<PAGE>   1
================================================================================

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K

/X/           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
                     FOR THE FISCAL YEAR ENDED JULY 31, 1996
                                       OR
/ /           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
              THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
                FOR THE TRANSITION PERIOD FROM       TO    
                         COMMISSION FILE NUMBER 1-3876

                               HOLLY CORPORATION
            (Exact name of registrant, as specified in its charter)

                DELAWARE                                75-1056913
      (State or other jurisdiction          (I.R.S. Employer Identification No.)
    of incorporation or organization)

           100 CRESCENT COURT                           75201-6927
               SUITE 1600                               (Zip Code)
             DALLAS, TEXAS
(Address of principal executive offices)

       Registrant's telephone number, including area code: (214) 871-3555

                                 -------------

          Securities registered pursuant to Section 12(b) of the Act:

                                                   NAME OF EACH EXCHANGE
      TITLE OF EACH CLASS                           ON WHICH REGISTERED
      -------------------                          ---------------------  
  Common Stock, $.01 Par Value                    American Stock Exchange

          Securities registered pursuant to Section 12(g) of the Act:

                                      NONE

                                 -------------

  Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  /X/

  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.  Yes /X/   No / /

  On October 11, 1996, the aggregate market value of the Common Stock, par
value $.01 per share, held by non-affiliates of the registrant was
$119,000,000. (This is not to be deemed an admission that any person whose
shares were not included in the computation of the amount set forth in the
preceding sentence necessarily is an "affiliate" of the registrant.)

  8,253,514 shares of Common Stock, par value $.01 per share, were outstanding
on October 11, 1996. 

                      DOCUMENTS INCORPORATED BY REFERENCE

  (1) Portions of the registrant's proxy statement for its annual meeting of
stockholders in December 1996, which proxy statement will be filed with the
Securities and Exchange Commission within 120 days after July 31, 1996, are
incorporated by reference in Part III. 

================================================================================



<PAGE>   2

                           ANNUAL REPORT ON FORM 10-K
                              OF HOLLY CORPORATION
                        FISCAL YEAR ENDED JULY 31, 1996



FACTORS AFFECTING FORWARD-LOOKING STATEMENTS

      This Annual Report on Form 10-K contains certain "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
All statements, other than statements of historical facts included in this Form
10-K, including without limitation those under "Markets and Competition" under

Items 1 and 2 and "Liquidity and Capital Resources" and "Additional Factors
that May Affect Future Results" under Item 7 regarding the Company's financial
position and results of operations, are forward-looking statements.  Such
statements are subject to certain risks and uncertainties, such as changes in
prices or demand for the Company's products as a result of competitive actions
or economic factors, changes in the cost of crude oil, changes in operating
costs resulting from new refining technologies, increased regulatory burdens or
inflation, and the Company's ability to continue to have access to capital
markets and commercial bank financing on favorable terms.  Should one or more
of these risks or uncertainties, among others as set forth in this Form 10-K,
materialize, actual results may vary materially from those estimated,
anticipated or projected.  Although the Company believes that the expectations
reflected by such forward-looking statements are reasonable based on
information currently available to the Company, no assurances can be given that
such expectations will prove to have been correct.  Cautionary statements
identifying important factors that could cause actual results to differ
materially from the Company's expectations are set forth in this Form 10-K,
including without limitation in conjunction with the forward-looking
statements included in this Form 10-K that are referred to above.  All
forward-looking statements included in this Form 10-K and all subsequent oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by these cautionary
statements.


                                     PART I


ITEMS 1 AND 2.  BUSINESS AND PROPERTY

       Holly Corporation, including its consolidated and wholly-owned
subsidiaries, herein referred to as the "Company" unless the context otherwise
indicates, is an independent refiner of petroleum and petroleum derivatives and
produces high value light products such as gasoline, diesel fuel and jet fuel
for sale primarily in the southwestern United States and northern Mexico.
Navajo Refining Company ("Navajo"), one of the wholly-owned subsidiaries, owns
a





                                     -2-

<PAGE>   3
high-conversion petroleum refinery in Artesia, New Mexico, which it operates in
conjunction with crude, vacuum distillation and other facilities situated 65
miles away in Lovington, New Mexico (collectively, the "Navajo Refinery").  The
Navajo Refinery has a crude capacity of 60,000 barrels-per-day ("BPD") and can
process a variety of high sulphur sour crude oils.  The Company also owns
Montana Refining Company, a Partnership ("MRC"), which owns a 7,000 BPD
petroleum refinery near Great Falls, Montana ("Montana Refinery"), which can
process a range of crude oils and which primarily serves the State of Montana.

       In addition to its refining operations, the Company also conducts a
small-scale oil and gas exploration and production program.

       The Company was incorporated in Delaware in 1947.

       The following table sets forth certain information about the refinery
operations of the Company during the last five fiscal years:

<TABLE>
<CAPTION>
                                                                           Years ended July 31,           
                                                               -------------------------------------------
                                                          1996       1995         1994         1993         1992 
                                                         ------     ------       ------       ------       ------
    <S>                                                  <C>        <C>         <C>           <C>          <C>
    Refinery production (BPD)(1)  . . . . . . .          68,400     68,100      64,300(2)     65,300       55,200
    Crude charge (BPD) (3)  . . . . . . . . . .          65,446     65,636      60,911(2)     62,115       51,723
    Refinery utilization(4)   . . . . . . . . .           97.7%      98.0%       90.9%(2)      92.7%        88.2%
    Average per barrel:
      Net sales   . . . . . . . . . . . . . . .          $26.04     $24.02      $22.88        $25.43       $24.84
      Raw material costs(5)   . . . . . . . . .           20.71      19.02       16.99         20.10        20.41
                                                         ------     ------      ------        ------       ------
      Gross margin  . . . . . . . . . . . . . .          $ 5.33     $ 5.00      $ 5.89        $ 5.33       $ 4.43
                                                         ======     ======      ======        ======       ======

    Product sales (percent of total sales volume)(6):
      Gasolines   . . . . . . . . . . . . . . .           55.4%      55.5%       54.5%         52.0%        49.4%
      Diesel fuels  . . . . . . . . . . . . . .           21.3       20.1        20.1          23.6         21.1
      Jet fuels   . . . . . . . . . . . . . . .           10.2       11.3        11.7          10.4         13.2
      Asphalt   . . . . . . . . . . . . . . . .            8.5        8.4         9.4           9.8         10.8
      LPG and other   . . . . . . . . . . . . .            4.6        4.7         4.3           4.2          5.5
                                                         -----      -----       -----         -----        -----

          Total   . . . . . . . . . . . . . . .          100.0%     100.0%      100.0%        100.0%       100.0%  
                                                         ======     ======      ======        ======       ======  
</TABLE>


- - ---------------
 (1)    Barrels per calendar day of refined products produced from crude oil
        and other raw materials.
 (2)    Refinery production, crude charge and utilization rates were reduced as
        a result of a scheduled turnaround for major maintenance at the Navajo
        Refinery.
 (3)    Barrels per day of crude oil processed.
 (4)    Crude charge divided by crude capacity.
 (5)    Includes cost of refined products purchased for resale.
 (6)    Includes refined products purchased for resale representing 2.4%, 2.3%,
        3.9%, 3.2% and 0.7%, respectively, of total sales volume for the
        periods shown in the table above.





                                     -3-

<PAGE>   4

NAVAJO REFINING COMPANY

   FACILITIES

       The Navajo Refinery's crude capacity is 60,000 BPD and it has the
ability to process a variety of sour crude oils into high value light products
(such as gasoline, diesel fuel and jet fuel).

       For the last three fiscal years, sour crude oils have represented
approximately 85% of the crude oils processed by the Navajo Refinery.  The
Navajo Refinery's processing capabilities enable management to vary its crude
supply mix to take advantage of changes in raw material prices and to respond
to fluctuations in the availability of crude oil supplies.  The Navajo Refinery
converts approximately 86% of its raw materials throughput into high value
light products.  For fiscal 1996, gasoline, diesel fuel and jet fuel (including
volumes purchased for resale) represented 56.9%, 20.6%, and 10.4%,
respectively, of Navajo's sales volume.

       The following table sets forth certain information concerning the
operations of Navajo during the last five fiscal years:


<TABLE>
<CAPTION>
                                                                       Years ended July 31,           
                                                           -------------------------------------------
                                                          1996      1995       1994        1993      1992 
                                                         ------    ------     ------      ------    ------
    <S>                                                  <C>       <C>       <C>          <C>       <C>
    Refinery production (BPD)(1)  . . . . . . .          61,800    61,900    57,400(2)    58,600    48,900
    Crude charge (BPD) (3)  . . . . . . . . . .          59,022    59,614    54,089(2)    55,488    45,363
    Refinery utilization(4)   . . . . . . . . .           98.4%     99.4%     90.1%(2)     92.5%     87.8%
    Average per barrel:
      Net sales   . . . . . . . . . . . . . . .          $25.91    $23.90    $22.63       $25.39    $24.69
      Raw material costs(5)   . . . . . . . . .           20.79     19.13     17.20        20.26     20.53
                                                         ------    ------    ------       ------    ------
      Gross margins   . . . . . . . . . . . . .          $ 5.12    $ 4.77    $ 5.43       $ 5.13    $ 4.16
                                                         ======    ======    ======       ======    ======
</TABLE>


- - ---------------
 (1)    Barrels per calendar day of refined products produced from crude oil
        and other raw materials.
 (2)    Refinery production, crude charge and utilization rates were reduced as
        a result of a scheduled turnaround for major maintenance.
 (3)    Barrels per day of crude oil processed.
 (4)    Crude charge divided by crude capacity.
 (5)    Includes cost of refined products purchased for resale.

       Navajo's Artesia facility is located on a 300-acre site and has fully
integrated crude, fluid catalytic cracking ("FCC"), vacuum distillation,
alkylation, hydrodesulfurization and reforming units, and approximately 1.5
million barrels of feedstock and product tank storage, as well as other
supporting units and office buildings at the site.  The Artesia facilities are
operated in conjunction with integrated refining facilities located in
Lovington, New Mexico, approximately 65 miles east of Artesia.  The principal
equipment at Lovington consists of a crude unit and an





                                     -4-

<PAGE>   5
associated vacuum unit.  The Lovington facility processes crude oil into
intermediate products, which are transported to Artesia through a Company-owned
eight-inch pipeline or by tanker truck.

       The Company's 500 miles of crude gathering pipelines lead to the Artesia
and Lovington facilities from various points in southeastern New Mexico.  The
Company distributes refined products from the Navajo Refinery to its principal
markets primarily through two Company-owned pipelines which extend from Artesia
to El Paso.  The Company has product storage at terminals in Tucson,
Albuquerque, Artesia and El Paso in which the Company has 50% or greater
interests.

   MARKETS AND COMPETITION

       The Navajo Refinery primarily serves the growing southwestern United
States market, including El Paso, Albuquerque, Phoenix and Tucson, and the
northern Mexico market.  The Company's products are shipped by pipeline from El
Paso to Albuquerque via a products pipeline system owned by Chevron Pipeline
Company and from El Paso to Tucson and Phoenix via a products pipeline system
owned by Santa Fe Pacific Pipeline.

       The petroleum refining business is highly competitive.  Among the
Company's competitors are some of the world's largest integrated petroleum
companies, which have their own crude oil supplies, distribution and marketing
systems.  The Company competes with independent refiners as well.  Competition
in particular geographic markets is affected primarily by the amounts of
refined products produced by refineries located in such markets and by the
availability of refined products and the cost of transportation to such markets
from refineries located outside those markets.  Diamond Shamrock, Inc., an
independent refiner and marketer, completed in November 1995 the construction
of a 409-mile, ten-inch refined products pipeline from its McKee refinery near
Dumas, Texas to El Paso.  Diamond Shamrock has announced that this pipeline has
an initial capacity of 27,000 BPD, and that it intends to use its pipeline to
supply fuels to the El Paso, New Mexico, Arizona and northern Mexico markets.
The Diamond Shamrock pipeline has increased and could further increase the
supply of products in the Company's principal markets.  In addition, there is
excess pipeline capacity from the West Coast into the Company's Arizona
markets.  To the extent additional West Coast products are available, there can
be no assurance that West Coast refiners will not seek to increase shipments of
refined products into the Company's markets through existing pipelines, new
pipelines or otherwise.

       In addition, periodically other projects that, if consummated, could
cause an increase in the supply of products to some or all of the Company's
markets have been explored by a variety of entities.  Whether or not such a
project will be consummated, in either the long or short-term, cannot be
presently be determined.

       Although not currently a problem, at times in the past the common
carrier pipelines used by the Company to serve the Arizona markets have been
operated at or near capacity and have been subject to periods of proration.  As
a result, the volumes of refined products that the Company and other shippers
have been able to deliver to this market at times have been





                                     -5-

<PAGE>   6
limited.  In general, no assurances can be given that the Company will not
experience future constraints on its ability to deliver its products through
the pipelines.  In particular, the flow of additional product into El Paso for
shipments to Arizona, either as a result of the new Diamond Shamrock pipeline
or otherwise, could result in the reoccurrence of such constraints.  In July
1993, the Company entered into a settlement agreement regarding this Arizona
pipeline system.  Under the agreement, the occurrence of certain defined events
will require increases in the capacity of the pipeline system.  It is
anticipated that this settlement lessens, at least in the foreseeable future,
the likelihood of prolonged constraints on the movement of the Company's
products into Arizona.  In addition, the common carrier pipeline used by the
Company to serve the Albuquerque market currently operates at or near capacity
with resulting limitations at times on the amount of refined products that the
Company and other shippers could deliver to this market.  As discussed below
(see "Capital Improvement Projects"), the Company has recently entered into a
Lease Agreement (the "Lease Agreement") with Mid-America Pipeline Company
which, following the construction of a new pipeline to the leased pipeline and
related terminalling facilities, will allow the Company to transport product
directly to Albuquerque on the leased pipeline, thereby eliminating by the end
of the 1997 fiscal year the risk of future pipeline constraints on shipments to
Albuquerque.  Any periodic constraints on the Company's ability to transport
its refined products could, if sustained, adversely affect the Company's
results of operations and financial condition.

       Recently there have been several refining and marketing consolidations
or acquisitions between entities competing in the Company's geographic market.
These include Tosco Corporation purchasing Circle K Corporation; Giant
Industries, Inc. purchasing the Bloomfield, N.M. refinery from Gary-Williams
Corporation and Diamond Shamrock, Inc. and Ultramar Corporation recently
announcing a plan to merge into a single entity.  While this could increase the
competitive pressures on the Company, the specific ramifications of these or
other potential consolidations cannot presently be determined.

   CRUDE OIL AND FEEDSTOCK SUPPLIES

       The Navajo Refinery is situated near the Permian Basin in an area which
historically has had abundant supplies of crude oil available both for regional
users, such as the Company, and for export to other areas.  The Company
purchases crude oil from producers in nearby southeastern New Mexico and west
Texas, from major oil companies and on the spot market.  Crude oil is gathered
both through the Company's pipelines and tank trucks and through third party
crude oil pipeline systems.  Crude oil acquired in locations distant from the
refinery is exchanged for crude oil that is transportable to the refinery.





                                     -6-

<PAGE>   7
   PRINCIPAL PRODUCTS AND MARKETS

       The Navajo Refinery converts approximately 86% of its raw materials
throughput into high value light products.  Set forth below is certain
information regarding the principal products of Navajo during the last five
fiscal years:


<TABLE>
<CAPTION>
                                                                          Years ended July 31,                                   
                                      ---------------------------------------------------------------------------------------------
                                           1996               1995                1994               1993                 1992     
                                      --------------      --------------     ---------------     --------------      --------------
                                       BPD       %         BPD       %        BPD        %        BPD       %         BPD       %  
                                      -----    -----      -----    -----     -----     -----     -----    -----      -----    -----
<S>                                   <C>       <C>       <C>       <C>      <C>        <C>      <C>       <C>       <C>       <C>
Product sales (percent of
   total sales volumes)(1)
   Gasolines  . . . . . . . . .       36,000    56.9%     36,400    57.8%    33,200     56.5%    32,600    53.4%     24,800    50.3%
   Diesel fuels . . . . . . . .       13,000    20.6      12,300    19.5     11,600     19.7     14,500    23.7      10,300    20.9
   Jet fuels  . . . . . . . . .        6,600    10.4       6,900    11.0      6,500     11.1      5,900     9.7       6,200    12.6
   Asphalt  . . . . . . . . . .        4,700     7.4       4,500     7.1      4,900      8.3      5,500     9.0       5,000    10.1
   LPG and other  . . . . . . .        3,000     4.7       2,900     4.6      2,600      4.4      2,600     4.2       3,000     6.1
                                      ------    ----      ------    ----     ------     ----     ------    ----      ------    ----
                                      63,300     100%     63,000     100%    58,800      100%    61,100     100%     49,300     100%
                                      ======    =====     ======    =====    ======     =====    ======    =====     ======    =====
</TABLE>


- - ---------------
(1)    Includes refined products purchased for resale representing 1.8%, 1.9%,
       4.0%, 3.2% and 0.4%, respectively, of total sales volume for the periods
       shown in the table above.

       Light products are shipped by product pipelines or are made available at
distant points by exchanges with others.  Light products are also made
available to customers through truck loading facilities at the refineries and
at terminals.  The demand for the Company's gasoline and asphalt products has
historically been stronger from March through October, which are the peak
"driving" and road construction months, than during the rest of the year.

       The Company's principal customers for gasoline include other refiners,
convenience store chains, independent marketers, an affiliate of PEMEX (the
government-owned energy company of Mexico) and retailers.  Navajo's gasoline is
marketed in the southwestern United States, including the metropolitan areas of
El Paso, Phoenix, Albuquerque, and Tucson, and in portions of northern Mexico.
Diesel fuel is sold to other refiners, wholesalers, independent dealers and
railroads.  Jet fuel is sold primarily for military use.  Military jet fuel is
sold to the Defense Fuel Supply Center (the "DFSC") of the Defense Logistics
Agency under a series of one-year contracts that can vary significantly from
year to year.  Navajo sold approximately 6,500 BPD of jet fuel to the DFSC in
its 1996 fiscal year and has a contract to supply 8,500 BPD to the DFSC for the
year ending September 30, 1997.  Asphalt is sold to contractors and government
authorities for highway construction and maintenance.  Carbon black oil is sold
for further processing and LPGs are sold to petrochemical plants and are used
as fuel in refinery operations.





                                     -7-

<PAGE>   8
       Approximately 10% of the Company's revenues for fiscal 1996 resulted
from the sale of military jet fuel to the United States government.  Although
there can be no assurance that the Company will be awarded such contracts in
the future, the Company has had a supply contract with the United States
government for each of the last 27 years.  Approximately 6% of the Company's
revenues for fiscal 1996 resulted from the sale for export of gasoline and
diesel fuel to an affiliate of PEMEX.  Those sales were made under a contract
that expires in mid-1997.  The loss of the Company's supply contract with the
United States government or with PEMEX could have a material adverse effect on
the Company's results of operations.  In addition to the United States
Government and PEMEX, another refiner, which is a purchaser of gasoline and
diesel fuel for resale to retail customers, accounted for approximately 19% of
the Company's revenues in fiscal 1996.  While a loss of, or reduction in
amounts purchased by, major purchasers that resell to retail customers could
have an adverse effect on the Company, the Company believes that the impact of
such a loss on the Company's results of operations should be limited because
the Company's sales volumes with respect to products whose end-users are retail
customers is more dependent on general retail demand and product supply in the
Company's primary markets than on sales to any specific purchaser.

   CAPITAL IMPROVEMENT PROJECTS

       As part of its efforts to improve operating efficiencies, the Company
currently is in the process of enhancing the Navajo Refinery by constructing an
isomerization unit and upgrading the fluid catalytic cracking unit (FCC).

       The first of these projects involves the conversion of an idled reformer
to a UOP Isomerization unit.  This unit, which is expected to be on-line in
November 1997 will increase the refinery's internal octane generating
capabilities, thereby improving light product yield and increasing the
refinery's ability to upgrade additional amounts of lower priced purchased
natural gasoline into finished gasoline.  The other significant project is a
revamp of the refinery's FCC.  This revamp, which will be implemented during
its next scheduled turnaround in early 1997, will improve the yield of high
value products from the FCC by incorporating certain state-of-the-art upgrades.
The total estimated costs of these two projects is $14 million, of which $8
million remains to be spent in fiscal 1997.

       The Company has entered into a joint venture with Mid-America Pipeline
Company and Amoco Pipeline Company to transport liquid petroleum gases (LPGs)
to Mexico.  The Company will have a 25% interest in the joint venture.  The
project involves the construction of a new 12" pipeline from Orla to El Paso,
Texas which will replace a portion of 8" pipeline currently used by Navajo,
which in turn has been transferred to the joint venture.  The 12" pipeline was
completed during October 1996.  The Company's total net cash investment in the
projects (in addition to the contribution of a portion of the existing 8"
pipeline to the joint venture) is estimated to be $5 million, of which $4
million remains to be spent in fiscal 1997.  The Company anticipates the
realization of benefits from the joint venture to start in the second half of
fiscal 1997.





                                     -8-

<PAGE>   9
       The Company has entered into a Lease Agreement which involves more than
300 miles of 8" pipeline running from Chavez County to San Juan County, New
Mexico.  The Company plans to construct at a total estimated cost of $13
million an 8" pipeline, from the Navajo Refinery to the leased pipeline, and
related terminalling facilities.  These facilities will allow the Company to
use the pipeline to transport refined products from its Navajo Refinery to
markets in northwest New Mexico, including Albuquerque and Farmington.
Mid-America Pipeline Company will continue to operate the pipeline.  The
pipeline and related facilities should be operational near the end of fiscal
1997.

       The additional pipeline capacity associated with the Lease Agreement and
the new 12" pipeline constructed in conjunction with the joint venture to
transport LPGs to Mexico should reduce pipeline operating expenses at current
throughputs.  In addition, the new pipeline capacity would allow the Company to
expand volumes, through refinery expansion or otherwise, that are shipped into
existing and new markets and could mitigate some of the potential impact of any
future increased competition in certain existing markets by allowing the
Company to shift volumes to other markets.

       In addition to the above-mentioned capital improvement products, the
Company has budgeted for fiscal 1997 approximately $10 million for capital
expenditures for various refinery improvements and environmental and safety
enhancements for the Navajo Refinery.

MONTANA REFINING COMPANY

       MRC owns a 7,000 BPD petroleum refinery near Great Falls, Montana, which
can process a range of crude oils and which serves primarily the State of
Montana.  For the last three fiscal years, excluding downtime for scheduled
maintenance and turnarounds, the Montana Refinery has operated at an average
annual crude capacity utilization rate of approximately 94%.

       The following table sets forth certain information regarding the
principal products of MRC during the last five years:


<TABLE>
<CAPTION>
                                                                       Years ended July 31,                                   
                                       --------------------------------------------------------------------------------------------
                                           1996                1995               1994                1993                1992     
                                       -------------       -------------      --------------      -------------       -------------
                                        BPD      %          BPD      %         BPD       %         BPD      %          BPD      %  
                                       -----    ----       -----    ----      -----     ----      -----    ----       -----    ----
<S>                                    <C>      <C>        <C>      <C>       <C>       <C>       <C>      <C>        <C>      <C>
Product sales (percent of
   total sales volumes)(1)
   Gasolines  . . . . . . . . .        2,900    40.3%      2,400    35.3%     2,700     38.6%     2,700    39.1%      2,800    42.4%
   Diesel fuels . . . . . . . .        2,000    27.8       1,700    25.0      1,700     24.3      1,600    23.2       1,500    22.7
   Jet fuels  . . . . . . . . .          500     6.9       1,100    16.2      1,100     15.7      1,200    17.4       1,100    16.7
   Asphalt  . . . . . . . . . .        1,500    20.8       1,300    19.1      1,300     18.6      1,200    17.4       1,100    16.7
   LPG and other  . . . . . . .          300     4.2         300     4.4        200      2.8        200     2.9         100     1.5
                                       -----    ----       -----    ----      -----     ----      -----    ----       -----    ----
                                       7,200     100%      6,800     100%     7,000      100%     6,900     100%      6,600     100%
                                       =====    =====      =====    =====     =====     =====     =====    =====      =====    =====
</TABLE>


- - ---------------
       (1)    Includes refined products purchased for resale representing 7.5%,
              6.5%, 3.4%, 3.2% and 2.6%, respectively, of total sales volume
              for the periods shown in the table above.





                                     -9-

<PAGE>   10
       The Montana Refinery obtains its supply of crude oils primarily from
suppliers in Canada via a 93-mile Company-owned pipeline, which runs from the
Canadian border.  The Montana Refinery's principal markets include Great Falls,
Helena, Bozeman and Billings, Montana.  MRC competes principally with three
other Montana refineries.

JET FUEL TERMINAL

       The Company owns and operates a 120,000 barrel capacity jet fuel
terminal near Mountain Home, Idaho, which serves as a terminalling facility for
jet fuel sold by unaffiliated producers to the Mountain Home United States Air
Force Base.

NAVAJO WESTERN ASPHALT COMPANY

       Navajo Western Asphalt Company, a wholly-owned subsidiary of the
Company, owns and operates an asphalt marketing facility near Phoenix.  The
Company has recently completed construction of asphalt processing and storage
facilities that should allow it to expand this operation.  In addition to
marketing asphalt produced at the Navajo Refinery, Navajo Western markets
asphalt obtained from third parties.

EXPLORATION AND PRODUCTION

       The Company contracts with an independent oil and gas consulting group
to identify oil and gas exploration and production projects for the Company.
The scope of this activity is presently modest relative to the Company's
refining operations.  For fiscal 1997, the Company has budgeted approximately
$7 million for capital expenditures related to oil and gas exploration
activities.

EMPLOYEES AND LABOR RELATIONS

       The Company has approximately 563 employees.  Of its employees, 224 are
covered by collective bargaining agreements ("covered employees").  Contracts
relating to the covered employees at all facilities were negotiated during 1996
and will expire in 1999.  The Company considers its employee relations to be
good.

REGULATION

       Refinery operations are subject to federal, state and local laws
regulating the discharge of matter into the environment or otherwise relating
to the protection of the environment.  Over the years, there have been and
continue to be ongoing communications, including notices of violations, and
discussions about environmental matters between the Company and federal and
state authorities, some of which have resulted in changes of operating
procedures and in capital expenditures by the Company.  Compliance with
applicable environmental laws and regulations will continue to have an impact
on the Company's operations, results of operations and capital requirements.





                                     -10-

<PAGE>   11
       Effective January 1, 1995, certain cities in the country were required
to use only reformulated gasoline ("RFG"), a cleaner burning fuel.  While none
of the Company's principal markets presently requires RFG, this requirement
could be implemented over time.  In fact, certain of the Company's markets are
presently considering implementing more rigorous fuel specifications.  Further,
other requirements of the Clean Air Act, or other presently existing or future
environmental regulations, could cause the Company to expend substantial
amounts at its refineries.  The specifics and extent of these or other
regulations and their attendant costs are not presently determinable.

       Currently, Arizona is evaluating requirements for future use of RFG or
other clean burning gasolines to improve the quality of air in the Phoenix
Area.  The impact, if any, on the Company cannot be evaluated until such time
as the additional fuel specification requirements have been determined.

       The Company is and has been the subject of various state, federal and
private proceedings relating to environmental regulations, conditions and
inquiries.  The most significant of these is the enforcement action which has
been brought by the United States Department of Justice ("DOJ"), on behalf of
the EPA, and which is discussed in the Management's Discussion and Analysis of
Financial Condition and Results of Operations and in Note 11 to the
Consolidated Financial Statements.  In addition to the expenditures that have
been and will be incurred in connection with a resolution of this matter,
current and future environmental regulations inevitably will require other
expenditures, including remediation, at the New Mexico and Montana refineries.
The extent of any such expenditures cannot be presently determined.

       The Company's operations are also subject to various laws and
regulations relating to occupational health and safety.  The Company maintains
safety, training and maintenance programs as part of its ongoing efforts to
ensure compliance with applicable laws and regulations.  Moreover, recently
enacted comprehensive health and safety legislation have required and continue
to require substantial expenditures.

INSURANCE

       The Company's operations (including its limited exploration and
production activities) are subject to normal hazards of operations, including
fire, explosion and weather-related perils.  The Company maintains various
insurance coverages, including business interruption insurance, subject to
certain deductibles.  The Company is not fully insured against certain risks
because such risks are not fully insurable, coverage is unavailable or premium
costs, in the judgment of the Company, do not justify such expenditures.


ITEM 3.  LEGAL PROCEEDINGS

       In July 1993, the DOJ, acting on behalf of the EPA, filed a complaint in
the United States District Court for the District of New Mexico alleging that
Navajo, beginning in September 1990 and continuing until the present, had
violated and continues to violate RCRA and implementing regulations of the EPA
by treating, storing and disposing of certain





                                     -11-

<PAGE>   12
hazardous wastes without necessary authorization and without compliance with
regulatory requirements.  The complaint seeks a court order directing Navajo to
comply with these regulatory standards and civil penalties for the alleged non-
compliance.  For the past three years, the Company has been negotiating a
settlement which the parties agree is near consummation.  If settled as
anticipated, the Company would close the existing evaporation ponds of its
wastewater management system and implement an alternative wastewater treatment
system.  Any settlement with DOJ and EPA also is expected to involve payment of
a civil penalty.  See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 11 to the Consolidated Financial
Statements.

       The Company is a party to various other litigation and proceedings which
it believes, based on advice of counsel, will not have a materially adverse
impact on its financial condition or results of operations.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

       No matter was submitted to a vote of security holders during the fourth
quarter of the Company's 1996 fiscal year.

Executive Officers of Registrant (per instruction 3 to Item 401(b) of
Regulation S-K)

       The executive officers of the Company as of October 21, 1996 are as
follows:


<TABLE>
<CAPTION>
                                                                        Executive
     Name               Age               Position                    Officer Since
     ----               ---               --------                    -------------
<S>                     <C>        <C>                                      <C>
Lamar Norsworthy        50         Chairman of the Board                    1971
                                     and Chief Executive Officer      
                                                                      
Matthew P. Clifton      45         President and Director                   1988
                                                                      
Jack P. Reid            60         Executive Vice President,                1976
                                     Refining and Director            
                                                                      
William J. Gray         55         Senior Vice President,                   1976
                                     Marketing and Supply             
                                     and Director                     
                                                                      
David G. Blair          38         Vice President, Marketing                1994
                                     Asphalt and LPG                  
                                                                      
Christopher L. Cella    39         Vice President, General                  1990
                                     Counsel and Secretary
</TABLE>






                                     -12-

<PAGE>   13

<TABLE>
<S>                     <C>        <C>                                      <C>
John A. Knorr           46         Vice President, Crude Oil                1988
                                     Supply and Trading                     
                                                                            
Virgil R. Langford      51         Vice President, Refining                 1989
                                                                            
Mike Mirbagheri         57         Vice President, International            1982
                                     Crude Oil and Refined                  
                                     Products                               
                                                                            
Henry A. Teichholz      53         Vice President, Treasurer                1984
                                     and Controller                         
                                                                            
Gregory A. White        39         Vice President, Marketing                1994
                                     Light Oils
</TABLE>


       In addition to the persons listed above, Kathryn Walker, age 46, was
appointed Controller of Navajo Refining Company in August 1993; prior thereto
she served from 1985 as Assistant Controller of Navajo.

       All officers of the Company are elected annually to serve until their
successors have been elected.  Mr.  Norsworthy occupied the additional office
of President from 1988 to 1995.  Mr. Clifton previously served as Senior Vice
President from 1991 to 1995.  Mr. Cella has occupied the additional office of
Secretary since December 1994.  Mr. Knorr is also President of one of the
partners of MRC and serves as the General Manager of MRC.  Messrs. Blair and
White were elected to their respective positions in September 1994.  Mr. Blair
has served as Marketing Manager of Asphalt and LPG of Navajo since 1989 and
previously held various marketing and supply positions.  Mr. White has served
as Marketing Manager of Light Oils of Navajo since 1989 and previously held
various marketing and supply positions.





                                     -13-

<PAGE>   14

                                    PART II



ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS
         MATTERS

       The Company's common stock is traded on the American Stock Exchange
under the symbol "HOC".  The following table sets forth the range of the daily
high and low sales prices per share of common stock, dividends paid per share
and the trading volume of common stock for the periods indicated:


<TABLE>
<CAPTION>
                                                                                 Total
Fiscal years ended July 31,                 High         Low     Dividends       Volume
- - ---------------------------                 ----         ---     ---------       ------
<S>                                        <C>         <C>         <C>         <C>
1995
       First Quarter  . . . . . .          $28 1/2     $23 3/4     $.10          230,200
       Second Quarter   . . . . .           26 1/2      24          .10          184,100
       Third Quarter  . . . . . .           26 3/4      23          .10          252,500
       Fourth Quarter   . . . . .           28 1/2      21 3/8      .10        1,218,600

1996
       First Quarter  . . . . . .          $23 3/8     $21 1/2     $.10          820,200
       Second Quarter   . . . . .           23 3/8      21 1/4      .10          374,100
       Third Quarter  . . . . . .           27 1/4      21 1/2      .10          655,700
       Fourth Quarter   . . . . .           28 1/8      24 1/2      .12          442,600
</TABLE>


       As of July 31, 1996, the Company had approximately 2,000 stockholders of
record.

       On September 13, 1996, the Company's Board of Directors declared a
regular quarterly dividend in the amount of $.12 per share payable on October
11, 1996.  The Company intends to consider the declaration of a dividend on a
quarterly basis, although there is no assurance as to future dividends since
they are dependent upon future earnings, capital requirements, financial
condition of the Company and other factors.  The Senior Notes and Credit
Agreement limit the payment of dividends.  See Note 6 to the Consolidated
Financial Statements.





                                     -14-

<PAGE>   15

ITEM 6.  SELECTED FINANCIAL DATA

The following table shows selected financial information for the Company as of
the dates or for the periods indicated.  This table should be read in
conjunction with the consolidated financial statements of the Company and
related notes thereto included elsewhere in this Form 10-K.


<TABLE>
<CAPTION>
($ in thousands, except per share amounts)
Years ended July 31,                                       1996            1995            1994         1993            1992      
- - --------------------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>             <C>            <C>           <C>             <C>
FINANCIAL DATA
   For the year
      Revenues  . . . . . . . . . . . . . . . .          $676,290        $614,830       $552,320      $630,621         $506,668
      Income before income taxes and
        cumulative effect of
        accounting change . . . . . . . . . . .          $ 31,788        $ 20,147       $ 35,002      $ 33,317         $    662
      Income tax provision (benefit)  . . . . .            12,554           7,730         14,285        13,384           (2,097)
                                                         --------        --------       --------      --------         -------- 
      Income before cumulative effect
         of accounting change . . . . . . . . .            19,234          12,417         20,717        19,933            2,759
      Cumulative effect of
         accounting change  . . . . . . . . . .                 -           5,703              -          (958)               -
                                                         --------        --------       --------      --------         -------- 

      Net income  . . . . . . . . . . . . . . .          $ 19,234        $ 18,120       $ 20,717      $ 18,975         $  2,759 
                                                         ========        ========       ========      ========         ========

      Income per common share
         Income before cumulative
           effect of accounting
           change   . . . . . . . . . . . . . .          $   2.33        $   1.51       $   2.51      $   2.42         $    .33
         Cumulative effect of
           accounting change  . . . . . . . . .                 -             .69              -          (.12)               -
                                                         --------        --------       --------      --------         -------- 

         Net income . . . . . . . . . . . . . .          $   2.33        $   2.20       $   2.51      $   2.30         $    .33
                                                         ========        ========       ========      ========         ========

      Cash dividends paid per common
         share  . . . . . . . . . . . . . . . .          $    .42        $    .40       $    .35      $    .30         $    .45
      Average number of shares of
         common stock outstanding . . . . . . .         8,254,000       8,254,000      8,254,000     8,254,000        8,254,000
      Net cash provided by
       operating activities . . . . . . . . . .          $ 44,452        $ 34,241       $ 27,684      $ 38,737         $    961
   At end of year
      Working capital . . . . . . . . . . . . .          $ 66,649        $ 17,740       $ 18,236      $ 12,145         $  5,031
      Total assets  . . . . . . . . . . . . . .          $351,271        $287,384       $281,814      $249,807         $245,462
      Long-term debt (including
         current portion) . . . . . . . . . . .          $ 97,065        $ 68,840       $ 74,448      $ 80,056         $ 80,164
      Stockholders' equity  . . . . . . . . . .          $ 96,243        $ 80,043       $ 64,772      $ 46,478         $ 29,505
</TABLE>






                                     -15-

<PAGE>   16

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

1996 Compared To 1995

       Net income for the 1996 fiscal year was $19.2 million as compared to
$18.1 million, which included a gain of $5.7 million for an accounting change,
in fiscal 1995.

       The increase in net income for fiscal 1996 (excluding the effect of the
change in accounting for turnarounds in the first quarter of the prior year)
was principally due to improved refining margins, as compared to the prior
year.  Refining margins for the 1996 fiscal year as a whole were better than
the margins of the prior year since product prices increased at a greater rate
than crude oil costs, particularly in the latter part of the current fiscal
year when refining margins were very strong as refining capacity and gasoline
inventories tightened nationally.  However, with the substantial increases in
crude oil costs recently, refining margins have narrowed, as product prices
have not kept pace.  Adding to the improved results last year were improvements
in the Company's oil and gas business.  With two new offshore properties
commencing production during the second quarter, sufficient revenues were
generated to help reduce the operating loss from the oil and gas division by
50% to $1.6 million.  The increase in depreciation, depletion and amortization
in the current fiscal year related primarily to oil and gas properties.
Interest expense, net of interest income, decreased slightly from fiscal 1995
levels, as the additional interest expense due to the new borrowings in
November 1995 was more than offset by the increase in interest income due to a
higher level of investments.  The 10% increase in revenues for the year ended
July 31, 1996 is primarily attributable to increases in selling prices as sales
volumes of refined products were fundamentally the same in both years.
Additionally, oil and gas revenues increased by $4.1 million to $5.4 million in
fiscal 1996.

       Effective August 1, 1994, the Company changed its method of accounting
for turnaround costs.  Turnarounds consist of preventive maintenance on major
processing units, which requires the shutdown and restart of all units, and
generally are scheduled at two to three year intervals.  Previously, the
Company estimated the costs of the next scheduled turnaround and ratably
accrued the related expenses prior to the actual turnaround.  To provide for a
better matching of turnaround costs with revenues, the Company changed its
accounting method for turnaround costs to one that results in the amortization
of costs incurred over the period until the next scheduled turnaround.  The
cumulative effect of this accounting change through the 1994 fiscal year was an
increase in net income in the first quarter of fiscal 1995 of $5.7 million.





                                     -16-

<PAGE>   17
1995 Compared To 1994

       Net income for the 1995 fiscal year was $18.1 million, including the
$5.7 million accounting change in the first quarter of fiscal 1995, compared to
$20.7 million in fiscal 1994.  Refining margins for the fiscal 1995 were weak
as crude oil costs increased at a greater rate than product prices.  Margins at
the Montana refinery were particularly poor in the first nine-month period of
fiscal 1995 as compared to the prior year's period.  The 11% increase in the
Company's revenues for the year ended July 31, 1995 is attributable to a 6%
increase in sales volume and higher selling prices.  The prior year's sales
volumes were reduced by a major maintenance turnaround at Navajo Refining
Company's New Mexico facilities.

       As previously discussed, effective August 1, 1994, the Company changed
its method of accounting for turnaround costs.  The increase in depreciation
expense in fiscal 1995 was primarily the result of this change in accounting,
as the amortization of turnaround costs is now recorded in depreciation,
depletion and amortization expense, whereas previously the expenses accrued
prior to the turnaround were recorded in cost of sales as an operating expense.
See Note 2 to the Consolidated Financial Statements for the effect of the
accounting change.

LIQUIDITY AND CAPITAL RESOURCES

       Cash and cash equivalents increased during the year ended July 31, 1996
by $50.5 million, as cash flows from operations and the proceeds from the new
$39 million of Senior Notes, as described below, were significantly greater
than capital expenditures, debt payments and dividends paid.  Working capital
increased during fiscal 1996 by $48.9 million to $66.6 million.  The Company's
long-term debt now represents 50.2% of total capitalization as compared to
46.2% at July 31, 1995.  At July 31, 1996, the Company had $25 million of
borrowing capacity under the Credit Agreement (the "Credit Agreement") which
can be used for short term working capital needs.  The Company believes that
these sources of funds, together with future cash flows from operations should
provide sufficient resources, financial strength and flexibility for the
Company to satisfy its liquidity needs, capital requirements, and debt service
obligations and to permit the payment of dividends for the foreseeable future.

       Net cash provided by operating activities amounted to $44.5 million in
fiscal 1996, compared to $34.2 million in fiscal 1995 and $27.7 million in
fiscal 1994.  The primary reason for the difference in cash provided from
operations in fiscal 1996 as compared to fiscal 1995 was the increase in cash
generated by earnings.  The primary reason for the differences in cash provided
from operations in fiscal 1995 as compared to fiscal 1994 was changes in
working capital accounts.  Compared to the 1996 and 1995 fiscal years,
significant amounts of cash flows were required in fiscal 1994 to maintain
working capital levels.

       Cash flows provided by financing activities amounted to $24.4 million in
fiscal 1996, as compared to cash flows used for financing activities of $8.9
million in fiscal 1995 and $8.5 million in fiscal 1994.  The Company's Credit
Agreement was most recently renewed for an additional two year period in July
1995.  The Credit Agreement is with a group of banks and provides for a total
facility of $100 million, the full amount of which may be used to support
letters of credit and $25 million of which may be used for direct borrowings
for short-term working capital needs.  In November 1995, the Company completed
the funding from a group





                                     -17-

<PAGE>   18
of insurance companies of a new private placement of Senior Notes in the amount
of $39 million and the extension of $21 million of previously outstanding
Senior Notes.  This private placement is intended to enhance the Company's
future investment flexibility and financial strength.  The company made
principal payments of $10.8 million on the Senior Notes in June 1996 (which
amount will also be due in June 1997 and June 1998) and of $5.6 million in June
1994 and June 1995.

       See Note 6 to the Consolidated Financial Statements for a summary of the
terms and conditions of the Senior Notes and Credit Agreement.

       Cash flows used for investing activities totalled $56.0 million over the
last three years, $18.3 million in 1996, $15.2 million in 1995 and $22.5
million in 1994, all for capital expenditures.  The Company has adopted capital
budgets totalling $32 million for fiscal 1997.  The major components of this
budget are $13 million for the construction of a pipeline connection from the
Navajo Refinery to an 8" pipeline that will be leased by the Company for
products transport (the "Lease Agreement") and related product terminals, $12
million for various refinery improvements and environmental and safety
enhancements and $7 million for exploration and production activities.  In
addition to these projects, the Company plans to complete in the 1997 fiscal
year the major items approved in the 1996 capital budget, including a joint
venture to ship liquid petroleum gas (LPGs) to Mexico and two projects at the
Navajo Refinery which entail upgrades to improve product yields.

       The Lease Agreement is with Mid-America Pipeline Company and involves
more than 300 miles of 8" pipeline running from Chavez County to San Juan
County, New Mexico.  The Company plans to construct an 8" pipeline, from the
Navajo Refinery to the leased pipeline, and related terminalling facilities.
These facilities will allow the Company to use the pipeline to transport
refined products from its Navajo Refinery to markets in northwest New Mexico,
including Albuquerque and Farmington.  Mid-America Pipeline Company will
continue to operate the pipeline.  The pipeline and related facilities are
projected to be operational near the end of fiscal 1997.

       The Company has entered into a joint venture with Mid-America Pipeline
Company and Amoco Pipeline Company to transport liquid petroleum gases (LPGs)
to Mexico.  The Company will have a 25% interest in the joint venture.  The
project involves the construction of a new 12" pipeline from Orla to El Paso,
Texas which will replace a portion of 8" pipeline currently used by Navajo,
which in turn has been transferred to the joint venture.  The 12" pipeline was
completed during October 1996.  The Company's total net cash investment in the
projects (in addition to the contribution of a portion of the existing 8"
pipeline to the joint venture) is estimated to be $5 million, of which $4
million remains to be spent in fiscal 1997.  The Company anticipates the
realization of benefits from the joint venture to start in the second half of
fiscal 1997.

       The additional pipeline capacity associated with the new pipeline
constructed in conjunction with the joint venture and with the Lease Agreement
and the construction of the related pipeline and terminalling facilities should
reduce pipeline operating expenses at current throughputs and allow the
Company, to expand volumes, through refinery expansion or otherwise, shipped
into existing and new markets.





                                     -18-

<PAGE>   19
       The Company believes the scheduled capital projects to upgrade the
Navajo Refinery will improve product yields and enhance refining profitability.
The planned UOP Isomerization unit, which will increase the refinery's internal
octane generating capabilities and improve light product yields, is expected to
be operational by the second quarter of fiscal 1997.  In addition, the planned
state-of-the-art upgrades to the Navajo Refinery's fluid catalytic cracking
unit (FCC), which will improve FCC high value product yields, are expected to
be operational by the third quarter of fiscal 1997.  The total estimated cost
of these two projects is $14 million, of which $8 million remains to be spent
in fiscal 1997.

ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS

       The Company's operating results have been, and will continue to be,
affected by a wide variety of factors that could have an adverse effect on
profitability during any particular period, many of which are beyond the
Company's control.  Among these are the demand for crude oil and refined
products, which is largely driven by the condition of local and worldwide
economies, although weather patterns and taxation relative to other energy
sources also play a significant part.  Governmental regulations and policies,
particularly in the areas of taxation, energy and the environment, also have a
significant impact on the Company's activities.  Operating results can be
affected by these industry factors, by competition in the particular geographic
markets that the Company serves and by Company-specific factors, such as the
success of particular marketing programs and refinery operations.

       In addition, the Company's profitability depends largely on the spread
between market prices for refined petroleum products and crude oil prices.
This margin is continually changing and may significantly fluctuate from time
to time.  Crude oil and refined products are commodities whose price levels are
determined by market forces beyond the control of the Company.  Additionally,
due to the seasonality of refined products markets and refinery maintenance
schedules, results of operations for any particular quarter of a fiscal year
are not necessarily indicative of results for the full year.  In general,
prices for refined products are significantly influenced by the price of crude
oil.  Although an increase or decrease in the price for crude oil generally
results in a corresponding increase or decrease in prices for refined products,
generally there is a lag time in the realization of the corresponding increase
or decrease in prices for refined products.  The effect of changes in crude oil
prices on operating results therefore depends in part on how quickly refined
product prices adjust to reflect these changes.  A substantial or prolonged
increase in crude oil prices without a corresponding increase in refined
product prices, a substantial or prolonged decrease in refined product prices
without a corresponding decrease in crude oil prices, or a substantial or
prolonged decrease in demand for refined products could have a significant
negative effect on the Company's earnings and cash flows.





                                     -19-

<PAGE>   20
       The Company is dependent on producing and selling quantities of refined
products at margins sufficient to cover operating costs, including any future
inflationary pressures.  The refining business is characterized by high fixed
costs resulting from the significant capital outlays associated with
refineries, terminals and related facilities.  Furthermore, future regulatory
requirements or competitive pressures could result in additional capital
expenditures, which may or may not produce desired results.  Such capital
expenditures may require significant financial resources that may be contingent
on the Company's continued access to capital markets and commercial bank
financing on favorable terms.

       Diamond Shamrock, Inc., an independent refiner and marketer, completed
in November 1995 the construction of a 409-mile, ten-inch refined products
pipeline from its McKee refinery near Dumas, Texas to El Paso.  Diamond
Shamrock has announced that this pipeline had an initial capacity of 27,000
BPD, and that it intends to use its pipeline to supply fuels to the El Paso,
New Mexico, Arizona and northern Mexico markets.  The Diamond Shamrock pipeline
has increased and could further increase the supply of products in the
Company's principal markets.

       In addition, periodically other projects that, if consummated, could
cause an increase in the supply of products to some or all of the Company's
markets have been explored by a variety of entities.  Whether or not such a
project will be consummated, in either the long or short-term cannot presently
be determined.

       Recently there have been several refining and marketing consolidations
or acquisitions between entities competing in the Company's geographic market.
These include Tosco Corporation purchasing Circle K Corporation; Giant
Industries, Inc. purchasing the Bloomfield, N.M. refinery from Gary-Williams
Corporation and Diamond Shamrock, Inc. and Ultramar Corporation recently
announcing a plan to merge into a single entity.  While this could increase the
competitive pressures on the Company, the specific ramifications of these or
other potential consolidations cannot presently be determined.

       At times in the past, the common carrier pipelines used by the Company
to serve the Tucson and Phoenix markets have been operated at or near their
capacity.  In addition, the common carrier pipeline used by the Company to
serve the Albuquerque market currently is operating at or near capacity.  The
aforementioned Lease Agreement with Mid-America Pipeline Company and related
capital investments by the Company are expected to alleviate by the end of the
1997 fiscal year the pipeline constraint associated with the Albuquerque
market.  There is no assurance that the Company will not experience future
constraints on its ability to deliver its products through common carrier
pipelines or that any existing constraints will not worsen.  In particular, the
flow of additional products into El Paso for shipment to Arizona, either as a
result of the new Diamond Shamrock pipeline or otherwise, could result in the
reoccurrence of such constraints.





                                     -20-

<PAGE>   21
       Effective January 1, 1995, certain cities in the country were required
to use only reformulated gasoline ("RFG"), a cleaner burning fuel.  While none
of the Company's principal markets presently requires RFG, this requirement
could be implemented over time.  In fact, certain of the Company's markets are
presently considering implementing more rigorous fuel specifications.  Further,
other requirements of the Clean Air Act, or other presently existing or future
environmental regulations, could cause the Company to expend substantial
amounts at its refineries.  The specifics and extent of these or other
regulations and their attendant costs are not presently determinable.

       In July 1993, the United States Department of Justice (DOJ), on behalf
of the United States Environmental Protection Agency (EPA), filed a suit
against the Company's subsidiary, Navajo Refining Company (Navajo) alleging
that, beginning in September 1990 and continuing through the present, Navajo
has violated and continues to violate the Resource Conservation and Recovery
Act (RCRA) and implementing regulations of the EPA by treating, storing and
disposing of certain hazardous wastes without compliance with regulatory
requirements.  For the past three years, the Company has been negotiating a
settlement which the parties agree is near consummation.  If settled as
anticipated, the Company would close the existing evaporation ponds of its
wastewater management system at a cost believed to be substantially less than
$1 million.  The settlement also contemplates that the Company would implement
an alternative to the existing wastewater treatment system at an estimated cost
of $3.5 million.  The costs to implement an alternative wastewater treatment
system would be capitalized and amortized over the future useful life of the
resulting asset in accordance with generally accepted accounting principles.
The settlement with the DOJ also is expected to involve the payment of a civil
penalty of less than $2 million.  In fiscal 1993, the Company recorded a $2
million reserve for the litigation.





                                     -21-

<PAGE>   22




I
TEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


       Index to Consolidated Financial Statements


<TABLE>
<CAPTION>
                                                                             Page
                                                                           Reference
                                                                           ---------
          <S>                                                                <C>
          Report of Independent Auditors  . . . . . . . . . . . . . . .       23
                                                                           
          Consolidated Balance Sheet at July 31,                           
             1996 and 1995  . . . . . . . . . . . . . . . . . . . . . .       24
                                                                           
          Consolidated Statement of Income for the                         
             years ended July 31, 1996, 1995 and 1994 . . . . . . . . .       25
                                                                           
          Consolidated Statement of Cash Flows for                         
             the years ended July 31,                                      
             1996, 1995 and 1994  . . . . . . . . . . . . . . . . . . .       26
                                                                           
          Consolidated Statement of Stockholders' Equity                   
             for the years ended July 31, 1996, 1995                       
             and 1994 . . . . . . . . . . . . . . . . . . . . . . . . .       27
                                                                           
          Notes to Consolidated Financial                                  

             Statements . . . . . . . . . . . . . . . . . . . . . . . .      28-42
</TABLE>






                                     -22-

<PAGE>   23


REPORT OF ERNST & YOUNG LLP,

INDEPENDENT AUDITORS




The Board of Directors
and Stockholders of Holly Corporation

       We have audited the accompanying consolidated balance sheet of Holly
Corporation at July 31, 1996 and 1995, and the related consolidated statements
of income, cash flows and stockholders' equity for each of the three years in
the period ended July 31, 1996.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to express
an opinion on these financial statements based on our audits.

       We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for our opinion.

       In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Holly Corporation at July 31, 1996 and 1995, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended July 31, 1996, in conformity with generally accepted accounting
principles.




                                                      ERNST & YOUNG LLP


Dallas, Texas
September 11, 1996






                                     -23-

<PAGE>   24
                               HOLLY CORPORATION

                           CONSOLIDATED BALANCE SHEET


<TABLE>
<CAPTION>
($ in thousands, except per share amounts)                                                     July 31,            
                                                                                 ----------------------------------
                                                                                   1996                      1995  
                                                                                 --------                  --------
<S>                                                                              <C>                       <C>
ASSETS
Current assets
   Cash and cash equivalents (Note 6) . . . . . . . . . . . . . . .              $ 63,959                  $ 13,432 
                                                                                                                    
   Accounts receivable (Notes 3 and 6)  . . . . . . . . . . . . . .               104,386                    85,825 
                                                                                                                    
   Inventories (Notes 4 and 6)  . . . . . . . . . . . . . . . . . .                38,673                    42,181 
                                                                                                                    
   Income taxes receivable  . . . . . . . . . . . . . . . . . . . .                     -                     1,540 
                                                                                                                    
   Prepayments and other  . . . . . . . . . . . . . . . . . . . . .                10,008                    10,032
                                                                                 --------                  --------

      Total current assets  . . . . . . . . . . . . . . . . . . . .               217,026                   153,010 
                                                                                                                    

Properties, plants and equipment, net (Note 5)  . . . . . . . . . .               131,444                   131,185 
                                                                                                                    
Equity interest in joint venture  . . . . . . . . . . . . . . . . .                   734                         -
Other assets  . . . . . . . . . . . . . . . . . . . . . . . . . . .                 2,067                     3,189
                                                                                 --------                  --------

                                                                                 $351,271                  $287,384
                                                                                 ========                  ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
   Accounts payable (Note 3)  . . . . . . . . . . . . . . . . . . .              $122,421                  $106,817 
                                                                                                                    
   Accrued liabilities (Notes 9 and 11)   . . . . . . . . . . . . .                12,453                    13,702 
                                                                                                                    
   Income taxes payable . . . . . . . . . . . . . . . . . . . . . .                 4,728                       476 
                                                                                                                    
   Current maturities of long-term debt (Note 6)  . . . . . . . . .                10,775                    14,275
                                                                                 --------                  --------

      Total current liabilities . . . . . . . . . . . . . . . . . .               150,377                   135,270

Deferred income taxes (Note 7)  . . . . . . . . . . . . . . . . . .                18,361                    17,506 
                                                                                                                    

Long-term debt, less current maturities (Note 6)  . . . . . . . . .                86,290                    54,565 
                                                                                                                    

Commitments and contingencies (Notes 10 and 11)

Stockholders' equity (Notes 6, 8 and 9)
   Preferred stock, $1.00 par value - 1,000,000
     shares authorized; none issued . . . . . . . . . . . . . . . .                     -                           
                                                                                                                  - 
   Common stock, $.01 par value - 20,000,000 shares
     authorized; 8,650,282 shares issued  . . . . . . . . . . . . .                    87                        87 
                                                                                                                    
   Additional capital . . . . . . . . . . . . . . . . . . . . . . .                 6,132                     6,132 
                                                                                                                    
   Retained earnings  . . . . . . . . . . . . . . . . . . . . . . .                90,593                    74,803
                                                                                 --------                  --------
                                                                                   96,812                    81,022 
                                                                                                                    
   Common stock held in treasury, at cost -
     396,768 shares . . . . . . . . . . . . . . . . . . . . . . . .                  (569)                     (569)
                                                                                                                    
   Deferred charge - amount due from ESOP . . . . . . . . . . . . .                     -                      (410)
                                                                                 --------                  --------
         Total stockholders' equity . . . . . . . . . . . . . . . .                96,243                    80,043
                                                                                 --------                  --------

                                                                                 $351,271                  $287,384
                                                                                 ========                  ========
</TABLE>

See accompanying notes.


                                     -24-

<PAGE>   25

                               HOLLY CORPORATION

                        CONSOLIDATED STATEMENT OF INCOME


<TABLE>
<CAPTION>
($ in thousands, except per share amounts)                                                  Years ended July 31,         
                                                                            -----------------------------------------------------
                                                                              1996                   1995                  1994  
                                                                            --------               --------              --------
<S>                                                                         <C>                    <C>                   <C>
REVENUES
   Refined products (Note 12)                                               $670,094               $612,150              $549,498
   Oil and gas                                                                 5,365                  1,252                 1,405
   Miscellaneous                                                                 831                  1,428                 1,417
                                                                            --------               --------              --------
                                                                             676,290                614,830               552,320

COSTS AND EXPENSES
   Cost of refined products                                                  600,478                553,768               480,702
   General and administrative                                                 14,081                 13,864                12,552
   Depreciation, depletion and amortization                                   19,315                 15,796                10,871
   Exploration expenses, including dry holes                                   4,018                  3,923                 4,655
                                                                            --------               --------              --------
                                                                             637,892                587,351               508,780
                                                                            --------               --------              --------
Income from operations                                                        38,398                 27,479                43,540

OTHER INCOME (EXPENSE)
   Interest income                                                             3,024                  1,020                   447
   Interest expense (Note 6)                                                  (9,634)                (8,352)               (8,985)
                                                                            --------               --------              --------
                                                                              (6,610)                (7,332)               (8,538)
                                                                            --------               --------              --------
Income before income taxes and cumulative effect
 of accounting change                                                         31,788                 20,147                35,002

Income tax provision (benefit) (Note 7)
   Current                                                                    13,365                  6,042                11,785
   Deferred                                                                     (811)                 1,688                 2,500
                                                                            --------               --------              --------
                                                                              12,554                  7,730                14,285
                                                                            --------               --------              --------
Income before cumulative effect of accounting
   change                                                                     19,234                 12,417                20,717
Cumulative effect of accounting change
   (Note 2)                                                                        -                  5,703                     -
                                                                            --------               --------              --------

Net income                                                                  $ 19,234               $ 18,120              $ 20,717
                                                                            ========               ========              ========

Income per common share
 Income before cumulative effect of accounting
   change                                                                   $   2.33               $   1.51              $   2.51
 Cumulative effect of accounting change                                            -                    .69                     -
                                                                            --------               --------              --------

 Net income                                                                 $   2.33               $   2.20              $   2.51
                                                                            ========               ========              ========

Cash dividends paid per common share                                        $    .42               $    .40              $    .35
                                                                            ========               ========              ========

Average number of shares of common
   stock outstanding (in thousands)                                            8,254                  8,254                 8,254
                                                                            ========               ========              ========
</TABLE>


See accompanying notes.





                                     -25-

<PAGE>   26
                              HOLLY CORPORATION

                     CONSOLIDATED STATEMENT OF CASH FLOWS


<TABLE>
<CAPTION>
($ in thousands)                                                                   Years ended July 31,        
                                                                            -----------------------------------
                                                                              1996          1995         1994  
                                                                            --------      --------     --------
<S>                                                                        <C>            <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . .       $ 19,234      $ 18,120     $ 20,717
   Adjustments to reconcile net income to net cash
     provided by operating activities
       Depreciation, depletion and amortization . . . . . . . . . . .         19,315        15,796       10,871
       Deferred income taxes  . . . . . . . . . . . . . . . . . . . .           (811)        1,688        2,500
       Dry hole costs and leasehold impairment  . . . . . . . . . . .          1,976           903        1,509
       Cumulative effect of accounting change . . . . . . . . . . . .              -        (5,703)           -
       (Increase) decrease in operating assets
         Accounts receivable  . . . . . . . . . . . . . . . . . . . .        (18,561)        8,455      (17,413)
         Inventories  . . . . . . . . . . . . . . . . . . . . . . . .          3,508         1,814       (6,023)
         Income taxes receivable  . . . . . . . . . . . . . . . . . .          1,540          (843)        (697)
         Prepayments and other  . . . . . . . . . . . . . . . . . . .            314           829       (2,403)
       Increase (decrease) in operating liabilities
         Accounts payable . . . . . . . . . . . . . . . . . . . . . .         15,604        (5,267)      25,297
         Accrued liabilities  . . . . . . . . . . . . . . . . . . . .           (694)        1,298       (1,703)
         Income taxes payable . . . . . . . . . . . . . . . . . . . .          4,274          (218)      (6,572)
       Other, net . . . . . . . . . . . . . . . . . . . . . . . . . .         (1,247)       (2,631)       1,601
                                                                            --------      --------     --------
           Net cash provided by operating activities  . . . . . . . .         44,452        34,241       27,684

CASH FLOWS FROM FINANCING ACTIVITIES
   Increase in notes payable  . . . . . . . . . . . . . . . . . . . .         39,000             -            -
   Payment of long-term debt  . . . . . . . . . . . . . . . . . . . .        (10,775)       (5,608)      (5,608)
   Debt issuance costs  . . . . . . . . . . . . . . . . . . . . . . .           (403)            -            -
   Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . .         (3,466)       (3,301)      (2,889)
                                                                            --------      --------     --------
           Net cash provided by (used for)
            financing activities  . . . . . . . . . . . . . . . . . .         24,356        (8,909)      (8,497)

CASH FLOWS FROM INVESTING ACTIVITIES
   Additions to properties, plants and equipment  . . . . . . . . . .        (18,281)      (15,197)     (22,521)
                                                                            --------      --------     --------

CASH AND CASH EQUIVALENTS
   Increase (decrease) for the year . . . . . . . . . . . . . . . . .         50,527        10,135       (3,334)
   Beginning of year  . . . . . . . . . . . . . . . . . . . . . . . .         13,432         3,297        6,631
                                                                            --------      --------     --------
   End of year  . . . . . . . . . . . . . . . . . . . . . . . . . . .       $ 63,959      $ 13,432     $  3,297
                                                                            ========      ========     ========
</TABLE>






See accompanying notes.





                                      -26-

<PAGE>   27
                               HOLLY CORPORATION

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

($ in thousands)


<TABLE>
<CAPTION>
                                                                                                                  Amount     Total
                                                                                                                   due       stock-
                                                         Common      Additional       Retained      Treasury      from      holders'
                                                          stock        capital        earnings       stock         ESOP      equity 
                                                         ------      ----------      ----------     --------     -------    --------
<S>                                                      <C>            <C>            <C>           <C>         <C>       <C>
BALANCE AT JULY 31, 1993  . . . . . . . . . . .          $   87         $6,132         $42,058       $ (569)     $(1,230)  $ 46,478

Net income  . . . . . . . . . . . . . . . . . .               -              -          20,717            -            -     20,717
Dividends paid  . . . . . . . . . . . . . . . .               -              -          (2,889)           -            -     (2,889)
Reduction in amount due from ESOP . . . . . . .               -              -               -            -          410        410
Tax benefit of dividends paid to ESOP
  on unallocated shares . . . . . . . . . . . .               -              -              56            -            -         56
                                                         ------         ------         -------       ------      -------   --------

BALANCE AT JULY 31, 1994  . . . . . . . . . . .              87          6,132          59,942         (569)        (820)    64,772

Net income  . . . . . . . . . . . . . . . . . .               -              -          18,120            -            -     18,120
Dividends paid  . . . . . . . . . . . . . . . .               -              -          (3,301)           -            -     (3,301)
Reduction in amount due from ESOP . . . . . . .               -              -               -            -          410        410
Tax benefit of dividends paid to ESOP
   on unallocated shares  . . . . . . . . . . .               -              -              42            -            -         42
                                                         ------         ------         -------       ------      -------   --------

BALANCE AT JULY 31, 1995  . . . . . . . . . . .              87          6,132          74,803         (569)        (410)    80,043

Net income  . . . . . . . . . . . . . . . . . .               -              -          19,234            -            -     19,234
Dividends paid  . . . . . . . . . . . . . . . .               -              -          (3,466)           -            -     (3,466)
Reduction in amount due from ESOP . . . . . . .               -              -               -            -          410        410
Tax benefit of dividends paid to ESOP
   on unallocated shares  . . . . . . . . . . .               -              -              22            -            -         22
                                                         ------         ------         -------       ------      -------   --------

BALANCE AT JULY 31, 1996  . . . . . . . . . . .          $   87         $6,132         $90,593       $ (569)     $     -   $ 96,243
                                                         ======         ======         =======       ======      =======   ========
</TABLE>





See accompanying notes.





                                      -27-

<PAGE>   28
                               HOLLY CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          July 31, 1996, 1995 and 1994

1.     DESCRIPTION OF BUSINESS AND SUMMARY OF
       SIGNIFICANT ACCOUNTING POLICIES


DESCRIPTION OF BUSINESS

       Holly Corporation, including its consolidated and wholly-owned
subsidiaries, herein referred to as the "Company" unless the context otherwise
indicates, is an independent refiner of petroleum and petroleum derivatives
which produces a high proportion of high value light products such as gasoline,
diesel fuel and jet fuel for sale primarily in the southwestern United States
and northern Mexico.  Navajo Refining Company (Navajo), one of the wholly-owned
subsidiaries, owns a high-conversion petroleum refinery in Artesia, New Mexico,
which it operates in conjunction with crude, vacuum distillation and other
facilities situated 65 miles away in Lovington, New Mexico (collectively, the
Navajo Refinery).  The Navajo Refinery has a crude capacity of 60,000
barrels-per-day (BPD) and can process a variety of high sulphur sour crude
oils.  The Company also owns Montana Refining Company, a Partnership (MRC),
which owns a 7,000 BPD petroleum refinery near Great Falls, Montana, which can
process a range of crude oils and which serves primarily the State of Montana.

       In addition to its refining operations, the Company also conducts a
small-scale oil and gas exploration and production program, which activities do
not represent a significant segment of the Company's assets or operations.

PRINCIPLES OF CONSOLIDATION

       The consolidated financial statements include the accounts of the
Company, its subsidiaries and MRC.

USE OF ESTIMATES

       The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes.  Actual results could differ from those estimates.

CASH EQUIVALENTS

       For purposes of the statement of cash flows, the Company considers all
highly liquid investments with a maturity of three months or less at the time
of purchase to be cash equivalents.





                                      -28-

<PAGE>   29
                               HOLLY CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          July 31, 1996, 1995 and 1994

INVENTORIES

       Inventories are stated at the lower of cost, using the last-in,
first-out (LIFO) method for crude oil and refined products and the average cost
method for materials and supplies, or market.

INVESTMENT IN JOINT VENTURE

       The Company has entered into a joint venture to transport liquid
petroleum gas to Mexico.  The Company will have a 25% interest in the joint
venture and will account for earnings using the equity method.  At July 31,
1996, the Company has contributed to the joint venture property which had a net
book value of $734,000.

REVENUE RECOGNITION

       Sales and related cost of sales are recognized when products are shipped
to customers and title passes.  Sales are reported exclusive of excise taxes.
Intercompany oil and gas sales of $885,000 in 1996, $333,000 in 1995 and
$177,000 in 1994 have been eliminated.

DEPRECIATION

        Depreciation is provided by the straight-line method over the estimated
useful lives of the assets, primarily 10 to 16 years for refining and pipeline
facilities and 3 to 10 years for corporate and other assets.

ENVIRONMENTAL COSTS

       Environmental costs are expensed if they relate to an existing condition
caused by past operations and do not contribute to current or future revenue
generation.  Liabilities are recorded when site restoration and environmental
remediation and cleanup obligations are either known or considered probable and
can be reasonably estimated.  Recoveries of environmental costs through
insurance, indemnification arrangements or other sources are included in other
assets to the extent such recoveries are considered probable.





                                      -29-

<PAGE>   30
                               HOLLY CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          July 31, 1996, 1995 and 1994

OIL AND GAS EXPLORATION AND DEVELOPMENT

       The Company accounts for the acquisition, exploration, development and
production costs of its oil and gas activities using the successful efforts
method of accounting.  Lease acquisition costs are capitalized; undeveloped
leases are written down when determined to be impaired and written off upon
expiration or surrender.  Geological and geophysical costs and delay rentals
are expensed as incurred.  Exploratory well costs are initially capitalized,
but if the effort is unsuccessful, the costs are charged against earnings.
Development costs, whether or not successful, are capitalized.  Productive
properties are stated at the lower of amortized cost or estimated realizable
value of underlying proved oil and gas reserves.  Depreciation, depletion and
amortization of such properties is computed by the unit-of-production method.
At July 31, 1996, the Company had not discovered a material amount of proven
reserves.

INCOME TAXES

       Provisions for income taxes include deferred taxes resulting from
temporary differences in income for financial and tax purposes, using the
liability method of accounting for income taxes.  The liability method requires
the effect of tax rate changes on current and accumulated deferred income taxes
to be reflected in the period in which the rate change was enacted.  The
liability method also requires that deferred tax assets be reduced by a
valuation allowance unless it is more likely than not that the assets will be
realized.

EARNINGS PER SHARE

       Earnings per share amounts are based upon the weighted average number of
common shares outstanding during each period.

FUTURES CONTRACTS

       The Company enters into commodity futures contracts to hedge a portion
of the price risk associated with crude oil and refined products.  Gains or
losses on contracts are recognized when the related inventory is sold or the
hedged transaction is consummated.

RECLASSIFICATIONS

       Certain reclassifications have been made to the 1995 and 1994 financial
statements to conform to the statement classifications used in 1996.





                                      -30-

<PAGE>   31
                               HOLLY CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          July 31, 1996, 1995 and 1994

2.     ACCOUNTING CHANGE

       Effective August 1, 1994, the Company changed its method of accounting
for turnaround costs.  Turnarounds consist of preventive maintenance on major
processing units as well as the shutdown and restart of all units, and
generally are scheduled at two to three year intervals.  Previously, the
Company estimated the costs of the next scheduled turnaround and ratably
accrued the related expenses prior to the actual turnaround.  To provide for a
better matching of turnaround costs with revenues, the Company changed its
accounting method for turnaround costs to one that results in the amortization
of costs incurred over the period until the next scheduled turnaround.  The
cumulative effect of this accounting change through the 1994 fiscal year was an
increase in net income in the first quarter of the 1995 fiscal year of
$5,703,000 (net of deferred taxes of $3,865,000), or $.69 per common share.
Excluding the cumulative effect, the change increased net income for fiscal
1995 by $886,000 or $.11 per common share.  If the accounting change for
turnaround costs had been retroactively applied, pro forma net income and net
income per common share would have been as follows:


<TABLE>
<CAPTION>
($ in thousands, except per share amounts)                      1994  
                                                              --------
<S>                                                           <C>
As reported
   Net income . . . . . . . . . . . . . .                     $ 20,717
   Net income per share . . . . . . . . .                     $   2.51
Pro forma amounts
   Net income . . . . . . . . . . . . . .                     $ 21,983
   Net income per share . . . . . . . . .                     $   2.66
</TABLE>


3.     ACCOUNTS RECEIVABLE


<TABLE>
<CAPTION>
($ in thousands)                                                1996                 1995  
                                                              --------             --------
<S>                                                           <C>                   <C>
Product . . . . . . . . . . . . . . . . .                     $ 43,642              $ 37,733
Crude oil resales . . . . . . . . . . . .                       54,456                48,092
Note receivable . . . . . . . . . . . . .                        6,288                     -
                                                              --------             ---------
                                                              $104,386              $ 85,825
                                                              ========              ========
</TABLE>


       Crude oil resales accounts receivable principally represent the sell
side of reciprocal crude oil buy/sell exchange arrangements involved in
supplying crude oil to the refineries, with an approximate like amount
reflected in accounts payable.  The net differential of these crude oil
buy/sell exchanges is reflected in cost of sales.  The exchange differentials
result principally from crude oil type and location differences.

       Credit losses are provided for in the financial statements and
consistently have been minimal.





                                      -31-

<PAGE>   32
                               HOLLY CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          July 31, 1996, 1995 and 1994


4.     INVENTORIES


<TABLE>
<CAPTION>
($ in thousands)                                              1996             1995  
                                                            --------         --------
<S>                                                         <C>              <C>
Crude oil and refined products  . . . . . .                 $ 32,090         $ 35,649
Materials and supplies  . . . . . . . . . .                    6,583            6,532
                                                            --------         --------

                                                            $ 38,673         $ 42,181
                                                            ========         ========
</TABLE>


       The excess of current cost over the LIFO value of inventory was
$15,509,000 and  $7,840,000 at July 31, 1996 and 1995, respectively.

5.     PROPERTIES, PLANTS AND EQUIPMENT


<TABLE>
<CAPTION>
($ in thousands)                                                1996              1995  
                                                              --------          --------
<S>                                                           <C>               <C>
Properties, plants and equipment, at cost
   Refining and pipeline facilities . . . . . . . .           $244,102          $234,528
   Oil and gas exploration
     and development  . . . . . . . . . . . . . . .             16,450            14,222
   Corporate and other  . . . . . . . . . . . . . .              1,069             1,064
                                                              --------          --------

                                                               261,621           249,814
Accumulated depreciation, depletion and
   amortization . . . . . . . . . . . . . . . . . .            130,177           118,629
                                                              --------          --------

                                                              $131,444          $131,185
                                                              ========          ========
</TABLE>


       Refining and pipeline facilities at July 31, 1996 and 1995 include
$9,561,000 and $1,578,000, respectively, of construction in progress which was
not being depreciated at those dates, pending completion of the construction
projects.





                                      -32-

<PAGE>   33
                               HOLLY CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          July 31, 1996, 1995 and 1994

6.     DEBT


<TABLE>
<CAPTION>
($ in thousands)                                               1996           1995  
                                                             --------       --------
<S>                                                          <C>            <C>
Senior Notes
   Series A . . . . . . . . . . . . . . . . . . .             $11,200        $16,800
   Series B . . . . . . . . . . . . . . . . . . .              25,833         52,000
   Series C . . . . . . . . . . . . . . . . . . .              39,000              -
   Series D . . . . . . . . . . . . . . . . . . .              21,000              -
Other . . . . . . . . . . . . . . . . . . . . . .                  32             40
                                                             --------       --------
                                                               97,065         68,840
                                                                                    
Less current maturities of long-
   term debt  . . . . . . . . . . . . . . . . . .              10,775         14,275
                                                             --------       --------

                                                             $ 86,290       $ 54,565
                                                             ========       ========
</TABLE>


SENIOR NOTES

       In June 1991, the Company sold $80 million of Senior Notes to a group of
insurance companies.  The Series A Notes which were issued in the principal
amount of $28 million, have a 7-year life, require equal annual principal
payments beginning June 15, 1994 and bear interest at 9.72%.  The Series B
Notes which were issued in the principal amount of $52 million, have a 10-year
life, require equal annual principal payments beginning June 15, 1996 and bear
interest at 10.16%.  In November 1995, the Company completed the funding from a
group of insurance companies of a new private placement of Senior Notes in the
amount of $39 million and the extension of $21 million of previously
outstanding Senior Notes.  The new $39 million Series C Notes have a 10-year
life, require equal annual principal payments beginning December 15, 1999, and
bear interest at 7.62%.  The new $21 million Series D Notes, for which
previously issued Series B Notes were exchanged, have a 10-year life, require
equal annual principal payments beginning December 15, 1999, and bear interest
at an initial rate of 10.16%, with reductions to 7.82% for the periods
subsequent to the original maturity dates of the exchanged Series B Notes.  The
Senior Notes are unsecured and the note agreements impose certain restrictive
covenants, including limitations on liens, additional indebtedness, sales of
assets, investments, business combinations and dividends, which collectively
are less restrictive than the terms of the bank Credit Agreement.





                                      -33-

<PAGE>   34
                               HOLLY CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          July 31, 1996, 1995 and 1994

CREDIT AGREEMENT

       In June 1995, the Company and certain of its subsidiaries amended its
bank Credit Agreement (Credit Agreement) extending the term for two additional
years.  The Credit Agreement provides a $100 million facility for letters of
credit, or for direct borrowings of up to $25 million, with such borrowings
being subject to an annual 20-day cleanup period.  Interest on borrowings is
based upon, at the Company's option, (i) the agent bank's prime rate plus 1/2%
per annum; (ii) various Eurodollar related rates; and (iii) various certificate
of deposit related rates.  A fee of 1% per annum is payable quarterly on the
outstanding balance of all letters of credit and a commitment fee of 3/8 of 1%
per annum is payable on the unused portion of the facility.  The borrowing base
for the facility consists of cash, cash equivalents, accounts receivable and
inventory, all of which secure the facility.  The Credit Agreement imposes
certain restrictions, including:  (i) a prohibition of other indebtedness in
excess of $3 million with exceptions for, among other things, indebtedness
under the Company's Senior Notes and certain nonrecourse debt; (ii) maintenance
of certain levels of net worth, working capital and interest coverage; (iii)
limitations on investments and dividends; and (iv) a prohibition of incursions
on controlling ownership, material changes in senior management and business
combinations with unaffiliated entities.

       At July 31, 1996, the Company had outstanding letters of credit
totalling $12,003,000 and no borrowings.  The unused commitment under the
Credit Agreement at July 31, 1996 was $87,997,000, of which up to $25,000,000
may be used for additional direct borrowings.

       No borrowings under the Company's Credit Agreement were outstanding
during 1996 and 1995, and an immaterial amount was outstanding during 1994.

       The Senior Notes and Credit Agreement restrict investments and
distributions, including dividends, to an amount in the aggregate not to exceed
75% of cumulative consolidated net income (as defined).  Under the most
restrictive of these covenants, at July 31, 1996 approximately $33.0 million
was available for the payment of dividends.

       Maturities of long-term debt for the next five fiscal years are as
follows:  1997 -- $10,775,000; 1998 -- $10,775,000; 1999 -- $5,175,000; 2000 --
$13,746,000 and 2001 -- $13,738,000.

       The Company made interest payments of $9,409,000 in 1996, $8,183,000 in
1995 and $8,744,000 in 1994.

       Based on the borrowing rates that the Company believes would be
available for replacement loans with similar terms and maturities of the debt
of the Company now outstanding, the Company estimates fair value of long-term
debt including current maturities to be $98.4 million at July 31, 1996.





                                      -34-

<PAGE>   35
                               HOLLY CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          July 31, 1996, 1995 and 1994


7.     INCOME TAXES

       The statutory federal income tax rate applied to pre-tax book income
reconciles to income tax expense as follows:


<TABLE>
<CAPTION>
($ in thousands)                                     1996          1995          1994  
                                                   -------        -------       -------
<S>                                                <C>            <C>           <C>
Tax computed at
  statutory rate  . . . . . . . . . .              $11,126        $ 7,051       $12,251
State income taxes, net of federal
  tax benefit . . . . . . . . . . . .                1,550            982         1,888
Other . . . . . . . . . . . . . . . .                 (122)          (303)          146
                                                   -------        -------       -------
                                                   $12,554        $ 7,730       $14,285
                                                   =======        =======       =======
</TABLE>


        Operations of the corporation that was the sole limited partner of MRC
prior to the acquisition of such corporation by the Company resulted in unused
net operating loss carryforwards of approximately $9,000,000, which are
expected to be available to the Company to a limited extent each year through
2006 based on the income of such corporation.  As of July 31, 1996,
approximately $5,000,000 of these net operating loss carryforwards remain
available to offset future income.  For financial reporting purposes, the
benefit of these net operating loss carryforwards is being offset against
contingent future payments of up to $95,000 per year through 2005 relating to
the acquisition of such corporation.

        Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amount used for income tax purposes.  The
Company's deferred income tax assets and liabilities as of July 31, 1996 and
1995 are as follows:





                                      -35-

<PAGE>   36
                               HOLLY CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          July 31, 1996, 1995 and 1994


<TABLE>
<CAPTION>
     ($ in thousands)
                                                                          1996  
                                                                        --------
                                                      Assets          Liabilities            Total 
                                                      ------          -----------           -------
     <S>                                             <C>              <C>                  <C>
     Deferred taxes
       Accrued employee benefits  . . . . . . .      $ 2,084           $     -             $  2,084
       Deferred turnaround costs  . . . . . . .            -             (1,122)             (1,122)
       Prepayments and other  . . . . . . . . .        1,263             (1,113)                150
                                                     -------           --------            --------
     Total current  . . . . . . . . . . . . . .        3,347             (2,235)              1,112
       Properties, plants and equipment
        (primarily tax in excess of
        book depreciation)  . . . . . . . . . .            -            (18,871)            (18,871)
       Intangible drilling costs  . . . . . . .            -             (1,031)             (1,031)
       Nondeductible oil and gas costs  . . . .        1,862                  -               1,862
       Deferred turnaround costs  . . . . . . .            -               (362)               (362)
       Other  . . . . . . . . . . . . . . . . .          150               (109)                 41
                                                     -------           --------            --------
     Total noncurrent   . . . . . . . . . . . .        2,012            (20,373)            (18,361)
                                                     -------           --------            --------
                                                       5,359            (22,608)            (17,249)

     Valuation allowance  . . . . . . . . . . .            -                  -                   -
                                                     -------           --------            --------
     Total  . . . . . . . . . . . . . . . . . .      $ 5,359           $(22,608)           $(17,249)
                                                     =======           ========            ======== 

<CAPTION>
                                                                          1995  
                                                                        --------
                                                      Assets          Liabilities            Total 
                                                      ------          -----------           -------
     <S>                                             <C>              <C>                  <C>
     Deferred taxes
       Accrued employee benefits  . . . . . . .      $1,336            $     -             $  1,336
       Deferred turnaround costs  . . . . . . .           -              (1,532)             (1,532)
       Prepayments and other  . . . . . . . . .        1,425             (1,783)               (358)
                                                     -------           --------            --------
     Total current  . . . . . . . . . . . . . .        2,761             (3,315)               (554)

       Properties, plants and equipment
        (primarily tax in excess of
        book depreciation)  . . . . . . . . . .           -             (17,923)            (17,923)
       Intangible drilling costs  . . . . . . .           -              (1,020)             (1,020)
       Nondeductible oil and gas costs  . . . .       2,233                   -               2,233
       Deferred turnaround costs  . . . . . . .           -                (887)               (887)
       Other  . . . . . . . . . . . . . . . . .          150                (59)                 91
                                                     -------           --------            --------
     Total noncurrent   . . . . . . . . . . . .        2,383            (19,889)            (17,506)
                                                     -------           --------            --------
                                                       5,144            (23,204)            (18,060)

     Valuation allowance  . . . . . . . . . . .           -                   -                   -
                                                     -------           --------            --------
     Total  . . . . . . . . . . . . . . . . . .      $ 5,144           $(23,204)           $(18,060)
                                                     =======           ========            ======== 
</TABLE>






                                      -36-

<PAGE>   37
                               HOLLY CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          July 31, 1996, 1995 and 1994


     The Company made income tax payments of $7,177,000 in 1996, $7,144,000 in
1995, and $18,893,000 in 1994.

     The Company's federal income tax returns have been examined by the
Internal Revenue Service through 1990.

8.   STOCKHOLDERS' EQUITY

     At July 31, 1996 and 1995, no stock options were outstanding and 751,500
shares of common stock were reserved for issuance under the Company's stock
option plan.

9.   EMPLOYEE BENEFIT PLANS

RETIREMENT PLAN

     The Company has a non-contributory defined benefit retirement plan that
covers substantially all employees.  The Company's policy is to make
contributions annually of not less than the minimum funding requirements of the
Employee Retirement Income Security Act of 1974.  Benefits are based on the
employee's years of service and compensation.

     Pension expense includes the following components:


<TABLE>
<CAPTION>
($ in thousands)                                     1996            1995             1994  
                                                   --------        --------         --------
<S>                                                 <C>              <C>              <C>
Service cost - benefits earned
  during the year . . . . . . . . . . . .           $1,125           $1,131           $1,014
Interest cost on projected benefit
  obligations . . . . . . . . . . . . . .            1,993            1,830            1,603
Actual return on plan assets  . . . . . .           (2,710)          (3,421)            (841)
Net amortization and deferral . . . . . .              278            1,296           (1,252)
                                                    ------           ------           ------ 
Pension expense . . . . . . . . . . . . .           $  686           $  836           $  524
                                                    ======           ======           ======
</TABLE>






                                      -37-

<PAGE>   38
                               HOLLY CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          July 31, 1996, 1995 and 1994

       The following table sets forth the funded status of the retirement plan
and amounts recognized in the consolidated balance sheet:


<TABLE>
<CAPTION>
       ($ in thousands)                                    1996               1995  
                                                         --------           --------
       <S>                                               <C>                <C>
       Plan assets at fair value  . . . . . .            $ 28,958           $ 25,985
       Actuarial present value of projected
         benefit obligations
          Accumulated benefit obligations
           Vested   . . . . . . . . . . . . .              17,733             19,717
           Unvested   . . . . . . . . . . . .                 365                259
          Provision for future salary
            increases   . . . . . . . . . . .               9,861              7,189
                                                         --------           --------

       Projected benefit obligations  . . . .              27,959             27,165
                                                         --------           --------

       Plan assets greater (less) than projected
         benefit obligations  . . . . . . . .                 999             (1,180)
       Unrecognized net gain  . . . . . . . .              (1,930)              (197)
       Unrecognized prior service
           cost   . . . . . . . . . . . . . .                  36                 72
       Unrecognized transition net
           asset  . . . . . . . . . . . . . .              (1,010)            (1,222)
                                                         --------           --------

       Accrued pension liability
         recognized in the consolidated
         balance sheet  . . . . . . . . . . .            $ (1,905)          $ (2,527)
                                                         ========           ======== 
</TABLE>


       The principal actuarial assumptions were:


<TABLE>
<CAPTION>
                                                           1996       1995       1994
                                                           ----       ----       ----
         <S>                                               <C>        <C>        <C>
         Discount rate  . . . . . . . . . . .              7.5%       7.5%       7.5%
         Rate of future compensation
           increases  . . . . . . . . . . . .                5%         5%         5%
         Expected long-term rate of return
           on assets  . . . . . . . . . . . .              8.5%       8.5%       8.5%
</TABLE>


       Pension costs are determined using the assumptions as of the beginning
of the year.  The funded status is determined using the assumptions as of the
end of the year.

       Approximately 45% of plan assets is invested in equity securities and
55% is invested in fixed income securities and other instruments at July 31,
1996.





                                      -38-

<PAGE>   39
                               HOLLY CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          July 31, 1996, 1995 and 1994

RETIREMENT RESTORATION PLAN

       The Company has adopted a retirement restoration plan that provides for
additional payments from the Company so that total retirement plan benefits for
executives will be maintained at the levels provided in the retirement plan
before the application of Internal Revenue Code limitations.  The Company
accrued in connection with this plan $252,000 in 1996 and $237,000 in 1995.

EMPLOYEE STOCK OWNERSHIP PLAN

       In December 1985, the Company established an Employee Stock Ownership
Plan (ESOP).  The ESOP is non-contributory and includes substantially all
employees of the Company and its subsidiaries who meet certain length of
service requirements and are not covered by a collective bargaining agreement.

       In 1985, the ESOP borrowed from the Company the $4,102,000 needed to
purchase 1,500,000 shares of the Company's common stock.  The loan was repaid
in ten annual installments of $410,000 commencing August 1, 1986 at an interest
rate of 12% per annum.  The Company made annual contributions sufficient to
enable the ESOP to repay the loan with interest.  The unearned compensation of
$4,102,000 was recorded as a reduction of stockholders' equity and was reduced
as payments were made.  Interest income earned on the note due from the ESOP
was offset against an equal amount contributed to the ESOP by the Company.

10.    LEASE COMMITMENTS

       The Company leases certain facilities and equipment under operating
leases, most of which contain renewal options.  In addition, the Company has
entered into an operating lease which involves leasing more than 300 miles of
8" pipeline beginning in fiscal 1997.  The lease will have an initial term of
ten years with a renewal option for an additional ten years, and provides for
future escalation of lease payments.  At July 31, 1996, the minimum future
rental commitments under these noncancellable leases with remaining lease terms
in excess of one year total in the aggregate $52,466,000, of which the
following amounts are payable over the next five years:  1997 -- $1,629,000;
1998 -- $4,548,000; 1999 -- $4,649,000; 2000 -- $5,051,000 and 2001 --
$5,377,000.  Rental expense charged to operations was not significant for the
periods covered in the accompanying financial statements.





                                      -39-

<PAGE>   40
                               HOLLY CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          July 31, 1996, 1995 and 1994

11.    CONTINGENCIES

       In July 1993, the United States Department of Justice (DOJ), on behalf
of the United States Environmental Protection Agency (EPA), filed a suit
against the Company's subsidiary, Navajo alleging that, beginning in September
1990 and continuing through the present, Navajo has violated and continues to
violate the Resource Conservation and Recovery Act (RCRA) and implementing
regulations of the EPA by treating, storing and disposing of certain hazardous
wastes without compliance with regulatory requirements.  For the past three
years, the Company has been negotiating a settlement which the parties agree is
near consummation.  If settled as anticipated, the Company would close the
existing evaporation ponds of its wastewater management system at a cost
believed to be substantially less than $1 million.  The settlement also
contemplates that the Company would utilize an alternative to the existing
wastewater treatment system at an estimated total cost of approximately $3.5
million.  The costs to implement an alternative wastewater treatment system
would be capitalized and amortized over the future useful life of the resulting
asset in accordance with generally accepted accounting principles.  The
settlement with the DOJ would also involve the payment of a civil penalty of
less than $2 million.  In fiscal 1993, the Company recorded a $2 million
reserve for the litigation.


       The Company is a party to various other litigation and proceedings which
it believes, based on advice of counsel, will not have a materially adverse
impact on its financial condition or results of operations.

12.    SIGNIFICANT CUSTOMERS

       All revenues were domestic revenues, except for sales of gasoline and
diesel fuel for export into Mexico.  The export sales were to an affiliate of
PEMEX (the government-owned energy company of Mexico) and accounted for
approximately $40,000,000 (6%) of the Company's revenues for fiscal 1996,
$41,000,000 (7%) of revenues for fiscal 1995 and $58,000,000 (11%) of revenues
for fiscal 1994.  Sales of military jet fuel to the United States Government
accounted for approximately $70,000,000 (10%) of the Company's revenues for
fiscal 1996, $74,000,000 (12%) of revenues for fiscal 1995 and $67,000,000
(12%) of revenues for fiscal 1994.  In addition to the United States Government
and PEMEX, another refiner, which is a purchaser of gasoline and diesel fuel
for resale to retail customers, accounted for approximately $131,000,000 (19%)
of the Company's revenues in fiscal 1996.  While a loss of, or reduction in
amounts purchased by, major purchasers that resell to retail customers could
have an adverse effect on the Company, the Company believes that the impact of
such a loss on the Company's results of operations should be limited because
the Company's sales volume with respect to products whose end-users are retail
customers is more dependent on general retail demand and product supply in the
Company's primary markets than on sales to any specific purchaser.





                                      -40-

<PAGE>   41
13.    QUARTERLY INFORMATION (UNAUDITED)


<TABLE>
<CAPTION>
                                                   First       Second       Third       Fourth
Financial Data                                    Quarter      Quarter     Quarter      Quarter       Year    
                                                  --------     --------    --------    --------     --------
                                                         ($ in thousands, except per share amounts)
<S>                                               <C>          <C>         <C>         <C>          <C>
1996                                                                                                
   Revenues . . . . . . . . . . . . . . .         $164,838     $151,778    $168,472    $191,202     $676,290
   Refining operating margin  . . . . . .         $ 19,607     $ 11,333    $ 15,009    $ 23,667     $ 69,616
   Income before income taxes . . . . . .         $ 10,211     $  2,302    $  5,830    $ 13,445     $ 31,788
   Net income . . . . . . . . . . . . . .         $  6,103     $  1,376    $  3,503    $  8,252     $ 19,234
   Income per common share  . . . . . . .         $    .74     $    .17    $    .42    $   1.00     $   2.33
   Dividends per common share . . . . . .         $    .10     $    .10    $    .10    $    .12     $    .42
   Average number of shares of                                                                      
      common stock outstanding                                                                      
      (in thousands)  . . . . . . . . . .            8,254        8,254       8,254       8,254        8,254
                                                                                                    
1995                                                                                                
   Revenues . . . . . . . . . . . . . . .         $160,724     $146,962    $147,047    $160,097     $614,830
   Refining operating margin  . . . . . .         $ 21,084     $ 10,482    $  8,953    $ 17,863     $ 58,382
   Income (loss) before income taxes and                                                            
      cumulative effect of accounting                                                               
      change  . . . . . . . . . . . . . .         $ 12,166      $ 1,649    $   (931)   $  7,263     $ 20,147
   Income (loss) before cumulative effect                                                           
      of accounting change  . . . . . . .         $  7,252      $   983    $   (376)   $  4,558     $ 12,417
   Cumulative effect of accounting                                                                  
      change  . . . . . . . . . . . . . .            5,703            -            -          -        5,703
                                                  --------     --------    ---------   --------     --------
                                                                                                    
   Net income (loss)  . . . . . . . . . .         $ 12,955      $   983    $   (376)   $  4,558     $ 18,120
                                                  ========      =======    ========    ========     ========
                                                                                                    
   Income per common share                                                                          
      Income (loss) before cumulative                                                               
        effect of accounting change . . .         $    .88      $   .12    $   (.05)   $    .56     $   1.51
      Cumulative effect of                                                                          
        accounting change . . . . . . . .              .69            -           -           -          .69
                                                  --------     --------    --------    --------     --------
                                                                                                    
      Net income (loss) . . . . . . . . .         $   1.57      $   .12    $   (.05)   $    .56     $   2.20
                                                  ========      =======    ========    ========     ========
                                                                                                    
                                                                                                    
   Dividends per common share . . . . . .         $    .10      $   .10    $    .10    $    .10     $    .40
   Average number of shares of                                                                      
      common stock outstanding                                                                      
      (in thousands)  . . . . . . . . . .            8,254        8,254       8,254       8,254        8,254
</TABLE>






                                      -41-

<PAGE>   42

<TABLE>
<CAPTION>
                                                   First       Second       Third       Fourth
Operating Data                                    Quarter      Quarter     Quarter      Quarter       Year    
                                                  --------     --------    --------    --------     --------
                                                                       (barrels-per-day)
<S>                                                <C>          <C>         <C>         <C>          <C>
1996                                                                                                
   Sales of                                                                                         
     refined products . . . . . . . . . .          74,400       67,500      67,000      72,200       70,300
   Refinery production  . . . . . . . . .          70,400       69,100      65,200      68,800       68,400
                                                                                                    
1995                                                                                                
   Sales of                                                                                         
     refined products . . . . . . . . . .          71,200       67,900      69,500      70,700       69,800
   Refinery production  . . . . . . . . .          67,000       68,200      68,600      68,400       68,100
</TABLE>






                                      -42-

<PAGE>   43

I
TEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
         ON ACCOUNTING AND FINANCIAL DISCLOSURE           

       The Company has had no change in, or disagreement with, its independent
certified public accountants on accounting and financial disclosure.



                                    PART III



ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

       The required information regarding the directors of the Company is
incorporated herein by this reference to information set forth under the
caption "Election of Directors" in the Company's Proxy Statement for its Annual
Meeting of Stockholders to be held in December 1996 which will be filed within
120 days of July 31, 1996 (the "Proxy Statement").

       The required information regarding the executive officers of the Company
is included herein in Part I, Item 4.

       Required information regarding compliance with Section 16(a) of the
Securities Exchange Act of 1934 is incorporated herein by this reference to
information set forth under the caption "Compliance with Section 16(a) of the
Securities Exchange Act of 1934" in the Proxy Statement.


ITEM 11.  EXECUTIVE COMPENSATION

       Information regarding executive compensation is incorporated herein by
this reference to information set forth under the captions "Executive
Compensation and Other Information" and "Compensation Committee Report on
Executive Compensation" in the Proxy Statement.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

       Information regarding security ownership of certain beneficial owners
and management is incorporated herein by this reference to information set
forth under the captions "Principal Stockholders" and "Election of Directors"
in the Proxy Statement.



ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

       Information regarding certain relationships and related transactions is
incorporated herein by this reference to information set forth under the
caption "Election of Directors" in the Proxy Statement.





                                      -43-

<PAGE>   44

                                    PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES
          AND REPORTS ON FORM 8-K                    

  (a)  Documents filed as part of this report

         (1)    Index to Consolidated Financial Statements

<TABLE>
<CAPTION>
                                                                        Page in
                                                                       Form 10-K
                                                                       ---------
              <S>                                                      <C>
              Report of Independent Auditors  . . . . . . . . . . .      23
              Consolidated Balance Sheet at                            
                 July 31, 1996 and 1995 . . . . . . . . . . . . . .      24
              Consolidated Statement of Income for                     
                the years ended July 31, 1996,                         
                1995, and 1994  . . . . . . . . . . . . . . . . . .      25
              Consolidated Statement of Cash Flows                     
                 for the years ended July 31, 1996,                    
                 1995, and 1994 . . . . . . . . . . . . . . . . . .      26
              Consolidated Statement of Stockholders'                  
                 Equity for the years ended July 31,                   
                 1996, 1995 and 1994  . . . . . . . . . . . . . . .      27
              Notes to Consolidated Financial                          
                 Statements . . . . . . . . . . . . . . . . . . . .    28-42
</TABLE>



         (2) Index to Consolidated Financial Statement Schedules

       All schedules are omitted since the required information is not present
       or is not present in amounts sufficient to require submission of the
       schedule, or because the information required is included in the
       consolidated financial statements or notes thereto.

         (3) Exhibits

              See Index to Exhibits on pages 46 to 52.


   (b)  Reports on Form 8-K

              No reports on Form 8-K were filed during the Company's fourth
              quarter that ended July 31, 1996.





                                      -44-

<PAGE>   45

                                  SIGNATURES


       Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.


                                        HOLLY CORPORATION
                                        (Registrant)
                                        
                                        
                                        
                                           /s/ Lamar Norsworthy       
                                        ---------------------------
                                        Lamar Norsworthy
                                        Chairman of the Board
                                        and Chief Executive Officer

Date:  October 28, 1996


       Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.



<TABLE>
<CAPTION>
       Signature                         Capacity                          Date
       ---------                         --------                          ----
<S>                              <C>                                 <C>
/s/ Lamar Norsworthy             Chairman of Board of Directors      October 28, 1996
- - --------------------------       and Chief Executive Officer                         
Lamar Norsworthy                 of the Company                      
                                                                     
                                                                     
                                                                     
/s/ Matthew P. Clifton           President and Director              October 28, 1996
- - --------------------------                                           
Matthew P. Clifton                                                   
                                                                     
                                                                     
                                                                     
/s/ Jack P. Reid                 Executive Vice President,           October 28, 1996
- - --------------------------       Refining and Director               
Jack P. Reid                     
                                                                     
                                                                     
                                                                     
/s/ Henry A. Teichholz           Vice President, Treasurer and       October 28, 1996
- - --------------------------       Controller (Principal Financial
Henry A. Teichholz               and Accounting Officer)
</TABLE>






                                      -45-

<PAGE>   46

<TABLE>
<CAPTION>
       Signature                         Capacity                          Date
       ---------                         --------                          ----
<S>                              <C>                                 <C>
/s/ William J. Gray              Senior Vice President, Marketing    October 28, 1996
- - --------------------------       and Supply and Director             
William J. Gray                                                      
                                                                     
                                                                     
/s/ Marcus R. Hickerson          Director                            October 28, 1996
- - --------------------------                                                           
Marcus R. Hickerson                                                  
                                                                     
                                                                     
/s/ A. J. Losee                  Director                            October 28, 1996
- - --------------------------                                           
A. J. Losee                                                          
                                                                     
                                                                     
/s/ Robert G. McKenzie           Director                            October 28, 1996
- - --------------------------                                                           
Robert G. McKenzie                                                   
                                                                     
                                                                     
/s/ Thomas K. Matthews, II       Director                            October 28, 1996
- - --------------------------                                                                     
Thomas K. Matthews, II           
</TABLE>






                                      -46-

<PAGE>   47
                               HOLLY CORPORATION


                               INDEX TO EXHIBITS


(Exhibits are numbered to correspond to the exhibit table in Item 601 of
       Regulation S-K)


<TABLE>
<CAPTION>
Exhibit
Number      Description
- - ------      -----------
<S>         <C>
 3.1        -  Restated Certificate of Incorporation of the Registrant, as
               amended (incorporated by reference to Exhibit 3(a), of Amendment
               No. 1 dated December 13, 1988 to Registrant's Annual Report on
               Form 10-K for its fiscal year ended July 31, 1988, File No. 1-
               3876).

 3.2        -  Bylaws of the Registrant, as amended (incorporated by reference
               to Exhibit 3(b) of Registrant's Annual Report on Form 10-K for
               its fiscal year ended July 31, 1993, File No. 1-3876).

 4.1        -  9.72% Series A Senior Note of Holly Corporation, dated as of June
               26, 1991, to Hartnat & Co. with schedule attached thereto of four
               other substantially identical Notes which differ only in the
               respects set forth in such schedule (incorporated by reference to
               Exhibit 4.1 of Registrant's Form 8-K dated June 26, 1991, File
               No. 1-3876).

 4.2        -  10.16% Series B Senior Note of Holly Corporation, dated as of
               June 26, 1991, to New York Life Insurance Company with schedule
               attached thereto of seven other substantially identical Notes
               which differ only in the respects set forth in such schedule
               (incorporated by reference to Exhibit 4.2 of Registrant's Form 8-
               K dated June 26, 1991, File No. 1-3876).

 4.3        -  7.62% Series C Senior Note of Holly Corporation, dated as of
               November 21, 1995, to John Hancock Mutual Life Insurance Company,
               with schedule attached thereto of five other substantially
               identical Notes which differ only in the respects set forth in
               such schedule (incorporated by reference to Exhibit 4.4 of
               Registrant's Quarterly Report on Form 10-Q for the quarterly
               period ended October 31, 1995, File No. 1-3876).

 4.4        -  Series D Senior Note of Holly Corporation, dated as of November
               21, 1995, to John Hancock Mutual Life Insurance Company, with
               schedule attached thereto of three other substantially identical
               Notes which differ only in the respects set forth in such
               schedule (incorporated by reference to Exhibit 4.5 of
               Registrant's Quarterly Report on Form 10-Q for the quarterly
               period ended October 31, 1995, File No. 1-3876).
</TABLE>





                                     -47-

<PAGE>   48

<TABLE>
<CAPTION>
Exhibit
Number      Description
- - ------      -----------
<S>         <C>
 4.5        -  Note Agreement of Holly Corporation, dated as of June 15, 1991,
               to John Hancock Mutual Life Insurance Company, with schedule
               attached thereto of eleven other substantially identical Note
               Agreements which differ only in the respects set forth in such
               schedule (incorporated by reference to Exhibit 4.8 of
               Registrant's Form 8-K dated June 26, 1991, File No. 1-3876).

 4.6        -  Note Agreement of Holly Corporation, dated as of November 15,
               1995, to John Hancock Mutual Life Insurance Company, with
               schedule attached thereto of five other substantially identical
               Note Agreements which differ only in the respects set forth in
               such schedule (incorporated by reference to Exhibit 4.6 of
               Registrant's Quarterly Report on Form 10-Q for the quarterly
               period ended October 31, 1995, File No. 1-3876).

 4.7        -  Guaranty, dated as of June 15, 1991, of Navajo Refining Company,
               Navajo Pipeline Co., Midland-Lea, Inc., and Lea Refining Company
               in favor of Kentucky Central Life Insurance Company, Pan-American
               Life Insurance Company, American International Life Assurance
               Company of New York, Safeco Life Insurance Company, The Manhattan
               Life Insurance Company, The Union Central Life Insurance Company,
               The Penn Insurance and Annuity Company, The Penn Mutual Life
               Insurance Company, Confederation Life Insurance Company, John
               Hancock Mutual Life Insurance Company, John Hancock Variable Life
               Insurance Company, and New York Life Insurance Company
               (incorporated by reference to Exhibit 4.3 of Registrant's Form 8-
               K dated June 26, 1991, File No. 1-3876).

 4.8        -  Guaranty, dated as of November 1, 1995, of Navajo Crude Oil
               Marketing and Navajo Western Asphalt Company in favor of New York
               Life Insurance, John Hancock Mutual Life Insurance Company, John
               Hancock Variable Life Insurance Company, Confederation Life
               Insurance Company, The Penn Insurance and Annuity Company, The
               Penn Mutual Life Insurance Company, The Manhattan Life Insurance
               Company, The Union Central Life Insurance Company, Safeco Life
               Insurance Company, American International Life Assurance Company
               of New York, Pan-American Life Insurance Company and Jefferson-
               Pilot Life Insurance Company (incorporated by reference to
               Exhibit 4.2 of Registrant's Quarterly Report on Form 10-Q for the
               quarterly period ended October 31, 1995, File No. 1-3876).
</TABLE>





                                     -48-

<PAGE>   49

<TABLE>
<CAPTION>
Exhibit
Number      Description
- - ------      -----------
<S>         <C>
 4.9        -  Guaranty, dated as of November 15, 1995, of Navajo Refining
               Company, Navajo Pipeline Company, Lea Refining Company, Navajo
               Holdings, Inc., Navajo Western Asphalt Company and Navajo Crude
               Oil Marketing Company in favor of John Hancock Mutual Life
               Insurance Company, John Hancock Variable Life Insurance Company,
               Alexander Hamilton Life Insurance Company of America, The Penn
               Mutual Life Insurance Company, AIG Life Insurance Company and
               Pan-American Life Insurance Company (incorporated by reference to
               Exhibit 4.7 of Registrant's Quarterly Report on Form 10-Q for the
               quarterly period ended October 31, 1995, File No. 1-3876).

 4.10       -  Letter of Consent, Waiver and Amendment, dated as of November 15,
               1995, among Holly Corporation, and New York Life Insurance
               Company, John Hancock Mutual Life Insurance Company, John Hancock
               Variable Life Insurance Company, Confederation Life Insurance
               Company, The Penn Insurance and Annuity Company, The Penn Mutual
               Life Insurance Company, The Manhattan Life Insurance Company, The
               Union Central Life Insurance Company, Safeco Life Insurance
               Company, American International Life Assurance Company of New
               York, Pan-American Life Insurance Company and Jefferson-Pilot
               Life Insurance Company (incorporated by reference to Exhibit 4.3
               of Registrant's Quarterly Report on Form 10-Q for the quarterly
               period ended October 31, 1995, File No. 1-3876).

 4.11       -  First Amended and Restated Credit Agreement, dated as of July 23,
               1993, among Holly Corporation, Navajo Refining Company, Navajo
               Holdings, Inc., Holly Petroleum, Inc., Navajo Pipeline Co., Lea
               Refining Company, Navajo Western Asphalt Company, Montana
               Refining Company, A Partnership and NationsBank of Texas, N.A.,
               Banque Paribas, The First National Bank of Boston, The Bank of
               Nova Scotia and NationsBank of Texas, N.A. as the agent
               (incorporated by reference to Exhibit 4(e) of Registrant's Annual
               Report on Form 10-K for its fiscal year ended July 31, 1993, File
               No. 1-3876).
</TABLE>





                                     -49-

<PAGE>   50

<TABLE>
<CAPTION>
Exhibit
Number      Description
- - ------      -----------
<S>         <C>
 4.12       -  First Amendment to First Amended and Restated Credit Agreement,
               dated as of April 7, 1994, among Holly Corporation, Navajo
               Refining Company, Holly Petroleum, Inc., Navajo Pipeline Co.,
               Navajo Holdings, Inc., Lea Refining Company, Navajo Western
               Asphalt Company, Montana Refining Company, A Partnership and
               Navajo Crude Oil Marketing Company, and NationsBank of Texas,
               N.A., as Agent, and NationsBank of Texas, N.A., Banque Paribas,
               The First National Bank of Boston, and The Bank of Nova Scotia
               (incorporated by reference to Exhibit 4(f) of Registrant's Annual
               Report on Form 10-K for its fiscal year ended July 31, 1994, File
               No. 1-3876).

 4.13       -  Second Amendment to First Amended and Restated Credit Agreement,
               dated as of June 13, 1995, among Holly Corporation, Navajo
               Refining Company, Holly Petroleum, Inc., Navajo Pipeline Co.,
               Navajo Holdings, Inc., Lea Refining Company, Navajo Western
               Asphalt Company, Montana Refining Company, A Partnership and
               Navajo Crude Oil Marketing Company, and NationsBank of Texas,
               N.A., as Agent, and NationsBank of Texas, N.A., Banque Paribas,
               The First National Bank of Boston, and The Bank of Nova Scotia
               (incorporated by reference to Exhibit 4(g) of Registrant's Annual
               Report on Form 10-K for its fiscal year ended July 31, 1995, File
               No. 1-3876).

 4.14       -  Third Amendment to First Amended and Restated Credit Agreement,
               dated as of November 15, 1995, among Holly Corporation, Navajo
               Refining Company, Holly Petroleum, Inc., Navajo Pipeline Co.,
               Navajo Holdings, Inc., Lea Refining Company, Navajo Western
               Asphalt Company, Montana Refining Company, a Partnership and
               Navajo Crude Oil Marketing Company, NationsBank of Texas, N.A.,
               as Agent, and NationsBank of Texas, N.A., Banque Paribas, The
               First National Bank of Boston, and The Bank of Nova Scotia
               (incorporated by reference to Exhibit 4.1 of Registrant's
               Quarterly Report on Form 10-Q for the quarterly period ended
               October 31, 1995, File No. 1-3876).

 4.15       -  Promissory Note of Holly Corporation, dated as of July 23, 1993,
               to NationsBank of Texas, N.A. with schedule attached thereto of
               three other substantially identical Notes which differ only in
               the respects set forth in such schedule (incorporated by
               reference to Exhibit 4(f) of Registrant's Annual Report on Form
               10-K for its fiscal year ended July 31, 1993, File No. 1-3876).
</TABLE>





                                     -50-

<PAGE>   51

<TABLE>
<CAPTION>
Exhibit
Number      Description
- - ------      -----------
<S>         <C>
 4.16       -  Guaranty, dated as of July 30, 1991, of Navajo Refining Company,
               Holly Petroleum, Inc., Navajo Pipeline Co., and Midland-Lea, Inc.
               in favor of NCNB Texas National Bank, Banque Paribas, The First
               National Bank of Boston, The Bank of Nova Scotia and NCNB Texas
               National Bank as agent for itself and the other banks
               (incorporated by reference to Exhibit 4.2 of Registrant's Form 8-
               K dated July 30, 1991, File No. 1-3876).

 4.17       -  First Supplement, executed as of February 20, 1992, to Guaranty,
               dated as of July 30, 1991, among Navajo Refining Company, Holly
               Petroleum, Inc., Navajo Holdings, Inc., Navajo Pipeline Co., Lea
               Refining Company and Navajo Western Asphalt Company in favor of
               NCNB Texas National Bank, Banque Paribas, The First National Bank
               of Boston, and The Bank of Nova Scotia and NCNB Texas National
               Bank as agent for the banks (incorporated by reference to Exhibit
               4.4 of Registrant's Quarterly Report on Form 10-Q for the
               quarterly period ending January 31, 1992, File No. 1-3876).

 4.18       -  Confirmation of Guaranty, executed as of July 23, 1993 by Navajo
               Refining Company, Holly Petroleum, Inc., Navajo Pipeline Co.,
               Navajo Holdings, Inc., Navajo Western Asphalt Company and Lea
               Refining Company which confirms the Guaranty (Exhibit 4(i) of
               this Form 10-K) and First Supplement to the Guaranty (Exhibit
               4(j) of this Form 10-K) (incorporated by reference to Exhibit
               4(i) of Registrant's Annual Report on Form 10-K for its fiscal
               year ended July 31, 1993, File No. 1-3876).

 4.19       -  Second Supplement to Guaranty, executed as of April 7, 1994, by
               Navajo Refining Company, Holly Petroleum, Inc., Navajo Holdings,
               Inc., Navajo Pipeline Co., Lea Refining Company, Navajo Western
               Asphalt Company and Navajo Crude Oil Marketing Company, in favor
               of NationsBank of Texas, N.A., Banque Paribas, The First National
               Bank of Boston, The Bank of Nova Scotia, and NationsBank of
               Texas, N.A., as agent for the banks (incorporated by reference to
               Exhibit 4(k) of Registrant's Annual Report on Form 10-K for its
               fiscal year ended July 31, 1994, File No. 1-3876).

 4.20       -  Security Agreement, dated as of July 30, 1991, among Holly
               Corporation, Navajo Refining Company, Holly Petroleum, Inc.,
               Navajo Pipeline Co., Midland-Lea, Inc., Lea Refining Company,
               Navajo Western Asphalt Company and NCNB Texas National Bank as
               agent for itself, Banque Paribas, The First National Bank of
               Boston and The Bank of Nova Scotia (incorporated by reference to
               Exhibit 4.3 of Registrant's Form 8-K dated July 30, 1991, File
               No. 1-3876).
</TABLE>





                                     -51-

<PAGE>   52

<TABLE>
<CAPTION>
Exhibit
Number      Description
- - ------      -----------
<S>         <C>
 4.21       -  First Supplement, executed as of February 20, 1992, to the
               Security Agreement, dated as of July 30, 1991, among Holly
               Corporation, Navajo Refining Company, Holly Petroleum, Inc.,
               Navajo Holdings, Inc., Navajo Pipeline Co., Lea Refining Company,
               Navajo Western Asphalt Company and NCNB Texas National Bank as
               agent for itself, Banque Paribas, The First National Bank of
               Boston and The Bank of Nova Scotia (incorporated by reference to
               Exhibit 4.3 of Registrant's Quarterly Report on Form 10-Q for the
               quarterly period ending January 31, 1992, File No. 1-3876).

 4.22       -  Confirmation of Security Agreement, executed as of July 23, 1993
               by Holly Corporation, Navajo Pipeline Co., Navajo Refining
               Company, Holly Petroleum, Inc., Navajo Holdings, Inc.,  Lea
               Refining Company and Navajo Western Asphalt Company which
               confirms the Security Agreement (Exhibit 4(m) of this Form 10-K)
               and First Supplement to the Security Agreement (Exhibit 4(n) of
               this Form 10-K) (incorporated by reference to Exhibit 4(l) of
               Registrant's Annual Report on Form 10-K for its fiscal year ended
               July 31, 1993, File No. 1-3876).

 4.23       -  Security Agreement, dated as of July 23, 1993, between Montana
               Refining Company, A Partnership, and NationsBank of Texas, N.A.
               as agent for itself, Banque Paribas, The First National Bank of
               Boston and The Bank of Nova Scotia (incorporated by reference to
               Exhibit 4(m) of Registrant's Annual Report on Form 10-K for its
               fiscal year ended July 31, 1993, File No. 1-3876).

 4.24       -  Second Supplement to Security Agreement, executed as of April 7,
               1994, by and among Holly Corporation, Navajo Refining Company,
               Holly Petroleum, Inc., Navajo Holdings, Inc., Navajo Pipeline
               Co., Lea Refining Company, Navajo Western Asphalt Company and
               Navajo Crude Oil Marketing Company, and NationsBank of Texas,
               N.A., as agent, Banque Paribas, The First National Bank of Boston
               and The Bank of Nova Scotia (incorporated by reference to Exhibit
               4(p) of Registrant's Annual Report on Form 10-K for its fiscal
               year ended July 31, 1994, File No. 1-3876).

 4.25       -  Holly Corporation Stock Option Plan - As adopted at the Annual
               Meeting of Stockholders of Holly Corporation on December 13, 1990
               (incorporated by reference to Exhibit 4(i) of Registrant's Annual
               Report on Form 10-K for its fiscal year ended July 31, 1991, File
               No. 1-3876).
</TABLE>





                                     -52-

<PAGE>   53

<TABLE>
<CAPTION>
Exhibit
Number      Description
- - ------      -----------
<S>         <C>
10.1        -  Supplemental Payment Agreement, dated as of July 8, 1993, between
               Lamar Norsworthy and Holly Corporation (incorporated by reference
               to Exhibit 10(a) of Registrant's Annual Report on Form 10-K for
               its fiscal year ended July 31, 1993, File No. 1-3876).

10.2        -  Supplemental Payment Agreement, dated as of July 8, 1993, between
               Jack P. Reid and Holly Corporation (incorporated by reference to
               Exhibit 10(b) of Registrant's Annual Report on Form 10-K for its
               fiscal year ended July 31, 1993, File No. 1-3876).

21          -  Subsidiaries of Registrant

23          -  Consent of Independent Auditors

27          -  Financial Data Schedule

99          -  Copy of civil action against the Company's subsidiary, Navajo
               Refining Company, filed on July 16, 1993 by the United States, in
               the United States District Court for the District of New Mexico,
               seeking civil penalties and other compliance measures under the
               Resource Conservation and Recovery Act and implementing
               regulations of the Environmental Protection Agency (incorporated
               by reference to Exhibit 28 of Registrant's Form 8-K dated July
               16, 1993, File No. 1-3876).
</TABLE>





                                     -53-





<PAGE>   1
                                                                      EXHIBIT 21



                               HOLLY CORPORATION

                           SUBSIDIARIES OF REGISTRANT




            Holly Corporation owns 100% of the capital stock of the following
subsidiaries (state of respective incorporation shown in parentheses):

                     Navajo Corp.                           (Del.)
                     Navajo Holdings, Inc.                  (N.M.)
                     Holly Petroleum, Inc.                  (Del.)
                     Black Eagle, Inc.                      (Del.)


       Holly Corporation owns 57.5% and Navajo Corp. owns 42.5% of the capital
stock of Navajo Refining Company (Del.).

       Navajo Refining Company owns 100% of the stock of Navajo Northern, Inc.
(Nev.), Lorefco, Inc. (Del.), and Navajo Western Asphalt Company (N.M.).

       Navajo Holdings, Inc. owns 100% of the stock of Navajo Pipeline Co.
(Del.).

       Navajo Pipeline Co. owns 100% of the stock of Navajo Southern, Inc.
(Del.).

       Lorefco, Inc. owns 100% of the stock of Lea Refining Company (Del.).

       Black Eagle, Inc. and Navajo Northern, Inc. are the general partners of
Montana Refining Company, a Partnership.










<PAGE>   1
                                                                      EXHIBIT 23



                        CONSENT OF INDEPENDENT AUDITORS


       We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 2-74856) pertaining to the Holly Corporation Incentive
Stock Option Plan, Holly Corporation Stock Option Plan, and Holly Corporation
Stock Appreciation Rights Plan and in the related Prospectus of our report
dated September 11, 1996 with respect to the consolidated financial statements
of Holly Corporation included in the Annual Report (Form 10-K) for the year
ended July 31, 1996.





                                             ERNST & YOUNG LLP


Dallas, Texas
October 24, 1996










<TABLE> <S> <C>

<ARTICLE> 5
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          JUL-31-1996
<PERIOD-END>                               JUL-31-1996
<CASH>                                          63,959
<SECURITIES>                                         0
<RECEIVABLES>                                  104,386
<ALLOWANCES>                                         0
<INVENTORY>                                     38,673
<CURRENT-ASSETS>                               217,026
<PP&E>                                         261,621
<DEPRECIATION>                                 130,177
<TOTAL-ASSETS>                                 351,271
<CURRENT-LIABILITIES>                          150,377
<BONDS>                                         86,290
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                            87
<OTHER-SE>                                      96,156
<TOTAL-LIABILITY-AND-EQUITY>                   351,271
<SALES>                                        675,459
<TOTAL-REVENUES>                               676,290
<CGS>                                          600,478
<TOTAL-COSTS>                                  637,892
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                               9,634
<INCOME-PRETAX>                                 31,788
<INCOME-TAX>                                    12,554
<INCOME-CONTINUING>                             19,234
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    19,234
<EPS-PRIMARY>                                     2.33
<EPS-DILUTED>                                     2.33
        

</TABLE>