Supplemental Guarantor / Non-Guarantor Financial Information | Supplemental Guarantor/Non-Guarantor Financial Information Obligations of HEP (“Parent”) under the Senior Notes have been jointly and severally guaranteed by each of its direct and indirect 100% owned subsidiaries (“Guarantor Subsidiaries”). These guarantees are full and unconditional, subject to certain customary release provisions. These circumstances include (i) when a Guarantor Subsidiary is sold or sells all or substantially all of its assets, (ii) when a Guarantor Subsidiary is declared “unrestricted” for covenant purposes, (iii) when a Guarantor Subsidiary's guarantee of other indebtedness is terminated or released and (iv) when the requirements for legal defeasance or covenant defeasance or to discharge the Senior Notes have been satisfied. The following financial information presents condensed consolidating balance sheets, statements of comprehensive income, and statements of cash flows of the Parent, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries. The information has been presented as if the Parent accounted for its ownership in the Guarantor Subsidiaries, and the Guarantor Restricted Subsidiaries accounted for the ownership of the Non-Guarantor Non-Restricted Subsidiaries, using the equity method of accounting. Condensed Consolidating Balance Sheet June 30, 2015 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) ASSETS Current assets: Cash and cash equivalents $ — $ 7,350 $ 3,074 $ — $ 10,424 Accounts receivable 2 35,771 4,442 (171 ) 40,044 Prepaid and other current assets 82 3,395 1,261 — 4,738 Total current assets 84 46,516 8,777 (171 ) 55,206 Properties and equipment, net — 624,509 376,299 — 1,000,808 Investment in subsidiaries 603,118 283,393 — (886,511 ) — Transportation agreements, net — 77,279 — — 77,279 Goodwill — 256,498 — — 256,498 Investment in SLC Pipeline — 24,280 — — 24,280 Other assets 1,344 9,828 — — 11,172 Total assets $ 604,546 $ 1,322,303 $ 385,076 $ (886,682 ) $ 1,425,243 LIABILITIES AND PARTNERS’ EQUITY Current liabilities: Accounts payable $ — $ 15,343 $ 956 $ (171 ) $ 16,128 Accrued interest 6,500 283 — — 6,783 Deferred revenue — 6,440 3,500 — 9,940 Accrued property taxes — 1,739 2,596 — 4,335 Other current liabilities 24 4,801 1 — 4,826 Total current liabilities 6,524 28,606 7,053 (171 ) 42,012 Long-term debt 296,905 604,000 — — 900,905 Other long-term liabilities 177 20,790 165 — 21,132 Deferred revenue — 35,484 — — 35,484 Class B unit — 30,305 — — 30,305 Equity - partners 300,940 603,118 377,858 (980,976 ) 300,940 Equity - noncontrolling interest — — — 94,465 94,465 Total liabilities and partners’ equity $ 604,546 $ 1,322,303 $ 385,076 $ (886,682 ) $ 1,425,243 Condensed Consolidating Balance Sheet December 31, 2014 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) ASSETS Current assets: Cash and cash equivalents $ 2 $ 2,828 $ — $ — $ 2,830 Accounts receivable — 34,274 6,044 (189 ) 40,129 Prepaid and other current assets 212 2,856 1,315 — 4,383 Total current assets 214 39,958 7,359 (189 ) 47,342 Properties and equipment, net — 596,988 383,491 — 980,479 Investment in subsidiaries 622,100 285,247 — (907,347 ) — Transportation agreements, net — 80,703 — — 80,703 Goodwill — 256,498 — — 256,498 Investment in SLC Pipeline — 24,478 — — 24,478 Other assets 1,319 10,736 — — 12,055 Total assets $ 623,633 $ 1,294,608 $ 390,850 $ (907,536 ) $ 1,401,555 LIABILITIES AND PARTNERS’ EQUITY Current liabilities: Accounts payable $ — $ 15,495 $ 2,575 $ (189 ) $ 17,881 Accrued interest 6,500 115 — — 6,615 Deferred revenue — 5,672 6,760 — 12,432 Accrued property taxes — 1,902 801 — 2,703 Other current liabilities 45 4,408 118 — 4,571 Total current liabilities 6,545 27,592 10,254 (189 ) 44,202 Long-term debt 296,579 571,000 — — 867,579 Other long-term liabilities 147 17,731 267 — 18,145 Deferred revenue — 29,392 — — 29,392 Class B unit — 26,793 — — 26,793 Equity - partners 320,362 622,100 380,329 (1,002,429 ) 320,362 Equity - noncontrolling interest — — — 95,082 95,082 Total liabilities and partners’ equity $ 623,633 $ 1,294,608 $ 390,850 $ (907,536 ) $ 1,401,555 Condensed Consolidating Statement of Comprehensive Income Three Months Ended June 30, 2015 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-restricted Subsidiaries Eliminations Consolidated (In thousands) Revenues: Affiliates $ — $ 64,727 $ 3,545 $ 25 $ 68,297 Third parties — 11,895 3,287 — 15,182 — 76,622 6,832 25 83,479 Operating costs and expenses: Operations (exclusive of depreciation and amortization) — 22,111 3,153 25 25,289 Depreciation and amortization 11,316 3,747 — 15,063 General and administrative 637 2,059 — — 2,696 637 35,486 6,900 25 43,048 Operating income (loss) (637 ) 41,136 (68 ) — 40,431 Equity in earnings (loss) of subsidiaries 36,111 (88 ) — (36,023 ) — Equity in earnings of SLC Pipeline — 631 — — 631 Interest expense (5,073 ) (3,983 ) — — (9,056 ) Interest income — 3 — — 3 Other income (expense) — 120 (49 ) — 71 31,038 (3,317 ) (49 ) (36,023 ) (8,351 ) Income (loss) before income taxes 30,401 37,819 (117 ) (36,023 ) 32,080 State income tax benefit — 64 — — 64 Net income (loss) 30,401 37,883 (117 ) (36,023 ) 32,144 Allocation of net income attributable to noncontrolling interests — — — (1,743 ) (1,743 ) Net income (loss) attributable to Holly Energy Partners 30,401 37,883 (117 ) (37,766 ) 30,401 Other comprehensive income (loss) 222 222 — (222 ) 222 Comprehensive income (loss) $ 30,623 $ 38,105 $ (117 ) $ (37,988 ) $ 30,623 Condensed Consolidating Statement of Comprehensive Income Three Months Ended June 30, 2014 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) Revenues: Affiliates $ — $ 61,427 $ 3,359 $ (306 ) $ 64,480 Third parties — 8,533 1,985 — 10,518 — 69,960 5,344 (306 ) 74,998 Operating costs and expenses: Operations (exclusive of depreciation and amortization) — 22,179 2,694 (306 ) 24,567 Depreciation and amortization — 12,288 3,594 — 15,882 General and administrative 585 1,931 — — 2,516 585 36,398 6,288 (306 ) 42,965 Operating income (loss) (585 ) 33,562 (944 ) — 32,033 Equity in earnings (loss) of subsidiaries 28,631 (708 ) — (27,923 ) — Equity in earnings of SLC Pipeline — 748 — — 748 Interest expense (5,012 ) (3,317 ) — — (8,329 ) Other income — 26 — — 26 23,619 (3,251 ) — (27,923 ) (7,555 ) Income (loss) before income taxes 23,034 30,311 (944 ) (27,923 ) 24,478 State income tax expense — (28 ) — — (28 ) Net income (loss) 23,034 30,283 (944 ) (27,923 ) 24,450 Allocation of net income attributable to noncontrolling interests — — — (1,416 ) (1,416 ) Net income (loss) attributable to Holly Energy Partners 23,034 30,283 (944 ) (29,339 ) 23,034 Other comprehensive income (loss) (746 ) (746 ) — 746 (746 ) Comprehensive income (loss) $ 22,288 $ 29,537 $ (944 ) $ (28,593 ) $ 22,288 Condensed Consolidating Statement of Comprehensive Income Six Months Ended June 30, 2015 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-restricted Subsidiaries Eliminations Consolidated (In thousands) Revenues: Affiliates $ — $ 127,783 $ 12,769 $ — $ 140,552 Third parties — 23,282 9,401 — 32,683 — 151,065 22,170 — 173,235 Operating costs and expenses: Operations (exclusive of depreciation and amortization) — 47,642 5,613 — 53,255 Depreciation and amortization — 22,278 7,479 — 29,757 General and administrative 1,700 4,286 — — 5,986 1,700 74,206 13,092 — 88,998 Operating income (loss) (1,700 ) 76,859 9,078 — 84,237 Equity in earnings (loss) of subsidiaries 74,044 6,772 — (80,816 ) — Equity in earnings of SLC Pipeline — 1,365 — — 1,365 Interest expense (10,140 ) (7,684 ) — — (17,824 ) Interest income — 3 — — 3 Other income (expense) — 279 (49 ) — 230 63,904 735 (49 ) (80,816 ) (16,226 ) Income (loss) before income taxes 62,204 77,594 9,029 (80,816 ) 68,011 State income tax expense — (37 ) — — (37 ) Net income (loss) 62,204 77,557 9,029 (80,816 ) 67,974 Allocation of net income attributable to noncontrolling interests — — — (5,770 ) (5,770 ) Net income (loss) attributable to Holly Energy Partners 62,204 77,557 9,029 (86,586 ) 62,204 Other comprehensive income (loss) (527 ) (527 ) — 527 (527 ) Comprehensive income (loss) $ 61,677 $ 77,030 $ 9,029 $ (86,059 ) $ 61,677 Condensed Consolidating Statement of Comprehensive Income Six Months Ended June 30, 2014 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) Revenues: Affiliates $ — $ 123,042 $ 13,883 $ (613 ) $ 136,312 Third parties — 19,614 6,076 — 25,690 — 142,656 19,959 (613 ) 162,002 Operating costs and expenses: Operations (exclusive of depreciation and amortization) — 42,330 5,662 (613 ) 47,379 Depreciation and amortization — 24,281 7,189 — 31,470 General and administrative 1,643 4,024 — — 5,667 1,643 70,635 12,851 (613 ) 84,516 Operating income (loss) (1,643 ) 72,021 7,108 — 77,486 Equity in earnings (loss) of subsidiaries 69,195 5,331 — (74,526 ) — Equity in earnings of SLC Pipeline — 1,270 — — 1,270 Interest expense (12,698 ) (6,085 ) — — (18,783 ) Interest income — 3 — — 3 Loss on early extinguishment of debt (7,677 ) — — — (7,677 ) Other income — 34 — — 34 48,820 553 — (74,526 ) (25,153 ) Income (loss) before income taxes 47,177 72,574 7,108 (74,526 ) 52,333 State income tax expense — (103 ) — — (103 ) Net income (loss) 47,177 72,471 7,108 (74,526 ) 52,230 Allocation of net income attributable to noncontrolling interests — — — (5,053 ) (5,053 ) Net income (loss) attributable to Holly Energy Partners 47,177 72,471 7,108 (79,579 ) 47,177 Other comprehensive income (loss) (651 ) (651 ) — 651 (651 ) Comprehensive income (loss) $ 46,526 $ 71,820 $ 7,108 $ (78,928 ) $ 46,526 Condensed Consolidating Statement of Cash Flows Six Months Ended June 30, 2015 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) Cash flows from operating activities $ (9,639 ) $ 111,517 $ 15,358 $ (6,772 ) $ 110,464 Cash flows from investing activities Additions to properties and equipment — (22,159 ) (784 ) — (22,943 ) Purchase of El Dorado crude tanks — (27,500 ) — — (27,500 ) Proceeds from sale of assets — 965 — — 965 Distributions from UNEV — 1,853 — (1,853 ) — Distributions in excess of equity in earnings in SLC Pipeline — 198 — — 198 — (46,643 ) (784 ) (1,853 ) (49,280 ) Cash flows from financing activities Net borrowings under credit agreement — 33,000 — — 33,000 Net intercompany financing activities 92,498 (92,498 ) — — — Distributions to HEP unitholders (82,614 ) — — — (82,614 ) Distributions to noncontrolling interests — — (11,500 ) 8,625 (2,875 ) Purchase of units for incentive grants (247 ) — — — (247 ) Other — (854 ) — — (854 ) 9,637 (60,352 ) (11,500 ) 8,625 (53,590 ) Cash and cash equivalents Increase (decrease) for the period (2 ) 4,522 3,074 — 7,594 Beginning of period 2 2,828 — — 2,830 End of period $ — $ 7,350 $ 3,074 $ — $ 10,424 Condensed Consolidating Statement of Cash Flows Six Months Ended June 30, 2014 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) Cash flows from operating activities $ (15,764 ) $ 96,308 $ 11,819 $ — $ 92,363 Cash flows from investing activities Additions to properties and equipment — (33,831 ) (4,743 ) — (38,574 ) Distributions from noncontrolling interest — 6,000 — (6,000 ) — Distributions in excess of equity in earnings of SLC Pipeline — 105 — — 105 — (27,726 ) (4,743 ) (6,000 ) (38,469 ) Cash flows from financing activities Net repayments under credit agreement — 180,000 — — 180,000 Net intercompany financing activities 247,935 (247,935 ) — — — Redemption of senior notes (156,188 ) — — — (156,188 ) Distributions to HEP unitholders (75,577 ) — — — (75,577 ) Distributions to noncontrolling interests — — (8,000 ) 6,000 (2,000 ) Purchase of units for incentive grants (406 ) — — — (406 ) Other — (9 ) — — (9 ) 15,764 (67,944 ) (8,000 ) 6,000 (54,180 ) Cash and cash equivalents Increase (decrease) for the period — 638 (924 ) — (286 ) Beginning of period 2 1,447 4,903 — 6,352 End of period $ 2 $ 2,085 $ 3,979 $ — $ 6,066 |