For our call this afternoon, Bruce will begin with prepared remarks and comments regarding our financial performance for the quarter. Matt will then follow up with some additional remarks. And at the conclusion of these prepared remarks, our team will be available to take your questions.Before we turn things over to Matt and Bruce for their comments, we want to make the following Safe Harbor disclosure statement. The statement is made under the Private Securities Litigation Reform Act of 1995. In summary, this Safe Harbor statement says that statements made in our press release and on this conference webcast with partnership or management expectations or predictions of the future are forward-looking statements and are intended to be covered under the Safe Harbor provisions of federal securities laws. There are many factors which could cause actual outcomes and results to materially differ from our expectations, including those we described in our 10-K and other filings with the SEC. These statements are not guarantees of future outcomes. This call may also include a discussion of non-GAAP financial measures that we use in analyzing our financial results. Please refer to today's press release for required reconciliations to GAAP financial measures and other related disclosures and information on where you may find this reconciliations and disclosures and a full reading of our Safe Harbor statement. Lastly, please note that information presented on our call today speaks only as of today, July 31, 2012, and any time-sensitive information provided may no longer be accurate at the time of any webcast replay or rereading of the transcript of our call. And now, I'd like to turn things over to Bruce Shaw. Bruce R. Shaw Thanks, Neale, and thanks, everybody, for joining us this afternoon. Today, I will cover HEP's financial result for the second quarter. And as a reminder, since we closed the UNEV transaction on July 12, 2012, UNEV results are not part of HEP's second quarter results and will not be included in my comments this afternoon.
On Wednesday, July 25, we announced the 31st consecutive increase in our quarterly distribution to $0.91 per unit, which is a 5% increase over the $0.865 per unit we declared for 2011 second quarter. Our distributable cash flow for the quarter ended June 30 was $34.5 million, up $13.1 million from the same period the previous year. Net income for the second quarter was $23.2 million versus $19 million for the same period in 2011. And the drivers of increased distributable cash flow and net income compared to the year-ago period are basically the same, the financial contribution of the assets that HEP acquired from HollyFrontier in November 2011, increased pipeline volumes and annual tariff increases.As a reminder, the majority of HEP's revenues and, therefore, income and DCF are supported by minimum commitments from our major customers. These commitments as of June 30, 2012, totaled approximately $220 million per year or about $55 million per quarter and amount to 85% to 90% of our total revenue. Operating expenses of approximately $17.9 million for the quarter were higher than 2011 second quarter amount of $14.4 million, primarily due to the inclusion of operating cost associated with our recently acquired assets serving HollyFrontier's El Dorado and Cheyenne Refineries and year-over-year increases in maintenance service, payroll and power costs. G&A expenses of $2.5 million for the quarter were higher than the previous year's second quarter number and a bit higher than our typical quarterly run rate, primarily due to transaction expenses related to the UNEV acquisition, which was announced June 28. Now I'll cover a few details relating to shortfalls billed and deferred revenue recognized during the quarter. As a reminder, the payments we received from HollyFrontier and Alon for quarterly shortfall billings under their minimum commitments are included in distributable cash flow in the current accounting period but classified as deferred revenues, so not recorded as revenue on our income statement until such time as they can be recognized. Deferred revenue recognition results from shortfall billings in prior quarters for which clawback rights either are uses or expire. Read the rest of this transcript for free on seekingalpha.com