Losses Widen for Delek US, Western Refining
BRENTWOOD, Tenn. -- Delek US Holdings Inc., a refiner, petroleum marketer and operator of the MAPCO Express chain of convenience stores, saw its net loss for the first quarter 2010 widen due to poor weather and lower refining economies in the Gulf Coast.
For the three months ended March 31, 2010, Delek US reported a net loss from continuing operations of $14.1 million, vs. a net loss of $1.4 million in the first quarter 2009. Excluding special items, the company reported an adjusted net loss from continuing operations of $14.0 million, compared to an adjusted net loss of $2.4 million in the year ago quarter,
"Our first quarter results were adversely impacted by a combination of severe winter weather in several of our core retail markets during January and February, in addition to weak Gulf Coast refining economics which persisted for most of the quarter," Uzi Yemin, president and CEO of Delek US, said in a statement. "Within our retail segment, same-store merchandise sales improved for the third consecutive quarter during the first quarter 2010, due in part to increased contributions from our reimaged store locations open more than one year. A slight decline in our same-store fuel gallons sold was offset by an increase in our first quarter retail fuel margin, when compared to the year-ago period."
Delek US' retail segment contribution margin was $7.4 million in the first quarter, compared to $7.3 million in the first quarter a year ago. An increase in retail fuel margin offset a slight decline in same-store fuel gallons sold and merchandise margin when compared to year-ago levels, the company stated.
Same-store merchandise sales increased 1.2 percent in the first quarter 2010, compared to a same-store decline of 4.4 percent in the first quarter 2009. This improvement was favorably impacted by strong contributions from the company's reimaged MAPCO store locations, along with an improvement in the company's fresh foodservice programs.
Merchandise margin declined to 30.8 percent in the first quarter 2010, vs. 32.0 percent in the prior year period, due to tight margins in the company's cigarette and dairy categories.
At the forecourt, same-store fuel gallons sold declined 0.3 percent in the first quarter 2010, compared to a same-store sales decline of 2.2 percent in first quarter 2009. The retail segment sold a total of 103.0 million gallons during the first quarter 2010, compared to 106.7 million gallons in the prior year period. Retail fuel margin was 12.9 cents per gallon in the first quarter of this year, compared to 11.2 cents per gallon in the prior year period.
Meanwhile, the company's refining segment operated for 90 days during the first quarter 2010, and was not in operation during the first quarter 2009 due to a fire at the Tyler refinery Nov. 20, 2008. Refining contribution margin was $2.5 million in the first quarter 2010, vs. $14.6 million in the first quarter 2009, during which the company also recorded $1.6 million in income from property damage insurance claims, net of expense, and $21.1 million of income on business interruption insurance claims related to the fire, Delek US stated.
Gulf Coast refining economics remained challenging for most of the first quarter 2010, as
The price of West Texas Intermediate crude, the Tyler refinery's primary feedstock, increased more than 80 percent between the first quarter 2009 and the first quarter 2010, the company stated. Refining margin was $6.24 per barrel sold in the first quarter 2010, compared to $3.91 per barrel sold in the fourth quarter 2009.
At the end of the first quarter 2010, Delek US had $40.3 million in cash and $313.5 million in debt, totaling a net debt of $273.2 million. During the first quarter 2010, Delek US applied taxable losses generated in 2009 against taxes paid in prior years, resulting in a net operating loss carryback. As a result, the company received a federal tax refund of nearly $40 million cash during the second quarter 2010, which it said should serve to enhance the company's liquidity position.
"As a management team, we remain focused on a return to profitable growth and continued balance sheet discipline. From a liquidity perspective, we remain well-positioned to reinvest in strategic growth initiatives that further our plan for long-term value creation," Yemin concluded. "Entering the second quarter, we have experienced increased demand for refined products sold in our refining, retail and marketing segments. This uplift in demand is primarily attributable to a combination of favorable seasonal trends and improving economic conditions in our regional markets."
In other earnings news, El Paso, Texas-based Western Refining Inc. reported a net loss of $30.7 million for its first quarter ended March 31, 2010. This is compared to net earnings of $58.9 million in the first quarter 2009. Excluding special items, net income was $51.7 million for the first quarter in 2009.
The company attributed the year-over-year decline in net income to lower refined product margins driven by weakness in finished product prices relative to crude and feedstock costs, along with a turnaround at its El Paso refinery and planned maintenance at the Gallup refinery.
"We saw improvement in refining margins throughout the quarter, especially when compared to the extremely low margin environment of last October and November," Jeff Stevens, president and CEO, said in a statement. "During the quarter, we also continued to see a positive impact on earnings from our cost savings initiatives."
Western Refining's retail segment saw net sales increase to $158.58 million in the first quarter 2010, from $132.67 in the year ago quarter. Operating income declined to $1.15 million, from $1.81 million a year ago.
Through the company's 150 convenience stores and fuel stations, it sold 46.36 million gallons during the first quarter 2010, compared to 49.30 million gallons in the comparable quarter. The company's per-gallon fuel margin for the first quarter was 15 cents, compared to 16 cents a year prior.
Merchandise sales totaled $42.75 million in the 2010 first quarter, compared to $43.93 in the first quarter 2009. Merchandise margin also dipped slightly to 27.9 percent, from 28.0 percent a year ago.
In 2009, Western announced planned reductions in operating expenses and cost reductions estimated to total $50 million annually. Through the first quarter of 2010, Western is ahead of schedule in realizing its 2010 cost reduction goal and continues to pursue additional savings opportunities, according to the company.
"Based on what we are seeing in our business, the overall economy seems to be strengthening. Also, we have seen an increase in sales of diesel fuel to our industrial and commercial customers based on improvements in their businesses. As we enter the driving season, we are cautiously optimistic in our outlook for demand and margins for refined products. Additionally, with our continued focus on operational efficiencies, we believe we are well-positioned for improved results," Stevens said.
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For the three months ended March 31, 2010, Delek US reported a net loss from continuing operations of $14.1 million, vs. a net loss of $1.4 million in the first quarter 2009. Excluding special items, the company reported an adjusted net loss from continuing operations of $14.0 million, compared to an adjusted net loss of $2.4 million in the year ago quarter,
"Our first quarter results were adversely impacted by a combination of severe winter weather in several of our core retail markets during January and February, in addition to weak Gulf Coast refining economics which persisted for most of the quarter," Uzi Yemin, president and CEO of Delek US, said in a statement. "Within our retail segment, same-store merchandise sales improved for the third consecutive quarter during the first quarter 2010, due in part to increased contributions from our reimaged store locations open more than one year. A slight decline in our same-store fuel gallons sold was offset by an increase in our first quarter retail fuel margin, when compared to the year-ago period."
Delek US' retail segment contribution margin was $7.4 million in the first quarter, compared to $7.3 million in the first quarter a year ago. An increase in retail fuel margin offset a slight decline in same-store fuel gallons sold and merchandise margin when compared to year-ago levels, the company stated.
Same-store merchandise sales increased 1.2 percent in the first quarter 2010, compared to a same-store decline of 4.4 percent in the first quarter 2009. This improvement was favorably impacted by strong contributions from the company's reimaged MAPCO store locations, along with an improvement in the company's fresh foodservice programs.
Merchandise margin declined to 30.8 percent in the first quarter 2010, vs. 32.0 percent in the prior year period, due to tight margins in the company's cigarette and dairy categories.
At the forecourt, same-store fuel gallons sold declined 0.3 percent in the first quarter 2010, compared to a same-store sales decline of 2.2 percent in first quarter 2009. The retail segment sold a total of 103.0 million gallons during the first quarter 2010, compared to 106.7 million gallons in the prior year period. Retail fuel margin was 12.9 cents per gallon in the first quarter of this year, compared to 11.2 cents per gallon in the prior year period.
Meanwhile, the company's refining segment operated for 90 days during the first quarter 2010, and was not in operation during the first quarter 2009 due to a fire at the Tyler refinery Nov. 20, 2008. Refining contribution margin was $2.5 million in the first quarter 2010, vs. $14.6 million in the first quarter 2009, during which the company also recorded $1.6 million in income from property damage insurance claims, net of expense, and $21.1 million of income on business interruption insurance claims related to the fire, Delek US stated.
Gulf Coast refining economics remained challenging for most of the first quarter 2010, as
The price of West Texas Intermediate crude, the Tyler refinery's primary feedstock, increased more than 80 percent between the first quarter 2009 and the first quarter 2010, the company stated. Refining margin was $6.24 per barrel sold in the first quarter 2010, compared to $3.91 per barrel sold in the fourth quarter 2009.
At the end of the first quarter 2010, Delek US had $40.3 million in cash and $313.5 million in debt, totaling a net debt of $273.2 million. During the first quarter 2010, Delek US applied taxable losses generated in 2009 against taxes paid in prior years, resulting in a net operating loss carryback. As a result, the company received a federal tax refund of nearly $40 million cash during the second quarter 2010, which it said should serve to enhance the company's liquidity position.
"As a management team, we remain focused on a return to profitable growth and continued balance sheet discipline. From a liquidity perspective, we remain well-positioned to reinvest in strategic growth initiatives that further our plan for long-term value creation," Yemin concluded. "Entering the second quarter, we have experienced increased demand for refined products sold in our refining, retail and marketing segments. This uplift in demand is primarily attributable to a combination of favorable seasonal trends and improving economic conditions in our regional markets."
In other earnings news, El Paso, Texas-based Western Refining Inc. reported a net loss of $30.7 million for its first quarter ended March 31, 2010. This is compared to net earnings of $58.9 million in the first quarter 2009. Excluding special items, net income was $51.7 million for the first quarter in 2009.
The company attributed the year-over-year decline in net income to lower refined product margins driven by weakness in finished product prices relative to crude and feedstock costs, along with a turnaround at its El Paso refinery and planned maintenance at the Gallup refinery.
"We saw improvement in refining margins throughout the quarter, especially when compared to the extremely low margin environment of last October and November," Jeff Stevens, president and CEO, said in a statement. "During the quarter, we also continued to see a positive impact on earnings from our cost savings initiatives."
Western Refining's retail segment saw net sales increase to $158.58 million in the first quarter 2010, from $132.67 in the year ago quarter. Operating income declined to $1.15 million, from $1.81 million a year ago.
Through the company's 150 convenience stores and fuel stations, it sold 46.36 million gallons during the first quarter 2010, compared to 49.30 million gallons in the comparable quarter. The company's per-gallon fuel margin for the first quarter was 15 cents, compared to 16 cents a year prior.
Merchandise sales totaled $42.75 million in the 2010 first quarter, compared to $43.93 in the first quarter 2009. Merchandise margin also dipped slightly to 27.9 percent, from 28.0 percent a year ago.
In 2009, Western announced planned reductions in operating expenses and cost reductions estimated to total $50 million annually. Through the first quarter of 2010, Western is ahead of schedule in realizing its 2010 cost reduction goal and continues to pursue additional savings opportunities, according to the company.
"Based on what we are seeing in our business, the overall economy seems to be strengthening. Also, we have seen an increase in sales of diesel fuel to our industrial and commercial customers based on improvements in their businesses. As we enter the driving season, we are cautiously optimistic in our outlook for demand and margins for refined products. Additionally, with our continued focus on operational efficiencies, we believe we are well-positioned for improved results," Stevens said.
Related News:
Delek Group Sees Positive Q4, '09 Results
CSNews Exclusive: MAPCO Reportedly Puts an End to Grille Marx
MAPCO Brings Virginia Stores Back Online