Filed by Holly Corporation
Pursuant to Rule 425 under
the Securities Act of 1933
and deemed filed pursuant
to Rule 14a-12 under the Securities Exchange Act of 1934
Subject Company: Holly Corporation
Commission File No.: 001-03876
Set forth below is the text of a press release issued by Holly Corporation on
June 12, 2003.
# # # # # # #
HOLLY CORPORATION REPORTS THIRD QUARTER OF FISCAL 2003 RESULTS
Dallas, Texas, June 12, 2003 -- Holly Corporation (AMEX-HOC), today
reported results for the Company's third quarter and nine months ended April 30,
2003.
Net income for the three months ended April 30, 2003 was $26.7 million
($1.67 per diluted share) compared to net income of $6.2 million ($.39 per
diluted share) for the three months ended April 30, 2002. For the nine months
ended April 30, 2003, net income was $30.4 million ($1.90 per diluted share)
compared to $25.9 million ($1.62 per diluted share) for the nine months ended
April 30, 2002. During the fiscal 2003 third quarter, the Company's income
benefited from a $16.4 million gain ($10.2 million after tax) from the sale of
pipeline assets to Plains Marketing, L.P., the $15.2 million ($9.4 million after
tax) received from Kinder Morgan Energy Partners, L.P. as payment for
reparations ordered by the Federal Energy Regulatory Commission, and strong
refining margins that improved substantially from the first six months of the
current fiscal year and compared very favorably to margins for the three months
ended April 30, 2002. Excluding the pipeline sale and reparations payment, net
income for the three and nine months ended April 30, 2003 would have been $7.1
million ($.44 per diluted share) and $10.7 million ($.67 per diluted share),
respectively.
For the Company's third quarter ended April 30, 2003, refining margins
of $8.86 per barrel were significantly higher than the refinery margins of $6.40
per barrel for the quarter ended April 30, 2002. Refining margins rose to high
levels during much of the current year's third quarter as refined product prices
rose at a greater rate than crude oil costs, but the high margins fell off late
in the quarter as refined product prices declined at a greater rate than crude
oil costs. For the nine months ended April 30, 2003, refining margins of $6.37
per barrel were less than the refinery margins of $7.13 per barrel for the nine
months ended April 30, 2002. The relative strength of the prior year's
nine-month margins was principally the result of strong margins in the fiscal
2002 first quarter, when the Company, along with the refining industry as a
whole, was still experiencing very favorable refining margins, which fell off
significantly after the prior year's first fiscal quarter.
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As mentioned above, the current year's third quarter had two
significant nonrecurring events that contributed substantially to earnings. As
previously announced, the Company in March 2003 sold its Iatan crude oil
gathering system located in west Texas to Plains Marketing, L.P., resulting in a
gain of $16.4 million. Additionally, in April 2003 the Company received from
Kinder Morgan Energy Partners, L.P. a payment of $15.2 million for reparations
ordered by the Federal Energy Regulatory Commission relating to tariffs on
common carrier pipeline shipments of refined products from 1993 to July 2000.
The Company's revenues and cost of products sold were higher in the
third quarter and nine months of fiscal 2003, as compared to the comparable
periods in fiscal 2002, due principally to higher refined product sales prices
and higher costs of purchased crude oil. Additionally, refined product sales
volumes increased for the three-month and nine-month periods by 5% and 10%,
respectively, as compared to the same periods of fiscal 2002. Negatively
impacting earnings for the both the three and nine months ended April 30, 2003,
as compared to the prior year periods, were increases in operating expenses, due
to higher utility costs, higher environmental costs, and increased compensation
expense, and losses at our asphalt joint venture, compared to substantial income
of the asphalt joint venture for the fiscal 2002 three- and nine-month periods.
"The Company experienced a very good third quarter as refining margins
rebounded nicely and the pipeline sale and FERC-ordered reparations payment
contributed to earnings. Excluding the two non-recurring items, we generated
over $20 million of earnings before interest, taxes and depreciation for the
fiscal 2003 third quarter," said Matthew P. Clifton, President of Holly. "As
recently announced, the acquisition of the Woods Cross refinery near Salt Lake
City from ConocoPhillips closed effective June 1, 2003. We are very excited
about adding the Woods Cross operations to the Company, which acquisition
increased our total current refining capacity by approximately 35%.
Additionally, the Company is continuing to work diligently in the construction
of a gas oil hydrotreating unit at its Artesia, New Mexico refinery facility
which is designed to satisfy future EPA mandated gasoline specifications and to
improve the refinery's yields of higher value products. The expansion of our New
Mexico facility that will result in a further increase of approximately 15% in
Holly's overall refining capacity is expected to be completed along with the
hydrotreating unit by the end of calendar 2003. In addition to our on-going
steps to move forward and strengthen the Company, we are continuing to plan for
the proposed merger with Frontier Oil Corporation, which is expected to be
submitted in the next few weeks to the stockholders of both companies for their
approval."
Holly, headquartered in Dallas, Texas, operates a 60,000 bpd refinery
located in Artesia, New Mexico that is being expanded to 75,000 bpd, a 25,000
bpd refinery in Woods Cross, Utah, and a 7,500 bpd refinery in Great Falls,
Montana. Holly also has approximately 2,000 miles of crude oil and refined
product
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pipelines in the west Texas and New Mexico region, Permian Basin crude gathering
operations and refined product terminals.
The following is a "safe harbor" statement under the Private Securities
Litigation Reform Act of 1995: The statements in this press release relating to
matters that are not historical facts are forward-looking statements based on
management's belief and assumptions using currently available information and
expectations as of the date hereof, are not guarantees of future performance and
involve certain risks and uncertainties. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, the
Company cannot give any assurances that these expectations will prove to be
correct. Therefore, actual outcomes and results could materially differ from
what is expressed, implied or forecast in such statements. Such differences
could be caused by a number of factors including, but not limited to, risks and
uncertainties with respect to the actions of actual or potential competitive
suppliers of refined petroleum products in the Company's markets, the demand for
and supply of 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 or shutdowns in refinery operations or pipelines, effects of
governmental regulations and policies, the availability and cost of financing to
the Company, the effectiveness of the Company's capital investments and
marketing strategies, the Company's efficiency in carrying out construction
projects, the successful integration of the Woods Cross refinery, the completion
of the proposed transaction with Frontier Oil Corporation, the possibility of
terrorist attacks and the consequences of any such attacks, general economic
conditions, and other financial, operational and legal risks and uncertainties
detailed from time to time in the Company's Securities and Exchange Commission
filings. The Company assumes no duty to publicly update or revise such
statements, whether as a result of new information, future events or otherwise.
Frontier Oil Corporation (NYSE - FTO) and Holly Corporation have filed
a preliminary joint proxy statement/prospectus and other documents regarding the
proposed Frontier/Holly merger transaction with the Securities and Exchange
Commission as part of a Registration Statement on Form S-4 filed by Front Range
Himalaya Corporation. Investors and security holders are urged to read the
preliminary joint proxy statement/prospectus included in such Registration
Statement because it contains important information about Frontier and Holly and
the proposed transaction. A definitive joint proxy statement/prospectus is
expected to be sent to security holders of Frontier and Holly seeking their
approval of the transaction. Investors and security holders may obtain a free
copy of the definitive joint proxy statement/prospectus (when available) and
other documents filed by Frontier and Holly with the SEC at the SEC's web site
at www.sec.gov. The definitive joint proxy statement/prospectus and other
relevant documents may also be obtained free of cost by directing a request to
Frontier Oil Corporation, attention: Doug Aron, 10000 Memorial Drive, Suite 600,
Houston, Texas 77024 or Holly Corp., attention: W. John Glancy, 100 Crescent
Court, Suite 1600, Dallas, Texas 75201.
Frontier and Holly and their respective directors and executive
officers may be deemed to be participants in the solicitation of proxies from
the shareholders of Frontier and Holly in connection with the merger.
Information about Frontier and Holly and their respective directors and officers
can be found in Proxy Statements, Annual Reports on Form 10-K and Quarterly
Reports on Form 10-Q filed by Frontier and Holly with the SEC. Additional
information regarding the interests of those persons may be obtained by reading
the preliminary joint proxy statement/prospectus and the definitive joint proxy
statement/prospectus when it becomes available.
3
RESULTS OF OPERATIONS
STATEMENT OF INCOME (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
APRIL 30, APRIL 30,
------------------------------ ------------------------------
2003 2002 2003 2002
------------- ------------- ------------- -------------
(In thousands, except per share data)
Sales and other revenues ......................... $ 312,180 $ 210,327 $ 858,198 $ 635,028
Operating costs and expenses
Cost of products sold .......................... 255,376 165,350 719,764 491,356
Operating expenses ............................. 28,439 23,717 78,768 71,729
Selling, general and administrative expenses ... 7,057 5,452 17,597 16,110
Depreciation, depletion and amortization ....... 8,979 6,884 23,336 20,029
Exploration expenses, including dry holes ...... 233 282 711 824
------------- ------------- ------------- -------------
Total operating costs and expenses ........... 300,084 201,685 840,176 600,048
------------- ------------- ------------- -------------
Income from operations ........................... 12,096 8,642 18,022 34,980
Other income (expense)
Equity in earnings of joint ventures ........... (690) 1,571 (86) 6,639
Interest expense, net .......................... 37 (405) (575) (1,056)
Gain on sale of assets ......................... 16,447 -- 16,447 --
Reparations payment received ................... 15,226 -- 15,226 --
Gain on sale of equity securities .............. -- -- -- 1,522
------------- ------------- ------------- -------------
31,020 1,166 31,012 7,105
------------- ------------- ------------- -------------
Income before income taxes ....................... 43,116 9,808 49,034 42,085
Income tax provision ............................. 16,415 3,609 18,682 16,149
------------- ------------- ------------- -------------
Net income ....................................... $ 26,701 $ 6,199 $ 30,352 $ 25,936
============= ============= ============= =============
Net income per common share - basic .............. $ 1.72 $ 0.40 $ 1.96 $ 1.67
Net income per common share - diluted ............ $ 1.67 $ 0.39 $ 1.90 $ 1.62
Average number of common shares outstanding:
Basic .......................................... 15,493 15,581 15,509 15,549
Diluted ........................................ 15,986 16,016 15,938 15,981
BALANCE SHEET DATA (Unaudited)
April 30, July 31,
2003 2002
------------ ------------
(In thousands, except ratio data)
Cash and cash equivalents .............................. $ 38,050 $ 71,630
Working capital ........................................ $ 27,460 $ 59,873
Total assets ........................................... $ 541,899 $ 502,306
Total long-term debt, including current maturities ..... $ 25,714 $ 34,285
Stockholders' equity ................................... $ 252,282 $ 228,556
Total debt to capitalization ratio(1) .................. 9.2% 13.0%
1) The total long-term debt to capitalization ratio is calculated by
dividing total long-term debt including current maturities by the sum
of total long-term debt including current maturities and stockholders'
equity.
OTHER FINANCIAL DATA (Unaudited)
Three Months Ended Nine Months Ended
April 30, April 30,
------------------------------ ------------------------------
2003 2002 2003 2002
------------- ------------- ------------- -------------
(In thousands) (In thousands)
Sales and other revenues (2)
Refining .................................. $ 307,715 $ 205,692 $ 842,926 $ 620,367
Pipeline Transportation ................... 3,742 4,294 13,742 13,395
Corporate and Other ....................... 723 341 1,530 1,266
------------- ------------- ------------- -------------
Consolidated .............................. $ 312,180 $ 210,327 $ 858,198 $ 635,028
============= ============= ============= =============
Income (loss) from operations (2)
Refining .................................. $ 14,446 $ 8,409 $ 19,933 $ 34,146
Pipeline Transportation ................... 1,470 2,593 7,296 7,579
Corporate and Other ....................... (3,820) (2,360) (9,207) (6,745)
------------- ------------- ------------- -------------
Consolidated .............................. $ 12,096 $ 8,642 $ 18,022 $ 34,980
============= ============= ============= =============
Cash flow from operating activities ......... $ 18,406 $ 17,677 $ 7,862 $ 11,205
Capital expenditures ........................ $ 19,922 $ 8,133 $ 47,556 $ 20,816
EBITDA (3) .................................. $ 52,058 $ 17,097 $ 72,945 $ 63,170
2) The Refining segment includes the Company's principal refinery in
Artesia, New Mexico, which is operated in conjunction with refining
facilities in Lovington, New Mexico (collectively, the Navajo Refinery)
and the Company's refinery near Great Falls, Montana. Included in the
Refining segment are costs relating to pipelines and terminals that
operate in conjunction with the Refining segment as part of the supply
and distribution networks of the refineries. The Pipeline Transportation
segment includes approximately 1,000 miles (approximately 600 miles
after the sale of pipelines to Plains Marketing, L.P.) of the Company's
pipeline assets in Texas and New Mexico. Revenues of the Pipeline
Transportation segment are earned through transactions with unaffiliated
parties for pipeline transportation, rental and terminalling operations.
3) Earnings Before Interest, Taxes, Depreciation and Amortization - EBITDA
is calculated as net income plus (i) interest expense net of interest
income, (ii) income tax provision, and (iii) depreciation, depletion,
and amortization. EBITDA is presented, not as an alternative measure of
operating results or cash flow from operations as determined in
accordance with accounting principles generally accepted in the United
States, but because EBITDA is a widely accepted financial indicator of a
company's ability to incur and service debt. EBITDA presented above is
reconciled to net income as follows:
Three Months Ended Nine Months Ended
April 30, April 30,
------------------------------ ------------------------------
2003 2002 2003 2002
------------- ------------- ------------- -------------
(In thousands) (In thousands)
Net Income ............................. $ 26,701 $ 6,199 $ 30,352 $ 25,936
Add provision for income tax ........ 16,415 3,609 18,682 16,149
Add interest expense ................ 135 622 1,224 2,320
Subtract interest income ............ (172) (217) (649) (1,264)
Add depreciation and amortization ... 8,979 6,884 23,336 20,029
------------- ------------- ------------- -------------
EBITDA ................................. $ 52,058 $ 17,097 $ 72,945 $ 63,170
============= ============= ============= =============
REFINING SEGMENT OPERATING DATA (Unaudited)
Three Months Ended Nine Months Ended
April 30, April 30,
------------------------------ ------------------------------
2003 2002 2003 2002
------------- ------------- ------------- -------------
Crude charge (BPD)(4) .................. 60,500 63,000 63,400 58,000
Sales of refined products (BPD)(5) ..... 80,700 76,600 81,700 74,500
Operating margin per produced barrel:
Average per produced barrel(6)
Average net sales price .............. $ 41.94 $ 30.04 $ 37.25 $ 30.36
Raw material costs ................... 33.08 23.64 30.88 23.23
------------- ------------- ------------- -------------
Refinery margin ...................... $ 8.86 $ 6.40 $ 6.37 $ 7.13
============= ============= ============= =============
Sales of produced refined products
Gasolines ............................ 58.3% 58.2% 57.6% 56.3%
Diesel fuels ......................... 21.9% 21.4% 21.6% 21.2%
Jet fuels ............................ 9.3% 10.2% 9.9% 10.5%
Asphalt .............................. 6.8% 6.1% 7.3% 8.3%
LPG and other ........................ 3.7% 4.1% 3.6% 3.7%
------------- ------------- ------------- -------------
Total .............................. 100.0% 100.0% 100.0% 100.0%
============= ============= ============= =============
4) Barrels per day of crude oil processed.
5) Includes refined products purchased for resale of 14,337 bpd, 6,892
bpd, 12,238 bpd, and 10,032 bpd, respectively.
6) Represents average per barrel amounts for produced refined products
sold.
FOR FURTHER INFORMATION, Contact:
Matthew P. Clifton, President
Stephen J. McDonnell, Vice President and
Chief Financial Officer
Holly Corporation
214/871-3555