-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JK/yZ/VvEHHPCHDH7gzjcr2Nxr4LAA0jgX8rOcoLFb4ksAcs5O3NWw0LP3/89QQa S2neVLnQAgHj7AaoLCkouA== 0000950134-08-014246.txt : 20080806 0000950134-08-014246.hdr.sgml : 20080806 20080806080343 ACCESSION NUMBER: 0000950134-08-014246 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20080806 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20080806 DATE AS OF CHANGE: 20080806 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOLLY CORP CENTRAL INDEX KEY: 0000048039 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 751056913 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03876 FILM NUMBER: 08993287 BUSINESS ADDRESS: STREET 1: 100 CRESCENT COURT STREET 2: SUITE 1600 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2148713555 MAIL ADDRESS: STREET 1: 100 CRESCENT COURT STREET 2: SUITE 1600 CITY: DALLAS STATE: TX ZIP: 75201 FORMER COMPANY: FORMER CONFORMED NAME: GENERAL APPLIANCE CORP DATE OF NAME CHANGE: 19680508 8-K 1 d59154e8vk.htm FORM 8-K e8vk
 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 6, 2008 (August 6, 2008)
 
HOLLY CORPORATION
(Exact name of Registrant as specified in its charter)
         
Delaware   001-03876   75-1056913
(State or other
jurisdiction of incorporation)
  (Commission File Number)   (I.R.S. Employer
Identification Number)
         
100 Crescent Court,
Suite 1600
Dallas, Texas
      75201-6915
(Zip code)
(Address of principal
executive offices)
       
Registrant’s telephone number, including area code: (214) 871-3555
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 


 

Item 2.02. Results of Operations and Financial Condition.
     The following information is furnished pursuant to Item 2.02, “Results of Operations and Financial Condition.”
     On August 6, 2008, Holly Corporation (the “Company”) issued a press release announcing the Company’s 2008 second quarter results. A copy of the Company’s press release is attached hereto as Exhibit 99.1 and incorporated herein in its entirety.
     In accordance with General Instruction B.2. of Form 8-K, the information furnished in this report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 (“Exchange Act”), or otherwise subject to the liabilities of that section, unless the Company specifically incorporates it by reference in a document filed under the Exchange Act or the Securities Act of 1933. By filing this report on Form 8-K and furnishing this information, the Company makes no admission as to the materiality of any information in this report, including Exhibit 99.1, or that any such information includes material investor information that is not otherwise publicly available.
     The information contained in this report on Form 8-K, including the information contained in Exhibit 99.1, is intended to be considered in the context of the Company’s Securities and Exchange Commission (“SEC”) filings and other public announcements that the Company may make, by press release or otherwise from time to time. The Company disclaims any current intention to revise or update the information contained in this report, including the information contained in Exhibit 99.1, although the Company may do so from time to time as its management believes is warranted. Any such updating may be made through the furnishing or filing of other reports or documents with the SEC, through press releases or through other public disclosure.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
  99.1   — Press Release of the Company issued August 6, 2008.*
 
*   Furnished herewith pursuant to Item 2.02.

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SIGNATURES
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
         
  HOLLY CORPORATION
 
 
  By:   /s/ Bruce R. Shaw    
    Bruce R. Shaw   
    Senior Vice President and
Chief Financial Officer 
 
 
Date: August 6, 2008

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EXHIBIT INDEX
         
Exhibit        
Number       Exhibit Title
 
       
99.1
    Press Release of the Company issued August 6, 2008.*
 
*   Furnished herewith pursuant to Item 2.02.

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EX-99.1 2 d59154exv99w1.htm PRESS RELEASE exv99w1
Exhibit 99.1
Press Release
   

   
August 6, 2008   (HOLLY LOGO)
Holly Corporation Reports Second Quarter Results
Dallas, Texas, August 6, 2008 — Holly Corporation (NYSE-HOC) (“Holly” or the “Company”) today reported second quarter net income of $11.5 million ($0.23 per basic and diluted share) compared to $158.6 million ($2.89 per basic and $2.84 per diluted share) for the same period of 2007. For the six months ended June 30, 2008, net income was $20.1 million ($0.40 per basic and $0.39 per diluted share) compared to $226.2 million ($4.11 per basic and $4.03 per diluted share) for the first six months of 2007.
Our refinery production levels decreased 15% and 4% for the three and six months ended June 30, 2008 as compared to the same periods in 2007, respectively, mainly as a result of reduced production at both our refineries during the second quarter of 2008. In May 2008, our Navajo Refinery experienced unplanned downtime for repairs to its fluid catalytic cracking unit (“FCC”) following an instrument control malfunction. This downtime not only lowered overall production levels in May but also reduced gross margins per barrel due to the substantial reduction in the yield of higher value products during the FCC outage. Additionally, our Woods Cross Refinery operated at reduced rates during the quarter primarily resulting from multiple power interruptions. We estimate that our refinery operating income for the second quarter was reduced by approximately $40.0 million, or $0.52 per share on a net tax basis as a result of downtime in the quarter.
Net income for both the second quarter and six months ended June 30, 2008 as compared to the prior year periods decreased due to reduced refined product margins combined with production declines, lower yields and higher operating expenses at our refineries. For the 2008 second quarter, overall refinery gross margins were $9.09 per produced barrel compared to $28.36 for the last year’s second quarter. For the first six months of 2008, our overall refinery gross margins were $8.35 per produced barrel compared to $22.35 for the first six months of 2007.
Sales and other revenues increased 43% for the three months ended June 30, 2008 and 50% for the six months ended June 30, 2008, as compared to the three and six months ended June 30, 2007, respectively, due principally to higher refined product sales prices. Cost of products sold increased 81% for the three months ended June 30, 2008 and 82% for the six months ended June 30, 2008, as compared to the three and six months ended June 30, 2007, respectively, due principally to higher crude oil acquisition costs. Operating expenses for both the three and six month periods increased primarily due to the inclusion of Holly Energy Partners, L.P. (NYSE-HEP) (“HEP”) operating costs beginning March 1, 2008, higher utility costs and increased maintenance costs associated with unplanned downtime.

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In February 2008, HEP acquired our crude pipelines and tankage assets. As a result of this transaction, we determined that our beneficial interest in HEP exceeds 50%, therefore, we reconsolidated HEP effective March 1, 2008. We no longer record our share of its earnings under the equity method of accounting. Accordingly, a significant increase in operating costs and expenses in the current year was due to the inclusion of $13.7 million of HEP’s operating expenses and $8.2 million of additional depreciation and amortization resulting from our consolidation of HEP. This press release includes key segment information that shows the impact of this reconsolidation on certain balance sheet and income statement amounts.
“To date, 2008 has been a challenging year. Although second quarter margins improved from first quarter levels, unplanned downtime prevented us from fully capitalizing on these higher margin levels. Despite the downtime, we remained profitable for the quarter, and we continue to have one of the strongest balance sheets among our peers,” said Matthew Clifton, Chairman of the Board and Chief Executive Officer of Holly. “Regarding our Woods Cross and Navajo expansion and crude flexibility capital projects, we continue to make substantial progress. In July, we announced a pipeline agreement with Centurion Pipeline L.P. to deliver heavy Canadian crude oil from Cushing, Oklahoma to a point located at Slaughter, Texas. We are proceeding with plans to construct a new 70 mile pipeline that will deliver this crude oil to our Navajo Refinery complex in New Mexico. Also, we expect to commence the start-up of the Woods Cross projects early in the fourth quarter and to be capable of operating at full capacity at year-end. These projects will ultimately help in improving our profitability at both refineries by reducing raw material costs. Additionally, we recently purchased a terminal and rail facility located near Cedar City, Utah that will serve as a key component of our UNEV joint venture pipeline project.”
The Company has scheduled a conference call for today, August 6, 2008 at 10:00AM EDT to discuss financial results. Listeners may access this call by dialing (888) 548-4639. The ID# for this call is 55825559. Listeners may access the call via the internet at: http://www.videonewswire.com/event.asp?id=49932. Additionally, listeners may replay this call approximately two hours after the call concludes by dialing (800) 642-1687. This audio archive will be available through August 20, 2008.
Holly Corporation, headquartered in Dallas, Texas, is an independent petroleum refiner and marketer that produces high value light products such as gasoline, diesel fuel and jet fuel. Holly operates through its subsidiaries an 85,000 BPSD refinery located in Artesia, New Mexico and a 26,000 BPSD refinery in Woods Cross, Utah. Also, a subsidiary of Holly owns a 46% interest (including the general partner interest) in Holly Energy Partners, L.P., which through subsidiaries owns or leases approximately 2,500 miles of petroleum product and crude oil gathering pipelines in Texas, New Mexico, Utah and Oklahoma, tankage and refined product terminals in several Southwest and Rocky Mountain states.
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

-6-


 

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. Such 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 regulations and policies, the availability and cost of financing to the Company, the effectiveness of the Company’s capital investments and marketing strategies, 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 Company’s efficiency in carrying out construction projects, 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.

-7-


 

RESULTS OF OPERATIONS
Financial Data (all information in this release is unaudited)
                                 
    Three Months Ended        
    June 30,     Change from 2007  
    2008     2007     Change     Percent  
    (In thousands, except per share data)  
Sales and other revenues
  $ 1,743,822     $ 1,216,997     $ 526,825       43.3 %
Operating costs and expenses:
                               
Cost of products sold (exclusive of depreciation, depletion and amortization)
    1,620,550       897,237       723,313       80.6  
Operating expenses (exclusive of depreciation, depletion and amortization)
    74,175       51,116       23,059       45.1  
General and administrative expenses (exclusive of depreciation, depletion and amortization)
    12,832       21,348       (8,516 )     (39.9 )
Depreciation, depletion and amortization
    15,929       10,641       5,288       49.7  
Exploration expenses, including dry holes
    110       105       5       4.8  
 
                         
Total operating costs and expenses
    1,723,596       980,447       743,149       75.8  
 
                         
 
                               
Income from operations
    20,226       236,550       (216,324 )     (91.4 )
Other income (expense):
                               
Equity in earnings of HEP
          4,954       (4,954 )     (100.0 )
Minority interest in earnings of HEP
    (493 )           (493 )      
Interest income
    3,826       3,550       276       7.8  
Interest expense
    (6,251 )     (291 )     (5,960 )     2,048.1  
 
                         
 
    (2,918 )     8,213       (11,131 )     (135.5 )
 
                         
Income from operations before income taxes
    17,308       244,763       (227,455 )     (92.9 )
Income tax provision
    5,856       86,136       (80,280 )     (93.2 )
 
                         
Net income
  $ 11,452     $ 158,627     $ (147,175 )     (92.8 )%
 
                         
 
                               
Net income per share — basic
  $ 0.23     $ 2.89     $ (2.66 )     (92.0 )%
 
                         
 
                               
Net income per share — diluted
  $ 0.23     $ 2.84     $ (2.61 )     (91.9 )%
 
                         
 
                               
Cash dividends declared per common share
  $ 0.15     $ 0.12     $ 0.03       25.0 %
 
                               
Average number of common shares outstanding:
                               
Basic
    50,158       54,959       (4,801 )     (8.7 )%
Diluted
    50,515       55,953       (5,438 )     (9.7 )%

-8-


 

                                 
    Six Months Ended        
    June 30,     Change from 2007  
    2008     2007     Change     Percent  
    (In thousands, except per share data)  
Sales and other revenues
  $ 3,223,806     $ 2,142,864     $ 1,080,942       50.4 %
Operating costs and expenses:
                               
Cost of products sold (exclusive of depreciation, depletion and amortization)
    3,003,987       1,648,951       1,355,036       82.2  
Operating expenses (exclusive of depreciation, depletion and amortization)
    134,883       101,245       33,638       33.2  
General and administrative expenses (exclusive of depreciation, depletion and amortization)
    25,664       37,195       (11,531 )     (31.0 )
Depreciation, depletion and amortization
    29,238       22,092       7,146       32.3  
Exploration expenses, including dry holes
    215       257       (42 )     (16.3 )
 
                         
Total operating costs and expenses
    3,193,987       1,809,740       1,384,247       76.5  
 
                         
 
                               
Income from operations
    29,819       333,124       (303,305 )     (91.0 )
Other income (expense):
                               
Equity in earnings of HEP
    2,990       8,300       (5,310 )     (64.0 )
Minority interest in earnings of HEP
    (1,295 )           (1,295 )     (100.0 )
Interest income
    7,381       6,110       1,271       20.8  
Interest expense
    (8,243 )     (543 )     (7,700 )     1,418.0  
 
                         
 
    833       13,867       (13,034 )     (94.0 )
 
                         
Income from operations before income taxes
    30,652       346,991       (316,339 )     (91.2 )
Income tax provision
    10,551       120,822       (110,271 )     (91.3 )
 
                         
Net income
  $ 20,101     $ 226,169     $ (206,068 )     (91.1 )%
 
                         
 
                               
Net income per share — basic
  $ 0.40     $ 4.11     $ (3.71 )     (90.3 )%
 
                         
 
                               
Net income per share — diluted
  $ 0.39     $ 4.03     $ (3.64 )     (90.3 )%
 
                         
 
                               
Cash dividends declared per common share
  $ 0.30     $ 0.22     $ 0.08       36.4 %
 
                               
Average number of common shares outstanding:
                               
Basic
    50,654       55,073       (4,419 )     (8.0 )%
Diluted
    51,015       56,079       (5,064 )     (9.0 )%
Balance Sheet Data
                 
    June 30,   December 31,
    2008   2007
    (In thousands)
Cash, cash equivalents and investments in marketable securities
  $ 297,912     $ 329,784  
Working capital
  $ 156,605     $ 216,541  
Total assets
  $ 2,442,871     $ 1,663,945  
Long-term debt – HEP
  $ 339,909     $  
Stockholders’ equity
  $ 480,373     $ 593,794  

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Segment Information
Our operations are currently 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 and include the operations of Holly Corporation, our parent company, and a small-scale oil and gas exploration and production program.
The Refining segment includes the operations of our Navajo Refinery, Woods Cross Refinery and Holly Asphalt Company. The Refining segment involves the purchase and refining of crude oil and wholesale and branded marketing of refined products, such as gasoline, diesel fuel and jet fuel, and includes our Navajo Refinery and Woods Cross Refinery. The petroleum products produced by the Refining segment are marketed in Texas, New Mexico, Arizona, Utah, Wyoming, Idaho, Washington and northern Mexico. The Refining segment also includes Holly Asphalt Company which manufactures and markets asphalt and asphalt products in Arizona, New Mexico, Texas and northern Mexico.
The HEP segment involves all of the operations of HEP effective March 1, 2008 (date of reconsolidation). HEP owns and operates a system of petroleum product and crude gathering pipelines in Texas, New Mexico, Oklahoma and Utah, distribution terminals in Texas, New Mexico, Arizona, Utah, Idaho, and Washington and refinery tankage in New Mexico and Utah. Revenues are generated by charging tariffs for transporting petroleum products and crude oil through their pipelines and by charging fees for terminalling petroleum products and other hydrocarbons, and storing and providing other services at their storage tanks and terminals. The HEP segment also includes a 70% interest in Rio Grande Pipeline Company (“Rio Grande”) which provides petroleum products transportation services. 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 and from HEP’s interest in Rio Grande.
                                         
                            Consolidations    
                    Corporate   and   Consolidated
    Refining   HEP   and Other   Eliminations   Total
    (In thousands)
Three Months Ended June 30, 2008
                                       
Sales and other revenues
  $ 1,736,201     $ 26,774     $ 886     $ (20,039 )   $ 1,743,822  
Operating expenses
  $ 64,183     $ 9,985     $ 7     $     $ 74,175  
General and administrative expenses
  $ (6 )   $ 1,359     $ 11,479     $     $ 12,832  
Depreciation and amortization
  $ 8,699     $ 6,220     $ 1,010     $     $ 15,929  
Income (loss) from operations
  $ 22,736     $ 9,210     $ (11,720 )   $     $ 20,226  
 
                                       
Three Months Ended June 30, 2007
                                       
Sales and other revenues
  $ 1,216,777     $     $ 114     $ 106     $ 1,216,997  
Operating expenses
  $ 51,113     $     $ 3     $     $ 51,116  
General and administrative expenses
  $ (3 )   $     $ 21,351     $     $ 21,348  
Depreciation and amortization
  $ 9,904     $     $ 737     $     $ 10,641  
Income (loss) from operations
  $ 258,632     $     $ (22,082 )   $     $ 236,550  

-10-


 

                                         
                            Consolidations    
                    Corporate   and   Consolidated
    Refining   HEP   and Other   Eliminations   Total
    (In thousands)
Six Months Ended June 30, 2008
                                       
Sales and other revenues
  $ 3,213,577     $ 36,716     $ 1,287     $ (27,774 )   $ 3,223,806  
Operating expenses
  $ 121,399     $ 13,661     $ 7     $ (184 )   $ 134,883  
General and administrative expenses
  $ 1     $ 1,881     $ 23,782     $     $ 25,664  
Depreciation and amortization
  $ 18,980     $ 8,230     $ 2,028     $     $ 29,238  
Income (loss) from operations
  $ 41,620     $ 12,944     $ (24,745 )   $     $ 29,819  
 
                                       
Six Months Ended June 30, 2007
                                       
Sales and other revenues
  $ 2,142,359     $     $ 505     $     $ 2,142,864  
Operating expenses
  $ 101,231     $     $ 14     $     $ 101,245  
General and administrative expenses
  $     $     $ 37,195     $     $ 37,195  
Depreciation and amortization
  $ 20,930     $     $ 1,162     $     $ 22,092  
Income (loss) from operations
  $ 371,247     $     $ (38,123 )   $     $ 333,124  
 
                                       
June 30, 2008
                                       
Cash, cash equivalents and investments in marketable securities
  $     $ 6,371     $ 291,541     $     $ 297,912  
Total assets
  $ 1,671,633     $ 451,937     $ 331,841     $ (12,540 )   $ 2,442,871  
Total debt
  $     $ 359,909     $     $     $ 359,909  
 
                                       
December 31, 2007
                                       
Cash, cash equivalents and investments in marketable securities
  $     $     $ 329,784     $     $ 329,784  
Total assets
  $ 1,271,163     $     $ 392,782     $     $ 1,663,945  

-11-


 

Refining Operating Data
Our refinery operations include the Navajo Refinery and the Woods Cross Refinery. The following tables set forth information, including non-GAAP performance measures about our refinery operations. The cost of products and refinery gross margin do not include the effect of depreciation, depletion and amortization. Reconciliations to amounts reported under GAAP are provided under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” below.
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2008     2007     2008     2007  
Navajo Refinery
                               
Crude charge (BPD) (1)
    72,800       82,730       78,000       79,790  
Refinery production (BPD) (2)
    76,960       90,940       85,800       88,540  
Sales of produced refined products (BPD)
    79,910       90,660       86,980       88,040  
Sales of refined products (BPD) (3)
    88,720       100,840       97,070       98,610  
 
                               
Refinery utilization (4)
    85.6 %     99.7 %     91.8 %     96.1 %
 
                               
Average per produced barrel (5)
                               
Net sales
  $ 133.89     $ 93.17     $ 117.33     $ 84.69  
Cost of products (6)
    125.82       65.63       110.15       62.45  
 
                       
Refinery gross margin
    8.07       27.54       7.18       22.24  
Refinery operating expenses (7)
    5.68       4.26       4.98       4.22  
 
                       
Net operating margin
  $ 2.39     $ 23.28     $ 2.20     $ 18.02  
 
                       
 
                               
Feedstocks:
                               
Sour crude oil
    83 %     78 %     81 %     76 %
Sweet crude oil
    10 %     10 %     9 %     10 %
Other feedstocks and blends
    7 %     12 %     10 %     14 %
 
                       
Total
    100 %     100 %     100 %     100 %
 
                       
 
                               
Sales of produced refined products:
                               
Gasolines
    55 %     58 %     57 %     59 %
Diesel fuels
    34 %     30 %     33 %     29 %
Jet fuels
    1 %     3 %     1 %     3 %
Fuel oil
    3 %     3 %     3 %     3 %
Asphalt
    4 %     3 %     3 %     3 %
LPG and other
    3 %     3 %     3 %     3 %
 
                       
Total
    100 %     100 %     100 %     100 %
 
                       
 
                               
Woods Cross Refinery
                               
Crude charge (BPD) (1)
    23,980       25,800       24,470       25,230  
Refinery production (BPD) (2)
    23,540       27,280       24,490       26,920  
Sales of produced refined products (BPD)
    23,790       26,130       24,550       27,120  
Sales of refined products (BPD) (3)
    24,490       26,230       26,010       27,390  
 
                               
Refinery utilization (4)
    92.2 %     99.2 %     94.1 %     97.0 %
 
                               
Average per produced barrel (5)
                               
Net sales
  $ 133.09     $ 96.51     $ 117.56     $ 83.67  
Cost of products (6)
    120.60       65.29       105.05       60.95  
 
                       
Refinery gross margin
    12.49       31.22       12.51       22.72  
Refinery operating expenses (7)
    8.13       4.22       7.17       4.50  
 
                       
Net operating margin
  $ 4.36     $ 27.00     $ 5.34     $ 18.22  
 
                       

-12-


 

                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2008     2007     2008     2007  
Woods Cross Refinery
                               
Feedstocks:
                               
Sour crude oil
    %     2 %     2 %     1 %
Sweet crude oil
    98 %     90 %     94 %     90 %
Other feedstocks and blends
    2 %     8 %     4 %     9 %
 
                       
Total
    100 %     100 %     100 %     100 %
 
                       
 
                               
Sales of produced refined products:
                               
Gasolines
    62 %     58 %     65 %     61 %
Diesel fuels
    29 %     31 %     26 %     28 %
Jet fuels
    %     3 %     %     2 %
Fuel oil
    6 %     7 %     5 %     7 %
Asphalt
    2 %     %     1 %     %
LPG and other
    1 %     1 %     3 %     2 %
 
                       
Total
    100 %     100 %     100 %     100 %
 
                       
 
                               
Consolidated
                               
Crude charge (BPD) (1)
    96,780       108,530       102,470       105,020  
Refinery production (BPD) (2)
    100,500       118,220       110,290       115,460  
Sales of produced refined products (BPD)
    103,700       116,790       111,530       115,160  
Sales of refined products (BPD) (3)
    113,210       127,070       123,080       126,000  
 
                               
Refinery utilization (4)
    87.2 %     99.6 %     92.3 %     96.3 %
 
                               
Average per produced barrel (5)
                               
Net sales
  $ 133.71     $ 93.92     $ 117.38     $ 84.45  
Cost of products (6)
    124.62       65.56       109.03       62.10  
 
                       
Refinery gross margin
    9.09       28.36       8.35       22.35  
Refinery operating expenses (7)
    6.24       4.25       5.46       4.29  
 
                       
Net operating margin
  $ 2.85     $ 24.11     $ 2.89     $ 18.06  
 
                       
 
                               
Feedstocks:
                               
Sour crude oil
    63 %     60 %     63 %     59 %
Sweet crude oil
    31 %     28 %     28 %     29 %
Other feedstocks and blends
    6 %     12 %     9 %     12 %
 
                       
Total
    100 %     100 %     100 %     100 %
 
                       
 
                               
Sales of produced refined products:
                               
Gasolines
    56 %     58 %     58 %     59 %
Diesel fuels
    32 %     30 %     31 %     29 %
Jet fuels
    1 %     3 %     1 %     3 %
Fuel oil
    4 %     4 %     4 %     4 %
Asphalt
    4 %     2 %     3 %     2 %
LPG and other
    3 %     3 %     3 %     3 %
 
                       
Total
    100 %     100 %     100 %     100 %
 
                       
 
(1)   Crude charge represents the barrels per day of crude oil processed at the crude units at our refineries.
 
(2)   Refinery production represents the barrels per day of refined products yielded from processing crude and other refinery feedstocks through the crude units and other conversion units at our refineries.
 
(3)   Includes refined products purchased for resale.
 
(4)   Represents crude charge divided by total crude capacity (BPSD). Our consolidated crude capacity was increased from 109,000 BPSD to 111,000 BPSD in mid-year 2007.
 
(5)   Represents average per barrel amount for produced refined products 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)   Transportation costs billed from HEP are included in cost of products.
 
(7)   Represents operating expenses of our refineries, exclusive of depreciation, depletion, and amortization.

-13-


 

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 in financial statements.
Earnings before interest, taxes, depreciation and amortization, which we refer to as EBITDA, is calculated as net income plus (i) interest expense net of interest income, (ii) income tax provision, and (iii) depreciation, depletion and amortization. EBITDA is not a calculation based upon 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.
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2008     2007     2008     2007  
            (In thousands)          
Income
  $ 11,452     $ 158,627     $ 20,101     $ 226,169  
Add provision for income tax
    5,856       86,136       10,551       120,822  
Add interest expense
    6,251       291       8,243       543  
Subtract interest income
    (3,826 )     (3,550 )     (7,381 )     (6,110 )
Add depreciation and amortization
    15,929       10,641       29,238       22,092  
 
                       
EBITDA
  $ 35,662     $ 252,145     $ 60,752     $ 363,516  
 
                       
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.
We calculate refinery gross margin and net operating margin using net sales, cost of products and operating expenses, in each case averaged per produced barrel sold. These two margins do not include the effect of depreciation, depletion and amortization. Each of these component performance measures can be reconciled directly to our Statements of Income.
Other companies in our industry may not calculate these performance measures in the same manner.

-14-


 

Refinery Gross Margin
Refinery gross margin per barrel is the difference between average net sales price and average cost of products per barrel of produced refined products. Refinery gross margin for each of our refineries and for both of our refineries on a consolidated basis is calculated as shown below.
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2008     2007     2008     2007  
Average per produced barrel:
                               
 
Navajo Refinery
                               
Net sales
  $ 133.89     $ 93.17     $ 117.33     $ 84.69  
Less cost of products
    125.82       65.63       110.15       62.45  
 
                       
Refinery gross margin
  $ 8.07     $ 27.54     $ 7.18     $ 22.24  
 
                       
 
                               
Woods Cross Refinery
                               
Net sales
  $ 133.09     $ 96.51     $ 117.56     $ 83.67  
Less cost of products
    120.60       65.29       105.05       60.95  
 
                       
Refinery gross margin
  $ 12.49     $ 31.22     $ 12.51     $ 22.72  
 
                       
 
                               
Consolidated
                               
Net sales
  $ 133.71     $ 93.92     $ 117.38     $ 84.45  
Less cost of products
    124.62       65.56       109.03       62.10  
 
                       
Refinery gross margin
  $ 9.09     $ 28.36     $ 8.35     $ 22.35  
 
                       
Net Operating Margin
Net operating margin per barrel is the difference between refinery gross margin and refinery operating expenses per barrel of produced refined products. Net operating margin for each of our refineries and for both of our refineries on a consolidated basis is calculated as shown below.
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2008     2007     2008     2007  
Average per produced barrel:
                               
 
                               
Navajo Refinery
                               
Refinery gross margin
  $ 8.07     $ 27.54     $ 7.18     $ 22.24  
Less refinery operating expenses
    5.68       4.26       4.98       4.22  
 
                       
Net operating margin
  $ 2.39     $ 23.28     $ 2.20     $ 18.02  
 
                       
 
                               
Woods Cross Refinery
                               
Refinery gross margin
  $ 12.49     $ 31.22     $ 12.51     $ 22.72  
Less refinery operating expenses
    8.13       4.22       7.17       4.50  
 
                       
Net operating margin
  $ 4.36     $ 27.00     $ 5.34     $ 18.22  
 
                       
 
                               
Consolidated
                               
Refinery gross margin
  $ 9.09     $ 28.36     $ 8.35     $ 22.35  
Less refinery operating expenses
    6.24       4.25       5.46       4.29  
 
                       
Net operating margin
  $ 2.85     $ 24.11     $ 2.89     $ 18.06  
 
                       
Below are reconciliations to our Consolidated Statements of Income for (i) net sales, cost of products 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.

-15-


 

Reconciliations of refined product sales from produced products sold to total sales and other revenue
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2008     2007     2008     2007  
Navajo Refinery
                               
Average sales price per produced barrel sold
  $ 133.89     $ 93.17     $ 117.33     $ 84.69  
Times sales of produced refined products sold (BPD)
    79,910       90,660       86,980       88,040  
Times number of days in period
    91       91       182       181  
 
                       
Refined product sales from produced products sold
  $ 973,623     $ 768,658     $ 1,857,376     $ 1,349,555  
 
                       
 
                               
Woods Cross Refinery
                               
Average sales price per produced barrel sold
  $ 133.09     $ 96.51     $ 117.56     $ 83.67  
Times sales of produced refined products sold (BPD)
    23,790       26,130       24,550       27,120  
Times number of days in period
    91       91       182       181  
 
                       
Refined product sales from produced products sold
  $ 288,125     $ 229,484     $ 525,270     $ 410,713  
 
                       
 
                               
Sum of refined products sales from produced products sold from our two refineries (4)
  $ 1,261,748     $ 998,142     $ 2,382,646     $ 1,760,268  
Add refined product sales from purchased products and rounding(1)
    120,310       91,747       255,556       171,093  
 
                       
Total refined products sales
    1,382,058       1,089,889       2,638,202       1,931,361  
Add direct sales of excess crude oil(2)
    314,486       91,843       517,437       153,523  
Add other refining segment revenue(3)
    39,657       35,045       57,938       57,475  
 
                       
Total refining segment revenue
    1,736,201       1,216,777       3,213,577       2,142,359  
Add HEP segment sales and other revenue
    26,774             36,716        
Add corporate and other revenues
    886       114       1,287       505  
Subtract consolidations and eliminations
    (20,039 )     106       (27,774 )      
 
                       
Sales and other revenues
  $ 1,743,822     $ 1,216,997     $ 3,223,806     $ 2,142,864  
 
                       
 
(1)   We purchase finished products when opportunities arise that provide a profit on the sale of such products, or to meet delivery commitments.
 
(2)   We purchase crude oil that at times exceeds the supply needs of our refineries. Quantities in excess of our needs are sold at market prices to purchasers of crude oil that are recorded on a gross basis with the sales price recorded as revenues and the corresponding acquisition cost as inventory and then upon sale as cost of products sold. Additionally, we enter into buy/sell exchanges of crude oil with certain parties to facilitate the delivery of quantities to certain locations that are netted at carryover cost.
 
(3)   Other refining segment revenue includes the revenues associated with Holly Asphalt Company and revenue derived from sulfur credit sales.
 
(4)   The above calculations of refined product sales from produced products sold can also be computed on a consolidated basis. These amounts may not calculate exactly due to rounding of reported numbers.
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2008     2007     2008     2007  
Average sales price per produced barrel sold
  $ 133.71     $ 93.92     $ 117.38     $ 84.45  
Times sales of produced refined products sold (BPD)
    103,700       116,790       111,530       115,160  
Times number of days in period
    91       91       182       181  
 
                       
Refined product sales from produced products sold
  $ 1,261,748     $ 998,142     $ 2,382,646     $ 1,760,268  
 
                       
Reconciliation of average cost of products per produced barrel sold to total costs of products sold
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2008     2007     2008     2007  
Navajo Refinery
                               
Average cost of products per produced barrel sold
  $ 125.82     $ 65.63     $ 110.15     $ 62.45  
Times sales of produced refined products sold (BPD)
    79,910       90,660       86,980       88,040  
Times number of days in period
    91       91       182       181  
 
                       
Cost of products for produced products sold
  $ 914,939     $ 541,451     $ 1,743,714     $ 995,156  
 
                       

-16-


 

                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2008     2007     2008     2007  
Woods Cross Refinery
                               
Average cost of products per produced barrel sold
  $ 120.60     $ 65.29     $ 105.05     $ 60.95  
Times sales of produced refined products sold (BPD)
    23,790       26,130       24,550       27,120  
Times number of days in period
    91       91       182       181  
 
                       
Cost of products for produced products sold
  $ 261,086     $ 155,249     $ 469,374     $ 299,186  
 
                       
 
                               
Sum of cost of products for produced products sold from our two refineries (4)
  $ 1,176,025     $ 696,700     $ 2,213,088     $ 1,294,342  
Add refined product costs from purchased products sold and rounding (1)
    123,226       86,404       258,415       168,556  
 
                       
Total refined cost of products sold
    1,299,251       783,104       2,471,503       1,462,898  
Add crude oil cost of direct sales of excess crude oil(2)
    311,963       92,054       514,176       153,906  
Add other refining segment costs of products sold(3)
    29,375       21,973       45,898       32,147  
 
                       
Total refining segment cost of products sold
    1,640,589       897,131       3,031,577       1,648,951  
Subtract consolidations and eliminations
    (20,039 )     106       (27,590 )      
 
                       
Costs of products sold (exclusive of depreciation, depletion and amortization)
  $ 1,620,550     $ 897,237     $ 3,003,987     $ 1,648,951  
 
                       
 
(1)   We purchase finished products when opportunities arise that provide a profit on the sale of such products, or to meet delivery commitments.
 
(2)   We purchase crude oil that at times exceeds the supply needs of our refineries. Quantities in excess of our needs are sold at market prices to purchasers of crude oil that are recorded on a gross basis with the sales price recorded as revenues and the corresponding acquisition cost as inventory and then upon sale as cost of products sold. Additionally, we enter into buy/sell exchanges of crude oil with certain parties to facilitate the delivery of quantities to certain locations that are netted at carryover cost.
 
(3)   Other refining segment cost of products sold includes the cost of products for Holly Asphalt Company and costs attributable to sulfur credit sales.
 
(4)   The above calculations of costs of products from produced products sold can also be computed on a consolidated basis. These amounts may not calculate exactly due to rounding of reported numbers.
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2008     2007     2008     2007  
Average cost of products per produced barrel sold
  $ 124.62     $ 65.56     $ 109.03     $ 62.10  
Times sales of produced refined products sold (BPD)
    103,700       116,790       111,530       115,160  
Times number of days in period
    91       91       182       181  
 
                       
Cost of products for produced products sold
  $ 1,176,025     $ 696,700     $ 2,213,088     $ 1,294,342  
 
                       
Reconciliation of average refinery operating expenses per produced barrel sold to total operating expenses
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2008     2007     2008     2007  
Navajo Refinery
                               
Average refinery operating expenses per produced barrel sold
  $ 5.68     $ 4.26     $ 4.98     $ 4.22  
Times sales of produced refined products sold (BPD)
    79,910       90,660       86,980       88,040  
Times number of days in period
    91       91       182       181  
 
                       
Refinery operating expenses for produced products sold
  $ 41,304     $ 35,145     $ 78,835     $ 67,247  
 
                       
 
                               
Woods Cross Refinery
                               
Average refinery operating expenses per produced barrel sold
  $ 8.13     $ 4.22     $ 7.17     $ 4.50  
Times sales of produced refined products sold (BPD)
    23,790       26,130       24,550       27,120  
Times number of days in period
    91       91       182       181  
 
                       
Refinery operating expenses for produced products sold
  $ 17,601     $ 10,034     $ 32,036     $ 22,089  
 
                       

-17-


 

                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2008     2007     2008     2007  
Sum of refinery operating expenses per produced products sold from our two refineries (2)
  $ 58,905     $ 45,179     $ 110,871     $ 89,336  
Add other refining segment operating expenses and rounding (1)
    5,278       5,934       10,528       11,895  
 
                       
Total refining segment operating expenses
    64,183       51,113       121,399       101,231  
Add HEP segment operating expenses
    9,985             13,661        
Add corporate and other costs
    7       3       (177 )     14  
 
                       
Operating expenses (exclusive of depreciation, depletion and amortization)
  $ 74,175     $ 51,116     $ 134,883     $ 101,245  
 
                       
 
(1)   Other refining segment operating expenses include the marketing costs associated with our refining segment and the operating expenses of Holly Asphalt Company.
 
(2)   The above calculations of refinery operating expenses from produced products sold can also be computed on a consolidated basis. These amounts may not calculate exactly due to rounding of reported numbers.
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2008     2007     2008     2007  
Average refinery operating expenses per produced barrel sold
  $ 6.24     $ 4.25     $ 5.46     $ 4.29  
Times sales of produced refined products sold (BPD)
    103,700       116,790       111,530       115,160  
Times number of days in period
    91       91       182       181  
 
                       
Refinery operating expenses for produced products sold
  $ 58,905     $ 45,179     $ 110,871     $ 89,336  
 
                       
Reconciliation of net operating margin per barrel to refinery gross margin per barrel to total sales and other revenues
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2008     2007     2008     2007  
Navajo Refinery
                               
Net operating margin per barrel
  $ 2.39     $ 23.28     $ 2.20     $ 18.02  
Add average refinery operating expenses per produced barrel
    5.68       4.26       4.98       4.22  
 
                       
Refinery gross margin per barrel
    8.07       27.54       7.18       22.24  
Add average cost of products per produced barrel sold
    125.82       65.63       110.15       62.45  
 
                       
Average net sales per produced barrel sold
  $ 133.89     $ 93.17     $ 117.33     $ 84.69  
Times sales of produced refined products sold (BPD)
    79,910       90,660       86,980       88,040  
Times number of days in period
    91       91       182       181  
 
                       
Refined products sales from produced products sold
  $ 973,623     $ 768,658     $ 1,857,376     $ 1,349,555  
 
                       
 
                               
Woods Cross Refinery
                               
Net operating margin per barrel
  $ 4.36     $ 27.00     $ 5.34     $ 18.22  
Add average refinery operating expenses per produced barrel
    8.13       4.22       7.17       4.50  
 
                       
Refinery gross margin per barrel
    12.49       31.22       12.51       22.72  
Add average cost of products per produced barrel sold
    120.60       65.29       105.05       60.95  
 
                       
Average net sales per produced barrel sold
  $ 133.09     $ 96.51     $ 117.56     $ 83.67  
Times sales of produced refined products sold (BPD)
    23,790       26,130       24,550       27,120  
Times number of days in period
    91       91       182       181  
 
                       
Refined products sales from produced products sold
  $ 288,125     $ 229,484     $ 525,270     $ 410,713  
 
                       
 
                               
Sum of refined products sales from produced products sold from our two refineries (4)
  $ 1,261,748     $ 998,142     $ 2,382,646     $ 1,760,268  
Add refined product sales from purchased products and rounding (1)
    120,310       91,747       255,556       171,093  
 
                       
Total refined products sales
    1,382,058       1,089,889       2,638,202       1,931,361  
Add direct sales of excess crude oil(2)
    314,486       91,843       517,437       153,523  
Add other refining segment revenue (3)
    39,657       35,045       57,938       57,475  
 
                       
Total refining segment revenue
    1,736,201       1,216,777       3,213,577       2,142,359  
Add HEP segment sales and other revenues
    26,774             36,716        
Add corporate and other revenues
    886       114       1,287       505  
Subtract consolidations and eliminations
    (20,039 )     106       (27,774 )      
 
                       
Sales and other revenues
  $ 1,743,822     $ 1,216,997     $ 3,223,806     $ 2,142,864  
 
                       

-18-


 

 
(1)   We purchase finished products when opportunities arise that provide a profit on the sale of such products or to meet delivery commitments.
 
(2)   We purchase crude oil that at times exceeds the supply needs of our refineries. Quantities in excess of our needs are sold at market prices to purchasers of crude oil that are recorded on a gross basis with the sales price recorded as revenues and the corresponding acquisition cost as inventory and then upon sale as cost of products sold. Additionally, we enter into buy/sell exchanges of crude oil with certain parties to facilitate the delivery of quantities to certain locations that are netted at carryover cost.
 
(3)   Other refining segment revenue includes the revenues associated with Holly Asphalt Company and revenue derived from sulfur credit sales.
 
(4)   The above calculations of refined product sales from produced products sold can also be computed on a consolidated basis. These amounts may not calculate exactly due to rounding of reported numbers.
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2008     2007     2008     2007  
Net operating margin per barrel
  $ 2.85     $ 24.11     $ 2.89     $ 18.06  
Add average refinery operating expenses per produced barrel
    6.24       4.25       5.46       4.29  
 
                       
Refinery gross margin per barrel
    9.09       28.36       8.35       22.35  
Add average cost of products per produced barrel sold
    124.62       65.56       109.03       62.10  
 
                       
Average sales price per produced barrel sold
  $ 133.71     $ 93.92     $ 117.38     $ 84.45  
Times sales of produced refined products sold (BPD)
    103,700       116,790       111,530       115,160  
Times number of days in period
    91       91       182       181  
 
                       
Refined product sales from produced products sold
  $ 1,261,748     $ 998,142     $ 2,382,646     $ 1,760,268  
 
                       
FOR FURTHER INFORMATION, Contact:
Bruce R, Shaw, Senior Vice President and
     Chief Financial Officer
M. Neale Hickerson, Vice President,
     Investor Relations
Holly Corporation
214/871-3555

-19-

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