HollyFrontier 2015 Annual Report Download - page 48

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Table of Content
40
Interest Income
Interest income for the year ended December 31, 2015 was $3.4 million compared to $4.4 million for the year ended December 31,
2014. This decrease was due to lower investment levels in marketable debt securities during the current year period.
Interest Expense
Interest expense was $43.5 million for the year ended December 31, 2015 compared to $43.6 million for the year ended
December 31, 2014. This slight decrease is due principally to the effects of lower HollyFrontier interest expense as a result of the
June 2015 redemption of the $150.0 million HollyFrontier senior notes, net of increased HEP interest expense attributable to higher
year-over-year HEP debt levels. For the years ended December 31, 2015 and 2014, interest expense included $36.9 million and
$36.1 million, respectively, in interest costs attributable to HEP operations.
Loss on Early Extinguishment of Debt
In June 2015, we redeemed our $150.0 million aggregate principal amount of 6.875% senior notes maturing November 2018 at
a redemption cost of $155.2 million, at which time we recognized a $1.4 million early extinguishment loss consisting of a $5.2
million debt redemption premium, net of an unamortized premium of $3.8 million.
In March 2014, HEP redeemed its $150.0 million aggregate principal amount of 8.25% senior notes maturing March 2018 at a
redemption cost of $156.2 million, at which time it recognized a $7.7 million early extinguishment loss consisting of a $6.2 million
debt redemption premium and unamortized discount and financing costs of $1.5 million.
Income Taxes
For the year ended December 31, 2015, we recorded income tax expense of $406.1 million compared to $141.2 million for the
year ended December 31, 2014. This increase was due principally to higher pre-tax earnings during the year ended December 31,
2015 compared to 2014. Our effective tax rates, before consideration of earnings attributable to the noncontrolling interest, were
33.6% and 30.2% for the years ended December 31, 2015 and 2014, respectively.
Results of Operations – Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Summary
Net income attributable to HollyFrontier stockholders for the year ended December 31, 2014 was $281.3 million ($1.42 per basic
and diluted share), a $454.6 million decrease compared to $735.8 million ($3.66 per basic and $3.64 per diluted share) for the
year ended December 31, 2013. Net income decreased due principally to a non-cash lower of cost or market inventory valuation
charge of $244.0 million, net of tax, and a year-over-year decrease in refining margins. Refinery gross margins for the year ended
December 31, 2014 decreased to $13.98 per produced barrel from $15.99 for the year ended December 31, 2013.
Sales and Other Revenues
Sales and other revenues decreased 2% from $20,160.6 million for the year ended December 31, 2013 to $19,764.3 million for
the year ended December 31, 2014 due to a decrease in year-over-year sales prices, partially offset by higher refined product sales
volumes. The average sales price we received per produced barrel sold decreased 5% from $115.60 for the year ended December 31,
2013 to $110.19 for the year ended December 31, 2014. Sales and other revenues for the years ended December 31, 2014 and
2013 include $57.3 million and $53.4 million, respectively, in HEP revenues attributable to pipeline and transportation services
provided to unaffiliated parties.
Cost of Products Sold
Cost of products sold decreased 1% from $17,392.2 million for the year ended December 31, 2013 to $17,228.4 million for the
year ended December 31, 2014, due principally to a decrease in year-over-year crude costs, partially offset by higher refined
product sales volumes. The average price we paid per barrel for crude oil and feedstocks and the transportation costs of moving
the finished products to the market place decreased 3% from $99.61 for the year ended December 31, 2013 to $96.21 for the year
ended December 31, 2014.
Lower of Cost or Market Inventory Valuation Adjustment
For the year ended December 31, 2014, we recorded a $397.5 million non-cash charge against income from operations to adjust
the value of our inventory to the lower of cost or market at December 31, 2014. This is attributable to a significant decrease in
market prices for crude oil and refined products at December 31, 2014. There was no comparable inventory valuation adjustment
for the year ended December 31, 2013.