Document
false0001283140HOLLY ENERGY PARTNERS LP 0001283140 2020-02-19 2020-02-19

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________

FORM 8-K
CURRENT REPORT

Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 19, 2020
___________________

HOLLY ENERGY PARTNERS, L.P.
(Exact name of Registrant as specified in its charter)
Delaware
001-32225
20-0833098
(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
 
Not applicable
(Former name or former address, if changed since last report)
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 Limited Partner Units
HEP
New York Stock Exchange
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))
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.     ☐
  



Item 2.02. Results of Operations and Financial Condition.
On February 19, 2020, Holly Energy Partners, L.P. (the “Partnership”) issued a press release announcing the Partnership’s fourth quarter 2019 results. A copy of the Partnership's press release is attached hereto as Exhibit 99.1 and incorporated herein in its entirety.
The information contained in, or incorporated into, this Item 2.02 is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any registration statement or other filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference to such filing.

Item 9.01 Financial Statements and Exhibits.
(d)    Exhibits.

99.1
104
—    Cover Page Interactive Data File (the cover page XBRL tags are embedded within the inline XBRL document).
* Furnished herewith pursuant to Item 2.02.







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 thereunto duly authorized.
HOLLY ENERGY PARTNERS, L.P.
By:     HEP Logistics Holdings, L.P.
    its General Partner

By:    Holly Logistic Services, L.L.C.
its General Partner

By:     /s/ John Harrison    
John Harrison
Senior Vice President, Chief
Financial Officer and Treasurer

Date: February 19, 2020


Exhibit



Earnings Release
February 19, 2020
https://cdn.kscope.io/683bfc27ec74eaf7cca6be6d596b3419-heplogoa12.jpg
Holly Energy Partners, L.P. Reports Fourth Quarter Results
Reported net income attributable to HEP of $45.7 million or $0.43 per unit
Announced quarterly distribution of $0.6725 per unit
Reported EBITDA of $87.8 million and Adjusted EBITDA of $86.9 million
Dallas, Texas -- Holly Energy Partners, L.P. (“HEP” or the “Partnership”) (NYSE:HEP) today reported financial results for the fourth quarter of 2019. Net income attributable to HEP for the fourth quarter was $45.7 million ($0.43 per basic and diluted limited partner unit) compared to $47.5 million ($0.45 per basic and diluted limited partner unit) for the fourth quarter of 2018.
Distributable cash flow was $64.5 million for the quarter, an increase of $0.3 million, or 0.5%, compared to the fourth quarter of 2018. HEP declared a quarterly cash distribution of $0.6725 on January 23, 2020.
The decrease in net income attributable to HEP was mainly due to lower volumes on product pipelines servicing HollyFrontier Corporation's ("HFC" or "HollyFrontier") Navajo refinery, lower recognition of deferred revenues and lower equity in earnings of Osage Pipe Line Company, LLC partially offset by higher volumes on our crude pipeline systems in Wyoming and Utah.
Commenting on our 2019 fourth quarter results, Michael Jennings, Chief Executive Officer, stated, “HEP delivered solid fourth quarter results despite heavy maintenance across HFC’s refining system.  HEP’s business model continues to provide stable cash flows supported by long term contracts with minimum volume commitments.
“Looking forward, we are making progress on our Cushing Connect project and expect completion on schedule. HEP expects to hold quarterly cash distribution constant at $0.6725, while maintaining a coverage of 1.0x for the full year 2020.”
Fourth Quarter 2019 Revenue Highlights
Revenues for the quarter were $131.6 million, a decrease of $1.2 million compared to the fourth quarter of 2018. The decrease was mainly attributable to lower volumes on product pipelines servicing HFC's Navajo refinery and lower recognition of deferred revenues partially offset by higher volumes on our crude pipeline systems in Wyoming and Utah. Compared to the fourth quarter of 2018, our overall pipeline volumes decreased for the quarter by 7%.

Revenues from our refined product pipelines were $30.8 million, a decrease of $8.8 million, on shipments averaging 175.7 thousand barrels per day ("mbpd") compared to 209.1 mbpd for the fourth quarter of 2018. The revenue decrease was mainly due to lower volumes on pipelines servicing HollyFrontier's Navajo refinery, which had lower throughputs during the quarter, and lower recognition of deferred revenue on our contract with Delek US Holdings, Inc. Revenue also decreased due to a reclassification of certain pipeline income from revenue to interest income under sales-type lease accounting.

Revenues from our intermediate pipelines were $7.5 million, an increase of $0.3 million, on shipments averaging 136.4 mbpd compared to 151.0 mbpd for the fourth quarter of 2018. The


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volume decrease was mainly attributable to lower throughput at HFC's Navajo refinery. Revenue remained relatively constant due to contractual minimum revenue commitments and tariff escalators.

Revenues from our crude pipelines were $33.8 million, an increase of $4.4 million, on shipments averaging 479.2 mbpd compared to 495.4 mbpd for the fourth quarter of 2018. Revenue increased mainly due to higher volumes on our crude pipeline systems in Wyoming and Utah. Overall volumes decreased due to lower volumes on our crude pipeline systems in New Mexico.

Revenues from terminal, tankage and loading rack fees were $41.3 million, an increase of $2.9 million compared to the fourth quarter of 2018. Refined products and crude oil terminalled in the facilities averaged 456.7 mbpd compared to 451.9 mbpd for the fourth quarter of 2018. The revenue increase was mainly due to our new Orla diesel rack, higher butane blending margins at our Las Vegas terminal and higher reimbursable project revenues.

Revenues from refinery processing units were $18.2 million for both of the fourth quarters of 2019 and 2018, on throughputs averaging 55.7 mbpd compared to 47.7 mbpd for the fourth quarter of 2018. The volume increase was primarily due to higher volumes on our naphtha fractionation unit in El Dorado. Revenue remained relatively consistent due to contractual minimum volume commitments.

Year Ended December 31, 2019 Revenue Highlights
Revenues for the year ended December 31, 2019, were $532.8 million, an increase of $26.6 million compared to the year ended December 31, 2018. The increase was mainly attributable to higher crude oil pipeline volumes around the Permian Basin, Wyoming and Utah, higher revenues on our refinery processing units and contractual tariff escalators.

Revenues from our refined product pipelines were $132.4 million, a decrease of $5.2 million, on shipments averaging 195.5 mbpd compared to 199.6 mbpd for the year ended December 31, 2018. The revenue decrease was mainly due to to a reclassification of certain of our pipeline tariffs from revenue to interest income under sales-type lease accounting principles as well as lower volumes on pipelines servicing HollyFrontier's Navajo refinery. These decreases were partially offset by higher volumes on pipelines servicing HFC's Woods Cross refinery, which had lower throughput in 2018 due to operational issues, and contractual tariff escalators.

Revenues from our intermediate pipelines were $29.6 million, a decrease of $0.1 million, on shipments averaging 140.6 mbpd compared to 144.5 mbpd for the year ended December 31, 2018. The decrease in revenue was primarily attributable to a decrease in deferred revenue realized.

Revenues from our crude pipelines were $130.7 million, an increase of $14.4 million, on shipments averaging 501.2 mbpd compared to 465.6 mbpd for the year ended December 31, 2018. The increases were mainly attributable to increased volumes on our crude pipeline systems in the Permian Basin, Wyoming and Utah as well as contractual tariff escalators.

Revenues from terminal, tankage and loading rack fees were $160.5 million, an increase of $12.9 million compared to the year ended December 31, 2018. Refined products and crude oil terminalled in the facilities averaged 483.2 mbpd compared to 474.9 mbpd for the year ended December 31, 2018. The revenue and volume increases were mainly due to volumes at our new Orla diesel rack, higher volumes at the Spokane and Catoosa terminals and contractual tariff escalators, partially offset by lower volumes at HFC's Tulsa refinery as a result of the planned turnaround in the first quarter and flooding in the second quarter.

Revenues from refinery processing units were $79.7 million, an increase of $4.5 million on throughputs averaging 68.8 mbpd compared to 62.8 mbpd for the year ended December 31, 2018. The increase in revenue was mainly due to an adjustment in revenue recognition and contractual rate increases.



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Operating Costs and Expenses Highlights
Operating costs and expenses were $66.4 million and $269.0 million for the three months and year ended December 31, 2019, respectively, representing a decrease of $0.4 million and an increase of $13.0 million from the three months and year ended December 31, 2018, respectively. The increase for the year ended December 31, 2019 was mainly due to higher maintenance costs and employee compensation expenses.
Interest expense was $19.8 million and $76.8 million for the three months and year ended December 31, 2019, respectively, representing increases of $1.1 million and $4.9 million over the same periods of 2018. These increases were mainly due to higher average balances outstanding under our senior secured revolving credit facility and and higher finance lease liabilities outstanding.

We have scheduled a webcast conference call today at 4:00 PM Eastern Time to discuss financial results. This webcast may be accessed at:

https://event.on24.com/wcc/r/2151018/2DE41EE4930CFDC2AFD3D4940F25F42F.

An audio archive of this webcast will be available using the above noted link through March 4, 2020.

About Holly Energy Partners, L.P.
Holly Energy Partners, L.P., headquartered in Dallas, Texas, provides petroleum product and crude oil transportation, terminalling, storage and throughput services to the petroleum industry, including HollyFrontier Corporation subsidiaries. The Partnership, through its subsidiaries and joint ventures, owns and/or operates petroleum product and crude pipelines, tankage and terminals in Texas, New Mexico, Washington, Idaho, Oklahoma, Utah, Nevada, Wyoming and Kansas, as well as refinery processing units in Utah and Kansas.
HollyFrontier Corporation, headquartered in Dallas, Texas, is an independent petroleum refiner and marketer that produces high value light products such as gasoline, diesel fuel, jet fuel and other specialty products. HollyFrontier owns and operates refineries located in Kansas, Oklahoma, New Mexico, Wyoming and Utah and markets its refined products principally in the Southwest U.S., the Rocky Mountains extending into the Pacific Northwest and in other neighboring Plains states. In addition, HollyFrontier produces base oils and other specialized lubricants in the U.S., Canada and the Netherlands, and exports products to more than 80 countries. HollyFrontier also owns a 57% limited partner interest and a non-economic general partner interest in Holly Energy Partners, L.P.
The statements in this press release relating to matters that are not historical facts are “forward-looking statements” within the meaning of the federal securities laws. These statements are based on our beliefs and assumptions and those of our general partner using currently available information and expectations as of the date hereof, are not guarantees of future performance and involve certain risks and uncertainties. Although we and our general partner believe that such expectations reflected in such forward-looking statements are reasonable, neither we nor our general partner can give any assurances that our expectations will prove to be correct. Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in these statements. Any differences could be caused by a number of factors including, but not limited to:
risks and uncertainties with respect to the actual quantities of petroleum products and crude oil shipped on our pipelines and/or terminalled, stored and throughput in our terminals and refinery processing units;
the economic viability of HollyFrontier Corporation and our other customers;
the demand for refined petroleum products in markets we serve;
our ability to purchase and integrate future acquired operations;
our ability to complete previously announced or contemplated acquisitions;
the availability and cost of additional debt and equity financing;
the possibility of reductions in production or shutdowns at refineries utilizing our pipelines, terminal facilities and refinery processing units;
the effects of current and future government regulations and policies;
our operational efficiency in carrying out routine operations and capital construction projects;


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the possibility of terrorist or cyber attacks and the consequences of any such attacks;
general economic conditions;
the impact of recent or proposed changes in tax laws and regulations that affect master limited partnerships; and
other financial, operational and legal risks and uncertainties detailed from time to time in our Securities and Exchange Commission filings.

The forward-looking statements speak only as of the date made and, other than as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


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RESULTS OF OPERATIONS (Unaudited)
       
Income, Distributable Cash Flow and Volumes
The following tables present income, distributable cash flow and volume information for the three months and the years ended December 31, 2019 and 2018.
 
Three Months Ended December 31,
 
Change from
 
2019
 
2018
 
2018
 
(In thousands, except per unit data)
Revenues
 
 
 
 
 
Pipelines:
 
 
 
 
 
Affiliates – refined product pipelines
$
16,550

 
$
22,189

 
$
(5,639
)
Affiliates – intermediate pipelines
7,490

 
7,144

 
346

Affiliates – crude pipelines
21,969

 
21,004

 
965

 
46,009

 
50,337

 
(4,328
)
   Third parties – refined product pipelines
14,262

 
17,401

 
(3,139
)
Third parties – crude pipelines
11,834

 
8,359

 
3,475

 
72,105

 
76,097

 
(3,992
)
Terminals, tanks and loading racks:
 
 
 
 
 
Affiliates
35,802

 
33,612

 
2,190

Third parties
5,543

 
4,853

 
690

 
41,345

 
38,465

 
2,880

 
 
 
 
 
 
Affiliates - refinery processing units
18,184

 
18,230

 
(46
)
 
 
 
 
 
 
Total revenues
131,634

 
132,792

 
(1,158
)
Operating costs and expenses
 
 
 
 
 
Operations
38,952

 
39,699

 
(747
)
Depreciation and amortization
24,513

 
24,375

 
138

General and administrative
2,929

 
2,747

 
182

 
66,394

 
66,821

 
(427
)
Operating income
65,240

 
65,971

 
(731
)
 
 
 
 
 
 
Equity in earnings of equity method investments
(37
)
 
1,698

 
(1,735
)
Interest expense, including amortization
(19,764
)
 
(18,650
)
 
(1,114
)
Interest income
2,195

 
526

 
1,669

Gain on sale of assets and other
329

 
51

 
278

 
(17,277
)
 
(16,375
)
 
(902
)
Income before income taxes
47,963

 
49,596

 
(1,633
)
State income tax benefit (expense)
(4
)
 
123

 
(127
)
Net income
47,959

 
49,719

 
(1,760
)
Allocation of net income attributable to noncontrolling interests
(2,292
)
 
(2,186
)
 
(106
)
Net income attributable to Holly Energy Partners
$
45,667

 
$
47,533

 
$
(1,866
)
Limited partners’ earnings per unit – basic and diluted(1)
$
0.43

 
$
0.45

 
$
(0.02
)
Weighted average limited partners’ units outstanding
105,440

 
105,440

 

EBITDA(2)
$
87,753

 
$
89,909

 
$
(2,156
)
Adjusted EBITDA(2)
$
86,916

 
$
89,909

 
$
(2,993
)
Distributable cash flow(3)
$
64,508

 
$
64,210

 
$
298

Volumes (bpd)
 
 
 
 
 
Pipelines:
 
 
 
 
 
Affiliates – refined product pipelines
104,875

 
134,459

 
(29,584
)
Affiliates – intermediate pipelines
136,416

 
150,964

 
(14,548
)
Affiliates – crude pipelines 
345,497

 
389,631

 
(44,134
)
 
586,788

 
675,054

 
(88,266
)
Third parties – refined product pipelines
70,871

 
74,616

 
(3,745
)
Third parties – crude pipelines
133,713

 
105,810

 
27,903

 
791,372

 
855,480

 
(64,108
)
Terminals and loading racks:
 
 
 
 
 
Affiliates
399,739

 
385,772

 
13,967

Third parties
56,952

 
66,087

 
(9,135
)
 
456,691

 
451,859

 
4,832

 
 
 
 
 
 
Affiliates – refinery processing units
55,728

 
47,696

 
8,032

 
 
 
 
 
 
Total for pipelines, terminals and refinery processing unit assets (bpd)
1,303,791

 
1,355,035

 
(51,244
)



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Years Ended December 31,
 
Change from
 
2019
 
2018
 
2018
 
(In thousands, except per unit data)
Revenues
 
 
 
 
 
Pipelines:
 
 
 
 
 
Affiliates – refined product pipelines
$
77,443

 
$
82,998

 
$
(5,555
)
Affiliates – intermediate pipelines
29,558

 
29,639

 
(81
)
Affiliates – crude pipelines
85,415

 
79,741

 
5,674

 
192,416

 
192,378

 
38

   Third parties – refined product pipelines
54,914

 
54,524

 
390

Third parties – crude pipelines
45,301

 
36,605

 
8,696

 
292,631

 
283,507

 
9,124

Terminals, tanks and loading racks:
 
 
 
 
 
Affiliates
139,655

 
130,251

 
9,404

Third parties
20,812

 
17,283

 
3,529

 
160,467

 
147,534

 
12,933

 
 
 
 
 
 
Affiliates - refinery processing units
79,679

 
75,179

 
4,500

 
 
 
 
 
 
Total revenues
532,777

 
506,220

 
26,557

Operating costs and expenses
 
 
 
 
 
Operations
161,996

 
146,430

 
15,566

Depreciation and amortization
96,705

 
98,492

 
(1,787
)
General and administrative
10,251

 
11,040

 
(789
)
 
268,952

 
255,962

 
12,990

Operating income
263,825

 
250,258

 
13,567

 
 
 
 
 
 
Equity in earnings of equity method investments
5,180

 
5,825

 
(645
)
Interest expense, including amortization
(76,823
)
 
(71,899
)
 
(4,924
)
Interest income
5,517

 
2,108

 
3,409

Gain on sales-type leases
35,166

 

 
35,166

Gain on sale of assets and other
272

 
121

 
151

 
(30,688
)
 
(63,845
)
 
33,157

Income before income taxes
233,137

 
186,413

 
46,724

State income tax expense
(41
)
 
(26
)
 
(15
)
Net income
233,096

 
186,387

 
46,709

Allocation of net income attributable to noncontrolling interests
(8,212
)
 
(7,540
)
 
(672
)
Net income attributable to Holly Energy Partners
$
224,884

 
$
178,847

 
$
46,037

Limited partners’ earnings per unit—basic and diluted(1)
$
2.13

 
$
1.70

 
$
0.43

Weighted average limited partners’ units outstanding
105,440

 
105,042

 
398

EBITDA(2)
$
392,936

 
$
347,156

 
$
45,780

Adjusted EBITDA(2)
$
359,308

 
$
347,156

 
$
12,152

Distributable cash flow(3)
$
271,431

 
$
265,087

 
$
6,344

 
 
 
 
 
 
Volumes (bpd)
 
 
 
 
 
Pipelines:
 
 
 
 
 
Affiliates – refined product pipelines
123,986

 
127,865

 
(3,879
)
Affiliates – intermediate pipelines
140,585

 
144,537

 
(3,952
)
Affiliates – crude pipelines
368,699

 
349,686

 
19,013

 
633,270

 
622,088

 
11,182

Third parties – refined product pipelines
71,545

 
71,784

 
(239
)
Third parties – crude pipelines
132,507

 
115,933

 
16,574

 
837,322

 
809,805

 
27,517

Terminals and loading racks:
 
 
 
 
 
Affiliates
422,119

 
413,525

 
8,594

Third parties
61,054

 
61,367

 
(313
)
 
483,173

 
474,892

 
8,281

 
 
 
 
 
 
Affiliates – refinery processing units
68,780

 
62,787

 
5,993

 
 
 
 
 
 
Total for pipelines, terminals and refinery processing unit assets (bpd)
1,389,275

 
1,347,484

 
41,791








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(1)
Prior to the equity restructuring transaction on October 31, 2017, net income attributable to Holly Energy Partners was 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 included incentive distributions that were declared subsequent to quarter end. There were no distributions made on the general partner interest after October 31, 2017. No general partner distributions were declared for the three months ended December 31, 2018, and general partner distributions of $36.5 million were declared for the year ended December 31, 2018.
(2)
Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is calculated as net income attributable to Holly Energy Partners plus (i) interest expense, net of interest income, (ii) state income tax and (iii) depreciation and amortization. Adjusted EBITDA is calculated as EBITDA minus (i) gain on sales-type leases and (ii) pipeline lease payments not included in operating costs and expenses plus (iii) pipeline tariffs not included in revenues due to impacts from lease accounting. Portions of our minimum guaranteed pipeline tariffs for assets subject to sales-type lease accounting are recorded as interest income with the remaining amounts recorded as a reduction in net investment in leases. These pipeline tariffs were previously recorded as revenues prior to the renewal of the throughput agreement, which triggered sales-type lease accounting. Similarly, certain pipeline lease payments were previously recorded as operating costs and expenses, but the underlying lease was reclassified from an operating lease to a financing lease, and these payments are now recoded as interest expense and reductions in the lease liability. EBITDA and Adjusted EBITDA are not calculations based upon generally accepted accounting principles ("GAAP"). However, the amounts included in the EBITDA and Adjusted EBITDA calculations are derived from amounts included in our consolidated financial statements. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income attributable to Holly Energy Partners or operating income, as indications of our operating performance or as alternatives to operating cash flow as a measure of liquidity. EBITDA and Adjusted EBITDA are not necessarily comparable to similarly titled measures of other companies. EBITDA and Adjusted EBITDA are presented here because they are widely used financial indicators used by investors and analysts to measure performance. EBITDA and Adjusted EBITDA are 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 and Adjusted EBITDA.
 
 
Three Months Ended
December 31,
 
Years Ended
December 31,
 
 
2019
 
2018
 
2019
 
2018
 
 
(In thousands)
Net income attributable to Holly Energy Partners
 
$
45,667

 
$
47,533

 
$
224,884

 
$
178,847

Add (subtract):
 
 
 
 
 
 
 
 
Interest expense
 
19,764

 
18,650

 
76,823

 
71,899

Interest Income
 
(2,195
)
 
(526
)
 
(5,517
)
 
(2,108
)
State income tax (benefit) expense
 
4

 
(123
)
 
41

 
26

Depreciation and amortization
 
24,513

 
24,375

 
96,705

 
98,492

Predecessor depreciation and amortization
 

 

 

 

EBITDA
 
$
87,753

 
$
89,909

 
$
392,936

 
$
347,156

Gain on sales-type leases
 

 

 
(35,166
)
 

Pipeline tariffs not included in revenues
 
2,375

 

 
4,750

 

Pipeline lease payments not included in operating costs and expenses
 
(3,212
)
 

 
(3,212
)
 

Adjusted EBITDA
 
$
86,916

 
$
89,909

 
$
359,308

 
$
347,156

(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 exception of maintenance capital expenditures. Distributable cash flow should not be considered in isolation or as an alternative to net income attributable to Holly Energy Partners 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 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.    



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Set forth below is our calculation of distributable cash flow.
 
 
Three Months Ended
December 31,
 
Years Ended
December 31,
 
 
2019
 
2018
 
2019
 
2018
 
 
(In thousands)
Net income attributable to Holly Energy Partners
 
$
45,667

 
$
47,533

 
$
224,884

 
$
178,847

Add (subtract):
 
 
 
 
 
 
 
 
Depreciation and amortization
 
24,513

 
24,375

 
96,705

 
98,492

Amortization of discount and deferred debt charges
 
773

 
764

 
3,080

 
3,041

Revenue recognized (greater) less than customer billings
 
394

 
(3,925
)
 
(2,433
)
 
(2,604
)
Maintenance capital expenditures (4)
 
(2,994
)
 
(3,678
)
 
(6,471
)
 
(8,182
)
Increase (decrease) in environmental liability
 
(277
)
 
131

 
(741
)
 
(237
)
Decrease in reimbursable deferred revenue
 
(2,432
)
 
(1,242
)
 
(8,036
)
 
(5,179
)
Gain on sales-type lease
 

 

 
(35,166
)
 

Other
 
(1,136
)
 
252

 
(391
)
 
909

Distributable cash flow
 
$
64,508

 
$
64,210

 
$
271,431

 
$
265,087

    
(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.

Set forth below is certain balance sheet data.
 
 
December 31,
 
 
2019
 
2018
 
 
(In thousands)
Balance Sheet Data
 
 
 
 
Cash and cash equivalents
 
$
13,287

 
$
3,045

Working capital
 
$
20,758

 
$
8,577

Total assets
 
$
2,199,232

 
$
2,102,540

Long-term debt
 
$
1,462,031

 
$
1,418,900

Partners' equity (5)
 
$
381,103

 
$
427,435


(5)
As a master limited partnership, we distribute our available cash, which historically has exceeded our net income attributable to Holly Energy 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 Holly Energy Partners. Additionally, if the assets contributed and acquired from HollyFrontier while we were a consolidated variable interest entity of HollyFrontier had been acquired from third parties, our acquisition cost in excess of HollyFrontier’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.


FOR FURTHER INFORMATION, Contact:

John Harrison, Senior Vice President,
Chief Financial Officer and Treasurer
Craig Biery, Director, Investor Relations
Holly Energy Partners, L.P.
214/954-6511


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