##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2010
 OR
 o
    
    TRANSITION 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.
 (Exact name of Registrant as specified in its charter)
 
 Delaware(State or other jurisdiction of 
incorporation or organization)
    
    74-2966572(I.R.S. Employer
Identification No.)
 (Address of principal executive offices) (Zip Code)
 (Registrants telephone number, including area code)
 
 þ o
  o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



PART I. FINANCIAL INFORMATION
    
    
    1ITEM 1. FINANCIAL STATEMENTS
    
    
    1CONSOLIDATED BALANCE SHEETS
    
    
    1CONSOLIDATED STATEMENTS OF OPERATIONS
    
    
    2CONSOLIDATED STATEMENTS OF CASH FLOWS
    
    
    3NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    
    
    4ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
    
    
    25FORWARD-LOOKING STATEMENTS
    
    
    25ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    52ITEM 4. CONTROLS AND PROCEDURES
    
    
    53PART II. OTHER INFORMATION
    
    
    55ITEM 1A. RISK FACTORS
    
    
    55ITEM 6. EXHIBITS
    
    
    55SIGNATURES
    
    
    57EXHIBITS
    
    
    58EX-10.1 Seventh Amendment to Amended Revolving Credit AgreementEX-10.2 Eighth Amendment to Amended Revolving Credit AgreementEX-10.3 Amendment No.1 to Credit AgreementEX-10.4 Amendment No.2 to Credit AgreementEX-10.5 Credit Agreement, dated May 28, 2010EX-10.6 Amended and Restated Supply and Offtake AgreementEX-31.1 CERTIFICATION OF CEO PURSUANT TO SECTION 302EX-31.2 CERTIFICATION OF CFO PURSUANT TO SECTION 302EX-32.1 CERTIFICATION OF CEO AND CFO PURSUANT TO SECTION 906




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 ALON USA ENERGY, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (dollars in thousands except per share data)
 June 30,
    
    
    December 31,2010
    
    
    2009(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    7,713
    
    
    $
    40,437Accounts and other receivables, net
    
    
    152,511
    
    
    
    103,094Income tax receivable
    
    
    18,128
    
    
    
    65,418Inventories
    
    
    239,503
    
    
    
    214,999Deferred income tax asset
    
    
    60,131
    
    
    
    7,700Prepaid expenses and other current assets
    
    
    10,935
    
    
    
    4,188Total current assets
    
    
    488,921
    
    
    
    435,836Equity method investments
    
    
    20,681
    
    
    
    43,052Property, plant, and equipment, net
    
    
    1,471,379
    
    
    
    1,477,426Goodwill
    
    
    105,943
    
    
    
    105,943Other assets
    
    
    95,484
    
    
    
    70,532Total assets
    
    $
    2,182,408
    
    
    $
    2,132,789LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    347,721
    
    
    $
    248,253Accrued liabilities
    
    
    78,668
    
    
    
    92,380Short-term debt and current portion of long-term debt
    
    
    52,446
    
    
    
    10,946Total current liabilities
    
    
    478,835
    
    
    
    351,579Other non-current liabilities
    
    
    146,886
    
    
    
    95,076Long-term debt
    
    
    879,593
    
    
    
    926,078Deferred income tax liability
    
    
    330,708
    
    
    
    328,138Total liabilities
    
    
    1,836,022
    
    
    
    1,700,871Commitments and contingencies (Note 16)Stockholders 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; 54,181,329 and 54,170,913 shares issued
and outstanding at June 30, 2010, and December 31,
2009, respectively
    
    
    542
    
    
    
    542Additional paid-in capital
    
    
    290,328
    
    
    
    289,853Accumulated other comprehensive loss, net of income tax
    
    
    (28,475
    )
    
    
    (32,871
    )Retained earnings
    
    
    78,712
    
    
    
    165,248Total stockholders equity
    
    
    341,107
    
    
    
    422,772Non-controlling interest in subsidiaries
    
    
    5,279
    
    
    
    9,146Total equity
    
    
    346,386
    
    
    
    431,918Total liabilities and equity
    
    $
    2,182,408
    
    
    $
    2,132,789
  1




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (unaudited, dollars in thousands except per share data)
 For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net sales (1)
    
    $
    840,361
    
    
    $
    1,106,398
    
    
    $
    1,419,674
    
    
    $
    1,828,578Operating costs and expenses:Cost of sales
    
    
    751,075
    
    
    
    988,318
    
    
    
    1,289,790
    
    
    
    1,528,048Direct operating expenses
    
    
    62,924
    
    
    
    71,345
    
    
    
    124,368
    
    
    
    140,209Selling, general and administrative expenses
    
    
    29,182
    
    
    
    31,581
    
    
    
    60,989
    
    
    
    63,496Depreciation and amortization
    
    
    25,368
    
    
    
    23,561
    
    
    
    51,690
    
    
    
    45,651Total operating costs and expenses
    
    
    868,549
    
    
    
    1,114,805
    
    
    
    1,526,837
    
    
    
    1,777,404Gain (loss) on disposition of assets
    
    
    474
    
    
    
    (1,600
    )
    
    
    474
    
    
    
    (1,600
    )Operating income (loss)
    
    
    (27,714
    )
    
    
    (10,007
    )
    
    
    (106,689
    )
    
    
    49,574Interest expense
    
    
    (21,735
    )
    
    
    (21,023
    )
    
    
    (48,320
    )
    
    
    (49,279
    )Equity earnings of investees
    
    
    1,209
    
    
    
    8,376
    
    
    
    1,106
    
    
    
    8,373Other income (loss), net
    
    
    (365
    )
    
    
    191
    
    
    
    13,839
    
    
    
    448Income (loss) before income tax expense (benefit),
non-controlling interest in loss of subsidiaries and
accumulated dividends on preferred stock of subsidiary
    
    
    (48,605
    )
    
    
    (22,463
    )
    
    
    (140,064
    )
    
    
    9,116Income tax expense (benefit)
    
    
    (17,093
    )
    
    
    (7,549
    )
    
    
    (51,806
    )
    
    
    3,446Income (loss) before non-controlling interest in loss of
subsidiaries and accumulated dividends on preferred stock
of subsidiary
    
    
    (31,512
    )
    
    
    (14,914
    )
    
    
    (88,258
    )
    
    
    5,670Non-controlling interest in loss of subsidiaries
    
    
    (2,253
    )
    
    
    (1,724
    )
    
    
    (6,057
    )
    
    
    (641
    )Accumulated dividends on preferred stock of subsidiary
    
    
    
    
    
    
    2,150
    
    
    
    
    
    
    
    4,300Net income (loss) available to common stockholders
    
    $
    (29,259
    )
    
    $
    (15,340
    )
    
    $
    (82,201
    )
    
    $
    2,011Earnings (loss) per share, basic
    
    $
    (0.54
    )
    
    $
    (0.33
    )
    
    $
    (1.52
    )
    
    $
    0.04Weighted average shares outstanding, basic (in thousands)
    
    
    54,164
    
    
    
    46,809
    
    
    
    54,162
    
    
    
    46,807Earnings (loss) per share, diluted
    
    $
    (0.54
    )
    
    $
    (0.33
    )
    
    $
    (1.52
    )
    
    $
    0.04Weighted average shares outstanding, diluted (in thousands)
    
    
    54,164
    
    
    
    46,809
    
    
    
    54,162
    
    
    
    46,810Cash dividends per share
    
    $
    0.04
    
    
    $
    0.04
    
    
    $
    0.08
    
    
    $
    0.08
 
 (1)
    
    Includes excise taxes on sales by the retail segment of $13,531 and $11,770 for the three
months and $26,317 and $22,814 for the six months ended June 30, 2010, and 2009, respectively.  2




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ALON USA ENERGY, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (unaudited, dollars in thousands)
 For the Six Months EndedJune 30,2010
    
    
    2009Cash flows from operating activities:Net income (loss) available to common stockholders
    
    $
    (82,201
    )
    
    $
    2,011Adjustments to reconcile net income (loss) available to
common stockholders to cash provided by (used in) operating
activities:Depreciation and amortization
    
    
    51,690
    
    
    
    45,651Stock compensation
    
    
    350
    
    
    
    381Deferred income tax expense
    
    
    (52,486
    )
    
    
    (35,977
    )Non-controlling interest in loss of subsidiaries
    
    
    (6,057
    )
    
    
    (641
    )Equity earnings of investees (net of dividends)
    
    
    (775
    )
    
    
    (6,879
    )Accumulated dividends on preferred stock of subsidiary
    
    
    
    
    
    
    4,300Amortization of debt issuance costs
    
    
    2,880
    
    
    
    3,567Amortization of original issuance discount
    
    
    812
    
    
    
    Write-off of unamortized debt issuance costs
    
    
    6,659
    
    
    
    (Gain) loss on disposition of assets
    
    
    (474
    )
    
    
    1,600Changes in
operating assets and liabilities, net of acquisition effects:Accounts and other receivables, net
    
    
    (49,417
    )
    
    
    (24,001
    )Income tax receivable
    
    
    47,290
    
    
    
    112,952Inventories
    
    
    (7,160
    )
    
    
    (85,269
    )Heating oil crack spread hedge
    
    
    
    
    
    
    117,485Prepaid expenses and other current assets
    
    
    (616
    )
    
    
    (410
    )Other assets
    
    
    (25,032
    )
    
    
    4,751Accounts payable
    
    
    51,453
    
    
    
    172,558Accrued liabilities
    
    
    (533
    )
    
    
    (10,123
    )Other non-current liabilities
    
    
    2,057
    
    
    
    (4,992
    )Net cash provided by (used in) operating activities
    
    
    (61,560
    )
    
    
    296,964Cash flows from investing activities:Capital expenditures
    
    
    (12,688
    )
    
    
    (29,244
    )Capital expenditures to rebuild the Big Spring refinery
    
    
    
    
    
    
    (39,281
    )Capital expenditures for turnarounds and catalysts
    
    
    (11,531
    )
    
    
    (10,314
    )Proceeds from insurance to rebuild Big Spring refinery
    
    
    
    
    
    
    34,125Proceeds from sale of securities
    
    
    36,852
    
    
    
    Proceeds from sale of assets
    
    
    20,095
    
    
    
    Acquisition of Bakersfield refinery
    
    
    (32,409
    )
    
    
    Earnout payment related to Krotz Springs refinery acquisition
    
    
    (4,375
    )
    
    
    Net cash used in investing activities
    
    
    (4,056
    )
    
    
    (44,714
    )Cash flows from financing activities:Dividends paid to stockholders
    
    
    (4,335
    )
    
    
    (3,746
    )Dividends paid to non-controlling interest
    
    
    (429
    )
    
    
    (288
    )Inventory supply agreement
    
    
    45,807
    
    
    
    Deferred debt issuance costs
    
    
    (2,354
    )
    
    
    (3,979
    )Revolving credit facilities, net
    
    
    (41,824
    )
    
    
    (126,506
    )Payments on long-term debt
    
    
    (5,473
    )
    
    
    (92,708
    )Additions to short-term debt
    
    
    76,500
    
    
    
    Payments on short-term debt
    
    
    (35,000
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    32,892
    
    
    
    (227,227
    )Net increase (decrease) in cash and cash equivalents
    
    
    (32,724
    )
    
    
    25,023Cash and cash equivalents, beginning of period
    
    
    40,437
    
    
    
    18,454Cash and cash equivalents, end of period
    
    $
    7,713
    
    
    $
    43,477Supplemental cash flow information:Cash paid for interest
    
    $
    38,846
    
    
    $
    48,477Cash paid (refunds received) for income tax
    
    $
    (46,374
    )
    
    $
    (106,511
    )Non-cash activities:Financing activity  payments on
long-term debt from deposit held to secure
heating oil crack spread hedge
    
    $
    
    
    
    $
    (50,000
    )
  3




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ALON USA ENERGY, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (unaudited, dollars in thousands except as noted)
 (1) Basis of Presentation and Certain Significant Accounting Policies
 (a) Basis of Presentation
   (b) Revenue Recognition
   (c) New Accounting Standards
 Subsequent Event (Topic 855) Subsequent Events
 Improving Disclosures about Fair Value Fair Value Measurements and Disclosure
 (d) Reclassifications
  4




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ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited, dollars in thousands except as noted)
 (2) Bakersfield Refinery Acquisition
     Current assets
    
    $
    17,033Other assets
    
    
    17,122Property, plant and equipment
    
    
    41,403Other non-current liabilities
    
    
    (43,149
    )Total consideration
    
    $
    32,409
    (3) Segment Data
  (a) Refining and Unbranded Marketing Segment
  5




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ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited, dollars in thousands except as noted)
 (b) Asphalt Segment
  (c) Retail and Branded Marketing Segment
  (d) Corporate
   Refining and
    
    
    
    
    
    Retail and Branded
    
    
    
    
    
    
    ConsolidatedUnbranded Marketing
    
    
    Asphalt
    
    
    Marketing
    
    
    Corporate
    
    
    TotalThree Months ended June 30, 2010Net sales to external customers
    
    $
    481,442
    
    
    $
    104,964
    
    
    $
    253,955
    
    
    $
    
    
    
    $
    840,361Intersegment sales/purchases
    
    
    209,889
    
    
    
    (52,643
    )
    
    
    (157,246
    )
    
    
    
    
    
    
    Depreciation and amortization
    
    
    19,881
    
    
    
    1,715
    
    
    
    3,436
    
    
    
    336
    
    
    
    25,368Operating income (loss)
    
    
    (35,387
    )
    
    
    463
    
    
    
    7,734
    
    
    
    (524
    )
    
    
    (27,714
    )Total assets
    
    
    1,767,631
    
    
    
    208,652
    
    
    
    188,983
    
    
    
    17,142
    
    
    
    2,182,408Turnaround, chemical catalyst,
capital expenditures and capital
expenditures to rebuild the Big
Spring refinery
    
    
    5,737
    
    
    
    347
    
    
    
    430
    
    
    
    393
    
    
    
    6,907
 Refining and
    
    
    
    
    
    
    Retail and Branded
    
    
    
    
    
    
    
    ConsolidatedUnbranded Marketing
    
    
    Asphalt
    
    
    Marketing
    
    
    Corporate
    
    
    TotalThree Months ended June 30, 2009Net sales to external customers
    
    $
    774,457
    
    
    $
    125,480
    
    
    $
    206,461
    
    
    $
    
    
    
    $
    1,106,398Intersegment sales/purchases
    
    
    186,646
    
    
    
    (70,348
    )
    
    
    (116,298
    )
    
    
    
    
    
    
    Depreciation and amortization
    
    
    18,300
    
    
    
    1,701
    
    
    
    3,412
    
    
    
    148
    
    
    
    23,561Operating income (loss)
    
    
    (17,193
    )
    
    
    5,125
    
    
    
    2,399
    
    
    
    (338
    )
    
    
    (10,007
    )Total assets
    
    
    1,783,680
    
    
    
    276,316
    
    
    
    197,556
    
    
    
    14,987
    
    
    
    2,272,539Turnaround, chemical catalyst,
capital expenditures and capital
expenditures to rebuild the Big
Spring refinery
    
    
    27,022
    
    
    
    414
    
    
    
    894
    
    
    
    654
    
    
    
    28,984
 6




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited, dollars in thousands except as noted)
 Refining and
    
    
    
    
    
    
    Retail and Branded
    
    
    
    
    
    
    ConsolidatedUnbranded Marketing
    
    
    Asphalt
    
    
    Marketing
    
    
    Corporate
    
    
    TotalSix Months ended June 30, 2010Net sales to external customers
    
    $
    767,586
    
    
    $
    172,105
    
    
    $
    479,983
    
    
    $
    
    
    
    $
    1,419,674Intersegment sales/purchases
    
    
    406,785
    
    
    
    (103,702
    )
    
    
    (303,083
    )
    
    
    
    
    
    
    Depreciation and amortization
    
    
    40,835
    
    
    
    3,432
    
    
    
    6,856
    
    
    
    567
    
    
    
    51,690Operating income (loss)
    
    
    (93,905
    )
    
    
    (17,716
    )
    
    
    5,875
    
    
    
    (943
    )
    
    
    (106,689
    )Total assets
    
    
    1,767,631
    
    
    
    208,652
    
    
    
    188,983
    
    
    
    17,142
    
    
    
    2,182,408Turnaround, chemical catalyst and
capital expenditures
    
    
    22,058
    
    
    
    526
    
    
    
    827
    
    
    
    808
    
    
    
    24,219
 Refining and
    
    
    
    
    
    
    Retail and Branded
    
    
    
    
    
    
    ConsolidatedUnbranded Marketing
    
    
    Asphalt
    
    
    Marketing
    
    
    Corporate
    
    
    TotalSix Months ended June 30, 2009Net sales to external customers
    
    $
    1,278,407
    
    
    $
    176,240
    
    
    $
    373,931
    
    
    $
    
    
    
    $
    1,828,578Intersegment sales/purchases
    
    
    315,993
    
    
    
    (114,876
    )
    
    
    (201,117
    )
    
    
    
    
    
    
    Depreciation and amortization
    
    
    35,177
    
    
    
    3,399
    
    
    
    6,780
    
    
    
    295
    
    
    
    45,651Operating income (loss)
    
    
    64,166
    
    
    
    (17,693
    )
    
    
    3,776
    
    
    
    (675
    )
    
    
    49,574Total assets
    
    
    1,783,680
    
    
    
    276,316
    
    
    
    197,556
    
    
    
    14,987
    
    
    
    2,272,539Turnaround, chemical catalyst,
capital expenditures and capital
expenditures to rebuild the Big
Spring refinery
    
    
    75,918
    
    
    
    576
    
    
    
    1,113
    
    
    
    1,232
    
    
    
    78,839
   (4) Fair Value
   7




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited, dollars in thousands except as noted)
  Quoted Prices inActive Markets
    
    
    Significantfor Identical
    
    
    Other
    
    
    SignificantAssets or
    
    
    Observable
    
    
    UnobservableLiabilities
    
    
    Inputs
    
    
    Inputs
    
    
    Consolidated(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    TotalSix Months ended June 30, 2010Assets:Futures and forwards
    
    $
    989
    
    
    $
    
    
    
    $
    
    
    
    $
    989Liabilities:Commodity swaps
    
    
    202
    
    
    
    404
    
    
    
    
    
    
    
    606Commodity calls
    
    
    
    
    
    
    6,706
    
    
    
    
    
    
    
    6,706Interest rate swaps
    
    
    
    
    
    
    13,315
    
    
    
    
    
    
    
    13,315Year ended December 31, 2009Assets:Futures and forwards
    
    $
    322
    
    
    $
    
    
    
    $
    
    
    
    $
    322Commodity swaps
    
    
    
    
    
    
    89
    
    
    
    
    
    
    
    89Liabilities:Commodity swaps
    
    
    
    
    
    
    9,983
    
    
    
    
    
    
    
    9,983Interest rate swaps
    
    
    
    
    
    
    16,933
    
    
    
    
    
    
    
    16,933
 (5) Derivative Financial Instruments
 Commodity Derivatives  Mark to Market
       8




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited, dollars in thousands except as noted)
    Cash Flow Hedges
  Interest Rate Derivatives.
   Commodity Derivatives.
  9




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited, dollars in thousands except as noted)
  As of June 30, 2010Asset Derivatives
    
    
    Liability DerivativesBalance Sheet
    
    
    
    
    
    
    Balance SheetLocation
    
    
    Fair Value
    
    
    Location
    
    
    Fair ValueDerivatives not designated as hedging instruments:Commodity contracts (futures, forwards, swaps and calls)
    
    Accounts receivable
    
    $
    108
    
    
    Accrued liabilities
    
    $
    (1,619
    )Commodity contracts (futures, forwards, swaps and calls)
    
    
    
    
    
    
    
    
    
    Other non-current liabilities
    
    
    (4,812
    )Total derivatives not designated as hedging instruments
    
    
    
    
    
    $
    108
    
    
    
    
    
    
    $
    (6,431
    )Derivatives designated as hedging instruments:Interest rate swaps
    
    
    
    
    
    $
    
    
    
    Other non-current liabilities
    
    $
    (13,315
    )Total derivatives designated as hedging instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,315
    )Total derivatives
    
    
    
    
    
    $
    108
    
    
    
    
    
    
    $
    (19,746
    )
 As of December 31, 2009Asset Derivatives
    
    
    Liability DerivativesBalance Sheet
    
    
    
    
    
    
    Balance SheetLocation
    
    
    Fair Value
    
    
    Location
    
    
    Fair ValueDerivatives not designated as hedging instruments:Commodity contracts (futures, forwards and SPR swaps)
    
    Accounts receivable
    
    $
    411
    
    
    Accrued liabilities
    
    $
    (9,983
    )Total derivatives not designated as hedging instruments under FAS 133
    
    
    
    
    
    $
    411
    
    
    
    
    
    
    $
    (9,983
    )Derivatives designated as hedging instruments:Interest rate swaps
    
    
    
    
    
    $
    
    
    
    Other non-current liabilities
    
    $
    (16,933
    )Total derivatives designated as hedging instruments under FAS 133
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,933
    )Total derivatives
    
    
    
    
    
    $
    411
    
    
    
    
    
    
    $
    (26,916
    )
 10




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited, dollars in thousands except as noted)
  Gain (Loss) Reclassifiedfrom Accumulated OCI intoIncome (IneffectiveGain (Loss) Reclassified from
    
    
    Portion and AmountGain (Loss) Recognized
    
    
    Accumulated OCI into Income (Effective
    
    
    Excluded fromCash Flow Hedging Relationships
    
    in OCI
    
    
    Portion)
    
    
    Effectiveness Testing)Location
    
    
    Amount
    
    
    Location
    
    
    AmountFor the Three Months Ended
June 30, 2010Commodity swaps (heating oil
swaps)
    
    $
    
    
    
    Cost of sales
    
    $
    (2,931
    )
    
    
    
    
    
    $
    Interest rate swaps
    
    
    2,049
    
    
    Interest expense
    
    
    (3,666
    )
    
    
    
    
    
    
    Total derivatives
    
    $
    2,049
    
    
    
    
    
    
    $
    (6,597
    )
    
    
    
    
    
    $
    For the Six Months Ended
June 30, 2010Commodity swaps (heating oil
swaps)
    
    $
    
    
    
    Cost of sales
    
    $
    (3,529
    )
    
    
    
    
    
    $
    Interest rate swaps
    
    
    3,618
    
    
    Interest expense
    
    
    (7,224
    )
    
    
    
    
    
    
    Total derivatives
    
    $
    3,618
    
    
    
    
    
    
    $
    (10,753
    )
    
    
    
    
    
    $
    Gain (Loss) Reclassifiedfrom Accumulated OCI intoIncome (IneffectiveGain (Loss) Reclassified from
    
    
    Portion and AmountGain (Loss) Recognized
    
    
    Accumulated OCI into Income
    
    
    Excluded fromCash Flow Hedging Relationships
    
    in OCI
    
    
    (Effective Portion)
    
    
    Effectiveness Testing)Location
    
    
    Amount
    
    
    Location
    
    
    AmountFor the Three Months Ended
June 30, 2009Commodity swaps (heating oil
swaps)
    
    $
    
    
    
    Cost of sales
    
    $
    3,068
    
    
    
    
    
    
    $
    Interest rate swaps
    
    
    4,602
    
    
    Interest expense
    
    
    (3,557
    )
    
    
    
    
    
    
    Total derivatives
    
    $
    4,602
    
    
    
    
    
    
    $
    (489
    )
    
    
    
    
    
    $
    For the Six Months Ended
June 30, 2009Commodity swaps (heating oil
swaps)
    
    $
    
    
    
    Cost of sales
    
    $
    4,014
    
    
    
    
    
    
    $
    Interest rate swaps
    
    
    5,639
    
    
    Interest expense
    
    
    (7,003
    )
    
    
    
    
    
    
    Total derivatives
    
    $
    5,639
    
    
    
    
    
    
    $
    (2,989
    )
    
    
    
    
    
    $
    
 Derivatives not designated as hedging instruments:
 Gain (Loss) Recognized in IncomeLocation
    
    
    AmountFor the Three Months Ended June 30, 2010Commodity contracts (futures & forwards)
    
    Cost of sales
    
    $
    267Commodity contracts (heating oil swaps)
    
    Cost of sales
    
    
    (209
    )Commodity contracts (calls)
    
    Cost of sales
    
    
    (60
    )Commodity contracts (commodity swaps)
    
    Other income (loss), net
    
    
    (202
    )Total derivatives
    
    
    
    
    
    $
    (204
    )For the Six Months Ended June 30, 2010Commodity contracts (futures & forwards)
    
    Cost of sales
    
    $
    1,740Commodity contracts (heating oil swaps)
    
    Cost of sales
    
    
    (315
    )Commodity contracts (calls)
    
    Cost of sales
    
    
    (60
    )Commodity contracts (commodity swaps)
    
    Other income (loss), net
    
    
    (202
    )Total derivatives
    
    
    
    
    
    $
    1,163
 11




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited, dollars in thousands except as noted)
 Gain (Loss) Recognized in IncomeLocation
    
    
    AmountFor the Three Months Ended June 30, 2009Commodity contracts (futures & forwards)
    
    Cost of sales
    
    $
    (13,798
    )Commodity contracts (heating oil swaps)
    
    Cost of sales
    
    
    471Commodity contracts (SPR swaps)
    
    Cost of sales
    
    
    1,073Total derivatives
    
    
    
    
    
    $
    (12,254
    )For the Six Months Ended June 30, 2009Commodity contracts (futures & forwards)
    
    Cost of sales
    
    $
    (14,490
    )Commodity contracts (heating oil swaps)
    
    Cost of sales
    
    
    41,184Commodity contracts (SPR swaps)
    
    Cost of sales
    
    
    174Total derivatives
    
    
    
    
    
    $
    26,868
 (6) Inventories
   June 30,
    
    
    December 31,2010
    
    
    2009Crude oil, refined products, asphalt and blendstocks
    
    $
    111,816
    
    
    $
    150,370Inventory consigned to others
    
    
    82,412
    
    
    
    22,558Materials and supplies
    
    
    19,883
    
    
    
    18,069Store merchandise
    
    
    18,634
    
    
    
    18,856Store fuel
    
    
    6,758
    
    
    
    5,146Total inventories
    
    $
    239,503
    
    
    $
    214,999
   (7) Property, Plant and Equipment, Net
  June 30,
    
    
    December 31,2010
    
    
    2009Refining facilities
    
    $
    1,572,610
    
    
    $
    1,535,841Pipelines and terminals
    
    
    39,213
    
    
    
    39,213Retail
    
    
    137,658
    
    
    
    137,150Other
    
    
    17,069
    
    
    
    16,747Property, plant and equipment, gross
    
    
    1,766,550
    
    
    
    1,728,951Less accumulated depreciation
    
    
    (295,171
    )
    
    
    (251,525
    )Property, plant and equipment, net
    
    $
    1,471,379
    
    
    $
    1,477,426
 12




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited, dollars in thousands except as noted)
 (8) Additional Financial Information
  (a) Other Assets
 June 30,
    
    
    December 31,2010
    
    
    2009Deferred turnaround and chemical catalyst cost
    
    $
    27,737
    
    
    $
    24,387Environmental receivables
    
    
    20,857
    
    
    
    3,448Deferred debt issuance costs
    
    
    18,527
    
    
    
    25,822Intangible assets
    
    
    8,124
    
    
    
    8,516Other
    
    
    20,239
    
    
    
    8,359Total other assets
    
    $
    95,484
    
    
    $
    70,532
   (b) Accrued Liabilities and Other Non-Current Liabilities
 June 30,
    
    
    December 31,2010
    
    
    2009Accrued Liabilities:Taxes other than income taxes, primarily excise taxes
    
    $
    18,074
    
    
    $
    20,205Employee costs
    
    
    7,766
    
    
    
    6,716Commodity swaps
    
    
    1,619
    
    
    
    9,983Valero earnout liability
    
    
    8,750
    
    
    
    8,750Other
    
    
    42,459
    
    
    
    46,726Total accrued liabilities
    
    $
    78,668
    
    
    $
    92,380Other Non-Current Liabilities:Pension and other postemployment benefit liabilities, net
    
    $
    35,851
    
    
    $
    34,902Environmental accrual (Note 16)
    
    
    67,926
    
    
    
    27,350Asset retirement obligations
    
    
    9,977
    
    
    
    8,789Interest rate swap valuations
    
    
    13,315
    
    
    
    16,933Valero earnout liability
    
    
    2,188
    
    
    
    6,562Commodity swaps
    
    
    4,812
    
    
    
    Other
    
    
    12,817
    
    
    
    540Total other non-current liabilities
    
    $
    146,886
    
    
    $
    95,076
 13




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited, dollars in thousands except as noted)
 (c) Comprehensive Income
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Income (loss) before non-controlling interest
in loss of subsidiaries and accumulated dividends
on preferred stock of subsidiary
    
    $
    (31,512
    )
    
    $
    (14,914
    )
    
    $
    (88,258
    )
    
    $
    5,670Other comprehensive gain (loss), net of tax:Unrealized gain on cash flow hedges, net of tax
    
    
    3,178
    
    
    
    1,408
    
    
    
    4,575
    
    
    
    1,136Total other comprehensive income, net of tax
    
    
    3,178
    
    
    
    1,408
    
    
    
    4,575
    
    
    
    1,136Comprehensive income (loss)
    
    
    (28,334
    )
    
    
    (13,506
    )
    
    
    (83,683
    )
    
    
    6,806Comprehensive income attributable to
non-controlling interest (including
accumulated dividends on preferred shares of
subsidiary)
    
    
    (2,117
    )
    
    
    527
    
    
    
    (5,878
    )
    
    
    3,740Comprehensive income (loss) attributable to common
stockholders
    
    $
    (26,217
    )
    
    $
    (14,033
    )
    
    $
    (77,805
    )
    
    $
    3,066
  June 30,
    
    
    December 31,2010
    
    
    2009Unrealized losses on cash flow hedges, net of tax
    
    $
    (11,499
    )
    
    $
    (15,895
    )Pension and post-employment benefits, net of tax
    
    
    (16,976
    )
    
    
    (16,976
    )Accumulated other comprehensive loss, net of tax
    
    $
    (28,475
    )
    
    $
    (32,871
    )
 (9) Postretirement Benefits
   For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Components of net periodic benefit cost:Service cost
    
    $
    1,019
    
    
    $
    836
    
    
    $
    2,037
    
    
    $
    1,673Interest cost
    
    
    946
    
    
    
    840
    
    
    
    1,892
    
    
    
    1,681Expected return on plan assets
    
    
    (905
    )
    
    
    (839
    )
    
    
    (1,810
    )
    
    
    (1,679
    )Amortization of net loss
    
    
    385
    
    
    
    263
    
    
    
    771
    
    
    
    526Net periodic benefit cost
    
    $
    1,445
    
    
    $
    1,100
    
    
    $
    2,890
    
    
    $
    2,201
 14




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited, dollars in thousands except as noted)
 (10) Indebtedness
  June 30,
    
    
    December 31,2010
    
    
    2009Term loan credit facility
    
    $
    432,000
    
    
    $
    434,250Revolving credit facilities
    
    
    174,753
    
    
    
    216,577Senior secured notes
    
    
    206,505
    
    
    
    205,693Short-term debt
    
    
    41,500
    
    
    
    Retail credit facilities
    
    
    77,281
    
    
    
    80,504Total debt
    
    
    932,039
    
    
    
    937,024Less short-term debt and current portion of long-term debt
    
    
    (52,446
    )
    
    
    (10,946
    )Total long-term debt
    
    $
    879,593
    
    
    $
    926,078
 (a) Alon USA Energy, Inc. Credit Facilities
 Term Loan Credit Facility
     Letters of Credit Facility.
  (b) Alon USA LP Credit Facility
 Revolving Credit Facility.
 15




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited, dollars in thousands except as noted)
     (c) Paramount Petroleum Corporation Credit Facility
 Revolving Credit Facility.
     (d) Alon Refining Krotz Springs, Inc. Credit Facilities
 Senior Secured Notes.
    16




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited, dollars in thousands except as noted)
   Short-Term Credit Facility.
    Revolving Credit Facility.
  (e) Alon Bakersfield Operating, Inc. Credit Facility
 Short-Term Credit Facility.
   (f) Retail Credit Facilities
    17




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited, dollars in thousands except as noted)
   (g) Other Retail Related Credit Facilities
  (11) Stock-Based Compensation
  (a) Amended and Restated 2005 Incentive Compensation Plan (share value in dollars)
  Restricted Stock
   WeightedAverageGrant DateNonvested Shares
    
    Shares
    
    
    Fair ValuesNonvested at January 1, 2009
    
    
    7,662
    
    
    $
    19.58Granted
    
    
    5,841
    
    
    
    12.84Vested
    
    
    (3,277)
    
    
    
    22.89Forfeited
    
    
    
    
    
    
    Nonvested at December 31, 2009
    
    
    10,226
    
    
    $
    14.67Granted
    
    
    10,416
    
    
    
    7.20Vested
    
    
    (4,473)
    
    
    
    16.77Forfeited
    
    
    
    
    
    
    Nonvested at June 30, 2010
    
    
    16,169
    
    
    $
    9.28
  18




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited, dollars in thousands except as noted)
  Stock Appreciation Rights.
       (b) 2000 Incentive Stock Compensation Plan
  19




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited, dollars in thousands except as noted)
  Alon Assets
    
    
    Alon OperatingWeighted
    
    
    
    
    
    
    WeightedNumber of
    
    
    Average
    
    
    Number of
    
    
    AverageOptions
    
    
    Exercise
    
    
    Options
    
    
    ExerciseOutstanding
    
    
    Price
    
    
    Outstanding
    
    
    PriceOutstanding at January 1, 2009
    
    
    2,793
    
    
    $
    100
    
    
    
    1,049
    
    
    $
    100Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited and expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at December 31, 2009
    
    
    2,793
    
    
    $
    100
    
    
    
    1,049
    
    
    $
    100Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited and expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at June 30, 2010
    
    
    2,793
    
    
    $
    100
    
    
    
    1,049
    
    
    $
    100
  (12) Stockholders Equity (per share in dollars)
 Common Stock Dividends
  (13) Earnings (Loss) Per Share (earnings per share in dollars)
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income (loss) available to common stockholders
    
    $
    (29,259
    )
    
    $
    (15,340
    )
    
    $
    (82,201
    )
    
    $
    2,011Average number of shares of common stock outstanding
    
    
    54,164
    
    
    
    46,809
    
    
    
    54,162
    
    
    
    46,807Dilutive restricted shares, SARs and conversion of
preferred shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Average number of shares of common stock outstanding
assuming dilution
    
    
    54,164
    
    
    
    46,809
    
    
    
    54,162
    
    
    
    46,810Earnings (loss) per share  basic
    
    $
    (0.54
    )
    
    $
    (0.33
    )
    
    $
    (1.52
    )
    
    $
    0.04Earnings (loss) per share  diluted *
    
    $
    (0.54
    )
    
    $
    (0.33
    )
    
    $
    (1.52
    )
    
    $
    0.04
 
 *
    
    For the purpose of adjusting net income (loss) in the calculation of diluted earnings (loss)
per share issued by Alons subsidiaries, the effect for the three and six months ended June
30, 2010 and 2009 is anti-dilutive and therefore excluded from the calculation. 20




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited, dollars in thousands except as noted)
 (14) Big Spring Refinery Fire
   (15) Related-Party Transactions
 Sale of Preferred Shares (per share amounts in dollars)
      Sale of HEP Units
  21




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited, dollars in thousands except as noted)
  Richmond Beach Property Sale
   (16) Commitments and Contingencies
 (a) Commitments
  Offtake Agreement with Valero
  Earnout Settlement with Valero
  Supply and Offtake Agreement with J. Aron & Company
   22




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited, dollars in thousands except as noted)
  Standby LC Facility
   (b) Contingencies
  (c) Environmental
       23




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited, dollars in thousands except as noted)
  (17) Subsequent Event
 Dividend Declared
  24




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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 The following discussion of our financial condition and results of operations should be read
in conjunction with the audited consolidated financial statements and notes thereto included in our
Annual Report on Form 10-K for the year ended December 31, 2009. In this document, the words
Alon, the Company, we and our refer to Alon USA Energy, Inc. and its subsidiaries.
 
 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;
    
    changes in the light/heavy 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;
    
    the global financial crisis impact on our business and financial condition; and
    
    the other factors discussed in our Annual Report on Form 10-K for the year ended
December 31, 2009 under the caption Risk Factors and in this Form 10-Q under Part II,
Item 1A.
 25




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##### Table of Contents



Company Overview
  Refining and Unbranded Marketing Segment
    Asphalt Segment
 Retail and Branded Marketing Segment
 26




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##### Table of Contents



Second Quarter Operational and Financial Highlights
  
    
    The Big Spring refinery and California refineries combined throughput for the second
quarter of 2010, averaged 62,218 bpd, consisting of 42,775 bpd at the Big Spring refinery
and 19,443 bpd at the California refineries compared to a combined average of 101,398 bpd
in the second quarter of 2009, consisting of 61,573 bpd at the Big Spring refinery and
39,825 bpd at the California refineries. Throughput at the Krotz Springs refinery for the
second quarter of 2010 was an average of 21,960 bpd compared to an average of 58,458 for
the second quarter of 2009. The average throughput at the Krotz Springs refinery reflects
only operations since its restart in June 2010.
    
    Refinery operating margin at the Big Spring refinery was $9.58 per barrel for the second
quarter of 2010, compared to $5.37 per barrel for the same period in 2009. This increase
was primarily due to higher Gulf Coast 3/2/1 crack spreads and greater light/heavy spreads.
    
    Refinery operating margin at the California refineries was $2.87 per barrel for the
second quarter of 2010, compared to $2.47 per barrel for the same period in 2009. This
increase primarily resulted from higher West Coast 3/2/1 crack spreads and greater
sweet/sour spreads.
    
    The average operating margin for the Krotz Springs refinery was ($1.95) per barrel for
the second quarter of 2010 compared to $5.85 per barrel for the same period in 2009. The
change reflects the refinery being down until June 2010.
    
    Asphalt margins in the second quarter of 2010 were $67.12 per ton compared to $50.97 per
ton in the second quarter of 2009. The average blended asphalt sales price increased 22.1%
from $397.35 per ton in the second quarter of 2009 to $485.15 per ton in the second quarter
of 2010 and the average non-blended asphalt sales price increased 160.8% from $145.04 per
ton in the second quarter of 2009 to $378.25 per ton in the second quarter of 2010.
    
    On June 15, 2010, Alon paid a regular quarterly cash dividend of $0.04 per share on
Alons common stock to stockholders of record at the close of business on May 28, 2010.
 Major Influences on Results of Operations
 Refining and Unbranded Marketing
 27




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28




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##### Table of Contents



Asphalt
 Retail and Branded Marketing
 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
 30




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ALON USA ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED
 Summary Financial Tables
 For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(dollars in thousands, except per
    
    
    (dollars in thousands, except pershare data)
    
    
    share data)STATEMENT OF OPERATIONS DATA:Net sales (1)
    
    $
    840,361
    
    
    $
    1,106,398
    
    
    $
    1,419,674
    
    
    $
    1,828,578Operating costs and expenses:Cost of sales
    
    
    751,075
    
    
    
    988,318
    
    
    
    1,289,790
    
    
    
    1,528,048Direct operating expenses
    
    
    62,924
    
    
    
    71,345
    
    
    
    124,368
    
    
    
    140,209Selling, general and administrative expenses
(2)
    
    
    29,182
    
    
    
    31,581
    
    
    
    60,989
    
    
    
    63,496Depreciation and amortization (3)
    
    
    25,368
    
    
    
    23,561
    
    
    
    51,690
    
    
    
    45,651Total operating costs and expenses
    
    
    868,549
    
    
    
    1,114,805
    
    
    
    1,526,837
    
    
    
    1,777,404Gain (loss) on disposition of assets
    
    
    474
    
    
    
    (1,600
    )
    
    
    474
    
    
    
    (1,600
    )Operating income (loss)
    
    
    (27,714
    )
    
    
    (10,007
    )
    
    
    (106,689
    )
    
    
    49,574Interest expense (4)
    
    
    (21,735
    )
    
    
    (21,023
    )
    
    
    (48,320
    )
    
    
    (49,279
    )Equity earnings of investees
    
    
    1,209
    
    
    
    8,376
    
    
    
    1,106
    
    
    
    8,373Other income (loss), net (5)
    
    
    (365
    )
    
    
    191
    
    
    
    13,839
    
    
    
    448Income (loss) before income tax expense
(benefit), non-controlling interest in loss of
subsidiaries and accumulated dividends on
preferred stock of subsidiary
    
    
    (48,605
    )
    
    
    (22,463
    )
    
    
    (140,064
    )
    
    
    9,116Income tax expense (benefit)
    
    
    (17,093
    )
    
    
    (7,549
    )
    
    
    (51,806
    )
    
    
    3,446Income (loss) before non-controlling interest
in loss of subsidiaries and accumulated
dividends on preferred stock of subsidiary
    
    
    (31,512
    )
    
    
    (14,914
    )
    
    
    (88,258
    )
    
    
    5,670Non-controlling interest in loss of subsidiaries
    
    
    (2,253
    )
    
    
    (1,724
    )
    
    
    (6,057
    )
    
    
    (641
    )Accumulated dividends on preferred stock of
subsidiary
    
    
    
    
    
    
    2,150
    
    
    
    
    
    
    
    4,300Net income (loss) available to common
stockholders
    
    $
    (29,259
    )
    
    $
    (15,340
    )
    
    $
    (82,201
    )
    
    $
    2,011Earnings (loss) per share, basic
    
    $
    (0.54
    )
    
    $
    (0.33
    )
    
    $
    (1.52
    )
    
    $
    0.04Weighted average shares outstanding, basic (in
thousands)
    
    
    54,164
    
    
    
    46,809
    
    
    
    54,162
    
    
    
    46,807Earnings (loss) per share, diluted
    
    $
    (0.54
    )
    
    $
    (0.33
    )
    
    $
    (1.52
    )
    
    $
    0.04Weighted average shares outstanding, diluted
(in thousands)
    
    
    54,164
    
    
    
    46,809
    
    
    
    54,162
    
    
    
    46,810Cash dividends per share
    
    $
    0.04
    
    
    $
    0.04
    
    
    $
    0.08
    
    
    $
    0.08CASH FLOW DATA:Net cash provided by (used in):Operating activities
    
    $
    (20,581
    )
    
    $
    177,437
    
    
    $
    (61,560
    )
    
    $
    296,964Investing activities
    
    
    2,275
    
    
    
    (29,705
    )
    
    
    (4,056
    )
    
    
    (44,714
    )Financing activities
    
    
    18,459
    
    
    
    (122,548
    )
    
    
    32,892
    
    
    
    (227,227
    )
 31




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For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(dollars in thousands, except per
    
    
    (dollars in thousands, except pershare data)
    
    
    share data)OTHER DATA:Adjusted EBITDA (6)
    
    $
    (1,976
    )
    
    $
    23,721
    
    
    $
    (40,528
    )
    
    $
    105,646Capital expenditures (7)
    
    
    5,385
    
    
    
    18,887
    
    
    
    12,688
    
    
    
    29,244Capital expenditures to rebuild the Big Spring
refinery
    
    
    
    
    
    
    7,146
    
    
    
    
    
    
    
    39,281Capital expenditures for turnaround and
chemical catalyst
    
    
    1,522
    
    
    
    2,951
    
    
    
    11,531
    
    
    
    10,314
 June 30,
    
    
    December 31,2010
    
    
    2009BALANCE SHEET DATA (end of period):Cash and cash equivalents
    
    $
    7,713
    
    
    $
    40,437Working capital
    
    
    10,086
    
    
    
    84,257Total assets
    
    
    2,182,408
    
    
    
    2,132,789Total debt
    
    
    932,039
    
    
    
    937,024Total equity
    
    
    346,386
    
    
    
    431,918
 
 (1)
    
    Includes excise taxes on sales by the retail and branded marketing segment of $13,531 and
$11,770 for the three months ended June 30, 2010 and 2009, respectively, and $26,317 and
$22,814 for the six months ended June 30, 2010 and 2009, respectively.(2)
    
    Includes corporate headquarters selling, general and administrative expenses of $188 and $190
for the three months ended June 30, 2010 and 2009, respectively, and $376 and $380 for the six
months ended June 30, 2010 and 2009, respectively, which are not allocated to our three
operating segments.(3)
    
    Includes corporate depreciation and amortization of $336 and $148 for the three months ended
June 30, 2010 and 2009, respectively, and $567 and $295 for the six months ended June 30, 2010
and 2009, respectively, which are not allocated to our three operating segments.(4)
    
    Interest expense of $48,320 for the six months ended June 30, 2010, includes a charge of
$6,659 for the write-off of debt issuance costs associated with our prepayment of the Alon
Refining Krotz Springs, Inc. revolving credit facility. Interest expense of $49,279 for the
three months ended June 30, 2009, includes $5,715 related to the unwind of the heating oil
crack spread hedge.(5)
    
    Other income (loss), net for the six months ended June 30, 2010 substantially represents the
gain from the sale of our investment in Holly Energy Partners.(6)
    
    Adjusted EBITDA represents earnings before non-controlling interest in income of
subsidiaries, income tax expense, interest expense, depreciation and amortization and gain on
disposition of assets. Adjusted EBITDA is not a recognized measurement under GAAP; however,
the amounts included in Adjusted EBITDA are derived from amounts included in our consolidated
financial statements. Our management believes that the presentation of Adjusted EBITDA is
useful to investors because it is frequently used by securities analysts, investors, and other
interested parties in the evaluation of companies in our industry. In addition, our
management believes that Adjusted EBITDA is useful in evaluating our operating performance
compared to that of other companies in our industry because the calculation of Adjusted EBITDA
generally eliminates the effects of non-controlling interest in income of subsidiaries, income
tax expense, interest expense, gain on disposition of assets and the accounting effects of
capital expenditures and acquisitions, items that may vary for different companies for reasons
unrelated to overall operating performance.  
    
    Adjusted EBITDA 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;
 32




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##### Table of Contents




    
    Adjusted EBITDA does not reflect the prior claim that non-controlling interest have
on the income generated by non-wholly-owned subsidiaries;
    
    Adjusted EBITDA does not reflect changes in or cash requirements for our working
capital needs; and
    
    Our calculation of Adjusted EBITDA may differ from EBITDA calculations of other
companies in our industry, limiting its usefulness as a comparative measure.
   For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(dollars in thousands)Net income (loss) available to common stockholders
    
    $
    (29,259
    )
    
    $
    (15,340
    )
    
    $
    (82,201
    )
    
    $
    2,011Non-controlling interest in loss of subsidiaries
(including accumulated dividends on preferred stock of
subsidiary)
    
    
    (2,253
    )
    
    
    426
    
    
    
    (6,057
    )
    
    
    3,659Income tax expense (benefit)
    
    
    (17,093
    )
    
    
    (7,549
    )
    
    
    (51,806
    )
    
    
    3,446Interest expense
    
    
    21,735
    
    
    
    21,023
    
    
    
    48,320
    
    
    
    49,279Depreciation and amortization
    
    
    25,368
    
    
    
    23,561
    
    
    
    51,690
    
    
    
    45,651(Gain) loss on disposition of assets
    
    
    (474
    )
    
    
    1,600
    
    
    
    (474
    )
    
    
    1,600Adjusted EBITDA
    
    $
    (1,976
    )
    
    $
    23,721
    
    
    $
    (40,528
    )
    
    $
    105,646
 
 (7)
    
    Includes corporate capital expenditures of $393 and $654 for the three months ended June 30,
2010, and 2009, respectively, and $808 and $1,232 for the six months ended June 30, 2010 and
2009, respectively, which are not allocated to our three operating segments. 33




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REFINING AND UNBRANDED MARKETING SEGMENT
 For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(dollars in thousands, except per barrel data and pricing statistics)STATEMENTS OF OPERATIONS DATA:Net sales (1)
    
    $
    691,331
    
    
    $
    961,103
    
    
    $
    1,174,371
    
    
    $
    1,594,400Operating costs and expenses:Cost of sales
    
    
    651,470
    
    
    
    889,519
    
    
    
    1,115,334
    
    
    
    1,358,882Direct operating expenses
    
    
    51,493
    
    
    
    61,638
    
    
    
    101,845
    
    
    
    120,009Selling, general and administrative expenses
    
    
    3,874
    
    
    
    7,239
    
    
    
    10,262
    
    
    
    14,566Depreciation and amortization
    
    
    19,881
    
    
    
    18,300
    
    
    
    40,835
    
    
    
    35,177Total operating costs and expenses
    
    
    726,718
    
    
    
    976,696
    
    
    
    1,268,276
    
    
    
    1,528,634Loss on disposition of assets
    
    
    
    
    
    
    (1,600
    )
    
    
    
    
    
    
    (1,600
    )Operating income (loss)
    
    $
    (35,387
    )
    
    $
    (17,193
    )
    
    $
    (93,905
    )
    
    $
    64,166KEY OPERATING STATISTICS:Total sales volume (bpd)
    
    
    69,423
    
    
    
    132,286
    
    
    
    52,943
    
    
    
    127,400Per barrel of throughput:Refinery operating margin  Big Spring (2)
    
    $
    9.58
    
    
    $
    5.37
    
    
    $
    7.26
    
    
    $
    8.83Refinery operating margin  CA Refineries (2)
    
    
    2.87
    
    
    
    2.47
    
    
    
    1.29
    
    
    
    3.99Refinery operating margin  Krotz Springs (2)
    
    
    (1.95
    )
    
    
    5.85
    
    
    
    (1.48
    )
    
    
    8.91Refinery direct operating expense  Big Spring (3)
    
    
    5.78
    
    
    
    4.70
    
    
    
    6.18
    
    
    
    4.14Refinery direct operating expense  CA Refineries (3)
    
    
    7.46
    
    
    
    3.80
    
    
    
    8.12
    
    
    
    4.65Refinery direct operating expense  Krotz Springs (3)
    
    
    7.69
    
    
    
    4.04
    
    
    
    12.96
    
    
    
    4.32Capital expenditures
    
    
    4,215
    
    
    
    16,925
    
    
    
    10,527
    
    
    
    26,323Capital expenditures to rebuild the Big Spring refinery
    
    
    
    
    
    
    7,146
    
    
    
    
    
    
    
    39,281Capital expenditures for turnaround and chemical catalyst
    
    
    1,522
    
    
    
    2,951
    
    
    
    11,531
    
    
    
    10,314PRICING STATISTICS:WTI crude oil (per barrel)
    
    $
    77.74
    
    
    $
    59.54
    
    
    $
    78.24
    
    
    $
    51.36WTS crude oil (per barrel)
    
    
    75.92
    
    
    
    58.15
    
    
    
    76.39
    
    
    
    50.20MAYA crude oil (per barrel)
    
    
    68.03
    
    
    
    53.89
    
    
    
    68.93
    
    
    
    46.28Crack spreads (3/2/1) (per barrel):Gulf Coast
    
    $
    9.75
    
    
    $
    8.30
    
    
    $
    8.43
    
    
    $
    8.97Group III
    
    
    11.47
    
    
    
    9.34
    
    
    
    9.13
    
    
    
    9.53West Coast
    
    
    15.47
    
    
    
    14.48
    
    
    
    12.81
    
    
    
    16.19Crack spreads (6/1/2/3) (per barrel):West Coast
    
    $
    4.82
    
    
    $
    2.59
    
    
    $
    3.15
    
    
    $
    4.39Crack spreads (2/1/1) (per barrel):Gulf Coast high sulfur diesel
    
    $
    8.92
    
    
    $
    6.63
    
    
    $
    7.59
    
    
    $
    8.04Crude oil differentials (per barrel):WTI less WTS
    
    $
    1.82
    
    
    $
    1.39
    
    
    $
    1.85
    
    
    $
    1.16WTI less MAYA
    
    
    9.71
    
    
    
    5.65
    
    
    
    9.31
    
    
    
    5.08Product price (dollars per gallon):Gulf Coast unleaded gasoline
    
    $
    2.053
    
    
    $
    1.638
    
    
    $
    2.046
    
    
    $
    1.429Gulf Coast ultra low-sulfur diesel
    
    
    2.143
    
    
    
    1.569
    
    
    
    2.098
    
    
    
    1.451Group III unleaded gasoline
    
    
    2.101
    
    
    
    1.674
    
    
    
    2.068
    
    
    
    1.454Group III ultra low-sulfur diesel
    
    
    2.171
    
    
    
    1.571
    
    
    
    2.103
    
    
    
    1.441West Coast LA CARBOB (unleaded gasoline)
    
    
    2.231
    
    
    
    1.841
    
    
    
    2.184
    
    
    
    1.674West Coast LA ultra low-sulfur diesel
    
    
    2.196
    
    
    
    1.606
    
    
    
    2.136
    
    
    
    1.478Natural gas (per MMBTU)
    
    
    4.35
    
    
    
    3.81
    
    
    
    4.66
    
    
    
    4.13
 34




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##### Table of Contents



THROUGHPUT AND YIELD DATA:
BIG SPRING
 For the Three Months Ended
    
    
    
    
    
    
    
    
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009bpd
    
    
    %
    
    
    bpd
    
    
    %
    
    
    bpd
    
    
    %
    
    
    bpd
    
    
    %Refinery throughput:Sour crude
    
    
    31,776
    
    
    
    74.3
    
    
    
    50,771
    
    
    
    82.5
    
    
    
    33,865
    
    
    
    79.2
    
    
    
    53,099
    
    
    
    84.3Sweet crude
    
    
    7,839
    
    
    
    18.3
    
    
    
    7,768
    
    
    
    12.6
    
    
    
    6,556
    
    
    
    15.3
    
    
    
    7,815
    
    
    
    12.4Blendstocks
    
    
    3,160
    
    
    
    7.4
    
    
    
    3,034
    
    
    
    4.9
    
    
    
    2,358
    
    
    
    5.5
    
    
    
    2,073
    
    
    
    3.3Total refinery throughput (4)
    
    
    42,775
    
    
    
    100.0
    
    
    
    61,573
    
    
    
    100.0
    
    
    
    42,779
    
    
    
    100.0
    
    
    
    62,987
    
    
    
    100.0Refinery production:Gasoline
    
    
    22,675
    
    
    
    53.6
    
    
    
    26,333
    
    
    
    43.0
    
    
    
    21,652
    
    
    
    51.3
    
    
    
    27,294
    
    
    
    43.4Diesel/jet
    
    
    12,654
    
    
    
    29.9
    
    
    
    19,571
    
    
    
    32.0
    
    
    
    13,195
    
    
    
    31.3
    
    
    
    20,648
    
    
    
    32.8Asphalt
    
    
    2,346
    
    
    
    5.5
    
    
    
    6,444
    
    
    
    10.5
    
    
    
    2,353
    
    
    
    5.6
    
    
    
    5,840
    
    
    
    9.3Petrochemicals
    
    
    2,576
    
    
    
    6.1
    
    
    
    3,281
    
    
    
    5.4
    
    
    
    2,300
    
    
    
    5.4
    
    
    
    3,154
    
    
    
    5.0Other
    
    
    2,056
    
    
    
    4.9
    
    
    
    5,595
    
    
    
    9.1
    
    
    
    2,722
    
    
    
    6.4
    
    
    
    5,946
    
    
    
    9.5Total refinery production (5)
    
    
    42,307
    
    
    
    100.0
    
    
    
    61,224
    
    
    
    100.0
    
    
    
    42,222
    
    
    
    100.0
    
    
    
    62,882
    
    
    
    100.0Refinery utilization (6)
    
    
    
    
    
    
    56.6
    %
    
    
    
    
    
    
    83.6
    %
    
    
    
    
    
    
    60.5
    %
    
    
    
    
    
    
    87.0
    %
 THROUGHPUT AND YIELD DATA:
CALIFORNIA REFINERIES
 For the Three Months Ended

    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009bpd
    
    
    %
    
    
    bpd
    
    
    %
    
    
    bpd
    
    
    %
    
    
    bpd
    
    
    %Refinery throughput:Medium sour crude
    
    
    3,448
    
    
    
    17.7
    
    
    
    20,150
    
    
    
    50.6
    
    
    
    3,775
    
    
    
    20.0
    
    
    
    16,209
    
    
    
    47.2Heavy crude
    
    
    15,597
    
    
    
    80.3
    
    
    
    19,315
    
    
    
    48.5
    
    
    
    14,674
    
    
    
    77.8
    
    
    
    17,914
    
    
    
    52.2Blendstocks
    
    
    398
    
    
    
    2.0
    
    
    
    360
    
    
    
    0.9
    
    
    
    408
    
    
    
    2.2
    
    
    
    202
    
    
    
    0.6Total refinery throughput (4)
    
    
    19,443
    
    
    
    100.0
    
    
    
    39,825
    
    
    
    100.0
    
    
    
    18,857
    
    
    
    100.0
    
    
    
    34,325
    
    
    
    100.0Refinery production:Gasoline
    
    
    2,783
    
    
    
    14.7
    
    
    
    6,587
    
    
    
    17.0
    
    
    
    2,626
    
    
    
    14.3
    
    
    
    4,936
    
    
    
    14.7Diesel/jet
    
    
    4,060
    
    
    
    21.4
    
    
    
    9,086
    
    
    
    23.4
    
    
    
    3,717
    
    
    
    20.3
    
    
    
    7,658
    
    
    
    22.8Asphalt
    
    
    6,516
    
    
    
    34.3
    
    
    
    11,450
    
    
    
    29.5
    
    
    
    6,341
    
    
    
    34.6
    
    
    
    10,100
    
    
    
    30.1Light unfinished
    
    
    
    
    
    
    
    
    
    
    99
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    999
    
    
    
    3.0Heavy unfinished
    
    
    5,212
    
    
    
    27.4
    
    
    
    10,868
    
    
    
    28.0
    
    
    
    5,235
    
    
    
    28.6
    
    
    
    9,340
    
    
    
    27.8Other
    
    
    423
    
    
    
    2.2
    
    
    
    697
    
    
    
    1.8
    
    
    
    408
    
    
    
    2.2
    
    
    
    534
    
    
    
    1.6Total refinery production (5)
    
    
    18,994
    
    
    
    100.0
    
    
    
    38,787
    
    
    
    100.0
    
    
    
    18,327
    
    
    
    100.0
    
    
    
    33,567
    
    
    
    100.0Refinery utilization (6)
    
    
    
    
    
    
    26.3
    %
    
    
    
    
    
    
    54.4
    %
    
    
    
    
    
    
    25.4
    %
    
    
    
    
    
    
    56.1
    %
 THROUGHPUT AND YIELD DATA:
KROTZ SPRINGS (A)
 For the Three Months Ended

    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009bpd
    
    
    %
    
    
    bpd
    
    
    %
    
    
    bpd
    
    
    %
    
    
    bpd
    
    
    %Refinery throughput:Light sweet crude
    
    
    10,358
    
    
    
    47.2
    
    
    
    28,065
    
    
    
    48.0
    
    
    
    5,208
    
    
    
    47.2
    
    
    
    27,746
    
    
    
    49.5Heavy sweet crude
    
    
    10,693
    
    
    
    48.7
    
    
    
    26,362
    
    
    
    45.1
    
    
    
    5,376
    
    
    
    48.7
    
    
    
    23,240
    
    
    
    41.4Blendstocks
    
    
    909
    
    
    
    4.1
    
    
    
    4,031
    
    
    
    6.9
    
    
    
    457
    
    
    
    4.1
    
    
    
    5,113
    
    
    
    9.1Total refinery throughput (4)
    
    
    21,960
    
    
    
    100.0
    
    
    
    58,458
    
    
    
    100.0
    
    
    
    11,041
    
    
    
    100.0
    
    
    
    56,099
    
    
    
    100.0Refinery production:Gasoline
    
    
    8,427
    
    
    
    38.6
    
    
    
    27,962
    
    
    
    47.1
    
    
    
    4,237
    
    
    
    38.6
    
    
    
    26,215
    
    
    
    46.0Diesel/jet
    
    
    9,098
    
    
    
    41.7
    
    
    
    24,514
    
    
    
    41.3
    
    
    
    4,575
    
    
    
    41.7
    
    
    
    24,491
    
    
    
    42.9Heavy Oils
    
    
    2,809
    
    
    
    12.9
    
    
    
    1,358
    
    
    
    2.3
    
    
    
    1,412
    
    
    
    12.9
    
    
    
    1,124
    
    
    
    2.0Other
    
    
    1,485
    
    
    
    6.8
    
    
    
    5,521
    
    
    
    9.3
    
    
    
    746
    
    
    
    6.8
    
    
    
    5,205
    
    
    
    9.1Total refinery production (5)
    
    
    21,819
    
    
    
    100.0
    
    
    
    59,355
    
    
    
    100.0
    
    
    
    10,970
    
    
    
    100.0
    
    
    
    57,035
    
    
    
    100.0Refinery utilization (6)
    
    
    
    
    
    
    25.3
    %
    
    
    
    
    
    
    65.5
    %
    
    
    
    
    
    
    12.7
    %
    
    
    
    
    
    
    61.4
    %
 
 (A)
    
    The throughput data reflects substantially one month of operations in June 2010 due to
the restart after major turnaround activity. 35




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##### Table of Contents



(1)
    
    Net sales include intersegment sales to our asphalt and retail and branded marketing segments
at prices which approximate wholesale market price. These intersegment sales are eliminated
through consolidation of our financial statements.(2)
    
    Refinery operating margin is a per barrel measurement calculated by dividing the margin
between net sales and cost of sales (exclusive of substantial unrealized hedge positions and
inventory adjustments related to acquisitions) attributable to each refinery by the refinerys
throughput volumes. Industry-wide refining results are driven and measured by the margins
between refined product prices and the prices for crude oil, which are referred to as crack
spreads. We compare our refinery operating margins to these crack spreads to assess our
operating performance relative to other participants in our industry. The refinery operating
margin for the three and six months ended June 30, 2010, excludes a benefit of $1,400 to cost
of sales for inventory adjustments related to the Bakersfield refinery acquisition. There were
unrealized hedging gains of $2,373 and $20,399 for the Krotz Springs refinery for the three
and six months ended June 30, 2009, respectively. Additionally, realized gains related to the
unwind of the heating oil crack spread hedge of $133,581 were excluded from the Krotz Springs
refinery margin for the three and six months ended June 30, 2009.(3)
    
    Refinery direct operating expense is a per barrel measurement calculated by dividing direct
operating expenses at our Big Spring, California, and Krotz Springs refineries, exclusive of
depreciation and amortization, by the applicable refinerys total throughput volumes. Direct
operating expenses related to the Bakersfield refinery of $410 have been excluded from the per
barrel measurement for the calculation for the three and six months ended June 30, 2010.(4)
    
    Total refinery throughput represents the total barrels per day of crude oil and blendstock
inputs in the refinery production process.(5)
    
    Total refinery production represents the barrels per day of various products produced from
processing crude and other refinery feedstocks through the crude units and other conversion
units at the refineries.(6)
    
    Refinery utilization represents average daily crude oil throughput divided by crude oil
capacity, excluding planned periods of downtime for maintenance and turnarounds. 36




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##### Table of Contents



ASPHALT SEGMENT
 For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(dollars in thousands, except per ton data)STATEMENTS OF OPERATIONS DATA:Net sales
    
    $
    104,964
    
    
    $
    125,480
    
    
    $
    172,105
    
    
    $
    176,240Operating costs and expenses:Cost of sales (1)
    
    
    90,264
    
    
    
    107,897
    
    
    
    161,709
    
    
    
    168,130Direct operating expenses
    
    
    11,431
    
    
    
    9,707
    
    
    
    22,523
    
    
    
    20,200Selling, general and administrative expenses
    
    
    1,091
    
    
    
    1,050
    
    
    
    2,157
    
    
    
    2,204Depreciation and amortization
    
    
    1,715
    
    
    
    1,701
    
    
    
    3,432
    
    
    
    3,399Total operating costs and expenses
    
    
    104,501
    
    
    
    120,355
    
    
    
    189,821
    
    
    
    193,933Operating income (loss)
    
    $
    463
    
    
    $
    5,125
    
    
    $
    (17,716
    )
    
    $
    (17,693
    )KEY OPERATING STATISTICS:Blended asphalt sales volume (tons in
thousands) (2)
    
    
    207
    
    
    
    299
    
    
    
    336
    
    
    
    446Non-blended asphalt sales volume (tons in
thousands) (3)
    
    
    12
    
    
    
    46
    
    
    
    34
    
    
    
    83Blended asphalt sales price per ton (2)
    
    $
    485.15
    
    
    $
    397.35
    
    
    $
    476.85
    
    
    $
    369.93Non-blended asphalt sales price per ton (3)
    
    
    378.25
    
    
    
    145.04
    
    
    
    349.50
    
    
    
    135.54Asphalt margin per ton (4)
    
    
    67.12
    
    
    
    50.97
    
    
    
    28.10
    
    
    
    15.33Capital expenditures
    
    $
    347
    
    
    $
    414
    
    
    $
    526
    
    
    $
    576
 
 (1)
    
    Cost of sales includes intersegment purchases of asphalt blends from our refining and
unbranded marketing segment at prices which approximate wholesale market prices. These
intersegment purchases are eliminated through consolidation of our financial statements.(2)
    
    Blended asphalt represents base asphalt that has been blended with other materials necessary
to sell the asphalt as a finished product.(3)
    
    Non-blended asphalt represents base material asphalt and other components that require
additional blending before being sold as a finished product.4)
    
    Asphalt margin is a per ton measurement calculated by dividing the margin between net sales and cost of sales by the total sales
volume. Asphalt margins are used in the asphalt industry to measure operating results related to asphalt sales. 37




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##### Table of Contents



RETAIL AND BRANDED MARKETING SEGMENT (A)
 For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(dollars in thousands, except per gallon data)STATEMENTS OF OPERATIONS DATA:Net sales (1)
    
    $
    253,955
    
    
    $
    206,461
    
    
    $
    479,983
    
    
    $
    373,931Operating costs and expenses:Cost of sales (2)
    
    
    219,230
    
    
    
    177,548
    
    
    
    419,532
    
    
    
    317,029Selling, general and administrative expenses
    
    
    24,029
    
    
    
    23,102
    
    
    
    48,194
    
    
    
    46,346Depreciation and amortization
    
    
    3,436
    
    
    
    3,412
    
    
    
    6,856
    
    
    
    6,780Total operating costs and expenses
    
    
    246,695
    
    
    
    204,062
    
    
    
    474,582
    
    
    
    370,155Gain on disposition of assets
    
    
    474
    
    
    
    
    
    
    
    474
    
    
    
    Operating income
    
    $
    7,734
    
    
    $
    2,399
    
    
    $
    5,875
    
    
    $
    3,776KEY OPERATING STATISTICS:Branded fuel sales (thousands of gallons) (3)
    
    
    74,852
    
    
    
    69,858
    
    
    
    145,321
    
    
    
    136,650Branded fuel margin (cents per gallon) (3)
    
    
    6.4
    ¢
    
    
    4.7
    ¢
    
    
    5.3
    ¢
    
    
    5.1
    ¢Number of stores (end of period)
    
    
    306
    
    
    
    306
    
    
    
    306
    
    
    
    306Retail fuel sales (thousands of gallons)
    
    
    35,408
    
    
    
    30,198
    
    
    
    68,122
    
    
    
    58,381Retail fuel sales (thousands of gallons per
site per month)
    
    
    39
    
    
    
    33
    
    
    
    37
    
    
    
    32Retail fuel margin (cents per gallon) (4)
    
    
    14.1
    ¢
    
    
    12.5
    ¢
    
    
    11.7
    ¢
    
    
    14.1
    ¢Retail fuel sales price (dollars per gallon) (5)
    
    $
    2.74
    
    
    $
    2.26
    
    
    $
    2.69
    
    
    $
    2.08Merchandise sales
    
    $
    73,247
    
    
    $
    70,650
    
    
    $
    136,728
    
    
    $
    133,262Merchandise sales (per site per month)
    
    $
    80
    
    
    $
    76
    
    
    $
    74
    
    
    $
    73Merchandise margin (6)
    
    
    32.6
    %
    
    
    30.2
    %
    
    
    31.4
    %
    
    
    30.7
    %Capital expenditures
    
    $
    430
    
    
    $
    894
    
    
    $
    827
    
    
    $
    1,113
 
 (1)
    
    Includes excise taxes on sales by the retail and branded marketing segment of $13,531 and
$11,770 for the three months ended June 30, 2010 and 2009, respectively, and $26,317 and
$22,814 for the six months ended June 30, 2010 and 2009, respectively. Net sales also include
royalty and related net credit card fees of $1,046 and $559 for the three months ended June
30, 2010 and 2009, respectively, and $1,819 and $792 for the six months ended June 30, 2010
and 2009, respectively.(2)
    
    Cost of sales includes intersegment purchases of motor fuels from our refining and unbranded
marketing segment at prices which approximate wholesale market prices. These intersegment
purchases are eliminated through consolidation of our financial statements.(3)
    
    Marketing sales volume represents branded fuel sales to our wholesale marketing customers
that are primarily supplied by the Big Spring refinery. The branded fuels that are not
supplied by the Big Spring refinery are obtained from third-party suppliers. The marketing
margin represents the margin between the net sales and cost of sales attributable to our
branded fuel sales volume, expressed on a cents-per-gallon basis.(4)
    
    Retail fuel margin represents the difference between motor fuel sales revenue and the net
cost of purchased motor fuel, including transportation costs and associated motor fuel taxes,
expressed on a cents-per-gallon basis. Motor fuel margins are frequently used in the retail
industry to measure operating results related to motor fuel sales.(5)
    
    Retail fuel sales price per gallon represents the average sales price for motor fuels sold
through our retail convenience stores.(6)
    
    Merchandise margin represents the difference between merchandise sales revenues and the
delivered cost of merchandise purchases, net of rebates and commissions, expressed as a
percentage of merchandise sales revenues. Merchandise margins, also referred to as in-store
margins, are commonly used in the retail convenience store industry to measure in-store, or
non-fuel, operating results. 38




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##### Table of Contents



Three Months Ended June 30, 2010 Compared to the Three Months Ended June 30, 2009
 Net Sales
 Consolidated
 Refining and Unbranded Marketing Segment
   Asphalt Segment
 Retail and Branded Marketing Segment
 Cost of Sales
 Consolidated
 39




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##### Table of Contents



Refining and Unbranded Marketing Segment.
 Asphalt Segment
 Retail and Branded Marketing Segment.
 Direct Operating Expenses
 Consolidated
 Refining and Unbranded Marketing Segment.
 Asphalt Segment.
 Selling, General and Administrative Expenses
 Consolidated
 Refining and Unbranded Marketing Segment
 Asphalt Segment
 Retail and Branded Marketing Segment
 40




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##### Table of Contents



Depreciation and Amortization
  Operating Income (Loss)
 Consolidated
 Refining and Unbranded Marketing Segment
   Asphalt Segment.
 Retail and Branded Marketing Segment.
 Interest Expense
  41




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##### Table of Contents



Income Tax Benefit
  Non-Controlling Interest In Loss Of Subsidiaries
  Net Loss Available to Common Stockholders
  Six Months Ended June 30, 2010 Compared to the Six Months Ended June 30, 2009
 Net Sales
 Consolidated
 Refining and Unbranded Marketing Segment
   42




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##### Table of Contents



Asphalt Segment
 Retail and Branded Marketing Segment
 Cost of Sales
 Consolidated
 Refining and Unbranded Marketing Segment.
 Asphalt Segment
 Retail and Branded Marketing Segment.
 Direct Operating Expenses
 Consolidated
 Refining and Unbranded Marketing Segment.
 43




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##### Table of Contents



Asphalt Segment.
 Selling, General and Administrative Expenses
 Consolidated
 Refining and Unbranded Marketing Segment
 Asphalt Segment
 Retail and Branded Marketing Segment
 Depreciation and Amortization
  Operating Income (Loss)
 Consolidated
 Refining and Unbranded Marketing Segment
  44




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##### Table of Contents



Asphalt Segment.
 Retail and Branded Marketing Segment.
 Interest Expense
  Income Tax Expense (Benefit)
  Non-Controlling Interest In Loss Of Subsidiaries
  Net Income (Loss)
  Liquidity and Capital Resources
   45




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##### Table of Contents



Cash Flows
  For the Six Months EndedJune 30,2010
    
    
    2009(dollars in thousands)Cash provided by (used in):Operating activities
    
    $
    (61,560
    )
    
    $
    296,964Investing activities
    
    
    (4,056
    )
    
    
    (44,714
    )Financing activities
    
    
    32,892
    
    
    
    (227,227
    )Net increase (decrease) in cash and cash equivalents
    
    $
    (32,724
    )
    
    $
    25,023
 Cash Flows Provided By (Used In) Operating Activities
  46




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##### Table of Contents



Cash Flows Used In Investing Activities
  Cash Flows Provided by (Used In) Financing Activities
  Indebtedness
 Alon USA Energy, Inc. Credit Facilities
 Term Loan Credit Facility
     47




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##### Table of Contents



Letters of Credit Facility.
  Alon USA LP Credit Facility
 Revolving Credit Facility.
     Paramount Petroleum Corporation Credit Facility
 Revolving Credit Facility.
    48




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##### Table of Contents



Alon Refining Krotz Springs, Inc. Credit Facilities
 Senior Secured Notes.
      Short-Term Credit Facility.
    Revolving Credit Facility.
  49




---



##### Table of Contents



Alon Bakersfield Operating, Inc. Credit Facility
 Short-Term Credit Facility.
   Retail Credit Facilities
      Other Retail Related Credit Facilities
  Capital Spending
  Turnaround and Chemical Catalyst Costs
 50




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##### Table of Contents



Contractual Obligations and Commercial Commitments
  Off-Balance Sheet Arrangements
  Critical Accounting Policies
   New Accounting Standards and Disclosures
  51




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Commodity Price Risk
     52




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##### Table of Contents



Description
    
    
    
    
    
    Wtd Avg Purchase
    
    
    Wtd Avg Sales
    
    
    
    
    
    
    Market
    
    
    Gainof Activity
    
    Contract Volume
    
    
    Price/BBL
    
    
    Price/BBL
    
    
    Contract Value
    
    
    Value
    
    
    (Loss)(in thousands)Forwards-long (Diesel)
    
    
    10,908
    
    
    $
    85.58
    
    
    $
    
    
    
    $
    934
    
   
    $
    880
    
    
    $
    (54
    )Forwards-short (Diesel)
    
    
    (260,943
    )
    
    
    
    
    
    
    85.45
    
    
    
    (22,297
    )
    
    
    (21,362
    )
    
    
    935Forwards-short (Crude)
    
    
    (84,000
    )
    
    
    
    
    
    
    76.92
    
    
    
    (6,461
    )
    
    
    (6,353
    )
    
    
    108Description
    
    
    
    
    
    Wtd Avg Contract
    
    
    Wtd Avg Market
    
    
    
    
    
    
    Market
    
    
    Gainof Activity
    
    Contract Volume
    
    
    Price/Oz
    
    
    Price/Oz
    
    
    Contract Value
    
    
    Value
    
    
    (Loss)(in thousands)Futures-short (Platinum)
    
    
    (2,846
    )
    
    $
    1,480.00
    
    
    $
    1,542.30
    
    
    $
    (4,212
    )
    
    $
    (4,389
    )
    
    $
    (177
    )Futures-short (Palladium)
    
    
    (2,534
    )
    
    
    436.00
    
    
    
    445.85
    
    
    
    (1,105
    )
    
    
    (1,130
    )
    
    
    (25
    )
 Description
    
    
    
    
    
    Wtd Avg Contract
    
    
    Wtd Avg Market
    
    
    
    
    
    
    Market
    
    
    Gainof Activity
    
    Contract Volume
    
    
    Spread
    
    
    Spread
    
    
    Contract Value
    
    
    Value
    
    
    (Loss)(in thousands)Futures-crack spread
(Heating oil)
    
    
    292,400
    
    
    $
    11.84
    
    
    $
    10.46
    
    
    $
    3,463
    
    
    $
    3,059
    
    
    $
    (404
    )Futures-call options (Heating oil)
    
    
    (3,514,500
    )
    
    
    13.24
    
    
    
    13.26
    
    
    
    (46,535
    )
    
    
    (46,595
    )
    
    
    (60
    )
 Interest Rate Risk
  
 ITEM 4.
    
    CONTROLS AND PROCEDURES
 (1) Evaluation of disclosure controls and procedures.
  53




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##### Table of Contents



(2) Changes in internal control over financial reporting.
  54




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1A.
    
    RISK FACTORS
 WE MAY INCUR SIGNIFICANT COSTS TO COMPLY WITH NEW OR CHANGING ENVIRONMENTAL LAWS AND
REGULATIONS.
     
 ITEM 6.
    
    EXHIBITS
 ExhibitNumber
    
    Description of Exhibit3.1
    
    Amended and Restated Certificate of Incorporation of Alon USA Energy, Inc. (incorporated by
reference to Exhibit 3.1 to Form S-1, 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, 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,
filed by the Company on June 17, 2005, SEC File No. 333-124797).
 55




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit4.2
    
    Indenture, dated as of October 22, 2009, by and among Alon Refining Krotz Springs, Inc. and
Wilmington Trust FSB, as Trustee (incorporated by reference to Exhibit 4.1 to Form 8-K,
filed by the Company on October 23, 2009, SEC File No. 001-32567).10.1
    
    Seventh Amendment to Amended Revolving Credit Agreement, dated as of June 1, 2010, by and
among Alon USA, LP, Israel Discount Bank of New York, Bank Leumi USA and certain other
guarantor companies and financial institutions from time to time named therein.10.2
    
    Eighth Amendment to Amended Revolving Credit Agreement, dated as of June 16, 2010, by and
among Alon USA, LP, Israel Discount Bank of New York, Bank Leumi USA and certain other
guarantor companies and financial institutions from time to time named therein.10.3
    
    Amendment No. 1 to Credit Agreement, dated May 28, 2010, among Alon Refining Krotz Springs,
Inc., each other party joined as a borrower thereunder from time to time, the Lenders party
thereto, and Bank Hapoalim B.M., as Administrative Agent.10.4
    
    Amendment No. 2 to Credit Agreement, dated June 15, 2010, among Alon Refining Krotz Springs,
Inc., each other party joined as a borrower thereunder from time to time, the Lenders party
thereto, and Bank Hapoalim B.M., as Administrative Agent.10.5
    
    Credit Agreement, dated May 28, 2010, by and between Alon Refining Krotz Springs, Inc. and
Goldman Sachs Bank USA, as Issuing Bank.10.6
    
    Amended and Restated Supply and Offtake Agreement, dated May 26, 2010 by and between Alon
Refining Krotz Springs, Inc. and J. Aron & Company.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
    
    Certifications 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.
 56




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##### Table of Contents



SIGNATURES
  Alon USA Energy, Inc.Date: August 6, 2010
    By:
    /s/ David WiessmanDavid WiessmanExecutive ChairmanDate: August 6, 2010
    By:
    /s/ Jeff D. MorrisJeff D. MorrisChief Executive Officer Date: August 6, 2010
    By:
    /s/ Shai EvenShai EvenChief Financial Officer 57




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##### Table of Contents



EXHIBITS
 ExhibitNumber
    
    Description of Exhibit3.1
    
    Amended and Restated Certificate of Incorporation of Alon USA Energy, Inc. (incorporated by
reference to Exhibit 3.1 to Form S-1, 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, 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,
filed by the Company on June 17, 2005, SEC File No. 333-124797).4.2
    
    Indenture, dated as of October 22, 2009, by and among Alon Refining Krotz Springs, Inc. and
Wilmington Trust FSB, as Trustee (incorporated by reference to Exhibit 4.1 to Form 8-K,
filed by the Company on October 23, 2009, SEC File No. 001-32567).10.1
    
    Seventh Amendment to Amended Revolving Credit Agreement, dated as of June 1, 2010, by and
among Alon USA, LP, Israel Discount Bank of New York, Bank Leumi USA and certain other
guarantor companies and financial institutions from time to time named therein.10.2
    
    Eighth Amendment to Amended Revolving Credit Agreement, dated as of June 16, 2010, by and
among Alon USA, LP, Israel Discount Bank of New York, Bank Leumi USA and certain other
guarantor companies and financial institutions from time to time named therein.10.3
    
    Amendment No. 1 to Credit Agreement, dated May 28, 2010, among Alon Refining Krotz Springs,
Inc., each other party joined as a borrower thereunder from time to time, the Lenders party
thereto, and Bank Hapoalim B.M., as Administrative Agent.10.4
    
    Amendment No. 2 to Credit Agreement, dated June 15, 2010, among Alon Refining Krotz Springs,
Inc., each other party joined as a borrower thereunder from time to time, the Lenders party
thereto, and Bank Hapoalim B.M., as Administrative Agent.10.5
    
    Credit Agreement, dated May 28, 2010, by and between Alon Refining Krotz Springs, Inc. and
Goldman Sachs Bank USA, as Issuing Bank.10.6
    
    Amended and Restated Supply and Offtake Agreement, dated May 26, 2010 by and between Alon
Refining Krotz Springs, Inc. and J. Aron & Company.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
    
    Certifications 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.
 58