What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-05 compared with 2021-11-05 · 365 added, 627 removed, 563 unchanged (64% of the section changed)

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

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

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

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

Forward-looking statements include, among other things, statements regarding the effect, impact, potential duration or other implications of, or expectations expressed with respect to, the outbreak of COVID-19, its development into a pandemic in March 2020, and any subsequent mutation of COVID-19 into one or more variants (the "COVID-19 Pandemic" or the "Pandemic") and the actions of members of the Organization of Petroleum Exporting Countries ("OPEC") and other leading oil producing countries (together with OPEC, “OPEC+”), with respect to oil production and pricing, and statements regarding our efforts and plans in response to such events, the information concerning our planned capital expenditures by segment for 2021, possible future results of operations, business and growth strategies, financing plans, expectations that regulatory developments or other matters will or will not have a material adverse effect on our business or financial condition, our competitive position and the effects of competition, the projected growth of the industry in which we operate, and the benefits and synergies to be obtained from our completed and any future acquisitions, statements of management’s goals and objectives, and other similar expressions concerning matters that are not historical facts.

Forward-looking statements include, among other things, statements that refer to the previously announced proposed acquisition of 3 Bear Delaware Holding – NM, LLC (the “3 Bear Acquisition”), including any statements regarding the expected timing, benefits, synergies, growth opportunities, impact on liquidity and prospects, and other financial and operating benefits thereof, and the timing or satisfaction of regulatory and other closing conditions and the closing of the 3 Bear Acquisition, statements regarding the effect, impact, potential duration or other implications of, or expectations expressed with respect to, the outbreak of COVID-19 and its development into a pandemic in early 2020 (the "COVID-19 Pandemic" or the "Pandemic") and its impact on oil production and pricing, and statements regarding our efforts and plans in response to such events, the information concerning possible future results of operations, business and growth strategies, including as the same may be impacted by the attack on Ukraine by Russia in February 2022 (the "Russia-Ukraine War"), financing plans, expectations that regulatory developments or other matters will or will not have a material adverse effect on our business or financial condition, our competitive position and the effects of competition, the projected growth of the industry in which we operate, and the benefits and synergies to be obtained from our completed and any future acquisitions, statements of management’s goals and objectives, and other similar expressions concerning matters that are not historical facts.

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

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• changes in, or the failure to comply with, the extensive government regulations applicable to our industry segments, including current and future restrictions on commercial and economic activities in response to the COVID-19 Pandemic or future pandemics;

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

• our ability to execute our strategy of growth through acquisitions, such as the 3 Bear Acquisition, and capital projects and changes in the expected value of and benefits derived therefrom, including any ability to successfully integrate acquisitions, realize expected synergies or achieve operational efficiency and effectiveness;

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

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

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

Management's Discussion and Analysis

regarding the timing, pace and extent of economic recovery in the United States ("U.S.") due to the COVID-19 Pandemic;

timing, pace and extent of economic recovery in the United States ("U.S.") due to the COVID-19 Pandemic;

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

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• seasonality;

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

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

• increased costs of compliance with, or liability for violation of, existing or future laws, regulations and other requirements;

• legislative and regulatory measures to address climate change and greenhouse gases emissions;

• acts of terrorism (including cyber-terrorism) aimed at either our facilities or other facilities;

• impacts of global conflicts;

• future decisions by the Organization of Petroleum Exporting Countries ("OPEC") and the members of other leading oil producing countries (together with OPEC, “OPEC+”) regarding production and pricing and disputes between OPEC+ members regarding the same;

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

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

The Impact of the COVID-19 Pandemic

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

and specific geographic areas where we operate.

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

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

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

to many parts of the world.

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

As a result, and particularly during 2020, we experienced a decline in the demand for, and thus also the market prices of, crude oil and certain of our products, particularly our refined petroleum products and most notably gasoline and jet fuel.

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

resulting from over-supply

Management's Discussion and Analysis

of produced oil.

Additionally, significant environmental events, such as extreme weather conditions or natural disasters can impact pipeline accessibility and utilization, other supply sources, as well as demand.

While in the last several months, we have seen successful domestic efforts to distribute the COVID-19 vaccine across the U.S., which has led to some improved stability in the capital markets as well as improved pricing in crude oil, refined products, and related forward curves, there continues to be general economic uncertainty, and, accordingly, demand for refined product and for our logistics assets has not yet returned to normal levels.

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 near term.

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

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

They are as follows:

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

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

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

• The decline in demand and margins impacting current results and forecasts could result in impairments in certain of our long-lived or indefinite-lived assets, including goodwill, or have other financial statement impacts that cannot currently be anticipated (see also Note 1 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional discussion of specific financial statement risks);

• A significant reduction or suspension in U.S.

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

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

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

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

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

• Equity method investees may be significantly impacted by the COVID-19 Pandemic which may increase the risk of impairment of those investments;

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

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

Federal Government has enacted certain stimulus and relief measures and may consider additional relief legislation.

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

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

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

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

To the extent these uncertainties have been identified and are believed to have an impact on our current period results of operations or financial position based on the requirements for assessing such financial statement impact under U.S.

Generally Accepted Accounting

Management's Discussion and Analysis

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.

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

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

Business and Economic Environment Overview

During the first quarter 2022, the economy has continued to recover from the impact of the COVID-19 Pandemic (the "Pandemic"), both globally and domestically.

The widespread availability of vaccines and testing in the U.S.

has contributed to stabilization in cases of COVID-19 and decreasing mortality rates across much of the country during recent months, and likewise has led to return to work, return to schools, and increased travel.

These conditions have, in turn, contributed to improvements in domestic demand and refining margins heading into 2022 and during the first quarter.

Additionally, while the recent and on-going Russia-Ukraine War has caused uncertainty in the geopolitical landscape and across global markets, constraints on crude oil supply resulting from sanctions on Russia have contributed to significant increases in both crude oil prices and crack spreads.

These conditions contributed to a significant improvement in our refining operating results in the first quarter of 2022 compared to the prior year period.

Further impacting the favorability of our current quarter results were significant improvements in our refining utilization rates, where last year we had outages related to turnaround activities, a fire at our El Dorado refinery and the effects of Winter Storm Uri.

Supported by strong performance in both our logistics and retail segments as well, and despite the continued impact of RINs costs on our crack spread capture rates, our operating results were significantly improved during the quarter ended March 31, 2022 compared to the quarter ended March 31, 2021.

We continue to monitor both the Pandemic and the geopolitical environment and the related uncertainties so that we may quickly implement measures to mitigate resultant risk, as needed.

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

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

Management's Discussion and Analysis

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

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

• Reducing discretionary capital expenditures;

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

• Taking advantage of the income and payroll tax relief afforded to us by the Coronavirus Aid Relief, and Economic Security Act (the "CARES Act") or other Pandemic relief legislation;

• Implementing regular site cleaning and disinfecting procedures;

• Adopting remote working where possible and when immediate exposure risk warrants, and where on-site operations are required, taking appropriate safety precautions;

• Continued monitoring of capital expenditures;

• Continuing to evaluate the suspension of the share repurchase program and dividend distributions until our internal parameters are met for resuming such activities;

• Adopting modified 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;

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

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

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

Additionally, we recorded a current income tax receivable of $135.6 million and a non-current tax receivable of $20.6 million as of December 31, 2020, related to the net operating loss carryback, all of which was received in the third quarter of 2021.

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

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

MD&A for further information.

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

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

We completed this turnaround work late in the first quarter 2021 and have since returned to normalized production.

• 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 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.

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.

As evidenced by our successful implementation of these risk mitigation activities during 2020 and 2021, we believe these strategies continue to be appropriately risk-responsive to mitigate the uncertainties related to the Pandemic and the Russia-Urkaine War and their potential impact on our cash flows and results of operations in the near term, including with respect to our liquidity positioning, operational flexibility and ability to respond to a reasonable degree of economic volatility.

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

MD&A for further information.

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

additional actions by businesses and governments in response to the

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.

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

Other Significant Events

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

Due to the extreme freezing conditions, and despite the acceleration of planned and ongoing turnaround work at the El Dorado and Krotz Spring refineries (which provided some mitigation), we experienced reduced throughputs at our refineries as there was a disruption in the crude supply, increases in natural gas costs, as well as damages to various units at our refineries requiring additional operating and capital expenditures.

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

Our on-site emergency response team, with the assistance of the El Dorado Fire Department, extinguished the fire, and we immediately began to monitor the air quality within the refinery and the community.

The incident 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 September 30, 2021.

The refining segment has a combined nameplate capacity of 302,000 barrels per day as of March 31, 2022.

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

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Gulf Coast 2-1-1 (4)

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

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

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

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

(1) While the El Dorado refinery has a total nameplate capacity of 80,000 bpd, in order to qualify for the small refinery exemption under the EPA’s Renewable Fuel Standards regulations total output cannot exceed 75,000 bpd.

We currently expect that the El Dorado refinery’s output will remain under the 75,000 bpd threshold in the current economic environment.

(1) While the El Dorado refinery has a total nameplate capacity of 80,000 bpd, in order to qualify for the small refinery exemption under the Environmental Protection Agency's ("EPA") Renewable Fuel Standards regulations total output cannot exceed 75,000 bpd.

El Dorado refinery’s output generally does not exceed 75,000.

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

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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 September 30, 2021.

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 78.9% interest in Delek Logistics at March 31, 2022.

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

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Retail Overview

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 retail segment (or "Retail") at March 31, 2022 includes the operations of 248 owned and leased convenience store sites located primarily in 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.

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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 September 30, 2021, we have removed the 7-Eleven brand name at 57 of our store locations.

As of March 31, 2022, we have removed the 7-Eleven brand name at 55 of our store locations.

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

In connection with our Retail strategic initiatives, we closed or sold 49 under-performing or non-strategic store locations since the fourth quarter of 2018.

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

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Management's Discussion and Analysis

Strategic Overview

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.

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.

Reliability and integrity.

Systems and processes.

Risk-based decision making.

Positioning for growth.

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."

Strategic Update

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.

The emphasis on environmental responsibility and long-term economic and environmental sustainability is accelerating, with increased demand for transparency evolving out of the ESG movement.

As we evaluate our current ESG positioning in the market, we also must integrate a broader sustainability view to all of our activities, both operational and strategic.

For these reasons, we have developed a Long-Term Sustainability Framework , which will help us to formulate our strategic objectives and initiatives.

Long-Term Sustainability Framework:

Overarching Objectives

Certain fundamental principles are foundational to our Long-Term Sustainability Framework, and direct us as we develop our guiding objectives.

With that in mind, we have initially identified the following overarching objectives :

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

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

Focus on Operational Optimization and Improved Margin Capture.

Implement Digital Transformation Strategy.

Identify ESG-Conscious Investments with Clear Value Propositions and Sustainable Returns.

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:

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

• continuing to be focused on controlling capital expenditures;

• focusing on operating efficiently;

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

• continuing to maintain a strong retail business;

• with our sights also set on recovery from the Pandemic and the future, continuing to explore and investigate 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 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.

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.

Supreme Court, stalled the approval of 2019 SRE applications already submitted (inclusive of 2019 SRE applications for each of our four refineries) and led to the postponement of 2020 SRE applications.

Because of these delays and uncertainties, the EPA issued, by Final Rule, extensions on the compliance deadline under the RFS as well as the deadline for submission of the obligated party attestation reports, as follows:

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;

Long-Term Sustainability Framework:

Key Initiatives

Additionally, integral to our Long-Term Sustainability Framework and the achievement of the initial overarching objectives are the following key initiatives:

• Transform our corporate and operating culture into "One Delek" through unification of purpose, vision and strategy with an emphasis on cultural sustainability.

• Transform our refining operations into the "Refinery of the Future" founded on digitization and automation, innovation and synergistic discipline.

• Develop a "New Energy" mentality focused on understanding the future of energy on a global scale and how Delek can be a leader and facilitator of positive, sustainable change in the energy industry.

Long-Term Sustainability Strategy:

The Overarching Objectives and Key Initiatives are integrated and interdependent, representative of the synergistic approach we are employing, and together comprise our Long-term Sustainability Strategy, as illustrated below (see further discussion in our 2021 Annual Report on Form 10-K):

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.

Supreme Court overturned the previous appeals court's ruling regarding RINs, resulting in market optimism that the stalled SRE applications from 2019, as well as new applications for 2020, may be granted, based on the published criteria.

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

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;

(2) the composition of those specific Net RINs Obligation (in terms of the vintages of RINs we currently own versus the waived RINs Obligation) and the related market prices at the date each exemption is granted;

(3) the composition of our RINs forward commitment contracts that may be settled or positions closed as a result of any exemption and the related gains or losses;

(4) the settlement requirements of related RINs product financing arrangements;

and (5) the quantity of and dates at which excess RINs can be sold and the sales price (see also Note 9, Note 10 and Note 14 to the condensed consolidated financial statements included as well as our related accounting policies related to RINs included in Note 2 to the audited consolidated financial statements included in Item 8.

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 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.

2022 Strategic Developments

In our 2021 Annual Report on Form 10-K, we further defined our 2022 strategy by identifying certain key Focused Objectives and Priorities, as they relate to our Key Initiatives.

The following table presents some of our most significant 2022 developments to date towards the achievement of our Focused Objectives:

Key Initiative:

Implementing One Delek Culture Transformation Key Initiative:

Planning for Refinery of the Future Operational Transformation

Focused Objective:

Improving Efficiency in Systems and Processes

We are committed to becoming even more efficient by focusing on our systems and processes.

We know there is always room for improvement, and those improvements can make every employee more effective and valued.

Improving Consistency and Transparency by Conforming Refining Inventory Accounting Methodology:

As of January 1, 2022, we changed our method for accounting for inventory held at the Tyler Refinery to the first-in, first-out ("FIFO") cost method from the last-in, first-out ("LIFO") cost method.

This change in accounting method will conform the Company’s refining inventory to a single method of accounting, and will eliminate the inherent volatility in the LIFO valuation of inventory attributable to increments and decrements in historical LIFO layers, which can impact comparability between periods as well as to market conditions and crack spreads.

For these reasons, we expect that the newly adopted accounting principle will improve financial reporting by providing better consistency, better transparency, and recognition that better reflects the physical flow of inventory and more accurately reflects the current value of inventory.

The effects of this change have been retrospectively applied to all periods presented with a cumulative effect adjustment reflected in the January 1, 2021 beginning retained earnings.

(See further discussion in Note 6 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q).

Delek US Holdings, Inc.

Employee Stock Purchase Plan

In June 2021, the Company's board of directors adopted the Delek US Holdings, Inc.

Employee Stock Purchase Plan (the "ESPP").

The ESPP is structured as a qualified employee stock purchase plan.

The Company authorized the issuance of 2,000,000 shares of common stock under the ESPP.

On each purchase date, eligible employees (as defined in the ESPP) can purchase the Company's stock at a price per share equal to 85.0% of the closing price of the Company's common stock on the exercise date, but no less than par value.

There are four offering periods of three months during each fiscal year, beginning each January 1st, April 1st, July 1st, and October 1st.

Focused Objective:

Balancing Risk and Reward

As we continue to grow, we want to cultivate a healthy appetite for risk.

That means, when we make decisions, we plan to identify those risks that come with the greatest potential for success, and pursue them with care.

Increasing Shareholder Value and Reducing Outsider Risk through Stock Purchase and Cooperation Agreement:

On March 7, 2022, Delek entered into a stock purchase and cooperation agreement (the “Icahn Group Agreement”) with IEP Energy Holding LLC, a Delaware limited liability company, American Entertainment Properties Corp., a Delaware corporation, Icahn Enterprises Holdings L.P., a Delaware limited partnership, Icahn Enterprises G.P.

Inc., a Delaware corporation, Beckton Corp., a Delaware corporation, and Carl C.

Icahn (collectively, the “Icahn Group”), pursuant to which the Company agreed to purchase an aggregate of 3,497,268 shares of common stock of the Company, at a price per share of $18.30, the closing price of a share of Company common stock on the New York Stock Exchange on March 4, 2022, the last trading day prior to the execution of the Ichan Group Agreement, which equals an aggregate purchase price of $64.0 million.

(See further discussion in Note 16 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q).

Delek Logistics 2028 Notes

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”), 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 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.

Focus on Leadership Succession Planning:

On March 28, 2022, Delek announced a Chief Executive Officer ("CEO") succession plan under which Ezra Uzi Yemin, the Company’s current President and CEO, will become Executive Chairman of the Board of Directors (the “Board”).

Under the succession plan, the Board has approved the appointment of Avigal Soreq as the next President and CEO of the Company, to be effective in June 2022.

Soreq has been the Chief Executive Officer of El Al Israel Airlines, the national airline of Israel, since January 2021.

Prior to that, he served as a member of the Company’s executive management team, including as the Chief Operating Officer from March 2020 until January 2021, its Chief Commercial Officer from November 2016 until March 2020, an Executive Vice President from August 2015 until January 2021, and a Vice President from 2012 until 2015.

In addition, Mr.

Soreq served as an Executive Vice President of Delek Logistics GP, LLC from 2015 until 2021, and as its Vice President from 2012 until 2015.

In addition, effective March 27, 2022, the Board named Todd O’Malley the Chief Operating Officer of the Company.

O’Malley has served as an Executive Vice President and the Chief Commercial Officer of the Company since March 2021.

The Company also announced that it has named Nithia Thaver an Executive Vice President and the Company’s President of Refining.

Thaver has served as the Company’s Senior Vice President, Refining, since December 2018.

Delek also announced on March 27, 2022, that Leonardo Moreno, a highly experienced executive in the global renewable energy and technology sector, has been appointed director to the Board.

Moreno will stand for election at the Company’s 2022 annual meeting of stockholders.

With this appointment, the Board has been expanded to comprise eight directors, seven of whom are independent and three of whom are diverse, fulfilling the Company’s objective of at least 30% of the Board comprising diverse members by 2022.

Focused Objective:

Balancing Risk and Reward / Driving EBITDA Improvements

As we continue to grow, we want to cultivate a healthy appetite for risk.

That means, when we make decisions, we plan to identify those risks that come with the greatest potential for success, and pursue them with care.

Planned Strategic Midstream Acquisition:

On April 8, 2022, DKL Delaware Gathering, LLC (the “Purchaser”), a subsidiary of Delek Logistics, entered into a Membership Interest Purchase Agreement with 3 Bear Energy – New Mexico LLC (the “Seller”) to purchase 100% of the limited liability company interests in 3 Bear Delaware Holding – NM, LLC (the “Purchased Interests”), related to Seller’s crude oil and gas gathering, processing and transportation businesses, as well as water disposal and recycling operations, in the Delaware Basin in New Mexico (the “Purchase Agreement”).

The purchase price for the Purchased Interests is $624.7 million, subject to customary adjustments under the Purchase Agreement for net working capital and indebtedness.

The Purchaser paid a deposit under the Purchase Agreement of approximately $31.2 million.

The transactions contemplated by the Purchase Agreement are expected to close around mid-year 2022.

(See further discussion in Note 18 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q).

Exclusive Supply Agreement

In May 2021, we executed an exclusive supply and strategic relationship agreement with Baker Petrolite LLC (an affiliate of Baker Hughes Company) ("Baker").

The agreement provides that, under certain circumstances, Baker will supply certain chemicals exclusively to us within a defined territory.

Those chemicals allow us, through blending competencies utilizing proprietary intellectual property, to clarify slurry which can then be used in International Maritime Organization-compliant products.

The agreement has a 5-year initial term and a 5-year extension option.

This planned acquisition provides us the opportunity to significantly expand our third-party midstream EBITDA and contribution margin within our logistics segment.

Management's Discussion and Analysis

Market Trends

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

Historically, the impact of commodity price volatility on our refining margins (as defined in our "Non-GAAP Measures" in MD&A Item 2.), specifically as it relates to the price of crude oil as compared to the price of refined products and timing differences in the movements of those prices (subject to our inventory costing methodology), as well as location differentials, may be favorable or unfavorable compared to peers.

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

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.

export arbitrage.

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 nine months of 2021.

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

refineries, including ours, were temporarily disrupted due to the negative effects arising out of Winter Storm Uri.

This contributed to a significant depletion of transportation fuel inventories throughout much of the country.

Additionally, in May 2021, there was a cybersecurity incident with the Colonial Pipeline which resulted in pipeline shutdowns that interrupted supply to much of the eastern U.S.

for six days, and which caused disruption for Delek primarily at our Krotz Springs refinery.

As a result of both of these events, the U.S.

market attracted higher levels of supply from international markets, which diluted price increases and associated refining margins.

Furthermore, while there have been improving crack spreads during 2021, driven largely by the improvement in domestic consumer demand and the modest economic improvement and outlook associated with stabilizing Pandemic uncertainties, the ability of U.S.

refiners to capture those improvements were significantly dampened by sharply increasing RIN prices.

As previously discussed, the RINs market was impacted by last year's judicial rulings imposing limitations on smaller refinery's abilities to qualify for the EPA's SREs under the RFS, combined with worsening environmental regulatory sentiment coming out of Washington, D.C..

These conditions were pervasive for the majority of the first half of 2021.

Following the June 2021 U.S.

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.

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.

Historically, the impact of commodity price volatility on our refining margins (as defined under the heading "Non-GAAP Measures" in MD&A Item 2.), specifically as it relates to the price of crude oil as compared to the price of refined products and timing differences in the movements of those prices (subject to our inventory costing methodology), as well as location differentials, may be favorable or unfavorable compared to peers.

Additionally, our refining margin profitability is impacted by regulatory factors, including the cost of Renewable Identification Numbers ("RINs").

During the first quarter 2022, the economy has continued to recover from the impact of the COVID-19 Pandemic, both globally and domestically.

The widespread availability of vaccines and testing in the U.S.

These conditions have, in turn, contributed to improvements in domestic demand for refined products and refining margins, which were further impacted by the Pandemic-related reduction in crude oil production and the closure of various domestic refining operations.

Additionally, the Russia-Ukraine War has caused significant consternation among NATO countries and across the global landscape, resulting in sanctions on Russia and disrupting the global markets in ways that could not and cannot be fully anticipated.

The reduced dependence on the Russian oil supply is impacting demand for domestic crude and refined product, as well as natural gas exports.

The uncertainties surrounding future oil supply are compounded by conflicts in the Middle East, which resulted in damaged fuel storage facilities in Abu Dhabi and increases in oil production in countries such as Libya and Kazakhstan in response to blockades and other disruptions.

All of these contributing factors, combined with upward price pressures on natural gas, liquified natural gas ("LNG"), and coal energy are causing an increase in the demand for hydrocarbon-based energy.

Because of the increasing post-Pandemic demand combined with the Russia-Ukraine War putting pressure on global supply of both crude oil and petroleum-based products, there were continued marked improvements in refined product pricing and crack spreads during the first quarter 2022.

Average gasoline (CBOB) prices increased to $2.71 from $1.71 in the first quarter 2022 compared to the first quarter 2021, or a 58.2% increase, while the average 5-3-2 ULSD crack spread has increased to $23.68 from $13.57 in the first quarter 2022 compared to the first quarter 2021, or a 74.5% increase.

Subsequent to March 31, 2022, we continue to see strong market conditions in downstream refining, with distillate crack spreads reaching record highs.

The domestic WTI differentials compared to Brent continued to be favorable during the first quarter of 2022, while the WTI Midland differential to Cushing remained relatively flat coming off the fourth quarter 2021, though it was favorable to our operations compared to the premium environment that existed in the first quarter of 2021.

During the Pandemic, when demand was constrained and crack spreads did not always support running at high utilization levels, we intentionally focused our efforts on targeted operational improvements and turnaround activities that would position us well for post-Pandemic economic recoveries.

As a result of those efforts, including several targeted turnaround activities performed during 2021, and despite normal seasonality pressures, we were poised to take advantage of the current highly favorable market conditions and optimize our market share capture.

Our operating results demonstrate the success of these efforts, reflecting a crude throughput utilization rate of 95% in the first quarter 2022 compared to 64% in the first quarter of 2021.

As we look to the second quarter, we plan to continue to capitalize on our Pandemic strategic activities and expect to run our refineries at or near our nameplate capacity.

Furthermore, looking beyond the second quarter, with no planned major turnaround activity for the remainder of the year and barring unforeseen disruptions, we are well-positioned to run our refineries at optimum utilization rates for the duration of 2022 for as long as these favorable crack spread conditions persist.

Market Outlook for the Remainder of 2022

As we finished the first quarter, we saw increasing pressure on crude oil and refined product supply, cemented with the March 8, 2022 formal announcement of a ban on US imports of Russian oil.

Looking forward to the second quarter, the pressure is only continuing to build as more countries sanction Russia and supply chain disruptions mount across the War-affected regions.

Furthermore, as the Russia-Ukraine War continues, industry forecasts predict that Russian oil exports (crude oil, products, and feedstocks) will remain significantly lower than pre-War volumes in the near term, and that such conditions may extend through the remainder of 2022.

These conditions support a bullish outlook for continued strong demand for crude oil and refined product which, barring unforeseen circumstances or significant government intervention, are widely expected to translate into continued strong crack spreads in the coming months.

Pressure in the U.S.

to curb soaring fuel prices at the pump have already resulted in some government measures, including the March 31, 2022 announcement of a 180 million barrel, six-month release of crude oil from the Strategic Petroleum Reserve (“SPR”).

Additional government measures are possible, which could result in incremental backwardation, though the nature and effect of such measures are currently unknown.

From a geographic positioning perspective, absent government intervention, industry analysts expect the Brent, a global benchmark crude, to WTI differential to continue to be favorable for domestic exports throughout 2022, including the U.S.

Gulf Coast region.

Furthermore, while the likelihood of a favorable Midland-Cushing differential is constrained by overbuilt pipeline capacity, significant export developments and other factors could quickly shift differentials to be more favorable to our Permian-heavy positioning.

We currently employ commercial strategies to minimize differential risk associated with our concentrated gathering activities in the Permian Basin, but

Management's Discussion and Analysis

we are well-positioned to capitalize on a favorable shift in Midland WTI pricing compared to other benchmark crudes, including Cushing WTI.

Despite the tremendous market environment during the first quarter 2022, the costs of RINs regulatory compliance continues to negatively impact our ability to capture crack spreads compared to other, larger refiners.

In December 2021, the EPA proposed a rule to revise 2021 Renewable Volume Requirements and to suggest rates for 2022 and 2023, including proposed views that such changes may be sufficient to render the granting of small refinery exemptions unnecessary, based on the arguably inaccurate presumption that small refineries are not unduly burdened by the cost of RINs.

Additionally, in April 2022, the EPA overturned the previously granted 2018 SREs, of which we received three such exemptions (for all our refineries except Big Spring), though it further announced that compliance will not be required.

Many consider this move to be indicative of the EPA's unfavorable sentiment around 2019 and 2020 pending SRE applications which, if this view persists, could result in significant increases in RINs prices over the coming months.

Accordingly, while our Net RINs Obligation will not be directly impacted by the EPA's 2018 SRE reversal decision, our Net RINs Obligation in future periods may be negatively impacted by volatility in prices, likewise disproportionately impacting our ability to capture crack spread, particularly compared to our larger refinery competitors.

For these reasons, we are continuing to pursue the small refinery exemptions through legal and regulatory means available to us .

Finally, while the global economic environment continues to support growth, both growth and stability continue to be impacted by building inflationary pressures, including with respect to essentials like housing, food, transportation and heat.

Federal Reserve and fellow central banks have made and are considering further rate changes to combat the rising inflation.

Successful efforts along these lines could cause the cost of capital to rise and could negatively impact construction and other growth efforts that drive demand for our products, but could also reduce the burden on consumers which could lead to increases in discretionary travel and other activities requiring refined fuel products.

Because of this uncertainty, there continues to be risk around inflation as well as the potential impact of regulatory efforts to curb inflation which cannot currently be determined.

See the following pages 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 or other locations.

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.

We manage our supply chain risk to ensure that we have the barrels to meet our crude slate consumption plan for each month through gathering supply contracts and throughput agreements on various strategic pipelines, some of which include those where we hold equity method investments.

We manage market price risk on crude oil through financial derivative hedges, in accordance with our risk management strategies.The table below reflects the quarterly average prices of WTI Midland and WTI Cushing crude oil for each of the quarterly periods in 2021 and for the first quarterly period in 2022.

Management's Discussion and Analysis

Crude Pricing Differentials

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

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

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

2 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 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 three quarterly periods in 2021.

Ultra Low Sulfur Diesel ("ULSD") for each of the quarterly periods in 2021 and for the first quarterly period in 2022.

Management's Discussion and Analysis

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 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.

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 2021 and for the first quarterly period in 2022.

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 price of RINs.

We enter into future commitments to purchase or sell RINs at fixed prices and quantities, which are used to manage the costs of our credits for commitments required by the EPA to blend biofuels into fuel products ("RINs Obligation").

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

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

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

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

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

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

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

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.

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

Additionally, our ability to obtain RINs through blending is limited by our refined product slate, blending capabilities and market constraints.The cost to purchase these additional RINs is a significant cash outflow for our business.

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

RINs prices are highly sensitive to regulatory and political influence and conditions, and therefore often do not correlate to movements in crude oil prices, refined product prices or crack spreads.

Furthermore, RIN prices are impacted by market expectations regarding whether the EPA may grant certain Small Refinery Exemptions ("SREs").

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 third quarter of 2021.

The chart below illustrates the volatility in RINs beginning with the first quarter of 2021 through the first quarter of 2022.

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 September 30, 2021, is set forth in the following table (in millions):

Payments Due by Period

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

Long term debt and notes payable obligations

$ 63.4 $ 315.8 $ 1,474.3 $ 400.0 $ 2,253.5

93.6 172.7 92.2 57.0 415.5

Operating lease commitments (2)(6)

73.2 390.5 175.1 150.0 788.8

Product financing commitments (3)

342.5 — — — 342.5

Transportation agreements (4)

126.2 194.4 187.2 77.1 584.9

Aron supply and offtake obligations (5)

15.5 333.7 — — 349.2

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

(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 September 30, 2021.

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

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

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

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

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

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

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

Critical Accounting Policies

Energy costs are a significant element of our Refining contribution margin and can significantly impact our ability to capture crack spreads, with natural gas representing the largest component.

Natural gas prices are driven by supply-side factors such as amount of natural gas production, level of natural gas in storage and import and export activity, while demand-side factors include variability of weather, economic growth and the availability and price of other fuels.

Refiners and other large-volume fuel consumers may be more or less susceptible to volatility in natural gas prices depending on their consumption levels as well as their capabilities to switch to more economical sources of fuel/energy.

Additionally, geographic location of facilities make consumers vulnerable to price differentials of natural gas available at different supply hubs.

Within Delek’s geographic footprint, we source the majority of our natural gas from the Gulf Coast, and secondarily from the Permian, coinciding with the physical locations of our refineries.

We manage our risk around natural gas prices by entering into variable and fixed-price supply contracts in both the Gulf and Permian Basin or by entering into derivative hedges based on forecasted consumption and forward curve prices, as appropriate, in accordance with our risk policy.

The chart below illustrates the quarterly average prices of Waha (Permian Basin) and Henry Hub (Gulf Coast) beginning with the first quarter of 2021 through the first quarter of 2022.

Management's Discussion and Analysis

Critical Accounting Estimates

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

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Based on this definition and as further described in our 2021 Annual Report on Form 10-K, we believe our critical accounting policies include the following:

(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 nine months ended September 30, 2021:

(i) evaluating impairment for property, plant and equipment and definite life intangibles, (ii) evaluating potential impairment of goodwill, (iii) estimating environmental expenditures, and (iv) estimating asset retirement obligations.

Additionally, we have identified the following critical accounting policy that impacts the three months ended March 31, 2022:

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 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

As of and during the three months ended March 31, 2022, our estimates of the expected AETR reflected inputs which are subject to judgment including (but not necessarily limited to) the following:

• Forecasted pre-tax U.S.

generally accepted accounting principles ("GAAP") income or loss for the year

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

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

• Forecasted capital expenditures for the year and future years (where such activities can be impacted by unanticipated events)

• Expected applicable jurisdictional tax rates

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All of these inputs are subject to significant judgment and assumptions about future events impacting 2022, 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

Management's Discussion and Analysis

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.

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 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.

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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 nine months ended September 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

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Refining Segment

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

2021 2020 2021 2020

Three Months Ended March 31,

As Adjusted (1)

$ 3,493.7 $ 1,740.1

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3,449.6 1,781.8

45.5 (68.1) (98.7) (380.8)

Add back (items included in cost of sales):

Operating expenses (excluding depreciation and amortization) (1)(2)

82.8 102.1 310.2 302.5

Depreciation and amortization

45.9 50.3 149.0 132.3

Refining margin

$ 216.8 $ 125.1

(1) Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories.

For further discussion, see Note 6 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

(2) Reflects the prior period conforming reclassification adjustment between operating expenses and general and administrative expenses.

Management's Discussion and Analysis

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The following table provides summary financial data for Delek:

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

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

Consolidated Summary Statement of Operations Data

Three Months Ended

(in millions) (1)

As Adjusted (1)

Net revenues $ 4,459.1 $ 2,392.2

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Operating income (loss) (2)

45.8 (75.2) (119.7) (413.9)

Total non-operating expense, net 28.8 23.6

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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.

(2) Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories.

For further discussion, see Note 6 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

We report operating results in three reportable segments:

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

Management's Discussion and Analysis

Results of Operations

Consolidated Results of Operations — Comparison of the Three and 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.

Consolidated Results of Operations — Comparison of the Three Months Ended March 31, 2022 versus the Three Months Ended March 31, 2021

Consolidated net income for the first quarter of 2022 was $14.8 million compared to net loss of $62.7 million for the first quarter of 2021.

Consolidated net income attributable to Delek for the first quarter of March 31, 2022 was $6.6 million, or $0.09 per basic share, compared to net loss of $70.0 million, or $(0.95) per basic share, for the first quarter 2021.

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

Consolidated net loss for the nine months ended September 30, 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.

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 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 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%.

In the first quarters of 2022 and 2021, we generated net revenues of $4,459.1 million and $2,392.2 million, respectively, an increase of $2,066.9 million, or 86.4%.

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

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Gulf Coast gasoline of 58.17%, ULSD of 76.81%, and HSD of 79.29%;

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

• in our retail segment, increases in fuel sales primarily attributable to a 40.6% increase in average price charged per gallon sold.

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Cost of Materials and Other

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%.

Cost of materials and other was $4,152.5 million for the first quarter of 2022 compared to $2,172.8 million for the first quarter of 2021, an increase of $1,979.7 million, or 91.1%.

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 64.0% increase in the average cost of WTI Cushing crude oil and a 61.3% increase in the average cost of WTI Midland crude oil;

• 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;

• increases in average RINs costs during the first quarter of 2022 compared to the first quarter of 2021;

• an increase in hedging losses compared to the first quarter of the prior year;

• increases in the average volumes sold and average cost per gallon of gasoline and diesel sold in our logistics segment;

• an increase in retail cost of materials and other due to 48.8% increase in average cost per gallon sold applied to higher fuel sales volumes.

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 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;

• an increase in retail fuel cost of materials and other primarily attributable to a 46.6% increase in average cost per gallon sold.

Such increases were partially offset by the following:

• 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 $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%.

Operating expenses were $166.9 million for the first quarter of 2022 compared to $155.3 million for the first quarter of 2021, an increase of $11.6 million, or 7.5%.

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 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 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.

• an increase in variable costs and utilities associated with higher throughput during current period;

• higher natural gas prices in the first quarter of 2022;

• increases in employee cost primarily related to increased salaries, wages and other benefits.

Such increases were partially offset by a decrease in outside services, maintenance and lease costs.

General and Administrative Expenses

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 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.

Management's Discussion and Analysis

General and administrative expenses were $53.1 million for the first quarter of 2022 compared to $41.1 million for the first quarter of 2021, an increase of $12.0 million, or 29.2%.

The increases were primarily driven by an increase in headcount and increases in salaries, wages and other benefits.

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.

Depreciation and amortization (included in both cost of sales and other operating expenses) was $68.3 million for the first quarter of 2022 compared to $68.5 million for the first quarter of 2021, a decrease of $0.2 million, or 0.3%.

Other Operating Income, Net

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.

Other operating income, net increased by $30.3 million in the first quarter of 2022 to $28.4 million compared to a loss of $1.9 million in the first quarter of 2021.

The increases were primarily driven by an increase due to realized hedge gains during Q1 2022.

Management's Discussion and Analysis

Non-operating Expenses, Net

Interest Expense

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.

Interest Expense, Net

Interest expense,net increased by $9.0 million, or 30.6%, to $38.4 million in the first quarter of 2022 compared to $29.4 million in the first quarter of 2021, primarily driven by the following:

• an increase in the average effective interest rate of 1.27% in the first quarter of 2022 compared to the first quarter of 2021 (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 $12.6 million in the first quarter of 2022 (calculated as a simple average of beginning borrowings/obligations and ending borrowings/obligations for the period) compared to the first quarter of 2021.

Results from Equity Method Investments

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:

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 $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.

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;

We recognized income of $10.9 million from equity method investments during the first quarter of 2022, compared to $4.8 million for the first quarter of 2021, an increase of $6.1 million.

This increase was primarily driven by the following:

• increase in income from our Red River and Caddo equity method investment due to higher throughput volumes and resulting revenue increases;

• an increase in income from our investment in W2W Holdings LLC to income of $2.1 million in the first quarter of 2022 from a loss of $0.3 million in the first quarter of 2021.

Income tax expense increased by $11.4 million in the first quarter of 2022 compared to the first quarter of 2021, primarily driven by the following:

• pre-tax income of $17.9 million in the first quarter of 2022, as compared to loss of $71.0 million for the first quarter of 2021;

• an increase in our effective tax rate which was 17.3% for the first quarter of 2022, compared to 11.7% for the first quarter of 2021 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 deferred tax asset for equity-based compensation and valuation allowance for state tax attributes.

Management's Discussion and Analysis

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Refining Segment Margins

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

Three Months Ended

2022 Adjusted 2021 (1)

$ 3,493.7 $ 1,740.1

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Refining margin

174.2 84.3 360.5 54.0

Operating expenses (excluding depreciation and amortization) (1) (2)

82.8 102.1 310.2 302.5

Contribution margin (1)

$ 96.9 $ 10.4

(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.

(1) Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories.

For further discussion, see Note 6 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

(2) Reflects the prior period conforming reclassification adjustment between operating expenses and general and administrative expenses.

Factors Impacting Refining Profitability

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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 largely depend on the factors discussed above.

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

Motor fuel margin is sales less the delivered cost of fuel and motor fuel taxes, measured on a cents per gallon basis.

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

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

Refining contribution margin is impacted by regulatory costs associated with the cost of RINs as well as energy costs, including the cost of natural gas.

In periods of unfavorable regulatory sentiment or uncertainty regarding the possibility of SREs, RINs prices can increase at higher rates than crack spreads, or even when crack spreads are declining.

This can be particularly impactful on smaller refineries, where the operating cost structure does not have as much scalability as larger refineries.

Additionally, volatility in energy costs, which are captured in our operating expenses and impact our Refining contribution margin, can significantly impact our ability to capture crack spreads, with natural gas representing the most significant component.

Within Delek’s geographic footprint, we source the majority of our natural gas from the Gulf Coast, and secondarily from the Permian, and we do not currently have the capability at our refineries to switch our energy consumption to utilize alternative sources of fuel.

For this reason, unfavorable Gulf Coast (Henry Hub) differentials can impact

Management's Discussion and Analysis

sales of refined products or to fix margins on future production.

our crack spread capture.

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 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.

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

We also enter into future commitments to purchase or sell RINs at fixed prices and quantities, which are used to manage our RINs Obligation.

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Refinery Statistics

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

(Unaudited) (Unaudited)

Three Months Ended

Tyler, TX Refinery

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Total refining margin ($ in millions) (2)

$ 80.3 $ 81.5

Per barrel of refined product sales:

Tyler refining margin (2)

12.13 $ 12.37

Direct operating expenses (3)

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Days in period

92 92 273 274

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

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Direct operating expenses (3)

$ 3.78 $ 6.42

(% based on amount received in period)

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Refinery Statistics (continued)

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

(Unaudited) (Unaudited)

Three Months Ended

Big Spring, TX Refinery

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Direct operating expenses (3)

$ 5.36 $ 6.50

(% based on amount received in period)

3 unchanged sentences

Days in period

92 92 273 274

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

17 unchanged sentences

Direct operating expenses (3)

$ 4.09 $ 9.20

(% based on amount received in period)

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Gulf Coast Sweet Crude 35.7 % 18.8 %

Other — % 2.8 % 0.7 % 0.9 %

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

See tables below.

(2) Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories.

For further discussion, see Note 6 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

(3) Reflects the prior period conforming reclassification adjustment between operating expenses and general and administrative expenses.

Management's Discussion and Analysis

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Inter-refinery Sales

Three Months Ended Nine Months Ended

September 30, September 30,

Three Months Ended

(in barrels per day) 2022 2021

(Unaudited) (Unaudited)

Tyler refined product sales to other Delek refineries 1,107 2,095

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Refinery Sales to Other Segments

Three Months Ended Nine Months Ended

September 30, September 30,

Three Months Ended

(in barrels per day) 2022 2021

(Unaudited) (Unaudited)

Tyler refined product sales to other Delek segments — 922

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Pricing Statistics (average for the period presented)

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

(Unaudited) (Unaudited)

Three Months Ended

WTI — Cushing crude oil (per barrel) $ 95.18 $ 58.03

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Management's Discussion and Analysis

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.

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

• 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 $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 $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:

Refining Segment Operational Comparison of the Three Months Ended March 31, 2022 versus the Three Months Ended March 31, 2021

Net revenues for the refining segment increased by $1,753.6 million, or 100.8%, in the first quarter of 2022 compared to the first quarter of 2021, primarily driven by the following:

• increases in the average price of U.S.

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

• 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 $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.

Gulf Coast gasoline of 58.2% ULSD of 76.8%, and HSD of 79.3% and

• an increase in sales volumes of refined and purchased product of 7.9 million barrels and 1.7 million barrels, respectively, where sales volumes were lower in the first quarter 2021 due to severe weather impacting our refineries and turnaround activities at our El Dorado refinery .

Net revenues included sales to our retail segment of $111.7 million and $69.7 million, sales to our logistics segment of $105.9 million and $65.8 million, and sales to our other segment of $8.1 million and $20.1 million for the three months ended March 31, 2022 and March 31, 2021, respectively.

We eliminate this intercompany revenue in consolidation.

Cost of Materials and Other

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%;

• 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

Cost of materials and other increased by $1,661.9 million, or 102.9%, in the first quarter of 2022 compared to the first quarter of 2021, primarily driven by the following:

• increases in the cost of WTI Cushing crude oil, from an average of $58.03 per barrel to an average of $95.18, or 64.0%, and increases in the cost of WTI Midland crude oil, from an average of $58.90 per barrel to an average of $95.01, or 61.3%;

• increase in RINs costs from an average cost per RIN of $1.07 and $1.17 for ethanol and biodiesel RINs, respectively during the first quarter of 2021 to an average of $1.14 and $1.43 during the first quarter of 2022;

• 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 $0.37 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 $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 $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 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.

Our refining segment 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 $123.4 million and $95.8 million during the first quarters of 2022 and 2021, respectively, which are eliminated in consolidation.

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:

Refining Margin

Refining margin increased by $91.7 million, or 73.3%, in the first quarter of 2022 compared to the first quarter of 2021, primarily driven by the following:

• a 79.7% improvement in the 5-3-2 crack spread (the primary measure for the Tyler refinery and El Dorado refinery), a 72.0% improvement in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery), and a 124.1% 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;

• 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 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.

Management's Discussion and Analysis

• an increase in sales volumes.

Such increase was partially offset by increases in average RINs costs in the first quarter of 2022 compared to the first quarter of 2021, and an increase in hedge losses compared to prior period.

(1) Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories.

For further discussion, see Note 6 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Operating Expenses

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.

Operating expenses increased by $5.2 million, or 4.5%, in the first quarter of 2022 compared to the first quarter of 2021, primarily driven by the following:

• increase in variable costs and utilities associated with higher throughput during the current period;

• higher natural gas prices in the first quarter of 2022.

Such increases were offset by a decrease in outside services, maintenance and lease costs incurred.

Contribution Margin

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.

Such increase was offset by the following:

• an increase in operating expenses of $7.7 million, or 2.5%

Contribution margin increased by $86.5 million, or a 2.2% improvement in contribution margin percentage, in the first quarter of 2022 compared to the first quarter of 2021, primarily driven by an increase in refining margin primarily driven by improved crack spreads, increased sales volumes, offset by hedge losses and higher average RINs costs.

Management's Discussion and Analysis

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Logistics Contribution Margin and Operating Information

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

Three Months Ended

Net revenues $ 206.6 $ 152.9

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West Texas wholesale marketing throughputs (average bpd)

10,560 9,948 10,033 11,718

West Texas wholesale marketing margin per barrel

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

(3) 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 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;

◦ 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.

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.

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

Financial Statements, for additional information;

• 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 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 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 $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.

(3) Excludes volumes that are being temporarily transported via trucks while connectors are under construction.

Logistics Segment Operational Comparison of the Three Months Ended March 31, 2022 versus the Three Months Ended March 31, 2021

Net revenues increased by $53.7 million, or 35.1%, in the first quarter of 2022 compared to the first quarter of 2021, primarily driven by:

• improvements in the West Texas wholesale marketing business which experienced increases in the average sales prices per gallon of gasoline and diesel sold and average volume of diesel sold, partially offset by decrease in the average volume of gasoline sold;

• increases in pipeline throughputs, where the first quarter of 2021 were negatively impacted by severe weather events.

Net revenues included sales to our refining segment of $123.4 million and $95.8 million for the three months ended March 31, 2022 and March 31, 2021, respectively.

We eliminate this intercompany revenue in consolidation.

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Cost of Materials and Other

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:

Cost of materials and other for the logistics segment increased $45.1 million, or 55.6%, in the first quarter of 2022 compared to the first quarter of 2021 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:

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◦ the average volumes of gasoline increased by 3.4 million gallons, while diesel volumes sold decreased by 2.5 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 $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 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.

Our logistics segment purchased product from our refining segment of $105.9 million and $65.8 million for the three months ended March 31, 2022 and March 31, 2021, respectively.

We eliminate these intercompany costs in consolidation.

Operating Expenses

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;

Operating expenses increased by $3.2 million, or 21.5%, in the first quarter of 2022 compared to the first quarter of 2021, driven by the following:

• increases in employee and outside service costs;

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

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

Contribution Margin

Contribution margin 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;

• 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:

• a decrease in gasoline and diesel volumes sold in our West Texas marketing operations;

• an increase in operating expenses

Contribution margin increased by $5.4 million in the first quarter of 2022 compared to the first quarter of 2021 primarily driven by the following:

• increases in revenue due to higher throughput volumes;

• partially offset by increases in operating expense.

Management's Discussion and Analysis

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Retail Contribution Margins

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

Three Months Ended

Net revenues $ 209.5 $ 174.8

Cost of materials and other

165.2 136.3 466.4 400.0

Operating expenses (excluding depreciation and amortization)

23.4 23.1 67.2 66.8

Contribution margin

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Number of stores (end of period)

250 253 250 253

Average number of stores

250 253 250 253

Average number of fuel stores

245 248 245 248

Retail fuel sales

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

171 182 510 547

Average retail sales price per gallon sold

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Merchandise sales per average number of stores (in millions)

$ 0.3 $ 0.3 $ 1.0 $ 1.0

Merchandise margin %

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Same-Store Comparison (2)

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

Three Months Ended

Change in same-store fuel gallons sold

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(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 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%.

Retail Segment Operational Comparison of the Three Months Ended March 31, 2022 versus the Three Months Ended March 31, 2021

Net revenues for the retail segment increased by $34.7 million, or 19.9%, in the first quarter of 2022 compared to the first quarter of 2021, primarily driven by the following:

• an increase in total fuel sales which were $139.9 million in the first quarter of 2022 compared to $100.1 million in the first quarter of 2021, primarily attributable to an increase of $1.02 in average price charged per gallon sold;

• slightly offset by a decrease in merchandise sales to $69.7 million in the first quarter of 2022 compared to $74.6 million in the first quarter of 2021 attributable to a same-store sales decrease of 5.2%.

Management's Discussion and Analysis

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 $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 $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.

Management's Discussion and Analysis

Cost of materials and other for the retail segment increased by $36.5 million, or 26.7%, in the first quarter of 2022 compared to the first quarter of 2021, primarily driven by an increase in average cost per gallon of $1.06 or 48.8% applied to fuel sales volumes that decreased period over period.

Our retail segment purchased finished product from our refining segment of $111.7 million and $69.7 million for the three months ended March 31, 2022 and March 31, 2021, respectively, which is eliminated in consolidation.

Operating Expenses

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.

Retail segment operating expenses increased by $1.1 million, or 5.1%, in the first quarter of 2022 compared to the first quarter of 2021.

Contribution Margin

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:

Contribution margin for the retail segment decreased by $2.9 million, or 17.4%, in the first quarter of 2022 compared to the first quarter of 2021, primarily driven by the following:

• a 6.7% decrease in merchandise sales, offset by an improvement in merchandise margin percentage of 1.9%;

• 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.

• a decrease in fuel sales volume and average fuel margin of $0.036 per gallon.

Management's Discussion and Analysis

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• potential issuances of additional equity and debt securities.

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.

At March 31, 2022 our total liquidity amounted to $2.1 billion comprised primarily of $637.5 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), $585.9 million in unused credit commitments under the Delek Logistics Credit Facility (as defined in Note 8 of the condensed consolidated financial statements in Item 1.

Financial Statements) and $854.1 million in cash and cash equivalents.

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

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

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

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

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

As of September 30, 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.

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

As of March 31, 2022, 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 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.

We currently expect to remain in compliance with our existing debt maintenance covenants, though we can provide no assurances, particularly if conditions significantly worsen beyond our ability to predict.

Additionally, we were in compliance with incurrence covenants during the quarter ended March 31, 2022 to the extent that any of our activities triggered these covenants.

However, given the uncertainty around economic conditions, 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.

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).

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

Nine Months Ended September 30,

Three Months Ended March 31,

Cash Flow Data:

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Financing activities 1.0 86.4

Net increase (decrease) $ 43.1 $ (147.4)

Net (decrease) increase $ (2.4) $ 6.0

Cash Flows from Operating Activities

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.

Additionally, cash paid for debt interest decreased by $12.0 million.

Partially offsetting these increases in cash provided were an increase in income taxes paid of $0.8 million and a decrease in dividends received of $2.6 million.

Net cash provided by operating activities was $26.8 million for the three months ended March 31, 2022, compared to net cash used of $34.3 million for the comparable period of 2021.

Cash paid for debt interest decreased by $117.7 million.

Partially offsetting this increase in cash provided was an increase in cash receipts from customers and cash payments to suppliers and for salaries resulting in a net $56.6 million decrease in cash provided by operating activities.

Additionally, income taxes paid increased $0.9 million and dividends received decreased $0.9 million.

Cash Flows from Investing Activities

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.

Net cash used in investing activities was $30.2 million for the first three months of 2022, compared to $46.1 million in the comparable period of 2021.

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 $48.3 million in 2021, to $29.5 million in 2022, 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 $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 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.

Net cash used in financing activities was $1.0 million for the three months ended March 31, 2022, compared to cash provided of $86.4 million in the comparable 2021 period.

This decrease in cash provided was predominantly due to the purchase of Delek common stock from IEP Energy Holding, LLC for $64.0 million in the current period.

Additionally, there were net payments on long-term revolvers and term debt of $7.2 million during the three months ended March 31, 2022, compared to net proceeds of $17.6 million in the comparable 2021 period.

Net proceeds from inventory financing arrangements decreased $13.1 million to $64.8 million for the three months ended March 31, 2022 compared to $77.9 million in the comparable 2021 period.

Partially offsetting the decrease was $16.4 million in proceeds from the sale of Delek Logistics limited partner units in the current period.

Cash Position, Indebtedness and Other Financing Arrangements

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.

As of March 31, 2022, our total cash and cash equivalents were $854.1 million and we had total long-term indebtedness of approximately $2,212.8 million.

The total long-term indebtedness is net of deferred financing costs and debt discount of $9.9 million and $17.3 million, respectively.

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Additionally, we also utilize other financing arrangements to finance operating assets and/or, from time to time, to monetize other assets that may not be needed in the near term, when internal cost of capital and other criteria are met.

Such arrangements include our supply and offtake arrangements, which finance a significant portion of our first-in, first-out inventory at the refineries and, from time to time, RINs or other non-inventory product financing liabilities.

Such arrangements include our supply and offtake arrangements, which finance a significant portion of our first-in, first-out inventory at the refineries and, from time to time, RINs

or other non-inventory product financing liabilities.

Our supply and offtake obligation with J.

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.

Aron amounted to $589.3 million at March 31, 2022, $479.3 million of which is due on December 30, 2022.

(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 September 30, 2021, and totaled $342.5 million, all of which is due by December 31, 2021.

Our product financing liabilities consisted primarily of RIN financings as of March 31, 2022, and totaled $319.7 million, all of which is due by December 31, 2022.

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.

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

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

Our capital expenditures for the three months ended March 31, 2022 were $32.9 million, of which approximately $14.3 million was spent in our refining segment, $9.1 million in our logistics segment, $3.0 million in our retail segment and $6.5 million primarily at the holding company level.

The following table summarizes our actual capital expenditures for the three months ended March 31, 2022 and planned capital expenditures for the full year 2022 by operating segment and major category (in millions):

2022 Forecast Three Months Ended March 31, 2022

Sustaining maintenance, including turnaround activities (1)

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Total capital spending $ 252.3 $ 32.9

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.

For example, we may experience increases in the cost of and/or timing to obtain necessary equipment required for our continued compliance with government regulations or to complete improvement projects or scheduled maintenance activities.

Additionally, the scope and cost of employee or contractor labor expense related to installation of that equipment could exceed our projections.

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

The amount of our capital expenditure budget is subject to change due to unanticipated increases in the cost, scope and completion time for our capital projects and subject to the changes and uncertainties discussed under the 'Forward-Looking Statements' section of Item 2, of this Quarterly Report on Form 10-Q.

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

Management's Discussion and Analysis

Cash Requirements

Long-Term Cash Requirements Under Contractual Obligations

Information regarding our known cash requirements under contractual obligations of the types described below as of March 31, 2022, is set forth in the following table (in millions):

Payments Due by Period

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

Long term debt and notes payable obligations

$ 82.1 $ 1,507.9 $ 250.0 $ 400.0 $ 2,240.0

91.7 169.4 65.3 42.8 369.2

Operating lease commitments (2)(7)

216.4 289.8 147.3 73.4 726.9

Finance lease commitments (3)

4.2 3.3 2.8 4.5 14.8

Purchase commitments (4)

1,060.5 3.5 — — 1,064.0

Product financing commitments (5)

319.7 — — — 319.7

Transportation agreements (6)

167.2 269.0 261.3 272.6 970.1

Aron supply and offtake obligations (7)

494.8 — — — 494.8

Total $ 2,436.6 $ 2,242.9 $ 726.7 $ 793.3 $ 6,199.5

(1) Expected interest payments on debt outstanding at March 31, 2022.

Floating interest rate debt is calculated using March 31, 2022 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 March 31, 2022.

(3) Amounts reflect future estimated lease payments under financing leases having remaining non-cancelable terms in excess of one year as of March 31, 2022.

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

We have estimated future payments under the market-based agreements using current market rates.

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

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

For additional information, see Note 10 of our condensed consolidated financial statements included in Item 1.

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

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

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

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

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

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

Other Cash Requirements

Our material short-term cash requirements under contractual obligations are presented above, and we e xpect to fund the majority of those requirements with cash flows from operations, with the exception of the supply and offtake obligations, which are expected to be refinanced.

Our other cash requirements consisted of operating activities and capital expenditures.

Operating activities include cash outflows related to payments to suppliers for crude and other inventories (which are largely reflected in our contractual purchase commitments in the table above) and payments for salaries and other employee related costs.

In line with our Long-term Sustainable strategy, future cash requirements will include initiatives to build on our long term sustainable business model, ESG initiatives and digital transformation.

Management's Discussion and Analysis

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis