Supplemental Guarantor / Non-Guarantor Financial Information

6 Months Ended

Jun. 30, 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 the 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

June 30, 2020		Parent		Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries		Eliminations			Consolidated
		(In thousands)
ASSETS
Current assets:
Cash and cash equivalents		$	3,927	$	(766	)	$	15,752	$	—		$	18,913
Accounts receivable		—		58,197			7,840		(1,261		)	64,776
Prepaid and other current assets		337		6,992			576					7,905
Total current assets		4,264		64,423			24,168		(1,261		)	91,594
Properties and equipment, net		—		1,110,139			348,795		—			1,458,934
Operating lease right-of-use assets	0	—		3,185			192		—			3,377
Net investment in leases		—		168,153					—			168,153
Investment in subsidiaries		1,868,595		282,348			—		(2,150,943		)	—
Intangible assets, net		—		94,318			—		—			94,318
Goodwill		—		270,336			—		—			270,336
Equity method investments		—		83,484			39,815		—			123,299
Other assets		5,497		6,275			—		—			11,772
Total assets		$	1,878,356	$	2,082,661		$	412,970	$	(2,152,204	)	$	2,221,783
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	—	$	14,343		$	8,843	$	(1,261	)	$	21,925
Accrued interest		10,683		—			—		—			10,683
Deferred revenue		—		10,502			500		—			11,002
Accrued property taxes		—		2,732			2,794		—			5,526
Current operating lease liabilities		—		1,145			68		—			1,213
Current finance lease liabilities		—		3,293			—		—			3,293
Other current liabilities		42		2,819			114		—			2,975
Total current liabilities		10,725		34,834			12,319		(1,261		)	56,617
Long-term debt		1,486,648		—			—		—			1,486,648
Noncurrent operating lease liabilities		—		2,530			—		—			2,530
Noncurrent finance lease liabilities		—		70,039			—		—			70,039
Other long-term liabilities		260		12,909			520		—			13,689
Deferred revenue		—		42,692			—		—			42,692
Class B unit		—		51,062			—		—			51,062
Equity - partners		380,723		1,868,595			282,348		(2,150,943		)	380,723
Equity - noncontrolling interest		—		—			117,783		—			117,783
Total liabilities and equity		$	1,878,356	$	2,082,661		$	412,970	$	(2,152,204	)	$	2,221,783

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 June 30, 2020	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	89,417		$	6,146		$	—		$	95,563
Third parties	—			15,887			3,357			—			19,244
	—			105,304			9,503			—			114,807
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—			30,980			3,757			—			34,737
Depreciation and amortization	—			20,739			4,295			—			25,034
General and administrative	780			1,755			—			—			2,535
	780			53,474			8,052			—			62,306
Operating income (loss)	(780		)	51,830			1,451			—			52,501
Other income (expense):
Equity in earnings of subsidiaries	89,893			1,510			—			(91,403		)	—
Equity in earnings of equity method investments	—			1,449			707			—			2,156
Interest expense	(12,740		)	(1,039		)	—			—			(13,779		)
Interest income	26			2,787			—			—			2,813
Gain on sales-type lease	—			33,834			—			—			33,834
Gain on sale of assets and other	71			396			1			—			468
	77,250			38,937			708			(91,403		)	25,492
Income before income taxes	76,470			90,767			2,159			(91,403		)	77,993
State income tax expense	—			(39		)	—			—			(39		)
Net income	76,470			90,728			2,159			(91,403		)	77,954
Allocation of net income attributable to noncontrolling interests	—			(835		)	(649		)	—			(1,484		)
Net income attributable to the partners	$	76,470		$	89,893		$	1,510		$	(91,403	)	$	76,470

Condensed Consolidating Statement of Comprehensive Income

Three Months Ended June 30, 2019	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	96,221		$	6,148		$	—		$	102,369
Third parties	—			23,700			4,682			—			28,382
	—			119,921			10,830			—			130,751
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—			36,701			3,901			—			40,602
Depreciation and amortization				20,027			4,220			—			24,247
General and administrative	745			1,243			—			—			1,988
	745			57,971			8,121			—			66,837
Operating income (loss)	(745		)	61,950			2,709			—			63,914
Other income (expense):
Equity in earnings of subsidiaries	65,431			2,063			—			(67,494		)	—
Equity in earnings of equity method investments	—			1,783			—			—			1,783
Interest expense	(18,996		)	(234		)	—			—			(19,230		)
Interest income	—			551			—			—			551
Gain (loss) on sale of assets and other	—			69			42			—			111
	46,435			4,232			42			(67,494		)	(16,785		)
Income before income taxes	45,690			66,182			2,751			(67,494		)	47,129
State income tax benefit	—			30			—			—			30
Net income	45,690			66,212			2,751			(67,494		)	47,159
Allocation of net income attributable to noncontrolling interests	—			(781		)	(688		)	—			(1,469		)
Net income attributable to the partners	$	45,690		$	65,431		$	2,063		$	(67,494	)	$	45,690

Condensed Consolidating Statement of Comprehensive Income

Six Months Ended June 30, 2020	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-restricted Subsidiaries				Eliminations				Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	184,172		$	12,819			$	—			$	196,991
Third parties	—			35,042			10,628				—				45,670
	—			219,214			23,447				—				242,661
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—			62,111			7,607				—				69,718
Depreciation and amortization	—			40,492			8,520				—				49,012
General and administrative	1,879			3,358			—				—				5,237
	1,879			105,961			16,127				—				123,967
Operating income (loss)	(1,879		)	113,253			7,320				—			—	118,694
Other income (expense):
Equity in earnings of subsidiaries	158,428			5,805			—				(164,233		)		—
Equity in earnings of equity method investments	—			3,537			333			—	—				3,870
Interest expense	(29,470		)	(2,076		)	—				—				(31,546		)
Interest income	26			5,005			—				—				5,031
Loss on early extinguishment of debt	(25,915		)	—			—				—				(25,915		)
Gain on sales-type lease	—			33,834			—				—				33,834
Gain on sale of assets and other	141			816			17			—	—				974
	103,210			46,921			350				(164,233		)		(13,752		)
Income before income taxes	101,331			160,174			7,670				(164,233		)		104,942
State income tax expense	—			(76		)	—				—				(76		)
Net income	101,331			160,098			7,670				(164,233		)		104,866
Allocation of net income attributable to noncontrolling interests	—			(1,670		)	(1,865		)		—				(3,535		)
Net income attributable to the partners	$	101,331		$	158,428		$	5,805			$	(164,233	)		$	101,331

Condensed Consolidating Statement of Comprehensive Income

Six Months Ended June 30, 2019	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-restricted Subsidiaries				Eliminations			Consolidated
	(In thousands)
Revenues:
Affiliates	$	—		$	193,614		$	12,114			$	—		$	205,728
Third parties	—			45,765			13,755				—			59,520
	—			239,379			25,869				—			265,248
Operating costs and expenses:
Operations (exclusive of depreciation and amortization)	—			70,778			7,343				—			78,121
Depreciation and amortization				39,563			8,508				—			48,071
General and administrative	1,821			2,787			—				—			4,608
	1,821			113,128			15,851				—			130,800
Operating income (loss)	(1,821		)	126,251			10,018				—			134,448
Other income (expense):
Equity in earnings of subsidiaries	136,730			7,559			—				(144,289		)	—
Equity in earnings of equity method investments	—			3,883			—			—	—			3,883
Interest expense	(38,037		)	(215		)	—				—			(38,252		)
Interest income	—			1,079			—			—	—			1,079
Gain on sale of assets and other	—			(260		)	61				—			(199		)
	98,693			12,046			61				(144,289		)	(33,489		)
Income before income taxes	96,872			138,297			10,079				(144,289		)	100,959
State income tax expense	—			(6		)	—				—			(6		)
Net income	96,872			138,291			10,079				(144,289		)	100,953
Allocation of net income attributable to noncontrolling interests	—			(1,561		)	(2,520		)		—			(4,081		)
Net income attributable to the partners	$	96,872		$	136,730		$	7,559			$	(144,289	)	$	96,872

Condensed Consolidating Statement of Cash Flows

Six Months Ended June 30, 2020	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Cash flows from operating activities	$	(31,103	)	$	151,331		$	20,277		$	(5,911	)	$	134,594
Cash flows from investing activities
Additions to properties and equipment	—			(8,883		)	(21,857		)	—			(30,740		)
Investment in Cushing Connect	—			(13,263		)	(2,400		)	13,263			(2,400		)
Proceeds from sale of assets	—			816			—			—			816
Distributions in excess of equity in earnings of equity investments	—			6,559			—			(6,089		)	470
	—			(14,771		)	(24,257		)	7,174			(31,854		)
Cash flows from financing activities
Net borrowings under credit agreement	29,500			—			—			—			29,500
Net intercompany financing activities	134,645			(134,645		)	—			—			—
Redemption of senior notes	(522,500		)	—			—			—			(522,500		)
Proceeds from issuance of senior notes	500,000			—			—			—			500,000
Contribution from general partner	435			—			13,263			(13,263		)	435
Contribution from noncontrolling interest	—			—			13,263			—			13,263
Distributions to HEP unitholders	(102,979		)	—			—			—			(102,979		)
Distributions to noncontrolling interests	—			—			(16,000		)	12,000			(4,000		)
Units withheld for tax withholding obligations	(147		)	—			—			—			(147		)
Deferred financing costs	(8,714		)	—			—			—			(8,714		)
Payments on finance leases	—			(1,972		)	—			—			(1,972		)
	30,240			(136,617		)	10,526			(1,263		)	(97,114		)
Cash and cash equivalents
Increase (decrease) for the period	(863		)	(57		)	6,546			—			5,626
Beginning of period	4,790			(709		)	9,206			—			13,287
End of period	$	3,927		$	(766	)	$	15,752		$	—		$	18,913

Condensed Consolidating Statement of Cash Flows

Six Months Ended June 30, 2019	Parent			Guarantor Restricted Subsidiaries			Non-Guarantor Non-Restricted Subsidiaries			Eliminations			Consolidated
	(In thousands)
Cash flows from operating activities	$	(37,005	)	$	165,882		$	23,671		$	(7,559	)	$	144,989
Cash flows from investing activities
Additions to properties and equipment	—			(17,274		)	(478		)	—			(17,752		)
Distributions from UNEV in excess of earnings	—			8,191			—			(8,191		)	—
Proceeds from sale of assets	—			194			—			—			194
Distributions in excess of equity in earnings of equity investments	—			299			—			—			299
	—			(8,590		)	(478		)	(8,191		)	(17,259		)
Cash flows from financing activities
Net borrowings under credit agreement	18,500			—			—			—			18,500
Net intercompany financing activities	155,225			(155,225		)	—			—			—
Distributions to HEP unitholders	(136,207		)	—			—			—			(136,207		)
Distributions to noncontrolling interests	—			—			(21,000		)	15,750			(5,250		)
Units withheld for tax withholding obligations	(119		)	—			—			—			(119		)
Purchase units for incentive grants	(255		)				—			—			(255		)
Payments on finance leases	(139		)	(364		)	—			—			(503		)
	37,005			(155,589		)	(21,000		)	15,750			(123,834		)
Cash and cash equivalents
Increase for the period	—			1,703			2,193			—			3,896
Beginning of period	2			—			3,043			—			3,045
End of period	$	2		$	1,703		$	5,236		$	—		$	6,941