Delek US Holdings, Inc Q2 2010 Earnings Conference Call Transcript

Delek US Holdings, Inc Q2 2010 Earnings Conference Call Transcript
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Delek US Holdings, Inc. (DK)

Q2 2010 Earnings Call

August 05, 2010 11:00 a.m. ET

Executives

Noel Ryan - Director, IR

Mark Cox - EVP & CFO

Uzi Yemin - President & CEO

Fred Green - President & COO

Analysts

Paul Cheng - Barclays Capital

Ben Brownlow - Morgan Keegan

Presentation

Operator

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» Delek US Holdings, Inc. Q1 2010 Earnings Call Transcript
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» Delek US Holdings, Inc. Q2 2009 Earnings Call Transcript

Good morning, my name is my name is Regina and I will be your conference operator for today. At this I would like to welcome everyone to the Delek Second Quarter 2010 Earnings Conference Call. (Operator Instructions).

Thank you. I would now like to turn the conference over to Mr. Noel Ryan, Director of Investor Relations. Sir, you may begin your conference.

Noel Ryan

Thank you Regina. Good morning everyone and welcome to the Delek US Holdings conference call for the second quarter of 2010. Our hosts for today's call are Uzi Yemin, President and Chief Executive Officer and Mark Cox, Chief Financial Officer of Delek US. Other members of the management team will be available during the question-and-answer portion of the call.

As a reminder, the conference call may contain forward-looking statements as the term is defined under the federal securities laws. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words believes, anticipates, plans, expects and similar expressions are intended to identify forward-looking statements.

You are cautioned that these statements may be affected by important factors set forth in Delek's filings with the Securities and Exchange Commission and in today's new release. As a result, actual operations or results may differ materially from the results discussed in the forward-looking statements.

We undertake no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise. Today's call is being recorded and will be available for replay beginning today and ending August 19, 2010 by dialing 800-642-1687 with the confirmation ID number 84169376. An online replay may also be accessed for the next 90 days at the company's website at www.DelekUS.com.

During today's call I will begin with an overview of our financial performance in the second quarter of 2010. Mark will then follow with the review of our capital spending, liquidity and results from operations within each of our three business segments for the period ended June 30, 2010. Uzi will then conclude with a high level outlook as we transition to the third quarter and the remainder of 2010. At the conclusion of these prepared remarks, we will open the call for questions.

For the three months ended June 30, 2010 Delek US reported a net income from continuing operations of $15 million or $0.28 per diluted share versus net income from continuing operations of $29.6 million or $0.54 per diluted share in the second quarter 2009. Excluding special items, the company reported an adjusted net income from continuing operations of $12.3 million or $0.23 per diluted share in the second quarter 2010 versus adjusted net income of $13 million or $0.24 per diluted share in the second quarter 2009.

Business conditions improved across each of the company's three operating segments during the second quarter resulting in a return to profitability. Within the refining segment, Gulf Coast refining economics increased significantly during the period as evidenced by a substantial increase in the benchmark Gulf Coast 5-3-2 crack spread when compared to the first quarter 2010 and the year ago period.

Accordingly we operated the Tyler refinery at or near peak capacity for the duration of the second quarter, often times reaching levels in excess of 60,000 barrels per day of production. In addition, for the second consecutive quarter Tyler's realized margin, defined as our refining margin as a percentage of the Gulf Coast 5-3-2 crack spread exceeded 90% during the period.

Within the retail segment elevated retail fuel margins improved merchandised margins and a continued improvement in same store sales of fuel gallons and merchandise helped to produce one of the quarters of retail in nearly two years. Overall it was a strong start to a seasonally strong period of the year for each of our businesses.

Before I hand over to Mark, allow me to provide some color on our general and administrative expenses, depreciation and amortization expense and interest expense incurred during the second quarter 2010. Total operating expense was 55.8 million in the second quarter 2010 versus 56.7 million in the second quarter 2009.

Even though the Tyler refinery operated for only 44 days during the second quarter 2009 versus 91 days in the second quarter 2010, substantial operating expenses related to the May 2009 restart of the refinery were incurred during the second quarter 2009, which helps to explain why OpEx on a year-over-year basis was relatively flat.

General and administrative expense declined 0.8 million to 14.8 million in the second quarter 2010 versus 15.6 million in the second quarter 2009. The decline in G&A expense was due primarily to a decline in administrative and labor expenses in the refining segment as well as a decline in administrative expenses in the marketing segment, both of which more than offset an increase in labor expense at retail.

Depreciation and amortization expense increased 3.5 million to 16 million in the second quarter 2010 versus 12.5 million in the second quarter 2009. The increase is due mainly to 2.6 million of increased depreciation expense within the refining segment related to multiple capital projects at the Tyler refinery completed in 2009.

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