##### 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, 2009
 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
    
    74-2966572(State or other jurisdiction of 
incorporation or organization)
    
    (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
(Do not check if a smaller reporting company)
    
    Smaller reporting company
o
 o þ




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##### 



PART I. FINANCIAL INFORMATIONITEM 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
    
    
    51ITEM 4. CONTROLS AND PROCEDURES
    
    
    52PART II. OTHER INFORMATIONITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    53ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    53ITEM 6. EXHIBITS
    
    
    54SIGNATURES
    
    
    55EXHIBITSEX-10.1EX-10.3EX-31.1EX-31.2EX-32.1




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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 31,2009
    
    
    2008(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    43,477
    
    
    $
    18,454Accounts and other receivables, net
    
    
    199,452
    
    
    
    204,576Income tax receivable
    
    
    
    
    
    
    116,564Inventories
    
    
    317,589
    
    
    
    232,320Current portion of heating oil crack spread hedge
    
    
    
    
    
    
    75,405Prepaid expenses and other current assets
    
    
    11,604
    
    
    
    6,353Total current assets
    
    
    572,122
    
    
    
    653,672Equity method investments
    
    
    44,540
    
    
    
    37,661Property, plant, and equipment, net
    
    
    1,474,759
    
    
    
    1,448,959Goodwill
    
    
    105,943
    
    
    
    105,943Non-current portion of heating oil crack spread hedge
    
    
    
    
    
    
    42,080Other assets
    
    
    75,175
    
    
    
    125,118Total assets
    
    $
    2,272,539
    
    
    $
    2,413,433LIABILITIES AND EQUITYCurrent liabilities:Accounts payable
    
    $
    366,281
    
    
    $
    233,004Accrued liabilities
    
    
    137,937
    
    
    
    111,317Current portion of long-term debt
    
    
    15,089
    
    
    
    28,397Deferred income tax liability
    
    
    
    
    
    
    30,570Total current liabilities
    
    
    519,307
    
    
    
    403,288Other non-current liabilities
    
    
    106,532
    
    
    
    104,190Long-term debt
    
    
    819,266
    
    
    
    1,075,172Deferred income tax liability
    
    
    287,412
    
    
    
    293,916Total liabilities
    
    
    1,732,517
    
    
    
    1,876,566Commitments and contingencies (Note 17)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; 46,819,862 and 46,814,021 shares issued and
outstanding at June 30, 2009 and December 31, 2008,
respectively
    
    
    468
    
    
    
    468Additional paid-in capital
    
    
    183,913
    
    
    
    183,642Accumulated other comprehensive loss, net of income tax
    
    
    (36,297
    )
    
    
    (37,354
    )Retained earnings
    
    
    286,160
    
    
    
    287,895Total stockholders equity
    
    
    434,244
    
    
    
    434,651Non-controlling interest in subsidiaries
    
    
    17,178
    
    
    
    17,916Preferred stock of subsidiary including accumulated dividends
    
    
    88,600
    
    
    
    84,300Total equity
    
    
    540,022
    
    
    
    536,867Total liabilities and equity
    
    $
    2,272,539
    
    
    $
    2,413,433
  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 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net sales (1)
    
    $
    1,106,398
    
    
    $
    1,244,671
    
    
    $
    1,828,578
    
    
    $
    2,265,434Operating costs and expenses:Cost of sales
    
    
    988,318
    
    
    
    1,252,392
    
    
    
    1,528,048
    
    
    
    2,221,389Direct operating expenses
    
    
    71,345
    
    
    
    40,546
    
    
    
    140,209
    
    
    
    82,835Selling, general and administrative expenses
    
    
    31,581
    
    
    
    27,802
    
    
    
    63,496
    
    
    
    56,656Net costs associated with fire
    
    
    
    
    
    
    9,374
    
    
    
    
    
    
    
    25,836Depreciation and amortization
    
    
    23,561
    
    
    
    13,507
    
    
    
    45,651
    
    
    
    27,252Total operating costs and expenses
    
    
    1,114,805
    
    
    
    1,343,621
    
    
    
    1,777,404
    
    
    
    2,413,968Gain on involuntary conversion of assets
    
    
    
    
    
    
    96,588
    
    
    
    
    
    
    
    96,588Gain (loss) on disposition of assets
    
    
    (1,600
    )
    
    
    42,935
    
    
    
    (1,600
    )
    
    
    45,246Operating income (loss)
    
    
    (10,007
    )
    
    
    40,573
    
    
    
    49,574
    
    
    
    (6,700
    )Interest expense
    
    
    (21,023
    )
    
    
    (10,736
    )
    
    
    (49,279
    )
    
    
    (21,392
    )Equity earnings of investees
    
    
    8,376
    
    
    
    1,292
    
    
    
    8,373
    
    
    
    1,608Other income, net
    
    
    191
    
    
    
    373
    
    
    
    448
    
    
    
    1,118Income (loss) before income tax expense (benefit),
non-controlling interest in income (loss) of subsidiaries
and accumulated dividends on preferred stock of subsidiary
    
    
    (22,463
    )
    
    
    31,502
    
    
    
    9,116
    
    
    
    (25,366
    )Income tax expense (benefit)
    
    
    (7,549
    )
    
    
    11,860
    
    
    
    3,446
    
    
    
    (9,233
    )Income (loss) before non-controlling interest in income
(loss) of subsidiaries and accumulated dividends on
preferred stock of subsidiary
    
    
    (14,914
    )
    
    
    19,642
    
    
    
    5,670
    
    
    
    (16,133
    )Non-controlling interest in income (loss) of subsidiaries
    
    
    (1,724
    )
    
    
    1,415
    
    
    
    (641
    )
    
    
    (782
    )Accumulated dividends on preferred stock of subsidiary
    
    
    2,150
    
    
    
    
    
    
    
    4,300
    
    
    
    Net income (loss) available to common stockholders
    
    $
    (15,340
    )
    
    $
    18,227
    
    
    $
    2,011
    
    
    $
    (15,351
    )Earnings (loss) per share, basic
    
    $
    (0.33
    )
    
    $
    0.39
    
    
    $
    0.04
    
    
    $
    (0.33
    )Weighted average shares outstanding, basic (in thousands)
    
    
    46,809
    
    
    
    46,782
    
    
    
    46,807
    
    
    
    46,782Earnings (loss) per share, diluted
    
    $
    (0.33
    )
    
    $
    0.38
    
    
    $
    0.04
    
    
    $
    (0.33
    )Weighted average shares outstanding, diluted (in thousands)
    
    
    46,809
    
    
    
    46,802
    
    
    
    46,810
    
    
    
    46,782Cash dividends per share
    
    $
    0.04
    
    
    $
    0.04
    
    
    $
    0.08
    
    
    $
    0.08
 
 (1)
    
    Includes excise taxes on sales by the retail segment of $11,770 and $9,319 for the three
months and $22,814 and $18,973 for the six months ended June 30, 2009 and 2008, 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 30,2009
    
    
    2008Cash flows from operating activities:Net income (loss)
    
    $
    2,011
    
    
    $
    (15,351
    )Adjustments to reconcile net income (loss) to cash provided by (used in)
operating activities:Depreciation and amortization
    
    
    45,651
    
    
    
    27,252Stock compensation
    
    
    381
    
    
    
    222Deferred income tax expense
    
    
    (35,977
    )
    
    
    30,605Non-controlling interest in income (loss) of subsidiaries
    
    
    (641
    )
    
    
    (782
    )Equity earnings of investees (net of dividends)
    
    
    (6,879
    )
    
    
    (239
    )Accumulated dividends on preferred stock of subsidiary
    
    
    4,300
    
    
    
    Gain on involuntary conversion of assets
    
    
    
    
    
    
    (96,588
    )(Gain) loss on disposition of assets
    
    
    1,600
    
    
    
    (45,246
    )Changes in operating assets and liabilities:Accounts and other receivables, net
    
    
    (24,001
    )
    
    
    (74,244
    )Income tax receivable
    
    
    112,952
    
    
    
    Inventories
    
    
    (85,269
    )
    
    
    9,791Heating oil crack spread hedge
    
    
    117,485
    
    
    
    Prepaid expenses and other current assets
    
    
    (410
    )
    
    
    (920
    )Other assets
    
    
    8,318
    
    
    
    549Accounts payable
    
    
    172,558
    
    
    
    136,282Accrued liabilities
    
    
    (10,123
    )
    
    
    (9,337
    )Other non-current liabilities
    
    
    (4,992
    )
    
    
    (4,070
    )Net cash provided by (used in) operating activities
    
    
    296,964
    
    
    
    (42,076
    )Cash flows from investing activities:Capital expenditures
    
    
    (29,244
    )
    
    
    (19,524
    )Capital expenditures to rebuild the Big Spring refinery
    
    
    (39,281
    )
    
    
    (160,341
    )Capital expenditures for turnarounds and catalysts
    
    
    (10,314
    )
    
    
    (2,069
    )Proceeds from insurance to rebuild Big Spring refinery
    
    
    34,125
    
    
    
    121,918Escrow deposit and costs relating to the Krotz Springs refinery acquisition
    
    
    
    
    
    
    (18,283
    )Sale of short-term investments, net
    
    
    
    
    
    
    27,296Net cash used in investing activities
    
    
    (44,714
    )
    
    
    (51,003
    )Cash flows from financing activities:Dividends paid to stockholders
    
    
    (3,746
    )
    
    
    (3,745
    )Dividends paid to non-controlling interest stockholders
    
    
    (288
    )
    
    
    (242
    )Deferred debt issuance costs
    
    
    (3,979
    )
    
    
    Revolving credit facilities, net
    
    
    (126,506
    )
    
    
    51,000Payments on long-term debt
    
    
    (92,708
    )
    
    
    (8,653
    )Net cash (used in) provided by financing activities
    
    
    (227,227
    )
    
    
    38,360Net increase (decrease) in cash and cash equivalents
    
    
    25,023
    
    
    
    (54,719
    )Cash and cash equivalents, beginning of period
    
    
    18,454
    
    
    
    68,615Cash and cash equivalents, end of period
    
    $
    43,477
    
    
    $
    13,896Supplemental cash flow information:Cash paid for interest
    
    $
    48,477
    
    
    $
    19,674Cash paid (net of refunds received) for income tax
    
    $
    (106,511
    )
    
    $
    22,229Non-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
 The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles a
replacement of FASB Statement No. 162
 Subsequent Events
 Employers Disclosures
about Postretirement Benefit Plans Employers Disclosures about Pensions and Other Postretirement Benefits
 4




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ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands except as noted)
  Equity Method
Investment Accounting Considerations
 Accounting by Lessees
for Maintenance Deposits
 Determination of the Useful Life
of Intangible Assets Goodwill and Other
Intangible Assets.
 Disclosure about Derivative Instruments and
Hedging Activities
 Fair Value
Measurements
 Partial Deferral of the
Effective Date of Statement 157
 Non-controlling Interests in Consolidated
Financial Statements, an Amendment of ARB 51
 5




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ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands except as noted)
 December 31,
    
    
    
    
    
    
    December 31,2008
    
    
    Adjustments
    
    
    2008(as previouslyreported)
    
    
    
    
    
    
    (recast)Total stockholders equity
    
    $
    431,919
    
    
    $
    2,732
    
    
    $
    434,651Non-controlling interest in subsidiaries (1)
    
    
    
    
    
    
    17,916
    
    
    
    17,916Preferred stock of subsidiary including accumulated dividends (1)
    
    
    
    
    
    
    84,300
    
    
    
    84,300Total equity
    
    $
    431,919
    
    
    $
    104,948
    
    
    $
    536,867
 
 (1)
    
    Previously reported outside of equity.  Business Combinations
 d) Reclassifications
  (2) Big Spring Refinery Fire
       6




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ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands except as noted)
 (3) Acquisitions and Deferred Gain Recognition
 Krotz Springs Refinery Acquisition
      Cash paid
    
    $
    474,494Transaction costs
    
    
    6,517Total purchase price
    
    $
    481,011
  Current assets
    
    $
    145,859Property, plant and equipment
    
    
    376,702Current liabilities
    
    
    (29,309
    )Other non-current liabilities
    
    
    (12,241
    )Total purchase price
    
    $
    481,011
   7




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands except as noted)
  Unaudited Pro Forma Financial Information
  
    
    The acquisition of the Krotz Springs refining business occurred on January 1, 2008;
    
    $302,000 of term debt and $141,494 of borrowings under the revolver was incurred on
January 1, 2008 to fund the acquisition and buy initial inventories; and
    
    Depreciation expense was higher beginning January 1, 2008 based upon the revaluation of
estimated asset values as of that date.
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(unaudited)
    
    
    (pro forma)
    
    
    (unaudited)
    
    
    (pro forma)Net sales
    
    $
    1,106,398
    
    
    $
    2,152,278
    
    
    $
    1,828,578
    
    
    $
    3,805,063Operating income (loss)
    
    
    (10,007
    )
    
    
    8,821
    
    
    
    49,574
    
    
    
    (63,081
    )Net income (loss)
    
    
    (15,340
    )
    
    
    (10,190
    )
    
    
    2,011
    
    
    
    (67,207
    )Earnings (loss) per share, basic and diluted
    
    $
    (0.33
    )
    
    $
    (0.22
    )
    
    $
    0.04
    
    
    $
    (1.44
    )
 Deferred Gain Recognition
  (4) Segment Data
  (a) Refining and Unbranded Marketing Segment
  (b) Asphalt Segment
  8




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ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands except as noted)
  (c) Retail and Branded Marketing Segment
  (d) Corporate
   Refining and
    
    
    
    
    
    Retail andUnbranded
    
    
    
    
    
    Branded
    
    
    
    
    
    ConsolidatedMarketing
    
    Asphalt
    
    Marketing
    
    Corporate
    
    TotalThree Months ended June 30, 2009Net sales to external customers
    
    $
    774,457
    
    
    $
    125,480
    
    
    $
    206,461
    
    
    $
    
    
    
    $
    1,106,398Intersegment sales/purchases
    
    
    123,062
    
    
    
    (70,348
    )
    
    
    (52,714
    )
    
    
    
    
    
    
    Depreciation and amortization
    
    
    19,459
    
    
    
    542
    
    
    
    3,412
    
    
    
    148
    
    
    
    23,561Operating income (loss)
    
    
    (18,352
    )
    
    
    6,284
    
    
    
    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
 Refining and
    
    
    
    
    
    Retail andUnbranded
    
    
    
    
    
    Branded
    
    
    
    
    
    ConsolidatedMarketing
    
    Asphalt
    
    Marketing
    
    Corporate
    
    TotalThree Months ended June 30, 2008Net sales to external customers
    
    $
    690,122
    
    
    $
    177,277
    
    
    $
    377,272
    
    
    $
    
    
    
    $
    1,244,671Intersegment sales/purchases
    
    
    179,437
    
    
    
    (99,773
    )
    
    
    (79,664
    )
    
    
    
    
    
    
    Depreciation and amortization
    
    
    9,210
    
    
    
    536
    
    
    
    3,538
    
    
    
    223
    
    
    
    13,507Operating income (loss)
    
    
    38,462
    
    
    
    2,653
    
    
    
    (168
    )
    
    
    (374
    )
    
    
    40,573Total assets
    
    
    1,218,458
    
    
    
    267,011
    
    
    
    241,353
    
    
    
    10,312
    
    
    
    1,737,134Turnaround, chemical catalyst,
capital expenditures and
capital expenditures to rebuild
the Big Spring refinery
    
    
    170,722
    
    
    
    62
    
    
    
    40
    
    
    
    319
    
    
    
    171,143
 9




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands except as noted)
 Refining and
    
    
    
    
    
    Retail andUnbranded
    
    
    
    
    
    Branded
    
    
    
    
    
    ConsolidatedMarketing
    
    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
    
    
    206,040
    
    
    
    (114,876
    )
    
    
    (91,164
    )
    
    
    
    
    
    
    Depreciation and amortization
    
    
    37,496
    
    
    
    1,080
    
    
    
    6,780
    
    
    
    295
    
    
    
    45,651Operating income (loss)
    
    
    61,847
    
    
    
    (15,374
    )
    
    
    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
 Refining and
    
    
    
    
    
    Retail andUnbranded
    
    
    
    
    
    Branded
    
    
    
    
    
    ConsolidatedMarketing
    
    Asphalt
    
    Marketing
    
    Corporate
    
    TotalSix Months ended June 30, 2008Net sales to external customers
    
    $
    1,297,691
    
    
    $
    281,217
    
    
    $
    686,526
    
    
    $
    
    
    
    $
    2,265,434Intersegment sales/purchases
    
    
    343,907
    
    
    
    (201,692
    )
    
    
    (142,215
    )
    
    
    
    
    
    
    Depreciation and amortization
    
    
    18,840
    
    
    
    1,068
    
    
    
    6,898
    
    
    
    446
    
    
    
    27,252Operating income (loss)
    
    
    (4,099
    )
    
    
    724
    
    
    
    (2,577
    )
    
    
    (748
    )
    
    
    (6,700
    )Total assets
    
    
    1,218,458
    
    
    
    267,011
    
    
    
    241,353
    
    
    
    10,312
    
    
    
    1,737,134Turnaround, chemical catalyst,
capital expenditures and
capital expenditures to
rebuild the Big Spring
refinery
    
    
    180,034
    
    
    
    275
    
    
    
    1,167
    
    
    
    458
    
    
    
    181,934
   (5) Cash and Cash Equivalents
  (6) Fair Value
   10




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ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands except as noted)
  Quoted PricesinActive Markets
    
    Significantfor Identical
    
    Other
    
    SignificantAssets or
    
    Observable
    
    UnobservableLiabilities
    
    Inputs
    
    Inputs
    
    Consolidated(Level 1)
    
    (Level 2)
    
    (Level 3)
    
    TotalAs of June 30, 2009Assets:Futures and forwards
    
    $
    1,077
    
    
    $
    
    
    
    $
    
    
    
    $
    1,077Liabilities:Commodity swaps
    
    
    
    
    
    
    15,157
    
    
    
    
    
    
    
    15,157Interest rate swaps
    
    
    
    
    
    
    20,461
    
    
    
    
    
    
    
    20,461As of December 31, 2008Assets:Commodity swaps
    
    $
    
    
    
    $
    117,485
    
    
    $
    
    
    
    $
    117,485Liabilities:Futures and forwards
    
    
    1,197
    
    
    
    
    
    
    
    
    
    
    
    1,197Commodity swaps
    
    
    
    
    
    
    25,473
    
    
    
    
    
    
    
    25,473Interest rate swaps
    
    
    
    
    
    
    26,100
    
    
    
    
    
    
    
    26,100
 (7) Derivative Financial Instruments
 Commodity Derivatives  Mark to Market
     11




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands except as noted)
  Cash Flow Hedges
  Interest Rate Derivatives.
   Commodity Derivatives.
   June 30,Counterparty Credit Quality (1)
    
    2009AAA
    
    $
    (9,094
    )AA
    
    
    (26,926
    )A
    
    
    1,479Lower than A
    
    
    Total
    
    $
    (34,541
    )
 
 (1)
    
    As determined by nationally recognized statistical ratings organizations. 12




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands except as noted)
  As of June 30, 2009Asset Derivatives
    
    
    Liability DerivativesBalance Sheet
    
    
    Fair
    
    
    Balance Sheet
    
    
    FairLocation
    
    
    Value
    
    
    Location
    
    
    ValueDerivatives not designated as hedging instruments under FAS 133:Commodity contracts (futures, forwards and SPR swaps)
    
    Accounts receivable
    
    $
    (143
    )
    
    Accrued liabilities
    
    $
    13,937Total derivatives not designated as hedging instruments under FAS 133
    
    
    
    
    
    $
    (143
    )
    
    
    
    
    
    $
    13,937Derivatives designated as hedging instruments under FAS 133:Interest rate swaps
    
    
    
    
    
    $
    
    
    
    Other non-current liabilities
    
    $
    20,461Total derivatives designated as hedging instruments under FAS 133
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,461Total derivatives
    
    
    
    
    
    $
    (143
    )
    
    
    
    
    
    $
    34,398
  Gain (Loss) Reclassifiedfrom Accumulated OCI intoGain (Loss) Reclassified from
    
    
    Income (Ineffective PortionGain (Loss)
    
    
    Accumulated OCI into Income
    
    
    and Amount Excluded fromCash Flow Hedging
    
    Recognized in
    
    
    (Effective Portion)
    
    
    Effectiveness Testing)Relationships
    
    OCI
    
    
    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
    )
    
    
    
    
    
    $
    
 13




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ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands except as noted)
 Gain (Loss) Recognized in IncomeLocation
    
    
    AmountDerivatives not designated as hedging instruments
under FAS 133:For the Three Months Ended June 30, 2009Commodity contracts (futures & forwards)
    
    Cost of sales
    
    $
    (14,006
    )Commodity contracts (heating oil swaps)
    
    Cost of sales
    
    
    471Commodity contracts (SPR swaps)
    
    Cost of sales
    
    
    1,973Total derivatives
    
    
    
    
    
    $
    (11,562
    )For the Six Months Ended June 30, 2009Commodity contracts (futures & forwards)
    
    Cost of sales
    
    $
    (14,490
    )Commodity contracts (heating oil swaps)
    
    Cost of sales
    
    
    41,182Commodity contracts (SPR swaps)
    
    Cost of sales
    
    
    1,074Total derivatives
    
    
    
    
    
    $
    27,766
 (8) Inventories
   June 30,
    
    
    December 31,2009
    
    
    2008Crude oil, refined products, asphalt and blendstocks
    
    $
    275,717
    
    
    $
    192,997Materials and supplies
    
    
    17,783
    
    
    
    16,456Store merchandise
    
    
    19,175
    
    
    
    19,875Store fuel
    
    
    4,914
    
    
    
    2,992Total inventories
    
    $
    317,589
    
    
    $
    232,320
   (9) Property, Plant and Equipment, net
  June 30,
    
    
    December 31,2009
    
    
    2008Refining facilities
    
    $
    1,495,169
    
    
    $
    1,430,896Pipelines and terminals
    
    
    39,181
    
    
    
    39,161Retail
    
    
    135,441
    
    
    
    134,263Other
    
    
    14,276
    
    
    
    13,052Property, plant and equipment, gross
    
    
    1,684,067
    
    
    
    1,617,372Less accumulated depreciation
    
    
    (209,308
    )
    
    
    (168,413
    )Property, plant and equipment, net
    
    $
    1,474,759
    
    
    $
    1,448,959
 (10) Additional Financial Information
  14




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ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands except as noted)
 (a) Other Assets
 June 30,
    
    
    December 31,2009
    
    
    2008Deferred turnaround and chemical catalyst cost
    
    $
    18,082
    
    
    $
    11,684Environmental receivables
    
    
    3,048
    
    
    
    8,524Deferred debt issuance costs
    
    
    36,060
    
    
    
    35,648Intangible assets
    
    
    6,703
    
    
    
    7,055Deposit for hedge related activities for Krotz Springs refinery acquisition
    
    
    
    
    
    
    50,000Other
    
    
    11,282
    
    
    
    12,207Total other assets
    
    $
    75,175
    
    
    $
    125,118
 (b) Accrued Liabilities and Other Non-Current Liabilities
 June 30,
    
    
    December 31,2009
    
    
    2008Accrued Liabilities:Taxes other than income taxes, primarily excise taxes
    
    $
    20,868
    
    
    $
    27,789Employee costs
    
    
    5,922
    
    
    
    4,884Commodity swaps
    
    
    8,886
    
    
    
    26,670Contingent liability
    
    
    24,000
    
    
    
    Other
    
    
    78,261
    
    
    
    51,974Total accrued liabilities
    
    $
    137,937
    
    
    $
    111,317Other Non-Current Liabilities:Pension and other postemployment benefit liabilities, net (Note 11)
    
    $
    37,030
    
    
    $
    35,989Environmental accrual
    
    
    28,956
    
    
    
    33,181Interest rate swap valuations
    
    
    20,461
    
    
    
    26,100Contingent liability
    
    
    11,000
    
    
    
    Other
    
    
    9,085
    
    
    
    8,920Total other non-current liabilities
    
    $
    106,532
    
    
    $
    104,190
 (c) Comprehensive Income
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Income (loss) before non-controlling interest in income
(loss) of subsidiaries and accumulated dividends on
preferred stock of subsidiary
    
    $
    (14,914
    )
    
    $
    19,642
    
    
    $
    5,670
    
    
    $
    (16,133
    )Other comprehensive gain (loss), net of tax:Unrealized gain (loss) on cash flow hedges, net of tax
    
    
    1,408
    
    
    
    (26,242
    )
    
    
    1,136
    
    
    
    (36,577
    )Total other comprehensive income (loss), net of tax
    
    
    1,408
    
    
    
    (26,242
    )
    
    
    1,136
    
    
    
    (36,577
    )Comprehensive income (loss)
    
    
    (13,506
    )
    
    
    (6,600
    )
    
    
    6,806
    
    
    
    (52,710
    )Comprehensive income attributable to non-controlling
interest (including accumulated dividends on
preferred shares of subsidiary)
    
    
    527
    
    
    
    (175
    )
    
    
    3,740
    
    
    
    3,214Comprehensive income attributable to
common stockholders
    
    $
    (14,033
    )
    
    $
    (6,425
    )
    
    $
    3,066
    
    
    $
    (55,924
    )
  June 30,
    
    
    December 31,2009
    
    
    2008Unrealized losses on cash flow hedges, net of tax
    
    $
    (16,948
    )
    
    $
    (18,005
    )Pension and post-employment benefits, net of tax
    
    
    (19,349
    )
    
    
    (19,349
    )Accumulated other comprehensive loss, net of tax
    
    $
    (36,297
    )
    
    $
    (37,354
    )
 15




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands except as noted)
 (11) Employee and Postretirement Benefits
   For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Components of net periodic benefit cost:Service cost
    
    $
    836
    
    
    $
    457
    
    
    $
    1,673
    
    
    $
    914Interest cost
    
    
    840
    
    
    
    748
    
    
    
    1,681
    
    
    
    1,496Expected return on plan assets
    
    
    (839
    )
    
    
    (822
    )
    
    
    (1,679
    )
    
    
    (1,644
    )Amortization of net loss
    
    
    263
    
    
    
    (147
    )
    
    
    526
    
    
    
    (94
    )Net periodic benefit cost
    
    $
    1,100
    
    
    $
    236
    
    
    $
    2,201
    
    
    $
    672
 (12) Long-Term Debt
  June 30,
    
    
    December 31,2009
    
    
    2008Term loan credit facilities
    
    $
    600,319
    
    
    $
    739,810Revolving credit facilities
    
    
    150,312
    
    
    
    276,818Retail credit facilities
    
    
    83,724
    
    
    
    86,941Total debt
    
    
    834,355
    
    
    
    1,103,569Less current portion
    
    
    (15,089
    )
    
    
    (28,397
    )Total long-term debt
    
    $
    819,266
    
    
    $
    1,075,172
 (a) Alon USA Energy, Inc. Credit Facilities
 Term Loan Credit Facility
   Letters of Credit Facility.
 16




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands except as noted)
  (b) Alon USA, LP Credit Facilities
 Revolving Credit Facility.
    (c) Paramount Petroleum Corporation Credit Facility
 Revolving Credit Facility.
  (d) Alon Refining Krotz Springs, Inc. Credit Facilities
 Term Loan Credit Facility
 17




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands except as noted)
      Revolving Credit Facility
       18




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands except as noted)
 (d) Retail Credit Facilities
     (e) Other Retail Related Credit Facilities
   (13) Stock-Based Compensation
  (a) 2005 Incentive Compensation Plan (share value in dollars)
  Restricted Stock.
  19




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands except as noted)
   Weighted AverageNonvested Shares
    
    Shares
    
    
    Grant Date Fair ValuesNonvested at January 1, 2008
    
    
    26,918
    
    
    $
    21.74Granted
    
    
    5,577
    
    
    
    13.45Vested
    
    
    (24,833
    )
    
    
    20.54Forfeited
    
    
    
    
    
    
    Nonvested at December 31, 2008
    
    
    7,662
    
    
    $
    19.58Granted
    
    
    5,841
    
    
    
    12.84Vested
    
    
    (3,277
    )
    
    
    22.89Forfeited
    
    
    
    
    
    
    Nonvested at June 30, 2009
    
    
    10,226
    
    
    $
    14.67
  Stock Appreciation Rights
   (b) 2000 Incentive Stock Compensation Plan
  20




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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, 2008
    
    
    5,216
    
    
    $
    100
    
    
    
    1,959
    
    
    $
    100Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (2,423
    )
    
    
    100
    
    
    
    (910
    )
    
    
    100Forfeited and expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at December 31, 2008
    
    
    2,793
    
    
    $
    100
    
    
    
    1,049
    
    
    $
    100Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited and expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at June 30, 2009
    
    
    2,793
    
    
    $
    100
    
    
    
    1,049
    
    
    $
    100
  (14) Stockholders Equity (per share in dollars)
 Common Stock Dividends
  (15) Earnings Per Share (per share in dollars)
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income (loss)
    
    $
    (15,340
    )
    
    $
    18,227
    
    
    $
    2,011
    
    
    $
    (15,351
    )Average number of shares of common stock outstanding
    
    
    46,809
    
    
    
    46,782
    
    
    
    46,807
    
    
    
    46,782Dilutive restricted shares, SARs and conversion of
preferred shares
    
    
    
    
    
    
    20
    
    
    
    3
    
    
    
    Average number of shares of common stock
outstanding assuming dilution
    
    
    46,809
    
    
    
    46,802
    
    
    
    46,810
    
    
    
    46,782Earnings (loss) per share  basic
    
    $
    (0.33
    )
    
    $
    0.39
    
    
    $
    0.04
    
    
    $
    (0.33
    )Earnings (loss) per share  diluted *
    
    $
    (0.33
    )
    
    $
    0.38
    
    
    $
    0.04
    
    
    $
    (0.33
    )
 
 *
    
    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 months ended June 30, 2009
was anti-dilutive and therefore excluded from the calculation, but for the three months ended
June 30, 2008 the adjustment was $675. The income adjustment effect for the six months ended
June 30, 2009 and 2008 is anti-dilutive and therefore excluded from the calculation.
Additionally, net income for the three and six months ended June 30, 2009 was not adjusted for
preferred stock dividends that would no longer be paid if the preferred stock was converted to
shares of common stock because their effects were anti-dilutive. 21




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands except as noted)
 (16) Related Party Transactions
 Sale of Preferred Shares
      22




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ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands except as noted)
 (17) Commitments and Contingencies
 (a) Commitments
  Offtake Agreement with Valero
  (b) Contingencies
  SemGroup, LP Bankruptcy
   (c) Environmental
   23




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands except as noted)
     (18) 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, 2008. 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;
    
    our planned project of the design and construction of a hydrocracker unit at our
California refineries may not be completed within the expected time frame or within the
budgeted costs for such project due to factors outside of our control;
 25




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##### Table of Contents




    
    the global financial crisis impact on our business and financial condition in ways
that we currently cannot predict. We may face significant challenges if conditions in the
financial markets do not improve or continue to worsen, such as adversely impacting our
ability to refinance existing credit facilities or extend their terms; and
    
    the other factors discussed in our Annual Report on Form 10-K for the year ended
December 31, 2008 under the caption Risk Factors.
  Company Overview
  Refining and Unbranded Marketing Segment
    Asphalt Segment
 Retail and Branded Marketing Segment
 26




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Second Quarter Operational and Financial Highlights
  
    
    The combined refineries throughput for the second quarter of 2009 averaged 159,856
barrels per day (bpd), consisting of an average of 61,573 bpd at the Big Spring refinery,
an average of 39,825 bpd at the California refineries and an average of 58,458 bpd at the
Krotz Springs refinery compared to a combined average of 70,244 bpd in the second quarter
of 2008, consisting of an average of 32,390 bpd at the Big Spring refinery and an average
of 37,854 bpd at the California refineries.
    
    Our average refinery operating margin for the Big Spring refinery increased $13.34 per
barrel to $5.37 per barrel for the three months ended June 30, 2009, compared to ($7.97)
per barrel for the three months ended June 30, 2008. This increase was attributable mainly
to the 2008 fire at the Big Spring refinery.
    
    Our California refineries operating margin for the three months ended June 30, 2009
increased $8.70 per barrel to $2.47 per barrel, compared to ($6.23) per barrel for the
three months ended June 30, 2008. This increase was primarily from a 52% decrease in WTI
prices from an average of $124.00 per barrel in the second quarter of 2008 to an average of
$59.54 per barrel in the second quarter of 2009.
    
    The average operating margin for the Krotz Springs refinery for the three months ended
June 30, 2009 was $5.85 per barrel.
    
    The second quarter of 2009 saw the continued contraction of sweet/sour and light/heavy
crude oil differentials. The average sweet/sour spread for the three months ended June 30,
2009 was $1.39 per barrel compared to $4.62 per barrel for the three months ended June 30,
2008. The average light/heavy spread for the three months ended June 30, 2009 was $5.65 per
barrel compared to $20.92 per barrel for the three months ended June 30, 2008.
    
    The average 3/2/1 Gulf Coast crack spread for the three months ended June 30, 2009 was
$8.30 per barrel compared to $12.95 per barrel for the three months ended June 30, 2008.
The average 2/1/1 Gulf Coast high sulphur diesel crack spread for the three months ended
June 30, 2009 was $6.63 per barrel compared to $14.06 per barrel for the three months ended
June 30, 2008. Additionally, the average 3/2/1 West Coast crack spread for the three
months ended June 30, 2009 was $14.48 per barrel compared to $23.28 per barrel for the
three months ended June 30, 2008.
    
    Asphalt margins in the second quarter of 2009 were $50.97 per ton compared to $35.76 per
ton in the second quarter of 2008. The average blended asphalt sales price decreased 14.5%
from $464.74 per ton in the second quarter of 2008 to $397.35 per ton in the second quarter
of 2009 and the average non-blended asphalt
 27




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sales price decreased 27.8% from $200.88 per ton in the second quarter of 2008 to $145.04
per ton in the second quarter of 2009. The percentage decrease in
asphalt sales price for both blended and non-blended asphalt was less than the 52% decrease
in WTI prices for the same periods.
    
    On June 15, 2009, we paid a regular quarterly cash dividend of $0.04 per share on our
common stock to stockholders of record at the close of business on May 29, 2009.
 Major Influences on Results of Operations
 Refining and Unbranded Marketing
      28




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Asphalt
  Retail and Branded Marketing
  Factors Affecting Comparability
   29




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##### Table of Contents



Results of Operations
 Net Sales
  Cost of Sales
 Direct Operating Expenses
 Selling, General and Administrative Expenses
 30




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##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED
 Summary Financial Tables
 For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(dollars in thousands, except per
    
    
    (dollars in thousands, except pershare data)
    
    
    share data)STATEMENT OF OPERATIONS DATA:Net sales (1)
    
    $
    1,106,398
    
    
    $
    1,244,671
    
    
    $
    1,828,578
    
    
    $
    2,265,434Operating costs and expenses:Cost of sales
    
    
    988,318
    
    
    
    1,252,392
    
    
    
    1,528,048
    
    
    
    2,221,389Direct operating expenses
    
    
    71,345
    
    
    
    40,546
    
    
    
    140,209
    
    
    
    82,835Selling, general and administrative
expenses (2)
    
    
    31,581
    
    
    
    27,802
    
    
    
    63,496
    
    
    
    56,656Net costs associated with fire (3)
    
    
    
    
    
    
    9,374
    
    
    
    
    
    
    
    25,836Depreciation and amortization (4)
    
    
    23,561
    
    
    
    13,507
    
    
    
    45,651
    
    
    
    27,252Total operating costs and expenses
    
    
    1,114,805
    
    
    
    1,343,621
    
    
    
    1,777,404
    
    
    
    2,413,968Gain on involuntary conversion of assets (5)
    
    
    
    
    
    
    96,588
    
    
    
    
    
    
    
    96,588Gain on disposition of assets (6)
    
    
    (1,600
    )
    
    
    42,935
    
    
    
    (1,600
    )
    
    
    45,246Operating income (loss)
    
    
    (10,007
    )
    
    
    40,573
    
    
    
    49,574
    
    
    
    (6,700
    )Interest expense (7)
    
    
    (21,023
    )
    
    
    (10,736
    )
    
    
    (49,279
    )
    
    
    (21,392
    )Equity earnings of investees
    
    
    8,376
    
    
    
    1,292
    
    
    
    8,373
    
    
    
    1,608Other income, net
    
    
    191
    
    
    
    373
    
    
    
    448
    
    
    
    1,118Income (loss) before income tax expense
(benefit), non-controlling interest in
income (loss) of subsidiaries and
accumulated dividends on preferred stock of
subsidiary
    
    
    (22,463
    )
    
    
    31,502
    
    
    
    9,116
    
    
    
    (25,366
    )Income tax expense (benefit)
    
    
    (7,549
    )
    
    
    11,860
    
    
    
    3,446
    
    
    
    (9,233
    )Income (loss) before non-controlling
interest in income (loss) of subsidiaries
and accumulated dividends on preferred
stock of subsidiary
    
    
    (14,914
    )
    
    
    19,642
    
    
    
    5,670
    
    
    
    (16,133
    )Non-controlling interest in income (loss)
of subsidiaries
    
    
    (1,724
    )
    
    
    1,415
    
    
    
    (641
    )
    
    
    (782
    )Accumulated dividends on preferred stock of
subsidiary
    
    
    2,150
    
    
    
    
    
    
    
    4,300
    
    
    
    Net income (loss)
    
    $
    (15,340
    )
    
    $
    18,227
    
    
    $
    2,011
    
    
    $
    (15,351
    )Earnings (loss) per share, basic
    
    $
    (0.33
    )
    
    $
    0.39
    
    
    $
    0.04
    
    
    $
    (0.33
    )Weighted average shares outstanding, basic
(in thousands)
    
    
    46,809
    
    
    
    46,782
    
    
    
    46,807
    
    
    
    46,782Earnings (loss) per share, diluted
    
    $
    (0.33
    )
    
    $
    0.38
    
    
    $
    0.04
    
    
    $
    (0.33
    )Weighted average shares outstanding,
diluted (in thousands)
    
    
    46,809
    
    
    
    46,802
    
    
    
    46,810
    
    
    
    46,782Cash dividends per share
    
    $
    0.04
    
    
    $
    0.04
    
    
    $
    0.08
    
    
    $
    0.08CASH FLOW DATA:Net cash provided by (used in):Operating activities
    
    $
    177,437
    
    
    $
    7,548
    
    
    $
    296,964
    
    
    $
    (42,076
    )Investing activities
    
    
    (29,705
    )
    
    
    (67,871
    )
    
    
    (44,714
    )
    
    
    (51,003
    )Financing activities
    
    
    (122,548
    )
    
    
    43,084
    
    
    
    (227,227
    )
    
    
    38,360
 31




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For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(dollars in thousands, except per
    
    
    (dollars in thousands, except pershare data)
    
    
    share data)OTHER DATA:Adjusted EBITDA (8)
    
    $
    23,721
    
    
    $
    12,810
    
    
    $
    105,646
    
    
    $
    (21,968
    )Capital expenditures (9)
    
    
    18,887
    
    
    
    10,342
    
    
    
    29,244
    
    
    
    19,524Capital expenditures to rebuild the Big
Spring refinery
    
    
    7,146
    
    
    
    160,341
    
    
    
    39,281
    
    
    
    160,341Capital expenditures for turnaround and
chemical catalyst
    
    
    2,951
    
    
    
    460
    
    
    
    10,314
    
    
    
    2,069
 June 30,
    
    December 31,2009
    
    2008BALANCE SHEET DATA (end of period):Cash and cash equivalents
    
    $
    43,477
    
    
    $
    18,454Working capital
    
    
    52,815
    
    
    
    250,384Total assets
    
    
    2,272,539
    
    
    
    2,413,433Total debt
    
    
    834,355
    
    
    
    1,103,569Total equity
    
    
    540,022
    
    
    
    536,867
 
 (1)
    
    Includes excise taxes on sales by the retail and branded marketing segment of $11,770 and
$9,319 for the three months ended June 30, 2009 and 2008, respectively, and $22,814 and
$18,973 for the six months ended June 30, 2009 and 2008, respectively.(2)
    
    Includes corporate headquarters selling, general and administrative expenses of $190 and $151
for the three months ended June 30, 2009 and 2008, respectively, and $380 and $302 for the six
months ended June 30, 2009 and 2008, respectively, which are not allocated to our three
operating segments.(3)
    
    Net costs associated with fire for the three and six months ended June 30, 2008,
respectively, includes $8,374 and $20,046 of expenses incurred from pipeline commitment
deficiencies, crude sale losses and other incremental costs; $1,000 and $5,000 for the three
and six months ended June 30, 2008, respectively, for our third party liability insurance
deductible under the insurance policy; and depreciation for the temporarily idled facilities
of $790 for the six months ended June 30, 2008.(4)
    
    Includes corporate depreciation and amortization of $148 and $223 for the three months ended
June 30, 2009 and 2008, respectively, and $295 and $446 for the six months ended June 30, 2009
and 2008, respectively, which are not allocated to our three operating segments. Also included
for the three and six months ended June 30, 2009 is additional depreciation attributable to
the depreciation on the assets acquired in the Krotz Springs refinery acquisition in July 2008
and capital expenditures placed in service in September 2008 from the rebuild of the Big
Spring refinery.(5)
    
    Based upon the receipt of insurance proceeds of $150,000 through June 30, 2008, an
involuntary gain on conversion of assets was recorded of $96,588 for the proceeds received in
excess of the book value of the assets impaired of $25,330 and demolition and repair expenses
of $28,082 incurred through June 30, 2008.(6)
    
    Gain on disposition of assets reported in the three and six months ended June 30, 2008
includes the recognition of deferred gain recorded primarily in connection with the
contribution of certain product pipelines and terminals to Holly Energy Partners, LP,(HEP),
in March 2005 (HEP transaction). A gain of $42,935 in the second quarter of 2008
represented all the recognition of the remaining deferred gain associated with the HEP
transaction and was due to the termination of an indemnification agreement with HEP.(7)
    
    Interest expense of $49,279 for the six months ended June 30, 2009 includes $5,715 related to
the liquidation of the heating oil hedge. The remaining increase compared to interest expense
for the six months ended June 30, 2008 of $21,392 is primarily due to interest on borrowings
and letter of credit fees related to the Krotz Springs refinery acquisition.(8)
    
    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 32




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##### Table of Contents



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 has limitations as an analytical tool, and you should not consider it in
isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these
limitations are: 
    
    Adjusted EBITDA does not reflect our cash expenditures or future requirements for
capital expenditures or contractual commitments;
    
    Adjusted EBITDA does not reflect the interest expense or the cash requirements
necessary to service interest or principal payments on our debt;
    
    Adjusted EBITDA does not reflect the prior claim that 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.
 
 Because of these limitations, Adjusted EBITDA should not be considered a measure of
discretionary cash available to us to invest in the growth of our business. We compensate for
these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only
supplementally.The following table reconciles net income (loss) to Adjusted EBITDA for the three and six months
ended June 30, 2009 and 2008, respectively: For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(dollars in thousands)Net income (loss)
    
    $
    (15,340
    )
    
    $
    18,227
    
    
    $
    2,011
    
    
    $
    (15,351
    )Non-controlling interest in income
of subsidiaries (including
accumulated dividends on preferred
stock of subsidiary)
    
    
    426
    
    
    
    1,415
    
    
    
    3,659
    
    
    
    (782
    )Income tax expense (benefit)
    
    
    (7,549
    )
    
    
    11,860
    
    
    
    3,446
    
    
    
    (9,233
    )Interest expense
    
    
    21,023
    
    
    
    10,736
    
    
    
    49,279
    
    
    
    21,392Depreciation and amortization
    
    
    23,561
    
    
    
    13,507
    
    
    
    45,651
    
    
    
    27,252(Gain) loss on disposition of assets
    
    
    1,600
    
    
    
    (42,935
    )
    
    
    1,600
    
    
    
    (45,246
    )Adjusted EBITDA
    
    $
    23,721
    
    
    $
    12,810
    
    
    $
    105,646
    
    
    $
    (21,968
    )
 
 Adjusted EBITDA for the three and six months ended June 30, 2008 includes a gain on the
involuntary conversion of assets of $96,588 representing the insurance proceeds received with
respect to property damage resulting from the Big Spring refinery fire in excess of the net book
value of assets impaired of $25,330 and the demolition and repair expenses of $28,082 incurred
through June 30, 2008. Adjusted EBITDA also includes net costs associated with fire at the Big
Spring refinery of $9,374 and $25,836 for the three and six months ended June 30, 2008,
respectively.(9)
    
    Includes corporate capital expenditures of $654 and $319 for the three months ended June 30,
2009 and 2008, respectively, and $1,232 and $458 for the six months ended June 30, 2009 and
2008, 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 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(dollars in thousands, except per barrel data and pricing statistics)STATEMENTS OF OPERATIONS DATA:Net sales (1)
    
    $
    897,519
    
    
    $
    869,559
    
    
    $
    1,484,447
    
    
    $
    1,641,598Operating costs and expenses:Cost of sales
    
    
    825,935
    
    
    
    917,689
    
    
    
    1,248,929
    
    
    
    1,673,646Direct operating expenses
    
    
    61,638
    
    
    
    30,668
    
    
    
    120,009
    
    
    
    61,141Selling, general and administrative expenses
    
    
    7,239
    
    
    
    3,679
    
    
    
    14,566
    
    
    
    8,068Net costs associated with fire (2)
    
    
    
    
    
    
    9,374
    
    
    
    
    
    
    
    25,836Depreciation and amortization (3)
    
    
    19,459
    
    
    
    9,210
    
    
    
    37,496
    
    
    
    18,840Total operating costs and expenses
    
    
    914,271
    
    
    
    970,620
    
    
    
    1,421,000
    
    
    
    1,787,531Gain on involuntary conversion of assets (4)
    
    
    
    
    
    
    96,588
    
    
    
    
    
    
    
    96,588Gain (loss) on disposition of assets (5)
    
    
    (1,600
    )
    
    
    42,935
    
    
    
    (1,600
    )
    
    
    45,246Operating income (loss)
    
    $
    (18,352
    )
    
    $
    38,462
    
    
    $
    61,847
    
    
    $
    (4,099
    )KEY OPERATING STATISTICS:Total sales volume (bpd)
    
    
    132,286
    
    
    
    55,727
    
    
    
    127,400
    
    
    
    59,717Per barrel of throughput:Refinery operating margin  Big Spring (6)
    
    $
    5.37
    
    
    $
    (7.97
    )
    
    $
    8.83
    
    
    $
    (1.08
    )Refinery operating margin  CA Refineries (6)
    
    
    2.47
    
    
    
    (6.23
    )
    
    
    3.99
    
    
    
    (4.03
    )Refinery operating margin  Krotz Springs (6)
    
    
    5.85
    
    
    
    N/A
    
    
    
    8.91
    
    
    
    N/ARefinery direct operating expense  Big Spring (7)
    
    
    4.70
    
    
    
    3.98
    
    
    
    4.14
    
    
    
    4.91Refinery direct operating expense  CA Refineries (7)
    
    
    3.80
    
    
    
    5.50
    
    
    
    4.65
    
    
    
    4.91Refinery direct operating expense  Krotz Springs (7)
    
    
    4.04
    
    
    
    N/A
    
    
    
    4.32
    
    
    
    N/ACapital expenditures
    
    
    16,925
    
    
    
    9,921
    
    
    
    26,323
    
    
    
    17,624Capital expenditures to rebuild the Big Spring refinery
    
    
    7,146
    
    
    
    160,341
    
    
    
    39,281
    
    
    
    160,341Capital expenditures for turnaround and chemical catalyst
    
    
    2,951
    
    
    
    460
    
    
    
    10,314
    
    
    
    2,069PRICING STATISTICS:WTI crude oil (per barrel)
    
    $
    59.54
    
    
    $
    124.00
    
    
    $
    51.36
    
    
    $
    111.00WTS crude oil (per barrel)
    
    
    58.15
    
    
    
    119.38
    
    
    
    50.20
    
    
    
    106.35MAYA crude oil (per barrel)
    
    
    53.89
    
    
    
    103.08
    
    
    
    46.28
    
    
    
    92.11Crack spreads (3/2/1) (per barrel):Gulf Coast
    
    $
    8.30
    
    
    $
    12.95
    
    
    $
    8.97
    
    
    $
    11.19Group III
    
    
    9.34
    
    
    
    13.80
    
    
    
    9.53
    
    
    
    11.95West Coast
    
    
    14.48
    
    
    
    23.28
    
    
    
    16.19
    
    
    
    19.91Crack spreads (6/1/2/3) (per barrel):West Coast
    
    $
    2.59
    
    
    $
    (1.69
    )
    
    $
    4.39
    
    
    $
    (1.28
    )Crack spreads (2/1/1) (per barrel):Gulf Coast high sulfur diesel
    
    $
    6.63
    
    
    $
    14.06
    
    
    $
    8.04
    
    
    $
    11.79Crude oil differentials (per barrel):WTI less WTS
    
    $
    1.39
    
    
    $
    4.62
    
    
    $
    1.16
    
    
    $
    4.65WTI less MAYA
    
    
    5.65
    
    
    
    20.92
    
    
    
    5.08
    
    
    
    18.89Product price (dollars per gallon):Gulf Coast unleaded gasoline
    
    $
    1.638
    
    
    $
    3.067
    
    
    $
    1.429
    
    
    $
    2.749Gulf Coast ultra low-sulfur diesel
    
    
    1.569
    
    
    
    3.648
    
    
    
    1.451
    
    
    
    3.229Group III unleaded gasoline
    
    
    1.674
    
    
    
    3.100
    
    
    
    1.454
    
    
    
    2.774Group III ultra low-sulfur diesel
    
    
    1.571
    
    
    
    3.644
    
    
    
    1.441
    
    
    
    3.233West Coast LA CARBOB (unleaded gasoline)
    
    
    1.841
    
    
    
    3.427
    
    
    
    1.674
    
    
    
    3.059West Coast LA ultra low-sulfur diesel
    
    
    1.606
    
    
    
    3.665
    
    
    
    1.478
    
    
    
    3.232Natural gas (per MMBTU)
    
    
    3.81
    
    
    
    11.47
    
    
    
    4.13
    
    
    
    10.14
 34




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THROUGHPUT AND YIELD DATA: BIG SPRING
 For the Three Months Ended
    
    For the Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008bpd
    
    %
    
    bpd
    
    %
    
    bpd
    
    %
    
    bpd
    
    %Refinery throughput:Sour crude
    
    
    50,771
    
    
    
    82.5
    
    
    
    27,126
    
    
    
    83.7
    
    
    
    53,099
    
    
    
    84.3
    
    
    
    26,080
    
    
    
    84.6Sweet crude
    
    
    7,768
    
    
    
    12.6
    
    
    
    4,427
    
    
    
    13.7
    
    
    
    7,815
    
    
    
    12.4
    
    
    
    3,402
    
    
    
    11.0Blendstocks
    
    
    3,034
    
    
    
    4.9
    
    
    
    837
    
    
    
    2.6
    
    
    
    2,073
    
    
    
    3.3
    
    
    
    1,348
    
    
    
    4.4Total refinery throughput (8)
    
    
    61,573
    
    
    
    100.0
    
    
    
    32,390
    
    
    
    100.0
    
    
    
    62,987
    
    
    
    100.0
    
    
    
    30,830
    
    
    
    100.0Refinery production:Gasoline
    
    
    26,333
    
    
    
    43.0
    
    
    
    8,981
    
    
    
    28.5
    
    
    
    27,294
    
    
    
    43.4
    
    
    
    11,478
    
    
    
    37.8Diesel/jet
    
    
    19,571
    
    
    
    32.0
    
    
    
    7,876
    
    
    
    24.9
    
    
    
    20,648
    
    
    
    32.8
    
    
    
    7,758
    
    
    
    25.6Asphalt
    
    
    6,444
    
    
    
    10.5
    
    
    
    5,976
    
    
    
    18.9
    
    
    
    5,840
    
    
    
    9.3
    
    
    
    4,537
    
    
    
    14.9Petrochemicals
    
    
    3,281
    
    
    
    5.4
    
    
    
    344
    
    
    
    1.1
    
    
    
    3,154
    
    
    
    5.0
    
    
    
    873
    
    
    
    2.9Other
    
    
    5,595
    
    
    
    9.1
    
    
    
    8,394
    
    
    
    26.6
    
    
    
    5,946
    
    
    
    9.5
    
    
    
    5,720
    
    
    
    18.8Total refinery production (9)
    
    
    61,224
    
    
    
    100.0
    
    
    
    31,571
    
    
    
    100.0
    
    
    
    62,882
    
    
    
    100.0
    
    
    
    30,366
    
    
    
    100.0Refinery utilization (10)
    
    
    
    
    
    
    83.6
    %
    
    
    
    
    
    
    45.1
    %
    
    
    
    
    
    
    87.0
    %
    
    
    
    
    
    
    43.0
    %
 THROUGHPUT AND YIELD DATA:
CALIFORNIA REFINERIES
 For the Three Months Ended
    
    For the Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008bpd
    
    %
    
    bpd
    
    %
    
    bpd
    
    %
    
    bpd
    
    %Refinery throughput:Medium sour crude
    
    
    20,150
    
    
    
    50.6
    
    
    
    11,837
    
    
    
    31.3
    
    
    
    16,209
    
    
    
    47.2
    
    
    
    11,269
    
    
    
    29.9Heavy crude
    
    
    19,315
    
    
    
    48.5
    
    
    
    25,540
    
    
    
    67.4
    
    
    
    17,914
    
    
    
    52.2
    
    
    
    25,545
    
    
    
    67.9Blendstocks
    
    
    360
    
    
    
    0.9
    
    
    
    477
    
    
    
    1.3
    
    
    
    202
    
    
    
    0.6
    
    
    
    818
    
    
    
    2.2Total refinery throughput (8)
    
    
    39,825
    
    
    
    100.0
    
    
    
    37,854
    
    
    
    100.0
    
    
    
    34,325
    
    
    
    100.0
    
    
    
    37,632
    
    
    
    100.0Refinery production:Gasoline
    
    
    6,587
    
    
    
    17.0
    
    
    
    5,088
    
    
    
    13.9
    
    
    
    4,936
    
    
    
    14.7
    
    
    
    5,296
    
    
    
    14.6Diesel/jet
    
    
    9,086
    
    
    
    23.4
    
    
    
    8,793
    
    
    
    23.9
    
    
    
    7,658
    
    
    
    22.8
    
    
    
    8,708
    
    
    
    23.9Asphalt
    
    
    11,450
    
    
    
    29.5
    
    
    
    9,534
    
    
    
    26.0
    
    
    
    10,100
    
    
    
    30.1
    
    
    
    9,966
    
    
    
    27.4Light unfinished
    
    
    99
    
    
    
    0.3
    
    
    
    
    
    
    
    0.0
    
    
    
    999
    
    
    
    3.0
    
    
    
    
    
    
    
    0.0Heavy unfinished
    
    
    10,868
    
    
    
    28.0
    
    
    
    13,050
    
    
    
    35.5
    
    
    
    9,340
    
    
    
    27.8
    
    
    
    12,166
    
    
    
    33.5Other
    
    
    697
    
    
    
    1.8
    
    
    
    271
    
    
    
    0.7
    
    
    
    534
    
    
    
    1.6
    
    
    
    234
    
    
    
    0.6Total refinery production (9)
    
    
    38,787
    
    
    
    100.0
    
    
    
    36,736
    
    
    
    100.0
    
    
    
    33,567
    
    
    
    100.0
    
    
    
    36,370
    
    
    
    100.0Refinery utilization (10)
    
    
    
    
    
    
    54.4
    %
    
    
    
    
    
    
    51.6
    %
    
    
    
    
    
    
    56.1
    %
    
    
    
    
    
    
    50.8
    %
 THROUGHPUT AND YIELD DATA: KROTZ SPRINGS
 For the Three Months
    
    For the Six MonthsEnded
    
    EndedJune 30,
    
    June 30,2009
    
    2009bpd
    
    %
    
    bpd
    
    %Refinery throughput:Light sweet crude
    
    
    28,065
    
    
    
    48.0
    
    
    
    27,746
    
    
    
    49.5Heavy sweet crude
    
    
    26,362
    
    
    
    45.1
    
    
    
    23,240
    
    
    
    41.4Blendstocks
    
    
    4,031
    
    
    
    6.9
    
    
    
    5,113
    
    
    
    9.1Total refinery throughput (8)
    
    
    58,458
    
    
    
    100.0
    
    
    
    56,099
    
    
    
    100.0Refinery production:Gasoline
    
    
    27,962
    
    
    
    47.1
    
    
    
    26,215
    
    
    
    46.0Diesel/jet
    
    
    24,514
    
    
    
    41.3
    
    
    
    24,491
    
    
    
    42.9Heavy oils
    
    
    1,358
    
    
    
    2.3
    
    
    
    1,124
    
    
    
    2.0Other
    
    
    5,521
    
    
    
    9.3
    
    
    
    5,205
    
    
    
    9.1Total refinery production (9)
    
    
    59,355
    
    
    
    100.0
    
    
    
    57,035
    
    
    
    100.0Refinery utilization (10)
    
    
    
    
    
    
    65.5
    %
    
    
    
    
    
    
    61.4
    %
 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 prices. These intersegment sales are eliminated
through consolidation of our financial statements.(2)
    
    Net costs associated with fire for the three and six months ended June 30, 2008,
respectively, includes $8,374 and $20,046 of expenses incurred from pipeline commitment
deficiencies, crude sale losses and other incremental costs; $1,000 and $5,000 for the three
and six months ended June 30, 2008, respectively, for our third party liability insurance
deductible under the insurance policy; and depreciation for the temporarily idled facilities
of $790 for the six months ended June 30, 2008.(3)
    
    Higher 2009 depreciation amounts attributable to the depreciation on the assets acquired in
the Krotz Springs refinery acquisition in July 2008 and capital expenditures placed in service
in September 2008 from the rebuild of the Big Spring refinery.(4)
    
    Based upon the receipt of insurance proceeds of $150,000 through June 30, 2008, an
involuntary gain on conversion of assets was recorded of $96,588 for the proceeds received in
excess of the book value of the assets impaired of $25,330 and demolition and repair expenses
of $28,082 incurred through June 30, 2008.(5)
    
    Gain on disposition of assets reported in the three and six months ended June 30, 2008
includes the recognition of deferred gain recorded primarily in connection with the HEP
transaction. A gain of $42,935 in the second quarter of 2008 represented all the recognition
of the remaining deferred gain associated with the HEP transaction and was due to the
termination of an indemnification agreement with HEP.(6)
    
    Refinery operating margin is a per barrel measurement calculated by dividing the margin
between net sales and cost of sales (exclusive of unrealized hedging gains and losses and
inventories adjustments related to acquisitions) attributable to each refinery by the
refinerys throughput volumes. Industry-wide refining results are driven and measured by the
margins between refined product prices and the prices for crude oil, which are referred to as
crack spreads. We compare our refinery operating margins to these crack spreads to assess our
operating performance relative to other participants in our industry. There were unrealized
hedging losses of ($868) for the Big Spring refinery for the three and six months ended June
30, 2009. There were unrealized hedging losses of ($75) and gains of $58 for the California
refineries for the three and six months ended June 30, 2009, respectively, and unrealized
hedging losses of ($3,186) and gains of $1,602 for the California refineries for the three and
six months ended June 30, 2008, respectively. 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.
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.(7)
    
    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.(8)
    
    Total refinery throughput represents the total barrels per day of crude oil and blendstock
inputs in the refinery production process.(9)
    
    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 refinery. Light product yields decreased at the Big Spring refinery for the
three and six months ended June 30, 2008 due to the fire on February 18, 2008 and the re-start
of the crude unit in a hydroskimming mode on April 5, 2008.(10)
    
    Refinery utilization represents average daily crude oil throughput divided by crude oil
capacity, excluding planned periods of downtime for maintenance and turnarounds. The decrease
in refinery utilization at our Big Spring refinery for the three and six months ended June 30,
2008 is due to the fire on February 18, 2008 and the re-start of the crude unit in a
hydroskimming mode on April 5, 2008. 36




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##### Table of Contents



ASPHALT SEGMENT
 For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(dollars in thousands, except per ton data)STATEMENTS OF OPERATIONS DATA:Net sales
    
    $
    125,480
    
    
    $
    177,277
    
    
    $
    176,240
    
    
    $
    281,217Operating costs and expenses:Cost of sales (1)
    
    
    107,897
    
    
    
    163,474
    
    
    
    168,130
    
    
    
    255,609Direct operating expenses
    
    
    9,707
    
    
    
    9,878
    
    
    
    20,200
    
    
    
    21,694Selling, general and administrative expenses
    
    
    1,050
    
    
    
    736
    
    
    
    2,204
    
    
    
    2,122Depreciation and amortization
    
    
    542
    
    
    
    536
    
    
    
    1,080
    
    
    
    1,068Total operating costs and expenses
    
    
    119,196
    
    
    
    174,624
    
    
    
    191,614
    
    
    
    280,493Gain (loss) on disposition of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    $
    6,284
    
    
    $
    2,653
    
    
    $
    (15,374
    )
    
    $
    724KEY OPERATING STATISTICS:Blended asphalt sales volume (tons in
thousands) (2)
    
    
    299
    
    
    
    378
    
    
    
    446
    
    
    
    627Non-blended asphalt sales volume (tons in
thousands) (3)
    
    
    46
    
    
    
    8
    
    
    
    83
    
    
    
    38Blended asphalt sales price per ton (2)
    
    $
    397.35
    
    
    $
    464.74
    
    
    $
    369.93
    
    
    $
    437.47Non-blended asphalt sales price per ton (3)
    
    
    145.04
    
    
    
    200.88
    
    
    
    135.54
    
    
    
    182.26Asphalt margin per ton (4)
    
    
    50.97
    
    
    
    35.76
    
    
    
    15.33
    
    
    
    38.51Capital expenditures
    
    $
    414
    
    
    $
    62
    
    
    $
    576
    
    
    $
    275
 
 (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
 For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(dollars in thousands, except per gallon data)STATEMENTS OF OPERATIONS DATA:Net sales (1)
    
    $
    206,461
    
    
    $
    377,272
    
    
    $
    373,931
    
    
    $
    686,526Operating costs and expenses:Cost of sales (2)
    
    
    177,548
    
    
    
    350,666
    
    
    
    317,029
    
    
    
    636,041Selling, general and administrative expenses
    
    
    23,102
    
    
    
    23,236
    
    
    
    46,346
    
    
    
    46,164Depreciation and amortization
    
    
    3,412
    
    
    
    3,538
    
    
    
    6,780
    
    
    
    6,898Total operating costs and expenses
    
    
    204,062
    
    
    
    377,440
    
    
    
    370,155
    
    
    
    689,103Gain (loss) on disposition of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    $
    2,399
    
    
    $
    (168
    )
    
    $
    3,776
    
    
    $
    (2,577
    )KEY OPERATING STATISTICS:Integrated branded fuel sales (thousands of gallons)
(3)
    
    
    66,617
    
    
    
    54,931
    
    
    
    130,263
    
    
    
    109,089Integrated branded fuel margin (cents per gallon) (3)
    
    
    5.4
    
    
    
    2.0
    
    
    
    5.6
    
    
    
    1.9Non-Integrated branded fuel sales (thousands of
gallons) (3)
    
    
    3,241
    
    
    
    37,182
    
    
    
    6,387
    
    
    
    75,451Non-Integrated branded fuel margin (cents per
gallon) (3)
    
    
    2.2
    
    
    
    (2.1
    )
    
    
    4.7
    
    
    
    (1.1
    )Number of stores (end of period)
    
    
    306
    
    
    
    306
    
    
    
    306
    
    
    
    306Retail fuel sales (thousands of gallons)
    
    
    30,198
    
    
    
    24,414
    
    
    
    58,381
    
    
    
    49,285Retail fuel sales (thousands of gallons per site per
month)
    
    
    33
    
    
    
    27
    
    
    
    32
    
    
    
    27Retail fuel margin (cents per gallon) (4)
    
    
    12.5
    
    
    
    19.2
    
    
    
    14.1
    
    
    
    18.8Retail fuel sales price (dollars per gallon) (5)
    
    $
    2.26
    
    
    $
    3.77
    
    
    $
    2.08
    
    
    $
    3.43Merchandise sales
    
    $
    70,650
    
    
    $
    68,314
    
    
    $
    133,262
    
    
    $
    128,552Merchandise sales (per site per month)
    
    
    76
    
    
    
    74
    
    
    
    73
    
    
    
    70Merchandise margin (6)
    
    
    30.2
    %
    
    
    31.5
    %
    
    
    30.7
    %
    
    
    31.5
    %Capital expenditures
    
    $
    894
    
    
    $
    40
    
    
    $
    1,113
    
    
    $
    1,167
 
 (1)
    
    Includes excise taxes on sales by the retail and branded marketing segment of $11,770 and
$9,319 for the three months ended June 30, 2009 and 2008, respectively, and $22,814 and
$18,973 for the six months ended June 30, 2009 and 2008, respectively. Net sales also
includes royalty and related net credit card fees of $262 and $51 for the three months ended
June 30, 2009 and 2008, respectively, and $351 and $127 for the six months ended June 30,
2009 and 2008, 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
located in both our integrated and non-integrated regions. The branded fuels we sell in our
integrated region are primarily supplied by the Big Spring refinery. Due to the fire on
February 18, 2008 at the Big Spring refinery, more fuel was obtained from third-party
suppliers during the three and six months ended June 30, 2008. The branded fuels we sell in
the non-integrated region are obtained from third-party suppliers. The marketing margin
represents the margin between the net sales and cost of sales attributable to our branded fuel
sales volume, expressed on a cents-per-gallon basis.(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, 2009 Compared to the Three Months Ended June 30, 2008
 Net Sales
 Consolidated
 Refining and Unbranded Marketing Segment
 Asphalt Segment
 Retail and Branded Marketing Segment
 Cost of Sales
 Consolidated
 Refining and Unbranded Marketing Segment.
 39




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##### Table of Contents



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
 Depreciation and Amortization
  40




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##### Table of Contents



Operating Income
 Consolidated
 Refining and Unbranded Marketing Segment
 Asphalt Segment.
 Retail and Branded Marketing Segment.
 Interest Expense
  Income Tax Expense (Benefit)
  Non-Controlling Interest In Income (Loss) Of Subsidiaries
  41




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##### Table of Contents



Net Income (Loss)
  Six Months Ended June 30, 2009 Compared to the Six Months Ended June 30, 2008
 Net Sales
 Consolidated
 Refining and Unbranded Marketing Segment
 Asphalt Segment
 Retail and Branded Marketing Segment
 42




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##### Table of Contents



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.
 Asphalt Segment.
 Selling, General and Administrative Expenses
 Consolidated
 Refining and Unbranded Marketing Segment
 43




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##### Table of Contents



Asphalt Segment
 Retail and Branded
Marketing Segment
 Depreciation and Amortization
  Operating Income
 Consolidated
 Refining and Unbranded Marketing Segment
 Asphalt Segment.
 Retail and Branded Marketing Segment.
 Interest Expense
  44




---



##### Table of Contents



Income Tax Expense (Benefit)
  Non-Controlling Interest In Income (Loss) Of Subsidiaries
  Net Income (Loss)
  Liquidity and Capital Resources
    45




---



##### Table of Contents



Cash Flows
  For the Six Months EndedJune 30,2009
    
    
    2008(dollars in thousands)Cash provided by (used in):Operating activities
    
    $
    296,964
    
    
    $
    (42,076
    )Investing activities
    
    
    (44,714
    )
    
    
    (51,003
    )Financing activities
    
    
    (227,227
    )
    
    
    38,360Net increase (decrease) in cash and cash equivalents
    
    $
    25,023
    
    
    $
    (54,719
    )
 Cash Flows Provided by (Used In) Operating Activities
  Cash Flows Used In Investing Activities
  Cash Flows Provided By (Used In) Financing Activities
  Cash Position and Indebtedness
  46




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##### Table of Contents



Summary of Indebtedness
 As of June 30, 2009(dollars in thousands)Amount Outstanding
    
    
    Total Facility
    
    
    Total Availability (1)Debt, including current portion:Term loan credit facilities
    
    $
    600,319
    
    
    $
    600,319
    
    
    $
    Revolving credit facilities
    
    
    150,312
    
    
    
    790,000
    
    
    
    136,533Retail credit facilities
    
    
    83,724
    
    
    
    83,724
    
    
    
    Totals
    
    $
    834,355
    
    
    $
    1,474,043
    
    
    $
    136,533
 
 (1)
    
    Total availability was calculated as the lesser of (a) the total size of the facilities
less outstanding borrowings and letters of credit as of June 30, 2009 which was $271.4
million, or (b) total borrowing base less outstanding borrowings and letters of credit, if
applicable, as of June 30, 2009 which was $136.5 million. Alon USA Energy, Inc. Credit Facilities
 Term Loan Credit Facility
   Letters of Credit Facility.
 Alon USA, LP Credit Facilities
 Revolving Credit Facility.
 47




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##### Table of Contents



Paramount Petroleum Corporation Credit Facility
 Revolving Credit Facility.
  Alon Refining Krotz Springs, Inc. Credit Facilities
 Term Loan Credit Facility
    48




---



##### Table of Contents



Revolving Credit Facility
       Retail Credit Facilities
     49




---



##### Table of Contents



Other Retail Related Credit Facilities
   Capital Spending
  Clean Air Capital Expenditures
 Turnaround and Chemical Catalyst Costs
 Contractual Obligations and Commercial Commitments
  Off-Balance Sheet Arrangements
  Critical Accounting Policies
   50




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##### Table of Contents



New Accounting Standards and Disclosures
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Commodity Price Risk
     51




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##### Table of Contents



Wtd Avg
    
    Wtd AvgDescription
    
    Contract
    
    Purchase
    
    Sales
    
    Contract
    
    Market
    
    Gainof Activity
    
    Volume
    
    Price/BBL
    
    Price/BBL
    
    Value
    
    Value
    
    (Loss)(in thousands)Forwards-long (Crude)
    
    
    180,000
    
    
    $
    60.00
    
    
    $
    
    
    
    $
    10,800
    
    
    $
    12,263
    
    
    $
    1,463Forwards-short (Gasoline)
    
    
    (200,000
    )
    
    
    
    
    
    
    75.48
    
    
    
    (15,096
    )
    
    
    (15,369
    )
    
    
    (273
    )Forwards-short (Diesel)
    
    
    (50,000
    )
    
    
    
    
    
    
    76.07
    
    
    
    (3,804
    )
    
    
    (3,774
    )
    
    
    30Futures-long (Crude Calls
 Asphalt)
    
    
    99,000
    
    
    
    5.04
    
    
    
    
    
    
    
    499
    
    
    
    1,196
    
    
    
    697Futures-short (Crude)
    
    
    (176,000
    )
    
    
    
    
    
    
    65.31
    
    
    
    (11,494
    )
    
    
    (12,362
    )
    
    
    (868
    )Futures-short (Heating Oil)
    
    
    (59,000
    )
    
    
    
    
    
    
    79.46
    
    
    
    (4,688
    )
    
    
    (4,713
    )
    
    
    (25
    )Futures-short (RBOB)
    
    
    (13,000
    )
    
    
    
    
    
    
    79.17
    
    
    
    (1,029
    )
    
    
    (976
    )
    
    
    53
 Wtd Avg
    
    Wtd AvgDescription
    
    Contract
    
    Contract
    
    Market
    
    Contract
    
    Market
    
    Gainof Activity
    
    Volume
    
    Spread
    
    Spread
    
    Value
    
    Value
    
    (Loss)(in thousands)Futures-long (SPR Swaps)
    
    
    434,000
    
    
    $
    96.36
    
    
    $
    74.80
    
    
    $
    41,821
    
    
    $
    32,462
    
    
    $
    (9,359
    )Futures-short (SPR Swaps)
    
    
    (434,000
    )
    
    
    61.44
    
    
    
    74.80
    
    
    
    (26,664
    )
    
    
    (32,462
    )
    
    
    (5,798
    )
 Interest Rate Risk
  
 ITEM 4. CONTROLS AND PROCEDURES
 (1) Evaluation of disclosure controls and procedures.
  (2) Changes in internal control over financial reporting.
  52




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
  (a)
    
    The stockholders approved the election of ten (10) directors for a one-year term expiring at
the 2010 Annual Meeting of our stockholders. The votes cast in these elections were as follows: Director
    
    For
    
    WithheldItzhak Bader
    
    
    43,457,580
    
    
    
    1,971,003Boaz Biran
    
    
    43,291,256
    
    
    
    2,137,327Ron Fainaro
    
    
    43,292,831
    
    
    
    2,135,752Avinadav Grinshpon
    
    
    43,291,313
    
    
    
    2,137,270Ron W. Haddock
    
    
    45,250,942
    
    
    
    177,641Jeff D. Morris
    
    
    43,124,719
    
    
    
    2,303,864Yeshayahu Pery
    
    
    43,454,908
    
    
    
    1,973,675Zalman Segal
    
    
    45,251,424
    
    
    
    177,159Avraham Shochat
    
    
    45,251,491
    
    
    
    177,089David Wiessman
    
    
    43,161,724
    
    
    
    2,266,859
  (b)
    
    The stockholders ratified the employment of KPMG LLP as our independent registered public
accounting firm for the fiscal year ending December 31, 2009. The votes for ratification were
45,277,655, the votes against ratification were 138,688 and the votes abstained were 12,240. There
were no broker non-votes.(c)
    
    The stockholders approved the issuance of shares of our common stock upon (i) exchange of
shares of Series A Preferred Stock of Alon Refining Louisiana, Inc. and (ii) exercise by us of an
option to satisfy the obligations under certain promissory notes of one of our subsidiaries with
such shares. The votes for the approval were 40,091,321, the votes against were 42,428, and the
votes abstained were 22,076. There were no broker non-votes. 53




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##### Table of Contents



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).10.1
    
    First Amendment Agreement dated as of April 9, 2009 by and among Alon Refining Louisiana,
Inc., Alon Krotz Springs, Inc., the lenders party thereto and Wells Fargo Bank, National
Association, as successor to Credit Suisse, Cayman Islands Branch, as agent.10.2
    
    Second Amendment to Loan and Security Agreement dated as of April 9, 2009 by and among Alon
Refining Louisiana, Inc., Alon Krotz Springs, Inc., the lenders party thereto and Bank of
America, N.A., as agent (incorporated by reference to Exhibit 10.2 to Form 8-K, filed by the
Company on April 27, 2009. SEC File No. 001-32567).10.3
    
    Fifth Amendment to Amended Revolving Credit Agreement, dated as of July 31, 2009, 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.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.
 
  54




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##### Table of Contents



SIGNATURES
  Alon USA Energy, Inc.Date:  August 6, 2009
    By:
    /s/ David WiessmanDavid WiessmanExecutive ChairmanDate:  August 6, 2009
    By:
    /s/ Jeff D. MorrisJeff D. MorrisChief Executive OfficerDate:  August 6, 2009
    By:
    /s/ Shai EvenShai EvenChief Financial Officer 55




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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).10.1
    
    First Amendment Agreement dated as of April 9, 2009 by and among Alon Refining Louisiana,
Inc., Alon Krotz Springs, Inc., the lenders party thereto and Wells Fargo Bank, National
Association, as successor to Credit Suisse, Cayman Islands Branch, as agent.10.2
    
    Second Amendment to Loan and Security Agreement dated as of April 9, 2009 by and among Alon
Refining Louisiana, Inc., Alon Krotz Springs, Inc., the lenders party thereto and Bank of
America, N.A., as agent (incorporated by reference to Exhibit 10.2 to Form 8-K, filed by the
Company on April 27, 2009. SEC File No. 001-32567).10.3
    
    Fifth Amendment to Amended Revolving Credit Agreement, dated as of July 31, 2009, 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.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.