Western Refining Announces First Quarter 2016 Results


EL PASO, Texas, May 03, 2016 (GLOBE NEWSWIRE) -- Western Refining, Inc. (NYSE:WNR) today reported results for its first quarter ended March 31, 2016. Net income attributable to Western, excluding special items, was $11.6 million, or $0.13 per diluted share. This compares to first quarter 2015 net income, excluding special items, of $113.3 million, or $1.18 per diluted share. Including special items, the Company recorded first quarter 2016 net income attributable to Western of $30.5 million, or $0.33 per diluted share, as compared to net income attributable to Western of $106.0 million, or $1.11 per diluted share for the first quarter of 2015. 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, "The first quarter was good operationally for Western. Total throughput at our El Paso refinery averaged a record 143,000 barrels per day and we did a good job managing our expenses.  We saw lower than normal gasoline margins as high levels of winter-grade gasoline worked its way through the system during the transition to summer-grade gasoline.  Gasoline margins began to improve late in the first quarter.  Narrow crude oil differentials and weak distillate margins also hampered our financial results.  In our Retail business, we saw an increase in same store fuel volumes and merchandise sales compared to Q1 2015."

Western paid a dividend of $0.38 per share of common stock to shareholders in the first quarter.  In April, Western's Board of Directors approved a $0.38 per share dividend for the second quarter.  Including the second quarter dividend, Western has returned approximately $145 million to shareholders through dividends and share repurchases in 2016.

Looking forward, Stevens said, "The second quarter has started off well as gasoline demand remains strong and southwest US gasoline margins have recovered from their lows in February.  We continue to be focused on a balanced approach of disciplined capital investments, returning cash to shareholders, and managing our balance sheet. Finally, we look forward to completing the Northern Tier transaction later this quarter and operating our combined assets as one team."

Conference Call Information

A conference call is scheduled for Tuesday, May 3, 2016, at 11:00 am ET to discuss Western's financial results for the first quarter ended March 31, 2016.  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: 71698288. The audio replay will be available two hours after the end of the call through May 17, 2016, by dialing (800) 585-8367 or (404) 537-3406, passcode: 71698288.

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 which are protected by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements reflect Western’s current expectations regarding future events, results or outcomes. The forward-looking statements contained herein include statements about: gasoline demand and southwest US gasoline margins; Western’s continued focus on a balanced financial approach of disciplined capital investments, returning cash to shareholders, and managing its balance sheet; and the completion of the Northern Tier transaction and operation of the combined assets. 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. Except as required by law, 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 the Upper Great Plains region of the United States.
  • WNRL owns and operates terminal, storage, transportation and wholesale assets consisting of a fleet of crude oil and refined product truck transports and wholesale petroleum product operations in the Southwest region. WNRL's primary customer is our refineries in the Southwest. WNRL purchases its wholesale 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
 March 31,
 2016 2015
 (Unaudited)
 (In thousands, except per share data)
Statements of Operations Data   
Net sales (1)$1,455,504  $2,318,730 
Operating costs and expenses:   
Cost of products sold (exclusive of depreciation and amortization) (1)1,047,361  1,741,310 
Direct operating expenses (exclusive of depreciation and amortization)223,585  215,311 
Selling, general and administrative expenses53,285  55,803 
Loss (gain) on disposal of assets, net(130) 282 
Maintenance turnaround expense125  105 
Depreciation and amortization52,651  49,926 
Total operating costs and expenses1,376,877  2,062,737 
Operating income78,627  255,993 
Other income (expense):   
Interest income164  163 
Interest and debt expense(26,681) (24,957)
Other, net6,104  3,206 
Income before income taxes58,214  234,405 
Provision for income taxes(18,629) (59,437)
Net income39,585  174,968 
Less net income attributable to non-controlling interests (2)9,047  68,979 
Net income attributable to Western Refining, Inc.$30,538  $105,989 
    
Basic earnings per share$0.34  $1.11 
Diluted earnings per share0.33  1.11 
    
Dividends declared per common share0.38  0.30 
    
Weighted average basic shares outstanding92,078  95,567 
Weighted average dilutive shares outstanding (3)92,144  95,682 


 Three Months Ended
 March 31,
 2016 2015
 (Unaudited)
 (In thousands)
Economic Hedging Activities Recognized Within Cost of Products Sold   
Realized hedging gain, net$17,803  $17,553 
Unrealized hedging loss, net(12,483) (20,057)
Total hedging gain (loss), net$5,320  $(2,504)
    
Cash Flow Data   
Net cash provided by (used in):   
Operating activities$1,104  $104,978 
Investing activities(46,487) (9,171)
Financing activities(134,018) (63,892)
Capital expenditures$79,029  $53,195 
Cash distributions received by Western from:   
NTI$13,537  $17,455 
WNRL13,392  10,314 
Other Data   
Adjusted EBITDA (4)$98,290  $314,010 
Balance Sheet Data (at end of period)   
Cash and cash equivalents$593,101  $463,074 
Restricted cash36,783  123,609 
Working capital1,066,651  966,002 
Total assets5,753,762  5,684,522 
Total debt and lease financing obligation1,711,282  1,550,810 
Total equity2,850,800  2,879,158 

(1) Excludes $627.5 million and $736.5 million of intercompany sales and $627.5 million and $736.5 million of intercompany cost of products sold for three months ended March 31, 2016 and 2015, respectively.

(2) Net income attributable to non-controlling interests for the three months ended March 31, 2016, consisted of income from NTI and WNRL in the amount of $4.3 million and $4.7 million, respectively. Net income attributable to non-controlling interests for the three months ended March 31, 2015, consisted of income from NTI and WNRL in the amount of $63.8 million and $5.2 million, respectively.

(3) Our computation of diluted earnings per share includes 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 both the three months ended March 31, 2016 and 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.

  
 Three Months Ended
 March 31,
 2016 2015
 (Unaudited)
  (In thousands)
Net income attributable to Western Refining, Inc.$30,538  $105,989 
Net income attributable to non-controlling interests9,047  68,979 
Interest and debt expense26,681  24,957 
Provision for income taxes18,629  59,437 
Loss (gain) on disposal of assets, net(130) 282 
Depreciation and amortization52,651  49,926 
Maintenance turnaround expense125  105 
Net change in lower of cost or market inventory reserve(51,734) (15,722)
Unrealized loss on commodity hedging transactions12,483  20,057 
Adjusted EBITDA$98,290  $314,010 
    
EBITDA by Reporting Entity   
Western Adjusted EBITDA$51,476  $171,283 
NTI Adjusted EBITDA18,449  118,583 
WNRL EBITDA28,365  24,144 
Consolidated Adjusted EBITDA$98,290  $314,010 


  
 Three Months Ended
 March 31,
 2016
 Western NTI WNRL
 (Unaudited)
  (In thousands)
Net income attributable to Western Refining, Inc.$18,010  $3,224  $9,304 
Net income attributable to non-controlling interests  4,344  4,703 
Interest and debt expense13,879  5,750  7,052 
Provision for income taxes18,368    261 
Gain on disposal of assets, net(26) (5) (99)
Depreciation and amortization25,538  19,969  7,144 
Maintenance turnaround expense125     
Net change in lower of cost or market inventory reserve(40,689) (11,045)  
Unrealized loss (gain) on commodity hedging transactions16,271  (3,788)  
Adjusted EBITDA$51,476  $18,449  $28,365 


  
 Three Months Ended
 March 31,
 2015
 Western NTI WNRL
 (Unaudited)
  (In thousands)
Net income attributable to Western Refining, Inc.$55,211  $40,638  $10,140 
Net income attributable to non-controlling interests  63,796  5,183 
Interest and debt expense14,230  6,763  3,964 
Provision for income taxes59,234    203 
Loss (gain) on disposal of assets, net381  (15) (84)
Depreciation and amortization25,823  19,365  4,738 
Maintenance turnaround expense105     
Net change in lower of cost or market inventory reserve(4,883) (10,839)  
Unrealized loss (gain) on commodity hedging transactions21,182  (1,125)  
Adjusted EBITDA$171,283  $118,583  $24,144 

Consolidating Financial Data

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

 Three Months Ended
 March 31,
 2016 2015
 (Unaudited)
 (In thousands)
Operating Income   
Western, excluding NTI and WNRL$49,074  $128,533 
NTI8,115  107,987 
WNRL21,438  19,473 
Operating income$78,627  $255,993 
Depreciation and Amortization   
Western, excluding NTI and WNRL$25,538  $25,823 
NTI19,969  19,365 
WNRL7,144  4,738 
Depreciation and amortization expense$52,651  $49,926 
Capital Expenditures   
Western, excluding NTI and WNRL$44,798  $38,608 
NTI27,990  6,673 
WNRL6,241  7,914 
Capital expenditures$79,029  $53,195 
Balance Sheet Data (at end of period)   
Cash and cash equivalents   
Western, excluding NTI and WNRL$529,481  $256,582 
NTI34,967  118,320 
WNRL28,653  88,172 
Cash and cash equivalents$593,101  $463,074 
 Total debt   
Western, excluding NTI and WNRL$862,020  $861,213 
NTI373,262  351,829 
WNRL422,810  291,502 
Total debt$1,658,092  $1,504,544 
Total working capital   
Western, excluding NTI and WNRL$913,095  $618,238 
NTI139,678  276,224 
WNRL13,878  71,540 
Total working capital$1,066,651  $966,002 

Refining Segment

El Paso and Gallup Refineries and Related Operations

 Three Months Ended
 March 31,
 2016 2015
  (In thousands, except per barrel data)
Statement of Operations Data (Unaudited):   
Net sales (including intersegment sales) (1)$886,320  $1,491,441 
Operating costs and expenses:   
Cost of products sold (exclusive of depreciation and amortization) (2)722,014  1,235,456 
Direct operating expenses (exclusive of depreciation and amortization)73,488  76,798 
Selling, general and administrative expenses7,270  9,569 
Loss on disposal of assets, net  417 
Maintenance turnaround expense125  105 
Depreciation and amortization21,285  20,484 
Total operating costs and expenses824,182  1,342,829 
Operating income$62,138  $148,612 
Key Operating Statistics   
Total sales volume (bpd) (1) (3)190,941  233,474 
Total refinery production (bpd)163,167  164,837 
Total refinery throughput (bpd) (4)165,368  167,299 
Per barrel of refinery throughput:   
Refinery gross margin (2) (5) (6)$10.79  $16.83 
Direct operating expenses (7)4.88  5.10 
Mid-Atlantic sales volume (bbls)1,731  1,940 
Mid-Atlantic margin per barrel$1.14  $1.32 

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
 March 31,
 2016 2015
Key Operating Statistics   
Refinery product yields (bpd):   
Gasoline90,011  89,197 
Diesel and jet fuel64,140  65,109 
Residuum3,218  4,938 
Other5,798  5,593 
Total refinery production (bpd)163,167  164,837 
Refinery throughput (bpd):   
Sweet crude oil123,953  131,182 
Sour crude oil28,499  23,237 
Other feedstocks and blendstocks12,916  12,880 
Total refinery throughput (bpd) (4)165,368  167,299 

El Paso Refinery

 Three Months Ended
 March 31,
 2016 2015
Key Operating Statistics   
Refinery product yields (bpd):   
Gasoline75,239  71,692 
Diesel and jet fuel58,284  56,726 
Residuum3,218  4,938 
Other4,619  3,980 
Total refinery production (bpd)141,360  137,336 
Refinery throughput (bpd):   
Sweet crude oil104,887  106,359 
Sour crude oil28,499  23,237 
Other feedstocks and blendstocks9,670  9,706 
Total refinery throughput (bpd) (4)143,056  139,302 
Total sales volume (bpd) (3)141,762  151,812 
Per barrel of refinery throughput:   
Refinery gross margin (2) (5)$7.42  $17.47 
Direct operating expenses (7)3.49  4.08 

Gallup Refinery

 Three Months Ended
 March 31,
 2016 2015
Key Operating Statistics   
Refinery product yields (bpd):   
Gasoline14,772  17,505 
Diesel and jet fuel5,856  8,383 
Other1,179  1,613 
Total refinery production (bpd)21,807  27,501 
Refinery throughput (bpd):   
Sweet crude oil19,066  24,823 
Other feedstocks and blendstocks3,246  3,174 
Total refinery throughput (bpd) (4)22,312  27,997 
Total sales volume (bpd) (3)30,614  32,884 
Per barrel of refinery throughput:   
Refinery gross margin (2) (5)$9.30  $14.04 
Direct operating expenses (7)10.06  8.06 

(1) Refining net sales for the three months ended March 31, 2016 and 2014 include $56.2 million and $215.5 million, respectively, representing a period average of 18,565 bpd and 48,778 bpd, respectively, in crude oil sales to third-parties.

(2) 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 our individual refineries.

 Three Months Ended
 March 31,
 2016 2015
 (Unaudited)
 (In thousands)
Realized hedging gain, net$22,269  $17,455 
Unrealized hedging loss, net(16,271) (21,182)
Total hedging gain (loss), net$5,998  $(3,727)

(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 8.4% and 9.1% of our total consolidated sales volumes for the three months ended March 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 satisfy our refined product customer sales requirements through a third-party supply agreement.

(4) Total refinery throughput includes crude oil, 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.

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
 March 31,
 2016 2015
 (Unaudited)
 (In thousands)
Refinery net sales (including intersegment sales)$800,918  $1,355,519 
Mid-Atlantic sales85,402  135,922 
Net sales (including intersegment sales)$886,320  $1,491,441 
    
Refinery cost of products sold (exclusive of depreciation and amortization)$638,588  $1,102,094 
Mid-Atlantic cost of products sold83,426  133,362 
Cost of products sold (exclusive of depreciation and amortization)$722,014  $1,235,456 

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

  
 Three Months Ended
 March 31,
 2016 2015
 (Unaudited)
  (In thousands, except per barrel data)
Refinery net sales (including intersegment sales)$800,918  $1,355,519 
Refinery cost of products sold (exclusive of depreciation and amortization)638,588  1,102,094 
Depreciation and amortization21,285  20,484 
Gross profit141,045  232,941 
Plus depreciation and amortization21,285  20,484 
Refinery gross margin$162,330  $253,425 
Refinery gross margin per throughput barrel$10.79  $16.83 
Gross profit per throughput barrel$9.37  $15.47 

(6) 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 changes in this reserve are included in the combined refinery gross margin but are not included in those measures for the individual refineries. The following table calculates the combined refinery gross margin per throughput barrel excluding changes in the lower of cost or market inventory reserve:

  
 Three Months Ended
 March 31,
 2016 2015
 (Unaudited)
  (In thousands, except per barrel data)
Refinery gross margin$162,330  $253,425 
Net change in lower of cost or market inventory reserve(40,689) (4,883)
Refinery gross margin, excluding LCM adjustment$121,641  $248,542 
Refinery gross margin, excluding LCM adjustment, per refinery throughput barrel$8.08  $16.51 

(7) 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
 March 31,
 2016 2015
 (Unaudited)
 (In thousands, except per barrel data)
Net sales$497,473  $697,776 
Operating costs and expenses:   
Cost of products sold (exclusive of depreciation and amortization) (1)367,771  480,463 
Direct operating expenses (exclusive of depreciation and amortization)78,144  69,705 
Selling, general and administrative expenses23,479  20,271 
Gain on disposal of assets, net(5) (15)
Depreciation and amortization19,969  19,365 
Total operating costs and expenses489,358  589,789 
Operating income$8,115  $107,987 
    
Key Operating Statistics   
Total sales volume (bpd)99,094  98,481 
Total refinery production (bpd)100,793  94,312 
Total refinery throughput (bpd) (2)100,609  94,108 
Per barrel of throughput:   
Refinery gross margin (1) (3) (4)$9.28  $20.77 
Direct operating expenses (5)4.85  4.59 
    
Retail fuel gallons sold (in thousands)73,090  71,861 
Retail fuel margin per gallon (6)$0.24  $0.21 
Merchandise sales84,193  82,614 
Merchandise margin (7)26.1% 25.9%
Company-operated retail outlets at period end169  165 
Franchised retail outlets at period end114  95 

(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
 March 31,
 2016 2015
 (Unaudited)
 (In thousands)
Realized hedging gain (loss), net$(4,465) $98 
Unrealized hedging gain, net3,788  1,125 
Total hedging gain (loss), net$(677) $1,223 

(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 $3.5 million and $21.8 million related to crude oil sales during the three months ended March 31, 2016 and 2015, 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 months ended March 31, 2016 and 2015 includes non-cash recoveries of $11.0 million and $10.8 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
 March 31,
 2016 2015
 (Unaudited)
 (In thousands, except per barrel data)
Net refinery sales (including intersegment sales)$495,276  $689,530 
Refinery cost of products sold (exclusive of depreciation and amortization)410,294  513,746 
Refinery depreciation and amortization17,409  17,113 
Gross profit67,573  158,671 
Plus depreciation and amortization17,409  17,113 
Refinery gross margin$84,982  $175,784 
Refinery gross margin per refinery throughput barrel$9.28  $20.77 
Gross profit per refinery throughput barrel$7.38  $18.73 

(4) Cost of products sold for NTI includes changes in the lower of cost or market inventory reserve shown in the table below. The following table calculates the refinery gross margin per refinery throughput barrel excluding changes in the lower of cost or market inventory reserve: 

 Three Months Ended
 March 31,
 2016 2015
 (Unaudited)
 (In thousands, except per barrel data)
Refinery gross margin$84,982  $175,784 
Net change in lower of cost or market inventory reserve(10,981) (10,525)
Refinery gross margin, excluding LCM adjustment$74,001  $165,259 
Refinery gross margin, excluding LCM adjustment, per refinery throughput barrel$8.08  $19.53 
        

(5) NTI's direct operating expenses per throughput barrel are 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.

(6) 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.

(7) 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

WNRL's financial and operational data presented includes the historical results of all assets acquired from Western in the TexNew Mex Pipeline System Transaction. This transaction 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 the TexNew Mex Pipeline System into WNRL.

  
 Three Months Ended
 March 31,
 2016 2015
 (Unaudited)
 (In thousands)
Statement of Operations Data:   
Net sales$468,039  $607,396 
Operating costs and expenses:   
Cost of products sold395,590  541,701 
Direct operating expenses38,901  36,371 
Selling, general and administrative expenses5,065  5,955 
Gain on disposal of assets, net(99) (84)
Depreciation and amortization7,144  5,892 
Total operating costs and expenses446,601  589,835 
Operating income$21,438  $17,561 


  
 Three Months Ended
 March 31,
 2016 2015
 (Unaudited)
 (In thousands, except key operating statistics)
Key Operating Statistics   
Pipeline and gathering (bpd):   
Mainline movements:   
Permian/Delaware Basin system49,486  36,512 
Four Corners system (1)52,467  45,841 
Tex New Mex system12,544   
Gathering (truck offloading):   
Permian/Delaware Basin system20,533  22,605 
Four Corners system12,761  10,662 
Terminalling, transportation and storage (bpd):   
Shipments into and out of storage (includes asphalt)388,258  391,318 
Wholesale:   
Fuel gallons sold (in thousands)314,943  303,431 
Fuel gallons sold to retail (included in fuel gallons sold above) (in thousands)79,841  75,263 
Fuel margin per gallon (2)$0.028  $0.027 
Lubricant gallons sold (in thousands)2,201  2,957 
Lubricant margin per gallon (3)$0.69  $0.66 
Crude oil trucking volume (bpd)35,111  43,050 
Average crude oil revenue per barrel$2.24  $2.76 

(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 measurement calculated by dividing the difference between fuel sales, net of transportation charges, and cost of fuel sales for our wholesale segment 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 the 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
 March 31,
 2016 2015
 (Unaudited)
 (In thousands, except per gallon data)
Statement of Operations Data   
Net sales (including intersegment sales)$231,186  $258,602 
Operating costs and expenses:   
Cost of products sold (exclusive of depreciation and amortization)189,500  220,175 
Direct operating expenses (exclusive of depreciation and amortization)33,052  32,354 
Selling, general and administrative expenses2,898  3,264 
Gain on disposal of assets, net(26) (36)
Depreciation and amortization3,330  3,286 
Total operating costs and expenses228,754  259,043 
Operating income (loss)$2,432  $(441)
Key Operating Statistics   
Retail fuel gallons sold91,469  83,824 
Average retail fuel sales price per gallon, net of excise taxes$1.43  $1.82 
Average retail fuel cost per gallon, net of excise taxes)1.28  1.68 
Retail fuel margin per gallon (1)0.15  0.14 
Merchandise sales75,967  70,887 
Merchandise margin (2)29.5% 29.4%
Operating retail outlets at period end258  261 
Cardlock fuel gallons sold15,253  16,120 
Cardlock fuel margin per gallon$0.128  $0.186 
Operating cardlocks at period end52  50 


  
 Three Months Ended
 March 31,
 2016 2015
 (Unaudited)
 (In thousands, except per gallon data)
Net Sales   
Retail fuel sales, net of excise taxes$130,825  $152,545 
Merchandise sales75,967  70,887 
Cardlock sales20,733  31,994 
Other sales3,661  3,176 
Net sales$231,186  $258,602 
Cost of Products Sold   
Retail fuel cost of products sold, net of excise taxes$117,220  $141,122 
Merchandise cost of products sold53,519  50,065 
Cardlock cost of products sold18,701  28,932 
Other cost of products sold60  56 
Cost of products sold$189,500  $220,175 
Retail fuel margin per gallon (1)$0.15  $0.14 

(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
 March 31,
 2016 2015
 (Unaudited)
 (In thousands, except per share data)
Reported diluted earnings per share$0.33  $1.11 
Income before income taxes$58,214  $234,405 
Special items:   
Unrealized loss on commodity hedging transactions, net (1)12,483  20,057 
Loss (gain) on disposal of assets, net(130) 282 
Net change in lower of cost or market inventory reserve (2)(51,734) (15,722)
Earnings before income taxes excluding special items18,833  239,022 
Recomputed income taxes excluding special items (3)(7,065) (63,534)
Net income excluding special items11,768  175,488 
Net income attributable to non-controlling interests186  62,195 
Net income attributable to Western excluding special items$11,582  $113,293 
Diluted earnings per share excluding special items$0.13  $1.18 

(1) Unrealized loss from commodity hedging transactions, net, includes $16.3 million in unrealized losses and $3.8 million in unrealized gains for Western and NTI, respectively, for the three months ended March 31, 2016 and $21.2 million in unrealized losses and $1.1 million in unrealized gains for Western and NTI, respectively, for the three months ended March 31, 2015.

(2) Net change in lower of cost or market inventory reserve includes $40.7 million and $11.0 million for Western and NTI, respectively, for the three months ended March 31, 2016 and $4.9 million and $10.8 million, respectively, for Western and NTI for the three months ended March 31, 2015.

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


            

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