HollyFrontier 2013 Annual Report Download - page 71

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HOLLYFRONTIER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: Description of Business and Summary of Significant Accounting Policies
Description of Business: References herein to HollyFrontier Corporation (“HollyFrontier”) include HollyFrontier and its
consolidated subsidiaries. In accordance with the Securities and Exchange Commission’s (“SEC”) “Plain English” guidelines, this
Annual Report on Form 10-K has been written in the first person. In these financial statements, the words “we,” “our,” “ours” and
“us” refer only to HollyFrontier and its consolidated subsidiaries or to HollyFrontier or an individual subsidiary and not to any
other person, with certain exceptions. Generally, the words “we,” “our,” “ours” and “us” include Holly Energy Partners, L.P.
(“HEP”) and its subsidiaries as consolidated subsidiaries of HollyFrontier, unless when used in disclosures of transactions or
obligations between HEP and HollyFrontier or its other subsidiaries. These financial statements contain certain disclosures of
agreements that are specific to HEP and its consolidated subsidiaries and do not necessarily represent obligations of HollyFrontier.
When used in descriptions of agreements and transactions, “HEP” refers to HEP and its consolidated subsidiaries.
We merged with Frontier Oil Corporation (“Frontier”) on July 1, 2011. Concurrent with the merger, we changed our name from
Holly Corporation (“Holly”) to HollyFrontier and changed the ticker symbol for our common stock traded on the New York Stock
Exchange to “HFC” (see Note 2). Accordingly, these financial statements include Frontier, its consolidated subsidiaries and the
operations of the merged Frontier businesses effective July 1, 2011, but not prior to this date.
We are principally an independent petroleum refiner that produces high-value light products such as gasoline, diesel fuel, jet fuel,
specialty lubricant products, and specialty and modified asphalt. We own and operate petroleum refineries that serve markets
throughout the Mid-Continent, Southwest and Rocky Mountain regions of the United States. As of December 31, 2013, we:
• owned and operated a petroleum refinery in El Dorado, Kansas (the “El Dorado Refinery”), two refinery facilities located
in Tulsa, Oklahoma (collectively, the “Tulsa Refineries”), a refinery in Artesia, New Mexico that is operated in conjunction
with crude oil distillation and vacuum distillation and other facilities situated 65 miles away in Lovington, New Mexico
(collectively, the “Navajo Refinery”), a refinery located in Cheyenne, Wyoming (the “Cheyenne Refinery”) and a refinery
in Woods Cross, Utah (the “Woods Cross Refinery”);
• owned and operated NK Asphalt Partners (“NK Asphalt”) which operates various asphalt terminals in Arizona and New
Mexico;
• owned a 50% interest in Sabine Biofuels II, LLC (“Sabine Biofuels”), a biodiesel production facility located in Port
Arthur, Texas; and
• owned a 39% interest in HEP, a consolidated variable interest entity (“VIE”), which includes our 2% general partner
interest. HEP owns and operates logistic assets consisting of petroleum product and crude oil pipelines and terminal,
tankage and loading rack facilities that principally support our refining and marketing operations in the Mid-Continent,
Southwest and Rocky Mountain regions of the United States and Alon USA, Inc.'s (“Alon”) refinery in Big Spring, Texas.
Additionally, HEP owns a 75% interest in UNEV Pipeline, LLC (“UNEV”), which owns a 12-inch refined products
pipeline from Salt Lake City, Utah to Las Vegas, Nevada, together with terminal facilities in the Cedar City, Utah and
North Las Vegas areas (the “UNEV Pipeline”) and a 25% interest in SLC Pipeline LLC (the “SLC Pipeline”), which owns
a 95-mile intrastate pipeline system that serves refineries in the Salt Lake City area.
Principles of Consolidation: Our consolidated financial statements include our accounts and the accounts of partnerships and
joint ventures that we control through an ownership interest greater than 50% or through a controlling financial interest with respect
to variable interest entities. All significant intercompany transactions and balances have been eliminated.
Variable Interest Entities: HEP is a VIE as defined under U.S. generally accepted accounting principles (“GAAP”). A VIE is a
legal entity whose equity owners do not have sufficient equity at risk for the entity to finance its activities without additional
subordinated financial support or, as a group, the equity holders lack the power, through voting rights, to direct the activities that
most significantly impact the entity's financial performance, the obligation to absorb the entity's expected losses or rights to expected
residual returns. As the general partner of HEP, we have the sole ability to direct the activities of HEP that most significantly impact
HEP's financial performance, and therefore we consolidate HEP.
We have a 50% ownership interest in Sabine Biofuels, a biofuels production facility that is a VIE. We do not hold a controlling
financial interest, nor do we have the power to direct the activities that most significantly impact its financial performance.
Accordingly, we account for our investment using the equity method of accounting.
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