UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-35721 DELEK LOGISTICS PARTNERS, LP (Exact name of registrant as specified in its charter) Delaware 45-5379027 (State or other ju ...

Delek Logistics Partners, LP (NYSE:DKL) Q1 2021 Earnings Conference Call May 5, 2021 8:30 AM ET Company Participants Blake Fernandez - Senior Vice President of Investor Relations & Market Intelligence Uzi Yemin - Chairman & Chief Executive Officer Reuven Spiegel - Chief Financial Officer Avigal Soreq - Executive Vice President & Chief Operating Officer Conference Call Participants Spiro Dounis - Credit Suisse Ned Baramov - Wells Fargo Operator Good day, and welcome to the Delek Logistics' First Quarter 2021 ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-35721 DELEK LOGISTICS PARTNERS, LP (Exact name of registrant as specified in its charter) Delaware 45-5379027 (State or other jurisdi ...

Financial Data and Key Metrics Changes - Distributable cash flow (DCF) for Q4 2020 was approximately $56 million, up from $33 million in Q4 2019, representing a significant increase [6] - Net income attributable to all partners increased approximately 88% year-over-year [6] - EBITDA for Q4 2020 was $64 million, a 48% increase compared to the prior year [6] - DCF coverage ratio improved to 1.41 in Q4 2020 from 1.08 in the prior year [6] - Quarterly distribution increased to $0.91 per limited partner unit, marking a 0.6% increase from Q3 2020 and a 2.8% increase from Q4 2019 [7] Business Line Data and Key Metrics Changes - In the Pipelines and Transportation segment, contribution margin rose to $44 million in Q4 2020 from $25 million in Q4 2019, driven by recent asset dropdowns [9] - Operating expenses in the Pipelines and Transportation segment decreased by $10 million year-over-year [9] - In the Wholesale Marketing and Terminalling segment, contribution margin was $18 million in Q4 2020, slightly up from $17 million in the prior year [9] - Equity income from crude oil joint ventures was approximately $6 million, compared to $5 million in the prior year [10] Market Data and Key Metrics Changes - The company had approximately $103 million of available capacity on its $850 million credit facility as of December 31, 2020 [7] - Total debt was approximately $1 billion, with a total leverage ratio of 3.75 times, within the allowable limit of 5.5 times under the credit facility [7] Company Strategy and Development Direction - The company aims for a 5% distribution growth for 2021, supported by strong operational performance and organic projects expected to materialize in Q2 [12][17] - The Wink to Webster Pipeline is set to fully operate in Q4 2021, which may enhance the company's position [18] - The company is undergoing an internal review to identify assets that could strengthen its market position [17][18] Management's Comments on Operating Environment and Future Outlook - Management highlighted a stellar year despite macro headwinds, with significant increases in net income and EBITDA [12] - The company exceeded year-end distribution coverage and leverage ratio targets earlier than expected, providing flexibility for 2021 [12] - Management expressed confidence in achieving the targeted distribution growth without compromising coverage or leverage ratios due to organic growth projects [18] Other Important Information - The company went the entire year without a recordable incident, reflecting positively on employee performance and safety [12] Q&A Session Summary Question: Inquiry about West Texas margins and RINs prices - Management noted that hedging losses impacted Q4 margins despite strong RIN prices, and they expect RIN prices to remain strong into Q1 [14][15] Question: Discussion on growth drivers for EBITDA - Management indicated several organic projects are planned for Q2, which are expected to support EBITDA growth and distribution targets [16][17]

PART I [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) Unaudited financial statements for Q3 2020 show total assets increased to **$957.6 million** due to acquisitions, and net income attributable to partners rose to **$46.3 million** from **$30.5 million** [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2020, total assets increased to **$957.6 million** from **$744.4 million** at year-end 2019, largely due to a **$172.5 million** increase in net property, plant, and equipment from acquisitions, while total liabilities grew to **$1.07 billion** Condensed Consolidated Balance Sheet Highlights (USD in thousands) | Account | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | **Total Assets** | **$957,586** | **$744,447** | | Property, plant and equipment, net | $467,501 | $295,044 | | Equity method investments | $255,368 | $246,984 | | **Total Liabilities** | **$1,069,040** | **$895,566** | | Long-term debt | $1,006,145 | $833,110 | | **Total Deficit** | **($111,454)** | **($151,119)** | [Condensed Consolidated Statements of Income and Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) For the third quarter of 2020, net income attributable to partners was **$46.3 million**, a **51.7% increase** from **$30.5 million** in Q3 2019, driven by a **49.1% rise** in operating income to **$51.8 million** Q3 and Nine Months Income Statement Highlights (USD in thousands, except per unit data) | Metric | Q3 2020 | Q3 2019 | Nine Months 2020 | Nine Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $142,268 | $137,556 | $423,306 | $445,382 | | Operating Income | $51,765 | $34,729 | $134,688 | $96,097 | | Net Income Attributable to Partners | $46,328 | $30,530 | $118,539 | $75,112 | | Diluted Net Income per LP Unit | $1.26 | $0.89 | $3.30 | $2.08 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2020, net cash from operating activities increased to **$134.7 million** from **$86.9 million** in the prior-year period, while net cash used in investing activities was **$116.4 million** primarily for asset acquisitions Cash Flow Summary (Nine Months Ended Sep 30, USD in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $134,654 | $86,871 | | Net cash used in investing activities | ($116,419) | ($141,377) | | Net cash (used in) provided by financing activities | ($17,756) | $56,337 | | **Net increase in cash** | **$479** | **$1,831** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail key accounting policies and events, including the impact of the COVID-19 pandemic, significant acquisitions, an IDR restructuring, and revenue recognition details - The COVID-19 pandemic has caused **significant economic disruption**, reducing demand for crude oil and refined products, and the company has considered these impacts in its financial statements, including evaluations for **potential asset impairments**[26](index=26&type=chunk)[27](index=27&type=chunk) - Effective August 13, 2020, the Partnership **eliminated all incentive distribution rights (IDRs)** and converted the 2% general partner interest into a non-economic interest in exchange for **14.0 million common units** and **$45.0 million in cash**[24](index=24&type=chunk)[52](index=52&type=chunk) - Acquired the Big Spring Gathering Assets from Delek Holdings for **$100.0 million cash** and **5.0 million common units**, and the Trucking Assets for approximately **$48.0 million cash**, both treated as common control transactions[36](index=36&type=chunk)[37](index=37&type=chunk) - As of September 30, 2020, the company expects to recognize **$1.6 billion in future lease revenues** related to unfulfilled performance obligations under non-cancelable commercial agreements with Delek Holdings[63](index=63&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the significant impact of COVID-19 and key 2020 strategic transactions, including asset acquisitions and IDR restructuring, noting a **45.1% increase** in Q3 2020 consolidated contribution margin and **$95.3 million** in liquidity - The COVID-19 pandemic has **significantly disrupted** the global economy, **reducing demand** for refined products and creating **downward pressure on commodity prices**, which impacts the company's operations, particularly the West Texas wholesale marketing business[128](index=128&type=chunk)[132](index=132&type=chunk) - Key 2020 developments include the **IDR Restructuring Transaction**, the **acquisition of Big Spring Gathering Assets and Trucking Assets**, and **tariff adjustments** based on FERC indexing[139](index=139&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk) Non-GAAP Reconciliation Highlights (Q3 2020 vs Q3 2019, USD in thousands) | Metric | Q3 2020 | Q3 2019 | | :--- | :--- | :--- | | Net Income | $46,328 | $30,530 | | EBITDA | $67,782 | $51,514 | | Distributable Cash Flow | $59,098 | $33,700 | [Results of Operations](index=37&type=section&id=Results%20of%20Operations) Consolidated contribution margin for Q3 2020 increased by **44.7%** to **$67.3 million**, primarily due to a **71.2% surge** in the Pipelines and Transportation segment's contribution margin to **$46.4 million** driven by acquisitions Consolidated Contribution Margin (USD in thousands) | Period | Q3 2020 | Q3 2019 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Contribution Margin | $67,346 | $46,527 | $20,819 | 44.7% | Segment Contribution Margin (Q3 2020 vs Q3 2019, USD in thousands) | Segment | Q3 2020 | Q3 2019 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Pipelines and Transportation | $46,388 | $27,091 | $19,297 | 71.2% | | Wholesale Marketing and Terminalling | $20,958 | $19,436 | $1,522 | 7.8% | - The increase in Pipelines and Transportation segment revenue and contribution margin was primarily driven by the **Big Spring Gathering Assets and Trucking Assets acquisitions**[218](index=218&type=chunk)[224](index=224&type=chunk) - The Wholesale Marketing and Terminalling segment's **revenue decreased** due to **lower average sales prices** for gasoline and diesel, but **contribution margin increased** as the **cost of materials decreased** even more significantly[229](index=229&type=chunk)[235](index=235&type=chunk)[242](index=242&type=chunk) [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) As of September 30, 2020, the Partnership had total liquidity of **$95.3 million**, consisting of **$6.0 million** in cash and **$89.3 million** available under its DKL Credit Facility, with total debt at **$1.006 billion** - **Total liquidity** as of September 30, 2020 was **$95.3 million**, comprising **$6.0 million in cash** and **$89.3 million in unused credit commitments**[246](index=246&type=chunk) - **Total indebtedness** was **$1.006 billion**, consisting of **$760.7 million** under the DKL Credit Facility and **$245.4 million** in senior notes (net of discounts and costs)[257](index=257&type=chunk) - A quarterly cash distribution of **$0.905 per common unit** was declared for Q3 2020, payable in November 2020[247](index=247&type=chunk) [Capital Spending](index=51&type=section&id=Capital%20Spending) The Partnership forecasts total capital spending for the full year 2020 to be approximately **$21.1 million**, with actual spending for the nine months ended September 30, 2020, at **$6.9 million** Capital Spending Summary (USD in thousands) | Category | Full Year 2020 Forecast | Nine Months Ended Sep 30, 2020 (Actual) | | :--- | :--- | :--- | | **Pipelines and Transportation** | **$13,573** | **$3,424** | | Regulatory | $918 | $318 | | Maintenance | $1,531 | $149 | | Discretionary | $11,124 | $2,957 | | **Wholesale Marketing and Terminalling** | **$7,478** | **$3,494** | | Regulatory | $1,311 | $1,085 | | Maintenance | $758 | $395 | | Discretionary | $5,409 | $2,014 | | **Total Capital Spending** | **$21,051** | **$6,918** | [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=52&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The Partnership is exposed to market risks from commodity price fluctuations affecting margins and interest rate risk on its floating-rate debt, with a hypothetical **1% change** in interest rates impacting annual interest expense by approximately **$7.6 million** - The company is exposed to **commodity price risk**, as shifts in crude oil and refined product prices can **impact operating margins** in the wholesale marketing and terminalling segment[269](index=269&type=chunk) - The company faces **interest rate risk** on its **floating-rate debt**, where a hypothetical **1% change in interest rates** would change annual interest expense by approximately **$7.6 million**[270](index=270&type=chunk) - The company is preparing for the planned **discontinuation of LIBOR** after 2021, which is used as a reference rate in some of its debt agreements[271](index=271&type=chunk) [Item 4. Controls and Procedures](index=52&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2020, with no material changes to internal control over financial reporting during Q3 - Based on an evaluation, the CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of the end of the reporting period (September 30, 2020)[272](index=272&type=chunk) - **No changes in internal control over financial reporting** occurred during Q3 2020 that have materially affected, or are reasonably likely to materially affect, internal controls[272](index=272&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various lawsuits and claims in the ordinary course of business but does not believe any currently pending proceedings will have a material adverse effect on its financial condition or results of operations - The company is involved in ordinary course lawsuits, investigations, and claims, but **does not expect them to have a material adverse effect** on its business[276](index=276&type=chunk) [Item 1A. Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) Key risk factors include the adverse impacts of the COVID-19 pandemic and volatile oil markets on demand and prices, alongside potential conflicts of interest with the general partner and its parent, Delek Holdings - The COVID-19 pandemic and volatile oil markets pose a **significant risk**, potentially leading to **reduced demand**, **lower commodity prices**, **business disruptions**, and **future asset impairments**[277](index=277&type=chunk) - **Significant conflicts of interest** exist with the general partner and its parent, Delek Holdings, as **Delek Holdings controls the general partner** and may make decisions that **favor its own interests** over those of the Partnership's unitholders[280](index=280&type=chunk) [Item 6. Exhibits](index=55&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including agreements related to the IDR restructuring, credit facility amendment, and CEO/CFO certifications - Key exhibits filed include agreements related to the **IDR restructuring** and **credit facility amendment**, as well as required **CEO and CFO certifications**[284](index=284&type=chunk)

Delek Logistics Partners LP (NYSE:DKL) Q3 2020 Earnings Conference Call November 5, 2020 8:30 AM ET Company Participants Uzi Yemin - Chairman, President and CEO Reuven Spiegel - Chief Financial Officer Avigal Soreq - EVP & Chief Operating Officer Blake Fernandez - SVP of Investor Relations & Market Intelligence Conference Call Participants Spiro Dounis - Credit Suisse Ned Baramov - Wells Fargo Operator Good day, and welcome to the Delek Logistics Third Quarter 2020 Earnings Conference Call. [Operator Instru ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents Delek Logistics Partners, LP's unaudited financial statements and notes for Q2 2020 and 2019 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheets detail the company's financial position as of June 30, 2020, showing increased assets and long-term debt, with a decreased total deficit Condensed Consolidated Balance Sheets (in thousands) | ASSETS / LIABILITIES AND DEFICIT | June 30, 2020 | December 31, 2019 | | :------------------------------- | :------------ | :---------------- | | Total current assets | $43,497 | $33,570 | | Property, plant and equipment, net | $473,744 | $295,044 | | Total assets | $973,737 | $744,447 | | Total current liabilities | $17,975 | $35,082 | | Long-term debt | $995,200 | $833,110 | | Total non-current liabilities | $1,034,077 | $860,484 | | Total deficit | $(78,315) | $(151,119) | | Total liabilities and deficit | $973,737 | $744,447 | - Total assets increased by **$229.3 million**, primarily due to a significant increase in net property, plant and equipment, reflecting recent acquisitions[9](index=9&type=chunk) - Total deficit decreased by **$72.8 million**, indicating an improvement in the equity position[9](index=9&type=chunk) [Condensed Consolidated Statements of Income and Comprehensive Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) Income statements show significant net income growth for Q2 and YTD June 30, 2020, driven by higher operating income despite lower net revenues Key Income Statement Data (in thousands, except per unit data) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenues | $117,637 | $155,342 | $281,038 | $307,825 | | Operating income | $47,881 | $32,256 | $82,923 | $61,367 | | Net income attributable to partners | $44,415 | $24,885 | $72,211 | $44,581 | | Net income per limited partner unit - basic | $1.18 | $0.69 | $1.98 | $1.20 | | Cash distributions per limited partner unit | $0.900 | $0.850 | $1.790 | $1.670 | - Net income attributable to partners increased by **78.5%** for the three months and **61.9%** for the six months ended June 30, 2020, year-over-year[13](index=13&type=chunk) - Operating income increased by **48.4%** for the three months and **35.1%** for the six months ended June 30, 2020, year-over-year[13](index=13&type=chunk) [Condensed Consolidated Statements of Partner's Equity (Deficit)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Partner's%20Equity%20(Deficit)) Partners' equity statements reflect a reduced total deficit from December 2019 to June 2020, primarily due to net income and unit issuance, partially offset by distributions Changes in Partners' Equity (Deficit) (in thousands) | Metric | June 30, 2020 | December 31, 2019 | | :------------------------------------------------------------------ | :------------ | :---------------- | | Balance at period end | $(78,315) | $(151,119) | | Net income attributable to partners (six months ended June 30, 2020) | $72,211 | $44,581 | | Issuance of units in connection with Big Spring Gathering Assets Acquisition | $109,514 | — | | Distribution to Delek Holdings for Trucking Assets Acquisition | $(47,558) | — | | Cash distributions (six months ended June 30, 2020) | $(61,540) | $(54,357) | - Total deficit decreased by **$72.8 million** from December 31, 2019, to June 30, 2020[18](index=18&type=chunk) - The issuance of units for the Big Spring Gathering Assets Acquisition contributed **$109.5 million** to equity[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash flow statements indicate increased operating cash, decreased investing cash use, and reduced financing cash provided for the six months ended June 30, 2020 Key Cash Flow Data (in thousands) | Metric | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $72,381 | $51,823 | | Net cash used in investing activities | $(114,242) | $(136,556) | | Net cash provided by financing activities | $52,512 | $85,651 | | Net increase in cash and cash equivalents | $10,651 | $918 | - Net cash provided by operating activities increased by **$20.6 million (39.7%)** year-over-year[22](index=22&type=chunk) - Net cash used in investing activities decreased by **$22.3 million (16.3%)** year-over-year, despite significant asset acquisitions in 2020[22](index=22&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures for the financial statements, covering organization, accounting policies, acquisitions, related parties, revenue, equity, debt, and COVID-19 impact [Note 1 - Organization and Basis of Presentation](index=13&type=section&id=Note%201%20-%20Organization%20and%20Basis%20of%20Presentation) This note covers the Partnership's formation, recent acquisitions, financial statement basis, COVID-19 risks, and new accounting pronouncements - The Partnership acquired Trucking Assets effective May 1, 2020, and Big Spring Gathering Assets effective March 31, 2020, from Delek Holdings[28](index=28&type=chunk)[29](index=29&type=chunk) - The COVID-19 Pandemic has significantly reduced global economic activity, leading to a decline in demand and market prices for crude oil and refined petroleum products, impacting sales volumes in the wholesale marketing business[33](index=33&type=chunk) - New accounting pronouncements adopted in 2020, including ASU 2018-13 (Fair Value Measurement), ASU 2016-13 (Credit Losses), and ASU 2018-15 (Cloud Computing), did not have a material impact on the Partnership's financial condition or results of operations[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) [Note 2 - Acquisitions](index=17&type=section&id=Note%202%20-%20Acquisitions) This note details the Q2 2020 acquisitions of Trucking Assets and Big Spring Gathering Assets from Delek Holdings, financed by cash and common units - Trucking Assets Acquisition: Acquired from Delek Holdings for approximately **$48.0 million** in cash, effective May 1, 2020. Assets include ~150 trucks and trailers, recorded at Delek Holdings' historical carrying value of **$13.3 million**[47](index=47&type=chunk)[48](index=48&type=chunk)[50](index=50&type=chunk) - Big Spring Gathering Assets Acquisition: Acquired from Delek Holdings for **$100.0 million** in cash and **5.0 million** common units, effective March 31, 2020. Assets include crude oil pipelines, gathering systems, terminals, and rights-of-way, recorded at Delek Holdings' historical carrying value of **$209.5 million**[51](index=51&type=chunk)[52](index=52&type=chunk)[54](index=54&type=chunk) - Both acquisitions were financed by a combination of cash on hand and borrowings under the DKL Credit Facility[47](index=47&type=chunk)[51](index=51&type=chunk) [Note 3 - Related Party Transactions](index=17&type=section&id=Note%203%20-%20Related%20Party%20Transactions) This note outlines commercial agreements, logistics services, and equity transactions with Delek Holdings, including new T&D agreements and an IDR Waiver - The Partnership has long-term, fee-based commercial agreements with Delek Holdings for crude oil gathering, transportation, storage, offloading, marketing, terminalling, and product sales, with fees subject to annual adjustments based on inflation indices[55](index=55&type=chunk)[58](index=58&type=chunk) - New agreements include the Trucking Assets T&D Agreement (10-year term, **$39.0 million/year** minimum revenue) and the Big Spring T&D Agreement (10-year term, **120,000 bpd** commitment on gathering assets and **50,000 bpd** to a redelivery point)[61](index=61&type=chunk)[62](index=62&type=chunk) - An IDR Waiver was adopted on March 31, 2020, for distributions related to the **5.0 million** Additional Units for at least two years, reducing distributions to IDR holders[70](index=70&type=chunk) Summary of Related Party Transactions (in thousands) | Transaction Type | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $87,629 | $61,918 | $194,328 | $124,883 | | Purchases from Affiliates | $29,730 | $73,213 | $110,493 | $152,647 | | Operating & maintenance expenses | $10,310 | $10,590 | $23,067 | $20,515 | | General & administrative expenses | $2,703 | $1,748 | $6,072 | $3,118 | [Note 4 - Revenues](index=23&type=section&id=Note%204%20-%20Revenues) This note details revenue generation from logistics and wholesale marketing, largely from Delek Holdings, disaggregates revenue by segment, and outlines future lease revenues - Revenue is generated from gathering, transporting, offloading, storing crude oil and refined products, and wholesale marketing, with a significant portion from long-term commercial agreements with Delek Holdings[78](index=78&type=chunk) - The majority of commercial agreements with Delek Holdings are accounted for as leases under ASC 842, with **$358.5 million** of net property, plant, and equipment subject to operating leases as of June 30, 2020[79](index=79&type=chunk) Disaggregation of Revenue by Segment (in thousands) | Revenue Type / Segment | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Pipelines and Transportation Total Revenue | $63,426 | $44,208 | $111,393 | $84,841 | | Wholesale Marketing and Terminalling Total Revenue | $54,211 | $111,134 | $169,645 | $222,984 | | Consolidated Total Revenue | $117,637 | $155,342 | $281,038 | $307,825 | Expected Revenue on Remaining Performance Obligations (in thousands) | Period | Amount | | :------------------ | :---------- | | Remainder of 2020 | $134,043 | | 2021 | $267,990 | | 2022 | $249,850 | | 2023 | $240,489 | | 2024 and thereafter | $733,292 | | Total | $1,625,664 | [Note 5 - Net Income Per Unit](index=27&type=section&id=Note%205%20-%20Net%20Income%20Per%20Unit) This note explains net income per unit calculation using the two-class method and highlights the IDR Waiver impacting distributions - Net income per unit is calculated using the two-class method, allocating earnings to common units, general partner units, and IDRs[86](index=86&type=chunk) - An IDR Waiver is in effect for the **5.0 million** Additional Units until at least March 31, 2022, reducing distributions to IDR holders[87](index=87&type=chunk) Net Income Per Limited Partner Unit (dollars, except units) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income attributable to partners | $44,415 | $24,885 | $72,211 | $44,581 | | Limited partners' interest in net income | $34,768 | $16,806 | $53,487 | $29,233 | | Common units - basic (weighted average) | 29,427,298 | 24,409,359 | 26,953,934 | 24,408,270 | | Net income per limited partner unit - basic | $1.18 | $0.69 | $1.98 | $1.20 | [Note 6 - Inventory](index=28&type=section&id=Note%206%20-%20Inventory) Inventory of refined petroleum products significantly decreased from December 2019 to June 2020, valued at lower of cost or net realizable value (FIFO) Inventory (in millions) | Date | Refined Petroleum Products | | :--------------- | :------------------------- | | June 30, 2020 | $2.1 | | December 31, 2019 | $12.6 | - Inventory decreased by **$10.5 million (83.3%)** from December 31, 2019, to June 30, 2020[92](index=92&type=chunk) - Inventory is stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis[92](index=92&type=chunk) [Note 7 - Long-Term Obligations](index=28&type=section&id=Note%207%20-%20Long-Term%20Obligations) This note details long-term debt, including the DKL Credit Facility and 6.750% Senior Notes Due 2025, with outstanding balances of $750.0 million and $250.0 million respectively - The DKL Credit Facility, a senior secured revolving credit agreement, has lender commitments of **$850.0 million** and an accordion feature to increase to **$1.0 billion**, maturing September 28, 2023[94](index=94&type=chunk) - As of June 30, 2020, **$750.0 million** was outstanding under the DKL Credit Facility with a weighted average interest rate of approximately **2.78%**, and **$100.0 million** in unused credit commitments[101](index=101&type=chunk)[100](index=100&type=chunk) - The Partnership has **$250.0 million** in outstanding **6.750% Senior Notes Due 2025**, with an effective interest rate of approximately **7.22%** as of June 30, 2020[105](index=105&type=chunk) [Note 8 - Equity](index=30&type=section&id=Note%208%20-%20Equity) This note details the Partnership's equity structure, changes in units outstanding from acquisitions, and the IDR Waiver and cash distribution policies - As of June 30, 2020, Delek Holdings owned a **69.1%** interest in the Partnership, including **20,745,868** common limited partner units (**70.5%** interest) and a **94.8%** interest in the general partner[106](index=106&type=chunk) Changes in Units Outstanding (in units) | Category | Balance at Dec 31, 2019 | Balance at Jun 30, 2020 | | :---------------------------------------- | :---------------------- | :---------------------- | | Common - Public | 9,131,579 | 8,687,371 | | Common - Delek Holdings | 15,294,046 | 20,745,868 | | General Partner | 498,482 | 600,678 | | Total | 24,924,107 | 30,033,917 | - The IDR Waiver, effective March 31, 2020, waives distributions on IDRs associated with **5.0 million** Additional Units for at least two years, impacting the general partner's share of distributions[115](index=115&type=chunk) Quarterly Cash Distributions Per Limited Partner Unit | Quarter Ended | Total Quarterly Distribution Per Limited Partner Unit | | :------------ | :---------------------------------------------------- | | June 30, 2019 | $0.850 | | Sep 30, 2019 | $0.880 | | Dec 31, 2019 | $0.885 | | Mar 31, 2020 | $0.890 | | June 30, 2020 | $0.900 | [Note 9 - Equity Based Compensation](index=33&type=section&id=Note%209%20-%20Equity%20Based%20Compensation) Equity-based compensation expense under the LTIP was immaterial for the three and six months ended June 30, 2020 and 2019 - Equity-based compensation expense under the LTIP was immaterial for the periods presented[119](index=119&type=chunk) [Note 10 - Equity Method Investments](index=33&type=section&id=Note%2010%20-%20Equity%20Method%20Investments) This note details equity method investments, including capital contributions to Red River and increased income, primarily financed by operating cash and the DKL Credit Facility - The Partnership holds a **33%** membership interest in Red River Pipeline Company LLC, which owns a crude oil pipeline from Cushing, Oklahoma to Longview, Texas[120](index=120&type=chunk) - Additional capital contributions of **$10.5 million** were made to equity method investments during the six months ended June 30, 2020[123](index=123&type=chunk) Summarized Financial Information for Red River (100% basis, in thousands) | Metric | June 30, 2020 | December 31, 2019 | | :------------- | :------------ | :---------------- | | Current Assets | $11,376 | $9,278 | | Non-current Assets | $416,554 | $381,778 | | Current liabilities | $17,869 | $8,291 | | Revenues (6 months) | $21,969 | $26,017 | | Net income (6 months) | $12,746 | $13,652 | - The Partnership's investment balance in these joint ventures was **$255.3 million** as of June 30, 2020, up from **$247.0 million** at December 31, 2019[125](index=125&type=chunk) [Note 11 - Segments](index=37&type=section&id=Note%2011%20-%20Segments) The Partnership operates in Pipelines and Transportation and Wholesale Marketing and Terminalling segments, with performance measured by contribution margin, showing growth in the former and declines in the latter - The two reportable segments are Pipelines and Transportation, and Wholesale Marketing and Terminalling[128](index=128&type=chunk)[129](index=129&type=chunk) - Segment contribution margin is defined as net revenues less cost of materials and other and operating expenses (excluding depreciation and amortization)[130](index=130&type=chunk) Segment Operating Performance (in thousands) | Segment / Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | **Pipelines and Transportation** | | | | | | Total Net Revenues | $63,426 | $44,208 | $111,393 | $84,841 | | Segment Contribution Margin | $42,513 | $24,123 | $72,926 | $48,355 | | **Wholesale Marketing and Terminalling** | | | | | | Total Net Revenues | $54,211 | $111,134 | $169,645 | $222,984 | | Segment Contribution Margin | $18,783 | $20,038 | $35,734 | $35,966 | Segment Total Assets (in thousands) | Segment | June 30, 2020 | December 31, 2019 | | :------------------------------- | :------------ | :---------------- | | Pipelines and transportation | $836,510 | $537,580 | | Wholesale marketing and terminalling | $137,227 | $206,867 | | Total assets | $973,737 | $744,447 | [Note 12 - Income Taxes](index=38&type=section&id=Note%2012%20-%20Income%20Taxes) The Partnership is not a federal taxable entity, passing income/loss to partners, but is subject to entity-level taxes in Tennessee and Texas - The Partnership is not a taxable entity for federal income tax purposes; partners account for their share of income/loss[134](index=134&type=chunk) - The Partnership is subject to entity-level tax in Tennessee and Texas[135](index=135&type=chunk) [Note 13 - Commitments and Contingencies](index=38&type=section&id=Note%2013%20-%20Commitments%20and%20Contingencies) This note addresses the Partnership's exposure to lawsuits, environmental claims, and remediation costs, including the Sulphur Springs Release, largely reimbursed by Delek Holdings - The Partnership is subject to various lawsuits, investigations, and claims, including environmental and employee-related matters, but does not believe any currently pending legal proceeding will have a material adverse effect[136](index=136&type=chunk)[368](index=368&type=chunk) - The Partnership incurred approximately **$0.1 million** and **$0.3 million** in additional costs for the Sulphur Springs Release during the three and six months ended June 30, 2020, respectively, with cleanup operations substantially completed[146](index=146&type=chunk) - Most remediation expenses for crude oil and other releases are reimbursed by Delek Holdings under the Omnibus Agreement, except for the Sulphur Springs Release[147](index=147&type=chunk) [Note 14 - Leases](index=40&type=section&id=Note%2014%20-%20Leases) This note outlines accounting for operating leases, including costs, cash flows, weighted-average remaining lease term, and discount rate - Leases with initial terms of 12 months or less are not recorded on the balance sheet; lease expense is recognized on a straight-line basis[150](index=150&type=chunk) Lease Cost and Cash Flow Information (in thousands) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $1,926 | $1,472 | $2,526 | $2,899 | | Total lease cost | $2,743 | $1,798 | $3,875 | $3,702 | | Operating cash flows from operating leases | $(1,926) | $(1,472) | $(2,526) | $(2,899) | - The weighted-average remaining lease term for operating leases is **3.8 years**, with a weighted-average discount rate of **5.8%** as of June 30, 2020[156](index=156&type=chunk)[154](index=154&type=chunk) [Note 15 - Subsequent Events](index=41&type=section&id=Note%2015%20-%20Subsequent%20Events) A quarterly cash distribution of $0.900 per unit was declared on July 24, 2020, payable August 12, 2020, a 5.9% increase over Q2 2019 - A quarterly cash distribution of **$0.900 per unit** was declared on July 24, 2020, payable on August 12, 2020[157](index=157&type=chunk) - This distribution represents a **5.9% increase** over the second quarter 2019 distribution[335](index=335&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=42&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, trends, and outlook, covering business overview, COVID-19 impact, segment performance, revenue, evaluation metrics, market trends, accounting policies, and liquidity [Business Overview](index=44&type=section&id=Business%20Overview) The Partnership operates crude oil and refined products logistics, dependent on Delek Holdings, facing COVID-19 related demand reduction, commodity price impacts, and operational risks - The Partnership's assets are integral to and dependent upon Delek Holdings' refining operations, providing crude oil gathering, transportation, offloading, storage, and refined product marketing services[173](index=173&type=chunk) - The COVID-19 Pandemic has led to reduced demand for refined petroleum products, particularly gasoline and jet fuel, and caused storage constraints due to over-supply of produced oil, maintaining downward pressure on commodity prices[178](index=178&type=chunk) - Management is actively responding to the pandemic by reducing planned capital expenditures for 2020, enacting cost reduction measures, and implementing site-specific precautionary measures[186](index=186&type=chunk) [Forward-Looking Statements](index=42&type=section&id=Forward-Looking%20Statements) This section notes forward-looking statements are subject to risks including dependence on Delek Holdings, industry dynamics, commodity price volatility, regulatory changes, and COVID-19 impact - Forward-looking statements reflect current estimates and projections about future results, performance, prospects, and opportunities[165](index=165&type=chunk) - Key risks include substantial dependence on Delek Holdings, industry dynamics (Permian Basin growth, takeaway capacity), commodity price and demand changes due to COVID-19, and regulatory impacts[166](index=166&type=chunk)[171](index=171&type=chunk) - The Partnership undertakes no obligation to revise or update any forward-looking statements[172](index=172&type=chunk) [Our Reporting Segments and Assets](index=48&type=section&id=Our%20Reporting%20Segments%20and%20Assets) The Partnership operates in Pipelines and Transportation (logistics services) and Wholesale Marketing and Terminalling (marketing and terminalling services) segments - The Pipelines and Transportation segment provides crude oil gathering and transportation services, primarily supporting Delek Holdings' refineries, and is not directly exposed to commodity price changes[189](index=189&type=chunk) - The Wholesale Marketing and Terminalling segment generates revenue from marketing refined products, wholesale activity, and terminalling services in Texas, Tennessee, Arkansas, and Oklahoma[190](index=190&type=chunk) [2020 Development](index=48&type=section&id=2020%20Development) 2020 developments include tariff and fee adjustments, the Trucking Assets and Big Spring Gathering Assets acquisitions, and an associated IDR Waiver - Tariffs on FERC regulated pipelines decreased by approximately **2.2%** on July 1, 2020, while CPI-adjusted fees decreased by **0.5%** and PPI-adjusted fees by **4.8%**[191](index=191&type=chunk) - The Trucking Assets Acquisition was effective May 1, 2020, and the Big Spring Gathering Assets Acquisition was effective March 31, 2020[191](index=191&type=chunk)[195](index=195&type=chunk) - Amendment No. 2 to the Partnership Agreement included an IDR Waiver for distributions associated with **5.0 million** newly issued common units for at least two years, through March 31, 2022[196](index=196&type=chunk) [How We Generate Revenue](index=50&type=section&id=How%20We%20Generate%20Revenue) Revenue is generated from logistics service fees and wholesale marketing, with most contribution margin from long-term, fee-based agreements with Delek Holdings - Revenue is generated through fees for logistics services (gathering, transporting, storing) and wholesale marketing of refined products[197](index=197&type=chunk) - A significant portion of contribution margin is derived from long-term commercial agreements with Delek Holdings, featuring minimum volume/throughput commitments and inflation-indexed tariffs/fees[197](index=197&type=chunk)[198](index=198&type=chunk) [How We Evaluate Our Operations](index=50&type=section&id=How%20We%20Evaluate%20Our%20Operations) Operations are evaluated using metrics like volumes, contribution margin per barrel, operating expenses, and non-GAAP measures such as EBITDA and distributable cash flow - Key metrics for evaluating operations include volumes, contribution margin per barrel, operating and maintenance expenses, cost of materials and other, EBITDA, and distributable cash flow[200](index=200&type=chunk) - Contribution margin is defined as net revenues less cost of materials and other and operating expenses (excluding depreciation and amortization)[205](index=205&type=chunk) - Wholesale marketing gross margin per barrel is affected by commodity price volatility and fluctuations in RINs value[206](index=206&type=chunk) [Market Trends](index=54&type=section&id=Market%20Trends) Midstream energy market trends are influenced by crude oil prices and refined product demand, with Q1 2020 seeing reduced prices due to COVID-19 and OPEC+ actions, impacting West Texas margins - Reduced demand for crude oil and refined products due to the COVID-19 Pandemic, combined with OPEC+ production increases, led to a significant reduction in crude oil prices in Q1 2020[213](index=213&type=chunk) - Oil prices remained extremely volatile in Q2 2020, with WTI-Cushing reaching a low of **($37.63) per barrel** and closing at **$39.27 per barrel** on June 30, 2020[213](index=213&type=chunk) - The volatility of refined products prices and changes in RINs prices significantly affect the margins in West Texas marketing operations[216](index=216&type=chunk)[220](index=220&type=chunk) Ethanol RIN Prices (per gallon) | Quarter Ended | High | Low | Average | | :------------ | :----- | :----- | :------ | | 03/31/19 | $0.16 | $0.08 | $0.21 | | 06/30/19 | $0.17 | $0.13 | $0.27 | | 09/30/19 | $0.19 | $0.11 | $0.26 | | 12/31/19 | $0.14 | $0.09 | $0.24 | | 03/31/20 | $0.40 | $0.17 | $0.30 | | 06/30/20 | $0.52 | $0.28 | $0.40 | [Contractual Obligations](index=58&type=section&id=Contractual%20Obligations) No material changes occurred in contractual obligations and commercial commitments during Q2 and YTD June 30, 2020, from the Annual Report on Form 10-K - No material changes to contractual obligations and commercial commitments occurred during the three and six months ended June 30, 2020[228](index=228&type=chunk) [Critical Accounting Policies](index=58&type=section&id=Critical%20Accounting%20Policies) Critical accounting policies include impairment evaluation for assets and goodwill; an interim goodwill analysis due to COVID-19 found no impairment as of June 30, 2020 - Critical accounting policies involve evaluating impairment for property, plant and equipment, intangibles, and goodwill[229](index=229&type=chunk) - An interim goodwill impairment analysis was performed due to the COVID-19 Pandemic, concluding no impairment as of June 30, 2020, based on conditions at that time[231](index=231&type=chunk) - The Partnership continues to monitor developments, as sustained adverse changes could lead to future goodwill impairment[232](index=232&type=chunk) [Non-GAAP Measures](index=58&type=section&id=Non-GAAP%20Measures) Management uses non-GAAP measures like EBITDA and distributable cash flow to evaluate performance, debt servicing, and distribution capacity, not as GAAP alternatives - Non-GAAP measures used include EBITDA (Earnings before interest, taxes, depreciation, and amortization) and distributable cash flow[235](index=235&type=chunk)[237](index=237&type=chunk) - These measures help assess the ability to incur and service debt, fund capital expenditures, and generate cash flow for unitholder distributions[239](index=239&type=chunk) - EBITDA and distributable cash flow have limitations as analytical tools and may not be comparable to similarly titled measures of other partnerships[239](index=239&type=chunk) [Results of Operations](index=61&type=section&id=Results%20of%20Operations) This section compares consolidated and segment-specific results for Q2 and YTD June 30, 2020 vs 2019, highlighting changes in revenues, costs, and contribution margins [Consolidated Results of Operations](index=61&type=section&id=Consolidated%20Results%20of%20Operations) Consolidated net revenues decreased in Q2 and YTD 2020 due to lower West Texas marketing volumes/prices, while operating income and net income significantly increased Consolidated Statement of Operations Data (in thousands) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenues | $117,637 | $155,342 | $281,038 | $307,825 | | Cost of materials and other | $43,892 | $93,854 | $145,185 | $190,119 | | Operating expenses | $12,449 | $17,327 | $27,193 | $33,385 | | Operating income | $47,881 | $32,256 | $82,923 | $61,367 | | Net income attributable to partners | $44,415 | $24,885 | $72,211 | $44,581 | | EBITDA | $64,842 | $44,751 | $113,538 | $84,190 | | Distributable cash flow | $56,972 | $31,184 | $92,709 | $60,140 | - Net revenues decreased by **$37.7 million (24.3%)** in Q2 2020 and **$26.8 million (8.7%)** YTD 2020, primarily due to lower volumes and sales prices of gasoline and diesel in West Texas marketing operations[253](index=253&type=chunk)[256](index=256&type=chunk) - Operating income increased by **$15.6 million (48.4%)** in Q2 2020 and **$21.6 million (35.1%)** YTD 2020, driven by larger decreases in cost of materials and other, and operating expenses[252](index=252&type=chunk) - EBITDA increased by **$20.1 million (44.9%)** in Q2 2020 and **$29.3 million (34.8%)** YTD 2020[244](index=244&type=chunk) [Pipelines and Transportation Segment](index=69&type=section&id=Pipelines%20and%20Transportation%20Segment) The Pipelines and Transportation segment saw significant revenue and contribution margin growth in Q2 and YTD 2020, driven by acquisitions and decreased operating expenses Pipelines and Transportation Segment Performance (in thousands) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Net Revenues | $63,426 | $44,208 | $111,393 | $84,841 | | Cost of materials and other | $11,182 | $7,357 | $17,280 | $12,924 | | Operating expenses | $9,731 | $12,728 | $21,187 | $23,562 | | Segment contribution margin | $42,513 | $24,123 | $72,926 | $48,355 | - Net revenues increased by **$19.2 million (43.5%)** in Q2 2020 and **$26.6 million (31.3%)** YTD 2020, primarily due to the Big Spring Gathering Assets and Trucking Assets acquisitions[290](index=290&type=chunk)[291](index=291&type=chunk) - Segment contribution margin increased by **$18.4 million (76.2%)** in Q2 2020 and **$24.6 million (50.8%)** YTD 2020, driven by increased revenues from acquisitions and decreased operating expenses[299](index=299&type=chunk)[300](index=300&type=chunk) Pipelines and Transportation Throughputs (average bpd) | Asset / System | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | El Dorado Assets: Crude pipelines | 79,066 | 37,625 | 75,995 | 33,179 | | Big Spring Gathering Assets | 105,162 | — | 105,162 | — | [Wholesale Marketing and Terminalling Segment](index=74&type=section&id=Wholesale%20Marketing%20and%20Terminalling%20Segment) The Wholesale Marketing and Terminalling segment saw significant revenue and cost of materials decreases in Q2 and YTD 2020 due to lower West Texas marketing volumes/prices Wholesale Marketing and Terminalling Segment Performance (in thousands) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Net Revenues | $54,211 | $111,134 | $169,645 | $222,984 | | Cost of materials and other | $32,710 | $86,497 | $127,905 | $177,195 | | Operating expenses | $2,718 | $4,599 | $6,006 | $9,823 | | Segment contribution margin | $18,783 | $20,038 | $35,734 | $35,966 | - Net revenues decreased by **$56.9 million (51.2%)** in Q2 2020 and **$53.3 million (23.9%)** YTD 2020, driven by lower volumes and sales prices of gasoline and diesel in West Texas marketing[305](index=305&type=chunk)[308](index=308&type=chunk) - Cost of materials and other decreased by **$53.8 million (62.2%)** in Q2 2020 and **$49.3 million (27.8%)** YTD 2020, primarily due to lower volumes and costs of gasoline and diesel[316](index=316&type=chunk)[317](index=317&type=chunk) West Texas Marketing Operating Information (average bpd) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | East Texas - Tyler Refinery sales volumes | 65,028 | 71,123 | 68,839 | 69,857 | | Big Spring marketing throughputs | 76,004 | 82,964 | 71,195 | 85,339 | | West Texas marketing throughputs | 9,143 | 11,404 | 12,612 | 12,418 | | West Texas gross margin per barrel | $0.64 | $6.25 | $1.96 | $4.84 | [Liquidity and Capital Resources](index=80&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity at June 30, 2020, was $116.2 million, with funding expected from operating cash, DKL Credit Facility, and potential issuances, as cash distributions increased - Total liquidity as of June 30, 2020, was **$116.2 million**, consisting of **$100.0 million** in unused DKL Credit Facility commitments and **$16.2 million** in cash and cash equivalents[331](index=331&type=chunk) - The Partnership expects to fund future capital expenditures primarily from operating cash flows, borrowings under the DKL Credit Facility, and potential future issuances of equity and debt securities[209](index=209&type=chunk) - A quarterly cash distribution of **$0.900 per unit** was declared for Q2 2020, representing a **5.9% increase** over Q2 2019[335](index=335&type=chunk) [Cash Flows](index=82&type=section&id=Cash%20Flows) Operating cash flows increased by $20.6 million, investing cash used decreased, and financing cash provided decreased for the six months ended June 30, 2020 Summary of Consolidated Cash Flows (in thousands) | Metric | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $72,381 | $51,823 | | Net cash used in investing activities | $(114,242) | $(136,556) | | Net cash provided by financing activities | $52,512 | $85,651 | | Net increase in cash and cash equivalents | $10,651 | $918 | - Operating cash flows increased by **$20.6 million**, primarily due to decreased cash payments to suppliers and increased dividends from equity method investments[340](index=340&type=chunk) - Investing cash used decreased by **$22.3 million**, mainly from lower equity method investment contributions, despite the Big Spring Gathering Assets and Trucking Assets acquisitions[341](index=341&type=chunk) - Financing cash provided decreased by **$33.1 million**, largely due to a **$47.6 million** distribution related to the Trucking Assets Acquisition, partially offset by higher net proceeds from the revolving credit facility[342](index=342&type=chunk) [Debt Overview](index=82&type=section&id=Debt%20Overview) Total indebtedness was $995.2 million as of June 30, 2020, primarily from the DKL Credit Facility and Senior Notes, with the Partnership in compliance with debt covenants Total Indebtedness (in millions) | Debt Instrument | Principal Amount (June 30, 2020) | | :-------------------------- | :------------------------------- | | DKL Credit Facility | $750.0 | | 6.75% Senior Notes Due 2025 | $245.2 | | Total Indebtedness | $995.2 | - The DKL Credit Facility has an average borrowing rate of **2.78%**, and the 2025 Notes have an effective interest rate of **7.22%**[347](index=347&type=chunk)[348](index=348&type=chunk) - The Partnership believes it was in compliance with all debt covenants as of June 30, 2020, and expects to remain so despite the impact of the COVID-19 Pandemic[334](index=334&type=chunk)[348](index=348&type=chunk) [Equity Units Overview](index=84&type=section&id=Equity%20Units%20Overview) On March 31, 2020, 5.0 million units were issued to Delek Holdings for an acquisition, with an IDR Waiver adopted to reduce distributions on these new units - **5.0 million** units were issued to Delek Holdings on March 31, 2020, as part of the consideration for the Big Spring Gathering Assets Acquisition[350](index=350&type=chunk) - Additional general partner units were issued to maintain the **2.0%** general partner interest[350](index=350&type=chunk) - An IDR Waiver was adopted, waiving distributions on IDRs associated with the **5.0 million** Additional Units for at least two years, through March 31, 2022[351](index=351&type=chunk) [Capital Spending](index=85&type=section&id=Capital%20Spending) The 2020 capital expenditure forecast was reduced to $18.3 million due to COVID-19, with non-essential projects suspended across regulatory, maintenance, and discretionary categories Capital Expenditures (in thousands) | Category / Segment | Full Year 2020 Forecast | Six Months Ended June 30, 2020 | | :--------------------------------- | :---------------------- | :----------------------------- | | **Pipelines and Transportation** | | | | Regulatory | $2,431 | $296 | | Maintenance | $1,584 | $134 | | Discretionary projects | $11,119 | $433 | | Total Pipelines and Transportation | $15,134 | $863 | | **Wholesale Marketing and Terminalling** | | | | Regulatory | $550 | $967 | | Maintenance | $1,111 | $395 | | Discretionary | $1,461 | $1,456 | | Total Wholesale Marketing and Terminalling | $3,122 | $2,818 | | **Total Capital Spending** | $18,256 | $3,681 | - The 2020 capital spending forecast was reduced to **$18.3 million** from **$22.7 million** due to COVID-19 uncertainties, with non-essential projects suspended[356](index=356&type=chunk) [Off-Balance Sheet Arrangements](index=85&type=section&id=Off-Balance%20Sheet%20Arrangements) The Partnership has no off-balance sheet arrangements as of the filing date of this Quarterly Report on Form 10-Q - The Partnership has no off-balance sheet arrangements[357](index=357&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=86&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section discusses market risks, including commodity price and interest rate risks, and the potential impact of LIBOR transition on annual interest expense - Revenues and cash flows are sensitive to changes in commodity prices, particularly crude oil, refined products, and ethanol[360](index=360&type=chunk) - A hypothetical **1%** change in interest rates on floating-rate debt would impact annual interest expense by approximately **$7.5 million**[361](index=361&type=chunk) - The transition from LIBOR to an alternative reference rate could materially impact borrowing costs on variable rate indebtedness[362](index=362&type=chunk) [Item 4. Controls and Procedures](index=86&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of June 30, 2020, with no material changes to internal control despite remote work - Disclosure controls and procedures were deemed effective as of June 30, 2020[363](index=363&type=chunk) - No material changes to internal control over financial reporting were identified during Q2 2020, despite the shift to remote work due to COVID-19[364](index=364&type=chunk) [PART II. OTHER INFORMATION](index=87&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=87&type=section&id=Item%201.%20Legal%20Proceedings) The Partnership faces various lawsuits and claims, including environmental and employee-related matters, but management does not foresee a material adverse effect - The Partnership is subject to lawsuits, investigations, and claims, including environmental and employee-related matters[368](index=368&type=chunk) - Management does not believe any pending legal proceeding will have a material adverse effect on the business[368](index=368&type=chunk) [Item 1A. Risk Factors](index=87&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors, highlighting the adverse impact of COVID-19 and global oil markets on business, financial condition, and distribution capacity - The COVID-19 Pandemic and global oil market developments have had, and may continue to have, an adverse impact on the business, future results, and financial performance[369](index=369&type=chunk) - The pandemic has led to reduced demand for oil and gas products, business disruptions, and downward pressure on commodity prices, potentially causing a prolonged economic slowdown[370](index=370&type=chunk)[372](index=372&type=chunk) - The full impact of COVID-19 is unknown and rapidly evolving, potentially leading to impairments of long-lived or indefinite-lived assets and affecting the ability to sustain or increase quarterly distributions[373](index=373&type=chunk)[374](index=374&type=chunk)[375](index=375&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=90&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports the unregistered sale of 155 general partner units on June 11, 2020, to maintain the general partner's 2% interest, exempt under Section 4(a)(2) Unregistered Sales of Equity Securities | Date of Sale | Number of General Partner Units Sold | Price per General Partner Unit | Consideration Paid to the Partnership | | :------------ | :----------------------------------- | :----------------------------- | :------------------------------------ | | June 11, 2020 | 155 | $26.01 | $4,042 | - The sale was conducted to maintain the general partner's **2%** interest in the Partnership[378](index=378&type=chunk) - The sales were exempt from registration under Section 4(a)(2) of the Securities Act of 1933[378](index=378&type=chunk) [Item 6. Exhibits](index=90&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report on Form 10-Q, including commercial agreements, CEO/CFO certifications, and XBRL financial statements - Exhibits include the Transportation Services Agreement, Third Amendment and Restatement of Schedules to Third Amended and Restated Omnibus Agreement, CEO/CFO certifications, and Inline XBRL formatted financial statements[380](index=380&type=chunk) [SIGNATURES](index=91&type=section&id=SIGNATURES) The report is signed by Ezra Uzi Yemin, Chairman and Chief Executive Officer, and Reuven Spiegel, Executive Vice President and Chief Financial Officer, on behalf of Delek Logistics Partners, LP's General Partner, Delek Logistics GP, LLC, on August 6, 2020 - The report was signed by Ezra Uzi Yemin (Chairman and CEO) and Reuven Spiegel (EVP and CFO) on August 6, 2020[383](index=383&type=chunk)[384](index=384&type=chunk)

Financial Data and Key Metrics Changes - Distributable cash flow was approximately $57 million in Q2 2020, compared to $31 million in Q2 2019, representing an increase of 83% year-over-year [8] - Limited Partners' interest in net income increased approximately 107% year-over-year, with net income attributable to all partners of $44.4 million in Q2 2020 compared to $24.9 million in the prior year [11] - EBITDA was $65 million, a 45% increase over the prior year period [9] - DCF coverage ratio improved to 1.58 times in Q2 2020 from 1.08 times in the prior year [8] Business Line Data and Key Metrics Changes - In the pipelines and transportation segment, contribution margin increased to $43 million in Q2 2020 from $24 million in Q2 2019, driven by recent asset drop-downs [12] - The wholesale marketing and terminalling segment saw a decrease in contribution margin to $19 million in Q2 2020 from $20 million in the prior year, primarily due to lower Texas wholesale margins [13] Market Data and Key Metrics Changes - West Texas wholesale gross margin was $0.64 per barrel in Q2 2020, down from $6.25 per barrel in the prior year [14] - Throughput in West Texas decreased to 9,000 barrels a day compared to 11,000 barrels a day in the prior year period [14] Company Strategy and Development Direction - The company announced its 29th consecutive increase in quarterly distribution and aims for 5% distribution growth this year [16] - Recent agreements, such as with Jefferson Energy, are expected to improve supply outlook and expand reach for shippers [17] - The Red River Pipeline expansion is anticipated to enhance performance in the second half of the year [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the financial performance despite macro volatility due to COVID-19, with expectations for progressive improvement in the second half of the year [16] - The outlook for the second half of the year remains positive, with a focus on asset optimization and business initiatives [17] Other Important Information - Total debt was approximately $995 million, with a leverage ratio below 4.1 times, well within the allowable limit under the credit facility [10] - Capital expenditures were approximately $1 million in Q2 2020, with a forecast of $18 million for the full year [15] Q&A Session Summary Question: Inquiry about results and volume trends in July - Management noted that refineries operated above minimum volume commitments and gathering systems have returned to 96%-97% of pre-pandemic levels [20][21] Question: Trends in West Texas margins and volumes - Management indicated a recovery in demand and volumes in the second half of Q2 and July, following a decline during the peak of the pandemic [22] Question: Future EBITDA targets and IDR removal - Management is optimistic about reaching $400 million EBITDA in the next two to three years and is actively considering the removal of IDRs [23][24] Question: Details on the agreement with Jefferson Energy - The agreement is strategic, providing flexibility and a positive outlook for the Paline system, although specific CapEx details were not disclosed [26][27] Question: Sustainability of reduced operating expenses - Management confirmed that cost control measures have led to lower operating expenses, with expectations of some increase due to integrity work but still improved compared to the previous year [27] Question: Contribution from trucking assets - The contribution from trucking assets was approximately $2 million for the quarter, with no plans to provide volume metrics going forward [28]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-35721 DELEK LOGISTICS PARTNERS, LP (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorp ...

Delek Logistics Partners, LP (NYSE:DKL) Q1 2020 Earnings Conference Call May 6, 2020 8:30 AM ET Company Participants Blake Fernandez - Senior Vice President of Investor Relations and Market Intelligence Uzi Yemin - Chairman and Chief Executive Officer Assi Ginzburg - Chief Financial Officer Reuven Spiegel - Executive Vice President, Finance Conference Call Participants Spiro Dounis - Credit Suisse Ned Baramov - Wells Fargo Operator Ladies and gentlemen, thank you for standing by, and welcome to the Delek L ...