Delek US Announces Q4 2006 Results

March 8, 2007 at 12:00 AM EST

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  • 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. - 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.