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) September 20, 2002
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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 September 20, 2002, the Company issued the following press release:
HOLLY CORPORATION REPORTS FISCAL 2002 RESULTS
Dallas, Texas, September 20, 2002 -- Holly Corporation
(AMEX-HOC), today reported results for the Company's fiscal year ended
July 31, 2002.
Net income for the three months ended July 31, 2002 was $6.1
million ($.38 per diluted share) compared to net income of $19.6
million ($1.24 per diluted share) for the three months ended July 31,
2001. For the year ended July 31, 2002, net income was $32.0 million
($2.01 per diluted share) compared to $73.5 million ($4.77 per diluted
share) for the year ended July 31, 2001. The reduced income for both
the quarter and year ended July 31, 2002, as compared to the prior year
periods, resulted principally from lower refined product margins.
During the year ended July 31, 2002, the Company, along with
the refining industry as a whole, experienced substantially lower
refining margins compared to the very favorable refining margins that
prevailed in the prior year. Refining margins have declined since the
end of the Company's first quarter in October 2001, as increases in
crude oil costs have outpaced product price increases. The Company's
revenues and cost of products sold were lower in fiscal 2002, as
compared to fiscal 2001, due principally to lower refined product sales
prices and lower costs of purchased crude oil in the current fiscal
year. Additionally, production of refined products was reduced during
the year ended July 31, 2002 as a result of two planned maintenance
turnarounds at the Company's Navajo Refinery, the first in August 2001
and a second 29-day extended turnaround in November and December 2001.
Comparing the fourth quarter of fiscal 2002 to the fourth quarter of
fiscal 2001, revenues decreased due to lower refined product sales
prices, partially offset by the increased production in the fourth
quarter of fiscal 2002. Cost of products sold increased in the fourth
quarter of fiscal 2002, as compared to the fourth quarter of fiscal
2001, due principally to the increased production.
"Refinery margins for the Company, and the industry, remained
at disappointing levels through much of the fiscal year, especially
when looking back at the very strong margins of a year ago. However, we
are extremely pleased that Company initiated improvements helped to
somewhat mitigate these disappointing margins. For the fourth quarter
and the fiscal year the Company generated $16.9 million and $80.0
million respectively of earnings before interest, taxes and
depreciation, reflecting benefits of the Company's recent operational
improvements. Although not the record year as experienced in fiscal
2001, net income for the 2002 year was more than $10 million higher
than net income for any other year since 1990," said Matthew P.
Clifton, President of Holly. "As our cost reduction and production
efficiency program initiated in 2000 is now substantially complete, we
are currently realizing the full benefits as planned from that program.
Looking forward, we will continue to look for new ways to control costs
and increase production efficiency. Additionally, much of our efforts
in the new fiscal year will be directed towards the previously
announced construction of a gas oil hydrotreating unit at
Navajo's Artesia, New Mexico refining facility and the expansion of our
New Mexico refining capacity. We are hopeful that the good refining
environment experienced in the last half of calendar 2000 and through
most of 2001 will return and we believe that the Company, with its
extremely strong balance sheet and recent and ongoing operational
enhancements, is well positioned for the future."
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 costs of defense and the risk of an adverse decision in
the pending litigation against the Company brought by Longhorn Partners
Pipeline, L.P., 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)
<Table>
<Caption>
THREE MONTHS ENDED YEARS ENDED
JULY 31, JULY 31,
-------------------------- --------------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
(In thousands, except per share data)
Sales and other revenues ........................... $ 253,878 $ 264,837 $ 888,906 $ 1,142,130
Operating costs and expenses
Cost of products sold ........................... 206,889 195,086 698,245 871,321
Operating expenses .............................. 24,560 25,945 96,289 100,410
Selling, general and administrative expenses .... 6,138 5,640 22,248 23,123
Depreciation, depletion and amortization ........ 7,670 7,736 27,699 27,327
Exploration expenses, including dry holes ....... 555 880 1,379 2,042
----------- ----------- ----------- -----------
Total operating costs and expenses ......... 245,812 235,287 845,860 1,024,223
----------- ----------- ----------- -----------
Income from operations ............................. 8,066 29,550 43,046 117,907
Other income (expense)
Equity in earnings of joint ventures ............ 1,114 2,391 7,753 5,302
Interest expense, net ........................... (369) (343) (1,425) (2,467)
Other income .................................... -- 1,153 1,522 1,153
----------- ----------- ----------- -----------
745 3,201 7,850 3,988
----------- ----------- ----------- -----------
Income before income taxes ......................... 8,811 32,751 50,896 121,895
Income tax provision ............................... 2,718 13,144 18,867 48,445
----------- ----------- ----------- -----------
Net income ......................................... $ 6,093 $ 19,607 $ 32,029 $ 73,450
=========== =========== =========== ===========
Net income per common share - basic (1) ............ $ 0.39 $ 1.27 $ 2.06 $ 4.84
Net income per common share - diluted (1) .......... $ 0.38 $ 1.24 $ 2.01 $ 4.77
Average number of common shares outstanding (1):
Basic ............................................ 15,593 15,418 15,560 15,187
Diluted .......................................... 15,947 15,829 15,971 15,387
</Table>
1) A two-for-one stock split was effected in July 2001. All references to the
number of shares and per share amounts have been adjusted to reflect the split
on a retroactive basis.
BALANCE SHEET DATA (Unaudited)
<Table>
<Caption>
JULY 31,
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2002 2001
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(In thousands, except ratio data)
Cash and cash equivalents ................... $ 71,630 $ 65,840
Working capital ............................. $ 59,873 $ 57,731
Total assets ................................ $ 502,306 $ 490,429
Total debt, including current maturities .... $ 34,285 $ 42,857
Stockholders' equity ........................ $ 228,556 $ 201,734
Total debt to capitalization ratio .......... 13.0% 17.5%
</Table>
OTHER FINANCIAL DATA (Unaudited)
<Table>
<Caption>
THREE MONTHS ENDED YEARS ENDED
JULY 31, JULY 31,
-------------------------- --------------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
(In thousands)
Sales and other revenues by segment(2) ...........
Refining ...................................... $ 248,363 $ 259,723 $ 868,730 $ 1,120,248
Pipeline Transportation ....................... 5,193 4,448 18,588 18,454
Corporate and Other ........................... 322 666 1,588 3,428
----------- ----------- ----------- -----------
Consolidated .................................. $ 253,878 $ 264,837 $ 888,906 $ 1,142,130
=========== =========== =========== ===========
Income (loss) from operations by segment(2)
Refining ...................................... $ 8,579 $ 30,296 $ 42,725 $ 116,218
Pipeline Transportation ....................... 3,042 2,019 10,621 10,243
Corporate and Other ........................... (3,555) (2,765) (10,300) (8,554)
----------- ----------- ----------- -----------
Consolidated .................................. $ 8,066 $ 29,550 $ 43,046 $ 117,907
=========== =========== =========== ===========
Cash flow from operating activities .............. $ 30,642 $ 37,183 $ 41,847 $ 105,641
Capital Expenditures ............................. $ 14,497 $ 7,587 $ 35,313 $ 28,571
EBITDA(3) ........................................ $ 16,850 $ 40,830 $ 80,020 $ 151,689
</Table>
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 from 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.
REFINING SEGMENT OPERATING DATA (Unaudited)
<Table>
<Caption>
THREE MONTHS ENDED YEARS ENDED
JULY 31, JULY 31,
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2002 2001 2002 2001
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Crude charge (BPD)(4) ............... 65,400 61,200 60,200 64,000
Average per barrel(5)
Refinery margin ................... $ 6.25 $ 10.14 $ 6.73 $ 9.80
Cash operating costs(6) ........... 3.91 4.36 4.22 4.26
---------- ---------- ---------- ----------
Net cash operating margin ......... $ 2.34 $ 5.78 $ 2.51 $ 5.54
========== ========== ========== ==========
Sales of produced refined products
Gasolines ......................... 55.9% 54.2% 56.3% 56.1%
Diesel fuels ...................... 21.3 19.5 20.9 21.8
Jet fuels ......................... 9.9 11.6 10.6 10.8
Asphalt ........................... 9.7 10.3 8.6 7.6
LPG and other ..................... 3.2 4.4 3.6 3.7
---------- ---------- ---------- ----------
Total ........................ 100.0% 100.0% 100.0% 100.0%
========== ========== ========== ==========
</Table>
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 costs of
defense and the risk of an
adverse decision in the pending litigation against the Company brought by
Longhorn Partners Pipeline, L.P., 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, 2001, 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 April 30, 2002. 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: September 25, 2002 By /s/ Stephen J. McDonnell
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Stephen J. McDonnell
Vice President and Chief
Financial Officer