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Holly Energy Partners, L.P. Reports Third Quarter Results

(2) Net income attributable to Holly Energy Partners is allocated between limited partners and the general partner interest in accordance with the provisions of the partnership agreement. Net income allocated to the general partner includes incentive distributions declared subsequent to quarter end. General partner incentive distributions were $4.9 million and $3.7 million for the three months ended September 30, 2012 and 2011, respectively, and $15.6 million and $10.6 million for the nine months ended September 30, 2012 and 2011, respectively. Net income attributable to the limited partners is divided by the weighted average limited partner units outstanding in computing the limited partners’ per unit interest in net income.

(3) 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 (excluding Predecessor amounts). EBITDA is not a calculation based upon 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 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. 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 also is 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

September 30,

Nine Months Ended

September 30,

2012   2011 2012   2011
(In thousands)
Net income attributable to Holly Energy Partners $ 24,493 $ 16,744 $ 69,634 $ 50,926
Add (subtract):
Interest expense 10,738 8,520 29,045 25,198
Amortization of discount and deferred debt charges 1,802 308 5,224 903
Loss on early extinguishment of debt 2,979
State income tax 137 (77 ) 287 169
Depreciation and amortization 13,044 8,916 39,899 24,627
Predecessor depreciation and amortization (444 ) (1,183 ) (7,903 ) (1,541 )
EBITDA $ 49,770   $ 33,228   $ 139,165   $ 100,282  
 

(4) Distributable cash flow is not a calculation based upon GAAP. However, the amounts included in the calculation are derived from amounts separately presented in our consolidated financial statements, with the exception of billed crude revenue settlement and 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 also is 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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