FRANKLIN, Tenn. -- Delek US Holdings Inc. said that for the second quarter and six months ended June 30, 2006, net income rose to a record $42.2 million, or 88 cents per diluted share, for second-quarter 2006 from $6.9 million, or 17 cents per diluted share, for second-quarter 2005. Net sales for the quarter increased 78% to $819.6 million compared with $459.7 million for second-quarter 2005.
The refining segment contribution margin increased to $67.6 million for second-quarter 2006 from $11.8 million for second-quarter 2005. The segment produced net [image-nocss] sales of $454.1 million in second-quarter 2006 compared with $190.1 million for second-quarter 2005.
The retail segment contribution margin for second-quarter 2006 was $15.2 million. The contribution margin reflected the 9.1% increase in the segment's merchandise sales for second-quarter 2006, to $82.4 million from $75.5 for second-quarter 2005, and included a 4% increase in same-store sales for the quarter. In addition, the number of convenience stores in operation increased to 349 at the quarter end from 329 at the same time in 2005. The merchandise margin increased to 30.8% for second-quarter 2006 from 30.2% and 30.5% on a comparable-quarter and sequential-quarter basis. This improvement was primarily the result of increased sales of higher margin items, such as food, coffee and fountain drinks, as well as the company's proprietary GrilleMarx branded food offerings that were introduced in first-quarter 2006.
The retail segment's total fuel sales for second-quarter 2006 increased 45.9% to $283.2 million from $194.1 million for second-quarter 2005, primarily because of the 31% increase in the average retail price per gallon of fuel to $2.75 for the latest quarter from $2.10 for the second quarter last year. The increase in the number of c-stores in operation accounted for substantially all of the comparable-quarter growth in retail fuel sales, to 95.2 million gallons from 86 million, as the rapid increase in fuel costs held same-store gallons sold fairly constant compared to the 2005 second quarter. The retail fuel margin rose to 16.1 cents per gallon for second-quarter 2006 from 15.5 cents per gallon for second-quarter 2005.
In spite of increased merchandise and retail fuel margins for the second quarter, the retail segment's contribution margin reflected increased credit card expenses, which rose $1.3 million, or 62.8%, due primarily to higher fuel prices as well as increases in interchange fees charged by several credit card providers. Furthermore, the retail segment increased self-insurance reserves for workers' compensation and general liability claims by approximately $1 million for second-quarter 2006, as a result of certain large claims incurred in first six months of 2006.
In addition to our strong operating performance for the second quarter, we also continued to build the foundation for future growth by signing two definitive purchase agreements during the quarter, which were consummated in the third quarter, said Uzi Yemin, president and CEO of Delek US. Through one of the transactions, we purchased terminal operations in new markets in west Texas, expanding our wholesale refined products distribution business and we obtained equipment that we expect will enhance our refinery productivity in Tyler. Through the other transaction, we added 43 retail fuel and convenience stores in northwest Georgia and southeast Tennessee, which complement our leading market positions in middle Tennessee and northern Alabama. During the second quarter, we also opened two additional MAPCO Marts, our next-generation convenience store concept, and re-opened one retro-fitted convenience store.
He added, We are committed to expanding both of the company's businesses through organic growth and acquisitions. In our refining business, we will continue to leverage the attractive niche market in which we operate the Tyler facility through ongoing investments to upgrade the capacity, efficiency and complexity of the operation. In our retail fuel and convenience store business, we are fully engaged in initiatives to expand same-store sales and achieve enhanced profitability within our existing store base. We also remain confident of the ongoing potential for attractive acquisitions within our existing geographic footprint or in contiguous markets.
Franklin, Tenn.-based Delek US operates a refinery in Tyler, Texas. Its retail segment markets gasoline, diesel and other refined petroleum products and convenience merchandise through a network of 389 company-operated retail fuel and c-stores, operated under the MAPCO Express, MAPCO Mart, East Coast and Discount Food Mart brand names. A majority of the company's stock is indirectly owned by Delek Group Ltd., an Israel-based conglomerate.
Separately, Dallas-based Alon USA Energy Inc. has reported net income of $43.1 million for second-quarter 2006, compared to net income of $27.5 million for second-quarter 2005, an increase of $15.6 million or 57%. Second-quarter 2006 earnings per share were 92 cents, compared to 79 cents for second-quarter 2005.
Net income for the six months ended June 30, 2006, was $97.3 million, compared to net income of $49.9 million for the six months ended June 30, 2005, an increase of $47.4 million or 95%. For the six months ended June 30, 2006, earnings per share were $2.08 compared to $1.43 for the six months ended June 30, 2005.
Net income for the three months ended June 30, 2006, and 2005 included $1.4 million and $1 million, respectively, of after-tax gain in connection with the contribution of certain pipeline and terminal assets to Holly Energy Partners LP in first-quarter 2005.
Net income for the six months ended June 30, 2006, included $35.7 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 and $4.2 million of after-tax interest expense resulting from the prepayment of Alon's $100 million term loan facility.
Jeff Morris, Alon USA's president and CEO, said, On July 5, 2006, we announced the acquisition of 40 Good Time Stores, which increased our Southwest Convenience Store retail segment to 207 stores.
Alon USA is an independent refiner and marketer of petroleum products, operating primarily in the southwestern and western United States. It owns and operates three refineries in Texas, California and Oregon. And it markets gasoline and diesel products under the FINA brand name and is a leading producer of asphalt. Alon also operates more than 200 c-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, Texas, refinery.
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