DALLAS -- Excluding special items, Alon USA Energy Inc. has reported net income for third-quarter 2006 of $46.5 million, or $1 per share, compared to $19.4 million, or 45 cents per share, for the same period last year. Including special items, net income for third-quarter 2006 was $38.1 million, or 82 cents per share, compared to $24.4 million, or 57 cents per share, for the same period last year.
Alon completed the acquisition of Paramount Petroleum Corp. on Aug. 4, 2006, with an effective date of July 31, 2006. The results include the operations of [image-nocss] Paramount for August and September 2006 and of 40 stores acquired from Good Time Stores for July, August and September 2006. Additionally during the quarter, Alon completed the acquisition of Edgington Oil Co. on Sept. 28, 2006. The purchase of Edgington has no impact on Alon's third-quarter results.
Special items for the third quarter included a $6.4 million after-tax LIFO noncash charge to cost of sales related to the difference between the fair market value of the inventories acquired from Paramount on July 31, 2006 and Alon's recorded amounts under LIFO accounting attributable to those inventories; a $1.6 million after-tax charge relating to the prepayment of a loan by a wholly-owned subsidiary; and a $1.8 million after-tax charge for a special employee bonus payment related to special dividend payments on Sept. 14, 2006. Special items for the three months ended Sept. 30, 2006, and 2005 also included $1.4 million and $5 million, respectively, of after-tax gain recognized on disposition of assets in connection with the contribution of certain pipeline and terminal assets to Holly Energy Partners LP in first-quarter 2005.
For the nine months ended Sept. 30, 2006, Alon's net income was $112.5 million, or $2.41 per share, compared to $51.3 million, or $1.36 per share, for the nine months ended Sept. 30, 2005, excluding special items in both years. Including special items, net income for the nine-month period was $135.4 million, or $2.90 per share, compared to net income of $74.3 million, or $1.98 per share, for the nine months ended Sept. 30, 2005.
Special items for the nine months included $36.9 million of after-tax gain relating to the sale of Alon's inactive Amdel and White Oil crude oil pipelines to an affiliate of Sunoco Logistics Partners LP in first-quarter 2006, and to the contribution of certain pipeline and terminal assets to HEP in first-quarter 2005; $5.8 million of after-tax interest expense resulting from the prepayment of Alon's $100 million term loan facility and the prepayment of a loan by a wholly-owned subsidiary; the $6.4 million noncash after-tax LIFO charge discussed above; and the $1.8 million after-tax charge for special employee bonuses discussed above. Special items for the nine months included $23 million of after-tax gain recognized in connection with the contribution of certain pipeline and terminal assets to HEP.
The increases in net income for the three- and nine-month periods over the comparable periods in 2005 were primarily attributable to higher refinery production and continued favorable differentials between WTI and WTS crude oil.
During the third quarter, Alon completed the acquisition of three refineries, seven asphalt terminals and 40 retail stores. The Paramount and Edgington refinery acquisitions are consistent with Alon's general business strategy of increasing cash flow and earnings through the acquisition of assets or businesses that are logical extensions of its existing assets or businesses.
The addition of the Paramount and Edgington assets has also increased the geographic diversity of Alon's refining and marketing and asphalt segments network by allowing Alon to expand throughout the Southwest and up the West Coast. With the addition of the Paramount and Edgington refineries, Alon believes it has diversified the risks associated with being a single-asset refinery. Alon intends to apply its experience of increasing reliability, capacity and yields at its Big Spring, Texas, refinery to the newly acquired assets in order to maximize the return on these investments.
In addition, Alon completed the acquisition of 40 convenience stores in El Paso, Texas effective July 3, 2006. This acquisition gives Alon a leading market share in El Paso and is consistent with Alon's strategy of strengthening its integrated marketing sector.
Alon USA Energy, Dallas, is an independent refiner and marketer of petroleum products, operating primarily in the southwestern and western United States. The company owns and operates four sour and heavy-crude oil refineries in Texas, California and Oregon, with crude oil throughput capacity of approximately 170,000 barrels per day. Alon markets gasoline and diesel products under the FINA brand name and is a leading producer of asphalt. It also operates more than 200 convenience stores in West Texas and New Mexico under the 7-Eleven and FINA brand names and supplies motor fuels to these stores from its Big Spring refinery.
Click here to view Alon USA's third-quarter 2006 earnings conference call.
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