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 December 31, 2018 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) ASSETS Current assets: Cash and cash equivalents $ 2 $ — $ 3,043 $ — $ 3,045 Accounts receivable — 53,376 5,994 (252 ) 59,118 Prepaid and other current assets 217 3,542 552 — 4,311 Total current assets 219 56,918 9,589 (252 ) 66,474 Properties and equipment, net — 1,193,181 345,474 — 1,538,655 Investment in subsidiaries 1,850,416 264,378 — (2,114,794 ) — Intangible assets, net — 115,329 — — 115,329 Goodwill — 270,336 — — 270,336 Equity method investments — 83,840 — — 83,840 Other assets 9,291 18,615 — — 27,906 Total assets $ 1,859,926 $ 2,002,597 $ 355,063 $ (2,115,046 ) $ 2,102,540 LIABILITIES AND PARTNERS’ EQUITY Current liabilities: Accounts payable $ — $ 30,325 $ 584 $ (252 ) $ 30,657 Accrued interest 13,302 — — — 13,302 Deferred revenue — 8,065 632 — 8,697 Accrued property taxes — 744 1,035 — 1,779 Other current liabilities 29 3,429 4 — 3,462 Total current liabilities 13,331 42,563 2,255 (252 ) 57,897 Long-term debt 1,418,900 — — — 1,418,900 Other long-term liabilities 260 14,743 304 — 15,307 Deferred revenue — 48,714 — — 48,714 Class B unit — 46,161 — — 46,161 Equity - partners 427,435 1,850,416 264,378 (2,114,794 ) 427,435 Equity - noncontrolling interest — — 88,126 — 88,126 Total liabilities and partners’ equity $ 1,859,926 $ 2,002,597 $ 355,063 $ (2,115,046 ) $ 2,102,540 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 Statement of Comprehensive Income Year Ended December 31, 2018 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) Revenues: Affiliates $ — $ 373,576 $ 24,232 $ — $ 397,808 Third parties — 84,679 23,733 — 108,412 — 458,255 47,965 — 506,220 Operating costs and expenses: Operations (exclusive of depreciation and amortization) — 133,156 13,274 — 146,430 Depreciation and amortization — 81,799 16,693 — 98,492 General and administrative 3,535 7,505 — — 11,040 3,535 222,460 29,967 — 255,962 Operating income (loss) (3,535 ) 235,795 17,998 — 250,258 Equity in earnings of subsidiaries 254,398 13,559 — (267,957 ) — Equity in earnings of equity method investments — 5,825 — — 5,825 Interest income — 2,032 76 — 2,108 Interest expense (72,061 ) 162 — — (71,899 ) Gain on sale of assets and other 45 71 5 — 121 182,382 21,649 81 (267,957 ) (63,845 ) Income (loss) before income taxes 178,847 257,444 18,079 (267,957 ) 186,413 State income tax expense — (26 ) — — (26 ) Net income (loss) 178,847 257,418 18,079 (267,957 ) 186,387 Allocation of net income attributable to noncontrolling interests — (3,020 ) (4,520 ) — (7,540 ) Net income (loss) attributable to the Partnership 178,847 254,398 13,559 (267,957 ) 178,847 Other comprehensive income (loss) — — — — — Comprehensive income (loss) attributable to the Partnership $ 178,847 $ 254,398 $ 13,559 $ (267,957 ) $ 178,847 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 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 (loss) 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 Predecessors — 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 Cash Flows Year Ended December 31, 2018 Parent Guarantor Restricted Subsidiaries Non-Guarantor Non-Restricted Subsidiaries Eliminations Consolidated (In thousands) Cash flows from operating activities $ (68,693 ) $ 345,378 $ 32,087 $ (13,559 ) $ 295,213 Cash flows from investing activities Additions to properties and equipment — (41,031 ) (6,269 ) — (47,300 ) Business and asset acquisitions — (5,013 ) (38 ) — (5,051 ) Purchase of controlling interests in SLC Pipeline and Frontier Aspen — (1,790 ) — — (1,790 ) Proceeds from the sale of assets — 210 — — 210 Distributions in excess of equity in earnings of equity method investments — 1,588 — — 1,588 Distributions from UNEV in excess of earnings — 8,941 — (8,941 ) — — (37,095 ) (6,307 ) (8,941 ) (52,343 ) Cash flows from financing activities Net repayments under credit agreement (89,000 ) — — — (89,000 ) Net intercompany financing activities 307,587 (307,587 ) — — — Proceeds from issuance of common units 114,771 — — — 114,771 Contributions from general partner 882 — — 882 Distributions to HEP unitholders (264,979 ) — — — (264,979 ) Distributions to noncontrolling interest — — (30,000 ) 22,500 (7,500 ) Deferred financing costs — 6 — — 6 Units withheld for tax withholding obligations (568 ) — — — (568 ) Other — (1,213 ) — — (1,213 ) 68,693 (308,794 ) (30,000 ) 22,500 (247,601 ) Cash and cash equivalents Increase for the period — (511 ) (4,220 ) — (4,731 ) Beginning of period 2 511 7,263 — 7,776 End of period $ 2 $ — $ 3,043 $ — $ 3,045 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 ) $ 268,978 $ 32,892 $ (12,148 ) $ 238,487 Cash flows from investing activities Additions to properties and equipment — (41,827 ) (2,983 ) — (44,810 ) Purchase of interest in Cheyenne Pipeline — (245,446 ) — — (245,446 ) Proceeds from sale of assets — 849 — — 849 Distributions from UNEV in excess of earnings — 3,134 — — 3,134 Distribution in excess of equity in earnings in equity investments — 7,352 — (7,352 ) — — (275,938 ) (2,983 ) (7,352 ) (286,273 ) Cash flows from financing activities Net borrowings 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 noncontrolling interests — — (26,000 ) 19,500 (6,500 ) Distributions to HEP unitholders (234,575 ) — — — (234,575 ) Contributions to HFC for El Dorado acquisition (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 (decrease) 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 ) Business and asset acquisitions — (44,119 ) — — (44,119 ) Purchase of investment in Frontier Pipeline — (42,627 ) — — (42,627 ) Proceeds from sale of assets — 427 — — 427 Distributions from UNEV in excess of earnings — 2,616 — (2,616 ) — Distributions 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 ) — — — Distributions to HFC for Osage acquisition — (1,245 ) — — (1,245 ) Purchase of units for incentive grants (3,521 ) — — — (3,521 ) Deferred financing costs (910 ) (3,085 ) — — (3,995 ) 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 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 |