HollyFrontier 2012 Annual Report Download

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ANNUAL REPORT
2012

Table of contents

  • Page 1
    2012 ANNUAL REPORT

  • Page 2
    ... Kansas City EL DORADO k yh WOODS CROSS Chicago PADD I CHEYENNE PADD V Las Vegas Cedar City Bloomfield Wichita Cushing Moriarty Duncan NAVAJO Wichita Falls Abilene aw Albuquerque Phoenix Tucson TULSA El Paso Orla PADD III Houston A NICHE PURE-PLAY REFINER HollyFrontier Corporation...

  • Page 3
    ... SHAREHOLDERS Since the July 2011 merger CASH RETURN TO SHAREHOLDERS LTM Cash Yield - based on January 1, 2012 opening stock price of $24.01 CASH AND SHORT-TERM INVESTMENTS HFC * MPC PSX TSO DK WNR VLO in Marketable Securities December 31, 2012 % INCREASED REGULAR DIVIDENDS 4x FEB MAY AUG NOV...

  • Page 4
    ...benefits of the strategic plan we have successfully executed since completing the HollyFrontier merger in 2011. Operations are running well across our refineries, which are among the most complex in the industry and have the ability to process domestic and Canadian crudes. We have reinvested over...

  • Page 5
    ... at the Navajo and Woods Cross refineries, a new coker charge heater at El Dorado and an FCC ï¬,u gas scrubber at Woods Cross. • Start-up of the UNEV Pipeline. In early 2012, the UNEV pipeline, our 400-mile, 12-inch refined products line that runs from Salt Lake City to Las Vegas, became fully...

  • Page 6
    ...miles east in Lovington, New Mexico 100,000 BPSD capacity and Nelson Complexity rating of 11.8 Processes sour and heavy crude oils into high-value light products Distributes to high-margin markets in Arizona, New Mexico and West Texas • • • • • • • • EL DORADO REFINERY TULSA...

  • Page 7
    ... in the UNEV Pipeline - a 400-mile refined product pipeline running from Salt Lake City, Utah to Las Vegas, Nevada 25% joint venture interest in SLC Pipeline, LLC - a 95-mile crude oil pipeline system that serves refineries in the Salt Lake City area • • • Located in Cheyenne, Wyoming 52...

  • Page 8
    ... $ $ $ $ $ 2,787,995,000 1,727,172,000 8.38 1,662,687,000 335,263,000 $ 10,328,997,000 $ 6,052,954,000 443,620 442,730 2,534 4 HollyFrontier Corporation 2012 Annual Report 10,329 111 151 226 332 443 1,728 2,766 3,050 9,576 6,053 542 619 697

  • Page 9
    ... _____ HOLLYFRONTIER CORPORATION (Exact name of registrant as specified in its charter) _____ Delaware (State or other jurisdiction of incorporation or organization) 75-1056913 (I.R.S. Employer Identification No.) 2828 N. Harwood, Suite 1300 Dallas, Texas (Address of principal executive offices...

  • Page 10
    ... and financial disclosure Controls and procedures Other information PART III 10. 11. 12. 13. 14. Directors, executive officers and corporate governance Executive compensation Security ownership of certain beneficial owners and management and related stockholder matters Certain relationships...

  • Page 11
    ... 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, curtailments or shutdowns in refinery operations or pipelines; effects...

  • Page 12
    ... biological resources. "Black wax crude oil" is a low sulfur, low gravity crude oil produced in the Uintah Basin in Eastern Utah that has certain characteristics that require specific facilities to transport, store and refine into transportation fuels. "Catalytic reforming" means a refinery process...

  • Page 13
    ... gasoline blend stocks while producing hydrogen in the process. "Roofing flux" is produced from the bottom cut of crude oil and is the base oil used to make roofing shingles for the housing industry. "ROSE," or "Solvent deasphalter / residuum oil supercritical extraction," means a refinery unit that...

  • Page 14
    ..."El Dorado Refinery") and Cheyenne, Wyoming (the "Cheyenne Refinery") with Holly's legacy refinery operations to form HollyFrontier. The aggregate equity consideration paid in connection with the merger was $3.7 billion. On June 1, 2009, we acquired an 85,000 BPSD refinery located in Tulsa, Oklahoma...

  • Page 15
    ... intrastate pipeline system that serves refineries in the Salt Lake City area. Our operations are currently organized into two reportable segments, Refining and HEP. The Refining segment includes the operations of our El Dorado, Tulsa, Navajo, Cheyenne and Woods Cross Refineries and NK Asphalt. The...

  • Page 16
    ... expenses, exclusive of depreciation and amortization, divided by refinery throughput. (10) Refining operating data for the year ended December 31, 2011 include crude oil processed and products yielded from the El Dorado and Cheyenne Refineries for the period from July 1, 2011 through December...

  • Page 17
    ... and sour crudes. The Tulsa West and East refinery facilities are both located in Tulsa, Oklahoma. In 2011, we integrated certain refining processes of the Tulsa Refineries which effectively provides us with a highly complex refining operation having a combined crude processing rate of approximately...

  • Page 18
    ...and Competition The primary markets for the El Dorado Refinery's refined products are Colorado and the Plains States, which include the Kansas City metropolitan area. The gasoline, diesel and jet fuel produced by the El Dorado Refinery are primarily shipped via pipeline to terminals for distribution...

  • Page 19
    ...38% 31% 8% -% 5% 11% 4% 3% 100% Crude Oil and Feedstock Supplies The El Dorado Refinery is located about 125 miles, and the Tulsa Refineries are located approximately 50 miles from Cushing, Oklahoma, a significant crude oil pipeline trading and storage hub. Local pipelines provide direct access to...

  • Page 20
    ... the Navajo Refinery are transported to markets in northwest New Mexico and to Moriarty, New Mexico, near Albuquerque, via HEP's pipelines running from Artesia to San Juan County, New Mexico. We have refined product storage through our pipelines and terminals agreement with HEP at terminals in El...

  • Page 21
    ... shipped to the Artesia refining facilities on HEP's intermediate pipelines running from Lovington to Artesia. From time to time, we purchase gas oil, naphtha and light cycle oil from other oil companies for use as feedstock. Rocky Mountain Region (Cheyenne and Woods Cross Refineries) Facilities The...

  • Page 22
    ...the Woods Cross Refinery to a hydrogen plant located at Chevron's Salt Lake City Refinery. Additionally, HEP owns and operates 12 miles of crude oil and refined products pipelines that allows us to connect our Woods Cross Refinery to common carrier pipeline systems. We plan to expand the Woods Cross...

  • Page 23
    ... this expansion, the Woods Cross Refinery will be able to process approximately 24,000 BPD of waxy Utah crudes. This expansion and crude oil supply agreement, and expected completion timeline, are subject to HollyFrontier successfully obtaining the necessary permits and regulatory approvals. Markets...

  • Page 24
    ... oil are shipped via truck. NK Asphalt Partners We manufacture and market commodity and modified asphalt products in Arizona, New Mexico, Oklahoma, Kansas, Missouri, Texas and northern Mexico. We have three manufacturing facilities located in Glendale, Arizona; Albuquerque, New Mexico; and Artesia...

  • Page 25
    ... west Texas and Cushing, Oklahoma and a 37-mile, 8-inch crude oil pipeline that connects HEP's New Mexico crude oil gathering system to our Navajo Refinery Lovington facility (the "Beeson Pipeline"). Tulsa West Loading Racks Transaction On August 1, 2009, HEP acquired from us, certain truck and rail...

  • Page 26
    ... pipelines located in west Texas, New Mexico and Oklahoma that deliver crude oil to our Navajo Refinery; approximately 10 miles of refined product pipelines that support our Woods Cross Refinery located near Salt Lake City, Utah; gasoline and diesel connecting pipelines that support our Tulsa East...

  • Page 27
    ... to the regulation on January 1, 2014. Recently completed capital projects at our Tulsa, Navajo and Woods Cross Refineries and capital projects planned for completion at our Cheyenne Refinery in 2013 will reduce the amount of benzene credits that we need to purchase. If economically justified, we...

  • Page 28
    ...other third party. Similarly, locations now owned or operated by us, where third ...projects that relate to recovery, treatment and monitoring activities resulting from past releases of refined product and crude oil into the environment. As of December 31, 2012...refineries and at pipeline transportation...

  • Page 29
    ... levels are determined by market forces beyond our control. For example, the reversal of certain existing pipelines or the construction of certain new pipelines transporting additional crude oil or refined products to markets that serve competing refineries could affect the market dynamic that has...

  • Page 30
    ... financing costs; and/or nonperformance or force majeure by, or disputes with, vendors, suppliers, contractors, or sub-contractors involved with a project. For example, there may be a delay in obtaining the necessary permits or regulatory approvals for the expansion at the Woods Cross refinery...

  • Page 31
    ... stability of financial markets generally and the solvency of lending counterparties specifically, the cost of obtaining money from the credit markets may increase as many lenders and institutional investors increase interest rates, enact tighter lending standards, refuse to refinance existing debt...

  • Page 32
    ... of that decision in 2013. The EPA has also adopted rules requiring the reporting of GHG emissions from specified large GHG emission sources in the United States, including petroleum refineries, on an annual basis. The EPA has also announced its intention to issue a New Source Performance Standard...

  • Page 33
    ... or failure of the network system used to monitor and control pipeline operations could disrupt our operations by impeding our processing of transactions, our ability to protect customer or company information and our financial reporting. Our computer systems, including our back-up systems, could be...

  • Page 34
    ...refining and marketing companies, including certain multinational oil companies. Because of their geographic diversity, larger and more complex refineries, integrated operations and greater resources, some of our competitors may be better able to withstand volatile market conditions, to obtain crude...

  • Page 35
    ... the West Coast. The Plains pipeline currently supplies New Mexico markets from El Paso. In addition, NuStar Energy LP and HEP own pipelines into the El Paso and New Mexico markets. The refined product transportation pipelines that also supply the markets supplied by the Woods Cross Refinery include...

  • Page 36
    ...the 2% general partner interest. HEP operates a system of crude oil and petroleum product pipelines, distribution terminals and refinery tankage in Arizona, Idaho, Kansas, New Mexico, Oklahoma, Texas, Utah, Washington and Wyoming. HEP generates revenues by charging tariffs for transporting petroleum...

  • Page 37
    ...unable to pay future regular and/or special dividends. We will only be able to pay dividends from our available cash on hand, cash from operations or borrowings under our credit agreement. The declaration of future regular and/or special dividends on our common stock will be at the discretion of our...

  • Page 38
    ... loss or unavailability to us of any member of our senior management team or a key technical employee could significantly harm us. We face competition for these professionals from our competitors, our customers and other companies operating in our industry. To the extent that the services of members...

  • Page 39
    ... at the Cheyenne, El Dorado, Navajo, Tulsa and Woods Cross refineries and at the Cedar City, Utah and Henderson, Colorado terminals. The EPA has requested additional information regarding certain of these reports, and our subsidiaries have complied with all requests received to date. Other We...

  • Page 40
    Table of Content Item 4. Mine Safety Disclosures Not Applicable. 32

  • Page 41
    ..., and in June 2012, approved an additional $350 million repurchase program that authorizes us to repurchase common stock in the open market or through privately negotiated transactions. The timing and amount of stock repurchases will depend on market conditions, corporate, regulatory and other...

  • Page 42
    ... 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K. Years Ended December 31, 2011 2010 2009 (In thousands, except per share date) 2012...

  • Page 43
    ..., the Tulsa West and East facilities, a petroleum refinery in Artesia, New Mexico, which operates in conjunction with crude, vacuum distillation and other facilities situated 65 miles away in Lovington, New Mexico (the Navajo Refinery), Cheyenne, Wyoming (the Cheyenne Refinery) and Woods Cross, Utah...

  • Page 44
    ... December 31, 2011 2010 (In thousands) Sales and other revenues Net income attributable to HollyFrontier stockholders $ $ 19,418,709 1,335,257 $ $ 14,207,835 179,979 Other Financial Data 2012 Net cash provided by operating activities Net cash provided by (used for) investing activities Net...

  • Page 45
    ... Information" in the Notes to Consolidated Financial Statements for additional information on our reportable segments. Refining Operating Data Our refinery operations include the El Dorado, Tulsa, Navajo, Cheyenne and Woods Cross Refineries. The following tables set forth information, including...

  • Page 46
    ... to higher employee benefit and equity-based compensation costs and increased corporate staffing levels as a result of our July 1, 2011 merger, net of the effects of merger related severance and integration costs incurred during 2011. For the years ended December 31, 2012 and 2011, general and...

  • Page 47
    ... to the inclusion of results from the El Dorado and Cheyenne Refinery operations, and higher crude oil costs. The average price we paid per barrel of crude oil and feedstocks used in production and the transportation costs of moving the finished products to the market place increased 19% from $82.27...

  • Page 48
    ... December 31, 2011, due principally to costs attributable to the El Dorado and Cheyenne Refinery operations. Also contributing to a much lesser extent were increased payroll and maintenance costs attributable to the legacy Holly refining operations. For the years ended December 31, 2011 and 2010...

  • Page 49
    ...September 2016 at a redemption price of $208.5 million. HollyFrontier Financing Obligation We have a financing obligation that relates to a sale and lease-back of certain crude oil tankage that we sold to an affiliate of Plains All American Pipeline, L.P. ("Plains") in October 2009 for $40.0 million...

  • Page 50
    ... available under our credit facilities will provide sufficient resources to fund currently planned capital projects and our liquidity needs for the foreseeable future. In addition, components of our growth strategy include construction of new refinery processing units and the expansion of existing...

  • Page 51
    ... as incurred. Our new capital appropriation for 2013 and expected cash spending is as follows: Expected Cash Spending Range New Appropriation Location: El Dorado Tulsa Navajo Cheyenne Woods Cross Corporate and Other Total Type: Sustaining Reliability and Growth Compliance and Safety Total $ 109...

  • Page 52
    ... capital for the Woods Cross Refinery consists of warehouse and office relocations to accommodate the refinery expansion and modernization program and of a new rail loading rack for intermediates and finished products associated with refining waxy crude oil. We continue to work on the $225...

  • Page 53
    ... New Mexico to third-party common carrier pipelines in west Texas for further transport to major crude oil markets. This project is estimated to cost approximately $38.0 million and could be fully operational in late 2013. Cash Flows - Financing Activities Year Ended December 31, 2012 Compared...

  • Page 54
    ... December 31, 2012. Interest payments consist of interest on our 9.875% and 6.875% senior notes and on our long-term financing obligation. We have long-term supply agreements to secure certain quantities of crude oil, feedstock and other resources used in the production process at market prices. We...

  • Page 55
    ... in years when price levels were generally lower; therefore, our results of operation are less sensitive to current market price reductions. As of December 31, 2012, the excess of current cost over the LIFO inventory value of our crude oil and refined product inventories was $134.0 million. An...

  • Page 56
    ...based...is generally ...2012...annually...benefit. Commodity Price Risk Management Our primary market risk is commodity price risk. We are exposed to market risks related to the volatility in crude oil and refined products, as well as volatility in the price of natural gas used in our refining operations...

  • Page 57
    ... HEP uses interest rate swaps to manage its exposure to interest rate risk. As of December 31, 2012, HEP had three interest rate swap contracts that hedge its exposure to the cash flow risk caused by the effects of LIBOR changes on $305.0 million in credit agreement advances. The first interest rate...

  • Page 58
    ... fair value. At December 31, 2012, outstanding borrowings under the HEP Credit Agreement were $421.0 million. By means...Market Risk See "Risk Management" under "Management's Discussion and Analysis of Financial Condition and Results of Operations." Reconciliations to Amounts Reported Under Generally...

  • Page 59
    ...) to amounts reported under generally accepted accounting principles in financial statements. Refinery gross margin and net operating margin are non-GAAP performance measures that are used by our management and others to compare our refining performance to that of other companies in our industry...

  • Page 60
    ...days in period Refinery operating expenses for produced products sold Total refinery operating expenses per produced products sold Add other refining segment operating expenses and rounding (5) Total refining segment operating expenses Add HEP segment operating expenses Add corporate and other costs...

  • Page 61
    ... NK Asphalt and miscellaneous revenue. (4) Other refining segment cost of products sold includes the incremental cost of products for NK Asphalt and miscellaneous costs. (5) Other refining segment operating expenses include the marketing costs associated with our refining segment and the operating...

  • Page 62
    ... Item 8. Financial Statements and Supplementary Data MANAGEMENT'S REPORT ON ITS ASSESSMENT OF THE COMPANY'S INTERNAL CONTROL OVER FINANCIAL REPORTING Management of HollyFrontier Corporation (the "Company") is responsible for establishing and maintaining adequate internal control over financial...

  • Page 63
    ... the related consolidated statements of income, comprehensive income, cash flows and equity for each of the three years in the period ended December 31, 2012 and our report dated February 27, 2013 expressed an unqualified opinion thereon. /s/ ERNST & YOUNG LLP Dallas, Texas February 27, 2013 55

  • Page 64
    ...to Consolidated Financial Statements Page Reference Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets at December 31, 2012 and 2011 Consolidated Statements of Income for the years ended December 31, 2012, 2011 and 2010 Consolidated Statements of Comprehensive Income...

  • Page 65
    ..., in accordance with the standards of the Public Company Accounting Oversight Board (United States), HollyFrontier Corporation's internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of...

  • Page 66
    ...amounts represent asset and liability balances attributable to Holly Energy Partners, L.P. ("HEP") as of December 31, 2012 and December 31, 2011. HEP is a consolidated variable interest entity. In July 2012, HEP acquired our 75% interest in UNEV Pipeline, LLC ("UNEV"). We have recast HEP's asset and...

  • Page 67
    ... HOLLYFRONTIER CORPORATION CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) 2012 Sales and other revenues Operating costs and expenses: Cost of products sold (exclusive of depreciation and amortization) Operating expenses (exclusive of depreciation and amortization) General...

  • Page 68
    ... HOLLYFRONTIER CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) Years Ended December 31, 2012 Net...plan curtailment Change in minimum pension liability Change in retirement medical obligation Other comprehensive income (loss) before income taxes Income tax expense (benefit...

  • Page 69
    ... - HEP Purchase of treasury stock Structured stock repurchase arrangement Contribution from joint venture partner Dividends Distributions to noncontrolling interest Excess tax benefit from equity-based compensation Purchase of units for incentive grants - HEP Deferred financing costs Other Net cash...

  • Page 70
    ... of common stock upon merger with Frontier Oil Corporation Allocated equity on HEP common unit issuances, net of tax Contribution from joint venture partner Issuance of common stock under incentive compensation plans, net of forfeitures Equity-based compensation, net of tax benefit Purchase of...

  • Page 71
    ... Lovington, New Mexico (collectively, the "Navajo Refinery"), a refinery located in Cheyenne, Wyoming (the "Cheyenne Refinery") and a refinery in Woods Cross, Utah (the "Woods Cross Refinery"); owned and operated NK Asphalt Partners ("NK Asphalt") which operates various asphalt terminals in Arizona...

  • Page 72
    ... locations. In many cases, we enter into net settlement agreements relating to the buy/sell arrangements, which may mitigate credit risk. Inventories: Inventories are stated at the lower of cost, using the last-in, first-out ("LIFO") method for crude oil unfinished and finished refined products...

  • Page 73
    ...of earnings. Revenue Recognition: Refined product sales and related cost of sales are recognized when products are shipped and title has passed to customers. HEP recognizes pipeline transportation revenues as products are shipped through its pipelines. All revenues are reported inclusive of shipping...

  • Page 74
    Table of Contents HOLLYFRONTIER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued Environmental Costs: Environmental costs are charged to operating expenses if they relate to an existing condition caused by past operations and do not contribute to current or future revenue generation...

  • Page 75
    ...-merger services. Our consolidated financial and operating results reflect the operations of the merged Frontier businesses beginning July 1, 2011, which consists of crude oil refining and the wholesale marketing of refined petroleum products produced at the El Dorado and Cheyenne Refineries, which...

  • Page 76
    ...of the United States. HEP also owns and operates refined product pipelines and terminals, located primarily in Texas, that serve Alon's refinery in Big Spring, Texas. As of December 31, 2012, we owned a 44% interest in HEP, including the 2% general partner interest. We are the primary beneficiary of...

  • Page 77
    ...storage capacity, a rail loading rack and a truck unloading rack located at our Tulsa East facility and an asphalt loading rack facility located at our Navajo Refinery facility located in Lovington, New Mexico. Transportation Agreements HEP serves our refineries under long-term pipeline and terminal...

  • Page 78
    ... of Contents HOLLYFRONTIER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued • (Level 2) Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, similar assets and liabilities in markets that are...

  • Page 79
    ... HOLLYFRONTIER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued Level 2 Financial Instruments Investments in marketable debt...cash flows related to both variable and fixed rate legs of the respective swap agreements. The measurements are computed using market-based observable inputs,...

  • Page 80
    ...HEP directors and select Holly Logistic Services, L.L.C. executives and employees. Compensation cost attributable to HEP's share-based compensation plan was $2.7 million, $2.1 million and $2.2 million for the years ended December 31, 2012, 2011 and 2010, respectively. Restricted Stock Under our Long...

  • Page 81
    ... 1.7 years. Performance Share Units Under our Long-Term Incentive Compensation Plan, we grant certain officers and other key employees performance share units, which are payable in stock upon meeting certain criteria over the service period, and generally vest over a period of three years. Under the...

  • Page 82
    ... of Contents HOLLYFRONTIER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued NOTE 8: Cash and Cash Equivalents and Investments in Marketable Securities Our investment portfolio at December 31, 2012 consisted of cash, cash equivalents and investments in marketable debt securities...

  • Page 83
    ... at historical LIFO acquisition costs below market value at the time of liquidation. NOTE 10: Properties, Plants and Equipment December 31, 2012 2011 (In thousands) Land, buildings and improvements Refining facilities Pipelines and terminals Transportation vehicles Other fixed assets Construction...

  • Page 84
    ... "HollyFrontier Credit Agreement") with Union Bank, N.A. as administrative agent and certain lenders from time to time party thereto. The HollyFrontier Credit Agreement matures in July 2016 and may be used to fund working capital requirements, capital expenditures, acquisitions and general corporate...

  • Page 85
    ... of long-term debt are as follows: December 31, 2012 (In thousands) 9.875% Senior Notes Principal Unamortized discount 6.875% Senior Notes Principal Unamortized premium 8.5% Senior Notes Principal Unamortized premium Financing Obligation Total HollyFrontier long-term debt $ 286,812 $ (7,468) 279,344...

  • Page 86
    ... 1,344,123 $ NOTE 14: Derivative Instruments and Hedging Activities Commodity Price Risk Management Our primary market risk is commodity price risk. We are exposed to market risks related to the volatility in crude oil and refined products, as well as volatility in the price of natural gas used in...

  • Page 87
    ...402) Operating 1,364 expenses (38) $ $ (1,364) (1,364) $ $ - - $ As of December 31, 2012, we have the following notional contract volumes related to outstanding swap contracts serving as cash flow hedges against price risk on forecasted purchases of natural gas and crude oil and sales of refined...

  • Page 88
    ...HOLLYFRONTIER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued The following table presents the pre-tax effect on income due to maturities and fair value adjustments of our economic hedges: Years Ended December 31, Location of Gain Recognized in Income Cost of products sold Operating...

  • Page 89
    Table of Contents HOLLYFRONTIER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued The following table presents the pre-tax...Balance Sheet Balance Sheet Fair Value Fair Value Location Location (In thousands) December 31, 2012 Derivatives designated as cash flow hedging instruments: ...

  • Page 90
    ...HOLLYFRONTIER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued Asset Derivatives Liability Derivatives Balance Sheet Balance Sheet Fair Value Fair Value Location Location... 2012 2011 2010 (In thousands) Tax computed at statutory rate State income taxes, net of federal tax benefit ...

  • Page 91
    ... Properties, plants and equipment (due primarily to tax in excess of book depreciation) Accrued post-retirement benefits Accrued environmental costs Hedging instruments Deferred turnaround costs Net operating loss and tax credit carryforwards Investment in HEP Debt fair value premiums Contingent...

  • Page 92
    Table of Contents HOLLYFRONTIER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued At December 31, 2012, we had a net operating loss carryforward of $46.5 million in the state of Colorado that is scheduled to be utilized in 2013 through 2029 and a Kansas income tax credit of $15.8 ...

  • Page 93
    ...Contents HOLLYFRONTIER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued In January 2012, our Board of Directors approved a $350 million stock repurchase program, and in June 2012, approved an additional $350 million repurchase program that authorizes us to repurchase common stock in...

  • Page 94
    ...of the Employee Retirement Income Security Act of 1974. Benefits are based on the employee's years of service and compensation. In 2012, our Compensation Committee, pursuant to authority delegated to it by the Board of Directors, approved the termination of the HollyFrontier Corporation Pension Plan...

  • Page 95
    Table of Contents HOLLYFRONTIER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued Years Ended December 31, 2012 2011 (In thousands) Change in pension plan assets Fair value of plan assets - beginning of year Actual return on plan assets Benefits paid Employer contributions ...

  • Page 96
    ... with us. The payments are based on each employee's years of service and eligible salary. For the year ended December 31, 2012, we recognized transition benefit costs of $15.6 million associated with transition to the new defined contribution plan. Retirement Restoration Plan We adopted an unfunded...

  • Page 97
    ... CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued Post-retirement Healthcare Plans We provide post-retirement medical benefits to certain eligible employees. These plans are unfunded and provide differing levels of healthcare benefits dependent upon hire date and work location...

  • Page 98
    ... Assumed health care cost trend rates have an effect on the amounts reported for the post-retirement health care benefit plans. The weighted average assumptions used to determine net periodic benefit expense follow: 2012 Discount rate Current health care trend rate Ultimate health care trend rate...

  • Page 99
    ... various long-term agreements (entered in the normal course of business) to purchase crude oil, natural gas, feedstocks and other resources to ensure we have adequate supplies to operate our refineries. The substantial majority of our purchase obligations are based on market prices or rates. These...

  • Page 100
    .... The Refining segment represents the operations of the El Dorado, Tulsa, Navajo, Cheyenne and Woods Cross Refineries and NK Asphalt (aggregated as a reportable segment). Refining activities involve the purchase and refining of crude oil and wholesale and branded marketing of refined products...

  • Page 101
    ...UNEV Pipeline operations as a consolidated subsidiary of HEP for all periods presented. The UNEV Pipeline was previously presented as a Non-Guarantor Restricted Subsidiary. Condensed Consolidating Balance Sheet Guarantor Restricted Subsidiaries NonGuarantor Restricted Subsidiaries HollyFrontier Corp...

  • Page 102
    ...HOLLYFRONTIER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued Condensed Consolidating Balance Sheet Guarantor Restricted Subsidiaries NonGuarantor Restricted Subsidiaries HollyFrontier Corp...Total current assets Properties, plants and equip, net Marketable securities (long-term) ...

  • Page 103
    ... 46 HollyFrontier Corp. Before Consolidation of HEP $ 20,044,003 16,078,948 906,098 120,507 185,907 17,291,460 2,752,543 Non-Guarantor Non-Restricted Subsidiaries (HEP Segment) $ 288,501 - 89,395 7,594 57,789 154,778 133,723 Year Ended December 31, 2012 Sales and other revenues Operating costs and...

  • Page 104
    ... (2) HollyFrontier Corp. Before Consolidation of HEP $ 8,287,412 7,510,357 451,762 63,120 89,262 8,114,501 172,911 Non-Guarantor Non-Restricted Subsidiaries (HEP Segment) $ 182,093 - 53,138 7,719 28,949 89,806 92,287 Year Ended December 31, 2010 Sales and other revenues Operating costs and expenses...

  • Page 105
    ... stock Structured stock repurchase agreement Contribution from joint venture partner Contribution from general partner Distribution from HEP upon UNEV transfer Dividends Distributions to noncontrolling interest Excess tax benefit from equity-based compensation Purchase of units for incentive grants...

  • Page 106
    ... of treasury stock Principal tender on senior notes - HFC Contribution to HEP Contribution from UNEV joint venture partner Dividends Distributions to noncontrolling interest Excess tax benefit from equity-based compensation Purchase of units for restricted grants - HEP Deferred financing costs Other...

  • Page 107
    ... stock Contribution to HEP Contribution from UNEV joint venture partner Dividends Purchase price in excess of transferred basis in assets Distributions to noncontrolling interest Excess tax benefit from equity-based compensation Purchase of units for restricted grants - HEP Deferred financing...

  • Page 108
    ... Contents HOLLYFRONTIER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued NOTE 23: Significant Customers All revenues are domestic revenues, except for refining segment sales of gasoline and diesel fuel for export into Mexico. We have two significant customers (Sinclair and Shell Oil...

  • Page 109
    ... in our definitive proxy statement for the annual meeting of stockholders to be held on May 15, 2013 and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The equity compensation plan information required by...

  • Page 110
    ... proxy statement for the annual meeting of stockholders to be held on May 15, 2013 and is incorporated herein by reference. PART IV Item 15. Exhibits, Financial Statement Schedules (a) (1) Documents filed as part of this report Index to Consolidated Financial Statements Page in Form 10-K Report...

  • Page 111
    ... Officer) Vice President, Controller and Chief Accounting Officer (Principal Accounting Officer) Senior Vice President, General Counsel and Secretary Director Date February 27, 2013 February 27, 2013 /s/ J.W. Gann, Jr. J.W. Gann, Jr. February 27, 2013 /s/ Denise C. McWatters Denise C. McWatters...

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    Table of Content Signature /s/ Franklin Myers Franklin Myers /s/ Michael E. Rose Michael E. Rose /s/ Tommy A. Valenta Tommy A. Valenta Director Capacity Date February 27, 2013 Director February 27, 2013 Director February 27, 2013 104

  • Page 113
    ... Registrant's Annual Report on Form 10-K for its fiscal year ended December 31, 2009, File No. 1-03876). Seventh Supplemental Indenture, dated April 14, 2010, among Holly Energy Storage- Tulsa LLC, Holly Energy Storage-Lovington LLC, Holly Energy Partners, L.P., Holly Energy Finance Corp., the other...

  • Page 114
    ... Indenture, dated December 29, 2011, among Cheyenne Logistics LLC, El Dorado Logistics LLC, Holly Energy Partners, L.P., Holly Energy Finance Corp., the other Guarantors and U.S. Bank National Association (incorporated by reference to Exhibit 4.12 of Holly Energy Partners, L.P.'s Annual Report on...

  • Page 115
    ...Option Agreement, dated July 12, 2012, among HollyFrontier Corporation, HEP UNEV Pipeline LLC (f/k/a Holly UNEV Pipeline Company), Navajo Pipeline Co., L.P., Holly Logistic Services, L.L.C., HEP Logistics Holdings, L.P., Holly Energy Partners, L.P., HEP Logistics GP, L.L.C. and Holly Energy Partners...

  • Page 116
    ... Pipelines Agreement, dated June 1, 2009, among Holly Corporation, Navajo Refining Company, L.L.C, Holly Energy Partners, L.P., Holly Energy Partners - Operating, L.P., HEP Pipeline, L.L.C., Lovington-Artesia, L.L.C., HEP Logistics Holdings, L.P., Holly Logistics Services, L.L.C. and HEP Logistics...

  • Page 117
    ... Report on Form 8-K filed December 7, 2009, File No. 1-03876). Pipeline Systems Operating Agreement, dated February 8, 2010, among Navajo Refining Company, L.L.C., Lea Refining Company, Woods Cross Refining Company, L.L.C., Holly Refining & Marketing - Tulsa LLC and Holly Energy Partners - Operating...

  • Page 118
    ....1 to Frontier Oil Corporation's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010, File No. 1-07627). LLC Interest Purchase Agreement, dated July 12, 2012, among HollyFrontier Corporation, Holly Energy Partners, L.P. and HEP UNEV Holdings LLC (incorporated by reference...

  • Page 119
    ...Control Agreement for Chief Executive Officer and Chief Financial Officer (incorporated by reference to Exhibit 10.1 of Registrant's Current Report on Form 8-K filed May 10, 2012, File No. 1-03876). HollyFrontier Corporation Form of Change in Control Agreement (for legacy Holly Corporation employees...

  • Page 120
    ... S-8 filed November 9, 2012, File No. 333-184877). Form of Restricted Stock Unit Agreement (for non-employee directors). Form of Notice of Grant of Restricted Stock Units (for non-employee directors). Waiver Agreement, dated February 21, 2011, between Holly Corporation and Matthew P. Clifton thereto...

  • Page 121
    ... of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002. Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002. The following financial information from Registrant's Annual Report on Form 10-K for its fiscal year ended December 31, 2012...

  • Page 122
    ... information; and any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting b. Date: February 27, 2013 /s/ Michael C. Jennings Michael C. Jennings Chief Executive Officer and President

  • Page 123
    ...; and any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. b. Date: February 27, 2013 /s/ Douglas S. Aron Douglas S. Aron Executive Vice President and Chief Financial Officer

  • Page 124
    ... on Form 10-K for the period ending December 31, 2012 and filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael C. Jennings, Chief Executive Officer of HollyFrontier Corporation (the "Company") hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted...

  • Page 125
    ... Act of 1934, as amended; and The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: February 27, 2013 /s/ Douglas S. Aron Douglas S. Aron Executive Vice President and Chief Financial Officer

  • Page 126
    .... Doug S. Aron Executive Vice President and Chief Financial Officer David L. Lamp Executive Vice President and Chief Operating Officer George J. Damiris Senior Vice President, Supply and Marketing James M. Stump Senior Vice President, Refining Operations A NNUA L M E E T IN G The Annual...

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    2828 North Harwood Suite 1300 Dallas, Texas 75201-1507