Delek US Holdings Reports Second Quarter Results
Delek US Holdings Reports Second Quarter Results
Company Announces Quarterly Dividend of $0.15 per share
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 second quarter 2013.
For the three months ended June 30, 2013, Delek US reported net income of $46.6 million, or $0.78 per diluted share, versus net income of $67.8 million, or $1.15 per diluted share in the second quarter 2012.
Lower earnings were primarily due to the refining segment, which faced less favorable market conditions in the second quarter 2013 compared to the prior-year-period, as a decline in the 5-3-2 Gulf Coast crack spread reduced margins. In addition, the differential between WTI Midland and WTI Cushing narrowed on a year-over-year basis.
These market conditions were partially offset by the benefit of higher crude throughput at the Tyler, Texas refinery, which averaged over 64,000 barrels per day for the quarter versus approximately 54,800 in the prior-year-period. Increased amounts of crude supplied by rail to the El Dorado, Arkansas refinery and improved access to Midland crude supplies at both refineries also favorably impacted earnings by providing greater access to cost advantaged crude.
Second quarter 2013 net income included approximately $4.3 million of after tax income, or $0.07 per share, as a majority of claims under litigation brought against a subsidiary of Lion Oil were dismissed.
As of June 30, 2013, Delek US had a cash balance of $450.1 million and total debt of $294.2 million, resulting in net cash of $155.9 million. This compares to a net cash position of $242.2 million at March 31, 2013 with this change being primarily driven by changes in working capital. As of June 30, 2013, Delek US's subsidiary, Delek Logistics Partners, LP (NYS: DKL) ("Delek Logistics"), had a cash balance of approximately $27.3 million and $90.0 million of debt, which is included in the consolidated amounts on Delek US's balance sheet. On July 9, 2013, Delek Logistics amended and restated its revolving credit facility, increasing lender commitments to $400.0 million from $175.0 million.
Delek US also announced that its Board of Directors declared a regular quarterly cash dividend of $0.15 per share. This cash dividend is payable on September 17, 2013 to shareholders of record on August 27, 2013.
"During the second quarter, we benefited from our focus on continuous improvement in our operations as we increased our throughput rate at our Tyler refinery to a record level. In addition, our logistics segment performed well and continued to benefit from increases in the price of RINs," said Uzi Yemin, Chairman, President and Chief Executive Officer of Delek US. "We completed our strategic initiative to improve our crude slate flexibility by increasing pipeline access to Midland sourced crude at both refineries and adding crude by rail sourcing capacity at our El Dorado refinery. With the new pipeline access in place, we now have access to 87,000 barrels per day of Midland crude out of our 140,000 barrels per day capacity. In July, we took another step toward further unlocking the value of our logistics assets through the first drop-down to Delek Logistics since the IPO last year. Our balance sheet remains strong giving us the ability to continue investing in our business while returning value to our shareholders."
Refining Segment
Refining segment contribution margin was $95.8 million in the second quarter 2013, versus $136.5 million in the second quarter 2012. Contribution margin at the El Dorado refinery was $29.3 million in the current quarter compared to a contribution margin of $55.9 million in the second quarter 2012. At Tyler, the contribution margin was $63.3 million in the second quarter 2013 compared to $80.0 million in the prior-year-period.
The benchmark Gulf Coast 5-3-2 crack spread, which averaged $19.83 per barrel during the quarter, declined from an average of $25.42 during second quarter 2012. This decline, combined with a narrowing of the WTI Midland crude discount to WTI Cushing to $0.14 per barrel in second quarter 2013 from $4.86 per barrel in the prior-year-period, were contributing factors to lower refining margins.
Tyler, Texas Refinery
Total throughput rates at the Tyler refinery were 70,793 barrels per day in the second quarter 2013, versus 56,729 barrels per day in the comparable period last year. Crude throughput was 64,439 barrels per day during the second quarter 2013, which is an increase from 54,758 barrels per day in the prior-year-period. Total volumes sold were 70,033 barrels per day in the second quarter 2013, compared to 58,644 barrels per day in the second quarter 2012. Continued efforts to improve the operations and initiatives to maximize production capabilities resulted in the increased level of throughputs.
Improved pipeline access to Midland sourced crude occurred on April 1, 2013 increasing the amount to approximately 52,000 barrels per day at the refinery. This represents a 17,000 barrel per day increase from the previous level of Midland priced crude supplied to the Tyler refinery.
Direct operating expense at Tyler was $27.5 million, or $4.32 per barrel sold, in the second quarter 2013, versus $28.9 million, or $5.42 per barrel sold, in the second quarter 2012. On a year-over-year basis, this decrease in operating expense per barrel was primarily due to higher utilization rates at the refinery.
Tyler's refining margin was $14.25 per barrel sold in the second quarter 2013, compared to $20.41 per barrel sold for the same quarter last year. This decrease was primarily due to a lower Gulf Coast 5-3-2 crack spread and a narrower WTI Midland discount as compared to second quarter 2012.
El Dorado, Arkansas Refinery
Total throughput rates at the El Dorado refinery were 74,182 barrels per day in the second quarter 2013 compared to 69,982 barrels per day in the second quarter 2012. Net barrels sold, which exclude buy/sell activity, was 70,597 barrels per day in the second quarter 2013. This compares to net barrels sold of 73,255, excluding buy/sell activity, in the second quarter 2012.
The El Dorado refinery operated at 67,860 barrels per day of crude throughput during the quarter compared to 63,230 barrels per day of crude throughput in the second quarter 2012. During the second quarter 2012, a suspension of crude oil deliveries from a non-affiliated supplier's pipeline caused reduced throughput rates beginning May 1, 2012. This pipeline resumed operation in March 2013. The refinery processed approximately 1,300 barrels per day of intermediate products from the Tyler refinery and purchased approximately 21,700 barrels per day of crude supplied by rail during the second quarter 2013, of which approximately 3,600 barrels per day of rail supplied crude was heavy Canadian barrels.
Improved pipeline access to Midland sourced crude occurred gradually during the quarter increasing from 10,000 barrels per day in March to approximately 35,000 barrels per day starting on June 1, 2013. This represents an increase of 25,000 barrels per day from the previous level of Midland sourced crude at the El Dorado refinery. In addition to improved pipeline access, construction of a new rail facility with two off loading racks at this refinery was 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 provides access of up to 20,000 barrels per day of light crudes.
Direct operating expense at El Dorado was $26.1 million, or $4.06 per net barrel sold compared to $25.1 million, or $3.76 per net barrel sold, during the second quarter of 2012.
El Dorado refining margin was $8.63 per net barrel sold in the second quarter 2013 compared to $12.14 per net barrel sold during the second quarter of 2012. This decrease was due to a lower Gulf Coast 5-3-2 crack spread on a year-over-year basis and a delayed start in the asphalt season due to weather.
Logistics Segment
Our logistics segment results include 100 percent of the performance of Delek Logistics. Delek US and its affiliates beneficially own approximately 62 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 second quarter 2013 was $16.2 million. On a year over year basis, results benefited from higher volumes and an improved margin in the west Texas wholesale business. The margin benefited 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's refineries and fees generated from the Paline pipeline.
On July 26, 2013, Delek US sold substantially all of the storage tanks and the product terminal in Tyler, Texas to Delek Logistics for $94.8 million in cash. These assets are expected to contribute approximately $10.5 million of EBITDA (earnings before interest, taxes, depreciation and amortization) annually to the logistics segment and will continue to support Delek US's Tyler, Texas refinery.
Retail Segment
Retail segment contribution margin was $16.0 million in the second quarter 2013, which compares to $18.2 million in the second quarter 2012. Higher fuel margins were partially offset by lower merchandising margins reducing results on a year-over-year basis. Fuel margin was 19.6 cents per gallon in the second quarter 2013 compared to 18.2 cents per gallon in the prior-year-period. Merchandising margin was 28.3% in second quarter 2013, compared to 29.7% in the prior-year-period. Operating expenses increased to $34.1 million in the second quarter 2013 compared to $31.7 million in the second quarter 2012 primarily due to expenses related to new large format stores and advertising expenses related to expansion of the loyalty program.
At the conclusion of the second quarter 2013, the retail segment operated 370 locations, versus 374 locations at the end of the second quarter 2012. During the second quarter 2013, three new large-format stores were opened, bringing the total openings to five for the first half. An additional five to seven large-format stores are expected to be opened in the second half of 2013.
Second Quarter 2013 Results Conference Call Information
The Company will hold a conference call to discuss its second quarter 2013 results on August 8, 2013 at 9:00 a.m. Central Time. Investors may listen to the conference call live via webcast at www.DelekUS.com by clicking on the Investor Relations tab. Please register at least 15 minutes early to the call, and install any necessary software. For those who cannot listen to the live broadcast, a telephonic replay will be available through November 8, 2013 by dialing (855) 859-2056, passcode 21161625. 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. Delek US Holdings, Inc. and its affiliates also own approximately 62 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 motor fuel and convenience merchandise through a network of approximately 370 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. | ||||||||
Condensed Consolidated Balance Sheets | ||||||||
June 30, | December 31, | |||||||
(In millions, except share and per share data) | ||||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 450.1 | $ | 601.7 | ||||
Accounts receivable | 305.1 | 256.6 | ||||||
Inventory | 606.0 | 477.6 | ||||||
Other current assets | 46.5 | 23.8 | ||||||
Total current assets | 1,407.7 | 1,359.7 | ||||||
Property, plant and equipment: | ||||||||
Property, plant and equipment | 1,521.0 | 1,456.2 | ||||||
Less: accumulated depreciation | (368.9 | ) | (332.0 | ) | ||||
Property, plant and equipment, net | 1,152.1 | 1,124.2 | ||||||
Goodwill | 72.7 | 72.7 | ||||||
Other intangibles, net | 14.5 | 16.7 | ||||||
Other non-current assets | 35.4 | 50.4 | ||||||
Total assets | $ | 2,682.4 | $ | 2,623.7 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 580.2 | $ | 568.8 | ||||
Current portion of long-term debt and capital lease obligations | 54.3 | 52.2 | ||||||
Obligation under Supply and Offtake Agreement | 325.0 | 285.2 | ||||||
Accrued expenses and other current liabilities | 106.5 | 92.9 | ||||||
Total current liabilities | 1,066.0 | 999.1 | ||||||
Non-current liabilities: | ||||||||
Long-term debt and capital lease obligations, net of current portion | 239.9 | 310.0 | ||||||
Environmental liabilities, net of current portion | 9.7 | 10.4 | ||||||
Asset retirement obligations | 8.6 | 8.3 | ||||||
Deferred tax liabilities | 184.1 | 183.2 | ||||||
Other non-current liabilities | 25.2 | 34.7 | ||||||
Total non-current liabilities | 467.5 | 546.6 | ||||||
Shareholders' equity: | ||||||||
Common stock, $0.01 par value, 110,000,000 shares authorized, 60,057,225 shares and 59,619,548 shares issued at June 30, 2013 and December 31, 2012, respectively | 0.6 | 0.6 | ||||||
Additional paid-in capital | 374.7 | 366.9 | ||||||
Accumulated other comprehensive income | — | 0.4 | ||||||
Treasury stock, 1,000,000 shares, at cost | (37.9 | ) | — | |||||
Retained earnings | 628.5 | 531.4 | ||||||
Non-controlling interest in subsidiaries | 183.0 | 178.7 | ||||||
Total shareholders' equity | 1,148.9 | 1,078.0 | ||||||
Total liabilities and shareholders' equity | $ | 2,682.4 | $ | 2,623.7 | ||||
Delek US Holdings, Inc. | |||||||||||||||
Condensed Consolidated Statements of Income (Unaudited) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
(In millions, except share and per share data) | |||||||||||||||
Net sales | $ | 2,247.0 | $ | 2,134.2 | $ | 4,571.7 | $ | 4,304.6 | |||||||
Operating costs and expenses: | |||||||||||||||
Cost of goods sold | 2,025.7 | 1,881.1 | 4,062.7 | 3,836.1 | |||||||||||
Operating expenses | 95.3 | 90.1 | 194.0 | 174.5 | |||||||||||
General and administrative expenses | 28.1 | 24.7 | 60.7 | 51.7 | |||||||||||
Depreciation and amortization | 21.6 | 21.6 | 43.6 | 40.6 | |||||||||||
Other operating income | (1.5 | ) | — | (1.5 | ) | — | |||||||||
Total operating costs and expenses | 2,169.2 | 2,017.5 | 4,359.5 | 4,102.9 | |||||||||||
Operating income | 77.8 | 116.7 | 212.2 | 201.7 | |||||||||||
Interest expense | 9.2 | 12.3 | 18.4 | 24.7 | |||||||||||
Interest income | (0.1 | ) | — | (0.2 | ) | — | |||||||||
Other income, net | (6.7 | ) | — | (6.7 | ) | — | |||||||||
Total non-operating expenses | 2.4 | 12.3 | 11.5 | 24.7 | |||||||||||
Income before income taxes | 75.4 | 104.4 | 200.7 | 177.0 | |||||||||||
Income tax expense | 24.4 | 36.6 | 67.6 | 63.0 | |||||||||||
Net income | 51.0 | 67.8 | 133.1 | 114.0 | |||||||||||
Net income attributed to non-controlling interest | 4.4 | — | 9.0 | — | |||||||||||
Net income attributable to Delek | $ | 46.6 | $ | 67.8 | $ | 124.1 | $ | 114.0 | |||||||
Basic earnings per share | $ | 0.79 | $ | 1.16 | $ | 2.09 | $ | 1.96 | |||||||
Diluted earnings per share | $ | 0.78 | $ | 1.15 | $ | 2.06 | $ | 1.93 | |||||||
Weighted average common shares outstanding: | |||||||||||||||
Basic | 58,925,800 | 58,239,476 | 59,246,988 | 58,178,743 | |||||||||||
Diluted | 59,830,885 | 59,175,544 | 60,255,526 | 58,951,436 | |||||||||||
Dividends declared per common share outstanding | $ | 0.250 | $ | 0.1375 | $ | 0.450 | $ | 0.265 | |||||||
Delek US Holdings, Inc. | |||||||||
Condensed Consolidated Statements of Cash Flows (Unaudited) | |||||||||
(In millions) | |||||||||
Six Months Ended June 30, | |||||||||
2013 | 2012 | ||||||||
Cash Flow Data | |||||||||
Cash flows provided by operating activities: | $ | 53.1 | $ | 190.5 | |||||
Cash flows used in investing activities: | (69.2 | ) | (77.8 | ) | |||||
Cash flows provided by (used in) financing activities: | (135.5 | ) | (17.5 | ) | |||||
Net (decrease) increase in cash and cash equivalents | $ | (151.6 | ) | $ | 95.2 | ||||
Delek US Holdings, Inc. | ||||||||||||||||||||
Segment Data | ||||||||||||||||||||
(In millions) | ||||||||||||||||||||
Three Months Ended June 30, 2013 | ||||||||||||||||||||
Refining | Retail | Logistics | Corporate, Eliminations | Consolidated | ||||||||||||||||
Net sales (excluding intercompany fees and sales) | $ | 1,539.9 | $ | 493.9 | $ | 212.9 | $ | 0.3 | $ | 2,247.0 | ||||||||||
Intercompany fees and sales | 128.1 | — | ||||||||||||||||||
