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Item 7. Management’s Discussion and Analysis

2023-03-01 compared with 2022-02-25 · 552 added, 688 removed, 695 unchanged (64% of the section changed)

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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 and the related Pandemic 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, 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 3 Bear Acquisition, including any statements regarding the expected benefits, synergies, growth opportunities, impact on liquidity and prospects, and other financial and operating benefits thereof, statements regarding the effect, impact, potential duration or other implications of, or expectations expressed with respect to, the outbreak of COVID-19 and the related 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 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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Important factors that, individually or in the aggregate, could cause such differences include, but are not limited to:

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

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

• reliability of our operating assets;

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

• the unprecedented market environment and economic effects of the COVID-19 Pandemic, including uncertainty regarding the timing, pace and extent of economic recovery in the 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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• increases in our debt levels or costs;

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

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

• possibility of accelerated repayment on a portion of our Inventory Intermediation Obligation if the purchase price adjustment feature triggers a change on the re-pricing dates;

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

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

• the suspension of our quarterly dividend;

• changes in our ability to pay dividends;

• seasonality;

• We operate in a highly regulated industry and increased costs of compliance with, or liability for violation of, existing or future laws, regulations and other requirements could significantly increase our costs of doing business, thereby adversely affecting our profitability;

• Legislative and regulatory measures to address climate change and greenhouse gases emissions could increase our operating costs or decrease demand for our refined products;

• 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;

• earthquakes, hurricanes, tornadoes, and other weather events, which can unforeseeably affect the price or availability of electricity, natural gas, crude oil, and other feedstocks, critical supplies, refined petroleum products and ethanol;

• increases in 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 OPEC+ members regarding production and pricing and disputes between OPEC+ members regarding the same;

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

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") costing method from the last-in, first-out ("LIFO") costing method, which will conform the Company’s refining inventory to a single method of accounting.

This change in accounting method is preferable because it provides better consistency across our refineries and improves transparency, and results in 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, 2020 beginning retained earnings.

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

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

During the fourth quarter 2022, we realigned our reportable segments for financial reporting purposes to reflect changes in the manner in which our chief operating decision maker, or CODM, assesses financial information for decision-making purposes.

The change primarily represents reporting the operating results of wholesale crude operations within the refining segment.

Prior to this change, wholesale crude operations were reported as part of corporate, other and eliminations.

In addition, during the fourth quarter 2022, the CODM determined that EBITDA is the key performance measure for planning and forecasting purposes and discontinued the use of contribution margin as a measure of performance.

While these reporting changes did not change our consolidated results, segment data for previous years has been restated and is consistent with the current year presentation throughout the financial statements and the accompanying notes.

Business and Economic Environment Overview

As we reflect on the macro environment in 2021, the economy continued to recover from the impact of the COVID-19 Pandemic, both globally and domestically.

However, 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 was largely attributable to limited demand from international markets where consumer demand improvement has lagged behind the U.S.

resulting in the closing of much of the U.S.

export arbitrage.

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 for much of the year.

That said, the fourth quarter of 2021 finished strong for the downstream oil and gas sector, with higher oil prices, widening crack spreads and improving demand for refined product.

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 impacted by the following macro factors:

• Rising RIN Prices :

For the first half of the year, the RINs market was impacted by 2020's judicial rulings imposing limitations on smaller refineries' abilities to qualify for the EPA's SREs under the RFS, which was exacerbated by worsening environmental regulatory sentiment coming out of Washington, D.C.

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.

This expectation was dampened by the release of a proposed rule by the EPA in December 2021 which recommended revised volumetric rates for 2020 and, for the first time, introduced proposed rates for 2021 and 2022, with no final ruling on the likelihood of small refinery exemptions.

Also of note, movements in crack spreads behave independently from movements in RFS regulatory requirements and RINs prices and thus can disproportionately impact small refiners.

For example, in periods of low crack spreads and high RIN costs (which are a function of both regulatory volumetric requirements and market RINs prices), small refineries may experience negative operating results where other, larger refineries with better economies of scale and other competitive advantages may fare better.

Even when increases in crack spreads coincide with the independent increases in RIN prices, small refiners may continue to see a larger burden of such costs on crack spread capture in contribution margin than many larger refineries experience.

• Rising Energy Costs:

Crack spread capture was further impacted by rising energy (natural gas and electricity) costs.

Throughout most of 2021, domestic natural gas demand outpaced growth in supply and contributed to sustained increases in natural gas prices.

Additional factors, including increased exports triggered by unusually high international gas prices, as well as critical pipeline outages and the prices and availability of substitute fuels for power generation, put additional upward pressure on domestic natural gas prices.

The spike in natural gas prices in the first quarter of 2021 relating to Winter Storm Uri had a significant impact on our refining contribution margin, and despite mitigating commercial efforts, the high natural gas prices continued to impact our crack spread capture for the remainder 2021.

• Unfavorable Location Differentials:

Most midstream and downstream oil and gas entities have competitive advantages or disadvantages that relate to their geographic positioning.

We have a significant presence in the Permian Basin, with one of our best performing refineries and much of our gathering assets located there.

For these reasons, our refining operations are heavily dependent on Midland WTI crude, and our refining margins are likewise impacted by the Midland-Cushing differential.

While an unfavorable Midland differential compared to Cushing on WTI crude oil will have a negative impact on our results, a favorable differential (or discount compared to Cushing barrels) will significantly increase our refining margin.

Such conditions are highly dependent on domestic and global demand and supply, which can be impacted by geopolitical conditions as well as unexpected outages or disruptions and can shift quickly.

Along with higher crack spreads driven by economic recovery observed during 2022, the industry witnessed higher inflation rates, higher natural gas costs, and supply constraints due to post-Pandemic disruptions and geopolitical events, putting pressure on operating costs which counterbalanced favorable crack spreads.

Since Q2 2022, major commodity prices have declined from their peak and indications are that overall inflation may be slowing along with declining natural gas prices as the trend toward stabilization continues.

It is more than likely that domestic export pressure of LNG, with significant increases of exports from the Gulf Coast, will continue to buoy natural gas prices, even as natural gas production continues to increase domestically, led by production in the Gulf Coast and the Permian Basin.

Expected production increases in oil and natural gas in the Permian Basin and in the Gulf Coast, and manufacturing activity should provide opportunity for optimizing our existing logistics infrastructure.

Our integration of 3 Bear has expanded our existing crude oil gathering throughput capacity in the Permian while also extending our product offering to include natural gas gathering and processing as well as wastewater recycling and disposal.

Our retail operations have benefited from continued strong demand from U.S.

drivers and present several high-growth opportunities for future investment which will complement our existing operations and build brand equity.

Our focus on safe and reliable operations is a pillar which underlines all of our business activities.

We continue to identify opportunities to mitigate market risk and focus on efforts that improve our overall cost structure while not compromising operational excellence.

During the year we have made investments in our technology infrastructure which has positioned the Company to become more efficient.

By executing on our initiatives to optimize our cost structure, we are positioning the Company for potential economic headwinds that coincide with a global recession, reduction in the reliance of liquid fuels, a tightening of capital markets, increased regulatory pressures, and volatility in the commodity markets.

The prioritization of energy security, highlighted by geopolitical events including the Russia-Ukraine War, and the continued global focus toward decarbonization, will continue to create opportunity for the development of the domestic production of liquid fuels with lower carbon footprint.

The energy-related legislation passed with the Inflation Reduction Act (IRA) encompasses clean energy financial incentives that are expected to increase capital investment opportunities that focus on the development of production capacity for liquid fuels with lower GHG emissions.

Gulf coast industries should be well positioned for growth, particularly if global trade becomes tied to environmental attributes.

Our focus on reduction of greenhouse gas emissions is a key objective as we strive to be a leader in the transition to a carbon neutral future.

Delek formed the New Energy Task Force in 2021, and the group has been studying and internally reporting our current emissions status, pinpointing potential means of achieving emissions reductions, providing updates on carbon capture opportunities and regulatory issues facing the industry and Delek specifically, and identifying transformational opportunities consistent with the Intergovernmental Panel on Climate Change’s 2°scenarios.

Delek prioritizes stewardship of the environment, and we focus on how to positively impact our shareholders, employees, customers, and the communities where we operate.

Our near-term focus is centered around unlocking the "sum of the parts" value of our existing business while identifying growth opportunities to enhance the Company's scale and diversify revenue streams, including in the alternative energy markets.

As part of our plan, we have hired Mark Hobbs who is an experienced investment banker with over 28 years of energy experience to fill the role of EVP, Corporate Development and who will work closely with the rest of our management team to unlock the “sum of parts” value.

In addition, we have also hired third party advisors to work alongside our management team to identify strategic options.

We believe this process will maximize the value of our shareholders while optimizing our asset portfolio and balance sheet.

Management's Discussion and Analysis

See further discussion on macroeconomic factors and market trends, including the impact on 2022 and the outlook for 2023, in the ‘Market Trends’ section below.

Overall, our Refining results are much improved in 2021 compared to 2020, largely attributable to improvements in oil prices and crack spreads combined with cost control efforts we implemented, while Pandemic-related pressure on demand combined with high RIN costs and energy costs continued to strain our crack spread capture in contribution margin.

On the positive side, while increasing RINs prices weighed negatively on Refining margins;

year-over-year we experienced improvement in crack spread net of incremental RINs cost, driven primarily by steadily improving crack spreads during most of 2021 combined with a fourth quarter 2021 stabilization of RIN costs to first quarter 2021 quarter levels.

Furthermore, while RINs costs will impact our capture rate in a more pronounced manner than many larger refineries, if RINs costs stabilize, we are poised to take advantage of possible widening crack spreads and increased demand in 2022.

If we receive SREs, the benefit will be even more significant, and will allow us to maintain a more consistent capture rate, which will align more closely to some of the larger refiners.

Logistics results continued to be strong in 2021 and benefited from MVCs during periods that may otherwise have been constrained, such as

Other 2022 Developments

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, American Entertainment Properties Corp., Icahn Enterprises Holdings L.P., Icahn Enterprises G.P.

Inc., Beckton Corp., 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, which equals an aggregate purchase price of $64.0 million.

Focus on Leadership Succession Planning

On June 9, 2022, Avigal Soreq was appointed the President and Chief Executive Officer ("CEO") and as a member of the Board under a previously announced CEO succession plan.

Ezra Uzi Yemin, the Company’s previous President and CEO, was appointed as the Executive Chairman of the Board.

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

With these appointments of Messrs.

Soreq and Moreno, the Board has been expanded to comprise nine 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.

Increasing Shareholder Value through Payment of Dividends

In July 2022, our Board of Directors (the "Board") reinstated the quarterly cash dividend of $0.20 per share of our common stock and increased the quarterly cash dividend to $0.21 per share of our common stock in October 2022.

In addition, our Board declared a special dividend of $0.20 per share of our common stock in July 2022.

Increasing Shareholder Value through Increase of Share Repurchase Program

On August 1, 2022, our Board approved an approximately $170.3 million increase in its share repurchase authorization, bringing the total amount available for repurchases under current authorizations to $400.0 million.

For the year ended December 31, 2022, Delek repurchased 4,261,185 shares for an aggregate purchase price of $129.6 million, exclusive of the shares purchased under the Icahn Group Purchase Agreement.

Increasing Flexibility through Delek Logistics Debt Amendments

On October 13, 2022, Delek Logistics entered into a fourth amended and restated senior secured revolving credit agreement which among other things (i) increased total aggregate commitments to $1.2 billion, comprised of (A) senior secured revolving commitments of $900.0 million in aggregate with an extend maturity date of October 13, 2027 (the "Delek Logistics Revolving Facility"), and (B) a new senior secured term loan facility for a term loan in the original principal amount of $300 million with a maturity date of October 13, 2024 (the "Delek Logistics Term Facility").

Increasing Flexibility through Delek Long-term Obligation Amendments

On October 26, 2022, Delek entered into a third amended and restated credit agreement providing for a senior secured asset-based revolving credit facility with total credit commitment of $1.1 billion with an extended maturity date of October 26, 2027 (the “Amended and Restated Revolving Credit Facility”).

On November 18, 2022, Delek entered into an amended and restated term loan credit agreement providing for a senior secured term loan facility in an initial principal amount of $950 million with an extended maturity date of November 19, 2029 (the “Amended and Restated Term Loan Credit Agreement”).

Outstanding term loans of Delek US were reduced by an aggregate amount of approximately $300 million.

On December 22, 2022, Delek entered into an Inventory Intermediation Agreement with Citigroup Energy Inc.

(“Citi”) (the "Inventory Intermediation Agreement").

Pursuant to the Inventory Intermediation Agreement, Citi will (i) purchase from and sell to Delek crude oil and other petroleum feedstocks in connection with refining processing operations at El Dorado, Big Spring, and Krotz Springs, (ii) purchase from and sell to Delek all refined products produced by such refineries other than certain excluded products and (iii) in connection with such purchases and sales, Delek will enter into certain market risk hedges in each case, on the terms and subject to certain conditions.

The Inventory Intermediation Agreement results in up to $800 million of working capital capacity for Delek.

The Inventory Intermediation Agreement has a term of 24 months, subject to extension by Citi for an additional 12 months.

The Inventory Intermediation Agreement replaces the Supply and Offtake Agreements with J.

Aron that expired on December 30, 2022.

Management's Discussion and Analysis

the first quarter when much of our market was impacted by the winter storm.

Logistics also continues to benefit from strong performance amongst our pipeline joint venture investments.

Retail stores continue to perform well and we are beginning to realize the benefit of store optimization activities we conducted during the past two years, and we expect to begin seeing growth from new stores and successful re-branding.

Looking forward to 2022, besides the expected favorable benefit of market improvements described above, we have many strategic initiatives that align with our new long-term sustainability view, as discussed in the ‘Strategic Overview’ section below.

Additionally, in 2022, we expect to begin realizing returns from our indirect investment in the WWP pipeline, as the majority of the segments are now fully online and supported by existing throughput MVCs, and we also look forward to evaluating the potential for exercising our call option for a 33 1/3% limited member interest in a clean energy facility in California.

Refining Overview

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

In addition, the refining segment includes our wholesale crude operations.

Logistics Overview

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.

Our logistics segment (or "Logistics") gathers, transports and stores crude oil and natural gas;

markets, distributes, transports and stores refined products;

and disposes and recycles water in select regions of the southeastern United States, West Texas and New Mexico for our refining segment and third parties.

It is comprised of the consolidated balance sheet and results of operations of Delek Logistics (NYSE:

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

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

The logistics segment's gathering and processing business owns or leases capacity on approximately 400 miles of crude oil transportation pipelines, approximately 450 miles of refined product pipelines, and an approximately 1,120-mile crude oil gathering system.

The storage and transportation business owns or leases associated crude oil storage tanks with an aggregate of approximately 10.3 million barrels of active shell capacity.

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

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Our convenience stores typically offer various grades of gasoline and diesel under the DK or Alon brand name and food products, food service, tobacco products, non-alcoholic and alcoholic beverages, general merchandise as well as money orders to the public, primarily under the 7-Eleven and DK or Alon brand names pursuant to a license agreement with 7-Eleven, Inc.

Management's Discussion and Analysis

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

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

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

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As of December 31, 2022, we have removed the 7-Eleven brand name at 106 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.

Management's Discussion and Analysis

commodity pricing information.

In connection with our Retail strategic initiatives, we closed or sold 52 under-performing or non-strategic store locations since the fourth quarter of 2018.

Corporate and Other Overview

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

Our corporate activities, results of certain immaterial operating segments, and intercompany eliminations are reported in 'corporate, other and eliminations' in our segment disclosures.

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

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

Previous Core Strategic Focus Areas

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:

Previous Key Initiatives

During 2022, our principal focus was on these Key Initiatives:

Safety and wellness.

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Positioning for growth.

We have 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 continued to actively review our targeted Pandemic 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

Management's Discussion and Analysis

and capitalize on our operational strengths and strategic positioning in the near term.

As the impact of the Pandemic began to stabilize in the latter half of 2021, we began to shift our attention to the post-Pandemic horizon in earnest, now that there's a clearer picture of what that may look like.

We also have continued to actively review our targeted 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 in the near term.

Capitalizing on our unwavering commitment to strategic thinking in a rapidly changing environment, we have embraced 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.

Management's Discussion and Analysis

Evolving Focus:

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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.

To illustrate these overlapping components and their interdependence, see the illustrative snapshot of our Long-Term Sustainability Strategy below:

Management's Discussion and Analysis

Our Key Initiatives , which are integrated with our Overarching Objectives, also provide clear, actionable paths toward long-term sustainability, as shown below:

Long-Term Sustainability Strategy:

Developing Actionable Key Initiatives, Focused Objectives and Specific Priorities

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.

As a result, we are implementing our new strategic framework in intentional stages.

Stage 1 - Second Half of 2021

While this Framework is in its early phase, we have already been hard at work executing on our Stage 1 Priorities in the context of our Overarching Objectives and Key Initiatives.

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.

We selected these Stage 1 Priorities because they are all foundational to a continued progression toward achieving our overarching strategic objectives under the Long-Term Sustainability Framework.

As we continue to develop future Stage Priorities, they will be designed to further advance the realization of our Key Initiatives.

Furthermore, we fully expect

Management's Discussion and Analysis

overlap with previous stages and that our priorities will evolve over time to align with changing circumstances and to reflect obstacles we encounter as well as our continued progress.

This is an evolution, not a "one-and-done" exercise.

Stage 2 - 2022

We developed our Stage 2 activities more intentionally, in the context of the new Framework.

First, we identified our Stage 2 Key Initiatives , which are a targeted subset of the Key Initiatives discussed above.

We then developed Stage 2 Focused Objectives which reflect the strategic objectives we want to achieve specifically in 2022.

Finally, we developed Stage 2 Specific Priorities , which represent those priorities that we believe will help us accomplish our Stage 2 Focused Objectives, and will likewise advance achievement on our overall Key Initiatives.

As our approach becomes more integrated, you will see that our Focused Objectives serve cross-purposes across our Key Initiatives, and that our Specific Priorities serve cross-purposes across our Focused Objectives.

Action Plan and Timeline

The following graphic shows the overall timeline and structure of our Key Initiatives, which guide our Focused Objectives, and ultimately our Specific Priorities, for Stage 1 and Stage 2, based on our planned timeline:

Effective June 2022, Avigal Soreq was named the President and Chief Executive Officer of the Company.

As a result of this change in leadership, the Company revisited its key initiatives.

Management's Discussion and Analysis

Long-Term Sustainability Strategy:

Stage 2 Activities Planned for 2022

We have preliminarily identified our Stage 2 Priorities , in the context of our Stage 2 Focused Objectives and Stage 2 Key Initiatives , as follows:

Key Initiative:

Implementing One Delek Culture Transformation Key Initiative:

Planning for Refinery of the Future Operational Transformation Key Initiative:

Preparing for the New Energy Transition

Focused Objective:

Safety & Wellness Leadership

We strive to be nationally recognized as an industry leader for our commitment to sustaining safe work environments that help every employee feel and do their best.

We want every Delek employee to come to work every day knowing they are valued and protected.

Continuing to incorporate the qualities of the "Delek Leader" and the "Employee of the Future" into our human capital programs, incentives and rewards Create an operating model with an empowered, highly effective workforce ready for any challenge by removing barriers and streamlining processes and procedures

Focused Objective:

Operating with Reliability and Integrity

By focusing on reliability and integrity, we maximize the return on our investments.

Our employees, customers and shareholders can count on us to operate every aspect of our business responsibly, reflecting that the work we do every day is recognized across our industry as reputable and essential.

Continued progress on 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 Sustain low operating cost model through spending discipline, supply chain management, and innovation solutions

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.

Continued progress on 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 Develop and cross-develop internal capabilities - "taught by Delek, supported by Delek, empowered by Delek" Continuing to redefine 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

Develop a Post-Pandemic Talent Retention Task Force to identify the risks around retaining talent and to develop strategies for retaining talent given the changing workforce expectations and tight market for talent Improve discipline around outage spend and optimizing downtimes Continue to develop process for 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

Continued enterprise-wide cost and waste reduction initiatives as well as initiatives focused on eliminating lost revenue and value leakage

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.

Continue to develop process for 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 Continue to develop process for 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

Continue exploring opportunities to monetize some of our investment in Delek Logistics, which will help us to better capture tangible value in the Delek valuation, while also improving liquidity in the market for DKL units without dilution of overall DKL market capitalization

Focused Objective:

Driving EBITDA Improvements

Increasing our profitability will allow us to become a more sustainable business that is equipped for steady growth.

It also means that we can achieve both our short-term and long-term goals.

Through cross-functional collaboration, identify operational improvements to reduce the cost of crude and transportation costs Sustain low operating cost model through spending discipline, supply chain management, and innovation solutions

Through cross-functional collaboration, identify operational improvements to reduce yield loss inside and outside of the fence Improve discipline around outage spend and optimizing downtimes

Safe and Reliable Operations

We are committed to maintaining safe, reliable, and environmentally responsible operations.

We are continuously looking to reduce costs, increase reliability and safety, improve efficiency, and pursue operational improvements.

Delek prioritizes stewardship of the environment, and we focus on how to positively impact our shareholders, employees, customers, and the communities where we operate.

For 2023, we will be focused on the following:

• Focus on operational excellence by implementing and sustaining a low operating cost model through spending discipline, supply chain management, and innovation solutions.

• Improve discipline around outage spend and optimizing downtimes.

• Continue our progression of digital 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.

Automate processes and shift operational roles to higher value-added activities.

Shareholder Returns

We believe shareholder value is strengthened through, among other things, a stable dividend complemented by share repurchases.

We also want to reward our shareholders with a competitive long-term capital allocation framework.

One of our near-term initiatives is centered around unlocking the "sum of the parts" value of our existing business while identifying growth opportunities to enhance the Company's scale and diversify revenue streams, including in the alternative energy markets.

We are also committed to lowering costs and improving the efficiency of our cost structure in all aspects of our business and will continue to focus on operational excellence.

We are continuously looking to improve our operating and general and administrative cost structure.

For 2023, we will be focused on the following:

• Explore opportunities to monetize some of our investment in Delek Logistics, which will help us to better capture tangible value in the Delek valuation, while also improving liquidity in the market for DKL units without dilution of overall DKL market capitalization.

• Reward our shareholders with a competitive long-term capital allocation framework including the share repurchases and an evaluation of debt reductions which will continue to strengthen our balance sheet.

• Monitor performance of our first phase of a zero-based budget for 2023 by setting clear mechanisms for tracking costs, including how to address variances and reallocate funds.

Long-Term Sustainable Business Model

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, 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.

Additionally, evolving consumer and capital markets sentiment, regulations, supply chain constraints and customer demand are expected to cause disruption and increasing pressure in the intermediate term.

In order to compete 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.

For 2023, we will be focused on the following:

• Continue our retail rebranding efforts and retail growth plans with additional new-to-industry locations in the planning phase.

In addition, invest in industry leading digital technology which will improve brand image and customer experience.

• Identify and evaluate investment opportunities that fit our sustainability view, including strategic investments or joint ventures in renewables, incubator investments in new technologies, and other core-business investments that could improve our scalability and agility.

• Deploy integrated solutions to simplify architecture, data management, and cybersecurity.

• Pursuit of strategic investments and acquisitions with a focus on diversifying revenue streams.

Management's Discussion and Analysis

2022 Strategic Activities - A Look Back

In addition to the Phase 1 Strategic Priorities that were identified in connection with the development of the Long-Term Sustainability Framework in the latter part of 2021, our 2021 strategic activities were also driven by the following strategic initiatives which were identified under our previous Five-Year Strategic Framework and which were aligned to our previous Core Strategic Focus Areas:

• Maintain and Continue to Enhance Our Safe Operations.

Our commitment to safety has been reflected in our continuous improvement in DART (days away, restricted or transferred) and TRIR (total recordable incident rate) metrics since 2016.

• Drive Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") and Cash Flow Improvement.

In 2021, the company continued to deliver cost savings and implement initiatives for margin improvements through optimization.

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

We have increased our focus on upgrading our technologies and implement advanced systems and processes to achieve further, more structural cost reductions, operational improvements and asset optimization over the medium to longer term.

• Ongoing Commitment to ESG.

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

We recently announced our first greenhouse gas emissions reductions target as we seek to align our business with the Paris Climate Accords, as well as a diversity goal for our Board of Directors composition.

• Laying the Foundation for Future Growth .

After focusing mainly on improving our cash flow break-even profile through reduced discretionary capital expenditures and operating costs in 2021, we are emerging from this downturn with an improved cost structure, a healthy balance sheet and opportunities to pursue future growth.

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

2021 Significant Strategic Developments/Areas of Focus

The following table highlights our 2021 Strategic Developments/Areas of Focus, with linkages to our new Long-Term Sustainability Strategy Overarching Objectives and Key Initiatives:

Under our new

Long-Term Sustainability Strategy

2021 Significant Developments/Areas of Focus Linkage to Overarching Objectives Linkage to Key Initiatives

Significant Developments:

Initiated a program to monetize a portion of our ownership in Delek Logistics under a Rule 10b5-1 program to sell up to 434,590 common limited partner units, which helped us to not only capture $2.1 million (pre-tax) to date of tangible value in the Delek valuation but also serves to improve the liquidity of the Delek Logistics units without diluting the overall market capitalization of Delek Logistics.

Long-term Sustainable Business Model One Delek

Negotiated an accretive buy-out of a financing commitment agreement with WWP which allowed us to recoup capital expenditures we may not have incurred had it not been for the financing commitment and recognize an incremental gain of approximately $10.2 million.

Operational Optimization and Improved Margin Capture One Delek

Successfully completed a $400.0 million senior note debt issuance at Delek Logistics (the “Delek Logistic 2028 Notes”) which the net proceeds were used to pay down borrowings under the Delek Logistics Credit Facility and likewise enhance liquidity.

Long-term Sustainable Business Model One Delek

Other Areas of Focus:

Continued expansion in our crude gathering business in the Permian Basin.

Long-term Sustainable Business Model One Delek

Executed an exclusive supply and strategic relationship agreement for the supply of certain chemicals exclusively which Delek Logistics can then use, through blending competencies utilizing proprietary intellectual property, to clarify slurry which can then be used in International Maritime Organization ("IMO")-compliant products.

ESG-Conscious Investments with Clear Value Propositions and Sustainable Returns One Delek

Executed opportunistic turnaround and maintenance activities to minimize impact of disruption from Winter Storm Uri and the El Dorado refinery fire.

Culture of Innovation, Excellence and Operating Discipline Refinery of the Future

Implemented enterprise-wide cost and waste reduction initiatives as well as initiatives focused on eliminating lost revenue and value leakage.

Operational Optimization and Improved Margin Capture Refinery of the Future

Continued our retail rebranding efforts, and resumed retail growth plans with four new-to-industry locations in the planning phase.

Long-term Sustainable Business Model One Delek

Progressed on digital 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.

Digital Transformation One Delek

Refinery of the Future

Identified 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.

Culture of Innovation, Excellence and Operating Discipline One Delek

Began to develop a process for 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.

ESG-Conscious Investments with Clear Value Propositions and Sustainable Returns One Delek

Redefined 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.

Long-term Sustainable Business Model One Delek

Refinery of the Future

(1) For further discussion of these items, see Notes 5, 6 and 10, respectively, in our consolidated financial statements included in Item 8.

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

The following table highlights our 2022 Strategic Developments:

2022 Key Initiatives

2022 Strategic Developments One Delek Culture Refinery of the Future New Energy Transition

Improving Efficiency and Processes to Drive Enhanced Analytics by implementing a New Enterprise Resource Planning System:

In October 2022, we implemented a new enterprise resource planning system, designed to improve the efficiency of our internal operational and administrative activities.

This system implementation is part of our ongoing business transformation initiatives and we expect these system infrastructure investments will result in more efficient and scalable operational processes and provide enhanced analytics to drive business performance.

Improving Consistency and Transparency by Conforming Refining Inventory Accounting Methodology:

As of January 1, 2022, we changed our method of 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, which conformed our refining inventory to a single method of accounting, and eliminated 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.

We expect improved 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, 2020 beginning retained earnings.

Committed to Lowering Costs and Improving the Efficiency of Our Cost Structure:

In 2022, we announced that we are progressing a business transformation focused on enterprise-wide opportunities to improve the efficiency of our cost structure.

For the three months ended December 31, 2022, we recorded restructuring costs totaling $13 million associated with our business transformation.

Improving process for investment opportunities:

Refined process for 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.

Completed Strategic Midstream Acquisition:

On June 1, 2022, DKL Delaware Gathering, LLC, a subsidiary of Delek Logistics, completed the acquisition of 100% of the limited liability company interests in 3 Bear Delaware Holding – NM, LLC (“3 Bear”) from 3 Bear Energy – New Mexico LLC (the “Seller”), 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 price for 3 Bear was $628 million and was financed through a combination of cash on hand and borrowings under Delek Logistics' existing credit agreement.

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

Committed to Lowering Costs and Improving the Efficiency of Our Cost Structure:

For the 2023 budget, we performed a first phase of a zero-based budget assessment of our resources and assets and their associated cost to develop a baseline for our operations.

We engaged an external consultant to help challenge our thinking as we went through this process.

During this process, each business leader was required to justify every dollar in their proposed budget submission and the external consultant team ensured consistency, set policies, and confirmed that the budgeted expenses matched the priorities to be achieved by the Company.

Management's Discussion and Analysis

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Instead, in the context of all known trends or uncertainties that have had, or that are reasonably likely to have, a material favorable or unfavorable effect on financial results, they should be considered part of the larger discussion on market trends and uncertainties throughout our management's discussion and analysis.

COVID-19 Pandemic

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

and specific geographic areas where we operate.

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

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

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

to many parts of the world.

Additionally, the COVID-19 Pandemic has had a significant negative impact on motor vehicle 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 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, the availability of the COVID-19 vaccine across the U.S.

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 new 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.

While the risk surrounding the uncertainties of the COVID-19 Pandemic appears to be lessening, they still represent risks that could impact our operations, financial condition and results of operations.

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

• Significant declines and/or volatility in prices of refined products we sell and the feedstocks we purchase as well as in crack spreads resulting from the COVID-19 Pandemic could have a significant impact on our revenues, cost of sales, operating income and liquidity, 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 2 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for additional discussion of specific statement risks);

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

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

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

• 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;

Management's Discussion and Analysis

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

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.

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

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

Delek's Response to Significant Uncertainties Associated with the COVID-19 Pandemic

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:

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

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

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

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

• Reducing 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 ("CARES") 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;

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

• Enacting temporary 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 on our financial results, 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 was and will be payable in equal installments in December 2021 and December 2022.

Additionally, we recorded a current income tax receivable totaling $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 we received in the third quarter of 2021.

• We made significant efforts to temporarily reduce our capital spending, particularly on growth and non-critical sustaining maintenance projects, and by deferring non-critical turnaround activities (for example, we are conducting "surgical strike" turnaround activities at our Tyler refinery, which allows us to defer the full turnaround until 2023).

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

Management's Discussion and Analysis, for further information.

• In light of the weak macro-economic environment, we elected to pull forward turnaround work into the fourth quarter of 2020 on certain units at the Krotz Springs refinery that 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 implemented a temporary cost reduction plan for 2021 designed to significantly reduce operating expenses and general and administrative expenses.

The majority of the operating expenses reduction was attributable to the temporary unit optimization at the Krotz Spring refinery, with additional reductions arising from 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.

• Finally, we elected to suspend dividends beginning in the fourth quarter 2020 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.

Management's Discussion and Analysis

The combination of these efforts had a mitigating impact on cash flows as well as our operations, which we believe has improved our liquidity positioning and operational flexibility and response in anticipation of the continued economic impacts of the COVID-19 Pandemic.

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

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

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

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

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

of this Annual Report on Form 10-K.

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

Regulatory Volatility

Our RINs cost and RINs Obligation (as defined in Note 11 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K) have been negatively impacted by increasing RINs prices during much of 2021 which resulted from the 2020 unfavorable ruling against companies previously granted the EPA's SREs under the RFS which governs RINs volume obligations for U.S.

hydrocarbon refining companies, importers and blenders.

Additionally, increased environmental regulatory activity 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 first half of the year) 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.

Additionally, 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 of December 31, 2020 that delayed the deadlines until future periods.

In late June 2021, the U.S.

Supreme Court overturned the 10th Circuit's previous ruling regarding RINs, resulting in market optimism that the stalled SRE applications from 2019, as well as new applications for 2020, might be granted, based on the published criteria.

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.

However, this expectation was dampened by the release of a proposed rule by the EPA in December 2021 which recommended revised volumetric rates for 2020 and, for the first time, introduced proposed rates for 2021 and 2022, and proposed denial of pending SRE petitions, noting that the proposed volumetric rate 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.

The December 2021 Proposed Rule is still under comment and review and has not yet been finalized.

Because of the delays and uncertainties, the EPA Issued, by Final Rule in February 2022, compliance and attestation reporting deadline extensions based on a formula that begins with the first reporting deadline that is at least 60 days after the 2019 RINs Obligation compliance requirements are made effective via Final Rule, with the 2020, 2021 and 2022 deadlines to occur at each successive quarterly reporting deadline.

So if the 2019 compliance requirement is finalized in June 2022, it's reporting and attestation compliance deadline would be September 1, 2022, followed by the following deadlines for subsequent RINs Obligation years:

2020 - December 1, 2022;

2021 - March 31, 2023;

2022 - June 1, 2023.

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

Additionally, uncertainty remains regarding the impact that proposed EPA rules, or future revisions to proposed rules, may have on RINs prices, which impact the determination of the fair value of our Net RINs Obligation, as well as the fair value of forward RIN commitment contracts.

While we cannot know the outcome of our SRE applications, Delek has a 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 December 31, 2021, the financial statement impact, including both the income statement and net cash impact, of any future receipt of SRE(s) or future changes to enacted Renewable Volume Obligation rates, 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 and/or the extent of enacted volumetric requirement changes;

(2) the composition of the 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 or volumetric requirement change is enacted;

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

In June 2022, the EPA finalized volumes for compliance years 2020, 2021 and 2022 under the RFS program (as defined in our accounting policies in Note 2 to consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K), announced supplemental volume obligations for compliance years 2022 and 2023 and established new provisions of the RFS which addressed bio-intermediates.

Additionally, the EPA denied the petitions for small refinery exemptions for prior period compliance years.

In December 2022, the EPA released proposed volumes for compliance years 2023, 2024 and 2025.

The cost of RINs continues to negatively impact our results of operations.

Also of note, movements in crack spreads behave independently from movements in RFS regulatory requirements and RINs prices and thus can disproportionately impact small refiners.

Uncertainty remains regarding the impact that proposed EPA rules, or future revisions to proposed rules, may have on RINs prices, which impact the determination of the fair value of our Net RINs Obligation, as well as the fair value of forward RIN commitment contracts.

Additionally, while our current Net RINs Obligation reflects current RINs market prices as of December 31, 2022, the financial statement impact, including both the income statement and net cash impact of future changes to enacted Renewable Volume Obligation rates, 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) the composition of the 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 volumetric requirement change is enacted;

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

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

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

We note that our total gross RINs Obligation for 2020 (which is the most recent period for which volumetric requirements have been enacted), for all four refineries, was approximately 340 million RINs, across all RIN categories.

While receipt of any SREs could result in significant benefit, both in terms of income statement effect and cash flows, other enacted regulatory changes could impact our financial results in ways that we cannot currently anticipate.

Management's Discussion and Analysis

Enacted regulatory changes could impact our financial results in ways that we cannot currently anticipate.

Delek's Response to Significant Uncertainties Associated with Regulatory Volatility

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Our efforts to mitigate this risk include the following:

• Aggressively pursuing small refinery exemptions for all four of our refineries;

◦ Immediately following the favorable U.S.

Supreme Court ruling in June 2021, we undertook efforts to prepare 2020 SRE applications for our refineries and we submitted them in August 2021.

We believe that RINs do significantly impact the crack spread capture at our refineries and therefore the original intent of SREs is still applicable and, likewise, that SREs should be granted to us.

Furthermore, Delek has a history of being granted the waivers.

Because EPA failed to decide Delek’s pending 2019 SRE petitions within the statutorily prescribed 90-day period, Delek filed suit against the Agency in federal district court in the District of Columbia.

That case remains pending before the court.

• Actively monitoring EPA rule-making and RFS actions regarding volumetric requirements, remittance due dates, and deferral opportunities in order to make decisions about RINs inventory;

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There continues to be significant uncertainty around coming regulatory requirements, not just from an operational perspective, but also around what reporting requirements may be, as well as the associated cost.

Management's Discussion and Analysis

The SEC is currently considering its requirements for ESG reporting in the near term, which may include requirements that independent assurance be obtained and reported for ESG disclosures, similar to financial statement audit reports.

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renewable power purchases, when feasible, and offsets, when necessary;

and previously executed facility shutdowns that were later divested Our pledge is the first step towards a long-term roadmap which we are seeking to align with the SBTI, to move Delek firmly in the direction of the carbon-neutral operating environment as envisioned by the Paris Accords.

and previously executed facility shutdowns that were later divested Our pledge is the first step towards a long-term roadmap which we are seeking to align with the Science Based Target initiatives (SBTi), to move Delek firmly in the direction of the carbon-neutral operating environment as envisioned by the Paris Accords.

We also continue to monitor the activities of the SEC as it works towards issuing reporting compliance rules around ESG and climate change, which includes consideration of framework and/or standards introduced by the Task Force on Climate-related Financial Disclosures ("TCFD") Sustainability Accounting Standards Board ("SASB"), so that we may ensure timely compliance with requirements as well as meaningful disclosure for our investors and stakeholders.

Talent Retention

It is widely reported that post-Pandemic talent retention has become a very real risk for companies that are looking forward to emerging from Pandemic conditions.

According to a 2021 report by Achievers Workforce Institute, 52% of employees in North America will look for a new job in the near future, leading many to refer to the phenomenon as a “turnover tsunami” or the "Great Resignation." The Pandemic has caused changes in consumer behavior, in travel and also in the way we work.

It has triggered a fundamental shift in the way many people view their lives and their relationships with employers, in a time when concern for the health and well-being of loved ones has been paramount.

Additionally, the job market has changed.

COVID-19-related fatalities have taken a toll on the talent pool, and the remaining workforce have shifted their views of what's important.

Encouraged/forced retirement and workforce reductions during the height of the Pandemic pushed workers into different roles, while health concerns, flexibility needs and the success of remote working optionality have changed the way employees view work.

Additionally, changing consumer behavior and demands during the Pandemic have fueled certain industries and decimated others, creating new demand for certain jobs and changing the market compensation for many.

As we look to 2022, we have identified certain key contributors to post-Pandemic talent retention risk which include the following:

Management's Discussion and Analysis

• Highly Competitive Labor Markets — in many of the markets where we operate, we recognize that there turnover rates are at historic highs, combined with low unemployment rates;

• Voluntary Underemployment or Unemployment — many workers have been forced into under- or unemployment during the Pandemic, and either have successfully adjusted to it or continue to have concerns about health and safety and/or caring for family members;

• Evolving Employee Value Proposition Expectations — Rising wages and new expectations for working flexibility favor employers who are culturally responsive.

We have also identified the following potential consequences of failing to adequately to address the risk around retaining talent:

• Strategic Transformation Failure — failure to recruit and retain employees for roles necessary for specific organizational transformation objectives can contribute to delay or failure of the transformation;

• Cultural Disruption/Erosion — failure to retain team builders and talent with institutional knowledge can cause cultural disruption/erosion, leading to employees that feel less invested in the success of their teams and the company, and contributing to the risk of escalating turnover;

• Loss of Agility Required for Sustainability — in a rapidly evolving economic landscape, agility is often dependent upon the talent and institutional knowledge of your employee force, and loss of that talent and knowledge can impact a company's ability to remain competitive and to achieve or maintain long-term sustainability.

Because of the pervasiveness of the risk, and that it is not specific to Delek, there remains significant uncertainty about the extent to which we may experience post-Pandemic talent attrition, and how workforce demands and expectations may continue to evolve on both a macro and micro level.

Furthermore, there is significant uncertainty as to the impact of post-Pandemic talent attrition, in terms of the specific talent and institutional knowledge that may be lost and how that could impact our strategic transformation activities, our culture and our ability to remain agile.

Failure to appropriately mitigate this risk, ultimately, could impair our long-term sustainability.

Delek's Response to Significant Uncertainties Associated with Post-Pandemic Talent Retention

We recognize that talent retention is a significant risk to the Company post-Pandemic, for all the reasons discussed above.

Our efforts to mitigate this risk include the following:

• We have engaged consultants to benchmark our overall Enterprise Risk Management framework , and as a result, we have:

◦ Identified Post-Pandemic Talent Retention ("PPTR") as one of the most critical emerging risks facing the Company;

◦ Identified the key drivers or post-Pandemic talent retention risk and potential consequences

• We have recently established a PPTR Task Force which has been charged with the following:

◦ Drilling down on the potential consequences of failing to appropriately manage PPTR identified above and identify underlying drivers and risks specific to Delek;

◦ Ranking each identified driver/risk to determine priority for mitigation activities;

◦ Identifying action plans for the mitigation activities, based on priorities

These efforts are incremental to our existing human capital programs, and are specifically designed to address the risks presented by the changing environment.

Additionally, the PPTR Task Force is recently established, and its function and responsibilities will continue to evolve over time.

That said, because the PPTR risk is subject to certain factors outside of our control, there will continue to be risk that our PPTR will not be sufficiently successful and that resulting turnover could indirectly result in an adverse effect on our financial results.

Other Significant Events

During February 2021, the Company experienced a severe weather event ("Winter Storm Uri"), at all the refineries, resulting in units being temporarily shut down and damages being incurred to parts of the facilities due to extreme freezing conditions.

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.

Additionally, 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 OSHA and Chemical Safety Board and resulted in operational disruptions as well as property and casualty damages.

For the year ended December 31, 2021, we have recognized approximately $30.9 million ($23.9 million after-tax) of insurance recoveries related to property and casualty claims relating to the winter storm and the fire, $13.4 million of which related to replacement cost coverage on property losses and which helps offset corresponding capital expenditures, and the remaining $17.5 million of which relates to repairs and other operating expenses incurred in connection with our property and casualty damages.

Additionally, during the first half of 2021, the fire and freeze events caused us to experience operational disruptions that significantly affected our results.

While we cannot know what our EBITDA would have been, we submitted business interruption insurance claims for covered economic losses based on our insurance policies.

For the three months and year ended December 31, 2021, we have recognized $9.9 million ($7.7 million after-tax) of business interruption insurance recoveries, which were recorded in other operating income on the consolidated statement of income.

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

Management's Discussion and Analysis

Market Trends

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

As we reflect on the macro environment in 2021,the economy continued to recover from the impact of the COVID-19 Pandemic, both globally and domestically.

While the effects of recurrent COVID-19 variant mutations caused fluctuating travel restrictions, global chip shortages, supply chain challenges, and inflationary pressures in multiple parts of the world, these effects were generally less pronounced than in 2020, which was characterized by economic lockdowns and pervasive uncertainty about the viability and availability of vaccines.

In the last several months, the availability of the COVID-19 vaccine across the U.S., as well as stabilizing trade relations with global partners, has led to improved stability in the U.S.

capital markets and certain industry sectors.

Crude oil markets experienced increasing levels of demand, which combined with intermittent constraints on supply, translated into a strong oil price recovery.

We saw this in the recovery of WTI, which is the largest component of our crude slate, with an average price per barrel of $77.33 in the fourth quarter of 2021 (for Cushing barrels) compared to an average price of $42.63 in the fourth quarter of 2020.

This translated into improved crack spreads and increases in CBOB gasoline prices, where the average 5-3-2 crack spread increased from $7.83 to $17.51 and where CBOB gasoline prices increased from an average of $1.17 to $2.22 in the fourth quarter of 2020 versus the fourth quarter of 2021, respectively.

These increases reflect recoveries of prices to pre-Pandemic levels.

That said, our refining operations are heavily dependent on Midland crude, because of our geographic footprint and gathering activities in Midland and surrounding Permian area.

Thus, an unfavorable Midland differential compared to Cushing on WTI crude oil will have a negative impact on our results.

The Midland differential was at an unfavorable premium for the latter half of 2020 through the third quarter 2021, and has just now flattened to near zero in the fourth quarter of 2021.

Other conditions impacting the macro-economic environment during 2021 included several events of unexpected severe weather.

Violent storms, wildfires and extreme temperatures across the U.S.

impacted travel, disrupted supply chain infrastructure and resulted in consumer losses of property and, in some cases, lives, which put pressure on the economy.

Winter Storm Uri, which crippled much of Texas in February of 2021, impacted much of our network in the Permian Basin and Gulf Coast region, causing pipeline disruptions, power outages and constrained consumer travel.

Additionally, 2021 ushered in both improvements in COVID-19 testing and vaccine distribution, but also a shift in regulatory sentiment.

The changing regulatory landscape has renewed industry focus on climate change concerns and resulted in an acceleration of ESG efforts.

While it has inspired expansion of technological investment in lower carbon-emission technologies such as renewables, green and blue hydrogen energy, as well as carbon capture, utilization and storage (“CCUS”) projects, it has also translated into delays in the EPA’s RFS activities with respect to proposing and finalizing volumetric requirements for Renewable Volume Obligations and granting small refinery exemptions, which in turn has had a significant impact on the prices of RINs.

Unfavorable RINs prices can impact the capture of crack spreads, and can be especially impactful to small refineries, and we felt the squeeze of high RINs prices in our refining segment, particularly with respect to our Krotz Springs and El Dorado refineries.

The cost of energy also affects our macro-economic environment.

During 2021, U.S.

natural gas prices saw a brief spike in February during Winter Storm Uri, which strained natural gas supply and distribution and, likewise, the electricity markets in Texas and Oklahoma.

Throughout most of the remainder of 2021, domestic natural gas demand outpaced growth in supply and contributed to sustained increases in natural gas prices.

Domestically, U.S.

Henry Hub natural gas prices rose dramatically to an average $3.86 per million British thermal units on a quarterly basis in 2021, up from $1.86 in 2020.

International natural gas pricing was volatile despite following the traditional seasonal pattern, swinging from Pandemic-driven lows in 2020 to record highs around the world.

The spike in natural gas prices in the first quarter of 2021 relating to Winter Storm Uri had a significant impact on our refining contribution margin, and the high natural gas prices continued to impact our crack spread capture for the remainder 2021.

That said, we successfully employed commercial strategies to help mitigate the risk of extreme volatility in energy costs during much of the year, following that initial spike.

Looking Ahead to 2022

As we look ahead to 2022, we expect the global economic environment to continue to support growth, though both growth and stability may be constrained by building inflationary pressures.

In February 2022, oil prices have surged toward $100 a barrel for the first time since 2014 which has the effect of both hampering growth and driving inflation.

There is an expectation that the U.S.

Federal Reserve and fellow central banks may make rate changes to combat the rising inflation.

At the same time, inflation hits companies and consumers with higher costs for essentials like food, transportation and heat.

In fact, the International Monetary Fund recently raised its forecast for global consumer price increases to an average 3.9% in advanced economies this year, up from 2.3%, and 5.9% in emerging and developing nations.

Additionally, military actions by Russia towards the Ukraine are causing significant consternation among NATO countries and across the global landscape, and could result in sanctions on Russia that could disrupt the global markets in ways that cannot yet be anticipated, but that could reduce Russian supply and create demand for domestic crude and refined product, and could also impact natural gas exports and domestic prices.

The uncertainties surrounding future oil supply are compounded by conflicts in the Middle East, which resulted in damaged fuel storage

Management's Discussion and Analysis

facilities in Abu Dhabi and increases in oil production in countries such as Libya and Kazakhstan in response to blockades and other disruptions.

Concerns about low oil inventories and potential supply disruptions have outweighed downward price pressure from China’s announcement that it will release crude oil from its national strategic stockpiles.

All of these contributing factors, combined with upward price pressures on natural gas, liquified natural gas ("LNG"), and coal energy are expected to increase the demand for hydrocarbon-based energy in 2022.

Likewise, we expect continued improvements in crack spreads, driven by increased demand.

Absent government intervention, industry analysts expect the Brent-WTI differential to be favorable for domestic exports in 2022, including the U.S.

Gulf Coast region.

However, the Midland-Cushing differential is not expected to improve significantly in 2022, due to overbuilt pipeline capacity despite an expectation for depleted Cushing inventory.

However, significant export developments and other factors could quickly shift differentials to be more favorable to our Permian-heavy positioning.

Meanwhile, in December 2021, the EPA proposed a rule to revise 2021 Renewable Volume Requirements and to suggest rates for 2022 and 2023.

Additionally, the EPA has 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.

In any case, we will continue to pursue the small refinery exemptions.

Furthermore, the establishment of volumes for two years may stabilize RIN prices, though they may continue to be higher than historical averages.

We expect the volatility in the global energy markets will continue until supply can meet the current demand and fears of an economic downturn subside.

Although the possibility of an economic downturn exists, Delek is witnessing a strong demand environment for refined products which is being driven by a rebound in domestic on road fuel demand.

To capture the macro environment, we have positioned the Company to continue to run safely, reliably and environmentally responsibly at near nameplate capacity while leveraging our new 3 Bear logistics lines of business with an eye towards the One Delek vision.

We will continue to balance the cost of debt and cost of equity while continuing to exercise a longer-term sustainable view of capital allocation.

See below for further discussion on how certain key market trends impact our operating results.

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 over the past three years.

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

Management's Discussion and Analysis

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.

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Crude Pricing Differentials

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

Historically, 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.

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Management's Discussion and Analysis

The charts below illustrate the quarterly average prices of Gulf Coast Gasoline (CBOB), HSD and ULSD over the past three years.

The charts below illustrate the quarterly average prices of CBOB, HSD and ULSD over the past three years.

Crack Spreads

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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 over the past three years.

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

When market conditions consist of near-capacity throughputs and no significant outages, our Big Spring refinery, whose benchmark is the 3-2-1 crack spread, should outperform our other refineries in terms of refining margin, which are benchmarked against either the 5-3-2 or the 2-1-1 crack spreads.

Management's Discussion and Analysis

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Environmental regulations 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 our RINs Obligation.

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

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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.

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, RINs prices are impacted by market expectations regarding whether the EPA may grant SREs.

The unfavorable 2020 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 in 2021.

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

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Management's Discussion and Analysis

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.

Energy costs are a significant element of our Refining EBITDA 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.

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The charts below illustrate the quarterly average prices of Waha (Permian Basin) and Henry Hub (Gulf Coast) over the past three years.

Management's Discussion and Analysis

Summary Financial and Other Information

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Year Ended December 31,

2022 As Adjusted (2)

As Adjusted (2)

Net revenues $ 20,245.8 $ 10,648.2 $ 7,301.8

Cost of sales:

Cost of materials and other 18,355.6 9,643.9 6,845.5

Operating expenses (excluding depreciation and amortization presented below) 701.8 502.0 475.7

Depreciation and amortization 263.8 239.6 241.6

Total cost of sales 19,321.2 10,385.5 7,562.8

Insurance proceeds (31.2) (23.3) —

Operating expenses related to retail and wholesale business (excluding depreciation and amortization presented below) 106.8 110.4 97.8

General and administrative expenses 348.8 212.6 234.6

Depreciation and amortization 23.2 25.0 26.0

Impairment of goodwill — — 126.0

Other operating income, net (12.5) (27.3) (13.1)

Total operating costs and expenses (3)

19,756.3 10,682.9 8,034.1

Operating loss (2)

Operating income (loss) (3)

489.5 (34.7) (732.3)

Interest expense, net 195.3 136.7 125.7

Income from equity method investments (57.7) (18.3) (30.3)

Gain on sale of non-operating refinery — — (56.8)

Other income, net (2.5) (15.8) (3.5)

Total non-operating expenses, net 135.1 102.6 35.1

Loss before income tax benefit (233.0) (763.1)

Income tax benefit (62.5) (192.7)

Net loss (170.5) (570.4)

Income (loss) before income tax expense (benefit) 354.4 (137.3) (767.4)

Income tax expense (benefit) 63.9 (42.0) (193.6)

Net income (loss) 290.5 (95.3) (573.8)

Net income attributed to non-controlling interests 33.4 33.0 37.6

Net loss attributable to Delek $ (203.5) $ (608.0)

Net income (loss) attributable to Delek $ 257.1 $ (128.3) $ (611.4)

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

See the Consolidated Statements of Income included in Item 8.Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for more detail regarding our results of operations and net loss per share.

See the Consolidated Statements of Income included in item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for more detail regarding our results of operations and net loss per share.

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

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

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

(3) For the year ended December 31, 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.

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Decisions concerning the allocation of resources and assessment of operating performance are made based on this segmentation.

Management measures the operating performance of each of its reportable segments based on the segment contribution margin.

Management measures the operating performance of each of its reportable segments based on the segment EBITDA.

Management's Discussion and Analysis

Non-GAAP Measures

Our management uses certain “non-GAAP” operational measures to evaluate our operating segment performance and non-GAAP financial measures to evaluate past performance and prospects for the future to supplement our GAAP financial information presented in accordance with U.S.

These financial and operational non-GAAP measures are important factors in assessing our operating results and profitability and include:

• Earnings before interest, taxes, depreciation and amortization ("EBITDA") - calculated as net income (loss) attributable to Delek adjusted to add back interest expense, income tax expense, depreciation and amortization;

• Refining margin - calculated as gross margin (which we define as sales minus cost of sales) adjusted for operating expenses and depreciation and amortization included in cost of sales.

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

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

These measures should not be considered substitutes for their most directly comparable U.S.

GAAP financial measures.

Non-GAAP Reconciliations

The following table provides a reconciliation of segment EBITDA to the most directly comparable U.S.

GAAP measure, net income attributable to Delek:

Reconciliation of segment EBITDA to net income attributable to Delek

Year Ended December 31,

(In millions) 2021 2020

2022 As Adjusted (1)

As Adjusted (1)

Refining segment EBITDA $ 719.1 $ 69.2 $ (549.3)

Logistics segment EBITDA 304.8 258.0 238.1

Retail segment EBITDA 44.1 51.1 47.0

Corporate, Other and Eliminations EBITDA (264.7) (147.3) (147.5)

EBITDA attributable to Delek $ 803.3 $ 231.0 $ (411.7)

Interest expense, net (195.3) (136.7) (125.7)

Income tax (expense) benefit (63.9) 42.0 193.6

Depreciation and amortization (287.0) (264.6) (267.6)

Net income (loss) attributable to Delek $ 257.1 $ (128.3) $ (611.4)

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

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

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

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

GAAP measure, gross margin:

Reconciliation of refining margin to gross margin

Refining Segment

Year Ended December 31,

(In millions) 2021 2020

2022 As Adjusted (1)

As Adjusted (1)

Net revenues $ 19,763.0 $ 10,267.8 $ 6,855.3

Cost of sales 19,222.6 10,351.0 7,416.1

Gross margin 540.4 (83.2) (560.8)

Add back (items included in cost of sales):

Operating expenses (excluding depreciation and amortization) 604.7 437.8 406.6

Depreciation and amortization 205.1 198.7 198.3

Refining margin $ 1,350.2 $ 553.3 $ 44.1

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

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

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

Management's Discussion and Analysis

Results of Operations

Consolidated Results of Operations — Comparison of the Year Ended December 31, 2021 versus the Year Ended December 31, 2020

Consolidated Results of Operations — Comparison of the Year Ended December 31, 2022 versus the Year Ended December 31, 2021 and the Year Ended December 31, 2021 versus the Year Ended December 31, 2020

Net Income (Loss)

Consolidated net income for the year ended December 31, 2022 was $290.5 million compared to a net loss of $95.3 million for the year ended December 31, 2021.

Consolidated net income attributable to Delek for the year ended December 31, 2022 was $257.1 million, or $3.63 per basic share, compared to a loss of $128.3 million, or $(1.73) per basic share, for the year ended December 31, 2021.

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

Consolidated net loss for the year ended December 31, 2021 was $95.3 million compared to $573.8 million for the year ended December 31, 2020.

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

Gulf Coast gasoline of 37.1%, ULSD of 71.8%, and HSD of 65.7% and increases in wholesale activity;

• in our logistics segment, increases in the average volumes of gasoline sold and in the average sales price per gallon of diesel and gasoline sold in our West Texas marketing operations as well as incremental revenues from the 3 Bear Acquisition;

• in our retail segment, increases in fuel sales primarily attributable to a 30.6% increase in average price charged per gallon sold.

We generated net revenues of $10,648.2 million and $7,301.8 million during the years ended December 31, 2021 and 2020, respectively, an increase of $3,346.4 million, or 45.8%.

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

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

Gulf Coast gasoline of 85.2%, ULSD of 69.5%, and HSD of 65.1%;

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• in our retail segment, increases in fuel sales primarily attributable to a 42.4% increase in average price charged per gallon sold.

Management's Discussion and Analysis

Total Operating Costs and Expenses

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• an increase in the cost of crude oil feedstocks at the refineries, including a 38.9% increase in the average cost of WTI Cushing crude oil and a 37.7% increase in the average cost of WTI Midland crude oil;

• increases in average RINs costs during the year ended December 31, 2021 compared to the year ended December 31, 2020;

• increases in average RINs cost due to increased production during the year ended December 31, 2022 compared to the year ended December 31, 2021;

• 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 35.3% increase in average cost per gallon sold applied to higher fuel sales volumes.

Management's Discussion and Analysis

Cost of materials and other was $9,643.9 million for the year ended December 31, 2021, compared to $6,845.5 million for 2020, an increase of $2,798.4 million, or 40.9%.

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

• an increase in the cost of crude oil feedstocks at the refineries, including a 70.7% increase in the average cost of WTI Cushing crude oil and a 71.3% increase in the average cost of WTI Midland crude oil;

• increases in average RINs expense during the year ended December 31, 2021 compared to the year ended December 31, 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 51.6% 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 $51.7 million recognized during the year ended December 31, 2021 from a loss of $87.5 million recognized during the year ended December 31, 2020;

• the benefit (expense) of $22.3 millions related to the change in pre-tax inventory valuation recognized during the year ended December 31, 2021 compared to $(29.2) millions recognized during the year ended December 31, 2020.

Such increases were partially offset by an increase in commodity hedging gains to a loss of $51.7 million recognized during the year ended December 31, 2021 from a loss of $87.5 million recognized during the year ended December 31, 2020.

Operating Expenses

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

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

• higher natural gas prices in 2022;

• increases maintenance cost and employee costs including incentive compensation costs.

Operating expenses (included in both cost of sales and other operating expenses) were $612.4 million for the year ended December 31, 2021 compared to $573.5 million in 2020, an increase of $38.9 million, or 6.8%.

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;

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

Insurance Proceeds

Insurance proceeds were $31.2 million for the year ended December 31, 2022 compared to $23.3 million in 2021, an increase of $7.9 million, or 33.9%.

The increase was primarily driven by the following:

• We received insurance recoveries related to the fire and freeze events that occurred during the first quarter 2021, which favorably impacted our results during the first two quarters of 2021.

For the year ended December 31, 2022, we recognized $31.2 million of business interruption insurance recoveries compared to $23.3 million in the 2021 period.

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

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

Management's Discussion and Analysis

Insurance proceeds were $23.3 million for the year ended December 31, 2021 with no comparable activity in the 2020 period.

The increase was primarily driven by the following:

• We received insurance recoveries related to the fire and freeze events that occurred during the first quarter 2021, which favorably impacted our results during the first two quarters of 2021.

For the year ended December 31, 2021, we recognized $23.3 million of business interruption insurance recoveries.

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

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

General and Administrative Expenses

General and administrative expenses were $348.8 million for the year ended December 31, 2022 compared to $212.6 million in 2021, an increase of $136.2 million, or 64.1%.

The increase was primarily driven by the following:

• an increase in employee costs including incentive compensation costs and incremental transaction costs related to the 3 Bear Acquisition;

• $12.5 million of restructuring costs primarily for consulting fees and severance costs associated with our cost optimization plans initiated in 2022.

General and administrative expenses were $212.6 million for the year ended December 31, 2021 compared to $234.6 million in 2020, a decrease of $22.0 million, or 9.4%.

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Depreciation and Amortization

Depreciation and amortization (included in both cost of sales and other operating expenses) was $287.0 million and $264.6 million for the years ended December 31, 2022 and 2021, respectively, an increase of $22.4 million, or 8.5%.

Depreciation and amortization (included in both cost of sales and other operating expenses) was $264.6 million and $267.6 million for the years ended December 31, 2021 and 2020, respectively, a decrease of $3.0 million, or 1.1%.

Other Operating Income, Net

Other operating income, net was $50.6 million and $13.1 million for the years ended December 31, 2021 and 2020, respectively, an increase of $37.5 million, primarily due to following:

• a gain of $23.3 million from property and casualty and business interruption insurance recoveries associated with losses incurred from Winter Storm Uri and the El Dorado fire;

• a $21.8 million increase in gains from our trading derivatives

Such increase was partially offset by $10.8 million gain on the underlying commodity related tie the Strategic Petroleum Reserve financial asset during the prior year period.

Other operating income, net was $12.5 million and $27.3 million for the years ended December 31, 2022 and 2021, respectively, a decrease of $14.8 million;

primarily due to hedge losses realized in 2022 compared to hedge gains realized in 2021 associated with our trading derivatives.

Other operating income, net was $27.3 million and $13.1 million for the years ended December 31, 2021 and 2020, respectively, an increase of $14.2 million, primarily due to an increase in gains from our trading derivatives in 2021 compared to 2020.

Management's Discussion and Analysis

Non-Operating Expenses, Net

Interest Expense

Interest expense was $137.2 million in the year ended December 31, 2021, compared to $129.0 million for 2020, an increase of $8.2 million, or 6.4% primarily due to the following:

Interest Expense, Net

Interest expense, net was $195.3 million in the year ended December 31, 2022, compared to $136.7 million for 2021, an increase of $58.6 million, or 42.9% primarily due to the following:

• an increase in the average effective interest rate of 129 basis points during the year ended December 31, 2022 compared to the year ended December 31, 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 $449.7 million during the year ended December 31, 2022 (calculated as a simple average of beginning borrowings/obligations and ending borrowings/obligations for the period) compared to the year ended December 31, 2021.

• an increase in the average effective interest rate of 0.16% during the year ended December 31, 2021 compared to the year ended December 31, 2020 (where effective interest rate is calculated as interest expense divided by the net average borrowings/obligations outstanding).

Interest expense, net was $136.7 million in the year ended December 31, 2021, compared to $125.7 million for 2020, an increase of $11.0 million, or 8.8% primarily due to the following:

• an increase in net average borrowings outstanding (including the obligations under the supply and offtake agreements which have an associated interest charge) of approximately $80.6 million during the year ended December 31, 2021 (calculated as a simple average of beginning borrowings/obligations and ending borrowings/obligations for the period) compared to the year ended December 31, 2020;

• an increase in the average effective interest rate of 16 basis points during the year ended December 31, 2021 compared to the year ended December 31, 2020 (where effective interest rate is calculated as interest expense divided by the net average borrowings/obligations outstanding).

Results from Equity Method Investments

We recognized income from equity method investments of $57.7 million for the year ended December 31, 2022, compared to $18.3 million for the year ended December 31, 2021, an increase of $39.4 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 $7.6 million during the year ended December 31, 2022 from a loss of $17.7 million in the year ended December 31, 2021.

We recognized income from equity method investments of $18.3 million for the year ended December 31, 2021, compared to $30.3 million for the year ended December 31, 2020, a decrease of $12.0 million.

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• a decrease in income from our investment in W2W Holdings LLC to a loss of $17.7 million during the year ended December 31, 2021 from a loss of $8.5 million in the year ended December 31, 2020.

During the year ended December 31, 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.

During the year ended December 31, 2021, we recognized a $20.9 million gain in other income related to a loan buy-out agreement between Wink to Webster Pipeline LLC and the Company.

There were no such gains in 2022.

Refer to Note 7 of our consolidated financial statements included in Item 8.

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

During the year ended December 31, 2021, we recognized a $20.9 million gain in other income related to a loan buy-out agreement between Wink to Webster Pipeline LLC and the Company.

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

See Note 3 of our consolidated financial statements included in Item 8.

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

Management's Discussion and Analysis

For the year ended December 31, 2022, we recorded income tax expense of $63.9 million compared to a benefit of $42.0 million for the same period for 2021, primarily driven by the following:

• This change to income tax expense in 2022 from income tax benefit in 2021 was principally due to pre-tax income during the year ended December 31, 2022 compared to a pre-tax loss for the year ended December 31, 2021.

Our effective tax rates were 18.0% and 30.6% for the years ended December 31, 2022 and 2021, respectively;

• an increase in valuation allowance on certain state attributes as a result of a shift in state nexus footprints.

Refer to Note 14 of the consolidated financial statements included in Item 8.

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

Income tax benefit decreased $151.6 million resulting in net benefit of $42.0 million during the year ended December 31, 2021 compared to the same period for 2020, primarily driven by the following:

• pre-tax loss of $233.0 million compared to $763.1 million for the years ended December 31, 2021 and 2020, respectively;

• Our effective tax rates were 30.6% and 25.2% for the years ended December 31, 2021 and 2020, respectively;

• 2020 federal net operating loss carryback to a prior 35% tax rate year creating a 14% rate arbitrage and $16.8 million benefit in 2020;

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• exclusion of impairment of goodwill expense in 2020 which reduced taxable benefit.

Refer to Note 14 of the consolidated financial statements included in Item 8.

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

A detailed discussion of the fiscal year 2020 compared to year-over-year changes from fiscal year 2019 can be found in Part II, Item 7.

Management's Discussion and Analysis, "Results of Operations", of our 2020 Annual Report on Form 10-K, filed on March 1, 2021.

Management's Discussion and Analysis

Refining Segment

The tables and charts below set forth certain information concerning our refining segment operations ($ in millions, except per barrel amounts):

Refining Segment Margins

The tables and charts below set forth selected information concerning our refining segment operations ($ in millions, except per barrel amounts):

Selected Refining Financial Information

Year Ended December 31,

Net revenues $ 9,956.0 $ 5,817.7

2022 As Adjusted (1)

As Adjusted (1)

Revenues $ 19,763.0 $ 10,267.8 $ 6,855.3

Cost of materials and other 18,412.8 9,714.5 6,811.2

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Operating expenses (excluding depreciation and amortization) (2)(3)

Contribution margin (1)

$ 604.7 $ 437.8 $ 406.6

Contribution margin percentage

0.8 % (5.7) %

Refining segment EBITDA $ 719.1 $ 69.2 $ (549.3)

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

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

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

(2) As of December 31, 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 of $14.0 million during the year ended December 31, 2021, and would not have been material to the prior periods presented.

(3) 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.

Finally, 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.

Finally, Refining EBITDA 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 our crack spread capture.

Additionally, volatility in energy costs, which are captured in our operating expenses and impact our Refining EBITDA, 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

Management's Discussion and Analysis

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 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.

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

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

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

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

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

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

Management's Discussion and Analysis

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

Refinery Statistics

Year Ended December 31,

Tyler, TX Refinery

2022 As Adjusted (2)

As Adjusted (2)

Total Refining Segment

Days in period 365 365 366

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

Total sales volume - refined product (average bpd) (1)

299,004 275,075 255,375

Products manufactured (average barrels per day):

Total production (average bpd) 290,040 260,507 265,461

Crude oil 281,205 250,632 253,556

Other feedstocks 10,558 12,305 14,295

Total throughput (average bpd):

291,763 262,937 267,851

(% based on amount received in period)

WTI crude oil 68.2 % 69.6 % 71.7 %

Gulf Coast Sweet Crude 7.8 % 7.5 % 5.9 %

Local Arkansas crude oil 4.1 % 4.5 % 4.9 %

Other 19.9 % 18.4 % 17.5 %

Crude utilization (% based on nameplate capacity) 93.1 % 83.0 % 84.0 %

Management's Discussion and Analysis

Refinery Statistics (continued)

Year Ended December 31,

2022 As Adjusted (2)

As Adjusted (2)

Tyler, TX Refinery

Days in period 365 365 366

Products manufactured (average bpd):

Gasoline 36,847 35,782 40,031

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Total production 72,205 66,795 73,506

Throughput (average barrels per day):

Throughput (average bpd):

Crude Oil 70,114 65,205 67,868

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Total throughput 72,718 67,176 73,980

Total refining revenue ($ in millions) $ 2,337.4 $ 1,432.2

Cost of materials and other ($ in millions) 2,169.5 1,331.7

Total refining margin ($ in millions) $ 167.9 $ 100.5

Per barrel of refined product sales:

Tyler refining margin $ 6.48 $ 3.71

Direct operating expenses $ 3.91 $ 3.45

Per barrel of throughput:

Operating expenses (3)

$ 5.24 $ 4.16 $ 3.45

(% based on amount received in period)

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Days in period 365 365 366

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

70,182 75,992

Products manufactured (average barrels per day):

Products manufactured (average bpd):

Gasoline 38,738 32,004 35,480

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Total production 79,309 64,857 73,157

Throughput (average barrels per day):

Throughput (average bpd):

Crude Oil 76,806 62,067 70,385

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Total throughput 80,452 65,647 73,364

Total refining revenue ($ in millions) $ 2,387.7 $ 1,788.8

Cost of materials and other ($ in millions) 2,345.5 1,809.3

Total refining margin ($ in millions) $ 42.2 $ (20.5)

Per barrel of refined product sales:

El Dorado refining margin $ 1.65 $ (0.74)

Per barrel of throughput:

Operating expenses (3)

$ 4.61 $ 4.29 $ 3.81

(% based on amount received in period)

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Year Ended December 31,

2022 As Adjusted (2)

As Adjusted (2)

Big Spring, TX Refinery

Days in period 365 365 366

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

71,930 65,508

Products manufactured (average barrels per day):

Products manufactured (average bpd):

Gasoline 30,689 35,640 32,340

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Total production 58,958 67,515 61,610

Throughput (average barrels per day):

Throughput (average bpd):

59,476 68,038 61,428

Other feedstocks

191 843 1,078

Total throughput 59,667 68,881 62,506

Total refining revenue ($ in millions) $ 2,561.3 $ 1,531.7

Cost of materials and other ($ in millions) 2,375.3 1,497.2

Total refining margin ($ in millions) $ 186.0 $ 34.5

Per barrel of refined product sales:

Big Spring refining margin $ 7.08 $ 1.44

Per barrel of refined throughput:

Operating expenses (3)

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Days in period 365 365 366

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

Products manufactured (average bpd):

34,370 26,170 20,615

Products manufactured (average barrels per day):

31,576 21,387 20,422

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Petrochemicals, LPG, NGLs

6,749 5,170 2,223

4,458 7,895 13,512

Total production

79,571 61,341 57,190

Throughput (average barrels per day):

Throughput (average bpd):

74,808 55,321 53,875

Other feedstocks

Total throughput

4,118 5,912 4,126

Total refining revenue ($ in millions) $ 2,674.9 $ 1,266.6

Cost of materials and other ($ in millions) 2,550.2 1,296.3

Total refining margin ($ in millions) $ 124.7 $ (29.7)

Per barrel of sales:

Krotz Springs refining margin

Total throughput

78,926 61,233 58,001

Per barrel of throughput:

Operating expenses (3)

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See tables below.

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

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

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

(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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Year Ended December 31,

2022 2021 2020

WTI — Cushing crude oil (per barrel) $ 94.62 $ 68.11 $ 39.89

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Gulf Coast high sulfur diesel (per gallon) $ 2.90 $ 1.75 $ 1.06

Natural gas (per One Million British Thermal Units ("MMBTU") $ 3.73 $ 2.13

Natural gas (MMBTU) $ 6.54 $ 3.73 $ 2.13

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

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2 heating oil (ultra low sulfur diesel).

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

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

Gulf Coast Pipeline No.

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Management's Discussion and Analysis

Refining Segment Operational Comparison of the Year Ended December 31, 2021 versus the Year Ended December 31, 2020

Net revenues for the refining segment increased $4,138.3 million, or 71.1%, in the year ended December 31, 2021 compared to the year ended December 31, 2020.

Refining Segment Operational Comparison of the Year Ended December 31, 2022 versus the Year Ended December 31, 2021 and the Year Ended December 31, 2021 versus the Year Ended December 31, 2020

Revenues for the refining segment increased $9,495.2 million, or 92.5%, in the year ended December 31, 2022 compared to the year ended December 31, 2021.

The increase was primarily driven by the following:

• an increase in the average price of U.S.

Gulf Coast gasoline of 37.1%, ULSD of 71.8%, and HSD of 65.7%;

• an increase in total sales volumes and wholesale activity.

Revenues included sales to our retail segment of $511.7 million and $355.7 million, sales to our logistics segment of $496.6 million and $321.9 million and sales to the other segment of $23.8 million and $25.4 million for the years ended December 31, 2022 and 2021, respectively.

We eliminate this intercompany revenue in consolidation.

Revenues for the refining segment increased $3,412.5 million, or 49.8%, in the year ended December 31, 2021 compared to the year ended December 31, 2020.

The increase was primarily driven by the following:

• increase in the average price of U.S.

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• increases in sales volumes of refined and purchased product of 0.7 million and 1.6 million barrels, respectively.

Net revenues included sales to our retail segment of $355.7 million and $220.0 million, sales to our logistics segment of $321.9 million and $203.8 million and sales to our other segment of $110.1 million and $30.8 million for the years ended December 31, 2021 and 2020, respectively.

Revenues included sales to our retail segment of $355.7 million and $220.0 million, sales to our logistics segment of $321.9 million and $203.8 million and sales to our other segment of $25.4 million and $13.5 million for the years ended December 31, 2021 and 2020, respectively.

We eliminate this intercompany revenue in consolidation.

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• increases in the cost of WTI Midland crude oil, from an average of $68.55 per barrel to an average of $94.38, or 37.7%;

• increases in RINs costs from an average cost per RIN of $0.44 and $0.64 for ethanol and biodiesel RINs, respectively during the year ended December 31, 2020 to an average of $1.31 and $1.50 during the year ended December 31, 2021.

These increases were partially offset by the following:

• the benefit (expense) of $23.6 million related to the change in pre-tax inventory valuation recognized during the year ended December 31, 2021 compared to $(29.4) million recognized during the year ended December 31, 2020.

• an increase in sales volumes and wholesale activity;

• an increase in RINs expense primarily due to increased production.

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 MVCs.

These costs and fees were $429.0 million and $367.9 million during the years ended December 31, 2022 and 2021, respectively.

We eliminate these intercompany fees in consolidation.

Management's Discussion and Analysis

Cost of materials and other increased $2,903.3 million, or 42.6%, in the year ended December 31, 2021 compared to the year ended December 31, 2020.

This increase was primarily driven by the following:

• increases in the cost of WTI Cushing crude oil, from an average of $39.89 per barrel to an average of $68.11, or 70.7%;

• increases in the cost of WTI Midland crude oil, from an average of $40.02 per barrel to an average of $68.55, or 71.3%;

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Refining margin increased by $796.9 million, or 144.0%, for the year ended December 31, 2022 compared to the year ended December 31, 2021, with a refining margin percentage of 6.8% as compared to 5.4% for the years ended December 31, 2022 and 2021, respectively, primarily driven by the following:

• a 96.8% improvement in the 5-3-2 crack spread (the primary measure for the Tyler refinery and El Dorado refinery), an 89.0% improvement in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery), and a 133.1% improvement in the average Gulf Coast 2-1-1 crack spread (the primary measure for the Krotz Springs refinery);

• an increase in total sales volumes.

These increases were partially offset by the following:

• increases in average RINs costs during the year ended December 31, 2022 compared to the year ended December 31, 2021.

Refining margin increased by $509.2 million for the year ended December 31, 2021 compared to the year ended December 31, 2020, with a refining margin percentage of 5.4% as compared to 0.6% for the years ended December 31, 2021 and 2020, respectively, primarily driven by the following:

• a 106.8% improvement in the 5-3-2 crack spread (the primary measure for the Tyler refinery and El Dorado refinery), a 104.5% improvement in the average Gulf Coast 3-2-1 crack spread (the primary measure for the Big Spring refinery), and a 157% improvement in the average Gulf Coast 2-1-1 crack spread (the primary measure for the Krotz Springs refinery);

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

Management's Discussion and Analysis

These increases were partially offset by the following:

• increases in average RINs costs during the year ended December 31, 2021 compared to the year ended December 31, 2020.

Management's Discussion and Analysis

Operating Expenses

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

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

• higher employee and outside service costs;

• higher natural gas prices in the year ended December 31, 2022 compared to the prior year for the same period.

Operating expenses increased $31.2 million, or 7.7%, in the year ended December 31, 2021, compared to year ended December 31, 2020.

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

• 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 later half of 2021;

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

Contribution Margin

Contribution margin increased by $412.9 million, or a 6.5% improvement in contribution margin percentage, for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by the following:

• an increase in refining margin primarily driven by an overall increase in the average crack spreads, 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 $31.4 million, or 7.8%.

EBITDA increased by $649.9 million, for the year ended December 31, 2022 compared to the year ended December 31, 2021, driven by an increase in refining margin primarily due to improved crack spreads and increased sales volumes, offset by increases in variable costs and utilities, increased employee and outside service costs, natural gas prices, and higher RINs expense primarily due to increased production.

EBITDA increased by $618.5 million, or a 112.6% improvement in EBITDA percentage, for the year ended December 31, 2021 compared to the year ended December 31, 2020, driven by an increase in refining margin primarily due to improved crack spreads, increased sales volumes, offset by increase in variable costs and utilities, natural gas prices, and higher RINs expense primarily due to increased production.

Management's Discussion and Analysis

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The table below sets forth certain information concerning our logistics segment operations ($ in millions, except per barrel amounts):

Logistics Contribution Margin and Operating Information

Selected Logistics Financial and Operating Information

Year Ended December 31,

Net revenues $ 700.9 563.4

2022 2021 2020

Revenues $ 1,036.4 $ 700.9 $ 563.4

Cost of materials and other $ 641.4 $ 384.4 $ 269.1

Operating expenses (excluding depreciation and amortization) $ 88.3 $ 61.9 $ 56.2

Contribution margin

$ 255.7 $ 238.1

EBITDA $ 304.8 $ 258.0 $ 238.1

Operating Information:

Gathering & Processing:

(average bpd)

Lion Pipeline System:

Crude pipelines (non-gathered) 78,519 65,335 74,179

Refined products pipelines 56,382 48,757 53,702

SALA Gathering System 15,391 14,460 13,466

East Texas Crude Logistics System 21,310 22,647 15,960

Midland Gathering Assets (1)

128,725 80,285 82,817

Plains Connection System 183,827 124,025 104,770

Delaware Gathering Assets:

Natural Gas Gathering and Processing (Mcfd) (3)

Crude Oil Gathering (average bpd) 87,519 — —

Water Disposal and Recycling (average bpd) 72,056 — —

Wholesale Marketing & Terminalling:

East Texas - Tyler refinery sales volumes (average bpd) (4)

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West Texas wholesale marketing throughputs (average bpd) 10,206 10,026 11,264

10,026 11,264

West Texas wholesale marketing margin per barrel $ 4.15 $ 3.72 $ 2.37

$ 3.72 $ 2.37

Terminalling throughputs (average bpd) (5)

132,262 138,301 147,251

Throughputs (average bpd):

Lion Pipeline System:

Crude pipelines (non-gathered)

65,335 74,179

Refined products pipelines to Enterprise Systems

48,757 53,702

SALA Gathering System

14,460 13,466

East Texas Crude Logistics System

22,647 15,960

Permian Gathering System (3)

80,285 82,817

Plains Connection System 124,025 104,770

(1) Formerly known as the Permian Gathering System.

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

(2) 2022 volumes include volumes from June 1, 2022 through December 31, 2022.

(3) Mcfd - average thousand cubic feet per day.

(4) Excludes jet fuel and petroleum coke.

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

Logistics revenue is largely based on fixed-fee or tariff rates charged for throughput volumes running through our logistics network, where many of those volumes are contractually protected by MVCs.

Logistics revenue is largely based on fixed-fee or tariff rates charged for throughput volumes running through our logistics network, where many of those volumes are contractually protected by minimum volume commitments ("MVCs").

To the extent that our logistics volumes are not subject to MVCs, our Logistics revenue may be negatively impacted in periods where are customers are experiencing economic pressures or reductions in demand for their products.

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With respect to our equity method investments in pipeline joint ventures, our earnings from those investments (which is based on our pro rata ownership percentage of the joint venture's recognized net income or loss) are directly impacted by the operations of those joint ventures.

Items impacting the joint venture net income (loss) may include (but is not limited to) the following:

Items impacting the joint venture net income (loss) may include (but are not limited to) the following:

long-term throughput contractual arrangements and related MVCs and, in some cases, deficiency credit provisions;

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Management's Discussion and Analysis

Logistics Segment Operational Comparison of the Year Ended December 31, 2021 versus the Year Ended December 31, 2020

Net revenues increased by $137.5 million, or 24.4%, in the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily driven by the following:

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

Refer to Note 5 of the consolidated financial statements included in Item 8.

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

Logistics Segment Operational Comparison of the Year Ended December 31, 2022 versus the Year Ended December 31, 2021 and the Year Ended December 31, 2021 versus the Year Ended December 31, 2020.

Revenues increased by $335.5 million, or 47.9%, in the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily driven by the following:

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

• incremental revenues from the 3 Bear Acquisition;

• increases in pipeline throughputs, where the year ended December 31, 2021 were negatively impacted by the Pandemic as well as severe weather events.

Revenues included sales to our refining segment of $477.1 million and $417.0 million for the years ended December 31, 2022 and 2021, respectively, and sales to our other segment of $2.3 million and $1.8 million for the years ended December 31, 2022 and 2021, respectively.

We eliminate this intercompany revenue in consolidation.

Revenues increased by $137.5 million, or 24.4%, in the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily driven by the following:

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

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

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

Net revenues included sales to our refining segment of $417.0 million and $377.7 million for the years ended December 31, 2021 and 2020, respectively, and sales to our other segment of $1.8 million and $2.1 million for the years ended December 31, 2021 and 2020, respectively.

Revenues included sales to our refining segment of $417.0 million and $377.7 million for the years ended December 31, 2021 and 2020, respectively, and sales to our other segment of $1.8 million and $2.1 million for the years ended December 31, 2021 and 2020, respectively.

We eliminate this intercompany revenue in consolidation.

Management's Discussion and Analysis

Cost of Materials and Other

Cost of materials and other for the logistics segment increased by $257.0 million, or 66.9%, in the year ended December 31, 2022 compared to the year ended December 31, 2021.

This increase was 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 sold in our West Texas marketing operations:

◦ the average cost per gallon of gasoline and diesel sold increased $0.74 per gallon and $1.43 per gallon, respectively;

◦ the average volumes of diesel sold increased by 1.0 million gallons, while gasoline volumes sold increased by 2.0 million gallons;

• incremental cost of materials and other from the 3 Bear Acquisition.

Our logistics segment purchased product from our refining segment of $496.6 million and $321.9 million for the years ended December 31, 2022 and 2021, respectively.

We eliminate these intercompany costs in consolidation.

Cost of materials and other for the logistics segment increased by $115.3 million, or 42.8%, in the year ended December 31, 2021 compared to the year ended December 31, 2020.

This increase was primarily driven by the following related to our West Texas marketing operations:

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We eliminate these intercompany costs in consolidation.

Management's Discussion and Analysis

Operating Expenses

Operating expenses increased by $26.4 million, or 42.6%, in the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily driven by the following:

• increase due to additional expenses associated with 3 Bear Acquisition;

• increases in employee and outside service costs;

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

Operating expenses increased by $5.7 million, or 10.1%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily 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;

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• 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 increased by $17.6 million, or 7.4%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by the following:

• an increase in gross margin of $1.35 per barrel in our West Texas marketing operations;

• increases in revenues associated with agreements executed in connection with the Permian 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.

EBITDA increased by $46.8 million, or 18.1%, in the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily driven by the following:

• increases in revenue due to higher throughput volumes;

• partially offset by increases in operating expense.

EBITDA increased by $19.9 million, or 8.4%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, 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

Retail Segment

The tables below sets forth certain information concerning our retail segment operations (gross sales $ in millions):

Retail Contribution Margin and Operating Information

The tables below set forth certain information concerning our retail segment operations (gross sales $ in millions):

Selected Retail Financial and Operating Information

Year Ended December 31,

Net revenues $ 797.4 681.7

2022 2021 2020

Revenues $ 956.9 $ 797.4 $ 681.7

Cost of materials and other $ 796.3 $ 635.6 $ 523.6

Operating expenses (excluding depreciation and amortization) $ 97.8 $ 90.0 $ 90.5

Contribution margin $ 72.0 $ 67.6

$ 44.1 $ 51.1 $ 47.0

Operating Information

Year Ended December 31,

2022 2021 2020

Number of stores (end of period) 249 248 253

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Year Ended December 31,

2022 2021 2020

Change in same-store retail fuel gallons sold 2.5 % (5.3) % (17.3) %

Change in same-store merchandise sales 0.3 % (1.8) % 6.2 %

(1) Refer to EBITDA discussion below for impacts related to bonus expense under the Delek annual incentive plan.

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

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Management's Discussion and Analysis

Retail Segment Operational Comparison of the Year Ended December 31, 2021 versus the Year Ended December 31, 2020

Net revenues for the retail segment increased by $115.7 million, or 17.0%, for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by the following:

Retail Segment Operational Comparison of the Year Ended December 31, 2022 versus the Year Ended December 31, 2021 and the Year Ended December 31, 2021 versus the Year Ended December 31, 2020.

Revenues for the retail segment increased by $159.5 million, or 20.0%, for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily driven by the following:

• an increase in total fuel sales which were $642.2 million for the year ended December 31, 2022 compared to $480.9 million for 2021, primarily attributable to a $0.88 increase in average price charged per gallon sold;

• partially offset by a decrease in merchandise sales to $314.7 million for the year ended December 31, 2022 compared to $316.4 million for the year ended December 31, 2021, primarily driven by the same-store sales decrease of 0.3%.

Revenues for the retail segment increased by $115.7 million, or 17.0%, for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by the following:

• an increase in total fuel sales which were $480.9 million for the year ended December 31, 2021 compared to $357.9 million for 2020, primarily attributable to a $0.86 increase in average price charged per gallon sold, slightly offset by a decrease in total retail fuel gallons sold;

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We eliminate this intercompany cost in consolidation.

Cost of materials and other for the retail segment increased by $112.0 million, or 21.4%, for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by the following:

• an increase in average cost per gallon of $0.86 or 51.6% applied to fuel sales volumes that decreased period over period.

Our retail segment purchased finished product from our refining segment of $355.7 million and $220.0 million for the years ended December 31, 2021 and 2020, respectively.

We eliminate this intercompany cost in consolidation.

Operating Expenses

Operating expenses for the retail segment increased by $7.8 million, or 8.7%, for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily driven by higher employee cost in 2022.

Operating expenses for the retail segment decreased by $0.5 million, or 0.5%, for the year ended December 31, 2021 compared to the year ended December 31, 2020.

Contribution Margin

Contribution margin for the retail segment increased by $4.4 million, a 6.5% increase in contribution margin percentage, for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by the following:

• an improvement in merchandise margin percentage of 2.2%, partially offset by 2.3% decrease in merchandise sales;

• an increase in fuel sales due to $0.86 increase in sales price, offset by a decrease in average fuel margin of $0.006 per gallon applied to lower fuel sales volumes.

EBITDA for the retail segment decreased by $7.0 million, a 13.7% decrease in EBITDA percentage, for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily driven by the following:

• a decrease in average fuel margin of $0.014 per gallon and an increase in fuel sales volume;

• an increase in operating expenses due to higher employee costs which included $1.8 million increase in bonus expense.

EBITDA for the retail segment increased by $4.1 million, an 8.7% increase in EBITDA percentage, for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by a $0.071 per gallon improvement in the retail fuel margin and a 0.2% increase in merchandise margin.

Management's Discussion and Analysis

Liquidity and Capital Resources

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At December 31, 2022 our total liquidity amounted to $1.4 billion comprised primarily of $362.6 million in unused credit commitments under the Delek Revolving Credit Facility (as defined in Note 10 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K), $592.0 million in unused credit commitments under the DKL Credit Facility (as defined in Note 10 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K), $179.5 million in unused credit commitments under the Delek Logistics Credit Facility (as defined in Note 10 of our consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K) and $841.3 million in cash and cash equivalents.

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

however, on August 1, 2022, our Board of Directors voted to reinstate the quarterly cash dividend and declared a quarterly cash dividend of $0.20 per share of our common stock.

On October 31, 2022, our Board of Directors increased the quarterly cash dividend to $0.21 per share of our common stock.

On 2/27/2023, our Board of Directors increased the quarterly cash dividend to $0.22 per share of our common stock.

In addition, on August 1, 2022, the Board approved an approximately $170.3 million increase in its share repurchase authorization, bringing the total amount available for repurchases under current authorizations to $400.0 million.

During 2022, we repurchased approximately 4.3 million shares of Delek US common stock for approximately $129.6 million, with an average price of $30.40 per share, exclusive of the shares purchased under the Icahn Group Purchase Agreement .

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

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

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

During 2021 and through the date of this Annual Report, the COVID-19 Pandemic has had a significant negative impact on economic conditions in the U.S., and a particularly severe impact on the oil and gas industry because of the significant impact the Pandemic has had on motor and air travel.

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

As a result, and while it's always a critical area of focus, we have dedicated significant efforts throughout 2021 to monitoring and evaluating the evolving uncertainties around liquidity and capital resources and implementing measures and plans to mitigate and manage the associated risk.

Here are some of our most significant areas of focus:

• We have focused on required maintenance and regulatory projects as well as strategically-timed turnaround activities.

As a result, we were able to reduce our capital expenditures to $227.1 million during the year ended December 31, 2021, compared to our initial full-year forecast included in our December 31, 2020 Annual Report on Form 10-K of $239.6 million;

• The temporary suspension of growth and non-essential projects (particularly in Refining) provided us with the opportunity to shift our focus to process improvement initiatives, cost control measures, and opportunities for innovation, which has improved our ability to control costs in terms of operating expenses and critical capital projects, all of which also favorably impact our cash position and provide a longer term foundation for increased operational effectiveness;

• Throughout 2021, we continued to monitor credit and liquidity of our key customers, which already go through a stringent and ongoing credit evaluation as part of our internal controls, and we have been able to successfully maintain our collection efforts without significant losses or write-offs.

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

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

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

See further discussion in Note 3 of our consolidated financial statements included in Item 8.

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

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

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

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

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

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

Management's Discussion and Analysis

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

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

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

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

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

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

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

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

We are pleased that, despite the challenging environment, we have continued to successfully manage our liquidity and available sources of capital during 2021 through strategic transactions such as the following:

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

◦ By taking advantage of credit opportunities and favorable investment markets, where appropriate.

The most significant of these transactions executed during 2021 were as follows:

▪ On May 24, 2021, Delek Logistics and Finance Corp.

issued $400.0 million in aggregate principal amount 7.125% Senior Notes due 2028 (the "Delek Logistics 2028 Notes”) at par, requiring semi-annual interest payments in arrears on each June 1 and December 1, commencing on December 31, 2021.

See further discussion in Note 9 of our consolidated financial statements included in Item 8.

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

▪ In December 2021, we initiated a program to monetize a portion of our ownership in Delek Logistics under a Rule 10b5-1 program to sell up to 434,590 common limited partner units, which helped us to not only capture $2.1 million (pre-tax) tangible value to date in the Delek valuation but also serves to improve the liquidity of the Delek Logistics units without diluting the overall market capitalization of Delek Logistics.

See further discussion in Note 5 of our consolidated financial statements included in Item 8.

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

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

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

However, if market conditions were to change, for instance due to 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 December 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 further discussion in Note 10 of our consolidated financial statements included in Item 8.

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

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

Additionally, we were in compliance with incurrence covenants during the quarter ended December 31, 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 based covenants, in the event that our activities would warrant testing these covenants.

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

Additionally, we were in compliance with incurrence covenants that were triggered during the quarter ended December 31, 2022.

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

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

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Cash Flows from Operating Activities

Net cash used in operating activities was $371.4 million for the year ended December 31, 2021, compared to cash used of $282.9 million for the comparable period of 2020.

Cash receipts from customers and cash payments to suppliers and for salaries increased resulting in a net $660.5 million increase in cash from operating activities.

Partially offsetting these increases in cash provided were an increase in cash paid for debt interest of $1.6 million, an increase in income taxes paid of $0.6 million and a decrease in dividends received of $4.0 million.

Net cash provided by operating activities was $425.3 million for the year ended December 31, 2022, compared to $371.4 million for the comparable period of 2021.

Increases were a result of a net $135.6 million increase in cash from operating activities in addition to an increase in dividends received of $3.1 million.

Partially offsetting these increases was an increase in cash paid for debt interest of $61.4 million and an increase in income taxes paid of $23.4 million.

Cash Flows from Investing Activities

Net cash used in investing activities was $931.6 million for the year ended December 31, 2022, compared to $178.4 million in the comparable period of 2021.

The increase in cash flows used in investing activities was primarily due to 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.

These increases in cash used in investing activities were partially offset by a decrease in cash purchases of property, plant and equipment which decreased from $269.4 million in 2020, to $222.2 million in 2021, partially attributable to delaying non-essential projects in light of the COVID-19 Pandemic.

Additionally, equity method investment contributions decreased $29.5 million primarily due to contributions made related to our Red River Pipeline Joint Venture and WWP Project Financing JV (each as defined in Note 6 of our accompanying consolidated financial statements in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K) for $12.2 million and $18.9 million, respectively, during the year ended December 31, 2020.

During the year ended December 31, 2021, we contributed $1.4 million related to our Red River Pipeline Joint Venture and $0.3 million related to our WWP Project Financing JV.

The increase in cash flows used in investing activities was primarily due to the $625.6 million acquisition of 3 Bear, a $89.2 million increase in purchases of property, plant and equipment, partially attributable to delaying non-essential projects in light of the COVID-19 Pandemic in 2021, a $17.3 million decrease in contract termination recoveries of capital expenditures occurring in 2021, a $10.7 million decrease in proceeds from sale of property, plant and equipment and a $7.0 million decrease in insurance recoveries occurring in 2021.

Cash Flows from Financing Activities

Net cash used in financing activities was $124.0 million for the year ended December 31, 2021, compared to cash provided of $306.4 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 $132.0 million during the year ended December 31, 2021, compared to net proceeds of $275.3 million in the comparable 2020 period.

Additionally, net proceeds from product financing arrangements decreased to $38.5 million for the year ended December 31, 2021 compared to $169.1 million in the comparable 2020 period.

Such decreases were partially offset by increases of $69.1 million due to suspension of dividends in the fourth quarter of 2020 and $28.9 million due to the repurchase of non-controlling interest in the prior year period with no comparable activity in the current year.

Net cash provided by financing activities was $491.1 million for the year ended December 31, 2022, compared to cash used of $124.0 million in the comparable 2021 period.

This increase in cash provided was predominantly due to net proceeds on long-term revolvers and term debt of $810.9 million during the year ended December 31, 2022, compared to net payments of $138.2 million in the comparable 2021 period.

We also sold $16.4 million of Delek Logistics limited partner units during 2022.

Such increases were partially offset by decreases attributable to share repurchases of $193.6 million with no comparable activity in 2021, $42.8 million due to the reinstatement of dividends in the second quarter of 2022, and net payments on product financing arrangements of $12.3 million for the year ended December 31, 2022 compared to proceeds of $38.5 million in the comparable 2021 period.

Additionally, we refinanced our existing J.

Aron Supply & Offtake Agreements with a new Citi Inventory Intermediation Agreement with net repayments of $48.1 million.

Cash Position and Indebtedness

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Total unused credit commitments or borrowing base availability, as applicable, under our revolving credit facilities was approximately $542.1 million.

The decrease of $130.4 million in total long term indebtedness as of December 31, 2021 compared to the prior year resulted primarily from net repayments under the Delek Logistics Credit Facility and other term debt in 2021.

The increase of $835.7 million in total long-term indebtedness as of December 31, 2022 compared to the prior year resulted primarily from net borrowings under the Delek Logistics Credit Facility and other term debt in 2022.

As of December 31, 2022, our total long-term indebtedness consisted of the following:

• an aggregate principal amount of $450.0 million under the Revolving Credit Facility, due on October 26, 2027, with average borrowing rate of 5.67%;

• an aggregate principal amount of $950.0 million under the Term Loan Credit Facility, due on March 30, 2025, with effective interest of 9.14%;

• an aggregate principal amount of $29.2 million in outstanding borrowings under the Delek Hapoalim Term Loan, due on December 31, 2022, with effective interest of 3.67%;

• an aggregate principal amount of $258.0 million under the Delek Logistics Credit Facility, due on September 28, 2023, with average borrowing rate of 2.46%;

• an aggregate principal amount of $720.5 million under the Delek Logistics Revolving Facility, due on October 13, 2027, with average borrowing rate of 7.55%;

• an aggregate principal amount of $300.0 million under the Delek Logistics Term Facility, due on October 13, 2024, with average borrowing rate of 7.92%;

• an aggregate principal amount of $250.0 million under the Delek Logistics 2025 Notes, due in 2025, with effective interest rate of 7.21%;

• an aggregate principal amount of $400.0 million under the Delek Logistics 2028 Notes, due in 2028, with effective interest rate of 7.40%;

Management's Discussion and Analysis

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

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

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

• an aggregate principal amount of $50.0 million under the United Community Bank Revolver, due on June 30, 2022, with fixed interest rate of 6.75%.

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

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

Management's Discussion and Analysis

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.

Our supply and offtake obligation with J.

Aron amounted to $487.5 million at December 31, 2021, $330.4 million of which is due on December 30, 2022, except that a portion (not to exceed $28.6 million, net of the $(10.0) million settlement threshold) of this otherwise long-term component is subject to potential earlier payment under the Periodic Price Adjustment provision.

See Note 9 of the our accompanying consolidated financial statements in Item 8.

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

Such arrangements include our inventory intermediation arrangement, 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 inventory intermediation obligation with Citi amounted to $541.7 million at December 31, 2022, $491.8 million of which is due on December 22, 2024.

See Note 9 of the accompanying consolidated financial statements included in Item 8.

Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for additional information about our inventory intermediation agreement.

Our product financing liabilities consisted primarily of RIN financings as of December 31, 2022, and totaled $258.0 million, all of which is due in the next 12 months.

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

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

For both arrangements and the related commitments, see also our "Contractual Obligations and Commitments" section included in Item 7.

For both arrangements and the related commitments, see also our "Contractual Obligations" section included in Item 7.

Management's Discussion and Analysis.

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Year Ended December 31,

2022 Forecast 2021 Actual

2023 Forecast Year Ended December 31, 2022 Actual

Sustaining maintenance, including turnaround activities $ 173.1 $ 129.3

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Total capital spending $ 350.5 $ 343.1

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 and subject to the changes and uncertainties discussed under the 'Forward-Looking Statements' section of Item 7.

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

Management's Discussion and Analysis

Cash Requirements

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204.6 367.7 317.6 450.5 1,340.4

Aron supply and offtake obligations (6)

Inventory intermediation obligation (6)

90.8 532.7 — — 623.5

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Floating interest rate debt is calculated using December 31, 2022 rates.

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

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

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

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

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

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

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

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

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

For additional information, see Note 9 to the consolidated financial statements in Item 8.

(6) Balances consist of contractual obligations under the Citi Inventory Intermediation Agreement, including principal obligation for the Baseline Volume Step-Out Liability and other recurring fees.

For additional information, see Note 9 to the consolidated financial statements included in Item 8.

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

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 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.

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

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Cash outlays in the first quarter of 2023 are planned to include incentive compensation payments that were earned and accrued in 2022.

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.

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 sum of the parts initiatives.

Refer to the cash flow section for our operating activities spend in 2022.

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Goodwill is evaluated for impairment by comparing the carrying amount of the reporting unit to its estimated fair value.

Prior to the adoption of Accounting Standard Update ("ASU") 2017-04, Simplifying the Test for Goodwill Impairment , if a reporting unit's carrying amount exceeds its fair value (Step 1), the impairment assessment leads to the testing of the implied fair value of the reporting unit's goodwill to its carrying amount (Step 2).

If the implied fair value is less than the carrying amount, a goodwill impairment charge is recorded.

Subsequent to adoption of ASU 2017-04 (which we adopted during the fourth quarter of 2018, as permitted by the ASU), Step 2 is no longer required, but rather any impairment is determined based on the results of Step 1.

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

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We performed a qualitative assessment on the reporting units in our logistics segment for the years ended December 31, 2022, 2021 and 2020, which did not result in an impairment charge nor did our analysis reflect any reporting units at risk.

We performed a qualitative assessment on the reporting units in our refining and retail segments during the year ended December 31, 2022.

Our quantitative assessment of goodwill performed on the reporting units in our refining and retail segments during the fourth quarter of 2021, resulted in no impairment during the year ended December 31, 2021.

There was $126.0 million impairment during the year ended December 31, 2020 and no impairment in 2019.

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

Each of the reporting units have a fair value that is substantially in excess of its carrying value, with the exception of the Krotz Springs refinery ("KSR") reporting unit.

Given the relatively small cushion for the KSR reporting unit, we performed a sensitivity analysis on our impairment test noting the following:

(in millions) Sensitivity

Goodwill Balance at 2021 Annual Assessment Date % Estimated Fair Value exceeds Carrying Value Increase in WACC that could cause impairment (1)

KSR $ 212.2 <10% 1.5%-2.0%

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

Management's Discussion and Analysis

There was $126.0 million impairment during the year ended December 31, 2020.

As part of our 2021 assessment, the aggregate fair value of all reporting units were reconciled to our market capitalization for reasonableness.

Each of the reporting units had a fair value that was substantially in excess of its carrying value, with the exception of the Krotz Springs refinery ("KSR") reporting unit.

Details of remaining goodwill balances by segment are included in Note 16 to the consolidated financial statements in Item 8.

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

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

We evaluate our interests in a VIE to

Management's Discussion and Analysis

determine whether we are the primary beneficiary.

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

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

Environmental Liabilities

It is our policy to accrue environmental and clean-up related costs of a non-capital nature when it is both probable that a liability has been incurred and the amount can be reasonably estimated.

Environmental liabilities represent the current estimated costs to investigate and remediate contamination at sites where we have environmental exposure.

This estimate is based on assessments of the extent of the contamination, the selected remediation methodology and review of applicable environmental regulations, typically considering estimated activities and costs for 15 years, and up to 30 years if a longer period is believed reasonably necessary.

Such estimates may require judgment with respect to costs, time frame and extent of required remedial and clean-up activities.

Accruals for estimated costs from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study and include, but are not limited to, costs to perform remedial actions and costs of machinery and equipment that are dedicated to the remedial actions and that do not have an alternative use.

Such accruals are adjusted as further information develops or circumstances change.

We discount environmental liabilities to their present value if payments are fixed or reliably determinable.

Expenditures for equipment necessary for environmental issues relating to ongoing operations are capitalized.

Changes in laws and regulations and actual remediation expenses compared to historical experience could significantly impact our results of operations and financial position.

We believe the estimates selected, in each instance, represent our best estimate of future outcomes, but the actual outcomes could differ from the estimates selected.

Asset Retirement Obligations

Delek recognizes liabilities which represent the fair value of a legal obligation to perform asset retirement activities, including those that are conditional on a future event, when the amount can be reasonably estimated.

If a reasonable estimate cannot be made at the time the liability is incurred, we record the liability when sufficient information is available to estimate the liability’s fair value.

In the refining segment, we have asset retirement obligations with respect to our refineries due to various legal obligations to clean and/or dispose of these assets at the time they are retired.

However, the majority of these assets can be used for extended and indeterminate periods of time provided that they are properly maintained and/or upgraded.

It is our practice and intent to continue to maintain these assets and make improvements based on technological advances.

In the logistics segment, these obligations relate to the required cleanout of the pipeline and terminal tanks and removal of certain above-grade portions of the pipeline situated on right-of-way property.

In the retail segment, we have asset retirement obligations related to the removal of underground storage tanks and the removal of brand signage at owned and leased retail sites which are legally required under the applicable leases.

The asset retirement obligation for storage tank removal on leased retail sites is accreted over the expected life of the owned retail site or the average retail site lease term.

In order to determine fair value, management must make certain estimates and assumptions including, among other things, projected cash flows, a credit-adjusted risk-free rate and an assessment of market conditions that could significantly impact the estimated fair value of the asset retirement obligations.

We believe the estimates selected, in each instance, represent our best estimate of future outcomes, but the actual outcomes could differ from the estimates selected.

Business Combinations

We recognize and measure the assets acquired and liabilities assumed in a business combination based on their estimated fair values at the acquisition date in accordance with the provisions of ASC 805.

Any excess or surplus of the purchase consideration when compared to the fair value of the net tangible assets acquired, if any, is recorded as goodwill or gain from a bargain purchase.

The fair value of assets and liabilities as of the acquisition date are often estimated using a combination of approaches, including the income approach, which requires us to project future cash flows and apply an appropriate discount rate;

the cost approach, which requires estimates of replacement costs and depreciation and obsolescence estimates;

and the market approach which uses market data and adjusts for entity-specific differences.

We use all available information to make these fair value determinations and engage third-party consultants for valuation assistance.

The estimates used in determining fair values are based on assumptions believed to be reasonable, but which are inherently uncertain.

Accordingly, actual results may differ materially from the projected results used to determine fair value.

New Accounting Pronouncements

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Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for a discussion of new accounting pronouncements applicable to us.

Management's Discussion and Analysis

Non-GAAP Measures

These financial and operational non-GAAP measures are important factors in assessing our operating results and profitability and include:

• Refining margin - calculated as the difference between net refining revenues and total cost of materials and other;

• Refined product margin - calculated as the difference between net revenues attributable to refined products (produced and purchased) and related cost of materials and other (which is applicable to both the refining segment and the West Texas wholesale marketing activities within our logistics segment);

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

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

These measures should not be considered substitutes for their most directly comparable U.S.

GAAP financial measures.

Non-GAAP Reconciliations

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

GAAP measure, gross margin:

Reconciliation of refining margin to gross margin

Refining Segment

Year Ended December 31,

2021 2020 2019

Net revenues $ 9,956.0 $ 5,817.7 $ 8,798.5

Cost of sales 10,072.3 6,346.5 8,154.9

Gross margin (116.3) (528.8) 643.6

Add back (items included in cost of sales):

Operating expenses (excluding depreciation and amortization) 434.1 402.7 492.4

Depreciation and amortization 198.7 198.3 134.3

Refining margin $ 516.5 $ 72.2 $ 1,270.3

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

What changed 10-K

Item 7. Management’s Discussion and Analysis