Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
See “Risk Management” under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
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Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles
Reconciliations of earnings before interest, taxes, depreciation and amortization (“EBITDA”) to amounts reported under generally accepted accounting principles in financial statements.
Earnings before interest, taxes, depreciation and amortization, which we refer to as EBITDA, is calculated as net income (loss) attributable to HF Sinclair stockholders plus (i) income tax provision, (ii) interest expense, net of interest income and (iii) depreciation and amortization. EBITDA is not a calculation provided for under GAAP; however, the amounts included in the EBITDA calculation are derived from amounts included on our consolidated financial statements. EBITDA should not be considered as an alternative to net income or operating income as an indication of our operating performance or as an alternative to operating cash flow as a measure of liquidity. EBITDA is not necessarily comparable to similarly titled measures of other companies. EBITDA is presented here because it is a widely used financial indicator used by investors and analysts to measure performance. EBITDA is also used by our management for internal analysis and as a basis for financial covenants.
Set forth below is our calculation of EBITDA.
Years Ended December 31,
2022 2021 2020
(In thousands)
Net income (loss) attributable to HF Sinclair stockholders $ 2,922,668 $ 558,324 $ (601,448)
Add (subtract) income tax provision 894,872 123,898 (232,147)
Add interest expense 175,628 125,175 126,527
Subtract interest income (30,179) (4,019) (7,633)
Add depreciation and amortization 656,787 503,539 520,912
EBITDA $ 4,619,776 $ 1,306,917 $ (193,789)
Reconciliations of refinery operating information (non-GAAP performance measures) to amounts reported under generally accepted accounting principles in financial statements.
Refinery gross margin and net operating margin are non-GAAP performance measures that are used by our management and others to compare our refining performance to that of other companies in our industry. We believe these margin measures are helpful to investors in evaluating our refining performance on a relative and absolute basis. Refinery gross margin per produced barrel sold is total Refining segment revenues less total Refining segment cost of products sold, exclusive of lower of cost or market inventory valuation adjustments, divided by sales volumes of produced refined products sold. Net operating margin per barrel sold is the difference between refinery gross margin and refinery operating expenses per produced barrel sold. These two margins do not include the non-cash effects of long-lived asset impairment charges, lower of cost or market inventory valuation adjustments or depreciation and amortization. Each of these component performance measures can be reconciled directly to our consolidated statements of operations. Other companies in our industry may not calculate these performance measures in the same manner.
Below are reconciliations to our consolidated statements of operations for refinery net operating and gross margin and operating expenses, in each case averaged per produced barrel sold. Due to rounding of reported numbers, some amounts may not calculate exactly.
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Reconciliation of average refining net operating margin per produced barrel sold to refinery gross margin to refining sales and other revenues
Years Ended December 31,
2022 2021 2020
(Dollars in thousands, except per barrel amounts)
Refining segment sales and other revenues $ 34,412,909 $ 16,358,558 $ 9,539,189
Refining segment cost of products sold (exclusive of lower of cost or market inventory adjustment) 28,270,195 14,673,062 8,439,680
Lower of cost or market inventory adjustment — (318,353) 82,214
6,142,714 2,003,849 1,017,295
Add (subtract) lower of cost or market inventory adjustment — (318,353) 82,214
Less Cheyenne Refinery sales and other revenues — — (501,589)
Less Cheyenne Refinery cost of products sold — — 447,628
Refining gross margin $ 6,142,714 $ 1,685,496 $ 1,045,548
Refining segment operating expenses $ 1,815,931 $ 1,090,424 $ 988,045
Less Cheyenne Refinery operating expenses — — (121,151)
$ 1,815,931 $ 1,090,424 $ 866,894
Produced barrels sold (BPD) 628,340 424,100 391,670
Refinery gross margin per produced barrel sold $ 26.78 $ 10.89 $ 7.29
Less average refinery operating expenses per produced barrel sold 7.92 7.04 6.05
Net operating margin per produced barrel sold $ 18.86 $ 3.85 $ 1.24
Reconciliation of renewables operating information (non-GAAP performance measures) to amounts reported under generally accepted accounting principles in financial statements.
Renewables gross margin and net operating margin are non-GAAP performance measures that are used by our management and others to compare our renewables performance to that of other companies in our industry. We believe these margin measures are helpful to investors in evaluating our renewables performance on a relative and absolute basis. Renewables gross margin per produced gallon sold is total Renewables segment revenues less total Renewables segment cost of products sold, exclusive of lower of cost or market inventory valuation adjustments, divided by sales volumes of produced renewables products sold. Net operating margin per produced gallon sold is the difference between renewables gross margin and renewables operating expenses per produced gallon sold. These two margins do not include the non-cash effects of lower of cost or market inventory valuation adjustments and depreciation and amortization. Each of these component performance measures can be reconciled directly to our consolidated statements of operations. Other companies in our industry may not calculate these performance measures in the same manner.
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Reconciliation of renewables gross margin and operating expenses to gross margin per produced gallon sold and net operating margin per produced gallon sold
Year Ended
December 31, 2022
Renewables segment sales and other revenues $ 1,015,499
Renewables segment cost of products sold 974,167
Lower of cost or market inventory adjustment 52,412
(11,080)
Add lower of cost or market inventory adjustment 52,412
Renewables gross margin $ 41,332
Renewables operating expenses $ 111,974
Produced gallons sold (in thousand gallons) 136,204
Renewables gross margin per produced gallon sold $ 0.30
Less operating expenses per produced gallon sold 0.82
Net operating margin per produced gallon sold $ (0.52)
Reconciliation of Marketing operating information (non-GAAP performance measures) to amounts reported under generally accepted accounting principles in financial statements.
Marketing gross margin is a non-GAAP performance measure that is used by our management and others to compare our Marketing performance to that of other companies in our industry. We believe this margin measure is helpful to investors in evaluating our Marketing performance on a relative and absolute basis. Marketing gross margin per gallon sold is total Marketing segment revenues less total Marketing segment cost of products sold divided by sales volumes of Marketing products sold. This margin does not include the non-cash effects of depreciation and amortization. This component performance measure can be reconciled directly to our consolidated statements of operations. Other companies in our industry may not calculate these performance measures in the same manner.
Reconciliation of Marketing gross margin to gross margin per gallon sold
Year Ended
December 31, 2022
Marketing segment sales and other revenues $ 3,911,922
Marketing segment cost of products sold 3,845,625
Marketing gross margin $ 66,297
Sales volumes (in thousand gallons) 1,118,444
Marketing segment gross margin per gallon sold $ 0.06
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