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Alon USA Records Net Loss in Q1

DALLAS -- Alon USA Energy Inc. operator of Southwest Convenience Stores and the largest 7-Eleven licensee in the U.S., reported a net loss for the first quarter of 2010 of $52.9 million, compared to net income of $17.4 million for the same period last year.

"At our last call, my view was that we were nearly into the worst [of the recession]. Now, we're at the end of the worst. … We see the positives in the second quarter," Jeff Morris, Alon CEO, said in a conference call with investors.

Excluding special items, Alon recorded net loss of $49.1 million for the first quarter, compared to net income of $19.3 million for the same period last year. Special items for the first quarter 2010 include an after-tax loss of $3.9 million for the write-off of debt issuance costs associated with the company's prepayment of an Alon Refining Krotz Springs revolving credit facility. Year-ago special items included accumulated dividends of $2.0 million on the preferred shares of Alon Refining Louisiana, prior to their conversion Dec. 31, 2009, to common stock of Alon.

In Alon's retail and branded marketing segment, retail fuel sales gallons increased 15.6 percent from 28.3 million gallons in the first quarter of 2009 to 32.7 million gallons in the first quarter 2010. Branded fuel sales increased 5.5 percent, reaching 70.5 million gallons in the first quarter of 2010, compared to 66.8 million gallons in the first quarter of 2009.

"We are also encouraged that we sustained gross profits from fuel, which increased sales 15 percent, though fuel margins were under pressure," Morris told investors, noting in-store sales were also up, though margins were also constricted.

First quarter 2010 net sales for its retail and branded marketing segment totaled $226.02 million, from $167.47 million a year ago. However, operating loss was $1.85 million, compared to operating income of $1.37 million in the comparable quarter.

Merchandise sales were up slightly to $63.48 million, from $63.05 million in the first quarter 2009. Merchandise margin, though, was down to 30.7 percent, from 31.7 percent a year ago.

He added: "We continue to invest and grow our foodservice offering to increase margin and sales."

Morris noted that the chain will continue to improve going forward, and acknowledged that the recent takeover activity between Alimentation Couche-Tard and Casey's General Stores is a promising sign.

"That event with Couche-Tard and Casey's, and other activities are certainly helpful. We see those as positives, the multiples for enterprise value vs. EBITDA is returning to a historical level of the seven to eight range," Morris told investors. "If these kinds of multiples are sustained, then that is positive for our IPO considerations."

Refining operating margins for both Alon's Big Spring refinery and California refineries were below 2009 comparable quarter levels. The Big Spring refinery and California refineries combined throughput for the first quarter of 2010 averaged 61,047 barrels per day ("bpd"), compared to a combined average of 93,178 bpd in the first quarter of 2009.

Also during the quarter, a U.S. bankruptcy court approved Alon's purchase of the Bakersfield refinery from Big West of California LLC, a subsidiary of Flying J Inc.

"We are continuing our work to finalize this transaction. As I have noted before, we believe the Bakersfield refinery provides an alternative solution to convert our current vacuum gas oil production at our California refineries into gasoline and distillate products," Morris said in a statement.

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