What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-11-05 compared with 2021-08-05 · 364 added, 288 removed, 826 unchanged (44% of the section changed)

71 unchanged sentences

Such uncertainty has been further aggravated by the mutation of the COVID-19 virus into one or more variants and plateauing demand for currently available vaccines.

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.

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

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

22 unchanged sentences

Management's Discussion and Analysis

Principles ("GAAP"), we have considered them in the preparation of our unaudited financial statements as of and for the six months ended June 30, 2021, which are included in Item 1, of this Quarterly Report on Form 10-Q.

Principles ("GAAP"), we have considered them in the preparation of our unaudited financial statements as of and for the nine months ended September 30, 2021, which are included in Item 1, of this Quarterly Report on Form 10-Q.

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

9 unchanged sentences

• Implementing regular site cleaning and disinfecting procedures;

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

• Adopting remote working where possible and when immediate exposure risk warrants, 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;

10 unchanged sentences

• 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.

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

Furthermore, both operating and general and administrative expenses were favorably impacted by a cumulative reduction in workforce, some of which were temporary.

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

• Finally, we elected to suspend share repurchases and dividends beginning in the second and fourth quarters of 2020, respectively, 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.

This has helped us maintain our liquidity and manage our cost of capital impacted by the Pandemic, as well as provided additional 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 had a mitigating impact on cash flows as well as our operations, which we believe has improved 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.

1 unchanged sentence

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, the speed and effectiveness of responses to combat the virus and any new variants and the challenges with the vaccination

additional actions by businesses and governments in response to the

Management's Discussion and Analysis

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, 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, 2020 and in this Form 10-Q, as applicable.

5 unchanged sentences

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 and Chemical Safety Board.

Contrary to initial assessments, and despite occurring during the early stages of turnaround activity, the facility did suffer operational disruptions as a result of the fire.

Work to determine the full extent of covered business interruption and property and casualty losses and potential insurance claims is ongoing and is expected to result in the future recognition of insurance recoveries.

The extent of any incremental losses is not yet determinable and may also be subject to insurance recoveries.

(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).

The incident was investigated by the Occupational Safety and Health Administration and Chemical Safety Board and resulted in operational disruptions as well as property and casualty damages..

To date, we have recognized approximately $21.4 million ($16.6 million after-tax) of insurance recoveries all related to property and casualty claims, $4.4 million of which related to replacement cost coverage on property losses and which helps offset corresponding capital expenditures, and the remaining $17.0 million of which relates to repairs and other operating expenses incurred in connection with our property and casualty damages.

We have additional property and casualty claims, as well as business interruption claims, that are outstanding and still pending, and which are expected to be recognized in future quarters.

Refining Overview

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 June 30, 2021.

The refining segment has a combined nameplate capacity of 302,000 barrels per day as of September 30, 2021.

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

20 unchanged sentences

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

It is comprised of the consolidated balance sheet and results of operations of Delek Logistics Partners, LP ("Delek Logistics", NYSE:DKL), where we owned an 80.0% interest in Delek Logistics at June 30, 2021.

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

1 unchanged sentence

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.

It also owns and operates ten 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.

1 unchanged sentence

Retail Overview

Our retail segment (or "Retail") at June 30, 2021 includes the operations of 252 owned and leased convenience store sites located primarily in Central and West Texas and New Mexico.

Our retail segment (or "Retail") at September 30, 2021 includes the operations of 250 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 grams to the public, primarily under the 7-Eleven and DK or Alon brand names pursuant to a license agreement with 7-Eleven, Inc.

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

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

and the terms of such termination and subsequent amendments 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 June 30, 2021, we have removed the 7-Eleven brand name at 57 of our store locations.

As of September 30, 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.

5 unchanged sentences

Corporate and Other Overview

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.

Our corporate activities, results of certain immaterial operating segments, our asphalt terminal operations, our 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.

1 unchanged sentence

Strategic Overview

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

The Road So Far:

A Recent Look Back

In recent history, 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 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 strategy continued to focus on the following objectives during the first six months of 2021:

In our 2020 Annual Report on Form 10-K, we outlined the specifics around the Company's strategy, including the Five-Year Strategic Framework (which we initially developed in 2019), as well as our corresponding Core Strategic Focus Areas and our Strategic Initiatives.

During much of the first half of 2021, our principal focus was on managing the operational and financial risks related to the COVID-19 Pandemic while also maintaining our attention on these Core Strategic Areas of Focus, which in turn continued to guide our objectives and initiatives :

Safety and wellness.

3 unchanged sentences

Positioning for growth.

As we look to the remainder of the year and the economic environment that is emerging, and while our core values continue to be the bedrock of the Company's operations and focus, we are actively reviewing our strategies and related operational objectives and will consider the need for changes in order to address the evolving industry and market, while ensuring that we continue to appropriately consider and capitalize on our operational strengths and strategic positioning.

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

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

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

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

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

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

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

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

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

That said, as we have previously communicated to you, not only have we consistently reevaluated our initiatives and immediate strategic priorities in light of the significant economic and operational impact of the COVID-19 Pandemic, we also have been continuing to actively review our strategies and related operational objectives and consider the need for changes in order to address the evolving industry and market, while ensuring that we continue to appropriately consider and capitalize on our operational strengths and strategic positioning.

The combination of our commitment to strategic thinking combined with the rapidly changing environment has led us to embrace a seismic shift in perspective around our long-term strategic direction and outlook, which now is guiding changes to our strategic framework and objectives.

The critical principle underlying this evolving perspective is sustainability , and is discussed in more detail below.

Evolving Focus:

A Sustainability Strategy

It is vitally important that our strategic process, especially in view of the evolutionary direction of our macroeconomic and geopolitical environment, involves a continuous evaluation of our business model in terms of long-term economic and operational sustainability.

We are operating in a mature industry (the production, logistics and marketing of hydrocarbon-based refined products), with increasingly difficult operational and regulatory challenges and, likewise, pressure on operating costs/gross margins as well as the availability and cost of capital.

More consolidation in our industry is expected as the regulatory environment continues to move towards reducing carbon emissions and transitions to renewable energy in the long-term, and evolving consumer and capital markets sentiment, regulations, talent availability, supply chain constraints and customer demand as we move in that direction are expected to cause disruption and increasing pressure in the intermediate term.

In order to compete and survive under historic environmental and regulatory changes, companies in our industry will need to be adaptive, forward-thinking and strategic in their approach to long-term sustainability.

What this picture looks like, as we come to understand it, is what we refer to as our "Sustainability View."

A New Framework:

Long-Term Sustainability

For these reasons, we have launched a process to develop a Long-Term Sustainability Framework , out of which will come our refined strategic objectives and initiatives.

Within this Long-Term Sustainability Framework, we have identified the following initial overarching objectives:

Focus on Improving Operational Efficiency at Capturing Margins.

Redirect Corporate Culture towards Innovation, Excellence, and Operating Discipline.

Understand Value Proposition of Costs and Investments and Maximize Return on Investment.

Implement Digital Transformation Strategy.

Evaluate Strategic Priorities and Redefine Long-term Sustainable Business Model.

Developing a strategy focused on long-term economic and operational sustainability in a challenging and rapidly changing environment is a larger and more ambitious objective than a strategy that is simply centered on growth and return on shareholder investment in the near-term.

For these reasons, it is important to understand the scalability of our strategy and what are the appropriate stages and priorities, recognizing that the inherent complexity of achieving long-term sustainability is a long game requiring both a measured, disciplined approach as well agility and flexibility to changing conditions.

Management's Discussion and Analysis

A Great Start:

Stage 1 Initiatives

While this Framework is in its early changes, we have already been hard at work identifying and developing our Stage 1 Initiatives in the context of these overarching objectives, and many of them are well underway in terms of implementation.

This progress is in part due to some overlap with our previous strategic objectives (thus also validating that our previous objectives were, in many ways, the right areas of focus), but also the result of the energy and commitment that our sustainability framework is generating in our organization.

Some of the initiatives that are underway and are expected to continue throughout the remainder of 2021 and into 2022 include the following:

• Enterprise-wide cost and waste reduction initiatives as well as initiatives focused on eliminating lost revenue and value leakage;

• Recent and on-going new system implementations that will improve our ability to understand all aspects of our business as well as our ability to make real-time and forward-looking operational decisions.

• Identifying the qualities of a "Delek Leader" and the "Employee of the Future" to help incorporate those qualities into our human capital programs, incentives and rewards.

• Identifying and evaluating the types of investment opportunities that fit our Sustainability View, including consideration of strategic investments or joint ventures in renewables, incubator investments in innovative new technologies, and other core-business investments that could improve our scalability and agility.

• Redefining our framework for evaluating, tracking and understanding the value creation propositions for proposed capital and strategic investments under the context of our evolving Long-Term Sustainability Objectives and our Sustainability View.

We have selected these Stage 1 initiatives because they are all foundational to continued progression toward achieving our overarching strategic objectives under the Long-Term Sustainability Framework, and thus were very intentional.

We look forward to reporting to you on our progress on these and other key initiatives, and to providing additional color around this exciting new way of thinking about and planning for the future of our business.

2021 Developments

Managing Through the COVID-19 Pandemic

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

5 unchanged sentences

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

While, as previously noted above, COVID-19 conditions seem to be improving, we were faced with some unprecedented challenges which required our focus during the first half of 2021, including the effects of Winter Storm Uri as well as the El Dorado fire (described above).

These events continue to be a significant area of focus as we continue to work on identifying and estimating losses (both realized and incurred and unrealized lost profit) in order to aggressively pursue insurance recoveries under our existing policies.

While, as previously noted above, COVID-19 conditions seem to be improving, we were faced with some unprecedented challenges which required our focus during the first nine months of 2021, including the effects of Winter Storm Uri as well as the El Dorado fire (described above).

These events continue to be a significant area of focus as we continue to aggressively pursue insurance recoveries under our existing policies.

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.

Our RINs cost and RINs Obligation have been negatively impacted during 2021 and as of June 30, 2021 by rapidly escalating RINs prices which resulted from an unfavorable ruling against companies previously granted the EPA's Small Refinery Exemptions (or "SREs") under

Management's Discussion and Analysis

the Renewable Fuel Standard (the "RFS") which governs RINs volume obligations for U.S.

hydrocarbon refining companies.

Additionally, the industry has been faced with worsening environmental regulatory sentiment in Washington, D.C.

following the change in the presidential administration in January 2021 has continued to put upward pressure on RIN prices.

Regulatory Volatility

Our RINs cost and RINs Obligation (as defined in Note 9 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q) have been negatively impacted by increasing RINs prices during much of 2021 which resulted from an unfavorable ruling against companies previously granted the EPA's Small Refinery Exemptions (or "SREs") under the Renewable Fuel Standard (the "RFS") which governs RINs volume obligations for U.S.

hydrocarbon refining companies, importers and blenders.

Additionally, a worsening environmental regulatory sentiment in Washington, D.C.

following the change in the presidential administration in January 2021 continued to put upward pressure on RIN prices.

The 10th Circuit Court of Appeals ruling, which was subsequently appealed and (for the majority of the period) was waiting to be heard by the U.S.

2 unchanged sentences

the 2019 compliance deadline was extended to November 30, 2021, and the submission deadline for the related report was extended to June 1, 2022, for small refineries;

and the 2020 compliance deadline was extended to January 31, 2021, and the submission deadline for the related report was extended to June 1, 2022, for small refineries.

While the uncertainty regarding the likelihood of SREs persisted, the RINs prices increased significantly, leaving our outlook regarding our ability to capture crack spreads, as well as those of many other downstream companies, also very uncertain.

Management's Discussion and Analysis

2020 compliance deadline was extended to January 31, 2022, and the submission deadline for the related report was extended to June 1, 2022, for small refineries;

and the 2021 compliance deadline remains at March 31, 2022.

In late June 2021, the U.S.

1 unchanged sentence

Immediately following this ruling, we undertook efforts to prepare 2020 SRE applications for our refineries and we submitted them in August 2021.

While we cannot know the outcome of our SRE applications, we have a history of being granted the waivers for all four refineries, but most often the Krotz Springs and El Dorado refineries.

In 2018, we were granted SREs for our Tyler, Krotz Springs and El Dorado refineries.

Additionally, while our current Net RINs Obligation reflects current RINs market prices as of June 30, 2021, the financial statement impact, including both the income statement and net cash impact, of any future receipt of SRE(s) is not determinable because of the complexity of the Net RINs Obligation and related transactions, where such financial statement impact is dependent upon the following:

Market expectations that at least some SRE applications may be approved and/or that the EPA may reduce certain outstanding compliance requirements, resulted in an improvement in RINs prices during the third quarter of 2021.

Uncertainty remains regarding the likelihood of SREs being granted as well as the potential for EPA relief from certain compliance requirements.

While we cannot know the outcome of our SRE applications, Delek has a long history of being granted the waivers with most grants to the Krotz Springs and El Dorado refineries.

As an example, in 2018, we were granted SREs for our Tyler, Krotz Springs and El Dorado refineries.

Additionally, while our current Net RINs Obligation reflects current RINs market prices as of September 30, 2021, the financial statement impact, including both the income statement and net cash impact, of any future receipt of SRE(s) is not determinable because of the complexity of the Net RINs Obligation and related transactions, where such financial statement impact is dependent upon the following:

(1) which refineries receive exemptions;

4 unchanged sentences

Financial Statements and Supplementary Data, of our December 31, 2020 Annual Report on Form 10-K).

We note that our total gross RINs Obligation for 2020, for all four refineries, was approximately 340 million RINs, across several RIN categories, and that receipt of any SREs could result in significant benefit, both in terms of income statement effect and cash flows.

We note that our total gross RINs Obligation for 2020, for all four refineries, was approximately 340 million RINs, across all RIN categories, and that receipt of any SREs could result in significant benefit, both in terms of income statement effect and cash flows.

Regardless of whether we expect to be granted SREs, we continue to actively manage our RINs inventory portfolio as well as monitor prices and positions on existing and expected RINs Obligations to mitigate our income statement and cash flow exposure.

See additional discussion of the effect of RINs prices and volatility on our refining margins in the "Market Trends" section below.

Other Strategic Activity

In addition to these management efforts, we successfully executed on several strategic opportunities as described below.

Wink to Webster Contract Termination

On September 30, 2021 Wink to Webster Pipeline LLC (“WWP”) made the decision to buy Delek out of the Midland Connector Financing Commitment Agreement which provided an interest-free commitment to fund us up to $65.0 million upon completion of a connector to connect the WWP long-haul pipeline to our Big Spring Gathering System, with repayment over 14 years.

The buy-out totaled $27.5 million and represented the estimated incremental cost of capital to fund the $65.0 million in expenditures over a 14-year term, and enabled us to recover approximately $18.0 million of capital expenditures that we may not have incurred had it not been for the financing commitment, including approximately $6.6 million that was written off during the third quarter.

As a result of the transaction, we recognized $20.9 million of other non-operating income in the third quarter, representing the excess over our current period recognized write-offs.

(See further discussion in Note 5 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q).

Delek US Holdings, Inc.

9 unchanged sentences

On May 24, 2021, Delek Logistics and its wholly owned subsidiary Delek Logistics Finance Corp.

(“Finance Corp.” and together with Delek Logistics, the “Co-issuers”), sold $400.0 million in aggregate principal amount of the Co-issuers 7.125% Senior Notes due 2028 (the “Delek Logistic 2028 Notes”) at par, pursuant to an indenture with U.S.

(“Finance Corp.” and together with Delek Logistics, the “Co-issuers”), issued $400.0 million in aggregate principal amount of the Co-issuers 7.125% Senior Notes due 2028 (the “Delek Logistic 2028 Notes”) at par, pursuant to an indenture with U.S.

Bank, National Association as trustee .

The Delek Logistics 2028 Notes are general unsecured senior obligations of the Co-issuers and are unconditionally guaranteed jointly and severally on a senior unsecured basis by the Guarantors and will be unconditionally guaranteed on the same basis by certain of the Delek Logistics’ future subsidiaries.

The Delek Logistic 2028 Notes rank equal in right of payment with all existing and future senior indebtedness of the Co-issuers, and senior in right of payment to any future subordinated indebtedness of the Co-issuers.

The Delek Logistics 2028 Notes are general unsecured senior obligations of the Co-issuers and are unconditionally guaranteed jointly and severally on a senior unsecured basis by Delek Logistics’ subsidiaries other than Finance Corp.

The Delek Logistic 2028 Notes rank equal in right of payment with all existing and future senior indebtedness of the Co-issuers, and senior in right of payment to any future subordinated indebtedness

Management's Discussion and Analysis

of the Co-issuers.

The Delek Logistic 2028 Notes will mature on June 1, 2028, and interest is payable semi-annually in arrears on each June 1 and December 1, commencing December 1, 2021.

(See further discussion in Note 8 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q)

Management's Discussion and Analysis

Exclusive Supply Agreement

7 unchanged sentences

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

During the first half of 2021, despite improved consumer demand resulting from stabilization in cases during much of the period and across much of the country, and corresponding to the availability of vaccines, improvements in domestic refining margins have been slow.

During 2021, despite improved consumer demand resulting from stabilization in cases of COVID-19 and decreasing mortality rates during much of the period and across much of the country, and corresponding to the availability of vaccines, improvements in domestic refining margins have been slow to materialize.

This is largely attributable to the increasing supply from international markets where consumer demand improvement has lagged behind the U.S and, similarly, the closing of much of the U.S.

1 unchanged sentence

market for transportation fuels has attracted higher infusion of international supply due in part to supply disruptions in the U.S.

that occurred during the first six months of 2021.

that occurred during the first nine months of 2021.

In February 2021, the operations of many U.S.

11 unchanged sentences

Supreme Court reversal of the lower court's ruling, however, there was a notable improvement in market optimism that existing SRE applications from 2019, as well as new applications for 2020, may be granted.

While it is possible that SREs may be granted before the extended compliance deadlines, refining companies in the U.S.

likely will not see much impact to RINs prices and, accordingly, refining margins until the EPA actually begins granting SREs on a relatively widespread basis.

See below for further discussion on how certain key market trends impact our refining margins.

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 two quarterly periods in 2021.

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

As a result, we saw some improvement in RIN prices during the third quarter 2021, in anticipation of possible EPA relief.

See the following pages for further discussion on how certain key market trends impact our refining margins.

Management's Discussion and Analysis

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 three quarterly periods 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

4 unchanged sentences

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 two quarterly periods in 2021.

The chart below illustrates the key differentials impacting our refining operations, including WTI Cushing to Brent, WTI Midland to WTI Cushing, and Louisiana Light Sweet crude oil ("LLS") to WTI Cushing for each of the quarterly periods in 2020 and for the three quarterly periods in 2021.

Management's Discussion and Analysis

Refined Product Prices

4 unchanged sentences

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

Ultra Low Sulfur Diesel ("ULSD") for each of the quarterly periods in 2020 and for the two quarterly periods in 2021.

Management's Discussion and Analysis

Ultra Low Sulfur Diesel ("ULSD") for each of the quarterly periods in 2020 and for the three quarterly periods in 2021.

Crack Spreads

1 unchanged sentence

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 ULSD, 3-2-1 and 2-1-1 crack spreads for each of the quarterly periods in 2020 and for the two quarterly periods in 2021.

The table below reflects the quarterly average Gulf Coast 5-3-2 ULSD, 3-2-1 ULSD and 2-1-1 HSD/LLS crack spreads for each of the quarterly periods in 2020 and for the three quarterly periods 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

RIN Volatility

Environmental regulations and the political environment continue to affect our refining margins in the form of volatility in the cost of RINs.

Environmental regulations and the political environment continue to affect our refining margins in the form of volatility in the price of RINs.

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

5 unchanged sentences

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

The 2020 unfavorable SRE judicial rulings, as well as the recent changes in regulatory sentiment following the presidential administration change, have caused significant increases in RINs prices to levels not seen in many years.

The 2020 unfavorable SRE judicial rulings, as well as the changes in regulatory sentiment following the presidential administration change, have caused significant increases in RINs prices to all-time highs.

Subsequently, in late June 2021, the U.S.

Supreme Court overturned the previous appeals court's ruling regarding RINs, resulting in market optimism regarding the granting of SRE applications.

Because of the volatility in RINs prices, it is not possible to predict future RINs cost with certainty, and movements in RIN prices can have significant and unanticipated adverse effects on our refining margins that are outside of our control.

The chart below illustrates the volatility in RINs beginning with the first quarter of 2020 through the second quarter of 2021.

The chart below illustrates the volatility in RINs beginning with the first quarter of 2020 through the third quarter of 2021.

Management's Discussion and Analysis

Other Required Information

Contractual Obligations

Information regarding our known contractual obligations and commercial commitments of the types described below as of June 30, 2021, is set forth in the following table (in millions):

Information regarding our known contractual obligations and commercial commitments of the types described below as of September 30, 2021, is set forth in the following table (in millions):

Payments Due by Period

12 unchanged sentences

Total $ 714.4 $ 1,407.1 $ 1,928.8 $ 684.1 $ 4,734.4

(1) Expected interest payments on debt outstanding at June 30, 2021.

Floating interest rate debt is calculated using June 30, 2021 rates.

(1) Expected interest payments on debt outstanding at September 30, 2021.

Floating interest rate debt is calculated using September 30, 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 June 30, 2021.

(2) Amounts reflect future estimated lease payments under operating leases having remaining non-cancelable terms in excess of one year as of September 30, 2021.

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

10 unchanged sentences

(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.

Additionally, we have identified the following critical accounting policy that impacts the six months ended June 30, 2021:

Additionally, we have identified the following critical accounting policy that impacts the nine months ended September 30, 2021:

Under Accounting Standards Codification ("ASC") 740, Income Taxes (“ASC 740”), 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.

As of and during the six months ended June 30, 2021, our estimates of the expected AETR reflected inputs which are subject to judgment including (but not necessarily limited to) the following:

As of and during the nine months ended September 30, 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

5 unchanged sentences

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 some of these assumptions.

Accordingly, where appropriate, we may consider the probability of certain components in determining what

We also note that, while economic conditions affecting our industry and industry outlooks related to COVID-19 are stabilizing and improving, there

Management's Discussion and Analysis

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.

remains a level of uncertainty related to COVID-19 and the expectations for recovery that increases the level of judgment involved with some of these assumptions.

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).

1 unchanged sentence

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 six months ended June 30, 2021.

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 the significant rise in number and severity of COVID-19 cases related to the spread of the Delta variant since the second quarter of 2021, as well as the impact of our stock price, which continues to be depressed, on our market capitalization.

To determine whether these negative developments arising due to the Pandemic that occurred through September 30, 2021, 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 determined that there was sufficient risk present associated with our Krotz Springs refinery (“KSR”) reporting unit to indicate that the fair value of that reporting unit were more likely than not to have declined below the carrying value as of August 31, 2021.

Accordingly, we performed a quantitative assessment of goodwill on the KSR reporting unit as of August 31, 2021.

The estimated fair value of the reporting unit was 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 the quantitative analysis, we concluded that the goodwill attributed to the KSR reporting unit was not impaired as of August 31, 2021, and the fair value was substantially in excess of its carrying value.

We performed a sensitivity analysis on our impairment test, noting that 1% change in our WACC or long-term growth rate, assuming no other changes in any if the other key assumptions, would not result in an impairment of this reporting unit.

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

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.

We updated our assessment from a sensitivity perspective to consider events that had occurred and conditions that existed as of September 30, 2020, noting no changes to our August 31, 2021 conclusion.

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 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.

Management's Discussion and Analysis

Non-GAAP Measures

11 unchanged sentences

GAAP measure, gross margin:

Reconciliation of refining margin to gross margin

Reconciliation of refining margin to gross margin (in millions)

Refining Segment

Three Months Ended June 30, Six Months Ended June 30,

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

2021 2020 2021 2020

14 unchanged sentences

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

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

1 unchanged sentence

Total operating costs and expenses (2)

Operating (loss) income (85.4) 22.8 (165.5) (338.7)

Total non-operating expense (income), net 33.1 (39.8) 56.7 (11.2)

(Loss) income before income tax benefit (118.5) 62.6 (222.2) (327.5)

Income tax benefit (46.0) (35.9) (58.4) (119.0)

Net (loss) income (72.5) 98.5 (163.8) (208.5)

2,910.7 2,138.1 7,659.9 5,833.5

Operating income (loss) (2)

45.8 (75.2) (119.7) (413.9)

Total non-operating expense, net 12.8 17.3 69.5 6.1

Income (loss) before income tax expense (benefit) 33.0 (92.5) (189.2) (420.0)

Income tax expense (benefit) 6.1 (15.6) (52.3) (134.6)

Net income (loss) 26.9 (76.9) (136.9) (285.4)

Net income attributed to non-controlling interests 8.8 11.2 24.7 29.4

Net (loss) income attributable to Delek $ (81.1) $ 87.7 $ (179.7) $ (226.7)

Net loss attributable to Delek $ 18.1 $ (88.1) $ (161.6) $ (314.8)

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

1 unchanged sentence

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

(2 ) As of September 30, 2021, we recorded an immaterial cumulative correction relating to prior periods to capitalize manufacturing overhead costs that should have been included in refining finished goods totaling $21.5 million.

The impact of the balance sheet error correction would not have been material to the prior periods presented and is not material to total inventory or to beginning retained earnings.

Of that amount, $14.0 million was recognized as a reduction of operating expenses and $7.5 million was recognized as a reduction of depreciation in the refining segment.

We report operating results in three reportable segments:

2 unchanged sentences

Results of Operations

Consolidated Results of Operations — Comparison of the Three and Six Months Ended June 30, 2021 versus the Three and Six Months Ended June 30, 2020

Consolidated net loss for the second quarter of 2021 was $72.5 million compared to net income of $98.5 million for the second quarter of 2020.

Consolidated net loss attributable to Delek for the second quarter of June 30, 2021 was $81.1 million, or $(1.10) per basic share, compared to net income of $87.7 million, or $1.19 per basic share, for the second quarter 2020.

Consolidated Results of Operations — Comparison of the Three and Nine Months Ended September 30, 2021 versus the Three and Nine Months Ended September 30, 2020

Consolidated net income for the third quarter of 2021 was $26.9 million compared to net loss of $76.9 million for the third quarter of 2020.

Consolidated net income attributable to Delek for the third quarter of September 30, 2021 was $18.1 million, or $0.24 per basic share, compared to net loss of $88.1 million, or $(1.20) per basic share, for the third 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 six months ended June 30, 2021 was $163.8 million compared to net loss of $208.5 million for the six months ended June 30, 2020.

Consolidated net loss attributable to Delek for the six months ended June 30, 2021 was $179.7 million, or $(2.43) per basic share, compared to a net loss of $226.7 million, or $(3.08) per basic share, for the six months ended June 30, 2020.

Consolidated net loss for the nine months ended September 30, 2021 was $136.9 million compared to net loss of $285.4 million for the nine months ended September 30, 2020.

Consolidated net loss attributable to Delek for the nine months ended September 30, 2021 was $161.6 million, or $(2.19) per basic share, compared to a net loss of $314.8 million, or $(4.28) per basic share, for the nine months ended September 30, 2020.

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

In the second quarters of 2021 and 2020, we generated net revenues of $2,191.5 million and $1,535.5 million, respectively, an increase of $656.0 million, or 42.7%.

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

Management's Discussion and Analysis

In the third quarters of 2021 and 2020, we generated net revenues of $2,956.5 million and $2,062.9 million, respectively, an increase of $893.6 million, or 43.3%.

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

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

Gulf Coast gasoline of 86.56%, ULSD of 79.25%, and HSD of 75.13%;

• in our logistics segment, increases in the average volumes of gasoline and diesel sold and in the average sales prices per gallon of gasoline and diesel sold in our West Texas marketing operations;

• in our logistics segment, increases in the average volumes of gasoline sold and in the average sales prices per gallon of gasoline and diesel sold in our West Texas marketing operations;

• in our retail segment, increases in fuel sales primarily attributable to a 47.9% increase in average price charged per gallon sold.

For the six months ended June 30, 2021 and 2020, we generated net revenues of $4,583.7 million and $3,356.7 million, respectively, an increase of $1,227.0 million, or 36.6%.

For the nine months ended September 30, 2021 and 2020, we generated net revenues of $7,540.2 million and $5,419.6 million, respectively, an increase of $2,120.6 million, or 39.1%.

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

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

Gulf Coast gasoline of 81.3%, ultra-low sulfur diesel of 54.0%, and high-sulfur diesel of 52.2%;

• in our logistics segment, increases in the average sales prices per gallon of gasoline and diesel sold in our West Texas marketing operations, as well increased revenues associated with agreements executed in six months ended June 30, 2020, partially offset by decreased throughputs due to the impact of Winter Storm Uri;

Gulf Coast gasoline of 83.2%, ULSD of 62.6%, and HSD of 60.1%;

• in our logistics segment, increases in the average sales prices per gallon of gasoline and diesel sold in our West Texas marketing operations, as well increased revenues associated with agreements executed in the nine months ended September 30, 2020, partially offset by decreased throughputs due to the impact of Winter Storm Uri;

• in our retail segment, increases in fuel sales primarily attributable to a 38.7% increase in average price charged per gallon sold.

1 unchanged sentence

Cost of Materials and Other

Cost of materials and other was $1,995.8 million for the second quarter of 2021 compared to $1,277.8 million for the second quarter of 2020, an increase of $718.0 million, or 56.2%.

Cost of materials and other was $2,670.1 million for the third quarter of 2021 compared to $1,875.9 million for the third quarter of 2020, an increase of $794.2 million, or 42.3%.

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 72.6% increase in the average cost of WTI Cushing crude oil and a 72.4% increase in the average cost of WTI Midland crude oil;

• increases in average RINs costs during the second quarter of 2021 compared to the second quarter of 2020;

• the benefit of $9.7 million related to the change in pre-tax inventory valuation recognized during the second quarter of 2021 compared to $203.1 million recognized during the second quarter of 2020;

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

• increases in average RINs costs during the third quarter of 2021 compared to the third quarter of 2020;

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

• an increase in retail cost of materials and other due to 56.0% increase in average cost per gallon sold applied to higher fuel sales volumes.

Such increases were partially offset by the following:

• a decrease in commodity hedging losses to a loss of $22.9 million recognized during the second quarter of 2021 from a loss of $153.7 million recognized during the second quarter of 2020.

Cost of materials and other was $4,201.3 million for the six months ended June 30, 2021 compared to $3,188.4 million for the six months ended June 30, 2020, an increase of $1,012.9 million, or 31.8%.

Cost of materials and other was $6,871.4 million for the nine months ended September 30, 2021 compared to $5,064.3 million for the nine months ended September 30, 2020, an increase of $1,807.1 million, or 35.7%.

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 67.0% increase in the average cost of WTI Cushing crude oil and a 68.0% increase in the average cost of WTI Midland crude oil;

• increases in average RINs costs during the six months ended June 30, 2021 compared to the six months ended June 30, 2020;

• an increase in hedging gains to a loss of $28.2 million recognized during the six months ended June 30, 2021 from a loss of $89.2 million recognized during the six months ended June 30, 2020;

• increases in average RINs costs during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020;

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

1 unchanged sentence

Such increases were partially offset by the following:

• the benefit (expense) of $30.1 million related to the change in pre-tax inventory valuation recognized during the six months ended June 30, 2021 compared to $(75.1) million recognized during the six months ended June 30, 2020.

• an increase in commodity hedging gains to a loss of $46.2 million recognized during the nine months ended September 30, 2021 from a loss of $85.2 million recognized during the nine months ended September 30, 2020;

• the benefit (expense) of $29.9 million related to the change in pre-tax inventory valuation recognized during the nine months ended September 30, 2021 compared to $(65.6) million recognized during the nine months ended September 30, 2020.

Management's Discussion and Analysis

Operating Expenses

Operating expenses were $161.1 million for the second quarter of 2021 compared to $127.8 million for the second quarter of 2020, an increase of $33.3 million, or 26.1%.

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

• an increase in variable costs partially due to higher natural gas and electric costs at our refineries as well as higher chemical and catalyst costs driven by lower comparable year period at our Krotz Springs refinery;

• increases in maintenance, outside services and lease costs due to continued costs associated with Winter Storm Uri as well as unit outages at certain of our refineries.

Operating expenses were $310.4 million for the six months ended June 30, 2021 compared to $282.3 million for the six months ended June 30, 2020, a increase of $28.1 million, or 10.0%.

Operating expenses were $122.8 million for the third quarter of 2021 compared to $139.7 million for the third quarter of 2020, a decrease of $16.9 million, or 12.1%.

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

• a one-time favorable adjustment of $14.0 million in the current period to reflect the cumulative error correction to capitalize manufacturing overhead in refining finished goods inventory;

• insurance recoveries of $17.0 million related to losses associated with Winter Storm Uri.

Such decreases were partially offset by the following:

• an increase in variable expenses due to natural gas pricing increases in the third quarter of 2021;

• increases in our logistics segment due to terminating certain cost cutting measures previously implemented in response to the Pandemic, as well as increased variable costs due to higher throughput;

• increases in our refining segment at our Krotz Springs refinery associated with new slurry operations and costs associated with Hurricane Ida.

Operating expenses were $433.2 million for the nine months ended September 30, 2021 compared to $422.0 million for the nine months ended September 30, 2020, an increase of $11.2 million, or 2.7%.

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

• an increase in variable expenses primarily associated with higher natural gas costs during the February 2021 severe freezing conditions that affected most of the regions where we operate;

• an increase in variable expenses primarily associated with higher natural gas costs during the February 2021 severe freezing conditions that affected most of the regions where we operate and higher natural gas pricing during the third quarter of 2021;

• an increase in Big Spring variable costs due to the refinery being shut down for turnaround activities during the first and second quarters of 2020;

• increases in maintenance, outside services and lease costs due to continued costs associated with Winter Storm Uri as well as unit outages at certain of our refineries.

Such increases were partially offset by the following:

• a decrease in expenses at our El Dorado refinery due to current year turnaround activities;

• decreases related to certain cost-cutting measures.

• a one-time favorable adjustment of $14.0 million in the third quarter of 2021 to reflect the cumulative error correction to capitalize manufacturing overhead in refining finished goods inventory;

• insurance recoveries of $17.0 million related to losses associated with Winter Storm Uri.

General and Administrative Expenses

General and administrative expenses were $58.6 million for the second quarter of 2021 compared to $61.7 million for the second quarter of 2020, a decrease of $3.1 million, or 5.0%.

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

• a decrease in contract services due to additional legal and consulting services associated with the drop downs in prior year and cost reduction measures.

General and administrative expenses were $105.7 million and $127.4 million for the six months ended June 30, 2021 and 2020, respectively, a decrease of $21.7 million, or 17.0%.

General and administrative expenses were $58.7 million for the third quarter of 2021 compared to $57.0 million for the third quarter of 2020, an increase of $1.7 million, or 3.0%.

General and administrative expenses were $164.4 million and $184.4 million for the nine months ended September 30, 2021 and 2020, respectively, a decrease of $20.0 million, or 10.8%.

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

• a decrease in employee expenses partially due to additional severance costs incurred in prior year and suspension of matching contributions to our 401(k) plan for the six months ended June 30, 2021 while the plan was still in place during the six months ended June 30, 2020;

• a decrease in employee expenses partially due to additional severance costs incurred in prior year and suspension of matching contributions to our 401(k) plan for the first half of 2021 while the plan was still in place during the nine months ended September 30, 2020;

• a decrease in contract services due to additional legal and consulting services associated with the drop downs in prior year and 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 $66.3 million for the second quarter of 2021 compared to $59.6 million for the second quarter of 2020, an increase of $6.7 million, or 11.2%.

This increase was primarily due to depreciation associated with assets added during the El Dorado refinery turnaround in the first quarter of 2021, as well as other refining assets placed in service.

Depreciation and amortization (included in both cost of sales and other operating expenses) was $134.8 million compared to $112.2 million for the six months ended June 30, 2021 and 2020, respectively, an increase of $22.6 million, or 20.1%, primarily due to depreciation associated with assets added during the Big Spring refinery turnaround in the first quarter of 2020 and the El Dorado refinery turnaround in 2021, as well as other refining assets placed in service.

Management's Discussion and Analysis

Depreciation and Amortization

Depreciation and amortization (included in both cost of sales and other operating expenses) was $60.8 million for the third quarter of 2021 compared to $65.2 million for the third quarter of 2020, a decrease of $4.4 million, or 6.7% primarily due to the following:

• a one-time favorable adjustment of $7.5 million in the current period to reflect the cumulative error correction to capitalize manufacturing overhead in refining finished goods inventory;

• an offsetting increase due to depreciation associated with assets added during the El Dorado refinery turnaround in the first quarter of 2021, as well as other refining assets placed in service.

Depreciation and amortization (included in both cost of sales and other operating expenses) was $195.6 million compared to $177.4 million for the nine months ended September 30, 2021 and 2020, respectively, an increase of $18.2 million, or 10.3%, primarily due to depreciation associated with assets added during the Big Spring refinery turnaround in the first quarter of 2020 and the El Dorado refinery turnaround in 2021, as well as other refining assets placed in service.

Other Operating Income, Net

Other operating income, net decreased by $9.3 million in the second quarter of 2021 to $4.9 million compared to $14.2 million in the second quarter of 2020.

Other operating income, net decreased by $11.9 million during the six months ended June 30, 2021 to $3.0 million compared to $14.9 million during the six months ended June 30, 2020.

Other operating income, net decreased by $2.0 million in the third quarter of 2021 to $1.7 million compared to a loss of $0.3 million in the third quarter of 2020.

Other operating income, net decreased by $9.9 million during the nine months ended September 30, 2021 to $4.7 million compared to $14.6 million during the nine months ended September 30, 2020 primarily due to unrealized gain of $10.6 million on the underlying commodity related tie the Strategic Petroleum Reserve financial asset during the prior year period.

Non-operating Expenses, Net

Interest Expense

Interest expense increased by $3.4 million, or 11.4%, to $33.2 million in the second quarter of 2021 compared to $29.8 million in the second quarter of 2020, primarily driven by the following:

• an increase in the average effective interest rate of 0.28% in the second quarter of 2021 compared to the second quarter of 2020 (where effective interest rate is calculated as interest expense divided by the net average borrowings/obligations outstanding);

• an increase in net average borrowings outstanding (including the obligations under the Supply and Offtake Agreements which have an associated interest charge) of approximately $128.7 million in the second quarter of 2021 (calculated as a simple average of beginning borrowings/obligations and ending borrowings/obligations for the period) compared to the second quarter of 2020.

Interest expense decreased by $3.3 million, or 5.0%, to $62.8 million during the six months ended June 30, 2021 compared to $66.1 million during the six months ended June 30, 2020, primarily driven by the following:

• a decrease in the average effective interest rate of 0.36% during the six months ended June 30, 2021 compared to the six months ended June 30, 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 $64.9 million during the six months ended June 30, 2021 (calculated as a simple average of beginning borrowings/obligations and ending borrowings/obligations for the period) compared to the six months ended June 30, 2020.

Interest expense increased by $5.8 million, or 18.2%, to $37.7 million in the third quarter of 2021 compared to $31.9 million in the third quarter of 2020, primarily driven by the following:

• an increase in the average effective interest rate of 0.96% in the third quarter of 2021 compared to the third quarter of 2020 (where effective interest rate is calculated as interest expense divided by the net average borrowings/obligations outstanding);

and partially offset by,

• a decrease in net average borrowings outstanding (including the obligations under the supply and offtake agreements which have an associated interest charge) of approximately $62.4 million in the third quarter of 2021 (calculated as a simple average of beginning borrowings/obligations and ending borrowings/obligations for the period) compared to the third quarter of 2020.

Interest expense increased by $2.5 million, or 2.6%, to $100.5 million during the nine months ended September 30, 2021 compared to $98.0 million during the nine months ended September 30, 2020, primarily driven by the following:

• an increase in the average effective interest rate of 0.07% during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 (where effective interest rate is calculated as interest expense divided by the net average borrowings/obligations outstanding);

• an increase in net average borrowings outstanding (including the obligations under the supply and offtake agreements which have an associated interest charge) of approximately $30.8 million during the nine months ended September 30, 2021 (calculated as a simple average of beginning borrowings/obligations and ending borrowings/obligations for the period) compared to the nine months ended September 30, 2020.

Results from Equity Method Investments

We recognized income of $6.8 million from equity method investments during the second quarter of 2021, compared to $10.7 million for the second quarter of 2020, a decrease of $3.9 million.

We recognized income of $2.9 million from equity method investments during the third quarter of 2021, compared to $12.8 million for the third quarter of 2020, a decrease of $9.9 million.

This decrease was primarily driven by the following:

• a decrease in income from our investment in W2W Holdings LLC to a loss of $3.9 million in the second quarter of 2021 from a loss of $0.9 million in the second quarter of 2020.

During the six months ended June 30, 2021, we recognized income of $11.6 million from equity method investments, compared to $15.8 million for the six months ended June 30, 2020, an decrease of $4.2 million.

Management's Discussion and Analysis

• a decrease in income from our investment in W2W Holdings LLC to a loss of $8.8 million in the third quarter of 2021 from income of $0.2 million in the third quarter of 2020.

During the nine months ended September 30, 2021, we recognized income of $14.5 million from equity method investments, compared to $28.6 million for the nine months ended September 30, 2020, an decrease of $14.1 million.

This decrease was primarily driven by the following:

• decrease in income from our logistics' equity method investments due to lower volumes as the impact of the February 2021 Winter Storm Uri was pervasive across all of our equity method investments' pipeline systems;

• a decrease in income from our investment in W2W Holdings LLC to a loss of $4.1 million in the second quarter of 2021 from a loss of $2.0 million in the second quarter of 2020.

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

• a decrease in income from our investment in W2W Holdings LLC to a loss of $12.9 million in the third quarter of 2021 from a loss of $1.8 million in the third quarter of 2020.

During the three and nine months ended September 30, 2021, we recognized a receivable of $27.5 million, $20.9 million of which is included as a gain in other income, related to payment to be received from a loan buy-out agreement between Wink to Webster Pipeline LLC and the Company.

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

Financial Statements, for additional information.

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.

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

Financial Statements, for additional information.

Management's Discussion and Analysis

Income tax benefit increased by $10.1 million in the second quarter of 2021 compared to the second quarter of 2020, primarily driven by the following:

• a pre-tax loss of $118.5 million in the second quarter of 2021, as compared to income of $62.6 million for the second quarter of 2020;

• an increase in our effective tax rate which was 38.8% for the second quarter of 2021, compared to (57.3)% for the second quarter of 2020 primarily due to the following:

◦ 2020 federal net operating loss carryback to a prior 35% tax rate year creating a 14% rate benefit reported as a discrete adjustment in the second quarter of 2020;

◦ changes in the second quarter estimated AETR applied to year-to-date loss for the second quarter of 2020 exceeded changes in AETR applied to year-to-date loss for the second quarter of 2021.

Income tax benefit decreased by $60.6 million during the six months ended June 30, 2021 compared to the same period for 2020, primarily driven by the following:

• pre-tax loss of $222.2 million in the six months ended June 30, 2021, as compared to pre-tax loss of $327.5 million for the six months ended June 30, 2020;

• a decrease in our effective tax rate which was 26.3% for the six months ended June 30, 2021, compared to 36.3% for the six months ended June 30, 2020 primarily due to the following:

◦ 2020 federal net operating loss carryback to a prior 35% tax rate year creating a 14% rate benefit reported as a discrete adjustment in the second quarter of 2020;

Income tax expense increased by $21.7 million in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

• pre-tax income of $33.0 million in the third quarter of 2021, as compared to loss of $92.5 million for the third quarter of 2020;

• an increase in our effective tax rate which was 18.5% for the third quarter of 2021, compared to 16.9% for the third quarter of 2020 primarily due to the following:

◦ the impact of credits and permanent differences on the tax rate due to changes in pre-tax book income;

◦ changes in the third quarter estimated AETR applied to year-to-date loss for the third quarter of 2020 exceeded changes in AETR applied to year-to-date loss for the third quarter of 2021;

◦ 2020 federal net operating loss carryback to a prior 35% tax rate year creating a 14% rate benefit reported in the third quarter of 2020.

Income tax benefit decreased by $82.3 million during the nine months ended September 30, 2021 compared to the same period for 2020, primarily driven by the following:

• pre-tax loss of $189.2 million in the nine months ended September 30, 2021, as compared to pre-tax loss of $420.0 million for the nine months ended September 30, 2020;

• a decrease in our effective tax rate which was 27.6% for the nine months ended September 30, 2021, compared to 32.0% for the nine months ended September 30, 2020 primarily due to the following:

◦ the reversal of a valuation allowance attributable to book-tax basis differences in partnership investments reported as a discrete benefit in the first quarter of 2020;

◦ 2020 federal net operating loss carryback to a prior 35% tax rate year creating a 14% rate benefit reported in the third quarter of 2020;

◦ the impact of credits and permanent differences on the tax rate due to changes in pre-tax book income.

Management's Discussion and Analysis

2 unchanged sentences

Refining Segment Margins

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

1 unchanged sentence

Cost of materials and other 2,640.4 1,479.2 6,609.9 4,314.4

2,321.8 928.6 3,969.5 2,835.2

Refining margin

4 unchanged sentences

$ 91.4 $ (17.8) $ 50.3 $ (248.5)

(1) As of September 30, 2021, we recorded an immaterial cumulative correction relating to prior periods to capitalize manufacturing overhead costs that should have been included in refining finished goods totaling $21.5 million.

The impact of the balance sheet error correction resulted in a reduction in operating expenses $14.0 million in the three and nine months ended September 30, 2021, and would not have been material to the prior periods presented.

Factors Impacting Refining Profitability

18 unchanged sentences

A discount in LLS relative to Brent will favorably influence the Krotz Springs refinery operating margin.

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.

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 largely depend on the factors discussed above.

Our retail merchandise sales are driven by convenience, customer service, competitive pricing and branding.

2 unchanged sentences

For that purpose, from a pricing perspective, we enter into

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

commodity derivative contracts to manage our price exposure to our inventory positions, future purchases of crude oil and ethanol, future sales of refined products or to fix margins on future production.

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.

7 unchanged sentences

Refinery Statistics

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

19 unchanged sentences

Tyler refining margin $ 7.03 $ (1.21) 6.52 $ 2.58

$ 5.20 $ 32.72 6.26 $ 4.62

Direct operating expenses $ 3.20 $ 3.28 3.42 $ 3.35

31 unchanged sentences

Refinery Statistics (continued)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

52 unchanged sentences

See tables below.

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

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

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

Management's Discussion and Analysis

1 unchanged sentence

Inter-refinery Sales

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

(in barrels per day) 2021 2020 2021 2020

5 unchanged sentences

Refinery Sales to Other Segments

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

(in barrels per day) 2021 2020 2021 2020

5 unchanged sentences

Pricing Statistics (average for the period presented)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

29 unchanged sentences

Management's Discussion and Analysis

Refining Segment Operational Comparison of the Three and Six Months Ended June 30, 2021 versus the Three and Six Months Ended June 30, 2020

Net revenues for the refining segment increased by $1,338.7 million, or 124.3%, in the second quarter of 2021 compared to the second quarter of 2020, primarily driven by the following:

Refining Segment Operational Comparison of the Three and Nine Months Ended September 30, 2021 versus the Three and Nine Months Ended September 30, 2020

Net revenues for the refining segment increased by $1,251.1 million, or 80.0%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

• increases in the average price of U.S.

1 unchanged sentence

• an increase in sales volumes of refined and purchased product of 1.3 million barrels and 0.1 million barrels, respectively.

Net revenues included sales to our retail segment of $91.8 million and $40.4 million, sales to our logistics segment of $74.1 million and $29.7 million, and sales to our other segment of $22.9 million and $5.0 million for the three months ended June 30, 2021 and June 30, 2020, respectively.

Net revenues included sales to our retail segment of $92.3 million and $57.6 million, sales to our logistics segment of $89.9 million and $45.1 million, and sales to our other segment of $28.7 million and $9.9 million for the three months ended September 30, 2021 and September 30, 2020, respectively.

We eliminate this intercompany revenue in consolidation.

Net revenues for the refining segment increased by $1,350.9 million, or 48.2%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily driven by the following:

Net revenues for the refining segment increased by $2,602.0 million, or 59.6%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

• increases in the average price of U.S.

1 unchanged sentence

• decreases in sales volume of refined product totaling 3.7 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 2.1 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 $161.5 million and $109.0 million, sales to our logistics segment of $139.9 million and $110.5 million and sales to our other segment of $43.0 million and $14.3 million for the six months ended June 30, 2021 and 2020, respectively.

Net revenues included sales to our retail segment of $253.8 million and $166.6 million, sales to our logistics segment of $229.8 million and $155.7 million and sales to our other segment of $71.7 million and $24.2 million for the nine months ended September 30, 2021 and 2020, respectively.

We eliminate this intercompany revenue in consolidation.

Cost of Materials and Other

Cost of materials and other increased by $1,393.2 million, or 150.0%, in the second quarter of 2021 compared to the second quarter of 2020, primarily driven by the following:

Cost of materials and other increased by $1,161.2 million, or 78.5%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

• increases in the cost of WTI Cushing crude oil, from an average of $40.88 per barrel to an average of $70.54, or 72.6%;

• increases in the cost of WTI Midland crude oil, from an average of $41.03 per barrel to an average of $70.74, or 72.4%;

• an increase attributable to the $9.6 million change in pre-tax inventory valuation benefit recognized during the second quarter of 2021 compared to $193.7 million recognized during the prior year period;

• increase in RINs costs from an average cost per RIN of $0.40 and $0.54 for ethanol and biodiesel RINs, respectively during the second quarter of 2020 to and average of $1.62 and $1.71 during the second quarter of 2021;

• increase in RINs costs from an average cost per RIN of $0.47 and $0.67 for ethanol and biodiesel RINs, respectively during the third quarter of 2020 to and average of $1.41 and $2.40 during the third quarter of 2021;

Management's Discussion and Analysis

• a 31% increase purchased product volumes sold.

These increases were partially offset by the following:

• a decrease in hedging losses to a loss $22.6 million recognized during the second quarter of 2021 from a loss of $146.8 million recognized during the second quarter of 2020.

Cost of materials and other increased by $1,134.3 million, or 40.0%, during the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily driven by the following:

• an increase in sales volumes.

Cost of materials and other increased by $2,295.5 million, or 53.2%, during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

• increases in the cost of WTI Cushing crude oil, from an average of $38.95 per barrel to an average of $65.06, or 67.0%;

• increases in the cost of WTI Midland crude oil, from an average of $38.98 per barrel to an average of $65.48, or 68.0%;

• increases in RINs costs from an average cost per RIN of $0.34 and $0.51 for ethanol and biodiesel RINs, respectively during the six months ended June 30, 2020 to an average of $1.34 and $1.44 during the six months ended June 30, 2021;

• a 31% increase purchased product volumes sold.

• increases in RINs costs from an average cost per RIN of $0.37 and $0.56 for ethanol and biodiesel RINs, respectively during the nine months ended September 30, 2020 to an average of $1.37 and $2.24 during the nine months ended September 30, 2021.

These increases were partially offset by the following:

• the benefit (expense) of $30.2 million related to the change in pre-tax inventory valuation recognized during the six months ended June 30, 2021 compared to $(75.3) million recognized during the six months ended June 30, 2020;

• a decrease in hedging losses to $27.6 million recognized during the six months ended June 30, 2021 as compared to $66.4 million recognized during the six months ended June 30, 2020.

• the benefit (expense) of $29.9 million related to the change in pre-tax inventory valuation recognized during the nine months ended September 30, 2021 compared to $(65.8) million recognized during the nine months ended September 30, 2020;

• a decrease in sales volumes;

• a decrease in hedging losses to $38.1 million recognized during the nine months ended September 30, 2021 as compared to $63.5 million recognized during the nine months ended September 30, 2020.

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 $101.9 million and $90.0 million during the second quarters of 2021 and 2020, respectively, and $197.7 million and $195.7 million during the six months ended June 30, 2021 and 2020, respectively.

These costs and fees were $109.3 million and $92.4 million during the third quarters of 2021 and 2020, respectively, and $307.0 million and $288.3 million during the nine months ended September 30, 2021 and 2020, respectively.

We eliminate these intercompany fees in consolidation.

Refining Margin

Refining margin decreased by $54.5 million, or 36.7%, in the second quarter of 2021 compared to the second quarter of 2020, primarily driven by the following:

• increases in average RINs costs in the second quarter of 2021 compared to the second quarter of 2020;

• a decrease attributable to the $9.6 million change in pre-tax inventory valuation benefit recognized during the second quarter of 2021 compared to $193.7 million recognized during the prior year period;

• a 31% increase purchased product volumes sold, while overall sales increased only 4%.

Such decrease was partially offset by the following:

Refining margin increased by $89.9 million, or 106.6%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

• a 163.7% improvement in the 5-3-2 crack spread (the primary measure for the Tyler refinery and El Dorado refinery), a 142.0% improvement in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery), and a 239.3% improvement in the average Gulf Coast 2-1-1 crack spread (the primary measure for the Krotz Springs refinery).

Such increase was partially offset by the following:

• increases in average RINs costs in the third quarter of 2021 compared to the third quarter of 2020;

• a $13.5 million decrease in hedging gains.

Management's Discussion and Analysis

Refining margin increased by $306.5 million, or 567.6%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

• a 102.4% improvement in the 5-3-2 crack spread (the primary measure for the Tyler refinery and El Dorado refinery), a 96.5% improvement in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery), and a 108.5% improvement in the average Gulf Coast 2-1-1 crack spread (the primary measure for the Krotz Springs refinery);

• a $25.4 million decrease in hedging losses;

Refining margin increased by $216.6 million, or 714.9%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily driven by the following:

• a 75.8% improvement in the 5-3-2 crack spread (the primary measure for the Tyler refinery and El Dorado refinery), a 75.8% decline in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery), and a 63.6% decline in the average Gulf Coast 2-1-1 crack spread (the primary measure for the Krotz Springs refinery);

• a $38.8 million decrease in hedging losses;

• an increase in reversal benefit of inventory valuation reserve of during the during the six months of 2021 compared to the prior year period.

• an increase in reversal benefit of inventory valuation reserve of during the during the nine months of 2021 compared to the prior year period.

These increases were partially offset by the following:

• increases in average RINs costs during the six months ended June 30, 2021 compared to the six months ended June 30, 2020;

• increases in average RINs costs during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020;

• a 20.4% increase purchased product volumes sold, while overall sales volumes decreased.

1 unchanged sentence

Operating Expenses

Operating expenses increased by $25.1 million, or 28.3%, in the second quarter of 2021 compared to the second quarter of 2020, primarily driven by the following:

• an increase outside services, maintenance and lease costs primarily due to continued repairs and equipment rentals related to Winter Storm Uri, unplanned unit outage at our Tyler refinery, and additional repairs at our Big Spring and Krotz Springs refineries;

• an increase in variable cost primarily due to increased catalyst cost incurred at our Krotz Springs refinery and higher natural gas costs.

Operating expenses increased by $27.0 million, or 13.5%, during the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily driven by the following:

• an increase outside services, maintenance and lease costs primarily due to continued repairs and equipment rentals related to Winter Storm Uri;

• an increase in utilities costs primarily associated with higher natural gas costs during the February 2021 related to Winter Storm Uri.

Such increases were offset by the following:

• a decrease in variable costs at our El Dorado refinery due to turnaround activities during the six months ended June 30, 2020

Operating expenses decreased by $19.3 million, or 18.9%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

• a one-time favorable adjustment of $14.0 million in the current period to reflect the cumulative error correction to capitalize manufacturing overhead in refining finished goods inventory;

• insurance recoveries of $17.0 million related to losses associated with Winter Storm Uri.

Such decreases were offset by the following:

• an increase in variable expenses due to natural gas pricing increases in the third quarter of 2021;

• increases at our Krotz Spring refinery due to additional costs incurred as a result of Hurricane Ida, and higher operating expenses due to slurry operations which did not exist in the third quarter of 2020.

Operating expenses increased by $7.7 million, or 2.5%, during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

• an increase in outside services, maintenance and lease costs primarily due to continued repairs and equipment rentals related to Winter Storm Uri;

• an increase in Big Spring variable costs due to the refinery being shut down for turnaround activities during the first and second quarters of 2020;

Management's Discussion and Analysis

• an increase in utilities costs primarily associated with higher natural gas costs during the February 2021 related to Winter Storm Uri and pricing increases in the third quarter of 2021.

Such increases were offset by the following:

• a one-time favorable adjustment of $14.0 million in the third quarter of 2021 to reflect the cumulative error correction to capitalize manufacturing overhead in refining finished goods inventory;

• insurance recoveries of $17.0 million related to losses associated with Winter Storm Uri.

Contribution Margin

Contribution margin decreased by $79.6 million, or a 6.4% decline in contribution margin percentage, in the second quarter of 2021 compared to the second quarter of 2020, primarily driven by the following:

• a decrease in refining margin primarily driven by higher average RINs costs, a decrease in reversal benefit related to inventory valuation reserve and higher percentage of purchased product sold, partially offset by improved crack spreads and decrease in hedging losses;

• an increase in operating expenses of $25.1 million, or 28.3%.

Contribution margin increased by $189.6 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily driven by the following:

Contribution margin increased by $109.2 million, or a 4.4% improvement in contribution margin percentage, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

• an increase in refining margin primarily driven by improved crack spreads, partially offset by higher average RINs costs and a decrease in hedging gains;

• a decrease in operating expenses of $19.3 million, or 18.9%.

Contribution margin increased by $298.8 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

• an increase in refining margin primarily driven by an overall increase in the average crack spreads, an increase in reversal benefit related to inventory valuation reserves and decrease in hedging losses, partially offset by higher percentage of purchased product sold and increase in average RINs cost.

5 unchanged sentences

Logistics Contribution Margin and Operating Information

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

31 unchanged sentences

(3) Prior-year period throughputs for the Big Spring Gathering Assets are for the 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 Six Months Ended June 30, 2021 versus the Three and Six Months Ended June 30, 2020

Net revenues increased by $50.8 million, or 43.2%, in the second quarter of 2021 compared to the second quarter of 2020, primarily driven by the following:

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

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

Financial Statements, for additional information.

• increases in the average volumes of gasoline and diesel sold and 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 0.3 million gallons and 0.7 million gallons, respectively.

Logistics Segment Operational Comparison of the Three and Nine Months Ended September 30, 2021 versus the Three and Nine Months Ended September 30, 2020

Net revenues increased by $47.4 million, or 33.3%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

• increased revenues at our Big Spring Refinery Crude Pipeline (the "BSR Crude Pipeline"), as a result of new contracts executed in the second quarter of 2020, which had higher throughput volumes during the third quarter of 2021 compared to the third quarter of 2020;

• increased revenues for the Trucking assets, due to higher volumes transported from El Dorado;

• increase in revenues for the Paline pipeline and Plains connection system, due to higher throughput volumes;

• increases in the average volumes of gasoline sold and in the average sales prices per gallon of gasoline and diesel sold in our West Texas marketing operations as follows:

◦ the average sales prices of gasoline and diesel sold increased by $0.93 per gallon and $0.95 per gallon, respectively;

Net revenues included sales to our refining segment of $101.9 million and $90.0 million for the three months ended June 30, 2021 and June 30, 2020, respectively, and sales to our other segment of $0.5 million and $0.4 million for the three months ended June 30, 2021 and 2020, respectively.

◦ the average volumes of gasoline sold increased by 2.9 million gallons, while diesel volumes sold decreased 0.5 million gallons.

Net revenues included sales to our refining segment of $109.3 million and $92.4 million for the three months ended September 30, 2021 and September 30, 2020, respectively, and sales to our other segment of $0.5 million and $0.4 million for the three months ended September 30, 2021 and 2020, respectively.

We eliminate this intercompany revenue in consolidation.

Net revenues increased by $40.3 million, or 14.3%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily driven by the following:

Management's Discussion and Analysis

Net revenues increased by $87.7 million, or 20.7%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, 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 March 31, 2020 and May 1, 2020, respectively.

1 unchanged sentence

Financial Statements, for additional information;

• increased revenues at our Big Spring Refinery Crude Pipeline (the "BSR Crude Pipeline"), as a result of new contracts executed in the second quarter of 2020, during the six months ended June 30, 2021 when compared to the six months ended June 30, 2020.

• increased revenues at our BSR Crude Pipeline, as a result of new contracts executed in the second quarter of 2020;

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

◦ the average sales prices per gallon of gasoline and diesel sold increased $0.69 per gallon and $0.69 per gallon, respectively;

◦ the average volumes of gasoline sold increased 13.6 million gallons, partially offset by a 8.5 million decrease of diesel gallons sold.

◦ the average volumes of gasoline sold decreased 10.7 million gallons, partially offset by a 9.0 million decrease of diesel gallons sold.

Such increases were partially offset by the following:

• 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 six months ended June 30, 2021 when compared to the six months ended June 30, 2020.

• 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 nine months ended September 30, 2021 when compared to the nine months ended September 30, 2020.

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

Net revenues included sales to our refining segment of $197.7 million and $195.7 million for the six months ended June 30, 2021 and 2020, respectively, and sales to our other segment of $0.9 million and $1.2 million for the six months ended June 30, 2021 and 2020, respectively.

Net revenues included sales to our refining segment of $307.0 million and $288.3 million for the nine months ended September 30, 2021 and 2020, respectively, and sales to our other segment of $1.4 million and $1.6 million for the nine months ended September 30, 2021 and 2020, respectively.

We eliminate this intercompany revenue in consolidation.

1 unchanged sentence

Cost of Materials and Other

Cost of materials and other for the logistics segment increased $44.9 million, or 102.3%, in the second quarter of 2021 compared to the second quarter of 2020 primarily driven by the following:

• increases in the average cost per gallon of gasoline and diesel sold, and increases in the volume of diesel and gasoline sold in our West Texas marketing operations:

◦ the average volumes of gasoline and diesel sold increased by 0.3 million gallons and 0.7 million gallons, respectively.

Cost of materials and other for the logistics segment increased $44.4 million, or 73.1%, in the third quarter of 2021 compared to the third quarter of 2020 primarily driven by the following:

• increases in the average cost per gallon of gasoline and diesel sold, and increases in the volume of gasoline sold in our West Texas marketing operations:

◦ the average cost per gallon of gasoline and diesel sold increased $1.01 per gallon and $0.96 per gallon, respectively;

Our logistics segment purchased product from our refining segment of $74.1 million and $29.7 million for the three months ended June 30, 2021 and June 30, 2020, respectively.

◦ the average volumes of gasoline increased by 2.9 million gallons, while diesel volumes sold decreased by 0.5 million gallons.

Our logistics segment purchased product from our refining segment of $89.9 million and $45.1 million for the three months ended September 30, 2021 and September 30, 2020, respectively.

We eliminate these intercompany costs in consolidation.

Cost of materials and other for the logistics segment increased $24.7 million, or 17.0%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020 primarily driven by the following:

Cost of materials and other for the logistics segment increased $69.1 million, or 33.6%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily driven by the following:

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

◦ the average cost per gallon of gasoline and diesel sold increased $0.75 per gallon and $0.68 per gallon, respectively;

◦ the average volumes of gasoline sold increased 13.6 million gallons, partially offset by a 8.5 million decrease of diesel gallons sold.

Our logistics segment purchased product from our refining segment of $139.9 million and $110.5 million for the six months ended June 30, 2021 and June 30, 2020, respectively.

◦ the average volumes of gasoline and diesel sold increased by 10.7 million gallons and 9.0 million gallons, respectively.

Our logistics segment purchased product from our refining segment of $229.8 million and $155.7 million for the nine months ended September 30, 2021 and September 30, 2020, respectively.

We eliminate these intercompany costs in consolidation.

Operating Expenses

Operating expenses increased by $3.1 million, or 25.0%, in the second quarter of 2021 compared to the second quarter of 2020, driven by the following:

• increases in employee and outside service costs due to reduction of cost cutting measures were implemented to respond to the COVID-19 Pandemic such as delaying non-essential projects;

• increases in utilities and other variable expenses due to higher throughput.

Operating expenses increased by $2.4 million, or 8.8%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, driven by the following:

• increases in employee and outside service costs due to the reduction of cost cutting measures were implemented to respond to the COVID-19 Pandemic such as delaying non-essential projects;

Operating expenses increased by $3.0 million, or 21.0%, in the third quarter of 2021 compared to the third quarter of 2020, driven by the following:

• increases in employee and outside service costs after cost cutting measures previously implemented to respond to the COVID-19 Pandemic, including delaying non-essential projects, ended;

• increase in energy costs, due to higher natural gas prices;

• increases in utilities, maintenance and other variable expenses due to higher throughput.

Operating expenses increased by $5.4 million, or 13.0%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, driven by the following:

• increases in employee and outside service costs after cost cutting measures implemented to respond to the COVID-19 Pandemic, including delaying non-essential projects, ended;

Management's Discussion and Analysis

• increase in energy costs due to higher natural gas prices;

• increases in variable expenses such as maintenance and materials costs due to higher throughput;

1 unchanged sentence

Contribution Margin

Contribution margin increased by $2.8 million, or 4.6%, in the second quarter of 2021 compared to the second quarter of 2020, primarily driven by the following:

• an increase in volumes sold and increase in gross margin of $3.60 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.

Such increases were partially offset by the following:

• an increase in operating expenses.

Contribution margin increased by $13.2 million, or 12.1%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily driven by the following:

Contribution margin remained stable at $67.2 million in the third quarter of 2021 compared to the third quarter of 2020 as increases in gross margin were offset by higher operating costs.

Contribution margin increased by $13.2 million, or 7.5%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

• an increase in gross margin of $1.27 per barrel in our West Texas marketing operations;

7 unchanged sentences

Retail Contribution Margins

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

30 unchanged sentences

Same-Store Comparison (2)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

6 unchanged sentences

(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 and Six Months Ended June 30, 2021 versus the Three and Six Months Ended June 30, 2020

Net revenues for the retail segment increased by $43.6 million, or 26.4%, in the second quarter of 2021 compared to the second quarter of 2020, primarily driven by the following:

• an increase in total fuel sales which were $124.5 million in the second quarter of 2021 compared to $75.9 million in the second quarter of 2020, primarily attributable to an increase of $1.11 in average price charged per gallon sold;

• slightly offset by a decrease in merchandise sales to $84.5 million in the second quarter of 2021 compared to $89.4 million in the second quarter of 2020 attributable to a same-store sales decrease of 5.4%.

Retail Segment Operational Comparison of the Three and Nine Months Ended September 30, 2021 versus the Three and Nine Months Ended September 30, 2020

Net revenues for the retail segment increased by $28.8 million, or 16.2%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

• an increase in total fuel sales which were $124.9 million in the third quarter of 2021 compared to $90.9 million in the third quarter of 2020, primarily attributable to an increase of $0.96 in average price charged per gallon sold;

• slightly offset by a decrease in merchandise sales to $81.7 million in the third quarter of 2021 compared to $86.8 million in the third quarter of 2020 attributable to a same-store sales decrease of 7.1%.

Management's Discussion and Analysis

Net revenues for the retail segment increased by $39.8 million, or 11.6%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily driven by the following:

• an increase in total fuel sales which were $224.6 million in the six months of 2021 compared to $182.9 million in the six months of 2020, primarily attributable to a $0.69 increase in average price charged per gallon sold, slightly offset by a decrease in total retail fuel gallons sold;

• slightly offset by a decrease in merchandise sales to $159.2 million in the six months of 2021 compared to $161.1 million in the six months of 2020, primarily driven by the same-store sales decrease of 1.9%

Net revenues for the retail segment increased by $68.6 million, or 13.1%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

• an increase in total fuel sales which were $349.5 million in the nine months of 2021 compared to $273.8 million in the nine months of 2020, primarily attributable to a $0.78 increase in average price charged per gallon sold, slightly offset by a decrease in total retail fuel gallons sold;

• slightly offset by a decrease in merchandise sales to $240.9 million in the nine months of 2021 compared to $247.9 million in the nine months of 2020, primarily driven by the same-store sales decrease of 3.1%.

Cost of Materials and Other

Cost of materials and other for the retail segment increased by $45.1 million, or 37.7%, in the second quarter of 2021 compared to the second quarter of 2020, primarily driven by the following:

• an increase in average cost per gallon of $1.16 or 86.5% applied to fuel sales volumes that increased period over period.

Our retail segment purchased finished product from our refining segment of $91.8 million and $40.4 million for the three months ended June 30, 2021 and June 30, 2020, respectively.

Cost of materials and other for the retail segment increased by $28.9 million, or 21.2%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

• an increase in average cost per gallon of $0.95 or 56.0% applied to fuel sales volumes that decreased period over period.

Our retail segment purchased finished product from our refining segment of $92.3 million and $57.6 million for the three months ended September 30, 2021 and September 30, 2020, respectively.

We eliminate this intercompany cost in consolidation.

Cost of materials and other for the retail segment increased by $37.5 million, or 14.2%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily driven by the following:

• an increase in average cost per gallon of $0.69 or 41.9% applied to fuel sales volumes that decreased slightly period over period.

Our retail segment purchased finished product from our refining segment of $161.5 million and $109.0 million for the six months ended June 30, 2021 and June 30, 2020, respectively.

Cost of materials and other for the retail segment increased by $66.4 million, or 16.6%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

• an increase in average cost per gallon of $0.78 or 46.6% applied to fuel sales volumes that decreased period over period.

Our retail segment purchased finished product from our refining segment of $253.8 million and $166.6 million for the nine months ended September 30, 2021 and September 30, 2020, respectively.

We eliminate this intercompany cost in consolidation.

1 unchanged sentence

Operating Expenses

Operating expenses for the retail segment increased by $0.9 million, or 4.2% in the second quarter of 2021 compared to the second quarter of 2020.

Operating expenses for the retail segment increased by $0.1 million, or 0.2% in the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

Operating expenses for the retail segment increased by $0.3 million, or 1.3% in the third quarter of 2021 compared to the third quarter of 2020.

Operating expenses for the retail segment increased by $0.4 million, or 0.6% in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

Contribution Margin

Contribution margin for the retail segment decreased by $2.4 million, or 9.9%, in the second quarter of 2021 compared to the second quarter of 2020, primarily driven by the following:

• a decrease in average fuel margin of $0.0570 per gallon;

Contribution margin for the retail segment decreased by $0.4 million, or 2.2%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

• a 5.9% decrease in merchandise sales, offset by an improvement in merchandise margin percentage of 2.1%;

• and a 4.2% increase in operating expenses.

Contribution margin for the retail segment increased by $2.2 million, or 6.0%, in the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily driven by a 1.6% increase in merchandise margin.

• a decrease in fuel sales volume, partially offset by increase in average fuel margin of $0.016 per gallon.

Contribution margin for the retail segment increased by $1.8 million, or 3.3%, in the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily driven by the following:

• 2.8% decrease in merchandise sales, partially offset by an improvement in merchandise margin percentage of 1.8%;

• a decrease in fuel sales volume, partially offset by increase in average fuel margin of $0.004 per gallon.

Management's Discussion and Analysis

Liquidity and Capital Resources

3 unchanged sentences

• potential issuances of additional equity and debt securities.

At June 30, 2021 our total liquidity amounted to $2.1 billion comprised primarily of $694.1 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.

At September 30, 2021 our total liquidity amounted to $2.1 billion comprised primarily of $721.7 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), $589.1 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.

2 unchanged sentences

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

Management's Discussion and Analysis

acquisitions.

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

6 unchanged sentences

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

As of June 30, 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.

As of September 30, 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 uncertainty created by the COVID-19 Pandemic on our operations, we currently expect to remain in compliance with our existing debt maintenance covenants, though we can provide no assurances, particularly if conditions significantly worsen beyond our ability to predict.

Additionally, we were in compliance with incurrence covenants during the quarter ended June 30, 2021 to the extent that any of our activities triggered these covenants.

Additionally, we were in compliance with incurrence covenants during the quarter ended September 30, 2021 to the extent that any of our activities triggered these covenants.

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

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

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

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

Such restrictions would generally remain in place until such quarter that we are able to satisfy the applicable incurrence based covenants.

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

1 unchanged sentence

Financial Statements);

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.

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

Financial Statements);

1 unchanged sentence

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

Six Months Ended June 30,

Nine Months Ended September 30,

Cash Flow Data:

4 unchanged sentences

Cash Flows from Operating Activities

Net cash provided by operating activities was $134.9 million for the six months ended June 30, 2021, compared to net cash used of $323.1 million for the comparable period of 2020.

Net cash provided by operating activities was $210.2 million for the nine months ended September 30, 2021, compared to net cash used of $399.8 million for the comparable period of 2020.

Cash receipts from customers and cash payments to suppliers and for salaries increased resulting in a net $601.4 million increase in cash provided by operating activities.

2 unchanged sentences

Cash Flows from Investing Activities

Net cash used in investing activities was $118.7 million for the first six months of 2021, compared to $155.9 million in the comparable period of 2020.

Net cash used in investing activities was $143.2 million for the first nine months of 2021, compared to $163.0 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 $241.7 million in 2020, to $163.1 million in 2021, partially attributable to delaying non-essential projects in light of the COVID-19 Pandemic.

Additionally, equity method investment contributions decreased $29.2 million primarily due to contributions made related to our Red River Pipeline Joint Venture and WWP Project Financing JV (each as defined in Note 5 of the condensed consolidated financial statements in Item 1.

Financial Statements) for $10.5 million and $18.9 million, respectively, during the six months ended June 30, 2020.

During the six months ended June 30, 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.

Financial Statements) for $11.8 million and $18.9 million, respectively, during the nine months ended September 30, 2020.

During the nine months ended September 30, 2021, we contributed $1.4 million related to our Red River Pipeline Joint Venture and $0.2 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 and proceeds of $39.9 million from the sale of the Bakersfield refinery in the prior year for which there was no comparable activity in the current year period.

Cash Flows from Financing Activities

Net cash provided by financing activities was $29.3 million for the six months ended June 30, 2021, compared to $372.7 million in the comparable 2020 period.

This decrease in cash provided was predominantly due to net payments on long-term revolvers and term debt of $101.5 million during the six months ended June 30, 2021, compared to net proceeds of $385.4 million in the comparable 2020 period.

Such decreases were partially offset by an increase in net proceeds from inventory financing arrangements to $156.0 million for the six months ended June 30, 2021 compared to $59.9 million in the comparable 2020 period.

Net cash used in financing activities was $23.9 million for the nine months ended September 30, 2021, compared to cash provided of $415.4 million in the comparable 2020 period.

This decrease in cash provided was predominantly due to net payments on long-term revolvers and term debt of $125.8 million during the nine months ended September 30, 2021, compared to net proceeds of $402.7 million in the comparable 2020 period.

Such decreases were partially offset by an increase in net proceeds from inventory financing arrangements to $135.6 million for the nine months ended September 30, 2021 compared to $142.6 million in the comparable 2020 period.

Additionally, cash provided increased $69.0 million due to suspension of dividends in the fourth quarter of 2020.

Cash Position, Indebtedness and Other Financing Arrangements

As of June 30, 2021, our total cash and cash equivalents were $833.0 million and we had total long-term indebtedness of approximately $2,244.3 million.

As of September 30, 2021, our total cash and cash equivalents were $830.6 million and we had total long-term indebtedness of approximately $2,222.2 million.

The total long-term indebtedness is net of deferred financing costs and debt discount of $11.1 million and $20.2 million, respectively.

8 unchanged sentences

• 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%;

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

• the Revolving Credit Facility, due on March 30, 2023, with borrowing rate of 3.50% for base rate loans, and no principal amount outstanding.

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

3 unchanged sentences

Our supply and offtake obligation with J.

Aron amounted to $496.3 million at June 30, 2021, $329.0 million of which is due on December 30, 2022, except that a portion (not to exceed $28.6 million) of this otherwise long-term component is subject to potential earlier payment under the Periodic Price Adjustment provision.

Aron amounted to $478.5 million at September 30, 2021, $329.8 million of which is due on December 30, 2022, except that a portion (not to exceed $28.6 million, net of the $10.0 million settlement threshold) 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.

Our product financing liabilities consisted primarily of RIN financings as of June 30, 2021, and totaled $358.8 million, all of which is due by December 31, 2021.

Our product financing liabilities consisted primarily of RIN financings as of September 30, 2021, and totaled $342.5 million, all of which is due by December 31, 2021.

See further description of these types of arrangements in the Environmental Credits and Related Regulatory Obligations accounting policy disclosed in Note 2 to our audited consolidated financial statements included Item 8.

1 unchanged sentence

For both arrangements and the related commitments, see also our "Contractual Obligations" section included in Item 2.

Management's Discussion and and Analysis.

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 six months ended June 30, 2021 were $132.7 million, of which approximately $118.5 million was spent in our refining segment, $10.4 million in our logistics segment, $1.3 million in our retail segment and $2.5 million at the holding company level.

The following table summarizes our actual capital expenditures for the six months ended June 30, 2021 and planned capital expenditures for the full year 2021 by operating segment and major category (in millions):

2021 Forecast Six Months Ended June 30, 2021

Our capital expenditures for the nine months ended September 30, 2021 were $161.6 million, of which approximately $133.0 million was spent in our refining segment, $14.6 million in our logistics segment, $3.2 million in our retail segment and $10.8 million primarily at the holding company level.

The following table summarizes our actual capital expenditures for the nine months ended September 30, 2021 and planned capital expenditures for the full year 2021 by operating segment and major category (in millions):

2021 Forecast Nine Months Ended September 30, 2021

Sustaining maintenance, including turnaround activities (1)

$ 153.6 $ 131.5

Regulatory 1.7 1.3

Discretionary projects 0.2 0.2

Refining segment total 155.5 133.0

Regulatory 3.4 1.4

Sustaining maintenance 1.6 1.2

1 unchanged sentence

Logistics segment total 24.6 14.6

Regulatory — —

Sustaining maintenance 2.8 2.0

1 unchanged sentence

Retail segment total 4.9 3.2

Regulatory 4.3 3.5

Sustaining maintenance 12.5 5.8

2 unchanged sentences

Total capital spending $ 207.0 $ 161.6

(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.

Management's Discussion and Analysis

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.

4 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis