-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SHW0xWhHZy8oEK/oBh2cWAemqZcKW7olcV7uC9MVumo6FWyFKRKDDeq9a4KUJDXQ D0QAXI1ZeD+V4KqT43TI0w== 0000950134-96-006842.txt : 19961216 0000950134-96-006842.hdr.sgml : 19961216 ACCESSION NUMBER: 0000950134-96-006842 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961031 FILED AS OF DATE: 19961213 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOLLY CORP CENTRAL INDEX KEY: 0000048039 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 751056913 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03876 FILM NUMBER: 96680354 BUSINESS ADDRESS: STREET 1: 100 CRESCENT COURT STREET 2: STE 1600 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2148713555 FORMER COMPANY: FORMER CONFORMED NAME: GENERAL APPLIANCE CORP DATE OF NAME CHANGE: 19680508 10-Q 1 FORM 10-Q PERIOD ENDING OCTOBER 31, 1996 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - ----- EXCHANGE ACT OF 1934 For the quarterly period ended October 31, 1996 -------------------------- OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - ----- EXCHANGE ACT OF 1934 For the transition period from to ---------------- ---------------- Commission File Number 1-3876 -------- HOLLY CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 75-1056913 - --------------------------------- ----------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 100 Crescent Court, Suite 1600 Dallas, Texas 75201-6927 - ---------------------------------------- ----------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (214) 871-3555 ------------------------------ - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- 8,253,514 shares of Common Stock, par value $.01 per share, were outstanding on December 6, 1996. 2 HOLLY CORPORATION INDEX
Page No. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheet - October 31, 1996 (Unaudited) and July 31, 1996 3 Consolidated Statement of Income (Unaudited) - Three Months Ended October 31, 1996 and 1995 4 Consolidated Statement of Cash Flows (Unaudited) - Three Months Ended October 31, 1996 and 1995 5 Notes to Consolidated Financial Statements (Unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Securities Holders 10 Item 6. Exhibits and Reports on Form 8-K 10
2 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements HOLLY CORPORATION CONSOLIDATED BALANCE SHEET (Dollars in Thousands Except Per Share Amounts)
Unaudited October 31, July 31, 1996 1996 --------- --------- ASSETS ------ Current assets Cash and cash equivalents $ 73,001 $ 63,959 Accounts receivable: Product 43,911 43,642 Crude oil resales 83,294 54,456 Note receivable -- 6,288 --------- --------- 127,205 104,386 Inventories: Crude oil and refined products 35,826 32,090 Materials and supplies 6,436 6,583 --------- --------- 42,262 38,673 Prepayments and other 9,582 10,008 --------- --------- Total current assets 252,050 217,026 Properties, plants and equipment, at cost 269,975 261,621 Less accumulated depreciation, depletion and amortization 134,422 130,177 --------- --------- 135,553 131,444 Equity interest in joint venture 2,058 734 Other assets 3,743 2,067 --------- --------- $ 393,404 $ 351,271 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities Accounts payable $ 161,418 $ 122,421 Accrued liabilities 16,023 12,453 Income taxes payable 1,378 4,728 Current maturities of long-term debt 10,775 10,775 --------- --------- Total current liabilities 189,594 150,377 Deferred income taxes 19,059 18,361 Long-term debt, less current maturities 86,290 86,290 Contingencies Stockholders' equity Preferred stock, $1.00 par value - 1,000,000 shares authorized; none issued -- -- Common stock, $.01 par value - 20,000,000 shares authorized; 8,650,282 shares issued 87 87 Additional capital 6,132 6,132 Retained earnings 92,811 90,593 --------- --------- 99,030 96,812 Common stock held in treasury, at cost - 396,768 shares (569) (569) --------- --------- Total stockholders' equity 98,461 96,243 --------- --------- $ 393,404 $ 351,271 ========= =========
See accompanying notes. 3 4 HOLLY CORPORATION CONSOLIDATED STATEMENT OF INCOME (Dollars in Thousands Except Per Share Amounts)
Unaudited Three Months Ended October 31, ---------------------- 1996 1995 --------- --------- Revenues Refined products $ 185,395 $ 164,528 Oil and gas 1,426 191 Miscellaneous 125 119 --------- --------- 186,946 164,838 Costs and expenses Cost of refined products 170,916 144,921 General and administrative 3,636 3,525 Depreciation, depletion and amortization 5,100 3,973 Exploration expenses, including dry holes 623 630 --------- --------- 180,275 153,049 --------- --------- Income from operations 6,671 11,789 Other Interest income 1,059 331 Interest expense (2,372) (1,909) --------- --------- (1,313) (1,578) --------- --------- Income before income taxes 5,358 10,211 Income tax provision Current 1,317 4,168 Deferred 833 (60) --------- --------- 2,150 4,108 --------- --------- Net income $ 3,208 $ 6,103 ========= ========= Income per common share $ .39 $ .74 Cash dividends paid per share $ .12 $ .10 Average number of shares of common stock outstanding (in thousands) 8,254 8,254
See accompanying notes. 4 5 HOLLY CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in Thousands)
Unaudited Three Months Ended October 31, -------------------- 1996 1995 -------- -------- Cash flows from operating activities Net income $ 3,208 $ 6,103 Adjustments to reconcile net income to net cash provided by operating activities Depreciation, depletion and amortization 5,100 3,973 Deferred income taxes 833 (60) Dry hole costs and leasehold impairment 118 112 (Increase) decrease in operating assets Accounts receivable (22,819) 4,363 Inventories (3,589) 6,662 Income taxes receivable -- 1,540 Prepayments and other (780) (685) Increase (decrease) in operating liabilities Accounts payable 38,997 (5,624) Accrued liabilities 3,570 204 Income taxes payable (3,350) 2,628 Other, net (1,460) 438 -------- -------- Net cash provided by operating activities 19,828 19,654 Cash flows from financing activities Cash dividends (990) (825) -------- -------- Net cash used for financing activities (990) (825) Cash flows from investing activities Additions to properties, plants and equipment (8,472) (4,202) Investment in joint venture (1,324) -- -------- -------- Net cash used for investing activities (9,796) (4,202) -------- -------- Cash and cash equivalents Increase for the period 9,042 14,627 Beginning of year 63,959 13,432 -------- -------- End of period $ 73,001 $ 28,059 ======== ======== Supplemental disclosure of cash flow information Cash paid during period for Interest $ 13 $ 278 Income taxes $ 4,282 $ --
See accompanying notes. 5 6 HOLLY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note A - Presentation of Financial Statements In the opinion of the Company, the accompanying consolidated financial statements, which have not been audited by independent accountants (except for the consolidated balance sheet as of July 31, 1996), reflect all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company's consolidated financial position as of October 31, 1996, the consolidated results of operations for the three months ended October 31, 1996 and 1995, and consolidated cash flows for the three months ended October 31, 1996 and 1995. Certain notes and other information have been condensed or omitted. Therefore, these financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 1996. Certain previously reported amounts have been reclassified to conform to classifications adopted in fiscal 1996. References herein to the "Company" are for convenience of presentation and may include obligations, commitments or contingencies that pertain solely to one or more affiliates of the Company. Results of operations for the first three months of fiscal 1997 are not necessarily indicative of the results to be expected for the full year. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Factors Affecting Forward-Looking Statements This Quarterly Report on Form 10-Q contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1993, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements included in this Form 10-Q, including without limitation statements in this Item 2 under the headings "Results of Operations," "Liquidity and Capital Resources" and "Recent Developments That May Affect Future Results," other than statements of historical facts, are forward-looking statements. Such statements are subject to certain risks and uncertainties, including risks and uncertainties with respect to the actions of actual or potential competitive suppliers of refined petroleum products in the Company's markets, demand and supply for crude oil and for refined products, the spread between market prices for refined products and crude oil, the possibility of constraints on the transportation of refined products, the possibility of inefficiencies or shutdowns in refinery operations, governmental regulations and policies, the availability of financing to the Company on favorable terms, and the effectiveness of Company capital investments and marketing strategies. Because of these and other risks and uncertainties, actual results may vary materially from those estimated, anticipated or projected. Although the Company believes that the expectations reflected by the forward-looking statements contained in this Report are reasonable based on information currently available to the Company, no assurances can be given that such expectations 6 7 HOLLY CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) will prove to have been correct. This summary discussion of risks and uncertainties that may cause actual results to differ from those indicated in forward-looking statements should be read in conjunction with the discussion under the heading "Additional Factors That May Affect Future Results" included in Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 1996 and in conjunction with the discussion below under the heading "Recent Developments That May Affect Future Results." All forward-looking statements included in this Form 10-Q and all subsequent oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements set forth above. Results of Operations Net income for the first quarter ended October 31, 1996 was $3.2 million as compared to $6.1 million, for the first quarter of the prior year. The decrease in net income in the first three months of fiscal 1997 was principally due to reduced refinery margins, as compared to the same period of the prior year. Refinery margins were especially down in the latter part of the current year's first quarter, and continue at depressed levels into the second quarter, as product prices have not kept pace with the substantial increases in crude oil costs. Additionally contributing to the decrease in earnings in the fiscal 1997 first quarter was a small decrease in refined product sales volumes as compared to the prior year's first quarter. Revenues increased in the quarter ended October 31, 1996 from the prior year's comparable period as a result of higher sales prices, partially offset by the reduced volumes. Oil and gas revenues in the current year increased, as compared to the first quarter of the prior year, as two offshore properties commenced production during the second quarter of the prior year. The increase in depreciation, depletion and amortization related primarily to the oil and gas properties. Liquidity and Capital Resources Cash flows from operations during the three months ended October 31, 1996 exceeded capital expenditures and dividends paid, resulting in a net increase of cash and cash equivalents of $9.0 million. Working capital decreased during the three months ended October 31, 1996 by $4.2 million to $62.5 million. The Company's long-term debt now represents 49.6% of total capitalization as compared to 50.2% at July 31, 1996. At October 31, 1996, the Company had $25 million of borrowing capacity under the Credit Agreement which can be used for short term working capital needs. The Company believes that these sources of funds, together with future cash flows from operations should provide sufficient resources, financial strength and flexibility for the Company to satisfy its liquidity needs, capital requirements, and debt service obligations and to permit the payment of dividends for the foreseeable future. 7 8 HOLLY CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Net cash provided by operating activities amounted to $19.8 million in the first three months of fiscal 1997, as compared to $19.7 million in the same period of the prior year. Net cash flows from operating activities were essentially the same in both periods, as the decrease in cash generated by earnings in the current year was offset by an increase in cash provided by working capital accounts. Cash flows used for financing activities amounted to $1.0 million in the first three months of fiscal 1997, as compared to $.8 million in the same period of the prior year, all of which were for dividends. The next principal payment of $10.8 million on the Company's Senior Notes is due June 1997. Cash flows used for investing activities were $9.8 million in the first three months of fiscal 1997, as compared to $4.2 million in the same period of the prior year. The Company has adopted capital budgets totalling $32 million for fiscal 1997. The major components of this budget are $13 million for the construction of a pipeline connection from the Navajo Refinery to an 8" pipeline that will be leased by the Company for products transport (the "Lease Agreement") and related product terminals, $12 million for various refinery improvements and environmental and safety enhancements and $7 million for exploration and production activities. In addition to these projects, the Company plans to complete by fall 1997 the major items approved in the 1996 capital budget, including a joint venture to ship liquid petroleum gas (LPGs) to Mexico and two projects at the Navajo Refinery which entail upgrades to improve product yields. The Lease Agreement is with Mid-America Pipeline Company and involves more than 300 miles of 8" pipeline running from Chavez County to San Juan County, New Mexico. The Company plans to construct an 8" pipeline, from the Navajo Refinery to the leased pipeline, and related terminalling facilities. These facilities will allow the Company to use the pipeline to transport refined products from its Navajo Refinery to markets in northwest New Mexico, including Albuquerque and Farmington. The pipeline and related facilities are projected to be operational near the end of fiscal 1997. The Company has entered into a joint venture with Mid-America Pipeline Company and Amoco Pipeline Company to transport liquid petroleum gases (LPGs) to Mexico. The Company will have a 25% interest in the joint venture. The project involves the construction of a new 12" pipeline from Orla to El Paso, Texas which replaced a portion of 8" pipeline used by Navajo, which was transferred to the joint venture. The 12" pipeline was completed during October 1996. The Company's total net cash investment in the projects (in addition to the contribution of a portion of the existing 8" pipeline to the joint venture) is now estimated to be $8 million, of which $7 million is to be spent in fiscal 1997. During the first quarter of fiscal 1997, the Company made a contribution of $1.3 to the joint venture. The Company anticipates the realization of benefits from the joint venture to start in the second half of fiscal 1997. 8 9 HOLLY CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) The additional pipeline capacity associated with the new pipeline constructed in conjunction with the joint venture and with the Lease Agreement and the construction of the related pipeline and terminalling facilities should reduce pipeline operating expenses at current throughputs and allow the Company to expand volumes, through refinery expansion or otherwise, shipped into existing and new markets. The Company believes the scheduled capital projects to upgrade the Navajo Refinery will improve product yields and enhance refining profitability. The planned UOP Isomerization unit, which will increase the refinery's internal octane generating capabilities and improve light product yields, is expected to be operational during the second quarter of fiscal 1997. In addition, the planned state-of-the-art upgrades to the Navajo Refinery's fluid catalytic cracking unit (FCC), which will improve FCC high value product yields, are now expected to be completed by fall 1997. The total estimated cost of these two projects is $14 million, of which $8 million is to be spent in fiscal 1997 through early fiscal 1998. Recent Developments That May Affect Future Results Ultramar Diamond Shamrock Corporation, an independent refiner and marketer, completed in November 1995 the construction of a 409-mile, ten-inch refined products pipeline from its McKee refinery near Dumas, Texas to El Paso. Ultramar Diamond Shamrock has announced that this pipeline currently has a capacity of 30,000 BPD, and with the addition of two pumping stations to be built in the first half of 1997, it will have a 40,000 BPD capacity. Ultramar Diamond Shamrock has stated its intention to use its pipeline to supply fuels to the El Paso, New Mexico, Arizona and northern Mexico markets. This pipeline has increased and could further increase the supply of products in the Company's principal markets. Recently there have been several refining and marketing consolidations or acquisitions between entities competing in the Company's geographic market. While this could increase the competitive pressures on the Company, the specific ramifications of these or other potential consolidations cannot presently be determined. In November 1996, Tosco Corporation and Unocal announced they have signed a letter of intent for Unocal to sell to Tosco Corporation all of the operating assets of 76 Products Company, Unocal's West Coast refining and marketing division. The total combined sales by the Company to Tosco Corporation and its affiliates and to Unocal's West Coast refining and marketing division currently amount to approximately 20%. 9 10 HOLLY CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Effective January 1, 1995, certain cities in the country were required to use only reformulated gasoline ("RFG"), a cleaner burning fuel. While none of the Company's principal markets presently requires RFG, this requirement could be implemented over time. In fact, Phoenix, one of the Company's markets, is presently considering implementing RFG or some other cleaner burning gasoline. The Company does not believe that further capital expenditures will be needed to provide RFG to meet its Phoenix sales requirements. However, other requirements of the Clean Air Act, or other presently existing or future environmental regulations, could cause the Company to expend substantial amounts at its refineries. The specifics and extent of these or other regulations and their attendant costs are not presently determinable. This discussion should be read in conjunction with the discussion under the heading "Additional Factors That May Affect Future Results" included in Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 1996. PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Securities Holders At the annual meeting of stockholders of December 12, 1996, all eight of the management's nominees for directors as listed in the proxy statement were elected. SCHEDULE OF VOTES CAST FOR EACH DIRECTOR
Total Shares Voted Total Shares Voted "For" "Withheld" ------------------ ------------------ Matthew P. Clifton 6,683,383 24,125 William J. Gray 6,683,407 24,101 Marcus R. Hickerson 6,682,529 24,979 A. J. Losee 6,681,965 25,543 Thomas K. Matthews, II 6,682,115 25,393 Robert G. McKenzie 6,682,899 24,609 Lamar Norsworthy 6,681,847 25,661 Jack P. Reid 6,675,004 32,504
Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: See Index to Exhibits on page 12. (b) Reports on Form 8-K: None. 10 11 SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HOLLY CORPORATION -------------------------------- (Registrant) Date: December 13, 1996 By /s/ Henry A. Teichholz ----------------- ------------------------------- Henry A. Teichholz Vice President, Treasurer and Controller (Duly Authorized Principal Financial and Accounting Officer) 11 12 HOLLY CORPORATION INDEX TO EXHIBITS (Exhibits are numbered to correspond to the exhibit table in Item 601 of Regulation S-K)
Exhibit Number Description -------- ----------- 27 - Financial Data Schedule
EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS JUL-31-1997 OCT-31-1996 73,001 0 127,205 0 42,262 252,050 269,975 134,422 393,404 189,594 86,290 0 0 87 98,374 393,404 186,821 186,946 170,916 180,275 0 0 2,372 5,358 2,150 3,208 0 0 0 3,208 .39 .39
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