Delek US Holdings Reports Fourth Quarter And Full-Year 2009 Results

BRENTWOOD, Tenn., March 11, 2010 -- Delek US Holdings, Inc. (NYSE: DK), a diversified energy company with assets in the petroleum refining, marketing and retail industries, today announced financial results for the fourth quarter and full-year 2009.

For the three months ended Dec. 31, 2009, Delek US reported a net loss from continuing operations of $21.1 million, or ($0.39) per basic share, versus net income from continuing operations of $1.4 million, or $0.03 per diluted share, in the fourth quarter 2008. Excluding special items, the Company reported an adjusted net loss from continuing operations of $27.0 million, or ($0.50) per basic share, in the fourth quarter 2009.

For the full-year 2009, the Company reported net income from continuing operations of $2.3 million, or $0.04 per diluted share, versus net income from continuing operations of $24.6 million, or $0.46 per diluted share, in 2008. Excluding special items, the Company reported an adjusted net loss from continuing operations of $22.4 million, or ($0.41) per basic share, in 2009. As previously reported, the Company’s Tyler refinery was offline between November 2008 and mid-May 2009 due to a fire at the facility.

In the Company’s refining segment, Gulf Coast refining economics remained severely depressed during the fourth quarter, as evidenced by a significant decline in the benchmark Gulf Coast 5-3-2 crack spread during the period. In the retail segment, positive same-store sales trends continued to signal broad-based stabilization in the Company’s core Southeastern U.S. markets.

As a result of the fire at the Tyler refinery in November 2008, the Company recorded income of $15.7 million related to claims under its property damage insurance policy during the fourth quarter 2009. Fourth quarter property damage expense was $0.1 million. The Company anticipates receiving additional insurance proceeds during 2010.

Uzi Yemin, President and Chief Executive Officer of Delek US, remarked: “During 2009, we continued to reinvest in our diversified downstream asset portfolio, while seeking to expand our asset footprint beyond our core markets. In the year ahead, we remain committed to capitalizing on strategic opportunities without compromising balance sheet discipline.”
Delek US Holdings – Fourth Quarter and Full-Year 2009 Earnings Results

Yemin continued: “Within our refining segment, we completed a series of regulatory, discretionary and maintenance-related capital projects during the past year designed to enhance the safety, reliability and efficiency of the Tyler refinery. With the bulk of these capital projects now behind us, we anticipate our total capital spending will decline significantly in 2010, compared to prior years.”

“Although our retail segment experienced weak demand for fuel and merchandise during the first half of 2009, business improved considerably during the second half of the year, as indicated by the strong same-store sales metrics reported in the third and fourth quarters of 2009,” continued Yemin.

Yemin concluded: “In recent months, we have renewed or extended maturities on more than $400 million in combined financing for our subsidiaries. In December 2009, our retail subsidiary extended a $108 million revolving credit facility by an additional year to April 2011. In February 2010, our refining subsidiary entered into a new, four-year, $300 million asset-backed revolving credit facility that includes a $300 million accordion feature, subject to lender commitments. Finally, at the corporate level, we extended maturities on $45 million of term loan debt from 2009 to 2011. By ensuring access to liquidity through these and other sources of credit, we believe Delek US is equipped with ample financial flexibility with which to manage and grow its core businesses.”

As of Dec. 31, 2009, Delek US had $68.4 million in cash and $317.1 million in debt, resulting in a net debt position of $248.7 million. Delek US intends to apply taxable losses generated in 2009 against taxes paid in prior years, resulting in a net operating loss carryback. Consequently, the Company anticipates it will receive a federal tax cash refund in excess of $35 million by the third quarter 2010.

Refining Segment

The refining segment operated for 92 days during the fourth quarter 2009, versus only 50 days during the fourth quarter 2008, due to the fire at the Tyler Refinery on November 20, 2008.
Refining contribution margin was $4.9 million in the fourth quarter 2009, versus $15.9 million in the fourth quarter 2008. Sustained weakness in refined product margins provided limited incentive to operate the Tyler refinery at normal rates during the fourth quarter, leading to lower production levels in the period.

Capacity utilization at the Tyler refinery was 76.6 percent in the fourth quarter 2009, compared to 88.9 percent in the fourth quarter 2008. Tyler produced an average of 50,189 barrels per day in the fourth quarter 2009, versus an average of 60,552 barrels per day in the fourth quarter 2008.

Direct operating expense per barrel sold was $5.73 per barrel in the fourth quarter 2009, versus $6.56 per barrel in the fourth quarter 2008. Lower natural gas expense was a key factor in the year over year decline in variable operating expense per barrel sold.

Refining margin, adding back inter-company product marketing fees of $0.54 per barrel, was $3.91 per barrel sold in the fourth quarter 2009, compared to $12.07 per barrel sold for the same quarter last year.

Retail Segment

Retail segment contribution margin declined to $0.3 million in the fourth quarter 2009, compared to $9.4 million in the fourth quarter 2008. Retail contribution margin in the fourth quarter 2009 and the fourth quarter 2008 included goodwill impairment charges of $7.0 million and $11.2 million, respectively. Strong same-store sales of fuel (gallons) and merchandise were offset by a lower retail fuel margin in the fourth quarter 2009, when compared to the prior year period.

Same-store sales of fuel (gallons) and merchandise increased during the fourth quarter, continuing a trend of positive same-store comparisons which began in the third quarter 2009. The improvement in fourth quarter same-store comparisons were favorably impacted by strong contributions from the Company’s “reimaged” MAPCO store locations.

Same-store sales of fuel (gallons) improved by 4.2 percent in the fourth quarter 2009, compared to a same store sales decline of 5.8 percent in the fourth quarter 2008. The retail segment sold a total of 108.7 million retail gallons during the three months ended Dec. 31, 2009, versus 106.3 million gallons in the prior year period.

The Company’s retail fuel margin was 12.9 cents per gallon in the fourth quarter 2009, compared to 25.5 cents per gallon in the prior year period. The retail fuel margin reported during the third and fourth quarters of 2008 was favorably impacted by weather-related supply disruptions.

Same-store merchandise sales increased 5.0 percent in the fourth quarter 2009, compared to a same-store sales decline of 8.1 percent in the fourth quarter 2008. Total merchandise sales in the retail segment totaled $93.0 million in the three months ended Dec. 31, 2009, versus $90.4 million in the prior year period. Increased revenue in the cigarette and candy categories were partially offset by weakness in the fountain, beer and dairy categories. Fourth quarter 2009 merchandise margin was 30.2 percent, versus 30.0 percent in the fourth quarter 2008.

The Company has restored nine of the 36 Virginia store locations to normal operations that were classified as discontinued operations during the fourth quarter 2008. Consequently, the results from these nine Virginia stores are reported in normal operations and the assets and liabilities associated with remaining stores are reflected in the appropriate balance sheet classifications for all periods. The above retail segment information for 2008 and 2009 reflects data from continuing operations.

Marketing Segment

Marketing segment contribution margin was $7.1 million in the fourth quarter 2009, compared to $3.7 million in the fourth quarter 2008. Fourth quarter 2009 marketing segment contribution margin was favorably impacted from the year-ago period due to fees earned from the segment’s crude logistics operations. The marketing segment’s crude logistics operations include certain pipeline and storage assets acquired via an intra-company sale of assets from the Company’s refining segment in March 2009. The marketing segment reported sales volumes of 14,048 barrels per day in the fourth quarter 2009, versus sales of 14,297 barrels per day in the prior year period.