EL PASO, Texas, Aug. 5, 2014 (GLOBE NEWSWIRE) -- Western Refining, Inc. (NYSE:WNR) today reported results for its second quarter ending June 30, 2014. Net income attributable to Western, excluding special items, was $128.8 million, or $1.29 per diluted share. This compares to second quarter 2013 net income, excluding special items, of $126.8 million, or $1.25 per diluted share. Including special items, the Company recorded second quarter 2014 net income attributable to Western of $156.7 million, or $1.56 per diluted share, as compared to net income of $149.3 million, or $1.46 per diluted share for the second quarter of 2013. Special items in the second quarter of 2014 consisted primarily of a non-cash, unrealized pre-tax hedging gain of $45.4 million. A reconciliation of reported earnings and description of special items can be found in the accompanying financial tables. Western's consolidated financial results include the results of both Western Refining Logistics, LP (NYSE:WNRL) and Northern Tier Energy LP (NYSE:NTI).
Commenting on the second quarter, Jeff Stevens, Western's President and Chief Executive Officer, said, "Western delivered another excellent quarter, both operationally and financially. During the quarter, total throughput for Western's Southwest refineries was at an all-time high of 165,000 barrels per day. We also saw strong WTI Midland/Cushing crude oil differentials during the quarter. Additionally, Northern Tier Energy and Western Refining Logistics contributed to these strong financial results."
"One of our key growth priorities for 2014 is the ongoing expansion of our crude oil gathering capabilities in the fast-growing Permian and San Juan Basins. We continue to make progress on our TexNew Mex pipeline reversal and its extension and expect it to come online in early 2015. This investment will further expand our direct pipeline access to cost-advantaged crude oils and positions our refineries to continue to benefit from the increased crude oil production in these regions," said Stevens.
During the second quarter, Western paid a dividend of $0.26 per share of common stock and in July, the Board of Directors authorized a $0.26 per share dividend for the third quarter. Also, during the second quarter, Western settled the 5.75% Convertible Senior Notes due 2014.
During the quarter, Western returned approximately $39 million in cash to shareholders via dividends and share repurchases, and in July purchased an additional $43 million in WNR shares, bringing the total cash returned to shareholders to approximately $730 million since the beginning of 2012.
Looking forward, Stevens said, "The third quarter is off to a strong start. Our refineries are running well and the WTI Midland/Cushing differential has continued to widen during the quarter. Overall, we are well-positioned to benefit from the strong margin environment, allowing us to continue to invest in our business and return cash to shareholders."
Conference Call Information
A conference call is scheduled for Tuesday, August 5, 2014, at 11:00 am EDT to discuss Western's financial results for the second quarter ended June 30, 2014. A slide presentation will be available for reference during the conference call. The call, press release and slide presentation can be accessed on the Investor Relations section on Western's website, www.wnr.com. The call can also be heard by dialing (866) 566-8590 or (702) 224-9819, passcode: 62225088. The audio replay will be available two hours after the end of the call through August 14, 2014, by dialing (800) 585-8367 or (404) 537-3406, passcode: 62225088.
Non-GAAP Financial Measures
In a number of places in the press release and related tables, we have excluded from GAAP measures certain income and expense items from GAAP financial measures and related disclosures. The excluded items are generally non-cash in nature such as unrealized net gains and losses from commodity hedging activities or losses on extinguishment of debt; however, other items that have a cash impact, such as gains on disposal of assets and significant costs to exit an activity are also excluded. We believe it is useful for investors and financial analysts to understand our financial performance excluding such items so that they can see the operating trends underlying our business. Readers of this press release should not consider these non-GAAP measures in isolation from, or as a substitute for, the financial information that we report in accordance with GAAP.
About Western Refining
Western Refining, Inc. is an independent refining and marketing company headquartered in El Paso, Texas. The refining segment operates refineries in El Paso, and Gallup, New Mexico. The Wholesale segment includes a fleet of crude oil and finished product truck transports, and wholesale petroleum products operations in Arizona, California, Colorado, Georgia, Maryland, Nevada, New Mexico, Texas, and Virginia. The retail segment includes retail service stations and convenience stores in Arizona, Colorado, New Mexico, and Texas.
Western Refining, Inc. owns the general partner and approximately 65% of the limited partnership interest of Western Refining Logistics, LP (NYSE:WNRL) and the general partner and approximately 39% of the limited partnership interest in Northern Tier Energy LP (NYSE:NTI).
More information about Western Refining is available at www.wnr.com.
Cautionary Statement on Forward-Looking Statements
This press release contains forward-looking statements covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements contained herein include statements about: our growth priorities; our enhanced crude oil gathering capabilities; growing crude oil production in the Delaware/Permian and San Juan Basins and our ability to benefit from such increased crude oil production; our direct access to cost-advantaged crude oils; the discount between West Texas Intermediate (WTI) Cushing and WTI Midland crude oils; the margin environment and our ability to benefit from the margin environment; our operating and financial performance in current and future periods; timing for the completion of the TexNew Mex pipeline and 70 mile extension; and our ability to invest in our business and to return cash to shareholders. These statements are subject to the general risks inherent in the Company's business. 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 relating to the uncertainties affecting Western's business is contained in its filings with the Securities and Exchange Commission. The forward-looking statements are only as of the date made, and Western does not undertake any obligation to (and expressly disclaims any obligation to) update any forward-looking statements to reflect events or circumstances after the date such statements were made, or to reflect the occurrence of unanticipated events.
Consolidated Financial Data
We report our operating results in five business segments: the refining group, the wholesale group, the retail group, WNRL and NTI.
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Our refining segment operates two refineries in the Southwest owned by Western that process crude oil and other feedstocks primarily into gasoline, diesel fuel, jet fuel and asphalt. We market refined products to a diverse customer base including wholesale distributors and retail chains.
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Our wholesale segment includes a fleet of crude oil and refined product truck transports and wholesale petroleum product operations in the Southwest region. The wholesale group also markets refined products in the Northeast and Mid-Atlantic regions. Wholesale receives its product supply from the refining group and third-party suppliers.
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Our retail segment operates retail convenience stores located in the Southwest that sell gasoline, diesel fuel and convenience store merchandise.
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WNRL owns and operates terminal, storage and transportation assets and provides related services primarily to our refining group in the Southwest.
- NTI owns and operates refining and transportation assets and operates retail convenience store assets and supports franchised retail convenience stores primarily in the Upper Great Plains region of the U.S.
The following tables set forth our unaudited summary historical financial and operating data for the periods indicated below:
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (Unaudited) | ||||
| (In thousands, except per share data) | ||||
| Statements of Operations Data | ||||
| Net sales (1) | $ 4,351,290 | $ 2,429,962 | $ 8,076,433 | $ 4,616,179 |
| Operating costs and expenses: | ||||
| Cost of products sold (exclusive of depreciation and amortization) (1) | 3,731,169 | 1,986,883 | 6,891,906 | 3,784,067 |
| Direct operating expenses (exclusive of depreciation and amortization) (1) | 203,463 | 113,861 | 401,812 | 235,721 |
| Selling, general and administrative expenses | 54,640 | 29,450 | 113,372 | 56,002 |
| Affiliate severance costs | 3,479 | — | 12,878 | — |
| Loss on disposal of assets, net | 119 | — | 1,005 | — |
| Maintenance turnaround expense | — | 35 | 46,446 | 43,203 |
| Depreciation and amortization | 47,848 | 27,143 | 94,258 | 51,475 |
| Total operating costs and expenses | 4,040,718 | 2,157,372 | 7,561,677 | 4,170,468 |
| Operating income | 310,572 | 272,590 | 514,756 | 445,711 |
| Other income (expense): | ||||
| Interest income | 221 | 235 | 416 | 386 |
| Interest expense and other financing costs | (25,722) | (14,681) | (52,582) | (32,669) |
| Amortization of loan fees | (2,079) | (1,515) | (4,176) | (3,119) |
| Loss on extinguishment of debt | (1) | (24,719) | (9) | (46,766) |
| Other, net | 983 | 101 | 2,465 | 298 |
| Income before income taxes | 283,974 | 232,011 | 460,870 | 363,841 |
| Provision for income taxes | (93,407) | (82,752) | (142,606) | (130,863) |
| Net income | 190,567 | 149,259 | 318,264 | 232,978 |
| Less net income attributed to non-controlling interests | 33,871 | — | 76,022 | — |
| Net income attributable to Western Refining, Inc. | $ 156,696 | $ 149,259 | $ 242,242 | $ 232,978 |
| Basic earnings per share | $ 1.88 | $ 1.81 | $ 2.97 | $ 2.74 |
| Diluted earnings per share | 1.56 | 1.46 | 2.44 | 2.26 |
| Weighted average basic shares outstanding | 83,556 | 82,390 | 81,653 | 84,546 |
| Weighted average dilutive shares outstanding (2) | 102,657 | 104,729 | 102,655 | 106,942 |
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (Unaudited) | ||||
| (In thousands) | ||||
| Cash Flow Data | ||||
| Net cash provided by (used in): | ||||
| Operating activities | $ 214,355 | $ 294,957 | $ 278,387 | $ 259,324 |
| Investing activities | (38,000) | 160,003 | (88,449) | (101,420) |
| Financing activities | (76,179) | (330,990) | (126,195) | (239,536) |
| Other Data | ||||
| Adjusted EBITDA (3) | $ 314,364 | $ 240,413 | $ 539,996 | $ 483,105 |
| Capital expenditures | 40,021 | 36,229 | 90,619 | 101,854 |
| Balance Sheet Data (at end of period) | ||||
| Cash and cash equivalents | $ 531,813 | $ 372,335 | ||
| Working capital | 839,194 | 360,059 | ||
| Total assets | 5,796,768 | 2,510,891 | ||
| Total debt and lease financing obligation | 1,200,171 | 560,911 | ||
| Total equity | 2,981,640 | 904,373 | ||
(1) Excludes $1,236.7 million, $2,294.8 million, $1,130.8 million and $2,139.9 million of intercompany sales; $1,232.2 million, $2,286.5 million, $1,127.7 million and $2,134.7 million of intercompany cost of products sold; and $4.4 million, $8.3 million, $3.1 million and $5.2 million of intercompany direct operating expenses for the three and six months ended June 30, 2014 and 2013, respectively.
(2) Our computation of diluted earnings per share includes our Convertible Senior Unsecured Notes and any unvested restricted shares and share units. If determined to be dilutive to period earnings, these securities are included in the denominator of our diluted earnings per share calculation. For purposes of the diluted earnings per share calculation, we assumed issuance of 0.1 million restricted share units for both the three and six months ended June 30, 2014 and assumed issuance of 19.0 million and 20.9 million shares related to the Convertible Senior Unsecured Notes for the three and six months ended June 30, 2014, respectively. We assumed issuance of 0.1 million and 0.2 million restricted shares and share units and assumed issuance of 22.2 million and 22.2 million shares related to the Convertible Senior Unsecured Notes for the three and six months ended June 30, 2013, respectively.
(3) Adjusted EBITDA represents earnings before interest expense and other financing costs, amortization of loan fees, provision for income taxes, depreciation, amortization, maintenance turnaround expense, and certain other non-cash income and expense items. However, Adjusted EBITDA is not a recognized measurement under United States generally accepted accounting principles ("GAAP"). 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 financings, income taxes, the accounting effects of significant turnaround activities (that many of our competitors capitalize and thereby exclude from their measures of EBITDA), and certain non-cash charges that are items that 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:
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Adjusted EBITDA does not reflect our cash expenditures or future requirements for significant turnaround activities, capital expenditures, or contractual commitments;
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Adjusted EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt;
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Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; and
- Adjusted EBITDA, as we calculate it, may differ from the Adjusted EBITDA calculations of other companies in our industry, thereby 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 periods presented:
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (Unaudited) | ||||
| (In thousands) | ||||
| Net income attributable to Western Refining, Inc. | $ 156,696 | $ 149,259 | $ 242,242 | $ 232,978 |
| Net income attributed to non-controlling interest | 33,871 | — | 76,022 | — |
| Interest expense and other financing costs | 25,722 | 14,681 | 52,582 | 32,669 |
| Provision for income taxes | 93,407 | 82,752 | 142,606 | 130,863 |
| Amortization of loan fees | 2,079 | 1,515 | 4,176 | 3,119 |
| Depreciation and amortization | 47,848 | 27,143 | 94,258 | 51,475 |
| Maintenance turnaround expense | — | 35 | 46,446 | 43,203 |
| Loss on disposal of assets, net | 119 | — | 1,005 | — |
| Loss on extinguishment of debt | 1 | 24,719 | 9 | 46,766 |
| Unrealized gain on commodity hedging transactions | (45,379) | (59,691) | (119,350) | (57,968) |
| Adjusted EBITDA | $ 314,364 | $ 240,413 | $ 539,996 | $ 483,105 |
| EBITDA by Reporting Entity | ||||
| Western Adjusted EBITDA | $ 221,500 | $ 240,413 | $ 344,651 | $ 483,105 |
| WNRL EBITDA | 14,884 | — | 29,534 | — |
| NTI Adjusted EBITDA | 77,980 | — | 165,811 | — |
| Adjusted EBITDA | $ 314,364 | $ 240,413 | $ 539,996 | $ 483,105 |
| Three Months Ended | |||
| June 30, | |||
| 2014 | |||
| Western | WNRL | NTI | |
| (Unaudited) | |||
| (In thousands) | |||
| Net income attributable to Western Refining, Inc. | $ 126,596 | $ 7,171 | $ 22,929 |
| Net income attributed to non-controlling interest | — | 3,804 | 30,067 |
| Interest expense and other financing costs | 19,323 | 227 | 6,172 |
| Provision for income taxes | 93,322 | 85 | — |
| Amortization of loan fees | 1,949 | 130 | — |
| Depreciation and amortization | 25,019 | 3,467 | 19,362 |
| Maintenance turnaround expense | — | — | — |
| Gain (loss) on disposal of assets, net | 208 | — | (89) |
| Loss on extinguishment of debt | 1 | — | — |
| Unrealized gain on commodity hedging transactions | (44,918) | — | (461) |
| Adjusted EBITDA | $ 221,500 | $ 14,884 | $ 77,980 |
| Six Months Ended | |||
| June 30, | |||
| 2014 | |||
| Western | WNRL | NTI | |
| (Unaudited) | |||
| (In thousands) | |||
| Net income attributable to Western Refining, Inc. | $ 180,801 | $ 14,315 | $ 47,126 |
| Net income attributed to non-controlling interest | — | 7,593 | 68,429 |
| Interest expense and other financing costs | 39,826 | 452 | 12,304 |
| Provision for income taxes | 142,402 | 204 | — |
| Amortization of loan fees | 3,917 | 259 | — |
| Depreciation and amortization | 49,200 | 6,711 | 38,347 |
| Maintenance turnaround expense | 46,446 | — | — |
| Gain (loss) on disposal of assets, net | 1,106 | — | (101) |
| Loss on extinguishment of debt | 9 | — | — |
| Unrealized gain on commodity hedging transactions | (119,056) | — | (294) |
| Adjusted EBITDA | $ 344,651 | $ 29,534 | $ 165,811 |
Consolidating Financial Data
The following tables set forth our consolidating historical financial data for the periods presented below.
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (Unaudited) | ||||
| (In thousands) | ||||
| Operating Income (Loss) | ||||
| Refining | $ 250,848 | $ 275,512 | $ 386,584 | $ 457,395 |
| Wholesale | 5,726 | 9,161 | 16,233 | 17,920 |
| Retail | 1,558 | 5,872 | (545) | 3,718 |
| Corporate and other | (17,583) | (17,955) | (36,272) | (33,322) |
| Western, excluding WNRL and NTI | $ 240,549 | $ 272,590 | $ 366,000 | $ 445,711 |
| WNRL | 11,417 | — | 22,820 | — |
| NTI | 58,606 | — | 125,936 | — |
| Operating income | $ 310,572 | $ 272,590 | $ 514,756 | $ 445,711 |
| Depreciation and Amortization | ||||
| Western, excluding WNRL and NTI | $ 25,019 | $ 27,143 | $ 49,200 | $ 51,475 |
| WNRL | 3,467 | — | 6,711 | — |
| NTI | 19,362 | — | 38,347 | — |
| Depreciation and amortization expense | $ 47,848 | $ 27,143 | $ 94,258 | $ 51,475 |
| Capital Expenditures | ||||
| Western, excluding WNRL and NTI | $ 26,039 | $ 36,229 | $ 63,552 | $ 101,854 |
| WNRL | 2,773 | — | 8,677 | — |
| NTI | 11,209 | — | 18,390 | — |
| Capital expenditures | $ 40,021 | $ 36,229 | $ 90,619 | $ 101,854 |
| Balance Sheet Data (at end of period) | ||||
| Cash and cash equivalents | ||||
| Western, excluding WNRL and NTI | $ 345,476 | $ 372,335 | ||
| WNRL | 79,395 | — | ||
| NTI | 106,942 | — | ||
| Cash and cash equivalents | $ 531,813 | $ 372,335 | ||
| Total debt | ||||
| Western, excluding WNRL and NTI | $ 897,456 | $ 550,832 | ||
| WNRL | — | — | ||
| NTI | 278,125 | — | ||
| Total debt | $ 1,175,581 | $ 550,832 | ||
| Total debt to capitalization ratio (1) | 69.4% | 60.9% | ||
| Total working capital | ||||
| Western, excluding WNRL and NTI | $ 614,013 | $ 360,059 | ||
| WNRL | 81,256 | — | ||
| NTI | 143,925 | — | ||
| Total working capital | $ 839,194 | $ 360,059 | ||
(1) Calculation of total debt to capitalization ratio for the six months ended June 30, 2014, excludes NTI debt of $278.1 million and total equity of $1,687.6 million attributable to non-controlling interest.
Refining Segment
El Paso and Gallup Refineries and Related Operations
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (In thousands, except per barrel data) | ||||
| Statement of Operations Data (Unaudited): | ||||
| Net sales (including intersegment sales) (1) | $ 2,430,001 | $ 2,001,482 | $ 4,471,200 | $ 3,777,568 |
| Operating costs and expenses: | ||||
| Cost of products sold (exclusive of depreciation and amortization) (2) | 2,076,946 | 1,622,728 | 3,836,144 | 3,064,880 |
| Direct operating expenses (exclusive of depreciation and amortization) | 74,268 | 73,338 | 147,005 | 155,213 |
| Selling, general, and administrative expenses | 7,354 | 7,358 | 14,484 | 14,112 |
| Loss on disposal of assets, net | 188 | — | 672 | — |
| Maintenance turnaround expense | — | 35 | 46,446 | 43,203 |
| Depreciation and amortization | 20,397 | 22,511 | 39,865 | 42,765 |
| Total operating costs and expenses | 2,179,153 | 1,725,970 | 4,084,616 | 3,320,173 |
| Operating income | $ 250,848 | $ 275,512 | $ 386,584 | $ 457,395 |
| Key Operating Statistics | ||||
| Total sales volume (bpd) (1) (3) | 227,313 | 184,248 | 214,105 | 172,506 |
| Total refinery production (bpd) | 163,567 | 158,650 | 149,362 | 139,787 |
| Total refinery throughput (bpd) (4) | 165,641 | 161,985 | 151,642 | 142,288 |
| Per barrel of throughput: | ||||
| Refinery gross margin (2) (5) | $ 23.42 | $ 25.69 | $ 23.14 | $ 27.67 |
| Direct operating expenses (6) | 4.93 | 4.98 | 5.36 | 6.03 |
The following tables set forth our summary refining throughput and production data for the periods and refineries presented:
El Paso and Gallup Refineries
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| Key Operating Statistics | ||||
| Refinery product yields (bpd): | ||||
| Gasoline | 84,773 | 83,885 | 75,894 | 75,794 |
| Diesel and jet fuel | 69,080 | 65,096 | 62,626 | 55,124 |
| Residuum | 5,792 | 5,869 | 5,075 | 4,981 |
| Other | 3,922 | 3,800 | 5,767 | 3,888 |
| Total refinery production (bpd) | 163,567 | 158,650 | 149,362 | 139,787 |
| Refinery throughput (bpd): | ||||
| Sweet crude oil | 126,797 | 118,336 | 120,157 | 109,280 |
| Sour crude oil | 29,019 | 27,867 | 24,090 | 24,635 |
| Other feedstocks and blendstocks | 9,825 | 15,782 | 7,395 | 8,373 |
| Total refinery throughput (bpd) (4) | 165,641 | 161,985 | 151,642 | 142,288 |
El Paso Refinery
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| Key Operating Statistics | ||||
| Refinery product yields (bpd): | ||||
| Gasoline | 68,566 | 65,805 | 59,018 | 58,703 |
| Diesel and jet fuel | 60,693 | 58,263 | 54,215 | 48,162 |
| Residuum | 5,792 | 5,869 | 5,075 | 4,981 |
| Other | 2,462 | 3,021 | 4,132 | 3,127 |
| Total refinery production (bpd) | 137,513 | 132,958 | 122,440 | 114,973 |
| Refinery throughput (bpd): | ||||
| Sweet crude oil | 102,162 | 93,992 | 95,052 | 85,577 |
| Sour crude oil | 29,019 | 27,867 | 24,090 | 24,635 |
| Other feedstocks and blendstocks | 8,060 | 13,777 | 5,132 | 6,683 |
| Total refinery throughput (bpd) (4) | 139,241 | 135,636 | 124,274 | 116,895 |
| Total sales volume (bpd) (3) | 150,728 | 148,271 | 139,176 | 138,437 |
| Per barrel of throughput: | ||||
| Refinery gross margin (2) (5) | $ 20.95 | $ 19.46 | $ 18.70 | $ 25.76 |
| Direct operating expenses (6) | 3.86 | 3.30 | 4.31 | 4.47 |
Gallup Refinery
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| Key Operating Statistics | ||||
| Refinery product yields (bpd): | ||||
| Gasoline | 16,207 | 18,080 | 16,876 | 17,091 |
| Diesel and jet fuel | 8,387 | 6,833 | 8,411 | 6,962 |
| Other | 1,460 | 779 | 1,635 | 761 |
| Total refinery production (bpd) | 26,054 | 25,692 | 26,922 | 24,814 |
| Refinery throughput (bpd): | ||||
| Sweet crude oil | 24,635 | 24,344 | 25,105 | 23,703 |
| Other feedstocks and blendstocks | 1,765 | 2,005 | 2,263 | 1,690 |
| Total refinery throughput (bpd) (4) | 26,400 | 26,349 | 27,368 | 25,393 |
| Total sales volume (bpd) (3) | 33,839 | 35,977 | 33,520 | 34,069 |
| Per barrel of throughput: | ||||
| Refinery gross margin (2) (5) | $ 15.34 | $ 24.26 | $ 14.42 | $ 25.46 |
| Direct operating expenses (6) | 9.03 | 10.41 | 8.73 | 10.25 |
(1) Refining net sales for the three and six months ended June 30, 2014 include $399.0 million and $753.4 million, respectively, representing 42,747 and 41,409 bpd, respectively, in crude oil sales to third-parties without comparable activity in 2013. The majority of the crude oil sales resulted from the purchase of barrels in excess of what was required for production purposes in the El Paso and Gallup refineries.
(2) Cost of products sold for the refining segment includes the segment's net realized and net non-cash unrealized hedging activity shown in the table below. The hedging gains and losses are also included in the combined gross profit and refinery gross margin but are not included in those measures for the individual refineries.
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (Unaudited) | ||||
| (In thousands) | ||||
| Realized hedging gain (loss), net | $ 4,177 | $ 18,329 | $ 20,661 | $ (10,489) |
| Unrealized hedging gain (loss), net | 44,918 | 59,691 | 119,056 | 57,968 |
| Total hedging gain (loss), net | $ 49,095 | $ 78,020 | $ 139,717 | $ 47,479 |
(3) Sales volume includes sales of refined products sourced primarily from our refinery production as well as refined products purchased from third parties. We purchase additional refined products from third parties to supplement supply to our customers. These products are similar to the products that we currently manufacture and represented 17.1% and 15.2% of our total consolidated sales volumes for the three and six months ended June 30, 2014, respectively. The majority of the purchased refined products are distributed through our wholesale refined product sales activities in the Mid-Atlantic region where we satisfy our refined product customer sales requirements through a third-party supply agreement.
(4) Total refinery throughput includes crude oil and other feedstocks and blendstocks.
(5) Refinery gross margin is a per barrel measurement calculated by dividing the difference between net sales and cost of products sold by our refineries' total throughput volumes for the respective periods presented. Net realized and net non‑cash unrealized economic hedging gains and losses included in the combined refining segment gross margin are not allocated to the individual refineries. Cost of products sold does not include any depreciation or amortization. Refinery gross margin is a non-GAAP performance measure that we believe is important to investors in evaluating our refinery performance as a general indication of the amount above our cost of products that we are able to sell refined products. Each of the components used in this calculation (net sales and cost of products sold) can be reconciled directly to our statement of operations. Our calculation of refinery gross margin may differ from similar calculations of other companies in our industry, thereby limiting its usefulness as a comparative measure.
The following table reconciles combined gross profit for both refineries to combined gross margin for both refineries for the periods presented:
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (Unaudited) | ||||
| (In thousands, except per barrel data) | ||||
| Net sales (including intersegment sales) | $ 2,430,001 | $ 2,001,482 | $ 4,471,200 | $ 3,777,568 |
| Cost of products sold (exclusive of depreciation and amortization) | 2,076,946 | 1,622,728 | 3,836,144 | 3,064,880 |
| Depreciation and amortization | 20,397 | 22,511 | 39,865 | 42,765 |
| Gross profit | 332,658 | 356,243 | 595,191 | 669,923 |
| Plus depreciation and amortization | 20,397 | 22,511 | 39,865 | 42,765 |
| Refinery gross margin | $ 353,055 | $ 378,754 | $ 635,056 | $ 712,688 |
| Refinery gross margin per refinery throughput barrel | $ 23.42 | $ 25.69 | $ 23.14 | $ 27.67 |
| Gross profit per refinery throughput barrel | $ 22.07 | $ 24.17 | $ 21.69 | $ 26.01 |
(6) Refinery direct operating expenses per throughput barrel is calculated by dividing direct operating expenses by total throughput volumes for the respective periods presented. Direct operating expenses do not include any depreciation or amortization.
Wholesale Segment
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (In thousands, except per gallon data) | ||||
| Statement of Operations Data (Unaudited) | ||||
| Net sales (including intersegment sales) | $ 1,307,622 | $ 1,242,331 | $ 2,480,040 | $ 2,376,048 |
| Operating costs and expenses: | ||||
| Cost of products sold (exclusive of depreciation and amortization) | 1,277,258 | 1,212,326 | 2,416,493 | 2,317,350 |
| Direct operating expenses (exclusive of depreciation and amortization) | 20,032 | 16,724 | 38,662 | 32,788 |
| Selling, general and administrative expenses | 3,341 | 3,120 | 6,219 | 6,025 |
| Loss on disposal of assets, net | 17 | — | 13 | — |
| Depreciation and amortization | 1,248 | 1,000 | 2,420 | 1,965 |
| Total operating costs and expenses | 1,301,896 | 1,233,170 | 2,463,807 | 2,358,128 |
| Operating income | $ 5,726 | $ 9,161 | $ 16,233 | $ 17,920 |
| Operating Data | ||||
| Fuel gallons sold | 415,499 | 402,696 | 800,227 | 758,329 |
| Fuel gallons sold to retail (included in fuel gallons sold) | 65,095 | 64,330 | 126,689 | 125,758 |
| Average fuel sales price per gallon, net of excise taxes | $ 3.02 | $ 2.98 | $ 2.97 | $ 3.02 |
| Average fuel cost per gallon, net of excise taxes | 2.98 | 2.92 | 2.92 | 2.96 |
| Fuel margin per gallon (1) | 0.05 | 0.07 | 0.06 | 0.07 |
| Lubricant gallons sold | 3,068 | 3,053 | 6,092 | 5,953 |
| Average lubricant sales price per gallon | $ 11.80 | $ 11.18 | $ 11.74 | $ 11.09 |
| Average lubricant cost per gallon | 10.57 | 9.87 | 10.56 | 9.89 |
| Lubricant margin (2) | 10.4% | 11.7% | 10.0% | 10.8% |
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (Unaudited) | ||||
| (In thousands, except per gallon data) | ||||
| Net Sales | ||||
| Fuel sales, net of excise taxes | $ 1,255,107 | $ 1,199,207 | $ 2,378,801 | $ 2,292,007 |
| Lubricant sales | 36,207 | 34,124 | 71,499 | 66,017 |
| Other sales | 16,308 | 9,000 | 29,740 | 18,024 |
| Net sales | $ 1,307,622 | $ 1,242,331 | $ 2,480,040 | $ 2,376,048 |
| Cost of Products Sold | ||||
| Fuel cost of products sold, net of excise taxes | $ 1,237,298 | $ 1,176,738 | $ 2,338,099 | $ 2,246,858 |
| Lubricant cost of products sold | 32,430 | 30,118 | 64,315 | 58,861 |
| Other cost of products sold | 7,530 | 5,470 | 14,079 | 11,631 |
| Cost of products sold | $ 1,277,258 | $ 1,212,326 | $ 2,416,493 | $ 2,317,350 |
| Fuel margin per gallon (1) | $ 0.05 | $ 0.07 | $ 0.06 | $ 0.07 |
(1) Wholesale fuel margin per gallon is a function of the difference between wholesale fuel sales and cost of fuel sales divided by the number of total gallons sold less gallons sold to our retail segment. Fuel margin per gallon is a measure frequently used in the petroleum products wholesale industry to measure operating results related to fuel sales.
(2) Lubricant margin is a measurement calculated by dividing the difference between lubricant sales and lubricant cost of products sold by lubricant sales. Lubricant margin is a measure frequently used in the petroleum products wholesale industry to measure operating results related to lubricant sales.
Retail Segment
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (In thousands, except per gallon data) | ||||
| Statement of Operations Data (Unaudited) | ||||
| Net sales (including intersegment sales) | $ 316,015 | $ 316,920 | $ 595,592 | $ 602,473 |
| Operating costs and expenses: | ||||
| Cost of products sold (exclusive of depreciation and amortization) | 280,338 | 279,514 | 529,521 | 536,528 |
| Direct operating expenses (exclusive of depreciation and amortization) | 29,155 | 26,885 | 56,738 | 52,939 |
| Selling, general and administrative expenses | 2,348 | 1,964 | 4,530 | 3,931 |
| Depreciation and amortization | 2,616 | 2,685 | 5,348 | 5,357 |
| Total operating costs and expenses | 314,457 | 311,048 | 596,137 | 598,755 |
| Operating income | $ 1,558 | $ 5,872 | $ (545) | $ 3,718 |
| Operating Data | ||||
| Fuel gallons sold | 78,143 | 76,669 | 151,530 | 149,551 |
| Average fuel sales price per gallon, net of excise taxes | $ 3.13 | $ 3.12 | $ 3.05 | $ 3.05 |
| Average fuel cost per gallon, net of excise taxes | 2.96 | 2.92 | 2.89 | 2.88 |
| Fuel margin per gallon (1) | 0.17 | 0.20 | 0.16 | 0.17 |
| Merchandise sales | $ 68,314 | $ 66,126 | $ 128,784 | $ 123,952 |
| Merchandise margin (2) | 28.7% | 28.9% | 28.8% | 28.6% |
| Operating retail outlets at period end | 229 | 222 | ||
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (Unaudited) | ||||
| (In thousands, except per gallon data) | ||||
| Net Sales | ||||
| Fuel sales, net of excise taxes | $ 244,842 | $ 239,305 | $ 461,130 | $ 456,780 |
| Merchandise sales | 68,314 | 66,126 | 128,784 | 123,952 |
| Other sales | 2,859 | 11,489 | 5,678 | 21,741 |
| Net sales | $ 316,015 | $ 316,920 | $ 595,592 | $ 602,473 |
| Cost of Products Sold | ||||
| Fuel cost of products sold, net of excise taxes | $ 231,385 | $ 223,628 | $ 437,499 | $ 431,130 |
| Merchandise cost of products sold | 48,728 | 47,046 | 91,704 | 88,503 |
| Other cost of products sold | 225 | 8,840 | 318 | 16,895 |
| Cost of products sold | $ 280,338 | $ 279,514 | $ 529,521 | $ 536,528 |
| Fuel margin per gallon (1) | $ 0.17 | $ 0.20 | $ 0.16 | $ 0.17 |
(1) Fuel margin per gallon is a measurement calculated by dividing the difference between fuel sales and cost of fuel sales for our retail segment by the number of gallons sold. Fuel margin per gallon is a measure frequently used in the convenience store industry to measure operating results related to fuel sales.
(2) Merchandise margin is a measurement calculated by dividing the difference between merchandise sales and merchandise cost of products sold by merchandise sales. Merchandise margin is a measure frequently used in the convenience store industry to measure operating results related to merchandise sales.
WNRL
The following table sets forth the summary operating results for WNRL. There is no comparable activity prior to WNRL's commencement of operations on October 16, 2013.
|
Three Months Ended |
Six Months Ended |
|
| June 30, | ||
| 2014 | ||
| (In thousands, except key operating statistics) | ||
| (Unaudited) | ||
| Revenues: | ||
| Affiliate | $ 34,324 | $ 66,380 |
| Third-party | 657 | 1,358 |
| Total revenues | 34,981 | 67,738 |
| Operating costs and expenses: | ||
| Operating and maintenance expenses | 17,954 | 34,089 |
| General and administrative expenses | 2,143 | 4,118 |
| Depreciation and amortization | 3,467 | 6,711 |
| Total operating costs and expenses | 23,564 | 44,918 |
| Operating income | $ 11,417 | $ 22,820 |
| Other income (expense): | ||
| Interest expense and other financing costs | (227) | (452) |
| Amortization of loan fees | (130) | (259) |
| Other, net | — | 3 |
| Income before income taxes | $ 11,060 | $ 22,112 |
| Income attributed to non-controlling interest | $ 3,804 | $ 7,593 |
| Key Operating Statistics | ||
| Pipeline and gathering (bpd): | ||
| Mainline movements: | ||
| Permian/Delaware Basin system | 24,196 | 19,794 |
| Four Corners system (1) | 35,837 | 38,412 |
| Gathering (truck offloading): | ||
| Permian/Delaware Basin system | 26,178 | 24,182 |
| Four Corners system | 11,188 | 11,293 |
| Terminalling, transportation and storage (bpd): | ||
| Shipments into and out of storage (includes asphalt) | 406,881 | 373,918 |
(1) Some barrels of crude oil movements to our Gallup refinery are transported on more than one of WNRL's mainlines. Mainline movements for the Four Corners system include each barrel transported on each mainline.
NTI
The following table sets forth the summary operating results for NTI. We acquired the general partner and a 38.7% limited partner interest in NTI on November 12, 2013. There is no comparable activity in prior periods.
|
Three Months Ended |
Six Months Ended |
|
| June 30, | ||
| 2014 | ||
| (In thousands, except per barrel data) | ||
| (Unaudited) | ||
| Net sales | $ 1,499,321 | $ 2,756,699 |
| Operating costs and expenses: | ||
| Cost of products sold (exclusive of depreciation and amortization) (1) | 1,328,824 | 2,396,214 |
| Direct operating expenses (exclusive of depreciation and amortization) | 66,507 | 133,688 |
| Selling, general and administrative expenses | 22,632 | 49,737 |
| Affiliate severance costs | 3,479 | 12,878 |
| Gain on disposal of assets, net | (89) | (101) |
| Depreciation and amortization | 19,362 | 38,347 |
| Total operating costs and expenses | 1,440,715 | 2,630,763 |
| Operating income | $ 58,606 | $ 125,936 |
| Other income (expense): | ||
| Interest income | 89 | 177 |
| Interest expense and other financing costs | (6,172) | (12,304) |
| Other, net | 473 | 1,746 |
| Income before income taxes | $ 52,996 | $ 115,555 |
| Income attributed to non-controlling interest | $ 30,067 | $ 68,429 |
| Key Operating Statistics | ||
| Total sales volume (bpd) | 102,409 | 95,822 |
| Total refinery production (bpd) | 93,342 | 93,139 |
| Total refinery throughput (bpd) (2) | 93,022 | 92,826 |
| Per barrel of throughput: | ||
| Refinery gross margin (1) (3) | $ 15.03 | $ 16.54 |
| Refinery gross margin excluding hedging activities (1) (3) | 15.26 | 16.71 |
| Gross profit (1) (3) | 12.98 | 14.49 |
| Direct operating expenses (4) | 4.17 | 4.33 |
| Retail fuel gallons sold (in thousands) | 76,740 | 149,779 |
| Retail fuel margin per gallon (5) | $ 0.19 | $ 0.19 |
| Merchandise sales | 89,895 | 168,443 |
| Merchandise margin (6) | 26.5% | 26.2% |
| Company-operated retail outlets at period end | 164 | |
| Franchised retail outlets at period end | 81 | |
(1) Cost of products sold for NTI includes the net realized and net non-cash unrealized hedging activity shown in the table below. The hedging losses are also included in the combined gross profit and refinery gross margin.
|
Three Months Ended |
Six Months Ended |
|
| June 30, | ||
| 2014 | ||
| (In thousands) | ||
| Realized hedging loss, net | $ (2,365) | $ (3,105) |
| Unrealized hedging gain, net | 461 | 294 |
| Total hedging loss, net | $ (1,904) | $ (2,811) |
(2) Total refinery throughput includes crude oil, other feedstocks and blendstocks.
(3) Refinery gross margin is a per barrel measurement calculated by dividing the difference between net sales and cost of products sold by our refinery's total throughput volumes for the respective period presented. The net realized and net non‑cash unrealized economic hedging losses included in NTI's gross margin are not allocated to the refinery. Cost of products sold does not include any depreciation or amortization. Refinery gross margin is a non-GAAP performance measure that we believe is important to investors in evaluating our refinery performance as a general indication of the amount above our cost of products that we are able to sell refined products. Each of the components used in this calculation (net sales and cost of products sold) can be reconciled directly to our statement of operations. Our calculation of refinery gross margin may differ from similar calculations of other companies in our industry, thereby limiting its usefulness as a comparative measure.
The following table reconciles gross profit to gross margin for the St. Paul Park refinery for the period presented:
|
Three Months Ended |
Six Months Ended |
|
| June 30, | ||
| 2014 | ||
| (In thousands, except per barrel data) | ||
| Net sales (including intersegment sales) | $ 1,486,741 | $ 2,730,336 |
| Cost of products sold (exclusive of depreciation and amortization) | 1,359,500 | 2,452,431 |
| Depreciation and amortization | 17,398 | 34,488 |
| Gross profit | 109,843 | 243,417 |
| Plus depreciation and amortization | 17,398 | 34,488 |
| Refinery gross margin | $ 127,241 | $ 277,905 |
| Refinery gross margin per refinery throughput barrel | $ 15.03 | $ 16.54 |
| Gross profit per refinery throughput barrel | $ 12.98 | $ 14.49 |
(4) NTI's direct operating expenses per throughput barrel is calculated by dividing direct operating expenses by total throughput volumes for the respective periods presented. Direct operating expenses do not include any depreciation or amortization.
(5) Fuel margin per gallon is a measurement calculated by dividing the difference between fuel sales and fuel cost of products sold by the number of gallons sold. Fuel margin per gallon is a measure frequently used in the retail industry to measure operating results related to fuel sales.
(6) Merchandise margin is a measurement calculated by dividing the difference between merchandise sales and merchandise cost of products sold by merchandise sales. Merchandise margin is a measure frequently used in the retail industry to measure operating results related to merchandise sales.
Reconciliation of Special Items
We present certain additional financial measures below and elsewhere in this press release that are non-GAAP measures within the meaning of Regulation G under the Securities Exchange Act of 1934.
We present these non-GAAP measures to provide investors with additional information to analyze our performance from period to period. We believe it is useful for investors to understand our financial performance excluding these special items so that investors can see the operating trends underlying our business. Investors should not consider these non-GAAP measures in isolation from, or as a substitute for, the financial information that we report in accordance with GAAP. These non-GAAP measures reflect subjective determinations by management, and may differ from similarly titled non-GAAP measures presented by other companies.
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (Unaudited) | ||||
| (In thousands, except per share data) | ||||
| Reported diluted earnings per share | $ 1.56 | $ 1.46 | $ 2.44 | $ 2.26 |
| Income before income taxes | $ 283,974 | $ 232,011 | $ 460,870 | $ 363,841 |
| Unrealized loss (gain) on commodity hedging transactions | (45,379) | (59,691) | (119,350) | (57,968) |
| Loss on disposal of assets, net | 119 | — | 1,005 | — |
| Affiliate severance costs | 3,479 | — | 12,878 | — |
| Loss on extinguishment of debt | 1 | 24,719 | 9 | 46,766 |
| Earnings before income taxes excluding special items | 242,194 | 197,039 | 355,412 | 352,639 |
| Recomputed income taxes after special items (1) | (77,696) | (70,284) | (134,381) | (126,844) |
| Net income excluding special items | 164,498 | 126,755 | 221,031 | 225,795 |
| Net income attributed to non-controlling interest | 35,721 | — | 83,736 | — |
| Net income attributable to Western after special items | $ 128,777 | $ 126,755 | $ 137,295 | $ 225,795 |
| Diluted earnings per share excluding special items | $ 1.29 | $ 1.25 | $ 2.23 | $ 2.19 |
(1) We recompute income taxes after deducting earnings attributed to non-controlling interest.