Supplemental Guarantor / Non-Guarantor Financial Information | Supplemental Guarantor/Non-Guarantor Financial Information Obligations of HEP (“Parent”) under the 6% 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 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 non-guarantor subsidiaries columns. Condensed Consolidating Balance Sheet March 31, 2017 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) ASSETS Current assets: Cash and cash equivalents $ 2 $ 1,278 $ 5,727 $ — $ 7,007 Accounts receivable — 42,055 4,063 (373 ) 45,745 Prepaid and other current assets 131 2,688 351 — 3,170 Total current assets 133 46,021 10,141 (373 ) 55,922 Properties and equipment, net — 952,758 368,223 — 1,320,981 Investment in subsidiaries 786,512 279,572 — (1,066,084 ) — Transportation agreements, net — 65,118 — — 65,118 Goodwill — 256,498 — — 256,498 Equity method investments — 162,319 — — 162,319 Other assets 725 8,572 — — 9,297 Total assets $ 787,370 $ 1,770,858 $ 378,364 $ (1,066,457 ) $ 1,870,135 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ — $ 14,849 $ 3,464 $ (373 ) $ 17,940 Accrued interest 4,000 518 — — 4,518 Deferred revenue — 11,732 75 — 11,807 Accrued property taxes — 3,538 1,869 — 5,407 Other current liabilities 53 2,721 5 — 2,779 Total current liabilities 4,053 33,358 5,413 (373 ) 42,451 Long-term debt 393,505 847,060 — — 1,240,565 Other long-term liabilities 286 16,047 188 — 16,521 Deferred revenue — 46,881 — — 46,881 Class B unit — 41,000 — — 41,000 Equity - partners 389,526 786,512 279,572 (1,066,084 ) 389,526 Equity - noncontrolling interest — — 93,191 — 93,191 Total liabilities and equity $ 787,370 $ 1,770,858 $ 378,364 $ (1,066,457 ) $ 1,870,135 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 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 equity $ 1,086,746 $ 1,783,870 $ 380,502 $ (1,366,881 ) $ 1,884,237 Condensed Consolidating Statement of Comprehensive Income Three Months Ended March 31, 2017 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-restricted Subsidiaries Eliminations Consolidated (In thousands) Revenues: Affiliates $ — $ 80,776 $ 8,249 $ — $ 89,025 Third parties — 11,003 5,606 — 16,609 — 91,779 13,855 — 105,634 Operating costs and expenses: Operations (exclusive of depreciation and amortization) — 29,092 3,397 — 32,489 Depreciation and amortization 14,853 3,924 — 18,777 General and administrative 1,155 1,479 — — 2,634 1,155 45,424 7,321 — 53,900 Operating income (loss) (1,155 ) 46,355 6,534 — 51,734 Other income (expense): Equity in earnings of subsidiaries 45,283 4,901 — (50,184 ) — Equity in earnings of equity method investments — 1,840 — — 1,840 Interest expense (6,340 ) (7,199 ) — — (13,539 ) Interest income — 102 — — 102 Loss on early extinguishment of debt (12,225 ) — — — (12,225 ) Gain on sale of assets and other — 72 1 — 73 26,718 (284 ) 1 (50,184 ) (23,749 ) Income (loss) before income taxes 25,563 46,071 6,535 (50,184 ) 27,985 State income tax expense — (106 ) — — (106 ) Net income 25,563 45,965 6,535 (50,184 ) 27,879 Allocation of net income attributable to noncontrolling interests — (682 ) (1,634 ) — (2,316 ) Net income attributable to Holly Energy Partners 25,563 45,283 4,901 (50,184 ) 25,563 Other comprehensive income 63 63 — (63 ) 63 Comprehensive income attributable to Holly Energy Partners $ 25,626 $ 45,346 $ 4,901 $ (50,247 ) $ 25,626 Condensed Consolidating Statement of Comprehensive Income Three Months Ended March 31, 2016 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) Revenues: Affiliates $ — $ 72,252 $ 10,594 $ — $ 82,846 Third parties — 10,732 8,432 — 19,164 — 82,984 19,026 — 102,010 Operating costs and expenses: Operations (exclusive of depreciation and amortization) — 24,824 3,031 — 27,855 Depreciation and amortization — 12,793 3,758 — 16,551 General and administrative 1,165 1,926 — — 3,091 1,165 39,543 6,789 — 47,497 Operating income (loss) (1,165 ) 43,441 12,237 — 54,513 Other income (expense): Equity in earnings of subsidiaries 48,990 9,184 — (58,174 ) — Equity in earnings of equity method investments — 2,765 — — 2,765 Interest expense (5,067 ) (5,468 ) — — (10,535 ) Interest income — 105 7 — 112 Gain (loss) on sale of assets and other — (9 ) 1 — (8 ) 43,923 6,577 8 (58,174 ) (7,666 ) Income before income taxes 42,758 50,018 12,245 (58,174 ) 46,847 State income tax expense — (95 ) — — (95 ) Net income 42,758 49,923 12,245 (58,174 ) 46,752 Allocation of net loss to Predecessor — 1,150 — — 1,150 Allocation of net income attributable to noncontrolling interests — (1,866 ) (3,061 ) — (4,927 ) Net income attributable to Holly Energy Partners 42,758 49,207 9,184 (58,174 ) 42,975 Other comprehensive (loss) (453 ) (453 ) — 453 (453 ) Comprehensive income attributable to Holly Energy Partners $ 42,305 $ 48,754 $ 9,184 $ (57,721 ) $ 42,522 (1) Retrospectively adjusted as described in Note 1. Condensed Consolidating Statement of Cash Flows Three Months Ended March 31, 2017 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) Cash flows from operating activities $ (20,297 ) $ 58,062 $ 10,736 $ (4,901 ) $ 43,600 Cash flows from investing activities Additions to properties and equipment — (7,902 ) (363 ) — (8,265 ) Distributions from UNEV in excess of earnings — 1,099 — (1,099 ) — Proceeds from sale of assets — 424 — — 424 Distributions in excess of equity in earnings of equity investments — 3,016 — — 3,016 — (3,363 ) (363 ) (1,099 ) (4,825 ) Cash flows from financing activities Net borrowings under credit agreement — 294,000 — — 294,000 Net intercompany financing activities 344,781 (344,781 ) — — — Proceeds from issuance of common units 39,371 (1,808 ) — — 37,563 Contribution from general partner 805 (805 ) — — — Redemption of senior notes (309,750 ) — — — (309,750 ) Distributions to HEP unitholders (54,807 ) 2 — — (54,805 ) Distribution to HFC for El Dorado tanks (103 ) — — — (103 ) Distributions to noncontrolling interests — — (8,000 ) 6,000 (2,000 ) Other — (330 ) — — (330 ) 20,297 (53,722 ) (8,000 ) 6,000 (35,425 ) Cash and cash equivalents Increase for the period — 977 2,373 — 3,350 Beginning of period 2 301 3,354 — 3,657 End of period $ 2 $ 1,278 $ 5,727 $ — $ 7,007 Condensed Consolidating Statement of Cash Flows Three Months Ended March 31, 2016 (1) Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) Cash flows from operating activities $ (10,084 ) $ 47,779 $ 13,424 $ (3,750 ) $ 47,369 Cash flows from investing activities Additions to properties and equipment — (7,919 ) (9,954 ) — (17,873 ) Purchase of Woods Cross refinery processing units — (24,311 ) — — (24,311 ) Proceeds from sale of assets — 12 — — 12 Distributions in excess of equity in earnings of equity investments — 99 — — 99 — (32,119 ) (9,954 ) — (42,073 ) Cash flows from financing activities Net repayments under credit agreement — 53,000 — — 53,000 Net intercompany financing activities 53,751 (53,751 ) — — — Contributions from general partner for Osage 32,455 (32,455 ) — — — Distributions to HFC for Tulsa Tank acquisition (30,378 ) (9,122 ) — — (39,500 ) Distributions to HEP unitholders (44,960 ) — — — (44,960 ) Contribution from HFC for acquisitions — 25,343 — — 25,343 Distributions to noncontrolling interests — — (5,000 ) 3,750 (1,250 ) Purchase of units for incentive grants (784 ) — — — (784 ) Deferred financing costs — (2,964 ) — — (2,964 ) Other — (160 ) — — (160 ) 10,084 (20,109 ) (5,000 ) 3,750 (11,275 ) Cash and cash equivalents Decrease for the period — (4,449 ) (1,530 ) — (5,979 ) Beginning of period 2 5,452 9,559 — 15,013 End of period $ 2 $ 1,003 $ 8,029 $ — $ 9,034 (1) Retrospectively adjusted as described in Note 1. |