- Reported net income attributable to HollyFrontier stockholders
of $148.2 million, or $0.90 per diluted share, and adjusted net
loss of $(85.3) million, or $(0.53) per diluted share, for the
first quarter
- Reported EBITDA of $281.3 million and Adjusted EBITDA of $47.3
million for the first quarter
HollyFrontier Corporation (NYSE:HFC) (“HollyFrontier” or the
“Company”) today reported first quarter net income attributable to
HollyFrontier stockholders of $148.2 million, or $0.90 per diluted
share, for the quarter ended March 31, 2021, compared to a net loss
of $(304.6) million, or $(1.88) per diluted share, for the quarter
ended March 31, 2020.
The first quarter results reflect special items that
collectively increased net income by a total of $233.5 million. On
a pre-tax basis, these items include a lower of cost or market
inventory valuation adjustment of $200.0 million and a $51.5
million gain on a tariff settlement, partially offset by severance
costs of $7.8 million related to restructuring in our Lubricants
and Specialty Products segment and charges related to the Cheyenne
Refinery conversion to renewable diesel production, including
decommissioning charges of $8.3 million, last-in, first-out
(“LIFO”) inventory liquidation costs of $0.9 million and severance
charges totaling $0.5 million. Excluding these items, net loss for
the current quarter was $(85.3) million ($(0.53) per diluted share)
compared to net income of $86.5 million ($0.53 per diluted share)
for the first quarter of 2020, which excludes certain items that
collectively decreased net income by $391.1 million.
HollyFrontier’s President & CEO, Michael Jennings,
commented, “A record earnings quarter in our Lubricants and
Specialties business, as well as steady performance from HEP,
helped offset the impacts of heavy planned maintenance and winter
storm Uri on our refining segment during the quarter. As we enter
the summer, our focus remains on safely completing the build-out of
our Renewables business on schedule.”
The Refining segment reported Adjusted EBITDA of $(65.8) million
for the first quarter of 2021 compared to $175.9 million for the
first quarter of 2020. This decrease was driven by the impacts of
planned maintenance and winter storm Uri on our operations and
lower realized margins along with higher laid-in crude costs, which
resulted in a consolidated refinery gross margin of $8.00 per
produced barrel, a 28% decrease compared to $11.06 for the first
quarter of 2020. Crude oil charge averaged 348,170 barrels per day
(“BPD”) for the current quarter compared to 392,630 BPD for the
first quarter of 2020.
The Lubricants and Specialty Products segment reported EBITDA of
$87.1 million for the first quarter of 2021 compared to $32.3
million in the first quarter of 2020. Excluding the $7.8 million
related to restructuring in our Lubricants and Specialty Products
segment, Adjusted EBITDA was $94.9 million. This increase was
driven by strong base oil margins in the first quarter of 2021.
Holly Energy Partners, L.P. (“HEP”) reported EBITDA of $96.2
million for the first quarter of 2021 compared to $64.4 million in
the first quarter of 2020.
For the first quarter of 2021, net cash provided by operations
totaled $62.3 million. During the period, HollyFrontier declared
and paid a dividend of $0.35 per share to shareholders totaling
$57.7 million. At March 31, 2021, the Company's cash and cash
equivalents totaled $1,193.4 million, a $174.9 million decrease
over cash and cash equivalents of $1,368.3 million at December 31,
2020. Additionally, the Company's consolidated debt was $3,126.1
million. The Company’s debt, exclusive of HEP debt, which is
nonrecourse to HollyFrontier, was $1,737.8 million at March 31,
2021.
The Company has scheduled a webcast conference call for today,
May 5, 2021, at 8:30 AM Eastern Time to discuss first quarter
financial results. This webcast may be accessed at:
https://event.on24.com/wcc/r/3081846/EF98CFA2BFD7FDCC6F3E486A1640262F.
An audio archive of this webcast will be available using the above
noted link through May 19, 2021.
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 owns and operates refineries
located in Kansas, Oklahoma, New Mexico and Utah and 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 produces base
oils and other specialized lubricants in the U.S., Canada and the
Netherlands, and exports products to more than 80 countries.
HollyFrontier also owns a 57% limited partner interest and a
non-economic general partner interest in Holly Energy Partners,
L.P., a master limited partnership that provides petroleum product
and crude oil transportation, terminalling, storage and throughput
services to the petroleum industry, including HollyFrontier
Corporation subsidiaries.
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.
Forward-looking statements use words such as “anticipate,”
“project,” “expect,” “plan,” “goal,” “forecast,” “intend,”
“should,” “would,” “could,” “believe,” “may,” and similar
expressions and statements regarding our plans and objectives for
future operations. 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, the Company’s ability to successfully close the
pending Puget Sound refinery transaction, or, once closed,
integrate the operation of the Puget Sound refinery with our
existing operations; the extraordinary market environment and
effects of the COVID-19 pandemic, including a significant decline
in demand for refined petroleum products in markets that the
Company serves; risks and uncertainties with respect to the actions
of actual or potential competitive suppliers and transporters of
refined petroleum products or lubricant and specialty products in
the Company’s markets; the spread between market prices for refined
products and market prices for crude oil; the possibility of
constraints on the transportation of refined products or lubricant
and specialty products; the possibility of inefficiencies,
curtailments or shutdowns in refinery operations or pipelines,
whether due to infection in the workforce or in response to
reductions in demand; the effects of current and/or future
governmental and environmental regulations and policies, including
the effects of current and/or future restrictions on various
commercial and economic activities in response to the COVID-19
pandemic; 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 and
consummating construction projects, including the Company's ability
to complete announced capital projects, such as the conversion of
the Cheyenne Refinery to a renewable diesel facility and the
construction of the Artesia renewable diesel unit and pretreatment
unit, on time and within budget; the Company's ability to timely
obtain or maintain permits, including those necessary for
operations or capital projects; the ability of the Company to
acquire refined or lubricant product operations or pipeline and
terminal operations on acceptable terms and to integrate any
existing or future acquired operations; the possibility of
terrorist or cyberattacks and the consequences of any such attacks;
general economic conditions, including uncertainty regarding the
timing, pace and extent of an economic recovery in the United
States; continued deterioration in gross margins or a prolonged
economic slowdown due to the COVID-19 pandemic could result in an
impairment of goodwill and/or additional long-lived asset
impairments; 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 Ended
March 31,
Change from 2020
2021
2020
Change
Percent
(In thousands, except per share
data)
Sales and other revenues
$
3,504,293
$
3,400,545
$
103,748
3
%
Operating costs and expenses:
Cost of products sold:
Cost of products sold (exclusive of lower
of cost or market inventory valuation adjustment)
2,960,305
2,693,726
266,579
10
Lower of cost or market inventory
valuation adjustment
(200,037
)
560,464
(760,501
)
(136
)
2,760,268
3,254,190
(493,922
)
(15
)
Operating expenses
399,909
328,345
71,564
22
Selling, general and administrative
expenses
81,975
87,737
(5,762
)
(7
)
Depreciation and amortization
124,079
140,575
(16,496
)
(12
)
Total operating costs and
expenses
3,366,231
3,810,847
(444,616
)
(12
)
Income (loss) from operations
138,062
(410,302
)
548,364
(134
)
Other income (expense):
Earnings of equity method investments
1,763
1,714
49
3
Interest income
1,031
4,073
(3,042
)
(75
)
Interest expense
(38,386
)
(22,639
)
(15,747
)
70
Gain on tariff settlement
51,500
—
51,500
—
Loss on early extinguishment of debt
—
(25,915
)
25,915
(100
)
Loss on foreign currency transactions
(1,317
)
(4,233
)
2,916
(69
)
Other, net
1,890
1,850
40
2
16,481
(45,150
)
61,631
(137
)
Income (loss) before income
taxes
154,543
(455,452
)
609,995
(134
)
Income tax benefit
(28,307
)
(162,166
)
133,859
(83
)
Net income (loss)
182,850
(293,286
)
476,136
(162
)
Less net income attributable to
noncontrolling interest
34,633
11,337
23,296
205
Net income (loss) attributable to
HollyFrontier stockholders
$
148,217
$
(304,623
)
$
452,840
(149
)%
Earnings (loss) per share
Basic
$
0.90
$
(1.88
)
$
2.78
(148
)%
Diluted
$
0.90
$
(1.88
)
$
2.78
(148
)%
Cash dividends declared per common
share
$
0.35
$
0.35
$
—
—
%
Average number of common shares
outstanding:
Basic
162,479
161,873
606
—
%
Diluted
162,479
161,873
606
—
%
EBITDA
$
281,344
$
(307,648
)
$
588,992
(191
)%
Adjusted EBITDA
$
47,308
$
268,769
$
(221,461
)
(82
)%
Balance Sheet Data
March 31,
December 31,
2021
2020
(In thousands)
Cash and cash equivalents
$
1,193,428
$
1,368,318
Working capital
$
1,942,968
$
1,935,605
Total assets
$
11,934,817
$
11,506,864
Long-term debt
$
3,126,091
$
3,142,718
Total equity
$
5,838,046
$
5,722,203
Segment Information
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 the
Corporate, Other and Eliminations column.
The Refining segment includes the operations of our El Dorado,
Tulsa, Navajo, Woods Cross Refineries and HollyFrontier Asphalt
Company LLC (“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 geographic regions of the United States. HFC Asphalt
operates various asphalt terminals in Arizona, New Mexico and
Oklahoma. The Refining segment also included the operations of the
Cheyenne Refinery until it permanently ceased petroleum refining
operations during the third quarter of 2020.
The Lubricants and Specialty Products segment involves
Petro-Canada Lubricants Inc.’s (“PCLI”) production operations,
located in Mississauga, Ontario, that include lubricant products
such as base oils, white oils, specialty products and finished
lubricants and the operations of our Petro-Canada Lubricants
business that includes the marketing of products to both retail and
wholesale outlets through a global sales network with locations in
Canada, the United States, Europe and China. Additionally, the
Lubricants and Specialty Products segment includes specialty
lubricant products produced at our Tulsa refineries that are
marketed throughout North America and are distributed in Central
and South America, the operations of Red Giant Oil, one of the
largest suppliers of locomotive engine oil in North America and the
operations of Sonneborn, a producer of specialty hydrocarbon
chemicals such as white oils, petrolatums and waxes with
manufacturing facilities in the United States and Europe.
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
processing units in the Mid-Continent, Southwest and Rocky Mountain
geographic regions of the United States. The HEP segment also
includes a 75% interest in UNEV Pipeline, LLC (an HEP consolidated
subsidiary), and a 50% ownership interest in each of Osage Pipeline
Company, LLC, Cheyenne Pipeline LLC and Cushing Connect Pipeline
& Terminal LLC. Revenues from the HEP segment are earned
through transactions with unaffiliated parties for pipeline
transportation, rental and terminalling operations as well as
revenues relating to pipeline transportation services provided for
our refining operations. Due to certain basis differences, our
reported amounts for the HEP segment may not agree to amounts
reported in HEP's periodic public filings.
Refining
Lubricants and Specialty
Products
HEP
Corporate, Other and
Eliminations
Consolidated Total
(In thousands)
Three Months Ended March 31,
2021
Sales and other revenues:
Revenues from external customers
$
2,957,033
$
521,998
$
25,258
$
4
$
3,504,293
Intersegment revenues
60,462
2,565
101,926
(164,953
)
—
$
3,017,495
$
524,563
$
127,184
$
(164,949
)
$
3,504,293
Cost of products sold (exclusive of lower
of cost or market inventory)
$
2,761,943
$
331,523
$
—
$
(133,161
)
$
2,960,305
Lower of cost or market inventory
valuation adjustment
$
(199,528
)
$
—
$
—
$
(509
)
$
(200,037
)
Operating expenses
$
292,855
$
60,753
$
41,365
$
4,936
$
399,909
Selling, general and administrative
expenses
$
28,496
$
45,553
$
2,969
$
4,957
$
81,975
Depreciation and amortization
$
88,082
$
20,121
$
23,006
$
(7,130
)
$
124,079
Income (loss) from operations
$
45,647
$
66,613
$
59,844
$
(34,042
)
$
138,062
Income (loss) before interest and income
taxes
$
45,677
$
66,985
$
86,758
$
(7,522
)
$
191,898
Net income attributable to noncontrolling
interest
$
—
$
—
$
1,646
$
32,987
$
34,633
Earnings of equity method investments
$
—
$
—
$
1,763
$
—
$
1,763
Capital expenditures
$
40,361
$
4,087
$
33,218
$
72,295
$
149,961
Three Months Ended March 31,
2020
Sales and other revenues:
Revenues from external customers
$
2,850,620
$
523,499
$
26,426
$
—
$
3,400,545
Intersegment revenues
84,246
3,104
101,428
(188,778
)
—
$
2,934,866
$
526,603
$
127,854
$
(188,778
)
$
3,400,545
Cost of products sold (exclusive of lower
of cost or market inventory)
$
2,468,751
$
391,380
$
—
$
(166,405
)
$
2,693,726
Lower of cost or market inventory
valuation adjustment
$
560,464
$
—
$
—
$
—
$
560,464
Operating expenses
$
259,174
$
54,131
$
34,981
$
(19,941
)
$
328,345
Selling, general and administrative
expenses
$
31,000
$
48,962
$
2,702
$
5,073
$
87,737
Depreciation and amortization
$
90,179
$
22,049
$
23,978
$
4,369
$
140,575
Income (loss) from operations
$
(474,702
)
$
10,081
$
66,193
$
(11,874
)
$
(410,302
)
Income (loss) before interest and income
taxes
$
(474,702
)
$
10,290
$
42,498
$
(14,972
)
$
(436,886
)
Net income attributable to noncontrolling
interest
$
—
$
—
$
1,216
$
10,121
$
11,337
Earnings of equity method investments
$
—
$
—
$
1,714
$
—
$
1,714
Capital expenditures
$
53,014
$
9,081
$
18,942
$
2,712
$
83,749
Refining
Lubricants and Specialty
Products
HEP
Corporate, Other and
Eliminations
Consolidated Total
(In thousands)
March 31, 2021
Cash and cash equivalents
$
7,090
$
110,788
$
19,753
$
1,055,797
$
1,193,428
Total assets
$
6,781,110
$
1,875,026
$
2,250,230
$
1,028,451
$
11,934,817
Long-term debt
$
—
$
—
$
1,388,335
$
1,737,756
$
3,126,091
December 31, 2020
Cash and cash equivalents
$
3,106
$
163,729
$
21,990
$
1,179,493
$
1,368,318
Total assets
$
6,203,847
$
1,864,313
$
2,198,478
$
1,240,226
$
11,506,864
Long-term debt
$
—
$
—
$
1,405,603
$
1,737,115
$
3,142,718
Refining Segment Operating Data
The following tables set forth information, including non-GAAP
(Generally Accepted Accounting Principles) performance measures
about our refinery operations. Refinery gross and net operating
margins do not include the non-cash effects of long-lived asset
impairment charges, 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.
As of March 31, 2021, our refinery operations included the El
Dorado, Tulsa, Navajo and Woods Cross Refineries. In the third
quarter of 2020, we permanently ceased petroleum refining
operations at our Cheyenne Refinery and subsequently began
converting certain assets at our Cheyenne Refinery to renewable
diesel production. The disaggregation of our refining geographic
operating data is presented in two regions, Mid-Continent and West,
to best reflect the economic drivers of our refining operations.
The Mid-Continent region continues to be comprised of the El Dorado
and Tulsa Refineries, and the new West region is comprised of the
Navajo and Woods Cross Refineries. Refining segment operating data
for the three months ended March 31, 2020 has been retrospectively
adjusted to reflect the revised regional groupings.
Three Months Ended
March 31,
2021
2020
Mid-Continent Region (El Dorado and
Tulsa Refineries)
Crude charge (BPD) (1)
216,290
252,380
Refinery throughput (BPD) (2)
229,560
270,920
Sales of produced refined products (BPD)
(3)
210,680
259,240
Refinery utilization (4)
83.2
%
97.1
%
Average per produced barrel (5)
Refinery gross margin
$
6.45
$
9.54
Refinery operating expenses (6)
9.91
5.30
Net operating margin
$
(3.46
)
$
4.24
Refinery operating expenses per throughput
barrel (7)
$
9.09
$
5.07
Feedstocks:
Sweet crude oil
59
%
52
%
Sour crude oil
13
%
22
%
Heavy sour crude oil
22
%
19
%
Other feedstocks and blends
6
%
7
%
Total
100
%
100
%
Sales of produced refined products:
Gasolines
51
%
51
%
Diesel fuels
34
%
32
%
Jet fuels
5
%
7
%
Fuel oil
1
%
1
%
Asphalt
3
%
3
%
Base oils
4
%
4
%
LPG and other
2
%
2
%
Total
100
%
100
%
Three Months Ended
March 31,
2021
2020
West Region (Navajo and Woods Cross
Refineries)
Crude charge (BPD) (1)
131,880
140,250
Refinery throughput (BPD) (2)
144,600
154,340
Sales of produced refined products (BPD)
(3)
144,260
150,610
Refinery utilization (4)
91.0
%
96.7
%
Average per produced barrel (5)
Refinery gross margin
$
10.26
$
13.68
Refinery operating expenses (6)
8.09
6.91
Net operating margin
$
2.17
$
6.77
Refinery operating expenses per throughput
barrel (7)
$
8.07
$
6.74
Feedstocks:
Sweet crude oil
24
%
27
%
Sour crude oil
59
%
52
%
Black wax crude oil
8
%
12
%
Other feedstocks and blends
9
%
9
%
Total
100
%
100
%
Sales of produced refined products:
Gasolines
55
%
56
%
Diesel fuels
36
%
36
%
Fuel oil
2
%
3
%
Asphalt
4
%
2
%
LPG and other
3
%
3
%
Total
100
%
100
%
Consolidated
Crude charge (BPD) (1)
348,170
392,630
Refinery throughput (BPD) (2)
374,160
425,260
Sales of produced refined products (BPD)
(3)
354,940
409,850
Refinery utilization (4)
86.0
%
96.9
%
Average per produced barrel (5)
Refinery gross margin
$
8.00
$
11.06
Refinery operating expenses (6)
9.17
5.89
Net operating margin
$
(1.17
)
$
5.17
Refinery operating expenses per throughput
barrel (7)
$
8.70
$
5.68
Feedstocks:
Sweet crude oil
45
%
43
%
Sour crude oil
31
%
32
%
Heavy sour crude oil
14
%
12
%
Black wax crude oil
3
%
5
%
Other feedstocks and blends
7
%
8
%
Total
100
%
100
%
Three Months Ended
March 31,
2021
2020
Consolidated
Sales of produced refined products:
Gasolines
54
%
53
%
Diesel fuels
35
%
33
%
Jet fuels
3
%
4
%
Fuel oil
1
%
1
%
Asphalt
3
%
3
%
Base oils
2
%
3
%
LPG and other
2
%
3
%
Total
100
%
100
%
(1)
Crude charge represents the barrels per
day of crude oil processed at our refineries.
(2)
Refinery throughput represents the barrels
per day of crude and other refinery feedstocks input to the crude
units and other conversion units at our refineries.
(3)
Represents barrels sold of refined
products produced at our refineries (including HFC Asphalt) and
does not include volumes of refined products purchased for resale
or volumes of excess crude oil sold.
(4)
Represents crude charge divided by total
crude capacity (“BPSD”). Our consolidated crude capacity is 405,000
BPSD.
(5)
Represents average amount per produced
barrel 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)
Represents total refining segment
operating expenses, exclusive of depreciation and amortization and
Cheyenne Refinery operating expenses, divided by sales volumes of
refined products produced at our refineries.
(7)
Represents total refining segment
operating expenses, exclusive of depreciation and amortization and
Cheyenne Refinery operating expenses, divided by refinery
throughput.
Lubricants and Specialty Products Segment Operating
Data
The following table sets forth information about our lubricants
and specialty products operations.
Three Months Ended March
31,
2021
2020
Lubricants and Specialty
Products
Throughput (BPD)
20,410
21,750
Sales of produced products (BPD)
32,570
36,800
Sales of produced products:
Finished products
52
%
47
%
Base oils
26
%
26
%
Other
22
%
27
%
Total
100
%
100
%
Supplemental financial data attributable to our Lubricants and
Specialty Products segment is presented below:
Rack Back (1)
Rack Forward (2)
Eliminations (3)
Total Lubricants and Specialty
Products
(In thousands)
Three months ended March 31,
2021
Sales and other revenues
$
173,442
$
483,246
$
(132,125
)
$
524,563
Cost of products sold
$
132,532
$
331,116
$
(132,125
)
$
331,523
Operating expenses
$
28,621
$
32,132
$
—
$
60,753
Selling, general and administrative
expenses
$
6,739
$
38,814
$
—
$
45,553
Depreciation and amortization
$
7,305
$
12,816
$
—
$
20,121
Income (loss) from operations
$
(1,755
)
$
68,368
$
—
$
66,613
Income (loss) before interest and income
taxes
$
(1,755
)
$
68,740
$
—
$
66,985
EBITDA
$
5,550
$
81,556
$
—
$
87,106
Three months ended March 31,
2020
Sales and other revenues
$
164,829
$
474,057
$
(112,283
)
$
526,603
Cost of products sold
$
180,600
$
323,063
$
(112,283
)
$
391,380
Operating expenses
$
23,269
$
30,862
$
—
$
54,131
Selling, general and administrative
expenses
$
5,363
$
43,599
$
—
$
48,962
Depreciation and amortization
$
10,867
$
11,182
$
—
$
22,049
Income (loss) from operations
$
(55,270
)
$
65,351
$
—
$
10,081
Income (loss) before interest and income
taxes
$
(55,270
)
$
65,560
$
—
$
10,290
EBITDA
$
(44,403
)
$
76,742
$
—
$
32,339
(1)
Rack Back consists of the PCLI base oil
production activities, by-product sales to third parties and
intra-segment base oil sales to Rack Forward.
(2)
Rack Forward activities include the
purchase of base oils from Rack Back and the blending, packaging,
marketing and distribution and sales of finished lubricants and
specialty products to third parties.
(3)
Intra-segment sales of Rack Back produced
base oils to Rack Forward are eliminated under the “Eliminations”
column.
Reconciliations to Amounts Reported Under Generally Accepted
Accounting Principles
Reconciliations of earnings before interest, taxes,
depreciation and amortization (“EBITDA”) and EBITDA excluding
special items (“Adjusted EBITDA”) to amounts reported under
generally accepted accounting principles (“GAAP”) in financial
statements.
Earnings before interest, taxes, depreciation and amortization,
referred to as EBITDA, is calculated as net income (loss)
attributable to HollyFrontier stockholders plus (i) interest
expense, net of interest income, (ii) income tax provision and
(iii) depreciation and amortization. Adjusted EBITDA is calculated
as EBITDA plus or minus (i) lower of cost or market inventory
valuation adjustments, (ii) HollyFrontier's pro-rata share of HEP's
loss on early extinguishment of debt, (iii) severance costs, (iv)
restructuring charges, (v) Cheyenne Refinery LIFO inventory
liquidation costs, (vi) decommissioning costs, (vii) acquisition
integration and regulatory costs and (viii) gain on tariff
settlement.
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.
Three Months Ended
March 31,
2021
2020
(In thousands)
Net income (loss) attributable to
HollyFrontier stockholders
$
148,217
$
(304,623
)
Subtract income tax benefit
(28,307
)
(162,166
)
Add interest expense
38,386
22,639
Subtract interest income
(1,031
)
(4,073
)
Add depreciation and amortization
124,079
140,575
EBITDA
$
281,344
$
(307,648
)
Add (subtract) lower of cost or market
inventory valuation adjustment
(200,037
)
560,464
Add HollyFrontier's pro-rata share of
HEP's loss on early extinguishment of debt
—
14,656
Add severance costs
514
—
Add restructuring charges
7,813
—
Add Cheyenne Refinery LIFO inventory
liquidation costs
923
—
Add decommissioning costs
8,251
—
Add acquisition integration and regulatory
costs
—
1,297
Subtract gain on tariff settlement
(51,500
)
—
Adjusted EBITDA
$
47,308
$
268,769
EBITDA and Adjusted EBITDA attributable to our Refining segment
is presented below:
Three Months Ended
March 31,
Refining Segment
2021
2020
(In thousands)
Income (loss) from before interest and
income taxes (1)
$
45,677
$
(474,702
)
Add depreciation and amortization
88,082
90,179
EBITDA
133,759
(384,523
)
Add (subtract) lower of cost or market
inventory valuation adjustment
(199,528
)
560,464
Adjusted EBITDA
$
(65,769
)
$
175,941
(1)
Income (loss) before interest and income
taxes of our Refining segment represents income (loss) plus (i)
interest expense, net of interest income and (ii) income tax
provision.
EBITDA and Adjusted EBITDA attributable to our Lubricants and
Specialty Products segment is set forth below.
Lubricants and Specialty Products
Segment
Rack Back
Rack Forward
Total Lubricants and Specialty
Products
(In thousands)
Three months ended March 31,
2021
Income (loss) before interest and income
taxes (1)
$
(1,755
)
$
68,740
$
66,985
Add depreciation and amortization
7,305
12,816
20,121
EBITDA
5,550
81,556
87,106
Add restructuring charges
1,079
6,734
7,813
Adjusted EBITDA
$
6,629
$
88,290
$
94,919
Three months ended March 31,
2020
Income (loss) before interest and income
taxes (1)
$
(55,270
)
$
65,560
$
10,290
Add depreciation and amortization
10,867
11,182
22,049
EBITDA
$
(44,403
)
$
76,742
$
32,339
(1)
Income (loss) before interest and income
taxes of our Lubricants and Specialty Products segment represents
income (loss) plus (i) interest expense, net of interest income and
(ii) income tax provision.
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
Three Months Ended
March 31,
2021
2020
(Dollars in thousands, except per
barrel amounts)
Consolidated
Net operating margin per produced barrel
sold
$
(1.17
)
$
5.17
Add average refinery operating expenses
per produced barrel sold
9.17
5.89
Refinery gross margin per produced barrel
sold
$
8.00
$
11.06
Times produced barrels sold (BPD)
354,940
409,850
Times number of days in period
90
91
Refining gross margin
$
255,557
$
412,498
Add (subtract) rounding
(5
)
146
West and Mid-Continent regions gross
margin
255,552
412,644
Add West and Mid-Continent regions cost of
products sold
2,761,943
2,287,109
Add Cheyenne refinery sales and other
revenues
—
235,113
Refining segment sales and other
revenues
3,017,495
2,934,866
Add lubricants and specialty products
segment sales and other revenues
524,563
526,603
Add HEP segment sales and other
revenues
127,184
127,854
Subtract corporate, other and
eliminations
(164,949
)
(188,778
)
Sales and other revenues
$
3,504,293
$
3,400,545
Reconciliation of average refining segment
operating expenses per produced barrel sold to total operating
expenses
Three Months Ended
March 31,
2021
2020
(Dollars in thousands, except per
barrel amounts)
Consolidated
Average operating expenses per produced
barrel sold
$
9.17
$
5.89
Times produced barrels sold (BPD)
354,940
409,850
Times number of days in period
90
91
Refining operating expenses
$
292,932
$
219,676
Add (subtract) rounding
(77
)
(22
)
West and Mid-Continent regions operating
expenses
292,855
219,654
Add Cheyenne Refinery operating
expenses
—
39,520
Refining segment operating expenses
292,855
259,174
Add lubricants and specialty products
segment operating expenses
60,753
54,131
Add HEP segment operating expenses
41,365
34,981
Add (subtract) corporate, other and
eliminations
4,936
(19,941
)
Operating expenses (exclusive of
depreciation and amortization)
$
399,909
$
328,345
Reconciliation of net income (loss)
attributable to HollyFrontier stockholders to adjusted net income
attributable to HollyFrontier stockholders
Adjusted net income (loss) attributable to HollyFrontier
stockholders is a non-GAAP financial measure that excludes non-cash
lower of cost or market inventory valuation adjustments, HEP's loss
on early extinguishment of debt, severance costs, restructuring
charges, Cheyenne Refinery LIFO inventory liquidation costs,
decommissioning costs, acquisition integration and regulatory costs
and a gain on a tariff settlement. 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 Ended
March 31,
2021
2020
(In thousands, except per share
amounts)
Consolidated
GAAP:
Income (loss) before income taxes
$
154,543
$
(455,452
)
Income tax benefit
(28,307
)
(162,166
)
Net income (loss)
182,850
(293,286
)
Less net income attributable to
noncontrolling interest
34,633
11,337
Net income (loss) attributable to
HollyFrontier stockholders
148,217
(304,623
)
Non-GAAP adjustments to arrive at
adjusted results:
Lower of cost or market inventory
valuation adjustment
(200,037
)
560,464
HEP's loss on early extinguishment of
debt
—
25,915
Severance costs
514
—
Restructuring charges
7,813
—
Cheyenne Refinery LIFO inventory
liquidation costs
923
—
Decommissioning costs
8,251
—
Acquisition integration and regulatory
costs
—
1,297
Gain on tariff settlement
(51,500
)
—
Total adjustments to income (loss) before
income taxes
(234,036
)
587,676
Adjustment to income tax benefit (1)
(525
)
185,340
Adjustment to net income attributable to
noncontrolling interest
—
11,259
Total adjustments, net of tax
(233,511
)
391,077
Adjusted results - Non-GAAP:
Adjusted income (loss) before income
taxes
(79,493
)
132,224
Adjusted income tax expense (benefit)
(2)
(28,832
)
23,174
Adjusted net income (loss)
(50,661
)
109,050
Less net income attributable to
noncontrolling interest
34,633
22,596
Adjusted net income (loss) attributable to
HollyFrontier stockholders
$
(85,294
)
$
86,454
Adjusted earnings (loss) per share -
diluted (3)
$
(0.53
)
$
0.53
(1)
Represents adjustment to GAAP income tax
benefit to arrive at adjusted income tax expense (benefit), which
is computed as follows:
Three Months Ended
March 31,
2021
2020
(In thousands)
Non-GAAP income tax expense (benefit)
(2)
$
(28,832
)
$
23,174
Subtract GAAP income tax benefit
(28,307
)
(162,166
)
Non-GAAP adjustment to income tax
benefit
$
(525
)
$
185,340
(2)
Non-GAAP income tax expense (benefit) is
computed by a) adjusting HFC's consolidated estimated Annual
Effective Tax Rate (“AETR”) for GAAP purposes for the effects of
the above Non-GAAP adjustments b) applying the resulting Adjusted
Non-GAAP AETR to Non-GAAP adjusted income before income taxes and
c) adjusting for discrete tax items applicable to the period.
(3)
Adjusted earnings per share - diluted is
calculated as adjusted net income (loss) attributable to
HollyFrontier stockholders divided by the average number of shares
of common stock outstanding assuming dilution ,which is based on
weighted-average diluted shares outstanding as that used in the
GAAP diluted earnings per share calculation. Income allocated to
participating securities, if applicable, in the adjusted earnings
per share calculation is the same as that used in GAAP diluted
earnings per share calculation.
Reconciliation of effective tax rate to
adjusted effective tax rate
Three Months Ended
March 31,
2021
2020
(Dollars in thousands)
GAAP:
Income (loss) before income taxes
$
154,543
$
(455,452
)
Income tax expense (benefit)
$
(28,307
)
$
(162,166
)
Effective tax rate for GAAP financial
statements
(18.3
)%
35.6
%
Adjusted - Non-GAAP:
Effect of Non-GAAP adjustments
54.6
%
(18.1
)%
Effective tax rate for adjusted
results
36.3
%
17.5
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210505005239/en/
Richard L. Voliva III, Executive Vice President and Chief
Financial Officer Craig Biery, Vice President, Investor Relations
HollyFrontier Corporation 214-954-6510
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