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