What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-09 compared with 2020-08-07 · 485 added, 324 removed, 644 unchanged (56% of the section changed)

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• the possibility of inefficiencies, curtailments, or shutdowns in refinery operations or pipelines, whether due to infection in the workforce or in response to reductions in demand as a result of the COVID-19 Pandemic;

our ability to execute our strategy of growth through acquisitions and capital projects and changes in the expected

value of and benefits derived therefrom, including any ability to successfully integrate acquisitions, realize expected synergies or achieve operational efficiency and effectiveness;

• our ability to execute our strategy of growth through acquisitions and capital projects and changes in the expected value of and benefits derived therefrom, including any ability to successfully integrate acquisitions, realize expected synergies or achieve operational efficiency and effectiveness;

• diminishment in value of long-lived assets may result in an impairment in the carrying value of the assets on our balance sheet and a resultant loss recognized in the statement of operations;

• the unprecedented market environment and economic effects of the COVID-19 Pandemic, including uncertainty regarding the timing, pace and extent of economic recovery in the United States due to the COVID-19 Pandemic;

Management's Discussion and Analysis

• general economic and business conditions affecting the southern, southwestern and western United States, particularly levels of spending related to travel and tourism and the ongoing and future impacts of the COVID-19 Pandemic;

• volatility under our derivative instruments;

Management's Discussion and Analysis

• deterioration of creditworthiness or overall financial condition of a material counterparty (or counterparties);

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• possibility of accelerated repayment on a portion of the J.

Aron S&O liability if the purchase price adjustment feature triggers a change on the re-pricing dates;

Aron supply and offtake liability if the purchase price adjustment feature triggers a change on the re-pricing dates;

• changes in our ability to continue to access the credit markets;

• compliance, or failure to comply, with restrictive and financial covenants in our various debt agreements;

the inability of our subsidiaries to freely make dividends, loans or other cash distributions to us;

• the suspension of our quarterly dividend;

• seasonality;

• acts of terrorism (including cyber-terrorism) aimed at either our facilities or other facilities that could impair our ability to produce or transport refined products or receive feedstocks;

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Our operating segments consist of refining, logistics, and retail, and are discussed in the sections that follow.

The recent outbreak of COVID-19 and its development into a pandemic in March 2020 (the "COVID-19 Pandemic" or the "Pandemic") has resulted in significant economic disruption globally, including in the U.S.

and specific geographic areas where we operate.

The outbreak of COVID-19 and its development into a pandemic in March 2020 (the "COVID-19 Pandemic" or the "Pandemic") has resulted in significant economic disruption globally, including in the United States ("U.S.") and specific geographic areas where we operate.

Actions taken by various governmental authorities, individuals and companies around the world to prevent the spread of COVID-19 through both voluntary and mandated social distancing, curfews, shutdowns and expanded safety measures have restricted travel, many business operations, public gatherings and the overall level of individual movement and in-person interaction across the globe.

This has in turn significantly reduced global economic activity which has had a significant impact on the nature and extent of travel.

The COVID-19 Pandemic has had a devastating impact on the airline industry, dramatically reducing the number of domestic flights and, due to foreign travel bans and immigration restrictions abroad as well as traveler concerns over exposure, virtually eliminating international travel originating from the U.S to many parts of the world.

to many parts of the world.

Additionally, the COVID-19 Pandemic has had a significant negative impact on motor vehicle use at a time when seasonal driving patterns typically result in an increase of consumer demand for gasoline.

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, particularly our refined petroleum products and most notably gasoline and jet fuel.

In April and June 2020, agreements were 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 that significantly affected crude oil prices beginning in the first quarter of 2020 (the "OPEC Production Disputes"), and to provide stability in the oil markets.

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

Based on these conditions and events, downward pressure on commodity prices, crack spreads and demand remains a significant risk and could continue for the foreseeable future.

As a result, there has

Management's Discussion and Analysis

also been a decline in the demand for, and thus also the market prices of, crude oil and certain of our products, particularly our refined petroleum products and most notably gasoline and jet fuel.

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

While OPEC+ have reached an agreement to cut oil production, the uncertainty about the duration of the COVID-19 Pandemic has caused storage constraints in the U.S.

resulting from over-supply of produced oil.

Based on these conditions and events, downward pressure on commodity prices, crack spreads and demand remains a significant risk and could continue for the foreseeable future.

During the latter part of the second quarter of 2020, governmental authorities in various states across the U.S., particularly those in our Permian Basin and U.S.

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Additionally, increased infection rates could impact our refining, logistics and retail operations, particularly in high-infection states, if our employees are personally affected by the illness, both through direct infection and quarantine procedures.

During the three and six months ended June 30, 2020, Delek has experienced the impact on demand and pricing of these unprecedented conditions, most notably in our refining segment.

Our business and our second quarter 2020 results reflect the impact of decreased demand combined with crack spreads that are 62% to 76% lower, on average, compared to the same quarter in the prior year.

During the three and nine months ended September 30, 2020, Delek has experienced the impact on demand and pricing of these unprecedented conditions, most notably in our refining segment.

Our business and our third quarter 2020 results reflect the impact of decreased demand combined with crack spreads that are 53% to 71% lower, on average, compared to the same quarter in the prior year.

We have also experienced operational constraints as well, including COVID-19 infections at certain of our company locations that have resulted in re-imposed or expanded remote policies and quarantine protocols.

And we continue to be faced with risk from our suppliers and customers who are facing similar challenges.

We have identified the following known uncertainties resulting from the COVID-19 Pandemic and the OPEC Production Disputes:

Significant declines and/or volatility in prices of refined products we sell and the feedstocks we purchase as well as in crack spreads resulting from the COVID-19 Pandemic and the OPEC Production Disputes could have a significant impact on our revenues, cost of sales, operating income and liquidity, as well to the carrying value of or long-lived or indefinite-lived assets;

We have identified the following known uncertainties resulting from the COVID-19 Pandemic, which is ongoing:

• Significant declines and/or volatility in prices of refined products we sell and the feedstocks we purchase as well as in crack spreads resulting from the COVID-19 Pandemic and the OPEC Production Disputes could have a significant impact on our revenues, cost of sales, operating income and liquidity, as well to the carrying value of our long-lived or indefinite-lived assets;

• A decline in the market prices of refined products and feedstocks below the carrying value in our inventory may result in the adjustment of the value of our inventories to the lower market price and a corresponding loss on the value of our inventories (see also Note 1 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional discussion of specific financial statement risks);

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• Customers of the refining segment as well as third-party customers of the logistics segment may experience financial difficulties which could interrupt the volumes ordered by those customers and/or could impact the credit worthiness of such customers and the collectability of their outstanding receivables;

• The impact of COVID-19 or protocols implemented in response to COVID-19 by key or specialty suppliers may negatively affect our ability to obtain specialty equipment or services when needed;

• Equity method investees may be significantly impacted by the COVID-19 Pandemic and/or the OPEC Production Disputes, which may increase the risk of impairment of those investments;

• Access to capital markets may be significantly impacted by the volatility and uncertainty in the oil and gas market specifically which could restrict our ability to raise funds;

Management's Discussion and Analysis

• While our current liquidity needs are managed by existing facilities, sources of future liquidity needs may be impacted by the volatility in the debt market and the availability and pricing of such funds as a result of the COVID-19 Pandemic and the OPEC Production Disputes;

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economy and/or consumer, as well as the impact and success of such efforts, remains unknown.

Other uncertainties related to the impact of the COVID-19 Pandemic as well as global geopolitical factors may exist that have not been identified or that are not specifically listed above, and could impact our future results of operations and financial position, the nature of which

Management's Discussion and Analysis

and the extent to which are currently unknown.

Actions taken by OPEC+ in April and June 2020, including the agreement for management of crude oil supply in the hopes of contributing to market stabilization (the "Oil Production Cuts"), as well as the U.S.

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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 U.S.

Generally Accepted Accounting Principles ("GAAP"), we have considered them in the preparation of our unaudited financial statements as of and for the six months ended June 30, 2020 , which are included in Item 1, of this Quarterly Report on Form 10-Q.

In addition, management continues to actively respond to the impact of the COVID-19 Pandemic and the OPEC Production Disputes on our business.

Generally Accepted Accounting Principles ("GAAP"), we have considered them in the preparation of our unaudited financial statements as of and for the nine months ended September 30, 2020, which are included in Item 1, of this Quarterly Report on Form 10-Q.

In addition, management continues to actively respond to the continuing impact of the COVID-19 Pandemic on our business.

Such efforts include (but are not limited to) the following:

Reviewing planned production throughputs at our refineries and planning for the possibility of reductions;

• Reviewing planned production throughputs at our refineries and planning for optimization of operations;

• Coordinating planned maintenance activities with possible downtime as a result of possible reductions in throughputs;

• Searching for additional storage capacity if needed to store potential builds in crude oil or refined product inventories;

• Finding additional suppliers for key or specialty items or securing inventory or priority status with existing vendors;

• Reducing planned capital expenditures for 2020;

Suspending the share repurchase program until our internal parameters are met for resuming such repurchases;

• Suspending the share repurchase program until our internal parameters are met for resuming such repurchases, which will continue to include evaluation of our undervalued stock price in relation to opportunities to provide alternative returns and/or accretive value to investors;

• Taking advantage of the income and payroll tax relief afforded to us by the CARES Act;

Implementing remote work measures and safety protocols at our refineries and other locations;

• Implementing regular site cleaning and disinfecting procedures;

• Adopting remote working where possible.

Where on-site operations are required, masks are mandatory and our employees have adopted social distancing;

• Reviewing dividend strategy to align with market changes and current economic conditions;

• Identifying alternative financing solutions to enhance our access to sources of liquidity;

Enacting cost reduction measures across the organization, including reducing contract services, reducing overtime and other employee related costs and reducing or eliminating non-critical travel which serves the dual purpose of also complying with recommendations made by the state and federal governments because of the COVID-19 Pandemic.

• Enacting cost reduction measures across the organization, including reducing contract services, reducing overtime and other employee related costs, workforce reduction and reducing or eliminating non-critical travel which serves the dual purpose of also complying with recommendations made by the state and federal governments because of the COVID-19 Pandemic.

The most significant of these efforts to date as well as specifically identified measures that are anticipated in the near term, in terms of realized or anticipated impact, include the following:

Pursuant to the provisions of the CARES Act, we recognized $16.8 million of current federal income tax benefit for the nine months ended September 30, 2020, attributable to anticipated tax refunds from net operating loss carryback to prior 35% tax rate years.

Additionally, we recorded an income tax receivable totaling $165.6 million as of September 30, 2020 related to the net operating loss carryback, which we expect to collect in the first half of 2021.

Finally, we deferred $7.8 million of payroll tax payments under the provisions of the CARES Act during the nine months ended September 30, 2020, which will be payable in equal installments in December 2021 and December 2022.

Beginning in the second quarter 2020, we made significant efforts to reduce our capital spending, particularly on growth and non-critical sustaining maintenance projects.

As a result, we have spent $208.0 million in capital expenditures (as discussed further in the "Capital Spending" section of the "Liquidity and Capital Resources" section of Item 2.

Management's Discussion and Analysis) during the nine months ended September 30, 2020 compared to our initial full-year forecast included in our December 31, 2019 Annual Report on Form 10-K of $325.7 million.

See the "Liquidity and Capital Resources" section of Item 2.

Management's Discussion and Analysis for further information.

Management's Discussion and Analysis

In light of the weak macro-economic environment, we elected to pull forward turnaround work into the fourth quarter of 2020 on certain units at the Krotz Springs refinery that will be conducted on a straight-time basis.

This will allow us to continue running the more profitable units of the refinery and should help improve economics toward a break-even level.

After this work is complete in the first quarter of next year and depending on market conditions, we have the flexibility to optimize operations at Krotz Springs by operating only the units that are producing favorable margins, thereby reducing unnecessary operating expenses, or moving back to full utilization at the facility, should the macro-economic environment and margins improve.

Additionally, we have developed a cost savings plan for 2021 designed to significantly reduce operating expenses and general and administrative expenses.

The majority of the expected operating expenses reduction is attributable to the temporary unit optimization at the Krotz Spring refinery, while other efforts such as targeted budgeting around outside contractor expenses and deferral of certain non-critical, non-capitalizable maintenance activities are also expected to have a favorable impact.

Furthermore, both operating and general and administrative expenses will be favorably impacted by a cumulative reduction in workforce, the first of these reductions of which began in the second quarter 2020, and which are expected to be completed by the fourth quarter.

Reductions in workforce are made possible in large part by significant efforts to improve process efficiency and leverage technology where cost-effective.

For the three and nine months ended September 30, 2020, we have incurred incremental severance costs of $1.8 million and $4.6 million related to these workforce reductions.

We have also incurred $2.4 million of severance costs subsequent to September 30, 2020.

Finally, we have elected to suspend dividends beginning in the fourth quarter 2020 in order to conserve capital.

We expect this will help us maintain our liquidity and manage our cost of capital in light of the COVID-19 Pandemic and lower oil prices.

We also believe it will provide us with flexibility to pursue opportunities to provide value to investors with respect to our stock price, which we believe is undervalued.

The combination of these efforts are expected to have a favorable impact on cash flows on a prospective basis and continuing in 2021, which will reinforce our liquidity positioning in anticipation of the continued economic impacts of the COVID-19 Pandemic.

See the "Liquidity and Capital Resources" section of Item 2.

Management's Discussion and Analysis for further information.

The extent to which our future results are affected by the COVID-19 Pandemic will depend on various factors and consequences beyond our control, such as the duration and scope of the Pandemic;

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of this Quarterly Report on Form 10-Q for further discussion of risks associated with the COVID-19 Pandemic and the OPEC Production Disputes.

Pursuant to the provisions of the CARES Act, we 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.

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.

Finally, we deferred $4.4 million of payroll tax payments under the provisions of the CARES Act during the six months ended June 30, 2020 , which will be payable in equal installments in December 2021 and December 2022.

Management's Discussion and Analysis

Refining Overview

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 as of June 30, 2020 .

The refining segment has a combined nameplate capacity of 302,000 barrels per day as of September 30, 2020.

A high-level summary of the refinery activities is presented below:

Tyler, Texas refinery (the "Tyler refinery")

El Dorado, Arkansas refinery (the "El Dorado refinery")

Big Spring,Texas refinery (the "Big Spring refinery")

Krotz Springs, Louisiana refinery (the "Krotz Springs refinery")

Tyler, Texas refinery (the "Tyler refinery") El Dorado, Arkansas refinery (the "El Dorado refinery") Big Spring, Texas refinery (the "Big Spring refinery") Krotz Springs, Louisiana refinery (the "Krotz Springs refinery")

Total Nameplate Capacity (barrels per day ("bpd")) 75,000 80,000 73,000 74,000

Primary Products

Gasoline, jet fuel, ultra-low-sulfur diesel, liquefied petroleum gases, propylene, petroleum coke and sulfur

Gasoline, ultra-low-sulfur diesel, liquefied petroleum gases, propylene, asphalt and sulfur

Gasoline, jet fuel, ultra-low-sulfur diesel, liquefied petroleum gases, propylene, aromatics and sulfur

Gasoline, jet fuel, high-sulfur diesel, light cycle oil, liquefied petroleum gases, propylene and ammonium thiosulfate

Relevant Crack Spread Benchmark (1)

Gulf Coast 5-3-2

Primary Products Gasoline, jet fuel, ultra-low-sulfur diesel, liquefied petroleum gases, propylene, petroleum coke and sulfur Gasoline, ultra-low-sulfur diesel, liquefied petroleum gases, propylene, asphalt and sulfur Gasoline, jet fuel, ultra-low-sulfur diesel, liquefied petroleum gases, propylene, aromatics and sulfur Gasoline, jet fuel, high-sulfur diesel, light cycle oil, liquefied petroleum gases, propylene and ammonium thiosulfate

Relevant Crack Spread Benchmark (1) Gulf Coast 5-3-2

Gulf Coast 5-3-2 (2)

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Gulf Coast 2-1-1 (4)

Marketing and Distribution

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

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

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Gulf Coast ("Gulf Coast") 5-3-2 crack spread because we believe it to be the most closely aligned benchmark.

Management's Discussion and Analysis

(3) Our Big Spring refinery is capable of processing substantial volumes of sour crude oil, which has historically cost less than intermediate, and/or substantial volumes of sweet crude oil, and therefore the West Texas Intermediate ("WTI") Cushing/ West Texas Sour ("WTS") price differential, taking into account differences in production yield, is an important measure for helping us make strategic, market-respondent production decisions.

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Our logistics segment gathers, transports and stores crude oil and markets, distributes, transports and stores refined products in select regions of the southeastern United States and West Texas for our refining segment and third parties.

It is comprised of the consolidated balance sheet and results of operations of Delek Logistics Partners, LP ("Delek Logistics", NYSE:DKL), where we owned a 69.1% interest (at June 30, 2020 ) in Delek Logistics and a 94.8% interest in the entity that owns the entire 2.0% general partner interest in Delek Logistics and all of the incentive distribution rights.

It is comprised of the consolidated balance sheet and results of operations of Delek Logistics Partners, LP ("Delek Logistics", NYSE:DKL), where we owned an 80.0% interest in Delek Logistics at September 30, 2020.

Delek Logistics was formed by Delek in 2012 to own, operate, acquire and construct crude oil and refined products logistics and marketing assets.

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In May 2020, the logistics segment acquired from another of our segments certain leased and owned tractors and trailers and related assets.

The logistics segment owns or leases 273 tractors and 324 trailers used to haul primarily crude oil and other products for related and third parties.

Management's Discussion and Analysis

The logistics segment owns or leases approximately 273 tractors and 324 trailers used to haul primarily crude oil and other products for related and third parties.

Retail Overview

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

Our retail segment at September 30, 2020 includes the operations of 253 owned and leased convenience store sites located primarily in Central and West Texas and New Mexico.

Our convenience stores typically offer various grades of gasoline and diesel under the DK or Alon 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 DK or Alon brand names pursuant to a license agreement with 7-Eleven, Inc.

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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.

As of June 30, 2020 , we have removed the 7-Eleven brand name at 57 of our store locations.

As of September 30, 2020, we have removed the 7-Eleven brand name at 57 of our store locations.

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

Substantially all of the motor fuel sold through our retail segment is supplied by our Big Spring refinery, which is transferred to the retail segment at prices substantially determined by reference to published commodity pricing information.

In connection with our retail strategic initiatives, as of June 30, 2020 , we have closed or sold 46 under-performing or non-strategic store locations of which one was closed during the six months ended June 30, 2020 .

In connection with our retail strategic initiatives, as of September 30, 2020, we have closed or sold 46 under-performing or non-strategic store locations of which one was closed during the nine months ended September 30, 2020.

The cost to acquire the refined fuel products we sell to our wholesale customers in our logistics segment and at our convenience stores in our retail segment depends on numerous factors beyond our control, including the supply of, and demand for, crude oil, gasoline and other refined petroleum products which, in turn, depend on, among other factors, changes in domestic and foreign economies, weather conditions, domestic and foreign political affairs, production levels, the availability of imports, the marketing of competitive fuels and government regulation.

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Additionally, our corporate activities include certain of our commodity and other hedging activities.

Management's Discussion and Analysis

Strategic Overview

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Therefore, when we take physical or financial positions for optimization purposes, our intent is generally to take offsetting positions in quantities and at prices that will advance these objectives while minimizing our positional and financial statement risk.

However, because of the volatility of the market in terms of pricing and availability, it is possible that we may have material positions with timing differences or, more rarely, that we are unable to cover a position with an offsetting

Management's Discussion and Analysis

position as intended.

Such differences could have a material impact on the classification of resulting gains/losses, assets or liabilities, and could also significantly impact net earnings.

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Transactions designed to maximize shareholder return

Dividend Declaration

On August 3, 2020 , Delek's Board of Directors voted to declare a quarterly cash dividend of $0.31 per share, payable on September 3, 2020 , to stockholders of record on August 19, 2020 .

Our previous quarterly cash dividend amounts ranged between $0.27 to $0.30 per share for dividends paid throughout 2019 and was $0.31 per share for the dividends paid during both the first and second quarters of 2020 .

Dividend Suspension

On November 5, 2020, we announced that we have elected to suspend dividends beginning in the fourth quarter of 2020 in order to conserve capital.

Our previous quarterly cash dividend amounts ranged between $0.27 to $0.30 per share for dividends paid throughout 2019 and was $0.31 per share for the dividends paid during each of the three quarterly periods of 2020.

The declaration, amount and payment of any future dividends on our common stock will be at the sole discretion of our Board of Directors, and we are not obligated to declare or pay any dividends.

Management's Discussion and Analysis

Share Repurchases

During the six months ended June 30, 2020 , Delek repurchased 58,713 shares for an aggregate purchase price of $1.9 million under the most recent share repurchase plan which provided for repurchases of up to $500.0 million and was approved by the board on November 6, 2018 .

As of June 30, 2020 , there remained $229.7 million available for repurchases under the most recent repurchase plan.

In our efforts to conserve capital, for the time being we have suspended the repurchase of shares.

During the nine months ended September 30, 2020, Delek repurchased 58,713 shares for an aggregate purchase price of $1.9 million under the most recent share repurchase plan which provided for repurchases of up to $500.0 million and was approved by the board on November 6, 2018.

As of September 30, 2020, there remained $229.7 million available for repurchases under the most recent repurchase plan.

In our efforts to conserve capital, for the time being, we have temporarily suspended the repurchase of shares.

However, in light of our November 2020 decision to suspend dividends, we acknowledge that share repurchases could resume and that potential share repurchases would take priority over future dividends or growth capital.

Transactions designed to maximize return on assets

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Under the agreements governing the joint venture, we must contribute our percentage interest of the applicable construction costs (including certain costs previously incurred by WWP), and it is anticipated that our capital contributions will total approximately $340 million to $380 million over the course of construction (expected to be two to three years).

Construction of the crude oil pipeline system remains on schedule, and the main segment of the pipeline system is expected to commence operations in the fourth quarter of 2020, with additional segments expected to be placed in service throughout 2021.

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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Our investment is accounted for as an equity method investment.

See further discussion in Note 5 of our condensed consolidated financial statements included in Item 1, Financial Statements, of this Quarterly Report on Form 10-Q.

See further discussion in Note 5 of our condensed consolidated financial statements included in Item 1.

Financial Statements, of this Quarterly Report on Form 10-Q.

Increased Investment in Delek Logistics

Effective August 13, 2020, Delek Logistics completed a restructuring transaction to eliminate the incentive distribution rights held by us and convert the 2.0% economic general partner interest into a non-economic general partner interest, in exchange for a total consideration consisting of $45.0 million in cash and 14.0 million newly issued common limited partner units.

Contemporaneously, we repurchased 5.2% ownership interest in Delek Logistics GP LLC, the general partner, from our affiliates, who are also members of the general partner's management and board of directors, for $23.1 million in cash.

Subsequent to these transactions, we owned 34,745,868 common limited partner units increasing our ownership to 80.0% of the outstanding common units, and 100% of the outstanding interest in the general partner, Delek Logistics GP, LLC.

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

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The total consideration was subject to certain post-closing adjustments and was comprised of $100.0 million in cash and 5.0 million common units representing limited partner interest in Delek Logistics.

The cash component of this dropdown

Management's Discussion and Analysis

was financed with borrowings on the Delek Logistics Credit Facility (as defined in Note 8 of our condensed consolidated financial statements included in Item 1, Financial Statements).

cash component of this dropdown was financed with borrowings on the Delek Logistics Credit Facility (as defined in Note 8 of our condensed consolidated financial statements included in Item 1.

Financial Statements).

Additionally, in March 2020, we purchased 451,822 of Delek Logistics limited partner units from a public investor for approximately $5.0 million.

As a result of these transactions, our ownership in Delek Logistics' common limited partner units was increased to 70.5% .

As a result of these transactions, our ownership in Delek Logistics' common limited partner units was increased to 70.5% at that time.

These continued investments enhance our ability to maximize the value of our logistics assets.

See further discussion in Note 4 of our condensed consolidated financial statements included in Item 1, Financial Statements, of this Quarterly Report on Form 10-Q.

See further discussion in Note 4 of our condensed consolidated financial statements included in Item 1.

Financial Statements, of this Quarterly Report on Form 10-Q.

Sale of Bakersfield Non-Operating Refinery

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

GCE intends to repurpose the refinery into a renewable diesel plant.

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.

See Note 2 of our condensed consolidated financial statements included in Item 1, Financial Statements, of this Quarterly Report on Form 10-Q.

See further discussion in Note 2 of our condensed consolidated financial statements included in Item 1.

Financial Statements, of this Quarterly Report on Form 10-Q.

Transactions designed to minimize the cost of capital/manage financial risk exposures

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The amendments provide us dedicated financing for the barrels covered through at least December 2022, and certain specific market-indexed provisions improve our ability to manage our exposure to commodity price volatility during the term of the Agreements.

See further discussion in Note 7 of our condensed consolidated financial statements included in Item 1, Financial Statements, of this Quarterly Report on Form 10-Q.

See further discussion in Note 7 of our condensed consolidated financial statements included in Item 1.

Financial Statements, of this Quarterly Report on Form 10-Q.

2020 Amendment to the Term Loan Credit Facility

On May 19, 2020, we amended the Term Loan Credit Facility agreement (as defined in Note 8 of our condensed consolidated financial statements included in Item 1, Financial Statements) 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% , requiring quarterly principal amortization payments of $0.5 million commencing with June 30, 2020.

On May 19, 2020, we amended the Term Loan Credit Facility agreement (as defined in Note 8 of our condensed consolidated financial statements included in Item 1.

Financial Statements) 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%, requiring quarterly principal amortization payments of $0.5 million commencing with June 30, 2020.

The Third Incremental Term Loan constitutes a separate class of term loans 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.

There are no restrictions on the Company's use of the proceeds of the Third Incremental Term Loan, and the proceeds may be used (i) for general corporate purposes and (ii) to pay transaction fees and expenses associated with the Third Incremental Term Loan.

See further discussion in Note 8 of our condensed consolidated financial statements included in Item 1, Financial Statements, of this Quarterly Report on Form 10-Q.

See further discussion in Note 8 of our condensed consolidated financial statements included in Item 1.

Financial Statements, of this Quarterly Report on Form 10-Q.

Management's Discussion and Analysis

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We have significant sources of WTI Midland crude because of our gathering system, and so accordingly favorable pricing of WTI Midland crude compared to other WTI crude can favorably impact our cost of materials and other and therefore our margins compared to other refiners.

The table below reflects the quarterly average prices of WTI Midland and WTI Cushing crude oil for each of the quarterly periods in 2019 and for the two quarterly periods in 2020 .

As shown in the historical graph, WTI Midland crude prices have generally been favorable as compared to WTI Cushing, though that trend has reversed slightly in the fourth quarter 2019.

The table below reflects the quarterly average prices of WTI Midland and WTI Cushing crude oil for each of the quarterly periods in 2019 and for the three quarterly periods in 2020.

As shown in the historical graph, WTI Midland crude prices have generally been favorable as compared to WTI Cushing, though that trend has reversed slightly in the fourth quarter 2019 and the third quarter of 2020.

Crack Spreads

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Generally, crack spreads represent the approximate refining margin resulting from processing one barrel of crude oil into its outputs, generally gasoline and diesel fuel.

The table below reflects the quarterly average Gulf Coast 5-3-2 Ultra Low Sulfur Diesel ("ULSD"), 3-2-1 and 2-1-1 crack spreads for each of the quarterly periods in 2019 and for the two quarterly periods in 2020 .

As the chart illustrates, the 3-2-1 crack spread has consistently outperformed the 5-3-2 and the 2-1-1 crack spreads.

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Our refineries produce the following products:

Tyler Refinery

El Dorado Refinery

Big Spring Refinery

Krotz Springs Refinery

Primary Products

Gasoline, jet fuel, ultra-low-sulfur diesel, liquefied petroleum gases, propylene, petroleum coke and sulfur

Gasoline, ultra-low-sulfur diesel, liquefied petroleum gases, propylene, asphalt and sulfur

Gasoline, jet fuel, ultra-low-sulfur diesel, liquefied petroleum gases, propylene, aromatics and sulfur

Gasoline, jet fuel, high-sulfur diesel, light cycle oil, liquefied petroleum gases, propylene and ammonium thiosulfate

Tyler Refinery El Dorado Refinery Big Spring Refinery Krotz Springs Refinery

The charts below illustrate the quarterly average prices of Gulf Coast Gasoline, U.S.

High Sulfur Diesel and U.S.

Ultra Low Sulfur Diesel for each of the quarterly periods in 2019 and for the two quarterly periods in 2020 .

Ultra Low Sulfur Diesel for each of the quarterly periods in 2019 and for the three quarterly periods in 2020.

Crude Pricing Differentials

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Conversely, as these price discounts increase, so does our competitive advantage, created by our access to WTI-linked crude oil pricing, and specifically WTI Midland crude sources through our gathering systems.

The chart below illustrates the differentials of both Brent crude oil and WTI Midland crude oil as compared to WTI Cushing crude oil as well as WTI Cushing as compared to Louisiana Light Sweet crude oil ("LLS") for each of the quarterly periods in 2019 and for the two quarterly periods in 2020 .

Management's Discussion and Analysis

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It is not possible at this time to predict with certainty what future volumes or costs may be, but given the volatile price of RINs, the cost of purchasing sufficient RINs could have an adverse impact on our results of operations if we are unable to recover those costs in the price of our refined products.

The chart below illustrates the volatility in RINs prices over several quarterly periods, beginning with the first quarter of 2019 through the second quarter of 2020 .

The chart below illustrates the volatility in RINs prices over several quarterly periods, beginning with the first quarter of 2019 through the third quarter of 2020.

Management's Discussion and Analysis

Contractual Obligations

Information regarding our known contractual obligations and commercial commitments of the types described below as of June 30, 2020 , is set forth in the following table (in millions):

Information regarding our known contractual obligations and commercial commitments of the types described below as of September 30, 2020, is set forth in the following table (in millions):

Payments Due by Period

<1 Year 1-3 Years 3-5 Years >5 Years Total

Long term debt and notes payable obligations

$ 33.4 $ 986.0 $ 1,487.3 $ — $ 2,506.7

84.4 161.2 82.0 — 327.6

Operating lease commitments (2)

54.8 73.5 39.9 51.8 220.0

Purchase commitments (3)

562.2 — — — 562.2

Transportation agreements (4)

124.8 244.7 129.1 75.3 573.9

Aron supply and offtake obligations (5)

(1) Expected interest payments on debt outstanding at June 30, 2020 .

Floating interest rate debt is calculated using June 30, 2020 rates.

For additional information, see Note 8 to of our condensed consolidated financial statements included in Item 1, Financial Statements, of this Quarterly Report on Form 10-Q.

(2) Amounts reflect future estimated lease payments under operating leases having remaining non-cancelable terms in excess of one year as of June 30, 2020 .

15.5 239.8 — — 255.3

Total $ 875.1 $ 1,705.2 $ 1,738.3 $ 127.1 $ 4,445.7

(1) Expected interest payments on debt outstanding at September 30, 2020.

Floating interest rate debt is calculated using September 30, 2020 rates.

For additional information, see Note 8 of our condensed consolidated financial statements included in Item 1.

Financial Statements, of this Quarterly Report on Form 10-Q.

(2) Amounts reflect future estimated lease payments under operating leases having remaining non-cancelable terms in excess of one year as of September 30, 2020.

(3) We have supply agreements to secure certain quantities of crude oil, finished product and other resources used in production at both fixed and market prices.

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Aron Supply and Offtake Agreements, including annual fees and principal obligation for the Baseline Volume Step-Out Liability.

For additional information, see Note 7 to of our condensed consolidated financial statements included in Item 1, Financial Statements, of this Quarterly Report on Form 10-Q.

For additional information, see Note 7 of our condensed consolidated financial statements included in Item 1.

Financial Statements, of this Quarterly Report on Form 10-Q.

Critical Accounting Policies

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(i) estimating our quarterly inventory adjustments using the last-in, first-out valuation method for the Tyler refinery, (ii) evaluating impairment for property, plant and equipment and definite life intangibles, (iii) evaluating potential impairment of goodwill, (iv) estimating environmental expenditures, and (v) estimating asset retirement obligations.

During the six months ended June 30, 2020 , we updated our critical accounting policies to include accounting policies that have become critical as a result of new transactions.

During the nine months ended September 30, 2020, we updated our critical accounting policies to include accounting policies that have become critical as a result of new transactions.

Accordingly, we are adding a critical accounting policy related to evaluating variable interest entities to reflect the significant judgment that is involved when determining whether an entity is a variable interest entity ("VIE") and evaluating whether we are the primary beneficiary in connection with our new investment in W2W Holdings LLC.

See Note 5 of the condensed consolidated financial statements in Item 1, Financial Statements for discussion of our investment in W2W Holdings LLC and the related accounting treatment.

See Note 5 of the condensed consolidated financial statements in Item 1.

Financial Statements, for discussion of our investment in W2W Holdings LLC and the related accounting treatment.

Evaluation of Variable Interest Entities

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Management's Discussion and Analysis

Additionally, due to the economic and industry impact of the COVID-19 Pandemic and the OPEC Production Disputes, we also modified the application of certain of our critical accounting policies during and as of the six months ended June 30, 2020 as follows:

Goodwill and Potential Impairment

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Under Accounting Standards Codification ("ASC") ASC 350, Intangibles - Goodwill and Other, goodwill of a reporting unit shall be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

During the six months ended June 30, 2020 , we have identified two significant events that adversely affected the global economy and the oil and gas industry.

These two events are the COVID-19 Pandemic and the OPEC Production Disputes (previously defined), both of which had the secondary effect of impacting prices of crude oil and refined products as well as supply and demand for crude oil and refined products, and triggered several identified uncertainties, as discussed in the 'Business Overview' section of Management's Discussion and Analysis.

Our assessment was performed based on the events that had occurred through June 30, 2020 and excluded developments that occurred in the subsequent period, including but 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.

In order to determine whether these events, including the developments around such events that had occurred through June 30, 2020 and our assumptions about future periods based on those events and related developments, would more likely than not reduce the fair value of a reporting unit below its carrying amount, we performed certain analyses on the most significant inputs in our valuation model to evaluate the impact of these events on the fair value of our reporting units.

This included sensitivity analysis and stress testing on certain of our inputs to our valuation model, including the weighted-average cost of capital, the throughput volume, and the crack spread, which is based on the crude and refined product markets.

Based on our analyses, we determined that there is not an indicator that fair value is more likely than not to have declined below carrying value as of June 30, 2020.

Additionally, because conditions and events are rapidly changing, we continue to monitor developments with these events and their impact on our valuation.

However, there is uncertainty in and around the impact of the COVID-19 Pandemic and the OPEC Production Disputes that have not yet occurred or for existing conditions and events that may have future ramifications that cannot yet be anticipated.

Continued or sustained adverse change to these factors may result in potential future impairment of some or all of our goodwill balance.

In our assessment of the potential indicators of impairment, we considered the continued impact of the COVID-19 pandemic, including the significant decline in our stock price.

We noted a decline in our stock price, which resulted in a decline in our market capitalization since June 30, 2020.

To determine whether the decline in market capitalization and other negative developments arising due to the Pandemic that occurred through September 30, 2020, would more likely than not reduce the fair value of a reporting unit below its carrying amount, we performed certain analyses on the most significant inputs in our valuation model to evaluate the impact of these events on the fair value of our reporting units.

Based on our initial qualitative analysis, we noted that the refining segment was most at risk for potential impairment.

Therefore, we performed extensive additional sensitivity analysis and stress testing on certain of the key assumptions our valuation model.

Based on our analyses, we determined that there was sufficient risk present associated with both our Big Spring refinery (“BSR”) and Krotz Springs refinery (“KSR”) reporting units to indicate that the fair values of those reporting units were more likely than not to have declined below the carrying value as of September 30, 2020.

Accordingly, we updated our estimates of fair value for the BSR and KSR reporting units as of September 30, 2020, using updated inputs and assumptions based on third party data where available.

The estimated fair values of the reporting units were determined using a combination of a discounted cash flow ("DCF") analysis and a market approach.

The DCF analysis was based on our current projection of cash flows which reflected our updated estimates for long-term growth rates, gross margin, capital expenditures and the Weighted Average Cost of Capital or "WACC", which we adjusted to reflect the uncertainties that exist in the market as a result of the Pandemic.

For the market approach, we applied an average historical multiple for guideline companies to estimated income before taxes, interest, depreciation, and amortization.

Our analysis included a reconciliation of the estimated fair value of all reporting units to the company’s market capitalization.

Based on these quantitative analyses, we concluded that the goodwill balances attributed to the BSR and KSR reporting unit were not impaired as of September 30, 2020.

The fair value measurements for the individual reporting units’ estimated fair values represent Level 3 measurements.

We performed a sensitivity analysis on our impairment test as of September 30, 2020, noting the following:

Total Goodwill Balance at September 30, 2020 % Estimated Fair Value exceeds Carrying Value Increase in WACC that could cause impairment (1)

Decrease in long-term growth rate that could cause impairment (1)

BSR $528.0 < 10% 0.5%-1.0% 1%

KSR 237.2 <10% 1.0%-1.5% 1%

(1) Assumes no other changes in any of the key assumptions.

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors.

As a result, there can be no assurance that the estimates and assumptions made for purposes of the interim goodwill impairment test will prove to be an accurate prediction of the future.

Our assessment was performed based on events that had occurred and conditions that existed as of September 30, 2020.

Because conditions and events are rapidly changing, we continue to monitor developments with these events and their impact on our valuation.

Continued or worsening adverse changes to these factors, as well as their impact on our cash flows, market capitalization and other assumptions and inputs, may result in the need to recognize an impairment in future periods.

Specifically with respect to the BSR and KSR reporting units, it is at least reasonably possible that continued or worsening adverse change to these factors, or the presence of new factors having a negative impact on our projection of future cash flows not known as of September 30, 2020, may result in a future impairment which could be material.

We will perform our annual goodwill assessment during the fourth quarter.

Other than as described above, for all financial statement periods presented, there have been no material modifications to the application of these critical accounting policies or estimates since our most recently filed Annual Report on Form 10-K.

See Note 1 of the condensed consolidated financial statements in Item 1, Financial Statements for discussion of updates to our accounting policies.

See Note 1 of the condensed consolidated financial statements in Item 1.

Financial Statements, for discussion of updates to our accounting policies.

Management's Discussion and Analysis

Non-GAAP Measures

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GAAP financial measures.

Management's Discussion and Analysis

Non-GAAP Reconciliations

The following table provides a reconciliation of refining margin to the most directly comparable U.S.GAAP measure, gross margin:

The following table provides a reconciliation of refining margin to the most directly comparable U.S.

GAAP measure, gross margin:

Reconciliation of refining margin to gross margin

Refining Segment

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

$ 1,563.5 $ 2,176.8 $ 4,368.4 $ 6,636.6

Cost of sales

1,631.6 2,061.3 4,749.2 6,085.4

(68.1) 115.5 (380.8) 551.2

Add back (items included in cost of sales):

Operating expenses (excluding depreciation and amortization)

102.1 120.7 302.5 356.7

Depreciation and amortization

50.3 34.6 132.3 98.9

Refining margin

$ 84.3 $ 270.8 $ 54.0 $ 1,006.8

Management's Discussion and Analysis

Summary Financial and Other Information

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Statement of Operations Data (in millions)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

Net revenues $ 2,062.9 $ 2,334.3 $ 5,419.6 $ 7,014.5

Total operating costs and expenses 2,138.1 2,246.9 5,833.5 6,570.4

Operating income (loss)

Total non-operating (income) expense, net

Income (loss) before income tax (benefit) expense

Operating (loss) income (75.2) 87.4 (413.9) 444.1

Total non-operating expense, net 17.3 14.0 6.1 61.3

(Loss) income before income tax (benefit) expense (92.5) 73.4 (420.0) 382.8

Income tax (benefit) expense (15.6) 13.4 (134.6) 83.8

Income (loss) from continuing operations, net of tax

(Loss) income from continuing operations, net of tax (76.9) 60.0 (285.4) 299.0

Loss from discontinued operations, net of tax — — — (0.8)

Net income (loss)

Net (loss) income (76.9) 60.0 (285.4) 298.2

Net income attributed to non-controlling interests 11.2 8.7 29.4 20.3

Net income (loss) attributable to Delek

Net (loss) income attributable to Delek US $ (88.1) $ 51.3 $ (314.8) $ 277.9

We report operating results in three reportable segments:

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Management measures the operating performance of each of its reportable segments based on the segment contribution margin which is defined as net revenues less costs of materials and other and operating expenses, excluding depreciation and amortization.

Management's Discussion and Analysis

Results of Operations

Consolidated Results of Operations — Comparison of the Three and Six Months Ended June 30, 2020 versus the Three and Six Months Ended June 30, 2019

Consolidated net income for the second quarter of 2020 was $98.5 million compared to $83.8 million for the second quarter of 2019 .

Consolidated net income attributable to Delek for the second quarter of June 30, 2020 was $87.7 million , or $1.19 per basic share, compared to $77.3 million , or $1.01 per basic share, for the second quarter 2019 .

Consolidated Results of Operations — Comparison of the Three and Nine Months Ended September 30, 2020 versus the Three and Nine Months Ended September 30, 2019

Consolidated net loss for the third quarter of 2020 was $76.9 million compared to net income of $60.0 million for the third quarter of 2019.

Consolidated net loss attributable to Delek for the third quarter of September 30, 2020 was $88.1 million, or $(1.20) per basic share, compared to net income of $51.3 million, or $0.68 per basic share, for the third quarter 2019.

Explanations for significant drivers impacting net income as compared to the comparable period of the prior year are discussed in the sections below.

Consolidated net loss for the six months ended June 30, 2020 was $208.5 million compared to net income of $238.2 million for the six months ended June 30, 2019 .

Consolidated net loss attributable to Delek for the six months ended June 30, 2020 was $226.7 million , or $(3.08) per basic share, compared to net income of $226.6 million , or $2.94 per basic share, for the six months ended June 30, 2019 .

Consolidated net loss for the nine months ended September 30, 2020 was $285.4 million compared to net income of $298.2 million for the nine months ended September 30, 2019.

Consolidated net loss attributable to Delek for the nine months ended September 30, 2020 was $314.8 million, or $(4.28) per basic share, compared to net income of $277.9 million, or $3.63 per basic share, for the nine months ended September 30, 2019.

Explanations for significant drivers impacting net loss as compared to the comparable period of the prior year are discussed in the sections below.

In the second quarter s of 2020 and 2019 , we generated net revenues of $1,535.5 million and $2,480.3 million , respectively, a decrease of $944.8 million , or 38.1% .

Management's Discussion and Analysis

In the third quarters of 2020 and 2019, we generated net revenues of $2,062.9 million and $2,334.3 million, respectively, a decrease of $271.4 million, or 11.6%.

The decrease in net revenues was primarily driven by the following factors:

• in our refining segment, decreases in the average price of U.S.

Gulf Coast gasoline of 54.7% , ultra-low sulfur diesel of 53.1% , and high-sulfur diesel of 59.4% combined with a decrease in barrels sold (both refined and purchased) of 1.8 million barrels;

Gulf Coast gasoline of 29.9%, ultra-low sulfur diesel of 37.3%, and high-sulfur diesel of 41.4%, partially offset by an increase in barrels sold (both refined and purchased) of 1.2 million barrels;

• in our retail segment, decreases in fuel sales volumes due to demand slowdown as a result of COVID-19 Pandemic and reduction in average number of stores, as well as a 19.4% decrease in average price charged per gallon;

partially offset by increase in merchandise sales;

in our logistics segment, decreases in average price per gallon sold combined with decreases in sales volumes in our West Texas marketing operations;

partially offset by increased revenues associated with agreements executed in connection with Big Spring Gathering System and Delek Trucking acquisitions.

For the six months ended June 30, 2020 and 2019 , we generated net revenues of $3,356.7 million and $4,680.2 million , respectively, a decrease of $1,323.5 million , or 28.3% .

partially offset by an increase in merchandise sales.

Such decreases were partially offset by:

• increased revenues in our logistics segment associated with agreements executed in connection with Big Spring Gathering System and Delek Trucking acquisitions, partially offset by decreases in the average sales prices per gallon and volumes of diesel gallon sold in our West Texas marketing operations.

For the nine months ended September 30, 2020 and 2019, we generated net revenues of $5,419.6 million and $7,014.5 million, respectively, a decrease of $1,594.9 million, or 22.7%.

The decrease in net revenues was primarily driven by the following factors:

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partially offset by an increase in merchandise sales;

in our logistics segment, decreases in average price per gallon sold in our West Texas marketing operations;

partially offset increased revenues associated with agreements executed in connection with Big Spring Gathering System and Delek Trucking acquisitions, and increased throughputs at our SALA gathering system and Magnolia pipeline.

• in our logistics segment, decreases in average price per gallon sold in our West Texas marketing operations, partially offset by increased revenue associated with agreements executed in connection with Big Spring Gathering System and Delek Trucking acquisitions, and increased throughputs at our SALA gathering system and Magnolia pipeline.

Cost of Materials and Other

Cost of materials and other was $1,277.8 million for the second quarter of 2020 compared to $2,067.7 million for the second quarter of 2019 , a decrease of $789.9 million , or 38.2% .

Cost of materials and other was $1,875.9 million for the third quarter of 2020 compared to $1,964.1 million for the third quarter of 2019, a decrease of $88.2 million, or 4.5%.

The net decrease in cost of materials and other was primarily driven by the following:

a narrowing of crude oil differentials during the second quarter where the Midland WTI crude oil differential to Brent crude oil was an average discount of $3.58 per barrel compared to $10.88 per barrel in the prior-year period, and the WTI Midland to WTI Cushing discount averaged nearly zero in the second quarter 2020 compared to a discount of $2.24 per barrel in the prior-year period;

Management's Discussion and Analysis

the net reversal (expense) benefit of $203.1 million related to inventory valuation reserves recognized during the second quarter of 2020 compared to $(0.6) million recognized during the second quarter of 2019 , partially offset by a decrease in hedging gains to a loss of $154.4 million recognized during the second quarter of 2020 from a gain of $30.7 million recognized during the second quarter of 2019 ;

decreases in cost of crude oil feedstocks at the refineries, including a decrease in the cost of WTI Cushing crude oil from an average of $59.80 per barrel to an average of $29.77 ;

decreases in the diesel sales volumes and decreases in the average cost per gallon of gasoline and diesel purchased in the logistics segment;

• decreases in cost of crude oil feedstocks at the refineries, including a 27.5% decrease in the average cost of WTI Cushing crude oil and a 26.9% decrease in the average cost of WTI Midland crude oil;

• the benefit (expense) of $9.5 million related to the change in pre-tax inventory valuation recognized during the third quarter of 2020 compared to $(20.0) million recognized during the third quarter of 2019, partially offset by a decrease in hedging gains to $5.9 million recognized during the third quarter of 2020 from $13.1 million recognized during the third quarter of 2019;

• decreases in the average cost per gallon of gasoline and diesel sold partially offset by increases in averages volumes of diesel sold in our West Texas marketing operations;

• a decrease in retail fuel cost of materials and other attributable to demand slowdown, a reduction in average number of stores and a decrease in average cost per gallon of $0.49.

Cost of materials and other was $3,188.4 million for the six months ended June 30, 2020 compared to $3,767.1 million for the six months ended June 30, 2019 , a decrease of $578.7 million , or 15.4% .

Cost of materials and other was $5,064.3 million for the nine months ended September 30, 2020 compared to $5,731.2 million for the nine months ended September 30, 2019, a decrease of $666.9 million, or 11.6%.

The net decrease in cost of materials and other was primarily driven by the following:

a narrowing of crude oil differentials during the six months ended June 30, 2020 where the Midland WTI crude oil differential to Brent crude oil was an average discount of $4.26 per barrel compared to $10.49 per barrel in the prior-year period, and the WTI Midland to WTI Cushing discount averaged $0.03 per barrel in the six months ended June 30, 2020 compared to a discount of $1.71 per barrel in the prior-year period;

increases in ethanol RIN prices which averaged $0.34 per RIN in six months ended June 30, 2020 compared to $0.18 per RIN in the prior-year period;

in the logistics segment, decreases in the diesel sales volumes and decreases in the average cost per gallon of gasoline and diesel purchased;

a decrease in retail fuel cost of materials and other attributable to demand slowdown, a reduction in number of stores and a decrease in average cost per gallon of $0.54 .

Such increases were partially offset by the following:

a decrease in hedging gains to a loss of $88.1 million recognized during the six months ended June 30, 2020 from a gain of $50.5 million recognized during the six months ended June 30, 2019 .

• decreases in cost of crude oil feedstocks at the refineries, including a 31.7% decrease in the average cost of WTI Cushing crude oil and a 30.2% decrease in the average cost of WTI Midland crude oil;

• decreases in the average volumes of diesel sold and average cost per gallon of gasoline and diesel sold, partially offset by increases in the average volumes of gasoline sold in our West Texas marketing operations;

Management's Discussion and Analysis

• a decrease in retail fuel cost of materials and other attributable to demand slowdown, a decrease in average cost per gallon of $0.52 and a reduction in number of stores.

Such decreases were partially offset by the following:

• the (expense) benefit of $(65.6) million related to the change in pre-tax inventory valuation recognized during the nine months ended September 30, 2020 compared to $31.5 million recognized during the nine months ended September 30, 2019;

• a decrease in hedging gains to a loss of $82.1 million recognized during the nine months ended September 30, 2020 from a gain of $63.5 million recognized during the nine months ended September 30, 2019.

Operating Expenses

Operating expenses were $127.8 million for the second quarter of 2020 compared to $162.3 million for the second quarter of 2019 , a decrease of $34.5 million , or 21.3% .

Operating expenses were $139.7 million for the third quarter of 2020 compared to $166.9 million for the third quarter of 2019, a decrease of $27.2 million, or 16.3%.

The decrease in operating expenses was primarily driven by the following:

• decrease in outside service costs across all segments due to cost reduction measures;

decreases in the refining segment related to catalyst and chemical costs, maintenance costs and cost reduction associated with the sale of our Bakersfield refinery during the quarter;

• decreases in the refining segment related employee expenses, maintenance costs and cost reductions due to the sale of our Bakersfield refinery in the second quarter of 2020;

• decrease in retail operating expenses due to reduction in number of stores.

Operating expenses were $282.3 million for the six months ended June 30, 2020 compared to $329.0 million for the six months ended June 30, 2019 , an decrease of $46.7 million , or 14.2% .

Operating expenses were $422.0 million for the nine months ended September 30, 2020 compared to $495.9 million for the nine months ended September 30, 2019, a decrease of $73.9 million, or 14.9%.

The decrease in operating expenses was primarily driven by the following:

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General and Administrative Expenses

General and administrative expenses were $61.7 million for the second quarter of 2020 compared to $69.5 million for the second quarter of 2019 , a decrease of $7.8 million , or 11.2% .

General and administrative expenses were $57.0 million for the third quarter of 2020 compared to $65.6 million for the third quarter of 2019, a decrease of $8.6 million, or 13.1%.

The decrease in general and administrative expense was primarily driven by the following:

Management's Discussion and Analysis

• decrease in contract services due to cost reduction measures;

decrease in loss allowance on a note receivable.

General and administrative expenses were $127.4 million and $131.7 million for the six months ended June 30, 2020 and 2019 , respectively, a decrease of $4.3 million , or 3.3% .

• decrease in stock-based compensation due to workforce reductions in 2020;

• decrease in travel related expense due to travel restrictions in place as a result of the COVID-19 Pandemic.

General and administrative expenses were $184.4 million and $197.3 million for the nine months ended September 30, 2020 and 2019, respectively, a decrease of $12.9 million, or 6.5%.

The decrease in general and administrative expense was primarily driven by the following:

• decrease in contract services due to cost reduction measures;

• decrease in stock-based compensation due to workforce reductions in 2020;

• decrease in travel related expense due to travel restrictions in place as a result of the COVID-19 Pandemic;

• decrease in loss allowance on a note receivable.

These decreases were partially offset by increases in salaried labor, including severance, partially offset by decrease in incentive accrual.

Management's Discussion and Analysis

Depreciation and Amortization

Depreciation and amortization (included in both cost of sales and other operating expenses) was $59.6 million for the second quarter of 2020 compared to $50.1 million for the second quarter of 2019 , an increase of $9.5 million , or 19.0% , primarily due to depreciation associated with assets added during the Big Spring refinery turnaround in the first quarter of 2020 , the El Dorado turnaround assets added in the second quarter of 2019 and the addition of the alkylation unit at our Krotz Springs refinery late in the second quarter of 2019 .

Depreciation and amortization (included in both cost of sales and other operating expenses) was $112.2 million compared to $96.9 million for the six months ended June 30, 2020 and 2019 , respectively, a increase of $15.3 million , or 15.8% , primarily due to depreciation associated with assets added during the Big Spring refinery turnaround in the first quarter of 2020 , the El Dorado turnaround assets added in the second quarter of 2019 and the addition of the alkylation unit at our Krotz Springs refinery late in the second quarter of 2019 .

Other Operating Income, Net

Other operating income, net increase d by $10.6 million in the second quarter of 2020 to income of $14.2 million compared to $3.6 million in the second quarter of 2019 .

Other operating income, net increase d by $13.7 million during the six months ended June 30, 2020 to $14.9 million compared to income of $1.2 million during the six months ended June 30, 2019 .

Depreciation and amortization (included in both cost of sales and other operating expenses) was $65.2 million for the third quarter of 2020 compared to $49.8 million for the third quarter of 2019, an increase of $15.4 million, or 30.9%, primarily due to depreciation associated with assets added during the Big Spring refinery turnaround in the first quarter of 2020 and other refining assets placed in service in late 2019 and first quarter of 2020.

Depreciation and amortization (included in both cost of sales and other operating expenses) was $177.4 million compared to $146.7 million for the nine months ended September 30, 2020 and 2019, respectively, an increase of $30.7 million, or 20.9%, primarily due to depreciation associated with assets added during the Big Spring refinery turnaround in the first quarter of 2020, the El Dorado turnaround assets added in the second of 2019 and the addition of the alkylation unit at our Krotz Springs refinery late in the second quarter of 2019.

Other Operating Loss (Income), Net

Other operating loss, net decreased by $0.2 million in the third quarter of 2020 to a loss of $0.3 million compared to a loss of $0.5 million in the third quarter of 2019.

Other operating income, net increased by $13.9 million during the nine months ended September 30, 2020 to $14.6 million compared to income of $0.7 million during the nine months ended September 30, 2019.

Non-operating Expenses, Net

Interest Expense

Interest expense decrease d by $3.0 million , or 9.1% , to $29.8 million in the second quarter of 2020 compared to $32.8 million in the second quarter of 2019 , primarily driven by the following:

a decrease in the average effective interest rate of 1.38% in the second quarter of 2020 compared to the second quarter of 2019 (where effective interest rate is calculated as interest expense divided by the net average borrowings/obligations outstanding), partially offset by an increase in net average borrowings outstanding (including the obligations under the Supply and Offtake Agreements which have an associated interest charge) of approximately $410.1 million in the second quarter of 2020 (calculated as a simple average of beginning borrowings/obligations and ending borrowings/obligations for the period) compared to the second quarter of 2019 .

Interest expense increase d by $4.6 million , or 7.5% , to $66.1 million during the six months ended June 30, 2020 compared to $61.5 million during the six months ended June 30, 2019 , primarily driven by the following:

an increase in net average borrowings outstanding (including the obligations under the supply and offtake agreements which have an associated interest charge) of approximately $435.3 million during the six months ended June 30, 2020 (calculated as a simple average of beginning borrowings/obligations and ending borrowings/obligations for the period) compared to the six months ended June 30, 2019 , partially offset by a decrease in the average effective interest rate of 0.56% during the six months ended June 30, 2020 compared to the

Management's Discussion and Analysis

six months ended June 30, 2019 (where effective interest rate is calculated as interest expense divided by the net average borrowings/obligations outstanding).

Interest expense decreased by $2.0 million, or 5.9%, to $31.9 million in the third quarter of 2020 compared to $33.9 million in the third quarter of 2019, primarily driven by the following:

• a decrease in the average effective interest rate of 1.18% in the third quarter of 2020 compared to the third quarter of 2019 (where effective interest rate is calculated as interest expense divided by the net average borrowings/obligations outstanding), partially offset by an increase in net average borrowings outstanding (including the obligations under the Supply and Offtake Agreements which have an associated interest charge) of approximately $430.2 million in the third quarter of 2020 (calculated as a simple average of beginning borrowings/obligations and ending borrowings/obligations for the period) compared to the third quarter of 2019.

Interest expense increased by $2.6 million, or 2.7%, to $98.0 million during the nine months ended September 30, 2020 compared to $95.4 million during the nine months ended September 30, 2019, primarily driven by the following:

• an increase in net average borrowings outstanding (including the obligations under the supply and offtake agreements which have an associated interest charge) of approximately $393.8 million during the nine months ended September 30, 2020 (calculated as a simple average of beginning borrowings/obligations and ending borrowings/obligations for the period) compared to the nine months ended September 30, 2019, partially offset by a decrease in the average effective interest rate of 0.69% during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 (where effective interest rate is calculated as interest expense divided by the net average borrowings/obligations outstanding).

Results from Equity Method Investments

We recognized income of $10.7 million from equity method investments during the second quarter of 2020 , compared to $9.3 million for the second quarter of 2019 , an increase of $1.4 million .

During the six months ended June 30, 2020 , we recognized income of $15.8 million from equity method investments, compared to $11.9 million for the six months ended June 30, 2019 , an increase of $3.9 million .

This increase was primarily driven by the following:

the addition of the Red River Joint Venture in May 2019 which contributed income of $4.7 million in the six months ended June 30, 2020 compared to $2.3 million in the six months ended June 30, 2019 ;

an increase in income from our other logistics joint ventures from $4.1 million in the six months ended June 30, 2019 to $7.3 million in the six months ended June 30, 2020 .

Such increases were partially offset by losses attributable to our investment in WWP and the WWP Project Financing JV, which is still in the construction period.

During the three and six months ended June 30, 2020 , we recognized a gain of $56.9 million on the sale of our non-operating refinery located in Bakersfield, California.

See Note 2 of the condensed consolidated financial statements in Item 1, Financial Statements, for additional information.

Other income increased $6.4 million , to $1.5 million in second quarter of 2020 compared to a loss of $4.9 million in the second quarter of 2019 .

Other income increased $5.9 million , to $2.4 million in the six months ended June 30, 2020 , compared to a loss of $3.5 million in the six months ended June 30, 2019 .

Income tax expense decrease d by $60.5 million in the second quarter of 2020 compared to the second quarter of 2019 , primarily driven by the following:

pre-tax income of $62.6 million in the second quarter of 2020 , as compared to $109.2 million for the second quarter of 2019 ;

a decrease in our effective tax rate which was (57.3)% for the second quarter of 2020 , compared to 22.5% for the second quarter of 2019 primarily due to the following:

We recognized income of $12.8 million from equity method investments during the third quarter of 2020, compared to $16.5 million for the third quarter of 2019, a decrease of $3.7 million.

This decrease was primarily driven by the following:

• income from the Red River Joint Venture decreased $2.7 million due to decrease in committed volumes in July and August 2020;

• a decrease in income from our other logistics joint ventures from $3.7 million in the third quarter of 2019 to $2.9 million in third quarter of 2020.

Management's Discussion and Analysis

During the nine months ended September 30, 2020, we recognized income of $28.6 million from equity method investments, compared to $28.4 million for the nine months ended September 30, 2019, an increase of $0.2 million.

During the nine months ended September 30, 2020, we recognized a gain of $56.8 million on the sale of our non-operating refinery located in Bakersfield, California, a nominal amount of which was recognized in the third quarter.

See Note 2 of the condensed consolidated financial statements in Item 1.

Financial Statements, for additional information.

Other income increased $0.8 million, to $1.0 million in third quarter of 2020 compared to $0.2 million in the third quarter of 2019.

Other income increased $6.7 million, to $3.4 million in the nine months ended September 30, 2020, compared to a loss of $3.3 million in the nine months ended September 30, 2019.

Income tax expense decreased by $29.0 million in the third quarter of 2020 compared to the third quarter of 2019, primarily driven by the following:

• pre-tax loss of $92.5 million in the third quarter of 2020, as compared to income of $73.4 million for the third quarter of 2019;

• a decrease in our effective tax rate which was 16.9% for the third quarter of 2020, compared to 18.3% for the third quarter of 2019 primarily due to the following:

◦ projected 2020 federal net operating loss carryback to a prior 35% tax rate year creating a 14% rate benefit;

an increase in the estimated annual effective tax rate applied to year-to-date loss for the quarter.

Income tax expense decrease d by $189.4 million during the six months ended June 30, 2020 compared to the same period for 2019 , primarily driven by the following:

pre-tax loss of $327.5 million in the six months ended June 30, 2020 , as compared to pre-tax income of $309.4 million for the six months ended June 30, 2019 ;

an increase in our effective tax rate which was 36.3% for the six months ended June 30, 2020 , compared to 22.8% for the six months ended June 30, 2019 primarily due to the following:

◦ net decrease in valuation allowance on utilization of state attributes.

Income tax expense decreased by $218.4 million during the nine months ended September 30, 2020 compared to the same period for 2019, primarily driven by the following:

• pre-tax loss of $420.0 million in the nine months ended September 30, 2020, as compared to pre-tax income of $382.8 million for the nine months ended September 30, 2019;

• an increase in our effective tax rate which was 32.0% for the nine months ended September 30, 2020, compared to 21.9% for the nine months ended September 30, 2019 primarily due to the following:

◦ projected 2020 federal net operating loss carryback to a prior 35% tax rate year creating a 14% tax rate arbitrage;

◦ reversal of a valuation allowance attributable to book-tax basis differences in partnership investments reported as a discrete benefit in the first quarter;

◦ an increase in the estimated annual effective tax rate applied to year to date loss for the year.

Management's Discussion and Analysis

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Refining Segment Margins

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

$ 1,563.5 $ 2,176.8 $ 4,368.4 $ 6,636.6

Cost of materials and other

1,479.2 1,906.0 4,314.4 5,629.8

Refining margin

84.3 270.8 54.0 1,006.8

Operating expenses (excluding depreciation and amortization)

102.1 120.7 302.5 356.7

Contribution margin

$ (17.8) $ 150.1 $ (248.5) $ 650.1

Factors Impacting Refining Profitability

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Refinery Statistics

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

(Unaudited) (Unaudited)

Tyler, TX Refinery

1 unchanged sentence

Total sales volume - refined product (average barrels per day) (1)

77,386 80,981 74,050 76,262

Products manufactured (average barrels per day):

Gasoline 40,383 41,480 39,221 40,281

Diesel/Jet 31,612 33,105 28,980 30,685

Petrochemicals, LPG, natural gas liquids ("NGLs") 3,848 3,992 3,022 3,129

Other 1,763 1,853 1,442 1,560

Total production 77,606 80,430 72,665 75,655

Throughput (average barrels per day):

Crude Oil 72,651 75,266 67,693 70,594

Other feedstocks 4,975 5,565 5,422 5,710

Total throughput 77,626 80,831 73,116 76,304

Total refining revenue ($ in millions) $ 383.8 $ 597.6 $ 1,055.3 $ 1,656.5

Cost of materials and other ($ in millions) 392.4 508.5 1,003.0 1,342.2

Total refining margin ($ in millions) $ (8.6) $ 89.1 $ 52.3 $ 314.3

Per barrel of refined product sales:

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East Texas crude oil 11.0 % 2.7 % 7.9 % 8.0 %

Other — % 2.8 % — % 0.7 %

El Dorado, AR Refinery

Days in period

92 92 274 273

Total sales volume - refined product (average barrels per day) (1)

79,594 71,282 77,742 58,310

Products manufactured (average barrels per day):

Gasoline 36,801 30,766 35,855 24,396

Diesel 30,709 22,348 29,473 18,559

Petrochemicals, LPG, NGLs 1,678 834 1,933 731

Asphalt 7,268 5,886 6,655 5,894

Other 825 713 801 678

Total production 77,281 60,547 74,717 50,258

Throughput (average barrels per day):

Crude Oil 74,235 58,362 72,427 49,199

Other feedstocks 2,814 1,748 2,610 1,431

Total throughput 77,049 60,110 75,037 50,630

Total refining revenue ($ in millions) $ 452.6 $ 803.8 $ 1,407.8 $ 2,379.6

Cost of materials and other ($ in millions) 405.6 775.9 1,399.1 2,246.8

Total refining margin ($ in millions) $ 47.0 $ 27.9 $ 8.7 $ 132.8

Per barrel of refined product sales:

4 unchanged sentences

Local Arkansas crude oil 17.7 % 20.7 % 17.2 % 25.4 %

Other 12.4 % 7.2 % 30.5 % 20.8 %

Management's Discussion and Analysis

Refinery Statistics (continued)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

(Unaudited) (Unaudited)

Big Spring, TX Refinery

1 unchanged sentence

Total sales volume - refined product (average barrels per day) (1)

75,884 72,909 61,602 77,712

Products manufactured (average barrels per day):

Gasoline 38,106 33,561 29,532 36,276

Diesel/Jet 28,777 28,391 22,190 27,796

Petrochemicals, LPG, NGLs 3,923 3,755 2,959 3,761

Asphalt 2,235 2,027 1,715 1,815

Other 1,397 1,423 1,030 1,339

Total production 74,438 69,157 57,426 70,986

Throughput (average barrels per day):

Crude oil 72,779 70,542 57,725 71,939

Other feedstocks 2,067 (1,282) 746 (3)

Total throughput 74,846 69,260 58,471 71,936

Total refining revenue ($ in millions) $ 401.9 $ 592.0 $ 1,104.4 $ 1,811.2

Cost of materials and other ($ in millions) 374.0 $ 510.1 1,069.3 1,497.7

Total refining margin ($ in millions) $ 27.9 $ 81.9 $ 35.1 $ 313.5

Per barrel of refined product sales:

6 unchanged sentences

Days in period

92 92 274 273

Total sales volume - refined product (average barrels per day) (1)

67,465 72,173 69,965 75,207

Products manufactured (average barrels per day):

Gasoline 32,287 34,757 26,872 35,760

Diesel/Jet 23,686 27,277 25,447 29,137

Heavy Oils 729 1,125 559 1,108

Petrochemicals, LPG, NGLs 3,394 3,814 2,417 5,103

Other 4,020 — 11,117 35

Total production 64,116 66,973 66,412 71,143

Throughput (average barrels per day):

Crude Oil 60,150 69,805 64,019 70,757

Other feedstocks 3,028 (3,553) 2,415 (596)

Total throughput 63,178 66,252 66,434 70,161

Total refining revenue ($ in millions) $ 335.9 $ 559.9 $ 999.1 $ 1,717.7

Cost of materials and other ($ in millions) 339.1 494.4 1,016.8 1,501.6

Total refining margin ($ in millions) $ (3.2) $ 65.5 $ (17.7) $ 216.1

Per barrel of refined product sales:

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(% based on amount received in period)

WTI Crude 72.6 % 78.7 % 69.3 % 73.9 %

Gulf Coast Sweet Crude 24.6 % 21.3 % 29.8 % 26.1 %

Other 2.8 % — % 0.9 % — %

(1) Includes inter-refinery sales and sales to other segments which are eliminated in consolidation.

See tables below.

Tyler's refining margin per barrel and the adjusted refining margin per barrel for the second quarter 2020 both reflect the $111.0 million margin benefit of favorable fixed price crude cost transactions during the quarter, but exclude the offsetting realized hedging losses of approximately $(111.0) million .

Giving effect to the related hedging losses, the refining margin per barrel would have decreased by $(17.49) .

Such margin impact was unusually large because of the historic volatility in the crude commodities market during the period.

Management's Discussion and Analysis

1 unchanged sentence

Inter-refinery Sales

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

(in barrels per day) 2020 2019 2020 2019

(Unaudited) (Unaudited)

Tyler refined product sales to other Delek refineries 2,479 1,543 1,813 890

3 unchanged sentences

Refinery Sales to Other Segments

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

(in barrels per day) 2020 2019 2020 2019

(Unaudited) (Unaudited)

Tyler refined product sales to other Delek segments 1,069 18 1,953 192

1 unchanged sentence

Big Spring refined product sales to other Delek segments 22,835 24,404 22,839 25,735

Krotz Springs refined product sales to other Delek segments 1,002 408 336 271

Pricing Statistics (average for the period presented)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

(Unaudited) (Unaudited)

WTI — Cushing crude oil (per barrel) $ 40.88 $ 56.40 $ 38.95 $ 57.03

1 unchanged sentence

WTS -- Midland crude oil (per barrel) (1)

$ 40.99 $ 55.94 $ 38.84 $ 55.95

LLS (per barrel) (1)

$ 42.46 $ 60.58 $ 40.67 $ 63.32

Brent crude oil (per barrel) $ 43.34 $ 62.03 $ 42.56 $ 64.73

1 unchanged sentence

Gulf Coast 5-3-2 crack spread (per barrel) (1)

$ 7.49 $ 16.02 $ 8.30 $ 15.77

Gulf Coast 3-2-1 crack spread (per barrel) (1)

$ 8.15 $ 17.55 $ 8.92 $ 17.34

Gulf Coast 2-1-1 crack spread (per barrel) (1)

$ 3.51 $ 12.03 $ 4.72 $ 9.73

Gulf Coast Unleaded Gasoline (per gallon) $ 1.15 $ 1.64 $ 1.07 $ 1.65

2 unchanged sentences

Natural gas (per MMBTU) (2)

$ 2.12 $ 2.33 $ 1.92 $ 2.56

(1) For our Tyler and El Dorado refineries, we compare our per barrel refining product margin to the Gulf Coast 5-3-2 crack spread consisting of WTI Cushing crude, U.S.

2 unchanged sentences

2 heating oil (ultra low sulfur diesel).

For our Big Spring refinery, we compare our per barrel refined product margin to the Gulf Coast 3-2-1 crack spread consisting of WTI Cushing crude, Gulf Coast 87 Conventional gasoline and Gulf Coast ultra low sulfur diesel, and for our Krotz Springs refinery, we compare our per barrel refined product margin to the Gulf Coast 2-1-1 crack spread consisting of LLS crude oil, Gulf Coast 87 Conventional gasoline and U.S, Gulf Coast Pipeline No.

For our Big Spring refinery, we compare our $1.02 per barrel refined product margin to the Gulf Coast 3-2-1 crack spread consisting of WTI Cushing crude, Gulf Coast 87 Conventional gasoline and Gulf Coast ultra low sulfur diesel, and for our Krotz Springs refinery, we compare our per barrel refined product margin to the Gulf Coast 2-1-1 crack spread consisting of LLS crude oil, Gulf Coast 87 Conventional gasoline and U.S.

Gulf Coast Pipeline No.

2 heating oil (high sulfur diesel).

4 unchanged sentences

Management's Discussion and Analysis

Refining Segment Operational Comparison of the Three and Six Months Ended June 30, 2020 versus the Three and Six Months Ended June 30, 2019

Net revenues for the refining segment decreased by $1,290.8 million , or 54.5% , in the second quarter of 2020 compared to the second quarter of 2019 , primarily driven by the following:

Refining Segment Operational Comparison of the Three and Nine Months Ended September 30, 2020 versus the Three and Nine Months Ended September 30, 2019

Net revenues for the refining segment decreased by $613.3 million, or 28.2%, in the third quarter of 2020 compared to the third quarter of 2019, primarily driven by the following:

• decreases in the average price of U.S.

Gulf Coast gasoline of 29.9%, ULSD of 37.3%, and HSD of 41.4%.

decreases in sales volume of refined product totaling 0.1 million barrels and a 1.7 million barrel decrease in purchased product sales due to decreased demand, partially offset by increased sales volumes at our El Dorado refinery which was impacted by scheduled turnaround activities in the comparable prior year period.

Net revenues included sales to our retail segment of $40.4 million and $101.7 million , sales to our logistics segment of $29.7 million and $73.2 million , and sales to our other segment of $5.0 million and $40.4 million for the three months ended June 30, 2020 and June 30, 2019 , respectively.

Such decreases were partially offset by the following:

• increases in sales volume of refined product totaling 0.7 million barrels, partially due to our El Dorado refinery which was impacted by vacuum unit outage in the comparable prior year period, and a 0.5 million barrel increase in purchased product sales.

Net revenues included sales to our retail segment of $57.6 million and $97.3 million, sales to our logistics segment of $45.1 million and $66.6 million, and sales to our other segment of $9.9 million and $23.9 million reduction in sales for the three months ended September 30, 2020 and September 30, 2019, respectively.

We eliminate this intercompany revenue in consolidation.

Net revenues for the refining segment decreased by $1,654.9 million , or 37.1% , in the six months ended June 30, 2020 compared to the six months ended June 30, 2019 , primarily driven by the following:

Net revenues for the refining segment decreased by $2,268.2 million, or 34.2%, in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, primarily driven by the following:

• decreases in the average price of U.S.

Gulf Coast gasoline of 35.4%, ULSD of 37.7%, and HSD of 41.7%;

decreases in sales volume of refined product totaling 0.9 million barrels partially due to scheduled turnaround activities at our Big Spring refinery, partially offset by increased sales volumes at our El Dorado refinery due to prior year scheduled turnaround activities, and a 2.5 million barrel decrease in purchased product sales due to decreased demand.

Net revenues included sales to our retail segment of $109.0 million and $191.9 million , sales to our logistics segment of $110.5 million and $152.6 million and sales to our other segment of $14.3 million and $55.4 million for the six months ended June 30, 2020 and 2019 , respectively.

• decreases in sales volume of refined product totaling 0.5 million barrels partially due to scheduled turnaround activities at our Big Spring refinery, partially offset by increased sales volumes at our El Dorado refinery due to prior year scheduled turnaround activities and production issues, and a 2.0 million barrel decrease in purchased product sales due to decreased demand.

Net revenues included sales to our retail segment of $166.6 million and $289.2 million, sales to our logistics segment of $155.7 million and $219.2 million and sales to our other segment of $24.2 million and $31.5 million for the nine months ended September 30, 2020 and 2019, respectively.

We eliminate this intercompany revenue in consolidation.

Management's Discussion and Analysis

Cost of Materials and Other

Cost of materials and other decreased by $1,126.1 million , or 54.8% , in the second quarter of 2020 compared to the second quarter of 2019 , primarily driven by the following:

the net reversal benefit (expense) of $193.7 million related to inventory valuation reserves recognized during the second quarter of 2020 compared to $(0.6) million recognized during the second quarter of 2019 ;

Cost of materials and other decreased by $426.8 million, or 22.4%, in the third quarter of 2020 compared to the third quarter of 2019, primarily driven by the following:

• decreases in the cost of WTI Cushing crude oil, from an average of $56.40 per barrel to an average of $40.88, or 27.5%;

• decreases in the cost of WTI Midland crude oil, from an average of $56.12 per barrel to an average of $41.03, or 26.9%;

Management's Discussion and Analysis

These decreases were partially offset by the following:

a decrease in hedging gains to a loss of $146.8 million recognized during the second quarter of 2020 from a gain of $25.6 million recognized during the second quarter of 2019 .

Cost of materials and other decreased by $888.6 million , or 23.9% , during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 , primarily driven by the following:

the net reversal (expense) benefit of $(75.3) million related to inventory valuation reserves recognized during the six months ended June 30, 2020 compared to $51.4 million recognized during the six months ended June 30, 2019 ;

• a decrease in hedging gains to $3.0 million recognized during the third quarter of 2020 from $20.0 million recognized during the third quarter of 2019;

• Increase in sales volumes partially due to production issues at El Dorado refinery in the prior year comparable period.

Cost of materials and other decreased by $1,315.4 million, or 23.4%, during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, primarily driven by the following:

• decreases in the cost of WTI Cushing crude oil, from an average of $57.03 per barrel to an average of $38.95, or 31.7%;

1 unchanged sentence

These decreases were partially offset by the following:

a decrease in hedging gains to a loss of $66.4 million recognized during the six months ended June 30, 2020 from a gain of $44.2 million recognized during the six months ended June 30, 2019 ;

• the (expense) benefit of $(65.8) million related to the change in pre-tax inventory valuation recognized during the nine months ended September 30, 2020 compared to $31.3 million recognized during the nine months ended September 30, 2019;

• a decrease in hedging gains to a loss of $63.5 million recognized during the nine months ended September 30, 2020 from a gain of $64.1 million recognized during the nine months ended September 30, 2019;

Our refining segment purchases finished product from our logistics segment and has multiple service agreements with our logistics segment which, among other things, require the refining segment to pay terminalling and storage fees based on the throughput volume of crude and finished product in the logistics segment pipelines and the volume of crude and finished product stored in the logistics segment storage tanks, subject to minimum volume commitments.

These costs and fees were $81.4 million and $52.2 million during the second quarters of 2020 and 2019 , respectively, and $178.1 million and $104.4 million during the six months ended June 30, 2020 and 2019 , respectively.

These costs and fees were $82.7 million and $55.4 million during the third quarters of 2020 and 2019, respectively, and $260.8 million and $159.8 million during the nine months ended September 30, 2020 and 2019, respectively.

We eliminate these intercompany fees in consolidation.

Management's Discussion and Analysis

Refining Margin

Refining margin decreased by $164.7 million , or 52.6% , in the second quarter of 2020 compared to the second quarter of 2019 , primarily driven by the following:

a narrowing of the average WTI Cushing crude oil differential to WTS crude oil to $0.16 per barrel during the second quarter of 2020 compared to $1.87 during the second quarter of 2019 and narrowing of the average WTI Midland crude oil differential to WTI Cushing crude oil to nearly zero during the second quarter of 2020 compared to $2.24 per barrel during the second quarter of 2019 ;

a narrowing of the discount between WTI Midland crude oil and Brent crude oil where, during the second quarter of 2020 , the WTI Midland crude oil differential to Brent crude oil was an average discount of $3.58 per barrel compared to $10.88 per barrel during the second quarter of 2019 ;

Refining margin decreased by $186.5 million, or 68.9%, in the third quarter of 2020 compared to the third quarter of 2019, primarily driven by the following:

• a narrowing of the average WTI Cushing crude oil differential to WTS crude oil to $(0.11) per barrel during the third quarter of 2020 compared to $0.46 during the third quarter of 2019 and narrowing of the average WTI Midland crude oil differential to WTI Cushing crude oil to $(0.15) per barrel during the third quarter of 2020 compared to $0.28 per barrel during the third quarter of 2019;

• a narrowing of the discount between WTI Midland crude oil and Brent crude oil where, during the third quarter of 2020, the WTI Midland crude oil differential to Brent crude oil was an average discount of $2.31 per barrel compared to $5.91 per barrel during the third quarter of 2019;

• a 70.8% decline in the average Gulf Coast 2-1-1 crack spread (the primary measure for the Krotz Springs refinery);

• a 63.8% decline in the 5-3-2 crack spread (the primary measure for the Tyler refinery and El Dorado refinery);

Management's Discussion and Analysis

• a 53.6% decline in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery);

a decrease in hedging gains to a loss of $146.8 million recognized during the second quarter of 2020 from a gain of $25.6 million recognized during the second quarter of 2019 .

• a decrease in hedging gains to $3.0 million recognized during the third quarter of 2020 from $20.0 million recognized during the third quarter of 2019.

These decreases were partially offset by the following:

an increase attributable to the reversal benefit of inventory valuation reserve totaling $193.7 million during the second quarter of 2020 compared to prior year period.

• an increase attributable to the $9.5 million change in pre-tax inventory valuation benefit recognized during the third quarter of 2020 compared to an expense of $20.0 million recognized during the prior year period.

Management's Discussion and Analysis

Refining margin decreased by $766.3 million , or 104.1% , in the six months ended June 30, 2020 compared to the six months ended June 30, 2019 , primarily driven by the following:

a narrowing of the average discount between WTI Midland crude oil compared to WTI Cushing where, during the six months of 2020 , the average WTI Midland crude oil differential to WTI Cushing crude oil was $0.03 per barrel compared to $1.71 during the six months of 2019 ;

a narrowing of the average discount between WTI Midland crude oil and Brent crude oil where, during the six months of 2020 , the WTI Midland crude oil differential to Brent crude oil was an average discount of $4.26 per barrel compared to $10.49 per barrel during the same period of 2019 ;

a narrowing of the average WTI Cushing crude oil differential to WTS crude oil to $0.24 per barrel during the six months of 2020 compared to $1.41 during the six months of 2019 ;

a narrowing of the discount between WTI Cushing crude oil compared to Brent where, during the six months of 2020 , the average WTI Cushing crude oil differential to Brent crude oil was $4.62 per barrel compared to $8.78 during the six months of 2019 ;

a 56.0% decline in the 5-3-2 crack spread (the primary measure for the Tyler refinery and El Dorado refinery);

a 45.9% decline in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery);

a 37.4% decline in the average Gulf Coast 2-1-1 crack spread (the primary measure for the Krotz Springs refinery);

a decrease in hedging gains to $(66.4) million recognized during the six months of 2020 from $44.2 million recognized during the six months of 2019 .

These decreases were partially offset by the following:

an increase in reversal benefit of inventory valuation reserve of during the during the six months of 2020 compared to the prior year period.

Refining margin decreased by $952.8 million, or 94.6%, in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, primarily driven by the following:

• a narrowing of the average discount between WTI Midland crude oil compared to WTI Cushing where, during the nine months of 2020, the average WTI Midland crude oil differential to WTI Cushing crude oil was $(0.03) per barrel compared to $1.22 during the nine months of 2019;

• a narrowing of the average discount between WTI Midland crude oil and Brent crude oil where, during the nine months of 2020, the WTI Midland crude oil differential to Brent crude oil was an average discount of $3.58 per barrel compared to $8.92 per barrel during the same period of 2019;

• a narrowing of the average WTI Cushing crude oil differential to WTS crude oil to $0.11 per barrel during the nine months of 2020 compared to $1.08 during the nine months of 2019;

• a narrowing of the discount between WTI Cushing crude oil compared to Brent where, during the nine months of 2020, the average WTI Cushing crude oil differential to Brent crude oil was $3.88 per barrel compared to $7.70 during the nine months of 2019;

• a 58.7% decline in the 5-3-2 crack spread (the primary measure for the Tyler refinery and El Dorado refinery), a 48.6% decline in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery), and a 51.5% decline in the average Gulf Coast 2-1-1 crack spread (the primary measure for the Krotz Springs refinery);

• a decrease in hedging gains to a loss of $(63.5) million recognized during the nine months of 2020 from a gain of $64.1 million recognized during the nine months of 2019;

• a decrease in reversal benefit of inventory valuation reserve of during the during the nine months of 2020 compared to the prior year period.

Management's Discussion and Analysis

Operating Expenses

Operating expenses decreased by $26.3 million , or 22.9% , in the second quarter of 2020 compared to the second quarter of 2019 , primarily driven by the following:

decreases in contractor and maintenance costs partially due to cost reduction measures taken in the second quarter of 2020 ;

decreases in catalyst and chemicals costs in the second quarter of 2020 , primarily at our Krotz Springs refinery related to scheduled unit downtime;

reduced costs resulting from the sale of the Bakersfield refinery in May 2020.

Operating expenses decreased by $35.6 million , or 15.1% , during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 , primarily driven by the following:

decreases in employee related costs primarily related to decrease in incentive plan and workforce optimization to reduce overtime rates;

Operating expenses decreased by $18.6 million, or 15.4%, in the third quarter of 2020 compared to the third quarter of 2019, primarily driven by the following:

• decreases in contractor and maintenance costs partially due to cost reduction measures taken in the third quarter of 2020;

• decreases in employee related costs primarily related to decrease in incentive plan and workforce optimization to reduce overtime rates in the third quarter of 2020;

• reduced costs as a result of the sale of the Bakersfield refinery in May 2020.

Operating expenses decreased by $54.2 million, or 15.2%, during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, primarily driven by the following:

• decrease in contract services and inspection costs associated with cost reduction measures taken in the nine months of 2020;

• decrease in maintenance costs due to deferral of projects amidst the COVID-19 Pandemic, and the incurrence of extraordinary maintenance costs at our Big Spring refinery in the comparable prior year period;

• decreases in utilities and catalyst costs, primarily at our Big Spring and Krotz Springs refineries related to reduced throughput due to turnaround and unit downtime, respectively;

decreases in contractor and maintenance costs partially due to cost reduction measures taken in the six months of 2020 .

• reduced costs as a result of the sale of the Bakersfield refinery in May 2020.

Contribution Margin

Contribution margin decreased by $138.4 million , or a 2.8% reduction in contribution margin percentage, in the second quarter of 2020 compared to the second quarter of 2019 , primarily driven by the following:

Contribution margin decreased by $167.9 million, or an 8.0% reduction in contribution margin percentage, in the third quarter of 2020 compared to the third quarter of 2019, primarily driven by the following:

• the decline of the Midland WTI crude oil differential to Brent crude oil compared to the prior-year period;

• an overall decline in the average crack spreads;

an increase in reversal benefit related to inventory valuation reserve of during the second quarter of 2020 compared to prior year period;

a narrowing of the discount between WTI Cushing and WTS crude oil compared to the second quarter of 2019 .

These decreases were partially offset by decreases in operating expenses across all refineries.

Management's Discussion and Analysis

Contribution margin decreased by $730.7 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 , primarily driven by the following:

• a narrowing of the discount between WTI Cushing and WTS crude oil compared to the third quarter of 2019.

These decreases were partially offset by the following:

• an increase in reversal benefit related to inventory valuation reserve of during the third quarter of 2020 compared to prior year period;

• decreases in operating expenses across all refineries.

Contribution margin decreased by $898.6 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, primarily driven by the following:

• the decline of the Midland WTI crude oil differential to Brent crude oil compared to the prior-year period;

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• an overall decline in the average crack spreads;

an increase in reversal benefit related to inventory valuation reserves recognized during the six months of 2020 compared to the prior year period;

• an decrease in reversal benefit related to inventory valuation reserves recognized during the nine months of 2020 compared to the prior year period;

• a narrowing of the discount between WTI Cushing and WTI crude oil compared to the prior-year period.

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Logistics Contribution Margin and Operating Information

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

Net revenues $ 142.2 $ 137.6 $ 423.3 $ 445.4

Cost of materials and other 60.7 72.6 205.9 262.7

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Contribution margin

$ 67.2 $ 46.6 $ 175.9 $ 130.9

Operating Information:

East Texas - Tyler Refinery sales volumes (average bpd) (1)

73,417 83,953 70,376 74,607

Big Spring wholesale marketing throughputs (average bpd)

78,659 80,203 73,701 83,608

West Texas wholesale marketing throughputs (average bpd)

9,948 9,535 11,718 11,446

West Texas wholesale marketing margin per barrel

$ 3.42 $ 4.82 $ 2.37 $ 4.83

Terminalling throughputs (average bpd) (2)

160,843 170,727 145,240 160,621

Throughputs (average bpd):

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Crude pipelines (non-gathered)

78,244 49,477 76,750 43,446

Refined products pipelines to Enterprise Systems

55,740 43,518 55,315 32,242

SALA Gathering System

13,659 21,632 13,520 21,143

East Texas Crude Logistics System

22,591 25,391 15,705 21,045

Big Spring Gathering Assets (3)

90,719 — 85,845 —

Plains Connection System 104,314 — 96,961 —

(1) Excludes jet fuel and petroleum coke.

(2) Consists of terminalling throughputs at our Tyler, Big Spring, Big Sandy and Mount Pleasant, Texas, El Dorado and North Little Rock, Arkansas and Memphis and Nashville, Tennessee terminals.

Throughputs for the Big Spring Gathering Assets are for the 91 days we owned the assets following the Big Spring Gathering Assets Acquisition effective March 31, 2020.

Logistics Segment Operational Comparison of the Three and Six Months Ended June 30, 2020 versus the Three and Six Months Ended June 30, 2019

Net revenues decreased by $37.6 million , or 24.2% , in the second quarter of 2020 compared to the second quarter of 2019 , primarily driven by the following:

decreases in the average volumes sold partially offset by decreases in the average sales prices per gallon of gasoline and diesel in our West Texas marketing operations:

the average volumes of diesel sold decreased 10.2 million gallons, partially offset by a 1.1 million decrease of gasoline gallons sold.

the average sales prices per gallon of diesel and gasoline sold decreased $1.11 per gallon and $1.09 per gallon, respectively.

Such decrease was partially offset by the following:

(3) Throughputs for the Big Spring Gathering Assets are for the approximately 180 days we owned the assets following the Big Spring Gathering Assets Acquisition effective March 31, 2020.

Logistics Segment Operational Comparison of the Three and Nine Months Ended September 30, 2020 versus the Three and Nine Months Ended September 30, 2019

Net revenues increased by $4.6 million, or 3.3%, in the third quarter of 2020 compared to the third quarter of 2019, primarily driven by the following:

• increased revenues associated with agreements executed in connection with Big Spring Gathering System and Delek Trucking acquisitions, which were effective April 1, 2020 and May 1, 2020, respectively.

Refer to Note 4 of the condensed consolidated financial statements in Item 1, Financial Statements, for additional information.

Net revenues included sales to our refining segment of $90.0 million and $61.1 million for the three months ended June 30, 2020 and June 30, 2019 , respectively, and sales to our other segment of $0.4 million and $1.1 million for the three months ended June 30, 2020 and 2019 , respectively.

Refer to Note 4 of the condensed consolidated financial statements in Item 1.

Financial Statements, for additional information.

Such increase was partially offset by the following:

• decreases in the average sales prices per gallon of gasoline and diesel, partially offset by in the average sales volume of diesel in our West Texas marketing operations.

◦ the average sales prices of diesel and gasoline sold decreased $0.76 per gallon and $0.60 per gallon, respectively.

◦ the average volumes of diesel sold increased 1.8 million gallons, partially offset by a 0.1 million decrease of gasoline gallons sold.

Net revenues included sales to our refining segment of $92.4 million and $65.4 million for the three months ended September 30, 2020 and September 30, 2019, respectively, and sales to our other segment of $0.4 million and $0.8 million for the three months ended September 30, 2020 and 2019, respectively.

We eliminate this intercompany revenue in consolidation.

Management's Discussion and Analysis

Net revenues decreased by $26.7 million , or 8.7% , in the six months ended June 30, 2020 compared to the six months ended June 30, 2019 , primarily driven by the following:

Net revenues decreased by $22.1 million, or 5.0%, in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, primarily driven by the following:

• decreases in the average sales prices per gallon and volumes of diesel gallon sold, partially offset by increases in the average sales volume of gasoline in our West Texas marketing operations:

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• increased revenues associated with agreements executed in connection with Big Spring Gathering System and Delek Trucking acquisitions, which were effective March 31, 2020 and May 1, 2020, respectively.

Refer to Note 4 of the condensed consolidated financial statements in Item 1, Financial Statements, for additional information.

increased revenues at our SALA Gathering System and Magnolia Pipeline as result of increased throughput during the six months ended June 30, 2020 when compared to the six months ended June 30, 2019 .

Net revenues included sales to our refining segment of $195.7 million and $122.1 million for the six months ended June 30, 2020 and 2019 , respectively, and sales to our other segment of $1.2 million for the six months ended June 30, 2020 .

Refer to Note 4 of the condensed consolidated financial statements in Item 1.

Financial Statements, for additional information.

• increased revenues at our SALA Gathering System and Magnolia Pipeline as result of increased throughput during the nine months ended September 30, 2020 when compared to the nine months ended September 30, 2019.

Net revenues included sales to our refining segment of $288.3 million and $187.5 million for the nine months ended September 30, 2020 and 2019, respectively, and sales to our other segment of $1.6 million and $3.6 million for the nine months ended September 30, 2020 and 2019, respectively.

We eliminate this intercompany revenue in consolidation.

Management's Discussion and Analysis

Cost of Materials and Other

Cost of materials and other for the logistics segment decreased $49.9 million , or 53.2% , in the second quarter of 2020 compared to the second quarter of 2019 primarily driven by the following:

decreases in the average diesel volumes sold and average cost per gallon of gasoline and diesel sold in our West Texas marketing operations:

the average volumes of diesel sold decreased 10.2 million gallons, partially offset by 1.1 million increase of gasoline gallons sold.

Cost of materials and other for the logistics segment decreased $11.9 million, or 16.4%, in the third quarter of 2020 compared to the third quarter of 2019 primarily driven by the following:

• decreases in the average cost per gallon of gasoline and diesel sold partially offset by increases in averages volumes of diesel sold in our West Texas marketing operations:

◦ the average cost per gallon of gasoline and diesel sold decreased $0.53 per gallon and $0.74 per gallon, respectively.

Our logistics segment purchased product from our refining segment of $29.7 million and $73.2 million for the three months ended June 30, 2020 and June 30, 2019 , respectively.

◦ the average volumes of diesel sold increased by 1.8 million gallons, partially offset by a 0.1 million increase in gasoline gallons sold.

Our logistics segment purchased product from our refining segment of $45.1 million and $66.6 million for the three months ended September 30, 2020 and September 30, 2019, respectively.

We eliminate these intercompany costs in consolidation.

Cost of materials and other for the logistics segment decreased $44.9 million , or 23.6% , in the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily driven by the following:

decrease in the average diesel volumes sold, partially offset by decreases in the average cost per gallon of gasoline and diesel sold in our West Texas marketing operations:

Management's Discussion and Analysis

◦ the average volumes of diesel sold decreased 11.5 million gallons, partially offset by a 14.4 million increase in gasoline gallons sold.

Cost of materials and other for the logistics segment decreased $56.8 million, or 21.6%, in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily driven by the following:

◦ the average volumes of gasoline sold increased 14.3 million gallons, partially offset by a 9.7 million decrease of diesel gallons sold.

◦ the average cost per gallon of gasoline and diesel sold decreased $0.44 per gallon and $0.66 per gallon, respectively.

Our logistics segment purchased product from our refining segment of $110.5 million and $152.6 million for the six months ended June 30, 2020 and June 30, 2019 , respectively.

Our logistics segment purchased product from our refining segment of $155.7 million and $219.2 million for the nine months ended September 30, 2020 and September 30, 2019, respectively.

We eliminate these intercompany costs in consolidation.

Management's Discussion and Analysis

Operating Expenses

Operating expenses decreased by $4.9 million , or 28.3% , in the second quarter of 2020 compared to the second quarter of 2019 , driven by the following:

decrease in employee and outside services costs due to measures implemented to respond to COVID-19 including delaying non-essential projects;

Operating expenses decreased by $4.1 million, or 22.3%, in the third quarter of 2020 compared to the third quarter of 2019, driven by the following:

• decrease in employee and outside services costs due to cost reduction measures implemented to respond to COVID-19 including delaying non-essential projects;

• decrease in utilities and other variable expenses due to lower production.

Operating expenses decreased by $6.2 million , or 18.6% , in the six months ended June 30, 2020 compared to the six months ended June 30, 2019 , driven by the following:

Operating expenses decreased by $10.3 million, or 19.9%, in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, driven by the following:

• decrease in employee and outside services costs due to measures implemented to respond to COVID-19 including delaying non-essential projects;

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Contribution Margin

Contribution margin increased by $ 17.2 million , or 38.9% , in the second quarter of 2020 compared to the second quarter of 2019 , primarily driven by the following:

Contribution margin increased by $20.6 million, or 44.2%, in the third quarter of 2020 compared to the third quarter of 2019, primarily driven by the following:

• increases in revenues associated with agreements executed in connection with Big Spring Gathering System and Delek Trucking acquisitions;

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• decreases in the volumes combined with a decrease in gross margin of $1.4 per barrel in our West Texas marketing operations.

Management's Discussion and Analysis

Contribution margin increased by $24.4 million , or 28.9% , in the six months ended June 30, 2020 compared to the six months ended June 30, 2019 , primarily driven by the following:

Contribution margin increased by $45.0 million, or 34.4%, in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, primarily driven by the following:

• increases in revenues associated with agreements executed in connection with Big Spring Gathering System and Delek Trucking acquisitions, Magnolia Pipeline, and SALA Gathering system;

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Retail Contribution Margins

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

Net revenues $ 177.7 $ 218.5 $ 521.7 $ 640.2

Cost of materials and other

136.3 176.4 400.0 521.9

Operating expenses (excluding depreciation and amortization)

23.1 23.5 66.8 71.9

Contribution margin

$ 18.3 $ 18.6 $ 54.9 $ 46.4

Operating Information

Number of stores (end of period)

253 263 253 263

Average number of stores

253 263 253 263

Average number of fuel stores

248 255 248 255

Retail fuel sales

$ 90.9 $ 137.4 $ 273.8 $ 400.1

Retail fuel sales (thousands of gallons)

45,096 54,943 135,471 162,576

Average retail gallons sold per average number of fuel stores (in thousands)

182 215 547 638

Average retail sales price per gallon sold

$ 2.01 $ 2.50 $ 2.02 $ 2.46

Retail fuel margin ($ per gallon) (1)

$ 0.311 $ 0.315 $ 0.352 $ 0.269

Merchandise sales (in millions)

$ 86.8 $ 81.5 $ 247.9 $ 240.2

Merchandise sales per average number of stores (in millions)

$ 0.3 $ 0.3 $ 1.0 $ 0.9

Merchandise margin %

31.6 % 30.5 % 31.3 % 30.9 %

Same-Store Comparison (2)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

Change in same-store fuel gallons sold

(18.8) % 3.0 % (15.6) % 3.1 %

Change in same-store merchandise sales

8.7 % (1.5) % 8.8 % (1.3) %

(1) Retail fuel margin represents gross margin on fuel sales in the retail segment, and is calculated as retail fuel sales revenue less retail fuel cost of sales.

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(2) Same-store comparisons include period-over-period increases or decreases in specified metrics for stores that were in service at both the beginning of the earliest period and the end of the most recent period used in the comparison.

Retail Segment Operational Comparison of the Three and Six Months Ended June 30, 2020 versus the Three and Six Months Ended June 30, 2019

Net revenues for the retail segment decreased by $59.1 million , or 26.3% , in the second quarter of 2020 compared to the second quarter of 2019 , primarily driven by the following:

total fuel sales were $75.9 million in the second quarter of 2020 compared to $140.8 million in the second quarter of 2019 , attributable to the following:

a decrease in total retail fuel gallons sold for the retail segment to 42,436 thousand gallons in the second quarter of 2020 compared to 53,743 thousand gallons in the second quarter of 2019 associated with the reduction in average number of stores period over period, and a same-store sales decrease in fuel volumes of 19.7% primarily due to demand slowdown as a result of the COVID-19 Pandemic;

Retail Segment Operational Comparison of the Three and Nine Months Ended September 30, 2020 versus the Three and Nine Months Ended September 30, 2019

Net revenues for the retail segment decreased by $40.8 million, or 18.7%, in the third quarter of 2020 compared to the third quarter of 2019, primarily driven by the following:

• total fuel sales were $90.9 million in the third quarter of 2020 compared to $137.4 million in the third quarter of 2019, attributable to the following:

Management's Discussion and Analysis

◦ a decrease in total retail fuel gallons sold for the retail segment to 45.1 million gallons in the third quarter of 2020 compared to 54.9 million gallons in the third quarter of 2019 associated with same-store decrease in fuel volumes of 18.8%, primarily due to demand slowdown as a result of the COVID-19 Pandemic;

◦ a $0.49 decrease in average price charged per gallon.

$5.9 million decrease related to reduction in number of stores period over period.

merchandise sales were $89.4 million in the second quarter of 2020 compared to $83.3 million in the second quarter of 2019 attributable to the following:

same-store sales increase of 13.1% primarily due to strong sales growth for key categories such as beer, cigarettes and packaged beverages;

partially offset by a $4.6 million decrease related to reduction in number of stores.

Net revenues for the retail segment decreased by $77.7 million , or 18.4% , in the six months ended June 30, 2020 compared to the six months ended June 30, 2019 , primarily driven by the following:

total fuel sales were $182.9 million in the six months of 2020 compared to $262.7 million in the six months of 2019 , attributable to the following:

a decrease in total retail fuel gallons sold of 90,376 thousand gallons in the six months of 2020 compared to 107,633 thousand gallons in the six months of 2019 , attributable to a decrease in volumes associated with the reduction in average number of stores period over in addition to same-store sales decline in fuel volumes of 13.9% primarily due to demand slowdown in the second quarter of 2020 as a result of the COVID-19 Pandemic;

• merchandise sales were $86.8 million in the third quarter of 2020 compared to $81.5 million in the third quarter of 2019 attributable to the following:

◦ same-store sales increase of 8.7% primarily due to strong sales growth for key categories such as beer, cigarettes and packaged beverages, partially offset by $1.5 million decrease related to reduction in number of stores period over period.

Net revenues for the retail segment decreased by $118.5 million, or 18.5%, in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, primarily driven by the following:

• total fuel sales were $273.8 million in the nine months of 2020 compared to $400.1 million in the nine months of 2019, attributable to the following:

◦ a decrease in total retail fuel gallons sold of 135.5 million gallons in the nine months of 2020 compared to 162.6 million gallons in the nine months of 2019, primarily attributable to same-store decline in fuel volumes of 15.6%, primarily due to demand slowdown in the nine months of 2020 as a result of the COVID-19 Pandemic;

◦ a $0.44 decrease in average price charged per gallon;

◦ $11.4 million decrease related to reduction in number of stores period over period.

merchandise sales were $161.1 million in the six months of 2020 compared to $158.6 million in the six months of 2019 primarily driven by the following:

a same-store sales increase of 7.6% ;

partially offset by $10.4 million decrease related to reduction in number of stores period over period.

• merchandise sales were $247.9 million in the nine months of 2020 compared to $240.2 million in the nine months of 2019 primarily driven by the following:

▪ same-store sales increase of 8.8% due to strong sales growth for key categories such as beer, cigarettes and packaged beverages, partially offset by $11.8 million decrease related to reduction in number of stores period over period.

Management's Discussion and Analysis

Cost of Materials and Other

Cost of materials and other for the retail segment decreased by $62.5 million , or 34.3% , in the second quarter of 2020 compared to the second quarter of 2019 , primarily driven by the following:

$7.7 million decrease due to reduction in number of stores period over period;

Cost of materials and other for the retail segment decreased by $40.1 million, or 22.7%, in the third quarter of 2020 compared to the third quarter of 2019, primarily driven by the following:

• a decrease in average cost per gallon of $0.49 or 22.2% applied to fuel sales volumes that decreased period over period;

Our retail segment purchased finished product from our refining segment of $40.4 million and $101.7 million for the three months ended June 30, 2020 and June 30, 2019 .

• $2.4 million decrease due to reduction in number of stores period over period.

Our retail segment purchased finished product from our refining segment of $57.6 million and $97.3 million for the three months ended September 30, 2020 and September 30, 2019.

We eliminate this intercompany cost in consolidation.

Cost of materials and other for the retail segment decreased by $81.8 million , or 23.7% , in the six months ended June 30, 2020 compared to the six months ended June 30, 2019 , primarily driven by the following:

Cost of materials and other for the retail segment decreased by $121.9 million, or 23.4%, in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, primarily driven by the following:

• a decrease in average cost per gallon of $0.52 or 23.8% applied to fuel sales volumes that decreased period over period;

• $18.4 million decrease due to reduction in number of stores period over period.

a decrease in average cost per gallon of $0.54 or 24.6% applied to fuel sales volumes that decreased slightly period over period.

Our retail segment purchased finished product from our refining segment of $109.0 million and $191.9 million for the six months ended June 30, 2020 and June 30, 2019 .

Our retail segment purchased finished product from our refining segment of $166.6 million and $289.2 million for the nine months ended September 30, 2020 and September 30, 2019.

We eliminate this intercompany cost in consolidation.

Operating Expenses

Operating expenses for the retail segment decreased by $3.3 million , or 13.3% in the second quarter of 2020 compared to the second quarter of 2019 .

This decrease is primarily attributable to a decrease in operating costs associated with the reduction in the number of stores.

Operating expenses for the retail segment decreased by $4.7 million , or 9.7% in the six months ended June 30, 2020 compared to the six months ended June 30, 2019 .

This decrease is primarily attributable to a decrease in operating costs associated with the reduction in the number of stores.

Management's Discussion and Analysis

Operating expenses for the retail segment decreased by $0.4 million, or 1.7% in the third quarter of 2020 compared to the third quarter of 2019 as a result of the reduction in the number of stores, as well as execution of various cost reduction initiatives throughout the business.

Operating expenses for the retail segment decreased by $5.1 million, or 7.1% in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

as a result of the reduction in the number of stores, in addition to the execution of various cost reduction initiatives implemented beginning in the second quarter of 2020.

Contribution Margin

Contribution margin for the retail segment increased by $6.7 million , or 38.1% , in the second quarter of 2020 compared to the second quarter of 2019 , primarily driven by a $0.153 per gallon improvement in the retail fuel margin and an increase in merchandise sales, offset by 0.4% decrease in merchandise margin.

Contribution margin for the retail segment increased by $8.8 million , or 31.7% , in the six months ended June 30, 2020 , compared to the six months ended June 30, 2019 , primarily driven by a $0.126 per gallon improvement in the retail fuel margin and increase in merchandise sales.

Contribution margin for the retail segment decreased by $0.3 million, or 1.6%, in the third quarter of 2020 compared to the third quarter of 2019, primarily driven by decrease in fuel sales and a $0.005 per gallon decline in the retail fuel margin, offset by 1.1% increase in merchandise margin.

Contribution margin for the retail segment increased by $8.5 million, or 18.3%, in the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019, primarily driven by a $0.083 per gallon improvement in the retail fuel margin and a 0.4% increase in merchandise margin.

Management's Discussion and Analysis

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• potential issuances of additional equity and debt securities.

Historically, we have generated adequate cash from operations to fund ongoing working capital requirements, pay quarterly cash dividends and operational capital expenditures and expect the same in the foreseeable future.

Historically, we have generated adequate cash from operations to fund ongoing working capital requirements, pay quarterly cash dividends and operational capital expenditures.

In response to the COVID-19 Pandemic and the decline in oil prices, on November 5, 2020, we announced that we have elected to suspend dividends in the fourth quarter of 2020 in order to conserve capital.

Other funding sources including borrowings under existing credit agreements and issuance of equity and debt securities have been utilized to meet our funding requirements and support our growth capital projects and acquisitions.

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If market conditions were to change, for instance due to the significant decline in oil prices or uncertainty created by the COVID-19 Pandemic, and our revenue was reduced significantly or operating costs were to increase significantly, our cash flows and liquidity could be unfavorably impacted.

As of June 30, 2020 , we were in compliance with all of our debt maintenance covenants, where the most significant long-term obligation subject to such covenants was the Delek Logistics Credit Facility (see Note 8 of the condensed consolidated financial statements in Item 1, Financial Statements).

As of September 30, 2020, we were in compliance with all of our debt maintenance covenants, where the most significant long-term obligation subject to such covenants was the Delek Logistics Credit Facility (see Note 8 of the condensed consolidated financial statements in Item 1.

Financial Statements).

After considering the current effect of the significant decline in oil prices and uncertainty created by the COVID-19 Pandemic on our operations, we currently expect to remain in compliance with our existing debt maintenance covenants, though we can provide no assurances, particularly if conditions significantly worsen beyond our ability to predict.

Additionally, we were in compliance with incurrence covenants during the quarter ended June 30, 2020 to the extent that any of our activities triggered these covenants.

Additionally, we were in compliance with incurrence covenants during the quarter ended September 30, 2020 to the extent that any of our activities triggered these covenants.

However, given the uncertainty around economic conditions arising from the COVID-19 Pandemic, it is at least reasonably possible that conditions could change significantly, and that such changes could adversely impact our ability to meet some of these incurrence covenants.

Failure to meet the incurrence covenants could impose certain incremental restrictions on our ability to incur new debt and also may limit the extent to which we may pay dividends, as well as impose additional restrictions on our ability to repurchase our stock, make new investments and incur new liens (among others).

Failure to meet the incurrence covenants could impose certain incremental restrictions on our ability to incur new debt and also may limit whether and the extent to which we may resume paying dividends, as well as impose additional restrictions on our ability to repurchase our stock, make new investments and incur new liens (among others).

Such restrictions would generally remain in place until such quarter that we return to compliance under the applicable incurrence based covenants.

In the event that we are subject to these incremental restrictions, we believe that we have sufficient current and alternative sources of liquidity, including (but not limited to):

available borrowings under our existing Wells Fargo Revolving Credit Facility (see Note 8 of the condensed consolidated financial statements in Item 1, Financial Statements);

the option to incur an additional $200 million of secured debt under the Wells Fargo Term Loan Credit Facility (see Note 8 of the condensed consolidated financial statements in Item 1, Financial Statements);

as well as the possibility of obtaining other secured and unsecured debt, raising capital through equity issuance, or taking advantage of transactional financing opportunities such as sale-leasebacks, as otherwise contemplated and allowed under incurrence covenants.

available borrowings under our existing Wells Fargo Revolving Credit Facility, and for Delek Logistics, under its Delek Logistics Credit Facility (see Note 8 of the condensed consolidated financial statements in Item 1.

Financial Statements);

the allowance to incur an additional $200 million of secured debt under the Wells Fargo Term Loan Credit Facility (see Note 8 of the condensed consolidated financial statements in Item 1.

Financial Statements);

The following table sets forth a summary of our consolidated cash flows (in millions):

Six Months Ended June 30,

Nine Months Ended September 30,

Cash Flow Data:

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Financing activities 415.4 (11.8)

Net decrease $ (147.4) $ (72.9)

Cash Flows from Operating Activities

Net cash used in operating activities was $323.1 million for the six months ended June 30, 2020 , compared to cash provided by operating activities of $235.4 million for the comparable period of 2019 .

Net cash used in operating activities was $399.8 million for the nine months ended September 30, 2020, compared to cash provided by operating activities of $448.4 million for the comparable period of 2019.

Cash receipts from customers and cash payments to suppliers and for salaries decreased resulting in a net $925.3 million decrease in cash from operating activities mainly due to a decline in the prices and volume of refined product sold.

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Cash Flows from Investing Activities

Net cash used in investing activities was $155.9 million for the first six months of 2020 , compared to $329.4 million in the comparable period of 2019 .

Net cash used in investing activities was $163.0 million for the first nine months of 2020, compared to $509.5 million in the comparable period of 2019.

The decrease in cash flows used in investing activities was primarily due to a $183.2 million decrease in equity method investment contributions primarily due to our obtaining a 33% membership interest in the Red River Pipeline Joint Venture in May 2019 for $124.7 million.

During the six months ended June 30, 2020 , we contributed $10.5 million related to our Red River Pipeline Joint Venture and $18.9 million related to our interest in WWP and WWP Project Financing JV which did not exist in the comparable prior year period.

During the nine months ended September 30, 2020, we contributed $11.8 million related to our Red River Pipeline Joint Venture and $18.9 million related to our interest in WWP and WWP Project Financing JV which did not exist in the comparable prior year period.

Additionally, we received distributions from our WWP Project Financing JV in the amount of $69.3 million for which there was no comparable activity in the prior year period.

We also received proceeds of $39.9 million from the sale of our Bakersfield refinery in the six months ended June 30, 2020 .

We also received proceeds of $39.9 million from the sale of our Bakersfield refinery in the nine months ended September 30, 2020.

These decreases in cash used investing activities were partially offset by an increase in cash purchases of property, plant and equipment which increased from $305.7 million in 2019, to $241.7 million in 2020 predominantly attributable to capital expenditures related to turnaround and other sustaining maintenance activities in our refining segment.

Cash Flows from Financing Activities

Net cash provided by financing activities was $372.7 million for the six months ended June 30, 2020 , compared to net cash used of $33.9 million in the comparable 2019 period.

This increase in cash provided was predominantly due to net proceeds received from long-term revolvers of $231.6 million during the six months ended June 30, 2020 , compared to net payments of $85 million in the comparable 2019 period.

Additionally contributing to this increase were a decrease in repurchases of common stock to $1.9 million for the six months ended June 30, 2020 compared to $104.8 million in the comparable 2019 period due to management suspending our share repurchase program, and an increase in net proceeds from inventory financing arrangements to $59.9 million for the six months ended June 30, 2020 compared to $4.2 million in the comparable 2019 period.

Partially offsetting this increase was a decrease in net proceeds received from term debt to $153.8 million during the six months ended June 30, 2020 , compared to $217.6 million in the comparable 2019 period.

Net cash provided by financing activities was $415.4 million for the nine months ended September 30, 2020, compared to net cash used of $11.8 million in the comparable 2019 period.

This increase in cash provided was predominantly due to net proceeds received from long-term revolvers of $252.3 million during the nine months ended September 30, 2020, compared to net payments of $0.5 million in the comparable 2019 period.

Additionally contributing to this increase were a decrease in repurchases of common stock to $1.9 million for the nine months ended September 30, 2020 compared to $147.8 million in the comparable 2019 period due to management suspending our share repurchase program, and an increase in net proceeds from inventory financing arrangements to $142.6 million for the nine months ended September 30, 2020 compared to $18.6 million in the comparable 2019 period.

Partially offsetting this increase was a decrease in net proceeds received from term debt to $150.4 million during the nine months ended September 30, 2020, compared to $215.3 million in the comparable 2019 period, and a $28.9 million increase in repurchase of non-controlling interests primarily associated with IDR simplification transactions.

Cash Position and Indebtedness

As of June 30, 2020 , our total cash and cash equivalents were $849.0 million and we had total long-term indebtedness of approximately $2,454.9 million .

As of September 30, 2020, our total cash and cash equivalents were $807.9 million and we had total long-term indebtedness of approximately $2,474.0 million.

The total long-term indebtedness is net of deferred financing costs and debt discount of $6.7 million and $26.0 million, respectively.

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• an aggregate principal amount of $20.0 million under the Promissory Notes, due on January 04, 2021, with fixed interest rate of 5.50%.

See Note 8 of the condensed consolidated financial statements in Item 1, Financial Statements, for additional information about our separate credit facilities.

See Note 8 of the condensed consolidated financial statements in Item 1.

Financial Statements, for additional information about our separate credit facilities.

Additionally, our obligation under the supply and offtake inventory financing agreements with J.

Aron amounted to $314.0 million at June 30, 2020 , $215.0 million of which is due on December 30, 2022, except that a portion (not to exceed $58.8 million ) of this otherwise long-term component is subject to potential earlier payment under the Periodic Price Adjustment provision.

See Note 7 of the condensed consolidated financial statements in Item 1, Financial Statements, for additional information about our supply and offtake facilities.

Aron amounted to $323.2 million at September 30, 2020, $220.4 million of which is due on December 30, 2022, except that a portion (not to exceed $58.8 million) of this otherwise long-term component is subject to potential earlier payment under the Periodic Price Adjustment provision.

See Note 7 of the condensed consolidated financial statements in Item 1.

Financial Statements, for additional information about our supply and offtake facilities.

Capital Spending

A key component of our long-term strategy is our capital expenditure program.

Our capital expenditures for the six months ended June 30, 2020 were $203.3 million , of which approximately $180.3 million was spent in our refining segment, $3.7 million in our logistics segment, $7.5 million in our retail segment and $11.8 million at the holding company level.

The following table summarizes our actual capital expenditures for the six months ended June 30, 2020 and planned capital expenditures for the full year 2020 by operating segment and major category (in millions):

2020 Forecast

Six Months Ended June 30, 2020

Our capital expenditures for the nine months ended September 30, 2020 were $208.0 million, of which approximately $180.9 million was spent in our refining segment, $6.9 million in our logistics segment, $8.2 million in our retail segment and $12.0 million at the holding company level.

The following table summarizes our actual capital expenditures for the nine months ended September 30, 2020 and planned capital expenditures for the full year 2020 by operating segment and major category (in millions):

2020 Forecast Nine Months Ended September 30, 2020

Sustaining maintenance, including turnaround activities

$ 159.1 $ 139.5

Discretionary projects

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Discretionary projects (1)(2)

Other total 14.6 12.0

Total capital spending $ 248.7 $ 208.0

(1) The forecast excludes a $65 million discretionary project to complete a connector to the WWP pipeline, for which we have secured pre-approved committed financing from the WWP members.

(1) The forecast excludes forecasted expenditures on a $65 million discretionary project to complete a connector to the WWP pipeline, for which we have secured pre-approved committed financing from the WWP members, at our election.

Additionally, our actual capital expenditures exclude approximately $3 million of spend in 2020 on this project that would fall under this separately committed financing .

(2) Excludes purchases of rights-of-way in the amount of $2.6 million in 2020.

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As a result of the uncertainties associated with the COVID-19 Pandemic, we have decreased our capital spending forecast for 2020 to $248.7 million, down from the prior forecast as reported in our Annual Report on Form 10-K for the year ended December 31, 2019, of $325.7 million.

Projects that are not essential to maintaining the current operations have been suspended and are expected to resume in 2021.

We continue to evaluate the adverse effects of the COVID-19 Pandemic, and may further revise our forecast as a result of changing circumstances.

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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 2. Management’s Discussion and Analysis