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Western Refining Reports Third Quarter 2010 Financial Results

EL PASO, Texas, Nov 4, 2010 (GlobeNewswire via COMTEX) --

Western Refining, Inc. (NYSE:WNR) today reported net income of $6.9 million, or $0.08 per diluted share, for the third quarter of 2010 versus a net loss of $4.8 million, or $0.05 per diluted share, for the same period in 2009. Excluding special items, net income was $11.4 million, or $0.13 per share for the third quarter of 2010 versus a net loss of $8.7 million or $0.10 per share for the prior year period. A reconciliation of net income (loss) to net income (loss) excluding special items, for all periods shown, is included in the accompanying financial tables.

The year-over-year improvement reflects higher refining margins and the continued gains generated from the Company's 2010 cost savings initiatives. Western's Southwest refineries generated strong gross margins per barrel during the quarter with the El Paso refinery improving 21% and the Four Corners refinery improving 38% relative to the third quarter of 2009. Western's Retail business had a record quarter, posting operating income of $7.6 million, an increase of 13% as compared to the prior year quarter, driven by increases in fuel and merchandise volumes. In addition, the Company's Wholesale business performed well due to increased lubricants margins and improving demand for both fuels and lubricants.

Jeff Stevens, Western's Chief Executive Officer, said, "We are very pleased to report another profitable quarter. Our refineries ran well and we believe refining margins at our Southwest refineries continued to be some of the strongest in the U.S. We are optimistic about the fourth quarter due to the strength in diesel margins which offset the weaker gasoline margins that we typically see this time of year. Overall, both gasoline and diesel margins are significantly stronger than the fourth quarter of 2009."

During the third quarter, Western announced the safe and successful completion of the shutdown of its Yorktown refining operations and generated $56 million in cash from the partial liquidation of working capital. The Company also incurred costs of $4 million during the quarter related to the shutdown. Western continues to operate the products terminal and is supplying finished products to its local customers. Western is currently negotiating with a number of interested parties regarding strategic alternatives for Yorktown, including third-party storage and terminalling or the sale of the terminal assets.

Western continues to benefit from the successful implementation of the Four Corners refinery consolidation and other cost reductions announced in 2009. These initiatives had an initial target of $50 million in annualized savings starting in 2010.

"Our focus on the cost savings initiatives continues to show results," continued Stevens. "We are on track to exceed our target of $50 million in annualized cost savings and we continue to take the necessary steps to actively manage our business in a prudent and fiscally responsible manner."

Cash flow from operations during the quarter was $239.6 million and capital expenditures were $20 million. The Company reduced total debt by $159.2 million during the quarter, primarily related to the revolving credit facility, and ended the period with a cash balance of $77.5 million.

In conclusion, Stevens stated, "We are pleased with the earnings potential of our assets and are continuing to be pro-active to ensure we are running our operations in a safe, reliable, and cost effective manner, which we believe will allow us to remain profitable in these market conditions."

Conference Call Information

A conference call is scheduled for November 4, 2010, at 10:00 a.m. ET to discuss Western's financial results. The call can be accessed at Western's website, www.wnr.com. The call can also be heard by dialing (866) 566-8590, passcode: 94459083. The audio replay will be available through November 11, 2010, by dialing (800) 642-1687, passcode: 94459083.

A copy of this press release, together with the reconciliations of certain non-GAAP financial measures contained herein, can be accessed on the investor relations menu on Western's website, www.wnr.com.

Non-GAAP Financial Measures

In a number of places in the press release and related tables, we have excluded the impact of the non-cash goodwill and other impairment losses from our results of operations for the third quarter of 2010 and the second quarter of 2009. We have also excluded third quarter 2010 charges related to the suspension of our refining operations at the Yorktown facility. We have excluded these amounts to better analyze changes in our business from period-to-period as these are non-recurring charges.

About Western Refining

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

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

Cautionary Statement on Forward-Looking Statements

This press release contains forward-looking statements. The forward-looking statements contained herein include statements about demand for our products, our expectations for diesel and gasoline margins, potential strategic alternatives for the Yorktown refinery, expected cost savings from initiatives we are pursuing, and our expectations regarding our future profitability. These statements are subject to the general risks inherent in our business and reflect our current expectations regarding these matters. 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. For additional information relating to the uncertainties affecting our business you are referred to our filings with the Securities and Exchange Commission. The forward-looking statements are only as of the date made, and we do not undertake any obligation to (and expressly disclaim 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 of historical and financial and operating data for the periods indicated below:


                                       Three Months Ended           Nine Months Ended
                                          September 30,               September 30,
                                   --------------------------  --------------------------

                                       2010          2009          2010          2009
                                   ------------  ------------  ------------  ------------
                                            (In thousands, except per share data)
  Statement of Operations Data:
  Net sales (1)                     $ 2,038,296   $ 1,896,273   $ 6,099,028   $ 4,848,016
  Operating costs and expenses:
  Cost of products sold
   (exclusive of depreciation and
   amortization) (1)                  1,807,411     1,699,399     5,479,813     4,115,610
  Direct operating expenses
   (exclusive of depreciation and
   amortization) (1)                    116,982       116,717       337,930       374,195
  Selling, general and
   administrative expenses               24,031        23,725        61,604        85,903
  Goodwill and other impairment
   losses                                 3,963            --         3,963       299,552
  Maintenance turnaround expense             --         1,031        23,286         4,353

  Depreciation and amortization          35,253        34,725       104,294       109,382
                                   ------------  ------------  ------------  ------------
  Total operating costs and
   expenses                           1,987,640     1,875,597     6,010,890     4,988,995
                                   ------------  ------------  ------------  ------------
  Operating income (loss)                50,656        20,676        88,138     (140,979)
  Other income (expense):
  Interest income                           151            17           317           197
  Interest expense                     (37,099)      (33,024)     (111,168)      (88,047)
  Amortization of loan fees             (2,453)       (1,795)       (7,287)       (4,832)
  Write-off of unamortized loan
   fees                                      --            --            --       (9,047)

  Other income (expense), net               712         ( 39)        4,631)        4,594)
                                   ------------  ------------  ------------  ------------
  Income (loss) before income
   taxes                                 11,967      (14,165)      (25,369)     (238,114)

  Provision for income taxes            (5,108)         9,383        15,892      (15,057)
                                   ------------  ------------  ------------  ------------

  Net income (loss)                     $ 6,859     $ (4,782)     $ (9,477)   $ (253,171)
                                   ============  ============  ============  ============

  Basic earnings per share               $ 0.08      $ (0.05)      $ (0.11)      $ (3.29)
  Diluted earnings per share             $ 0.08      $ (0.05)      $ (0.11)      $ (3.29)
  Dividends declared per common
   share                                     --            --            --            --
  Weighted average basic shares
   outstanding                           88,280        87,973        88,170        76,191
  Weighted average dilutive
   shares outstanding                    88,280        87,973        88,170        76,191
  Cash Flow Data:
  Net cash provided by (used in):
  Operating activities                $ 239,604      $ 28,018      $ 93,481     $ 148,553
  Investing activities                 (19,208)      (24,026)      (56,099)      (93,367)
  Financing activities                (163,250)       (5,408)      (34,750)      (69,964)
  Other Data:
  Adjusted EBITDA (2)                  $ 90,735      $ 44,714     $ 224,629     $ 216,094
  Capital expenditures                   19,660        24,034        56,741        93,762
  Balance Sheet Data (at end of
   period):
  Cash and cash equivalents                                        $ 77,522      $ 65,039
  Working capital                                                   354,727       316,166
  Total assets                                                    2,661,682     2,918,468
  Total debt                                                      1,093,608     1,067,025
  Stockholders' equity                                              680,291       783,462

(1) Excludes $833.2 million, $583.7 million, $2,317.0 million, and $1,450.6 million of intercompany sales; $831.6 million, $582.3 million, $2,312.6 million, and $1,446.4 million of intercompany cost of products sold; and $1.6 million, $1.4 million, $4.4 million, and $4.2 million of intercompany direct operating expenses for the three and nine months ended September 30, 2010 and 2009, respectively.

(2) Adjusted EBITDA represents earnings before interest expense, income tax expense, amortization of loan fees, depreciation, amortization, maintenance turnaround expense, LCM inventory reserve adjustments, and goodwill and other impairment losses. However, Adjusted EBITDA is not a recognized measurement under 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, and the accounting effects of significant turnaround activities (which many of our competitors capitalize and thereby exclude from their measures of EBITDA) and acquisitions, 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, 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       Nine Months Ended
                                         September 30,           September 30,
                                    ----------------------  ------------------------

                                       2010        2009        2010         2009
                                    ----------  ----------  ----------  ------------
                                         (In thousands, except per share data)

  Net income (loss)                    $ 6,859   $ (4,782)   $ (9,477)   $ (253,171)
  Interest expense                      37,099      33,024     111,168        88,047
  Provision for income taxes             5,108     (9,383)    (15,892)        15,057
  Amortization of loan fees              2,453       1,795       7,287         4,832
  Write-off of unamortized loan
   fees                                     --          --          --         9,047
  Depreciation and amortization         35,253      34,725     104,294       109,382
  Maintenance turnaround expense            --       1,031      23,286         4,353
  Goodwill and other impairment
   losses                                3,963          --       3,963       299,552

  Net change in LCM reserve                 --    (11,696)          --      (61,005)
                                    ----------  ----------  ----------  ------------

  Adjusted EBITDA                     $ 90,735    $ 44,714   $ 224,629     $ 216,094
                                    ==========  ==========  ==========  ============

Refining Segment

The following tables present the segment financial data for our refining group, including other revenues and expenses not specific to a particular refinery:


                                            Three Months Ended           Nine Months Ended
                                               September 30,               September 30,
                                        --------------------------  --------------------------

                                            2010          2009          2010          2009
                                        ------------  ------------  ------------  ------------
                                                (In thousands, except per barrel data)
  Statement of Operations Data:
  Net sales (including intersegment
   sales)                                $ 2,045,006   $ 1,834,130   $ 6,095,884   $ 4,645,709
  Operating costs and expenses:
  Cost of products sold (exclusive of
   depreciation and amortization) (1)      1,864,165     1,685,451     5,611,868     4,046,932
  Direct operating expenses (exclusive
   of depreciation and amortization)          88,685        88,042       257,049       288,677
  Selling, general, and administrative
   expenses                                    6,018         8,470        14,208        28,247
  Goodwill and other impairment losses         3,757            --         3,757       230,712
  Maintenance turnaround expense                  --         1,031        23,286         4,353

  Depreciation and amortization               30,434        29,686        89,211        94,162
                                        ------------  ------------  ------------  ------------

  Total operating costs and expenses       1,993,059     1,812,680     5,999,379     4,693,083
                                        ------------  ------------  ------------  ------------

  Operating income (loss)                   $ 51,947      $ 21,450      $ 96,505    $ (47,374)
                                        ============  ============  ============  ============

  Key Operating Statistics:
  Total sales volume (bpd) (2)               256,741       265,544       257,135       256,830
  Total refinery production (bpd)            209,337       220,453       205,689       219,435
  Total refinery throughput (bpd) (3)        211,167       223,129       207,111       221,232
  Per barrel of throughput:
  Refinery gross margin (1) (4)               $ 9.31        $ 7.24        $ 8.56        $ 9.91
  Gross profit (4)                              7.74          5.80          6.98          8.36
  Direct operating expenses (5)                 4.56          4.29          4.55          4.78

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


  All Refineries
  ------------------------------

                                   Three Months Ended   Nine Months Ended
                                     September 30,        September 30,
                                  -------------------  -------------------

                                     2010      2009       2010      2009
                                  ---------  --------  ---------  --------
  Refinery product yields (bpd)
  Gasoline                          112,302   115,536    108,753   114,771
  Diesel and jet fuel                79,320    83,954     78,279    82,538
  Residuum                            5,281     5,458      4,838     5,672

  Other                               7,578     9,778      8,172     9,956
                                  ---------  --------  ---------  --------
  Liquid products                   204,481   214,726    200,042   212,937

  By-products                         4,856     5,727      5,647     6,498
                                  ---------  --------  ---------  --------

  Total                             209,337   220,453    205,689   219,435
                                  =========  ========  =========  ========

  Refinery throughput (bpd)
  Sweet crude oil                   137,242   128,535    133,846   127,944
  Sour or heavy crude oil            46,791    73,031     52,231    69,569

  Other feedstocks/blendstocks       27,134    21,563     21,034    23,719
                                  ---------  --------  ---------  --------

  Total                             211,167   223,129    207,111   221,232
                                  =========  ========  =========  ========



  El Paso Refinery
  ------------------------------

                                   Three Months Ended   Nine Months Ended
                                     September 30,        September 30,
                                  -------------------  -------------------

                                     2010      2009       2010      2009
                                  ---------  --------  ---------  --------
  Key Operating Statistics:
  Refinery product yields (bpd)
  Gasoline                           69,748    64,852     64,597    65,737
  Diesel and jet fuel                54,572    54,236     51,065    50,853
  Residuum                            5,281     5,458      4,838     5,672

  Other                               3,420     3,290      3,194     3,382
                                  ---------  --------  ---------  --------
  Total refinery production
   (bpd)                            133,021   127,836    123,694   125,644
                                  =========  ========  =========  ========

  Refinery throughput (bpd)
  Sweet crude oil                   110,136   103,122    105,267   102,373
  Sour crude oil                     13,677    19,969     11,957    15,985

  Other feedstocks/blendstocks       11,277     7,051      8,358     9,431
                                  ---------  --------  ---------  --------
  Total refinery throughput
   (bpd)                            135,090   130,142    125,582   127,789
                                  =========  ========  =========  ========

  Total sales volume (bpd) (2)      151,936   150,823    152,578   143,905
  Per barrel of throughput:
  Refinery gross margin (4)          $ 9.77    $ 8.05     $ 9.56   $ 10.29
  Direct operating expenses (5)        3.27      3.01       3.47      3.51



  Four Corners Refineries
  ------------------------------

                                   Three Months Ended   Nine Months Ended
                                     September 30,        September 30,
                                  -------------------  -------------------

                                     2010    2009 (6)     2010    2009 (6)
                                  ---------  --------  ---------  --------
  Key Operating Statistics:
  Refinery product yields (bpd)
  Gasoline                           16,786    19,020     16,113    17,667
  Diesel and jet fuel                 7,090     7,617      6,288     7,703

  Other                                 692     1,081        779     1,084
                                  ---------  --------  ---------  --------
  Total refinery production
   (bpd)                             24,568    27,718     23,180    26,454
                                  =========  ========  =========  ========

  Refinery throughput (bpd)
  Sweet crude oil                    21,679    25,413     20,866    25,562

  Other feedstocks/blendstocks        3,635     3,036      2,899     1,696
                                  ---------  --------  ---------  --------
  Total refinery throughput
   (bpd)                             25,314    28,449     23,765    27,258
                                  =========  ========  =========  ========

  Total sales volume (bpd)           40,542    37,711     36,395    36,877
  Per barrel of throughput:
  Refinery gross margin             $ 19.44   $ 14.04    $ 17.78   $ 16.11
  Direct operating expenses            6.21      7.64       6.60      8.56



  Yorktown Refinery
  ------------------------------

                                   Three Months Ended   Nine Months Ended
                                     September 30,        September 30,
                                  -------------------  -------------------

                                   2010 (7)    2009     2010 (7)    2009
                                  ---------  --------  ---------  --------
  Key Operating Statistics:
  Refinery product yields (bpd)
  Gasoline                           25,768    31,664     28,043    31,367
  Diesel and jet fuel                17,658    22,101     20,926    23,982

  Other                               3,466     5,407      4,199     5,490
                                  ---------  --------  ---------  --------
  Liquid products                    46,892    59,172     53,168    60,839

  By-products                         4,856     5,727      5,647     6,498
                                  ---------  --------  ---------  --------
  Total refinery production
   (bpd)                             51,748    64,899     58,815    67,337
                                  =========  ========  =========  ========

  Refinery throughput (bpd)
  Sweet crude oil                     5,427        --      7,713         9
  Heavy crude oil                    33,114    53,062     40,274    53,584

  Other feedstocks/blendstocks       12,222    11,476      9,777    12,592
                                  ---------  --------  ---------  --------
  Total refinery throughput
   (bpd)                             50,763    64,538     57,764    66,185
                                  =========  ========  =========  ========

  Total sales volume (bpd) (2)       64,262    77,010     68,162    76,048
  Per barrel of throughput:
  Refinery gross margin (1) (4)      $ 3.35    $ 2.67     $ 2.83    $ 7.32
  Direct operating expenses (5)        6.17      4.98       5.09      5.20

(1) Cost of products sold for the three and nine months ended September 30, 2009 included non-cash LCM recovery adjustments of $11.7 million and $61.0 million, respectively, related to valuing our Yorktown inventories to net realizable market values. These non-cash adjustments resulted in a corresponding increase of $0.57 and $1.01 in combined refinery gross margin per throughput barrel for the three and nine months ended September 30, 2009, respectively. The increase in Yorktown's gross margin was $1.97 and $3.38 for the three and nine months ended September 30, 2009, respectively. Also included in cost of products sold for the three and nine months ended September 30, 2009 are $0.7 million and $13.3 million, respectively, in economic hedging losses previously reported in gain (loss) from derivative activities in the Condensed Consolidated Statements of Operations.

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

(3) Total refinery throughput includes crude oil, other feedstocks, and blendstocks.

(4) Refinery gross margin is a per barrel measurement calculated by dividing the difference between net sales and cost of products sold by our refineries' total throughput volumes for the respective periods presented. Economic hedging gains and losses included in the combined refining segment gross margin are not allocated to the individual refineries. Cost of products sold does not include any depreciation or amortization. Refinery gross margin is a non-GAAP performance measure that we believe is important to investors in evaluating our refinery performance as a general indication of the amount above our cost of products that we are able to sell refined products. Each of the components used in this calculation (net sales and cost of products sold) can be reconciled directly to our statement of operations. Our calculation of refinery gross margin may differ from similar calculations of other companies in our industry, thereby limiting its usefulness as a comparative measure.

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


                                                     Three Months Ended           Nine Months Ended
                                                        September 30,               September 30,
                                                 --------------------------  --------------------------

                                                     2010          2009          2010          2009
                                                 ------------  ------------  ------------  ------------
                                                         (In thousands, except per barrel data)

  Net sales (including intersegment sales)        $ 2,045,006   $ 1,834,130   $ 6,095,884   $ 4,645,709
  Cost of products sold (exclusive of
   depreciation and amortization)                   1,864,165     1,685,451     5,611,868     4,046,932

  Depreciation and amortization                        30,434        29,686        89,211        94,162
                                                 ------------  ------------  ------------  ------------
  Gross profit                                        150,407       118,993       394,805       504,615

  Plus depreciation and amortization                   30,434        29,686        89,211        94,162
                                                 ------------  ------------  ------------  ------------

  Refinery gross margin                             $ 180,841     $ 148,679     $ 484,016     $ 598,777
                                                 ============  ============  ============  ============

  Refinery gross margin per refinery throughput
   barrel                                              $ 9.31        $ 7.24        $ 8.56        $ 9.91
                                                 ============  ============  ============  ============

  Gross profit per refinery throughput barrel          $ 7.74        $ 5.80        $ 6.98        $ 8.36
                                                 ============  ============  ============  ============

(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) In late November 2009, we consolidated refining operations in the Four Corners region and indefinitely suspended refining operations at our Bloomfield refinery. Refinery production, throughput, and sales volumes for the three and nine months ended September 30, 2010 reflect production and sales of refined products at the Gallup refinery only.

(7) In early September 2010, we suspended refining operations at our Yorktown refinery. We calculated the refinery production, throughput, and sales volumes for the three and nine months ended September 30, 2010 by dividing total volumes for the period by 92 and 273 days, respectively.

Retail Segment


                                       Three Months Ended       Nine Months Ended
                                          September 30,           September 30,
                                     ----------------------  -----------------------

                                        2010        2009        2010        2009
                                     ----------  ----------  ----------  -----------
                                          (in thousands, except per gallon data)
  Statement of Operations Data:
  Net sales (including intersegment
   sales)                             $ 195,138   $ 176,708   $ 537,930    $ 466,445
  Operating costs and expenses:
  Cost of products sold (exclusive
   of depreciation and
   amortization)                        166,406     148,723     462,814      392,330
  Direct operating expenses
   (exclusive of depreciation and
   amortization)                         17,169      17,273      50,177       49,598
  Selling, general and
   administrative expenses                1,461       1,545       3,425        4,762
  Goodwill impairment losses                 --          --          --       27,610

  Depreciation and amortization           2,496       2,415       7,631        7,298
                                     ----------  ----------  ----------  -----------
  Total operating costs and
   expenses                             187,532     169,956     524,047      481,598
                                     ----------  ----------  ----------  -----------

  Operating income                      $ 7,606     $ 6,752    $ 13,883   $ (15,153)
                                     ==========  ==========  ==========  ===========

  Operating Data:
  Fuel gallons sold (in thousands)       56,583      53,708     155,831      155,216
  Fuel margin per gallon (1)             $ 0.22      $ 0.23      $ 0.19       $ 0.19
  Merchandise sales                    $ 52,439    $ 51,129   $ 144,440    $ 144,339
  Merchandise margin (2)                  28.8%       28.4%       28.5%        28.4%
  Operating retail outlets at
   period end                                                       150          152



                                       Three Months Ended       Nine Months Ended
                                          September 30,           September 30,
                                     ----------------------  -----------------------

                                        2010        2009        2010        2009
                                     ----------  ----------  ----------  -----------
                                          (in thousands, except per gallon data)
  Net sales:
  Fuel sales                            158,736     139,028     435,124      357,542
  Excise taxes included in fuel
   revenues                            (21,764)    (19,405)    (59,697)     (53,649)
  Merchandise sales                      52,439      51,129     144,440      144,339

  Other sales                             5,727       5,956      18,063       18,213
                                     ----------  ----------  ----------  -----------

  Net sales                           $ 195,138   $ 176,708   $ 537,930    $ 466,445
                                     ==========  ==========  ==========  ===========

  Cost of products sold:
  Fuel cost of products sold            146,465     126,841     405,333      328,384
  Excise taxes included in fuel
   cost of products sold               (21,764)    (19,405)    (59,697)     (53,649)
  Merchandise cost of products sold      37,318      36,622     103,286      103,400

  Other cost of products sold             4,387       4,665      13,892       14,195
                                     ----------  ----------  ----------  -----------

  Cost of products sold               $ 166,406   $ 148,723   $ 462,814    $ 392,330
                                     ==========  ==========  ==========  ===========


  Fuel margin per gallon                 $ 0.22      $ 0.23      $ 0.19       $ 0.19
                                     ==========  ==========  ==========  ===========

(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.

(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.

Wholesale Segment


                                       Three Months Ended         Nine Months Ended
                                          September 30,             September 30,
                                     ----------------------  --------------------------

                                        2010        2009         2010          2009
                                     ----------  ----------  ------------  ------------
                                           (in thousands, except per gallon data)
  Statement of Operations Data:
  Net sales (including intersegment
   sales)                             $ 631,303   $ 469,142   $ 1,782,189   $ 1,186,466
  Operating costs and expenses:
  Cost of products sold (exclusive
   of depreciation and
   amortization)                        608,406     447,543     1,717,703     1,122,719
  Direct operating expenses
   (exclusive of depreciation and
   amortization)                         12,713      12,791        35,107        40,153
  Selling, general and
   administrative expenses                3,823       3,734         8,699        12,634
  Goodwill impairment losses                 --          --            --        41,230
  Depreciation and amortization           1,210       1,394         3,914         4,205
  Total operating costs and
   expenses                             626,152     465,462     1,765,423     1,220,941
                                     ----------  ----------  ------------  ------------

  Operating income                      $ 5,151     $ 3,680      $ 16,766    $ (34,475)
                                     ==========  ==========  ============  ============

  Operating Data:
  Fuel gallons sold (in thousands)      259,446     213,590       735,510       611,514
  Fuel margin per gallon (1)             $ 0.07      $ 0.07        $ 0.07        $ 0.07
  Lubricant sales                      $ 28,015    $ 26,665      $ 77,477      $ 86,801
  Lubricant margins (2)                   12.6%       10.0%         11.8%          8.9%

  (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.
  (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.



                                              Three Months Ended September 30,
                                     --------------------------------------------------

                                        2010        2009         2010          2009
                                     ----------  ----------  ------------  ------------
                                           (in thousands, except per gallon data)
  Net sales:
  Fuel sales                          $ 656,888   $ 493,017   $ 1,863,682   $ 1,244,117
  Excise taxes included in fuel
   sales                               (61,377)    (57,415)     (181,378)     (165,579)
  Lubricant sales                        28,015      26,665        77,477        86,801

  Other sales                             7,777       6,875        22,408        21,127
                                     ----------  ----------  ------------  ------------

  Net sales                           $ 631,303   $ 469,142   $ 1,782,189   $ 1,186,466
                                     ==========  ==========  ============  ============

  Cost of products sold:
  Fuel cost of products sold          $ 640,866   $ 477,838   $ 1,818,326   $ 1,200,856
  Excise taxes included in fuel
   sales                               (61,377)    (57,415)     (181,378)     (165,579)
  Lubricant cost of products sold        24,494      23,997        68,321        79,071

  Other cost of products sold             4,423       3,123        12,434         8,371
                                     ----------  ----------  ------------  ------------

  Cost of products sold               $ 608,406   $ 447,543   $ 1,717,703   $ 1,122,719
                                     ==========  ==========  ============  ============


  Fuel margin per gallon                 $ 0.07      $ 0.07        $ 0.07        $ 0.07
                                     ==========  ==========  ============  ============

Reconciliation of Special Items

We present below certain additional financial measures that are non-GAAP measures within the meaning of Regulation G under the Securities and 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       Nine Months Ended
                                                         September 30,           September 30,
                                                    ----------------------  -----------------------

                                                       2010        2009        2010        2009
                                                    ----------  ----------  ----------  -----------
                                                         (In thousands, except per share data)


  Reported earnings (loss) per share                    $ 0.08    $ (0.05)    $ (0.11)     $ (3.29)
                                                    ==========  ==========  ==========  ===========

  Earnings (loss) before income taxes                 $ 11,967  $ (14,165)  $ (25,369)  $ (238,114)
  Non-cash goodwill and other impairment losses
   (1)                                                   3,963          --       3,963      299,552
  Non-cash LCM inventory adjustment (2)                     --    (11,696)          --     (61,005)

  Yorktown suspension costs (3)                          3,978          --       3,978           --
                                                    ----------  ----------  ----------  -----------
  Earnings (loss) before income taxes excluding
   special items                                        19,908    (25,861)    (17,428)          433
  Recomputed income taxes after special items          (8,501)      17,120      10,910        (106)

  Net income (loss) excluding special items           $ 11,407   $ (8,741)   $ (6,518)        $ 327
                                                    ==========  ==========  ==========  ===========

  Diluted earnings (loss) per share excluding
   special items                                        $ 0.13    $ (0.10)    $ (0.07)       $ 0.00
                                                    ==========  ==========  ==========  ===========

(1) During the third quarter of 2010, we ceased operating our refined products distribution terminal located in Flagstaff, Arizona. The Company's impairment analysis resulted in pre-tax and after-tax impairment loss of $4.0 million and $2.3 million, respectively.

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

(2) During the fourth quarter of 2008, we recorded an adjustment to reduce the carrying value of our inventories to the lower of cost or market, which resulted in a pre-tax increase of cost of products sold of $61.0 million. During the third quarter of 2009 reversing adjustments to value our inventories at the lower of cost or market were recorded, which resulted in a pre-tax decrease in cost of products sold of $11.7 million and $61.0 million for the three and nine months ended September 30, 2009, respectively ($4.0 million and $46.1 million after tax). This charge and reversal are included in the refining segment's operating income, but are excluded from the operating results presented here in order to make that information comparable between periods.

(3) During the third quarter of 2010, we temporarily suspended refining operations at our Yorktown facility. In connection with this change in operations, we recorded one-time termination benefits of $3.0 million and other refinery costs relating to the suspension of operations at Yorktown of $1.0 million. These were non-recurring charges. We expect to incur additional costs during the fourth quarter of 2010.

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: Western Refining, Inc.

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