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 June 30, 2017 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) ASSETS Current assets: Cash and cash equivalents $ 2 $ 10,464 $ 5,873 $ — $ 16,339 Accounts receivable — 40,497 4,483 (242 ) 44,738 Prepaid and other current assets 92 2,718 312 — 3,122 Total current assets 94 53,679 10,668 (242 ) 64,199 Properties and equipment, net — 947,611 364,155 — 1,311,766 Investment in subsidiaries 790,632 277,591 — (1,068,223 ) — Transportation agreements, net — 63,381 — — 63,381 Goodwill — 256,498 — — 256,498 Equity method investments — 163,360 — — 163,360 Other assets 725 7,962 — — 8,687 Total assets $ 791,451 $ 1,770,082 $ 374,823 $ (1,068,465 ) $ 1,867,891 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 30 $ 15,236 $ 904 $ (242 ) $ 15,928 Accrued interest 10,000 550 — — 10,550 Deferred revenue — 12,641 904 — 13,545 Accrued property taxes — 1,696 2,700 — 4,396 Other current liabilities 26 3,160 3 — 3,189 Total current liabilities 10,056 33,283 4,511 (242 ) 47,608 Long-term debt 393,739 843,000 — — 1,236,739 Other long-term liabilities 286 15,240 191 — 15,717 Deferred revenue — 46,245 — — 46,245 Class B unit — 41,682 — — 41,682 Equity - partners 387,370 790,632 277,591 (1,068,223 ) 387,370 Equity - noncontrolling interest — — 92,530 — 92,530 Total liabilities and equity $ 791,451 $ 1,770,082 $ 374,823 $ (1,068,465 ) $ 1,867,891 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 June 30, 2017 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-restricted Subsidiaries Eliminations Consolidated (In thousands) Revenues: Affiliates $ — $ 88,022 $ 5,130 $ — $ 93,152 Third parties — 10,385 5,606 — 15,991 — 98,407 10,736 — 109,143 Operating costs and expenses: Operations (exclusive of depreciation and amortization) — 30,871 3,226 — 34,097 Depreciation and amortization 15,791 4,154 — 19,945 General and administrative 865 1,750 — — 2,615 865 48,412 7,380 — 56,657 Operating income (loss) (865 ) 49,995 3,356 — 52,486 Other income (expense): Equity in earnings of subsidiaries 48,375 2,519 — (50,894 ) — Equity in earnings of equity method investments — 4,053 — — 4,053 Interest expense (6,175 ) (7,573 ) — — (13,748 ) Interest income — 103 — — 103 Gain on sale of assets and other — 87 2 — 89 42,200 (811 ) 2 (50,894 ) (9,503 ) Income (loss) before income taxes 41,335 49,184 3,358 (50,894 ) 42,983 State income tax expense — (127 ) — — (127 ) Net income 41,335 49,057 3,358 (50,894 ) 42,856 Allocation of net income attributable to noncontrolling interests — (682 ) (839 ) — (1,521 ) Net income attributable to Holly Energy Partners 41,335 48,375 2,519 (50,894 ) 41,335 Other comprehensive income (91 ) (91 ) — 91 (91 ) Comprehensive income attributable to Holly Energy Partners $ 41,244 $ 48,284 $ 2,519 $ (50,803 ) $ 41,244 Condensed Consolidating Statement of Comprehensive Income Three Months Ended June 30, 2016 (1) Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) Revenues: Affiliates $ — $ 74,787 $ 4,392 $ — $ 79,179 Third parties — 11,691 4,027 — 15,718 — 86,478 8,419 — 94,897 Operating costs and expenses: Operations (exclusive of depreciation and amortization) — 26,401 2,811 — 29,212 Depreciation and amortization — 11,925 3,787 — 15,712 General and administrative 971 1,892 — — 2,863 971 40,218 6,598 — 47,787 Operating income (loss) (971 ) 46,260 1,821 — 47,110 Other income (expense): Equity in earnings of subsidiaries 45,164 1,370 — (46,534 ) — Equity in earnings of equity method investments — 3,623 — — 3,623 Interest expense (5,073 ) (6,203 ) — — (11,276 ) Interest income — 107 5 — 112 40,091 (1,103 ) 5 (46,534 ) (7,541 ) Income before income taxes 39,120 45,157 1,826 (46,534 ) 39,569 State income tax expense — (54 ) — — (54 ) Net income 39,120 45,103 1,826 (46,534 ) 39,515 Allocation of net loss to Predecessor — 1,960 — — 1,960 Allocation of net income attributable to noncontrolling interests — (1,898 ) (457 ) — (2,355 ) Net income attributable to Holly Energy Partners 39,120 45,165 1,369 (46,534 ) 39,120 Other comprehensive (loss) (142 ) (142 ) — 142 (142 ) Comprehensive income attributable to Holly Energy Partners $ 38,978 $ 45,023 $ 1,369 $ (46,392 ) $ 38,978 (1) Retrospectively adjusted as described in Note 1. Condensed Consolidating Statement of Comprehensive Income Six Months Ended June 30, 2017 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-restricted Subsidiaries Eliminations Consolidated (In thousands) Revenues: Affiliates $ — $ 168,798 $ 13,379 $ — $ 182,177 Third parties — 21,388 11,212 — 32,600 — 190,186 24,591 — 214,777 Operating costs and expenses: Operations (exclusive of depreciation and amortization) — 59,963 6,623 — 66,586 Depreciation and amortization — 30,644 8,078 — 38,722 General and administrative 2,020 3,229 — — 5,249 2,020 93,836 14,701 — 110,557 Operating income (loss) (2,020 ) 96,350 9,890 — 104,220 Other income (expense): Equity in earnings (loss) of subsidiaries 93,658 7,420 — (101,078 ) — Equity in earnings of equity method investments — 5,893 — — 5,893 Interest expense (12,515 ) (14,772 ) — — (27,287 ) Interest income — 205 — — 205 Loss on early extinguishment of debt (12,225 ) — — — (12,225 ) Gain (loss) on sale of assets and other — 159 3 — 162 68,918 (1,095 ) 3 (101,078 ) (33,252 ) Income (loss) before income taxes 66,898 95,255 9,893 (101,078 ) 70,968 State income tax expense — (233 ) — — (233 ) Net income (loss) 66,898 95,022 9,893 (101,078 ) 70,735 Allocation of net income attributable to noncontrolling interests — (1,364 ) (2,473 ) — (3,837 ) Net income (loss) attributable to Holly Energy Partners 66,898 93,658 7,420 (101,078 ) 66,898 Other comprehensive income (loss) (28 ) (28 ) — 28 (28 ) Comprehensive income (loss) $ 66,870 $ 93,630 $ 7,420 $ (101,050 ) $ 66,870 Condensed Consolidating Statement of Comprehensive Income Six Months Ended June 30, 2016 (1) Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) Revenues: Affiliates $ — $ 147,039 $ 14,986 $ — $ 162,025 Third parties — 22,423 12,459 — 34,882 — 169,462 27,445 — 196,907 Operating costs and expenses: Operations (exclusive of depreciation and amortization) — 51,225 5,842 — 57,067 Depreciation and amortization — 24,718 7,545 — 32,263 General and administrative 2,136 3,818 — — 5,954 2,136 79,761 13,387 — 95,284 Operating income (loss) (2,136 ) 89,701 14,058 — 101,623 Other income (expense): Equity in earnings (loss) of subsidiaries 94,154 10,553 — (104,707 ) — Equity in earnings of equity method investments — 6,388 — — 6,388 Interest expense (10,140 ) (11,671 ) — — (21,811 ) Interest income — 212 12 — 224 Gain (loss) on sale of assets and other — (9 ) 1 — (8 ) 84,014 5,473 13 (104,707 ) (15,207 ) Income (loss) before income taxes 81,878 95,174 14,071 (104,707 ) 86,416 State income tax expense — (149 ) — — (149 ) Net income (loss) 81,878 95,025 14,071 (104,707 ) 86,267 Allocation of net loss to Predecessor 3,110 — — 3,110 Allocation of net income attributable to noncontrolling interests — (3,764 ) (3,518 ) — (7,282 ) Net income (loss) attributable to Holly Energy Partners 81,878 94,371 10,553 (104,707 ) 82,095 Other comprehensive income (loss) (595 ) (595 ) — 595 (595 ) Comprehensive income (loss) $ 81,283 $ 93,776 $ 10,553 $ (104,112 ) $ 81,500 (1) Retrospectively adjusted as described in Note 1. Condensed Consolidating Statement of Cash Flows Six Months Ended June 30, 2017 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) Cash flows from operating activities $ (20,412 ) $ 122,060 $ 19,373 $ (7,420 ) $ 113,601 Cash flows from investing activities Additions to properties and equipment — (17,670 ) (2,854 ) — (20,524 ) Distributions from UNEV in excess of earnings — 3,080 — (3,080 ) — Proceeds from sale of assets — 635 — — 635 Distributions in excess of equity in earnings of equity investments — 1,654 — — 1,654 — (12,301 ) (2,854 ) (3,080 ) (18,235 ) Cash flows from financing activities Net borrowings under credit agreement — 290,000 — — 290,000 Net intercompany financing activities 389,005 (389,005 ) — — — Proceeds from issuance of common units 52,383 251 — — 52,634 Contribution from general partner 1,072 (77 ) — — 995 Redemption of senior notes (309,750 ) — — — (309,750 ) Distributions to HEP unitholders (112,195 ) — — — (112,195 ) Distribution to HFC for El Dorado tanks (103 ) — — — (103 ) Distributions to noncontrolling interests — — (14,000 ) 10,500 (3,500 ) Other — (765 ) — — (765 ) 20,412 (99,596 ) (14,000 ) 10,500 (82,684 ) Cash and cash equivalents Increase for the period — 10,163 2,519 — 12,682 Beginning of period 2 301 3,354 — 3,657 End of period $ 2 $ 10,464 $ 5,873 $ — $ 16,339 Condensed Consolidating Statement of Cash Flows Six Months Ended June 30, 2016 (1) Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) Cash flows from operating activities $ (10,608 ) $ 110,255 $ 19,155 $ (7,500 ) $ 111,302 Cash flows from investing activities Additions to properties and equipment — (18,440 ) (14,227 ) — (32,667 ) Purchase of Woods Cross refinery processing units — (42,718 ) — — (42,718 ) Purchase of Cheyenne Pipeline — (42,500 ) — — (42,500 ) Proceeds from sale of assets — 18 — — 18 Distributions in excess of equity in earnings of equity investments — 1,496 — — 1,496 — (102,144 ) (14,227 ) — (116,371 ) Cash flows from financing activities Net repayments under credit agreement — 74,000 — — 74,000 Net intercompany financing activities 86,789 (86,789 ) — — — Proceeds from issuance of common units 14,586 (896 ) — — 13,690 Distributions to HEP unitholders (91,109 ) — — — (91,109 ) Distributions to noncontrolling interests — — (10,000 ) 7,500 (2,500 ) Contributions from general partner for Osage 31,285 (31,285 ) — — — Distributions to HFC for Tulsa Tank acquisition (30,378 ) (9,122 ) — — (39,500 ) Distribution to HFC for Osage — (1,245 ) — — (1,245 ) Contribution from HFC for acquisitions 99 45,608 — — 45,707 Contributions from general partner 120 — — — 120 Purchase of units for incentive grants (784 ) — — — (784 ) Deferred financing costs — (3,084 ) — — (3,084 ) Other — (357 ) — — (357 ) 10,608 (13,170 ) (10,000 ) 7,500 (5,062 ) Cash and cash equivalents Decrease for the period — (5,059 ) (5,072 ) — (10,131 ) Beginning of period 2 5,452 9,559 — 15,013 End of period $ 2 $ 393 $ 4,487 $ — $ 4,882 (1) Retrospectively adjusted as described in Note 1. |