Calumet Specialty Products Partners, L.P. disclosed in its third-quarter 2017 Form 10-Q that, beginning in September 2017, Calumet’s implementation of its new enterprise resource planning (“ERP”) system had resulted in various “operating and reporting disruptions, including limitations on [Calumet’s] ability to ship product and bill customers, project [its] inventory requirements, manage [its] supply chain, maintain current and complete books and records, maintain an effective internal control environment and meet external reporting deadlines.” According to the SEC order on settled enforcement proceedings:
Three senior finance and accounting managers, including the company’s interim controller, then left the company.
Calumet was seven weeks late filing its financial results for the third quarter of 2017 and, in that filing, announced two material weaknesses in internal control over financial reporting (“ICFR”).
Calumet’s ERP implementation issues and material weaknesses in ICFR continued into March 2018. On March 1, Calumet’s independent auditor identified a potential additional material weakness in the company’s ICFR with respect to the financial statement closing process.
Calumet investors, concerned that Calumet would not be able to disclose its 2017 Financial Results on time, began pressuring the company to issue an earnings release consistent with Calumet’s practice in prior years.
Despite the departure of senior finance and accounting managers, the pervasive ERP implementation and internal control issues, and the seven-week delay in the filing of its third quarter 2017 Form 10-Q, Calumet issued an earnings release on March 8, 2018, announcing the company’s 2017 Financial Results. The earnings release was furnished as an exhibit to a Form 8-K, which was filed with the Commission.
According to the SEC, the earnings release materially misstated, among other things, the company’s earnings for 2017.
On March 19, Calumet filed a Form 8-K with the Commission disclosing that it expected its 2017 Financial Results to differ from what had been reported in the March 8 earnings release. Calumet’s shares declined over eight percent that day.
Calmut agreed to pay a $250,000 civil monetary penalty to the SEC for violating securities laws. Calmut did not admit of deny the SEC’s findings.