(Source: PRNewswire-FirstCall)
DALLAS, Aug. 10 /PRNewswire-FirstCall/ -- Holly Corporation ("Holly" or the "Company") today reported second quarter financial results. For the quarter, net income attributable to Holly Corporation stockholders was $14.6 million ($0.29 per basic and diluted share) compared to $11.5 million ($0.23 per basic and diluted share) for the same period of 2008. For the six months ended June 30, 2009, net income was $36.6 million ($0.73 per basic and diluted share) compared to $20.1 million ($0.40 per basic and $0.39 per diluted share) for the first six months of 2008.
For the quarter, net income attributable to our stockholders increased by $3.2 million compared to the second quarter of 2008. This increase was due to the effects of increased refining production, partially offset by an overall decrease in refinery gross margins. Overall refinery gross margins were $7.82 per produced barrel, a 14% decrease compared to $9.09 for the second quarter of 2008. For the three months ended June 30, 2009, our refinery production levels increased 41% over the same period of 2008 due to incremental production attributable to the operations of our newly acquired Tulsa refinery and production gains resulting from our recent Navajo and Woods Cross refinery capacity expansions. Also contributing to the year-over-year increase in second quarter production levels were the effects of reduced production during the second quarter of 2008 as a result of a fluid catalytic cracking unit ("FCC") outage that resulted in downtime at our Navajo refinery. Furthermore, increased earnings attributable to our asphalt marketing business also contributed to the increased earnings in the current year.
For the six months ended June 30, 2009, net income attributable to our stockholders increased by $16.5 million compared to the same period of 2008. This increase was due to an overall year-over-year increase in refined product margins combined with a slight increase in year-to-date production levels. Overall refinery gross margins were $9.41 per produced barrel, a 13% increase compared to $8.35 for the first six months of 2008. For the six months ended June 30, 2009, our refinery production levels increased 4% over the same period of 2008. This was due to the effects of incremental production attributable to our Tulsa refinery operations, production gains resulting from our recent Navajo and Woods Cross refinery capacity expansions and production downtime during the second quarter of 2008. These factors were largely offset by the effects of production downtime during the first quarter of 2009. During the first quarter of 2009, we timed our scheduled major maintenance turnaround at the Navajo refinery to coincide with completion of our 15,000 BPSD capacity expansion, increasing its refining capacity to 100,000 BPSD.
"Despite a challenging refining environment, we remained profitable for the quarter," said Matthew Clifton, Chairman of the Board and Chief Executive Officer of Holly. "Our EBITDA for the quarter was $56.8 million, a 59% increase over the second quarter of 2008. Although overall refining margins were tight in the second quarter, we experienced a small improvement in the markets served by our Navajo refinery averaging $8.39 per barrel, a 4% increase over last year's second quarter. During the second quarter, we started to see the positive impact from our recent Navajo refinery expansion with refinery production averaging over 96,000 barrels per day. We expect our phase two operation upgrades to be complete in late 2009 that will allow us to run a wider variety of crudes while increasing our flexibility in varying the mix of transportation fuels. At our Woods Cross refinery, margin levels averaged $8.95 per barrel, a 28% decrease from last year's second quarter. However most of the Woods Cross margin reduction was driven by drawdowns of gasoline inventories during early 2009 and the resulting impact on the second quarter of 2009 in a higher current cost environment. Negatively affecting our overall margin numbers for both refineries were reductions in diesel crack spreads from the very high levels realized during 2008."
"On June 1, 2009, we completed the acquisition of our 85,000 BPSD Tulsa refinery. Our employees (including our new valued Tulsa employees) did a fantastic job in smoothly transitioning the Tulsa operations into our overall refining business. Although we remain extremely pleased with the facility and its contribution potential, June's results at Tulsa were well below expectations. However, as we start the third quarter, while facing continued headwinds from low diesel crack spreads, we expect the positive effects of a 15% increase in our crude charge levels in July and improved gross margins on our specialty lubricant products to lead to improved financial performance."
"We were pleased by the record earnings of Holly Energy Partners, our affiliated MLP, during the second quarter of 2009. Having just completed its fifth year of operation since its initial public offering, it continues to grow and increase its distribution to Holly and its other unitholders. It has increased its quarterly distribution every quarter since inception. On June 1, 2009, Holly sold a newly constructed intermediate pipeline to HEP, and on August 1, 2009, Holly sold certain rail and truck loading facilities at the Tulsa refinery to HEP. These sales resulted in proceeds of approximately $52.0 million to Holly and has provided HEP attractive continued growth opportunities."
"Looking forward, 2009 will remain a challenging year for the refining industry. We do believe, however, that the markets we serve, the improvements and initiatives that we have recently executed, the quality of our employees and our strong balance sheet, position us to meet these challenges," Clifton said.
Sales and other revenues for the 2009 second quarter were $1,038.4 million, a 41% decrease compared to the three months ended June 30, 2008. This decrease was due to the effects of a 48% decline in year-over-year second quarter sales prices of produced refined products sold, partially offset by a 25% current quarter increase in volumes of refined products sold over the same period in 2008. Additionally, direct sales of excess crude oil decreased in the current year. Cost of products sold was $879.9 million, a 46% decrease compared to the three months ended June 30, 2008 due mainly to lower crude oil acquisition costs.
Sales and other revenues for the first six months of 2009 were $1,689.2 million, a 48% decrease compared to the six months ended June 30, 2008. This decrease was due to the effects of an overall 46% decline in year-over-year prices of produced refined products sold for the current year-to-date period combined with a 2% decrease in refined products sold compared to the first six months of 2008. Cost of products sold was $1,391.6 million, a 54% decrease compared to the six months ended June 30, 2008.
Operating costs and expenses for the three and six months ended June 30, 2009 increased due to the inclusion of costs attributable to the operations of our Tulsa refinery beginning June 1, 2009, increased costs attributable to the operations of Holly Energy Partners, L.P. ("HEP") and increased depreciation and amortization expense. A factor contributing to the overall year-to-date increase in operating costs and expenses was due to the inclusion of HEP's costs for a full six month period during the six months ended June 30, 2009 compared to four months in 2008 as a result of our reconsolidation of HEP effective March 1, 2008. For the six months ended June 30, 2009, HEP's operating costs and expenses were $37.1 million, an increase of $13.5 million compared to 2008. Additionally, interest expense for the three and six months ended June 30, 2009 and 2008 primarily relates to interest costs attributable to HEP. This press release includes key segment information that shows the impact of HEP's consolidation on certain balance sheet and income statement amounts.
We issued $200 million of senior notes at a 9.875% coupon in June due 2017. The proceeds from this offering were primarily used to fund the purchase of the Tulsa refinery and associated inventories from Sunoco in June.
The Company has scheduled a webcast conference call for today, August 10, 2009 at 10:00 AM Eastern Time to discuss financial results. This webcast may be accessed at: http://www.videonewswire.com/event.asp?id=60707.
An audio archive of this webcast will be available using the link above through August 24, 2009.
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 a 100,000 BPSD refinery located in Artesia, New Mexico, a 31,000 BPSD refinery in Woods Cross, Utah and an 85,000 BPSD refinery located in Tulsa, Oklahoma that was acquired on June, 1 2009. Also, a subsidiary of Holly owns a 41% interest (including the general partner interest) in Holly Energy Partners, L.P., which through subsidiaries owns or leases approximately 2,700 miles of petroleum product and crude oil pipelines in Texas, New Mexico, Utah and Oklahoma and 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. Any differences could be caused by a number of factors, including, but not limited to, risks and uncertainties with respect to the actions of actual or potential competitive suppliers of refined petroleum products in the Company's markets, the demand for and supply of crude oil and refined products, the spread between market prices for refined products and market prices for crude oil, the possibility of constraints on the transportation of refined products, the possibility of inefficiencies, curtailments or shutdowns in refinery operations or pipelines, effects of governmental 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 Company's ability to successfully integrate the operations of the Tulsa refinery into its business, 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 Change from 2008 ------------------ ---------------- June 30, -------- 2009 2008 Change Percent ---- ---- ------ ------- (In thousands, except per share data) Sales and other revenues $1,038,381 $1,743,822 $(705,441) (40.5)% Operating costs and expenses: Cost of products sold (exclusive of depreciation and amortization) 879,926 1,620,550 (740,624) (45.7) Operating expenses (exclusive of depreciation and amortization) 78,508 74,175 4,333 5.8 General and administrative expenses (exclusive of depreciation and amortization) 15,108 12,942 2,166 16.7 Depreciation and amortization 25,500 15,929 9,571 60.1 ------ ------ ----- Total operating costs and expenses 999,042 1,723,596 (724,554) (42.0) ------- --------- --------- Income from operations 39,339 20,226 19,113 94.5 Other income (expense): Equity in earnings of SLC Pipeline 488 - 488 - Interest income 134 3,826 (3,692) (96.5) Interest expense (7,205) (6,251) (954) 15.3 Tulsa Refinery acquisition costs (1,610) - (1,610) - ------- --- ------- (8,193) (2,425) (5,768) 237.9 ------- ------- ------- Income before income taxes 31,146 17,801 13,345 75.0 Income tax provision 9,575 5,856 3,719 63.5 ----- ----- ----- Net income(1) 21,571 11,945 9,626 80.6 Less noncontrolling interest in net income(1) 6,966 493 6,473 1,313.0 ----- --- ----- Net income attributable to Holly Corporation stockholders(1) $14,605 $11,452 $3,153 27.5% ======= ======= ====== Net income per share attributable to Holly Corporation stockholders - basic $0.29 $0.23 $0.06 26.1% ===== ===== ===== Net income per share attributable to Holly Corporation stockholders - diluted $0.29 $0.23 $0.06 26.1% ===== ===== ===== Cash dividends declared per common share $0.15 $0.15 $- -% Average number of common shares outstanding: Basic 50,170 50,158 12 -% Diluted 50,226 50,515 (289) (0.6)% EBITDA $56,751 $35,662 $21,089 59.1% Six Months Ended Change from 2008 ---------------- ---------------- June 30, -------- 2009 2008 Change Percent ---- ---- ------ ------- (In thousands, except per share data) Sales and other revenues $1,689,204 $3,223,806 $(1,534,602) (47.6)% Operating costs and expenses: Cost of products sold (exclusive of depreciation and amortization) 1,391,580 3,003,987 (1,612,407) (53.7) Operating expenses (exclusive of depreciation and amortization) 145,710 134,883 10,827 8.0 General and administrative expenses (exclusive of depreciation and amortization) 26,855 25,879 976 3.8 Depreciation and amortization 45,821 29,238 16,583 56.7 ------ ------ ------ Total operating costs and expenses 1,609,966 3,193,987 (1,584,021) (49.6) --------- --------- ----------- Income from operations 79,238 29,819 49,419 165.7 Other income (expense): Equity in earnings of SLC Pipeline 663 - 663 - Interest income 2,330 7,381 (5,051) (68.4) Interest expense (13,444) (8,243) (5,201) 63.1 Tulsa Refinery acquisition costs (1,610) - (1,610) - Equity in earnings of HEP - 2,990 (2,990) (100.0) --- ----- ------- (12,061) 2,128 (14,189) (666.8) -------- ----- -------- Income before income taxes 67,177 31,947 35,230 110.3 Income tax provision 21,706 10,551 11,155 105.7 ------ ------ ------ Net income(1) 45,471 21,396 24,075 112.5 Less noncontrolling interest in net income(1) 8,921 1,295 7,626 588.9 ----- ----- ----- Net income attributable to Holly Corporation stockholders(1) $36,550 $20,101 $16,449 81.8% ======= ======= ======= Net income per share attributable to Holly Corporation stockholders - basic $0.73 $0.40 $0.33 82.5% ===== ===== ===== Net income per share attributable to Holly Corporation stockholders - diluted $0.73 $0.39 $0.34 87.2% ===== ===== ===== Cash dividends declared per common share $0.30 $0.30 $- -% Average number of common shares outstanding: Basic 50,106 50,654 (548) (1.1)% Diluted 50,189 51,015 (826) (1.6)% EBITDA $115,191 $60,752 $54,439 89.6% Balance Sheet Data June 30, December 31, 2009 2008 ---- ---- (In thousands) Cash, cash equivalents and investments in marketable securities $109,479 $96,008 Working capital $159,367 $68,465 Total assets $2,621,441 $1,874,225 Long-term debt - Holly Corporation $187,964 $- Long-term debt - HEP $390,056 $341,914 Total equity(1) $1,026,569 $936,332 (1) During the first quarter of 2009, we adopted SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51." As a result, net income attributable to the noncontrolling interest in our HEP subsidiary is now presented as an adjustment to net income to arrive at "Net income attributable to Holly Corporation stockholders" in our Consolidated Statements of Income. Prior to our adoption of this standard, this amount was presented as "Minority interest in earnings of HEP," a non-operating expense item before "Income before income taxes." Additionally, equity attributable to noncontrolling interests is now presented as a separate component of total equity in our consolidated financial statements. We have adopted this standard on a retrospective basis. While this presentation differs from previous GAAP requirements, this standard did not affect our net income and equity attributable to Holly Corporation stockholders. 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. Intersegment transactions are eliminated in our consolidated financial statements and are included in Consolidations and Eliminations.
The Refining segment includes the operations of our Navajo, Woods Cross and Tulsa Refineries 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, jet fuel and specialty lubricant products.
