Delek us holdings reports third quarter 2014 results
Brentwood, tenn.--(business wire)--delek us holdings, inc. (nyse: dk) (“delek us”) today announced financial results for its third quarter ended september 30, 2014. delek us reported third quarter net income of $72.5 million, or $1.22 per diluted share, versus a net loss of $(1.7) million, or $(0.03) per basic share, in the quarter ended september 30, 2013. on a year-over-year basis, third quarter 2014 results increased primarily due to improved refining economics, including a wider discount between midland wti and cushing wti, increased throughput at the el dorado refinery and a higher 5-3-2 gulf coast crack spread. in addition, results benefited from hedging gains that were partially offset by losses on inventory as market prices declined during the quarter. uzi yemin, chairman, president and chief executive officer of delek us stated, “our results showed a significant improvement on a year-over-year basis in the third quarter as we benefited from our access to 87,000 barrels per day of midland sourced crude, which traded $9.85 per barrel below cushing. in addition, crude throughput at our el dorado refinery was up 20% on a year-over-year basis due to our ability to process additional barrels of light crude. our retail segment results benefited from a 5.1% year-over-year increase in same store fuel gallons sold and the logistics segment performance improved compared to the third quarter 2013.” yemin continued, “during the quarter, we made progress on our tyler expansion project that is expected to be completed in the first quarter 2015, which should increase our aggregate crude throughput capacity at both refineries from the current 140,000 barrels per day to 155,000 barrels per day. further, we have identified an avenue to supply additional midland crude through existing pipelines, which should be in place in early 2015 to support the incremental production. based on current crude oil price differentials, this should enhance the economic return from this expansion.” yemin concluded, “on a year-to-date basis, we have generated approximately $474 million of contribution margin, paid approximately $45 million in dividends, and repurchased $42 million of stock. our financial position is solid. we continue to invest in our business and allocate capital to our current share repurchase program with a focus on creating long-term value for our shareholders.” tyler turnaround and expansion update during the first quarter 2015, the tyler refinery will conduct its scheduled turnaround and replace the fluid catalytic cracking reactor. in addition, work has continued on a project to expand the crude nameplate capacity at the tyler refinery by 15,000 barrels per day to 75,000 barrels per day. this expansion project is expected to cost approximately $70.0 million, of which approximately $34.0 million has been spent through september 2014. both the turnaround, which is expected to commence in late january, and the expansion project are expected to be completed by mid-march. several steps are underway to support this expansion. access to an additional 10,000 barrels per day of crude oil has been identified through existing pipelines that should allow the tyler expansion to be supported primarily by midland sourced crude. this would increase delek us' access to midland sourced crude to 97,000 barrels per day, and is expected to be in place in early 2015. also, steps have been taken to increase light product distribution options at tyler. for example, delek logistics partners, lp is improving the efficiency at its tyler, texas terminal to handle additional trucks and also purchased a terminal in mount pleasant, texas. in addition, by using trucks and a third party pipeline, the tyler refinery has the ability to ship incremental product to the dallas market. regular quarterly dividend delek us announced today that its board of directors declared its regular quarterly cash dividend of $0.15 per share. shareholders of record on november 25, 2014 will receive this cash dividend payable on december 16, 2014. liquidity update as of september 30, 2014, delek us had a cash balance of $497.7 million and total debt of $594.2 million, resulting in net debt of $96.5 million. this compares to $56.1 million of net debt at june 30, 2014. as of september 30, 2014, delek us’ subsidiary, delek logistics partners, lp (nyse: dkl) (“delek logistics”), had a cash balance of approximately $0.7 million and $230.0 million of debt, which is included in the consolidated amounts on delek us’ balance sheet. excluding delek logistics, delek us had approximately $497.0 million in cash and $364.2 million of debt, or a $132.8 million net cash position. share repurchase update during the third quarter, 1,005,657 shares were repurchased for approximately $33.7 million. these repurchases were completed at an average price of $33.45 per share. the total amount repurchased under this program for the nine months ended september 30, 2014 was 1,265,901 shares for approximately $41.6 million, which equates to an average price of $32.82 per share. shares under the program may be repurchased from time to time in the open market or through privately negotiated transactions, subject to market conditions and other factors. the $100 million repurchase authorization will expire on december 31, 2014, and as of september 30, 2014, $58.4 million of authority remained. refining segment three months ended september 30, refining contribution margin increased to $151.1 million compared to $29.1 million in the third quarter 2013. improved year-over-year performance in the refining segment can be attributed to several factors. first, the wti midland crude discount to wti cushing was significantly wider on a year-over-year basis, averaging $9.85 per barrel in third quarter 2014 compared to an average of $0.28 per barrel in the prior-year period. second, higher throughput at the el dorado refinery on a year-over-year basis improved contribution margin as well. third, the benchmark gulf coast 5-3-2 crack spread averaged $15.05 per barrel during the third quarter 2014, compared with $12.30 per barrel during third quarter 2013. finally, lower crude oil prices improved the profitability of residual products, including asphalt, on a year-over-year basis. these factors more than offset a futures market that was backwardated during the third quarter 2014, compared to a market that was in contango during the third quarter 2013. effective april 1, 2014, delek us revised the structure of the internal financial information, which resulted in a change in the composition of our reportable segments. as a result of these changes, the results of hedging activity previously reported in corporate, other and eliminations in the financial segment data tables are now included in our refining segment and allocated to each refinery based on total throughput. prior year period results have also been adjusted to include this change. tyler, texas refinery three months ended september 30, during the third quarter 2014, refining margin improved year-over-year at tyler primarily due to a wider discount between midland and cushing crude oil. this refinery currently has access to approximately 52,000 barrels per day of midland sourced crude. total operating expense decreased primarily due to lower insurance and supplies expenses versus the prior-year period. el dorado, arkansas refinery three months ended september 30, crude throughput increased year-over-year at the el dorado refinery as it was able to process additional barrels of light crude following work that was completed during its turnaround in the first quarter 2014. this translated into a higher sales volume during the period. additionally, results benefited from a wider discount between midland and cushing crude oil as well as improved margins on residual products, including asphalt, due to a lower crude oil price environment on a year-over-year basis. direct operating expense decreased year-over-year due to lower outside services, maintenance and repair expenses. 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 2014 was $23.7 million compared to $16.1 million in the third quarter 2013. on a year-over-year basis, this increase was due to delek logistics’ acquisition of the product terminal and substantially all of the storage tank assets at the el dorado refinery in february 2014 from subsidiaries of delek us, as well as third party acquisitions of the hopewell pipeline in east texas in july 2013 and the north little rock terminal in october 2013. expenses associated with the el dorado, arkansas tank farms and product terminals were reclassified from the refining segment to the logistics segment in the third quarter 2013. also contributing to higher year-over-year results was an improvement in the gross margin per barrel in the west texas business, as well as increased volumes on the lion pipeline system as it supported higher throughput at the el dorado refinery. retail segment three months ended september 30, retail segment contribution margin decreased slightly year-over-year primarily due to higher operating expenses, which were partially offset by higher fuel gallons sold and increased merchandise sales. fuel gallons sold increased to 116.1 million from 102.5 million in the prior-year period and merchandise sales increased to $107.0 million compared to $102.6 million. on a same store sales basis, fuel gallons increased 5.1% and merchandise sales increased 2.5% from third quarter 2013. higher operating expenses on a year-over-year basis were primarily due to credit card, advertising and employee related expenses. during the third quarter 2014, four new large-format stores were opened bringing the total to 63 large-format stores in the portfolio. one additional large-format store is expected to be opened during the remainder of 2014. third quarter 2014 results | conference call information delek us will hold a conference call to discuss its third quarter 2014 results on thursday, november 6, 2014 at 9:00 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, at least 15 minutes prior to the call to register, download and install any necessary software. for those who cannot listen to the live broadcast, a telephonic replay will be available through february 6, 2015 by dialing (855) 859-2056, passcode 17088963. 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 held on november 5, 2014 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 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 (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 366 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: gains and losses from derivative instruments; 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; operating hazards inherent in transporting, storing and processing crude oil and intermediate and finished petroleum products; 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; 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. delek us holdings, inc. condensed consolidated balance sheets and per share data) (480.9 ) (79.5 ) delek us holdings, inc. condensed consolidated statements of income three months ended september 30, 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 three months ended september 30, nine months ended september 30, three months ended september 30, nine months ended september 30, logistics segment three months ended september 30, nine months ended september 30, retail segment three months ended september 30, nine months ended september 30, (1) sales volume includes 1,810 bpd and 1,117 bpd sold to the logistics segment during the three and nine months ended september 30, 2014, respectively, and 532 bpd and 1,157 bpd during the three and nine months ended september 30, 2013, respectively. sales volume also includes sales of 2,518 bpd and 3,746 bpd of intermediate and finished products to the el dorado refinery during the three and nine months ended september 30, 2014, respectively, and 156 bpd and 433 bpd of intermediate and finished products during the three and nine months ended september 30, 2013, respectively. (2) sales volume includes 2,792 bpd and 3,559 bpd of produced finished product sold to the retail segment during the three and nine months ended september 30, 2014, respectively, and 1,677 bpd and 2,086 bpd during the three and nine months ended september 30, 2013, respectively. sales volume also includes 945 and 1,420 bpd of produced finished product sold to the tyler refinery during the three and nine months ended september 30, 2014, respectively, and 834 and 877 bpd during the three and nine months ended september 30, 2013, respectively. sales volume excludes 14,597 bpd and 13,319 bpd of wholesale activity during the three and nine months ended september 30, 2014, respectively, and 19,750 bpd and 21,534 bpd of wholesale activity during the three and nine months ended september 30, 2013, respectively. (3) excludes jet fuel and petroleum coke (4) excludes bulk ethanol and biodiesel (5) consists of terminalling throughputs at our tyler and big sandy, texas north little rock and el dorado, arkansas, and memphis and nashville, tennessee terminals. throughputs for the tyler, texas terminal are presented for the third quarter of 2014. prior to july 27, 2013, the logistics segment did not record revenue for throughput at the tyler, texas terminal. throughputs for the north little rock terminal are presented for the third quarter of 2014 following its acquisition in october 2013. throughputs for the big sandy terminal are presented for the third quarter of 2014, following its commencement of operations in december 2013. throughputs at the el dorado, arkansas terminal are for the period from february 10, 2014 through september 30, 2014. prior to february 10, 2014, the logistics segment did not record revenue for throughput at the el dorado, arkansas terminal. throughputs for the memphis and nashville, tennessee terminals are for all periods presented.
