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These excerpts taken from the WNR 10-K filed Mar 13, 2009. Fiscal
Year Ended December 31, 2008, Compared to Fiscal Year Ended
December 31, 2007
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, 2008, were
$10,725.6 million, compared to $7,305.0 million for
the twelve months ended December 31, 2007, an increase of
$3,420.6 million, or 46.8%. This increase primarily
resulted from the impact of the Giant acquisition
($3,573.9 million) and higher sales prices for refined
products at the El Paso refinery. The average sales price
per barrel at the El Paso refinery increased from $89.38 in
2007 to $113.62 in 2008. This increase was partially offset by
decreased sales volume at the El Paso refinery. Our sales
volume decreased by 3.1 million barrels, or 5.8%, to
50.8 million barrels for 2008 compared to 53.9 million
barrels for 2007. Net sales were reduced by
$1,756.2 million and $646.0 million for the year ended
December 31, 2008 and 2007, respectively, to account for
intercompany transactions that have been eliminated from net
sales in consolidation.
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 $9,746.9 million for the twelve months ended
December 31, 2008, compared to $6,375.7 million for
the twelve months ended December 31, 2007, an increase of
$3,371.2 million, or 52.9%. This increase primarily was the
result of the impact of the Giant acquisition
($3,302.2 million, including a non-cash LCM inventory
write-down of $61.0 million in 2008) and higher crude
oil costs at the El Paso refinery. The average cost per
barrel at the El Paso refinery increased from $72.38 in
2007, to $102.77 in 2008. Cost of products sold was reduced by
$1,756.2 million and $646.0 million for the year ended
December 31, 2008 and 2007, respectively, to account for
intercompany transactions that have been eliminated from cost of
products sold in consolidation.
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
$532.3 million for the twelve months ended
December 31, 2008, compared to $382.7 million for the
twelve months ended December 31, 2007, an increase of
$149.6 million, or 39.1%. This increase primarily resulted
from the Giant acquisition ($148.7 million), increases at
the El Paso refinery related to natural gas expense
($6.0 million), chemicals and catalysts ($4.0 million)
and property taxes ($1.5 million). These increases were
partially offset by
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Table of Contents
decreased personnel costs at the El Paso refinery mainly
related to incentive compensation ($8.1 million), general
maintenance costs ($2.0 million), and decreased insurance
expense ($1.1 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
$115.9 million for the twelve months ended
December 31, 2008, compared to $77.4 million for the
twelve months ended December 31, 2007, an increase of
$38.5 million, or 49.7%. This increase primarily resulted
from the Giant acquisition ($39.1 million), and increased
expenses at the El Paso refinery and corporate headquarters
related to charitable contributions and corporate sponsorship
($1.2 million), general maintenance projects
($0.7 million), travel expenses ($0.6 million),
information systems expenses ($0.5 million), commitment
fees ($0.5 million), and public company expense
($0.4 million). These increases were partially offset by
decreased expenses at the El Paso refinery and corporate
headquarters for professional and legal fees ($1.3 million)
and personnel costs ($2.8 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, 2008, we performed a maintenance turnaround at
the north side of the El Paso refinery at a cost of
$28.9 million. 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 performed in
the fourth quarter of 2008 at the north side of the El Paso
refinery.
Depreciation and Amortization. Depreciation
and amortization for the twelve months ended December 31,
2008, was $113.6 million, compared to $64.2 million
for the twelve months ended December 31, 2007. The increase
primarily was due to the Giant acquisition ($46.0 million)
and the completion of various capital projects during the last
part of 2007 and 2008 at the El Paso refinery, including
the flare gas recovery system, the acid and sulfur gas
facilities, crude unit upgrades and the construction of a new
laboratory.
Operating Income. Operating income was
$187.9 million for the twelve months ended
December 31, 2008, compared to $389.2 million for the
twelve months ended December 31, 2007, a decrease of
$201.3 million. This decrease primarily is attributable to
decreased refinery gross margins at the El Paso refinery.
Interest Income. Interest income for the
twelve months ended December 31, 2008 and 2007, was
$1.8 million and $18.9 million, respectively. The
decrease is primarily attributable to decreased balances of cash
for investment.
Interest Expense and other Financing
Costs. Interest expense for the twelve months
ended December 31, 2008 and 2007, was $102.2 million
(net of capitalized interest of $9.9 million) and
$53.8 million (net of capitalized interest of
$5.8 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 credit
agreement to fund the acquisition. Our results of operations for
the year ended December 31, 2007, include only seven months
of interest expense associated with this term loan credit
agreement.
Amortization of Loan Fees. Amortization of
loan fees for 2008 was $4.8 million, compared to
$1.9 million for 2007. On June 30, 2008, we entered
into an amendment to our term loan credit agreement discussed
above and incurred $22.4 million in loan fees. This
increase was partially offset by the write-off of
$10.9 million in unamortized loan fees incurred in May 2007.
Write-off of Unamortized Loan Fees. On
June 30, 2008, we entered into an amendment to our term
loan credit agreement discussed above. As a result of such
amendment, we recorded an expense of $10.9 million related
to the write-off of deferred loan fees incurred in May 2007.
Gain (Loss) from Derivative Activities. The
net gain from derivative activities was $11.4 million for
the twelve months ended December 31, 2008, compared to a
net loss of $9.9 million for the twelve months ended
December 31, 2007. 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 $20.2 million for the year
ended December 31, 2008, using an estimated effective tax
rate of 24.0%, as compared to the Federal statutory rate of
Table of Contents
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.
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.
Net Income. We reported net income of
$64.2 million for the twelve months ended December 31,
2008, representing $0.95 net income per share on weighted
average dilutive shares outstanding of 67.8 million. For
the twelve months ended December 31, 2007, we reported net
income of $238.6 million representing $3.53 net income
per share on weighted average dilutive shares outstanding of
67.6 million.
Fiscal Year Ended December 31, 2008, Compared to Fiscal Year Ended December 31, 2007 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, 2008, were $10,725.6 million, compared to $7,305.0 million for the twelve months ended December 31, 2007, an increase of $3,420.6 million, or 46.8%. This increase primarily resulted from the impact of the Giant acquisition ($3,573.9 million) and higher sales prices for refined products at the El Paso refinery. The average sales price per barrel at the El Paso refinery increased from $89.38 in 2007 to $113.62 in 2008. This increase was partially offset by decreased sales volume at the El Paso refinery. Our sales volume decreased by 3.1 million barrels, or 5.8%, to 50.8 million barrels for 2008 compared to 53.9 million barrels for 2007. Net sales were reduced by $1,756.2 million and $646.0 million for the year ended December 31, 2008 and 2007, respectively, to account for intercompany transactions that have been eliminated from net sales in consolidation. 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 $9,746.9 million for the twelve months ended December 31, 2008, compared to $6,375.7 million for the twelve months ended December 31, 2007, an increase of $3,371.2 million, or 52.9%. This increase primarily was the result of the impact of the Giant acquisition ($3,302.2 million, including a non-cash LCM inventory write-down of $61.0 million in 2008) and higher crude oil costs at the El Paso refinery. The average cost per barrel at the El Paso refinery increased from $72.38 in 2007, to $102.77 in 2008. Cost of products sold was reduced by $1,756.2 million and $646.0 million for the year ended December 31, 2008 and 2007, respectively, to account for intercompany transactions that have been eliminated from cost of products sold in consolidation. 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 $532.3 million for the twelve months ended December 31, 2008, compared to $382.7 million for the twelve months ended December 31, 2007, an increase of $149.6 million, or 39.1%. This increase primarily resulted from the Giant acquisition ($148.7 million), increases at the El Paso refinery related to natural gas expense ($6.0 million), chemicals and catalysts ($4.0 million) and property taxes ($1.5 million). These increases were partially offset by
Table of Contentsdecreased personnel costs at the El Paso refinery mainly related to incentive compensation ($8.1 million), general maintenance costs ($2.0 million), and decreased insurance expense ($1.1 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 $115.9 million for the twelve months ended December 31, 2008, compared to $77.4 million for the twelve months ended December 31, 2007, an increase of $38.5 million, or 49.7%. This increase primarily resulted from the Giant acquisition ($39.1 million), and increased expenses at the El Paso refinery and corporate headquarters related to charitable contributions and corporate sponsorship ($1.2 million), general maintenance projects ($0.7 million), travel expenses ($0.6 million), information systems expenses ($0.5 million), commitment fees ($0.5 million), and public company expense ($0.4 million). These increases were partially offset by decreased expenses at the El Paso refinery and corporate headquarters for professional and legal fees ($1.3 million) and personnel costs ($2.8 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, 2008, we performed a maintenance turnaround at the north side of the El Paso refinery at a cost of $28.9 million. 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 performed in the fourth quarter of 2008 at the north side of the El Paso refinery. Depreciation and Amortization. Depreciation and amortization for the twelve months ended December 31, 2008, was $113.6 million, compared to $64.2 million for the twelve months ended December 31, 2007. The increase primarily was due to the Giant acquisition ($46.0 million) and the completion of various capital projects during the last part of 2007 and 2008 at the El Paso refinery, including the flare gas recovery system, the acid and sulfur gas facilities, crude unit upgrades and the construction of a new laboratory. Operating Income. Operating income was $187.9 million for the twelve months ended December 31, 2008, compared to $389.2 million for the twelve months ended December 31, 2007, a decrease of $201.3 million. This decrease primarily is attributable to decreased refinery gross margins at the El Paso refinery. Interest Income. Interest income for the twelve months ended December 31, 2008 and 2007, was $1.8 million and $18.9 million, respectively. The decrease is primarily attributable to decreased balances of cash for investment. Interest Expense and other Financing Costs. Interest expense for the twelve months ended December 31, 2008 and 2007, was $102.2 million (net of capitalized interest of $9.9 million) and $53.8 million (net of capitalized interest of $5.8 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 credit agreement to fund the acquisition. Our results of operations for the year ended December 31, 2007, include only seven months of interest expense associated with this term loan credit agreement. Amortization of Loan Fees. Amortization of loan fees for 2008 was $4.8 million, compared to $1.9 million for 2007. On June 30, 2008, we entered into an amendment to our term loan credit agreement discussed above and incurred $22.4 million in loan fees. This increase was partially offset by the write-off of $10.9 million in unamortized loan fees incurred in May 2007. Write-off of Unamortized Loan Fees. On June 30, 2008, we entered into an amendment to our term loan credit agreement discussed above. As a result of such amendment, we recorded an expense of $10.9 million related to the write-off of deferred loan fees incurred in May 2007. Gain (Loss) from Derivative Activities. The net gain from derivative activities was $11.4 million for the twelve months ended December 31, 2008, compared to a net loss of $9.9 million for the twelve months ended December 31, 2007. 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 $20.2 million for the year ended December 31, 2008, using an estimated effective tax rate of 24.0%, as compared to the Federal statutory rate of
Table of Contents35%. 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. 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. Net Income. We reported net income of $64.2 million for the twelve months ended December 31, 2008, representing $0.95 net income per share on weighted average dilutive shares outstanding of 67.8 million. For the twelve months ended December 31, 2007, we reported net income of $238.6 million representing $3.53 net income per share on weighted average dilutive shares outstanding of 67.6 million. Fiscal
Year Ended December 31, 2008, Compared to Fiscal Year Ended
December 31, 2007
Net Sales. Net sales primarily consist of
gross sales of refined petroleum products, net of customer
rebates, discounts, and excise taxes. Net sales for the twelve
months ended December 31, 2008, were
$10,455.6 million, compared to $7,092.4 million for
the twelve months ended December 31, 2007, an increase of
$3,363.2 million, or 47.4%. This increase primarily
resulted from the impact of the Giant acquisition
($2,406.4 million) and higher sales prices for refined
products at the El Paso refinery. The average sales price
per barrel at the El Paso refinery increased from $89.38 in
2007 compared to $113.62 in 2008. This increase was partially
offset by decreased sales volume at the El Paso refinery
due to the turnaround in the fourth quarter of 2008. Our sales
volume decreased by 3.1 million barrels, or 5.8%, to
50.8 million barrels for 2008 compared to 53.9 million
barrels for 2007.
Cost of Products Sold (exclusive of depreciation and
amortization). Cost of products sold primarily
includes cost of crude oil, other feedstocks and blendstocks,
purchased products for resale, transportation and distribution
costs. Cost of products sold was $9,665.1 million for the
twelve months ended December 31, 2008, compared to
$6,246.7 million for the twelve months ended
December 31, 2007, an increase of $3,418.4 million, or
54.7%. This increase primarily was the result of the impact of
the Giant acquisition ($2,239.3 million, including a
non-cash LCM inventory write-down of $61.0 million in
2008) and higher crude oil costs at the El Paso
refinery. The average cost per barrel at the El Paso
refinery increased from $72.38 in 2007 to $102.77 in 2008.
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
$418.6 million for the twelve months ended
December 31, 2008, compared to $338.4 million for the
twelve months ended December 31, 2007, an increase of
$80.2 million, or 23.7%. This increase primarily resulted
from the Giant acquisition ($79.3 million), increases at
the El Paso refinery related to natural gas expense
($6.0 million), chemicals and catalysts ($4.0 million)
and property taxes ($1.5 million). These increases were
partially offset by decreased personnel costs at the
El Paso refinery mainly related to incentive compensation
($8.1 million), general maintenance costs
($2.0 million) and decreased insurance expense
($1.1 million).
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Table of Contents
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 $37.6 million for the twelve
months ended December 31, 2008, compared to
$16.8 million for the twelve months ended December 31,
2007, an increase of $20.8 million, or 123.8%. This
increase primarily resulted from the Giant acquisition
($12.1 million), and increased expenses at the El Paso
refinery related to personnel costs ($7.6 million), and
general maintenance expenses ($0.7 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, 2008, we performed a maintenance turnaround at
the north side of the El Paso refinery at a cost of
$28.9 million. 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.
Depreciation and Amortization. Depreciation
and amortization for the twelve months ended December 31,
2008, was $95.7 million, compared to $56.5 million for
the twelve months ended December 31, 2007. The increase
primarily was due to the Giant acquisition ($35.8 million)
and the completion of various capital projects during the last
part of 2007 and 2008 at the El Paso refinery, including
the flare gas recovery system, the acid and sulfur gas
facilities, crude unit upgrades and the construction of a new
laboratory.
Operating Income. Operating income was
$209.7 million for the twelve months ended
December 31, 2008, compared to $418.1 million for the
twelve months ended December 31, 2007, a decrease of
$208.4 million. This decrease primarily is attributable to
decreased refinery gross margins at the El Paso refinery.
Fiscal Year Ended December 31, 2008, Compared to Fiscal Year Ended December 31, 2007 Net Sales. Net sales primarily consist of gross sales of refined petroleum products, net of customer rebates, discounts, and excise taxes. Net sales for the twelve months ended December 31, 2008, were $10,455.6 million, compared to $7,092.4 million for the twelve months ended December 31, 2007, an increase of $3,363.2 million, or 47.4%. This increase primarily resulted from the impact of the Giant acquisition ($2,406.4 million) and higher sales prices for refined products at the El Paso refinery. The average sales price per barrel at the El Paso refinery increased from $89.38 in 2007 compared to $113.62 in 2008. This increase was partially offset by decreased sales volume at the El Paso refinery due to the turnaround in the fourth quarter of 2008. Our sales volume decreased by 3.1 million barrels, or 5.8%, to 50.8 million barrels for 2008 compared to 53.9 million barrels for 2007. Cost of Products Sold (exclusive of depreciation and amortization). Cost of products sold primarily includes cost of crude oil, other feedstocks and blendstocks, purchased products for resale, transportation and distribution costs. Cost of products sold was $9,665.1 million for the twelve months ended December 31, 2008, compared to $6,246.7 million for the twelve months ended December 31, 2007, an increase of $3,418.4 million, or 54.7%. This increase primarily was the result of the impact of the Giant acquisition ($2,239.3 million, including a non-cash LCM inventory write-down of $61.0 million in 2008) and higher crude oil costs at the El Paso refinery. The average cost per barrel at the El Paso refinery increased from $72.38 in 2007 to $102.77 in 2008. 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 $418.6 million for the twelve months ended December 31, 2008, compared to $338.4 million for the twelve months ended December 31, 2007, an increase of $80.2 million, or 23.7%. This increase primarily resulted from the Giant acquisition ($79.3 million), increases at the El Paso refinery related to natural gas expense ($6.0 million), chemicals and catalysts ($4.0 million) and property taxes ($1.5 million). These increases were partially offset by decreased personnel costs at the El Paso refinery mainly related to incentive compensation ($8.1 million), general maintenance costs ($2.0 million) and decreased insurance expense ($1.1 million).
Table of ContentsSelling, 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 $37.6 million for the twelve months ended December 31, 2008, compared to $16.8 million for the twelve months ended December 31, 2007, an increase of $20.8 million, or 123.8%. This increase primarily resulted from the Giant acquisition ($12.1 million), and increased expenses at the El Paso refinery related to personnel costs ($7.6 million), and general maintenance expenses ($0.7 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, 2008, we performed a maintenance turnaround at the north side of the El Paso refinery at a cost of $28.9 million. 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. Depreciation and Amortization. Depreciation and amortization for the twelve months ended December 31, 2008, was $95.7 million, compared to $56.5 million for the twelve months ended December 31, 2007. The increase primarily was due to the Giant acquisition ($35.8 million) and the completion of various capital projects during the last part of 2007 and 2008 at the El Paso refinery, including the flare gas recovery system, the acid and sulfur gas facilities, crude unit upgrades and the construction of a new laboratory. Operating Income. Operating income was $209.7 million for the twelve months ended December 31, 2008, compared to $418.1 million for the twelve months ended December 31, 2007, a decrease of $208.4 million. This decrease primarily is attributable to decreased refinery gross margins at the El Paso refinery. | EXCERPTS ON THIS PAGE:
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