Delek US Holdings, Inc. (DK) Q4 2011 Earnings Report, Transcript and Summary

Good morning. My name is Nicole, and I will be your conference operator today. At this time, I would like to welcome everyone to the Delek US Holdings Fourth Quarter and Full Year 2011 Release Conference Call. [Operator Instructions] Mr. Noel Ryan, you may begin your conference.

Thanks, Nicole, and good morning, and thank you, everyone, for joining us in today's conference call and webcast to discuss Delek US fourth quarter and full year 2011 financial results. Leading today's call are Uzi Yemin, our President and CEO; and Mark Cox, our EVP and CFO. Other members of the management team will be available during the question-and-answer portion of the call. As a reminder, this conference call may contain forward-looking statements as that term is defined under 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 our filings with the Securities and Exchange Commission and in our latest earnings 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 April 8, 2012, by dialing (855) 859-2056 with the confirmation number 47977839. An online replay may also be accessed for the next 90 days at the company’s website at delekus.com. Yesterday evening, we distributed the press release that provides a summary of our fourth quarter and full year 2011 results. This press release is available on our corporate website at delekus.com and through various news outlets. During today's call, I will begin with an overview of our fourth quarter and full year financial performance. Mark will follow with a review of our capital structure liquidity, recently completed acquisitions and our fourth quarter segment level performance. Uzi will conclude our prepared remarks with the strategic outlook for 2012, at which time, we will open the call for questions. As noted in the press release, Delek US reported a net loss from continuing operations of $6 million or a loss of $0.10 per basic share in the fourth quarter 2011 versus a net loss from continuing operations of $70.9 million or a loss of $1.30 per basic share in the prior year period. Excluding special items, the company reported an adjusted net loss from continuing operations of $4.5 million or a loss of $0.07 per basic share in the fourth quarter. Our fourth quarter adjusted net loss from continuing operations excludes the impact of a $1.5 million after-tax impairment on goodwill related to our acquisition of certain retail locations in 2006. Total contribution margin increased to $44.7 million in the fourth quarter, versus $26.7 million in the prior year period driven by improved results in the refining segment, which represented nearly 70% of total contribution margin in the period. As we indicated in our preliminary results release distributed in late January, fourth quarter profitability was negatively impacted by elevated refining system feedstock cost resulting from sharp narrowing in the WTI-LLS differential during November and December in addition to lower asphalt prices at our El Dorado refinery when compared to the third quarter 2011. In the marketing segment, total sales volumes increased nearly 7% in the fourth quarter 2011 supported by a sharp increase in gasoline sales volumes when compared to the prior year period. In the retail segment, fourth quarter contribution margin increased slightly over the prior year period driven by a year-over-year increase in the retail fuel margin in addition to continued growth in same-store sales of fuel gallons and merchandise. For the full year 2011, Delek US reported net income from continuing operations of $158.3 million or $2.78 per diluted share, representing the most profitable year in our history. Our record full year performance was driven by significant contributions from our refining segment, which benefited from elevated Gulf Coast refined product margins, continued access to substantial volumes of cost advantage feedstocks and the addition of Lion Oil to the company's consolidated results from operations. Before I hand the call over to Mark, allow me to provide a high-level income statement analysis for the fourth quarter. Total operating expenses increased by $23.3 million to $82.7 million in the fourth quarter of 2011 when compared to the prior year period. This increase was primarily due to the inclusion of $25.5 million of Lion Oil operating expenses. General and administrative expenses were $19.5 million in the fourth quarter 2011 compared to $14 million in the prior year period. The overall increase was due primarily to the addition of G&A expenses at Lion Oil. Depreciation and amortization expense was $20.8 million in the fourth quarter versus $16.2 million in the prior year period. The increase was primarily due to $5.2 million of depreciation expense at Lion versus no impact from Lion in the prior year period. Interest expense was $12.5 million in the fourth quarter 2011 compared to $8.5 million in the fourth quarter 2010. The increase in interest expense was primarily attributable to $5.4 million associated mainly with Lion Oil financings. Our income tax benefit was $2.8 million for the fourth quarter of 2011 compared with a tax benefit of $1.5 million in the fourth quarter 2010. Our effective tax rate was 30.8% for the fourth quarter 2011 compared to 2.1% in the prior year period. The increase in our effective tax rate was due primarily to a lower net loss in the fourth quarter 2011 when compared to the prior year period. With that overview, I will hand the call over to Mark.

Thank you, Noel. Good morning, everyone, and thank you for taking the time to join us. As always, we appreciate you being on today. I'll begin my prepared remarks with a summary of the acquisitions we recently completed, followed by a review of our capital structure and liquidity. I'll conclude with a segment level review of our business during the fourth quarter. As we announced in our press release, we completed the acquisition of 3 pipeline systems and a light products terminal through 3 separate transactions that occurred between December of 2011 and February of this year. In December, we acquired Paline Pipeline Company from Ergon Terminaling. Paline owns and operates a 10-inch 185-mile Paline Pipeline system, which is a 36,000 barrel per day crude line that runs between Nederland and Longview, Texas. In the prior owner, Paline had been used to transport Gulf Coast and offshore crudes north into Longview. However, we are nearly finished with the project that will reverse the flow of crude on Paline. We currently have a lease agreement with a major oil company to ship crude that expires in 2014. Delek US acquired Paline Pipeline Company and all the related assets for a purchase price of $50 million, consisting of $25 million paid in cash, and a 3-year quarterly, equally, amortizing $25 million unsecured note that has an interest rate of 6% payable to Ergon. Separately, in January of this year, we completed the acquisition of 35-mile 10-inch Nettleton Pipeline System from Plains Marketing. The purchase price was approximately $12.3 million and, again, we paid for that in cash. The Nettleton Pipeline is used exclusively to transport crude oil from Longview, Texas where the company has significant crude storage capabilities to the Tyler refinery. During 2011, more than half of the crude oil processed at the Tyler refinery was supplied through the Nettleton Pipeline, making this a strategically important asset for us to own. Finally, in early February this year, we acquired a light products terminal located in Big Sandy, Texas and a 20-mile refined products pipeline for $11 million, again, we paid for in cash. With the acquisition of this terminal and pipeline system, the Tyler refinery further secures its position as the leading supplier of refined products to customers in the Eastern Texas market. As we look ahead at the remainder of this year, we intend to further scale our logistics holdings with strategic acquisitions that complement our existing downstream assets. Turning now to capital structure and liquidity. Throughout the year, we continued to manage our balance sheet. Even after funding 2 acquisitions, we managed to reduce our consolidated net debt position by $40 million on a year-over-year basis, which we are especially proud of that accomplishment. While this accomplishment is indicative of our commitment to maintaining a balanced leverage profile, it also illustrates the magnitude of cash flow generated by our operations, specifically by our refining segment during 2011. In addition to that, allocating capital towards strategic acquisitions and debt reduction, our board approved $0.33 in cash dividends during 2011, consisting of $0.15 of annualized cash dividends and special cash dividend of $0.18 paid during the fourth quarter. These payouts reflect our board's long-standing commitment to returning value to shareholders while emphasizing a continued confidence in the fundamental strength of our core businesses. As of December 31, 2011, Delek US had $225.9 million in cash and $432.6 million in debt, resulting in a net debt position of $206.7 million. At the end of the year, we were at approximately 1.2x total debt to trailing 12-month EBITDA. As of December 31, 2011, our blended effective interest rate on all borrowings was 5.5%. Looking now at capital spending, our 2000 capital spending budget is approximately $117.9 million of which more than 60% is tied to discretionary projects, with the remainder being allocated to maintenance and regulatory projects. For 2012, we have budgeted $75 million for the refining segment. Nearly $37 million for the retail segment, and there was $6 million for other capital spending and less than $1 million for our marketing segment. The increase in refining segment CapEx is due to a combination of factors including the addition of a full year capital spending at the El Dorado refinery, as well as increased spending on discretionary capital projects at both refineries. As we mentioned on our conference call last quarter, our engineering and finance teams have outlined a series of quick hit capital projects at both refineries that should allow us to capture some of the low-hanging fruit we identified during the integration of Lion Oil. Collectively, each of these projects requires modest capital investment, can be completed in a year or less and have the potential to generate significant incremental contribution margin for our company over a relatively short period of time. We still anticipate that in aggregate, the LSR/Sat Gas Expansion and Vacuum Tower Bottoms Project outlined on our November call have the potential to generate up to $30 million of incremental contribution margin annually at current economics, beginning in July of this year. Turning now to refining. Refining segment contribution margin increased to $30.7 million in the fourth quarter of 2011, and that compares to $11.7 million in the prior year period. During the fourth quarter, the Tyler refinery generated $41.7 million in contribution margin while the company's Lion Oil operations, including the El Dorado refinery, reported a negative contribution margin of $11 million. Tyler's fourth quarter performance benefited from favorable Gulf Coast refining margins and increased refining throughputs, which was partially offset by higher feedstock costs even when compared to the prior year period. At El Dorado, fourth quarter results were adversely impacted by elevated feedstock cost and weak asphalt margins. The price per majority of crude oil purchased at the El Dorado refinery, in addition to the portion of the crude purchased at the Tyler refinery, takes into account the difference between the price per barrel of West Texas Intermediate or WTI and the price per barrel of Louisiana Light Sweet crude oil or LLS. This differential is established during the month prior to the month in which the crude oil is processed at the company's refineries. Between October and December, the WTI-LLS differential narrowed from more than $25 per barrel to $10 per barrel. As the differential narrowed, our refining segment's actual cost accrued was significantly higher than what the spot WTI-LLS differential would have indicated in those months, given a 1-month lag between when we established differentials to WTI for our barrels and when they're actually priced and run in the system. As the WTI-LLS differentials have widened during the first quarter to approximately $15 per barrel, the situation has reversed itself to our benefit. Our narrowing differentials were the primary factor driving that impacted our fourth quarter results. A sharp seasonal decline in asphalt margins also played a role. The prices for paving asphalt and roofing flex, which collectively compromised -- comprised of approximately 17% of El Dorado's production in Q4 fell sharply during November. However, we began to see rebound in December and the trends continued into January and February. Turning to Tyler refinery, total throughputs at Tyler were 63,722 barrels per day in the fourth quarter. This compares to 55,318 barrels per day in the prior year period. Total sales volumes increased to a single quarter record of 63,211 barrels per day in the fourth quarter of last year. Tyler operated at 94.7% of capacity during the fourth quarter of 2011 compared to 81.1% from the prior year period. Direct operating expense per barrel sold was $4.62 per barrel in the fourth quarter of 2011. This compares to $5.51 per barrel sold in the prior year period. The year-over-year decline in OpEx per barrel was primarily attributable to increased sales volumes in the period, in addition to lower contract -- contractor and maintenance expense. Tyler's refining margin, excluding intercompany product margin fees of $0.53 per barrel, was $12.32 per barrel sold in the fourth quarter of 2011, and that compares to $8.36 per barrel sold the same quarter last year. During the fourth quarter, the Tyler refinery processed the crude selected, consisted mainly of WTI and East Texas crude. The refinery produced approximately 95% light products in the period. Looking now at El Dorado, during the fourth quarter, total throughputs at El Dorado were 82,468 barrels per day, while total sales volumes were 75,694 barrels per day. El Dorado operated at 95.4% of capacity during the fourth quarter 2011, and that compares to 99.7% in the third quarter of 2011. Direct operating expense per barrel sold was $3.65 per barrel sold in the fourth quarter, versus $4.27 per barrel sold in the third quarter of 2011. The quarter-over-quarter decline in OpEx per barrel was primarily attributable to a decline in maintenance and employee expense. El Dorado's refinery margin was $2.07 per barrel sold in the fourth quarter of 2011. That compares to $14.33 per barrel sold in the third quarter. During the fourth quarter, the El Dorado refinery processed a crude slate consisting mainly of Gulf Coast, West Texas and local Arkansas crudes. El Dorado produced approximately 79.4% light products in the third quarter, in addition to -- excuse me, in the fourth quarter, in addition to 16.6% asphalt and 4% other products including petrochemicals. Looking -- turning now our discussion of refining system crude supply, our El Dorado refinery secured approximately 25,000 barrels per day of crude oil priced at or below WTI during the fourth quarter. Included in this figure is approximately 15,000 barrels per day of local Arkansas crude and approximately 10,000 barrels of West Texas Sour. A bit more than 50,000 barrels per day of crude processed at El Dorado during the fourth quarter included Gulf Coast crudes priced at varying premiums to WTI. Given that WTI continues to trade at a steep discount to Gulf Coast and domestic offshore crudes, we're incentivized to secure incremental volumes of WTI and WTI-linked crudes for our refining system. In recent months, we have continued to make progress on the initiatives designed to increase the quantity of WTI-linked crudes being supplied to El Dorado from 25,000 barrels per day to 50,000 barrels per day beginning in early 2013. Longer term, our goal is to have a flexibility with which to pursue a wider range of cost advantage feedstocks, many of which are currently available in domestic inland markets where we operate including WTI. By expanding our crude procurement capabilities, we intend to introduce -- we continue to significantly reduce our cost accrued beginning again early next year. Looking now at our marketing segment. Total sales volumes increased nearly 7% to 15,337 barrels per day in the fourth quarter of last year, and that compares to the prior year period. Total sales volumes increased on a year-over-year basis for the eighth consecutive quarter during the fourth quarter 2011, as regional demand for gasoline rebounded sharply when compared to the prior year period. Looking now at retail. On our retail segment, contribution margin increased to $8.5 million in the fourth quarter 2011, and that compares to $8.2 million in the prior year period. During the second half of 2011, we continued to exercise a competitive fuel-pricing strategy that seeks to grow our retail fuel volume sold without compromising our retail fuel margin. Thus far, we are pleased with the result of the strategy. Same-store fuel gallons sold increased 4.3% and retail fuel margins increased $0.015 per gallon to $0.146 per gallon in the fourth quarter when compared to the prior year level. Same-store merchandise sales increased 2% in the fourth quarter 2011, when compared to the prior year. Same-store food service sales increased 7 -- 4% in the fourth quarter of 2011 as the company increased the concentration of fresh fuel QSR concepts to more than 21% store based. Merchandise margin declined to 29.2% during the fourth quarter of 2011 versus 29.8% in the prior year period, due mainly to lower gross profit margins in the cigarette category, which comprises more than 1/3 of our total merchandise sales. Our cigarette gross profit margin declined by more than 300 basis points in the fourth quarter of 2011 versus the prior year period. Our new construction initiative remains ongoing as we continue to build new stores in our core markets. In 2011, we completed 50 store reimages and opened 2 new large format locations. Of the 377 stores in operation at year-end, 180 stores or more than 47% of the store base is either a [indiscernible] location or a new large format. With that, I'll turn the call over to Uzi for some closing remarks.

Thank you, Mark. The past year was a period of historic accomplishment for our company. During 2011, we generated a record full year net income from continuing operations, more than doubled our production capacity with the acquisition of a second refinery, dramatically increased our portfolio of logistics assets in the mid-continent region, improved our liquidity profile and returned value to shareholders through a combination of regular and special cash dividends. As we look to the year ahead, our focus will be directed towards the following initiatives: First, we will look to become an integrated producer and supplier of refined products in domestic inland markets; second, we are committed to operating our assets in a safe, compliant and cost-effective manner; third, we will seek to secure increased values -- volumes of cost-advantage feedstocks for both our Tyler and El Dorado refineries; fourth, we intend to invest in capital projects that improve our system-wide profitability; and finally, we are committed to maintaining balance sheet discipline by reducing net debt outstanding. We also intend to actively explore various means by which to return value to our shareholders. As we turn the page on a record full year performance, we look forward to new opportunities and continued growth in the year to come. During the third quarter, refined products' margins remain elevated while crude oil financials have widened above fourth quarter levels, setting the stage for what could be another strong year. In closing, I would like to thank our employees for their loyalty and support during the year of significant organizational change. The completion of major strategic acquisitions as well as the integration that followed, required the level of commitment and focus for which our entire management team is extremely grateful. With that, Nicole, can we please open the call for questions?

[Operator Instructions] Your first question comes from the line of Jeff Dietert with Simmons.

I was hoping you could talk a little bit more about the Paline crude pipeline acquisition. It looks as though the purchase price is $50 million. But you talked about the intention of reversing the pipeline and there's a lease agreement as well. Does -- do you initiate the pipeline reversal immediately or does that follow after the lease agreement? And are there additional capital costs associated with reversing the line in addition to the purchase price?

Well, I will try to answer -- I will try to answer your question in the order that you asked them. First of all, the lease agreement is in the final stages of being finalized. Second, the capital or the investment and reversing that pipeline is part of the $50 million deferred owner invested. That capital, we may have a nominal amount, a couple of million dollars extra, but it's pretty insignificant. Third, in terms of that lease agreement, that lease agreement will expire sometime in 2014. As we all know, Longview is our hub for crude oil or different types of crude oil for both Tyler and El Dorado. Our intent in that -- in regard to this asset is to maintain the flexibility and to provide ourselves either access from Longview to the Gulf Coast, and look at the differentials at that time. Or if differentials change, maybe look into bringing Gulf Coast crude into Longview. It depends on the situation at that point. Obviously, in today's market, it makes sense to reverse that pipeline because there's a huge differential between Longview and the Gulf Coast that we all know. So for us, it's all around the flexibility and the fact that Longview is our hub. Obviously, if we tie this to the other acquisition, that -- the other pipeline, the middle-end pipeline, that's another pipeline that will increase our flexibility because this connects Longview again, to our system. Now we will have 2 pipelines that connect Tyler to Longview. So for us, tremendous amount of flexibility and it depends on the differentials at any given day.

Great. And on the Nettleton Pipeline, is there the potential to increase the capacity of that line to bring more crude into Tyler?

Well, marginally, yes. Probably 3,000 to 4,000 barrels, but obviously it depends on our crude unit. So we are in the process of evaluating the capacity. Probably not too much CapEx are going to increase our capacity. And we will notify the market as long as we know that it's probably 3 to 6 weeks process to evaluate that.

Great. Could you just talk briefly about what kinds of returns you expect on the investments in these 3 infrastructure additions?

Well, the lease agreement right now, at this moment, provides between $4 million to $6 million. Obviously, if differentials remain the way they are, then that's something -- it's totally different in the future. But at this point, $4 million to $6 million. The Nettleton Pipeline, we were going to -- we were paying the third party operator roughly between $1.5 million to $2 million a year, so that's -- the return on that, that's the savings obviously. And the Big Sandy Terminal, Big Sandy Terminal, a third party operator used to operate that 2 years ago. It is connected to Tyler with the pipeline, the same pipeline that we bought. And in the last 2 years, the seller improved the asset, built several things in that asset. They didn't operate that asset. So it's still in the air what -- how we are going to operate the asset, and what they are -- we're going to put on, on this terminal. Obviously, we will notify the market probably next call in regard to the number that we expect to get from this asset.

Your next question comes from the line of Blake Fernandez with Howard Weil.

I know on the cost side, you mentioned that the per barrel costs were down in part due to the higher volumes. And I'm talking the refining segment, mind you. And then also some lower contract and maintenance expenses. I'm just trying to kind of understand, is that a good estimate going forward? Because there is a fairly decent drop off on a per barrel basis there. And is there anything odd in the first quarter that we should be kind of aware of from a modeling standpoint?

Well, let's talk about the first quarter. Since unusual, usually we come with the numbers in -- early in each quarter. Now we already have tremendous amount of data on the first quarter. So let me take the opportunity and update you in regard to the first quarter. The first thing that happened in the first quarter, we continue to move forward. We're moving the TI related to El Dorado. So TI related to El Dorado in the first quarter, you can probably use that number. If we used WTI price, we buy WTI price related crudes for El Dorado, now with the amount of around 35,000 barrels. So we moved it up from the previous numbers. Now we need to remember, that's the blended number, so it's 35 for your model and 35 TI pricing. In Tyler, we managed to buy a little cheaper versus in the past. And in Tyler, we are TI plus 1.5 for the entire production. In terms of expenses, in regard to your question, obviously, we are like other -- several other years, couple of years ago, we maintained good utilization. That utilization for the quarter was -- for the fourth quarter was 95%. We intend to maintain that level roughly in Tyler and in El Dorado, it depends on the asphalt production, we can talk about that a little later. So -- however, in Tyler, we are planning to do -- we didn't do it yet. We're planning to change catalysts with our DHT but with results -- with 5 to 7 days outage on the crude side. So we will probably need to factor that in. Going back to your original question of expenses. These expenses are actually what we expect going forward since we have this low cost of natural gas. Obviously, Tyler has completed the natural gas project. Now going forward, if we look at July 1, as we said in the past, we'll start operating El Dorado with natural gas. That's part of the $30 million that we mentioned earlier. So I hope that this long answer gives you some flavor in regard to the first quarter.

No, that's great, that's helpful. The second question, I guess, is a bit of a tie-on with the recent asset purchases, but obviously in the past, you've talked about potential for an MLP but needing sufficient size and scale. Obviously, this is incremental assets to potentially fall into that bucket. I'm just curious where we stand with regard to having sufficient size and scale to embark on an MLP?

Well, as we said in the past, we feel that within the Delek US Group, especially we got these assets, we have sufficient assets to support that process. Obviously, we can't talk about it too much, and I'll just leave it to that. That we feel that we increased the number of logistics assets obviously, and we didn't change our intent to move forward with these assets.

Okay, great. The last one for me, and this is probably premature. But I'm just curious, the Brown Dense has been an interesting topic on the EMP side. Obviously, that field would potentially be a benefit to both of your refineries, right in your backyard. Have you had any discussions at this point with EMP producers or is it just too early days to get into that?

Honestly, Blake, this is much bigger than just the specific field that you mentioned. If we look at what's going on in our areas, for example, Midland. For example, other areas like East Texas, they are drilling everywhere. That influences differentials for our refineries. So we are extremely excited about what EMP or producers do nowadays around our areas. So how I'm going to a specific -- with the specific producer here, I'm just going to say that we see local activity increasing dramatically. And obviously, that, by itself, gives us more flexibility and more access to cheaper crudes.

Your next question comes from the line of Ben Brownlow with Morgan Keegan.

I want to switch over to retail. And if you could discuss kind of the outlook on cigarette margins and when you expect pricing to stabilize there year-over-year?

Yes. It looks like from our perspective that it has somewhat stabilized at this point, so, Blake, I don't -- we don’t project any more downward movement in there. It's continuing to evolve and we'll see if they come out with any additional programs that would impact the margin further. But at this point, we think the programs that are in place have kind of taken their effect on margin.

Great. And the food service sales continue to do extremely well. With that being 21% of the store mix, where do you see that sort of longer term in the timeline there ?

Probably around 1/3.

Okay. And what -- sort of what timeline are you thinking there?

Well, it depends on the -- how successful the program is. We don’t want to invest money and then find ourselves with the situation that we need to reverse things. So in the next 2 to 3 years, we intend to get to 35%, if we see that the program is successful as we hope it is.

Okay, great. And you always have seen a lot of opportunity with the downstream assets propositions, where do you think with retail assets in terms of opportunity and multiples?

As you know, many, many operators are under huge pressure right now, because of what's going on with MLP, with the Philip Morris. So we think that the next 18 months will bring significant opportunities for us on the retail side. Especially if we look at our balance sheet, I think Mark mentioned $227 million by the end of the year, and I guess first quarter expecting to be a nice quarter so cash continues to pile in.

[Operator Instructions] Your next question comes from the line of Rakesh Advani with Credit Suisse.

Just a quick couple of questions. In regards to the assets that you could possibly put into an MLP, beyond the marketing assets that you have right now, is any of that kind of EBITDA numbers that you can give us as of right now?

Rakesh, unfortunately, for reasons mainly from legal standpoint, we cannot.

Only the marketing is where we can go with right now?

Marketing and the addition of what we just provided you, obviously, there are other assets within the Delek Group -- Delek US family. But unfortunately, we're in this period that we can't talk about it too much.

Okay, thanks. And apologies if I missed this. But the reversal of the pipeline, have you disclosed when it'll come on stream?

We haven't, but it's in the next couple of months.

Okay. And then in terms of your cash distributions, is now the big focus that you're going to put all the money into -- or the majority of the money into just keep on picking up logistics assets? Or like, is there some of it is going to be set aside to maybe do a special distribution again, or like what's kind of your outlook over there?

Well, as we mentioned in the past, and, Mark, if you want to say something about it, go ahead.

No, I think, Rakesh, we'll look at all options. We're continuing to look at opportunities to acquire additional assets in all 3 of our business segments. I would tell you we're probably not focused on any one individually. But on the refining sector, of course, as strong as refining has been, probably assets we'd be interested in would be expensive at this point. So that can make it a little more difficult. As far as dividends, we paid a special dividend in the past, it would be something that we could look at in the future. But we also want to keep our balance sheet strong. We're looking at continuing to reduce debt, and as you can appreciate, with 2 refineries, we do have some turnarounds coming up in 2014, so at some point, we'll start planning for those as well. So we want to continue to maintain a very strong balance sheet, which we have today. But we also want to continue to grow as we have and continue to stay active in the markets.

Switching to the retail side. Are you seeing any demand destruction flowing through so far in the first quarter?

Honestly, no.

No. And -- so I think you had it in the fourth quarter, your same-store sales was around up like 4% or so? Is that the trend in the first quarter as well?

Well, the weather in the first quarter, obviously, is much better than what it used to be last year and so that will influence our business nicely.

Your next question is from the line of Jeff Dietert with Simmons.

I was hoping you could talk a little about the asphalt market. I think it was weak in the fourth quarter, but give us an update on how that's evolved so far in the first quarter. And how that relates to your project on vacuum tower in upgrading some of the asphalt to lighter products, is that something that adds flexibility, is that something you intend to do year-round or make seasonal adjustments? How are you thinking about that?

Well, I'll let Fred in a second give an update on the VTB project. In regard to the asphalt market, obviously historically, fourth quarter and first quarter are weak. So what we do during these 2 quarters, we basically increase our inventory level. As we do that, as we increase our inventory level, we put it on the books with market price asphalt, which is historically the weakest in the -- over the year. If we look at the benchmark, the Oklahoma benchmark, today, we see that asphalt is being sold around $5.40 a ton versus last year, same period, $4.40. So we are basically $100 higher per ton. Obviously, crude oil is a little higher than what it used to be last year. But what we see so far is that there will be another strong year -- we are hoping to have another strong year of asphalt and obviously the season start sometime in April and/or May, we have -- we take enough inventory that we put in storage in different terminals. Some of them we own, some of them we lease. And we're hoping to start selling it in higher prices in the next 6 to 8 weeks. In regard to the VTB, Fred, do you want to...

Yes, sure. Jeff, this is Fred Green. The project that we're working on for Tyler should complete in the month of June. And really what we're looking at there is a tank and the ability to receive the material from Lion and process it through the coker. Once we get the assets in place, it becomes an optimization for the LP model for both Lion and for Tyler. We would expect that we'd be able to take advantage of it though year-round.

There are no further questions at this time.

Well, thank you, Nicole, and I would like to thank each one of you for listening to us this morning. We hope that we can hear from you in the next few weeks, and obviously, we'll update you next time we'll be on the call. Thank you so much. Have a great day.

Thank you for participating in today's conference call. You may now disconnect.