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. In conjunction with the preparation of our December 31, 2016, Condensed Consolidating Balance Sheet and Statements of Comprehensive Income included below, we identified and corrected the presentation of noncontrolling interests presented in the eliminations column in prior periods to reflect such balances and activity within the respective guarantor and nonguarantor subsidiaries columns. Condensed Consolidating Balance Sheet December 31, 2016 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) ASSETS Current assets: Cash and cash equivalents $ 2 $ 301 $ 3,354 $ — $ 3,657 Accounts receivable — 45,056 5,554 (202 ) 50,408 Prepaid and other current assets 11 2,633 244 — 2,888 Total current assets 13 47,990 9,152 (202 ) 56,953 Properties and equipment, net — 957,045 371,350 — 1,328,395 Investment in subsidiaries 1,086,008 280,671 — (1,366,679 ) — Transportation agreements, net — 66,856 — — 66,856 Goodwill — 256,498 — — 256,498 Equity method investments — 165,609 — — 165,609 Other assets 725 9,201 — — 9,926 Total assets $ 1,086,746 $ 1,783,870 $ 380,502 $ (1,366,881 ) $ 1,884,237 LIABILITIES AND PARTNERS’ EQUITY Current liabilities: Accounts payable $ — $ 24,245 $ 2,899 $ (202 ) $ 26,942 Accrued interest 17,300 769 — — 18,069 Deferred revenue — 8,797 2,305 — 11,102 Accrued property taxes — 4,514 883 — 5,397 Other current liabilities 14 3,208 3 — 3,225 Total current liabilities 17,314 41,533 6,090 (202 ) 64,735 Long-term debt 690,912 553,000 — — 1,243,912 Other long-term liabilities 286 15,975 184 — 16,445 Deferred revenue — 47,035 — — 47,035 Class B unit — 40,319 — — 40,319 Equity - partners 378,234 1,086,008 280,671 (1,366,679 ) 378,234 Equity - noncontrolling interest — — 93,557 — 93,557 Total liabilities and partners’ equity $ 1,086,746 $ 1,783,870 $ 380,502 $ (1,366,881 ) $ 1,884,237 Condensed Consolidating Balance Sheet December 31, 2015 (1) 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 — 921,217 371,843 — 1,293,060 Investment in subsidiaries 834,444 283,287 — (1,117,731 ) — 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 $ 835,262 $ 1,671,950 $ 388,363 $ (1,117,929 ) $ 1,777,646 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 20,363 171 — 20,744 Deferred revenue — 39,063 — — 39,063 Class B unit — 33,941 — — 33,941 Equity - partners 531,793 834,444 283,287 (1,117,731 ) 531,793 Equity - noncontrolling interest — — 94,429 — 94,429 Total liabilities and partners’ equity $ 835,262 $ 1,671,950 $ 388,363 $ (1,117,929 ) $ 1,777,646 (1) Retrospectively adjusted as described in Note 2. Condensed Consolidating Statement of Comprehensive Income Year Ended December 31, 2016 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) Revenues: Affiliates $ — $ 307,049 $ 26,067 $ — $ 333,116 Third parties — 47,326 21,601 — 68,927 — 354,375 47,668 — 402,043 Operating costs and expenses: Operations (exclusive of depreciation and amortization) — 111,181 12,805 — 123,986 Depreciation and amortization — 55,083 15,345 — 70,428 General and administrative 3,804 8,728 — — 12,532 3,804 174,992 28,150 — 206,946 Operating income (loss) (3,804 ) 179,383 19,518 — 195,097 Equity in earnings of subsidiaries 193,432 14,634 — (208,066 ) — Equity in earnings of equity method investments — 14,213 — — 14,213 Interest income — 421 19 — 440 Interest expense (31,387 ) (21,165 ) — — (52,552 ) Gain on sale of assets and other — 702 (25 ) — 677 162,045 8,805 (6 ) (208,066 ) (37,222 ) Income (loss) before income taxes 158,241 188,188 19,512 (208,066 ) 157,875 State income tax expense — (285 ) — — (285 ) Net income (loss) 158,241 187,903 19,512 (208,066 ) 157,590 Net loss applicable to predecessor — 10,657 — — 10,657 Allocation of net income attributable to noncontrolling interests — (5,128 ) (4,878 ) — (10,006 ) Net income (loss) attributable to Holly Energy Partners 158,241 193,432 14,634 (208,066 ) 158,241 Other comprehensive income (loss) (99 ) (99 ) — 99 (99 ) Comprehensive income (loss) $ 158,142 $ 193,333 $ 14,634 $ (207,967 ) $ 158,142 Condensed Consolidating Statement of Comprehensive Income Year Ended December 31, 2015 (1) 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) — 94,087 11,469 — 105,556 Depreciation and amortization — 48,302 15,004 — 63,306 General and administrative 3,616 8,940 — — 12,556 3,616 151,329 26,473 — 181,418 Operating income (loss) (3,616 ) 165,137 15,936 — 177,457 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 and other — 535 (49 ) — 486 140,824 634 (49 ) (173,012 ) (31,603 ) Income (loss) before income taxes 137,208 165,771 15,887 (173,012 ) 145,854 State income tax expense — (228 ) — — (228 ) Net income (loss) 137,208 165,543 15,887 (173,012 ) 145,626 Net loss applicable to predecessor — 2,702 — — 2,702 Allocation of net income attributable to noncontrolling interests — (7,148 ) (3,972 ) — (11,120 ) Net income (loss) attributable to Holly Energy Partners 137,208 161,097 11,915 (173,012 ) 137,208 Other comprehensive income (loss) 236 236 — (236 ) 236 Comprehensive income (loss) $ 137,444 $ 161,333 $ 11,915 $ (173,248 ) $ 137,444 (1) Retrospectively adjusted as described in Note 2. Condensed Consolidating Statement of Comprehensive Income Year Ended December 31, 2014 (1) 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) — 94,766 12,660 (1,241 ) 106,185 Depreciation and amortization — 47,955 14,574 — 62,529 General and administrative 2,658 8,166 — — 10,824 2,658 150,887 27,234 (1,241 ) 179,538 Operating income (loss) (2,658 ) 149,188 6,477 — 153,007 Equity in earnings (loss) 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 ) Gain on sale of assets and other — 82 — — 82 108,183 (5,340 ) — (143,549 ) (40,706 ) Income (loss) before income taxes 105,525 143,848 6,477 (143,549 ) 112,301 State income tax expense — (235 ) — — (235 ) Net income (loss) 105,525 143,613 6,477 (143,549 ) 112,066 Net loss applicable to predecessors — 1,747 — — 1,747 Allocation of net income attributable to noncontrolling interests — (6,669 ) (1,619 ) — (8,288 ) Net income (loss) attributable to Holly Energy Partners 105,525 138,691 4,858 (143,549 ) 105,525 Other comprehensive income (loss) 98 98 — (98 ) 98 Comprehensive income (loss) $ 105,623 $ 138,789 $ 4,858 $ (143,647 ) $ 105,623 (1) Retrospectively adjusted as described in Note 2. Condensed Consolidating Statement of Cash Flows Year Ended December 31, 2016 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) Cash flows from operating activities $ (20,441 ) $ 245,771 $ 32,052 $ (14,634 ) $ 242,748 Cash flows from investing activities Additions to properties and equipment — (44,447 ) (15,257 ) — (59,704 ) Acquisition of tanks and operating units — (44,119 ) — — (44,119 ) Purchase of tanks and operating units — (42,627 ) — — (42,627 ) Proceeds from the sale of assets — 427 — — 427 Distributions in excess of equity in earnings of equity companies — 2,993 — — 2,993 Distributions from UNEV — 2,616 — (2,616 ) — — (125,157 ) (15,257 ) (2,616 ) (143,030 ) Cash flows from financing activities Net repayments under credit agreement — (159,000 ) — — (159,000 ) Net intercompany financing activities (302,600 ) 302,600 — — — Proceeds from issuance of 6% Senior Notes 394,000 — — — 394,000 Proceeds from issuance of common units 125,870 — — — 125,870 Contributions from general partner 2,577 — — — 2,577 Distributions to HEP unitholders (192,037 ) — — — (192,037 ) Distributions to noncontrolling interest — — (23,000 ) 17,250 (5,750 ) Distribution to HFC for acquisitions (30,378 ) (287,122 ) — — (317,500 ) Contributions from HFC for acquisitions (3,397 ) 54,659 — — 51,262 Distributions to HFC for Osage acquisition — (1,245 ) — — (1,245 ) Contributions from HFC for Osage acquisition 31,287 (31,287 ) — — — Purchase of units for incentive grants (3,521 ) — — — (3,521 ) Deferred financing costs (910 ) (3,085 ) — — (3,995 ) Other (450 ) (1,285 ) — — (1,735 ) 20,441 (125,765 ) (23,000 ) 17,250 (111,074 ) Cash and cash equivalents Increase for the period — (5,151 ) (6,205 ) — (11,356 ) Beginning of period 2 5,452 9,559 — 15,013 End of period $ 2 $ 301 $ 3,354 $ — $ 3,657 Condensed Consolidating Statement of Cash Flows Year Ended December 31, 2015 (1) Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) Cash flows from operating activities $ (19,490 ) $ 232,650 $ 29,501 $ (11,915 ) $ 230,746 Cash flows from investing activities Additions to properties and equipment — (65,574 ) (1,442 ) — (67,016 ) Purchase of tanks and operating units — (126,105 ) — — (126,105 ) Purchase of investment in Frontier Pipeline — (55,032 ) — — (55,032 ) Proceeds from sale of assets — 1,279 — — 1,279 Distributions from UNEV — 1,960 — (1,960 ) — Distribution in excess of equity in earnings in equity companies — 194 — — 194 — (243,278 ) (1,442 ) (1,960 ) (246,680 ) Cash flows from financing activities Net borrowings under credit agreement — 141,000 — — 141,000 Net intercompany financing activities 192,108 (192,108 ) — — — Distributions to noncontrolling interests — — (18,500 ) 13,875 (4,625 ) Distributions to HEP unitholders (169,063 ) — — — (169,063 ) Contributions from HFC for acquisitions — 128,476 — — 128,476 Distributions to HFC for acquisitions — (62,000 ) — — (62,000 ) Deferred financing costs — (962 ) — — (962 ) Purchase of units for restricted grants (3,555 ) — — — (3,555 ) Other — (1,154 ) — — (1,154 ) 19,490 13,252 (18,500 ) 13,875 28,117 Cash and cash equivalents Increase (decrease) 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 (1) Retrospectively adjusted as described in Note 2. 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 ) $ 191,889 $ 19,398 $ (692 ) $ 185,256 Cash flows from investing activities Additions to properties and equipment — (101,492 ) (8,201 ) — (109,693 ) Acquisition of tanks and operating units — (88,993 ) — — (88,993 ) Distributions from UNEV — 11,383 — (11,383 ) — Distributions in excess of equity in earnings in equity companies — 263 — — 263 — (178,839 ) (8,201 ) (11,383 ) (198,423 ) Cash flows from financing activities Net borrowings 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 f acquisitions — 120,111 — — 120,111 Purchase of units for restricted grants (3,577 ) — — — (3,577 ) Deferred financing costs — (9 ) — — (9 ) Other 3 — — — 3 25,339 (11,669 ) (16,100 ) 12,075 9,645 Cash and cash equivalents Increase 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. |