DALLAS, Nov. 7 /PRNewswire-FirstCall/ -- Holly Corporation
(NYSE:HOC) ("Holly") today reported record quarterly net income of
$61.7 million ($2.02 per basic and $1.97 per diluted share) for the
three months ended September 30, 2005, compared to net income of
$11.5 million ($0.37 per basic and $0.36 per diluted share) for the
three months ended September 30, 2004. Net income was $127.8
million ($4.09 per basic and $4.00 per diluted share) for the nine
months ended September 30, 2005, compared to net income of $76.5
million ($2.43 per basic and $2.37 per diluted share) for the nine
months ended September 30, 2004. Earnings for the third quarter of
2005 as compared to the third quarter of 2004 increased $50.2
million due principally to very high refined product margins
experienced in the third quarter of 2005. Additionally favorably
impacting earnings were increased production volumes offset by
higher refinery operating costs and expenses. Company-wide refinery
margins were $14.43 per produced barrel for the third quarter of
2005 compared to refinery margins of $7.41 per produced barrel for
the third quarter of 2004. Earnings for the nine months ended
September 30, 2005 increased 67.0% or $51.3 million from the nine
months ended September 30, 2004. This increase was principally due
to the very high refined product margins experienced in the third
quarter of 2005 along with increased refinery production volumes
offset by higher refinery costs and expenses. Company-wide refinery
margins were $11.95 per produced barrel for the nine months ended
September 30, 2005 compared to refinery margins of $9.82 per
produced barrel for the first nine months of 2004. Additionally, in
the nine months ended September 30, 2004, the Company received 100%
of the benefit of the refined product pipelines and terminals
contributed to Holly Energy Partners, L.P. (NYSE:HEP) ("HEP") prior
to its initial public offering in July 2004, where subsequent to
HEP's initial public offering in July 2004, including the current
nine months ended September 30, 2005, approximately half of the
income from HEP's refined product pipelines and terminals is
attributable to owners other than the Company. Sales and other
revenues increased 57% for the third quarter of 2005 and 45% for
the first nine months of 2005 as compared to the third quarter and
first nine months of 2004, respectively, due principally to higher
product prices. Additionally, refined product sales volumes
increased 4% in the third quarter as compared to the prior year's
third quarter and increased 7% for the first nine months of 2005 as
compared to the first nine months of 2004. Cost of products sold
was higher in the third quarter and first nine months of 2005 due
to the higher costs of purchased crude oil, and to a lesser degree,
higher volumes. Additionally impacting sales and costs of sales
were increases in the current year due to the inclusion of the NK
Asphalt Partners joint venture (doing business as Holly Asphalt
Company) in the 2005 consolidated financial statements, following
the February 2005 purchase of the other partner's interest, and the
inclusion of revenues from HEP's assets recently acquired from Alon
through June 30, 2005 at which time HEP was deconsolidated.
Operating expenses increased in the nine months ending September
30, 2005 as compared to the same period in the prior year, due
principally to increased refinery utility costs and the inclusion
of the NK Asphalt Partners joint venture in the 2005 consolidated
financial statements, reduced by the operating costs of HEP in the
2005 third quarter which are no longer consolidated in the
Company's results. "We are very pleased with our 2005 third quarter
earnings, a record quarter, due to the extremely good margins,
reliable refinery operations and the successful execution of our
refinery profit improvement initiatives," said Matthew Clifton,
President of Holly. "We generated $106.7 million of earnings before
interest, taxes and depreciation ("EBITDA") in the quarter,
bringing our year-to-date EBITDA to $238.9 million. Following the
Gulf Coast hurricanes, margins spiked to unprecedented levels and
continued at high levels into the fourth quarter. As more Gulf
Coast refineries come back on line to full capacity, refined
product prices should fall back, which we have started to see in
recent weeks. As we have previously stated, we believe industry
fundamentals remain in our favor for the foreseeable future as
demand for refined products should continue to press refining
supply capabilities, resulting in strong pricing for gasoline and
distillate products. This situation is only magnified when there
are supply disruptions, such as those experienced during and after
the recent hurricanes." "Operationally, our refineries ran well
during the quarter and we realized significant benefits from the
execution of our previously announced value- added refinery
initiatives for 2005, including strides to improve high value
product yields, increase sour crude runs and raise refinery
utilization rates at our facilities. Additionally, we are expecting
to start up our new ROSE unit by the end of 2005, which will
convert a significant portion of our lowest valued product into
high valued transportation fuels. We are also well under way with
our clean fuels projects at the Navajo and Woods Cross refineries,
which should allow us to produce ultra low sulfur diesel fuel by
2006 deadline and will provide a phased-in 10,000 barrels-per-day
expansion of the Navajo facility. The strong industry fundamentals
combined with our high sour crude capabilities and our continued
execution of value-added refining initiatives should keep our
earnings at healthy levels. With respect to Holly Energy Partners,
we are extremely pleased with its level of growth to date and look
forward to its continued success. Additionally, we have now
finished our $100 million stock repurchase program started in May
2005 and will continue in our commitment to build long-term value
for our shareholders," said Clifton. The Company no longer
consolidates the results of HEP, and since July 1, 2005, the share
of the earnings of HEP is being recorded using the equity method of
accounting. HEP has since July 2004 owned and operated product
pipelines and terminals previously 100% owned by the Company.
Following HEP's acquisition in July 2005 of the intermediate
feedstock pipelines, the Company determined that its beneficial
variable interest in HEP is now less than 50%; and therefore as
required, HEP was deconsolidated as of July 1, 2005. Holly
Corporation currently owns a 45% interest in HEP, including the
general partner interest. Additionally, the Company has adopted
Statement of Financial Accounting Standards ("SFAS") 123 (revised),
"Share- Based Payment," which prescribes the accounting for a
wide-range of share- based compensation arrangements. The Company
elected early adoption of this standard on July 1, 2005 based on
modified retrospective application with early application under
SFAS 123 to prior quarters in the current year. Therefore the
financial statements for periods ended March 31, 2005 and June 30,
2005 have been restated. This change resulted in increases in net
income of $0.6 million in the three months ended March 31, 2005 and
$0.4 million in the three months ended June 30, 2005. Additionally
as part of the adoption of SFAS 123 (revised), a cumulative effect
of a change in accounting principle was recorded of an increase in
net income of $0.7 million in the three months ended September 30,
2005. The Company has scheduled a conference call for today,
November 7, 2005 at 10:00AM EST to discuss financial results.
Listeners may access this call by dialing (800) 858-5936. The ID#
for this call is #1346989. Listeners may access the call via the
internet at: http://audioevent.mshow.com/256727 . 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 November 21, 2005. 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 a 75,000 barrels per stream day ("bpsd") refinery
located in Artesia, New Mexico, a 26,000 bpsd refinery in Woods
Cross, Utah, and an 8,000 bpsd refinery in Great Falls, Montana.
Holly also owns a 45% interest (including the general partner
interest) in Holly Energy Partners, L.P., which through
subsidiaries owns or leases approximately 1,600 miles of petroleum
product pipelines in Texas, New Mexico and Oklahoma 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 belief 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. 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 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 or Holly Energy Partners, L.
P. 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. RESULTS OF OPERATIONS Financial Data (all information
in this release is unaudited) Three Months Ended Nine Months Ended
September 30, September 30, 2005 2004 2005 2004 (In thousands,
except per share data) Sales and other revenues $935,279 $597,448
$2,358,300 $1,629,240 Operating costs and expenses: Cost of
products sold (exclusive of depreciation, depletion, and
amortization) 772,887 507,630 1,933,915 1,308,179 Operating
expenses (exclusive of depreciation, depletion, and amortization)
46,947 46,762 146,187 127,494 General and administrative expenses
(exclusive of depreciation, depletion and amortization) 12,616
12,001 35,527 35,947 Depreciation, depletion and amortization 9,390
9,985 34,336 29,840 Exploration expenses, including dry holes 69
122 310 550 Total operating costs and expenses 841,909 576,500
2,150,275 1,502,010 Income from operations 93,370 20,948 208,025
127,230 Other income (expense): Equity in earnings (loss) of joint
ventures --- 348 (685) 293 Equity in earnings of Holly Energy
Partners 3,296 --- 3,296 --- Minority interests in income of
partnerships --- (2,704) (6,721) (3,699) Interest income 1,202 933
4,455 3,323 Interest expense (501) (922) (4,706) (2,628) 3,997
(2,345) (4,361) (2,711) Income before income taxes 97,367 18,603
203,664 124,519 Income tax provision 36,317 7,078 76,556 48,025
Income before cumulative change in accounting principle 61,050
11,525 127,108 76,494 Cumulative effect of accounting change (net
of income tax expense of $426) 669 --- 669 --- Net income $61,719
$11,525 $127,777 $76,494 Basic earnings per share: Income before
cumulative change in accounting principle $2.00 $0.37 $4.07 $2.43
Cumulative effect of accounting change 0.02 --- 0.02 --- Net income
$2.02 $0.37 $4.09 $2.43 Diluted earnings per share: Income before
cumulative change in accounting principle $1.95 $0.36 $3.98 $2.37
Cumulative effect of accounting change 0.02 --- 0.02 --- Net income
$1.97 $0.36 $4.00 $2.37 Cash dividends declared per common share
$0.10 $0.08 $0.28 $0.21 Average number of common shares
outstanding: Basic 30,618 31,513 31,253 31,444 Diluted 31,386
32,420 31,980 32,316 Balance Sheet Data September 30, December 31,
2005 (B) 2004 (In thousands) Cash, cash equivalents and investments
in marketable securities $273,651 $219,265 Working capital $255,280
$148,642 Total assets $1,197,257 $982,713 Total debt, including
current maturities and bank borrowings (A) $8,572 $33,572 Minority
interests $--- $157,550 Stockholders' equity $389,021 $339,916 (A)
Includes HEP's bank borrowings of $25.0 million at December 31,
2004. (B) There are no HEP balances included at September 30, 2005
due to the deconsolidation on July 1, 2005. Other Financial Data
Three Months Ended Nine Months Ended September 30, September 30,
2005 2004 2005 2004 (In thousands) Net cash provided by operating
activities $86,079 $37,081 $158,559 $160,381 Net cash provided by
(used for) investing activities $(136,789) $46,980 $(287,212)
$30,737 Net cash provided by (used for) financing activities
$15,418 $9,042 $137,502 $(45,307) Capital expenditures $29,417
$8,796 $58,062 $27,915 EBITDA (A) $106,725 $28,577 $238,920
$153,664 (A) Earnings before interest, taxes, depreciation and
amortization, which we refer to as EBITDA as presented above is
reconciled to net income under "Reconciliations to Amounts Reported
under Generally Accepted Accounting Principles" below. Our major
business segment is Refining after the deconsolidation of HEP on
July 1, 2005 and Refining and HEP prior to the deconsolidation. The
Refining segment presented in the September 30, 2004 quarterly
report on Form 10-Q is not the same Refining segment as presented
below. The Refining segment for the three months and nine months
ended September 30, 2004 has been reported to include results of
operations involving assets included in HEP prior to the
contribution on July 13, 2004. The HEP segment did not have any
activity prior to HEP's formation on July 13, 2004 or subsequent to
the deconsolidation effective on July 1, 2005. Three Months Ended
Nine Months Ended September 30, September 30, 2005 2004 2005 2004
(In thousands) Sales and other revenues (A) Refining $934,987
$593,010 $2,340,931 $1,623,936 HEP --- 12,190 36,034 12,190
Corporate and Other 417 399 1,034 1,496 Consolidations and
Eliminations (125) (8,151) (19,699) (8,382) Consolidated $935,279
$597,448 $2,358,300 $1,629,240 Income (loss) from operations (A)
Refining $105,922 $25,421 $225,708 $152,231 HEP --- 5,432 16,019
5,432 Corporate and Other (12,552) (9,905) (33,702) (30,433)
Consolidated $93,370 $20,948 $208,025 $127,230 (A) 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, Montana Refinery and Woods Cross Refinery. The petroleum
products produced by the Refining segment are marketed in Texas,
New Mexico, Arizona, Utah, Wyoming, Montana, Idaho, Washington and
northern Mexico. The Refining segment also includes certain crude
oil and intermediate product pipelines, prior to July 8, 2005 (see
Note 2 to our consolidated financial statements), that we owned and
operated in conjunction with our refining operations as part of the
supply networks of the refineries. In February 2005, we acquired
the remaining 51% interest in our asphalt joint venture from the
other partner; subsequent to the purchase, we are including the
operations of NK Asphalt Partners in our consolidated financial
statements. NK Asphalt Partners, dba Holly Asphalt Company,
manufactures and markets asphalt and asphalt products in Arizona,
New Mexico, Texas and California. The cost of pipeline
transportation and terminal services provided by HEP is also
included in the Refining segment. The HEP segment involved all of
the operations of HEP through June 30, 2005 (prior to the
deconsolidation), including approximately 1,300 miles (780 miles
prior to the Alon asset acquisition) of its pipeline assets
principally in Texas, New Mexico and Oklahoma and refined product
terminals in several Southwest and Rocky Mountain States. The HEP
segment also included its 70% interest in Rio Grande, which
provides petroleum products transportation. Revenues from the HEP
segment were 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. Results of operations involving the assets included in the
HEP segment prior to July 13, 2004 are included in the Refining
segment for reporting purposes. Our operations not included in the
two reportable segments are included in Corporate and Other, which
includes costs of Holly Corporation, the parent company, consisting
primarily of general and administrative expenses as well as a
small- scale oil and gas exploration and production program. The
consolidations and eliminations amount includes the elimination of
the revenue associated with our pipeline transportation services
between us and HEP for the six months ended June 30, 2005. Refining
Operating Data Our refinery operations include the Navajo Refinery,
the Woods Cross Refinery and the Montana Refinery. The following
tables set forth information, including non-generally accepted
accounting principles ("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
presented under "Reconciliations to Amounts Reported under
Generally Accepted Accounting Principles." Three Months Ended Nine
Months Ended September 30, September 30, 2005 2004 2005 2004 Navajo
Refinery Crude charge (BPD) (A) 73,030 69,470 73,080 70,160
Refinery production (BPD) (B) 79,660 76,250 80,470 77,910 Sales of
produced refined products (BPD) 80,280 76,810 80,160 77,410 Sales
of refined products (BPD) (C) 87,830 86,660 89,130 85,050 Refinery
utilization (D) 97.4% 92.6% 97.4% 93.5% Average per produced barrel
(E) Net sales $79.18 $52.71 $67.46 $50.12 Cost of products (F)
63.38 44.15 54.21 39.00 Refinery gross margin (G) 15.80 8.56 13.25
11.12 Refinery operating expenses 3.65 3.47 3.48 3.24 Net operating
margin $12.15 $5.09 $9.77 $7.88 Feedstocks: Sour crude oil 87% 86%
88% 82% Sweet crude oil 2% 3% 1% 6% Other feedstocks and blends 11%
11% 11% 12% Total 100% 100% 100% 100% Sales of produced refined
products: Gasolines 57% 57% 58% 58% Diesel fuels 29% 27% 28% 26%
Jet fuels 4% 5% 4% 6% Asphalt 5% 8% 6% 7% LPG and other 5% 3% 4% 3%
Total 100% 100% 100% 100% Three Months Ended Nine Months Ended
September 30, September 30, 2005 2004 2005 2004 Woods Cross
Refinery Crude charge (BPD) (A) 24,350 25,560 23,970 23,750
Refinery production (BPD) (B) 26,190 25,560 25,760 23,930 Sales of
produced refined products (BPD) 27,240 24,600 26,710 23,720 Sales
of refined products (BPD) (C) 28,840 25,800 27,960 24,330 Refinery
utilization (D) 93.7% 102.2% 92.2% 95.0% Average per produced
barrel (E) Net sales $81.72 $53.06 $68.23 $50.34 Cost of products
(F) 68.65 48.80 59.26 44.00 Refinery gross margin (G) 13.07 4.26
8.97 6.34 Refinery operating expenses 4.11 3.93 4.18 3.93 Net
operating margin $8.96 $0.33 $4.79 $2.41 Feedstocks: Sour crude oil
7% 7% 8% 6% Sweet crude oil 81% 88% 81% 88% Other feedstocks and
blends 12% 5% 11% 6% Total 100% 100% 100% 100% Sales of produced
refined products: Gasolines 63% 58% 61% 59% Diesel fuels 30% 33%
29% 32% Jet fuels 2% 2% 2% 1% Fuel oil 4% 6% 6% 7% LPG and other 1%
1% 2% 1% Total 100% 100% 100% 100% Montana Refinery Crude charge
(BPD) (A) 8,240 8,310 7,900 7,460 Refinery production (BPD) (B)
8,790 8,910 8,380 7,920 Sales of produced refined products (BPD)
10,980 10,010 8,510 7,960 Sales of refined products (BPD) (C)
11,280 10,210 8,700 8,180 Refinery utilization (D) 103.0% 103.9%
98.8% 93.3% Average per produced barrel (E) Net sales $52.47 $43.79
$52.70 $42.89 Cost of products (F) 44.66 37.60 43.58 35.36 Refinery
gross margin 7.81 6.19 9.12 7.53 Refinery operating expenses 4.61
4.83 6.10 5.61 Net operating margin $3.20 $1.36 $3.02 $1.92
Feedstocks: Sour crude oil 92% 91% 93% 92% Other feedstocks and
blends 8% 9% 7% 8% Total 100% 100% 100% 100% Three Months Ended
Nine Months Ended September 30, September 30, 2005 2004 2005 2004
Montana Refinery Sales of produced refined products: Gasolines 29%
35% 38% 41% Diesel fuels 13% 15% 17% 17% Jet fuels 5% 6% 5% 6%
Asphalt 50% 41% 36% 32% LPG and other 3% 3% 4% 4% Total 100% 100%
100% 100% Consolidated Crude charge (BPD) (A) 105,620 103,340
104,950 101,370 Refinery production (BPD) (B) 114,640 110,720
114,610 109,760 Sales of produced refined products (BPD) 118,500
111,420 115,380 109,090 Sales of refined products (BPD) (C) 127,950
122,670 125,790 117,560 Refinery utilization (D) 96.9% 95.7% 96.3%
93.9% Average per produced barrel (E) Net sales $77.29 $51.99
$66.55 $49.64 Cost of products (F) 62.86 44.58 54.60 39.82 Refinery
gross margin (G) 14.43 7.41 11.95 9.82 Refinery operating expenses
3.85 3.70 3.84 3.56 Net operating margin $10.58 $3.71 $8.11 $6.26
Feedstocks: Sour crude oil 69% 68% 70% 66% Sweet crude oil 20% 23%
19% 24% Other feedstocks and blends 11% 9% 11% 10% Total 100% 100%
100% 100% Sales of produced refined products: Gasolines 56% 56% 58%
57% Diesel fuels 27% 27% 27% 27% Jet fuels 4% 4% 4% 5% Asphalt 8%
9% 7% 7% LPG and other 5% 4% 4% 4% Total 100% 100% 100% 100% (A)
Crude charge represents the barrels per day of crude oil processed
at the crude units at our refineries. (B) 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. (C) Includes
refined products purchased for resale. (D) Represents crude charge
divided by total crude capacity. (E) Represents average per barrel
amounts for produced refined products sold, which are non-GAAP.
Reconciliations to amounts reported under GAAP are located under
"Reconciliations to Amounts Reported under Generally Accepted
Accounting Principles." (F) Subsequent to the formation of HEP,
transportation costs billed from HEP are included in cost of
products. (G) Represents operating expenses of our refinery,
exclusive of depreciation, depletion, and amortization, and
excludes refining segment expenses of product pipelines and
terminals. 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 Nine Months Ended
September 30, September 30, 2005 2004 2005 2004 (In thousands) Net
income $61,719 $11,525 $127,777 $76,494 Add provision for income
tax 36,317 7,078 76,556 48,025 Add interest expense 501 922 4,706
2,628 Subtract interest income (1,202) (933) (4,455) (3,323) Add
depreciation, depletion and amortization 9,390 9,985 34,336 29,840
EBITDA $106,725 $28,577 $238,920 $153,664 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 Consolidated
Statement of Income. Other companies in our industry may not
calculate these performance measures in the same manner. 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 all of our refineries on a consolidated
basis is calculated as shown below. Three Months Ended Nine Months
Ended September 30, September 30, 2005 2004 2005 2004 Average per
produced barrel Navajo Refinery Net sales $79.18 $52.71 $67.46
$50.12 Less cost of products 63.38 44.15 54.21 39.00 Refinery gross
margin $15.80 $8.56 $13.25 $11.12 Woods Cross Refinery Net sales
$81.72 $53.06 $68.23 $50.34 Less cost of products 68.65 48.80 59.26
44.00 Refinery gross margin $13.07 $4.26 $8.97 $6.34 Montana
Refinery Net sales $52.47 $43.79 $52.70 $42.89 Less cost of
products 44.66 37.60 43.58 35.36 Refinery gross margin $7.81 $6.19
$9.12 $7.53 Consolidated Net sales $77.29 $51.99 $66.55 $49.64 Less
cost of products 62.86 44.58 54.60 39.82 Refinery gross margin
$14.43 $7.41 $11.95 $9.82 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
all of our refineries on a consolidated basis is calculated as
shown below. Three Months Ended Nine Months Ended September 30,
September 30, 2005 2004 2005 2004 Average per produced barrel
Navajo Refinery Refinery gross margin $15.80 $8.56 $13.25 $11.12
Less refinery operating expenses 3.65 3.47 3.48 3.24 Net operating
margin $12.15 $5.09 $9.77 $7.88 Woods Cross Refinery Refinery gross
margin $13.07 $4.26 $8.97 $6.34 Less refinery operating expenses
4.11 3.93 4.18 3.93 Net operating margin $8.96 $0.33 $4.79 $2.41
Three Months Ended Nine Months Ended September 30, September 30,
2005 2004 2005 2004 Average per produced barrel Montana Refinery
Refinery gross margin $7.81 $6.19 $9.12 $7.53 Less refinery
operating expenses 4.61 4.83 6.10 5.61 Net operating margin $3.20
$1.36 $3.02 $1.92 Consolidated Refinery gross margin $14.43 $7.41
$11.95 $9.82 Less refinery operating expenses 3.85 3.70 3.84 3.56
Net operating margin $10.58 $3.71 $8.11 $6.26 Below are
reconciliations to our Consolidated Statement 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. Reconciliations of refined
product sales from produced products sold to total sales and other
revenue Three Months Ended Nine Months Ended September 30,
September 30, 2005 2004 2005 2004 Navajo Refinery Average sales
price per produced barrel sold $79.18 $52.71 $67.46 $50.12 Times
sales of produced refined products sold (BPD) 80,280 76,810 80,160
77,410 Times number of days in period 92 92 273 274 Refined product
sales from produced products sold $584,804 $372,476 $1,476,273
$1,063,062 Woods Cross Refinery Average sales price per produced
barrel sold $81.72 $53.06 $68.23 $50.34 Times sales of produced
refined products sold (BPD) 27,240 24,600 26,710 23,720 Times
number of days in period 92 92 273 274 Refined product sales from
produced products sold $204,797 $120,085 $497,522 $327,174 Montana
Refinery Average sales price per produced barrel sold $52.47 $43.79
$52.70 $42.89 Times sales of produced refined products sold (BPD)
10,980 10,010 8,510 7,960 Times number of days in period 92 92 273
274 Refined product sales from produced products sold $53,003
$40,327 $122,434 $93,545 Sum of refined products sales from
produced products sold from our three refineries (C) $842,604
$532,888 $2,096,229 $1,483,781 Add refined product sales from
purchased products and rounding (A) 69,739 58,293 196,185 126,032
Total refined products sales 912,343 591,181 2,292,414 1,609,813
Add other refining segment revenue (B) 22,644 1,829 48,517 14,123
Total refining segment revenue 934,987 593,010 2,340,931 1,623,936
Add HEP sales and other revenue --- 12,190 36,034 12,190 Add
corporate and other revenues 417 399 1,034 1,496 Subtract
consolidations and eliminations (125) (8,151) (19,699) (8,382)
Sales and other revenues $935,279 $597,448 $2,358,300 $1,629,240
(A) We purchase finished products when opportunities arise that
provide a profit on the sale of such products, or to meet delivery
commitments. (B) Other refining segment revenue includes the
revenues associated with NK Asphalt Partners subsequent to their
consolidation in February 2005 and revenues during 2004 from
terminal and pipeline assets that are now owned by HEP. (C) 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 Nine Months Ended September 30, September 30,
2005 2004 2005 2004 Average sales price per produced barrel sold
$77.29 $51.99 $66.55 $49.64 Times sales of produced refined
products sold (BPD) 118,500 111,420 115,380 109,090 Times number of
days in period 92 92 273 274 Refined product sales from produced
products sold $842,604 $532,888 $2,096,229 $1,483,781
Reconciliation of average cost of products per produced barrel sold
to total costs of products sold Three Months Ended Nine Months
Ended September 30, September 30, 2005 2004 2005 2004 Navajo
Refinery Average cost of products per produced barrel sold $63.38
$44.15 $54.21 $39.00 Times sales of produced refined products sold
(BPD) 80,280 76,810 80,160 77,410 Times number of days in period 92
92 273 274 Cost of products for produced products sold $468,109
$311,987 $1,186,314 $827,203 Woods Cross Refinery Average cost of
products per produced barrel sold $68.65 $48.80 $59.26 $44.00 Times
sales of produced refined products sold (BPD) 27,240 24,600 26,710
23,720 Times number of days in period 92 92 273 274 Cost of
products for produced products sold $172,042 $110,444 $432,114
$285,968 Montana Refinery Average cost of products per produced
barrel sold $44.66 $37.60 $43.58 $35.36 Times sales of produced
refined products sold (BPD) 10,980 10,010 8,510 7,960 Times number
of days in period 92 92 273 274 Cost of products for produced
products sold $45,114 $34,627 $101,246 $77,122 Sum of cost of
products for produced products sold from our three refineries (C)
$685,265 $457,058 $1,719,674 $1,190,293 Add refined product costs
from purchased products sold and rounding (A) 71,039 58,723 200,061
126,268 Total refined costs of products sold 756,304 515,781
1,919,735 1,316,561 Add other refining segment costs of products
sold (B) 16,708 --- 33,879 --- Total refining segment cost of
products sold 773,012 515,781 1,953,614 1,316,561 Subtract
consolidations and eliminations (125) (8,151) (19,699) (8,382)
Costs of products sold (exclusive of depreciation, depletion and
amortization) $772,887 $507,630 $1,933,915 $1,308,179 (A) We
purchase finished products when opportunities arise that provide a
profit on the sale of such products, or to meet delivery
commitments. (B) Other refining segment costs of products sold
includes the cost of products for NK Asphalt Partners subsequent to
their consolidation in February 2005. (C) 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
Nine Months Ended September 30, September 30, 2005 2004 2005 2004
Average cost of products per produced barrel sold $62.86 $44.58
$54.60 $39.82 Times sales of produced refined products sold (BPD)
118,500 111,420 115,380 109,090 Times number of days in period 92
92 273 274 Cost of products for produced products sold $685,265
$457,058 $1,719,674 $1,190,293 Reconciliation of average refinery
operating expenses per produced barrel sold to total operating
expenses Three Months Ended Nine Months Ended September 30,
September 30, 2005 2004 2005 2004 Navajo Refinery Average refinery
operating expenses per produced barrel sold $3.65 $3.47 $3.48 $3.24
Times sales of produced refined products sold (BPD) 80,280 76,810
80,160 77,410 Times number of days in period 92 92 273 274 Refinery
operating expenses for produced products sold $26,958 $24,521
$76,155 $68,722 Woods Cross Refinery Average refinery operating
expenses per produced barrel sold $4.11 $3.93 $4.18 $3.93 Times
sales of produced refined products sold (BPD) 27,240 24,600 26,710
23,720 Times number of days in period 92 92 273 274 Refinery
operating expenses for produced products sold $10,300 $8,894
$30,480 $25,542 Montana Refinery Average refinery operating
expenses per produced barrel sold $4.61 $4.83 $6.10 $5.61 Times
sales of produced refined products sold (BPD) 10,980 10,010 8,510
7,960 Times number of days in period 92 92 273 274 Refinery
operating expenses for produced products sold $4,657 $4,448 $14,172
$12,236 Sum of refinery operating expenses per produced products
sold from our three refineries (B) $41,915 $37,863 $120,807
$106,500 Add other refining segment operating expenses and rounding
(A) 5,032 4,509 13,544 16,471 Total refining segment operating
expenses 46,947 42,372 134,351 122,971 Add HEP operating expenses
--- 4,368 11,836 4,368 Add corporate and other costs --- 22 --- 155
Operating expenses (exclusive of depreciation, depletion and
amortization) $46,947 $46,762 $146,187 $127,494 (A) Other refining
segment operating expenses includes the marketing costs associated
with our refining segment, the operating expenses of NK Asphalt
Partners subsequent to their consolidation in February 2005 and the
operating expenses during 2004 of terminal and pipeline assets now
owned by HEP. (B) 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 Nine Months Ended September
30, September 30, 2005 2004 2005 2004 Average refinery operating
expenses per produced barrel sold $3.85 $3.70 $3.84 $3.56 Times
sales of produced refined products sold (BPD) 118,500 111,420
115,380 109,090 Times number of days in period 92 92 273 274
Refinery operating expenses for produced products sold $41,915
$37,863 $120,807 $106,500 Reconciliation of net operating margin
per barrel to refinery gross margin per barrel to total sales and
other revenues Three Months Ended Nine Months Ended September 30,
September 30, 2005 2004 2005 2004 Navajo Refinery Net operating
margin per produced barrel $12.15 $5.09 $9.77 $7.88 Add average
refinery operating expenses per produced barrel 3.65 3.47 3.48 3.24
Refinery gross margin per produced barrel 15.80 8.56 13.25 11.12
Add average cost of products per produced barrel sold 63.38 44.15
54.21 39.00 Average net sales per produced barrel sold $79.18
$52.71 $67.46 $50.12 Times sales of produced refined products sold
(BPD) 80,280 76,810 80,160 77,410 Times number of days in period 92
92 273 274 Refined product sales from produced products sold
$584,804 $372,476 $1,476,273 $1,063,062 Woods Cross Refinery Net
operating margin per produced barrel $8.96 $0.33 $4.79 $2.41 Add
average refinery operating expenses per produced barrel 4.11 3.93
4.18 3.93 Refinery gross margin per produced barrel 13.07 4.26 8.97
6.34 Add average cost of products per produced barrel sold 68.65
48.80 59.26 44.00 Average net sales per produced barrel sold $81.72
$53.06 $68.23 $50.34 Times sales of produced refined products sold
(BPD) 27,240 24,600 26,710 23,720 Times number of days in period 92
92 273 274 Refined product sales from produced products sold
$204,797 $120,085 $497,522 $327,174 Montana Refinery Net operating
margin per produced barrel $3.20 $1.36 $3.02 $1.92 Add average
refinery operating expenses per produced barrel 4.61 4.83 6.10 5.61
Refinery gross margin per produced barrel 7.81 6.19 9.12 7.53 Add
average cost of products per produced barrel sold 44.66 37.60 43.58
35.36 Average net sales per produced barrel sold $52.47 $43.79
$52.70 $42.89 Times sales of produced refined products sold (BPD)
10,980 10,010 8,510 7,960 Times number of days in period 92 92 273
274 Refined product sales from produced products sold $53,003
$40,327 $122,434 $93,545 Three Months Ended Nine Months Ended
September 30, September 30, 2005 2004 2005 2004 Sum of refined
product sales from produced products sold from our three refineries
(C) $842,604 $532,888 $2,096,229 $1,483,781 Add refined product
sales from purchased products and rounding (A) 69,739 58,293
196,185 126,032 Total refining product sales 912,343 591,181
2,292,414 1,609,813 Add other refining segment revenue (B) 22,644
1,829 48,517 14,123 Total refining segment revenue 934,987 593,010
2,340,931 1,623,936 Add HEP sales and other revenue --- 12,190
36,034 12,190 Add corporate and other revenues 417 399 1,034 1,496
Subtract consolidations and eliminations (125) (8,151) (19,699)
(8,382) Sales and other revenues $935,279 $597,448 $2,358,300
$1,629,240 (A) We purchase finished products when opportunities
arise that provide a profit on the sale of such products, or to
meet delivery commitments. (B) Other refining segment revenue
includes the revenues associated with NK Asphalt Partners
subsequent to their consolidation in February 2005 and revenues
during 2004 from terminal and pipeline assets that are now owned by
HEP. (C) 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 Nine Months Ended September
30, September 30, 2005 2004 2005 2004 Net operating margin per
produced barrel $10.58 $3.71 $8.11 $6.26 Average refinery operating
expenses per produced barrel 3.85 3.70 3.84 3.56 Refinery gross
margin per produced barrel 14.43 7.41 11.95 9.82 Add average cost
of products per produced barrel sold 62.86 44.58 54.60 39.82
Average net sales per produced barrel sold $77.29 $51.99 $66.55
$49.64 Times sales of produced refined products sold (BPD) 118,500
111,420 115,380 109,090 Times number of days in period 92 92 273
274 Refined product sales from produced products sold $842,604
$532,888 $2,096,229 $1,483,781 DATASOURCE: Holly Corporation
CONTACT: Stephen J. McDonnell, Vice President and Chief Financial
Officer, or M. Neale Hickerson, Vice President, Investor Relations,
both of Holly Corporation, +1-214-871-3555 Web site:
http://www.hollycorp.com/ http://audioevent.mshow.com/256727
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