ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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20-0833098
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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2828 N. Harwood, Suite 1300
Dallas, Texas
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75201
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(Address of principal executive offices)
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(Zip code)
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Large accelerated filer
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ý
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Accelerated filer
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¨
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Non-accelerated filer
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¨
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Smaller reporting company
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¨
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Emerging growth company
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¨
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Item 1.
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Consolidated Statement of Equity
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Item 2.
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 6.
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•
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risks and uncertainties with respect to the actual quantities of petroleum products and crude oil shipped on our pipelines and/or terminalled, stored or throughput in our terminals;
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•
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the economic viability of HollyFrontier Corporation, Alon USA, Inc. and our other customers;
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•
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the demand for refined petroleum products in markets we serve;
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•
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our ability to purchase and integrate future acquired operations;
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•
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our ability to complete previously announced or contemplated acquisitions;
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•
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the availability and cost of additional debt and equity financing;
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•
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the possibility of reductions in production or shutdowns at refineries utilizing our pipeline and terminal facilities;
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•
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the effects of current and future government regulations and policies;
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•
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our operational efficiency in carrying out routine operations and capital construction projects;
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•
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the possibility of terrorist attacks and the consequences of any such attacks;
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•
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general economic conditions; and
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•
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other financial, operational and legal risks and uncertainties detailed from time to time in our Securities and Exchange Commission filings.
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Item 1.
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Financial Statements
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March 31, 2017
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December 31, 2016
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(Unaudited)
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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7,007
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$
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3,657
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Accounts receivable:
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||||
Trade
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10,111
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7,846
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Affiliates
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35,634
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42,562
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45,745
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50,408
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Prepaid and other current assets
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3,170
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2,888
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Total current assets
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55,922
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56,953
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Properties and equipment, net
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1,320,981
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1,328,395
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Transportation agreements, net
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65,118
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66,856
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Goodwill
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256,498
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256,498
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Equity method investments
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162,319
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165,609
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Other assets
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9,297
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9,926
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Total assets
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$
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1,870,135
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$
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1,884,237
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LIABILITIES AND EQUITY
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Current liabilities:
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Accounts payable:
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Trade
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$
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11,459
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$
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10,518
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Affiliates
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6,481
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16,424
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17,940
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26,942
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||||
Accrued interest
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4,518
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18,069
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Deferred revenue
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11,807
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11,102
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Accrued property taxes
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5,407
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5,397
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Other current liabilities
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2,779
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3,225
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Total current liabilities
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42,451
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64,735
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Long-term debt
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1,240,565
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1,243,912
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Other long-term liabilities
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16,521
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16,445
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Deferred revenue
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46,881
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47,035
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Class B unit
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41,000
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40,319
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Equity:
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Partners’ equity:
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Common unitholders (63,922,861 and 62,780,503 units issued and outstanding
at March 31, 2017 and December 31, 2016, respectively)
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521,050
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510,975
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General partner interest (2% interest)
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(131,678
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)
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(132,832
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)
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Accumulated other comprehensive income
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154
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91
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Total partners’ equity
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389,526
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378,234
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Noncontrolling interest
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93,191
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93,557
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Total equity
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482,717
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471,791
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Total liabilities and equity
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$
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1,870,135
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$
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1,884,237
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Three Months Ended
March 31, |
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2017
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2016
(1)
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Revenues:
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Affiliates
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$
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89,025
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$
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82,846
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Third parties
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16,609
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19,164
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105,634
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102,010
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Operating costs and expenses:
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Operations (exclusive of depreciation and amortization)
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32,489
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27,855
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Depreciation and amortization
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18,777
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16,551
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General and administrative
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2,634
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3,091
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53,900
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47,497
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Operating income
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51,734
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54,513
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Other income (expense):
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Equity in earnings of equity method investments
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1,840
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2,765
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Interest expense
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(13,539
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)
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(10,535
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)
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Interest income
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102
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112
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Loss on early extinguishment of debt
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(12,225
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)
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—
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Gain (loss) on sale of assets and other
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73
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(8
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)
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(23,749
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)
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(7,666
|
)
|
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Income before income taxes
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27,985
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46,847
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State income tax expense
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(106
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)
|
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(95
|
)
|
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Net income
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27,879
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|
46,752
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|
||
Allocation of net loss attributable to Predecessor
|
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—
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|
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1,150
|
|
||
Allocation of net income attributable to noncontrolling interests
|
|
(2,316
|
)
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(4,927
|
)
|
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Net income attributable to the partners
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25,563
|
|
|
42,975
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General partner interest in net income attributable to the partners
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(17,138
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)
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(12,103
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)
|
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Limited partners’ interest in net income
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$
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8,425
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$
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30,872
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Limited partners’ per unit interest in earnings—basic and diluted
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$
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0.13
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$
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0.52
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Weighted average limited partners’ units outstanding
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63,113
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58,657
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Three Months Ended
March 31, |
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2017
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2016
(1)
|
||||
Net income
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$
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27,879
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$
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46,752
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|
||||
Other comprehensive income:
|
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|
||||
Change in fair value of cash flow hedging instruments
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76
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(683
|
)
|
||
Reclassification adjustment to net income on partial settlement of cash flow hedge
|
|
(13
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)
|
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230
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|
||
Other comprehensive income (loss)
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63
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|
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(453
|
)
|
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Comprehensive income before noncontrolling interest
|
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27,942
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|
|
46,299
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|
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Allocation of net loss attributable to Predecessor
|
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—
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|
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1,150
|
|
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Allocation of comprehensive income to noncontrolling interests
|
|
(2,316
|
)
|
|
(4,927
|
)
|
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Comprehensive income attributable to Holly Energy Partners
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|
$
|
25,626
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|
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$
|
42,522
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Three Months Ended
March 31, |
||||||
|
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2017
|
|
2016
(1)
|
||||
Cash flows from operating activities
|
|
|
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|
||||
Net income
|
|
$
|
27,879
|
|
|
$
|
46,752
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
18,777
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|
|
16,551
|
|
||
Gain on sale of assets
|
|
(58
|
)
|
|
—
|
|
||
Amortization of deferred charges
|
|
770
|
|
|
593
|
|
||
Amortization of restricted and performance units
|
|
398
|
|
|
651
|
|
||
Earnings distributions greater (less) than income from equity investments
|
|
273
|
|
|
(365
|
)
|
||
Loss on early extinguishment of debt
|
|
12,225
|
|
|
—
|
|
||
(Increase) decrease in operating assets:
|
|
|
|
|
||||
Accounts receivable—trade
|
|
375
|
|
|
657
|
|
||
Accounts receivable—affiliates
|
|
7,733
|
|
|
(637
|
)
|
||
Prepaid and other current assets
|
|
(282
|
)
|
|
(128
|
)
|
||
Increase (decrease) in operating liabilities:
|
|
|
|
|
||||
Accounts payable—trade
|
|
(1,122
|
)
|
|
(1,082
|
)
|
||
Accounts payable—affiliates
|
|
(9,943
|
)
|
|
(5,460
|
)
|
||
Accrued interest
|
|
(13,551
|
)
|
|
(4,780
|
)
|
||
Deferred revenue
|
|
551
|
|
|
(4,588
|
)
|
||
Accrued property taxes
|
|
9
|
|
|
343
|
|
||
Other current liabilities
|
|
(328
|
)
|
|
(843
|
)
|
||
Other, net
|
|
(106
|
)
|
|
(295
|
)
|
||
Net cash provided by operating activities
|
|
43,600
|
|
|
47,369
|
|
||
|
|
|
|
|
||||
Cash flows from investing activities
|
|
|
|
|
||||
Additions to properties and equipment
|
|
(8,265
|
)
|
|
(17,873
|
)
|
||
Purchase of Woods Cross refinery processing units
|
|
—
|
|
|
(24,311
|
)
|
||
Proceeds from sale of assets
|
|
424
|
|
|
12
|
|
||
Distributions in excess of equity in earnings of equity investments
|
|
3,016
|
|
|
99
|
|
||
Net cash used for investing activities
|
|
(4,825
|
)
|
|
(42,073
|
)
|
||
|
|
|
|
|
||||
Cash flows from financing activities
|
|
|
|
|
||||
Borrowings under credit agreement
|
|
380,000
|
|
|
522,000
|
|
||
Repayments of credit agreement borrowings
|
|
(86,000
|
)
|
|
(469,000
|
)
|
||
Redemption of 6.5 % Senior Notes
|
|
(309,750
|
)
|
|
—
|
|
||
Proceeds from issuance of common units
|
|
37,563
|
|
|
—
|
|
||
Distributions to HEP unitholders
|
|
(54,805
|
)
|
|
(44,960
|
)
|
||
Distributions to noncontrolling interest
|
|
(2,000
|
)
|
|
(1,250
|
)
|
||
Distribution to HFC for Tulsa tank acquisition
|
|
—
|
|
|
(39,500
|
)
|
||
Distribution to HFC for El Dorado tanks
|
|
(103
|
)
|
|
—
|
|
||
Contributions from HFC for acquisitions
|
|
—
|
|
|
25,343
|
|
||
Purchase of units for incentive grants
|
|
—
|
|
|
(784
|
)
|
||
Deferred financing costs
|
|
—
|
|
|
(2,964
|
)
|
||
Other
|
|
(330
|
)
|
|
(160
|
)
|
||
Net cash used by financing activities
|
|
(35,425
|
)
|
|
(11,275
|
)
|
||
|
|
|
|
|
||||
Cash and cash equivalents
|
|
|
|
|
||||
Increase (decrease) for the period
|
|
3,350
|
|
|
(5,979
|
)
|
||
Beginning of period
|
|
3,657
|
|
|
15,013
|
|
||
End of period
|
|
$
|
7,007
|
|
|
$
|
9,034
|
|
|
|
Common
Units
|
|
General
Partner
Interest
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Noncontrolling Interest
|
|
Total Equity
|
||||||||||
|
|
|
||||||||||||||||||
Balance December 31, 2016
|
|
$
|
510,975
|
|
|
$
|
(132,832
|
)
|
|
$
|
91
|
|
|
$
|
93,557
|
|
|
$
|
471,791
|
|
Issuance of common units
|
|
39,371
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39,371
|
|
|||||
Contribution from HFC
|
|
—
|
|
|
805
|
|
|
—
|
|
|
—
|
|
|
805
|
|
|||||
Distribution to HFC for acquisition
|
|
—
|
|
|
(103
|
)
|
|
—
|
|
|
—
|
|
|
(103
|
)
|
|||||
Distributions to HEP unitholders
|
|
(38,134
|
)
|
|
(16,672
|
)
|
|
—
|
|
|
—
|
|
|
(54,806
|
)
|
|||||
Distributions to noncontrolling interest
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,000
|
)
|
|
(2,000
|
)
|
|||||
Amortization of restricted and performance units
|
|
398
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
398
|
|
|||||
Class B unit accretion
|
|
(667
|
)
|
|
(14
|
)
|
|
—
|
|
|
—
|
|
|
(681
|
)
|
|||||
Net income
|
|
9,107
|
|
|
17,138
|
|
|
—
|
|
|
1,634
|
|
|
27,879
|
|
|||||
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
63
|
|
|
—
|
|
|
63
|
|
|||||
Balance March 31, 2017
|
|
$
|
521,050
|
|
|
$
|
(131,678
|
)
|
|
$
|
154
|
|
|
$
|
93,191
|
|
|
$
|
482,717
|
|
Note 1:
|
Description of Business and Presentation of Financial Statements
|
|
|
Three Months Ended March 31, 2016
|
||||||||||||||
|
|
Holly Energy Partners, L.P.
(Previously reported)
|
|
Tulsa Tanks
|
|
Woods Cross Operating
|
|
Holly Energy Partners, L.P.
(Currently reported)
|
||||||||
|
|
(In Thousands)
|
||||||||||||||
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
||||||||
Operations (exclusive of depreciation and
amortization)
|
|
$
|
26,922
|
|
|
$
|
—
|
|
|
$
|
933
|
|
|
$
|
27,855
|
|
Allocation of net loss attributable to predecessor
|
|
—
|
|
|
217
|
|
|
933
|
|
|
1,150
|
|
|
|
Three Months Ended March 31, 2016
|
||||||||||
|
|
Holly Energy Partners, L.P.
(Previously reported)
|
|
Woods Cross Operating
|
|
Holly Energy Partners, L.P.
(Currently reported)
|
||||||
Cash flows from operating activities
|
|
(In Thousands)
|
||||||||||
Net income
|
|
$
|
47,685
|
|
|
$
|
(933
|
)
|
|
$
|
46,752
|
|
Net cash provided by operating activities
|
|
$
|
48,302
|
|
|
$
|
(933
|
)
|
|
$
|
47,369
|
|
|
|
|
|
|
|
|
||||||
Cash flows from investing activities
|
|
|
|
|
|
|
||||||
Additions to properties and equipment
|
|
$
|
(17,873
|
)
|
|
$
|
—
|
|
|
$
|
(17,873
|
)
|
Acquisition of tanks and operating units
|
|
—
|
|
|
(24,311
|
)
|
|
(24,311
|
)
|
|||
Net cash used for investing activities
|
|
$
|
(17,762
|
)
|
|
$
|
(24,311
|
)
|
|
$
|
(42,073
|
)
|
|
|
|
|
|
|
|
||||||
Cash flows from financing activities
|
|
|
|
|
|
|
||||||
Contributions from HFC for acquisitions
|
|
$
|
99
|
|
|
$
|
25,244
|
|
|
$
|
25,343
|
|
Net cash provided (used) by financing activities
|
|
$
|
(36,519
|
)
|
|
$
|
25,244
|
|
|
$
|
(11,275
|
)
|
Note 2:
|
Financial Instruments
|
•
|
(Level 1) Quoted prices in active markets for identical assets or liabilities.
|
•
|
(Level 2) Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, similar assets and liabilities in markets that are not active or can be corroborated by observable market data.
|
•
|
(Level 3) Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes valuation techniques that involve significant unobservable inputs.
|
|
|
|
|
March 31, 2017
|
|
December 31, 2016
|
||||||||||||
Financial Instrument
|
|
Fair Value Input Level
|
|
Carrying
Value
|
|
Fair Value
|
|
Carrying
Value
|
|
Fair Value
|
||||||||
|
|
|
|
(In thousands)
|
||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||
Interest rate swaps
|
|
Level 2
|
|
$
|
154
|
|
|
$
|
154
|
|
|
$
|
91
|
|
|
$
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||
6.5% Senior notes
|
|
Level 2
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
297,519
|
|
|
$
|
308,250
|
|
6% Senior notes
|
|
Level 2
|
|
393,565
|
|
|
422,288
|
|
|
393,393
|
|
|
415,500
|
|
||||
|
|
|
|
$
|
393,565
|
|
|
$
|
422,288
|
|
|
$
|
690,912
|
|
|
$
|
723,750
|
|
Note 3:
|
Properties and Equipment
|
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
|
|
(In thousands)
|
||||||
Pipelines, terminals and tankage
|
|
$
|
1,247,967
|
|
|
$
|
1,246,746
|
|
Refinery assets
|
|
347,075
|
|
|
346,058
|
|
||
Land and right of way
|
|
65,331
|
|
|
65,331
|
|
||
Construction in progress
|
|
35,148
|
|
|
28,753
|
|
||
Other
|
|
27,662
|
|
|
27,133
|
|
||
|
|
1,723,183
|
|
|
1,714,021
|
|
||
Less accumulated depreciation
|
|
402,202
|
|
|
385,626
|
|
||
|
|
$
|
1,320,981
|
|
|
$
|
1,328,395
|
|
Note 4:
|
Transportation Agreements
|
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
|
|
(In thousands)
|
||||||
Alon transportation agreement
|
|
$
|
59,933
|
|
|
$
|
59,933
|
|
HFC transportation agreement
|
|
74,231
|
|
|
74,231
|
|
||
Other
|
|
50
|
|
|
50
|
|
||
|
|
134,214
|
|
|
134,214
|
|
||
Less accumulated amortization
|
|
69,096
|
|
|
67,358
|
|
||
|
|
$
|
65,118
|
|
|
$
|
66,856
|
|
Note 5:
|
Employees, Retirement and Incentive Plans
|
Restricted Units
|
|
Units
|
|
Weighted Average Grant-Date Fair Value
|
|||
Outstanding at January 1, 2017 (nonvested)
|
|
123,988
|
|
|
$
|
32.96
|
|
Granted
|
|
20,348
|
|
|
36.01
|
|
|
Forfeited
|
|
(17,653
|
)
|
|
29.75
|
|
|
Outstanding at March 31, 2017 (nonvested)
|
|
126,683
|
|
|
$
|
33.90
|
|
Performance Units
|
|
Units
|
|
Outstanding at January 1, 2017 (nonvested)
|
|
49,520
|
|
Vesting and transfer of common units to recipients
|
|
(2,262
|
)
|
Forfeited
|
|
(21,228
|
)
|
Outstanding at March 31, 2017 (nonvested)
|
|
26,030
|
|
Note 6:
|
Debt
|
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
|
|
(In thousands)
|
||||||
Credit Agreement
|
|
|
|
|
||||
Amount outstanding
|
|
$
|
847,000
|
|
|
$
|
553,000
|
|
|
|
|
|
|
||||
6% Senior Notes
|
|
|
|
|
||||
Principal
|
|
400,000
|
|
|
400,000
|
|
||
Unamortized debt issuance costs
|
|
(6,435
|
)
|
|
(6,607
|
)
|
||
|
|
393,565
|
|
|
393,393
|
|
||
6.5% Senior Notes
|
|
|
|
|
||||
Principal
|
|
—
|
|
|
300,000
|
|
||
Unamortized discount and debt issuance costs
|
|
—
|
|
|
(2,481
|
)
|
||
|
|
—
|
|
|
297,519
|
|
||
|
|
|
|
|
||||
Total long-term debt
|
|
$
|
1,240,565
|
|
|
$
|
1,243,912
|
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2017
|
|
2016
|
||||
|
|
(In thousands)
|
||||||
Interest on outstanding debt:
|
|
|
|
|
||||
Credit Agreement, net of interest on interest rate swaps
|
|
$
|
6,449
|
|
|
$
|
5,006
|
|
6.5% Senior Notes
|
|
162
|
|
|
4,875
|
|
||
6% Senior Notes
|
|
6,000
|
|
|
—
|
|
||
Amortization of discount and deferred debt issuance costs
|
|
770
|
|
|
593
|
|
||
Commitment fees and other
|
|
354
|
|
|
201
|
|
||
Total interest incurred
|
|
13,735
|
|
|
10,675
|
|
||
Less capitalized interest
|
|
196
|
|
|
140
|
|
||
Net interest expense
|
|
$
|
13,539
|
|
|
$
|
10,535
|
|
Cash paid for interest
|
|
$
|
26,517
|
|
|
$
|
14,841
|
|
Note 7:
|
Significant Customers
|
Note 8:
|
Related Party Transactions
|
•
|
Revenues received from HFC were
$89.0 million
and
$82.8 million
for the three months ended
March 31, 2017
and
2016
, respectively.
|
•
|
HFC charged us general and administrative services under the Omnibus Agreement of
$0.6 million
for each of the three months ended
March 31, 2017
and
2016
.
|
•
|
We reimbursed HFC for costs of employees supporting our operations of
$11.4 million
and
$9.8 million
for the three months ended
March 31, 2017
and
2016
, respectively.
|
•
|
HFC reimbursed us
$1.3 million
and
$1.8 million
for the three months ended
March 31, 2017
and
2016
, respectively, for expense and capital projects.
|
•
|
We distributed
$30.3 million
and
$24.5 million
for the three months ended
March 31, 2017
and
2016
, respectively, to HFC as regular distributions on its common units and general partner interest, including general partner incentive distributions.
|
•
|
Accounts receivable from HFC were
$35.6 million
and
$42.6 million
at
March 31, 2017
, and
December 31, 2016
, respectively.
|
•
|
Accounts payable to HFC were
$6.5 million
and
$16.4 million
at
March 31, 2017
, and
December 31, 2016
, respectively.
|
•
|
Revenues for the
three
months ended
March 31, 2017
and
2016
, include
$2.1 million
and
$5.2 million
, respectively, of shortfall payments billed to HFC in 2016 and 2015, respectively. Deferred revenue in the consolidated balance sheets at
March 31, 2017
and
December 31, 2016
, includes
$5.8 million
and
$5.6 million
, respectively, relating to certain shortfall billings. It is possible that HFC may not exceed its minimum obligations to receive credit for any of the
$5.8 million
deferred at
March 31, 2017
.
|
Note 9:
|
Partners’ Equity
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2017
|
|
2016
|
||||
|
|
(In thousands)
|
||||||
General partner interest in net income
|
|
$
|
511
|
|
|
$
|
630
|
|
General partner incentive distribution
|
|
16,627
|
|
|
11,473
|
|
||
Net loss attributable to Predecessor
|
|
—
|
|
|
(1,150
|
)
|
||
Total general partner interest in net income
|
|
$
|
17,138
|
|
|
$
|
10,953
|
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2017
|
|
2016
|
||||
|
|
(In thousands, except per unit data)
|
||||||
General partner interest in distribution
|
|
$
|
1,148
|
|
|
$
|
948
|
|
General partner incentive distribution
|
|
16,627
|
|
|
11,473
|
|
||
Total general partner distribution
|
|
17,775
|
|
|
12,421
|
|
||
Limited partner distribution
|
|
39,632
|
|
|
33,728
|
|
||
Total regular quarterly cash distribution
|
|
$
|
57,407
|
|
|
$
|
46,149
|
|
Cash distribution per unit applicable to limited partners
|
|
$
|
0.6200
|
|
|
$
|
0.5750
|
|
Note 10:
|
Net Income Per Limited Partner Unit
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2017
|
|
2016
|
||||
|
|
(In thousands)
|
||||||
Net income attributable to the partners
|
|
$
|
25,563
|
|
|
$
|
42,975
|
|
Less: General partner’s distribution declared (including IDRs)
|
|
(17,775
|
)
|
|
(12,421
|
)
|
||
Limited partner’s distribution declared on common units
|
|
(39,632
|
)
|
|
(33,728
|
)
|
||
Distributions in excess of net income attributable to the partners
|
|
$
|
(31,844
|
)
|
|
$
|
(3,174
|
)
|
|
|
General Partner (including IDRs)
|
|
Limited Partners’ Common Units
|
|
Total
|
||||||
|
|
(In thousands, except per unit data)
|
||||||||||
Three Months Ended March 31, 2017
|
|
|
|
|
|
|
||||||
Net income attributable to the partners:
|
|
|
|
|
|
|
||||||
Distributions declared
|
|
$
|
17,775
|
|
|
$
|
39,632
|
|
|
$
|
57,407
|
|
Distributions in excess of net income attributable to the partners
|
|
(637
|
)
|
|
(31,207
|
)
|
|
(31,844
|
)
|
|||
Net income attributable to the partners
|
|
$
|
17,138
|
|
|
$
|
8,425
|
|
|
$
|
25,563
|
|
Weighted average limited partners' units outstanding
|
|
|
|
63,113
|
|
|
|
|||||
Limited partners' per unit interest in earnings - basic and diluted
|
|
|
|
$
|
0.13
|
|
|
|
||||
|
|
|
|
|
|
|
||||||
Three Months Ended March 31, 2016
|
|
|
|
|
|
|
||||||
Net income attributable to the partners:
|
|
|
|
|
|
|
||||||
Distributions declared
|
|
$
|
12,421
|
|
|
$
|
33,728
|
|
|
$
|
46,149
|
|
Distributions in excess of net income attributable to the partners
|
|
(63
|
)
|
|
(3,111
|
)
|
|
(3,174
|
)
|
|||
Net income attributable to the partners
|
|
$
|
12,358
|
|
|
$
|
30,617
|
|
|
$
|
42,975
|
|
Weighted average limited partners' units outstanding
|
|
|
|
58,657
|
|
|
|
|||||
Limited partners' per unit interest in earnings - basic and diluted
|
|
|
|
$
|
0.52
|
|
|
|
Note 11:
|
Environmental
|
Note 12:
|
Contingencies
|
Note 13:
|
Segments
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2017
|
|
2016
|
||||
|
|
|
||||||
Revenues:
|
|
|
|
|
||||
Pipelines and terminals - affiliate
|
|
$
|
69,645
|
|
|
$
|
78,339
|
|
Pipelines and terminals - third-party
|
|
16,609
|
|
|
19,164
|
|
||
Refinery processing units - affiliate
|
|
19,380
|
|
|
4,507
|
|
||
Total segment revenues
|
|
$
|
105,634
|
|
|
$
|
102,010
|
|
|
|
|
|
|
||||
Segment operating income:
|
|
|
|
|
||||
Pipelines and terminals
|
|
$
|
46,485
|
|
|
$
|
57,248
|
|
Refinery processing units
|
|
7,883
|
|
|
356
|
|
||
Total segment operating income
|
|
54,368
|
|
|
57,604
|
|
||
Unallocated general and administrative expenses
|
|
(2,634
|
)
|
|
(3,091
|
)
|
||
Interest and financing costs, net
|
|
(25,662
|
)
|
|
(10,423
|
)
|
||
Equity in earnings of unconsolidated affiliates
|
|
1,840
|
|
|
2,765
|
|
||
Gain (loss) on sale of assets and other
|
|
73
|
|
|
(8
|
)
|
||
Income before income taxes
|
|
$
|
27,985
|
|
|
$
|
46,847
|
|
|
|
|
|
|
||||
Capital Expenditures:
|
|
|
|
|
||||
Pipelines and terminals
|
|
$
|
8,129
|
|
|
$
|
17,873
|
|
Refinery processing units
|
|
136
|
|
|
24,311
|
|
||
Total capital expenditures
|
|
$
|
8,265
|
|
|
$
|
42,184
|
|
|
|
March 31, 2017
|
|
December 31, 2016
|
||||
|
|
(in thousands)
|
||||||
Identifiable assets:
|
|
|
|
|
||||
Pipelines and terminals
|
|
$
|
1,356,168
|
|
|
$
|
1,369,756
|
|
Refinery processing units
|
|
341,363
|
|
|
342,506
|
|
||
Other
|
|
172,604
|
|
|
171,975
|
|
||
Total identifiable assets
|
|
$
|
1,870,135
|
|
|
$
|
1,884,237
|
|
Note 14:
|
Supplemental Guarantor/Non-Guarantor Financial Information
|
March 31, 2017
|
|
Parent
|
|
Guarantor
Restricted Subsidiaries
|
|
Non-Guarantor Non-Restricted Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Current assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
|
$
|
2
|
|
|
$
|
1,278
|
|
|
$
|
5,727
|
|
|
$
|
—
|
|
|
$
|
7,007
|
|
Accounts receivable
|
|
—
|
|
|
42,055
|
|
|
4,063
|
|
|
(373
|
)
|
|
45,745
|
|
|||||
Prepaid and other current assets
|
|
131
|
|
|
2,688
|
|
|
351
|
|
|
—
|
|
|
3,170
|
|
|||||
Total current assets
|
|
133
|
|
|
46,021
|
|
|
10,141
|
|
|
(373
|
)
|
|
55,922
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Properties and equipment, net
|
|
—
|
|
|
952,758
|
|
|
368,223
|
|
|
—
|
|
|
1,320,981
|
|
|||||
Investment in subsidiaries
|
|
786,512
|
|
|
279,572
|
|
|
—
|
|
|
(1,066,084
|
)
|
|
—
|
|
|||||
Transportation agreements, net
|
|
—
|
|
|
65,118
|
|
|
—
|
|
|
—
|
|
|
65,118
|
|
|||||
Goodwill
|
|
—
|
|
|
256,498
|
|
|
—
|
|
|
—
|
|
|
256,498
|
|
|||||
Equity method investments
|
|
—
|
|
|
162,319
|
|
|
—
|
|
|
—
|
|
|
162,319
|
|
|||||
Other assets
|
|
725
|
|
|
8,572
|
|
|
—
|
|
|
—
|
|
|
9,297
|
|
|||||
Total assets
|
|
$
|
787,370
|
|
|
$
|
1,770,858
|
|
|
$
|
378,364
|
|
|
$
|
(1,066,457
|
)
|
|
$
|
1,870,135
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Accounts payable
|
|
$
|
—
|
|
|
$
|
14,849
|
|
|
$
|
3,464
|
|
|
$
|
(373
|
)
|
|
$
|
17,940
|
|
Accrued interest
|
|
4,000
|
|
|
518
|
|
|
—
|
|
|
—
|
|
|
4,518
|
|
|||||
Deferred revenue
|
|
—
|
|
|
11,732
|
|
|
75
|
|
|
—
|
|
|
11,807
|
|
|||||
Accrued property taxes
|
|
—
|
|
|
3,538
|
|
|
1,869
|
|
|
—
|
|
|
5,407
|
|
|||||
Other current liabilities
|
|
53
|
|
|
2,721
|
|
|
5
|
|
|
—
|
|
|
2,779
|
|
|||||
Total current liabilities
|
|
4,053
|
|
|
33,358
|
|
|
5,413
|
|
|
(373
|
)
|
|
42,451
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Long-term debt
|
|
393,505
|
|
|
847,060
|
|
|
—
|
|
|
—
|
|
|
1,240,565
|
|
|||||
Other long-term liabilities
|
|
286
|
|
|
16,047
|
|
|
188
|
|
|
—
|
|
|
16,521
|
|
|||||
Deferred revenue
|
|
—
|
|
|
46,881
|
|
|
—
|
|
|
—
|
|
|
46,881
|
|
|||||
Class B unit
|
|
—
|
|
|
41,000
|
|
|
—
|
|
|
—
|
|
|
41,000
|
|
|||||
Equity - partners
|
|
389,526
|
|
|
786,512
|
|
|
279,572
|
|
|
(1,066,084
|
)
|
|
389,526
|
|
|||||
Equity - noncontrolling interest
|
|
—
|
|
|
—
|
|
|
93,191
|
|
|
—
|
|
|
93,191
|
|
|||||
Total liabilities and equity
|
|
$
|
787,370
|
|
|
$
|
1,770,858
|
|
|
$
|
378,364
|
|
|
$
|
(1,066,457
|
)
|
|
$
|
1,870,135
|
|
December 31, 2016
|
|
Parent
|
|
Guarantor
Restricted Subsidiaries
|
|
Non-Guarantor Non-Restricted Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Current assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
|
$
|
2
|
|
|
$
|
301
|
|
|
$
|
3,354
|
|
|
$
|
—
|
|
|
$
|
3,657
|
|
Accounts receivable
|
|
—
|
|
|
45,056
|
|
|
5,554
|
|
|
(202
|
)
|
|
50,408
|
|
|||||
Prepaid and other current assets
|
|
11
|
|
|
2,633
|
|
|
244
|
|
|
—
|
|
|
2,888
|
|
|||||
Total current assets
|
|
13
|
|
|
47,990
|
|
|
9,152
|
|
|
(202
|
)
|
|
56,953
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Properties and equipment, net
|
|
—
|
|
|
957,045
|
|
|
371,350
|
|
|
—
|
|
|
1,328,395
|
|
|||||
Investment in subsidiaries
|
|
1,086,008
|
|
|
280,671
|
|
|
—
|
|
|
(1,366,679
|
)
|
|
—
|
|
|||||
Transportation agreements, net
|
|
—
|
|
|
66,856
|
|
|
—
|
|
|
—
|
|
|
66,856
|
|
|||||
Goodwill
|
|
—
|
|
|
256,498
|
|
|
—
|
|
|
—
|
|
|
256,498
|
|
|||||
Equity method investments
|
|
—
|
|
|
165,609
|
|
|
—
|
|
|
—
|
|
|
165,609
|
|
|||||
Other assets
|
|
725
|
|
|
9,201
|
|
|
—
|
|
|
—
|
|
|
9,926
|
|
|||||
Total assets
|
|
$
|
1,086,746
|
|
|
$
|
1,783,870
|
|
|
$
|
380,502
|
|
|
$
|
(1,366,881
|
)
|
|
$
|
1,884,237
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Accounts payable
|
|
$
|
—
|
|
|
$
|
24,245
|
|
|
$
|
2,899
|
|
|
$
|
(202
|
)
|
|
$
|
26,942
|
|
Accrued interest
|
|
17,300
|
|
|
769
|
|
|
—
|
|
|
—
|
|
|
18,069
|
|
|||||
Deferred revenue
|
|
—
|
|
|
8,797
|
|
|
2,305
|
|
|
—
|
|
|
11,102
|
|
|||||
Accrued property taxes
|
|
—
|
|
|
4,514
|
|
|
883
|
|
|
—
|
|
|
5,397
|
|
|||||
Other current liabilities
|
|
14
|
|
|
3,208
|
|
|
3
|
|
|
—
|
|
|
3,225
|
|
|||||
Total current liabilities
|
|
17,314
|
|
|
41,533
|
|
|
6,090
|
|
|
(202
|
)
|
|
64,735
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Long-term debt
|
|
690,912
|
|
|
553,000
|
|
|
—
|
|
|
—
|
|
|
1,243,912
|
|
|||||
Other long-term liabilities
|
|
286
|
|
|
15,975
|
|
|
184
|
|
|
—
|
|
|
16,445
|
|
|||||
Deferred revenue
|
|
—
|
|
|
47,035
|
|
|
—
|
|
|
—
|
|
|
47,035
|
|
|||||
Class B unit
|
|
—
|
|
|
40,319
|
|
|
—
|
|
|
—
|
|
|
40,319
|
|
|||||
Equity - partners
|
|
378,234
|
|
|
1,086,008
|
|
|
280,671
|
|
|
(1,366,679
|
)
|
|
378,234
|
|
|||||
Equity - noncontrolling interest
|
|
—
|
|
|
—
|
|
|
93,557
|
|
|
—
|
|
|
93,557
|
|
|||||
Total liabilities and equity
|
|
$
|
1,086,746
|
|
|
$
|
1,783,870
|
|
|
$
|
380,502
|
|
|
$
|
(1,366,881
|
)
|
|
$
|
1,884,237
|
|
Three Months Ended March 31, 2017
|
|
Parent
|
|
Guarantor Restricted
Subsidiaries
|
|
Non-Guarantor Non-restricted Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Affiliates
|
|
$
|
—
|
|
|
$
|
80,776
|
|
|
$
|
8,249
|
|
|
$
|
—
|
|
|
$
|
89,025
|
|
Third parties
|
|
—
|
|
|
11,003
|
|
|
5,606
|
|
|
—
|
|
|
16,609
|
|
|||||
|
|
—
|
|
|
91,779
|
|
|
13,855
|
|
|
—
|
|
|
105,634
|
|
|||||
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operations (exclusive of depreciation and amortization)
|
|
—
|
|
|
29,092
|
|
|
3,397
|
|
|
—
|
|
|
32,489
|
|
|||||
Depreciation and amortization
|
|
|
|
|
14,853
|
|
|
3,924
|
|
|
—
|
|
|
18,777
|
|
|||||
General and administrative
|
|
1,155
|
|
|
1,479
|
|
|
—
|
|
|
—
|
|
|
2,634
|
|
|||||
|
|
1,155
|
|
|
45,424
|
|
|
7,321
|
|
|
—
|
|
|
53,900
|
|
|||||
Operating income (loss)
|
|
(1,155
|
)
|
|
46,355
|
|
|
6,534
|
|
|
—
|
|
|
51,734
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Equity in earnings of subsidiaries
|
|
45,283
|
|
|
4,901
|
|
|
—
|
|
|
(50,184
|
)
|
|
—
|
|
|||||
Equity in earnings of equity method investments
|
|
—
|
|
|
1,840
|
|
|
—
|
|
|
—
|
|
|
1,840
|
|
|||||
Interest expense
|
|
(6,340
|
)
|
|
(7,199
|
)
|
|
—
|
|
|
—
|
|
|
(13,539
|
)
|
|||||
Interest income
|
|
—
|
|
|
102
|
|
|
—
|
|
|
—
|
|
|
102
|
|
|||||
Loss on early extinguishment of debt
|
|
(12,225
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,225
|
)
|
|||||
Gain on sale of assets and other
|
|
—
|
|
|
72
|
|
|
1
|
|
|
—
|
|
|
73
|
|
|||||
|
|
26,718
|
|
|
(284
|
)
|
|
1
|
|
|
(50,184
|
)
|
|
(23,749
|
)
|
|||||
Income (loss) before income taxes
|
|
25,563
|
|
|
46,071
|
|
|
6,535
|
|
|
(50,184
|
)
|
|
27,985
|
|
|||||
State income tax expense
|
|
—
|
|
|
(106
|
)
|
|
—
|
|
|
—
|
|
|
(106
|
)
|
|||||
Net income
|
|
25,563
|
|
|
45,965
|
|
|
6,535
|
|
|
(50,184
|
)
|
|
27,879
|
|
|||||
Allocation of net income attributable to noncontrolling interests
|
|
—
|
|
|
(682
|
)
|
|
(1,634
|
)
|
|
—
|
|
|
(2,316
|
)
|
|||||
Net income attributable to Holly Energy Partners
|
|
25,563
|
|
|
45,283
|
|
|
4,901
|
|
|
(50,184
|
)
|
|
25,563
|
|
|||||
Other comprehensive income
|
|
63
|
|
|
63
|
|
|
—
|
|
|
(63
|
)
|
|
63
|
|
|||||
Comprehensive income attributable to Holly Energy Partners
|
|
$
|
25,626
|
|
|
$
|
45,346
|
|
|
$
|
4,901
|
|
|
$
|
(50,247
|
)
|
|
$
|
25,626
|
|
Three Months Ended March 31, 2016
|
|
Parent
|
|
Guarantor
Restricted Subsidiaries
|
|
Non-Guarantor Non-Restricted Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Affiliates
|
|
$
|
—
|
|
|
$
|
72,252
|
|
|
$
|
10,594
|
|
|
$
|
—
|
|
|
$
|
82,846
|
|
Third parties
|
|
—
|
|
|
10,732
|
|
|
8,432
|
|
|
—
|
|
|
19,164
|
|
|||||
|
|
—
|
|
|
82,984
|
|
|
19,026
|
|
|
—
|
|
|
102,010
|
|
|||||
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operations (exclusive of depreciation and amortization)
|
|
—
|
|
|
24,824
|
|
|
3,031
|
|
|
—
|
|
|
27,855
|
|
|||||
Depreciation and amortization
|
|
—
|
|
|
12,793
|
|
|
3,758
|
|
|
—
|
|
|
16,551
|
|
|||||
General and administrative
|
|
1,165
|
|
|
1,926
|
|
|
—
|
|
|
—
|
|
|
3,091
|
|
|||||
|
|
1,165
|
|
|
39,543
|
|
|
6,789
|
|
|
—
|
|
|
47,497
|
|
|||||
Operating income (loss)
|
|
(1,165
|
)
|
|
43,441
|
|
|
12,237
|
|
|
—
|
|
|
54,513
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Equity in earnings of subsidiaries
|
|
48,990
|
|
|
9,184
|
|
|
—
|
|
|
(58,174
|
)
|
|
—
|
|
|||||
Equity in earnings of equity method investments
|
|
—
|
|
|
2,765
|
|
|
—
|
|
|
—
|
|
|
2,765
|
|
|||||
Interest expense
|
|
(5,067
|
)
|
|
(5,468
|
)
|
|
—
|
|
|
—
|
|
|
(10,535
|
)
|
|||||
Interest income
|
|
—
|
|
|
105
|
|
|
7
|
|
|
—
|
|
|
112
|
|
|||||
Gain (loss) on sale of assets and other
|
|
—
|
|
|
(9
|
)
|
|
1
|
|
|
—
|
|
|
(8
|
)
|
|||||
|
|
43,923
|
|
|
6,577
|
|
|
8
|
|
|
(58,174
|
)
|
|
(7,666
|
)
|
|||||
Income before income taxes
|
|
42,758
|
|
|
50,018
|
|
|
12,245
|
|
|
(58,174
|
)
|
|
46,847
|
|
|||||
State income tax expense
|
|
—
|
|
|
(95
|
)
|
|
—
|
|
|
—
|
|
|
(95
|
)
|
|||||
Net income
|
|
42,758
|
|
|
49,923
|
|
|
12,245
|
|
|
(58,174
|
)
|
|
46,752
|
|
|||||
Allocation of net loss to Predecessor
|
|
—
|
|
|
1,150
|
|
|
—
|
|
|
—
|
|
|
1,150
|
|
|||||
Allocation of net income attributable to noncontrolling interests
|
|
—
|
|
|
(1,866
|
)
|
|
(3,061
|
)
|
|
—
|
|
|
(4,927
|
)
|
|||||
Net income attributable to Holly Energy Partners
|
|
42,758
|
|
|
49,207
|
|
|
9,184
|
|
|
(58,174
|
)
|
|
42,975
|
|
|||||
Other comprehensive (loss)
|
|
(453
|
)
|
|
(453
|
)
|
|
—
|
|
|
453
|
|
|
(453
|
)
|
|||||
Comprehensive income attributable to Holly Energy Partners
|
|
$
|
42,305
|
|
|
$
|
48,754
|
|
|
$
|
9,184
|
|
|
$
|
(57,721
|
)
|
|
$
|
42,522
|
|
Three Months Ended March 31, 2017
|
|
Parent
|
|
Guarantor
Restricted Subsidiaries
|
|
Non-Guarantor Non-Restricted Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Cash flows from operating activities
|
|
$
|
(20,297
|
)
|
|
$
|
58,062
|
|
|
$
|
10,736
|
|
|
$
|
(4,901
|
)
|
|
$
|
43,600
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Additions to properties and equipment
|
|
—
|
|
|
(7,902
|
)
|
|
(363
|
)
|
|
—
|
|
|
(8,265
|
)
|
|||||
Distributions from UNEV in excess of earnings
|
|
—
|
|
|
1,099
|
|
|
—
|
|
|
(1,099
|
)
|
|
—
|
|
|||||
Proceeds from sale of assets
|
|
—
|
|
|
424
|
|
|
—
|
|
|
—
|
|
|
424
|
|
|||||
Distributions in excess of equity in earnings of equity investments
|
|
—
|
|
|
3,016
|
|
|
—
|
|
|
—
|
|
|
3,016
|
|
|||||
|
|
—
|
|
|
(3,363
|
)
|
|
(363
|
)
|
|
(1,099
|
)
|
|
(4,825
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net borrowings under credit agreement
|
|
—
|
|
|
294,000
|
|
|
—
|
|
|
—
|
|
|
294,000
|
|
|||||
Net intercompany financing activities
|
|
344,781
|
|
|
(344,781
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Proceeds from issuance of common units
|
|
39,371
|
|
|
(1,808
|
)
|
|
—
|
|
|
—
|
|
|
37,563
|
|
|||||
Contribution from general partner
|
|
805
|
|
|
(805
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Redemption of senior notes
|
|
(309,750
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(309,750
|
)
|
|||||
Distributions to HEP unitholders
|
|
(54,807
|
)
|
|
2
|
|
|
—
|
|
|
—
|
|
|
(54,805
|
)
|
|||||
Distribution to HFC for El Dorado tanks
|
|
(103
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(103
|
)
|
|||||
Distributions to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
(8,000
|
)
|
|
6,000
|
|
|
(2,000
|
)
|
|||||
Other
|
|
—
|
|
|
(330
|
)
|
|
—
|
|
|
—
|
|
|
(330
|
)
|
|||||
|
|
20,297
|
|
|
(53,722
|
)
|
|
(8,000
|
)
|
|
6,000
|
|
|
(35,425
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Increase for the period
|
|
—
|
|
|
977
|
|
|
2,373
|
|
|
—
|
|
|
3,350
|
|
|||||
Beginning of period
|
|
2
|
|
|
301
|
|
|
3,354
|
|
|
—
|
|
|
3,657
|
|
|||||
End of period
|
|
$
|
2
|
|
|
$
|
1,278
|
|
|
$
|
5,727
|
|
|
$
|
—
|
|
|
$
|
7,007
|
|
Three Months Ended March 31, 2016
(1)
|
|
Parent
|
|
Guarantor
Restricted Subsidiaries
|
|
Non-Guarantor Non-Restricted Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
Cash flows from operating activities
|
|
$
|
(10,084
|
)
|
|
$
|
47,779
|
|
|
$
|
13,424
|
|
|
$
|
(3,750
|
)
|
|
$
|
47,369
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Additions to properties and equipment
|
|
—
|
|
|
(7,919
|
)
|
|
(9,954
|
)
|
|
—
|
|
|
(17,873
|
)
|
|||||
Purchase of Woods Cross refinery processing units
|
|
—
|
|
|
(24,311
|
)
|
|
—
|
|
|
—
|
|
|
(24,311
|
)
|
|||||
Proceeds from sale of assets
|
|
—
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|||||
Distributions in excess of equity in earnings of equity investments
|
|
—
|
|
|
99
|
|
|
—
|
|
|
—
|
|
|
99
|
|
|||||
|
|
—
|
|
|
(32,119
|
)
|
|
(9,954
|
)
|
|
—
|
|
|
(42,073
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net repayments under credit agreement
|
|
—
|
|
|
53,000
|
|
|
—
|
|
|
—
|
|
|
53,000
|
|
|||||
Net intercompany financing activities
|
|
53,751
|
|
|
(53,751
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Contributions from general partner for Osage
|
|
32,455
|
|
|
(32,455
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Distributions to HFC for Tulsa Tank acquisition
|
|
(30,378
|
)
|
|
(9,122
|
)
|
|
—
|
|
|
—
|
|
|
(39,500
|
)
|
|||||
Distributions to HEP unitholders
|
|
(44,960
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(44,960
|
)
|
|||||
Contribution from HFC for acquisitions
|
|
—
|
|
|
25,343
|
|
|
—
|
|
|
—
|
|
|
25,343
|
|
|||||
Distributions to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
(5,000
|
)
|
|
3,750
|
|
|
(1,250
|
)
|
|||||
Purchase of units for incentive grants
|
|
(784
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(784
|
)
|
|||||
Deferred financing costs
|
|
—
|
|
|
(2,964
|
)
|
|
—
|
|
|
—
|
|
|
(2,964
|
)
|
|||||
Other
|
|
—
|
|
|
(160
|
)
|
|
—
|
|
|
—
|
|
|
(160
|
)
|
|||||
|
|
10,084
|
|
|
(20,109
|
)
|
|
(5,000
|
)
|
|
3,750
|
|
|
(11,275
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Decrease for the period
|
|
—
|
|
|
(4,449
|
)
|
|
(1,530
|
)
|
|
—
|
|
|
(5,979
|
)
|
|||||
Beginning of period
|
|
2
|
|
|
5,452
|
|
|
9,559
|
|
|
—
|
|
|
15,013
|
|
|||||
End of period
|
|
$
|
2
|
|
|
$
|
1,003
|
|
|
$
|
8,029
|
|
|
$
|
—
|
|
|
$
|
9,034
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
|
Three Months Ended March 31,
|
|
Change from
|
||||||||
|
|
2017
|
|
2016
|
|
2016
|
||||||
|
|
(In thousands, except per unit data)
|
||||||||||
Revenues:
|
|
|
|
|
|
|
||||||
Pipelines:
|
|
|
|
|
|
|
||||||
Affiliates—refined product pipelines
|
|
$
|
17,744
|
|
|
$
|
25,182
|
|
|
$
|
(7,438
|
)
|
Affiliates—intermediate pipelines
|
|
5,284
|
|
|
7,413
|
|
|
(2,129
|
)
|
|||
Affiliates—crude pipelines
|
|
16,881
|
|
|
17,491
|
|
|
(610
|
)
|
|||
|
|
39,909
|
|
|
50,086
|
|
|
(10,177
|
)
|
|||
Third parties—refined product pipelines
|
|
12,538
|
|
|
14,766
|
|
|
(2,228
|
)
|
|||
|
|
52,447
|
|
|
64,852
|
|
|
(12,405
|
)
|
|||
Terminals, tanks and loading racks:
|
|
|
|
|
|
|
||||||
Affiliates
|
|
29,736
|
|
|
28,253
|
|
|
1,483
|
|
|||
Third parties
|
|
4,071
|
|
|
4,398
|
|
|
(327
|
)
|
|||
|
|
33,807
|
|
|
32,651
|
|
|
1,156
|
|
|||
|
|
|
|
|
|
|
||||||
Affiliates—refinery processing units
|
|
19,380
|
|
|
4,507
|
|
|
14,873
|
|
|||
|
|
|
|
|
|
|
||||||
Total revenues
|
|
105,634
|
|
|
102,010
|
|
|
3,624
|
|
|||
Operating costs and expenses:
|
|
|
|
|
|
|
||||||
Operations (exclusive of depreciation and amortization)
|
|
32,489
|
|
|
27,855
|
|
|
4,634
|
|
|||
Depreciation and amortization
|
|
18,777
|
|
|
16,551
|
|
|
2,226
|
|
|||
General and administrative
|
|
2,634
|
|
|
3,091
|
|
|
(457
|
)
|
|||
|
|
53,900
|
|
|
47,497
|
|
|
6,403
|
|
|||
Operating income
|
|
51,734
|
|
|
54,513
|
|
|
(2,779
|
)
|
|||
Other income (expense):
|
|
|
|
|
|
|
||||||
Equity in earnings of equity method investments
|
|
1,840
|
|
|
2,765
|
|
|
(925
|
)
|
|||
Interest expense, including amortization
|
|
(13,539
|
)
|
|
(10,535
|
)
|
|
(3,004
|
)
|
|||
Interest income
|
|
102
|
|
|
112
|
|
|
(10
|
)
|
|||
Loss on early extinguishment of debt
|
|
(12,225
|
)
|
|
—
|
|
|
(12,225
|
)
|
|||
Gain (loss) on sale of assets
|
|
73
|
|
|
(8
|
)
|
|
81
|
|
|||
|
|
(23,749
|
)
|
|
(7,666
|
)
|
|
(16,083
|
)
|
|||
Income before income taxes
|
|
27,985
|
|
|
46,847
|
|
|
(18,862
|
)
|
|||
State income tax expense
|
|
(106
|
)
|
|
(95
|
)
|
|
(11
|
)
|
|||
Net income
|
|
27,879
|
|
|
46,752
|
|
|
(18,873
|
)
|
|||
Allocation of net loss to Predecessor
|
|
—
|
|
|
1,150
|
|
|
(1,150
|
)
|
|||
Allocation of net income attributable to noncontrolling interests
|
|
(2,316
|
)
|
|
(4,927
|
)
|
|
2,611
|
|
|||
Net income attributable to the partners
|
|
25,563
|
|
|
42,975
|
|
|
(17,412
|
)
|
|||
General partner interest in net income attributable to the partners
(1)
|
|
(17,138
|
)
|
|
(12,103
|
)
|
|
(5,035
|
)
|
|||
Limited partners’ interest in net income
|
|
$
|
8,425
|
|
|
$
|
30,872
|
|
|
$
|
(22,447
|
)
|
Limited partners’ earnings per unit—basic and diluted
(1)
|
|
$
|
0.13
|
|
|
$
|
0.52
|
|
|
$
|
(0.39
|
)
|
Weighted average limited partners’ units outstanding
|
|
63,113
|
|
|
58,657
|
|
|
4,456
|
|
|||
EBITDA
(2)
|
|
$
|
70,108
|
|
|
$
|
69,926
|
|
|
$
|
182
|
|
Distributable cash flow
(3)
|
|
$
|
57,289
|
|
|
$
|
55,365
|
|
|
$
|
1,924
|
|
|
|
|
|
|
|
|
||||||
Volumes (bpd)
|
|
|
|
|
|
|
||||||
Pipelines:
|
|
|
|
|
|
|
||||||
Affiliates—refined product pipelines
|
|
107,266
|
|
|
132,430
|
|
|
(25,164
|
)
|
|||
Affiliates—intermediate pipelines
|
|
104,340
|
|
|
137,410
|
|
|
(33,070
|
)
|
|||
Affiliates—crude pipelines
|
|
268,890
|
|
|
287,433
|
|
|
(18,543
|
)
|
|||
|
|
480,496
|
|
|
557,273
|
|
|
(76,777
|
)
|
|||
Third parties—refined product pipelines
|
|
85,141
|
|
|
78,334
|
|
|
6,807
|
|
|||
|
|
565,637
|
|
|
635,607
|
|
|
(69,970
|
)
|
|||
Terminals and loading racks:
|
|
|
|
|
|
|
||||||
Affiliates
|
|
374,923
|
|
|
357,022
|
|
|
17,901
|
|
|||
Third parties
|
|
69,647
|
|
|
81,327
|
|
|
(11,680
|
)
|
|||
|
|
444,570
|
|
|
438,349
|
|
|
6,221
|
|
|||
|
|
|
|
|
|
|
||||||
Affiliates—refinery processing units
|
|
62,829
|
|
|
42,442
|
|
|
20,387
|
|
|||
|
|
|
|
|
|
|
||||||
Total for pipelines and terminal and refiney processing unit assets (bpd)
|
|
1,073,036
|
|
|
1,116,398
|
|
|
(43,362
|
)
|
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
|
|
(In thousands)
|
||||||
Balance Sheet Data
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
7,007
|
|
|
$
|
3,657
|
|
Working capital (deficit)
|
|
$
|
13,471
|
|
|
$
|
(7,782
|
)
|
Total assets
|
|
$
|
1,870,135
|
|
|
$
|
1,884,237
|
|
Long-term debt
|
|
$
|
1,240,565
|
|
|
$
|
1,243,912
|
|
Partners’ equity
(5)
|
|
$
|
389,526
|
|
|
$
|
378,234
|
|
(1)
|
Net income attributable to the partners is allocated between limited partners and the general partner interest in accordance with the provisions of the partnership agreement. HEP net income allocated to the general partner includes incentive distributions that are declared subsequent to quarter end. After the amount of incentive distributions and other priority allocations are allocated to the general partner, the remaining net income attributable to the partners is allocated to the partners based on their weighted average ownership percentage during the period.
|
(2)
|
Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is calculated as net income attributable to the partners plus (i) interest expense and loss on early extinguishment of debt, net of interest income, (ii) state income tax and (iii) depreciation and amortization, excluding amounts related to the Predecessor. EBITDA is not a calculation based upon generally accepted accounting principles (“GAAP”). However, the amounts included in the EBITDA calculation are derived from amounts included in our consolidated financial statements. EBITDA should not be considered as an alternative to net income attributable to the partners or operating income, as an indication of our operating performance or as an alternative to operating cash flow as a measure of liquidity. EBITDA is not necessarily comparable to similarly titled measures of other companies. EBITDA is presented here because it is a widely used financial indicator used by investors and analysts to measure performance. EBITDA is also used by our management for internal analysis and as a basis for compliance with financial covenants. Set forth below is our calculation of EBITDA.
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2017
|
|
2016
|
||||
|
|
(In thousands)
|
||||||
Net income attributable to the partners
|
|
$
|
25,563
|
|
|
$
|
42,975
|
|
Add (subtract):
|
|
|
|
|
||||
Interest expense
|
|
12,769
|
|
|
9,942
|
|
||
Interest income
|
|
(102
|
)
|
|
(112
|
)
|
||
Amortization of discount and deferred debt issuance costs
|
|
770
|
|
|
593
|
|
||
Loss on early extinguishment of debt
|
|
12,225
|
|
|
—
|
|
||
State income tax expense
|
|
106
|
|
|
95
|
|
||
Depreciation and amortization
|
|
18,777
|
|
|
16,551
|
|
||
Predecessor depreciation and amortization
|
|
—
|
|
|
(118
|
)
|
||
EBITDA
|
|
$
|
70,108
|
|
|
$
|
69,926
|
|
(3)
|
Distributable cash flow is not a calculation based upon GAAP. However, the amounts included in the calculation are derived from amounts presented in our consolidated financial statements, with the general exceptions of maintenance capital expenditures. Distributable cash flow should not be considered in isolation or as an alternative to net income or operating income as an indication of our operating performance or as an alternative to operating cash flow as a measure of liquidity. Distributable cash flow is not necessarily comparable to similarly titled measures of other companies. Distributable cash flow is presented here because it is a widely accepted financial indicator used by investors to compare partnership performance. It is also used by management for internal analysis and for our performance units. We believe that this measure provides investors an enhanced perspective of the operating performance of our assets and the cash our business is generating. Set forth below is our calculation of distributable cash flow.
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2017
|
|
2016
|
||||
|
|
(In thousands)
|
||||||
Net income attributable to the partners
|
|
$
|
25,563
|
|
|
$
|
42,975
|
|
Add (subtract):
|
|
|
|
|
||||
Depreciation and amortization
|
|
18,777
|
|
|
16,551
|
|
||
Amortization of discount and deferred debt issuance costs
|
|
770
|
|
|
593
|
|
||
Loss on early extinguishment of debt
|
|
12,225
|
|
|
—
|
|
||
Increase (decrease) in deferred revenue related to minimum revenue commitments
|
|
1,178
|
|
|
(3,658
|
)
|
||
Maintenance capital expenditures
(4)
|
|
(825
|
)
|
|
(1,661
|
)
|
||
Decrease in environmental liability
|
|
(246
|
)
|
|
(328
|
)
|
||
Decrease in reimbursable deferred revenue
|
|
(925
|
)
|
|
(528
|
)
|
||
Other non-cash adjustments
|
|
772
|
|
|
1,539
|
|
||
Predecessor depreciation and amortization
|
|
—
|
|
|
(118
|
)
|
||
Distributable cash flow
|
|
$
|
57,289
|
|
|
$
|
55,365
|
|
(4)
|
Maintenance capital expenditures are capital expenditures made to replace partially or fully depreciated assets in order to maintain the existing operating capacity of our assets and to extend their useful lives. Maintenance capital expenditures include expenditures required to maintain equipment reliability, tankage and pipeline integrity, safety and to address environmental regulations.
|
(5)
|
As a master limited partnership, we distribute our available cash, which historically has exceeded our net income attributable to the partners because depreciation and amortization expense represents a non-cash charge against income. The result is a decline in partners’ equity since our regular quarterly distributions have exceeded our quarterly net income attributable to the partners. Additionally, if the assets contributed and acquired from HFC while we were a consolidated VIE of HFC had been acquired from third parties, our acquisition cost in excess of HFC’s basis in the transferred assets would have been recorded in our financial statements as increases to our properties and equipment and intangible assets at the time of acquisition instead of decreases to partners’ equity.
|
|
Three Months Ended
March 31, |
||||||
Equity Method Investment
|
2017
|
|
2016
|
||||
|
(in thousands)
|
||||||
SLC Pipeline LLC
|
$
|
118
|
|
|
$
|
1,025
|
|
Frontier Aspen LLC
|
564
|
|
|
1,526
|
|
||
Osage Pipe Line Company, LLC
|
202
|
|
|
214
|
|
||
Cheyenne Pipeline LLC
|
956
|
|
|
—
|
|
||
Total
|
$
|
1,840
|
|
|
$
|
2,765
|
|
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
|
|
(In thousands)
|
||||||
Credit Agreement
|
|
$
|
847,000
|
|
|
$
|
553,000
|
|
|
|
|
|
|
||||
6% Senior Notes
|
|
|
|
|
||||
Principal
|
|
400,000
|
|
|
400,000
|
|
||
Unamortized debt issuance costs
|
|
(6,435
|
)
|
|
(6,607
|
)
|
||
|
|
393,565
|
|
|
393,393
|
|
||
6.5% Senior Notes
|
|
|
|
|
||||
Principal
|
|
—
|
|
|
300,000
|
|
||
Unamortized discount and debt issuance costs
|
|
—
|
|
|
(2,481
|
)
|
||
|
|
—
|
|
|
297,519
|
|
||
|
|
|
|
|
||||
Total long-term debt
|
|
$
|
1,240,565
|
|
|
$
|
1,243,912
|
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
Item 6.
|
Exhibits
|
|
HOLLY ENERGY PARTNERS, L.P.
|
|
|
(Registrant)
|
|
|
|
|
|
|
By: HEP LOGISTICS HOLDINGS, L.P.
its General Partner
|
|
|
|
|
|
By: HOLLY LOGISTIC SERVICES, L.L.C.
its General Partner
|
|
|
|
Date: May 3, 2017
|
|
/s/ Richard L. Voliva III
|
|
|
Richard L. Voliva III
|
|
|
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
|
|
|
|
Date: May 3, 2017
|
|
/s/ Kenneth P. Norwood
|
|
|
Kenneth P. Norwood
|
|
|
Vice President and Controller
(Principal Accounting Officer)
|
Exhibit
Number
|
|
Description
|
|
|
|
3.1
|
|
First Amended and Restated Agreement of Limited Partnership of Holly Energy Partners, L.P. (incorporated by reference to Exhibit 3.1 of Registrant’s Quarterly Report on Form 10-Q for its quarterly period ended June 30, 2004, File No. 1-32225).
|
3.2
|
|
Amendment No. 1 to the First Amended and Restated Agreement of Limited Partnership of Holly Energy Partners, L.P., dated February 28, 2005 (incorporated by reference to Exhibit 3.1 of Registrant’s Form 8-K Current Report dated February 28, 2005, File No. 1-32225).
|
3.3
|
|
Amendment No. 2 to the First Amended and Restated Agreement of Limited Partnership of Holly Energy Partners, L.P., as amended, dated July 6, 2005 (incorporated by reference to Exhibit 3.1 of Registrant’s Form 8-K Current Report dated July 6, 2005, File No. 1-32225).
|
3.4
|
|
Amendment No. 3 to First Amended and Restated Agreement of Limited Partnership of Holly Energy Partners, L.P., dated April 11, 2008 (incorporated by reference to Exhibit 4.1 of Registrant’s Current Report on Form 8-K dated April 15, 2008, File No. 1-32225).
|
3.5
|
|
Amendment No. 4 to First Amended and Restated Agreement of Limited Partnership of Holly Energy Partners, L.P., dated January 16, 2013 (incorporated by reference to Exhibit 3.1 of Registrant’s Current Report on Form 8-K dated January 16, 2013, File No. 1-32225).
|
3.6
|
|
Amendment No. 5 to First Amended and Restated Agreement of Limited Partnership of Holly Energy Partners, L.P., dated June 13, 2016 (incorporated by reference to Exhibit 3.1 of Registrant’s Current Report on Form 8-K dated June 15, 2016, File No. 1-32225).
|
3.7
|
|
First Amended and Restated Agreement of Limited Partnership of Holly Energy Partners - Operating Company, L.P. (incorporated by reference to Exhibit 3.2 of Registrant’s Quarterly Report on Form 10-Q for its quarterly period ended June 30, 2004, File No. 1-32225).
|
3.8
|
|
First Amended and Restated Agreement of Limited Partnership of HEP Logistics Holdings, L.P. (incorporated by reference to Exhibit 3.4 of Registrant’s Quarterly Report on Form 10-Q for its quarterly period ended June 30, 2004, File No. 1-32225).
|
3.90
|
|
First Amended and Restated Limited Liability Company Agreement of Holly Logistic Services, L.L.C. (incorporated by reference to Exhibit 3.5 of Registrant’s Quarterly Report on Form 10-Q for its quarterly period ended June 30, 2004, File No. 1-32225).
|
3.10
|
|
Amendment No. 1 to the First Amended and Restated Limited Liability Company Agreement of Holly Logistic Services, L.L.C., dated April 27, 2011 (incorporated by reference to Exhibit 3.1 of Registrant’s Form 8-K Current Report dated May 3, 2011, File No. 1-32225).
|
3.11
|
|
First Amended and Restated Limited Liability Company Agreement of HEP Logistics GP, L.L.C. (incorporated by reference to Exhibit 3.6 of Registrant’s Quarterly Report on Form 10-Q for its quarterly period ended June 30, 2004, File No. 1-32225).
|
10.1
|
|
Seventeenth Amended and Restated Omnibus Agreement, dated as of January 18, 2017, effective January 1, 2017, by and among HollyFrontier Corporation, Holly Energy Partners, L.P. and certain of their respective subsidiaries (incorporated by reference to Exhibit 10.26 of Registrant’s Annual Report on Form 10-K for its fiscal year ended December 31, 2016, File No. 1-32225).
|
10.2
|
|
Amended and Restated Unloading and Blending Services Agreement, dated January 18, 2017, effective September 16, 2016, by and between HollyFrontier Refining & Marketing LLC, Holly Energy Partners-Operating, L.P. and HEP Refining, L.L.C. (incorporated by reference to Exhibit 10.28 of Registrant’s Annual Report on Form 10-K for its fiscal year ended December 31, 2016, File No. 1-32225).
|
10.3
|
|
Third Amended and Restated Master Throughput Agreement, dated January 18, 2017, effective January 1, 2017, by and between HollyFrontier Refining & Marketing LLC and Holly Energy Partners - Operating, L.P. (incorporated by reference to Exhibit 10.29 of Registrant’s Annual Report on Form 10-K for its fiscal year ended December 31, 2016, File No. 1-32225).
|
10.4
|
|
Fourth Amended and Restated Master Lease and Access Agreement, dated as of January 18, 2017, effective January 1, 2017, by and among certain subsidiaries of Holly Energy Partners, L.P. and certain subsidiaries of HollyFrontier Corporation (incorporated by reference to Exhibit 10.32 of Registrant’s Annual Report on Form 10-K for its fiscal year ended December 31, 2016, File No. 1-32225).
|
10.5+
|
|
Form of Change in Control Agreement (incorporated by reference to Exhibit 10.47 of Registrant’s Annual Report on Form 10-K for its fiscal year ended December 31, 2016, File No. 1-32225).
|
10.6+
|
|
Form of Notice of Grant of Restricted Units (Employee) (incorporated by reference to Exhibit 10.52 of Registrant’s Annual Report on Form 10-K for its fiscal year ended December 31, 2016, File No. 1-32225).
|
10.7+
|
|
Form of Restricted Unit Agreement (Employee) (incorporated by reference to Exhibit 10.53 of Registrant’s Annual Report on Form 10-K for its fiscal year ended December 31, 2016, File No. 1-32225).
|
10.8*
|
|
Amendment to Amended and Restated Master Tolling Agreement (Operating Assets), dated as of January 1, 2017, by and among Holly Energy Partners-Operating, L.P., HollyFrontier El Dorado Refining LLC and HollyFrontier Woods Cross Refining LLC.
|
10.9*
|
|
Amendment to Master Tolling Agreement, dated as of January 1, 2017, by and among Holly Energy Partners-Operating, L.P., HollyFrontier El Dorado Refining LLC and HollyFrontier Woods Cross Refining LLC.
|
31.1*
|
|
Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2*
|
|
Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1**
|
|
Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2**
|
|
Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
|
101++
|
|
The following financial information from Holly Energy Partners, L.P.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statement of Partners’ Equity, and (vi) Notes to Consolidated Financial Statements.
|
*
|
Filed herewith.
|
**
|
Furnished herewith.
|
+
|
Constitutes management contracts or compensatory plans or arrangements.
|
++
|
Filed electronically herewith.
|
Appli-cable Assets
|
Type of
Applicable Asset
|
Products
|
Minimum Throughput Commit-ment (on a BPD basis)
|
Tolling Fee
|
Tolling Fee
Adjustment
|
PPI Adjust-ment Minimum/ Cap
|
Fee Adjustment Commence-ment Date
|
Assumed OPEX
|
Purchase Price
|
Accrued Turn-around Cost
|
Assumed Fuel Gas Cost
|
Initial Term (all times are Dallas, TX time)
|
Extension Term (all times are Dallas, TX time)
|
||
El Dorado
Assets
|
Naphtha Fractiona-tion Unit
|
Isopentane
1
ISOM Feed
Int. Naphtha
Reformer
Feed
|
48,750 BPD
|
$0.3840/
BBL
2
|
PPI/HFC Merit Comp
Adjustment
3
Turnaround Surcharge
6
Fuel Gas
Surcharge
7
|
Subject to 1% Minimum/ 3% Cap
3
|
July 1, 2017
|
--
|
$
|
25,936,371
|
|
$1.6M
6
|
$73,610
7
|
12:01 a.m. on Novem-ber 1, 2015 (the “Effec-tive Time”) to 12:00 mid-night on October 31, 2030
|
The Applicable Refinery Owner shall have the option to extend the Applicable Term beyond the Initial Term for one additional five (5) year period beginning at 12:01 am on November 1, 2030 and ending at 12:00 midnight on October 31, 2035 on the same terms and conditions as in existence for the Initial Term.
|
Appli-cable Assets
|
Type of
Applicable Asset
|
Products
|
Minimum Throughput Commit-ment (on a BPD basis)
|
Tolling Fee
|
Tolling Fee
Adjustment
|
PPI Adjust-ment Minimum/ Cap
|
Fee Adjustment Commence-ment Date
|
Assumed OPEX
|
Purchase Price
|
Accrued Turn-around Cost
|
Assumed Fuel Gas Cost
|
Initial Term (all times are Dallas, TX time)
|
Extension Term (all times are Dallas, TX time)
|
||
Woods Cross Assets
|
Crude Unit 2
|
Naphtha
Diesel
tower
bottoms
|
14,625 BPD
8
|
$2.56/
BBL
10
|
PPI/WX Union Annual Increase
9
OPEX Adjust-ment
4
CAPEX Adjust-ment
5
Turn-around Surcharge
6
Fuel Gas Surcharge (excluding Polymeri-zation Unit)
7
|
None
|
July 1, 2017
|
$4.0M
4
|
$64.75M
|
$8.7M
6
|
$11,871
|
12:01 a.m. on October 1, 2016 (the “Effec-tive Time”) to 12:00 midnight on September 30, 2031
|
The Applicable Refinery Owner shall have the option to extend the Applic-able Term beyond the Initial Term for one additional five (5) year period beginning at 12:01 am on October 1, 2031 and ending at 12:00 midnight on Septem-ber 30, 2036 on the same terms and condi-tions as in existence for the Initial Term.
|
||
FCC Unit 2
|
Gasoline
Light
Cycle Oil
Olefins
Slurry
|
7,600 BPD
8
|
$12.39 /BBL
10
|
$11.8M
4
|
$176.25M
|
$7.8M
6
|
$11,566
|
||||||||
Polymeriza-tion Unit
|
Gasoline
Butane
Propane
|
2,438 BPD
8
|
$9.72/
BBL
10
|
$3.6M
4
|
$37.0M
|
$3.2M
6
|
-
|
(1)
|
if the change in PPI is 0% and the HFC Merit Compensation Adjustment is 3.5%, the Tolling Fee adjustment would be (0.75 x 1%) + (0.25 x 3.5%) = 1.625%
|
(2)
|
if the change in PPI is 2% and the HFC Merit Compensation Adjustment is 2%, the Tolling Fee adjustment would be (0.75 x 2%) + (0.25 x 2%) = 2%
|
(3)
|
if the change in PPI is 5% and the HFC Merit Compensation Adjustment is 2%, the Tolling Fee adjustment would be (0.75 x 3%) + (0.25 x 2%) = 2.75%
|
(4)
|
if the change in PPI is 0% and the HFC Merit Compensation Adjustment is -2%, the Tolling Fee adjustment would be (0.75 x 1%) + (0.25 x (-2%)) = 0.25%
|
Applicable Assets
|
Type of Applicable Asset
|
Products
|
Minimum Throughput Commitment (on a MSCFD basis)
|
Tolling Fee
|
Tolling Fee Adjustment
|
PPI Adjustment Minimum/ Cap
|
Fee Adjustment Commencement Date
|
Assumed OPEX
|
Purchase Price
|
Accrued Turnaround Cost
|
Assumed Fuel Gas Cost
|
Initial Term (all times are Dallas, TX time)
|
Extension Term (all times are Dallas, TX time)
|
El Dorado Assets
|
Hydrogen Generation Unit
|
Hydrogen
1
|
5,948 MSCFD
|
$3.8121/ MSCF
2
|
PPI/HFC Merit Comp Adjustment
3
Turnaround Surcharge
4
Fuel Gas Surcharge
5
|
Subject to 1% Minimum/ 3% Cap
3
|
July 1, 2017
|
__
|
$37,159,081
|
$2.3M
4
|
$136,156
5
|
From 12:01 a.m. on November 1, 2015 (the “
Effective Time
”) to 12:00 midnight on October 31, 2030
|
The Applicable Refinery Owner shall have the option to extend the Applicable Term beyond the Initial Term for one additional five (5) year period beginning at 12:01 am on November 1, 2030 and ending at 12:00 midnight on October 31, 2035 on the same terms and conditions as in existence for the Initial Term.
|
1.
|
The “Feedstock” is fungible natural gas to be supplied via pipeline.
|
2.
|
The Tolling Fee shall never be less than $4.07 per MSCF of Feedstock, subject to a one-time potential reduction in the Tolling Fee for the adjustment in paragraph 4 below.
|
3.
|
The Tolling Fee, as previously adjusted on a cumulative basis, shall be adjusted on July 1 of each calendar year, commencing July 1, 2017, by an amount equal to a percentage calculated as follows: (A) 0.75 x the change in the PPI as described below,
plus
(B) 0.25 x the annual HollyFrontier Merit Compensation Adjustment (positive or negative) for such calendar year. The change in the PPI is the upper change in the annual change rounded to four decimal places of the Producers Price Index-Commodities-Finished Goods, (PPI), et al. (“
PPI
”), produced by the U.S. Department of Labor, Bureaus of Labor Statistics. The series ID is WPUSOP3000– located at
http://www.bls.gov/data/
. The change in PPI for each year shall be calculated as follows: annual PPI index (most current year)
less
annual PPI index (most current year minus 1)
divided
by annual PPI index (most current year minus 1); provided that the change in PPI in any year shall not be less than one percent (1%) or more than three percent (3%). For the avoidance of doubt, if the change in PPI in any year is less than one percent (1%) it will be rounded up to one percent (1%) and if the change in PPI in any year is greater than three percent (3%) it will be rounded down to three percent (3%). If either index is no longer published, the Parties shall negotiate in good faith to agree on a new index (as applicable) that gives comparable protection against inflation or deflation, and the same method of adjustment for increases or decreases in the new index shall be used to calculate increases or decreases in the Tolling Fee. If the Parties are unable to agree on a new index, a new index
|
(1)
|
if the change in PPI is 0% and the HFC Merit Compensation Adjustment is 3.5%, the Tolling Fee adjustment would be (0.75 x 1%) + (0.25 x 3.5%) = 1.625%
|
(2)
|
if the change in PPI is 2% and the HFC Merit Compensation Adjustment is 2%, the Tolling Fee adjustment would be (0.75 x 2%) + (0.25 x 2%) = 2%
|
(3)
|
if the change in PPI is 5% and the HFC Merit Compensation Adjustment is 2%, the Tolling Fee adjustment would be (0.75 x 3%) + (0.25 x 2%) = 2.75%
|
(4)
|
if the change in PPI is 0% and the HFC Merit Compensation Adjustment is -2%, the Tolling Fee adjustment would be (0.75 x 1%) + (0.25 x (-2%)) = 0.25%
|
4.
|
After the first turnaround on the Applicable Asset during the Applicable Term, HEP Operating will calculate its aggregate Turnaround Costs incurred in connection therewith. In the event such aggregate Turnaround Costs for the Applicable Asset exceeds the Accrued Turnaround Cost set forth above then (A) a turnaround surcharge (the “
Turnaround Surcharge
”) will be added to the Tolling Fee based on each MSCFD of Feedstock (using the Minimum Throughput Commitment) in order to allow HEP Operating to recover (i) such Turnaround Costs in excess of the Accrued Turnaround Cost plus (ii) a ten percent (10%) return on such excess (the aggregate amount specified in clauses (i) and (ii), the “
Turnaround Payment
”). Such Turnaround Surcharge shall be paid by the Applicable Refinery Owner to HEP Operating on each MSCFD of Feedstock processed through the Applicable Asset until the earlier to occur of (i) the expiration of the Applicable Term or (ii) the recovery by HEP Operating of the Turnaround Payment. In addition, the Tolling Fee will be adjusted by the amount necessary to recover the new estimated turnaround expense for the remainder of the Applicable Term (based on the Minimum Throughput Commitment).
|
5.
|
If at the end of any calendar month during the Applicable Term the aggregate cost of gas incurred by HEP Operating in connection with the operation of the Applicable Assets exceeds $136,156 (the “
Assumed Fuel Gas Cost
”), the Applicable Refinery Owner shall promptly pay to HEP Operating an amount equal to the positive difference, if any, of (i) the aggregate cost of fuel gas incurred by HEP Operating in connection with the operation of the Applicable Assets during such calendar month less (ii) the Assumed Fuel Gas Cost.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Holly Energy Partners, L.P;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
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designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
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designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.
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evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
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disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
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a.
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b.
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any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: May 3, 2017
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/s/ George J. Damiris
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George J. Damiris
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Chief Executive Officer
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1.
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I have reviewed this quarterly report on Form 10-Q of Holly Energy Partners, L.P;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
|
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
|
a.
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: May 3, 2017
|
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/s/ Richard L. Voliva III
|
|
|
Richard L. Voliva III
|
|
|
Executive Vice President and
Chief Financial Officer
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Date: May 3, 2017
|
|
/s/ George J. Damiris
|
|
|
George J. Damiris
|
|
|
Chief Executive Officer
|
|
|
|
|
|
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and
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2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: May 3, 2017
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|
/s/ Richard L. Voliva III
|
|
|
Richard L. Voliva III
|
|
|
Executive Vice President and
Chief Financial Officer
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