Good morning. My name is Amy and I will be your conference operator today. At this time, I would like to welcome everyone to the Delek US Holdings Fourth Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Keith Johnson, you may begin your conference.

Thank you, Amy. Good morning. I would like to thank everyone for joining us on today's conference call and webcast to discuss Delek US Holdings fourth quarter and full-year 2015 results. Joining me on today's call will be Uzi Yemin, our Chairman, President and CEO; Assi Ginzburg, our CFO; Danny Norris, our CAO; as well as other members of our management team. 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 May the 26, by dialing 855-859-2056 with the ID number 28236908. An online replay may also be accessed for the next 90 days at the company's website. Last night, we distributed a press release that provides a summary of our fourth quarter and full-year 2015 results. This press release is available on our corporate website and through various news outlets. On today's call, Assi will begin with a few opening remarks on financial performance for the quarter. Danny will cover additional financial details before turning it over to Uzi to offer a few closing strategic comments. With that, I'll turn the call over to Assi.

Thanks, Keith. For the fourth quarter of 2015, Delek US reported an adjusted net loss of $4.3 million or $0.07 per basic share compared to adjusted net income of $70.1 million or $1.20 per diluted share in prior-year period. For the full year of 2015, Delek US reported adjusted net income of $60.4 million or $0.98 per diluted shares compared to $211.6 million or $3.57 per diluted share for 2014. During 2015, results were reduced by approximately $51 million of other inventory charges, excluding LCM, related to change in product and crude oil prices. We ended the fourth quarter with $302 million of cash on a consolidated basis and $674 million of net debt. Excluding debt and cash at Delek Logistics, we had a net debt position of $322 million at Delek US. During Q4, we repurchased 484,000 shares for $13.3 million. For 2015, we spent $42 million to repurchase approximately 1.4 million shares under our repurchase plan that expired on the December 31, 2015. In addition, we paid $37 million in 2015 in dividend for a total of $80 million returned to shareholders during the year. Looking into the first half of 2016, we expect to receive up to $130 million of cash from a combination of a favorable litigation settlement and tax-related items. Of these amounts, approximately $43 million is expected to be booked as business interruption proceeds in the first quarter. Now, I will turn it over to Danny to discuss additional financial details.

Thank you, Assi. For the fourth quarter 2015, Delek US reported a net loss of $31.5 million or $0.51 per basic share compared to net income of $37.5 million or $0.64 per diluted share in the fourth quarter last year. For the full-year 2015, Delek US reported net income of $19.4 million or $0.32 per diluted share in 2015 versus net income of $198.6 million or $3.35 per diluted share in 2014. A reconciliation of reported results to adjusted results is included in the financial tables of our press release. The adjustments consist of non-cash items, including lower of cost or market inventory evaluations, impairment charges and unrealized hedging gains and losses. General and administrative expenses were $24.9 million in the fourth quarter of 2015 compared to $35.8 million in the prior-year period. During the fourth quarter of 2015, G&A was reduced by $6.4 million due to allocation of litigation settlement proceeds received in the first quarter of 2016. Approximately, $1.7 million of the allocation was for cost incurred in the fourth quarter of 2015. Also lower employee-related expenses on a year-over-year basis accounted for the remainder of the reduction. Depreciation and amortization expense was $36.6 million in the fourth quarter of 2015 compared to $29.5 million in the fourth quarter of 2014. This increase was primarily due to capital spending related to the Tyler turnaround and expansion project. The equity loss from our 48% investment in Alon USA was approximately $21.7 million on a pre-tax basis, which includes $18.7 million related to a goodwill impairment recorded at Alon USA during the fourth quarter of 2015. The amount also includes an adjustment in the depreciation amount for the actual basis difference to $600,000 per quarter from $3.4 million per quarter previously estimated. The net effect of this change during the…

Thank you, Danny, and good morning everybody. We remain focused on the factors under our control to improve the operations and manage the allocation of our capital in a changing market environment. As we matched operating rates to commercial demand during the seasonal slow period in the fourth quarter, we made improvement in our capital rate at the Tyler refinery compared to the third quarter of 2015. We continue to make progress in optimization of our – in optimizing, I'm sorry, our commercial strategies to balance the utilization rate at Tyler with market demand, while supporting our realized netbacks. We had a record year in our retail segment with a contribution margin of $64 million and we continue to add large-format stores to grow our footprint. Our logistics segment consistent of DKL improved its contribution margin and distributions increased during the challenging MLP industry in 2015. This performance was primarily due to a business mix weighted toward stable fee-based contracts. From a capital spending standpoint, we expect declines moving forward. And we completed a large investment program in refining during 2015 that has been underway for the past two years. This investment program included completing scheduled five-year turnaround at both refineries, expanding Tyler and adding flexibility at El Dorado. The next scheduled five-year turnaround are in 2019 and 2020. Capital expenditures for 2016 are expected to decline by 59% from 2015 levels and are below our previous guidance of $100 million to $110 million. This should increase our ability to generate free cash flow from our operations. As our capital spending transitions from an investment phase in refining to an ongoing maintenance level, we will continue to target improved yields and efficiencies in our refining system. We remain focused on creating long-term value for our shareholders and believe that our financial position should allow us the flexibility to take advantage of growth opportunities. As part of these efforts, we're evaluating ways to unlock the value of our retail segment, which could include a dropdown to DKL. In addition, we continue to evaluate additional opportunities to provide growth, but remained patient in the light of the changing market environment. We will continue to manage our capital allocation program, which includes $125 million share repurchase authorization for 2016, based on market conditions and growth opportunities as we move through the year. With that, Amy, would you please open the call for questions? [Operator Instructions]

Your first question comes from the line of Paul Cheng with Barclays. Paul, your line is open.

Thank you. Hey, guys, good morning.

Mr. Cheng, how are you doing this morning?

Very good. Thank you. Uzi, I'm curious that the $130 million in cash, that really is a windfall maybe I'm missing. I didn't realize that you have that coming, and that's roughly 15%, 16% of your current market cap. How should we look at this windfall cash receivable? And what's the priority of the use of the cash?

Well, that's a great question. First of all, you made a comment that is it's a windfall. Not that it came of the moon, all of a sudden, falling over our head. We knew, this was coming and I can't get into too many details about the $49 million, because we are under CA. But we suffered our profitability in past period and we got this settlement done. So, that's behind us. The second is, obviously, the tax credit on the biodiesel. Again, we suffered from that in prior periods, especially last year, as biodiesel blended mix didn't make sense without the tax credit. So, all these – it's not something that we didn't expect to see. We knew this was coming. And in prior results, we suffered from the lack of that money and lack of these funding. Now, to your question, what we're going to do with the money. Obviously, in this environment, we think that the cheapest thing on the board is, obviously, our stock. So, we're going to look at it very hard and make sure that we can bring value to our shareholders by supporting our stock price.

You said then, since that you guys know that it is coming that is probably I have to say that I'm pretty ignorant, because I didn't expect that. So, maybe you can say, if you could, share with us that is there any other potential cash inflow, may not be to this magnitude, but that you guys are working on, either on the irrigation side or any other thing that we should be aware?

There are couple of things that we're – yeah, I'm sorry. There are a couple of things that we're working on, not to that magnitude, but obviously this settlement is something that is bigger than usual. But I think that we told the market that, for example, the $20 million or little more than $20 million on the tax credit in 2015 – we told the market this is going to come if the biodiesel credit or biodiesel tax credit will be reinstated. We do work on couple of things, but at this point it's premature to talk about them.

And then on the $43 million of the business interruption insurance that you're going to report in the first quarter and you also have some tax credit you're going to report, is the company going to treat that, from a modeling standpoint, as a special item or that you're just going to flow it through – how should that begin – I mean, when people are doing the earnings estimate on you guys, how should we treat it?

I will start by saying that the taxes will not be a P&L impact. Those are all balance sheet related. We do have, like you mentioned, $43 million of business interruption income. We didn't have the – made a decision yet how to book it and is it one time and when it's related to. So, I think we're still looking into it. We just settled that few days ago. But high level, you'll be able to see it clearly in our financials.

Okay. Two final questions. One, have you done any economic run cuts given today's market condition? And secondly, on the demand – if you're looking at your retail store, what is the quarter-to-date same store sales that you are seeing?

Let's start with the second part, because it's easy. We had one market with 40 stores problems, if you ignore that, January was flat and February is much stronger. January so far – I'm sorry, January was zero – similar to the market, by the way. And February is around – I'm going by memory, around 3% same stores. But I'm going to tell you that there was a one market with the local problem, 40 stores, it was resolved already. There was a supply situation in one market. Other than that, January was flat and February is up 3%. So, I think that demand is very, very, very strong. I'm not sure if I got the first question, Paul. What was your first question?

Any economic run cut at your refineries given the low margin that we've seen in the last several weeks?

Yes. We are optimizing the system. In January and part of February, you can assume 10% – call it 12% down from economic standpoint.

Thank you.

Your next question comes from the line of Roger Read with Wells Fargo. Roger, your line is open.

Yeah. Good morning.

Good morning, Roger.

Uzi, I guess, I'm going to take a shot here with the Alon deal. You announced the share repurchase program, as you've highlighted the $130 million of extra cash. And I recognize we got that the standstill agreement and all, but if you look at where the two previous acquisitions of Alon occurred, substantially higher prices than today, why not take an additional cash windfall plus cash on the balance sheet and accelerate that transaction?

That's a great question. We ask ourselves the same question. I'm going to just tell you one thing, Roger. Alon ratio with us got so much out of whack. And that's perfectly fine if this is the game we're playing, we're playing that game. I think we calculated that the other day, 80%, there will be a different CEO here that will sign this deal. I'm not going to sign this deal. So, if somebody thinks that Delek will pay 80% ratio to Alon, then that's something that is unheard of. With that being said, if the market conditions change, then we're looking at that. At this point, 80% doesn't make sense. Now, you asked a different question. Why not to take cash and buy Alon? That's something that we will need to look at. We're not focusing on that at this point as the standstill is still in place and we can't do anything about it for Q4 months. So, I wouldn't get the market too excited about us all of a sudden paying big check to Alon.

Well, I wasn't really trying to get them excited. I was just sort of curious what the alternative paths might be rather than aggressively buying back your own shares. And I guess, that would be my kind of follow-up question here. As you think about the $125 million authorization, quite clearly, cash coming in that would cover that regardless of what free cash flow generation may be in 2016, should we think about that as a kind of the way the process has been relatively modest acquisitions along the line or should we expect something more aggressive from you?

First of all, we need the market to improve. We got the $130 million, first quarter is secured. We want the market to improve, the crack to improve. They're actually improving pretty nicely. And in the market that we're in, we really enjoy when Brent TI opens up. I'm sure you watch that as much as anybody else. So, if the cracks are moving the right direction, and they're moving in the right direction, no reason why we won't be more aggressive in the path to buy our stock at $14. We bought the stock at $30, at $35. So, at $14, it's no-brainer.

Yeah. And you've exposed me as one of the more boring people in the world watching crude diffs on a daily basis, but thanks. I'll turn it back.

Thank you, Roger.

Your next question comes from the line of Ryan Todd with Deutsche Bank. Ryan, your line is open.

Thanks. Good morning, guys.

Hey, Ryan.

Maybe if I could start out with a question on the retail monetization options. I mean, can you talk through your thinking on the pluses and minuses of either a spinoff versus dropping to DKL? And particularly, in the context of current multiples in the MLP space and maybe some thoughts around the timing of how this could play out?

That's a great question. Let me put it this way. First of all, we got to a scale. Let's start with the underlying business. We got to a situation that the retail is actually making very nice money and it's growing. So, we are – two years, three years ago, when we spoke, we said that it's premature to talk about dropping down retail or do something with retail. So that we're – so we are happy with the performance. We just opened six new stores. They're not in the numbers. Gallons are coming in very nicely. Obviously, we know the multiples of retail. We are in that business. As a matter of fact, it's almost we buy half of our company or more than that with retail. So, no-brainer that we look at that. With that being said, there's something that we need to remember. This is a tax situation around retail. And the base for the retail is pretty low as we invested over the years. And if we go ahead and spinoff or sell retail, there are tax consequences that we need to look at. So, while its look, hey, great, let's sell retail, it needs to come together with tax treatment that would be favorable. Otherwise, it doesn't make sense. As we stand right now, we think that the best approach is to unlock value to dropping into the MLP. We know that the multiples came down dramatically. But at the same time, we are in this game for long term, the MLP. And we've said all along that we want to continue to grow the MLP and so we're having a hard look on that.

Great. Thanks. I appreciate the detail. And then maybe one in terms of -I guess in terms of CapEx and free cash flow. I guess, first of all, the $89 million budget for next year, should we think of that as kind of a baseline go-forward maintenance CapEx rate going forward?

I wouldn't call it just – I'm sorry, I wouldn't call it just maintenance. Let me be clear. That number doesn't include building new stores. Other than that, this is what we are planning to spend over the next few years.

Okay. And then, there was a decent amount of noise in the – I mean, I think there were a decent number of one-time items that impacted your cash flow in this quarter. I guess, do you have a thought in terms of maybe in the current differential environment and that CapEx level, how much free cash flow you think you might be able to be generating on an ongoing basis and in terms of the use of that free cash flow, would the priorities be in line with your comments on the $130 million earlier, which is the bulk of that free cash flow would potentially go into share buybacks?

If you look at 2015, roughly, we finished the year with an EBITDA of $215 million and those numbers included roughly $50 million of inventory charges and I will say another $50 million impact from the turnaround. So, if you look at the 2015, our base EBITDA was probably $300 million and north. Even if 2016 will be below that number, you can see that with only $90 million of CapEx and roughly $50 million of interest cost, we should have a free cash flow with our business. And when you add to that the fact that we just entered into the settlement with the insurance company plus the taxes, we feel very comfortable that next year we'll be able to generate free cash flow.

Great. That's helpful. I'll leave it there.

Thank you.

Your next question comes from the line of Brad Heffern with RBC Capital Markets. Brad, your line is open. Brad, if you're on mute, please unmute. Your line is open. Your next question comes from the line of Phil Gresh. Phil from JPMorgan, your line is open.

Hey. Good morning. Can you hear me?

Yes. Good morning, Phil.

Okay. First question is just on the dropdown opportunities. With respect to retail, how much of the EBITDA there would you consider MLP eligible or droppable? Is it the whole thing or is it just a component of it?

I will say that there are two options and we're exploring both of them. One part is the wholesale margin. If you look at other companies, they have done those types of transaction. And when you look at $0.04, $0.05 fuel margin on 0.5 billion of gallons that can be $20 million, $25 million of the sizable dropdown. Something unique to Delek is the fact that we own 60% of our real estate. So, if you look at other companies, again, you also saw that people drop their real estate into the MLP inside a C-Corp and that's something that we're looking into too. So, it can be basically – we can create, if we choose, that most of our retail EBITDA will be able to be eligible for an MLP. With that being said, we will need to make sure that we have the right tax structure, that we have minimum leakage when we do that, and that you support the goal of Delek US to be able to increase the overall liquidity and the value of the company.

Yeah. Okay. Understood. That's helpful. I guess, the follow-up question just with respect to dropdowns is maybe you could just talk about how you're viewing the ability to finance – the situation at the MLP market today, would it be more likely that you'd take back units versus being able to issue public equity? And obviously, you should probably get some cash back, I would assume, if you're just kind of maintaining a consistent leverage profile. But just anything about how you're thinking about that as another source of cash that could come back to the parent as well and be used for other things like buybacks.

Sure. So, something that is quite unique to our MLP is the fact that we have on our revolver $350 million of availability to-date. That's something that – and we are below the leverage needed there, which mean we have room to borrow a few hundred million dollars on our revolver. I don't see us in this market going out and raising equity to the MLP. I don't believe there is a market to that. And therefore, the combination of borrowing under the ABL – sorry, under the revolver plus potentially do take some shares will be able for us to optimize both the MLP coverage – leverage and the Delek US excess cash.

Okay. Last question then is just kind of putting all that together with everything else you said. Just sort of maybe remind us how far you're willing to take the balance sheet relative to maybe today's EBITDA environment and the volatility that we're seeing? I mean, how much of this cash do you want to use to just continue to protect the balance sheet?

I think that the margin is protected really well right now. And any proceeds coming from the potential dropdown should be used to more than just protecting the balance sheet. It should use strategically to where it needs to be. Either acquisition or potentially buying back the stock depends on the stock price.

So, the leverage target is, what, 1 times to 1.5 times net debt to EBITDA at the parent? Is that what it's been in the past?

When you look at the parent today, we have roughly $600 million of – sorry, $300 million of net debt at the parent, excluding the MLP. Against that, we own more than $300 million of shares of Alon. So basically, excluding Alon, the company has basically a zero net debt at the top. We don't get to participate in the Alon EBITDA as part of our business. So, we're very comfortable with the situation today, which mean any excess above today can be used for strategic items.

Got it. Okay. Thanks so much.

Your next question comes from the line of Blake Fernandez with Howard Weil. Blake, your line is open.

Thanks. Good morning, guys. You've pretty much iterated the buyback commentary. I just – I'm kind of curious, the run rate has been a little bit below, I guess, what we would have thought the past couple of quarters. And I'm just curious, is there an element of kind of warehousing some cash for the ultimate acquisition of ALJ and maybe some capital requirements there? Can you just talk a little bit about once you finally make that final acquisition, what kind of capital you're envisioning?

Blake, good morning. Thank you for the question. Again, let me go back to the – there are two elements to your question. First of all, we just finalized the settlement. So, that was three weeks ago, both Assi and Fred did great job in finishing this thing. And we just now, like two week ago, finalized what the tax return is. So, during that window, we were in blackout. So, we couldn't buy any stock. So that, obviously, we couldn't bank on something we didn't know for sure what's going to happen. So, now we know it happened. At the same time, and I said it earlier, the ratio between us and Alon, two days ago, got to 80%, I think. I think, 81%, which if I wasn't looking at it myself, I wouldn't believe it. So, now we – and obviously, we've got beaten down pretty hard with the stock. So, we were in blackout. We didn't know during that period that if the money is coming in. Now, we know that the money is coming in. We are going to look at, subject to availability from the underlying business – obviously, crack spreads are moving the right direction. We're going to look at buying our stock. If the ratio between us and Alon changes favorably, we'll look at that. At this point, $14 or $13 of our stock just doesn't make sense to us.

Okay. And, well, just to be clear on that 80% ratio, just so we're kind of on the same page, are you looking at this as like EV per complexity barrel? Are you looking at EBITDA multiples? How are you evaluating that?

No. Two days ago – and again, I think they calculated in the last two days, the price – the share price of Alon and the share price of Delek, if you divide one by the other, got to 81%.

Got it. Okay. And so, just back on the initial question, though, as far as like capital requirements. I mean, is there any large spending that you're envisioning once you finalize that deal?

I'm sorry, I didn't follow the question. Can you explain the question?

Well, I guess, once you finally take 100% of ALJ, I guess, I'm just curious, are there any major capital spending or projects that you're envisioning? I just didn't know if you were trying to preserve the balance sheet for any kind of major CapEx that you had envisioned once you finally take full control of ALJ.

Obviously, as we said in the past, ALJ in the last few years – and I'm speaking on behalf of ALJ, so I need to be careful with that. But it's obvious that ALJ in the last few years did a great job in reducing their debt on their balance sheet. At the same time, they have some big projects including the projects that they announced, the algae project. That's probably for Paul to – who obviously did great job last year and that was a great year for Alon. But it's not a secret that Alon will need some capital. So, as we look at that, we need to consider if we move on Alon, and as I said, the ratio today doesn't make sense, then if we move on Alon, then we will need to preserve some cash for their capital.

Okay. Okay. I had one other follow-up, if you don't mind.

Sure.

Just kind of talking about the profitability of the company. I don't mean this to be unfair, but Delek is one of the only refiners this quarter to post a negative earnings. And I'm just curious, I mean, obviously, the Midland spread working against you, is there anything going on in the business that you think kind of distorted numbers this quarter or, I guess, just a sense – I know 4Q is always weak, but any sense of profitability going forward or things to improve on?

Well, first of all, the comment is correct. I would say that adjusted was negative; without Alon, obviously, we're breakeven. If we take Alon away and we're not planning to take Alon away, but if you look at the underlying business, it was breakeven. If you look at the crack at the Tyler, it was $7.5 in the fourth quarter. The crack in El Dorado was $4.50. Obviously, the $4.50 is influenced dramatically by the asphalt. We're out of the asphalt season. Now, we're building the inventory. It happened last year, if you remember, we're building inventory very cheap. If this was the summer, then El Dorado was much closer to Tyler. So, in an environment that we were in, $7, $7.5 for the fourth quarter, while it's not great, we're still generating cash flow. Now, going forward, it's not a secret that January was very weak for everybody, especially the Mid-Continent, Mid-Continent got $1.225 under. It improved dramatically that helps the El Dorado netbacks very nicely. And also, the fact that prices are coming up in the last few days help from an ethanol standpoint. So, looking at the summer, we are very optimistic that the underlying business will operate. With that being said, again Midland is flat, as you said, but there is something else that is helping us, which I mentioned earlier is the Brent TI. As it's getting wider, obviously, our cracks are improving.

Okay. Fair enough. Thank you, Uzi.

Thank you. Blake.

Your next question comes from the line of Brad Heffern with RBC Capital. Brad, your line is open.

Good morning, guys. Can you hear me?

Yeah. Good morning.

Sorry about before, I'm not sure what happened. I guess, touching on the Tyler expansion, obviously, you guys ran it at a lower throughput number this quarter and the capture improved. But I think that the throughput number this quarter was actually similar to numbers that Tyler had hit on the high end before the expansion. So, I'm curious how you think about the economics of the expansion at this point relative to your initial expectations and if you think that it will be able to run full in a higher-demand time of year?

Brad, that's a great question. I honestly ask myself that question all the time. I still believe – we still believe that in the summer, Tyler will sell every drop of its production. As we change to a different vapor pressure and the demand is coming up, and we are actually doing – we have a lot of initiatives. It's not the time to discuss them, because they're probably something that we need to protect our competitive situation. But we are getting more and more customers at higher level netbacks versus our previous years. So, in the summer, our belief is that we're going to run it close to capacity, if not at capacity.

Okay. Perfect. Thanks for that. And then thinking about crude slate, I think historically you've run some Canadian heavy via rail at El Dorado, but I don't think you've been doing that lately. Is that correct? And are you thinking about doing that in the context of where the relative spreads are at?

The spreads are around $13 or $14. Mark, I don't know if you want to make comment on that. Go ahead.

Yeah. Yeah. This is Mark Smith. Yeah. The Canadian spreads have continued to tighten in. We're seeing a lot of Canadian conventional production declines. And so, the way we get the – we manifest rail into El Dorado, so it costs us anywhere from – depending on what the railcar costs are, anywhere from $17 to $20 a barrel to get it to El Dorado. So, at these differentials, it still makes much more sense to run the local crude plus the Midland crude, even with the Midland differential that's flat.

Okay. That's an easy call. All right. Thanks.

Your next question comes from the line of Chi Chow with Tudor, Pickering, Holt. Chi, your line is open.

Thanks. Good morning.

Hey, Chi. Good morning.

Hi. So, Uzi, back on – maybe a question back on ALJ. It think you previously suggested that possible synergy between the DK and ALJ assets could potentially be implemented, even without taking a majority interest. Can you provide any updates on this?

Yes, of course. There are some areas that we can create value for both companies without owning 100%. We're looking at these areas. They are areas on the commercial side, they are areas of procurement side, they are areas of back office and main office side. So, these ideas still exist. As a matter of fact, we're looking at them together with the ALJ guide. And Fred has been doing a lot of work to evaluate that. And some of them will be implemented regardless if we buy 100% of ALJ or not. Fred, do you want to say anything?

No. I think, you covered it. There are areas that can be beneficial for both companies that we can take advantage of in the near term and we're looking at those now.

Okay. But so far, nothing has been implemented, is that accurate?

A little bit on the asphalt side, a little bit in other areas, but not to the magnitude of what we thought or what we think can bring value to the shareholders.

Okay. Great. On just the prior question on Tyler, I don't know if you can answer this or not, but you talked previously about a potential products pipeline out of Tyler into other markets. Any updates on that initiative?

Yeah. That possibility obviously still exist. We still need to look at the economics where the best markets are. That's one of the things that we're looking. We have another company – a great company, I won't mention the name that we are looking together at that possibility.

Okay. Great. And then maybe, two final quick questions. What is your outlook on the Midland differentials this year? And you mentioned some economic run cuts here in 1Q, do you have any guidance on throughputs at the refineries for Q1?

Yeah. You can assume – and Assi and Keith will do a better job than me talking to each one of you. You can assume, call it – until now, obviously, economics are improving now, call it, 10% to 12% below capacity for the period until, call it, end of February. March, depends on the economics, which obviously are improving as we speak. I believe that if you look at Midland and this is your second – or the second part of your question, it got to a positive situation and now it's flat. Eventually, for this year, I am not too – or we are not too bullish, it depends on how you look at it, bullish or bearish. On Midland, we don't think the differentials will – there will be probably minus $50 to plus $20 or plus $30. It depends on what's going on in Midland itself. 2017-2018, we think we will go eventually, as production ramp-up and people will get out of their T&Ds and you are obviously familiar with the two lawsuits that are around that. We'll go to more normalized, call it, $1 to $2 that we expected in the past, call it, $1.50. But this year, probably, between $30 to – plus $30 to minus $50.

Great. Thanks, Uzi. Appreciate it.

Thank you, Chi.

Your next question comes from the line of Johannes Van Der Tuin with Credit Suisse. Johannes, your line is open.

Hi. Good morning. I hope everything is well. A couple of quick questions. First is on the CapEx. The rate of run rate CapEx that you have announced seems very, very reasonable. I was just wondering if there are any sort of quick-hit projects that might come up that you'd want to increase the CapEx for and/or are buried within that CapEx? What kind of flexibility is there?

Honestly, in that CapEx, there are some projects that are quick-hit, some things that will give us the flexibility. In the future, not more than probably $15 million to $20 million as we invested $750 million – $700 million in our system over the last three years. So, even freight ran out of projects.

Okay. Are any of those projects something you'd like to highlight, just to understand the nature of them and how they're going to work with the business?

There's really – I mean the project Uzi is mentioning, there are a few discretionary projects, but they're not high material type projects. I mean, we're really primarily sustaining capital and regulatory compliance for both plants.

Oka. Understood. Second question. It goes really a little bit more to the asphalt that you had mentioned previously and the inventories being built. Do you have a view on kind of what's going to be happening with asphalt market in your area and region going into the summer?

That's a great question. I'm going to take a shot at it. And Mark, if you think that you want to add something, please do. In our areas, as more and more people got out of the asphalt business, it got much stronger than I expected last year, we actually made money. Obviously, fourth quarter, we don't make money because we mark it down as inventory. That's one of the reasons you see the margins in El Dorado lower. I believe that this is going to be a very strong asphalt season. Six months ago, few months ago, the government passed the highway bill, the first one after, I believe, 10 years or since 2007. So, no reason to believe that the asphalt season won't be. Mark, do you want to...?

Yeah. I think I agree with that. So, we had the highway bill pass, plus Texas has passed infrastructure bill, where the work in Texas and the demand in Texas is pretty high. And so, most of our asphalt that doesn't kind of stick around the El Dorado and Arkansas area, and if you've ever driven on the highway between Little Rock and Memphis, you know there is a lot of asphalt being put down, is done in Texas and Southern Oklahoma. So, both those areas are going to be a pretty good demand season when it starts here in the spring.

Okay. And then just perhaps a final question, and that is, it's been referenced to obliquely several times, and that's the nervousness around the economic context that we're currently in. Is there a way that you're thinking about the economy as a whole and how that fits into how you manage your business, especially just through this cycle, more generally speaking?

That's a great comment and question, Johannes. One of the reasons why we shore up the balance sheet is to prepare ourselves for – we don't believe that we are going into a recession. As a matter of fact, I believe that this morning the GDP got revised up. But we want to be ready if that happens. And one of the reasons why we – during the great times, we went ahead and finished the capital project and one of the reasons why we continue to keep the balance sheet very strong. That's a great comment and we think about that all the time.

Okay. Thank you very much.

Thank you.

Your next question comes from the line of Paul Sankey with Wolfe Research. Paul, your line is open.

Hi, guys. Hi, Uzi.

Hey.

I'm coming, obviously, late here, and I think you've, one way or the other, answered my questions. But if we could just sort of run through it again, the stock's been weak and disappointing, hasn't it, Uzi? And I guess, there's some elements of the market capture as well as just the market environment in there, although it doesn't seem that you've been that much worse than others. I guess, you are, I think, alone in reporting a loss for the quarter in refining. But then, you've got strengths in some other businesses right now with marketing. And we've got this issue of the buyback and the Alon confusion. I was just wondering, what do you think the problem is and how do you think we fix it in terms of the stock price, Uzi? I think you've kind of said at times during this call that you don't really understand, for example, the ratio of Alon to you. And you're as perplexed kind of as I am. But I just wondered if you could kind of pull it together for me and help me think about how we come out of this to a more appropriate valuation. Thanks.

Paul, you and me spoke about that million times in the past. I'm as frustrated as anybody, not more than anybody, about the stock performance. I think that the stock performance doesn't reflect anything of the valuation of the company. The steps that we're taking are obviously unlocking the value of the retail or trying to unlock the value of the retail. We are going to look at the buyback. And with the extra cash that is coming in, assuming the market is strong for the summer, there is no reason why we won't be as strong with our stock performance. With that being said, I want to be clear, the overhang of Alon and also the disappointing margin from Tyler in the second quarter, in the third quarter, didn't help our situation. We're going to fix the Tyler situation. And as long as Alon is so much at a ratio that is so much unreasonable, we're just not going to tell the market that we're buying Alon, that won't happen. And obviously, with the steps in improving the profitability, we're hoping that the stock price will recover.

Sure. And I guess, you've had the good news of the tax. And I just wonder, has there been major changes in the shareholder structure that you're aware of that would be another reason maybe that things have changed?

I'm not sure I follow the question, Paul, if you can just clarify the question.

I don't know. I guess, somehow maybe the holding of Delek has been, but maybe more hedge fund oriented or if there is some – if you've considered maybe the structure of the shareholder base literally as being maybe a problem. I don't know, I'm just making stuff up here, Uzi. I'll leave it there, because we're running out of time. Thanks.

No, no. First of all, we're looking at the ownership structure of Delek. We're obviously more heavily hedge fund. We love our shareholders. There are some of them that are hedge funds, but they act like value chain, but – or value funds. But with that being said, we need to do better job. We, at Delek, marketing our story to different people in order to create more value and we speak about it all the time and we're going to do that.

Great. We're out of time. Thanks.

Thank you, guys.

Your next question comes from the line of Neil Mehta with Goldman Sachs. Neil, your line is open.

Hey, Uzi.

Hey. Hey, Neil.

So, a quick question. First of all, thanks for providing the adjusted EPS, Uzi and Assi. I thought that was helpful in trying to parse through the results. In terms of the buybacks, $125 million, how do you think about that versus the dividend? I know you used to have a special dividend in the past and you've been pretty good about growing your dividend over time. Can you just talk about how you weigh the two different factors?

At this point, because of the weakness of the stock and because of the fact that dividend is now at more than 4%, we prefer the buyback over the dividend.

Yeah. No, that makes senses. And then on Alon, even if you don't go to 100% there, there is the potential to just take an incremental 3% on a couple of months and get effective control. Are there any advantages to getting effective control of the company, meaning Alon, relative to having 48%, in your mind?

There is one thing with Alon that I need to be clear, if we buy a few more percentages, I'm not saying that it doesn't make sense. We need to look at that, when the time comes, in the three months, four months and we obviously talk about that and think about that right now. One thing, there is – in Alon convertibles, there is a change of control provision that if we go over 51%, that triggers the convertible. So, we will need to talk to the market – the different markets that own these bonds to see how it plays out. I wouldn't rule it out, but there is that overhang of the $150 million of convertibles with that change of control. I think I mentioned that to you in the past.

Yeah. You did. So, thanks, Uzi. And last question is on Tyler. It's come up a couple of times here. But can you just outline the specific strategy that you're taking at the plant to make sure we get the capture rates up and the performance up to the level that you think it should be at?

Yes. Absolutely, what we're doing is targeting the local customers in our areas. I'm not going to go to too many details, but we have a big campaign going on. We are the only refiner in the Dallas market, so what we need to do is to target specifically these customers and not go to other channels. And please, Neil, let's leave it to that, because this is getting into our competitive advantage.

That's fair enough. Thanks a lot, Uzi. Appreciate you taking the time.

Thank you, Neil.

Thank you, Neil.

Your next question comes from the line of Jeff Dietert with Simmons. Jeff, your line open.

Good morning. Uzi. Thanks for taking my question. I know it's late. I was hoping to focus on winter-grade gasoline versus summer-grade gasoline. We're here in late February. Have you effectively purged your winter-grade gasoline already and effectively move into summer-grade early next month? And obviously, there is a shift in profitability there.

As we speak, we're turning our tanks. So, probably, in 10 days, we'll be done. Literally, as we speak, by turning the tanks.

Great. And so, really March will be, for the most part, a full month of summer-grade-type margins?

Well, it depends what you call summer-grade. If you're talking about 11.5 or 9...

Yeah. The lower grade for pressure.

That is correct. We went from the 13 to the 11.5, I believe, 10 days ago. And then we're changing to 9 in two weeks, Mark.

In mid-March.

Mid-March, so yes.

Mid-March. Okay. Thanks for your comments.

Thank you, Jeff.

Your next question comes from the line of Paul Cheng of Barclays. Your line is open.

Hey, guys. I actually – it's not a question, just a request. It's great that you break down the special item, but if it's possible, I think it will help everyone if in the press release you actually trying to break it down what is the pre-tax and after-tax, so that we can actually calculate. And also that separate out by different segments, so that we know where to get it. And hopefully, that also by the line item [indiscernible], because in the middle of the earning, I think that would help everyone greatly. Thank you.

You're welcome. We made progress from last time, right, Paul?

Absolutely.

Hey, you know, Paul, we're lucky to get you twice in the same call. I may retire today after your comments.

Thank you, Paul.

And there are no further questions. I'd turn the call back over to the presenters.

Well, Amy, thank you for this honestly a long call. I'd like to thank everybody for their great interest with our company. I'd like to thank my colleagues around the table. I'd like to thank, more than anything, our employees who work very, very hard in this environment and are pulling our company together and make it what it is. We'll talk to you in the future. Obviously, I didn't thank the board for their support, so that may be a good point to thank them as well. Have a great day.

And this concludes today's conference call. You may now disconnect.