Hollyfrontier corporation reports quarterly
results and announces regular cash dividend
Dallas--(business wire)--hollyfrontier corporation (nyse:hfc) (“hollyfrontier” or the “company”) today reported a second quarter net loss attributable to hollyfrontier stockholders of $(409.4) million or $(2.33) per diluted share for the quarter ended june 30, 2016, compared to net income attributable to hollyfrontier stockholders of $360.8 million or $1.88 per diluted share for the quarter ended june 30, 2015. included in the current quarter results were non-cash items consisting of goodwill and long-lived asset impairment charges, offset by an inventory reserve adjustment. these non-cash items include $309.3 million of goodwill and $344.8 million of long-lived asset write-downs related to our cheyenne refinery, offset by a $138.5 million benefit attributable to the change in our lower of cost or market reserve. excluding these non-cash items, adjusted net income attributable to hollyfrontier stockholders for second quarter of 2016 was $49.0 million, or $0.28 per share. a reconciliation of actual to adjusted amounts are shown in the accompanying reconciliations to amounts reported under generally accepted accounting principles tables. hollyfrontier also announced today that its board of directors declared a regular quarterly dividend of $0.33 per share. this dividend will be paid on september 23, 2016 to holders of record of common stock on august 23, 2016. for the second quarter, net income attributable to our stockholders, exclusive of impairment and lower of cost or market inventory valuation adjustments and related tax effects, decreased by $224.0 million compared to the same period of 2015, principally reflecting lower refining margins. production levels averaged approximately 443,000 barrels per day ("bpd") and crude oil charges averaged 429,000 bpd for the current quarter. on a per barrel basis, consolidated refinery gross margin was $8.88 per produced barrel, a 49% decrease compared to $17.42 for the second quarter of 2015. total operating expenses for the quarter were $251.3 million compared to $246.2 million for the second quarter of last year, and refining operating expenses averaged $5.51 per produced barrel sold compared to $5.14 per barrel for the same period of 2015. hollyfrontier’s president & ceo, george damiris, commented, “we incurred $57.0 million in costs during the second quarter associated with purchasing renewable identification numbers ("rins") to comply with the epa’s renewable fuel standard program. along with others in our industry and our trade association, afpm, we are advocating for the epa to level the playing field by moving the point of obligation to include currently exempt parties who, unlike merchant refiners, control blending and can therefore increase biofuel usage in keeping with the intent of the rfs program. the current misalignment in the point of obligation also unfairly allows exempt blenders to extract unintended windfall profits from the sale of rins to obligated refiners as well as speculators who contribute to rin prices far exceeding the cost of blending." "second quarter earnings were impacted by weak benchmark refining margins, falling secondary product margins and increasing costs associated with the rfs mandate," damiris said. "despite strong demand fundamentals, summer gasoline margins have been disappointing due to supply outpacing demand. the combination of higher industry throughputs, a 2% increase in gasoline yield across the u.s. refining system, and rising imports have driven gasoline inventories 11% above last year. we are focused on things we can control; running our refineries safely and reliably and reining in operating and capital spending. overall, hollyfrontier is well positioned to withstand the current operating environment and exploit potential opportunities given our complex refineries in advantaged markets, strong balance sheet, and excellent liquidity position.” for the second quarter of 2016, net cash provided by operations totaled $303.7 million. during the period , we declared a dividend of $0.33 per share to shareholders totaling $58.2 million. at june 30, 2016, our combined balance of cash and short-term investments totaled $533.3 million and our consolidated debt was $1,678.1 million. our debt, exclusive of holly energy partners' debt, which is nonrecourse to hollyfrontier, was $595.0 million at june 30, 2016. the company has scheduled a webcast conference call for today, august 3, 2016, 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=1109619. an audio archive of this webcast will be available using the above noted link through august 17, 2016. 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. a subsidiary of hollyfrontier also owns a 39% 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 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 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 asphalt 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 the unev pipeline (an hep consolidated subsidiary), a 50% ownership interest in each of the frontier pipeline, osage pipeline and the cheyenne pipeline and a 25% ownership interest in 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. corporate and other consolidations and eliminations consolidated total 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. reconciliations to amounts reported under generally accepted accounting principles reconciliations of earnings before interest, taxes, depreciation and amortization (“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. ebitda is not a calculation provided for under accounting principles generally accepted in the united states; however, the amounts included in the ebitda calculation are derived from amounts included in our consolidated financial statements. ebitda should not be considered as an alternative 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 is not necessarily comparable to similarly titled measures of other companies. ebitda is presented here because it is a widely used financial indicator used by investors and analysts to measure performance. ebitda is also used by our management for internal analysis and as a basis for financial covenants. set forth below is our calculation of ebitda. (1) includes loss on early extinguishment of debt of $1.4 million for the three months ended june 30, 2015 and $8.7 million and $1.4 million for the six months ended june 30, 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, depreciation and amortization or goodwill and asset impairment charges. 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 refined product sales to total sales and other revenues 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) reconciliation of average refinery operating expenses per produced barrel sold to total operating expenses reconciliation of net operating margin per barrel to refinery gross margin per barrel to total sales and other revenues 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 and impairment charges. 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 three months ended june 30, six months ended june 30,
