Delek U.S. Retail Continues Momentum

BRENTWOOD, Tenn. -- Delek U.S. Holdings Inc., operator of the MAPCO convenience store chain, reported a decline in net income for both the fourth quarter and full-year 2010 compared to a year ago, while its retail segment showed gains for the sixth consecutive quarter, thanks to food service and private label sales initiatives.

For the three months ended Dec. 31, 2010, Delek U.S. reported a net loss from continuing operations of $70.9 million versus a net loss from continuing operations of $21.1 million in the fourth quarter 2009. Excluding special items, the adjusted net loss from continuing operations was $7.8 million in the fourth quarter 2010, versus an adjusted net loss from continuing operations of $27.0 million in the fourth quarter 2009.

For the full-year 2010, the net loss from continuing operations totaled $79.9 million, versus net income from continuing operations of $2.3 million in 2009. Excluding special items, the adjusted net loss from continuing operations was $19.4 million in 2010, versus an adjusted net loss from continuing operations of $22.4 million in 2009.

“During 2010, we secured more than $500 million in long-term financing for our subsidiaries and continued to invest in our retail store network," stated Uzi Yemin, president and CEO of Delek U.S. Holdings. “Gulf Coast refining economics have improved significantly during the first quarter 2011, when compared to the year-ago period. As we look to the year ahead, we remain focused on the expansion of our retail footprint through new store construction. In addition, we have retained Morgan Keegan to assist MAPCO in locating and evaluating retail acquisition opportunities in both new and existing markets," concluded Yemin.

As of Dec. 31, 2010, Delek U.S. had $49.1 million in cash and $295.8 million in debt, resulting in a net debt position of $246.7 million.

Regarding the retail segment, same-store merchandise sales increased on a year-over-year basis for a sixth consecutive quarter, as food service and private label sales initiatives continued to gain momentum. Higher crude oil prices put downward pressure on retail fuel margins during the fourth quarter, while also contributing to higher retail fuel prices, the latter of which contributed to a modest decline in same-store fuel sales (gallons) during the period.

Same-store merchandise sales increased 4.4 percent in the fourth quarter 2010, compared to a same-store sales increase of 5.0 percent in the fourth quarter 2009. Same-store food service sales increased 14.3 percent during the fourth quarter 2010, driven by increased penetration of fresh and prepared food concepts throughout the retail network. Same-store private label sales were approximately 4 percent of total merchandise sales during the fourth quarter 2010, increasing more than 60 percent when compared to the prior-year period.

Merchandise margin declined to 29.8 percent in the fourth quarter 2010, versus 30.2 percent in the fourth quarter 2009. The decline was primarily attributable to increased promotional activity surrounding the launch of new private label products and event-related discounts throughout the holiday season.

Same-store sales of fuel (gallons) declined less than 1 percent in the fourth quarter 2010, versus an increase of 4.2 percent in the prior-year period. The retail segment sold a total of 103.2 million retail gallons during the three months ended Dec. 31, 2010, versus 108.7 million gallons in the prior year period. At the conclusion of the fourth quarter 2010, the retail segment operated 412 locations, versus 442 locations in the prior-year period.

Retail fuel margin was 13.1 cents per gallon in the fourth quarter 2010, compared to 12.9 cents per gallon in the fourth quarter 2009. During the fourth quarter 2010, the retail segment blended fewer gallons of ethanol due to less favorable blending economics, when compared to the prior-year period.

As of December 31, 2010, more than 30 percent of the 412 stores in operation were classified as locations that had been either re-imaged or recently constructed. During 2011, the company intends to re-image at least 25 locations and build 10 to 20 sites in both new and existing markets.