HollyFrontier 2014 Annual Report Download - page 46

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Table of Content
38
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.
Results of Operations – Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
Summary
Net income attributable to HollyFrontier stockholders for the year ended December 31, 2013 was $735.8 million ($3.66 per basic
and $3.64 per diluted share), a $991.4 million decrease compared to $1,727.2 million ($8.41 per basic and $8.38 per diluted share)
for the year ended December 31, 2012. Net income decreased due principally to a year-over-year decrease in refining margins,
refinery downtime and pension settlement and debt extinguishment charges. Refinery gross margins for the year ended
December 31, 2013 decreased to $15.99 per produced barrel from $24.89 for the year ended December 31, 2012.
Sales and Other Revenues
Sales and other revenues increased slightly from $20,090.7 million for the year ended December 31, 2012 to $20,160.6 million
for the year ended December 31, 2013 due to higher refined product sales volumes, partially offset by a decrease in year-over-
year sales prices. The average sales price we received per produced barrel sold decreased 3% from $119.48 for the year ended
December 31, 2012 to $115.60 for the year ended December 31, 2013. Refined product sales volumes for 2013 reflected higher
volumes of purchased products, comprising 8% of total refined products sales compared to 3% for the year ended December 31,
2012 due to a decrease in refinery production and corresponding sales volumes of produced product as a result of planned turnaround
and maintenance projects at our refineries and other unplanned refinery outages during 2013. Sales and other revenues for the
years ended December 31, 2013 and 2012 include $53.4 million and $47.6 million, respectively, in HEP revenues attributable to
pipeline and transportation services provided to unaffiliated parties.
Cost of Products Sold
Cost of products sold increased 10% from $15,840.6 million for the year ended December 31, 2012 to $17,392.2 million for the
year ended December 31, 2013, due principally to higher refined product sales volumes and crude costs for 2013. The sales volume
increase is attributable to higher sales volumes of purchased products caused in part, by planned turnaround projects and unplanned
refinery outages during the year ended December 31, 2013. 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 increased 5% from $94.59 for the year ended
December 31, 2012 to $99.61 for the year ended December 31, 2013.
Gross Refinery Margins
Gross refinery margin per produced barrel decreased 36% from $24.89 for the year ended December 31, 2012 to $15.99 for the
year ended December 31, 2013. This was due to a decrease in average per barrel sales prices for refined products sold combined
with increased crude oil and feedstock prices for 2013. Gross refinery margin per produced barrel does not include the effects of
depreciation and amortization.
Operating Expenses
Operating expenses, exclusive of depreciation and amortization, increased 10% from $995.0 million for the year ended
December 31, 2012 to $1,090.9 million for the year ended December 31, 2013 due principally to higher repair and maintenance
and fuel costs during 2013 and $31.7 million in pension settlement costs, partially offset by a decrease in environmental remediation
costs. For the years ended December 31, 2013 and 2012, operating expenses include $95.7 million and $88.9 million, respectively,
in costs attributable to HEP operations.