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Table of Contents HOLLYFRONTIER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Continued
71
We capitalized interest attributable to construction projects of $11.8 million, $12.1 million and $9.1 million for the years ended
December 31, 2014, 2013 and 2012, respectively.
Depreciation expense was $261.8 million, $213.6 million and $182.9 million for the years ended December 31, 2014, 2013 and
2012, respectively. For the years ended December 31, 2014, 2013 and 2012, depreciation expense included $58.1 million, $62.3
million and $55.5 million, respectively, attributable to HEP operations.
NOTE 9: Goodwill
We performed our annual goodwill impairment testing as of July 1, 2014, which entailed an assessment of our reporting unit fair
values relative to their respective carrying values that were derived using a combination of both income and market approaches.
Our income approach utilizes the discounted future expected cash flows and has an 80% weighting. Our market approach, which
includes both the guideline public company and guideline transaction methods, each having a 10% weighting, utilizes pricing
multiples derived from historical market transactions of similar assets. Our discounted cash flows reflect estimates of future cash
flows based on both historical and forward crack-spreads, forecasted production levels, operating costs and capital expenditures.
Based on our testing as of July 1, 2014, the fair value of our Cheyenne reporting unit exceeded its carrying cost by slightly less
than 20%, and the fair value of our El Dorado and HEP reporting units exceeded their respective carrying values by a much larger
percentage.
Historically, the refining industry has experienced significant fluctuations in operating results over an extended business cycle
including changes in prices of crude oil and refined products, changes in operating costs including natural gas and higher costs of
complying with government regulations. It is reasonably possible that at some future downturn in refining operations that the
goodwill related to our Cheyenne Refinery will be determined to be impaired.
The following table provides a summary of changes to our goodwill balance by segment for the year ended December 31, 2014.
Refining
Segment HEP Total
(In thousands)
Balance at January 1, 2014 $ 2,042,931 $ 288,991 $ 2,331,922
Adjustment to goodwill (141) — (141)
Balance at December 31, 2014 $ 2,042,790 $ 288,991 $ 2,331,781
During 2014, we recorded an insignificant reduction to goodwill due to the sale of certain business assets.
NOTE 10: Environmental
We expensed $28.5 million, $13.2 million and $46.1 million for the years ended December 31, 2014, 2013 and 2012, respectively,
for environmental remediation obligations. In 2012, we increased certain environmental cost accruals to reflect revisions to certain
cost estimates and the time frame for which certain environmental remediation and monitoring activities are expected to occur.
The accrued environmental liability reflected in our consolidated balance sheets was $104.5 million and $87.8 million at
December 31, 2014 and 2013, respectively, of which $81.8 million and $73.6 million, respectively, were classified as other long-
term liabilities. These accruals include remediation and monitoring costs expected to be incurred over an extended period of time
(up to 30 years for certain projects).