What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-07 compared with 2020-11-09 · 339 added, 569 removed, 560 unchanged (62% of the section changed)

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Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is management’s analysis of our financial performance and of significant trends that may affect our future performance.

The MD&A should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and in the Annual Report on Form 10-K as filed with the Securities and Exchange Commission ("SEC") on February 28, 2020 (the "Annual Report on Form 10-K").

The MD&A should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and in the Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 1, 2021 (the "Annual Report on Form 10-K").

Those statements in the MD&A that are not historical in nature should be deemed forward-looking statements that are inherently uncertain.

Unless otherwise noted or the context requires otherwise, the terms "we," "our," "us," "Delek" and the "Company" are used in this report to refer to Delek and its consolidated subsidiaries for all periods presented.

Delek US Holdings, Inc.

is a registrant pursuant to the Securities Act of 1933, as amended ("Securities Act") and is listed on the New York Stock Exchange ("NYSE") under the ticker symbol "DK".

Unless otherwise noted or the context requires otherwise, the terms "we," "our," "us," "Delek" and the "Company" are used in this report to refer to Delek US Holdings, Inc.

and its consolidated subsidiaries for all periods presented.

You should read the following discussion of our financial condition and results of operations in conjunction with our historical condensed consolidated financial statements and notes thereto.

The Company announces material information to the public about the Company, its products and services and other matters through a variety of means, including filings with the Securities and Exchange Commission, press releases, public conference calls, the Company’s website ( www.delekus.com ), the investor relations section of its website ( ir.delekus.com ), the news section of its website ( www.delekus.com/news ), and/or social media, including its Twitter account ( @DelekUSHoldings ).

The Company announces material information to the public about the Company, its products and services and other matters through a variety of means, including filings with the SEC, press releases, public conference calls, the Company’s website ( www.delekus.com ), the investor relations section of its website ( ir.delekus.com ), the news section of its website ( www.delekus.com/news ), and/or social media, including its Twitter account ( @DelekUSHoldings ).

The Company encourages investors and others to review the information it makes public in these locations, as such information could be deemed to be material information.

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Forward-Looking Statements

This Quarterly Report on Form 10-Q 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.

This Quarterly Report on Form 10-Q 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 ("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, statements regarding the effect, impact, potential duration or other implications of, or expectations expressed with respect to, the recent outbreak COVID-19 and the actions of members of the Organization of Petroleum Exporting Countries (“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 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 its development into a pandemic in March 2020 (the "COVID-19 Pandemic" or the "Pandemic") and the actions of members of the Organization of Petroleum Exporting Countries ("OPEC") and other leading oil producing countries (together with OPEC, “OPEC+”), 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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• 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;

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

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

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

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

• the unprecedented market environment and economic effects of the COVID-19 Pandemic, including uncertainty

Management's Discussion and Analysis

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;

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• risks and uncertainties with respect to the quantities and costs of refined petroleum products supplied to our pipelines and/or held in our terminals;

• operating hazards, natural disasters, casualty losses and other matters beyond our control;

• operating hazards, natural disasters, weather related disruptions, casualty losses and other matters beyond our control;

• increases in our debt levels or costs;

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

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

The Impact of the COVID-19 Pandemic

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

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to many parts of the world.

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

As a result, there has

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

As a result, and certainly during 2020, we experienced 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.

Uncertainty about the duration of the COVID-19 Pandemic has caused periodic storage constraints in the U.S.

Management's Discussion and Analysis

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

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

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

resulting from over-supply of produced oil.

resulting from over-supply of produced oil, while some of this oversupply was alleviated during and after Winter Storm Uri, which caused disruption in pipelines and other supply sources in PADD 3 during February and early March.

While in the last few months, we have seen successful domestic efforts to distribute the vaccine across the U.S.

which has led to some improved stability in the capital markets as well as improved pricing in crude oil, refined products and related forward curves, there continues to be uncertainty, and demand for refined product, and likewise for our logistics assets, has not yet returned to normal levels.

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

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

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

These actions have resulted in an increase in the level of individual movement and travel and, in turn, an increase in the demand and market prices for some of our products relative to late March 2020.

However, many of the states where such restrictions were lifted have recently 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.

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

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

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

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

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

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

We have previously identified the following known uncertainties resulting from the COVID-19 Pandemic.

And while the risk surrounding these uncertainties appears to be lessening, they still represent risks that could impact our operations, financial condition and results of operations.

They are as follows:

• 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, as well to the carrying value of our long-lived or indefinite-lived assets;

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

• 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 for refined products 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 also Note 1 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional discussion of specific financial statement risks);

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

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

• 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;

Management's Discussion and Analysis

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

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.

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 and may consider additional relief legislation.

Beyond the direct impact of existing legislation on Delek in the current or prior periods (as applicable), 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.

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

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

Generally Accepted Accounting Principles ("GAAP"), we have considered them in the preparation of our unaudited financial statements as of and for the three months ended March 31, 2021, which are included in Item 1, of this Quarterly Report on Form 10-Q.

Management's Discussion and Analysis

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

Additionally, to the extent warranted, we continue to monitor the impact and implement measures to mitigate the risk.

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

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

• Reducing planned capital expenditures for 2020;

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

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

• Reducing discretionary capital expenditures;

• 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.

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

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

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

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

• Adopting remote working where possible, and where on-site operations are required, taking appropriate safety precautions;

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

• Enacting cost reduction measures across the organization, including reducing contract services, reducing overtime and other employee related costs, and reducing or eliminating non-critical travel.

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

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

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

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

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

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

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

• 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 2021 and the remaining balance in 2022.

• We made significant efforts to reduce our capital spending, particularly on growth and non-critical sustaining maintenance projects.

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

Management's Discussion and Analysis for further information.

Management's Discussion and Analysis

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

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

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

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

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

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

MD&A 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 our Krotz Springs refinery that was 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.

We completed this turnaround work late in the first quarter 2021 and have begun moving back to full utilization at the facility.

• Additionally, we developed a cost savings plan for 2021 designed to continue to 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 Springs refinery, while other efforts such as targeted budgeting around outside contractor expenses and deferral of certain non-critical, non-capitalizable maintenance activities are also expected to have a favorable impact.

Furthermore, both operating and general and administrative expenses will be favorably impacted by a cumulative reduction in workforce.

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

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

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

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

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

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

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

• 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 impacted by the Pandemic, and we 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 continue to have a favorable impact on cash flows 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 2.

Management's Discussion and Analysis for further information.

MD&A 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.

The COVID-19 Pandemic, and the volatile regional and global economic conditions stemming from the Pandemic, could also exacerbate the risk factors identified in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and in this Form 10-Q.

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

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.

See also "Risk Factors" in Part II, Item 1A.

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

Management's Discussion and Analysis

Other Significant Events

During February 2021, the Company experienced a severe weather event ("Winter Storm Uri") which temporarily impacted operations at all of our refineries.

Due to the extreme freezing conditions, we experienced reduced throughputs at our Tyler and Big Spring refineries as there was a disruption in the crude supply, as well as damages to various units at our refineries requiring additional operating and capital expenditures.

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

As a result of the temporary unit optimization at our Krotz Springs refinery, there was limited disruption to its operations.

Additionally, the severe weather conditions and the resultant industry downtime caused energy prices to rise in certain regions where we operate, which has resulted in additional operating expenses for the refineries impacted.

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.

The incident is currently being investigated by the Occupational Safety and Health Administration.

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

(See Note 11 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information about losses incurred and related insurance coverages).

Refining Overview

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

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

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 and aviation fuel, asphalt and other petroleum-based products that are distributed through owned and third-party product terminals.

The refining segment has a combined nameplate capacity of 302,000 barrels per day as of March 31, 2021.

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

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

(1) The term "crack spread" is a measure of the difference between market prices for crude oil and refined products.

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

Management's Discussion and Analysis

(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 West Texas Intermediate ("WTI") Cushing/ West Texas Sour ("WTS") price differential, taking into account differences in production yield, is an important measure for helping us make strategic, market-respondent production decisions.

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Our refining segment also owns and operates three biodiesel facilities involved in the production of biodiesel fuels and related activities, located in Crossett, Arkansas, Cleburne, Texas, and New Albany, Mississippi.

Management's Discussion and Analysis

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 an 80.0% interest in Delek Logistics at September 30, 2020.

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.

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 10.2 million barrels of active shell capacity.

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

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

Additionally, on March 31, 2020, the logistics segment 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, the logistics segment acquired from another of our segments certain leased and owned tractors and trailers and related assets.

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, and an 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.

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

Our retail segment (or "Retail") at March 31, 2021 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.

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

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

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.

As of March 31, 2021, we have removed the 7-Eleven brand name at 57 of our store locations.

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

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

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.

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

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Corporate and Other Overview

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

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

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

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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.

In the face of the economic impact of the COVID-19 Pandemic and the OPEC Production Disputes, our overall strategy remains unchanged and continues to be focused on the following objectives:

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 flows.

Having taken into account the significance of the economic impact of the COVID-19 Pandemic and the OPEC Production Disputes in early 2020, our overall strategy remains unchanged and continues to be focused on the following objectives:

Safety and wellness.

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

With these objectives serving as our guiding principles, we are 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.

And with these objectives in mind, we have achieved the following successes to date in 2020:

2021 Developments

Transactions designed to maximize shareholder return

Dividend Suspension

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

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

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

Management's Discussion and Analysis

Share Repurchases

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

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

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

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

Transactions designed to maximize return on assets

Investment in Midstream Ventures

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

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

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

The WWP Project Financing JV was created for the specific purpose of obtaining financing, through its wholly-owned subsidiary, W2W Finance LLC, to fund the majority of 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 and as allowed under the project financing debt.

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 the Delek member, the guarantee is from Delek US Holdings, Inc.).

Our investment is accounted for as an equity method investment.

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

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

Increased Investment in Delek Logistics

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

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

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

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

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

Management's Discussion and Analysis

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

Financial Statements).

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

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

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

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

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

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 million.

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

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

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

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

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

2020 Amendments to Supply and Offtake Agreements

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

Aron which applies to the El Dorado refinery, the Big Spring refinery and the Krotz Springs refinery so that the repurchase of Baseline Volumes at the end of the Supply and Offtake Agreement term (representing the "Baseline Step-Out Liability" or, collectively, the "Baseline Step-Out Liabilities") will be based on market-indexed price subject to commodity price risk with corresponding changes to underlying market-based indices and certain differentials.

The amendments resulted in Baseline Step-Out Liabilities for which the fair value is no longer subject to interest rate risk but is now subject to commodity price volatility.

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

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

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

2020 Amendment to the Term Loan Credit Facility

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

Financial Statements) and borrowed $200.0 million in aggregate principal amount of incremental term loans (the “Third Incremental Term Loan”) at an original issue discount of 7.00%, requiring quarterly principal amortization payments of $0.5 million commencing with June 30, 2020.

The Third Incremental Term Loan constitutes a separate class of term loans under the Term Loan Credit Facility from those initially borrowed in March 2018 and the incremental term loans borrowed in May 2019 and November 2019.

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

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

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

Our principle focus during the first quarter of 2021 was to execute on the following initiatives, consistent with those discussed above in the context of the COVID-19 Pandemic measures:

• effectively implementing and executing on our operating cost savings initiatives;

• continuing to be focused on controlling capital expenditures;

• focusing on operating efficiently, including the Krotz Springs refinery optimization;

• continuing to position ourselves to manage our supply chain risk, our customer risk and our liquidity sources;

• continuing to maintain a strong retail business;

• with our sights also set on recovery from the Pandemic and the future, continuing to explore and investigate growth opportunities for midstream or other lines of business.

While, as previously noted above, COVID-19 conditions seem to be improving, as is the outlook, with the continued successful distribution of effective vaccines, we were faced with some unprecedented challenges which required our focus during the first quarter 2021.

These included the effects of Winter Storm Uri as well as the El Dorado fire (described above).

We believe that managing the efforts listed above, plus managing through the disruption caused by these two unexpected events, were critical to managing our results in this continued challenging environment.

That said, and related to the last bullet above, we did successfully execute on a strategic opportunity in our logistics segment, as described below.

Exclusivity Supply Agreement

In May 2021, Delek Logistics executed a strategic exclusivity supply agreement with Baker Petrolite LLC (an affiliate of Baker Hughes Company) ("Baker"), for the supply of chemicals to meet IMO regulations through blending competencies utilizing proprietary intellectual property.The agreement has a 5-year initial term and a 5-year extension option.

Terms of the agreement are intended to incentivize a cooperative arrangement relating to strategic blending activities to be operated by Delek Logistics, and provides an exciting growth opportunity in our logistics segment.

Management's Discussion and Analysis

Market Trends

Commodity Prices

Our results of operations are significantly affected by fluctuations in the prices of certain commodities, including, but not limited to, crude oil, gasoline, distillate fuel, biofuels, natural gas and electricity, among others.

Historically, our profitability has been affected by commodity price volatility, specifically as it relates to the price of crude oil and refined products.

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

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

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

Crack Spreads

Crack spreads are used as benchmarks for predicting and evaluating a refinery's product margins by measuring the difference between the market price of feedstocks and crude oil and refined products.

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

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

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

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.

Historically, the impact of commodity price volatility on our refining margins (as defined in our 'Non-GAAP Measures' on page 45), specifically as it relates to the price of crude oil as compared to the price of refined products and timing differences in the movements of those prices (subject to our inventory costing methodology), as well as location differentials, may be favorable or unfavorable compared to peers.

Additionally, our refining margin profitability is impacted by regulatory factors, including the cost of RINs.

WTI crude oil represents the largest component of our crude slate at all of our refineries, and can be sourced through our gathering channels or optimization efforts from Midland, Texas or Cushing, Oklahoma.

The table below reflects the quarterly average prices of WTI Midland and WTI Cushing crude oil for each of the quarterly periods in 2020 and for the first quarterly period in 2021.

As shown in the historical graph, WTI Midland crude prices can be favorable or unfavorable as compared to WTI Cushing.

Crude Pricing Differentials

crude oil production has increased over recent years, domestic refiners have benefited from the discount for WTI Cushing compared to Brent ("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.

Because of our positioning in the Permian basin, including our access to significant sources of WTI Midland crude through our gathering system, we are even further benefited by discounts for WTI Midland/WTI Cushing differentials.

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

Conversely, as these price discounts widen, so does our competitive advantage, created specifically by our access to WTI Midland crude sourced through our gathering systems.

The chart below illustrates the differentials of both Brent crude oil and WTI Midland crude oil as compared to WTI Cushing crude oil as well as WTI Cushing as compared to Louisiana Light Sweet crude oil ("LLS") for each of the quarterly periods in 2020 and for the first quarterly period in 2021.

Management's Discussion and Analysis

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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

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

High Sulfur Diesel and U.S.

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

Crude Pricing Differentials

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.

Because of our positioning in the Permian basin, we are even further benefited by discounts in the WTI Midland/WTI Cushing differential.

When 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 charts below illustrate the quarterly average prices of Gulf Coast Gasoline (CBOB), U.S.

High Sulfur Diesel ("HSD") and U.S.

ULSD for each of the quarterly periods in 2020 and for the first quarterly period in 2021.

Crack Spreads

Crack spreads are used as benchmarks for predicting and evaluating a refinery's product margins by measuring the difference between the market price of feedstocks/crude oil and the resultant refined products.

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

The table below reflects the quarterly average Gulf Coast 5-3-2 Ultra Low Sulfur Diesel ("ULSD"), 3-2-1 and 2-1-1 crack spreads for each of the quarterly periods in 2020 and for the first quarterly period in 2021.

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

When market conditions consist of 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, which are benchmarked against either the 5-3-2 or the 2-1-1 crack spreads.

Management's Discussion and Analysis

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Environmental regulations continue to affect our margins in the form of volatility in the cost of RINs.

On a consolidated basis, we work to balance the cost of our RINs Obligation in order to minimize the effect of RINs on our results.

While we generate RINs in both our refining and logistics segments through our ethanol blending and biodiesel production, our refining segment needs to purchase additional RINs to satisfy its obligations.

As a result, increases in the price of RINs generally adversely affect our results of operations.

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

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

On a consolidated basis, we work to balance our RINs Obligation in order to minimize the effect of RINs on our results.

While we generate RINs in both our refining and logistics segments through our ethanol blending and biodiesel production and blending, our refining segment still needs to purchase additional RINs to satisfy its obligations.

The cost to purchase these additional RINs is a significant cash outflow for our business.

Additionally, increases in the market prices of RINs generally adversely affect our results of operations through changes in fair value to our existing RINs Obligation, to the extent we do not have offsetting RINs inventory on hand or effective economic hedges through net forward purchase commitments.

The volatility of RINs prices is highly sensitive to regulatory and political influence and conditions, and therefore often does not correlate to movements in crude oil prices, refined product prices or crack spreads.

Additionally, the pricing of RINs and the resulting impact on a refiner's margins is dependent on the type of refined product produced.

Furthermore, RIN prices are impacted by market expectations regarding whether the EPA may grant certain small refinery exemptions.

Therefore, the recent judicial rulings overturning certain small refinery exemptions, as well as the new presidential administration's vocal support for faster-moving clean energy initiatives, have caused significant recent increases in RINs prices to levels not seen in many years.

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

The chart below illustrates the volatility in RINs prices over several quarterly periods, beginning with the first quarter of 2020 through the first quarter of 2021.

Management's Discussion and Analysis

Contractual Obligations

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

Information regarding our known contractual obligations and commercial commitments of the types described below as of March 31, 2021, is set forth in the following table (in millions):

Payments Due by Period

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219.0 (0.2) — — 218.8

Product financing commitments (4)

277.8 — — — 277.8

Transportation agreements (5)

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Total $ 787.4 $ 1,658.9 $ 1,777.5 $ 152.0 $ 4,375.8

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

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

(1) Expected interest payments on debt outstanding at March 31, 2021.

Floating interest rate debt is calculated using March 31, 2021 rates.

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

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

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

(2) Amounts reflect future estimated lease payments under operating leases having remaining non-cancelable terms in excess of one year as of March 31, 2021.

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

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

(4) Balances consist of contractual obligations under RINs product financing arrangements.

(5) Balances consist of 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.

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

(7) Includes an immaterial amount of financing lease cost.

Critical Accounting Policies

The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities.

The preparation of our condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities.

The SEC has defined critical accounting policies as those that are both most important to the portrayal of our financial condition and results of operations, and require our most difficult, subjective or complex judgments or estimates.

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

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

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

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

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

Evaluation of Variable Interest Entities

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.

Management's Discussion and Analysis

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

Goodwill and Potential Impairment

Our annual goodwill impairment analysis is performed during the fourth quarter of each year.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Additionally, we have identified the following critical accounting policy that impacts the first quarter of 2021:

Under ASC 740, Accounting for Income Taxes, we use an estimated annual effective tax rate ("AETR") to record income taxes.

The development of the estimated AETR involves significant judgment, particularly early in the year and in times of economic uncertainty.

In the first quarter of 2021, our estimates of the expected AETR reflected inputs which are subject to judgment including (but not necessarily limited to) the following:

• Forecasted pre-tax GAAP income or loss for the year

• Estimates of expected permanent differences in GAAP income or loss and taxable income or loss for the year

• Forecasted capital expenditures for the year and future years (where such activities were significantly impacted by the recent weather event and can likewise be impacted by unanticipated events)

• Expected applicable jurisdictional tax rates

• Estimated impact of possible deduction and tax credit limitations

• Estimates regarding net operating losses, carryback and carryforward provisions (and limitations) and valuation allowances

All of these inputs are subject to significant judgment and assumptions about future events impacting 2021, some of which are based on historical trends and results, operational plans, and projections regarding future pricing and profitability (where we utilize third party forward curves and pricing sources, where possible, but where expectations regarding capture rates and other factors involve judgment).

We also note that, while economic conditions affecting our industry and industry outlooks related to COVID-19 are stabilizing and improving, there remains a level of uncertainty related to COVID-19 and the expectations for recovery that increases the level of judgment involved with

Management's Discussion and Analysis

some of these assumptions, particularly during the first quarter of 2021.

Accordingly, where appropriate, we may consider the probability of certain components in determining what we believe to be a reasonable estimate based on conditions and events that were in existence as of our reporting date, which may also involve the use of significant management judgment.

Furthermore, many of our assumptions are inter-relational, where changing one assumption can impact other assumptions (e.g., in terms of the applicability of or limitations under various tax code provisions).

The nature of the AETR estimation approach for recording income taxes requires continuous review and adjustment during the year based on actual results, and as better information regarding forecasted results and assumptions becomes available.

Significant changes in any of these assumptions or in actual results compared to our forecasts and assumptions could cause material changes in our AETR, which could result in cumulative adjustments to reflect the new estimates in future periods.

We have developed and utilized methodologies and rationales for the development of our assumptions, subject to internal controls and sensitivity or probability assessments, as appropriate, and we believe our process provides a reasonable basis for our estimated AETR as well as the income taxes as of and for the three months ended March 31, 2021.

Non-GAAP Measures

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• Refining margin per barrels sold - calculated as refining margin divided by our average refining sales in barrels per day (excluding purchased barrels) multiplied by 1,000 and multiplied by the number of days in the period.

We believe these non-GAAP operational and financial measures are useful to investors, lenders, ratings agencies and analysts to assess our ongoing performance because, when reconciled to their most comparable GAAP financial measure, they provide improved comparability between periods through the exclusion of certain items that we believe are not indicative of our core operating performance and they may obscure our underlying results and trends.

Non-GAAP measures have important limitations as analytical tools, because they exclude some, but not all, items that affect net earnings and operating income.

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Refining Segment

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

2020 2019 2020 2019

Three Months Ended March 31,

$ 1,740.1 $ 1,727.9

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Operating expenses (excluding depreciation and amortization)

102.1 120.7 302.5 356.7

Depreciation and amortization

50.3 34.6 132.3 98.9

Refining margin

3 unchanged sentences

The following table provides summary financial data for Delek:

Statement of Operations Data (in millions)

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

Summary Statement of Operations Data (in millions) (1)

Three Months Ended

Net revenues $ 2,392.2 $ 1,821.2

Total operating costs and expenses 2,472.3 2,182.7

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

Operating loss (80.1) (361.5)

Total non-operating expense, net 23.6 28.6

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

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

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

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

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

Loss before income tax benefit (103.7) (390.1)

Income tax benefit (12.4) (83.1)

Net loss (91.3) (307.0)

Net income attributed to non-controlling interests 7.3 7.4

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

Net loss attributable to Delek $ (98.6) $ (314.4)

(1) This information is presented at a summary level for your reference.

See the Consolidated Condensed Statements of Income included in Item 1.

to this Quarterly Report on Form 10-Q for more detail regarding our results of operations and net loss per share.

We report operating results in three reportable segments:

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Results of Operations

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

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

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

Consolidated Results of Operations — Comparison of the Three Months Ended March 31, 2021 versus the Three Months Ended March 31, 2020

Consolidated net loss for the first quarter of 2021 was $91.3 million compared to net loss of $307.0 million for the first quarter of 2020.

Consolidated net loss attributable to Delek for the first quarter of March 31, 2021 was $98.6 million, or $(1.34) per basic share, compared to net loss of $314.4 million, or $(4.28) per basic share, for the first quarter 2020.

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

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

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

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

In the first quarters of 2021 and 2020, we generated net revenues of $2,392.2 million and $1,821.2 million, respectively, an increase of $571.0 million, or 31.4%.

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

• in our refining segment, we achieved similar results in the current period as compared to prior year, despite challenges impacting our refineries, including the severe weather event in February 2021, the El Dorado fire and turnaround activities, and the temporary suspension of crude refining unit production at our Krotz Spring refinery;

such results were driven by increases in the average price of U.S.

Gulf Coast gasoline of 36.9%, ULSD of 16.0%, and HSD of 10.3%;

• in our corporate and other segment, an increase in wholesale crude activity which began in the second quarter of 2020.

Management's Discussion and Analysis

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

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

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

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

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

partially offset by an increase in merchandise sales.

Such decreases were partially offset by:

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

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

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

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

Gulf Coast gasoline of 35.4%, ultra-low sulfur diesel of 37.7%, and high-sulfur diesel of 41.7%;

• in our retail segment, decreases in fuel sales volumes due to demand slowdown as a result of COVID-19 Pandemic and reduction in average number of stores, as well as a 17.9% decrease in average price charged per gallon;

partially offset by an increase in merchandise sales;

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

Such increases were partially offset by:

• in our retail segment, decreases in fuel sales volumes due to demand slowdown as a result of COVID-19 Pandemic, partially offset by an increase in merchandise sales as well as a 12.9% increase in average price charged per gallon.

Total Operating Costs and Expenses

Cost of Materials and Other

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

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

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

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

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

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

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

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

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

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

Management's Discussion and Analysis

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

Such decreases were partially offset by the following:

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

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

Cost of materials and other was $2,205.5 million for the first quarter of 2021 compared to $1,910.6 million for the first quarter of 2020, an increase of $294.9 million, or 15.4%.

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

• increases in cost of crude oil feedstocks at the refineries, including a 27.3% increase in the average cost of WTI Cushing crude oil and a 29.4% increase in the average cost of WTI Midland crude oil;

• an increase in wholesale crude activity which began in the second quarter of 2020;

• a decrease in hedging gains to a loss of $57.4 million recognized during the first quarter of 2021 from a gain of $77.9 million recognized during the first quarter of 2020;

These increases were partially offset by:

• the benefit (expense) of $20.4 million related to the change in pre-tax inventory valuation recognized during the first quarter of 2021 compared to $(280.8) million recognized during the first quarter of 2020;

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

• a decrease in total retail fuel gallons sold due to demand slowdown as a result of the COVID-19 Pandemic, partially offset by an increase in average cost per gallon.

Operating Expenses

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

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

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

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

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

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

Operating expenses were $149.3 million for the first quarter of 2021 compared to $154.5 million for the first quarter of 2020, a decrease of $5.2 million, or 3.4%.

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.

• a decrease in employee expenses partially due to staff reductions and suspension of matching contributions to our 401(k) match;

• decreases in contract services partially due to cost reduction measures continuing in the first quarter of 2021.

Such decrease was offset by the following:

• an increase in utilities costs primarily associated with higher natural gas costs during the February 2021 severe freezing conditions that affected most of the regions where we operate, partially offset by lower production at our El Dorado and Krotz Springs refineries.

General and Administrative Expenses

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

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

• decrease in contract services due to cost reduction measures;

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

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

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

General and administrative expenses were $47.1 million for the first quarter of 2021 compared to $65.7 million for the first quarter of 2020, a decrease of $18.6 million, or 28.3%.

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

• decrease in contract services due to cost reduction measures;

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

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

• decrease in loss allowance on a note receivable.

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

Management's Discussion and Analysis

• a decrease in employee expenses partially due to staff reductions, suspension of matching contributions to our 401(k) plan, and reduction of stock-based compensation;

• a decrease in contract services due to cost reduction measures;

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

Depreciation and Amortization

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

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

Depreciation and amortization (included in both cost of sales and other operating expenses) was $68.5 million for the first quarter of 2021 compared to $52.6 million for the first quarter of 2020, an increase of $15.9 million, or 30.2%.

This increase was primarily due to depreciation associated with assets added during the Big Spring refinery turnaround in the first quarter of 2020, as well as other refining assets placed in service.

Other Operating Loss (Income), Net

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

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

Other operating loss, net increased by $2.6 million in the first quarter of 2021 to a loss of $1.9 million compared to income of $0.7 million in the first quarter of 2020.

Management's Discussion and Analysis

Non-operating Expenses, Net

Interest Expense

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

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

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

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

Interest expense decreased by $6.7 million, or 18.5%, to $29.6 million in the first quarter of 2021 compared to $36.3 million in the first quarter of 2020, primarily driven by the following:

• a decrease in the average effective interest rate of 1.44% in the first quarter of 2021 compared to the first quarter of 2020 (where effective interest rate is calculated as interest expense divided by the net average borrowings/obligations outstanding), partially offset by an increase in net average borrowings outstanding (including the obligations under the Supply and Offtake Agreements which have an associated interest charge) of approximately $221.9 million in the first quarter of 2021 (calculated as a simple average of beginning borrowings/obligations and ending borrowings/obligations for the period) compared to the first quarter of 2020.

Results from Equity Method Investments

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

This decrease was primarily driven by the following:

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

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

Management's Discussion and Analysis

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

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

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

Financial Statements, for additional information.

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

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

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

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

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

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

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

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

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

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

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

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

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

We recognized income of $4.8 million from equity method investments during the first quarter of 2021, compared to $5.1 million for the first quarter of 2020, a decrease of $0.3 million.

Income tax expense increased by $70.7 million in the first quarter of 2021 compared to the first quarter of 2020, primarily driven by the following:

• a pre-tax loss of $103.7 million in the first quarter of 2021, as compared to $390.1 million for the first quarter of 2020;

• a decrease in our effective tax rate which was 12.0% for the first quarter of 2021, compared to 21.3% for the first quarter of 2020 primarily due to the following:

◦ changes in valuation allowance for state attributes in the first quarter of 2021 compared to the first quarter of 2020;

◦ the reversal of a valuation allowance for deferred tax assets in partnership investments in the first quarter of 2020;

◦ changes in the state income tax footprint for separate state jurisdictions.

Management's Discussion and Analysis

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Refining Segment Margins

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

Three Months Ended

$ 1,740.1 $ 1,727.9

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Refining margin

84.3 270.8 54.0 1,006.8

Operating expenses (excluding depreciation and amortization)

102.1 120.7 302.5 356.7

Contribution margin

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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.

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

Management's Discussion and Analysis

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 our 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 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 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

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

(Unaudited) (Unaudited)

Three Months Ended

Tyler, TX Refinery

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Days in period

92 92 274 273

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

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Refinery Statistics (continued)

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

(Unaudited) (Unaudited)

Three Months Ended

Big Spring, TX Refinery

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Days in period

92 92 274 273

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

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Inter-refinery Sales

Three Months Ended Nine Months Ended

September 30, September 30,

Three Months Ended

(in barrels per day) 2021 2020

(Unaudited) (Unaudited)

Tyler refined product sales to other Delek refineries 2,095 763

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Refinery Sales to Other Segments

Three Months Ended Nine Months Ended

September 30, September 30,

Three Months Ended

(in barrels per day) 2021 2020

(Unaudited) (Unaudited)

Tyler refined product sales to other Delek segments 922 3,207

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Pricing Statistics (average for the period presented)

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

(Unaudited) (Unaudited)

Three Months Ended

WTI — Cushing crude oil (per barrel) $ 58.03 $ 45.57

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2 heating oil (ultra low sulfur diesel).

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

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

Gulf Coast Pipeline No.

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Management's Discussion and Analysis

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

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

• decreases in the average price of U.S.

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

Such decreases were partially offset by the following:

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

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

We eliminate this intercompany revenue in consolidation.

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

• decreases in the average price of U.S.

Refining Segment Operational Comparison of the Three Months Ended March 31, 2021 versus the Three Months Ended March 31, 2020

Net revenues for the refining segment increased by $12.2 million, or 0.7%, in the first quarter of 2021 compared to the first quarter of 2020, primarily driven by the following:

• increases in the average price of U.S.

Gulf Coast gasoline of 36.9%, ULSD of 16.0%, and HSD of 10.3%.

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

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

Such increase was partially offset by the following:

• a decrease in sales volumes of refined product totaling 5.2 million barrels, partially due to the temporary suspension of crude refining unit production at our Krotz Springs refinery from November 2020 through February 2021 and related turnaround activities, severe weather impacting our refineries in February 2021, and turnaround at our El Dorado refinery, partially offset by a 1.2 million barrel increase in purchased product sales and increased sales volumes at our Big Spring refinery which was in a turnaround in the prior year period.

Net revenues included sales to our retail segment of $69.7 million and $68.6 million, sales to our logistics segment of $65.8 million and $80.7 million, and sales to our other segment of $20.1 million and $9.3 million for the three months ended March 31, 2021 and March 31, 2020, respectively.

We eliminate this intercompany revenue in consolidation.

Management's Discussion and Analysis

Cost of Materials and Other

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

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

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

These decreases were partially offset by the following:

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

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

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

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

• decreases in the cost of WTI Midland crude oil, from an average of $55.81 per barrel to an average of $38.98, or 30.2%.

Cost of materials and other decreased by $258.9 million, or 13.6%, in the first quarter of 2021 compared to the first quarter of 2020, primarily driven by the following:

• a decrease in refined sales volumes at our Krotz Springs refinery and El Dorado refinery, partially offset by increased sales volumes at Big Spring refinery;

• the benefit (expense) of $20.6 million related to the change in pre-tax inventory valuation recognized during the first quarter of 2021 compared to $(271.6) million recognized during the first quarter of 2020.

These decreases were partially offset by the following:

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

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

• increases in the cost of WTI Cushing crude oil, from an average of $45.57 per barrel to an average of $58.03, or 27.3%;

• increases in the cost of WTI Midland crude oil, from an average of $45.51 per barrel to an average of $58.90, or 29.4%;

• a decrease in hedging gains to a loss $5.0 million recognized during the first quarter of 2021 from a gain of $80.4 million recognized during the first quarter of 2020.

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

These costs and fees were $95.8 million and $105.7 million during the first quarters of 2021 and 2020, respectively.

We eliminate these intercompany fees in consolidation.

Management's Discussion and Analysis

Refining Margin

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

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

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

Refining margin increased by $271.1 million, or 151.7%, in the first quarter of 2021 compared to the first quarter of 2020, primarily driven by the following:

• a 15.6% improvement in the 5-3-2 crack spread (the primary measure for the Tyler refinery and El Dorado refinery);

• a 25.6% improvement in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery);

• an increase attributable to the $20.6 million change in pre-tax inventory valuation benefit recognized during the first quarter of 2021 compared to an expense of $271.6 million recognized during the prior year period.

These increases were partially offset by the following:

• a higher percentage of purchased product with a decrease in overall sales volumes;

• a 5.8% decline in the average Gulf Coast 2-1-1 crack spread (the primary measure for the Krotz Springs refinery);

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

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

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

These decreases were partially offset by the following:

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

Management's Discussion and Analysis

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

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

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

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

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

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

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

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

• a narrowing of the average WTI Cushing crude oil differential to WTS crude oil to $(0.74) per barrel during the first quarter of 2021 compared to $0.58 during the first quarter of 2020 and narrowing of the average WTI Midland crude oil differential to WTI Cushing crude oil to $(0.87) per barrel during the first quarter of 2021 compared to $0.06 per barrel during the first quarter of 2020;

• a narrowing of the discount between WTI Midland crude oil and Brent crude oil where, during the first quarter of 2021, the WTI Midland crude oil differential to Brent crude oil was an average discount of $2.27 per barrel compared to $5.31 per barrel during the first quarter of 2020;

• a decrease in hedging gains to a loss of $5.0 million recognized during the first quarter of 2021 from a gain of $80.4 million recognized during the first quarter of 2020.

Management's Discussion and Analysis

Operating Expenses

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

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

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

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

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

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

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

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

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

Operating expenses increased by $1.9 million, or 1.7%, in the first quarter of 2021 compared to the first quarter of 2020, primarily driven by the following:

Such increase was offset by the following:

• decreases in contract services partially due to cost reduction measures continuing in the first quarter of 2021;

• decreases in employee related costs partially due to staff reductions made in prior year and suspension of matching contributions to our 401(k) plan.

Contribution Margin

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

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

• an overall decline in the average crack spreads;

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

These decreases were partially offset by the following:

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

• decreases in operating expenses across all refineries.

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

Contribution margin increased by $269.2 million, or a 15.6% improvement in contribution margin percentage, in the first quarter of 2021 compared to the first quarter of 2020, primarily driven by the following:

• an overall increase in the average crack spreads;

• an increase in reversal benefit related to inventory valuation reserve during the first quarter of 2021 compared to prior year period.

These increases were partially offset by the following:

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

• reduced performance at our Big Spring refinery due to turnaround;

• an overall decline in the average crack spreads;

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

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

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

• a narrowing of the discount between WTI Cushing and WTS crude oil compared to the first quarter of 2020;

• an increase in hedging losses compared to the prior-year period.

Management's Discussion and Analysis

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Logistics Contribution Margin and Operating Information

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

Three Months Ended

Net revenues $ 152.9 $ 163.4

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Big Spring Gathering Assets (3)

90,719 — 85,845 —

Plains Connection System 108,361 —

(1) Excludes jet fuel and petroleum coke.

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

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

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

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

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

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

Financial Statements, for additional information.

Such increase was partially offset by the following:

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

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

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

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

We eliminate this intercompany revenue in consolidation.

Management's Discussion and Analysis

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

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

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

◦ the average sales prices per gallon of gasoline and diesel sold decreased $0.51 per gallon and $0.71 per gallon, respectively.

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

(3) The Big Spring Gathering Assets Acquisition was effective March 31, 2020;

therefore, there is no comparable activity for first quarter 2020.

Logistics Segment Operational Comparison of the Three Months Ended March 31, 2021 versus the Three Months Ended March 31, 2020

Net revenues decreased by $10.5 million, or 6.4%, in the first quarter of 2021 compared to the first quarter of 2020, primarily driven by the following:

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

◦ the average volumes of gasoline and diesel sold decreased by 13.9 million gallons and 9.2 million gallons, respectively.

◦ the average sales prices of gasoline and diesel sold increased $0.24 per gallon and $0.12 per gallon, respectively.

• decreases in throughputs due to the impact of the severe freezing conditions that affected most of the regions where we operate resulting in lower volumes outside of contractual minimum volume commitments during the three months ended March 31, 2021 when compared to the three months ended March 31, 2020.

• decreases in throughputs at the Paline pipeline due to scheduled pipeline maintenance.

Such decrease was partially offset by the following:

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Financial Statements, for additional information.

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

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

We eliminate this intercompany revenue in consolidation.

• increased revenues at our Big Spring Refinery Crude Pipeline (the "BSR Crude Pipeline") during the three months ended March 31, 2021 when compared to the three months ended March 31, 2020 as a result of new contracts executed in the second quarter of 2020.

Management's Discussion and Analysis

Net revenues included sales to our refining segment of $95.8 million and $105.7 million for the three months ended March 31, 2021 and March 31, 2020, respectively, and sales to our other segment of $0.4 million and $0.9 million for the three months ended March 31, 2021 and 2020, respectively.

We eliminate this intercompany revenue in consolidation.

Cost of Materials and Other

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

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

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

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

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

We eliminate these intercompany costs in consolidation.

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

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

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

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

Cost of materials and other for the logistics segment decreased $20.2 million, or 19.9%, in the first quarter of 2021 compared to the first quarter of 2020 primarily driven by the following:

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

◦ the average volumes of gasoline and diesel sold decreased by 13.9 million gallons and 9.2 million gallons, respectively.

◦ the average cost per gallon of gasoline and diesel sold increased $0.27 per gallon and $0.10 per gallon, respectively.

Our logistics segment purchased product from our refining segment of $65.8 million and $80.7 million for the three months ended March 31, 2021 and March 31, 2020, respectively.

We eliminate these intercompany costs in consolidation.

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Operating Expenses

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

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

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

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

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

Operating expenses decreased by $0.7 million, or 4.7%, in the first quarter of 2021 compared to the first quarter of 2020, driven by the following:

• a 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.

• decreases in variable expenses such as maintenance and materials costs due to lower throughput;

• partially offset by the increase in utility costs as a result of significantly higher energy costs during the February 2021 severe freezing conditions that affected most of the regions where we operate.

Contribution Margin

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

Contribution margin increased by $10.4 million, or 22.0%, in the first quarter of 2021 compared to the first quarter of 2020, primarily driven by the following:

• an increase in gross margin of $0.72 per barrel in our West Texas marketing operations;

• increases in revenues 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:

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

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

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

• decreases in operating expenses.

Such increases were partially offset by the following:

• decreases in gross margin per barrel sold of $2.46 in our West Texas marketing operations.

• decreases in gasoline and diesel volumes sold in our West Texas marketing operations.

Management's Discussion and Analysis

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Retail Contribution Margins

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

Three Months Ended

Net revenues $ 174.8 $ 178.6

Cost of materials and other

136.3 176.4 400.0 521.9

Operating expenses (excluding depreciation and amortization)

23.1 23.5 66.8 71.9

Contribution margin

1 unchanged sentence

Operating Information

Three Months Ended

Number of stores (end of period)

253 263 253 263

Average number of stores

253 263 253 263

Average number of fuel stores

248 255 248 255

Retail fuel sales

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

182 215 547 638

Average retail sales price per gallon sold

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Merchandise sales per average number of stores (in millions)

$ 0.3 $ 0.3 $ 1.0 $ 0.9

Merchandise margin %

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Same-Store Comparison (2)

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

Three Months Ended

Change in same-store fuel gallons sold

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Change in same-store merchandise sales

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

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

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

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

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

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

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

Management's Discussion and Analysis

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

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

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

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

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

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

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

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

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

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

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

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

Retail Segment Operational Comparison of the Three Months Ended March 31, 2021 versus the Three Months Ended March 31, 2020

Net revenues for the retail segment decreased by $3.8 million, or 2.1%, in the first quarter of 2021 compared to the first quarter of 2020, primarily driven by the following:

• total fuel sales were $100.1 million in the first quarter of 2021 compared to $106.9 million in the first quarter of 2020, attributable to the following:

◦ a decrease in total retail fuel gallons sold for the retail segment to 39.8 million gallons in the first quarter of 2021 compared to 48.0 million gallons in the first quarter of 2020 associated with same-store decrease in fuel volumes of 17.0%, primarily due to demand slowdown as a result of the COVID-19 Pandemic;

Management's Discussion and Analysis

◦ an offsetting $0.29 increase in average price charged per gallon.

• merchandise sales were $74.6 million in the first quarter of 2021 compared to $71.7 million in the first quarter of 2020 attributable to a same-store sales increase of 4.2%, primarily due to strong sales growth for key categories such as beer, packaged beverages and services.

Cost of Materials and Other

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

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

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

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

We eliminate this intercompany cost in consolidation.

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

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

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

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

Cost of materials and other for the retail segment decreased by $7.6 million, or 5.3%, in the first quarter of 2021 compared to the first quarter of 2020, primarily driven by the following:

• a decrease in total retail fuel gallons sold due to demand slowdown as a result of the COVID-19 Pandemic;

• an offsetting increase in average cost per gallon of $0.25 or 12.9% applied to fuel sales volumes that decreased period over period.

Our retail segment purchased finished product from our refining segment of $69.7 million and $68.6 million for the three months ended March 31, 2021 and March 31, 2020.

We eliminate this intercompany cost in consolidation.

Operating Expenses

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

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

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

Operating expenses for the retail segment decreased by $0.8 million, or 3.6% in the first quarter of 2021 compared to the first quarter of 2020 as a result of the execution of various cost reduction initiatives throughout the business.

Contribution Margin

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

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

Contribution margin for the retail segment increased by $4.6 million, or 37.4%, in the first quarter of 2021 compared to the first quarter of 2020, primarily driven by a 4.1% improvement in merchandise sales, an improvement in merchandise margin percentage of 1.1%, and a 3.6% reduction in operating expenses.

Management's Discussion and Analysis

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• potential issuances of additional equity and debt securities.

At March 31, 2021 our total liquidity amounted to $1.5 billion comprised of $ 635.4 million in unused credit commitments under the Delek Revolving Credit Facility (as defined in Note 8 of the condensed consolidated financial statements in Item 1.

Financial Statements), $ 112.5 million in unused credit commitments under the Delek Logistics Credit Facility (as defined in Note 8 of the condensed consolidated financial statements in Item 1.

Financial Statements) and $793.5 million in cash and cash equivalents.

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

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

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

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

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

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

As of March 31, 2021, 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 Note 8 of the condensed consolidated financial statements in Item 1.

Financial Statements).

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

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

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

After considering the current effect of the 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 March 31, 2021 to the extent that any of our activities triggered these covenants.

However, given the

Management's Discussion and Analysis

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

Failure to meet the incurrence covenants could impose certain incremental restrictions on our ability to incur new debt and also may limit 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).

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

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

Financial Statements);

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

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

Financial Statements);

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

Nine Months Ended September 30,

Three Months Ended March 31,

Cash Flow Data:

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Financing activities 86.4 130.3

Net decrease $ (147.4) $ (72.9)

Net increase (decrease) $ 6.0 $ (170.4)

Cash Flows from Operating Activities

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

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

Net cash used in operating activities was $34.3 million for the three months ended March 31, 2021, compared to $154.1 million for the comparable period of 2020.

Cash payments to suppliers and for salaries decreased resulting in a $201.7 million decrease in cash used in operating activities.

Additionally, cash paid for debt interest increased by $109.9 million.

This decrease was partially offset by a $9.9 million increase in cash received for dividends and $70 million decrease in cash paid for taxes.

Cash Flows from Investing Activities

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

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

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

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

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

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

Net cash used in investing activities was $46.1 million for the first three months of 2021, compared to $146.6 million in the comparable period of 2020.

The decrease in cash flows used in investing activities was primarily due to a decrease in cash purchases of property, plant and equipment which decreased from $189.2 million in 2020, to $48.3 million in 2021, partially attributable to delaying non-essential projects in light of the COVID-19 Pandemic.

Additionally, equity method investment contributions decreased $25.6 million primarily due to contributions made related to our Red River Pipeline Joint Venture and WWP Project Financing JV for $8.2 million and $18.9 million, respectively, during the three months ended March 31, 2020.

During the three months ended March 31, 2021, we contributed $1.4 million related to our Red River Pipeline Joint Venture and $0.1 million related to our WWP Project Financing JV.

These decreases in cash used in investing activities were partially offset by distributions received in the prior year from our WWP Project Financing JV to return excess capital contributions made in the amount of $69.3 million for which there was no comparable activity in the current year period.

Cash Flows from Financing Activities

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

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

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

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

Net cash provided by financing activities was $86.4 million for the three months ended March 31, 2021, compared to $130.3 million in the comparable 2020 period.

This decrease in cash provided was predominantly due to net proceeds received from long-term revolvers of $40.9 million during the three months ended March 31, 2021, compared to $176.7 million in the comparable 2020 period.

Such decreases were partially offset by an increase in net proceeds from inventory financing arrangements to $77.9 million for the three months ended March 31, 2021 compared to $21.0 million in the comparable 2020 period.

Additionally, cash paid decreased $1.9 million and $23.1 million, respectively, due to suspension of our share repurchase program in the second quarter of 2020 and suspension of dividend payment in the fourth quarter of 2020.

Also, there was a decrease in net payments under our term debt of $23.3 million during the three months ended March 31, 2021, compared to $27.9 million in the comparable 2020 period.

During the three months ended March 31, 2020, we also repurchased 451,822 of Delek Logistics limited partner units from an investor for $5.0 million with no comparable activity in the current year period.

Cash Position and Indebtedness

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

As of March 31, 2021, our total cash and cash equivalents were $793.5 million and we had total long-term indebtedness of approximately $2,367.8 million.

The total long-term indebtedness is net of deferred financing costs and debt discount of $6.0 million and $23.0 million, respectively.

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• an aggregate principal amount of $50.0 million under the Revolving Credit Facility, due on March 30, 2023, with average borrowing rate of 3.50%;

• an aggregate principal amount of $1,276.3 million under the Term Loan Credit Facility, due on March 30, 2025, with effective interest of 3.57%;

• an aggregate principal amount of $39.7 million in outstanding borrowings under the Delek Hapoalim Term Loan, due on December 31, 2022, with effective interest of 3.58%;

• an aggregate principal amount of $1,269.8 million under the Term Loan Credit Facility, due on March 30, 2025, with effective interest rate of 3.61%;

• an aggregate principal amount of $39.5 million in outstanding borrowings under the Delek Hapoalim Term Loan, due on December 31, 2022, with effective interest rate of 3.54%;

• an aggregate principal amount of $737.5 million under the Delek Logistics Credit Facility, due on September 28, 2023, with average borrowing rate of 2.45%;

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• 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 8 of the condensed consolidated financial statements in Item 1.

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

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

Aron amounted to $410.7 million at March 31, 2021, $287.1 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 7 of the condensed consolidated financial statements in Item 1.

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

Management's Discussion and Analysis

Capital Spending

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

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

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

2020 Forecast Nine Months Ended September 30, 2020

Our capital expenditures for the three months ended March 31, 2021 were $67.0 million, of which approximately $57.8 million was spent in our refining segment, $7.8 million in our logistics segment, $0.8 million in our retail segment and $0.6 million at the holding company level.

The following table summarizes our actual capital expenditures for the three months ended March 31, 2021 and planned capital expenditures for the full year 2021 by operating segment and major category (in millions):

2021 Forecast Three Months Ended March 31, 2021

Sustaining maintenance, including turnaround activities (1)

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Total capital spending $ 180.2 $ 67.0

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

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

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

Management's Discussion and Analysis

(1) Excludes potential additional capital expenditures associated with the effects of Winter Storm Uri and/or the El Dorado fire that are not yet determinable and/or which we reasonably expect to be covered under our applicable insurance policies and likewise reimbursable by insurance recoveries.

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.

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Our capital expenditure budget may also be revised as management continues to evaluate projects for reliability or profitability.

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

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

We have no material off-balance sheet arrangements through the date of the filing of this Quarterly Report on Form 10-Q.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis