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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005
 OR
 o
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM  TO.
 Commission file number: 001-32567
 ALON USA ENERGY, INC.
  Delaware
    
    74-2966572(State of incorporation)
    
    (I.R.S. Employer Identification No.)
 7616 LBJ Freeway, Suite 300, Dallas, Texas 75251
 (972) 367-3600
  Title of each class
    
    Name of each exchange on which registeredCommon Stock, par value
    
    New York Stock Exchange$0.01 per share
  o þ
 o þ
 þ o
 o
  o o þ
 o þ




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##### 



TABLE OF CONTENTS
 PagePART I
    
    
    1ITEMS 1. AND 2. BUSINESS AND PROPERTIES.
    
    
    1ITEM 1A. RISK FACTORS.
    
    
    14ITEM 1B. UNRESOLVED STAFF COMMENTS.
    
    
    21ITEM 3. LEGAL PROCEEDINGS.
    
    
    21ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
    
    
    21PART II
    
    
    22ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASE OF EQUITY SECURITIES.
    
    
    22ITEM 6. SELECTED FINANCIAL DATA.
    
    
    23ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
    
    
    25ITEM 7A. QUANTITATIVE and QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
    
    
    49ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE.
    
    
    50ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
    
    
    50ITEM 9A. CONTROLS AND PROCEDURES.
    
    
    50ITEM 9B. OTHER INFORMATION.
    
    
    50PART III
    
    
    51ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF the REGISTRANT.
    
    
    51ITEM 11. EXECUTIVE COMPENSATION.
    
    
    51ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
    
    
    51ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
    
    
    51ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
    
    
    51PART IV
    
    
    52ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
    
    
    52SIGNATURES
    
    
    1Management Employment AgreementAmendment to Executive/Management Employment AgreementList of SubsidiariesConsent of KPMG LLPCertifications of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO and CFO Pursuant to Section 906
  i




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##### Table of Contents



PART I
 
 ITEMS 1. AND 2. BUSINESS AND PROPERTIES.
 Statements in this Annual Report on Form 10-K, including those in Items 1 and 2, Business and
Properties, and Item 3, Legal Proceedings, that are not historical in nature should be deemed
forward looking statements that are inherently uncertain. See Forward-Looking Statements in
Managements Discussion and Analysis of Financial Condition and Results of Operations in Item 7
for a discussion of forward looking statements and of factors that could cause actual outcomes and
results to differ materially from those projected.
 Company Overview
   Refining and Marketing Segment
  Retail Segment




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2005
Highlights and Recent Developments
        2




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Refining and Marketing Segment
 Refinery Operations
    Year Ended December 31,2005
    
    
    2004
    
    
    2003Bpd
    
    
    %
    
    
    Bpd
    
    
    %
    
    
    Bpd
    
    
    %Refinery throughput:Sweet crude
    
    
    5,072
    
    
    
    7.8
    
    
    
    4,321
    
    
    
    7.0
    
    
    
    5,398
    
    
    
    8.4Sour crude
    
    
    55,643
    
    
    
    86.0
    
    
    
    53,646
    
    
    
    87.0
    
    
    
    55,676
    
    
    
    86.5Blendstocks
    
    
    4,040
    
    
    
    6.2
    
    
    
    3,697
    
    
    
    6.0
    
    
    
    3,280
    
    
    
    5.1Total refinery throughput (1)(2)
    
    
    64,755
    
    
    
    100.0
    
    
    
    61,664
    
    
    
    100.0
    
    
    
    64,354
    
    
    
    100.0Refinery production:Gasoline
    
    
    29,499
    
    
    
    45.8
    
    
    
    28,711
    
    
    
    46.8
    
    
    
    30,700
    
    
    
    47.7Diesel/jet
    
    
    21,903
    
    
    
    34.0
    
    
    
    19,939
    
    
    
    32.5
    
    
    
    21,554
    
    
    
    33.5Asphalt
    
    
    5,824
    
    
    
    9.1
    
    
    
    5,781
    
    
    
    9.4
    
    
    
    5,746
    
    
    
    8.9Petrochemicals
    
    
    4,256
    
    
    
    6.6
    
    
    
    4,492
    
    
    
    7.3
    
    
    
    4,536
    
    
    
    7.1Other
    
    
    2,911
    
    
    
    4.5
    
    
    
    2,449
    
    
    
    4.0
    
    
    
    1,804
    
    
    
    2.8Total
refinery production (2)(3)
    
    
    64,393
    
    
    
    100.0
    
    
    
    61,372
    
    
    
    100.0
    
    
    
    64,340
    
    
    
    100.0Refinery utilization (4)
    
    
    94.3
    %
    
    
    
    
    
    
    95.0
    %
    
    
    
    
    
    
    99.3
    %
 
 (1)
    
    Total refinery throughput represents the total of crude oil and blendstock inputs
in the refinery production process.(2)
    
    2005 throughput reflects the effect of the downtime
associated with the planned major turnaround in the first quarter
2005. Refinery throughput increased to an average of 70,419 bpd
for the last three quarters of 2005, compared to an average
throughput of 47,447 bpd for the first quarter 2005. Refinery production
increased to an average of 70,065 bpd for the last three
quarters of 2005, compared to average production of 47,060 bpd for the first quarter 2005.(3)
    
    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 Alons refinery.(4)
    
    Refinery utilization represents average daily crude oil throughput divided by
crude capacity, excluding planned periods of downtime for maintenance and turnarounds. Raw Material Supply
  3




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Big Spring Refinery Production
 Gasoline
 Distillates
 Asphalt
 Petrochemical Feedstocks and Other
 Transportation Fuel Marketing
  Branded Transportation Fuel Marketing
  Unbranded Transportation Fuel Marketing
 Jet Fuel Marketing
 4




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Product Supply Sales
 Asphalt Marketing
   Pipelines and Product Terminals
  5




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Crude Oil and Natural Gas Pipelines
 Crude Oil Pipelines
    
    Status
    
    Miles
    
    ConnectionsAmdel
    
    Sunoco Throughput
    
    
    504
    
    
    Midland and NederlandWhite Oil
    
    Sunoco Throughput
    
    
    25
    
    
    Garden City (Amdel) and Big
SpringMesa Interconnect
    
    Owned
    
    
    4
    
    
    Mesa pipeline and Big Spring
  Sunoco
Transaction .
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Product Pipelines
 TerminationProduct Pipelines
    
    Access
    
    Miles
    
    Connections
    
    Date (a)Chevron(a)
    
    Lease
    
    
    38
    
    
    Coahoma and Midland
    
    
    2006Fin-Tex
    
    HEP throughput
    
    
    137
    
    
    Midland and Orla (Holly)
    
    
    2020Holly
    
    Lease
    
    
    133
    
    
    Orla and El Paso
    
    
    2018Trust
    
    HEP throughput
    
    
    332
    
    
    Big Spring/Abilene/Wichita Falls
    
    
    2020Dyess JP-8
    
    HEP throughput
    
    
    2
    
    
    Abilene and Dyess Air Force Bases
    
    
    2020River
    
    HEP throughput
    
    
    47
    
    
    Wichita Falls and Duncan (Magellan)
    
    
    2020Carswell
    
    Owned
    
    
    148
    
    
    Abilene and Fort Worth
    
    
    N/A
 
 (a)
    
    The Chevron pipeline description does not include a four-mile pipeline that we own
that connects Big Spring and Coahoma. This lease currently expires in
December 2006.     Product Terminals
 WorkingTerminals
    
    Access
    
    Capacity(a)
    
    
    Supply Source
    
    Mode of DeliveryBig Spring, Texas(b)
    
    Owned
    
    
    331
    
    
    Pipeline/refinery
    
    Pipeline/truckAbilene, Texas
    
    HEP
    
    
    111
    
    
    Pipeline
    
    Pipeline/truckWichita Falls, Texas
    
    HEP
    
    
    155
    
    
    Pipeline
    
    TruckDuncan, Oklahoma
    
    Owned(c)
    
    
    154
    
    
    Pipeline
    
    PipelineOrla, Texas
    
    HEP
    
    
    116
    
    
    Pipeline
    
    PipelineSouthlake, Texas
    
    Owned
    
    
    212
    
    
    Pipeline
    
    TruckTotal
    
    
    
    
    1,079
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(a)
    
    Measured in thousands of barrels.(b)
    
    Includes the tankage located at our refinery.(c)
    
    The terminal is owned but the underlying real property is leased.  HEP Transaction
 Retail Segment
   Location
    
    Owned
    
    Leased
    
    TotalBig Spring, Texas
    
    
    6
    
    
    
    1
    
    
    
    7El Paso, Texas
    
    
    13
    
    
    
    36
    
    
    
    49Lubbock, Texas
    
    
    17
    
    
    
    5
    
    
    
    22Midland, Texas
    
    
    9
    
    
    
    10
    
    
    
    19Odessa, Texas
    
    
    10
    
    
    
    25
    
    
    
    35Wichita Falls, Texas
    
    
    8
    
    
    
    4
    
    
    
    12Albuquerque, New Mexico
    
    
    12
    
    
    
    11
    
    
    
    23Total stores
    
    
    75
    
    
    
    92
    
    
    
    167
 Convenience Store Management and Employees
 Distribution and Supply
 8




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7-Eleven
License Agreement
 Technology and Store Automation
 Competition
     9




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Government Regulation and Legislation
 Environmental Controls and Expenditures
  Environmental Expenditures
   Remediation Efforts.
 10




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Environmental Indemnity from FINA
 Environmental Insurance
 Environmental Indemnity to HEP
 11




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Environmental Indemnity to Sunoco
 Other Government Regulation
    Employees
  12




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Properties
  Executive Officers of the Registrant
  Name
    
    Age
    
    PositionDavid Wiessman
    
    
    51
    
    
    Executive Chairman of the Board of DirectorsJeff D. Morris
    
    
    54
    
    
    Director, President and Chief Executive OfficerClaire A. Hart
    
    
    50
    
    
    Senior Vice PresidentShai Even
    
    
    37
    
    
    Vice President, Chief Financial Officer and TreasurerJoseph A. Concienne
    
    
    55
    
    
    Vice President of Refining and TransportationJimmy C. Crosby
    
    
    46
    
    
    Vice President of Supply and PlanningJoseph Israel
    
    
    34
    
    
    Vice President of Mergers and AcquisitionsHarlin R. Dean
    
    
    39
    
    
    Vice President, General Counsel and SecretaryJoseph Lipman
    
    
    60
    
    
    President and Chief Executive Officer of SCS
  David Wiessman
 Jeff D. Morris
 Claire A. Hart
 13




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Shai Even
 Joseph A. Concienne
 Jimmy C. Crosby
 Joseph Israel
 Harlin R. Dean
 Joseph Lipman
 
 ITEM 1A. RISK FACTORS.
  The price volatility of crude oil, other feedstocks, refined products and fuel and utility services
may have a material adverse effect on our earnings, profitability and cash flows.
  14




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
    
    changes in global and local economic conditions;
    
    domestic and foreign demand for fuel products;
    
    worldwide political conditions, particularly in significant oil producing regions
such as the Middle East, West Africa and Venezuela;
    
    the level of foreign and domestic production of crude oil and refined products and
the level of crude oil, feedstock and refined products imported into
the U.S.;
    
    utilization rates of U.S. refineries;
    
    development and marketing of alternative and competing fuels;
    
    U.S. government regulations; and
    
    local factors, including market conditions, weather conditions and the level of
operations of other refineries and pipelines in our markets.
    Our profitability is linked to the sweet/sour crude oil price spread, which increased significantly
in 2005. A decrease in this spread could negatively affect our profitability.
  The dangers inherent in our operations could cause disruptions and could expose us to potentially
significant losses, costs or liabilities. We are particularly vulnerable to disruptions in our
operations because all of our refining operations are conducted at a single facility.
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We are subject to interruptions of supply as a result of our reliance on pipelines for
transportation of crude oil and refined products.
   If the price of crude oil increases significantly, it could limit our ability to purchase enough
crude oil to operate our refinery at full capacity.
  Changes in our credit profile could affect our relationships with our suppliers, which could have a
material adverse effect on our liquidity and our ability to operate our Big Spring refinery at full
capacity.
  Covenants and events of default in our debt instruments could limit our ability to undertake
certain types of transactions and adversely affect our liquidity.
  16




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Competition in the refining and marketing industry is intense, and an increase in competition in
the markets in which we sell our products could adversely affect our earnings and profitability.
   Competition in the retail industry is intense, and an increase in competition in the markets in
which our retail businesses operate could adversely affect our earnings and profitability.
   We may incur significant costs to comply with new or changing environmental laws and regulations.
   We may incur significant costs and liabilities with respect to environmental lawsuits and
proceedings and any investigation and remediation of existing and future environmental conditions.
  17




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We could incur substantial costs or disruptions in our business if we cannot obtain or maintain
necessary permits and authorizations or otherwise comply with health, safety, environmental and
other laws and regulations.
  Our insurance policies do not cover all losses, costs or liabilities that we may experience.
  We are exposed to risks associated with the credit-worthiness of our insurers.
  If we lose any of our key personnel, our ability to manage our business and continue our growth
could be negatively impacted.
  18




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A substantial portion of our refining workforce is unionized, and we may face labor disruptions
that would interfere with our operations.
  We conduct our convenience store business under a license agreement with 7-Eleven, and the loss of
this license could adversely affect the results of operations of our retail segment.
  We may not be able to successfully execute our strategy of growth through acquisitions.
  
    
    diversion of management time and attention from our existing business;
    
    challenges in managing the increased scope, geographic diversity and complexity of operations;
    
    difficulties in integrating the financial, technological and management standards,
processes, procedures and controls of an acquired business with those of our existing
operations;
    
    liability for known or unknown environmental conditions or other contingent
liabilities not covered by indemnification or insurance;
    
    greater than anticipated expenditures required for compliance with environmental or
other regulatory standards or for investments to improve operating results;
    
    difficulties in achieving anticipated operational improvements;
    
    incurrence of additional indebtedness to finance acquisitions or capital
expenditures relating to acquired assets; and
    
    issuance of additional equity, which could result in further dilution of the
ownership interest of existing stockholders.
  Terrorist attacks, threats of war or actual war may negatively affect our operations, financial
condition, results of operations and prospects.
  19




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If the price of crude oil increases significantly, it could reduce our profit on our fixed-price
asphalt supply contracts.
  Our operating results are seasonal and generally lower in the first and fourth quarters of the
year.
  We depend upon our subsidiaries for cash to meet our obligations and pay any dividends, and we do
not own 100% of the stock of our operating subsidiaries.
    20




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It may be difficult to serve process on or enforce a United States judgment against certain of our
directors.
 ,
 
 ITEM 1B. UNRESOLVED STAFF COMMENTS.
  
 ITEM 3. LEGAL PROCEEDINGS.
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
  21




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PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE
OF EQUITY SECURITIES.
 Market Information
   2005
    
    HIGH
    
    LOWFourth Quarter
    
    $
    25.05
    
    
    $
    18.05Third Quarter
    
    
    26.50
    
    
    
    17.05
 Holders
  Dividends
  Recent Sales of Unregistered Securities
  Use of Proceeds from Registered Securities
    
    
    payment of a dividend in the amount of approximately $65.7 million to Alon Israel, a stockholder of the Company;
 22




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
    
    payment of a dividend in the amount of approximately $2.7 million to Tabris
Investments Inc., a stockholder of the Company;
    
    payment of a dividend in the amount of approximately $4.7 million to the minority
stockholders of Alon USA Operating, Inc., a subsidiary of the Company;
    
    approximately $20.7 million was used to repay debt due to our parent company, Alon
Israel, and $3.6 million was used to repay debt due to Atofina Petrochemicals, Inc.
    
    approximately $2.5 million was used for general corporate purposes; and
    
    the remaining $72.3 million, along with $31.6 million of cash from operating activities was
used to prepay our $100.0 million secured term loan, including prepayment premiums and
accrued interest.
 Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  
 ITEM 6. SELECTED FINANCIAL DATA.
    23




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Year Ended December 31,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001(dollars in thousands, except per share data)STATEMENT OF OPERATIONS DATA:Net sales (1)
    
    $
    2,328,507
    
    
    $
    1,707,564
    
    
    $
    1,410,766
    
    
    $
    1,207,723
    
    
    $
    1,210,366Operating costs and expenses (1)
    
    
    2,178,335
    
    
    
    1,638,300
    
    
    
    1,368,473
    
    
    
    1,182,663
    
    
    
    1,162,142Gain on disposition of assets (2)
    
    
    38,591
    
    
    
    175
    
    
    
    
    
    
    
    
    
    
    
    Operating income
    
    
    188,763
    
    
    
    69,439
    
    
    
    42,293
    
    
    
    25,060
    
    
    
    48,224Net income
    
    
    103,988
    
    
    
    25,132
    
    
    
    14,068
    
    
    
    4,352
    
    
    
    17,627Earnings per share, basic and diluted (3)
    
    $
    2.61
    
    
    $
    .72
    
    
    $
    .40
    
    
    $
    .12
    
    
    $
    .50Dividends per share (4)
    
    
    1.72
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average shares outstanding (3)
    
    
    39,889
    
    
    
    35,001
    
    
    
    35,001
    
    
    
    35,001
    
    
    
    35,001CASH FLOW DATA:Net cash provided by (used in):Operating activities
    
    $
    137,895
    
    
    $
    76,743
    
    
    $
    76,173
    
    
    $
    5,001
    
    
    $
    45,154Investing activities
    
    
    (106,962
    )
    
    
    (39,886
    )
    
    
    (34,664
    )
    
    
    (70,918
    )
    
    
    (37,927
    )Financing activities
    
    
    42,530
    
    
    
    19,244
    
    
    
    (39,667
    )
    
    
    62,238
    
    
    
    (3,500
    )BALANCE SHEET DATA (end of period):Cash, cash equivalents and short-term
investments
    
    $
    322,140
    
    
    $
    63,357
    
    
    $
    7,256
    
    
    $
    5,414
    
    
    $
    9,093Working capital
    
    
    275,996
    
    
    
    44,443
    
    
    
    5,071
    
    
    
    30,962
    
    
    
    19,500Total assets
    
    
    758,780
    
    
    
    472,516
    
    
    
    386,982
    
    
    
    392,066
    
    
    
    281,753Total debt
    
    
    132,390
    
    
    
    187,706
    
    
    
    166,816
    
    
    
    214,539
    
    
    
    126,721Stockholders equity
    
    
    279,493
    
    
    
    71,472
    
    
    
    46,923
    
    
    
    33,128
    
    
    
    29,961
 
 (1)
    
    Our buy/sell arrangements involve linked purchases and sales related to refined product
contracts entered into to address location, or grade requirements. Included in cost of sales
are amounts which approximate the revenues resulting from these transactions. See Note 2 to
our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.(2)
    
    Gain on disposition of assets reported in 2005 reflects the initial pre-tax gain recognized
in connection with assets contributed in the February 28, 2005 HEP transaction and recognition
of deferred gain recorded in the ten months following the transaction. The transaction was
recorded as a partial sale for accounting purposes.(3)
    
    Weighted average shares outstanding and earnings per share amounts for the periods presented
reflect the effect of a 33,600-for-one split of our common stock
which was effected on July 6,
2005. On August 2, 2005, we completed an initial public offering of 11,730,000 shares of
our common stock. The shares issued in our initial public offering are included in the number of
weighted average shares outstanding at December 31, 2005.(4)
    
    Dividends per share reflects the $68.4 million paid on August 2, 2005 to our stockholders of
record prior to our initial public offering. These dividends were paid with a portion of the
proceeds received in our initial public offering. 24




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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
 The following discussion of our financial condition and results of operations is provided as a
supplement to, and should be read in conjunction with our consolidated financial statements and the
notes thereto included elsewhere in this Annual Report on Form 10-K and the other sections of this
Annual Report on Form 10-K , including Items 1 and 2 Business and Properties, and Item 6 Selected
Financial Data.
 Forward-Looking Statements
    
    
    changes in general economic conditions and capital markets;
    
    changes in the underlying demand for our products;
    
    the availability, costs and price volatility of crude oil, other refinery feedstocks
and refined products;
    
    changes in the sweet/sour spread;
    
    the effects of transactions involving forward contracts and derivative instruments;
    
    actions of customers and competitors;
    
    changes in fuel and utility costs incurred by our facilities;
    
    disruptions due to equipment interruption, pipeline disruptions or failure at our or
third-party facilities;
    
    the execution of planned capital projects;
    
    adverse changes in the credit ratings assigned to our trade credit and debt instruments;
    
    the effects of and cost of compliance with current and future state and federal
environmental, economic, safety and other laws, policies and regulations;
    
    operating hazards, natural disasters, casualty losses and other matters beyond our control; and
    
    the other factors discussed under Item 1A Risk Factors.
  25




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Overview
  Refining and Marketing Segment
  Retail Segment
 Summary of 2005 Developments
     26




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
    
    Net sales increased $620.9 million to $2,328.5 million and operating income
increased $119.4 million to $188.8 million for 2005, compared to net sales of $1,707.6
million and operating income of $69.4 million in 2004.
    
    Our average refinery operating margin increased $4.27 per barrel to $12.30 per
barrel for 2005, compared to $8.03 per barrel for 2004.
    
    Our cash, cash equivalents and short-term investments increased $258.8 million to
$322.1 million in 2005, compared to cash and cash equivalents of
$63.4 million at December 31, 2004, as a result of cash of $137.9 million generated from operating
activities, together with $118.0 million net proceeds from the HEP transaction and $72.3 net proceeds from our initial public offering. Total
debt was reduced by $55.3 million to $132.4 million, compared to $187.7 million in
2004.
    
    Our capital expenditures and turnaround spending for 2005 totaled approximately
$35.1 million, of which $13.9 million was spent on a major turnaround, catalyst and the
crude throughput expansion from 62,000 bpd to 70,000 bpd in February 2005, $12.1
million was spent on regulatory and compliance projects and $9.1 million was spent on
various sustaining and capital improvement projects.
 Major Influences on Results of Operations
 Refining and Marketing
    27




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Retail
 Outlook
     28




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##### Table of Contents



Factors Affecting Comparability
      Results of Operations
 Net Sales
 29




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##### Table of Contents



Cost of Sales
 Direct Operating Expenses
 Selling, General and Administrative Expenses
 Summary Financial Tables
 30




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##### Table of Contents



ALON USA ENERGY, INC. CONSOLIDATED
 Year Ended December 31,2005
    
    
    2004
    
    
    2003(dollars in thousands)STATEMENT OF OPERATIONS DATA:Net sales
    
    $
    2,328,507
    
    
    $
    1,707,564
    
    
    $
    1,410,766Operating costs and expenses:Cost of sales
    
    
    1,990,338
    
    
    
    1,469,940
    
    
    
    1,215,032Direct operating expenses
    
    
    93,843
    
    
    
    75,742
    
    
    
    66,113Selling, general and administrative expenses (1)
    
    
    73,219
    
    
    
    73,554
    
    
    
    69,066Depreciation and amortization (2)
    
    
    20,935
    
    
    
    19,064
    
    
    
    18,262Total operating costs and expenses
    
    
    2,178,335
    
    
    
    1,638,300
    
    
    
    1,368,473Gain on disposition of assets (3)
    
    
    38,591
    
    
    
    175
    
    
    
    Operating income
    
    
    188,763
    
    
    
    69,439
    
    
    
    42,293Interest expense
    
    
    (19,326
    )
    
    
    (23,704
    )
    
    
    (16,284
    )Equity earnings in HEP
    
    
    1,086
    
    
    
    
    
    
    
    Other income (expense), net (4)
    
    
    4,775
    
    
    
    277
    
    
    
    (1,819
    )Income before income tax expense, minority interest in income of subsidiaries
and accounting change
    
    
    175,298
    
    
    
    46,012
    
    
    
    24,190Income tax expense
    
    
    65,518
    
    
    
    18,315
    
    
    
    9,105Income before minority interest in income of subsidiaries and accounting change
    
    
    109,780
    
    
    
    27,697
    
    
    
    15,085Minority interest in income of subsidiaries
    
    
    5,792
    
    
    
    2,565
    
    
    
    681Net income before accounting change
    
    
    103,988
    
    
    
    25,132
    
    
    
    14,404Cumulative effect of adoption of accounting principle
    
    
    
    
    
    
    
    
    
    
    336Net income
    
    $
    103,988
    
    
    $
    25,132
    
    
    $
    14,068Earnings per share, basic and diluted (5)
    
    $
    2.61
    
    
    $
    .72
    
    
    $
    .40Weighted average shares outstanding (5)
    
    
    39,889
    
    
    
    35,001
    
    
    
    35,001CASH FLOW DATA:Net cash provided by (used in):Operating activities
    
    $
    137,895
    
    
    $
    76,743
    
    
    $
    76,173Investing activities
    
    
    (106,962
    )
    
    
    (39,886
    )
    
    
    (34,664
    )Financing activities
    
    
    42,530
    
    
    
    19,244
    
    
    
    (39,667
    )BALANCE SHEET DATA (end of period):Cash, cash equivalents and short-term investments
    
    $
    322,140
    
    
    $
    63,357
    
    
    $
    7,256Working capital
    
    
    275,996
    
    
    
    44,443
    
    
    
    5,071Total assets
    
    
    758,780
    
    
    
    472,516
    
    
    
    386,982Total debt
    
    
    132,390
    
    
    
    187,706
    
    
    
    166,816Stockholders equity
    
    
    279,493
    
    
    
    71,472
    
    
    
    46,923OTHER DATA:Adjusted EBITDA (6)
    
    $
    176,968
    
    
    $
    88,605
    
    
    $
    58,400Capital
expenditures (7)
    
    
    23,034
    
    
    
    27,301
    
    
    
    23,391Capital expenditures for turnarounds and catalysts
    
    
    12,041
    
    
    
    2,322
    
    
    
    1,547
 
 (1)
    
    Includes corporate headquarters selling, general and administrative expenses of $491, $589
and $622, for the years ended December 31, 2005, 2004 and 2003, respectively, which are not
allocated to our two operating segments.(2)
    
    Includes corporate depreciation and amortization of $1,914, $1,480, and $1,548, for the years
ended December 31, 2005, 2004 and 2003, respectively, which are not allocated to our two
operating segments.(3)
    
    Gain on disposition of assets reported in 2005, reflects the initial pre-tax gain recognized
in connection with assets contributed in the February 28, 2005 HEP transaction and recognition
of deferred gain recorded in the ten months following the transaction. The transaction was
recorded as a partial sale for accounting purposes.(4)
    
    Includes interest earned on cash, cash equivalents and short-term investments.(5)
    
    Weighted average shares outstanding and earnings per share amounts for the
periods presented reflect the effect of a 33,600-for-one split of our common stock which was
effected on July 6, 2005. On August 2, 2005, we completed an initial public offering of
11,730,000 shares of our common stock. The shares issued in our initial public offering are
included in number of weighted average shares outstanding at December 31, 2005. 31




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##### Table of Contents



(6)
    
    See  Reconciliation of Amounts Reported Under Generally Accepted Accounting Principles
for information regarding our definition of EBITDA and Adjusted EBITDA, its limitations as an analytical
tool and a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods presented.(7)
    
    Includes corporate capital expenditures of $470, $612, and
$609, for the years ended December 31, 2005, 2004 and 2003,
respectively, which are not included in our two operating segment
capital expenditures. 32




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##### Table of Contents



REFINING AND MARKETING SEGMENT
 Year Ended December 31,2005
    
    
    2004
    
    
    2003(dollars in thousands, except per barrel data andpricing statistics)STATEMENT OF OPERATIONS DATA:Net sales (1) (2)
    
    $
    2,147,390
    
    
    $
    1,523,850
    
    
    $
    1,225,045Operating costs and expenses:Cost of sales (2)
    
    
    1,866,536
    
    
    
    1,342,426
    
    
    
    1,084,213Direct operating expenses
    
    
    93,843
    
    
    
    75,742
    
    
    
    66,113Selling, general and administrative expenses
    
    
    22,932
    
    
    
    23,679
    
    
    
    20,063Depreciation and amortization
    
    
    14,464
    
    
    
    13,392
    
    
    
    12,636Total operating costs and expenses
    
    
    1,997,775
    
    
    
    1,455,239
    
    
    
    1,183,025Gain on disposition of assets (3)
    
    
    38,628
    
    
    
    
    
    
    
    Operating income
    
    $
    188,243
    
    
    $
    68,611
    
    
    $
    42,020KEY OPERATING STATISTICS AND OTHER DATA:Total sales volume (bpd)
    
    
    87,251
    
    
    
    85,950
    
    
    
    90,914Non-integrated marketing sales volume (bpd) (4)
    
    
    20,335
    
    
    
    19,926
    
    
    
    24,093Non-integrated marketing margin
(per barrel sales volume) (4)
    
    $
    (1.32
    )
    
    $
    0.03
    
    
    $
    0.52Per barrel of throughput:Refinery operating margin (5)
    
    $
    12.30
    
    
    $
    8.03
    
    
    $
    5.80Direct operating expenses (6)
    
    
    3.97
    
    
    
    3.36
    
    
    
    2.81Capital expenditures
    
    $
    19,080
    
    
    $
    23,555
    
    
    $
    16,169Capital expenditures for turnarounds and catalysts
    
    
    12,041
    
    
    
    2,322
    
    
    
    1,547PRICING STATISTICS:WTI crude oil (per barrel)
    
    $
    56.49
    
    
    $
    41.42
    
    
    $
    31.11WTS crude oil (per barrel)
    
    
    51.87
    
    
    
    37.45
    
    
    
    28.36Crack spreads (3/2/1) (per barrel):Gulf Coast
    
    $
    11.45
    
    
    $
    6.77
    
    
    $
    4.73Group III
    
    
    11.44
    
    
    
    8.02
    
    
    
    6.74Crude differentials (per barrel):WTI less WTS
    
    $
    4.62
    
    
    $
    3.97
    
    
    $
    2.75Product price (per gallon):Gulf Coast unleaded
    
    
    158.8¢
    
    
    
    116.4¢
    
    
    
    86.9¢Gulf Coast low-sulfur diesel
    
    
    167.6
    
    
    
    111.0
    
    
    
    82.2Group III unleaded
    
    
    159.4
    
    
    
    119.0
    
    
    
    91.9Group III low-sulfur diesel
    
    
    166.5
    
    
    
    115.1
    
    
    
    86.5Natural gas (per MMBTU)
    
    $
    9.01
    
    
    $
    6.19
    
    
    $
    5.50
 Year Ended December 31,2005
    
    
    2004
    
    
    2003Bpd
    
    
    %
    
    
    Bpd
    
    
    %
    
    
    Bpd
    
    
    %THROUGHPUT AND PRODUCTION DATA:Refinery throughput:Sweet crude
    
    
    5,072
    
    
    
    7.8
    
    
    
    4,321
    
    
    
    7.0
    
    
    
    5,398
    
    
    
    8.4Sour crude
    
    
    55,643
    
    
    
    86.0
    
    
    
    53,646
    
    
    
    87.0
    
    
    
    55,676
    
    
    
    86.5Blendstocks
    
    
    4,040
    
    
    
    6.2
    
    
    
    3,697
    
    
    
    6.0
    
    
    
    3,280
    
    
    
    5.1Total
refinery throughput (7)(8)
    
    
    64,755
    
    
    
    100.0
    
    
    
    61,664
    
    
    
    100.0
    
    
    
    64,354
    
    
    
    100.0Refinery production:Gasoline
    
    
    29,499
    
    
    
    45.8
    
    
    
    28,711
    
    
    
    46.8
    
    
    
    30,700
    
    
    
    47.7Diesel/jet
    
    
    21,903
    
    
    
    34.0
    
    
    
    19,939
    
    
    
    32.5
    
    
    
    21,554
    
    
    
    33.5Asphalt
    
    
    5,824
    
    
    
    9.1
    
    
    
    5,781
    
    
    
    9.4
    
    
    
    5,746
    
    
    
    8.9Petrochemicals
    
    
    4,256
    
    
    
    6.6
    
    
    
    4,492
    
    
    
    7.3
    
    
    
    4,536
    
    
    
    7.1Other
    
    
    2,911
    
    
    
    4.5
    
    
    
    2,449
    
    
    
    4.0
    
    
    
    1,804
    
    
    
    2.8Total
refinery production (8)(9)
    
    
    64,393
    
    
    
    100.0
    
    
    
    61,372
    
    
    
    100.0
    
    
    
    64,340
    
    
    
    100.0Refinery
utilization (10)
    
    
    
    
    
    
    94.3
    %
    
    
    
    
    
    
    95.0
    %
    
    
    
    
    
    
    99.3
    %
 
 (1)
    
    Net sales include inter-segment sales to our retail segment at prices which approximate
market price. These inter-segment sales are eliminated through consolidation of our financial
statements.(2)
    
    Our buy/sell arrangements involve linked purchase and sales related to refined product
contracts entered into to address location or grade requirements. Included in cost of sales
are amounts which approximate the revenues resulting from these transactions. See Note 2 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 33




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##### Table of Contents



(3)
    
    Gain on disposition of assets reported in 2005 reflects the initial pre-tax gain recognized in
connection with assets contributed in the February 28, 2005 HEP transaction and recognition of
deferred gain recorded in the ten months following the transaction. The transaction was
recorded as a partial sale for accounting purposes.(4)
    
    Non-integrated marketing sales volume represents refined products sales to our wholesale
marketing customers located in our non-integrated region. The refined products we sell in
this region are obtained from third-party suppliers. Non-integrated marketing margin
represents the margin between net sales and cost of sales attributable to our non-integrated
refined products sales volume expressed on a per barrel basis.(5)
    
    Refinery operating margin is a per barrel measurement calculated by dividing the margin
between net sales and costs of sales exclusive of depreciation and
amortization expense, attributable
to our refining and marketing segment, exclusive of net sales and cost of sales relating to
our non-integrated system, by our Big Spring refinerys throughput volumes. We exclude net
sales and cost of sales from our non-integrated system because the refined products we sell in
this system are not produced at our refinery. 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 margin to these crack spreads
to assess our operating performance relative to other participants in our industry.(6)
    
    Refinery direct operating expense is a per barrel measurement calculated by dividing direct
operating expenses, exclusive of depreciation and amortization expense, by our refinery throughput.(7)
    
    Total refinery throughput represents the aggregate volume of crude oil and blendstock used in
the refinery production process.(8)
    
    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 our refinery.(9)
    
    2005 throughput reflects the effect of the downtime
associated with the planned major turnaround in the first throughput
of quarter 2005. Refinery throughput
increased to an average of 70,419 bpd for the last three quarters of
2005, compared to average throughput of 47,447 bpd for the first quarter 2005. Refinery
production increased to an average production of 70,065 bpd for the last three quarters of 2005, compared to average production of
47,060 bpd for the first quarter 2005.(10)
    
    Refinery utilization represents average daily crude oil throughput divided by crude capacity,
excluding planned periods of downtime for maintenance and turnarounds. 34




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##### Table of Contents



RETAIL SEGMENT
 Year Ended December 31,2005
    
    
    2004
    
    
    2003(dollars in thousands, except per gallon data)STATEMENT OF OPERATIONS DATA:Net sales
    
    $
    326,537
    
    
    $
    301,491
    
    
    $
    278,189Operating costs and expenses:Cost of sales (1)
    
    
    269,222
    
    
    
    245,291
    
    
    
    223,287Selling, general and administrative expenses
    
    
    49,796
    
    
    
    49,286
    
    
    
    48,381Depreciation and amortization
    
    
    4,557
    
    
    
    4,192
    
    
    
    4,078Total operating costs and expenses
    
    
    323,575
    
    
    
    298,769
    
    
    
    275,746Gain (loss) on disposition of assets
    
    
    (37
    )
    
    
    175
    
    
    
    Operating income
    
    $
    2,925
    
    
    $
    2,897
    
    
    $
    2,443KEY OPERATING STATISTICS AND OTHER DATA:Number of stores (end of period)
    
    
    167
    
    
    
    167
    
    
    
    170Fuel sales (thousands of gallons)
    
    
    87,714
    
    
    
    97,541
    
    
    
    100,389Fuel sales (thousands of gallons per site per month)
    
    
    45
    
    
    
    49
    
    
    
    50Fuel margin (cpg) (2)
    
    
    14.9¢
    
    
    
    12.9¢
    
    
    
    11.9¢Fuel sales price (dollar per gallon) (3)
    
    $
    2.20
    
    
    $
    1.76
    
    
    $
    1.47Merchandise sales
    
    $
    133,305
    
    
    $
    130,117
    
    
    $
    130,413Merchandise sales (per site per month)
    
    
    68
    
    
    
    65
    
    
    
    64Merchandise margin (4)
    
    
    33.2
    %
    
    
    33.5
    %
    
    
    33.0
    %Capital expenditures
    
    
    3,484
    
    
    
    3,134
    
    
    
    6,613
 
 (1)
    
    Cost of sales includes inter-segment purchases of motor fuels from our refining and marketing
segment at prices which approximate market prices. These inter-segment purchases are
eliminated through consolidation of our financial statements.(2)
    
    Fuel margin represents the difference between motor fuel revenues and the net cost of
purchased 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.(3)
    
    Fuel sales price per gallon represents the average sales price for motor fuels sold through
our retail segment(4)
    
    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. 35




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##### Table of Contents



Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
 Net Sales
 Consolidated
 Refining and Marketing Segment
 Retail Segment
 Cost of Sales
 Consolidated
 Refining and Marketing Segment
 Retail Segment
 Direct Operating Expenses
  36




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##### Table of Contents



Selling, General and Administrative Expenses
 Consolidated
 Refining and Marketing Segment
 Retail Segment
 Depreciation and Amortization
  Operating Income
 Consolidated
 Refining and Marketing Segment
 Retail
Segment
 Interest Expense
  37




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##### Table of Contents



Income Tax Expense
  Minority
Interest In Income of Subsidiaries
  Net Income
  Year Ended December 31, 2004 Compared to Year Ended December 31 2003
 Net Sales
 Consolidated
 Refining and Marketing Segment
 Retail Segment
 Cost of Sales
 Consolidated
 Refining and Marketing Segment
 38




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##### Table of Contents



Retail
 Direct Operating Expenses
  Selling, General and Administrative Expenses
 Consolidated
 Refining and Marketing Segment
 Retail Segment
 Depreciation and Amortization
  Operating Income
 Consolidated
 Refining and Marketing Segment
 Retail Segment
 39




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##### Table of Contents



Interest Expense
  Income Tax Expense
  Minority
Interest In Income of Subsidiaries
  Net Income
  Liquidity and Capital Resources
  Cash Flow
  Year Ended December 312005
    
    
    2004
    
    
    2003(dollars in thousands)Cash provided by (used in):Operating activities
    
    $
    137,895
    
    
    $
    76,743
    
    
    $
    76,173Investing activities (1)
    
    
    (106,962
    )
    
    
    (39,886
    )
    
    
    (34,664
    )Financing activities
    
    
    42,530
    
    
    
    19,244
    
    
    
    (39,667
    )Net increase in cash and cash equivalents
    
    $
    73,463
    
    
    $
    56,101
    
    
    $
    1,842
 
 (1)
    
    2005 cash used in investing activities include $185,320 investments in
short-term, highly liquid debt instruments, partially offset by $118,000 net proceeds
received in the HEP transaction. Cash Flows Provided By Operating Activities
  40




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##### Table of Contents



Cash Flows Used In Investing Activities
 .
   Cash Flows Provided By (Used In) Financing Activities
   41




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##### Table of Contents



Initial Public Offering
   Cash, Cash Equivalents and Short-Term Investment Position and Indebtedness
  Summary of Indebtedness
 As of December 31, 2005(dollars in thousands)Debt, including current portionBank credit facilities:Revolving credit facility
    
    $
    Term loan
    
    
    100,000Retail
mortgages and equipment loans
    
    
    32,390Total debt
    
    $
    132,390
 Revolving Credit Facility
  42




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##### Table of Contents




    
    a minimum consolidated tangible net worth equal to the sum of $106.0 million plus an
amount determined on a cumulative basis equal to the sum of 50% of any positive net
income for each fiscal year after December 31, 2004 (minimum consolidated tangible net
worth as of December 31, 2005 was $158.1 million and our actual consolidated tangible
net worth was $193.6);
    
    a ratio of total consolidated indebtedness less freely transferable cash and
permitted investments not subject to any lien (other than liens in favor of Israel
Discount Bank) to consolidated EBITDA for the last four fiscal quarters of no greater
than 4.0 to 1.0 (the ratio as of December 31, 2005 was (0.4) to 1.00);
    
    a minimum ratio of consolidated current assets to consolidated current liabilities
of 1.0 to 1.0 (the ratio as of December 31, 2005 was 1.8 to 1.0); and
    
    a ratio of total consolidated EBITDA to consolidated interest expense, in each case
as of the end of any period of four fiscal quarters, to be not less than 2.0 to 1.0
(the ratio as of December 31, 2005 was 11.8 to 1.0);
    Term Loan
 43




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##### Table of Contents



Mortgage Loans and Equipment Loans
 Capital Spending
  2006
    
    
    2007(dollars in thousands)Refining and Marketing Segment:Sustaining maintenance
    
    $
    11,515
    
    
    $
    7,034Growth/profit improvement/other
    
    
    4,932
    
    
    
    13,402Low-sulfur gasoline and diesel compliance
    
    
    9,930
    
    
    
    50026,377
    
    
    
    20,936Retail Segment:Sustaining maintenance
    
    
    1,947
    
    
    
    1,211Growth/profit improvement
    
    
    5,471
    
    
    
    9,1297,418
    
    
    
    10,340Total
    
    $
    33,795
    
    
    $
    31,276
 Clean Air Capital Expenditures
   2011 and2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    Thereafter
    
    Total(dollars in thousands)Low-sulfur gasoline
    
    $
    
    
    
    $
    500
    
    
    $
    1,000
    
    
    $
    4,877
    
    
    $
    9,000
    
    
    $
    
    
    
    $
    15,377Low-sulfur diesel
    
    
    9,930
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,930Total
    
    $
    9,930
    
    
    $
    500
    
    
    $
    1,000
    
    
    $
    4,877
    
    
    $
    9,000
    
    
    $
    
    
    
    $
    25,307
 44




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##### Table of Contents



Turnaround and Chemical Catalyst Costs
  2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011(dollars in thousands)Scheduled turnaround costs
    
    $
    400
    
    
    $
    700
    
    
    $
    400
    
    
    $
    8,750
    
    
    $
    500
    
    
    $
    500Chemical catalyst costs
    
    
    3,970
    
    
    
    10,750
    
    
    
    7,701
    
    
    
    6,596
    
    
    
    7,400
    
    
    
    5,400Total
    
    $
    4,370
    
    
    $
    11,450
    
    
    $
    8,101
    
    
    $
    15,346
    
    
    $
    7,900
    
    
    $
    5,900
 Contractual Obligations and Commercial Commitments
  Payments Due by PeriodLess Than
    
    
    
    
    
    
    
    
    
    
    More ThanContractual Obligations
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 Years
    
    
    Total(dollars in thousands)Long-term debt obligations (a)
    
    $
    4,487
    
    
    $
    104,099
    (b)
    
    $
    5,023
    
    
    $
    18,781
    
    
    $
    132,390Operating lease obligations
    
    
    12,469
    
    
    
    33,061
    
    
    
    9,908
    
    
    
    6,278
    
    
    
    61,716Pipelines and Terminals Agreement
(c)
    
    
    19,621
    
    
    
    58,863
    
    
    
    39,242
    
    
    
    160,238
    
    
    
    277,964Other commitments (d)
    
    
    6,827
    
    
    
    8,483
    
    
    
    5,654
    
    
    
    28,981
    
    
    
    49,945Total obligations
    
    $
    43,404
    
    
    $
    204,506
    
    
    $
    59,827
    
    
    $
    214,278
    
    
    $
    522,015
 
 (a)
    
    We repaid approximately $24.3 million of outstanding debt with a portion of the
proceeds received from our initial public offering, of which $3.6 million was due within
one year and $20.7 million was due within five years.(b)
    
    Includes $100.0 million of indebtedness owed under our term facility. We prepaid
all amounts outstanding under the term facility in the first quarter of 2006.(c)
    
    Balances represent the minimum committed volume multiplied by the tariff and
terminal rates pursuant to the terms of the Pipelines and Terminals Agreement with HEP.(d)
    
    Other commitments include refinery maintenance services costs and management fees
to our parent. These management fees were terminated in connection with our initial
public offering for an aggregate payment of $6.0 million, of which $2.0 million was paid
in August 2005 and the remaining $4.0 million was paid in January 2006.   Off-Balance Sheet Arrangements
  45




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##### Table of Contents



Critical Accounting Policies
  Inventory
 Environmental and Other Loss Contingencies
 Turnarounds and Chemical Catalyst Costs
 Impairment of Long-Lived Assets
 46




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##### Table of Contents



Deferred Income Taxes
 Asset Retirement Obligations
  New Accounting Standards and Disclosures
 Share-Based
Payment
    47




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##### Table of Contents



Reconciliation of Amounts Reported Under Generally Accepted Accounting Principles
 Reconciliation of Adjusted EBITDA to amounts reported under generally accepted accounting
principles in financial statements.
   
    
    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 the EBITDA calculations
of other companies in our industry, limiting its usefulness as a comparative measure.
 48




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##### Table of Contents



For the Year Ended December 31,2005
    
    
    2004
    
    
    2003(dollars in thousands)Net income
    
    $
    103,988
    
    
    $
    25,132
    
    
    $
    14,068Minority interest
    
    
    5,792
    
    
    
    2,565
    
    
    
    681Income tax expense
    
    
    65,518
    
    
    
    18,315
    
    
    
    9,105Interest expense
    
    
    19,326
    
    
    
    23,704
    
    
    
    16,284Depreciation and amortization
    
    
    20,935
    
    
    
    19,064
    
    
    
    18,262EBITDA
    
    
    215,559
    
    
    
    88,780
    
    
    
    58,400Gain on disposition of assets
    
    
    (38,591
    )
    
    
    (175
    )
    
    
    Adjusted EBITDA
    
    $
    176,968
    
    
    $
    88,605
    
    
    $
    58,400
 
 ITEM 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 Quantitative and Qualitative Disclosure About Market Risk
  Commodity Price Risk
     49




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##### Table of Contents



Wtd Avg
    
    
    Wtd AvgDescription
    
    Contract
    
    
    Purchase
    
    
    Sales
    
    
    Contract
    
    
    Fair
    
    
    Gainof Activity
    
    Volume
    
    
    Price
    
    
    Price
    
    
    Value
    
    
    Value
    
    
    (Loss)Futures-long
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Futures-short
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forwards-long (refined products)
    
    
    25,000
    
    
    
    63.62
    
    
    
    71.84
    
    
    
    1,590
    
    
    
    1,796
    
    
    
    206Forwards-short (refined products)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 Interest Rate Risk
  
 ITEM 8.
    
    CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE.
  
 ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
  
 ITEM 9A.
    
    CONTROLS AND PROCEDURES.
  Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  
 ITEM 9B.
    
    OTHER INFORMATION.
  50




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##### Table of Contents



PART III
 
 ITEM 10.
    
    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
    
 ITEM 11.
    
    EXECUTIVE COMPENSATION.
  
 ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS.
  
 ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
  
 ITEM 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES.
  51




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##### Table of Contents



PART IV
 
 ITEM 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
 (a)
    
    The following documents are filed as part of this report:(1)
    
    Consolidated Financial Statements and ScheduleSee Index to Consolidated Financial Statements and Schedule on page F-1.(2)
    
    Exhibits:Reference is made to the Index of Exhibits immediately preceding the exhibits hereto, which
index in incorporated herein by reference.
 Exhibit No.
    
    Description of Exhibit3.1
    
    Amended Restated Certificate of Incorporation of Alon USA Energy, Inc. (incorporated by
reference to Exhibit 3.1 to Form S-1/A, filed by the Company on July 7, 2005, SEC File No.
333-124797).3.2
    
    Amended and Restated Bylaws of Alon USA Energy, Inc. (incorporated by reference to Exhibit
3.2 to Form S-1/A, filed by the Company on July 14, 2005, SEC File No. 333-124797).4.1
    
    Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Form S-1/A,
filed by the Company on June 17, 2005, SEC File No. 333-124797).10.1 
    
    Area License Agreement, dated as of June 2, 1993, between Southwest Convenience Stores, Inc.
and The Southland Corporation (incorporated by reference to Exhibit 10.1 to Form S-1/A,
filed by the Company on July 7, 2005, SEC File No. 333-124797).10.2 
    
    Amendment to Area License Agreement and Consent to Assignment, dated as of December 20,
1996, between The Southland Corporation and Permian Basin Investments, Inc. d/b/a Southwest
Convenience Stores, Inc. (incorporated by reference to Exhibit 10.2.1 to Form S-1/A, filed
by the Company on July 7, 2005, SEC File No. 333-124797).10.3 
    
    Amendment No. 2 to Area License Agreement, dated as of August 14, 1997, between Southwest
Convenience Stores LLC and The Southland Corporation (incorporated by reference to Exhibit
10.2.2 to Form S-1/A, filed by the Company on July 7, 2005, SEC File No. 333-124797).10.4
    
    Trademark License Agreement, dated as of June 31, 2000, among Finamark, Inc., Atofina
Petrochemicals, Inc. and SWBU, L.P. (incorporated by reference to Exhibit 10.3 to Form S-1,
filed by the Company on May 11, 2005, SEC File No. 333-124797).10.5
    
    First Amendment to Trademark License Agreement, dated as of April 11, 2001, among Finamark,
Inc., Atofina Petrochemicals, Inc. and SWBU, L.P. (incorporated by reference to Exhibit 10.4
to Form S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.6
    
    Pipeline Lease Agreement, dated as of January 22, 2001, between Chevron Pipe Line Company
and Fin-Tex Pipe Line Company (incorporated by reference to Exhibit 10.5 to Form S-1, filed
by the Company on May 11, 2005, SEC File No. 333-124797).10.7
    
    Pipeline Lease Agreement, dated as of February 21, 1997, between Navajo Pipeline Company and
American Petrofina Pipe Line Company (incorporated by reference to Exhibit 10.6 to Form S-1,
filed by the Company on May 11, 2005, SEC File No. 333-124797).10.8
    
    Contribution Agreement, dated as of January 25, 2005, among Holly Energy Partners, L.P.,
Holly Energy Partners  Operating, L.P., T & R Assets, Inc., Fin-Tex Pipe Line Company, Alon
USA Refining, Inc., Alon Pipeline Assets, LLC, Alon Pipeline Logistics, LLC, Alon USA, Inc.
and Alon USA, LP. (incorporated by reference to Exhibit 10.7 to Form S-1, filed by the
Company on May 11, 2005, SEC File No. 333-124797).
 52




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit10.9
    
    Pipelines and Terminals Agreement, dated as of February 28, 2005, between Alon USA, LP and
Holly Energy Partners, L.P. (incorporated by reference to Exhibit 10.8 to Form S-1, filed by
the Company on May 11, 2005, SEC File No. 333-124797).10.10
    
    Master Lease, dated as of October 1, 2002, between SCS Finance I, L.P. and Southwest
Convenience Stores, LP (incorporated by reference to Exhibit 10.9 to Form S-1, filed by the
Company on May 11, 2005, SEC File No. 333-124797).10.11
    
    Loan Agreement, dated as of October 1, 2002, between GE Capital Franchise Finance
Corporation and SCS Finance I, L.P. (incorporated by reference to Exhibit 10.10 to Form S-1,
filed by the Company on May 11, 2005, SEC File No. 333-124797).10.12
    
    Equipment Loan and Security Agreement, dated as of October 1, 2002, between GE Capital
Franchise Finance Corporation and SCS Finance I, L.P. (incorporated by reference to Exhibit
10.11 to Form S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.13
    
    Master Lease, dated as of October 1, 2002, between SCS Finance II, L.P. and Southwest
Convenience Stores, LP. (incorporated by reference to Exhibit 10.12 to Form S-1, filed by
the Company on May 11, 2005, SEC File No. 333-124797).10.14
    
    Loan Agreement, dated as of October 1, 2002, between GE Capital Franchise Finance
Corporation and SCS Finance II, L.P. (incorporated by reference to Exhibit 10.13 to Form
S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.15
    
    Equipment Loan and Security Agreement, dated as of October 1, 2002, between GE Capital
Franchise Finance Corporation and SCS Finance II, L.P. (incorporated by reference to Exhibit
10.14 to Form S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.16
    
    Amended and Restated Credit Agreement, dated as of January 14, 2004, among Alon USA, Inc.,
the lenders listed therein and Credit Suisse First Boston (incorporated by reference to
Exhibit 10.15 to Form S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.17
    
    First Amendment, dated as of February 10, 2005, to the Amended and Restated Credit
Agreement, dated as of January 14, 2004, among Alon USA, Inc., the lenders listed therein
and Credit Suisse First Boston, and the Guarantee and Collateral Agreement, dated as of
January 14, 2004, among Credit Suisse First Boston, Alon USA, Inc., the subsidiaries of Alon
USA, Inc. identified therein and Alon USA, Inc. (incorporated by reference to Exhibit 10.17
to Form S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.18
    
    Second Amendment, dated as of May 6, 2005, to the Amended and Restated Credit Agreement,
dated as of January 14, 2004, among Alon USA Energy, Inc., the lenders listed therein and
Credit Suisse First Boston (incorporated by reference to Exhibit 10.18 to Form S-1/A, filed
by the Company on June 17, 2005, SEC File No. 333-124797).10.19
    
    Guarantee and Collateral Agreement, dated as of January 14, 2004, among Credit Suisse First
Boston, Alon USA, Inc., the subsidiaries of Alon USA, Inc. identified therein and Alon USA
Energy, Inc. (incorporated by reference to Exhibit 10.16 to Form S-1, filed by the Company
on May 11, 2005, SEC File No. 333-124797).10.20
    
    Amended Revolving Credit Agreement, dated as of January 14, 2004, among Alon USA, LP, the
guarantor companies and financial institutions identified therein and Israel Discount Bank
of New York (incorporated by reference to Exhibit 10.19 to Form S-1, filed by the Company on
May 11, 2005, SEC File No. 333-124797).10.21
    
    First Amendment, dated as of February 10, 2005, to the Amended Revolving Credit Agreement,
dated as of January 14, 2005, among Alon USA, LP, the guarantor companies and financial
institutions identified therein and Israel Discount Bank of New York (incorporated by
reference to Exhibit 10.20 to Form S-1, filed by the Company on May 11, 2005, SEC File No.
333-124797).
 53




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit10.22
    
    Second Amendment, dated as of June 16, 2005, to the Amended Revolving Credit Agreement,
dated as of January 14, 2005, among Alon USA, LP, the guarantor companies and financial
institutions identified therein and Israel Discount Bank of New York (incorporated by
reference to Exhibit 10.20.1 to Form S-1/A, filed by the Company on June 17, 2005, SEC File
No. 333-124797).10.23
    
    Amending Revolving Credit Agreement, dated as of February 15, 2006, among Alon USA, LP, the
guarantor companies and financial institutions named therein, Israel Discount Bank of New
York and Bank Leumi USA (incorporated by reference to Exhibit 10.1 to Form 8-K filed by the
Company on February 16, 2006, SEC File No. 001-32567).10.24
    
    Management and Consulting Agreement, dated August 1, 2003, among Alon USA, Inc., Alon Israel
Oil Company, Ltd. and Alon USA Energy, Inc. (incorporated by reference to Exhibit 10.21 to
Form S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.25
    
    Amendment, dated as of June 17, 2005, to the Management and Consulting Agreement, dated as
of August 1, 2003, among Alon USA, Inc., Alon Israel Oil Company, Ltd. and Alon USA Energy,
Inc. (incorporated by reference to Exhibit 10.21.1 to Form S-1/A, filed by the Company on
June 17, 2005, SEC File No. 333-124797).10.26
    
    Registration Rights Agreement, dated as of July 6, 2005, between Alon USA Energy, Inc. and
Alon Israel Oil Company, Ltd. (incorporated by reference to Exhibit 10.22 to Form S-1/A,
filed by the Company on July 7, 2005, SEC File No. 333-124797).10.27*
    
    Executive Employment Agreement, dated as of July 31, 2000, between Jeff D. Morris and Alon
USA GP, Inc., as amended on May 4, 2005 (incorporated by reference to Exhibit 10.23 to Form
S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.28*
    
    Executive Employment Agreement, dated as of July 31, 2000, between Claire A. Hart and Alon
USA GP, Inc., as amended on May 4, 2005 (incorporated by reference to Exhibit 10.24 to Form
S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.29*
    
    Executive Employment Agreement, dated as of February 5, 2001, between Joseph A. Concienne,
III and Alon USA GP, Inc., as amended on May 4, 2005 (incorporated by reference to Exhibit
10.25 to Form S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.30*
    
    Management Employment Agreement, dated as of October 1, 2002, between Harlin R. Dean and
Alon USA GP, LLC, as amended on May 4, 2005 (incorporated by reference to Exhibit 10.26 to
Form S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.31*
    
    Amendment, dated as of October 1, 2003, to the Management Employment Agreement, dated as of
October 1, 2002, between Harlin Dean and Alon USA GP, LLC, as amended on May 4, 2005
(incorporated by reference to Exhibit 10.26.1 to Form S-1/A, filed by the Company on June
17, 2005, SEC File No. 333-124797).10.32*
    
    Amendment to Executive/Management Employment Agreement, dated as of November 7, 2005,
between Harlin Dean and Alon USA GP, LLC (incorporated by reference to Exhibit 10.1 to Form
8-K, filed by the Company on November 8, 2005, SEC File No. 001-32567).10.33+*
    
    Management Employment Agreement, dated September 1, 2000, between Yosef Israel and Alon USA,
GP, LLC.10.34+*
    
    Amendment to Executive/Management Employment Agreement, dated May 1, 2005 between Yosef
Israel and Alon USA. GP, LLC.10.35*
    
    Annual Cash Bonus Plan (incorporated by reference to Exhibit 10.27 to Form S-1, filed by
the Company on May 11, 2005, SEC File No. 333-124797).10.36*
    
    Description of 10% Bonus Plan (incorporated by reference to Exhibit 10.28 to Form S-1, filed
by the Company on May 11, 2005, SEC File No. 333-124797).10.37*
    
    Change of Control Incentive Bonus Program (incorporated by reference to Exhibit 10.29 to
Form S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).
 54




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit10.38*
    
    Description of Director Compensation (incorporated by reference to Exhibit 10.30 to Form
S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.39*
    
    Form of Director Indemnification Agreement (incorporated by reference to Exhibit 10.31 to
Form S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.40*
    
    Form of Officer Indemnification Agreement (incorporated by reference to Exhibit 10.32 to
Form S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.41*
    
    Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit
10.33 to Form S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.42
    
    Liquor License Purchase Agreement, dated as of May 12, 2003, between Southwest Convenience
Stores, LLC and SCS Beverage, Inc. (incorporated by reference to Exhibit 10.34 to Form
S-1/A, filed by the Company on June 17, 2005, SEC File No. 333-124797).10.43
    
    Premises Lease, dated as of May 12, 2003, between Southwest Convenience Stores, LLC and SCS
Beverage, Inc. (incorporated by reference to Exhibit 10.35 to Form S-1/A, filed by the
Company on June 17, 2005, SEC File No. 333-124797).10.44*
    
    Alon Assets, Inc. 2000 Stock Option Plan (incorporated by reference to Exhibit 10.36 to Form
S-1/A, filed by the Company on June 17, 2005, SEC File No. 333-124797).10.45*
    
    Alon USA Operating, Inc. 2000 Stock Option Plan (incorporated by reference to Exhibit 10.37
to Form S-1/A, filed by the Company on June 17, 2005, SEC File No. 333-124797).10.46*
    
    Incentive Stock Option Agreement, dated as of July 31, 2000, between Alon Assets, Inc. and
Jeff D. Morris, as amended on June 30, 2002 (incorporated by reference to Exhibit 10.38 to
Form S-1/A, filed by the Company on June 17, 2005, SEC File No. 333-124797).10.47
    
    Shareholder Agreement, dated as of July 2000, between Alon Assets, Inc. and Jeff D. Morris,
as amended on June 30, 2002 (incorporated by reference to Exhibit 10.39 to Form S-1/A, filed
by the Company on June 17, 2005, SEC File No. 333-124797).10.48*
    
    Incentive Stock Option Agreement, dated as of July 31, 2000, between Alon USA Operating,
Inc. and Jeff D. Morris, as amended on June 30, 2002 (incorporated by reference to Exhibit
10.40 to Form S-1/A, filed by the Company on June 17, 2005, SEC File No. 333-124797).10.49
    
    Shareholder Agreement, dated as of July 31, 2000, between Alon USA Operating, Inc. and Jeff
D. Morris, as amended on June 30, 2002 (incorporated by reference to Exhibit 10.41 to Form
S-1/A, filed by the Company on June 17, 2005, SEC File No. 333-124797).10.50*
    
    Incentive Stock Option Agreement, dated as of July 31, 2000, between Alon Assets, Inc. and
Claire A. Hart, as amended on June 30, 2002 and July 25, 2002 (incorporated by reference to
Exhibit 10.42 to Form S-1/A, filed by the Company on June 17, 2005, SEC File No.
333-124797).10.51
    
    Shareholder Agreement, dated as of July 31, 2000, between Alon Assets, Inc. and Claire A.
Hart, as amended on June 30, 2002 (incorporated by reference to Exhibit 10.43 to Form S-1/A,
filed by the Company on June 17, 2005, SEC File No. 333-124797).10.52*
    
    Incentive Stock Option Agreement, dated as of July 31, 2000, between Alon USA Operating,
Inc. and Claire A. Hart, as amended on June 30, 2002 and July 25, 2002 (incorporated by
reference to Exhibit 10.44 to Form S-1/A, filed by the Company on June 17, 2005, SEC File
No. 333-124797).10.53
    
    Shareholder Agreement, dated as of July 31, 2000, between Alon USA Operating, Inc. and
Claire A. Hart, as amended on June 30, 2002 (incorporated by reference to Exhibit 10.45 to
Form S-1/A, filed by the Company on June 17, 2005, SEC File No. 333-124797).10.54*
    
    Incentive Stock Option Agreement, dated as of February 5, 2001, between Alon Assets, Inc.
and Joseph A. Concienne, III, as amended on July 25, 2002 (incorporated by reference to
Exhibit 10.46 to Form S-1/A, filed by the Company on June 17, 2005, SEC File No.
333-124797).
 55




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit10.55
    
    Shareholder Agreement, dated as of February 5, 2001, between Alon Assets, Inc. and Joseph A.
Concienne, III (incorporated by reference to Exhibit 10.47 to Form S-1/A, filed by the
Company on June 17, 2005, SEC File No. 333-124797).10.56*
    
    Incentive Stock Option Agreement, dated as of February 5, 2001, between Alon USA Operating,
Inc. and Joseph A. Concienne, III, as amended on July 25, 2002 (incorporated by reference to
Exhibit 10.48 to Form S-1/A, filed by the Company on June 17, 2005, SEC File No.
333-124797).10.57
    
    Shareholder Agreement, dated as of February 5, 2001, between Alon USA Operating, Inc. and
Joseph A. Concienne, III (incorporated by reference to Exhibit 10.49 to Form S-1/A, filed by
the Company on June 17, 2005, SEC File No. 333-124797).10.58*
    
    Agreement of Principles of Employment, dated as of July 6, 2005, between David Wiessman and
Alon USA Energy, Inc. (incorporated by reference to Exhibit 10.50 to Form S-1/A, filed by
the Company on July 7, 2005, SEC File No. 333-124797).10.59*
    
    Alon USA Energy, Inc. 2005 Incentive Compensation Plan, as amended on November 7, 2005
(incorporated by reference to Exhibit 10.2 to Form 8-K, filed by the Company on November 8,
2005, SEC File No. 001-32567).10.60*
    
    Agreement, dated as of July 6, 2005, by and among Alon USA Energy, Inc., Alon USA, Inc.,
Alon USA Capital, Inc., Alon USA Operating, Inc., Alon Assets, Inc., Jeff D. Morris, Claire
A. Hart and Joseph A. Concienne, III (incorporated by reference to Exhibit 10.52 to Form
S-1/A, filed by the Company on July 7, 2005, SEC File No. 333-124797).10.61*
    
    Form of Restricted Stock Award Agreement relating to Director Grants pursuant to Section 12
of the Alon USA Energy, Inc. 2005 Incentive Compensation Plan (incorporated by reference to
Exhibit 10.1 to Form 8-K filed by the Company on August 5, 2005, SEC File No. 001-32567).10.62*
    
    Form of Restricted Stock Award Agreement relating to Participant Grants pursuant to Section
8 of the Alon USA Energy, Inc. 2005 Incentive Compensation Plan (incorporated by reference
to Exhibit 10.1 to Form 8-K filed by the Company on August 23, 2005, SEC File No.
001-32567).10.63*
    
    Form II of Restricted Stock Award Agreement relating to Participant Grants pursuant to
Section 8 of the Alon USA Energy, Inc. 2005 Incentive Compensation Plan (incorporated by
reference to Exhibit 10.3 to Form 8-K filed by the Company on November 8, 2005, SEC File No.
001-32567).10.64
    
    Purchase and Sale Agreements between Alon Petroleum Pipe Line, LP and Sunoco Pipelines, LP,
dated February 13, 2006 (incorporated by reference to Exhibit 10.1 to Form 8-K filed by the
Company on February 13, 2006, SEC File No. 001-32567).21.1+
    
    List of Subsidiaries of Alon USA Energy, Inc.23.1+
    
    Consent of KPMG LLP.31.1+
    
    Certifications of Chief Executive Officer pursuant to §302 of the Sarbanes-Oxley Act of 2002.31.2+
    
    Certifications of Chief Financial Officer pursuant to §302 of the Sarbanes-Oxley Act of 2002.32.1+
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
§1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.
 
 +
    
    Filed herewith.*
    
    Identifies management contracts and compensatory plans or arrangements.
    
    Filed under confidential treatment request. 56




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
 PageAudited Consolidated Financial Statements:Report of Independent Registered Public Accounting Firm
    
    F-2Consolidated Balance Sheets as of December 31, 2005 and 2004
    
    F-3Consolidated Statements of Operations for the Years Ended December 31, 2005, 2004 and 2003
    
    F-4Consolidated Statements of Stockholders Equity for the Years Ended December 31, 2005,
2004 and 2003
    
    F-5Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2004 and 2003
    
    F-6Notes to Consolidated Financial Statements
    
    F-8
 ALON USA ENERGY, INC. (PARENT COMPANY ONLY)
 INDEX TO CONDENSED FINANCIAL STATEMENTS AND SCHEDULE
 Audited Condensed Financial Statements:Report of Independent Registered Public Accounting Firm
    
    F-32Alon USA Energy, Inc. (Parent Company Only) Condensed Balance Sheets as of
December 31, 2005 and 2004
    
    F-33Alon USA Energy, Inc. (Parent Company Only) Condensed Statements of Operations for
the Years Ended December 31, 2005, 2004 and 2003
    
    F-34Alon USA Energy, Inc. (Parent Company Only) Condensed Statements of Cash Flows for
the Years Ended December 31, 2005, 2004 and 2003
    
    F-35Alon USA Energy, Inc. (Parent Company Only) Notes to Condensed Financial Statements
    
    F-36
 F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    Accounting for Asset Retirement Obligations
  
 F-2




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
(in thousands except share data)
 As of December 31,2005
    
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    136,820
    
    
    $
    63,357Short-term investments
    
    
    185,320
    
    
    
    Accounts and other receivables, net
    
    
    89,529
    
    
    
    69,328Inventories
    
    
    79,181
    
    
    
    79,329Prepaid expenses and other current assets
    
    
    6,264
    
    
    
    2,441Total current assets
    
    
    497,114
    
    
    
    214,455Investment in HEP
    
    
    22,754
    
    
    
    Property, plant, and equipment, net
    
    
    211,410
    
    
    
    236,228Other assets
    
    
    27,502
    
    
    
    21,833Total assets
    
    $
    758,780
    
    
    $
    472,516LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    157,076
    
    
    $
    103,051Accrued liabilities
    
    
    48,128
    
    
    
    50,846Current portion of deferred gain on disposition of assets
    
    
    11,427
    
    
    
    Current portion of long-term debt
    
    
    4,487
    
    
    
    16,115Total current liabilities
    
    
    221,118
    
    
    
    170,012Other non-current liabilities
    
    
    18,345
    
    
    
    19,436Deferred gain on disposition of assets
    
    
    52,433
    
    
    
    Long-term debt
    
    
    127,903
    
    
    
    171,591Deferred income tax liability
    
    
    52,422
    
    
    
    31,829Total liabilities
    
    
    472,221
    
    
    
    392,868Commitments and contingencies (Note 19)Minority interest in subsidiaries
    
    
    7,066
    
    
    
    8,176Stockholders equity:Preferred stock par value $0.01, 10,000,000 shares
authorized; no shares issued and outstanding
    
    
    
    
    
    
    Common stock, par value $0.01, 100,000,000 shares
authorized; 46,809,857 and 35,001,120 shares issued
and outstanding at December 31, 2005 and 2004
    
    
    468
    
    
    
    350Additional paid-in capital
    
    
    181,108
    
    
    
    8,379Accumulated other comprehensive loss, net of income tax
    
    
    (2,596
    )
    
    
    (2,261
    )Retained earnings
    
    
    100,513
    
    
    
    65,004Total stockholders equity
    
    
    279,493
    
    
    
    71,472Total liabilities and stockholders equity
    
    $
    758,780
    
    
    $
    472,516




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
 Year Ended December 31,2005
    
    
    2004
    
    
    2003Net sales
    
    $
    2,328,507
    
    
    $
    1,707,564
    
    
    $
    1,410,766Operating costs and expenses:Cost of sales
    
    
    1,990,338
    
    
    
    1,469,940
    
    
    
    1,215,032Direct operating expenses
    
    
    93,843
    
    
    
    75,742
    
    
    
    66,113Selling, general and administrative expenses
    
    
    73,219
    
    
    
    73,554
    
    
    
    69,066Depreciation and amortization
    
    
    20,935
    
    
    
    19,064
    
    
    
    18,262Total operating costs and expenses
    
    
    2,178,335
    
    
    
    1,638,300
    
    
    
    1,368,473Gain on disposition of assets
    
    
    38,591
    
    
    
    175
    
    
    
    Operating income
    
    
    188,763
    
    
    
    69,439
    
    
    
    42,293Interest expense
    
    
    (19,326
    )
    
    
    (23,704
    )
    
    
    (16,284
    )Equity earnings in HEP
    
    
    1,086
    
    
    
    
    
    
    
    Other income (expense), net
    
    
    4,775
    
    
    
    277
    
    
    
    (1,819
    )Income before income tax expense, minority
interest in income of subsidiaries, and
accounting change
    
    
    175,298
    
    
    
    46,012
    
    
    
    24,190Income tax expense
    
    
    65,518
    
    
    
    18,315
    
    
    
    9,105Income before minority interest in income of
subsidiaries and accounting change
    
    
    109,780
    
    
    
    27,697
    
    
    
    15,085Minority interest in income of subsidiaries
    
    
    5,792
    
    
    
    2,565
    
    
    
    681Income before accounting change
    
    
    103,988
    
    
    
    25,132
    
    
    
    14,404Cumulative effect of adoption of accounting
principle (Note 11)
    
    
    
    
    
    
    
    
    
    
    336Net income
    
    $
    103,988
    
    
    $
    25,132
    
    
    $
    14,068Earnings per share, basic and diluted
    
    $
    2.61
    
    
    $
    .72
    
    
    $
    .40Weighted average shares outstanding
    
    
    39,889
    
    
    
    35,001
    
    
    
    35,001




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(dollars in thousands)
 AccumulatedAdditional
    
    
    OtherCommon
    
    
    Paid-In
    
    
    Comprehensive
    
    
    RetainedStock
    
    
    Capital
    
    
    Loss
    
    
    Earnings
    
    
    TotalBalance at January 1, 2003
    
    $
    350
    
    
    $
    8,199
    
    
    $
    (1,225
    )
    
    $
    25,804
    
    
    $
    33,128Received for shares issued
    
    
    
    
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    40Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,068
    
    
    
    14,068Other comprehensive loss:Minimum pension liability,
net of income tax
    
    
    
    
    
    
    
    
    
    
    (313
    )
    
    
    
    
    
    
    (313
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,755Balance at December 31, 2003
    
    
    350
    
    
    
    8,239
    
    
    
    (1,538
    )
    
    
    39,872
    
    
    
    46,923Received for shares issued
    
    
    
    
    
    
    140
    
    
    
    
    
    
    
    
    
    
    
    140Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,132
    
    
    
    25,132Other comprehensive loss:Minimum pension liability,
net of income tax
    
    
    
    
    
    
    
    
    
    
    (723
    )
    
    
    
    
    
    
    (723
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,409Balance at December 31, 2004
    
    
    350
    
    
    
    8,379
    
    
    
    (2,261
    )
    
    
    65,004
    
    
    
    71,472Proceeds from sale of common
stock, net
    
    
    118
    
    
    
    172,729
    
    
    
    
    
    
    
    
    
    
    
    172,847Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (68,479
    )
    
    
    (68,479
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    103,988
    
    
    
    103,988Other comprehensive loss:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Minimum pension liability,
net of income tax
    
    
    
    
    
    
    
    
    
    
    (335
    )
    
    
    
    
    
    
    (335
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    103,653Balance at December 31, 2005
    
    $
    468
    
    
    $
    181,108
    
    
    $
    (2,596
    )
    
    $
    100,513
    
    
    $
    279,493




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
 Year Ended December 31,2005
    
    
    2004
    
    
    2003Cash flows from operating activities:Net income
    
    $
    103,988
    
    
    $
    25,132
    
    
    $
    14,068Adjustments to reconcile net income to cash provided by operating activities:Depreciation and amortization
    
    
    20,935
    
    
    
    19,064
    
    
    
    18,262Stock option compensation
    
    
    2,336
    
    
    
    530
    
    
    
    683Deferred income tax expense
    
    
    16,646
    
    
    
    1,669
    
    
    
    6,241Minority interest in income of subsidiaries
    
    
    5,792
    
    
    
    2,565
    
    
    
    681Accrued interest on subordinated notes to stockholders
    
    
    
    
    
    
    3,815
    
    
    
    3,665Gain on disposition of assets
    
    
    (38,591
    )
    
    
    (175
    )
    
    
    Cumulative effect of adoption of accounting principle
    
    
    
    
    
    
    
    
    
    
    336Changes in operating assets and liabilities:Accounts and other receivables, net
    
    
    (20,201
    )
    
    
    (9,514
    )
    
    
    3,177Inventories
    
    
    148
    
    
    
    (4,256
    )
    
    
    8,970Prepaid expenses and other current assets
    
    
    (2,107
    )
    
    
    2,575
    
    
    
    1,816Other assets
    
    
    1,279
    
    
    
    1,871
    
    
    
    1,158Accounts payable
    
    
    52,895
    
    
    
    17,245
    
    
    
    9,653Accrued liabilities
    
    
    (2,718
    )
    
    
    17,902
    
    
    
    3,454Other non-current liabilities
    
    
    (2,507
    )
    
    
    (1,680
    )
    
    
    4,009Net cash provided by operating activities
    
    
    137,895
    
    
    
    76,743
    
    
    
    76,173Cash flows from investing activities:Capital expenditures
    
    
    (23,034
    )
    
    
    (27,301
    )
    
    
    (23,391
    )Capital
expenditures for turnarounds and catalysts
    
    
    (12,041
    )
    
    
    (2,322
    )
    
    
    (1,547
    )Proceeds from disposition of assets
    
    
    118,000
    
    
    
    317
    
    
    
    274Purchases of short-term investments, net
    
    
    (185,320
    )
    
    
    
    
    
    
    Acquisition of minority interest in subsidiary
    
    
    
    
    
    
    (10,000
    )
    
    
    (10,000
    )Acquisition of asphalt business
    
    
    
    
    
    
    (580
    )
    
    
    Dividends from investment in HEP (net of equity earnings in HEP)
    
    
    531
    
    
    
    
    
    
    
    Minority interest shares purchased
    
    
    (5,098
    )
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (106,962
    )
    
    
    (39,886
    )
    
    
    (34,664
    )Cash flows from financing activities:Proceeds from sale of common stock, net
    
    
    172,459
    
    
    
    140
    
    
    
    1,721Dividends paid to minority interest shareholders
    
    
    (6,134
    )
    
    
    
    
    
    
    Dividends paid to shareholders
    
    
    (68,479
    )
    
    
    
    
    
    
    Deferred debt issuance costs
    
    
    
    
    
    
    (1,885
    )
    
    
    Payments on revolving credit facilities, net
    
    
    
    
    
    
    (19,600
    )
    
    
    (29,400
    )Additions to long-term debt
    
    
    2,936
    
    
    
    100,671
    
    
    
    1,546Payments on long-term debt
    
    
    (58,252
    )
    
    
    (60,082
    )
    
    
    (13,534
    )Net cash provided by (used in) financing activities
    
    
    42,530
    
    
    
    19,244
    
    
    
    (39,667
    )Net increase in cash and cash equivalents
    
    
    73,463
    
    
    
    56,101
    
    
    
    1,842Cash and cash equivalents, beginning of period
    
    
    63,357
    
    
    
    7,256
    
    
    
    5,414Cash and cash equivalents, end of period
    
    $
    136,820
    
    
    $
    63,357
    
    
    $
    7,256
  F-6




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##### Table of Contents



Year Ended December 31,2005
    
    
    2004
    
    
    2003Supplemental cash flow information:Cash paid for interest, net of capitalized interest
    
    $
    18,736
    
    
    $
    20,536
    
    
    $
    15,196Cash paid for income tax, net of tax refunds of $7,306 in 2003
    
    $
    44,523
    
    
    $
    15,701
    
    
    $
    (1,562
    )Non-cash activities:Investing activity  receipt of Class B HEP subordinated units as proceeds
from disposition of assets
    
    $
    30,000
    
    
    $
    
    
    
    $
    Asphalt Business Acquisition:Property, plant and equipment acquired
    
    $
    
    
    
    $
    (3,917
    )
    
    $
    Net working capital acquired (accounts and other receivables, net,
inventories, accounts payable)
    
    
    
    
    
    
    817
    
    
    
    Net debt assumed
    
    
    
    
    
    
    2,520
    
    
    
    Cash used in acquisition of asphalt business
    
    $
    
    
    
    $
    (580
    )
    
    $
    




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except as noted)
 (1) Description and Nature of Business
   Refining and Marketing Segment.
 Retail Segment.
 (2) Summary of Significant Accounting Policies
 (a) Basis of Presentation
   (b) Use of Estimates
  (c) Revenue Recognition




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except as noted)
   (d) Cost Classifications
     (e) Cash and Cash Equivalents
  (f) Short-Term Investments
  (g) Accounts Receivable




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except as noted)
 (h) Inventories
  (i ) Hedging Activity
 Accounting for
Derivative Instruments and Hedging Activities
 (j) HEP Investment
  (k) Property, Plant, and Equipment
     (l) Impairment of Long-Lived Assets and Assets to Be Disposed Of
  F-10




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except as noted)
 (m) Asset Retirement Obligations
 Accounting for Asset Retirement
Obligations
 Accounting for Conditional
Retirement Obligations
 (n) Turnarounds and Chemical Catalyst Costs
  (o) Income Taxes
  (p) Stock-Based Compensation
 Accounting for Stock Issued to Employees
 Accounting for Stock-Based Compensation
 (q) Environmental Expenditures




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except as noted)
  (r) Earnings Per Share
  (s) Other Comprehensive Income
  (t) Commitments and Contingencies
 Accounting for Asset Retirement Obligations
 (u) New Accounting Standards and Disclosures
 Share-Based
Payment
 Consolidation of Variable Interest
Entities an Interpretation of ARB No. 51
 Inventory Costs




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except as noted)
  Exchanges of Nonmonetary Assets Accounting for Nonmonetary Transactions
 Accounting Changes and Error Corrections.
 Accounting for Conditional
Retirement Obligations
 Application of FASB
Statement No. 109, Accounting for Income Taxes, for the Tax Deduction Provided to U.S. Based
Manufacturers by the American Jobs Creation Act of 2004 Accounting for Income
Taxes
 Accounting for
Purchases and Sales of Inventory with the Same Counterparty
 (3) Initial Public Offering of Alon




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except as noted)
 (4) Sale of Pipelines and Terminals
 HEP Transaction
    (5) Segment Data
  (a) Refining and Marketing Segment




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except as noted)
  (b) Retail Segment
  ( c ) Corporate
   Refining andYear ended December 31, 2005
    
    Marketing
    
    
    Retail
    
    
    Corporate
    
    
    TotalNet sales to external customers
    
    $
    2,001,970
    
    
    $
    326,537
    
    
    $
    
    
    
    $
    2,328,507Intersegment sales/purchases
    
    
    145,420
    
    
    
    (145,420
    )
    
    
    
    
    
    
    Depreciation and amortization
    
    
    14,464
    
    
    
    4,557
    
    
    
    1,914
    
    
    
    20,935Operating income (loss)
    
    
    188,243
    
    
    
    2,925
    
    
    
    (2,405
    )
    
    
    188,763Total assets
    
    
    676,750
    
    
    
    69,794
    
    
    
    12,236
    
    
    
    758,780Turnaround, chemical catalyst and
capital expenditures
    
    
    31,121
    
    
    
    3,484
    
    
    
    470
    
    
    
    35,075
 Refining andYear ended December 31, 2004
    
    Marketing
    
    
    Retail
    
    
    Corporate
    
    
    TotalNet sales to external customers
    
    $
    1,406,073
    
    
    $
    301,491
    
    
    $
    
    
    
    $
    1,707,564Intersegment sales/purchases
    
    
    117,777
    
    
    
    (117,777
    )
    
    
    
    
    
    
    Depreciation and amortization
    
    
    13,392
    
    
    
    4,192
    
    
    
    1,480
    
    
    
    19,064Operating income (loss)
    
    
    68,611
    
    
    
    2,897
    
    
    
    (2,069
    )
    
    
    69,439Total assets
    
    
    389,830
    
    
    
    69,949
    
    
    
    12,737
    
    
    
    472,516Turnaround, chemical catalyst and
capital expenditures
    
    
    25,877
    
    
    
    3,134
    
    
    
    612
    
    
    
    29,623
 Refining andYear ended December 31, 2003
    
    Marketing
    
    
    Retail
    
    
    Corporate
    
    
    TotalNet sales to external customers
    
    $
    1,132,577
    
    
    $
    278,189
    
    
    $
    
    
    
    $
    1,410,766Intersegment sales/purchases
    
    
    92,468
    
    
    
    (92,468
    )
    
    
    
    
    
    
    Depreciation and amortization
    
    
    12,636
    
    
    
    4,078
    
    
    
    1,548
    
    
    
    18,262Operating income (loss)
    
    
    42,020
    
    
    
    2,443
    
    
    
    (2,170
    )
    
    
    42,293Total assets
    
    
    304,046
    
    
    
    73,747
    
    
    
    9,189
    
    
    
    386,982Turnaround, chemical catalyst and
capital expenditures
    
    
    17,716
    
    
    
    6,613
    
    
    
    609
    
    
    
    24,938




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except as noted)
   (6) Derivatives and Hedging Activities
 (a) Fair Value of Financial Instruments
  (b) Derivative Financial Instruments
  Commodity Instruments
    (7) Accounts Receivable




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollar in thousands except as noted)
  (8) Inventories
   December 31,2005
    
    
    2004Crude oil, refined products, and blendstocks
    
    $
    57,822
    
    
    $
    58,412Materials and supplies
    
    
    5,880
    
    
    
    5,570Store merchandise
    
    
    12,977
    
    
    
    12,860Store fuel
    
    
    2,502
    
    
    
    2,487Total inventories
    
    $
    79,181
    
    
    $
    79,329
   (9) Property, Plant, and Equipment, Net
  December 31,2005
    
    
    2004Refining facilities
    
    $
    171,346
    
    
    $
    149,016Pipelines and terminals
    
    
    27,237
    
    
    
    69,289Retail
    
    
    63,486
    
    
    
    59,543Other
    
    
    10,691
    
    
    
    9,323Property, plant, and equipment, gross
    
    
    272,760
    
    
    
    287,171Less accumulated depreciation
    
    
    (61,350
    )
    
    
    (50,943
    )Property, plant, and equipment, net
    
    $
    211,410
    
    
    $
    236,228
  Refining facilities
    
    3  20 years; average 18 yearsPipelines and terminals
    
    5  25 years; average 23 yearsRetail
    
    5  40 years; average 18 yearsOther
    
    3  15 years; average 5 years
  (10) Other Assets




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except as noted)
 December 31,2005
    
    
    2004Receivable from FINA for environmental costs
    
    $
    3,257
    
    
    $
    4,314Deferred debt issuance costs
    
    
    6,529
    
    
    
    8,291Deferred turnaround, chemical catalyst cost
    
    
    9,865
    
    
    
    2,399Retail license fees
    
    
    3,429
    
    
    
    3,429Other
    
    
    4,422
    
    
    
    3,400Total other assets
    
    $
    27,502
    
    
    $
    21,833
   (11) Accrued Liabilities
  December 31,2005
    
    
    2004Accrued Liabilities  Current:Taxes other than income taxes, primarily excise taxes
    
    $
    21,206
    
    
    $
    24,217Income taxes payable
    
    
    7,239
    
    
    
    828Employee costs
    
    
    4,977
    
    
    
    5,925Other
    
    
    14,706
    
    
    
    19,876Total accrued liabilities
    
    $
    48,128
    
    
    $
    50,846Accrued Liabilities  Non-Current:Pension and other postemployment benefit liabilities, net (Note 12)
    
    $
    10,611
    
    
    $
    11,792Environmental accrual (Note 19)
    
    
    2,986
    
    
    
    4,058Asset retirement obligation
    
    
    2,211
    
    
    
    2,524Other
    
    
    2,537
    
    
    
    1,062Total other non-current liabilities
    
    $
    18,345
    
    
    $
    19,436
 Accounting for Asset
Retirement Obligations




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except as noted)
  December 31,2005
    
    
    2004Balance at beginning of year
    
    $
    2,524
    
    
    $
    2,349Accretion expense
    
    
    53
    
    
    
    178Retirements
    
    
    (366
    )
    
    
    (28
    )Additions
    
    
    
    
    
    
    25Balance at end of year
    
    $
    2,211
    
    
    $
    2,524
 (12) Employee and Postretirement Benefits
   Accounting and Disclosure Requirements Related to the
Medicare Prescription Drug, Improvement and Modernization Act of 2003
  F-19




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except as noted)
 Pension Benefits
    
    
    Postretirement Benefits2005
    
    
    2004
    
    
    2005
    
    
    2004Change in projected benefit obligation:Benefit obligation at beginning of year
    
    $
    31,772
    
    
    $
    27,356
    
    
    $
    1,852
    
    
    $
    3,435Service cost
    
    
    1,694
    
    
    
    1,326
    
    
    
    75
    
    
    
    160Interest cost
    
    
    2,068
    
    
    
    1,826
    
    
    
    112
    
    
    
    222Plan participants contributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28Plan Amendments
    
    
    127
    
    
    
    
    
    
    
    
    
    
    
    (2,119
    )Actuarial loss (gain)
    
    
    4,113
    
    
    
    1,980
    
    
    
    (110
    )
    
    
    409Benefits paid
    
    
    (674
    )
    
    
    (716
    )
    
    
    (174
    )
    
    
    (283
    )Projected benefit obligations at end of year
    
    $
    39,100
    
    
    $
    31,772
    
    
    $
    1,755
    
    
    $
    1,852Change in plan assets:Fair value of plan assets at beginning of period
    
    
    20,114
    
    
    
    16,172
    
    
    
    
    
    
    
    Actual gain on plan assets
    
    
    1,883
    
    
    
    1,929
    
    
    
    
    
    
    
    Employer contribution
    
    
    3,354
    
    
    
    2,729
    
    
    
    174
    
    
    
    255Plan participants contributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28Benefits paid
    
    
    (674
    )
    
    
    (716
    )
    
    
    (174
    )
    
    
    (283
    )Fair value of plan assets at end of period
    
    $
    24,677
    
    
    $
    20,114
    
    
    $
    
    
    
    $
    Reconciliation of funded status:Fair value of plan assets at end of year
    
    $
    24,677
    
    
    $
    20,114
    
    
    
    
    
    
    
    Less benefit obligation at end of year
    
    
    39,100
    
    
    
    31,772
    
    
    
    1,755
    
    
    
    1,852Funded status at end of year
    
    
    (14,423
    )
    
    
    (11,658
    )
    
    
    (1,755
    )
    
    
    (1,852
    )Unrecognized prior service costs
    
    
    100
    
    
    
    
    
    
    
    (3,804
    )
    
    
    (4,117
    )Unrecognized
net actuarial loss
    
    
    11,983
    
    
    
    8,300
    
    
    
    1,005
    
    
    
    1,183Accrued benefit costs
    
    $
    (2,340
    )
    
    $
    (3,358
    )
    
    $
    (4,554
    )
    
    $
    (4,786
    )Amounts recognized in the consolidated balance
sheets:Accrued benefit liability
    
    $
    (6,656
    )
    
    $
    (7,005
    )
    
    $
    (4,554
    )
    
    $
    (4,786
    )Intangible asset
    
    
    94
    
    
    
    
    
    
    
    
    
    
    
    Accumulated other comprehensive loss
    
    
    4,222
    
    
    
    3,647
    
    
    
    
    
    
    
    Accrued pension cost
    
    $
    (2,340
    )
    
    $
    (3,358
    )
    
    $
    (4,554
    )
    
    $
    (4,786
    )
  December 31,2005
    
    
    2004Projected benefit obligation
    
    $
    39,100
    
    
    $
    31,772Accumulated benefit obligation
    
    
    31,333
    
    
    
    27,118Fair value of plan assets
    
    
    24,677
    
    
    
    20,114
  Pension Benefits
    
    Postretirement Benefits2005
    
    2004
    
    2003
    
    2005
    
    2004
    
    2003Discount rate
    
    
    6.00
    %
    
    
    6.00
    %
    
    
    6.25
    %
    
    
    6.00
    %
    
    
    6.00
    %
    
    
    6.25
    %Rate of compensation increase
    
    
    3.50
    %
    
    
    3.00
    %
    
    
    3.00
    %
    
    
    
    
    
    
    
    
    
    
    
 F-20




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except as noted)
  Pension Benefits
    
    Postretirement Benefits2005
    
    2004
    
    2003
    
    2005
    
    2004
    
    2003Discount rate
    
    
    6.00
    %
    
    
    6.25
    %
    
    
    6.75
    %
    
    
    6.00
    %
    
    
    6.25
    %
    
    
    6.75
    %Expected return on plan assets
    
    
    9.00
    %
    
    
    9.00
    %
    
    
    9.00
    %
    
    
    
    
    
    
    
    
    
    
    Rate of compensation increase
    
    
    3.00
    %
    
    
    3.00
    %
    
    
    3.00
    %
    
    
    
    
    
    
    
    
    
    
    
   Pension Benefits
    
    
    Postretirement BenefitsYear Ended December 31
    
    
    Year Ended December 312005
    
    
    2004
    
    
    2003
    
    
    2005
    
    
    2004
    
    

    2003Components of net
periodic Benefit cost:Service cost
    
    $
    1,694
    
    
    $
    1,326
    
    
    $
    1,142
    
    
    $
    75
    
    
    $
    160
    
    
    $
    231Interest cost
    
    
    2,068
    
    
    
    1,826
    
    
    
    1,616
    
    
    
    112
    
    
    
    222
    
    
    
    307Amortization of prior service
costs
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    (314
    )
    
    
    (157
    )
    
    
    (38
    )Expected return on plan assets
    
    
    (1,996
    )
    
    
    (1,388
    )
    
    
    (1,326
    )
    
    
    
    
    
    
    
    
    
    
    Recognized net actuarial loss.
    
    
    544
    
    
    
    563
    
    
    
    262
    
    
    
    67
    
    
    
    29
    
    
    
    3Net periodic benefit cost
    
    $
    2,337
    
    
    $
    2,327
    
    
    $
    1,694
    
    
    $
    (60
    )
    
    $
    254
    
    
    $
    503
 Plan Assets
  Pension BenefitsPlan Assets2005
    
    2004Asset Category:Equity securities
    
    
    82.0
    %
    
    
    70.0
    %Debt securities
    
    
    8.0
    %
    
    
    30.0
    %Real estate
    
    
    10.0
    %
    
    
    0.0
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
  F-21




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except as noted)
 Cash Flows
   Employers Accounting for Pensions
  December 31,2005
    
    2004Health care cost trend rate for next year
    
    
    9.00
    %
    
    
    10.00
    %Rate to which the cost trend rate is assumed to decline
    
    
    6.00
    %
    
    
    6.00
    %Year that the rate reaches the ultimate trend rate
    
    
    2009
    
    
    
    2009
  1% Increase
    
    1% DecreaseEffect on total of service and interest components
    
    $
    8
    
    
    $
    (10
    )Effect on post retirement benefit obligation
    
    
    81
    
    
    
    (91
    )
  (13)
    
    Long-Term Debt
  December 31,2005
    
    
    2004Secured term loan
    
    $
    100,000
    
    
    $
    100,000Revolving credit facility
    
    
    
    
    
    
    Retail
mortgages and equipment loans
    
    
    31,989
    
    
    
    33,610FINA deferred purchase price
    
    
    
    
    
    
    3,978Subordinated notes payable
    
    
    
    
    
    
    49,200Other debt
    
    
    401
    
    
    
    918Total debt
    
    
    132,390
    
    
    
    187,706Less current portion
    
    
    (4,487
    )
    
    
    (16,115
    )Total long-term debt
    
    $
    127,903
    
    
    $
    171,591
 F-22




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except as noted)
 (a)
    
    Secured Term Loan
  (b)
    
    Revolving Credit Facility
    (c)
    
    Retail Mortgages and Equipment Loans
    (d)
    
    Atofina Deferred Purchase Price
  (e)
    
    Subordinated Notes Payable
  F-23




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except as noted)
 (f)
    
    Maturity of Long-Term Debt
  (g)
    
    Interest and Financing Expense
  December 31,2005
    
    
    2004
    
    
    2003Interest expense
    
    $
    15,422
    
    
    $
    19,261
    
    
    $
    12,868Letters of credit and finance costs
    
    
    3,385
    
    
    
    3,415
    
    
    
    2,811Amortization of debt issuance costs
    
    
    1,446
    
    
    
    1,329
    
    
    
    902Capitalized interest
    
    
    (927
    )
    
    
    (301
    )
    
    
    (297
    )Total interest expense
    
    $
    19,326
    
    
    $
    23,704
    
    
    $
    16,284
 (14)
    
    Income Taxes
  December 31,2005
    
    
    2004
    
    
    2003Current:Federal
    
    $
    41,886
    
    
    $
    15,554
    
    
    $
    2,336State
    
    
    6,986
    
    
    
    1,092
    
    
    
    528Total current
    
    
    48,872
    
    
    
    16,646
    
    
    
    2,864Deferred:Federal
    
    
    16,009
    
    
    
    1,487
    
    
    
    5,341State
    
    
    637
    
    
    
    182
    
    
    
    900Total deferred
    
    
    16,646
    
    
    
    1,669
    
    
    
    6,241Income tax expense
    
    $
    65,518
    
    
    $
    18,315
    
    
    $
    9,105
  December 31,2005
    
    
    2004
    
    
    2003Computed expected tax expense
    
    $
    61,481
    
    
    $
    16,104
    
    
    $
    8,349State and local income taxes, net of federal benefit
    
    
    4,895
    
    
    
    828
    
    
    
    921Deduction for qualified production income
    
    
    (1,111
    )
    
    
    
    
    
    
    Other, net
    
    
    253
    
    
    
    1,383
    
    
    
    (165
    )Income tax expense
    
    $
    65,518
    
    
    $
    18,315
    
    
    $
    9,105
 F-24




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except as noted)
  December 31,2005
    
    
    2004Current deferred income tax assets and liabilities:Accounts receivable, allowance
    
    $
    327
    
    
    $
    Deferred gain
    
    
    2,009
    
    
    
    Accrued liabilities and other
    
    
    205
    
    
    
    Inventories
    
    
    (826
    )
    
    
    Current deferred income tax assets, net
    
    
    1,715
    
    
    
    Noncurrent deferred income tax liabilities and assets:Deferred charges
    
    
    
    
    
    
    (1,821
    )Inventories
    
    
    
    
    
    
    (1,510
    )Property, plant, and equipment
    
    
    (35,370
    )
    
    
    (34,619
    )Other noncurrent
    
    
    (19,635
    )
    
    
    (111
    )Post retirement benefits
    
    
    1,742
    
    
    
    3,722Noncurrent accrued liabilities and other
    
    
    841
    
    
    
    2,510Noncurrent deferred income tax liabilities, net
    
    $
    (52,422
    )
    
    $
    (31,829
    )
  (15)
    
    Related-Party Transactions
   (16)
    
    Stockholders Equity
 (a)
    
    Common and preferred stock
   F-25




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except as noted)
 CommonStock(in thousands)Balance as of January 1, 2003
    
    
    35,001Balance as of December 31, 2003
    
    
    35,001Balance as of December 31, 2004
    
    
    35,001Sale of common stock
    
    
    11,730Shares issued in connection with stock plans (Note 18)
    
    
    79Balance as of December 31, 2005
    
    
    46,810
 (b)
    
    Initial Public Offering
  (c)
    
    Stock Split
  (d)
    
    Dividends
   (17)
    
    Earnings per Share
  December 312005
    
    
    2004
    
    
    2003Net income
    
    $
    103,988
    
    
    $
    25,132
    
    
    $
    14,068Average number of shares of common stock outstanding
    
    
    39,889
    
    
    
    35,001
    
    
    
    35,001Effect of dilutive restricted shares
    
    
    19
    
    
    
    
    
    
    
    Average number of shares of common stock
outstanding assuming dilution
    
    
    39,908
    
    
    
    35,001
    
    
    
    35,001Earnings per share  basic
    
    $
    2.61
    
    
    $
    .72
    
    
    $
    .40Earnings per share  diluted
    
    $
    2.61
    
    
    $
    .72
    
    
    $
    .40
 (18)
    
    Stock Based Compensation
  F-26




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except as noted)
 (a)
    
    2005 Incentive Compensation Plan
   Accounting for Stock-Based Compensation
 (b)
    
    2000 Incentive Stock Compensation Plan
   Alon Assets
    
    
    Alon OperatingWeighted
    
    
    
    
    
    
    WeightedNumber of
    
    
    Average
    
    
    Number of
    
    
    AverageOptions
    
    
    Exercise
    
    
    Options
    
    
    ExerciseOutstanding
    
    
    Price
    
    
    Outstanding
    
    
    PriceOutstanding at January 1, 2004
    
    
    12,217
    
    
    $
    100
    
    
    
    4,587
    
    
    $
    100Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (1,212
    )
    
    
    100
    
    
    
    (455
    )
    
    
    100Forfeited and expired
    
    
    (1,733
    )
    
    
    100
    
    
    
    (650
    )
    
    
    100Outstanding at December 31, 2004
    
    
    9,272
    
    
    
    100
    
    
    
    3,482
    
    
    
    100Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (1,212
    )
    
    
    100
    
    
    
    (455
    )
    
    
    100Outstanding at December 31, 2005
    
    
    8,060
    
    
    $
    100
    
    
    
    3,027
    
    
    $
    100
 F-27




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except as noted)
  (c)
    
    Stock Warrants
  (19)
    
    Commitments and Contingencies
 (a)
    
    Leases
  Year ending December 31:2006
    
    $
    12,4692007
    
    
    11,8862008
    
    
    10,8032009
    
    
    10,3722010
    
    
    7,0502011 and thereafter
    
    
    9,136Total
    
    $
    61,716
  (b)
    
    Other Commitments
    F-28




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except as noted)
 (c)
    
    Environmental
       F-29




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except as noted)
   (20)
    
    Quarterly Information (unaudited)Selected financial data by quarter is set forth in the table below:
 QuartersFirst
    
    Second
    
    Third
    
    Fourth
    
    Total Year2005Net sales
    
    $
    407,974
    
    
    $
    590,366
    
    
    $
    648,135
    
    
    $
    682,032
    
    
    $
    2,328,507Operating income
    
    
    44,278
    
    
    
    49,475
    
    
    
    44,232
    
    
    
    50,778
    
    
    
    188,763Net income
    
    
    22,436
    
    
    
    27,482
    
    
    
    24,388
    
    
    
    29,682
    
    
    
    103,988Earnings per share(1)(2)
    
    $
    .64
    
    
    $
    .79
    
    
    $
    .57
    
    
    $
    .64
    
    
    $
    2.61Weighted average shares
outstanding (1)
    
    
    35,001
    
    
    
    35,001
    
    
    
    42,821
    
    
    
    46,731
    
    
    
    39,8892004Net sales
    
    $
    352,723
    
    
    $
    440,179
    
    
    $
    445,386
    
    
    $
    469,276
    
    
    $
    1,707,564Operating income
    
    
    8,751
    
    
    
    33,815
    
    
    
    17,032
    
    
    
    9,841
    
    
    
    69,439Net income
    
    
    1,497
    
    
    
    15,288
    
    
    
    6,100
    
    
    
    2,247
    
    
    
    25,132Earnings per share
    
    $
    .04
    
    
    $
    .44
    
    
    $
    .17
    
    
    $
    .06
    
    
    $
    .72Weighted average
shares outstanding
    
    
    35,001
    
    
    
    35,001
    
    
    
    35,001
    
    
    
    35,001
    
    
    
    35,001
 
 (1)
    
    Weighted average shares outstanding and earnings per share for the periods presented reflect the effect of a
33,600-for-one split of Alons common shares which was effected on July 6, 2005. On August 2, 2005 Alon completed an initial public
offering 11,730,000 shares of its common stock. The shares issued in
our initial public offering are reflected in the number
of weighted average shares outstanding for the quarters ended
September 30, 2005 and December 31, 2005, respectively, and for the year ended December 31, 2005.(2)
    
    Alon granted awards of 78,737 shares of restricted stock under its 2005 Incentive
Compensation Plan. There is no dilutive effect
on earnings per share. (21)
    
    Subsequent Events
 (a)
    
    Debt Prepayment
  F-30




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands except as noted)
 (b)
    
    Dividend Announcement
  (c)
    
    Revolving Credit Facility Amendment
   (d)
    
    Crude Oil Pipelines Disposition
  F-31




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##### Table of Contents



Report of Independent Registered Public Accounting Firm









/s/ KPMG LLPDallas, TexasMarch 13, 2006


F-32



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##### Table of Contents



ALON USA ENERGY, INC. (PARENT COMPANY ONLY)
 CONDENSED BALANCE SHEETS
 (dollars in thousands)
 1. (b)
SCHEDULES TO THE FINANCIAL STATEMENTS (PARENT ONLY)  SCHEDULE I
 December 31,
    
    
    December 31,2005
    
    
    2004ASSETSCurrent assets
    
    $
    89,298
    
    
    $
    2,126Investment in subsidiary
    
    
    190,355
    
    
    
    111,558Total assets
    
    $
    279,653
    
    
    $
    113,684LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities
    
    $
    
    
    
    $
    511Long-term debt
    
    
    
    
    
    
    41,701Long-term liabilities
    
    
    160
    
    
    
    Total liabilities
    
    
    160
    
    
    
    42,212Shareholders equity:Shareholders investment
    
    
    181,576
    
    
    
    8,729Accumulated other comprehensive loss
    
    
    (2,596
    )
    
    
    (2,261
    )Retained earnings
    
    
    100,513
    
    
    
    65,004Total stockholders equity
    
    
    279,493
    
    
    
    71,472Total liabilities and stockholders equity
    
    $
    279,653
    
    
    $
    113,684
 F-33




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##### Table of Contents



ALON USA ENERGY, INC. (PARENT COMPANY ONLY)
 CONDENSED STATEMENTS OF OPERATIONS
 (dollars in thousands)
 For the Year Ended December 31,2005
    
    
    2004
    
    
    2003Interest income
    
    $
    1,086
    
    
    $
    
    
    
    $
    General and administrative expenses
    
    
    (248
    )
    
    
    (3
    )
    
    
    (7
    )Interest expense
    
    
    (1,082
    )
    
    
    (2,946
    )
    
    
    (2,728
    )Other income, net
    
    
    
    
    
    
    
    
    
    
    20Loss before income tax benefit
and equity earnings in subsidiary
    
    
    (244
    )
    
    
    (2,949
    )
    
    
    (2,715
    )Income tax benefit
    
    
    101
    
    
    
    1,165
    
    
    
    1,045Loss before equity earnings in subsidiary
    
    
    (143
    )
    
    
    (1,784
    )
    
    
    (1,670
    )Equity earnings in subsidiary
    
    
    104,131
    
    
    
    26,916
    
    
    
    15,738Net income
    
    $
    103,988
    
    
    $
    25,132
    
    
    $
    14,068
 F-34




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##### Table of Contents



ALON USA ENERGY, INC. (PARENT COMPANY ONLY)
 CONDENSED STATEMENTS OF CASH FLOWS
 (unaudited, dollars in thousands)
 December 31,2005
    
    
    2004
    
    
    2003Cash flows from operating activities:Net income
    
    $
    103,988
    
    
    $
    25,132
    
    
    $
    14,068Stock compensation
    
    
    388
    
    
    
    
    
    
    
    Adjustments:Accrued interest on subordinated notes to stockholders
    
    
    
    
    
    
    18
    
    
    
    2Equity
earnings in subsidiary, net
    
    
    (104,131
    )
    
    
    (26,916
    )
    
    
    (15,738
    )Changes in operating assets and liabilities:Other assets
    
    
    (222
    )
    
    
    
    
    
    
    Other
non-current liabilities
    
    
    160
    
    
    
    
    
    
    
    Accounts payable and accrued liabilities
    
    
    (558
    )
    
    
    (1,321
    )
    
    
    (366
    )Net cash used in operating activities
    
    
    (375
    )
    
    
    (3,087
    )
    
    
    (2,034
    )Cash flows from investing activities:Purchase of
short-term investments
    
    
    (29,400
    )
    
    
    
    
    
    
    Dividends received from subsidiary
    
    
    25,000
    
    
    
    
    
    
    
    Net cash provided by investing activities
    
    
    (4,400
    )
    
    
    
    
    
    
    Cash flows from financing activities:Stock issuance and payments from stockholders
    
    
    172,459
    
    
    
    140
    
    
    
    40Dividends paid
    
    
    (68,479
    )
    
    
    
    
    
    
    Additions to long-term debt
    
    
    2,826
    
    
    
    2,727
    
    
    
    Payments on long-term debt
    
    
    (44,527
    )
    
    
    
    
    
    
    Net cash provided by financing activities
    
    
    62,279
    
    
    
    2,867
    
    
    
    40Net increase in cash and cash equivalents
    
    
    57,504
    
    
    
    (220
    )
    
    
    (1,994
    )Cash and cash equivalents, beginning of period
    
    
    44
    
    
    
    264
    
    
    
    2,258Cash and cash equivalents, end of period
    
    $
    57,548
    
    
    $
    44
    
    
    $
    264
 F-35




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##### Table of Contents



ALON USA ENERGY, INC. (PARENT COMPANY ONLY)
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 (unaudited, dollars in thousands, except share and per share data)
 (1)
    
    Basis of Presentation
    (2)
    
    Initial Public Offering
  (3)
    
    Long-Term Debt
  (4)
    
    Dividends Paid
  (5)
    
    Dividends Received
  F-36




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##### Table of Contents



SIGNATURES
  By:
    /s/ Jeff D. MorrisDate: March 14, 2006
    
    Jeff D. MorrisChief Executive Officer  Date: March 14, 2006
    By:
    /s/ David WiessmanDavid WiessmanExecutive ChairmanDate: March 14, 2006
    By:
    /s/ Jeff D. MorrisJeff D. MorrisPresident, Chief Executive Officer and DirectorDate: March 14, 2006
    By:
    /s/ Shai EvenShai EvenChief Financial Officer and TreasurerDate: March 14, 2006
    By:
    /s/ Ron W. HaddockRon W. HaddockDirectorDate: March 14, 2006
    By:
    /s/ Itzhak BaderItzhak BaderDirectorDate: March 14, 2006
    By:
    /s/ Shaul GliksbergShaul GliksbergDirectorDate: March 14, 2006
    By:
    /s/ Avraham Baiga ShochatAvraham Baiga ShochatDirectorDate: March 14, 2006
    By:
    /s/ Yeshayahu PeryYeshayahu PeryDirectorDate: March 14, 2006
    By:
    /s/ Zalman SegalZalman SegalDirector




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit3.1
    
    Amended Restated Certificate of Incorporation of Alon USA Energy, Inc. (incorporated by
reference to Exhibit 3.1 to Form S-1/A, filed by the Company on July 7, 2005, SEC File No.
333-124797).3.2
    
    Amended and Restated Bylaws of Alon USA Energy, Inc. (incorporated by reference to Exhibit
3.2 to Form S-1/A, filed by the Company on July 14, 2005, SEC File No. 333-124797).4.1
    
    Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Form S-1/A,
filed by the Company on June 17, 2005, SEC File No. 333-124797).10.1 
    
    Area License Agreement, dated as of June 2, 1993, between Southwest Convenience Stores, Inc.
and The Southland Corporation (incorporated by reference to Exhibit 10.1 to Form S-1/A,
filed by the Company on July 7, 2005, SEC File No. 333-124797).10.2 
    
    Amendment to Area License Agreement and Consent to Assignment, dated as of December 20,
1996, between The Southland Corporation and Permian Basin Investments, Inc. d/b/a Southwest
Convenience Stores, Inc. (incorporated by reference to Exhibit 10.2.1 to Form S-1/A, filed
by the Company on July 7, 2005, SEC File No. 333-124797).10.3 
    
    Amendment No. 2 to Area License Agreement, dated as of August 14, 1997, between Southwest
Convenience Stores LLC and The Southland Corporation (incorporated by reference to Exhibit
10.2.2 to Form S-1/A, filed by the Company on July 7, 2005, SEC File No. 333-124797).10.4
    
    Trademark License Agreement, dated as of June 31, 2000, among Finamark, Inc., Atofina
Petrochemicals, Inc. and SWBU, L.P. (incorporated by reference to Exhibit 10.3 to Form S-1,
filed by the Company on May 11, 2005, SEC File No. 333-124797).10.5
    
    First Amendment to Trademark License Agreement, dated as of April 11, 2001, among Finamark,
Inc., Atofina Petrochemicals, Inc. and SWBU, L.P. (incorporated by reference to Exhibit 10.4
to Form S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.6
    
    Pipeline Lease Agreement, dated as of January 22, 2001, between Chevron Pipe Line Company
and Fin-Tex Pipe Line Company (incorporated by reference to Exhibit 10.5 to Form S-1, filed
by the Company on May 11, 2005, SEC File No. 333-124797).10.7
    
    Pipeline Lease Agreement, dated as of February 21, 1997, between Navajo Pipeline Company and
American Petrofina Pipe Line Company (incorporated by reference to Exhibit 10.6 to Form S-1,
filed by the Company on May 11, 2005, SEC File No. 333-124797).10.8
    
    Contribution Agreement, dated as of January 25, 2005, among Holly Energy Partners, L.P.,
Holly Energy Partners  Operating, L.P., T & R Assets, Inc., Fin-Tex Pipe Line Company, Alon
USA Refining, Inc., Alon Pipeline Assets, LLC, Alon Pipeline Logistics, LLC, Alon USA, Inc.
and Alon USA, LP. (incorporated by reference to Exhibit 10.7 to Form S-1, filed by the
Company on May 11, 2005, SEC File No. 333-124797).10.9
    
    Pipelines and Terminals Agreement, dated as of February 28, 2005, between Alon USA, LP and
Holly Energy Partners, L.P. (incorporated by reference to Exhibit 10.8 to Form S-1, filed by
the Company on May 11, 2005, SEC File No. 333-124797).10.10
    
    Master Lease, dated as of October 1, 2002, between SCS Finance I, L.P. and Southwest
Convenience Stores, LP (incorporated by reference to Exhibit 10.9 to Form S-1, filed by the
Company on May 11, 2005, SEC File No. 333-124797).10.11
    
    Loan Agreement, dated as of October 1, 2002, between GE Capital Franchise Finance
Corporation and SCS Finance I, L.P. (incorporated by reference to Exhibit 10.10 to Form
S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.12
    
    Equipment Loan and Security Agreement, dated as of October 1, 2002, between GE Capital
Franchise Finance Corporation and SCS Finance I, L.P. (incorporated by reference to Exhibit
10.11 to Form S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit10.13
    
    Master Lease, dated as of October 1, 2002, between SCS Finance II, L.P. and Southwest
Convenience Stores, LP. (incorporated by reference to Exhibit 10.12 to Form S-1, filed by
the Company on May 11, 2005, SEC File No. 333-124797).10.14
    
    Loan Agreement, dated as of October 1, 2002, between GE Capital Franchise Finance
Corporation and SCS Finance II, L.P. (incorporated by reference to Exhibit 10.13 to Form
S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.15
    
    Equipment Loan and Security Agreement, dated as of October 1, 2002, between GE Capital
Franchise Finance Corporation and SCS Finance II, L.P. (incorporated by reference to Exhibit
10.14 to Form S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.16
    
    Amended and Restated Credit Agreement, dated as of January 14, 2004, among Alon USA, Inc.,
the lenders listed therein and Credit Suisse First Boston (incorporated by reference to
Exhibit 10.15 to Form S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.17
    
    First Amendment, dated as of February 10, 2005, to the Amended and Restated Credit
Agreement, dated as of January 14, 2004, among Alon USA, Inc., the lenders listed therein
and Credit Suisse First Boston, and the Guarantee and Collateral Agreement, dated as of
January 14, 2004, among Credit Suisse First Boston, Alon USA, Inc., the subsidiaries of Alon
USA, Inc. identified therein and Alon USA, Inc. (incorporated by reference to Exhibit 10.17
to Form S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.18
    
    Second Amendment, dated as of May 6, 2005, to the Amended and Restated Credit Agreement,
dated as of January 14, 2004, among Alon USA Energy, Inc., the lenders listed therein and
Credit Suisse First Boston (incorporated by reference to Exhibit 10.18 to Form S-1/A, filed
by the Company on June 17, 2005, SEC File No. 333-124797).10.19
    
    Guarantee and Collateral Agreement, dated as of January 14, 2004, among Credit Suisse First
Boston, Alon USA, Inc., the subsidiaries of Alon USA, Inc. identified therein and Alon USA
Energy, Inc. (incorporated by reference to Exhibit 10.16 to Form S-1, filed by the Company
on May 11, 2005, SEC File No. 333-124797).10.20
    
    Amended Revolving Credit Agreement, dated as of January 14, 2004, among Alon USA, LP, the
guarantor companies and financial institutions identified therein and Israel Discount Bank
of New York (incorporated by reference to Exhibit 10.19 to Form S-1, filed by the Company on
May 11, 2005, SEC File No. 333-124797).10.21
    
    First Amendment, dated as of February 10, 2005, to the Amended Revolving Credit Agreement,
dated as of January 14, 2005, among Alon USA, LP, the guarantor companies and financial
institutions identified therein and Israel Discount Bank of New York (incorporated by
reference to Exhibit 10.20 to Form S-1, filed by the Company on May 11, 2005, SEC File No.
333-124797).10.22
    
    Second Amendment, dated as of June 16, 2005, to the Amended Revolving Credit Agreement,
dated as of January 14, 2005, among Alon USA, LP, the guarantor companies and financial
institutions identified therein and Israel Discount Bank of New York (incorporated by
reference to Exhibit 10.20.1 to Form S-1/A, filed by the Company on June 17, 2005, SEC File
No. 333-124797).10.23
    
    Amending Revolving Credit Agreement, dated as of February 15, 2006, among Alon USA, LP, the
guarantor companies and financial institutions named therein, Israel Discount Bank of New
York and Bank Leumi USA (incorporated by reference to Exhibit 10.1 to Form 8-K filed by the
Company on February 16, 2006, SEC File No. 001-32567).10.24
    
    Management and Consulting Agreement, dated August 1, 2003, among Alon USA, Inc., Alon Israel
Oil Company, Ltd. and Alon USA Energy, Inc. (incorporated by reference to Exhibit 10.21 to
Form S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.25
    
    Amendment, dated as of June 17, 2005, to the Management and Consulting Agreement, dated as
of August 1, 2003, among Alon USA, Inc., Alon Israel Oil Company, Ltd. and Alon USA Energy,
Inc. (incorporated by reference to Exhibit 10.21.1 to Form S-1/A, filed by the Company on
June 17, 2005, SEC File No. 333-124797).




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit10.26
    
    Registration Rights Agreement, dated as of July 6, 2005, between Alon USA Energy, Inc. and
Alon Israel Oil Company, Ltd. (incorporated by reference to Exhibit 10.22 to Form S-1/A,
filed by the Company on July 7, 2005, SEC File No. 333-124797).10.27*
    
    Executive Employment Agreement, dated as of July 31, 2000, between Jeff D. Morris and Alon
USA GP, Inc., as amended on May 4, 2005 (incorporated by reference to Exhibit 10.23 to Form
S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.28*
    
    Executive Employment Agreement, dated as of July 31, 2000, between Claire A. Hart and Alon
USA GP, Inc., as amended on May 4, 2005 (incorporated by reference to Exhibit 10.24 to Form
S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.29*
    
    Executive Employment Agreement, dated as of February 5, 2001, between Joseph A. Concienne,
III and Alon USA GP, Inc., as amended on May 4, 2005 (incorporated by reference to Exhibit
10.25 to Form S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.30*
    
    Management Employment Agreement, dated as of October 1, 2002, between Harlin R. Dean and
Alon USA GP, LLC, as amended on May 4, 2005 (incorporated by reference to Exhibit 10.26 to
Form S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.31*
    
    Amendment, dated as of October 1, 2003, to the Management Employment Agreement, dated as of
October 1, 2002, between Harlin Dean and Alon USA GP, LLC, as amended on May 4, 2005
(incorporated by reference to Exhibit 10.26.1 to Form S-1/A, filed by the Company on June
17, 2005, SEC File No. 333-124797).10.32*
    
    Amendment to Executive/Management Employment Agreement, dated as of November 7, 2005,
between Harlin Dean and Alon USA GP, LLC (incorporated by reference to Exhibit 10.1 to Form
8-K, filed by the Company on November 8, 2005, SEC File No. 001-32567).10.33+*
    
    Management Employment Agreement , dated September 1, 2000, between Yosef Israel and Alon
USA, GP, LLC.10.34+*
    
    Amendment to Executive/Management Employment Agreement, dated May 1, 2005 between Yosef
Israel and Alon USA. GP, LLC.10.35*
    
    Annual Cash Bonus Plan (incorporated by reference to Exhibit 10.27 to Form S-1, filed by
the Company on May 11, 2005, SEC File No. 333-124797).10.36*
    
    Description of 10% Bonus Plan (incorporated by reference to Exhibit 10.28 to Form S-1, filed
by the Company on May 11, 2005, SEC File No. 333-124797).10.37*
    
    Change of Control Incentive Bonus Program (incorporated by reference to Exhibit 10.29 to
Form S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.38*
    
    Description of Director Compensation (incorporated by reference to Exhibit 10.30 to Form
S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.39*
    
    Form of Director Indemnification Agreement (incorporated by reference to Exhibit 10.31 to
Form S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.40*
    
    Form of Officer Indemnification Agreement (incorporated by reference to Exhibit 10.32 to
Form S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.41*
    
    Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit
10.33 to Form S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.42
    
    Liquor License Purchase Agreement, dated as of May 12, 2003, between Southwest Convenience
Stores, LLC and SCS Beverage, Inc. (incorporated by reference to Exhibit 10.34 to Form
S-1/A, filed by the Company on June 17, 2005, SEC File No. 333-124797).10.43
    
    Premises Lease, dated as of May 12, 2003, between Southwest Convenience Stores, LLC and SCS
Beverage, Inc. (incorporated by reference to Exhibit 10.35 to Form S-1/A, filed by the
Company on June 17, 2005, SEC File No. 333-124797).




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit10.44*
    
    Alon Assets, Inc. 2000 Stock Option Plan (incorporated by reference to Exhibit 10.36 to Form
S-1/A, filed by the Company on June 17, 2005, SEC File No. 333-124797).10.45*
    
    Alon USA Operating, Inc. 2000 Stock Option Plan (incorporated by reference to Exhibit 10.37
to Form S-1/A, filed by the Company on June 17, 2005, SEC File No. 333-124797).10.46*
    
    Incentive Stock Option Agreement, dated as of July 31, 2000, between Alon Assets, Inc. and
Jeff D. Morris, as amended on June 30, 2002 (incorporated by reference to Exhibit 10.38 to
Form S-1/A, filed by the Company on June 17, 2005, SEC File No. 333-124797).10.47
    
    Shareholder Agreement, dated as of July 2000, between Alon Assets, Inc. and Jeff D. Morris,
as amended on June 30, 2002 (incorporated by reference to Exhibit 10.39 to Form S-1/A, filed
by the Company on June 17, 2005, SEC File No. 333-124797).10.48*
    
    Incentive Stock Option Agreement, dated as of July 31, 2000, between Alon USA Operating,
Inc. and Jeff D. Morris, as amended on June 30, 2002 (incorporated by reference to Exhibit
10.40 to Form S-1/A, filed by the Company on June 17, 2005, SEC File No. 333-124797).10.49
    
    Shareholder Agreement, dated as of July 31, 2000, between Alon USA Operating, Inc. and Jeff
D. Morris, as amended on June 30, 2002 (incorporated by reference to Exhibit 10.41 to Form
S-1/A, filed by the Company on June 17, 2005, SEC File No. 333-124797).10.50*
    
    Incentive Stock Option Agreement, dated as of July 31, 2000, between Alon Assets, Inc. and
Claire A. Hart, as amended on June 30, 2002 and July 25, 2002 (incorporated by reference to
Exhibit 10.42 to Form S-1/A, filed by the Company on June 17, 2005, SEC File No.
333-124797).10.51
    
    Shareholder Agreement, dated as of July 31, 2000, between Alon Assets, Inc. and Claire A.
Hart, as amended on June 30, 2002 (incorporated by reference to Exhibit 10.43 to Form S-1/A,
filed by the Company on June 17, 2005, SEC File No. 333-124797).10.52*
    
    Incentive Stock Option Agreement, dated as of July 31, 2000, between Alon USA Operating,
Inc. and Claire A. Hart, as amended on June 30, 2002 and July 25, 2002 (incorporated by
reference to Exhibit 10.44 to Form S-1/A, filed by the Company on June 17, 2005, SEC File
No. 333-124797).10.53
    
    Shareholder Agreement, dated as of July 31, 2000, between Alon USA Operating, Inc. and
Claire A. Hart, as amended on June 30, 2002 (incorporated by reference to Exhibit 10.45 to
Form S-1/A, filed by the Company on June 17, 2005, SEC File No. 333-124797).10.54*
    
    Incentive Stock Option Agreement, dated as of February 5, 2001, between Alon Assets, Inc.
and Joseph A. Concienne, III, as amended on July 25, 2002 (incorporated by reference to
Exhibit 10.46 to Form S-1/A, filed by the Company on June 17, 2005, SEC File No.
333-124797).10.55
    
    Shareholder Agreement, dated as of February 5, 2001, between Alon Assets, Inc. and Joseph A.
Concienne, III (incorporated by reference to Exhibit 10.47 to Form S-1/A, filed by the
Company on June 17, 2005, SEC File No. 333-124797).10.56*
    
    Incentive Stock Option Agreement, dated as of February 5, 2001, between Alon USA Operating,
Inc. and Joseph A. Concienne, III, as amended on July 25, 2002 (incorporated by reference to
Exhibit 10.48 to Form S-1/A, filed by the Company on June 17, 2005, SEC File No.
333-124797).10.57
    
    Shareholder Agreement, dated as of February 5, 2001, between Alon USA Operating, Inc. and
Joseph A. Concienne, III (incorporated by reference to Exhibit 10.49 to Form S-1/A, filed by
the Company on June 17, 2005, SEC File No. 333-124797).10.58*
    
    Agreement of Principles of Employment, dated as of July 6, 2005, between David Wiessman and
Alon USA Energy, Inc. (incorporated by reference to Exhibit 10.50 to Form S-1/A, filed by
the Company on July 7, 2005, SEC File No. 333-124797).10.59*
    
    Alon USA Energy, Inc. 2005 Incentive Compensation Plan, as amended on November 7, 2005
(incorporated by reference to Exhibit 10.2 to Form 8-K, filed by the Company on November 8,
2005, SEC File No. 001-32567).




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit10.60*
    
    Agreement, dated as of July 6, 2005, by and among Alon USA Energy, Inc., Alon USA, Inc.,
Alon USA Capital, Inc., Alon USA Operating, Inc., Alon Assets, Inc., Jeff D. Morris, Claire
A. Hart and Joseph A. Concienne, III (incorporated by reference to Exhibit 10.52 to Form
S-1/A, filed by the Company on July 7, 2005, SEC File No. 333-124797).10.61*
    
    Form of Restricted Stock Award Agreement relating to Director Grants pursuant to Section 12
of the Alon USA Energy, Inc. 2005 Incentive Compensation Plan (incorporated by reference to
Exhibit 10.1 to Form 8-K filed by the Company on August 5, 2005, SEC File No. 001-32567).10.62*
    
    Form of Restricted Stock Award Agreement relating to Participant Grants pursuant to Section
8 of the Alon USA Energy, Inc. 2005 Incentive Compensation Plan (incorporated by reference
to Exhibit 10.1 to Form 8-K filed by the Company on August 23, 2005, SEC File No.
001-32567).10.63*
    
    Form II of Restricted Stock Award Agreement relating to Participant Grants pursuant to
Section 8 of the Alon USA Energy, Inc. 2005 Incentive Compensation Plan (incorporated by
reference to Exhibit 10.3 to Form 8-K filed by the Company on November 8, 2005, SEC File No.
001-32567).10.64
    
    Purchase and Sale Agreements between Alon Petroleum Pipe Line, LP and Sunoco Pipelines, LP,
dated February 13, 2006 (incorporated by reference to Exhibit 10.1 to Form 8-K filed by the
Company on February 13, 2006, SEC File No. 001-32567).21.1+
    
    List of Subsidiaries of Alon USA Energy, Inc.23.1+
    
    Consent of KPMG LLP.31.1+
    
    Certifications of Chief Executive Officer pursuant to §302 of the Sarbanes-Oxley Act of 2002.31.2+
    
    Certifications of Chief Financial Officer pursuant to §302 of the Sarbanes-Oxley Act of 2002.32.1+
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
§1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.
 
 +
    
    Filed herewith.*
    
    Identifies management contracts and compensatory plans or arrangements.
    
    Filed under confidential treatment request.