EL PASO, Texas, Aug. 4, 2015 (GLOBE NEWSWIRE) -- Western Refining, Inc. (NYSE:WNR) today reported results for its second quarter ending June 30, 2015. Net income attributable to Western, excluding special items, was $138 million, or $1.44 per diluted share. This compares to second quarter 2014 net income, excluding special items, of $128.8 million, or $1.29 per diluted share. Including special items, the Company recorded second quarter 2015 net income attributable to Western of $133.9 million, or $1.40 per diluted share, as compared to net income attributable to Western of $156.7 million, or $1.56 per diluted share for the second quarter of 2014. A reconciliation of reported earnings and description of special items can be found in the accompanying financial tables.
Jeff Stevens, Western's President and Chief Executive Officer, said, "This was another outstanding quarter for all of our business segments. Our refineries ran at historically high throughput rates in a strong margin environment and expenses were in line with expectations. In our Retail business, we saw an increase in same store fuel volumes, fuel margins, and merchandise sales. NTI and WNRL also performed well in the quarter which contributed to our solid financial results."
Western paid a dividend of $0.34 per share of common stock to shareholders in the second quarter. In July, Western's Board of Directors approved a $0.34 per share dividend for the third quarter. Including the third quarter dividend, Western will have returned approximately $118 million to shareholders through dividends and share repurchases to date in 2015.
Looking forward, Stevens said, "In the third quarter, gasoline margins have strengthened in the Southwest and gasoline demand continues to be good. In July, we moved approximately 17,000 barrels per day of Four Corners area crude oil to the El Paso refinery through the TexNew Mex pipeline. Construction of the Bobcat pipeline is on schedule and on budget and phase one should be completed later in 2015. These pipelines are part of our evolving southwest logistics system which will provide even greater flexibility for delivering crude oil from the Four Corners region and Delaware and Permian basins to our refineries and eastward to other locations. Overall, Western is well positioned for the second half of 2015."
Conference Call Information
A conference call is scheduled for Tuesday, August 4, 2015, at 10:00 am ET to discuss Western's financial results for the second quarter ended June 30, 2015. A slide presentation, which includes our quarterly guidance, 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: 66525450. The audio replay will be available two hours after the end of the call through August 18, 2015, by dialing (800) 585-8367 or (404) 537-3406, passcode: 66525450.
Non-GAAP Financial Measures
In a number of places in the press release and related tables, we have excluded certain income and expense items from GAAP measures. The excluded items are generally non-cash in nature such as unrealized net gains and losses from commodity hedging activities or losses on disposal of assets; however, other items that have a cash impact, such as gains on disposal of assets 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 retail segment includes retail service stations, convenience stores, and unmanned fleet fueling locations in Arizona, Colorado, New Mexico, and Texas.
Western Refining, Inc. owns the general partner and approximately 66% of the limited partnership interest of Western Refining Logistics, LP (NYSE:WNRL) and the general partner and approximately 38% 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: gasoline demand and gasoline margins in the southwest US; the timing and cost for completion of construction of the Bobcat crude oil pipeline; Western's evolving southwest logistics system and flexibility it will provide to deliver crude oil from the Four Corners area and Delaware and Permian basins to Western's refineries and eastward to other locations; and Western's overall positioning for the second half of 2015. These statements are subject to the general risks inherent in Western'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, Western's business and operations involve numerous risks and uncertainties, many of which are beyond its control, which could result in Western's expectations not being realized, or otherwise materially affect Western's 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 to which you are referred. 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 four business segments: refining, NTI, WNRL and retail.
- Our refining segment owns and operates two refineries in the Southwest 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. The refining segment also sells refined products in the Mid-Atlantic region and Mexico.
- NTI owns and operates refining and transportation assets and operates and supports retail convenience stores primarily in Minnesota and Wisconsin.
- WNRL owns and operates terminal, storage, transportation and provides related services primarily to our refining segment in the Southwest. The WNRL segment also includes wholesale assets consisting of a fleet of crude oil and refined product truck transports and wholesale petroleum product operations in the Southwest region. WNRL receives its product supply from the refining segment and third-party suppliers.
- Our retail segment operates retail convenience stores and unmanned commercial fleet fueling ("cardlock") locations located in the Southwest. The retail convenience stores sell gasoline, diesel fuel and convenience store merchandise.
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, | |||
| 2015 | 2014 | 2015 | 2014 | |
| (Unaudited) | ||||
| (In thousands, except per share data) | ||||
| Statements of Operations Data | ||||
| Net sales (1) | $ 2,828,892 | $ 4,351,290 | $ 5,147,622 | $ 8,076,433 |
| Operating costs and expenses: | ||||
| Cost of products sold (exclusive of depreciation and amortization) (1) | 2,177,887 | 3,731,169 | 3,919,197 | 6,891,906 |
| Direct operating expenses (exclusive of depreciation and amortization) (1) | 224,723 | 203,463 | 440,034 | 401,812 |
| Selling, general and administrative expenses | 59,540 | 54,640 | 115,343 | 113,372 |
| Affiliate severance costs | — | 3,479 | — | 12,878 |
| Loss (gain) on disposal of assets, net | (387) | 119 | (105) | 1,005 |
| Maintenance turnaround expense | 593 | — | 698 | 46,446 |
| Depreciation and amortization | 51,143 | 47,848 | 101,069 | 94,258 |
| Total operating costs and expenses | 2,513,499 | 4,040,718 | 4,576,236 | 7,561,677 |
| Operating income | 315,393 | 310,572 | 571,386 | 514,756 |
| Other income (expense): | ||||
| Interest income | 201 | 221 | 364 | 416 |
| Interest expense and other financing costs | (27,316) | (27,801) | (52,273) | (56,758) |
| Loss on extinguishment of debt | — | (1) | — | (9) |
| Other, net | 4,024 | 983 | 7,230 | 2,465 |
| Income before income taxes | 292,302 | 283,974 | 526,707 | 460,870 |
| Provision for income taxes | (78,435) | (93,407) | (137,872) | (142,606) |
| Net income | 213,867 | 190,567 | 388,835 | 318,264 |
| Less net income attributable to non-controlling interests (2) | 79,948 | 33,871 | 148,927 | 76,022 |
| Net income attributable to Western Refining, Inc. | $ 133,919 | $ 156,696 | $ 239,908 | $ 242,242 |
| Basic earnings per share | $ 1.40 | $ 1.88 | $ 2.51 | $ 2.97 |
| Diluted earnings per share | 1.40 | 1.56 | 2.51 | 2.44 |
| Dividends declared per common share | 0.34 | 0.26 | 0.64 | 0.52 |
| Weighted average basic shares outstanding | 95,539 | 83,556 | 95,553 | 81,653 |
| Weighted average dilutive shares outstanding (3) | 95,626 | 102,657 | 95,654 | 102,655 |
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2015 | 2014 | 2015 | 2014 | |
| (Unaudited) | ||||
| (In thousands) | ||||
| Economic Hedging Activities Recognized Within Cost of Products Sold | ||||
| Realized hedging gain, net | $7,823 | $1,812 | $25,376 | $17,556 |
| Unrealized hedging gain (loss), net | (22,287) | 45,379 | (42,344) | 119,350 |
| Total hedging gain (loss), net | $(14,464) | $47,191 | $(16,968) | $136,906 |
| Cash Flow Data | ||||
| Net cash provided by (used in): | ||||
| Operating activities | $187,066 | $ 214,355 | $ 292,044 | $ 278,387 |
| Investing activities | (4,962) | (38,000) | (14,133) | (88,449) |
| Financing activities | (101,242) | (76,179) | (165,134) | (126,195) |
| Capital expenditures | 66,350 | 40,021 | 119,545 | 90,619 |
| Cash distributions received by Western from: | ||||
| NTI | $ 38,472 | $ 27,429 | $ 55,927 | $ 42,034 |
| WNRL | 10,901 | 8,868 | 21,215 | 16,043 |
| Other Data | ||||
| Adjusted EBITDA (4) | $ 355,050 | $ 314,364 | $ 669,060 | $ 539,996 |
| Balance Sheet Data (at end of period) | ||||
| Cash and cash equivalents | $ 543,936 | $ 531,813 | ||
| Restricted cash | 68,275 | — | ||
| Working capital | 1,063,221 | 839,194 | ||
| Total assets | 5,953,549 | 5,796,768 | ||
| Total debt and lease financing obligation | 1,597,637 | 1,200,171 | ||
| Total equity | 2,997,586 | 2,981,640 | ||
(1) Excludes $895.5 million, $1,632.0 million, $1,236.7 million and $2,294.8 million of intercompany sales and $895.5 million, $1,632.0 million, $1,232.2 million and $2,286.5 million of intercompany cost of products sold for three and six months ended June 30, 2015 and 2014, respectively, and $4.5 million and $8.3 million of intercompany direct operating expenses for the three and six months ended June 30, 2014, respectively, with no comparable activity for three and six months ended June 30, 2015.
(2) Net income attributable to non-controlling interests for the three and six months ended June 30, 2015, consisted of income from NTI and WNRL in the amount of $74.6 million, $138.4 million, $5.4 million and $10.6 million, respectively. Net income attributable to non-controlling interests for the three and six months ended June 30, 2014, consisted of income from NTI and WNRL in the amount of $30.1 million, $68.4 million, $3.8 million and $7.6 million, respectively.
(3) Our computation of diluted earnings per share includes our Convertible Senior Unsecured Notes and any unvested restricted shares 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 the three and six months ended June 30, 2015. We assumed issuance of 0.1 million restricted share units for both the three and six months ended June 30, 2014 and 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.
(4) Adjusted EBITDA represents earnings before interest expense and other financing costs, 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 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:
- Adjusted EBITDA does not reflect our cash expenditures or future requirements for significant turnaround activities, capital expenditures or contractual commitments;
- Adjusted EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt;
- Adjusted EBITDA does not reflect 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.
| Three Months Ended | Six Months Ended | ||||
| June 30, | June 30, | ||||
| 2015 | 2014 | 2015 | 2014 | ||
| (Unaudited) | |||||
| (In thousands) | |||||
| Net income attributable to Western Refining, Inc. | $ 133,919 | $ 156,696 | $ 239,908 | $ 242,242 | |
| Net income attributable to non-controlling interest | 79,948 | 33,871 | 148,927 | 76,022 | |
| Interest expense and other financing costs | 27,316 | 27,801 | 52,273 | 56,758 | |
| Provision for income taxes | 78,435 | 93,407 | 137,872 | 142,606 | |
| Loss (gain) on disposal of assets, net | (387) | 119 | (105) | 1,005 | |
| Depreciation and amortization | 51,143 | 47,848 | 101,069 | 94,258 | |
| Maintenance turnaround expense | 593 | — | 698 | 46,446 | |
| Loss on extinguishment of debt | — | 1 | — | 9 | |
| Net change in lower of cost or market inventory reserve | (38,204) | — | (53,926) | — | |
| Unrealized loss (gain) on commodity hedging transactions | 22,287 | (45,379) | 42,344 | (119,350) | |
| Adjusted EBITDA | $ 355,050 | $ 314,364 | $ 669,060 | $ 539,996 | |
| EBITDA by Reporting Entity | |||||
| Western Adjusted EBITDA | $ 217,860 | $ 221,500 | $ 389,143 | $ 344,651 | |
| WNRL Adjusted EBITDA | 26,888 | 14,884 | 51,032 | 29,534 | |
| NTI Adjusted EBITDA | 110,302 | 77,980 | 228,885 | 165,811 | |
| Adjusted EBITDA | $ 355,050 | $ 314,364 | $ 669,060 | $ 539,996 | |
| Three Months Ended | |||
| June 30, | |||
| 2015 | |||
| Western | WNRL | NTI | |
| (Unaudited) | |||
| (In thousands) | |||
| Net income attributable to Western Refining, Inc. | $ 74,904 | $ 10,525 | $ 48,490 |
| Net income attributable to non-controlling interest | — | 5,390 | 74,558 |
| Interest expense and other financing costs | 14,321 | 6,248 | 6,747 |
| Provision for income taxes | 78,287 | 148 | — |
| Loss (gain) on disposal of assets, net | 69 | (160) | (296) |
| Depreciation and amortization | 26,891 | 4,737 | 19,515 |
| Maintenance turnaround expense | 593 | — | — |
| Net change in lower of cost or market inventory reserve | — | — | (38,204) |
| Unrealized loss (gain) on commodity hedging transactions | 22,795 | — | (508) |
| Adjusted EBITDA | $ 217,860 | $ 26,888 | $ 110,302 |
| Six Months Ended | ||||
| June 30, | ||||
| 2015 | ||||
| Western | WNRL | NTI | ||
| (Unaudited) | ||||
| (In thousands) | ||||
| Net income attributable to Western Refining, Inc. | $ 130,115 | $ 20,665 | $ 89,128 | |
| Net income attributable to non-controlling interest | — | 10,573 | 138,354 | |
| Interest expense and other financing costs | 28,551 | 10,212 | 13,510 | |
| Provision for income taxes | 137,521 | 351 | — | |
| Loss (gain) on disposal of assets, net | 450 | (244) | (311) | |
| Depreciation and amortization | 52,714 | 9,475 | 38,880 | |
| Maintenance turnaround expense | 698 | — | — | |
| Net change in lower of cost or market inventory reserve | (4,883) | — | (49,043) | |
| Unrealized loss (gain) on commodity hedging transactions | 43,977 | — | (1,633) | |
| Adjusted EBITDA | $ 389,143 | $ 51,032 | $ 228,885 | |
| 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 attributable to non-controlling interest | — | 3,804 | 30,067 |
| Interest expense and other financing costs | 21,272 | 357 | 6,172 |
| Provision for income taxes | 93,322 | 85 | — |
| Loss (gain) on disposal of assets, net | 208 | — | (89) |
| Depreciation and amortization | 25,019 | 3,467 | 19,362 |
| 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 attributable to non-controlling interest | — | 7,593 | 68,429 |
| Interest expense and other financing costs | 43,743 | 711 | 12,304 |
| Provision for income taxes | 142,402 | 204 | — |
| Loss (gain) on disposal of assets, net | 1,106 | — | (101) |
| Depreciation and amortization | 49,200 | 6,711 | 38,347 |
| Maintenance turnaround expense | 46,446 | — | — |
| Loss on extinguishment of debt | 9 | — | — |
| Unrealized loss (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, | |||
| 2015 | 2014 | 2015 | 2014 | |
| (Unaudited) | ||||
| (In thousands) | ||||
| Operating Income | ||||
| Western, excluding WNRL and NTI | $ 167,965 | $ 240,549 | $ 296,498 | $ 366,000 |
| WNRL | 22,293 | 11,417 | 41,766 | 22,820 |
| NTI | 125,135 | 58,606 | 233,122 | 125,936 |
| Operating income | $ 315,393 | $ 310,572 | $ 571,386 | $ 514,756 |
| Depreciation and Amortization | ||||
| Western, excluding WNRL and NTI | $26,891 | $ 25,019 | $ 52,714 | $ 49,200 |
| WNRL | 4,737 | 3,467 | 9,475 | 6,711 |
| NTI | 19,515 | 19,362 | 38,880 | 38,347 |
| Depreciation and amortization expense | $ 51,143 | $ 47,848 | $ 101,069 | $ 94,258 |
| Capital Expenditures | ||||
| Western, excluding WNRL and NTI | $ 47,345 | $ 26,039 | $ 85,953 | $ 63,552 |
| WNRL | 7,850 | 2,773 | 15,764 | 8,677 |
| NTI | 11,155 | 11,209 | 17,828 | 18,390 |
| Capital expenditures | $ 66,350 | $ 40,021 | $ 119,545 | $ 90,619 |
| Balance Sheet Data (at end of period) | ||||
| Cash and cash equivalents | ||||
| Western, excluding WNRL and NTI | $ 337,462 | $ 345,476 | ||
| WNRL | 78,550 | 79,395 | ||
| NTI | 127,924 | 106,942 | ||
| Cash and cash equivalents | $ 543,936 | $ 531,813 | ||
| Total debt | ||||
| Western, excluding WNRL and NTI | $ 891,750 | $ 897,456 | ||
| WNRL | 300,000 | — | ||
| NTI | 356,490 | 278,125 | ||
| Total debt | $ 1,548,240 | $ 1,175,581 | ||
| Total working capital | ||||
| Western, excluding WNRL and NTI | $ 694,183 | $ 614,013 | ||
| WNRL | 66,782 | 81,256 | ||
| NTI | 302,256 | 143,925 | ||
| Total working capital | $ 1,063,221 | $ 839,194 | ||
Refining Segment
El Paso and Gallup Refineries and Related Operations
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2015 | 2014 | 2015 | 2014 | |
|
(In thousands, except per barrel data) |
||||
| Statement of Operations Data (Unaudited): | ||||
| Net sales (including intersegment sales) (1) | $ 1,819,032 | $ 2,742,701 | $ 3,310,473 | $ 5,068,515 |
| Operating costs and expenses: | ||||
| Cost of products sold (exclusive of depreciation and amortization) (2) | 1,527,952 | 2,392,222 | 2,763,408 | 4,432,747 |
| Direct operating expenses (exclusive of depreciation and amortization) | 77,379 | 74,286 | 154,911 | 147,040 |
| Selling, general, and administrative expenses | 7,133 | 7,354 | 16,702 | 14,484 |
| Loss on disposal of assets, net | 78 | 188 | 495 | 672 |
| Maintenance turnaround expense | 593 | — | 698 | 46,446 |
| Depreciation and amortization | 21,884 | 20,397 | 43,522 | 39,865 |
| Total operating costs and expenses | 1,635,019 | 2,494,447 | 2,979,736 | 4,681,254 |
| Operating income | $ 184,013 | $ 248,254 | $ 330,737 | $ 387,261 |
| Key Operating Statistics | ||||
| Total sales volume (bpd) (1) (3) | 233,653 | 227,313 | 233,564 | 214,105 |
| Total production (bpd) | 160,266 | 163,567 | 162,539 | 149,362 |
| Total throughput (bpd) | 162,001 | 165,641 | 164,635 | 151,642 |
| Per barrel of throughput: | ||||
| Refinery gross margin (2) (4) | $ 19.71 | $ 23.42 | $ 18.26 | $ 23.14 |
| Direct operating expenses (5) | 5.25 | 4.93 | 5.20 | 5.36 |
| Mid-Atlantic sales volume (bbls) | 2,513 | 2,496 | 4,453 | 4,878 |
| Mid-Atlantic margin per barrel | $ 0.32 | $ (1.03) | $ 0.75 | $ 0.15 |
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, | |||
| 2015 | 2014 | 2015 | 2014 | |
| Key Operating Statistics | ||||
| Product yields (bpd): | ||||
| Gasoline | 86,034 | 84,773 | 87,607 | 75,894 |
| Diesel and jet fuel | 63,188 | 69,080 | 64,143 | 62,626 |
| Residuum | 5,140 | 5,792 | 5,039 | 5,075 |
| Other | 5,904 | 3,922 | 5,750 | 5,767 |
| Total production (bpd) | 160,266 | 163,567 | 162,539 | 149,362 |
| Throughput (bpd): | ||||
| Sweet crude oil | 132,230 | 126,797 | 131,709 | 120,157 |
| Sour crude oil | 22,068 | 29,019 | 22,649 | 24,090 |
| Other feedstocks and blendstocks | 7,703 | 9,825 | 10,277 | 7,395 |
| Total throughput (bpd) | 162,001 | 165,641 | 164,635 | 151,642 |
El Paso Refinery
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2015 | 2014 | 2015 | 2014 | |
| Key Operating Statistics | ||||
| Product yields (bpd): | ||||
| Gasoline | 68,289 | 68,566 | 69,981 | 59,018 |
| Diesel and jet fuel | 55,032 | 60,693 | 55,874 | 54,215 |
| Residuum | 5,140 | 5,792 | 5,039 | 5,075 |
| Other | 4,504 | 2,462 | 4,244 | 4,132 |
| Total production (bpd) | 132,965 | 137,513 | 135,138 | 122,440 |
| Throughput (bpd): | ||||
| Sweet crude oil | 106,601 | 102,162 | 106,481 | 95,052 |
| Sour crude oil | 22,068 | 29,019 | 22,649 | 24,090 |
| Other feedstocks and blendstocks | 5,646 | 8,060 | 7,665 | 5,132 |
| Total throughput (bpd) | 134,315 | 139,241 | 136,795 | 124,274 |
| Total sales volume (bpd) (3) | 149,561 | 150,728 | 150,680 | 139,176 |
| Per barrel of throughput: | ||||
| Refinery gross margin (2) (4) | $ 20.01 | $ 20.95 | $ 18.72 | $ 18.70 |
| Direct operating expenses (5) | 4.17 | 3.86 | 4.13 | 4.31 |
Gallup Refinery
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2015 | 2014 | 2015 | 2014 | |
| Key Operating Statistics | ||||
| Product yields (bpd): | ||||
| Gasoline | 17,745 | 16,207 | 17,626 | 16,876 |
| Diesel and jet fuel | 8,156 | 8,387 | 8,269 | 8,411 |
| Other | 1,400 | 1,460 | 1,506 | 1,635 |
| Total production (bpd) | 27,301 | 26,054 | 27,401 | 26,922 |
| Throughput (bpd): | ||||
| Sweet crude oil | 25,629 | 24,635 | 25,228 | 25,105 |
| Other feedstocks and blendstocks | 2,057 | 1,765 | 2,612 | 2,263 |
| Total throughput (bpd) | 27,686 | 26,400 | 27,840 | 27,368 |
| Total sales volume (bpd) (3) | 33,637 | 33,839 | 33,263 | 33,520 |
| Per barrel of throughput: | ||||
| Refinery gross margin (2) (4) | $ 22.64 | $ 15.34 | $ 18.34 | $ 14.42 |
| Direct operating expenses (5) | 7.81 | 9.03 | 7.93 | 8.73 |
(1) Refining net sales for the three and six months ended June 30, 2015 and 2014 include $259.0 million, $474.5 million, $399.0 million and $753.4 million, respectively, representing a period average of 50,455 bpd, 49,621 bpd, 42,747 bpd and 41,409 bpd, respectively, in crude oil sales to third-parties.
(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, | ||||
| 2015 | 2014 | 2015 | 2014 | ||
| (Unaudited) | |||||
| (In thousands) | |||||
| Realized hedging gain, net | $ 10,686 | $ 4,177 | $ 28,141 | $ 20,661 | |
| Unrealized hedging gain (loss), net | (22,795) | 44,918 | (43,977) | 119,056 | |
| Total hedging gain (loss), net | $ (12,109) | $ 49,095 | $ (15,836) | $ 139,717 | |
(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 10.7%, 10.0%, 9.4% and 11.1% of our total consolidated sales volumes for the three and six months ended June 30, 2015 and 2014, respectively. The majority of the purchased refined products are distributed through our 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) Refinery gross margin for the respective periods presented is a per barrel measurement calculated by subtracting cost of products sold from net sales and dividing that difference by our refineries' total throughput volumes. 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. Refinery gross margin is a non-GAAP performance measure that we believe is useful for evaluating our refinery performance as a general indication of the excess of the refined product sales amount over the related cost of products sold. Our calculation of refinery gross margin excludes the sales and costs related to our Mid-Atlantic business that we report within the refining segment. The following table reconciles the sales and cost of sales used to calculate refinery gross margin with the total sales and cost of sales reported in the refining statement of operations data above:
| Three Months Ended | Six Months Ended | ||||
| June 30, | June 30, | ||||
| 2015 | 2014 | 2015 | 2014 | ||
| (Unaudited) | |||||
| (In thousands) | |||||
| Refinery net sales (including intersegment sales) | $ 1,612,976 | $ 2,430,001 | $ 2,968,495 | $ 4,471,200 | |
| Mid-Atlantic sales | 206,056 | 312,700 | 341,978 | 597,315 | |
| Net sales (including intersegment sales) | $ 1,819,032 | $ 2,742,701 | $ 3,310,473 | $ 5,068,515 | |
| Refinery cost of products sold (exclusive of depreciation and amortization) | $ 1,322,364 | $ 2,076,946 | $ 2,424,458 | $ 3,836,144 | |
| Mid-Atlantic cost of products sold | 205,588 | 315,276 | 338,950 | 596,603 | |
| Cost of products sold (exclusive of depreciation and amortization) | $ 1,527,952 | $ 2,392,222 | $ 2,763,408 | $ 4,432,747 | |
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 our refineries to combined gross margin for our refineries for the periods presented:
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2015 | 2014 | 2015 | 2014 | |
| (Unaudited) | ||||
| (In thousands, except per barrel data) | ||||
| Refinery net sales (including intersegment sales) | $ 1,612,976 | $ 2,430,001 | $ 2,968,495 | $ 4,471,200 |
| Refinery cost of products sold (exclusive of depreciation and amortization) | 1,322,364 | 2,076,946 | 2,424,458 | 3,836,144 |
| Depreciation and amortization | 21,884 | 20,397 | 43,522 | 39,865 |
| Gross profit | 268,728 | 332,658 | 500,515 | 595,191 |
| Plus depreciation and amortization | 21,884 | 20,397 | 43,522 | 39,865 |
| Refinery gross margin | $ 290,612 | $353,055 | $ 544,037 | $ 635,056 |
| Refinery gross margin per throughput barrel | $ 19.71 | $ 23.42 | $ 18.26 | $ 23.14 |
| Gross profit per throughput barrel | $ 18.23 | $ 22.07 | $ 16.80 | $ 21.69 |
(5) 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.
NTI
The following table sets forth the summary operating results for NTI.
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2015 | 2014 | 2015 | 2014 | |
| (Unaudited) | ||||
| (In thousands, except per barrel data) | ||||
| Net sales | $ 852,820 | $ 1,499,321 | $ 1,550,596 | $ 2,756,699 |
| Operating costs and expenses: | ||||
| Cost of products sold (exclusive of depreciation and amortization) (1) | 608,799 | 1,328,824 | 1,089,262 | 2,396,214 |
| Direct operating expenses (exclusive of depreciation and amortization) | 76,348 | 66,507 | 146,053 | 133,688 |
| Selling, general and administrative expenses | 23,319 | 22,632 | 43,590 | 49,737 |
| Affiliate severance costs | — | 3,479 | — | 12,878 |
| Gain on disposal of assets, net | (296) | (89) | (311) | (101) |
| Depreciation and amortization | 19,515 | 19,362 | 38,880 | 38,347 |
| Total operating costs and expenses | 727,685 | 1,440,715 | 1,317,474 | 2,630,763 |
| Operating income | $ 125,135 | $ 58,606 | $ 233,122 | $ 125,936 |
| Key Operating Statistics | ||||
| Total sales volume (bpd) | 103,778 | 102,409 | 101,144 | 95,822 |
| Total refinery production (bpd) | 98,722 | 93,342 | 96,529 | 93,139 |
| Total refinery throughput (bpd) (2) | 98,954 | 93,022 | 96,544 | 92,826 |
| Per barrel of throughput: | ||||
| Refinery gross margin (1) (3) | $ 21.98 | $ 15.03 | $ 21.39 | $ 16.54 |
| Direct operating expenses (4) | 4.80 | 4.17 | 4.70 | 4.33 |
| Retail fuel gallons sold (in thousands) | 77,398 | 76,740 | 149,259 | 149,779 |
| Retail fuel margin per gallon (5) | $ 0.22 | $ 0.19 | $ 0.21 | $ 0.19 |
| Merchandise sales | 95,799 | 89,895 | 178,413 | 168,443 |
| Merchandise margin (6) | 25.9% | 26.5% | 25.9% | 26.2% |
| Company-operated retail outlets at period end | 165 | 164 | ||
| Franchised retail outlets at period end | 99 | 81 | ||
(1) Cost of products sold for NTI includes the net realized and net non-cash unrealized hedging activity shown in the table below. Hedging gains and losses are also included in the combined gross profit and refinery gross margin.
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2015 | 2014 | 2015 | 2014 | |
| (Unaudited) | ||||
| (In thousands) | ||||
| Realized hedging loss, net | $ (2,863) | $ (2,365) | $ (2,765) | $ (3,105) |
| Unrealized hedging gain, net | 508 | 461 | 1,633 | 294 |
| Total hedging loss, net | $ (2,355) | $ (1,904) | $ (1,132) | $ (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 the refinery's total throughput volumes for the respective periods presented. Refinery net sales include $37.2 million, $59.0 million, $314.5 million and $569.2 million related to crude oil sales during the three and six months ended June 30, 2015 and 2014, respectively. Refinery gross margin is a non-GAAP performance measure that we believe is useful in evaluating refinery performance as a general indication of the excess of the refined product sales amount over the related cost of products sold. Each of the components used in this calculation (net sales and cost of products sold) can be reconciled to corresponding amounts included in the 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. Cost of products sold for the three and six months ended June 30, 2015 includes a non-cash recovery of $38.2 million and $49.0 million, respectively, in order to state the inventories value at market prices which were lower than cost.
The following table reconciles gross profit to gross margin for the St. Paul Park refinery for the periods presented:
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2015 | 2014 | 2015 | 2014 | |
| (Unaudited) | ||||
| (In thousands, except per barrel data) | ||||
| Net refinery sales (including intersegment sales) | $ 839,876 | $ 1,486,741 | $ 1,529,406 | $ 2,730,336 |
| Refinery cost of products sold (exclusive of depreciation and amortization) | 641,872 | 1,359,500 | 1,155,618 | 2,452,431 |
| Refinery depreciation and amortization | 17,255 | 17,398 | 34,368 | 34,488 |
| Gross profit | 180,749 | 109,843 | 339,420 | 243,417 |
| Plus depreciation and amortization | 17,255 | 17,398 | 34,368 | 34,488 |
| Refinery gross margin | $ 198,004 | $ 127,241 | $ 373,788 | $ 277,905 |
| Refinery gross margin per refinery throughput barrel | $ 21.98 | $ 15.03 | $ 21.39 | $ 16.54 |
| Gross profit per refinery throughput barrel | $ 20.07 | $ 12.98 | $ 19.42 | $ 14.49 |
(4) NTI's direct operating expenses per throughput barrel is calculated by dividing refining direct operating expenses by total throughput volumes for the respective periods presented. Direct operating expenses do not include any depreciation or amortization.
(5) Retail fuel margin per gallon is a measurement calculated by dividing the difference between retail fuel sales and retail fuel cost of products sold by the number of gallons sold. Retail 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.
WNRL
The WNRL financial and operational data presented include the historical results of all assets acquired from Western in the Wholesale Acquisition. This acquisition from Western was a transfer of assets between entities under common control. We have retrospectively adjusted historical financial and operational data of WNRL, for all periods presented, to reflect the purchase and consolidation of WRW into WNRL.
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2015 | 2014 | 2015 | 2014 | |
| (Unaudited) | ||||
| (In thousands) | ||||
| Statement of Operations Data: | ||||
| Net sales (net of excise taxes) | $ 734,501 | $ 970,337 | $ 1,341,897 | $ 1,834,947 |
| Operating costs and expenses: | ||||
| Cost of products sold (net of excise taxes) | 664,026 | 905,726 | 1,205,727 | 1,710,543 |
| Direct operating expenses | 37,355 | 36,974 | 72,992 | 70,657 |
| Selling, general and administrative expenses | 6,250 | 5,691 | 12,181 | 10,888 |
| Loss (gain) on disposal of assets, net | (160) | 18 | (244) | 18 |
| Depreciation and amortization | 4,737 | 4,454 | 9,475 | 8,606 |
| Total operating costs and expenses | 712,208 | 952,863 | 1,300,131 | 1,800,712 |
| Operating income | $ 22,293 | $ 17,474 | $ 41,766 | $ 34,235 |
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2015 | 2014 | 2015 | 2014 | |
| (Unaudited) | ||||
| (In thousands, except key operating statistics) | ||||
| Key Operating Statistics | ||||
| Pipeline and gathering (bpd): | ||||
| Mainline movements: | ||||
| Permian/Delaware Basin system | 43,873 | 24,196 | 40,213 | 19,794 |
| Four Corners system (1) | 51,486 | 35,837 | 48,679 | 38,412 |
| Gathering (truck offloading): | ||||
| Permian/Delaware Basin system | 24,019 | 26,178 | 23,316 | 24,182 |
| Four Corners system | 12,950 | 11,188 | 11,812 | 11,293 |
| Terminalling, transportation and storage (bpd): | ||||
| Shipments into and out of storage (includes asphalt) | 389,220 | 406,881 | 390,263 | 373,918 |
| Wholesale: | ||||
| Fuel gallons sold (in thousands) | 310,811 | 293,204 | 614,242 | 561,018 |
| Fuel gallons sold to retail (included in fuel gallons sold above) (in thousands) | 79,023 | 65,095 | 154,286 | 126,689 |
| Fuel margin per gallon (2) | $ 0.037 | $ 0.020 | $ 0.032 | $ 0.022 |
| Lubricant gallons sold (in thousands) | 3,014 | 3,068 | 5,971 | 6,092 |
| Lubricant margin per gallon (3) | $ 0.78 | $ 0.85 | $ 0.72 | $ 0.80 |
| Crude oil trucking volume (bpd) | 48,992 | 37,251 | 46,037 | 32,138 |
| Average crude oil revenue per barrel | $ 2.51 | $ 2.99 | $ 2.63 | $ 3.03 |
(1) Some barrels of crude oil in route to Western's Gallup refinery and Permian/Delaware Basin are transported on more than one of our mainlines. Mainline movements for the Four Corners and Delaware Basin systems include each barrel transported on each mainline.
(2) Fuel margin per gallon is a measurement calculated by dividing the difference between fuel sales, net of transportation charges, and cost of fuel sales for WNRL's wholesale business by the number of gallons sold. Fuel margin per gallon is a measure frequently used in the petroleum products wholesale industry to measure operating results related to fuel sales.
(3) Lubricant margin per gallon is a measurement calculated by dividing the difference between lubricant sales, net of transportation charges, and lubricant cost of products sold by number of gallons sold. 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, | |||
| 2015 | 2014 | 2015 | 2014 | |
| (Unaudited) | ||||
| (In thousands, except per gallon data) | ||||
| Statement of Operations Data | ||||
| Net sales (including intersegment sales) | $ 318,072 | $ 375,232 | $ 576,674 | $ 710,516 |
| Operating costs and expenses: | ||||
| Cost of products sold (exclusive of depreciation and amortization) | 272,643 | 336,381 | 492,818 | 638,506 |
| Direct operating expenses (exclusive of depreciation and amortization) | 33,641 | 29,950 | 65,995 | 58,405 |
| Selling, general and administrative expenses | 3,109 | 2,709 | 6,373 | 5,308 |
| Gain on disposal of assets, net | (9) | — | (45) | — |
| Depreciation and amortization | 4,031 | 2,817 | 7,317 | 5,752 |
| Total operating costs and expenses | 313,415 | 371,857 | 572,458 | 707,971 |
| Operating income | $ 4,657 | $ 3,375 | $ 4,216 | $ 2,545 |
| Key Operating Statistics | ||||
| Retail fuel gallons sold | 90,339 | 78,143 | 174,163 | 151,530 |
| Average retail fuel sales price per gallon (net of excise taxes) | $ 2.20 | $ 3.13 | $ 2.02 | $ 3.05 |
| Average retail fuel cost per gallon (net of excise taxes) | 2.03 | 2.96 | 1.86 | 2.89 |
| Fuel margin per gallon (1) | 0.17 | 0.17 | 0.16 | 0.16 |
| Merchandise sales | $ 79,981 | $ 68,314 | 150,868 | 128,784 |
| Merchandise margin (2) | 29.9% | 28.7% | 29.6% | 28.8% |
| Operating retail outlets at period end | ||||
| Cardlock fuel gallons sold | 16,903 | 17,444 | 33,023 | 34,329 |
| Cardlock fuel margin per gallon | $ 0.160 | $ 0.181 | $ 0.173 | $ 0.172 |
| Operating cardlocks at period end | 52 | 52 | ||
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2015 | 2014 | 2015 | 2014 | |
| (Unaudited) | ||||
| (In thousands, except per gallon data) | ||||
| Net Sales | ||||
| Retail fuel sales (net of excise taxes) | $ 199,166 | $ 244,842 | $ 351,711 | $ 461,130 |
| Merchandise sales | 79,981 | 68,314 | 150,868 | 128,784 |
| Cardlock sales | 35,782 | 59,217 | 67,776 | 114,924 |
| Other sales | 3,143 | 2,859 | 6,319 | 5,678 |
| Net sales | $ 318,072 | $ 375,232 | $ 576,674 | $ 710,516 |
| Cost of Products Sold | ||||
| Retail fuel cost of products sold (net of excise taxes) | $ 183,471 | $ 231,385 | $ 324,593 | $ 437,499 |
| Merchandise cost of products sold | 56,104 | 48,728 | 106,169 | 91,704 |
| Cardlock cost of products sold | 33,004 | 56,043 | 61,936 | 108,985 |
| Other cost of products sold | 64 | 225 | 120 | 318 |
| Cost of products sold | $ 272,643 | $ 336,381 | $ 492,818 | $ 638,506 |
| Retail fuel margin per gallon (1) | $ 0.17 | $ 0.17 | $ 0.16 | $ 0.16 |
(1) Retail fuel margin per gallon is a measurement calculated by dividing the difference between retail fuel sales and cost of retail fuel sales by the number of gallons sold. Retail fuel margin per gallon is a measure frequently used in the convenience store industry to measure operating results related to retail 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.
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 | ||
| June 30, | ||
| 2015 | 2014 | |
| (Unaudited) | ||
| (In thousands, except per share data) | ||
| Reported diluted earnings per share | $ 1.40 | $ 1.56 |
| Income before income taxes | $ 292,302 | $ 283,974 |
| Unrealized loss (gain) on commodity hedging transactions | 22,287 | (45,379) |
| Loss (gain) on disposal of assets, net | (387) | 119 |
| Affiliate severance costs | — | 3,479 |
| Net change in lower of cost or market inventory reserve | (38,204) | — |
| Loss on extinguishment of debt | — | 1 |
| Earnings before income taxes excluding special items | 275,998 | 242,194 |
| Recomputed income taxes excluding special items (1) | (80,847) | (77,696) |
| Net income excluding special items | 195,151 | 164,498 |
| Net income attributable to non-controlling interest | 57,138 | 35,721 |
| Net income attributable to Western excluding special items | $ 138,013 | $ 128,777 |
| Diluted earnings per share excluding special items | $ 1.44 | $ 1.29 |
(1) We recompute income taxes after deducting special items and earnings attributable to non-controlling interest.