Nov. 5, 2009 (PR Newswire) --
DALLAS, Nov. 5 /PRNewswire-FirstCall/ -- Holly Corporation (NYSE: HOC) ("Holly" or the "Company") today reported third quarter financial results. For the quarter, net income attributable to Holly Corporation stockholders was $23.5 million ($0.47 per basic and diluted share) compared to $49.9 million ($1.00 per basic and diluted share) for the same period of 2008. For the nine months ended September 30, 2009, net income was $60 million ($1.20 per basic and $1.19 per diluted share) compared to $70 million ($1.39 per basic and $1.38 per diluted share) for the first nine months of 2008.
Net income attributable to our stockholders for the third quarter and the nine months ended September 30, 2009 decreased by $26.4 million and $10 million, respectively, compared to the same periods of 2008. These decreases were principally due to industry-wide reduced refinery gross margins in the third quarter of 2009 relative to the high levels in the third quarter of 2008. While comparing the 2009 third quarter to the prior year's third quarter, the impact of the overall margin decreases was somewhat mitigated by substantial production gains. Overall refinery gross margins for the quarter were $8.27 per produced barrel, a 45% decrease compared to $15.17 for the third quarter of 2008, and for the current year-to-date period were $8.90 per produced barrel, a 16% decrease compared to $10.57 for the first nine months of 2008. For the three and nine months ended September 30, 2009, our refinery production levels increased 79% and 28%, respectively, over the same periods of 2008 due to production from our newly acquired Tulsa refinery and production gains resulting from our recent Navajo and Woods Cross refinery capacity expansions. Also impacting production gains was scheduled downtime for major maintenance at the Navajo refinery in the first quarter of 2009 and at the Woods Cross refinery in the third quarter of 2008.
"Despite the continued challenging refining environment, our quarterly results remained profitable," said Matthew Clifton, Chairman of the Board and Chief Executive Officer of Holly. "For the quarter, EBITDA was $73.6 million, a 30% increase over EBITDA for the second quarter of 2009. While overall margins remained tight this third quarter, we experienced improvements compared to the preceding second quarter in the markets served by our Woods Cross refinery where gross margins averaged $15.19 per barrel. Additionally, we benefited from strong spreads attributable to our specialty lubricants business, driving our margin level at the Tulsa refinery to $6.70 per barrel in the third quarter. At the Navajo refinery, margins fell slightly to $7.27 in the third quarter. Even with the improvement in company-wide margins from the second quarter of 2009, current year margin levels fell short of prior year levels due to very strong gasoline and distillate cracks realized in the third quarter of 2008. We benefited somewhat during the quarter from our recent Navajo refinery expansion with production volumes averaging just under 94,000 barrels per day. We expect our Navajo refinery phase two operational upgrades to be complete in early 2010, which will allow us to run a wider range of lower priced crudes while increasing our flexibility in varying the mix of transportation fuels. Additionally, our overall results benefited throughout the current year from the improvement in earnings attributable to our asphalt marketing business and increased contributions from Holly Energy Partners."
"We recently announced an agreement to purchase Sinclair Oil Company's 75,000 BPD refinery located in Tulsa, Oklahoma. Once acquired, we intend to integrate both of the Tulsa refinery operations into a single integrated facility operating at crude rate of approximately 125,000 BPD. This acquisition will enable us to increase our overall crude capacity by 40,000 BPSD, save approximately $125 million in previously required regulatory capital costs and raise the complexity of our overall Tulsa operations while preserving our high-value specialty products production capabilities."
"Looking forward, the refining industry will remain challenging until economic activity increases and refined product inventories are reduced. We do believe, however, that the enhanced capabilities of our assets, the markets we serve and our attractive Tulsa acquisitions, combined with the quality of our employees and our strong balance sheet will continue to allow us to meet these challenges," Clifton said.
Sales and other revenues for the 2009 third quarter were $1,490.4 million, a 13% decrease compared to the three months ended September 30, 2008. This decrease was due to the effects of a 42% decline in year-over-year third quarter sales prices of produced refined products sold, partially offset by a 63% current quarter increase in volumes of refined products sold over the same period in 2008. Cost of products sold was $1,295.4 million, a 16% decrease compared to the three months ended September 30, 2008 due mainly to lower crude oil acquisition costs.
Sales and other revenues for the first nine months of 2009 were $3,179.6 million, a 36% decrease compared to the nine months ended September 30, 2008. This decrease was due to the effects of an overall 43% decline in year-over-year prices of produced refined products sold for the current year-to-date period, partially offset by an 18% year-to-date increase in volumes of refined products sold over the same period in 2008. Cost of products sold was $2,687 million, a 41% decrease compared to the nine months ended September 30, 2008.
Operating costs and expenses for the three and nine months ended September 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 nine month period during the nine months ended September 30, 2009 compared to seven months in 2008 as a result of our reconsolidation of HEP effective March 1, 2008. For the nine months ended September 30, 2009, HEP's operating costs and expenses were $56.3 million, an increase of $15.4 million compared to 2008. Additionally, interest expense for the nine months ended September 30, 2009 and 2008 primarily relates to interest costs attributable to HEP. We also incurred interest expense on our $200 million of Senior Notes starting in June 2009. This press release includes key segment information that shows the impact of HEP's consolidation on certain balance sheet and income statement amounts.
The Company has scheduled a webcast conference call for today, November 5, 2009 at 4:00 PM Eastern Time to discuss financial results. This webcast may be accessed at: http://www.videonewswire.com/event.asp?id=63067.
An audio archive of this webcast will be available using the link above through November 18, 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 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 Company's ability to successfully complete the pending acquisition of the Sinclair refinery and to integrate the operations of the Tulsa refinery and the Sinclair refinery into a single facility and 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
------------------
September 30, Change from 2008
------------- ----------------
2009 2008 Change Percent
---- ---- ------ -------
(In thousands, except per share data)
Sales and other revenues $1,490,429 $1,719,920 $(229,491) (13.3)%
Operating costs and
expenses:
Cost of products sold
(exclusive of
depreciation and
amortization) 1,295,438 1,534,776 (239,338) (15.6)
Operating expenses
(exclusive of
depreciation and
amortization) 97,063 71,130 25,933 36.5
General and
administrative expenses
(exclusive of
depreciation 16,728 14,298 2,430 17.0
and amortization)
Depreciation and
amortization 24,267 16,740 7,527 45.0
------ ------ -----
Total operating costs
and expenses 1,433,496 1,636,944 (203,448) (12.4)
--------- --------- ---------
Income from operations 56,933 82,976 (26,043) (31.4)
Other income (expense):
Equity in earnings of
SLC Pipeline 646 - 646 -
Interest income 231 1,896 (1,665) (87.8)
Interest expense (12,405) (7,376) (5,029) 68.2
Acquisition costs -
Tulsa refineries (378) - (378) -
----- -- -----
(11,906) (5,480) (6,426) 117.3
-------- ------- -------
Income before income
taxes 45,027 77,496 (32,469) (41.9)
Income tax provision 13,680 25,750 (12,070) (46.9)
------ ------ --------
Net income(1) 31,347 51,746 (20,399) (39.4)
Less noncontrolling
interest in net
income(1) 7,863 1,847 6,016 325.7
----- ----- -----
Net income
attributable to Holly
Corporation
stockholders(1) $23,484 $49,899 $(26,415) (52.9)%
======= ======= ========
Net income per share
attributable to Holly
Corporation stockholders
- basic $0.47 $1.00 $(0.53) (53.0)%
===== ===== ======
Net income per share
attributable to Holly
Corporation $0.47 $1.00 $(0.53) (53.0)%
stockholders - diluted ===== ===== ======
Cash dividends declared
per common share $0.15 $0.15 $- -%
===== ===== ==
Average number of common
shares outstanding:
Basic 50,244 49,717 527 1.1%
Diluted 50,327 50,032 295 0.6%
EBITDA $73,605 $97,869 $(24,264) (24.8)%
Nine Months Ended
-----------------
September 30, Change from 2008
------------- ----------------
2009 2008 Change Percent
---- ---- ------ -------
(In thousands, except per share data)
Sales and other
revenues $3,179,633 $4,943,726 $(1,764,093) (35.7)%
Operating costs and
expenses:
Cost of products sold
(exclusive of
depreciation and
amortization) 2,687,018 4,538,763 (1,851,745) (40.8)
Operating expenses
(exclusive of
depreciation and
amortization) 242,773 206,013 36,760 17.8
General and
administrative
expenses (exclusive
of depreciation 43,583 40,177 3,406 8.5
and amortization)
Depreciation and
amortization 70,088 45,978 24,110 52.4
------ ------ ------
Total operating costs
and expenses 3,043,462 4,830,931 (1,787,469) (37.0)
--------- --------- -----------
Income from operations 136,171 112,795 23,376 20.7
Other income
(expense):
Equity in earnings of
SLC Pipeline 1,309 - 1,309 -
Interest income 2,561 9,277 (6,716) (72.4)
Interest expense (25,849) (15,619) (10,230) 65.5
Acquisition costs -
Tulsa refineries (1,988) - (1,988) -
Equity in earnings of
HEP - 2,990 (2,990) (100.0)
--- ----- -------
(23,967) (3,352) (20,615) 615.0
-------- ------- --------
Income before income
taxes 112,204 109,443 2,761 2.5
Income tax provision 35,386 36,301 (915) (2.5)
------ ------ -----
Net income(1) 76,818 73,142 3,676 5.0
Less
noncontrolling
interest in net
income(1) 16,784 3,142 13,642 434.2
------ ----- ------
Net income
attributable to Holly
Corporation
stockholders(1) $60,034 $70,000 $(9,966) (14.2)%
======= ======= =======
Net income per share
attributable to Holly
Corporation stockholders $1.20 $1.39 $(0.19) (13.7)%
- basic ===== ===== ======
Net income per share
attributable to Holly
Corporation stockholders $1.19 $1.38 $(0.19) (13.8)%
- diluted ===== ===== ======
Cash dividends
declared per common
share $0.45 $0.45 $- -%
===== ===== ==
Average number of
common shares
outstanding:
Basic 50,153 50,339 (186) (0.4)%
Diluted 50,272 50,717 (445) (0.9)%
EBITDA $188,796 $158,621 $30,175 19.0%
Balance Sheet Data
September 30, December 31,
2009 2008
---- ----
(In thousands)
Cash, cash equivalents and investments
in marketable securities $99,553 $96,008
Working capital $177,847 $68,465
Total assets $2,698,098 $1,874,225
Long-term debt - Holly Corporation $188,204 $-
Long-term debt - Holly Energy Partners $417,628 $341,914
Total equity(1) $1,047,356 $936,332
(1) During the first quarter of 2009, we adopted accounting standards
under Accounting Standards Codification ("ASC") Topic
"Noncontrolling Interest in a Subsidiary" (previously Statement of
Financial Accounting Standard ("SFAS") No. 160). 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 these standards, 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 these standards on a retrospective
basis. While this presentation differs from previous requirements
under generally accepted accounting principles in the United States
("GAAP"), it 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. The petroleum products produced by the Refining segment are primarily marketed in the southwest, rocky mountain and mid-continent regions of the United States and northern Mexico. Additionally, the Refining segment includes specialty lubricant products produced at our Tulsa refinery that are marketed throughout North America and are distributed in Central and South America. Holly Asphalt Company 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). HEP owns and operates a system of petroleum product and crude gathering pipelines in Texas, New Mexico, Oklahoma and Utah, distribution terminals in Texas, New Mexico, Arizona, Utah, Idaho, and Washington and refinery tankage in New Mexico and Utah. Revenues are generated by charging tariffs for transporting petroleum products and crude oil through its pipelines and by charging fees for terminalling petroleum products and other hydrocarbons, and storing and providing other services at their storage tanks and terminals. The HEP segment also includes a 70% interest in Rio Grande Pipeline Company ("Rio Grande") which provides petroleum products transportation services. Additionally, HEP owns a 25% interest in SLC Pipeline LLC ("SLC Pipeline") that services refineries in the Salt Lake City, Utah area.
