HollyFrontier Corporation Reports Quarterly Net Income

HollyFrontier Corporation Reports Quarterly Net Income

DALLAS--(BUSINESS WIRE)-- HollyFrontier Corporation (NYS: HFC) ("HollyFrontier" or the "Company") today reported fourth quarter net income attributable to HollyFrontier stockholders of $391.6 million or $1.92 per diluted share for the quarter ended December 31, 2012, compared to $223.4 million or $1.06 per diluted share for the quarter ended December 31, 2011. For the year ended December 31, 2012, net income attributable to HollyFrontier stockholders totaled $1,727.2 million or $8.38 per diluted share compared to $1,023.4 million or $6.42 per diluted share for the year ended December 31, 2011.

For the fourth quarter, net income attributable to our stockholders increased by $168.2 million, or 75% compared to the same period of 2011, principally reflecting higher fourth quarter refining margins. Refinery gross margins were $24.00 per produced barrel, a 57% increase compared to $15.32 for the fourth quarter of 2011. Production levels averaged approximately 447,000 barrels per day ("BPD") and crude oil charges averaged approximately 408,000 BPD for the current quarter, compared to expected crude throughput of 424,000 BPD. Lower crude oil charges in the quarter resulted from a combination of unplanned downtime and turnaround activity extending longer than planned. Operating expenses for the quarter were $296.8 million or $6.29 per barrel compared to $246.1 million or $5.22 per barrel for the fourth quarter of last year.

HollyFrontier's President & CEO, Mike Jennings, commented, "We are extremely pleased with our solid fourth quarter results and the record year for HollyFrontier. For the fourth quarter, strength in inland to coastal crude oil differentials continued to contribute to attractive refined product margins, particularly considering the effects of lower seasonal demand that have historically yielded tighter margins. Looking to 2013, we believe that the structural crude advantages currently driving our operating margins will positively impact our operating income, allowing us to continue to pay both regular and special dividends. We remain committed to increasing total shareholder return while maintaining a strong balance sheet."

For the fourth quarter of 2012, net cash provided by operations totaled $490.9 million. During the period, we paid dividends to shareholders of $275.5 million, which includes our $0.20 regular and a $0.50 special dividend declared in the fourth quarter. At December 31, 2012, our combined balance of cash and short-term investments totaled $2.4 billion and our consolidated debt was $1.3 billion. Our debt, exclusive of Holly Energy Partners' debt which is nonrecourse to HollyFrontier, was $471.6 million at December 31, 2012. We had no cash borrowings or outstanding principal under our credit facility during the quarter.

Included in our fourth quarter 2012 results were charges totaling $21.6 million or $0.11 per share after-tax, related to increased environmental accruals and the partial write-off of a previously capitalized project.

The Company has scheduled a webcast conference call for today, February 26, 2013, at 11:00 AM Eastern Time to discuss fourth quarter financial results. This webcast may be accessed at: https://event.webcasts.com/starthere.jsp?ei=1012528. An audio archive of this webcast will be available using the above noted link through March 12, 2013.

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 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 31,000 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. A subsidiary of HollyFrontier also owns a 44% interest (including the 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 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.



Financial Data (all information in this release is unaudited)

Three Months Ended
December 31,

Change from 2011 
2012 2011Change Percent
(In thousands, except per share data)

Sales and other revenues


Operating costs and expenses:

Cost of products sold4,073,2264,258,439(185,213)(4.3)
Operating expenses296,754246,11050,64420.6
General and administrative expenses39,68041,473(1,793)(4.3)
Depreciation and amortization64,706 53,327 11,379 21.3
Total operating costs and expenses4,474,366 4,599,349 (124,983)(2.7)
Income from operations673,141373,063300,07880.4
Other income (expense):
Earnings of equity method investments468561(93)(16.6)
Interest income1,4263381,088321.9
Interest expense(22,826)(21,852)(974)4.5
(20,932)(20,953)21 (0.1)
Income before income taxes652,209352,110300,09985.2
Income tax provision252,216 116,261 135,955 116.9
Net income399,993235,849164,14469.6
Less net income attributable to noncontrolling interest8,389 12,469 (4,080)(32.7)
Net income attributable to HollyFrontier stockholders$391,604 $223,380 $168,224 75.3%
Earnings per share attributable to HollyFrontier stockholders:
Basic$1.92 $1.07 $0.85 79.4%
Diluted$1.92 $1.06 $0.86 81.1%
Cash dividends declared per common share$0.70 $0.60 $0.10 16.7%
Average number of common shares outstanding:

Years Ended
December 31,

Change from 2011 
2012 2011(1)Change Percent
(In thousands, except per share data)
Sales and other revenues$20,090,724$15,439,528$4,651,19630.1%
Operating costs and expenses:
Cost of products sold15,840,64312,680,0783,160,56524.9
Operating expenses994,966748,081246,88533.0
General and administrative expenses128,101120,1147,9876.6
Depreciation and amortization242,868 159,707 83,161 52.1
Total operating costs and expenses17,206,578 13,707,980 3,498,598 25.5
Income from operations2,884,1461,731,5481,152,59866.6
Other income (expense):
Earnings of equity method investments2,9232,30062327.1
Interest income4,7861,2843,502272.7
Interest expense(104,186)(78,323)(25,863)33.0
Gain on sale of marketable securities326326
Merger transaction costs (15,114)15,114 (100.0)
Income before income taxes2,787,9951,641,6951,146,30069.8
Income tax provision1,027,962 581,991 445,971 76.6
Net income1,760,0331,059,704700,32966.1
Less net income attributable to noncontrolling interest32,861 36,307 (3,446)(9.5)
Net income attributable to HollyFrontier stockholders$1,727,172 $1,023,397 $703,775 68.8%
Earnings per share attributable to HollyFrontier stockholders:
Basic$8.41 $6.46 $1.95 30.2%
Diluted$8.38 $6.42 $1.96 30.5%
Cash dividends declared per common share$3.10 $1.34 $1.76 131.3%
Average number of common shares outstanding:

(1) Our consolidated financial and operating results reflect the operations of the merged Frontier businesses beginning July 1, 2011.


Balance Sheet Data

December 31,
2012 2011
(In thousands)
Cash, cash equivalents and investments in marketable securities$2,393,401$1,840,610
Working capital$2,815,821$2,030,063
Total assets$10,328,997$9,576,243
Long-term debt$1,336,238$1,214,742
Total equity$6,642,658$5,835,900

Segment Information

Our operations are 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 El Dorado, Tulsa, Navajo, Cheyenne and Woods Cross refineries and NK Asphalt and involves the purchase and refining of crude oil and wholesale and branded marketing of refined products, such as gasoline, diesel fuel, jet fuel, specialty lubricant products, and specialty and modified asphalt. The petroleum products are primarily marketed in the Mid-Continent, Southwest and Rocky Mountain regions of the United States and northern Mexico. Additionally, specialty lubricant products produced at our Tulsa West facility are marketed throughout North America and are distributed in Central and South America. NK Asphalt manufactures and markets asphalt and asphalt products in Arizona, New Mexico, Oklahoma, Kansas, Missouri, Texas and northern Mexico.

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 and terminal, tankage and loading rack facilities in the Mid-Continent, Southwest and Rocky Mountain regions of the United States. 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 its storage tanks and terminals. The HEP segment also includes a 75% interest in the UNEV Pipeline (an HEP consolidated subsidiary) and a 25% interest in the SLC 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.




and Other



(In thousands)
Three Months Ended December 31, 2012
Sales and other revenues$5,135,106$81,251$136$(68,986)$5,147,507
Depreciation and amortization$48,160$15,500$1,253
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