Hollyfrontier corporation reports quarterly
results and announces regular cash dividend
Dallas--(business wire)--hollyfrontier corporation (nyse:hfc) (“hollyfrontier” or the “company”) today reported second quarter net income attributable to hollyfrontier stockholders of $345.5 million or $1.94 per diluted share for the quarter ended june 30, 2018, compared to $57.8 million or $0.33 per diluted share for the quarter ended june 30, 2017. the second quarter results reflect special items that collectively increased net income by a total of $86.6 million. these items include a lower of cost or market inventory valuation adjustment that increased pre-tax earnings by $106.9 million and a $25.3 million reduction to rins costs as a result of our woods cross refinery's small refinery exemption for the 2017 calendar year. these items were partially offset by $14.7 million in charges related to damages attributable to our woods cross refinery outage that started in march 2018, net of estimated insurance claims. excluding these items, net income for the current quarter was $258.9 million ($1.45 per diluted share) compared to $116.0 million ($0.66 per diluted share) for the second quarter of 2017, which excludes certain items that collectively decreased earnings by $58.2 million for the three months ended june 30, 2017. these items include an inventory valuation adjustment, a rins cost reduction as a result of the small refinery exemption granted to our cheyenne refinery for the 2016 calendar year, petro-canada lubricants inc. ("pcli") acquisition and integration costs, long-lived asset impairment charges and incremental cost of products sold attributable to our pcli inventory value step-up. adjusted for these items, net income increased $142.9 million compared to the same period of 2017 due principally to higher margins in our refining business. total operating expenses for the quarter were $296.2 million compared to $316.3 million for the second quarter of last year. hollyfrontier’s president & ceo, george damiris, commented, “hollyfrontier's second quarter reflects our ability to take advantage of both location and quality discounts in the crude oil markets. within our lubricants business, healthy finished product demand and our integrated business model are generating consistent earnings despite a weak base oil market. going into the second half of the year, we expect the macro environment to remain very positive and look forward to finishing the year strong.” the refining and marketing segment reported adjusted ebitda of $384.8 million compared to $192.8 million for the second quarter of 2017. this increase was primarily driven by lower laid-in crude costs which resulted in a consolidated refinery gross margin of $16.57 per produced barrel, a 46% increase compared to $11.36 for the second quarter of 2017. crude oil charges averaged 463,480 barrels per day (“bpd”) for the current quarter compared to 467,090 bpd for the second quarter 2017. our woods cross refinery ran at reduced rates throughout the quarter as a result of the outage beginning in march 2018. we expect to increase production during august and return to full run rate by early september. our lubricants and specialty products segment reported ebitda of $39.4 million, driven by consistent rack forward sales volumes and margins. rack forward ebitda was $51.9 million for the quarter and hollyfrontier continues to expect rack forward ebitda in the $190.0 million to $210.0 million range for 2018. rack back ebitda was negatively impacted by weakness in the base oil markets. additionally, we closed on our previously announced acquisition of red giant oil company on august 1, 2018. holly energy partners, l.p. ("hep") reported ebitda of $81.9 million for the second quarter compared to $75.1 million in the second quarter of 2017. this growth was driven by the acquisition of the slc and frontier pipelines as well as volume growth in hep’s permian crude gathering system. for the second quarter of 2018, net cash provided by operations totaled $394.4 million. during the period, we declared and paid a dividend of $0.33 per share to shareholders totaling $58.6 million and spent $28.6 million in stock repurchases. at june 30, 2018, our cash and cash equivalents totaled $979.9 million, a $198.4 million increase over cash and cash equivalents of $781.5 million at march 31, 2018. additionally, our consolidated debt was $2,387.8 million. our debt, exclusive of hep debt, which is nonrecourse to hollyfrontier, was $992.2 million at june 30, 2018. hollyfrontier also announced today that its board of directors declared a regular quarterly dividend of $0.33 per share. the dividend will be paid on september 20, 2018 to holders of record of common stock on august 23, 2018. the company has scheduled a webcast conference call for today, august 2, 2018, at 8:30 am eastern time to discuss second quarter financial results. this webcast may be accessed at: https://event.webcasts.com/starthere.jsp?ei=1200322&tp_key=944875c65d. an audio archive of this webcast will be available using the above noted link through august 16, 2018. 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 45,000 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. in addition, hollyfrontier, through its subsidiary, owns petro-canada lubricants inc., whose mississauga, ontario facility produces 15,600 barrels per day of base oils and other specialized lubricant products, and also owns a 57% interest and a non-economic 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 and cyber attacks and the consequences of any such attacks, general economic conditions and other financial, operational and legal risks and uncertainties detailed from time to time in the company’s securities and exchange commission filings. the forward-looking statements speak only as of the date made and, other than as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. results of operations financial data (all information in this release is unaudited) cost of products sold (exclusive of lower of cost or market inventory valuation adjustment) balance sheet data segment information in the fourth quarter of 2017, we revised our reportable segments to align with certain changes in how our chief operating decision maker manages and allocates resources to our business. accordingly, our tulsa refineries' lubricants operations, previously reported in the refining segment, are now combined with the operations of our petro-canada lubricants business (acquired february 1, 2017) and reported in the lubricants and specialty products segment. segment information for the three and six months ended june 30, 2017 has been retrospectively adjusted to reflect our current segment presentation. 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 corporate, other and eliminations column. the refining segment includes the operations of our el dorado, tulsa, navajo, cheyenne and woods cross refineries and 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 terminals in arizona, new mexico and oklahoma. the lubricants and specialty products segment involves pcli's 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 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 process 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 and cheyenne pipeline 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. lubricantsand specialtyproducts corporate,other andeliminations consolidatedtotal lubricantsand specialtyproducts corporate,other andeliminations consolidatedtotal 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. in the fourth quarter of 2017, we revised the following refining segment operating data computations: refinery gross margin; net operating margin; and operating expenses to better align with similar measurements provided by other companies in our industry and to facilitate comparison of our refining performance relative to our peers. effective with this change, these measurements are now inclusive of all refining segment activities, including hfc asphalt operations and revenues and costs related to products purchased for resale and excess crude oil sales. refining segment operating data for the three and six months ended june 30, 2017 has been retrospectively adjusted to reflect our current presentation. 256,370 263,730 255,900 98.6 5.24 60 19 15 6 100 50 32 7 1 3 5 2 100 2017 88,370 96,200 96,280 88.4 $ 10.53 6.10 $ 4.43 $ 6.11 22 70 8 100 50 39 3 5 3 100 74,610 82,240 78,710 76.9 $ 14.79 10.30 $ 4.49 $ 9.86 35 36 20 9 100 2017 58 33 2 5 2 100 419,350 442,170 430,890 91.8 6.37 48 26 15 4 7 100 51 34 5 1 4 3 2 100 lubricants and specialty products segment operating data we acquired our petro-canada lubricants business on february 1, 2017. for the six months ended june 30, 2017 our lubricants and specialty product operating results reflect the operations of our petro-canada lubricants business for the period february 1, 2017 through june 30, 2017. the following table sets forth information about our lubricants and specialty products operations. 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: total lubricantsand specialtyproducts total lubricantsand specialtyproducts 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 (loss) attributable to hollyfrontier stockholders plus (i) interest expense, net of interest income, (ii) income tax provision, and (iii) depreciation and amortization. adjusted ebitda is calculated as ebitda plus or minus (i) lower of cost or market inventory valuation adjustments (ii) our rins cost reduction related to our cheyenne and woods cross small refinery exemptions (iii) woods cross refinery outage damages (iv) woods cross refinery estimated insurance claims on outage damages (v) pcli acquisition and integration costs (vi) long-lived asset impairment charges charged to operating expense (vii) incremental cost of products sold attributable to our pcli inventory value step-up (viii) loss on early extinguishment of debt and (ix) gain on foreign currency swap contracts. 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. ebitda and adjusted ebitda attributable to our refining segment is presented below: ebitda attributable to our lubricants and specialty products segment is set forth below. total lubricantsand specialtyproducts $ $ $ $ $ $ $ $ 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 reconciliation of average refining segment operating expenses per produced barrel sold to total operating expenses 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, rins cost reductions, refinery outage damages and related estimated insurance claims, asset impairment costs, pcli acquisition and integration costs, incremental costs of products sold due to pcli inventory value step-up, gain of foreign currency swap contracts and loss on early extinguishment of debt. 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. reconciliation of effective tax rate to adjusted effective tax rate
