<PAGE> 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, 1997
----------------------------
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 5, 1997.
<PAGE> 2
HOLLY CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet -
October 31, 1997 (Unaudited) and July 31, 1997 3
Consolidated Statement of Income (Unaudited) -
Three Months Ended October 31, 1997 and 1996 4
Consolidated Statement of Cash Flows (Unaudited) -
Three Months Ended October 31, 1997 and 1996 5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HOLLY CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Unaudited
October 31, July 31,
1997 1997
---------- ---------
<S> <C> <C>
ASSETS
------
Current assets
Cash and cash equivalents $ 20,976 $ 20,042
Accounts receivable: Product 39,067 45,608
Crude oil resales 82,790 60,213
-------- --------
121,857 105,821
Inventories: Crude oil and refined products 40,980 49,429
Materials and supplies 8,460 8,844
-------- --------
49,440 58,273
Income taxes receivable 1,116 1,319
Prepayments and other 12,495 9,273
-------- --------
Total current assets 205,884 194,728
Properties, plants and equipment, at cost 291,009 278,707
Less accumulated depreciation, depletion and amortization 139,539 135,167
-------- --------
151,470 143,540
Investment in joint venture 5,813 5,235
Other assets 16,145 6,300
-------- --------
$379,312 $349,803
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities
Accounts payable $145,524 $124,585
Accrued liabilities 15,663 13,730
Income taxes payable 1,680 397
Current maturities of long-term debt 10,775 10,775
-------- --------
Total current liabilities 173,642 149,487
Deferred income taxes 21,064 19,679
Long-term debt, less current maturities 75,516 75,516
Commitments and 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 103,440 99,471
-------- --------
109,659 105,690
Common stock held in treasury, at cost - 396,768 shares (569) (569)
--------- --------
Total stockholders' equity 109,090 105,121
-------- --------
$379,312 $349,803
======== ========
</TABLE>
See accompanying notes.
3
<PAGE> 4
HOLLY CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Dollars in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Unaudited
Three Months Ended
October 31,
---------------------------
1997 1996
---------- ----------
<S> <C> <C>
Revenues
Refined products $ 166,106 $ 185,395
Oil and gas 2,629 1,426
Miscellaneous 187 125
--------- ---------
168,922 186,946
Costs and expenses
Cost of refined products 149,733 170,916
General and administrative 3,151 3,636
Depreciation, depletion and amortization 5,174 5,100
Exploration expenses, including dry holes 790 623
--------- ---------
158,848 180,275
-------- --------
Income from operations 10,074 6,671
Other
Equity in earnings of joint venture 351 -
Interest income 398 1,059
Interest expense (2,144) (2,372)
--------- ---------
(1,395) (1,313)
--------- ---------
Income before income taxes 8,679 5,358
Income tax provision
Current 1,708 1,317
Deferred 1,764 833
--------- ---------
3,472 2,150
--------- ---------
Net income $ 5,207 $ 3,208
========== ==========
Income per common share $ .63 $ .39
Cash dividends paid per share $ .15 $ .12
Average number of shares of common
stock outstanding (in thousands) 8,254 8,254
</TABLE>
See accompanying notes.
4
<PAGE> 5
HOLLY CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Unaudited
Three Months Ended
October 31,
----------------------------
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities
Net income $ 5,207 $ 3,208
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation, depletion and amortization 5,174 5,100
Deferred income taxes 1,764 833
Equity in earnings of joint venture (351) -
Dry hole costs and leasehold impairment 177 118
(Increase) decrease in operating assets
Accounts receivable (16,036) (22,819)
Inventories 8,833 (3,589)
Income taxes receivable 203 -
Prepayments and other (518) (780)
Increase (decrease) in operating liabilities
Accounts payable 20,939 38,997
Accrued liabilities 1,933 3,570
Income taxes payable 1,283 (3,350)
Turnaround expenditures (13,150) (1,496)
Other, net 44 36
------- -------
Net cash provided by operating activities 15,502 19,828
Cash flows from financing activities
Debt issuance costs (500) -
Cash dividends (1,238) (990)
------- -------
Net cash used for financing activities (1,738) (990)
Cash flows from investing activities
Additions to properties, plants and equipment (12,830) (8,472)
Investment in joint venture - (1,324)
------- ---------
Net cash used for investing activities (12,830) (9,796)
------- -------
Cash and cash equivalents
Increase for the period 934 9,042
Beginning of year 20,042 63,959
------- -------
End of period $20,976 $73,001
======= =======
Supplemental disclosure of cash flow information
Cash paid during period for
Interest $ 337 $ 13
Income taxes $ 175 $ 4,282
</TABLE>
See accompanying notes.
5
<PAGE> 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, 1997), reflect all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the Company's consolidated financial position as of October 31, 1997, the
consolidated results of operations for the three months ended October 31, 1997
and 1996, and consolidated cash flows for the three months ended October 31,
1997 and 1996.
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, 1997. Certain
reclassifications have been made to the prior years' financial statements to
conform to current classifications.
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 1998 are not necessarily indicative of the results to be
expected for the full year.
Note B - Accounting Pronouncement
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
Per Share." SFAS No. 128, which establishes standards for computing and
presenting earnings per share, is effective for interim and annual periods
ending after December 15, 1997 and requires restatement of earnings per share
data presented in prior periods. Early adoption is not permitted. The Company
will adopt SFAS No. 128 in the quarterly period ending January 31, 1998. The
adoption of SFAS No. 128 is not expected to have an impact on reported earnings
per share.
Note C - Debt
In October 1997, the Company and its subsidiaries entered into a new
three-year credit agreement (Credit Agreement) with a group of banks. The
Credit Agreement provides a $100 million facility for letters of credit, or for
direct borrowings of up to $50 million. Interest on borrowings is based upon,
at the Company's option, (i) the higher of the agent bank's prime rate and the
Federal funds rate plus .50%, per annum; or (ii) various Euro-dollar related
rates. A fee ranging from 1% to 1.5% per annum is payable on the outstanding
balance of all letters of credit and a commitment fee ranging from .20% to .35%
per annum is payable on the unused portion of the facility. Such fees are
determined based on a quarterly calculation of the ratio of cash flow to debt
of the Company. The borrowing base, which secures the facility, consists of
accounts receivable and inventory. The Credit Agreement imposes certain
requirements, including: (i) a prohibition of other indebtedness in excess of
$5 million with exceptions for, among other things,
6
<PAGE> 7
HOLLY CORPORATION
indebtedness under the Company's Senior Notes; (ii) maintenance of certain
levels of net worth, working capital and a cash-flow-to-debt ratio; (iii)
limitations on investments, capital expenditures and dividends; and (iv) a
prohibition of changes in controlling ownership and material changes in senior
management.
Note D - Contingencies
In July 1993, the United States Department of Justice (DOJ), on behalf of
the United States Environmental Protection Agency (EPA), filed a suit against
the Company's subsidiary, Navajo Refining Company (Navajo) alleging that,
beginning in September 1990 and continuing through the present, Navajo has
violated and continues to violate the Resource Conservation and Recovery Act
(RCRA) and implementing regulations of the EPA by treating, storing and
disposing of certain hazardous wastes in the refinery's wastewater treatment
system without compliance with regulatory requirements. In June 1995, Navajo
and the DOJ agreed in principle on a settlement that would have resolved this
pending litigation. Under this agreement, the Company would close the existing
evaporation ponds of its wastewater treatment system pursuant to a closure plan
to be approved by the EPA and the State of New Mexico in accordance with RCRA
regulations. The estimated costs of such a closure plan would be substantially
less than $1 million. The agreement also contemplates that the Company would
utilize an alternative to the existing wastewater treatment system at what was
an estimated total cost of approximately $3.5 million (now estimated to be
possibly as low as $2.5 million). The costs to implement an alternative
wastewater treatment system would be capitalized and amortized over the future
useful life of the resulting asset in accordance with generally accepted
accounting principles. Finally, the agreement would also involve the payment
of a civil penalty of less than $2 million. In May 1997, EPA approved the
Company's closure plan and recommended that the State of New Mexico likewise
approve the plan. Although the DOJ previously represented that New Mexico
would follow EPA's lead and approve the closure plan, New Mexico authorities
have declined to approve the plan as presently formulated. In light of these
developments, the prospects for settlement are uncertain. If settlement is not
achieved, the matter is scheduled for trial in 1998. In the event of
litigation, the DOJ is expected to assert civil penalties in excess of the
previously agreed amount. Also, the costs of any such alternative closure plan
may exceed those of the plan agreed to with the DOJ. In fiscal 1993, the
Company recorded a $2 million reserve for this litigation.
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" and
"Liquidity and Capital Resources," other than statements of historical facts,
are forward-
7
<PAGE> 8
HOLLY CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
looking statements. Such statements are subject to risks and uncertainties,
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
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, the effectiveness of Company
capital investments and marketing strategies, and the completion of announced
capital projects. 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 will prove to be 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, 1997 and in conjunction with the discussion below under the heading
"Liquidity and Capital Resources." 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, 1997 was $5.2 million
as compared to $3.2 million, for the first quarter of the prior year.
The increase in net income in the first three months of fiscal 1998 was
principally due to increased refinery margins, as compared to the same period
of the prior year. Refinery margins, particularly for Montana Refining
Company, were especially strong in the early portion of the current year's
first quarter, but have declined from those levels. Comparing the first
quarter of fiscal 1998 with the corresponding quarter of fiscal 1997, crude
prices decreased at a greater rate than product prices, resulting in the
earnings increase. Somewhat offsetting the earnings increase resulting from
the favorable margins was a decrease in refined product sales volumes of 8%, as
production was reduced as a result of a planned major maintenance (turnaround)
that was conducted in stages at the Navajo Refinery and continued into the
early part of the second quarter of fiscal 1998. Revenues decreased in the
quarter ended October 31, 1997 from the prior year's comparable period as a
result of the reduced volumes, and partially the result of the reduced sales
prices.
8
<PAGE> 9
HOLLY CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Liquidity and Capital Resources
Cash and cash equivalents increased during the three months ended
October 31, 1997 by $.9 million, as cash flows from operations were slightly
greater than capital expenditures, debt issuance costs and dividends paid.
Working capital decreased during the first quarter of fiscal 1998 by $13.0
million to $32.2 million. The Company's long-term debt now represents 44.2% of
total capitalization as compared to 45.1% at July 31, 1997. In October 1997,
the Company entered into a new Credit Agreement which can be used for direct
borrowings of up to $50 million. The Company believes that these sources of
funds, together with future cash flows from operations, should provide
sufficient resources, financial strength and flexibility to enable the Company
for the foreseeable future to satisfy its liquidity needs, capital
requirements, and debt service obligations while continuing the payment of
dividends.
Net cash provided by operating activities amounted to $15.5 million in
the first three months of fiscal 1998, as compared to $19.8 million in the same
period of the prior year. The decrease in net cash provided by operating
activities was principally due to expenditures of $13.2 million during the
quarter ended October 31, 1997 for the Navajo Refinery turnaround. Such
expenditures were partially offset by factors which increased cash generated by
operating activities, including the increase in earnings, and changes in
working capital accounts including the partial liquidation of the inventory
built up in late fiscal 1997 that was part of the preparation for the
turnaround.
Cash flows used for financing activities amounted to $1.7 million in the
first three months of fiscal 1998, as compared to $1.0 million in the same
period of the prior year. With the Company's then-existing credit agreement
scheduled to mature in November 1997, the Company in October 1997 entered into
the new three-year Credit Agreement with a different group of banks, some of
which had also been included in the previous credit agreement. The new Credit
Agreement provides for a total facility of $100 million, the full amount of
which may be used to support letters of credit and $50 million of which may be
used for direct borrowings. The other terms of the new Credit Agreement are
substantially similar to those of the previous credit agreement. See Note C to
the Consolidated Financial Statements for a summary of the terms and conditions
of the new Credit Agreement. The next principal payment of $10.8 million on
the Company's Senior Notes is due in June 1998.
9
<PAGE> 10
HOLLY CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Cash flows used for investing activities were $12.8 million in the first
three months of fiscal 1998, as compared to $9.8 million in the same period of
the prior year. The Company has adopted capital budgets totalling $23 million
for fiscal 1998. The components of this budget are $8 million for various
refinery improvements and environmental and safety enhancements, $12 million
for various pipeline and transportation projects and $3 million for oil and gas
exploration and production activities. In addition to these projects, the
Company plans to complete in the 1998 fiscal year certain major items,
totalling $21 million, that were approved in previous capital budgets. These
include projects involving upgrades at the Navajo Refinery to improve product
yields, certain environmental enhancements, and the construction of a
connecting pipeline and related product terminals that will be used in
conjunction with the leased pipeline to northwest New Mexico described below.
In addition to the above projects, the Company purchased in November
1997 a hydrotreater unit for $5 million from a closed refinery. This will
allow the Company, if market conditions necessitate, the ability of
reconstructing the unit at the Navajo Refinery at a substantial savings versus
the cost of a new unit. The hydrotreater would enhance product yields and
facilitate the Company's ability to meet the present California Air Resources
Board (CARB) standards, should such standards be adopted in markets that the
Company serves.
The Company believes the scheduled capital projects to upgrade the
Navajo Refinery will improve product yields and enhance refining profitability.
In November 1997, the fluid catalytic cracking unit (FCC) upgrade for the
Navajo Refinery became operational and this project is expected to improve the
high value product yields of the refinery.
The Company has entered into a agreement with Mid-America Pipeline
Company to lease more than 300 miles of 8" pipeline running from Chaves County
to San Juan County, New Mexico (the Leased Pipeline). The Company has
constructed a 12" pipeline, from the Navajo Refinery to the Leased Pipeline,
and is in the process of constructing related terminalling and pumping
facilities. These facilities will allow the Company to use the Leased Pipeline
to transport refined products from the Navajo Refinery to Albuquerque and to
markets in northwest New Mexico. The Leased Pipeline and related facilities
are projected to be operational near the end of fiscal 1998.
Completion of the current pipeline and terminals to be used in
connection with the Leased Pipeline to Albuquerque and to northwest New Mexico
together with recently expanded pipeline capacity to El Paso should reduce the
Company's pipeline operating expenses at current throughputs and would give the
Company increased flexibility to expand shipments of refined products from the
Navajo Refinery to existing and new markets.
10
<PAGE> 11
HOLLY CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
The Company announced in February 1997 the formation of an alliance with
FINA, Inc. (FINA) to create a comprehensive supply network that can increase
substantially the supplies of gasoline and diesel fuel in the West Texas, New
Mexico, and Arizona markets to meet expected increasing demand in the coming
years. FINA is in the process of constructing a 50-mile pipeline which will
connect an existing FINA pipeline system to the Company's 12" pipeline
extending between Orla, Texas and El Paso, Texas. Once completed, FINA will be
able to transport to El Paso gasoline and diesel fuel from its Big Spring,
Texas refinery or, if conditions dictate, from its Port Arthur, Texas refinery
on the Gulf Coast via FINA's connecting Amdel Pipeline. In New Mexico, the
activation of the Company's 12" pipeline from the Navajo Refinery to the Leased
Pipeline will provide direct transportation service to Albuquerque and
northwest New Mexico positioning the Company and FINA, via exchange, to meet
increasing demand in these areas. Pursuant to a long- term agreement, FINA
will be permitted to transport up to 20,000 BPD to El Paso on this
interconnected system. However, if conditions dictate and if mutually agreed
by the Company and FINA, volumes from Big Spring or the Gulf Coast could be
substantially increased to utilize more fully this 10"-12" pipeline network in
meeting future demand increases in New Mexico, West Texas and Arizona. It is
anticipated that this pipeline network should be fully operational by August
1998, at which time the Company will begin to realize pipeline and terminalling
revenues from FINA under the terms of the agreement.
Ultramar Diamond Shamrock Corporation (UDS), an independent refiner and
marketer, completed in November 1995 the construction of a 408-mile, 10"
refined products pipeline from its McKee refinery near Dumas, Texas to El Paso.
UDS has announced that the pipeline currently has a capacity of 45,000 BPD, and
that, with the addition of four pump stations to be completed in 1998, it will
have a capacity of 60,000 BPD. UDS has stated its intention to use this
pipeline to supply fuels to the El Paso, New Mexico, Arizona and northern
Mexico markets. In November 1997, UDS agreed to sell to Phillips Petroleum
Company (Phillips) a 25% initial interest, increasing to 33-1/3% after the
pipeline capacity is increased to 60,000 BPD, in the pipeline and a UDS
terminal in El Paso. Phillips plans to complete a 35-mile pipeline from its
Borger, Texas refinery to the existing line at the UDS McKee refinery.
Phillips stated that this arrangement will replace its previously announced
plans to build a pipeline from its Borger, Texas refinery to El Paso and will
allow Phillips to supply fuels to El Paso and other markets in the Southwest.
These pipeline systems have increased, and could further increase, the
supply of products in the Company's principal markets.
In addition, there continue to be reports, in the media and otherwise,
concerning other potential pipeline projects that could substantially affect
the volume of products in the Company's markets. The effects of such projects
on the Company's future results of operations cannot presently be determined.
11
<PAGE> 12
HOLLY CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
In July 1993, the United States Department of Justice (DOJ) on behalf of
the United States Environmental Protection Agency (EPA), filed a suit against
the Company's subsidiary, Navajo alleging that, beginning in September 1990 and
continuing through the present, Navajo has violated and continues to violate
the Resource Conservation and Recovery Act (RCRA) and implementing regulations
of the EPA by treating, storing and disposing of certain hazardous wastes in
the refinery's wastewater treatment system without compliance with regulatory
requirements. In June 1995, Navajo and the DOJ agreed in principle on a
settlement that would have resolved this pending litigation. Under this
agreement, the Company would close the existing evaporation ponds used in its
wastewater treatment system pursuant to a closure plan to be approved by the
EPA and the State of New Mexico in accordance with RCRA regulations. The costs
of such a closure plan were estimated to be substantially less than $l million.
The agreement also contemplates that the Company would utilize an alternative
to the existing wastewater treatment system at what was an estimated total cost
of approximately $3.5 million (now estimated to be possibly as low as $2.5
million). The costs to implement the alternative treatment system would be
capitalized and amortized over the future useful life of the resulting asset in
accordance with generally accepted accounting principles. Finally, the
agreement would also involve the payment of a civil penalty of less than $2
million. In May 1997, EPA approved the Company's closure plan and recommended
that the State of New Mexico likewise approve the plan. Although the DOJ
previously represented that New Mexico would follow EPA's lead and approve the
closure plan, New Mexico authorities have declined to approve the plan as
presently formulated. In light of these developments, the prospects for
settlement are uncertain. If settlement is not achieved, the matter is
scheduled for trial in 1998. In the event of litigation, the DOJ is expected
to assert civil penalties in excess of the previously agreed amount. Also, the
costs of any such alternative closure plan may exceed those of the plan agreed
to with the DOJ. In fiscal 1993, the Company recorded a $2 million reserve for
this litigation.
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, 1997.
12
<PAGE> 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In July 1993, the DOJ, acting on behalf of the EPA, filed a complaint in
the United States District Court for the District of New Mexico alleging that
Navajo, beginning in September 1990 and continuing until the present, had
violated and continues to violate RCRA and implementing regulations of the EPA
by treating, storing and disposing of certain hazardous wastes without
necessary authorization and without compliance with regulatory requirements.
The complaint seeks a court order directing Navajo to comply with these
regulatory standards and civil penalties for the alleged non- compliance.
Substantial negotiations regarding a possible settlement of this matter have
taken place but present prospects for settlement are uncertain. If settlement
is not achieved, the matter is scheduled for trial in 1998. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Note D to the Consolidated Financial Statements.
Item 4. Submission of Matters to a Vote of Securities Holders
At the annual meeting of stockholders on December 11, 1997, all eight of
the management's nominees for directors as listed in the proxy statement were
elected.
SCHEDULE OF VOTES CAST FOR EACH DIRECTOR
<TABLE>
<CAPTION>
Total Shares Voted Total Shares Voted
"For" "Withheld"
------------------ ------------------
<S> <C> <C>
Matthew P. Clifton 6,967,731 10,283
William J. Gray 6,964,716 13,298
Marcus R. Hickerson 6,963,358 14,656
A.J. Losee 6,962,344 15,670
Thomas K. Matthews, II 6,962,356 15,658
Robert G. McKenzie 6,968,904 9,110
Lamar Norsworthy 6,967,909 10,105
Jack P. Reid 6,964,831 13,183
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: See Index to Exhibits on page 15.
(b) Reports on Form 8-K: None.
13
<PAGE> 14
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 12, 1997 By /S/Henry A. Teichholz
----------------- -------------------------------------
Henry A. Teichholz
Vice President, Treasurer
and Controller
(Duly Authorized Principal
Financial and Accounting
Officer)
14
<PAGE> 15
HOLLY CORPORATION
INDEX TO EXHIBITS
(Exhibits are numbered to correspond to the
exhibit table in Item 601 of Regulation S-K)
<TABLE>
<CAPTION>
Exhibit
Number Description
-------- -----------
<S> <C>
27 - Financial Data Schedule
</TABLE>
15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> OCT-31-1997
<CASH> 20,976
<SECURITIES> 0
<RECEIVABLES> 121,857
<ALLOWANCES> 0
<INVENTORY> 49,440
<CURRENT-ASSETS> 205,884
<PP&E> 291,009
<DEPRECIATION> 139,539
<TOTAL-ASSETS> 379,312
<CURRENT-LIABILITIES> 173,642
<BONDS> 75,516
0
0
<COMMON> 87
<OTHER-SE> 109,003
<TOTAL-LIABILITY-AND-EQUITY> 379,312
<SALES> 168,735
<TOTAL-REVENUES> 168,922
<CGS> 149,733
<TOTAL-COSTS> 155,697
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,144
<INCOME-PRETAX> 8,679
<INCOME-TAX> 3,472
<INCOME-CONTINUING> 5,207
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,207
<EPS-PRIMARY> .63
<EPS-DILUTED> .63
</TABLE>
