Alon USA Reports Fourth Quarter and Year-End 2007 Results

DALLAS, March 5 /PRNewswire-FirstCall/ -- Alon USA Energy, Inc. ("Alon") today announced results for the quarter ended December 31, 2007. Net loss for the fourth quarter of 2007 was ($39.9) million, or ($0.85) per share, compared to net income of $22.0 million, or $0.47 per share, for the same period last year. Excluding special items, Alon recorded a net loss of ($41.5) million, or ($0.89) per share, for the fourth quarter of 2007, compared to net income of $26.0 million, or $0.56 per share, for the same period last year.

Net income for the year ended December 31, 2007 was $103.9 million, or $2.22 per share, compared to $157.4 million, or $3.37 per share, for the same period last year. Excluding special items, net income for the year ended December 31, 2007 was $99.5 million, or $2.13 per share, compared to $138.5 million, or $2.96 per share, for the same period last year.

Jeff Morris, Alon's President and CEO, commented, "The fourth quarter was a challenging quarter as earnings were negatively affected by record crude oil prices, which resulted in the worst quarter in the history of the company. However, 2007 was the second best year in the history of the company. In 2007 we set throughput records at each of our refineries and reached new sales levels in both our asphalt and convenience retail segments. We believe that the overall increase in sales by almost 50% year over year is a reflection of the potential and the future growth of our company."

Mr. Morris added, "On February 18, 2008, the Big Spring Refinery experienced a major fire. We believe we are adequately insured and are aggressively working to re-establish production at the facility. We are very proud of the performance of all Big Spring personnel and emergency responders which helped to limit the severity of injuries and damage to our equipment. Importantly, no major vessels, compressors, or motors will require replacement. We are currently ahead of our own internal schedule and continue to be optimistic about returning to the first stage of operation, producing gasoline, diesel and asphalt by the end of March.

"We are continuing to progress on our announced hydrotreater and mild hydrocracker projects at our California refineries and expect to complete these projects on schedule. In addition, our board of directors has approved plans for an initial public offering related to our retail and marketing businesses which we will seek to complete by year end. Our board of directors has also instructed us to continue to pursue the M&A activities we are currently evaluating. In sum, while we will be working hard to repair our Big Spring refinery, these efforts will not lessen our focus on opportunities to further our growth strategies."

Fourth Quarter 2007

Special items for the fourth quarter of 2007 included $1.6 million of after-tax gain recognized on the disposition of assets in connection with the contribution of certain pipeline and terminal assets to Holly Energy Partners, L.P., in the first quarter of 2005 (the "HEP Contribution"). Special items for the fourth quarter of 2006 included $6.0 million aggregate after-tax inventories adjustments related to the refinery acquisitions of Paramount Petroleum Corporation ("Paramount") and Edgington Oil Company ("Edgington") in the third quarter of 2006 and $2.0 million of after-tax gain recognized in the HEP Contribution.

The combined refineries throughput for the fourth quarter of 2007 averaged 124,376 barrels per day ("bpd"), consisting of an average of 66,633 bpd at the Big Spring refinery and an average of 57,743 bpd at the California refineries compared to the combined refineries throughput for the fourth quarter of 2006 of 125,584 bpd, consisting of an average of 65,931 bpd at the Big Spring refinery and 59,653 bpd at the California refineries. The lower throughput volumes for the California refineries in the fourth quarter of 2007 was due to reduced rates caused by lower refining margins.

Earnings in the fourth quarter of 2007 compared to the fourth quarter of 2006 were adversely affected by lower asphalt margins and lower refinery operating margins at both the Big Spring and California refineries. Asphalt margins in the fourth quarter of 2007 were ($9.03) per ton compared to $44.34 per ton in the fourth quarter of 2006. The decrease in asphalt margins is primarily due to increased crude oil prices in the fourth quarter of 2007. Refinery operating margins at the California refineries in the fourth quarter of 2007 were ($5.28) per barrel compared to $6.21 per barrel in the fourth quarter of 2006. West Coast 3-2-1 crack spreads decreased to an average of $16.92 per barrel for the fourth quarter of 2007 compared to an average of $18.90 per barrel for the fourth quarter of 2006. The California refineries operating margins were also negatively impacted by increased crude oil prices. The Big Spring refinery operating margin for the fourth quarter of 2007 was $4.88 per barrel compared to $10.17 per barrel for the fourth quarter of 2006. The Big Spring refinery operating margin was lower for the fourth quarter of 2007 primarily due to operational issues related to the catalytic reformer that were remediated during the scheduled turnaround in January 2008 and higher crude prices. Gulf Coast 3-2-1 crack spreads decreased to an average of $7.94 per barrel for the fourth quarter of 2007 compared to an average of $8.54 per barrel for the fourth quarter of 2006.

Year-End 2007

Special items for the year ended December 31, 2007 included $4.4 million of after-tax gain recognized on disposition of assets in connection with the HEP Contribution. Special items for the year ended December 31, 2006 included: $38.9 million of aggregate after-tax gains resulting from the sale of Alon's inactive Amdel and White Oil crude oil pipelines in the first quarter of 2006 and from the HEP Contribution; $5.8 million of aggregate after-tax interest expense resulting from the prepayment of debt; $12.5 million of after-tax inventories adjustments related to the acquisitions of Paramount and Edgington; and a $1.8 million after-tax charge for special employee bonuses.

The combined refineries throughput for the year ended December 31, 2007 averaged 129,907 bpd, consisting of an average of 68,145 bpd at the Big Spring refinery and an average of 61,762 bpd at the California refineries compared to an average of 65,413 bpd at the Big Spring refinery for the year ended December 31, 2006 and an average of 60,066 bpd at the California refineries from their acquisition in the third quarter of 2006 through December 31, 2006.

Earnings for the year ended December 31, 2007 compared to the year ended December 31, 2006 decreased primarily as a result of the Big Spring catalytic reformer issue discussed above and lower asphalt margins. The Big Spring refinery operating margin for the year ended December 31, 2007 was $13.96 per barrel compared to $13.72 per barrel for the same period in 2006. Gulf Coast 3-2-1 crack spreads increased to an average of $15.00 per barrel for the year ended December 31, 2007 compared to an average of $12.48 per barrel for the year ended December 31, 2006. Refinery operating margins at the California refineries for the year ended December 31, 2007 were $2.54 per barrel compared to $3.50 per barrel from their acquisition in the third quarter of 2006 through December 31, 2006. This decrease in refinery operating margins was primarily due to the increase in crude oil prices. West Coast 3-2-1 crack spreads increased to an average of $27.37 per barrel for the year ended December 31, 2007 compared to an average of $24.30 per barrel for the year ended December 31, 2006. Asphalt margins for the year ended December 31, 2007 were $26.07 per ton compared to $37.12 per ton for the year ended December 31, 2006.

Conference Call

Alon has scheduled a conference call for Thursday, March 6, 2008, at 10:00 a.m. Eastern, to discuss the fourth quarter and year-end 2007 results. To access the call, please dial (800) 240-4186, or (303) 262-2140, for international callers, and ask for the Alon USA Energy call at least 10 minutes prior to the start time. Investors may also listen to the conference call live on the Alon corporate website, http://www.alonusa.com/, by logging on that site and clicking "Investors." A telephonic replay of the conference call will be available through March 20, 2008 and may be accessed by calling (800) 405-2236, or (303) 590-3000, for international callers, and using the passcode 11107168. A web cast archive will also be available at http://www.alonusa.com/ shortly after the call and will be accessible for approximately 90 days. For more information, please contact Donna Washburn at DRG&E at (713) 529-6600 or email dmw@drg-e.com.

Alon USA Energy, Inc., headquartered in Dallas, Texas, is an independent refiner and marketer of petroleum products, operating primarily in the South Central, Southwestern and Western regions of the United States. The Company owns and operates four sour and heavy crude oil refineries in Texas, California and Oregon, with an aggregate crude oil throughput capacity of approximately 170,000 barrels per day. Alon markets gasoline and diesel products under the FINA brand name and is a leading producer of asphalt. Alon also operates more than 300 convenience stores in West Texas and New Mexico substantially under the 7-Eleven and FINA brand names and supplies motor fuels to these stores primarily from its Big Spring refinery. In addition, Alon supplies approximately 780 additional FINA branded stations.

Any statements in this press release that are not statements of historical fact are forward-looking statements. Forward-looking statements reflect our current expectations regarding future events, results or outcomes. These expectations may or may not be realized. Some of these expectations may be based upon assumptions or judgments that prove to be incorrect. In addition, our business and operations involve numerous risks and uncertainties, many of which are beyond our control, which could result in our expectations not being realized or otherwise materially affect our financial condition, results of operations and cash flows. Additional information regarding these and other risks is contained in our filings with the Securities and Exchange Commission.

This press release does not constitute an offer to sell or the solicitation of offers to buy any security and shall not constitute an offer, solicitation or sale of any security in any jurisdiction in which such offer, solicitation or sale would be unlawful.

-Tables to follow- ALON USA ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED EARNINGS RELEASE RESULTS OF OPERATIONS - FINANCIAL DATA (A) (ALL INFORMATION IN THIS PRESS RELEASE, EXCEPT FOR BALANCE SHEET DATA AS OF DECEMBER 31, 2006 AND INCOME STATEMENT DATA FOR THE YEAR ENDED DECEMBER 31, 2006 IS UNAUDITED) For the Three Months Ended For the Year Ended December 31, December 31, 2007 2006 2007 2006 (dollars in thousands, except per share data) STATEMENT OF OPERATIONS DATA: Net sales $1,146,694 $837,636 $4,542,151 $3,093,890 Operating costs and expenses: Cost of sales 1,122,425 712,403 3,999,287 2,627,321 Direct operating expenses 48,825 48,263 201,196 129,277 Selling, general and administrative expenses (1) 30,219 24,834 105,352 86,939 Depreciation and amortization (2) 14,760 13,792 57,403 34,274 Total operating costs and expenses 1,216,229 799,292 4,363,238 2,877,811 Gain on disposition of assets (3) 2,618 3,286 7,206 63,255 Operating income (loss) (66,917) 41,630 186,119 279,334 Interest expense (4) (11,873) (10,507) (47,747) (30,658) Equity earnings of investees 1,106 986 11,177 3,161 Other income, net 1,637 1,492 6,565 7,740 Income (loss) before income tax expense (benefit) and minority interest in income (loss) of subsidiaries (76,047) 33,601 156,114 259,577 Income tax expense (benefit) (33,583) 10,616 46,199 93,968 Income (loss) before minority interest in income (loss) of subsidiaries (42,464) 22,985 109,915 165,609 Minority interest in income (loss) of subsidiaries (2,595) 1,015 5,979 8,241 Net income (loss) $(39,869) $21,970 $103,936 $157,368 Earnings (loss) per share, basic $(0.85) $0.47 $2.22 $3.37 Weighted average shares outstanding (in thousands) 46,775 46,751 46,763 46,738 Cash dividends per share $0.04 $0.04 $0.16 $3.03 CASH FLOW DATA: Net cash provided by (used in): Operating activities $(49,645) $54,549 $123,950 $142,977 Investing activities 3,330 (19,455) (147,254) (421,070) Financing activities (4,496) (14,841) 27,753 205,439 OTHER DATA: Adjusted net income (loss) (5) $(41,479) $26,022 $99,504 $138,545 Earnings (loss) per share, excluding after-tax gain on disposition of assets, interest expense related to the prepayment of debt, net of tax, inventories adjustments related to acquisitions, net of tax and special employee bonus payment, net of tax (5) $(0.89) $0.56 $2.13 $2.96 Adjusted EBITDA (6) $(52,032) $54,614 $254,058 $261,254 Capital expenditures (7) 13,335 12,454 42,204 39,832 Capital expenditures for turnarounds and chemical catalyst 485 950 9,842 3,940 December 31, December 31, 2007 2006 BALANCE SHEET DATA (end of period): Cash, cash equivalents and short-term investments $95,911 $64,166 Working capital 279,580 228,779 Total assets 1,581,386 1,408,785 Total debt 536,615 498,669 Total stockholders' equity 387,767 290,330 (A) Alon acquired the California refineries and asphalt assets in the third quarter of 2006. Comparable data related to the Paramount Petroleum Corporation refinery and asphalt assets are included for five months in the results of operations for the year ended December 31, 2006. The Edgington Oil Company refinery was acquired on September 28, 2006 and, therefore, comparable data related to this refinery is included for three months in the results of operations for the year ended December 31, 2006. REFINING AND MARKETING SEGMENT (B) For the Three For the Months Ended Year Ended December 31, December 31, 2007 2006 2007 2006 (dollars in thousands, except per barrel data and pricing statistics) STATEMENT OF OPERATIONS DATA: Net sales (8) $1,067,471 $853,154 $4,128,153 $2,744,943 Operating costs and expenses: Cost of sales 1,065,099 765,639 3,720,870 2,385,080 Direct operating expenses 36,634 39,339 154,267 108,673 Selling, general and administrative expenses 6,717 7,505 28,141 21,375 Depreciation and amortization 11,180 10,483 46,628 24,961 Total operating costs and expenses 1,119,630 822,966 3,949,906 2,540,089 Gain on disposition of assets (3) 2,589 3,282 7,138 63,251 Operating income (loss) $(49,570) $33,470 $185,385 $268,105 KEY OPERATING STATISTICS: Total sales volume (bpd) 108,274 132,436 125,585 131,662 Non-integrated marketing sales volume (bpd) (9) 10,906 15,615 13,346 17,995 Non-integrated marketing margin (per barrel sales volume) (9) $0.52 $0.75 $0.56 $(0.47) Per barrel of throughput: Refinery operating margin - Big Spring (10) $4.88 $10.17 $13.96 $13.72 Refinery operating margin - CA Refineries (10) (17) (5.28) 6.21 2.54 3.50 Refinery direct operating expenses - Big Spring (11) 4.29 4.23 3.67 3.63 Refinery direct operating expenses - CA Refineries (11)(17) 1.95 2.50 2.79 2.38 Capital expenditures 9,244 5,051 29,498 27,740 Capital expenditures for turnaround and chemical catalysts 485 950 9,842 3,940 PRICING STATISTICS: WTI crude oil (per barrel) $90.61 $59.39 $72.32 $66.06 WTS crude oil (per barrel) 84.45 54.54 67.32 60.91 MAYA crude oil (per barrel) 75.67 46.96 59.86 51.26 Crack spreads (3/2/1) (per barrel): Gulf Coast (12) $7.94 $8.54 $15.00 $12.48 Group III (12) 9.77 9.94 19.41 14.37 West Coast (12) 16.92 18.90 27.37 24.30 Crack spreads (6/1/2/3) (per barrel): West Coast (12) $1.71 $2.50 $6.33 $3.66 Crude oil differentials (per barrel): WTI less WTS (13) $6.16 $4.85 $5.00 $5.15 WTI less MAYA (13) 14.94 12.43 12.46 14.74 Product price (dollars per gallon): Gulf Coast unleaded gasoline $2.256 $1.540 $2.045 $1.829 Gulf Coast low-sulfur diesel 2.527 1.772 2.147 1.951 Group III unleaded gasoline 2.302 1.561 2.160 1.866 Group III low-sulfur diesel 2.567 1.829 2.233 2.014 West Coast LA CARBOB (unleaded gasoline) 2.548 1.872 2.442 2.196 West Coast LA ultra low-sulfur diesel 2.585 1.888 2.237 2.060 Natural gas (per MMBTU) $7.39 $7.24 $7.12 $6.98 (B) Following the acquisitions of the California refineries and asphalt assets, we added a third reporting segment, the asphalt segment, beginning in the third quarter ended September 30, 2006. As a result, asphalt is no longer included in the refining and marketing segment. All comparable periods for the refining and marketing segment exclude asphalt, as this information is now reflected in the asphalt segment. THROUGHPUT AND YIELD DATA: BIG SPRING For the Three Months Ended For the Year Ended December 31, December 31, 2007 2006 2007 2006 bpd % bpd % bpd % bpd % Refinery crude throughput: Sour crude 57,498 86.3 59,383 90.1 58,607 86.0 58,529 89.4 Sweet crude 4,557 6.8 2,850 4.3 5,017 7.4 2,987 4.6 Blendstocks 4,578 6.9 3,698 5.6 4,521 6.6 3,897 6.0 Total refinery throughput (14) 66,633 100.0 65,931 100.0 68,145 100.0 65,413 100.0 Refinery production: Gasoline 33,763 51.2 31,249 48.1 32,135 47.5 29,671 46.0 Diesel/jet 17,793 27.0 19,785 30.5 19,676 29.1 20,651 32.0 Asphalt 7,639 11.6 5,691 8.8 7,620 11.3 6,147 9.5 Petrochemicals 3,406 5.2 4,834 7.4 3,980 5.9 4,465 6.9 Other 3,277 5.0 3,351 5.2 4,190 6.2 3,627 5.6 Total refinery production (15) 65,878 100.0 64,910 100.0 67,601 100.0 64,561 100.0 Refinery Utilization (16) 88.6% 88.9% 92.5% 90.8% THROUGHPUT AND YIELD DATA: CALIFORNIA REFINERIES For the Three For the For the Months Ended Year Ended Period Ended December 31, December 31, December 31, 2007 2006 2007 2006 bpd % bpd % bpd % bpd % Refinery crude throughput: Sour crude 14,577 25.2 37,422 62.7 20,839 33.7 37,171 61.9 Heavy crude 42,410 73.4 21,615 36.2 40,700 65.9 22,533 37.5 Blendstocks 756 1.3 616 1.0 223 0.4 362 0.6 Total refinery throughput (14)(17) 57,743 100.0 59,653 100.0 61,762 100.0 60,066 100.0 Refinery production: Gasoline 7,269 12.9 7,555 13.1 7,318 12.1 6,806 11.6 Diesel/jet 12,319 21.9 10,922 18.9 13,360 22.1 11,026 18.9 Asphalt 17,717 31.5 18,928 32.7 19,006 31.5 19,500 33.3 Light unfinished 2,252 4.0 6,144 10.6 3,071 5.1 6,144 10.5 Heavy unfinished 16,616 29.5 2,507 4.4 16,793 27.9 2,938 5.0 Other 133 0.2 11,714 20.3 793 1.3 12,126 20.7 Total refinery production (15)(17) 56,306 100.0 57,770 100.0 60,341 100.0 58,540 100.0 Refinery Utilization (16) 79.9% 83.8% 85.9% 83.8% ASPHALT SEGMENT For the Three Months Ended For the Year Ended December 31, December 31, 2007 2006 2007 2006 (dollars in thousands, except per ton data) STATEMENT OF OPERATIONS DATA: Net sales $136,429 $166,766 $642,937 $389,634 Operating costs and expenses: Cost of sales (18) 139,987 146,368 592,709 346,839 Direct operating expenses 12,191 8,924 46,929 20,604 Selling, general and administrative expenses 651 1,221 2,825 8,773 Depreciation and amortization 533 1,791 2,145 2,247 Total operating costs and expenses 153,362 158,304 644,608 378,463 Operating income (loss) $(16,933) $8,462 $(1,671) $11,171 KEY OPERATING STATISTICS: Number of terminals (end of period) 12 12 12 12 Asphalt sales volume (thousands of tons) 394 460 1,927 1,153 Average sales price per ton $346.27 $362.53 $333.65 $337.93 Asphalt margin per ton (19) $(9.03) $44.34 $26.07 $37.12 Capital expenditures $512 $1,756 $2,167 $3,156 RETAIL SEGMENT For the Three Months Ended For the Year Ended December 31, December 31, 2007 2006 2007 2006 (dollars in thousands, except per gallon data) STATEMENT OF OPERATIONS DATA: Net sales $142,519 $87,197 $481,797 $351,493 Operating costs and expenses: Cost of sales (18) 117,064 69,877 396,444 287,582 Selling, general and administrative expenses 22,675 15,941 73,863 56,280 Depreciation and amortization 2,770 1,262 7,724 5,453 Total operating costs and expenses 142,509 87,080 478,031 349,315 Gain on disposition of assets 29 4 68 4 Operating income $39 $121 $3,834 $2,182 KEY OPERATING STATISTICS: Number of stores (end of period) 307 206 307 206 Fuel sales (thousands of gallons) 26,872 20,121 91,946 75,969 Fuel sales (thousands of gallons per site per month) (20) 30 33 30 34 Fuel margin (cents per gallon) (21) 20.0 14.9 19.0 16.0 Fuel sales price (dollars per gallon) (22) $2.97 $2.24 $2.82 $2.55 Merchandise sales $63,351 $42,172 $221,640 $157,468 Merchandise sales (per site per month) (20) 69 68 72 70 Merchandise margin (23) 31.7% 34.0% 30.6% 32.9% Capital expenditures $3,014 $5,621 $8,968 $8,748 (1) Includes corporate headquarters selling, general and administrative expenses of $176 and $167 for the three months ended December 31, 2007 and 2006, respectively, and $523 and $511 for the years ended December 31, 2007 and 2006, respectively, which are not allocated to our three operating segments. (2) Includes corporate depreciation and amortization of $277 and $256 for the three months ended December 31, 2007 and 2006, respectively, and $906 and $1,613 for the years ended December 31, 2007 and 2006, respectively, which are not allocated to our three operating segments. (3) Gain on disposition of assets reported for the three months and year ended December 31, 2007 reflects the recognition of $2,618 and $7,206, respectively, of deferred gain recorded primarily in connection with the contribution of certain product pipelines and terminals to Holly Energy Partners, LP ("HEP") in March 2005 ("HEP Transaction"). Gain on disposition of assets reported for the year ended December 31, 2006 reflects the $52,500 pre-tax gain on disposition of assets recorded in connection with the Amdel and White Oil transaction and the recognition of $10,755 deferred gain recorded primarily in connection with the HEP transaction. Deferred gain recorded primarily in connection with the HEP transaction for the fourth quarter 2006 was $3,286. (4) Interest expense for the year ended December 31, 2006 includes $3,600 of prepayment premiums and $6,094 of unamortized debt issuance costs written off as a result of prepayments of $100,000 term loan in January 2006 and $30,200 of retail debt in July 2006. (5) The following table provides a reconciliation of net income (loss) under United States generally accepted accounting principles ("GAAP") to adjusted net income (loss) utilized in determining earnings per common share, excluding the after-tax gain on disposition of assets, the after-tax interest expense related to prepayments of debt, the after-tax inventories adjustments related to acquisitions and the after-tax special employee bonus payment. Adjusted net income (loss) is not a recognized measurement under GAAP; however, the amounts included in adjusted net income (loss) are calculated based on amounts included in our consolidated financial statements. Our management believes that the presentation of adjusted net income (loss) and earnings per common share, excluding these after-tax items, is useful to investors because it provides a more meaningful measurement of operating performance for evaluation of our Company's results and for comparison to other companies in our industry. Three Months Ended Year Ended December 31, December 31, 2007 2006 2007 2006 (dollars in thousands, except earnings per share) Net income (loss) $(39,869) $21,970 $103,936 $157,368 Plus: Interest expense related to prepayments of debt, net of tax - - - 5,866 Plus: Inventories adjustments related to acquisitions, net of tax - 6,074 - 12,459 Plus: Special employee bonus payment, net of tax - - - 1,780 Less: Gain on disposition of assets, net of tax (1,610) (2,022) (4,432) (38,928) Adjusted net income (loss) $(41,479) $26,022 $99,504 $138,545 Weighted average common equivalent shares outstanding 46,775 46,751 46,763 46,738 Earnings (loss) per share, excluding after-tax gain on disposition of assets, interest expense related to prepayments of debt, net of tax, inventories adjustments related to acquisitions, net of tax and special employee bonus payment, net of tax $(0.89) $0.56 $2.13 $2.96 (6) Adjusted EBITDA represents earnings before minority interest in income (loss) of subsidiaries, income tax expense (benefit), interest expense, depreciation, amortization and gain on disposition of assets. Adjusted EBITDA is not a recognized measurement under GAAP; however, the amounts included in Adjusted EBITDA are derived from amounts included in our consolidated financial statements. Our management believes that the presentation of Adjusted EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. In addition, our management believes that Adjusted EBITDA is useful in evaluating our operating performance compared to that of other companies in our industry because the calculation of Adjusted EBITDA generally eliminates the effects of minority interest in income of subsidiaries, income tax expense, interest expense, gain on disposition of assets and the accounting effects of capital expenditures and acquisitions, items which may vary for different companies for reasons unrelated to overall operating performance. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are: -- Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; -- Adjusted EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt; -- Adjusted EBITDA does not reflect the prior claim that minority stockholders have on the income generated by non-wholly-owned subsidiaries; -- Adjusted EBITDA does not reflect changes in or cash requirements for our working capital needs; and -- Our calculation of Adjusted EBITDA may differ from the Adjusted EBITDA calculations of other companies in our industry, limiting its usefulness as a comparative measure. Because of these limitations, Adjusted EBITDA should not be considered a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only supplementally. The following table reconciles net income to Adjusted EBITDA for the three months and year ended December 31, 2007 and 2006, respectively: For the Three For the Months Ended Year Ended December 31, December 31, 2007 2006 2007 2006 (dollars in thousands) Net income (loss) $(39,869) $21,970 $103,936 $157,368 Minority interest in income (loss) of subsidiaries (2,595) 1,015 5,979 8,241 Income tax expense (benefit) (33,583) 10,616 46,199 93,968 Interest expense 11,873 10,507 47,747 30,658 Depreciation and amortization 14,760 13,792 57,403 34,274 Gain on disposition of assets (2,618) (3,286) (7,206) (63,255) Adjusted EBITDA $(52,032) $54,614 $254,058 $261,254 (7) Includes corporate capital expenditures of $565 and $26 for the three months ended December 31, 2007 and 2006, respectively, and $1,571 and $188 for the years ended December 31, 2007 and 2006, respectively, which are not included in our three operating segment capital expenditures. (8) Net sales include inter-segment sales to our asphalt and retail segments at prices which are intended to approximate wholesale market prices. These inter-segment sales are eliminated through consolidation of our financial statements. Net sales for the year ended December 31, 2006 include $3,300 for the sale of sulfur credits. (9) 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. 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. (10) Refinery operating margin for our Big Spring refinery is a per barrel measurement calculated by dividing the margin between net sales (exclusive of sale of sulfur credits for $3,300 for the year ended December 31, 2006) 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 margins to these crack spreads to assess our operating performance relative to other participants in our industry. The refinery operating margin for our California refineries is calculated by dividing the margin between the net sales and cost of sales by the throughput volumes at the California refineries. The 2006 refinery operating margin for the California refineries includes a charge of $19,987 to cost of sales for inventories adjustments related to acquisitions. (11) Refinery direct operating expenses is a per barrel measurement calculated by dividing direct operating expenses at our Big Spring and California refineries, exclusive of depreciation and amortization, by the applicable refinery's total throughput volumes. (12) A 3/2/1 crack spread in a given region is calculated assuming that three barrels of a benchmark crude oil are converted, or cracked, into two barrels of gasoline and one barrel of diesel. We calculate the Gulf Coast 3/2/1 crack spread using the market values of Gulf Coast conventional gasoline and low-sulfur diesel and the market value of WTI crude oil. We calculate the Group III 3/2/1 crack spread using the market values of Group III conventional gasoline and low-sulfur diesel and the market value of WTI crude oil. We calculate the West Coast 3/2/1 crack spread using the market values of West Coast LA CARB pipeline gasoline and LA ultra low-sulfur pipeline diesel and the market value of WTI crude oil. A 6/1/2/3 crack spread is calculated assuming that six barrels of a benchmark crude oil are converted, or cracked, into one barrel of gasoline, two barrels of diesel and three barrels of fuel oil. We calculate the West Coast 6/1/2/3 crack spread using the market values of West Coast LA CARB pipeline gasoline, LA ultra low-sulfur pipeline diesel, LA 380 pipeline CST (fuel oil) and the market value of WTI crude oil. (13) The WTI/WTS, or sweet/sour, spread represents the differential between the average value per barrel of WTI crude oil and the average value per barrel of WTS crude oil. The WTI/Maya, or light/heavy, spread represents the differential between the average value per barrel of WTI crude oil and the average value per barrel of Maya crude oil. (14) Total refinery throughput represents the aggregate volume of crude oil and blendstock used in the refinery production process. (15) Total refinery production represents the barrels per day of various finished products produced from processing crude oil and other refinery feedstocks through the crude units and other conversion units at the applicable refinery. (16) Refinery utilization represents average daily crude oil throughput divided by crude oil capacity, excluding planned periods of downtime for maintenance and turnarounds. (17) Total refinery throughput and production data includes our Paramount refinery for the period from August 1, 2006 through December 31, 2006 and our Long Beach refinery for the period September 28, 2006 through December 31, 2006. (18) Cost of sales includes inter-segment purchases of asphalt blends and motor fuels from our refining and marketing segment at prices which are intended to approximate wholesale market prices. These inter-segment purchases are eliminated through consolidation of our financial statements. (19) Asphalt margin represents the difference between asphalt sales and the related net cost of purchased asphalt, including transportation costs and discounts divided by asphalt sales volume. Asphalt margins are used in the asphalt industry to measure operating results related to asphalt sales. (20) Fuel and merchandise sales per site for the year ended December 31, 2007 were calculated using 206 stores for six months and 307 stores for six months due to the acquisition of Skinny's, Inc. on June 29, 2007. Fuel and merchandise sales per site for the year ended December 31, 2006 were calculated using 167 stores for six months and 206 stores for six months due to the Good Time Stores acquisition on July 3, 2006. (21) Fuel margin represents the difference between motor fuel revenues and the net cost of purchased 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. (22) Fuel sales price per gallon represents the average sales price for motor fuels sold through our retail segment. (23) 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. Contacts: Claire A. Hart, Senior Vice President Alon USA Energy, Inc. 972-367-3649 Investors: Jack Lascar/Sheila Stuewe DRG&E / 713-529-6600 Media: Blake Lewis Lewis Public Relations 214-269-2093 Ruth Sheetrit SMG Public Relations 011-972-547-555551