Press Release

Print Page
 
Email Page
 
RSS Feeds
 
Email Alerts
 
IR Contacts
 
Financial Tear Sheet
Printer Friendly Version View printer-friendly version
<< Back
Western Refining Announces Second Quarter 2013 Results

EL PASO, Texas, Aug. 1, 2013 (GLOBE NEWSWIRE) -- Western Refining, Inc. (NYSE:WNR) today reported second quarter 2013 net income, excluding special items, of $126.8 million, or $1.25 per diluted share. This compares to second quarter 2012 net income, excluding special items, of $205.0 million, or $1.89 per diluted share. Including special items, the Company recorded second quarter 2013 net income of $149.3 million, or $1.46 per diluted share, as compared to net income of $238.5 million, or $2.19 per diluted share for the second quarter of 2012. Special items in the second quarter of 2013 were $35.0 million which consisted of a non-cash unrealized pre-tax hedging gain of $59.7 million offset by charges associated with the extinguishment of debt of $24.7 million. A reconciliation of reported earnings and description of special items can be found in the accompanying financial tables.

Adjusted EBITDA was $240.4 million for the second quarter which compares to an Adjusted EBITDA of $365.9 million for the second quarter of 2012. The quarter-on-quarter reduction in both net income and Adjusted EBITDA was primarily due to lower refining margins.

Jeff Stevens, Western's President and Chief Executive Officer, said, "Western realized another strong quarter as we delivered our fifth consecutive quarter of Adjusted EBITDA of more than $200 million. We began operating our Delaware Basin gathering system during the quarter giving us additional access to high quality, cost-advantaged crude oil for the El Paso refinery. Our crack spread hedges also contributed to the good quarter by partially offsetting the pressure on refining margins."

Stevens continued, "Our Board declared a third quarter dividend of $0.18 per share, a 50% increase from the second quarter dividend, and we continued to opportunistically repurchase shares of Western common stock as we remain committed to returning cash to our shareholders. From the inception of our share repurchase program, through July 26, 2013, we have purchased approximately 10.7 million shares at an average cost of $29.43 per share."

On July 25, 2013, Western filed a Form S-1 Registration Statement with the U.S. Securities and Exchange Commission to pursue the formation of a traditional master limited partnership (MLP).   The registration statement has not been declared effective, and this press release is not an offer to sell nor a solicitation of an offer to buy any securities of the MLP. This process is ongoing and the Company will provide additional information as available.

Looking forward, Stevens said, "We continue to make significant progress towards our 2013 goals. Margins are good as they recover from the lows we experienced at the end of the second quarter. The market for RINs has become very volatile. As we have mentioned previously, our growing Wholesale and Retail businesses generate RINs which satisfy a significant portion of our renewable fuel obligations. Overall, we continue to invest in high return capital projects while maintaining our commitment to return cash to shareholders."

Conference Call Information

A conference call is scheduled for Thursday, August 1, 2013, at 11:00 a.m. EDT to discuss Western's financial results. 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: 91648349. The audio replay will be available two hours after the end of the call through August 8, 2013, by dialing (800) 585-8367 or (404) 537-3406, passcode: 91648349.

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 unrealized net gains and losses from our commodity hedging activities for the periods ending June 30, 2013 and 2012, and the loss on extinguishment of debt for the periods ending June 30, 2013 and 2012. 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.

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 stand-alone refined products terminals in Albuquerque and Bloomfield, New Mexico, asphalt terminals in Albuquerque, El Paso, and Phoenix and Tucson, Arizona, retail service stations and convenience stores in Arizona, Colorado, New Mexico, and Texas, a fleet of crude oil and finished product truck transports, and wholesale petroleum products operations in Arizona, California, Colorado, Georgia, Maryland, Nevada, New Mexico, Texas, and Virginia. More information about the Company 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 PSLRA. The forward-looking statements contained herein include statements about: our commitment to return cash to shareholders; the formation, and potential initial public offering, of a master limited partnership; expectations for margins; the market for RINS; our investment in high return capital projects; our ability to continue to deliver value to our shareholders; and our progress towards 2013 goals. 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, 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 the Company's 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 unaudited summary historical financial and operating data for the periods indicated below:

  Three Months Ended Six Months Ended
  June 30, June 30,
  2013 2012 2013 2012
  (Unaudited)
  (In thousands, except per share data)
Statements of Operations Data        
Net sales (1) $ 2,429,962 $ 2,469,348 $ 4,616,179 $ 4,808,560
Operating costs and expenses:        
Cost of products sold (exclusive of depreciation and amortization) (1) 1,986,883 1,899,684 3,784,067 4,136,186
Direct operating expenses (exclusive of depreciation and amortization) (1) 113,861 116,792 235,721 232,373
Selling, general, and administrative expenses 29,450 27,316 56,002 53,097
Gain on disposal of assets, net (1,891)
Maintenance turnaround expense 35 1,862 43,203 2,312
Depreciation and amortization 27,143 22,767 51,475 45,531
Total operating costs and expenses 2,157,372 2,068,421 4,170,468 4,467,608
Operating income 272,590 400,927 445,711 340,952
Other income (expense):        
Interest income 235 202 386 395
Interest expense and other financing costs (14,681) (21,808) (32,669) (45,930)
Amortization of loan fees (1,515) (1,771) (3,119) (3,578)
Loss on extinguishment of debt (24,719) (7,654) (46,766) (7,654)
Other, net 101 (279) 298 1,283
Income before income taxes 232,011 369,617 363,841 285,468
Provision for income taxes (82,752) (131,113) (130,863) (100,468)
Net income $ 149,259 $ 238,504 $ 232,978 $ 185,000
Basic earnings per share $ 1.81 $ 2.63 $ 2.74 $ 2.04
Diluted earnings per share 1.46 2.19 2.26 1.75
Dividends declared per common share $ 0.12 $ — $ 0.24 $ 0.08
Weighted average basic shares outstanding 82,390 90,024 84,546 89,684
Weighted average dilutive shares outstanding 104,729 110,535 106,942 110,163
Cash Flow Data        
Net cash provided by (used in):        
Operating activities $ 294,957 $ 306,014 $ 259,324 $ 348,857
Investing activities 160,003 116,135 (101,420) 161,249
Financing activities (330,990) (297,047) (239,536) (334,838)
Other Data        
Adjusted EBITDA (2) $ 240,413 $ 365,897 $ 483,105 $ 548,880
Capital expenditures 36,229 37,159 101,854 59,397
Balance Sheet Data (at end of period)        
Cash and cash equivalents     $ 372,335 $ 346,097
Working capital     360,059 685,819
Total assets     2,510,891 2,410,535
Total debt     550,832 491,798
Shareholders' equity     904,373 1,005,125

(1) Excludes $1,130.8 million, $2,139.9 million, $1,256.7 million, and $2,529.1 million of intercompany sales; $1,127.7 million, $2,134.7 million, $1,254.9 million, and $2,525.8 million of intercompany cost of products sold; and $3.1 million, $5.2 million, $1.8 million, and $3.3 million of intercompany direct operating expenses for the three and six months ended June 30, 2013 and 2012, respectively. Cost of products sold includes $18.3 million and $59.7 million in net realized and net non-cash unrealized gains, respectively, from hedging activities for the three months ended June 30, 2013 and $10.5 million in realized non-cash losses and $58.0 million in net realized and net non-cash unrealized gains, respectively, from hedging activities for the six months ended June 30, 2013. Cost of products sold includes $0.4 million and $59.6 million in net realized and net non-cash unrealized gains, respectively, and $35.4 million and $158.4 million in net realized and net unrealized non-cash losses, respectively, from hedging activities for the three and six months ended June 30, 2012, respectively.

(2) 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;
  • 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 to Adjusted EBITDA for the periods presented:

  Three Months Ended Six Months Ended
  June 30, June 30,
  2013 2012 2013 2012
  (Unaudited)
  (In thousands)
Net income $ 149,259 $ 238,504 $ 232,978 $ 185,000
Interest expense and other financing costs 14,681 21,808 32,669 45,930
Provision for income taxes 82,752 131,113 130,863 100,468
Amortization of loan fees 1,515 1,771 3,119 3,578
Depreciation and amortization 27,143 22,767 51,475 45,531
Maintenance turnaround expense 35 1,862 43,203 2,312
Loss on extinguishment of debt 24,719 7,654 46,766 7,654
Unrealized (gain) loss on commodity hedging transactions (59,691) (59,582) (57,968) 158,407
Adjusted EBITDA $ 240,413 $ 365,897 $ 483,105 $ 548,880

Refining Segment

  Three Months Ended Six Months Ended
  June 30, June 30,
  2013 2012 2013 2012
  (In thousands, except per barrel data)
Statement of Operations Data (Unaudited):        
Net sales (including intersegment sales) $ 2,001,482 $ 2,171,574 $ 3,777,568 $ 4,315,211
Operating costs and expenses:        
Cost of products sold (exclusive of depreciation and amortization) (1) 1,622,728 1,674,490 3,064,880 3,768,035
Direct operating expenses (exclusive of depreciation and amortization) 73,338 76,579 155,213 151,688
Selling, general, and administrative expenses 7,358 6,546 14,112 13,056
Gain on disposal of assets, net (1,382)
Maintenance turnaround expense 35 1,862 43,203 2,312
Depreciation and amortization 22,511 18,652 42,765 37,351
Total operating costs and expenses 1,725,970 1,778,129 3,320,173 3,971,060
Operating income $ 275,512 $ 393,445 $ 457,395 $ 344,151
Key Operating Statistics        
Total sales volume (bpd) (2) 184,248 191,704 172,506 188,998
Total refinery production (bpd) 158,650 155,487 139,787 149,164
Total refinery throughput (bpd) (3) 161,985 157,960 142,288 151,396
Per barrel of throughput:        
Refinery gross margin (1) (4) $ 25.69 $ 34.58 $ 27.67 $ 19.86
Refinery gross margin excluding hedging activities (1) (4) 20.40 32.02 25.83 26.98
Gross profit (1) (4) 24.17 33.28 26.01 18.50
Direct operating expenses (5) 4.98 5.33 6.03 5.51

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

All Refineries (El Paso and Gallup)

  Three Months Ended Six Months Ended
  June 30, June 30,
  2013 2012 2013 2012
Key Operating Statistics        
Refinery product yields (bpd):        
Gasoline 83,885 80,085 75,794 77,450
Diesel and jet fuel 65,096 64,699 55,124 62,001
Residuum 5,869 6,491 4,981 5,409
Other 3,800 4,212 3,888 4,304
Total refinery production (bpd) 158,650 155,487 139,787 149,164
Refinery throughput (bpd):        
Sweet crude oil 118,336 120,862 109,280 115,133
Sour crude oil 27,867 26,823 24,635 24,683
Other feedstocks and blendstocks 15,782 10,275 8,373 11,580
Total refinery throughput (bpd) (3) 161,985 157,960 142,288 151,396

El Paso Refinery

  Three Months Ended Six Months Ended
  June 30, June 30,
  2013 2012 2013 2012
Key Operating Statistics        
Refinery product yields (bpd):        
Gasoline 65,805 63,467 58,703 60,960
Diesel and jet fuel 58,263 57,137 48,162 54,871
Residuum 5,869 6,491 4,981 5,409
Other 3,021 3,259 3,127 3,383
Total refinery production (bpd) 132,958 130,354 114,973 124,623
Refinery throughput (bpd):        
Sweet crude oil 93,992 97,862 85,577 92,846
Sour crude oil 27,867 26,823 24,635 24,683
Other feedstocks and blendstocks 13,777 7,472 6,683 8,747
Total refinery throughput (bpd) (3) 135,636 132,157 116,895 126,276
Total sales volume (bpd) (2) 148,271 156,792 138,437 155,837
Per barrel of throughput:        
Refinery gross margin (1) (4) $ 19.46 $ 31.91 $ 25.76 $ 26.85
Direct operating expenses (5) 3.30 3.91 4.47 4.23

Gallup Refinery

  Three Months Ended Six Months Ended
  June 30, June 30,
  2013 2012 2013 2012
Key Operating Statistics        
Refinery product yields (bpd):        
Gasoline 18,080 16,618 17,091 16,490
Diesel and jet fuel 6,833 7,562 6,962 7,130
Other 779 953 761 921
Total refinery production (bpd) 25,692 25,133 24,814 24,541
Refinery throughput (bpd):        
Sweet crude oil 24,344 23,000 23,703 22,287
Other feedstocks and blendstocks 2,005 2,803 1,690 2,833
Total refinery throughput (bpd) (3) 26,349 25,803 25,393 25,120
Total sales volume (bpd) (2) 35,977 34,911 34,069 33,129
Per barrel of throughput:        
Refinery gross margin (1) (4) $ 24.26 $ 31.95 $ 25.46 $ 26.89
Direct operating expenses (5) 10.41 7.98 10.25 8.27

(1) 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 Six Months Ended
  June 30, June 30,
  2013 2012 2013 2012
  (Unaudited)
  (In thousands)
Realized hedging gain (loss), net $ 18,329 $ (22,809) $ (10,489) $ (37,771)
Unrealized hedging gain (loss), net 59,691 59,582 57,968 (158,407)
Total hedging gain (loss), net $ 78,020 $ 36,773 $ 47,479 $ (196,178)

(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 13.1% and 15.3% of our total consolidated sales volumes for the three and six months ended June 30, 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 and 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 all refineries to combined gross margin for all refineries for the periods presented:

  Three Months Ended Six Months Ended
  June 30, June 30,
  2013 2012 2013 2012
  (Unaudited)
  (In thousands, except per barrel data)
Net sales (including intersegment sales) $ 2,001,482 $ 2,171,574 $ 3,777,568 $ 4,315,211
Cost of products sold (exclusive of depreciation and amortization) 1,622,728 1,674,490 3,064,880 3,768,035
Depreciation and amortization 22,511 18,652 42,765 37,351
Gross profit 356,243 478,432 669,923 509,825
Plus depreciation and amortization 22,511 18,652 42,765 37,351
Refinery gross margin $ 378,754 $ 497,084 $ 712,688 $ 547,176
Refinery gross margin per refinery throughput barrel $ 25.69 $ 34.58 $ 27.67 $ 19.86
Gross profit per refinery throughput barrel $ 24.17 $ 33.28 $ 26.01 $ 18.50

(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.

Wholesale Segment

  Three Months Ended Six Months Ended
  June 30, June 30,
  2013 2012 2013 2012
  (In thousands, except per gallon data)
Statement of Operations Data (Unaudited)        
Net sales (including intersegment sales) $ 1,242,331 $ 1,244,022 $ 2,376,048 $ 2,436,086
Operating costs and expenses:        
Cost of products sold (exclusive of depreciation and amortization) 1,212,326 1,207,351 2,317,350 2,373,882
Direct operating expenses (exclusive of depreciation and amortization) 16,724 16,778 32,788 35,100
Selling, general, and administrative expenses 3,120 2,809 6,025 5,124
Gain on disposal of assets, net (509)
Depreciation and amortization 1,000 950 1,965 1,904
Total operating costs and expenses 1,233,170 1,227,888 2,358,128 2,415,501
Operating income $ 9,161 $ 16,134 $ 17,920 $ 20,585
Operating Data        
Fuel gallons sold 402,696 386,146 758,329 753,374
Fuel gallons sold to retail (included in fuel gallons sold) 64,330 59,673 125,758 116,377
Average fuel sales price per gallon $ 3.21 $ 3.35 3.26 $ 3.36
Average fuel cost per gallon 3.15 3.27 3.20 3.30
Fuel margin per gallon (1) 0.07 0.09 0.07 0.07
         
Lubricant gallons sold 3,053 2,862 5,953 5,716
Average lubricant sales price per gallon $ 11.18 $ 11.24 $ 11.09 $ 11.18
Average lubricant cost per gallon 9.87 10.09 9.89 10.06
Lubricant margin (2) 11.7% 10.2% 10.8% 10.0%
         
Realized hedging loss $ — $ 23,202 $ — $ 2,405
Unrealized hedging loss
     
  Three Months Ended Six Months Ended
  June 30, June 30,
  2013 2012 2013 2012
  (Unaudited)
  (In thousands, except per gallon data)
Net Sales        
Fuel sales $ 1,292,740 $ 1,293,362 $ 2,468,777 $ 2,531,752
Excise taxes included in fuel sales (93,533) (89,830) (176,770) (177,073)
Lubricant sales 34,124 32,161 66,017 63,887
Other sales 9,000 8,329 18,024 17,520
Net sales $ 1,242,331 $ 1,244,022 $ 2,376,048 $ 2,436,086
Cost of Products Sold        
Fuel cost of products sold $ 1,270,271 $ 1,264,538 $ 2,423,628 $ 2,485,233
Excise taxes included in fuel cost of products sold (93,533) (89,830) (176,770) (177,073)
Lubricant cost of products sold 30,118 28,881 58,861 57,480
Other cost of products sold 5,470 3,762 11,631 8,242
Cost of products sold $ 1,212,326 $ 1,207,351 $ 2,317,350 $ 2,373,882
Fuel margin per gallon (1) $ 0.07 $ 0.09 $ 0.07 $ 0.07

(1) Wholesale fuel margin per gallon is a function of the difference between wholesale fuel sales and cost of fuel sales divided by the number of total gallons sold less gallons sold to our retail segment. Fuel margin per gallon is a measure frequently used in the petroleum products wholesale industry to measure operating results related to fuel sales.

(2) 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 Segment

  Three Months Ended Six Months Ended
  June 30, June 30,
  2013 2012 2013 2012
  (In thousands, except per gallon data)
Statement of Operations Data (Unaudited)        
Net sales (including intersegment sales) $ 316,920 $ 310,426 $ 602,473 $ 586,339
Operating costs and expenses:        
Cost of products sold (exclusive of depreciation and amortization) 279,514 272,755 536,528 520,007
Direct operating expenses (exclusive of depreciation and amortization) 26,885 25,197 52,939 48,923
Selling, general, and administrative expenses 1,964 1,969 3,931 3,909
Depreciation and amortization 2,685 2,605 5,357 5,122
Total operating costs and expenses 311,048 302,526 598,755 577,961
Operating income $ 5,872 $ 7,900 $ 3,718 $ 8,378
Operating Data        
Fuel gallons sold 76,669 70,953 149,551 138,525
Average fuel sales price per gallon $ 3.51 $ 3.74 $ 3.44 $ 3.62
Average fuel cost per gallon 3.31 3.51 3.27 3.42
Fuel margin per gallon (1) 0.20 0.23 0.17 0.20
         
Merchandise sales $ 66,126 $ 62,947 $ 123,952 $ 119,486
Merchandise margin (2) 28.9% 30.3% 28.6% 29.4%
Operating retail outlets at period end     222 222
     
  Three Months Ended Six Months Ended
  June 30, June 30,
  2013 2012 2013 2012
  (Unaudited)
   (In thousands, except per gallon data)
Net Sales        
Fuel sales $ 269,094 $ 265,672 $ 515,192 $ 501,277
Excise taxes included in fuel sales (29,789) (27,014) (58,412) (53,503)
Merchandise sales 66,126 62,947 123,952 119,486
Other sales 11,489 8,821 21,741 19,079
Net sales $ 316,920 $ 310,426 $ 602,473 $ 586,339
Cost of Products Sold        
Fuel cost of products sold $ 253,417 $ 249,181 $ 489,542 $ 474,229
Excise taxes included in fuel cost of products sold (29,789) (27,014) (58,412) (53,503)
Merchandise cost of products sold 47,046 43,851 88,503 84,335
Other cost of products sold 8,840 6,737 16,895 14,946
Cost of products sold $ 279,514 $ 272,755 $ 536,528 $ 520,007
Fuel margin per gallon (1) $ 0.20 $ 0.23 $ 0.17 $ 0.20

(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 convenience store 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.

Reconciliation of Special Items

We present certain additional financial measures below and elsewhere in this press release that are non-GAAP measures within the meaning of Regulation G under the Securities Exchange Act of 1934.

We present these non-GAAP measures to provide investors with additional information to analyze our performance from period to period. We believe it is useful for investors to understand our financial performance excluding these special items so that investors can see the operating trends underlying our business. Investors should not consider these non-GAAP measures in isolation from, or as a substitute for, the financial information that we report in accordance with GAAP. These non-GAAP measures reflect subjective determinations by management, and may differ from similarly titled non-GAAP measures presented by other companies.

  Three Months Ended Six Months Ended
  June 30, June 30,
  2013 2012 2013 2012
  (Unaudited)
  (In thousands, except per share data)
Reported diluted earnings per share $ 1.46 $ 2.19 $ 2.26 $ 1.75
Income before income taxes $ 232,011 $ 369,617 $ 363,841 $ 285,468
Unrealized loss (gain) on commodity hedging transactions (59,691) (59,582) (57,968) 158,407
Loss on extinguishment of debt 24,719 7,654 46,766 7,654
Earnings before income taxes excluding special items 197,039 317,689 352,639 451,529
Recomputed income taxes after special items (70,284) (112,684) (126,844) (158,893)
Net income excluding special items $ 126,755 $ 205,005 $ 225,795 $ 292,636
Diluted earnings per share excluding special items $ 1.25 $ 1.89 $ 2.19 $ 2.73
CONTACT: Investor and Analyst Contact:
         Jeffrey S. Beyersdorfer
         (602) 286-1530

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

Western Refining Inc. Logo

Western Refining, Inc.