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Press release from PR Newswire

Holly Corporation Reports Third Quarter 2010 Results

Thursday, November 04, 2010

Holly Corporation Reports Third Quarter 2010 Results07:00 EDT Thursday, November 04, 2010Announces Regular Quarterly Cash DividendDALLAS, Nov. 4, 2010 /PRNewswire-FirstCall/ -- Holly Corporation (NYSE: HOC) ("Holly" or the "Company") today reported third quarter 2010 financial results.  For the quarter, net income attributable to Holly stockholders was $51.2 million ($0.96 per basic and diluted share) compared to $23.5 million ($0.47 per basic and diluted share) for the third quarter of 2009.  For the nine months ended September 30, 2010, net income attributable to Holly stockholders was $89.2 million ($1.68 per basic and $1.67 per diluted share) compared to $60 million ($1.20 per basic and $1.19 per diluted share) for the same period of 2009.Holly also announced that its Board of Directors has declared a regular quarterly cash dividend in the amount of $0.15 per share, payable January 4, 2011 to holders of record on December 20, 2010. For the quarter, net income attributable to our stockholders increased by $27.7 million compared to the same period of 2009.  This increase was due principally to higher refinery gross margins during the current year third quarter combined with increased sales volumes of produced refined products.  Overall refinery gross margins were $10.41 per produced barrel, a 26% increase compared to $8.27 for the third quarter of 2009.  For the quarter, our overall refinery production levels averaged 230,630 barrels per day ("BPD"), an increase of 24% over the same period of 2009 due principally to increased production from our Tulsa refinery complex since we acquired the east facility in December 2009. For the nine months ended September 30, 2010, net income attributable to our stockholders increased by $29.2 million compared to the same period of 2009.  This increase was due principally to increased sales volumes of produced refined products combined with a slight increase in overall current year-to-date refinery gross margins.  Overall refinery gross margins were $9.10 per produced barrel, a 2% increase compared to $8.90 for the first nine months of 2009.  For the current year-to-date period, our overall refinery production levels averaged 227,060, an increase of 64% over the same period of 2009 due to production from our Tulsa refinery facilities and production increases at our Navajo and Woods Cross refineries.  "We are pleased with our third quarter results," said Matthew Clifton, Chairman of the Board and Chief Executive Officer of Holly.  "Continued strong diesel cracks at each of our refineries combined with robust gasoline cracks at our Woods Cross refinery and attractive lube margins at our Tulsa refinery helped fuel significant improved year over year third quarter performance.  Unscheduled downtime at certain operating units at our Navajo refinery during the quarter reduced our expected run rate and, accordingly, somewhat limited our capture of solid gross margins at that facility.  "Progress continues on our Tulsa integration and diesel desulfurization expansion efforts, with expected completion by the end of the first quarter 2011.  The Tulsa projects will reduce emissions and should improve the profit producing potential of what has been a strong profit contributor over the last two quarters.  "Our affiliated logistic MLP, Holly Energy Partners, had a strong third quarter achieving record quarterly distributable cash flow and EBITDA levels.  Our combined limited partner and general partner distributions during the third quarter were $9.1 million."At the end of the third quarter our cash and marketable securities stood at $272 million. Excluding the Holly Energy Partners debt that is non-recourse to Holly, our cash adjusted debt to total capitalization ratio was down to 10%.  Accordingly, our balance sheet ranks as one of the strongest among our independent refining peers. "In October the product margin environment for our refineries decreased slightly from the average during the third quarter but is strong for this time of year.  Looking forward we feel good about the quality of our assets, our dedicated personnel, the markets we serve and our improving strong financial position," Clifton said. Sales and other revenues for the third quarter of 2010 were $2,091 million, a 41% increase compared to the three months ended September 30, 2009.  This increase was due to the effects of a 14% year-over-year increase in third quarter refined product sales prices combined with a 28% increase in volumes of produced refined products sold.  The volume increase was primarily due to volumes attributable to our Tulsa refinery operations.  Cost of products sold was $1,807 million, a 40% increase compared to the three months ended September 30, 2009 due mainly to higher crude oil acquisition costs and increased volumes of produced refined products sold.  Sales and other revenues for the nine months ended September 30, 2010 were $6,111.1 million, a 93% increase compared to the nine months ended September 30, 2009.  This increase was due to the effects of a 28% year-over-year increase in year-to-date refined product sales prices combined with a 65% increase in volumes of produced refined products sold.  The volume increase was attributable to our Tulsa refinery operations and year-to-date production increases at our Navajo and Woods Cross refineries.  Cost of products sold was $5,379.1 million, a 100% increase compared to the nine months ended September 30, 2009 due mainly to higher crude oil acquisition costs and increased volumes of produced refined products sold.Operating costs and expenses for the three and the nine months ended September 30, 2010 increased mainly due to the inclusion of costs attributable to the operations of our Tulsa refinery facilities.  Interest expense for the three and the nine months ended September 30, 2010 increased by $5 million and $30.3 million, respectively, primarily due to interest incurred on the $300 million Holly senior notes and the $150 million 8.25% senior notes issued by HEP in March 2010.The Company has scheduled a webcast conference call for today, November 4, 2010 at 4:00 PM Eastern Time to discuss financial results.  This webcast may be accessed at: http://www.videonewswire.com/event.asp?id=73298.  An audio archive of this webcast will be available using the above noted link through November 18, 2010.Holly 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 specialty lubricant products.  Holly operates through its subsidiaries a 100,000 BPSD refinery located in Artesia, New Mexico, a 31,000 BPSD refinery in Woods Cross, Utah and a 125,000 BPSD refinery located in Tulsa, Oklahoma.  Also, a subsidiary of Holly owns a 34% interest (including the 2% 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 pipelines in Texas, New Mexico, Utah and Oklahoma and 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 with the Securities and Exchange Commission.  Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that our expectations will prove correct.  Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in such statements.  Any differences could be caused by a number of factors, including, but not limited to, risks and uncertainties with respect to the actions of actual or potential competitive suppliers of refined petroleum products in the Company's markets, the demand for and supply of crude oil and refined products, the spread between market prices for refined products and market prices for crude oil, the possibility of constraints on the transportation of refined products, the possibility of inefficiencies, curtailments or shutdowns in refinery operations or pipelines, effects of governmental and environmental regulations and policies, the availability and cost of financing to the Company, the effectiveness of the Company's capital investments and marketing strategies, the Company's efficiency in carrying out construction projects, the ability of the Company to acquire refined product operations or pipeline and terminal operations on acceptable terms and to integrate any future acquired operations, the possibility of terrorist attacks and the consequences of any such attacks, general economic conditions, and other financial, operational and legal risks and uncertainties detailed from time to time in the Company's Securities and Exchange Commission filings.  The forward-looking statements speak only as of the date made and, other than as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.RESULTS OF OPERATIONSFinancial Data (all information in this release is unaudited)Three Months EndedSeptember 30,Change from 200920102009 ChangePercent(In thousands, except per share data)Sales and other revenues                                 $  2,090,988$  1,488,491$  602,49740.5%Operating costs and expenses: Cost of products sold (exclusive of depreciation and amortization)1,807,0441,295,438511,60639.5 Operating expenses (exclusive of depreciation and amortization)130,26396,71733,54634.7 General and administrative expenses (exclusive of depreciation   and amortization)                                    16,92516,7281971.2 Depreciation and amortization                            29,13824,0265,11221.3  Total operating costs and expenses                     1,983,3701,432,909550,46138.4Income from operations                                   107,61855,58252,03693.6Other income (expense): Equity in earnings of SLC Pipeline                         570646(76)(11.8) Interest income                                       64231(167)(72.3) Interest expense                                       (17,368)(12,407)(4,961)40.0 Acquisition costs - Tulsa refinery                         -(378)378(100.0)(16,734)(11,908)(4,826)40.5Income from continuing operations before income taxes         90,88443,67447,210108.1Income tax provision                                     31,49413,49717,997133.3Income from continuing operations                           59,39030,17729,21396.8Income from discontinued operations (1)                     -901(901)(100.0)Net income                                             59,39031,07828,31291.1Less noncontrolling interest in net income                     8,2137,5946198.2Net income attributable to Holly Corporation stockholders         $  51,177$  23,484$  27,693117.9%Earnings attributable to Holly Corporation stockholders: Income from continuing operations                         $  51,177$  23,213$  27,964120.5% Income from discontinued operations                       -271(271)(100.0) Net income                                           $  51,177$  23,484$  27,693117.9%Earnings per share attributable to Holly Corporation  stockholders ? basic: Income from continuing operations                         $  0.96$  0.46$  0.50108.7% Income from discontinued operations (1)                   -0.01(0.01)(100.0) Net income                                           $  0.96$  0.47$  0.49104.3%Earnings per share attributable to Holly Corporation  stockholders ? diluted: Income from continuing operations                         $  0.96$  0.46$  0.50108.7% Income from discontinued operations (1)                   -0.01(0.01)(100.0) Net income                                           $  0.96$  0.47$  0.49104.3%Cash dividends declared per common share                   $  0.15$  0.15$  --%Average number of common shares outstanding: Basic                                               53,21050,2442,9665.9% Diluted                                               53,56750,3273,2406.4%EBITDA from continuing operations                          $  129,113$  72,912$  56,20177.1%Nine Months EndedSeptember 30,Change from 200920102009 ChangePercent(In thousands, except per share data)Sales and other revenues                                 $  6,111,138$  3,172,299$  2,938,83992.6%Operating costs and expenses: Cost of products sold (exclusive of depreciation and amortization)5,379,1202,687,0182,692,102100.2 Operating expenses (exclusive of depreciation and amortization)378,638241,518137,12056.8 General and administrative expenses (exclusive of depreciation   and amortization)                                    50,62343,5727,05116.2 Depreciation and amortization                             85,71969,36716,35223.6  Total operating costs and expenses                     5,894,1003,041,4752,852,62593.8Income from operations                                   217,038130,82486,21465.9Other income (expense): Equity in earnings of SLC Pipeline                         1,5951,30928621.8 Interest income                                        7582,561(1,803)(70.4) Interest expense                                       (56,113)(25,849)(30,264)117.1 Acquisition costs - Tulsa refinery                         -(1,988)1,988(100.0)(53,760)(23,967)(29,793)124.3Income from continuing operations before income taxes         163,278106,85756,42152.8Income tax provision                                     54,47634,66819,80857.1Income from continuing operations                           108,80272,18936,61350.7Income from discontinued operations (1)                     -3,438(3,438)(100.0)Net income                                             108,80275,62733,17543.9Less noncontrolling interest in net income                     19,55715,5933,96425.4Net income attributable to Holly Corporation stockholders         $  89,245$  60,034$  29,21148.7%Earnings attributable to Holly Corporation stockholders: Income from continuing operations                         $  89,245$  59,014$  30,23151.2% Income from discontinued operations                       -1,020(1,020)(100.0) Net income                                           $  89,245$  60,034$  29,21148.7%Earnings per share attributable to Holly Corporation  stockholders ? basic: Income from continuing operations                         $  1.68$  1.18$  0.5042.4% Income from discontinued operations (1)                   -0.02(0.02)(100.0) Net income                                           $  1.68$  1.20$  0.4840.0%Earnings per share attributable to Holly Corporation  stockholders ? diluted: Income from continuing operations                         $  1.67$  1.17$  0.5042.7% Income from discontinued operations (1)                   -0.02(0.02)(100.0) Net income                                           $  1.67$  1.19$  0.4840.3%Cash dividends declared per common share                   $  0.45$  0.45$  --%Average number of common shares outstanding: Basic                                               53,17250,1533,0196.0% Diluted                                               53,53150,2723,2596.5%EBITDA from continuing operations                          $  284,795$  186,337$  98,45852.8%(1) On December 1, 2009, HEP sold its interest in Rio Grande Pipeline Company ("Rio Grande").  Results of operations of Rio Grande are presented in discontinued operations.Balance Sheet DataSeptember 30,December 31,20102009(In thousands)Cash, cash equivalents and investments in marketable securities                       $  273,091$  125,819Working capital (1)                                                           $  204,758$  257,899Total assets                                                                 $  3,397,379$  3,145,939Long-term debt                                                              $  650,906$  707,458Total equity                                                                 $  1,265,477$  1,207,871(1) HEP's credit agreement expires in August 2011, therefore, working capital at September 30, 2010 reflects $157 million of HEP credit agreement borrowings that are classified as current liabilities.  HEP intends to renew its credit agreement prior to expiration and to continue to finance outstanding borrowings, which HEP will then reclassify as long-term debt, to the extent not designated for working capital purposes.  Excluding HEP's $157 million in credit agreement borrowings, working capital was $361.8 million at September 30, 2010.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.  Intersegment transactions are eliminated in our consolidated financial statements and are included in Consolidations and Eliminations. The Refining segment includes the operations of our Navajo, Woods Cross and Tulsa refineries and Holly Asphalt Company ("Holly Asphalt").  The Refining segment involves the purchase and refining of crude oil and wholesale and branded marketing of refined products, such as gasoline, diesel fuel, jet fuel and specialty lubricant products.  The petroleum products produced by the Refining segment are primarily marketed in the Southwest, Rocky Mountain and Mid-Continent regions of the United States and northern Mexico.  Additionally, the Refining segment includes specialty lubricant products produced at our Tulsa refinery that are marketed throughout North America and are distributed in Central and South America.  Holly Asphalt 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.  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, Utah and Oklahoma.  Revenues are generated by charging tariffs for transporting petroleum products and crude oil through its pipelines, by leasing certain pipeline capacity to Alon USA, Inc., by charging fees for terminalling refined products and other hydrocarbons, and storing and providing other services at its storage tanks and terminals. The HEP segment also includes a 25% interest in SLC Pipeline LLC ("SLC Pipeline") that services refineries in the Salt Lake City, Utah area.  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. RefiningHEPCorporate and OtherConsolidations and EliminationsConsolidatedTotal(In thousands)Three Months Ended September 30, 2010 Sales and other revenues            $  2,081,709$  46,558$  100$  (37,379)$  2,090,988 Operating expenses                 $  116,757$  13,632$  6$  (132)$  130,263 General and administrative expenses   $  -$  1,508$  15,417$  -$  16,925 Depreciation and amortization         $  21,274$  6,830$  1,329$  (295)$  29,138 Income (loss) from operations         $  100,111$  24,588$  (16,652)$  (429)$  107,618Three Months Ended September 30, 2009 Sales and other revenues            $  1,476,304$  40,805$  229$  (28,847)$  1,488,491 Operating expenses                 $  85,735$  11,103$  7$  (128)$  96,717 General and administrative expenses   $  -$  1,848$  14,880$  -$  16,728 Depreciation and amortization         $  16,527$  5,974$  1,525$  -$  24,026 Income (loss) from operations         $  50,584$  21,880$  (16,183)$  (699)$  55,582RefiningHEPCorporate and OtherConsolidationsandEliminationsConsolidatedTotal(In thousands)Nine Months Ended September 30, 2010 Sales and other revenues            $  6,086,243$  132,730$  317$  (108,152)$  6,111,138 Operating expenses                 $  338,802$  40,187$  24$  (375)$  378,638 General and administrative expenses   $  -$  5,984$  44,639$  -$  50,623 Depreciation and amortization         $  62,599$  20,822$  3,183$  (885)$  85,719 Income (loss) from operations         $  200,080$  65,737$  (47,529)$  (1,250)$  217,038Nine Months Ended September 30, 2009 Sales and other revenues            $  3,136,017$  108,136$  423$  (72,277)$  3,172,299 Operating expenses                 $  209,790$  32,076$  34$  (382)$  241,518 General and administrative expenses   $  -$  4,979$  38,593$  -$  43,572 Depreciation and amortization         $  46,310$  17,794$  5,263$  -$  69,367 Income (loss) from operations         $  121,703$  53,287$  (43,467)$  (699)$  130,824September 30, 2010 Cash, cash equivalents and    investments in marketable securities $  -$    706$    272,385$    -$  273,091 Total assets                       $  2,210,374$    660,727$    555,419$    (29,141)$  3,397,379December 31, 2009 Cash, cash equivalents and    investments in marketable securities $  -$    2,508$    123,311$  -$  125,819 Total assets                       $  2,142,317$    641,775$    392,007$  (30,160)$  3,145,939Refining Operating DataOur refinery operations include the Navajo, Woods Cross and Tulsa refineries.  The following tables set forth information, including non-GAAP performance measures about our consolidated refinery operations.  The cost of products and refinery gross margin do not include the effect of depreciation and amortization.  Reconciliations to amounts reported under GAAP are provided under "Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles" below.Three Months EndedSeptember 30,Nine Months EndedSeptember 30,2010200920102009Navajo RefineryCrude charge (BPD) (1)                                  85,11086,25082,15076,670Refinery production (BPD) (2)                             91,55093,62090,29084,560Sales of produced refined products (BPD)                   92,18093,99690,73084,102Sales of refined products (BPD) (3)                         94,90096,58093,78088,110Refinery utilization (4)                                   85.1%86.2%82.2%80.7%Average per produced barrel (5) Net sales                                           $  87.60$  78.15$  88.98$  69.21 Cost of products (6)                                   79.3970.8881.4460.25 Refinery gross margin                                 8.217.277.548.96 Refinery operating expenses (7)                         5.254.375.014.88 Net operating margin                                   $  2.96$  2.90$  2.53$  4.08Feedstocks: Sour crude oil                                        88%86%86%84% Sweet crude oil                                       4%6%4%6% Other feedstocks and blends                            8%8%10%10% Total                                               100%100%100%100%Three Months EndedSeptember 30,Nine Months EndedSeptember 30,2010200920102009Sales of produced refined products: Gasolines                                           55%56%57%57% Diesel fuels                                          32%33%31%33% Jet fuels                                             2%3%4%2% Fuel oil                                             6%4%4%3% Asphalt                                             3%2%2%3% LPG and other                                       2%2%2%2% Total                                               100%100%100%100%Woods Cross RefineryCrude charge (BPD) (1)                                  27,44026,86026,87025,670Refinery production (BPD) (2)                             28,41027,63027,94026,220Sales of produced refined products (BPD)                   27,54027,09828,26027,061Sales of refined products (BPD) (3)                         27,84027,15028,45027,520Refinery utilization (4)                                   88.5%86.7%86.7%81.9%Average per produced barrel (5) Net sales                                           $  94.86$  80.87$  93.71$  66.87 Cost of products (6)                                   73.0865.6874.0255.22 Refinery gross margin                                 21.7815.1919.6911.65 Refinery operating expenses (7)                         6.116.445.866.45 Net operating margin                                   $  15.67$  8.75$  13.83$  5.20Feedstocks: Sour crude oil                                        5%6%6%4% Sweet crude oil                                       61%61%60%63% Black wax crude oil                                   30%27%29%28% Other feedstocks and blends                            4%6%5%5% Total                                               100%100%100%100%Sales of produced refined products: Gasolines                                           60%59%62%65% Diesel fuels                                          33%32%31%28% Jet fuels                                             1%3%1%1% Fuel oil                                             2%3%1%3% Asphalt                                             2%2%3%1% LPG and other                                       2%1%2%2% Total                                               100%100%100%100%Tulsa Refinery (8)Crude charge (BPD) (1)                                  114,82066,230112,34028,300Refinery production (BPD) (2)                             110,67064,230108,83027,400Sales of produced refined products (BPD)                   113,04060,596107,95026,077Sales of refined products (BPD) (3)                         113,04060,850108,56026,250Refinery utilization (4)                                   91.9%77.9%89.9%74.5%Average per produced barrel (5) Net sales                                           $  89.22$  76.80$  88.91$  76.65 Cost of products (6)                                   79.8070.1081.2670.80 Refinery gross margin                                 9.426.707.655.85 Refinery operating expenses (7)                         4.804.645.104.76 Net operating margin                                   $  4.62$  2.06$  2.55$       1.09Feedstocks: Sour crude oil                                        9%-%6%-% Sweet crude oil                                       91%100%94%100% Total                                               100%100%100%100%Three Months EndedSeptember 30,Nine Months EndedSeptember 30,2010200920102009Sales of produced refined products: Gasolines                                           39%23%39%23% Diesel fuels                                          30%30%31%30% Jet fuels                                             8%11%8%11% Lubricants                                           10%18%10%18% Gas oil / intermediates                                 4%16%3%16% Asphalt                                             6%-%5%-% LPG and other                                       3%2%4%2% Total                                               100%100%100%100%ConsolidatedCrude charge (BPD) (1)                                  227,370179,350221,360130,640Refinery production (BPD) (2)                             230,630185,480227,060138,190Sales of produced refined products (BPD)                   232,760181,690226,940137,240Sales of refined products (BPD) (3)                         235,780184,570230,790141,890Refinery utilization (4)                                   88.8%83.0%86.5%80.5%Average per produced barrel (5) Net sales                                           $  89.25$  78.11$  89.53$  70.16 Cost of products (6)                                   78.8469.8480.4361.26 Refinery gross margin                                 10.418.279.108.90 Refinery operating expenses (7)                         5.144.775.165.17 Net operating margin                                   $  5.27$  3.50$  3.94$  3.73Feedstocks: Sour crude oil                                        39%44%37%52% Sweet crude oil                                       54%47%55%36% Black wax crude oil                                   4%4%4%5% Other feedstocks and blends                            3%5%4%7% Total                                               100%100%100%100%Sales of produced refined products: Gasolines                                           48%45%49%52% Diesel fuels                                          31%32%31%31% Jet fuels                                             5%6%6%3% Fuel oil                                             3%2%2%3% Asphalt                                             4%2%3%2% Lubricants                                           5%6%5%4% Gas oil / intermediates                                 2%5%1%3% LPG and other                                       2%2%3%2% Total                                               100%100%100%100%(1) Crude charge represents the barrels per day of crude oil processed 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 by 15,000 BPSD effective April 1, 2009 (our Navajo refinery expansion), 85,000 BPSD effective June 1, 2009 (our Tulsa Refinery west facility acquisition) and 40,000 BPSD effective December 1, 2009 (our Tulsa refinery east facility acquisition), increasing our consolidated crude capacity to 256,000 BPSD.(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, terminal and refinery storage costs billed from HEP are included in cost of products.  (7) Represents operating expenses of our refineries, exclusive of depreciation and amortization.(8) The amounts reported for the Tulsa Refinery for the nine months ended September 30, 2009 include crude oil processed and products yielded from the Tulsa Refinery west facility for the period from June 1, 2009 (date of Tulsa Refinery west facility acquisition) through September 30, 2009 only, and averaged over the 273 days for the nine months ended.  Operating data for the period from June 1, 2009 through September 30, 2009 is as follows:Tulsa RefineryCrude charge (BPD)                             63,330Refinery production (BPD)                         61,310Sales of produced refined products (BPD)           58,360Sales of refined products (BPD)                   58,740Refinery utilization                               74.5%Reconciliations to Amounts Reported Under Generally Accepted Accounting PrinciplesReconciliations 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 attributable to Holly Corporation stockholders plus (i) interest expense, net of interest income, (ii) income tax provision, and (iii) depreciation and amortization.  EBITDA is not a calculation provided for under accounting principles generally accepted in the United States; however, the amounts included in the EBITDA calculation are derived from amounts included in our consolidated financial statements.  EBITDA should not be considered as an alternative to net income or operating income as an indication of our operating performance or as an alternative to operating cash flow as a measure of liquidity.  EBITDA is not necessarily comparable to similarly titled measures of other companies.  EBITDA is presented here because it is a widely used financial indicator used by investors and analysts to measure performance.  EBITDA is also used by our management for internal analysis and as a basis for financial covenants. Set forth below is our calculation of EBITDA from continuing operations.  Three Months EndedSeptember 30,Nine Months Ended September 30,2010200920102009(In thousands)Income from continuing operations                           $  59,390$  30,177$  108,802$  72,189 Subtract noncontrolling interest in income from continuing  operations                                          (8,213)(6,964)(19,557)(13,175) Add income tax provision                                31,49413,49754,47634,668 Add interest expense                                   17,36812,40756,11325,849 Subtract interest income                                 (64)(231)(758)(2,561) Add depreciation and amortization                         29,13824,02685,71969,367EBITDA from continuing operations                           $  129,113$  72,912$  284,795$  186,337Reconciliations 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 and amortization.  Each of these component performance measures can be reconciled directly to our Consolidated Statements of Income.Other companies in our industry may not calculate these performance measures in the same manner.Refinery Gross MarginRefinery 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 EndedSeptember 30,Nine Months Ended September 30,2010200920102009Average per produced barrel:Navajo Refinery Net sales                                             $  87.60$  78.15$  88.98$  69.21 Less cost of products                                   79.3970.8881.4460.25 Refinery gross margin                                   $  8.21$  7.27$  7.54$  8.96Woods Cross Refinery Net sales                                             $  94.86$  80.87$  93.71$  66.87 Less cost of products                                   73.0865.6874.0255.22 Refinery gross margin                                   $  21.78$  15.19$  19.69$  11.65Tulsa Refinery Net sales                                             $  89.22$  76.80$  88.91$  76.65 Less cost of products                                   79.8070.1081.2670.80 Refinery gross margin                                   $  9.42$  6.70$  7.65$  5.85Consolidated Net sales                                             $  89.25$  78.11$  89.53$  70.16 Less cost of products                                   78.8469.8480.4361.26 Refinery gross margin                                   $  10.41$  8.27$  9.10$  8.90Net Operating MarginNet 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 EndedSeptember 30,Nine Months Ended September 30,2010200920102009Average per produced barrel:Navajo Refinery Refinery gross margin                                   $  8.21$  7.27$  7.54$  8.96 Less refinery operating expenses                         5.254.375.014.88 Net operating margin                                   $  2.96$  2.90$  2.53$  4.08Woods Cross Refinery Refinery gross margin                                   $  21.78$  15.19$  19.69$  11.65 Less refinery operating expenses                         6.116.445.866.45 Net operating margin                                   $  15.67$  8.75$  13.83$  5.20Tulsa Refinery Refinery gross margin                                   $  9.42$  6.70$  7.65$  5.85 Less refinery operating expenses                         4.804.645.104.76 Net operating margin                                   $  4.62$  2.06$  2.55$  1.09Consolidated Refinery gross margin                                   $  10.41$  8.27$  9.10$  8.90 Less refinery operating expenses                         5.144.775.165.17 Net operating margin                                   $  5.27$  3.50$  3.94$  3.73Below 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.Reconciliations of refined product sales from produced products sold to total sales and other revenueThree Months EndedSeptember 30,Nine Months Ended September 30,2010200920102009(Dollars in thousands, except per barrel amounts)Navajo RefineryAverage sales price per produced barrel sold                 $  87.60$  78.15$  88.98$  69.21Times sales of produced refined products sold (BPD)           92,18093,99690,73084,102Times number of days in period                             9292273273Refined product sales from produced products sold             $  742,897$  675,812$  2,203,971$  1,589,051Woods Cross RefineryAverage sales price per produced barrel sold                 $  94.86$  80.87$  93.71$  66.87Times sales of produced refined products sold (BPD)           27,54027,09828,26027,061Times number of days in period                             9292273273Refined product sales from produced products sold             $  240,345$  201,610$  722,971$  494,012Tulsa RefineryAverage sales price per produced barrel sold                 $  89.22$  76.80$  88.91$  76.65Times sales of produced refined products sold (BPD)           113,04060,596107,95026,077Times number of days in period                             9292273273Refined product sales from produced products sold             $  927,859$  428,147$  2,620,209$  545,673Sum of refined product sales from produced products sold from our three refineries (1)$  1,911,101$  1,305,569$  5,547,151$  2,628,736Add refined product sales from purchased products and rounding (2)24,58621,53993,09383,579Total refined product sales                                 1,935,6871,327,1085,640,2442,712,315Add direct sales of excess crude oil (3)                      106,36498,540355,381320,416Add other refining segment revenue (4)                       39,65850,65690,618103,286Total refining segment revenue                             2,081,7091,476,3046,086,2433,136,017Add HEP segment sales and other revenues                   46,55840,805132,730108,136Add corporate and other revenues                          100229317423Subtract consolidations and eliminations                      (37,379)(28,847)(108,152)(72,277)Sales and other revenues                                 $  2,090,988$  1,488,491$  6,111,138$  3,172,299(1) 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.(2) We purchase finished products when opportunities arise that provide a profit on the sale of such products, or to meet delivery commitments.(3) 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.(4) Other refining segment revenue includes the revenues associated with Holly Asphalt and revenue derived from feedstock and sulfur credit sales.Three Months EndedSeptember 30,Nine Months Ended September 30,2010200920102009(Dollars in thousands, except per barrel amounts)Average sales price per produced barrel sold                 $  89.25$  78.11$  89.53$  70.16Times sales of produced refined products sold (BPD)           232,760181,690226,940137,240Times number of days in period                             9292273273Refined product sales from produced products sold             $  1,911,101$  1,305,569$  5,547,151$2,628,736Reconciliation of average cost of products per produced barrel sold to total cost of products soldThree Months EndedSeptember 30,Nine Months EndedSeptember 30,2010200920102009(Dollars in thousands, except per barrel amounts)Navajo RefineryAverage cost of products per produced barrel sold             $  79.39$  70.88$  81.44$  60.25Times sales of produced refined products sold (BPD)           92,18093,99690,73084,102Times number of days in period                             9292273273Cost of products for produced products sold                  $  673,272$  612,944$  2,017,211$  1,383,331Woods Cross RefineryAverage cost of products per produced barrel sold             $  73.08$  65.68$  74.02$  55.22Times sales of produced refined products sold (BPD)           27,54027,09828,26027,061Times number of days in period                             9292273273Cost of products for produced products sold                  $  185,161$  163,741$  571,063$  407,946Tulsa RefineryAverage cost of products per produced barrel sold             $  79.80$  70.10$  81.26$  70.80Times sales of produced refined products sold (BPD)           113,04060,596107,95026,077Times number of days in period                             9292273273Cost of products for produced products sold                  $  829,894$  390,796$  2,394,761$  504,027Sum of cost of products for produced products sold from our three refineries (1)$    1,688,327$1,167,481$  4,983,035$  2,295,304Add refined product costs from purchased products sold and rounding (2)24,59422,29593,89888,271Total refined cost of products sold                           1,712,9211,189,7765,076,9332,383,575Add crude oil cost of direct sales of excess crude oil (3)         105,09197,400351,643317,954Add other refining segment cost of products sold (4)            25,55536,28256,18656,685Total refining segment cost of products sold                   1,843,5671,323,4585,484,7622,758,214Subtract consolidations and eliminations                      (36,523)(28,020)(105,642)(71,196)Costs of products sold (exclusive of depreciation and amortization) $  1,807,044$  1,295,438$  5,379,120$  2,687,018(1) The above calculations of cost of products for produced products sold can also be computed on a consolidated basis.  These amounts may not calculate exactly due to rounding of reported numbers.(2) We purchase finished products when opportunities arise that provide a profit on the sale of such products, or to meet delivery commitments.(3) 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. (4) Other refining segment cost of products sold includes the cost of products for Holly Asphalt and costs attributable to feedstock and sulfur credit sales.Three Months Ended September 30,Nine Months Ended September 30,2010200920102009(Dollars in thousands, except per barrel amounts)  Average cost of products per produced barrel sold             $  78.84$  69.84$  80.43$  61.26  Times sales of produced refined products sold (BPD)           232,760181,690226,940137,240  Times number of days in period                             9292273273  Cost of products for produced products sold                   $  1,688,327$  1,167,481$  4,983,035$  2,295,304Reconciliation of average refinery operating expenses per produced barrel sold to total operating expensesThree Months Ended September 30,Nine Months Ended September 30,2010200920102009(Dollars in thousands, except per barrel amounts)Navajo RefineryAverage refinery operating expenses per produced barrel sold   $  5.25$  4.37$  5.01$  4.88Times sales of produced refined products sold (BPD)           92,18093,99690,73084,102Times number of days in period                            9292273273Refinery operating expenses for produced products sold       $  44,523$  37,790$  124,094$  112,044Woods Cross RefineryAverage refinery operating expenses per produced barrel sold   $  6.11$  6.44$  5.86$  6.45Times sales of produced refined products sold (BPD)           27,54027,09828,26027,061Times number of days in period                            9292273273Refinery operating expenses for produced products sold       $  15,481$  16,055$  45,210$  47,650Tulsa RefineryAverage refinery operating expenses per produced barrel sold   $  4.80$  4.64$  5.10$  4.76Times sales of produced refined products sold (BPD)           113,04060,596107,95026,077Times number of days in period                            9292273273Refinery operating expenses for produced products sold       $  49,918$  25,867$  150,299$  33,887Sum of refinery operating expenses per produced products sold from our three refineries (1)$  109,922$  79,712$  319,603$  193,581Add other refining segment operating expenses and rounding (2) 6,8356,02319,19916,209Total refining segment operating expenses                   116,75785,735338,802209,790Add HEP segment operating expenses                       13,63211,10340,18732,076Add corporate and other costs                             672434Subtract consolidations and eliminations                     (132)(128)(375)(382)Operating expenses (exclusive of depreciation and amortization) $  130,263$  96,717$  378,638$  241,518(1) 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. (2) Other refining segment operating expenses include the marketing costs associated with our refining segment and the operating expenses of Holly Asphalt.Three Months Ended September 30,Nine Months EndedSeptember 30,2010200920102009(Dollars in thousands, except per barrel amounts)  Average refinery operating expenses per produced barrel sold sold$  5.14$  4.77$  5.16$  5.17  Times sales of produced refined products sold (BPD)           232,760181,690226,940137,240  Times number of days in period                             9292273273  Refinery operating expenses for produced products sold         $  109,922$  79,712$  319,603$  193,581Reconciliation of net operating margin per barrel to refinery gross margin per barrel to total sales and other revenuesThree Months Ended September 30,Nine Months Ended September 30,2010200920102009(Dollars in thousands, except per barrel amounts)Navajo RefineryNet operating margin per barrel                             $  2.96$  2.90$  2.53$  4.08Add average refinery operating expenses per produced barrel    5.254.375.014.88Refinery gross margin per barrel                            8.217.277.548.96Add average cost of products per produced barrel sold         79.3970.8881.4460.25Average sales price per produced barrel sold                 $  87.60$  78.15$  88.98$  69.21Times sales of produced refined products sold (BPD)           92,18093,99690,73084,102Times number of days in period                             9292273273Refined product sales from produced products sold             $  742,897$  675,812$  2,203,971$  1,589,051Woods Cross RefineryNet operating margin per barrel                             $  15.67$  8.75$  13.83$  5.20Add average refinery operating expenses per produced barrel    6.116.445.866.45Refinery gross margin per barrel                            21.7815.1919.6911.65Add average cost of products per produced barrel sold         73.0865.6874.0255.22Average sales price per produced barrel sold                 $  94.86$  80.87$  93.71$  66.87Times sales of produced refined products sold (BPD)           27,54027,09828,26027,061Times number of days in period                             9292273273Refined product sales from produced products sold             $  240,345$  201,610$  722,971$  494,012Tulsa RefineryNet operating margin per barrel                             $  4.62$  2.06$  2.55$  1.09Add average refinery operating expenses per produced barrel    4.804.645.104.76Refinery gross margin per barrel                            9.426.707.655.85Add average cost of products per produced barrel sold         79.8070.1081.2670.80Average sales price per produced barrel sold                 $  89.22$  76.80$  88.91$  76.65Times sales of produced refined products sold (BPD)           113,04060,596107,95026,077Times number of days in period                             9292273273Refined product sales from produced products sold             $  927,859$  428,147$  2,620,209$  545,673Sum of refined product sales from produced products sold from our three refineries (1)$  1,911,101$  1,305,569$  5,547,151$  2,628,736Add refined product sales from purchased products and rounding (2)24,58621,53993,09383,579Total refined product sales                                 1,935,6871,327,1085,640,2442,712,315Add direct sales of excess crude oil (3)                      106,36498,540355,381320,416Add other refining segment revenue (4)                       39,65850,65690,618103,286Total refining segment revenue                             2,081,7091,476,3046,086,2433,136,017Add HEP segment sales and other revenues                   46,55840,805132,730108,136Add corporate and other revenues                          100229317423Subtract consolidations and eliminations                      (37,379)(28,847)(108,152)(72,277)Sales and other revenues                                 $  2,090,988$  1,488,491$  6,111,138$  3,172,299(1) 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.(2) We purchase finished products when opportunities arise that provide a profit on the sale of such products or to meet delivery commitments.(3) 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.(4) Other refining segment revenue includes the revenues associated with Holly Asphalt and revenue derived from feedstock and sulfur credit sales.Three Months Ended September 30,Nine Months Ended September 30,2010200920102009(Dollars in thousands, except per barrel amounts)Net operating margin per barrel                             $  5.27$  3.50$  3.94$  3.73Add average refinery operating expenses per produced barrel    5.144.775.165.17Refinery gross margin per barrel                            10.418.279.108.90Add average cost of products per produced barrel sold         78.8469.8480.4361.26Average sales price per produced barrel sold                 $  89.25$  78.11$  89.53$  70.16Times sales of produced refined products sold (BPD)           232,760181,690226,940137,240Times number of days in period                             9292273273Refined product sales from produced products sold             $  1,911,101$  1,305,569$  5,547,151$2,628,736SOURCE Holly CorporationFor further information: Bruce R, Shaw, Senior Vice President and Chief Financial Officer, or M. Neale Hickerson, Vice President, Investor Relations, both of Holly Corporation, +1-214-871-3555