Document


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

FORM 8-K
CURRENT REPORT

Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 21, 2018 (February 21, 2018)

 
HOLLYFRONTIER CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware
(State or other
jurisdiction of incorporation)
001-03876
(Commission File Number)
75-1056913
(I.R.S. Employer
Identification Number)

2828 N. Harwood, Suite 1300
Dallas, TX
(Address of principal
executive offices)
 

75201
(Zip code)

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

Not applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company     ¨

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




Item 2.02. Results of Operations and Financial Condition.

On February 21, 2018, HollyFrontier Corporation (the “Company”) issued a press release announcing the Company’s fourth quarter 2017 results. A copy of the Company’s press release is attached hereto as Exhibit 99.1 and incorporated herein in its entirety.

The information contained in, or incorporated into, this Item 2.02 is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any registration statement or other filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference to such filing.


Item 9.01 Financial Statements and Exhibits.

(d)    Exhibits.
99.1

* Furnished herewith pursuant to Item 2.02.







SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
HOLLYFRONTIER CORPORATION

By:    /s/ Richard L. Voliva III            
Richard L. Voliva III
Executive Vice President and
Chief Financial Officer

Date: February 21, 2018




EXHIBIT INDEX



Exhibit
Number    Exhibit Title

99.1
—    Press Release of the Company issued February 21, 2018.*

* Furnished herewith pursuant to Item 2.02.


Exhibit


Press Release
February 21, 2018
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12071845&doc=3


HollyFrontier Corporation Reports Quarterly Net Income

Dallas, Texas, February 21, 2018 ‑‑ HollyFrontier Corporation (NYSE-HFC) (“HollyFrontier” or the “Company”) today reported fourth quarter net income attributable to HollyFrontier stockholders of $521.1 million or $2.92 per diluted share for the quarter ended December 31, 2017 compared to $53.2 million or $0.30 per diluted share for the quarter ended December 31, 2016.

The fourth quarter results reflect special items that collectively increased net income by a total of $396.5 million. On a pre-tax basis, these items include a lower of cost or market inventory valuation adjustment of $93.4 million, a $27.0 million reduction to RINs costs as a result of our Woods Cross refinery's small refinery exemption and HollyFrontier's pro-rata share of Holly Energy Partners' remeasurement gain on pipeline acquisitions of $21.4 million, slightly offset by $4.4 million of integration costs related to our Petro-Canada Lubricants Inc. (“PCLI”) acquisition. Additionally, the effect of the Tax Cuts and Jobs Act enacted in December 2017 reduced income taxes by approximately $307.0 million.

Excluding these items, net income for the current quarter was $124.6 million ($0.70 per diluted share) compared to a net loss of ($10.0) million (($0.06) per diluted share) for the fourth quarter 2016, which excludes an inventory valuation adjustment and PCLI pre-acquisition costs that collectively increased net income by $63.2 million. Adjusted for these items, net income for the quarter increased $134.6 million compared to the same period of 2016 driven by both higher sales volumes and refining margins combined with earnings attributable to our recently acquired PCLI operations. For the current quarter, crude oil charges averaged 461,110 barrels per day (“BPD”) compared to 432,070 BPD for the fourth quarter of 2016. On a per barrel basis, consolidated refinery gross margin was $12.54 per produced barrel sold, an 85% increase compared to $6.77 for the fourth quarter of 2016. Total operating expenses for the quarter were $349.8 million compared to $258.7 million for the fourth quarter of last year and include $64.0 million in costs attributable to our PCLI operations.

HollyFrontier’s President & CEO, George Damiris, commented, “In comparison to last year, HollyFrontier's significant financial improvement for the fourth quarter reflects both better refinery operations and the improved macroeconomic environment. Additionally, Lubricants and Specialty Products had a strong fourth quarter led by the Rack Forward Business. We are excited about 2018 based on our improving refinery reliability, our positive outlook for both product cracks and crude spreads, as well as the growth potential of converting a higher percentage of base oil sales into finished products."

For the fourth quarter of 2017, net cash provided by operations totaled $166.0 million. During the period, we declared and paid a dividend of $0.33 per share to shareholders totaling $59.0 million. At December 31, 2017, our cash and cash equivalents totaled $630.8 million and our consolidated debt was $2.5 billion. Our debt, exclusive of Holly Energy Partners' debt which is nonrecourse to HollyFrontier, was $991.7 million at December 31, 2017.

The Company has scheduled a webcast conference call for today, February 21, 2018, at 8:30 AM Eastern Time to discuss fourth quarter financial results. This webcast may be accessed at: https://event.webcasts.com/starthere.jsp?ei=1177986&tp_key=757b7364b3. An audio archive of this webcast will be available using the above noted link through March 7, 2018.

HollyFrontier Corporation, headquartered in Dallas, Texas, is an independent petroleum refiner and marketer that produces high-value light products such as gasoline, diesel fuel, jet fuel and other specialty products. HollyFrontier

1



operates through its subsidiaries a 135,000 barrels per stream day (“BPSD”) refinery located in El Dorado, Kansas, two refinery facilities with a combined capacity of 125,000 BPSD located in Tulsa, Oklahoma, a 100,000 BPSD refinery located in Artesia, New Mexico, a 52,000 BPSD refinery located in Cheyenne, Wyoming and a 45,000 BPSD refinery in Woods Cross, Utah. HollyFrontier markets its refined products principally in the Southwest U.S., the Rocky Mountains extending into the Pacific Northwest and in other neighboring Plains states. In addition, HollyFrontier, through its subsidiary, owns Petro-Canada Lubricants Inc. whose Mississauga, Ontario facility produces 15,600 barrels per day of base oils and other specialized lubricant products, and also owns a 57% limited partner interest and a non-economic general partner interest in Holly Energy Partners, L.P.

The following is a “safe harbor” statement under the Private Securities Litigation Reform Act of 1995: The statements in this press release relating to matters that are not historical facts are “forward-looking statements” based on management’s beliefs and assumptions using currently available information and expectations as of the date hereof, are not guarantees of future performance and involve certain risks and uncertainties, including those contained in our filings with the Securities and Exchange Commission. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that our expectations will prove correct. Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in such statements. Any differences could be caused by a number of factors, including, but not limited to, risks and uncertainties with respect to the following:
the actions of actual or potential competitive suppliers of refined petroleum products in the Company’s markets;
the demand for and supply of crude oil and refined products;
the spread between market prices for refined products and market prices for crude oil;
the possibility of constraints on the transportation of refined products;
the possibility of inefficiencies, curtailments or shutdowns in refinery operations or pipelines;
effects of governmental and environmental regulations and policies;
the availability and cost of financing to the Company;
the effectiveness of the Company’s capital investments and marketing strategies;
the Company’s efficiency in carrying out construction projects;
the ability of the Company to acquire refined product operations or pipeline and terminal operations on acceptable terms and to integrate any future acquired operations;
the possibility of terrorist attacks and the consequences of any such attacks;
general economic conditions; and
other financial, operational and legal risks and uncertainties detailed from time to time in the Company’s Securities and Exchange Commission filings.

The forward-looking statements speak only as of the date made and, other than as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

2



RESULTS OF OPERATIONS

Financial Data (all information in this release is unaudited)
 
Three Months Ended December 31,
 
Change from 2016
 
2017
 
2016
 
Change
 
Percent
 
(In thousands, except per share data)
Sales and other revenues
$
3,992,705

 
$
2,955,068

 
$
1,037,637

 
35
 %
Operating costs and expenses:
 
 
 
 
 
 
 
Cost of products sold:
 
 
 
 
 
 
 
Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)
3,184,672

 
2,550,772

 
633,900

 
25

Lower of cost or market inventory valuation adjustment
(93,362
)
 
(97,656
)
 
4,294

 
(4
)
 
3,091,310

 
2,453,116

 
638,194

 
26

Operating expenses
349,797

 
258,688

 
91,109

 
35

Selling, general and administrative expenses
80,215

 
37,378

 
42,837

 
115

Depreciation and amortization
105,731

 
93,594

 
12,137

 
13

Total operating costs and expenses
3,627,053

 
2,842,776

 
784,277

 
28

Income from operations
365,652

 
112,292

 
253,360

 
226

 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
Earnings of equity method investments
1,545

 
4,058

 
(2,513
)
 
(62
)
Interest income
1,667

 
1,111

 
556

 
50

Interest expense
(32,063
)
 
(26,304
)
 
(5,759
)
 
22

Loss on foreign currency swap

 
(6,520
)
 
6,520

 
(100
)
Loss on foreign currency transactions
(2,596
)
 

 
(2,596
)
 

Remeasurement gain on HEP pipeline interest acquisitions
36,254

 

 
36,254

 

Other, net
803

 
(1,221
)
 
2,024

 
(166
)
 
5,610

 
(28,876
)
 
34,486

 
(119
)
Income before income taxes
371,262

 
83,416

 
287,846

 
345

Income tax (benefit) expense
(185,972
)
 
12,952

 
(198,924
)
 
(1,536
)
Net income
557,234

 
70,464

 
486,770

 
691

Less net income attributable to noncontrolling interest
36,152

 
17,299

 
18,853

 
109

Net income attributable to HollyFrontier stockholders
$
521,082

 
$
53,165

 
$
467,917

 
880
 %
 
 
 
 
 
 
 
 
Earnings per share attributable to HollyFrontier stockholders:
 
 
 
 
 
 
 
Basic
$
2.94

 
$
0.30

 
$
2.64

 
880
 %
Diluted
$
2.92

 
$
0.30

 
$
2.62

 
873
 %
Cash dividends declared per common share
$
0.33

 
$
0.33

 
$

 
 %
Average number of common shares outstanding:
 
 
 
 
 
 
 
Basic
176,265

 
175,936

 
329

 
 %
Diluted
177,457

 
176,137

 
1,320

 
1
 %
EBITDA
$
471,237

 
$
184,904

 
$
286,333

 
155
 %
Adjusted EBITDA
$
333,921

 
$
100,654

 
$
233,267

 
232
 %


3



 
Years Ended December 31,
 
Change from 2016
 
2017
 
2016
 
Change
 
Percent
 
(In thousands, except per share data)
Sales and other revenues
$
14,251,299

 
$
10,535,700

 
$
3,715,599

 
35
 %
Operating costs and expenses:
 
 
 
 
 
 
 
Cost of products sold:
 
 
 
 
 
 
 
Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)
11,467,799

 
8,765,927

 
2,701,872

 
31

Lower of cost or market inventory valuation adjustment
(108,685
)
 
(291,938
)
 
183,253

 
(63
)
 
11,359,114

 
8,473,989

 
2,885,125

 
34

Operating expenses
1,294,234

 
1,018,839

 
275,395

 
27

Selling, general and administrative expenses
264,874

 
125,648

 
139,226

 
111

Depreciation and amortization
409,937

 
363,027

 
46,910

 
13

Goodwill and asset impairment
19,247

 
654,084

 
(634,837
)
 
(97
)
Total operating costs and expenses
13,347,406

 
10,635,587

 
2,711,819

 
25

Income (loss) from operations
903,893

 
(99,887
)
 
1,003,780

 
(1,005
)
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
Earnings of equity method investments
12,510

 
14,213

 
(1,703
)
 
(12
)
Interest income
3,736

 
2,491

 
1,245

 
50

Interest expense
(117,597
)
 
(72,192
)
 
(45,405
)
 
63

Loss on early extinguishment of debt
(12,225
)
 
(8,718
)

(3,507
)
 
40

Gain (loss) on foreign currency swap
24,545

 
(6,520
)
 
31,065

 
(476
)
Gain on foreign currency transactions
16,921

 

 
16,921

 

Remeasurement gain on HEP pipeline interest acquisitions
36,254

 

 
36,254

 

Other, net
826

 
(921
)
 
1,747

 
(190
)
 
(35,030
)
 
(71,647
)
 
36,617

 
(51
)
Income (loss) before income taxes
868,863

 
(171,534
)
 
1,040,397

 
(607
)
Income tax (benefit) expense
(12,379
)
 
19,411

 
(31,790
)
 
(164
)
Net income (loss)
881,242

 
(190,945
)
 
1,072,187

 
(562
)
Less net income attributable to noncontrolling interest
75,847

 
69,508

 
6,339

 
9

Net income (loss) attributable to HollyFrontier stockholders
$
805,395

 
$
(260,453
)
 
$
1,065,848

 
(409
)%
 
 
 
 
 
 
 
 
Earnings (loss) per share attributable to HollyFrontier stockholders:
 
 
 
 
 
 
 
Basic
$
4.54

 
$
(1.48
)
 
$
6.02

 
(407
)%
Diluted
$
4.52

 
$
(1.48
)
 
$
6.00

 
(405
)%
Cash dividends declared per common share
$
1.32

 
$
1.32

 
$

 
 %
Average number of common shares outstanding:
 
 
 
 
 
 
 
Basic
176,174

 
176,101

 
73

 
 %
Diluted
177,196

 
176,101

 
1,095

 
1
 %
EBITDA
$
1,329,039

 
$
200,404

 
$
1,128,635

 
563
 %
Adjusted EBITDA
$
1,179,479

 
$
575,956

 
$
603,523

 
105
 %

Balance Sheet Data
 
December 31,
 
2017
 
2016
 
(In thousands)
Cash, cash equivalents and short-term marketable securities
$
630,757

 
$
1,134,727

Working capital
$
1,640,118

 
$
1,767,780

Total assets
$
10,692,154

 
$
9,435,661

Long-term debt
$
2,498,993

 
$
2,235,137

Total equity
$
5,896,940

 
$
5,301,985



4



Segment Information

Effective fourth quarter of 2017, we revised our reportable segments to align with certain changes in how our chief operating decision maker manages and allocates resources to our business. Accordingly, our Tulsa refineries' lubricants operations, previously reported in the Refining segment, are now combined with the operations of our Petro-Canada Lubricants business (acquired February 1, 2017) and reported in the Lubricants and Specialty Products segment. Our prior period segment information has been retrospectively adjusted to reflect our current segment presentation.

Our operations are organized into three reportable segments, Refining, Lubricants and Specialty Products and HEP. Our operations that are not included in the Refining, Lubricants and Specialty Products and HEP segments are included in Corporate and Other. Intersegment transactions are eliminated in our consolidated financial statements and are included in Eliminations. Corporate and Other and Eliminations are aggregated and presented under Corporate, Other and Eliminations column. The Refining segment includes the operations of our El Dorado, Tulsa, Navajo, Cheyenne and Woods Cross refineries and HFC Asphalt (aggregated as a reportable segment). Refining activities involve the purchase and refining of crude oil and wholesale and branded marketing of refined products, such as gasoline, diesel fuel and jet fuel. These petroleum products are primarily marketed in the Mid-Continent, Southwest and Rocky Mountain regions of the United States. HFC Asphalt operates various terminals in Arizona, New Mexico and Oklahoma.

The Lubricants and Specialty Products segment involves PCLI's production operations, located in Mississauga, Ontario, that include lubricant products such as base oils, white oils, specialty products and finished lubricants and the operations of our Petro-Canada Lubricants business that includes the marketing of products to both retail and wholesale outlets through a global sales network with locations in Canada, the United States, Europe and China. Additionally, the Lubricants and Specialty Products segment includes specialty lubricant products produced at our Tulsa Refineries that are marketed throughout North America and are distributed in Central and South America.

The HEP segment involves all of the operations of HEP, a consolidated variable interest entity, which owns and operates logistics assets consisting of petroleum product and crude oil pipelines, terminals, tankage, loading rack facilities and refinery process units in the Mid-Continent, Southwest and Rocky Mountain regions of the United States. At December 31, 2017, the HEP segment also includes a 75% interest in UNEV Pipeline (an HEP consolidated subsidiary), and a 50% ownership interest in each of the Osage Pipeline and Cheyenne Pipeline. Revenues from the HEP segment are earned through transactions with unaffiliated parties for pipeline transportation, rental and terminalling operations as well as revenues relating to pipeline transportation services provided for our refining operations. Due to certain basis differences, our reported amounts for the HEP segment may not agree to amounts reported in HEP's periodic public filings.

 
Refining
 
Lubricants and Specialty Products
 
HEP
 
Corporate, Other and Eliminations
 
Consolidated Total
 
(In thousands)
Three Months Ended December 31, 2017
 
 
 
 
 
 
 
 
 
Sales and other revenues:
 
 
 
 
 
 
 
 
 
Revenues from external customers
$
3,546,444

 
$
415,693

 
$
29,399

 
$
1,169

 
$
3,992,705

Intersegment revenues
70,262

 

 
99,822

 
(170,084
)
 

 
$
3,616,706

 
$
415,693

 
$
129,221

 
$
(168,915
)
 
$
3,992,705

Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)
$
3,059,588

 
$
275,003

 
$

 
$
(149,919
)
 
$
3,184,672

Lower of cost or market inventory valuation adjustment
$
(92,114
)
 
$
(1,248
)
 
$

 
$

 
$
(93,362
)
Operating expenses
$
264,820

 
$
67,666

 
$
35,021

 
$
(17,710
)
 
$
349,797

Selling, general and administrative expenses
$
31,608

 
$
33,659

 
$
5,451

 
$
9,497

 
$
80,215

Depreciation and amortization
$
70,500

 
$
11,324

 
$
21,145

 
$
2,762

 
$
105,731

Income (loss) from operations
$
282,304

 
$
29,289

 
$
67,604

 
$
(13,545
)
 
$
365,652

Earnings of equity method investments
$

 
$

 
$
1,545

 
$

 
$
1,545

Capital expenditures
$
46,295

 
$
10,691

 
$
14,135

 
$
8,021

 
$
79,142

 
 
 
 
 
 
 
 
 
 

5



 
Refining
 
Lubricants and Specialty Products
 
HEP
 
Corporate, Other and Eliminations
 
Consolidated Total
 
(In thousands)
Three Months Ended December 31, 2016
 
 
 
 
 
 
 
 
 
Sales and other revenues
 
 
 
 
 
 
 
 
 
Revenues from external customers
$
2,823,701

 
$
112,685

 
$
18,833

 
$
(151
)
 
$
2,955,068

Intersegment revenues
74,317

 

 
93,693

 
(168,010
)
 

 
$
2,898,018

 
$
112,685

 
$
112,526

 
$
(168,161
)
 
$
2,955,068

Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)
$
2,608,746

 
$
89,087

 
$

 
$
(147,061
)
 
$
2,550,772

Lower of cost or market inventory valuation adjustment
$
(96,436
)
 
$
(1,220
)
 
$

 
$

 
$
(97,656
)
Operating expenses
$
239,869

 
$
3,229

 
$
34,819

 
$
(19,229
)
 
$
258,688

Selling, general and administrative expenses
$
25,045

 
$
786

 
$
3,914

 
$
7,633

 
$
37,378

Depreciation and amortization
$
71,745

 
$
228

 
$
18,841

 
$
2,780

 
$
93,594

Income (loss) from operations
$
49,049

 
$
20,575

 
$
54,952

 
$
(12,284
)
 
$
112,292

Earnings of equity method investments
$

 
$

 
$
4,058

 
$

 
$
4,058

Capital expenditures
$
77,722

 
$
638

 
$
11,480

 
$
2,473

 
$
92,313

 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2017
 
 
 
 
 
 
 
 
 
Sales and other revenues
 
 
 
 
 
 
 
 
 
Revenues from external customers
$
12,579,672

 
$
1,594,036

 
$
77,225

 
$
366

 
$
14,251,299

Intersegment revenues
338,390

 

 
377,137

 
(715,527
)
 

 
$
12,918,062

 
$
1,594,036

 
$
454,362

 
$
(715,161
)
 
$
14,251,299

Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)
$
11,009,345

 
$
1,093,984

 
$

 
$
(635,530
)
 
$
11,467,799

Lower of cost or market inventory valuation adjustment
$
(107,479
)
 
$
(1,206
)
 
$

 
$

 
$
(108,685
)
Operating expenses
$
1,006,675

 
$
222,461

 
$
137,605

 
$
(72,507
)
 
$
1,294,234

Selling, general and administrative expenses
$
103,067

 
$
105,112

 
$
14,323

 
$
42,372

 
$
264,874

Depreciation and amortization
$
289,434

 
$
31,894

 
$
77,660

 
$
10,949

 
$
409,937

Goodwill and asset impairment
$
19,247

 
$

 
$

 
$

 
$
19,247

Income (loss) from operations
$
597,773

 
$
141,791

 
$
224,774

 
$
(60,445
)
 
$
903,893

Earnings of equity method investments
$

 
$

 
$
12,510

 
$

 
$
12,510

Capital expenditures
$
176,533

 
$
31,464

 
$
44,810

 
$
19,452

 
$
272,259

Year Ended December 31, 2016
 
 
 
 
 
 
 
 
 
Sales and other revenues
 
 
 
 
 
 
 
 
 
Revenues from external customers
$
10,002,831

 
$
464,359

 
$
68,927

 
$
(417
)
 
$
10,535,700

Intersegment revenues
317,884

 

 
333,116

 
(651,000
)
 

 
$
10,320,715

 
$
464,359

 
$
402,043

 
$
(651,417
)
 
$
10,535,700

Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)
$
9,003,505

 
$
377,136

 
$

 
$
(614,714
)
 
$
8,765,927

Lower of cost or market inventory valuation adjustment
$
(287,848
)
 
$
(4,090
)
 
$

 
$

 
$
(291,938
)
Operating expenses
$
909,724

 
$
13,867

 
$
123,984

 
$
(28,736
)
 
$
1,018,839

Selling, general and administrative expenses
$
92,297

 
$
2,899

 
$
12,532

 
$
17,920

 
$
125,648

Depreciation and amortization
$
281,701

 
$
620

 
$
68,811

 
$
11,895

 
$
363,027

Goodwill and asset impairment
$
654,084

 
$

 
$

 
$

 
$
654,084

Income (loss) from operations
$
(332,748
)
 
$
73,927

 
$
196,716

 
$
(37,782
)
 
$
(99,887
)
Earnings of equity method investments
$

 
$

 
$
14,213

 
$

 
$
14,213

Capital expenditures
$
357,407

 
$
5,708

 
$
107,595

 
$
9,080

 
$
479,790

 
 
 
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
 
 
Cash, cash equivalents and short-term marketable securities
$
7,488

 
$
41,756

 
$
7,776

 
$
573,737

 
$
630,757

Total assets
$
6,474,666

 
$
1,610,472

 
$
2,191,984

 
$
415,032

 
$
10,692,154

Long-term debt
$

 
$

 
$
1,507,308

 
$
991,685

 
$
2,498,993

 
 
 
 
 
 
 
 
 
 
December 31, 2016
 
 
 
 
 
 
 
 
 
Cash, cash equivalents and short-term marketable securities
$
49

 
$

 
$
3,657

 
$
1,131,021

 
$
1,134,727

Total assets
$
6,048,091

 
$
465,715

 
$
1,920,487

 
$
1,001,368

 
$
9,435,661

Long-term debt
$

 
$

 
$
1,243,912

 
$
991,225

 
$
2,235,137


6



Refining Segment Operating Data

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

During the fourth quarter of 2017, we revised the following refining segment operating data computations: refinery gross margin; net operating margin; and operating expenses to better align with similar measurements provided by other companies in our industry and to facilitate comparison of our refining performance relative to our peers. Effective with this change, these measurements are now inclusive of all refining segment activities including HFC asphalt operations and revenues and costs related to products purchased for resale and excess crude oil sales. All prior period data has been retrospectively adjusted to reflect our current presentation.
 
 
Three Months Ended December 31,
 
Years Ended December 31,
 
 
2017
 
2016
 
2017
 
2016
Mid-Continent Region (El Dorado and Tulsa Refineries)
 
 
 
 
 
 
 
 
Crude charge (BPD) (1)
 
270,180

 
272,520

 
261,380

 
262,170

Refinery throughput (BPD) (2)
 
289,050

 
289,990

 
277,940

 
280,920

Sales of produced refined products (BPD) (3)
 
277,560

 
285,800

 
260,800

 
262,300

Refinery utilization (4)
 
103.9
%
 
104.8
%
 
100.5
%
 
100.8
%
 
 
 
 
 
 
 
 
 
Average per produced barrel sold (5)
 
 
 
 
 
 
 
 
Refinery gross margin (6)
 
$
11.42

 
$
6.04

 
$
9.91

 
$
7.44

Refinery operating expenses (7)
 
5.09

 
4.27

 
5.15

 
4.73

Net operating margin
 
$
6.33

 
$
1.77

 
$
4.76

 
$
2.71

 
 
 
 
 
 
 
 
 
Refinery operating expenses per throughput barrel (8)
 
$
4.89

 
$
4.21

 
$
4.83

 
$
4.42

 
 
 
 
 
 
 
 
 
Feedstocks:
 
 
 
 
 
 
 
 
Sweet crude oil
 
59
%
 
59
%
 
61
%
 
58
%
Sour crude oil
 
19
%
 
19
%
 
17
%
 
18
%
Heavy sour crude oil
 
16
%
 
16
%
 
16
%
 
17
%
Other feedstocks and blends
 
6
%
 
6
%
 
6
%
 
7
%
Total
 
100
%
 
100
%
 
100
%
 
100
%
 
 
 
 
 
 
 
 
 
Sales of produced refined products:
 
 
 
 
 
 
 
 
Gasolines
 
53
%
 
52
%
 
50
%
 
50
%
Diesel fuels
 
32
%
 
31
%
 
33
%
 
33
%
Jet fuels
 
7
%
 
8
%
 
7
%
 
7
%
Fuel oil
 
1
%
 
1
%
 
1
%
 
1
%
Asphalt
 
2
%
 
2
%
 
3
%
 
3
%
Base oils
 
3
%
 
4
%
 
4
%
 
4
%
LPG and other
 
2
%
 
2
%
 
2
%
 
2
%
Total
 
100
%
 
100
%
 
100
%
 
100
%



7



 
 
Three Months Ended December 31,
 
Years Ended December 31,
 
 
2017
 
2016
 
2017
 
2016
Southwest Region (Navajo Refinery)
 
 
 
 
 
 
 
 
Crude charge (BPD) (1)
 
110,980

 
92,450

 
100,040

 
98,090

Refinery throughput (BPD) (2)
 
121,400

 
100,720

 
109,280

 
107,690

Sales of produced refined products (BPD) (3)
 
122,710

 
105,180

 
111,630

 
111,390

Refinery utilization (4)
 
111.0
%
 
92.5
%
 
100
%
 
98.1
%
 
 
 
 
 
 
 
 
 
Average per produced barrel sold (5)
 
 
 
 
 
 
 
 
Refinery gross margin (6)
 
$
12.91

 
$
9.14

 
$
12.40

 
$
9.49

Refinery operating expenses (7)
 
4.71

 
5.35

 
5.20

 
5.05

Net operating margin
 
$
8.20

 
$
3.79

 
$
7.20

 
$
4.44

 
 
 
 
 
 
 
 
 
Refinery operating expenses per throughput barrel (8)
 
$
4.76

 
$
5.59

 
$
5.31

 
$
5.23

 
 
 
 
 
 
 
 
 
Feedstocks:
 
 
 
 
 
 
 
 
Sweet crude oil
 
31
%
 
25
%
 
25
%
 
28
%
Sour crude oil
 
61
%
 
67
%
 
66
%
 
63
%
Other feedstocks and blends
 
8
%
 
8
%
 
9
%
 
9
%
Total
 
100
%
 
100
%
 
100
%
 
100
%
 
 
 
 
 
 
 
 
 
Sales of produced refined products:
 
 
 
 
 
 
 
 
Gasolines
 
51
%
 
52
%
 
51
%
 
52
%
Diesel fuels
 
40
%
 
38
%
 
39
%
 
39
%
Fuel oil
 
3
%
 
4
%
 
3
%
 
3
%
Asphalt
 
3
%
 
3
%
 
4
%
 
3
%
LPG and other
 
3
%
 
3
%
 
3
%
 
3
%
Total
 
100
%
 
100
%
 
100
%
 
100
%
Rocky Mountain Region (Cheyenne and Woods Cross Refineries)
 
 
 
 
 
 
 
 
Crude charge (BPD) (1)
 
79,950

 
67,100

 
77,380

 
63,650

Refinery throughput (BPD) (2)
 
87,000

 
75,930

 
84,790

 
68,870

Sales of produced refined products (BPD) (3)
 
82,590

 
73,190

 
79,840

 
66,950

Refinery utilization (4)
 
82.4
%
 
69.2
%
 
79.8
%
 
65.6
%
Average per produced barrel sold (5)
 
 
 
 
 
 
 
 
Refinery gross margin (6)
 
$
15.77

 
$
6.22

 
$
15.78

 
$
8.80

Refinery operating expenses (7)
 
10.75

 
11.27

 
10.46

 
10.17

Net operating margin
 
$
5.02

 
$
(5.05
)
 
$
5.32

 
$
(1.37
)
 
 
 
 
 
 
 
 
 
Refinery operating expenses per throughput barrel (8)
 
$
10.20

 
$
10.86

 
$
9.85

 
$
9.89

 
 
 
 
 
 
 
 
 
Feedstocks:
 
 
 
 
 
 
 
 
Sweet crude oil
 
35
%
 
37
%
 
34
%
 
39
%
Heavy sour crude oil
 
34
%
 
32
%
 
35
%
 
35
%
Black wax crude oil
 
23
%
 
19
%
 
22
%
 
18
%
Other feedstocks and blends
 
8
%
 
12
%
 
9
%
 
8
%
Total
 
100
%
 
100
%
 
100
%
 
100
%
 
 
 
 
 
 
 
 
 
Sales of produced refined products:
 
 
 
 
 
 
 
 
Gasolines
 
59
%
 
60
%
 
58
%
 
59
%
Diesel fuels
 
30
%
 
30
%
 
32
%
 
32
%
Fuel oil
 
3
%
 
3
%
 
3
%
 
2
%
Asphalt
 
4
%
 
5
%
 
4
%
 
4
%
LPG and other
 
4
%
 
2
%
 
3
%
 
3
%
Total
 
100
%
 
100
%
 
100
%
 
100
%

8



 
 
Three Months Ended December 31,
 
Years Ended December 31,
 
 
2017
 
2016
 
2017
 
2016
Consolidated
 
 
 
 
 
 
 
 
Crude charge (BPD) (1)
 
461,110

 
432,070

 
438,800

 
423,910

Refinery throughput (BPD) (2)
 
497,450

 
466,640

 
472,010

 
457,480

Sales of produced refined products (BPD) (3)
 
482,860

 
464,160

 
452,270

 
440,640

Refinery utilization (4)
 
100.9
%
 
94.5
%
 
96.0
%
 
92.8
%
 
 
 
 
 
 
 
 
 
Average per produced barrel sold (5)
 
 
 
 
 
 
 
 
Refinery gross margin (6)
 
$
12.54

 
$
6.77

 
$
11.56

 
$
8.16

Refinery operating expenses (7)
 
5.96

 
5.62

 
6.10

 
5.64

Net operating margin
 
$
6.58

 
$
1.15

 
$
5.46

 
$
2.52

 
 
 
 
 
 
 
 
 
Refinery operating expenses per throughput barrel (8)
 
$
5.79

 
$
5.59

 
$
5.84

 
$
5.43

 
 
 
 
 
 
 
 
 
Feedstocks:
 
 
 
 
 
 
 
 
Sweet crude oil
 
48
%
 
48
%
 
48
%
 
48
%
Sour crude oil
 
26
%
 
26
%
 
25
%
 
26
%
Heavy sour crude oil
 
15
%
 
16
%
 
16
%
 
16
%
Black wax crude oil
 
4
%
 
3
%
 
4
%
 
3
%
Other feedstocks and blends
 
7
%
 
7
%
 
7
%
 
7
%
Total
 
100
%
 
100
%
 
100
%
 
100
%
Consolidated
 
 
 
 
 
 
 
 
Sales of produced refined products:
 
 
 
 
 
 
 
 
Gasolines
 
53
%
 
54
%
 
52
%
 
52
%
Diesel fuels
 
34
%
 
32
%
 
34
%
 
34
%
Jet fuels
 
4
%
 
5
%
 
4
%
 
4
%
Fuel oil
 
2
%
 
2
%
 
2
%
 
2
%
Asphalt
 
3
%
 
3
%
 
4
%
 
3
%
Base oils
 
2
%
 
2
%
 
2
%
 
3
%
LPG and other
 
2
%
 
2
%
 
2
%
 
2
%
Total
 
100
%
 
100
%
 
100
%
 
100
%
(1)
Crude charge represents the barrels per day of crude oil processed at our refineries.
(2)
Refinery throughput represents the barrels per day of crude and other refinery feedstocks input to the crude units and other conversion units at our refineries.
(3)
Represents barrels sold of refined products produced at our refineries (including HFC Asphalt) and does not include volumes of refined products purchased for resale or volumes of excess crude oil sold.
(4)
Represents crude charge divided by total crude capacity (BPSD). Effective July 1, 2016, our consolidated crude capacity increased from 443,000 BPSD to 457,000 BPSD upon completion of our Woods Cross Refinery expansion project.
(5)
Represents average amount per produced barrel sold, which is a non-GAAP measure. Reconciliations to amounts reported under GAAP are provided under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” below.
(6)
Excludes lower of cost or market inventory valuation adjustments of $93.4 million and $108.7 million for the three months and year ended December 31, 2017, respectively and $97.7 million and $291.9 million for the three months and year ended December 31, 2016, respectively.
(7)
Represents total refining segment operating expenses, exclusive of depreciation and amortization, divided by sales volumes of refined products produced at our refineries.
(8)
Represents total refining segment operating expenses, exclusive of depreciation and amortization, divided by refinery throughput.



9



Lubricants and Specialty Products Segment Operating Data

The following table sets forth information about our lubricants and specialty products operations and includes the operations of PCLI and affiliated Petro-Canada entities for the period February 1, 2017 (date of acquisition) through December 31, 2017.
 
 
Three Months Ended December 31,
 
Years Ended December 31,
Lubricants and Specialty Products
 
2017
 
2016
 
2017
 
2016
Throughput (BPD)
 
20,990

 

 
21,710

 

Sales of produced refined products (BPD)
 
29,670

 
11,230

 
31,480

 
12,030

 
 
 
 
 
 
 
 
 
Sales of produced refined products:
 
 
 
 
 
 
 
 
Finished products
 
46
%
 
46
%
 
45
%
 
50
%
Base oils
 
28
%
 
54
%
 
31
%
 
50
%
Other
 
26
%
 
%
 
24
%
 
%
Total
 
100
%
 
100
%
 
100
%
 
100
%
Our Lubricants and Specialty Products segment includes base oil production activities, by-product sales to third parties and intra-segment base oil sales to rack forward, referred to as “rack back.” "Rack forward" includes the purchase of base oils and the blending, packaging, marketing and distribution and sales of finished lubricants and specialty products to third parties. Supplemental financial data attributable to our Lubricants and Specialty Products segment is presented below:
 
 
Rack Back (1)
 
Rack Forward (2)
 
Eliminations (3)
 
Total Lubricants and Specialty Products
 
 
(In thousands)
Three Months Ended December 31, 2017
 
 
 
 
 
 
 
 
Sales and other revenues
 
$
186,478

 
$
361,681

 
$
(132,466
)
 
$
415,693

Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)
 
153,141

 
254,328

 
(132,466
)
 
275,003

Lower of cost or market inventory valuation adjustment
 

 
(1,248
)
 

 
(1,248
)
Operating expenses
 
30,051

 
37,615

 

 
67,666

Selling, general and administrative expenses
 
11,713

 
21,946

 

 
33,659

Depreciation and amortization
 
8,996

 
2,328

 

 
11,324

Income (loss) from operations
 
$
(17,423
)
 
$
46,712

 
$

 
$
29,289

 
 
 
 
 
 
 
 
 
Three Months Ended December 31, 2016
 
 
 
 
 
 
 
 
Sales and other revenues
 
$

 
$
112,685

 
$

 
$
112,685

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

 
89,087

 

 
89,087

Lower of cost or market inventory valuation adjustment

 

 
(1,220
)
 

 
(1,220
)
Operating expenses
 

 
3,229

 

 
3,229

Selling, general and administrative expenses
 

 
786

 

 
786

Depreciation and amortization
 

 
228

 

 
228

Income from operations
 
$

 
$
20,575

 
$

 
$
20,575

 
 
 
 
 
 
 
 
 
Year Ended December 31, 2017
 
 
 
 
 
 
 
 
Sales and other revenues
 
$
621,153

 
$
1,415,842

 
$
(442,959
)
 
$
1,594,036

Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)
 
504,782

 
1,032,161

 
(442,959
)
 
1,093,984

Lower of cost or market inventory valuation adjustment
 

 
(1,206
)
 

 
(1,206
)
Operating expenses
 
95,303

 
127,158

 

 
222,461

Selling, general and administrative expenses
 
27,618

 
77,494

 

 
105,112

Depreciation and amortization
 
23,471

 
8,423

 

 
31,894

Income (loss) from operations
 
$
(30,021
)
 
$
171,812

 
$

 
$
141,791


10



 
 
Rack Back (1)
 
Rack Forward (2)
 
Eliminations (3)
 
Total Lubricants and Specialty Products
 
 
(In thousands)
Year Ended December 31, 2016
 
 
 
 
 
 
 
 
Sales and other revenues
 
$

 
$
464,359

 
$

 
$
464,359

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

 
377,136

 

 
377,136

Lower of cost or market inventory valuation adjustment
 

 
(4,090
)
 

 
(4,090
)
Operating expenses
 

 
13,867

 

 
13,867

Selling, general and administrative expenses
 

 
2,899

 

 
2,899

Depreciation and amortization
 

 
620

 

 
620

Income from operations
 
$

 
$
73,927

 
$

 
$
73,927

(1)
Rack back consists of the PCLI base oil production activities, by-product sales to third parties and intra-segment base oil sales to rack forward.
(2)
Rack forward activities include the purchase of base oils from rack back and the blending, packaging, marketing and distribution and sales of finished lubricants and specialty products to third parties.
(3)
Intra-segment sales of rack back produced base oils to rack forward are eliminated under the “Eliminations” column.

Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles

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

Earnings before interest, taxes, depreciation and amortization, which we refer to as EBITDA, is calculated as net income (loss) attributable to HollyFrontier stockholders plus (i) interest expense, net of interest income, (ii) income tax provision, and (iii) depreciation and amortization. Adjusted EBITDA is calculated as EBITDA plus or minus (i) lower of cost or market inventory valuation adjustments (ii) incremental cost of products sold attributable to our PCLI inventory value step-up (iii) PCLI acquisition and integration costs (iv) goodwill and asset impairment charges (v) our RINs cost reduction related to our Cheyenne and Woods Cross Refinery small refinery exemptions (vi) net gain on foreign currency swaps and (vii) HollyFrontier's pro-rata share of HEP's remeasurement gain on pipeline interest acquisitions.

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

Set forth below is our calculation of EBITDA and adjusted EBITDA.
 
 
Three Months Ended December 31,
 
Years Ended December 31,
 
 
2017
 
2016
 
2017
 
2016
 
 
(In thousands)
Net income (loss) attributable to HollyFrontier stockholders
 
$
521,082

 
$
53,165

 
$
805,395

 
$
(260,453
)
   Add (subtract) income tax provision (benefit)
 
(185,972
)
 
12,952

 
(12,379
)
 
19,411

   Add interest expense (1)
 
32,063

 
26,304

 
129,822

 
80,910

   Subtract interest income
 
(1,667
)
 
(1,111
)
 
(3,736
)
 
(2,491
)
   Add depreciation and amortization
 
105,731

 
93,594

 
409,937

 
363,027

EBITDA
 
$
471,237

 
$
184,904

 
$
1,329,039

 
$<