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Section 1: 8-K (8-K)

Document
false0001510295 0001510295 2019-10-31 2019-10-31


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________
FORM 8-K
_____________________________________________

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 31, 2019
_____________________________________________
Marathon Petroleum Corporation
(Exact name of registrant as specified in its charter)
_____________________________________________
Delaware
 
001-35054
 
27-1284632
(State or other jurisdiction
of incorporation)
 
(Commission File Number)
 
(IRS Employer
Identification No.)

539 South Main Street, Findlay, Ohio 45840
(Address of principal executive offices) (Zip code)

Registrant’s telephone number, including area code: (419422-2121
_____________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
symbol(s)
Name of each exchange on which registered
Common Stock, par value $.01
MPC
New York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 





Item 2.02
Results of Operations and Financial Condition
On October 31, 2019, Marathon Petroleum Corporation (“MPC”) issued a press release announcing third-quarter 2019 earnings. The press release is included as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

Item 8.01
Other Events.
The information in Item 2.02 and Exhibit 99.1 of this Current Report on Form 8-K is incorporated herein by reference.
On October 31, 2019, MPC announced its intention to separate its Speedway business into an independent, publicly traded company and to form a special committee of its board of directors to enhance its evaluation of strategic alternatives regarding its Midstream business. A copy of the press release and a related investor presentation posted to the Investor Relations section of MPC’s website are attached hereto as Exhibit 99.2 and Exhibit 99.3, respectively, and are incorporated herein by reference.
MPC’s board of directors has also determined to submit and recommend a proposal at MPC’s 2020 annual meeting of shareholders (“2020 Annual Meeting”) to approve an amendment to MPC’s Restated Certificate of Incorporation to eliminate, over a three-year period, the classified structure of the board of directors and provide for the annual election of all directors.  Pursuant to MPC’s Restated Certificate of Incorporation, such proposal requires the affirmative vote of holders of at least 80% of MPC’s outstanding shares.
Forward-Looking Statements
This communication contains forward-looking statements within the meaning of federal securities laws regarding MPC. These forward-looking statements relate to, among other things, expectations, estimates and projections concerning the business and operations, strategy and value creation plans of MPC. In accordance with “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, these statements are accompanied by cautionary language identifying important factors, though not necessarily all such factors, that could cause future outcomes to differ materially from those set forth in the forward-looking statements. You can identify forward-looking statements by words such as “anticipate,” “believe,” “commitment,” “could,” “design,” “estimate,” “expect,” “forecast,” “goal,” “guidance,” “imply,” “intend,” “may,” “objective,” “opportunity,” “outlook,” “plan,“ “policy,” “position,” “potential,” “predict,” “priority,” “progress,” “project,” “proposition,” “prospective,” “pursue,” “seek,” “should,” “strategy,” “target,” “would,” “will” or other similar expressions that convey the uncertainty of future events or outcomes. Such forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the company’s control and are difficult to predict. Factors that could cause MPC’s actual results to differ materially from those implied in the forward-looking statements include but are not limited to: with respect to the planned Speedway separation, the ability to successfully complete the separation within the expected timeframe or at all, based on numerous factors including the macroeconomic environment, credit markets and equity markets, our ability to satisfy customary conditions, and the ability to achieve the strategic and other objectives discussed herein; with respect to the Midstream review, our ability to achieve the strategic and other objectives related to the strategic review discussed herein; the risk that the cost savings and any other synergies from the Andeavor transaction may not be fully realized or may take longer to realize than expected; future levels of revenues, refining and marketing margins, operating costs, retail gasoline and distillate margins, merchandise margins, income from operations, net income and earnings per share; future levels of capital, environmental and maintenance expenditures; general and administrative and other expenses; business strategies, growth opportunities and expected investment; share repurchase authorizations, including the timing and amounts of any such repurchases; the adequacy of capital resources and liquidity, including availability, timing and amounts of free cash flow necessary to execute business plans and to effect any share repurchases or dividend increases; the effect of restructuring or reorganization of business components; the potential effects of judicial or other proceedings on the business, financial condition, results of operations and cash flows; continued or further volatility in and/or degradation of general economic, market, industry or business conditions; the anticipated effects of actions of third parties such as competitors, activist investors or federal, foreign, state or local regulatory authorities or plaintiffs in litigation; the impact of adverse market conditions or other similar risks to those identified herein affecting MPLX; and the factors set forth under the heading “Risk Factors” in MPC’s Annual Report on Form 10-K for the year ended Dec. 31, 2018, and in Forms 10-Q, filed with the Securities and Exchange Commission (the “SEC”). Copies of MPC's Form 10-K and Forms 10-Q are available on the SEC website, MPC's website at https://www.marathonpetroleum.com/Investors/ or by contacting MPC's Investor Relations office. Copies of MPLX LP's Form 10-K and Forms 10-Q are available on the SEC website, MPLX's website at http://ir.mplx.com or by contacting MPLX's Investor Relations office.
We have based our forward-looking statements on our current expectations, estimates and projections about our business and industry. We caution that these statements are not guarantees of future performance and you should not rely unduly on them, as





they involve risks, uncertainties, and assumptions that we cannot predict. In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. While our management considers these assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. Accordingly, our actual results may differ materially from the future performance that we have expressed or forecast in our forward-looking statements.  We undertake no obligation to update any forward-looking statements except to the extent required by applicable law.
Important Additional Information
MPC, its directors and certain of its executive officers may be deemed to be participants in the solicitation of proxies from MPC shareholders in connection with the matters to be considered at MPC’s 2020 Annual Meeting. MPC intends to file a proxy statement with the SEC in connection with any such solicitation of proxies from MPC shareholders. MPC shareholders are encouraged to read any such proxy statement and accompanying white proxy card when they become available as they will contain important information. Information regarding the ownership of MPC’s directors and executive officers in MPC shares, restricted shares and options is included in their SEC filings on Forms 3, 4 and 5. More detailed information regarding the identity of potential participants, and their direct or indirect interests, by security holdings or otherwise, will be set forth in the proxy statement and other materials to be filed with the SEC in connection with MPC’s 2020 Annual Meeting. Information can also be found in MPC’s Annual Report on Form 10-K for the year ended Dec. 31, 2018, filed with the SEC, and Current Reports on Form 8-K filed with the SEC. Shareholders will be able to obtain any proxy statement, any amendments or supplements to the proxy statement and other documents filed by MPC with the SEC for no charge on the SEC website, MPC’s website at https://www.marathonpetroleum.com/Investors/ or by contacting MPC’s Investor Relations office.

Item 9.01
Financial Statements and Exhibits.
(d) Exhibits.


Exhibit Number
 
Description
 
 
 
 
 
Press Release issued by Marathon Petroleum Corporation on October 31, 2019
 
Strategic Review Press Release issued by Marathon Petroleum Corporation on October 31, 2019
 
October 2019 Investor Presentation
104
 
Cover Page Interactive Data File (embedded within the Inline XBRL document)






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
Marathon Petroleum Corporation
 
 
 
 
 
 
 
 
Date: October 31, 2019
By:
 
/s/ John J. Quaid
 
 
 
Name: John J. Quaid
 
 
 
Title: Vice President and Controller



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


400742265_mpcnewsreleaseletterheada11.jpg


Marathon Petroleum Corp. Reports Third-Quarter Results

Reported income of $1.1 billion, or $1.66 per diluted share; adjusted income of $1.1 billion, or $1.63 per diluted share
Generated $2.8 billion of operating cash flow
Returned $848 million to shareholders through dividends and share repurchases
Realized synergies of $283 million
Strong 98% refining utilization, and significant operational improvements on the West Coast
Record retail merchandise sales; 33 consecutive quarters of same-store merchandise growth
Announces intent to separate Speedway and formation of Midstream Special Committee

FINDLAY, Ohio, Oct. 31., 2019 – Marathon Petroleum Corp. (NYSE: MPC) today reported net income of $1.1 billion, or $1.66 per diluted share, for the third quarter 2019 compared to $737 million, or $1.62 per diluted share, for the third quarter of 2018. Excluding adjustments shown in the accompanying earnings release tables, third quarter 2019 adjusted net income was $1.1 billion, or $1.63 per diluted share, compared to $774 million, or $1.70 per diluted share, for the third quarter of 2018.
 
MPC returned $848 million of capital to shareholders during the third quarter of 2019, including $500 million in share repurchases.

“Our third-quarter results showcased our operational and commercial excellence,” said Gary R. Heminger, chairman and chief executive officer. “Refining system utilization was 98% and leveraging our commercial expertise drove strong capture of 94% vs. market indicators. The retail segment delivered solid fuel margins and exceptional merchandise sales growth across our nationwide footprint, marking the 33rd consecutive quarter of same-store merchandise sales growth.

“The focus of the first year of our combination was execution to unlock unrealized value. We have made significant, observable progress improving mechanical availability and operational integrity, expanding our commercial capabilities, and reducing costs. We have converted roughly 550 of our targeted 700 retail stores and our synergy capture across the company is significantly ahead-of-schedule and on-track to exceed the targeted $600 million by year end.”

“Our company has a history of bold strategic actions. Creating value for our shareholders has always been and remains a top priority. Today we announced our next step to unlocking future value: our intent to separate Speedway into an independent company. Additionally, we are forming a special committee of the Board of Directors to continue evaluating alternatives to enhance value across our midstream business.”

Synergies

MPC realized $283 million of synergies in the third quarter. Some examples of realized synergies include: approximately $55 million from supply and distribution optimization, approximately $40 million from


1




catalyst reformulation, and approximately $24 million from marketing-related enhancements. The company has realized $686 million of total synergies through the first nine months of the year, and is on track to exceed the $600 million of annual gross run-rate synergies targeted for the end of 2019.

Segment Results
In the third quarter of 2019, total income from operations was $2.0 billion compared to $1.4 billion for the third quarter of 2018. Adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA) was $3.1 billion in the third quarter of 2019 compared to $2.2 billion for the same quarter last year. Adjusted EBITDA excludes refining planned turnaround costs of $164 million in the third quarter of 2019 and $197 million in the third quarter of 2018.

 
Three Months Ended 
September 30,
(In millions)
 
2019
 
 
2018
Income from Operations by Segment
 
 
 
 
 
Refining & Marketing
$
883

 
$
666

Retail
 
442

 
 
161

Midstream
 
919

 
 
679

Items not allocated to segments:
 
 
 
 
 
    Corporate and other unallocated items
 
(198
)
 
 
(99
)
    Transaction-related costs
 
(22
)
 
 
(4
)
        Income from operations
$
2,024

 
$
1,403



Midstream
Midstream segment income from operations, which primarily reflects the results of MPLX LP (NYSE: MPLX), was $919 million in the third quarter of 2019, compared with $679 million for the third quarter of 2018. The increase was due to growth across MPLX’s businesses as well as contributions from legacy Andeavor Logistics. Segment EBITDA was $1.2 billion in the third quarter 2019 versus $884 million for the same quarter last year.

Retail
Retail segment income from operations was $442 million in the third quarter of 2019, compared with $161 million in the third quarter of 2018. The increase in earnings was largely related to the addition of the legacy Andeavor retail operations and higher fuel and merchandise margin contributions across the legacy Speedway system. Segment EBITDA was $555 million in the third quarter 2019 versus $237 million for the same quarter last year.
Retail fuel margin increased to 24.5 cents per gallon in the third quarter of 2019 from 16.5 cents per gallon in the third quarter of 2018. Same-store merchandise sales increased by 5.2 percent year-over-year and same-store gasoline sales volume decreased by 2.8 percent year-over-year.

Refining & Marketing (R&M)
R&M segment income from operations was $883 million in the third quarter of 2019 compared with $666 million in the same quarter of 2018. The year-over-year increase was primarily due to higher throughputs as a result of the Andeavor combination. R&M margin was $14.66 per barrel for the quarter with a clean product yield of 83 percent.


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Segment adjusted EBITDA was $1.4 billion in the third quarter of 2019 versus $1.1 billion for the same quarter last year. Segment adjusted EBITDA excludes refinery planned turnaround costs which totaled $164 million in the third quarter of 2019. This compares to $197 million of turnaround-related costs in the third quarter of 2018.
Crude capacity utilization was 98 percent, resulting in total throughputs of 3.2 million barrels per day for the third quarter of 2019, which was 1.1 million barrels per day higher than the throughput for the third quarter of last year. The increase was primarily due to the addition of the Andeavor refineries.

Items Not Allocated to Segments and Other
Items not allocated to segments totaled $220 million of expenses in the third quarter of 2019 compared to $103 million in the third quarter of 2018. Third quarter 2019 results include $22 million of transaction-related expenses and the inclusion of legacy Andeavor corporate costs.
 
Strong Financial Position and Liquidity

As of Sept. 30, 2019, the company had $1.5 billion in cash and cash equivalents (excluding MPLX’s cash and cash equivalents of $41 million), $5 billion available under a five-year bank revolving credit facility, $1 billion available under a 364-day bank revolving credit facility, and $750 million available under its trade receivables securitization facility.

Strategic Update

In a separate release this morning, MPC announced several strategic actions to enhance shareholder value. The company plans to separate its Speedway business into an independent company and also form a special committee of MPC’s board to continue to evaluate alternatives to enhance value across the midstream business. Among other aspects, the special committee will analyze the strategic fit of assets with MPC, the ability to realize full valuation credit for midstream earnings and cash flow, balance sheet impacts including liquidity and credit ratings, transaction tax impacts, separation costs, and overall complexity.

During the quarter, the Gray Oak Pipeline project progressed and is expected to be placed in service by the end of 2019. The pipeline will provide crude oil transportation from the Permian and Eagle Ford Basins to the Texas Gulf Coast region, including Corpus Christi. The Gray Oak pipeline will connect to multiple terminals including the South Texas Gateway Terminal, which is expected to start up by mid-2020. The terminal is designed to have two deepwater docks, with initial storage capacity of approximately 7 million barrels and up to 800 mbpd of throughput capacity. MPC owns a 25 percent interest in both the Gray Oak Pipeline and the South Texas Gateway Terminal.

The Wink-to-Webster crude oil pipeline, in which MPLX has an equity interest, remains on schedule to be competed in the first half of 2021. The 36-inch diameter pipeline will originate in the Permian Basin and have destination points in the Houston market, including MPC’s Galveston Bay refinery.

Also in the Permian, the Whistler Pipeline is being designed to transport approximately 2 billion cubic feet per day of natural gas from Waha, Texas to the Agua Dulce market in South Texas, ultimately reaching MPC’s Galveston Bay refinery. MPLX has an equity interest in Whistler, which is expected to be placed in service in the second half of 2021.

The company also continues to progress the reversal of the Capline pipeline, with a purge of the mainline initiated in the fourth quarter. Once reversed, Capline will be capable of supplying discounted mid-continent and Canadian crude to St. James, Louisiana, which has a direct connection to MPC’s Garyville


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refinery. Capline, which is partially owned by MPC and operated by MPLX, is expected to begin light crude service in the first half of 2021, with heavy crude service expected in 2022.
In the retail segment, Speedway continues to expand its brand through store conversions of the acquired Andeavor sites. As of September 30, 2019, Speedway had completed 379 store conversions in 2019, bringing the total number of conversions since the combination with Andeavor to 549. The company remains on track to complete 700 total cumulative store conversions by the end of 2019, including locations on the West Coast and in the Southwest.
MPC also continues to expand its presence in Mexico. In addition to significant exports from the Gulf Coast and investments in refined product distribution, the company is now supplying over 215 retail sites, including 171 that are branded ARCO as of September 30, 2019. The entire network of sites in Mexico provides additional product outlets for and enhanced integration with the refining business.

In preparation for the IMO fuel specification change, the company has completed infrastructure enhancements at multiple refineries to decrease on-purpose high sulfur fuel oil production and receive outside feedstocks into resid destruction units. The company progressed the completion of its Garyville crude revamp and coker drum replacement projects. The crude project is expected to be completed by the end of 2019. The coker project is expected to increase unit capacity by approximately 14 percent and remains on track to be completed in two phases, fourth quarter of 2019 and first quarter of 2020.

Construction continues on the Dickinson Renewable Diesel project, which remains on-track for planned completion in late 2020. The project will convert the Dickinson refinery into a 12 mbpd biorefinery that will process corn and soybean oil to produce renewable diesel. MPC intends to sell the renewable diesel into the California market to comply with the California Low Carbon Fuel Standard.

The Los Angeles Refinery Integration and Compliance (LARIC) project to physically connect the adjacent Carson and Wilmington facilities for cleaner and more efficient operations is nearing completion. The expansion of the Wilmington hydrocracker is on track to be completed in the first half of 2020.

Fourth Quarter 2019 Outlook
Refining & Marketing Segment:
 
 
Refining operating costs per barrel(a)
$
6.10

Distribution costs (in millions)
$
1,300

Refining planned turnaround costs (in millions)
$
185

Depreciation and amortization (in millions)
$
425

 
 
 
Refinery throughputs (mbpd):
 
 
    Crude oil refined
 
2,775

    Other charge and blendstocks
 
175

        Total
 
2,950

 
 
 
(a) 
Includes refining major maintenance and operating costs. Excludes turnaround and depreciation and amortization expenses.

Retail Segment:
Range
Fuel sales (millions of gallons)
 
2,450

 
 
2,575

Merchandise sales (in $ millions)
 
1,500

 
 
1,600

 
 
 
 
 
 
Corporate and unallocated items (in $ millions)
 
195

 
 
 



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Conference Call

At 9:30 a.m. EDT today, MPC will hold a conference call and webcast to discuss the reported results and provide an update on company operations. Interested parties may listen by visiting MPC’s website at http://www.marathonpetroleum.com and clicking on the “2019 Third-Quarter Financial Results” link. A replay of the webcast will be available on the company’s website for two weeks. Financial information, including the earnings release and other investor-related material, will also be available online prior to the conference call and webcast at https://www.marathonpetroleum.com.

###

About Marathon Petroleum Corporation

Marathon Petroleum Corporation (MPC) is a leading, integrated, downstream energy company headquartered in Findlay, Ohio. The company operates the nation’s largest refining system with more than 3 million barrels per day of crude oil capacity across 16 refineries. MPC’s marketing system includes branded locations across the United States, including Marathon brand retail outlets. Speedway LLC, an MPC subsidiary, owns and operates retail convenience stores across the United States. MPC also owns the general partner and majority limited partner interest in MPLX LP, a midstream company which owns and operates gathering, processing, and fractionation assets, as well as crude oil and light product transportation and logistics infrastructure. More information is available at www.marathonpetroleum.com.


Investor Relations Contacts: (419) 421-2071
Kristina Kazarian, Vice President, Investor Relations
Taryn Erie, Manager, Investor Relations
Doug Wendt, Manager, Investor Relations

Media Contacts:
Hamish Banks, Vice President, Communications (419) 421-2521
Jamal Kheiry, Manager, Communications (419) 421-3312


References to Earnings and Defined Terms
References to earnings mean net income attributable to MPC from the statements of income. Unless otherwise indicated, references to earnings and earnings per share are MPC’s share after excluding amounts attributable to noncontrolling interests. Discretionary free cash flow is defined as operating cash flow less maintenance and regulatory capital.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of federal securities laws regarding Marathon Petroleum Corporation (MPC). These forward-looking statements relate to, among other things, expectations, estimates and projections concerning the business and operations, strategy and value creation plans of MPC. In accordance with “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, these statements are accompanied by cautionary language identifying important factors, though not necessarily all such factors, that could cause future outcomes to differ materially from those set forth in the forward-looking statements. You can identify forward-looking statements by words such as “anticipate,” “believe,” “commitment,” “could,” “design,” “estimate,” “expect,” “forecast,” “goal,” “guidance,” “imply,” “intend,” “may,” “objective,” “opportunity,” “outlook,” “plan,“ “policy,” “position,” “potential,” “predict,” “priority,” “project,” “proposition,” “prospective,” “pursue,” “seek,” “should,” “strategy,” “target,” “would,” “will” or other similar expressions that convey the uncertainty of future events or outcomes. Such forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the company’s control and are difficult


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to predict. Factors that could cause MPC’s actual results to differ materially from those implied in the forward-looking statements include but are not limited to: with respect to the planned Speedway separation, the ability to successfully complete the separation within the expected timeframe or at all, based on numerous factors including the macroeconomic environment, credit markets and equity markets, our ability to satisfy customary conditions, and the ability to achieve the strategic and other objectives discussed herein; with respect to the Midstream review, our ability to achieve the strategic and other objectives related to the strategic review discussed herein; the risk that the cost savings and any other synergies from the Andeavor transaction may not be fully realized or may take longer to realize than expected; disruption from the Andeavor transaction making it more difficult to maintain relationships with customers, employees or suppliers; risks relating to any unforeseen liabilities of Andeavor; risks related to the acquisition of Andeavor Logistics LP by MPLX LP (MPLX), including the risk that anticipated opportunities and any other synergies from or anticipated benefits of the transaction may not be fully realized or may take longer to realize than expected, including whether the transaction will be accretive within the expected timeframe or at all, or disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers; the ability to complete any divestitures on commercially reasonable terms and/or within the expected timeframe, and the effects of any such divestitures on the business, financial condition, results of operations and cash flows; future levels of revenues, refining and marketing margins, operating costs, retail gasoline and distillate margins, merchandise margins, income from operations, net income and earnings per share; the regional, national and worldwide availability and pricing of refined products, crude oil, natural gas, NGLs and other feedstocks; consumer demand for refined products; the ability to manage disruptions in credit markets or changes to credit ratings; future levels of capital, environmental and maintenance expenditures; general and administrative and other expenses; the success or timing of completion of ongoing or anticipated capital or maintenance projects; the reliability of processing units and other equipment; business strategies, growth opportunities and expected investment; share repurchase authorizations, including the timing and amounts of such repurchases; the adequacy of capital resources and liquidity, including availability, timing and amounts of free cash flow necessary to execute business plans and to effect any share repurchases or dividend increases; the effect of restructuring or reorganization of business components; the potential effects of judicial or other proceedings on the business, financial condition, results of operations and cash flows; continued or further volatility in and/or degradation of general economic, market, industry or business conditions; compliance with federal and state environmental, economic, health and safety, energy and other policies and regulations, including the cost of compliance with the Renewable Fuel Standard, and/or enforcement actions initiated thereunder; the anticipated effects of actions of third parties such as competitors, activist investors or federal, foreign, state or local regulatory authorities or plaintiffs in litigation; the impact of adverse market conditions or other similar risks to those identified herein affecting MPLX; and the factors set forth under the heading “Risk Factors” in MPC’s Annual Report on Form 10-K for the year ended Dec. 31, 2018, and in Forms 10-Q, filed with the SEC. Copies of MPC's Form 10-K and Forms 10-Q are available on the SEC website, MPC's website at https://www.marathonpetroleum.com/Investors/ or by contacting MPC's Investor Relations office. Copies of MPLX's Form 10-K and Forms 10-Q are available on the SEC website, MPLX's website at http://ir.mplx.com or by contacting MPLX's Investor Relations office.


We have based our forward-looking statements on our current expectations, estimates and projections about our business and industry. We caution that these statements are not guarantees of future performance and you should not rely unduly on them, as they involve risks, uncertainties, and assumptions that we cannot predict. In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. While our management considers these assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. Accordingly, our actual results may differ materially from the future performance that we have expressed or forecast in our forward-looking statements. We undertake no obligation to update any forward-looking statements except to the extent required by applicable law.


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Important Additional Information
MPC, its directors and certain of its executive officers may be deemed to be participants in the solicitation of proxies from MPC shareholders in connection with the matters to be considered at MPC’s 2020 Annual Meeting. MPC intends to file a proxy statement with the SEC in connection with any such solicitation of proxies from MPC shareholders. MPC shareholders are encouraged to read any such proxy statement and accompanying white proxy card when they become available as they will contain important information. Information regarding the ownership of MPC’s directors and executive officers in MPC shares, restricted shares and options is included in their SEC filings on Forms 3, 4 and 5. More detailed information regarding the identity of potential participants, and their direct or indirect interests, by security holdings or otherwise, will be set forth in the proxy statement and other materials to be filed with the SEC in connection with MPC’s 2020 Annual Meeting. Information can also be found in MPC’s Annual Report on Form 10-K for the year ended Dec. 31, 2018, filed with the SEC, and Current Reports on Form 8-K filed with the SEC. Shareholders will be able to obtain any proxy statement, any amendments or supplements to the proxy statement and other documents filed by MPC with the SEC for no charge on the SEC website, MPC’s website at https://www.marathonpetroleum.com/Investors/ or by contacting MPC’s Investor Relations office.



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Consolidated Statements of Income (Unaudited)

Three Months Ended 
September 30,
 
Nine Months Ended 
September 30,
(In millions, except per-share data)
 
2019
 
 
2018
 
 
2019
 
 
2018
Revenues and other income:
 
 
 
 
 
 
 
 
 
 
 
    Sales and other operating revenues
$
31,043

 
$
22,988

 
$
92,857

 
$
64,171

    Income from equity method investments
 
124

 
 
96

 
 
330

 
 
262

    Net gain on disposal of assets
 
4

 
 
1

 
 
222

 
 
6

    Other income
 
31

 
 
47

 
 
96

 
 
122

        Total revenues and other income
 
31,202

 
 
23,132

 
 
93,505

 
 
64,561

Costs and expenses:
 
 
 
 
 
 
 
 
 
 
 
    Cost of revenues (excludes items below)
 
27,300

 
 
20,606

 
 
82,942

 
 
57,772

    Depreciation and amortization
 
855

 
 
555

 
 
2,660

 
 
1,616

    Selling, general and administrative expenses
 
833

 
 
445

 
 
2,618

 
 
1,271

    Other taxes
 
190

 
 
123

 
 
550

 
 
348

        Total costs and expenses
 
29,178

 
 
21,729

 
 
88,770

 
 
61,007

Income from operations
 
2,024

 
 
1,403

 
 
4,735

 
 
3,554

    Net interest and other financial costs
 
317

 
 
240

 
 
945

 
 
618

Income before income taxes
 
1,707

 
 
1,163

 
 
3,790

 
 
2,936

    Provision for income taxes
 
340

 
 
222

 
 
797

 
 
525

Net income
 
1,367

 
 
941

 
 
2,993

 
 
2,411

Less net income attributable to:
 
 
 
 
 
 
 
 
 
 
 
Redeemable noncontrolling interest
 
20

 
 
19

 
 
61

 
 
55

Noncontrolling interests
 
252

 
 
185

 
 
738

 
 
527

Net income attributable to MPC
$
1,095

 
$
737

 
$
2,194

 
$
1,829

 
 
 
 
 
 
 
 
 
 
 
 
Per-share data
 
 
 
 
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
 
 
 
 
    Net income attributable to MPC per share
$
1.67

 
$
1.63

 
$
3.31

 
$
3.96

    Weighted average shares:
 
656

 
 
451

 
 
663

 
 
462

Diluted:
 
 
 
 
 
 
 
 
 
 
 
    Net income attributable to MPC per share
$
1.66

 
$
1.62

 
$
3.28

 
$
3.92

    Weighted average shares:
 
660

 
 
456

 
 
668

 
 
466

 
 
 
 
 
 
 
 
 
 
 
 



8




Income Summary (Unaudited)
 
Three Months Ended 
September 30,
 
Nine Months Ended 
September 30,
(In millions)
 
2019(a)
 
 
2018
 
 
2019(a)
 
 
2018
Income from Operations by segment
 
 
 
 
 
 
 
 
 
 
 
  Refining & Marketing
$
883

 
$
666

 
$
1,455

 
$
1,558

  Retail
 
442

 
 
161

 
 
1,105

 
 
415

  Midstream
 
919

 
 
679

 
 
2,705

 
 
1,863

  Items not allocated to segments:
 
 
 
 
 
 
 
 
 
 
 
      Corporate and other unallocated items
 
(198
)
 
 
(99
)
 
 
(568
)
 
 
(269
)
      Capline restructuring gain
 

 
 

 
 
207

 
 

      Transaction-related costs(b)
 
(22
)
 
 
(4
)
 
 
(147
)
 
 
(14
)
      Litigation
 

 
 

 
 
(22
)
 
 

      Impairments
 

 
 

 
 

 
 
1

Income from operations
 
2,024

 
 
1,403

 
 
4,735

 
 
3,554

Net interest and other financial costs
 
317

 
 
240

 
 
945

 
 
618

Income before income taxes
 
1,707

 
 
1,163

 
 
3,790

 
 
2,936

Provision for income taxes
 
340

 
 
222

 
 
797

 
 
525

Net income
 
1,367

 
 
941

 
 
2,993

 
 
2,411

Less net income attributable to:
 
 
 
 
 
 
 
 
 
 
 
Redeemable noncontrolling interest
 
20

 
 
19

 
 
61

 
 
55

Noncontrolling interests
 
252

 
 
185

 
 
738

 
 
527

Net income attributable to MPC
$
1,095

 
$
737

 
$
2,194

 
$
1,829

 
 
 
 
 
 
 
 
 
 
 
 
(a) 
Includes the results of Andeavor from the October 1, 2018 acquisition date forward.
(b) 
Includes costs related to the Andeavor acquisition including financial advisor and legal fees, employee severance, and other expenses.


     
Capital Expenditures and Investments (Unaudited)
 
Three Months Ended 
September 30,
 
Nine Months Ended 
September 30,
(In millions)
 
2019(a)
 
 
2018
 
 
2019(a)
 
 
2018
Refining & Marketing
$
561

 
$
226

 
$
1,385

 
$
613

Retail
 
177

 
 
98

 
 
370

 
 
225

Midstream
 
783

 
 
593

 
 
2,420

 
 
1,676

Corporate and Other(b)
 
62

 
 
28

 
 
141

 
 
97

    Total
$
1,583

 
$
945

 
$
4,316

 
$
2,611

 
 
 
 
 
 
 
 
 
 
 
 
(a) 
Includes the results of Andeavor from the October 1, 2018 acquisition date forward.
(b) 
Includes capitalized interest of $32 million, $21 million, $97 million and $55 million, respectively.



9




Refining & Marketing Operating Statistics (Unaudited)
 
Three Months Ended 
September 30,
 
Nine Months Ended 
September 30,
(per barrel)
 
2019
 
 
2018
 
 
2019
 
 
2018
Refining & Marketing margin(a)
$
14.66

 
$
14.25

 
$
13.72

 
$
13.48

Less:
 
 
 
 
 
 
 
 
 
 
 
Refining operating costs(b)
 
5.44

 
 
4.25

 
 
5.45

 
 
4.55

Distribution costs(c)
 
4.31

 
 
4.17

 
 
4.48

 
 
4.02

Other(d)
 
(0.05
)
 
 
(0.17
)
 
 
(0.05
)
 
 
(0.15
)
Refining planned turnaround costs
 
0.56

 
 
1.06

 
 
0.69

 
 
0.80

Depreciation and amortization
 
1.45

 
 
1.38

 
 
1.46

 
 
1.40

Purchase accounting - depreciation and amortization(e)
 
(0.09
)
 
 

 
 
(0.01
)
 
 

Refining & Marketing segment income
$
3.04

 
$
3.56

 
$
1.70

 
$
2.86

 
 
 
 
 
 
 
 
 
 
 
 
Refining & Marketing refined product sales volume
(mbpd)(f)
 
3,706

 
 
2,382

 
 
3,730

 
 
2,346

Crude oil capacity utilization (percent)(g)
 
98

 
 
97

 
 
97

 
 
97

Refinery throughputs (mbpd):(h)
 
 
 
 
 
 
 
 
 
 
 
    Crude oil refined
 
2,969

 
 
1,833

 
 
2,925

 
 
1,819

    Other charge and blendstocks
 
187

 
 
199

 
 
200

 
 
173

        Total
 
3,156

 
 
2,032

 
 
3,125

 
 
1,992

Sour crude oil throughput (percent)
 
47

 
 
52

 
 
49

 
 
53

Sweet crude oil throughput (percent)
 
53

 
 
48

 
 
51

 
 
47

Refined product yields (mbpd):(h)
 
 
 
 
 
 
 
 
 
 
 
    Gasoline
 
1,553

 
 
942

 
 
1,538

 
 
942

    Distillates
 
1,103

 
 
676

 
 
1,091

 
 
659

    Propane
 
56

 
 
40

 
 
55

 
 
37

    Feedstocks and special products
 
334

 
 
313

 
 
345

 
 
294

    Heavy fuel oil
 
44

 
 
29

 
 
47

 
 
30

    Asphalt
 
106

 
 
73

 
 
90

 
 
68

        Total
 
3,196

 
 
2,073

 
 
3,166

 
 
2,030

(a) 
Sales revenue less cost of refinery inputs and purchased products, divided by total refinery throughputs.
(b) 
Includes refining major maintenance and operating costs. Excludes planned turnaround and depreciation and amortization expense.
(c) 
Includes fees paid to MPLX, on a per barrel throughput basis, of $2.74, $3.22, $2.79 and $3.08, respectively. Excludes depreciation and amortization expense.
(d) 
Includes income from equity method investments, net gain on disposal of assets and other income.
(e) 
Reflects the cumulative effects related to a measurement period adjustment arising from the finalization of purchase accounting.
(f) 
Includes intersegment sales.
(g) 
Based on calendar day capacity, which is an annual average that includes downtime for planned maintenance and other normal operating activities.
(h) 
Excludes inter-refinery volumes of 116 mbpd, 54 mbpd, 98 mbpd and 53 mbpd, respectively.



10




Refining & Marketing Operating Statistics by Region (Unaudited)
 
Three Months Ended 
September 30,
 
Nine Months Ended 
September 30,
 
 
2019
 
 
2018
 
 
2019
 
 
2018
Gulf Coast
 
 
 
 
 
 
 
 
 
 
 
(per barrel)
 
 
 
 
 
 
 
 
 
 
 
Refining & Marketing margin dollars(a)
$
11.26

 
$
N/A

 
$
9.46

 
$
N/A

Refining operating costs(b)
$
4.23

 
$
3.54

 
$
4.05

 
$
4.16

Refining planned turnaround costs
$
0.15

 
$
0.30

 
$
0.18

 
$
0.57

Refining depreciation and amortization(c)
$
1.08

 
$
1.03

 
$
1.08

 
$
1.03

 
 
 
 
 
 
 
 
 
 
 
 
Refinery throughputs (mbpd):(d)
 
 
 
 
 
 
 
 
 
 
 
    Crude oil refined
 
1,115

 
 
1,150

 
 
1,146

 
 
1,121

    Other charge and blendstocks
 
203

 
 
204

 
 
183

 
 
187

        Total
 
1,318

 
 
1,354

 
 
1,329

 
 
1,308

Sour crude oil throughput (percent)
 
62

 
 
63

 
 
61

 
 
62

Sweet crude oil throughput (percent)
 
38

 
 
37

 
 
39

 
 
38

Refined product yields (mbpd):(d)
 
 
 
 
 
 
 
 
 
 
 
    Gasoline
 
559

 
 
567

 
 
565

 
 
557

    Distillates
 
429

 
 
442

 
 
438

 
 
421

    Propane
 
27

 
 
27

 
 
27

 
 
24

    Feedstocks and special products
 
297

 
 
314

 
 
295

 
 
301

    Heavy fuel oil
 
14

 
 
16

 
 
15

 
 
18

    Asphalt
 
20

 
 
22

 
 
21

 
 
21

        Total
 
1,346

 
 
1,388

 
 
1,361

 
 
1,342

 
 
 
 
 
 
 
 
 
 
 
 
Mid-Continent
 
 
 
 
 
 
 
 
 
 
 
(per barrel)
 
 
 
 
 
 
 
 
 
 
 
Refining & Marketing margin(a)
$
17.42

 
$
N/A

 
$
17.69

 
$
N/A

Refining operating costs(b)
$
4.88

 
$
5.26

 
$
5.08

 
$
4.96

Refining planned turnaround costs
$
1.26

 
$
2.37

 
$
0.75

 
$
1.13

Refining depreciation and amortization(c)
$
1.43

 
$
1.68

 
$
1.54

 
$
1.70

 
 
 
 
 
 
 
 
 
 
 
 
Refinery throughputs (mbpd):(d)
 
 
 
 
 
 
 
 
 
 
 
    Crude oil refined
 
1,197

 
 
683

 
 
1,137

 
 
698

    Other charge and blendstocks
 
48

 
 
49

 
 
51

 
 
39

        Total
 
1,245

 
 
732

 
 
1,188

 
 
737

Sour crude oil throughput (percent)
 
27

 
 
34

 
 
27

 
 
37

Sweet crude oil throughput (percent)
 
73

 
 
66

 
 
73

 
 
63

Refined product yields (mbpd):(d)
 
 
 
 
 
 
 
 
 
 
 
    Gasoline
 
628

 
 
375

 
 
618

 
 
385

    Distillates
 
415

 
 
234

 
 
405

 
 
238

    Propane
 
19

 
 
13

 
 
19

 
 
13

    Feedstocks and special products
 
86

 
 
53

 
 
65

 
 
46

    Heavy fuel oil
 
14

 
 
13

 
 
15

 
 
12

    Asphalt
 
84

 
 
51

 
 
68

 
 
47

        Total
 
1,246

 
 
739

 
 
1,190

 
 
741



11




 
Three Months Ended 
September 30,
 
Nine Months Ended 
September 30,
 
 
2019
 
 
2018
 
 
2019
 
 
2018
West Coast
 
 
 
 
 
 
 
 
 
 
 
(per barrel)
 
 
 
 
 
 
 
 
 
 
 
Refining & Marketing margin(a)
$
15.85

 
$
N/A

 
$
14.85

 
$
N/A

Refining operating costs(b)
$
7.74

 
$

 
$
7.98

 
$

Refining planned turnaround costs
$
0.02

 
$

 
$
1.45

 
$

Refining depreciation and amortization(c)
$
1.08

 
$

 
$
1.06

 
$

 
 
 
 
 
 
 
 
 
 
 
 
Refinery throughputs (mbpd):(d)
 
 
 
 
 
 
 
 
 
 
 
    Crude oil refined
 
657

 
 

 
 
642

 
 

    Other charge and blendstocks
 
52

 
 

 
 
64

 
 

        Total
 
709

 
 

 
 
706

 
 

Sour crude oil throughput (percent)
 
59

 
 

 
 
63

 
 

Sweet crude oil throughput (percent)
 
41

 
 

 
 
37

 
 

Refined product yields (mbpd):(d)
 
 
 
 
 
 
 
 
 
 
 
    Gasoline
 
366

 
 

 
 
355

 
 

    Distillates
 
259

 
 

 
 
248

 
 

    Propane
 
10

 
 

 
 
9

 
 

    Feedstocks and special products
 
60

 
 

 
 
76

 
 

    Heavy fuel oil
 
23

 
 

 
 
24

 
 

    Asphalt
 
2

 
 

 
 
1

 
 

        Total
 
720

 
 

 
 
713

 
 

 
 
 
 
 
 
 
 
 
 
 
 
(a) 
Sales revenue less cost of refinery inputs and purchased products, divided by refinery throughputs, excluding inter-refinery transfer volumes.
(b)
Includes refining major maintenance and operating costs. Excludes planned turnaround and depreciation and amortization expense.
(c) 
Purchase accounting measurement period adjustments related to prior periods are not allocated to regional depreciation and amortization.
(d) 
Includes inter-refinery transfer volumes.



12




Retail Operating Statistics (Unaudited)
 
Three Months Ended 
September 30,
 
Nine Months Ended 
September 30,
 
 
2019
 
 
2018
 
 
2019
 
 
2018
Speedway fuel sales (millions of gallons)
 
1,992

 
 
1,474

 
 
5,820

 
 
4,317

Direct dealer fuel sales (millions of gallons)
 
653

 
 
N/A
 
 
1,929

 
 
N/A
Retail fuel margin (dollars per gallon)(a)
$
0.2453

 
$
0.1651

 
$
0.2286

 
$
0.1620

Merchandise sales (in millions)
$
1,703

 
$
1,339

 
$
4,736

 
$
3,753

Merchandise margin (in millions)
$
498

 
$
384

 
$
1,376

 
$
1,069

Merchandise margin percent
 
29.2
 %
 
 
28.7
 %
 
 
29.1
 %
 
 
28.5
 %
Same store gasoline sales volume (period over period)(b)
 
(2.8
)%
 
 
(1.2
)%
 
 
(2.8
)%
 
 
(1.8
)%
Same store merchandise sales (period over period)(b)(c)
 
5.2
 %
 
 
4.9
 %
 
 
5.6
 %
 
 
3.4
 %
Total convenience stores at period-end
 
3,931

 
 
2,745

 
 
 
 
 
 
Direct dealer locations at period-end
 
1,067

 
 
N/A
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a) 
Includes bankcard processing fees (as applicable).
(b) 
Same store comparison includes only locations owned at least 13 months.
(c) 
Excludes cigarettes.


Midstream Operating Statistics (Unaudited)
 
Three Months Ended 
September 30,
 
Nine Months Ended 
September 30,
 
 
2019
 
 
2018
 
 
2019
 
 
2018
Pipeline throughputs (mbpd)(a)
 
5,319

 
 
3,829

 
 
5,250

 
 
3,694

Terminal throughput (mbpd)
 
3,292

 
 
1,474

 
 
3,267

 
 
1,468

Gathering system throughput (million cubic feet per day)(b)
 
6,281

 
 
4,737

 
 
6,061

 
 
4,403

Natural gas processed (million cubic feet per day)(b)
 
8,804

 
 
7,171

 
 
8,629

 
 
6,874

C2 (ethane) + NGLs fractionated (mbpd)(b)
 
547

 
 
488

 
 
527

 
 
451

 
 
 
 
 
 
 
 
 
 
 
 
(a) 
Includes common-carrier pipelines and private pipelines contributed to MPLX. Excludes equity method affiliate pipeline volumes.
(b) 
Includes amounts related to unconsolidated equity method investments on a 100% basis.


Select Financial Data (Unaudited)
(In millions)
September 30 
2019
 
June 30 
2019
Cash and cash equivalents
$
1,525

 
$
1,247

MPC debt
 
9,139

 
 
9,142

MPLX debt
 
19,700

 
 
14,036

ANDX debt
 

 
 
5,229

Total consolidated debt
 
28,839

 
 
28,407

Redeemable noncontrolling interest
 
968

 
 
1,005

Equity
 
42,656

 
 
43,061

Shares outstanding
 
650

 
 
660

 
 
 
 
 
 



13




 
Three Months Ended 
September 30,
 
Nine Months Ended 
September 30,
 
 
2019
 
 
2018
 
 
2019
 
 
2018
Cash provided by operations
$
2,787

 
$
1,182

 
$
7,032

 
$
3,431

Dividends paid per share
$
0.53

 
$
0.46

 
$
1.59

 
$
1.38

 
 
 
 
 
 
 
 
 
 
 
 


Non-GAAP Financial Measures
Management uses certain financial measures to evaluate our operating performance that are calculated and presented on the basis of methodologies other than in accordance with GAAP. We believe these non-GAAP financial measures are useful to investors and analysts to assess our ongoing financial performance because, when reconciled to their most comparable GAAP financial measures, they provide improved comparability between periods through the exclusion of certain items that we believe are not indicative of our core operating performance and that may obscure our underlying business results and trends. These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP, and our calculations thereof may not be comparable to similarly titled measures reported by other companies. The non-GAAP financial measures we use are as follows:
Adjusted Net Income Attributable to MPC
Adjusted net income attributable to MPC is defined as net income attributable to MPC excluding the items in the table below, along with their related income tax effect. We have excluded these items because we believe that they are not indicative of our core operating performance and that their exclusion results in an important measure of our ongoing financial performance to better assess our underlying business results and trends.

Adjusted Diluted Earnings Per Share
Adjusted diluted earnings per share is defined as adjusted net income attributable to MPC divided by the number of weighted-average shares outstanding in the applicable period, assuming dilution.


14






Reconciliation of Net Income Attributable to MPC to Adjusted Net Income Attributable to MPC
 
Three Months Ended 
September 30,
 
Nine Months Ended 
September 30,
(In millions)
 
2019
 
 
2018
 
 
2019
 
 
2018
Net income attributable to MPC
$
1,095

 
$
737

 
$
2,194

 
$
1,829

Pre-tax adjustments:
 
 
 
 
 
 
 
 
 
 
 
Capline restructuring gain
 

 
 

 
 
(207
)
 
 

Transaction-related costs
 
22

 
 
4

 
 
147

 
 
14

Litigation
 

 
 

 
 
22

 
 

Impairments
 

 
 

 
 

 
 
(1
)
Pension settlement
 

 
 
45

 
 

 
 
45

Purchase accounting - depreciation and amortization(a)
 
(57
)
 
 

 
 
(17
)
 
 

Out of period tax adjustment
 

 
 

 
 
36

 
 

Tax impact of adjustments(b)
 
7

 
 
(12
)
 
 
13

 
 
(14
)
NCI impact of adjustments
 
6

 
 

 
 
2

 
 

Adjusted net income attributable to MPC
$
1,073

 
$
774

 
$
2,190

 
$
1,873

 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share
$
1.66

 
$
1.62

 
$
3.28

 
$
3.92

Adjusted diluted earnings per share(c)
$
1.63

 
$
1.70

 
$
3.27

 
$
4.02

(a) 
Reflects the cumulative effects related to a measurement period adjustment arising from the finalization of purchase accounting.
(b) 
We generally tax effect taxable adjustments to reported earnings using a combined federal and state statutory rate of approximately 24 percent.
(c) 
Weighted-average diluted shares outstanding and income allocated to participating securities, if applicable, in the adjusted earnings per share calculation are the same as those used in the GAAP diluted earnings per share calculation.


Adjusted EBITDA & Segment Adjusted EBITDA
Adjusted EBITDA and Segment Adjusted EBITDA represent earnings before net interest and other financial costs, income taxes, depreciation and amortization expense as well as adjustments to exclude refining turnaround costs and items not allocated to segment results. We believe these non-GAAP financial measures are useful to investors and analysts to analyze and compare our operating performance between periods by excluding items that do not reflect the core operating results of our business or in the case of turnarounds, which provide benefits over multiple years. We also believe that excluding turnaround costs from this metric is useful for comparability to other companies as certain of our competitors defer these costs and amortize them between turnarounds. Adjusted EBITDA and Segment Adjusted EBITDA should not be considered as a substitute for, or superior to segment income (loss) from operations, net income attributable to MPC, income before income taxes, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP. Adjusted EBITDA and Segment Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.


15





Reconciliation of Net Income Attributable to MPC to Adjusted EBITDA
 
Three Months Ended 
September 30,
 
Nine Months Ended 
September 30,
(In millions)
 
2019
 
 
2018
 
 
2019
 
 
2018
Net income attributable to MPC
$
1,095

 
$
737

 
$
2,194

 
$
1,829

Plus (Less):
 
 
 
 
 
 
 
 
 
 
 
Net interest and other financial costs
 
317

 
 
240

 
 
945

 
 
618

Net income attributable to noncontrolling interests
 
272

 
 
204

 
 
799

 
 
582

Provision for income taxes
 
340

 
 
222

 
 
797

 
 
525

Depreciation and amortization
 
855

 
 
555

 
 
2,660

 
 
1,616

Refining planned turnaround costs
 
164

 
 
197

 
 
587

 
 
432

Capline restructuring gain
 

 
 

 
 
(207
)
 
 

Transaction-related costs
 
22

 
 
4

 
 
147

 
 
14

Litigation
 

 
 

 
 
22

 
 

Impairments
 

 
 

 
 

 
 
(1
)
Adjusted EBITDA
$
3,065

 
$
2,159

 
$
7,944

 
$
5,615



Reconciliation of Segment Income From Operations to Segment Adjusted EBITDA and Adjusted EBITDA
 
Three Months Ended 
September 30,
 
Nine Months Ended 
September 30,
(In millions)
 
2019
 
 
2018
 
 
2019
 
 
2018
Refining & Marketing Segment
 
 
 
 
 
 
 
 
 
 
 
Segment income from operations
$
883

 
$
666

 
$
1,455

 
$
1,558

Add: Depreciation and amortization
 
397

 
 
257

 
 
1,235

 
 
761

        Refining planned turnaround costs
 
164

 
 
197

 
 
587

 
 
432

Segment Adjusted EBITDA
$
1,444

 
$
1,120

 
$
3,277

 
$
2,751

Retail Segment
 
 
 
 
 
 
 
 
 
 
 
Segment income from operations
$
442

 
$
161

 
$
1,105

 
$
415

Add: Depreciation and amortization
 
113

 
 
76

 
 
369

 
 
228

Segment EBITDA
$
555

 
$
237

 
$
1,474

 
$
643

Midstream Segment
 
 
 
 
 
 
 
 
 
 
 
Segment income from operations
$
919

 
$
679

 
$
2,705

 
$
1,863

Add: Depreciation and amortization
 
300

 
 
205

 
 
925

 
 
577

Segment EBITDA
$
1,219

 
$
884

 
$
3,630

 
$
2,440

 
 
 
 
 
 
 
 
 
 
 
 
Segment Adjusted EBITDA
$
3,218

 
$
2,241

 
$
8,381

 
$
5,834

Corporate and other unallocated items
 
(198
)
 
 
(99
)
 
 
(568
)
 
 
(269
)
Add: Depreciation and amortization
 
45

 
 
17

 
 
131

 
 
50

Adjusted EBITDA
$
3,065

 
$
2,159

 
$
7,944

 
$
5,615





16




Refining & Marketing Margin
Refining margin is defined as sales revenue less the cost of refinery inputs and purchased products and excludes any LCM inventory market adjustment.
Reconciliation of Refining & Marketing Income from Operations to Refining & Marketing Margin
 
Three Months Ended 
September 30,
 
Nine Months Ended 
September 30,
(In millions)
 
2019
 
 
2018
 
 
2019
 
 
2018
Refining & Marketing income from operations
$
883

 
$
666

 
$
1,455

 
$
1,558

Plus (Less):
 
 
 
 
 
 
 
 
 
 
 
Refining operating costs(a)
 
1,577

 
 
795

 
 
4,656

 
 
2,480

Refining depreciation and amortization
 
328

 
 
241

 
 
1,083

 
 
712

Refining planned turnaround costs
 
164

 
 
197

 
 
587

 
 
432

Distribution costs(b)
 
1,251

 
 
780

 
 
3,818

 
 
2,183

Distribution depreciation and amortization
 
69

 
 
16

 
 
152

 
 
49

Income from equity method investments
 
(6
)
 
 
(7
)
 
 
(10
)
 
 
(14
)
Net gain on disposal of assets
 

 
 
(1
)
 
 
(6
)
 
 
(5
)
Other income
 
(8
)
 
 
(24
)
 
 
(30
)
 
 
(63
)
Refining & Marketing margin
$
4,258

 
$
2,663

 
$
11,705

 
$
7,332

 
 
 
 
 
 
 
 
 
 
 
 
Refining & Marketing margin by region:
 
 
 
 
 
 
 
 
 
 
 
Gulf Coast
$
1,285

 
$
N/A

 
$
3,292

 
$
N/A

Mid-Continent
 
1,977

 
 
N/A

 
 
5,687

 
 
N/A

West Coast
 
996

 
 
N/A

 
 
2,726

 
 
N/A

Refining & Marketing margin
$
4,258

 
$
N/A

 
$
11,705

 
$
N/A

 
 
 
 
 
 
 
 
 
 
 
 
(a) 
Includes refining major maintenance and operating costs. Excludes planned turnaround and depreciation and amortization expense.
(b)  
Includes fees paid to MPLX of $794 million, $601 million, $2,378 million and $1,675 million, respectively. Excludes depreciation and amortization expense.


17




Retail Fuel Margin
Retail fuel margin is defined as the price paid by consumers or direct dealers less the cost of refined products, including transportation, consumer excise taxes and bankcard processing fees (where applicable) and excluding any LCM inventory market adjustment.
Retail Merchandise Margin
Retail merchandise margin is defined as the price paid by consumers less the cost of merchandise.
Reconciliation of Retail Income from Operations to Retail Total Margin
 
Three Months Ended 
September 30,
 
Nine Months Ended 
September 30,
(in millions)
 
2019
 
 
2018
 
 
2019
 
 
2018
Retail income from operations
$
442

 
$
161

 
$
1,105

 
$
415

Plus (Less):
 
 
 
 
 
 
 
 
 
 
 
Operating, selling, general and administrative expenses
 
644

 
 
418

 
 
1,824

 
 
1,203

Depreciation and amortization
 
113

 
 
76

 
 
369

 
 
228

Income from equity method investments
 
(20
)
 
 
(18
)
 
 
(58</