updated 3/3/2011 6:15:50 AM ET 2011-03-03T11:15:50

EL PASO, Texas, March 3, 2011 (GLOBE NEWSWIRE) -- Western Refining, Inc. (NYSE:WNR) today reported for the fourth quarter of 2010 a net loss, excluding special items, of $3.5 million, or $0.04 per diluted share. This compares to a fourth quarter 2009 net loss, excluding special items, of $51.1 million, or $0.58 per diluted share. On a GAAP basis, the Company reported a fourth quarter 2010 net loss of $7.6 million, or $0.09 per diluted share, compared to the fourth quarter 2009 net loss of $97.5 million, or $1.11 per diluted share. The quarter-over-quarter improvement was due in large part to higher refining margins and continued benefits generated from the Company's cost savings initiatives. A reconciliation of reported earnings excluding special items, for all periods shown, is included in the accompanying financial tables.

For the year ended December 31, 2010, the Company reported a net loss, excluding special items, of $10.1 million, or $0.11 per diluted share. This compares to full-year 2009 net loss, excluding special items, of $44.5 million, or $0.56 per diluted share. The Company reported on a GAAP basis a net loss of $17.0 million, or $0.19 per diluted share, for the full-year 2010, compared to a net loss of $350.6 million, or $4.43 per diluted share, for the full-year 2009.

The Company reported a fourth quarter Adjusted EBITDA, as defined and calculated in the accompanying financial tables, of $63.5 million compared to ($24.7) million for the same quarter in 2009. Adjusted EBITDA for the full-year 2010 was $288.1 million compared to $191.4 million for 2009.

Jeff Stevens, Western's President and Chief Executive Officer, said, "Throughout 2010, we took a number of steps to improve our financial and operating performance. We believe the actions we took, coupled with the strength of refining margins in our markets, position Western well for 2011."

During 2010, the Company pursued several initiatives to enhance and streamline operations, strengthen its balance sheet, and improve liquidity, including:

  • Completing the consolidation of its two Four Corners refineries into its Gallup, New Mexico refinery.
  • Achieving its goal of $50 million in annual cost savings through a number of successful initiatives which management believes are sustainable going forward.
  • Temporarily suspending refining operations at its Yorktown refinery while continuing to successfully operate the products terminal and storage facility and supplying the region with finished products.
  • Amending and extending its revolving credit facility to eliminate financial maintenance covenants under the revolver, lower the interest rate, increase borrowing capacity, and extend the maturity.
  • Reducing total debt by $47.1 million.

Commenting on current market conditions, Stevens said, "We are currently seeing an extraordinary refining margin environment during a time of year when we traditionally experience seasonally weaker margins. As an inland refiner, the widening Brent/West Texas Intermediate (WTI) spreads, strengthening crude oil contango, and expanding sweet/sour differentials are all contributing to historically high margins. We are encouraged by the very strong refining margins as we start 2011 and are optimistic that Western is well positioned as we move into the higher demand driving season."

Conference Call Information

A conference call is scheduled for March 3, 2011, at 10:00 a.m. ET to discuss Western's financial results. The call can be accessed at Western's website, www.wnr.com. The call can also be heard by dialing (866) 566-8590, passcode: 25992210. The audio replay will be available through March 10, 2011, and can be accessed by dialing (800) 642-1687, passcode: 25992210.

A copy of this press release can be accessed on the Investor Relations section on Western's website, www.wnr.com.

Non-GAAP Financial Measures

In a number of places in the press release and related tables, we have excluded the impact of the non-cash goodwill and other impairment losses from our results of operations for the fourth quarters of 2010 and 2009 and years ended December 31, 2010 and 2009. We have also excluded fourth quarter and full year 2010 charges related to the temporary suspension of our refining operations at the Yorktown facility. Additionally, we have excluded certain fourth quarter and full year 2009 litigation charges. We have excluded these amounts to better analyze changes in our business from period-to-period as these are non-recurring charges.

About Western Refining

Western Refining, Inc. is an independent refining and marketing company headquartered in El Paso, Texas. Western operates refineries in El Paso, and Gallup, New Mexico. Western's asset portfolio also includes refined products terminals in Albuquerque and Bloomfield, New Mexico and Yorktown, Virginia; asphalt terminals in Phoenix and Tucson, Arizona, Albuquerque, and El Paso; retail service stations and convenience stores in Arizona, Colorado, and New Mexico; a fleet of crude oil and finished product truck transports; and wholesale petroleum products operations in Arizona, California, Colorado, Nevada, New Mexico, Texas, and Utah. More information about the Company is available at www.wnr.com.

The Western Refining, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=7615

Cautionary Statement on Forward-Looking Statements

This press release contains forward-looking statements. The forward-looking statements contained herein include statements about the strengthening refining market, the Company's position therein, the sustainability of certain cost savings, our expectations regarding margins and spreads, and our outlook for 2011. These statements are subject to the general risks inherent in our 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 Western's 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. 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

The following tables set forth our summary historical financial and operating data for the periods indicated below:

         
      Three Months Ended December 31, Year Ended December 31,
      2010 2009 2010 2009
      (In thousands, except per share data)
Statement of Operations Data:        
Net sales (1)   $ 1,866,025 $ 1,959,352 $ 7,965,053 $ 6,807,368
Operating costs and expenses:        
Cost of products sold (exclusive of depreciation and amortization) (1) 1,676,154 1,828,518 7,155,967 5,944,128
Direct operating expenses (exclusive of depreciation and amortization) (1) 106,601 111,969 444,531 486,164
Selling, general, and administrative expenses 22,571 23,794 84,175 109,697
Goodwill and other impairment losses 9,075 52,788 13,038 352,340
Maintenance turnaround expense  3,735 23,286 8,088
Depreciation and amortization  34,327 36,599 138,621 145,981
Total operating costs and expenses 1,848,728 2,057,403 7,859,618 7,046,398
Other income (expense):        
Operating income (loss)  17,297 (98,051) 105,435 (239,030)
Interest income    124 51 441 248
Interest expense    (35,381) (33,274) (146,549) (121,321)
Amortization of loan fees  (2,452) (2,038) ( 9,739) (6,870)
Write-off of unamortized loan fees  (9,047)
Other income (expense), net  2,655 (19,778) 7,286 (15,184)
Income (loss) before income taxes  (17,757) (153,090) (43,126) (391,204)
Provision for income taxes 10,185 55,640 26,077 40,583
Net loss     $ (7,572) $ (97,450) $ (17,049) $ (350,621)
             
Basic loss per share    $ (0.09) $ (1.11) $ (0.19) $ (4.43)
Diluted loss per share    $ (0.09) $ (1.11) $ (0.19) $ (4.43)
Dividends declared per common share  $ — $ — $ — $ —
Weighted average basic shares outstanding  88,305 87,983 88,204 79,163
Weighted average dilutive shares outstanding  88,305 87,983 88,204 79,163
Cash Flow Data:          
Net cash provided by (used in):        
Operating activities    $ 40,975 $ (7,712) $ 134,456 $ 140,841
Investing activities    (17,678) (21,994) (73,777) (115,361)
Financing activities    (40,907) 39,557 (75,657) (30,407)
Other Data:          
Adjusted EBITDA (2)   $ 63,478 $ (24,656) $ 288,107 $ 191,438
Capital expenditures    21,354 22,092 78,095 115,854
Balance Sheet Data (at end of period):        
Cash and cash equivalents      $ 59,912 $ 74,890
Working capital        272,750 311,254
Total assets        2,628,146 2,824,654
Total debt          1,069,531 1,116,664
Stockholders' equity        675,593 688,452

(1) Excludes $977.0 million, $644.4 million, $3,294.0 million, and $2,095.0 million of intercompany sales, $974.9 million, $642.4 million, $3,287.5 million, and $2,088.8 million of intercompany cost of products sold, and $2.1 million, $2.0 million, $6.5 million, and $6.2 million of intercompany direct operating expenses for the three and twelve months ended December 31, 2010 and 2009, respectively. 

(2) Adjusted EBITDA represents earnings before interest expense, income tax expense, amortization of loan fees, write-off of unamortized loan fees, loss on early extinguishment of debt, depreciation, amortization, goodwill and other impairment losses, maintenance turnaround expense, and Lower of Cost or Market, or LCM, inventory reserve adjustments. Adjusted EBITDA is not, however, a recognized measurement under United States generally accepted accounting principles, or 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), acquisitions, and other 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
     
  • Our calculation of Adjusted EBITDA may differ from the Adjusted EBITDA calculations of other companies in our industry, 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 December 31, Year Ended December 31,
      2010 2009 2010 2009
       (In thousands)      
             
Net loss     $ (7,572) $ (97,450) $ (17,049) $ (350,621)
Interest expense    35,381 33,274 146,549 121,321
Provision for income taxes    (10,185) (55,640) (26,077) (40,583)
Amortization of loan fees    2,452 2,038 9,739 6,870
Write-off of unamortized loan fees  9,047
Depreciation and amortization  34,327 36,599 138,621 145,981
Maintenance turnaround expense  3,735 23,286 8,088
Goodwill and other impairment losses 9,075 52,788 13,038 352,340
Net change in LCM reserve   (61,005)
Adjusted EBITDA    $ 63,478 $ (24,656) $ 288,107 $ 191,438
           

Refining Segment

  Three Months Ended December 31, Year Ended December 31,
  2010 2009 2010 2009
  (In thousands, except per barrel data)
Statement of Operations Data:        
Net sales (including intersegment sales) $ 1,974,235 $ 1,962,366 $ 8,070,119 $ 6,608,075
Operating costs and expenses:        
Cost of products sold (exclusive of depreciation and amortization) (1) 1,827,958 1,872,567 7,439,826 5,919,499
Direct operating expenses (exclusive of depreciation and amortization)  78,820 87,013 335,869 375,690
Selling, general, and administrative expenses 5,947 7,774 20,155 36,021
Goodwill and other impairment losses 9,075 52,788 12,832 283,500
Maintenance turnaround expense  3,735 23,286 8,088
Depreciation and amortization  29,450 31,375 118,661 125,537
Total operating costs and expenses  1,951,250 2,055,252 7,950,629 6,748,335
Operating income (loss)  $ 22,985 $ (92,886) $ 119,490 $ (140,260)
         
Key Operating Statistics:        
Total sales volume (bpd) (2) (7)  224,005 262,498 248,785 258,259
Total refinery production (bpd) (7)  155,334 197,210 192,997 213,833
Total refinery throughput (bpd) (3) (7)  157,044 199,739 194,492 215,815
Per barrel of throughput:        
Refinery gross margin (1) (4)  $ 10.12 $ 4.89 $ 8.88 $ 8.74
Gross profit (4)  8.09 3.18 7.21 7.15
Direct operating expenses (5)  5.46 4.74 4.73 4.77

The following table reconciles gross profit to refinery gross margin for the periods presented:

     
  Three Months Ended December 31, Year Ended December 31,
  2010 2009 2010 2009
   (In thousands, except per barrel data)      
         
Net sales (including intersegment sales) $ 1,974,235 $ 1,962,366 $ 8,070,119 $ 6,608,075
Cost of products sold (exclusive of depreciation and amortization)  1,827,958 1,872,567 7,439,826 5,919,499
Depreciation and amortization  29,450 31,375 118,661 125,537
Gross profit  116,827 58,424 511,632 563,039
Plus depreciation and amortization  29,450 31,375 118,661 125,537
Refinery gross margin  $ 146,277 $ 89,799 $ 630,293 $ 688,576
         
Refinery gross margin per refinery throughput barrel  $ 10.12 $ 4.89 $ 8.88 $ 8.74
Gross profit per refinery throughput barrel  $ 8.09 $ 3.18 $ 7.21 $ 7.15

The following tables set forth our summary refining throughput and production data for the periods presented below:

         
All Refineries        
  Three Months Ended December 31, Year Ended December 31,
  2010 2009 2010 2009
Refinery product yields (bpd)        
Gasoline  85,639 109,190 102,927 113,364
Diesel and jet fuel  60,405 73,090 73,774 80,157
Residuum  5,077 5,007 4,899 5,504
Other  4,213 7,547 7,174 9,349
Liquid products  155,334 194,834 188,774 208,374
By-products 2,376 4,223 5,459
Total  155,334 197,210 192,997 213,833
         
Refinery throughput (bpd)        
Sweet crude oil  122,664 121,531 131,028 126,328
Sour or heavy crude oil  20,090 52,475 44,129 65,260
Other feedstocks/blendstocks  14,290 25,733 19,335 24,227
Total  157,044 199,739 194,492 215,815
         
         
Southwest Refining        
  Three Months Ended December 31, Year Ended December 31,
  2010 2009 2010 2009
Key Operating Statistics:        
Refinery product yields (bpd)        
Gasoline  85,639 79,976 81,953 82,540
Diesel and jet fuel  60,405 56,256 58,122 57,976
Residuum  5,077 5,007 4,899 5,504
Other  4,213 4,170 4,033 4,391
Total refinery production (bpd)  155,334 145,409 149,007 150,411
         
Refinery throughput (bpd)        
Sweet crude oil  122,664 114,081 125,259 124,443
Sour crude oil  20,090 22,396 14,007 17,601
Other feedstocks/blendstocks  14,290 10,773 12,022 11,038
Total refinery throughput (bpd)  157,044 147,250 151,288 153,082
         
Total sales volume (bpd) (2) 191,512 193,976 189,613 184,108
Per barrel of throughput:        
Refinery gross margin (4) $ 9.41 $ 6.29 $ 10.42 $ 9.88
Direct operating expenses (5) 4.54 4.99 4.39 4.69
         
         
El Paso Refinery        
  Three Months Ended December 31, Year Ended December 31,
  2010 2009 2010 2009
Key Operating Statistics:        
Refinery product yields (bpd)        
Gasoline  69,131 63,450 65,740 65,160
Diesel and jet fuel  53,072 49,548 51,571 50,524
Residuum  5,077 5,007 4,899 5,504
Other  3,400 3,222 3,245 3,341
Total refinery production (bpd)  130,680 121,227 125,455 124,529
         
Refinery throughput (bpd)        
Sweet crude oil  100,708 91,691 104,119 99,680
Sour crude oil  20,090 22,396 14,007 17,601
Other feedstocks/blendstocks  11,108 8,450 9,051 9,184
Total refinery throughput (bpd)  131,906 122,537 127,177 126,465
         
Total sales volume (bpd) (2) 155,834 159,570 153,398 147,854
Per barrel of throughput:        
Refinery gross margin (4) $ 8.83 $ 5.82 $ 9.37 $ 9.20
Direct operating expenses (5) 3.57 3.85 3.50 3.60
         
         
Four Corners Refineries        
  Three Months Ended December 31, Year Ended December 31,
  2010 2009 2010 (6) 2009 (6)
Key Operating Statistics:        
Refinery product yields (bpd)        
Gasoline  16,508 16,526 16,213 17,380
Diesel and jet fuel  7,333 6,708 6,551 7,452
Other  813 948 788 1,050
Total refinery production (bpd)  24,654 24,182 23,552 25,882
         
Refinery throughput (bpd)        
Sweet crude oil  21,956 22,390 21,140 24,763
Other feedstocks/blendstocks  3,182 2,323 2,971 1,854
Total refinery throughput (bpd)  25,138 24,713 24,111 26,617
         
Total sales volume (bpd) (2) 35,678 34,406 36,215 36,254
Per barrel of throughput:        
Refinery gross margin (4) $ 14.13 $ 12.09 $ 16.82 $ 15.17
Direct operating expenses (5) 6.91 9.55 6.68 8.79
         
         
Yorktown Refinery        
  Three Months Ended December 31, Year Ended December 31,
  2010 2009 2010 2009
Key Operating Statistics:        
Refinery product yields (bpd)        
Gasoline  29,214 28,043 30,824
Diesel and jet fuel  16,834 20,926 22,181
Other  3,377 4,199 4,958
Liquid products  49,425 53,168 57,963
By-products 2,376 5,647 5,459
Total refinery production (bpd)  51,801 58,815 63,422
         
Refinery throughput (bpd)        
Sweet crude oil  7,450 7,713 1,885
Heavy crude oil  30,079 40,274 47,659
Other feedstocks/blendstocks  14,960 9,777 13,189
Total refinery throughput (bpd)  52,489 57,764 62,733
         
Total sales volume (bpd) (2) (7) 68,521 79,112 74,151
Per barrel of throughput:        
Refinery gross margin (1) (4)  $ — $ 0.94 $ 3.49 $ 5.97
Direct operating expenses (5) 4.03 5.93 4.95

(1) Cost of products sold includes non-cash LCM recoveries of $61.0 million for 2009 related to valuation of our Yorktown inventories to net realizable market values in 2008. The non-cash adjustment resulted in a corresponding increase of $0.78 in combined refinery gross margins for the year ended December 31, 2009. The non-cash adjustment resulted in a corresponding increase of $2.66 in Yorktown's refinery gross margins for the year ended December 31, 2009. 

(2) Includes sales of refined products sourced from our refinery production as well as refined products purchased from third parties.

(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. 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. 

(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, and combined refinery direct operating expenses include transportation and other related expenses not specific to a particular refinery.

(6) Until November 2009, Four Corners refining was comprised of two separate facilities; the Bloomfield refinery and the Gallup refinery. In late November 2009, we consolidated refining operations into the Gallup facility and indefinitely suspended refining operations at the Bloomfield refinery. We calculated total barrels per day sales volume, refinery production, and refinery throughput related to the Four Corners refineries by dividing the year ended December 31, 2009 by 365 days. 

(7) In September 2010, we temporarily suspended refining operations at our Yorktown refinery. We calculated Yorktown total barrels per day refinery production and refinery throughput by dividing total volumes by 273 days. Total Yorktown sales volume includes refined product sales, following the temporary suspension through December 31, 2010. We calculated Yorktown's barrels per day sales volume by dividing total refinery sales volume by 365 days.

For our combined refining operating statistics, we calculated total barrels per day sales volume, refinery production, refinery throughput, and refinery products yields by dividing all refineries' operations by 365 days.

Wholesale Segment

         
  Three Months Ended December 31, Year Ended December 31,
  2010 2009 2010 2009
  (In thousands, except per gallon data)
Statement of Operations Data:        
Net sales (including intersegment sales) $ 688,397 $ 477,931 $ 2,470,586 $ 1,664,397
Operating costs and expenses:        
Cost of products sold (exclusive of depreciation and amortization)  666,228 457,191 2,383,931 1,579,910
Direct operating expenses (exclusive of depreciation and amortization)  13,115 11,622 48,222 51,775
Selling, general and administrative expenses 3,939 3,932 12,638 16,566
Goodwill impairment losses 41,230
Depreciation and amortization  1,155 1,411 5,069 5,616
Total operating costs and expenses 684,437 474,156 2,449,860 1,695,097
Operating income (loss) $ 3,960 $ 3,775 $ 20,726 $ (30,700)
         
Operating Data:        
Fuel gallons sold (in thousands)  274,276 211,693 1,009,786 823,207
Fuel margin per gallon (1)  $ 0.06 $ 0.07 $ 0.07 $ 0.07
Lubricant sales  $ 24,723 $ 24,392 $ 102,200 $ 111,193
Lubricant margins (2) 10.7% 11.9% 11.5% 9.6%

The following table reconciles fuel sales and cost of fuel sales to net sales and cost of products sold:

  Three Months Ended December 31, Year Ended December 31,
  2010 2009 2010 2009
  (In thousands, except per gallon data)
Net sales:        
Fuel sales  $ 724,946 $ 505,314 $ 2,588,628 $ 1,749,431
Excise taxes included in fuel sales  (69,172) (59,192) (250,550) (224,771)
Lubricant sales  24,723 24,392 102,200 111,193
Other sales  7,900 7,417 30,308 28,544
Net sales  $ 688,397 $ 477,931 $ 2,470,586 $ 1,664,397
         
Cost of products sold:        
Fuel cost of products sold  $ 709,432 $ 491,321 $ 2,527,758 $ 1,692,177
Excise taxes included in fuel sales  (69,172) (59,192) (250,550) (224,771)
Lubricant cost of products sold  22,090 21,496 90,411 100,567
Other cost of products sold  3,878 3,566 16,312 11,937
Cost of products sold  $ 666,228 $ 457,191 $ 2,383,931 $ 1,579,910
         
Fuel margin per gallon (1)  $ 0.06 $ 0.07 $ 0.07 $ 0.07

(1) Fuel margin per gallon is a measurement calculated by dividing the difference between fuel sales 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.

(2) Lubricant margin is a measurement calculated by dividing the difference between lubricant sales and lubricants 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 lubricants sales.

Retail Segment

         
  Three Months Ended December 31, Year Ended December 31,
  2010 2009 2010 2009
  (In thousands, except per gallon data)
Statement of Operations Data:        
Net sales (including intersegment sales) $ 180,439 $ 163,493 $ 718,369 $ 629,938
Operating costs and expenses:        
Cost of products sold (exclusive of depreciation and amortization)  156,860 141,151 619,674 533,481
Direct operating expenses (exclusive of depreciation and amortization)  16,820 15,381 66,997 64,979
Selling, general and administrative expenses 1,670 1,454 5,095 6,216
Goodwill impairment losses 27,610
Depreciation and amortization  2,614 2,522 10,245 9,820
Total operating costs and expenses 177,964 160,508 702,011 642,106
Operating income (loss) $ 2,475 $ 2,985 $ 16,358 $ (12,168)
         
Operating Data:        
Fuel gallons sold (in thousands)  51,472 50,316 207,303 205,532
Fuel margin per gallon (1)  $ 0.17 $ 0.17 $ 0.19 $ 0.18
Merchandise sales  $ 46,884 $ 44,757 $ 191,324 $ 189,096
Merchandise margin (2) 28.4% 28.4% 28.5% 28.4%
Operating retail outlets at period end      150 149

The following table reconciles fuel sales and cost of fuel sales to net sales and cost of products sold:

  Three Months Ended December 31, Year Ended December 31,
  2010 2009 2010 2009
  (In thousands, except per gallon data)
Net sales:        
Fuel sales  $ 147,564 $ 131,491 $ 582,688 $ 489,033
Excise taxes included in fuel revenues  (19,942) (18,349) (79,639) (71,998)
Merchandise sales  46,884 44,757 191,324 189,096
Other sales  5,933 5,594 23,996 23,807
Net sales  $ 180,439 $ 163,493 $ 718,369 $ 629,938
         
Cost of products sold:        
Fuel cost of products sold  138,583 123,101 543,916 451,485
Excise taxes included in fuel cost of products sold  (19,942) (18,349) (79,639) (71,998)
Merchandise cost of products sold  33,569 32,059 136,855 135,459
Other cost of products sold  4,650 4,340 18,542 18,535
Cost of products sold  $ 156,860 $ 141,151 $ 619,674 $ 533,481
         
Fuel margin per gallon (1)  $ 0.17 $ 0.17 $ 0.19 $ 0.18

(1) Fuel margin per gallon is a measurement calculated by dividing the difference between fuel sales and cost of fuel sales for our retail segment by the number of gallons sold. Fuel margin per gallon is a measure frequently used in the retail industry to measure operating results related to fuel sales.

(2) Merchandise margin is a measurement calculated by dividing the difference between merchandise sales and merchandise cost of products sold by merchandise sales. Merchandise margin is a measure frequently used in the convenience store industry to measure operating results related to merchandise sales. 

Reconciliations of Special Items

We present below certain additional financial measures 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 that 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, Year Ended December 31,
  2010 2009 2010 2009
  (In thousands, except per share data)
         
Reported earnings (losses) per share $ ( 0.09) $ ( 1.11) $ ( 0.19) $ ( 4.43)
         
         
Earnings (loss) before income taxes $ (17,757) $ (153,090) $ (43,126) $ (391,204)
Goodwill and other impairment losses (1) (2) 9,075 52,788 13,038 352,340
Litigation charges (3) 20,000 20,000
Non-cash LCM inventory adjustment (4) (61,005)
Yorktown suspension costs (5) 524 4,502
Earnings (loss) before income taxes excluding special items (8,158) (80,302) (25,586) (79,869)
Recomputed income taxes after special items 4,679 29,189 15,471 35,365
Net income (loss) excluding special items $ (3,479) $ (51,113) $ (10,115) $ (44,504)
         
Diluted earnings (loss) per share excluding special items $ (0.04) $ (0.58) $ (0.11) $ (0.56)

(1) During the second quarter of 2009, we determined that the goodwill in four of our six reporting units was impaired, which resulted in a pre-tax and after-tax goodwill impairment loss of $299.6 million in the quarter. The goodwill impairment loss is included in the refining, retail, and wholesale segments' operating income but is excluded from the operating results presented here in order to make information comparable between periods.

(2) During the fourth quarter of 2009, we indefinitely suspended the refining operations at our Bloomfield facility, which resulted in a pre-tax impairment loss of $52.8 million related to certain of the Bloomfield long-lived and intangible assets. The other impairment losses are included in the refining segment's operating income but are excluded from the operating results presented here in order to make information comparable between periods. During the fourth quarter of 2010, the Company recorded an additional impairment charge of $9.1 million resulting from its fourth quarter 2010 analysis of specific assets that the Company had previously planned to relocate from the Bloomfield facility to the Gallup refinery. Based on the current operations of the Gallup refinery, the Company has determined that one of the three assets set aside for relocation to Gallup was no longer required to attain the Company's desired levels of production. During the third quarter of 2010, the Company permanently closed its product distribution terminal in Flagstaff, Arizona and recorded an impairment charge of $3.8 million.

(3) During the fourth quarter of 2009, we recorded a $20.0 million pre-tax charge from the settlement of a lawsuit with Statoil Marketing & Trading (US) Inc. in which we were the defendant. We made a cash payment of $10.0 million in March 2010, with the remainder to be paid within the next two years. The settlement charge is excluded from the refining segment's operating income but is included in the operating results presented here in order to make information comparable between periods.

(4) During the fourth quarter of 2008, we recorded an adjustment to reduce the carrying value of our inventories to the lower of cost or market, which resulted in a pre-tax increase of cost of products sold of $61.0 million. During the first through the third quarters of 2009, reversing adjustments to value our inventories at the lower of cost or market were recorded, which resulted in a pre-tax decrease in cost of products sold for $61.0 million. This reversal is included in the refining segment's operating income but is excluded from the operating results presented here in order to make that information comparable between periods.

(5) During the third quarter of 2010, we temporarily suspended refining operations at our Yorktown facility. In connection with this change in operations, we recorded one-time termination benefits of $3.0 million and other refinery costs relating to the temporary suspension of operations at Yorktown of $1.5 million in the third and fourth quarters of 2010. These were non-recurring charges.

CONTACT: Investor and Analyst Contact:
         Jeffrey S. Beyersdorfer
         (915) 534-1400
         
         Media Contact:
         Gary Hanson
         (915) 534-1400

© Copyright 2012, GlobeNewswire, Inc. All Rights Reserved

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