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Item 7. Management’s Discussion and Analysis

2021-03-01 compared with 2020-02-28 · 664 added, 414 removed, 524 unchanged (67% of the section changed)

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Forward-Looking Statements

This Annual Report on Form 10-K contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

This Annual Report on Form 10-K contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act.

These forward-looking statements reflect our current estimates, expectations and projections about our future results, performance, prospects and opportunities.

Forward-looking statements include, among other things, the information concerning our planned capital expenditures by segment for 2020, possible future results of operations, business and growth strategies, financing plans, expectations that regulatory developments or other matters will or will not have a material adverse effect on our business or financial condition, our competitive position and the effects of competition, the projected growth of the industry in which we operate, and the benefits and synergies to be obtained from our completed and any future acquisitions, statements of management’s goals and objectives, and other similar expressions concerning matters that are not historical facts.

Forward-looking statements include, among other things, statements regarding the effect, impact, potential duration or other implications of, or expectations expressed with respect to, the outbreak of COVID-19 and the actions of members of the OPEC and Russia with respect to oil production and pricing, and statements regarding our efforts and plans in response to such events, the information concerning our planned capital expenditures by segment for 2021, possible future results of operations, business and growth strategies, financing plans, expectations that regulatory developments or other matters will or will not have a material adverse effect on our business or financial condition, our competitive position and the effects of competition, the projected growth of the industry in which we operate, and the benefits and synergies to be obtained from our completed and any future acquisitions, statements of management’s goals and objectives, and other similar expressions concerning matters that are not historical facts.

Words such as "may," "will," "should," "could," "would," "predicts," "potential," "continue," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "appears," "projects" and similar expressions, as well as statements in future tense, identify forward-looking statements.

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Important factors that, individually or in the aggregate, could cause such differences include, but are not limited to:

volatility in our refining margins or fuel gross profit as a result of changes in the prices of crude oil, other feedstocks and refined petroleum products;

• volatility in our refining margins or fuel gross profit as a result of changes in the prices of crude oil, other feedstocks and refined petroleum products and the impact of the COVID-19 Pandemic on such demand;

• reliability of our operating assets;

• actions of our competitors and customers;

changes in, or the failure to comply with, the extensive government regulations applicable to our industry segments;

• changes in, or the failure to comply with, the extensive government regulations applicable to our industry segments, including current and future restrictions on commercial and economic activities in response to 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 inability 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;

general economic and business conditions affecting the southern, southwestern and western United States, particularly levels of spending related to travel and tourism;

• 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;

• 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;

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• increases in our debt levels or costs;

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

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;

• future decisions by OPEC+ members regarding production and pricing and disputes between OPEC+ members regarding such;

• disruption, failure, or cybersecurity breaches affecting or targeting our IT systems and controls, our infrastructure, or the infrastructure of our cloud-based IT service providers;

• changes in the cost or availability of transportation for feedstocks and refined products;

other factors discussed under Item 1A, Risk Factors and Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and in our other filings with the SEC.

• other factors discussed under Item 1A.

Risk Factors and Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations and in our other filings with the SEC.

In light of these risks, uncertainties and assumptions, our actual results of operations and execution of our business strategy could differ materially from those expressed in, or implied by, the forward-looking statements, and you should not place undue reliance upon them.

In addition, past financial and/or operating performance is not necessarily a reliable indicator of future performance, and you should not use our historical performance to anticipate future results or period trends.

In addition, past financial and/or operating performance is not necessarily a reliable indicator of future performance, and you should not use our

Management's Discussion and Analysis

historical performance to anticipate future results or period trends.

We can give no assurances that any of the events anticipated by any forward-looking statements will occur or, if any of them do, what impact they will have on our results of operations and financial condition.

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We undertake no obligation to revise or update any forward-looking statements as a result of new information, future events or otherwise.

Management's Discussion and Analysis

Executive Summary and Strategic Overview

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We are an integrated downstream energy business focused on petroleum refining, the transportation, storage and wholesale distribution of crude oil, intermediate and refined products and convenience store retailing.

Effective July 1, 2017, we acquired through the Delek/Alon the operations and net assets of Alon, as discussed in the 'Recent Strategic Developments' section of Item 1, Business, and as discussed in Note 3 of our consolidated financial statements included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

The Delek/Alon Merger continues to have a significant impact on our revenue and profitability as well as earnings per share, our net asset position, our purchasing position in the marketplace, our footprint in the refining industry, especially in the Gulf Coast Region/Permian Basin, and our ability to go to market and secure financing.

Business and Economic Environment

The outbreak of the COVID-19 Pandemic has resulted in significant economic disruption globally, including in the 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.

Additionally, the COVID-19 Pandemic has had a significant negative impact on motor vehicle use.

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 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 2020, governmental authorities in various states across the U.S., particularly those in our Permian Basin and U.S.

Gulf Coast regions, began to lift many of the restrictions created by actions taken to slow down the spread of COVID-19.

Additionally, during the fourth quarter 2020, the availability of multiple viable vaccines was announced and since have begun distribution.

These actions have resulted in an increase in the level of individual movement and travel and, in turn, an increase in the demand for some of our products relative to earlier in the year, as well as an improvement in the forward curve and pricing outlooks for crude oil prices and crack spreads.

These improvements have likewise led to improvement in the equity market capitalization of public companies in the midstream and downstream oil and gas sectors.

However, many of the states where such restrictions were lifted also experienced a marked increase in the spread of COVID-19 and many governmental authorities in such areas have responded by reimposing certain restrictions they had previously lifted.

This response, as well as the increased infection rates, impacts regions that we serve and could significantly impact demand in ways that we cannot predict.

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.

Identified Uncertainties Impacting Delek

During the year ended December 31, 2020, Delek experienced the impact on demand and pricing of these unprecedented conditions, most notably in our refining segment.

Our business and our 2020 results reflect the impact of decreased demand combined with decreased crack spreads.

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

And we continue to face risk from our suppliers and customers who are being affected by similar challenges.

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

• 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 could have a significant impact on our revenues, cost of sales, operating income and liquidity;

• 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;

• The decline in demand for refined product could significantly impact the demand for throughput at our refineries, unfavorably impacting operating results at our refineries, and could impact the demand for storage, which could impact our logistics segment;

• The decline in demand and margins impacting current results and forecasts could result in impairments in certain of our long-lived or indefinite-lived assets, including goodwill, or have other financial statement impacts that cannot currently be anticipated (See further discussion in Note 2 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K);

Management's Discussion and Analysis

• A significant reduction or suspension in U.S.

crude oil production could adversely affect our suppliers and sources of crude oil;

• An outbreak in one of our refineries, exacerbated by a limited pool of qualified replacements as well as quarantine protocols, could cause significant disruption in our production or, worst case, temporary idling of the facility;

• The restrictions on travel and requirements for social distancing could significantly impact the traffic at our convenience stores, particularly the demand for fuel;

• 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 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;

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;

Federal Government has enacted certain stimulus and relief measures, including the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") passed on March 27, 2020, and is continuing to consider additional relief legislation.

Beyond the direct impact of existing legislation on Delek in the current period, the extent to which the provisions of the existing or any future legislation will achieve its intention to stimulate or provide relief to the greater U.S.

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 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.

Federal Government's passage and/or enactment of additional stimulus and relief measures, as well as their future actions may impact the extent to which the risk underlying these uncertainties are realized.

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.

GAAP, we have considered them in the preparation of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Delek's Response to the Continuing Impact of the Pandemic and the Identified Uncertainties

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 optimization of operations;

• Coordinating planned maintenance or turnaround 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 as compared to pre-Pandemic levels;

• Suspending the share repurchase program and dividend distributions until our internal parameters are met for resuming such activities;

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

• Implementing regular site cleaning and disinfecting procedures;

• Adopting remote working where possible, and mandating masks and social distancing protocols where on-site operations are required;

• 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, workforce reduction and reducing or eliminating non-critical travel.

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 on our financial results, include the following:

Management's Discussion and Analysis

• For the year ended December 31, 2020 pursuant to the provisions of the CARES Act, we recognized $16.8 million of current federal income tax benefit attributable to anticipated tax refunds from net operating loss carryback to prior 35% tax rate years, and deferred $10.9 million of payroll tax payments which will be payable in equal installments in December 2021 and December 2022.

Additionally, we recorded an income tax receivable totaling $156.2 million as of December 31, 2020 related to the net operating loss carryback, which we expect to collect $135.6 million in the first half of 2021 and the remaining balance within eighteen months.

• 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 spent $239.6 million in capital expenditures (as discussed further in the "Capital Spending" section of the "Liquidity and Capital Resources" section of Item 7.

Management's Discussion and Analysis) during the year ended December 31, 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 7.

Management's Discussion and Analysis for further information.

• 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 is being conducted on a straight-time basis.

This allowed 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 2021 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 have been and will continue to be favorably impacted by a cumulative reduction in workforce, the first of which began in the second quarter 2020 and was completed in 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 year ended December 31, 2020, we have incurred incremental severance costs of $8.5 million related to these workforce reductions.

• Finally, we 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 during periods impacted by the Pandemic, and 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 in 2021 as well as our operations process effectiveness, which will improve our liquidity positioning and operational flexibility and response in anticipation of the continued economic impacts of the COVID-19 Pandemic.

See the "Liquidity and Capital Resources" section of Item 7.

Management's Discussion and Analysis of this Annual Report on Form 10-K 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;

additional actions by businesses and governments in response to the Pandemic, and the speed and effectiveness of responses to combat the virus and any new variants.

The COVID-19 Pandemic, and the volatile regional and global economic conditions stemming from the Pandemic, could also exacerbate the risk factors identified in the "Risk Factors"' section located in Item 1A.

of this Annual Report on Form 10-K.

The COVID-19 Pandemic may also materially adversely affect our results in a manner that is either not currently known or that we do not currently consider to be a significant risk to our business.

Significant Subsequent Events

During February 2021, the Company experienced a severe weather event at the Tyler, El Dorado and Krotz Springs refineries, resulting in units being temporarily shut down and damages to parts of the facilities due to extreme freezing conditions.

The Company is currently determining the financial impact of the event and expects to incur certain recovery costs and repair costs.

Additionally, the severe weather conditions and the resultant industry downtime have caused energy prices to rise in certain regions where we operate, which are expected to result in additional operating expenses for the refineries impacted until such time that supply is restored and energy prices stabilize.

As a result of this event and the related outages at our El Dorado refinery, we expect to accelerate certain of our planned turnaround activities to coincide with repairs of any damaged units, therefore optimizing and limiting our downtime.

On February 27, 2021, our El Dorado refinery experienced a fire in its Penex unit, in which six Delek employees were injured.

Our on-site emergency response team, with the assistance of the El Dorado Fire Department, extinguished the fire, and we immediately began to monitor the air quality within the refinery and the community and have detected no adverse impacts as of the date of this Annual Report on Form 10-K.

Our most critical focus, however, is on the safety of our employees, contractors and neighbors.

While all of our facilities have rigorous, well-documented safety controls, a full investigation will be launched as soon as possible, consistent with our dedication to Safety as a Core Value.

The facility was in the process of undergoing turnaround activity, so there are no operational disruptions as a result of the fire.

Although we are in the preliminary stages of assessing the extent of damages, we do not believe that this incident will have a material adverse effect on our results of operations.

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, 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 December 31, 2019 .

Prior to the Delek/Alon Merger, the refining segment operated the Tyler refinery and the El Dorado refinery with a combined design crude throughput (nameplate) capacity of 155,000 barrels per day ("bpd").

Effective with the Delek/Alon Merger, our refining segment now also includes the Big Spring refinery and the Krotz Springs refinery.

The refining segment (or "Refining") processes crude oil and other feedstocks for the manufacture of transportation motor fuels, including various grades of gasoline, diesel fuel, 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 bpd as of December 31, 2020.

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

Tyler Refinery

El Dorado Refinery

Big Spring Refinery

Krotz Springs Refinery

Tyler Refinery El Dorado Refinery Big Spring Refinery 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

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 Gulf Coast 5-3-2

Gulf Coast 5-3-2 (1)

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Gulf Coast 2-1-1 (3)

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.

In addition, we sell motor fuels through our wholesale distribution network on an unbranded basis.

(1) While there is variability in the crude slate and the product output at the El Dorado refinery, we compare our per barrel refined product margin to the Gulf Coast 5-3-2 crack spread because we believe it to be the most closely aligned benchmark.

(1) While there is variability in the crude slate and the product output at the El Dorado refinery, we compare our per barrel refined product margin to the U.S.

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

(2) 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 WTI Cushing/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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Logistics Overview

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 61.4% limited partner interest (at December 31, 2019 ) in Delek Logistics and a 94.6% interest in the entity that owns the entire 2.0% general partner interest in Delek Logistics and all of the incentive distribution rights.

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

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

The logistics segment's pipelines and transportation business owns or leases capacity on approximately 400 miles of crude oil transportation pipelines, approximately 450 miles of refined product pipelines, an approximately 700 -mile crude oil gathering system and associated crude oil storage tanks with an aggregate of approximately 9.9 million barrels of active shell capacity.

Our logistics segment owns and operates nine light product terminals and markets light products using third-party terminals.

Additionally, the logistics segment has strategic investments in pipeline joint ventures that provide access to pipeline capacity as well as the potential for earnings from joint venture operations.

Management's Discussion and Analysis

Our logistics segment (or "Logistics") 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 (NYSE:

DKL), where we owned an 80.0% interest at December 31, 2020.

Delek Logistics was formed by Delek in 2012 to own, operate, acquire and construct crude oil and refined products logistics and marketing assets, and a substantial majority of its assets are currently integral to our refining and marketing operations.

Logistics' pipelines and transportation business owns or leases capacity on approximately 400 miles of crude oil transportation pipelines, approximately 450 miles of refined product pipelines, and approximately 900-mile crude oil gathering system and associated crude oil storage tanks with an aggregate of approximately 10.2 million barrels of active shell capacity.

It also owns and operates nine light product terminals and markets light products using third-party terminals.

Logistics has strategic investments in pipeline joint ventures that provide access to pipeline capacity as well as the potential for earnings from joint venture operations.

On March 31, 2020, Logistics acquired from another of our segments approximately 200 miles of gathering and ancillary assets located in Howard, Borden and Martin Counties, Texas.

In May 2020, Logistics acquired from another of our segments certain leased and owned tractors and trailers and related assets, and subsequently owns or leases approximately 264 tractors and 353 trailers used to haul primarily crude oil and other products for related and third parties.

Retail Overview

Our retail segment at December 31, 2019 includes the operations of 252 owned and leased convenience store sites located primarily in Central and West Texas and New Mexico which were acquired in connection with the Delek/Alon Merger.

Our retail segment (or "Retail") at December 31, 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.

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

and the terms of such termination require the removal of all 7-Eleven branding on a store-by-store basis by December 31, 2021.

and the terms of such termination and subsequent amendment require the removal of all 7-Eleven branding on a store-by-store basis by December 31, 2023.

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.

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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, we closed or sold 30 under-performing or non-strategic store locations during 2019 .

In connection with our Retail strategic initiatives, we closed or sold 46 under-performing or non-strategic store locations since the fourth quarter of 2018.

Corporate and Other Overview

Our corporate activities, results of certain immaterial operating segments (including our asphalt terminal operations effective with the Delek/Alon Merger), our non-controlling equity interest of approximately 47% of the outstanding shares in Alon (which was accounted for as an equity method investment) prior to the Delek/Alon Merger, results and assets of discontinued operations and intercompany eliminations are reported in the corporate, other and eliminations in our segment disclosures.

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

Strategic Overview

The Company's overall strategy has been to take a disciplined approach that looks to balance returning cash to our shareholders and prudently investing in the business to support safe and reliable operations, while exploring opportunities for growth.

Our goal has been to balance the different aspects of this program based on evaluations of each opportunity and how it matches our strategic goals for the company, while factoring in market conditions and expected cash generation.

2019 Strategic Goals and Developments

The following is a summary of our most significant 2019 strategic goals, and the actions we completed during 2019 in pursuit of those goals:

Maintain and continue to enhance our safe operations.

As we invest in and grow our business, we remain focused on safe and compliant operations for the benefit of our employees, communities, customers and shareholders.

Capitalize on the successful integration of the Alon transaction.

Since the Delek/Alon Merger, we expended significant efforts to fully integrate the Alon organization.

Now that the integration is complete, our goal is to continue to implement best practices to improve the performance of our larger organization which includes focusing on simplifying the organization structure and the balance sheet.

We are continuing to realize synergies that are expected to have a positive effect on our combined operations.

Build on a winning culture.

We believe our team responded well to our larger scale, as steps were taken to integrate the two companies following the acquisition of Alon in July 2017.

We are now a larger and more diverse company, but our focus is to foster a culture that has the ability to act quickly in a changing environment to take advantage of opportunities.

In order to support this operation, we continue to be focused on expanding our team, developing systems and providing the resources to position the organization for success in the future.

Enhance our position in the Permian Basin.

Our 302,000 barrels per day of crude throughput capacity is primarily a WTI-linked crude oil slate that is weighted to supply from the Permian Basin through our access to approximately 200,000 barrels per day.

In addition, we have complementary retail and logistics presence in the area.

Our strategic focus will be to evaluate options to utilize our position to create additional growth across our businesses, while working toward reducing our susceptibility to volatility in the crude and refined product markets.

Grow our logistics operations.

The combination of our access to the Permian Basin and larger refining operation should allow us to continue to grow our logistics footprint.

We will look for opportunities to capitalize on this position to increase our crude gathering operations, support the refining system and third-party customers.

This includes exploring opportunities for continued development through joint ventures and opportunities to acquire assets in markets that are complementary to our existing geographic footprint.

Optimization of our refining system.

We have doubled the size of our refining system since 2016.

This gives us the opportunities to utilize the best practices from each location to improve reliability, efficiencies and yields in an effort to maximize performance.

This should enhance our competitive position and free cash flow potential.

Management's Discussion and Analysis

Use our financial flexibility and cash flow to create shareholder value.

We are focused on managing the cash flow in our business to support our capital allocation program that includes:

1) returning cash to shareholders through dividends and share repurchases, 2) investing in our business and 3) growing through acquisitions - all of which combine to serve our central goal of increasing long-term value for our shareholders.

In addition to the above, it continues to be a strategic and operational objective to manage price and supply risk related to crude oil that is used in refinery production, and to develop strategic sourcing relationships.

For that purpose, from a pricing perspective, we enter into commodity derivative contracts to manage our price exposure to our inventory positions, future purchases of crude oil and ethanol, future sales of refined products or to fix margins on future production.

We also enter into future commitments to purchase or sell RINs at fixed prices and quantities, which are used to manage the costs associated with our RINs obligations.

Additionally, from a sourcing perspective, we often enter into purchase and sale contracts with vendors and customers or take financial commodity positions for crude oil that may not be used immediately in production, but that may be used to manage the overall supply and availability of crude expected to ultimately be needed for production and/or to meet minimum requirements under strategic pipeline arrangements, and also to optimize and hedge availability risks associated with crude that we ultimately expect to use in production.

Such transactions are inherently based on certain assumptions and judgments made about the current and possible future availability of crude.

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 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.

Transactions designed to maximize shareholder return

Share Repurchases

During the year ended December 31, 2019 , Delek repurchased 5,039,034 shares for an aggregate purchase price of $178.1 million under the most recent share repurchase plan which provided for repurchases up to $500.0 million and was approved by the board on November 6, 2018 .

As of December 31, 2019 , there remained $231.7 million available for repurchases under the most recent repurchase plan.

See further discussion in Note 5 of our consolidated financial statements included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Transactions designed to maximize return on assets

Alkylation Project Completed

The alkylation unit at the Krotz Springs refinery was completed in April 2019 providing additional flexibility to the refinery.

The total cost was approximately $138.0 million.

This unit is expected to improve the refinery's ability to convert low value products into gasoline, enable the refinery to produce multiple summer gasoline grades and increase octane and allow the refinery to produce premium gasoline.

Because of the conversion improvement at the refinery from this project, its returns are expected to be less dependent on the crack spread environment over time.

Investment in Midstream Ventures

In July 2019, we acquired a 15% ownership interest in Wink to Webster Pipeline LLC ("WWP").

WWP intends to construct and operate a crude oil pipeline system from Wink, Texas to Webster, Texas along with certain pipelines from Webster, Texas to other destinations in the Gulf Coast area.

It is expected to span approximately 650 miles at completion.

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).

During the year ended December 31, 2019 , we made capital contributions totaling $126.7 million .

Subsequent to December 31, 2019 , we have made additional capital contributions totaling $18.9 million .

In May 2019, Delek Logistics, acquired a 33% membership interest in Red River Pipeline Company LLC (the "Red River Pipeline Joint Venture" as previously defined) with Plains Pipeline, L.P.

(“Plains”) for approximately $124.7 million , substantially all of which was financed under the Delek Logistics Credit Facility, The Red River Pipeline Joint Venture subsequently proceeded with an expansion project to increase the capacity of the pipeline from 150,000 barrels per day to 235,000 barrels per day for which we contributed an additional $3.5 million in May 2019.

This investment was also made to advance our long-term strategic objectives to expand our midstream investments and network/pipeline access.

See further discussion in Note 7 of our consolidated financial statements included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Purchase of Biofuel Production Assets

Effective October 1, 2019, we acquired certain assets of JNS Biofuel, LLC, a biodiesel facility located in New Albany, Mississippi for a total purchase price of $8.0 million .

The assets acquired consisted primarily of real property and integral equipment.

This acquisition allows us to bring assets in-house for a facility where we were previously the sole tolling customer, and utilize those assets to leverage across our renewables activities.

Management's Discussion and Analysis

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

2019 Amendments to Supply and Offtake Agreements

During January 2019, we amended the El Dorado refinery and the Krotz Springs refinery Supply and Offtake Agreements with J.

Aron so that the repurchase of baseline volumes at the end of the applicable Supply and Offtake Agreement term (representing the "Baseline Step-Out Liabilities") will be based upon a fixed price instead of a market-indexed price and therefore subject to changes in fair value that reflect changes in interest rate risk rather than commodity price risk.

The modified arrangement results in a Baseline Step-Out Liability that is no longer subject to commodity volatility, but for which its fair value is subject to interest rate risk.

As a result, we recorded a gain on the change in fair value resulting from the modification of the instruments from commodities-based risk to interest rate risk in cost of materials and other in the first quarter of 2019.

Such Baseline Step-Out Liabilities will continue to be recorded at fair value, where the fair value will reflect changes in interest rate risk rather than commodity price risk.

In September 2019, we amended the Supply and Offtake Agreements to increase the fixed Step-Out price on Baseline Volumes.

As a result of the change in the contract terms, we received cash, net of estimated fees paid, totaling approximately $38.9 million .

No gain or loss was recognized as a result of these September 2019 amendments.

See further discussion in Note 10 of our consolidated financial statements included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

2019 Amendments to the Term Loan Credit Facility Agreement

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

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

Per the Incremental Amendment, the required scheduled quarterly principal payments under the Term Loan Credit Facility increased from $1.750 million to $2.375 million commencing with the quarterly principal payment due on June 28, 2019.

There are no restrictions on the Company's use of the proceeds of the Incremental Term Loans, and the proceeds may be used to (i) to reduce utilizations under the Revolving Credit Facility, (ii) for general corporate purposes and (iii) to pay transaction fees and expenses associated with the Incremental Amendment.

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

Pursuant to the Second Incremental Amendment, the Company borrowed $150.0 million in aggregate principal amount of incremental term loans (the "Incremental Loans') at an original issue discount of 1.21% , increasing the aggregate principal amount of loans outstanding under the Term Loan Credit Facility on the Second Incremental Effective Date to $1,088.3 million .

Per the Second Incremental Amendment, the required scheduled quarterly principal payments under the Term Loan Credit Facility increased from $2.375 million to $2.750 million commencing with the quarterly principal payment due on December 31, 2019.

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

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

On December 18, 2019, we amended the Second Amended and Restated Credit Agreement dated March 30, 2018, which increased the capacity to issue letters of credit under the agreement from $300.0 million up to $400.0 million , including letters of credit denominated in Canadian dollars of up to $10.0 million .

See further discussion in Note 11 of our consolidated financial statements included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

2019 New Term Loan Facility

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

("BHI") as the administrative agent.

Pursuant to the Agreement, on December 31, 2019 Delek borrowed $40.0 million .

The interest under the Agreement is equal to LIBOR plus a margin of 3.00% .

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

Proceeds may be used for general purposes.

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

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

See further discussion in Note 11 of our consolidated financial statements included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Our corporate activities, results of certain immaterial operating segments, discontinued operations, our recently commenced wholesale crude operations, and intercompany eliminations are reported in 'corporate, other and eliminations' in our segment disclosures.

Management's Discussion and Analysis

A Look to the Future:

Our Strategic Goals

During 2019, Delek’s leadership team built a new framework to facilitate development of the Company’s strategies and initiatives.

This framework starts with the Company’s overarching objectives for the next five years, and continues to lay the foundation for our annual strategic goals:

Strategic Overview

The Company's overall strategy is to take a disciplined approach that looks to balance returning cash to our shareholders and prudently investing in the business to support safe and reliable operations, while exploring opportunities for growth.

Our goal has been to balance the different aspects of this program based on evaluations of each opportunity and how it matches our strategic priorities for the company, while factoring in market conditions and expected cash flows.

In 2019, Delek’s leadership team built a Five-Year Strategic Framework to facilitate development of the Company’s strategies and initiatives.

This framework lays out the Company’s overarching objectives for a five-year period and provides the foundation for our Core Strategic Focus Areas, our Strategic Initiatives, and ultimately our Annual Strategic Priorities, as follows:

Five-Year Strategic Framework

Our Five-Year Strategic Framework consisted of the following overarching objectives:

Become nationally recognized for safety and wellness leadership.

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Improve efficiency and execution through development of systems and processes.

Identify and manage risks to improve decision making and increase profitability, and

Identify and manage risks to improve decision-making and increase profitability.

Significantly increase overall earnings.

These overarching objectives are supported by five strategic focus areas, which inform the priorities of each segment’s initiatives, as discussed below:

These overarching objectives are supported by strategic focus areas, which inform the priorities of each segment’s initiatives, while our overall strategy has been and continues to be to take a disciplined approach that looks to balance returning cash to our shareholders and prudently investing in the business to support safe and reliable operations, while exploring opportunities for growth.

Core Strategic Focus Areas

Our strategic focus areas and plans must balance the different aspects of our Five-Year Strategic Framework based on evaluations of each opportunity and how it matches our strategic goals for the company, while factoring in market conditions and expected cash generation.

Recognizing the significance of the economic impact of the COVID-19 Pandemic (and, earlier in the year, the OPEC Production Disputes), we re-calibrated our 2020 strategy to ensure we were identifying the significant uncertainties arising from and related to the Pandemic in order to be responsive and proactive regarding the risks that those uncertainties created (as discussed above).

That said, our modified 2020 strategy as well as our 2021 strategy are still centered around the following strategic focus areas:

Safety and wellness.

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Positioning for growth.

We believe that these strategic objectives and areas of focus are representative of our desire to maximize the opportunities both within and external to the organization in a way that is innovative and forward-thinking, while incorporating some of the strategies that have been essential to our story so far and are part of who we are as a company.

Accordingly, these focus areas continue to provide a foundation for our 2020 strategic initiatives, which are as follows:

Related to our strategic initiatives, we have developed the following 2020 strategic initiatives:

Management's Discussion and Analysis

We believe that these Core Strategic Focus Areas are just as relevant in the Pandemic environment as they are in more stable economic conditions, and are representative of our desire to maximize the opportunities both within and external to the organization in a way that is innovative and forward-thinking while simultaneously managing risk and incorporating some of the strategies that have been essential to our story so far and are part of who we are as a company.

Strategic Initiatives

Building on the Five-Year Strategic Framework and the Core Strategic Focus Areas, we developed the following Strategic Initiatives:

2020 Strategic Priorities - A Look Back

All of the elements above are a critical evolution to how we determine our strategic priorities for a particular year, under normal conditions.

There were many unforeseen external factors impacting our operations and the economic environment during 2020, but we took that as a challenge rather than a derailment, and we used it as an opportunity to evaluate the fundamentals of our strategy.

What we found is that the unforeseen events and conditions arising as a result of the Pandemic reinforced the importance of our Framework and our Focus Areas, and validated the relevancy of not only our Initiatives, but also of our previously identified 2020 Strategic Priorities.

These Strategic Priorities are outlined below.

2020 Strategic Priorities

• Maintain and continue to enhance our safe operations and commitment to responsible corporate citizenship.

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The organization is focused on Environment/Health/Safety, Employee Engagement, Community Commitment and Ethics/Governance in an effort to have safe and compliant operations for the benefit of our employees, communities, customers and shareholders.

◦ Our successes in this area included continued focus on safety across our organization, as well as the completion of our first ever Sustainability Report, and improving our performance and executing on our plans for environmental, social and governance responsibility (or "ESG") continues to be a priority for us.

• Broaden our winning culture.

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Safety, Integrity, Maximize Value, Passion for Winning & Excellence, Growth Oriented and Commitment are guiding factors in the way we do business.

We are investing in our people to expand our knowledge base through training, systems and processes with a goal to retain the ability to act quickly as we grow.

We are committed to investing in our people to expand our knowledge base through training, systems and processes with a goal to retain the ability to act quickly as we grow.

◦ We had significant constraints on costs and investment during 2020 as a result of the Pandemic, and even a workforce reduction.

But that is when we really saw the returns from our investments in getting the right people, who in turn have been creating and improving our processes and helping us lay the groundwork for system upgrades that will be key to our continued growth and success.

The success of these efforts to date was particularly evident this year in terms of how we have managed our business and our risk in the COVID-19 Pandemic economic environment.

• Enhance our integrated platform.

Our integrated platform allows to purchase a barrel of crude oil at the wellhead, transport crude oil to our refineries to produce finished products then transport it to our retail network or third parties.

In 2019, projects such as the alkylation unit at Krotz Springs, turnaround at El Dorado, steps to improve our retail portfolio or investment in our logistics assets are all examples of the continuous effort to improve our existing platform.

Our integrated platform allows us to purchase a barrel of crude oil at the wellhead, transport crude oil to our refineries to produce finished products then transport it to our retail network or third parties.

Enhancing this platform we believe will maximize our return on investments and opportunities for growth.

Management's Discussion and Analysis

◦ In 2020, projects such as the dropdown of gathering and trucking assets to Logistics, our involvement and investment in the expansion of Logistics and other pipeline joint venture systems, and the development of wholesale crude sales channels for excess gathered barrels, are all examples of the continuous effort to enhance our existing platform.

• Diversify our business model through growth in our midstream operations.

Our intention is to use our cash flow and strong balance sheet to diversify our earnings mix by increasing the size of our more stable midstream business.

We executed initiatives in 2019 to develop our midstream operations through construction of the Big Spring Gathering System, entering into joint ventures for the Red River and Wink to Webster pipelines, with the intention to use our cash flow and strong balance sheet to diversify our earnings mix by increasing the size of our more stable midstream business.

◦ We saw continued growth in our midstream operations with strategic dropdowns of the Big Spring Gathering System and trucking assets to Delek Logistics and expansions of the pipeline capacity under Logistics' Red River joint venture investment, both of which provided immediate accretive value when we executed the IDR Simplification, as well as long term accretive value through our investment in Delek Logistics.

• Maximize operational efficiencies.

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In a commodity based environment that changes quickly, we are consistently focused on executing on factors that are within our control.

◦ In light of the Pandemic and the resulting decline in commodity prices and crack spreads, we quickly shifted our focus away from capital growth projects in the early part of 2020.

This provided us with the opportunity to focus our team's considerable efforts and talent on process improvement initiatives, cost control measures, and opportunities for innovation.

As a result, we have implemented new technologies, processes and other changes that are already having a positive effect on safety (e.g., we now have more structured safety protocols), our costs (e.g., operating expenses significantly declined in 2020 compared to the prior year), and our operational effectiveness (e.g., our cost and contractor management process and system improvements are positively impacting our ability to monitor and manage our capital spend).

• Create organizational scalability to support growth.

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We are focused on developing our systems and processes, improving efficiencies and retaining knowledge within the organization to create a structure that is scalable as we grow in the future.

◦ As referenced above, we have implemented new technologies, processes and other changes that we believe are already having a positive effect on safety, our costs, and our operational effectiveness.

These represent fundamental cultural changes that we expect will position us well to implement other planned process and system improvements in the near term, and better position us for scalable growth.

• Use our financial flexibility and cash flow to create shareholder value.

Delek is focused on managing the cash flow of our business to support a capital allocation program that includes:

1) returning cash to shareholders through dividends and share repurchases, 2) applying a disciplined approach to investing in our business and 3) growing through acquisitions- all of which combine to serve our overarching goal of increasing long-term value for our shareholders.

Already, we have begun working towards the achievement of our 2020 strategic initiatives as evidenced by the significant 2020 transactions highlighted below:

2020 Investment in Project Financing Joint Venture

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

The WWP Project Financing JV was created for the specific purpose of obtaining financing, through its wholly-owned subsidiary W2W Finance LLC, to fund our combined capital calls resulting from and occurring during the construction period of the pipeline system under the WWP Joint Venture, and to service that debt.

In connection with the arrangement, both Delek Energy and MPLX contributed their respective 15% ownership interests to the WWP Project Financing JV as collateral for and in service of the related project financing.

Accordingly, distributions received from WWP through the WWP Project Financing JV will first be applied in service of the related project financing debt, with excess distributions being made to the members of the WWP Project Financing JV as provided for in the W2W Holdings LLC Agreement.

The obligations of the members under the W2W Holdings LLC Agreement are guaranteed by the parents of the members of the WWP Project Financing JV (i.e., for Delek Energy, the guarantee is from Delek US Holdings, Inc.).

We believe that this financing mechanism provides not only for better pricing on the strength of our combined investments and member guarantees, but that it enhances our financial position by presenting our investment in the WWP Project Financing JV net of encumbrances that are specific to that investment.

See further discussion in Notes 7 and 25 of our consolidated financial statements included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

2020 Amendments to Supply and Offtake Agreements

In January 2020, we amended our three Supply and Offtake Agreements to convert the Baseline Step-Out Liabilities back to a market-indexed price subject to commodity price risk with corresponding changes to underlying market-based indices and certain differentials.

We believe that this will reduce the need for economic commodity hedges and provide operating results that more closely correlate to current crack spreads and differentials.

See further discussion in Notes 10 and 25 of our consolidated financial statements included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

1) returning cash to shareholders through dividends and share repurchases, 2) applying a disciplined approach to investing in our business and 3) growing through acquisitions all of which combine to serve our overarching goal of increasing long-term value for our shareholders, while also actively managing cash flow and financial risk during periods of negative economic pressure.

◦ Even during this unprecedented year, we have achieved successes in this area, both in terms of strategic transactions that enhance shareholder value and in terms of managing our cash flow and financial risk so that we are protecting our shareholders' investments in Delek as best we can.

See the section below, as well as the "Liquidity and Capital Resources" section of Item 7.

Management's Discussion and Analysis of this Annual Report on Form 10-K for further information.

The following section highlights some of the specific significant developments and successes realized during 2020.

2020 Significant Developments

With these objectives and priorities serving as our guiding principles, and applying the short-term measures to mitigate the impact of the COVID-19 Pandemic and the OPEC Production Disputes described in the 'Business Overview' above, we are pleased to report that we have achieved the following successes during 2020:

Transactions designed to maximize return on assets and shareholder value

Investment in Midstream Ventures

In July 2019, we acquired a 15% ownership interest in Wink to Webster Pipeline LLC (the "WWP Joint Venture"), which we subsequently contributed to a non-recourse financing joint venture with MPLX (who likewise contributed their 15% interest in the WWP Joint Venture) as collateral for and in service of the related project financing (the "WWP Project Financing JV") effective February 21, 2020, in exchange for a 50% interest in the WWP Project Financing JV.

The WWP Joint Venture is constructing and will operate a crude oil pipeline system from Wink, Texas to Webster, Texas along with certain pipelines from Webster, Texas to other destinations in the Texas Gulf Coast area that are expected to span approximately 650 miles at completion.

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

It is anticipated that capital contributions required of the 15% ownership interest we contributed to the WWP Project

Management's Discussion and Analysis

Financing JV will total approximately $340 million to $380 million over the course of construction, the majority of which will be financed under the nonrecourse financing facility of the WWP Project Financing JV.

Distributions received from the WWP Joint Venture through the WWP Project Financing JV will first be applied in service of the related project financing debt, with excess distributions being made to the members of the WWP Project Financing JV.

The obligations of the members under the WWP Project Financing JV HoldCo LLC Agreement are guaranteed by the parents of the members of the WWP Project Financing JV.

See further discussion in Note 7 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Transactions with 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 total consideration consisting of $45.0 million in cash and 14.0 million newly issued common limited partner units (as previously defined, the "IDR Simplification").

Contemporaneously, we repurchased a 5.2% ownership interest in Delek Logistics GP, LLC, the general partner of Delek Logistics from certain of 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.

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

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

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

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

Total consideration for the Acquisition was approximately $48.0 million in cash, subject to certain post-closing adjustments, primarily financed with borrowings under Delek Logistics’ revolving credit facility.

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

Delek Logistics will operate and maintain the Big Spring Gathering System connecting our interests in and to certain crude oil production with the Delek Logistics' Big Spring, Texas terminal and provide gathering, transportation and other related services.

The total consideration was comprised of $100.0 million in cash and 5.0 million common limited partner units in Delek Logistics.

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

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

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

See further discussion in Note 6 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Sale of Bakersfield Non-Operating Refinery

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

(“GCE”) for total cash consideration of $40.0 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% limited member interest in the acquiring subsidiary of GCE for $400 per unit (up to $13.3 million), subject to certain adjustments.

Such option is exercisable by Delek through the 90th day after GCE demonstrates commercial operations, as contractually defined.

See further discussion in Note 4 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

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

Amendment and Restated Supply and Offtake Agreements

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

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

As part of this amendment, there were changes to the underlying market index, annual fee, the crude purchase fee, crude roll fees and timing of cash settlements related to periodic price adjustments on the fixed differential component of the Baseline Volume Step-Out Liabilities.

The amendments provide us dedicated financing for the inventory 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 10 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

2020 Amendment to the Term Loan Credit Facility

On May 19, 2020, we amended the Term Loan Credit Facility agreement (as defined in Note 11 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K) 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

Management's Discussion and Analysis

quarterly principal amortization payments of $0.5 million commencing on June 30, 2020.

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 11 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

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 previous 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.

Share Repurchases

During the year ended December 31, 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 up to $500.0 million and was approved by the Board of Directors on November 6, 2018.

As of December 31, 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.

See further discussion in Note 22 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

A Look to the Future:

Our 2021 Strategic Priorities

As we move forward, we are increasingly optimistic about our outlook, and we have identified five strategic priorities for 2021 that continue to be rooted in our Five-Year Strategic Framework, linked to our Core Strategic Focus Areas, and driven by our Strategic Initiatives discussed above.

Our 2021 Strategic Priorities are presented below.

2021 Strategic Priorities

Building on the continuation of our Five-Year Strategic Framework and the Core Strategic Focus Areas, we have developed and are optimistic about the following 2021 Strategic Initiatives:

• Maintain and Continue to Enhance Our Safe Operations.

We are proud of our commitment to safety as a core value of the company, and this commitment is reflected in our continuous improvement in DART (days away, restricted or transferred) and TRIR (total recordable incident rate) metrics since 2016.

According to the American Fuel & Petrochemical Manufacturers trade association, Delek ranks second overall in these safety metrics among companies operating multiple refineries.

The retail business unit’s TRIR is half the industry average.

• Drive EBITDA and Cash Flow Improvement.

In 2020, the company acted decisively by adapting to the challenging macro environment and delivering significant cost savings.

We plan to maintain and enhance our cost containment efforts in 2021.

Simultaneously, initiatives for margin improvements through optimization are underway.

The combination of these improvements along with a diverse asset base should lead to a lower cash flow break-even profile in the future.

• Develop and Utilize Systems, Processes and Technology to Improve Operations.

Recognizing that the energy industry remains behind the curve in terms of technological advancements, and that Delek has a long history of being nimble, we have added innovation to our core values.

Our vision is to use select technologies and implement advanced systems and processes to achieve further, more structural cost reductions, operational improvements and asset optimization over the medium to longer term.

Through our focus on innovation, we expect to enhance the competitiveness of the portfolio within the industry.

• Ongoing Commitment to ESG.

At Delek, we understand the importance of ESG and the growing role it plays with all stakeholders, as well as within an investment management framework.

Therefore, we were pleased that the sustainability report we published in 2020 was well-received, yielding improved scoring from multiple rating agencies.

However, we are still relatively early in our ESG journey, and we are striving for progressive improvements over time in terms of underlying performance metrics and disclosure in all ESG categories.

We are taking a holistic approach to addressing the evolving and challenging requirements of ESG by gleaning fresh ideas and feedback from business leaders and employees throughout the organization.

One example is our de-carbonization steering committee that involves members of each business unit and attempts to generate leading-edge solutions to improve our carbon footprint while maximizing long-term returns on our capital investments.

• Laying the Foundation for Future Growth .

Delek was built through a history of strategic acquisitions, with a strong track record of seamless integration.

We understand that difficult macro environments often create acquisition opportunities or prospects to pivot strategically.

After focusing mainly on improving our cash flow break-even profile through reduced capital expenditures and operating costs in 2020, we are emerging from this downturn with an improved cost structure, a healthy balance sheet and opportunities to pursue future growth.

We are constantly evaluating the optimal investment options available in our various business units and comparing the potential returns of both organic and inorganic opportunities.

In the constantly evolving energy landscape, Delek remains strong, nimble and well-positioned to capture opportunities.

Management's Discussion and Analysis

Market Trends

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The table below reflects the quarterly average prices of WTI Midland and WTI Cushing crude oil for each of the quarterly periods over the past three years.

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

As shown in the historical graph, over the past three years WTI Midland crude prices have generally been favorable as compared to WTI Cushing, though that trend reversed slightly in the fourth quarter 2019 and 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, 3-2-1 and 2-1-1 crack spreads for each of the quarterly periods over the past three years.

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

The table below reflects the quarterly average Gulf Coast 5-3-2 ULSD, 3-2-1 and 2-1-1 crack spreads for each of the quarterly periods over the past three years.

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

In such conditions, things being equal (i.e., near-capacity throughputs and no significant outages), our Big Spring refinery, whose benchmark is the 3-2-1 crack spread, should outperform our other refineries in terms of refining margin.

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Crack spreads are impacted by the price of refined products as compared to the price of crude oil and therefore may narrow or widen based on different trends in those market prices, or lags in one commodity pricing change versus the other.

For example, the average Gulf Coast 5-3-2 crack spread per barrel remained relatively steady at $13.78 in 2019 compared to $13.21 in 2018 , despite Gulf Coast price of gasoline (CBOB) decreasing 10.7% , from an average of $1.83 per gallon in 2018 to $1.63 per gallon in 2019 , which indicates that decreases in feedstocks trended similarly.

For example, the average Gulf Coast 5-3-2 ULSD crack spread per barrel remained relatively steady at $8.18 in 2020 compared to $15.77 in 2019, despite Gulf Coast price of gasoline (CBOB) decreasing 33.1%, from an average of $1.63 per gallon in 2019 to $1.09 per gallon in 2020, which indicates that decreases in feedstocks trended similarly.

As a result, while, in such circumstances, total revenues for gasoline and corresponding cost of materials and other will be lower (assuming consistent volumes), refining margins would remain relatively flat year-over-year.

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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

In addition to decreases in the price of CBOB gasoline, the Gulf Coast price of High Sulfur Diesel decreased 40.2%, from an average of $1.76 per gallon in 2019 to $1.06 per gallon in 2020.

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Crude Pricing Differentials

crude oil production has increased, we have seen the discount for WTI Cushing compared to Brent widen.

crude oil production has increased over recent years, domestic producers have benefited from the discount for WTI Cushing compared to Brent, a global benchmark crude.

This generally leads to higher margins in our refineries as refined product prices are influenced by Brent crude prices and the majority of our crude supply is WTI-linked.

The average discount for WTI Cushing compared to Brent increased to $3.54 during 2020 from $7.13 during 2019.

We note similar historical trends when reviewing the discount for LLS compared to WTI Cushing, where the average discount increased to $5.66 during 2019 from $4.99 during 2018 .

We note similar historical trends when reviewing the discount for LLS compared to WTI Cushing, where the average discount decreased to $1.67 during 2020 from $5.66 during 2019.

Additionally, our refineries continue to have relatively greater access to WTI Midland and WTI Midland-linked crude feedstocks compared to certain of our competitors.

The average discount for WTI Midland compared to WTI Cushing decreased to $(0.13) during 2020 from $0.68 during 2019.

As these discounts shrink or, as in the case of the WTI Midland/WTI Cushing differential, become a premium, without taking into account changes in inventory, as they did at the end of 2019, our reliance on WTI-linked crude pricing, and specifically WTI Midland crude can negatively impact our results.

As these discounts shrink or become premiums, our reliance on WTI-linked crude pricing, and specifically WTI Midland crude can negatively impact our results.

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 LLS over the past three years.

Management's Discussion and Analysis

RIN Volatility

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The following table provides summary financial data for Delek (in millions):

Summary Statement of Operations Data

Year Ended December 31,

Summary Statement of Operations Data Year Ended December 31,

Net revenues $ 7,301.8 $ 9,298.2

Total operating costs and expenses 8,029.8 8,805.9

Operating income

Operating (loss) income (728.0) 492.3

Total non-operating expenses, net 35.1 89.6

Income from continuing operations before income tax expense

Income tax expense

Income from continuing operations, net of tax

Income (loss) from discontinued operations, net of tax

(Loss) income before income tax (benefit) expense (763.1) 402.7

Income tax (benefit) expense (192.7) 71.7

(Loss) income from continuing operations, net of tax (570.4) 331.0

Income from discontinued operations, net of tax — 5.2

Net (loss) income (570.4) 336.2

Net income attributed to non-controlling interests 37.6 25.6

Net income attributable to Delek

(1) Statement of operations data for the year ended December 31, 2018 reflects a $5.5 million adjustment to increase income tax expense related to the establishment of a valuation allowance on deferred tax assets and to decrease net income and net income attributable to Delek, and reducing basic and diluted income per share by $0.07 and $0.06 , respectively, that were not reflected in the Earnings Release furnished as Exhibit 99.1 to the Form 8-K filed with the SEC on February 20, 2019.

Such adjustment had no impact on adjusted net income or adjusted net income per share (as defined in the Earnings Release).

See further discussion in Notes 15 and 23 of our consolidated financial statements included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

(2) Statement of operations data for the year ended December 31, 2018 includes a $60.7 million adjustment to increase net revenues and cost of materials and other to record a correction of an intercompany elimination that was not reflected in the February 20, 2019 Earnings Release.

Such amounts are not considered material to the financial statements and had no impact to operating income, segment contribution margin or net income.

Net (loss) income attributable to Delek $ (608.0) $ 310.6

We report operating results in three reportable segments:

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Consolidated Results of Operations — Comparison of the Year Ended December 31, 2020 versus the Year Ended December 31, 2019

Consolidated net income for the year ended December 31, 2019 was $336.2 million compared to $374.9 million for the year ended December 31, 2018 .

Consolidated net income attributable to Delek for the year ended December 31, 2019 was $310.6 million , or $4.10 per basic share, compared to $340.1 million , or $4.11 per basic share, for the year ended December 31, 2018 .

Consolidated net loss for the year ended December 31, 2020 was $570.4 million compared to net income of $336.2 million for the year ended December 31, 2019.

Consolidated net loss attributable to Delek for the year ended December 31, 2020 was $608.0 million, or $(8.26) per basic share, compared to net income of $310.6 million, or $4.10 per basic share, for the year ended December 31, 2019.

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

We generated net revenues of $7,301.8 million and $9,298.2 million during the years ended December 31, 2020 and 2019, respectively, a decrease of $1,996.4 million, or 21.5%.

The decrease in net revenues was primarily due to the following factors:

The decrease in net revenues was primarily due to the following:

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

Gulf Coast gasoline of 10.7% , ULSD of 8.0% , and High-Sulfur diesel ("HSD") of 8.3% , partially offset by increase in sales volumes;

Gulf Coast gasoline of 33.1%, ULSD of 36.6%, and High-Sulfur diesel ("HSD") of 40.2%;

• in our retail segment, decreases in fuel sales volumes due to demand slowdown as a result of the COVID-19 Pandemic and reduction in average number of stores, as well as a 17.5% decrease in average price charged per gallon;

partially offset by an increase in merchandise revenue;

• in our logistics segment, decreases in the average volume sold and sales prices per gallon of gasoline and diesel sold in our West Texas marketing operations, where the average sales prices per gallon of gasoline and diesel sold decreased $0.49 per gallon and $0.71 per gallon, respectively.

Such decrease was partially offset by increased revenue associated with agreements executed in connection with Big Spring Gathering System and Delek Trucking acquisitions.

Operating Costs and Expenses

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Cost of materials and other was $6,841.2 million for the year ended December 31, 2020, compared to $7,657.2 million for 2019, a decrease of $816.0 million, or 10.7%.

The net decrease in cost of materials and other primarily related to the following factors:

The net decrease in cost of materials and other primarily related to the following:

• a decrease in the cost of crude oil feedstocks at the refineries including a decrease in the cost of WTI Cushing crude oil from an average of $56.99 per barrel to an average of $39.89, and a decrease in the cost of WTI Midland crude oil from an average of $56.31 per barrel to an average of $40.02 per barrel;

a decrease in RIN expense where ethanol RIN prices averaged $0.17 per RIN compared to $0.31 per RIN in the prior year period;

• a decrease in average volumes sold and the cost of refined products in the logistics segment where the average cost per gallon of gasoline and diesel purchased decreased $0.43 per gallon and $0.66 per gallon, respectively;

an increase in hedging gains to $22.8 million recognized during 2019 compared to a loss of $0.8 million recognized during 2018 ;

the reenactment of the BTC in December 2019 for the 2018 and 2019 periods which resulted in a benefit of $78.0 million during 2019 .

• a decrease in retail fuel cost of materials and other attributable to demand slowdown, a decrease in average cost per gallon of $0.50 and a reduction in average number of stores during the year.

Such decreases were partially offset by:

a prior period benefit of approximately $115.5 million related to a combination of the 2017 RINs waivers and a biodiesel tax credit recognized during 2018 , whereas 2018 RIN Waivers provided a benefit of $20.7 million in 2019 .

• a decrease in hedging gains to a loss of $83.4 million recognized during the year ended December 31, 2020 from a gain of $22.8 million recognized during the year ended December 31, 2019

• the (expense) benefit of $(29.2) million related to the change in pre-tax inventory valuation recognized during the year ended December 31, 2020 compared to $52.3 million recognized during the year ended December 31, 2019;

• a prior period benefit of approximately $77.6 million and $20.7 million related to the BTC and 2018 RINs waivers, respectively, recognized during 2019.

Operating Expenses

Operating expenses (included in both cost of sales and other operating expenses) were $682.2 million for the year ended December 31, 2019 compared to $645.0 million in 2018 , an increase of $37.2 million , or 5.8% .

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

higher employee related costs primarily across our refining and logistics segment;

higher contract services in our refining and logistics segments;

a $16.0 million reduction of operating expenses in 2018 attributed to recoveries received from the settlement of disputed indemnification matters related to environmental obligations and asset retirement obligations at the Bakersfield refinery.

Such increases were partially offset by:

reductions in maintenance expense and variable expenses in our refining segment;

Operating expenses (included in both cost of sales and other operating expenses) were $559.8 million for the year ended December 31, 2020 compared to $682.2 million in 2019, a decrease of $122.4 million, or (17.9)%.

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 lower employee, utilities, catalysts and maintenance costs;

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

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General and Administrative Expenses

General and administrative expenses were $274.7 million for the year ended December 31, 2019 compared to $247.6 million in 2018 , an increase of $27.1 million , or 10.9% .

The increase was primarily driven by the following factors:

an increase in employee costs driven by higher equity-based compensation and increased headcount;

increases in legal and audit costs associated with various acquisition, investment, litigation and dispute matters;

increases in property and other taxes;

increases in supplies expenses for subscriptions and office related costs;

increases for various outside service costs.

General and administrative expenses were $248.3 million for the year ended December 31, 2020 compared to $274.7 million in 2019, a decrease of $26.4 million, or 9.6%.

The decrease was primarily driven by the following:

• decrease in contract services due to cost reduction measures;

• 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;

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

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

Depreciation and Amortization

Depreciation and amortization (included in both cost of sales and other operating expenses) was $194.3 million and $199.4 million for the years ended December 31, 2019 and 2018 , respectively, a decrease of $5.1 million , or 2.6% .

Depreciation and amortization (included in both cost of sales and other operating expenses) was $267.6 million and $194.3 million for the years ended December 31, 2020 and 2019, respectively, an increase of $73.3 million, or 37.7%, primarily due to the following:

• 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;

• accelerated depreciation of approximately $19.0 million taken in the fourth quarter of 2020 primarily due to the decision to abandon certain property and equipment.

Other Operating Income, Net

Other operating income, net was $2.5 million and $31.3 million for the years ended December 31, 2019 and 2018 , respectively, a decrease of $28.8 million partially due to lower net gains associated with our Canadian crude trading operations during 2019 compared to 2018 .

Other operating income, net was $13.1 million and $2.5 million for the years ended December 31, 2020 and 2019, respectively, an increase of $10.6 million, primarily due to a gain of $10.8 million on the underlying commodity related to our contract to store crude oil barrels at one of the Strategic Petroleum Reserve locations.

Refer to Note 13 of the consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K, for additional information.

Non-Operating Expenses

Interest Expense

Interest expense was $131.1 million in the year ended December 31, 2019 , compared to $125.9 million for 2018 , an increase of $5.2 million , or 4.1% .

The increase was 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 $321.6 million (calculated as a simple average of beginning borrowings/obligations and ending borrowings/obligations for the period) for the year ended December 31, 2019 compared to the year ended December 31, 2018 .

Interest expense was $129.0 million in the year ended December 31, 2020, compared to $131.1 million for 2019, a decrease of $2.1 million, or 1.6%.

Results from Equity Method Investments

We recognized income from equity method investments of $34.3 million for the year ended December 31, 2019 , compared to $9.7 million for the year ended December 31, 2018 , an increase of $24.6 million .

This increase was primarily driven by the following:

an increase in income from our asphalt joint venture from $3.4 million during 2018 to $15.2 million during 2019 ;

the addition of the Red River Pipeline Joint Venture in May 2019 which contributed income of $8.4 million in 2019 ;

an increase in income from our other logistics joint ventures from $6.2 million during 2018 to $11.5 million during 2019 .

We recognized income from equity method investments of $30.3 million for the year ended December 31, 2020, compared to $34.3 million for the year ended December 31, 2019, a decrease of $4.0 million.

This decrease was primarily driven by the following:

• an $8.5 million loss from WWP Project Financing Joint Venture primarily due to impairment taken by the underlying WWP Joint Venture.

This decrease was partially offset by an increase in income primarily related to our logistics joint ventures.

Other Non-Operating Expenses, Net

During the year ended December 31, 2018 , we incurred certain infrequently occurring expenses/charges that were not incurred during the year ended December 31, 2019 .

These included a $9.1 million loss on extinguishment of debt related to the Refinancing and an impairment loss on assets held for sale totaling approximately $27.5 million related to the asphalt assets held for sale.

These charges were partially offset by a realized gain on the sale of certain asphalt assets totaling $13.3 million , including a gain on the sale of an asphalt equity method investment.

See Notes 8 and 11 of the consolidated financial statements in Item 15, Exhibits and Financial Statement Schedules, for additional information.

During the year ended December 31, 2020, we recognized a gain of $56.8 million on the sale of our non-operating refinery located in Bakersfield, California.

See Note 4 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Other income increased $7.6 million, to $3.5 million during the year ended December 31, 2020, compared to expense of $4.1 million year ended December 31, 2019.

Income tax expense decreased $264.4 million during the years ended December 31, 2020 compared to the same period for 2019, primarily driven by the following:

pre-tax income of $402.7 million compared to $485.5 million for the years ended December 31, 2019 and 2018 , respectively;

• pre-tax loss of $763.1 million compared to pre-tax income of $402.7 million for the years ended December 31, 2020 and 2019, respectively;

Management's Discussion and Analysis

a decrease in our effective tax rate which was 17.8% compared to 21.0% for the years ended December 31, 2019 and 2018 , respectively, primarily due to the following:

the 2019 recognition of the BTC receivable, the majority of which is non-taxable;

discrete adjustments that were reported during 2018 for the following:

tax expense associated with the impairment of assets held for sale;

changes in valuation allowance attributable to the book-tax basis differences from the Big Spring Logistic Asset Acquisition (See Note 6 of our consolidated financial statements included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K).

A detailed discussion of the fiscal year 2018 compared to year-over-year changes from fiscal year 2017 can be found in Part II, Item 7, Management's Discussion and Analysis, "Results of Operations", of our 2018 Annual Report on Form 10-K, as amended and filed on June 27, 2019.

• an increase in our effective tax rate which was 25.3% compared to 17.8% for the years ended December 31, 2020 and 2019, respectively, 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, offset by an increase in valuation allowance on certain state attributes;

◦ exclusion of goodwill impairment expense from taxable income.

• Refer to Note 15 of the consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K, for additional information.

A detailed discussion of the fiscal year 2019 compared to year-over-year changes from fiscal year 2018 can be found in Part II, Item 7.

Management's Discussion and Analysis, "Results of Operations", of our 2019 Annual Report on Form 10-K, filed on February 28, 2020.

Management's Discussion and Analysis

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Year Ended December 31,

Net revenues $ 5,817.7 $ 8,798.5

Cost of materials and other 5,745.5 7,528.2

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Contribution margin

$ (330.5) $ 777.9

Contribution margin percentage

(5.7) % 8.8 %

Factors Impacting Refining Profitability

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Our motor fuel margins are impacted by local supply, demand, weather, competitor pricing and product brand.

As part of our overall business strategy, we regularly evaluate opportunities to expand our portfolio of businesses and may at any time be discussing or negotiating a transaction that, if consummated, could have a material effect on our business, financial condition, liquidity or results of operations.

We also enter into future commitments to purchase or sell renewable identification numbers ("RINs") at fixed prices and quantities, which are used to manage the costs of our credits for commitments required by the U.S.

Environmental Protection Agency ("EPA") to blend biofuels into fuel products ("RINs Obligation").

Additionally, from a sourcing perspective, we often enter into purchase and sale contracts with vendors and customers or take physical or financial commodity positions for crude oil that may not be

Management's Discussion and Analysis

used immediately in production, but that may be used to manage the overall supply and availability of crude expected to ultimately be needed for production and/or to meet minimum requirements under strategic pipeline arrangements, and also to optimize and hedge availability risks associated with crude that we ultimately expect to use in production.

Such transactions are inherently based on certain assumptions and judgments made about the current and possible future availability of crude.

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

Finally, as part of our overall business strategy, we regularly evaluate opportunities to expand our portfolio of businesses and may at any time be discussing or negotiating a transaction that, if consummated, could have a material effect on our business, financial condition, liquidity or results of operations.

Management's Discussion and Analysis

Refinery Statistics

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

74,075 76,178

Products manufactured (average barrels per day):

Gasoline 40,031 40,801

Diesel/Jet 29,220 30,673

Petrochemicals, LPG, NGLs 2,794 2,798

Other 1,461 1,554

Total production 73,506 75,826

Throughput (average barrels per day):

Crude Oil 51,854 70,516

Other feedstocks 22,126 5,873

Total throughput 73,980 76,389

Total refining revenue ($ in millions) $ 1,432.2 $ 2,209.2

Cost of materials and other ($ in millions) 1,331.7 1,817.5

Total refining margin ($ in millions) $ 100.5 $ 391.7

Per barrel of refined product sales:

Tyler refining margin $ 3.71 $ 14.09

Operating expenses

Direct operating expenses $ 3.45 $ 3.91

(% based on amount received in period)

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

75,992 62,420

Products manufactured (average barrels per day):

Gasoline 35,480 27,712

Diesel 28,429 20,753

Petrochemicals, LPG, NGLs 1,772 872

Asphalt 6,687 5,533

Other 789 735

Total production 73,157 55,605

Throughput (average barrels per day):

Crude Oil 70,385 54,420

Other feedstocks 2,979 1,576

Total throughput 73,364 55,996

Total refining revenue ($ in millions) $ 1,788.8 $ 3,291.1

Cost of materials and other ($ in millions) 1,809.3 3,123.0

Total refining margin ($ in millions) $ (20.5) $ 168.1

Per barrel of refined product sales:

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Local Arkansas crude oil 17.8 % 23.1 %

Other 29.9 % 37.6 %

Management's Discussion and Analysis

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Year Ended December 31,

Year Ended December 31, 2018

Big Spring, TX Refinery

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

65,508 76,413

Products manufactured (average barrels per day):

Gasoline 32,340 36,352

Diesel/Jet 23,283 27,602

Petrochemicals, LPG, NGLs 3,183 3,746

Asphalt 1,685 1,870

Other 1,119 1,327

Total production 61,610 70,897

Throughput (average barrels per day):

61,428 72,039

Other feedstocks

Total throughput 62,506 71,586

Total refining revenue ($ in millions) $ 1,531.7 $ 2,366.5

Cost of materials and other ($ in millions) 1,497.2 1,984.6

Total refining margin ($ in millions) $ 34.5 $ 381.9

Per barrel of refined product sales:

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Operating expenses

$ 4.33 $ 4.35

(% based on amount received in period)

WTI crude oil

67.0 % 75.5 %

WTS crude oil

33.0 % 24.5 %

Krotz Springs, LA Refinery

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

61,302 70,511

Products manufactured (average barrels per day):

20,615 35,026

20,422 28,049

Petrochemicals, LPG, NGLs

Total production

57,190 68,879

Throughput (average barrels per day):

53,875 67,943

Other feedstocks

Total throughput

58,001 67,577

Total refining revenue ($ in millions) $ 1,266.6 $ 2,175.7

Cost of materials and other ($ in millions) 1,296.3 1,914.2

Total refining margin ($ in millions) $ (29.7) $ 261.5

Per barrel of sales:

Krotz Springs refining margin

$ (1.32) $ 10.16

Operating expenses

$ 3.97 $ 4.46

(% based on amount received in period)

70.1 % 72.0 %

Gulf Coast Sweet Crude

29.1 % 28.0 %

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

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Brent crude oil (per barrel) $ 43.24 $ 64.14

Gulf Coast 5-3-2 crack spread (per barrel) - utilizing HSD $ 5.87 $ 13.78

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

$ 8.18 $ 15.77

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

$ 8.70 $ 16.71

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

$ 4.65 $ 9.90

Gulf Coast Unleaded Gasoline (per gallon) $ 1.09 $ 1.63

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Natural gas (per MMBTU) (2)

$ 2.13 $ 2.53

(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.

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Gulf Coast Pipeline No.

2 heating oil (high sulfur diesel).

2 heating oil (ultra low sulfur diesel).

For our Big Spring refinery, we compare our $1.06 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.

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The Krotz Springs refinery’s crude oil input is primarily comprised of LLS and WTI Midland.

The Big Spring and Krotz Springs refineries were acquired July 1, 2017 as part of the Delek/Alon Merger, so Gulf Coast 3-2-1 and 2-1-1 crack spreads, LLS and WTS statistics are presented only for the period Delek owned these refineries.

(2) One million British thermal units ("MMBTU").

Management's Discussion and Analysis

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Gulf Coast gasoline of 33.1%, ULSD of 36.6%, and HSD of 40.2%;

decreases in sales volume of refined product totaling 9.0 million barrels due to decreases in sales volumes across all four refineries primarily resulting from unit outages and planned downtime, offset by a 9.6 million barrel increase in purchased product sales across all four refineries primarily to compensate for production shortfalls.

• decreases in sales volume of refined product totaling 0.8 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 3.9 million barrel decrease in purchased product sales due to decreased demand.

Net revenues included sales to our retail segment of $220.0 million and $379.6 million, sales to our logistics segment of $203.8 million and $278.3 million and sales to our other segment of $30.8 million and $44.7 million for the years ended December 31, 2020 and 2019, respectively.

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This decrease was primarily driven by the following:

a decrease in refined product sales volume across all refineries;

• a decrease in the cost of WTI Cushing crude oil from an average of $56.99 per barrel for 2019 to an average of $39.89 during 2020;

• a decrease in the cost of WTI Midland crude oil, from an average of $56.31 per barrel for 2019 to an average of $40.02 during 2020.

the net reversal benefit (expense) of $52.3 million related to inventory valuation reserves recognized during 2019 compared to $(51.3) million recognized during 2018 ;

the reenactment of the BTC in December 2019 for the 2018 and 2019 periods which resulted in a benefit of $78.0 million during 2019 .

These decreases were partially offset by the following:

a prior period benefit of approximately $115.5 million related to a combination of the 2017 RIN Waivers and a biodiesel tax credit recognized during the year ended December 31, 2018 , whereas 2018 RIN Waivers provided a benefit of $20.7 million the same period of 2019 .

• a prior period benefit of $77.6 million due to the reenactment of the BTC in December 2019 for the 2018 and 2019 periods, of which $31.1 million related to the first three quarters of 2019 blending activities and $36.0 million related to 2018 blending activities;

• a prior period benefit of approximately $20.7 million related to the 2018 RIN Waivers recognized during the year ended December 31, 2019, whereas there was no benefit for the same period of 2020;

• the (expense) benefit of $(29.4) million related to the change in pre-tax inventory valuation recognized during the year ended December 31, 2020 compared to $52.2 million recognized during the twelve year ended December 31, 2019;

• a decrease in hedging gains to a loss of $68.2 million recognized during the year ended December 31, 2020 from a gain of $32.6 million recognized during the year ended December 31, 2019.

Management's Discussion and Analysis

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 fees were $218.0 million and $200.4 million during the years ended December 31, 2019 and 2018 , respectively.

These costs and fees were $339.1 million and $218.0 million during the years ended December 31, 2020 and 2019, respectively.

We eliminate these intercompany fees in consolidation.

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• a narrowing of the discount between WTI Midland crude oil compared to WTI Cushing where, during the year ended December 31, 2020, the average WTI Midland crude oil differential to WTI Cushing crude oil was $(0.13) per barrel compared to $0.68 during the year ended December 31, 2019;

a prior period benefit of approximately $115.5 million related to a combination of the 2017 RIN Waivers and a biodiesel tax credit recognized during the year ended 2018 , whereas 2018 RIN Waivers provided a benefit of $20.7 million the same period of 2019 .

These decreases were partially offset by the following:

a 4.3% improvement in the 5-3-2 crack spread (the primary measure for the Tyler refinery and El Dorado refinery);

a 0.5% improvement in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery);

a 3.3% improvement in the average Gulf Coast 2-1-1 crack spread (the primary measure for the Krotz Springs refinery);

the net reversal benefit (expense) of $52.3 million related to inventory valuation reserves recognized during 2019 compared to $(51.3) million recognized during 2018 ;

the $78.0 million benefit attributable to the BTC reenactment;

the benefit attributable to the decrease in RIN prices.

• a narrowing of the discount between WTI Cushing crude oil compared to Brent where, during the year ended December 31, 2020, the average WTI Cushing crude oil differential to Brent crude oil was $3.54 per barrel compared to $7.13 during the year ended December 31, 2019;

• a 48.1% decline in the 5-3-2 crack spread (the primary measure for the Tyler refinery and El Dorado refinery), a 47.9% decline in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery), and a 53.0% 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 $68.2 million recognized during the year ended December 31, 2020 from a gain of $32.6 million recognized during the year ended December 31, 2019;

• a decrease in reversal benefit of inventory valuation reserve during year ended December 31, 2020 compared to the prior year period.

Management's Discussion and Analysis

Operating Expenses

Operating expenses increased $27.0 million , or 5.8% , in the year ended December 31, 2019 , compared to year ended December 31, 2018 .

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

an overall net increase of $18.1 million in outside services costs across the Tyler, Big Spring and Krotz Springs refineries primarily related to various unit outages and project studies;

an increase in employee related costs of $7.9 million across all four refineries;

a $16.0 million reduction of expenses in 2018 attributed to recoveries received from the settlement of disputed indemnification matters related to environmental obligations and asset retirement obligations at the Bakersfield refinery;

an offsetting decrease of $10.4 million in variable expenses, primarily due to reduced production;

offsetting reductions in repairs and maintenance expense at the El Dorado, Krotz Springs and Big Spring refineries.

Operating expenses decreased $89.7 million, or 18.2%, in the year ended December 31, 2020, compared to year ended December 31, 2019.

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

• decrease in contract services and inspection costs associated with cost reduction measures taken in 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;

• decrease in employee related expenses due to deferrals of projects and elimination of incentive bonus;

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

Management's Discussion and Analysis

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Contribution margin decreased by $1,108.4 million, or a 14.5% decline in contribution margin percentage, for the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily driven by the following:

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

a narrowing of the discount between WTI Midland and WTI Cushing compared to the prior-year period;

increase in operating expenses across all refineries;

These decreases were partially offset by the following:

an overall improvement in crack spreads:

a 3.3% improvement in the average Gulf Coast 2-1-1 crack spread (the primary measure for the Krotz Springs refinery), a 4.3% improvement in the 5-3-2 crack spread (the primary measure for the Tyler and El Dorado refineries) and a 0.5% improvement in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery);

the net reversal benefit (expense) of $52.3 million related to inventory valuation reserves recognized during 2019 compared to $(51.3) million recognized during 2018 ;

the $78.0 million benefit attributable to BTC reenactment;

the benefit attributable to the decrease in RIN prices.

• 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;

• a decrease in reversal benefit related to inventory valuation reserves recognized during the year ended December 31, 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.

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

Management's Discussion and Analysis

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Year Ended December 31,

Net revenues $ 563.4 584.0

Cost of materials and other 269.1 336.5

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Contribution margin

$ 238.1 $ 173.4

Operating Information:

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

71,182 74,206

Big Spring wholesale marketing throughputs (average bpd) 76,345 82,695

West Texas wholesale marketing throughputs (average bpd)

11,264 11,075

West Texas wholesale marketing margin per barrel

$ 2.37 $ 4.44

Terminalling throughputs (average bpd) (2)

147,251 160,075

Throughputs (average bpd):

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Crude pipelines (non-gathered)

74,179 49,485

Refined products pipelines to Enterprise Systems

53,702 37,716

SALA Gathering System

13,466 15,325

East Texas Crude Logistics System

15,960 19,927

Big Spring Gathering System (3)

Plains Connection System (3)

(1) Excludes jet fuel and petroleum coke.

(2) Throughputs for the year ended December 31, 2018 are for the 306 days we marketed certain finished products produced at or sold from the Big Spring refinery following execution of the Big Spring Marketing Agreement, effective March 1, 2018, as defined in Note 6 to our accompanying consolidated financial statements.

(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 year ended December 31, 2018 for the Big Spring terminal are for 306 days we operated the terminal following its acquisition effective March 1, 2018.

Barrels per day are calculated for only the days we operated each terminal.

Total throughput barrels for the year ended December 31, 2018 was 56.6 million barrels, which averaged 155,193 bpd per the period.

(3) Throughputs for the Big Spring Gathering System and the Plains Connection System are for the approximately 275 days we owned the assets following the Big Spring Gathering Assets Acquisition effective March 31, 2020.

Management's Discussion and Analysis

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Net revenues decreased by $20.6 million, or 3.5%, in the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily driven by the following:

decreases in the average volumes sold and in the average sales prices per gallon of gasoline and diesel in our West Texas marketing operations.

the average volumes of gasoline and diesel sold in 2019 and 2018 decreased by 14.3 million gallons and 21.8 million gallons, respectively.

the average sales prices per gallon of gasoline and diesel sold in 2019 and 2018 decreased by $0.14 per gallon and $0.22 per gallon, respectively.

Such decreases were partially offset by the following events:

increased revenues associated with the assets we acquired in the Big Spring Logistic Assets Acquisition, which we owned for the entirety of the year ended December 31, 2019 compared to ten months during the year ended December 31, 2018 ;

increased revenues associated with our Paline Pipeline as a result of increased rates and a change in the fee structure from the year ended December 31, 2018 , during which the capacity of the Paline Pipeline was contracted to separate parties for a monthly fee, compared to the year ended December 31, 2019 , during which the pipeline was subject to a FERC tariff;

increased revenues associated with the gathering assets as a result of increased throughput due to diversification of market locations during the year ended December 31, 2019 compared to the year ended December 31, 2018 ;

increased revenues associated with our trucking assets.

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

◦ the average volumes of gasoline sold increased by 12.6 million gallons, offset by 8.1 million decrease of diesel gallons sold.

◦ the average sales prices per gallon of gasoline and diesel sold decreased by $0.49 per gallon and $0.71 per gallon, respectively.

Such decreases were partially offset by the following:

• 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 6 of the consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K, for additional information.

Net revenues included sales to our refining segment of $377.7 million and $254.9 million for the years ended December 31, 2020 and 2019, respectively, and sales to our other segment of $2.1 million and $6.1 million for the years ended December 31, 2020 and 2019, respectively.

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This decrease was primarily driven by the following:

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

the average volumes of gasoline and diesel sold in 2019 and 2018 decreased by 14.3 million gallons and 21.8 million gallons, respectively.

the average cost per gallon of gasoline and diesel sold in 2019 and 2018 decreased by $0.15 per gallon and $0.19 per gallon, respectively.

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

◦ the average volumes of gasoline sold increased by 12.6 million gallons, partially offset by a 8.1 million decrease of diesel gallons sold.

◦ the average cost per gallon of gasoline and diesel sold decreased by $0.43 per gallon and $0.66 per gallon, respectively.

Our logistics segment purchased product from our refining segment of $203.8 million and $278.3 million for the years ended December 31, 2020 and 2019, respectively.

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Operating Expenses

Operating expenses increased by $15.4 million , or 26.2% , in the year ended December 31, 2019 compared to the year ended December 31, 2018 , primarily driven by the following:

costs in the amount of $7.1 million associated with the clean-up of a finished product release involving one of our pipelines that occurred in October 2019 near Sulphur Springs, Texas;

higher operating costs associated with allocated contract services pertaining to certain of our assets;

higher employee costs allocated to us as a result of an increase in allocated employee headcount in various operational groups as Delek Logistics continues to experience growth.

These increases were partially offset by:

decreases in variable expenses such as utilities, maintenance and material costs.

Operating expenses decreased by $17.9 million, or 24.2%, in the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily driven by the following:

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

• lower operating costs associated with allocated contract services pertaining to certain of our assets;

• decreases in variable expenses such as utilities, maintenance and materials costs due to lower production.

Contribution Margin

Contribution margin increased by $64.7 million, or 37.3%, in the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily driven by the following:

increases in revenue generated under the agreements executed in connection with the Big Spring Logistic Assets Acquisition;

increase in revenue associated with the gathering assets.

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

• decreases in operating expenses.

Such increases were partially offset by the following:

higher operating expenses;

decreases in the volumes combined with a $1.13 decrease in gross margin per barrel of gasoline and diesel sold in our West Texas marketing operations.

• decreases in gross margin per barrel sold of $2.07 in our West Texas marketing operations.

Management's Discussion and Analysis

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Year Ended December 31,

Year Ended December 31, 2018

Net revenues $ 681.7 838.0

Cost of materials and other 523.6 684.7

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Year Ended December 31,

Year Ended December 31, 2018

Number of stores (end of period) 253 252

Average number of stores 253 266

Average number of fuel stores 248 247

Retail fuel sales $ 357.9 $ 524.9

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Retail fuel margin ($ per gallon) (1)

Merchandise sales

Merchandise sales per average number of stores

$ 0.347 $ 0.276

Merchandise sales (in millions) $ 323.8 $ 313.1

Merchandise sales per average number of stores (in millions) $ 1.3 $ 1.2

Merchandise margin % 31.0 % 30.8 %

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The retail fuel margin per gallon calculation is derived by dividing retail fuel margin by the total retail fuel gallons sold for the period.

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

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

Management's Discussion and Analysis

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• total fuel sales were $357.9 million for the year ended December 31, 2020 compared to $524.9 million for 2019, attributable to the following:

$22.8 million decrease related to reduction in number of stores period over period;

◦ a decrease in total retail fuel gallons sold of 176,924 thousand gallons during 2020 compared to 214,094 thousand gallons in 2019, primarily attributable to a same-store decline in fuel volumes of (17.3)%, primarily due to demand slowdown as a result of the COVID-19 Pandemic;

◦ a $0.43 decrease in average price charged per gallon;

a slight decrease in total retail fuel gallons sold of 214,094 thousand gallons during 2019 compared to 217,118 thousand gallons in 2018 , attributable to a decrease in volumes associated with the reduction in average number of stores period over period offset by same-store sales growth in fuel volumes of 2.9% .

merchandise sales were $313.1 million for the year ended December 31, 2019 compared to $339.0 million for 2018 primarily driven by the following:

◦ $9.8 million decrease related to reduction in number of stores period over period;

a same-store sales decrease of 1.0% .

• merchandise sales were $323.8 million for the year ended December 31, 2020 compared to $313.1 million for 2019 primarily driven by the following:

◦ a same-store sales increase of 6.2% due to strong sales growth for key categories such as beer, cigarettes and packaged beverages, partially offset by a $10.8 million decrease related to reduction in number of stores period over period.

Management's Discussion and Analysis

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Cost of materials and other for the retail segment decreased by $161.1 million, or 23.5%, for the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily driven by the following:

$39.4 million decrease due to reduction in number of stores period over period;

a decrease in average cost per gallon of $0.21 or 9.0% applied to fuel sales volumes that decreased slightly period over period.

• a decrease in average cost per gallon of $0.50 or 23.0% applied to fuel sales volumes that decreased period over period;

• a $16.3 million decrease due to reduction in number of stores period over period.

Our retail segment purchased finished product from our refining segment of $220.0 million and $379.6 million for the years ended December 31, 2020 and 2019, respectively.

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Operating expenses for the retail segment decreased by $4.3 million, or 4.5%, for the year ended December 31, 2020 compared to the year ended December 31, 2019.

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

This decrease is primarily attributable to a decrease in operating costs associated with 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 decreased by $0.4 million , a 0.7% decline in contribution margin percentage, for the year ended December 31, 2019 compared to the year ended December 31, 2018 , primarily driven by a reduction in merchandise margin, partially offset by a $0.037 per gallon improvement in the retail fuel margin.

Contribution margin for the retail segment increased by $9.1 million, a 15.6% increase in contribution margin percentage, for the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily driven by a $0.071 per gallon improvement in the retail fuel margin and a 0.2% increase in merchandise margin.

Management's Discussion and Analysis

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At December 31, 2020 our total liquidity amounted to $1.6 billion comprised of $746.8 million in unused credit commitments under the Delek Revolving Credit Facility, $103.4 million in unused credit commitments under the DKL Credit Facility and $787.5 million in cash and cash equivalents.

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

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

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

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.

In addition we have historically been able to source funding at terms that reflect market conditions, our financial position and our credit ratings.

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However, there can be no assurances regarding the availability of any future debt or equity financings or whether such financings can be made available on terms that are acceptable to us;

We believe we have sufficient financial resources from the above sources to meet our funding requirements in the next 12 months, including working capital requirements, minimum quarterly cash distributions and capital expenditures.

At times, we may consider utilizing other financing agreements including entering into Joint Venture agreements.

any execution of such financing activities will be dependent on the contemporaneous availability of functioning debt or equity markets.

Additionally, new debt financing activities will be subject to the satisfaction of any debt incurrence limitation covenants in our existing financing agreements.

Our debt limitation covenants in our existing financing documents are usual and customary for credit agreements of our type and reflective of market conditions at the time of their execution.

Additionally, our ability to satisfy working capital requirements, to service our debt obligations, to fund planned capital expenditures, or to pay dividends will depend upon future operating performance, which will be affected by prevailing economic conditions in the oil and gas industry and other financial and business factors, including the current COVID-19 Pandemic and the impact on demand and commodity prices as well as crack spreads, some of which are beyond our control.

During 2020 and through the date of this Annual Report, the COVID-19 Pandemic has had a significant negative impact on economic conditions in the U.S., and a particularly severe impact on the oil and gas industry because of the significant impact the Pandemic has had on motor and air travel.

As previously discussed at length in the 'Executive Summary and Strategic Overview' Section of Management's Discussion and Analysis, we have identified several uncertainties and related risks associated with the current and potential future effects of the Pandemic, including increased uncertainty and risk associated with our ability to manage liquidity and capital resources.

As a result, and while it's always a critical area of focus, we have dedicated significant efforts throughout 2020 to monitoring and evaluating the evolving uncertainties around liquidity and capital resources and implementing measures and plans to mitigate and manage the associated risk.

Here are some of our most significant areas of focus:

• In early 2020, as the economic impact of the Pandemic became evident, we reviewed our capital expenditure planning and forecast and suspended the majority of our non-critical growth capital projects during 2020 as well as made strategic decisions to abandon certain capital assets/projects that may no longer fit our objectives.

Instead, we focused on required maintenance and regulatory projects as well as strategically-timed turnaround activities.

As a result, we were able to reduce our capital expenditures to $239.6 million during the year ended December 31, 2020, compared to our initial full-year forecast included in our December 31, 2019 Annual Report on Form 10-K of $325.7 million;

• The temporary suspension of growth and non-essential projects (particularly in Refining) provided us with the opportunity to shift our focus to process improvement initiatives, cost control measures, and opportunities for innovation, which has improved our ability to control costs in terms of operating expenses and the aforementioned critical capital projects, particularly during the fourth quarter of 2020 (and as evident in our results of operations and cash flows from investing activities as presented in our unaudited consolidated financial statements for the three months ended, December 31, 2020, which is presented in our earnings release included in Ex.

99.1 to our Form 8-K filed with the SEC on February 24, 2021), all of which also favorably impact our cash position and provide a longer term foundation for increased operational effectiveness;

• Throughout 2020, we continued to monitor credit and liquidity of our key customers, which already go through a stringent and ongoing credit evaluation as part of our internal controls, and we have been able to successfully maintain our collection efforts without significant losses or write-offs.

As part of this effort, we also continue to monitor our customers, as well as vendors, for any areas of concentration that could put us at undue risk, and have experienced no significant deterioration in credit or concentration risks that warrant disclosure;

• We continued executing on our strategy of divesting of non-strategic or underperforming assets.

Where we made significant divestitures of underperforming stores in Retail during 2019, in 2020 we focused on executing a transaction to divest of our remaining non-operating refinery located in Bakersfield, California.

As a result, on May 7, 2020, we sold our equity interests in our non-operating refinery located in Bakersfield to a subsidiary of Global Clean Energy Holdings, Inc.

(“GCE”) for total cash consideration of $40.0 million (and resulting in a realized gain on the sale of $56.8 million) and which was incurring non-operating losses to maintain basic regulatory requirements.

As a result, not only did the sale produce significant cash proceeds, its elimination was immediately cash accretive.

See further discussion in Note 4 of our consolidated financial statements included in Item 8.

Management's Discussion and Analysis

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K;

• To mitigate some of the risk inherent in prices, we utilized (and continue to utilize) various derivative financial instruments to protect a portion of our commodity exposure against pricing risk.

In many cases, we hedge our production in a manner that systematically places hedges for several quarters in advance, allowing us to maintain a disciplined risk management program as it relates to commodity price volatility.

We supplement the systematic hedging program with discretionary hedges that take advantage of favorable market conditions.

These activities included certain fixed price purchase contracts and crack spread hedges executed throughout the year to ensure that we were not overly exposed to the unusually high market volatility which could impact cash requirements at settlement.

However, many of these activities also require margin deposits that can fluctuate significantly in a volatile market, much of which cannot be anticipated;

• We continue to actively monitor our maintenance and incurrence covenants under our credit facilities and debt instruments, and have implemented enhancements in our cash forecasting and modeling that allow us to better anticipate potential issues, in many cases, before they occur.

We believe that our enhanced forecasting efforts and processes will better position us to preemptively work toward amendments with lenders as needed, though it is possible that amendments may not be granted for reasons that may or may not be known to us;

• We have examined our discretionary uses of cash, including our stock repurchase activities and dividend distribution payments, both of which are designed to provide a return on shareholder value in times of favorable economic conditions and operating results, but which can actually weaken shareholder value in times of economic distress and downward pressure on our operating results if such activities diminish our ability to appropriately manage and mitigate the heightened risk.

As a result of this examination, beginning in the second quarter 2020, we have temporarily suspended the repurchase of shares.

Additionally, on November 5, 2020, we announced that we have elected to suspend dividends indefinitely beginning in the fourth quarter of 2020.

Both of these decisions have the immediate benefit of conserving capital.

Depending on market conditions, we may make the decision to resume share repurchases could which may take priority over future dividends or growth capital;

• Finally, we are always evaluating our existing sources of capital and considering the feasibility and potential advantages of strategic transactions and capital markets opportunities that could expand our sources of liquidity and strengthen our flexibility, while balancing the comparative cost of capital, the incremental leverage risk, as well as the potential transactional risk on our core business and infrastructure.

We are pleased that, despite the challenging environment, we have continued to successfully manage our liquidity and available sources of capital during 2020 through strategic transactions such as the following:

◦ The Delek Logistics IDR Simplification, which resulted in the receipt of newly issued registered common limited partner units that we may sell in the market, when we determine that such sale meets all of our criteria for pursuing such a divestiture, including (but not limited to):

▪ that we have evaluated the impact of a dilution of our ownership interest in Delek Logistics' common limited partner units in terms of the impact on distributions to Delek and on Delek's earnings per share and believe the liquidity, potential shareholder value and/or strategic benefits/considerations to be sufficient to warrant the transaction;

▪ that there is a market for the number of units we are considering divesting;

▪ that the cost of capital associated with the sale transaction (i.e., in terms of the fees and discounts) is reasonable and not unduly cost-prohibitive, given the other factors.

◦ By monetizing assets (including financial assets such as RINs inventories), where the cost of capital is not cost-prohibitive compared to the liquidity considerations, through product financing arrangements;

◦ By renegotiating and extending financing arrangements and taking advantage of expansion opportunities under our existing credit facilities, where appropriate.

The two most significant of these transactions executed during 2020 were as follows:

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

Aron which extended our dedicated financing for the inventory covered through at least December 2022, and updated certain specific market-indexed provisions to improve our ability to manage our exposure to commodity price volatility during the term of the Agreements.

See further discussion in Note 10 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K;

▪ On May 19, 2020, we amended the Term Loan Credit Facility agreement (as defined in Note 11 of our consolidated financial statements included in Item 8.

Management's Discussion and Analysis

As a result of these efforts, and despite the devastating economic effects of the Pandemic on our industry, we have maintained a strong cash position with capital resources flexibility that positions us well as we look forward to the expected economic recovery from the Pandemic, where crack spread forecasts and forward curves indicate the market's expectation for significant recovery in 2022 and stabilization by 2023.

We believe we have sufficient financial resources from the above sources to meet our funding requirements in the next 12 months, including working capital requirements, quarterly cash distributions for Delek Logistics public unitholders, and planned capital expenditures.

However, if market conditions were to change, for instance due to another significant decline in oil prices or crack spreads and/or significant worsening of conditions/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 December 31, 2020, we believe 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 further discussion in Note 11 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K).

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 December 31, 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 based covenants, in the event that our activities would warrant testing these covenants.

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, and for Delek Logistics, under its Delek Logistics Credit Facility (see further discussion in Note 11 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K);

the allowance to incur an additional $200 million of secured debt under the Wells Fargo Term Loan Credit Facility(see further discussion in Note 11 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K);

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 or joint ventures, as otherwise contemplated and allowed under our incurrence covenants.

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

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Financing activities 306.4 (7.9)

Net (decrease) increase

Net decrease $ (167.8) $ (124.0)

Cash Flows from Operating Activities

Net cash provided by operating activities was $575.2 million for the year ended December 31, 2019 , compared to $560.3 million for the comparable period of 2018 .

Net cash provided by operating activities for 2018 was net of cash used by discontinued operations of $30.1 million .

Net cash provided by operating activities from continuing operations in 2018 was $590.4 million resulting in a $15.2 million decrease when compared to net cash provided by operating activities from continuing operations for 2019 .

Cash receipts from customers and cash payments to suppliers and for salaries decreased resulting in a net $28.2 million decrease in cash from operating activities mainly due to a decline in the volume of refined product sold.

Additionally, cash paid for debt interest increased by $6.1 million.

This decrease was partially offset by a $9.7 million decrease in cash paid for taxes and a $15.1 million increase in cash received for dividends.

Net cash used in operating activities was $282.9 million for the year ended December 31, 2020, compared to cash provided of $575.2 million for the comparable period of 2019.

Cash receipts from customers and cash payments to suppliers and for salaries decreased resulting in a net $960.5 million decrease in cash from operating activities mainly due to a decline in the prices and volume of refined product sold.

This decrease was partially offset by a $9.3 million increase in cash received for dividends, a $90.6 million decrease in cash paid for taxes and a $2.5 million decrease in cash paid for debt interest.

Cash Flows from Investing Activities

Net cash used in investing activities was $191.3 million for the year ended December 31, 2020, compared to $691.3 million in the comparable period of 2019.

The increase in cash flows used in investing activities was primarily due to an increase in cash purchases of property, plant and equipment expenditures related to turnaround activities, which increased from $322.0 million in 2018 , to $413.0 million in 2019 , and a $267.2 million increase in equity method investment contributions in the current year, $124.7 million of which related to our obtaining a 33% membership interest in Red River in May 2019 and $126.7 million of which related to our obtaining a 15% interest in the WWP in July 2019.

Also contributing to this increase was the sale of asphalt assets and discontinued operations in 2018 , for which we received proceeds of $110.8 million and $55.5 million , respectively.

Cash Flows from Financing Activities

Net cash used in financing activities was $7.9 million for the year ended December 31, 2019 , compared to $297.6 million in the comparable 2018 period.

Contributing to this decrease was a decrease in repurchase of common stock to $178.1 million for the year ended December 31, 2019 compared to $365.3 million in the comparable 2018 period, a decrease in repayments of product financing arrangements to $22.2 million for the

Equity method investment contributions decreased $236.2 million primarily due to our initial investments in and contributions to the Red River Pipeline Joint Venture and WWP Joint Venture in 2019 for $128.6 million and $126.7 million, respectively.

During the year ended December 31, 2020, we contributed $12.2 million related to our Red River Pipeline Joint Venture and $18.9 million related to our interest in WWP and WWP Project Financing JV.

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 year ended December 31, 2020.

Also contributing to the decrease was cash purchases of property, plant and equipment which

Management's Discussion and Analysis

year ended December 31, 2019 compared to $72.4 million in the comparable 2018 period, an increase in term loan net proceeds of $399.7 million for the year ended December 31, 2019 compared to term loan net payments of $135.7 million in the comparable 2018 period, as well as proceeds from product financing arrangements of $40.8 million during the year ended December 31, 2019 ;

there were no such proceeds in the comparable 2018 period.

The decrease in net cash used by financing activities was partially offset by the decrease in net proceeds received during 2019 from long-term revolvers due to completion of the Refinancing transaction as well as the additional borrowings used to fund the Big Spring Logistic Assets Acquisition during the year ended December 31, 2018 .

We made net payments on long-term revolvers of $118.3 million during 2019 compared to proceeds received of $444.8 million in 2018 .

Debt Overview

As of December 31, 2019 , we had total indebtedness of approximately $2,067.1 million comprised of $1,069.5 million under the Term Loan Credit Facility, $588.4 million under the Delek Logistics Credit Facility, $244.7 million in Delek Logistics Notes, $30.0 million under the Revolving Credit Facility, $50.0 million under the Reliant Revolver, $45.0 million in Promissory Notes and the $39.5 million Hapoalim Term Loan.

decreased from $413.0 million in 2019, to $269.4 million in 2020, partially attributable to delaying non-essential projects in light of the COVID-19 Pandemic.

Cash Flows from Financing Activities

Net cash provided by financing activities was $306.4 million for the year ended December 31, 2020, compared to cash used of $7.9 million in the comparable 2019 period.

This increase in cash provided was predominantly due to net proceeds received from long-term revolvers of $128.2 million during the year ended December 31, 2020, compared to net payments of $118.3 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 year ended December 31, 2020 compared to $178.1 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 $169.1 million for the year ended December 31, 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 $147.1 million during the year ended December 31, 2020, compared to $399.7 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 December 31, 2020, our total cash and cash equivalents were $787.5 million and we had total long-term indebtedness of approximately $2,348.4 million.

The total long-term indebtedness is net of deferred financing costs and debt discount of $6.4 million and $24.4 million, respectively.

Additionally, we had letters of credit issued of approximately $253.2 million.

Total unused credit commitments or borrowing base availability, as applicable, under our revolving credit facilities was approximately $850.2 million.

The increase of $281.3 million compared to the balance at December 31, 2019 resulted primarily from the additional borrowings under the Term Loan Credit Facility and the Delek Logistics Credit Facility in 2020.

On March 30, 2018, Delek entered into a term loan credit agreement with Wells Fargo Bank, National Association, as administrative agent, and certain subsidiaries of Delek as guarantors, providing for a senior secured term loan facility in an amount of $700.0 million (the "Term Loan Credit Facility") which was amended on May 22, 2019 to borrow $250.0 million in incremental term loans at an original issue discount of 0.75% , and again on November 12, 2019 to borrow an additional $150.0 million in incremental term loans at an original issue discount of 1.21% .

In addition to the Term Loan Credit Facility, on March 30, 2018 we also entered into a second amended and restated credit agreement with Wells Fargo Bank, National Association, as administrative agent and certain subsidiaries of Delek as guarantors, providing for a senior secured asset-based revolving credit facility with commitments of $1.0 billion (the "Revolving Credit Facility" and, together with the Term Loan Credit Facility, the "New Credit Facilities").

On December 18, 2019, we amended the Revolving Credit Facility to increase the letter of credit sub-limit under the facility from $300.0 million to $400.0 million , including letters of credit denominated in Canadian dollars of up to $10.0 million .

The Revolving Credit Facility will mature and the commitments thereunder will terminate on March 30, 2023.

The Term Loan Credit Facility matures on March 30, 2025 and requires scheduled quarterly principal payments on the last business day of the applicable quarter which, as of December 31, 2019 , were $2.75 million .

Additionally, the Term Loan Credit Facility requires prepayments by Delek with the net cash proceeds from certain debt incurrences, asset dispositions and insurance or condemnation events with respect to Delek’s assets, subject to certain exceptions, thresholds and reinvestment rights.

The Term Loan Credit Facility also requires annual prepayments with a variable percentage of Delek’s excess cash flow, ranging from 50% to 0% depending on Delek’s consolidated fiscal year end secured net leverage ratio.

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

The obligations of the borrowers under the New Credit Facilities are guaranteed by Delek and each of its direct and indirect, existing and future, wholly-owned domestic subsidiaries, subject to customary exceptions and limitations, and excluding Delek Logistics Partners, LP, Delek Logistics GP, LLC, and each subsidiary of the foregoing (collectively, the "MLP Subsidiaries").

Borrowings under the New Credit Facilities are also guaranteed by DK Canada Energy ULC, a British Columbia unlimited liability company and a wholly-owned restricted subsidiary of Delek.

The Revolving Credit Facility is secured by a first priority lien over substantially all of Delek’s and each guarantor's receivables, inventory, RINs, instruments, intercompany loan receivables, deposit and securities accounts and related books and records and certain other personal property, subject to certain customary exceptions (the "Revolving Priority Collateral"), and a second priority lien over substantially all of Delek's and each guarantor's other assets, including all of the equity interests of any subsidiary held by Delek or any guarantor (other than equity interests in certain MLP Subsidiaries) subject to certain customary exceptions, but excluding real property (such real property and equity interests, the "Term Priority Collateral").

The Term Loan Credit Facility is secured by a first priority lien on the Term Priority Collateral and a second priority lien on the Revolving Priority Collateral.

Certain excluded assets are not included in the Term Priority Collateral and the Revolving Priority Collateral.

At December 31, 2019 , the weighted average borrowing rate under the Revolving Credit Facility was 5.0% and was comprised entirely of a base rate borrowing and the principal amount outstanding thereunder was $30.0 million .

Additionally, there were letters of credit issued of approximately $309.8 million as of December 31, 2019 under the Revolving Credit Facility.

Unused credit commitments under the Revolving Credit Facility, as of December 31, 2019 , were approximately $660.2 million .

At December 31, 2019 , the weighted average borrowing rate under the Term Loan Credit Facility was approximately 4.05% comprised entirely of a LIBOR borrowing and the principal amount outstanding thereunder was $1,085.5 million .

As of December 31, 2019 , the effective interest rate related to the Term Loan Credit Facility was 4.37% .

On December 31, 2019, Delek entered into a term loan credit and guaranty agreement with BHI as the administrative agent.

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

The interest rate under the Agreement is equal to LIBOR plus a margin of 3.00% .

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

Proceeds may be used for general corporate purposes.

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

At December 31, 2019 , the weighted average borrowing rate under the term loan was approximately 4.80% comprised entirely of a LIBOR borrowing and the principal amount outstanding thereunder was $40.0 million .

As of December 31, 2019 , the effective interest rate related to the BHI Term Loan was 5.31% .

Management's Discussion and Analysis

In September 2018, Delek Logistics entered into a third amended and restated senior secured revolving credit agreement with Fifth Third as administrative agent (hereafter, the "Delek Logistics Credit Facility") with commitments of $850 million.

The obligations under the Delek Logistics Credit Facility are secured by first priority liens on substantially all of the Delek Logistics' and its subsidiaries' tangible and intangible assets.

Additionally, Delek Marketing & Supply, LLC ("Delek Marketing"), a subsidiary of Delek Holdings, continues to provide a limited guaranty of Delek Logistics' obligations under the Delek Logistics Credit Facility.

Delek Marketing's guaranty is (i) limited to an amount equal to the principal amount, plus unpaid and accrued interest, of a promissory note made by Delek Holdings in favor of Delek Marketing (the "Holdings Note") and (ii) secured by Delek Marketing's pledge of the Holdings Note to the lenders under the Delek Logistics Credit Facility.

As of December 31, 2019 , the principal amount of the Holdings Note was $102.0 million .

The Delek Logistics Credit Facility has a maturity date of September 28, 2023 and allows borrowings in either U.S.

dollars or Canadian dollars.

Borrowings denominated in U.S.

dollars bear interest at either the U.S.

dollar prime rate, plus an applicable margin, or LIBOR, plus an applicable margin, at the election of the borrowers.

Borrowings denominated in Canadian dollars bear interest at either a Canadian dollar prime rate, plus an applicable margin, or the Canadian Dealer Offered Rate, plus an applicable margin, at the election of the borrowers.

At December 31, 2019 , the weighted average interest rate for borrowings under the Delek Logistics Credit Facility was approximately 4.7% .

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

As of December 31, 2019 , this fee was 0.50% per year.

On May 23, 2017, Delek Logistics and Delek Logistics Finance Corp., a Delaware corporation and a wholly owned subsidiary of Delek Logistics (“Finance Corp.” and together with Delek Logistics, the “Issuers”), issued $250.0 million in aggregate principal amount of 6.75% senior notes due 2025 (the “2025 Notes”) at a discount.

The 2025 Notes are general unsecured senior obligations of the Issuers and rank equal in right of payme nt with all existing and future senior indebtedness of the Issuers, and senior in right of payment to any future subordinated indebtedness of the Issuers.

Interest on the 2025 Notes is payable semi-annually in arrears on each May 15 and November 15.

At any time prior to May 15, 2020, the Issuers may redeem up to 35% of the aggregate principal amount of the 2025 Notes with the net cash proceeds of one or more equity offerings by Delek Logistics at a redemption price of 106.750% of the redeemed principal amount, plus accrued and unpaid interest, if any, subject to certain conditions and limitations.

Prior to May 15, 2020, the Issuers may redeem all or part of the 2025 Notes, at a redemption price of the principal amount, plus accrued and unpaid interest, if any, plus a "make whole" premium, subject to certain conditions and limitations.

In addition, beginning on May 15, 2020, th e Issuers may, subject to certain conditions and limitations, redeem all or part of the 2025 Notes at a redemption price of 105.063% of the redeemed principal for the twelve-month period beginning on May 15, 2020, 103.375% for the twelve-month period beginning on May 15, 2021, 101.688% for the twelve-month period beginning on May 15, 2022 and 100% beginning on May 15, 2023 and thereafter, plus accrued and unpaid interest, if any.

In the event of a change of control, accompanied or followed by a ratings downgrade within a certain period of time, subject to certain conditions and limitations, the Issuers will be obligated to make an offer for the purchase of the 2025 Notes from holders at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest.

Delek has an unsecured revolving credit agreement with Reliant Bank (the "Reliant Bank Revolver").

On December 16, 2019, we amended the Reliant Bank Revolver to extend the maturity date from June 28, 2020 to June 30, 2022, reduce the fixed interest rate from 4.75% to 4.50% per annum and increase the revolver commitment amount from $30.0 million to $50.0 million .

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

We believe we were in compliance with our covenants in all debt facilities as of December 31, 2019 .

See Note 11 to our accompanying consolidated financial statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for a complete discussion of our third-party indebtedness.

As of December 31, 2020, our total long-term indebtedness consisted of the following:

• no aggregate principal amount under the Revolving Credit Facility, due on March 30, 2023, with average borrowing rate of 3.50%;

• an aggregate principal amount of $1,273.0 million under the Term Loan Credit Facility, due on March 30, 2025, with effective interest of 3.57%;

• an aggregate principal amount of $39.6 million in outstanding borrowings under the BHI Term Loan, due on December 31, 2022, with effective interest of 3.58%;

• an aggregate principal amount of $746.6 million under the Delek Logistics Credit Facility, due on September 28, 2023, with average borrowing rate of 2.44%;

• an aggregate principal amount of $250.0 million under the Delek Logistics Notes, due in 2025, with effective interest rate of 7.45%;

• an aggregate principal amount of $50.0 million under the Reliant Bank Revolver, due on June 30, 2022, with fixed interest rate of 4.50%;

• 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 11 to our accompanying consolidated financial statements in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for additional information about our separate debt and credit facilities.

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

Aron amounted to $347.7 million at December 31, 2020, $224.9 million of which is due on December 30, 2022, except that a portion (not to exceed $33.1 million) of this otherwise long-term component is subject to potential earlier payment under the Periodic Price Adjustment provision.

See Note 10 to our accompanying consolidated financial statements in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K, for additional information about our supply and offtake facilities.

We receive debt ratings from the major ratings agencies in the U.S.

In determining our debt ratings, the agencies consider a number of qualitative and quantitative items including, but not limited to, commodity pricing levels, our liquidity, asset quality, reserve mix, debt levels and seniorities, cost structure, planned asset sales and production growth opportunities.

There are no “rating triggers” in any of our contractual debt obligations that would accelerate scheduled maturities should our debt rating fall below a specified level.

However, a downgrade could adversely impact our interest rate on any credit facility implementations and the ability to economically access debt markets in the future.

Additionally, any rating downgrades may result in additional letters of credit or cash collateral being posted under certain contractual arrangements.

Management's Discussion and Analysis

Our credit ratings as of December 31, 2020 and 2019 are presented below:

Year Ended December 31,

S&P BB/Negative BB/Stable

Moody's Ba3/Stable Ba3/Stable

Delek Logistics

S&P BB-/Negative BB-/Stable

Moody's B1/Stable B1/Stable

Capital Spending

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

Our capital expenditures for the year ended December 31, 2019 were $428.1 million , of which approximately $266.6 million was spent in our refining segment, $9.9 million in our logistics segment, $20.5 million in our retail segment and $131.1 million at the holding company level.

Our capital expenditures for the year ended December 31, 2020 were $239.6 million, of which approximately $201.0 million was spent in our refining segment, $15.8 million in our logistics segment, $9.1 million in our retail segment and $13.7 million in corporate and other.

The following table summarizes our actual capital expenditures for 2020 and planned capital expenditures for 2021 by operating segment and major category (in millions):

Year Ended December 31,

2020 Forecast

2021 Forecast 2020 Actual

Sustaining maintenance, including turnaround activities

$ 92.2 $ 158.9

Regulatory 4.4 41.3

Discretionary projects 0.7 0.8

Refining segment total 97.3 201.0

Regulatory 9.0 1.9

Sustaining maintenance 4.9 1.5

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Logistics segment total 20.8 15.8

Regulatory 3.3 0.2

Sustaining maintenance — 2.4

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Retail segment total 5.7 9.1

Corporate and Other

Regulatory 1.8 0.4

Sustaining maintenance 15.0 1.2

Discretionary projects (1)(2)

Other total 26.7 13.7

Total capital spending $ 150.5 $ 239.6

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

(1) Excludes purchases of rights-of-way in the amount of $2.7 million in 2020.

The amount of our capital expenditure budget is subject to change due to unanticipated increases in the cost, scope and completion time for our capital projects and subject to the changes and uncertainties discussed under the 'Forward-Looking Statements' section of Item 7, Management Discussion and Analysis, of this Annual Report on Form 10-K.

For further information, please refer to our discussion in Item 1A, Risk Factors, of this Annual Report on Form 10-K.

Management Discussion and Analysis, of this Annual Report on Form 10-K.

For further information, please refer to our discussion in Item 1A.

Risk Factors, of this Annual Report on Form 10-K.

Management's Discussion and Analysis

Contractual Obligations and Commitments

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Payments Due by Period

1-3 Years 3-5 Years >5 Years Total

Long term debt and notes payable obligations

$ 33.4 $ 861.8 $ 1,484.0 $ — $ 2,379.2

77.9 145.1 72.4 — 295.4

Operating lease commitments (2)

216.6 407.5 277.0 214.4 1,115.5

Purchase commitments (3)

876.6 — — — 876.6

Product financing agreements (4)

198.0 — — — 198.0

Transportation agreements (5)

124.8 230.1 127.5 60.0 542.4

Aron supply and offtake obligations (6)

15.5 243.5 — — 259.0

Total $ 1,542.8 $ 1,888.0 $ 1,960.9 $ 274.4 $ 5,666.1

(1) Expected interest payments on debt outstanding at December 31, 2020.

Floating interest rate debt is calculated using December 31, 2020 rates.

For additional information, see Note 11 to the consolidated financial statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

For additional information, see Note 11 to the consolidated financial statements in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

(2) Amounts reflect future estimated lease payments under operating leases having remaining non-cancelable terms in excess of one year as of December 31, 2020.

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Excludes purchase commitments in buy-sell transactions which have matching notional amounts with the same counterparty and are generally net settled.

(4) Balances consist of obligations under RINs product financing arrangements, as described in the 'Environmental Credits and Related Regulatory Obligations' accounting policy included in Note 2 to the consolidated financial statements in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

(5) Balances consist of contractual obligations under agreements with third parties (not including Delek Logistics) for the transportation of crude oil to our refineries.

(6) Balances consists of contractual obligations under the J.

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

For additional information, see Note 10 to the consolidated financial statements in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Off-Balance Sheet Arrangements

9 unchanged sentences

Actual results may differ based on the accuracy of the information utilized and subsequent events, some over which we may have little or no control.

Evaluation of Variable Interest Entities ("VIEs")

Our consolidated financial statements include the financial statements of our subsidiaries and VIEs, of which we are the primary beneficiary.

We evaluate all legal entities in which we hold an ownership or other pecuniary interest to determine if the entity is a VIE.

Variable interests can be contractual, ownership or other pecuniary interests in an entity that change with changes in the fair value of the VIE’s assets.

If we are not the primary beneficiary, the general partner or another limited partner may consolidate the VIE, and we record the investment as an equity method investment.

Significant judgment is exercised in determining that a legal entity is a VIE and in evaluating whether we are the primary beneficiary in a VIE.

Generally, the primary beneficiary is the party that has both the power to direct the activities that most significantly impact the VIE’s economic performance and the right to receive benefits or obligation to absorb losses that could be potentially significant to the VIE.

We evaluate the entity’s need for continuing financial support;

the equity holder’s lack of a controlling financial interest;

and/or if an equity holder’s voting interests are disproportionate to its obligation to absorb expected losses or receive residual returns.

We evaluate our interests in a VIE to determine whether we are the primary beneficiary.

We use a primarily qualitative analysis to determine if we are deemed to have a controlling financial interest in the VIE, either on a standalone basis or as part of a related party group.

We continually monitor our interests in legal entities for changes in the design or activities of an entity and changes in our interests, including our status as the primary beneficiary to determine if the changes require us to revise our previous conclusions.

LIFO Inventory

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Our assessment did not result in impairment during the years ended December 31, 2020, 2019 or 2018.

Goodwill and Potential Impairment

Management's Discussion and Analysis

Goodwill in an acquisition represents the excess of the aggregate purchase price over the fair value of the identifiable net assets.

5 unchanged sentences

In assessing the recoverability of goodwill, assumptions are made with respect to future business conditions and estimated expected future cash flows to determine the fair value of a reporting unit.

We may consider inputs such as a market participant weighted average cost of capital ("WACC"), estimated growth rates for revenue, forecasted crack spreads, gross margin, capital expenditures, and long-term growth rate based on history and our best estimate of future forecasts, all of which are subject to significant judgment and estimates.

We may also corroborate the fair values of the reporting units using a multiple of expected future cash flows, such as those used by third-party analysts.

We may consider inputs such as a market participant weighted average cost of capital ("WACC"), forecasted crack spreads, gross margin, capital expenditures, and long-term growth rate based on historical information and our best estimate of future forecasts, all of which are subject to significant judgment and estimates.

We may also consider a market approach in determining or corroborating the fair values of the reporting units using a multiple of expected future cash flows, such as those used by third-party analysts.

The market approach involves significant judgment, including selection of an appropriate peer group, selection of valuation multiples, and determination of the appropriate weighting in our valuation model.

If these estimates and assumptions change in the future, due to factors such as a decline in general economic conditions, sustained decrease in the crack spreads, competitive pressures on sales and margins and other economic and industry factors beyond management's control, an impairment charge may be required.

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The crack spread is often unpredictable and may negatively impact our results of operations in ways that cannot be anticipated and that are beyond management's control.

Management's Discussion and Analysis

Our annual assessment of goodwill did not result in impairment during the years ended December 31, 2019 , 2018 or 2017 .

All reporting have fair values that are substantially in excess of its carrying values except for the Big Spring reporting unit.

This reporting unit consists primarily of our Big Spring Refinery and has a $528.0 million goodwill balance, for which the calculated excess fair value represented 11.9% of carrying value.

Its fair value is significantly driven by the WACC and the forecasted crack spreads.

As described above, both of these assumptions are often unpredictable and are beyond management's control.

We note an increase in more than 1% in the WACC may result in an impairment.

Therefore, any sustained adverse changes to these assumptions may result in a material impairment charge for a portion or all of the goodwill balance.

Details of remaining goodwill balances by segment are included in Note 18 to the consolidated financial statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

We may also elect to perform a qualitative impairment assessment of goodwill balances.

The qualitative assessment permits companies to assess whether it is more likely than not (i.e., a likelihood of greater than 50%) that the fair value of a reporting unit is less than its carrying amount.

If a company concludes that, based on the qualitative assessment, it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the company is required to perform the quantitative impairment test.

Alternatively, if a company concludes based on the qualitative assessment that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it has completed its goodwill impairment test and does not need to perform the quantitative impairment test.

We performed a qualitative assessment on the reporting units in our logistics segment for the years ended December 31, 2020, 2019 and 2018, which did not result in an impairment charge nor did our analysis reflect any reporting units at risk.

Our quantitative assessment of goodwill performed on the reporting units in our refining and retail segments during the fourth quarter of 2020, resulted in an impairment of $126.0 million during the year ended December 31, 2020, related to our Big Spring refinery and Krotz Springs refinery reporting units.

The impairment was predominantly the result of the continued uncertainty regarding the impact of the COVID-19 Pandemic, which impacted various components of our assessment, including the WACC.

The Pandemic has resulted in government-imposed temporary business closures and shelter-at-home directives.

This has 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.

As part of our assessment, the aggregate fair value of all reporting units have been reconciled to our market capitalization for reasonableness.

Each of the remaining reporting units have a fair value that is substantially in excess of its carrying value.

There was no impairment during the years ended December 31, 2019 and 2018.

Details of remaining goodwill balances by segment are included in Note 18 to the consolidated financial statements in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Environmental Liabilities

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We believe the estimates selected, in each instance, represent our best estimate of future outcomes, but the actual outcomes could differ from the estimates selected.

Management's Discussion and Analysis

Asset Retirement Obligations

10 unchanged sentences

New Accounting Pronouncements

See Note 2 to the consolidated financial statements in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for a discussion of new accounting pronouncements applicable to us.

Management's Discussion and Analysis

See Note 2 to the consolidated financial statements in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for a discussion of new accounting pronouncements applicable to us.

Non-GAAP Measures

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GAAP financial measures.

Non-GAAP Reconciliations

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

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Year Ended December 31,

2020 2019 2018

Net revenues $ 5,817.7 $ 8,798.5 $ 9,610.4

Cost of sales 6,346.5 8,154.9 8,904.6

Gross margin (528.8) 643.6 705.8

Add back (items included in cost of sales):

4 unchanged sentences

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-K

Item 7. Management’s Discussion and Analysis