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 ...

PART I [Item 1. Business](index=3&type=section&id=ITEM%201.%20BUSINESS) Delek Logistics Partners, LP operates crude oil and refined products logistics, highly integrated with Delek US Holdings, Inc., across pipelines and wholesale marketing segments - Delek Logistics Partners, LP, a Delaware limited partnership, was formed in 2012 by Delek US Holdings, Inc. and its subsidiary Delek Logistics GP, LLC[10](index=10&type=chunk) - The Partnership's assets are integral to and dependent on Delek Holdings' refining operations, with Delek Holdings as the primary customer for the majority of the contribution margin[11](index=11&type=chunk) - In May 2019, the Partnership invested **$124.7 million** for a **33%** interest in the Red River Pipeline Joint Venture, plus **$3.5 million** for an expansion project to increase pipeline capacity from **150,000 bpd** to **235,000 bpd**[18](index=18&type=chunk) - On July 1, 2019, tariffs on FERC-regulated pipelines and throughput/storage fees decreased by approximately **0.1%** due to changes in the FERC oil pipeline index[16](index=16&type=chunk) - Capacity agreements on the Paline Pipeline System with an unrelated third party and Delek Refining, Ltd. terminated on February 28, 2019, making capacity available at a tariff of **$1.64 per barrel**[17](index=17&type=chunk) Company Overview Significant Acquisitions 2019 Developments Assets and Operations Pipelines and Transportation Segment Wholesale Marketing and Terminalling Segment Joint Ventures Commercial Agreements Commercial Agreements with Delek Holdings Other Agreements with Delek Holdings Other Agreements with Third Parties Major Customers Employees Seasonality and Customer Maintenance Programs Working Capital Competition Pipelines and Transportation Wholesale Marketing and Terminalling Governmental Regulation and Environmental Matters Rate Regulation of Petroleum Pipelines Department of Transportation Environmental, Health and Safety Air Emissions and Climate Change Renewable Fuel Standard Hazardous Substances and Substances Water [Item 1A. Risk Factors](index=23&type=section&id=ITEM%201A.%20RISK%20FACTORS) The Partnership faces significant risks from its dependence on Delek Holdings, operational hazards, cash flow, commodity price volatility, regulatory compliance, and partnership structure conflicts - The Partnership is substantially dependent on Delek Holdings, which accounted for approximately **87%** of its contribution margin in 2019, exposing it to risks from Delek Holdings' nonpayment or operational difficulties[106](index=106&type=chunk) - Operations are subject to inherent risks and operational hazards, including business interruptions, mechanical failures, natural disasters, and cyber-attacks, which could lead to substantial losses and affect financial performance[112](index=112&type=chunk)[113](index=113&type=chunk) - The Partnership's ability to pay quarterly distributions depends on cash flow, which can be affected by uncontrollable economic, financial, competitive, and regulatory factors, potentially decreasing unit price[123](index=123&type=chunk)[124](index=124&type=chunk) - The Partnership is exposed to direct commodity price risk in its wholesale marketing business and interest rate risk on floating-rate debt, with potential losses from unsuccessful derivative strategies[159](index=159&type=chunk)[160](index=160&type=chunk) - Conflicts of interest exist between the general partner (controlled by Delek Holdings) and unitholders, as the general partner may prioritize its own or Delek Holdings' interests, and unitholders have limited voting rights[258](index=258&type=chunk)[259](index=259&type=chunk) [Item 1B. Unresolved Staff Comments](index=47&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) There are no unresolved staff comments - No unresolved staff comments[363](index=363&type=chunk) [Item 2. Properties](index=47&type=section&id=ITEM%202.%20PROPERTIES) Descriptions of the Partnership's properties are detailed in Item 1. 'Business - Assets and Operations' - Descriptions of the Partnership's properties are included in Item 1. 'Business - Assets and Operations'[364](index=364&type=chunk) [Item 3. Legal Proceedings](index=47&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The Partnership is subject to routine legal proceedings, including environmental matters, with a 2013 Magnolia Release civil action settled in 2018, and no material adverse effects expected from current cases - The Partnership is subject to routine lawsuits, investigations, and claims, including environmental claims and employee-related matters[364](index=364&type=chunk) - A civil action related to the 2013 Magnolia Release was settled in December 2018 for **$2.2 million**, with final payments of **$0.6 million** to the State of Arkansas and **$1.7 million** to the DOJ made in November 2019[365](index=365&type=chunk) - Management does not believe that any currently pending legal proceeding will have a material adverse effect on the business, financial condition, or results of operations[364](index=364&type=chunk) [Item 4. Mine Safety Disclosures](index=47&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) Mine safety disclosures are not applicable to the Partnership - Mine safety disclosures are not applicable[366](index=366&type=chunk) PART II [Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=48&type=section&id=ITEM%205.%20MARKET%20FOR%20THE%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%2C%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The Partnership's common units trade on the NYSE as 'DKL', with Delek Holdings holding a 63.4% ownership interest and a target of 5% annual distribution growth through 2020 - Common units trade on the NYSE under the symbol **'DKL'**[369](index=369&type=chunk) - As of February 21, 2020, Delek Holdings and its affiliates owned **15,294,046 common units** and **498,482 general partner units**, representing a **63.4%** ownership interest[369](index=369&type=chunk) - The Partnership Agreement requires quarterly distribution of all available cash to unitholders[370](index=370&type=chunk) - The general partner is entitled to **2.0%** of all quarterly distributions and holds incentive distribution rights (IDRs) that can reach a maximum of **48.0%** of cash distributed from Operating Surplus above **$0.43125 per unit per quarter**[373](index=373&type=chunk)[374](index=374&type=chunk) - The Partnership aims to grow its distribution per limited partner unit by **5% annually** through 2020[372](index=372&type=chunk) Unregistered Sales of General Partner Equity Securities (Q4 2019) | Date of Sale | Number of General Partner Units Sold | Price per General Partner Unit | Consideration Paid to the Partnership | | :-------------- | :----------------------------------- | :----------------------------- | :------------------------------------ | | December 10, 2019 | 170 | $32.72 | $5,569 | [Item 6. Selected Financial Data](index=52&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) This section presents selected consolidated financial data for the five years ended December 31, 2019, including income and balance sheet data, noting key acquisitions' impact on comparability - The Partnership acquired El Dorado Rail Offloading Racks and Tyler Crude Tank assets from Delek Holdings in March 2015, accounted for as common control transfers with retrospective adjustments to prior years' results[379](index=379&type=chunk)[380](index=380&type=chunk) - In March 2018, the Partnership acquired Big Spring Logistic Assets from Delek Holdings as a common control transaction, with prior periods not recast as these assets did not constitute a business[380](index=380&type=chunk) Statements of Income and Other Comprehensive Income Data (2015-2019, in thousands except per unit data) | Metric | 2019 | 2018 | 2017 | 2016 | 2015 | | :---------------------------------------------------------------------- | :--------- | :--------- | :--------- | :--------- | :--------- | | Net revenues | $583,992 | $657,609 | $538,075 | $448,059 | $589,669 | | Operating costs and expenses | 458,180 | 531,852 | 449,898 | 370,409 | 512,407 | | Operating income | 125,812 | 125,757 | 88,177 | 77,650 | 77,262 | | Net income attributable to partners | $96,749 | $90,182 | $69,409 | $62,804 | $66,848 | | Limited partners' interest in net income | $63,669 | $64,639 | $50,980 | $50,611 | $61,685 | | Net income per limited partner unit (Common - basic) | $2.61 | $2.65 | $2.09 | $2.08 | $2.55 | | Cash distributions per limited partner unit | $3.440 | $3.120 | $2.835 | $2.575 | $2.240 | Balance Sheet Data (2015-2019, in thousands) | Metric | 2019 | 2018 | 2017 | 2016 | 2015 | | :--------------------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Property, plant and equipment, net | $295,044 | $312,562 | $255,068 | $251,029 | $253,848 | | Total assets | 744,447 | 624,593 | 443,530 | 415,547 | 375,288 | | Total debt, including current maturities | 833,110 | 700,430 | 422,649 | 392,600 | 351,600 | | Total liabilities | 895,566 | 759,416 | 472,755 | 428,831 | 386,306 | | Total deficit | (151,119) | (134,823) | (29,225) | (13,284) | (11,018) | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=53&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) MD&A reviews the Partnership's financial performance, strategies, and market trends, aiming for stable cash flows and distribution growth through acquisitions and asset optimization, with 2019 seeing decreased net revenues but increased net income from equity investments - The Partnership's business consists of two reportable segments: Pipelines and Transportation, and Wholesale Marketing and Terminalling[404](index=404&type=chunk)[405](index=405&type=chunk) - Key business strategies include generating stable cash flow through long-term, fee-based contracts, growing the business via strategic acquisitions and expansion projects (including joint ventures), engaging in mutually beneficial transactions with Delek Holdings, and optimizing existing assets while expanding the customer base[411](index=411&type=chunk)[412](index=412&type=chunk)[413](index=413&type=chunk)[414](index=414&type=chunk)[415](index=415&type=chunk)[416](index=416&type=chunk)[417](index=417&type=chunk) - Net revenues decreased by **$73.6 million** (**11.2%**) in 2019 compared to 2018, primarily due to lower average volumes and sales prices of gasoline and diesel in West Texas marketing operations[482](index=482&type=chunk)[483](index=483&type=chunk) - Operating expenses increased by **$15.4 million** (**26.2%**) in 2019, driven by **$7.1 million** in cleanup costs for a diesel fuel release near Sulphur Springs, Texas, and higher allocated contract and employee costs[489](index=489&type=chunk) - Income from equity method investments increased by **$13.6 million** (**218.3%**) in 2019, primarily due to the addition of the Red River Pipeline Joint Venture and increased income from other joint ventures (Andeavor Logistics and CP LLC)[496](index=496&type=chunk) Forward-Looking Statements Business Overview Our Reporting Segments and Assets 2019 Developments Business Strategies Commercial Agreements with Delek Holdings Other Transactions How We Evaluate Our Operations Market Trends Non-GAAP Measures Results of Operations Non-GAAP Reconciliations Critical Accounting Policies and Estimates Consolidated Results of Operations - Comparison of the Year Ended December 31, 2019 versus the Year Ended December 31, 2018 Operating Segments Pipelines and Transportation Segment Wholesale Marketing and Terminalling Segment [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=79&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The Partnership faces market risks from commodity price fluctuations and interest rate changes on floating-rate debt, with a 1% rate change impacting interest expense by $5.9 million, and LIBOR transition posing future borrowing cost risks - The Partnership's revenues and cash flows are sensitive to changes in commodity prices (crude oil, refined products, ethanol) and interest rates[564](index=564&type=chunk)[565](index=565&type=chunk) - A hypothetical **1%** change in interest rates on floating-rate debt outstanding as of December 31, 2019, would change interest expense by approximately **$5.9 million**[565](index=565&type=chunk) - The discontinuation of LIBOR after 2021 poses a risk, as the transition to an alternative reference rate could materially impact borrowing costs on variable rate indebtedness[566](index=566&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=80&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This item incorporates by reference the financial statements and supplementary data from page F-1 of this Annual Report on Form 10-K - The information required by Item 8 is incorporated by reference to the section beginning on page F-1[568](index=568&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=80&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) There have been no changes in or disagreements with accountants on accounting and financial disclosure - No changes in and disagreements with accountants on accounting and financial disclosure[568](index=568&type=chunk) [Item 9A. Controls and Procedures](index=80&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2019, with no material changes during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of December 31, 2019[569](index=569&type=chunk) - Management concluded that internal control over financial reporting was effective as of December 31, 2019, based on the COSO framework[572](index=572&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended December 31, 2019[573](index=573&type=chunk) [Item 9B. Other Information](index=80&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) There is no other information to report under this item - No other information to report[574](index=574&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=81&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) Delek Logistics GP, LLC, the general partner, is controlled by Delek Holdings, appointing officers and directors, with the Board comprising eight members, a majority being independent, and committees overseeing governance and executive incentives - Delek Logistics GP, LLC, the general partner, is an indirect subsidiary of Delek Holdings, which controls its officers and directors[577](index=577&type=chunk) - The Board of Directors has eight members, with five qualifying as independent directors under SEC and NYSE rules[580](index=580&type=chunk) - Executive officers of the general partner are employees of Delek Holdings; most devote less than **50%** of their time to the Partnership's business, except for Mr. Sakazi[582](index=582&type=chunk) - The Board has an Audit Committee, Conflicts Committee, and EHS Committee, all composed of independent directors[606](index=606&type=chunk)[609](index=609&type=chunk)[613](index=613&type=chunk) - The Conflicts Committee administers the Long-Term Incentive Plan (LTIP) for awards to executives, aligning their interests with unitholders[616](index=616&type=chunk) [Item 11. Executive Compensation](index=86&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) Executive officers are compensated by Delek Holdings via long-term incentives under the LTIP, with no 2019 equity awards for NEOs, while non-officer directors receive cash retainers and annual phantom unit awards - Executive officers are employees of Delek Holdings and do not receive traditional fixed or discretionary compensation directly from the Partnership[621](index=621&type=chunk)[626](index=626&type=chunk) - Executive compensation is primarily through long-term incentive awards (phantom units) under the LTIP, administered by the Conflicts Committee, to align interests with unitholders[627](index=627&type=chunk)[628](index=628&type=chunk) - No plan-based equity awards were granted to NEOs in 2019, and no outstanding equity awards were held by NEOs at December 31, 2019[641](index=641&type=chunk)[642](index=642&type=chunk)[643](index=643&type=chunk) - Compensated Directors (non-officer/employee directors) receive cash retainers for Board and committee service, plus an annual equity award of phantom units[651](index=651&type=chunk) Compensation of Directors in 2019 | Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Total ($) | | :-------------------- | :------------------------------ | :--------------- | :-------- | | Charles J. Brown, III | 87,000 | 99,991 | 186,991 | | Francis C. D'Andrea | 90,900 | 99,991 | 190,891 | | Eric D. Gadd | 88,100 | 99,991 | 188,091 | | Ron W. Haddock | 78,900 | 99,991 | 178,891 | | Reuven Spiegel | 96,500 | 99,991 | 196,491 | [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=90&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) As of February 21, 2020, Delek US Holdings, Inc. beneficially owned 62.7% of common units and 100% of general partner units, with other significant holders and 582,505 securities available for future issuance under equity compensation plans Security Ownership of Certain Beneficial Owners and Management (as of Feb 21, 2020) | Name of Beneficial Owner | Common Units () | Common Units (%) | General Partner Units () | General Partner Units (%) | Common Stock Delek US Holdings, Inc. () | Common Stock Delek US Holdings, Inc. (%) | | :-------------------------------- | :--------------- | :--------------- | :------------------------ | :------------------------ | :--------------------------------------- | :--------------------------------------- | | Delek US Holdings, Inc. | 15,294,046 | 62.7 | 498,482 | 100.0 | n/a | n/a | | Tortoise Capital Advisors, L.L.C. | 60,250 | 7.2 | — | n/a | n/a | n/a | | Ezra Uzi Yemin | 267,522 | 1.1 | — | n/a | 761,124 | 1.0 | | Assaf Ginzburg | 16,510 | * | — | n/a | 33,641 | * | | Frederec Green | 68,552 | * | — | n/a | 125,085 | * | Equity Compensation Plan Information (as of Dec 31, 2019) | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance | | :------------------------------------------------------- | :---------------------------------------------------------------------------------------- | :---------------------------------------------------------- | :----------------------------------------------------------- | | Equity compensation plans approved by security holders | 582,505 | N/A | 87,310 | | Equity compensation plans not approved by security holders | — | N/A | — | | TOTAL | 582,505 | N/A | 87,310 | [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=92&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) The Partnership has significant related party transactions with Delek Holdings due to its majority ownership, including cash distributions and commercial agreements, governed by the Omnibus Agreement and a formal related party transactions policy - Delek Holdings and its affiliates hold a **63.4%** ownership interest in the Partnership, leading to numerous related party transactions[667](index=667&type=chunk) - In 2019, **$83.0 million** of the **$113.7 million** in total cash distributions were paid to Delek Holdings and the general partner, including incentive distribution rights[671](index=671&type=chunk) - The Partnership has long-term, fee-based commercial agreements with Delek Holdings for various logistics and marketing services, with minimum throughput commitments[673](index=673&type=chunk) - The Omnibus Agreement outlines non-compete clauses, a right of first offer for Delek Holdings' logistics assets, reimbursement for certain operating and capital expenditures, and indemnification for environmental, title, and tax matters[674](index=674&type=chunk) - The Board has a formal written related party transactions policy, generally requiring approval by the Board or the Conflicts Committee for transactions exceeding **$2.5 million** annually or those outside the ordinary course of business[681](index=681&type=chunk)[684](index=684&type=chunk) [Item 14. Principal Accountant Fees and Services](index=95&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) Ernst & Young LLP served as the independent auditor, with audit fees of $694,050 in 2019 and audit-related fees of $54,622, all pre-approved by the Audit Committee to ensure independence Principal Accountant Fees (in USD) | Fee Type | 2019 | 2018 | | :---------------- | :-------- | :-------- | | Audit fees | $694,050 | $677,525 | | Audit-related fees | $54,622 | $81,447 | | Tax fees | $0 | $0 | | All other fees | $0 | $0 | - All services performed by Ernst & Young LLP were pre-approved by the Audit Committee, which has a policy to ensure auditor independence[691](index=691&type=chunk)[692](index=692&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=98&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists financial statements, schedules, and exhibits filed with the Annual Report on Form 10-K, including organizational documents, commercial agreements, and certifications - The section includes the Index to Financial Statements and Schedule, and a list of exhibits[696](index=696&type=chunk) - Exhibits include organizational documents (Certificate of Limited Partnership, Partnership Agreement), debt instruments (Indenture for 2025 Notes, Credit Agreement), commercial agreements with Delek Holdings and third parties, and equity compensation plans[699](index=699&type=chunk)[700](index=700&type=chunk) - Certifications by the Chief Executive Officer and Chief Financial Officer, and the Report of Independent Registered Public Accounting Firm for Red River Pipeline Company LLC are also filed as exhibits[703](index=703&type=chunk) Financial Statements [Reports of Independent Registered Public Accounting Firm](index=103&type=section&id=Reports%20of%20Independent%20Registered%20Public%20Accounting%20Firm) [Consolidated Balance Sheets](index=105&type=section&id=Consolidated%20Balance%20Sheets) [Consolidated Statements of Income and Comprehensive Income](index=106&type=section&id=Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) [Consolidated Statements of Partners' Equity (Deficit)](index=107&type=section&id=Consolidated%20Statements%20of%20Partners%27%20Equity%20%28Deficit%29) [Consolidated Statements of Cash Flows](index=108&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) [Notes to Consolidated Financial Statements](index=110&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) 1. General 2. Accounting Policies 3. Acquisitions 4. Related Party Transactions 5. Revenues 6. Net Income Per Unit 7. Inventory 8. Property, Plant and Equipment 9. Goodwill 10. Other Intangible Assets 11. Long-Term Obligations 12. Equity 13. Equity Based Compensation 14. Equity Method Investments 15. Segment Data 16. Income Taxes 17. Commitments and Contingencies 18. Leases 19. Selected Quarterly Financial Data (Unaudited) 20. Subsequent Events This section presents the audited consolidated financial statements of Delek Logistics Partners, LP for 2017-2019, including reports, balance sheets, income statements, equity statements, cash flows, and detailed notes on financial position and policies - The consolidated financial statements include the balance sheets as of December 31, 2019 and 2018, and statements of income, partners' equity, and cash flows for the three years ended December 31, 2019[708](index=708&type=chunk) - Ernst & Young LLP issued an unqualified opinion on the financial statements and the effectiveness of internal control over financial reporting as of December 31, 2019[708](index=708&type=chunk)[710](index=710&type=chunk)[716](index=716&type=chunk) - The financial statements are prepared in conformity with U.S. GAAP and include estimates and assumptions that affect reported amounts[740](index=740&type=chunk) Item 16. Form 10-K Summary This item states that there is no Form 10-K Summary - No Form 10-K Summary is provided[916](index=916&type=chunk) Signatures The report is signed by Delek Logistics GP, LLC's Director, EVP, and CFO, Assaf Ginzburg, along with the Chairman and other directors, affirming compliance with the Securities Exchange Act of 1934 - The report is signed by Assaf Ginzburg, Director, Executive Vice President and Chief Financial Officer of Delek Logistics GP, LLC, on behalf of Delek Logistics Partners, LP[920](index=920&type=chunk) - Signatures also include Ezra Uzi Yemin, Chairman of the Board of Directors and Chief Executive Officer, and other directors, affirming compliance with the Securities Exchange Act of 1934[920](index=920&type=chunk)

Delek Logistics Partners, LP (NYSE:DKL) Q4 2019 Earnings Conference Call February 26, 2020 8:30 AM ET Company Participants Blake Fernandez - SVP, IR and Market Intelligence Uzi Yemin - Chairman and CEO Assi Ginzburg - CFO Conference Call Participants Operator Ladies and gentlemen, thank you for standing by, and welcome to the Delek Logistics Fourth Quarter Earnings Conference Call. At this time, all participants' lines are in a listen-only mode. After the speakers’ presentation, there will be a question and ...

Financial Performance - Net revenues for the three months ended September 30, 2019, were $137,556,000, a decrease of 16% from $164,110,000 for the same period in 2018[14] - Operating income for the three months ended September 30, 2019, was $34,729,000, up from $32,624,000 in the prior year, indicating an increase of about 6.4%[14] - Net income attributable to partners for the three months ended September 30, 2019, was $30,530,000, compared to $23,326,000 in the same period last year, marking an increase of about 31%[14] - Net income attributable to partners for the nine months ended September 30, 2019, was $75,112,000, an increase of 9.5% compared to $68,903,000 for the same period in 2018[21] - Net income for the three months ended September 30, 2019, was $14,342 million, representing a 64.5% increase from $8,709 million in the prior year[96] - Net income attributable to partners for the three months ended September 30, 2019, was $30.530 million, compared to $23.326 million for the same period in 2018, reflecting a year-over-year increase of 31.6%[86] Assets and Liabilities - Total assets increased to $767,807,000 as of September 30, 2019, compared to $624,593,000 at December 31, 2018, representing a growth of approximately 23%[10] - Long-term debt rose to $840,765,000 as of September 30, 2019, compared to $700,430,000 at December 31, 2018, reflecting an increase of approximately 20%[10] - Total current liabilities decreased to $32,341,000 as of September 30, 2019, down from $36,505,000 at December 31, 2018, a reduction of approximately 11.9%[10] - The equity method investments increased significantly to $246,998,000 as of September 30, 2019, from $104,770,000 at December 31, 2018, representing a growth of approximately 135%[10] - Current assets increased to $11,618 million as of September 30, 2019, from $6,594 million as of December 31, 2018, reflecting a significant growth[94] Cash Distributions - Cash distributions per limited partner unit increased to $0.880 for the three months ended September 30, 2019, compared to $0.790 for the same period in 2018[14] - The total cash distributions for the three months ended September 30, 2019, were $30.379 million, compared to $25.960 million for the same period in 2018, representing an increase of 5.419 million[90] - Quarterly cash distributions in August 2019 totaled $28.9 million, an increase from $25.0 million in August 2018, representing a year-over-year growth of 11.6%[52] - Cash distributions for the nine months ended September 30, 2019, totaled $83,271,000, compared to $71,845,000 for the same period in 2018, reflecting a 15.9% increase[21] - The Partnership's cash distribution rate is set at $0.88 per unit for Q3 2019, equating to an annualized rate of $3.52 per unit[177] Revenue and Expenses - Total revenue for the three months ended September 30, 2019, was $137.6 million, with lease revenue from affiliates contributing $60.1 million[55] - Revenues for the three months ended September 30, 2019, were $66.6 million, compared to $63.8 million for the same period in 2018, reflecting a year-over-year increase of 4.3%[51] - The Partnership's operating and maintenance expenses for the three months ended September 30, 2019, were $18.3 million, compared to $10.3 million in the same period of 2018, reflecting an increase of 77.5%[51] - General and administrative expenses for the three months ended September 30, 2019, were $4.3 million, significantly higher than $0.8 million in the same period of 2018[51] - Total operating costs and expenses for the three months ended September 30, 2019, were $102.8 million, a decrease of approximately 21.7% from $131.5 million in the same period of 2018[206] Investments and Acquisitions - The company contributed $124.7 million to Red River for a 33% membership interest, with an additional $3.5 million for an expansion project expected to complete in the first half of 2020[94] - The company incurred equity method investment contributions of $137,361,000 during the nine months ended September 30, 2019, compared to $172,000 in the same period of 2018[21] - The total purchase price for the Big Spring Logistic Assets Acquisition was $170.8 million, financed through borrowings under the Partnership's revolving credit facility[36] - A contract intangible asset related to the Marketing Contract Intangible Acquisition was recorded at $144.2 million, amortized over a twenty-year period[39] Debt and Financing - The DKL Credit Facility was increased from $700 million to $850 million, with an accordion feature allowing for an increase to $1 billion[70] - As of September 30, 2019, the outstanding borrowings under the DKL Credit Facility amounted to $596.3 million, with unused credit commitments of $253.7 million[73] - The weighted average interest rate for borrowings under the DKL Credit Facility was approximately 4.9% as of September 30, 2019[72] - The Partnership issued $250.0 million in aggregate principal amount of 6.75% senior notes due 2025, with an effective interest rate of approximately 7.2% as of September 30, 2019[80] Regulatory and Environmental Matters - The company expects maintenance and remediation efforts for the Sulphur Springs Release to cost between $4.0 million and $6.0 million[121] - The company anticipates that continuing capital investments will be required to comply with evolving environmental and safety regulations[114] - The company experienced five crude oil releases in 2019 and six in 2018, with remediation efforts at various stages of completion[118] - The company expects regulatory closure for some release sites by the end of 2019, with a few remaining sites expected to close in 2020[118] Market and Operational Insights - The Partnership's operations are significantly influenced by crude oil prices, which affect drilling activity and capital spending in the midstream energy sector[178] - A substantial majority of the Partnership's revenue is derived from long-term commercial agreements with Delek Holdings, which include minimum volume commitments[163] - The Partnership's revenue generation is closely tied to the volumes of crude oil and refined products handled, influenced by supply and demand dynamics[170] - The Partnership manages operating and maintenance expenses to maximize profitability, which include costs associated with terminals and pipelines[173]