Supplemental Guarantor / Non-Guarantor Financial Information

3 Months Ended

Mar. 31, 2020

Supplemental Guarantor / Non-Guarantor Financial Information [Abstract]

Supplemental Guarantor / Non-Guarantor Financial Information

Supplemental Guarantor/Non-Guarantor Financial Information

Obligations of HEP (“Parent”) under both the 6% and 5% 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, 2020		Parent		Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries		Eliminations			Consolidated
		(In thousands)
ASSETS
Current assets:
Cash and cash equivalents		$	1,722	$	(1,152	)	$	18,712	$	—		$	19,282
Accounts receivable		—		49,018			5,988		(962		)	54,044
Prepaid and other current assets		445		6,483			620					7,548
Total current assets		2,167		54,349			25,320		(962		)	80,874
Properties and equipment, net		—		1,123,996			341,793		—			1,465,789
Operating lease right-of-use assets	0	—		3,379			208		—			3,587
Net investment in leases		—		134,108			—		—			134,108
Investment in subsidiaries		1,837,112		277,876			—		(2,114,988		)	—
Intangible assets, net		—		97,820			—		—			97,820
Goodwill		—		270,336			—		—			270,336
Equity method investments		—		84,526			39,054		—			123,580
Other assets		6,110		6,080			—		—			12,190
Total assets		$	1,845,389	$	2,052,470		$	406,375	$	(2,115,950	)	$	2,188,284
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	—	$	13,363		$	13,541	$	(962	)	$	25,942
Accrued interest		4,695		—			—		—			4,695
Deferred revenue		—		10,510			300		—			10,810
Accrued property taxes		—		3,845			1,862		—			5,707
Current operating lease liabilities		—		1,167			68		—			1,235
Current finance lease liabilities		—		3,238			—		—			3,238
Other current liabilities		121		2,923			21		—			3,065
Total current liabilities		4,816		35,046			15,792		(962		)	54,692
Long-term debt		1,502,154		—			—		—			1,502,154
Noncurrent operating lease liabilities		—		2,709			—		—			2,709
Noncurrent finance lease liabilities		—		70,640			—		—			70,640
Other long-term liabilities		260		11,658			532		—			12,450
Deferred revenue		—		45,078			—		—			45,078
Class B unit		—		50,227			—		—			50,227
Equity - partners		338,159		1,837,112			277,876		(2,114,988		)	338,159
Equity - noncontrolling interest		—		—			112,175		—			112,175
Total liabilities and equity		$	1,845,389	$	2,052,470		$	406,375	$	(2,115,950	)	$	2,188,284

Condensed Consolidating Balance Sheet

December 31, 2019	Parent		Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries		Eliminations			Consolidated
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	4,790	$	(709	)	$	9,206	$	—		$	13,287
Accounts receivable	—		60,229			8,549		(331		)	68,447
Prepaid and other current assets	282		6,710			637		—			7,629
Total current assets	5,072		66,230			18,392		(331		)	89,363
Properties and equipment, net	—		1,133,534			333,565		—			1,467,099
Operating lease right-of-use assets	—		3,243			12		—			3,255
Net investment in leases	—		134,886			—		—			134,886
Investment in subsidiaries	1,844,812		275,279			—		(2,120,091		)	—
Intangible assets, net	—		101,322			—		—			101,322
Goodwill	—		270,336			—		—			270,336
Equity method investments	—		82,987			37,084		—			120,071
Other assets	6,722		6,178			—		—			12,900
Total assets	$	1,856,606	$	2,073,995		$	389,053	$	(2,120,422	)	$	2,199,232
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	—	$	29,895		$	4,991	$	(331	)	$	34,555
Accrued interest	13,206		—			—		—			13,206
Deferred revenue	—		9,740			650		—			10,390
Accrued property taxes	—		2,737			1,062		—			3,799
Current operating lease liabilities	—		1,114			12		—			1,126
Current finance lease liabilities	—		3,224			—		—			3,224
Other current liabilities	6		2,293			6		—			2,305
Total current liabilities	13,212		49,003			6,721		(331		)	68,605
Long-term debt	1,462,031		—			—		—			1,462,031
Noncurrent operating lease liabilities	—		2,482			—		—			2,482
Noncurrent finance lease liabilities	—		70,475			—		—			70,475
Other long-term liabilities	260		12,150			398		—			12,808
Deferred revenue	—		45,681			—		—			45,681
Class B unit	—		49,392			—		—			49,392
Equity - partners	381,103		1,844,812			275,279		(2,120,091		)	381,103
Equity - noncontrolling interest	—		—			106,655		—			106,655
Total liabilities and equity	$	1,856,606	$	2,073,995		$	389,053	$	(2,120,422	)	$	2,199,232

Condensed Consolidating Statement of Comprehensive Income

Three Months Ended March 31, 2020	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	94,755		$	6,673		$	—		$	101,428
Third parties	—			19,155			7,271			—			26,426
	—			113,910			13,944			—			127,854
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—			31,131			3,850			—			34,981
Depreciation and amortization	—			19,753			4,225			—			23,978
General and administrative	1,099			1,603			—			—			2,702
	1,099			52,487			8,075			—			61,661
Operating income (loss)	(1,099		)	61,423			5,869			—			66,193
Other income (expense):
Equity in earnings of subsidiaries	68,535			4,295			—			(72,830		)	—
Equity in earnings of equity method investments	—			2,088			(374		)	—			1,714
Interest expense	(16,730		)	(1,037		)	—			—			(17,767		)
Interest income	—			2,218			—			—			2,218
Loss on early extinguishment of debt	(25,915		)	—			—			—			(25,915		)
Gain on sale of assets and other	70			420			16			—			506
	25,960			7,984			(358		)	(72,830		)	(39,244		)
Income before income taxes	24,861			69,407			5,511			(72,830		)	26,949
State income tax expense	—			(37		)	—			—			(37		)
Net income	24,861			69,370			5,511			(72,830		)	26,912
Allocation of net income attributable to noncontrolling interests	—			(835		)	(1,216		)	—			(2,051		)
Net income attributable to the partners	$	24,861		$	68,535		$	4,295		$	(72,830	)	$	24,861

Condensed Consolidating Statement of Comprehensive Income

Three Months Ended March 31, 2019	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	97,393		$	5,966		$	—		$	103,359
Third parties	—			22,065			9,073			—			31,138
	—			119,458			15,039			—			134,497
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—			34,077			3,442			—			37,519
Depreciation and amortization				19,536			4,288			—			23,824
General and administrative	1,076			1,544			—			—			2,620
	1,076			55,157			7,730			—			63,963
Operating income (loss)	(1,076		)	64,301			7,309			—			70,534
Other income (expense):
Equity in earnings of subsidiaries	71,299			5,496			—			(76,795		)	—
Equity in earnings of equity method investments	—			2,100			—			—			2,100
Interest expense	(19,041		)	19			—			—			(19,022		)
Interest income	—			528			—			—			528
Gain (loss) on sale of assets and other	—			(329		)	19			—			(310		)
	52,258			7,814			19			(76,795		)	(16,704		)
Income before income taxes	51,182			72,115			7,328			(76,795		)	53,830
State income tax expense	—			(36		)	—			—			(36		)
Net income	51,182			72,079			7,328			(76,795		)	53,794
Allocation of net income attributable to noncontrolling interests	—			(780		)	(1,832		)	—			(2,612		)
Net income attributable to the partners	$	51,182		$	71,299		$	5,496		$	(76,795	)	$	51,182

Condensed Consolidating Statement of Cash Flows

Three Months Ended March 31, 2020	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Cash flows from operating activities	$	(24,974	)	$	85,061		$	22,243		$	(4,383	)	$	77,947
Cash flows from investing activities
Additions to properties and equipment	—			(5,942		)	(13,000		)	—			(18,942		)
Investment in Cushing Connect	—			(7,304		)	(2,345		)	7,304			(2,345		)
Distributions from UNEV in excess of earnings	—			4,617			—			(4,617		)	—
Proceeds from sale of assets	—			417			—			—			417
	—			(8,212		)	(15,345		)	2,687			(20,870		)
Cash flows from financing activities
Net borrowings under credit agreement	45,000			—			—			—			45,000
Net intercompany financing activities	76,196			(76,196		)	—			—			—
Redemption of senior notes	(522,500		)	—			—			—			(522,500		)
Proceeds from issuance of senior notes	500,000			—			—			—			500,000
Contribution from general partner	354			—			7,304			(7,304		)	354
Contribution from noncontrolling interest	—			—			7,304			—			7,304
Distributions to HEP unitholders	(68,519		)	—			—			—			(68,519		)
Distributions to noncontrolling interests	—			—			(12,000		)	9,000			(3,000		)
Units withheld for tax withholding obligations	(147		)	—			—			—			(147		)
Deferred financing costs	(8,478		)	—			—			—			(8,478		)
Payments on finance leases	—			(1,096		)	—			—			(1,096		)
	21,906			(77,292		)	2,608			1,696			(51,082		)
Cash and cash equivalents
Increase (decrease) for the period	(3,068		)	(443		)	9,506			—			5,995
Beginning of period	4,790			(709		)	9,206			—			13,287
End of period	$	1,722		$	(1,152	)	$	18,712		$	—		$	19,282

Condensed Consolidating Statement of Cash Flows

Three Months Ended March 31, 2019	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Cash flows from operating activities	$	(26,584	)	$	91,226		$	12,009		$	(5,496	)	$	71,155
Cash flows from investing activities
Additions to properties and equipment	—			(10,564		)	(154		)	—			(10,718		)
Distributions from UNEV in excess of earnings	—			3,504			—			(3,504		)	—
Proceeds from sale of assets	—			9			—			—			9
Distributions in excess of equity in earnings of equity investments	—			395			—			—			395
	—			(6,656		)	(154		)	(3,504		)	(10,314		)
Cash flows from financing activities
Net repayments under credit agreement	19,000			—			—			—			19,000
Net intercompany financing activities	75,678			(75,678		)	—			—			—
Distributions to HEP unitholders	(67,975		)	—			—			—			(67,975		)
Distributions to noncontrolling interests	—			—			(12,000		)	9,000			(3,000		)
Units withheld for tax withholding obligations	(119		)	—			—			—			(119		)
Payments on finance leases	—			(252		)	—			—			(252		)
	26,584			(75,930		)	(12,000		)	9,000			(52,346		)
Cash and cash equivalents
Increase (decrease) for the period	—			8,640			(145		)	—			8,495
Beginning of period	2			—			3,043			—			3,045
End of period	$	2		$	8,640		$	2,898		$	—		$	11,540