HollyFrontier 2014 Annual Report Download - page 45

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Table of Content
37
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.
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 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 the current year period.
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.