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 December 31, 2015 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) ASSETS Current assets: Cash and cash equivalents $ 2 $ 5,452 $ 9,559 $ — $ 15,013 Accounts receivable — 35,558 5,715 (198 ) 41,075 Prepaid and other current assets 174 3,634 1,246 — 5,054 Total current assets 176 44,644 16,520 (198 ) 61,142 Properties and equipment, net — 678,027 371,843 — 1,049,870 Investment in subsidiaries 591,323 283,287 — (874,610 ) — Transportation agreements, net — 73,805 — — 73,805 Goodwill — 256,498 — — 256,498 Equity method investments — 79,438 — — 79,438 Other assets 642 13,061 — — 13,703 Total assets $ 592,141 $ 1,428,760 $ 388,363 $ (874,808 ) $ 1,534,456 LIABILITIES AND PARTNERS’ EQUITY Current liabilities: Accounts payable $ — $ 19,448 $ 3,333 $ (198 ) $ 22,583 Accrued interest 6,500 252 — — 6,752 Deferred revenue — 6,010 6,006 — 12,016 Accrued property taxes — 2,627 1,137 — 3,764 Other current liabilities 7 3,802 — — 3,809 Total current liabilities 6,507 32,139 10,476 (198 ) 48,924 Long-term debt 296,752 712,000 — — 1,008,752 Other long-term liabilities 210 20,294 171 — 20,675 Deferred revenue — 39,063 — — 39,063 Class B unit — 33,941 — — 33,941 Equity - partners 288,672 591,323 377,716 (969,039 ) 288,672 Equity - noncontrolling interest — — — 94,429 94,429 Total liabilities and partners’ equity $ 592,141 $ 1,428,760 $ 388,363 $ (874,808 ) $ 1,534,456 Condensed Consolidating Balance Sheet December 31, 2014 (1) 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 — 635,107 383,491 — 1,018,598 Investment in subsidiaries 656,477 285,247 — (941,724 ) — Transportation agreements, net — 80,703 — — 80,703 Goodwill — 256,498 — — 256,498 Equity method investments — 24,478 — — 24,478 Other assets 1,319 10,143 — — 11,462 Total assets $ 658,010 $ 1,332,134 $ 390,850 $ (941,913 ) $ 1,439,081 LIABILITIES AND PARTNERS’ EQUITY Current liabilities: Accounts payable $ — $ 19,237 $ 2,575 $ (189 ) $ 21,623 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 31,334 10,254 (189 ) 47,944 Long-term debt 296,579 570,407 — — 866,986 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 354,739 656,477 380,329 (1,036,806 ) 354,739 Equity - noncontrolling interest — — — 95,082 95,082 Total liabilities and partners’ equity $ 658,010 $ 1,332,134 $ 390,850 $ (941,913 ) $ 1,439,081 (1) Retrospectively adjusted as described in Notes 2 and 7. Condensed Consolidating Statement of Comprehensive Income Year Ended December 31, 2015 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) Revenues: Affiliates $ — $ 269,277 $ 22,944 $ — $ 292,221 Third parties — 47,189 19,465 — 66,654 — 316,466 42,409 — 358,875 Operating costs and expenses: Operations (exclusive of depreciation and amortization) — 91,839 11,469 — 103,308 Depreciation and amortization — 47,848 15,004 — 62,852 General and administrative 3,616 8,940 — — 12,556 3,616 148,627 26,473 — 178,716 Operating income (loss) (3,616 ) 167,839 15,936 — 180,159 Equity in earnings of subsidiaries 161,097 11,915 — (173,012 ) — Equity in earnings of equity method investments — 4,803 — — 4,803 Interest income — 526 — — 526 Interest expense (20,273 ) (17,145 ) — — (37,418 ) Gain on sale of assets — 375 — — 375 Other — 160 (49 ) — 111 140,824 634 (49 ) (173,012 ) (31,603 ) Income (loss) before income taxes 137,208 168,473 15,887 (173,012 ) 148,556 State income tax expense — (228 ) — — (228 ) Net income (loss) 137,208 168,245 15,887 (173,012 ) 148,328 Allocation of net (income) attributable to noncontrolling interests — — — (11,120 ) (11,120 ) Net income (loss) attributable to Holly Energy Partners 137,208 168,245 15,887 (184,132 ) 137,208 Other comprehensive income (loss) 236 236 — (236 ) 236 Comprehensive income (loss) $ 137,444 $ 168,481 $ 15,887 $ (184,368 ) $ 137,444 Condensed Consolidating Statement of Comprehensive Income Year Ended December 31, 2014 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) Revenues: Affiliates $ — $ 254,364 $ 22,073 $ (1,241 ) $ 275,196 Third parties — 45,711 11,638 — 57,349 — 300,075 33,711 (1,241 ) 332,545 Operating costs and expenses: Operations (exclusive of depreciation and amortization) — 93,382 12,660 (1,241 ) 104,801 Depreciation and amortization — 47,592 14,574 — 62,166 General and administrative 2,658 8,166 — — 10,824 2,658 149,140 27,234 (1,241 ) 177,791 Operating income (loss) (2,658 ) 150,935 6,477 — 154,754 Equity in earnings of subsidiaries 138,691 4,858 — (143,549 ) — Equity in earnings of equity method investments — 2,987 — — 2,987 Interest income — 3 — — 3 Interest expense (22,831 ) (13,270 ) — — (36,101 ) Loss on early extinguishment of debt (7,677 ) — — — (7,677 ) Other — 82 — — 82 108,183 (5,340 ) — (143,549 ) (40,706 ) Income (loss) before income taxes 105,525 145,595 6,477 (143,549 ) 114,048 State income tax expense — (235 ) — — (235 ) Net income (loss) 105,525 145,360 6,477 (143,549 ) 113,813 Allocation of net loss attributable to noncontrolling interests — — — (8,288 ) (8,288 ) Net income (loss) attributable to Holly Energy Partners 105,525 145,360 6,477 (151,837 ) 105,525 Other comprehensive income (loss) 98 98 — (98 ) 98 Comprehensive income (loss) $ 105,623 $ 145,458 $ 6,477 $ (151,935 ) $ 105,623 Condensed Consolidating Statement of Comprehensive Income Year Ended December 31, 2013 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) Revenues: Affiliates $ — $ 236,336 $ 17,258 $ (1,226 ) $ 252,368 Third parties — 42,139 10,675 — 52,814 — 278,475 27,933 (1,226 ) 305,182 Operating costs and expenses: Operations (exclusive of depreciation and amortization) — 88,614 12,056 (1,226 ) 99,444 Depreciation and amortization — 51,082 14,341 — 65,423 General and administrative 3,381 8,368 — — 11,749 3,381 148,064 26,397 (1,226 ) 176,616 Operating income (loss) (3,381 ) 130,411 1,536 — 128,566 Equity in earnings (loss) of subsidiaries 115,850 1,231 — (117,081 ) — Equity in earnings of equity method investments — 2,826 — — 2,826 Interest income — 56 105 — 161 Interest expense (33,020 ) (13,990 ) — — (47,010 ) Gain on sale of assets — 1,810 — — 1,810 Other — 61 — — 61 82,830 (8,006 ) 105 (117,081 ) (42,152 ) Income (loss) before income taxes 79,449 122,405 1,641 (117,081 ) 86,414 State income tax expense — (333 ) — — (333 ) Net income (loss) 79,449 122,072 1,641 (117,081 ) 86,081 Allocation of net loss attributable to noncontrolling interests — — — (6,632 ) (6,632 ) Net income (loss) attributable to Holly Energy Partners 79,449 122,072 1,641 (123,713 ) 79,449 Other comprehensive income (loss) 4,135 4,135 — (4,135 ) 4,135 Comprehensive income (loss) $ 83,584 $ 126,207 $ 1,641 $ (127,848 ) $ 83,584 Condensed Consolidating Statement of Cash Flows Year Ended December 31, 2015 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) Cash flows from operating activities $ (19,490 ) $ 234,898 $ 29,501 $ (11,915 ) $ 232,994 Cash flows from investing activities Additions to properties and equipment — (65,574 ) (1,442 ) — (67,016 ) Purchase of El Dorado crude tanks — (27,500 ) — — (27,500 ) Purchase of investment in Frontier Pipeline — (55,032 ) — — (55,032 ) Proceeds from the sale of assets — 1,279 — — 1,279 Distributions from UNEV — 1,960 — (1,960 ) — Distributions in excess of equity in earnings of equity companies — 194 — — 194 — (144,673 ) (1,442 ) (1,960 ) (148,075 ) Cash flows from financing activities Net borrowings under credit agreement — 141,000 — — 141,000 Net intercompany financing activities 192,108 (192,108 ) — — — Contributions from HFC for El Dorado Operating acquisition — 27,623 — — 27,623 Distributions to HFC for El Dorado Operating acquisition — (62,000 ) — — (62,000 ) Distributions to HEP unitholders (169,063 ) — — — (169,063 ) Distributions to noncontrolling interests — — (18,500 ) 13,875 (4,625 ) Deferred financing costs — (962 ) — — (962 ) Purchase of units for incentive grants (3,555 ) — — — (3,555 ) Other — (1,154 ) — — (1,154 ) 19,490 (87,601 ) (18,500 ) 13,875 (72,736 ) Cash and cash equivalents Increase for the period — 2,624 9,559 — 12,183 Beginning of period 2 2,828 — — 2,830 End of period $ 2 $ 5,452 $ 9,559 $ — $ 15,013 Condensed Consolidating Statement of Cash Flows Year Ended December 31, 2014 (1) Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) Cash flows from operating activities $ (25,339 ) $ 193,273 $ 19,398 $ (692 ) $ 186,640 Cash flows from investing activities Additions to properties and equipment — (101,492 ) (8,201 ) — (109,693 ) Distributions from UNEV — 11,383 — (11,383 ) — Distribution in excess of equity in earnings in equity companies — 263 — — 263 — (89,846 ) (8,201 ) (11,383 ) (109,430 ) Cash flows from financing activities Net repayments under credit agreement — 208,000 — — 208,000 Net intercompany financing activities 339,771 (339,771 ) — — — Redemption of senior notes (156,188 ) — — — (156,188 ) Distributions to noncontrolling interests — — (16,100 ) 12,075 (4,025 ) Distributions to HEP unitholders (154,670 ) — — — (154,670 ) Contributions from HFC for El Dorado Operating acquisition — 29,734 — — 29,734 Deferred financing costs — (9 ) — — (9 ) Purchase of units for restricted grants (3,577 ) — — — (3,577 ) Other 3 — — — 3 25,339 (102,046 ) (16,100 ) 12,075 (80,732 ) Cash and cash equivalents Increase (decrease) for the period — 1,381 (4,903 ) — (3,522 ) Beginning of period 2 1,447 4,903 — 6,352 End of period $ 2 $ 2,828 $ — $ — $ 2,830 (1) Retrospectively adjusted as described in Note 2. Condensed Consolidating Statement of Cash Flows Year Ended December 31, 2013 (1) Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) Cash flows from operating activities $ (34,605 ) $ 197,678 $ 20,007 $ — $ 183,080 Cash flows from investing activities Additions to properties and equipment — (49,597 ) (7,016 ) — (56,613 ) Proceeds from the sale of assets — 2,731 — — 2,731 Distributions from UNEV — 9,375 — (9,375 ) — Distributions in excess of equity in earnings in equity companies — 300 — — 300 — (37,191 ) (7,016 ) (9,375 ) (53,582 ) Cash flows from financing activities Net borrowings under credit agreement — (58,000 ) — — (58,000 ) Net intercompany financing activities 105,031 (105,031 ) — — — Proceeds from issuance of common units 73,444 — — — 73,444 Distributions to noncontrolling interests — — (12,500 ) 9,375 (3,125 ) Contributions from general partner 1,499 — — — 1,499 Distributions to HEP unitholders (139,486 ) — — — (139,486 ) Contributions from HFC for El Dorado Operating acquisition — 4,512 — — 4,512 Purchase of units for restricted grants (5,634 ) — — — (5,634 ) Deferred financing costs — (1,344 ) — — (1,344 ) Other (249 ) — — — (249 ) 34,605 (159,863 ) (12,500 ) 9,375 (128,383 ) Cash and cash equivalents Increase for the period — 624 491 — 1,115 Beginning of period 2 823 4,412 — 5,237 End of period $ 2 $ 1,447 $ 4,903 $ — $ 6,352 (1) Retrospectively adjusted as described in Note 2. |