Good morning. My name is Ruth and I will be your conference operator today. At this time, I would like to welcome everyone to the Delek US Holdings Q3 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. Keith Johnson, you may begin your conference.

Thank you, Ruth. Good morning. I would like to thank everyone for joining us on today's conference call and webcast to discuss Delek US Holdings third quarter 2016 financial 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’re 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. 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 for a few closing strategic comments. With that, I’ll turn the call over to Assi.

Thank you, Keith. For the third quarter 2015, Delek US reported an adjusted net loss of $11.3 million or $0.18 per basic share compared to adjusted net income of $52.7 million or $0.82 per diluted share in the prior-year period. We ended the third quarter with approximately $350 million of cash on a consolidated basis and $512,000 of net debt. Excluding debt at Delek Logistics, we had net debt of approximately $137 million at Delek US as of September 30, 2016. This cash and debt balances exclude amounts related to our retails assets. As announced on August 29, we reached an agreement to sell our retail-related assets to COPEC for $535 million, plus the working capital adjustment and retail cash on hand at closing. Based on balances as of September 30, in addition to the purchase price, we would have received retail cash on hand of approximately $18 million. At the closing of the transaction, we will pay off the debt associated with our recent assets, which was $159 million as of September 30, plus an estimate of prepayment fee of the amount of $50 million. The retail assets related have been classified as discontinued operations for reporting purposes. Before I turn over to Danny, I wanted to say that I'm looking forward to continue as the CFO through May 2017 and excited about the initiative we have in front of us. Behind May 2017, I will continue working with the company as an officer on a different role. Now, I will turn it over to Danny to discuss additional financial details.

Thank you, Assi. For the third quarter of 2016, Delek US reported a net loss of $161.7 million or $2.61 per basic share compared to net income of $18.7 million or $0.29 per diluted share in the third quarter last year. Included in the reported results was an after-tax non-cash charge of $156 million or $2.52 per share related to an impairment of our investment in Alon USA. A reconciliation of reported results to adjusted results is included in the financial bibles of our press release. The primary driver of the change on a year-over-year basis was reduced performance in our refining segment due to a 40.6% decline in the Gulf Coast 5-3-2 crack spread and a higher RINs cost of $6.1 million for the quarter compared to $300,000 in the prior-year period. Our 47% investment in Alon USA resulted in a pretax loss of $4.8 million in the third quarter of 2016. We also incurred $3.8 million in interest cost during the period related to borrowings associated with the acquisition of the Alon USA shares. The combination of the pretax loss and associated interest expense reduced third quarter 2016 and associated interest expense reduced third quarter 2016 after-tax results by $0.09 per basic share. In the prior-year period, the equity income related to Alon USA was $16.8 million and interest associated with the investment was $4.5 million, which combined for a net pretax benefit of $12.3 million or $0.13 per diluted share on an after-tax basis. These after-tax per share amounts are based on a 35% marginal tax rate. Our operating expenses declined by $10.5 million compared to the third quarter of 2015. This decline was driven primarily by $2.1 million of lower variable cost and $7.3 million from reduced outside services and maintenance expenses, which were due in…

Thank you, Danny. And good morning. During the third quarter, in refining, we took advantage of the crude processing facility at El Dorado as we adjusted our crude slate to include some Gulf Coast builds. At Delek, we continue to match production and commercial demand, which benefited our capture rate on a year-over-year basis. Now that we have made solid progress on our expense reduction initiative, we’re focusing on our commercial and operation gross margin improvement efforts. In our refining segment, our goal is to improve our gross margin per barrel by $2 over the next 18 to 24-month period. In our logistics assets, the RIO crude oil pipeline joint venture project began operations in September and progress was made on the Caddo joint venture project, which is scheduled to be completed by January 2017. This project should benefit our operations as they improve crude sourcing ability for our refining assets. Based on guidance for distribution growth in 2017 of a minimum of 10%, we would expect the distribution to the general partner to be at least $17 million in 2017. While we continue to improve our operations, one factor that is out of our control is wind. The Renewable Fuel Standard is a broken system that continues to add costs to US refining industry, reducing its competitive in the global market. And in addition, to the cost to purchase wind, this system is also affecting the wholesale as non-obligated blenders are negatively impacting netbacks in local market. We continue to look for ways to reduce our exposure, but this environment for winds continue to negatively affect our performance. We expect to close the $535 million sale of the retail-related assets in the near future. We believe that this transaction will improve our financial flexibility, which can be used as we value both growth opportunity and returning cash to our shareholders. These growth opportunities could include refining and logistics assets as well as corporate transactions. As always, we remain focused on factors that are under control as we work to create the long-term value for our shareholders. As you know, on October 14, we made a non-binding proposal to acquire the remaining outstanding stock of Alon USA in an all-stock transaction. I’m sure that there are many questions related to this proposal. But we do not intend to comment on any developments beyond what was in the proposal until it is determined that such disclosures or comments are required. With that, Ruth, can you please open the call for questions?

[Operator Instructions] Your first question comes from the line of Doug Leggate from Bank of America. Your line is open.

Hey, guys. It’s Clay Augumini on for Doug. Just a couple of quick ones from me. Just on the drop-down backlog, wholesale appeared to be the next in queue, but that’s always been sold. Can you give us some idea to the scale of the MLP-able EBITDA that remains at DK?

Are you talking about the existing backlog? Or…

Yes.

Today, at DK, we’re talking about very minimum project. Obviously, we are relying on M&A, if you will. And I’ll leave you to that. But the 10% that we mentioned are not conditioned on any drop-down. We believe that organic projects can support the 10% that we mentioned.

Got you. Thank you. And just on the retail sale, wondering if you could share your thoughts on how you ultimately decided to sell the business rather than drop it down, some of your peers that also have sizeable retail or wholesale have talked about the value of having an integrated business model that also stabilizes earnings. If you can talk about how you came to decide how to – whether to monetize and why that offered better value and what factors you considered, that would be great.

Absolutely. I would say that the multiple we got on the retail sell, call it, 13 times. It’s actually a little more than that because we're keeping the cash on hand. And as of September 30, that was, call it, $17 million, $18 million. So, if you look at that, we’re talking about in excess of 13 times. And I personally said this business many years ago, I believe in the retail, but retail historically is traded at six to eight times. We believe that it’s much more accretive to shareholders if we had the cash on hand and our job is to sell something for 13 to 14 times and try to buy something else for lower multiple. So, for us, while that’s a great business and it was a tough decision, if we want to keep the business or sell it, 13, 14 times was very appealing to us.

Got you. Appreciate the answers, guys.

Clay, one more thing to remember. We, at Delek, reported this quarter total cost for RINs of around $7 million. And that's basically after we already removed any RINs related to our retail business. The reason is that we did keep at Delek the wholesale activity to generate the RINs. So, the other refineries, in general, are looking into – getting into the retail basis in order to generate RINs, while Delek generating them in the refining segment.

Got you. Thanks for that.

Your next question comes from the line of Fernando Valle from Citi. Your line is open.

Hi, guys. Good morning. Thanks for taking my question. The first one is just on the outage of the Colonial last quarter and also what we’ve seen today. What was the impact on you from the Colonial being out last quarter and what are you envisioning for this quarter?

Obviously, last quarter, as we see in the retail margin, margins that have moved up, we were able to support most of our customers. However, there were outages, especially in couple of cities. So, financially, it was a benefit to us because of margin jumping, not the refining margin, but I’m talking about the retail margin or the wholesale margin, if you will. And also, the impact lead to the Enterprise and TEPPCO lines. So, generally speaking, wholesale margins and shutdown of the Colonial last time was beneficial to us and probably to other refiners. This time, honestly, it just happened. We need to evaluate the situation. I don't believe that – if anything, there will be negative impact. If anything, it’s a positive impact on us. But it’s too early to assess that. I must say one more thing in that regard. As you know, we – in our logistics assets and refining, we sell barrels along the TEPPCO line. As pressure on Colonial comes up, people are trying to move over on TEPPCO and netbacks on TEPPCO are moving up. That’s what happened last time. It’s, again, too early to measure it this time. But generally speaking, I think the reaction to the entire refining industry should be positive.

Great, thanks.

I must admit – I’d say, though, that my heart is to Colonial and to the people that got hurt. And I wish this incident could have been avoided. We hate every time we see people hurting as much.

Yes, of course. Thank you for the reply. And then my second question, you talked a little bit about the rationale behind selling the retail being the multiples. Not to go directly into the offer that you’ve made, but can you just – you had talked before about trying to grow Delek into 5-6 refinery company. Can you speak to the rationale how that – obviously, you’re still trying to grow. Is that still the plan? Do you see the fundamentals for refining improving? Where in the cycle do you think we are in refining?

That’s a great question. Actually, it’s two different questions. Let me take them one by one. First of all, retail. I mentioned that earlier – and I’m going to say it again. Retail was a great business line for us. Growing, very stable. We love the business. And we did the process of evaluating the dropdown. It came to us – it became clear to us that the value on the retail assets in the marketplace is very good and provide us with tremendous amounts of cash. So, while it was a tough decision, really tough decision, we made the decision to move forward with the sell. On the second question, growing the business, it’s not a secret that the last year was a tough year for the refining industry. I do believe that see a glimmer of hope here as inventories are coming down a little bit and we as an industry, I think, are becoming more rational and we pay attention to what we do. While it will take some time to create the inventory, I think we somehow through the bottom of this cycle and from here we’re probably going to see a better 2017. I must say that – I’d like to add one more thing here. We had in our mind several components in order to continue to grow our business. The first one is to control our expenses and you saw that we’re very aggressive in controlling our expenses. The second one is to make sure that reliability is being supported by CapEx, but as reliability is improving, CapEx is coming down. The third component is, obviously, making sure that we have liquidity to support the growth that we want to achieve. And the next component for us is to make sure that we’re improving the gross profit and that’s the reason we put a goal of $2 per barrel for the next 18 to 24 months under current market conditions, so we will be as competitive as we should be in the marketplace. And I hope that was a comprehensive enough answer to your question.

Yes, very much so. Appreciate it.

[Operator Instructions] Your next question comes from the line of Neil Mehta from Goldman Sachs. Your line is open.

Hey, good morning, Uzi/Assi.

Hey, good morning, Neil.

Good morning, Neil.

So, I want to kick it off on El Dorado, can you talk a little bit about the gross margins in the quarter. They did look a little soft, at least the headline gross margins. What drove that and then ultimately the path to improving profitability there?

Absolutely. Several factors impacted the El Dorado. And we are working very hard to improve them. First of all, and probably the most important thing is, if you recall, El Dorado has the ability to run much heavier crude. And we are working hard to stop thinking about moving a heavier build, especially WCS, West Canadian sour, to El Dorado. We expect that to start happening sometime in the first quarter. And the market – we can move – diverge [ph] from cushion. And the marketing cushion is roughly $10 under. It will be – it would probably be $1.50 to $2 to bring it to the refinery. But that should improve the competitiveness of the refinery. Second, on the product side, obviously, we have the RINs. And while in Tyler, we sell across the rack. In El Dorado, we have, obviously, some pipeline sales. And most of the charge in Delek US is because of the RINs and because of the situation in the marketplace. Third one is our situation with asphalt. As we get to the end of the season, that market is getting – got a little softer. And that impacted our margin. We are working, as I mentioned, Neil, our goal is to improve our gross profit in El Dorado by $2 not by relying on crack spreads, but by doing the work that we're doing internally to improve our gross margin by $2. And we think that that goal is achievable in the next two years.

I appreciate that, Uzi. The second question is on Midland. It’s gotten a lot of attention lately as the Permian has seen a pickup in rigs and product path. Looks like it’s going to be strong out of the Permian. Whether there's enough takeaway infrastructure out of the Delaware, but not out of the Permian broadly. Just would love your high-level thoughts on that and where do you a normalized Permian differential over the next couple of years?

I get very excited when I think about that. And I'll tell you why because I think the market today doesn’t reflect reality. And let me take a step back. Obviously, we have more than sufficient offtake capacity as we stand right now. However, let’s be clear. The situation is basically around the D&Ds. And the offtake capacity – there’s a big change with D&Ds that were signed and then, if you will, far cheaper. And while D&Ds need to be fulfilled and this is basically the same cost for the shippers, when we talk about spot and walking [ph] shippers, you’re talking about probably – I’ll call it $250 to $350 per barrel. That number is very important and I’ll explain why. Today, everybody that needs to ship or they have the D&D ship on the pipe. However, the moment there’s a little disruption or if there’s just decent growth out of the Permian, these D&Ds will be fulfilled. And people will be now not obligated to ship, but will – only based on economics. And then, we would see back the $2 or the $2.50 that we should see. And one indication for me was that when there was a pipeline interruption, probably six weeks ago, eight weeks ago, when the market part of this would be more than just few days. Eventually, it was only a few days. Midland differential jumped all the way close to $2. So, that tells us that the difference between the D&Ds and the fulfillment or the contract of the D&Ds, how much people are really shipping is not big. And in my mind, if production continues to grow and we saw Chevron’s announcement, we saw Occi’s announcement, everybody is focused on the Permian, people buying land everywhere. And don’t forget, we will be – we are a very big player in that area. So, I’m excited about that. And I think that the worst is behind us.

Where do you see that point of intersection where those differentials widen out? Is that a late 2017 event? Is that a 2018 or is it beyond?

It depends on growth and depends on D&Ds expiration – when D&Ds expire. Some of them already starting to expire in 2017. Some of them will expire in 2018. So, I would say that sometimes in 2017 we will see that number widening.

Uzi, if I can ask one more here, just on this Colonial stuff, I know it's very early, but high level, if it's difficult to move product from the Gulf Coast up to the Northeast or up to the East Coast broadly, what are the alternatives to move product into the East Coast? Is there – it doesn't look like there's a lot of pad to – do those barrels ultimately need to come by – come from Canada, Europe to clean up New York harbor?

If it’s a long-term situation, then people will start barging from the Gulf Coast up toward Northeast. I must say that – and this is one person's opinion. I know how long will it take, but I do not believe – and again, that’s my opinion, I do not believe that this is a long-term situation. Now, again, as I mentioned earlier, as beneficial as it is to the refining industry, my heart is to Colonial and to the families that suffer this pain.

Absolutely. Thank you, Uzi.

[Operator Instructions]. There are no further questions at this time. Let me turn the call back over to the presenters.

I’d like to thank my colleagues around the table for the great work they’re doing. I’d like to thank the Board of Directors, you investors for your interest in our company, and mainly I’d like to thank our employees for making this company what it is. Thank you. And have a great day.

This concludes today’s conference call. You may now disconnect.