Delek us holdings reports third quarter 2015 results
Brentwood, tenn.--(business wire)--delek us holdings, inc. (nyse: dk) (“delek us”) today announced financial results for its third quarter ended september 30, 2015. delek us reported a third quarter net income of $18.7 million, or $0.29 per diluted share, versus net income of $72.5 million, or $1.22 per diluted share, for the quarter ended september 30, 2014. third quarter 2015 results on a pre-tax basis were reduced by approximately $32.4 million of inventory related expenses consisting of an inventory charge due to the lower of cost or market valuation of $27.3 million and $5.1 million for other inventory related charges due to crude oil and product price movements during the quarter. also, a $1.6 million net hedging loss, including $5.8 million of unrealized losses, lowered results in the third quarter of 2015. this compares to approximately $12.2 million of inventory related charges and a net hedging gain of $29.7 million, including $3.6 million of unrealized gains, in the third quarter 2014. on a year-over-year basis, results in the third quarter 2015 benefited from increased throughput at the tyler, texas refinery, a higher wti gulf coast 5-3-2 crack spread and improved performance in the logistics and retail segments. in addition, the approximately 48 percent ownership in alon usa increased pre-tax income by $12.3 million net of associated interest expense. these benefits were more than offset by a $10.57 per barrel change in the midland wti and cushing wti differential to a premium as compared to a discount in the third quarter 2014, along with the items mentioned above. uzi yemin, chairman, president and chief executive officer of delek us stated, "during the quarter we improved throughput sequentially at the tyler refinery as we matched operating rates to increased commercial demand. the retail segment had a solid third quarter, and its trailing twelve month contribution margin reached a record amount. our logistics performance improved year-over-year, and our joint venture crude oil pipeline projects are expected to be completed in the second half of 2016. lastly, our cash flow generation has benefited from lower capital expenditures following the completion of the expansion and turnaround at tyler in march 2015, and we repurchased $39.0 million of stock between late august and the end of october." yemin concluded, "we expect our maintenance and regulatory capital expenditure needs in 2016 to be approximately $100 to $110 million. our cash flow attributed to our ownership of delek logistics’ general partner should increase as incentive distribution rights payments have reached the level of high splits based on delek logistics’ recent distribution increase. also, the potential for increased free cash flow from our operations should improve as capital expenditures decline from our 2015 forecast of $227 million. as we enter the fourth quarter, midland has moved back to a discount and the futures market remains in contango. our financial position remains conservative, and we continue to evaluate growth opportunities, including the acquisition of additional shares of alon usa, while also returning cash to shareholders." regular quarterly dividend and share repurchase delek us announced today that its board of directors had declared its regular quarterly cash dividend of $0.15 per share. shareholders of record on november 24, 2015 will receive this cash dividend payable on december 15, 2015. during the third quarter 2015 approximately 960,000 shares were repurchased for $29.0 million, or $30.22 per share, under the 2015 share repurchase authorization of $125.0 million. on a year-to-date basis from august 2015 through the end of october 2015 approximately 1,326,000 shares were repurchased for $39.0 million, or $29.41 per share, leaving approximately $86.0 million available under this authorization. liquidity as of september 30, 2015, delek us had a cash balance of $366.3 million and total debt of $953.7 million, resulting in net debt of $587.4 million. this compares to $593.5 million of net debt at june 30, 2015. as of september 30, 2015, delek us' subsidiary, delek logistics partners, lp (nyse: dkl) ("delek logistics"), had $325.2 million of debt, which is included in the consolidated amounts on delek us' balance sheet. excluding delek logistics, delek us had approximately $366.3 million in cash and $628.5 million of debt, or a $262.2 million net debt position. refining segment refining contribution margin decreased to $47.4 million from $151.3 million in the third quarter 2014. this decline in year-over-year performance can be attributed to several factors. first, the midland differential to wti cushing moved to a premium from a discount on a year-over-year basis. second, a net hedging loss of $1.5 million occurred in the third quarter 2015 compared to a $27.9 million hedging gain in the prior year period. finally, during the third quarter 2015 there was $32.3 million of lower of cost or market valuation and other inventory related charges due to price movements, compared to approximately $12.2 million of inventory related charges in the prior year period. the wti midland crude differential to wti cushing declined on a year-over-year basis, averaging a $0.72 per barrel premium in third quarter 2015 compared to an average discount of $9.85 per barrel in the third quarter 2014. this decline in the midland differential was partially offset by a crude oil futures market that was in contango of $0.54 per barrel in the third quarter 2015 compared to backwardation of $1.30 per barrel in the third quarter 2014. the gulf coast 5-3-2 crack spread averaged $16.41 per barrel during the third quarter 2015, an increase from $15.05 per barrel during third quarter 2014. tyler, texas refinery during the third quarter 2015, the tyler refinery benefited from the 15,000 barrel per day expansion completed in march 2015. this was the primary driver in higher throughputs and sales volume. direct operating expense increased primarily due to higher employee related expenses, maintenance, and outside services, partially offset by lower chemical, utility and insurance cost on a year-over year-basis. in addition to the change on a year-over-year basis in the midland wti to cushing wti differential, included in the refining margin in the third quarter 2015 is approximately $2.0 million of hedging losses and $27.2 million of lower of cost or market valuation and other inventory related charges. hedging and inventory combined for a $29.2 million, or $3.95 per barrel sold, reduction in refining margin. in the third quarter 2014, results included $15.8 million of hedging gains. el dorado, arkansas refinery during the third quarter 2015, sales volume was reduced primarily due to lower total throughput compared to the prior year period. direct operating expense increased primarily due to higher utility and outside services on a year-over-year basis. in addition to the change on a year-over-year basis in the midland wti to cushing wti differential, included in the refining margin in the third quarter 2015 is approximately $0.5 million of hedging gains and $5.1 million of lower of cost or market valuation and other inventory related charges. also, during the third quarter 2015, there was $4.2 million of losses related to product price volatility on the colonial pipeline that lowered the refining margin. in the third quarter 2014, results included $12.1 million of hedging gains. logistics segment delek us and its affiliates beneficially own approximately 62 percent (including the 2 percent general partner interest) of all outstanding delek logistics units. the logistics segment's results include 100 percent of the performance of delek logistics and adjustments for the minority interests are made on a consolidated basis. the logistics segment's contribution margin in the third quarter 2015 was $29.1 million compared to $23.5 million in the third quarter 2014. on a year-over-year basis, results benefited from an increased contribution from the paline pipeline and acquisitions by delek logistics over the past year, including the el dorado, arkansas rail offloading rack and the tyler, texas crude oil storage tank purchased on march 31, 2015 from subsidiaries of delek us. these factors were partially offset by a lower gross margin per barrel in the west texas wholesale business. retail segment retail segment contribution margin increased year-over-year primarily due to higher fuel margins and gallons sold, combined with increased merchandise sales. operating expense decreased primarily due to lower credit expenses on a year-over-year basis. fuel gallons sold increased to 117.9 million from 116.1 million in the prior-year period and merchandise sales increased year over year to $111.3 million compared to $107.0 million. on a same store sales basis, fuel gallons sold increased 0.4% and merchandise sales increased 3.8% from third quarter 2014. at the end of the third quarter 2015, there were a total of 64 large-format stores in the portfolio. third quarter 2015 results | conference call information delek us will hold a conference call to discuss its third quarter 2015 results on wednesday, november 4, 2015 at 8:30 a.m. central time. investors will have the opportunity to listen to the conference call live by going to www.delekus.com and clicking on the investor relations tab. participants are encouraged to register at least 15 minutes early to download and install any necessary software. for those who cannot listen to the live broadcast, a telephonic replay will be available through february 4, 2016 by dialing (855) 859-2056, passcode 55522141. an archived version of the replay will also be available at www.delekus.com for 90 days. investors may also wish to listen to delek logistics’ (nyse: dkl) third quarter earnings conference call that will be held on november 4, 2015 at 7:30 a.m. central time and review delek logistics’ earnings press release. market trends and information disclosed by delek logistics may be relevant to the logistics segment reported by delek us. both a replay of the conference call and press release for delek logistics are available online at www.deleklogistics.com. 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 155,000 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 (nyse: 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 355 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. delek us holdings, inc. also owns approximately 48 percent of the outstanding common stock of alon usa energy, inc. (nyse: alj). 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; gains and losses from derivative instruments; changes in the scope, costs, and/or timing of capital and maintenance projects; management's ability to execute its strategy of growth through acquisitions and the transactional risks associated with acquisitions; the effect on our financial results by the financial results of alon usa energy, inc., in which we hold a significant equity investment; operating hazards inherent in transporting, storing and processing crude oil and intermediate and finished petroleum products; our competitive position and the effects of competition; the projected growth of the industries in which we operate; general economic and business conditions, particularly levels of spending relating to travel and tourism or conditions affecting the southeastern united states; 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. (in millions, except share and per share data) nine months ended september 30, nine months ended september 30, corporate,other and eliminations corporate,other and eliminations corporate,other and eliminations corporate,other and eliminations refining segment nine months ended september 30, tyler refinery nine months ended september 30, el dorado refinery pricing statistics (average for the period presented): logistics segment nine months ended september 30, retail segment nine months ended september 30, (1) (2) (3) (4)
