Alon USA Energy, Inc.

Disclaimer

Links to third-party websites are provided solely as a convenience to you. By following the link below, you will be taken to an independent web site that is not maintained by Alon. We do not endorse or make any representations as to the accuracy or completeness of any information, product or materials contained in any of these sites. If you decide to access any of the third-party sites linked to our web site, you do so entirely at your own risk.

Investor Center

Press Releases

Alon USA Reports Third Quarter Results

Download PDF

Declares Quarterly Cash Dividend

Company schedules conference call for November 6, 2008 at 10:00 A.M. Eastern

DALLAS, Nov. 5 /PRNewswire-FirstCall/ -- Alon USA Energy, Inc. (NYSE: ALJ) ("Alon") today announced results for the quarter and nine months ended September 30, 2008. Net income for the third quarter of 2008 was $37.3 million, or $0.80 per share, compared to net income of $12.6 million, or $0.27 per share, for the same period last year. Excluding special items, Alon recorded net income of $24.3 million, or $0.52 per share, for the third quarter of 2008, compared to net income of $11.9 million, or $0.26 per share, for the same period last year.

Net income for the nine months ended September 30, 2008, was $21.9 million, or $0.47 per share, compared to net income of $143.8 million, or $3.08 per share, for the same period last year. Excluding special items, Alon recorded a net loss of ($60.6) million, or ($1.30) per share, for the nine months ended September 30, 2008, compared to net income of $141.0 million, or $3.02 per share, for the same period last year.

Jeff Morris, Alon's President and CEO, commented, "We successfully completed the acquisition of the Krotz Springs, Louisiana refinery this quarter. With the completion of the acquisition, our crude oil refining capacity increased by 50% to approximately 250,000 barrels per day ("bpd"), including four refineries located on the West Coast, West Texas and Gulf Coast. I am also pleased that we have completed work on the Fluid Catalytic Cracking Unit ("FCCU") at our Big Spring refinery that was damaged in the February 18, 2008 fire. With the completion of this work, we were able to restart the FCCU and return to our normal operating capabilities. We are grateful for the support of our insurers who have already advanced us $280 million to date.

"At our California refineries, we optimized our refining economics during the third quarter of 2008, lowering throughput rates to balance production with demand for our asphalt products. We also faced challenges during the quarter at our Krotz Springs refinery with hurricanes Gustav and Ike. These hurricanes caused minimal damage to the refinery, but disrupted crude supply receipts into the refinery and product movements from the refinery while power was being restored to the area.

"I am very pleased with the $0.52 earnings per share excluding special items in the third quarter of 2008 considering the utilization of the Big Spring refinery was at 53% and the Krotz Springs refinery was impacted by the hurricanes."

THIRD QUARTER 2008

Special items for the third quarter of 2008 included an after-tax gain of $60.3 million recognized from the involuntary conversion of assets due to the Big Spring refinery fire. An after-tax loss of $35.8 million was recorded in the third quarter related to inventories adjustments that occurred due to the Krotz Springs refinery acquisition. Also, $10.2 million of after-tax losses were incurred for costs associated with the Big Spring refinery fire. Special items for the third quarters of 2008 and 2007 also included an after-tax loss of $1.3 million and after-tax gain of $0.7 million, respectively, recognized on disposition of assets.

Refinery operating margin at the Big Spring refinery was $8.17 while operating only in a hydroskimming mode for the third quarter of 2008 compared to $9.40 for the same period in 2007. This decrease resulted primarily from lower refinery light product yields as a result of the fire at the Big Spring refinery which was partially offset by higher industry Gulf Coast 3-2-1 crack spreads. Light product yields were approximately 54% and 79% for the third quarter of 2008 and 2007, respectively. Refinery operating margin at the California refineries was $9.13 for the third quarter of 2008 compared to $0.82 for the same period in 2007. The Krotz Springs refinery operating margin for the third quarter of 2008 was $7.20 excluding the effects of inventories adjustments recorded as part of the acquisition.

The combined refineries throughput for the third quarter of 2008 averaged 122,252 bpd, consisting of 35,204 bpd at the Big Spring refinery, 28,661 bpd at the California refineries, and 58,387 bpd at the Krotz Springs refinery compared to a combined average of 134,608 bpd in the third quarter of 2007, consisting of 67,824 bpd at the Big Spring refinery and 66,784 bpd at the California refineries. The Big Spring refinery had lower throughput as a result of the February 18, 2008 fire. Throughput at the California refineries was reduced to optimize our refining and asphalt economics. The Krotz Springs refinery throughput was adversely affected by electrical outages and reduced crude supply due to hurricanes Gustav and Ike.

Gulf Coast 3-2-1 average crack spreads increased to $16.05 per barrel for the third quarter of 2008 compared to $13.14 per barrel for the third quarter of 2007. West Coast 3-2-1 average crack spreads decreased to $14.68 per barrel for the third quarter of 2008 compared to $20.50 per barrel for the third quarter of 2007. The WTI/WTS crude oil differentials for the third quarter of 2008 decreased to $2.16 per barrel compared to $5.26 per barrel in the same period of 2007.

Asphalt margins for the third quarter of 2008 increased to an average of $80.30 per ton compared to $15.67 per ton for the third quarter of 2007. This increase resulted primarily from a 79% increase in sales prices which were $613.98 per ton for the third quarter of 2008 compared to $342.17 per ton for the same period in 2007, as asphalt prices increased to more closely coincide with crude prices.

YEAR-TO-DATE 2008

Special items for the nine months ended September 30, 2008 and 2007 included $26.3 million and $2.8 million, respectively, of after-tax gains recognized primarily from the disposition of assets in connection with the contribution of certain product pipelines and terminals to Holly Energy Partners, LP, in March 2005. Special items recognized for the nine months ended September 30, 2008 also included the previously mentioned $35.8 million after-tax loss associated with inventories acquired in the Krotz Springs refinery acquisition in addition to after-tax gain of $117.5 million associated with the involuntary conversion of assets due to the Big Spring refinery fire and $25.5 million of after-tax losses associated with the fire.

Refinery operating margin at the Big Spring refinery was $2.30, while operating primarily in a hydroskimming mode for the nine months ended September 30, 2008, compared to $15.81 for the same period in 2007. This decrease resulted from both lower refinery light product yields as a result of the fire at the Big Spring refinery as well as lower industry Gulf Coast 3-2-1 crack spreads. Light product yields were approximately 62% and 82% for the nine months ended September 30, 2008 and 2007, respectively. Refinery operating margin at the California refineries was a negative ($0.37) for the nine months ended September 30, 2008 compared to $5.11 for the same period in 2007. The California refineries operating margin was adversely affected by higher crude oil cost during 2008.

The combined refineries throughput for the nine months ended September 30, 2008, excluding the Krotz Springs refinery acquired in July 2008, averaged 66,919 bpd, consisting of 32,299 bpd at the Big Spring refinery and 34,620 bpd at the California refineries compared to a combined average of 131,770 bpd, consisting of 68,654 bpd at the Big Spring refinery and 63,116 bpd at the California refineries for the same period last year. The Big Spring refinery had lower throughput due to the fire. Throughput at the California refineries was reduced to optimize our refining and asphalt economics.

Gulf Coast 3-2-1 average crack spreads decreased to $12.82 per barrel for the nine months ended September 30, 2008, compared to $17.38 per barrel for the same period in 2007. West Coast 3-2-1 average crack spreads decreased to $18.15 per barrel for the nine months ended September 30, 2008 compared to $30.89 per barrel for the nine months ended September 30, 2007. The WTI/WTS crude oil differentials for the first nine months of 2008 decreased to $3.81 per barrel compared to $4.61 per barrel in the same period of 2007.

Asphalt margins increased to an average of $54.83 per ton for the nine months ended September 30, 2008, compared to $35.09 per ton for the same period of 2007. This increase resulted primarily from a 51% increase in sales prices which were $497.50 per ton for the first nine months of 2008 compared to $330.40 per ton for the same period in 2007.

Alon also announced today that its Board of Directors has approved the regular quarterly cash dividend of $0.04 per share. The dividend is payable on December 12, 2008 to shareholders of record as of November 28, 2008.

The Company has scheduled a conference call for Thursday, November 6, 2008, at 10:00 a.m. Eastern, to discuss the third quarter 2008 results. To access the call, please dial 800-240-6709, or 303-262-2054, for international callers, and ask for the Alon USA Energy call at least 10 minutes prior to the start time. Investors may also listen to the conference live on the Alon corporate website, http://www.alonusa.com, by logging onto that site and clicking "Investors". A telephonic replay of the conference call will be available through November 20, 2008, and may be accessed by calling 800-405-2236, or 303-590-3000, for international callers, and using the passcode 11120481. A web cast archive will also be available at http://www.alonusa.com shortly after the call and will be accessible for approximately 90 days. For more information, please contact Donna Washburn at DRG&E at 713-529-6600 or email dmw@drg-e.com.

Alon USA Energy, Inc., headquartered in Dallas, Texas, is an independent refiner and marketer of petroleum products, operating primarily in the South Central, Southwestern and Western regions of the United States. The Company owns four crude oil refineries in Texas, California, Louisiana and Oregon, with an aggregate crude oil throughput capacity of approximately 250,000 barrels per day. Alon markets gasoline and diesel products under the FINA brand name and is a leading producer of asphalt. Alon also operates more than 300 convenience stores primarily in West Texas and New Mexico substantially under the 7-Eleven and FINA brand names and supplies motor fuels to these stores primarily from its Big Spring refinery. In addition, Alon supplies approximately 800 additional FINA branded stations.

Any statements in this press release that are not statements of historical fact are forward-looking statements. Forward-looking statements reflect our current expectations regarding future events, results or outcomes. These expectations may or may not be realized. Some of these expectations may be based upon assumptions or judgments that prove to be incorrect. In addition, our business and operations involve numerous risks and uncertainties, many of which are beyond our control, which could result in our expectations not being realized or otherwise materially affect our financial condition, results of operations and cash flows. Additional information regarding these and other risks is contained in our filings with the Securities and Exchange Commission.

     Contacts: Claire A. Hart, Senior Vice President
               Alon USA Energy, Inc.
               972-367-3649

               Investors:  Jack Lascar/Sheila Stuewe
               DRG&E / 713-529-6600
               Media:  Blake Lewis
               Lewis Public Relations
               214-635-3020
               Ruth Sheetrit
               SMG Public Relations
               011-972-547-555551

                              -Tables to follow-



             ALON USA ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED
                               EARNINGS RELEASE

    RESULTS OF OPERATIONS - FINANCIAL DATA (A)
     (ALL INFORMATION IN THIS PRESS RELEASE,
     EXCEPT FOR BALANCE SHEET DATA AS OF
     DECEMBER 31, 2007 IS UNAUDITED)
                                   For the Three           For the Nine
                                   Months Ended            Months Ended
                                   September 30,           September 30,
                                 2008        2007         2008       2007
                              (dollars in thousands, except per share data)

    STATEMENT OF OPERATIONS DATA:
    Net sales                $1,905,106  $1,243,723   $4,170,540  $3,396,809
    Operating costs and
     expenses:
       Cost of sales          1,812,399   1,136,026    4,033,788   2,876,862
       Direct operating
        expenses                 66,748      48,342      149,583     152,371
       Selling, general and
        administrative
        expenses (1)             29,697      26,425       86,353      76,485
       Net costs associated
        with fire (2)            17,376           -       43,212           -
       Business interruption
        recovery (3)            (30,000)          -      (30,000)          -
       Depreciation and
        amortization (4)         17,232      17,048       44,484      42,643
          Total operating
           costs and
           expenses           1,913,452   1,227,841    4,327,420   3,148,361
    Gain on involuntary
     conversion of assets (5)   103,092           -      199,680           -
    Gain (loss) on
     disposition of
     assets (6)                  (2,241)      1,108       43,005       4,588
    Operating income             92,505      16,990       85,805     253,036
    Interest expense            (21,493)    (12,787)     (42,885)    (35,874)
    Equity earnings (losses)
     of investees                (3,915)      5,531       (2,307)     10,071
    Other income (loss), net        (25)      1,747        1,093       4,928
    Income before income tax
     expense (benefit) and
     minority interest in
     income of subsidiaries      67,072      11,481       41,706     232,161
    Income tax expense
     (benefit) (7)               25,083      (1,839)      15,850      79,782
    Income before minority
     interest in income of
     subsidiaries                41,989      13,320       25,856     152,379
    Minority interest in
     income of subsidiaries       2,542         693        1,760       8,574
    Accumulated dividends on
     preferred stock of
     subsidiary                   2,150           -        2,150           -
    Net income                  $37,297     $12,627      $21,946    $143,805

    Earnings per share, basic     $0.80       $0.27        $0.47       $3.08
    Weighted average shares
     outstanding, basic
     (in thousands)              46,786      46,761       46,783      46,758

    Cash dividends per share      $0.04       $0.04        $0.12       $0.12

    CASH FLOW DATA:
    Net cash provided by
     (used in):
       Operating activities     $33,682     $14,687      $(8,394)   $173,595
       Investing
        activities (8)         (532,747)    (50,595)    (583,750)   (150,584)
       Financing
        activities (9)          503,845      (4,334)     542,205      32,249
    OTHER DATA:
    Adjusted net income
     (loss) (10)                $24,268     $11,950     $(60,592)   $141,000
    Earnings (loss) per
     share, excluding net
     costs associated with
     fire, net of tax,
     inventories adjustments
     related to acquisition,
     net of tax, after-tax gain
     on involuntary conversion
     of assets and after-tax
     gain (loss) on disposition
     of assets (10)               $0.52       $0.26       $(1.30)      $3.02
    Adjusted EBITDA (11)            N/A      40,208          N/A     306,090
    Capital expenditures (12)    21,724      11,202       41,248      28,869
    Capital expenditures to
     rebuild the Big Spring
     refinery                   152,225           -      312,566           -
    Capital expenditures for
     turnaround and chemical
     catalyst                         3       4,220        2,072       9,357

                                                    September 30, December 31,
                                                         2008         2007
    BALANCE SHEET DATA (end of period):
    Cash and cash equivalents                            $18,676     $95,911
    Working capital                                      171,827     279,580
    Total assets                                       2,436,310   1,581,386
    Total debt                                         1,082,357     536,615
    Total stockholders' equity, minority interest in
     subsidiaries and preferred stock of subsidiary
     including accumulated dividends                     502,211     403,922



    REFINING AND UNBRANDED MARKETING
    SEGMENT (A)
                                     For the Three          For the Nine
                                     Months Ended           Months Ended
                                     September 30,          September 30,
                                   2008       2007        2008       2007
                               (dollars in thousands, except per barrel data
                                           and pricing statistics)

    STATEMENTS OF OPERATIONS DATA:
    Net sales (13)             $1,472,928   $913,589  $3,114,526  $2,458,306
    Operating costs and
     expenses:
       Cost of sales            1,442,376    853,305   3,116,022   2,078,199
       Direct operating
        expenses                   54,109     36,396     115,250     117,633
       Selling, general and
        administrative expenses     4,384      4,506      12,452      17,568
       Net costs associated with
        fire (2)                   17,376          -      43,212           -
       Business interruption
        recovery (3)              (30,000)         -     (30,000)          -
       Depreciation and
        amortization               13,081     13,085      31,921      34,341
          Total operating costs
           and expenses         1,501,326    907,292   3,288,857   2,247,741
    Gain on involuntary
     conversion of assets (5)     103,092          -     199,680           -
    Gain (loss) on disposition
     of assets (6)                 (2,241)     1,125      43,005       4,631
    Operating income              $72,453     $7,422     $68,354    $215,196

    KEY OPERATING STATISTICS:
    Total sales volume (bpd)      108,596    125,487     113,860     131,418
    Per barrel of throughput:
       Refinery operating margin
        - Big Spring (14)           $8.17      $9.40       $2.30      $15.81
       Refinery operating margin
        - CA Refineries (14)         9.13       0.82       (0.37)       5.11
       Refinery operating margin
        - Krotz Springs (14)         7.20        N/A        7.20         N/A
       Refinery direct operating
        expense - Big Spring (15)    5.15       3.22        5.00        3.48
       Refinery direct operating
        expense - CA
        Refineries (15)              6.17       2.65        5.26        3.05
       Refinery direct operating
        expense - Krotz
        Springs (15)                 3.94        N/A        3.94         N/A
    Capital expenditures           20,821      6,151      38,445      20,234
    Capital expenditures to
     rebuild the Big Spring
     refinery                     152,225          -     312,566           -
    Capital expenditures for
     turnaround and chemical
     catalyst                           3      4,220       2,072       9,357

    PRICING STATISTICS:
    WTI crude oil (per barrel)    $117.98     $75.43     $113.34      $66.15
    WTS crude oil (per barrel)     115.82      70.17      109.53       61.54
    MAYA crude oil (per barrel)    106.75      63.04       97.03       54.59
    Crack spreads (3/2/1)
     (per barrel):
       Gulf Coast (16)             $16.05     $13.14      $12.82      $17.38
       Group III (16)               14.94      21.23       12.95       22.66
       West Coast (16)              14.68      20.50       18.15       30.89
    Crack spreads (6/1/2/3)
     (per barrel):
       West Coast (16)              $3.17      $2.35       $0.22       $7.89
    Crack spreads (2/1/1)
     (per barrel):
       Gulf Coast high-sulfur
        diesel (16)                $15.86     $11.18      $13.15      $20.46
    Crude oil differentials
     (per barrel):
       WTI less WTS (17)            $2.16      $5.26       $3.81       $4.61
       WTI less MAYA (17)           11.23      12.39       16.31       11.56
    Product price (dollars per
     gallon):
       Gulf Coast unleaded
        gasoline                   $3.090     $2.073      $2.863      $1.973
       Gulf Coast low-sulfur
        diesel                      3.394      2.181       3.285       2.019
       Group III unleaded
        gasoline                    3.032      2.288       2.861       2.112
       Group III low-sulfur
        diesel                      3.430      2.330       3.300       2.120
       West Coast LA CARBOB
        (unleaded gasoline)         3.084      2.307       3.067       2.406
       West Coast LA ultra
        low-sulfur diesel           3.308      2.238       3.258       2.120
       Natural gas (per MMBTU)       8.98       6.24        9.75        7.02


    (A) In the first quarter of 2008, our branded marketing business was
        removed from the refining and marketing segment and combined with the
        retail segment. Information for the three and nine months ended
        September 30, 2007 has been recast to provide a comparison to the
        current year results.



    THROUGHPUT AND YIELD
    DATA:
    BIG SPRING
                     For the Three Months Ended    For the Nine Months Ended
                             September 30,                September 30,
                          2008          2007           2008          2007
                      bpd     %      bpd     %      bpd    %      bpd     %
    Refinery
     throughput:
       Sour crude   29,413   83.5  56,292   83.0  27,199  84.2  58,980   85.9
       Sweet crude   4,396   12.5   5,903    8.7   3,736  11.6   5,172    7.5
       Blendstocks   1,395    4.0   5,629    8.3   1,364   4.2   4,502    6.6
    Total refinery
     throughput
     (18)           35,204  100.0  67,824  100.0  32,299 100.0  68,654  100.0
    Refinery
     production:
       Gasoline      8,987   26.3  30,516   45.1  10,642  33.7  31,586   46.3
       Diesel/jet    8,861   26.0  19,560   28.9   8,128  25.7  20,310   29.8
       Asphalt       4,582   13.5   8,485   12.6   4,552  14.4   7,614   11.2
       Petrochemicals  626    1.8   3,658    5.4     790   2.5   4,174    6.1
       Other        11,054   32.4   5,392    8.0   7,511  23.7   4,497    6.6
    Total refinery
     production
     (19)           34,110  100.0  67,611  100.0  31,623 100.0  68,181  100.0
    Refinery
     utilization (20)        52.9%          91.7%         45.3%          93.9%


    THROUGHPUT AND YIELD
    DATA:
    CALIFORNIA REFINERIES
                     For the Three Months Ended    For the Nine Months Ended
                             September 30,                September 30,
                         2008           2007           2008          2007
                      bpd     %      bpd     %      bpd    %      bpd     %
    Refinery throughput:
       Medium sour
        crude        8,692   30.3  24,395   36.5  10,404  30.1  22,949   36.4
       Heavy crude  19,714   68.8  42,562   63.8  23,587  68.1  40,124   63.5
       Blendstocks     255    0.9    (173)  (0.3)    629   1.8      43    0.1
    Total refinery
     throughput
     (18)           28,661  100.0  66,784  100.0  34,620 100.0  63,116  100.0
    Refinery
     production:
       Gasoline      3,513   12.6   8,090   12.3   4,672  14.0   7,335   11.9
       Diesel/jet    7,379   26.5  14,490   22.1   8,262  24.7  13,711   22.2
       Asphalt       9,026   32.4  21,507   32.8   9,650  28.8  19,440   31.5
       Light
        unfinished       0    0.0   3,196    4.9       0   0.0   3,346    5.4
       Heavy
        unfinished   7,678   27.5  17,248   26.3  10,659  31.8  16,853   27.3
       Other           278    1.0   1,057    1.6     249   0.7   1,015    1.7
    Total refinery
     production
     (19)           27,874  100.0  65,588  100.0  33,492 100.0  61,700  100.0
    Refinery
     utilization (20)        39.2%          92.4%         46.9%          87.9%



    THROUGHPUT AND YIELD
    DATA:
    KROTZ SPRINGS (B)
                                        For the Three        For the Nine
                                        Months Ended         Months Ended
                                        September 30,        September 30,
                                            2008                 2008
                                        bpd        %         bpd        %
    Refinery throughput:
       Light sweet crude              37,803      64.7     37,803      64.7
       Heavy sweet crude              18,595      31.9     18,595      31.9
       Blendstocks                     1,989       3.4      1,989       3.4
    Total refinery throughput (18)    58,387     100.0     58,387     100.0
    Refinery production:
       Gasoline                       24,255      41.0     24,255      41.0
       Diesel/jet                     27,910      47.2     27,910      47.2
       Heavy oils                      1,260       2.1      1,260       2.1
       Other                           5,700       9.7      5,700       9.7
    Total refinery production (19)    59,125     100.0     59,125     100.0
    Refinery utilization (20)                     67.9%                67.9%


    (B) For the nine months ended September 30, 2008, represents throughput
        and production data for the period from July 1, 2008 through
        September 30, 2008.



    ASPHALT SEGMENT
                                       For the Three        For the Nine
                                       Months Ended         Months Ended
                                       September 30,        September 30,
                                     2008       2007       2008      2007
                                  (dollars in thousands, except per ton data)
    STATEMENTS OF OPERATIONS DATA:
    Net sales                      $261,556   $211,117   $542,773  $506,508
    Operating costs and expenses:
       Cost of sales (21)           227,348    201,447    482,957   452,722
       Direct operating expenses     12,639     11,946     34,333    34,738
       Selling, general and
        administrative expenses         921        358      3,043     2,174
       Depreciation and amortization    535        557      1,603     1,612
          Total operating costs
           and expenses             241,443    214,308    521,936   491,246
    Gain (loss) on disposition
     of assets                            -         (4)         -         -
    Operating income (loss)         $20,113    $(3,195)   $20,837   $15,262

    KEY OPERATING STATISTICS:
    Total sales volume (tons in
     thousands)                         426        617      1,091     1,533
    Sales price per ton             $613.98    $342.17    $497.50   $330.40
    Asphalt margin per ton (22)      $80.30     $15.67     $54.83    $35.09
    Capital expenditures                $32       $495       $307    $1,655



    RETAIL AND BRANDED MARKETING SEGMENT (A)
                                       For the Three        For the Nine
                                       Months Ended         Months Ended
                                       September 30,        September 30,
                                     2008       2007       2008      2007
                                (dollars in thousands, except per gallon data)
    STATEMENTS OF OPERATIONS DATA:
    Net sales                      $351,496   $342,082 $1,038,022  $943,006
    Operating costs and expenses:
       Cost of sales (21)           323,549    304,339    959,590   856,952
       Selling, general and
        administrative expenses      24,241     21,431     70,405    56,396
       Depreciation and amortization  3,392      3,212     10,290     6,061
          Total operating costs
           and expenses             351,182    328,982  1,040,285   919,409
    Gain (loss) on disposition of
     assets                               -        (13)         -       (43)
    Operating income (loss)            $314    $13,087    $(2,263)  $23,554

    KEY OPERATING STATISTICS:
    Integrated branded fuel sales
     (thousands of gallons) (23)     54,700     60,458    163,789   191,134
    Integrated branded fuel margin
     (cents per gallon) (23)            2.7       17.7        2.2      11.5
    Non-Integrated branded fuel
     sales (thousands of
     gallons) (23)                   28,236     53,291    103,687   162,396
    Non-Integrated branded fuel
     margin (cents per gallon) (23)    (1.3)       2.5       (1.2)      1.7

    Number of stores (end of
     period)                            306        308        306       308
    Retail fuel sales (thousands
     of gallons)                     23,807     27,049     73,092    65,075
    Retail fuel sales (thousands
     of gallons per site per
     month) (24)                         26         29         27        30
    Retail fuel margin (cents per
     gallon) (25)                      22.5       16.0       20.0      19.3
    Retail fuel sales price (dollars
     per gallon) (26)                 $3.86      $2.92      $3.57     $2.77
    Merchandise sales               $69,378    $69,180   $197,931  $159,289
    Merchandise sales (per site
     per month) (24)                     76         75         72        74
    Merchandise margin (27)           30.8%      30.7%      30.9%     29.7%
    Capital expenditures               $844     $3,977     $2,011    $5,954


    (A) In the first quarter of 2008, our branded marketing business was
        removed from the refining and marketing segment and combined with the
        retail segment. Information for the three and nine months ended
        September 30, 2007 has been recast to provide a comparison to the
        current year results.


    (1)  Includes corporate headquarters selling, general and administrative
         expenses of $151 and $130 for the three months ended September 30,
         2008 and 2007, respectively, and $453 and $347 for the nine months
         ended September 30, 2008 and 2007, respectively, which are not
         allocated to our three operating segments.
    (2)  Includes $17,376 and $37,422 for the three and nine months ended
         September 30, 2008, respectively, of expenses incurred from pipeline
         commitment deficiencies, crude sale losses and other incremental
         costs; $5,000 for the nine months ended September 30, 2008 for our
         third party liability insurance deductible under the insurance
         policy; and depreciation for the temporarily idled facilities of
         $790 for the nine months ended September 30, 2008.
    (3)  Alon recorded income for the three and nine months ended
         September 30, 2008 of $30,000 for business interruption recovery as
         a result of the Big Spring refinery fire with all proceeds received
         in September and October 2008.
    (4)  Includes corporate depreciation and amortization of $224 and $194 for
         the three months ended September 30, 2008 and 2007, respectively, and
         $670 and $629 for the nine months ended September 30, 2008 and 2007,
         respectively, which are not allocated to our three operating
         segments.
    (5)  With the insurance proceeds received of $250,000 through
         September 30, 2008, an involuntary gain on conversion of assets has
         been recorded of $199,680 for the proceeds received in excess of the
         book value of the assets impaired of $25,330 and demolition and
         repair expenses of $24,990 incurred through September 30, 2008.
    (6)  Gain on disposition of assets reported in the nine months ended
         September 30, 2008 and the three and nine months ended September 30,
         2007 includes the recognition of deferred gain recorded primarily in
         connection with the contribution of certain product pipelines and
         terminals to Holly Energy Partners, LP, ("HEP"), in March 2005 ("HEP
         transaction").  A gain of $42,935 recognized in the second quarter of
         2008 represented all the recognition of the remaining deferred gain
         associated with the HEP transaction and was due to the termination of
         an indemnification agreement with HEP.
    (7)  Income tax expense for the three and nine months ended September 30,
         2007 includes a benefit of $5,485 resulting from the true-up of the
         prior year income tax expense.
    (8)  Cash used in investing activities for the three and nine months ended
         September 30, 2008 includes the acquisition of all the capital stock
         of the refining business located in Krotz Springs, Louisiana from
         Valero Energy Corporation.  The purchase price was $333,000 in cash
         plus approximately $141,702 representing a preliminary working
         capital settlement.
    (9)  Cash provided by financing activities for the three and nine months
         ended September 30, 2008 includes borrowings under a $302,000 term
         loan credit facility and a $400,000 revolving credit facility.
         Additionally, funds for a portion of the purchase price were
         provided through an $80,000 equity investment by Alon Israel Oil
         Company, Ltd., Alon's majority stockholder, in preferred stock of a
         new Alon holding company subsidiary.
    (10) The following table provides a reconciliation of net income under
         United States generally accepted accounting principles ("GAAP") to
         adjusted net income (loss) utilized in determining earnings (loss)
         per common share, excluding the after-tax loss on net costs
         associated with fire, after-tax inventories adjustments related to
         acquisition, after-tax gain on involuntary conversion of assets and
         after-tax gain (loss) on disposition of assets.  Our management
         believes that the presentation of adjusted net income (loss) and
         earnings (loss) per common share, excluding these after-tax items, is
         useful to investors because it provides a more meaningful measurement
         for evaluation of our Company's operating results.


                                     Three Months Ended  Nine Months Ended
                                        September 30,       September 30,
                                       2008      2007      2008      2007
                                   (dollars in thousands, except earnings per
                                                      share)
    Net income                        $37,297   $12,627   $21,946  $143,805
       Plus: Net costs associated with
        fire, net of tax               10,160         -    25,450         -
       Plus: Inventories adjustments
        related to acquisition, net
        of tax                         35,779         -    35,779         -
       Less: Gain on involuntary
        conversion of assets, net
        of tax                        (60,278)        -  (117,450)        -
       Less: Gain (loss) on
        disposition of assets, net
        of tax                          1,310      (677)  (26,317)   (2,805)
    Adjusted net income (loss)         24,268    11,950   (60,592)  141,000

    Weighted average shares
     outstanding (in thousands)        46,786    46,761    46,783    46,758
    Earnings (loss) per share,
     excluding net costs associated
     with fire, net of tax, inventory
     adjustments related to acquisition,
     net of tax, after-tax gain on
     involuntary conversion of assets
     and after-tax gain (loss) on
     disposition of assets              $0.52     $0.26    $(1.30)    $3.02



    (11) Adjusted EBITDA has not been presented for the three and nine month
         periods ended September 30, 2008.  Alon has historically provided
         Adjusted EBITDA during periods of normal operations because
         management believes it is helpful for investors to compare Alon's
         operating results to other companies in our industry.  Due to the
         limited operations of the Big Spring refinery following the February
         fire and the costs and expenses incurred to repair affected units,
         management does not believe a presentation of Adjusted EBITDA for the
         three and nine month periods ended September 30, 2008 is meaningful
         or useful to investors

         For the three and nine month periods ended September 30, 2007,
         Adjusted EBITDA represents earnings before minority interest in
         income of subsidiaries, income tax expense, interest expense,
         depreciation and amortization and gain on disposition of assets.
         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 during periods of normal operations 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 minority interest in income of
         subsidiaries, income tax expense, interest expense, gain on
         disposition of assets 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 minority
            stockholders 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 to Adjusted EBITDA for the
         three and nine months ended September 30, 2007:

                                                  Three Months   Nine Months
                                                     Ended          Ended
                                                 September 30,  September 30,
                                                      2007           2007
                                                     (dollars in thousands)
    Net income                                       $12,627       $143,805
       Minority interest in income of subsidiaries       693          8,574
       Income tax expense (benefit)                   (1,839)        79,782
       Interest expense                               12,787         35,874
       Depreciation and amortization                  17,048         42,643
       Gain on disposition of assets                  (1,108)        (4,588)
    Adjusted EBITDA                                  $40,208       $306,090



    (12) Includes corporate capital expenditures of $27 and $579 for the three
         months ended September 30, 2008 and 2007, respectively, and $485 and
         $1,006 for the nine months ended September 30, 2008 and 2007,
         respectively, which are not allocated to our three operating
         segments.
    (13) Net sales include intersegment sales to our asphalt and retail and
         branded marketing segments at prices which approximate wholesale
         market prices.  These intersegment sales are eliminated through
         consolidation of our financial statements.
    (14) Refinery operating margin is a per barrel measurement calculated by
         dividing the margin between net sales and cost of sales (exclusive of
         unrealized hedging gains and losses and inventories adjustments
         related to acquisitions) 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.  There were unrealized hedging gains of $2,525 and
         $4,127 for the California refineries for the three and nine months
         ended September 30, 2008, respectively, and unrealized hedging losses
         of $2,256 and $2,698 for the California refineries for the three and
         nine months ended September 30, 2007, respectively.  There were
         unrealized hedging losses of $1,120 for the Big Spring refinery for
         the three and nine months ended September 30, 2007, respectively
         The refinery operating margin for the Krotz Springs refinery excludes
         a charge of $61,192 to cost of sales for inventories adjustments
         related to the acquisition.
    (15) Refinery direct operating expense is a per barrel measurement
         calculated by dividing direct operating expenses at our Big Spring,
         California and Krotz Springs refineries, exclusive of depreciation
         and amortization, by the applicable refinery's total throughput
         volumes.
    (16) A 3/2/1 crack spread in a given region is calculated assuming that
         three barrels of a benchmark crude oil are converted, or cracked,
         into two barrels of gasoline and one barrel of diesel.  We calculate
         the Gulf Coast 3/2/1 crack spread using the market values of Gulf
         Coast conventional gasoline and ultra low-sulfur diesel and the
         market value of West Texas Intermediate, or WTI, a light sweet crude
         oil.
         We calculate the Group III 3/2/1 crack spread using the market values
         of Group III conventional gasoline and ultra low-sulfur diesel and
         the market value of WTI crude oil.  We calculate the West Coast 3/2/1
         crack spread using the market values of West Coast LA CARB pipeline
         gasoline and LA ultra low-sulfur pipeline diesel and the market value
         of WTI crude oil. A 6/1/2/3 crack spread is calculated assuming that
         six barrels of a benchmark crude oil are converted, or cracked, into
         one barrel of gasoline, two barrels of diesel and three barrels of
         fuel oil. We calculate the West Coast 6/1/2/3 crack spread using the
         market values of West Coast LA CARB pipeline gasoline, LA ultra
         low-sulfur pipeline diesel, LA 380 pipeline CST (fuel oil) and the
         market value of WTI crude oil.  We calculate the Gulf Coast 2/1/1
         crack spread using the market values of Gulf Coast conventional
         gasoline and No. 2 diesel and the market value of WTI crude oil.
    (17) The WTI/WTS, or sweet/sour, spread represents the differential
         between the average value per barrel of WTI crude oil and the average
         value per barrel of WTS crude oil.  The WTI/Maya, or light/heavy,
         spread represents the differential between the average value per
         barrel of WTI crude oil and the average value per barrel of Maya
         crude oil.
    (18) Total refinery throughput represents the total barrels per day of
         crude oil and blendstock inputs in the refinery production process.
    (19) Total refinery production represents the barrels per day of various
         finished products produced from processing crude and other refinery
         feedstocks through the crude units and other conversion units at the
         refinery.  Light product yields decreased at the Big Spring refinery
         for the three and nine months ended September 30, 2008 due to the
         fire on February 18, 2008 and the re-start of the crude unit in a
         hydroskimming mode on April 5, 2008.
    (20) Refinery utilization represents average daily crude oil throughput
         divided by crude oil capacity, excluding planned periods of downtime
         for maintenance and turnarounds. The decrease in refinery utilization
         at our Big Spring refinery for the three and nine months ended
         September 30, 2008 is due to the fire on February 18, 2008.
         Production ceased at the Big Spring refinery until the re-start of
         the crude unit in a hydroskimming mode on April 5, 2008.  The Big
         Spring refinery returned to normal operating capabilities with the
         re-start of the Fluid Catalytic Cracking Unit on September 26, 2008.
         The decrease in refinery utilization at our California refineries is
         due to reduced throughput to optimize our refining and asphalt
         economics.  The low refinery utilization at our Krotz Springs
         refinery is due to shutdowns during hurricanes Gustav and Ike and
         limited crude supply and electrical outages following the hurricanes.
    (21) Cost of sales includes intersegment purchases of asphalt blends and
         motor fuels from our refining and unbranded marketing segment at
         prices which approximate wholesale market prices. These intersegment
         purchases are eliminated through consolidation of our financial
         statements.
    (22) 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.
    (23) Marketing sales volume represents branded fuel sales to our wholesale
         marketing customers located in both our integrated and non-integrated
         regions. The branded fuels we sell in our integrated region are
         primarily supplied by the Big Spring refinery, but due to the fire on
         February 18, 2008 at the Big Spring refinery more fuel has been
         purchased from third-party suppliers. The branded fuels we sell in
         the non-integrated region are obtained from third-party suppliers.
         The marketing margin represents the margin between the net sales and
         cost of sales attributable to our branded fuel sales volume,
         expressed on a cents-per-gallon basis.
    (24) Retail fuel and merchandise sales per site for the three and nine
         month periods ending September 30, 2007 were calculated using 308
         stores for the three months ended and a weighted average for the nine
         months ended. We added 102 stores with the acquisition of Skinny's,
         Inc. on June 29, 2007, which were weighted for the calculation of the
         nine months ended September 30, 2007.
    (25) Retail fuel margin represents the difference between motor fuel sales
         revenue and the net cost of purchased motor fuel, including
         transportation costs and associated motor fuel taxes, expressed on a
         cents-per-gallon basis. Motor fuel margins are frequently used in the
         retail industry to measure operating results related to motor fuel
         sales.
    (26) Retail fuel sales price per gallon represents the average sales price
         for motor fuels sold through our retail convenience stores.
    (27) 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 convenience store industry
         to measure in-store, or non-fuel, operating results.

SOURCE Alon USA Energy, Inc.