HollyFrontier Corporation (NYSE:HFC) Q3 2019 Earnings Conference Call - Final Transcript

Oct 31, 2019 • 09:30 am ET

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HollyFrontier Corporation (NYSE:HFC) Q3 2019 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Welcome to HollyFrontier Corporation's Third Quarter 2019 Conference Call and Webcast. Hosting the call today from HollyFrontier is George Damiris, President and Chief Executive Officer. He is joined by Rich Voliva, Executive Vice President and Chief Financial Officer; Tom Creery, President Refining and Marketing and Jim Stump Senior Vice President, Refining.

[Operator Instructions]

It is now my pleasure to turn the floor over to Craig Biery, Director, Investor Relations. Craig, you may begin.

Executive
Craig Biery

Thank you, Cheryl. Good morning everyone and welcome to HollyFrontier Corporation's third Quarter 2019 earnings call. This morning, we issued a press release announcing results for the quarter ending September 30th, 2019. If you would like a copy of the press release, you may find one on our website at hollyfrontier.com. Before we proceed with remarks, please note the Safe Harbor disclosure statement in today's press release.

In summary, it says statements made regarding management expectations, judgments or predictions are forward-looking statements. These statements are intended to be covered under the safe harbor provisions of federal security laws. There are many factors that could cause results to differ from expectations, including those noted in our SEC filings. The call also may include discussion of non-GAAP measures, please see the press release for reconciliations to GAAP financial measures. Also please note any time sensitive information provided on today's call may no longer be accurate at the time of any webcast replay or rereading of the transcript.

And with that, I'll turn the call over to George Damiris

Executive
George J. Damiris

Thank you, Craig, and good morning, everyone. Today, we reported third quarter net income attributable to HollyFrontier shareholders of $262 million or $1.58 per diluted share. Certain items detailed in our earnings release decreased net income by $16 million on an after-tax basis. Excluding these items, net income for the current quarter was $278 million or $1.68 per diluted share versus adjusted net income of $351 million or $1.98 per diluted share for the same period last year.

Adjusted EBITDA for the period was $523 million, a decrease of $90 million compared to the third quarter of 2018. This decrease was principally driven by lower product margins and weaker laid-in crude advantage across our refining system. The Refining and Marketing segment reported adjusted EBITDA of $425 million compared to $507 million for the third quarter of last year. Consolidated refinery gross margin was $17.23 per produced barrel, an 11% decrease compared to the $19.41 for the same period last year. We set a new quarterly crude charge record averaging over 476,000 barrels per day in the third quarter. Our Lubricants and Specialty Products business reported EBITDA of $38 million compared to $42 million in the prior year despite improvements in the base oil market. Rack Forward EBITDA was $51 million for the quarter, and EBITDA margin was 11% of sales. Weakness in Rack Forward earnings was driven by unfavorable sales mix and the impact of macroeconomic headwinds on end markets.

With respect to our Sonneborn acquisition, as of September 30, we have