Alon USA Energy, Inc. Reports Fourth Quarter and Full Year 2013 Results

(1)

Includes excise taxes on sales by the retail segment of $18,454 and $17,082 for the three months ended December 31, 2013 and 2012, respectively, and $73,597 and $66,563 for the years ended December 31, 2013 and 2012, respectively.

(2)

Includes corporate headquarters selling, general and administrative expenses of $177 and $376 for the three months ended December 31, 2013 and 2012, respectively, and $721 and $960 for the years ended December 31, 2013 and 2012, respectively, which are not allocated to our three operating segments.

(3)

Includes corporate depreciation and amortization of $651 and $339 for the three months ended December 31, 2013 and 2012, respectively, and $2,673 and $2,127 for the years ended December 31, 2013 and 2012, respectively, which are not allocated to our three operating segments.

(4)

Interest expense for the year ended December 31, 2013 includes $8,467 for a prepayment premium and write-offs of unamortized original issuance discount and debt issuance costs recognized for prepayment of a portion of the Alon Refining Krotz Springs senior secured notes.

Interest expense for the three months and year ended December 31, 2012 includes charges of $27,576 for the write-offs of unamortized original issuance discount and debt issuance costs recognized for the repayment of the Alon USA Energy, Inc. term loans. Additionally, interest expense for the year ended December 31, 2012 includes a charge of $9,624 for the write-off of unamortized original issuance discount associated with our repayment of the Alon Brands Term Loan.

(5)

Other income (loss), net for the year ended December 31, 2012 is substantially the loss on heating oil call option crack spread contracts.

(6)

The following table provides a reconciliation of net income (loss) available to stockholders under United States generally accepted accounting principles ("GAAP") to adjusted net income (loss) available to stockholders utilized in determining adjusted earnings (loss) per share, excluding the after-tax loss on write-off of unamortized debt issuance costs, after-tax loss on write-off of unamortized original issuance discount, after-tax loss on debt prepayment premium, after-tax loss on heating oil call option crack spread contracts, after-tax unrealized (gains) losses on commodity swaps, after-tax costs associated with the unplanned reformer shutdown and repair and after-tax (gain) loss on disposition of assets. Our management believes that the presentation of adjusted net income (loss) available to stockholders and adjusted earnings (loss) per share, excluding these items, is useful to investors because it provides a more meaningful measurement for evaluation of our Company's operating results.

For the Three Months Ended

For the Year Ended

December 31,

December 31,

2013

2012

2013

2012

(dollars in thousands)

Net income (loss) available to stockholders

$

(13,985)

$

22,187

$

22,986

$

79,134

    Plus: Write-off of unamortized debt issuance costs, net of tax

1,442

5,416

1,442

5,416

    Plus: Write-off of unamortized original issuance discount, net of tax

1,442

11,632

1,442

17,413

    Plus: Debt prepayment premium, net of tax

3,643

—

3,643

—

    Plus: Loss on heating oil call option crack spread contracts, net of tax

—

—

—

4,413

    Plus: Unrealized (gains) losses on commodity swaps, net of tax

—

(2,817)

—

19,599

    Plus: Costs associated with the unplanned reformer shutdown and repair, net of tax

—

—

11,643

—

    Less: (Gain) loss on disposition of assets, net of tax

(549)

(281)

(6,683)

1,417

Adjusted net income (loss) available to stockholders

$

(8,007)

$

36,137

$

34,473

$

127,392

Adjusted earnings (loss) per share *

$

(0.12)

$

0.58

$

0.51

$

2.13

*

Adjusted earnings (loss) per share includes the effects of dividends on preferred stock on adjusted net income (loss) available to stockholders necessary to calculate earnings (loss) per share.

(7)

Adjusted EBITDA represents earnings before net income attributable to non-controlling interest, income tax expense, interest expense, depreciation and amortization, gain (loss) on disposition of assets, unrealized gains (losses) on commodity swaps and loss on heating oil call option crack spread contracts. Adjusted EBITDA is not a recognized measurement under GAAP; however, the amounts included in Adjusted EBITDA are derived from amounts included in our consolidated financial statements. Our management believes that the presentation of Adjusted EBITDA is useful to investors because it is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. In addition, our management believes that Adjusted EBITDA is useful in evaluating our operating performance compared to that of other companies in our industry because the calculation of Adjusted EBITDA generally eliminates the effects of net income attributable to non-controlling interest, income tax expense, interest expense, gain (loss) on disposition of assets, unrealized gains (losses) on commodity swaps and loss on heating oil call option crack spread contracts and the accounting effects of capital expenditures and acquisitions, items that may vary for different companies for reasons unrelated to overall operating performance.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

• Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;
• Adjusted EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt;
• Adjusted EBITDA does not reflect the prior claim that non-controlling interest have on the income generated by non-wholly-owned subsidiaries;
• Adjusted EBITDA does not reflect changes in or cash requirements for our working capital needs; and
• Our calculation of Adjusted EBITDA may differ from EBITDA calculations of other companies in our industry, limiting its usefulness as a comparative measure.

Because of these limitations, Adjusted EBITDA should not be considered a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only supplementally.

The following table reconciles net income (loss) available to stockholders to Adjusted EBITDA for the three months and years ended December 31, 2013 and 2012, respectively:

For the Three Months Ended

For the Year Ended

December 31,

December 31,

2013

2012

2013

2012

(dollars in thousands)

Net income (loss) available to stockholders

$

(13,985)

$

22,187

$

22,986

$

79,134

Net income attributable to non-controlling interest

1,692

8,705

25,129

11,463

Income tax expense

2,534

15,179

12,151

49,884

Interest expense

30,878

51,459

94,694

129,572

Depreciation and amortization

32,545

28,929

125,494

121,929

(Gain) loss on disposition of assets

(712)

(529)

(9,558)

2,309

Unrealized (gains) losses on commodity swaps

—

(5,522)

—

31,936

Loss on heating oil call option crack spread contracts

—

—

—

7,297

Adjusted EBITDA

$

52,952

$

120,408

$

270,896

$

433,524

(8)

Includes corporate capital expenditures of $213 and $961 for the three months ended December 31, 2013 and 2012, respectively, and $881 and $2,228 for the years ended December 31, 2013 and 2012, respectively, which are not allocated to our three operating segments.

(9)

Net sales include intersegment sales to our asphalt and retail segments at prices which approximate wholesale market prices. These intersegment sales are eliminated through consolidation of our financial statements.

(10)

Refinery operating margin is a per barrel measurement calculated by dividing the margin between net sales and cost of sales (exclusive of substantial hedge positions and certain inventory adjustments) attributable to each refinery by the refinery's throughput volumes. Industry-wide refining results are driven and measured by the margins between refined product prices and the prices for crude oil, which are referred to as crack spreads. We compare our refinery operating margins to these crack spreads to assess our operating performance relative to other participants in our industry.

The refinery operating margins exclude gains on commodity swaps of $2,567 and $23,900 for the three months and year ended December 31, 2013. The refinery operating margins for the three months and year ended December 31, 2013 excludes $4,313 of negative inventory effects and $3,828 of positive inventory effects, respectively.

The refinery operating margins exclude losses on commodity swaps of $24,252 and $116,020 for the three months and year ended December 31, 2012, respectively. The refinery operating margins for the three months and year ended December 31, 2012 also exclude approximately $8,000 primarily from negative inventory effects.

(11)

Refinery direct operating expense is a per barrel measurement calculated by dividing direct operating expenses at our Big Spring, California and Krotz Springs refineries by the applicable refinery's total throughput volumes.

(12)

We compare our Big Spring refinery's operating margin to the Gulf Coast 3/2/1 crack spread. A Gulf Coast 3/2/1 crack spread is calculated assuming that three barrels of WTI Cushing crude oil are converted, or cracked, into two barrels of Gulf Coast conventional gasoline and one barrel of Gulf Coast ultra-low sulfur diesel.

We compare our California refineries' operating margin to the West Coast 3/1/1/1 crack spread. A West Coast 3/1/1/1 crack spread is calculated assuming that three barrels of Buena Vista crude oil are converted into one barrel of West Coast LA CARBOB pipeline gasoline, one barrel of LA ultra-low sulfur pipeline diesel and one barrel of LA 380 pipeline CST fuel oil.

We compare our Krotz Springs refinery's operating margin to the Gulf Coast 2/1/1 crack spread. A Gulf Coast 2/1/1 crack spread is calculated assuming that two barrels of LLS crude oil are converted into one barrel of Gulf Coast conventional gasoline and one barrel of Gulf Coast high sulfur diesel.

(13)

The WTI Cushing less WTI Midland spread represents the differential between the average value per barrel of WTI Cushing crude oil and the average value per barrel of WTI Midland crude oil. The WTI Cushing less WTS, or sweet/sour, spread represents the differential between the average value per barrel of WTI Cushing crude oil and the average value per barrel of WTS crude oil. The LLS less WTI Cushing spread represents the differential between the average value per barrel of LLS crude oil and the average value per barrel of WTI Cushing crude oil. The Brent less LLS spread represents the differential between the average value per barrel of Brent crude oil and the average value per barrel of LLS crude oil. The Brent less WTI Cushing spread represents the differential between the average value per barrel of Brent crude oil and the average value per barrel of WTI Cushing crude oil.

(14)

Total refinery throughput represents the total barrels per day of crude oil and blendstock inputs in the refinery production process. The California refineries did not process crude oil in 2013 and therefore, no throughput data has been presented for the three months and year ended December 31, 2013. Throughput data for the California refineries for the year ended December 31, 2012 reflects substantially eight months of throughput as the California refineries did not process crude oil in the first quarter 2012 or December 2012.

During the year ended December 31, 2013, the Krotz Springs refinery was impacted by the unplanned shut down and repair of the reformer unit for approximately one month.

(15)

Total refinery production represents the barrels per day of various products produced from processing crude and other refinery feedstocks through the crude units and other conversion units at the refineries.

(16)

Refinery utilization represents average daily crude oil throughput divided by crude oil capacity, excluding planned periods of downtime for maintenance and turnarounds.

(17)

Net sales and cost of sales include asphalt purchases sold as part of a supply and offtake arrangement of approximately $26,000 and $45,000 for the three months ended December 31, 2013 and 2012, respectively, and approximately $177,000 and $68,000 for the years ended December 31, 2013 and 2012, respectively. The volumes associated with these sales are excluded from the Key Operating Statistics.

(18)

Cost of sales includes intersegment purchases of asphalt blends and motor fuels from our refining and marketing segment at prices which approximate wholesale market prices. These intersegment purchases are eliminated through consolidation of our financial statements.

(19)

Blended asphalt represents base asphalt that has been blended with other materials necessary to sell the asphalt as a finished product.

(20)

Non-blended asphalt represents base material asphalt and other components that require additional blending before being sold as a finished product.

(21)

Asphalt margin is a per ton measurement calculated by dividing the margin between net sales and cost of sales by the total sales volume. Asphalt margins are used in the asphalt industry to measure operating results related to asphalt sales.

(22)

At December 31, 2013, we had 297 convenience stores of which 285 sold fuel. At December 31, 2012, we had 298 convenience stores of which 286 sold fuel.

(23)

Retail fuel margin represents the difference between retail fuel sales revenue and the net cost of purchased retail fuel, including transportation costs and associated excise taxes, expressed on a cents-per-gallon basis. Retail fuel margins are frequently used in the retail industry to measure operating results related to retail fuel sales.

(24)

Retail fuel sales price per gallon represents the average sales price for retail fuels sold through our retail convenience stores.

(25)

Merchandise margin represents the difference between merchandise sales revenues and the delivered cost of merchandise purchases, net of rebates and commissions, expressed as a percentage of merchandise sales revenues. Merchandise margins, also referred to as in-store margins, are commonly used in the retail industry to measure in-store, or non-fuel, operating results.