Results for the three months ended June 30, 2009 were also impacted by the effects of a fire at the Company's Tyler, Texas, refinery on Nov. 20, 2008. The Tyler refinery was subject to a gradual, monitored restart in early May 2009, culminating in a full resumption of operations on May 18, 2009.[image-nocss]
Delek US reported net income from continuing operations of $26.3 million, or $0.48 per diluted share, in the second quarter 2009, vs. net income from continuing operations of $3.3 million, or $0.06 per diluted share, in the second quarter 2008. Excluding special items, the company reported adjusted net income from continuing operations of $12.8 million, or $0.24 per diluted share, in the second quarter 2009.
During the second quarter, Delek US recorded income of $57.6 million related to claims under the company's property damage and business interruption insurance policies, including $37.0 million from the company's business-interruption policy and $17.3 million from its property-damage policy, net of $3.3 million in property-damage expenses. Since the start of the third quarter on July 1, 2009, the company has received cash payments and approvals for payments totaling $12 million. The company believes it will receive additional insurance proceeds as claims are finalized.
"The Tyler refinery resumed operations during the second quarter 2009," said Uzi Yemin, president and CEO of Delek US. "Our second-quarter results benefited from the receipt of more than $57 million in gross insurance proceeds, in addition to a significant decline in commodity prices when compared to the prior year period. The discretionary upgrades and capital improvements made in connection with the rebuild process are now complete, positioning us to take advantage of a more flexible crude slate, as refining economics allow."
Retail Segment
Retail segment contribution margin declined to $9.9 million in the second quarter 2009, compared to $15.6 million in the second quarter 2008. The year-over-year decline in contribution margin was primarily attributable to lower retail fuel margins when compared to the prior year period.
Second quarter 2009 retail margins were 12.3 cents per gallon, compared to 17.4 cents per gallon in the second quarter 2008. Same-store retail fuel gallons sold declined 0.8% in the second quarter. Coordinated marketing efforts initiated in early June helped to improve store traffic exiting the second quarter and into the early weeks of July.
The retail segment reported a 1.3% same-store merchandise sales decline in the second quarter. An increase in cigarette and other tobacco sales was offset by declines in the beer and dairy categories. Merchandise margin for the three months ended June 30, 2009, was 30.1%, vs. 31.8% in the second quarter 2008.
In the first six months of 2009, the retail segment reimaged 21 stores. From the start of the company's reimaging program in 2006 through June 30, 2009, the retail segment had reimaged approximately 25% of the company's total store base.
During the fourth quarter 2008, the company's Virginia operations were reclassified to discontinued operations and the assets and liabilities associated with the remaining stores are reflected as "held for sale" for all periods. As of June 30, 2009, the company had sold 27 of the 36 Virginia stores.
Marketing Segment
Marketing-segment contribution margin was $7.7 million in the second quarter 2009, compared to $6.1 million in the second quarter 2008.
The marketing segment received $6.3 million intercompany fees from the refining segment during the second quarter 2009, including $4.3 million related to marketing services. The balance of $2.0 million was for services provided under the intercompany pipeline and storage agreement.
Refining Segment
Refining contribution margin increased to $58.3 million in the second quarter 2009, compared to $20.5 million in the second quarter 2008. Refining-segment financial results for the three months ended June 30, 2009, are not comparable to the prior year due to a fire at the Tyler refinery.
Refining margin, adding back inter-company marketing fees of $1.97 per barrel, was $14.52 per barrel sold, compared to $10.49 per barrel sold for the same quarter last year. Second-quarter 2009 refining margins benefited from several factors when compared to the year ago quarter, most notable of which was a year-over-year decline of nearly 50% in the average price of WTI to less than $70 per barrel.
Delek US Holdings Inc. is a diversified energy business focused on petroleum refining, marketing and supply of refined products, and retail marketing of fuel and general merchandise. The marketing and supply segment markets refined products through its terminals in Abilene, Texas and San Angelo, Texas, as well as other third party terminals. The retail segment markets gasoline, diesel and other refined petroleum products and convenience merchandise through a network of company-operated retail fuel and convenience stores, operated under the MAPCO Express, MAPCO Mart, East Coast, Discount Food Mart, Fast Food and Fuel and Favorite Markets brand names.
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