Delek US Holdings, Inc. 10-Q

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Changes in commodity prices (mainly crude oil and refined products) and interest rates are our primary sources of market risk. When we make the decision to manage our market exposure, our objective is generally to avoid losses from adverse price changes, realizing we will not obtain the gains of beneficial price changes. 57 | Management's Discussion and Analysis Price Risk Management Activities At times, we enter into the following instruments/transactions in order to manage our market-indexed pricing risk: commodity derivative contracts which we use to manage our price exposure to our inventory positions, future purchases of crude oil and ethanol, future sales of refined products or to fix margins on future production; and future commitments to purchase or sell RINs at fixed prices and quantities, which are used to manage the costs associated with our RINs Obligations and meet the definition of derivative instruments under ASC 815, Derivatives and Hedging ("ASC 815"). In accordance with ASC 815, all of these commodity contracts and future purchase commitments are recorded at fair value, and any change in fair value between periods has historically been recorded in the profit and loss section of our condensed consolidated financial statements. Occasionally, at inception, the Company will elect to designate the commodity derivative contracts as cash flow hedges under ASC 815. Gains or losses on commodity derivative contracts accounted for as cash flow hedges are recognized in other comprehensive income on the condensed consolidated balance sheets and, ultimately, when the forecasted transactions are completed in net revenues or cost of materials and other in the condensed consolidated statements of income. The following table sets forth information relating to our open commodity derivative contracts, excluding our trading derivative contracts (which are discussed separately below), as of March 31, 2026 ($ in millions): Total Outstanding Notional Contract Volume by Year of Maturity Contract Description Fair Value Notional Contract Volume 2026 2027 Contracts not designated as hedging instruments: Crude oil price swaps - long (1) $ 145.4 12,624,000 11,774,000 850,000 Crude oil price swaps - short (1) (161.6) 13,657,000 13,157,000 500,000 Crude oil options - long (1) 0.2 50,000 50,000 — Crude oil options - short (1) — 50,000 50,000 — Inventory, refined product and crack spread swaps - long (1) 5.4 2,520,000 2,520,000 — Inventory, refined product and crack spread swaps - short (1) (15.2) 2,472,000 2,472,000 — RINs commitment contracts - long (2) 2.3 10,636,802 10,636,802 — RINs commitment contracts - short (2) (3.1) 10,000,000 10,000,000 — Total $ (26.6) (1) Volume in barrels. (2) Volume in RINs. 58 | Management's Discussion and Analysis Interest Rate Risk We have market exposure to changes in interest rates relating to our outstanding floating rate borrowings, which totaled approximately $1,080.2 million as of March 31, 2026. We help manage this risk through interest rate swap agreements that we may periodically enter into in order to modify the interest rate characteristics of our outstanding long-term debt. In accordance with ASC 815, all interest rate hedging instruments are recorded at fair value and any changes in the fair value between periods are recognized in earnings. We expect that any interest rate derivatives held will reduce our exposure to short-term interest rate movements. As of March 31, 2026, we had two floating-to-fixed interest rate derivative agreements in place for a notional amount of $200.0 million, which matures in May 2027, and $500.0 million, which matures in November 2027. The estimated fair value of our interest rate derivative liability was $0.9 million as of March 31, 2026. On April 1, 2026, we entered into an interest rate swap agreement to hedge floating rate debt by exchanging interest rate cash flows, based on a notional amount from a floating rate to a fixed rate, which effectively fixed the variable SOFR interest component of the Delek Term Loan Credit Facility. The aggregate notional amount under this agreement covers $200.0 million of the outstanding principal throughout the duration of the interest rate swap. The annualized impact of a hypothetical one percent change in interest rates on our floating rate debt, after considering the interest rate swaps, outstanding as of March 31, 2026 would be to change interest expense by approximately $3.8 million. We also have interest rate exposure in connection with our Inventory Intermediation Agreement under which we pay a time value of money charge based on SOFR. Commodity Derivatives Trading Activities From time to time, we enter into active trading positions in a variety of commodity derivatives, which include forward physical contracts, swap contracts, and futures contracts. These trading activities are undertaken by using a range of contract types in combination to create incremental gains by capitalizing on crude oil supply and pricing seasonality. These contracts are classified as held for trading and are recognized at fair value with changes in fair value recognized in the income statement. We had no outstanding trading commodity derivative contracts as of March 31, 2026. 59 | Controls and Procedures