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| 8-K - Western Refining, Inc. | wnr20123318-k.htm |
FOR IMMEDIATE RELEASE
Investor and Analyst Contact: | Media Contact: | |
Jeffrey S. Beyersdorfer | Gary Hanson | |
(602) 286-1530 | (602) 286-1777 | |
WESTERN REFINING ANNOUNCES FIRST QUARTER 2012 RESULTS
Continues Strong Cash Generation and Accelerates Debt Repayment
EL PASO, Texas - May 3, 2012 - Western Refining, Inc. (NYSE: WNR) today reported first quarter 2012 net income, excluding special items, of $85.1 million, or $0.81 per diluted share. This compares to first quarter 2011 net income, excluding special items, of $25.4 million, or $0.27 per diluted share. Including special items, the Company recorded a first quarter 2012 net loss of $53.5 million, or $0.60 per diluted share as compared to net income of $12.2 million, or $0.13 per diluted share for the first quarter of 2011. The special item in the first quarter of 2012 was a non-cash unrealized pre-tax hedging loss of $218.0 million. The quarter on quarter improvement in net income, excluding special items, was due in large part to higher refining margins resulting from the price advantage of WTI crude oil as compared to Brent crude oil. A reconciliation of reported earnings and description of special items can be found in the accompanying financial tables.
Jeff Stevens, Western's President and Chief Executive Officer, said, “We are pleased with our first quarter results and the positive momentum that we continue to achieve. Refining margins, particularly in our geographic areas, strengthened during the quarter and exceeded what we achieved in the same quarter last year. The stronger margins, along with our continued focus on cost and operational improvements, contributed to our solid performance."
Continuing, Stevens said, "In this current environment, we have the opportunity to further strengthen our balance sheet. We have accelerated our targeted debt reduction for the year to $150 to $175 million. On March 1, we made a $30 million prepayment on our term loan and on April 30, we made an additional $75 million prepayment on our term loan for a total year-to-date debt prepayment of $105 million.”
For the first quarter of 2012, Adjusted EBITDA was $183.0 million compared to Adjusted EBITDA of $111.7 million for the first quarter of 2011. Total debt as of March 31, 2012, was $777.0 million and cash was $374.3 million, including restricted cash of $153.3 million. This resulted in net debt of $402.7 million at the end of the quarter.
Commenting on the second quarter, Stevens said, “The widening price differentials between WTI Cushing crude oil and WTI Midland crude oil are contributing to refining margins that are stronger than those in the first quarter. The current margin environment, the location of our assets, our access to discounted crude oils, the recent improvements in our balance sheet, and our on-going capital investments, position Western well.”
Conference Call Information
A conference call is scheduled for Thursday, May 3, 2012, at 1:00 p.m. ET 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: 68989715. The audio replay will be available two hours after the end of the call through May 10, 2012, by dialing (800) 585-8367 or (404) 537-3406, passcode: 68989715.
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 and the non-cash loss on extinguishment of debt for the first quarters ended March 31, 2012 and 2011. We have excluded these amounts to provide a better analysis of changes in our business from period-to-period.
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, 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. The forward-looking statements contained herein include statements about: the price differential between WTI and Brent crude oils as well as the price differential between WTI Midland and WTI Cushing crude oils; the positive momentum of the Company; further strengthening of the Company's balance sheet; accelerated debt reduction targets; on-going access to discounted crude oils; our opportunity for further balance sheet improvements; and on-going capital investments. 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 ands 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 March 31, | ||||||||
2012 | 2011 | |||||||
(In thousands, except per share data) | ||||||||
Statements of Operations Data | ||||||||
Net sales (1) | $ | 2,339,212 | $ | 1,839,588 | ||||
Operating costs and expenses: | ||||||||
Cost of products sold (exclusive of depreciation and amortization) (1) | 2,236,502 | 1,612,727 | ||||||
Direct operating expenses (exclusive of depreciation and amortization) (1) | 115,581 | 111,007 | ||||||
Selling, general, and administrative expenses | 25,781 | 24,027 | ||||||
Loss (gain) on disposal of assets | (1,891 | ) | (3,630 | ) | ||||
Maintenance turnaround expense | 450 | — | ||||||
Depreciation and amortization | 22,764 | 35,371 | ||||||
Total operating costs and expenses | 2,399,187 | 1,779,502 | ||||||
Operating income (loss) | (59,975 | ) | 60,086 | |||||
Other income (expense): | ||||||||
Interest income | 193 | 92 | ||||||
Interest expense and other financing costs | (24,122 | ) | (34,492 | ) | ||||
Amortization of loan fees | (1,807 | ) | (2,335 | ) | ||||
Loss on extinguishment of debt | — | (4,641 | ) | |||||
Other, net | 1,562 | 288 | ||||||
Income (loss) before income taxes | (84,149 | ) | 18,998 | |||||
Provision for income taxes | 30,645 | (6,773 | ) | |||||
Net income (loss) | $ | (53,504 | ) | $ | 12,225 | |||
Basic earnings (loss) per share | $ | (0.60 | ) | $ | 0.13 | |||
Diluted earnings (loss) per share | $ | (0.60 | ) | $ | 0.13 | |||
Cash dividends declared per common share | $ | 0.08 | $ | — | ||||
Weighted average basic shares outstanding | 89,343 | 88,367 | ||||||
Weighted average dilutive shares outstanding | 89,343 | 88,367 | ||||||
Cash Flow Data | ||||||||
Net cash provided by (used in): | ||||||||
Operating activities | $ | 42,843 | $ | (21,041 | ) | |||
Investing activities | 45,114 | 828 | ||||||
Financing activities | (37,791 | ) | (27,766 | ) | ||||
Other Data | ||||||||
Adjusted EBITDA (2) | $ | 182,983 | $ | 111,685 | ||||
Capital expenditures | (22,238 | ) | (10,779 | ) | ||||
Balance Sheet Data (at end of period) | ||||||||
Cash and cash equivalents | $ | 220,995 | $ | 11,933 | ||||
Restricted cash | 153,287 | — | ||||||
Working capital | 577,060 | 365,577 | ||||||
Total assets | 2,483,594 | 2,681,777 | ||||||
Total debt | 777,009 | 1,053,880 | ||||||
Stockholders’ equity | 764,439 | 693,123 | ||||||
(1) | Excludes $1,272.4 million and $1,100.9 million of intercompany sales; $1,270.8 million and $1,098.6 million of intercompany cost of products sold; and $1.6 million and $2.3 million of intercompany direct operating expenses for the three months ended March 31, 2012 and 2011, 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, 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 (which many of our competitors capitalize and thereby exclude from their measures of EBITDA), acquisitions, and certain non-cash charges, which 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 |
• | 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 March 31, | ||||||||
2012 | 2011 | |||||||
(In thousands) | ||||||||
Net income (loss) | $ | (53,504 | ) | $ | 12,225 | |||
Interest expense and other financing costs | 24,122 | 34,492 | ||||||
Provision for income taxes | (30,645 | ) | 6,773 | |||||
Amortization of loan fees | 1,807 | 2,335 | ||||||
Depreciation and amortization | 22,764 | 35,371 | ||||||
Maintenance turnaround expense | 450 | — | ||||||
Loss on extinguishment of debt | — | 4,641 | ||||||
Unrealized loss on commodity hedging transactions (a) | 217,989 | 15,848 | ||||||
Adjusted EBITDA | $ | 182,983 | $ | 111,685 | ||||
(a)Adjusted EBITDA for the three months ended March 31, 2011 as previously reported has been increased by $15.8 million for the impact of unrealized losses related to our commodity hedging transactions. We believe this to be a better representation of EBITDA given the non-cash, potentially volatile nature of commodity hedging.
Refining Segment
Three Months Ended March 31, | ||||||||
2012 | 2011 | |||||||
(In thousands, except per barrel data) | ||||||||
Statement of Operations Data: | ||||||||
Net sales (including intersegment sales) | $ | 2,143,637 | $ | 1,710,717 | ||||
Operating costs and expenses: | ||||||||
Cost of products sold (exclusive of depreciation and amortization) (1) | 2,093,545 | 1,538,166 | ||||||
Direct operating expenses (exclusive of depreciation and amortization) | 75,109 | 81,137 | ||||||
Selling, general, and administrative expenses | 6,510 | 6,202 | ||||||
Loss (gain) on disposal of assets, net | (1,382 | ) | (3,630 | ) | ||||
Maintenance turnaround expense | 450 | — | ||||||
Depreciation and amortization | 18,699 | 31,052 | ||||||
Total operating costs and expenses | 2,192,931 | 1,652,927 | ||||||
Operating income (loss) | $ | (49,294 | ) | $ | 57,790 | |||
Key Operating Statistics | ||||||||
Total sales volume (bpd) (2) | 186,291 | 164,270 | ||||||
Total refinery production (bpd) | 142,841 | 119,504 | ||||||
Total refinery throughput (bpd) (3) | 144,831 | 121,549 | ||||||
Per barrel of throughput: | ||||||||
Refinery gross margin (4) | $ | 3.80 | $ | 15.77 | ||||
Gross profit (4) | 2.38 | 12.93 | ||||||
Direct operating expenses (5) | 5.70 | 7.42 | ||||||
The following tables set forth our summary refining throughput and production data for the periods and refineries presented:
All Refineries
Three Months Ended March 31, | ||||||
2012 | 2011 | |||||
Key Operating Statistics | ||||||
Refinery product yields (bpd): | ||||||
Gasoline | 74,815 | 66,639 | ||||
Diesel and jet fuel | 59,303 | 46,294 | ||||
Residuum | 4,327 | 3,553 | ||||
Other | 4,396 | 3,018 | ||||
Liquid products | 142,841 | 119,504 | ||||
By-products (coke) | — | — | ||||
Total refinery production (bpd) | 142,841 | 119,504 | ||||
Refinery throughput (bpd): | ||||||
Sweet crude oil | 109,402 | 93,992 | ||||
Sour or heavy crude oil | 22,543 | 16,413 | ||||
Other feedstocks and blendstocks | 12,886 | 11,144 | ||||
Total refinery throughput (bpd) (3) | 144,831 | 121,549 | ||||
El Paso Refinery
Three Months Ended March 31, | ||||||||
2012 | 2011 | |||||||
Key Operating Statistics | ||||||||
Refinery product yields (bpd): | ||||||||
Gasoline | 58,453 | 49,884 | ||||||
Diesel and jet fuel | 52,604 | 39,544 | ||||||
Residuum | 4,327 | 3,553 | ||||||
Other | 3,507 | 2,186 | ||||||
Total refinery production (bpd) | 118,891 | 95,167 | ||||||
Refinery throughput (bpd): | ||||||||
Sweet crude oil | 87,829 | 72,023 | ||||||
Sour crude oil | 22,543 | 16,413 | ||||||
Other feedstocks and blendstocks | 10,022 | 8,220 | ||||||
Total refinery throughput (bpd) (3) | 120,394 | 96,656 | ||||||
Total sales volume (bpd) (2) | 154,882 | 131,444 | ||||||
Per barrel of throughput: | ||||||||
Refinery gross margin (4) | $ | 21.30 | $ | 18.70 | ||||
Direct operating expenses (5) | 4.57 | 5.91 | ||||||
Gallup Refinery
Three Months Ended March 31, | ||||||||
2012 | 2011 | |||||||
Key Operating Statistics | ||||||||
Refinery product yields (bpd): | ||||||||
Gasoline | 16,362 | 16,755 | ||||||
Diesel and jet fuel | 6,699 | 6,750 | ||||||
Other | 889 | 832 | ||||||
Total refinery production (bpd) | 23,950 | 24,337 | ||||||
Refinery throughput (bpd): | ||||||||
Sweet crude oil | 21,573 | 21,969 | ||||||
Other feedstocks and blendstocks | 2,864 | 2,924 | ||||||
Total refinery throughput (bpd) (3) | 24,437 | 24,893 | ||||||
Total sales volume (bpd) (2) | 31,346 | 32,826 | ||||||
Per barrel of throughput: | ||||||||
Refinery gross margin (4) | $ | 21.54 | $ | 19.70 | ||||
Direct operating expenses (5) | 8.56 | 6.70 | ||||||
The following table reconciles combined gross profit for all refineries to combined gross margin for all refineries for the periods presented:
Three Months Ended March 31, | ||||||||
2012 | 2011 | |||||||
(In thousands, except per barrel data) | ||||||||
Net sales (including intersegment sales) | $ | 2,143,637 | $ | 1,710,717 | ||||
Cost of products sold (exclusive of depreciation and amortization) | 2,093,545 | 1,538,166 | ||||||
Depreciation and amortization | 18,699 | 31,052 | ||||||
Gross profit | 31,393 | 141,499 | ||||||
Plus depreciation and amortization | 18,699 | 31,052 | ||||||
Refinery gross margin | $ | 50,092 | $ | 172,551 | ||||
Refinery gross margin per refinery throughput barrel | $ | 3.80 | $ | 15.77 | ||||
Gross profit per refinery throughput barrel | $ | 2.38 | $ | 12.93 | ||||
(1) | Cost of products sold for the combined refining segment includes $218.0 million and $14.9 million of net non-cash unrealized hedging losses for the three months ended March 31, 2012 and 2011, respectively. |
(2) | Sales volume includes sales of refined products sourced primarily from our refinery production as well as some refined products purchased from third parties. |
(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 (which includes net non-cash unrealized hedging losses) 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. |
(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 March 31 | ||||||||
2012 | 2011 | |||||||
(In thousands, except per gallon data) | ||||||||
Statement of Operations Data | ||||||||
Net sales (including intersegment sales) | $ | 1,192,064 | $ | 1,046,021 | ||||
Operating costs and expenses: | ||||||||
Cost of products sold (exclusive of depreciation and amortization) | 1,166,531 | 1,010,150 | ||||||
Direct operating expenses (exclusive of depreciation and amortization) | 18,322 | 15,770 | ||||||
Selling, general, and administrative expenses | 2,315 | 2,046 | ||||||
Loss (gain) on disposal of assets | (509 | ) | — | |||||
Depreciation and amortization | 954 | 1,136 | ||||||
Total operating costs and expenses | 1,187,613 | 1,029,102 | ||||||
Operating income | $ | 4,451 | $ | 16,919 | ||||
Operating Data | ||||||||
Fuel gallons sold (in thousands) | 367,228 | 360,094 | ||||||
Fuel margin per gallon (1) | $ | 0.06 | $ | 0.09 | ||||
Lubricant sales | $ | 31,726 | $ | 26,176 | ||||
Lubricant margin (2) | 9.9 | % | 12.2 | % | ||||
Three Months Ended March 31, | ||||||||
2012 | 2011 | |||||||
(In thousands, except per gallon data) | ||||||||
Net Sales | ||||||||
Fuel sales | $ | 1,238,390 | $ | 1,103,362 | ||||
Excise taxes included in fuel sales | (87,243 | ) | (91,551 | ) | ||||
Lubricant sales | 31,726 | 26,176 | ||||||
Other sales | 9,191 | 8,034 | ||||||
Net sales | $ | 1,192,064 | $ | 1,046,021 | ||||
Cost of Products Sold | ||||||||
Fuel cost of products sold | $ | 1,220,695 | $ | 1,075,127 | ||||
Excise taxes included in fuel cost of products sold | (87,243 | ) | (91,551 | ) | ||||
Lubricant cost of products sold | 28,599 | 22,976 | ||||||
Other cost of products sold | 4,480 | 3,598 | ||||||
Cost of products sold | $ | 1,166,531 | $ | 1,010,150 | ||||
Fuel margin per gallon (1) | $ | 0.06 | $ | 0.09 | ||||
(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 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 March 31, | ||||||||
2012 | 2011 | |||||||
(In thousands, except per gallon data) | ||||||||
Statement of Operations Data | ||||||||
Net sales (including intersegment sales) | $ | 275,913 | $ | 183,743 | ||||
Operating costs and expenses: | ||||||||
Cost of products sold (exclusive of depreciation and amortization) | 247,252 | 163,053 | ||||||
Direct operating expenses (exclusive of depreciation and amortization) | 23,726 | 16,351 | ||||||
Selling, general, and administrative expenses | 1,940 | 1,126 | ||||||
Depreciation and amortization | 2,517 | 2,436 | ||||||
Total operating costs and expenses | 275,435 | 182,966 | ||||||
Operating income | $ | 478 | $ | 777 | ||||
Operating Data | ||||||||
Fuel gallons sold (in thousands) | 67,572 | 46,275 | ||||||
Fuel margin per gallon (1) | $ | 0.16 | $ | 0.15 | ||||
Merchandise sales | $ | 56,539 | $ | 43,646 | ||||
Merchandise margin (2) | 28.4 | % | 28.3 | % | ||||
Operating retail outlets at period end | 210 | 150 | ||||||
Three Months Ended March 31, | ||||||||
2012 | 2011 | |||||||
(In thousands, except per gallon data) | ||||||||
Net Sales | ||||||||
Fuel sales | $ | 235,605 | $ | 151,706 | ||||
Excise taxes included in fuel sales | (26,489 | ) | (17,929 | ) | ||||
Merchandise sales | 56,539 | 43,646 | ||||||
Other sales | 10,258 | 6,320 | ||||||
Net sales | $ | 275,913 | $ | 183,743 | ||||
Cost of Products Sold | ||||||||
Fuel cost of products sold | $ | 225,048 | $ | 144,752 | ||||
Excise taxes included in fuel cost of products sold | (26,489 | ) | (17,929 | ) | ||||
Merchandise cost of products sold | 40,484 | 31,308 | ||||||
Other cost of products sold | 8,209 | 4,922 | ||||||
Cost of products sold | $ | 247,252 | $ | 163,053 | ||||
Fuel margin per gallon (1) | $ | 0.16 | $ | 0.15 | ||||
(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 without. Investors should not consider these non-GAAP measures in isolation from, or as a substitute for, the financial information that we report in accordance with GAAP. These non-GAAP measures reflect subjective determinations by management, and may differ from similarly titled non-GAAP measures presented by other companies.
Three Months Ended March 31, | ||||||||
2012 | 2011 | |||||||
(In thousands, except per gallon data) | ||||||||
Reported diluted earnings (losses) per share | $ | (0.60 | ) | $ | 0.13 | |||
Income (loss) before income taxes | $ | (84,149 | ) | $ | 18,998 | |||
Unrealized loss on commodity hedging transactions | 217,989 | 15,848 | ||||||
Loss on extinguishment of debt | — | 4,641 | ||||||
Earnings before income taxes excluding special items | 133,840 | 39,487 | ||||||
Recomputed income taxes after special items | (48,718 | ) | (14,097 | ) | ||||
Net income excluding special items | $ | 85,122 | $ | 25,390 | ||||
Diluted earnings per share excluding special items | $ | 0.81 | $ | 0.27 | ||||
Diluted earnings per share, excluding special items, includes tax-effected interest related to our convertible debt in the numerator and it includes 20.3 million as if converted shares for our convertible debt and restricted stock in the denominator.