Supplemental Guarantor / Non-Guarantor Financial Information

9 Months Ended

Sep. 30, 2019

Supplemental Guarantor / Non-Guarantor Financial Information [Abstract]

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

September 30, 2019		Parent		Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries		Eliminations			Consolidated
		(In thousands)
ASSETS
Current assets:
Cash and cash equivalents		$	5,603	$	(1,043	)	$	2,909	$	—		$	7,469
Accounts receivable		—		46,995			5,218		(261		)	51,952
Prepaid and other current assets		145		4,335			299					4,779
Total current assets		5,748		50,287			8,426		(261		)	64,200
Properties and equipment, net		—		1,144,873			334,077		—			1,478,950
Operating lease right-of-use assets	0	—		3,424			30		—			3,454
Net investment in leases		—		136,394			—		—			136,394
Investment in subsidiaries		1,829,611		251,700			—		(2,081,311		)	—
Intangible assets, net		—		104,824			—		—			104,824
Goodwill		—		270,336			—		—			270,336
Equity method investments		—		82,884			—		—			82,884
Other assets		7,334		5,899			—		—			13,233
Total assets		$	1,842,693	$	2,050,621		$	342,533	$	(2,081,572	)	$	2,154,275
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	—	$	18,055		$	1,561	$	(261	)	$	19,355
Accrued interest		5,884		—			—		—			5,884
Deferred revenue		—		8,964			810		—			9,774
Accrued property taxes		—		5,131			4,135		—			9,266
Current operating lease liabilities		—		777			30		—			807
Current finance lease liabilities		—		5,426			—		—			5,426
Other current liabilities		96		2,830			—		—			2,926
Total current liabilities		5,980		41,183			6,536		(261		)	53,438
Long-term debt		1,431,869		—			—		—			1,431,869
Noncurrent operating lease liabilities		—		2,995			—		—			2,995
Noncurrent finance lease liabilities		—		69,168			—		—			69,168
Other long-term liabilities		260		12,245			397		—			12,902
Deferred revenue		—		46,862			—		—			46,862
Class B unit		—		48,557			—		—			48,557
Equity - partners		404,584		1,829,611			251,700		(2,081,311		)	404,584
Equity - noncontrolling interest		—		—			83,900		—			83,900
Total liabilities and equity		$	1,842,693	$	2,050,621		$	342,533	$	(2,081,572	)	$	2,154,275

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
Net investment in leases	—		16,488		—		—			16,488
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		2,127		—		—			11,418
Total assets	$	1,859,926	$	2,002,597	$	355,063	$	(2,115,046	)	$	2,102,540
LIABILITIES AND 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
Current finance lease liabilities	—		936		—		—			936
Other current liabilities	29		2,493		4		—			2,526
Total current liabilities	13,331		42,563		2,255		(252		)	57,897
Long-term debt	1,418,900		—		—		—			1,418,900
Noncurrent finance lease liabilities	—		867		—		—			867
Other long-term liabilities	260		13,876		304		—			14,440
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 equity	$	1,859,926	$	2,002,597	$	355,063	$	(2,115,046	)	$	2,102,540

Condensed Consolidating Statement of Comprehensive Income

Three Months Ended September 30, 2019	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	99,482		$	6,545		$	—		$	106,027
Third parties	—			23,999			5,869			—			29,868
	—			123,481			12,414			—			135,895
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—			40,866			4,058			—			44,924
Depreciation and amortization	—			19,757			4,364			—			24,121
General and administrative	569			2,145			—			—			2,714
	569			62,768			8,422			—			71,759
Operating income (loss)	(569		)	60,713			3,992			—			64,136
Other income (expense):
Equity in earnings of subsidiaries	101,638			3,013			—			(104,651		)	—
Equity in earnings of equity method investments	—			1,334			—			—			1,334
Interest expense	(18,945		)	138			—			—			(18,807		)
Interest income	—			2,243			—			—			2,243
Gain on sales-type lease	—			35,166			—			—			35,166
Gain on sale of assets and other	221			(104		)	25			—			142
	82,914			41,790			25			(104,651		)	20,078
Income before income taxes	82,345			102,503			4,017			(104,651		)	84,214
State income tax expense	—			(30		)	—			—			(30		)
Net income	82,345			102,473			4,017			(104,651		)	84,184
Allocation of net income attributable to noncontrolling interests	—			(835		)	(1,004		)	—			(1,839		)
Net income attributable to the partners	$	82,345		$	101,638		$	3,013		$	(104,651	)	$	82,345

Condensed Consolidating Statement of Comprehensive Income

Three Months Ended September 30, 2018	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	94,270		$	5,918		$	—		$	100,188
Third parties	—			21,277			4,319			—			25,596
	—			115,547			10,237			—			125,784
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—			32,906			3,090			—			35,996
Depreciation and amortization	—			20,198			4,169			—			24,367
General and administrative	698			1,800			—			—			2,498
	698			54,904			7,259			—			62,861
Operating income (loss)	(698		)	60,643			2,978			—			62,923
Other income (expense):
Equity in earnings of subsidiaries	63,731			2,251			—			(65,982		)	—
Equity in earnings of equity method investments	—			1,114			—			—			1,114
Interest expense	(18,030		)	(12		)	—			—			(18,042		)
Interest income	—			540			—			—			540
Gain (loss) on sale of assets and other	—			14			24			—			38
	45,701			3,907			24			(65,982		)	(16,350		)
Income before income taxes	45,003			64,550			3,002			(65,982		)	46,573
State income tax expense	—			(39		)	—			—			(39		)
Net income	45,003			64,511			3,002			(65,982		)	46,534
Allocation of net income attributable to noncontrolling interests	—			(780		)	(751		)	—			(1,531		)
Net income attributable to the partners	$	45,003		$	63,731		$	2,251		$	(65,982	)	$	45,003

Condensed Consolidating Statement of Comprehensive Income

Nine Months Ended September 30, 2019	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	293,096		$	18,659		$	—		$	311,755
Third parties	—			69,764			19,624			—			89,388
	—			362,860			38,283			—			401,143
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—			111,644			11,401			—			123,045
Depreciation and amortization	—			59,320			12,872			—			72,192
General and administrative	2,390			4,932			—			—			7,322
	2,390			175,896			24,273			—			202,559
Operating income (loss)	(2,390		)	186,964			14,010			—			198,584
Other income (expense):
Equity in earnings (loss) of subsidiaries	238,368			10,572			—			(248,940		)	—
Equity in earnings of equity method investments	—			5,217			—			—			5,217
Interest expense	(56,982		)	(77		)	—			—			(57,059		)
Interest income	—			3,322			—			—			3,322
Gain on sales-type lease	—			35,166			—			—			35,166
Gain (loss) on sale of assets	221			(364		)	86			—			(57		)
	181,607			53,836			86			(248,940		)	(13,411		)
Income (loss) before income taxes	179,217			240,800			14,096			(248,940		)	185,173
State income tax expense	—			(36		)	—			—			(36		)
Net income (loss)	179,217			240,764			14,096			(248,940		)	185,137
Allocation of net income attributable to noncontrolling interests	—			(2,396		)	(3,524		)	—			(5,920		)
Net income attributable to the partners	$	179,217		$	238,368		$	10,572		$	(248,940	)	$	179,217

Condensed Consolidating Statement of Comprehensive Income

Nine Months Ended September 30, 2018	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	278,083		$	17,546		$	—		$	295,629
Third parties	—			60,795			17,004			—			77,799
	—			338,878			34,550			—			373,428
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—			97,064			9,667			—			106,731
Depreciation and amortization	—			61,630			12,487			—			74,117
General and administrative	2,739			5,554			—			—			8,293
	2,739			164,248			22,154			—			189,141
Operating income (loss)	(2,739		)	174,630			12,396			—			184,287
Other income (expense):
Equity in earnings (loss) of subsidiaries	187,349			9,344			—			(196,693		)	—
Equity in earnings of equity method investments	—			4,127			—			—			4,127
Interest expense	(53,341		)	92			—			—			(53,249		)
Interest income	—			1,581			—			—			1,581
Gain (loss) on sale of assets and other	45			(37		)	63			—			71
	134,053			15,107			63			(196,693		)	(47,470		)
Income (loss) before income taxes	131,314			189,737			12,459			(196,693		)	136,817
State income tax expense	—			(149		)	—			—			(149		)
Net income (loss)	131,314			189,588			12,459			(196,693		)	136,668
Allocation of net income attributable to noncontrolling interests	—			(2,239		)	(3,115		)	—			(5,354		)
Net income attributable to the partners	$	131,314		$	187,349		$	9,344		$	(196,693	)	$	131,314

Condensed Consolidating Statement of Cash Flows

Nine Months Ended September 30, 2019	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Cash flows from operating activities	$	(62,229	)	$	271,657		$	31,467		$	(12,678	)	$	228,217
Cash flows from investing activities
Additions to properties and equipment	—			(23,227		)	(601		)	—			(23,828		)
Distributions from UNEV in excess of earnings	—			10,572			—			(10,572		)	—
Proceeds from sale of assets	—			265			—			—			265
Distributions in excess of equity in earnings of equity investments	—			693			—			—			693
	—			(11,697		)	(601		)	(10,572		)	(22,870		)
Cash flows from financing activities
Net borrowings under credit agreement	12,500			—			—			—			12,500
Net intercompany financing activities	260,362			(260,362		)	—			—			—
Contribution from general partner	182			—			—			—			182
Distributions to HEP unitholders	(204,701		)	—			—			—			(204,701		)
Distributions to noncontrolling interests	—			—			(31,000		)	23,250			(7,750		)
Units withheld for tax withholding obligations	(119		)	—			—			—			(119		)
Purchase units for incentive grants	(255		)	—			—			—			(255		)
Payments on finance leases	—			(780		)	—			—			(780		)
Other	(139		)	139			—			—			—
	67,830			(261,003		)	(31,000		)	23,250			(200,923		)
Cash and cash equivalents
Increase (decrease) for the period	5,601			(1,043		)	(134		)	—			4,424
Beginning of period	2			—			3,043			—			3,045
End of period	$	5,603		$	(1,043	)	$	2,909		$	—		$	7,469

Condensed Consolidating Statement of Cash Flows

Nine Months Ended September 30, 2018	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Cash flows from operating activities	$	(58,326	)	$	259,360		$	25,722		$	(9,344	)	$	217,412
Cash flows from investing activities
Additions to properties and equipment	—			(28,057		)	(6,213		)	—			(34,270		)
Business and asset acquisitions	—			(6,803		)	(38		)	—			(6,841		)
Distributions from UNEV in excess of earnings	—			7,156			—			(7,156		)	—
Proceeds from sale of assets	—			210			—			—			210
Distributions in excess of equity in earnings of equity investments	—			1,368			—			—			1,368
	—			(26,126		)	(6,251		)	(7,156		)	(39,533		)
Cash flows from financing activities
Net repayments under credit agreement	(91,000		)	—			—			—			(91,000		)
Net intercompany financing activities	231,231			(231,231		)	—			—			—
Proceeds from issuance of common units	114,839			48			—			—			114,887
Distributions to HEP unitholders	(197,300		)	—			—			—			(197,300		)
Distributions to noncontrolling interests	—			—			(22,000		)	16,500			(5,500		)
Contributions from general partner	614			—			—			—			614
Units withheld for tax withholding obligations	(58		)	—			—			—			(58		)
Other	—			(923		)	—			—			(923		)
	58,326			(232,106		)	(22,000		)	16,500			(179,280		)
Cash and cash equivalents
Increase (decrease) for the period	—			1,128			(2,529		)	—			(1,401		)
Beginning of period	2			511			7,263			—			7,776
End of period	$	2		$	1,639		$	4,734		$	—		$	6,375