What changed in this filing

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Item 1. Financial Statements

2023-08-09 compared with 2023-05-09 · 228 added, 192 removed, 702 unchanged (37% of the section changed)

3 unchanged sentences

(In millions, except share and per share data)

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Current assets:

18 unchanged sentences

Current portion of long-term debt 49.5 74.5

Current portion of obligation under Inventory Intermediation Agreements 57.1 49.9

Current portion of obligation under Inventory Intermediation Agreement — 49.9

Current portion of operating lease liabilities 50.2 49.6

3 unchanged sentences

Long-term debt, net of current portion 2,761.4 2,979.2

Obligation under Inventory Intermediation Agreements 479.1 491.8

Obligation under Inventory Intermediation Agreement 453.4 491.8

Environmental liabilities, net of current portion 111.6 111.5

6 unchanged sentences

Preferred stock, $ 0.01 par value, 10,000,000 shares authorized, no shares issued and outstanding

Common stock, $ 0.01 par value, 110,000,000 shares authorized, 84,569,103 shares and 84,509,517 shares issued at March 31, 2023 and December 31, 2022, respectively

Common stock, $ 0.01 par value, 110,000,000 shares authorized, 83,150,295 shares and 84,509,517 shares issued at June 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 1,121.8 1,134.1

Accumulated other comprehensive loss ( 5.3 ) ( 5.2 )

Treasury stock, 17,575,527 shares, at cost, at March 31, 2023 and December 31, 2022, respectively

Treasury stock, 17,575,527 shares, at cost, at June 30, 2023 and December 31, 2022, respectively

( 694.1 ) ( 694.1 )

8 unchanged sentences

(In millions, except share and per share data)

Three Months Ended March 31,

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

2023 2022 2023 2022

Net revenues $ 4,195.6 $ 5,982.6 $ 8,119.9 $ 10,441.7

12 unchanged sentences

Income from equity method investments ( 25.5 ) ( 15.7 ) ( 40.1 ) ( 26.6 )

Other (income) loss, net ( 7.1 ) 1.3

Other expense (income), net 0.5 ( 3.6 ) ( 6.6 ) ( 2.3 )

Total non-operating expense, net 55.4 24.3 110.2 53.1

Income before income tax expense 88.0 17.9

Income tax expense 15.8 3.1

Net income 72.2 14.8

(Loss) income before income tax (benefit) expense ( 5.3 ) 469.0 82.7 486.9

Income tax (benefit) expense ( 3.8 ) 100.4 12.0 103.5

Net (loss) income ( 1.5 ) 368.6 70.7 383.4

Net income attributed to non-controlling interests 6.8 6.8 14.7 15.0

Net income attributable to Delek $ 64.3 $ 6.6

Basic income per share $ 0.96 $ 0.09

Diluted income per share $ 0.95 $ 0.09

Net (loss) income attributable to Delek $ ( 8.3 ) $ 361.8 $ 56.0 $ 368.4

Basic (loss) income per share $ ( 0.13 ) $ 5.11 $ 0.84 $ 5.12

Diluted (loss) income per share $ ( 0.13 ) $ 5.05 $ 0.84 $ 5.07

Weighted average common shares outstanding:

6 unchanged sentences

(In millions)

Three Months Ended March 31,

Net income $ 72.2 $ 14.8

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

2023 2022 2023 2022

Net (loss) income $ ( 1.5 ) $ 368.6 $ 70.7 $ 383.4

Other comprehensive loss:

1 unchanged sentence

Total other comprehensive loss ( 0.1 ) ( 0.1 ) ( 0.1 ) ( 0.2 )

Comprehensive income $ 72.2 $ 14.7

Comprehensive (loss) income $ ( 1.6 ) $ 368.5 $ 70.6 $ 383.2

Comprehensive income attributable to non-controlling interest 6.8 6.8 14.7 15.0

Comprehensive income attributable to Delek $ 64.3 $ 6.5

Comprehensive (loss) income attributable to Delek $ ( 8.4 ) $ 361.7 $ 55.9 $ 368.2

See accompanying notes to the condensed consolidated financial statements

3 unchanged sentences

(In millions, except share and per share data)

Three Months Ended March 31, 2023

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings Treasury Shares Non-Controlling Interest in Subsidiaries Total Stockholders' Equity

Three Months Ended June 30, 2023

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings Treasury Stock Non-Controlling Interest in Subsidiaries Total Stockholders' Equity

Shares Amount Shares Amount

Balance at December 31, 2022 84,509,517 $ 0.9 $ 1,134.1 $ ( 5.2 ) $ 507.9 ( 17,575,527 ) $ ( 694.1 ) $ 125.9 $ 1,069.5

Net income — — — — 64.3 — — 7.9 72.2

Balance at March 31, 2023

84,569,103 $ 0.9 $ 1,141.2 $ ( 5.2 ) $ 557.2 ( 17,575,527 ) $ ( 694.1 ) $ 124.3 $ 1,124.3

Net (loss) income — — — — ( 8.3 ) — — 6.8 ( 1.5 )

Common stock dividends ($ 0.23 per share)

6 unchanged sentences

Other 68,331 — 2.0 ( 0.1 ) ( 0.1 ) — — — 1.8

Balance at June 30, 2023

83,150,295 $ 0.8 $ 1,121.8 $ ( 5.3 ) $ 518.1 ( 17,575,527 ) $ ( 694.1 ) $ 121.6 $ 1,062.9

Three Months Ended June 30, 2022

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings Treasury Stock Non-Controlling Interest in Subsidiaries Total Stockholders' Equity

Shares Amount Shares Amount

Balance at March 31, 2022

88,320,612 $ 0.9 $ 1,156.0 $ ( 3.9 ) $ 391.3 ( 17,575,527 ) $ ( 694.1 ) $ 124.5 $ 974.7

Net income — — — — 361.8 — — 6.8 368.6

Distributions to non-controlling interests — — — — — — — ( 9.0 ) ( 9.0 )

Equity-based compensation expense — — 7.1 — — — — 0.1 7.2

Taxes paid due to the net settlement of equity-based compensation — — ( 4.0 ) — — — — — ( 4.0 )

Exercise of equity-based awards 289,971 — — — — — — — —

Other — — — — ( 0.1 ) — — — ( 0.1 )

Balance at June 30, 2022

88,610,583 $ 0.9 $ 1,159.1 $ ( 3.9 ) $ 753.0 ( 17,575,527 ) $ ( 694.1 ) $ 122.4 $ 1,337.4

Financial Statements

Delek US Holdings, Inc.

Condensed Consolidated Statements of Changes in Stockholders' Equity (unaudited) (Continued)

Condensed Consolidated Statements of Changes in Stockholders' Equity (unaudited)

(In millions, except share and per share data)

Three Months Ended March 31, 2022

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings As Adjusted Treasury Stock Non-Controlling Interest in Subsidiaries Total Stockholders' Equity As Adjusted

Six Months Ended June 30, 2023

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings Treasury Shares Non-Controlling Interest in Subsidiaries Total Stockholders' Equity

Shares Amount Shares Amount

1 unchanged sentence

Net income — — — — 56.0 — — 14.7 70.7

Common stock dividends ($ 0.45 per share)

— — — — ( 29.7 ) — — — ( 29.7 )

Distributions to non-controlling interests — — — — — — — ( 19.1 ) ( 19.1 )

Equity-based compensation expense — — 12.0 — — — — 0.3 12.3

Repurchase of common stock ( 1,811,627 ) ( 0.1 ) ( 24.4 ) — ( 15.9 ) — — — ( 40.4 )

Taxes paid due to the net settlement of equity-based compensation — — ( 3.4 ) — — — — ( 0.2 ) ( 3.6 )

Exercise of equity-based awards 361,839 — — — — — — — —

Other 90,566 — 3.5 ( 0.1 ) ( 0.2 ) — — — 3.2

Balance at June 30, 2023 83,150,295 $ 0.8 $ 1,121.8 $ ( 5.3 ) $ 518.1 ( 17,575,527 ) $ ( 694.1 ) $ 121.6 $ 1,062.9

Six Months Ended June 30, 2022

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings Treasury Stock Non-Controlling Interest in Subsidiaries Total Stockholders' Equity

Shares Amount Shares Amount

Balance at December 31, 2021 91,772,080 $ 0.9 $ 1,206.5 $ ( 3.8 ) $ 384.7 ( 17,575,527 ) $ ( 694.1 ) $ 119.8 $ 1,014.0

Net income — — — — 368.4 — — 15.0 383.4

Equity-based compensation expense — — 12.4 — — — — 0.2 12.6

Distribution to non-controlling interest — — — — — — — ( 17.7 ) ( 17.7 )

4 unchanged sentences

Other — — — ( 0.1 ) ( 0.1 ) — — — ( 0.2 )

Balance at March 31, 2022 88,320,612 $ 0.9 $ 1,156.0 $ ( 3.9 ) $ 391.3 ( 17,575,527 ) $ ( 694.1 ) $ 124.5 $ 974.7

Balance at June 30, 2022 88,610,583 $ 0.9 $ 1,159.1 $ ( 3.9 ) $ 753.0 ( 17,575,527 ) $ ( 694.1 ) $ 122.4 $ 1,337.4

See accompanying notes to the condensed consolidated financial statements

3 unchanged sentences

(In millions)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

18 unchanged sentences

Cash flows from investing activities:

Acquisition of 3 Bear — ( 621.7 )

Equity method investment contributions — ( 0.1 )

Distributions from equity method investments 7.3 1.7

3 unchanged sentences

Proceeds from sale of property, plant and equipment 0.7 1.1

Insurance proceeds — 0.1

Other ( 4.8 ) —

Net cash used in investing activities ( 279.9 ) ( 720.9 )

13 unchanged sentences

Dividends paid ( 29.7 ) —

Deferred financing costs paid ( 1.2 ) ( 0.7 )

Net cash (used in) provided by financing activities ( 230.0 ) 523.1

Net increase (decrease) in cash and cash equivalents 23.7 ( 2.4 )

Net (decrease) increase in cash and cash equivalents ( 19.7 ) 388.1

Cash and cash equivalents at the beginning of the period 841.3 856.5

3 unchanged sentences

(In millions)

Three Months Ended March 31,

Six Months Ended June 30,

Supplemental disclosures of cash flow information:

3 unchanged sentences

Non-cash investing activities:

(Decrease) Increase in accrued capital expenditures $ ( 19.2 ) $ 3.4

Decrease in accrued capital expenditures $ ( 24.3 ) $ ( 4.8 )

Non-cash financing activities:

31 unchanged sentences

The Delaware Gathering Acquisition was financed through a combination of cash on hand and borrowings under the Delek Logistics' Revolving Facility (as discussed in Note 9 of these consolidated financial statements).

For the three months ended March 31, 2023, we incurred no incremental direct acquisition and integration costs.

Our consolidated financial and operating results reflect the Delaware Gathering Acquisition operations beginning June 1, 2022.

Our results of operations included revenue and net income of $ 44.3 million and $ 11.5 million, respectively, for the three months ended March 31, 2023.

For the three and six months ended June 30, 2023, we incurred no incremental direct acquisition and integration costs.

For the three and six months ended June 30, 2022, we incurred $ 6.2 million and $ 6.4 million, respectively, in incremental direct acquisition and integration costs that principally consist of legal, advisory and other professional fees.

Such costs are included in general and administrative expenses in the accompanying condensed consolidated statements of income for these periods.

The Delaware Gathering Acquisition was accounted for using the acquisition method of accounting, whereby the purchase price was allocated to the tangible and intangible assets acquired and the liabilities assumed based on their fair values.

10 unchanged sentences

Purchase Price Allocation

The following table summarizes the preliminary fair values of assets acquired and liabilities assumed in the Delaware Gathering Acquisition as of June 1, 2022 (in millions):

The following table summarizes the final fair values of assets acquired and liabilities assumed in the Delaware Gathering Acquisition as of June 1, 2022 (in millions):

Assets acquired:

20 unchanged sentences

• Rights-of-way intangible that is subject to amortization with a preliminary fair value of $ 13.5 million, which will be amortized over the weighted-average useful life of 25.4 years.

These fair value estimates are preliminary and therefore, the final fair value of assets acquired and liabilities assumed and the resulting effect on our financial position may change once all necessary information has become available and we finalize our valuations.

To the extent possible, estimates have been considered and recorded, as appropriate, for the items above based on the information available as of March 31, 2023.

We will continue to evaluate these items until they are satisfactorily resolved and adjust our purchase price allocation accordingly, within the allowable measurement period (not to exceed one year from the date of acquisition), as defined by Accounting Standards Codification ("ASC") 805, Business Combinations ("ASC 805").

The fair value of property, plant and equipment was based on the combination of the cost and market approaches.

5 unchanged sentences

The fair values of all other current assets and liabilities were equivalent to their carrying values due to their short-term nature.

Notes to Condensed Financial Statements (Unaudited)

The goodwill recognized in the Delaware Gathering Acquisition is primarily attributable to enhancing our third-party revenues, further diversification of our customer and product mix, expanding our footprint into the Delaware basin and bolstering our Environmental, Social and Governance ("ESG") optionality through furthering carbon capture opportunities and greenhouse gas reduction projects currently underway.

1 unchanged sentence

Goodwill related to the Delaware Gathering Acquisition is included in the logistics segment.

Notes to Condensed Financial Statements (Unaudited)

Unaudited Pro Forma Financial Information

5 unchanged sentences

Actual results may differ significantly from the unaudited pro forma financial information.

Three Months Ended March 31,

Three Months Ended June 30, 2022

Six Months Ended June 30, 2022

(in millions, except per share data)

23 unchanged sentences

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

The refining segment has a combined nameplate capacity of 302,000 barrels per day ("bpd") as of March 31, 2023, including the following:

Notes to Condensed Financial Statements (Unaudited)

The refining segment has a combined nameplate capacity of 302,000 barrels per day ("bpd") as of June 30, 2023, including the following:

• Tyler, Texas refinery (the "Tyler refinery");

3 unchanged sentences

The 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.

Notes to Condensed Financial Statements (Unaudited)

Logistics Segment

3 unchanged sentences

Retail Segment

Our retail segment consists of 249 owned and leased convenience store sites as of March 31, 2023, located primarily in West Texas and New Mexico.

Our retail segment consists of 247 owned and leased convenience store sites as of June 30, 2023, located primarily in West Texas and New Mexico.

These convenience stores typically offer various grades of fuel, food and beverage products, general merchandise, and certain food and other services.

1 unchanged sentence

Business Segment Operating Performance

The following is a summary of business segment operating performance as measured by EBITDA for the period indicated (in millions):

Three Months Ended March 31, 2023

The following is a summary of business segment operating performance as measured by EBITDA attributable to Delek for the period indicated (in millions):

Three Months Ended June 30, 2023

(In millions) Refining Logistics Retail Corporate,

6 unchanged sentences

Interest expense, net ( 12.2 ) ( 35.0 ) — ( 33.2 ) ( 80.4 )

Income tax benefit 3.8

Net loss attributable to Delek $ ( 8.3 )

Capital spending (excluding business combinations) $ 29.5 $ 19.4 $ 5.3 $ 7.0 $ 61.2

Three Months Ended June 30, 2022

(In millions) Refining Logistics Retail Corporate,

Other and Eliminations Consolidated

Net revenues (excluding intercompany fees and revenues) $ 5,562.6 $ 142.4 $ 277.1 $ 0.5 $ 5,982.6

Inter-segment fees and revenues 312.3 124.3 — ( 436.6 ) —

Total revenues $ 5,874.9 $ 266.7 $ 277.1 $ ( 436.1 ) $ 5,982.6

Segment EBITDA attributable to Delek $ 587.9 $ 62.6 $ 12.5 $ ( 89.2 ) $ 573.8

Depreciation and amortization ( 49.9 ) ( 13.3 ) ( 3.2 ) ( 1.6 ) ( 68.0 )

Interest expense, net ( 1.7 ) ( 16.8 ) — ( 25.1 ) ( 43.6 )

Income tax expense ( 100.4 )

1 unchanged sentence

Capital spending (excluding business combinations) $ 19.0 $ 26.7 $ 6.0 $ 8.7 $ 60.4

Three Months Ended March 31, 2022

Notes to Condensed Financial Statements (Unaudited)

Six Months Ended June 30, 2023

(In millions) Refining Logistics Retail Corporate,

9 unchanged sentences

Capital spending (excluding business combinations) $ 177.1 $ 55.5 $ 8.0 $ 12.7 $ 253.3

Notes to Condensed Financial Statements (Unaudited)

Six Months Ended June 30, 2022

(In millions) Refining Logistics Retail Corporate,

Other and Eliminations Consolidated

Net revenues (excluding intercompany fees and revenues) $ 9,729.1 $ 225.2 $ 486.6 $ 0.8 $ 10,441.7

Inter-segment fees and revenues 538.1 248.1 — ( 786.2 ) —

Total revenues $ 10,267.2 $ 473.3 $ 486.6 $ ( 785.4 ) $ 10,441.7

Segment EBITDA attributable to Delek $ 667.9 $ 126.8 $ 22.8 $ ( 127.3 ) $ 690.2

Depreciation and amortization ( 102.7 ) ( 23.7 ) ( 6.7 ) ( 3.2 ) ( 136.3 )

Interest expense, net ( 2.3 ) ( 31.0 ) — ( 48.7 ) ( 82.0 )

Income tax expense ( 103.5 )

Net income attributable to Delek $ 368.4

Capital spending (excluding business combinations) $ 33.3 $ 35.8 $ 9.0 $ 15.2 $ 93.3

Earnings Per Share

3 unchanged sentences

For those instruments that are indexed to our common stock, they are generally dilutive when the market price of the underlying indexed share of common stock is in excess of the exercise price.

Notes to Condensed Financial Statements (Unaudited)

The following table sets forth the computation of basic and diluted earnings per share.

Three Months Ended March 31,

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

2023 2022 2023 2022

Numerator for EPS

Net income $ 72.2 $ 14.8

Net (loss) income $ ( 1.5 ) $ 368.6 $ 70.7 $ 383.4

Income attributed to non-controlling interest 6.8 6.8 14.7 15.0

3 unchanged sentences

Weighted average common shares outstanding, assuming dilution (denominator for diluted EPS) 65,773,609 71,679,954 66,835,322 72,675,313

Basic income per share $ 0.96 $ 0.09

Diluted income per share $ 0.95 $ 0.09

Basic (loss) income per share $ ( 0.13 ) $ 5.11 $ 0.84 $ 5.12

Diluted (loss) income per share $ ( 0.13 ) $ 5.05 $ 0.84 $ 5.07

The following equity instruments were excluded from the diluted weighted average common shares outstanding because their effect would be anti-dilutive:

Antidilutive stock-based compensation (because average share price is less than exercise price) 2,572,768 1,450,184 2,149,803 2,853,904

Delek Logistics

Antidilutive due to loss 464,170 — — —

Total antidilutive stock-based compensation 3,036,938 1,450,184 2,149,803 2,853,904

Delek Logistics

1 unchanged sentence

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

As of March 31, 2023, we owned a 78.7 % interest in Delek Logistics, consisting of 34,311,278 common limited partner units and the non-economic general partner interest.

As of June 30, 2023, we owned a 78.7 % interest in Delek Logistics, consisting of 34,311,278 common limited partner units and the non-economic general partner interest.

The limited partner interests in Delek Logistics not owned by us are reflected in net income attributable to non-controlling interest in the accompanying consolidated statements of income and in non-controlling interest in subsidiaries in the accompanying consolidated balance sheets.

3 unchanged sentences

The assets of Delek Logistics can only be used to settle its own obligations and its creditors have no recourse to our assets.

Exclusive of intercompany balances and the marketing agreement intangible asset between Delek Logistics and Delek which are eliminated in consolidation, the Delek Logistics consolidated balance sheets are included in the consolidated balance sheets of Delek.

The Delek Logistics consolidated balance sheets are presented below (in millions):

Exclusive of intercompany balances and the marketing agreement intangible asset between Delek Logistics and Delek which are eliminated in consolidation, the Delek Logistics condensed consolidated balance sheets are included in the condensed consolidated balance sheets of Delek.

The Delek Logistics condensed consolidated balance sheets are presented below (in millions):

Notes to Condensed Financial Statements (Unaudited)

As of March 31, 2023

As of June 30, 2023

As of December 31, 2022

1 unchanged sentence

Accounts receivable 65.9 53.3

Accounts receivable from related parties 7.4 —

Inventory 3.1 1.5

30 unchanged sentences

The obligations of the HoldCo members under the W2W Holdings LLC Agreement are guaranteed by the parents of the member entities.

As of March 31, 2023, except for the guarantee of member obligations under the joint venture, we do not have other guarantees with or to HoldCo, nor any third-party associated with HoldCo contracted work.

As of June 30, 2023, except for the guarantee of member obligations under the joint venture, we do not have other guarantees with or to HoldCo, nor any third-party associated with HoldCo contracted work.

The Company's maximum exposure to any losses incurred by HoldCo is limited to its investment.

As of March 31, 2023 and December 31, 2022, Delek's HoldCo investment balance totaled $ 53.5 million and $ 49.0 million, respectively, and is included in total assets in corporate, other and eliminations in our segment disclosure.

For the three months ended March 31, 2023 and 2022, we recognized income of $ 4.5 million and $ 2.1 million, respectively, associated with HoldCo activities.

As of June 30, 2023 and December 31, 2022, Delek's HoldCo investment balance totaled $ 55.0 million and $ 49.0 million, respectively, and is included in total assets in corporate, other and eliminations in our segment disclosure.

In addition, on the investment, we recognized income of $ 6.8 million and $ 11.3 million for the three and six months ended June 30, 2023, respectively, and $ 2.1 million and $ 4.2 million for the three and six months ended June 30, 2022, respectively.

Notes to Condensed Financial Statements (Unaudited)

Delek Logistics Investments

Delek Logistics has a 33 % membership interest in Red River Pipeline Company LLC (“Red River”), which owns a 16-inch crude oil pipeline running from Cushing, Oklahoma to Longview, Texas.

As of March 31, 2023 and December 31, 2022, Delek's investment balance in Red River totaled $ 141.6 million and $ 149.6 million, respectively.

We recognized income on the investment totaling $ 3.8 million and $ 5.2 million for the three months ended March 31, 2023 and 2022, respectively.

As of June 30, 2023 and December 31, 2022, Delek's investment balance in Red River totaled $ 140.9 million and $ 149.6 million, respectively.

We recognized income on the investment totaling $ 4.0 million and $ 7.8 million for the three and six months ended June 30, 2023, respectively, and $ 4.6 million and $ 9.9 million for the three and six months ended June 30, 2022, respectively.

This investment is accounted for using the equity method and is included as part of total assets in our logistics segment.

Notes to Condensed Financial Statements (Unaudited)

In addition to Red River, Delek Logistics has two other joint ventures that own and operate logistics assets, and which serve third parties and subsidiaries of Delek.

1 unchanged sentence

to operate one of these pipeline systems (the "Caddo Pipeline") and a 33 % membership interest in Andeavor Logistics Rio Pipeline LLC which operates the other pipeline system (the "Rio Pipeline").

As of March 31, 2023 and December 31, 2022, Delek Logistics' investment balance in these joint ventures was $ 101.7 million and $ 107.4 million, respectively, and are accounted for using the equity method.

We recognized income on these investments totaling $ 2.5 million and $ 1.8 million for the three months ended March 31, 2023 and 2022, respectively.

As of June 30, 2023 and December 31, 2022, Delek Logistics' investment balance in these joint ventures was $ 101.8 million and $ 107.4 million, respectively, and are accounted for using the equity method.

We recognized income on these investments totaling $ 3.3 million and $ 5.8 million for the three and six months ended June 30, 2023, respectively, and $ 2.4 million and $ 4.2 million for the three and six months ended June 30, 2022, respectively.

Other Investments

In addition to our pipeline joint ventures, we also have a 50 % interest in a joint venture that owns asphalt terminals located in the southwestern region of the U.S., as well as a 50 % interest in a joint venture that owns, operates and maintains a terminal consisting of an ethanol unit train facility with an ethanol tank in Arkansas.

As of March 31, 2023 and December 31, 2022, Delek's investment balance in these joint ventures was $ 57.4 million and $ 53.7 million, respectively.

We recognized income on these investments totaling $ 3.8 million and $ 1.8 million for the three months ended March 31, 2023 and 2022, respectively.

As of June 30, 2023 and December 31, 2022, Delek's investment balance in these joint ventures was $ 65.9 million and $ 53.7 million, respectively.

We recognized income on these investments totaling $ 11.4 million and $ 15.2 million for the three and six months ended June 30, 2023, respectively, and $ 6.6 million and $ 8.3 million for the three and six months ended June 30, 2022, respectively.

Both investments are accounted for using the equity method.

The investment in asphalt terminal operations is included as part of total assets in corporate, other and eliminations in our segment disclosure while the ethanol terminal operations is reflected in the refining segment.

Combined summarized financial information for our equity method investees on a 100% basis is shown below (in millions):

As of March 31, 2023 As of December 31, 2022

Combined summarized financial information for our equity method investees (with the exception of our interest in a joint venture that owns asphalt terminals) on a 100% basis is shown below (in millions):

As of June 30, 2023 As of December 31, 2022

Current assets $ 70.3 $ 54.5

2 unchanged sentences

Non-current liabilities $ 551.0 $ 548.5

Three Months Ended March 31,

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

2023 2022 2023 2022

Revenues $ 32.0 $ 34.9 $ 63.7 $ 72.1

2 unchanged sentences

Net income $ 32.9 $ 19.0 $ 57.6 $ 41.5

Summarized financial information for our interest in a joint venture that owns asphalt terminals on a 100% basis is shown below (in millions):

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

2023 2022 2023 2022

Revenues $ 103.8 $ 71.2 $ 157.0 $ 100.1

Gross profit $ 27.3 $ 16.5 $ 37.9 $ 22.3

Operating income $ 22.2 $ 12.6 $ 28.7 $ 15.4

Net income $ 22.3 $ 12.8 $ 29.1 $ 15.6

Crude oil feedstocks, refined products, blendstocks and asphalt inventory for all of our operations, excluding merchandise inventory in our retail segment, are stated at the lower of cost determined using FIFO basis or net realizable value.

Retail merchandise inventory consists of cigarettes, beer, convenience merchandise and food service merchandise and is stated at estimated cost as determined by the retail inventory method.

Notes to Condensed Financial Statements (Unaudited)

The following table presents the components of inventory for each period presented:

Titled Inventory Inventory Intermediation Agreement (1)

March 31, 2023

June 30, 2023

Feedstocks, raw materials and supplies $ 475.9 $ 143.7 $ 619.6

8 unchanged sentences

(1) Refer to Note 8 - Inventory Intermediation Obligations for further information.

Notes to Condensed Financial Statements (Unaudited)

At March 31, 2023, we recorded a pre-tax inventory valuation reserve of $ 9.5 million due to a market price decline below our cost of certain inventory products.

At June 30, 2023, we recorded a pre-tax inventory valuation reserve of $ 1.6 million due to a market price decline below our cost of certain inventory products.

At December 31, 2022, we recorded a pre-tax inventory valuation reserve of $ 11.2 million.

For the three months ended March 31, 2023 and 2022, we recognized a net reduction (increase) in cost of materials and other in the accompanying condensed consolidated statements of income related to the change in pre-tax inventory valuation of $ 1.7 million and $ 8.5 million, respectively.

We recognized a net reduction (increase) in cost of materials and other in the accompanying condensed consolidated statements of income related to the change in pre-tax inventory valuation of $ 7.9 million and $ 9.6 million for the three and six months ended June 30, 2023, respectively, and $( 7.3 ) million and $ 1.2 million for the three and six months ended June 30, 2022, respectively.

For the three months ended June 30, 2023, we recorded an immaterial cumulative error correction of approximately $ 8.0 million, which was reflected as an adjustment to total cost of sales.

This adjustment related to spare parts that should have been included in inventories.

The impact of the balance sheet error correction would not have been material to any prior period financial statements and is not material to inventories or total cost of sales in the current period.

Inventory Intermediation Obligations

The following table summarizes our outstanding obligations under our Inventory Intermediation Agreement and Supply and Offtake Agreements:

As of March 31, 2023 As of December 31, 2022

Obligations under Inventory Intermediation Agreements

As of June 30, 2023 As of December 31, 2022

Obligations under Inventory Intermediation Agreement

Obligations related to Base Layer Volumes $ 453.4 $ 491.8

Current portion — 49.9

Total Obligations under Inventory Intermediation Agreements $ 536.2 $ 541.7

Total obligations under Inventory Intermediation Agreement $ 453.4 $ 541.7

Other (receivable) payable for monthly activity true-up $ ( 12.4 ) $ 5.6

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The following table summarizes these fees:

Three Months Ended March 31,

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

2023 2022 2023 2022

Net fees and expenses:

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Interest expense, net $ 15.6 $ 5.2 $ 29.6 $ 10.2

Inventory Intermediation Agreements

Inventory Intermediation Agreement

On December 22, 2022, Delek entered into an inventory intermediation agreement ("Inventory Intermediation Agreement") with Citigroup Energy Inc.

("Citi") in connection with DK Trading & Supply, LLC ("DKTS"), an indirect subsidiary of Delek.

Pursuant to the Inventory Intermediation Agreement, Citi will (i) purchase from and sell to DKTS 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 DKTS all refined products produced by such refineries other than certain excluded products and (iii) in connection with such purchases and sales, DKTS will enter into certain market risk hedges in each case, on the terms and subject to certain conditions.

Notes to Condensed Financial Statements (Unaudited)

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 DKTS.

As of March 31, 2023, we had letters of credit outstanding of $ 90.0 million supporting the Inventory Intermediation Agreement.

The Inventory Intermediation Agreement expires December 30, 2024, subject to an extension that can be executed by Citi for an additional twelve months .

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The Inventory Intermediation Agreement replaced the Supply and Offtake Agreements that expired on December 30, 2022.

On June 21, 2023, DKTS entered into a letter agreement to the Inventory Intermediation Agreement with Citi to temporarily increase its letter of credit issued to Citi by $ 100.0 million which will allow DKTS to defer payments of certain obligations under the Inventory Intermediation Agreement until July 2023.

These deferred obligations will be subject to applicable interest charges.

As of June 30, 2023, we had letters of credit outstanding of $ 195.0 million supporting the Inventory Intermediation Agreement.

The Inventory Intermediation Agreement provides for the lease to Citi of crude oil and refined product storage facilities.

At the inception of the Inventory Intermediation Agreement, we transferred title to a certain number of barrels of crude and other inventories to Citi, and the Inventory Intermediation Agreement requires the repurchase of the remaining inventory (including certain "Base Layer Volumes") at the termination.

As of March 31, 2023 and December 31, 2022, the volumes subject to the Inventory Intermediation Agreement totaled 6.4 million barrels and 6.3 million barrels, including Base Layer Volumes associated with our non-current inventory intermediation obligation of 5.5 million barrels.

As of June 30, 2023 and December 31, 2022, the volumes subject to the Inventory Intermediation Agreement totaled 5.8 million barrels and 6.3 million barrels, including Base Layer Volumes associated with our non-current inventory intermediation obligation of 5.5 million barrels.

The Inventory Intermediation Agreement is accounted for as an inventory financing arrangement under the fair value election provided by ASC 815 Derivatives and Hedging ("ASC 815") and ASC 825, Financial Instruments ("ASC 825").

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The remaining obligation resulting from our monthly activity, including long and short inventory positions valued at market-indexed pricing, are included in current liabilities (or receivables) on our condensed consolidated balance sheet.

Notes to Condensed Financial Statements (Unaudited)

Gains (losses) related to changes in fair value due to commodity-index price are recorded as a component of cost of materials and other in the condensed consolidated statements of income.

With respect to the repurchase obligation, for the three months ended March 31, 2023, we recognized gains of $ 12.7 million attributable to changes in fair value due to commodity-index price.

With respect to the repurchase obligation, we recognized gains attributable to changes in fair value due to commodity-index price totaling $ 26.3 million and $ 39.0 million during the three and six months ended June 30, 2023, respectively.

Supply & Offtake Agreements

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The Baseline Step-Out Liabilities had a floating component whose fair value reflected changes to commodity price risk with changes in fair value recorded in cost of materials.

For the three months ended March 31, 2022, we recognized gains in cost of materials and other attributable to changes in fair value due to commodity-index price totaling $ 148.8 million.

For the three and six months ended June 30, 2022, we recognized gains in cost of materials and other attributable to changes in fair value due to commodity-index price totaling $ 58.1 million and $ 206.9 million, respectively.

Long-Term Obligations

Outstanding borrowings under debt instruments are as follows (in millions):

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Delek Revolving Credit Facility $ 150.0 $ 450.0

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Long-term debt, net of current portion $ 2,761.4 $ 2,979.2

Notes to Condensed Financial Statements (Unaudited)

Delek Term Loan Credit Facility

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At Delek’s option, borrowings bear interest at either the Adjusted Term Secured Overnight Financing Rate ("SOFR") or base rate as defined by the agreement, plus an applicable margin of 2.50 % per annum with respect to base rate borrowings and 3.50 % per annum with respect to SOFR borrowings.

At March 31, 2023 and December 31, 2022, the weighted average borrowing rate was approximately 8.41 % and 7.92 %;

At June 30, 2023 and December 31, 2022, the weighted average borrowing rate was approximately 8.70 % and 7.92 %;

respectively.

The effective interest rate was 9.71 % as of March 31, 2023.

The effective interest rate was 9.95 % as of June 30, 2023.

Delek Logistics Term Loan Facility

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SOFR borrowings include a credit spread adjustment of 0.10 % to 0.25 % plus an applicable margin of 3.50 % for the first year and 4.00 % for the second year.

At March 31, 2023 and December 31, 2022, the weighted average borrowing rate was approximately 8.41 % and 7.92 %, respectively.

The effective interest rate was 8.83 % as of March 31, 2023.

Notes to Condensed Financial Statements (Unaudited)

At June 30, 2023 and December 31, 2022, the weighted average borrowing rate was approximately 8.41 % and 7.92 %, respectively.

The effective interest rate was 9.98 % as of June 30, 2023.

Revolving Credit Facilities

Available capacity and amounts outstanding for each of our revolving credit facilities as of March 31, 2023 are shown below (in millions):

Available capacity and amounts outstanding for each of our revolving credit facilities as of June 30, 2023 are shown below (in millions):

Total Capacity

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Interest is measured at either the SOFR, base rate, or Canadian dollar bankers’ acceptances rate (“CDOR”), plus an applicable margin of 0.25 % to 0.75 % per annum with respect to base rate borrowings or 1.25 % to 1.75 % per annum with respect to SOFR and CDOR.

As of March 31, 2023 and December 31, 2022, the weighted average interest rate was 6.31 % and 5.67 %, respectively.

As of June 30, 2023 and December 31, 2022, the weighted average interest rate was 6.45 % and 5.67 %, respectively.

(2) Total capacity includes letters of credit up to $ 115.0 million and $ 25.0 million for swing line loans.

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dollar prime rate plus an applicable margin of 1.00 % to 2.00 % depending on Delek Logistics’ leverage ratio, or a SOFR rate plus a credit spread adjustment of 0.10 % to 0.25 % and an applicable margin ranging from 2.00 % to 3.00 % depending on the leverage ratio.

As of March 31, 2023 and December 31, 2022, the weighted average interest rate was 7.57 % and 7.55 %, respectively.

As of June 30, 2023 and December 31, 2022, the weighted average interest rate was 7.95 % and 7.55 %, respectively.

(3) Requires a quarterly fee of 0.50 % per year on the average unused revolving commitment.

The weighted average borrowing rate as of March 31, 2023 and December 31, 2022 was 7.00 % and 6.75 %, respectively.

The weighted average borrowing rate as of June 30, 2023 and December 31, 2022 was 7.50 % and 6.75 %, respectively.

United Community Bank Revolver

On June 9, 2023, we amended the United Community Bank Revolver to reduce commitments from $ 50.0 million to $ 25.0 million and extended the maturity date to June 30, 2024.

Delek Logistics 2025 Notes

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Interest is payable semi-annually in arrears on May 15 and November 15.

As of March 31, 2023, the effective interest rate was 7.19 %.

As of June 30, 2023, the effective interest rate was 7.17 %.

Delek Logistics 2028 Notes

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Interest is payable semi-annually in arrears on June 1 and December 1.

As of March 31, 2023, the effective interest rate was 7.40 %.

As of June 30, 2023, the effective interest rate was 7.39 %.

Notes to Condensed Financial Statements (Unaudited)

Guarantees Under Revolver and Term Facilities

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Certain of our debt facilities contain limitations on future transactions such as incurrence of additional indebtedness, investments, affiliate transactions, asset acquisitions or dispositions, and dividends or distributions.

As of March 31, 2023, we were in compliance with covenants on all of our debt instruments.

As of June 30, 2023, we were in compliance with covenants on all of our debt instruments.

Some of Delek's subsidiaries have restrictions in their respective credit facilities limiting their use of assets.

As of March 31, 2023, we had no subsidiaries with restricted net assets which would prohibit earnings from being transferred to the parent company for its use.

Notes to Condensed Financial Statements (Unaudited)

As of June 30, 2023, we had no subsidiaries with restricted net assets which would prohibit earnings from being transferred to the parent company for its use.

Derivative Instruments

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Our Canadian crude trading operations are accounted for as derivative instruments, and the related unrealized and realized gains and losses are recognized in other operating income, net on the condensed consolidated statements of income.

Additionally, as of and for the three months ended March 31, 2023, other forward contracts accounted for as derivatives that are specific to managing crude costs rather than for trading purposes are recognized in cost of materials and other on the condensed consolidated statements of income in our refining segment, and are included in our disclosures of commodity derivatives in the tables below.

Additionally, as of and for the three and six months ended June 30, 2023, other forward contracts accounted for as derivatives that are specific to managing crude costs rather than for trading purposes are recognized in cost of materials and other on the condensed consolidated statements of income in our refining segment, and are included in our disclosures of commodity derivatives in the tables below.

Futures, swaps or other commodity related derivative instruments that are utilized to specifically provide economic hedges on our Canadian forward contract or investment positions are recognized in other operating income, net because that is where the related underlying transactions are reflected.

Notes to Condensed Financial Statements (Unaudited)

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

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Changes in the fair value of these future RINs commitment contracts are recorded in cost of materials and other on the condensed consolidated statements of income.

As of March 31, 2023, we do not believe there is any material credit risk with respect to the counterparties to any of our derivative contracts.

Notes to Condensed Financial Statements (Unaudited)

The following table presents the fair value of our derivative instruments as of March 31, 2023 and December 31, 2022.

As of June 30, 2023, we do not believe there is any material credit risk with respect to the counterparties to any of our derivative contracts.

The following table presents the fair value of our derivative instruments as of June 30, 2023 and December 31, 2022.

The fair value amounts below are presented on a gross basis and do not reflect the netting of asset and liability positions permitted under our master netting arrangements, including cash collateral on deposit with our counterparties.

We have elected to offset the recognized fair value amounts for multiple derivative instruments executed with the same counterparty in our financial statements.

As a result, the asset and liability amounts below differ from the amounts presented in our consolidated balance sheets.

As a result, the asset and liability amounts below differ from the amounts presented in our condensed consolidated balance sheets.

See Note 11 for further information regarding the fair value of derivative instruments (in millions).

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Derivative Type Balance Sheet Location Assets Liabilities Assets Liabilities

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Total net fair value of derivatives $ 26.2 $ ( 5.4 ) $ 22.7 $ ( 21.3 )

(1) As of March 31, 2023 and December 31, 2022, we had open derivative positions representing 178,925,171 and 158,307,020 barrels, respectively, of crude oil and refined petroleum products.

Additionally, as of March 31, 2023 and December 31, 2022, we had open derivative positions representing 4,600,000 and 2,310,000 million British Thermal Units ("MMBTU"), respectively, of natural gas products.

(2) As of March 31, 2023 and December 31, 2022, we had open RINs commitment contracts representing 133,850,000 and 259,022,967 RINs, respectively.

(3) As of March 31, 2023 and December 31, 2022, $( 1.1 ) million and $ 13.8 million, respectively, of cash (obligation) collateral held by counterparties has been netted with the derivatives with each counterparty.

Total gains (losses) on our non-trading commodity derivatives and RINs commitment contracts recorded in the consolidated statements of income are as follows (in millions) (2) :

Three Months Ended March 31,

(1) As of June 30, 2023 and December 31, 2022, we had open derivative positions representing 152,606,574 and 158,307,020 barrels, respectively, of crude oil and refined petroleum products.

Additionally, as of June 30, 2023 and December 31, 2022, we had open derivative positions representing 6,787,500 and 2,310,000 million British Thermal Units ("MMBTU"), respectively, of natural gas products.

(2) As of June 30, 2023 and December 31, 2022, we had open RINs commitment contracts representing 81,100,000 and 259,022,967 RINs, respectively.

(3) As of June 30, 2023 and December 31, 2022, $ 12.9 million and $ 13.8 million, respectively, of cash collateral held by counterparties has been netted with the derivatives with each counterparty.

Total gains (losses) on our non-trading commodity derivatives and RINs commitment contracts recorded in the condensed consolidated statements of income are as follows (in millions) (2) :

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

2023 2022 2023 2022

Gains (losses) on hedging derivatives not designated as hedging instruments recognized in cost of materials and other (1)

$ 5.3 $ ( 34.4 ) $ 10.7 $ ( 105.8 )

Losses on non-trading physical forward contract commodity derivatives in cost of materials and other ( 2.4 ) ( 3.4 )

Gains (losses) on non-trading physical forward contract commodity derivatives in cost of materials and other — 8.2 ( 2.4 ) 4.8

Losses on hedging derivatives not designated as hedging instruments recognized in operating expenses — ( 1.7 ) — ( 1.7 )

Total gains (losses) $ 5.3 ( 27.9 ) $ 8.3 $ ( 102.7 )

(1) Gains (losses) on commodity derivatives that are economic hedges but not designated as hedging instruments include unrealized gains (losses) of $ 30.0 million and $( 70.7 ) million for the three months ended March 31, 2023 and 2022.

(1) Gains (losses) on commodity derivatives that are economic hedges but not designated as hedging instruments include unrealized gains (losses) of $( 6.6 ) million and $ 23.3 million for the three and six months ended June 30, 2023 , respectively, and $ 66.1 million and $( 4.6 ) million for the three and six months ended June 30, 2022, respectively.

(2) See separate table below for disclosures about "trading derivatives."

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Total gains (losses) on our trading derivatives (none of which were designated as hedging instruments) recorded in other operating (income) expense, net on the condensed consolidated statements of income are as follows (in millions):

Three Months Ended March 31,

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

2023 2022 2023 2022

Trading Physical Forward Contract Commodity Derivatives

Realized gains $ 5.9 $ 2.9 $ 7.2 $ 20.9

Unrealized losses ( 1.8 ) ( 0.4 )

Unrealized gains (losses) 1.9 0.1 0.1 ( 0.3 )

Total $ 7.8 $ 3.0 $ 7.3 $ 20.6

Trading Hedging Commodity Derivatives

Realized gains $ 1.4 $ 15.0

Realized (loses) gains $ ( 3.1 ) $ ( 3.0 ) $ ( 1.7 ) $ 11.9

Unrealized gains (losses) 1.2 0.6 2.3 ( 16.5 )

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The environmental credits obligation surplus or deficit is categorized as Level 2, if measured at fair value either directly through observable inputs or indirectly through market-corroborated inputs, and gains (losses) related to changes in fair value are recorded as a component of cost of materials and other in the consolidated statements of income.

With respect to our Consolidated Net RINs Obligation surplus or deficit, we recognized gains (losses) on changes in fair value totaling $ 0.3 million and $( 1.1 ) million for the three months ended March 31, 2023 and 2022, respectively, primarily attributable to changes in the market prices of the underlying credits that occurred at the end of each quarter.

With respect to our Consolidated Net RINs Obligation surplus or deficit, we recognized gains (losses) on changes in fair value totaling $( 2.1 ) million and $( 1.8 ) million for the three and six months ended June 30, 2023, respectively, and $( 39.8 ) million and $( 41.0 ) million for the three and six months ended June 30, 2022, respectively, primarily attributable to changes in the market prices of the underlying credits that occurred at the end of each quarter.

Notes to Condensed Financial Statements (Unaudited)

As of and for the three months ended March 31, 2023 and 2022, we elected to account for our Inventory Intermediation step-out liability and our J.

As of and for the three and six months ended June 30, 2023 and 2022, we elected to account for our Inventory Intermediation step-out liability and our J.

Aron step-out liability at fair value in accordance with ASC 825, as it pertains to the fair value option.

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The fair value of the Delek Logistics 2028 Notes is measured based on quoted market prices in an active market, defined as Level 1 in the fair value hierarchy.

The carrying value (excluding unamortized debt issuance costs) and estimated fair value of these notes was $ 400.0 million and $ 365.4 million, respectively, as of March 31, 2023, and $ 400.0 million and $ 359.7 million, respectively, at December 31, 2022.

The carrying value (excluding unamortized debt issuance costs) and estimated fair value of these notes was $ 400.0 million and $ 372.1 million, respectively, as of June 30, 2023, and $ 400.0 million and $ 359.7 million, respectively, at December 31, 2022.

The fair value approximates the historical or amortized cost basis comprising our carrying value for all other financial instruments and therefore are not included in the table below.

The fair value hierarchy for our financial assets and liabilities accounted for at fair value on a recurring basis was as follows (in millions):

As of March 31, 2023

As of June 30, 2023

Level 1 Level 2 Level 3 Total

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This differs from the presentation in the financial statements which reflects our policy, wherein we have elected to offset the fair value amounts recognized for multiple derivative instruments executed with the same counterparty and where the legal right of offset exists.

As of March 31, 2023 and December 31, 2022, $( 1.1 ) million and $ 13.8 million, respectively, of cash (obligation) collateral was held by counterparty brokerage firms and has been netted with the net derivative positions with each counterparty.

As of June 30, 2023 and December 31, 2022, $ 12.9 million and $ 13.8 million, respectively, of cash (obligation) collateral was held by counterparty brokerage firms and has been netted with the net derivative positions with each counterparty.

See Note 10 for further information regarding derivative instruments.

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While it is often difficult to quantify future environmental or safety related expenditures, we anticipate that continuing capital investments and changes in operating procedures will be required for the foreseeable future to comply with existing and new requirements, as well as evolving interpretations and more strict enforcement of existing laws and regulations.

As of March 31, 2023, we have recorded an environmental liability of approximately $ 114.6 million, primarily related to the estimated probable costs of remediating or otherwise addressing certain environmental issues of a non-capital nature at our refineries, as well as terminals, some of which we no longer own.

As of June 30, 2023, we have recorded an environmental liability of approximately $ 114.7 million, primarily related to the estimated probable costs of remediating or otherwise addressing certain environmental issues of a non-capital nature at our refineries, as well as terminals, some of which we no longer own.

This liability includes estimated costs for ongoing investigation and remediation efforts for known contamination of soil and groundwater.

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In the future, we could be required to extend the expected remediation period or undertake additional investigations of our refineries, pipelines and terminal facilities, which could result in the recognition of additional remediation liabilities.

Included in our environmental liabilities as of both March 31, 2023 and December 31, 2022 is a liability totaling $ 78.5 million related to a property that we have historically operated as an asphalt and marine fuel terminal both as an owner and, subsequently, as a lessee under an in-substance lease agreement (the “License Agreement”).

Included in our environmental liabilities as of both June 30, 2023 and December 31, 2022 is a liability totaling $ 78.5 million related to a property that we have historically operated as an asphalt and marine fuel terminal both as an owner and, subsequently, as a lessee under an in-substance lease agreement (the “License Agreement”).

The License Agreement, which provided us the license to continue operating our asphalt and marine fuel terminal operations on the property for a term of ten years and expired in June 2020, also ascribed a contractual noncontingent indemnification guarantee to certain of our wholly-owned subsidiaries related to certain incremental environmental remediation activities, predicated on the completion of certain property development activities ascribed to the lessor.

Our combined liability, comprised of our environmental liability plus the estimated fair value of the noncontingent guarantee liability, was recorded in connection with the Delek/Alon Merger, effective July 1, 2017.

While the License Agreement expired in June 2020, it is currently being disputed in litigation where we have determined that no loss accrual is necessary and that the amount of incremental loss that is reasonably possible is immaterial as of March 31, 2023.

Such ongoing dispute causes sufficient uncertainty around the release of risk and the appropriate joint and several liability allocations thereunder that we cannot currently determine a more reasonable estimate of the potential total contingent liability that is probable, nor do we have sufficient information to better estimate the fair value of any remaining noncontingent guarantee liability.

As such, as of March 31, 2023 and December 31, 2022, except for accretion and expenditures, our combined environmental liability related to the terminal and property remained unchanged.

As such, as of June 30, 2023 and December 31, 2022, except for accretion and expenditures, our combined environmental liability related to the terminal and property remained unchanged.

Notes to Condensed Financial Statements (Unaudited)

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

We continue to incur repair costs that may be recoverable under property and casualty insurance policies.

During the three months ended March 31, 2022, we recognized a gain of $ 4.3 million related to business interruption claims.

We recognized a gain of $ 0.9 million and $ 0.9 million during the three and six months ended June 30, 2023, respectively, and a gain of $ 3.3 million and $ 7.6 million during the three and six months ended June 30, 2022, respectively, related to business interruption claims.

This gain is included in other operating income in the condensed consolidated statements of income.

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

We continue to incur repair costs that may be recoverable under property and casualty insurance policies.

In addition, during the three months ended March 31, 2023 and 2022, we recognized a gain of $ 5.1 million and $ 5.7 million, respectively, related to property and business interruption claims.

In addition, we recognized a gain of $ 3.8 million and $ 8.9 million during the three and six months ended June 30, 2023, respectively, and a gain of $ 5.3 million and $ 11.0 million during the three and six months ended June 30, 2022, respectively, related to property and business interruption claims.

If applicable, we accrue receivables for probable insurance or other third-party recoveries.

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

Crude Oil and Other Releases

There were no material releases that occurred during the three months ended March 31, 2023.

For other releases that occurred in prior years, we have received regulatory closure or a majority of the cleanup and remediation efforts are substantially complete.

We do not anticipate material costs associated with any fines or penalties or to complete activities that may be needed to achieve regulatory closure.

Expenses incurred for the remediation of these crude oil and other releases are included in operating expenses in our condensed consolidated statements of income.

Letters of Credit

As of March 31, 2023, we had in place letters of credit totaling approximately $ 238.6 million with various financial institutions securing obligations primarily with respect to our commodity transactions for the refining segment and certain of our insurance programs.

There were no amounts drawn by beneficiaries of these letters of credit at March 31, 2023.

Under ASC 740, Income Taxes (“ASC 740”), we used an estimated annual tax rate to record income taxes for the three months ended March 31, 2023 and 2022.

Our effective tax rate was 18.0 % and 17.3 % for the three months ended March 31, 2023 and 2022, respectively.

Under ASC 740, Income Taxes (“ASC 740”) we used an estimated annual tax rate to record income taxes for the three and six months ended June 30, 2023 and June 30, 2022.

Our effective tax rate was 71.7 % and 14.5 % for the three and six months ended June 30, 2023, respectively, and 21.4 % and 21.3 % for the three and six months ended June 30, 2022, respectively.

The difference between the effective tax rate and the statutory rate is generally attributable to permanent differences and discrete items.

The change in our effective tax rate for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 was primarily due to an increase in quarter to date pre-tax earnings and the impact of fixed dollar favorable permanent adjustments on the quarter.

Notes to Condensed Financial Statements (Unaudited)

The change in our effective tax rate for the three and six months ended June 30, 2023 as compared to the three and six months ended June 30, 2022 was primarily due to a decrease in pre-tax earnings and the impact fixed dollar favorable permanent differences on the tax rate, and changes in the second quarter estimated annual effective tax rate applied to year to date earnings.

Related Party Transactions

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Transactions with our related parties were as follows for the periods presented (in millions):

Three Months Ended March 31,

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

2023 2022 2023 2022

$ 32.0 $ 27.2 $ 49.9 $ 43.9

Cost of materials and other (2)

$ 52.8 $ 23.7 $ 98.2 $ 47.1

Notes to Condensed Financial Statements (Unaudited)

(1) Consists primarily of asphalt sales which are recorded in corporate, other and eliminations segment.

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The detail of other current assets is as follows (in millions):

Other Current Assets March 31, 2023 December 31, 2022

Other Current Assets June 30, 2023 December 31, 2022

Prepaid expenses $ 49.2 $ 45.4

Investment commodities 40.4 29.8

Short-term derivative assets (see Note 10)

Income and other tax receivables 9.7 20.9

Investment commodities 5.6 29.8

Other 4.2 4.2

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The detail of accrued expenses and other current liabilities is as follows (in millions):

Accrued Expenses and Other Current Liabilities March 31, 2023 December 31, 2022

Consolidated Net RINs Obligation deficit (see Note 11)

$ 136.0 $ 295.5

Crude purchase liabilities 140.4 268.7

Accrued Expenses and Other Current Liabilities June 30, 2023 December 31, 2022

Product financing agreements $ 322.4 $ 258.0

Crude purchase liabilities 163.7 268.7

Income and other taxes payable 132.5 120.4

Consolidated Net RINs Obligation deficit (see Note 11)

Employee costs 51.3 91.2

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2005 Long-Term Incentive Plans (collectively, the "Incentive Plans")

Compensation expense related to equity-based awards granted under the Incentive Plans amounted to $ 5.9 million and $ 5.1 million for the three months ended March 31, 2023 and 2022, respectively.

On May 3, 2023, the Company's stockholders approved an amendment to the Delek US Holdings, Inc.

2016 Long-Term Incentive Plan that increased the number of shares of common stock available for issuance under this plan by 2,015,000 shares to 17,010,000 shares.

Compensation expense related to equity-based awards granted under the Incentive Plans amounted to $ 4.9 million and $ 10.8 million for the three and six months ended June 30, 2023, respectively, and $ 6.7 million and $ 11.8 million for the three and six months ended June 30, 2022, respectively.

These amounts are included in general and administrative expenses and operating expenses in the accompanying condensed consolidated statements of income.

As of March 31, 2023, there was $ 45.6 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements, which is expected to be recognized over a weighted-average period of 1.4 years.

We issued net shares of common stock of 53,643 and 45,800 as a result of exercised or vested equity-based awards during the three months ended March 31, 2023 and 2022, respectively.

These amounts are net of 20,463 and 17,829 shares withheld to satisfy employee tax obligations related to the exercises and vesting during the three months ended March 31, 2023 and 2022, respectively.

As of June 30, 2023, there was $ 55.3 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements, which is expected to be recognized over a weighted-average period of 1.7 years.

We issued net shares of common stock of 308,196 and 361,839 as a result of exercised or vested equity-based awards during the three and six months ended June 30, 2023, respectively, and 289,971 and 335,771 for the three and six months ended June 30, 2022, respectively.

These amounts are net of 125,645 and 146,108 shares withheld to satisfy employee tax obligations related to the exercises and vesting during the three and six months ended June 30, 2023, respectively, and 250,334 and 268,163 shares during the three and six months ended June 30, 2022, respectively.

Notes to Condensed Financial Statements (Unaudited)

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May 2, 2023 $ 0.230 May 15, 2023 May 22, 2023

August 4, 2023 $ 0.235 August 14, 2023 August 21, 2023

Stock Repurchase Program

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The authorization has no expiration date.

During the three months ended March 31, 2023, 16,292 shares of our common stock were repurchased and cancelled at the time of transaction for a total of $ 0.4 million.

As of March 31, 2023, there was $ 270.0 million of authorization remaining under Delek's aggregate stock repurchase program.

During the three and six months ended June 30, 2023, 1,795,335 and 1,811,627 shares of our common stock were repurchased and cancelled at the time of transaction for a total of $ 40.0 million and $ 40.4 million, respectively.

No repurchases were made during the three and six months ended June 30, 2022.

As of June 30, 2023, there was $ 230.1 million of authorization remaining under Delek's aggregate stock repurchase program.

Stock Purchase and Cooperation Agreement

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Under the terms of the Icahn Group Agreement, the Icahn Group agreed to standstill restrictions which require, among other things, that until the completion of the Company’s 2023 annual meeting of stockholders, the Icahn Group will refrain from acquiring additional shares of the Company Common Stock.

We lease certain retail stores, land, building and various equipment from others.

Leases with an initial term of 12 months or less are not recorded on the balance sheet;

we recognize lease expense for these leases on a straight-line basis over the lease term.

Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to 15 years or more.

The exercise of existing lease renewal options is at our sole discretion.

Certain leases also include options to purchase the leased property.

The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

Some of our lease agreements include a rate based on equipment usage and others include a rate with fixed increases or inflationary indices based increase.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

We rent or sublease certain real estate and equipment to third parties.

Our sublease portfolio consists primarily of operating leases within our retail stores and crude storage equipment.

As of March 31, 2023, $ 22.2 million of our net property, plant, and equipment balance is subject to an operating lease to a third party.

This agreement does not include options for the lessee to purchase our leasing equipment, nor does it include any material residual value guarantees or material restrictive covenants.

The agreement includes a one year renewal option and certain variable payments based on usage.

Notes to Condensed Financial Statements (Unaudited)

The following table presents additional information related to our operating leases in accordance ASC 842, Leases ("ASC 842"):

(in millions) Three Months Ended March 31,

Operating lease costs (1)

$ 18.2 $ 17.4

Short-term lease costs (2)

Sublease income — ( 0.1 )

Net lease costs $ 25.8 $ 26.0

Other Information

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases (1)

$ ( 18.2 ) $ ( 17.4 )

Leased assets obtained in exchange for new operating lease liabilities $ 18.3 $ 1.5

Leased assets obtained in exchange for new financing lease liabilities $ 1.4 $ —

March 31, 2023 March 31, 2022

Weighted-average remaining lease term (years) operating leases 4.2 4.5

Weighted-average remaining lease term (years) financing leases 6.3 6.5

Weighted-average discount rate operating leases (3)

Weighted-average discount rate financing leases (3)

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

(2) Includes an immaterial amount of variable lease cost.

(3) Our discount rate is primarily based on our incremental borrowing rate in accordance with ASC 842.

Subsequent Events

Subsequent to March 31, 2023, we made repurchases of 1,795,335 shares of our common stock that were cancelled at the time of transaction for approximately $ 40 million.

Subsequent to June 30, 2023, we made repurchases of 981,690 shares of our common stock that were cancelled at the time of transaction for approximately $ 25.0 million.

Management's Discussion and Analysis

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

What changed 10-Q

Item 1. Financial Statements