Hollyfrontier corporation reports 2019 fourth quarter and full year results
Dallas--(business wire)--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 %
