DALLAS, Aug. 6 /PRNewswire-FirstCall/ -- Holly Corporation (NYSE: HOC)
('Holly' or the 'Company') today reported second quarter net income of $11.5
million ($0.23 per basic and diluted share) compared to $158.6 million ($2.89
per basic and $2.84 per diluted share) for the same period of 2007. For the
six months ended June 30, 2008, net income was $20.1 million ($0.40 per basic
and $0.39 per diluted share) compared to $226.2 million ($4.11 per basic and
$4.03 per diluted share) for the first six months of 2007.
Our refinery production levels decreased 15% and 4% for the three and six
months ended June 30, 2008 as compared to the same periods in 2007,
respectively, mainly as a result of reduced production at both our refineries
during the second quarter of 2008. In May 2008, our Navajo Refinery
experienced unplanned downtime for repairs to its fluid catalytic cracking
unit ('FCC') following an instrument control malfunction. This downtime not
only lowered overall production levels in May but also reduced gross margins
per barrel due to the substantial reduction in the yield of higher value
products during the FCC outage. Additionally, our Woods Cross Refinery
operated at reduced rates during the quarter primarily resulting from multiple
power interruptions. We estimate that our refinery operating income for the
second quarter was reduced by approximately $40.0 million, or $0.52 per share
on a net tax basis as a result of downtime in the quarter.
Net income for both the second quarter and six months ended June 30, 2008
as compared to the prior year periods decreased due to reduced refined product
margins combined with production declines, lower yields and higher operating
expenses at our refineries. For the 2008 second quarter, overall refinery
gross margins were $9.09 per produced barrel compared to $28.36 for the last
year's second quarter. For the first six months of 2008, our overall refinery
gross margins were $8.35 per produced barrel compared to $22.35 for the first
six months of 2007.
Sales and other revenues increased 43% for the three months ended June 30,
2008 and 50% for the six months ended June 30, 2008, as compared to the three
and six months ended June 30, 2007, respectively, due principally to higher
refined product sales prices. Cost of products sold increased 81% for the
three months ended June 30, 2008 and 82% for the six months ended June 30,
2008, as compared to the three and six months ended June 30, 2007,
respectively, due principally to higher crude oil acquisition costs.
Operating expenses for both the three and six month periods increased
primarily due to the inclusion of Holly Energy Partners, L.P. (NYSE: HEP)
('HEP') operating costs beginning March 1, 2008, higher utility costs and
increased maintenance costs associated with unplanned downtime.
In February 2008, HEP acquired our crude pipelines and tankage assets. As
a result of this transaction, we determined that our beneficial interest in
HEP exceeds 50%, therefore, we reconsolidated HEP effective March 1, 2008. We
no longer record our share of its earnings under the equity method of
accounting. Accordingly, a significant increase in operating costs and
expenses in the current year was due to the inclusion of $13.7 million of
HEP's operating expenses and $8.2 million of additional depreciation and
amortization resulting from our consolidation of HEP. This press release
includes key segment information that shows the impact of this reconsolidation
on certain balance sheet and income statement amounts.
'To date, 2008 has been a challenging year. Although second quarter
margins improved from first quarter levels, unplanned downtime prevented us
from fully capitalizing on these higher margin levels. Despite the downtime,
we remained profitable for the quarter, and we continue to have one of the
strongest balance sheets among our peers,' said Matthew Clifton, Chairman of
the Board and Chief Executive Officer of Holly. 'Regarding our Woods Cross
and Navajo expansion and crude flexibility capital projects, we continue to
make substantial progress. In July, we announced a pipeline agreement with
Centurion Pipeline L.P. to deliver heavy Canadian crude oil from Cushing,
Oklahoma to a point located at Slaughter, Texas. We are proceeding with plans
to construct a new 70 mile pipeline that will deliver this crude oil to our
Navajo Refinery complex in New Mexico. Also, we expect to commence the start-
up of the Woods Cross projects early in the fourth quarter and to be capable
of operating at full capacity at year-end. These projects will ultimately help
in improving our profitability at both refineries by reducing raw material
costs. Additionally, we recently purchased a terminal and rail facility
located near Cedar City, Utah that will serve as a key component of our UNEV
joint venture pipeline project.'
The Company has scheduled a conference call for today, August 6, 2008 at
10:00AM EDT to discuss financial results. Listeners may access this call by
dialing (888) 548-4639. The ID# for this call is 55825559. Listeners may
access the call via the internet at:
http://www.videonewswire.com/event.asp?id=49932. Additionally, listeners may
replay this call approximately two hours after the call concludes by dialing
(800) 642-1687. This audio archive will be available through August 20, 2008.
Holly Corporation, headquartered in Dallas, Texas, is an independent
petroleum refiner and marketer that produces high value light products such as
gasoline, diesel fuel and jet fuel. Holly operates through its subsidiaries
an 85,000 BPSD refinery located in Artesia, New Mexico and a 26,000 BPSD
refinery in Woods Cross, Utah. Also, a subsidiary of Holly owns a 46%
interest (including the general partner interest) in Holly Energy Partners,
L.P., which through subsidiaries owns or leases approximately 2,500 miles of
petroleum product and crude oil gathering pipelines in Texas, New Mexico, Utah
and Oklahoma, tankage and refined product terminals in several Southwest and
Rocky Mountain states.
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. Such
differences could be caused by a number of factors including, but not limited
to, risks and uncertainties with respect to the actions of actual or potential
competitive suppliers of refined petroleum products in the Company's markets,
the demand for and supply of crude oil and refined products, the spread
between market prices for refined products and market prices for crude oil,
the possibility of constraints on the transportation of refined products, the
possibility of inefficiencies, curtailments or shutdowns in refinery
operations or pipelines, effects of governmental regulations and policies, the
availability and cost of financing to the Company, the effectiveness of the
Company's capital investments and marketing strategies, 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 Company's efficiency in carrying out construction projects,
the possibility of terrorist attacks and the consequences of any such attacks,
general economic conditions, and other financial, operational and legal risks
and uncertainties detailed from time to time in the Company's Securities and
Exchange Commission filings. The forward-looking statements speak only as of
the date made and, other than as required by law, we undertake no obligation
to publicly update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
RESULTS OF OPERATIONS
Financial Data (all information in this release is unaudited)
Three Months Ended
June 30, Change from 2007
2008 2007 Change Percent
(In thousands, except per share data)
Sales and other revenues $1,743,822 $1,216,997 $526,825 43.3%
Operating costs and expenses:
Cost of products sold
(exclusive of
depreciation, depletion
and amortization) 1,620,550 897,237 723,313 80.6
Operating expenses
(exclusive of
depreciation, depletion
and amortization) 74,175 51,116 23,059 45.1
General and administrative
expenses (exclusive of
depreciation, depletion
and amortization) 12,832 21,348 (8,516) (39.9)
Depreciation, depletion
and amortization 15,929 10,641 5,288 49.7
Exploration expenses,
including dry holes 110 105 5 4.8
Total operating costs
and expenses 1,723,596 980,447 743,149 75.8
Income from operations 20,226 236,550 (216,324) (91.4)
Other income (expense):
Equity in earnings of HEP - 4,954 (4,954) (100.0)
Minority interest in earnings
of HEP (493) - (493) -
Interest income 3,826 3,550 276 7.8
Interest expense (6,251) (291) (5,960) 2,048.1
(2,918) 8,213 (11,131) (135.5)
Income from operations before
income taxes 17,308 244,763 (227,455) (92.9)
Income tax provision 5,856 86,136 (80,280) (93.2)
Net income $11,452 $158,627 $(147,175) (92.8)%
Net income per share - basic $0.23 $2.89 $(2.66) (92.0)%
Net income per share - diluted $0.23 $2.84 $(2.61) (91.9)%
Cash dividends declared per
common share $0.15 $0.12 $0.03 25.0%
Average number of common shares
outstanding:
Basic 50,158 54,959 (4,801) (8.7)%
Diluted 50,515 55,953 (5,438) (9.7)%
Six Months Ended
June 30, Change from 2007
2008 2007 Change Percent
(In thousands, except per share data)
Sales and other revenues $3,223,806 $2,142,864 $1,080,942 50.4%
Operating costs and expenses:
Cost of products sold
(exclusive of
depreciation, depletion
and amortization) 3,003,987 1,648,951 1,355,036 82.2
Operating expenses
(exclusive of
depreciation, depletion
and amortization) 134,883 101,245 33,638 33.2
General and administrative
expenses (exclusive of
depreciation, depletion
and amortization) 25,664 37,195 (11,531) (31.0)
Depreciation, depletion
and amortization 29,238 22,092 7,146 32.3
Exploration expenses,
including dry holes 215 257 (42) (16.3)
Total operating costs
and expenses 3,193,987 1,809,740 1,384,247 76.5
Income from operations 29,819 333,124 (303,305) (91.0)
Other income (expense):
Equity in earnings of HEP 2,990 8,300 (5,310) (64.0)
Minority interest in
earnings of HEP (1,295) - (1,295) (100.0)
Interest income 7,381 6,110 1,271 20.8
Interest expense (8,243) (543) (7,700) 1,418.0
833 13,867 (13,034) (94.0)
Income from operations before
income taxes 30,652 346,991 (316,339) (91.2)
Income tax provision 10,551 120,822 (110,271) (91.3)
Net income $20,101 $226,169 $(206,068) (91.1)%
Net income per share - basic $0.40 $4.11 $(3.71) (90.3)%
Net income per share - diluted $0.39 $4.03 $(3.64) (90.3)%
Cash dividends declared per
common share $0.30 $0.22 $0.08 36.4%
Average number of common
shares outstanding:
Basic 50,654 55,073 (4,419) (8.0)%
Diluted 51,015 56,079 (5,064) (9.0)%
Balance Sheet Data
June 30, December 31,
2008 2007
(In thousands)
Cash, cash equivalents and investments in
marketable securities $297,912 $329,784
Working capital $156,605 $216,541
Total assets $2,442,871 $1,663,945
Long-term debt - HEP $339,909 $-
Stockholders' equity $480,373 $593,794
Segment Information
Our operations are currently organized into two reportable segments,
Refining and HEP. Our operations that are not included in the Refining and
HEP segments are included in Corporate and Other and include the operations of
Holly Corporation, our parent company, and a small-scale oil and gas
exploration and production program.
The Refining segment includes the operations of our Navajo Refinery, Woods
Cross Refinery and Holly Asphalt Company. The Refining segment involves the
purchase and refining of crude oil and wholesale and branded marketing of
refined products, such as gasoline, diesel fuel and jet fuel, and includes our
Navajo Refinery and Woods Cross Refinery. The petroleum products produced by
the Refining segment are marketed in Texas, New Mexico, Arizona, Utah,
Wyoming, Idaho, Washington and northern Mexico. The Refining segment also
includes Holly Asphalt Company which manufactures and markets asphalt and
asphalt products in Arizona, New Mexico, Texas and northern Mexico.
The HEP segment involves all of the operations of HEP effective March 1,
2008 (date of reconsolidation).
