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 December 31, 2017 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) ASSETS Current assets: Cash and cash equivalents $ 2 $ 511 $ 7,263 $ — $ 7,776 Accounts receivable — 59,448 5,038 (182 ) 64,304 Prepaid and other current assets 13 2,016 282 — 2,311 Total current assets 15 61,975 12,583 (182 ) 74,391 Properties and equipment, net — 1,213,626 355,845 — 1,569,471 Investment in subsidiaries 1,902,285 273,319 — (2,175,604 ) — Intangible assets, net — 129,463 — — 129,463 Goodwill — 266,716 — — 266,716 Equity method investments — 85,279 — — 85,279 Other assets 11,753 17,041 — — 28,794 Total assets $ 1,914,053 $ 2,047,419 $ 368,428 $ (2,175,786 ) $ 2,154,114 LIABILITIES AND PARTNERS’ EQUITY Current liabilities: Accounts payable $ — $ 20,928 $ 1,526 $ (182 ) $ 22,272 Accrued interest 12,500 756 — — 13,256 Deferred revenue — 8,540 1,058 — 9,598 Accrued property taxes — 3,431 1,221 — 4,652 Other current liabilities — 5,707 — — 5,707 Total current liabilities 12,500 39,362 3,805 (182 ) 55,485 Long-term debt 1,507,308 — — — 1,507,308 Other long-term liabilities 286 15,359 198 — 15,843 Deferred revenue — 47,272 — — 47,272 Class B unit — 43,141 — — 43,141 Equity - partners 393,959 1,902,285 273,319 (2,175,604 ) 393,959 Equity - noncontrolling interest — — 91,106 — 91,106 Total liabilities and partners’ equity $ 1,914,053 $ 2,047,419 $ 368,428 $ (2,175,786 ) $ 2,154,114 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 ) — Intangible assets, 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 Statement of Comprehensive Income Year Ended December 31, 2017 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) Revenues: Affiliates $ — $ 351,395 $ 25,741 $ — $ 377,136 Third parties — 55,400 21,826 — 77,226 — 406,795 47,567 — 454,362 Operating costs and expenses: Operations (exclusive of depreciation and amortization) — 122,619 14,986 — 137,605 Depreciation and amortization — 62,889 16,389 — 79,278 General and administrative 4,170 10,153 — — 14,323 4,170 195,661 31,375 — 231,206 Operating income (loss) (4,170 ) 211,134 16,192 — 223,156 Equity in earnings of subsidiaries 254,695 12,148 — (266,843 ) — Equity in earnings of equity method investments — 12,510 — — 12,510 Interest income — 491 — — 491 Interest expense (43,260 ) (15,188 ) — — (58,448 ) Loss on early extinguishment of debt (12,225 ) — — — (12,225 ) Remeasurement gain on preexisting equity interests — 36,254 — — 36,254 Gain on sale of assets and other — 417 5 — 422 199,210 46,632 5 (266,843 ) (20,996 ) Income (loss) before income taxes 195,040 257,766 16,197 (266,843 ) 202,160 State income tax expense — (249 ) — — (249 ) Net income (loss) 195,040 257,517 16,197 (266,843 ) 201,911 Allocation of net loss applicable to Predecessor — — — — — Allocation of net income attributable to noncontrolling interests — (2,822 ) (4,049 ) — (6,871 ) Net income (loss) attributable to the Partnership 195,040 254,695 12,148 (266,843 ) 195,040 Other comprehensive income (loss) (91 ) (91 ) — 91 (91 ) Comprehensive income (loss) attributable to the Partnership $ 194,949 $ 254,604 $ 12,148 $ (266,752 ) $ 194,949 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 Allocation of 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 the Partnership 158,241 193,432 14,634 (208,066 ) 158,241 Other comprehensive income (loss) (99 ) (99 ) — 99 (99 ) Comprehensive income (loss) attributable to the Partnership $ 158,142 $ 193,333 $ 14,634 $ (207,967 ) $ 158,142 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) — 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 (loss) 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 Allocation of net loss applicable to Predecessors — 2,702 — — 2,702 Allocation of net income attributable to noncontrolling interests — (7,148 ) (3,972 ) — (11,120 ) Net income (loss) attributable to the Partnership 137,208 161,097 11,915 (173,012 ) 137,208 Other comprehensive income (loss) 236 236 — (236 ) 236 Comprehensive income (loss) attributable to the Partnership $ 137,444 $ 161,333 $ 11,915 $ (173,248 ) $ 137,444 Condensed Consolidating Statement of Cash Flows Year Ended December 31, 2017 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) Cash flows from operating activities $ (51,235 ) $ 264,182 $ 32,892 $ (7,352 ) $ 238,487 Cash flows from investing activities Additions to properties and equipment — (41,827 ) (2,983 ) — (44,810 ) Purchase of controlling interests in SLC Pipeline and Frontier Aspen — (245,446 ) — — (245,446 ) Proceeds from the sale of assets — 849 — — 849 Distributions in excess of equity in earnings of equity method investments — 3,134 — — 3,134 Distributions from UNEV in excess of earnings — 12,148 — (12,148 ) — — (271,142 ) (2,983 ) (12,148 ) (286,273 ) Cash flows from financing activities Net repayments under credit agreement 1,012,000 (553,000 ) — — 459,000 Net intercompany financing activities (561,675 ) 561,675 — — — Redemption of notes (309,750 ) — — — (309,750 ) Proceeds from issuance of 6% Senior Notes 101,750 — — — 101,750 Proceeds from issuance of common units 52,100 10 — — 52,110 Contributions from general partner 1,440 (368 ) — — 1,072 Distributions to HEP unitholders (234,575 ) — — — (234,575 ) Distributions to noncontrolling interest — — (26,000 ) 19,500 (6,500 ) Contributions to HFC for El Dorado Operating Tanks (103 ) — — — (103 ) Deferred financing costs (9,347 ) (35 ) — — (9,382 ) Units withheld for tax withholding obligations (605 ) — — — (605 ) Other — (1,112 ) — — (1,112 ) 51,235 7,170 (26,000 ) 19,500 51,905 Cash and cash equivalents Increase for the period — 210 3,909 — 4,119 Beginning of period 2 301 3,354 — 3,657 End of period $ 2 $ 511 $ 7,263 $ — $ 7,776 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 $ (19,641 ) $ 245,771 $ 32,052 $ (14,634 ) $ 243,548 Cash flows from investing activities Additions to properties and equipment — (44,447 ) (15,257 ) — (59,704 ) Acquisition of tanks and refinery processing units — (44,119 ) — — (44,119 ) Purchase of interest in Cheyenne Pipeline — (42,627 ) — — (42,627 ) Proceeds from sale of assets — 427 — — 427 Distributions from UNEV in excess of earnings — 2,616 — (2,616 ) — Distribution in excess of equity in earnings in equity investments — 2,993 — — 2,993 — (125,157 ) (15,257 ) (2,616 ) (143,030 ) Cash flows from financing activities Net borrowings 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 noncontrolling interests — — (23,000 ) 17,250 (5,750 ) Distributions to HEP unitholders (192,037 ) — — — (192,037 ) Distributions 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 acquisitions 31,287 (31,287 ) — — — Distribution to HFC for Osage acquisition — (1,245 ) — — (1,245 ) Deferred financing costs (910 ) (3,085 ) — — (3,995 ) Purchase of units for incentive grants (3,521 ) — — — (3,521 ) Units withheld for tax withholding obligations (800 ) — — — (800 ) Other (450 ) (1,285 ) — — (1,735 ) 19,641 (125,765 ) (23,000 ) 17,250 (111,874 ) Cash and cash equivalents Increase (decrease) 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 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) Cash flows from operating activities $ (18,794 ) $ 232,650 $ 29,501 $ (11,915 ) $ 231,442 Cash flows from investing activities Additions to properties and equipment — (37,951 ) (1,442 ) — (39,393 ) Acquisition of tanks and operating units — (153,728 ) — — (153,728 ) Purchase of investment in Frontier Pipeline — (55,032 ) — — (55,032 ) Proceeds from sale of assets — 1,279 — — 1,279 Distributions from UNEV in excess of earnings — 1,960 — (1,960 ) — Distributions in excess of equity in earnings in equity investments — 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 ) Purchase of units for incentive grants (3,555 ) — — — (3,555 ) Deferred financing costs — (962 ) — — (962 ) Units withheld for tax withholding obligations (696 ) — — — (696 ) Other — (1,154 ) — — (1,154 ) 18,794 13,252 (18,500 ) 13,875 27,421 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 |