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) December 12, 2002
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HOLLY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 001-03876 75-1056913
- ---------------------------- ------------------------ -------------------
(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 December 12, 2002, the Company issued the following press release:
HOLLY CORPORATION REPORTS FIRST QUARTER OF FISCAL 2003 RESULTS
Dallas, Texas, December 12, 2002 -- Holly Corporation
(AMEX-HOC), today reported results for the Company's first quarter
ended October 31, 2002.
Net income for the three months ended October 31, 2002 was
$5.2 million ($.33 per diluted share) compared to historically very
high net income of $20.2 million ($1.27 per diluted share) for the
three months ended October 31, 2001. The $15 million decrease in income
is principally a result of lower refined product margins.
For the Company's first quarter ended October 31, 2002,
refinery margins of $5.79 per barrel were well below the refinery
margins of $9.32 per barrel for the quarter ended October 31, 2001.
During the prior year's first quarter, the Company, along with the
refining industry as a whole, was still experiencing extremely
favorable refining margins, which have since declined. Increases in
crude oil and other feedstock costs continued to outpace refined
product price increases during much of the fiscal 2003 first quarter.
However, starting in October 2002, crude oil costs began to fall while
product prices held relatively firm, generating strong earnings late in
the quarter and at the beginning of the second quarter of fiscal 2003.
Current refinery margins have, however, returned to lower levels. The
Company's revenues and cost of products sold were higher in the first
quarter of fiscal 2003, as compared to the fiscal 2002 first quarter,
due to a 5% increase in sales volumes, higher refined product sales
prices and higher costs of purchased crude oil.
"Given the difficult refining environment, we believe the $5.2
million in net income achieved during our first quarter would compare
favorably to the results of other independent refiners during this
period. The Company generated for the first quarter $16.1 million of
earnings before interest, taxes and depreciation, reflecting benefits
from the Company's recent initiatives to improve refinery operational
performance and increase transportation segment earnings," 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
forthcoming EPA mandated gasoline specifications and improve the
refinery's yields of higher value products and its profit generating
capabilities. Additionally, an expansion of our New Mexico facility
that will result in a 15% increase in Holly's overall refining capacity
is expected to be completed along with the hydrotreating unit by the
end of calendar 2003. Given an exceptionally strong balance sheet
reflecting no net debt, the anticipated future benefit of the gas oil
hydrotreater and expansion projects, and the recent disposition of the
Longhorn Partners Pipeline,
L.P. litigation, we believe the Company is well positioned to weather
difficult economic times, to prosper as the industry improves, and to
capitalize on 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 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)
<Table>
<Caption>
THREE MONTHS ENDED
OCTOBER 31,
----------------------------
2002 2001
------------ ------------
(In thousands, except share data)
Sales and other revenues ............................... $ 275,658 $ 257,947
Operating costs and expenses
Cost of products sold ............................... 231,959 191,984
Operating expenses .................................. 24,140 24,746
Selling, general and administrative expenses ........ 5,203 5,430
Depreciation, depletion and amortization ............ 7,196 6,431
Exploration expenses, including dry holes ........... 217 299
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Total operating costs and expenses ................ 268,715 228,890
------------ ------------
Income from operations ................................. 6,943 29,057
Other income (expense)
Equity in earnings of joint ventures ................ 1,983 2,748
Interest expense, net ............................... (420) (258)
Gain on sale of equity securities ................... -- 1,522
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1,563 4,012
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Income before income taxes ............................. 8,506 33,069
Income tax provision ................................... 3,259 12,847
------------ ------------
Net income ............................................. $ 5,247 $ 20,222
============ ============
Net income per common share - basic .................... $ 0.34 $ 1.30
Net income per common share - diluted .................. $ 0.33 $ 1.27
Average number of common shares outstanding:
Basic ............................................... 15,522 15,508
Diluted ............................................. 15,877 15,944
</Table>
BALANCE SHEET DATA (Unaudited)
<Table>
<Caption>
OCTOBER 31, JULY 31,
2002 2002
------------ ------------
(In thousands, except ratio data)
Cash and cash equivalents .................... $ 66,995 $ 71,630
Working capital .............................. $ 32,874 $ 59,873
Total assets ................................. $ 537,235 $ 502,306
Total debt, including current maturities ..... $ 34,285 $ 34,285
Stockholders' equity ......................... $ 230,761 $ 228,556
Total debt to capitalization ratio ........... 12.9% 13.0%
</Table>
OTHER FINANCIAL DATA (Unaudited)
<Table>
<Caption>
THREE MONTHS ENDED
OCTOBER 31,
----------------------------
2002 2001
------------ ------------
Sales and other revenues (1)
Refining ................................. $ 270,553 $ 252,812
Pipeline Transportation .................. 4,794 4,565
Corporate and Other ...................... 311 570
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Consolidated ............................. $ 275,658 $ 257,947
============ ============
Income (loss) from operations (1)
Refining ................................. $ 6,733 $ 28,765
Pipeline Transportation .................. 2,806 2,482
Corporate and Other ...................... (2,596) (2,190)
------------ ------------
Consolidated ............................. $ 6,943 $ 29,057
============ ============
Cash flow from operating activities ......... $ 7,133 $ 24,404
Capital Expenditures ........................ $ 8,577 $ 6,384
EBITDA(2) ................................... $ 16,122 $ 39,758
</Table>
1) 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.
2) Earnings before interest, taxes, depreciation and amortization.
REFINING SEGMENT OPERATING DATA (Unaudited)
<Table>
<Caption>
THREE MONTHS ENDED
OCTOBER 31,
2002 2001
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Crude charge (BPD) (3) ..................... 61,800 60,200
Average per barrel (4)
Refinery margin ......................... $ 5.79 $ 9.32
Cash operating costs (5) ................ 4.03 4.22
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Net cash operating margin ............... $ 1.76 $ 5.10
============= =============
Sales of produced refined products
Gasolines ............................... 54.9% 52.6%
Diesel fuels ............................ 20.6% 21.3%
Jet fuels ............................... 11.2% 10.2%
Asphalt ................................. 9.8% 12.4%
LPG and other ........................... 3.5% 3.5%
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Total ................................ 100.0% 100.0%
============= =============
</Table>
3) Barrels per day of crude oil processed.
4) Represents average per barrel amounts for produced refined products
sold.
5) 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 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 October 31, 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: December 12, 2002 By /s/Stephen J. McDonnell
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Stephen J. McDonnell
Vice President and Chief
Financial Officer