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. Condensed Consolidating Balance Sheet March 31, 2018 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) ASSETS Current assets: Cash and cash equivalents $ 2 $ 1,485 $ 7,078 $ — $ 8,565 Accounts receivable — 51,428 4,935 (198 ) 56,165 Prepaid and other current assets 226 2,427 355 — 3,008 Total current assets 228 55,340 12,368 (198 ) 67,738 Properties and equipment, net — 1,204,672 356,382 — 1,561,054 Investment in subsidiaries 1,879,597 272,530 — (2,152,127 ) — Intangible assets, net — 125,427 — — 125,427 Goodwill — 268,166 — — 268,166 Equity method investments — 84,678 — — 84,678 Other assets 11,096 16,630 — — 27,726 Total assets $ 1,890,921 $ 2,027,443 $ 368,750 $ (2,152,325 ) $ 2,134,789 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ — $ 20,691 $ 3,461 $ (198 ) $ 23,954 Accrued interest 6,079 — — — 6,079 Deferred revenue — 8,497 — — 8,497 Accrued property taxes — 4,423 1,713 — 6,136 Other current liabilities 226 7,376 — — 7,602 Total current liabilities 6,305 40,987 5,174 (198 ) 52,268 Long-term debt 1,390,952 — — — 1,390,952 Other long-term liabilities 260 15,249 202 — 15,711 Deferred revenue — 47,740 — — 47,740 Class B unit — 43,870 — — 43,870 Equity - partners 493,404 1,879,597 272,530 (2,152,127 ) 493,404 Equity - noncontrolling interest — — 90,844 — 90,844 Total liabilities and equity $ 1,890,921 $ 2,027,443 $ 368,750 $ (2,152,325 ) $ 2,134,789 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 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 equity $ 1,914,053 $ 2,047,419 $ 368,428 $ (2,175,786 ) $ 2,154,114 Condensed Consolidating Statement of Comprehensive Income Three Months Ended March 31, 2018 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-restricted Subsidiaries Eliminations Consolidated (In thousands) Revenues: Affiliates $ — $ 94,291 $ 7,137 $ — $ 101,428 Third parties — 19,978 7,478 — 27,456 — 114,269 14,615 — 128,884 Operating costs and expenses: Operations (exclusive of depreciation and amortization) — 32,664 3,538 — 36,202 Depreciation and amortization 21,001 4,141 — 25,142 General and administrative 1,280 1,842 — — 3,122 1,280 55,507 7,679 — 64,466 Operating income (loss) (1,280 ) 58,762 6,936 — 64,418 Other income (expense): Equity in earnings of subsidiaries 65,052 5,212 — (70,264 ) — Equity in earnings of equity method investments — 1,279 — — 1,279 Interest expense (17,649 ) 68 — — (17,581 ) Interest income — 515 — — 515 Gain on sale of assets and other 45 28 13 — 86 47,448 7,102 13 (70,264 ) (15,701 ) Income before income taxes 46,168 65,864 6,949 (70,264 ) 48,717 State income tax expense — (82 ) — — (82 ) Net income 46,168 65,782 6,949 (70,264 ) 48,635 Allocation of net income attributable to noncontrolling interests — (730 ) (1,737 ) — (2,467 ) Net income attributable to the partners 46,168 65,052 5,212 (70,264 ) 46,168 Other comprehensive income — — — — — Comprehensive income attributable to the partners $ 46,168 $ 65,052 $ 5,212 $ (70,264 ) $ 46,168 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 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 the partners 25,563 45,283 4,901 (50,184 ) 25,563 Other comprehensive income 63 63 — (63 ) 63 Comprehensive income attributable to the partners $ 25,626 $ 45,346 $ 4,901 $ (50,247 ) $ 25,626 Condensed Consolidating Statement of Cash Flows Three Months Ended March 31, 2018 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) Cash flows from operating activities $ (23,679 ) $ 98,013 $ 11,398 $ (5,212 ) $ 80,520 Cash flows from investing activities Additions to properties and equipment — (9,029 ) (3,583 ) — (12,612 ) Distributions from UNEV in excess of earnings — 788 — (788 ) — Proceeds from sale of assets — 22 — — 22 Distributions in excess of equity in earnings of equity investments — 358 — — 358 — (7,861 ) (3,583 ) (788 ) (12,232 ) Cash flows from financing activities Net repayments under credit agreement (116,500 ) — — — (116,500 ) Net intercompany financing activities 89,060 (89,060 ) — — — Proceeds from issuance of common units 114,376 153 — — 114,529 Contribution from general partner 297 — — — 297 Distributions to HEP unitholders (63,496 ) — — — (63,496 ) Distributions to noncontrolling interests — — (8,000 ) 6,000 (2,000 ) Units withheld for tax withholding obligations (58 ) — — — (58 ) Deferred financing cost — 6 — — 6 Other — (277 ) — — (277 ) 23,679 (89,178 ) (8,000 ) 6,000 (67,499 ) Cash and cash equivalents Increase (decrease) for the period — 974 (185 ) — 789 Beginning of period 2 511 7,263 — 7,776 End of period $ 2 $ 1,485 $ 7,078 $ — $ 8,565 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 $ (20,262 ) $ 58,062 $ 10,736 $ (4,901 ) $ 43,635 Cash flows from investing activities Additions to properties and equipment — (7,902 ) (363 ) — (8,265 ) Proceeds from sale of assets — 424 — — 424 Distributions from UNEV in excess of earnings — 1,099 — (1,099 ) — 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 ) — — — Redemption of senior notes (309,750 ) — — — (309,750 ) Proceeds from issuance of common units 39,371 (1,808 ) — — 37,563 Distributions to HEP unitholders (54,807 ) 2 — — (54,805 ) Distributions to noncontrolling interests — — (8,000 ) 6,000 (2,000 ) Distribution to HFC for El Dorado tanks (103 ) — — — (103 ) Contributions from general partner 805 (805 ) — — — Units withheld for tax withholding obligations (35 ) — — — (35 ) Other — (330 ) — — (330 ) 20,262 (53,722 ) (8,000 ) 6,000 (35,460 ) Cash and cash equivalents Decrease 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 |