Inventories

9 Months Ended

Sep. 30, 2011

5. Inventories

Inventories were as follows:


	September 30,		December 31,
	2011		2010
	(In thousands)
Refined products (1)	$	221,457	$	189,994
Crude oil and other raw materials		140,970		152,155
Lubricants		15,238		11,456
Convenience store merchandise		13,159		12,068

Inventories	$	390,824	$	365,673


(1)		Includes $83.2 million and $10.0 million of inventory valued using the first-in, first-out (“FIFO”) valuation method at September 30, 2011 and December 31, 2010, respectively.

The Company values its crude oil, other raw materials, and asphalt inventories at the lower of cost or market under the LIFO valuation method. Other than refined products inventories held by the Company’s retail and wholesale groups, refined products inventories are valued under the LIFO valuation method. Lubricants and convenience store merchandise are valued under the FIFO valuation method.

As of September 30, 2011 and December 31, 2010, refined products and crude oil and other raw materials totaled 5.0 million barrels and 5.7 million barrels, respectively. At September 30, 2011, the excess of the current cost of these crude oil, refined product, and other feedstock and blendstock inventories over LIFO cost was $180.5 million. At December 31, 2010, the excess of the current cost of these crude oil, refined product, and other feedstock and blendstock inventories over LIFO cost was $173.5 million.

During the three and nine months ended September 30, 2011, the Company recorded LIFO liquidations caused by permanently decreased levels in inventory volumes that were consistent with the Company’s expectations of 2011 year-end inventory levels of certain refined products, crude oil, and other raw materials. The effect of these liquidations increased gross profit by $1.3 million, net income by $0.9 million, and net earnings per diluted share by $0.01 for the three months ended September 30, 2011. The effect of these liquidations increased gross profit by $1.3 million, net income by $0.8 million, and net earnings per diluted share by $0.01 for the nine months ended September 30, 2011.

During the three and nine months ended September 30, 2010, the Company recorded LIFO liquidations caused by permanent decreases in inventory levels that were consistent with the Company’s expectations of year-end 2010 inventory levels of crude oil, other raw materials, and refined products at the Yorktown facility. The effect of these liquidations increased gross profit by $8.9 million, net income by $5.1 million, and earnings per diluted share by $0.06 for the three months ended September 30, 2010. The effect of these liquidations increased gross profit by $8.9 million, decreased net loss by $3.3 million, and decreased the loss per diluted share by $0.04 for the nine months ended September 30, 2010.

Average LIFO cost per barrel of the Company’s refined products and crude oil and other raw materials inventories as of September 30, 2011 and December 31, 2010 was as follows:


	September 30,						December 31,
	2011						2010
					Average						Average
					LIFO						LIFO
					Cost Per						Cost Per
	Barrels		LIFO Cost		Barrel		Barrels		LIFO Cost		Barrel
	(In thousands, except cost per barrel)
Refined products		2,108	$	138,280	$	65.60		2,574	$	180,031	$	69.94
Crude oil and other		2,916		140,970		48.34		3,115		152,155		48.85

		5,024	$	279,250		55.58		5,689	$	332,186		58.39