Hollyfrontier corporation reports quarterly net
income
Dallas--(business wire)--hollyfrontier corporation (nyse: hfc) (“hollyfrontier” or the “company”) today reported fourth quarter net income attributable to hollyfrontier stockholders of $521.1 million or $2.92 per diluted share for the quarter ended december 31, 2017 compared to $53.2 million or $0.30 per diluted share for the quarter ended december 31, 2016. the fourth quarter results reflect special items that collectively increased net income by a total of $396.5 million. on a pre-tax basis, these items include a lower of cost or market inventory valuation adjustment of $93.4 million, a $27.0 million reduction to rins costs as a result of our woods cross refinery's small refinery exemption and hollyfrontier's pro-rata share of holly energy partners' remeasurement gain on pipeline acquisitions of $21.4 million, slightly offset by $4.4 million of integration costs related to our petro-canada lubricants inc. (“pcli”) acquisition. additionally, the effect of the tax cuts and jobs act enacted in december 2017 reduced income taxes by approximately $307.0 million. excluding these items, net income for the current quarter was $124.6 million ($0.70 per diluted share) compared to a net loss of ($10.0) million (($0.06) per diluted share) for the fourth quarter 2016, which excludes an inventory valuation adjustment and pcli pre-acquisition costs that collectively increased net income by $63.2 million. adjusted for these items, net income for the quarter increased $134.6 million compared to the same period of 2016 driven by both higher sales volumes and refining margins combined with earnings attributable to our recently acquired pcli operations. for the current quarter, crude oil charges averaged 461,110 barrels per day (“bpd”) compared to 432,070 bpd for the fourth quarter of 2016. on a per barrel basis, consolidated refinery gross margin was $12.54 per produced barrel sold, an 85% increase compared to $6.77 for the fourth quarter of 2016. total operating expenses for the quarter were $349.8 million compared to $258.7 million for the fourth quarter of last year and include $64.0 million in costs attributable to our pcli operations. hollyfrontier’s president & ceo, george damiris, commented, “in comparison to last year, hollyfrontier's significant financial improvement for the fourth quarter reflects both better refinery operations and the improved macroeconomic environment. additionally, lubricants and specialty products had a strong fourth quarter led by the rack forward business. we are excited about 2018 based on our improving refinery reliability, our positive outlook for both product cracks and crude spreads, as well as the growth potential of converting a higher percentage of base oil sales into finished products." for the fourth quarter of 2017, net cash provided by operations totaled $166.0 million. during the period, we declared and paid a dividend of $0.33 per share to shareholders totaling $59.0 million. at december 31, 2017, our cash and cash equivalents totaled $630.8 million and our consolidated debt was $2.5 billion. our debt, exclusive of holly energy partners' debt which is nonrecourse to hollyfrontier, was $991.7 million at december 31, 2017. the company has scheduled a webcast conference call for today, february 21, 2018, at 8:30 am eastern time to discuss fourth quarter financial results. this webcast may be accessed at: https://event.webcasts.com/starthere.jsp?ei=1177986&tp_key=757b7364b3. an audio archive of this webcast will be available using the above noted link through march 7, 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% limited partner 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 following: the actions of actual or potential competitive suppliers of refined petroleum products in the company’s markets; the demand for and supply of crude oil and refined products; the spread between market prices for refined products and market prices for crude oil; the possibility of constraints on the transportation of refined products; the possibility of inefficiencies, curtailments or shutdowns in refinery operations or pipelines; effects of governmental and environmental regulations and policies; the availability and cost of financing to the company; the effectiveness of the company’s capital investments and marketing strategies; the company’s efficiency in carrying out construction projects; the ability of the company to acquire refined product operations or pipeline and terminal operations on acceptable terms and to integrate any future acquired operations; the possibility of terrorist attacks and the consequences of any such attacks; general economic conditions; and other financial, operational and legal risks and uncertainties detailed from time to time in the company’s securities and exchange commission filings. the forward-looking statements speak only as of the date made and, other than as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. results of operations financial data (all information in this release is unaudited) balance sheet data segment information effective 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. our prior period segment information 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 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. at december 31, 2017, the hep segment also includes a 75% interest in unev pipeline (an hep consolidated subsidiary), and a 50% ownership interest in each of the osage pipeline and cheyenne pipeline. revenues from the hep segment are earned through transactions with unaffiliated parties for pipeline transportation, rental and terminalling operations as well as revenues relating to pipeline transportation services provided for our refining operations. due to certain basis differences, our reported amounts for the hep segment may not agree to amounts reported in hep's periodic public filings. lubricants and specialty lubricants and specialty year ended december 31, 2017 refining segment operating data the following tables set forth information, including non-gaap 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. during 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. all prior period data has been retrospectively adjusted to reflect our current presentation. mid-continent region (el dorado and tulsa refineries) lubricants and specialty products segment operating data the following table sets forth information about our lubricants and specialty products operations and includes the operations of pcli and affiliated entities for the period february 1, 2017 (date of acquisition) through december 31, 2017. 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) rack back (1) rack forward (2) eliminations (3) 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, which we refer 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) incremental cost of products sold attributable to our pcli inventory value step-up (iii) pcli acquisition and integration costs (iv) goodwill and asset impairment charges (v) our rins cost reduction related to our cheyenne and woods cross refinery small refinery exemptions (vi) net gain on foreign currency swaps and (vii) hollyfrontier's pro-rata share of hep's remeasurement gain on pipeline interest acquisitions. 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. (1) includes loss on early extinguishment of debt of $12.2 million and $8.7 million for the years ended december 31, 2017 and 2016, respectively. 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 (loss) 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, pcli acquisition and integration costs, goodwill and asset impairment charges, incremental costs of products sold due to pcli inventory value step-up, rins cost reductions, remeasurement gain on hep's pipeline interest acquisitions and gain of foreign currency swaps. 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
