HF Sinclair Corp (Form: 8-K/A, Received: 03/16/2022 17:16:55)

HF SINCLAIR CORPORATION

Date: March 16, 2022

/s/ Richard L. Voliva III

Richard L. Voliva III

Executive Vice President and Chief Financial Officer

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 14, 2022

HF SINCLAIR CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

001-41325

87-2092143

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(I.R.S. Employer

Identification Number)


2828 N. Harwood, Suite 1300	Dallas	Texas	75201
(Address of principal executive offices)			(Zip code)

Registrant’s telephone number, including area code: (214) 871-3555

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to 12(b) of the Securities Exchange Act of 1934:

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Common Stock $0.01 par value

DINO

New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

EXPLANATORY NOTE

On March 14, 2022, HF Sinclair Corporation (the “Company”) filed a Current Report on Form 8-K (the “Original Form 8-K”) with the U.S. Securities and Exchange Commission regarding, among other things, the HFC Transactions (as defined in the Original Form 8-K). The Company is filing this Amendment No. 1 on Form 8-K/A to the Original Form 8-K to provide the historical audited financial statements and pro forma financial information required by Item 9.01(a) and (b) and to file the Transition Services Agreement referenced in Item 1.01 of the Original Form 8-K. The pro forma condensed combined financial information included as Exhibit 99.2 to this Amendment No. 1 on Form 8-K/A has been presented for illustrative purposes only as required by Form 8-K, and is not intended to, and does not purport to, represent what the Company’s actual results or financial condition would have been if the HFC Transactions had occurred on the relevant date, and is not intended to project the future results or the financial condition that the Company may achieve following the HFC Transactions.

Item 5.02

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensation Arrangements of Certain Officers.

On March 14, 2022, effective as of the HFC Merger (as defined in the Original Form 8-K), HollyFrontier Corporation (“HollyFrontier”) assigned to the Company, and the Company assumed, all obligations of HollyFrontier under (a) all of HollyFrontier’s employee, director, and executive compensation plans pursuant to which HollyFrontier is obligated to, or may, issue equity securities to its directors, officers, or employees, including any currently-effective amendments thereto and/or restatements thereof, including, but not limited to, the HollyFrontier Corporation Long-Term Incentive Compensation Plan, the HollyFrontier Corporation 2020 Incentive Plan, and the U.K. Sub-Plan adopted under both of the foregoing plans (collectively, the “LTIP Plans”), (b) HollyFrontier’s equity-based award agreements, programs, notices, and/or similar agreements entered into or issued pursuant to the LTIP Plans, and each outstanding award granted or assumed thereunder (collectively, the “Award Agreements”), and (c) certain other change of control agreements between HollyFrontier and its directors, officers and employees (the “Change of Control Agreements” and, collectively with the LTIP Plans and the Award Agreements, the “Assumed Agreements”). Effective as of the HFC Merger, the LTIP Plans were amended and restated solely to change references to HollyFrontier Corporation to HF Sinclair Corporation and to change references to HollyFrontier Common Stock to HF Sinclair Common Stock. In addition, each of the Change in Control Agreements was automatically deemed to be amended as necessary to provide that references to HollyFrontier Corporation in each such Change of Control Agreement will be read to refer to HF Sinclair Corporation and references to HollyFrontier Common Stock in such Assumed Agreement will be read to refer to HF Sinclair Common Stock. As the amendments are not material, the amended and restated LTIP Plans and the form of Change of Control Agreement will be filed as exhibits with HF Sinclair’s next quarterly report.

Item 9.01

Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired.

Audited combined consolidated financial statements of Hippo Holding, LLC and Sinclair Transportation Company and their subsidiaries comprised of the combined consolidated balance sheets as of December 31, 2021 and 2020, and the related combined consolidated statements of income, changes in parent’s net investment, and cash flows for the years ended December 31, 2021 and 2020 are included as Exhibit 99.1 hereto and incorporated herein by reference.

(b) Pro Forma Financial Information.

The unaudited pro forma condensed combined financial information of the Company for and as of the year ended December 31, 2021, and the notes related thereto, are included as Exhibit 99.2 hereto and incorporated herein by reference.

(d)

Exhibits.


Exhibit No.		Description

10.1†		Transition Services Agreement, dated as of March 14, 2022, between HF Sinclair ( f/k/a Hippo Parent Corporation), and The Sinclair Companies.

23.1*		Consent of KPMG LLP, Independent Auditor.

99.1*		Audited combined consolidated financial statements of Hippo Holding, LLC and Sinclair Transportation Company and their subsidiaries comprised of the combined consolidated balance sheets as of December 31, 2021 and 2020, and the related combined consolidated statements of income, changes in parent’s net investment, and cash flows for the years ended December 31, 2021 and 2020.

99.2*		Unaudited pro forma condensed combined financial information of HF Sinclair Corporation as of and for the year ended December 31, 2021, and the notes related thereto.

104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

*	Filed herewith.

†	Schedules and certain exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The registrant agrees to furnish supplementally a copy of the omitted schedules and exhibits to the SEC upon request.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Exhibit 10.1

TRANSITION SERVICES AGREEMENT

This TRANSITION SERVICES AGREEMENT (this “Agreement”) is made and entered into as of March 14, 2022, between Hippo Parent Corporation, a Delaware corporation (“New Parent”), and The Sinclair Companies, a Wyoming corporation (“Sinclair HoldCo”). Each of the New Parent and Sinclair HoldCo is hereinafter referred to individually as a “Party” and together as the “Parties,” and each of New Parent and Sinclair HoldCo may be hereinafter referred to as either “Provider” or “Recipient,” depending on whether it is the provider or recipient of Services (as defined below) hereunder.

WHEREAS, in connection with the transactions contemplated by that certain Business Combination Agreement (the “Business Combination Agreement”), dated as of August 2, 2021, by and among New Parent, Sinclair HoldCo and the other parties thereto, each Party desires to purchase from the other Party certain transitional services on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Parties hereby agree as follows:

1. Definitions. Capitalized terms that are not otherwise defined in this Agreement shall have the meanings ascribed to them in the Business Combination Agreement.

2. Provision of Services.

(a) During the term of this Agreement as set forth in Section 6, Provider shall provide to Recipient (i) the services set forth on Exhibit A hereto and, (ii) with respect to New Parent (as Recipient), any other services requested by New Parent in writing that were provided by or on behalf of Sinclair HoldCo or its Affiliates to any member of the Company Group or in connection with the Downstream Business prior to the Closing Date and that are reasonably required by New Parent (each service described in clauses (i) and (ii), as applicable, a “Service,” and collectively, the “Services”) to operate the Downstream Business consistent with the manner in which the Downstream Business was operated prior to the Closing Date. Provider may provide the Services upon request by Recipient or on an ongoing basis, as agreed in writing by the Parties. The absence of designation of a Service as “as requested” or “ad hoc” on Exhibit A shall not preclude such Service from being characterized as such.

(b) Unless expressly required by Exhibit A, (i) (A) Sinclair HoldCo (as Provider) shall perform the Services to the same standard of care as the Services were performed by Sinclair HoldCo or its Affiliates for the Company Group or in connection with the Downstream Business prior to the date of this Agreement, and (B) New Parent (as Provider) shall perform the Services to the same standard of care as it performs similar services on its own behalf or on behalf of its Subsidiaries, and (ii) Recipient shall use the Services for substantially the same purposes and in substantially the same manner as such Services were used prior to the date of this Agreement, except as otherwise agreed by Provider.

(c) Provider may (i) employ the services of, or otherwise make available, contractors, subcontractors, vendors or other third parties (each, a “Third Party Provider”), and shall pay for any and all costs, expenses, fees, levies or charges for any Third Party Providers or (ii) use its own personnel or the personnel of any of its Affiliates to provide some or all of the Services. For all purposes of this Agreement, Provider shall be responsible for any Third Party Provider as if such Third Party Provider was a party to this Agreement, and each Third Party Provider shall be considered the “Provider” with respect to any Services it provides or fails to provide hereunder.

3. Access. Recipient shall make available on a timely basis to Provider all information and materials reasonably requested by Provider to enable it to provide the Services hereunder. Recipient shall give Provider reasonable access, upon reasonable prior notice, during regular business hours and at such other times as are reasonably required, to Recipient’s premises for the purpose of providing the Services hereunder.

4. Pricing, Invoice, Payment and Disputes.

(a) Exhibit A sets forth the price for each Service set forth on Exhibit A, which shall be equal to the internally allocated costs for the performance of such Service and reasonable, documented out-of-pocket expenses passed through without mark up (including pass through of third-party charges at cost). With respect to each Service to be provided in accordance with Section 2(a)(ii), Recipient shall pay Provider an amount equal to the internally allocated costs for the performance of such Service and Provider’s reasonable, documented out-of-pocket expenses passed through without mark up (including pass through of third-party charges at cost). Provider shall invoice Recipient after the end of each month for the Services actually provided during such month. Each invoice shall be payable by Recipient thirty (30) days after the date of such invoice.

(b) If Recipient disputes a charge included in an invoice in good faith, Recipient shall provide Provider with written notice containing reasonable detail regarding the basis for such dispute no later than fifteen (15) days after receiving such invoice. The Parties shall cooperate to promptly resolve any disputed charge. If the Parties agree that the disputed charge is not valid, Provider shall include a credit to Recipient in the next invoicing cycle or, if the disputed charge occurs in the last invoicing cycle, a refund (to the extent not previously paid), in the amount of such disputed charge. If the Parties are unable to resolve the billing dispute within twenty (20) days, the Parties shall escalate the issue to senior officers of each Party who shall reasonably cooperate to attempt resolve the issue.

5. Taxes. Any Taxes assessed on the provision of the Services hereunder shall be paid by Recipient (other than any income Taxes on amounts paid to Provider by Recipient pursuant to the terms hereof).

6. Term. Provider shall provide each of the Services from the Closing Date through the end of the term for such Service as set forth in Exhibit A (the “Initial Term”), subject to termination in accordance with Section 7. The Initial Term for each such Service shall not extend beyond the date that is twelve months after the Closing Date; provided, however, that Recipient may elect to extend the term of any Service as set forth, with respect to such Service, on Exhibit A for up to an additional six months beyond the Initial Term (the “Extended Term”). This Agreement automatically expires, without notice, at the end of the last-remaining Initial Term or Extended Term for any Service or upon termination in accordance with Section 7.

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7. Partial Termination; Termination.

(a) Either Party may terminate this Agreement, in whole or in part, prior to the expiration of its stated term immediately upon written notice to the other Party: (i) if the other Party commits a material breach of any provision of this Agreement (including Recipient’s failure to make payments when due) and such breach continues for a period of thirty (30) days following a written request to cure such breach; or (ii) if the other Party files, or has filed against it, a petition for voluntary or involuntary bankruptcy or pursuant to any other insolvency law or makes or seeks to make a general assignment for the benefit of its creditors or applies for or consents to the appointment of a trustee, receiver or custodian for it or a substantial part of its property.

(b) Recipient may terminate its right to receive any Service for any or no reason upon thirty (30) days prior written notice to Provider. Upon termination of any Service, Recipient shall promptly pay Provider for such Service to the extent actually provided pursuant to this Agreement through the date of termination and, upon such payment, Recipient shall have no further payment obligations under this Agreement with respect to such Service.

8. Cooperation; Representatives. The Parties shall use good faith efforts to reasonably cooperate with each other in all matters relating to the provision and receipt of Services. Each of Sinclair HoldCo and New Parent shall appoint a principal representative to facilitate communications and performance under this Agreement, who initially shall be Peter M. Johnson for Sinclair HoldCo and Richard L. Voliva III for New Parent. Sinclair HoldCo may treat an act of the principal representative of New Parent as being authorized by New Parent without inquiring behind such act or ascertaining whether such principal representative had authority to so act, and New Parent may treat an act of the principal representative of Sinclair HoldCo as being authorized by Sinclair HoldCo without inquiring behind such act or ascertaining whether such principal representative had authority to so act. Each of Sinclair HoldCo and New Parent shall have the right at any time and from time to time to replace its respective principal representative by giving notice in writing to the other Party, setting forth the name of (i) the principal representative to be replaced and (ii) the replacement, and certifying that the replacement principal representative is authorized to act for the Party giving the notice in all matters relating to this Agreement.

9. Independent Contractor. At all times during the term of this Agreement, Provider shall be an independent contractor in providing the Services hereunder with the sole right to supervise, manage, operate, control and direct the performance of the Services to be provided by it and the sole obligation to employ, compensate and manage its employees and business affairs. Nothing contained in this Agreement shall be deemed or construed to create a partnership or joint venture, to create the relationships of employee/employer or principal/agent, or otherwise create any liability whatsoever of any Party with respect to the indebtedness, liabilities, obligations or actions of the other Party or any of its respective Representatives.

10. Force Majeure. Provider shall not be in default hereunder by reason of any failure or delay in the performance of its obligations to provide the Services to be provided by it hereunder where such failure or delay is due to fire, explosion, hurricane, storm, weather events, earthquake, act of nature, civil unrest or similar disorder, terrorist acts, war or any other hostilities or other casualty; provided, however, that Provider shall use all commercially reasonable efforts to avoid, remove or overcome such events, and resume its performance hereunder, as soon as is reasonably

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possible. Upon the occurrence of any such event which results in, or would reasonably be expected to result in, delay or failure to perform according to the terms of this Agreement, Provider shall promptly provide written notice to Recipient of such occurrence. During the period Provider is excused from providing any Services to be provided by it in accordance with this Section 10, Recipient shall not be liable for payment for such excused Services and shall be free to acquire such Services from any substitute source, at Recipient’s cost and expense, and without liability to Provider. At Recipient’s election, for any Service that Provider is excused from providing in accordance with this Section 10, the term of such Service as set forth on Exhibit A shall be extended by the period of time that such Service was not provided.

11. WARRANTIES. EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, PROVIDER HEREBY DISCLAIMS ALL WARRANTIES, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

12. Confidential Information. “Confidential Information” shall mean confidential or other proprietary information that is disclosed by one Party to the other Party under this Agreement. Confidential Information shall not include information which: (i) is or becomes public knowledge without any action by, or involvement of, the receiving Party; (ii) is independently developed by the receiving Party without use of the Confidential Information; or (iii) is received from a third party who is not under and does not thereby breach an obligation of confidentiality. The receiving Party agrees to (a) observe complete confidentiality with respect to the Confidential Information, (b) not to disclose, or permit any third party or entity access to, the Confidential Information (or any portion thereof) without prior written permission of the disclosing Party (except such disclosure or access which is required to perform any obligations under this Agreement), and (c) advise any employees, or any third parties who receive access to the Confidential Information, of the confidential and proprietary nature thereof and are prohibited from copying, utilizing or otherwise revealing the Confidential Information. Without limiting the foregoing, the receiving Party agrees to employ with regard to the Confidential Information procedures no less restrictive than the strictest procedures used by it to protect its own confidential and proprietary information. Notwithstanding the foregoing, the receiving Party may disclose the Confidential Information to the extent that it is required to be disclosed pursuant to any judicial or governmental order, provided that the receiving Party gives the disclosing Party, where possible, sufficient prior notice to contest such order. The receiving party shall be responsible for any breach of this Section 12 by any employees or third parties to whom it makes available Confidential Information as if such breach was committed by the receiving party. Except with respect to trade secrets, the covenants set forth in this Section 12 shall terminate five (5) years after the expiration of the term of this Agreement.

13. Indemnification.

(a) Provider shall indemnify, defend and hold harmless Recipient, its Affiliates and their respective Representatives (collectively, the “Recipient Indemnitees”) from and against any and all Damages suffered, incurred or sustained by any of them to the extent resulting from, arising out of or relating to Provider’s gross negligence or willful misconduct in connection with the provision of, or failure to provide, any Services to Recipient.

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(b) Recipient shall indemnify, defend and hold harmless Provider, its Affiliates and their respective Representatives (collectively, the “Provider Indemnitees”) from and against any and all Damages suffered, incurred or sustained by any of them to the extent resulting from, arising out of or relating to (i) Recipient’s breach of this Agreement and (ii) the Services supplied by Provider pursuant to this Agreement, other than to the extent resulting from, arising out of or relating to Provider’s gross negligence or willful misconduct.

14. Specific Performance.

(a) The Parties shall be entitled to seek specific performance to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. Each of the Parties hereby further waives (i) any defense in any action for specific performance that a remedy at law would be adequate and (ii) any requirement under any applicable Law to post security as a prerequisite to obtaining equitable relief.

(b) Notwithstanding the foregoing, at least ten (10) days prior to either Party seeking specific performance to prevent breaches of this Agreement or to enforce specifically the terms of and provisions of this Agreement in any court, such Party shall provide the other with written notice containing reasonable detail regarding the basis for such dispute. During such ten (10) day period, the Parties shall reasonably cooperate to resolve any such dispute and if such dispute cannot be resolved the Parties shall escalate the issue to senior officers of each Party who shall reasonably cooperate to attempt resolve the issue.

15. Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned or delegated by any Party without the prior written consent of the other Party; provided, however, that Recipient may, without the prior written consent of Provider, assign its right to receive any of the Services hereunder to one or more of its Subsidiaries.

16. Parties in Interest. This Agreement shall inure to the benefit of and be binding on the Parties and their respective successors and permitted assigns. This Agreement is for the sole benefit of the Parties and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer on any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

17. Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by e-mail of a PDF document (with written confirmation of receipt) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective Party at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 17):

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(i)

if to New Parent,

Hippo Parent Corporation

2828 North Harwood Street, Suite 1300

Dallas, TX 75201

Email: president@hollyfontier.com

Attn: President

with a copy to (which shall not constitute notice):

Morgan Lewis & Bockius LLP

1701 Market Street

Philadelphia, PA 19103

Attn: Benjamin R. Wills

Telephone: (215) 963-5541

Email: Benjamin.wills@morganlewis.com

(ii)

if to Sinclair HoldCo,

The Sinclair Companies

550 East South Temple

Salt Lake City, UT 84102

Attn: Lynn Hart

Telephone: (801) 524-2756

Email: lhart@sinclairoil.com

with a copy to (which shall not constitute notice):

Vinson & Elkins L.L.P.

845 Texas Avenue, Suite 4700

Houston, Texas 77002

Attn: Scott N. Wulfe

Alan Beck

Telephone: (713) 758-2750

(713) 758-3638

Email: swulfe@velaw.com

abeck@velaw.com

18. Interpretation; Exhibits. Terms defined in the singular have a comparable meaning when used in the plural, and vice versa. As used in this Agreement, (a) the words “hereof,” “herein,” “hereby,” “hereto” and “hereunder” and words of similar import refer to this Agreement as a whole and not to any particular provision of this Agreement, (b) the word “including,” and words of similar import, means “including, but not limited to” and “including, without limitation,” (c) the terms “dollars” and “$” means United States Dollars, the lawful currency of the United States of America, (d) the word “will” shall be construed to have the same meaning and effect as the word “shall,” (e) the word “or” is not exclusive, (f) the word “extent” in the phrase “to the extent” means the degree to which a subject or other thing extends, and such phrase shall not mean simply “if” and (g) references herein to a Person in a particular capacity or capacities shall exclude such Person in any other capacity. The heading references herein are for convenience purposes only, do not constitute a part

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of this Agreement, and shall not be deemed to limit or affect any of the provisions hereof. References to “Sections,” “Subsections,” or “Exhibits” means the Sections, Subsections of, or Exhibits to, this Agreement, as the case may be, except as may be otherwise specified. The Exhibits referred to herein shall be construed with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein. All terms defined in this Agreement have their defined meanings when used in any Exhibit to this Agreement.

19. Entire Agreement. This Agreement (including the Exhibits hereto) comprises the entire agreement between the Parties with respect to the Services and supersedes all prior and contemporaneous agreements and understandings, oral or written, with respect to Services. In the event of any inconsistency or conflict between the provisions of this Agreement (including the Exhibits hereto), on the one hand, and the provisions of the Business Combination Agreement, on the other hand, the Business Combination Agreement shall govern and control.

20. Governing Law. This Agreement shall be governed by and construed and interpreted in accordance with the Laws of the State of Utah, without giving effect to the conflicts of law provision or rule (whether of the State of Utah or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of Utah.

21. WAIVER OF JURY TRIAL. EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND ACKNOWLEDGES THAT IT AND THE OTHER PARTY HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 21.

22. Severability. If any term or provision of this Agreement, or the application thereof to any Person or any circumstance, is invalid, illegal or unenforceable in any jurisdiction, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid, legal and enforceable, the intent and purpose of such invalid, illegal or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity, illegality or unenforceability, nor shall such invalidity, illegality or unenforceability in any jurisdiction affect the validity, legality or enforceability of such provision, or the application thereof, in any other jurisdiction.

23. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same agreement. A signed copy of this Agreement delivered by e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

* * *

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IN WITNESS WHEREOF, New Parent and Sinclair HoldCo have duly executed this Agreement as of the date first written above.


NEW PARENT:

HIPPO PARENT CORPORATION

By:		/s/ Michael C. Jennings
Name: Michael C. Jennings
Title: Chief Executive Officer

SINCLAIR HOLDCO:

THE SINCLAIR COMPANIES

By:		/s/ Ross B. Matthews
Name: Ross B. Matthews
Title: Chief Operating Officer

[Signature Page to Transition Services Agreement]

EXHIBIT A

SERVICES AND FEES

Omitted pursuant to Item 601(b)(2) of Regulation S-K.

Exhibit 23.1

Consent of Independent Auditors

We consent to the incorporation by reference in the registration statements on Form S-8 (No. 333-211557 and No. 333-238835) of HollyFrontier Corporation of our report dated February 16, 2022, with respect to the combined consolidated financial statements of Hippo Holding, LLC and Sinclair Transportation Company and their subsidiaries, which report appears in the Form 8-K/A of HF Sinclair Corporation dated March 16, 2022.

/s/ KPMG LLP

Salt Lake City, Utah

March 16, 2022

Exhibit 99.1

LOGO

Combined Hippo Holding, LLC and Sinclair

Transportation Company and their Subsidiaries

COMBINED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021 and 2020

CONTENTS


	Page
INDEPENDENT AUDITOR’S REPORT		1
FINANCIAL STATEMENTS
COMBINED CONSOLIDATED BALANCE SHEETS		4
COMBINED CONSOLIDATED STATEMENTS OF INCOME		5
COMBINED CONSOLIDATED STATEMENTS OF CHANGES IN PARENT’S NET INVESTMENT		6
COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS		7
NOTES TO THE COMBINED CONSOLIDATED FINANCIAL STATEMENTS		8

LOGO

KPMG LLP

Suite 1500

15 W. South Temple

Salt Lake City, UT 84101

Independent Auditors’ Report

Stockholders and Board of Directors

The Sinclair Companies:

Opinion

We have audited the combined consolidated financial statements of Hippo Holding, LLC and subsidiaries and Sinclair Transportation Company and subsidiaries (collectively, the Company), which comprise the combined consolidated balance sheets as of December 31, 2021 and 2020, and the related combined consolidated statements of income, changes in parent’s net investment, and cash flows for the years then ended, and the related notes to the combined consolidated financial statements.

In our opinion, the accompanying combined consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in accordance with U.S. generally accepted accounting principles.

Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Combined Consolidated Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Emphasis of Matter

We draw attention to Note 1 to the combined consolidated financial statements, which describes the Company’s basis of presentation used in preparing the combined consolidated financial statements. Our opinion is not modified with respect to this matter.

Responsibilities of Management for the Combined Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the combined consolidated financial statements in accordance with U.S. generally accepted accounting principles, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of combined consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the combined consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that the combined consolidated financial statements are available to be issued.

LOGO

Auditors’ Responsibilities for the Audit of the Combined Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the combined consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the combined consolidated financial statements.

In performing an audit in accordance with GAAS, we:

•

Exercise professional judgment and maintain professional skepticism throughout the audit.

•

Identify and assess the risks of material misstatement of the combined consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the combined consolidated financial statements.

•

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed.

•

Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the combined consolidated financial statements.

•

Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.

LOGO

Salt Lake City, Utah

February 16, 2022

Hippo Holding, LLC and Sinclair Transportation Company and their Subsidiaries

Combined Consolidated Balance Sheets

(Dollars in thousands)


	December 31,
	2021			2020
ASSETS
Current Assets:
Cash and cash equivalents	$	470		$	2,612
Trade and other accounts receivable		326,219			215,169
Related party receivable		277,487			54,815
Inventories		412,144			475,146
Prepaid expenses and other assets		981			1,149

Total current assets		1,017,301			748,891

Long Term Assets:
Investment in affiliates		194,629			210,771
Deferred turnaround costs (net of amortization)		150,857			107,154
Notes receivable and other noncurrent assets		15,803			32,720

Total other assets		361,289			350,645

Property, plant and equipment, at cost		2,595,942			2,491,681
Less accumulated depreciation		(1,260,726	)		(1,180,605	)

Property, plant and equipment (net)		1,335,216			1,311,076

Total Assets	$	2,713,806		$	2,410,612

LIABILITIES AND PARENT’S NET INVESTMENT
Current Liabilities:
Accounts payable and accrued liabilities	$	434,938		$	326,297

Total current liabilities		434,938			326,297

Long Term Liabilities:
Long term liabilities		16,243			8,400

Total Liabilities		451,181			334,697

Parent’s Net Investment
Parent’s Net Investment		2,262,625			2,075,915

Total Liabilities and Parent’s Net Investment	$	2,713,806		$	2,410,612

See accompanying notes to these combined consolidated financial statements

- 4 -

Hippo Holding, LLC and Sinclair Transportation Company and their Subsidiaries

Combined Consolidated Statements of Income

(Dollars in thousands)


	Year ended December 31,
	2021		2020
Revenues and Other Income:
Sales and operating revenues	$	5,764,564	$	3,328,521
Other income (net)		3,668		1,623
Equity in income of affiliates		12,950		10,897

Total revenues and other income		5,781,182		3,341,041

Costs and Expenses:
Cost of goods sold		5,368,914		3,111,285
Administrative, general and selling		45,431		20,972
Depreciation and amortization		180,127		176,164

Total costs and expenses		5,594,472		3,308,421

Net Income	$	186,710	$	32,620

See accompanying notes to these combined consolidated financial statements

- 5 -

Hippo Holding, LLC and Sinclair Transportation Company and their Subsidiaries

Combined Consolidated Statements of Changes in Parent’s Net Investment

(Dollars in thousands)


	Parent’s Net Investment
Balance at December 31, 2019	$	2,043,834
Dividends		(539	)
Net loss		32,620

Balance at December 31, 2020		2,075,915
Net Income		186,710

Balance at December 31, 2021	$	2,262,625

See accompanying notes to these combined consolidated financial statements

- 6 -

Hippo Holding, LLC and Sinclair Transportation Company and Subsidiaries

Combined Consolidated Statements of Cash Flows

(Dollars in thousands)


	Year ended December 31,
	2021			2020
Cash Flows From Operating Activities:
Net income	$	186,710		$	32,620
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		180,127			176,164
Earnings of equity method investments, inclusive of distributions		3,095			8,316
Loss on sale of property, plant and equipment		1,824			2,162
Turnaround costs paid		(111,730	)		(23,447	)
Changes in assets and liabilities:
Trade accounts receivable		(111,050	)		128,351
Inventories		63,002			(83,673	)
Prepaid expenses and other assets		168			6,449
Other long term assets		917			(53	)
Accounts payable and accrued liabilities		144,242			(42,559	)
Long term liabilities		10,113			(7,178	)

Net cash provided by operating activities		367,418			197,152

Cash Flows From Investing Activities:
Advance from cash management arrangement with related party, (net)		(200,852	)		(88,031	)
Proceeds from sale of investments		—			2,478
Distributions from affiliates		5,302			3,902
Investments in affiliates		(6,510	)		(24,412	)
Purchase of property, plant and equipment		(182,704	)		(94,196	)
Proceeds from sale of equity investment		14,255			—
Proceeds from sale of property, plant and equipment		949			1,384

Net cash used in investing activities		(369,560	)		(198,875	)

Cash Flows From Financing Activities:
Dividends		—			(539	)

Net cash used in financing activities		—			(539	)

Decrease in Cash and cash equivalents		(2,142	)		(2,262	)
Cash and cash equivalents, Beginning of Year		2,612			4,874

Cash and cash equivalents, End of Year	$	470		$	2,612

Supplemental Disclosures of Cash Flow Information		—			—
Supplemental Disclosures of Non-Cash Investing Activities:
Purchases of property, plant and equipment included in accounts payable	$	12,690		$	47,291
Transfer of property, plant and equipment to a related party (net)	$	9,090		$	2,958
Transfer of note receivable to related entity	$	16,000		$	—
Transfer of long term liability to related entity	$	3,270		$	—

See accompanying notes to these combined consolidated financial statements

- 7 -

Hippo Holding, LLC and Sinclair Transportation Company and their Subsidiaries

Notes to the Combined Consolidated Financial Statements

December 31, 2021 and 2020

(Dollars in Thousands)

1.	The Company, Basis of Presentation, and Summary of Significant Accounting Policies

The Company

The accompanying combined consolidated financial statements consist of Hippo Holding, LLC and subsidiaries (“Hippo”), which include the Sinclair Oil Corporation, Sinclair Trucking Company, Sinclair Wyoming Refining Company, Sinclair Casper Refining Company, Sinclair Crude Company, Sinclair Tulsa Refining Company, Wyoming Renewable Diesel Company LLC, and Sinclair Golf Course, Inc., and Sinclair Transportation Company and its subsidiaries, which include Sinclair Logistics LLC, Sinclair Terminals, Sinclair Pipelines and Sinclair Pipeline Company, LLC Inc., (collectively, the “Company”). Hippo Holding, LLC and Sinclair Transportation Company are wholly owned by The Sinclair Companies (“Parent”).

The Company owns and operates various petroleum refineries, marketing operations, renewable diesel operations, pipelines and terminals.

Hippo Holding, LLC was formed on July 29, 2021 in contemplation of the Business Combination Agreement (the “Business Combination Agreement”) between the Parent and HollyFrontier Corporation. In conjunction with the contemplated transaction, the Parent created Hippo Holding, LLC and transferred ownership of Sinclair Oil Corporation and its subsidiaries and Wyoming Renewable Diesel Company LLC to Hippo. Concurrently, with the transfer of Sinclair Oil Corporation by Parent to Hippo, Sinclair Oil Corporation transferred its ownership of Sinclair Transportation Company to Parent. These transfers are accounted for as transactions among entities under common control and constitutes a change in reporting entity. Consequently, the Company has retrospectively presented the historical financial statements of the consolidated Hippo Holdings, LLC as of December 31, 2020 and for the years ended December 31, 2021 and 2020.

Basis of Presentation

The combined consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) from the consolidated financial statements and accounting records of the Parent using the historical results of operations and historical cost basis of the assets and liabilities that comprise the Company. These combined consolidated financial statements have been prepared to demonstrate the Company’s combined consolidated historical financial positions results of operations, and cash flows. All intercompany balances and transactions within the Company’s combined consolidated financial statements have been eliminated. Transactions and balances between the Company and the Parent and its subsidiaries that are not included in these combined consolidated financial statements are reflected as related party balances and transactions within these financial statements. Transactions between the Company and the Parent are reflected as either contributions by, or distributions to, the Parent.

The combined consolidated financial statements include the assets, liabilities, revenues, and expenses that are specifically identifiable to the Company. The combined consolidated financial statements also include allocations of certain administrative, accounting, legal, human resources and information technology expenses from the Parent based on estimated hours incurred for the respective entities. These allocated costs are primarily related to corporate administrative expenses, employee related costs for corporate and shared employees. Nevertheless, the combined consolidated financial statements may not include all of the actual expenses that would have been incurred had the Company operated as a standalone company during the periods presented and may not reflect the combined consolidated results of operations, financial position and cash flows had the Company operated as a standalone business during the periods presented. Actual costs that would have been incurred if the Company had operated as a standalone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. The Company also may incur additional costs associated with being a standalone company that were not included in the expense allocations and therefore would result in additional costs that are not reflected in the combined

- 8 -

Hippo Holding, LLC and Sinclair Transportation Company and their Subsidiaries

Notes to the Combined Consolidated Financial Statements

December 31, 2021 and 2020

(Dollars in Thousands)

consolidated historical results of operations, financial position and cash flow. Consequently, future results of operations should the Company operate separately from the Parent will include costs and expenses that may be materially different than the Company’s historical results of operations, financial position, and cash flows. Accordingly, the combined consolidated financial statements for the periods presented are not indicative of the Company’s future results of operations, financial position and cash flow.

Parent’s net investment represents Parent’s interest in the recorded net assets of the Company. All significant transactions between the Company and the Parent have been included in the accompanying combined consolidated financial statements. Parent’s net investment includes the combined cumulative operating results of the Company.

Related Party Transactions

The Company has a financing and cash management arrangement for all periods presented with Sinclair Finance Company, a wholly owned subsidiary of the Parent. Under this financing and cash management arrangement the Company delivers available cash, borrows, and makes repayments with Sinclair Finance Company throughout the year in the normal course of business. Funds on deposit with Sinclair Finance Company earn an adjusted money market rate and borrowed funds bear interest at one-month LIBOR plus 1.75%. Outstanding balances are due on demand. As of December 31, 2021 and 2020, the outstanding balances are presented on the combined consolidated balance sheets as a related party receivable of $277,487 and $54,815, respectively.

In the normal course of business, the Company sells refined petroleum products to affiliates of the Parent. The Company has sales to these affiliates of $67,726 and $33,911 for the years ended December 31, 2021 and 2020, respectively. In addition, the Company has recognized expenses related to services provided by the Parent and relate to administrative, accounting, legal, human resources and information technology support of $5,901 and $6,832 for the years ending December 31, 2021 and 2020, respectively

The Company has no long-term debt under credit agreements to which it is the legal obligor. However, the Company is a guarantor to the Parent’s $750,000 line of credit which had no outstanding balance as of December 31, 2021 and 2020. The Company’s accounts receivable and inventories are subject to the Parent’s line of credit collateral. The Parent’s line of credit contains covenants that include a minimum debt service coverage ratio, maximum leverage ratio and minimum current ratio. The line of credit matures in July 2023. If a change in control were to occur, the Company would no longer have access to the Parent’s line of credit.

During the year ended December 31, 2021, the Company transferred both a note receivable of $16,000 and long-term liability of $3,270 to Sinclair Finance Company. The transfer was settled through the related party receivable. Additionally, during the years ended December 31, 2021 and 2020, the Company transferred property, plant, and equipment of $9,090 and $2,958 to an affiliate of the Parent which was settled through the related party receivable.

A summary of the significant accounting policies of the Company follows.

Use of Estimates

The preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the respective reporting periods. Actual results may differ from such estimates.

- 9 -

Hippo Holding, LLC and Sinclair Transportation Company and their Subsidiaries

Notes to the Combined Consolidated Financial Statements

December 31, 2021 and 2020

(Dollars in Thousands)

Cash and Cash Equivalents

Cash and cash equivalents are comprised of highly liquid investments with original maturities of three months or less.

Accounts Receivable

Accounts receivable consist primarily of amounts due from customers who are retailers or wholesalers of petroleum products throughout the Mid-West and Rocky Mountain regions. Credit is extended based on the Company’s evaluation of the customer’s financial condition and in certain circumstances, collateral, such as a letter of credit, cash deposits or guarantee is required.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

The Company has categorized its financial assets and liabilities based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

Financial assets recorded on the combined consolidated balance sheets are categorized based on the lowest level of inputs to the valuation techniques as follows:

Level 1. Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access.

Level 2 Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 assets include the quoted prices for similar assets in active markets; quoted prices for identical or similar assets in non-active markets; pricing models whose inputs are observable for substantially the full term of the asset; and pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability.

Level 3. Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.

A review of fair value hierarchy classifications is conducted on an annual basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities, there were no changes in classification in the current or prior year.

The Company’s assessment of the significance of a particular input to fair value requires judgment and may affect the fair value of assets and their placement within the fair value hierarchy.

Fair Value of Financial Instruments

The carrying values of notes receivable approximate fair value because the stated interest rates reflect current market rates.

Inventories

Crude oil and petroleum products inventory is determined by the last-in, first-out (LIFO) method and is valued at the lower of cost or market. Other inventories are primarily determined by the first-in, first-out (FIFO) method and are valued at the lower of cost or net realizable value.

- 10 -

Hippo Holding, LLC and Sinclair Transportation Company and their Subsidiaries

Notes to the Combined Consolidated Financial Statements

December 31, 2021 and 2020

(Dollars in Thousands)

Investment in Affiliates

The Company has investments in affiliates over which it has significant influence but not a controlling financial interest. The Company has a 49% equity interest in Pioneer Pipeline, a 25% equity interest in UNEV Pipeline, and a 32.5% equity interest in Saddle Butte Pipeline. During the third quarter of 2021 the Company sold its 50% ownership interest in an affiliate ^for $14,255. The Company recorded $12,950 and $10,897 of equity income from its affiliates in 2021 and 2020, respectively.

Summary financial information for the investee companies is presented below:


	December 31,
	2021		2020
Balance Sheets
Current assets	$	57,835	$	47,778
Property, plant and equipment (net)		600,946		692,472
Other assets		1,249		12,793

Total assets	$	660,030	$	753,043

Current liabilities	$	11,679	$	16,577
Noncurrent liabilities		35,854		95,071

Total liabilities		47,533		111,648
Stockholders’ equity		612,497		641,395

Total liabilities and stockholders’ equity	$	660,030	$	753,043


	Year ended December 31,
	2021		2020
Results of operations:
Sales	$	576,640	$	348,348
Operating income		36,732		40,455
Net income		32,949		36,819

The Company has a difference of $7,301 and $7,548 as of December 31, 2021 and 2020, respectively related to its investment in UNEV when compared to its proportional interest in the underlying carrying value of UNEV. The Company amortizes this basis difference on a straight-line basis over 40 years. The Company has recorded a reduction to Equity in income of the affiliates of $247 for the years ended December 31, 2021 and 2020, respectively.

Notes Receivable

Notes receivable consists of loans and notes due from distributors and unrelated third parties and are reported at their principal balance plus accrued interest less allowances for uncollectibility. The Company considers financial condition, historical payment patterns and general and industry specific economic factors in determining risk and collectability. The loans bear interest at a market rate based on credit quality and are secured by various assets. The allowance, if any, is based on the Company’s regular assessment of collectability and historical collection experience. The Company will write off notes deemed uncollectable. Interest income on loans is recognized on the accrual basis over the life of the loans.

Property, Plant and Equipment

Depreciation is provided on the straight-line method for property, plant and equipment. Maintenance and repairs are expensed as incurred and substantial improvements that extend the life of the asset are capitalized.

- 11 -

Hippo Holding, LLC and Sinclair Transportation Company and their Subsidiaries

Notes to the Combined Consolidated Financial Statements

December 31, 2021 and 2020

(Dollars in Thousands)

The Company reviews long-lived assets for impairments whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the undiscounted future cash flow of an asset group to be held and used in operations is less than the carrying value, an impairment loss is recognized for the excess, if any, of the property’s net book value over its estimated fair value.

Deferred Turnaround costs

Refinery units require regular major maintenance and repair which are commonly referred to as turnarounds. Catalysts used in certain refinery processes also require regular change-outs. The required frequency of the maintenance varies by unit and by catalyst, but generally is every two to five years. Under the deferral method, turnaround costs are deferred and amortized on a straight-line basis over the expected period until the next scheduled turnaround and are included in depreciation and amortization in the Company’s combined consolidated statements of income. Other repairs and maintenance costs are expensed when incurred. Deferred turnaround amortization expense was $68,027 and $68,245 for the years ended December 31, 2021 and 2020, respectively.

Revenue Recognition

Company revenues are primarily generated from contracts with customers with the sale of its refined petroleum products, crude oil, natural gas and renewable diesel products. Revenues are recognized when the Company satisfies its performance obligation to transfer products to its customers, which typically occurs at a point in time upon shipment of the products, and for an amount that reflects the transaction price that is allocated to the performance obligation. Revenue recognized for services related to transportation and terminal storage are satisfied over time as the services are fulfilled, at the contractual agreed upon pricing.

The Company contracts with customers state the final terms of the sale, including the description, quantity, and price for goods sold. Payment is typically due in full within ten to thirty days of shipment. The Company’s commodity sales are typically based on prevailing market-based prices. Some of its contracts also contain variable consideration in the form of sales incentives to its customers, such as discounts and rebates.

The Company elected to exclude from the measurement of the transaction price all taxes assessed by governmental authorities that are both imposed on and concurrent with a specific revenue-producing transaction and collected by it from a customer.

The Company enters into certain purchase and sale arrangements with the same counterparty that are deemed to be made in contemplation of one another. The Company combines these transactions and presents the net effect in cost of goods sold.

Other Income

Other income includes net gains and losses on investments, interest income and expense from related parties and gains and losses from sales of property, plant and equipment and other assets, unless otherwise identified on the combined consolidated statements of income.

Renewable Fuel Identification Numbers

The Company purchases and sells renewable fuel identification numbers (RINs) to satisfy its renewable fuel standard (“RFS”) compliance. The Company records a current liability, included in accounts payable and accrued liabilities on the combined consolidated balance sheet, when the Company does not have sufficient quantities of RINs at year end to satisfy Environmental Protection Agency regulatory blending requirements. As of December 31, 2021, and 2020, the Company recorded a liability of $63,653 and $32,636, respectively. The purchases and sales of RINs used for compliance is reflected in costs of goods sold on the combined consolidated statements of income. The Company does not record an asset on the combined consolidated balance sheets related to RINs that have not been validated and contracted.

- 12 -

Hippo Holding, LLC and Sinclair Transportation Company and their Subsidiaries

Notes to the Combined Consolidated Financial Statements

December 31, 2021 and 2020

(Dollars in Thousands)

The Company also operates a renewable diesel company located at one of its refineries. The company uses vegetable oils, such as soybean oil, as feedstock and markets the renewable diesel product to several customers. As part of the production process RINs are generated and sold separately. On December 20, 2019, the Biodiesel and Renewable Diesel Mixture and Alternative Fuel Excise Tax Credit was extended through December 31, 2022. The Company recorded $174,688 and $92,851 of RINs in Sales and operating revenues for 2021 and 2020, respectively.

Income Taxes

The Company consists of wholly owned subsidiaries of the Parent. These subsidiaries are disregarded entities for income tax purposes. Income and loss flows directly to the Parent’s income tax return. The Parent has elected to be taxed as an S Corporation under the Internal Revenue Code. As an S Corporation, taxable income (loss) for federal income tax purposes, as well as for certain states, flows directly to the Parent’s stockholders.

The Parent evaluates the Company’s tax positions taken in the course of the preparation of the Parent’s tax return to determine whether the tax positions will “more likely than not” be sustained by the applicable tax authority. The Parent has determined that there is no tax liability resulting from unrecognized tax benefits related to uncertain tax positions. The Parent is subject to tax examination for each of its open tax years, which extend back to 2018.

Derivative Instruments

The Company enters into future contracts on the New York Mercantile Exchange and into forward purchase agreements with third parties to manage price risk on crude oil and to fix margins on certain future production which generally do not involve an exchange of product. When material, all instruments are recognized at fair value in the financial statements as either assets or liabilities, unless they satisfy the normal purchase and sales exception criteria. The Company records the change in fair value of the future contracts in cost of goods sold. The impact to the financial statements related to futures contracts was not material for the years ended December 31, 2021 and 2020.

2.	Fair Value Measurements

As of December 31, 2021, and 2020 the Company had fair value hierarchy of money market funds at fair market value recorded in Cash and cash equivalents of $64 and $491, respectively; these assets are considered level 1 fair value assets. In addition the Company had derivatives measured at fair value recorded in trade and other accounts receivable of $2,820 and $3,236, respectively; these assets are considered level 2 fair value assets.

3.	Inventories

Inventories consist of the following:


	December 31,
	2021		2020
Crude oil and petroleum products	$	387,706	$	456,191
Materials and supplies		24,438		18,955

	$	412,144	$	475,146

At December 31, 2021 and 2020, replacement cost exceeded the LIFO cost of crude oil and petroleum product inventories by $285,652 and $22,638, respectively.

- 13 -

Hippo Holding, LLC and Sinclair Transportation Company and their Subsidiaries

Notes to the Combined Consolidated Financial Statements

December 31, 2021 and 2020

(Dollars in Thousands)

During 2021 and 2020, the petroleum inventory quantities increased. This increase resulted in an additional LIFO inventory layer. This decreased cost of goods sold and increased net income by $20,865 and $23,824, respectively.

4.	Notes Receivable

Loans are made in the normal course of business to distributors of the Company and other third parties. The terms of the notes exceed one year and become due between 2022 and 2024 with no minimum required principal payments. The interest rates on the notes range between 4.5% to Libor plus 9.5%, with one note having an option to reduce the annual interest rate if certain annual minimum fuel volume purchases are satisfied. The Company has determined it is not necessary to record an allowance for uncollectibility as of December 31, 2021 and 2020. Long-term notes receivable as of December 31, 2021 and 2020 was $15,763 and $31,450, respectively.

5.	Property, Plant and Equipment

Property, plant and equipment consist of the following:


	December 31,						Depreciable Lives (Years)
	2021			2020			Depreciable Lives (Years)
Refineries	$	2,158,702		$	1,998,427			20
Equipment and furnishings		133,759			130,661			5-15
Land		3,977			5,617
Marketing and distribution facilities		45,528			65,439			5-30
Petroleum transporting and other vehicles		16,904			18,062			5-10
Pipelines and related property		192,079			199,693			5-40
Construction-in-progress		44,993			73,782

	$	2,595,942		$	2,491,681
Less accumulated depreciation		(1,260,726	)		(1,180,605	)

Property, plant and equipment (net)	$	1,335,216		$	1,311,076

During 2021 and 2020, the Company sold property, plant and equipment for $949 and $1,384, respectively and recognized a loss of $1,824 and $2,162, respectively which has been recorded in other income.

Depreciation expense was $112,100 and $107,919 for the years ended December 31, 2021 and 2020, respectively.

6.	Employee Benefit Plans

Defined Contribution Plans

The Parent has defined contribution “401(k)” plans that cover substantially all employees of the Company. Contributions are based on employees’ compensation and the Company partially matches employee contributions. The Parent’s contributions to these plans were $10,675 and $10,212 for 2021 and 2020, respectively.

- 14 -

Hippo Holding, LLC and Sinclair Transportation Company and their Subsidiaries

Notes to the Combined Consolidated Financial Statements

December 31, 2021 and 2020

(Dollars in Thousands)

Current and Postretirement Medical Plans

The Parent provides health insurance, life insurance and long-term disability insurance coverage through current and postretirement medical plans (the “Plan”) to current qualified employees as well as certain retirees and other terminated employees of the Parent’s subsidiaries. The Plan is funded by Parent’s subsidiaries contributions to a trust account. The Parent’s subsidiaries contribute sufficient monies to meet minimum funding requirements and to pay claims. Employees are required to contribute toward certain coverage levels as determined by the Plan. The costs of the postretirement and postemployment benefits are shared by the Parent’s subsidiaries and retirees.

The Plan does not offer new early retirees age 55 to 61 post employment healthcare. Employees with at least 12 years of service may retire at age 62 to 65 and receive a cash payment equal to 50% of the Company’s full premium related to the actual employees’ historical coverage since age 60 (last 36 months) prorated to age 65. The Plan offers retirees age 65 or older the Medicare Supplement Plan for a maximum benefit of $10 per covered person.

Sinclair Services Company, a subsidiary of the Parent, is the sponsor of the plan. The Company has contributed $22,362 and $10,942 to the plan for the years ended December 31, 2021 and 2020, respectively.

7.	Commitments and Contingent Liabilities

Lease Commitments

The Company leases railcars, trucks and office space under long-term operating leases. The leases expire at various dates through 2030. Certain of the leases have options to extend the term of the lease.

As of December 31, 2021, the minimum future rental commitments on non-cancelable leases with a term in excess of one year are as follows:


Year Ending December 31,
2022	$	2,495
2023		2,022
2024		1,465
2025		1,076
2026		857
Thereafter		1,098

	$	9,013

The Company recorded $2,737 and $3,611 of lease expense in 2021 and 2020, respectively, in cost of goods sold.

Environmental Issues

Liabilities are recorded when environmental assessments and/or cleanups are probable, and the costs can be reasonably estimated. Generally, the timing of these accruals coincides with the Company’s commitment to a formal plan of action. The environmental reserves are recorded in Accounts payable and accrued liabilities for the current portion of $4,338 and $5,446, for 2021 and 2020, respectively, and Other long-term liabilities for the long-term portion of $3,344 and $2,168, for 2021 and 2020, respectively.

No obligations to retire petroleum refining, pipeline and terminals long-lived assets have been recognized, as indeterminate settlement dates for the asset retirements prevent estimation of the fair value of the associated retirement obligation. The Company performs periodic reviews of such assets for any changes in facts and circumstances that might require recognition of a retirement obligation. If the settlement dates become determinable, the associated retirement obligation could be material to the financial statements.

- 15 -

Hippo Holding, LLC and Sinclair Transportation Company and their Subsidiaries

Notes to the Combined Consolidated Financial Statements

December 31, 2021 and 2020

(Dollars in Thousands)

Commitments

The Company has a 10-year financial commitment, which expires in March 2022 with UNEV Pipeline, LLC, a pipeline affiliate, to utilize the pipeline through product shipments and/or fees for a minimum of $7,400 annually.

The Company has long-term agreements (entered in the normal course of business) with third parties for the transportation of crude oil to its refineries that expire between 2020 and 2038. These agreements require a minimum of 55,000 barrels per day at contracted rates based on the quality of the crude oil.

The Company has an off-take agreement, which expires in 2024, with a refiner whereby the Company has agreed to purchase 45,000 to 50,000 barrels per day of gasoline and distillate products to supply Sinclair’s branded and unbranded marketing network throughout the Midwest. The Company recorded cost of $1,360,642 and $727,201 in 2021 and 2020, respectively, in cost of goods sold.

Litigation

The Company is involved in certain litigation related to its business activities. Management does not believe that it is reasonably possible the resolution of these matters will have a material adverse effect on the Company’s financial position or results of operations.

8.	Subsequent events

Subsequent events were evaluated through February 16, 2022, the date the financial statements were available to be issued.

- 16 -

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

On August 2, 2021, HollyFrontier Corporation, (“HFC” or the “Corporation”), Hippo Parent Corporation, a wholly-owned subsidiary of HFC (“New Parent” or, following the consummation of the HFC Transactions (as defined below), HF Sinclair Corporation, or “HF Sinclair”), Hippo Merger Sub, Inc., a wholly-owned subsidiary of New Parent (“Parent Merger Sub”), The Sinclair Companies (“Sinclair”), and Hippo Holding LLC, a wholly-owned subsidiary of Sinclair (the “Target Company”), entered into a business combination agreement (as amended on March 14, 2022, the “BCA”).

On March 14, 2022 (the “HFC Closing Date”), pursuant to the BCA, HF Sinclair completed its acquisition of the Target Company by effecting (a) a holding company merger in accordance with Section 251(g) of the Delaware General Corporation Law whereby HFC merged with and into Parent Merger Sub, with HFC surviving such merger as a direct wholly-owned subsidiary of HF Sinclair (the “HFC Merger”) and (b) immediately following the HFC Merger, a contribution whereby Sinclair contributed all of its equity interests of the Target Company to HF Sinclair in exchange for shares of HF Sinclair, resulting in the Target Company becoming a direct wholly-owned subsidiary of HF Sinclair (the “HF Sinclair Transaction” and together with the HFC Merger, the “HFC Transactions”).

Under the terms of the BCA, at the effective time of the HFC Merger, (a) each share of common stock of HFC, par value $0.01 per share, was automatically converted into one share of common stock of HF Sinclair, par value $0.01 per share (“HF Sinclair Common Stock”) and (b) immediately thereafter, Sinclair contributed its equity interests in the Target Company to HF Sinclair in exchange for 60,230,036 shares of HF Sinclair Common Stock with a value of approximately $2.1 billion based on HFC’s fully diluted shares of common stock outstanding and its closing stock price on March 11, 2022. On the HFC Closing Date, Sinclair made a $90.2 million cash payment to HF Sinclair related to estimated working capital adjustments pursuant to the BCA, which reduced the aggregate transaction value. Following the consummation of the HFC Merger, HF Sinclair assumed HFC’s listing on the New York Stock Exchange and New Parent was renamed HF Sinclair.

Additionally, on March 14, 2022 (the “HEP Closing Date”), Holly Energy Partners, L.P. (“HEP” or the “Partnership”), Sinclair, and Sinclair Transportation Company, a wholly-owned subsidiary of Sinclair (“STC”), completed the previously announced transaction whereby HEP acquired all of the outstanding shares of STC in exchange for 21 million newly issued common limited partner units of HEP (“common units”) with a value of approximately $349.0 million based on HEP’s fully diluted common units outstanding and its closing unit price on March 11, 2022, plus cash consideration equal to $321.4 million, inclusive of estimated working capital adjustments pursuant to the contribution agreement dated August 2, 2021 (the “HEP Agreement”) for an aggregate transaction value of $670.4 million (the “HEP Transaction,” and together with the HFC Transactions, the “Sinclair Transactions”). The cash consideration was funded through a draw under HEP’s senior secured revolving credit facility.

The HEP Transaction immediately preceded the HFC Transactions and the transactions were cross-conditioned on each other. For purposes of the unaudited pro forma condensed combined financial information and related footnotes (the “Pro Forma Financial Statements”), the target entities in the HFC Transactions and HEP Transaction, Target Company and STC, respectively, are referred to collectively as “Hippo Holding, LLC and Sinclair Transportation Company and their Subsidiaries” or “H&T.”

The Pro Forma Financial Statements have been prepared in accordance with Article 11 of Regulation S-X, Pro Forma Financial Information, which is herein referred to as Article 11. The Pro Forma Financial Statements present the combination of the financial information and the pro forma effects with respect to the Sinclair Transactions, further details of which are included within the footnotes to the Pro Forma Financial Statements.

The Pro Forma Financial Statements are presented for informational purposes only and are not necessarily indicative of the financial position or results of operations that would have occurred had the events been consummated as of the dates indicated, nor are they indicative of any future results. The information presented in the Pro Forma Financial Statements does not give effect to the potential impact of current financial conditions, or any anticipated revenue enhancements, cost savings or operating synergies that may result from the Sinclair Transactions.

The Sinclair Transactions will be accounted for using the acquisition method of accounting with HFC identified as the accounting acquirer. Under the acquisition method of accounting, HFC will record the assets acquired and liabilities assumed at their respective acquisition date fair values at the effective dates.

The Pro Forma Financial Statements have been prepared from the respective historical consolidated financial statements of HFC and H&T, adjusted to give effect to the Sinclair Transactions. The unaudited pro forma condensed combined balance sheet (the “Pro Forma Balance Sheet”) combines the historical condensed consolidated balance sheets of HFC and H&T as of December 31, 2021, giving effect to the Sinclair Transactions as if they had been consummated on December 31, 2021. The unaudited pro forma condensed combined statement of operations (the “Pro Forma Statement of Operations”) for the year ended December 31, 2021, combines the historical consolidated statements of operations of HFC and H&T, giving effect to the Sinclair Transactions as if they had been consummated on January 1, 2021. The Pro Forma Financial Statements contain certain reclassification adjustments to conform the historical H&T financial statement presentation to HFC’s financial statement presentation.

The Pro Forma Financial Statements are intended to provide information about the continuing impact of the Sinclair Transactions as if they had been consummated as of an earlier date. The transaction accounting adjustments are based on available information and certain assumptions that management believes are factually supportable as of the closing date of the Sinclair Transactions. In the opinion of management, all adjustments necessary to present fairly the Pro Forma Financial Statements have been made.

HFC has incurred and will incur certain non-recurring charges in connection with the Sinclair Transactions, the substantial majority of which consist of transaction costs related to financial advisors, legal advisors, financial advisory and professional accounting services. Any such charge could affect the future results of the post-acquisition company in the period in which such charges are incurred; however, these costs are not expected to be incurred in any period beyond 12 months from the effective date. Accordingly, the Pro Forma Statement of Operations for the year ended December 31, 2021, reflects the effect of these estimated non-recurring charges to the extent such charges are not included in the historical balance sheet of HFC as of December 31, 2021. Further, there may be additional charges related to other integration activities resulting from the Sinclair Transactions, the timing, nature, and amount of which HFC’s management could not identify as of the closing dates of the Sinclair Transactions, and thus, such charges are not reflected in the Pro Forma Financial Statements.

HFC has used currently available information to determine preliminary fair value estimates for the assets acquired and liabilities assumed in the Sinclair Transactions based on reviews of available financial statements, preliminary valuation studies, and other due diligence procedures. The fair value estimates of the H&T assets acquired and liabilities assumed are preliminary as HFC continues to complete the detailed valuation analysis to arrive at the required final estimates, which will be completed as soon as practicable, and will not extend beyond the one-year measurement period provided under Accounting Standards Codification 805, Business Combinations (“ASC 805”).

The final determination of the fair values of the assets and liabilities of H&T will be based on the actual net tangible and intangible assets and liabilities of H&T that existed as of the closing date of the Sinclair Transactions. In addition, the portion of the preliminary purchase consideration paid in HF Sinclair Common Stock and HEP common units has been determined based on the closing prices of HFC common stock and HEP’s common units on March 11, 2022.

As a result of the foregoing, the transaction accounting adjustments are preliminary and subject to change as additional information becomes available and additional analysis is performed. The preliminary pro forma adjustments have been made solely for the purpose of providing the Pro Forma Financial Statements presented herein. The assumptions and estimates used to determine the fair value of the assets acquired and liabilities

assumed are described in the notes accompanying the Pro Forma Financial Statements. Any increases or decreases in the fair values of assets acquired and liabilities assumed upon completion of the final valuations will result in adjustments to the Pro Forma Balance Sheet and if applicable, the Pro Forma Statement of Operations. The final fair value of the assets acquired and liabilities assumed may be materially different than those reflected in the preliminary fair values presented herein.

The Pro Forma Financial Statements should be read in conjunction with:

•

the audited consolidated financial statements contained in HFC’s Annual Report on Form 10-K for the year ended December 31, 2021, which is incorporated by reference into this HF Sinclair Current Report on Form 8-K; and

•

the audited consolidated financial statements contained in H&T’s annual financial statements for the year ended December 31, 2021, which are included as an exhibit to this HF Sinclair Current Report on Form 8-K.

HF SINCLAIR CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

As of December 31, 2021


	Historical						Transaction Accounting Adjustments
	HollyFrontier Corporation			Hippo Holding, LLC and Sinclair Transportation Company and their Subsidiaries			Reclass Adjustments - Note 2			Pro Forma Adjustments - Note 4				HF Sinclair Corporation Pro Forma Combined

	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	234,444		$	470		$	—		$	93,267		(a)	$	328,181

Accounts receivable: Product and transportation		1,130,485			—			201,911			(41,737	)	(b)		1,290,659
Crude oil Resales		111,403			—			35,653			—				147,056
Other		—			—			91,150			79,618		(d)		170,768
Trade and other accounts receivable		—			326,219			(326,219	)		—				—
Related party receivable		—			277,487			—			(277,487	)	(c)		—

		1,241,888			603,706			2,495			(239,606	)			1,608,483
Inventories: Crude oil and refined products		1,879,131			—			388,335			331,565		(d)		2,599,031
Materials, supplies and other		242,997			—			23,809			—				266,806
Inventories		—			412,144			(412,144	)		—				—

		2,122,128			412,144			—			331,565				2,865,837
Income taxes receivable		97,382			—			—			—				97,382
Prepayments and other		66,612			981			—			44		(g)		67,637

Total current assets		3,762,454			1,017,301			2,495			185,270				4,967,520

Properties, plants and equipment, at cost		8,448,207			2,595,942			—			(1,212,830	)	(d)(g)		9,831,319
Less accumulated depreciation		(3,033,353	)		(1,260,726	)		—			1,260,726		(d)		(3,033,353	)

		5,414,854			1,335,216			—			47,896				6,797,966
Operating lease right-of-use assets		396,191			—			—			4,643		(g)		400,834

Other assets: Turnaround costs		397,385			150,857			—			(150,857	)	(d)		397,385
Goodwill		2,293,044			—			—			587,199		(a)(b)(c)(d)(h)(i)(j)(k)(m)(q)		2,880,243
Intangibles and other		652,685			—			15,942			189,080		(d)(g)		857,707
Investment in affiliates		—			194,629			—			(13,596	)	(d)(e)		181,033
Notes receivable and other noncurrent assets		—			15,803			(15,803	)		—				—

		3,343,114			361,289			139			611,826				4,316,368

Total assets	$	12,916,613		$	2,713,806		$	2,634		$	849,635			$	16,482,688

HF SINCLAIR CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET (Continued)

As of December 31, 2021


	Historical					Transaction Accounting Adjustments
	HollyFrontier Corporation			Hippo Holding, LLC and Sinclair Transportation Company and their Subsidiaries		Reclass Adjustments - Note 2			Pro Forma Adjustments - Note 4				HF Sinclair Corporation Pro Forma Combined
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	1,613,484		$	—	$	313,265		$	908		(b)(f)	$	1,927,657
Income taxes payable		25,156			—		117			—				25,273
Operating lease liabilities		110,606			—		—			954		(g)		111,560
Accrued liabilities		316,218			—		116,737			14,387		(b)(g)		447,342
Accounts payable and accrued liabilities		—			434,938		(434,938	)		—				—

Total current liabilities		2,065,464			434,938		(4,819	)		16,249				2,511,832

Long-term debt		3,072,737			—		—			325,000		(a)		3,397,737
Noncurrent operating lease liabilities		308,747			—		—			3,716		(g)		312,463
Deferred income taxes		837,401			—		—			364,476		(q)		1,201,877
Other long-term liabilities		337,799			16,243		7,453			19,767		(g)(h)(i)		381,262
Equity:
HollyFrontier stockholders’ equity:
Common stock		2,560			—		—			602		(j)		3,162
Additional capital		4,220,075			—		—			2,132,955		(e)(j)(k)(q)		6,353,030
Retained earnings		4,413,836			—		—			(26,139	)	(f)(l)		4,387,697
Accumulated other comprehensive income		2,671			—		—			—				2,671
Common stock held in treasury		(2,951,257	)		—		—			—				(2,951,257	)

Total HollyFrontier stockholders’ equity		5,687,885			—		—			2,107,418				7,795,303
Noncontrolling interest		606,580			—		—			275,634		(e)(k)(l)		882,214
Parent’s net investment		—			2,262,625		—			(2,262,625	)	(m)		—

Total equity		6,294,465			2,262,625		—			120,427				8,677,517

Total liabilities and equity	$	12,916,613		$	2,713,806	$	2,634		$	849,635			$	16,482,688

See accompanying “Notes to Unaudited Pro Forma Condensed Combined Financial Statements”

HF SINCLAIR CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

Year Ended December 31, 2021


	Historical					Transaction Accounting Adjustments
	HollyFrontier Corporation			Hippo Holding, LLC and Sinclair Transportation Company and their Subsidiaries		Reclass Adjustments - Note 2			Pro Forma Adjustments - Note 4				HF Sinclair Corporation Pro Forma Combined

	(in thousands, except per share data)
Sales and other revenues	$	18,389,142		$	5,764,564	$	52,885		$	(1,412,174	)	(b)	$	22,794,417
Operating costs and expenses:
Cost of products sold (exclusive of depreciation and amortization):
Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment)		15,567,052			5,368,914		(172,254	)		(1,409,001	)	(b)		19,354,711
Lower of cost or market inventory valuation adjustment		(310,123	)		—		—			—				(310,123	)

		15,256,929			5,368,914		(172,254	)		(1,409,001	)			19,044,588
Operating expenses (exclusive of depreciation and amortization)		1,517,478			—		229,753			—				1,747,231
Selling, general and administrative expenses (exclusive of depreciation and amortization)		362,010			45,431		(4,185	)		22,430		(f)		425,686
Depreciation and amortization		503,539			180,127		(429	)		(60,970	)	(n)		622,267

Total operating costs and expenses		17,639,956			5,594,472		52,885			(1,447,541	)			21,839,772

Income from operations		749,186			170,092		—			35,367				954,645
Other income (expense):
Earnings of equity method investments		12,432			12,950		—			(4,438	)	(o)		20,944
Interest income		4,019			—		138			—				4,157
Interest expense		(125,175	)		—		(72	)		(7,475	)	(p)		(132,722	)
Gain on tariff settlement		51,500			—		—			—				51,500
Loss on foreign currency transactions		(2,938	)		—		—			—				(2,938	)
Gain on sale of assets and other		98,128			3,668		(66	)		—				101,730

		37,966			16,618		—			(11,913	)			42,671

Income before income taxes		787,152			186,710		—			23,454				997,316
Income tax expense (benefit):		123,898			—		—			57,481		(q)		181,379

Net income		663,254			186,710		—			(34,027	)			815,937
Less net income attributable to noncontrolling interest		104,930			—		—			22,459		(l)(o)(q)		127,389

Net income attributable to HollyFrontier stockholders	$	558,324		$	186,710	$	—		$	(56,486)			$	688,548

Earnings per share:
Basic	$	3.39											$	3.06

Diluted	$	3.39											$	3.06

Average number of common shares outstanding:
Basic		162,569								60,230		(j)		222,799
Diluted		162,569								60,230		(j)		222,799

See accompanying “Notes to Unaudited Pro Forma Condensed Combined Financial Statements”

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

NOTE 1 — BASIS OF PRESENTATION

The HFC and H&T historical financial information has been derived from each company’s historical financial statements which are incorporated by reference and included as an exhibit, respectively, to this HF Sinclair Current Report on Form 8-K, respectively. Certain of H&T’s historical amounts have been reclassified to conform to HFC’s financial statement presentation, as discussed further in Note 2. The Pro Forma Financial Statements should be read in conjunction with each company’s historical financial statements and the notes thereto. The Pro Forma Balance Sheet gives effect to the Sinclair Transactions as if they had been completed on December 31, 2021. The Pro Forma Statement of Operations gives effect to the Sinclair Transactions as if they had been completed on January 1, 2021. In the opinion of HFC’s management, all material adjustments have been made that are necessary to present fairly the Pro Forma Financial Statements in accordance with Article 11. HFC management has elected not to present management’s adjustments and has only presented transaction accounting adjustments in the Pro Forma Financial Statements.

The Pro Forma Financial Statements do not purport to be indicative of the financial position or results of operations of the combined company that would have occurred if the Sinclair Transactions had occurred on the dates indicated, nor are they indicative of HFC’s future financial position or results of operations. In addition, future results may differ significantly from those reflected in the Pro Forma Financial Statements.

NOTE 2 — RECLASSIFICATION ADJUSTMENTS

The Pro Forma Financial Statements have been adjusted as follows to reflect reclassifications of H&T’s historical financial statements to conform to HFC’s financial statement presentation.

Pro Forma Balance Sheet as of December 31, 2021

•	Reclassification of $201.9 million, $35.7 million and $91.2 million from Trade and other accounts receivable to Accounts receivable: Product and transportation, Accounts receivable: Crude oil resales and Accounts Receivable: Other, respectively;

•	Reclassification of $388.3 million and $23.8 million from Inventories to Inventories: Crude oil and refined products and Inventories: Materials, supplies and other, respectively;

•	Reclassification of $15.8 million from Notes receivable and other noncurrent assets and $0.1 million from Accounts payable and accrued liabilities to Other assets: Intangibles and other; and

•	Reclassification of $313.3 million, $0.1 million, $116.7 million and $7.4 million from Accounts payable and accrued liabilities to Accounts payable, Income taxes payable, Accrued liabilities and Other long-term liabilities, respectively.

Pro Forma Statement of Operations for the year ended December 31, 2021

•	Reclassification of $52.9 million from Cost of products (exclusive of lower of cost or market inventory valuation adjustment) to Sales and other revenues;

•

Reclassification of $172.2 million from Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment), $4.2 million from Selling, general and administrative expense, and $0.4 million from Depreciation and amortization to Operating expenses (exclusive of depreciation and amortization); and

•	Reclassification of approximately $0.1 million from Gain on sale of assets to Interest Income and Interest expense, respectively.

NOTE 3 — PRELIMINARY ACQUISITION ACCOUNTING

On August 2, 2021, HFC, New Parent, Hippo Merger Sub, Parent Merger Sub, Sinclair, and the Target Company, entered into the BCA (as amended on March 14, 2022). Pursuant to the BCA, HFC acquired the Target Company on March 14, 2022, by effecting the HFC Transactions. Under the terms of the BCA, at the effective time of the HFC Merger, (a) each share of common stock of HFC, par value $0.01 per common share, was automatically converted into one share of HF Sinclair Common Stock and (b) immediately thereafter, Sinclair contributed its equity interests in the Target Company to HF Sinclair in exchange for 60,230,036 shares of HF Sinclair Common Stock, On the HFC Closing Date, Sinclair made a $90.2 million cash payment to HF Sinclair related to estimated working capital adjustments pursuant to the BCA.

Additionally, immediately preceding the HFC Transactions described above, HEP acquired all of the outstanding shares of STC in exchange for 21,000,000 newly issued common units of HEP and cash consideration equal to $325.0 million as part of the HEP Transaction. On the HEP Closing Date, Sinclair made a $3.6 million cash payment to HF Sinclair related to estimated working capital adjustments pursuant to the HEP Agreement, which reduced the cash consideration to $321.4 million. Based on the HFC closing share price of $35.68 per common share and the HEP closing price of $16.62 per common unit as of March 11, 2022, the estimated purchase price for the assets acquired and the liabilities assumed by HFC in the Sinclair Transactions is $2.7 billion.

HFC has determined it is the accounting acquirer in the Sinclair Transactions, which are accounted for under the acquisition method of accounting for business combinations in accordance with ASC 805. The allocation of the preliminary purchase price is based upon HFC management’s estimates of, and assumptions related to, the fair values of assets acquired and liabilities assumed as of December 31, 2021, using currently available information.

Due to the fact that the Pro Forma Financial Statements have been prepared based on these preliminary estimates, the final fair values of assets acquired and liabilities assumed and the resulting effect on HFC’s financial position and results of operations may differ significantly from the pro forma amounts included herein. HFC expects to finalize the fair values of assets acquired and liabilities assumed as soon as practicable after completing the Sinclair Transactions. The preliminary purchase price allocation is subject to change due to several factors, including, but not limited to, changes in the estimated fair value of H&T’s assets acquired and liabilities assumed as of the closing date of the Sinclair Transactions, which could result from HFC’s additional valuation analysis, changes in discount rates and other factors.

The following tables present the preliminary purchase consideration and preliminary purchase price allocation of the assets acquired and the liabilities assumed in the Sinclair Transactions:


Preliminary Purchase Consideration (in thousands except per share and per unit amounts)
Shares of HF Sinclair common stock issued to Sinclair		60,230
Closing price per share of HFC common stock⁽¹⁾	$	35.68

Purchase consideration paid in HF Sinclair common stock		2,149,008
Shares of HEP common units issued to Sinclair		21,000
Closing price per unit of HEP common units⁽²⁾	$	16.62

Purchase consideration paid in units of HEP common units		349,020
Total equity consideration		2,498,028
Cash consideration paid by HEP		325,000
Aggregate of Estimated Adjustment Payments received by HFC and HEP		(93,737	)

Total cash consideration		231,263

Total preliminary purchase consideration	$	2,729,291

(1)	Based on the HFC closing stock price on March 11, 2022.

(2)	Based on the HEP closing unit price on March 11, 2022.


	Preliminary Purchase Price Allocation
	(in thousands)
Assets Acquired
Accounts receivable: Product and transportation	$	201,911
Accounts receivable: Crude oil resales		35,653
Accounts receivable: Other		170,768
Inventories: Crude oil and refined products		719,900
Inventories: Materials, supplies and other		23,809
Prepayments and other		1,025
Properties, plants and equipment		1,383,112
Operating lease right-of-use assets		4,643
Other assets: Intangibles and other		205,022
Investment in affiliates		242,683

Total assets acquired	$	2,988,526
Liabilities Assumed
Accounts payable	$	313,265
Income taxes payable		117
Operating lease liabilities		954
Accrued liabilities		134,232
Noncurrent operating lease liabilities		3,716
Deferred income taxes		333,580
Other long-term liabilities		43,463

Total liabilities assumed	$	829,327

Net assets acquired	$	2,159,199

Goodwill	$	570,092

From August 2, 2021, the last trading date prior to the initial public announcement of the HFC Transactions, to March 11, 2022, the preliminary value of the Corporation interest consideration to be issued increased by approximately $406.0 million, as a result of the increase in the share price of HFC common stock from $28.94 per common share to $35.68 per common share.

From August 2, 2021, the last trading date prior to the initial public announcement of the HEP Transaction, to March 11, 2022, the preliminary value of the Partnership interest consideration to be issued decreased by approximately $73.7 million, as a result of the decrease in the unit price of HEP’s common units from $20.13 per common unit to $16.62 per common unit.

A 25% increase or decrease in the closing price of HFC common stock and a 20% increase or decrease in the closing price of HEP’s common units, as compared to the March 11, 2022, closing prices, would increase or decrease the total transaction consideration by approximately $607.1 million, assuming all other factors are held constant.

A 25% increase or decrease in the closing price of HFC common stock and a 20% increase or decrease in the closing price of HEP’s common units would potentially result in a range of goodwill between zero and $1.2 billion as of the closing date of the Sinclair Transactions based on the preliminary estimates of the fair values of the assets acquired and liabilities assumed.

NOTE 4 — PRO FORMA ADJUSTMENTS

The Pro Forma Financial Statements have been adjusted to reflect adjustments to historical book values of H&T to their preliminary estimated fair values in accordance with the acquisition method of accounting, the estimated closing price paid by HFC for the net parent investment of H&T and the estimated tax impacts of pro forma adjustments. These adjustments include the following:

(a)

Reflects the change in Cash and cash equivalents for the following:

•

Borrowings of $325.0 million on the HEP revolving credit facility as used to fund the $325.0 million cash portion of the preliminary purchase consideration;

•

The receipt of $93.7 million for the aggregate of the Estimated Adjustment Payments, as defined in the BCA and Contribution Agreement, which is also part of the preliminary purchase consideration for the HFC Transactions and the HEP Transaction, respectively; and

•

The elimination of cash of $0.5 million not acquired as part of the Sinclair Transactions.

(b)

Reflects the elimination of historical balances due to and due from HFC and H&T as of December 31, 2021, with a corresponding offset to Other assets: Goodwill, as well as the elimination of Sales and other revenues and Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment) for the year ended December 31, 2021, as follows:

•

Elimination of $41.7 million for historical HFC and H&T amounts recorded within Accounts receivable: Product and Transportation;

•

Elimination of $21.5 million for historical HFC and H&T amounts recorded within Accounts payable;

•

Elimination of $3.1 million for historical H&T amounts recorded within Accrued liabilities; and

•

Elimination of $1.4 billion for historical HFC and H&T amounts recorded within Sales and other revenues and Cost of products sold (exclusive of lower of cost or market inventory valuation adjustment).

(c)

Reflects the elimination of the historical H&T Related party receivable, as this amount was settled by H&T prior to the closing date of the Sinclair Transactions. The historical H&T Related party receivable was $277.5 million as of December 31, 2021.

(d)

Reflects the adjustments to recognize at the completion of the Sinclair Transactions, the preliminary estimated fair value of HFC common stock and HEP common units issued to H&T for total consideration of $2.7 billion allocated to the estimated fair values of the assets acquired and liabilities assumed based on the following adjustments:

•

An increase of $79.6 million to Accounts receivable: Other;

•

An increase of $331.6 million to Inventories: Crude oil and refined products;

•

An increase of $47.9 million to Properties, plants and equipment;

•

A decrease of $150.9 million to Other assets: Turnaround costs;

•

An increase of $189.1 million to Other assets: Intangibles and other; and

•

A decrease of $13.6 million to Investment in affiliates, comprised of an increase of $70.8 million related to the historical equity method investments owned by Hippo Holding LLC and STC, excluding STC’s 25.0% interest in UNEV Pipeline LLC. The carrying value of STC’s 25.0% interest in UNEV Pipeline, LLC was $84.4 million as of December 31, 2021, and was eliminated at the closing date of the HEP Transaction.

(e)

As previously mentioned, as part of HEP’s acquisition of STC, HEP acquired the 25.0% of UNEV Pipeline, LLC owned by one of STC’s subsidiaries, Sinclair Logistics LLC, and as such, UNEV Pipeline, LLC became a wholly owned subsidiary of HEP. Accordingly, a pro forma adjustment has been made to the Pro Forma Balance Sheet to eliminate $61.7 million related to the fair value of the UNEV Pipeline, LLC equity method investment acquired by HEP, with a corresponding reduction to Noncontrolling interests for HEP’s historical carrying amount of the investment of $77.1 million as of December 31, 2021, with the offset reflected within Additional capital for $15.4 million.

(f)

Reflects the accrual of estimated non-recurring costs of $22.4 million related to the Sinclair Transactions including, among others, fees paid for financial advisors, legal services, and professional accounting services. These estimated and to be incurred costs are not reflected in the historical December 31, 2021 consolidated balance sheet of HFC but are reflected in the Pro Forma Balance Sheet as of December 31, 2021, as an increase to Accounts payable: Trade and a decrease to Retained earnings for $22.4 million, with a corresponding increase to Selling, general and administrative expenses (exclusive of depreciation and amortization) on the Pro Forma Statement of Operations for the year ended December 31, 2021.

(g)

Reflects the adjustments for $8.9 million of lease assets and $8.9 million of lease liabilities. The lease assets comprise less than $0.1 million within Prepayments and other, $4.2 million of finance leases within Properties, plants and equipment, at cost, and $4.6 million of operating leases within Operating lease right-of-use assets, and the lease liabilities comprise $1.5 million of short-term finance leases within Accrued liabilities, $2.7 million of long-term finance leases within Other long-term liabilities, $1.0 million operating leases within Operating lease liabilities, and $3.7 million of long-term operating leases within Noncurrent operating lease liabilities, which correspond to the estimated fair value of the leases acquired by HFC from H&T based on HFC having previously adopted ASC 842, Leases, which H&T had not adopted as of December 31, 2021.

(h)

Reflects the adjustment to recognize environmental liabilities for $10.9 million to align H&T’s historical policy with that of HFC as the accounting acquirer.

(i)

Reflects the fair value adjustment to recognize asset retirement obligations for $6.2 million to align H&T’s historical accounting policy with that of HFC as the accounting acquirer.

(j)

Reflects the issuance of 60,230,036 shares of HF Sinclair Common Stock for the following:

•

An increase of $0.6 million to Common stock to reflect the par value of HF Sinclair Common Stock issued as part of the preliminary purchase consideration for the HFC Transactions; and

•

An increase of $2.1 billion to Additional capital to reflect capital in excess of par value of HF Sinclair Common Stock issued as part of the preliminary purchase consideration for the HFC Transactions.

(k)

Reflects the issuance of 21 million common units of HEP for an estimated $349.0 million to STC as part of the preliminary purchase consideration for the HEP Transaction with a corresponding increase to Noncontrolling interest.

(l)

Reflects noncontrolling interest (“NCI”) adjustments related to the following:

•

A decrease of $3.7 million to Retained Earnings with a corresponding increase to Noncontrolling interest and a decrease to Net income attributable to noncontrolling interest to reflect transaction costs accrued for STC;

•

A decrease of $4.0 million to Net income attributable to noncontrolling interest to reflect the allocation of pro forma interest expense related to the HEP bonds;

•

A decrease of $8.5 million to Net income attributable to noncontrolling interest to reflect the allocation of pro forma depreciation expense related to the assets acquired in the HEP Transaction;

•

An increase of $22.5 million to reflect the pro forma adjustments related to HEP historical net income for the year ended December 31, 2021, for the increase in the noncontrolling interest percentage in HEP from 43.4% to 52.8% given the HEP issuance of 21,000,000 common units to Sinclair, assuming the HEP Transaction had occurred as of January 1, 2021; and

•

An increase of $23.5 million to Net income attributable to noncontrolling interest to reflect the portion of STC’s net income attributable to the NCI.

(m)

Reflects the elimination of H&T’s historical Net parent investment balance in accordance with the acquisition method of accounting. H&T’s historical Net parent investment balance was $2.3 billion as of December 31, 2021.

(n)

Reflects the pro forma adjustments to Depreciation and amortization for $61.0 million related to depreciation expense for the properties and equipment acquired based on the preliminary estimated fair value, calculated on a straight-line basis assuming an estimated 12.34 year weighted average useful life of the assets.

(o)

Reflects the pro forma adjustment related to the acquisition by HEP of STC’s 25.0% ownership in UNEV Pipeline, LLC, which is reflected as an elimination from H&T’s historical Equity in income of affiliatesand an elimination from HFC’s historical Net income attributable to noncontrolling interest. As of December 31, 2021, STC’s historical Equity in income of affiliates was $4.4 million. As of December 31, 2021, HFC’s historical Net income attributable to noncontrolling interest was $4.7 million. The difference of $0.3 million is related to historical amortization expense recorded by STC for the year ended December 31, 2021.

(p)

Reflects the pro forma adjustment to Interest expense for an increase of $7.5 million for the year ended December 31, 2021, related to the $325.0 million of borrowings on the HEP revolving credit facility to fund the cash portion of the preliminary purchase price consideration for the HEP Transaction.

(q)

Reflects the pro forma income tax adjustments based upon a statutory federal and blended state tax rate of 24.7% for the year ended December 31, 2021, which include:

•

Income tax expense impact of the Sinclair Transactions accounting adjustments, including $22.4 million of non-deductible transaction costs for tax purposes as of December 31, 2021, which have been treated as permanently non-deductible for purposes of the Pro Forma Financial Statements;

•

Income tax expense related to the historical activity of Sinclair, which historically did not have any tax expense given that Sinclair was an S-Corporation;

•

For deferred tax purposes, HFC records a deferred tax liability on the outside basis difference related to the difference between the book basis and tax basis in HEP. As of December 31, 2021, there is a pro forma adjustment to record an additional $30.9 million deferred tax liability related to the estimated outside basis difference in HEP due to a change in the book basis in HEP as a result of the HEP Transaction; and

•

Additionally for deferred tax purposes, there is a $333.6 million increase in deferred tax liabilities to reflect adjustments to the book basis of the refinery assets acquired and liabilities assumed for which there will not be a step-up in tax basis.