Press Release

Print Page | Close Window

03/08/07
Delek US Holdings, Inc. Reports Fourth-Quarter Earnings
    --  Delek US Reports Record Earnings for 2006

    --  Sales Exceed $3.2 Billion for 2006

    --  2006 Refinery Operating Margin Exceeds Industry Benchmark by
        10%

FRANKLIN, Tenn.--(BUSINESS WIRE)--March 8, 2007--Delek US Holdings, Inc. (NYSE: DK) today reported record net income for the full year 2006, of $93.0 million, or $1.94 per diluted share, compared to $64.1 million, or $1.63 per diluted share for full year 2005. For the fourth quarter net income was $11.6 million, or $0.22 per diluted share, compared to $24.6 million, or $0.62 per diluted share, for the fourth quarter 2005.

Uzi Yemin, President and Chief Executive Officer of Delek US, remarked, "We are very pleased and encouraged by the strong operating performance of all our businesses for the fourth quarter and full-year 2006. We expanded our businesses and achieved steady operating improvements during 2006 even while volatile energy prices impacted comparable-period results.

"We achieved these results as we completed and integrated two major acquisitions during the year, established a new wholesale marketing business segment and completed two significant capital projects at our Tyler refinery. These accomplishments, along with our recently announced agreement to expand our base of retail fuel and convenience stores by more than 27%, position us for growth in 2007."

Refining Segment: The refining segment contribution margin was $23.7 million for the fourth quarter of 2006 compared to $37.0 million for the fourth quarter of 2005. Net sales for the quarter were $349.6 million compared to $342.2 million for the same period last year. The refinery operating gross margin excluding inter-company marketing fees of $0.66 per barrel was $8.73 per barrel sold. Delek exceeded the U.S. Gulf Coast crack spread of $6.76 by a record 29%. This compares to $12.39 per barrel, which was 113% of the U.S. Gulf Coast 5-3-2 crack spread, for the same quarter of 2005. The average gross margin was enhanced by the Company's first full quarter of Ultra Low Sulfur Diesel production. During the quarter, Delek produced nearly 19,000 barrels per day of ULSD and sold approximately 1.7 million barrels.

During the quarter, total production increased 11.3% to 56,300 barrels per day compared to 50,600 barrels a day for the same quarter last year, while total throughput increased 12.9% to more than 58,800 barrels per day compared to 52,100 barrels per day compared to the fourth quarter last year, which was impacted by a refinery turnaround. Direct operating expenses for the quarter declined 16.1% to $3.43 per barrel sold.

Yemin added, "We are proceeding with three significant capital projects focused on optimizing our crude slate and improving the efficiency of our refining operations. We currently estimate a capital outlay of approximately $55 million, which is expected to generate a return on investment in excess of 50%. These projects are scheduled for completion in the second half of 2008 in conjunction with the completion of our gasoline hydrotreater unit."

Retail Segment: The retail segment reported a contribution margin for the fourth quarter of 2006 of $9.0 million compared to $14.4 million for the same quarter last year. The contribution margin for the quarter was adversely impacted by the unusually low retail fuel margin for the quarter of $0.088 per gallon compared to $0.167 per gallon for the fourth quarter last year. Net sales for the quarter were $330.6 million, an increase of 9.5% compared to the fourth quarter last year.

Merchandise sales for the quarter increased 16.7% to $84.6 million compared to $72.5 million for the fourth quarter of 2005. Same-store merchandise sales increased 1.1% for the quarter. The food and fountain service category same-store sales increased 7.7%. The merchandise margin was 30.8% for the fourth quarter of 2006, a 160 basis point increase from the same quarter last year.

The retail segment's total fuel sales for the fourth quarter of 2006 increased 7.0% to $229.6 million from $214.5 million for the same quarter of 2005, primarily due to a 13.7% increase in gallons sold to over 104.4 million. The increase in gallons sold was driven by the increase in the number of stores in operation from 349 at the end of 2005 to 394 at the end of 2006.

The Company expects the purchase of 107 Favorite Markets retail fuel and convenience stores from Calfee Company of Dalton, Inc. to close in the second quarter. These stores will solidify Delek's market presence in Chattanooga, TN and north Georgia, and will establish a new core market.

Marketing Segment: The marketing segment reported a contribution margin for the fourth quarter of 2006 of $6.2 million including $3.4 million of inter-company marketing service fees from the refinery segment. The marketing segment contributed $127.2 million to net sales for the quarter on total sales volume of approximately 18,000 barrels per day. This is the first full quarter of operations for the marketing segment. This segment's contribution continues to grow as the business is assimilated.

Conference Call: The Company 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 www.delekus.com and clicking Investor Relations, or by going to 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 (706) 645-9291, code 8428497, and the replay will also be available on Delek's website for 90 days.

About the Company: Delek US Holdings, Inc. is a diversified energy business focused on petroleum refining, marketing and supply, and retail marketing. 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 marketing and supply segment markets refined products through its terminals in Abilene, Texas and San Angelo, Texas as well as other third party terminals. The retail segment markets gasoline, diesel and other refined petroleum products and convenience merchandise through a network of 394 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.

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 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; risks and uncertainties with the respect to the quantities and costs of refined petroleum products supplied to our pipelines and/or held in our terminals; potential conflicts of interest between our majority 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.

                      Delek U.S. Holdings, Inc.
                     Consolidated Balance Sheets
            (In millions, except share and per share data)



                                                         December 31
                                                        --------------
                                                         2006   2005
                                                        --------------
  Assets
   Current assets:
     Cash and cash equivalents                          $101.6 $ 62.6
     Short-term investments                               73.2   26.6
     Accounts receivable                                  83.7   52.9
     Inventory                                           120.8  101.3
     Other current assets                                 31.3    8.4
                                                         ------ ------
      Total current assets                               410.6  251.8
                                                         ------ ------

  Property, plant and equipment:
   Property, plant and equipment                         493.1  317.1
   Less: accumulated depreciation                        (68.4) (46.5)
                                                         ------ ------
      Property, plant and equipment, net                 424.7  270.6
                                                         ------ ------

  Goodwill                                                80.7   63.7
  Other intangibles, net                                  12.2    0.6
  Note receivable from a related party                      --    0.2
  Other non-current assets                                21.2   19.3
                                                         ------ ------
      Total assets                                      $949.4 $606.2
                                                         ====== ======

  Liabilities and Shareholders' Equity
  Current Liabilities:
   Accounts payable                                     $175.5 $144.6
   Current portion of long-term debt and capital lease
    obligations                                            1.8    1.7
   Notes payable                                          19.2     --
   Accrued expenses and other current liabilities         34.4   29.5
                                                         ------ ------
      Total current liabilities                          230.9  175.8

  Non-Current liabilities:
   Long-term debt and capital lease obligations, net of
    current portion                                      265.6  224.6
   Notes payable to related parties, net of current
    portion                                                 --   42.5
   Environmental liabilities, net of current portion       9.3    7.3
   Asset retirement obligations                            3.3    3.4
   Deferred tax liabilities                               50.5   27.5
   Other non-current liabilities                           7.6    5.2
                                                         ------ ------
      Total non-current liabilities                      336.3  310.5

  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 and
      3,000 shares authorized, 51,139,869 and 100 shares
      issued and outstanding, respectively                 0.5    0.4
   Additional paid-in capital                            211.9   40.7
   Retained earnings                                     169.8   78.8
                                                         ------ ------
      Total shareholders' equity                         382.2  119.9
                                                         ------ ------
      Total liabilities and shareholders' equity        $949.4 $606.2
                                                         ====== ======
                      Delek U.S. Holdings, Inc.
                Consolidated Statements of Operations
           (In millions, except share and per share data)



                     Three-months Ended            Year Ended
                        December 31,              December 31,
                 -------------------------- -------------------------
                      2006         2005         2006         2005
                   -----------  -----------  -----------  -----------

Net sales        $      807.5  $     644.3  $   3,207.7  $   2,031.9
Operating costs
 and expenses:
 Cost of goods
  sold                  724.2        552.1      2,818.3      1,731.6
Operating expense        44.4         40.8        173.2        133.1
General and
 administrative
 expenses                11.0          6.5         38.2         23.5
Depreciation and
 amortization             8.0          4.6         22.8         16.1
Loss on disposal
 of assets                 --           --           --         (1.6)
  (Gains) losses
   on forward
   contract
   activities              --         (1.8)          --          9.1
                   -----------  -----------  -----------  -----------
                        787.6        602.2      3,052.5      1,911.8
                   -----------  -----------  -----------  -----------
  Operating
   Income                19.9         42.1        155.2        120.1
                   -----------  -----------  -----------  -----------

Interest expense          7.1          5.5         24.2         17.4
Interest income          (2.3)        (1.1)        (7.2)        (2.1)
Interest expense
 to related
 parties                   --          0.7          1.0          3.0
Other expenses
 (income), net            0.1         (0.2)         0.2          2.5
                   -----------  -----------  -----------  -----------
                          4.9          4.9         18.2         20.8
                 ------------- ------------ ------------ ------------
Income before
 income tax
 expense and
 cumulative
 effect of change
  in accounting
  policy                 15.0         37.2        137.0         99.3
Income tax
 expense                  3.4         12.6         44.0         34.9
                   -----------  -----------  -----------  -----------
Income before
 cumulative
 effect of change
 in accounting
  policy                 11.6         24.6         93.0         64.4

Cumulative effect
 of change in
 accounting
 policy                    --           --           --         (0.3)
                   -----------  -----------  -----------  -----------

Net income       $       11.6  $      24.6  $      93.0  $      64.1
                   ===========  ===========  ===========  ===========

Basic earnings
 per share:
 Income before
  cumulative
  effect of
  change in
  accounting
  policy         $       0.23  $      0.62  $      1.98  $      1.64
 Cumulative
  effect of
  change in
  accounting
  policy                   --           --           --        (0.01)
                   -----------  -----------  -----------  -----------
 Net income      $       0.23  $      0.62  $      1.98  $      1.63
                   ===========  ===========  ===========  ===========

Diluted earnings
 per share:
 Income before
  cumulative
  effect of
  change in
  accounting
  policy         $       0.22  $      0.62  $      1.94  $      1.64
  Cumulative
   effect of
   change in
   accounting
   policy                  --           --           --        (0.01)
                   -----------  -----------  -----------  -----------
  Net income     $       0.22  $      0.62  $      1.94  $      1.63
                   ===========  ===========  ===========  ===========

 Basic and
  diluted
  weighted
  average common
  shares
  outstanding
   Basic           50,973,202   39,389,869   47,077,369   39,389,869
                   ===========  ===========  ===========  ===========
   Diluted         52,113,480   39,389,869   47,915,962   39,389,869
                   ===========  ===========  ===========  ===========
                      Delek U.S. Holdings, Inc.
                Consolidated Statements of Cash Flows
                            (In millions)


                                                       Year Ended
                                                       December 31
                                                   -------------------
                                                      2006      2005
                                                    ---------  -------
  Cash flows from operating activities:
  Net Income                                       $    93.0  $  64.1
  Adjustments to reconcile net income to net cash
   provided by operating activities:
     Depreciation and amortization                      22.8     16.1
     Deferred income taxes                              21.5      8.9
     Stock compensation expense                          2.4       --
     Other non-cash operating activities                 3.8      2.8
     Changes in assets and liabilities, net of
      acquisitions                                     (33.6)    56.8
                                                    ---------  -------
         Net cash provided by operating activities     109.9    148.7
                                                    ---------  -------

  Cash flows from investing activities:
  Purchases of short-term investments               (1,546.9)   (26.6)
  Sales of short-term investments                    1,500.3       --
  Business combinations, net of cash acquired         (107.2)  (109.6)
  Purchase of property, plant and equipment            (97.5)   (29.2)
  Proceeds from sale of convenience store assets          --      3.1
                                                    ---------  -------
         Net cash used in investing activities        (251.3)  (162.3)
                                                    ---------  -------

  Cash flows from financing activities:
  Net proceeds on long-term revolver                    46.7     27.0
  Proceeds on debt                                      60.1     38.9
  Payments on debt and capital lease obligations       (89.6)    (0.6)
  Proceeds from issuance of common stock               167.5       --
  Dividends paid                                        (1.9)      --
  Other financing activities                            (2.3)   (11.2)
                                                    ---------  -------
         Net cash provided by financing activities     180.4     54.1
                                                    ---------  -------

Net increase in cash and cash equivalents:              39.0     40.5
Cash and cash equivalents at the beginning of the
 period                                                 62.6     22.1
                                                    ---------  -------
Cash and cash equivalents at the end of the period $   101.6  $  62.6
                                                    =========  =======


Supplemental disclosures of cash flow information:
  Cash paid during the year for:
   Interest                                        $    19.1  $  17.0
                                                    =========  =======
   Income taxes                                       $ 32.5   $ 25.8
                                                    =========  =======

  Capital lease obligations                        $     1.1  $    --
                                                    =========  =======

               DELEK US HOLDINGS, INC. AND SUBSIDIARIES
                          Segment Statistics

                                     Three Months       Year Ended
                                          Ended        December 31,
                                      December 31,
                                    ----------------------------------
                                     2006    2005     2006     2005
                                    ----------------------------------
REFINING SEGMENT (1) :
Days operated in period                  92      92      365      247
Total sales volume (average barrels
 per day)                            55,596  48,486   55,523   51,096

Products manufactured (average
 barrels per day):
  Gasoline                           30,722  26,188   30,163   26,927
  Diesel/Jet                         21,832  19,920   21,816   20,779
  Petrochemicals, LPG, NGLs           1,922   1,716    2,280    2,218
  Other                               1,814   2,733    2,324    1,684
  Total production                   56,290  50,557   56,583   51,608

Throughput (average barrels per
 day):
  Crude oil                          54,373  50,253   55,998   51,906
  Other feedstocks                    4,468   1,857    2,130    1,244
  Total throughput                   58,841  52,110   58,128   53,150

Per barrel of sales:
  Refining operating margin (2)       $8.07  $12.39   $11.00   $12.29
  Refining operating margin
   excluding inter-company
   marketing service fees(3)          $8.73  $12.39   $11.16   $12.29
  Direct operating expenses           $3.43   $4.09    $3.44    $3.63

Pricing statistics (average for the
 period presented):
  WTI -- Cushing crude oil (per
   barrel)                           $60.20  $60.01   $66.27   $59.39
  US Gulf Coast 5-3-2 crack spread
   (per barrel)                       $6.76  $10.92   $10.16   $12.19
  US Gulf Coast Unleaded Gasoline
   (per gallon)                       $1.55   $1.61    $1.83    $1.69
  Low sulfur diesel (per gallon)      $2.08   $1.90    $2.00    $1.72
  Natural gas -- (per MMBTU)          $6.18   $6.84    $6.89   $10.13

                                     Three Months       Year Ended
                                          Ended        December 31,
                                      December 31,
                                    ----------------------------------
                                     2006             2006
                                    --------        ---------
MARKETING SEGMENT(4):
Days operated in period                  92              153
Total sales volume (average barrels
 per day)                            17,906           17,758
Products sold (average barrels per
 day):
  Gasoline                            8,279            8,129
  Diesel/Jet                          9,554            9,568
  Other                                  73               61
  Total sales                        17,906           17,758
Direct Operating Expenses (per
 barrel of sales)                     $0.08            $0.12


                                     Three Months       Year Ended
                                          Ended        December 31,
                                      December 31,
                                    ----------------------------------
                                     2006    2005     2006     2005
                                    ----------------------------------
RETAIL SEGMENT:
Number of stores (end of period)        394     349      394      349
Average number of stores                393     332      369      330
Retail fuel sales (thousands of
 gallons)                           104,443  91,829  396,867  341,335
Average retail gallons per average
 number of stores (in thousands)        266     277    1,075    1,034
Retail fuel margin ($ per gallon)    $0.088  $0.167   $0.145   $0.165
Merchandise sales (in thousands)    $84,553 $72,542 $330,512 $292,382
Merchandise margin %                   30.8%   29.2%    30.6%    29.8%
Credit expense (% of gross margin)
 (5)                                    9.3%    6.7%     7.8%     5.9%
Merchandise and cash over/short (%
 of net sales) (6)                      0.3%    0.3%     0.3%     0.3%
Operating expense/merchandise sales
 plus total gallons (7)                13.5%   13.1%    13.5%    13.2%

(1) 2005 comparative amounts reflect Refining operations from the date of acquisition, April 29, 2005, through the end of the three months or full year 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) Excludes inter-company marketing services fees of $3.4 million for both the three months ended and year ended December 31, 2006, from Refining to Marketing segment.

(4) The statistics and results of operations reflect Marketing's operations from the date of acquisition on August 1, 2006 through December 31, 2006.

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

(6) 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.

(7) Operating expense for our retail segment divided by merchandise sales plus total gallons sold is a ratio we use to measure store operating performance --especially operating expense control. Total gallons are used rather than net fuel sales to eliminate the volatility of fuel prices in the calculation and improve comparability.

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

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

                    For the Three Months Ended December 31, 2006
               -------------------------------------------------------
                                              Corporate,
               Refining   Retail              Other and   Consolidated
                                   Marketing Eliminations
               --------- --------- --------- ------------ ------------
Net sales        $349.6    $330.6    $127.2          $.1       $807.5
Operating costs
 and expenses:
 Cost of goods
  sold            308.4     295.0     120.8           --        724.2
Operating
 expenses          17.5      26.6        .2           .1         44.4
               --------- --------- --------- ------------ ------------
Segment
 contribution
 margin            23.7       9.0       6.2           --         38.9
               --------- --------- --------- ------------
General and
 administrative
 expenses                                                        11.0
Depreciation
 and
 amortization                                                     8.0
                                                          ------------
Operating
 income                                                         $19.9
                                                          ============
                    For the Three Months Ended December 31, 2005
               -------------------------------------------------------
                                              Corporate,
               Refining   Retail              Other and   Consolidated
                                             Eliminations
               --------- ---------           ------------ ------------
Net sales        $342.2    $302.0                   $0.1       $644.3
Operating costs
 and expenses:
 Cost of goods
  sold            287.0     265.2                   (0.1)       552.1
Operating
 expenses          18.2      22.4                     .2         40.8
               --------- ---------           ------------ ------------
Segment
 contribution
 margin            37.0      14.4                      -         51.4
               --------- ---------           ------------
General and
 administrative
 expenses                                                         6.5
Depreciation
 and
 amortization                                                     4.6
Gains on
 forward
 contract
 activities                                                      (1.8)
                                                          ------------
Operating
 income                                                         $42.1
                                                          ============
                        For the Year Ended December 31, 2006
               -------------------------------------------------------
               (Excluding Marketing which was for the period from
               August 1, 2006 through December 31, 2006)
                                              Corporate,
               Refining   Retail              Other and   Consolidated
                                   Marketing Eliminations
               --------- --------- --------- ------------ ------------
Net sales      $1,590.2  $1,395.6    $221.6         $0.3     $3,207.7
Operating costs
 and expenses:
 Cost of goods
  sold          1,367.4   1,235.1     216.0          (.2)     2,818.3
 Operating
  expenses         69.6     102.8        .3           .5        173.2
               --------- --------- --------- ------------ ------------
Segment
 contribution
 margin           153.2      57.7       5.3           --        216.2
               --------- --------- --------- ------------
General and
 administrative
 expenses                                                        38.2
Depreciation
 and
 amortization                                                    22.8
                                                          ------------
Operating
 income                                                        $155.2
                                                          ============
                        For the Year Ended December 31, 2005
               -------------------------------------------------------
               (Excluding Refining which was for the period from
               April 29, 2005 through December 31, 2005)
                                              Corporate,
               Refining   Retail              Other and   Consolidated
                                             Eliminations
               --------- ---------           ------------ ------------
Net sales        $931.4  $1,101.0                   $(.5)    $2,031.9
Operating costs
 and expenses:
 Cost of goods
  sold            776.4     956.1                    (.9)     1,731.6
Operating
 expenses          45.8      86.9                     .4        133.1
               --------- ---------           ------------ ------------
Segment
 contribution
 margin           109.2      58.0                    1.0        167.2
               --------- ---------           ------------
General and
 administrative
 expenses                                                        23.5
Depreciation
 and
 amortization                                                    16.1
Gain on
 disposal of
 assets                                                          (1.6)
Losses on
 forward
 contract
 activities                                                       9.1
                                                          ------------
Operating
 income                                                        $120.1
                                                          ============
                Delek U.S. Holdings, Inc.
                  Capital Expenditures
                      (In millions)

                                Year Ended December 31,
                               --------------------------
                                 2007 Budget 2006 Actual
                               ------------- ------------
     Refining:
       Sustaining maintenance  $        7.1  $       3.7
       Regulatory                      48.5         65.6
       Discretionary projects          34.4          5.6
                                ------------  -----------
         Total refinery                90.0         74.9

     Marketing:
       Sustaining maintenance           0.1          0.2

     Retail:
       Sustaining maintenance           3.0          3.7
       Store enhancements               3.0          6.4
       Re-image/builds                 19.0         12.3
                                ------------  -----------
         Total retail                  25.0         22.4
                                ------------  -----------

     Total capital spending    $      115.1  $      97.5
                                ============  ===========

CONTACT: Delek US Holdings, Inc.
Investor Relations Contact:
Assi Ginzburg, 615-224-1179
Vice President of Strategic Planning
or
Corporate Communications Inc.
Scott Brittain or Kristina Korte, 615-254-3376
or
U.S. Media Contact:
Lovell Communications Inc.
Paula Lovell, 615-297-7766 or 615-972-2964
or
Israel Media Contact:
Arad Communications
Lior Chorev, 011-972-3-644-0404

SOURCE: Delek US Holdings, Inc.