- Net income of $1.33 per diluted share; $1.19 per diluted share, excluding special items
- Completed the sale of Wholesale business to WNRL for $360 million
- Returned $424 million in cash to shareholders in fourth quarter
EL PASO, Texas, Feb. 26, 2015 (GLOBE NEWSWIRE) -- Western Refining, Inc. (NYSE:WNR) today reported fourth quarter 2014 net income of $116.8 million, or $1.19 per diluted share, excluding special items. This compares to fourth quarter 2013 net income of $57.3 million, or $0.60 per diluted share, excluding special items. Including special items, the Company recorded fourth quarter 2014 net income attributable to Western Refining, Inc. of $130.9 million, or $1.33 per diluted share as compared to net loss of $7.3 million, or $(0.09) per diluted share for the fourth quarter of 2013. The special items for the fourth quarter of 2014 primarily included a non-cash lower of cost or market inventory adjustment of $78.6 million and a non-cash unrealized pre-tax hedging gain of $58.1 million. A reconciliation of reported earnings and description of special items can be found in the accompanying financial tables. Western's consolidated financial results include the results of both Western Refining Logistics, LP (NYSE:WNRL) and Northern Tier Energy LP (NYSE:NTI).
Western recorded full year 2014 net income attributable to Western Refining, Inc. of $559.9 million, or $5.61 per diluted share compared to full year 2013 net income of $276.0 million, or $2.79 per diluted share.
Jeff Stevens, Western's President and Chief Executive Officer, said, "Western had a very successful 2014. We improved the safety and reliability at both the El Paso and Gallup refineries, realized significant synergies from our Northern Tier investment, and continued to grow WNRL. In addition, in 2014 we returned $553.0 million through dividends and share repurchases to our shareholders."
Stevens concluded, "We successfully executed our 2014 strategic plan and are well-positioned for positive growth in a volatile crude oil pricing environment. Our 2015 goals are focused on continuing to improve the safety, environmental, and reliability performance of our business while increasing operating efficiencies and containing costs. We are committed to continuing to return cash to our shareholders."
Conference Call Information
A conference call is scheduled for Thursday, February 26, 2015, at 10:00 am ET to discuss Western's financial results for the fourth quarter and full year ended December 31, 2014. A slide presentation will be available for reference during the conference call. The call, press release, and slide presentation can be accessed on the Investor Relations section on Western's website, www.wnr.com. The call can also be heard by dialing (866) 566-8590 or (702) 224-9819, passcode: 55203854. The audio replay will be available two hours after the end of the call through March 12, 2015, by dialing (800) 585-8367 or (404) 537-3406, passcode: 55203854.
Non-GAAP Financial Measures
In a number of places in the press release and related tables, we have excluded from GAAP measures certain income and expense items. The excluded items are generally non-cash in nature, however, other items that have a cash impact, such as gains or losses on disposal of assets or significant costs to exit an activity are also excluded. We believe it is useful for investors and financial analysts to understand our financial performance excluding such items so that they can see the operating trends underlying our business. Readers of this press release should not consider these non-GAAP measures in isolation from, or as a substitute for, the financial information that we report in accordance with GAAP.
About Western Refining
Western Refining, Inc. is an independent refining and marketing company headquartered in El Paso, Texas. The refining segment operates refineries in El Paso and Gallup, New Mexico. The 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). Western Refining, Inc. also owns 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: our positioning for positive growth; the volatility of the crude oil pricing environment; our focus on safety, environmental, and reliability performance of our business; our ability to increase operating efficiencies and contain costs; and our commitment to return cash to our shareholders. These statements are subject to the general risks inherent in the Company's business. These expectations may or may not be realized. Some of these expectations may be based upon assumptions or judgments that prove to be incorrect. In addition, our business and operations involve numerous risks and uncertainties, many of which are beyond our control, which could result in our expectations not being realized, or otherwise materially affect our financial condition, results of operations, and cash flows. Additional information relating to the uncertainties affecting Western's business is contained in its filings with the Securities and Exchange Commission. The forward-looking statements are only as of the date made, and Western does not undertake any obligation to (and expressly disclaims any obligation to) update any forward looking statements to reflect events or circumstances after the date such statements were made, or to reflect the occurrence of unanticipated events.
Consolidated Financial Data
We report our operating results in 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 U.S.
-
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 fueling fleet 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 | Year Ended | |||
| December 31, | December 31, | |||
| 2014 | 2013 (4) | 2014 | 2013 (4) | |
| (In thousands, except per share data) | ||||
| Statements of Operations Data | ||||
| Net sales (1) | $ 3,024,816 | $ 3,022,281 | $ 15,153,573 | $ 10,086,070 |
| Operating costs and expenses: | ||||
| Cost of products sold (exclusive of depreciation and amortization) (1) | 2,448,502 | 2,728,532 | 12,719,963 | 8,690,222 |
| Direct operating expenses (exclusive of depreciation and amortization) (1) | 230,639 | 164,641 | 850,634 | 523,836 |
| Selling, general and administrative expenses | 55,442 | 52,252 | 226,020 | 137,031 |
| Affiliate severance costs | — | — | 12,878 | — |
| Loss (gain) on disposal of assets, net | 7,591 | 2,035 | 8,530 | (4,989) |
| Maintenance turnaround expense | 140 | 4,151 | 48,469 | 50,249 |
| Depreciation and amortization | 49,398 | 38,638 | 190,566 | 117,848 |
| Total operating costs and expenses | 2,791,712 | 2,990,249 | 14,057,060 | 9,514,197 |
| Operating income | 233,104 | 32,032 | 1,096,513 | 571,873 |
| Other income (expense): | ||||
| Interest income | 289 | 205 | 1,188 | 746 |
| Interest expense and other financing costs | (20,336) | (21,939) | (89,276) | (68,040) |
| Amortization of loan fees | (1,718) | (1,899) | (7,786) | (6,541) |
| Loss on extinguishment of debt | — | (1) | (9) | (46,773) |
| Other, net | 2,397 | 1,822 | 2,046 | 2,214 |
| Income before income taxes | 213,736 | 10,220 | 1,002,676 | 453,479 |
| Provision for income taxes | (69,285) | 6,012 | (292,604) | (153,925) |
| Net income | 144,451 | 16,232 | 710,072 | 299,554 |
| Less net income attributed to non-controlling interest | 13,516 | 23,560 | 150,146 | 23,560 |
| Net income (loss) attributable to Western | $ 130,935 | $ (7,328) | $ 559,926 | $ 275,994 |
| Basic earnings (loss) per share | $ 1.34 | $ (0.09) | $ 6.17 | $ 3.35 |
| Diluted earnings (loss) per share (2) | $ 1.33 | $ (0.09) | $ 5.61 | $ 2.79 |
| Weighted average basic shares outstanding | 98,029 | 79,720 | 90,708 | 82,248 |
| Weighted average dilutive shares outstanding | 98,172 | 79,720 | 101,190 | 104,904 |
| Three Months Ended | Year Ended | |||
| December 31, | December 31, | |||
| 2014 | 2013 (4) | 2014 | 2013 (4) | |
| (In thousands) | ||||
| Cash Flow Data | ||||
| Net cash provided by (used in): | ||||
| Operating activities | $ 243,575 | $ 91,740 | $ 737,633 | $ 441,153 |
| Investing activities | (238,828) | (755,563) | (380,864) | (895,885) |
| Financing activities | (223,742) | 760,752 | (393,680) | 468,835 |
| Capital expenditures | 76,017 | 57,888 | 223,271 | 205,677 |
| Cash distributions received by Western from: | ||||
| NTI | $ 35,623 | $ — | $ 96,537 | $ — |
| WNRL | 9,833 | — | 35,043 | — |
| Other Data | ||||
| Adjusted EBITDA (3) | $ 313,421 | $ 179,494 | $ 1,231,443 | $ 754,839 |
| Balance Sheet Data (at end of period) | ||||
| Cash and cash equivalents | $ 431,159 | $ 468,070 | ||
| Restricted cash | 167,009 | — | ||
| Working capital | 754,762 | 448,667 | ||
| Total assets | 5,665,416 | 5,512,965 | ||
| Total debt and lease financing obligation | 1,548,026 | 1,411,517 | ||
| Total equity | 2,787,644 | 2,570,587 | ||
(1) Excludes $902.9 million, $4,390.7 million, $1,024.8 million, and $4,277.8 million of intercompany sales; $898.6 million, $4,374.1 million, $1,020.7 million, and $4,265.0 million of intercompany cost of products sold; and $4.3 million, $16.6 million, $4.1 million and $12.8 million, of intercompany direct operating expenses for the three and twelve months ended December 31, 2014 and 2013, respectively.
(2) Our computation of diluted earnings (loss) per share includes our Convertible Senior Unsecured Notes and any unvested restricted shares and share units. If determined to be dilutive to period earnings, these securities are included in the denominator of our diluted earnings per share calculation. For purposes of the diluted earnings (loss) per share calculation, we assumed issuance of 0.1 million restricted share units for both the three and twelve months ended December 31, 2014 and assumed issuance of 10.3 million shares related to our Convertible Senior Notes for the twelve months ended December 31, 2014. Our Convertible Senior Notes and our restricted shares and share units were determined to be anti-dilutive for the three months ended December 31, 2013 and as such were not included in our computation of diluted earnings (loss) per share. We assumed issuance of 0.2 million restricted shares and share units and assumed issuance of 22.5 million shares related to the Convertible Senior Notes for the twelve months ended December 31, 2013.
(3) Adjusted EBITDA represents earnings before interest expense and other financing costs, amortization of loan fees, provision for income taxes, depreciation, amortization, maintenance turnaround expense, and certain other non-cash income and expense items. However, Adjusted EBITDA is not a recognized measurement under United States generally accepted accounting principles ("GAAP"). Our management believes that the presentation of Adjusted EBITDA is useful to investors because it is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. In addition, our management believes that Adjusted EBITDA is useful in evaluating our operating performance compared to that of other companies in our industry because the calculation of Adjusted EBITDA generally eliminates the effects of financings, income taxes, the accounting effects of significant turnaround activities (that many of our competitors capitalize and thereby exclude from their measures of EBITDA), and certain non-cash charges that are items that may vary for different companies for reasons unrelated to overall operating performance.
Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
-
Adjusted EBITDA does not reflect our cash expenditures or future requirements for significant turnaround activities, capital expenditures, or contractual commitments;
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Adjusted EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt;
-
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 (loss) to Adjusted EBITDA for the periods presented:
| Three Months Ended | Twelve Months Ended | |||
| December 31, | December 31, | |||
| 2014 | 2013 (4) | 2014 | 2013 (4) | |
| (In thousands) | ||||
| Net income (loss) attributable to Western | $ 130,935 | $ (7,328) | $ 559,926 | $ 275,994 |
| Net income attributed to non-controlling interest | 13,516 | 23,560 | 150,146 | 23,560 |
| Interest expense and other financing costs | 20,336 | 21,939 | 89,276 | 68,040 |
| Amortization of loan fees | 1,718 | 1,899 | 7,786 | 6,541 |
| Provision for income taxes | 69,285 | (6,012) | 292,604 | 153,925 |
| Depreciation and amortization | 49,398 | 38,638 | 190,566 | 117,848 |
| Maintenance turnaround expense | 140 | 4,151 | 48,469 | 50,249 |
| Loss (gain) on disposal of assets, net | 7,591 | 2,035 | 8,530 | (4,989) |
| Loss on extinguishment of debt | — | 1 | 9 | 46,773 |
| Net change in lower of cost or market inventory reserve | 78,554 | — | 78,554 | — |
| Unrealized loss (gain) on commodity hedging transactions | (58,052) | 100,611 | (194,423) | 16,898 |
| Adjusted EBITDA | $ 313,421 | $ 179,494 | $ 1,231,443 | $ 754,839 |
| Adjusted EBITDA by Reporting Entity: | ||||
| Western Adjusted EBITDA | $ 170,235 | $ 118,067 | $ 763,829 | $ 693,412 |
| NTI Adjusted EBITDA | 118,260 | 49,829 | 397,061 | 49,829 |
| WNRL Adjusted EBITDA | 24,926 | 11,598 | 70,553 | 11,598 |
| Adjusted EBITDA | $ 313,421 | $ 179,494 | $ 1,231,443 | $ 754,839 |
| Three Months Ended | ||||||
| December 31, | ||||||
| 2014 | 2013 (4) | |||||
| Western | WNRL | NTI | Western | WNRL | NTI | |
| (Unaudited) | ||||||
| (In thousands) | ||||||
| Net income (loss) attributable to Western Refining, Inc. | $ 111,475 | $ 12,458 | $ 7,002 | $ (26,492) | $ 5,572 | $ 13,592 |
| Net income attributable to non-controlling interest | — | 6,361 | 7,155 | — | 2,956 | 20,604 |
| Interest expense and other financing costs | 12,399 | 1,154 | 6,783 | 16,866 | 190 | 4,883 |
| Amortization of loan fees | 1,586 | 132 | — | 1,790 | 109 | — |
| Provision for income taxes | 69,165 | 120 | — | (6,107) | 95 | — |
| Depreciation and amortization | 25,205 | 4,478 | 19,715 | 25,222 | 2,676 | 10,740 |
| Maintenance turnaround expense | 140 | — | — | 4,151 | — | — |
| Loss on disposal of assets, net | 7,359 | 223 | 9 | 2,025 | — | 10 |
| Loss on extinguishment of debt | — | — | — | 1 | — | — |
| Net change in lower of cost or market inventory reserve | 4,883 | — | 73,671 | — | — | — |
| Unrealized loss (gain) on commodity hedging transactions | (61,977) | — | 3,925 | 100,611 | — | — |
| Adjusted EBITDA | $ 170,235 | $ 24,926 | $ 118,260 | $ 118,067 | $ 11,598 | $ 49,829 |
| Twelve Months Ended | ||||||
| December 31, | ||||||
| 2014 | 2013 (4) | |||||
| Western | WNRL | NTI | Western | WNRL | NTI | |
| (Unaudited) | ||||||
| (In thousands) | ||||||
| Net income attributable to Western Refining, Inc. | $ 436,300 | $ 34,787 | $ 88,839 | $ 256,830 | $ 5,572 | $ 13,592 |
| Net income attributable to non-controlling interest | — | 18,205 | 131,941 | — | 2,956 | 20,604 |
| Interest expense and other financing costs | 64,082 | 1,836 | 23,358 | 62,967 | 190 | 4,883 |
| Amortization of loan fees | 7,263 | 523 | — | 6,432 | 109 | — |
| Provision for income taxes | 292,145 | 459 | — | 153,830 | 95 | — |
| Depreciation and amortization | 99,502 | 14,520 | 76,544 | 104,432 | 2,676 | 10,740 |
| Maintenance turnaround expense | 48,469 | — | — | 50,249 | — | — |
| Loss (gain) on disposal of assets, net | 8,399 | 223 | (92) | (4,999) | — | 10 |
| Loss on extinguishment of debt | 9 | — | — | 46,773 | — | — |
| Net change in lower of cost or market inventory reserve | 4,883 | — | 73,671 | — | — | — |
| Unrealized loss (gain) on commodity hedging transactions | (197,223) | — | 2,800 | 16,898 | — | — |
| Adjusted EBITDA | $ 763,829 | $ 70,553 | $ 397,061 | $ 693,412 | $ 11,598 | $ 49,829 |
(4) The information presented includes the results of operations of NTI beginning November 12, 2013, the consummation date of the purchase transactions. Additionally, the information presented includes the financial results for WNRL from the period beginning October 16, 2013.
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, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (In thousands, except per share data) | ||||
| Operating Income (Loss) | ||||
| Western, excluding WNRL and NTI | $ 194,400 | $ (14,243) | $ 799,493 | $ 525,598 |
| WNRL (1) | 20,210 | 8,917 | 55,791 | 8,917 |
| NTI (2) | 18,494 | 37,358 | 241,229 | 37,358 |
| Operating income | $ 233,104 | $ 32,032 | $ 1,096,513 | $ 571,873 |
| Depreciation and Amortization | ||||
| Western, excluding WNRL and NTI | $ 25,205 | $ 25,222 | $ 99,502 | $ 104,432 |
| WNRL (1) | 4,478 | 2,676 | 14,520 | 2,676 |
| NTI (2) | 19,715 | 10,740 | 76,544 | 10,740 |
| Depreciation and amortization expense | $ 49,398 | $ 38,638 | $ 190,566 | $ 117,848 |
| Capital Expenditures | ||||
| Western, excluding WNRL and NTI | $ 60,478 | $ 47,194 | $ 161,968 | $ 194,983 |
| WNRL (1) | 4,983 | 2,810 | 16,408 | 2,810 |
| NTI (2) | 10,556 | 7,884 | 44,895 | 7,884 |
| Capital expenditures | $ 76,017 | $ 57,888 | $ 223,271 | $ 205,677 |
| Balance Sheet Data (at end of period) | ||||
| Cash and cash equivalents | ||||
| Western, excluding WNRL and NTI | $ 289,007 | $ 298,256 | ||
| WNRL | 54,298 | 84,000 | ||
| NTI | 87,854 | 85,814 | ||
| Cash and cash equivalents | $ 431,159 | $ 468,070 | ||
| Total debt | ||||
| Western, excluding WNRL and NTI | $ 894,500 | $ 1,108,238 | ||
| WNRL | 269,000 | — | ||
| NTI | 357,037 | 278,369 | ||
| Total debt | $ 1,520,537 | $ 1,386,607 | ||
| Total working capital | ||||
| Western, excluding WNRL and NTI | $ 501,034 | $ 256,262 | ||
| WNRL | 50,081 | 85,182 | ||
| NTI | 203,647 | 107,223 | ||
| Total working capital | $ 754,762 | $ 448,667 | ||
(1) WNRL financial data represents financial results for the period beginning October 16, 2013 through December 31, 2014, and includes the financial results of WNRL wholesale beginning October 15, 2014 through December 31, 2014.
(2) NTI financial data represents financial results for the period beginning November 12, 2013 through December 31, 2014.
Refining
El Paso and Gallup Refineries and Related Operations
| Three Months Ended | Year Ended | |||
| December 31, | December 31, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (In thousands, except per barrel data) | ||||
| Statement of Operations Data: | ||||
| Net sales (including intersegment sales) (1) | $ 1,918,993 | $ 2,218,723 | $ 9,485,734 | $ 8,866,162 |
| Operating costs and expenses: | ||||
| Cost of products sold (exclusive of depreciation and amortization) (6) | 1,596,601 | 2,104,009 | 8,175,332 | 7,828,695 |
| Direct operating expenses (exclusive of depreciation and amortization) | 81,359 | 71,844 | 306,583 | 254,087 |
| Selling, general and administrative expenses | 6,770 | 8,432 | 28,470 | 26,451 |
| (Gain) loss on disposal of assets, net | 7,427 | 2,025 | 8,202 | (4,999) |
| Maintenance turnaround expense | 140 | 4,151 | 48,469 | 50,249 |
| Depreciation and amortization | 21,581 | 19,878 | 81,726 | 75,346 |
| Total operating costs and expenses | 1,713,878 | 2,210,339 | 8,648,782 | 8,229,829 |
| Operating income | $ 205,115 | $ 8,384 | $ 836,952 | $ 636,333 |
| Key Operating Statistics | ||||
| Total sales volume (bpd) (2) | 222,479 | 184,790 | 217,640 | 176,653 |
| Total refinery production (bpd) | 156,637 | 154,908 | 152,942 | 147,793 |
| Total refinery throughput (bpd) (3) | 158,231 | 157,252 | 155,019 | 150,429 |
| Per barrel of throughput: | ||||
| Refinery gross margin (4) (6) | $ 22.13 | $ 7.99 | $ 23.11 | $ 18.89 |
| Direct operating expenses (5) | 5.59 | 5.14 | 5.42 | 5.69 |
| Mid-Atlantic sales volume (bbls) | 1,705 | 2,556 | 8,588 | 9,734 |
| Mid-Atlantic margin per barrel | $ 0.12 | $ (0.30) | $ 0.32 | $ 0.47 |
El Paso and Gallup Refineries
| Three Months Ended | Year Ended | |||
| December 31, | December 31, | |||
| 2014 | 2013 | 2014 | 2013 | |
| Key Operating Statistics | ||||
| Refinery product yields (bpd): | ||||
| Gasoline | 83,869 | 81,821 | 79,279 | 78,568 |
| Diesel and jet fuel | 62,370 | 62,852 | 63,359 | 59,580 |
| Residuum | 4,763 | 5,616 | 5,121 | 5,445 |
| Other | 5,635 | 4,619 | 5,183 | 4,200 |
| Total refinery production (bpd) | 156,637 | 154,908 | 152,942 | 147,793 |
| Refinery throughput (bpd): | ||||
| Sweet crude oil | 123,414 | 124,460 | 121,514 | 117,289 |
| Sour or heavy crude oil | 25,922 | 24,907 | 25,113 | 25,195 |
| Other feedstocks and blendstocks | 8,895 | 7,885 | 8,392 | 7,945 |
| Total refinery throughput (bpd) (3) | 158,231 | 157,252 | 155,019 | 150,429 |
El Paso Refinery
| Three Months Ended | Year Ended | |||
| December 31, | December 31, | |||
| 2014 | 2013 | 2014 | 2013 | |
| Key Operating Statistics | ||||
| Refinery product yields (bpd): | ||||
| Gasoline | 66,253 | 66,323 | 62,252 | 61,893 |
| Diesel and jet fuel | 53,285 | 56,244 | 54,501 | 52,600 |
| Residuum | 4,763 | 5,616 | 5,121 | 5,445 |
| Other | 4,191 | 3,858 | 3,740 | 3,442 |
| Total refinery production (bpd) | 128,492 | 132,041 | 125,614 | 123,380 |
| Refinery throughput (bpd): | ||||
| Sweet crude oil | 97,874 | 101,538 | 96,384 | 93,654 |
| Sour crude oil | 25,922 | 24,907 | 25,113 | 25,195 |
| Other feedstocks and blendstocks | 5,828 | 7,278 | 5,739 | 6,488 |
| Total refinery throughput (bpd) (3) | 129,624 | 133,723 | 127,236 | 125,337 |
| Total sales volume (bpd) (2) | 140,299 | 148,437 | 139,216 | 141,894 |
| Per barrel of throughput: | ||||
| Refinery gross margin (4) (6) | $ 14.99 | $ 13.85 | $ 18.34 | $ 18.74 |
| Direct operating expenses (5) | 4.55 | 3.97 | 4.37 | 4.30 |
Gallup Refinery
| Three Months Ended | Year Ended | |||
| December 31, | December 31, | |||
| 2014 | 2013 | 2014 | 2013 | |
| Key Operating Statistics | ||||
| Refinery product yields (bpd): | ||||
| Gasoline | 17,616 | 15,498 | 17,027 | 16,675 |
| Diesel and jet fuel | 9,085 | 6,608 | 8,858 | 6,980 |
| Other | 1,444 | 761 | 1,443 | 758 |
| Total refinery production (bpd) | 28,145 | 22,867 | 27,328 | 24,413 |
| Refinery throughput (bpd): | ||||
| Sweet crude oil | 25,540 | 22,922 | 25,130 | 23,635 |
| Other feedstocks and blendstocks | 3,067 | 607 | 2,653 | 1,457 |
| Total refinery throughput (bpd) (3) | 28,607 | 23,529 | 27,783 | 25,092 |
| Total sales volume (bpd) (2) | 34,429 | 36,353 | 34,300 | 34,759 |
| Per barrel of throughput: | ||||
| Refinery gross margin (4) (6) | $ 16.56 | $ 14.43 | $ 16.55 | $ 18.94 |
| Direct operating expenses (5) | 7.90 | 11.24 | 8.40 | 10.13 |
(1) Refining net sales for the three and twelve months ended December 31, 2014, includes $325.8 million and $1,489.6 million, respectively, representing a period average of 47,751 bpd and 44,124 bpd, respectively, in crude oil sales to third parties without comparable activity in either period in 2013. The majority of the crude oil sales resulted from the purchase of barrels in excess of what was required for production purposes in the El Paso and Gallup refineries.
(2) 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 9.84% and 14.44% of our total consolidated sales volumes for the years ended December 31, 2014 and 2013, respectively. The majority of the purchased refined products are distributed through our wholesale refined product sales activities in the Mid-Atlantic region where we satisfy our refined product customer sales requirements through a third-party supply agreement.
(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.
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, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (In thousands, except per barrel data) | ||||
| Net sales (including intersegment sales) | $ 1,762,323 | $ 1,919,619 | $ 8,496,576 | $ 7,693,829 |
| Cost of products sold (exclusive of depreciation and amortization) | 1,440,144 | 1,804,050 | 7,188,928 | 6,656,778 |
| Depreciation and amortization | 21,581 | 20,371 | 81,726 | 85,712 |
| Gross profit | 300,598 | 95,198 | 1,225,922 | 951,339 |
| Plus depreciation and amortization | 21,581 | 20,371 | 81,726 | 85,712 |
| Refinery gross margin | $ 322,179 | $ 115,569 | $ 1,307,648 | $ 1,037,051 |
| Refinery gross margin per refinery throughput barrel | $ 22.13 | $ 7.99 | $ 23.11 | $ 18.89 |
| Gross profit per refinery throughput barrel | $ 20.65 | $ 6.58 | $ 21.67 | $ 17.33 |
(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.
(6) 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, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (In thousands) | ||||
| Realized hedging gain, net | $ 41,538 | $ 15,465 | $ 82,937 | $ 17,714 |
| Unrealized hedging gain (loss), net | 61,977 | (100,611) | 197,223 | (16,898) |
| Total hedging gain (loss), net | $ 103,515 | $ (85,146) | $ 280,160 | $ 816 |
NTI
The following table sets forth the summary operating results for Northern Tier Energy, LP ("NTI"). The selected historical financial data for the 2013 period presented below represents the financial results from the period beginning November 12, 2013 through the year ended December 31, 2014.
| Three Months Ended | Year Ended | |||
| December 31, | December 31, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (In thousands, except per barrel data) | ||||
| Statement of Operations Data: | ||||
| Net sales | $ 953,925 | $ 686,824 | $ 5,159,657 | $ 686,824 |
| Operating costs and expenses: | ||||
| Cost of products sold (exclusive of depreciation and amortization) (1) | 807,601 | 591,942 | 4,439,512 | 591,942 |
| Direct operating expenses (exclusive of depreciation and amortization) | 88,507 | 35,123 | 298,104 | 35,123 |
| Selling, general and administrative expenses | 19,599 | 11,651 | 91,482 | 11,651 |
| Affiliate severance costs | — | — | 12,878 | — |
| Loss (gain) on disposal of assets, net | 9 | 10 | (92) | 10 |
| Depreciation and amortization | 19,715 | 10,740 | 76,544 | 10,740 |
| Total operating costs and expenses | 935,431 | 649,466 | 4,918,428 | 649,466 |
| Operating income | 18,494 | 37,358 | 241,229 | 37,358 |
| Other income (expense): | ||||
| Interest income | 117 | 42 | 389 | 42 |
| Interest expense and other financing costs | (6,783) | (4,883) | (23,358) | (4,883) |
| Other, net | 2,329 | 1,679 | 2,520 | 1,679 |
| Income before income taxes | $ 14,157 | $ 34,196 | $ 220,780 | $ 34,196 |
| Key Operating Statistics: | ||||
| Total sales volume (bpd) | 100,285 | 84,028 | 98,016 | 84,028 |
| Total refinery production (bpd) | 92,422 | 82,758 | 93,838 | 82,758 |
| Total refinery throughput (bpd) (2) | 91,964 | 82,261 | 93,525 | 82,261 |
| Per barrel of throughput: | ||||
| Refinery gross margin (1) (3) | $ 11.54 | $ 18.06 | $ 15.91 | $ 18.06 |
| Direct operating expenses (4) | 5.91 | 5.05 | 4.77 | 5.05 |
| Retail fuel gallons sold (in thousands) | 77,324 | 40,031 | 306,777 | 40,031 |
| Retail fuel margin per gallon (5) | $ 0.28 | $ 0.17 | $ 0.22 | $ 0.17 |
| Merchandise sales | 85,055 | 27,958 | 349,145 | 27,958 |
| Merchandise margin (6) | 25.8% | 25.0% | 25.9% | 25.0% |
| Company-operated retail outlets at period end | 165 | 164 | ||
| Franchised retail outlets at period end | 89 | 75 | ||
(1) Cost of products sold for NTI includes the net realized and net non-cash unrealized hedging activity shown in the table below. The hedging gains and losses are also included in the combined gross profit and refinery gross margin.
| Three Months Ended | Year Ended | |||
| December 31, | December 31, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (In thousands) | ||||
| Realized hedging loss (gain), net | $ 9,520 | $ (1,846) | $ 12,394 | $ (1,846) |
| Unrealized hedging loss, net | (3,925) | — | (2,800) | — |
| Total hedging loss (gain), net | $ 5,595 | $ (1,846) | $ 9,594 | $ (1,846) |
(2) Total refinery throughput includes crude oil, other feedstocks and blendstocks.
(3) Refinery gross margin is a per barrel measurement calculated by dividing the difference between net sales and cost of products sold by our refinery's total throughput volumes for the respective period presented. The net realized and net non‑cash unrealized economic hedging losses included in NTI's gross margin are not allocated to the refinery. Cost of products sold does not include any depreciation or amortization. Refinery gross margin is a non-GAAP performance measure that we believe is important to investors in evaluating our refinery performance as a general indication of the amount above our cost of products that we are able to sell refined products. Each of the components used in this calculation (net sales and cost of products sold) can be reconciled directly to our statement of operations. Our calculation of refinery gross margin may differ from similar calculations of other companies in our industry, thereby limiting its usefulness as a comparative measure.
The following table reconciles gross profit for the St. Paul Park refinery to gross margin for the St. Paul Park refinery for the period presented:
| Three Months Ended | Year Ended | |||
| December 31, | December 31, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (In thousands, except per barrel data) | ||||
| Net sales (including intersegment sales) | $ 941,990 | $ 633,201 | $ 5,097,634 | $ 633,201 |
| Cost of products sold (exclusive of depreciation and amortization) | 844,390 | 557,453 | 4,554,658 | 557,453 |
| Depreciation and amortization | 17,160 | 9,485 | 67,538 | 9,485 |
| Gross profit | 80,440 | 66,263 | 475,438 | 66,263 |
| Plus depreciation and amortization | 17,160 | 9,485 | 67,538 | 9,485 |
| Refinery gross margin | $ 97,600 | $ 75,748 | $ 542,976 | $ 75,748 |
| Refinery gross margin per refinery throughput barrel | $ 11.54 | $ 18.06 | $ 15.91 | $ 18.06 |
| Gross profit per refinery throughput barrel | $ 9.51 | $ 15.79 | $ 13.93 | $ 15.79 |
(4) NTI's direct operating expenses per throughput barrel is calculated by dividing direct operating expenses by total throughput volumes for the respective periods presented. Direct operating expenses do not include any depreciation or amortization.
(5) 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. Fuel margin per gallon is a measure frequently used in the retail industry to measure operating results related to retail 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 following table sets forth the summary operating results for 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. Accordingly, the financial information of WNRL contained herein has been retrospectively adjusted to include the historical operating results and book values of assets acquired from Western prior to the effective date of the Wholesale Acquisition for all periods presented. The WNRL financial data is derived from the combined financial results of the WNRL predecessor (the "WNRL Predecessor", WNRL's predecessor as defined for accounting purposes), and the combined consolidated financial results of WNRL for the period beginning October 16, 2013, the date WNRL commenced operations. The WNRL Predecessor includes the financial results of the initial net assets acquired from Western during the initial public offering through October 15, 2013 and the net assets of WRW acquired on October 15, 2014.
| Three Months Ended | Year Ended | |||
| December 31, | December 31, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (In thousands) | ||||
| Net sales, net of excise taxes (including intersegment sales) | $ 751,222 | $ 833,558 | $ 3,501,888 | $ 3,407,128 |
| Operating costs and expenses: | ||||
| Cost of products sold, net of excise taxes (exclusive of depreciation and amortization) | 683,134 | 781,299 | 3,244,919 | 3,279,717 |
| Direct operating expenses (exclusive of depreciation and amortization) | 34,628 | 33,255 | 142,398 | 135,307 |
| Selling, general and administrative expenses | 5,264 | 4,476 | 22,540 | 17,661 |
| Loss on disposal of assets, net | 173 | — | 157 | — |
| Depreciation and amortization | 4,473 | 4,015 | 17,372 | 15,970 |
| Total operating costs and expenses | 727,672 | 823,045 | 3,427,386 | 3,448,655 |
| Operating income (loss) | 23,550 | 10,513 | 74,502 | (41,527) |
| Other income (expense): | ||||
| Interest income | 4 | — | 4 | 7 |
| Interest expense and other financing costs | (1,154) | (194) | (1,851) | (213) |
| Amortization of loan fees | (132) | (109) | (523) | (109) |
| Other, net | 12 | 41 | 120 | 143 |
| Income (loss) before income taxes | $ 22,280 | $ 10,251 | $ 72,252 | $ (41,699) |
| Three Months Ended | Year Ended | |||
| December 31, | December 31, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (In thousands, except per gallon/barrel data) | ||||
| Pipeline and gathering (bpd): | ||||
| Mainline movements: | ||||
| Permian/Delaware Basin system | 31,447 | 10,519 | 24,644 | 3,258 |
| Four Corners system (1) | 34,525 | 36,933 | 37,485 | 38,091 |
| Gathering (truck offloading): | ||||
| Permian/Delaware Basin system | 24,050 | 16,996 | 24,166 | 10,169 |
| Four Corners system | 12,627 | 11,695 | 11,550 | 8,814 |
| Terminalling, transportation and storage (bpd): | ||||
| Shipments into and out of storage (includes asphalt) | 387,633 | 383,017 | 381,371 | 367,208 |
| Wholesale: | ||||
| Fuel gallons sold | 297,020 | 268,411 | 1,147,860 | 1,073,538 |
| Fuel gallons sold to retail (included in fuel gallons sold, above) | 73,395 | 63,444 | 268,148 | 254,907 |
| Fuel margin per gallon (2) | $ 0.024 | $ 0.028 | $ 0.022 | $ 0.026 |
| Lubricant gallons sold | 2,919 | 2,854 | 12,082 | 11,793 |
| Lubricant margin per gallon (3) | $ 0.83 | $ 0.96 | $ 0.86 | $ 0.89 |
| Crude oil trucking volume (bpd) | 41,369 | 17,778 | 36,314 | 12,603 |
| Average crude oil revenue per barrel | $ 2.79 | $ 2.14 | $ 2.90 | $ 2.24 |
(1) Some barrels of crude oil movements to Western's Gallup refinery are transported on more than one of our mainlines. Mainline movements for the Four Corners system include each barrel transported on each mainline.
(2) Fuel margin per gallon is a measurement calculated by dividing the difference between fuel sales and cost of fuel sales 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 is a measurement calculated by dividing the difference between lubricant sales and lubricant cost of products sold by lubricant sales. Lubricant margin is a measure frequently used in the petroleum products wholesale industry to measure operating results related to lubricant sales.
Retail
| Three Months Ended | Year Ended | |||
| December 31, | December 31, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (In thousands, except per gallon data) | ||||
| Statement of Operations Data: | ||||
| Net sales (including intersegment sales) | $ 303,514 | $ 307,732 | $ 1,395,903 | $ 1,402,564 |
| Operating costs and expenses: | ||||
| Cost of products sold (exclusive of depreciation and amortization) | 259,749 | 271,828 | 1,233,632 | 1,254,212 |
| Direct operating expenses (exclusive of depreciation and amortization) | 29,353 | 28,339 | 118,468 | 111,320 |
| Selling, general and administrative expenses | 3,499 | 2,768 | 11,461 | 9,796 |
| Gain on disposal of assets, net | (14) | — | (154) | — |
| Depreciation and amortization | 2,912 | 3,001 | 11,733 | 12,382 |
| Total operating costs and expenses | 295,499 | 305,936 | 1,375,140 | 1,387,710 |
| Operating income | $ 8,015 | $ 1,796 | $ 20,763 | $ 14,854 |
| Key Operating Statistics: | ||||
| Retail fuel gallons sold | 77,649 | 75,076 | 309,884 | 302,759 |
| Average retail fuel sales price per gallon, net of excise taxes | $ 2.86 | $ 3.24 | $ 3.31 | $ 3.41 |
| Average retail fuel cost per gallon, net of excise taxes | 2.61 | 3.06 | 3.11 | 3.23 |
| Retail fuel margin per gallon (1) | 0.24 | 0.18 | 0.20 | 0.18 |
| Merchandise sales | $ 66,993 | $ 61,745 | $ 266,677 | $ 253,096 |
| Merchandise margin (2) | 28.8% | 28.9% | 28.8% | 28.8% |
| Operating retail outlets at period end | 230 | 228 | ||
| Cardlock gallons sold | 16,185 | 16,775 | 67,420 | 67,803 |
| Cardlock margin per gallon | $ 0.184 | $ 0.137 | $ 0.178 | $ 0.153 |
| Operating cardlocks at period end | 50 | 53 | ||
| Three Months Ended | Year Ended | |||
| December 31, | December 31, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (In thousands, except per gallon data) | ||||
| Net Sales | ||||
| Retail fuel sales, net of excise taxes | $ 191,109 | $ 213,626 | $ 903,948 | $ 914,463 |
| Merchandise sales | 66,993 | 61,745 | 266,677 | 253,096 |
| Cardlock sales | 42,959 | 54,817 | 214,714 | 225,466 |
| Other sales | 2,453 | (22,456) | 10,564 | 9,539 |
| Net sales | $ 303,514 | $ 307,732 | $ 1,395,903 | $ 1,402,564 |
| Cost of Products Sold | ||||
| Retail fuel cost of products sold, net of excise taxes | $ 172,169 | $ 200,203 | $ 840,811 | $ 858,574 |
| Merchandise cost of products sold | 47,722 | 43,887 | 189,957 | 180,284 |
| Cardlock cost of products sold | 39,833 | 52,508 | 202,489 | 215,082 |
| Other cost of products sold | 25 | (24,770) | 375 | 272 |
| Cost of products sold | $ 259,749 | $ 271,828 | $ 1,233,632 | $ 1,254,212 |
| Retail fuel margin per gallon (1) | $ 0.24 | $ 0.18 | $ 0.20 | $ 0.18 |
(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, | ||
| 2014 | 2013 | |
| (In thousands, except per share data) | ||
| Reported diluted earnings (loss) per share | $ 1.33 | $ (0.09) |
| Earnings before income taxes | $ 213,736 | $ 10,220 |
| Loss on disposal of assets, net | 7,591 | 2,035 |
| Unrealized loss (gain) from commodity hedging transactions | (58,052) | 100,611 |
| Net change in lower of cost or market inventory reserve (1) | 78,554 | — |
| Loss on extinguishment of debt | — | 1 |
| Earnings before income taxes excluding special items | 241,829 | 112,867 |
| Recomputed income taxes after special items (2) | (61,795) | (31,972) |
| Net income excluding special items | 180,034 | 80,895 |
| Net income attributed to non-controlling interest | 63,253 | 23,560 |
| Net income attributable to Western after special items | $ 116,781 | $ 57,335 |
| Diluted earnings per share excluding special items | $ 1.19 | $ 0.60 |
(1) The net change in the lower of cost or market inventory reserve includes $73.7 million related to NTI's inventory.
(2) We recompute income taxes after deducting earnings attributed to non-controlling interest.