Delek Us Holdings, Inc. · NYSE:DK
Delek Us — Proxy Contest (April 2021)
45 slides from Delek Us's proxy contest presentation, Apr 12, 2021
Slide 1: Investor Presentation
April 12, 2021 Investor Presentation Delek US Holdings, Inc.
Slide 2: Disclaimers
2 Disclaimers Forward Looking Statements: Delek US Holdings, Inc. (“Delek US”) and Delek Logistics Partners, LP (“Delek Logistics”; and collectively with Delek US, “we” or “our”) are traded on the New York Stock Exchange in the United States under the symbols “DK” and ”DKL”, respectively. These slid
Slide 3: Executive Summary
3 Track Record of Strong Performance Delek has outperformed peers and CVR over the past five years on a Total Shareholder Return (“TSR”) basis Peer-leading capital returns – returned 17% of average market capitalization over 2019-2020 Executing Our Strategy for Shareholder Value Creation Activ
Slide 4: Integrated Platform, Growing Cash Flows and Strong Returns
Over 250 convenience stores located in the southwest United States Stable source of demand for refined products High-return growth opportunities Track record of prudent strategic actions Crude oil gathering supplies crude to our refineries Supplies refined products to our Retail network
Slide 5: Peer-Leading Return of Capital and Strong Financial Position
$784 Million Cash 5 Commitment to Peer-Leading Return of Capital Strong Financial Position(4) (1) See definition in Non-GAAP Disclosures discussion on page 2 and reconciliation to GAAP measure in the Appendix (2) Based on Scotia Research as of March 15, 2021; peer set includes: CVR Energy, Inc., Hol
Slide 6: Track Record of Strong Performance
Track Record of Strong PerformanceI
Slide 7: 5-Year Total Shareholder Return and Strategic Actions
78% 10% 6% 5-Year (1) FactSet as of 4/9/2021; peer set includes: CVR Energy, Inc., HollyFrontier Corporation, Marathon Petroleum Corporation, Par Pacific Holdings, Inc., PBF Energy Inc., Phillips 66 and Valero Energy Corporation. Based on peer groups used by Wall Street Research. TSR calculated base
Slide 8: We Are Committed to Returning Capital to Shareholders
Delek returned ~$335 million to shareholders in 2019-2020 and ~$900 million in the last five years 17% 17% 16% 15% 14% 13% 7% --% VLO DK MPC HFC PSX CVI PBF PARR 8 Leading Peers in Capital Returns (2019-2020, % of Average Market Capitalization) Note: Peers include Valero Energy Corporation (VLO), Ma
Slide 9: Our Strategy for Shareholder Value Creation
Our Strategy for Shareholder Value CreationII
Slide 10: Our Strategy for Growth and Value Creation
Aligning Our Portfolio with the Most Attractive Opportunities Actively Managing Our Portfolio of Assets and Investing in Midstream and Retail A Positioning for Energy Transition Existing Footprint in Biodiesel and Reviewing Opportunities in Renewable Diesel and De-Carbonization D Focusing on Cash Fl
Slide 11: Aligning Our Portfolio with the Most Attractive Opportunities
11 Aligning Our Portfolio with the Most Attractive Opportunities Divestitures Over $800 million in proceeds since 2016 from well-timed divestitures to enhance our portfolio composition Dropdowns Asset dropdowns to DKL have created substantial value at both DK and DKL Joint Ventures Joint ventures ha
Slide 12: Enhancing Our Position In Midstream
12 Enhancing Our Position In Midstream $256 ~$30-$35 ~$80-$105 ~$365-$395 3 Months Ending 12/31/2020 Annualized Krotz Springs Midstream Assets Wink to Webster & Other Midstream Growth Initiatives Total Annual Segment Earnings Potential Krotz Springs • Logistics assets associated with Krotz Springs r
Slide 13: Enhancing Our Retail Network
4.0x 9.0x 5.0x 12.0x NTI Build Multiple Retail Trading (TEV / NTM EBITDA) Multiple Substantial value uplift potential Low build multiple 13 Enhancing Our Retail Network • Serves as a natural fuel short while improving DK’s cash flow stability and reducing its Renewable Identification Number (“RIN”)
Slide 14: Focusing on Cash Flow Generation to Enhance Returns
$428 $682 $275 $240 $560 $248 $155 $490 $238 Capex Opex G&A 2019A 2020A 2021E 14 Focusing on Cash Flow Generation to Enhance Returns Note: All figures rounded to nearest whole number (1) Permission to quote was neither sought nor provided (2) Reflects midpoint of the Company’s $150-$160mm guidance r
Slide 15: Prudent Capital Allocation and Strong Balance Sheet
15 Prudent Capital Allocation and Strong Balance Sheet Disciplined capital allocation program to create value for shareholders C Invest Invest in people and existing assets with safety, maintenance and reliability as top priorities Enhance Balance Sheet Maintain strong balance sheet to preserve fina
Slide 16: Positioning for Energy Transition
16 Positioning for Energy Transition Existing footprint in biodiesel and reviewing opportunities in renewable diesel and de-carbonization Operate 3 Biodiesel Facilities: ~40mm gallons of annual biodiesel production capacity (equal to 407,200 metric tons of carbon reduction)(1) Crossett, AR New Alban
Slide 17: Analyst Commentary
17Note: Permission to quote was neither sought nor provided “DK is taking necessary measures to manage through a volatile period… We expect DK to make it to the other side of a challenging period, with potential to deploy capital in multiple enhancing opportunities.” – Cowen (11/5/2020) “The thesis
Slide 18: Board and Governance Aligned with Our Strategy
Board and Governance Aligned with Our StrategyIII
Slide 19: Board Composition Aligned with Our Strategy
Desired Board Skill / Characteristic # of Directors Leadership Experience Public Co. Board 7 / 8 Public Co. C-Suite 5 / 8 Industry-Specific Experience Refining 6 / 8 Retail 3 / 8 Finance and Transaction Experience Finance / Accounting 6 / 8 M&A 7 / 8 Technology Digital Transformation / Innovation 3
Slide 20: Delek Director Experience and Backgrounds
20 Ezra Uzi Yemin Chairman, President & CEO, Delek and Delek Logistics Extensive sector and executive experience from 20+ years as CEO of Delek, overseeing growth and development of an integrated portfolio, including four refineries, midstream pipelines, terminals and logistics and 250+ retail sites
Slide 21: Board Refreshment Aligned with Strategic Priorities
21 Laurie Z. Tolson Joined January 2021 Experience in digital transformation and enterprise software provides critical insights into opportunities to enhance our technological capabilities and generate efficiencies Richard J. Marcogliese Joined January 2020 Public company leadership experience, deep
Slide 22: Perspectives Regarding CVR's Campaign
Perspectives Regarding CVR’s CampaignIV
Slide 23: CVR's campaign is not in the best interests of Delek shareholders
23 CVR’s self-serving campaign seeking to undermine Delek’s value-maximizing strategy is not in the best interests of Delek shareholders Delek regularly evaluates all of the actions CVR is proposing • Delek carefully reviewed each of CVR’s business proposals • Delek determined that a number of the p
Slide 24: Delek's perspective on CVR's proposals
Delek is currently focused on growing and enhancing the store network to create value and will continue to consider monetization alternatives Sell Retail Network Dropdowns to DKL have provided substantial value to Delek shareholders and the current structure provides an attractive alternative financ
Slide 25: Analyst Commentary on CVR's Letter
25 “It is ironic that CVI claims DK ‘desperately needs a new strategic direction’ despite the two companies operating in essentially the same business, in the same markets, at the same scale. CVI’s letter could have been motivated to push DK to close a plant in a market CVI is exposed to, or convers
Slide 26: Krotz Springs & El Dorado Refineries
• Recent investments at the Krotz Springs and El Dorado refineries improve ability to capture margins as the macro environment improves • Overall, Delek has been one of the lowest cost refiners on an operating expense per barrel basis(1) • The Board and management team regularly review alternatives
Slide 27: Retail Network Presents Growth Opportunities
Retail Network Presents Growth Opportunities CVR Proposal: Sell Retail Network Sold MAPCO at 12.7x(1) in 2016 (1) Based on midpoint of pre-disposition EBITDA guidance provided for MAPCO Express retail assets 27 $29 $47 ~$100 2016A 2020A 2025E Adjusted Retail Segment Earnings ($ in millions) We hav
Slide 28: Benefits of Maintaining Interest in and Structure of DKL
240% (72%) 24% DKL UAN MLP (CVR) Peer Average 28 Benefits of Maintaining Interest in and Structure of DKL CVR Proposal: Halt Dropdowns to DKL and Buy-In Public Interest in DKL Source: FactSet as of 4/9/2021 (1) Peer set includes: Enterprise Products Partners L.P., Holly Energy Partners, L.P., Magell
Slide 29: Continuing Focus on Enhanced Efficiency
• In 2020, Delek reduced operating and G&A expenses by $145 million and expects an additional $80 million in savings in 2021(1) • We eliminated costs by reducing reliance on third-party contractors, reducing headcount by 8% and closing down or divesting underperforming stores • Delek has consistentl
Slide 30: Proven Track Record of Active Portfolio Management
30 Proven Track Record of Active Portfolio Management CVR Proposal: Divest Non-Core Assets and Cease Non-Core Activities Our low-cost Supply and Trading activities are a small but highly integrated part of Delek that generates value for our other businesses and has historically dampened gross margin
Slide 31: Implication of Electing CVR's Nominees
Current Board If CVR Nominees Replace Our Targeted Directors Implication of Electing CVR’s Nominees Public Company Board Experience Substantially reduces our overall independent board leadership experience Public Company C-Suite Experience 4 current directors, including 2 targeted by CVR, were or ar
Slide 32: CVR's Nominees versus Delek's Targeted Directors
32 Randall Balhorn Experience is primarily in energy trading, which is a small part of our business and which CVR is targeting for further reduction No public company board or C-Suite experience Long-standing ties to other nominees and CVR's CEO George Damiris Executive experience limited to
Slide 33: Nominees Have Longstanding Ties with CVR's CEO and Each Other
33 All three CVR nominees and CVR’s CEO, David Lamp, worked together for years at Koch Energy and all four worked together for 8 years... … and George Damiris reported directly to David Lamp for years at HollyFrontier(1) and they worked together over 20 years Years of Employment with Koch Energy Yea
Slide 34: Board Independence, Diversity and ESG
34 N Board Independence and Diversity 7 of 8 directors are independent Appointed 6 new independent directors since 2013, including 3 since February 2019 Lead Independent Director and regular executive sessions Fully independent Board committees Each director attended at least 95% of Board
Slide 35: Delek Has Outperformed CVR and SMID Peers Over Multiple Periods
(31%) (52%) (43%) (90%) (80%) (70%) (60%) (50%) (40%) (30%) (20%) (10%) --% 10% Jan-20 Apr-20 Aug-20 Dec-20 Apr-21 78% 6% (12%) (50%) --% 50% 100% 150% 200% 250% 300% 350% Apr-16 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21 35Source: Public filings and FactSet as of 4/9/2021 (1) Peer set includes: CVR Energy,
Slide 36: Delek's Board's Recommendation
Delek’s Board’s Recommendation
Slide 37: Board's Recommendation
1. Election of Delek Directors 2. Advisory Resolution on Executive Compensation 3. Ratification of the Appointment of Auditors 4. Amendment to our 2016 Long-Term Incentive Plan 5. Approval of our Employee Stock Purchase Plan • Delek’s strategy is working – delivering strong returns, including peer-
Slide 38: Appendix
Appendix
Slide 39: Total Shareholder Returns and CEO Compensation
78% 10% 6% 5-Year $25 $22 $19 $9 $9 $7 $5 $3 Source: Public filings Note: Permission to quote was neither sought nor provided (1) FactSet as of 4/9/2021. TSR calculated based on price performance of stock over given time period and assumes all dividends are reinvested (2) Peer set includes CVR Energ
Slide 40: Compensation Aligned with Business Goals
40 Incentives Aligned with Business Goals Consistently High Say-on-Pay Support from Shareholders 2020 2018 96% 2019 98% 99% Profitability 60% based on adjusted EPS and relative ROIC metrics Environmental and Safety Metrics 10% based on safety metrics 5% attributed to Tier 1 and 2 events 5% a
Slide 41: DKL Outperformance and GP Interests Grant
240% 24% DKL Peer Average Under Mr. Yemin’s management, DKL has significantly outperformed, on a TSR basis, since the IPO and provided substantial value to Delek shareholders(1) (1) TSR is calculated from 11/2/2012 to 4/9/2021; peer set includes: Enterprise Products Partners L.P., Holly Energy Partn
Slide 42: Reconciliation of GAAP to Non-GAAP
42 Reconciliation of GAAP to Non-GAAP Delek US Holdings, Inc. Reconciliation of Amounts Reported Under U.S. GAAP (In millions) Refining Logistics (Midstream) Retail Reported segment contribution margin $777.9 $173.4 $58.5 Less: General and administrative expenses 134.1 20.8 23.8 Add: Gain (loss) on
Slide 43: Reconciliation of GAAP to Non-GAAP (Cont'd)
43 Reconciliation of GAAP to Non-GAAP (Cont’d) Delek Logistics Partners, LP Reconciliation of Amounts Reported Under U.S. GAAP (In millions) 2020 2019 2018 2017 2016 Reconciliation of Net Income to EBITDA: Net income $159.3 $96.7 $90.2 $69.4 $62.8 Add: Income tax expense (benefit) 0.2 1.0 0.5 (0.2)
Slide 44: Retail Segment Reconciliation
44 Retail Segment Reconciliation of Amounts Reported Under U.S. GAAP (In millions) 2018 2019 2020 Reconciliation of Contribution Margin to Adjusted Retail Segment Earnings: Contribution Margin $58.9 $58.5 $67.6 $26.8 Less: General and administrative expenses 23.2 23.8 20.5 7.4 Add: Gain on sale of a
Slide 45: Investor Relations Contacts
Investor Relations Contacts Blake Fernandez SVP IR/Market Intelligence 615-224-1312