Delek US Holdings Reports Record First Quarter Net Income
Delek US Holdings Reports Record First Quarter Net Income
Company Increases Quarterly Dividend by 50%
BRENTWOOD, Tenn.--(BUSINESS WIRE)-- Delek US Holdings, Inc. (NYS: DK) , a diversified energy company with assets in the petroleum refining, logistics and retail industries, today announced financial results for the first quarter 2013 and an increase to its regular quarterly dividend.
For the three months ended March 31, 2013, Delek US reported record first quarter net income of $77.5 million, or $1.28 per diluted share, versus net income of $46.2 million, or $0.79 per diluted share in the first quarter 2012.
The increase in earnings compared to the prior year period is largely attributable to higher refining margins. The key factors driving the record net income were the improved market conditions on a year-over-year basis and the refineries' ability to benefit from the expanded discount between West Texas Intermediate ("WTI") Midland and WTI Cushing during the period. In addition, higher sales volumes at the Tyler refinery and the purchase of heavy Canadian rail supplied crude at the El Dorado refinery contributed to the strong performance. The logistics segment benefited from solid results in its west Texas operations as both volumes and margins increased from the prior year period.
As of March 31, 2013, Delek US had a cash balance of $592.9 million and total debt of $350.7 million, resulting in net cash of $242.2 million. This compares to a net cash position of $239.5 million at December 31, 2012. At March 31, 2013, Delek US' subsidiary, Delek Logistics Partners, LP (NYS: DKL) , had a cash balance of approximately $19.0 million and approximately $90.0 million of debt, which is included in the consolidated amounts on Delek US' balance sheet.
Dividend Announcement and Share Repurchase Authorization
Delek US also announced that its Board of Directors declared a regular quarterly cash dividend of $0.15 per share. This represents a 50 percent increase from the previous dividend of $0.10 per share. This cash dividend is payable on June 18, 2013 to shareholders of record on May 28, 2013.
On March 12, 2013, Delek US announced that its Board of Directors authorized a $75 million common stock repurchase program, which will expire on December 31, 2013. During the first quarter 2013, Delek US repurchased 1.0 million shares of common stock, at a cost of $37.9 million, from a subsidiary of Delek Group concurrent with that entity's secondary offering.
"We are off to a strong start in 2013 with record first quarter net income. Our balance sheet remains strong and provides us the financial flexibility to return value to our shareholders through the repurchase of shares and an increase in our regular quarterly dividend by 50 percent,"said Uzi Yemin, Chairman, President and Chief Executive Officer of Delek US. "Our operations performed well during the first quarter compared to the year ago period as the strategic locations of our refineries allowed us to benefit from a wider discount in Midland based crudes during the period as market conditions improved. In addition, our wholesale and retail fuel businesses provide us with the flexibility to balance our renewable fuel blending requirements at our refineries and create opportunities related to RINs based on market conditions."
Crude Supply Update
Delek US has increased its access to Midland sourced crude supplies and remains focused on improving crude supply flexibility across its refinery operations. Improved pipeline access began at the Tyler refinery in April of this year allowing access to 52,000 barrels per day of Midland sourced crude. The El Dorado refinery began receiving 20,000 barrels per day of Midland sourced crude through increased pipeline access in May 2013 and this amount is expected to increase toward 35,000 barrels per day in June. By June, the combination of these changes will increase Midland sourced crude in Delek US' refinery system by approximately 42,000 barrels per day and is expected to replace crude sources that are currently more expensive.
In addition to improved pipeline access, construction of a new rail facility with two off loading racks at the El Dorado refinery has been completed. The offloading capacity of these racks is approximately 12,000 barrels per day of heavy crude or up to 25,000 barrels per day of light crude. In addition, a third party rail facility adjacent to the El Dorado refinery can offload up to 20,000 barrels per day of light crudes. These facilities allow the El Dorado refinery the ability to receive primarily Canadian, Bakken, Eagleford, Cushing and other cost advantaged crude by rail. The combination of improved pipeline access and increased rail supplied crude allows the refinery to better optimize its crude slate.
Yemin concluded, "Our strategic initiative to improve pipeline access has increased our ability to source Midland crude. When combined with locally sourced crude, we should have approximately 105,000 barrels per day of cost advantaged WTI linked crude supplies out of 140,000 barrels per day of refining capacity. These steps, combined with our rail initiative, increase our crude supply flexibility in our refinery system and allow us to access cost advantaged crudes."
Refining segment contribution margin increased to $171.5 million in the first quarter 2013, versus $118.3 million in the first quarter 2012. Contribution margin at the El Dorado refinery increased to $68.0 million in the first quarter 2013 from a contribution margin of $42.9 million in first quarter 2012. Contribution margin at Tyler increased to $102.9 million in the first quarter 2013 from $74.5 million in the same period prior year.
Refining results benefited from improved market conditions as the benchmark Gulf Coast 5-3-2 crack spread averaged $26.68 per barrel during the quarter. This compares with a 5-3-2 crack spread of $23.87 during first quarter 2012. In addition, margins also improved as the (WTI) Midland crude discount to WTI Cushing expanded to $7.80 per barrel in first quarter 2013 from $1.48 per barrel in the prior year period.
Tyler, Texas Refinery
Total throughputs at the Tyler refinery were 59,996 barrels per day in the first quarter 2013, versus 55,525 barrels per day in the first quarter 2012. Total volumes sold were 58,523 barrels per day in the first quarter 2013, compared to 56,840 barrels per day in the first quarter 2012.
Direct operating expense at Tyler was $30.1 million, or $5.72 per barrel sold, in the first quarter 2013, versus $26.7 million, or $5.17 per barrel sold, in the first quarter 2012. On a year-over-year basis, this increase is primarily due to expenses associated with necessary maintenance that was completed during the quarter ahead of the summer driving season.
Tyler's refining margin was $25.26 per barrel sold in the first quarter 2013, compared to $19.57 per barrel sold for the same quarter last year. This increase was primarily due to a wider WTI Midland discount and a higher Gulf Coast 5-3-2 crack spread as compared to first quarter 2012.
El Dorado, Arkansas Refinery
Total throughputs at the El Dorado refinery were 68,080 barrels per day in the first quarter 2013 compared to 78,214 barrels per day in the first quarter 2012. Net barrels sold, which exclude buy/sell activity, was 76,327 barrels per day in the first quarter 2013. This compares to net barrels sold of 82,044, excluding buy/sell activity, in the first quarter 2012.
The El Dorado refinery operated at 63,908 barrels per day of crude throughput during the quarter despite continued suspension of crude oil deliveries from a non-affiliated supplier's pipeline, which has caused reduced throughput rates since May 1, 2012. El Dorado began receiving deliveries again from this pipeline in March 2013. The refinery was able to maintain this throughput level through a combination of processing intermediate products from Tyler and purchasing approximately 16,400 barrels per day of crude supplied by rail during the first quarter 2013. This was the first period that the rail supplied crude included heavy Canadian barrels, which averaged approximately 3,600 barrels per day during the first quarter 2013.
Direct operating expense at El Dorado was $30.9 million, or $4.51 per net barrel sold, which excludes buy/sell activity, in the first quarter 2013, compared to $22.5 million, or $3.01 per barrel sold, during the first quarter of 2012. This increase was primarily due to expenses related to necessary maintenance that was completed during the quarter ahead of the summer driving season.
El Dorado refining margin was $14.41 per net barrel sold in the first quarter 2013 compared to $8.76 per barrel sold during the first quarter of 2012. This increase was due to improved market conditions and a lighter crude oil slate that resulted in a product slate containing a higher percentage of light products, which improved margins, as compared to the same period last year.
Our logistics segment results include 100 percent of the performance of Delek Logistics. Delek US beneficially owns 62.4 percent (including the 2 percent general partner interest) of all outstanding Delek Logistics units and adjustments for the publicly-held minority interest are made on a consolidated basis. Delek Logistics commenced operations on November 7, 2012, and results prior to that date are presented on a predecessor basis.
Contribution margin in the first quarter 2013 increased to $17.1 million from $8.7 million in the predecessor's first quarter 2012. This increase is attributed to an improved margin in the west Texas wholesale business and a benefit from the sale of renewable identification numbers (RINs) related to blending ethanol. In addition, results benefited from the contribution from contracts associated with services provided to Delek US' refineries and fees generated from the Paline pipeline.
Retail segment contribution margin was $7.9 million in the first quarter 2013, which compares to $7.3 million in the first quarter 2012. Results benefited from an increase in fuel margin to 14.5 cents per gallon in first quarter 2013 from 12.1 cents per gallon in the prior year period. Merchandising margin was 29.3% in first quarter 2013, compared to 29.4% in the prior year period.
At the conclusion of the first quarter 2013, the retail segment operated 373 locations, versus 375 locations at the end of the first quarter 2012. During the first quarter 2013, two new large-format stores were opened and four additional large-format stores are expected to be opened in the second quarter 2013.
First Quarter 2013 Results | Conference Call Information
The Company will hold a conference call to discuss its first quarter 2013 results on May 9, 2012 at 10:00 a.m. Central Time. Investors will have the opportunity to listen to the conference call live over the Internet by going to www.DelekUS.com and clicking on the Investor Relations tab, at least 15 minutes early to register, download and install any necessary software. For those who cannot listen to the live broadcast, a telephonic replay will be available through August 9, 2013 by dialing (855) 859-2056, passcode 41606390. An archived version of the replay will also be available at www.DelekUS.com for 90 days.
About Delek US Holdings, Inc.
Delek US Holdings, Inc. is a diversified downstream energy company with assets in petroleum refining, logistics and convenience store retailing. The refining segment consists of refineries operated in Tyler, Texas and El Dorado, Arkansas with a combined nameplate production capacity of 140,000 barrels per day. Subsidiaries of Delek US Holdings, Inc. also own 62.4 percent (including the 2 percent general partner interest) of Delek Logistics Partners, LP. Delek Logistics Partners, LP (NYS: DKL) is a growth-oriented master limited partnership focused on owning and operating midstream energy infrastructure assets. The retail segment markets fuel and merchandise through a network of approximately 373 company-operated convenience store locations operated under the MAPCO Express®, MAPCO Mart®, East Coast®, Fast Food and Fuel™, Favorite Markets®, Delta Express® and Discount Food Mart™ 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 current estimates, expectations and projections about 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: risks and uncertainties with respect to the quantities and costs of crude oil we are able to obtain and the price of the refined petroleum products we ultimately sell; management's ability to execute its strategy of growth through acquisitions and the transactional risks associated with acquisitions; our competitive position and the effects of competition; the projected growth of the industries in which we operate; changes in the scope, costs, and/or timing of capital and maintenance projects; losses from derivative instruments; 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 our majority stockholder and other stockholders; and other risks contained in our filings with the United States 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 US Holdings, Inc.
|(In millions, except share|
and per share data)
|Cash and cash equivalents||$||592.9||$||601.7|
|Other current assets||18.4||23.8|
|Total current assets||1,444.0||1,359.7|
|Property, plant and equipment:|
|Property, plant and equipment||1,491.7||1,456.2|
|Less: accumulated depreciation||(352.2||)||(332.0||)|
|Property, plant and equipment, net||1,139.5||1,124.2|
|Other intangibles, net||15.6||16.7|
|Other non-current assets||48.2||50.4|
|LIABILITIES AND SHAREHOLDERS' EQUITY|
|Current portion of long-term debt and capital lease obligations||54.5||52.2|
|Obligation under Supply and Offtake Agreement||248.8||285.2|
|Accrued expenses and other current liabilities||128.8||92.9|
|Total current liabilities||1,077.9||999.1|
|Long-term debt and capital lease obligations, net of current portion||296.2||310.0|
|Environmental liabilities, net of current portion||9.8||10.4|
|Asset retirement obligations||8.6||8.3|
|Deferred tax liabilities||186.9||183.2|
|Other non-current liabilities||28.8||34.7|
|Total non-current liabilities||530.3||546.6|
|Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued and outstanding||—||—|
|Common stock, $0.01 par value, 110,000,000 shares authorized, 59,834,304 shares and 59,619,548 shares issued at March 31, 2013 and December 31, 2012, respectively||0.6||0.6|
|Additional paid-in capital||370.8||366.9|
|Accumulated other comprehensive income||—||0.4|
|Treasury stock, 1,000,000 shares, at cost||(37.9||)||—|
|Non-controlling interest in subsidiaries||181.3||178.7|
|Total shareholders' equity||1,111.8||1,078.0|
|Total liabilities and shareholders' equity||$||2,720.0||$||2,623.7|
Delek US Holdings, Inc.
|Three Months Ended|
(In millions, except share and
per share data)
|Operating costs and expenses:|
|Cost of goods sold||2,037.0||1,955.0|
|General and administrative expenses||32.6||27.0|
|Depreciation and amortization||22.0||19.0|
|Total operating costs and expenses||2,190.3||2,085.4|
|Total non-operating expenses||9.1||12.4|
|Income before income taxes||125.3||72.6|
|Income tax expense||43.2||26.4|
|Net income attributed to non-controlling interest||4.6||—|
|Net income attributable to Delek||$||77.5||$||46.2|
|Basic earnings per share||$||1.30||$||0.79|
|Diluted earnings per share||$||1.28||$||0.79|
|Weighted average common shares outstanding:|
|Dividends declared per common share outstanding||$||0.20||$||0.1275|
|Delek US Holdings, Inc.|
|Condensed Consolidated Statements of Cash Flows (Unaudited)|
|Three Months Ended|
|Cash Flow Data|
|Cash flows provided by operating activities:||$||81.5||$||45.6|
|Cash flows used in investing activities:||(34.6||)||(44.0||)|
|Cash flows provided by (used in) financing activities:||(55.7||)||7.6|
|Net increase in cash and cash equivalents||$||(8.8||)||$||9.2|
|Delek US Holdings, Inc.|
|Three Months Ended March 31, 2013|
|Net sales (excluding intercompany fees and sales)||$||1,679.8||$||448.8||$||196.0||$||0.1||$||2,324.7|
|Intercompany fees and sales||54.5||—||14.9||(69.4||)||—|
|Operating costs and expenses:|
|Cost of goods sold||1,501.1||409.3||187.9||(61.3||)||2,037.0|
|Segment contribution margin||$||171.5||$||7.9||$||17.1||$||(7.5||)||189.0|
|General and administrative expenses||32.6|
|Depreciation and amortization||22.0|
|Capital spending (excluding business combinations)||$||15.3||$||5.4||$||1.3||$||6.0||$||28.0|
|Three Months Ended March 31, 2012|
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