Delek US Holdings Reports First Quarter 2010 Results

BRENTWOOD, Tenn., May 6, 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 first quarter 2010.

For the three months ended Mar. 31, 2010, Delek US reported a net loss from continuing operations of $14.1 million, or ($0.26) per basic share, versus a net loss from continuing operations of $1.4 million, or ($0.03) per basic share, in the first quarter 2009. Excluding special items, the Company reported an adjusted net loss from continuing operations of $14.0 million, or ($0.26) per basic share, in the first quarter 2010, versus an adjusted net loss of $2.4 million, or ($0.05) per basic share, in the first quarter 2009.

Uzi Yemin, President and Chief Executive Officer of Delek US, remarked: “Our first quarter results were adversely impacted by a combination of severe winter weather in several of our core retail markets during January and February, in addition to weak Gulf Coast refining economics which persisted for most of the quarter.”

Yemin continued: “Within our retail segment, same-store merchandise sales improved for the third consecutive quarter during the first quarter 2010, due in part to increased contributions from our reimaged store locations open more than one year. A slight decline in our same-store fuel gallons sold was offset by an increase in our first quarter retail fuel margin, when compared to the year-ago period.”

As of Mar. 31, 2010, Delek US had $40.3 million in cash and $313.5 million in debt, resulting in a net debt position of $273.2 million. During the first quarter 2010, Delek US applied taxable losses generated in 2009 against taxes paid in prior years, resulting in a net operating loss carryback. Consequently, the Company received a federal tax refund of nearly $40 million cash during the second quarter 2010, which should serve to enhance the Company’s liquidity position.

“As a management team, we remain focused on a return to profitable growth and continued balance sheet discipline. From a liquidity perspective, we remain well-positioned to reinvest in strategic growth initiatives that further our plan for long-term value creation,” continued Yemin.

Yemin concluded: “Entering the second quarter, we have experienced increased demand for refined products sold in our refining, retail and marketing segments. This uplift in demand is primarily attributable to a combination of favorable seasonal trends and improving economic conditions in our regional markets.”

Refining Segment

The refining segment operated for 90 days during the first quarter 2010. The refinery was not in operation during the first quarter 2009 due to a fire at the Tyler refinery on November 20, 2008.

Refining contribution margin was $2.5 million in the first quarter 2010, versus $14.6 million in the first quarter 2009. During the first quarter 2009, the Company recorded $1.6 million of income on property damage insurance claims, net of expense, and $21.1 million of income on business interruption insurance claims related to the November 2008 fire. The Company did not receive any such insurance proceeds in the first quarter 2010.

Gulf Coast refining economics remained challenging for most of the first quarter 2010. The benchmark 5-3-2 Gulf Coast crack spread declined more than 25 percent to $6.62 per barrel in the period, versus $9.14 per barrel in the first quarter 2009. In addition, the price of West Texas Intermediate crude, the Tyler refinery’s primary feedstock, increased more than 80 percent between the first quarter 2009 and the first quarter 2010.

Capacity utilization at the Tyler refinery was 81.7 percent in the first quarter 2010, versus 76.6 percent in the fourth quarter 2009. Tyler produced an average of 53,580 barrels per day in the first quarter 2010, versus an average of 50,189 in the fourth quarter 2009. Direct operating expense per barrel sold was $5.14 per barrel in the first quarter 2010, versus $5.73 per barrel in the fourth quarter 2009.

Refining margin, adding back inter-company product marketing fees of $0.53 per barrel, was $6.24 per barrel sold in the first quarter 2010, compared to $3.91 per barrel sold in the fourth quarter 2009.

Retail Segment

Retail segment contribution margin was $7.4 million in the first quarter 2010, compared to $7.3 million in the first quarter 2009. An increase in the Company’s retail fuel margin offset a slight decline in same-store fuel gallons sold and merchandise margin, when compared to year-ago levels.

Same-store merchandise sales increased 1.2 percent in the first quarter 2010, compared to a same-store decline of 4.4 percent in the first quarter 2009. The improvement in same-store merchandise sales was favorably impacted by strong contributions from the Company’s “reimaged” MAPCO store locations, in addition to a general improvement in the Company’s fresh food service programs. Merchandise margin declined to 30.8 percent in the first quarter 2010, versus 32.0 percent in the prior year period, due to margin compression within the Company’s cigarette and dairy categories.

Same-store fuel gallons sold declined by 0.3 percent in the first quarter 2010, compared to a same-store sales decline of 2.2 percent in first quarter 2009. The retail segment sold a total of 103.0 million gallons during the three months ended Mar. 31, 2010, versus 106.7 million gallons in the prior year period. The Company’s retail fuel margin was 12.9 cents per gallon in the first quarter 2010, compared to 11.2 cents per gallon in the prior year period.

Marketing Segment

Marketing segment contribution margin increased to $5.8 million in the first quarter 2010, compared to $5.0 million in the first quarter 2009. Marketing contribution margin benefitedfrom fees earned through the Company’s crude logistics operations during the first quarter 2010.Inventory levels remained at normalized levels during the first quarter, while wholesale product, prices in West Texas moved closer to parity, leading to more rational pricing in the period.

Total sales volumes within the marketing segment increased 7.2 percent to 14,298 barrels per day in the first quarter 2010, compared to 13,342 barrels per day in the prior-year period.

Reconciliation of GAAP to Non-GAAP Financial Measures

Delek US reports its financial results in accordance with generally accepted accounting principles (GAAP). However, management believes that certain non-GAAP performance measures may provide users of financial information (i) increased transparency into the Company’s operations; and (ii) additional meaningful comparisons between current results and results in prior operating periods. For these reasons, management is presenting certain adjustments to GAAP results in order to reflect the ongoing operations of the business. Management believes these measures will help investors better understand and evaluate the Company.

Delek US provides the following reconciliation schedule in calculating “adjusted” net income from continuing operations, a non-GAAP measure, for the three months ended Mar. 31, 2010 and for the three months ended Mar. 31, 2009.

The following items are excluded in the calculation of adjusted net income from continuing operations for the three months ended Mar. 31, 2010: