What changed in this filing

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Item 1. Financial Statements

2020-08-07 compared with 2020-05-08 · 382 added, 260 removed, 788 unchanged (45% of the section changed)

3 unchanged sentences

(In millions, except share and per share data)

March 31, 2020

June 30, 2020

December 31, 2019

31 unchanged sentences

Stockholders’ equity:

Preferred stock, $0.01 par value, 11,000,000 shares and 10,000,000 shares authorized at March 31,2020 and December 31, 2019, respectively, no shares issued and outstanding

Common stock, $0.01 par value, 110,000,000 shares authorized, 91,089,920 shares and 90,987,025 shares issued at March 31, 2020 and December 31, 2019, respectively

Preferred stock, $0.01 par value, 11,000,000 shares and 10,000,000 shares authorized at June 30,2020 and December 31, 2019, respectively, no shares issued and outstanding

Common stock, $0.01 par value, 110,000,000 shares authorized, 91,232,964 shares and 90,987,025 shares issued at June 30, 2020 and December 31, 2019, respectively

Additional paid-in capital

Accumulated other comprehensive income

Treasury stock, 17,575,527 shares and 17,516,814 shares, at cost, as of March 31, 2020 and December 31, 2019, respectively

Treasury stock, 17,575,527 shares and 17,516,814 shares, at cost, as of June 30, 2020 and December 31, 2019, respectively

Retained earnings

8 unchanged sentences

Three Months Ended

Six Months Ended

Cost of sales:

6 unchanged sentences

Depreciation and amortization

Other operating (income) expense, net

Other operating income, net

Total operating costs and expenses

Operating (loss) income

Operating income (loss)

Interest expense

1 unchanged sentence

Income from equity method investments

Other income, net

Total non-operating expenses, net

(Loss) income before income tax (benefit) expense

Gain on sale of non-operating refinery

Other (income) expense, net

Total non-operating (income) expense, net

Income (loss) before income tax (benefit) expense

Income tax (benefit) expense

Net (loss) income

Income (loss) from continuing operations, net of tax

Discontinued operations:

Loss from discontinued operations, including gain (loss) on sale of discontinued operations

Income tax benefit

Loss from discontinued operations, net of tax

Net income (loss)

Net income attributed to non-controlling interests

Net (loss) income attributable to Delek

Basic (loss) income per share

Diluted (loss) income per share

Net income (loss) attributable to Delek

Basic income (loss) per share:

Income (loss) from continuing operations

Loss from discontinued operations

Basic income (loss) per share

Diluted income (loss) per share:

Income (loss) from continuing operations

Loss from discontinued operations

Diluted income (loss) per share

Dividends declared per common share outstanding

4 unchanged sentences

(In millions)

Three Months Ended March 31,

Net (loss) income

Three Months Ended June 30,

Six Months Ended June 30,

Net income (loss)

Other comprehensive income (loss):

Commodity contracts designated as cash flow hedges:

Net gains related to commodity cash flow hedges

Income tax expense

Net comprehensive income on commodity contracts designated as cash flow hedges

Foreign currency translation (loss) gain, net of taxes

Gains related to postretirement benefit plans, net of taxes

Total other comprehensive income

Comprehensive (loss) income

Net gains (losses) related to commodity cash flow hedges

Income tax expense (benefit)

Net comprehensive income (loss) on commodity contracts designated as cash flow hedges

Other income, net of taxes

Total other comprehensive income (loss)

Comprehensive income (loss)

Comprehensive income attributable to non-controlling interest

Comprehensive (loss) income attributable to Delek

Comprehensive income (loss) attributable to Delek

See accompanying notes to condensed consolidated financial statements

3 unchanged sentences

(In millions, except share and per share data)

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Additional Paid-in Capital

4 unchanged sentences

Total Stockholders' Equity

March 31, 2020

Other comprehensive loss related to commodity contracts, net

Common stock dividends ($0.31 per share)

Distributions to non-controlling interests

Equity-based compensation expense

Repurchase of non-controlling interests

Taxes paid due to the net settlement of equity-based compensation

Exercise of equity-based awards

June 30, 2020

Financial Statements

Delek US Holdings, Inc.

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)

(In millions, except share and per share data)

Three Months Ended June 30, 2019

Additional Paid-in Capital

Accumulated Other Comprehensive Income

Retained Earnings

Treasury Stock

Non-Controlling Interest in Subsidiaries

Total Stockholders' Equity

March 31, 2019

Other comprehensive loss related to commodity contracts, net

Common stock dividends ($0.28 per share)

Distribution to non-controlling interest

Equity-based compensation expense

Repurchase of common stock

Taxes paid due to the net settlement of equity-based compensation

Exercise of equity-based awards

June 30, 2019

Financial Statements

Delek US Holdings, Inc.

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)

(In millions, except share and per share data)

Six Months Ended June 30, 2020

Additional Paid-in Capital

Accumulated Other Comprehensive Income

Retained Earnings

Treasury Stock

Non-Controlling Interest in Subsidiaries

Total Stockholders' Equity

December 31, 2019

2 unchanged sentences

Other comprehensive income related to commodity contracts, net

Foreign currency translation loss, net

Common stock dividends ($0.62 per share)

5 unchanged sentences

Exercise of equity-based awards

March 31, 2020

June 30, 2020

Financial Statements

2 unchanged sentences

(In millions, except share and per share data)

Three Months Ended March 31, 2019

Six Months Ended June 30, 2019

Additional Paid-in Capital

5 unchanged sentences

December 31, 2018

Other comprehensive income related to commodity contracts, net

Other comprehensive income related to postretirement benefit plans, net

Foreign currency translation gain, net

Other comprehensive loss related to commodity contracts, net

Common stock dividends ($0.55 per share)

4 unchanged sentences

Exercise of equity-based awards

March 31, 2019

June 30, 2019

See accompanying notes to condensed consolidated financial statements

3 unchanged sentences

(In millions)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

8 unchanged sentences

Loss on disposal of assets

Gain on sale of non-operating refinery

Equity-based compensation expense

Excess tax deficiency (benefit) of equity-based compensation

Loss from discontinued operations

Changes in assets and liabilities:

3 unchanged sentences

Accounts payable and other current liabilities

Obligation under Supply and Offtake Agreement

Obligation under Supply and Offtake Agreements

Non-current assets and liabilities, net

4 unchanged sentences

Purchases of property, plant and equipment

Purchase of intangible assets

Proceeds from sale of property, plant and equipment

Proceeds from sale of retail stores

Proceeds from sale of non-operating refinery

Net cash used in investing activities

2 unchanged sentences

(In millions)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from financing activities:

1 unchanged sentence

Payments on long-term revolvers

Proceeds from term debt

Payments on term debt

15 unchanged sentences

Non-cash investing activities:

Increase in accrued capital expenditures

(Decrease) increase in accrued capital expenditures

Non-cash financing activities:

32 unchanged sentences

As a result, there has also been a decline in the demand for, and thus also the market prices of, crude oil and certain of our products.

In addition, recent events concerning the dispute over production levels between Russia and the members of the Organization of Petroleum Exporting Countries ("OPEC"), particularly Saudi Arabia, and the subsequent actions taken by such countries as a result thereof, including Saudi Arabia discounting the price of its crude oil exports (the "OPEC Production Disputes"), have exacerbated the decline in crude oil prices and have contributed to an increase in crude oil price volatility.

Uncertainties related to the impact of the COVID-19 Pandemic and OPEC Production Disputes exist that could impact our future results of operations and financial position, the nature of which and the extent to which are currently unknown.

To the extent these uncertainties have been identified and are believed to have an impact on our current period results of operations or financial position based on the requirements for assessing such financial statement impact under GAAP, we have considered them in the preparation of our unaudited financial statements as of and for the three months ended March 31, 2020 .

In April and June 2020, an agreement was reached to cut oil production between the members of the Organization of Petroleum Exporting Countries ("OPEC") and other leading oil producing countries (together with OPEC, “OPEC+”), as part of the efforts to resolve the oil production disputes ("OPEC Production Disputes") that significantly affected crude oil prices beginning in first quarter of 2020 and to provide stability in the oil markets.

While OPEC+ have reached an agreement to cut oil production, uncertainty about the duration of the COVID-19 Pandemic has caused storage constraints in the United States resulting from over-supply of produced oil.

Therefore, downward pressure on commodity prices has remained and could continue for the foreseeable future.

Uncertainties related to the impact of the COVID-19 Pandemic and other events exist that could impact our future results of operations and financial position, the nature of which and the extent to which are currently unknown.

The application of accounting policies impacted by such considerations include (but are not necessarily limited to) the following:

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The interim evaluation of indefinite-lived intangibles and goodwill for potential impairment, where indicators exist, as defined by GAAP;

The interim evaluation of joint ventures for potential impairment, where indicators exist, as defined by GAAP;

Notes to Condensed Consolidated Financial Statements (Unaudited)

The interim evaluation of joint ventures for potential impairment, where indicators exist, as defined by GAAP;

The evaluation of derivatives and hedge accounting for counterparty risk and changes in forecasted transactions, as provided for under GAAP;

The evaluation of inventory valuation allowances that may be warranted under the lower of cost or net realizable value analysis (for FIFO) and the lower of cost or market analysis (for LIFO), pursuant to GAAP;

The evaluation of inventory valuation allowances that may be warranted under the lower of cost or net realizable value analysis, for first-in, first-out (“FIFO”), and the lower of cost or market analysis, for last-in, first-out ("LIFO"), pursuant to GAAP;

The consideration of debt modifications and/or covenant requirements, as applicable;

3 unchanged sentences

Credit Losses

Under ASU 2016-13, Financial Instruments - Measurement of Credit Losses on Financial Instruments (as codified in ASC 326), we have applied the expected credit loss model for recognition and measurement of impairments in financial assets measured at amortized cost or at fair value through other comprehensive income including accounts receivables.

Under ASU 2016-13, Financial Instruments - Measurement of Credit Losses on Financial Instruments (as codified in Accounting Standards Codification ("ASC") 326), we have applied the expected credit loss model for recognition and measurement of impairments in financial assets measured at amortized cost or at fair value through other comprehensive income including accounts receivables.

The expected credit loss model is also applied for notes receivables and contractual holdbacks to which ASU 2016-13 applies and which are not accounted for at fair value through profit or loss.

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In January 2020, the FASB issued ASU 2020-01 which is intended to clarify interactions between the guidance to account for certain equity securities under Topics 321, 323 and 815, and improve current GAAP by reducing diversity in practice and increasing comparability of accounting.

The pronouncement is effective for fiscal years and interim periods within those fiscal years beginning December 15, 2020, and early adoption is permitted.

The pronouncement is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020, and early adoption is permitted.

The Company is currently evaluating the impact this guidance may have on its consolidated financial statements and related disclosures.

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The pronouncement eliminates, modifies and adds disclosure requirements for defined benefit plans.

The pronouncement is effective for fiscal years ending after December 15, 2020, and early adoption is permitted.

The pronouncement is effective for fiscal years beginning after December 15, 2020, and early adoption is permitted.

We expect to adopt this guidance on the effective date and do not expect adopting this new guidance will have a material impact on our business, financial condition or results of operations.

5 unchanged sentences

results of certain immaterial operating segments, including our Canadian crude trading operations (as discussed in Note 9 );

wholesale crude operations;

Alon's asphalt terminal operations;

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The refining segment processes crude oil and other feedstocks for the manufacture of transportation motor fuels, including various grades of gasoline, diesel fuel and aviation fuel, asphalt and other petroleum-based products that are distributed through owned and third-party product terminals.

The refining segment has a combined nameplate capacity of 302,000 barrels per day ("bpd") as of March 31, 2020 , including the following:

The refining segment has a combined nameplate capacity of 302,000 barrels per day ("bpd") as of June 30, 2020 , including the following:

75,000 bpd Tyler, Texas refinery (the "Tyler refinery");

80,000 bpd El Dorado, Arkansas refinery (the "El Dorado refinery");

73,000 bpd Big Spring, Texas refinery (the "Big Spring refinery");

Notes to Condensed Consolidated Financial Statements (Unaudited)

73,000 bpd Big Spring, Texas refinery (the "Big Spring refinery");

74,000 bpd Krotz Springs, Louisiana refinery (the "Krotz Springs refinery");

a non-operating refinery located in Bakersfield, California.

a non-operating refinery located in Bakersfield, California, which was sold May 7, 2020.

The refining segment also owns and operates three biodiesel facilities involved in the production of biodiesel fuels and related activities, located in Crossett, Arkansas, Cleburne, Texas and New Albany, Mississippi (acquired in October 2019).

3 unchanged sentences

The blender's tax credit was re-enacted in December 2019 for the years 2020 through 2022 and was retroactively reinstated for 2018 and 2019.

The refining segment's petroleum-based products are marketed primarily in the south central, southwestern and western regions of the United States, and also ships and sells gasoline into wholesale markets in the southern and eastern United States.

On May 7, 2020, we sold our equity interests in Alon Bakersfield Property, Inc., an indirect wholly-owned subsidiary that owns our non-operating refinery located in Bakersfield, California, to a subsidiary of Global Clean Energy Holdings, Inc.

(“GCE”) for total cash consideration of $ 40 million .

As a result of this sale, we recognized a gain of $ 56.9 million , largely due to the buyer assuming substantially all of the asset retirement obligations and environmental liabilities associated with this refinery, which is included in gain on sale of non-operating refinery on the accompanying condensed consolidated statements of income.

As part of the transaction, GCE granted a call option to Delek to acquire up to a 33 1/3% interest in the acquiring subsidiary of GCE, exercisable by Delek through the 90th day after GCE demonstrates commercial operations, as contractually defined.

The refining segment's petroleum-based products are marketed primarily in the south central, southwestern and western regions of the United States.

This segment also ships and sells gasoline into wholesale markets in the southern and eastern United States.

Motor fuels are sold under the Alon or Delek brand through various terminals to supply Alon or Delek branded retail sites.

4 unchanged sentences

Retail Segment

Our retail segment consists of 253 owned and leased convenience store sites as of March 31, 2020 , located primarily in central and West Texas and New Mexico.

Our retail segment consists of 253 owned and leased convenience store sites as of June 30, 2020 , located primarily in Central and West Texas and New Mexico.

These convenience stores typically offer various grades of gasoline and diesel primarily under the Alon or Delek brand name and food products, food service, tobacco products, non-alcoholic and alcoholic beverages, general merchandise as well as money orders to the public, primarily under the 7-Eleven and Alon brand names.

1 unchanged sentence

In November 2018, we terminated the license agreement with 7-Eleven, Inc.

and the terms of such termination require the removal of all 7-Eleven branding on a store-by-store basis by the earlier of December 31, 2021 or the date upon which our last 7-Eleven store is de-identified or closed.

Merchandise sales at our convenience store sites will continue to be sold under the 7-Eleven brand name until 7-Eleven branding is removed at such convenience store sites pursuant to the termination.

This agreement was amended in April 2020 to extend date for the required removal of all 7-Eleven branding on a store-by-store basis from December 31, 2021 to December 31, 2022.

Merchandise sales at our convenience store sites will continue to be sold under the 7-Eleven brand name until 7-Eleven branding is removed at such convenience store sites.

Significant Inter-segment Transactions

5 unchanged sentences

logistics segment crude transportation, terminalling and storage fee revenue from our refining segment for the utilization of pipeline, terminal and storage assets.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Business Segment Operating Performance

The following is a summary of business segment operating performance as measured by contribution margin for the period indicated (in millions):

Notes to Condensed Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

(In millions)

9 unchanged sentences

Other operating income, net

Operating income

Capital spending (excluding business combinations)

Three Months Ended June 30, 2019

Other and Eliminations (1)

Net revenues (excluding inter-segment fees and revenues)

Inter-segment fees and revenues

Operating costs and expenses:

Cost of materials and other

Operating expenses (excluding depreciation and amortization presented below)

Segment contribution margin

Depreciation and amortization

General and administrative expenses

Other operating income, net

Operating income

Capital spending (excluding business combinations)

Six Months Ended June 30, 2020

(In millions)

Other and Eliminations

Net revenues (excluding inter-segment fees and revenues)

Inter-segment fees and revenues

Operating costs and expenses:

Cost of materials and other

Operating expenses (excluding depreciation and amortization presented below)

Segment contribution margin

Depreciation and amortization

General and administrative expenses

Other operating income, net

Operating loss

Capital spending (excluding business combinations)

Three Months Ended March 31, 2019

Notes to Condensed Consolidated Financial Statements (Unaudited)

Six Months Ended June 30, 2019

Other and Eliminations (1)

7 unchanged sentences

General and administrative expenses

Other operating expense, net

Other operating income, net

Operating income

Capital spending (excluding business combinations)

The refining segment results of operations for the three months ended March 31, 2019 , includes hedging gains, a component of cost of materials and other, of $ 7.6 million which was previously included and reported in corporate, other and eliminations.

The refining segment results of operations for the three and six months ended June 30, 2019 , includes hedging gains, a component of cost of materials and other, of $ 19.8 million and $ 27.4 million , respectively, which was previously included and reported in corporate, other and eliminations.

Other Segment Information

Total assets by segment were as follows as of March 31, 2020 :

Total assets by segment were as follows as of June 30, 2020 :

Other and Eliminations

2 unchanged sentences

Total assets, excluding inter-segment notes receivable and right of use assets

Notes to Condensed Consolidated Financial Statements (Unaudited)

Property, plant and equipment and accumulated depreciation as of March 31, 2020 and depreciation expense by reporting segment for the three months ended March 31, 2020 are as follows (in millions):

Property, plant and equipment and accumulated depreciation as of June 30, 2020 and depreciation expense by reporting segment for the three and six months ended June 30, 2020 are as follows (in millions):

Other and Eliminations

2 unchanged sentences

Property, plant and equipment, net

Depreciation expense for the three months ended March 31, 2020

I n accordance with Accounting Standards Codification ("ASC") 360, Property, Plant and Equipment ("ASC 360"), Delek evaluates the realizability of property, plant and equipment as events occur that might indicate potential impairment.

T here were no indicators of impairment related to our property, plant and equipment as of March 31, 2020 (see Note 1 for further discussion on the impact of COVID-19 Pandemic and OPEC Production Disputes).

Depreciation expense for the three months ended June 30, 2020

Depreciation expense for the six months ended June 30, 2020

I n accordance with ASC 360, Property, Plant and Equipment ("ASC 360"), Delek evaluates the realizability of property, plant and equipment as events occur that might indicate potential impairment.

T here were no indicators of impairment related to our property, plant and equipment as of June 30, 2020 (see Note 1 for further discussion on the impact of COVID-19 Pandemic and OPEC Production Disputes).

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 3 - Earnings (Loss) Per Share

5 unchanged sentences

Three Months Ended

Six Months Ended

Numerator for EPS

Net (loss) income

Income attributed to non-controlling interest

Income (loss) from continuing operations, net of tax

Income from continuing operations attributed to non-controlling interest

Numerator for basic and diluted EPS - attributable to Delek

Numerator for EPS - discontinued operations

Loss from discontinued operations attributable to Delek

Weighted average common shares outstanding (denominator for basic EPS)

1 unchanged sentence

Weighted average common shares outstanding, assuming dilution (denominator for diluted EPS)

Basic (loss) income per share

Diluted (loss) income per share

Basic income (loss) per share:

Income (loss) from continuing operations

Loss from discontinued operations

Basic income (loss) per share

Diluted income (loss) per share:

Income (loss) from continuing operations

Loss from discontinued operations

Diluted income (loss) per share

The following equity instruments were excluded from the diluted weighted average common shares outstanding because their effect would be antidilutive:

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A substantial majority of Delek Logistics' assets are integral to Delek’s refining and marketing operations.

As of March 31, 2020 , we owned a 69.1 % limited partner interest in Delek Logistics, consisting of 20,745,868 common units, and a 94.6 % interest in Delek Logistics GP, LLC, which owns the entire 2.0 % general partner interest, consisting of 600,523 general partner units, in Delek Logistics and all of the incentive distribution rights.

As of June 30, 2020 , we owned a 69.1 % interest in Delek Logistics, consisting of 20,745,868 common limited partner units (representing a 70.5 % interest), and a 94.8 % interest in Delek Logistics GP, LLC, which owns the entire 2.0 % general partner interest (consisting of 600,678 general partner units) in Delek Logistics as well as all of the incentive distribution rights.

The limited partner interests in Delek Logistics not owned by us are reflected in net income attributable to non-controlling interest in the accompanying condensed consolidated statements of income and in non-controlling interest in subsidiaries in the accompanying condensed consolidated balance sheets.

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Accounts receivable

Accounts receivable from related parties

Other current assets

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Total liabilities and deficit

Effective May 1, 2020, Delek through its wholly owned subsidiaries Lion Oil Company (“Lion Oil”) and Delek Refining, Ltd.

(“Delek Refining”) contributed certain leased and owned tractors and trailers and related assets used in the provision of trucking and transportation services for crude oil, petroleum and certain other products throughout Arkansas, Oklahoma and Texas to Delek Trucking, LLC (“Delek Trucking”), a direct wholly owned subsidiary of Lion Oil.

Following this contribution, Lion Oil sold all of the issued and outstanding membership interests in Delek Trucking (the “Acquisition”) to DKL Transportation, LLC (“DKL Transportation”), a wholly owned subsidiary of Delek Logistics.

Promptly following the consummation of the Acquisition, Delek Trucking merged with and into DKL Transportation, with DKL Transportation continuing as the surviving entity.

Total consideration for the Acquisition was approximately $ 48.0 million in cash, subject to certain post-closing adjustments,

Notes to Condensed Consolidated Financial Statements (Unaudited)

financed primarily with borrowings under Delek Logistics’ revolving credit facility.

In connection with the Acquisition, Delek Refining, Lion Oil and DKL Transportation entered into a Transportation Services Agreement pursuant to which DKL Transportation will gather, coordinate the pickup of, transport and deliver petroleum products for Delek Refining and Lion Oil, as well as provide ancillary services as requested.

Prior periods have not been recast in our Segment Data Note 2 , as these assets did not constitute a business in accordance with ASU 2017-01, Clarifying the Definition of a Business , and the transaction was accounted for as an acquisition of assets between entities under common control.

Effective March 31, 2020, Delek Logistics, through its wholly-owned subsidiary DKL Permian Gathering, LLC, acquired the Big Spring Gathering System, located in Howard, Borden and Martin Counties, Texas, from Delek, which included the execution of related commercial agreements.

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The cash component of this dropdown was financed with borrowings on the DKL Credit Facility (as defined in Note 8 ).

Prior periods have not been recast in our

Notes to Condensed Consolidated Financial Statements (Unaudited)

Segment Data Note 2 , as these assets did not constitute a business in accordance with ASU 2017-01, Clarifying the Definition of a Business , and the transaction was accounted for as an acquisition of assets between entities under common control.

Prior periods have not been recast in our Segment Data Note 2 , as these assets did not constitute a business in accordance with ASU 2017-01 and the transaction was accounted for as an acquisition of assets between entities under common control.

Additionally, in March 2020, we purchased 451,822 of Delek Logistics limited partner units from an investor pursuant to a Common Unit Purchase Agreement between Delek Marketing & Supply, LLC and such investor.

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Pursuant to the LLCA, Delek Energy will be required to contribute its percentage interest of the applicable construction costs (including certain costs previously incurred by WWP) and it is anticipated that Delek Energy’s capital contributions will total approximately $ 340 million to $ 380 million over the course of construction (expected to be two to three years ).

During the three months ended March 31, 2020 , we made capital contributions totaling $ 18.9 million .

During the six months ended June 30, 2020 , we made capital contributions totaling $ 18.9 million .

As of December 31, 2019 , Delek's investment balance in WWP totaled $ 125.3 million .

On February 21, 2020, we, through our wholly-owned direct subsidiary Delek Energy, entered into the W2W Holdings LLC ("HoldCo") Agreement with MPLX Operations LLC ("MPLX") (collectively, with its wholly-owned subsidiaries, the "WWP Project Financing Joint Venture" or the "WWP Project Financing JV").

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The Company's maximum exposure to any losses incurred by HoldCo is limited to its investment.

As of March 31, 2020, except for the guarantee of member obligations under the W2W Holdings LLC Agreement, the Company does not have other existing guarantees with or to HoldCo, or any third-party work contracted with it.

As of March 31, 2020 and December 31, 2019 , Delek's investment balance in WWP Project Financing Joint Venture totaled $ 73.9 million and $ 125.3 million , respectively.

We received distributions of $ 69.3 million from WWP Project Financing Joint Venture to return excess contributions made.

In addition, we recognized $ 1.1 million loss on the investment for the three months ended March 31, 2020 .

As of June 30, 2020 , except for the guarantee of member obligations under the W2W Holdings LLC Agreement, the Company does not have other existing guarantees with or to HoldCo, or any third-party work contracted with it.

As of June 30, 2020 , Delek's investment balance in WWP Project Financing Joint Venture totaled $ 73.0 million .

During the six months ended June 30, 2020 , we received distributions of $ 69.3 million from WWP Project Financing Joint Venture to return excess contributions made.

In addition, we recognized a loss on the investment totaling $ 0.9 million and $ 2.0 million for the three and six months ended June 30, 2020 ,

Notes to Condensed Consolidated Financial Statements (Unaudited)

respectively.

This investment is accounted for using the equity method and is included as part of total assets in corporate, other and eliminations in our segment disclosure.

Red River Pipeline Company LLC ("Red River")

Delek Logistics Investments

In May 2019, Delek Logistics, through its wholly owned indirect subsidiary DKL Pipeline, LLC (“DKL Pipeline”), entered into a Contribution and Subscription Agreement (the “Contribution Agreement”) with Plains Pipeline, L.P.

1 unchanged sentence

Pursuant to the Contribution Agreement, DKL Pipeline contributed $ 124.7 million , substantially all of which was financed under the Delek Logistics Credit Facility (as defined in Note 8 ), to Red River in exchange for a 33 % membership interest in Red River and DKL Pipeline’s admission as a member of Red River (the "Red River Pipeline Joint Venture").

Red River owns a 16-inch crude oil pipeline running from Cushing, Oklahoma to Longview, Texas, with an expansion project planned to increase the pipeline capacity, which is expected to be completed during the first half of 2020.

Delek Logistics contributed an additional $ 3.5 million related to such expansion project in May 2019.

As of March 31, 2020 and December 31, 2019 , Delek's investment balance in Red River totaled $ 140.9 million and $ 131.0 million , respectively, and we recognized income on the investment totaling $ 1.8 million for the three months ended March 31, 2020 .

Delek Logistics contributed an additional $ 3.5 million related to such expansion project in May 2019 and, during the six months ended June 30, 2020 , we made additional capital contributions totaling $ 10.5 million based on capital calls received.

As of June 30, 2020 and December 31, 2019 , Delek's investment balance in Red River totaled $ 142.0 million and $ 131.0 million , respectively, and we recognized income on the investment totaling $ 2.9 million and $ 4.7 million for the three and six months ended June 30, 2020 , respectively.

This investment is accounted for using the equity method and is included as part of total assets in our logistics segment.

Other Investments

Notes to Condensed Consolidated Financial Statements (Unaudited)

In addition to Red River, Delek Logistics has two joint ventures that own and operate logistics assets, and which serve third parties and subsidiaries of Delek.

As of March 31, 2020 and December 31, 2019 , Delek Logistics' investment balances in these joint ventures totaled $ 114.9 million and $ 116.0 million , respectively, and were accounted for using the equity method.

Delek Renewables, LLC, a wholly-owned subsidiary of Delek, has a joint venture that owns, operates and maintains a terminal consisting of an ethanol unit train facility with an ethanol tank in North Little Rock, Arkansas.

As of March 31, 2020 and December 31, 2019 , Delek Renewables, LLC's investment balance in this joint venture was $ 4.5 million and $ 4.3 million , respectively, and was accounted for using the equity method.

The investment in this joint venture is reflected in the refining segment.

We own a 50 % membership interest in the entity formed with an affiliate of Plains All American Pipeline, L.P.

to operate one of these pipeline systems (the "Caddo Pipeline") and a 33 % membership interest in Andeavor Logistics RIO Pipeline LLC which operates the other pipeline system (the "RIO Pipeline").

As of June 30, 2020 and December 31, 2019 , Delek Logistics' investment balances in these joint ventures totaled $ 113.3 million and $ 116.0 million , respectively, and were accounted for using the equity method.

We recognized income on these investments totaling $ 3.5 million and $ 7.3 million for the three and six months ended June 30, 2020 , respectively and $ 2.2 million and $ 4.1 million for the three and six months ended June 30, 2019 , respectively.

Other Investments

We have a 50 % interest in a joint venture that owns an asphalt terminal located in Brownwood, Texas.

As of March 31, 2020 and December 31, 2019 , Delek's investment balance in this joint venture was $ 31.1 million and $ 30.7 million , respectively.

As of June 30, 2020 and December 31, 2019 , Delek's investment balance in this joint venture was $ 35.3 million and $ 30.7 million , respectively.

We recognized income on this investment totaling $ 5.0 million and $ 5.5 million for the three and six months ended June 30, 2020 , respectively and $ 4.7 million and $ 5.2 million for the three and six months ended June 30, 2019 , respectively.

This investment is accounted for using the equity method and is included as part of total assets in corporate, other and eliminations in our segment disclosure.

As of June 30, 2020 and December 31, 2019 , Delek Renewables, LLC's investment balance in this joint venture was $ 3.7 million and $ 4.3 million , respectively, and was accounted for using the equity method.

The investment in this joint venture is reflected in the refining segment.

Note 6 - Inventory

Crude oil, work in process, refined products, blendstocks and asphalt inventory for all of our operations, excluding the Tyler refinery and merchandise inventory in our retail segment, are stated at the lower of cost determined using the first-in, first-out (“FIFO”) basis or net realizable value.

Cost of all inventory at the Tyler refinery is determined using the last-in, first-out ("LIFO") inventory valuation method and inventory is stated at the lower of cost or market.

Cost of all inventory at the Tyler refinery is determined using the LIFO inventory valuation method and inventory is stated at the lower of cost or market.

Retail merchandise inventory consists of cigarettes, beer, convenience merchandise and food service merchandise and is stated at estimated cost as determined by the retail inventory method.

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Total inventories

At March 31, 2020 , we recorded a pre-tax inventory valuation reserve of $ 282.5 million , $ 149.6 million of which related to LIFO inventory, due to a market price decline below our cost of certain inventory products.

Notes to Condensed Consolidated Financial Statements (Unaudited)

At June 30, 2020 , we recorded a pre-tax inventory valuation reserve of $ 77.0 million , $ 76.3 million of which related to LIFO inventory, due to a market price decline below our cost of certain inventory products.

At December 31, 2019 , we recorded a pre-tax inventory valuation reserve of $ 1.7 million , $ 1.2 million of which related to LIFO inventory, which reversed in the first quarter of 2020 due to the sale of inventory quantities that gave rise to the December 31, 2019 reserve.

We recognized a net (increase) reduction in cost of materials and other in the accompanying condensed consolidated statements of income related to the change in pre-tax inventory valuation of $( 280.8 ) million and $ 52.1 million for the three months ended March 31, 2020 and 2019 , respectively.

We recognized a net (increase) reduction in cost of materials and other in the accompanying condensed consolidated statements of income related to the change in pre-tax inventory valuation of $ 203.1 million and $( 75.1 ) million for the three and six months ended June 30, 2020 , respectively, and $( 0.6 ) million and $ 51.5 million for the three and six months ended June 30, 2019 , respectively.

Note 7 - Crude Oil Supply and Inventory Purchase Agreement

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Baseline Volumes pursuant to the respective Supply and Offtake Agreements

Barrels of inventory consigned under the respective Supply and Offtake Agreements as of March 31, 2020 (1)

Barrels of inventory consigned under the respective Supply and Offtake Agreements as of June 30, 2020 (1)

Barrels of inventory consigned under the respective Supply and Offtake Agreements as of December 31, 2019 (1)

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As a result, we recorded gains on the change in fair value resulting from the modification in cost of materials and other in the periods in which the amendments occurred, including a gain of $ 7.6 million which was recognized in the first quarter of 2019 .

As a result of these amendments, the changes in fair value of the Baseline Step-Out Liabilities were recorded in interest expense.

In January 2020, we amended and restated our three Supply and Offtake Agreements so that the repurchase of Baseline Volumes at the end of the Supply and Offtake Agreement term (representing the "Baseline Step-Out Liability" or, collectively, the "Baseline Step-Out Liabilities") would be based on market-indexed prices subject to commodity price risk.

As a result of the amendment, such Baseline Step-Out Liabilities will continue to be recorded at fair value under the fair value election provided by ASC 815 and ASC 825, where the fair value will now reflect changes in commodity price risk rather than interest rate risk with such changes in fair value being recorded in cost of materials and other.

As a result of these amendments, the subsequent changes in fair value of the Baseline Step-Out Liabilities were recorded in interest expense.

In January 2020, we amended our three Supply and Offtake Agreements so that the repurchase of Baseline Volumes at the end of the Supply and Offtake Agreement term (representing the "Baseline Step-Out Liability" or, collectively, the "Baseline Step-Out Liabilities") would be based on market-indexed prices subject to commodity price risk.

As a result of the amendment, such Baseline Step-Out Liabilities will continue to be recorded at fair value under the fair value election provided by ASC 815 and ASC 825, where the fair value will now reflect changes in commodity price risk rather than interest rate risk with subsequent changes in fair value being recorded in cost of materials and other.

We recognized a loss in the first quarter of 2020 of $ 1.5 million on the change in fair value resulting from the modification.

In April 2020, we amended and restated our three Supply and Offtake Agreements to renew and extend the terms to December 30, 2022, with J.

Aron having the sole discretion to further extend to May 30, 2025 by giving at least 6 months prior notice to the current maturity date.

As part of this amendment, there were changes to the underlying market index, annual fee, the crude purchase fee, crude roll fees and timing of cash settlements related to periodic price adjustments (the "Periodic Price Adjustments").

The Baseline Step-Out Liabilities continue to be recorded at fair value under the fair value election included under ASC 815 and ASC 825.

The Baseline Step-Out Liabilities have a floating component whose fair value reflects changes to commodity price risk with changes in fair value recorded in cost of materials and other and a fixed component whose fair value reflects changes to interest rate risk with changes in fair value recorded in interest expense.

There was no amendment date change in fair value resulting from the modification.

The Baseline Step-Out Liabilities are reflected as non-current liabilities on our consolidated balance sheet to the extent that they are not contractually due within twelve months.

Pursuant to the Periodic Price Adjustments provision in the Supply and Offtake Agreements, the Company may be required to pay down all or a portion of the fixed component of the Baseline Step-Out Liabilities or may receive additional proceeds depending on the change in fair value of the inventory collateral subject to a threshold at certain specified Periodic Pricing Dates, which occur on October 1st and May 1st, annually, not to extend beyond expiration of the Supply and Offtake Agreements.

Additionally, at the Periodic Pricing Dates, if a Periodic Price Adjustment is triggered, the prospective pricing underlying the fixed component of the Baseline Step-Out Liabilities will be adjusted to reflect either the pay-down or the incremental proceeds, accordingly.

As of June 30, 2020 , the fixed component of the Baseline Step-Out Liabilities subject to the Periodic Price Adjustments amounted to approximately $58.8 million .

All or some portion of that amount may become due or payable in periods occurring within twelve months, if Periodic Price Adjustments are triggered in October 2020 and May 2021.

Monthly activity resulting in over and short volumes continue to be valued using market-indexed pricing, and are included in current liabilities (or receivables) on our consolidated balance sheet.

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Krotz Springs

Balances as of March 31, 2020:

Balances as of June 30, 2020:

Baseline Step-Out Liability

Revolving over/short product financing liability

Revolving over/short inventory financing liability

Total Obligations Under Supply and Offtake Agreements

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Baseline Step-Out Liability

Revolving over/short product financing liability

Revolving over/short inventory financing liability

Total Obligations Under Supply and Offtake Agreements

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Other current receivable for monthly activity true-up

The El Dorado Supply and Offtake Agreement has a maturity date of April 30, 2020.

The Big Spring and Krotz Springs Supply and Offtake Agreements expire in May 2021, except that J.

Aron or Delek may elect to terminate in May 2020 on prior notice, as defined in those Agreements.

The Big Spring and Krotz Springs Supply and Offtake Agreements were amended in November 2019 to require such notice prior to February 2020, and again in January, February and March 2020 to ultimately require such notice in April 2020.

Subsequent to March 31, 2020 , in April 2020, we amended and restated our three Supply and Offtake Agreements to renew and extend the terms to December 30, 2022, with J.

Aron having the sole discretion to further extend to May 30, 2025.

As part of this amendment, there were changes to the underlying market index, annual fee and the crude purchase fee.

The Supply and Offtake Agreements require payments of fees which are factored into the interest rate yield under the fair value accounting model.

The Supply and Offtake Agreements require payments of fixed annual fees which are factored into the interest rate yield under the fair value accounting model.

Recurring cash fees paid during the periods presented were as follows:

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Krotz Springs

Recurring cash fees paid during the three months ended March 31,2020

Recurring cash fees paid during the three months ended March 31, 2019

Recurring cash fees paid during the three months ended June 30, 2020

Recurring cash fees paid during the three months ended June 30, 2019

Recurring cash fees paid during the six months ended June 30,2020

Recurring cash fees paid during the six months ended June 30, 2019

Interest expense recognized under the Supply and Offtake Agreements includes the yield attributable to recurring cash fees, one-time cash fees (e.g., in connection with amendments), as well as other changes in fair value, which may increase or decrease interest expense.

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Krotz Springs

Interest expense for the three months ended March 31, 2020

Interest expense for the three months ended March 31, 2019

Reflected in interest expense are losses totaling $ 3.9 million and gains totaling $ 5.1 million for the three months March 31, 2020 and 2019 , respectively, related to the changes in fair value in the Baseline Step-Out Liabilities component of Obligations Under Supply and Offtake Agreements.

Interest expense for the three months ended June 30, 2020

Interest expense for the three months ended June 30, 2019

Interest expense for the six months ended June 30, 2020

Interest expense for the six months ended June 30, 2019

Reflected in interest expense are losses totaling $ 3.9 million for the six months ended June 30, 2020 , and losses totaling $ 1.4 million and gains totaling $ 3.7 million for the three and six months ended June 30, 2019 , respectively, related to the changes in fair value in the Baseline Step-Out Liabilities component of Obligations Under Supply and Offtake Agreements.

There were no such gains or losses for three months ended June 30, 2020 .

We maintained letters of credit under the Supply and Offtake Agreements as follows:

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Big Spring and Krotz Springs

Letters of credit outstanding as of March 31, 2020

Letters of credit outstanding as of December 31.

In connection with the Krotz Springs Supply and Offtake Agreement, prior to September 30, 2019, we granted a security interest to J.

Aron in certain assets (including all of its accounts receivable and inventory) to secure our obligations to J.

Pursuant to an amendment to the security agreement effective September 30, 2019, no cash, deposit accounts or accounts receivable constitute collateral.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Letters of credit outstanding as of

June 30, 2020

Letters of credit outstanding as of

December 31, 2019

Note 8 - Long-Term Obligations and Notes Payable

Outstanding borrowings, net of unamortized debt discounts and certain deferred financing costs, under Delek’s existing debt instruments are as follows (in millions):

March 31, 2020

June 30, 2020

December 31, 2019

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Current portion of long-term debt and notes payable

Net of deferred financing costs of $ 3.4 million and $ 3.5 million and debt discount of $ 11.9 million and $ 12.5 million at March 31, 2020 and December 31, 2019 , respectively.

Net deferred financing costs of $ 0.3 million and $ 0.3 million and debt discount of $ 0.2 million and $ 0.2 million at March 31, 2020 and December 31, 2019 , respectively.

Net of deferred financing costs of $ 3.8 million and $ 4.0 million and debt discount of $ 1.2 million and $ 1.3 million at March 31, 2020 and December 31, 2019 , respectively.

Net of deferred financing costs of $ 3.2 million and $ 3.5 million and debt discount of $ 26.0 million and $ 12.5 million at June 30, 2020 and December 31, 2019 , respectively.

Net deferred financing costs of $ 0.2 million and $ 0.3 million and debt discount of $ 0.2 million and $ 0.2 million at June 30, 2020 and December 31, 2019 , respectively.

Net of deferred financing costs of $ 3.6 million and $ 4.0 million and debt discount of $ 1.2 million and $ 1.3 million at June 30, 2020 and December 31, 2019 , respectively.

Delek Revolver and Term Loan

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Proceeds of future borrowings under the Revolving Credit Facility will be used for working capital and general corporate purposes of Delek and its subsidiaries.

Notes to Condensed Consolidated Financial Statements (Unaudited)

On May 22, 2019 (the "First Incremental Effective Date"), we amended the Term Loan Credit Facility agreement pursuant to the terms of the First Incremental Amendment to Term Loan Credit Agreement (the "Incremental Amendment").

Pursuant to the Incremental Amendment, the Company borrowed $ 250.0 million in aggregate principal amount of incremental term loans (the “Incremental Term Loans”) at an original issue discount of 0.75 % , increasing the aggregate principal amount of loans outstanding under the Term Loan Credit Facility on the First Incremental Effective Date to $ 943.0 million .

On November 12, 2019 (the "Second Incremental Effective Date"), we amended the Term Loan Credit facility agreement pursuant to the terms of the Second Incremental Amendment to the Term Loan Credit Agreement (the "Second Incremental Amendment") and borrowed $ 150.0 million in aggregate principal amount of incremental term loans (the "Incremental Loans") at an original issue discount of 1.21 % , increasing the aggregate principal amount of loans outstanding under the Term Loan Credit Facility on the Second Incremental Effective Date to $ 1,088.3 million .The terms of the Incremental Term Loans and Incremental Loans are substantially identical to the terms applicable to the initial term loans under the Term Loan Credit Facility borrowed in March 2018.

There are no restrictions on the Company's use of the proceeds of the Incremental Term Loans and Incremental Term Loans.

The proceeds for the Incremental Term Loans may be used for (i) reducing utilizations under the Revolving Credit Facility, (ii) general corporate purposes and (iii) paying transaction fees and expenses associated with the Incremental Amendment.

The proceeds for the Incremental Loans may be used for (i) for general corporate purposes (including growth capital expenditures) and (ii) to pay fees and expenses associated with the Second Incremental Amendment.

The terms of the Incremental Term Loans and Incremental Loans are substantially identical to the terms applicable to the initial term loans under the Term Loan Credit Facility borrowed in March 2018.

There are no restrictions on the Company's use of the proceeds of the Incremental Term Loans and Incremental Loans.

The proceeds may be used for (i) reducing utilizations under the Revolving Credit Facility, (ii) general corporate purposes and (iii) paying transaction fees and expenses associated with the incremental amendments.

On May 19, 2020, we amended the Term Loan Credit Facility agreement and borrowed $ 200.0 million in aggregate principal amount of incremental term loans (the “Third Incremental Term Loan”) at an original issue discount of 7.00 % .

The Third Incremental Term Loan constitutes a separate class of term loan (the "Class B Loan") under the Term Loan Credit Facility from those initially borrowed in March 2018 and the incremental term loans borrowed in May 2019 and November 2019 (collectively, the "Class A Loans").

Delek will be required to pay a make-whole prepayment fee if the Third Incremental Term Loan is prepaid pursuant to an optional prepayment, in connection with a non-permitted debt issuance or in connection with an acceleration within one year of the incurrence of the Third Incremental Term Loan.

Delek may voluntarily prepay the outstanding Third Incremental Term Loans at any time subject to customary “breakage” costs with respect to LIBOR loans and subject to a prepayment premium of 1.0 % in connection with certain customary repricing events that may occur during the period from the day after the first anniversary of the Third Incremental Term Loan through the second anniversary of the Third Incremental Term Loan.

The other terms of the Third Incremental Term Loan are substantially identical to the terms applicable to the Class A Loans.

The proceeds of the Third Incremental Term Loan may be used (i) for general corporate purposes and (ii) to pay transaction fees and expenses associated with the Third Incremental Term Loan.

Interest and Unused Line Fees

Notes to Condensed Consolidated Financial Statements (Unaudited)

plus an applicable margin (or, in the case of Revolving Credit Facility borrowings denominated in Canadian dollars, the Canadian dollar bankers' acceptances rate ("CDOR")).

The interest rates applicable to borrowings under the Term Loan Credit Facility and the Revolving Credit Facility are based on a fluctuating rate of interest measured by reference to either, at Delek’s option, (i) a base rate, plus an applicable margin, or (ii) a reserve-adjusted LIBOR, plus an applicable margin (or, in the case of Revolving Credit Facility borrowings denominated in Canadian dollars, the Canadian dollar bankers' acceptances rate ("CDOR")).

The initial applicable margin for all Term Loan Credit Facility borrowings was 1.50 % per annum with respect to base rate borrowings and 2.50 % per annum with respect to LIBOR borrowings.

On October 26, 2018, Delek entered into an amendment to the Term Loan Credit Facility (the “First Amendment”) to reduce the margin on certain borrowings under the Term Loan Credit Facility and incorporate certain other changes.

The First Amendment decreased the applicable margins for borrowings under (i) Base Rate Loans from 1.50 % to 1.25 % and (ii) LIBOR Rate Loans from 2.50 % to 2.25 % , as such terms are defined in the Term Loan Credit Facility.

The First Amendment decreased the applicable margins for Class A Loans under (i) Base Rate Loans from 1.50 % to 1.25 % and (ii) LIBOR Rate Loans from 2.50 % to 2.25 % , as such terms are defined in the Term Loan Credit Facility.

Class B Loans incurred under the Third Incremental Term Loan bear interest at a rate that is determined, at the Company’s election, at LIBOR or at base rate, in each case, plus an applicable margin of 5.50 % with respect to LIBOR borrowings and 4.50 % with respect to base rate borrowings.

Additionally, Class B loans that are LIBOR borrowings are subject to a minimum LIBOR rate floor of 1.00 % .

The initial applicable margin for Revolving Credit Facility borrowings was 0.25 % per annum with respect to base rate borrowings and 1.25 % per annum with respect to LIBOR and CDOR borrowings, and the applicable margin for such borrowings after September 30, 2018 is based on Delek’s excess availability as determined by reference to a borrowing base, ranging from 0.25 % to 0.75 % per annum with respect to base rate borrowings and from 1.25 % to 1.75 % per annum with respect to LIBOR and CDOR borrowings.

In addition, the Revolving Credit Facility requires Delek to pay an unused line fee on the average amount of unused commitments thereunder in each quarter, which the fee is at a rate of 0.25 % or 0.375 % per annum, depending on average commitment usage for such quarter.

As of March 31, 2020 , the unused line fee was 0.375 % per annum.

As of June 30, 2020 , the unused line fee was 0.375 % per annum.

Maturity and Repayments

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The Term Loan Credit Facility also requires annual prepayments with a variable percentage of Delek’s excess cash flow, ranging from 50.0 % to 0 % depending on Delek’s consolidated fiscal year end secured net leverage ratio.

Delek may also make voluntarily prepayments under the Term Loan Credit Facility at any time, subject to a prepayment premium of 1.0 % in connection with certain customary repricing events that may occur within six months after the Second Incremental Effective Date, with no such premium applied after six months.

The Third Incremental Term Loan requires quarterly payments on the Class B Loans of $ 0.5 million commencing June 30, 2020.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Guarantee and Security

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Additional Information

At March 31, 2020 , the weighted average borrowing rate under the Revolving Credit Facility was 3.50 % and was comprised entirely of a base rate borrowing, and the principal amount outstanding thereunder was $ 100.0 million .

Additionally, there were letters of credit issued of approximately $ 193.6 million as of March 31, 2020 under the Revolving Credit Facility.

Unused credit commitments under the Revolving Credit Facility, as of March 31, 2020 , were approximately $ 681.7 million .

At March 31, 2020 , the weighted average borrowing rate under the Term Loan Credit Facility was approximately 3.24 % comprised entirely of a LIBOR borrowing, and the principal amount outstanding thereunder was $ 1,082.8 million .

As of March 31, 2020 , the effective interest rate related to the Term Loan Credit Facility was 3.55 % .

At June 30, 2020 , the weighted average borrowing rate under the Revolving Credit Facility was 3.50 % and was comprised entirely of a base rate borrowing, and the principal amount outstanding thereunder was $ 100.0 million .

Additionally, there were letters of credit issued of approximately $ 204.6 million as of June 30, 2020 under the Revolving Credit Facility.

Unused credit commitments under the Revolving Credit Facility, as of June 30, 2020 , were approximately $ 695.4 million .

At June 30, 2020 , the weighted average borrowing rate under the Term Loan Credit Facility was approximately 3.06 % comprised entirely of LIBOR borrowings, and the principal amount outstanding thereunder was $ 1,279.5 million .

As of June 30, 2020 , the effective interest rate related to the Term Loan Credit Facility was 3.44 % .

Delek Hapoalim Term Loan

On December 31, 2019, Delek entered into a term loan credit and guaranty agreement (the "Agreement") with Bank Hapoalim B.M.

Notes to Condensed Consolidated Financial Statements (Unaudited)

as the administrative agent.

("BHI") as the administrative agent.

Pursuant to the Agreement, on December 31, 2019, Delek borrowed $ 40.0 million (the "BHI Term Loan").

1 unchanged sentence

The Agreement has a current maturity of December 31, 2022 and requires quarterly loan amortization payments of $ 0.1 million , commencing March 31, 2020.

Proceeds may be used for general purposes.

Proceeds may be used for general corporate purposes.

The Agreement has an accordion feature that allows increasing the term loan to maximum size of $ 100.0 million , subject to receiving increased or new commitments from lenders and the satisfaction of certain other conditions precedent.

Any such additional borrowings must be completed by December 31, 2021.

At March 31, 2020 , the weighted average borrowing rate under the term loan was approximately 3.99 % comprised entirely of a LIBOR borrowing and the principal amount outstanding thereunder was $ 39.9 million .

As of March 31, 2020 , the effective interest rate related to the BHI Term Loan was 4.43 % .

At June 30, 2020 , the weighted average borrowing rate under the term loan was approximately 3.18 % comprised entirely of a LIBOR borrowing and the principal amount outstanding thereunder was $ 39.8 million .

As of June 30, 2020 , the effective interest rate related to the BHI Term Loan was 3.61 % .

Delek Logistics Credit Facility

Prior to its amendment and restatement on September 28, 2018 , Delek Logistics had a $ 700.0 million senior secured revolving credit agreement with Fifth Third Bank ("Fifth Third"), as administrative agent, and a syndicate of lenders (the "2014 Facility") with a $ 100.0 million accordion feature, bearing interest at either a U.S.

dollar prime rate, Canadian dollar prime rate, LIBOR, or a CDOR rate, in each case plus applicable margins, at the election of the borrowers and as a function of draw down currency.

On September 28, 2018 , Delek Logistics and all of its subsidiaries entered into a third amended and restated senior secured revolving credit agreement with Fifth Third as administrative agent and a syndicate of lenders (hereafter, the "Delek Logistics Credit Facility").

7 unchanged sentences

Borrowings under the Delek Logistics Credit Facility bear interest at either a U.S.

dollar prime rate , Canadian dollar prime rate , LIBOR , or a CDOR rate, in each case plus applicable margins, at the election of the borrowers and as a function of draw down currency.

dollar prime rate , Canadian dollar prime rate , LIBOR , or a CDOR rate, in each case plus applicable margins, at the

Notes to Condensed Consolidated Financial Statements (Unaudited)

election of the borrowers and as a function of draw down currency.

The applicable margin in each case and the fee payable for the unused revolving commitments vary based upon Delek Logistics' most recent total leverage ratio calculation delivered to the lenders, as called for and defined under the terms of the Delek Logistics Credit Facility.

At March 31, 2020 , the weighted average borrowing rate was approximately 3.70 % .

At June 30, 2020 , the weighted average borrowing rate was approximately 2.78 % .

Additionally, the Delek Logistics Credit Facility requires Delek Logistics to pay a leverage ratio dependent quarterly fee on the average unused revolving commitment.

As of March 31, 2020 , this fee was 0.40 % per year.

As of March 31, 2020 , Delek Logistics had $ 695.0 million of outstanding borrowings under the Delek Logistics Credit Facility, with no letters of credit in place.

Unused credit commitments under the Delek Logistics Credit Facility, as of March 31, 2020 , were $ 155.0 million .

As of June 30, 2020 , this fee was 0.40 % on an annualized basis.

As of June 30, 2020 , Delek Logistics had $ 750.0 million of outstanding borrowings under the Delek Logistics Credit Facility, with no letters of credit in place.

Unused credit commitments under the Delek Logistics Credit Facility, as of June 30, 2020 , were $ 100.0 million .

Delek Logistics Notes

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Interest on the Delek Logistics Notes is payable semi-annually in arrears on each May 15 and November 15, commencing November 15, 2017.

At any time prior to May 15, 2020, the Issuers may redeem up to 35 % of the aggregate principal amount of the Delek Logistics Notes with the net cash proceeds of one or more equity offerings by Delek Logistics at a redemption price of 106.750 % of the redeemed principal amount, plus accrued and unpaid interest, if any, subject to certain conditions and limitations.

Prior to May 15, 2020, the Issuers may redeem all or part of the Delek Logistics Notes at a redemption price of the principal amount plus accrued and unpaid interest, if any, plus a "make whole" premium, subject to certain conditions and limitations.

In addition, beginning on May 15, 2020, th e Issuers may, subject to certain conditions and limitations, redeem all or part of the Delek Logistics Notes, at a redemption price of 105.063 % of the redeemed principal for the twelve-month period beginning on May 15, 2020, 103.375 % for the twelve-month period beginning on May 15, 2021, 101.688 % for the twelve-month period beginning on May 15, 2022 and 100.00 % beginning on May 15, 2023 and thereafter, plus accrued and unpaid interest, if any.

Beginning on May 15, 2020, th e Issuers may, subject to certain conditions and limitations, redeem all or part of the Delek Logistics Notes, at a redemption price of 105.063 % of the redeemed principal for the twelve-month period beginning on May 15, 2020, 103.375 % for the twelve-month period beginning on May 15, 2021, 101.688 % for the twelve-month period beginning on May 15, 2022 and 100.00 % beginning on May 15, 2023 and thereafter, plus accrued and unpaid interest, if any.

In the event of a change of control, accompanied or followed by a ratings downgrade within a certain period of time, subject to certain conditions and limitations, the Issuers will be obligated to make an offer for the purchase of the Delek Logistics Notes from holders at a price equal to 101 % of the principal amount thereof, plus accrued and unpaid interest.

Notes to Condensed Consolidated Financial Statements (Unaudited)

In May 2018, the Delek Logistics Notes were exchanged for new notes with terms substantially identical in all material respects with the 2025 Notes except the new notes do not contain terms with respect to transfer restrictions.

As of March 31, 2020 , we had $ 250.0 million in outstanding principal amount under the Delek Logistics Notes.

As of March 31, 2020 , the effective interest rate related to the Delek Logistics Notes was 7.23 % .

As of June 30, 2020 , we had $ 250.0 million in outstanding principal amount under the Delek Logistics Notes.

As of June 30, 2020 , the effective interest rate related to the Delek Logistics Notes was 7.22 % .

Reliant Bank Revolver

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There were no other significant changes to the agreement .

The revolving credit agreement requires us to pay a quarterly fee of 0.50 % per year on the average unused revolving commitment.

As of March 31, 2020 , we had $ 50.0 million outstanding and had no unused credit commitments under the Reliant Bank Revolver.

The revolving credit agreement requires us to pay a quarterly fee of 0.50 % on an annualized basis on the average unused revolving commitment.

As of June 30, 2020 , we had $ 50.0 million outstanding and had no unused credit commitments under the Reliant Bank Revolver.

Promissory Notes

Delek has four notes payable (the "Promissory Notes") with various assignees of Alon Israel Oil Company, Ltd., the holder of a predecessor consolidated promissory note, which bear interest at a fixed rate of 5.50 % per annum and which, collectively, require annual principal amortization payments of $ 25.0 million through 2020 followed by a final principal amortization payment of $ 20.0 million at maturity on January 4, 2021.

As of March 31, 2020 , a total principal amount of $ 20.0 million was outstanding under the Promissory Notes.

Delek has four notes payable (the "Promissory Notes") with various assignees of Alon Israel Oil Company, Ltd., the holder of a predecessor consolidated promissory note, which bear interest at a fixed rate of 5.50 % per annum and which, collectively, require annual principal amortization payments of $ 25.0 million to be made each January through 2020, followed by a final principal amortization payment of $ 20.0 million at maturity on January 4, 2021.

As of June 30, 2020 , a total principal amount of $ 20.0 million was outstanding under the Promissory Notes.

Restrictive Covenants

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The Term Loan Credit Facility does not have any financial maintenance covenants.

We believe we were in compliance with all covenant requirements under each of our credit facilities as of March 31, 2020 .

We believe we were in compliance with all covenant requirements under each of our credit facilities as of June 30, 2020 .

Certain of our debt facilities contain limitations on the incurrence of additional indebtedness, making of investments, creation of liens, dispositions and acquisitions of assets, and making of restricted payments and transactions with affiliates.

Specifically, these covenants may limit the payment, in the form of cash or other assets, of dividends or other distributions, or the repurchase of shares with respect to the equity of our subsidiaries.

Additionally, certain of our debt facilities limit our ability to make investments, including extensions of loans or advances to, or acquisitions of equity interests in, or guarantees of obligations of, any other entities.

These covenants may also limit the payment, in the form of cash or other assets, of dividends or other distributions, or the repurchase of shares with respect to the equity of certain of our subsidiaries.

Additionally, some of our debt facilities limit our ability to make investments, including extensions of loans or advances to, or acquisitions of equity interests in, or guarantees of obligations of, certain other entities.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 9 - Derivative Instruments

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Rather, such forward contracts are accounted for under other applicable GAAP.

Forward contracts entered into for trading purposes that do not meet the normal

Notes to Condensed Consolidated Financial Statements (Unaudited)

purchases, normal sales exception are accounted for as derivative instruments at fair value with changes in fair value recognized in earnings in the period of change.

As of March 31, 2020 and December 31, 2019 , and for the three months ended March 31, 2020 and March 31, 2019 , all of our forward contracts that were accounted for as derivative instruments primarily consisted of contracts related to our Canadian crude trading operations.

Forward contracts entered into for trading purposes that do not meet the normal purchases, normal sales exception are accounted for as derivative instruments at fair value with changes in fair value recognized in earnings in the period of change.

As of June 30, 2020 and December 31, 2019 , and for the three and six months ended June 30, 2020 and June 30, 2019 , all of our forward contracts that were accounted for as derivative instruments primarily consisted of contracts related to our Canadian crude trading operations.

Since Canadian crude trading activity is not related to managing supply or pricing risk of the actual inventory that will be used in production, such unrealized and realized gains and losses are recognized in other operating income, net rather than cost of materials and other on the accompanying condensed consolidated statements of income.

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Changes in the fair value of these future RIN commitment contracts are recorded in cost of materials and other on the condensed consolidated statements of income.

As of March 31, 2020 , we do not believe there is any material credit risk with respect to the counterparties to any of our derivative contracts.

As of June 30, 2020 , we do not believe there is any material credit risk with respect to the counterparties to any of our derivative contracts.

In accordance with ASC 815, certain of our commodity swap contracts have been designated as cash flow hedges and the change in fair value between the execution date and the end of period has been recorded in other comprehensive income.

The fair value of these contracts is recognized in income in the same financial statement line item as hedged transaction at the time the positions are closed and the hedged transactions are recognized in income.

The following table presents the fair value of our derivative instruments as of March 31, 2020 and December 31, 2019 .

The following table presents the fair value of our derivative instruments as of June 30, 2020 and December 31, 2019 .

The fair value amounts below are presented on a gross basis and do not reflect the netting of asset and liability positions permitted under our master netting arrangements, including cash collateral on deposit with our counterparties.

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See Note 10 for further information regarding the fair value of derivative instruments (in millions).

March 31, 2020

Notes to Condensed Consolidated Financial Statements (Unaudited)

June 30, 2020

December 31, 2019

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Commodity derivatives (1)

Other long-term assets

Commodity derivatives (1)

Other long-term liabilities

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Commodity derivatives (1)

Other current liabilities

Commodity derivatives (1)

Other long-term assets

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Total net fair value of derivatives

As of March 31, 2020 and December 31, 2019 , we had open derivative positions representing 185,713,596 and 86,484,065 barrels, respectively, of crude oil and refined petroleum products.

Of these open positions, contracts representing 450,000 and 600,000 barrels were designated as cash flow hedging instruments as of March 31, 2020 and December 31, 2019 , respectively.

Additionally, as of March 31, 2020 and December 31, 2019 , we had open derivative positions representing 91,502,500 and 40,050,000 One Million British Thermal Units, ("MMBTU") of natural gas products, respectively.

As of March 31, 2020 and December 31, 2019 , we had open RIN commitment contracts representing 86,300,000 and 147,000,000 RINs, respectively.

As of March 31, 2020 and December 31, 2019 , $ 7.0 million and $ 38.8 million , respectively, of cash collateral held by counterparties has been netted with the derivatives with each counterparty.

As of June 30, 2020 and December 31, 2019 , we had open derivative positions representing 289,196,954 and 86,484,065 barrels, respectively, of crude oil and refined petroleum products.

Of these open positions, contracts representing 180,000 and 600,000 barrels were designated as cash flow hedging instruments as of June 30, 2020 and December 31, 2019 , respectively.

Additionally, as of June 30, 2020 and December 31, 2019 , we had open derivative positions representing 50,830,000 and 40,050,000 One Million British Thermal Units, ("MMBTU") of natural gas products, respectively.

As of June 30, 2020 and December 31, 2019 , we had open RIN commitment contracts representing 103,400,000 and 147,000,000 RINs, respectively.

As of June 30, 2020 and December 31, 2019 , $ 11.5 million and $ 38.8 million , respectively, of cash collateral held by counterparties has been netted with the derivatives with each counterparty.

Total gains on our hedging derivatives and RIN commitment contracts recorded in the condensed consolidated statements of income are as follows (in millions):

Notes to Condensed Consolidated Financial Statements (Unaudited)

Three Months Ended March 31,

Gains on commodity derivatives not designated as hedging instruments recognized in cost of materials and other (1)

Losses on commodity derivatives not designated as hedging instruments recognized in other operating income (expense), net (1) (2)

Realized gains (losses) reclassified out of accumulated other comprehensive income and into cost of materials and other on commodity derivatives designated as cash flow hedging instruments

Gains (losses) on commodity derivatives that are economic hedges but not designated as hedging instruments include unrealized gains (losses) of $ 52.0 million and $( 27.1 ) million for the three months ended March 31, 2020 and 2019 , respectively.

Of these amounts, approximately $ 37.6 million and $( 5.6 ) million for three months ended March 31, 2020 and 2019 , respectively, represent unrealized gains (losses) where the instrument has matured but where it has not cash settled as of period end, excluding the reversal of prior period settlement differences.

Three Months Ended June 30,

Six Months Ended June 30,

(Losses) gains on commodity derivatives not designated as hedging instruments recognized in cost of materials and other (1)

(Losses) gains on commodity derivatives not designated as hedging instruments recognized in other operating income, net (1) (2)

Realized losses (gains) reclassified out of accumulated other comprehensive income and into cost of materials and other on commodity derivatives designated as cash flow hedging instruments

Total (losses) gains

Gains (losses) on commodity derivatives that are economic hedges but not designated as hedging instruments include unrealized (losses) gains of $( 23.4 ) million and $ 28.6 million for the three and six months ended June 30, 2020 , respectively, and $( 3.6 ) million and $( 30.7 ) million for the three and six months ended June 30, 2019 , respectively.

Of these amounts, approximately $ 33.4 million and $( 0.8 ) million as of June 30, 2020 and June 30, 2019 , respectively, represent unrealized gains (losses) where the instrument has matured but where it has not cash settled as of period end.

Derivative instruments that have matured but not cash settled at the balance sheet date continue to be reflected in derivative assets or liabilities on our balance sheet.

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The effect of cash flow hedge accounting on the condensed consolidated statements of income is as follows (in millions):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Gain (loss) on cash flow hedging relationships recognized in cost of materials and other:

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Derivative designated as hedging instruments

For cash flow hedges, no component of the derivative instruments’ gains or losses was excluded from the assessment of hedge effectiveness for the three months ended March 31, 2020 or 2019 .

Gains (losses) of $ 0.6 million and $( 15.1 ) million , net of tax, on settled commodity contracts were reclassified into cost of materials and other in the condensed consolidated statements of income during the three months ended March 31, 2020 and 2019 , respectively.

As of March 31, 2020 , we estimate that $ 3.3 million of deferred gains related to commodity cash flow hedges will be reclassified into cost of materials and other over the next 12 months as a result of hedged transactions that are forecasted to occur.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For cash flow hedges, no component of the derivative instruments’ gains or losses was excluded from the assessment of hedge effectiveness for the three and six months ended June 30, 2020 or 2019 .

Gains (losses), net of tax, on settled commodity contracts of $ 1.7 and $ 2.3 million during the three and six months ended June 30, 2020 , respectively, and $( 11.7 ) million and $( 26.8 ) million during the three and six months ended June 30, 2019 , respectively, were reclassified into cost of materials and other in the condensed consolidated statements of income.

As of June 30, 2020 , we estimate that $ 1.9 million of deferred gains related to commodity cash flow hedges will be reclassified into cost of materials and other over the next 12 months as a result of hedged transactions that are forecasted to occur.

Total (losses) gains on our trading physical forward contract derivatives (none of which were designated as hedging instruments) recorded in other operating income (expense), net on the condensed consolidated statements of income are as follows (in millions):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Realized (losses) gains

Unrealized (losses) gains

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 10 - Fair Value Measurements

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Such investment stores, included in other current assets on the condensed consolidated balance sheets, are maintained on a weighted average cost basis for determining realized gains and losses on physical sales under forward contracts, and ending balances are adjusted to fair value at each reporting date.

The unrealized loss on commodity investments for the three months ended March 31, 2020 and 2019 totaled $ 7.9 million and $ 1.0 million , respectively.

The unrealized gain (loss) on commodity investments for the three and six months ended June 30, 2020 totaled $ 8.9 million and $ 1.0 million , respectively, and totaled $( 1.0 ) million and $( 2.0 ) million for the three and six months ended June 30, 2019 , respectively.

In April 2020, we entered into a contract with the Department of Energy to deposit one million barrels of crude oil into one of the Strategic Petroleum Reserve ("SPR") storage locations where they will be stored on our behalf until October 2020 for a fee of approximately 100,000 barrels.

The fee of 100,000 barrels was recorded as a prepaid asset at cost, and the right to receive the 900,000 barrels was recorded as a financial asset (the "Right to receive crude oil barrels"), measured at fair value based on the value of the underlying commodity using published market prices of the commodity on the applicable exchange.

Such asset is, therefore, classified as Level 2.

The unrealized gain on the underlying commodity related to the SPR financial asset for the three and six months ended June 30, 2020 of $9.7 million was recorded in other (income) expense, net.

Our RIN commitment contracts are future commitments to purchase or sell RINs at fixed prices and quantities, which are used to manage the costs associated with our RINs Obligation.

These RIN commitment contracts are categorized as Level 2, and are measured at fair value based on quoted prices from an independent pricing service.

Our environmental credits obligation surplus or deficit is based on the amount of RINs or other emissions credits we must purchase, net of amounts internally generated and purchased and the price of those RINs or other emissions credits as of the balance sheet date, by refinery/obligor.

The environmental credits obligation surplus or deficit is categorized as Level 2, and is measured at fair value either directly through observable inputs or indirectly through market-corroborated inputs.

Our environmental credits obligation surplus or deficit is based on the amount of RINs or other emissions credits subject to fair value accounting that we must purchase, net of amounts internally generated and purchased and the price of those RINs or other emissions credits as of the balance sheet date, by refinery/obligor.

The environmental credits obligation surplus or deficit is categorized as Level 2 if measured at fair value either directly through observable inputs or indirectly through market-corroborated inputs.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The fair values of financial instruments are estimated based upon current market conditions and quoted market prices for the same or similar instruments.

Management estimates that the carrying value approximates fair value for all of Delek's assets and liabilities that fall under the scope of ASC 825.

As of and for the three months ended March 31, 2020 and 2019 , we elected to account for our J.

As of and for the six months ended June 30, 2020 and 2019 , we elected to account for our J.

Aron step-out liability at fair value in accordance with ASC 825 , as it pertains to the fair value option.

This standard permits the election to carry financial instruments and certain other items similar to financial instruments at fair value on the balance sheet, with all changes in fair value reported in earnings.

With respect to the amended and restated Supply and Offtake Agreements, such amendments being effective January 2020 for all the agreements, we apply fair value measurement as follows:

(1) we determine fair value for our amended variable step-out liability based on changes in fair value related to market volatility based on a floating commodity-index price, where such obligation is categorized as Level 2 and is presented in the current or long-term portion, based on maturity of the agreement, of the Obligation under Supply and Offtake Agreements on our condensed consolidated balance sheets, and where gains (losses) related to changes in fair value are recorded as a component of cost of materials and other in the condensed consolidated statements of income;

and (2) we determine fair value of the short-term commodity-indexed financing facility based on the market prices for the consigned crude oil and refined products collateralizing the financing/funding where such obligation is categorized as Level 2 and is presented in the current portion of the Obligation under Supply and Offtake Agreements on our condensed consolidated balance sheets, and where gains (losses) related to the change in fair value are recorded as a component of cost of materials and other in the condensed consolidated statements of income.

With respect to the amended and restated Supply and Offtake Agreements, such amendments being effective April 2020 for all the agreements, we apply fair value measurement as follows:

(1) we determine fair value for our amended variable step-out liability based on changes in fair value related to market volatility based on a floating commodity-index price, and for our amended fixed step-out liability based on changes to interest rates and the timing and amount of expected future cash settlements where such obligation is categorized as Level 2.

Gains (losses) related to changes in fair value due to commodity-index price are recorded as a component of cost of materials and other, and changes in fair value due to interest rate risk are recorded as a component of interest expense in the condensed consolidated statements of income;

and (2) we determine fair value of the commodity-indexed revolving over/short inventory financing liability based on the market prices for the consigned crude oil and refined products collateralizing the financing/funding where such obligation is categorized as Level 2 and is presented in the current portion of the Obligation under Supply and Offtake Agreements on our condensed consolidated balance sheets.

Gains (losses) related to the change in fair value are recorded as a component of cost of materials and other in the condensed consolidated statements of income.

Before the January 2020 amendments, we determined the fair value for the fixed price step-out liability based on changes to interest rates reflecting changes to the interest rate risk, with obligation categorized as Level 2.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The fair value hierarchy for our financial assets and liabilities accounted for at fair value on a recurring basis was as follows (in millions):

March 31, 2020

June 30, 2020

Commodity derivatives

Commodity investments

Right to receive crude oil barrels

RIN commitment contracts

Environmental credits obligation surplus

Commodity derivatives

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Net assets (liabilities)

Notes to Condensed Consolidated Financial Statements (Unaudited)

The derivative values above are based on analysis of each contract as the fundamental unit of account as required by ASC 820.

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This differs from the presentation in the financial statements which reflects our policy, wherein we have elected to offset the fair value amounts recognized for multiple derivative instruments executed with the same counterparty and where the legal right of offset exists.

As of March 31, 2020 and December 31, 2019 , $ 7.0 million and $ 38.8 million , respectively, of cash collateral was held by counterparty brokerage firms and has been netted in the financial statements with the net derivative positions with each counterparty.

As of June 30, 2020 and December 31, 2019 , $ 11.5 million and $ 38.8 million , respectively, of cash collateral was held by counterparty brokerage firms and has been netted in the financial statements with the net derivative positions with each counterparty.

See Note 9 for further information regarding derivative instruments.

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In the ordinary conduct of our business, we are from time to time subject to lawsuits, investigations and claims, including environmental claims and employee-related matters.

Although we cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against us, including civil penalties or other enforcement actions, we do not believe that any currently pending legal proceeding or

Notes to Condensed Consolidated Financial Statements (Unaudited)

proceedings to which we are a party will have a material adverse effect on our financial statements.

Certain environmental matters that have or may result in penalties or assessments are discussed below in the " Environmental, Health and Safety" section of this note.

One of our Alon subsidiaries was the defendant in a legal action related to an easement dispute arising from a purchase of property that occurred in October 2013.

In June 2019, the court found in favor of the plaintiffs and assessed damages against such subsidiary totaling $ 6.7 million , which is included as of March 31, 2020 in accrued expenses and other current liabilities on the accompanying condensed consolidated balance sheet.

In June 2019, the court found in favor of the plaintiffs and assessed damages against such subsidiary totaling $ 6.7 million , which is included as of June 30, 2020 in accrued expenses and other current liabilities on the accompanying condensed consolidated balance sheet.

Self-insurance

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While it is often difficult to quantify future environmental or safety related expenditures, we anticipate that continuing capital investments and changes in operating procedures will be required for the foreseeable future to comply with existing and new requirements, as well as evolving interpretations and more strict enforcement of existing laws and regulations.

As of March 31, 2020 , we have recorded an environmental liability of approximately $ 144.5 million , primarily related to the estimated probable costs of remediating or otherwise addressing certain environmental issues of a non-capital nature at our refineries, as well as terminals, some of which we no longer own.

This liability includes estimated costs for ongoing investigation and remediation efforts for known contamination of soil and groundwater, as well as estimated costs for additional issues which have been identified subsequent to the acquisitions.

As of June 30, 2020 , we have recorded an environmental liability of approximately $ 112.9 million , primarily related to the estimated probable costs of remediating or otherwise addressing certain environmental issues of a non-capital nature at our refineries, as well as terminals, some of which we no longer own.

This liability includes estimated costs for ongoing investigation and remediation efforts for known contamination of soil and groundwater.

Approximately $ 6.6 million of the total liability is expected to be expended over the next 12 months, with most of the balance expended by 2032 , although some costs may extend up to 30 years.

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We have experienced several crude oil and other releases involving our assets.

There were no material releases that occurred in the first quarter of 2020 and five releases that occurred throughout the year 2019.

There were no material releases that occurred during the six months ended June 30, 2020 , and five releases that occurred throughout the year 2019.

Cleanup operations and site maintenance and remediation efforts on these and other releases are at various stages of completion.

The majority of the remediation efforts for these releases are substantially completed or have received regulatory closure.

The majority of the remediation efforts for these releases are substantially complete or have received regulatory closure.

With the exception of the Sulphur Springs release defined below, we expect regulatory closure in 2020 for the release sites that have not yet received it.

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Cleanup operations and site maintenance and remediation on this release have been substantially completed where such costs incurred totaled $ 7.1 million during 2019.

During the first quarter of 2020, we incurred approximately $ 0.2 million of additional costs related to final clean-up of this release.

During the three and six months ended June 30, 2020 , we incurred approximately $ 0.1 million and $ 0.3 million of additional costs related to final clean-up of this release, respectively.

The release is currently in boom maintenance.

Ground water wells for monitoring activities are expected to be installed in 2020.

We expect the monitoring period to last for at least a year.

Ground water monitoring wells were installed in the second quarter of 2020.

We expect to conduct quarterly ground water monitoring for at least a year.

Additionally, we will be conducting creek bed sediment sampling in the third quarter of 2020.

We have filed suit in January 2020 against a third party contractor, seeking damages related to this release.

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Letters of Credit

As of March 31, 2020 , we had in place letters of credit totaling approximately $ 193.6 million with various financial institutions securing obligations primarily with respect to our commodity transactions for the refining segment and certain of our insurance programs.

There were no amounts drawn by beneficiaries of these letters of credit at March 31, 2020 .

As of June 30, 2020 , we had in place letters of credit totaling approximately $ 204.6 million with various financial institutions securing obligations primarily with respect to our commodity transactions for the refining segment and certain of our insurance programs.

There were no amounts drawn by beneficiaries of these letters of credit at June 30, 2020 .

Note 12 - Income Taxes

Under ASC 740, Income Taxes (“ASC 740”) we used an estimated annual tax rate to record income taxes for the three months ended March 31, 2020 and March 31, 2019 .

Our effective tax rate was 21.3 % and 22.9 % for the three months ended March 31, 2020 and 2019 , respectively.

Under ASC 740, Income Taxes (“ASC 740”) we used an estimated annual tax rate to record income taxes for the three and six months ended June 30, 2020 and June 30, 2019 .

Our effective tax rate was ( 57.3 )% and 36.3 % for the three and six months ended June 30, 2020 , respectively, compared to 22.5 % and 22.8 % for the three and six ended June 30, 2019 , respectively.

The difference between the effective tax rate and the statutory rate is generally attributable to permanent differences and discrete items.

The change in our effective tax rate for the three months ended March 31, 2020 as compared to the three months ended March 31, 2019 was primarily due to tax benefit for federal tax credits attributable to the Company’s biodiesel blending operations that were re-enacted in December 2019, and reversal of a valuation allowance for deferred tax assets in partnership investments due to changes in the future realizability of deferred tax basis differences which was reported as a discrete benefit in the quarter.

On March 27, 2020, the president of the United States signed the Coronavirus Aid Relief, and Economic Security (CARES) Act into law.

The change in our effective tax rate for the three and six months ended June 30, 2020 as compared to the three and six months ended June 30, 2019 was primarily due to tax benefit for federal tax credits attributable to the Company’s biodiesel blending operations that were re-enacted in December 2019, reversal of a valuation allowance for deferred tax assets in partnership investments due to changes in the future realizability of deferred tax basis differences, and expected net operating loss carryback provided under the CARES Act which allows the Company to recover federal taxes paid in prior years at a 35% tax rate creating a 14% tax rate benefit.

On March 27, 2020, the Coronavirus Aid Relief, and Economic Security Act (the "CARES Act") was enacted into law.

The Act includes several significant provisions for corporations, including the usage of net operating losses, interest deductions and payroll benefits.

There was not a material impact on the consolidated financial statements as of and for the three months ended March 31, 2020 as a result of the enactment.

The Company recognized $ 16.8 million of current federal income tax benefit for the three and six months ended June 30, 2020 , attributable to anticipated tax refunds from net operating loss carryback to prior 35% tax rate years under the CARES Act.

Additionally, we recorded an income tax receivable totaling $ 193 million as of June 30, 2020 related to the net operating loss carryback, which we expect to collect in the first half of 2021.

Note 13 - Related Party Transactions

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Transactions with our related parties were as follows for the periods presented:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in millions)

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Other Current Assets

March 31, 2020

June 30, 2020

December 31, 2019

Short-term derivative assets (see Note 9)

Income and other tax receivables

Short-term derivative assets (see Note 9)

Right to receive crude oil barrels (see Note 10)

Prepaid expenses

Biodiesel tax credit (see Note 2)

Environmental Credits Obligation surplus (see Note 10)

Note receivable - current portion, net of allowance of $3.1 million

Biodiesel tax credit (see Note 2)

Investment commodities

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Other Non-Current Assets

March 31, 2020

June 30, 2020

December 31, 2019

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Deferred financing costs

Note receivable - non-current portion

Long-term derivative assets (see Note 9)

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Accrued Expenses and Other Current Liabilities

March 31, 2020

June 30, 2020

December 31, 2019

Crude purchase liabilities

Income and other taxes payable

Environmental Credits Obligation deficit (see Note 10)

Product financing agreements

Crude purchase liabilities

Environmental Credits Obligation deficit (see Note 10)

Short-term derivative liabilities (see Note 9)

Employee costs

Interest payable

Environmental liabilities (see Note 11)

Interest payable

Tank inspection liabilities

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Other Non-Current Liabilities

March 31, 2020

June 30, 2020

December 31, 2019

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2005 Long-Term Incentive Plans (collectively, the "Incentive Plans")

Compensation expense related to equity-based awards granted under the Incentive Plans amounted to $ 5.8 million and $ 4.8 million for the three months ended March 31, 2020 and 2019 , respectively.

On May 5, 2020, the Company's stockholders approved an amendment to the Delek US Holdings, Inc.

2016 Long-Term Incentive Plan that increased the number of shares of Common Stock available for issuance under this plan by 2,120,000 shares to 11,020,000 shares.

Compensation expense related to equity-based awards granted under the Incentive Plans amounted to $ 5.0 million and $ 10.9 million for the three and six months ended June 30, 2020 , respectively, and $ 6.6 million and $ 11.4 million for the three and six months ended June 30, 2019 , respectively.

These amounts are included in general and administrative expenses in the accompanying condensed consolidated statements of income.

As of March 31, 2020 , there was $ 47.8 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements, which is expected to be recognized over a weighted-average period of 2.1 years.

We issued 102,895 and 244,566 shares of common stock as a result of exercised or vested equity-based awards during the three months ended March 31, 2020 and 2019 , respectively.

These amounts are net of 61,505 and 169,991 shares withheld to satisfy employee tax obligations related to the exercises and vestings during the three months ended March 31, 2020 and 2019 , respectively.

As of June 30, 2020 , there was $ 48.2 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements, which is expected to be recognized over a weighted-average period of 2.1 years.

We issued net shares of common stock of 143,044 and 246,463 as a result of exercised or vested equity-based awards during the three and six months ended June 30, 2020 , respectively, and 139,057 and 383,623 for the three and six months ended June 30, 2019 , respectively.

These amounts are net of 68,944 and 130,449 shares withheld to satisfy employee tax obligations related to the exercises and vestings during the three and six months ended June 30, 2020 , respectively, and 153,940 and 324,076 for the three and six months ended June 30, 2019 , respectively.

Delek Logistics GP, LLC 2012 Long-Term Incentive Plan

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Note 16 - Shareholders' Equity

During the three months ended March 31, 2020 , our Board of Directors declared the following dividends:

During the six months ended June 30, 2020 , our Board of Directors declared the following dividends:

Approval Date

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The repurchase program does not obligate us to acquire any particular amount of stock and does not expire.

During the three months ended March 31, 2020 , 58,713 shares of our common stock were repurchased for a total of $ 1.9 million compared to repurchases of 1,291,644 shares during the three months ended March 31, 2019 for a total of $ 46.2 million .

As of March 31, 2020 , there was $ 229.7 million of authorization remaining under Delek's aggregate stock repurchase program.

During the six months ended June 30, 2020 , 58,713 shares of our common stock were repurchased for a total of $ 1.9 million .

No repurchases of our common stock were made in the three months

Notes to Condensed Consolidated Financial Statements (Unaudited)

ended June 30, 2020 .

During the three and six months ended June 30, 2019 , we repurchased 1,647,078 and 2,938,722 shares of our common stock for a total of $ 58.6 million and $ 104.8 million , respectively.

As of June 30, 2020 , there was $ 229.7 million of authorization remaining under Delek's aggregate stock repurchase program.

Stockholder Rights Plan

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The Rights initially trade with, and are inseparable from, Delek’s common stock.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Once the Rights become exercisable, each Right will allow its holder to purchase one one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $ 0.01 per share (a “Preferred Share”) for $ 92.24 , subject to adjustment (the “Exercise Price”).

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Postretirement Benefits

The net periodic (benefit) cost for our postretirement benefit plans was not material for the three months ended March 31, 2020 or 2019 .

The net periodic (benefit) cost for our postretirement benefit plans was not material for the three and six months ended June 30, 2020 or 2019 .

Additionally, our estimated contributions to our pension plans during 2020 have not changed significantly from amounts previously disclosed in the notes to the consolidated financial statements for the year ended December 31, 2019 .

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Our sublease portfolio consists primarily of operating leases within our retail stores and crude storage equipment.

As of March 31, 2020 , $ 23.0 million of our net property, plant, and equipment balance is subject to an operating lease.

As of June 30, 2020 , $ 27.3 million of our net property, plant, and equipment balance is subject to an operating lease.

This agreement does not include options for the lessee to purchase our leasing equipment, nor does it include any material residual value guarantees or material restrictive covenants.

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The following table presents additional information related to our operating leases in accordance ASC 842, Leases ("ASC 842"):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in millions)

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Leased assets obtained in exchange for new operating lease liabilities

March 31, 2020

June 30, 2020

Weighted-average remaining lease term (years) operating leases

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Dividend Declaration

On May 4, 2020 , our Board of Directors voted to declare a quarterly cash dividend of $ 0.31 per share of our common stock, payable on June 3, 2020 to shareholders of record on May 20, 2020 .

2020 Amendments to Supply and Offtake Agreements

In April 2020, we amended our three Supply and Offtake Agreements with J.

Aron to extend the respective terms to December 30, 2022, with J.

Aron having the sole discretion to further extend the agreements to May 30, 2025.

As part of this amendment, there were changes to the underlying market index, annual fee and the crude purchase fee.

See Note 7 for further discussion.

COVID-19 Pandemic and OPEC Production Disputes Subsequent Events

Subsequent to quarter end, steps taken to address the COVID-19 Pandemic and developments in the OPEC Production Disputes significantly impacted supply and demand in global oil and gas markets, causing oil prices to decline sharply, as well as other changes to the economic outlook in the near term.

Such subsequent developments included but are not limited to government-imposed temporary business closures and voluntary shelter-at-home directives as well as developments in production discussions between global oil producers, and the effect thereof.

Oil prices as well as demand are expected to continue to be volatile as a result of the near-term over-supply and the ongoing COVID-19 Pandemic as changes in oil inventories, industry demand and global and national economic performance are reported, and we cannot predict when prices and demand will improve and stabilize.

We are currently unable to estimate the impact these events will have on our future financial position and results of operations.

Accordingly, we can give no assurances that the events will not have a material adverse effect on our financial position or results of operations, and the information presented in this Quarterly Report on Form 10-Q should be considered in light of these events.

Sale of Bakersfield Non-Operating Refinery

(“GCE”), a southern California-based renewable energy company, for total cash consideration of $ 40 million .

GCE intends to repurpose the refinery to produce renewable diesel and possibly renewable jet fuel.

As part of the transaction, GCE granted a call option to Delek to acquire up to a 33 1/3% interest in the acquiring subsidiary, GCE Acquisitions, exercisable by Delek through the 90th day after GCE demonstrates commercial operations, as contractually defined.

Notes to Condensed Consolidated Financial Statements (Unaudited)

On August 3, 2020 , our Board of Directors voted to declare a quarterly cash dividend of $ 0.31 per share of our common stock, payable on September 3, 2020 to shareholders of record on August 19, 2020 .

Management's Discussion and Analysis

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements