- Reported net income attributable to HollyFrontier stockholders
of $772.4 million or $4.61 per diluted share and adjusted net
income of $821.5 million or $4.90 per diluted share, for the
year
- Reported EBITDA of $1,702.6 million and adjusted EBITDA of
$1,714.5 million, for the year
- Returned $758.3 million to shareholders through dividends and
share repurchases in the year
HollyFrontier Corporation (NYSE:HFC) (“HollyFrontier” or the
“Company”) today reported fourth quarter net income attributable to
HollyFrontier stockholders of $60.6 million or $0.37 per diluted
share for the quarter ended December 31, 2019, compared to $141.9
million or $0.81 per diluted share for the quarter ended December
31, 2018.
The fourth quarter results reflect special items that
collectively decreased net income by a total of $17.4 million.
These items include a lower of cost or market inventory valuation
adjustment that decreased pre-tax earnings by $30.7 million, a
biodiesel blender's tax credit of $18.0 million and Sonneborn
integration and regulatory costs of $4.1 million. Excluding these
items, net income for the fourth quarter was $78.0 million ($0.48
per diluted share) compared to $393.9 million ($2.25 per diluted
share) for the fourth quarter of 2018, which excludes certain items
that collectively decreased net income by $252.0 million for the
three months ended December 31, 2018.
HollyFrontier’s President & CEO, Michael Jennings,
commented, “Despite heavy maintenance across our refining system in
the fourth quarter, HFC achieved healthy financial results in 2019.
The resulting strong cash flow generation allowed us to invest over
$500 million into our assets, complete the acquisition of Sonneborn
and return $758 million in cash to shareholders through dividends
and share repurchases during the year. Looking forward to 2020, we
are optimistic that demand for gasoline and diesel will strengthen
into the summer driving season, margins for finished lubricants
will remain strong and the base oil market will improve as existing
capacity absorbs growing demand for premium base oils.”
The Refining segment reported adjusted EBITDA of $171.6 million
compared to $583.4 million for the fourth quarter of 2018. This
decrease was primarily driven by heavy planned refinery
maintenance, lower product margins and depressed crude
differentials which resulted in a consolidated refinery gross
margin of $13.58 per produced barrel, a 39% decrease compared to
$22.17 for the fourth quarter of 2018. Crude oil charge averaged
380,560 barrels per day (“BPD”) for the current quarter compared to
405,580 BPD for the fourth quarter 2018.
Our Lubricants and Specialty Products segment reported EBITDA of
$34.6 million, compared to $(3.5) million in the fourth quarter
2018. Rack Forward EBITDA was $61.4 million, compared to $48.9
million in the prior year, driven by contributions from our
Sonneborn finished lubricants business.
Holly Energy Partners, L.P. ("HEP") reported EBITDA of $87.8
million for the fourth quarter 2019 compared to $89.9 million in
the fourth quarter of 2018.
For the fourth quarter of 2019, net cash provided by operations
totaled $137.2 million. During the period, we declared and paid a
dividend of $0.35 per share to shareholders totaling $57.2 million
and spent $61.1 million in stock repurchases. At December 31, 2019,
our cash and cash equivalents totaled $885.2 million, a $96.7
million decrease over cash and cash equivalents of $981.9 million
at September 30, 2019. Additionally, our consolidated long-term
debt was $2,455.6 million. Our debt, exclusive of HEP debt, which
is nonrecourse to HollyFrontier, was $993.6 million at December 31,
2019.
The Company has scheduled a webcast conference call for today,
February 20, 2020, at 8:30 AM Eastern Time to discuss fourth
quarter financial results. This webcast may be accessed at:
https://event.on24.com/wcc/r/2151024/A720AA4739D7D845E99819FC98FCD935.
An audio archive of this webcast will be available using the above
noted link through March 5, 2020.
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 owns and operates refineries
located in Kansas, Oklahoma, New Mexico, Wyoming and Utah and
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 produces base
oils and other specialized lubricants in the U.S., Canada and the
Netherlands, and exports products to more than 80 countries.
HollyFrontier also owns a 57% limited partner interest and a
non-economic general partner interest in Holly Energy Partners,
L.P., a master limited partnership that provides petroleum product
and crude oil transportation, terminalling, storage and throughput
services to the petroleum industry, including HollyFrontier
Corporation subsidiaries.
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 and transporters of refined
petroleum products or lubricant and specialty products in the
Company’s markets, the demand for and supply of crude oil, refined
products and lubricant and specialty 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 or lubricant and specialty 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 and
consummating construction projects, the ability of the Company to
acquire refined or lubricant product operations or pipeline and
terminal operations on acceptable terms and to integrate any
existing or future acquired operations, the possibility of
terrorist or cyberattacks 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 December
31,
Change from 2018
2019
2018
Change
Percent
(In thousands, except per share
data)
Sales and other revenues
$
4,381,888
$
4,344,204
$
37,684
1
%
Operating costs and expenses:
Cost of products sold:
Cost of products sold (exclusive of lower
of cost or market inventory valuation adjustment)
3,610,528
3,245,507
365,021
11
Lower of cost or market inventory
valuation adjustment
30,708
329,232
(298,524
)
(91
)
3,641,236
3,574,739
66,497
2
Operating expenses
383,630
352,139
31,491
9
Selling, general and administrative
expenses
93,259
85,955
7,304
8
Depreciation and amortization
134,580
113,719
20,861
18
Total operating costs and
expenses
4,252,705
4,126,552
126,153
3
Income from operations
129,183
217,652
(88,469
)
(41
)
Other income (expense):
Earnings of equity method investments
(37
)
1,698
(1,735
)
(102
)
Interest income
5,012
6,232
(1,220
)
(20
)
Interest expense
(36,383
)
(33,917
)
(2,466
)
7
Gain on foreign currency transactions
576
681
(105
)
(15
)
Other, net
2,008
(528
)
2,536
(480
)
(28,824
)
(25,834
)
(2,990
)
12
Income before income taxes
100,359
191,818
(91,459
)
(48
)
Income tax expense
19,290
28,501
(9,211
)
(32
)
Net income
81,069
163,317
(82,248
)
(50
)
Less net income attributable to
noncontrolling interest
20,464
21,421
(957
)
(4
)
Net income attributable to
HollyFrontier stockholders
$
60,605
$
141,896
$
(81,291
)
(57
)%
Earnings per share attributable to
HollyFrontier stockholders:
Basic
$
0.38
$
0.82
$
(0.44
)
(54
)%
Diluted
$
0.37
$
0.81
$
(0.44
)
(54
)%
Cash dividends declared per common
share
$
0.35
$
0.33
$
0.02
6
%
Average number of common shares
outstanding:
Basic
161,398
172,485
(11,087
)
(6
)%
Diluted
162,898
174,259
(11,361
)
(7
)%
EBITDA
$
245,846
$
311,801
$
(65,955
)
(21
)%
Adjusted EBITDA
$
262,660
$
641,033
$
(378,373
)
(59
)%
Years Ended December
31,
Change from 2018
2019
2018
Change
Percent
(In thousands, except per share
data)
Sales and other revenues
$
17,486,578
$
17,714,666
$
(228,088
)
(1
)%
Operating costs and expenses:
Cost of products sold:
Cost of products sold (exclusive of lower
of cost or market inventory valuation adjustment)
13,918,384
13,940,782
(22,398
)
—
Lower of cost or market inventory
valuation adjustment
(119,775
)
136,305
(256,080
)
(188
)
13,798,609
14,077,087
(278,478
)
(2
)
Operating expenses
1,394,052
1,285,838
108,214
8
Selling, general and administrative
expenses
354,236
290,424
63,812
22
Depreciation and amortization
509,925
437,324
72,601
17
Goodwill impairment
152,712
—
152,712
—
Total operating costs and
expenses
16,209,534
16,090,673
118,861
1
Income from operations
1,277,044
1,623,993
(346,949
)
(21
)
Other income (expense):
Earnings of equity method investments
5,180
5,825
(645
)
(11
)
Interest income
22,139
16,892
5,247
31
Interest expense
(143,321
)
(131,363
)
(11,958
)
9
Gain on foreign currency transactions
5,449
6,197
(748
)
(12
)
Other, net
5,013
2,923
2,090
72
(105,540
)
(99,526
)
(6,014
)
6
Income before income taxes
1,171,504
1,524,467
(352,963
)
(23
)
Income tax expense
299,152
347,243
(48,091
)
(14
)
Net income
872,352
1,177,224
(304,872
)
(26
)
Less net income attributable to
noncontrolling interest
99,964
79,264
20,700
26
Net income attributable to
HollyFrontier stockholders
$
772,388
$
1,097,960
$
(325,572
)
(30
)%
Earnings per share attributable to
HollyFrontier stockholders:
Basic
$
4.64
$
6.25
$
(1.61
)
(26
)%
Diluted
$
4.61
$
6.19
$
(1.58
)
(26
)%
Cash dividends declared per common
share
$
1.34
$
1.32
$
0.02
2
%
Average number of common shares
outstanding:
Basic
166,287
175,009
(8,722
)
(5
)%
Diluted
167,385
176,661
(9,276
)
(5
)%
EBITDA
$
1,702,647
$
1,996,998
$
(294,351
)
(15
)%
Adjusted EBITDA
$
1,714,524
$
2,054,653
$
(340,129
)
(17
)%
Balance Sheet Data
Years Ended December
31,
2019
2018
(In thousands)
Cash and cash equivalents
$
885,162
$
1,154,752
Working capital
$
1,620,261
$
2,128,224
Total assets
$
12,164,841
$
10,994,601
Long-term debt
$
2,455,640
$
2,411,540
Total equity
$
6,509,426
$
6,459,059
Segment Information
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 the
Corporate, Other and Eliminations column.
The Refining segment includes the operations of our El Dorado,
Tulsa, Navajo, Cheyenne and Woods Cross refineries and
HollyFrontier Asphalt Company LLC (“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 asphalt terminals in Arizona, New Mexico
and Oklahoma.
The Lubricants and Specialty Products segment includes
Petro-Canada Lubricants Inc.’s (“PCLI”) 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 operations of Red Giant Oil, one of the
largest suppliers of locomotive engine oil in North America and the
operations of Sonneborn, a producer of specialty hydrocarbon
chemicals such as white oils, petrolatums and waxes with
manufacturing facilities in the United States and Europe.
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
processing units in the Mid-Continent, Southwest and Rocky Mountain
regions of the United States. The HEP segment also includes a 75%
interest in UNEV Pipeline, LLC (an HEP consolidated subsidiary),
and a 50% ownership interest in each of Osage Pipeline Company,
LLC, Cheyenne Pipeline LLC and Cushing Connect Pipeline &
Terminal LLC. 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,
2019
Sales and other revenues:
Revenues from external customers
$
3,837,269
$
512,980
$
31,639
$
—
$
4,381,888
Intersegment revenues
67,879
3,150
99,995
(171,024
)
—
$
3,905,148
$
516,130
$
131,634
$
(171,024
)
$
4,381,888
Cost of products sold (exclusive of lower
of cost or market inventory adjustment)
$
3,381,967
$
377,740
$
—
$
(149,179
)
$
3,610,528
Lower of cost or market inventory
valuation adjustment
$
30,708
$
—
$
—
$
—
$
30,708
Operating expenses
$
301,407
$
60,868
$
38,951
$
(17,596
)
$
383,630
Selling, general and administrative
expenses
$
32,196
$
42,914
$
2,929
$
15,220
$
93,259
Depreciation and amortization
$
82,527
$
22,890
$
24,514
$
4,649
$
134,580
Income (loss) from operations
$
76,343
$
11,718
$
65,240
$
(24,118
)
$
129,183
Income (loss) before interest and income
taxes
$
76,343
$
11,681
$
65,532
$
(21,826
)
$
131,730
Net income attributable to noncontrolling
interest
$
—
$
—
$
1,457
$
19,007
$
20,464
Earnings of equity method investments
$
—
$
—
$
(37
)
$
—
$
(37
)
Capital expenditures
$
69,835
$
15,110
$
6,284
$
7,477
$
98,706
Three Months Ended December 31,
2018
Sales and other revenues:
Revenues from external customers
$
3,890,507
$
422,975
$
30,613
$
109
$
4,344,204
Intersegment revenues
85,721
1,313
102,179
(189,213
)
—
$
3,976,228
$
424,288
$
132,792
$
(189,104
)
$
4,344,204
Cost of products sold (exclusive of lower
of cost or market inventory adjustment)
$
3,071,340
$
341,126
$
—
$
(166,959
)
$
3,245,507
Lower of cost or market inventory
valuation adjustment
$
329,232
$
—
$
—
$
—
$
329,232
Operating expenses
$
290,794
$
42,719
$
39,699
$
(21,073
)
$
352,139
Selling, general and administrative
expenses
$
30,675
$
44,325
$
2,748
$
8,207
$
85,955
Depreciation and amortization
$
73,482
$
13,232
$
24,375
$
2,630
$
113,719
Income (loss) from operations
$
180,705
$
(17,114
)
$
65,970
$
(11,909
)
$
217,652
Income (loss) before interest and income
taxes
$
180,705
$
(16,737
)
$
67,719
$
(12,184
)
$
219,503
Net income attributable to noncontrolling
interest
$
—
$
—
$
1,405
$
20,016
$
21,421
Earnings of equity method investments
$
—
$
—
$
1,698
$
—
$
1,698
Capital expenditures
$
70,741
$
14,309
$
13,030
$
3,871
$
101,951
Refining
Lubricants and Specialty
Products
HEP
Corporate, Other and
Eliminations
Consolidated Total
(In thousands)
Year Ended December 31, 2019
Sales and other revenues:
Revenues from external customers
$
15,284,110
$
2,081,221
$
121,027
$
220
$
17,486,578
Intersegment revenues
312,678
11,307
411,750
(735,735
)
—
$
15,596,788
$
2,092,528
$
532,777
$
(735,515
)
$
17,486,578
Cost of products sold (exclusive of lower
of cost or market inventory adjustment)
$
12,980,506
$
1,580,036
$
—
$
(642,158
)
$
13,918,384
Lower of cost or market inventory
valuation adjustment
$
(119,775
)
$
—
$
—
$
—
$
(119,775
)
Operating expenses
$
1,095,488
$
231,523
$
161,996
$
(94,955
)
$
1,394,052
Selling, general and administrative
expenses
$
120,518
$
168,595
$
10,251
$
54,872
$
354,236
Depreciation and amortization
$
309,932
$
88,781
$
96,706
$
14,506
$
509,925
Goodwill impairment
$
—
$
152,712
$
—
$
—
$
152,712
Income (loss) from operations
$
1,210,119
$
(129,119
)
$
263,824
$
(67,780
)
$
1,277,044
Income (loss) before interest and income
taxes (1)
$
1,210,119
$
(128,837
)
$
304,442
$
(93,038
)
$
1,292,686
Net income attributable to noncontrolling
interest
$
—
$
—
$
4,981
$
94,983
$
99,964
Earnings of equity method investments
$
—
$
—
$
5,180
$
—
$
5,180
Capital expenditures
$
199,002
$
40,997
$
30,112
$
23,652
$
293,763
Year Ended December 31, 2018
Sales and other revenues:
Revenues from external customers
$
15,806,304
$
1,799,506
$
108,412
$
444
$
17,714,666
Intersegment revenues
370,259
13,197
397,808
(781,264
)
—
$
16,176,563
$
1,812,703
$
506,220
$
(780,820
)
$
17,714,666
Cost of products sold (exclusive of lower
of cost or market inventory adjustment)
$
13,250,849
$
1,381,540
$
—
$
(691,607
)
$
13,940,782
Lower of cost or market inventory
valuation adjustment
$
136,305
$
—
$
—
$
—
$
136,305
Operating expenses
$
1,055,209
$
167,820
$
146,430
$
(83,621
)
$
1,285,838
Selling, general and administrative
expenses
$
113,641
$
143,750
$
11,041
$
21,992
$
290,424
Depreciation and amortization
$
284,439
$
43,255
$
98,492
$
11,138
$
437,324
Income (loss) from operations
$
1,336,120
$
76,338
$
250,257
$
(38,722
)
$
1,623,993
Income (loss) before interest and income
taxes
$
1,336,120
$
77,640
$
256,204
$
(31,026
)
$
1,638,938
Net income attributable to noncontrolling
interest
$
—
$
—
$
4,520
$
74,744
$
79,264
Earnings of equity method investments
$
—
$
—
$
5,825
$
—
$
5,825
Capital expenditures
$
202,791
$
37,448
$
54,141
$
16,649
$
311,029
(1)
HEP segment includes a $35.2 million gain
due to new throughput agreements on specific HEP assets that meet
the definition of sales-type leases. This gain is eliminated in HFC
consolidation.
Refining
Lubricants and Specialty
Products
HEP
Corporate, Other and
Eliminations
Consolidated Total
(In thousands)
December 31, 2019
Cash and cash equivalents
$
9,755
$
169,277
$
13,287
$
692,843
$
885,162
Total assets
$
7,189,094
$
2,223,418
$
2,205,437
$
546,892
$
12,164,841
Long-term debt
$
—
$
—
$
1,462,031
$
993,609
$
2,455,640
December 31, 2018
Cash and cash equivalents
$
7,236
$
80,931
$
3,045
$
1,063,540
$
1,154,752
Total assets
$
6,465,155
$
1,506,209
$
2,142,027
$
881,210
$
10,994,601
Long-term debt
$
—
$
—
$
1,418,900
$
992,640
$
2,411,540
Refining Segment Operating Data
The following tables set forth information, including non-GAAP
(Generally Accepted Accounting Principles) 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.
Three Months Ended December
31,
Years Ended December
31,
2019
2018
2019
2018
Mid-Continent Region (El Dorado and
Tulsa Refineries)
Crude charge (BPD) (1)
243,400
216,870
254,010
249,240
Refinery throughput (BPD) (2)
256,790
236,240
268,500
264,730
Sales of produced refined products (BPD)
(3)
254,950
243,680
259,310
255,800
Refinery utilization (4)
93.6
%
83.4
%
97.7
%
95.9
%
Average per produced barrel (5)
Refinery gross margin
$
11.15
$
19.01
$
13.71
$
14.44
Refinery operating expenses (6)
6.66
6.55
5.77
5.51
Net operating margin
$
4.49
$
12.46
$
7.94
$
8.93
Refinery operating expenses per throughput
barrel (7)
$
6.61
$
6.76
$
5.58
$
5.32
Feedstocks:
Sweet crude oil
54
%
56
%
55
%
54
%
Sour crude oil
26
%
25
%
24
%
24
%
Heavy sour crude oil
15
%
11
%
16
%
16
%
Other feedstocks and blends
5
%
8
%
5
%
6
%
Total
100
%
100
%
100
%
100
%
Sales of produced refined products:
Gasolines
53
%
52
%
51
%
51
%
Diesel fuels
30
%
30
%
32
%
33
%
Jet fuels
6
%
7
%
7
%
6
%
Fuel oil
1
%
1
%
1
%
1
%
Asphalt
4
%
3
%
3
%
3
%
Base oils
3
%
4
%
4
%
4
%
LPG and other
3
%
3
%
2
%
2
%
Total
100
%
100
%
100
%
100
%
Three Months Ended December
31,
Years Ended December
31,
2019
2018
2019
2018
Southwest Region (Navajo
Refinery)
Crude charge (BPD) (1)
85,240
110,160
101,760
109,440
Refinery throughput (BPD) (2)
94,710
119,640
111,870
118,630
Sales of produced refined products (BPD)
(3)
106,770
119,390
117,230
120,520
Refinery utilization (4)
85.2
%
110.2
%
101.8
%
109.4
%
Average per produced barrel (5)
Refinery gross margin
$
17.71
$
22.68
$
18.97
$
19.05
Refinery operating expenses (6)
5.78
5.37
5.10
4.81
Net operating margin
$
11.93
$
17.31
$
13.87
$
14.24
Refinery operating expenses per throughput
barrel (7)
$
6.52
$
5.36
$
5.35
$
4.89
Feedstocks:
Sweet crude oil
23
%
14
%
21
%
27
%
Sour crude oil
67
%
78
%
70
%
65
%
Other feedstocks and blends
10
%
8
%
9
%
8
%
Total
100
%
100
%
100
%
100
%
Sales of produced refined products:
Gasolines
54
%
51
%
52
%
50
%
Diesel fuels
33
%
39
%
37
%
40
%
Fuel oil
2
%
3
%
3
%
3
%
Asphalt
5
%
4
%
5
%
4
%
LPG and other
6
%
3
%
3
%
3
%
Total
100
%
100
%
100
%
100
%
Rocky Mountain Region (Cheyenne and
Woods Cross Refineries)
Crude charge (BPD) (1)
51,920
78,550
71,830
72,890
Refinery throughput (BPD) (2)
57,230
84,670
78,230
79,980
Sales of produced refined products (BPD)
(3)
57,090
80,600
72,650
76,300
Refinery utilization (4)
53.5
%
81.0
%
74.1
%
75.1
%
Average per produced barrel (5)
Refinery gross margin
$
16.69
$
30.96
$
19.13
$
26.55
Refinery operating expenses (6)
16.85
11.45
12.47
11.83
Net operating margin
$
(0.16
)
$
19.51
$
6.66
$
14.72
Refinery operating expenses per throughput
barrel (7)
$
16.81
$
10.90
$
11.58
$
11.28
Feedstocks:
Sweet crude oil
37
%
34
%
36
%
28
%
Heavy sour crude oil
25
%
38
%
32
%
42
%
Black wax crude oil
29
%
21
%
24
%
21
%
Other feedstocks and blends
9
%
7
%
8
%
9
%
Total
100
%
100
%
100
%
100
%
Three Months Ended December
31,
Years Ended December
31,
2019
2018
2019
2018
Rocky Mountain Region (Cheyenne and
Woods Cross Refineries)
Sales of produced refined products:
Gasolines
53
%
52
%
53
%
55
%
Diesel fuels
35
%
32
%
34
%
33
%
Fuel oil
4
%
4
%
4
%
3
%
Asphalt
4
%
6
%
5
%
5
%
LPG and other
4
%
6
%
4
%
4
%
Total
100
%
100
%
100
%
100
%
Consolidated
Crude charge (BPD) (1)
380,560
405,580
427,600
431,570
Refinery throughput (BPD) (2)
408,730
440,550
458,600
463,340
Sales of produced refined products (BPD)
(3)
418,800
443,670
449,190
452,630
Refinery utilization (4)
83.3
%
88.7
%
93.6
%
94.4
%
Average per produced barrel (5)
Refinery gross margin
$
13.58
$
22.17
$
15.96
$
17.71
Refinery operating expenses (6)
7.82
7.12
6.68
6.39
Net operating margin
$
5.76
$
15.05
$
9.28
$
11.32
Refinery operating expenses per throughput
barrel (7)
$
8.02
$
7.17
$
6.54
$
6.24
Feedstocks:
Sweet crude oil
44
%
40
%
44
%
43
%
Sour crude oil
32
%
35
%
30
%
30
%
Heavy sour crude oil
13
%
13
%
15
%
17
%
Black wax crude oil
4
%
4
%
4
%
4
%
Other feedstocks and blends
7
%
8
%
7
%
6
%
Total
100
%
100
%
100
%
100
%
Consolidated
Sales of produced refined products:
Gasolines
53
%
52
%
52
%
52
%
Diesel fuels
32
%
33
%
34
%
34
%
Jet fuels
4
%
4
%
4
%
3
%
Fuel oil
1
%
2
%
2
%
2
%
Asphalt
4
%
4
%
4
%
4
%
Base oils
2
%
2
%
2
%
2
%
LPG and other
4
%
3
%
2
%
3
%
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"). Our consolidated crude capacity is 457,000
BPSD.
(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)
Represents total refining segment
operating expenses, exclusive of depreciation and amortization,
divided by sales volumes of refined products produced at our
refineries.
(7)
Represents total refining segment
operating expenses, exclusive of depreciation and amortization,
divided by refinery throughput.
Lubricants and Specialty Products Segment Operating
Data
We acquired our Sonneborn business on February 1, 2019. For the
year ended December 31, 2019, our lubricants and specialty product
operating results reflect the operations of our Sonneborn business
for the period February 1, 2019 through December 31, 2019.
The following table sets forth information about our lubricants
and specialty products operations.
Three Months Ended December
31,
Years Ended December
31,
2019
2018
2019
2018
Lubricants and Specialty
Products
Throughput (BPD)
21,229
16,790
20,251
19,590
Sales of produced products (BPD)
34,392
27,550
34,827
30,510
Sales of produced products:
Finished products
47
%
51
%
49
%
48
%
Base oils
25
%
30
%
27
%
31
%
Other
28
%
19
%
24
%
21
%
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,
2019
Sales and other revenues
$
175,488
$
455,134
$
(114,492
)
$
516,130
Cost of products sold
$
167,141
$
325,091
$
(114,492
)
$
377,740
Operating expenses
$
29,014
$
31,854
$
—
$
60,868
Selling, general and administrative
expenses
$
6,147
$
36,767
$
—
$
42,914
Depreciation and amortization
$
4,010
$
18,880
$
—
$
22,890
Income (loss) from operations
$
(30,824
)
$
42,542
$
—
$
11,718
Income (loss) before interest and income
taxes
$
(30,824
)
$
42,505
$
—
$
11,681
EBITDA
$
(26,814
)
$
61,385
$
—
$
34,571
Three Months Ended December 31,
2018
Sales and other revenues
$
136,592
$
401,170
$
(113,474
)
$
424,288
Cost of products sold
$
150,617
$
303,983
$
(113,474
)
$
341,126
Operating expenses
$
28,426
$
14,293
$
—
$
42,719
Selling, general and administrative
expenses
$
9,940
$
34,385
$
—
$
44,325
Depreciation and amortization
$
8,969
$
4,263
$
—
$
13,232
Income (loss) from operations
$
(61,360
)
$
44,246
$
—
$
(17,114
)
Income (loss) before interest and income
taxes
$
(61,360
)
$
44,623
$
—
$
(16,737
)
EBITDA
$
(52,391
)
$
48,886
$
—
$
(3,505
)
Rack Back (1)
Rack Forward (2)
Eliminations (3)
Total Lubricants and Specialty
Products
(In thousands)
Year Ended December 31, 2019
Sales and other revenues
$
661,523
$
1,883,920
$
(452,915
)
$
2,092,528
Cost of products sold
$
620,660
$
1,412,291
$
(452,915
)
$
1,580,036
Operating expenses
$
116,984
$
114,539
$
—
$
231,523
Selling, general and administrative
expenses
$
31,854
$
136,741
$
—
$
168,595
Depreciation and amortization
$
37,001
$
51,780
$
—
$
88,781
Goodwill impairment
$
152,712
$
—
$
—
$
152,712
Income (loss) from operations
$
(297,688
)
$
168,569
$
—
$
(129,119
)
Income (loss) before interest and income
taxes
$
(297,688
)
$
168,851
$
—
$
(128,837
)
EBITDA
$
(260,687
)
$
220,631
$
—
$
(40,056
)
Year Ended December 31, 2018
Sales and other revenues
$
682,892
$
1,650,056
$
(520,245
)
$
1,812,703
Cost of products sold
$
633,459
$
1,268,326
$
(520,245
)
$
1,381,540
Operating expenses
$
111,155
$
56,665
$
—
$
167,820
Selling, general and administrative
expenses
$
32,086
$
111,664
$
—
$
143,750
Depreciation and amortization
$
26,955
$
16,300
$
—
$
43,255
Income (loss) from operations
$
(120,763
)
$
197,101
$
—
$
76,338
Income (loss) before interest and income
taxes
$
(120,763
)
$
198,403
$
—
$
77,640
EBITDA
$
(93,808
)
$
214,703
$
—
$
120,895
(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,
referred to as EBITDA, is calculated as net income attributable to
HollyFrontier stockholders plus (i) interest expense, net of
interest income, (ii) income tax expense and (iii) depreciation and
amortization. Adjusted EBITDA is calculated as EBITDA plus or minus
(i) lower of cost or market inventory valuation adjustments, (ii)
goodwill impairment, (iii) acquisition integration and regulatory
costs, (iv) incremental costs of products sold attributable to our
Sonneborn inventory value step-up, (v) RINs cost reduction related
to our Cheyenne and Woods Cross small refinery exemptions, (vi)
biodiesel credit, (vii) Woods Cross refinery outage damages and
(viii) Woods Cross refinery estimated insurance claims on outage
damages.
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,
2019
2018
2019
2018
(In thousands)
Net income attributable to HollyFrontier
stockholders
$
60,605
$
141,896
$
772,388
$
1,097,960
Add (subtract) income tax expense
(benefit)
19,290
28,501
299,152
347,243
Add interest expense
36,383
33,917
143,321
131,363
Subtract interest income
(5,012
)
(6,232
)
(22,139
)
(16,892
)
Add depreciation and amortization
134,580
113,719
509,925
437,324
EBITDA
$
245,846
$
311,801
$
1,702,647
$
1,996,998
Add (subtract) lower of cost or market
inventory valuation adjustment
30,708
329,232
(119,775
)
136,305
Add goodwill impairment
—
—
152,712
—
Add acquisition integration and regulatory
costs
4,118
—
24,194
3,595
Add incremental cost of products sold
attributable to Sonneborn inventory value step-up
—
—
9,338
—
Subtract RINs cost reduction
—
—
(36,580
)
(96,971
)
Subtract biodiesel blender's tax
credit
(18,012
)
—
(18,012
)
—
Add Woods Cross refinery outage
damages
—
—
—
24,566
Subtract Woods Cross refinery insurance
claims on outage damages
—
—
—
(9,840
)
Adjusted EBITDA
$
262,660
$
641,033
$
1,714,524
$
2,054,653
EBITDA and Adjusted EBITDA attributable to our Refining segment
is presented below:
Three Months Ended December
31,
Years Ended December
31,
Refining Segment
2019
2018
2019
2018
(In thousands)
Income from operations (1)
$
76,343
$
180,705
$
1,210,119
$
1,336,120
Add depreciation and amortization
82,527
73,482
309,932
284,439
EBITDA
158,870
254,187
1,520,051
1,620,559
Add (subtract) lower of cost or market
inventory valuation adjustment
30,708
329,232
(119,775
)
136,305
Subtract RINs cost reduction
—
—
(36,580
)
(96,971
)
Subtract biodiesel blender's tax
credit
(18,012
)
—
(18,012
)
—
Add Woods Cross refinery outage
damages
—
—
—
24,566
Subtract Woods Cross refinery insurance
claims on outage damages
—
—
—
(9,840
)
Adjusted EBITDA
$
171,566
$
583,419
$
1,345,684
$
1,674,619
(1)
Income from operations of our Refining
segment represents income plus (i) interest expense, net of
interest income and (ii) income tax provision.
EBITDA and Adjusted EBITDA attributable to our Lubricants and
Specialty Products segment is set forth below.
Lubricants and Specialty Products
Segment
Rack Back
Rack Forward
Total Lubricants and Specialty
Products
(In thousands)
Three Months Ended December 31,
2019
Income (loss) before interest and income
taxes (1)
$
(30,824
)
$
42,505
$
11,681
Add depreciation and amortization
4,010
18,880
22,890
EBITDA
$
(26,814
)
$
61,385
$
34,571
Three Months Ended December 31,
2018
Income (loss) before interest and income
taxes (1)
$
(61,360
)
$
44,623
$
(16,737
)
Add depreciation and amortization
8,969
4,263
13,232
EBITDA
$
(52,391
)
$
48,886
$
(3,505
)
Year Ended December 31, 2019
Income (loss) before interest and income
taxes (1)
$
(297,688
)
$
168,851
$
(128,837
)
Add depreciation and amortization
37,001
51,780
88,781
EBITDA
(260,687
)
220,631
(40,056
)
Add goodwill impairment
152,712
—
152,712
Add incremental cost of products sold
attributable to Sonneborn inventory value step-up
—
9,338
9,338
Adjusted EBITDA
$
(107,975
)
$
229,969
$
121,994
Year Ended December 31, 2018
Income (loss) before interest and income
taxes (1)
$
(120,763
)
$
198,403
$
77,640
Add depreciation and amortization
26,955
16,300
43,255
EBITDA
$
(93,808
)
$
214,703
$
120,895
(1)
Income (loss) before interest and income
taxes of our Lubricants and Specialty Products segment represents
income (loss) plus (i) interest expense, net of interest income,
and (ii) income tax provision.
Reconciliations of refinery operating information (non-GAAP
performance measures) to amounts reported under generally accepted
accounting principles in financial statements.
Refinery gross margin and net operating margin are non-GAAP
performance measures that are used by our management and others to
compare our refining performance to that of other companies in our
industry. We believe these margin measures are helpful to investors
in evaluating our refining performance on a relative and absolute
basis. Refinery gross margin per produced barrel sold is total
refining segment revenues less total refining segment cost of
products sold, exclusive of lower of cost or market inventory
valuation adjustments, divided by sales volumes of produced refined
products sold. Net operating margin per barrel sold is the
difference between refinery gross margin and refinery operating
expenses per produced barrel sold. These two margins do not include
the non-cash effects of lower of cost or market inventory valuation
adjustments or depreciation and amortization. Each of these
component performance measures can be reconciled directly to our
consolidated statements of income. Other companies in our industry
may not calculate these performance measures in the same
manner.
Below are reconciliations to our consolidated statements of
income for refinery net operating and gross margin and operating
expenses, in each case averaged per produced barrel sold. Due to
rounding of reported numbers, some amounts may not calculate
exactly.
Reconciliation of average refining segment
net operating margin per produced barrel sold to refinery gross
margin to total sales and other revenues
Three Months Ended December
31,
Years Ended December
31,
2019
2018
2019
2018
(Dollars in thousands, except per
barrel amounts)
Consolidated
Net operating margin per produced barrel
sold
$
5.76
$
15.05
$
9.28
$
11.32
Add average refinery operating expenses
per produced barrel sold
7.82
7.12
6.68
6.39
Refinery gross margin per produced barrel
sold
$
13.58
$
22.17
$
15.96
$
17.71
Times produced barrels sold (BPD)
418,800
443,670
449,190
452,630
Times number of days in period
92
92
365
365
Refining segment gross margin
$
523,232
$
904,927
$
2,616,711
$
2,925,868
Add (subtract) rounding
(51
)
(39
)
(429
)
(154
)
Total refining segment gross margin
523,181
904,888
2,616,282
2,925,714
Add refining segment cost of products
sold
3,381,967
3,071,340
12,980,506
13,250,849
Refining segment sales and other
revenues
3,905,148
3,976,228
15,596,788
16,176,563
Add lubricants and specialty products
segment sales and other revenues
516,130
424,288
2,092,528
1,812,703
Add HEP segment sales and other
revenues
131,634
132,792
532,777
506,220
Subtract corporate, other and
eliminations
(171,024
)
(189,104
)
(735,515
)
(780,820
)
Sales and other revenues
$
4,381,888
$
4,344,204
$
17,486,578
$
17,714,666
Reconciliation of average refining segment
operating expenses per produced barrel sold to total operating
expenses
Three Months Ended December
31,
Years Ended December
31,
2019
2018
2019
2018
(Dollars in thousands, except per
barrel amounts)
Consolidated
Average operating expenses per produced
barrel sold
$
7.82
$
7.12
$
6.68
$
6.39
Times produced barrels sold (BPD)
418,800
443,670
449,190
452,630
Times number of days in period
92
92
365
365
Refining segment operating expenses
$
301,301
$
290,622
$
1,095,215
$
1,055,692
Add (subtract) rounding
106
172
273
(483
)
Total refining segment operating
expenses
301,407
290,794
1,095,488
1,055,209
Add lubricants and specialty products
segment operating expenses
60,868
42,719
231,523
167,820
Add HEP segment operating expenses
38,951
39,699
161,996
146,430
Subtract corporate, other and
eliminations
(17,596
)
(21,073
)
(94,955
)
(83,621
)
Operating expenses (exclusive of
depreciation and amortization)
$
383,630
$
352,139
$
1,394,052
$
1,285,838
Reconciliation of net income attributable
to HollyFrontier stockholders to adjusted net income attributable
to HollyFrontier stockholders
Adjusted net income attributable to HollyFrontier stockholders
is a non-GAAP financial measure that excludes non-cash lower of
cost or market inventory valuation adjustments, goodwill
impairment, acquisition integration and regulatory costs,
incremental cost of products sold due to Sonneborn inventory value
step-up, RINs cost reductions, biodiesel credit and refinery outage
damages and related estimated insurance claims. We believe this
measure is helpful to investors and others in evaluating our
financial performance and to compare our results to that of other
companies in our industry. Similarly titled performance measures of
other companies may not be calculated in the same manner.
Three Months Ended December
31,
Years Ended December
31,
2019
2018
2019
2018
(Dollars in thousands, except per
share amounts)
Consolidated
GAAP:
Income before income taxes
$
100,359
$
191,818
$
1,171,504
$
1,524,467
Income tax expense
19,290
28,501
299,152
347,243
Net income
81,069
163,317
872,352
1,177,224
Less net income attributable to
noncontrolling interest
20,464
21,421
99,964
79,264
Net income attributable to HollyFrontier
stockholders
60,605
141,896
772,388
1,097,960
Non-GAAP adjustments to arrive at
adjusted results:
Lower of cost or market inventory
valuation adjustment
30,708
329,232
(119,775
)
136,305
RINs cost reduction
—
—
(36,580
)
(96,971
)
Biodiesel blender's tax credit
(18,012
)
—
(18,012
)
—
Woods Cross refinery outage damages
—
—
—
24,566
Woods Cross refinery insurance claims on
outage damages
—
—
—
(9,840
)
Acquisition integration and regulatory
costs
4,118
—
24,194
3,595
Goodwill impairment
—
—
152,712
—
Incremental cost of products sold
attributable to Sonneborn inventory value step up
—
—
9,338
—
Total adjustments to income before income
taxes
16,814
329,232
11,877
57,655
Adjustment to income tax expense (1)
(566
)
77,198
(37,270
)
14,746
Total adjustments, net of tax
17,380
252,034
49,147
42,909
Adjusted results - Non-GAAP:
Adjusted income before income taxes
117,173
521,050
1,183,381
1,582,122
Adjusted income tax expense (2)
18,724
105,699
261,882
361,989
Adjusted net income
98,449
415,351
921,499
1,220,133
Less net income attributable to
noncontrolling interest
20,464
21,421
99,964
79,264
Adjusted net income attributable to
HollyFrontier stockholders
$
77,985
$
393,930
$
821,535
$
1,140,869
Adjusted earnings per share attributable
to HollyFrontier stockholders - diluted (3)
$
0.48
$
2.25
$
4.90
$
6.44
Average number of common shares
outstanding - diluted
162,898
174,259
167,385
176,661
(1)
Represents adjustment to GAAP income tax
expense to arrive at adjusted income tax expense, which is computed
as follows:
Three Months Ended December
31,
Years Ended December
31,
2019
2018
2019
2018
(Dollars in thousands)
Non-GAAP income tax expense benefit
(2)
$
18,724
$
105,699
$
261,882
$
361,989
Subtract GAAP income tax expense
19,290
28,501
299,152
347,243
Non-GAAP adjustment to income tax
expense
$
(566
)
$
77,198
$
(37,270
)
$
14,746
(2)
Non-GAAP income tax expense is computed by
a) adjusting HFC's consolidated estimated Annual Effective Tax Rate
(“AETR”) for GAAP purposes for the effects of the above Non-GAAP
adjustments, b) applying the resulting Adjusted Non-GAAP AETR to
Non-GAAP adjusted income before income taxes and c) adjusting for
discrete tax items applicable to the period.
(3)
Adjusted earnings per share attributable
to HollyFrontier stockholders - diluted is calculated as adjusted
net income attributable to HollyFrontier stockholders divided by
the average number of shares of common stock outstanding assuming
dilution.
Reconciliation of effective tax rate to
adjusted effective tax rate
Three Months Ended December
31,
Years Ended December
31,
2019
2018
2019
2018
(Dollars in thousands)
GAAP:
Income before income taxes
$
100,359
$
191,818
$
1,171,504
$
1,524,467
Income tax expense
$
19,290
$
28,501
$
299,152
$
347,243
Effective tax rate for GAAP financial
statements
19.2
%
14.9
%
25.5
%
22.8
%
Adjusted - Non-GAAP:
Effect of Non-GAAP adjustments
(3.2
)%
5.4
%
(3.4
)%
0.1
%
Effective tax rate for adjusted
results
16.0
%
20.3
%
22.1
%
22.9
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200220005228/en/
Richard L. Voliva III, Executive Vice President and Chief
Financial Officer Craig Biery, Director, Investor Relations
HollyFrontier Corporation 214-954-6510
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