Noel Ryan - Director, IR Mark Cox - EVP & CFO Uzi Yemin - President & CEO Fred Green - President & COO

Paul Cheng - Barclays Capital Ben Brownlow - Morgan Keegan

Thank you Regina. Good morning everyone and welcome to the Delek US Holdings conference call for the second quarter of 2010.

Our hosts for today's call are Uzi Yemin, President and Chief Executive Officer and Mark Cox, Chief Financial Officer of Delek US. Other members of the management team will be available during the question-and-answer portion of the call.

As a reminder, the conference call may contain forward-looking statements as the term is defined under the federal securities laws. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements.

Without limiting the foregoing, the words believes, anticipates, plans, expects and similar expressions are intended to identify forward-looking statements. You are cautioned that these statements may be affected by important factors set forth in Delek's filings with the Securities and Exchange Commission and in today's new release.

As a result, actual operations or results may differ materially from the results discussed in the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise.

Today's call is being recorded and will be available for replay beginning today and ending August 19, 2010 by dialing 800-642-1687 with the confirmation ID number 84169376. An online replay may also be accessed for the next 90 days at the company's website at www.DelekUS.com.

During today's call I will begin with an overview of our financial performance in the second quarter of 2010. Mark will then follow with the review of our capital spending, liquidity and results from operations within each of our three business segments for the period ended June 30, 2010.

Uzi will then conclude with a high level outlook as we transition to the third quarter and the remainder of 2010. At the conclusion of these prepared remarks, we will open the call for questions.

For the three months ended June 30, 2010 Delek US reported a net income from continuing operations of $15 million or $0.28 per diluted share versus net income from continuing operations of $29.6 million or $0.54 per diluted share in the second quarter 2009. Excluding special items, the company reported an adjusted net income from continuing operations of $12.3 million or $0.23 per diluted share in the second quarter 2010 versus adjusted net income of $13 million or $0.24 per diluted share in the second quarter 2009.

Business conditions improved across each of the company's three operating segments during the second quarter resulting in a return to profitability. Within the refining segment, Gulf Coast refining economics increased significantly during the period as evidenced by a substantial increase in the benchmark Gulf Coast 5-3-2 crack spread when compared to the first quarter 2010 and the year ago period.

Accordingly we operated the Tyler refinery at or near peak capacity for the duration of the second quarter, often times reaching levels in excess of 60,000 barrels per day of production. In addition, for the second consecutive quarter Tyler's realized margin, defined as our refining margin as a percentage of the Gulf Coast 5-3-2 crack spread exceeded 90% during the period.

Within the retail segment elevated retail fuel margins improved merchandised margins and a continued improvement in same store sales of fuel gallons and merchandise helped to produce one of the quarters of retail in nearly two years. Overall it was a strong start to a seasonally strong period of the year for each of our businesses.

Before I hand over to Mark, allow me to provide some color on our general and administrative expenses, depreciation and amortization expense and interest expense incurred during the second quarter 2010. Total operating expense was 55.8 million in the second quarter 2010 versus 56.7 million in the second quarter 2009.

Even though the Tyler refinery operated for only 44 days during the second quarter 2009 versus 91 days in the second quarter 2010, substantial operating expenses related to the May 2009 restart of the refinery were incurred during the second quarter 2009, which helps to explain why OpEx on a year-over-year basis was relatively flat. General and administrative expense declined 0.8 million to 14.8 million in the second quarter 2010 versus 15.6 million in the second quarter 2009.

The decline in G&A expense was due primarily to a decline in administrative and labor expenses in the refining segment as well as a decline in administrative expenses in the marketing segment, both of which more than offset an increase in labor expense at retail. Depreciation and amortization expense increased 3.5 million to 16 million in the second quarter 2010 versus 12.5 million in the second quarter 2009.

The increase is due mainly to 2.6 million of increased depreciation expense within the refining segment related to multiple capital projects at the Tyler refinery completed in 2009. In addition, during the second quarter we incurred a 0.9 million increase in depreciation expense in the retail segment, primarily associated with completed store reimaging.

Interest expense increased 3.1 million to 8.8 million in the second quarter 2010 versus 5.7 million in the first quarter 2009. The increase is attributable to a number of factors including higher interest rates under several of our credit facilities which have been renewed or mended over the last 18 months.

A resumption in the use of our refining segments, ABL credit facility, when compared to the second quarter of 2009 when the refinery was not operating for a significant portion of the period and a decrease in capitalized interest during the second quarter of 2010 when compared to the same period in 2009. With that overview I'll hand the call over to Mark.

Thank you Noel and I'd like to thank everyone for taking the time to join us on our call today. As always we appreciate you being here with us.

I'd like to begin my portion of today's call with a review of our capital structure. As of June 30th 2010 Delek US has $72.9 million in cash and $300 million in debt which results in a net debt position of $227.1 million.

As we discussed in our first quarter earnings call Delek US applied taxable losses from 2009 against taxes paid in prior years resulting in a net operating loss carry back. During the month of April we received a federal tax refund of nearly $40 million.

As we said in recent quarters we remain committed to reducing debt and increasing our financial flexibility. To that end of July the 6th, Delek US prepaid $12 million on our $65 million note with Delek petroleum.

The prepayment reduced the outstanding balance on the note from $65 million to $44 million. Turning to a discussion on insurance proceeds, during the second quarter the company recorded $17 million of gross insurance proceeds related to the November 2008 fire at the Tyler Refinery.

This compares to 57.6 million in gross insurance proceeds received during the second quarter of last year. The $17 million in gross insurance proceeds was a portion as follows $12.8 million was applied to the company's outstanding business interruption insurance claims while 4.2 million was applied to property damage insurance claims.

To-date the company has received gross insurance proceeds of a $141.1 million. The insurance proceeds were received during the second quarter of 2010 represents final payments on business interruption and property damage claims outstanding.

Let's take a look at capital spending, during the second quarter our total capital expenditures amounted to $15 million more than 75% was related to the spending at the refinery. The capital spend at Tyler 90% was related to regulatory work primarily the MSAT II project.

For the full year 2010 we are increasing our capital spending forecast from approximately $58.7 million to 70.4 million. The revised forecast is primarily attributable to projects designed to improve the safety, reliability and profitability of the Tyler Refinery, in addition to plans at retail to accelerate our store re-imaging initiative during 2010.

Let's take a look at the business segments, first looking at refining. Our refining segment contribution margin was 38.7 million in the second quarter of 2010, this compares to 2.5 million in the first quarter of 2010.

The refining segment contribution margin benefited from 17 million in gross insurance proceeds received during the second quarter of 2010 versus 57.6 million gross proceeds received in the prior year period. For the three months ended June 30, 2010 capacity utilization at Tyler was 95%, this is the highest average utilization rate since we acquired the refinery in 2005.

Tyler produced an average of 58,805 barrels per day during the second quarter of this year, 93% of which was light products. Sales of refined products was strong during the quarter averaging more than 59,000 barrels per day in the period.

Our decision to run Tyler at elevated rates during the second quarter was largely in response to increased regional demand and significantly improved refined product margins when compared to the year ago period. Gulf Coast refining economics improved significantly during the second quarters evident by more than 40% increase in the benchmark Gulf Coast 5-3-2 crack spread to $9.54 as compared to $6.62 on the first quarter of this year.

During second quarter of 2010, direct operating expense per barrel declined to $4.39 per barrel versus $5.14 per barrel in the first quarter of 2010. The decline in operating expenses attributable to the increased utilization at the refinery, increased operating efficiencies related to bottle-necking efforts initiated in 2009 and lower natural gas cost.

The refining margin in the second quarter after adding back the Intercompany marketing fees of $0.55 was $8.96 per barrel sold. The market structure for West Texas Intermediate crude remained in contained order in the second quarter of this year much as ahead throughout last year.

The WIT contango averaged $1.66 in the second quarter of 2010. This compares to a $1.90 in the second quarter of last year.

Finally, as we looked to the third quarter, note that we conduct maintenance of the Tyler refinery for approximately one week beginning in late July to improve the reliability to several units and to conduct tie ins related to the MSAT II regulatory project. Given the recent pull back in product cracks when compared to the second quarter, we chose to conduct this maintenance now instead of in September, when it was originally scheduled.

The maintenance has since been completed and we have begun to restart process units. Turning to the marketing segment, the marketing segment contribution margin was $6.7 million in the second quarter of 2010.

This compares to 7.7 million in the second quarter of last year. The second quarter marketing segment contribution margin was favorably impacted by fees earned from the segment's crude logistics operations.

The marketing segment generated gross proceeds of $2.6 million for its crude logistics operations during the second quarter of this year. Sales volumes within the marketing segment increased for the third consecutive quarter to 14,652 barrels per day in the second quarter of 2010.

This compares to 14,231 barrels per day in the prior year period. Looking at the retail segment, retail segment contribution margin was 18.1 million in the second quarter of 2010.

This compares to 10.2 million in the second quarter of 2009. The year-over-year improvement in contribution margin was primarily due to the same store increase in fuel gallons on merchandised sales, increased gross profit generation of select in store merchandise as well as a significant increase in the retail fuel margin.

On a year-over-year average, same store fuel gallons sold increased 3.4% in the second quarter of 2010 versus a decline of 0.8% in the second quarter last year. Retail fuel margins increased to elevated levels during the second quarter and were a key factor to our success at retail during the period.

Second quarter retail fuel margins increased to 18.6 cents per gallon, the highest reported margin since the fourth quarter of 2008. On a year-over-year basis, same store merchandise sales increased 4.6% in the second quarter of this year compared to a same store decline of 1.4% in the second quarter last year, marking the fourth consecutive quarter of same store merchandise growth.

The improvement in same store merchandise sales is due to several factors, including strong contribution from the company's reimaged store locations, successful promotion efforts within the beer, snack and dairy categories, increased penetration of newly introduced private label products as well as continued growth in fresh food sales. Same store sales of food and fountain increased 16.4% from the second quarter 2010, due primarily to increased contribution from the company's quick service restaurant locations in addition to improved sales resulting from the company's ongoing fresh Grab N' Go initiatives.

Merchandise margin increased to 31.3% during the second quarter of this year versus 30.3% in the year ago period, due primarily to increased margin capture within several leading categories including the cigarette category and the dairy category, the latter of which includes energy and juice products. The private label initiative continued to make progress during the second quarter with more than 40 private label SKUs lost during the first half of this year.

As more consumers become increasingly familiar with our quality attractively priced products, we believe a significant opportunity exists to generate incremental gross profit dollars. Reimage locations continue to outperform the legacy store base during the second quarter.

For the three months ended June 30, 2010 same store fuel gallons sold in the 70 reimage stores opened more than one year increased 5.8% versus a same store increase of 3.5% for the entire 425 store fleet. Similarly same store merchandise sales for the 70 reimage stores opened more than one year increased an impressive 7.9% in the three month period ended June 30, 2010 compared to an increase of 4.6% for the entire store fleet.

Of our 425 stores in operation at quarter end, 112 were in reimage locations and 13 stores were large format prototype stores. In the first half of 2010 we completed six store re-images and intend to complete an additional 21 re-images in the second half of the year.

As a result we have increased our 2010 store re-imaging forecast from 16 stores to 21 stores as reflected in our revised CapEx forecast. With that I will hand the call over to Uzi for some concluding remarks on our strategic outlook.

Thank you, Mark. As we look ahead to the remainder of the year we are cautiously optimistic that in an economic recovery underway.

Entering the third quarter demand for refined products in the Tyler markets remains on pace with second quarter levels. Within our retail business same store sales of fuel gallons and merchandize continue to improve during July when compared to a year ago period driven in part by continued contributions from the company's re-image store locations and more attractive product mix and ongoing promotional efforts.

We're optimistic, this positive trend will continue as we transition into the late summer month. This concludes our prepared remarks.

Regina would you please open the call for questions.

Hey guys. Good morning.

Good morning Paul.

Several quick question, Uzi can you talk about the start process at the time when you enter into negotiation with Shell on the Montreal and ultimately the reason to pull out?

Absolutely, as we all – we said all along Paul we want to be active in the M&A and when we were approached to look at the Montreal asset we though that this was a great opportunity to look at it. Since, then we made up our mind that this wasn't the right asset for us, different reasons I won't discuss them at this point.

But we want to remain active in the M&A market. We think that if we are not at the bottom, we are somewhere around the bottom and we remain active and we see a lot of assets being in the market and I guess that's for us with the support of the Delek Group and their strong balance sheet we feel strongly that this is the right time for us to strike.

You said do you have a sort of a seeming of how pick up deal that you feel comfortable?

We always said that we will be able to pull a deal that is up to call it all in $500 million, we feel that there is enough contribution that come from Delek Group and the guidelines that we always get to the market is the leverage one exceed 2 to 2.5 times EBITDA after the acquisition.

Uzi when you are talking about all in $500 million, is that just including the working capital requirement or it's just on the purchase price?

Not including LCs but up to $500 million PP&E plus inventory.

Plus inventory? Okay.

Second question, this is just quick on the balance sheet, can Mark give me, what is the market value in excess of the book value for inventory at the end of the second quarter?

Yes Paul. It was $18.1 million.

18.1, thank you. And when I'm looking at July, March and start going down, it looked like Gulf Coast margin is probably down somewhere in the $1.50 or so.

So curious that it does look like that July you may not make money. Is there any comment that you can make?

Well we usually don't give guidance in regard to quarter. I just want to say to you, I want to emphasize that we knew or as we saw this going on, we chose to conduct the maintenance that was playing for sometime in September, October and we took the refinery for a approximately a week, call it eight days, maintenance period.

So I don't want to give actual numbers but we took advantage of this decline if you will, environment and conducted the maintenance that was required as well as design of the MSAT. And as a matter of fact, our MSAT project, Fred can give some color into that but MSAT project will be up and running ahead of time, I think sometime in September.

Yeah, it will be like September. It will probably be up about two weeks earlier that we had planned originally.

Okay, just two final short question. Mark can you share with us what's the contango benefit in July and August for you guys and the last one is, when I'm looking at your margin realization, excluding the BI and the contango benefit, second quarter looked like it was about $6.75 and your benchmark, I think Gulf Coast 5-3-2 in the second quarter and so that's about 80 - 82% capture rate.

I just want to see if that is a reasonable assumption on the capture rate going forward or that something you need in the second quarter we need to take into consideration.

Paul, addressing your first question related to contango, in July contango was about $1.40 to $1.45 and looking at August, it's come down a little bit from that. We're about 55 to $0.60.

Relative to the capture rate, I think we continue to see the capture rate at Tyler improve. I think we're going to continue to see it improve as a result of some of the debottlenecking efforts that we've done there in addition to some of the maintenance work and the work that we've just completed in this most recent effort that we've completed and Uzi, is there anything else you would add to that or…..

No I wouldn't. Just a, Paul as you know, part of the margins are going to marketing.

So we would love to walk you through the numbers and get you to the 94% that we see and we can do that offline. I don't think we should do it now.

Noel and Mark, we'll be happy to do it for you afterwards.

Okay, thank you.

Good morning.

Good morning Ben.

Hi Ben.

I guess on the financial details with the unusual items, the 1.7 million, honestly that includes the loss on the sale of assets of 0.6. Can you just detail out the remaining 1.1 I guess specifically the costs related to the write down of DHT Tyler?

Yeah, there's really three other components to that, one is we did have some stores that we recorded accelerated depreciation, on that we had leases on them. We terminated those leases when they came up for renewal.

Another piece of it was some catalyst we had the refinery that we retired earlier than we originally anticipated. And the final piece of that is related to the floods that we had there in Nashville, we had one store that was more or less destroyed We have kept the building but the inside structure was destroyed so we have written off the asset base and the depreciation so we stated with that and we are in the process now of rebuilding that store but those are the three components that go into the number.

Do you have -- if there is a that breakout on the cost for each one or I can grab it later after the call.

We will do that after the call.

Okay great and the 16.4% through service comp obviously very, very strong. Can you just talk about what is driving that?

Is it promotions or are you just offerings or is it just a turn in underlying demand?

Well all the above I guess. First of all, we changed eight stores with those during the quarter.

Second, the Grab N' Go is going extremely well and third we as we experience more and more people coming into the store then I am going by memory but we at the average we increase the traffic by 5.5%. More and more people by this food servicing and as we mentioned on the call July was another very, very strong month in that area.

Okay great and just one last one for me. Is it possible to breakout what the ethanol blending benefit was to retail for your margins?

We will gladly do it after the call.

Okay great. Thank you very much.

Well I just wanted to thank everybody that was on the call. Today I would like to thank my colleges for the efforts that they put together in order to make this quarter a successful quarter and we will talk to you again during our next call sometimes in November.

Thank you, guys.