Barrels
Gasoline Swap Contracts by Expiration Dates		Purchased				BPD				($/Bbl)
Second Quarter 2010			136,500				1,500			$	58.42
Third Quarter 2010			138,000				1,500				58.42
Fourth Quarter 2010			138,000				1,500				58.42
Totals			412,500
Average price										$	58.42

     At December 31, 2009, the Company had the following derivatives related to gasoline sales in its fuel products segment, all of which were designated as hedges.

Gasoline Swap Contracts by Expiration Dates		Barrels Sold				BPD				($/Bbl)
First Quarter 2010			630,000				7,000			$	75.28
Second Quarter 2010			637,000				7,000				75.28
Third Quarter 2010			644,000				7,000				75.28
Fourth Quarter 2010			644,000				7,000				75.28
Calendar Year 2011			729,000				1,997				83.53
Totals			3,284,000
Average price										$	77.11

     At December 31, 2009, the Company had the following derivatives related to gasoline purchases in its fuel products segment, none of which were designated as hedges.

		Barrels
Gasoline Swap Contracts by Expiration Dates		Purchased				BPD				($/Bbl)
First Quarter 2010			135,000				1,500			$	58.42
Second Quarter 2010			136,500				1,500				58.42
Third Quarter 2010			138,000				1,500				58.42
Fourth Quarter 2010			138,000				1,500				58.42
Totals			547,500
Average price										$	58.42

Jet Fuel Put Spread Contracts

     At March 31, 2010 and December 31, 2009, the Company had the following jet fuel put options related to jet fuel crack spreads in its fuel products segment, none of which are designated as hedges.

										Average				Average
										Sold Put				Bought Put
Jet Fuel Put Option Crack Spread Contracts by Expiration Dates		Barrels				BPD				($/Bbl)				($/Bbl)
Calendar Year 2011			814,000				2,230			$	4.17			$	6.23
Totals			814,000
Average price										$	4.17			$	6.23

Natural Gas Swap Contracts

     Natural gas purchases comprise a significant component of the Company’s cost of sales; therefore, changes in the price of natural gas also significantly affect the Company’s profitability and cash flows. The Company utilizes swap contracts to manage natural gas price risk and volatility of cash flows. The Company’s policy is generally to enter into natural gas derivative contracts to hedge approximately 50% or more of its upcoming fall and winter months’ anticipated natural gas requirement for a period no greater than three years forward. At March 31, 2010 and December 31, 2009, the Company did not have any derivatives related to natural gas purchases.

Interest Rate Swap Contracts

     The Company’s profitability and cash flows are affected by changes in interest rates, specifically LIBOR and prime rates. The primary purpose of the Company’s interest rate risk management activities is to hedge its exposure to changes in interest rates.

     During 2010, the Company entered into forward swap contracts to manage interest rate risk related to a portion of its current variable rate senior secured first lien term loan. The Company hedged the future interest payments related to $100,000 of the total outstanding term loan indebtedness for the period from February 15, 2011 to February 15, 2012 pursuant to these forward swap contracts. These swap contracts are designated as cash flow hedges of the future payments of interest with three-month LIBOR fixed at an average rate during the hedge period of 2.03%.

     In 2009, the Company hedged the future interest payments related to $200,000 of the total outstanding term loan indebtedness for the period from February 15, 2010 to February 15, 2011. This swap contract is designated as a cash flow hedge of the future payment of interest with three-month LIBOR fixed at an average rate during the hedge period of 0.94%.

     In 2008, the Company entered into a forward swap contract to manage interest rate risk related to a portion of its current variable rate senior secured first lien term loan which closed January 3, 2008. The Company hedged the future interest payments related to $150,000 and $50,000 of the total outstanding term loan indebtedness in 2009 and 2010, respectively, pursuant to this forward swap contract. This swap contract is designated as a cash flow hedge of the future payment of interest with three-month LIBOR fixed at 3.09% and 3.66% per annum in 2009 and 2010, respectively.

     In 2006, the Company entered into a forward swap contract to manage interest rate risk related to a portion of its then existing variable rate senior secured first lien term loan. Due to the repayment of $19,000 of the outstanding balance of the Company’s then existing term loan facility in August 2007 and subsequent refinancing of the remaining term loan balance, this swap contract was not designated as a cash flow hedge of the future payment of interest. The entire change in the fair value of this interest rate swap is recorded to unrealized gain (loss) on derivative instruments in the unaudited condensed consolidated statements of operations. In the first quarter of 2008, the Company fixed its unrealized loss on this interest rate swap derivative instrument by entering into an offsetting interest rate swap which is not designated as a cash flow hedge.

8. Fair Value of Financial Instruments

     The Company’s financial instruments which require fair value disclosure consist primarily of cash and cash equivalents, accounts receivable, financial derivatives, accounts payable and indebtedness. The carrying values of cash and cash equivalents, accounts receivable and accounts payable are considered to be representative of their respective fair values, due to the short maturity of these instruments. Derivative instruments are reported in the accompanying unaudited condensed consolidated financial statements at fair value. The fair value of the Company’s term loan was $346,205 and $328,543 at March 31, 2010 and December 31, 2009, respectively. The carrying values of borrowings under the Company’s senior secured revolving credit facility were $6,956 and $39,900 at March 31, 2010 and December 31, 2009, respectively, and approximate their fair values. In addition, based upon fees charged for similar agreements, the face values of outstanding standby letters of credit approximated their fair values at March 31, 2010 and December 31, 2009.

9. Fair Value Measurements

     The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. In determining fair value, the Company uses various valuation techniques and prioritizes the use of observable inputs. The availability of observable inputs varies from instrument to instrument and depends on a variety of factors including the type of instrument, whether the instrument is actively traded, and other characteristics particular to the instrument. For many financial instruments, pricing inputs are readily observable in the market, the valuation methodology used is widely accepted by market participants, and the valuation does not require significant management judgment. For other financial instruments, pricing inputs are less observable in the marketplace and may require management judgment.

     As of March 31, 2010, the Company held certain assets and liabilities that are required to be measured at fair value on a recurring basis. These included the Company’s derivative instruments related to crude oil, gasoline, diesel, jet fuel and interest rates, and investments associated with the Company’s non-contributory defined benefit plan (“Pension Plan”).

     The Company’s derivative instruments consist of over-the-counter (“OTC”) contracts, which are not traded on a public exchange. Substantially all of the Company’s derivative instruments are with counterparties that have long-term credit ratings of at least A2 and A by Moody’s and S&P, respectively. To estimate the fair values of the Company’s derivative instruments, the entity uses the market approach. Under this approach, the fair values of the Company’s derivative instruments for crude oil, gasoline, diesel, jet fuel, natural gas and interest rates are determined primarily based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. Generally, the Company obtains this data through surveying its counterparties and performing various analytical tests to validate the data. The Company determines the fair value of its crude oil option contracts utilizing a standard option pricing model based on inputs that can be derived from information available in publicly quoted markets, or are quoted by counterparties to these contracts. In situations where the Company obtains inputs via quotes from its counterparties, it verifies the reasonableness of these quotes via similar quotes from another counterparty as of each date for which financial statements are prepared. The Company also includes an adjustment for non-performance risk in the recognized measure of fair value of all of the Company’s derivative instruments. The adjustment reflects the full credit default spread (“CDS”) applied to a net exposure by counterparty. When the Company is in a net asset position, it uses its counterparty’s CDS, or a peer group’s estimated CDS when a CDS for the counterparty is not available. The Company uses its own peer group’s estimated CDS when it is in a net liability position. As a result of applying the applicable CDS, at March 31, 2010, the Company’s asset was increased by approximately $80 and its liability was reduced by $281. Based on the use of various unobservable inputs, principally non-performance risk and unobservable inputs in forward years for gasoline, jet fuel and diesel, the Company has categorized these derivative instruments as Level 3. The Company has consistently applied these valuation techniques in all periods presented and believes it has obtained the most accurate information available for the types of derivative instruments it holds.

     The Company’s investments associated with its Pension Plan consist of mutual funds that are publicly traded and for which market prices are readily available, thus these investments are categorized as Level 1.

The Company’s assets measured at fair value at March 31, 2010 were as follows:

		Fair Value Measurements
		Level 1				Level 2				Level 3				Total
Assets:
Cash and cash equivalents		$	37			$	—			$	—			$	37
Crude oil swaps			—				—				139,295				139,295
Gasoline swaps			—				—				—				—
Diesel swaps			—				—				—				—
Jet fuel swaps			—				—				—				—
Natural gas swaps			—				—				—				—
Crude oil options			—				—				825				825
Jet fuel options			—				—				249				249
Pension Plan investments			14,134				—				—				14,134
Total assets at fair value		$	14,171			$	—			$	140,369			$	154,540
Liabilities:
Crude oil swaps		$	—			$	—			$	—			$	—
Gasoline swaps			—				—				(25,496	)			(25,496	)
Diesel swaps			—				—				(70,144	)			(70,144	)
Jet fuel swaps			—				—				(34,579	)			(34,579	)
Natural gas swaps			—				—				—				—
Crude oil options			—				—				—				—
Jet fuel options			—				—				—				—
Interest rate swaps			—				—				(4,670	)			(4,670	)
Total liabilities at fair value		$	—			$	—			$	(134,889	)		$	(134,889	)

     The table below sets forth a summary of net changes in fair value of the Company’s Level 3 financial assets and liabilities for the three months ended March 31, 2010:

		Derivative
		Instruments, Net
Fair value at January 1, 2010		$	26,138
Realized losses			561
Unrealized losses			(7,758	)
Comprehensive loss			(6,099	)
Purchases, issuances and settlements			(7,362	)
Transfers in (out) of Level 3			—
Fair value at March 31, 2010		$	5,480
Total gains (losses) included in net income (loss) attributable to changes in unrealized gains (losses) relating to financial assets and liabilities held as of March 31, 2010		$	(7,758	)

     All settlements from derivative instruments that are deemed “effective” and were designated as cash flow hedges are included in sales for gasoline, diesel and jet fuel derivatives, cost of sales for crude oil and natural gas derivatives, and interest expense for interest rate derivatives in the unaudited condensed consolidated financial statements of operations in the period that the hedged cash flow occurs. Any “ineffectiveness” associated with these derivative instruments are recorded in earnings immediately in unrealized gain (loss) on derivative instruments in the unaudited condensed consolidated statements of operations. All settlements from derivative instruments not designated as cash flow hedges are recorded in realized gain (loss) on derivative instruments in the unaudited condensed consolidated statements of operations. See Note 7 for further information on derivative instruments.

10. Comprehensive Income (Loss)

     Comprehensive income (loss) for the Company includes the change in fair value of cash flow hedges and the minimum pension liability adjustment that have not been recognized in net income (loss). Comprehensive income (loss) for the three months ended March 31, 2010 and 2009 was as follows:

		Three Months Ended
		March 31,
		2010				2009
Net income (loss)		$	(13,067	)		$	75,638
Cash flow hedge gain reclassified to net income (loss)			(5,730	)			(1,311	)
Change in fair value of cash flow hedges			(6,099	)			(20,072	)
Defined benefit pension and retiree health benefit plans			405				94
Total comprehensive income (loss)		$	(24,491	)		$	54,349

11. Unit-Based Compensation and Distributions

     A summary of the Company’s nonvested phantom units as of March 31, 2010 and the changes during the three months ended March 31, 2010 is presented below:

						Weighted Average
						Grant Date
		Number of Units				Fair Value
Nonvested at December 31, 2009			57,493			$	12.42
Granted			55,325				18.85
Vested			(50,442	)			17.60
Forfeited			—				—
Nonvested at March 31, 2010			62,376			$	13.93

     For the three months ended March 31, 2010 and 2009, compensation expense of $147 and $55, respectively, was recognized in the unaudited condensed consolidated statements of operations related to vested phantom unit grants. As of March 31, 2010 and 2009, there was a total of $869 and $638 of unrecognized compensation costs related to nonvested phantom unit grants. These costs are expected to be recognized over a weighted-average period of approximately two years.

     The Company’s distribution policy is as defined in its partnership agreement. For the three months ended March 31, 2010 and 2009, the Company made distributions of $16,397 and $14,818, respectively, to its partners.

12. Employee Benefit Plans

     The components of net periodic pension and other post retirement benefits cost for the three months ended March 31, 2010 and 2009 were as follows:

		For the Three Months Ended
		March 31,
						2010				2009
						Other Post								Other Post
		Pension				Retirement				Pension				Retirement
		Benefits				Employee Benefits				Benefits				Employee Benefits
Service cost		$	21			$	—			$	63			$	2
Interest cost			334				6				332				11
Expected return on assets			(259	)			—				(187	)			—
Amortization of net (gain) loss			69				(1	)			95				(1	)
Prior service cost			—				(9	)			—				—
Net periodic benefit cost		$	165			$	(4	)		$	303			$	12