Alon USA Partners, LP Reports Fourth Quarter and Full Year 2014 Results

Stacey Hudson, Investor Relations Manager

Alon USA Partners GP, LLC
972-367-3808

Investors: Jack Lascar/Stephanie Smith
Dennard - Lascar Associates, LLC 713-529-6600
Media: Blake Lewis
Lewis Public Relations
214-635-3020
Ruth Sheetrit
SMG Public Relations
011-972-547-555551

ALON USA PARTNERS, LP AND SUBSIDIARIES CONSOLIDATED

EARNINGS RELEASE

RESULTS OF OPERATIONS - FINANCIAL DATA
(ALL INFORMATION IN THIS PRESS RELEASE EXCEPT FOR BALANCE SHEET DATA AS OF DECEMBER 31, 2013, AND INCOME STATEMENT DATA FOR THE YEAR ENDED DECEMBER 31, 2013, IS UNAUDITED)

For the Three Months Ended

For the Year Ended

December 31,

December 31,

2014

2013

2014

2013

(dollars in thousands, except per unit data, per barrel data and pricing statistics)

STATEMENT OF OPERATIONS DATA:

Net sales (1)

$

800,179

$

878,524

$

3,221,373

$

3,430,287

Operating costs and expenses:

Cost of sales

697,919

811,096

2,823,694

3,073,044

Direct operating expenses

25,944

26,923

105,760

110,940

Selling, general and administrative expenses

6,941

5,412

26,446

22,276

Depreciation and amortization

14,067

11,047

47,494

45,329

744,871

854,478

3,003,394

3,251,589

Loss on disposition of assets

—

—

—

Operating income

55,308

24,046

217,979

178,677

Interest expense

(12,229)

(9,985)

(46,706)

(40,474)

Other income, net

19

5

646

23

Income before state income tax expense

43,098

14,066

171,919

138,226

State income tax expense

999

570

2,784

2,004

Net income

$

42,099

$

13,496

$

169,135

$

136,222

Earnings per unit

$

0.67

$

0.22

$

2.71

$

2.18

Weighted average common units outstanding (in thousands)

62,507

62,502

62,505

62,502

Cash distribution per unit

$

1.02

$

—

$

2.02

$

2.76

CASH FLOW DATA:

Net cash provided by (used in):

Operating activities

$

57,130

$

56,618

$

196,504

$

216,337

Investing activities

(11,719)

(7,968)

(74,800)

(29,626)

Financing activities

(54,381)

44,457

(168,962)

(99,129)

OTHER DATA:

Adjusted EBITDA (2)

$

69,394

$

35,098

$

266,119

$

224,050

Cash available for distribution (2)

44,005

11,412

Capital expenditures

2,133

6,756

16,064

23,390

Capital expenditures for turnarounds and catalysts

9,586

1,212

58,736

6,236

KEY OPERATING STATISTICS:

Per barrel of throughput:

Refinery operating margin (3)

$

15.12

$

9.96

$

16.69

$

14.59

Refinery direct operating expense (4)

3.67

3.98

4.39

4.53

For the Three Months Ended

For the Year Ended

December 31,

December 31,

2014

2013

2014

2013

(dollars in thousands, except per unit data, per barrel data and pricing statistics)

PRICING STATISTICS:

Crack spreads (per barrel):

Gulf Coast 3/2/1 (5)

$

9.04

$

13.05

$

14.52

$

19.16

WTI Cushing crude oil (per barrel)

$

73.37

$

97.47

$

93.10

$

97.97

Crude oil differentials (per barrel):

WTI Cushing less WTI Midland (6)

$

5.79

$

2.32

$

6.93

$

2.59

WTI Cushing less WTS (6)

4.43

3.14

6.04

3.72

Brent less WTI Cushing (6)

3.70

9.89

7.30

12.41

Product price (dollars per gallon):

Gulf Coast unleaded gasoline

$

1.85

$

2.49

$

2.49

$

2.70

Gulf Coast ultra-low sulfur diesel

2.20

2.92

2.71

2.97

Natural gas (per MMBtu)

3.83

3.85

4.26

3.73

As of December 31,

2014

2013

BALANCE SHEET DATA (end of period):

(dollars in thousands)

Cash and cash equivalents

$

106,325

$

153,583

Working capital

(4,561)

18,007

Total assets

770,246

849,924

Total debt

302,376

344,322

Total debt less cash and cash equivalents

196,051

190,739

Total equity

188,402

145,442

THROUGHPUT AND PRODUCTION DATA:

For the Three Months Ended

For the Year Ended

December 31,

December 31,

2014

2013

2014

2013

bpd

%

bpd

%

bpd

%

bpd

%

Refinery throughput:

WTS crude

35,663

46.4

39,775

54.0

30,323

45.9

43,705

65.1

WTI crude

35,691

46.4

28,690

39.0

32,429

49.1

20,706

30.9

Blendstocks

5,513

7.2

5,148

7.0

3,281

5.0

2,692

4.0

Total refinery throughput (7)

76,867

100.0

73,613

100.0

66,033

100.0

67,103

100.0

Refinery production:

Gasoline

41,015

53.0

39,170

53.0

32,932

49.7

33,736

50.4

Diesel/jet

27,074

34.9

24,529

33.3

23,252

35.1

22,404

33.5

Asphalt

2,749

3.5

3,391

4.6

2,716

4.1

3,640

5.4

Petrochemicals

4,476

5.8

4,651

6.3

3,756

5.7

4,152

6.2

Other

2,185

2.8

2,029

2.8

3,565

5.4

3,033

4.5

Total refinery production (8)

77,499

100.0

73,770

100.0

66,221

100.0

66,965

100.0

Refinery utilization (9)

97.7

%

97.8

%

97.2

%

94.9

%

(1)

Includes sales to related parties of $115,694 and $138,430 for the three months ended December 31, 2014 and 2013, respectively, and $563,008 and $600,710 for the years ended December 31, 2014 and 2013, respectively.

(2)

Adjusted EBITDA represents earnings before state income tax expense, interest expense, depreciation and amortization and loss 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 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 state income tax expense, interest expense, loss 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 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 months and years ended December 31, 2014 and 2013, respectively:

For the Three Months Ended

For the Year Ended

December 31,

December 31,

2014

2013

2014

2013

(dollars in thousands)

Net income

$

42,099

$

13,496

$

169,135

$

136,222

State income tax expense

999

570

2,784

2,004

Interest expense

12,229

9,985

46,706

40,474

Depreciation and amortization

14,067

11,047

47,494

45,329

Loss on disposition of assets

—

—

—

21

Adjusted EBITDA

$

69,394

$

35,098

$

266,119

$

224,050

Cash available for distribution is not a recognized term under GAAP. Our management believes that the presentation of cash available for distribution is useful to investors because it is frequently used by securities analysts, investors, and other interested parties in the evaluation of entities in our industry. Cash available for distribution should not be considered in isolation or as an alternative to net income or operating income as a measure of operating performance. In addition, cash available for distribution is not presented as, and should not be considered, an alternative to cash flows from operations or as a measure of liquidity. Cash available for distribution as reported may not be comparable to similarly titled measures of other entities, thereby limiting its usefulness as a comparative measure.

Available cash for each quarter generally equals our Adjusted EBITDA for the quarter, less cash needed for maintenance capital expenditures, debt service and other contractual obligations and reserves for future operating or capital needs that the board of directors of our general partner deems necessary or appropriate, including reserves for our expenses in the quarters in which our planned major turnarounds and catalyst replacements occur. Actual distributions are set by the board of directors of our general partner. The board of directors of our general partner may modify our cash distribution policy at any time, and our partnership agreement does not require us to make distributions at all.

The following table reconciles Adjusted EBITDA to cash available for distribution for the three months ended December 31, 2014 and 2013, respectively:

For the Three Months Ended

December 31,

2014

2013

(dollars in thousands)

Adjusted EBITDA

$

69,394

$

35,098

less: Maintenance/growth capital expenditures

2,133

6,756

less: Major and non-major turnaround and catalyst replacement capital expenditures

9,586

1,212

less: Major turnaround reserve for future years

1,500

1,150

less: Principal payments

625

625

less: State income tax payments

342

570

less: Interest paid in cash

11,203

9,269

Cash available for distribution before special expenses

44,005

15,516

less: Special turnaround reserve

—

4,104

Cash available for distribution

$

44,005

$

11,412

(3)

The refinery operating margin for three months and year ended December 31, 2014 excludes losses related to inventory adjustments of $4,650.

(4)

Refinery direct operating expense is a per barrel measurement calculated by dividing direct operating expenses by total throughput volumes.

(5)

We compare our refinery 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.

(6)

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

(7)

Total refinery throughput represents the total barrels per day of crude oil and blendstock inputs in the refinery production process.

(8)

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

(9)

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