Investor Relations

Press Release

<< Back
Printer-friendly version
Delek US Holdings Reports Second-Quarter Earnings
- Record Quarterly Net Income of $42.2 Million - Earnings per Share of $0.88

FRANKLIN, Tenn., Aug 09, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- Delek US Holdings, Inc. (NYSE: DK) today announced results for the second quarter and six months ended June 30, 2006. Net income rose to a record $42.2 million, or $0.88 per diluted share, for the second quarter 2006 from $6.9 million, or $0.17 per diluted share, for the second quarter 2005. Net sales for the quarter increased 78% to $819.6 million compared with $459.7 million for the second quarter of 2005.

Uzi Yemin, President and Chief Executive Officer of Delek US, remarked, "We achieved outstanding financial and operating results for the second quarter of 2006. We were especially pleased by the strong operational execution in both our businesses. In refining, this performance included a record for total sales volume, which reached 57,036 average barrels per day, an increase of 17.7% from the second quarter of 2005 and a 5.1% increase from the first quarter of 2006. The strength of our retail operations can be measured in the 4.0% growth in same-store merchandise sales, an improved merchandise margin and the expansion of our retail fuel margin to $0.161 per gallon, despite the significant rise in retail fuel prices compared with the second quarter of 2005."

Refining Segment: The refining segment contribution margin increased to $67.6 million for the second quarter of 2006 from $11.8 million for the second quarter of 2005. A primary contributor to this growth was the 115.6% increase in the refinery operating gross margin to $16.34 per barrel for the second quarter of 2006, which was 106.2% of the U.S. Gulf Coast 5-3-2 crack spread, from $7.58 per barrel for the second quarter of 2005, which was 88.4% of the crack spread. In addition, direct operating expenses for the second quarter of 2006 were $3.31 per barrel, down from $3.71 for the second quarter of 2005. This decline reflected improved operating efficiencies associated with a 9.7% increase in total throughput for the latest quarter to 57,342 average barrels per day, as well as a decrease in the cost of natural gas used in the refining process.

The refining segment produced net sales of $454.1 million by selling 5.2 million barrels of refined product compared with $190.1 million on the sale of 3.1 million barrels for the second quarter of 2005. This growth reflected the 17.7% increase in total sales volume to 57,036 barrels per day, as well as a full quarter's operating activity in 2006 as compared to a partial quarter's activity in 2005 due to the April acquisition of the refinery.

Retail Segment: The retail segment contribution margin for the second quarter of 2006 was $15.2 million. The contribution margin reflected the 9.1% increase in the segment's merchandise sales for the second quarter of 2006, to $82.4 million from $75.5 for the second quarter of 2005, and included a 4.0% increase in same-store sales for the quarter. In addition, the number of convenience stores in operation increased to 349 at the quarter end from 329 at the same time in 2005. The merchandise margin increased to 30.8% for the second quarter of 2006 from 30.2% and 30.5% on a comparable-quarter and sequential-quarter basis. This improvement was primarily the result of increased sales of higher margin items, such as food, coffee and fountain drinks, as well as the Company's proprietary GrilleMarx(TM) branded food offerings that were introduced in the first quarter of 2006.

The retail segment's total fuel sales for the second quarter of 2006 increased 45.9% to $283.2 million from $194.1 million for the second quarter of 2005, primarily because of the 31.0% increase in the average retail price per gallon of fuel to $2.75 for the latest quarter from $2.10 for the second quarter last year. The increase in the number of convenience stores in operation accounted for substantially all of the comparable-quarter growth in retail fuel sales, to 95.2 million gallons from 86.0 million, as the rapid increase in fuel costs held same-store gallons sold fairly constant compared to the 2005 second quarter. The retail fuel margin rose to $0.161 per gallon for the second quarter of 2006 from $0.155 per gallon for the second quarter of 2005.

In spite of increased merchandise and retail fuel margins for the second quarter, the retail segment's contribution margin reflected increased credit card expenses, which rose $1.3 million, or 62.8%, due primarily to higher fuel prices as well as increases in interchange fees charged by several credit card providers. Furthermore, the retail segment increased self-insurance reserves for workers' compensation and general liability claims by approximately $1.0 million for the second quarter of 2006, as a result of certain large claims incurred in first six months of 2006.

Yemin added, "In addition to our strong operating performance for the second quarter, we also continued to build the foundation for future growth by signing two definitive purchase agreements during the quarter, which were consummated in the third quarter. Through one of the transactions, we purchased terminal operations in new markets in west Texas, expanding our wholesale refined products distribution business, and we obtained equipment that we expect will enhance our refinery productivity in Tyler. Through the other transaction, we added 43 retail fuel and convenience stores in northwest Georgia and southeast Tennessee, which complement our leading market positions in middle Tennessee and northern Alabama. During the second quarter, we also opened two additional MAPCO Marts, our next-generation convenience store concept, and re-opened one retro-fitted convenience store.

"As illustrated by our second-quarter performance, we are committed to expanding both of the Company's businesses through organic growth and acquisitions. In our refining business, we will continue to leverage the attractive niche market in which we operate the Tyler facility through ongoing investments to upgrade the capacity, efficiency and complexity of the operation. In our retail fuel and convenience store business, we are fully engaged in initiatives to expand same-store sales and achieve enhanced profitability within our existing store base. We also remain confident of the ongoing potential for attractive acquisitions within our existing geographic foot-print or in contiguous markets. As a result, we are optimistic about Delek US's prospects for long-term profitable growth."

Conference Call: Delek US will hold a conference call to discuss this release today at 10:30 a.m. Eastern time. Investors will have the opportunity to listen to the conference call live over the Internet by going to http://www.delekus.com and clicking Investor Relations, or by going to http://www.earnings.com, at least 15 minutes early to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a telephonic replay will be available for one week at 719/457-0820, code 3432013, and the replay will also be available on the Company's Web site for 90 days.

Safe Harbor Provisions Regarding Forward-Looking Statements: This press release contains forward-looking statements that are based upon current expectations and involve a number of risks and uncertainties. Statements concerning our current estimates, expectations and projections about our future results, performance, prospects and opportunities and other statements, concerns, or matters that are not historical facts are "forward-looking statements," as that term is defined under the federal securities laws.

Investors are hereby cautioned that the following important factors, among others, may affect these forward-looking statements. These factors include but are not limited to: our competitive position and the effects of competition; the projected growth of the industry in which we operate; changes in the scope, costs, and/or timing of capital projects; management's ability to execute its strategy of growth through acquisitions and transactional risks in acquisitions; general economic and business conditions, particularly levels of spending relating to travel and tourism or conditions affecting the southeastern United States; potential conflicts of interest between Delek US's major stockholder and other stockholders; and other risks contained in our filings with the Securities and Exchange Commission.

Forward-looking statements should not be read as a guarantee of future performance or results and will not be accurate indications of the times at, or by which such performance or results will be achieved. Forward-looking information is based on information available at the time and/or management's good faith belief with respect to future events, and is subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements. Delek US undertakes no obligation to update or revise any such forward-looking statements.

About the Company: Delek US Holdings, Inc. is a diversified energy business focused on petroleum refining and supply and on retail marketing. The Company's business consists of two main operating segments: refining and retail. The refining segment operates a high conversion, independent refinery, with a design crude distillation capacity of 60,000 barrels per day, in Tyler, Texas. The retail segment markets gasoline, diesel and other refined petroleum products and convenience merchandise through a network of 389 company-operated retail fuel and convenience stores, operated under the MAPCO Express(R), MAPCO Mart,(TM) East Coast(R) and Discount Food Mart(TM) brand names.


                   DELEK US HOLDINGS, INC. AND SUBSIDIARIES
              Condensed Consolidated Balance Sheets (Unaudited)
               (In thousands, except share and per share data)

                                                    June 30,     December 31,
                                                      2006           2005
    Assets
    Current assets:
     Cash and cash equivalents                       $95,035        $62,568
     Short-term investments                          108,195         26,586
     Accounts receivable                              87,584         52,968
     Inventory                                       114,875        101,294
     Other current assets                              7,032          8,405
      Total current assets                           412,721        251,821
    Property, plant and equipment:
     Property, plant and equipment                   360,562        317,118
     Less: accumulated depreciation                  (55,602)       (46,523)
      Total property, plant and equipment, net       304,960        270,595

    Goodwill                                          63,711         63,711
    Note receivable from a related party                   -            200
    Other noncurrent assets                           22,038         19,833
     Total assets                                   $803,430       $606,160

    Liabilities and Shareholders' Equity
    Current liabilities:
     Accounts payable                                $29,918        $35,392
     Account payable to a related party                  122              -
     Fuel payable                                    128,950        109,154
     Current portion of long-term debt                 1,530          1,696
     Interest payable                                  1,520          1,870
     Related party interest payable                        -          2,870
     Other taxes payable                              12,468         11,760
     Accrued employee costs                            4,520          4,649
     Income taxes payable                             14,430            202
     Accrued expenses and other current liabilities    8,169          8,221
      Total current liabilities                      201,627        175,814
    Noncurrent liabilities:
     Long-term debt, net of current portion          211,361        224,559
     Notes payable to related parties                      -         42,500
     Accrued lease liability                           4,072          3,754
     Deferred revenue, net of current portion          1,242          1,434
     Asset retirement obligations                      3,598          3,393
     Deferred tax liabilities                         30,611         27,530
     Other noncurrent liabilities                      7,206          7,306
      Total noncurrent liabilities                   258,090        310,476

    Shareholders' equity:
     Preferred stock, $0.01 par value,
      10,000,000 shares authorized, 0 shares
      issued and outstanding                               -              -
     Common stock, $0.01 par value,
      110,000,000 shares authorized, 50,889,869
      shares and 39,389,869 shares issued
      and outstanding, respectively                      509            394
     Additional paid-in capital                      209,392         40,727
     Retained earnings                               133,812         78,749
      Total shareholders' equity                     343,713        119,870
      Total liabilities and shareholders' equity    $803,430       $606,160


                   DELEK US HOLDINGS, INC. AND SUBSIDIARIES
         Condensed Consolidated Statements of Operations (Unaudited)
               (In thousands, except share and per share data)

                        For the Three Months Ended   For the Six Months Ended
                                 June 30,                   June 30,
                             2006         2005         2006          2005
    Net sales             $819,590     $459,707    $1,479,349     $688,794

    Operating costs and expenses:
     Cost of goods sold    693,346      399,865     1,276,659      598,311
     Operating expenses     43,399       32,307        84,085       53,298
     General and
      administrative
      expenses              10,177        5,648        17,139        9,632
     Depreciation and
      amortization           4,710        3,714         9,082        7,167
     Loss (gain)on
      disposal of assets         1       (2,182)            1       (2,182)
     Losses on forward
      contract activities        -            -            54            -
                           751,633      439,352     1,387,020      666,226

    Operating income        67,957       20,355        92,329       22,568

    Interest expense         5,748        4,084        11,639        6,327
    Interest income         (1,652)         (13)       (2,545)         (25)
    Deferred finance cost
     written off in
     connection with
     refinance                   -        3,466             -        3,466
    Interest expense to
     related parties           339        1,012         1,019        1,435
    (Gain) loss on
     interest rate
     derivative
     instruments              (593)       1,123        (1,524)           1
    Guarantee fees to
     related parties            62          125           210          125
                             3,904        9,797         8,799       11,329

    Income before income
     tax expense and
     cumulative effect of
     change in accounting
     policy                 64,053       10,558        83,530       11,239

    Income tax expense      21,859        3,695        28,467        3,944

    Income before cumulative
     effect of change in
     accounting policy      42,194        6,863        55,063        7,295

    Cumulative effect of
     change in accounting
     policy, net                 -            -             -          267

    Net income             $42,194      $ 6,863       $55,063      $ 7,028

    Basic earnings per share:
     Income before
      cumulative effect
      of change in
      accounting policy      $0.90        $0.17         $1.27        $0.19
     Cumulative effect of
      change in accounting
      policy, net                -            -             -         0.01
     Net income              $0.90        $0.17         $1.27        $0.18

    Diluted earnings per share:
     Income before
      cumulative effect
      of change in
      accounting policy      $0.88        $0.17         $1.26        $0.19
     Cumulative effect of
      change in accounting
      policy, net                -            -             -         0.01
     Net income              $0.88        $0.17         $1.26        $0.18

    Basic and diluted
     weighted average common
     shares outstanding
      Basic             47,056,536   39,389,869    43,223,202   39,389,869
      Diluted           48,144,592   39,389,869    43,767,230   39,389,869


                   DELEK US HOLDINGS, INC. AND SUBSIDIARIES
         Condensed Consolidated Statements of Cash Flows (Unaudited)
                                (In thousands)

                                                  For the Six Months Ended
                                                          June 30,
                                                       2006       2005
    Cash flows from operating activities:
    Net income                                      $ 55,063     $7,028
    Adjustments to reconcile net income to
    net cash (used in) provided by
    operating activities:
     Depreciation and amortization                    10,884      8,135
     Accretion of asset retirement obligations           201         57
     Deferred income taxes                             1,577      3,965
     (Gain) loss on interest rate derivative
      instruments                                     (1,524)         1
     (Gain) loss on disposal of assets                     1     (2,182)
     Deferred financing costs written-off in
      connection with refinance                            -      3,466
     Unrealized (gain) loss on short-term investments   (100)         -
     Non-cash stock compensation expense                 880          -
     Changes in assets and liabilities, net of
     acquisitions:
      Accounts receivable                            (34,616)   (43,574)
      Inventory                                      (13,581)    (2,612)
      Prepaid inventory                                    -     22,107
      Other current assets                            (2,077)    (5,384)
      Other noncurrent assets                         (2,328)       831
      Accounts payable                                (5,474)    12,384
      Accounts payable to a related party                122          -
      Fuel payable                                    19,796     48,665
      Interest payable                                  (350)      (903)
      Related party interest payable                  (2,870)       (65)
      Other taxes payable                                708      4,333
      Accrued employee costs                            (749)       135
      Income taxes payable                            14,228        (21)
      Accrued expenses and other current liabilities   1,148      4,080
      Asset retirement obligations                      (412)       267
      Other noncurrent liabilities                       (19)       616
       Net cash provided by operating activities      40,508     61,329
    Cash flows from investing activities:
    Purchases of short-term investments             (285,097)         -
    Sales of short-term investments                  203,588          -
    Return of escrow deposit made with Escrow Agent    5,000          -
    Purchase price adjustments                          (210)       (91)
    Business combinations, net of cash acquired            -    (68,684)
    Purchases of property, plant and equipment       (43,353)    (4,105)
    Proceeds from the sale of convenience store
     assets                                                -      3,111
       Net cash used in investing activities        (120,072)   (69,769)
    Cash flows from financing activities:
    Proceeds from issuance of common stock           167,899          -
    Proceeds from issuance of Senior Secured
     Credit Facility - Term Loan                           -    165,000
    Payments on Senior Secured Credit Facility       (16,342)         -
    Net proceeds from Senior Secured Credit
     Facility - Revolver                               3,000     15,500
    Proceeds from IDB Note                            30,000          -
    Proceeds from Israel Discount Bank Note                -     30,000
    Repayment of Israel Discount Bank Note           (20,000)         -
    Proceeds from Bank Leumi Note                          -     20,000
    Repayment of Bank Leumi Note                     (10,000)         -
    Payments on Credit Agreement - Term A and
     Term B Loans                                          -   (131,900)
    Net payments on Credit Agreement - Revolver            -     (5,000)
    Payments on SunTrust Term Loan                         -    (33,700)
    Net payments on SunTrust Revolver                      -     (3,527)
    Proceeds from term notes to related parties                  35,000
    Repayments of notes payable to a related parties (42,500)    (3,500)
    Payments on capital lease obligations                  -       (616)
    Proceeds from (payments on) notes payable - other    (22)        12
    Repayment of note receivable from a related party    200          -
    Decrease in restricted cash                            -      3,717
    Deferred financing costs paid                       (204)   (13,636)
       Net cash provided by financing activities     112,031     77,350
    Net increase in cash and cash equivalents         32,467     68,910
    Cash and cash equivalents at beginning of period  62,568     22,106
    Cash and cash equivalents at end of period      $ 95,035    $91,016


                   DELEK US HOLDINGS, INC. AND SUBSIDIARIES
                              Segment Statistics
                                (In thousands)

                              Three Months Ended       Six Months Ended
                                   June 30,                 June 30,
                               2006        2005         2006         2005
    REFINING SEGMENT (1) :
    Days operated in period      91          63           181          63
    Total sales volume
     (average barrels
      per day)               57,036      48,463        55,659      48,463

    Products manufactured
    (average barrels per day):
     Gasoline                29,987      26,709        29,707      26,709
     Diesel/Jet              21,680      20,492        22,753      20,492
     Petrochemicals, LPG,
      NGLs                    2,575       2,415         2,347       2,415
     Other                    1,914         906         2,623         906
     Total production        56,156      50,522        57,430      50,522
    Throughput (average
    barrels per day):
     Crude oil               55,985      51,343        56,991      51,343
     Other feedstocks         1,357         913         1,485         913
     Total throughput        57,342      52,256        58,476      52,256

    Per barrel of sales:
     Refining operating
      margin (2)             $16.34       $7.58        $12.69       $7.58
     Direct operating
      expenses                $3.31       $3.71         $3.46       $3.71

    Pricing statistics
    (average for the
    period presented):
     WTI - Cushing crude
      oil (per barrel)       $70.67       53.01        $67.08       53.01
     US Gulf Coast 5-3-2
      crack spread
      (per barrel)           $15.38        8.57        $11.78        8.57
     US Gulf Coast Unleaded
      Gasoline (per gallon)   $2.11        1.45         $1.91        1.45
     Low sulfur diesel
      (per gallon)            $2.12        1.56         $2.00        1.56
     Natural gas -
      (per MMBTU)             $6.65        6.84         $7.10        6.84


                              Three Months Ended       Six Months Ended
                                   June 30,                 June 30,
                               2006        2005         2006         2005
    RETAIL SEGMENT
    (in thousands):
    Number of stores (end
     of period)                 349         329           349         329
    Average number of stores    349         330           349         330
    Retail fuel sales
     (thousands of gallons)  95,213      86,002       185,421     166,074
    Average retail gallons
     per average number of
     stores (in thousands)      273         261           531         503
    Retail fuel margin
     ($ per gallon)          $0.161      $0.155        $0.140      $0.141
    Merchandise sales       $82,412     $75,477      $155,200    $141,501
    Merchandise margin %       30.8%       30.2%         30.7%       30.4%
    Credit expense (% of
     gross margin) (3)          7.9%        5.6%          7.9%        5.6%
    Merchandise and cash
     over/short (% of net
     sales) (4)                 0.2%        0.3%          0.3%        0.3%
    Operating expense/
     merchandise sales plus
     total gallons (5)         14.0%       12.4%         13.8%       13.1%

    (1) 2005 comparative amounts reflect Refining operations from the date of
        acquisition, April 29, 2005, through the end of the three months or
        six months ended period.
    (2) Refining operating margin per barrel is calculated by dividing the
        margin between net sales and cost of crude oil, feedstocks and related
        transportation by the total barrels sold at our refinery. Industry-
        wide refining results are driven and measured by the margins between
        refined petroleum product prices and the prices for crude oil, which
        are referred to as crack spreads: the differential in price between a
        representative barrel of benchmark refined petroleum products, such as
        gasoline or heating oil, and a barrel of benchmark crude oil. The US
        Gulf Coast 5-3-2 crack spread represents the differential between
        Platt's quotations for 3/5 of a barrel of US Gulf Coast Pipeline 87
        Octane Conventional Gasoline and 2/5 of a barrel of US Gulf Coast
        Pipeline No. 2 Heating Oil (high sulfur diesel) on the one hand, and
        the first month futures price of 5/5 of a barrel of light sweet crude
        oil on the New York Mercantile Exchange, on the other hand. We compare
        our refining operating margin to these crack spreads to assess our
        operating performance relative to other participants in our industry.
    (3) Consists of third party credit, debit and fuel card processing fees as
        a percentage of gross margin.
    (4) Merchandise and cash over/short as a percentage of net sales is a
        measure of merchandise loss or theft, motor fuel theft and cash
        shortages as a percentage of net sales.
    (5) Operating expense for our retail segment divided by merchandise sales
        plus retail fuel gallons is a ratio we use to measure store operating
        performance - especially operating expense control. Retail fuel
        gallons are used rather than net retail fuel sales to eliminate the
        volatility of fuel prices in the calculation and improve
        comparability.


                   DELEK US HOLDINGS, INC. AND SUBSIDIARIES
                                 Segment Data
                                (In thousands)

The following is a summary of business segment operating performance as measured by contribution margin for the period indicated:

                        As of and for the Three Months Ended June 30, 2006
                                               Corporate,
                                               Other and
                         Refining    Retail   Eliminations   Consolidated

    Net sales            $454,056   $365,583      $(49)        $819,590
    Operating costs and
    expenses:
     Cost of goods sold   369,232    324,270      (156)         693,346
     Operating expenses    17,209     26,084       106           43,399
    Segment contribution
     margin                67,615     15,229         1           82,845
    General and
     administrative
     expenses                                                    10,177
    Depreciation and
     amortization                                                 4,710
    Loss on disposal
     of assets                                                        1
    Operating income                                            $67,957


                        As of and for the Three Months Ended June 30, 2005
                        (Excluding Refining which was for the period from
                               April 29, 2005 though June 30, 2005)
                                               Corporate,
                                               Other and
                         Refining    Retail   Eliminations   Consolidated
    Net sales            $190,095  $269,557       $55          $459,707
    Operating costs
    and expenses:
     Cost of goods sold   166,951   232,901        13           399,865
     Operating expenses    11,316    20,877       114            32,307
    Segment contribution
     margin               $11,828   $15,779      $(72)           27,535
    General and
     administrative
     expenses                                                     5,648
    Depreciation and
     amortization                                                 3,714
    (Gain) on disposal
     of assets                                                   (2,182)
    Operating income                                            $20,355


                         As of and for the Six Months Ended June 30, 2006
                                               Corporate,
                                               Other and
                         Refining    Retail   Eliminations   Consolidated
    Net sales            $816,102  $663,196       $51        $1,479,349
    Operating costs
    and expenses:
     Cost of goods sold   688,232   588,582      (155)        1,276,659
     Operating expenses    34,900    48,994       191            84,085
    Segment contribution
     margin               $92,970   $25,620       $15           118,605
    General and
     administrative
     expenses                                                    17,139
    Depreciation and
     amortization                                                 9,082
    Loss on disposal
     of assets                                                        1
    Losses on forward
     contract
     activities                                                      54
    Operating income                                            $92,329


                         As of and for the Six Months Ended June 30, 2005
                        (Excluding Refining which was for the period from
                                April 29, 2005 though June 30, 2005)
                                               Corporate,
                                               Other and
                         Refining    Retail   Eliminations   Consolidated
    Net sales            $190,095  $498,589       $110         $688,794
    Operating costs
    and expenses:
     Cost of goods sold   166,951   431,347         13          598,311
     Operating expenses    11,316    41,794        188           53,298
    Segment contribution
     margin               $11,828   $25,448       $(91)          37,185
    General and
     administrative
     expenses                                                     9,632
    Depreciation and
     amortization                                                 7,167
    (Gain) on disposal
     of assets                                                   (2,182)
    Operating income                                            $22,568

SOURCE Delek US Holdings, Inc.

Investor Relations: Assi Ginzburg, Vice President of Strategic Planning of Delek US Holdings, Inc., +1-615-224-1179; Scott Brittain or Kristina Korte, both of Corporate Communications Inc., +1-615-254-3376; U.S. Media Contact: Paula Lovell of Lovell Communications Inc., +1-615-297-7766, +1-615-972-2964 (Cell); or Israel Media Contact: Lior Chorev of Arad Communications, +972-3-644-0404