##### 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, 2005
 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
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 (Address of principal executive offices) (Zip Code)
 (Registrants telephone number, including area code)
 
 o þ
 o þ
 o o




---



ALON USA ENERGY, INC.
 TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATION
    
    
    1Item 1. (a) Financial Statements
    
    
    1Consolidated Balance Sheets
    
    
    1Consolidated Statements of Operations
    
    
    2Consolidated Statements of Cash Flow
    
    
    3Notes to Consolidated Financial Statements
    
    
    4Item 1. (b) Schedules to the Financial Statements (Parent Only)  Schedule I
    
    
    13Condensed Balance Sheets
    
    
    13Condensed Statements of Operations
    
    
    14Condensed Statements of Cash Flows
    
    
    15Notes to Condensed Financial Statements
    
    
    16Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Forward-Looking Statements
    
    
    17Item 3. Quantitative and Qualitative Disclosure About Market Risk
    
    
    36Item 4. Controls and Procedures
    
    
    37PART II. OTHER INFORMATION
    
    
    38Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
    
    
    38Item 4. Submission of Matters to a Vote Security Holders
    
    
    38Item 6. Exhibits
    
    
    38SIGNATURES
    
    
    41EXHIBITS
    
    
    42Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO & CFO Pursuant to Section 906
  i




---



##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. (a) Financial Statements
 ALON USA ENERGY, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share and per share data)
 December 31,
    
    June 30,2004
    
    2005(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    63,357
    
    
    $
    168,546Accounts and other receivables, net
    
    
    69,328
    
    
    
    92,569Inventories
    
    
    79,329
    
    
    
    85,344Prepaid expenses and other current assets
    
    
    2,441
    
    
    
    6,471Total current assets
    
    
    214,455
    
    
    
    352,930Investment in HEP
    
    
    
    
    
    
    23,181Property, plant and equipment, net
    
    
    236,228
    
    
    
    207,269Other assets
    
    
    21,833
    
    
    
    29,502Total assets
    
    $
    472,516
    
    
    $
    612,882LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued liabilities
    
    $
    153,897
    
    
    $
    190,437Current portion of deferred gain on disposition of assets
    
    
    
    
    
    
    6,310Current portion of long-term debt
    
    
    16,115
    
    
    
    8,377Total current liabilities
    
    
    170,012
    
    
    
    205,124Other non-current liabilities
    
    
    19,436
    
    
    
    19,076Deferred gain on disposition of assets
    
    
    
    
    
    
    67,306Long-term debt
    
    
    171,591
    
    
    
    149,524Deferred income tax liability
    
    
    31,829
    
    
    
    42,727Total liabilities
    
    
    392,868
    
    
    
    483,757Commitments and contingencies (note 14)Minority interest in subsidiaries
    
    
    8,176
    
    
    
    7,735Stockholders 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; 35,001,120
shares issued and outstanding
    
    
    350
    
    
    
    350Additional paid-in capital
    
    
    8,379
    
    
    
    8,379Accumulated other comprehensive loss
    
    
    (2,261
    )
    
    
    (2,261
    )Retained earnings
    
    
    65,004
    
    
    
    114,922Total stockholders equity
    
    
    71,472
    
    
    
    121,390Total liabilities and stockholders equity
    
    $
    472,516
    
    
    $
    612,882
  1




---



##### Table of Contents



ALON USA ENERGY, INC., AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, dollars in thousands, except share and per share data)
 For the Three Months Ended
    
    For the Six Months EndedJune 30,
    
    June 30,2004
    
    2005
    
    2004
    
    2005Net sales
    
    $
    440,179
    
    
    $
    590,366
    
    
    $
    792,902
    
    
    $
    998,340Operating costs and expenses:Cost of sales
    
    
    365,046
    
    
    
    498,047
    
    
    
    668,026
    
    
    
    849,601Direct operating expenses
    
    
    17,781
    
    
    
    20,373
    
    
    
    36,693
    
    
    
    38,709Selling, general and administrative expenses
    
    
    19,208
    
    
    
    18,983
    
    
    
    36,526
    
    
    
    35,648Depreciation and amortization
    
    
    4,504
    
    
    
    5,018
    
    
    
    9,266
    
    
    
    9,852Total operating costs and expenses
    
    
    406,539
    
    
    
    542,421
    
    
    
    750,511
    
    
    
    933,810Gain on disposition of assets
    
    
    175
    
    
    
    1,530
    
    
    
    175
    
    
    
    29,223Operating income
    
    
    33,815
    
    
    
    49,475
    
    
    
    42,566
    
    
    
    93,753Interest expense
    
    
    5,676
    
    
    
    4,745
    
    
    
    11,691
    
    
    
    9,752Equity earnings in investee
    
    
    
    
    
    
    (277
    )
    
    
    
    
    
    
    (412
    )Other income, net
    
    
    (51
    )
    
    
    (830
    )
    
    
    (144
    )
    
    
    (1,080
    )Income before income tax expense and minority
interest in
income of subsidiaries
    
    
    28,190
    
    
    
    45,837
    
    
    
    31,019
    
    
    
    85,493Income tax expense
    
    
    11,415
    
    
    
    16,354
    
    
    
    12,534
    
    
    
    32,009Income before minority interest in income of
subsidiaries
    
    
    16,775
    
    
    
    29,483
    
    
    
    18,485
    
    
    
    53,484Minority interest in income of subsidiaries
    
    
    1,487
    
    
    
    2,001
    
    
    
    1,700
    
    
    
    3,566Net income
    
    $
    15,288
    
    
    $
    27,482
    
    
    $
    16,785
    
    
    $
    49,918Earnings per share
    
    $
    .44
    
    
    $
    .79
    
    
    $
    .48
    
    
    $
    1.43Weighted average shares outstanding
    
    
    35,001,120
    
    
    
    35,001,120
    
    
    
    35,001,120
    
    
    
    35,001,120
  2




---



##### Table of Contents



ALON USA ENERGY, INC., AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOW
(unaudited, dollars in thousands)
 For the Six Months EndedJune 30,2004
    
    2005Cash flows from operating activities:Net income
    
    $
    16,785
    
    
    $
    49,918Adjustments:Depreciation and amortization
    
    
    9,266
    
    
    
    9,852Stock option plan compensation
    
    
    238
    
    
    
    191Deferred income tax expense
    
    
    
    
    
    
    8,237Minority interest in income of subsidiaries
    
    
    1,700
    
    
    
    3,566Accrued interest on subordinated notes to stockholders
    
    
    2,114
    
    
    
    1,059Gain on disposition of assets
    
    
    (175
    )
    
    
    (29,223
    )Equity earnings in investee
    
    
    
    
    
    
    (412
    )Changes in operating assets and liabilities:Accounts and other receivables, net
    
    
    (24,980
    )
    
    
    (23,241
    )Inventories
    
    
    (9,276
    )
    
    
    (6,015
    )Prepaid expenses and other current assets
    
    
    1,270
    
    
    
    (1,369
    )Other assets
    
    
    2,354
    
    
    
    930Accounts payable and accrued liabilities
    
    
    25,612
    
    
    
    36,540Other non-current liabilities
    
    
    (982
    )
    
    
    (1,057
    )Net cash provided by operating activities
    
    
    23,926
    
    
    
    48,976Cash flows from investing activities:Capital expenditures
    
    
    (13,350
    )
    
    
    (16,459
    )Turnaround and chemical catalyst expenditures
    
    
    (1,500
    )
    
    
    (10,781
    )Proceeds from disposition of assets, net
    
    
    328
    
    
    
    118,000Acquisition in minority interest in subsidiary
    
    
    (10,000
    )
    
    
    Distributions from investee
    
    
    
    
    
    
    516Net cash (used in) provided by investing activities
    
    
    (24,522
    )
    
    
    91,276Cash flows from financing activities:Minority interest shares purchased
    
    
    
    
    
    
    (2,717
    )Payments received for shares issued
    
    
    140
    
    
    
    Dividends paid to minority interest owners
    
    
    
    
    
    
    (1,482
    )Net payments on revolving credit facilities
    
    
    (19,600
    )
    
    
    Deferred debt issuance costs
    
    
    (1,885
    )
    
    
    Additions to long-term debt
    
    
    99,161
    
    
    
    2,932Payments on long-term debt
    
    
    (45,133
    )
    
    
    (33,796
    )Net cash provided by (used in) financing activities
    
    
    32,683
    
    
    
    (35,063
    )Net increase in cash and cash equivalents
    
    
    32,087
    
    
    
    105,189Cash and cash equivalents, beginning of period
    
    
    7,256
    
    
    
    63,357Cash and cash equivalents, end of period
    
    $
    39,343
    
    
    $
    168,546Supplemental cash flow information:Cash paid for interest
    
    $
    6,552
    
    
    $
    7,782Cash paid for income tax
    
    $
    1,802
    
    
    $
    12,447Financing activity  receipt of Class B HEP subordinated units as proceeds
from disposition of assets
    
    $
    
    
    
    $
    30,000
  3




---



##### Table of Contents



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
       (2) Sale of Pipelines and Terminals
 HEP Transaction.
  4




---



##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands, except as noted)
    (3) New Accounting Standards
    5




---



##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands, except as noted)
 Accounting for Income Taxes, Accounting for Income Taxes,
    (4) Segment Data
  (a) Refining and Marketing Segment
  (b) Retail Segment
  6




---



##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands, except as noted)
 (c) Corporate/Other
     Three Months Ended June 30, 2005Refining and
    
    
    
    
    
    CorporateMarketing
    
    Retail
    
    and other
    
    Eliminations
    
    ConsolidatedNet sales:Unaffiliated customers
    
    $
    503,182
    
    
    $
    87,184
    
    
    $
    
    
    
    $
    
    
    
    $
    590,366Intersegment
    
    
    39,592
    
    
    
    
    
    
    
    
    
    
    
    (39,592
    )
    
    
    Total net sales
    
    $
    542,774
    
    
    $
    87,184
    
    
    $
    
    
    
    $
    (39,592
    )
    
    $
    590,366Operating income (loss)
    
    $
    49,379
    
    
    $
    702
    
    
    $
    (606
    )
    
    $
    
    
    
    $
    49,475Interest expense
    
    
    (3,866
    )
    
    
    (879
    )
    
    
    
    
    
    
    
    
    
    
    (4,745
    )Other income, net
    
    
    268
    
    
    
    
    
    
    
    839
    
    
    
    
    
    
    
    1,107Income (loss) before
income tax expense
and minority interest
    
    $
    45,781
    
    
    $
    (177
    )
    
    $
    233
    
    
    $
    
    
    
    $
    45,837Total assets
    
    $
    529,673
    
    
    $
    70,884
    
    
    $
    12,325
    
    
    $
    
    
    
    $
    612,882Depreciation and amortization
    
    
    3,489
    
    
    
    1,051
    
    
    
    478
    
    
    
    
    
    
    
    5,018Capital expenditures
    
    
    4,723
    
    
    
    1,021
    
    
    
    16
    
    
    
    
    
    
    
    5,760
 Three Months Ended June 30, 2004Refining and
    
    
    
    
    
    CorporateMarketing
    
    Retail
    
    and other
    
    Eliminations
    
    ConsolidatedNet sales:Unaffiliated customers
    
    $
    361,260
    
    
    $
    78,919
    
    
    $
    
    
    
    $
    
    
    
    $
    440,179Intersegment
    
    
    30,826
    
    
    
    
    
    
    
    
    
    
    
    (30,826
    )
    
    
    Total net sales
    
    $
    392,086
    
    
    $
    78,919
    
    
    $
    
    
    
    $
    (30,826
    )
    
    $
    440,179Operating income (loss)
    
    $
    33,335
    
    
    $
    1,040
    
    
    $
    (560
    )
    
    $
    
    
    
    $
    33,815Interest expense
    
    
    (4,870
    )
    
    
    (806
    )
    
    
    
    
    
    
    
    
    
    
    (5,676
    )Other income, net
    
    
    64
    
    
    
    
    
    
    
    (13
    )
    
    
    
    
    
    
    51Income (loss) before
income tax expense
and minority interest
    
    $
    28,529
    
    
    $
    234
    
    
    $
    (573
    )
    
    $
    
    
    
    $
    28,190Total assets
    
    $
    376,413
    
    
    $
    71,309
    
    
    $
    12,861
    
    
    $
    
    
    
    $
    460,583Depreciation and amortization
    
    
    3,063
    
    
    
    1,008
    
    
    
    433
    
    
    
    
    
    
    
    4,504Capital expenditures
    
    
    11,500
    
    
    
    974
    
    
    
    129
    
    
    
    
    
    
    
    12,603
 7




---



##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands, except as noted)
 Six Months Ended June 30, 2005Refining and
    
    
    
    
    
    CorporateMarketing
    
    Retail
    
    and other
    
    Eliminations
    
    ConsolidatedNet sales:Unaffiliated customers
    
    $
    837,260
    
    
    $
    161,080
    
    
    $
    
    
    
    $
    
    
    
    $
    998,340Intersegment
    
    
    72,448
    
    
    
    
    
    
    
    
    
    
    
    (72,448
    )
    
    
    Total net sales
    
    $
    909,708
    
    
    $
    161,080
    
    
    $
    
    
    
    $
    (72,448
    )
    
    $
    998,340Operating income (loss)
    
    $
    94,167
    
    
    $
    791
    
    
    $
    (1,205
    )
    
    $
    
    
    
    $
    93,753Interest expense
    
    
    (8,012
    )
    
    
    (1,740
    )
    
    
    
    
    
    
    
    
    
    
    (9,752
    )Other income, net
    
    
    387
    
    
    
    
    
    
    
    1,105
    
    
    
    
    
    
    
    1,492Income (loss) before
income tax expense
and minority interest
    
    $
    86,542
    
    
    $
    (949
    )
    
    $
    (100
    )
    
    $
    
    
    
    $
    85,493Total assets
    
    $
    529,673
    
    
    $
    70,884
    
    
    $
    12,325
    
    
    $
    
    
    
    $
    612,882Depreciation and amortization
    
    
    6,800
    
    
    
    2,103
    
    
    
    949
    
    
    
    
    
    
    
    9,852Capital expenditures
    
    
    25,050
    
    
    
    2,030
    
    
    
    160
    
    
    
    
    
    
    
    27,240
 Six Months Ended June 30, 2004Refining and
    
    
    
    
    
    CorporateMarketing
    
    Retail
    
    and other
    
    Eliminations
    
    ConsolidatedNet sales:Unaffiliated customers
    
    $
    645,883
    
    
    $
    147,019
    
    
    $
    
    
    
    $
    
    
    
    $
    792,902Intersegment
    
    
    55,895
    
    
    
    
    
    
    
    
    
    
    
    (55,895
    )
    
    
    Total net sales
    
    $
    701,778
    
    
    $
    147,019
    
    
    $
    
    
    
    $
    (55,895
    )
    
    $
    792,902Operating income (loss)
    
    $
    43,152
    
    
    $
    518
    
    
    $
    (1,104
    )
    
    $
    
    
    
    $
    42,566Interest expense
    
    
    (10,057
    )
    
    
    (1,634
    )
    
    
    
    
    
    
    
    
    
    
    (11,691
    )Other income, net
    
    
    64
    
    
    
    (5
    )
    
    
    85
    
    
    
    
    
    
    
    144Income (loss) before
income tax expense
and minority interest
    
    $
    33,159
    
    
    $
    (1,121
    )
    
    $
    (1,019
    )
    
    $
    
    
    
    $
    31,019Total assets
    
    $
    376,413
    
    
    $
    71,309
    
    
    $
    12,861
    
    
    $
    
    
    
    $
    460,583Depreciation and amortization
    
    
    6,350
    
    
    
    2,066
    
    
    
    850
    
    
    
    
    
    
    
    9,266Capital expenditures
    
    
    13,222
    
    
    
    1,216
    
    
    
    412
    
    
    
    
    
    
    
    14,850
 (5) Cash and Cash Equivalents
  (6) Inventories
  8




---



##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands, except as noted)
  December 31,
    
    June 30,2004
    
    2005Crude oil, refined products, and blendstocks
    
    $
    58,412
    
    
    $
    62,921Materials and supplies
    
    
    5,570
    
    
    
    5,577Store merchandise
    
    
    12,860
    
    
    
    13,570Store fuel
    
    
    2,487
    
    
    
    3,276Total inventories
    
    $
    79,329
    
    
    $
    85,344
  (7) Investment in HEP
  (8) Property, Plant, and Equipment
  December 31,
    
    June 30,2004
    
    2005Refining facilities
    
    $
    149,016
    
    
    $
    162,410Pipelines and terminals
    
    
    69,289
    
    
    
    26,227Retail
    
    
    59,543
    
    
    
    61,695Other
    
    
    9,323
    
    
    
    10,125Property, plant, and equipment, gross
    
    
    287,171
    
    
    
    260,457Less accumulated depreciation
    
    
    (50,943
    )
    
    
    (53,188
    )Property, plant, and equipment, net
    
    $
    236,228
    
    
    $
    207,269
  (9) Employee and Postretirement Benefits
  9




---



##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands, except as noted)
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2004
    
    2005
    
    2004
    
    2005Components of net periodic benefit cost:Service cost
    
    $
    332
    
    
    $
    347
    
    
    $
    663
    
    
    $
    693Interest cost
    
    
    457
    
    
    
    478
    
    
    
    913
    
    
    
    957Expected return on plan assets
    
    
    (347
    )
    
    
    (414
    )
    
    
    (694
    )
    
    
    (827
    )Amortization of net loss
    
    
    140
    
    
    
    166
    
    
    
    282
    
    
    
    332Net periodic benefit cost
    
    $
    582
    
    
    $
    577
    
    
    $
    1,164
    
    
    $
    1,155
 (10) Long-Term Debt
 Revolving Credit Facility
   Debt Repayment
  Guarantees and Restrictions
  (11) Stock Based Compensation
   10




---



##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands, except as noted)
  (12) Stockholders Equity
 (a) Stock Split
  (b) Special Dividends
  (13) Earnings Per Share
  (14) Commitments and Contingencies
 (a) Other Commitments
  (b) Other Contingencies
  (c) Environmental
  11




---



##### Table of Contents



ALON USA ENERGY, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in thousands, except as noted)
   (15) Subsequent Event  Initial Public Offering of Alon
   12




---



##### Table of Contents



Item 1.
(b) Schedules to the Financial Statements (Parent Only)  Schedule I
 ALON USA ENERGY, INC. (PARENT COMPANY ONLY)
 
 CONDENSED BALANCE SHEETS
(dollars in thousands)
 December 31,
    
    June 30,2004
    
    2005(Unaudited)ASSETSCurrent assets
    
    $
    2,126
    
    
    $
    4,929Investment in subsidiary
    
    
    111,558
    
    
    
    137,068Total assets
    
    $
    113,684
    
    
    $
    141,997LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities
    
    $
    511
    
    
    $
    Long-term debt
    
    
    41,701
    
    
    
    20,607Total liabilities
    
    
    42,212
    
    
    
    20,607Shareholders equity:Shareholders investment
    
    
    8,729
    
    
    
    8,729Accumulated other comprehensive loss
    
    
    (2,261
    )
    
    
    (2,261
    )Retained earnings
    
    
    65,004
    
    
    
    114,922Total stockholders equity
    
    
    71,472
    
    
    
    121,390Total liabilities and stockholders equity
    
    $
    113,684
    
    
    $
    141,997
 13




---



##### Table of Contents



ALON USA ENERGY, INC. (PARENT COMPANY ONLY)
 
 CONDENSED STATEMENTS OF OPERATIONS
(unaudited, dollars in thousands)
 For the Three Months Ended
    
    For the Six Months EndedJune 30,
    
    June 30,2004
    
    2005
    
    2004
    
    2005General and administrative expenses
    
    $
    1
    
    
    $
    
    
    
    $
    3
    
    
    $
    Interest expense
    
    
    700
    
    
    
    354
    
    
    
    1,379
    
    
    
    979Loss before income tax benefit and equity earnings
in subsidiary
    
    
    (701
    )
    
    
    (354
    )
    
    
    (1,382
    )
    
    
    (979
    )Income tax benefit
    
    
    (269
    )
    
    
    (140
    )
    
    
    (537
    )
    
    
    (387
    )Loss before equity earnings in subsidiary
    
    
    (432
    )
    
    
    (214
    )
    
    
    (845
    )
    
    
    (592
    )Equity earnings in subsidiary
    
    
    15,720
    
    
    
    27,696
    
    
    
    17,630
    
    
    
    50,510Net income
    
    $
    15,288
    
    
    $
    27,482
    
    
    $
    16,785
    
    
    $
    49,918
 14




---



##### Table of Contents



ALON USA ENERGY, INC. (PARENT COMPANY ONLY)
 
 CONDENSED STATEMENTS OF CASH FLOWS
(unaudited, dollars in thousands)
 For the Six MonthsEnded June 30,2004
    
    2005Cash flows from operating activities:Net income
    
    $
    16,785
    
    
    $
    49,918Adjustments:Accrued interest on subordinated notes to stockholders
    
    
    1,379
    
    
    
    979Equity earnings in subsidiary
    
    
    (17,630
    )
    
    
    (50,510
    )Changes in operating assets and liabilities:Accounts payable and accrued liabilities
    
    
    (2,196
    )
    
    
    (2,393
    )Net cash used in operating activities
    
    
    (1,662
    )
    
    
    (2,006
    )Cashflows from investing activities:Dividends received from subsidiary
    
    
    
    
    
    
    25,000Net cash provided by investing activities
    
    
    
    
    
    
    25,000Cash flows from financing activities:Stock issuance and payments from stockholders
    
    
    140
    
    
    
    Additions to long-term debt
    
    
    2,727
    
    
    
    2,927Payments on long-term debt
    
    
    
    
    
    
    (25,000
    )Net cash provided by (used in) financing activities
    
    
    2,867
    
    
    
    (22,073
    )Net increase in cash and cash equivalents
    
    
    1,205
    
    
    
    921Cash and cash equivalents, beginning of period
    
    
    264
    
    
    
    44Cash and cash equivalents, end of period
    
    $
    1,469
    
    
    $
    965
 15




---



##### Table of Contents



ALON
USA ENERGY, INC. (PARENT COMPANY ONLY)
 
 NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited, dollars in thousands)
 (1) Basis of Presentation
    (2) Long-Term Debt
  (3) Dividends Received
  16




---



##### 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 Managements Discussion and Analysis of Financial Condition and the
consolidated financial statements and notes thereto for the year ended December 31, 2004 included
in our registration statement on Form S-1 (Registration No. 333-124797) declared effective by the
U.S. Securities Exchange Commission (SEC) on July 27, 2005. The terms 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;
    
    actions of customers and competitors;
    
    changes in fuel and utility costs incurred by our facilities;
    
    disruptions due to equipment interruption, pipeline disruptions or failure at our or third-party facilities;
    
    the execution of planned capital projects;
    
    adverse changes in the credit ratings assigned to our trade credit and debt instruments;
    
    the effects of and cost of compliance with current and future state and federal
environmental, economic, safety and other laws, policies and regulations;
    
    operating hazards, natural disasters, casualty losses and other matters beyond our
control; and
    
    the other factors discussed in our registration statement on Form S-1 (Registration No.
333-124797) under the caption Risk Factors.
 17




---



##### Table of Contents



Company Overview
  Refining and Marketing Segment.
  Retail Segment.
 Summary of Recent Developments
   
    
    Net sales increased $205.4 million to $998.3 million and operating income increased
$51.2 million to $93.8 million for the first six months of 2005, compared to the first six
months of 2004.
    
    Our average refinery operating margin increased $2.74 per barrel to $11.33 per barrel
for the first six months of 2005, compared to the first six months of 2004.
    
    Our capital expenditures and turnaround spending totaled approximately $27.2 million, of
which $12.6 million was spent on a major turnaround and the completion of crude throughput
expansion from 62,000 bpd to 70,000 bpd in February 2005.
  18




---



##### Table of Contents



Major Influences on Results of Operations
 Refining and Marketing.
       Retail.
 19




---



##### Table of Contents



Outlook
    Factors Affecting Comparability
      20




---



##### Table of Contents



Results of Operations
 Net Sales.
 Cost of Sales.
 Direct Operating Expenses.
 Selling, General and Administrative Expenses.
 21




---



##### Table of Contents



Summary Financial Tables.
 ALON USA ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED
 For the Three Months Ended
    
    For the Six Months EndedJune 30,
    
    June 30,2004
    
    2005
    
    2004
    
    2005STATEMENT OF OPERATIONS DATA:Net sales
    
    $
    440,179
    
    
    $
    590,366
    
    
    $
    792,902
    
    
    $
    998,340Operating costs and expenses:Cost of sales
    
    
    365,046
    
    
    
    498,047
    
    
    
    668,026
    
    
    
    849,601Direct operating expenses
    
    
    17,781
    
    
    
    20,373
    
    
    
    36,693
    
    
    
    38,709Selling, general and administrative expenses
(a)
    
    
    19,208
    
    
    
    18,983
    
    
    
    36,526
    
    
    
    35,648Depreciation and amortization (b)
    
    
    4,504
    
    
    
    5,018
    
    
    
    9,266
    
    
    
    9,852Total operating costs and expenses
    
    
    406,539
    
    
    
    542,421
    
    
    
    750,511
    
    
    
    933,810Gain on disposition of assets (c)
    
    
    175
    
    
    
    1,530
    
    
    
    175
    
    
    
    29,223Operating income
    
    
    33,815
    
    
    
    49,475
    
    
    
    42,566
    
    
    
    93,753Interest expense
    
    
    5,676
    
    
    
    4,745
    
    
    
    11,691
    
    
    
    9,752Equity earnings in investee
    
    
    
    
    
    
    (277
    )
    
    
    
    
    
    
    (412
    )Other income, net
    
    
    (51
    )
    
    
    (830
    )
    
    
    (144
    )
    
    
    (1,080
    )Income tax expense
    
    
    11,415
    
    
    
    16,354
    
    
    
    12,534
    
    
    
    32,009Minority interest in income of subsidiaries
    
    
    1,487
    
    
    
    2,001
    
    
    
    1,700
    
    
    
    3,566Net income
    
    $
    15,288
    
    
    $
    27,482
    
    
    $
    16,785
    
    
    $
    49,918Earnings per share (d)
    
    $
    .44
    
    
    $
    .79
    
    
    $
    .48
    
    
    $
    1.43Weighted average shares outstanding (d)
    
    
    35,001,120
    
    
    
    35,001,120
    
    
    
    35,001,210
    
    
    
    35,001,120OTHER DATA:Adjusted EBITDA (e)
    
    $
    38,195
    
    
    $
    54,070
    
    
    $
    51,801
    
    
    $
    75,874Capital expenditures, net of disposition proceeds
    
    
    21,880
    
    
    
    5,361
    
    
    
    23,022
    
    
    
    (101,541
    )Capital expenditures for turnarounds and catalysts
    
    
    410
    
    
    
    399
    
    
    
    1,500
    
    
    
    10,781CASH FLOW DATA:Net cash provided by (used in):Operating activities
    
    $
    35,126
    
    
    $
    65,413
    
    
    $
    23,926
    
    
    $
    48,976Investing activities
    
    
    (22,290
    )
    
    
    (5,244
    )
    
    
    (24,522
    )
    
    
    91,276Financing activities
    
    
    3,271
    
    
    
    (612
    )
    
    
    32,683
    
    
    
    (35,063
    )BALANCE SHEET DATA (end of period):Cash and cash equivalents
    
    
    
    
    
    
    
    
    
    $
    39,343
    
    
    $
    168,546Working capital
    
    
    
    
    
    
    
    
    
    
    63,152
    
    
    
    147,806Total assets
    
    
    
    
    
    
    
    
    
    
    460,583
    
    
    
    612,882Total debt
    
    
    
    
    
    
    
    
    
    
    196,924
    
    
    
    157,901Stockholders equity
    
    
    
    
    
    
    
    
    
    
    63,848
    
    
    
    121,390
 
 (a)
    
    Includes corporate headquarters selling, general and administrative expenses of $127, and
$128 for the three months ended June 30, 2004 and 2005, respectively, and $254 and $256 for
the six months ended June 30, 2004 and 2005, respectively, which are not allocated to our two
operating segments.(b)
    
    Includes corporate depreciation and amortization of $433, and $478 for the three months ended
June 30, 2004 and 2005, respectively, and $850 and $949 for the six months ended June 30, 2004
and 2005, respectively, which are not allocated to our two operating segments.(c)
    
    Gain on disposition of assets reported in the six months ended June 30, 2005, reflects the
initial pre-tax gain recognized in connection with assets contributed in the HEP transaction
and the monthly recognition of the deferred gain recorded in connection with the HEP
transaction. 22




---



##### Table of Contents



(d)
    
    Weighted average common shares outstanding and earnings per common share amounts for the
three and six months ended June 30, 2004 and 2005, have been restated to reflect the effect of
a 33,600-for-one split of Alons common stock which was effected on July 6, 2005.(e)
    
    See  Reconciliation of Amounts Reported Under Generally Accepted Accounting Principles for
information regarding our definition of Adjusted EBITDA, its limitations as an analytical tool
and a reconciliation of net income to Adjusted EBITDA for the periods presented. 23




---



##### Table of Contents



REFINING AND MARKETING SEGMENT
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2004
    
    2005
    
    2004
    
    2005(unaudited, dollars in thousands, except forper barrel and pricing statistics)STATEMENT OF OPERATIONS DATA:Net sales (a)
    
    $
    392,086
    
    
    $
    542,774
    
    
    $
    701,778
    
    
    $
    909,708Operating Costs and Expenses:Cost of sales
    
    
    331,398
    
    
    
    464,656
    
    
    
    603,995
    
    
    
    788,170Direct operating expenses
    
    
    17,781
    
    
    
    20,373
    
    
    
    36,693
    
    
    
    38,709Selling, general and administrative expenses
    
    
    6,509
    
    
    
    6,407
    
    
    
    11,588
    
    
    
    11,085Depreciation and amortization
    
    
    3,063
    
    
    
    3,489
    
    
    
    6,350
    
    
    
    6,800Total operating costs and expenses
    
    
    358,751
    
    
    
    494,925
    
    
    
    658,626
    
    
    
    844,764Gain on disposition of assets (b)
    
    
    
    
    
    
    1,530
    
    
    
    
    
    
    
    29,223Operating income
    
    $
    33,335
    
    
    $
    49,379
    
    
    $
    43,152
    
    
    $
    94,167KEY OPERATING STATISTICS:Total sales volume (bpd)
    
    
    89,479
    
    
    
    95,217
    
    
    
    85,816
    
    
    
    83,799Non-integrated marketing sales volume (bpd)
    
    
    19,629
    
    
    
    20,543
    
    
    
    19,682
    
    
    
    20,304Non-integrated marketing margin (per barrel sales
volume) (c)
    
    $
    0.25
    
    
    $
    .26
    
    
    $
    .14
    
    
    $
    (.32
    )Per barrel of throughput:Refinery operating margin (d)
    
    $
    10.58
    
    
    $
    11.83
    
    
    $
    8.59
    
    
    $
    11.33Direct operating expenses
    
    
    3.12
    
    
    
    3.10
    
    
    
    3.24
    
    
    
    3.57PRICING STATISTICS:WTI crude oil (per barrel)
    
    $
    38.31
    
    
    $
    53.00
    
    
    $
    36.77
    
    
    $
    51.39WTS crude oil (per barrel)
    
    
    35.44
    
    
    
    49.26
    
    
    
    33.57
    
    
    
    46.98Crack spreads (3/2/1) (per barrel):Gulf Coast
    
    $
    9.09
    
    
    $
    10.18
    
    
    $
    7.91
    
    
    $
    8.44Group III
    
    
    11.51
    
    
    
    11.62
    
    
    
    9.18
    
    
    
    9.80Crude differentials (per barrel):WTI less WTS
    
    $
    2.87
    
    
    $
    3.74
    
    
    $
    3.20
    
    
    $
    4.41Product price (per gallon):Gulf Coast unleaded
    
    
    120.0
    ¢
    
    
    147.8
    ¢
    
    
    111.6
    ¢
    
    
    140.2
    ¢Gulf Coast low-sulfur diesel
    
    
    98.7
    
    
    
    155.8
    
    
    
    96.0
    
    
    
    147.0Group III unleaded
    
    
    124.9
    
    
    
    151.3
    
    
    
    114.3
    
    
    
    143.7Group III low-sulfur diesel
    
    
    106.0
    
    
    
    158.9
    
    
    
    99.7
    
    
    
    149.8Natural gas (per MMBTU)
    
    $
    6.16
    
    
    $
    6.95
    
    
    $
    5.94
    
    
    $
    6.73
 THROUGHPUT AND YIELD DATA:
 For the Three Months Ended
    
    For the Six Months EndedJune 30,
    
    June 30,2004
    
    2005
    
    2004
    
    2005Bpd
    
    %
    
    Bpd
    
    %
    
    Bpd
    
    %
    
    Bpd
    
    %Refinery crude throughput:Sour crude
    
    
    54,291
    
    
    
    91.2
    
    
    
    61,572
    
    
    
    89.7
    
    
    
    54,035
    
    
    
    91.8
    
    
    
    51,391
    
    
    
    91.2Sweet crude
    
    
    4,924
    
    
    
    8.8
    
    
    
    7,033
    
    
    
    10.3
    
    
    
    4,851
    
    
    
    8.2
    
    
    
    4,943
    
    
    
    8.8Total crude throughput
    
    
    59,215
    
    
    
    100.0
    
    
    
    68,605
    
    
    
    100.0
    
    
    
    58,886
    
    
    
    100.0
    
    
    
    56,334
    
    
    
    100.0Blendstocks
    
    
    3,363
    
    
    
    
    
    
    
    3,502
    
    
    
    
    
    
    
    3,456
    
    
    
    
    
    
    
    3,511Total refinery throughput (e)
    
    
    62,578
    
    
    
    
    
    
    
    72,107
    
    
    
    
    
    
    
    62,342
    
    
    
    
    
    
    
    59,845Refinery product yields (f):Gasoline
    
    
    29,045
    
    
    
    46.6
    
    
    
    31,340
    
    
    
    43.8
    
    
    
    29,228
    
    
    
    47.4
    
    
    
    26,478
    
    
    
    44.6Diesel/jet
    
    
    20,100
    
    
    
    32.2
    
    
    
    25,867
    
    
    
    36.1
    
    
    
    19,937
    
    
    
    31.9
    
    
    
    20,579
    
    
    
    34.6Asphalt
    
    
    6,325
    
    
    
    10.1
    
    
    
    6,374
    
    
    
    8.9
    
    
    
    5,714
    
    
    
    8.2
    
    
    
    5,341
    
    
    
    9.0Petrochemicals
    
    
    4,970
    
    
    
    8.0
    
    
    
    5,145
    
    
    
    7.2
    
    
    
    4,753
    
    
    
    7.3
    
    
    
    4,386
    
    
    
    7.4Other
    
    
    1,954
    
    
    
    3.1
    
    
    
    2,876
    
    
    
    4.0
    
    
    
    2,605
    
    
    
    5.2
    
    
    
    2,615
    
    
    
    4.4Total refined products manufactured
    
    
    62,394
    
    
    
    100.0
    
    
    
    71,602
    
    
    
    100.0
    
    
    
    62,237
    
    
    
    100.0
    
    
    
    59,399
    
    
    
    100.0
 24




---



##### Table of Contents



(a)
    
    Net sales include intersegment sales to our retail segment at prices which approximate market
price. These intersegment sales are eliminated through consolidation of our financial
statements.(b)
    
    Gain on disposition of assets in the first six months of 2005 reflects the initial pre-tax
gain and the monthly recognition of deferred gain recorded in connection with the HEP
transaction.(c)
    
    The non-integrated marketing sales volume represents refined products sales to our wholesale
marketing customers located in our non-integrated region. The refined products we sell in
this region are obtained from third-party suppliers. The non-integrated marketing margin
represents the margin between the net sales and cost of sales attributable to our
non-integrated refined products sales volume, expressed on a per barrel basis.(d)
    
    Refinery operating margin is a per barrel measurement calculated by dividing the margin
between net sales and cost of sales attributable to our refining and marketing segment,
exclusive of net sales and cost of sales relating to our non-integrated system, by our Big
Spring refinerys throughput volumes. Industry-wide refining results are driven and measured
by the margins between refined product prices and the prices for crude oil, which are referred
to as crack spreads. We compare our refinery operating margin to these crack spreads to
assess our operating performance relative to other participants in our industry.(e)
    
    Total refinery throughput represents the total of crude oil and blendstock inputs in the
refinery production process.(f)
    
    Total refinery yield represents the barrels per day of various finished products produced
from processing crude and other refinery feedstocks through the crude units and other
conversion units at the refinery. 25




---



##### Table of Contents



RETAIL SEGMENT
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2004
    
    2005
    
    2004
    
    2005(unaudited, dollars in thousands, except for per gallon data)STATEMENT OF OPERATIONS DATA:Net sales
    
    $
    78,919
    
    
    $
    87,184
    
    
    $
    147,019
    
    
    $
    161,080Operating Costs and Expenses:Cost of sales (a)
    
    
    64,474
    
    
    
    72,983
    
    
    
    119,926
    
    
    
    133,879Selling, general and administrative expenses
    
    
    12,572
    
    
    
    12,448
    
    
    
    24,684
    
    
    
    24,307Depreciation and amortization
    
    
    1,008
    
    
    
    1,051
    
    
    
    2,066
    
    
    
    2,103Total operating costs and expenses
    
    
    78,054
    
    
    
    86,482
    
    
    
    146,676
    
    
    
    160,289Gain on disposition of assets
    
    
    175
    
    
    
    
    
    
    
    175
    
    
    
    Operating income
    
    $
    1,040
    
    
    $
    702
    
    
    $
    518
    
    
    $
    791KEY OPERATING STATISTICS:Number of stores (end of period)
    
    
    167
    
    
    
    167
    
    
    
    167
    
    
    
    167Fuel sales (thousands of gallons)
    
    
    24,712
    
    
    
    24,678
    
    
    
    48,713
    
    
    
    48,066Fuel sales (thousands of gallons per site per month)
    
    
    49
    
    
    
    49
    
    
    
    49
    
    
    
    48Fuel margin (cents per gallon) (b)
    
    
    12.5
    ¢
    
    
    10.3
    ¢
    
    
    11.7
    ¢
    
    
    11.5
    ¢Fuel sales price (cents per gallon)
    
    
    156.0
    
    
    
    212.0
    
    
    
    188.0
    
    
    
    200.0Merchandise sales
    
    $
    34,292
    
    
    $
    34,860
    
    
    $
    64,946
    
    
    $
    64,855Merchandise sales (per site per month)
    
    
    68
    
    
    
    70
    
    
    
    65
    
    
    
    65Merchandise margin (c)
    
    
    33.1
    %
    
    
    33.5
    %
    
    
    32.9
    %
    
    
    33.4
    %
 
 (a)
    
    Cost of sales include intersegment purchases of motor fuels from our refining and marketing
segment at prices which approximate market prices. These intersegment sales are eliminated
through consolidation of our financial statements.(b)
    
    Fuel margin represents the difference between motor fuel revenues 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.(c)
    
    Merchandise margin represents the difference between merchandise sales revenues and the
delivered cost of merchandise purchases, net of rebates and commissions, expressed as a
percentage of merchandise sales revenues. Merchandise margins, also referred to as in-store
margins, are commonly used in the retail industry to measure in-store, or non-fuel, operating
results. Three Months Ended June 30, 2005 Compared to the Three Months Ended June 30, 2004
 Net Sales
 Consolidated.
 Refining and Marketing Segment.
 26




---



##### Table of Contents



Retail Segment.
 Cost of Sales
 Consolidated.
 Refining and Marketing Segment.
 Retail Segment.
 Direct Operating Expenses
  Selling, General and Administrative Expenses
 Consolidated.
 Refining and Marketing Segment
 Retail Segment.
 Depreciation and Amortization
  27




---



##### Table of Contents



Operating Income
 Consolidated
 Refining and Marketing Segment
 Retail Segment
 Interest Expense
  Income Tax Expense
  Minority Interest
  Net Income
  28




---



##### Table of Contents



Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004
 Net Sales
 Consolidated
 Refining and Marketing Segment
 Retail Segment.
 Cost of Sales
 Consolidated
 Refining and Marketing Segment
 Retail Segment
 Direct Operating Expenses
  29




---



##### Table of Contents



Selling, General and Administrative Expenses
 Consolidated
 Refining and Marketing Segment
 Retail Segment
 Depreciation and Amortization
  Operating Income
 Consolidated
 Refining
and Marketing Segment
 Retail Segment.
 Interest Expense
  30




---



##### Table of Contents



Income Tax Expense
  Minority Interest
  Net Income
  Liquidity and Capital Resources
  Cash Flow
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2004
    
    2005
    
    2004
    
    2005Non cash provided by (used in):Operating activities
    
    $
    35,126
    
    
    $
    65,413
    
    
    $
    23,926
    
    
    $
    48,976Investing activities
    
    
    (22,290
    )
    
    
    (5,244
    )
    
    
    (24,522
    )
    
    
    91,276Financing activities
    
    
    3,271
    
    
    
    (612
    )
    
    
    32,683
    
    
    
    (35,063
    )Net increase in cash and cash equivalents
    
    $
    16,107
    
    
    $
    59,557
    
    
    $
    32,087
    
    
    $
    105,189
 Cash Flows Provided By Operating Activities
  31




---



##### Table of Contents



Cash Flows Provided By (Used In) Investing Activities
  Cash Flows Provided By (Used In) Financing Activities
  Initial Public Offering of Alon USA Energy, Inc.
    Cash Position and Indebtedness.
    32




---



##### Table of Contents



Capital Spending.
  Clean Air Capital Expenditures.
  Turnaround and Chemical Catalyst Costs.
 Contractual Obligations and Commercial Commitments
  Payments Due by PeriodLess Than
    
    
    
    
    
    
    
    
    
    More ThanContractual Obligations
    
    1 Year
    
    1-3 Years
    
    3-5 Years
    
    5 Years
    
    Total(dollars in thousands)Long-term debt obligations (a)
    
    $
    4,904
    
    
    $
    13,873
    
    
    $
    97,122
    (b)
    
    $
    42,002
    
    
    $
    157,901Operating lease obligations
    
    
    5,807
    
    
    
    28,070
    
    
    
    14,182
    
    
    
    7,540
    
    
    
    55,599Pipelines and Terminals Agreement (c)
    
    
    9,811
    
    
    
    58,863
    
    
    
    39,242
    
    
    
    179,859
    
    
    
    287,775Other commitments (d)
    
    
    3,747
    
    
    
    12,483
    
    
    
    5,654
    
    
    
    34,636
    
    
    
    56,520Total obligations
    
    $
    24,269
    
    
    $
    113,289
    
    
    $
    156,200
    
    
    $
    264,037
    
    
    $
    557,795
 
 (a)
    
    We repaid approximately $24.3 million of outstanding debt with a portion of the proceeds
received from our initial public offering, of which $3.6 million was due within one year and
$20.7 million was due within five years.(b)
    
    Includes $92.5 million of indebtedness owed under our term loan. We have the right to prepay
our term loan commencing in January 2006. We intend to repay all amounts outstanding under
the term loan in the first quarter of 2006.(c)
    
    Balances represent the minimum committed volume multiplied by the tariff and terminal rates
pursuant to the terms of the Pipelines and Terminals Agreement with HEP. See Business 
Pipelines and Product Terminals  HEP transaction. 33




---



##### Table of Contents



(d)
    
    Other commitments include refinery maintenance services costs and management fees to our
parent. These management fees were terminated in connection with our initial public offering
for an aggregate payment of $6.0 million, of which $2.0 million is payable in August 2005 and
the remaining $4.0 million is due in the first quarter of 2006.
 Off-Balance Sheet Arrangements
  Critical Accounting Policies
   Reconciliation of Amounts Reported Under Generally Accepted Accounting Principles
 Reconciliation of earnings before minority interest, income tax expense, interest expense,
depreciation, amortization and gain on disposition of assets (EBITDA) to amounts reported under
generally accepted accounting principles in financial statements.
   
    
    Adjusted EBITDA does not reflect our cash expenditures or future requirements for
capital expenditures or contractual commitments;
    
    Adjusted EBITDA does not reflect the interest expense or the cash requirements necessary
to service interest or principal payments on our debt;
    
    Adjusted EBITDA does not reflect the prior claim that minority stockholders have on the
income generated by our non-wholly- owned subsidiaries;
    
    Adjusted EBITDA does not reflect changes in or cash requirements for our working capital
needs; and
    
    Our calculation of Adjusted EBITDA may differ from the EBITDA calculations of other
companies in our industry, limiting its usefulness as a comparative measure.
 34




---



##### Table of Contents



For the Three Months Ended
    
    For the Six Months EndedJune 30,
    
    June 30,2004
    
    2005
    
    2004
    
    2005(dollars in thousands)Net income
    
    $
    15,288
    
    
    $
    27,482
    
    
    $
    16,785
    
    
    $
    49,918Minority interest
    
    
    1,487
    
    
    
    2,001
    
    
    
    1,700
    
    
    
    3,566Income Tax Expense
    
    
    11,415
    
    
    
    16,354
    
    
    
    12,534
    
    
    
    32,009Interest Expense
    
    
    5,676
    
    
    
    4,745
    
    
    
    11,691
    
    
    
    9,752Depreciation and amortization
    
    
    4,504
    
    
    
    5,018
    
    
    
    9,266
    
    
    
    9,852Gain on disposition of assets
    
    
    (175
    )
    
    
    (1,530
    )
    
    
    (175
    )
    
    
    (29,223
    )Adjusted EBITDA
    
    $
    38,195
    
    
    $
    54,070
    
    
    $
    51,801
    
    
    $
    75,874
 New Accounting Standards and Disclosures
    Accounting for Income Taxes, Accounting for Income Taxes,
 35




---



##### Table of Contents



Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
  Commodity Price Risk.
     36




---



##### Table of Contents



Interest Rate Risk.
  
 Item 4. CONTROLS AND PROCEDURES
 (a) Evaluation of disclosure controls and procedures.
  (b) Changes in internal control over financial reporting.
  37




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
 Use of Proceeds
    
    
    payment of a dividend in the amount of approximately $65.7 million to Alon Israel Oil
Company, Ltd., a stockholder of the Company;
    
    payment of a dividend in the amount of approximately $2.7 million to Tabris Investments
Inc., a stockholder of the Company;
    
    payment of a dividend in the amount of approximately $4.7 million to the minority
stockholders of Alon USA Operating, Inc., a subsidiary of the Company; and
    
    approximately $20.7 million was used to repay debt due to our parent company, Alon
Israel, and $3.6 million was used to repay debt due to Atofina Petrochemicals, Inc.
 
 Item 4. Submission of Matters to a Vote Security Holders
  
 Item 6. Exhibits
 ExhibitNumber
    
    Description of Exhibit3.1
    
    Amended Restated Certificate of Incorporation of Alon USA Energy, Inc. (previously filed as
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. (previously filed as 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 (previously filed as Exhibit 4.1 to Form S-1, filed by the
Company on June 17, 2005, SEC File No. 333-124797).
 38




---



##### Table of Contents



ExhibitNumber
    
    Description of Exhibit10.1
    
    Second Amendment, dated as of May 6, 2005, to the Amended and Restated Credit Agreement, dated
as of January 14, 2004, among Alon USA Energy, Inc., the lenders listed therein and Credit
Suisse First Boston (previously filed as Exhibit 10.18 to Form S-1, filed by the Company on
June 17, 2005, SEC File No. 333-124797).10.2
    
    Second Amendment, dated as of June 16, 2005, to the Amended Revolving Credit Agreement, dated
as of January 14, 2005, among Alon USA, LP, the guarantor companies and financial institutions
identified therein and Israel Discount Bank of New York (previously filed as Exhibit 10.20.1 to
Form S-1, filed by the Company on June 17, 2005, SEC File No. 333-124797).10.3
    
    Amendment, dated as of June 17, 2005, to the Management and Consulting Agreement, dated as of
August 1, 2003, among Alon USA, Inc., Alon Israel Oil Company, Ltd. and Alon USA Energy, Inc.
(previously filed as Exhibit 10.21.1 to Form S-1, filed by the Company on June 17, 2005, SEC
File No. 333-124797).10.4
    
    Registration Rights Agreement, dated as of July 6, 2005, between Alon USA Energy, Inc. and Alon
Israel Oil Company, Ltd. (previously filed as Exhibit 10.22 to Form S-1, filed by the Company
on July 7, 2005, SEC File No. 333-124797).10.5
    
    Executive Employment Agreement, dated as of July 31, 2000, between Jeff D. Morris and Alon USA
GP, Inc., as amended on May 4, 2005 (previously filed as Exhibit 10.23 to Form S-1, filed by
the Company on May 11, 2005, SEC File No. 333-124797).10.6
    
    Executive Employment Agreement, dated as of July 31, 2000, between Claire A. Hart and Alon USA
GP, Inc., as amended on May 4, 2005 (previously filed as Exhibit 10.24 to Form S-1, filed by
the Company on May 11, 2005, SEC File No. 333-124797).10.7
    
    Executive Employment Agreement, dated as of February 5, 2001, between Joseph A. Concienne, III
and Alon USA GP, Inc., as amended on May 4, 2005 (previously filed as Exhibit 10.25 to Form
S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.8
    
    Management Employment Agreement, dated as of October 1, 2002, between Harlin R. Dean and Alon
USA GP, LLC, as amended on May 4, 2005 (previously filed as Exhibit 10.26 to Form S-1, filed by
the Company on May 11, 2005, SEC File No. 333-124797).10.9
    
    Description of Director Compensation (previously filed as Exhibit 10.30 to Form S-1, filed by
the Company on May 11, 2005, SEC File No. 333-124797).10.10
    
    Form of Director Indemnification Agreement (previously filed as Exhibit 10.31 to Form S-1,
filed by the Company on May 11, 2005, SEC File No. 333-124797).10.11
    
    Form of Officer Indemnification Agreement (previously filed as Exhibit 10.32 to Form S-1, filed
by the Company on May 11, 2005, SEC File No. 333-124797).10.12
    
    Form of Director and Officer Indemnification Agreement (previously filed as Exhibit 10.33 to
Form S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.13
    
    Agreement of Principles of Employment, dated as of July 6, 2005, between David Wiessman and
Alon USA Energy, Inc. (previously filed as Exhibit 10.50 to Form S-1, filed by the Company on
July 7, 2005, SEC File No. 333-124797).10.14
    
    Alon USA Energy, Inc. 2005 Incentive Compensation Plan. (previously filed as Exhibit 10.51 to
Form S-1, filed by the Company on July 7, 2005, SEC File No. 333-124797).10.15
    
    Agreement, dated as of July 6, 2005, by and among Alon USA Energy, Inc., Alon USA, Inc., Alon
USA Capital, Inc., Alon USA Operating, Inc., Alon Assets, Inc., Jeff D. Morris, Claire A. Hart
and Joseph A. Concienne, III (previously filed as Exhibit 10.52 to Form S-1, filed by the
Company on July 7, 2005, SEC File No. 333-124797).31.1
    
    Certifications of Chief Executive Officer pursuant to §302 of the Sarbanes-Oxley Act of 2002.
 39




---



##### Table of Contents



ExhibitNumber
    
    Description of Exhibit31.2
    
    Certifications of Chief Financial Officer pursuant to §302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
§1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Furnished herewith. 40




---



##### Table of Contents



SIGNATURES
  ALON USA ENERGY, INC.Date: August 22, 2005
    By:

/s/ David WiessmanDavid WiessmanExecutive Chairman Date: August 22, 2005
    By:

/s/ Jeff D. MorrisJeff D. MorrisChief Executive Officer Date: August 22, 2005
    By:

/s/ Shai EvenShai EvenChief Financial Officer 41




---



##### Table of Contents



EXHIBITS
 ExhibitNumber
    
    Description of Exhibit3.1
    
    Amended Restated Certificate of Incorporation of Alon USA Energy, Inc. (previously filed as
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. (previously filed as 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 (previously filed as Exhibit 4.1 to Form S-1, filed by the
Company on June 17, 2005, SEC File No. 333-124797).10.1
    
    Second Amendment, dated as of May 6, 2005, to the Amended and Restated Credit Agreement, dated
as of January 14, 2004, among Alon USA Energy, Inc., the lenders listed therein and Credit
Suisse First Boston (previously filed as Exhibit 10.18 to Form S-1, filed by the Company on
June 17, 2005, SEC File No. 333-124797).10.2
    
    Second Amendment, dated as of June 16, 2005, to the Amended Revolving Credit Agreement, dated
as of January 14, 2005, among Alon USA, LP, the guarantor companies and financial institutions
identified therein and Israel Discount Bank of New York (previously filed as Exhibit 10.20.1 to
Form S-1, filed by the Company on June 17, 2005, SEC File No. 333-124797).10.3
    
    Amendment, dated as of June 17, 2005, to the Management and Consulting Agreement, dated as of
August 1, 2003, among Alon USA, Inc., Alon Israel Oil Company, Ltd. and Alon USA Energy, Inc.
(previously filed as Exhibit 10.21.1 to Form S-1, filed by the Company on June 17, 2005, SEC
File No. 333-124797).10.4
    
    Registration Rights Agreement, dated as of July 6, 2005, between Alon USA Energy, Inc. and Alon
Israel Oil Company, Ltd. (previously filed as Exhibit 10.22 to Form S-1, filed by the Company
on July 7, 2005, SEC File No. 333-124797).10.5
    
    Executive Employment Agreement, dated as of July 31, 2000, between Jeff D. Morris and Alon USA
GP, Inc., as amended on May 4, 2005 (previously filed as Exhibit 10.23 to Form S-1, filed by
the Company on May 11, 2005, SEC File No. 333-124797).10.6
    
    Executive Employment Agreement, dated as of July 31, 2000, between Claire A. Hart and Alon USA
GP, Inc., as amended on May 4, 2005 (previously filed as Exhibit 10.24 to Form S-1, filed by
the Company on May 11, 2005, SEC File No. 333-124797).10.7
    
    Executive Employment Agreement, dated as of February 5, 2001, between Joseph A. Concienne, III
and Alon USA GP, Inc., as amended on May 4, 2005 (previously filed as Exhibit 10.25 to Form
S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).10.8
    
    Management Employment Agreement, dated as of October 1, 2002, between Harlin R. Dean and Alon
USA GP, LLC, as amended on May 4, 2005 (previously filed as Exhibit 10.26 to Form S-1, filed by
the Company on May 11, 2005, SEC File No. 333-124797).10.9
    
    Description of Director Compensation (previously filed as Exhibit 10.30 to Form S-1, filed by
the Company on May 11, 2005, SEC File No. 333-124797).10.10
    
    Form of Director Indemnification Agreement (previously filed as Exhibit 10.31 to Form S-1,
filed by the Company on May 11, 2005, SEC File No. 333-124797).10.11
    
    Form of Officer Indemnification Agreement (previously filed as Exhibit 10.32 to Form S-1, filed
by the Company on May 11, 2005, SEC File No. 333-124797).10.12
    
    Form of Director and Officer Indemnification Agreement (previously filed as Exhibit 10.33 to
Form S-1, filed by the Company on May 11, 2005, SEC File No. 333-124797).
 42




---



##### Table of Contents



ExhibitNumber
    
    Description of Exhibit10.13
    
    Agreement of Principles of Employment, dated as of July 6, 2005, between David Wiessman and
Alon USA Energy, Inc. (previously filed as Exhibit 10.50 to Form S-1, filed by the Company on
July 7, 2005, SEC File No. 333-124797).10.14
    
    Alon USA Energy, Inc. 2005 Incentive Compensation Plan. (previously filed as Exhibit 10.51 to
Form S-1, filed by the Company on July 7, 2005, SEC File No. 333-124797).10.15
    
    Agreement, dated as of July 6, 2005, by and among Alon USA Energy, Inc., Alon USA, Inc., Alon
USA Capital, Inc., Alon USA Operating, Inc., Alon Assets, Inc., Jeff D. Morris, Claire A. Hart
and Joseph A. Concienne, III (previously filed as Exhibit 10.52 to Form S-1, filed by the
Company on July 7, 2005, SEC File No. 333-124797).31.1
    
    Certifications of Chief Executive Officer pursuant to §302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certifications of Chief Financial Officer pursuant to §302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
§1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Furnished herewith. 43