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 $53.2 million or $0.30 per diluted share for the quarter ended december 31, 2016, compared to a net loss of $(43.9) million or $(0.24) per diluted share for the quarter ended december 31, 2015. included in the current quarter results were items consisting of a non-cash lower of cost or market inventory adjustment that increased pre-tax earnings by $97.7 million and pre-acquisition costs related to our recent pcli purchase that decreased pre-tax earnings by $13.4 million. excluding these items, net loss attributable to hollyfrontier stockholders was $(10.0) million or $(0.06) per diluted share. actual to adjusted amounts are reconciled in the tables included in the accompanying reconciliations to amounts reported under generally accepted accounting principles. for the fourth quarter, net income attributable to our stockholders, exclusive of lower of cost or market inventory adjustments, pcli pre-acquisition costs and related tax effects, decreased by $54.1 million compared to the same period of 2015, principally reflecting lower refining margins. production levels averaged approximately 453,000 barrels per day ("bpd") and crude oil charges averaged 432,000 bpd for the current quarter. on a per barrel basis, consolidated refinery gross margin was $7.23 per produced barrel, a 27% decrease compared to $9.91 for the fourth quarter of 2015. total operating expenses for the quarter were $258.7 million compared to $285.2 million for the fourth quarter of last year, and refining operating expenses averaged $5.51 per produced barrel sold compared to $6.40 per barrel for the same period of 2015. hollyfrontier’s president & ceo, george damiris, commented, "2016 presented a challenging refining environment for the industry as a whole and for hfc due to weak benchmark refining margins, rising rfs compliance costs and narrow crude differentials in the face of these macro challenges we continue to focus on what we can control. we have achieved approximately $300 million of the $700 million in annual ebitda improvements targeted by 2018. we also completed the largest acquisition in our company’s history with the addition of the petro-canada lubricants business. we look forward to realizing the benefits from combining this differentiated, high margin business with hollyfrontier.” for the fourth quarter of 2016, net cash provided by operations totaled $164.3 million. during the period, we declared a regular dividend of $0.33 per share to shareholders totaling approximately $58.8 million. at december 31, 2016, our combined balance of cash and short-term investments totaled $1.1 billion, and our consolidated debt was $2.2 billion. our debt, exclusive of holly energy partners' debt which is nonrecourse to hollyfrontier, was $991.2 million at december 31, 2016. in february 2017, we amended our credit agreement, increasing the credit facility size to $1.35 billion and extended the maturity to 2022. additionally, we paid $862.1 million in cash upon closing of our pcli acquisition on february 1, 2017. the company has scheduled a webcast conference call for today, february 22, 2017, 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=1131678. an audio archive of this webcast will be available using the above noted link through march 10, 2017. 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. additionally, hollyfrontier owns petro-canada lubricants inc. whose mississauga, ontario facility produces 15,600 bpd of base oils and other specialized lubricant products. a subsidiary of hollyfrontier also owns a 37% interest (including the general partner interest) in holly energy partners, l.p. the following is a “safe harbor” statement under the private securities litigation reform act of 1995: the statements in this press release relating to matters that are not historical facts are “forward-looking statements” based on management’s beliefs and assumptions using currently available information and expectations as of the date hereof, are not guarantees of future performance and involve certain risks and uncertainties, including those contained in our filings with the securities and exchange commission. although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that our expectations will prove correct. therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in such statements. any differences could be caused by a number of factors, including, but not limited to, risks and uncertainties with respect to the following: the actions of actual or potential competitive suppliers of refined petroleum products in the company’s markets; the ability to successfully integrate pcli's business with the company; 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) three months endeddecember 31, years endeddecember 31, balance sheet data segment information our operations are organized into two reportable segments, refining and hep. our operations that are not included in the refining and hep segments are included in corporate and other. intersegment transactions are eliminated in our consolidated financial statements and are included in consolidations and eliminations. the refining segment includes the operations of our el dorado, tulsa, navajo, cheyenne and woods cross refineries and 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. additionally, the refining segment includes specialty lubricant products produced at our tulsa refineries that are marketed throughout north america and are distributed in central and south america. hfc asphalt operates various terminals in arizona, new mexico and oklahoma. 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 (an hep consolidated subsidiary), a 50% ownership interest in each of the frontier pipeline, osage pipeline and cheyenne pipeline and a 25% ownership interest in the slc pipeline. revenues from the hep segment are earned through transactions with unaffiliated parties for pipeline transportation, rental and terminalling operations as well as revenues relating to pipeline transportation services provided for our refining operations. due to certain basis differences, our reported amounts for the hep segment may not agree to amounts reported in hep's periodic public filings. corporateand other consolidationsandeliminations consolidatedtotal refining operating data the following tables set forth information, including non-gaap performance measures about our refinery operations. the cost of products and 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 endeddecember 31, years endeddecember 31, 16 7 three months endeddecember 31, years endeddecember 31, three months endeddecember 31, years endeddecember 31, three months endeddecember 31, years endeddecember 31, represents crude charge divided by total crude capacity (bpsd). effective july 1, 2016, our consolidated crude capacity increased from 443,000 bpsd to 457,000 bpsd upon completion of our woods cross refinery expansion project. excludes lower of cost or market inventory valuation adjustments of $(97.7) million and $(291.9) million for the three months and year ended december 31, 2016, respectively and $143.6 million and $227.0 million for the three months and year ended december 31, 2015, respectively. represents operating expenses of our refineries, exclusive of depreciation and amortization. (10) represents refinery operating expenses, exclusive of depreciation and amortization, divided by refinery throughput. reconciliations to amounts reported under generally accepted accounting principles reconciliations of earnings before interest, taxes, depreciation and amortization (“ebitda”) and ebitda excluding “non-cash” lower of cost or market inventory valuation adjustments, goodwill and asset impairment charges and pcli pre-acquisition costs (“adjusted ebitda”) to amounts reported under generally accepted accounting principles 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 adjustment, (ii) goodwill and asset impairment charges and (iii) pcli pre-acquisition costs. ebitda and adjusted ebitda are not calculations provided for under gaap; 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. they 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 endeddecember 31, years endeddecember 31, (1) includes loss on early extinguishment of debt of $8.7 million and $1.4 million for the years ended december 31, 2016 and 2015, 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 barrel is the difference between average net sales price and average cost of products per barrel of produced refined products. net operating margin per barrel is the difference between refinery gross margin and refinery operating expenses per barrel of produced refined products. these two margins do not include the non-cash effects of lower of cost or market inventory valuation adjustments, goodwill and asset impairment charges and 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. refinery gross and net operating margins below are reconciliations to our consolidated statements of income for (i) net sales, cost of products sold (exclusive of lower of cost or market inventory valuation adjustment) and operating expenses, in each case averaged per produced barrel sold, and (ii) net operating margin and refinery gross margin. due to rounding of reported numbers, some amounts may not calculate exactly. reconciliation of produced product sales to total sales and other revenues three months endeddecember 31, years endeddecember 31, reconciliation of average cost of products per produced barrel sold to cost of products sold (exclusive of lower of cost or market inventory valuation adjustment) three months endeddecember 31, years endeddecember 31, reconciliation of average refinery operating expenses per produced barrel sold to total operating expenses three months endeddecember 31, years endeddecember 31, reconciliation of net operating margin per barrel to refinery gross margin per barrel to total sales and other revenues three months endeddecember 31, years endeddecember 31, 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, impairment charges and pcli pre-acquisition costs. 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 endeddecember 31, years endeddecember 31, reconciliation of effective tax rate to adjusted effective tax rate three months endeddecember 31, year endeddecember 31,
