Press Release

Print Page | Close Window

05/24/06
Delek US Holdings Reports First-Quarter Earnings of $0.33 Per Diluted Share

FRANKLIN, Tenn., May 24 /PRNewswire-FirstCall/ -- Delek US Holdings, Inc. (NYSE: DK) today announced financial results for the first quarter ended March 31, 2006. Net sales for the quarter increased 188% to $659.8 million compared with $229.1 million for the first quarter of 2005. Net income increased to $12.9 million, or $0.33 per diluted share, from $165,000, or $0.00 per diluted share, for the first quarter last year.

Commenting on the announcement, Uzi Yemin, President and Chief Executive Officer of Delek US, said, "We are pleased with Delek's operating and financial performance for the first quarter of 2006. Our strong profitable growth primarily resulted from the acquisition of our refining operations in Tyler, Texas, on April 29, 2005. In addition, we have continued to expand our retail segment, through both the addition of new stores and increased same- store sales. With the completion of our initial public offering in May 2006, which provided net proceeds to Delek of approximately $172.0 million, we believe we are well positioned to implement our growth strategies for each of our businesses."

Refining Segment: Net sales were $362.0 million for the refining segment for the first quarter of 2006, reflecting sales volume of 4.9 million barrels of refined petroleum products at an average sales price of $73.36. With a refining operating margin of $8.83 per barrel for the quarter and direct operating expenses of $3.61 per barrel, our refining business produced a segment contribution margin of $25.4 million for the first quarter of 2006.

Delek achieved a substantial increase in throughput (average barrels processed per day), to 59,624 barrels per day ("bpd") for the first quarter of 2006 from 53,150 bpd for the last eight months of 2005. This improvement was driven by efficiencies gained in the major turnaround Delek undertook in December 2005 for all process units not involved in the turnaround completed early in 2005 by the refinery's prior owner. Delek does not expect that a major turnaround will be necessary prior to 2010.

Delek's first-quarter refining operating margin of $8.83 per barrel remained above the U.S. Gulf Coast 5-3-2 crack spread of $8.13 per barrel. Since acquisition, Delek has operated at a premium to the crack spread because of the strength of Delek's positioning in the Tyler-area market, and the continued high demand for light products, which contribute over 90% of our product mix.

Retail Segment: Net sales increased 30.0% for the first quarter of 2006, to $297.6 million from $229.0 million for the first quarter of 2005. Contributing to this growth, the average retail fuel price per gallon rose 22.0% to $2.31 for the quarter and retail gallons sold increased 12.7% to 90.2 million. The majority of the increase in retail gallons resulted from the acquisition of 21 convenience stores in December 2005, as well as an increase of 1.7% in comparable-store gallons sold. In addition, merchandise sales grew 10.2% for the first quarter of 2006 to $72.8 million, due both to the growth in stores in operation to 349 at the end of the quarter from 329 at the same time in 2005 and to a 5.2% increase in same-store merchandise sales. Segment contribution margin for the retail business was $10.4 million for the first quarter of 2006, up 7.5% from $9.7 million for the first quarter of 2005.

Delek's first-quarter growth in same-store merchandise sales reflects an improving economic environment, as well as its focus on marketing and sales of food, coffee and fountain drinks, especially the introduction of its proprietary GrilleMarx(TM) branded food offerings. The sales growth in these higher margin items, combined with the double-digit growth in total gallons sold, enabled Delek to offset the impact of higher fuel prices and increased credit expense.

During the first quarter, Delek completed the re-imaging of the majority of the 21 BP stores acquired in December and launched its next-generation store concept, Mapco Mart, which is designed to add quality fresh food offerings in a modern, upscale facility. Delek expects this new concept to produce higher margins and expand its potential customer base, by attracting core convenience store shoppers, as well as customers seeking freshly prepared meals. Delek opened two of these new concept stores via its "raze and rebuild" strategy during the first quarter and has already opened two additional stores thus far in the second quarter.

Yemin added, "On a longer-term basis, we are focused on significant growth opportunities for both our refining and retail businesses. We have a demonstrated record of successfully completing and integrating acquisitions, and, with our strong financial position, particularly after completing the IPO, we expect to leverage our expertise in an industry environment that has produced attractive acquisition opportunities for both refining and retail assets.

Our strategies are also designed to produce profitable organic growth. In refining, both the industry dynamics and our strong Tyler-area market position are compelling, and we are engaged in an array of initiatives to modernize and improve the profitability of our refining operations through operational changes and capital investments expected to improve efficiency, processing capacity and utilization. In retail, we are continuously focused on improving our store economics through branding initiatives and targeted merchandising strategies, renewal of our physical retail assets and investment in our proprietary technology infrastructure. In a highly fragmented industry, we expect these investments and our scale advantages to enable us to increase our market share within our existing geographic footprint and by expanding to contiguous states."

Conference Call: Delek 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 9186466, and the replay will also be available on the Company's Web site for 60 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; 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'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 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 company- operated retail fuel and convenience stores, operated under the MAPCO Express(R), MAPCO Mart, East Coast(R) and Discount Food Mart(TM) brand names.



                   DELEK US HOLDINGS, INC. AND SUBSIDIARIES
                      (A Subsidiary of Delek Group Ltd.)
              Condensed Consolidated Balance Sheets (Unaudited)
               (In thousands, except share and per share data)

                                                    March 31,   December 31,
                                                        2006           2005
    Assets
    Current assets:
      Cash and cash equivalents                      $69,487        $62,568
      Short-term investments                           2,000         26,586
      Accounts receivable                             60,847         52,968
      Inventory                                      118,995        101,294
      Other current assets                             9,107          8,405
        Total current assets                         260,436        251,821
    Property, plant and equipment:
      Property, plant and equipment                  329,126        317,118
      Less: accumulated depreciation                 (50,897)       (46,523)
        Property, plant and equipment, net           278,229        270,595

    Goodwill                                          63,711         63,711
    Note receivable from a related party                   -            200
    Other noncurrent assets                           19,408         19,833
        Total assets                                $621,784       $606,160

    Liabilities and Shareholder's Equity
    Current liabilities:
      Accounts payable                               $35,247        $35,392
      Account payable to a related party                 125              -
      Fuel payable                                   100,234        109,154
      Current portion of long-term debt               17,243          1,696
      Interest payable                                 2,470          1,870
      Related party payable                            3,251          2,870
      Other taxes payable                             13,300         11,760
      Accrued employee costs                           3,751          4,649
      Income taxes payable                             5,015            202
      Accrued expenses and other current liabilities  10,301          8,221
        Total current liabilities                    190,937        175,814
    Noncurrent liabilities:
      Long-term debt, net of current portion         208,588        224,559
      Notes payable to related parties                42,500         42,500
      Accrued lease liability                          3,903          3,754
      Deferred revenue, net of current portion         1,320          1,434
      Asset retirement obligations                     3,545          3,393
      Deferred tax liabilities                        30,970         27,530
      Other noncurrent liabilities                     7,282          7,306
        Total noncurrent liabilities                 298,108        310,476

    Shareholder's 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,
       39,389,869 shares issued and outstanding          394            394
      Additional paid-in capital                      40,727         40,727
      Retained earnings                               91,618         78,749
        Total shareholder's equity                   132,739        119,870
        Total liabilities and
         shareholder's equity                       $621,784       $606,160



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

                                                   For the Three Months Ended
                                                             March 31,
                                                        2006           2005
    Net sales                                       $659,759       $229,087

    Operating costs and expenses:
      Cost of goods sold                             583,313        198,446
      Operating expenses                              40,686         20,991
      General and administrative expenses              6,962          3,984
      Depreciation and amortization                    4,372          3,453
      Losses on forward contract activities               54              -
                                                     635,387        226,874

    Operating income                                  24,372          2,213

    Interest expense                                   5,891          2,243
    Interest income                                     (893)           (12)
    Interest expense to related parties                  680            423
    Gain on interest rate derivative instruments        (931)        (1,122)
    Guarantee fees to related parties                    148              -
                                                       4,895          1,532
    Income before income tax expense and cumulative
     effect of change in accounting policy            19,477            681

    Income tax expense                                 6,608            249

    Income before cumulative effect of change in
     accounting policy                                12,869            432

    Cumulative effect of change in
     accounting policy, net                                -            267

    Net income                                       $12,869           $165

    Basic and diluted earnings per share:
      Income before cumulative effect of change in
       accounting policy                               $0.33          $0.01
      Cumulative effect of change in accounting policy     -           0.01

      Net income                                       $0.33          $0.00

    Basic and diluted weighted average common
     shares outstanding                           39,389,869     39,389,869



                   DELEK US HOLDINGS, INC. AND SUBSIDIARIES
                      (A Subsidiary of Delek Group Ltd.)
         Condensed Consolidated Statements of Cash Flows (Unaudited)
                                (In thousands)

                                                   For the Three Months Ended
                                                             March 31,
                                                        2006           2005
    Cash flows from operating activities:
    Net income                                       $12,869           $165
    Adjustments to reconcile net income to net
     cash (used in) provided by operating activities:
        Depreciation and amortization                  5,307          3,740
        Accretion of asset retirement obligations        104             28
        Deferred income taxes                          1,149            200
        Gain on interest rate derivative instruments    (931)        (1,122)
        Changes in assets and liabilities:
          Accounts receivable                         (7,879)        (1,831)
          Inventory                                  (17,701)        (1,833)
          Other current assets                        (1,412)           (11)
          Other noncurrent assets                        503         (1,952)
          Accounts payable                              (145)         2,414
          Related party payable                          125              -
          Fuel payable                                (8,920)         5,199
          Interest payable                               600             13
          Interest payable to related parties            381            423
          Income taxes payable                         4,813             49
          Other taxes payable                          1,540           (806)
          Accrued employee costs                        (898)          (284)
          Accrued expenses and other current
           liabilities                                 2,615          1,778
          Asset retirement obligations                  (262)           267
          Other noncurrent liabilities                    11            457
            Net cash (used in) provided by
             operating activities                     (8,131)         6,894

    Cash flows from investing activities:
    Purchases of short-term investments             (126,992)             -
    Sales of short-term investments                  151,578              -
    Return of escrow deposit made with
     Escrow Agent                                      3,000              -
    Purchase price adjustments                          (145)           (56)
    Purchases of property, plant and equipment       (12,088)        (1,815)
            Net cash provided by (used in)
             investing activities                     15,353         (1,871)

    Cash flows from financing activities:
    Payment on Senior Secured Credit Facility           (412)             -
    Payments on Credit Agreement -
     Term A and Term B Loans                               -         (2,900)
    Payments on SunTrust Term Loan                         -           (400)
    Net payments on SunTrust Revolver                      -         (1,400)
    Payments on capital lease obligations                  -           (106)
    Payment on other notes payable                       (12)           (18)
    Repayment of note receivable from a related party    200              -
    Deferred financing costs paid                        (79)             -
            Net cash used in financing activities       (303)        (4,824)
    Net increase in cash and cash equivalents          6,919            199

    Cash and cash equivalents at beginning
     of period                                        62,568         22,106
    Cash and cash equivalents at end of period      $ 69,487       $ 22,305

    Supplemental disclosures of cash flow information:
    Cash paid during the year for:
      Interest                                        $5,738         $1,867
      Income taxes                                      $646             $-
    Assets acquired via the issuance of notes payable     $-           $ 40


                                                  Three Months Ended March 31,
                                                        2006           2005
    REFINING SEGMENT:
    Days operated in period                               90
    Total sales volume (average barrels per day)      54,267

    Products manufactured (average barrels per day):
      Gasoline                                        29,424
      Diesel/Jet                                      23,838
      Petrochemicals, LPG, NGLs                        2,116
      Other                                            3,341
      Total production                                58,719

    Throughput (average barrels per day):
      Crude oil                                       58,008
      Other feedstocks                                 1,615
      Total throughput                                59,624

    Per barrel of sales:
      Refining operating margin (1)                    $8.83
      Direct operating expenses                        $3.61

    Pricing statistics (average for the period
     presented):
      WTI - Cushing crude oil (per barrel)            $63.34
      US Gulf Coast 5-3-2 crack spread (per barrel)    $8.13
      US Gulf Coast Unleaded Gasoline (per gallon)     $1.70
      Low sulfur diesel (per gallon)                   $1.81
      Natural gas - (per MMBTU)                        $7.73

    RETAIL SEGMENT:
    Number of stores (end of period)                     349            329
    Average number of stores                             349            330
    Retail fuel sales (thousands of gallons)          90,207         80,072
    Average retail gallons per average number
     of stores (in thousands)                            258            243
    Retail fuel margin ($ per gallon)                 $0.119         $0.126
    Merchandise sales                                $72,788        $66,024
    Merchandise margin %                               30.5%          30.6%
    Credit expense (% of gross margin) (2)              7.8%           5.5%
    Merchandise and cash over/short
     (% of net sales) (3)                                .3%            .4%
    Operating expense/merchandise sales
     plus total gallons (4)                            13.4%          13.7%

    (1)  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.

    (2)  Consists of third party credit, debit and fuel card processing fees
         as a percentage of gross margin.

    (3)  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.

    (4)  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.

SOURCE: Delek US Holdings, Inc.

CONTACT: U.S. Media, Paula Lovell, Lovell Communications Inc., +1-615-297-7766, +1-615-972-2964 - Cell; Israel Media, Lior Chorev, Arad Communications, +011-972-3-644-0404; Investor Relations, Scott Brittain or Kristina Korte, both of Corporate Communications Inc., +1-615-254-3376, all for Delek US Holdings, Inc.