UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2012~~March 31, 2013



¨	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

_________________________________________________________________

HOLLYFRONTIER CORPORATION

(Exact name of registrant as specified in its charter)



Delaware		75-1056913
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2828 N. Harwood, Suite 1300 Dallas, Texas		75201
(Address of principal executive offices)		(Zip Code)

(214) 871-3555

Registrant’s telephone number, including area code

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 ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	ý	Accelerated filer	¨	Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

~~203,145,233~~203,105,789 shares of Common Stock, par value $.01 per share, were outstanding on ~~October 31, 2012~~April 30, 2013.

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HOLLYFRONTIER CORPORATION

INDEX



	Page

Forward-Looking Statements	3

PART I. FINANCIAL INFORMATION

Definitions	4

Item 1. Financial Statements

Consolidated Balance Sheets
~~September~~March 31 ~~30, 2012~~, 2013 (Unaudited) and December 31, ~~2011~~2012	6

Consolidated Statements of Income (Unaudited)
Three ~~and Nine~~ Months Ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012	7

Consolidated Statements of Comprehensive Income (Unaudited)
Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~	8

Consolidated Statements of Cash Flows (Unaudited)
~~Nine~~Three Months Ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~	9

Notes to Consolidated Financial Statements (Unaudited)	10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	3634

Item 3. Quantitative and Qualitative Disclosures About Market Risk	5247

Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles	5247

Item 4. Controls and Procedures	5550

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	5651

Item 1A. Risk Factors	5751

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	5752

Item 6. Exhibits	5752

Signatures	5853

Index to Exhibits	5954

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FORWARD-LOOKING STATEMENTS

References herein to HollyFrontier Corporation (“HollyFrontier”) include HollyFrontier and its consolidated subsidiaries. In accordance with the Securities and Exchange Commission’s (“SEC”) “Plain English” guidelines, this Quarterly Report on Form 10-Q has been written in the first person. In this document, the words “we,” “our,” “ours” and “us” refer only to HollyFrontier and its consolidated subsidiaries or to HollyFrontier or an individual subsidiary and not to any other person with certain exceptions. Generally, the words “we,” “our,” “ours” and “us” include Holly Energy Partners, L.P. (“HEP”) and its subsidiaries as consolidated subsidiaries of HollyFrontier, unless when used in disclosures of transactions or obligations between HEP and HollyFrontier or its other subsidiaries. This document contains certain disclosures of agreements that are specific to HEP and its consolidated subsidiaries and do not necessarily represent obligations of HollyFrontier. When used in descriptions of agreements and transactions, “HEP” refers to HEP and its consolidated subsidiaries.

This Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of the federal securities laws. All statements, other than statements of historical fact included in this Form 10-Q, including, but not limited to, those under “Results of Operations,” “Liquidity and Capital Resources” and “Risk Management” in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and those in Part II, Item 1 “Legal Proceedings” are forward-looking statements. These statements are based on management’s beliefs 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 we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that our expectations will prove to be correct. Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in these statements. Any 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 our 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, curtailments or shutdowns in refinery operations or pipelines;

effects of governmental and environmental regulations and policies;

the availability and cost of our financing;

the effectiveness of our capital investments and marketing strategies;

our efficiency in carrying out construction projects;

our ability to acquire refined product operations or pipeline and terminal operations on acceptable terms and to integrate any existing or future acquired operations;

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 our SEC filings.

Cautionary statements identifying important factors that could cause actual results to differ materially from our expectations are set forth in this Form 10-Q, including without limitation, the forward-looking statements that are referred to above. This summary discussion should be read in conjunction with the discussion of the known material risk factors and other cautionary statements under the heading “Risk Factors” included in Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2011~~2012 and in conjunction with the discussion in this Form 10-Q in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Liquidity and Capital Resources.” All forward-looking statements included in this Form 10-Q and all subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. The forward-looking statements speak only as of the date made and, other than as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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PART I. FINANCIAL INFORMATION

DEFINITIONS

Within this report, the following terms have these specific meanings:

“Alkylation” means the reaction of propylene or butylene (olefins) with isobutane to form an iso-paraffinic gasoline (inverse of cracking).

“Aromatic oil” is long chain oil that is highly aromatic in nature that is used to manufacture tires and in the production of asphalt.

“BPD” means the number of barrels per calendar day of crude oil or petroleum products.

“BPSD” means the number of barrels per stream day (barrels of capacity in a 24 hour period) of crude oil or petroleum products.

“Biodiesel” means a clean alternative fuel produced from renewable biological resources.

“Black wax crude oil” is a low sulfur, low gravity crude oil produced in the Uintah Basin in Eastern Utah that has certain characteristics that require specific facilities to transport, store and refine into transportation fuels.

“Catalytic reforming” means a refinery process which uses a precious metal (such as platinum) based catalyst to convert low octane naphtha to high octane gasoline blendstock and hydrogen. The hydrogen produced from the reforming process is used to desulfurize other refinery oils and is a primary source of hydrogen for the refinery.

“Cracking” means the process of breaking down larger, heavier and more complex hydrocarbon molecules into simpler and lighter molecules.

“Crude distillation” means the process of distilling vapor from liquid crudes, usually by heating, and condensing the vapor slightly above atmospheric pressure turning it back to liquid in order to purify, fractionate or form the desired products.

“~~Delayed coker unit” is a refinery unit that removes carbon from the bottom cuts of crude oil to produce unfinished light transportation fuels and petroleum coke.~~

“Ethanol” means a high octane gasoline blend stock that is used to make various grades of gasoline.

“FCC,” or fluid catalytic cracking, means a refinery process that breaks down large complex hydrocarbon molecules into smaller more useful ones using a circulating bed of catalyst at relatively high temperatures.

“~~Hydrocracker” means a refinery unit that breaks down large complex hydrocarbon molecules into smaller more useful ones using a fixed bed of catalyst at high pressure and temperature with hydrogen.~~

“Hydrodesulfurization” means to remove sulfur and nitrogen compounds from oil or gas in the presence of hydrogen and a catalyst at relatively high temperatures.

“Hydrogen plant” means a refinery unit that converts natural gas and steam to high purity hydrogen, which is then used in the hydrodesulfurization, hydrocracking and isomerization processes.

“HF alkylation,” or hydrofluoric alkylation, means a refinery process which combines isobutane and C3/C4 olefins using HF acid as a catalyst to make high octane gasoline blend stock.

“Isomerization” means a refinery process for rearranging the structure of C5/C6 molecules without changing their size or chemical composition and is used to improve the octane of C5/C6 gasoline blendstocks.

“LPG” means liquid petroleum gases.

~~Table of Content~~

“Lubricant” or “lube” means a solvent neutral paraffinic product used in passenger and commercial vehicle engine oils, specialty products for metal working or heat transfer and other industrial applications.

“MSAT2” means Control of Hazardous Air Pollutants from Mobile Sources, a rule issued by the U.S. Environmental Protection Agency to reduce hazardous emissions from motor vehicles and motor vehicle fuels.

“MEK” means a lube process that separates waxy oil from non-waxy oils using methyl ethyl ketone as a solvent.

Table of Content

“MMBTU” means one million British thermal units.

“Natural gasoline” means a low octane gasoline blend stock that is purchased and used to blend with other high octane stocks produced to make various grades of gasoline.

“~~PPM” means parts-per-million.~~

“Paraffinic oil” is a high paraffinic, high gravity oil produced by extracting aromatic oils and waxes from gas oil and is used in producing high-grade lubricating oils.

“Refinery gross margin” means the difference between average net sales price and average product costs per produced barrel of refined products sold. This does not include the associated depreciation and amortization costs.

“Reforming” means the process of converting gasoline type molecules into aromatic, higher octane gasoline blend stocks while producing hydrogen in the process.

“Roofing flux” is produced from the bottom cut of crude oil and is the base oil used to make roofing shingles for the housing industry.

“~~RFS2~~” or advanced renewable fuel standard is a regulatory mandate required by the Energy Independence and Security Act of 2007 that requires 36 billion gallons of renewable fuel to be blended into transportation fuels by 2022. New mandated blending requirements for this standard became effective July 1, 2010.

“ROSE,” or “Solvent deasphalter / residuum oil supercritical extraction,” means a refinery unit that uses a light hydrocarbon like propane or butane to extract non-asphaltene heavy oils from asphalt or atmospheric reduced crude. These deasphalted oils are then further converted to gasoline and diesel in the FCC process. The remaining asphaltenes are either sold, blended to fuel oil or blended with other asphalt as a hardener.

“Scanfiner” is a refinery unit that removes sulfur from gasoline to produce low sulfur gasoline blendstock.

“Sour crude oil” means crude oil containing quantities of sulfur greater than 0.4 percent by weight, while “sweet crude oil” means crude oil containing quantities of sulfur equal to or less than 0.4 percent by weight.

“Vacuum distillation” means the process of distilling vapor from liquid crudes, usually by heating, and condensing the vapor below atmospheric pressure turning it back to a liquid in order to purify, fractionate or form the desired products.

“WCS” means Western Canada Select crude oil and is made up of Canadian heavy conventional and bitumen crude oils blended with sweet synthetic and condensate diluents.

“WTI” means West Texas Intermediate and is a grade of crude oil used as a common benchmark in oil pricing. WTI is a sweet crude oil and has a relatively low density.

“WTS” means West Texas Sour, a medium sour crude oil.

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Item 1.	Financial Statements

HOLLYFRONTIER CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)


	September 30, 2012			December 31, 2011			March 31, 2013			December 31, 2012
	(Unaudited)			As Adjusted (see Note 2)			(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents (HEP: $1,993 and $6,369, respectively)	$	2,057,408		$	1,578,904
Cash and cash equivalents (HEP: $18,193 and $5,237, respectively)							$	1,872,442		$	1,757,699
Marketable securities	280,409			211,639			665,694			630,586
Accounts receivable: Product and transportation (HEP: $42,832 and $37,290, respectively)	734,662			703,691
Accounts receivable: Product and transportation (HEP: $37,129 and $38,097, respectively)							599,669			587,728
Crude oil resales	2,212			5,166			56,855			46,502
	736,874			708,857			656,524			634,230
Inventories: Crude oil and refined products	1,406,147			1,052,084			1,398,769			1,238,678
Materials and supplies (HEP: $1,233 and $1,483, respectively)	79,303			62,535
Materials, supplies and other (HEP: $1,491 and $1,259, respectively)							72,031			80,954
	1,485,450			1,114,619			1,470,800			1,319,632
Income taxes receivable	40,548			87,277			37,904			74,957
Prepayments and other (HEP: $3,080 and $2,246, respectively)	31,232			219,450
Prepayments and other (HEP: $1,984 and $2,360, respectively)							59,946			53,161
Total current assets	4,631,921			3,920,746			4,763,310			4,470,265

Properties, plants and equipment, at cost (HEP: $1,122,334 and $1,099,579, respectively)	3,823,731			3,631,787
Less accumulated depreciation (HEP: $(127,408) and $(93,200), respectively)	(703,799		)	(578,882		)
Properties, plants and equipment, at cost (HEP: $1,158,287 and $1,155,710, respectively)							4,008,803			3,943,114
Less accumulated depreciation (HEP: $(152,710) and $(141,154), respectively)							(794,605		)	(748,414		)
	3,119,932			3,052,905			3,214,198			3,194,700
Marketable securities (long-term)	5,519			50,067			5,000			5,116
Other assets: Turnaround costs	83,585			57,060			197,356			151,764
Goodwill (HEP: $288,991 and $288,991, respectively)	2,338,302			2,336,510			2,338,302			2,338,302
Intangibles and other (HEP: $76,096 and $75,902, respectively)	166,677			158,955
Intangibles and other (HEP: $75,007 and $76,300, respectively)							178,006			168,850
	2,588,564			2,552,525			2,713,664			2,658,916
Total assets	$	10,345,936		$	9,576,243		$	10,696,172		$	10,328,997

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable (HEP: $11,303 and $21,709, respectively)	$	1,530,714		$	1,504,694
Accounts payable (HEP: $12,346 and $12,030, respectively)							$	1,339,419		$	1,314,151
Income taxes payable	150,899			40,366			151,403			—
Accrued liabilities (HEP: $19,315 and $16,006, respectively)	219,980			169,940
Accrued liabilities (HEP: $14,135 and $23,705, respectively)							127,005			195,077
Deferred income tax liabilities	175,567			175,683			149,127			145,216
Total current liabilities	2,077,160			1,890,683			1,766,954			1,654,444

Long-term debt (HEP: $874,434 and $598,761, respectively)	1,346,227			1,214,742
Deferred income taxes	399,205			463,721
Other long-term liabilities (HEP: $7,574 and $4,000, respectively)	163,848			171,197
Long-term debt (HEP: $811,913 and $864,673, respectively)							1,283,245			1,336,238
Deferred income taxes (HEP: $4,951 and $4,951, respectively)							554,102			536,670
Other long-term liabilities (HEP: $30,192 and $28,683, respectively)							162,824			158,987

Equity:
HollyFrontier stockholders’ equity:
Preferred stock, $1.00 par value – 5,000,000 shares authorized; none issued	—			—			—			—
Common stock $.01 par value – 320,000,000 shares authorized; 255,962,866 shares issued as of September 30, 2012 and December 31, 2011	2,560			2,563
Common stock $.01 par value – 320,000,000 shares authorized; 255,962,866 shares issued as of March 31, 2013 and December 31, 2012							2,560			2,560
Additional capital	3,904,379			3,859,367			3,973,788			3,911,353
Retained earnings	2,806,117			1,964,656			3,225,050			3,054,769
Accumulated other comprehensive income (loss)	(62,521		)	77,873			3,334			(8,425		)
Common stock held in treasury, at cost – 52,417,146 and 46,630,220 shares as of September 30, 2012 and December 31, 2011, respectively	(886,259		)	(700,449		)
Common stock held in treasury, at cost – 52,635,439 and 52,411,370 shares as of March 31, 2013 and December 31, 2012, respectively							(918,939		)	(907,303		)
Total HollyFrontier stockholders’ equity	5,764,276			5,204,010			6,285,793			6,052,954
Noncontrolling interest	595,220			631,890			643,254			589,704
Total equity	6,359,496			5,835,900			6,929,047			6,642,658
Total liabilities and equity	$	10,345,936		$	9,576,243		$	10,696,172		$	10,328,997

Parenthetical amounts represent asset and liability balances attributable to Holly Energy Partners, L.P. (“HEP”) as of ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012. HEP is a consolidated variable interest entity.

In July 2012, HEP acquired our 75% interest in UNEV Pipeline, LLC (“UNEV”). We have recast HEP's asset and liability balances at December 31, 2011 presented parenthetically above to include balances attributable to UNEV. See Note 4.

See accompanying notes.

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HOLLYFRONTIER CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share data)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2012			2011			2012			2011			2013			2012

Sales and other revenues	$	5,204,798		$	5,173,398		$	14,943,217		$	10,467,116		$	4,707,789		$	4,931,738
Operating costs and expenses:
Cost of products sold (exclusive of depreciation and amortization)	3,898,736			3,989,927			11,767,417			8,421,639			3,792,535			4,186,917
Operating expenses (exclusive of depreciation and amortization)	233,859			227,883			698,212			501,971			265,099			241,627
General and administrative expenses (exclusive of depreciation and amortization)	28,787			43,141			88,421			78,641			29,198			27,528
Depreciation and amortization	65,112			43,240			178,162			106,380			71,762			56,102
Total operating costs and expenses	4,226,494			4,304,191			12,732,212			9,108,631			4,158,594			4,512,174
Income from operations	978,304			869,207			2,211,005			1,358,485			549,195			419,564
Other income (expense):
Earnings of equity method investments	852			532			2,455			1,739			59			717
Interest income	2,219			204			3,360			946			1,531			460
Interest expense	(21,103		)	(25,074		)	(81,360		)	(56,471		)	(21,320		)	(33,315		)
Gain on sale of marketable equity securities	—			—			326			—
Merger transaction costs	—			(9,100		)	—			(15,114		)
	(18,032		)	(33,438		)	(75,219		)	(68,900		)	(19,730		)	(32,138		)
Income before income taxes	960,272			835,769			2,135,786			1,289,585			529,465			387,426
Income tax provision:
Current	324,211			296,670			753,018			461,210			206,627			142,870
Deferred	25,411			8,088			22,728			4,520			(20,533		)	(2,464		)
	349,622			304,758			775,746			465,730			186,094			140,406
Net income	610,650			531,011			1,360,040			823,855			343,371			247,020
Less net income attributable to noncontrolling interest	10,277			7,923			24,472			23,838			9,702			5,324
Net income attributable to HollyFrontier stockholders	$	600,373		$	523,088		$	1,335,568		$	800,017		$	333,669		$	241,696
Earnings per share attributable to HollyFrontier stockholders:
Basic	$	2.95		$	2.50		$	6.46		$	5.66		$	1.64		$	1.16
Diluted	$	2.94		$	2.48		$	6.44		$	5.63		$	1.63		$	1.16
Cash dividends declared per common share	$	1.15		$	0.59		$	2.40		$	0.74		$	0.80		$	0.60
Average number of common shares outstanding:
Basic	203,557			209,583			206,657			141,353			203,515			208,531
Diluted	204,434			210,579			207,546			142,092			204,217			209,138

See accompanying notes.

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HOLLYFRONTIER CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2012			2011			2012			2011			2013			2012

Net income	$	610,650		$	531,011		$	1,360,040		$	823,855		$	343,371		$	247,020
Other comprehensive income (loss):
Net unrealized gain (loss) on available-for-sale securities	13			(655		)	(203		)	(972		)
Unrealized gain (loss), net of reclassifications from contract settlements of hedging instruments	(111,333		)	23,272			(236,147		)	24,864
Pension curtailment adjustment	—			—			7,102			—
Retirement medical obligation adjustment	—			9			—			9
Securities available-for-sale:
Unrealized gain on available-for-sale securities													19			305
Reclassification adjustments to net income on sale or maturity of marketable securities													(3		)	(117		)
Net unrealized gain on available-for-sale securities													16			188
Hedging instruments:
Change in fair value of cash flow hedging instruments													(10,346		)	(140,697		)
Reclassification adjustments to net income on settlement of cash flow hedging instruments													27,704			(16,192		)
Amortization of unrealized loss attributable to discontinued cash flow hedges													939			1,274
Net unrealized gain (loss) on hedging instruments													18,297			(155,615		)
Actuarial loss on post-retirement healthcare plan reclassified to net income upon partial plan settlement													1,726			—
Other comprehensive income (loss) before income taxes	(111,320		)	22,626			(229,248		)	23,901			20,039			(155,427		)
Income tax expense (benefit)	(43,353		)	8,520			(89,383		)	8,618			7,488			(60,670		)
Other comprehensive income (loss)	(67,967		)	14,106			(139,865		)	15,283			12,551			(94,757		)
Total comprehensive income	542,683			545,117			1,220,175			839,138			355,922			152,263
Less noncontrolling interest in comprehensive income	10,406			8,640			25,001			25,575			10,494			5,861
Comprehensive income attributable to HollyFrontier stockholders	$	532,277		$	536,477		$	1,195,174		$	813,563		$	345,428		$	146,402

See accompanying notes.

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HOLLYFRONTIER CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Nine Months Ended
	September 30,
	2012			2011			Three Months Ended March 31,
				As Adjusted (See Note 2)			2013			2012
Cash flows from operating activities:
Net income	$	1,360,040		$	823,855		$	343,371		$	247,020
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	178,162			106,380			71,762			56,102
Earnings of equity method investments, net of distributions	169			198			628			34
Gain on sale of marketable equity securities	(326		)	—
Deferred income taxes	22,728			4,520			(20,533		)	(2,464		)
Equity-based compensation expense	25,399			15,535			8,580			9,485
Change in fair value – derivative instruments	(10,977		)	(5,920		)	(53,745		)	12,122
(Increase) decrease in current assets:
Accounts receivable	(29,474		)	495,971			(22,294		)	(25,247		)
Inventories	(370,831		)	(195,575		)	(151,168		)	(230,536		)
Income taxes receivable	53,465			51,034			37,053			365
Prepayments and other	16,690			7,778			3,866			(1,831		)
Increase (decrease) in current liabilities:
Accounts payable	(96,263		)	(403,762		)	(40,964		)	124,235
Income taxes payable	110,533			182,468			151,403			111,846
Accrued liabilities	(6,166		)	28,999			(9,846		)	(46,358		)
Turnaround expenditures	(74,612		)	(27,985		)	(69,835		)	(21,762		)
Other, net	(6,749		)	5,707			285			20,894
Net cash provided by operating activities	1,171,788			1,089,203			248,563			253,905

Cash flows from investing activities:
Additions to properties, plants and equipment	(178,235		)	(98,428		)	(66,951		)	(47,133		)
Additions to properties, plants and equipment – HEP	(29,302		)	(175,795		)	(5,013		)	(14,254		)
Increase in cash due to merger with Frontier	—			872,158
Proceeds from sale of property							2,290			—
Investment in Sabine Biofuels	(2,000		)	(9,125		)	—			(1,200		)
Purchases of marketable securities	(236,315		)	(370,042		)	(178,251		)	(106,573		)
Sales and maturities of marketable securities	212,216			194,386			143,280			100,480
Net cash provided by (used for) investing activities	(233,636		)	413,154
Net cash used for investing activities							(104,645		)	(68,680		)

Cash flows from financing activities:
Borrowings under credit agreement – HEP	523,000			93,000			57,000			36,000
Repayments under credit agreement – HEP	(292,000		)	(50,000		)	(110,000		)	(81,000		)
Net proceeds from issuance of senior notes – HEP	294,750			—			—			294,750
Principal tender on senior notes – HFC	(205,000		)	(15		)
Principal tender on senior notes – HEP	(185,000		)	—			—			(157,761		)
Proceeds from sale of HEP common units							73,444			—
Proceeds from common unit offerings - HEP							73,444			—
Purchase of treasury stock	(190,307		)	(38,955		)	(6,610		)	(62,532		)
Structured stock repurchase arrangement	8,620			—
Contribution from joint venture partner	6,000			27,500			—			5,500
Dividends	(382,610		)	(129,377		)	(102,163		)	(126,019		)
Distributions to noncontrolling interest	(43,749		)	(37,929		)	(15,288		)	(14,391		)
Excess tax benefit from equity-based compensation	16,021			1,399			744			3,792
Purchase of units for incentive grants – HEP	(4,919		)	(1,641		)	(2,719		)	(1,283		)
Deferred financing costs	(3,289		)	(11,724		)	—			(1,123		)
Other	(1,165		)	(857		)	2,973			(512		)
Net cash used for financing activities	(459,648		)	(148,599		)	(29,175		)	(104,579		)

Cash and cash equivalents:
Increase for the period	478,504			1,353,758			114,743			80,646
Beginning of period	1,578,904			229,101			1,757,699			1,578,904
End of period	$	2,057,408		$	1,582,859		$	1,872,442		$	1,659,550

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	77,184		$	50,570		$	20,825		$	24,422
Income taxes	$	622,314		$	225,499		$	17,380		$	27,006

See accompanying notes.

Table of Content

HOLLYFRONTIER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


NOTE 1:	Description of Business and Presentation of Financial Statements

References herein to HollyFrontier Corporation (“HollyFrontier”) include HollyFrontier and its consolidated subsidiaries. In accordance with the Securities and Exchange Commission’s (“SEC”) “Plain English” guidelines, this Quarterly Report on Form 10-Q has been written in the first person. In these financial statements, the words “we,” “our,” “ours” and “us” refer only to HollyFrontier and its consolidated subsidiaries or to HollyFrontier or an individual subsidiary and not to any other person, with certain exceptions. Generally, the words “we,” “our,” “ours” and “us” include Holly Energy Partners, L.P. (“HEP”) and its subsidiaries as consolidated subsidiaries of HollyFrontier, unless when used in disclosures of transactions or obligations between HEP and HollyFrontier or its other subsidiaries. These financial statements contain certain disclosures of agreements that are specific to HEP and its consolidated subsidiaries and do not necessarily represent obligations of HollyFrontier. When used in descriptions of agreements and transactions, “HEP” refers to HEP and its consolidated subsidiaries.

We merged with Frontier Oil Corporation (“Frontier”) effective July 1, 2011. Concurrent with the merger, we changed our name from Holly Corporation (“Holly”) to HollyFrontier and changed the ticker symbol for our common stock traded on the New York Stock Exchange to “HFC” (see Note 3). Accordingly, these financial statements include Frontier, its consolidated subsidiaries and the operations of the merged Frontier businesses effective July 1, 2011, but not prior to this date.

We are principally an independent petroleum refiner that produces high-value light products such as gasoline, diesel fuel, jet fuel, specialty lubricant products, and specialty and modified asphalt. We own and operate petroleum refineries that serve markets throughout the Mid-Continent, Southwest and Rocky Mountain regions of the United States. As of ~~September 30, 2012~~March 31, 2013, we:

owned and operated a petroleum refinery in El Dorado, Kansas (the “El Dorado Refinery”), two refinery facilities located in Tulsa, Oklahoma (collectively, the “Tulsa Refineries”), a refinery in Artesia, New Mexico that is operated in conjunction with crude oil distillation and vacuum distillation and other facilities situated 65 miles away in Lovington, New Mexico (collectively, the “Navajo Refinery”), a refinery located in Cheyenne, Wyoming (the “Cheyenne Refinery”) and a refinery in Woods Cross, Utah (the “Woods Cross Refinery”);

owned and operated NK Asphalt Partners (“NK Asphalt”) which operates various asphalt terminals in Arizona and New Mexico;

owned Ethanol Management Company (“EMC”), a products terminal and blending facility near Denver, Colorado and a 50% interest in Sabine Biofuels II, LLC (“Sabine Biofuels”), a biodiesel production facility located in Port Arthur, Texas; and

owned a ~~44%~~39% interest in HEP, a consolidated variable interest entity (“VIE”), which includes our 2% general partner interest. HEP owns and operates logistic assets consisting of petroleum product and crude oil pipelines and terminal, tankage and loading rack facilities that principally support our refining and marketing operations in the Mid-Continent, Southwest and Rocky Mountain regions of the United States and Alon USA, Inc.'s (“Alon”) refinery in Big Spring, Texas. Additionally, HEP owns a 75% interest in UNEV Pipeline, LLC (“UNEV”), which owns a 12-inch refined products pipeline from Salt Lake City, Utah to Las Vegas, Nevada, together with terminal facilities in the Cedar City, Utah and North Las Vegas areas (the “UNEV Pipeline”), and a 25% interest in SLC Pipeline LLC (the “SLC Pipeline”), a 95-mile intrastate pipeline system that serves refineries in the Salt Lake City area.

We have prepared these consolidated financial statements without audit. In management’s opinion, these consolidated financial statements include all normal recurring adjustments necessary for a fair presentation of our consolidated financial position as of ~~September 30, 2012~~March 31, 2013, the consolidated results of operations and comprehensive income for the three months ended March 31, 2013 and ~~nine~~ ~~months ended~~ ~~September 30,~~ 2012 ~~and~~ ~~2011~~ and consolidated cash flows for the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012 in accordance with the rules and regulations of the SEC. Although certain notes and other information required by generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted, we believe that the disclosures in these consolidated financial statements are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, ~~2011~~2012 that has been filed with the SEC.

Our results of operations for the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013 are not necessarily indicative of the results of operations to be realized for the year ending December 31, ~~2012~~2013.

Balance Sheet Offsetting: We purchase and sell inventories of crude oil with certain same-parties that are net settled in accordance with contractual net settlement provisions. Our policy is to present such balances on a net basis because it more appropriately presents our economic resources (accounts receivable) and claims against us (accounts payable) and the future cash flows associated with such assets and liabilities. The following table presents these balances on a gross basis with offsetting amounts that reconcile to a net payable balance included in our consolidated balance sheets.

Table of Contents

HOLLYFRONTIER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued



	Gross Payable		Gross Receivable Offset in Balance Sheet			Net Payable Recognized in Balance Sheet
	(In thousands)
March 31, 2013

Accounts Payable	$	2,068,683	$	(729,264	)	$	1,339,419

December 31, 2012

Accounts Payable	$	2,037,549	$	(723,398	)	$	1,314,151

See Note 10 for disclosure of amounts related to our derivative instruments that are also presented on a net basis in our consolidated balance sheets.

Accounts Receivable: Our accounts receivable consist of amounts due from customers that are primarily companies in the petroleum industry. Credit is extended based on our evaluation of the customer’s financial condition, and in certain circumstances collateral, such as letters of credit or guarantees, is required. We reserve for doubtful accounts based on our historical loss experience as well as specific accounts identified as high risk, which historically have been minimal. Credit losses are charged to the allowance for doubtful accounts when an account is deemed uncollectible. Our allowance for doubtful accounts was $2.5 million ~~and $3.5 million~~at ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012~~, respectively.~~.

Inventories: We use the last-in, first-out (“LIFO”) method of valuing inventory. Under the LIFO method, an actual valuation of inventory can only be made at the end of each year based on the inventory levels at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and are subject to the final year-end LIFO inventory valuation.

Goodwill: Goodwill represents the excess of the cost of an acquired entity over the fair value of the assets acquired and liabilities assumed. Goodwill is not subject to amortization and is tested annually, or more frequently if events or circumstances indicate the possibility of impairment. As of ~~September 30, 2012~~March 31, 2013, there have been no impairments to goodwill.


~~NOTE 2:~~	~~Change in Accounting Principle~~

In the first quarter of 2012, we changed our policy of reporting certain same-party accounts receivable and payable balances in the consolidated balance sheets to reflect a net amount due under contractual netting agreements. Prior to this change, we reported such balances on a gross basis with a same-party receivable and payable balance presented separately in our balance sheet. GAAP permits a reporting entity to elect a policy of offsetting same-party receivables and payables when such amounts are net settled under legally enforceable contractual setoff provisions. We believe that a net presentation is preferable because it more appropriately presents our economic resources (accounts receivable) and claims against us (accounts payable) and the future cash flows associated with such assets and liabilities. Additionally, we believe a net presentation of such amounts conforms to the predominant practices used by other companies in our industry. We have applied this change in accounting principle on a retrospective basis and have recast our prior period financial statements.

~~The following table summarizes the line items affected in our consolidated balance sheet at December 31, 2011:~~

As Originally Reported As Adjusted Effect of Change
(In thousands)
Accounts receivable: Crude oil resales $ 743,544
$ 5,166
$ (738,378 )
Total current assets 4,659,124
3,920,746
(738,378 )
Total assets $ 10,314,621
$ 9,576,243
$ (738,378 )

Accounts payable $ 2,243,072
$ 1,504,694
$ (738,378 )
Total current liabilities 2,629,061
1,890,683
(738,378 )
Total liabilities and equity $ 10,314,621
$ 9,576,243
$ (738,378 )

~~The following table summarizes the line items affected in our consolidated statement of cash flow for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011~~:

As Originally Reported As Adjusted Effect of Change
(In thousands)
(Increase) decrease in current assets:
Accounts receivable $ 389,289
$ 495,971
$ 106,682

Increase (decrease) in current liabilities:
Accounts payable $ (297,080 ) $ (403,762 ) $ (106,682 )

At ~~September 30, 2012, our accounts payable balance is presented net of~~ ~~$639.4 million~~ ~~in crude oil receivables subject to contractual setoff provisions. There was no cumulative impact to retained earnings since this change in accounting principle did not affect earnings.~~

~~Table of Contents~~

~~HOLLYFRONTIER CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) Continued~~


~~NOTE 3:~~	~~Holly-Frontier Merger~~

On February 21, 2011, we entered into a merger agreement providing for a “merger of equals” business combination between us and Frontier. The legacy Frontier business operations consist of crude oil refining and the wholesale marketing of refined petroleum products produced at the El Dorado and Cheyenne Refineries and serve markets in the Rocky Mountain and Plains States regions of the United States. On July 1, 2011, North Acquisition, Inc., a direct wholly-owned subsidiary of Holly, merged with and into Frontier, with Frontier surviving as a wholly-owned subsidiary of Holly. Subsequent to the merger and following approval by the post-closing board of directors of HollyFrontier, Frontier merged with and into HollyFrontier, with HollyFrontier continuing as the surviving corporation.

~~In accordance with the merger agreement, we issued approximately~~ ~~102.8 million~~ ~~shares of HollyFrontier common stock in exchange for outstanding shares of Frontier common stock to former Frontier stockholders. Each outstanding share of Frontier common stock was converted into~~ ~~0.4811~~ ~~shares of HollyFrontier common stock with any fractional shares paid in cash. The aggregate consideration paid in connection with the merger was approximately~~ ~~$3.7 billion. This is based on our July 1, 2011 market closing price of~~ ~~$35.93~~ ~~and includes a portion of the fair value of the outstanding equity-based awards assumed from Frontier that relates to pre-merger services.~~

~~Our consolidated financial and operating results reflect the operations of the merged Frontier businesses beginning July 1, 2011. Assuming the merger had been consummated on~~ ~~January 1, 2011, pro forma revenues, net income and basic and diluted earnings per share are as follows:~~

Nine Months Ended September 30, 2011
(In thousands, except per share amounts)
Sales and other revenues $ 14,446,297
Net income attributable to HollyFrontier stockholders $ 1,118,018
Basic earnings per share $ 5.34
Diluted earnings per share $ 5.31

~~Adjustments made to derive pro forma net income primarily relate to depreciation and amortization expense to reflect our new basis in the legacy Frontier refining facilities.~~


NOTE 4:2:	Holly Energy Partners

HEP, a consolidated VIE, is a publicly held master limited partnership that was formed to acquire, own and operate the petroleum product and crude oil pipeline and terminal, tankage and loading rack facilities that support our refining and marketing operations in the Mid-Continent, Southwest and Rocky Mountain regions of the United States. HEP also owns and operates refined product pipelines and terminals, located primarily in Texas, that serve Alon's refinery in Big Spring, Texas.

As of ~~September 30, 2012~~March 31, 2013, we owned a ~~44%~~39% interest in HEP, including the 2% general partner interest. We are the primary beneficiary of HEP's earnings and cash flows and therefore we consolidate HEP. See Note 1916 for supplemental guarantor/non-guarantor financial information, including HEP balances included in these consolidated financial statements. All intercompany transactions with HEP are eliminated in our consolidated financial statements.

HEP has two primary customers (including us) and generates revenues by charging tariffs for transporting petroleum products and crude oil though its pipelines, by charging fees for terminalling refined products and other hydrocarbons, and storing and providing other services at its storage tanks and terminals. Under our long-term transportation agreements with HEP (discussed further below), we accounted for 83% of HEP’s total revenues for the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013. We do not provide financial or equity support through any liquidity arrangements and /or debt guarantees to HEP.

~~Table of Contents~~

~~HOLLYFRONTIER CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) Continued~~

HEP has outstanding debt under a senior secured revolving credit agreement and its senior notes. With the exception of the assets of HEP Logistics Holdings, L.P., one of our wholly-owned subsidiaries and HEP’s general partner, HEP’s creditors have no recourse to our assets. Any recourse to HEP’s general partner would be limited to the extent of HEP Logistics Holdings, L.P.’s assets, which other than its investment in HEP, are not significant. Furthermore, our creditors have no recourse to the assets of HEP and its consolidated subsidiaries. See Note 129 for a description of HEP’s debt obligations.

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HOLLYFRONTIER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued

At ~~September 30, 2012~~March 31, 2013, we have an agreement to pledge up to ~~6,000,000~~12.0 million of our HEP common units to collateralize certain crude oil purchases. These units represent a ~~21%~~20% ownership interest in HEP.

HEP has risk associated with its operations. If a major customer of HEP were to terminate its contracts or fail to meet desired shipping or throughput levels for an extended period of time, revenue would be reduced and HEP could suffer substantial losses to the extent that a new customer is not found. In the event that HEP incurs a loss, our operating results will reflect HEP’s loss, net of intercompany eliminations, to the extent of our ownership interest in HEP at that point in time.

~~UNEV Interest Transaction~~

~~On July 12, 2012, we sold our~~ ~~75%~~ ~~interest in UNEV to HEP. We received consideration totaling approximately~~ ~~$315.0 million, which consisted of approximately~~ ~~$260.0 million~~ ~~in cash and 1 million HEP common units. As a result of this transaction, our ownership interest in HEP increased to~~ ~~44%, which includes the~~ 2% ~~general partner interest. We have a~~ 10~~-year transportation agreement with the UNEV Pipeline expiring in 2022 that results in minimum annualized payments to UNEV of~~ ~~$16.9 million~~.

We accounted for this transaction as a business transfer between entities under common control, whereby we have retrospectively adjusted HEP financial information for all prior periods presented as if UNEV was a consolidated subsidiary of HEP since inception. This had no impact on our consolidated balances and amounts; however, it did affect certain amounts presented under the HEP segment in Note 18, “Segment Information” and Note 19, “Supplemental Guarantor/Non-Guarantor Financial Information.”

Transportation Agreements

HEP serves our refineries under long-term pipeline and terminal, tankage and throughput agreements expiring from 2019 through 2026. Under these agreements, we pay HEP fees to transport, store and throughput volumes of refined product and crude oil on HEP's pipeline and terminal, tankage and loading rack facilities that result in minimum annual payments to ~~HEP.~~HEP including UNEV (a consolidated subsidiary of HEP). Under these agreements, the agreed upon tariff rates are subject to annual tariff rate adjustments on July 1 at a rate based upon the percentage change in Producer Price Index (“PPI”) or Federal Energy Regulatory Commission (“FERC”) index. As of ~~July 1, 2012~~March 31, 2013, these agreements result in minimum annualized payments to HEP of $~~200.3~~220.8 million.

Since HEP is a consolidated VIE, our transactions with HEP including ~~the UNEV transaction and~~ fees paid under our transportation agreements with ~~HEP and UNEV, a consolidated subsidiary of~~ HEP are eliminated and have no impact on our consolidated financial statements.

HEP Common Unit ~~Issuances~~Offering

In March 2013, HEP closed on a public offering of 1,875,000 of its common units. Additionally, our wholly-owned subsidiary, HollyFrontier Holdings LLC, as a selling unitholder, closed on a public sale of 1,875,000 HEP common units held by it. HEP used net proceeds of $73.4 million to repay indebtedness incurred under its credit facility and for general partnership purposes. As a result of ~~the common units received in connection with HEP's acquisition of our~~ ~~75%~~ ~~interest in UNEV,~~these transactions and resulting HEP ownership changes, we adjusted additional capital and equity attributable to HEP's noncontrolling interest holders to ~~effectively~~ reallocate ~~a portion of~~ HEP's equity among its unitholders.


NOTE 5:3:	Financial Instruments

Our financial instruments consist of cash and cash equivalents, investments in marketable securities, accounts receivable, accounts payable, debt and derivative instruments. The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair value. HEP's outstanding credit agreement borrowings also approximate fair value as interest rates are reset frequently at current interest rates.

Fair value measurements are derived using inputs (assumptions that market participants would use in pricing an asset or liability, including assumptions about risk). GAAP categorizes inputs used in fair value measurements into three broad levels as follows:

(Level 1) Quoted prices in active markets for identical assets or liabilities.

(Level 2) Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, similar assets and liabilities in markets that are not active or can be corroborated by observable market data.

~~Table of Contents~~

~~HOLLYFRONTIER CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) Continued~~

(Level 3) Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes valuation techniques that involve significant unobservable inputs.

Table of Contents

HOLLYFRONTIER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued

The carrying amounts and related estimated fair values of our investments in marketable securities, derivative instruments and ~~the~~ senior notes at ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012 were as follows:


					Fair Value by Input Level										Fair Value by Input Level
Financial Instrument	Carrying Amount		Fair Value		Level 1		Level 2		Level 3		Carrying Amount		Fair Value		Level 1		Level 2		Level 3
			(In thousands)										(In thousands)
September 30, 2012
March 31, 2013
Assets:
Marketable debt securities	$	285,928	$	285,928	$	—	$	285,928	$	—	$	670,694	$	670,694	$	—	$	670,694	$	—
NYMEX futures contracts	4,126		4,126		4,126		—		—
Commodity price swaps											43,808		43,808		—		27,598		16,210
Forward sales											1,468		1,468		—		—		1,468
Total assets	$	290,054	$	290,054	$	4,126	$	285,928	$	—	$	715,970	$	715,970	$	—	$	698,292	$	17,678

Liabilities:
NYMEX futures contracts											$	5,837	$	5,837	$	5,837	$	—	$	—
Commodity price swaps	$	57,457	$	57,457	$	—	$	29,409	$	28,048	38,650		38,650		—		14,723		23,927
HollyFrontier senior notes	435,139		475,977		—		475,977		—		435,373		469,573		—		469,573		—
HEP senior notes	443,434		473,625		—		473,625		—		443,913		480,563		—		480,563		—
HEP interest rate swaps	3,764		3,764		—		3,764		—		2,868		2,868		—		2,868		—
Total liabilities	$	939,794	$	1,010,823	$	—	$	982,775	$	28,048	$	926,641	$	997,491	$	5,837	$	967,727	$	23,927


December 31, 2011
December 31, 2012
Assets:
Equity securities	$	753	$	753	$	753	$	—	$	—
Marketable debt securities	260,953		260,953		—		260,953		—		$	635,702	$	635,702	$	—	$	635,702	$	—
Commodity price swaps	175,654		175,654		—		144,038		31,616		17,383		17,383		—		6,151		11,232
Total assets	$	437,360	$	437,360	$	753	$	404,991	$	31,616	$	653,085	$	653,085	$	—	$	641,853	$	11,232

Liabilities:
NYMEX futures contracts	$	1,252	$	1,252	$	1,252	$	—	$	—	$	5,563	$	5,563	$	5,563	$	—	$	—
Commodity price swaps											83,982		83,982		—		39,092		44,890
HollyFrontier senior notes	651,262		693,979		—		693,979		—		435,254		470,990		—		470,990		—
HEP senior notes	325,860		344,350		—		344,350		—		443,673		484,125		—		484,125		—
HEP interest rate swaps	520		520		—		520		—		3,430		3,430		—		3,430		—
Total liabilities	$	978,894	$	1,040,101	$	1,252	$	1,038,849	$	—	$	971,902	$	1,048,090	$	5,563	$	997,637	$	44,890

Level 1 Financial Instruments

Our ~~investments in equity securities and our~~ NYMEX futures contracts are exchange traded and are measured and recorded at fair value using quoted market prices, a Level 1 input.

Level 2 Financial Instruments

Investments in marketable debt securities and derivative instruments consisting of commodity price swaps and HEP's interest rate swaps are measured and recorded at fair value using Level 2 inputs. ~~With respect to~~The fair values of the commodity price and interest rate swap contracts ~~fair value is~~are based on the net present value of expected future cash flows related to both variable and fixed rate legs of the respective swap agreements. The measurements are computed using market-based observable inputs, quoted forward commodity prices with respect to our commodity price swaps and the forward London Interbank Offered Rate (“LIBOR”) yield curve with respect to HEP's interest rate swaps. The fair value of the marketable debt securities and senior notes is based on values provided by a third-party, ~~bank,~~ which were derived using market quotes for similar type instruments, a Level 2 input.

1413

Table of Contents

HOLLYFRONTIER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued

Level 3 Financial Instruments

We have ~~entered into certain~~ commodity price swap contracts ~~related~~that relate to forecasted sales of diesel and unleaded gasoline and forecasted purchases of WCS for which quoted forward market prices are not readily available. The forward rate used to value these price swaps ~~was~~is derived using a projected forward rate using quoted market rates for similar products, adjusted for regional pricing and grade differentials, a Level 3 input.

The following table presents the changes in fair value of the Level 3 assets and liabilities (all related to ~~commodity price swap contracts)~~derivative instruments) for the three months ended March 31, 2013 and ~~nine~~ ~~months ended~~ ~~September 30,~~ 2012:

Level 3 Financial Instruments Three Months Ended September 30, 2012 Nine Months Ended September 30, 2012
(In thousands)
Asset balance at beginning of period $ 119,461
$ 31,616
Change in fair value (192,446 ) (158,893 )
Settlement date fair value of contracts open at beginning of period 44,937
99,229
Liability balance at end of period $ (28,048 ) $ (28,048 )



Level 3 Financial Instruments	Three Months Ended March 31,
	2013			2012
	(In thousands)
Asset (liability) balance at beginning of period	$	(33,658	)	$	31,616
Change in fair value:
Recognized in other comprehensive income	(49,202		)	(146,769		)
Recognized in cost of products sold	43,559			—
Settlement date fair value of contractual maturities:
Recognized in sales and other revenues	19,185			(34,125		)
Recognized in cost of products sold	13,867			—
Asset (liability) balance at end of period	$	(6,249	)	$	(149,278	)

A hypothetical change of 10% to the estimated future cash flows attributable to our Level 3 ~~commodity price swaps~~derivative instruments would result in an estimated fair value change of approximately $~~4.0~~4.1 million.


NOTE 6:4:	Earnings Per Share

Basic earnings per share is calculated as net income attributable to HollyFrontier stockholders divided by the average number of shares of common stock outstanding. Diluted earnings per share assumes, when dilutive, the issuance of the net incremental shares from variable restricted and variable performance shares. The following is a reconciliation of the denominators of the basic and diluted per share computations for net income attributable to HollyFrontier stockholders:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2012		2011		2012		2011		2013		2012
	(In thousands, except per share data)								(In thousands, except per share data)
Earnings attributable to HollyFrontier stockholders	$	600,373	$	523,088	$	1,335,568	$	800,017	$	333,669	$	241,696
Average number of shares of common stock outstanding	203,557		209,583		206,657		141,353		203,515		208,531
Effect of dilutive variable restricted shares andperformance share units⁽¹⁾	877		996		889		739		702		607
Average number of shares of common stock outstanding assuming dilution	204,434		210,579		207,546		142,092		204,217		209,138
Basic earnings per share	$	2.95	$	2.50	$	6.46	$	5.66	$	1.64	$	1.16
Diluted earnings per share	$	2.94	$	2.48	$	6.44	$	5.63	$	1.63	$	1.16

(1) Excludes anti-dilutive restricted and performance share units of:	—		39		3		179

Table of Contents

HOLLYFRONTIER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued


NOTE 7:5:	Stock-Based Compensation

As of ~~September 30, 2012~~March 31, 2013, we have two principal share-based compensation plans ~~including the Frontier plan that was retained upon the July 1, 2011 merger~~ (collectively, the “Long-Term Incentive Compensation Plan”).

The compensation cost charged against income for these plans was $~~7.3~~7.5 million and $~~9.4~~8.5 million for the three months ended ~~September 30, 2012~~March 31, 2013 and ~~2011, respectively, and~~ ~~$23.2 million~~ ~~and~~ ~~$13.9 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30,~~ 2012 ~~and~~ ~~2011~~, respectively. Our accounting policy for the recognition of compensation expense for awards with pro-rata vesting (substantially all of our awards) is to expense the costs ratably over the vesting periods.

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~~HOLLYFRONTIER CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) Continued~~

Additionally, HEP maintains a share-based compensation plan for ~~HEP directors and select~~ Holly Logistic Services, L.L.C. non-employee directors and certain executives and employees. Compensation cost attributable to HEP’s share-based compensation plan was $~~0.5~~1.1 million and $~~0.6~~0.9 million for the three months ended ~~September 30, 2012~~March 31, 2013 and ~~2011, respectively, and~~ ~~$2.1 million~~ ~~and~~ ~~$1.6 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30,~~ 2012 ~~and~~ ~~2011~~, respectively.

Restricted Stock and Restricted Stock Units

Under our Long-Term Incentive Compensation Plan, we grant certain officers and other key employees ~~and non-employee directors~~ restricted stock awards with ~~most~~ awards generally vesting over a period of ~~one~~ to three years. ~~Although~~Award recipients are generally entitled to all the rights of absolute ownership of the ~~shares does not transfer to the recipients until after the shares vest, recipients generally have dividend rights on these~~restricted shares from the date of ~~grant.~~grant (unless a recipient's tax election requires otherwise) including the right to vote the shares and to receive dividends. Upon vesting, restrictions on the restricted shares lapse at which time they convert to common shares. The vesting for certain key executives is contingent upon certain performance targets being realized. In addition, we grant non-employee directors restricted stock unit awards, which typically vest over a period of one year and are payable in stock. The fair value of each ~~share of~~ restricted stock ~~awarded, including the shares issued to the key executives,~~and restricted stock unit award is measured based on the market price as of the date of grant and is amortized over the respective vesting period.

A summary of restricted stock and restricted stock unit activity and changes during the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013 is presented below:

Restricted Stock Grants Weighted Average Grant Date Fair Value Aggregate Intrinsic Value ($000)

Outstanding at January 1, 2012 (non-vested) 1,122,350
$ 25.48

Granted 420,922
33.97

Vesting and transfer of ownership to recipients (574,408 ) 23.48

Forfeited (3,975 ) 33.06

Outstanding at September 30, 2012 (non-vested) 964,889
$ 30.35
$ 39,821



Restricted Stock and Restricted Stock Units	Grants		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value ($000)

Outstanding at January 1, 2013 (non-vested)	843,527		$	34.52
Granted	29,500		45.90
Vesting (transfer/conversion to common stock)	(97,812	)	25.48
Forfeited	(6,714	)	35.77
Outstanding at March 31, 2013 (non-vested)	768,501		$	36.09	$	39,539

For the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013, ~~we issued~~ ~~574,408~~97,812 ~~shares of our common stock upon the vesting of~~ restricted stock ~~grants~~and restricted stock units vested having a grant date fair value of $~~13.5~~2.5 million. As of ~~September 30, 2012~~March 31, 2013, there was $~~12.3~~15.0 million of total unrecognized compensation cost related to non-vested restricted stock and restricted stock unit grants. That cost is expected to be recognized over a weighted-average period of ~~1.1~~1.2 years.

Performance Share Units

Under our Long-Term Incentive Compensation Plan, we grant certain officers and other key employees performance share units, which are payable in stock upon meeting certain criteria over the service period, and generally vest over a period of three years. Under the terms of our performance share unit grants, awards are subject to either a “financial performance” or “market performance” criteria, or both.

The fair value of performance share unit awards subject to financial performance criteria is computed using the grant date closing stock price of each respective award grant and will apply to the number of units ultimately awarded. The number of shares ultimately issued for each award will be based on our financial performance as compared to peer group companies over the performance period and can range from zero to 200%. As of ~~September 30, 2012~~March 31, 2013, estimated share payouts for outstanding non-vested performance share unit awards ranged from ~~107%~~110% to ~~175%~~170%.

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HOLLYFRONTIER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued

For the performance share units subject to market performance criteria, performance is calculated as the total shareholder return achieved by HollyFrontier stockholders compared with the average shareholder return achieved by an equally-weighted peer group of independent refining companies over a three-year period. These share unit awards are valued using a Monte Carlo valuation model, which simulates future stock price movements using key inputs including grant date stock prices, expected stock price performance, expected rate of return and volatility. These units are payable in stock based on share price performance relative to the defined peer group and can range from zero to 200% of the initial target award.

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~~HOLLYFRONTIER CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) Continued~~

A summary of performance share unit activity and changes during the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013 is presented below:



Performance Share Units	Grants

Outstanding at January 1, ~~2012~~2013 (non-vested)	~~774,788~~875,574
Granted	~~298,559~~—
Vesting and transfer of ownership to recipients	~~(240,019~~—	)
Forfeited	(~~5,057~~7,914	)
Outstanding at ~~September 30, 2012~~March 31, 2013 (non-vested)	~~828,271~~867,660

~~For the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012, we issued~~ ~~459,426~~ ~~shares of our common stock, representing a~~ ~~191%~~ ~~payout on vested performance share units having a grant date fair value of~~ ~~$2.8 million~~. Based on the weighted-average grant date fair value of $~~28.20~~35.40 per share, there was $~~15.1~~22.9 million of total unrecognized compensation cost related to non-vested performance share ~~units.~~units as of March 31, 2013. That cost is expected to be recognized over a weighted-average period of ~~1.4~~1.6 years.


NOTE 8:6:	Cash and Cash Equivalents and Investments in Marketable Securities

Our investment portfolio at ~~September 30, 2012~~March 31, 2013 consisted of cash, cash equivalents and investments in marketable debt ~~securities primarily issued by government and municipal entities.~~securities.

We invest in highly-rated marketable debt securities ~~primarily issued by government and municipal entities~~ that have maturities at the date of purchase of greater than three months. We also invest in other marketable debt securities with the maximum maturity or put date of any individual issue generally not greater than two years from the date of purchase, which are usually held until maturity. All of these instruments are classified as available-for-sale. As a result, they are reported at fair value using quoted market prices. Interest income is recorded as earned. Unrealized gains and losses, net of related income taxes, are reported as a component of accumulated other comprehensive income. Upon sale or maturity, realized gains ~~and losses~~ on ~~the sale of~~our marketable debt securities are recognized as interest income. These gains are computed based on the specific identification of the underlying cost of the securities, ~~sold and the~~net of unrealized gains and losses previously reported in other comprehensive ~~income are reclassified to current earnings.~~income.

The following is a summary of our available-for-sale securities:

Amortized Cost Gross Unrealized Gain Gross Unrealized Loss
Fair Value
(Net Carrying Amount)
(In thousands)
September 30, 2012
Marketable debt securities (state and political subdivisions) $ 285,915
$ 26
$ (13 ) $ 285,928

December 31, 2011
Marketable debt securities (state and political subdivisions) $ 260,879
$ 74
$ —
$ 260,953
Equity securities 610
143
—
753
Total marketable securities $ 261,489
$ 217
$ —
$ 261,706

~~For the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012, we invested~~ ~~$236.3 million~~ ~~in marketable debt securities and received a total of~~ ~~$212.2 million~~ ~~from sales and maturities of equity and marketable debt securities.~~



	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value (Net Carrying Amount)
	(In thousands)
March 31, 2013
Certificates of deposit	$	81,771	$	9	$	(4	)	$	81,776
Commercial paper	51,541		27		—			51,568
Corporate debt securities	69,806		4		(38		)	69,772
State and political subdivisions debt securities	467,583		29		(34		)	467,578
Total marketable securities	$	670,701	$	69	$	(76	)	$	670,694

December 31, 2012
Certificates of deposit	$	82,791	$	14	$	(6	)	$	82,799
Commercial paper	45,737		17		—			45,754
Corporate debt securities	49,587		2		(30		)	49,559
State and political subdivisions debt securities	457,615		26		(51		)	457,590
Total marketable securities	$	635,730	$	59	$	(87	)	$	635,702

1716

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HOLLYFRONTIER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued

For the three months ended March 31, 2013 and 2012, we recognized $0.5 million and $0.3 million, respectively, of interest income on our marketable debt securities. Unrealized gains and losses are temporary.


NOTE 9:7:	Inventories

Inventory consists of the following components:


	September 30, 2012		December 31, 2011		March 31, 2013		December 31, 2012
	(In thousands)				(In thousands)
Crude oil	$	526,783	$	400,952	$	512,441	$	502,978
Other raw materials and unfinished products⁽¹⁾	126,406		137,356		188,814		150,090
Finished products⁽²⁾	752,958		513,776		697,514		585,610
Process chemicals⁽³⁾	2,663		1,180		4,398		3,514
Repairs and maintenance supplies and other	76,640		61,355		67,633		77,440
Total inventory	$	1,485,450	$	1,114,619	$	1,470,800	$	1,319,632


(1)	Other raw materials and unfinished products include feedstocks and blendstocks, other than crude.


(2)	Finished products include gasolines, jet fuels, diesels, lubricants, asphalts, LPG’s and residual fuels.


(3)	Process chemicals include additives and other chemicals.


NOTE ~~10:~~	~~Goodwill~~

~~The following table provides a summary of changes to our goodwill balance by segment for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012~~.

Refining Segment HEP Total
(In thousands)
Balance at January 1, 2012 $ 2,047,519
$ 288,991
$ 2,336,510
Adjustment to goodwill related to Frontier merger 1,792
—
1,792
Balance at September 30, 2012 $ 2,049,311
$ 288,991
$ 2,338,302

During the first quarter of 2012, we adjusted goodwill upon finalizing certain fair value estimates that primarily relate to income tax receivables, properties, plants and equipment and environmental liabilities that were recognized upon our July 1, 2011 merger with Frontier.


~~NOTE 11:~~8:	Environmental

We expensed $~~1.7~~0.1 million and $~~0.7 million~~ ~~for the three months ended~~ ~~September 30, 2012~~ ~~and~~ ~~2011, respectively, and~~ ~~$16.9 million~~ ~~and~~ ~~$0.6~~14.3 million for the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012, respectively, for environmental remediation obligations. The accrued environmental liability reflected in our consolidated balance sheets was $~~61.8~~87.9 million and $~~42.2~~88.9 million at ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012, respectively, of which $~~48.6~~68.9 million and $~~31.7~~72.6 million, respectively, were classified as other long-term liabilities. These accruals include remediation and monitoring costs expected to be incurred over an extended period of ~~time. They also include~~ ~~$15.6 million~~ ~~in environmental liabilities that were assumed upon our merger with Frontier.~~time (up to 30 years for certain projects).

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~~HOLLYFRONTIER CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) Continued~~


NOTE ~~12:~~9:	Debt

HollyFrontier Credit Agreement

We have a $1 billion senior secured credit agreement (the “HollyFrontier Credit Agreement”) with Union Bank, N.A. as administrative agent and certain lenders from time to time party thereto. The HollyFrontier Credit Agreement matures in July 2016 and may be used to fund working capital requirements, capital expenditures, acquisitions and general corporate purposes. Obligations under the HollyFrontier Credit Agreement are collateralized by our inventory, accounts receivables and certain deposit accounts and guaranteed by our material, wholly-owned subsidiaries.

At ~~September 30, 2012~~March 31, 2013, we were in compliance with all covenants, had no outstanding borrowings and had outstanding letters of credit totaling $~~29.2~~29.0 million under the HollyFrontier Credit Agreement.

HEP Credit Agreement

~~In June 2012,~~ HEP ~~amended its previous credit agreement, increasing the size of the credit facility from~~ ~~$375 million~~ to ~~$550 million. HEP's~~has a $550 million senior secured revolving credit facility that matures in June 2017 (the “HEP Credit Agreement”) and is available to fund capital expenditures, investments, acquisitions, distribution payments and working capital and for general partnership purposes. It is also available to fund letters of credit up to a $50 million sub-limit and to fund distributions to unitholders up to a $60 million sub-limit. At ~~September 30, 2012~~March 31, 2013, ~~the~~ HEP ~~Credit Agreement~~was in compliance with all of its covenants, had outstanding borrowings of $~~431.0~~368.0 million. and no outstanding letters of credit under the HEP Credit Agreement.

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HOLLYFRONTIER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued

HEP’s obligations under the HEP Credit Agreement are collateralized by substantially all of HEP’s assets (presented parenthetically in our consolidated balance sheets). Indebtedness under the HEP Credit Agreement involves recourse to HEP Logistics Holdings, L.P., its general partner, and is guaranteed by HEP’s wholly-owned subsidiaries. Any recourse to the general partner would be limited to the extent of HEP Logistics Holdings, L.P.’s assets, which other than its investment in HEP, are not significant. HEP’s creditors have no other recourse to our assets. Furthermore, our creditors have no recourse to the assets of HEP and its consolidated subsidiaries.

HollyFrontier Senior Notes

Our senior notes consist of the following:

9.875% senior notes ($286.8 million principal amount maturing June 2017)

6.875% senior notes ($150 million principal amount maturing November 2018)

These senior notes (collectively, the “HollyFrontier Senior Notes”) are unsecured and impose certain restrictive covenants, including limitations on our ability to incur additional debt, incur liens, enter into sale-and-leaseback transactions, pay dividends, enter into mergers, sell assets and enter into certain transactions with affiliates. At any time when the HollyFrontier Senior Notes are rated investment grade by both Moody’s and Standard & Poor’s and no default or event of default exists, we will not be subject to many of the foregoing covenants. Additionally, we have certain redemption rights under the HollyFrontier Senior Notes.

~~In September 2012, we redeemed our~~ ~~$200 million~~ ~~aggregate principal amount of~~ ~~8.5%~~ ~~senior notes maturing September 2016 at a~~ ~~$208.5 million~~ ~~redemption price. At that time, we recognized an unamortized debt premium which was netted against the~~ ~~$8.5 million~~ ~~redemption premium, resulting in a net reduction of~~ ~~$2.4 million~~ ~~to interest expense upon redemption.~~

HollyFrontier Financing Obligation

We have a financing obligation that relates to a sale and lease-back of certain crude oil tankage that we sold to an affiliate of Plains All American Pipeline, L.P. (“Plains”) in October ~~2009. Under this transaction, the~~2009 for $40.0 million ~~in cash proceeds received was recorded as a liability.~~. Monthly lease payments are recorded as a reduction in principal over the 15-year lease term ending in 2024.

HEP Senior Notes

HEP’s senior notes consist of the following:

8.25% HEP senior notes ($150 million principal amount maturing March 2018)

6.5% HEP senior notes ($300 million principal amount maturing March 2020)

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~~HOLLYFRONTIER CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) Continued~~

~~In March 2012, HEP issued~~ ~~$300 million~~ ~~in an aggregate principal amount of~~ ~~6.5%~~ ~~HEP senior notes maturing March 2020. The~~ ~~$294.8 million~~ ~~in net proceeds were used to repay~~ ~~$157.8 million~~ ~~aggregate principal amount of~~ ~~6.25%~~ ~~HEP senior notes,~~ ~~$72.9 million~~ in promissory notes due to HollyFrontier, related fees, expenses and accrued interest in connection with these transactions and to repay borrowings under the HEP Credit Agreement. In April 2012, HEP called for redemption the ~~$27.3 million~~ ~~aggregate principal amount outstanding of~~ ~~6.25%~~ ~~HEP senior notes.~~

The 8.25% and 6.5% HEP senior notes (collectively, the “HEP Senior Notes”) are unsecured and impose certain restrictive covenants, including limitations on HEP’s ability to incur additional indebtedness, make investments, sell assets, incur certain liens, pay distributions, enter into transactions with affiliates, and enter into mergers. At any time when the HEP Senior Notes are rated investment grade by both Moody’s and Standard & Poor’s and no default or event of default exists, HEP will not be subject to many of the foregoing covenants. Additionally, HEP has certain redemption rights under the HEP Senior Notes.

Indebtedness under the HEP Senior Notes involves recourse to HEP Logistics Holdings, L.P., its general partner, and is guaranteed by HEP’s wholly-owned subsidiaries. However, any recourse to the general partner would be limited to the extent of HEP Logistics Holdings, L.P.’s assets, which other than its investment in HEP, are not significant. HEP’s creditors have no other recourse to our assets. Furthermore, our creditors have no recourse to the assets of HEP and its consolidated subsidiaries.

~~The carrying amounts of long-term debt are as follows:~~

September 30,
2012 December 31,
2011
(In thousands)
9.875% Senior Notes
Principal $ 286,812
$ 291,812
Unamortized discount (7,788 ) (8,930 )
279,024
282,882
6.875% Senior Notes
Principal 150,000
150,000
Unamortized premium 6,115
6,490
156,115
156,490
8.5% Senior Notes
Principal —
199,985
Unamortized premium —
11,905
—
211,890
Financing Obligation 36,654
37,620

Total HollyFrontier long-term debt 471,793
688,882

HEP Credit Agreement 431,000
200,000

HEP 8.25% Senior Notes
Principal 150,000
150,000
Unamortized discount (1,678 ) (1,907 )
148,322
148,093
HEP 6.5% Senior Notes
Principal 300,000
—
Unamortized discount (4,888 ) —
295,112
—
HEP 6.25% Senior Notes
Principal —
185,000
Unamortized discount —
(8,331 )
Unamortized premium – designated fair value hedge —
1,098
—
177,767

Total HEP long-term debt 874,434
525,860

Total long-term debt $ 1,346,227
$ 1,214,742

~~We capitalized interest attributable to construction projects of~~ ~~$2.5 million~~ ~~and~~ ~~$5.8 million~~ ~~for the three months ended~~ ~~September 30, 2012~~ ~~and~~ ~~2011, respectively, and~~ ~~$6.3 million~~ ~~and~~ ~~$13.6 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012~~ ~~and~~ ~~2011, respectively.~~

2018

Table of Contents

HOLLYFRONTIER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued

The carrying amounts of long-term debt are as follows:



	March 31, 2013			December 31, 2012
	(In thousands)
9.875% Senior Notes
Principal	$	286,812		$	286,812
Unamortized discount	(7,139		)	(7,468		)
	279,673			279,344
6.875% Senior Notes
Principal	150,000			150,000
Unamortized premium	5,700			5,910
	155,700			155,910
Financing Obligation	35,959			36,311

Total HollyFrontier long-term debt	471,332			471,565

HEP Credit Agreement	368,000			421,000

HEP 8.25% Senior Notes
Principal	150,000			150,000
Unamortized discount	(1,525		)	(1,602		)
	148,475			148,398
HEP 6.5% Senior Notes
Principal	300,000			300,000
Unamortized discount	(4,562		)	(4,725		)
	295,438			295,275

Total HEP long-term debt	811,913			864,673

Total long-term debt	$	1,283,245		$	1,336,238

We capitalized interest attributable to construction projects of $3.4 million and $1.5 million for the three months ended March 31, 2013 and 2012, respectively.

NOTE ~~13:~~10: Derivative Instruments and Hedging Activities

Commodity Price Risk Management

Our primary market risk is commodity price risk. We are exposed to market risks related to the volatility in crude oil and refined products, as well as volatility in the price of natural gas used in our refining operations. We periodically enter into derivative contracts in the form of commodity price swaps and futures contracts to mitigate price exposure with respect to:

our inventory positions;

natural gas purchases;

costs of crude oil and related grade differentials;

prices of refined products; and

our refining margins.

Accounting Hedges

We have swap contracts serving as cash flow hedges against price risk on forecasted purchases of natural gas and WTI crude oil and forecasted sales of ultra-low sulfur ~~diesel and conventional unleaded gasoline.~~diesel. We also have forward sales contracts that lock in the sales prices of future sales of refined product. These contracts have been designated as accounting hedges and are measured quarterly at fair value with offsetting adjustments (gains/losses) recorded directly to other comprehensive income. These fair value adjustments are later reclassified to earnings as the hedging instruments mature. Also on a quarterly basis, hedge ineffectiveness is measured by comparing the change in fair value of the swap contracts against the expected future cash inflows/outflows on the respective transaction being hedged. Any hedge ineffectiveness is also recognized in earnings.

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HOLLYFRONTIER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued

The following table presents the pre-tax effect on other comprehensive income (“OCI”) and earnings due to fair value adjustments and maturities of commodity price swaps under hedge accounting:


	Unrealized Gain (Loss) Recognized in OCI			Gain (Loss) Recognized in Earnings Due to Settlements				Gain (Loss) Attributable to Hedge Ineffectiveness Recognized in Earnings				Unrealized Gain (Loss) Recognized in OCI			Gain (Loss) Recognized in Earnings Due to Settlements				Gain (Loss) Attributable to Hedge Ineffectiveness Recognized in Earnings
				Location	Amount			Location	Amount						Location	Amount			Location	Amount
				(In thousands)											(In thousands)
Three Months Ended September 30, 2012
Three Months Ended March 31, 2013
Commodity price swaps
Change in fair value												$	(10,404	)	Sales and other revenues	$	(19,185	)	Sales and other revenues	$	(356	)
Loss reclassified to earnings due to settlements												27,200			Cost of products sold	(6,532		)	Cost of products sold	3,131
Amortization of discontinued hedge reclassified to earnings												90			Operating expenses	(1,573		)	Operating expenses	(365		)
Total												$	16,886			$	(27,290	)		$	2,410

Three Months Ended March 31, 2012
Commodity price swaps
Change in fair value	$	(144,635	)	Sales and other revenues	$	(44,936	)	Sales and other revenues	$	(3,531	)	$	(140,121	)	Sales and other revenues	$	(34,125	)	Sales and other revenues	$	(1,330	)
Loss reclassified to earnings due to settlements	33,409			Cost of products sold	11,527			Cost of products sold	6,208			(16,416		)	Cost of products sold	50,541
Total	$	(111,226	)		$	(33,409	)		$	2,677		$	(156,537	)		$	16,416			$	(1,330	)

Three Months Ended September 30, 2011
Commodity price swaps
Change in fair value	$	22,181		Cost of products sold	$	—		Cost of products sold	$	362

Nine Months Ended September 30, 2012
Commodity price swaps
Change in fair value	$	(257,711	)	Sales and other revenues	$	(99,228	)	Sales and other revenues	$	(1,876	)
Loss reclassified to earnings due to settlements	20,986			Cost of products sold	78,242			Cost of products sold	(109		)
Total	$	(236,725	)		$	(20,986	)		$	(1,985	)

Nine Months Ended September 30, 2011
Commodity price swaps
Change in fair value	$	22,053
Loss reclassified to earnings due to settlements	166			Operating expenses	$	(166	)	Cost of products sold	$	362
Total	$	22,219			$	(166	)		$	362

~~Table of Contents~~

~~HOLLYFRONTIER CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) Continued~~

As of ~~September 30, 2012~~March 31, 2013, we have the following notional contract volumes ~~(stated in barrels)~~ related to outstanding ~~swap contracts~~derivative instruments serving as cash flow hedges against price risk on forecasted purchases of natural gas and crude oil and sales of refined products:


		Notional Contract Volumes by Year of Maturity			Notional Contract Volumes by Year of Maturity
Commodity Price Swaps	Total Outstanding Notional	2012	2013
Derivative Instrument				Total Outstanding Notional	2013	2014	2015	2016	2017	Unit of Measure

Commodity Price Swaps:
Natural gas - long				45,600,000	7,200,000	9,600,000	9,600,000	9,600,000	9,600,000	MMBTU
WTI crude oil - long	13,351,000	5,336,000	8,015,000	8,340,000	7,975,000	365,000	—	—	—	Barrels
Ultra-low sulfur diesel - short	10,143,000	2,668,000	7,475,000	8,340,000	7,975,000	365,000	—	—	—	Barrels
Conventional unleaded gasoline - short	3,208,000	2,668,000	540,000
Forward sales - diesel and gasoline				535,000	535,000	—	—	—	—	Barrels

In the first quarter of 2013, we dedesignated certain commodity price swaps (long positions) that previously received hedge accounting treatment. These contracts now serve as economic hedges against price risk on forecasted natural gas purchases totaling 45,600,000 MMBTU's to be purchased ratably through 2017. As of March 31, 2013, we have an unrealized loss of $5.1 million classified as OCI that relates to the application of hedge accounting prior to dedesignation that will be amortized as a charge to operating expenses as the contracts mature.

Economic Hedges

We also have swap contracts that serve as economic hedges (derivatives used for risk management, but not designated as accounting hedges) to fix our purchase price on forecasted ~~crude oil,~~ natural gas and ~~butane~~crude oil and other feedstock purchases, and to lock in the spread between WCS and WTI crude oil and between WTS and WTI crude oil on forecasted ~~purchases.~~purchases of WCS and WTS. Also, we have NYMEX futures contracts to lock in prices on ~~forecasted sales and~~ purchases of inventory. These contracts are measured quarterly at fair value with offsetting adjustments (gains/losses) recorded directly to income.

Table of Contents

HOLLYFRONTIER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued

The following table presents the pre-tax effect on income due to maturities and fair value adjustments of our economic hedges:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
Location of Gain Recognized in Income	2012		2011		2012		2011
Location of Gain (Loss) Recognized in Income									2013			2012
	(In thousands)								(In thousands)
Cost of products sold	$	19,869	$	10,034	$	55,738	$	9,382	$	33,592		$	(14,994	)
Operating expenses	604		—		446		—		(4,993		)	(1,701		)
Total	$	20,473	$	10,034	$	56,184	$	9,382	$	28,599		$	(16,695	)

As of ~~September 30, 2012~~March 31, 2013, we have the following notional contract volumes related to our outstanding ~~swap~~derivative contracts serving as economic hedges:


		Notional Contract Volumes by Year of Maturity				Notional Contract Volumes by Year of Maturity
Derivative Instrument	Total Outstanding Notional	2012	2013	Unit of Measure	Total Outstanding Notional	2013	2014	2015	2016	2017	Unit of Measure

Commodity price swap (gasoline) - long					125,000	125,000	—	—	—	—	Barrels
Commodity price swap (gasoline) - short					125,000	125,000	—	—	—	—	Barrels
Commodity price swap (WCS spread) - long					5,362,500	5,362,500	—	—	—	—	Barrels
Commodity price swap (WTS spread) - long					1,960,000	1,960,000	—	—	—	—	Barrels
Commodity price swap (natural gas) - long	3,312,000	3,312,000	—	MMBTU	45,600,000	7,200,000	9,600,000	9,600,000	9,600,000	9,600,000	MMBTU
Commodity price swap (WCS spread) - long	6,117,500	460,000	5,657,500	Barrels
Commodity price swap (WTI) - short	150,000	—	150,000	Barrels
Commodity price swap (gasoline) - short	630,000	150,000	480,000	Barrels
Commodity price swap (natural gas) - short					45,600,000	7,200,000	9,600,000	9,600,000	9,600,000	9,600,000	MMBTU
NYMEX futures (WTI) - long	234,000	—	234,000	Barrels	234,000	234,000	—	—	—	—	Barrels
NYMEX futures (WTI)- short	2,206,000	1,856,000	350,000	Barrels
NYMEX futures (WTI) - short					1,178,000	1,178,000	—	—	—	—	Barrels
Physical contracts - long					540,000	540,000	—	—	—	—	Barrels
Physical contracts - short					540,000	540,000	—	—	—	—	Barrels

~~Table of Contents~~

~~HOLLYFRONTIER CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) Continued~~

Interest Rate Risk Management

HEP uses interest rate swaps to manage its exposure to interest rate risk.

As of ~~September 30, 2012~~March 31, 2013, HEP had three interest rate swap contracts that hedge its exposure to the cash flow risk caused by the effects of LIBOR changes on $305.0 million in credit agreement advances. The first interest rate swap effectively converts $155.0 million of LIBOR based debt to fixed rate debt having an interest rate of 0.99% plus an applicable margin of ~~2.00%~~2.50% as of ~~September 30, 2012~~March 31, 2013, which equaled an effective interest rate of ~~2.99%~~3.49%. This swap matures in February 2016. ~~In August 2012,~~ HEP ~~entered into~~has two ~~similar~~additional interest rate swaps with identical terms which effectively convert $150.0 million of LIBOR based debt to fixed rate debt having an interest rate of 0.74% plus an applicable margin of ~~2.00%~~2.50% as of ~~September 30, 2012~~March 31, 2013, which equaled an effective interest rate of ~~2.74%~~3.24%. Both of these swap contracts mature in July 2017. All of these swap contracts have been designated as cash flow hedges. To date, there has been no ineffectiveness on these cash flow hedges.

At ~~September 30, 2012, HEP had a pre-tax unrealized loss recorded in accumulated other comprehensive income~~

Table of ~~$5.9 million~~ ~~that relates to its current and previous cash flow hedging instruments. Of this amount,~~ ~~$2.1 million~~ relates to a cash flow hedge terminated in December 2011 and represents the application of hedge accounting prior to termination. This amount will be amortized as a charge to interest expense through February 2013, the remaining term of the terminated swap contract.Contents

HOLLYFRONTIER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued

The following table presents the pre-tax effect on other comprehensive income and earnings due to fair value adjustments and maturities of HEP's interest rate swaps under cash flow hedge accounting:


	Unrealized Gain (Loss) Recognized in OCI			Loss Recognized in Earnings Due to Settlements				Unrealized Gain (Loss) Recognized in OCI			Loss Recognized in Earnings Due to Settlements
				Location	Amount						Location	Amount
				(In thousands)				(In thousands)
Three Months Ended September 30, 2012
Three Months Ended March 31, 2013
Interest rate swaps
Change in fair value	$	(1,802	)					$	58
Loss reclassified to earnings due to settlements	1,695			Interest expense	$	(1,695	)	504			Interest expense	$	(1,353	)
Amortization of discontinued hedge reclassified to earnings								849
Total	$	(107	)		$	(1,695	)	$	1,411			$	(1,353	)

Three Months Ended September 30, 2011
Three Months Ended March 31, 2012
Interest rate swaps
Change in fair value	$	(310	)					$	(578	)
Loss reclassified to earnings due to settlements	1,403			Interest expense	$	(1,403	)	224			Interest expense	$	(1,498	)
Amortization of discontinued hedge reclassified to earnings								1,274
Total	$	1,093			$	(1,403	)	$	920			$	(1,498	)

Nine Months Ended September 30, 2012
Interest rate swaps
Change in fair value	$	(4,240	)
Loss reclassified to earnings due to settlements	4,818			Interest expense	$	(4,818	)
Total	$	578			$	(4,818	)

Nine Months Ended September 30, 2011
Interest rate swaps
Change in fair value	$	(1,485	)
Loss reclassified to earnings due to settlements	4,132			Interest expense	$	(4,132	)
Total	$	2,647			$	(4,132	)

The following table presents the fair value and balance sheet locations of our outstanding derivative instruments. These amounts are presented on a gross basis with offsetting balances that reconcile to a net asset or liability position in our consolidated balance sheets. We present on a net basis to reflect the net settlement of these positions in accordance with provisions of our master netting arrangements.



	Derivatives in Net Asset Position							Derivatives in Net Liability Position
	Gross Assets		Gross Liabilities Offset in Balance Sheet			Net Assets Recognized in Balance Sheet		Gross Liabilities		Gross Assets Offset in Balance Sheet			Net Liabilities Recognized in Balance Sheet
			(In thousands)
March 31, 2013
Derivatives designated as cash flow hedging instruments:
Commodity price swap contracts	$	—	$	—		$	—	$	24,630	$	(27,144	)	$	(2,514	)
Forward sales contracts	1,468		—			1,468		—		—			—
Interest rate swap contracts	—		—			—		2,868		—			2,868
	$	1,468	$	—		$	1,468	$	27,498	$	(27,144	)	$	354

Derivatives not designated as cash flow hedging instruments:
Commodity price swap contracts	$	12,493	$	(1,842	)	$	10,651	$	12,178	$	(4,171	)	$	8,007
NYMEX futures contracts	—		—			—		5,837		—			5,837
	$	12,493	$	(1,842	)	$	10,651	$	18,015	$	(4,171	)	$	13,844

Total net balance						$	12,119						$	14,198

Balance sheet classification:	Prepayment and other					$	12,119	Accrued liabilities					$	562
								Other long-term liabilities					13,636
						$	12,119						$	14,198

2322

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HOLLYFRONTIER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued

The following table presents balance sheet locations and related fair values of outstanding derivative instruments. These amounts are presented on a gross basis in accordance with GAAP disclosure requirements and do not reflect the netting of asset or liability positions permitted under the terms of master netting arrangements. Therefore, they are not equal to amounts presented in our consolidated balance sheets.

Asset Derivatives Liability Derivatives

Balance Sheet
Location
Fair Value
Balance Sheet
Location
Fair Value
(In thousands)
September 30, 2012
Derivatives designated as cash flow hedging instruments:
Commodity price swap contracts Accrued liabilities $ 22,018
Accrued liabilities $ 86,945
Variable-to-fixed interest rate swap contracts Other long-term liabilities 3,764
Total $ 22,018
$ 90,709

Derivatives not designated as hedging instruments:
Commodity price swap contracts Prepayments and other current assets $ 4,126

Accrued liabilities 20,986
Accrued liabilities $ 13,516
Total $ 25,112
$ 13,516

December 31, 2011
Derivatives designated as cash flow hedging instruments:
Commodity price swap contracts Prepayments and other current assets $ 173,784

Variable-to-fixed interest rate swap contracts Other long-term liabilities $ 520
Total $ 173,784
$ 520

Derivatives not designated as hedging instruments:
Commodity price swap contracts Prepayments and other current assets $ 1,870
Accrued liabilities $ 1,252



	Derivatives in Net Asset Position						Derivatives in Net Liability Position
	Gross Assets		Gross Liabilities Offset in Balance Sheet		Net Assets Recognized in Balance Sheet		Gross Liabilities		Gross Assets Offset in Balance Sheet			Net Liabilities Recognized in Balance Sheet
			(In thousands)
December 31, 2012
Derivatives designated as cash flow hedging instruments:
Commodity price swap contracts	$	—	$	—	$	—	$	37,828	$	(17,383	)	$	20,445
Interest rate swap contracts	—		—		—		3,430		—			3,430
	$	—	$	—	$	—	$	41,258	$	(17,383	)	$	23,875

Derivatives not designated as cash flow hedging instruments:
Commodity price swap contracts	$	—	$	—	$	—	$	46,154	$	—		$	46,154
NYMEX futures contracts	—		—		—		5,563		—			5,563
	$	—	$	—	$	—	$	51,717	$	—		$	51,717

Total net balance					$	—						$	75,592

Balance sheet classification:							Accrued liabilities					$	62,388
							Other long-term liabilities					13,204
												$	75,592

At ~~September 30, 2012~~March 31, 2013, we had a pre-tax net unrealized loss of $~~68.7~~4.3 million classified in accumulated other comprehensive income that relates to all accounting hedges. Assuming commodity prices and interest rates remain unchanged, an unrealized ~~loss~~gain of approximately $~~66.0~~5.3 million will be effectively transferred from accumulated other comprehensive income into the statement of income as the hedging instruments mature over the next twelve-month period.

~~Table of Contents~~

~~HOLLYFRONTIER CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) Continued~~


NOTE ~~14:~~11:	Equity

Changes to equity during the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013 are presented below:


	HollyFrontier Stockholders’ Equity			Noncontrolling Interest			Total Equity			HollyFrontier Stockholders’ Equity			Noncontrolling Interest			Total Equity
	(In thousands)									(In thousands)
Balance at December 31, 2011	$	5,204,010		$	631,890		$	5,835,900
Balance at December 31, 2012										$	6,052,954		$	589,704		$	6,642,658
Net income	1,335,568			24,472			1,360,040			333,669			9,702			343,371
Other comprehensive income (loss)	(140,394		)	529			(139,865		)
Dividends	(494,107		)	—			(494,107		)	(163,388		)	—			(163,388		)
Distributions to noncontrolling interest holders	—			(43,749		)	(43,749		)	—			(15,288		)	(15,288		)
Allocated equity on HEP unit issuances	11,469			(18,763		)	(7,294		)
Contribution from joint venture partner	—			3,000			3,000
Other comprehensive income, net of tax										11,759			792			12,551
Allocated equity on HEP common unit issuances, net of tax										54,011			60,145			114,156
Equity-based compensation	23,166			2,233			25,399			7,457			1,123			8,580
Excess tax benefit attributable to equity-based compensation	16,020			—			16,020			744			—			744
Purchase of treasury stock ⁽¹⁾	(200,076		)	—			(200,076		)	(11,413		)	—			(11,413		)
Net proceeds received under structured share repurchase arrangement	8,620			—			8,620
Purchase of HEP units for restricted grants	—			(4,392		)	(4,392		)	—			(2,924		)	(2,924		)
Balance at September 30, 2012	$	5,764,276		$	595,220		$	6,359,496
Balance at March 31, 2013										$	6,285,793		$	643,254		$	6,929,047


(1)	Includes ~~329,631~~31,141 shares withheld under the terms of stock-based compensation agreements to provide funds for the payment of payroll and income taxes due at the vesting of share-based awards.

~~In January 2012, our~~We have a Board ~~of Directors~~ approved a ~~$350 million~~ ~~stock repurchase program, and in June 2012, approved an additional~~ ~~$350 million~~ repurchase program that authorizes us to repurchase common stock in the open market or through privately negotiated transactions. The timing and amount of stock repurchases will depend on market conditions, corporate, regulatory and other relevant considerations. ~~These programs~~This program may be discontinued at any time by the Board of Directors. As of ~~September 30, 2012~~March 31, 2013, we ~~have repurchased~~had remaining authorization to repurchase up to ~~6,351,498~~ ~~shares at a cost of~~ $~~189.8~~494.4 million under ~~these~~this stock repurchase ~~programs.~~program.

~~In May 2012, we entered into a structured share repurchase arrangement with a financial institution under which we provided an up-front cash payment of~~ ~~$100.0 million~~ and, depending on market conditions, would either receive shares of our common stock or cash at the expiration of the agreement. The agreement expired in September 2012 at which time we received our up-front payment plus an additional ~~$8.6 million~~ ~~in cash that was recorded as additional capital.~~

2523

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HOLLYFRONTIER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued


NOTE ~~15:~~12:	Other Comprehensive Income (Loss)

The components and allocated tax effects of other comprehensive income (loss) are as follows:


	Before-Tax			Tax Expense (Benefit)			After-Tax			Before-Tax			Tax Expense (Benefit)			After-Tax
	(In thousands)									(In thousands)
Three Months Ended September 30, 2012
Three Months Ended March 31, 2013
Unrealized gain, net of reclassifications from sale or maturity, on available-for-sale securities										$	16		$	8		$	8
Unrealized gain on hedging activities										18,297			6,809			11,488
Actuarial loss on post-retirement healthcare plan reclassified to net income upon partial plan settlement										1,726			671			1,055
Other comprehensive income										20,039			7,488			12,551
Less other comprehensive income attributable to noncontrolling interest										792			—			792
Other comprehensive income attributable to HollyFrontier stockholders										$	19,247		$	7,488		$	11,759

Three Months Ended March 31, 2012
Unrealized gain, net of reclassifications from sale or maturity, on available-for-sale securities	$	13		$	6		$	7		$	188		$	74		$	114
Unrealized loss on hedging activities	(111,333		)	(43,359		)	(67,974		)	(155,615		)	(60,744		)	(94,871		)
Other comprehensive loss	(111,320		)	(43,353		)	(67,967		)	(155,427		)	(60,670		)	(94,757		)
Less other comprehensive income attributable to noncontrolling interest	129			—			129			537			—			537
Other comprehensive loss attributable to HollyFrontier stockholders	$	(111,449	)	$	(43,353	)	$	(68,096	)	$	(155,964	)	$	(60,670	)	$	(95,294	)

Three Months Ended September 30, 2011
Unrealized loss on available-for-sale securities	$	(655	)	$	(252	)	$	(403	)
Unrealized gain on hedging activities	23,272			8,772			14,500
Retirement medical obligation adjustment	9			—			9
Other comprehensive income	22,626			8,520			14,106
Less other comprehensive income attributable to noncontrolling interest	717			—			717
Other comprehensive income attributable to HollyFrontier stockholders	$	21,909		$	8,520		$	13,389

Nine Months Ended September 30, 2012
Unrealized loss, net of reclassifications from sale or maturity, on available-for-sale securities	$	(203	)	$	(78	)	$	(125	)
Unrealized loss on hedging activities	(236,147		)	(92,068		)	(144,079		)
Pension plan curtailment	7,102			2,763			4,339
Other comprehensive loss	(229,248		)	(89,383		)	(139,865		)
Less other comprehensive income attributable to noncontrolling interest	529			—			529
Other comprehensive loss attributable to HollyFrontier stockholders	$	(229,777	)	$	(89,383	)	$	(140,394	)

Nine Months Ended September 30, 2011
Unrealized loss on available-for-sale securities	$	(972	)	$	(376	)	$	(596	)
Unrealized gain on hedging activities	24,864			8,994			15,870
Retirement medical obligation adjustment	9			—			9
Other comprehensive income	23,901			8,618			15,283
Less other comprehensive income attributable to noncontrolling interest	1,737			—			1,737
Other comprehensive income attributable to HollyFrontier stockholders	$	22,164		$	8,618		$	13,546

The temporary unrealized gain (loss) on available-for-sale securities is due to changes in market prices of securities.

Table of Contents

HOLLYFRONTIER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued

The following table presents the income statement line item effects for reclassifications out of accumulated other comprehensive income (“AOCI”):



AOCI Components	Gain (Loss) Reclassified From AOCI			Income Statement Line Item
	(In thousands)
Three Months Ended March 31, 2013

Securities available-for-sale	$	3		Interest income
	1			Income tax expense
	$	2		Net of tax

Hedging instruments:
Commodity price swaps	$	(19,185	)	Sales and other revenues
	(6,532		)	Cost of products sold
	(1,573		)	Operating expenses
Interest rate swaps	(1,353		)	Interest expense
	(28,643		)
	(10,823		)	Income tax benefit
	(17,820		)	Net of tax
	820			Noncontrolling interest
	$	(17,000	)	Net of tax and noncontrolling interest

Retiree medical obligation	$	(84	)	Cost of products sold
	(1,549		)	Operating expenses
	(93		)	General and administrative expenses
	(1,726		)
	(671		)	Income tax benefit
	$	(1,055	)	Net of tax

Total reclassifications for the period	$	(18,053	)

Three Months Ended March 31, 2012

Securities available-for-sale	$	117		Interest income
	46			Income tax expense
	$	71		Net of tax

Hedging instruments
Commodity price swaps	$	(34,125	)	Sales and other revenues
	50,541			Cost of products sold
Interest rate swaps	(1,498		)	Interest expense
	14,918
	6,143			Income tax expense
	8,775			Net of tax
	873			Noncontrolling interest
	$	9,648		Net of tax and noncontrolling interest

Total reclassifications for the period	$	9,719

Table of Contents

HOLLYFRONTIER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued

Accumulated other comprehensive income (loss) in the equity section of our consolidated balance sheets includes:

September 30,
2012 December 31,
2011
(In thousands)
Pension obligation adjustment $ (18,376 ) $ (22,715 )
Retiree medical obligation adjustment (4,042 ) (4,042 )
Unrealized gain on available-for-sale securities 9
134
Unrealized gain (loss) on hedging activities, net of noncontrolling interest (40,112 ) 104,496
Accumulated other comprehensive income (loss) $ (62,521 ) $ 77,873



	March 31, 2013			December 31, 2012
	(In thousands)
Pension obligation	$	(23,973	)	$	(23,973	)
Retiree medical obligation	29,660			28,605
Unrealized gain (loss) on available-for-sale securities	1			(7		)
Unrealized (loss) on hedging activities, net of noncontrolling interest	(2,354		)	(13,050		)
Accumulated other comprehensive income (loss)	$	3,334		$	(8,425	)

~~Table of Contents~~

~~HOLLYFRONTIER CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) Continued~~


NOTE ~~16:~~13:	Retirement Plan

We sponsor a non-contributory defined benefit retirement plan that covers ~~most legacy Holly non-union employees hired prior to January 1, 2007 and union employees hired prior to July 1, 2010, and was closed to new entrants effective January 1, 2007 for non-union~~certain employees and July 1, 2010 for union employees. Effective January 1, 2012, no additional benefits will be accrued under this plan for non-union employee participants and effective May 1, 2012, no additional benefits will be accrued for union employee participants, at which time the plan wasis fully frozen. ~~The changes for union employee participants have been accounted for~~In 2012, our Compensation Committee, pursuant to authority delegated to it by the Board of Directors, approved the termination of the HollyFrontier Corporation Pension Plan (the “Plan”). Accordingly, our remaining liability under the Plan is expected to be funded in 2013. Our actual obligations under the Plan are contingent upon the timing of the pension plan termination as ~~a curtailment. Accordingly,~~well as participant settlement obligations. We expect to record an additional expense on termination of the Plan at the date we ~~adjusted~~are released from the ~~projected benefit obligation and~~liability, including the amount of actuarial loss currently recorded as accumulated other comprehensive income by ($~~7.1~~37.6 million, $23.0 million ~~and recorded additional pension expense~~after-tax) at March 31, 2013 plus an amount equal to any contribution we make to the Plan in excess of the $~~0.7~~19.3 million ~~in the second quarter of 2012. The changes related to the non-union employees were also accounted for as a curtailment, which was~~accrued pension liability we have recorded in the fourth quarter of 2011. Our funding policy for this defined benefit retirement plan is to make annual contributions of not less than the minimum funding requirements of the Employee Retirement Income Security Act of 1974. Benefits are based on the employee’s years of service and compensation.at March 31, 2013.

The net periodic pension expense consisted of the following components:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2012			2011			2012			2011			2013			2012
	(In thousands)												(In thousands)
Service cost – benefit earned during the period	$	—		$	1,268		$	679		$	3,803		$	—		$	170
Interest cost on projected benefit obligations	955			1,281			3,007			3,844			899			991
Expected return on plan assets	(950		)	(1,244		)	(2,849		)	(3,923		)	(46		)	(950		)
Amortization of prior service cost	—			97			67			293			—			17
Amortization of net loss	415			529			1,518			1,594			693			483
Estimated effect of curtailment	—			798			899			798			—			225
Net periodic pension expense	$	420		$	2,729		$	3,321		$	6,409		$	1,546		$	936

The expected long-term annual rate of return on plan assets is ~~6.5%~~0.25%, which is the rate is used in measuring ~~2012~~2013 net periodic benefit costs. ~~We contributed~~ ~~$22.4 million~~ ~~to the retirement plan in June~~ ~~2012~~.

In 2012, we established a program for plan participants whose benefits pursuant to the defined benefit plan were frozen. The program provides for payments after year-end for each of the next three years provided the employee remains with ~~the~~ us. The payments are based on each employee's years of service and eligible salary. For the ~~three and~~ ~~nine~~three months ended ~~September 30,~~ March 31, 2013 and 2012, we recognized transition benefit costs of $~~3.2~~2.9 million and $~~10.1~~3.4 million, respectively, associated with transition to the new defined contribution plan.

We have a post-retirement healthcare and other benefits plan that is available to certain of our employees who satisfy certain age and service requirements.The net periodic benefit expense of this plan consisted of the following components:

Three Months Ended September 30, 2012 Nine Months Ended September 30, 2012
(In thousands)
Service cost – benefit earned during the period $ 475
$ 1,425
Interest cost on projected benefit obligations 875
2,625
Amortization of prior service credit (550 ) (1,650 )
Amortization of net loss 75
225
Net periodic pension expense $ 875
$ 2,625

2726

Table of Contents

HOLLYFRONTIER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued



	Three Months Ended March 31,
	2013			2012
	(In thousands)
Service cost – benefit earned during the period	$	278		$	475
Interest cost on projected benefit obligations	159			875
Amortization of prior service credit	(1,474		)	(550		)
Amortization of net loss	31			75
Actuarial loss on post-retirement healthcare plan reclassified to net income upon partial plan settlement	1,726			—
Net periodic pension expense	$	720		$	875

In the first quarter of 2013, we settled a portion of our post-retirement medical obligation. Upon settlement, we reclassified a $1.7 million pretax loss out of accumulated other comprehensive income that was recognized as a charge to net income.


NOTE ~~17:~~14:	Contingencies

We are a party to various litigation and legal proceedings which we believe, based on advice of counsel, will not either individually or in the aggregate have a materially adverse effect on our financial condition, results of operations or cash flows.


NOTE ~~18:~~15:	Segment Information

Our operations are organized into two reportable segments, Refining and HEP. Our operations that are not included in the Refining and HEP segments are included in Corporate and Other. Intersegment transactions are eliminated in our consolidated financial statements and are included in Consolidations and Eliminations.

The Refining segment represents the operations of the El Dorado, Tulsa, Navajo, Cheyenne and Woods Cross Refineries and NK ~~Asphalt.~~Asphalt (aggregated as a reportable segment). Refining activities involve the purchase and refining of crude oil and wholesale and branded marketing of refined products, such as gasoline, diesel fuel and jet fuel. These petroleum products are primarily marketed in the Mid-Continent, Southwest and Rocky Mountain regions of the United States. Additionally, the Refining segment includes specialty lubricant products produced at our Tulsa Refineries that are marketed throughout North America and are distributed in Central and South America. NK Asphalt operates various asphalt terminals in Arizona and New Mexico.

The HEP segment includes all of the operations of HEP, a consolidated VIE, which owns and operates logistics assets consisting of petroleum product and crude oil pipelines and terminal, tankage and loading rack facilities in the Mid-Continent, Southwest and Rocky Mountain regions of the United States. Revenues are generated by charging tariffs for transporting petroleum products and crude oil through its pipelines, by leasing certain pipeline capacity, by charging fees for terminalling refined products and other hydrocarbons and storing and providing other services at its storage tanks and terminals. The HEP segment also includes a 75% interest in UNEV (a consolidated subsidiary of HEP) and a 25% interest in the SLC Pipeline. Revenues from the HEP segment are earned through transactions with unaffiliated parties for pipeline transportation, rental and terminalling operations as well as revenues relating to pipeline transportation services provided for our refining operations. Our revaluation of HEP’s assets and liabilities at March 1, 2008 (date of reconsolidation) resulted in basis adjustments to our consolidated HEP balances. Therefore, our reported amounts for the HEP segment may not agree to amounts reported in HEP’s periodic public filings.

The accounting policies for our segments are the same as those described in the summary of significant accounting policies in our Annual Report on Form 10-K for the year ended December 31, ~~2011~~2012.

2827

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HOLLYFRONTIER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued


	Refining ⁽¹⁾		HEP ⁽²⁾		Corporate and Other			Consolidations and Eliminations			Consolidated Total		Refining		HEP ⁽¹⁾		Corporate and Other			Consolidations and Eliminations			Consolidated Total
	(In thousands)												(In thousands)
Three Months Ended September 30, 2012
Three Months Ended March 31, 2013
Sales and other revenues	$	5,192,649	$	72,496	$	352		$	(60,699	)	$	5,204,798	$	4,692,426	$	76,484	$	563		$	(61,684	)	$	4,707,789
Depreciation and amortization	$	47,890	$	12,636	$	4,793		$	(207	)	$	65,112	$	57,170	$	13,749	$	1,050		$	(207	)	$	71,762
Income (loss) from operations	$	973,586	$	37,137	$	(31,871	)	$	(548	)	$	978,304	$	542,202	$	33,474	$	(25,972	)	$	(509	)	$	549,195
Capital expenditures	$	70,069	$	5,683	$	3,765		$	—		$	79,517	$	63,632	$	5,013	$	3,319		$	—		$	71,964

Three Months Ended September 30, 2011
Three Months Ended March 31, 2012
Sales and other revenues	$	5,164,853	$	49,131	$	299		$	(40,885	)	$	5,173,398	$	4,919,737	$	67,577	$	156		$	(55,732	)	$	4,931,738
Depreciation and amortization	$	35,070	$	7,505	$	872		$	(207	)	$	43,240	$	41,721	$	13,395	$	1,193		$	(207	)	$	56,102
Income (loss) from operations	$	884,997	$	24,587	$	(40,135	)	$	(242	)	$	869,207	$	414,943	$	32,113	$	(26,975	)	$	(517	)	$	419,564
Capital expenditures	$	46,294	$	68,101	$	3,523		$	—		$	117,918	$	45,534	$	14,254	$	1,599		$	—		$	61,387

Nine Months Ended September 30, 2012
Sales and other revenues	$	14,907,849	$	207,250	$	912		$	(172,794	)	$	14,943,217
Depreciation and amortization	$	133,087	$	38,683	$	7,013		$	(621	)	$	178,162
Income (loss) from operations	$	2,201,648	$	100,843	$	(89,899	)	$	(1,587	)	$	2,211,005
Capital expenditures	$	171,865	$	29,302	$	6,370		$	—		$	207,537

Nine Months Ended September 30, 2011
Sales and other revenues	$	10,432,720	$	144,916	$	1,100		$	(111,620	)	$	10,467,116
Depreciation and amortization	$	81,875	$	22,407	$	2,719		$	(621	)	$	106,380
Income (loss) from operations	$	1,357,739	$	75,700	$	(73,689	)	$	(1,265	)	$	1,358,485
Capital expenditures	$	92,078	$	175,795	$	6,350		$	—		$	274,223


September 30, 2012
March 31, 2013
Cash, cash equivalents and investments in marketable securities	$	557	$	1,993	$	2,340,786	$	—		$	2,343,336	$	20	$	18,193	$	2,524,923	$	—		$	2,543,136
Total assets	$	6,567,224	$	1,409,151	$	2,426,067	$	(56,506	)	$	10,345,936	$	6,946,525	$	1,428,372	$	2,671,573	$	(350,298	)	$	10,696,172
Long-term debt	$	—	$	874,434	$	487,843	$	(16,050	)	$	1,346,227	$	—	$	811,913	$	487,092	$	(15,760	)	$	1,283,245

December 31, 2011
December 31, 2012
Cash, cash equivalents and investments in marketable securities	$	—	$	6,369	$	1,834,241	$	—		$	1,840,610	$	2,101	$	5,237	$	2,386,063	$	—		$	2,393,401
Total assets	$	6,280,426	$	1,418,660	$	1,997,601	$	(120,444	)	$	9,576,243	$	6,702,872	$	1,426,800	$	2,531,967	$	(332,642	)	$	10,328,997
Long-term debt	$	—	$	598,761	$	705,331	$	(89,350	)	$	1,214,742	$	—	$	864,673	$	487,472	$	(15,907	)	$	1,336,238

~~(1) The Refining segment reflects the operations of the El Dorado and Cheyenne Refineries beginning July 1, 2011 (date of Holly-Frontier merger).~~

~~(2)~~(1) HEP acquired our 75% interest in UNEV in July 2012. As a result, we have recast our HEP segment information for the three months ended March 31, 2012to include the UNEV Pipeline operations as a consolidated subsidiary of ~~HEP for all periods presented. For the three and nine months ended~~ ~~September 30, 2012, UNEV Pipeline revenues were~~ ~~$3.0 million~~ ~~and~~ ~~$10.8 million, respectively.~~HEP. The UNEV Pipeline ~~was~~operations were previously presented under Corporate and Other.

HEP segment revenues from external customers were $~~11.9~~12.9 million and $~~8.3 million~~ ~~for the three months ended~~ ~~September 30, 2012~~ ~~and~~ ~~2011, respectively, and~~ ~~$34.6 million~~ ~~and~~ ~~$33.0~~11.9 million for the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012, respectively.

~~Table of Contents~~

~~HOLLYFRONTIER CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) Continued~~


NOTE ~~19:~~16:	Supplemental Guarantor/Non-Guarantor Financial Information

Our obligations under the HollyFrontier Senior Notes have been jointly and severally guaranteed by the substantial majority of our existing and future restricted subsidiaries (“Guarantor Restricted Subsidiaries”). These guarantees are full and unconditional. HEP, in which we have a ~~44%~~39% ownership interest at ~~September 30, 2012~~March 31, 2013, and its subsidiaries (collectively, “Non-Guarantor Non-Restricted Subsidiaries”), and certain of our other subsidiaries (“Non-Guarantor Restricted Subsidiaries”) have not guaranteed these obligations.

The following condensed consolidating financial information is provided for HollyFrontier Corporation (the “Parent”), the Guarantor Restricted Subsidiaries, the Non-Guarantor Restricted Subsidiaries and the Non-Guarantor Non-Restricted Subsidiaries. The information has been presented as if the Parent accounted for its ownership in the Guarantor Restricted Subsidiaries, and the Guarantor Restricted Subsidiaries accounted for the ownership of the Non-Guarantor Restricted Subsidiaries and Non-Guarantor Non-Restricted Subsidiaries, using the equity method of accounting. The Guarantor Restricted Subsidiaries and the Non-Guarantor Restricted Subsidiaries are collectively the “Restricted Subsidiaries.”

HEP acquired our 75% interest in UNEV in July 2012. As a result, we have recast our HEP segment information for the three months ended March 31, 2012to include the UNEV Pipeline operations as a consolidated subsidiary of ~~HEP for all periods presented. The~~HEP. UNEV ~~Pipeline~~ was previously presented as a Non-Guarantor Restricted Subsidiary.

Condensed Consolidating Balance Sheet
September 30, 2012 Parent
Guarantor
Restricted
Subsidiaries

Non-
Guarantor
Restricted
Subsidiaries
Eliminations
HollyFrontier
Corp. Before
Consolidation
of HEP

Non-Guarantor
Non-Restricted
Subsidiaries
(HEP Segment)
Eliminations Consolidated
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 2,053,324
$ 2,089
$ 2
$ —
$ 2,055,415
$ 1,993
$ —
$ 2,057,408
Marketable securities 280,401
8
—
—
280,409
—
—
280,409
Accounts receivable, net 2,265
732,777
—
—
735,042
42,832
(41,000 ) 736,874
Intercompany accounts receivable (payable) 1,175,041
(1,431,906 ) 256,865
—
—
—
—
—
Inventories —
1,484,217
—
—
1,484,217
1,233
—
1,485,450
Income taxes receivable 40,544
—
4
—
40,548
—
—
40,548
Prepayments and other 6,557
29,973
—
—
36,530
3,080
(8,378 ) 31,232
Total current assets 3,558,132
817,158
256,871
—
4,632,161
49,138
(49,378 ) 4,631,921
Properties, plants and equip, net 22,483
2,108,183
—
—
2,130,666
994,926
(5,660 ) 3,119,932
Marketable securities (long-term) 5,519
—
—
—
5,519
—
—
5,519
Investment in subsidiaries 3,251,918
280,048
(181,421 ) (3,350,545 ) —
—
—
—
Intangibles and other assets 9,608
2,215,337
25,000
(25,000 ) 2,224,945
365,087
(1,468 ) 2,588,564
Total assets $ 6,847,660
$ 5,420,726
$ 100,450
$ (3,375,545 ) $ 8,993,291
$ 1,409,151
$ (56,506 ) $ 10,345,936

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 135,714
$ 1,424,692
$ 4
$ —
$ 1,560,410
$ 11,303
$ (40,999 ) $ 1,530,714
Income taxes payable 2,319
148,580
—
—
150,899
—
—
150,899
Accrued liabilities 87,232
120,858
954
—
209,044
19,315
(8,379 ) 219,980
Deferred income tax liabilities 191,958
(16,381 ) (10 ) —
175,567
—
—
175,567
Total current liabilities 417,223
1,677,749
948
—
2,095,920
30,618
(49,378 ) 2,077,160
Long-term debt 460,139
27,704
—
—
487,843
874,434
(16,050 ) 1,346,227
Deferred income tax liabilities 189,613
203,766
875
—
394,254
—
4,951
399,205
Other long-term liabilities 91,153
92,733
—
(25,000 ) 158,886
7,574
(2,612 ) 163,848
Investment in HEP —
166,856
—
—
166,856
—
(166,856 ) —
Equity – HollyFrontier 5,689,532
3,251,918
98,627
(3,350,545 ) 5,689,532
396,644
(321,900 ) 5,764,276
Equity – noncontrolling interest —
—
—
—
—
99,881
495,339
595,220
Total liabilities and equity $ 6,847,660
$ 5,420,726
$ 100,450
$ (3,375,545 ) $ 8,993,291
$ 1,409,151
$ (56,506 ) $ 10,345,936

3028

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HOLLYFRONTIER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued


Condensed Consolidating Balance Sheet	Condensed Consolidating Balance Sheet																						Condensed Consolidating Balance Sheet
December 31, 2011		Parent			Guarantor Restricted Subsidiaries			Non- Guarantor Restricted Subsidiaries			Eliminations			HollyFrontier Corp. Before Consolidation of HEP		Non-Guarantor Non-Restricted Subsidiaries (HEP Segment)		Eliminations			Consolidated
March 31, 2013																								Parent			Guarantor Restricted Subsidiaries		Non- Guarantor Restricted Subsidiaries		Eliminations			HollyFrontier Corp. Before Consolidation of HEP		Non-Guarantor Non-Restricted Subsidiaries (HEP Segment)		Eliminations			Consolidated
		(In thousands)																						(In thousands)
ASSETS
Current assets:
Cash and cash equivalents		$	1,575,891		$	(3,358	)	$	2		$	—		$	1,572,535	$	6,369	$	—		$	1,578,904		$	1,854,247		$	—	$	2	$	—		$	1,854,249	$	18,193	$	—		$	1,872,442
Marketable securities		210,886			753			—			—			211,639		—		—			211,639			665,685			9		—		—			665,694		—		—			665,694
Accounts receivable, net		8,317			698,911			—			—			707,228		37,290		(35,661		)	708,857			4,766			650,601		7,763		—			663,130		37,129		(43,735		)	656,524
Intercompany accounts receivable (payable)		3,075,563			(3,373,844		)	298,281			—			—		—		—			—			(765,537		)	499,248		266,289		—			—		—		—			—
Inventories		—			1,113,136			—			—			1,113,136		1,483		—			1,114,619			—			1,469,309		—		—			1,469,309		1,491		—			1,470,800
Income taxes receivable		87,273			4			—			—			87,277		—		—			87,277			37,904			—		—		—			37,904		—		—			37,904
Prepayments and other		19,379			202,428			4			—			221,811		2,246		(4,607		)	219,450			22,859			39,266		—		—			62,125		1,984		(4,163		)	59,946
Total current assets		4,977,309			(1,361,970		)	298,287			—			3,913,626		47,388		(40,268		)	3,920,746			1,819,924			2,658,433		274,054		—			4,752,411		58,797		(47,898		)	4,763,310
Properties, plants and equip, net		26,702			2,026,105			—			—			2,052,807		1,006,379		(6,281		)	3,052,905			25,019			2,468,535		—		—			2,493,554		1,005,577		(284,933		)	3,214,198
Marketable securities (long-term)		50,067			—			—			—			50,067		—		—			50,067			5,000			—		—		—			5,000		—		—			5,000
Investment in subsidiaries		846,359			295,902			(240,060		)	(902,201		)	—		—		—			—			5,909,650			175,693		—		(6,085,343		)	—		—		—			—
Intangibles and other assets		19,329			2,242,197			—			—			2,261,526		364,893		(73,894		)	2,552,525			17,096			2,334,619		40,418		(25,000		)	2,367,133		363,998		(17,467		)	2,713,664
Total assets		$	5,919,766		$	3,202,234		$	58,227		$	(902,201	)	$	8,278,026	$	1,418,660	$	(120,443	)	$	9,576,243		$	7,776,689		$	7,637,280	$	314,472	$	(6,110,343	)	$	9,618,098	$	1,428,372	$	(350,298	)	$	10,696,172

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	23,497		$	1,494,790		$	359		$	—		$	1,518,646	$	21,709	$	(35,661	)	$	1,504,694		$	68,099		$	1,294,946	$	—	$	—		$	1,363,045	$	12,346	$	(35,972	)	$	1,339,419
Income taxes payable		(109,320		)	149,686			—			—			40,366		—		—			40,366			151,403			—		—		—			151,403		—		—			151,403
Accrued liabilities		53,390			103,981			1,170			—			158,541		16,006		(4,607		)	169,940			52,552			63,281		1,200		—			117,033		14,135		(4,163		)	127,005
Deferred income tax liabilities		192,073			(16,390		)	—			—			175,683		—		—			175,683			149,127			—		—		—			149,127		—		—			149,127
Total current liabilities		159,640			1,732,067			1,529			—			1,893,236		37,715		(40,268		)	1,890,683			421,181			1,358,227		1,200		—			1,780,608		26,481		(40,135		)	1,766,954
Long-term debt		651,261			54,070			—			—			705,331		598,761		(89,350		)	1,214,742			460,374			35,958		—		(25,000		)	471,332		811,913		—			1,283,245
Liability to HEP																								—			254,789		—		—			254,789		—		(254,789		)	—
Deferred income tax liabilities		162,021			295,893			856			—			458,770		—		4,951			463,721			549,151			—		—		—			549,151		4,951		—			554,102
Other long-term liabilities		116,443			52,892			—			—			169,335		4,000		(2,138		)	171,197			57,168			78,656		—		—			135,824		30,193		(3,193		)	162,824
Investment in HEP		—			220,953			—			—			220,953		—		(220,953		)	—			—			—		137,579		—			137,579		—		(137,579		)	—
Equity – HollyFrontier		4,830,401			846,359			55,842			(902,201		)	4,830,401		679,182		(305,573		)	5,204,010			6,288,815			5,909,650		175,693		(6,085,343		)	6,288,815		453,256		(456,278		)	6,285,793
Equity – noncontrolling interest		—			—			—			—			—		99,002		532,888			631,890			—			—		—		—			—		101,578		541,676			643,254
Total liabilities and equity		$	5,919,766		$	3,202,234		$	58,227		$	(902,201	)	$	8,278,026	$	1,418,660	$	(120,443	)	$	9,576,243		$	7,776,689		$	7,637,280	$	314,472	$	(6,110,343	)	$	9,618,098	$	1,428,372	$	(350,298	)	$	10,696,172

Table of Contents

HOLLYFRONTIER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued



Condensed Consolidating Balance Sheet
December 31, 2012	Parent			Guarantor Restricted Subsidiaries		Non- Guarantor Restricted Subsidiaries			Eliminations			HollyFrontier Corp. Before Consolidation of HEP		Non-Guarantor Non-Restricted Subsidiaries (HEP Segment)		Eliminations			Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	1,748,808		$	3,652	$	2		$	—		$	1,752,462	$	5,237	$	—		$	1,757,699
Marketable securities	630,579			7		—			—			630,586		—		—			630,586
Accounts receivable, net	4,788			627,262		—			—			632,050		38,097		(35,917		)	634,230
Intercompany accounts receivable (payable)	(546,655		)	285,291		261,364			—			—		—		—			—
Inventories	—			1,318,373		—			—			1,318,373		1,259		—			1,319,632
Income taxes receivable	74,957			—		—			—			74,957		—		—			74,957
Prepayments and other	21,867			34,667		—			—			56,534		2,360		(5,733		)	53,161
Total current assets	1,934,344			2,269,252		261,366			—			4,464,962		46,953		(41,650		)	4,470,265
Properties, plants and equip, net	24,209			2,444,398		—			—			2,468,607		1,014,556		(288,463		)	3,194,700
Marketable securities (long-term)	5,116			—		—			—			5,116		—		—			5,116
Investment in subsidiaries	5,251,396			74,120		—			(5,325,516		)	—		—		—			—
Intangibles and other assets	11,825			2,284,329		25,000			(25,000		)	2,296,154		365,291		(2,529		)	2,658,916
Total assets	$	7,226,890		$	7,072,099	$	286,366		$	(5,350,516	)	$	9,234,839	$	1,426,800	$	(332,642	)	$	10,328,997

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	1,941		$	1,336,097	$	—		$	—		$	1,338,038	$	12,030	$	(35,917	)	$	1,314,151
Income taxes payable	—			—		—			—			—		—		—			—
Accrued liabilities	71,226			105,298		581			—			177,105		23,705		(5,733		)	195,077
Deferred income tax liabilities	145,225			—		(9		)	—			145,216		—		—			145,216
Total current liabilities	218,392			1,441,395		572			—			1,660,359		35,735		(41,650		)	1,654,444
Long-term debt	460,254			36,311		—			(25,000		)	471,565		864,673		—			1,336,238
Liability to HEP	—			257,777		—			—			257,777		—		(257,777		)	—
Deferred income tax liabilities	530,544			—		1,175			—			531,719		—		4,951			536,670
Other long-term liabilities	48,757			85,220		—			—			133,977		28,683		(3,673		)	158,987
Investment in HEP	—			—		210,499			—			210,499		—		(210,499		)	—
Equity – HollyFrontier	5,968,943			5,251,396		74,120			(5,325,516		)	5,968,943		382,207		(298,196		)	6,052,954
Equity – noncontrolling interest	—			—		—			—			—		115,502		474,202			589,704
Total liabilities and equity	$	7,226,890		$	7,072,099	$	286,366		$	(5,350,516	)	$	9,234,839	$	1,426,800	$	(332,642	)	$	10,328,997

3130

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HOLLYFRONTIER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued


Condensed Consolidating Statement of Income and Comprehensive Income	Condensed Consolidating Statement of Income and Comprehensive Income																									Condensed Consolidating Statement of Income and Comprehensive Income
Three Months Ended September 30, 2012		Parent			Guarantor Restricted Subsidiaries			Non- Guarantor Restricted Subsidiaries			Eliminations			HollyFrontier Corp. Before Consolidation of HEP			Non-Guarantor Non-Restricted Subsidiaries (HEP Segment)			Eliminations			Consolidated
Three Months Ended March 31, 2013																											Parent			Guarantor Restricted Subsidiaries		Non- Guarantor Restricted Subsidiaries			Eliminations			HollyFrontier Corp. Before Consolidation of HEP			Non-Guarantor Non-Restricted Subsidiaries (HEP Segment)			Eliminations			Consolidated
		(In thousands)																									(In thousands)
Sales and other revenues		$	195		$	5,192,846		$	35		$	—		$	5,193,076		$	72,496		$	(60,774	)	$	5,204,798			$	531		$	4,692,426	$	32		$	—		$	4,692,989		$	76,484		$	(61,684	)	$	4,707,789
Operating costs and expenses:
Cost of products sold		—			3,958,261			—			—			3,958,261			—			(59,525		)	3,898,736				—			3,853,128		(92		)	133			3,853,169			—			(60,634		)	3,792,535
Operating expenses		—			213,021			9			—			213,030			21,324			(495		)	233,859				—			239,423		(19		)	—			239,404			26,029			(334		)	265,099
General and administrative		26,723			637			28			—			27,388			1,399			—			28,787				24,131			1,775		60			—			25,966			3,232			—			29,198
Depreciation and amortization		4,665			48,018			—			—			52,683			12,636			(207		)	65,112				926			60,620		—			—			61,546			13,749			(3,533		)	71,762
Total operating costs and expenses		31,388			4,219,937			37			—			4,251,362			35,359			(60,227		)	4,226,494				25,057			4,154,946		(51		)	133			4,180,085			43,010			(64,501		)	4,158,594
Income (loss) from operations		(31,193		)	972,909			(2		)	—			941,714			37,137			(547		)	978,304				(24,526		)	537,480		83			(133		)	512,904			33,474			2,817			549,195
Other income (expense):
Earnings of equity method investments		988,255			15,720			15,586			(1,004,000		)	15,561			877			(15,586		)	852				550,891			11,614		11,992			(563,103		)	11,394			657			(11,992		)	59
Interest income (expense)		(6,747		)	(374		)	161			—			(6,960		)	(12,432		)	508			(18,884		)		(7,221		)	1,797		137			152			(5,135		)	(12,382		)	(2,272		)	(19,789		)
		981,508			15,346			15,747			(1,004,000		)	8,601			(11,555		)	(15,078		)	(18,032		)		543,670			13,411		12,129			(562,951		)	6,259			(11,725		)	(14,264		)	(19,730		)
Income before income taxes		950,315			988,255			15,745			(1,004,000		)	950,315			25,582			(15,625		)	960,272				519,144			550,891		12,212			(563,084		)	519,163			21,749			(11,447		)	529,465
Income tax provision		349,485			—			—			—			349,485			137			—			349,622				186,039			—		—			—			186,039			55			—			186,094
Net income		600,830			988,255			15,745			(1,004,000		)	600,830			25,445			(15,625		)	610,650				333,105			550,891		12,212			(563,084		)	333,124			21,694			(11,447		)	343,371
Less net income attributable to noncontrolling interest		—			—			—			—			—			10,277			—			10,277				—			—		—			—			—			2,890			6,812			9,702
Net income attributable to HollyFrontier stockholders		$	600,830		$	988,255		$	15,745		$	(1,004,000	)	$	600,830		$	15,168		$	(15,625	)	$	600,373			$	333,105		$	550,891	$	12,212		$	(563,084	)	$	333,124		$	18,804		$	(18,259	)	$	333,669
Comprehensive income attributable to HollyFrontier stockholders		$	502,238		$	1,018,987		$	15,745		$	(1,004,000	)	$	532,970		$	14,932		$	(15,625	)	$	532,277			$	344,864		$	568,396	$	12,831		$	(581,208	)	$	344,883		$	19,423		$	(18,878	)	$	345,428


Condensed Consolidating Statement of Income and Comprehensive Income	Condensed Consolidating Statement of Income and Comprehensive Income																								Condensed Consolidating Statement of Income and Comprehensive Income
Three Months Ended September 30, 2011		Parent			Guarantor Restricted Subsidiaries			Non- Guarantor Restricted Subsidiaries		Eliminations			HollyFrontier Corp. Before Consolidation of HEP			Non-Guarantor Non-Restricted Subsidiaries (HEP Segment)			Eliminations			Consolidated
Three Months Ended March 31, 2012																										Parent			Guarantor Restricted Subsidiaries		Non- Guarantor Restricted Subsidiaries		Eliminations			HollyFrontier Corp. Before Consolidation of HEP			Non-Guarantor Non-Restricted Subsidiaries (HEP Segment)			Eliminations			Consolidated
		(In thousands)																								(In thousands)
Sales and other revenues		$	266		$	5,164,628		$	33	$	—		$	5,164,927		$	49,131		$	(40,660	)	$	5,173,398			$	99		$	4,919,737	$	57	$	—		$	4,919,893		$	67,577		$	(55,732	)	$	4,931,738
Operating costs and expenses:
Cost of products sold		—			4,029,997			—		—			4,029,997			—			(40,070		)	3,989,927				—			4,241,301		—		491			4,241,792			—			(54,875		)	4,186,917
Operating expenses		—			213,002			7		—			213,009			15,015			(141		)	227,883				—			222,115		—		(385		)	221,730			20,030			(133		)	241,627
General and administrative		39,555			1,562			—		—			41,117			2,024			—			43,141				24,973			501		15		—			25,489			2,039			—			27,528
Depreciation and amortization		872			35,070			—		—			35,942			7,505			(207		)	43,240				1,103			45,174		—		—			46,277			13,395			(3,570		)	56,102
Total operating costs and expenses		40,427			4,279,631			7		—			4,320,065			24,544			(40,418		)	4,304,191				26,076			4,509,091		15		106			4,535,288			35,464			(58,578		)	4,512,174
Income (loss) from operations		(40,161		)	884,997			26		—			844,862			24,587			(242		)	869,207				(25,977		)	410,646		42		(106		)	384,605			32,113			2,846			419,564
Other income (expense):
Earnings of equity method investments		892,420			8,400			8,469		(900,929		)	8,360			641			(8,469		)	532				421,061			8,502		8,375		(429,677		)	8,261			831			(8,375		)	717
Interest income (expense)		(15,162		)	(977		)	14		—			(16,125		)	(9,391		)	646			(24,870		)		(14,023		)	1,913		199		504			(11,407		)	(19,170		)	(2,278		)	(32,855		)
Merger transaction costs		(9,100		)	—			—		—			(9,100		)	—			—			(9,100		)
		868,158			7,423			8,483		(900,929		)	(16,865		)	(8,750		)	(7,823		)	(33,438		)		407,038			10,415		8,574		(429,173		)	(3,146		)	(18,339		)	(10,653		)	(32,138		)
Income before income taxes		827,997			892,420			8,509		(900,929		)	827,997			15,837			(8,065		)	835,769				381,061			421,061		8,616		(429,279		)	381,459			13,774			(7,807		)	387,426
Income tax provision		304,835			—			—		—			304,835			(77		)	—			304,758				140,331			—		—		—			140,331			75			—			140,406
Net income		523,162			892,420			8,509		(900,929		)	523,162			15,914			(8,065		)	531,011				240,730			421,061		8,616		(429,279		)	241,128			13,699			(7,807		)	247,020
Less net income attributable to noncontrolling interest		—			—			—		—			—			7,923			—			7,923				—			—		—		—			—			(557		)	5,881			5,324
Net income attributable to HollyFrontier stockholders		$	523,162		$	892,420		$	8,509	$	(900,929	)	$	523,162		$	7,991		$	(8,065	)	$	523,088			$	240,730		$	421,061	$	8,616	$	(429,279	)	$	241,128		$	14,256		$	(13,688	)	$	241,696
Comprehensive income attributable to HollyFrontier stockholders		$	514,759		$	913,835		$	8,509	$	(900,929	)	$	536,174		$	8,368		$	(8,065	)	$	536,477			$	145,436		$	264,909	$	9,000	$	(273,511	)	$	145,834		$	14,640		$	(14,072	)	$	146,402

3231

Table of Contents

HOLLYFRONTIER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued

Condensed Consolidating Statement of Income and Comprehensive Income
Nine Months Ended September 30, 2012 Parent Guarantor
Restricted
Subsidiaries Non-
Guarantor
Restricted
Subsidiaries Eliminations HollyFrontier
Corp. Before
Consolidation
of HEP Non-Guarantor
Non-Restricted
Subsidiaries
(HEP Segment) Eliminations Consolidated
(In thousands)
Sales and other revenues $ 394
$ 14,908,154
$ 138
$ —
$ 14,908,686
$ 207,250
$ (172,719 ) $ 14,943,217
Operating costs and expenses:
Cost of products sold —
11,932,230
—
—
11,932,230
—
(164,813 ) 11,767,417
Operating expenses —
642,153
33
—
642,186
61,724
(5,698 ) 698,212
General and administrative 81,147
1,299
50
—
82,496
5,925
—
88,421
Depreciation and amortization 6,644
133,456
—
—
140,100
38,683
(621 ) 178,162
Total operating costs and expenses 87,791
12,709,138
83
—
12,797,012
106,332
(171,132 ) 12,732,212
Income (loss) from operations (87,397 ) 2,199,016
55
—
2,111,674
100,918
(1,587 ) 2,211,005
Other income (expense):
Earnings of equity method investments 2,240,275
42,707
42,163
(2,283,029 ) 42,116
2,502
(42,163 ) 2,455
Interest income (expense) (34,194 ) (1,774 ) 536
—
(35,432 ) (44,306 ) 1,738
(78,000 )
Gain on sale of marketable securities —
326
—
—
326
—
—
326
2,206,081
41,259
42,699
(2,283,029 ) 7,010
(41,804 ) (40,425 ) (75,219 )
Income before income taxes 2,118,684
2,240,275
42,754
(2,283,029 ) 2,118,684
59,114
(42,012 ) 2,135,786
Income tax provision 775,459
—
—
—
775,459
287
—
775,746
Net income 1,343,225
2,240,275
42,754
(2,283,029 ) 1,343,225
58,827
(42,012 ) 1,360,040
Less net income attributable to noncontrolling interest —
—
—
—
—
24,472
—
24,472
Net income attributable to HollyFrontier stockholders $ 1,343,225
$ 2,240,275
$ 42,754
$ (2,283,029 ) $ 1,343,225
$ 34,355
$ (42,012 ) $ 1,335,568
Comprehensive income attributable to HollyFrontier stockholders $ 1,179,627
$ 2,263,429
$ 42,754
$ (2,283,029 ) $ 1,202,781
$ 34,405
$ (42,012 ) $ 1,195,174



Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2013	Parent			Guarantor Restricted Subsidiaries			Non- Guarantor Restricted Subsidiaries			HollyFrontier Corp. Before Consolidation of HEP			Non-Guarantor Non-Restricted Subsidiaries (HEP Segment)			Eliminations			Consolidated
	(In thousands)
Cash flows from operating activities	$	176,731		$	58,316		$	1,499		$	236,546		$	29,438		$	(17,421	)	$	248,563

Cash flows from investing activities
Additions to properties, plants and equip	(1,736		)	(65,215		)	—			(66,951		)	—			—			(66,951		)
Additions to properties, plants and equip – HEP	—			—			—			—			(5,013		)	—			(5,013		)
Proceeds from sale of property	—			—			—			—			2,290			—			2,290
Purchases of marketable securities	(178,251		)	—			—			(178,251		)	—			—			(178,251		)
Sales and maturities of marketable securities	143,280			—			—			143,280			—			—			143,280
	(36,707		)	(65,215		)	—			(101,922		)	(2,723		)	—			(104,645		)
Cash flows from financing activities
Net repayments under credit agreement – HEP	—			—			—			—			(53,000		)	—			(53,000		)
Proceeds from sale of HEP common units	73,444			—			—			73,444			—			—			73,444
Proceeds from common unit offerings - HEP	—			—			—			—			73,444			—			73,444
Purchase of treasury stock	(6,610		)	—			—			(6,610		)	—			—			(6,610		)
Contribution from general partner	—			—			(1,499		)	(1,499		)	1,499			—			—
Dividends	(102,163		)	—			—			(102,163		)	—			—			(102,163		)
Distributions to noncontrolling interest	—			—			—			—			(32,709		)	17,421			(15,288		)
Excess tax benefit from equity-based compensation	744			—			—			744			—			—			744
Purchase of units for incentive grants - HEP	—			—			—			—			(2,719		)	—			(2,719		)
Other	—			3,247			—			3,247			(274		)	—			2,973
	(34,585		)	3,247			(1,499		)	(32,837		)	(13,759		)	17,421			(29,175		)
Cash and cash equivalents
Increase (decrease) for the period	105,439			(3,652		)	—			101,787			12,956			—			114,743
Beginning of period	1,748,808			3,652			2			1,752,462			5,237			—			1,757,699
End of period	$	1,854,247		$	—		$	2		$	1,854,249		$	18,193		$	—		$	1,872,442

Condensed Consolidating Statement of Income and Comprehensive Income
Nine Months Ended September 30, 2011 Parent Guarantor
Restricted
Subsidiaries Non-
Guarantor
Restricted
Subsidiaries Eliminations HollyFrontier
Corp. Before
Consolidation
of HEP Non-Guarantor
Non-Restricted
Subsidiaries
(HEP Segment) Eliminations Consolidated
(In thousands)
Sales and other revenues $ 1,067
$ 10,432,420
$ 33
$ —
$ 10,433,520
$ 144,916
$ (111,320 ) $ 10,467,116
Operating costs and expenses:
Cost of products sold —
8,531,358
—
—
8,531,358
—
(109,719 ) 8,421,639
Operating expenses —
459,679
186
—
459,865
41,821
285
501,971
General and administrative 71,884
1,769
—
—
73,653
4,988
—
78,641
Depreciation and amortization 2,719
81,875
—
—
84,594
22,407
(621 ) 106,380
Total operating costs and expenses 74,603
9,074,681
186
—
9,149,470
69,216
(110,055 ) 9,108,631
Income (loss) from operations (73,536 ) 1,357,739
(153 ) —
1,284,050
75,700
(1,265 ) 1,358,485
Other income (expense):
Earnings of equity method investments 1,380,375
25,231
25,454
(1,405,715 ) 25,345
1,848
(25,454 ) 1,739
Interest income (expense) (27,033 ) (2,595 ) 39
—
(29,589 ) (27,789 ) 1,853
(55,525 )
Merger transaction costs (15,114 ) —
—
—
(15,114 ) —
—
(15,114 )
1,338,228
22,636
25,493
(1,405,715 ) (19,358 ) (25,941 ) (23,601 ) (68,900 )
Income before income taxes 1,264,692
1,380,375
25,340
(1,405,715 ) 1,264,692
49,759
(24,866 ) 1,289,585
Income tax provision 465,561
—
—
—
465,561
169
—
465,730
Net income 799,131
1,380,375
25,340
(1,405,715 ) 799,131
49,590
(24,866 ) 823,855
Less net income attributable to noncontrolling interest —
—
—
—
—
23,838
—
23,838
Net income attributable to HollyFrontier stockholders $ 799,131
$ 1,380,375
$ 25,340
$ (1,405,715 ) $ 799,131
$ 25,752
$ (24,866 ) $ 800,017
Comprehensive income attributable to HollyFrontier stockholders $ 790,561
$ 1,401,542
$ 25,340
$ (1,405,715 ) $ 811,728
$ 26,701
$ (24,866 ) $ 813,563

3332

Table of Contents

HOLLYFRONTIER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) Continued


Condensed Consolidating Statement of Cash Flows	Condensed Consolidating Statement of Cash Flows																						Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 30, 2012		Parent			Guarantor Restricted Subsidiaries				Non- Guarantor Restricted Subsidiaries		HollyFrontier Corp. Before Consolidation of HEP			Non-Guarantor Non-Restricted Subsidiaries (HEP Segment)			Eliminations			Consolidated
Three Months Ended March 31, 2012																								Parent			Guarantor Restricted Subsidiaries			Non- Guarantor Restricted Subsidiaries		HollyFrontier Corp. Before Consolidation of HEP			Non-Guarantor Non-Restricted Subsidiaries (HEP Segment)			Eliminations			Consolidated
		(In thousands)																						(In thousands)
Cash flows from operating activities		$	1,260,731		$	(142,743	)		$	—	$	1,117,988		$	100,652		$	(46,852	)	$	1,171,788			$	253,124		$	(3,659	)	$	—	$	249,465		$	19,296		$	(14,856	)	$	253,905

Cash flows from investing activities
Cash flows from investing activities:
Additions to properties, plants and equip		(4,993		)	(173,242		)		—		(178,235		)	—			—			(178,235		)		(1,019		)	(46,114		)	—		(47,133		)	—			—			(47,133		)
Additions to properties, plants and equip – HEP		—			—				—		—			(29,302		)	—			(29,302		)		—			—			—		—			(14,254		)	—			(14,254		)
Investment in Sabine Biofuels		—			(2,000		)		—		(2,000		)	—			—			(2,000		)		—			(1,200		)	—		(1,200		)	—			—			(1,200		)
Purchases of marketable securities		(236,315		)	—				—		(236,315		)	—			—			(236,315		)		(106,573		)	—			—		(106,573		)	—			—			(106,573		)
Sales and maturities of marketable securities		211,286			930				—		212,216			—			—			212,216				100,480			—			—		100,480			—			—			100,480
		(30,022		)	(174,312		)		—		(204,334		)	(29,302		)	—			(233,636		)		(7,112		)	(47,314		)	—		(54,426		)	(14,254		)	—			(68,680		)
Cash flows from financing activities
Cash flows from financing activities:
Net borrowings under credit agreement – HEP		—			—				—		—			231,000			—			231,000				—			—			—		—			(45,000		)	—			(45,000		)
Repayment of promissory notes		—			72,900				—		72,900			(72,900		)	—			—				—			72,900			—		72,900			(72,900		)	—			—
Net proceeds from issuance of senior notes - HEP		—			—				—		—			294,750			—			294,750				—			—			—		—			294,750			—			294,750
Principal tender on senior notes - HFC		(205,000		)	—				—		(205,000		)	—			—			(205,000		)
Principal tender on senior notes - HEP		—			—				—		—			(185,000		)	—			(185,000		)		—			—			—		—			(157,761		)	—			(157,761		)
Purchase of treasury stock		(190,307		)	—				—		(190,307		)	—			—			(190,307		)		(62,532		)	—			—		(62,532		)	—			—			(62,532		)
Structured stock repurchase agreement		8,620			—				—		8,620			—			—			8,620
Contribution from joint venture partner		—			—				—		—			6,000			—			6,000				—			(9,000		)	—		(9,000		)	14,500			—			5,500
Contribution from general partner		—			(10,286		)		—		(10,286		)	10,286			—			—
Distribution from HEP upon UNEV transfer		—			260,922				—		260,922			(260,922		)	—			—
Dividends		(382,610		)	—				—		(382,610		)	—			—			(382,610		)		(126,019		)	—			—		(126,019		)	—			—			(126,019		)
Distributions to noncontrolling interest		—			—			��	—		—			(91,063		)	47,314			(43,749		)		—			—			—		—			(29,716		)	15,325			(14,391		)
Excess tax benefit from equity-based compensation		16,021			—				—		16,021			—			—			16,021				3,792			—			—		3,792			—			—			3,792
Purchase of units for incentive grants - HEP		—			—				—		—			(4,919		)	—			(4,919		)
Purchase of units for restricted grants - HEP																								—			—			—		—			(1,283		)	—			(1,283		)
Deferred financing costs		—			(67		)		—		(67		)	(3,222		)	—			(3,289		)		—			—			—		—			(1,123		)	—			(1,123		)
Other		—			(967		)		—		(967		)	264			(462		)	(1,165		)		—			(313		)	—		(313		)	270			(469		)	(512		)
		(753,276		)	322,502				—		(430,774		)	(75,726		)	46,852			(459,648		)		(184,759		)	63,587			—		(121,172		)	1,737			14,856			(104,579		)
Cash and cash equivalents
Increase (decrease) for the period		477,433			5,447				—		482,880			(4,376		)	—			478,504
Increase (decrease) for the period:																								61,253			12,614			—		73,867			6,779			—			80,646
Beginning of period		1,575,891			(3,358		)		2		1,572,535			6,369			—			1,578,904				1,575,891			(3,358		)	2		1,572,535			6,369			—			1,578,904
End of period		$	2,053,324		$	2,089			$	2	$	2,055,415		$	1,993		$	—		$	2,057,408			$	1,637,144		$	9,256		$	2	$	1,646,402		$	13,148		$	—		$	1,659,550

~~Table of Contents~~

~~HOLLYFRONTIER CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) Continued~~

Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 30, 2011 Parent
Guarantor
Restricted
Subsidiaries

Non-
Guarantor
Restricted
Subsidiaries

HollyFrontier
Corp. Before
Consolidation
of HEP

Non-Guarantor
Non-Restricted
Subsidiaries
(HEP Segment)
Eliminations Consolidated
(In thousands)
Cash flows from operating activities $ 1,690,926
$ (664,988 ) $ —
$ 1,025,938
$ 93,299
$ (30,034 ) $ 1,089,203

Cash flows from investing activities:
Additions to properties, plants and equip (6,056 ) (92,372 ) —
(98,428 ) —
—
(98,428 )
Additions to properties, plants and equip – HEP —
—
—
—
(175,795 ) —
(175,795 )
Investment in Sabine Biofuels (9,125 ) —
—
(9,125 ) —
—
(9,125 )
Cash received in merger with Frontier 182
871,976
—
872,158
—
—
872,158
Purchases of marketable securities (370,042 ) —
—
(370,042 ) —
—
(370,042 )
Sales and maturities of marketable securities 194,386
—
—
194,386
—
—
194,386
(190,655 ) 779,604
—
588,949
(175,795 ) —
413,154
Cash flows from financing activities:
Net borrowings under credit agreement – HEP —
—
—
—
43,000
—
43,000
Purchase of treasury stock (38,955 ) —
—
(38,955 ) —
—
(38,955 )
Principal tender on senior notes – HFC (15 ) —
—
(15 ) —
—
(15 )
Contribution to HEP —
(96,000 ) —
(96,000 ) 96,000
—
—
Contribution from UNEV joint venture partner —
—
—
—
27,500
—
27,500
Dividends (129,377 ) —
—
(129,377 ) —
—
(129,377 )
Distributions to noncontrolling interest —
—
—
—
(67,963 ) 30,034
(37,929 )
Excess tax benefit from equity-based compensation 1,399
—
—
1,399
—
—
1,399
Purchase of units for restricted grants - HEP —
—
—
—
(1,641 ) —
(1,641 )
Deferred financing costs (8,574 ) —
—
(8,574 ) (3,150 ) —
(11,724 )
Other —
(857 ) —
(857 ) —
—
(857 )
(175,522 ) (96,857 ) —
(272,379 ) 93,746
30,034
(148,599 )
Cash and cash equivalents
Increase (decrease) for the period: 1,324,749
17,759
—
1,342,508
11,250
—
1,353,758
Beginning of period 230,082
(9,035 ) 2
221,049
8,052
—
229,101
End of period $ 1,554,831
$ 8,724
$ 2
$ 1,563,557
$ 19,302
$ —
$ 1,582,859

3533

Table of Content


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Item 2 contains “forward-looking” statements. See “Forward-Looking Statements” at the beginning of Part I of this Quarterly Report on Form 10-Q. References herein to HollyFrontier Corporation (“HollyFrontier”) include HollyFrontier and its consolidated subsidiaries. In accordance with the Securities and Exchange Commission’s (“SEC”) “Plain English” guidelines, this Quarterly Report on Form 10-Q has been written in the first person. In this document, the words “we,” “our,” “ours” and “us” refer only to HollyFrontier and its consolidated subsidiaries or to HollyFrontier or an individual subsidiary and not to any other person, with certain exceptions. Generally, the words “we,” “our,” “ours” and “us” include Holly Energy Partners, L.P. (“HEP”) and its subsidiaries as consolidated subsidiaries of HollyFrontier, unless when used in disclosures of transactions or obligations between HEP and HollyFrontier or its other subsidiaries. This document contains certain disclosures of agreements that are specific to HEP and its consolidated subsidiaries and do not necessarily represent obligations of HollyFrontier. When used in descriptions of agreements and transactions, “HEP” refers to HEP and its consolidated subsidiaries.

We merged with Frontier Oil Corporation (“Frontier”) effective July 1, 2011. Accordingly, this document includes Frontier, its consolidated subsidiaries and the operations of the merged Frontier businesses effective July 1, 2011, but not prior to this date.

OVERVIEW

We are principally an independent petroleum refiner that produces high-value refined products such as gasoline, diesel fuel, jet fuel, specialty lubricant products, and specialty and modified asphalt. We own and operate refineries having a combined crude oil processing capacity of 443,000 barrels per day that serve markets throughout the Mid-Continent, Southwest and Rocky Mountain regions of the United States. Our refineries are located in El Dorado, Kansas (the “El Dorado Refinery”), Tulsa, Oklahoma (the, “Tulsa Refineries”), which comprise two production facilities, the Tulsa West and East facilities, a petroleum refinery in Artesia, New Mexico, which operates in conjunction with crude, vacuum distillation and other facilities situated 65 miles away in Lovington, New Mexico (collectively, the “Navajo Refinery”), Cheyenne, Wyoming (the, “Cheyenne Refinery”) and Woods Cross, Utah (the “Woods Cross Refinery”).

On February 21, 2011, we entered into a merger agreement providing for a “merger of equals” business combination between us and Frontier. On July 1, 2011, North Acquisition, Inc. a direct wholly-owned subsidiary of Holly Corporation (“Holly”) merged with and into Frontier, with Frontier surviving as a wholly-owned subsidiary of Holly. Concurrent with the merger, we changed our name to HollyFrontier Corporation and changed the ticker symbol for our common stock traded on the New York Stock Exchange to “HFC.” Subsequent to the merger and following approval by the post-closing board of directors of HollyFrontier, Frontier merged with and into HollyFrontier, with HollyFrontier continuing as the surviving corporation. This merger combined the legacy Frontier refinery operations consisting of the El Dorado and Cheyenne Refineries, with Holly’s legacy refinery operations to form HollyFrontier.

Our discussion of financial and operating results for the three ~~and~~ months~~nine~~ ~~months~~ ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012 is presented in the following section.

3634

Table of Content

RESULTS OF OPERATIONS

Financial Data (Unaudited)


	Three Months Ended September 30,						Change from 2011					Three Months Ended March 31,						Change from 2012
	2012			2011			Change			Percent		2013			2012			Change			Percent
	(In thousands, except per share data)											(In thousands, except per share data)
Sales and other revenues	$	5,204,798		$	5,173,398		$	31,400		0.6	%	$	4,707,789		$	4,931,738		$	(223,949	)	(5	)%
Operating costs and expenses:
Cost of products sold (exclusive of depreciation and amortization)	3,898,736			3,989,927			(91,191		)	(2.3	)	3,792,535			4,186,917			(394,382		)	(9	)
Operating expenses (exclusive of depreciation and amortization)	233,859			227,883			5,976			2.6		265,099			241,627			23,472			10
General and administrative expenses (exclusive of depreciation and amortization)	28,787			43,141			(14,354		)	(33.3	)	29,198			27,528			1,670			6
Depreciation and amortization	65,112			43,240			21,872			50.6		71,762			56,102			15,660			28
Total operating costs and expenses	4,226,494			4,304,191			(77,697		)	(1.8	)	4,158,594			4,512,174			(353,580		)	(8	)
Income from operations	978,304			869,207			109,097			12.6		549,195			419,564			129,631			31
Other income (expense):
Earnings of equity method investments	852			532			320			60.2		59			717			(658		)	(92	)
Interest income	2,219			204			2,015			987.7		1,531			460			1,071			233
Interest expense	(21,103		)	(25,074		)	3,971			(15.8	)	(21,320		)	(33,315		)	11,995			(36	)
Merger transaction costs	—			(9,100		)	9,100			(100.0	)
	(18,032		)	(33,438		)	15,406			(46.1	)	(19,730		)	(32,138		)	12,408			(39	)
Income before income taxes	960,272			835,769			124,503			14.9		529,465			387,426			142,039			37
Income tax provision	349,622			304,758			44,864			14.7		186,094			140,406			45,688			33
Net income	610,650			531,011			79,639			15.0		343,371			247,020			96,351			39
Less net income attributable to noncontrolling interest	10,277			7,923			2,354			29.7		9,702			5,324			4,378			82
Net income attributable to HollyFrontier stockholders	$	600,373		$	523,088		$	77,285		14.8	%	$	333,669		$	241,696		$	91,973		38	%
Earnings per share attributable to HollyFrontier stockholders:
Basic	$	2.95		$	2.50		$	0.45		18.0	%	$	1.64		$	1.16		$	0.48		41	%
Diluted	$	2.94		$	2.48		$	0.46		18.5	%	$	1.63		$	1.16		$	0.47		41	%
Cash dividends declared per common share	$	1.15		$	0.59		$	0.56		94.9	%	$	0.80		$	0.60		$	0.20		33	%
Average number of common shares outstanding:
Basic	203,557			209,583			(6,026		)	(2.9	)%	203,515			208,531			(5,016		)	(2	)%
Diluted	204,434			210,579			(6,145		)	(2.9	)%	204,217			209,138			(4,921		)	(2	)%

~~Table of Content~~

Nine Months Ended
September 30, Change from 2011
2012
2011⁽¹⁾
Change Percent
(In thousands, except per share data)
Sales and other revenues $ 14,943,217
$ 10,467,116
$ 4,476,101
42.8 %
Operating costs and expenses:
Cost of products sold (exclusive of depreciation and amortization) 11,767,417
8,421,639
3,345,778
39.7
Operating expenses (exclusive of depreciation and amortization) 698,212
501,971
196,241
39.1
General and administrative expenses (exclusive of depreciation and amortization) 88,421
78,641
9,780
12.4
Depreciation and amortization 178,162
106,380
71,782
67.5
Total operating costs and expenses 12,732,212
9,108,631
3,623,581
39.8
Income from operations 2,211,005
1,358,485
852,520
62.8
Other income (expense):
Earnings of equity method investments 2,455
1,739
716
41.2
Interest income 3,360
946
2,414
255.2
Interest expense (81,360 ) (56,471 ) (24,889 ) 44.1
Gain on sale of marketable securities 326
—
326
—
Merger transaction costs —
(15,114 ) 15,114
(100.0 )
(75,219 ) (68,900 ) (6,319 ) 9.2
Income before income taxes 2,135,786
1,289,585
846,201
65.6
Income tax provision 775,746
465,730
310,016
66.6
Net income 1,360,040
823,855
536,185
65.1
Less net income attributable to noncontrolling interest 24,472
23,838
634
2.7
Net income attributable to HollyFrontier stockholders $ 1,335,568
$ 800,017
$ 535,551
66.9 %
Earnings per share attributable to HollyFrontier stockholders:
Basic $ 6.46
$ 5.66
$ 0.80
14.1 %
Diluted $ 6.44
$ 5.63
$ 0.81
14.4 %
Cash dividends declared per common share $ 2.40
$ 0.74
$ 1.66
224.3 %
Average number of common shares outstanding:
Basic 206,657
141,353
65,304
46.2 %
Diluted 207,546
142,092
65,454
46.1 %

(1) Our consolidated financial and operating results reflect the operations of the merged Frontier businesses beginning July 1, 2011. Assuming the merger had been consummated on January 1, 2011, pro forma revenues and net income for the ~~nine~~ ~~months ended~~ ~~September 30, 2011~~ ~~are as follows:~~

Nine Months Ended September 30, 2011
(In thousands)
Sales and other revenues $ 14,446,297
Net income attributable to HollyFrontier stockholders $ 1,118,018

Balance Sheet Data


	September 30, 2012		December 31, 2011		March 31, 2013		December 31, 2012
	(Unaudited)				(Unaudited)
	(In thousands)				(In thousands)
Cash, cash equivalents and investments in marketable securities	$	2,343,336	$	1,840,610	$	2,543,136	$	2,393,401
Working capital	$	2,554,761	$	2,030,063	$	2,996,356	$	2,815,821
Total assets	$	10,345,936	$	9,576,243	$	10,696,172	$	10,328,997
Long-term debt	$	1,346,227	$	1,214,742	$	1,283,245	$	1,336,238
Total equity	$	6,359,496	$	5,835,900	$	6,929,047	$	6,642,658

3835

Table of Content

Other Financial Data (Unaudited)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,						Three Months Ended March 31,
	2012			2011			2012			2011			2013			2012
	(In thousands)												(In thousands)
Net cash provided by operating activities	$	742,285		$	631,207		$	1,171,788		$	1,089,203		$	248,563		$	253,905
Net cash provided by (used for) investing activities	$	(89,183	)	$	668,216		$	(233,636	)	$	413,154
Net cash provided by (used for) financing activities	$	32,108		$	(143,253	)	$	(459,648	)	$	(148,599	)
Net cash used for investing activities													$	(104,645	)	$	(68,680	)
Net cash used for financing activities													$	(29,175	)	$	(104,579	)
Capital expenditures	$	79,517		$	117,918		$	207,537		$	274,223		$	71,964		$	61,387
EBITDA ⁽¹⁾	$	1,033,991		$	895,956		$	2,367,476		$	1,427,652		$	611,314		$	471,059

(1)

Earnings before interest, taxes, depreciation and amortization, which we refer to as “EBITDA”, is calculated as net income plus (i) interest expense, net of interest income, (ii) income tax provision, 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 in 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. EBITDA presented above is reconciled to net income under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” following Item 3 of Part I of this Form 10-Q.

Our operations are organized into two reportable segments, Refining and HEP. See Note 1815 “Segment Information” in the Notes to Consolidated Financial Statements for additional information on our reportable segments.

Refining Operating Data (Unaudited)

The following tables set forth information, including non-GAAP performance measures, about our refinery operations. The cost of products and refinery gross margin do not include the effect of depreciation and amortization. Reconciliations to amounts reported under GAAP are provided under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” following Item 3 of Part I of this Form 10-Q.

Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012
2011⁽¹⁰⁾
Mid-Continent Region (El Dorado and Tulsa Refineries)
Crude charge (BPD) ⁽¹⁾
256,850
263,260
252,110
160,230
Refinery throughput (BPD) ⁽²⁾
278,990
283,970
270,380
168,150
Refinery production (BPD) ⁽³⁾
268,310
272,790
262,830
162,900
Sales of produced refined products (BPD) 246,360
263,180
249,320
159,230
Sales of refined products (BPD) ⁽⁴⁾
248,690
268,680
253,050
161,750
Refinery utilization ⁽⁵⁾
98.8 % 101.3 % 97.0 % 94.0 %

Average per produced barrel ⁽⁶⁾

Net sales $ 121.83
$ 122.82
$ 120.19
$ 122.74
Cost of products ⁽⁷⁾
92.84
96.18
96.49
100.32
Refinery gross margin 28.99
26.64
23.70
22.42
Refinery operating expenses ⁽⁸⁾
4.71
4.57
4.72
5.09
Net operating margin $ 24.28
$ 22.07
$ 18.98
$ 17.33

Refinery operating expenses per throughput barrel ⁽⁹⁾
$ 4.16
$ 4.23
$ 4.35
$ 4.82

Feedstocks:
Sweet crude oil 69 % 75 % 70 % 84 %
Sour crude oil 9 % 7 % 8 % 4 %
Heavy sour crude oil 14 % 11 % 15 % 7 %
Other feedstocks and blends 8 % 7 % 7 % 5 %
Total 100 % 100 % 100 % 100 %

~~Table of Content~~

Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012
2011 ⁽¹⁰⁾
Mid-Continent Region (El Dorado and Tulsa Refineries)
Sales of produced refined products:
Gasolines 50 % 44 % 47 % 41 %
Diesel fuels 26 % 35 % 29 % 33 %
Jet fuels 10 % 7 % 10 % 7 %
Fuel oil 1 % — % 1 % — %
Asphalt 2 % 2 % 2 % 4 %
Lubricants 5 % 4 % 5 % 7 %
Gas oil / intermediates — % 2 % — % 4 %
LPG and other 6 % 6 % 6 % 4 %
Total 100 % 100 % 100 % 100 %

Southwest Region (Navajo Refinery)
Crude charge (BPD) ⁽¹⁾
101,480
92,270
91,890
82,860
Refinery throughput (BPD) ⁽²⁾
110,080
100,290
100,558
91,220
Refinery production (BPD) ⁽³⁾
108,810
100,100
98,980
90,230
Sales of produced refined products (BPD) 106,370
99,530
97,470
91,310
Sales of refined products (BPD) ⁽⁴⁾
110,760
102,940
102,450
95,980
Refinery utilization ⁽⁵⁾
101.5 % 92.3 % 91.9 % 82.9 %

Average per produced barrel ⁽⁶⁾

Net sales $ 122.16
$ 120.67
$ 123.64
$ 119.84
Cost of products ⁽⁷⁾
92.26
92.33
97.37
97.37
Refinery gross margin 29.90
28.34
26.27
22.47
Refinery operating expenses ⁽⁸⁾
5.14
5.30
5.57
5.56
Net operating margin $ 24.76
$ 23.04
$ 20.70
$ 16.91

Refinery operating expenses per throughput barrel ⁽⁹⁾
$ 4.97
$ 5.26
$ 5.40
$ 5.57

Feedstocks:
Sweet crude oil 2 % 4 % 2 % 4 %
Sour crude oil 75 % 70 % 78 % 72 %
Heavy sour crude oil 16 % 18 % 11 % 15 %
Other feedstocks and blends 7 % 8 % 9 % 9 %
Total 100 % 100 % 100 % 100 %

Sales of produced refined products:
Gasolines 52 % 50 % 52 % 51 %
Diesel fuels 36 % 34 % 37 % 34 %
Jet fuels — % 1 % — % 1 %
Fuel oil 7 % 7 % 6 % 6 %
Asphalt 2 % 5 % 2 % 5 %
LPG and other 3 % 3 % 3 % 3 %
Total 100 % 100 % 100 % 100 %


Rocky Mountain Region (Cheyenne and Woods Cross Refineries)
									Three Months Ended March 31,
									2013			2012
Mid-Continent Region (El Dorado and Tulsa Refineries)
Crude charge (BPD) ⁽¹⁾	75,040		70,060		73,660		41,050		240,480			256,270
Refinery throughput (BPD) ⁽²⁾	82,030		75,860		81,550		44,340		267,020			272,790
Refinery production (BPD) ⁽³⁾	79,500		73,620		79,650		43,030		260,210			268,260
Sales of produced refined products (BPD)	81,200		72,400		79,360		42,390		242,560			259,060
Sales of refined products (BPD) ⁽⁴⁾	83,080		74,410		81,590		43,090		253,750			264,390
Refinery utilization ⁽⁵⁾	90.4	%	84.4	%	88.7	%	84.6	%	92.5		%	98.6		%

Average per produced barrel ⁽⁶⁾
Net sales									$	116.55		$	119.99
Cost of products ⁽⁷⁾									93.90			102.20
Refinery gross margin									22.65			17.79
Refinery operating expenses ⁽⁸⁾									5.84			4.81
Net operating margin									$	16.81		$	12.98

Refinery operating expenses per throughput barrel ⁽⁹⁾									$	5.31		$	4.57

Feedstocks:
Sweet crude oil									72		%	70		%
Sour crude oil									5		%	9		%
Heavy sour crude oil									13		%	15		%
Other feedstocks and blends									10		%	6		%
Total									100		%	100		%

4036

Table of Content

Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012
2011⁽¹⁰⁾
Rocky Mountain Region (Cheyenne and Woods Cross Refineries)
Average per produced barrel ⁽⁶⁾

Net sales $ 120.44
$ 119.40
$ 117.51
$ 119.07
Cost of products ⁽⁷⁾
84.35
86.35
88.87
90.00
Refinery gross margin 36.09
33.05
28.64
29.07
Refinery operating expenses ⁽⁸⁾
6.30
6.55
6.30
6.44
Net operating margin $ 29.79
$ 26.50
$ 22.34
$ 22.63

Refinery operating expenses per throughput barrel ⁽⁹⁾
$ 6.24
$ 6.25
$ 6.13
$ 6.16

Feedstocks:
Sweet crude oil 51 % 49 % 44 % 53 %
Sour crude oil 2 % 3 % 2 % 2 %
Heavy sour crude oil 28 % 31 % 33 % 20 %
Black wax crude oil 11 % 10 % 11 % 18 %
Other feedstocks and blends 8 % 7 % 10 % 7 %
Total 100 % 100 % 100 % 100 %

Sales of produced refined products:
Gasolines 56 % 50 % 55 % 55 %
Diesel fuels 31 % 34 % 31 % 32 %
Jet fuels — % — % — % 1 %
Fuel oil 2 % 1 % 2 % 2 %
Asphalt 7 % 7 % 6 % 5 %
LPG and other 4 % 8 % 6 % 5 %
Total 100 % 100 % 100 % 100 %



	Three Months Ended March 31,
	2013		2012
Mid-Continent Region (El Dorado and Tulsa Refineries)
Sales of produced refined products:
Gasolines	47	%	47	%
Diesel fuels	31	%	32	%
Jet fuels	9	%	9	%
Fuel oil	1	%	—	%
Asphalt	4	%	1	%
Lubricants	3	%	5	%
Gas oil / intermediates	—	%	1	%
LPG and other	5	%	5	%
Total	100	%	100	%


Consolidated
Southwest Region (Navajo Refinery)
Crude charge (BPD) ⁽¹⁾	433,370			425,590			417,660			284,140			71,220			81,140
Refinery throughput (BPD) ⁽²⁾	471,100			460,120			452,488			303,710			80,100			90,400
Refinery production (BPD) ⁽³⁾	456,620			446,510			441,460			296,160			74,190			87,060
Sales of produced refined products (BPD)	433,930			435,110			426,150			292,930			71,160			87,250
Sales of refined products (BPD) ⁽⁴⁾	442,530			446,030			437,090			300,820			89,820			93,130
Refinery utilization ⁽⁵⁾	97.8		%	96.1		%	94.3		%	89.1		%	71.2		%	81.1		%

Average per produced barrel ⁽⁶⁾
Net sales	$	121.66		$	121.76		$	120.48		$	121.31		$	121.97		$	125.91
Cost of products ⁽⁷⁾	91.11			93.66			95.28			97.91			94.77			106.37
Refinery gross margin	30.55			28.10			25.20			23.40			27.20			19.54
Refinery operating expenses ⁽⁸⁾	5.11			5.07			5.21			5.43			8.06			6.67
Net operating margin	$	25.44		$	23.03		$	19.99		$	17.97		$	19.14		$	12.87

Refinery operating expenses per throughput barrel ⁽⁹⁾	$	4.71		$	4.79		$	4.91		$	5.24		$	7.16		$	6.44

Feedstocks:
Sweet crude oil	50		%	55		%	49		%	55		%
Sour crude oil	23		%	20		%	22		%	24		%	80		%	81		%
Heavy sour crude oil	17		%	15		%	16		%	12		%	10		%	9		%
Black wax crude oil	2		%	2		%	2		%	3		%
Other feedstocks and blends	8		%	8		%	11		%	6		%	10		%	10		%
Total	100		%	100		%	100		%	100		%	100		%	100		%

Sales of produced refined products:
Gasolines													52		%	54		%
Diesel fuels													37		%	36		%
Fuel oil													7		%	5		%
Asphalt													1		%	2		%
LPG and other													3		%	3		%
Total													100		%	100		%



Rocky Mountain Region (Cheyenne and Woods Cross Refineries)
Crude charge (BPD) ⁽¹⁾	68,920		70,240
Refinery throughput (BPD) ⁽²⁾	74,190		78,740
Refinery production (BPD) ⁽³⁾	72,870		77,200
Sales of produced refined products (BPD)	72,390		76,640
Sales of refined products (BPD) ⁽⁴⁾	78,540		79,320
Refinery utilization ⁽⁵⁾	83.0	%	84.6	%

4137

Table of Content


	Three Months Ended				Nine Months Ended				Three Months Ended March 31,
	September 30,				September 30,				2013			2012
Rocky Mountain Region (Cheyenne and Woods Cross Refineries)
Average per produced barrel ⁽⁶⁾
Net sales									$	108.26		$	110.76
Cost of products ⁽⁷⁾									86.54			96.79
Refinery gross margin									21.72			13.97
Refinery operating expenses ⁽⁸⁾									8.11			6.57
Net operating margin									$	13.61		$	7.40
	2012		2011		2012		2011⁽¹⁰⁾
Consolidated
Refinery operating expenses per throughput barrel ⁽⁹⁾									$	7.91		$	6.39
												��
Feedstocks:
Sweet crude oil									44		%	45		%
Sour crude oil									1		%	2		%
Heavy sour crude oil									34		%	31		%
Black wax crude oil									14		%	11		%
Other feedstocks and blends									7		%	11		%
Total									100		%	100		%

Sales of produced refined products:
Gasolines	51	%	47	%	50	%	47	%	59		%	56		%
Diesel fuels	29	%	35	%	31	%	33	%	27		%	30		%
Jet fuels	6	%	4	%	6	%	4	%	—		%	1		%
Fuel oil	3	%	2	%	2	%	2	%	1		%	2		%
Asphalt	3	%	4	%	3	%	4	%	7		%	5		%
Lubricants	3	%	2	%	3	%	4	%
Gas oil / intermediates	—	%	1	%	—	%	2	%
LPG and other	5	%	5	%	5	%	4	%	6		%	6		%
Total	100	%	100	%	100	%	100	%	100		%	100		%



Consolidated
Crude charge (BPD) ⁽¹⁾	380,620			407,650
Refinery throughput (BPD) ⁽²⁾	421,310			441,930
Refinery production (BPD) ⁽³⁾	407,270			432,520
Sales of produced refined products (BPD)	386,110			422,950
Sales of refined products (BPD) ⁽⁴⁾	422,110			436,840
Refinery utilization ⁽⁵⁾	85.9		%	92.0		%

Average per produced barrel ⁽⁶⁾
Net sales	$	116.00		$	119.54
Cost of products ⁽⁷⁾	92.68			102.08
Refinery gross margin	23.32			17.46
Refinery operating expenses ⁽⁸⁾	6.68			5.51
Net operating margin	$	16.64		$	11.95

Refinery operating expenses per throughput barrel ⁽⁹⁾	$	6.12		$	5.28

Feedstocks:
Sweet crude oil	53		%	52		%
Sour crude oil	19		%	22		%
Heavy sour crude oil	16		%	16		%
Black wax crude oil	2		%	2		%
Other feedstocks and blends	10		%	8		%
Total	100		%	100		%

Table of Content



	Three Months Ended March 31,
	2013		2012
Consolidated
Sales of produced refined products:
Gasolines	50	%	50	%
Diesel fuels	31	%	32	%
Jet fuels	6	%	6	%
Fuel oil	2	%	2	%
Asphalt	4	%	2	%
Lubricants	2	%	3	%
LPG and other	5	%	5	%
Total	100	%	100	%


(1)	Crude charge represents the barrels per day of crude oil processed at our refineries.


(2)	Refinery throughput represents the barrels per day of crude and other refinery feedstocks input to the crude units and other conversion units at our refineries.


(3)	Refinery production represents the barrels per day of refined products yielded from processing crude and other refinery feedstocks through the crude units and other conversion units at our refineries.


(4)	Includes refined products purchased for resale.


(5)	Represents crude charge divided by total crude capacity (BPSD). ~~As a result of our merger effective July 1, 2011, our~~Our consolidated crude capacity ~~increased from 256,000 BPSD to~~is 443,000 BPSD.


(6)	Represents average per barrel amount for produced refined products sold, which is a non-GAAP measure. Reconciliations to amounts reported under GAAP are provided under “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” following Item 3 of Part I of this Form 10-Q.


(7)	Transportation, terminal and refinery storage costs billed from HEP are included in cost of products.


(8)	Represents operating expenses of our refineries, exclusive of depreciation and amortization.


(9)	Represents refinery operating expenses, exclusive of depreciation and amortization, divided by refinery throughput.


~~(10)~~	Refining operating data for the nine months ended September 30, 2011 include crude oil processed and products yielded from the El Dorado and Cheyenne Refineries for the period from July 1, 2011 through September 30, 2011 only, and averaged over the 273 days in the nine months ended September 30, 2011.

~~Table of Content~~

Results of Operations – Three Months Ended ~~September 30, 2012~~March 31, 2013 Compared to Three Months Ended ~~September 30, 2011~~March 31, 2012

Summary

Net income attributable to HollyFrontier stockholders for the three months ended ~~September 30, 2012~~March 31, 2013 was $~~600.4~~333.7 million ($~~2.95~~1.64 per basic and $~~2.94~~1.63 per diluted share), a $~~77.3~~92.0 million increase compared to $~~523.1~~241.7 million ($~~2.50~~1.16 per basic and~~$2.48~~ ~~per~~ diluted share) for the three months ended ~~September 30, 2011~~March 31, 2012. Net income increased due principally to higher year-over-year ~~third~~first quarter refining margins. Refinery gross margins for the three months ended ~~September 30, 2012~~March 31, 2013 increased to $~~30.55~~23.32 per produced barrel ~~compared to~~from $~~28.10~~17.46 for the three months ended ~~September 30, 2011~~March 31, 2012.

Sales and Other Revenues

Sales and other revenues ~~increased~~decreased 1%5% from $~~5,173.4~~4,931.7 million for the three months ended ~~September 30, 2011~~March 31, 2012 to $~~5,204.8~~4,707.8 million for the three months ended ~~September 30, 2012~~March 31, 2013 on ~~relatively flat~~lower year-over-year ~~third~~first quarter sales prices and volumes of refined products sold. The average sales price we received per produced barrel sold was $~~121.76~~119.54 for the three months ended ~~September 30, 2011~~March 31, 2012 compared to $~~121.66~~116.00 for the three months ended ~~September 30, 2012~~March 31, 2013. Additionally, refinery production and corresponding sales volumes of produced refined products were down due to planned turnaround and maintenance projects at our El Dorado and Navajo Refineries. Sales and other revenues for the three months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012 include $~~11.9~~12.9 million and $~~8.3~~11.9 million, respectively, in HEP revenues attributable to pipeline and transportation services provided to unaffiliated parties.

Cost of Products Sold

Cost of products sold decreased 2%9% from $~~3,989.9~~4,186.9 million for the three months ended ~~September 30, 2011~~March 31, 2012 to $~~3,898.7~~3,792.5 million for the three months ended ~~September 30, 2012~~March 31, 2013, due principally to lower crude oil ~~costs.~~costs and sales volumes. The average price we paid per barrel for crude oil and feedstocks and the transportation costs of moving the finished products to the market place decreased 3%9% from $~~93.66~~102.08 for the three months ended ~~September 30, 2011~~March 31, 2012 to $~~91.11~~92.68 for the three months ended ~~September 30, 2012~~March 31, 2013.

Table of Content

Cost of products sold for the three months ended March 31, 2013 includes $18.2 million in costs related to renewable fuel credits. We expect to purchase approximately 50% of estimated renewable fuel credits needed to comply with Environmental Protection Agency (“EPA”) renewable fuel standards in 2013. These will be purchased at market prices, which have recently substantially increased and may be affected by many factors including demand and federal regulation, and we cannot accurately predict our future cost of these fuel credits. Increases in the price of these credits could have an adverse effect on our financial condition and results of operations.

Gross Refinery Margins

Gross refinery margin per produced barrel increased 9%34% from $~~28.10~~17.46 for the three months ended ~~September 30, 2011~~March 31, 2012 to $~~30.55~~23.32 for the three months ended ~~September 30, 2012~~March 31, 2013. This was due to ~~the effects of~~ a larger decrease in crude oil and feedstock prices ~~relative~~when compared to the decrease in average ~~sales price we received~~ per barrel ~~of produced~~sales prices for refined products ~~sold.~~sold for the quarter. Gross refinery margin does not include the effects of depreciation and amortization. See “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” following Item 3 of Part 1 of this Form 10-Q for a reconciliation to the income statement of prices of refined products sold and cost of products purchased.

Operating Expenses

Operating expenses, exclusive of depreciation and amortization, increased 3%10% from $~~227.9~~241.6 million for the three months ended ~~September 30, 2011~~March 31, 2012 to $~~233.9~~265.1 million for the three months ended ~~September 30, 2012~~March 31, 2013, due principally to ~~increased HEP operating expenses and~~ higher repair and maintenance costs ~~as a result of a fire at~~and higher fuel costs during the ~~Diesel Hydrotreater Unit at our Tulsa East Refinery facility in August 2012.~~quarter.

General and Administrative Expenses

General and administrative expenses ~~decreased~~increased ~~33%~~6% from $~~43.1~~27.5 million for the three months ended ~~September 30, 2011~~March 31, 2012 to $~~28.8~~29.2 million for the three months ended ~~September 30, 2012~~March 31, 2013~~. General and administrative expenses for the three months ended September 30, 2011 were higher~~ due to ~~severance~~higher payroll and ~~integration costs incurred as a result of our July 2011 merger.~~other miscellaneous year-over-year cost increases.

Depreciation and Amortization Expenses

Depreciation and amortization increased ~~51%~~28% from $~~43.2~~56.1 million for the three months ended ~~September 30, 2011~~March 31, 2012 to $~~65.1~~71.8 million for the three months ended ~~September 30, 2012~~March 31, 2013. The increase was due principally to depreciation and amortization attributable to capitalized improvement projects and ~~HEP's UNEV Pipeline which became operational in the first quarter of 2012.~~capitalized refinery turnaround costs.

Interest Expense

Interest expense was $~~21.1~~21.3 million for the three months ended ~~September 30, 2012~~March 31, 2013 compared to $~~25.1~~33.3 million for the three months ended ~~September 30, 2011~~March 31, 2012. This decrease was due to lower year-over-year debt levels principally toas a result of the ~~recognition of an unamortized debt premium, which resulted in a net reduction of $2.4 million to interest expense upon~~ redemption of our $200 million 8.5% senior ~~notes.~~notes in September 2012. For the three months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012, interest expense included $12.5 million and $~~9.4~~13.0 million, respectively, in interest costs attributable to HEP operations.

~~Table of Content~~

~~Merger Transaction Costs~~

~~For the three months ended~~ ~~September 30, 2011, we recognized merger transaction costs of~~ ~~$9.1 million~~ related to our merger with Frontier effective July 1, 2011. These costs included legal, advisory and other professional fees that were directly attributable to the merger. There were no such costs incurred for the three months ended ~~September 30, 2012~~.

Income Taxes

For the three months ended ~~September 30, 2012~~March 31, 2013, we recorded income tax expense of $~~349.6~~186.1 million compared to $~~304.8~~140.4 million for the three months ended ~~September 30, 2011~~March 31, 2012. This increase is due principally to ~~significantly~~ higher pre-tax earnings during the three months ended ~~September 30, 2012~~March 31, 2013 compared to the same period of ~~2011~~2012. Our effective tax rates, before consideration of earnings attributable to the noncontrolling interest, were ~~36.4%~~35.1% and ~~36.5%~~36.2% for the three months ended ~~September 30, 2012~~March 31, 2013 and ~~2011, respectively.~~

~~Results of Operations –~~ ~~Nine~~ ~~Months Ended~~ ~~September 30,~~ 2012 ~~Compared to~~ ~~Nine~~ ~~Months Ended~~ ~~September 30, 2011~~

~~Summary~~

~~Net income attributable to HollyFrontier stockholders for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012~~ ~~was~~ ~~$1,335.6 million~~ (~~$6.46~~ ~~per basic and~~ ~~$6.44~~ ~~per diluted share), a~~ ~~$535.6 million~~ ~~increase compared to~~ ~~$800.0 million~~ (~~$5.66~~ ~~per basic and~~ ~~$5.63~~ ~~per diluted share) for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011. Net income increased due principally to increased operating scale following our July 1, 2011 merger and higher refining margins in the current year. Refinery gross margins for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012~~ ~~increased to~~ ~~$25.20~~ ~~per produced barrel compared to~~ ~~$23.40~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011~~.

~~Sales and Other Revenues~~

~~Sales and other revenues increased~~ ~~43%~~ ~~from~~ ~~$10,467.1 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011~~ to ~~$14,943.2 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012~~, due principally to the inclusion of revenues attributable to the El Dorado and Cheyenne Refineries for a full nine-month period and higher sales volumes of refined products produced from the legacy Holly refineries, slightly offset by lower year-to-date refined product sales prices. The average sales price we received per produced barrel sold decreased 1% ~~from~~ ~~$121.31~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011~~ to ~~$120.48~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012. Sales and other revenues for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012~~ ~~and~~ ~~2011~~ ~~include~~ ~~$34.6 million~~ ~~and~~ ~~$33.0 million, respectively, in HEP revenues attributable to pipeline and transportation services provided to unaffiliated parties.~~

~~Cost of Products Sold~~

~~Cost of products sold increased~~ ~~40%~~ ~~from~~ ~~$8,421.6 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011~~ to ~~$11,767.4 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012~~, due principally to sales volumes attributable to the El Dorado and Cheyenne Refineries, partially offset by lower crude oil costs. The average price we paid per barrel for crude oil and feedstocks and the transportation costs of moving the finished products to the market place decreased 3% ~~from~~ ~~$97.91~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011~~ to ~~$95.28~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012~~.

~~Gross Refinery Margins~~

~~Gross refinery margin per produced barrel increased~~ 8% ~~from~~ ~~$23.40~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011~~ to ~~$25.20~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012~~. This is due to the effects of a greater decrease in crude oil and feedstock prices relative to the decrease in average sales price we received per barrel of produced refined products sold. Gross refinery margin does not include the effects of depreciation and amortization. See “Reconciliations to Amounts Reported Under Generally Accepted Accounting Principles” following Item 3 of Part 1 of this Form 10-Q for a reconciliation to the income statement of prices of refined products sold and cost of products purchased.

~~Operating Expenses~~

~~Operating expenses, exclusive of depreciation and amortization, increased~~ ~~39%~~ ~~from~~ ~~$502.0 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011~~ to ~~$698.2 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012~~, due principally to the inclusion of the legacy Frontier refinery operations and repair and maintenance costs, primarily as a result of a fire at the Diesel Hydrotreater Unit at our Tulsa East Refinery facility in August 2012. Also contributing to a much lesser extent were increases to our long-term environmental remediation cost estimates and increased payroll costs attributable to the legacy Holly refining operations.

~~General and Administrative Expenses~~

~~General and administrative expenses increased~~ ~~12%~~ ~~from~~ ~~$78.6 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011~~ to ~~$88.4 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012~~, due principally to higher employee benefit and equity-based compensation costs and increased corporate staffing levels as a result of our July 1, 2011 merger, net of the effects of merger related severance and integration costs incurred during the third quarter of 2011.

~~Table of Content~~

~~Depreciation and Amortization Expenses~~

~~Depreciation and amortization increased~~ ~~67%~~ ~~from~~ ~~$106.4 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011~~ to ~~$178.2 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012. The increase was due principally to depreciation and amortization attributable to the legacy Frontier refinery assets, capitalized improvement projects and HEP's UNEV Pipeline.~~

~~Interest Expense~~

~~Interest expense was~~ ~~$81.4 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012~~ ~~compared to~~ ~~$56.5 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011. This increase principally reflects interest on the senior notes assumed upon our merger with Frontier. For the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012~~ ~~and~~ ~~2011, interest expense included~~ ~~$44.4 million~~ ~~and~~ ~~$27.8 million, respectively, in interest costs attributable to HEP operations.~~

~~Merger Transaction Costs~~

~~For the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011, we recognized merger transaction costs of~~ ~~$15.1 million~~ related to our merger with Frontier effective July 1, 2011. These costs included legal, advisory and other professional fees that were directly attributable to the merger. There were no such costs incurred for the ~~nine~~ ~~months ended~~ ~~September 30, 2012~~.

~~Income Taxes~~

~~For the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012, we recorded income tax expense of~~ ~~$775.7 million~~ ~~compared to~~ ~~$465.7 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2011. This increase is due principally to significantly higher pre-tax earnings during the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012~~ ~~compared to the same period of~~ ~~2011. Our effective tax rates, before consideration of earnings attributable to the noncontrolling interest, were~~ ~~36.3%~~ ~~and~~ ~~36.1%~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012~~ ~~and~~ ~~2011~~, respectively.

LIQUIDITY AND CAPITAL RESOURCES

HollyFrontier Credit Agreement

HEP Credit Agreement

~~In June 2012,~~ HEP ~~amended its previous credit agreement increasing the size of the credit facility from $375 million to $550 million. HEP's~~has a $550 million senior secured revolving credit facility that matures in June 2017 (the “HEP Credit Agreement”) and is available to fund capital expenditures, investments, acquisitions, distribution payments and working capital and for general partnership purposes. It is also available to fund letters of credit up to a $50 million sub-limit and to fund distributions to unitholders up to a $60 million sub-limit. At ~~September 30, 2012~~March 31, 2013, ~~the~~ HEP ~~Credit Agreement~~was in compliance with all of its covenants, had outstanding borrowings of $~~431.0~~368.0 million and no outstanding letters of credit under the HEP Credit Agreement

Table of Content

HollyFrontier Senior Notes

Our senior notes consist of the following:

9.875% senior notes ($286.8 million principal amount maturing June 2017)

6.875% senior notes ($150 million principal amount maturing November 2018)

~~Table of Content~~

These senior notes (collectively the “HollyFrontier Senior Notes”) are unsecured and impose certain restrictive covenants, including limitations on our ability to incur additional debt, incur liens, enter into sale-and-leaseback transactions, pay dividends, enter into mergers, sell assets and enter into certain transactions with affiliates. At any time when the HollyFrontier Senior Notes are rated investment grade by both Moody’s and Standard & Poor’s and no default or event of default exists, we will not be subject to many of the foregoing covenants. Additionally, we have certain redemption rights under the HollyFrontier Senior Notes.

In September 2012, we redeemed our $200 million aggregate principal amount of 8.5% senior notes maturing September 2016 at a $208.5 million redemption price. At that time, we recognized an unamortized debt premium which was netted against the $8.5 million redemption premium, resulting in a net reduction of $2.4 million to interest expense upon redemption.

HollyFrontier Financing Obligation

HEP Senior Notes

HEP’s senior notes consist of the following:

8.25% HEP senior notes ($150 million principal amount maturing March 2018)

6.5% HEP senior notes ($300 million principal amount maturing March 2020)

In March 2012, HEP issued $300 million in an aggregate principal amount of 6.5% HEP senior notes maturing March 2020. The $294.8 million in net proceeds were used to repay $157.8 million aggregate principal amount of 6.25% HEP senior notes, $72.9 million in promissory notes due to HollyFrontier, related fees, expenses and accrued interest in connection with these transactions and to repay borrowings under the HEP Credit Agreement. In April 2012, HEP called for redemption the $27.3 million aggregate principal amount outstanding of 6.25% HEP senior notes.

~~See “Risk Management”~~HEP Common Unit Issuance

Liquidity

We believe our current cash and cash equivalents, along with future internally generated cash flow and funds available under our credit facilities will provide sufficient resources to fund currently planned capital projects and our liquidity needs for the foreseeable future. In addition, components of our growth strategy include construction of new refinery processing units and the expansion of existing units at our facilities and selective acquisition of complementary assets for our refining operations intended to increase earnings and cash flow.

As of ~~September 30, 2012~~March 31, 2013, our cash, cash equivalents and investments in marketable securities totaled $~~2.3~~2.5 billion. We consider all highly-liquid instruments with a maturity of three months or less at the time of purchase to be cash equivalents. Cash equivalents are stated at cost, which approximates market ~~value, and are invested~~value. These primarily consist of investments in conservative, highly-rated instruments issued by financial institutions, or government and corporate entities with strong credit ~~standings.~~standings and money market funds.

Table of Content

~~In January 2012, our~~We have a Board ~~of Directors~~ approved ~~a $350 million~~ stock ~~repurchase program, and in June 2012, approved an additional $350 million~~ repurchase program that authorizes us to repurchase common stock in the open market or through privately negotiated transactions. The timing and amount of stock repurchases will depend on market conditions, corporate, regulatory and other relevant considerations. ~~These programs~~This program may be discontinued at any time by the Board of Directors. As of ~~September 30, 2012~~March 31, 2013, we ~~have repurchased~~had remaining authorization to repurchase up to ~~6,351,498~~ ~~shares at a cost of~~ $~~189.8~~494.4 million under ~~these~~this stock repurchase ~~programs.~~program.

~~Table of Content~~

In May 2012, we entered into a structured share repurchase arrangement with a financial institution under which we provided an up-front cash payment of $100.0 million and, depending on market conditions, would either receive shares of our common stock or cash at the expiration of the agreement. The agreement expired in September 2012 at which time we received our up-front payment plus an additional $8.6 million in cash that was recorded as additional capital.

Cash and cash equivalents increased $~~478.5~~114.7 million for the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013. Cash provided by operating activities of $~~1,171.8~~248.6 million exceeded net cash used for investing and financing activities of $~~233.6~~104.6 million and $~~459.6~~29.2 million, respectively. Working capital increased by $~~524.7~~180.5 million during the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013.

Cash Flows – Operating Activities

~~Nine~~Three Months Ended ~~September 30, 2012~~March 31, 2013 Compared to ~~Nine~~Three Months Ended ~~September 30, 2011~~March 31, 2012

Net cash flows provided by operating activities were $~~1,171.8~~248.6 million for the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013 compared to $~~1,089.2~~253.9 million for the ~~nine~~three months ended ~~September 30, 2011~~March 31, 2012, ~~an increase~~a decrease of $~~82.6~~5.3 million. Net income for the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013 was $~~1,360.0~~343.4 million, an increase of $~~536.2~~96.4 million compared to $~~823.9~~247.0 million for the ~~nine~~three months ended ~~September 30, 2011~~March 31, 2012. Non-cash adjustments consisting of depreciation and amortization, ~~gain on sale of equity securities,~~ deferred income taxes, equity-based compensation expense and fair value changes to derivative instruments resulted in an increase to operating cash flows of $~~215.0~~6.1 million for the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013 compared to $~~120.5~~75.2 million for the same period in ~~2011~~2012. Changes in working capital items decreased cash flows by $~~322.0~~32.0 million for the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013 compared to ~~an increase~~a decrease of $~~166.9~~67.5 million for the ~~nine~~three months ended ~~September 30, 2011~~March 31, 2012. ~~The decrease in working capital items~~Additionally, for the ~~nine~~three months ended ~~September 30, 2012~~ ~~was due principally to higher inventory levels, including increased crude inventory purchases in the third quarter of 2012 relative to year-end 2011. Additionally, for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2012~~March 31, 2013, turnaround expenditures increased to $~~74.6~~69.8 million from $~~28.0~~21.8 million for the same period of ~~2011~~2012.

Cash Flows – Investing Activities and Planned Capital Expenditures

~~Nine~~Three Months Ended ~~September 30, 2012~~March 31, 2013 Compared to ~~Nine~~Three Months Ended ~~September 30, 2011~~March 31, 2012

Net cash flows used for investing activities were $~~233.6~~104.6 million for the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013 compared to ~~net cash flows provided by investing activities of~~ $~~413.2~~68.7 million for the ~~nine~~three months ended ~~September 30, 2011~~March 31, 2012, a decrease of $~~646.8~~36.0 million~~, primarily driven by cash received in the merger with Frontier in July 2011.~~. Cash expenditures for properties, plants and equipment for the first ~~nine~~three months of ~~2012~~2013 ~~decreased~~increased to $~~207.5~~72.0 million from $~~274.2~~61.4 million for the same period in ~~2011~~2012. These include HEP capital expenditures of $~~29.3~~5.0 million and $~~175.8~~14.3 million for the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012, respectively. Also for the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013 and ~~2011~~2012, we invested $~~236.3~~178.3 million and $~~370.0~~106.6 million, respectively, in marketable securities and received proceeds of $~~212.2~~143.3 million and $~~194.4~~100.5 million, respectively, from the sale or maturity of marketable securities.

Planned Capital Expenditures

HollyFrontier Corporation

Each year our Board of Directors approves our annual capital budget which includes specific projects that our management is authorized to undertake. Additionally, when conditions warrant or as new opportunities arise, additional projects may be approved. The funds appropriated for a particular capital project may be expended over a period of several years, depending on the time required to complete the project. Therefore, our planned capital expenditures for a given year consist of expenditures appropriated in that year’s capital budget plus expenditures for projects appropriated in prior years which have not yet been completed. Our appropriated capital budget for ~~2012~~2013 is $~~241.0~~320.0 million including both sustaining capital and major capital projects. We expect to spend approximately $~~295.0~~400.0 million to $450.0 million in cash for capital projects appropriated in ~~2012~~2013~~, including projects approved in~~ and prior ~~years, and this~~years. This spending is comprised of $~~115.0~~130.0 million ~~at the Tulsa Refineries,~~to $~~61.0~~146.0 million at the Woods Cross Refinery, $~~43.0~~116.0 million to $130.0 million at the Tulsa Refineries, $56.0 million to $65.0 million at the El Dorado Refinery, $~~33.0~~58.0 million to $61.0 million at the Cheyenne Refinery, $~~34.0~~28.0 million to $33.0 million at the Navajo Refinery and $~~9.0~~12.0 million to $15.0 million for miscellaneous other projects. In addition, we expect to spend $~~120.0~~156.0 million on refinery turnarounds and tank ~~maintenance.~~maintenance during 2013.

A significant portion of our current capital spending is associated with compliance-oriented capital improvements. This spending is required due to existing consent decrees (for projects including FCC unit flue gas scrubbers and tail gas treatment units), federal fuels regulations (particularly, MSAT2 which mandates a reduction in the benzene content of blended gasoline), refinery waste water treatment improvements and other similar initiatives. Our refinery operations and related emissions are highly regulated at both federal and state levels, and we invest in our facilities as needed to remain in compliance with these standards. Additionally, when faced with new emissions or fuels standards, we seek to execute projects that facilitate compliance and also improve the operating costs and/or yields of associated refining processes.

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El Dorado Refinery

Newly appropriated capital projects at the El Dorado Refinery include naphtha ~~splitting~~fractionation, an additional hydrogen plant and ~~aromatics recovery~~a Low-Nox addition to the FCC unit ~~revamps~~flue gas scrubber. Continuing project work will include coke drum pressure reduction designed to ~~reduce benzene in gasoline (MSAT2 compliance)~~improve liquid yields and ~~installation of~~ a new tail gas treatment unit to reduce air emissions in compliance with ~~our sulfur recovery facilities as required under an~~the El Dorado Refinery's existing ~~Environmental Protection Agency (“EPA”)~~EPA consent decree. Also included in the 2012 capital budget are yield improvement projects that address both the FCC unit and the Coker. A previously appropriated project which we expect to complete in late 2012 is the replacement of an existing Coker furnace with more current furnace technology. This project is expected to improve Coker on-stream factor and reduce fuel consumption.

Tulsa Refineries

~~The most significant newly appropriated capital project~~New 2013 appropriations for ~~our~~the Tulsa Refineries isinclude a gasoline-blending system and numerous infrastructure upgrades. We will continue spending on the conversion of aour propane de-asphalt unit to ROSE ~~technology. This~~technology and on our sulfur recovery project ~~is expected~~related to cost $25.0 million and will increase processing of vacuum tower bottoms, increase the production of bright stock lube, reduce energy consumption, and allow the shutdown of a low-pressure steam boiler. Projects still underway from prior appropriations include a $58.0 million project to recover sulfur from the refinery fuel gas ~~system and to shut down another low-pressure steam boiler by electrification of turbine drivers.~~system. The sulfur recovery project is ~~required~~anticipated to ~~comply~~be completed in approximately the second quarter of 2013 and, in addition to facilitating compliance with our EPA consent, ~~decree but~~ is ~~being enhanced so as~~anticipated to also allow us to increase ~~our capacity to run~~use of lower priced sour / heavy crude in Tulsa. ~~Other projects underway in~~Spending on maintenance capital items and general improvements continues at an elevated level at the Tulsa ~~involve replacement of an existing vacuum tower and improvements~~Refineries due to ~~our wastewater treatment plants and storm water retention systems.~~perceived opportunities.

Navajo Refinery

~~We have approved a new project for the~~The Navajo Refinery ~~to remove sulfur and other contaminants from the crude unit off-gas stream that~~capital spending in 2013 will ~~improve liquid yields and reduce refinery fuel costs. Current spending~~be principally on previously ~~appropriated projects includes an MSAT2 project (naphtha splitting and benzene saturation) to reduce reliance on benzene credits purchases,~~approved capital appropriations as well as ~~expenditures~~maintenance capital spending. Included among previously approved capital projects is a $25.0 million upgrade to ~~improve~~ the ~~Artesia~~Navajo Refinery's waste water ~~handling and processing facilities.~~treatment system.

Cheyenne Refinery

We ~~have approved four~~plan to install a new ~~compliance projects for~~hydrogen plant at the Cheyenne Refinery ~~including~~and have appropriated this capital project as part of our 2013 budget. The hydrogen plant, along with a previously approved naphtha fractionation project, is anticipated to allow us to reduce benzene content in Cheyenne gasoline production, while at the same time improving the refinery's overall liquid yields and light oils production. Previously appropriated projects still underway at Cheyenne include wastewater treatment plant improvements, a wet gas scrubber for the FCC unit to reduce ~~particulate and other~~air emissions, ~~MSAT2 related investments to reduce benzene in gasoline, and spending for additional~~a redundant tail gas unit associated with ~~our~~ sulfur recovery ~~facilities. We also plan~~processes and additional investment in the waste water treatment plant to improve metallurgy on portions of the Cheyenne Refinery’s delayed coking unit. These new major capital appropriations total approximately $60.0 million, and we expect to spend approximately 30% of this amount on these projects during 2012. Expenditures for MSAT2 compliance projects were accelerated by approximately one year at each of the Cheyenne and El Dorado Refineries due to the Holly-Frontier merger, which resultedreduce selenium concentration in ~~our loss of a small refiner exemption that previously provided for delayed compliance with this standard.~~waste water.

Woods Cross Refinery

~~We plan to significantly expand our~~Newly appropriated capital for the Woods Cross Refinery ~~in response~~consists of warehouse and office relocations to ~~increased availability of locally-produced~~accommodate the refinery expansion and modernization program and a new rail loading rack for intermediates and finished products associated with refining waxy crude oil. We ~~have announced a 10-year crude supply agreement with Newfield Exploration Company under which we will purchase 20,000 BPD of waxy crudes (black and yellow wax). Our~~continue to work on the $225.0 million refinery expansion project announced previously. The permit for the refinery expansion project is pending and will ~~increase crude processing capacity of Woods Cross from 31,000 BPD to 45,000 BPD. Most of the incremental crude supply~~require a second public comment period that is expected to ~~be waxy crude, and~~begin soon. We currently expect the expansion is being configured to create high liquid yields and relatively large proportions of additional gasoline and diesel fuel in comparison to the increased crude charge. We expect this $225.0 million project to ~~have a pre-tax payback period of approximately two years, and we expect to complete the expansion~~be completed in approximately the fourth quarter of ~~2014. Our execution~~2014 or first quarter of this project is subject to certain contingencies, including our receipt of required emissions and other permits. Also at Woods Cross, we have two significant compliance projects authorized in prior year appropriations. The first of these involves installation of a wet gas scrubber on the FCC unit to reduce particulate and other emissions and the second relates to MSAT2 compliance which will require naphtha fractionation and benzene saturation.2015.

Regulatory compliance items or other presently existing or future environmental regulations / consent decrees could cause us to make additional capital investments beyond those described above and incur additional operating costs to meet applicable requirements.

HEP

Each year the Holly Logistic Services, L.L.C. board of directors approves HEP’s annual capital budget, which specifies capital projects that HEP management is authorized to undertake. Additionally, at times when conditions warrant or as new opportunities arise, special projects may be approved. The funds allocated for a particular capital project may be expended over a period of several years, depending on the time required to complete the project. Therefore, HEP’s planned capital expenditures for a given year consist of expenditures approved for capital projects included in its current year capital budget as well as, in certain cases, expenditures approved for capital projects in capital budgets for prior years. The ~~2012~~2013 HEP capital budget is comprised of $~~8.9~~10.1 million for maintenance capital expenditures and $~~25.8~~2.0 million for expansion capital expenditures.

HEP is proceeding with the expansion of its crude oil transportation system in southeastern New Mexico in response to increased crude oil production in the area. The expansion will provide shippers with additional pipeline takeaway capacity to either common carrier pipeline stations for transportation to major crude oil markets or to our New Mexico refining facilities. To complete the project, HEP will convert an existing refined products pipeline to crude oil service, construct several new pipeline segments, expand an existing pipeline and build new truck unloading stations and crude storage capacity. Excluding the value of the existing pipeline to be converted, total capital expenditures are expected to cost between $35.0 million and $40.0 million. The project is expected to provide increased capacity of up to 100,000 BPD across HEP's system and anticipates it will be in service no later than early 2014.

UNEV is proceeding with a project to add certain enhancements to its product terminal in Las Vegas, Nevada. The project will cost approximately $13.0 million with construction scheduled to be completed during the second quarter of 2014.

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HEP is also performing preliminary engineering, routing and cost estimates for two proposed new pipelines. The ~~UNEV Pipeline~~first proposed pipeline would be a new 50-mile intrastate crude oil pipeline between Cushing, Oklahoma and ~~associated~~our Tulsa refining facilities that would allow for a significant portion of crude oil transported to be heavy Canadian and sour crude oil. The second proposed pipeline would be a new 100-mile interstate petroleum products pipeline between our refinery in Cheyenne, Wyoming and Denver, Colorado. The project also will evaluate the construction of a new petroleum products terminal in North Denver or, alternatively, the routing of the new pipeline to existing third-party product terminals in ~~Cedar City, Utah and Las Vegas, Nevada were operational during~~ the ~~first~~Denver area. HEP anticipates that it will be in a position to decide whether to proceed with these projects in the second quarter of 2012. On July 12, 2012, HEP acquired our 75% interest in UNEV Pipeline LLC, owner of the UNEV Pipeline. We received consideration totaling approximately $315.0 million, which consisted of approximately $260.0 million in cash2013 when preliminary engineering and ~~1 million HEP common units.~~detailed project cost estimates are completed and if necessary shipper commitments can be secured.

HEP ~~has recently made certain modifications~~and we are collaborating to ~~its~~construct a rail facility that will enable crude oil ~~gathering~~loading and ~~trunk line system that have effectively increased HEP’s ability~~unloading near our Artesia and / or Lovington, New Mexico refining facilities. The rail project, which will be connected to ~~gather and transport an additional 10,000 BPD of Delaware Basin~~HEP's crude oil pipeline transportation system in ~~response to increased drilling activity in southeast~~southeastern New ~~Mexico. Furthermore, HEP has developed a project to replace a 5-mile section~~Mexico, will have an initial capacity of this pipeline system that will allow for an additional 15,000 BPD of capacity that will be executed as needed if Delaware Basin crude volumes continue to increase. This project is estimated to cost approximately $2.0 million. HEP has a second project which consists of the reactivation and conversion to crude oil service of a 70-mile, 8-inch petroleum products pipeline owned by HEP. Once in service, this pipeline will initially be capable of transporting up to ~~35,000~~70,000 BPD and will enable access to a variety of crude oil ~~from southeast New Mexico to third-party common carrier pipelines in west Texas for further transport to major~~types including WTI, WTS and WCS. The project will provide both additional crude oil ~~markets. The scope~~takeaway options for producers as crude production in the region continues to grow, and an expanded set of ~~this project~~crude oil sourcing options for us. Project completion is ~~being finalized. Subject to receipt of acceptable shipper support and board approval, this project could be operational in~~expected by early ~~2013.~~2014.

Cash Flows – Financing Activities

~~Nine~~Three Months Ended ~~September 30, 2012~~March 31, 2013 Compared to ~~Nine~~Three Months Ended ~~September 30, 2011~~March 31, 2012

Net cash flows used for financing activities were $~~459.6~~29.2 million for the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013 compared to $~~148.6~~104.6 million for the ~~nine~~three months ended ~~September 30, 2011~~March 31, 2012, ~~an increase~~a decrease of $~~311.0~~75.4 million. During the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013, we received $73.4 million from the sale of HEP common units, purchased $~~190.3~~6.6 million in common stock, paid $~~382.6~~102.2 million in dividends ~~paid~~and recognized $~~205.0~~0.7 million excess tax benefits on our equity-based compensation. Also during this period, HEP received $57.0 million and repaid $110.0 million under the HEP Credit Agreement, paid distributions of $15.3 million to noncontrolling interests, purchased $2.7 million in ~~principal on HFC's senior notes,~~HEP common units in the open market for recipients of its incentive grants and received aproceeds of $~~6.0~~73.4 million ~~contribution from our UNEV Pipeline joint venture partner~~upon its common unit offering in March 2013. During the three months ended March 31, 2012, we purchased $62.5 million in common stock, paid $126.0 million in dividends and recognized $~~16.0~~3.8 million excess tax benefits on our equity-based compensation. Also during this period, HEP received $294.8 million in net proceeds upon the issuance of the HEP 6.5% senior notes, paid $~~185.0~~157.8 million in principal on the HEP 6.25% senior notes, received $~~523.0~~36.0 million and repaid $~~292.0~~81.0 million under the HEP Credit Agreement, paid distributions of $~~43.7~~14.4 million to noncontrolling interests, incurred $~~3.3~~1.1 million in deferred financing costs and purchased $~~4.9~~1.3 million in HEP common units in the open market for recipients of its incentive grants. ~~During~~The UNEV joint venture partner contributions received during the ~~nine~~three months ended ~~September 30, 2011~~March 31, 2012~~, we purchased~~ were $~~39.0~~5.5 million ~~in common stock, paid~~ ~~$129.4 million~~ ~~in dividends, received a~~ ~~$27.5 million~~ ~~contribution from our UNEV Pipeline joint venture partner and recognized~~ ~~$1.4 million~~ ~~excess tax benefits on our equity-based compensation. Additionally, we incurred~~ ~~$8.6 million~~ ~~in deferred financing costs. Also during this period, HEP received~~ ~~$93.0 million~~ ~~and repaid~~ ~~$50.0 million~~ ~~under the HEP Credit Agreement, paid distributions of~~ ~~$37.9 million~~ ~~to noncontrolling interests, incurred~~ ~~$3.2 million~~ ~~in deferred financing costs and purchased~~ ~~$1.6 million~~ ~~in HEP common units in the open market for recipients of its incentive grants.~~.

Contractual Obligations and Commitments

HollyFrontier Corporation

~~In September 2012, we redeemed $200 million in aggregate principal amount of our 8.5% senior notes maturing September 2016.~~ There were no ~~other~~ significant changes to our contractual obligations during the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013.

HEP

~~In June 2012, HEP amended its credit agreement increasing the size of the credit facility from $375 million to $550 million. The HEP Credit Agreement expires in June 2017.~~ During the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013, HEP had net ~~borrowings~~repayments of $~~231.0~~53.0 million resulting in $~~431.0~~368.0 million of outstanding borrowings under the HEP Credit Agreement at ~~September 30, 2012~~March 31, 2013.

~~In March 2012, HEP issued $300 million in aggregate principal amount of 6.5% senior notes maturing March 2020.~~

There were no other significant changes to HEP’s long-term contractual obligations during this period.

CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities as of the date of the financial statements. Actual results may differ from these estimates under different assumptions or conditions.

~~Table of Content~~

Our significant accounting policies are described in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, ~~2011~~2012. Certain critical accounting policies that materially affect the amounts recorded in our consolidated financial statements include the assessment and consolidation of variable interest entities, the use of the LIFO method of valuing certain inventories, the amortization of deferred costs for regular major maintenance and repairs at our refineries, assessing the possible impairment of certain long-lived assets and goodwill, accounting for derivative instruments and assessing contingent liabilities for probable losses.

~~In the first quarter~~

Table of 2012, we changed our policy of reporting certain same-party accounts receivable and payable amounts in the consolidated balance sheets to reflect a net amount due under contractual netting agreements. Prior to this change, we reported such amounts on a gross basis with a same-party receivable and payable balance presented separately in our balance sheet. GAAP permits a reporting entity to elect a policy of offsetting same party receivables and payables when such amounts are net settled under legally enforceable contractual setoff provisions. We believe that a net presentation is preferable because it more appropriately presents our economic resources (accounts receivable) and claims against us (accounts payable) and the future cash flows associated with such assets and liabilities. Additionally, we believe a net presentation of such amounts conforms to the predominant practices used by others in our industry. We have applied this change in accounting principle on a retrospective basis and have recast our prior period financial statements. See Note 2 to our Consolidated Financial Statements under Item 1 for a summary of line items affected in our prior period financial statements.Content

We use the LIFO method of valuing inventory. Under the LIFO method, an actual valuation of inventory can only be made at the end of each year based on the inventory levels at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and are subject to the final year-end LIFO inventory valuation.

Goodwill represents the excess of the cost of an acquired entity over the fair value of the assets acquired and liabilities assumed. Goodwill is not subject to amortization and is tested annually or more frequently if events or circumstances indicate the possibility of impairment. As of ~~September 30, 2012~~March 31, 2013, there have been no impairments to goodwill.

RISK MANAGEMENT

We use certain strategies to reduce some commodity price and operational risks. We do not attempt to eliminate all market risk exposures when we believe that the exposure relating to such risk would not be significant to our future earnings, financial position, capital resources or liquidity or that the cost of eliminating the exposure would outweigh the benefit.

Commodity Price Risk Management

our inventory positions;

natural gas purchases;

costs of crude oil and related grade differentials;

prices of refined products; and

our refining margins.

We have swap contracts serving as cash flow hedges against price risk on forecasted purchases of WTI crude oil and forecasted sales of ultra-low sulfur diesel and conventional unleaded gasoline. These contracts have been designated as accounting hedges and are measured quarterly at fair value with offsetting adjustments (gains/losses) recorded directly to other comprehensive income. These fair value adjustments are later reclassified to earnings as the hedging instruments mature. Also on a quarterly basis, hedge ineffectiveness is measured by comparing the change in fair value of the swap contracts against the expected future cash inflows/outflows on the respective transaction being hedged. Any hedge ineffectiveness is also recognized in earnings.

~~Table of Content~~

As of ~~September 30, 2012~~, we have the following notional contract volumes (stated in barrels) related to outstanding swap contracts serving as cash flow hedges against price risk on forecasted purchases of crude oil and sales of refined products:

Notional Contract Volumes by Year of Maturity
Commodity Price Swaps Total Outstanding Notional 2012 2013

WTI crude oil - long 13,351,000
5,336,000
8,015,000
Ultra-low sulfur diesel - short 10,143,000
2,668,000
7,475,000
Conventional unleaded gasoline - short 3,208,000
2,668,000
540,000

We also have swap contracts that serve as economic hedges to fix our purchase price on forecasted crude oil, natural gas and butane purchases, and to lock in the spread between WCS and WTI crude oil on forecasted purchases. Also, we have NYMEX futures contracts to lock in prices on forecasted sales and purchases of inventory. These contracts are measured quarterly at fair value with offsetting adjustments (gains/losses) recorded directly to income.

~~As of~~ ~~September 30, 2012~~March 31, 2013, we have the following notional contract volumes related to ~~our~~all outstanding ~~swap~~derivative contracts ~~serving as economic hedges:~~used to mitigate commodity price risk:

Notional Contract Volumes by Year of Maturity
Derivative Instrument Total Outstanding Notional 2012 2013 Unit of Measure

Commodity price swap (natural gas) - long 3,312,000
3,312,000
—
MMBTU
Commodity price swap (WCS spread) - long 6,117,500
460,000
5,657,500
Barrels
Commodity price swap (WTI) - short 150,000
—
150,000
Barrels
Commodity price swap (gasoline) - short 630,000
150,000
480,000
Barrels
NYMEX futures (WTI) - long 234,000
—
234,000
Barrels
NYMEX futures (WTI)- short 2,206,000
1,856,000
350,000
Barrels



		Notional Contract Volumes by Year of Maturity
Contract Description	Total Outstanding Notional	2013	2014	2015	2016	2017	Unit of Measure

Natural gas price swap - long	91,200,000	14,400,000	19,200,000	19,200,000	19,200,000	19,200,000	MMBTU
Natural gas price swap - short	45,600,000	7,200,000	9,600,000	9,600,000	9,600,000	9,600,000	MMBTU
WTI price swap - long	8,340,000	7,975,000	365,000	—	—	—	Barrels
Ultra-low sulfur diesel price swap - short	8,340,000	7,975,000	365,000	—	—	—	Barrels
Unleaded gasoline price swap - long	125,000	125,000	—	—	—	—	Barrels
Unleaded gasoline price swap - short	125,000	125,000	—	—	—	—	Barrels
WCS price swap - long	5,362,500	5,362,500	—	—	—	—	Barrels
WTS price swap - long	1,960,000	1,960,000	—	—	—	—	Barrels
NYMEX futures (WTI) - long	234,000	234,000	—	—	—	—	Barrels
NYMEX futures (WTI) - short	1,178,000	1,178,000	—	—	—	—	Barrels
Forward sales - diesel and gasoline	535,000	535,000	—	—	—	—	Barrels
Physical contracts - long	540,000	540,000	—	—	—	—	Barrels
Physical contracts - short	540,000	540,000	—	—	—	—	Barrels

The following sensitivity analysis provides the hypothetical effects of market price fluctuations to the commodity positions hedged under our derivative contracts:

Table of Content



	Derivative Fair Value Gain (Loss) at March 31,
Change in Underlying Commodity Prices of Hedged Positions	2013			2012
	(In thousands)
10% increase in underlying commodity prices	$	(27,011	)	$	(69,072	)
10% decrease in underlying commodity prices	$	27,011		$	69,072

Interest Rate Risk Management

HEP uses interest rate swaps to manage its exposure to interest rate risk.

~~Publicly available information is reviewed on the counterparties in order to review and monitor their financial stability and assess their ongoing ability to honor their commitments under the~~ These swap ~~contracts. These counterparties are large financial institutions. We~~contracts have ~~not experienced, nor do we expect to experience, any difficulty in the counterparties honoring their commitments.~~been designated as cash flow hedges.

The market risk inherent in our fixed-rate debt and positions is the potential change arising from increases or decreases in interest rates as discussed below.

~~Table of Content~~

For the fixed rate HollyFrontier Senior Notes and HEP Senior Notes, changes in interest rates will generally affect fair value of the debt, but not our earnings or cash flows. The outstanding principal, estimated fair value and estimated change in fair value (assuming a hypothetical 10% change in the yield-to-maturity rates) for these debt instruments as of ~~September 30, 2012~~March 31, 2013 is presented below:


	Outstanding Principal		Estimated Fair Value		Estimated Change in Fair Value		Outstanding Principal		Estimated Fair Value		Estimated Change in Fair Value
	(In thousands)						(In thousands)
HollyFrontier Senior Notes	$	436,812	$	475,977	$	13,215	$	436,812	$	469,573	$	12,292
HEP Senior Notes	$	450,000	$	473,625	$	16,309	$	450,000	$	480,563	$	13,950

For the variable rate HEP Credit Agreement, changes in interest rates would affect cash flows, but not the fair value. At ~~September 30, 2012~~March 31, 2013, outstanding borrowings under the HEP Credit Agreement were $~~431.0~~368.0 million. By means of its cash flow hedges, HEP has effectively converted the variable rate on $305.0 million of outstanding principal to a weighted average fixed rate of ~~2.87%~~3.37%.

At ~~September 30, 2012~~March 31, 2013, ~~cash and cash equivalents~~our marketable securities included investments in investment grade, highly liquid investments with maturities of three months or less at the time of purchase and hence the interest rate market risk implicit in these cash investments is low. Due to the short-term nature of our cash and cash equivalents, a hypothetical 10% increase in interest rates would not have a material effect on the fair market value of our portfolio. Since we have the ability to liquidate this portfolio, we do not expect our operating results or cash flows to be materially affected by the effect of a sudden change in market interest rates on our investment portfolio.

Our operations are subject to ~~normal~~ hazards of petroleum processing operations, including fire, explosion and weather-related perils. We maintain various insurance coverages, including business interruption insurance, subject to certain deductibles. We are not fully insured against certain risks because such risks are not fully insurable, coverage is unavailable, or premium costs, in our judgment, do not justify such expenditures.

Financial information is reviewed on the counterparties in order to review and monitor their financial stability and assess their ongoing ability to honor their commitments under the derivative contracts. We have not experienced, nor do we expect to experience, any difficulty in the counterparties honoring their commitments.

We have a risk management oversight committee ~~that is made up~~consisting of members from our senior management. This committee oversees our risk enterprise program, monitors our risk environment and provides direction for activities to mitigate identified risks that may adversely affect the achievement of our goals.

Table of Content


Item 3.	Quantitative and Qualitative Disclosures About Market Risk

See “Risk Management” under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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 attributable to HollyFrontier stockholders plus (i) interest expense, net of interest income, (ii) income tax provision, 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 in 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.

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Set forth below is our calculation of EBITDA.


	Three Months Ended						Nine Months Ended
	September 30,						September 30,						Three Months Ended March 31,
	2012			2011			2012			2011			2013			2012
	(In thousands)												(In thousands)
Net income attributable to HollyFrontier stockholders	$	600,373		$	523,088		$	1,335,568		$	800,017		$	333,669		$	241,696
Add income tax provision	349,622			304,758			775,746			465,730			186,094			140,406
Add interest expense	21,103			25,074			81,360			56,471			21,320			33,315
Subtract interest income	(2,219		)	(204		)	(3,360		)	(946		)	(1,531		)	(460		)
Add depreciation and amortization	65,112			43,240			178,162			106,380			71,762			56,102
EBITDA	$	1,033,991		$	895,956		$	2,367,476		$	1,427,652		$	611,314		$	471,059

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 barrel is the difference between average net sales price and average cost of products per barrel of produced refined products. Net operating margin per barrel is the difference between refinery gross margin and refinery operating expenses per barrel of produced refined products. These two margins do not include the effect of depreciation and amortization. Each of these component performance measures can be reconciled directly to our consolidated statements of income.

Other companies in our industry may not calculate these performance measures in the same manner.

Refinery Gross and Net Operating Margins

Below are reconciliations to our consolidated statements of income for (i) net sales, cost of products and operating expenses, in each case averaged per produced barrel sold, and (ii) net operating margin and refinery gross margin. Due to rounding of reported numbers, some amounts may not calculate exactly.

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Reconciliations of refined product sales from produced products sold to total sales and other revenues


	Three Months Ended						Nine Months Ended
	September 30,						September 30,						Three Months Ended March 31,
	2012			2011			2012			2011			2013			2012
	(Dollars in thousands, except per barrel amounts)												(Dollars in thousands, except per barrel amounts)
Consolidated
Average sales price per produced barrel sold	$	121.66		$	121.76		$	120.48		$	121.31		$	116.00		$	119.54
Times sales of produced refined products sold (BPD)	433,930			435,110			426,150			292,930			386,110			422,950
Times number of days in period	92			92			274			273			90			91
Refined product sales from produced products sold	$	4,856,857		$	4,874,067		$	14,067,859		$	9,701,147		$	4,030,988		$	4,600,909

Total refined product sales	$	4,856,857		$	4,874,067		$	14,067,859		$	9,701,147
Total refined product sales from produced products sold													$	4,030,988		$	4,600,909
Add refined product sales from purchased products and rounding ⁽¹⁾	100,674			127,520			376,813			266,355			409,891			155,613
Total refined product sales	4,957,531			5,001,587			14,444,672			9,967,502			4,440,879			4,756,522
Add direct sales of excess crude oil ⁽²⁾	187,196			148,989			378,036			422,890			236,250			158,282
Add other refining segment revenue ⁽³⁾	47,922			14,277			85,141			42,328			15,297			4,933
Total refining segment revenue	5,192,649			5,164,853			14,907,849			10,432,720			4,692,426			4,919,737
Add HEP segment sales and other revenues	72,496			49,131			207,250			144,916			76,484			67,577
Add corporate and other revenues	352			299			912			1,100			563			156
Subtract consolidations and eliminations	(60,699		)	(40,885		)	(172,794		)	(111,620		)	(61,684		)	(55,732		)
Sales and other revenues	$	5,204,798		$	5,173,398		$	14,943,217		$	10,467,116		$	4,707,789		$	4,931,738

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Reconciliation of average cost of products per produced barrel sold to total cost of products sold


	Three Months Ended							Nine Months Ended
	September 30,							September 30,						Three Months Ended March 31,
	2012			2011				2012			2011			2013			2012
	(Dollars in thousands, except per barrel amounts)													(Dollars in thousands, except per barrel amounts)
Consolidated
Average cost of products per produced barrel sold	$	91.11		$	93.66			$	95.28		$	97.91		$	92.68		$	102.08
Times sales of produced refined products sold (BPD)	433,930			435,110				426,150			292,930			386,110			422,950
Times number of days in period	92			92				274			273			90			91
Cost of products for produced products sold	$	3,637,253		$	3,749,221			$	11,125,379		$	7,829,852		$	3,220,621		$	3,928,901

Total cost of products for produced products sold	$	3,637,253		$	3,749,221			$	11,125,379		$	7,829,852		$	3,220,621		$	3,928,901
Add refined product costs from purchased products and rounding ⁽¹⁾	100,078			128,857				377,476			268,390			394,087			156,672
Total cost of refined products sold	3,737,331			3,878,078			��	11,502,855			8,098,242			3,614,708			4,085,573
Add crude oil cost of direct sales of excess crude oil ⁽²⁾	182,252			147,223				367,795			416,084			226,268			155,810
Add other refining segment cost of products sold ⁽⁴⁾	38,743			4,696				67,185			17,032			12,193			409
Total refining segment cost of products sold	3,958,326			4,029,997				11,937,835			8,531,358			3,853,169			4,241,792
Subtract consolidations and eliminations	(59,590		)	(40,070		)		(170,418		)	(109,719		)	(60,634		)	(54,875		)
Costs of products sold (exclusive of depreciation and amortization)	$	3,898,736		$	3,989,927			$	11,767,417		$	8,421,639		$	3,792,535		$	4,186,917

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Reconciliation of average refinery operating expenses per produced barrel sold to total operating expenses


	Three Months Ended						Nine Months Ended
	September 30,						September 30,						Three Months Ended March 31,
	2012			2011			2012			2011			2013			2012
	(Dollars in thousands, except per barrel amounts)												(Dollars in thousands, except per barrel amounts)
Consolidated
Average refinery operating expenses per produced barrel sold	$	5.11		$	5.07		$	5.21		$	5.43		$	6.68		$	5.51
Times sales of produced refined products sold (BPD)	433,930			435,110			426,150			292,930			386,110			422,950
Times number of days in period	92			92			274			273			90			91
Refinery operating expenses for produced products sold	$	203,999		$	202,953		$	608,346		$	434,237		$	232,129		$	212,071

Total refinery operating expenses per produced products sold	$	203,999		$	202,953		$	608,346		$	434,237
Total refinery operating expenses for produced products sold													$	232,129		$	212,071
Add other refining segment operating expenses and rounding ⁽⁵⁾	8,848			10,080			26,933			26,156			7,756			9,210
Total refining segment operating expenses	212,847			213,033			635,279			460,393			239,885			221,281
Add HEP segment operating expenses	21,324			15,015			61,799			41,821			26,029			20,030
Add corporate and other costs	42			291			1,302			168			(481		)	449
Subtract consolidations and eliminations	(354		)	(456		)	(168		)	(411		)	(334		)	(133		)
Operating expenses (exclusive of depreciation and amortization)	$	233,859		$	227,883		$	698,212		$	501,971		$	265,099		$	241,627

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Reconciliation of net operating margin per barrel to refinery gross margin per barrel to total sales and other revenues


	Three Months Ended						Nine Months Ended
	September 30,						September 30,						Three Months Ended March 31,
	2012			2011			2012			2011			2013			2012
	(Dollars in thousands, except per barrel amounts)												(Dollars in thousands, except per barrel amounts)
Consolidated
Net operating margin per barrel	$	25.44		$	23.03		$	19.99		$	17.97		$	16.64		$	11.95
Add average refinery operating expenses per produced barrel	5.11			5.07			5.21			5.43			6.68			5.51
Refinery gross margin per barrel	30.55			28.10			25.20			23.40			23.32			17.46
Add average cost of products per produced barrel sold	91.11			93.66			95.28			97.91			92.68			102.08
Average sales price per produced barrel sold	$	121.66		$	121.76		$	120.48		$	121.31		$	116.00		$	119.54
Times sales of produced refined products sold (BPD)	433,930			435,110			426,150			292,930			386,110			422,950
Times number of days in period	92			92			274			273			90			91
Refined product sales from produced products sold	$	4,856,857		$	4,874,067		$	14,067,859		$	9,701,147		$	4,030,988		$	4,600,909

Total refined product sales from produced products sold	$	4,856,857		$	4,874,067		$	14,067,859		$	9,701,147		$	4,030,988		$	4,600,909
Add refined product sales from purchased products and rounding ⁽¹⁾	100,674			127,520			376,813			266,355			409,891			155,613
Total refined product sales	4,957,531			5,001,587			14,444,672			9,967,502			4,440,879			4,756,522
Add direct sales of excess crude oil ⁽²⁾	187,196			148,989			378,036			422,890			236,250			158,282
Add other refining segment revenue ⁽³⁾	47,922			14,277			85,141			42,328			15,297			4,933
Total refining segment revenue	5,192,649			5,164,853			14,907,849			10,432,720			4,692,426			4,919,737
Add HEP segment sales and other revenues	72,496			49,131			207,250			144,916			76,484			67,577
Add corporate and other revenues	352			299			912			1,100			563			156
Subtract consolidations and eliminations	(60,699		)	(40,885		)	(172,794		)	(111,620		)	(61,684		)	(55,732		)
Sales and other revenues	$	5,204,798		$	5,173,398		$	14,943,217		$	10,467,116		$	4,707,789		$	4,931,738


(1)	We purchase finished products when opportunities arise that provide a profit on the sale of such products, or to meet delivery commitments.

(2)

We purchase crude oil that at times exceeds the supply needs of our refineries. Quantities in excess of our needs are sold at market prices to purchasers of crude oil that are recorded on a gross basis with the sales price recorded as revenues and the corresponding acquisition cost as inventory and then upon sale as cost of products sold. Additionally, at times we enter into buy/sell exchanges of crude oil with certain parties to facilitate the delivery of quantities to certain locations that are netted at carryover cost.


(3)	Other refining segment revenue includes the incremental revenues associated with NK Asphalt and miscellaneous revenue.


(4)	Other refining segment cost of products sold includes the incremental cost of products for NK Asphalt and miscellaneous costs.


(5)	Other refining segment operating expenses include the marketing costs associated with our refining segment and the operating expenses of NK Asphalt.

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Item 4.	Controls and Procedures

Evaluation of disclosure controls and procedures. Our principal executive officer and principal financial officer have evaluated, as required by Rule 13a-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”), our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) under the Exchange Act as of the end of the period covered by this Quarterly Report on Form 10-Q. Our disclosure controls and procedures are designed to provide reasonable assurance that the information we are required to disclose in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Based upon the evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective ~~as of~~ ~~September 30, 2012~~at the reasonable assurance ~~level.~~level as of March 31, 2013.

Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during our last fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PART II. OTHER INFORMATION


Item 1.	Legal Proceedings

Commitment and Contingency Reserves

We periodically establish reserves for certain legal proceedings. The establishment of a reserve involves an estimation process that includes the advice of legal counsel and subjective judgment of management. While management believes these reserves to be adequate, future changes in the facts and circumstances could result in the actual liability exceeding the estimated ranges of loss and amounts accrued.

While the outcome and impact on us cannot be predicted with certainty, management believes that the resolution of these proceedings through settlement or adverse judgment will not have a material adverse effect on our consolidated financial position or cash flow. Operating results, however, could be significantly impacted in the reporting periods in which such matters are resolved.

~~New Mexico OHSB Complaint – Navajo Tank Fire~~

On March 3, 2010, the New Mexico Occupational Health and Safety Bureau (“OHSB”), the New Mexico regulatory agency responsible for enforcing certain state occupational health and safety regulations, which are identical to Federal Occupational Safety and Health Administration (“OSHA”) regulations, commenced an inspection in relation to the tank fire that took place on March 2, 2010 at the Navajo facility in Artesia, New Mexico. On August 31, 2010, OHSB issued two citations to Navajo, alleging 10 willful violations and one serious violation of various construction safety standards. OHSB proposed penalties in the amount of $0.7 million. Navajo filed a notice of contest, challenging the citations. The citations have been settled pursuant to a settlement agreement signed on September 4, 2012. The settlement provides for (a) withdrawal of six willful citations, (b) reclassification of four willful citations as serious, (c) acceptance of one citation that was originally classified as serious, and (d) Navajo's payment of a $400,000 penalty. The settlement became final on September 26, 2012.

~~Propane Pit - Woods Cross~~

In December 2011, the EPA conducted an inspection at Woods Cross and identified some alleged violations of the Chemical Accident Prevention and Risk Management Plan (“RMP”) requirements set forth in section 112(r)(7) of the Federal Clean Air Act and Part 68 of Title 40 of the ~~Code of Federal Regulations~~. Following extended negotiations, Holly Refining & Marketing – Woods Cross LLC and the EPA on October 12, 2012 agreed to resolve this matter with a civil penalty of $115,000, subject to the parties' agreement on the final terms of two documents – an Administrative Compliance Order on Consent (“ACOC”) specifying the details of the closure of the Frozen Earth Propane Storage Pit and a Combined Complaint and Consent Agreement (“CCCA”) detailing the EPA allegations and resolution of those allegations. Neither of these agreements will require Holly Refining & Marketing – Woods Cross LLC to admit or deny the EPA's allegations. Negotiations with the EPA on the terms of the ACOC and CCCA are continuing.

~~Additional~~ Environmental Matters

We are reporting the following proceedings to comply with SEC regulations which require us to disclose proceedings arising under federal, state or local provisions regulating the discharge of materials into the environment or protecting the environment if we reasonably believe that such proceedings may result in monetary sanctions of $100,000 or more. Our respective subsidiaries have or will develop corrective action plans regarding these disclosures that will be implemented in consultation with the respective federal and state agencies. It is not possible to predict the ultimate outcome of these proceedings, although none are currently expected to have a material effect on our consolidated financial position.

Frontier Refining LLC (“FR”), our wholly-owned subsidiary, has undertaken environmental audits at the Cheyenne Refinery regarding compliance with federal and state air quality and waste requirements. By letters dated October 5, 2012, and November 7, 2012, FR submitted reports to the EPA voluntarily disclosing non-compliance with certain emission limitations, reporting, and other provisions of a 2009 federal consent decree. By letter dated January 10, 2013, FR submitted to the EPA a voluntary self-disclosure of preliminary audit findings consistent with the EPA’s Audit Policy. By letter dated October 31, 2012, FR submitted a preliminary report to the Wyoming Department of Environmental Quality (“WDEQ”) voluntarily disclosing non-compliance with certain notification, reporting, and other provisions of the refinery's state air ~~permit~~permits and other regulatory requirements. The Cheyenne Refinery also has four outstanding Notices of Violations issued in 2010, 2011 and 2013 that are subject to ongoing settlement negotiations with the WDEQ. Additional air, water and waste audits are ongoing or planned for the Cheyenne Refinery for 2013.

Ethanol Management Company LLC (“EMC”), our wholly-owned subsidiary, has undertaken an environmental audit at the terminal located in Henderson, Colorado regarding compliance with the hazardous waste requirements administered by the Colorado Department of Public Health and Environment (“CDPHE”). By letter dated November 7, 2012, EMC notified the CDPHE that wastewater held in spill tanks at the terminal was stored in the tank longer than permissible under the hazardous waste regulations.

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Between November 2010 and February 2012, certain of our subsidiaries ~~have~~ submitted ~~ten~~multiple reports to the EPA to voluntarily ~~disclosing~~disclose non-compliance with fuels regulations at the Cheyenne, El Dorado, Navajo, Tulsa and Woods Cross refineries and at the ~~Henderson, Colorado and~~ Cedar City, Utah and Henderson, Colorado terminals. The EPA has requested additional information regarding certain of these reports, and our subsidiaries have complied with all requests received to date.

Other

We are a party to various other litigation and ~~legal~~ proceedings that we believe, based on advice of counsel, will not either individually or in the aggregate have a materially adverse impact on our financial condition, results of operations or cash flows.


Item 1A.	Risk Factors

~~There~~Except for the additional risk factor information described below, there have been no material changes in our risk factors as previously disclosed in Part 1, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2011~~2012. In addition to the other information set forth in this quarterly report, you should carefully consider the risk factors discussed below and in our ~~2011~~2012 Form 10-K, which could materially affect our business, financial condition or future results. The risks described in this quarterly report and in our ~~2011~~2012 Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

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The availability and cost of renewable identification numbers could have an adverse effect on our financial condition and results of operations.

Pursuant to the 2007 Energy Independence and Security Act, the EPA promulgated the Renewable Fuel Standard 2 (“RFS2”) regulations reflecting the increased volume of renewable fuels mandated to be blended into the nation's fuel supply. The regulations, in part, require refiners to add annually increasing amounts of “renewable fuels” to their petroleum products or purchase credits, known as renewable identification numbers (“RINs”), in lieu of such blending. We currently purchase RINs for some fuel categories on the open market in order to comply with the quantity of renewable fuels we are required to blend under the RFS2. Recently, due in part to the nation's fuel supply approaching the “blend wall” (the 10% ethanol limit prescribed by most automobile warranties), the price of RINs has been extremely volatile with the price dramatically increasing in recognition of the decrease in RINs availability. While we cannot predict the future prices of RINs, the costs to obtain the necessary number of RINs could be material. If we are unable to pass the costs of compliance with the RFS2 on to our customers, if sufficient RINs are unavailable for purchase, if we have to pay a significantly higher price for RINs or if we are otherwise unable to meet the RFS2 mandates, our financial condition and results of operations could be adversely affected.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Under our common stock repurchase programs, repurchases are being made from time to time in the open market or privately negotiated transactions based on market conditions, securities law limitations and other factors. The following table includes repurchases made under these programs during the ~~third~~first quarter of ~~2012~~2013.

Period
Total Number of
Shares Purchased

Average Price
Paid Per Share

Total Number of
Shares Purchased
under Approved
Stock Repurchase
Programs

Maximum Dollar
Value of Shares
Yet to be
Purchased under
Approved Stock
Repurchase
Programs
July 2012 —
$ —
—
$ 510,228,860
August 2012 —
$ —
—
$ 510,228,860
September 2012 ⁽¹⁾
13,600
$ 39.39
—
$ 510,228,860
Total for July to September 2012 13,600
—



Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
January 2013	—	$	—	—	$	494,399,956
February 2013	—	$	—	—	$	494,399,956
March 2013 ⁽¹⁾	186,700	$	52.45	—	$	494,399,956
Total for January to March 2013	186,700			—

(1) The ~~September 2012~~March 2013 shares repurchased were not purchased under our approved stock repurchase program, but rather pursuant to separate authority from our Board of Directors. These repurchases were made in the open market.


Item 6.	Exhibits

The Exhibit Index on page 5954 of this Quarterly Report on Form 10-Q lists the exhibits that are filed or furnished, as applicable, as part of the Quarterly Report on Form 10-Q.

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SIGNATURES

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.




	HOLLYFRONTIER CORPORATION
	(Registrant)

Date: ~~November 7, 2012~~May 8, 2013		/s/ Douglas S. Aron
		Douglas S. Aron
		Executive Vice President and Chief Financial Officer (Principal Financial Officer)

Date: ~~November 7, 2012~~May 8, 2013		/s/ J. W. Gann, Jr.
		J. W. Gann, Jr.
		Vice President, ~~and~~ Controller ~~(Principal~~and Chief Accounting Officer (Principal Accounting Officer)

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Exhibit Index



Exhibit Number		Description

3.1		Amended and Restated Certificate of Incorporation of HollyFrontier Corporation (incorporated by reference to Exhibit 3.1 of Registrant's Current Report on Form 8-K ~~Current Report~~ filed July 8, 2011, File No. 1-03876).

3.2		Amended and Restated By-Laws of HollyFrontier Corporation (incorporated by reference to Exhibit 3.1 of Registrant's Current Report on Form 8-K ~~Current Report~~ filed November 21, 2011, File No. 1-03876).

~~4.1+~~10.1+		Fourth Supplemental Indenture, dated August 6, 2012, among HEP UNEV Holdings LLC, HEP UNEV Pipeline LLC, Holly Energy Partners, L.P., Holly Energy Finance Corp., the other guarantors party thereto and U.S. Bank National Association to the Indenture, dated March 10, 2010, among Holly Energy Partners, L.P., Holly Energy Finance Corp., each of the guarantors party thereto and U.S. Bank National Association.

~~4.2+~~		First Supplemental Indenture, dated August 6, 2012, among HEP UNEV Holdings LLC, HEP UNEV Pipeline LLC, Holly Energy Partners, L.P., Holly Energy Finance Corp., the other guarantors party thereto and U.S. Bank National Association to the Indenture, dated March 12, 2012, among Holly Energy Partners, L.P., Holly Energy Finance Corp., each of the guarantors party thereto and U.S. Bank National Association.

~~10.1~~		~~LLC Interest Purchase Agreement, dated July 12, 2012, by and among~~ HollyFrontier Corporation ~~Holly Energy Partners, L.P.~~Form of Amendment to Change in Control Agreement for David L. Lamp and ~~HEP UNEV Holdings LLC~~George J. Damiris (incorporated by reference to Exhibit ~~10.2~~10.1 of Registrant's ~~Quarterly~~Current Report on Form ~~10-Q for its quarterly period ended June 30, 2012,~~8-K filed March 14, 2013, File No. 1-03876).

10.2		~~Seventh Amended~~Second Amendment to Credit Agreement and ~~Restated Omnibus~~First Amendment to Guarantee and Collateral Agreement, dated ~~July 12, 2012, by and~~March 19, 2013, among HollyFrontier Corporation ~~Holly Energy Partners, L.P.~~ and certain of ~~their respective~~its subsidiaries, as borrowers, Union Bank, N.A., as administrative agent and certain lenders from time to time party thereto (incorporated by reference to Exhibit ~~10.3~~10.1 of Registrant's ~~Quarterly~~Current Report on Form ~~10-Q for its quarterly period ended June 30, 2012,~~8-K filed March 21, 2013, File No. 1-03876).

~~10.3~~		Limited Partial Waiver of Incentive Distribution Rights under the First Amended and Restated Agreement of Limited Partnership of Holly Energy Partners, L.P., dated as of July 12, 2012 (incorporated by reference to Exhibit 10.4 of Registrant's Quarterly Report on Form 10-Q for its quarterly period ended June 30, 2012, File No. 1-03876).

~~10.4~~		Amended and Restated Limited Liability Company Agreement of HEP UNEV Holdings LLC, dated July 12, 2012, by and among HEP UNEV Holdings LLC, HollyFrontier Holdings LLC and Holly Energy Partners, L.P. (incorporated by reference to Exhibit 10.5 of Registrant's Quarterly Report on Form 10-Q for its quarterly period ended June 30, 2012, File No. 1-03876).

~~10.5~~		Termination of Option Agreement, dated July 12, 2012, by and among HollyFrontier Corporation, HEP UNEV Pipeline LLC (f/k/a Holly UNEV Pipeline Company), Navajo Pipeline Co., L.P., Holly Logistic Services, L.L.C., HEP Logistics Holdings, L.P., Holly Energy Partners, L.P., HEP Logistics GP, L.L.C. and Holly Energy Partners - Operating, L.P. (incorporated by reference to Exhibit 10.6 of Registrant's Quarterly Report on Form 10-Q for its quarterly period ended June 30, 2012, File No. 1-03876).

~~31.1+~~31.1*		Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.

~~31.2+~~31.2*		Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.

~~32.1++~~32.1**		Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002.

~~32.2++~~32.2**		Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.

101*101++		The following financial information from HollyFrontier Corporation’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2012,~~March 31, 2013, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Cash Flows, and (v) Notes to the Consolidated Financial Statements.

+* Filed herewith.

++** Furnished herewith.

* Furnished+ Constitutes management contracts or compensatory plans or arrangements.

++ Filed electronically herewith.

5954



	As Originally Reported		As Adjusted		Effect of Change
	(In thousands)
Accounts receivable: Crude oil resales	$	743,544	$	5,166	$	(738,378	)
Total current assets	4,659,124		3,920,746		(738,378		)
Total assets	$	10,314,621	$	9,576,243	$	(738,378	)

Accounts payable	$	2,243,072	$	1,504,694	$	(738,378	)
Total current liabilities	2,629,061		1,890,683		(738,378		)
Total liabilities and equity	$	10,314,621	$	9,576,243	$	(738,378	)



		Nine Months Ended September 30, 2011
	(In thousands, except per share amounts)
Sales and other revenues		$	14,446,297
Net income attributable to HollyFrontier stockholders		$	1,118,018
Basic earnings per share		$	5.34
Diluted earnings per share		$	5.31



Restricted Stock	Grants		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value ($000)

Outstanding at January 1, 2012 (non-vested)	1,122,350		$	25.48
Granted	420,922		33.97
Vesting and transfer of ownership to recipients	(574,408	)	23.48
Forfeited	(3,975	)	33.06
Outstanding at September 30, 2012 (non-vested)	964,889		$	30.35	$	39,821



	Refining Segment		HEP		Total
	(In thousands)
Balance at January 1, 2012	$	2,047,519	$	288,991	$	2,336,510
Adjustment to goodwill related to Frontier merger	1,792		—		1,792
Balance at September 30, 2012	$	2,049,311	$	288,991	$	2,338,302



	September 30, 2012			December 31, 2011
	(In thousands)
9.875% Senior Notes
Principal	$	286,812		$	291,812
Unamortized discount	(7,788		)	(8,930		)
	279,024			282,882
6.875% Senior Notes
Principal	150,000			150,000
Unamortized premium	6,115			6,490
	156,115			156,490
8.5% Senior Notes
Principal	—			199,985
Unamortized premium	—			11,905
	—			211,890
Financing Obligation	36,654			37,620

Total HollyFrontier long-term debt	471,793			688,882

HEP Credit Agreement	431,000			200,000

HEP 8.25% Senior Notes
Principal	150,000			150,000
Unamortized discount	(1,678		)	(1,907		)
	148,322			148,093
HEP 6.5% Senior Notes
Principal	300,000			—
Unamortized discount	(4,888		)	—
	295,112			—
HEP 6.25% Senior Notes
Principal	—			185,000
Unamortized discount	—			(8,331		)
Unamortized premium – designated fair value hedge	—			1,098
	—			177,767

Total HEP long-term debt	874,434			525,860

Total long-term debt	$	1,346,227		$	1,214,742



	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
	(In thousands)
September 30, 2012
Derivatives designated as cash flow hedging instruments:
Commodity price swap contracts	Accrued liabilities	$	22,018	Accrued liabilities	$	86,945
Variable-to-fixed interest rate swap contracts				Other long-term liabilities	3,764
Total		$	22,018		$	90,709

Derivatives not designated as hedging instruments:
Commodity price swap contracts	Prepayments and other current assets	$	4,126
	Accrued liabilities	20,986		Accrued liabilities	$	13,516
Total		$	25,112		$	13,516

December 31, 2011
Derivatives designated as cash flow hedging instruments:
Commodity price swap contracts	Prepayments and other current assets	$	173,784
Variable-to-fixed interest rate swap contracts				Other long-term liabilities	$	520
Total		$	173,784		$	520

Derivatives not designated as hedging instruments:
Commodity price swap contracts	Prepayments and other current assets	$	1,870	Accrued liabilities	$	1,252



Southwest Region (Navajo Refinery)
Crude charge (BPD) ⁽¹⁾	101,480			92,270			91,890			82,860
Refinery throughput (BPD) ⁽²⁾	110,080			100,290			100,558			91,220
Refinery production (BPD) ⁽³⁾	108,810			100,100			98,980			90,230
Sales of produced refined products (BPD)	106,370			99,530			97,470			91,310
Sales of refined products (BPD) ⁽⁴⁾	110,760			102,940			102,450			95,980
Refinery utilization ⁽⁵⁾	101.5		%	92.3		%	91.9		%	82.9		%

Average per produced barrel ⁽⁶⁾
Net sales	$	122.16		$	120.67		$	123.64		$	119.84
Cost of products ⁽⁷⁾	92.26			92.33			97.37			97.37
Refinery gross margin	29.90			28.34			26.27			22.47
Refinery operating expenses ⁽⁸⁾	5.14			5.30			5.57			5.56
Net operating margin	$	24.76		$	23.04		$	20.70		$	16.91

Refinery operating expenses per throughput barrel ⁽⁹⁾	$	4.97		$	5.26		$	5.40		$	5.57

Feedstocks:
Sweet crude oil	2		%	4		%	2		%	4		%
Sour crude oil	75		%	70		%	78		%	72		%
Heavy sour crude oil	16		%	18		%	11		%	15		%
Other feedstocks and blends	7		%	8		%	9		%	9		%
Total	100		%	100		%	100		%	100		%

Sales of produced refined products:
Gasolines	52		%	50		%	52		%	51		%
Diesel fuels	36		%	34		%	37		%	34		%
Jet fuels	—		%	1		%	—		%	1		%
Fuel oil	7		%	7		%	6		%	6		%
Asphalt	2		%	5		%	2		%	5		%
LPG and other	3		%	3		%	3		%	3		%
Total	100		%	100		%	100		%	100		%