"We are starting to experience a gradual pickup in demand in both our wholesale and retail business units," added Jeff Stevens, director, president and chief operating [image-nocss] officer of the company. "On the retail side,... we saw a slight uptick in demand, [and] we saw pretty good margins particularly as we got into June. We have continued to see that in July; ... July-over-July of last year had an increase of gasoline demand in our retail and our margins remain fairly strong.
Overall, the company reported a net loss of $7.8 million, or $0.11 per diluted share, for the quarter, excluding a non-cash loss from the impairment of goodwill of approximately $299.6 million. Including the goodwill impairment loss, the company reported a second quarter 2009 net loss of $307.3 million, or $4.20 per diluted share. The company's net income was $8.2 million, or $0.12 per diluted share, for the same period in 2008. The goodwill impairment loss represents a write-off of the entire balance of the company's goodwill from the application of impairment testing criteria under existing accounting rules. This non-cash charge does not impact the company's financial covenants.
Operating income for the second quarter of 2009, excluding the non-cash loss from the impairment of goodwill, was $31.7 million. Including the goodwill impairment loss, the company had an operating loss of $267.8 million for the second quarter of 2009. The company's operating income was $59.0 million for the same period in 2008. The decline in operating income was primarily due to lower refined product margins at the Yorktown refinery, excluding the lower of cost or market inventory adjustment, the goodwill impairment charge and lower refinery throughput. The lower margins were the result of increased crude oil and other feedstocks costs, coupled with weakness in finished product prices and lower value products.
"Throughout much of the quarter, refining margins were unseasonably low as a result of the prolonged economic slowdown," said CEO Paul Foster in a statement. "Earnings at the El Paso refinery were also negatively impacted by a partial shutdown of the refinery for planned maintenance, which decreased our throughput volumes in late May and early June.
"In the quarter, we generated cash flow from operations of approximately $23.7 million, and year-to-date, we have generated cash flow from operations of $120.5 million," he added. "We had no cash borrowings outstanding under the company's revolving credit facility in the quarter, and we have not made any cash borrowings under this facility since early in the first quarter of this year."
Commenting on current market conditions, Foster said, "Diesel margins continue to be soft as a result of high inventory levels and lower than normal seasonal demand. However, gasoline margins have improved in the past few weeks, and we are starting to experience a pickup in demand in our wholesale and retail business units."
Western Refining Inc. is an independent refining and marketing company based in El Paso, Texas. Western has a refinery in El Paso, two refineries in the Four Corners region of northern New Mexico and a refinery in Yorktown, Va. Western's asset portfolio also includes refined products terminals in Albuquerque, N.M., and Flagstaff, Ariz., asphalt terminals in Phoenix and Tucson, Ariz., 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.
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