UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) March 7, 2003
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HOLLY CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 001-03876 75-1056913
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
100 Crescent Court, Suite 1600
Dallas, Texas 75201-6927
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 871-3555
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ITEM 5. OTHER EVENTS
On March 7, 2003, the Company issued the following press release:
HOLLY CORPORATION REPORTS SECOND QUARTER OF FISCAL 2003 RESULTS
Dallas, Texas, March 7, 2003 -- Holly Corporation (AMEX-HOC),
today reported results for the Company's second quarter and six months
ended January 31, 2003.
The Company incurred a net loss for the three months ended
January 31, 2003 of $1.6 million ($.10 per diluted share) compared to a
net loss of $485,000 ($.03 per diluted share) for the three months ended
January 31, 2002. For the six months ended January 31, 2003, net income
was $3.7 million ($.23 per diluted share) compared to $19.7 million
($1.24 per diluted share) for the six months ended January 31, 2002. The
larger fiscal second quarter loss and the lower earnings for the six
months ended January 31, 2003, as compared to the prior year periods,
were principally the result of lower refined product margins and a loss
rather than substantial earnings at our asphalt joint venture, offset
partially by increases in sales volumes resulting from the absence of a
maintenance turnaround in the second quarter of fiscal 2003.
For the Company's second quarter ended January 31, 2003,
refining margins of $4.71 per barrel were slightly less than the refinery
margins of $5.02 per barrel for the quarter ended January 31, 2002. For
the six months ended January 31, 2003, refining margins of $5.24 per
barrel were significantly less than the refinery margins of $7.36 per
barrel for the six months ended January 31, 2002. During the prior year's
first quarter, the Company, along with the refining industry as a whole,
was still experiencing very favorable refining margins, which fell off
significantly in the prior year's second quarter. For much of the current
year's second quarter, increases in crude oil and other feedstock costs
outpaced refined product price increases, resulting in refining margins
slightly less than those experienced in the second quarter of fiscal
2002. Refinery margins since the end of January 2003 have improved
substantially.
The Company's revenues and cost of products sold were higher
in the first quarter and six months of fiscal 2003, as compared to the
comparable periods in fiscal 2002, due principally to higher refined
product sales prices and higher costs of purchased crude oil.
Additionally, refined product sales volumes increased for the three-month
and six-month periods by 19% and 12%, respectively, as compared to the
same periods of fiscal 2002, as production of refined products in the
quarter ended January 31, 2002 was reduced because of an extended 29-day
planned maintenance turnaround that involved a number of process units at
the Artesia and Lovington facilities. Equity in earnings of joint
ventures was reduced in the first quarter and six months of fiscal 2003,
as compared to the comparable periods in
fiscal 2002, due to a loss from our asphalt joint venture in the current
fiscal year, because of lower margins and an inventory charge of $1.3
million in the quarter ended January 31, 2003.
"The Company experienced a very difficult refining environment
during the first half of our fiscal year with worldwide concerns that
have driven crude oil prices to high levels. Given the difficult refining
environment, we are disappointed that we lost $1.6 million during our
second quarter ended January 31, 2003, yet pleased that we still
generated $4.8 million of earnings before interest, taxes and
depreciation and that current refining margins have improved
substantially," said Matthew P. Clifton, President of Holly. "The Company
is continuing to work diligently in the construction of a gas oil
hydrotreating unit at its Artesia, New Mexico refinery facility which is
designed to satisfy future EPA mandated gasoline specifications and to
improve the refinery's yields of higher value products. Additionally, an
expansion of our New Mexico facility that will result in an increase of
approximately 20% in Holly's current overall refining capacity is
expected to be completed along with the hydrotreating unit by the end of
calendar 2003. We are also now in the final stages of preparation for the
acquisition of the Woods Cross refinery near Salt Lake City from
ConocoPhillips. The Woods Cross acquisition is still being reviewed by
the Federal Trade Commission, but we expect the acquisition will close in
April or May 2003. Given an exceptionally strong balance sheet reflecting
minimal debt, the anticipated future benefits of the gas oil hydrotreater
and expansion project, and the planned acquisition of the Woods Cross
refinery, we believe the Company is well positioned to weather difficult
economic times, to prosper as the industry improves, and to capitalize on
further growth opportunities that may develop."
Holly Corporation, through its affiliates, Navajo Refining
Company and Montana Refining Company, is engaged in the refining,
transportation, terminalling and wholesale marketing of petroleum
products.
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. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable,
the Company cannot give any assurances that these expectations will prove
to be 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 Company's
efficiency in carrying out construction projects, the successful
acquisition and integration of the Woods Cross refinery, 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 Company assumes no duty to publicly
update or revise such statements, whether as a result of new information,
future events or otherwise.
RESULTS OF OPERATIONS
STATEMENT OF INCOME (Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JANUARY 31, JANUARY 31,
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2003 2002 2003 2002
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(In thousands, except share data)
Sales and other revenues ......................... $ 270,360 $ 166,754 $ 546,018 $ 424,701
Operating costs and expenses
Cost of products sold ......................... 232,429 134,022 464,388 326,006
Operating expenses ............................ 26,189 23,266 50,329 48,012
Selling, general and administrative expenses .. 5,337 5,228 10,540 10,658
Depreciation, depletion and amortization ...... 7,161 6,714 14,357 13,145
Exploration expenses, including dry holes ..... 261 243 478 542
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Total operating costs and expenses ....... 271,377 169,473 540,092 398,363
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Income (loss) from operations .................... (1,017) (2,719) 5,926 26,338
Other income (expense)
Equity in earnings of joint ventures .......... (1,378) 2,320 604 5,068
Interest expense, net ......................... (193) (393) (612) (651)
Gain on sale of equity securities ............. -- -- -- 1,522
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(1,571) 1,927 (8) 5,939
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Income (loss) before income taxes ................ (2,588) (792) 5,918 32,277
Income tax provision (benefit) ................... (992) (307) 2,267 12,540
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Net income (loss) ................................ $ (1,596) $ (485) $ 3,651 $ 19,737
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Net income (loss) per common share - basic ....... $ (0.10) $ (0.03) $ 0.24 $ 1.27
Net income (loss) per common share - diluted ..... $ (0.10) $ (0.03) $ 0.23 $ 1.24
Average number of common shares outstanding:
Basic .......................................... 15,513 15,559 15,517 15,533
Diluted ........................................ 15,513 15,559 15,913 15,961
BALANCE SHEET DATA (Unaudited)
JANUARY 31, JULY 31,
2003 2002
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(In thousands, except ratio data)
Cash and cash equivalents ............................ $ 17,751 $ 71,630
Working capital ...................................... $ 7,724 $ 59,873
Total assets ......................................... $ 530,443 $ 502,306
Total long-term debt, including current maturities ... $ 25,714 $ 34,285
Stockholders' equity ................................. $ 227,636 $ 228,556
Total debt to capitalization ratio(1) ................ 10.1% 13.0%
1) The total long-term debt to capitalization ratio is calculated by
dividing total long-term debt including current maturities by the
sum of total long-term debt including current maturities and
stockholders' equity.
OTHER FINANCIAL DATA (Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JANUARY 31, JANUARY 31,
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2003 2002 2003 2002
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(In thousands) (In thousands)
Sales and other revenues (2)
Refining .................................................. $ 264,658 $ 161,863 $ 535,211 $ 414,675
Pipeline Transportation ................................... 5,206 4,536 10,000 9,101
Corporate and Other ....................................... 496 355 807 925
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Consolidated .............................................. $ 270,360 $ 166,754 $ 546,018 $ 424,701
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Income (loss) from operations (2)
Refining .................................................. $ (1,246) $ (3,028) $ 5,487 $ 25,737
Pipeline Transportation ................................... 3,020 2,504 5,826 4,986
Corporate and Other ....................................... (2,791) (2,195) (5,387) (4,385)
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Consolidated .............................................. $ (1,017) $ (2,719) $ 5,926 $ 26,338
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Cash flow from operating activities .......................... $ (17,677) $ (30,876) $ (10,544) $ (6,472)
Capital expenditures ......................................... $ 19,057 $ 6,299 $ 27,634 $ 12,683
EBITDA (3) ................................................... $ 4,766 $ 6,315 $ 20,887 $ 46,073
2) The Refining segment includes the Company's principal refinery in
Artesia, New Mexico, which is operated in conjunction with
refining facilities in Lovington, New Mexico (collectively, the
Navajo Refinery) and the Company's refinery near Great Falls,
Montana. Included in the Refining segment are costs relating to
pipelines and terminals that operate in conjunction with the
Refining segment as part of the supply and distribution networks
of the refineries. The Pipeline Transportation segment includes
approximately 1,000 miles of the Company's pipeline assets in
Texas and New Mexico. Revenues of the Pipeline Transportation
segment are earned through transactions with unaffiliated parties
for pipeline transportation, rental and terminalling operations.
3) Earnings Before Interest, Taxes, Depreciation and Amortization -
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 presented,
not as an alternative measure of operating results or cash flow
from operations as determined in accordance with accounting
principles generally accepted in the United States, but because
EBITDA is a widely accepted financial indicator of a company's
ability to incur and service debt.
REFINING SEGMENT OPERATING DATA (Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JANUARY 31, JANUARY 31,
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2003 2002 2003 2002
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Crude charge (BPD) (4) ................... 67,700 52,000 64,800 56,100
Average per barrel (5)
Refinery margin ........................ $ 4.71 $ 5.02 $ 5.24 $ 7.36
Cash operating costs (6) ............... 4.05 4.73 4.04 4.45
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Net cash operating margin .............. $ 0.66 $ 0.29 $ 1.20 $ 2.91
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Sales of produced refined products
Gasolines .............................. 59.4 % 59.0 % 57.2 % 55.5 %
Diesel fuels ........................... 22.4 % 20.8 % 21.5 % 21.1 %
Jet fuels .............................. 9.2 % 11.1 % 10.2 % 10.6 %
Asphalt ................................ 5.5 % 5.8 % 7.6 % 9.4 %
LPG and other .......................... 3.5 % 3.3 % 3.5 % 3.4 %
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Total ............................. 100.0 % 100.0 % 100.0 % 100.0 %
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4) Barrels per day of crude oil processed.
5) Represents average per barrel amounts for produced refined
products sold.
6) Includes operating costs and selling, general and administrative
expenses of refineries, as well as pipeline expenses that are part
of refinery operations.
FOR FURTHER INFORMATION, Contact:
Matthew P. Clifton, President
Stephen J. McDonnell, Vice President and
Chief Financial Officer
Holly Corporation
214/871-3555
This Current Report on Form 8-K contains certain "forward-looking
statements" within the meaning of the U.S. Private Securities Litigation Reform
Act of 1995. All statements, other than statements of historical facts included
in this Form 8-K, are forward-looking statements. Such statements are subject to
risks and uncertainties, 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 Company's efficiency in carrying out construction projects, the successful
acquisition and integration of the Woods Cross
refinery, the possibility of terrorist attacks and the consequences of any such
attacks, and general economic conditions. Although the Company believes that the
expectations reflected by such forward-looking statements are reasonable based
on information currently available to the Company, no assurances can be given
that such expectations will prove to have been correct. This summary discussion
of risks and uncertainties that may cause actual results to differ from those
indicated in forward-looking statements should be read in conjunction with the
discussion under the heading "Additional Factors That May Affect Future Results"
included in Item 7 of the Company's Annual Report on Form 10-K for the fiscal
year ended July 31, 2002, and the discussion under the heading "Additional
Factors That May Affect Future Results" included in Item 2 of Part I of the
Company's Quarterly Report on Form 10-Q for the quarter ended January 31, 2003.
All forward-looking statements included in this Current Report on Form 8-K and
all subsequent oral forward-looking statements attributable to the Company or
persons acting on its behalf are expressly qualified in their entirety by the
cautionary statements set forth above.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOLLY CORPORATION
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(Registrant)
Date: March 7, 2003 By /s/Stephen J. McDonnell
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Stephen J. McDonnell
Vice President and Chief
Financial Officer