EL PASO, Texas, Feb. 28, 2017 (GLOBE NEWSWIRE) -- Western Refining, Inc. (NYSE:WNR) today reported results for the fourth quarter ended December 31, 2016. The Company reported a fourth quarter 2016 net loss attributable to Western of $9.6 million, or $(0.09) per diluted share, as compared to net income of $13.5 million, or $0.14 per diluted share for the fourth quarter of 2015. Net loss attributable to Western, excluding special items, was $7.8 million, or $(0.07) per diluted share. This compares to fourth quarter 2015 net income, excluding special items, of $52.2 million, or $0.56 per diluted share. A reconciliation of reported earnings and description of special items can be found in the accompanying financial tables.

For full year 2016, net income attributable to Western was $124.9 million, or $1.24 per diluted share compared to full year 2015 net income attributable to Western of $406.8 million, or $4.28 per diluted share.

Jeff Stevens, Western's Chief Executive Officer, said, "Western had a successful 2016 despite a volatile crude oil price environment and challenging fourth quarter.  There was pressure on refining margins throughout 2016 which were considerably below the highs we saw in 2015 and crude oil price differentials also remained narrow.  However, we had good, reliable operations at our refineries and completed a major turnaround at our St. Paul Park refinery resulting in additional crude oil flexibility and increased capacity. Additionally, our Retail operations achieved record levels in total fuel volumes and merchandise sales in 2016."

Stevens continued, "Western invested $141 million in discretionary capital during the year to enhance our crude oil flexibility, throughput, and improve product yields at our St. Paul Park refinery and to enhance our logistics capabilities in the Permian, San Juan and Williston Basins. In the Permian and San Juan Basins, we continued to expand our fully integrated crude oil pipeline logistics system and are able to move crude oil south to either our El Paso refinery or eastward to Midland and the Gulf Coast.  Additionally, we continued to balance capital investment with returning cash to shareholders.  In 2016, we returned approximately $228 million in cash to shareholders through dividends and share repurchases."

Stevens concluded, "As we begin 2017, we are looking forward to the completion of the pending Tesoro transaction.  Meanwhile, we remain focused on safe and reliable operations while emphasizing operational efficiencies and managing our costs. We will also continue to maximize the benefits of our investment in Western Refining Logistics.  Overall, we have expanded and enhanced our asset base which provides maximum flexibility in these volatile business conditions."

Conference Call Information

A conference call is scheduled for Tuesday, February 28, 2017, at 10:00 am ET to discuss Western's financial results for the fourth quarter and full year ended December 31, 2016.  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: 48866421. The audio replay will be available two hours after the end of the call through March 7, 2017, by dialing (800) 585-8367 or (404) 537-3406, passcode: 48866421.

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 and lower of cost or market inventory adjustments; however, other items that have a cash impact, such as gains or losses 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 Company operates refineries in El Paso, Gallup, New Mexico and St. Paul Park, Minnesota. The Company’s retail operations includes retail service stations and convenience stores in Arizona, Colorado, Minnesota, New Mexico, Texas, and Wisconsin, operating primarily through the Giant, Howdy’s, and SuperAmerica brands.

Western Refining, Inc. also owns the general partner and approximately 53% of the limited partnership interest of Western Refining Logistics, LP (NYSE:WNRL).

More information about Western Refining is available at www.wnr.com.

Cautionary Statement on Forward-Looking Statements

This communication contains certain statements that are “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Words such as “may,” “will,” “could,” “anticipate,” “estimate,” “expect,” “predict,” “project,” “future,” “potential,” “intend,” “plan,” “assume,” “believe,” “forecast,” “look,” “build,” “focus,” “create,” “work” “continue” or the negative of such terms or other variations thereof and words and terms of similar substance used in connection with any discussion of future plans, actions, or events identify forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding the proposed merger, integration and transition plans, synergies, opportunities, anticipated future performance, expected share buyback program and expected dividends. In addition, the forward-looking statements contained herein include statements about: Western’s ability to continue safe and reliable operations at its refineries; Western's ability to achieve crude oil flexibility and improve product yields at the St. Paul Park refinery; Western's ability to enhance its logistics capabilities in the Permian, San Juan and Williston Basins; continued expansion of Western's crude oil pipeline logistics system and ability to ship crude oil to El Paso, Midland, and the Gulf Coast; the completion of the pending Tesoro transaction; Western's ability to remain focused on safe and reliable operations, to realize operational efficiencies, to manage its costs, and to realize benefits of its investment in WNRL; and Western's ability to achieve maximum flexibility in volatile business conditions.  There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements included in this communication. For example, the expected timing and likelihood of completion of the proposed merger, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the proposed merger that could reduce anticipated benefits or cause the parties to abandon the transaction, the ability to successfully integrate the businesses, the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement, the possibility that stockholders of Tesoro Corporation (“Tesoro”) may not approve the issuance of new shares of common stock in the merger or that stockholders of Western Refining, Inc. (“Western”) may not approve the merger agreement, the risk that the parties may not be able to satisfy the conditions to the proposed transaction in a timely manner or at all, risks related to disruption of management time from ongoing business operations due to the proposed transaction, the risk that any announcements relating to the proposed transaction could have adverse effects on the market price of Tesoro’s common stock or Western’s common stock, the risk that the proposed transaction and its announcement could have an adverse effect on the ability of Tesoro and Western to retain customers and retain and hire key personnel and maintain relationships with their suppliers and customers and on their operating results and businesses generally, the risk that problems may arise in successfully integrating the businesses of the companies, which may result in the combined company not operating as effectively and efficiently as expected, the risk that the combined company may be unable to achieve cost-cutting synergies or it may take longer than expected to achieve those synergies, the risk that the combined company may not buy back shares, the risk of the amount of any future dividend Tesoro may pay, and other factors. All such factors are difficult to predict and are beyond our control, including those detailed in Tesoro’s annual reports on Form 10-K, quarterly reports on Form 10-Q, Current Reports on Form 8-K and registration statement on Form S-4 filed with the SEC on December 14, 2016, as amended (the “Form S-4”) that are available on Tesoro’s website at http://www.tsocorp.com and on the SEC website at http://www.sec.gov, and those detailed in Western’s annual reports on Form 10-K, quarterly reports on Form 10-Q and Current Reports on Form  8-K that are available on Western’s website at http://www.wnr.com and on the SEC website at http://www.sec.gov. Tesoro’s and Western’s forward-looking statements are based on assumptions that Tesoro and Western believe to be reasonable but that may not prove to be accurate. Tesoro and Western undertake no obligation to publicly release the result of any revisions to any such forward-looking statements that may be made to reflect events or circumstances that occur, or which we become aware of, except as required by applicable law or regulation. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

No Offer or Solicitation:

This communication relates to a proposed business combination between Western and Tesoro. This announcement is for informational purposes only and is neither an offer to purchase, nor a solicitation of an offer to sell, any securities or the solicitation of any vote in any jurisdiction pursuant to the proposed transactions or otherwise, nor shall there be any sale, issuance or transfer or securities in any jurisdiction in contravention of applicable law. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

Additional Information and Where to Find It:
This communication may be deemed to be solicitation material in respect of the proposed transaction between Tesoro and Western. In connection with the proposed transaction, Tesoro has filed with the SEC, and the SEC has declared effective, a registration statement on Form S-4 (Reg. No. 333-215080), containing a joint proxy statement/prospectus of Tesoro and Western, which proxy statement/prospectus was first mailed to Tesoro and Western stockholders on February 17, 2017. This communication is not a substitute for the registration statement, proxy statement/prospectus or any other documents that Tesoro or Western may file with the SEC or send to stockholders in connection with the proposed transaction. STOCKHOLDERS OF TESORO AND WESTERN ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE FORM S-4 AND THE DEFINITIVE PROXY STATEMENT/PROSPECTUS INCLUDED THEREIN, AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.

Investors and security holders will be able to obtain copies of these documents, including the proxy statement/prospectus, and other documents filed with the SEC (when available) free of charge at the SEC’s website, http://www.sec.gov. Copies of documents filed with the SEC by Tesoro will be made available free of charge on Tesoro’s website at http://www.tsocorp.com or by contacting Tesoro’s Investor Relations Department by phone at 210-626-6000. Copies of documents filed with the SEC by Western will be made available free of charge on Western’s website at http://www.wnr.com or by contacting Western’s Investor Relations Department by phone at 602-286-1530 or 602-286-1533.

Participants in the Solicitation:

Tesoro and its directors and executive officers, and Western and its directors and executive officers, may be deemed to be participants in the solicitation of proxies from the holders of Tesoro common stock and Western common stock in respect of the proposed transaction. Information about the directors and executive officers of Tesoro is set forth in the proxy statement for Tesoro’s 2016 Annual Meeting of Stockholders, which was filed with the SEC on March 22, 2016, and in the other documents filed after the date thereof by Tesoro with the SEC. Information about the directors and executive officers of Western is set forth in the proxy statement for Western’s 2016 Annual Meeting of Shareholders, which was filed with the SEC on April 22, 2016, and in the other documents filed after the date thereof by Western with the SEC. Investors may obtain additional information regarding the interests of such participants by reading the proxy statement/prospectus regarding the proposed transaction when it becomes available. You may obtain free copies of these documents as described in the preceding paragraph.


Consolidated Financial Data

We report our operating results in three business segments: refining, WNRL and retail.

  • Refining. Our refining segment owns and operates three refineries 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.

  • WNRL. WNRL owns and operates terminal, storage, transportation and wholesale assets in the Southwest and terminal and storage assets in the Upper Great Plains region. WNRL's Southwest wholesale assets consist of a fleet of crude oil, asphalt and refined product truck transports and wholesale petroleum product operations. WNRL's primary customer is our refining segment. WNRL purchases its wholesale product supply from the refining segment and third-party suppliers.

  • Retail. Our retail segment operates retail convenience stores and unmanned commercial fleet fueling ("cardlock") locations located in the Southwest ("Southwest Retail") and Upper Great Plains ("SuperAmerica") regions. 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 Year Ended
 December 31, December 31,
 2016 2015 2016 2015
 (In thousands, except per share data)
Statements of Operations Data       
Net sales (1)$2,115,325  $2,070,324  $7,743,213  $9,787,036 
Operating costs and expenses:       
Cost of products sold (exclusive of depreciation and amortization) (1)1,721,812  1,706,406  5,978,811  7,521,375 
Direct operating expenses (exclusive of depreciation and amortization) (1)240,716  228,451  928,023  902,925 
Selling, general and administrative expenses51,204  55,437  217,861  225,245 
Merger and reorganization costs8,453    12,440   
Loss (gain) and impairments on disposal of assets, net(90) 208  (1,271) 51 
Maintenance turnaround expense19,404  836  47,137  2,024 
Depreciation and amortization55,456  52,845  216,787  205,291 
Total operating costs and expenses2,096,955  2,044,183  7,399,788  8,856,911 
Operating income18,370  26,141  343,425  930,125 
Other income (expense):       
Interest income256  153  692  703 
Interest and debt expense(35,226) (26,434) (123,291) (105,603)
Loss on extinguishment of debt(3,916)   (3,916)  
Other, net7,152  1,604  24,964  13,161 
Net income (loss) before income taxes(13,364) 1,464  241,874  838,386 
Provision for income taxes13,613  6,034  (54,868) (223,955)
Net income249  7,498  187,006  614,431 
Less net income (loss) attributable to non-controlling interests (2)9,838  (6,047) 62,067  207,675 
Net income (loss) attributable to Western Refining, Inc.$(9,589) $13,545  $124,939  $406,756 
Basic earnings (loss) per share$(0.09) $0.14  $1.24  $4.28 
Diluted earnings (loss) per share (3)(0.09) 0.14  1.24  4.28 
Dividends declared per common share0.38  0.38  1.52  1.36 
Weighted average basic shares outstanding108,431  93,683  100,473  94,899 
Weighted average dilutive shares outstanding108,890  93,785  100,868  94,999 


 Three Months Ended Year Ended
 December 31, December 31,
 2016 2015 2016 2015
 (In thousands)
Economic Hedging Activities Recognized Within Cost of Products Sold       
Realized hedging gain, net$12,663  $41,374  $58,773  $93,699 
Unrealized hedging loss, net(22,976) (8,160) (77,674) (50,233)
Total hedging gain (loss), net$(10,313) $33,214  $(18,901) $43,466 
        
Cash Flow Data       
Net cash provided by (used in):       
Operating activities$105,870  $177,419  $383,747  $843,083 
Investing activities130,737  (157,392) (226,342) (191,846)
Financing activities(234,122) 42,905  (661,326) (309,894)
Capital expenditures$65,872  $94,887  $300,969  $290,863 
Cash distributions received by Western from:       
NTI$110,000  $37,047  $129,949  $135,365 
WNRL15,119  12,610  56,190  45,455 
Other Data       
Adjusted EBITDA (4)$92,629  $203,614  $575,994  $1,298,124 
Balance Sheet Data (at end of period)       
Cash and cash equivalents    $268,581  $772,502 
Restricted cash      69,106 
Working capital    688,477  1,114,366 
Total assets    5,560,397  5,833,393 
Total debt and lease financing obligation    1,936,468  1,703,626 
Total equity    2,296,960  2,945,906 



(1) Excludes $948.1 million, $3,558.4 million, $850.6 million and $3,869.8 million of intercompany sales; $948.1 million, $3,558.4 million, $850.6 million and $3,869.8 million of intercompany cost of products sold for the three and twelve months ended December 31, 2016 and 2015, respectively.

(2) Net income (loss) attributable to non-controlling interests for the twelve months ended December 31, 2016 and 2015, consisted of income from NTI of $35.3 million and $186.5 million, respectively, and $(11.0) million for the three months ended December 31, 2015 with no comparable activity during the three months ended December 31, 2016. Net income attributable to non-controlling interest for the three and twelve months ended December 31, 2016 and 2015, consisted of income from WNRL of $9.8 million, $26.7 million, $5.0 million and $21.2 million, respectively.

(3) Our computation of diluted earnings per share includes the dilutive effect of any unvested restricted shares units and phantom stock. 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 0.5 million and 0.4 million restricted share units and phantom stock for the three and twelve months ended December 31, 2016, respectively. We assumed issuance of 0.1 million restricted share units for both the three and twelve months ended December 31, 2015.

(4) Adjusted EBITDA represents earnings before interest and debt expense, 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 U.S. 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:

  • 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. The following table reconciles net income attributable to Western Refining, Inc. to Adjusted EBITDA for the periods presented:

 Three Months Ended Twelve Months Ended
 December 31, December 31,
 2016 2015 2016 2015
 (In thousands)
Net income (loss) attributable to Western Refining, Inc.$(9,589) $13,545  $124,939  $406,756 
Net income (loss) attributable to non-controlling interests9,838  (6,047) 62,067  207,675 
Interest and debt expense35,226  26,434  123,291  105,603 
Provision for income taxes(13,613) (6,034) 54,868  223,955 
Depreciation and amortization55,456  52,845  216,787  205,291 
Maintenance turnaround expense19,404  836  47,137  2,024 
Loss (gain) and impairments on disposal of assets, net(90) 208  (1,271) 51 
Loss on extinguishment of debt3,916    3,916   
Net change in lower of cost or market inventory reserve(30,895) 113,667  (133,414) 96,536 
Unrealized loss on commodity hedging transactions22,976  8,160  77,674  50,233 
Adjusted EBITDA$92,629  $203,614  $575,994  $1,298,124 
        
Adjusted EBITDA:       
Western (1)$55,892  $175,932  $450,836  $1,191,740 
WNRL36,737  27,682  125,158  106,384 
Consolidated Adjusted EBITDA$92,629  $203,614  $575,994  $1,298,124 


 Three Months Ended
 December 31,
 2016 2015
 Western (1) WNRL Western (1) WNRL
 (Unaudited)
  (In thousands)
Net income (loss) attributable to Western Refining, Inc.$(20,503) $10,914  $3,699  $9,846 
Net income (loss) attributable to non-controlling interests  9,838  (11,043) 4,996 
Interest and debt expense28,868  6,358  19,743  6,691 
Provision for income taxes(13,559) (54) (5,727) (307)
Depreciation and amortization45,684  9,772  46,368  6,477 
Maintenance turnaround expense19,404    836   
Loss (gain) and impairments on disposal of assets, net1  (91) 229  (21)
Loss on extinguishment of debt3,916       
Net change in lower of cost or market inventory reserve(30,895)   113,667   
Unrealized loss on commodity hedging transactions22,976    8,160   
Adjusted EBITDA$55,892  $36,737  $175,932  $27,682 


 Twelve Months Ended
 December 31,
 2016 2015
 Western (1) WNRL Western (1) WNRL
 (Unaudited)
  (In thousands)
Net income attributable to Western Refining, Inc.$85,027  $39,912  $365,338  $41,418 
Net income attributable to non-controlling interests35,323  26,744  186,520  21,155 
Interest and debt expense97,319  25,972  82,496  23,107 
Provision for income taxes54,162  706  223,908  47 
Depreciation and amortization183,909  32,878  184,356  20,935 
Maintenance turnaround expense47,137    2,024   
Loss (gain) and impairments on disposal of assets, net(217) (1,054) 329  (278)
Loss on extinguishment of debt3,916       
Net change in lower of cost or market inventory reserve(133,414)   96,536   
Unrealized loss on commodity hedging transactions77,674    50,233   
Adjusted EBITDA$450,836  $125,158  $1,191,740  $106,384 


(1) Our presentation of Adjusted EBITDA for Western excludes the results of WNRL for all periods presented.


Consolidating Financial Data

The following tables set forth our consolidating historical financial data for the periods presented below.

 Three Months Ended Year Ended
 December 31, December 31,
 2016 2015 2016 2015
 (In thousands)
Operating Income       
Refining$18,807  $30,126  $357,610  $930,531 
WNRL27,039  14,340  70,095  55,794 
Retail3,953  4,923  25,146  41,279 
Other(31,429) (23,248) (109,426) (97,479)
Operating income$18,370  $26,141  $343,425  $930,125 
Depreciation and Amortization       
Refining$39,388  $36,192  $150,989  $142,108 
WNRL9,772  9,568  39,242  35,384 
Retail5,571  5,940  23,193  23,197 
Other725  1,145  3,363  4,602 
Depreciation and amortization expense$55,456  $52,845  $216,787  $205,291 
Capital Expenditures       
Refining$48,182  $73,335  $248,863  $201,249 
WNRL4,783  13,485  29,161  65,635 
Retail11,780  7,720  20,308  20,895 
Other1,127  347  2,637  3,084 
Capital expenditures$65,872  $94,887  $300,969  $290,863 
Balance Sheet Data (at end of period)       
Cash and cash equivalents       
Western, excluding WNRL    $253,929  $727,897 
WNRL    14,652  44,605 
Cash and cash equivalents    $268,581  $772,502 
Total debt       
Western, excluding WNRL    $1,569,273  $1,212,927 
WNRL    313,032  437,467 
Total debt    $1,882,305  $1,650,394 
Total working capital       
Western, excluding WNRL    $705,667  $1,078,574 
WNRL    (17,190) 35,792 
Total working capital    $688,477  $1,114,366 


Refining

 Three Months Ended Year Ended
 December 31, December 31,
 2016 2015 2016 2015
 (In thousands, except per barrel data)
Statement of Operations Data:       
Net sales (including intersegment sales) (1)$1,906,648  $1,818,753  $6,918,931  $8,777,196 
Operating costs and expenses:       
Cost of products sold (exclusive of depreciation and amortization) (7)1,688,665  1,619,368  5,831,811  7,176,706 
Direct operating expenses (exclusive of depreciation and amortization)126,776  116,315  472,128  459,996 
Selling, general and administrative expenses13,608  15,863  59,239  65,422 
Loss and impairments on disposal of assets, net  53  17  409 
Maintenance turnaround expense19,404  836  47,137  2,024 
Depreciation and amortization39,388  36,192  150,989  142,108 
Total operating costs and expenses1,887,841  1,788,627  6,561,321  7,846,665 
Operating income$18,807  $30,126  $357,610  $930,531 
Key Operating Statistics       
Total sales volume (bpd) (2)314,391  336,617  312,699  338,403 
Total refinery production (bpd)250,254  254,321  256,177  256,197 
Total refinery throughput (bpd) (3)252,063  255,847  258,023  258,322 
Per barrel of throughput:       
Refinery gross margin (4) (5) (7)$9.36  $8.35  $11.45  $16.93 
Refinery gross margin, excluding LCM adjustment (4) (5) (7)8.06  13.13  10.05  17.95 
Direct operating expenses (6)5.46  4.94  5.00  4.87 
Mid-Atlantic sales volume (bbls)1,549  1,759  7,239  8,356 
Mid-Atlantic margin per barrel$0.60  $1.61  $0.82  $0.46 

El Paso Refinery

 Three Months Ended Year Ended
 December 31, December 31,
 2016 2015 2016 2015
Key Operating Statistics       
Refinery product yields (bpd):       
Gasoline77,482  68,976  74,916  70,200 
Diesel and jet fuel55,561  48,972  55,793  54,082 
Residuum3,086  2,524  2,929  4,174 
Other3,755  5,964  4,747  4,872 
Total refinery production (bpd)139,884  126,436  138,385  133,328 
Refinery throughput (bpd):       
Sweet crude oil104,276  99,765  104,454  105,064 
Sour crude oil27,657  22,634  26,612  22,949 
Other feedstocks and blendstocks9,374  5,459  8,805  7,064 
Total refinery throughput (bpd) (3)141,307  127,858  139,871  135,077 
Total sales volume (bpd) (2)148,971  144,423  148,808  148,897 
Per barrel of throughput:       
Refinery gross margin (4) (7)$10.57  $9.55  $10.93  $16.48 
Direct operating expenses (6)3.86  4.22  3.82  4.02 

Gallup Refinery

 Three Months Ended Year Ended
 December 31, December 31,
 2016 2015 2016 2015
Key Operating Statistics       
Refinery product yields (bpd):       
Gasoline15,446  17,068  16,315  17,066 
Diesel and jet fuel7,654  7,569  7,574  7,994 
Other1,689  646  1,355  1,303 
Total refinery production (bpd)24,789  25,283  25,244  26,363 
Refinery throughput (bpd):       
Sweet crude oil22,412  21,979  22,964  24,071 
Other feedstocks and blendstocks2,883  3,633  2,787  2,659 
Total refinery throughput (bpd) (3)25,295  25,612  25,751  26,730 
Total sales volume (bpd) (2)32,620  32,014  34,427  33,005 
Per barrel of throughput:       
Refinery gross margin (4) (7)$11.45  $13.61  $12.23  $18.34 
Direct operating expenses (6)11.91  8.60  9.51  8.38 

St. Paul Park Refinery

 Three Months Ended Year Ended
 December 31, December 31,
 2016 2015 2016 2015
Key Operating Statistics       
Refinery product yields (bpd):       
Gasoline43,694  50,303  46,287  46,453 
Diesel and jet fuel31,808  35,033  30,767  33,356 
Residuum5,565  11,500  9,661  10,933 
Other4,515  5,766  5,833  5,764 
Total refinery production (bpd)85,582  102,602  92,548  96,506 
Refinery throughput (bpd):       
Light crude oil38,187  55,116  49,794  55,612 
Synthetic crude oil28,434  15,571  17,516  13,127 
Heavy crude oil13,645  25,948  21,641  24,962 
Other feedstocks and blendstocks5,195  5,742  3,449  2,814 
Total refinery throughput (bpd) (3)85,461  102,377  92,400  96,515 
Total sales volume (bpd) (2)92,712  103,483  98,965  101,349 
Per barrel of throughput:       
Refinery gross margin (4) (7)$5.54  $14.26  $9.17  $18.88 
Direct operating expenses (6)5.34  4.12  4.66  4.33 



(1) Refining net sales for the three and twelve months ended December 31, 2016 and 2015, includes $206.1 million, $547.4 million, $230.0 million and $1,078.2 million, respectively, in crude oil sales to third parties representing a period average of 46,990 bpd, 34,177 bpd, 59,344 bpd and 61,516 bpd, respectively.

(2) 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 represent 5.4%, 5.7%, 5.5% and 6.5% of our total consolidated sales volumes for the three and twelve months ended December 31, 2016 and 2015, respectively. The majority of the purchased refined products are distributed through our refined product sales activities in the Mid-Atlantic region where we satisfied our refined product customer sales requirements via a third-party supply agreement through December 31, 2016.

(3) Total refinery throughput includes crude oil, other feedstocks and blendstocks.

(4) 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.

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 Year Ended
 December 31, December 31,
 2016 2015 2016 2015
 (In thousands)
Refinery net sales (including intersegment sales)$1,804,640  $1,715,670  $6,485,540  $8,177,250 
Mid-Atlantic sales102,008  103,083  433,391  599,946 
Net sales (including intersegment sales)$1,906,648  $1,818,753  $6,918,931  $8,777,196 
        
Refinery cost of products sold (exclusive of depreciation and amortization)$1,587,579  $1,519,117  $5,404,339  $6,580,591 
Mid-Atlantic cost of products sold101,086  100,251  427,472  596,115 
Cost of products sold (exclusive of depreciation and amortization)$1,688,665  $1,619,368  $5,831,811  $7,176,706 

The following table reconciles combined gross profit for our refineries to combined gross margin for our refineries for the periods presented:

 Three Months Ended Year Ended
 December 31, December 31,
 2016 2015 2016 2015
 (In thousands, except per barrel data)
Net sales (including intersegment sales)$1,804,640  $1,715,670  $6,485,540  $8,177,250 
Cost of products sold (exclusive of depreciation and amortization)1,587,579  1,519,117  5,404,339  6,580,591 
Depreciation and amortization39,388  36,192  150,989  142,108 
Gross profit177,673  160,361  930,212  1,454,551 
Plus depreciation and amortization39,388  36,192  150,989  142,108 
Refinery gross margin$217,061  $196,553  $1,081,201  $1,596,659 
Refinery gross margin per refinery throughput barrel$9.36  $8.35  $11.45  $16.93 
Gross profit per refinery throughput barrel$7.66  $6.81  $9.85  $15.43 


(5) Cost of products sold for the combined refining segment includes changes in the lower of cost or market inventory reserve shown in the table below. The reserve changes are also included in the combined refinery gross margin but are not included in those measures for the individual refineries. The following table calculates the refinery gross margin per refinery throughput barrel excluding changes in the lower of cost or market inventory reserve that we believe is useful in evaluating our refinery performance exclusive of the impact of fluctuations in inventory values:

 Three Months Ended Year Ended
 December 31, December 31,
 2016 2015 2016 2015
 (in thousands, except per barrel data)
Refinery gross margin$217,061  $196,553  $1,081,201  $1,596,659 
Net change in lower of cost or market inventory reserve(30,246) 112,432  (131,954) 95,835 
Refinery gross margin, excluding LCM adjustment$186,815  $308,985  $949,247  $1,692,494 
Refinery gross margin, excluding LCM adjustment, per refinery throughput barrel$8.06  $13.13  $10.05  $17.95 


(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.

(7) Cost of products sold for the combined refining segment includes the 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 Year Ended
 December 31, December 31,
 2016 2015 2016 2015
 (In thousands)
Realized hedging gain, net$12,663  $41,374  $58,773  $93,699 
Unrealized hedging loss, net(22,976) (8,160) (77,674) (50,233)
Total hedging gain (loss), net$(10,313) $33,214  $(18,901) $43,466 



WNRL

The WNRL financial and operational data presented includes the historical results of all assets acquired from Western in the St. Paul Park Logistics Transaction and the TexNew Mex Pipeline Transaction. These acquisitions from Western were transfers 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 the purchased assets into WNRL.

 Three Months Ended Year Ended
 December 31, December 31,
 2016 2015 2016 2015
 (In thousands)
Net sales$606,816  $575,897  $2,222,718  $2,599,867 
Operating costs and expenses:       
Cost of products sold520,731  500,853  1,916,113  2,308,137 
Direct operating expenses43,833  44,611  174,936  175,767 
Selling, general and administrative expenses5,532  6,546  23,386  25,063 
Gain and impairments on disposal of assets, net(91) (21) (1,054) (278)
Depreciation and amortization9,772  9,568  39,242  35,384 
Total operating costs and expenses579,777  561,557  2,152,623  2,544,073 
Operating income$27,039  $14,340  $70,095  $55,794 


 Three Months Ended Year Ended
 December 31, December 31,
 2016 2015 2016 2015
 (In thousands, except per gallon/barrel data)
Pipeline and gathering (bpd):       
Mainline movements:       
Permian/Delaware Basin system52,090  52,068  51,805  47,368 
TexNew Mex system7,790  14,566  9,543  12,302 
Four Corners system (1)49,278  60,115  53,204  56,079 
Gathering (truck offloading) (bpd):       
Permian/Delaware Basin system16,809  21,865  17,662  23,617 
Four Corners system8,417  13,589  10,464  13,438 
Terminalling, transportation and storage (bpd):       
Shipments into and out of storage (includes asphalt)568,288  377,698  441,865  391,842 
Wholesale:       
Fuel gallons sold317,998  318,186  1,258,027  1,237,994 
Fuel gallons sold to retail (included in fuel gallons sold, above)81,521  78,780  332,214  314,604 
Fuel margin per gallon (2)$0.030  $0.026  $0.028  $0.030 
Lubricant gallons sold1,385  2,728  6,787  11,697 
Lubricant margin per gallon (3)$0.83  $0.77  $0.85  $0.73 
Asphalt trucking volume (bpd)5,518    4,727   
Crude oil trucking volume (bpd)40,586  39,675  38,582  45,337 
Average crude oil trucking revenue per barrel$2.12  $2.35  $2.16  $2.53 



(1) Some barrels of crude oil in route to Western's Gallup refinery and Permian/Delaware Basin are transported on more than one mainline. Mainline movements for the Four Corners and Delaware Basin systems include each barrel transported on each mainline.

(2) Fuel margin per gallon is a function of the difference between 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.

(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 lubricant sales. Lubricant margin is a measure frequently used in the petroleum products wholesale industry to measure operating results related to lubricant sales.


Retail

 Three Months Ended Year Ended
 December 31, December 31,
 2016 2015 2016 2015
 (In thousands, except per gallon data)
Statement of Operations Data:       
Net sales (including intersegment sales)$549,913  $526,234  $2,159,946  $2,279,737 
Operating costs and expenses:       
Cost of products sold (exclusive of depreciation and amortization)460,468  436,727  1,789,269  1,906,048 
Direct operating expenses (exclusive of depreciation and amortization)70,107  67,525  281,039  267,079 
Selling, general and administrative expenses9,813  10,943  41,533  42,312 
Loss (gain) and impairments on disposal of assets, net1  176  (234) (178)
Depreciation and amortization5,571  5,940  23,193  23,197 
Total operating costs and expenses545,960  521,311  2,134,800  2,238,458 
Operating income$3,953  $4,923  $25,146  $41,279 
Key Operating Statistics:       
Southwest Retail:       
Retail fuel gallons sold99,602  90,733  394,925  357,835 
Average retail fuel sales price per gallon, net of excise taxes$1.80  $1.78  $1.70  $2.02 
Average retail fuel cost per gallon, net of excise taxes1.64  1.59  1.54  1.82 
Retail fuel margin per gallon (1)0.16  0.19  0.16  0.20 
Merchandise sales$81,057  $77,640  $330,244  $311,654 
Merchandise margin (2)30.1% 29.1% 29.4% 29.4%
Operating retail outlets at period end    259  258 
Cardlock gallons sold15,669  15,495  64,067  65,508 
Cardlock margin per gallon$0.120  $0.127  $0.122  $0.163 
Operating cardlocks at period end    51  52 
SuperAmerica:       
Retail fuel gallons sold75,738  76,811  306,825  304,484 
Retail fuel margin per gallon (1)$0.20  $0.23  $0.22  $0.23 
Merchandise sales87,774  87,343  367,737  366,401 
Merchandise margin (2)25.7% 24.6% 25.9% 25.6%
Company-operated retail outlets at period end    170  168 
Franchised retail outlets at period end    115  109 


 Three Months Ended Year Ended
 December 31, December 31,
 2016 2015 2016 2015
 (In thousands, except per gallon data)
Net Sales       
Retail fuel sales, net of excise taxes$337,910  $326,576  $1,301,580  $1,442,147 
Merchandise sales168,831  164,983  697,981  678,055 
Cardlock sales29,777  26,453  104,079  127,413 
Other sales13,395  8,222  56,306  32,122 
Net sales$549,913  $526,234  $2,159,946  $2,279,737 
Cost of Products Sold       
Retail fuel cost of products sold, net of excise taxes$307,739  $291,739  $1,170,348  $1,298,456 
Merchandise cost of products sold121,958  120,859  505,638  492,578 
Cardlock cost of products sold27,827  24,429  95,928  116,506 
Other cost of products sold2,944  (300) 17,355  (1,492)
Cost of products sold$460,468  $436,727  $1,789,269  $1,906,048 
Retail fuel margin per gallon (1)$0.17  $0.21  $0.19  $0.22 



(1) Retail fuel margin per gallon is a measurement calculated by dividing the difference between retail fuel sales and cost of retail fuel sales for our retail segment 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 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
 December 31,
 2016 2015
 (In thousands, except per share data)
Reported diluted earnings (loss) per share$(0.09) $0.14 
Income (loss) before income taxes$(13,364) $1,464 
Special items:   
Loss (gain) and impairments on disposal of assets, net(90) 208 
Merger and reorganization costs8,453   
Unrealized loss on commodity hedging transactions22,976  8,160 
Net change in lower of cost or market inventory reserve(30,895) 113,667 
Loss on extinguishment of debt3,916   
Earnings (loss) before income taxes excluding special items(9,004) 123,499 
Recomputed income taxes after special items (1)11,029  (28,737)
Net income (loss) excluding special items2,025  94,762 
Net income attributable to non-controlling interests9,795  42,572 
Net income (loss) attributable to Western excluding special items$(7,770) $52,190 
Diluted earnings (loss) per share excluding special items$(0.07) $0.56 


(1) We recompute income taxes after deducting special items and earnings attributable to non-controlling interests.

Investor and Analyst Contact:
Jeffrey S. Beyersdorfer
(602) 286-1530

Michelle Clemente
(602) 286-1533

Media Contact:
Gary W. Hanson
(602) 286-1777