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November 05, 2015
HollyFrontier Corporation Reports Quarterly Net Income

DALLAS--(BUSINESS WIRE)-- HollyFrontier Corporation (NYSE:HFC) ("HollyFrontier" or the "Company") today reported third quarter net income attributable to HollyFrontier stockholders of $196.3 million or $1.04 per diluted share for the quarter ended September 30, 2015, compared to $175.0 million or $0.88 per diluted share for the quarter ended September 30, 2014. Included in the current quarter results was a non-cash inventory valuation charge that decreased after-tax earnings by $146.3 million, or $0.78 per share. Excluding this inventory valuation charge, after-tax earnings was $342.6 million, or $1.82 per share.

For the third quarter, net income attributable to our stockholders, excluding the lower of cost or market inventory valuation adjustment, increased by $167.6 million compared to the same period of 2014, principally reflecting improved margins and strong refining operations across our system. Crude oil charges averaged 460,000 barrels per day ("BPD"), a new quarterly record since the HollyFrontier merger in July 2011. Production levels averaged approximately 474,000 BPD. On a per barrel basis, consolidated refinery gross margin was $19.85 per produced barrel, a 27% increase compared to $15.59 for the third quarter of 2014. Total operating expenses for the quarter were $265.4 million compared to $281.0 million for the third quarter of last year, and refining operating expenses averaged $5.46 per produced barrel sold compared to $6.39 per barrel for the same period of 2014.

HollyFrontier's President & CEO, Mike Jennings, commented, "Third quarter earnings reflect solid refining margins and impressive operational reliability across our refining system. We reported a second consecutive quarterly record in terms of utilization rate, averaging 460,000 BPD of crude throughput. Strong refining operations, improved margin realization and lower operating costs generated a greater than 100% increase in earnings per share, excluding the current quarter inventory charge, when compared to the third quarter of 2014. Furthermore, we continued to execute our capital allocation plan, returning approximately $164.0 million to shareholders through dividends and share repurchases during the quarter."

For the third quarter of 2015, net cash provided by operations totaled $333.4 million. We executed $102.0 million in share repurchases and completed a $300.0 million accelerated share repurchase program initiated in May. Our shares outstanding as of September 30, 2015 were approximately 185.0 million, down from approximately 196.0 million at December 31, 2014. Additionally, we declared and paid a $0.33 regular dividend to shareholders in the third quarter totaling approximately $62.0 million. At September 30, 2015, our combined balance of cash and short-term investments totaled $626.8 million and our consolidated debt was $982.8 million. Our debt, exclusive of Holly Energy Partners' debt, which is nonrecourse to HollyFrontier, was $31.8 million at September 30, 2015. We had no cash borrowings or outstanding principal under our credit facility during the quarter.

The Company has scheduled a webcast conference call for today, November 5, 2015, at 8:30 AM Eastern Time to discuss third quarter financial results. This webcast may be accessed at: https://event.webcasts.com/starthere.jsp?ei=1079891. An audio archive of this webcast will be available using the above noted link through November 19, 2015.

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 operates through its subsidiaries a 135,000 barrels per stream day ("BPSD") refinery located in El Dorado, Kansas, two refinery facilities with a combined capacity of 125,000 BPSD located in Tulsa, Oklahoma, a 100,000 BPSD refinery located in Artesia, New Mexico, a 52,000 BPSD refinery located in Cheyenne, Wyoming and a 31,000 BPSD refinery in Woods Cross, Utah. HollyFrontier markets its refined products principally in the Southwest U.S., the Rocky Mountains extending into the Pacific Northwest and in other neighboring Plains states. A subsidiary of HollyFrontier also owns a 39% interest (including the general partner interest) in Holly Energy Partners, L.P.

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 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
September 30,
      Change from 2014
2015     2014 Change     Percent
(In thousands, except per share data)
Sales and other revenues $ 3,585,823 $ 5,317,555 $ (1,731,732 ) (33 )%
Operating costs and expenses:
Cost of products sold:
Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment) 2,653,859 4,625,893 (1,972,034 ) (43 )
Lower of cost or market inventory adjustment   225,451         225,451  
2,879,310 4,625,893 (1,746,583 ) (38 )
Operating expenses 265,398 280,957 (15,559 ) (6 )
General and administrative expenses 30,746 27,149 3,597 13
Depreciation and amortization   87,764     80,945     6,819   8
Total operating costs and expenses   3,263,218     5,014,944     (1,751,726 ) (35 )
Income from operations 322,605 302,611 19,994 7
Other income (expense):
Earnings (loss) of equity method investments 1,269 (1,247 ) 2,516 202
Interest income 673 1,004 (331 ) (33 )
Interest expense (11,102 ) (11,038 ) (64 ) 1
Gain (loss) on sale of assets   7,228     (556 )   7,784   (1,400 )
  (1,932 )   (11,837 )   9,905   (84 )
Income before income taxes 320,673 290,774 29,899 10
Income tax provision   110,066     103,216     6,850   7
Net income 210,607 187,558 23,049 12
Less net income attributable to noncontrolling interest   14,285     12,552     1,733   14
Net income attributable to HollyFrontier stockholders $ 196,322   $ 175,006   $ 21,316   12 %
Earnings per share attributable to HollyFrontier stockholders:
Basic $ 1.05   $ 0.88   $ 0.17   19 %
Diluted $ 1.04   $ 0.88   $ 0.16   18 %
Cash dividends declared per common share $ 0.33   $ 0.82   $ (0.49 ) (60 )%
Average number of common shares outstanding:
Basic 187,208 197,261 (10,053 ) (5 )%
Diluted 187,344 197,535 (10,191 ) (5 )%
EBITDA $ 404,581 $ 369,201 $ 35,380 10 %
 
         
Nine Months Ended
September 30,
Change from 2014
2015     2014 Change     Percent
(In thousands, except per share data)
Sales and other revenues $ 10,294,361 $ 15,481,208 $ (5,186,847 ) (34 )%
Operating costs and expenses:
Cost of products sold:
Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment) 7,792,707 13,439,359 (5,646,652 ) (42 )
Lower of cost or market inventory adjustment   83,425         83,425  
7,876,132 13,439,359 (5,563,227 ) (41 )
Operating expenses 775,159 826,577 (51,418 ) (6 )
General and administrative expenses 86,432 82,437 3,995 5
Depreciation and amortization   255,579     262,883     (7,304 ) (3 )
Total operating costs and expenses   8,993,302     14,611,256     (5,617,954 ) (38 )
Income from operations 1,301,059 869,952 431,107 50
Other income (expense):
Loss of equity method investments (5,907 ) (2,956 ) (2,951 ) 100
Interest income 2,403 3,593 (1,190 ) (33 )
Interest expense (31,813 ) (33,521 ) 1,708 (5 )
Loss on early extinguishment of debt (1,370 ) (7,677 ) 6,307 (82 )
Gain (loss) on sale of assets   8,867     (556 )   9,423   (1,695 )
  (27,820 )   (41,117 )   13,297   (32 )
Income before income taxes 1,273,239 828,835 444,404 54
Income tax provision   446,784     292,162     154,622   53
Net income 826,455 536,673 289,782 54
Less net income attributable to noncontrolling interest   42,433     33,177     9,256   28
Net income attributable to HollyFrontier stockholders $ 784,022   $ 503,496   $ 280,526   56 %
Earnings per share attributable to HollyFrontier stockholders:
Basic $ 4.09   $ 2.54   $ 1.55   61 %
Diluted $ 4.09   $ 2.53   $ 1.56   62 %
Cash dividends declared per common share $ 0.98   $ 2.44   $ (1.46 ) (60 )%
Average number of common shares outstanding:
Basic 191,182 197,895 (6,713 ) (3 )%
Diluted 191,282 198,096 (6,814 ) (3 )%
EBITDA $ 1,517,165 $ 1,096,146 $ 421,019 38 %
 
       

Balance Sheet Data

 
September 30, December 31,
2015 2014
(In thousands)
Cash, cash equivalents and total investments in marketable securities $ 626,784 $ 1,042,095
Working capital $ 1,215,220 $ 1,531,595
Total assets $ 9,071,637 $ 9,230,640
Long-term debt $ 982,846 $ 1,054,890
Total equity $ 6,181,684 $ 6,100,719
 

Segment Information

Our operations are organized into two reportable segments, Refining and HEP. Our operations that are not included in the Refining and HEP segments are included in Corporate and Other. Intersegment transactions are eliminated in our consolidated financial statements and are included in Consolidations and Eliminations. The Refining segment includes the operations of our El Dorado, Tulsa, Navajo, Cheyenne and Woods Cross refineries and NK 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. Additionally, the Refining segment includes specialty lubricant products produced at our Tulsa refineries that are marketed throughout North America and are distributed in Central and South America. NK Asphalt operates various asphalt terminals in Arizona, New Mexico and Oklahoma.

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 and terminal, tankage and loading rack facilities in the Mid-Continent, Southwest and Rocky Mountain regions of the United States. The HEP segment also includes a 75% interest in the UNEV Pipeline (a consolidated subsidiary of HEP) and 50% and 25% ownership interests in Frontier Pipeline and SLC Pipeline, respectively. 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     HEP    

Corporate
and Other

   

Consolidations
and
Eliminations

   

Consolidated
Total

(In thousands)
Three Months Ended September 30, 2015
Sales and other revenues $ 3,571,192 $ 88,389 $ 104 $ (73,862) $ 3,585,823
Depreciation and amortization $ 68,976 $ 15,919 $ 3,076 $ (207) $ 87,764
Income (loss) from operations $ 310,810 $ 43,702 $ (31,296) $ (611) $ 322,605
Capital expenditures $ 147,641 $ 7,473 $ 1,870 $ $ 156,984
 
Three Months Ended September 30, 2014
Sales and other revenues $ 5,303,053 $ 82,141 $ 181 $ (67,820) $ 5,317,555
Depreciation and amortization $ 63,109 $ 15,078 $ 2,965 $ (207) $ 80,945
Income (loss) from operations $ 292,132 $ 39,341 $ (28,313) $ (549) $ 302,611
Capital expenditures $ 98,115 $ 22,875 $ 3,374 $ $ 124,364
 
Nine Months Ended September 30, 2015
Sales and other revenues $ 10,246,965 $ 261,624 $ 473 $ (214,701) $ 10,294,361
Depreciation and amortization $ 202,686 $ 44,869 $ 8,645 $ (621) $ 255,579
Income (loss) from operations $ 1,261,024 $ 128,746 $ (86,984) $ (1,727) $ 1,301,059
Capital expenditures $ 405,738 $ 57,286 $ 10,873 $ $ 473,897
 
Nine Months Ended September 30, 2014
Sales and other revenues $ 15,440,047 $ 244,177 $ 1,802 $ (204,818) $ 15,481,208
Depreciation and amortization $ 210,490 $ 45,739 $ 7,275 $ (621) $ 262,883
Income (loss) from operations $ 835,555 $ 117,670 $ (81,670) $ (1,603) $ 869,952
Capital expenditures $ 290,392 $ 61,657 $ 17,084 $ $ 369,133
 
September 30, 2015
Cash, cash equivalents and total investments in marketable securities $ 62 $ 10,856 $ 615,866 $ $ 626,784
Total assets $ 7,122,334 $ 1,499,260 $ 753,619 $ (303,576) $ 9,071,637
Long-term debt $ $ 951,067 $ 31,779 $ $ 982,846
 
December 31, 2014
Cash, cash equivalents and total investments in marketable securities $ 88 $ 2,830 $ 1,039,177 $ $ 1,042,095
Total assets $ 6,965,245 $ 1,434,572 $ 1,150,865 $ (320,042) $ 9,230,640
Long-term debt $ $ 867,579 $ 187,311 $ $ 1,054,890
 
 

Refining Operating Data

The following tables set forth information, including non-GAAP performance measures about our refinery operations. The cost of products and 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
September 30,
      Nine Months Ended
September 30,
2015     2014 2015     2014
Mid-Continent Region (El Dorado and Tulsa Refineries)
Crude charge (BPD) (1) 277,290 252,310 271,800 257,800

Refinery throughput (BPD) (2)

295,250 258,950 286,420 269,700
Refinery production (BPD) (3) 282,370 254,480 274,990 265,210
Sales of produced refined products (BPD) 267,360 249,850 265,210 256,520
Sales of refined products (BPD) (4) 312,990 280,220 291,210 274,580
Refinery utilization (5) 106.7 % 97 % 104.5 % 99.2 %
 
Average per produced barrel (6)
Net sales $ 74.15 $ 113.67 $ 75.34 $ 114.96
Cost of products (7)   55.48     100.32     58.27     101.35  
Refinery gross margin (8) 18.67 13.35 17.07 13.61
Refinery operating expenses (9)   4.79     5.56     4.68     5.38  
Net operating margin (8) $ 13.88   $ 7.79   $ 12.39   $ 8.23  
 
Refinery operating expenses per throughput barrel (10) $ 4.34 $ 5.36 $ 4.33 $ 5.12
 
Feedstocks:
Sweet crude oil 60 % 73 % 60 % 73 %
Sour crude oil 24 % 10 % 22 % 6 %
Heavy sour crude oil 10 % 15 % 13 % 16 %
Other feedstocks and blends   6 %   2 %   5 %   5 %
Total   100 %   100 %   100 %   100 %
 
Sales of produced refined products:
Gasolines 49 % 47 % 48 % 46 %
Diesel fuels 34 % 32 % 35 % 33 %
Jet fuels 7 % 7 % 7 % 8 %
Fuel oil 1 % 1 % 1 % 1 %
Asphalt 2 % 3 % 2 % 2 %
Lubricants 4 % 4 % 4 % 4 %
LPG and other   3 %   6 %   3 %   6 %
Total   100 %   100 %   100 %   100 %
 
 
Three Months Ended
September 30,
Nine Months Ended
September 30,
2015 2014 2015 2014
Southwest Region (Navajo Refinery)
Crude charge (BPD) (1) 104,910 98,290 100,100 99,030

Refinery throughput (BPD) (2)

115,660 109,550 111,490 110,670
Refinery production (BPD) (3) 113,890 107,120 109,750 108,290
Sales of produced refined products (BPD) 111,080 107,290 111,330 107,350
Sales of refined products (BPD) (4) 117,320 116,570 120,040 115,310
Refinery utilization (5) 104.9 % 98.3 % 100.1 % 99.0 %
 
Average per produced barrel (6)
Net sales $ 71.52 $ 116.09 $ 73.37 $ 118.01
Cost of products (7)   51.65     98.39     54.45     101.90  
Refinery gross margin (8) 19.87 17.70 18.92 16.11
Refinery operating expenses (9)   5.25     5.45     4.87     5.33  
Net operating margin (8) $ 14.62   $ 12.25   $ 14.05   $ 10.78  
 
Refinery operating expenses per throughput barrel (10) $ 5.04 $ 5.34 $ 4.86 $ 5.17
 
Feedstocks:
Sweet crude oil 39 % 14 % 34 % 9 %
Sour crude oil 52 % 76 % 56 % 78 %
Heavy sour crude oil % % % 3 %
Other feedstocks and blends   9 %   10 %   10 %   10 %
Total   100 %   100 %   100 %   100 %
 
Sales of produced refined products:
Gasolines 52 % 52 % 54 % 53 %
Diesel fuels 43 % 39 % 39 % 39 %
Fuel oil 2 % 4 % 2 % 4 %
Asphalt 1 % 1 % 1 % 1 %
LPG and other   2 %   4 %   4 %   3 %
Total   100 %   100 %   100 %   100 %
 
Rocky Mountain Region (Cheyenne and Woods Cross Refineries)
Crude charge (BPD) (1) 77,890 59,020 69,190 64,750

Refinery throughput (BPD) (2)

82,550 68,100 74,760 71,450
Refinery production (BPD) (3) 77,930 66,030 70,380 68,730
Sales of produced refined products (BPD) 77,620 59,200 67,680 68,790
Sales of refined products (BPD) (4) 80,530 62,770 72,520 72,040
Refinery utilization (5) 93.8 % 71.1 % 83.4 % 78.0 %
 
 
Three Months Ended
September 30,
Nine Months Ended
September 30,
2015 2014 2015 2014
Rocky Mountain Region (Cheyenne and Woods Cross Refineries)
Average per produced barrel (6)
Net sales $ 74.53 $ 115.14 $ 73.79 $ 114.25
Cost of products (7)   50.61     93.91     53.47     96.15  
Refinery gross margin (8) 23.92 21.23 20.32 18.10
Refinery operating expenses (9)   8.10     11.63     9.64     10.05  
Net operating margin (8) $ 15.82   $ 9.60   $ 10.68   $ 8.05  
 
Refinery operating expenses per throughput barrel (10) $ 7.62 $ 10.11 $ 8.73 $ 9.68
 
Feedstocks:
Sweet crude oil 46 % 44 % 43 % 44 %
Sour crude oil % 2 % % 2 %
Heavy sour crude oil 36 % 27 % 37 % 30 %
Black wax crude oil 12 % 14 % 12 % 15 %
Other feedstocks and blends   6 %   13 %   8 %   9 %
Total   100 %   100 %   100 %   100 %
 
Sales of produced refined products:
Gasolines 57 % 53 % 57 % 54 %
Diesel fuels 38 % 35 % 37 % 33 %
Fuel oil 3 % 2 % 3 % 1 %
Asphalt % 5 % 1 % 6 %
LPG and other   2 %   5 %   2 %   6 %
Total   100 %   100 %   100 %   100 %
 
Consolidated
Crude charge (BPD) (1) 460,090 409,620 441,090 421,580

Refinery throughput (BPD) (2)

493,460 436,600 472,670 451,820
Refinery production (BPD) (3) 474,190 427,630 455,120 442,230
Sales of produced refined products (BPD) 456,060 416,310 444,220 432,660
Sales of refined products (BPD) (4) 510,840 459,560 483,770 461,930
Refinery utilization (5) 103.9 % 92.5 % 99.6 % 95.2 %
 
Average per produced barrel (6)
Net sales $ 73.57 $ 114.50 $ 74.61 $ 115.61
Cost of products (7)   53.72     98.91     56.58     100.66  
Refinery gross margin (8) 19.85 15.59 18.03 14.95
Refinery operating expenses (9)   5.46     6.39     5.48     6.11  
Net operating margin (8) $ 14.39   $ 9.20   $ 12.55   $ 8.84  
 
Refinery operating expenses per throughput barrel (10) $ 5.05 $ 6.10 $ 5.15 $ 5.85
 
Feedstocks:
Sweet crude oil 52 % 54 % 51 % 53 %
Sour crude oil 27 % 25 % 26 % 23 %
Heavy sour crude oil 12 % 13 % 14 % 15 %
Black wax crude oil 2 % 2 % 2 % 2 %
Other feedstocks and blends   7 %   6 %   7 %   7 %
Total   100 %   100 %   100 %   100 %
 
 
Three Months Ended
September 30,
Nine Months Ended
September 30,
2015 2014 2015 2014
Consolidated
Sales of produced refined products:
Gasolines 51 % 49 % 51 % 49 %
Diesel fuels 37 % 34 % 36 % 34 %
Jet fuels 4 % 4 % 4 % 5 %
Fuel oil 1 % 2 % 1 % 2 %
Asphalt 1 % 2 % 2 % 3 %
Lubricants 3 % 3 % 3 % 2 %
LPG and other   3 %   6 %   3 %   5 %
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) Refinery production represents the barrels per day of refined products yielded from processing crude and other refinery feedstocks through the crude units and other conversion units at our refineries.
(4) Includes refined products purchased for resale.
(5) Represents crude charge divided by total crude capacity (BPSD). Our consolidated crude capacity is 443,000 BPSD.
(6) Represents average per barrel amount for produced refined products 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.
(7) Transportation, terminal and refinery storage costs billed from HEP are included in cost of products.
(8) Excludes lower of cost or market inventory valuation adjustment of $225.5 million and $83.4 million for the three and nine ended September 30, 2015, respectively.
(9) Represents operating expenses of our refineries, exclusive of depreciation and amortization.
(10) Represents refinery operating expenses, exclusive of depreciation and amortization, divided by refinery throughput.
 

Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles

Reconciliations of earnings before interest, taxes, depreciation and amortization ("EBITDA") to amounts reported under generally accepted accounting principles in financial statements.

Earnings before interest, taxes, depreciation and amortization, which we refer to as EBITDA, is calculated as net income attributable to HollyFrontier stockholders plus (i) interest expense, net of interest income, (ii) income tax provision, and (iii) depreciation and amortization. EBITDA is not a calculation provided for under accounting principles generally accepted in the United States; however, the amounts included in the EBITDA calculation are derived from amounts included in our consolidated financial statements. EBITDA should not be considered as an alternative 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 is not necessarily comparable to similarly titled measures of other companies. EBITDA is presented here because it is a widely used financial indicator used by investors and analysts to measure performance. EBITDA is also used by our management for internal analysis and as a basis for financial covenants.

Set forth below is our calculation of EBITDA.

    Three Months Ended
September 30,
      Nine Months Ended
September 30,
2015     2014 2015     2014
(In thousands)
 
Net income attributable to HollyFrontier stockholders $ 196,322 $ 175,006 $ 784,022 $ 503,496
Add income tax provision 110,066 103,216 446,784 292,162
Add interest expense (1) 11,102 11,038 33,183 41,198
Subtract interest income (673 ) (1,004 ) (2,403 ) (3,593 )
Add depreciation and amortization   87,764     80,945     255,579     262,883  
EBITDA $ 404,581   $ 369,201   $ 1,517,165   $ 1,096,146  
 

(1) Includes loss on early extinguishment of debt of $1.4 million and $7.7 million for the nine months ended September 30, 2015 and 2014, respectively.

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 barrel is the difference between average net sales price and average cost of products per barrel of produced refined products. Net operating margin per barrel is the difference between refinery gross margin and refinery operating expenses per barrel of produced refined products. 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.

Refinery Gross and Net Operating Margins

Below are reconciliations to our consolidated statements of income for (i) net sales, cost of products (exclusive of lower of cost or market inventory valuation adjustment) and operating expenses, in each case averaged per produced barrel sold, and (ii) net operating margin and refinery gross margin. Due to rounding of reported numbers, some amounts may not calculate exactly.

Reconciliation of produced refined product sales to total sales and other revenues

    Three Months Ended
September 30,
      Nine Months Ended
September 30,
2015     2014 2015     2014
(Dollars in thousands, except per barrel amounts)
Consolidated
Average sales price per produced barrel sold $ 73.57 $ 114.50 $ 74.61 $ 115.61
Times sales of produced refined products (BPD) 456,060 416,310 444,220 432,660
Times number of days in period   92     92     273     273  
Produced refined product sales $ 3,086,815   $ 4,385,410   $ 9,048,108   $ 13,655,412  
 
Total produced refined product sales $ 3,086,815 $ 4,385,410 $ 9,048,108 $ 13,655,412
Add refined product sales from purchased products and rounding (1)   350,633     458,211     777,024     930,354  
Total refined product sales 3,437,448 4,843,621 9,825,132 14,585,766
Add direct sales of excess crude oil (2) 67,750 405,493 260,678 741,534
Add other refining segment revenue (3)   65,994     53,939     161,155     112,747  
Total refining segment revenue 3,571,192 5,303,053 10,246,965 15,440,047
Add HEP segment sales and other revenues 88,389 82,141 261,624 244,177
Add corporate and other revenues 104 181 473 1,802
Subtract consolidations and eliminations   (73,862 )   (67,820 )   (214,701 )   (204,818 )
Sales and other revenues $ 3,585,823   $ 5,317,555   $ 10,294,361   $ 15,481,208  
 
 

Reconciliation of average cost of products per produced barrel sold to total cost of products sold

    Three Months Ended
September 30,
      Nine Months Ended
September 30,
2015     2014 2015     2014
(Dollars in thousands, except per barrel amounts)
Consolidated
Average cost of products per produced barrel sold $ 53.72 $ 98.91 $ 56.58 $ 100.66
Times sales of produced refined products (BPD) 456,060 416,310 444,220 432,660
Times number of days in period   92     92     273     273  
Cost of products for produced products sold $ 2,253,958   $ 3,788,304   $ 6,861,573   $ 11,889,575  
 
Total cost of products for produced products sold $ 2,253,958 $ 3,788,304 $ 6,861,573 $ 11,889,575
Add refined product costs from purchased products sold and rounding (1)   370,638     462,629     807,260     935,497  
Total cost of refined products sold 2,624,596 4,250,933 7,668,833 12,825,072
Add crude oil cost of direct sales of excess crude oil (2) 65,338 395,482 254,529 725,596
Add other refining segment cost of products sold (4)   36,823     46,172     81,265     90,229  
Total refining segment cost of products sold 2,726,757 4,692,587 8,004,627 13,640,897
Subtract consolidations and eliminations   (72,898 )   (66,694 )   (211,920 )   (201,538 )
Costs of products sold (exclusive of lower of cost or market inventory valuation adjustment and depreciation and amortization) $ 2,653,859   $ 4,625,893   $ 7,792,707   $ 13,439,359  
 
 

Reconciliation of average refinery operating expenses per produced barrel sold to total operating expenses

    Three Months Ended
September 30,
      Nine Months Ended
September 30,
2015     2014 2015     2014
(Dollars in thousands, except per barrel amounts)
Consolidated
Average refinery operating expenses per produced barrel sold $ 5.46 $ 6.39 $ 5.48 $ 6.11
Times sales of produced refined products (BPD) 456,060 416,310 444,220 432,660
Times number of days in period   92     92     273     273  
Refinery operating expenses for produced products sold $ 229,088   $ 244,740   $ 664,571   $ 721,690  
 
Total refinery operating expenses for produced products sold $ 229,088 $ 244,740 $ 664,571 $ 721,690
Add other refining segment operating expenses and rounding (5)   10,110     10,485     30,632     31,415  
Total refining segment operating expenses 239,198 255,225 695,203 753,105
Add HEP segment operating expenses 25,095 25,456 78,350 72,835
Add corporate and other costs 1,251 646 2,039 1,693
Subtract consolidations and eliminations   (146 )   (370 )   (433 )   (1,056 )
Operating expenses (exclusive of depreciation and amortization) $ 265,398   $ 280,957   $ 775,159   $ 826,577  
 
 

Reconciliation of net operating margin per barrel to refinery gross margin per barrel to total sales and other revenues

    Three Months Ended
September 30,
      Nine Months Ended
September 30,
2015     2014 2015     2014
(Dollars in thousands, except per barrel amounts)
Consolidated
Net operating margin per barrel $ 14.39 $ 9.20 $ 12.55 $ 8.84
Add average refinery operating expenses per produced barrel   5.46     6.39     5.48     6.11  
Refinery gross margin per barrel 19.85 15.59 18.03 14.95
Add average cost of products per produced barrel sold   53.72     98.91     56.58     100.66  
Average sales price per produced barrel sold $ 73.57 $ 114.50 $ 74.61 $ 115.61
Times sales of produced refined products (BPD) 456,060 416,310 444,220 432,660
Times number of days in period   92     92     273     273  
Produced refined product sales $ 3,086,815   $ 4,385,410   $ 9,048,108   $ 13,655,412  
 
Total produced refined product sales $ 3,086,815 $ 4,385,410 $ 9,048,108 $ 13,655,412
Add refined product sales from purchased products and rounding (1)   350,633     458,211     777,024     930,354  
Total refined product sales 3,437,448 4,843,621 9,825,132 14,585,766
Add direct sales of excess crude oil (2) 67,750 405,493 260,678 741,534
Add other refining segment revenue (3)   65,994     53,939     161,155     112,747  
Total refining segment revenue 3,571,192 5,303,053 10,246,965 15,440,047
Add HEP segment sales and other revenues 88,389 82,141 261,624 244,177
Add corporate and other revenues 104 181 473 1,802
Subtract consolidations and eliminations   (73,862 )   (67,820 )   (214,701 )   (204,818 )
Sales and other revenues $ 3,585,823   $ 5,317,555   $ 10,294,361   $ 15,481,208  
 

(1)

 

We purchase finished products to facilitate delivery to certain locations or to meet delivery commitments.

(2)

We purchase crude oil that at times exceeds the supply needs of our refineries. Quantities in excess of our needs are sold at market prices to purchasers of crude oil that are recorded on a gross basis with the sales price recorded as revenues and the corresponding acquisition cost as inventory and then upon sale as cost of products sold. Additionally, at times we enter into buy/sell exchanges of crude oil with certain parties to facilitate the delivery of quantities to certain locations that are netted at cost.

(3)

Other refining segment revenue includes the incremental revenues associated with NK Asphalt, product purchased and sold forward for profit as market conditions and available storage capacity allows and miscellaneous revenue.

(4)

Other refining segment cost of products sold includes the incremental cost of products for NK Asphalt, the incremental cost associated with storing product purchased and sold forward as market conditions and available storage capacity allows and miscellaneous costs.

(5)

Other refining segment operating expenses include the marketing costs associated with our refining segment and the operating expenses of NK Asphalt.

HollyFrontier Corporation
Douglas S. Aron, 214-954-6510
Executive Vice President and Chief Financial Officer
or
Julia Heidenreich, 214-954-6510
Vice President Investor Relations

Source: HollyFrontier Corporation

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