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Western Refining Reports Fourth Quarter and Full Year 2014 Results
  • 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;
     
  • 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.

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

         Michelle Clemente
         (602) 286-1533

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

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