EL PASO, Texas, Feb. 28, 2017 (GLOBE NEWSWIRE) -- Western Refining, Inc. (NYSE:WNR) today reported results for the fourth quarter ended December 31, 2016. The Company reported a fourth quarter 2016 net loss attributable to Western of $9.6 million, or $(0.09) per diluted share, as compared to net income of $13.5 million, or $0.14 per diluted share for the fourth quarter of 2015. Net loss attributable to Western, excluding special items, was $7.8 million, or $(0.07) per diluted share. This compares to fourth quarter 2015 net income, excluding special items, of $52.2 million, or $0.56 per diluted share. A reconciliation of reported earnings and description of special items can be found in the accompanying financial tables.

For full year 2016, net income attributable to Western was $124.9 million, or $1.24 per diluted share compared to full year 2015 net income attributable to Western of $406.8 million, or $4.28 per diluted share.

Jeff Stevens, Western's Chief Executive Officer, said, "Western had a successful 2016 despite a volatile crude oil price environment and challenging fourth quarter.  There was pressure on refining margins throughout 2016 which were considerably below the highs we saw in 2015 and crude oil price differentials also remained narrow.  However, we had good, reliable operations at our refineries and completed a major turnaround at our St. Paul Park refinery resulting in additional crude oil flexibility and increased capacity. Additionally, our Retail operations achieved record levels in total fuel volumes and merchandise sales in 2016."

Stevens continued, "Western invested $141 million in discretionary capital during the year to enhance our crude oil flexibility, throughput, and improve product yields at our St. Paul Park refinery and to enhance our logistics capabilities in the Permian, San Juan and Williston Basins. In the Permian and San Juan Basins, we continued to expand our fully integrated crude oil pipeline logistics system and are able to move crude oil south to either our El Paso refinery or eastward to Midland and the Gulf Coast.  Additionally, we continued to balance capital investment with returning cash to shareholders.  In 2016, we returned approximately $228 million in cash to shareholders through dividends and share repurchases."

Stevens concluded, "As we begin 2017, we are looking forward to the completion of the pending Tesoro transaction.  Meanwhile, we remain focused on safe and reliable operations while emphasizing operational efficiencies and managing our costs. We will also continue to maximize the benefits of our investment in Western Refining Logistics.  Overall, we have expanded and enhanced our asset base which provides maximum flexibility in these volatile business conditions."

Conference Call Information

A conference call is scheduled for Tuesday, February 28, 2017, at 10:00 am ET to discuss Western's financial results for the fourth quarter and full year ended December 31, 2016.  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: 48866421. The audio replay will be available two hours after the end of the call through March 7, 2017, by dialing (800) 585-8367 or (404) 537-3406, passcode: 48866421.

Non-GAAP Financial Measures

In a number of places in the press release and related tables, we have excluded certain income and expense items from GAAP measures. The excluded items are generally non-cash in nature such as unrealized net gains and losses from commodity hedging activities and lower of cost or market inventory adjustments; however, other items that have a cash impact, such as gains or losses on disposal of assets 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 RefiningWestern Refining, Inc. is an independent refining and marketing company headquartered in El Paso, Texas. The Company operates refineries in El Paso, Gallup, New Mexico and St. Paul Park, Minnesota. The Company's retail operations includes retail service stations and convenience stores in Arizona, Colorado, Minnesota, New Mexico, Texas, and Wisconsin, operating primarily through the Giant, Howdy's, and SuperAmerica brands.

Western Refining, Inc. also owns the general partner and approximately 53% of the limited partnership interest of Western Refining Logistics, LP (NYSE:WNRL).

More information about Western Refining is available at www.wnr.com.

Cautionary Statement on Forward-Looking StatementsThis communication contains certain statements that are "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Words such as "may," "will," "could," "anticipate," "estimate," "expect," "predict," "project," "future," "potential," "intend," "plan," "assume," "believe," "forecast," "look," "build," "focus," "create," "work" "continue" or the negative of such terms or other variations thereof and words and terms of similar substance used in connection with any discussion of future plans, actions, or events identify forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding the proposed merger, integration and transition plans, synergies, opportunities, anticipated future performance, expected share buyback program and expected dividends. In addition, the forward-looking statements contained herein include statements about: Western's ability to continue safe and reliable operations at its refineries; Western's ability to achieve crude oil flexibility and improve product yields at the St. Paul Park refinery; Western's ability to enhance its logistics capabilities in the Permian, San Juan and Williston Basins; continued expansion of Western's crude oil pipeline logistics system and ability to ship crude oil to El Paso, Midland, and the Gulf Coast; the completion of the pending Tesoro transaction; Western's ability to remain focused on safe and reliable operations, to realize operational efficiencies, to manage its costs, and to realize benefits of its investment in WNRL; and Western's ability to achieve maximum flexibility in volatile business conditions.  There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements included in this communication. For example, the expected timing and likelihood of completion of the proposed merger, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the proposed merger that could reduce anticipated benefits or cause the parties to abandon the transaction, the ability to successfully integrate the businesses, the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement, the possibility that stockholders of Tesoro Corporation ("Tesoro") may not approve the issuance of new shares of common stock in the merger or that stockholders of Western Refining, Inc. ("Western") may not approve the merger agreement, the risk that the parties may not be able to satisfy the conditions to the proposed transaction in a timely manner or at all, risks related to disruption of management time from ongoing business operations due to the proposed transaction, the risk that any announcements relating to the proposed transaction could have adverse effects on the market price of Tesoro's common stock or Western's common stock, the risk that the proposed transaction and its announcement could have an adverse effect on the ability of Tesoro and Western to retain customers and retain and hire key personnel and maintain relationships with their suppliers and customers and on their operating results and businesses generally, the risk that problems may arise in successfully integrating the businesses of the companies, which may result in the combined company not operating as effectively and efficiently as expected, the risk that the combined company may be unable to achieve cost-cutting synergies or it may take longer than expected to achieve those synergies, the risk that the combined company may not buy back shares, the risk of the amount of any future dividend Tesoro may pay, and other factors. All such factors are difficult to predict and are beyond our control, including those detailed in Tesoro's annual reports on Form 10-K, quarterly reports on Form 10-Q, Current Reports on Form 8-K and registration statement on Form S-4 filed with the SEC on December 14, 2016, as amended (the "Form S-4") that are available on Tesoro's website at http://www.tsocorp.com and on the SEC website at http://www.sec.gov, and those detailed in Western's annual reports on Form 10-K, quarterly reports on Form 10-Q and Current Reports on Form  8-K that are available on Western's website at http://www.wnr.com and on the SEC website at http://www.sec.gov. Tesoro's and Western's forward-looking statements are based on assumptions that Tesoro and Western believe to be reasonable but that may not prove to be accurate. Tesoro and Western undertake no obligation to publicly release the result of any revisions to any such forward-looking statements that may be made to reflect events or circumstances that occur, or which we become aware of, except as required by applicable law or regulation. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

No Offer or Solicitation:

This communication relates to a proposed business combination between Western and Tesoro. This announcement is for informational purposes only and is neither an offer to purchase, nor a solicitation of an offer to sell, any securities or the solicitation of any vote in any jurisdiction pursuant to the proposed transactions or otherwise, nor shall there be any sale, issuance or transfer or securities in any jurisdiction in contravention of applicable law. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

Additional Information and Where to Find It:This communication may be deemed to be solicitation material in respect of the proposed transaction between Tesoro and Western. In connection with the proposed transaction, Tesoro has filed with the SEC, and the SEC has declared effective, a registration statement on Form S-4 (Reg. No. 333-215080), containing a joint proxy statement/prospectus of Tesoro and Western, which proxy statement/prospectus was first mailed to Tesoro and Western stockholders on February 17, 2017. This communication is not a substitute for the registration statement, proxy statement/prospectus or any other documents that Tesoro or Western may file with the SEC or send to stockholders in connection with the proposed transaction. STOCKHOLDERS OF TESORO AND WESTERN ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE FORM S-4 AND THE DEFINITIVE PROXY STATEMENT/PROSPECTUS INCLUDED THEREIN, AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.

Investors and security holders will be able to obtain copies of these documents, including the proxy statement/prospectus, and other documents filed with the SEC (when available) free of charge at the SEC's website, http://www.sec.gov. Copies of documents filed with the SEC by Tesoro will be made available free of charge on Tesoro's website at http://www.tsocorp.com or by contacting Tesoro's Investor Relations Department by phone at 210-626-6000. Copies of documents filed with the SEC by Western will be made available free of charge on Western's website at http://www.wnr.com or by contacting Western's Investor Relations Department by phone at 602-286-1530 or 602-286-1533.

Participants in the Solicitation:

Tesoro and its directors and executive officers, and Western and its directors and executive officers, may be deemed to be participants in the solicitation of proxies from the holders of Tesoro common stock and Western common stock in respect of the proposed transaction. Information about the directors and executive officers of Tesoro is set forth in the proxy statement for Tesoro's 2016 Annual Meeting of Stockholders, which was filed with the SEC on March 22, 2016, and in the other documents filed after the date thereof by Tesoro with the SEC. Information about the directors and executive officers of Western is set forth in the proxy statement for Western's 2016 Annual Meeting of Shareholders, which was filed with the SEC on April 22, 2016, and in the other documents filed after the date thereof by Western with the SEC. Investors may obtain additional information regarding the interests of such participants by reading the proxy statement/prospectus regarding the proposed transaction when it becomes available. You may obtain free copies of these documents as described in the preceding paragraph.

Consolidated Financial Data

We report our operating results in three business segments: refining, WNRL and retail.
  • Refining. Our refining segment owns and operates three refineries 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.
  • WNRL. WNRL owns and operates terminal, storage, transportation and wholesale assets in the Southwest and terminal and storage assets in the Upper Great Plains region. WNRL's Southwest wholesale assets consist of a fleet of crude oil, asphalt and refined product truck transports and wholesale petroleum product operations. WNRL's primary customer is our refining segment. WNRL purchases its wholesale product supply from the refining segment and third-party suppliers.
  • Retail. Our retail segment operates retail convenience stores and unmanned commercial fleet fueling ("cardlock") locations located in the Southwest ("Southwest Retail") and Upper Great Plains ("SuperAmerica") regions. 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,
  2016   2015   2016   2015
  (In thousands, except per share data)
Statements of Operations Data              
Net sales (1) $ 2,115,325     $ 2,070,324     $ 7,743,213     $ 9,787,036  
Operating costs and expenses:              
Cost of products sold (exclusive of depreciation and amortization) (1) 1,721,812     1,706,406     5,978,811     7,521,375  
Direct operating expenses (exclusive of depreciation and amortization) (1) 240,716     228,451     928,023     902,925  
Selling, general and administrative expenses 51,204     55,437     217,861     225,245  
Merger and reorganization costs 8,453         12,440      
Loss (gain) and impairments on disposal of assets, net (90 )   208     (1,271 )   51  
Maintenance turnaround expense 19,404     836     47,137     2,024  
Depreciation and amortization 55,456     52,845     216,787     205,291  
Total operating costs and expenses 2,096,955     2,044,183     7,399,788     8,856,911  
Operating income 18,370     26,141     343,425     930,125  
Other income (expense):              
Interest income 256     153     692     703  
Interest and debt expense (35,226 )   (26,434 )   (123,291 )   (105,603 )
Loss on extinguishment of debt (3,916 )       (3,916 )    
Other, net 7,152     1,604     24,964     13,161  
Net income (loss) before income taxes (13,364 )   1,464     241,874     838,386  
Provision for income taxes 13,613     6,034     (54,868 )   (223,955 )
Net income 249     7,498     187,006     614,431  
Less net income (loss) attributable to non-controlling interests (2) 9,838     (6,047 )   62,067     207,675  
Net income (loss) attributable to Western Refining, Inc. $ (9,589 )   $ 13,545     $ 124,939     $ 406,756  
Basic earnings (loss) per share $ (0.09 )   $ 0.14     $ 1.24     $ 4.28  
Diluted earnings (loss) per share (3) (0.09 )   0.14     1.24     4.28  
Dividends declared per common share 0.38     0.38     1.52     1.36  
Weighted average basic shares outstanding 108,431     93,683     100,473     94,899  
Weighted average dilutive shares outstanding 108,890     93,785     100,868     94,999  

  Three Months Ended   Year Ended
  December 31,   December 31,
  2016   2015   2016   2015
  (In thousands)
Economic Hedging Activities Recognized Within Cost of Products Sold              
Realized hedging gain, net $ 12,663     $ 41,374     $ 58,773     $ 93,699  
Unrealized hedging loss, net (22,976 )   (8,160 )   (77,674 )   (50,233 )
Total hedging gain (loss), net $ (10,313 )   $ 33,214     $ (18,901 )   $ 43,466  
               
Cash Flow Data              
Net cash provided by (used in):              
Operating activities $ 105,870     $ 177,419     $ 383,747     $ 843,083  
Investing activities 130,737     (157,392 )   (226,342 )   (191,846 )
Financing activities (234,122 )   42,905     (661,326 )   (309,894 )
Capital expenditures $ 65,872     $ 94,887     $ 300,969     $ 290,863  
Cash distributions received by Western from:              
NTI $ 110,000     $ 37,047     $ 129,949     $ 135,365  
WNRL 15,119     12,610     56,190     45,455  
Other Data              
Adjusted EBITDA (4) $ 92,629     $ 203,614     $ 575,994     $ 1,298,124  
Balance Sheet Data (at end of period)              
Cash and cash equivalents         $ 268,581     $ 772,502  
Restricted cash             69,106  
Working capital         688,477     1,114,366  
Total assets         5,560,397     5,833,393  
Total debt and lease financing obligation         1,936,468     1,703,626  
Total equity         2,296,960     2,945,906  

(1) Excludes $948.1 million, $3,558.4 million, $850.6 million and $3,869.8 million of intercompany sales; $948.1 million, $3,558.4 million, $850.6 million and $3,869.8 million of intercompany cost of products sold for the three and twelve months ended December 31, 2016 and 2015, respectively.(2) Net income (loss) attributable to non-controlling interests for the twelve months ended December 31, 2016 and 2015, consisted of income from NTI of $35.3 million and $186.5 million, respectively, and $(11.0) million for the three months ended December 31, 2015 with no comparable activity during the three months ended December 31, 2016. Net income attributable to non-controlling interest for the three and twelve months ended December 31, 2016 and 2015, consisted of income from WNRL of $9.8 million, $26.7 million, $5.0 million and $21.2 million, respectively.(3) Our computation of diluted earnings per share includes the dilutive effect of any unvested restricted shares units and phantom stock. 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 per share calculation, we assumed issuance of 0.5 million and 0.4 million restricted share units and phantom stock for the three and twelve months ended December 31, 2016, respectively. We assumed issuance of 0.1 million restricted share units for both the three and twelve months ended December 31, 2015.(4) Adjusted EBITDA represents earnings before interest and debt expense, 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 U.S. 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 attributable to Western Refining, Inc. to Adjusted EBITDA for the periods presented:
  Three Months Ended   Twelve Months Ended
  December 31,   December 31,
  2016   2015   2016   2015
  (In thousands)
Net income (loss) attributable to Western Refining, Inc. $ (9,589 )   $ 13,545     $ 124,939     $ 406,756  
Net income (loss) attributable to non-controlling interests 9,838     (6,047 )   62,067     207,675  
Interest and debt expense 35,226     26,434     123,291     105,603  
Provision for income taxes (13,613 )   (6,034 )   54,868     223,955  
Depreciation and amortization 55,456     52,845     216,787     205,291  
Maintenance turnaround expense 19,404     836     47,137     2,024  
Loss (gain) and impairments on disposal of assets, net (90 )   208     (1,271 )   51  
Loss on extinguishment of debt 3,916         3,916      
Net change in lower of cost or market inventory reserve (30,895 )   113,667     (133,414 )   96,536  
Unrealized loss on commodity hedging transactions 22,976     8,160     77,674     50,233  
Adjusted EBITDA $ 92,629     $ 203,614     $ 575,994     $ 1,298,124  
               
Adjusted EBITDA:              
Western (1) $ 55,892     $ 175,932     $ 450,836     $ 1,191,740  
WNRL 36,737     27,682     125,158     106,384  
Consolidated Adjusted EBITDA $ 92,629     $ 203,614     $ 575,994     $ 1,298,124  

  Three Months Ended
  December 31,
  2016   2015
  Western (1)   WNRL   Western (1)   WNRL
  (Unaudited)
    (In thousands)
Net income (loss) attributable to Western Refining, Inc. $ (20,503 )   $ 10,914     $ 3,699     $ 9,846  
Net income (loss) attributable to non-controlling interests     9,838     (11,043 )   4,996  
Interest and debt expense 28,868     6,358     19,743     6,691  
Provision for income taxes (13,559 )   (54 )   (5,727 )   (307 )
Depreciation and amortization 45,684     9,772     46,368     6,477  
Maintenance turnaround expense 19,404         836      
Loss (gain) and impairments on disposal of assets, net 1     (91 )   229     (21 )
Loss on extinguishment of debt 3,916              
Net change in lower of cost or market inventory reserve (30,895 )       113,667      
Unrealized loss on commodity hedging transactions 22,976         8,160      
Adjusted EBITDA $ 55,892     $ 36,737     $ 175,932     $ 27,682  

  Twelve Months Ended
  December 31,
  2016   2015
  Western (1)   WNRL   Western (1)   WNRL
  (Unaudited)
    (In thousands)
Net income attributable to Western Refining, Inc. $ 85,027     $ 39,912     $ 365,338     $ 41,418  
Net income attributable to non-controlling interests 35,323     26,744     186,520     21,155  
Interest and debt expense 97,319     25,972     82,496     23,107  
Provision for income taxes 54,162     706     223,908     47  
Depreciation and amortization 183,909     32,878     184,356     20,935  
Maintenance turnaround expense 47,137         2,024      
Loss (gain) and impairments on disposal of assets, net (217 )   (1,054 )   329     (278 )
Loss on extinguishment of debt 3,916              
Net change in lower of cost or market inventory reserve (133,414 )       96,536      
Unrealized loss on commodity hedging transactions 77,674         50,233      
Adjusted EBITDA $ 450,836     $ 125,158     $ 1,191,740     $ 106,384  

(1) Our presentation of Adjusted EBITDA for Western excludes the results of WNRL for all periods presented.

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,
  2016   2015   2016   2015
  (In thousands)
Operating Income              
Refining $ 18,807     $ 30,126     $ 357,610     $ 930,531  
WNRL 27,039     14,340     70,095     55,794  
Retail 3,953     4,923     25,146     41,279  
Other (31,429 )   (23,248 )   (109,426 )   (97,479 )
Operating income $ 18,370     $ 26,141     $ 343,425     $ 930,125  
Depreciation and Amortization              
Refining $ 39,388     $ 36,192     $ 150,989     $ 142,108  
WNRL 9,772     9,568     39,242     35,384  
Retail 5,571     5,940     23,193     23,197  
Other 725     1,145     3,363     4,602  
Depreciation and amortization expense $ 55,456     $ 52,845     $ 216,787     $ 205,291  
Capital Expenditures              
Refining $ 48,182     $ 73,335     $ 248,863     $ 201,249  
WNRL 4,783     13,485     29,161     65,635  
Retail 11,780     7,720     20,308     20,895  
Other 1,127     347     2,637     3,084  
Capital expenditures $ 65,872     $ 94,887     $ 300,969     $ 290,863  
Balance Sheet Data (at end of period)              
Cash and cash equivalents              
Western, excluding WNRL         $ 253,929     $ 727,897  
WNRL         14,652     44,605  
Cash and cash equivalents         $ 268,581     $ 772,502  
Total debt              
Western, excluding WNRL         $ 1,569,273     $ 1,212,927  
WNRL         313,032     437,467  
Total debt         $ 1,882,305     $ 1,650,394  
Total working capital              
Western, excluding WNRL         $ 705,667     $ 1,078,574  
WNRL         (17,190 )   35,792  
Total working capital         $ 688,477     $ 1,114,366  

Refining

  Three Months Ended   Year Ended
  December 31,   December 31,
  2016   2015   2016   2015
  (In thousands, except per barrel data)
Statement of Operations Data:              
Net sales (including intersegment sales) (1) $ 1,906,648     $ 1,818,753     $ 6,918,931     $ 8,777,196  
Operating costs and expenses:              
Cost of products sold (exclusive of depreciation and amortization) (7) 1,688,665     1,619,368     5,831,811     7,176,706  
Direct operating expenses (exclusive of depreciation and amortization) 126,776     116,315     472,128     459,996  
Selling, general and administrative expenses 13,608     15,863     59,239     65,422  
Loss and impairments on disposal of assets, net     53     17     409  
Maintenance turnaround expense 19,404     836     47,137     2,024  
Depreciation and amortization 39,388     36,192     150,989     142,108  
Total operating costs and expenses 1,887,841     1,788,627     6,561,321     7,846,665  
Operating income $ 18,807     $ 30,126     $ 357,610     $ 930,531  
Key Operating Statistics              
Total sales volume (bpd) (2) 314,391     336,617     312,699     338,403  
Total refinery production (bpd) 250,254     254,321     256,177     256,197  
Total refinery throughput (bpd) (3) 252,063     255,847     258,023     258,322  
Per barrel of throughput:              
Refinery gross margin (4) (5) (7) $ 9.36     $ 8.35     $ 11.45     $ 16.93  
Refinery gross margin, excluding LCM adjustment (4) (5) (7) 8.06     13.13     10.05     17.95  
Direct operating expenses (6) 5.46     4.94     5.00     4.87  
Mid-Atlantic sales volume (bbls) 1,549     1,759     7,239     8,356  
Mid-Atlantic margin per barrel $ 0.60     $ 1.61     $ 0.82     $ 0.46  

El Paso Refinery
  Three Months Ended   Year Ended
  December 31,   December 31,
  2016   2015   2016   2015
Key Operating Statistics              
Refinery product yields (bpd):              
Gasoline 77,482     68,976     74,916     70,200  
Diesel and jet fuel 55,561     48,972     55,793     54,082  
Residuum 3,086     2,524     2,929     4,174  
Other 3,755     5,964     4,747     4,872  
Total refinery production (bpd) 139,884     126,436     138,385     133,328  
Refinery throughput (bpd):              
Sweet crude oil 104,276     99,765     104,454     105,064  
Sour crude oil 27,657     22,634     26,612     22,949  
Other feedstocks and blendstocks 9,374     5,459     8,805     7,064  
Total refinery throughput (bpd) (3) 141,307     127,858     139,871     135,077  
Total sales volume (bpd) (2) 148,971     144,423     148,808     148,897  
Per barrel of throughput:              
Refinery gross margin (4) (7) $ 10.57     $ 9.55     $ 10.93     $ 16.48  
Direct operating expenses (6) 3.86     4.22     3.82     4.02  

Gallup Refinery
  Three Months Ended   Year Ended
  December 31,   December 31,
  2016   2015   2016   2015
Key Operating Statistics              
Refinery product yields (bpd):              
Gasoline 15,446     17,068     16,315     17,066  
Diesel and jet fuel 7,654     7,569     7,574     7,994  
Other 1,689     646     1,355     1,303  
Total refinery production (bpd) 24,789     25,283     25,244     26,363  
Refinery throughput (bpd):              
Sweet crude oil 22,412     21,979     22,964     24,071  
Other feedstocks and blendstocks 2,883     3,633     2,787     2,659  
Total refinery throughput (bpd) (3) 25,295     25,612     25,751     26,730  
Total sales volume (bpd) (2) 32,620     32,014     34,427     33,005  
Per barrel of throughput:              
Refinery gross margin (4) (7) $ 11.45     $ 13.61     $ 12.23     $ 18.34  
Direct operating expenses (6) 11.91     8.60     9.51     8.38  

St. Paul Park Refinery
  Three Months Ended   Year Ended
  December 31,   December 31,
  2016   2015   2016   2015
Key Operating Statistics              
Refinery product yields (bpd):              
Gasoline 43,694     50,303     46,287     46,453  
Diesel and jet fuel 31,808     35,033     30,767     33,356  
Residuum 5,565     11,500     9,661     10,933  
Other 4,515     5,766     5,833     5,764  
Total refinery production (bpd) 85,582     102,602     92,548     96,506  
Refinery throughput (bpd):              
Light crude oil 38,187     55,116     49,794     55,612  
Synthetic crude oil 28,434     15,571     17,516     13,127  
Heavy crude oil 13,645     25,948     21,641     24,962  
Other feedstocks and blendstocks 5,195     5,742     3,449     2,814  
Total refinery throughput (bpd) (3) 85,461     102,377     92,400     96,515  
Total sales volume (bpd) (2) 92,712     103,483     98,965     101,349  
Per barrel of throughput:              
Refinery gross margin (4) (7) $ 5.54     $ 14.26     $ 9.17     $ 18.88  
Direct operating expenses (6) 5.34     4.12     4.66     4.33  

(1) Refining net sales for the three and twelve months ended December 31, 2016 and 2015, includes $206.1 million, $547.4 million, $230.0 million and $1,078.2 million, respectively, in crude oil sales to third parties representing a period average of 46,990 bpd, 34,177 bpd, 59,344 bpd and 61,516 bpd, respectively.(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 represent 5.4%, 5.7%, 5.5% and 6.5% of our total consolidated sales volumes for the three and twelve months ended December 31, 2016 and 2015, respectively. The majority of the purchased refined products are distributed through our refined product sales activities in the Mid-Atlantic region where we satisfied our refined product customer sales requirements via a third-party supply agreement through December 31, 2016.(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.

Our calculation of refinery gross margin excludes the sales and costs related to our Mid-Atlantic business that we report within the refining segment. The following table reconciles the sales and cost of sales used to calculate refinery gross margin with the total sales and cost of sales reported in the refining statement of operations data above:

  Three Months Ended   Year Ended
  December 31,   December 31,
  2016   2015   2016   2015
  (In thousands)
Refinery net sales (including intersegment sales) $ 1,804,640     $ 1,715,670     $ 6,485,540     $ 8,177,250  
Mid-Atlantic sales 102,008     103,083     433,391     599,946  
Net sales (including intersegment sales) $ 1,906,648     $ 1,818,753     $ 6,918,931     $ 8,777,196  
               
Refinery cost of products sold (exclusive of depreciation and amortization) $ 1,587,579     $ 1,519,117     $ 5,404,339     $ 6,580,591  
Mid-Atlantic cost of products sold 101,086     100,251     427,472     596,115  
Cost of products sold (exclusive of depreciation and amortization) $ 1,688,665     $ 1,619,368     $ 5,831,811     $ 7,176,706  

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,
  2016   2015   2016   2015
  (In thousands, except per barrel data)
Net sales (including intersegment sales) $ 1,804,640     $ 1,715,670     $ 6,485,540     $ 8,177,250  
Cost of products sold (exclusive of depreciation and amortization) 1,587,579     1,519,117     5,404,339     6,580,591  
Depreciation and amortization 39,388     36,192     150,989     142,108  
Gross profit 177,673     160,361     930,212     1,454,551  
Plus depreciation and amortization 39,388     36,192     150,989     142,108  
Refinery gross margin $ 217,061     $ 196,553     $ 1,081,201     $ 1,596,659  
Refinery gross margin per refinery throughput barrel $ 9.36     $ 8.35     $ 11.45     $ 16.93  
Gross profit per refinery throughput barrel $ 7.66     $ 6.81     $ 9.85     $ 15.43  

(5) Cost of products sold for the combined refining segment includes changes in the lower of cost or market inventory reserve shown in the table below. The reserve changes are also included in the combined refinery gross margin but are not included in those measures for the individual refineries. The following table calculates the refinery gross margin per refinery throughput barrel excluding changes in the lower of cost or market inventory reserve that we believe is useful in evaluating our refinery performance exclusive of the impact of fluctuations in inventory values:
  Three Months Ended   Year Ended
  December 31,   December 31,
  2016   2015   2016   2015
  (in thousands, except per barrel data)
Refinery gross margin $ 217,061     $ 196,553     $ 1,081,201     $ 1,596,659  
Net change in lower of cost or market inventory reserve (30,246 )   112,432     (131,954 )   95,835  
Refinery gross margin, excluding LCM adjustment $ 186,815     $ 308,985     $ 949,247     $ 1,692,494  
Refinery gross margin, excluding LCM adjustment, per refinery throughput barrel $ 8.06     $ 13.13     $ 10.05     $ 17.95  

(6) 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.(7) 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,
  2016   2015   2016   2015
  (In thousands)
Realized hedging gain, net $ 12,663     $ 41,374     $ 58,773     $ 93,699  
Unrealized hedging loss, net (22,976 )   (8,160 )   (77,674 )   (50,233 )
Total hedging gain (loss), net $ (10,313 )   $ 33,214     $ (18,901 )   $ 43,466  

WNRL

The WNRL financial and operational data presented includes the historical results of all assets acquired from Western in the St. Paul Park Logistics Transaction and the TexNew Mex Pipeline Transaction. These acquisitions from Western were transfers of assets between entities under common control. We have retrospectively adjusted historical financial and operational data of WNRL, for all periods presented, to reflect the purchase and consolidation of the purchased assets into WNRL.
  Three Months Ended   Year Ended
  December 31,   December 31,
  2016   2015   2016   2015
  (In thousands)
Net sales $ 606,816     $ 575,897     $ 2,222,718     $ 2,599,867  
Operating costs and expenses:              
Cost of products sold 520,731     500,853     1,916,113     2,308,137  
Direct operating expenses 43,833     44,611     174,936     175,767  
Selling, general and administrative expenses 5,532     6,546     23,386     25,063  
Gain and impairments on disposal of assets, net (91 )   (21 )   (1,054 )   (278 )
Depreciation and amortization 9,772     9,568     39,242     35,384  
Total operating costs and expenses 579,777     561,557     2,152,623     2,544,073  
Operating income $ 27,039     $ 14,340     $ 70,095     $ 55,794  

  Three Months Ended   Year Ended
  December 31,   December 31,
  2016   2015   2016   2015
  (In thousands, except per gallon/barrel data)
Pipeline and gathering (bpd):              
Mainline movements:              
Permian/Delaware Basin system 52,090     52,068     51,805     47,368  
TexNew Mex system 7,790     14,566     9,543     12,302  
Four Corners system (1) 49,278     60,115     53,204     56,079  
Gathering (truck offloading) (bpd):              
Permian/Delaware Basin system 16,809     21,865     17,662     23,617  
Four Corners system 8,417     13,589     10,464     13,438  
Terminalling, transportation and storage (bpd):              
Shipments into and out of storage (includes asphalt) 568,288     377,698     441,865     391,842  
Wholesale:              
Fuel gallons sold 317,998     318,186     1,258,027     1,237,994  
Fuel gallons sold to retail (included in fuel gallons sold, above) 81,521     78,780     332,214     314,604  
Fuel margin per gallon (2) $ 0.030     $ 0.026     $ 0.028     $ 0.030  
Lubricant gallons sold 1,385     2,728     6,787     11,697  
Lubricant margin per gallon (3) $ 0.83     $ 0.77     $ 0.85     $ 0.73  
Asphalt trucking volume (bpd) 5,518         4,727      
Crude oil trucking volume (bpd) 40,586     39,675     38,582     45,337  
Average crude oil trucking revenue per barrel $ 2.12     $ 2.35     $ 2.16     $ 2.53  

(1) Some barrels of crude oil in route to Western's Gallup refinery and Permian/Delaware Basin are transported on more than one mainline. Mainline movements for the Four Corners and Delaware Basin systems include each barrel transported on each mainline.(2) Fuel margin per gallon is a function of the difference between 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.(3) Lubricant margin per gallon is a measurement calculated by dividing the difference between lubricant sales, net of transportation charges, 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,
  2016   2015   2016   2015
  (In thousands, except per gallon data)
Statement of Operations Data:              
Net sales (including intersegment sales) $ 549,913     $ 526,234     $ 2,159,946     $ 2,279,737  
Operating costs and expenses:              
Cost of products sold (exclusive of depreciation and amortization) 460,468     436,727     1,789,269     1,906,048  
Direct operating expenses (exclusive of depreciation and amortization) 70,107     67,525     281,039     267,079  
Selling, general and administrative expenses 9,813     10,943     41,533     42,312  
Loss (gain) and impairments on disposal of assets, net 1     176     (234 )   (178 )
Depreciation and amortization 5,571     5,940     23,193     23,197  
Total operating costs and expenses 545,960     521,311     2,134,800     2,238,458  
Operating income $ 3,953     $ 4,923     $ 25,146     $ 41,279  
Key Operating Statistics:              
Southwest Retail:              
Retail fuel gallons sold 99,602     90,733     394,925     357,835  
Average retail fuel sales price per gallon, net of excise taxes $ 1.80     $ 1.78     $ 1.70     $ 2.02  
Average retail fuel cost per gallon, net of excise taxes 1.64     1.59     1.54     1.82  
Retail fuel margin per gallon (1) 0.16     0.19     0.16     0.20  
Merchandise sales $ 81,057     $ 77,640     $ 330,244     $ 311,654  
Merchandise margin (2) 30.1 %   29.1 %   29.4 %   29.4 %
Operating retail outlets at period end         259     258  
Cardlock gallons sold 15,669     15,495     64,067     65,508  
Cardlock margin per gallon $ 0.120     $ 0.127     $ 0.122     $ 0.163  
Operating cardlocks at period end         51     52  
SuperAmerica:              
Retail fuel gallons sold 75,738     76,811     306,825     304,484  
Retail fuel margin per gallon (1) $ 0.20     $ 0.23     $ 0.22     $ 0.23  
Merchandise sales 87,774     87,343     367,737     366,401  
Merchandise margin (2) 25.7 %   24.6 %   25.9 %   25.6 %
Company-operated retail outlets at period end         170     168  
Franchised retail outlets at period end         115     109  

  Three Months Ended   Year Ended
  December 31,   December 31,
  2016   2015   2016   2015
  (In thousands, except per gallon data)
Net Sales              
Retail fuel sales, net of excise taxes $ 337,910     $ 326,576     $ 1,301,580     $ 1,442,147  
Merchandise sales 168,831     164,983     697,981     678,055  
Cardlock sales 29,777     26,453     104,079     127,413  
Other sales 13,395     8,222     56,306     32,122  
Net sales $ 549,913     $ 526,234     $ 2,159,946     $ 2,279,737  
Cost of Products Sold              
Retail fuel cost of products sold, net of excise taxes $ 307,739     $ 291,739     $ 1,170,348     $ 1,298,456  
Merchandise cost of products sold 121,958     120,859     505,638     492,578  
Cardlock cost of products sold 27,827     24,429     95,928     116,506  
Other cost of products sold 2,944     (300 )   17,355     (1,492 )
Cost of products sold $ 460,468     $ 436,727     $ 1,789,269     $ 1,906,048  
Retail fuel margin per gallon (1) $ 0.17     $ 0.21     $ 0.19     $ 0.22  

(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,
  2016   2015
  (In thousands, except per share data)
Reported diluted earnings (loss) per share $ (0.09 )   $ 0.14  
Income (loss) before income taxes $ (13,364 )   $ 1,464  
Special items:      
Loss (gain) and impairments on disposal of assets, net (90 )   208  
Merger and reorganization costs 8,453      
Unrealized loss on commodity hedging transactions 22,976     8,160  
Net change in lower of cost or market inventory reserve (30,895 )   113,667  
Loss on extinguishment of debt 3,916      
Earnings (loss) before income taxes excluding special items (9,004 )   123,499  
Recomputed income taxes after special items (1) 11,029     (28,737 )
Net income (loss) excluding special items 2,025     94,762  
Net income attributable to non-controlling interests 9,795     42,572  
Net income (loss) attributable to Western excluding special items $ (7,770 )   $ 52,190  
Diluted earnings (loss) per share excluding special items $ (0.07 )   $ 0.56  

(1) We recompute income taxes after deducting special items and earnings attributable to non-controlling interests.
Investor and Analyst Contact:Jeffrey S. Beyersdorfer(602) 286-1530Michelle Clemente(602) 286-1533Media Contact:Gary W. Hanson(602) 286-1777

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