August 1, 2019 - 6:30 AM EDT
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HollyFrontier Corporation Reports Quarterly Results and Announces Regular Cash Dividend

DALLAS

  • Reported net income attributable to HollyFrontier stockholders of $196.9 million, or $1.15 per diluted share, and adjusted net income of $372.3 million, or $2.18 per diluted share, for the second quarter
  • Reported EBITDA of $442.8 million and adjusted EBITDA of $647.0 million for the second quarter
  • Returned $245.8 million to shareholders through dividends and share repurchases in the second quarter

HollyFrontier Corporation (NYSE:HFC) (“HollyFrontier” or the “Company”) today reported second quarter net income attributable to HollyFrontier stockholders of $196.9 million, or $1.15 per diluted share, for the quarter ended June 30, 2019, compared to $345.5 million, or $1.94 per diluted share, for the quarter ended June 30, 2018.

The second quarter results reflect special items that collectively decreased net income by a total of $175.4 million. These items include a lower of cost or market inventory valuation adjustment that decreased pre-tax earnings by $47.8 million, a goodwill impairment of $152.7 million and Sonneborn acquisition and integration costs of $3.6 million. Excluding these items, net income for the current quarter was $372.3 million ($2.18 per diluted share) compared to $258.9 million ($1.45 per diluted share) for the second quarter of 2018, which excludes certain items that collectively increased earnings by $86.6 million for the three months ended June 30, 2018. Total operating expenses for the quarter were $333.3 million compared to $296.2 million for the second quarter of last year.

HollyFrontier’s President & CEO, George Damiris, commented, “HollyFrontier’s solid second quarter results were driven by strong gasoline and diesel margins across our company. Our healthy free cash flow generation allowed us to return over $245 million in cash to shareholders through regular dividends and share repurchases. With no major planned downtime until late September, we believe our refineries are well positioned for strong operational and financial performance in the third quarter.”

The Refining and Marketing segment reported adjusted EBITDA of $556.1 million compared to $384.8 million for the second quarter of 2018. This increase was primarily driven by higher gasoline and diesel margins across our refining system which resulted in a consolidated refinery gross margin of $19.64 per produced barrel, a 19% increase compared to $16.57 for the second quarter of 2018. Crude oil charge averaged 453,030 barrels per day (“BPD”) for the current quarter compared to 463,480 BPD for the second quarter 2018.

Our Lubricants and Specialty Products segment reported adjusted EBITDA of $28.8 million, despite weakness in the base oil market. Rack Forward adjusted EBITDA was $64.2 million for the quarter, driven by improved finished product margins.

Holly Energy Partners, L.P. (“HEP”) reported EBITDA of $88.6 million for the second quarter 2019 compared to $81.9 million in the second quarter of 2018.

For the second quarter of 2019, net cash provided by operations totaled $752.7 million. During the period, we declared and paid a dividend of $0.33 per share to shareholders totaling $56.7 million and spent $189.2 million in stock repurchases. At June 30, 2019, our cash and cash equivalents totaled $914.6 million, a $418.5 million increase over cash and cash equivalents of $496.1 million at March 31, 2019. Additionally, our consolidated debt was $2,430.8 million. Our debt, exclusive of HEP debt, which is nonrecourse to HollyFrontier, was $993.1 million at June 30, 2019.

HollyFrontier also announced today that its Board of Directors declared a regular quarterly dividend of $0.33 per share. The dividend will be paid on September 4, 2019 to holders of record of common stock on August 22, 2019.

The Company has scheduled a webcast conference call for today, August 1, 2019, at 8:30 AM Eastern Time to discuss second quarter financial results. This webcast may be accessed at: https://78449.themediaframe.com/dataconf/productusers/hfc/mediaframe/30665/indexl.html. An audio archive of this webcast will be available using the above noted link through August 15, 2019.

HollyFrontier Corporation, headquartered in Dallas, Texas, is an independent petroleum refiner and marketer that produces high value light products such as gasoline, diesel fuel, jet fuel and other specialty products. HollyFrontier owns and operates refineries located in Kansas, Oklahoma, New Mexico, Wyoming and Utah and markets its refined products principally in the Southwest U.S., the Rocky Mountains extending into the Pacific Northwest and in other neighboring Plains states. In addition, HollyFrontier produces base oils and other specialized lubricants in the U.S., Canada and the Netherlands, and exports products to more than 80 countries. HollyFrontier also owns a 57% limited partner interest and a non-economic general partner interest in Holly Energy Partners, L.P., a master limited partnership that provides petroleum product and crude oil transportation, terminalling, storage and throughput services to the petroleum industry, including HollyFrontier Corporation subsidiaries.

The following is a “safe harbor” statement under the Private Securities Litigation Reform Act of 1995: The statements in this press release relating to matters that are not historical facts are “forward-looking statements” based on management’s beliefs and assumptions using currently available information and expectations as of the date hereof, are not guarantees of future performance and involve certain risks and uncertainties, including those contained in our filings with the Securities and Exchange Commission. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that our expectations will prove correct. Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in such statements. Any differences could be caused by a number of factors, including, but not limited to, risks and uncertainties with respect to the actions of actual or potential competitive suppliers of refined petroleum products in the Company’s markets, the demand for and supply of crude oil and refined products, the spread between market prices for refined products and market prices for crude oil, the possibility of constraints on the transportation of refined products, the possibility of inefficiencies, curtailments or shutdowns in refinery operations or pipelines, effects of governmental and environmental regulations and policies, the availability and cost of financing to the Company, the effectiveness of the Company’s capital investments and marketing strategies, the Company’s efficiency in carrying out construction projects, the ability of the Company to acquire refined product operations or pipeline and terminal operations on acceptable terms and to integrate any future acquired operations, the possibility of terrorist and cyber attacks and the consequences of any such attacks, general economic conditions and other financial, operational and legal risks and uncertainties detailed from time to time in the Company’s Securities and Exchange Commission filings. The forward-looking statements speak only as of the date made and, other than as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

RESULTS OF OPERATIONS

Financial Data (all information in this release is unaudited)

 

Three Months Ended
June 30,

 

Change from 2018

 

2019

 

2018

 

Change

 

Percent

 

(In thousands, except per share data)

Sales and other revenues

$

4,782,615

 

 

$

4,471,236

 

 

$

311,379

 

 

7

%

Operating costs and expenses:

 

 

 

 

 

 

 

Cost of products sold:

 

 

 

 

 

 

 

Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)

3,704,884

 

 

3,595,916

 

 

108,968

 

 

3

 

Lower of cost or market inventory valuation adjustment

47,801

 

 

(106,926

)

 

154,727

 

 

(145

)

 

3,752,685

 

 

3,488,990

 

 

263,695

 

 

8

 

Operating expenses

333,252

 

 

296,215

 

 

37,037

 

 

13

 

Selling, general and administrative expenses

85,317

 

 

68,675

 

 

16,642

 

 

24

 

Depreciation and amortization

126,908

 

 

110,379

 

 

16,529

 

 

15

 

Goodwill impairment

152,712

 

 

 

 

152,712

 

 

 

Total operating costs and expenses

4,450,874

 

 

3,964,259

 

 

486,615

 

 

12

 

Income from operations

331,741

 

 

506,977

 

 

(175,236

)

 

(35

)

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

Earnings of equity method investments

1,783

 

 

1,734

 

 

49

 

 

3

 

Interest income

4,588

 

 

2,934

 

 

1,654

 

 

56

 

Interest expense

(34,264

)

 

(32,324

)

 

(1,940

)

 

6

 

Gain (loss) on foreign currency transactions

2,213

 

 

(325

)

 

2,538

 

 

(781

)

Other, net

92

 

 

1,364

 

 

(1,272

)

 

(93

)

 

(25,588

)

 

(26,617

)

 

1,029

 

 

(4

)

Income before income taxes

306,153

 

 

480,360

 

 

(174,207

)

 

(36

)

Income tax expense

89,336

 

 

117,447

 

 

(28,111

)

 

(24

)

Net income

216,817

 

 

362,913

 

 

(146,096

)

 

(40

)

Less net income attributable to noncontrolling interest

19,902

 

 

17,406

 

 

2,496

 

 

14

 

Net income attributable to HollyFrontier stockholders

$

196,915

 

 

$

345,507

 

 

$

(148,592

)

 

(43

)%

 

 

 

 

 

 

 

 

Earnings per share attributable to HollyFrontier stockholders:

 

 

 

 

 

 

 

Basic

$

1.16

 

 

$

1.96

 

 

$

(0.80

)

 

(41

)%

Diluted

$

1.15

 

 

$

1.94

 

 

$

(0.79

)

 

(41

)%

Cash dividends declared per common share

$

0.33

 

 

$

0.33

 

 

$

 

 

%

Average number of common shares outstanding:

 

 

 

 

 

 

 

Basic

169,356

 

 

175,899

 

 

(6,543

)

 

(4

)%

Diluted

170,547

 

 

177,586

 

 

(7,039

)

 

(4

)%

EBITDA

$

442,835

 

 

$

602,723

 

 

$

(159,888

)

 

(27

)%

Adjusted EBITDA

$

646,985

 

 

$

485,256

 

 

$

161,729

 

 

33

%

 

Six Months Ended
June 30,

 

Change from 2018

 

2019

 

2018

 

Change

 

Percent

 

(In thousands, except per share data)

Sales and other revenues

$

8,679,862

 

 

$

8,599,663

 

 

$

80,199

 

 

1

%

Operating costs and expenses:

 

 

 

 

 

 

 

Cost of products sold:

 

 

 

 

 

 

 

Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)

6,904,089

 

 

6,943,041

 

(38,952

)

 

(1

)

Lower of cost or market inventory valuation adjustment

(184,545

)

 

(210,764

)

 

26,219

 

 

(12

)

 

6,719,544

 

 

6,732,277

 

 

(12,733

)

 

 

Operating expenses

664,844

 

 

616,503

 

 

48,341

 

 

8

 

Selling, general and administrative expenses

173,351

 

 

133,339

 

 

40,012

 

 

30

 

Depreciation and amortization

248,329

 

 

214,720

 

 

33,609

 

 

16

 

Goodwill impairment

152,712

 

 

 

 

152,712

 

 

 

Total operating costs and expenses

7,958,780

 

 

7,696,839

 

 

261,941

 

 

3

 

Income from operations

721,082

 

 

902,824

 

 

(181,742

)

 

(20

)

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

Earnings of equity method investments

3,883

 

 

3,013

 

 

870

 

 

29

 

Interest income

10,963

 

 

5,524

 

 

5,439

 

 

98

 

Interest expense

(70,911

)

 

(65,047

)

 

(5,864

)

 

9

 

Gain on foreign currency transactions

4,478

 

 

5,235

 

 

(757

)

 

(14

)

Other, net

649

 

 

2,710

 

 

(2,061

)

 

(76

)

 

(50,938

)

 

(48,565

)

 

(2,373

)

 

5

 

Income before income taxes

670,144

 

 

854,259

 

 

(184,115

)

 

(22

)

Income tax expense

176,841

 

 

202,484

 

 

(25,643

)

 

(13

)

Net income

493,303

 

 

651,775

 

 

(158,472

)

 

(24

)

Less net income attributable to noncontrolling interest

43,333

 

 

38,177

 

 

5,156

 

 

14

 

Net income attributable to HollyFrontier stockholders

$

449,970

 

 

$

613,598

 

 

$

(163,628

)

 

(27

)%

 

 

 

 

 

 

 

 

Earnings per share attributable to HollyFrontier stockholders:

 

 

 

 

 

 

 

Basic

$

2.64

 

 

$

3.47

 

 

$

(0.83

)

 

(24

)%

Diluted

$

2.62

 

 

$

3.44

 

 

$

(0.82

)

 

(24

)%

Cash dividends declared per common share

$

0.66

 

 

$

0.66

 

 

$

 

 

%

Average number of common shares outstanding:

 

 

 

 

 

 

 

Basic

170,100

 

 

176,256

 

 

(6,156

)

 

(3

)%

Diluted

171,264

 

 

177,820

 

 

(6,556

)

 

(4

)%

EBITDA

$

935,088

 

 

$

1,090,325

 

 

$

(155,237

)

 

(14

)%

Adjusted EBITDA

$

928,782

 

 

$

800,911

 

 

$

127,871

 

 

16

%

Balance Sheet Data

 

June 30,

 

December 31,

 

2019

 

2018

 

(In thousands)

Cash and cash equivalents

$

914,644

 

 

$

1,154,752

 

Working capital

$

1,802,370

 

 

$

2,128,224

 

Total assets

$

12,104,491

 

 

$

10,994,601

 

Long-term debt

$

2,430,832

 

 

$

2,411,540

 

Total equity

$

6,530,999

 

 

$

6,459,059

 

Segment Information

Our operations are organized into three reportable segments, Refining, Lubricants and Specialty Products and HEP. Our operations that are not included in the Refining, Lubricants and Specialty Products and HEP segments are included in Corporate and Other. Intersegment transactions are eliminated in our consolidated financial statements and are included in Eliminations. Corporate and Other and Eliminations are aggregated and presented under Corporate, Other and Eliminations column.

The Refining segment includes the operations of our El Dorado, Tulsa, Navajo, Cheyenne and Woods Cross refineries and HollyFrontier Asphalt Company LLC (“HFC Asphalt”) (aggregated as a reportable segment). Refining activities involve the purchase and refining of crude oil and wholesale and branded marketing of refined products, such as gasoline, diesel fuel and jet fuel. These petroleum products are primarily marketed in the Mid-Continent, Southwest and Rocky Mountain regions of the United States. HFC Asphalt operates various terminals in Arizona, New Mexico and Oklahoma.

The Lubricants and Specialty Products segment involves Petro-Canada Lubricants Inc.’s (“PCLI”) production operations, located in Mississauga, Ontario, that include lubricant products such as base oils, white oils, specialty products and finished lubricants and the operations of our Petro-Canada Lubricants business that includes the marketing of products to both retail and wholesale outlets through a global sales network with locations in Canada, the United States, Europe and China. Additionally, the Lubricants and Specialty Products segment includes specialty lubricant products produced at our Tulsa refineries that are marketed throughout North America and are distributed in Central and South America, the operations of Red Giant Oil, one of the largest suppliers of locomotive engine oil in North America and the operations of Sonneborn, a producer of specialty hydrocarbon chemicals such as white oils, petrolatums and waxes with manufacturing facilities in the United States and Europe.

The HEP segment involves all of the operations of HEP, a consolidated variable interest entity, which owns and operates logistics assets consisting of petroleum product and crude oil pipelines, terminals, tankage, loading rack facilities and refinery process units in the Mid-Continent, Southwest and Rocky Mountain regions of the United States. The HEP segment also includes a 75% interest in UNEV Pipeline, LLC (an HEP consolidated subsidiary), and a 50% ownership interest in each of Osage Pipeline Company, LLC and Cheyenne Pipeline LLC. Revenues from the HEP segment are earned through transactions with unaffiliated parties for pipeline transportation, rental and terminalling operations as well as revenues relating to pipeline transportation services provided for our refining operations. Due to certain basis differences, our reported amounts for the HEP segment may not agree to amounts reported in HEP's periodic public filings.

 

 

Refining

 

Lubricants and Specialty Products

 

HEP

 

Corporate, Other and Eliminations

 

Consolidated Total

 

 

(In thousands)

Three Months Ended June 30, 2019

 

 

 

 

 

 

 

 

Sales and other revenues:

 

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

$

4,208,776

 

 

$

545,346

 

 

$

28,382

 

 

$

111

 

 

$

4,782,615

 

Intersegment revenues

 

88,484

 

 

 

 

102,369

 

 

(190,853

)

 

 

 

 

$

4,297,260

 

 

$

545,346

 

 

$

130,751

 

 

$

(190,742

)

 

$

4,782,615

 

Cost of products sold (exclusive of lower of cost or market inventory)

 

$

3,458,832

 

 

$

415,353

 

 

$

 

 

$

(169,301

)

 

$

3,704,884

 

Lower of cost or market inventory valuation adjustment

 

$

47,801

 

 

$

 

 

$

 

 

$

 

 

$

47,801

 

Operating expenses

 

$

252,715

 

 

$

59,122

 

 

$

40,608

 

 

$

(19,193

)

 

$

333,252

 

Selling, general and administrative expenses

 

$

29,638

 

 

$

42,087

 

 

$

1,988

 

 

$

11,604

 

 

$

85,317

 

Depreciation and amortization

 

$

76,225

 

 

$

23,020

 

 

$

24,241

 

 

$

3,422

 

 

$

126,908

 

Goodwill impairment

 

$

 

 

$

152,712

 

 

$

 

 

$

 

 

$

152,712

 

Income (loss) from operations

 

$

432,049

 

 

$

(146,948

)

 

$

63,914

 

 

$

(17,274

)

 

$

331,741

 

Earnings of equity method investments

 

$

 

 

$

 

 

$

1,783

 

 

$

 

 

$

1,783

 

Capital expenditures

 

$

33,899

 

 

$

9,331

 

 

$

7,034

 

 

$

6,470

 

 

$

56,734

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2018

 

 

 

 

 

 

 

 

Sales and other revenues:

 

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

$

3,987,115

 

 

$

459,405

 

 

$

24,746

 

 

$

(30

)

 

$

4,471,236

 

Intersegment revenues

 

91,866

 

 

8,284

 

 

94,014

 

 

(194,164

)

 

 

 

 

$

4,078,981

 

 

$

467,689

 

 

$

118,760

 

 

$

(194,194

)

 

$

4,471,236

 

Cost of products sold (exclusive of lower of cost or market inventory)

 

$

3,394,853

 

 

$

373,141

 

 

$

 

 

$

(172,078

)

 

$

3,595,916

 

Lower of cost or market inventory valuation adjustment

 

$

(106,926

)

 

$

 

 

$

 

 

$

 

 

$

(106,926

)

Operating expenses

 

$

262,558

 

 

$

19,905

 

 

$

34,533

 

 

$

(20,781

)

 

$

296,215

 

Selling, general and administrative expenses

 

$

26,201

 

 

$

35,257

 

 

$

2,673

 

 

$

4,544

 

 

$

68,675

 

Depreciation and amortization

 

$

72,989

 

 

$

10,020

 

 

$

24,609

 

 

$

2,761

 

 

$

110,379

 

Income (loss) from operations

 

$

429,306

 

 

$

29,366

 

 

$

56,945

 

 

$

(8,640

)

 

$

506,977

 

Earnings of equity method investments

 

$

 

 

$

 

 

$

1,734

 

 

$

 

 

$

1,734

 

Capital expenditures

 

$

42,188

 

 

$

16,842

 

 

$

18,957

 

 

$

1,950

 

 

$

79,937

 

 

 

Refining

 

Lubricants and Specialty Products

 

HEP

 

Corporate, Other and Eliminations

 

Consolidated Total

 

 

(In thousands)

Six Months Ended June 30, 2019

 

 

 

 

 

 

 

 

Sales and other revenues:

 

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

$

7,581,442

 

 

$

1,038,680

 

 

$

59,520

 

 

$

220

 

 

$

8,679,862

 

Intersegment revenues

 

163,228

 

 

 

 

205,728

 

 

(368,956

)

 

 

 

 

$

7,744,670

 

 

$

1,038,680

 

 

$

265,248

 

 

$

(368,736

)

 

$

8,679,862

 

Cost of products sold (exclusive of lower of cost or market inventory)

 

$

6,421,372

 

 

$

804,370

 

 

$

 

 

$

(321,653

)

 

$

6,904,089

 

Lower of cost or market inventory valuation adjustment

 

$

(184,545

)

 

$

 

 

$

 

 

$

 

 

$

(184,545

)

Operating expenses

 

$

517,212

 

 

$

112,681

 

 

$

78,121

 

 

$

(43,170

)

 

$

664,844

 

Selling, general and administrative expenses

 

$

56,615

 

 

$

81,806

 

 

$

4,608

 

 

$

30,322

 

 

$

173,351

 

Depreciation and amortization

 

$

150,640

 

 

$

43,191

 

 

$

48,071

 

 

$

6,427

 

 

$

248,329

 

Goodwill impairment

 

$

 

 

$

152,712

 

 

$

 

 

$

 

 

$

152,712

 

Income (loss) from operations

 

$

783,376

 

 

$

(156,080

)

 

$

134,448

 

 

$

(40,662

)

 

$

721,082

 

Earnings of equity method investments

 

$

 

 

$

 

 

$

3,883

 

 

$

 

 

$

3,883

 

Capital expenditures

 

$

75,662

 

 

$

17,190

 

 

$

17,752

 

 

$

9,865

 

 

$

120,469

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2018

 

 

 

 

 

 

 

 

Sales and other revenues:

 

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

$

7,645,262

 

 

$

902,271

 

 

$

52,203

 

 

$

(73

)

 

$

8,599,663

 

Intersegment revenues

 

182,904

 

 

10,258

 

 

195,441

 

 

(388,603

)

 

 

 

 

$

7,828,166

 

 

$

912,529

 

 

$

247,644

 

 

$

(388,676

)

 

$

8,599,663

 

Cost of products sold (exclusive of lower of cost or market inventory)

 

$

6,606,557

 

 

$

680,672

 

 

$

 

 

$

(344,188

)

 

$

6,943,041

 

Lower of cost or market inventory valuation adjustment

 

$

(210,764

)

 

$

 

 

$

 

 

$

 

 

$

(210,764

)

Operating expenses

 

$

502,405

 

 

$

84,813

 

 

$

70,736

 

 

$

(41,451

)

 

$

616,503

 

Selling, general and administrative expenses

 

$

52,572

 

 

$

65,911

 

 

$

5,795

 

 

$

9,061

 

 

$

133,339

 

Depreciation and amortization

 

$

140,164

 

 

$

18,884

 

 

$

49,750

 

 

$

5,922

 

 

$

214,720

 

Income (loss) from operations

 

$

737,232

 

 

$

62,249

 

 

$

121,363

 

 

$

(18,020

)

 

$

902,824

 

Earnings of equity method investments

 

$

 

 

$

 

 

$

3,013

 

 

$

 

 

$

3,013

 

Capital expenditures

 

$

84,962

 

 

$

25,380

 

 

$

31,570

 

 

$

7,565

 

 

$

149,477

 

 

June 30, 2019

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

7,213

 

 

$

170,593

 

 

$

6,941

 

 

$

729,897

 

 

$

914,644

 

Total assets

 

$

7,075,770

 

 

$

2,247,858

 

 

$

2,188,139

 

 

$

592,724

 

 

$

12,104,491

 

Long-term debt

 

$

 

 

$

 

 

$

1,437,710

 

 

$

993,122

 

 

$

2,430,832

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

7,236

 

 

$

80,931

 

 

$

3,045

 

 

$

1,063,540

 

 

$

1,154,752

 

Total assets

 

$

6,465,155

 

 

$

1,506,209

 

 

$

2,142,027

 

 

$

881,210

 

 

$

10,994,601

 

Long-term debt

 

$

 

 

$

 

 

$

1,418,900

 

 

$

992,640

 

 

$

2,411,540

 

Refining Segment Operating Data

The following tables set forth information, including non-GAAP (Generally Accepted Accounting Principles) performance measures about our refinery operations. Refinery gross and net operating margins do not include the non-cash effects of lower of cost or market inventory valuation adjustments and depreciation and amortization. Reconciliations to amounts reported under GAAP are provided under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” below.

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Mid-Continent Region (El Dorado and Tulsa Refineries)

 

 

 

 

 

 

 

 

Crude charge (BPD) (1)

 

264,290

 

 

289,820

 

 

238,890

 

 

258,930

 

Refinery throughput (BPD) (2)

 

278,710

 

 

300,030

 

 

254,520

 

 

273,200

 

Sales of produced refined products (BPD) (3)

 

273,010

 

 

270,710

 

 

245,450

 

 

261,950

 

Refinery utilization (4)

 

101.7

%

 

111.5

%

 

91.9

%

 

99.6

%

 

 

 

 

 

 

 

 

 

Average per produced barrel (5)

 

 

 

 

 

 

 

 

Refinery gross margin

 

$

17.17

 

 

$

11.90

 

 

$

14.51

 

 

$

11.30

 

Refinery operating expenses (6)

 

5.02

 

 

4.89

 

 

5.74

 

 

5.02

 

Net operating margin

 

$

12.15

 

 

$

7.01

 

 

$

8.77

 

 

$

6.28

 

 

 

 

 

 

 

 

 

 

Refinery operating expenses per throughput barrel (7)

 

$

4.92

 

 

$

4.41

 

 

$

5.54

 

 

$

4.82

 

 

 

 

 

 

 

 

 

 

Feedstocks:

 

 

 

 

 

 

 

 

Sweet crude oil

 

57

%

 

58

%

 

54

%

 

51

%

Sour crude oil

 

22

%

 

23

%

 

23

%

 

26

%

Heavy sour crude oil

 

16

%

 

16

%

 

17

%

 

18

%

Other feedstocks and blends

 

5

%

 

3

%

 

6

%

 

5

%

Total

 

100

%

 

100

%

 

100

%

 

100

%

 

 

 

 

 

 

 

 

 

Sales of produced refined products:

 

 

 

 

 

 

 

 

Gasolines

 

51

%

 

49

%

 

52

%

 

51

%

Diesel fuels

 

34

%

 

35

%

 

31

%

 

33

%

Jet fuels

 

6

%

 

6

%

 

7

%

 

6

%

Fuel oil

 

1

%

 

1

%

 

1

%

 

1

%

Asphalt

 

2

%

 

3

%

 

3

%

 

3

%

Base oils

 

4

%

 

4

%

 

4

%

 

4

%

LPG and other

 

2

%

 

2

%

 

2

%

 

2

%

Total

 

100

%

 

100

%

 

100

%

 

100

%

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Southwest Region (Navajo Refinery)

 

 

 

 

 

 

 

 

Crude charge (BPD) (1)

 

109,080

 

 

111,900

 

 

107,560

 

 

109,020

 

Refinery throughput (BPD) (2)

 

119,480

 

 

120,340

 

 

117,860

 

 

118,510

 

Sales of produced refined products (BPD) (3)

 

122,090

 

 

118,240

 

 

122,730

 

 

120,240

 

Refinery utilization (4)

 

109.1

%

 

111.9

%

 

107.6

%

 

109.0

%

 

 

 

 

 

 

 

 

 

Average per produced barrel (5)

 

 

 

 

 

 

 

 

Refinery gross margin

 

$

23.45

 

 

$

21.04

 

 

$

19.70

 

 

$

15.38

 

Refinery operating expenses (6)

 

4.53

 

 

5.34

 

 

4.73

 

 

4.68

 

Net operating margin

 

$

18.92

 

 

$

15.70

 

 

$

14.97

 

 

$

10.70

 

 

 

 

 

 

 

 

 

 

Refinery operating expenses per throughput barrel (7)

 

$

4.63

 

 

$

5.25

 

 

$

4.93

 

 

$

4.75

 

 

 

 

 

 

 

 

 

 

Feedstocks:

 

 

 

 

 

 

 

 

Sweet crude oil

 

24

%

 

34

%

 

20

%

 

32

%

Sour crude oil

 

67

%

 

59

%

 

71

%

 

60

%

Other feedstocks and blends

 

9

%

 

7

%

 

9

%

 

8

%

Total

 

100

%

 

100

%

 

100

%

 

100

%

 

 

 

 

 

 

 

 

 

Sales of produced refined products:

 

 

 

 

 

 

 

 

Gasolines

 

48

%

 

47

%

 

51

%

 

51

%

Diesel fuels

 

40

%

 

41

%

 

38

%

 

39

%

Fuel oil

 

4

%

 

3

%

 

3

%

 

2

%

Asphalt

 

6

%

 

5

%

 

5

%

 

4

%

LPG and other

 

2

%

 

4

%

 

3

%

 

4

%

Total

 

100

%

 

100

%

 

100

%

 

100

%

 

Rocky Mountain Region (Cheyenne and Woods Cross Refineries)

 

 

 

 

 

 

Crude charge (BPD) (1)

 

79,660

 

 

61,760

 

 

80,440

 

 

71,560

 

Refinery throughput (BPD) (2)

 

86,700

 

 

69,830

 

 

87,080

 

 

79,570

 

Sales of produced refined products (BPD) (3)

 

74,000

 

 

64,870

 

 

78,000

 

 

77,460

 

Refinery utilization (4)

 

82.1

%

 

63.7

%

 

82.9

%

 

73.8

%

 

 

 

 

 

 

 

 

 

Average per produced barrel (5)

 

 

 

 

 

 

 

 

Refinery gross margin

 

$

22.48

 

 

$

27.89

 

 

$

17.07

 

 

$

25.05

 

Refinery operating expenses (6)

 

11.53

 

 

14.34

 

 

11.11

 

 

11.58

 

Net operating margin

 

$

10.95

 

 

$

13.55

 

 

$

5.96

 

 

$

13.47

 

 

 

 

 

 

 

 

 

 

Refinery operating expenses per throughput barrel (7)

 

$

9.84

 

 

$

13.33

 

 

$

9.95

 

 

$

11.28

 

 

 

 

 

 

 

 

 

 

Feedstocks:

 

 

 

 

 

 

 

 

Sweet crude oil

 

34

%

 

18

%

 

35

%

 

26

%

Heavy sour crude oil

 

35

%

 

51

%

 

35

%

 

43

%

Black wax crude oil

 

23

%

 

20

%

 

22

%

 

21

%

Other feedstocks and blends

 

8

%

 

11

%

 

8

%

 

10

%

Total

 

100

%

 

100

%

 

100

%

 

100

%

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Rocky Mountain Region (Cheyenne and Woods Cross Refineries)

 

 

 

 

 

 

Sales of produced refined products:

 

 

 

 

 

 

 

 

Gasolines

 

50

%

 

57

%

 

52

%

 

57

%

Diesel fuels

 

37

%

 

32

%

 

35

%

 

33

%

Fuel oil

 

4

%

 

3

%

 

4

%

 

2

%

Asphalt

 

6

%

 

5

%

 

6

%

 

4

%

LPG and other

 

3

%

 

3

%

 

3

%

 

4

%

Total

 

100

%

 

100

%

 

100

%

 

100

%

 

Consolidated

 

 

 

 

 

 

 

 

Crude charge (BPD) (1)

 

453,030

 

 

463,480

 

 

426,890

 

 

439,510

 

Refinery throughput (BPD) (2)

 

484,890

 

 

490,200

 

 

459,460

 

 

471,280

 

Sales of produced refined products (BPD) (3)

 

469,100

 

 

453,830

 

 

446,190

 

 

459,640

 

Refinery utilization (4)

 

99.1

%

 

101.4

%

 

93.4

%

 

96.2

%

 

 

 

 

 

 

 

 

 

Average per produced barrel (5)

 

 

 

 

 

 

 

 

Refinery gross margin

 

$

19.64

 

 

$

16.57

 

 

$

16.39

 

 

$

14.68

 

Refinery operating expenses (6)

 

5.92

 

 

6.36

 

 

6.40

 

 

6.04

 

Net operating margin

 

$

13.72

 

 

$

10.21

 

 

$

9.99

 

 

$

8.64

 

 

 

 

 

 

 

 

 

 

Refinery operating expenses per throughput barrel (7)

 

$

5.73

 

 

$

5.89

 

 

$

6.22

 

 

$

5.89

 

 

 

 

 

 

 

 

 

 

Feedstocks:

 

 

 

 

 

 

 

 

Sweet crude oil

 

44

%

 

46

%

 

42

%

 

42

%

Sour crude oil

 

29

%

 

29

%

 

31

%

 

30

%

Heavy sour crude oil

 

16

%

 

17

%

 

16

%

 

18

%

Black wax crude oil

 

4

%

 

3

%

 

4

%

 

3

%

Other feedstocks and blends

 

7

%

 

5

%

 

7

%

 

7

%

Total

 

100

%

 

100

%

 

100

%

 

100

%

 

Sales of produced refined products:

 

 

 

 

 

 

 

 

Gasolines

 

50

%

 

50

%

 

52

%

 

52

%

Diesel fuels

 

36

%

 

36

%

 

34

%

 

35

%

Jet fuels

 

4

%

 

4

%

 

4

%

 

3

%

Fuel oil

 

2

%

 

1

%

 

2

%

 

2

%

Asphalt

 

4

%

 

4

%

 

4

%

 

3

%

Base oils

 

2

%

 

2

%

 

2

%

 

2

%

LPG and other

 

2

%

 

3

%

 

2

%

 

3

%

Total

 

100

%

 

100

%

 

100

%

 

100

%

(1)

Crude charge represents the barrels per day of crude oil processed at our refineries.

(2)

Refinery throughput represents the barrels per day of crude and other refinery feedstocks input to the crude units and other conversion units at our refineries.

(3)

Represents barrels sold of refined products produced at our refineries (including HFC Asphalt) and does not include volumes of refined products purchased for resale or volumes of excess crude oil sold.

(4)

Represents crude charge divided by total crude capacity (“BPSD”). Our consolidated crude capacity is 457,000 BPSD.

(5)

Represents average amount per produced barrel sold, which is a non-GAAP measure. Reconciliations to amounts reported under GAAP are provided under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” below.

(6)

Represents total refining segment operating expenses, exclusive of depreciation and amortization, divided by sales volumes of refined products produced at our refineries.

(7)

Represents total refining segment operating expenses, exclusive of depreciation and amortization, divided by refinery throughput.

Lubricants and Specialty Products Segment Operating Data

We acquired our Sonneborn business on February 1, 2019. For the six months ended June 30, 2019 our lubricants and specialty product operating results reflect the operations of our Sonneborn business for the period February 1, 2019 through June 30, 2019.

The following table sets forth information about our lubricants and specialty products operations.

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Lubricants and Specialty Products

 

 

 

 

 

 

 

 

Throughput (BPD)

 

16,990

 

 

18,610

 

 

18,390

 

 

20,100

 

Sales of produced products (BPD)

 

34,660

 

 

31,000

 

 

34,050

 

 

31,400

 

 

 

 

 

 

 

 

 

 

Sales of produced products:

 

 

 

 

 

 

 

 

Finished products

 

52

%

 

48

%

 

50

%

 

48

%

Base oils

 

32

%

 

32

%

 

29

%

 

32

%

Other

 

16

%

 

20

%

 

21

%

 

20

%

Total

 

100

%

 

100

%

 

100

%

 

100

%

Our Lubricants and Specialty Products segment includes base oil production activities, by-product sales to third parties and intra-segment base oil sales to rack forward, referred to as “Rack Back.” “Rack Forward” includes the purchase of base oils and the blending, packaging, marketing and distribution and sales of finished lubricants and specialty products to third parties. Supplemental financial data attributable to our Lubricants and Specialty Products segment is presented below:

 

 

Rack Back (1)

 

Rack Forward (2)

 

Eliminations (3)

 

Total Lubricants and Specialty Products

 

 

(In thousands)

Three months ended June 30, 2019

 

 

 

 

 

 

 

 

Sales and other revenues

 

$

133,225

 

 

$

507,183

 

 

$

(95,062

)

 

$

545,346

 

Cost of products sold

 

$

131,725

 

 

$

378,690

 

 

$

(95,062

)

 

$

415,353

 

Operating expenses

 

$

30,585

 

 

$

28,537

 

 

$

 

 

$

59,122

 

Selling, general and administrative expenses

 

$

6,366

 

 

$

35,721

 

 

$

 

 

$

42,087

 

Depreciation and amortization

 

$

11,075

 

 

$

11,945

 

 

$

 

 

$

23,020

 

Goodwill impairment

 

$

152,712

 

 

$

 

 

$

 

 

$

152,712

 

Income (loss) from operations

 

$

(199,238

)

 

$

52,290

 

 

$

 

 

$

(146,948

)

EBITDA

 

$

(188,163

)

 

$

64,235

 

 

$

 

 

$

(123,928

)

 

 

 

 

 

 

 

 

 

Three months ended June 30, 2018

 

 

 

 

 

 

 

 

Sales and other revenues

 

$

175,642

 

 

$

425,461

 

 

$

(133,414

)

 

$

467,689

 

Cost of products sold

 

$

153,040

 

 

$

353,515

 

 

$

(133,414

)

 

$

373,141

 

Operating expenses

 

$

27,210

 

 

$

(7,305

)

 

$

 

 

$

19,905

 

Selling, general and administrative expenses

 

$

7,888

 

 

$

27,369

 

 

$

 

 

$

35,257

 

Depreciation and amortization

 

$

6,013

 

 

$

4,007

 

 

$

 

 

$

10,020

 

Income from operations

 

$

(18,509

)

 

$

47,875

 

 

$

 

 

$

29,366

 

EBITDA

 

$

(12,496

)

 

$

51,882

 

 

$

 

 

$

39,386

 

 

 

Rack Back (1)

 

Rack Forward (2)

 

Eliminations (3)

 

Total Lubricants and Specialty Products

 

 

(In thousands)

Six months ended June 30, 2019

 

 

 

 

 

 

 

 

Sales and other revenues

 

$

289,680

 

 

$

951,525

 

 

$

(202,525

)

 

$

1,038,680

 

Cost of products sold

 

$

277,543

 

 

$

729,352

 

 

$

(202,525

)

 

$

804,370

 

Operating expenses

 

$

60,145

 

 

$

52,536

 

 

$

 

 

$

112,681

 

Selling, general and administrative expenses

 

$

19,845

 

 

$

61,961

 

 

$

 

 

$

81,806

 

Depreciation and amortization

 

$

21,601

 

 

$

21,590

 

 

$

 

 

$

43,191

 

Goodwill impairment

 

$

152,712

 

 

$

 

 

$

 

 

$

152,712

 

Income (loss) from operations

 

$

(242,166

)

 

$

86,086

 

 

$

 

 

$

(156,080

)

EBITDA

 

$

(220,565

)

 

$

107,676

 

 

$

 

 

$

(112,889

)

 

 

 

 

 

 

 

 

 

Six months ended June 30, 2018

 

 

 

 

 

 

 

 

Sales and other revenues

 

$

349,074

 

 

$

824,500

 

 

$

(261,045

)

 

$

912,529

 

Cost of products sold

 

$

305,094

 

 

$

636,623

 

 

$

(261,045

)

 

$

680,672

 

Operating expenses

 

$

55,981

 

 

$

28,832

 

 

$

 

 

$

84,813

 

Selling, general and administrative expenses

 

$

14,707

 

 

$

51,204

 

 

$

 

 

$

65,911

 

Depreciation and amortization

 

$

11,641

 

 

$

7,243

 

 

$

 

 

$

18,884

 

Income (loss) from operations

 

$

(38,349

)

 

$

100,598

 

 

$

 

 

$

62,249

 

EBITDA

 

$

(26,708

)

 

$

107,841

 

 

$

 

 

$

81,133

 

(1)

Rack Back consists of the PCLI base oil production activities, by-product sales to third parties and intra-segment base oil sales to rack forward.

(2)

Rack Forward activities include the purchase of base oils from rack back and the blending, packaging, marketing and distribution and sales of finished lubricants and specialty products to third parties.

(3)

Intra-segment sales of Rack Back produced base oils to rack forward are eliminated under the “Eliminations” column.

Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles

Reconciliations of earnings before interest, taxes, depreciation and amortization (“EBITDA”) and EBITDA excluding special items (“Adjusted EBITDA”) to amounts reported under generally accepted accounting principles (“GAAP”) in financial statements.

Earnings before interest, taxes, depreciation and amortization, referred to as EBITDA, is calculated as net income attributable to HollyFrontier stockholders plus (i) interest expense, net of interest income, (ii) income tax expense, and (iii) depreciation and amortization. Adjusted EBITDA is calculated as EBITDA plus or minus (i) lower of cost or market inventory valuation adjustments, (ii) goodwill impairment (iii) acquisition and integration costs, (iv) incremental cost of products sold attributable to our Sonneborn inventory value step-up, (v) RINs cost reduction related to our Cheyenne and Woods Cross small refinery exemptions, (vi) Woods Cross refinery outage damages and (vii) Woods Cross refinery estimated insurance claims on outage damages.

EBITDA and Adjusted EBITDA are not calculations provided for under accounting principles generally accepted in the United States; however, the amounts included in these calculations are derived from amounts included in our consolidated financial statements. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income or operating income as an indication of our operating performance or as an alternative to operating cash flow as a measure of liquidity. EBITDA and Adjusted EBITDA are not necessarily comparable to similarly titled measures of other companies. These are presented here because they are widely used financial indicators used by investors and analysts to measure performance. EBITDA and Adjusted EBITDA are also used by our management for internal analysis and as a basis for financial covenants.

Set forth below is our calculation of EBITDA and adjusted EBITDA.

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

(In thousands)

Net income attributable to HollyFrontier stockholders

 

$

196,915

 

 

$

345,507

 

 

$

449,970

 

 

$

613,598

 

Add interest expense

 

34,264

 

 

32,324

 

 

70,911

 

 

65,047

 

Subtract interest income

 

(4,588

)

 

(2,934

)

 

(10,963

)

 

(5,524

)

Add income tax expense

 

89,336

 

 

117,447

 

 

176,841

 

 

202,484

 

Add depreciation and amortization

 

126,908

 

 

110,379

 

 

248,329

 

 

214,720

 

EBITDA

 

$

442,835

 

 

$

602,723

 

 

$

935,088

 

 

$

1,090,325

 

Add (subtract) lower of cost or market inventory valuation adjustment

 

47,801

 

 

(106,926

)

 

(184,545

)

 

(210,764

)

Add goodwill impairment

 

152,712

 

 

 

 

152,712

 

 

 

Add acquisition and integration costs

 

3,637

 

 

 

 

16,189

 

 

3,595

 

Add incremental cost of products sold attributable to Sonneborn inventory value step-up

 

 

 

 

 

9,338

 

 

 

Subtract RINs cost reduction

 

 

 

(25,267

)

 

 

 

(96,971

)

Add Woods Cross refinery outage damages

 

 

 

24,566

 

 

 

 

24,566

 

Subtract Woods Cross refinery estimated insurance claims on outage damages

 

 

 

(9,840

)

 

 

 

(9,840

)

Adjusted EBITDA

 

$

646,985

 

 

$

485,256

 

 

$

928,782

 

 

$

800,911

 

EBITDA and Adjusted EBITDA attributable to our Refining segment is presented below:

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

Refining Segment

 

2019

 

2018

 

2019

 

2018

 

 

(In thousands)

Income from operations (1)

 

$

432,049

 

 

$

429,306

 

 

$

783,376

 

 

$

737,232

 

Add depreciation and amortization

 

76,225

 

 

72,989

 

 

150,640

 

 

140,164

 

EBITDA

 

508,274

 

 

502,295

 

 

934,016

 

 

877,396

 

Add (subtract) lower of cost or market inventory valuation adjustment

 

47,801

 

 

(106,926

)

 

(184,545

)

 

(210,764

)

Subtract RINs cost reduction

 

 

 

(25,267

)

 

 

 

(96,971

)

Add Woods Cross refinery outage damages

 

 

 

24,566

 

 

 

 

24,566

 

Subtract Woods Cross refinery estimated insurance claims on outage damages

 

 

 

(9,840

)

 

 

 

(9,840

)

Adjusted EBITDA

 

$

556,075

 

 

$

384,828

 

 

$

749,471

 

 

$

584,387

 

(1)

Income from operations of our Refining segment represents income plus (i) interest expense, net of interest income and (ii) income tax provision.

EBITDA and Adjusted EBITDA attributable to our Lubricants and Specialty Products segment is set forth below.

Lubricants and Specialty Products Segment

 

Rack Back

 

Rack Forward

 

Total Lubricants and Specialty Products

 

 

(In thousands)

Three months ended June 30, 2019

 

 

 

 

 

 

Income (loss) from operations (1)

 

$

(199,238

)

 

$

52,290

 

 

$

(146,948

)

Add depreciation and amortization

 

11,075

 

 

11,945

 

 

23,020

 

EBITDA

 

$

(188,163

)

 

$

64,235

 

 

$

(123,928

)

Add goodwill impairment

 

152,712

 

 

 

 

152,712

 

Adjusted EBITDA

 

$

(35,451

)

 

$

64,235

 

 

$

28,784

 

 

 

 

 

 

 

 

Three months ended June 30, 2018

 

 

 

 

 

 

Income (loss) from operations (1)

 

$

(18,509

)

 

$

47,875

 

 

$

29,366

 

Add depreciation and amortization

 

6,013

 

 

4,007

 

 

10,020

 

EBITDA

 

$

(12,496

)

 

$

51,882

 

 

$

39,386

 

 

 

 

 

 

 

 

Six months ended June 30, 2019

 

 

 

 

 

 

Income (loss) from operations (1)

 

$

(242,166

)

 

$

86,086

 

 

$

(156,080

)

Add depreciation and amortization

 

21,601

 

 

21,590

 

 

43,191

 

EBITDA

 

$

(220,565

)

 

$

107,676

 

 

$

(112,889

)

Add goodwill impairment

 

152,712

 

 

 

 

152,712

 

Add incremental cost of products sold attributable to Sonneborn inventory value step-up

 

 

 

9,338

 

 

9,338

 

Adjusted EBITDA

 

$

(67,853

)

 

$

117,014

 

 

$

49,161

 

 

 

 

 

 

 

 

Six months ended June 30, 2018

 

 

 

 

 

 

Income (loss) from operations (1)

 

$

(38,349

)

 

$

100,598

 

 

$

62,249

 

Add depreciation and amortization

 

11,641

 

 

7,243

 

 

18,884

 

EBITDA

 

$

(26,708

)

 

$

107,841

 

 

$

81,133

 

(1)

Income (loss) from operations of our Lubricants and Specialty Products segment represents income (loss) plus (i) interest expense, net of interest income and (ii) income tax provision.

Reconciliations of refinery operating information (non-GAAP performance measures) to amounts reported under generally accepted accounting principles in financial statements.

Refinery gross margin and net operating margin are non-GAAP performance measures that are used by our management and others to compare our refining performance to that of other companies in our industry. We believe these margin measures are helpful to investors in evaluating our refining performance on a relative and absolute basis. Refinery gross margin per produced barrel sold is total refining segment revenues less total refining segment cost of products sold, exclusive of lower of cost or market inventory valuation adjustments, divided by sales volumes of produced refined products sold. Net operating margin per barrel sold is the difference between refinery gross margin and refinery operating expenses per produced barrel sold. These two margins do not include the non-cash effects of lower of cost or market inventory valuation adjustments or depreciation and amortization. Each of these component performance measures can be reconciled directly to our consolidated statements of income. Other companies in our industry may not calculate these performance measures in the same manner.

Below are reconciliations to our consolidated statements of income for refinery net operating and gross margin and operating expenses, in each case averaged per produced barrel sold. Due to rounding of reported numbers, some amounts may not calculate exactly.

Reconciliation of average refining segment net operating margin per produced barrel sold to refinery gross margin to total sales and other revenues

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

(Dollars in thousands, except per barrel amounts)

Consolidated

 

 

 

 

 

 

 

 

Net operating margin per produced barrel sold

 

$

13.72

 

 

$

10.21

 

 

$

9.99

 

 

$

8.64

 

Add average refinery operating expenses per produced barrel sold

 

5.92

 

 

6.36

 

 

6.4

 

 

6.04

 

Refinery gross margin per produced barrel sold

 

$

19.64

 

 

$

16.57

 

 

$

16.39

 

 

$

14.68

 

Times produced barrels sold (BPD)

 

469,100

 

 

453,830

 

 

446,190

 

 

459,640

 

Times number of days in period

 

91

 

 

91

 

 

181

 

 

181

 

Refining segment gross margin

 

$

838,394

 

 

$

684,317

 

 

$

1,323,663

 

 

$

1,221,300

 

Add (subtract) rounding

 

34

 

 

(189

)

 

(365

)

 

309

 

Total refining segment gross margin

 

838,428

 

 

684,128

 

 

1,323,298

 

 

1,221,609

 

Add refining segment cost of products sold

 

3,458,832

 

 

3,394,853

 

 

6,421,372

 

 

6,606,557

 

Refining segment sales and other revenues

 

4,297,260

 

 

4,078,981

 

 

7,744,670

 

 

7,828,166

 

Add lubricants and specialty products segment sales and other revenues

 

545,346

 

 

467,689

 

 

1,038,680

 

 

912,529

 

Add HEP segment sales and other revenues

 

130,751

 

 

118,760

 

 

265,248

 

 

247,644

 

Subtract corporate, other and eliminations

 

(190,742

)

 

(194,194

)

 

(368,736

)

 

(388,676

)

Sales and other revenues

 

$

4,782,615

 

 

$

4,471,236

 

 

$

8,679,862

 

 

$

8,599,663

 

Reconciliation of average refining segment operating expenses per produced barrel sold to total operating expenses

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

(Dollars in thousands, except per barrel amounts)

Consolidated

 

 

 

 

 

 

 

 

Average operating expenses per produced barrel sold

 

$

5.92

 

 

$

6.36

 

 

$

6.40

 

 

$

6.04

 

Times produced barrels sold (BPD)

 

469,100

 

 

453,830

 

 

446,190

 

 

459,640

 

Times number of days in period

 

91

 

 

91

 

 

181

 

 

181

 

Refining segment operating expenses

 

$

252,714

 

 

$

262,659

 

 

$

516,866

 

 

$

502,497

 

Add (subtract) rounding

 

1

 

 

(101

)

 

346

 

 

(92

)

Total refining segment operating expenses

 

252,715

 

 

262,558

 

 

517,212

 

 

502,405

 

Add lubricants and specialty products segment operating expenses

 

59,122

 

 

19,905

 

 

112,681

 

 

84,813

 

Add HEP segment operating expenses

 

40,608

 

 

34,533

 

 

78,121

 

 

70,736

 

Subtract corporate, other and eliminations

 

(19,193

)

 

(20,781

)

 

(43,170

)

 

(41,451

)

Operating expenses (exclusive of depreciation and amortization)

 

$

333,252

 

 

$

296,215

 

 

$

664,844

 

 

$

616,503

 

Reconciliation of net income attributable to HollyFrontier stockholders to adjusted net income attributable to HollyFrontier stockholders

Adjusted net income attributable to HollyFrontier stockholders is a non-GAAP financial measure that excludes non-cash lower of cost or market inventory valuation adjustments, goodwill impairment, acquisition and integration costs, incremental cost of products sold due to Sonneborn inventory value step-up, RINs cost reductions and refinery outage damages and related estimated insurance claims. We believe this measure is helpful to investors and others in evaluating our financial performance and to compare our results to that of other companies in our industry. Similarly titled performance measures of other companies may not be calculated in the same manner.

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

(In thousands, except per share amounts)

Consolidated

 

 

 

 

 

 

 

 

GAAP:

 

 

 

 

 

 

 

 

Income before income taxes

 

$

306,153

 

 

$

480,360

 

 

$

670,144

 

 

$

854,259

 

Income tax expense

 

89,336

 

 

117,447

 

 

176,841

 

 

202,484

 

Net income

 

216,817

 

 

362,913

 

 

493,303

 

 

651,775

 

Less net income attributable to noncontrolling interest

 

19,902

 

 

17,406

 

 

43,333

 

 

38,177

 

Net income attributable to HollyFrontier stockholders

 

196,915

 

 

345,507

 

 

449,970

 

 

613,598

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjustments to arrive at adjusted results:

 

 

 

 

 

 

 

 

Lower of cost or market inventory valuation adjustment

 

47,801

 

 

(106,926

)

 

(184,545

)

 

(210,764

)

Goodwill impairment

 

152,712

 

 

 

 

152,712

 

 

 

Acquisition and integration costs

 

3,637

 

 

 

 

16,189

 

 

3,595

 

Incremental cost of products sold attributable to Sonneborn inventory value step-up

 

 

 

 

 

9,338

 

 

 

RINs cost reduction

 

 

 

(25,267

)

 

 

 

(96,971

)

Woods Cross refinery outage damages

 

 

 

24,566

 

 

 

 

24,566

 

Woods Cross refinery estimated insurance claims on outage damages

 

 

 

(9,840

)

 

 

 

(9,840

)

Total adjustments to income before income taxes

 

204,150

 

 

(117,467

)

 

(6,306

)

 

(289,414

)

Adjustment to income tax expense (1)

 

28,748

 

 

(30,872

)

 

(21,769

)

 

(71,940

)

Total adjustments, net of tax

 

175,402

 

 

(86,595

)

 

15,463

 

 

(217,474

)

 

 

 

 

 

 

 

 

 

Adjusted results - Non-GAAP:

 

 

 

 

 

 

 

 

Adjusted income before income taxes

 

510,303

 

 

362,893

 

 

663,838

 

 

564,845

 

Adjusted income tax expense (2)

 

118,084

 

 

86,575

 

 

155,072

 

 

130,544

 

Adjusted net income

 

392,219

 

 

276,318

 

 

508,766

 

 

434,301

 

Less net income attributable to noncontrolling interest

 

19,902

 

 

17,406

 

 

43,333

 

 

38,177

 

Adjusted net income attributable to HollyFrontier stockholders

 

$

372,317

 

 

$

258,912

 

 

$

465,433

 

 

$

396,124

 

Adjusted earnings per share attributable to HollyFrontier stockholders - diluted (3)

 

$

2.18

 

 

$

1.45

 

 

$

2.71

 

 

$

2.22

 

Average number of common shares outstanding - diluted

 

170,547

 

 

177,586

 

 

171,264

 

 

177,820

 

(1)

Represents adjustment to GAAP income tax expense to arrive at adjusted income tax expense, which is computed as follows:

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

(In thousands)

Non-GAAP income tax expense (2)

 

$

118,084

 

 

$

86,575

 

 

$

155,072

 

 

$

130,544

 

Subtract GAAP income tax expense

 

89,336

 

 

117,447

 

 

176,841

 

 

202,484

 

Non-GAAP adjustment to income tax expense

 

$

28,748

 

 

$

(30,872

)

 

$

(21,769

)

 

$

(71,940

)

(2)

Non-GAAP income tax expense is computed by a) adjusting HFC's consolidated estimated Annual Effective Tax Rate (“AETR”) for GAAP purposes for the effects of the above Non-GAAP adjustments b) applying the resulting Adjusted Non-GAAP AETR to Non-GAAP adjusted income before income taxes and c) adjusting for discrete tax items applicable to the period.

(3)

Adjusted earnings per share attributable to HollyFrontier stockholders - diluted is calculated as adjusted net income attributable to HollyFrontier stockholders divided by the average number of shares of common stock outstanding assuming dilution.

Reconciliation of effective tax rate to adjusted effective tax rate

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

(Dollars in thousands)

GAAP:

 

 

 

 

 

 

 

 

Income before income taxes

 

$

306,153

 

 

$

480,360

 

 

$

670,144

 

 

$

854,259

 

Income tax expense

 

$

89,336

 

 

$

117,447

 

 

$

176,841

 

 

$

202,484

 

Effective tax rate for GAAP financial statements

 

29.2

%

 

24.4

%

 

26.4

%

 

23.7

%

Adjusted - Non-GAAP:

 

 

 

 

 

 

 

 

Effect of Non-GAAP adjustments

 

(6.0

)%

 

(0.5

)%

 

(3.0

)%

 

(0.6

)%

Effective tax rate for adjusted results

 

23.2

%

 

23.9

%

 

23.4

%

 

23.1

%

 

Richard L. Voliva III, Executive Vice President and
Chief Financial Officer
Craig Biery, Director,
Investor Relations
HollyFrontier Corporation
214-954-6510


Source: Business Wire (August 1, 2019 - 6:30 AM EDT)

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