Segment Information

9 Months Ended

Sep. 30, 2011

Segment Information [Abstract]

Segment Information

3. Segment Information

     The Company is organized into three operating segments based on manufacturing and marketing criteria and the nature of the respective segment’s products and services, production processes, and types of customers. These segments are the refining group, the wholesale group, and the retail group. A description of each segment and its principal products follows:

     Refining Group. The Company’s refining group currently operates two refineries: one in El Paso, Texas (the “El Paso refinery”) and one near Gallup, New Mexico (the “Gallup refinery”). The refining group also operates a crude oil transportation and gathering pipeline system in New Mexico, an asphalt plant in El Paso, three stand-alone refined product distribution terminals, and four asphalt terminals. The two refineries make various grades of gasoline, diesel fuel, and other products from crude oil, other feedstocks, and blending components. The Company purchases crude oil, other feedstocks, and blending components from various third-party suppliers. The Company also acquires refined products through exchange agreements and from various third-party suppliers. The Company sells these products through its own service stations, its own wholesale channels, independent wholesalers and retailers, commercial accounts, and sales and exchanges with major oil companies.

     Wholesale Group. The Company’s wholesale group includes several lubricant and bulk petroleum distribution plants, unmanned fleet fueling operations, a bulk lubricant terminal facility, and a fleet of refined product and lubricant delivery trucks. The wholesale group distributes commercial wholesale petroleum products primarily in Arizona, California, Colorado, Nevada, New Mexico, Texas, Utah, and Virginia. The Company’s wholesale group purchases petroleum fuels and lubricants from third-party suppliers and from the refining group. As of January 2011, wholesale operations include the distribution of finished product through the Company’s Yorktown terminal facility. For the three months ended September 30, 2011, the wholesale group results included $385.2 million of net sales and $7.6 million of operating income related to the Company’s East Coast wholesale operations through the Yorktown facility. For the nine months ended September 30, 2011, the wholesale group results included $991.4 million of net sales and $11.9 million of operating income related to the Company’s East Coast wholesale operations through the Yorktown facility. The finished products sold through the Yorktown facility are purchased from third parties.

     Retail Group. The Company’s retail group operates service stations that include convenience stores or kiosks. The service stations sell various grades of gasoline, diesel fuel, general merchandise, and beverage and food products to the general public. The Company’s wholesale group supplies the majority of the gasoline and diesel fuel that the retail group sells. The Company purchases general merchandise and beverage and food products from various third-party suppliers. At September 30, 2011, the Company’s retail group operated 172 service stations and convenience stores or kiosks located in Arizona, Colorado, and New Mexico. During the second and third quarters of 2011, the retail group acquired two convenience stores for a net purchase price of $4.3 million, entered into six individual convenience store leases, and entered into a master agreement to lease 14 additional convenience stores. For the three and nine months ended September 30, 2011, the retail group results included $21.5 million and $24.5 million in net sales, respectively, from the convenience stores added during the second and third quarters of 2011. The operations of the additional convenience stores did not have a significant impact on the operating income of the retail group for the three and nine months ended September 30, 2011. Subsequent to September 30, 2011, the retail group entered into a master lease agreement to lease 34 additional convenience stores located in Texas and New Mexico.

     Seasonality. Demand for gasoline is generally higher during the summer months than during the winter months. In addition, higher volumes of ethanol are blended to the gasoline produced in the Southwest region during the winter months, thereby increasing the supply of gasoline. This combination of decreased demand and increased supply during the winter months can lower gasoline prices. As a result, the Company’s operating results for the first and fourth calendar quarters are generally lower than those for the second and third calendar quarters of each year. The effects of seasonal demand for gasoline are partially offset by increased demand during the winter months for diesel fuel in the Southwest.

     Segment Accounting Principles. Operating income for each segment consists of net revenues less cost of products sold; direct operating expenses; selling, general, and administrative expenses; maintenance turnaround expense; and depreciation and amortization. Cost of products sold reflects current costs adjusted, where appropriate, for last-in, first-out (“LIFO”) and lower of cost or market (“LCM”) inventory adjustments. Intersegment revenues are reported at prices that approximate market.

     Operations that are not included in any of the three segments mentioned above are included in the category “Other”. These operations consist primarily of corporate staff operations and other items not considered to be related to the normal business operations of the other segments. Other items of income and expense not specifically related to the other segments, including income taxes, are not allocated to operating segments.

     The total assets of each segment consist primarily of cash and cash equivalents; net property, plant, and equipment; inventories; net accounts receivable; and other assets directly associated with the individual segment’s operations. Included in the total assets of the corporate operations are cash and cash equivalents; various receivables, net of reserve for doubtful accounts; property, plant, and equipment; and other long-term assets.

     Disclosures regarding the Company’s reportable segments with reconciliations to consolidated totals for the three and nine months ended September 30, 2011 and 2010 are presented below:

	For the Three Months Ended September 30, 2011
	Refining		Wholesale		Retail
	Group		Group		Group		Other			Consolidated
	(In thousands)
Net sales to external customers	$	1,089,496	$	1,056,128	$	251,515	$	—		$	2,397,139
Intersegment revenues (1)		1,189,526		195,638		6,486		—			—
Operating income (loss)	$	171,446	$	12,707	$	2,482	$	(15,430	)	$	171,205
Other income (expense), net											(40,582	)
Income before income taxes										$	130,623
Depreciation and amortization	$	31,440	$	1,033	$	2,410	$	698		$	35,581
Capital expenditures		15,392		193		2,851		217			18,653

(1) Intersegment revenues of $1,391.7 million have been eliminated in consolidation.

	For the Nine Months Ended September 30, 2011
	Refining		Wholesale		Retail
	Group (2)		Group		Group		Other			Consolidated
	(In thousands)
Net sales to external customers	$	3,119,809	$	3,024,418	$	650,384	$	—		$	6,794,611
Intersegment revenues (1)		3,128,556		529,369		19,779		—			—
Operating income (loss)	$	431,671	$	30,275	$	6,689	$	(44,909	)	$	423,726
Other income (expense), net											(116,394	)
Income before income taxes										$	307,332
Depreciation and amortization	$	92,633	$	3,257	$	7,232	$	2,179		$	105,301
Capital expenditures		33,918		1,641		8,171		925			44,655
Total assets at September 30, 2011		2,118,314		285,176		165,960		451,940			3,021,390

(1)

Intersegment revenues of $1,391.7 and $3,677.7 million have been eliminated in consolidation for the three and nine months ended September 30, 2011.

(2)

Included in refining assets are $11.8 million in temporarily idled long-lived assets currently located at the Bloomfield facility that the Company intends to relocate and place into service at the Gallup refinery. The Company currently plans to place these assets in service during the scheduled 2012 Gallup maintenance turnaround. Also included in refining assets are $448.5 million in long-lived and intangible assets that the Company has temporarily idled at the Yorktown facility, which the Company plans to place back in service during 2013. Unforeseen circumstances could alter the Company’s planned time lines or prevent full utilization of these assets in the future. As such, risk of partial or full impairment exists.

	For the Three Months Ended September 30, 2010
	Refining		Wholesale		Retail
	Group		Group		Group		Other			Consolidated
	(In thousands)
Net sales to external customers	$	1,372,880	$	476,707	$	188,709	$	—		$	2,038,296
Intersegment revenues (1)		672,126		154,596		6,429		—			—
Operating income (loss)	$	51,947	$	5,449	$	7,606	$	(14,048	)	$	50,954
Other income (expense), net											(38,987	)
Income before income taxes										$	11,967
Depreciation and amortization	$	30,434	$	1,210	$	2,496	$	1,113		$	35,253
Capital expenditures		18,041		63		1,385		171			19,660

	For the Nine Months Ended September 30, 2010
	Refining		Wholesale		Retail
	Group		Group		Group		Other			Consolidated
	(In thousands)
Net sales to external customers	$	4,182,086	$	1,396,018	$	520,924	$	—		$	6,099,028
Intersegment revenues (1)		1,913,798		386,171		17,006		—			—
Operating income (loss)	$	96,505	$	17,185	$	13,883	$	(39,016	)	$	88,557
Other income (expense), net											(113,926	)
Loss before income taxes										$	(25,369	)
Depreciation and amortization	$	89,211	$	3,914	$	7,631	$	3,538		$	104,294
Capital expenditures		52,527		470		3,503		241			56,741
Total assets at September 30, 2010		2,238,670		158,246		155,731		109,035			2,661,682

(1) Intersegment revenues of $833.2 million and $2,317.0 million have been eliminated in consolidation for the three and nine months ended September 30, 2010, respectively.