HollyFrontier 2015 Annual Report Download - page 49

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Table of Content
41
Gross Refinery Margins
Gross refinery margin per produced barrel decreased 13% from $15.99 for the year ended December 31, 2013 to $13.98 for the
year ended December 31, 2014. This was due to a decrease in average per barrel sales prices for refined products sold, partially
offset by decreased crude oil and feedstock prices for the current year. Gross refinery margin per produced barrel does not include
the non-cash effects of lower of cost or market inventory valuation adjustments and depreciation and amortization. See
“Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” following Item 7A of Part II of this
Form 10-K for a reconciliation to the income statement of prices of refined products sold and cost of products purchased.
Operating Expenses
Operating expenses, exclusive of depreciation and amortization, increased 5% from $1,090.9 million for the year ended
December 31, 2013 to $1,144.9 million for the year ended December 31, 2014 due principally to higher year-over-year repair and
maintenance and natural gas fuel costs and increased environmental accruals, partially offset by $31.7 million in pension settlement
costs incurred during 2013. For the years ended December 31, 2014 and 2013, operating expenses include $103.4 million and
$95.7 million, respectively, in costs attributable to HEP operations.
General and Administrative Expenses
General and administrative expenses decreased 10% from $128.0 million for the year ended December 31, 2013 to $114.6 million
for the year ended December 31, 2014 due principally to lower incentive compensation expense during the current year, and the
effects of $4.5 million in pension settlement costs incurred in 2013. For the years ended December 31, 2014 and 2013, general
and administrative expenses include $8.5 million and $9.4 million, respectively, in costs attributable to HEP operations.
Depreciation and Amortization Expenses
Depreciation and amortization increased 20% from $303.4 million for the year ended December 31, 2013 to $363.4 million for
the year ended December 31, 2014. The increase was due principally to depreciation and amortization attributable to capitalized
improvement projects, capitalized refinery turnaround costs and accelerated depreciation of assets no longer in operation. For the
years ended December 31, 2014 and 2013, depreciation and amortization expenses include $60.5 million and $64.7 million,
respectively, in costs attributable to HEP operations.
Interest Income
Interest income for the year ended December 31, 2014 was $4.4 million compared to $5.6 million for the year ended December 31,
2013. This decrease was due to lower investment levels in marketable debt securities during 2014 as compared to 2013.
Interest Expense
Interest expense was $43.6 million for the year ended December 31, 2014 compared to $68.1 million for the year ended
December 31, 2013. This decrease was due to lower year-over-year debt levels. For the years ended December 31, 2014 and 2013,
interest expense included $36.1 million and $46.8 million, respectively, in interest costs attributable to HEP operations.
Loss on Early Extinguishment of Debt
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. In June 2013, we redeemed our $286.8
million aggregate principal amount of 9.875% senior notes maturing June 2017 at a redemption cost of $301.0 million, at which
time we recognized a $22.1 million early extinguishment loss consisting of a $14.2 million debt redemption premium and an
unamortized discount of $7.9 million.
Income Taxes
For the year ended December 31, 2014, we recorded income tax expense of $141.2 million compared to $391.6 million for the
year ended December 31, 2013. This decrease was due principally to lower pre-tax earnings during the year ended December 31,
2014 compared to 2013. Our effective tax rates, before consideration of earnings attributable to the noncontrolling interest, were
30.2% and 33.8% for the years ended December 31, 2014 and 2013, respectively.