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These excerpts taken from the WNR 10-K filed Mar 13, 2009. Fiscal
Year Ended December 31, 2007, Compared to Fiscal Year Ended
December 31, 2006
Net Sales. Net sales primarily consist of
gross sales of refined products, lubricants and merchandise, net
of customer rebates or discount and excise taxes. Net sales for
the twelve months ended December 31, 2007, were
$7,305.0 million, compared to $4,199.4 million for the
twelve months ended December 31, 2006, an increase of
$3,105.6 million, or 74.0%. This increase primarily
resulted from the impact of the Giant acquisition
($3,130.2 million) and higher sales prices for refined
products and higher sales volume at the El Paso refinery.
Net sales for the twelve months ended December 31, 2007,
also were impacted by intercompany transactions of
$646.0 million that were eliminated from net sales in
consolidation. There were no similar transactions for the twelve
months ended December 31, 2006.
Cost of Products Sold (exclusive of depreciation and
amortization). Cost of products sold primarily
include cost of crude oil, other feedstocks and blendstocks,
purchased refined products, lubricants and merchandise for
resale, transportation and distribution costs. Cost of products
sold was $6,375.7 million for the twelve months ended
December 31, 2007, compared to $3,653.0 million for
the twelve months ended December 31, 2006, an increase of
$2,722.7 million, or 74.5%. This increase primarily was the
result of the impact of the Giant acquisition
($2,860.8 million) and increased refinery throughput at the
El Paso refinery. For the twelve months ended
December 31, 2007, intercompany transactions of
$646.0 million were eliminated from cost of products sold
in consolidation. There were no similar transactions for the
twelve months ended December 31, 2006.
Direct Operating Expenses (exclusive of depreciation and
amortization). Direct operating expenses include
direct costs of labor, maintenance materials and services,
transportation expenses, chemicals and catalysts, natural gas,
utilities, insurance expense, property taxes and other direct
operating expenses. Direct operating expenses were
$382.7 million for the twelve months ended
December 31, 2007, compared to $171.7 million for the
twelve months ended December 31, 2006, an increase of
$211.0 million, or 122.9%. This increase primarily resulted
from the Giant acquisition ($195.1 million), increases at
the El Paso refinery related to personnel costs
($4.8 million), energy costs ($3.3 million), general
maintenance costs ($3.0 million), and property taxes
($2.9 million).
Selling, General and Administrative
Expenses. Selling, general and administrative
expenses consist primarily of corporate overhead, marketing
expenses, public company costs, and stock-based compensation.
Selling, general and administrative expenses were
$77.4 million for the twelve months ended December 31,
2007, compared to $37.1 million for the twelve months ended
December 31, 2006, an increase of $40.3 million, or
108.6%. This increase primarily resulted from the Giant
acquisition ($29.6 million), increased professional and
legal fees ($5.2 million), and increased personnel costs at
the El Paso refinery ($2.5 million).
Maintenance Turnaround Expense. Maintenance
turnaround expense includes major maintenance and repairs
performed generally every four years, depending on the
processing units involved. During the year ended
December 31, 2007, we performed a maintenance turnaround at
the Yorktown refinery at a cost of $13.2 million and
incurred costs of $2.7 million in anticipation of the
turnaround performed in the fourth quarter of 2008 at the north
side of the El Paso refinery. During 2006, we performed a
major maintenance turnaround on the south side of the
El Paso refinery at a cost of $22.2 million.
Depreciation and Amortization. Depreciation
and amortization for the twelve months ended December 31,
2007, was $64.2 million, compared to $13.6 million for
the twelve months ended December 31, 2006. The increase
Table of Contents
primarily was due to the Giant acquisition ($44.1 million)
and the completion of various capital projects during 2006 and
2007 at the El Paso refinery, including our sulfur gas
facilities and the flare gas recovery system.
Operating Income. Operating income was
$389.2 million for the twelve months ended
December 31, 2007, compared to $301.8 million for the
twelve months ended December 31, 2006, an increase of
$87.4 million. This increase primarily is attributable to
increased refinery gross margins from the El Paso refinery.
Interest Income. Interest income for the
twelve months ended December 31, 2007 and 2006, was
$18.9 million and $10.8 million, respectively. The
increase primarily is attributable to increased balances of cash
for investment and an increase in average interest rates.
Interest Expense and Other Financing
Costs. Interest expense for the twelve months
ended December 31, 2007 and 2006, was $53.8 million
(net of capitalized interest of $5.8 million) and
$2.2 million, respectively. The increase primarily was due
to an increase in outstanding debt as a result of the Giant
acquisition. In May 2007, we entered into a term loan agreement
to fund the acquisition. As of December 31, 2007, we had
$1,293.5 million of outstanding debt under this term loan.
Amortization of Loan Fees. Amortization of
loan fees for 2007 was $1.9 million, compared to
$0.5 million for 2006. In May 2007, we entered into a term
loan agreement to fund the Giant acquisition and incurred
$17.0 million in loan fees.
Write-off of Unamortized Loan Fees. In January
2006, we paid off our new term loan facility with proceeds from
our initial public offering. Accordingly, we recorded an expense
of $2.0 million related to the write-off of previously
recorded deferred financing costs.
Gain (Loss) from Derivative Activities. The
net loss from derivative activities was $9.9 million for
the twelve months ended December 31, 2007, compared to an
$8.6 million net gain for the twelve months ended
December 31, 2006. The difference between the two periods
primarily was attributable to fluctuations in market prices
related to the derivative transactions that were either settled
or marked to market during each respective period.
Provision for Income Taxes. We recorded a
provision for income taxes of $101.9 million for the year
ended December 31, 2007, using an estimated effective tax
rate of 29.9%, as compared to the Federal statutory rate of 35%.
The effective tax rate was lower primarily due to the federal
income tax credit available to small business refiners related
to the production of ultra low sulfur diesel fuel and the
manufacturing activities deduction.
Our income tax provision for the year ended December 31,
2006 was $112.4 million using an estimated effective tax
rate of 35.4%, including a one-time charge of $8.3 million
recognized upon the change to a corporate holding company
structure and the resulting change to a taxable entity. The
one-time charge increased our effective tax rate by 2.6% for
2006. The impact of this adjustment decreased diluted earnings
per share by $0.13 for the twelve months ended December 31,
2006.
Net Income. We reported net income of
$238.6 million for the twelve months ended
December 31, 2007, representing $3.53 net income per
share on weighted average dilutive shares outstanding of
67.6 million. For the twelve months ended December 31,
2006, we reported net income of $204.8 million representing
$3.11 net income per share on weighted average dilutive
shares outstanding of 65.8 million.
Table of Contents
Fiscal Year Ended December 31, 2007, Compared to Fiscal Year Ended December 31, 2006 Net Sales. Net sales primarily consist of gross sales of refined products, lubricants and merchandise, net of customer rebates or discount and excise taxes. Net sales for the twelve months ended December 31, 2007, were $7,305.0 million, compared to $4,199.4 million for the twelve months ended December 31, 2006, an increase of $3,105.6 million, or 74.0%. This increase primarily resulted from the impact of the Giant acquisition ($3,130.2 million) and higher sales prices for refined products and higher sales volume at the El Paso refinery. Net sales for the twelve months ended December 31, 2007, also were impacted by intercompany transactions of $646.0 million that were eliminated from net sales in consolidation. There were no similar transactions for the twelve months ended December 31, 2006. Cost of Products Sold (exclusive of depreciation and amortization). Cost of products sold primarily include cost of crude oil, other feedstocks and blendstocks, purchased refined products, lubricants and merchandise for resale, transportation and distribution costs. Cost of products sold was $6,375.7 million for the twelve months ended December 31, 2007, compared to $3,653.0 million for the twelve months ended December 31, 2006, an increase of $2,722.7 million, or 74.5%. This increase primarily was the result of the impact of the Giant acquisition ($2,860.8 million) and increased refinery throughput at the El Paso refinery. For the twelve months ended December 31, 2007, intercompany transactions of $646.0 million were eliminated from cost of products sold in consolidation. There were no similar transactions for the twelve months ended December 31, 2006. Direct Operating Expenses (exclusive of depreciation and amortization). Direct operating expenses include direct costs of labor, maintenance materials and services, transportation expenses, chemicals and catalysts, natural gas, utilities, insurance expense, property taxes and other direct operating expenses. Direct operating expenses were $382.7 million for the twelve months ended December 31, 2007, compared to $171.7 million for the twelve months ended December 31, 2006, an increase of $211.0 million, or 122.9%. This increase primarily resulted from the Giant acquisition ($195.1 million), increases at the El Paso refinery related to personnel costs ($4.8 million), energy costs ($3.3 million), general maintenance costs ($3.0 million), and property taxes ($2.9 million). Selling, General and Administrative Expenses. Selling, general and administrative expenses consist primarily of corporate overhead, marketing expenses, public company costs, and stock-based compensation. Selling, general and administrative expenses were $77.4 million for the twelve months ended December 31, 2007, compared to $37.1 million for the twelve months ended December 31, 2006, an increase of $40.3 million, or 108.6%. This increase primarily resulted from the Giant acquisition ($29.6 million), increased professional and legal fees ($5.2 million), and increased personnel costs at the El Paso refinery ($2.5 million). Maintenance Turnaround Expense. Maintenance turnaround expense includes major maintenance and repairs performed generally every four years, depending on the processing units involved. During the year ended December 31, 2007, we performed a maintenance turnaround at the Yorktown refinery at a cost of $13.2 million and incurred costs of $2.7 million in anticipation of the turnaround performed in the fourth quarter of 2008 at the north side of the El Paso refinery. During 2006, we performed a major maintenance turnaround on the south side of the El Paso refinery at a cost of $22.2 million. Depreciation and Amortization. Depreciation and amortization for the twelve months ended December 31, 2007, was $64.2 million, compared to $13.6 million for the twelve months ended December 31, 2006. The increase
Table of Contentsprimarily was due to the Giant acquisition ($44.1 million) and the completion of various capital projects during 2006 and 2007 at the El Paso refinery, including our sulfur gas facilities and the flare gas recovery system. Operating Income. Operating income was $389.2 million for the twelve months ended December 31, 2007, compared to $301.8 million for the twelve months ended December 31, 2006, an increase of $87.4 million. This increase primarily is attributable to increased refinery gross margins from the El Paso refinery. Interest Income. Interest income for the twelve months ended December 31, 2007 and 2006, was $18.9 million and $10.8 million, respectively. The increase primarily is attributable to increased balances of cash for investment and an increase in average interest rates. Interest Expense and Other Financing Costs. Interest expense for the twelve months ended December 31, 2007 and 2006, was $53.8 million (net of capitalized interest of $5.8 million) and $2.2 million, respectively. The increase primarily was due to an increase in outstanding debt as a result of the Giant acquisition. In May 2007, we entered into a term loan agreement to fund the acquisition. As of December 31, 2007, we had $1,293.5 million of outstanding debt under this term loan. Amortization of Loan Fees. Amortization of loan fees for 2007 was $1.9 million, compared to $0.5 million for 2006. In May 2007, we entered into a term loan agreement to fund the Giant acquisition and incurred $17.0 million in loan fees. Write-off of Unamortized Loan Fees. In January 2006, we paid off our new term loan facility with proceeds from our initial public offering. Accordingly, we recorded an expense of $2.0 million related to the write-off of previously recorded deferred financing costs. Gain (Loss) from Derivative Activities. The net loss from derivative activities was $9.9 million for the twelve months ended December 31, 2007, compared to an $8.6 million net gain for the twelve months ended December 31, 2006. The difference between the two periods primarily was attributable to fluctuations in market prices related to the derivative transactions that were either settled or marked to market during each respective period. Provision for Income Taxes. We recorded a provision for income taxes of $101.9 million for the year ended December 31, 2007, using an estimated effective tax rate of 29.9%, as compared to the Federal statutory rate of 35%. The effective tax rate was lower primarily due to the federal income tax credit available to small business refiners related to the production of ultra low sulfur diesel fuel and the manufacturing activities deduction. Our income tax provision for the year ended December 31, 2006 was $112.4 million using an estimated effective tax rate of 35.4%, including a one-time charge of $8.3 million recognized upon the change to a corporate holding company structure and the resulting change to a taxable entity. The one-time charge increased our effective tax rate by 2.6% for 2006. The impact of this adjustment decreased diluted earnings per share by $0.13 for the twelve months ended December 31, 2006. Net Income. We reported net income of $238.6 million for the twelve months ended December 31, 2007, representing $3.53 net income per share on weighted average dilutive shares outstanding of 67.6 million. For the twelve months ended December 31, 2006, we reported net income of $204.8 million representing $3.11 net income per share on weighted average dilutive shares outstanding of 65.8 million.
Table of ContentsFiscal
Year Ended December 31, 2007, Compared to Fiscal Year Ended
December 31, 2006
Net Sales. Net sales consist primarily of
gross sales of refined petroleum products, net of customer
rebates, discounts, and excise taxes. Net sales for the twelve
months ended December 31, 2007, were $7,092.4 million,
compared to $4,199.4 million for the twelve months ended
December 31, 2006, an increase of $2,893.0 million, or
68.9%. This increase primarily resulted from the impact of the
Giant acquisition ($2,271.6 million), higher sales volume
at our El Paso refinery, and higher prices for refined
products. Our sales volume increased by 26.7 million
barrels, or 51.4%, to 78.6 million barrels for 2007,
compared to 51.9 million barrels for 2006. The increase in
sales volume primarily was due to the impact of the Giant
acquisition (24.7 million barrels) and increased refinery
production resulting from the expansion of our crude oil
refining capacity in El Paso in 2006. Our average sales
price per barrel increased from $80.91 for 2006 to $90.23 for
2007.
Cost of Products Sold (exclusive of depreciation and
amortization). Cost of products sold includes
cost of crude oil, other feedstocks and blendstocks, purchased
products for resale, transportation costs, and distribution
costs. Cost of products sold was $6,246.7 million for the
twelve months ended December 31, 2007, compared to
$3,653.0 million for the twelve months ended
December 31, 2006, an increase of $2,593.7 million, or
71.0%. This increase primarily was a result of increased
refinery throughput at our El Paso refinery, higher
feedstock prices, and the impact of the Giant acquisition
($2,085.8 million). Total refinery throughput for 2007
increased by 23.1 million barrels to 69.5 million
barrels. Throughput from the three Giant refineries from June 1
through December 31 represented 29.8% of total throughput for
2007. Refinery gross margin per throughput barrel increased from
$11.78 in 2006 to $12.17 in 2007, reflecting higher refining
margins in the first half of 2007. Our margins in the Southwest
were negatively impacted by weaker margins in Phoenix and Tucson
and by lower value products sales, such as asphalt, due to the
sales prices of such products not increasing in relation to the
price of crude oil in the third and fourth quarter of 2007.
Gross profit per barrel, based on the closest comparable GAAP
measure to refinery gross margin, was $11.36 and $11.49 for the
twelve months ended December 31, 2007 and 2006,
respectively. Our weighted average cost per barrel of crude oil
for 2007 (reflecting seven months of Giant operations) was
$74.42, compared to $65.19 for 2006, an increase of 14.2%.
Direct Operating Expenses (exclusive of depreciation and
amortization). Direct operating expenses include
costs associated with the operations of our refineries, such as
energy and utility costs, catalyst and chemical costs, routine
maintenance, labor, insurance, property taxes, and environmental
compliance costs. Direct operating expenses were
$338.4 million for the twelve months ended
December 31, 2007, compared to $171.7 million for the
twelve
Table of Contents
months ended December 31, 2006, an increase of
$166.7 million, or 97.1%. This increase primarily resulted
from expenses associated with the refineries acquired from Giant
($150.8 million) and increases at the El Paso refinery
related to personnel costs ($4.8 million), energy costs
($3.3 million), general maintenance costs
($3.0 million), and property taxes ($2.9 million).
Direct operating expenses per throughput barrel were $4.87 for
2007, compared to $3.70 for 2006.
Selling, General and Administrative
Expenses. Selling, general and administrative
expenses consist primarily of segment overhead, marketing
expenses, and stock-based compensation. Selling, general and
administrative expenses were $16.8 million for the twelve
months ended December 31, 2007, compared to
$10.2 million for the twelve months ended December 31,
2006, an increase of $6.6 million, or 64.7%. This increase
primarily resulted from the acquisition of the three refineries
from Giant in 2007 ($5.5 million), increased professional
and legal fees ($5.2 million), and increased personnel
costs at the El Paso refinery ($2.5 million).
Maintenance Turnaround Expense. Maintenance
turnaround expense includes major maintenance and repairs
generally performed every four years, depending on the
processing units involved. During the year ended
December 31, 2007, we performed a maintenance turnaround at
the Yorktown refinery at a cost of $13.2 million and
incurred costs of $2.7 million in anticipation of the
turnaround performed in the fourth quarter of 2008 at the
El Paso refinery. During 2006, we performed a major
maintenance turnaround on the south side of the El Paso
refinery at a cost of $22.2 million.
Depreciation and Amortization. Depreciation
and amortization for the twelve months ended December 31,
2007, was $56.5 million, compared to $13.6 million for
the twelve months ended December 31, 2006. The increase was
due to the acquisition of the three refineries from Giant
($36.4 million) and the completion of various capital
projects during 2006 and 2007 at our El Paso refinery.
Operating Income. Operating income was
$418.1 million for the twelve months ended
December 31, 2007, compared to $328.6 million for the
twelve months ended December 31, 2006, an increase of
$89.5 million. This increase is attributable primarily to
higher refinery gross margins at the El Paso refinery
partially offset by the turnaround costs at our Yorktown
refinery.
Fiscal Year Ended December 31, 2007, Compared to Fiscal Year Ended December 31, 2006 Net Sales. Net sales consist primarily of gross sales of refined petroleum products, net of customer rebates, discounts, and excise taxes. Net sales for the twelve months ended December 31, 2007, were $7,092.4 million, compared to $4,199.4 million for the twelve months ended December 31, 2006, an increase of $2,893.0 million, or 68.9%. This increase primarily resulted from the impact of the Giant acquisition ($2,271.6 million), higher sales volume at our El Paso refinery, and higher prices for refined products. Our sales volume increased by 26.7 million barrels, or 51.4%, to 78.6 million barrels for 2007, compared to 51.9 million barrels for 2006. The increase in sales volume primarily was due to the impact of the Giant acquisition (24.7 million barrels) and increased refinery production resulting from the expansion of our crude oil refining capacity in El Paso in 2006. Our average sales price per barrel increased from $80.91 for 2006 to $90.23 for 2007. Cost of Products Sold (exclusive of depreciation and amortization). Cost of products sold includes cost of crude oil, other feedstocks and blendstocks, purchased products for resale, transportation costs, and distribution costs. Cost of products sold was $6,246.7 million for the twelve months ended December 31, 2007, compared to $3,653.0 million for the twelve months ended December 31, 2006, an increase of $2,593.7 million, or 71.0%. This increase primarily was a result of increased refinery throughput at our El Paso refinery, higher feedstock prices, and the impact of the Giant acquisition ($2,085.8 million). Total refinery throughput for 2007 increased by 23.1 million barrels to 69.5 million barrels. Throughput from the three Giant refineries from June 1 through December 31 represented 29.8% of total throughput for 2007. Refinery gross margin per throughput barrel increased from $11.78 in 2006 to $12.17 in 2007, reflecting higher refining margins in the first half of 2007. Our margins in the Southwest were negatively impacted by weaker margins in Phoenix and Tucson and by lower value products sales, such as asphalt, due to the sales prices of such products not increasing in relation to the price of crude oil in the third and fourth quarter of 2007. Gross profit per barrel, based on the closest comparable GAAP measure to refinery gross margin, was $11.36 and $11.49 for the twelve months ended December 31, 2007 and 2006, respectively. Our weighted average cost per barrel of crude oil for 2007 (reflecting seven months of Giant operations) was $74.42, compared to $65.19 for 2006, an increase of 14.2%. Direct Operating Expenses (exclusive of depreciation and amortization). Direct operating expenses include costs associated with the operations of our refineries, such as energy and utility costs, catalyst and chemical costs, routine maintenance, labor, insurance, property taxes, and environmental compliance costs. Direct operating expenses were $338.4 million for the twelve months ended December 31, 2007, compared to $171.7 million for the twelve
Table of Contentsmonths ended December 31, 2006, an increase of $166.7 million, or 97.1%. This increase primarily resulted from expenses associated with the refineries acquired from Giant ($150.8 million) and increases at the El Paso refinery related to personnel costs ($4.8 million), energy costs ($3.3 million), general maintenance costs ($3.0 million), and property taxes ($2.9 million). Direct operating expenses per throughput barrel were $4.87 for 2007, compared to $3.70 for 2006. Selling, General and Administrative Expenses. Selling, general and administrative expenses consist primarily of segment overhead, marketing expenses, and stock-based compensation. Selling, general and administrative expenses were $16.8 million for the twelve months ended December 31, 2007, compared to $10.2 million for the twelve months ended December 31, 2006, an increase of $6.6 million, or 64.7%. This increase primarily resulted from the acquisition of the three refineries from Giant in 2007 ($5.5 million), increased professional and legal fees ($5.2 million), and increased personnel costs at the El Paso refinery ($2.5 million). Maintenance Turnaround Expense. Maintenance turnaround expense includes major maintenance and repairs generally performed every four years, depending on the processing units involved. During the year ended December 31, 2007, we performed a maintenance turnaround at the Yorktown refinery at a cost of $13.2 million and incurred costs of $2.7 million in anticipation of the turnaround performed in the fourth quarter of 2008 at the El Paso refinery. During 2006, we performed a major maintenance turnaround on the south side of the El Paso refinery at a cost of $22.2 million. Depreciation and Amortization. Depreciation and amortization for the twelve months ended December 31, 2007, was $56.5 million, compared to $13.6 million for the twelve months ended December 31, 2006. The increase was due to the acquisition of the three refineries from Giant ($36.4 million) and the completion of various capital projects during 2006 and 2007 at our El Paso refinery. Operating Income. Operating income was $418.1 million for the twelve months ended December 31, 2007, compared to $328.6 million for the twelve months ended December 31, 2006, an increase of $89.5 million. This increase is attributable primarily to higher refinery gross margins at the El Paso refinery partially offset by the turnaround costs at our Yorktown refinery. These excerpts taken from the WNR 10-K filed Feb 29, 2008. Fiscal
Year Ended December 31, 2007, Compared to Fiscal Year Ended
December 31, 2006
Net Sales. Net sales consist primarily of
gross sales of refined petroleum products, net of customer
rebates, discounts, and excise taxes. Net sales for the twelve
months ended December 31, 2007, were $7,092.4 million,
compared to $4,199.4 million for the twelve months ended
December 31, 2006, an increase of $2,893.0 million, or
68.9%. This increase primarily resulted from the impact of the
Giant acquisition ($2,271.6 million), higher sales volume
at our El Paso refinery, and higher prices for refined
products. Our sales volume increased by 26.7 million
barrels, or 51.4%, to 78.6 million barrels for 2007,
compared to 51.9 million barrels for 2006. The increase in
sales volume primarily was due to the impact of the Giant
acquisition (24.7 million barrels) and increased refinery
production resulting from the expansion of our crude oil
refining capacity in El Paso in 2006. Our average sales
price per barrel increased from $80.91 for 2006 to $90.23 for
2007.
Cost of Products Sold (exclusive of depreciation and
amortization). Cost of products sold includes
cost of crude oil, other feedstocks and blendstocks, purchased
products for resale, transportation costs, and distribution
costs. Cost of products sold was $6,246.7 million for the
twelve months ended December 31, 2007, compared to
$3,653.0 million for the twelve months ended
December 31, 2006, an increase of $2,593.7 million, or
71.0%. This increase primarily was a result of increased
refinery throughput at our El Paso refinery, higher
feedstock prices, and the impact of the Giant acquisition
($2,085.9 million). Total refinery throughput for 2007
increased by 23.1 million barrels to 69.5 million
barrels compared to 46.4 million barrels for 2006.
Throughput from the three Giant refineries represented 29.8% of
total throughput for 2007. Refinery gross margin per throughput
barrel increased from $11.78 in 2006 to $12.17 in 2007,
reflecting higher refining margins in the first half of 2007.
Our margins in the Southwest were negatively impacted by weaker
margins in Phoenix and Tucson and by lower value products sales,
such as asphalt, due to the sales prices of such products not
increasing in relation to the price of crude oil in the third
and fourth quarter of 2007. Gross profit per barrel, based on
the closest comparable GAAP measure to refinery gross margin,
was $11.36 and $11.49 for the twelve months ended
December 31, 2007 and 2006, respectively. Our weighted
average cost per barrel of crude oil for 2007 (reflecting seven
months of Giant operations) was $74.42, compared to $65.19 for
2006, an increase of 14.2%.
Direct Operating Expenses (exclusive of depreciation and
amortization). Direct operating expenses include
costs associated with the operations of our refineries, such as
energy and utility costs, catalyst and chemical costs, routine
maintenance, labor, insurance, property taxes, and environmental
compliance costs. Direct operating expenses were
$338.4 million for the twelve months ended
December 31, 2007, compared to $171.7 million for the
twelve months ended December 31, 2006, an increase of
$166.7 million, or 97.1%. This increase primarily resulted
from expenses associated with the refineries acquired from Giant
($150.8 million) and increases at the El Paso refinery
related to personnel costs ($4.8 million), energy costs
($3.3 million), general maintenance costs
($3.0 million), and property taxes ($2.9 million).
Direct operating expenses per throughput barrel were $4.87 for
2007, compared to $3.70 for 2006.
43
Table of Contents
Selling, General, and Administrative
Expenses. Selling, general, and administrative
expenses consist primarily of overhead and marketing expenses.
Selling, general, and administrative expenses were
$16.8 million for the twelve months ended December 31,
2007, compared to $10.2 million for the twelve months ended
December 31, 2006, an increase of $6.6 million, or
64.7%. This increase primarily resulted from the acquisition of
the three refineries from Giant in 2007 ($5.5 million),
increased professional and legal fees ($5.2 million), and
increased personnel costs at the El Paso refinery
($2.5 million).
Maintenance Turnaround Expense. Maintenance
turnaround expense includes major maintenance and repairs
generally performed every four years, depending on the
processing units involved. During the year ended
December 31, 2007, we performed a maintenance turnaround at
the Yorktown refinery at a cost of $13.2 million and
incurred costs of $2.7 million in anticipation of a
turnaround scheduled for 2008 at the El Paso refinery.
During 2006, we performed a major maintenance turnaround on the
South side of the El Paso refinery at a cost of
$22.2 million.
Depreciation and Amortization. Depreciation
and amortization for the twelve months ended December 31,
2007, was $56.5 million, compared to $13.6 million for
the twelve months ended December 31, 2006. The increase was
due to the acquisition of the three refineries from Giant
($36.4 million) and the completion of various capital
projects during 2006 and 2007 at our El Paso refinery.
Operating Income. Operating income was
$418.1 million for the twelve months ended
December 31, 2007, compared to $328.6 million for the
twelve months ended December 31, 2006, an increase of
$89.5 million. This increase is attributable primarily to
higher refinery gross margins at El Paso partially offset
by the turnaround costs at our Yorktown refinery.
Fiscal Year Ended December 31, 2007, Compared to Fiscal Year Ended December 31, 2006 Net Sales. Net sales consist primarily of gross sales of refined petroleum products, net of customer rebates, discounts, and excise taxes. Net sales for the twelve months ended December 31, 2007, were $7,092.4 million, compared to $4,199.4 million for the twelve months ended December 31, 2006, an increase of $2,893.0 million, or 68.9%. This increase primarily resulted from the impact of the Giant acquisition ($2,271.6 million), higher sales volume at our El Paso refinery, and higher prices for refined products. Our sales volume increased by 26.7 million barrels, or 51.4%, to 78.6 million barrels for 2007, compared to 51.9 million barrels for 2006. The increase in sales volume primarily was due to the impact of the Giant acquisition (24.7 million barrels) and increased refinery production resulting from the expansion of our crude oil refining capacity in El Paso in 2006. Our average sales price per barrel increased from $80.91 for 2006 to $90.23 for 2007. Cost of Products Sold (exclusive of depreciation and amortization). Cost of products sold includes cost of crude oil, other feedstocks and blendstocks, purchased products for resale, transportation costs, and distribution costs. Cost of products sold was $6,246.7 million for the twelve months ended December 31, 2007, compared to $3,653.0 million for the twelve months ended December 31, 2006, an increase of $2,593.7 million, or 71.0%. This increase primarily was a result of increased refinery throughput at our El Paso refinery, higher feedstock prices, and the impact of the Giant acquisition ($2,085.9 million). Total refinery throughput for 2007 increased by 23.1 million barrels to 69.5 million barrels compared to 46.4 million barrels for 2006. Throughput from the three Giant refineries represented 29.8% of total throughput for 2007. Refinery gross margin per throughput barrel increased from $11.78 in 2006 to $12.17 in 2007, reflecting higher refining margins in the first half of 2007. Our margins in the Southwest were negatively impacted by weaker margins in Phoenix and Tucson and by lower value products sales, such as asphalt, due to the sales prices of such products not increasing in relation to the price of crude oil in the third and fourth quarter of 2007. Gross profit per barrel, based on the closest comparable GAAP measure to refinery gross margin, was $11.36 and $11.49 for the twelve months ended December 31, 2007 and 2006, respectively. Our weighted average cost per barrel of crude oil for 2007 (reflecting seven months of Giant operations) was $74.42, compared to $65.19 for 2006, an increase of 14.2%. Direct Operating Expenses (exclusive of depreciation and amortization). Direct operating expenses include costs associated with the operations of our refineries, such as energy and utility costs, catalyst and chemical costs, routine maintenance, labor, insurance, property taxes, and environmental compliance costs. Direct operating expenses were $338.4 million for the twelve months ended December 31, 2007, compared to $171.7 million for the twelve months ended December 31, 2006, an increase of $166.7 million, or 97.1%. This increase primarily resulted from expenses associated with the refineries acquired from Giant ($150.8 million) and increases at the El Paso refinery related to personnel costs ($4.8 million), energy costs ($3.3 million), general maintenance costs ($3.0 million), and property taxes ($2.9 million). Direct operating expenses per throughput barrel were $4.87 for 2007, compared to $3.70 for 2006.
Table of ContentsSelling, General, and Administrative Expenses. Selling, general, and administrative expenses consist primarily of overhead and marketing expenses. Selling, general, and administrative expenses were $16.8 million for the twelve months ended December 31, 2007, compared to $10.2 million for the twelve months ended December 31, 2006, an increase of $6.6 million, or 64.7%. This increase primarily resulted from the acquisition of the three refineries from Giant in 2007 ($5.5 million), increased professional and legal fees ($5.2 million), and increased personnel costs at the El Paso refinery ($2.5 million). Maintenance Turnaround Expense. Maintenance turnaround expense includes major maintenance and repairs generally performed every four years, depending on the processing units involved. During the year ended December 31, 2007, we performed a maintenance turnaround at the Yorktown refinery at a cost of $13.2 million and incurred costs of $2.7 million in anticipation of a turnaround scheduled for 2008 at the El Paso refinery. During 2006, we performed a major maintenance turnaround on the South side of the El Paso refinery at a cost of $22.2 million. Depreciation and Amortization. Depreciation and amortization for the twelve months ended December 31, 2007, was $56.5 million, compared to $13.6 million for the twelve months ended December 31, 2006. The increase was due to the acquisition of the three refineries from Giant ($36.4 million) and the completion of various capital projects during 2006 and 2007 at our El Paso refinery. Operating Income. Operating income was $418.1 million for the twelve months ended December 31, 2007, compared to $328.6 million for the twelve months ended December 31, 2006, an increase of $89.5 million. This increase is attributable primarily to higher refinery gross margins at El Paso partially offset by the turnaround costs at our Yorktown refinery. | EXCERPTS ON THIS PAGE:
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