What changed in this filing

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Item 1. Financial Statements

2021-05-07 compared with 2020-11-09 · 164 added, 270 removed, 561 unchanged (44% of the section changed)

3 unchanged sentences

(in thousands, except unit and per unit data)

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Current assets:

34 unchanged sentences

Common unitholders - public;

8,687,371 units issued and outstanding at September 30, 2020 ( 9,131,579 at December 31, 2019)

8,697,468 units issued and outstanding at March 31, 2021 ( 8,697,468 at December 31, 2020)

164,100 164,614

Common unitholders - Delek Holdings;

34,745,868 units issued and outstanding at September 30, 2020 ( 15,294,046 at December 31, 2019)

34,745,868 units issued and outstanding at March 31, 2021 ( 34,745,868 at December 31, 2020)

( 275,490 ) ( 272,915 )

General partner - no units issued and outstanding at September 30, 2020 ( 498,482 at December 31, 2019) (1)

Total deficit ( 111,390 ) ( 108,301 )

Total liabilities and deficit $ 948,870 $ 956,417

(1) See Note 3 for a description of the IDR Restructuring Transaction.

See accompanying notes to the condensed consolidated financial statements

3 unchanged sentences

(in thousands, except unit and per unit data)

Three months ended Nine months ended

September 30, September 30,

2020 2019 2020 2019

Three months ended

Net revenues:

19 unchanged sentences

Income before income tax expense 36,451 28,771

Income tax (benefit) expense ( 168 ) 84 67 220

Income tax expense 184 975

Net income attributable to partners $ 36,267 $ 27,796

1 unchanged sentence

General partner's interest in net income, including incentive distribution rights (2)

— 8,895 18,724 24,244

Limited partners' interest in net income $ 36,267 $ 18,719

13 unchanged sentences

(in thousands)

Common - Public Common - Delek Holdings General Partner Total

Balance at June 30, 2020 $ 160,870 $ ( 235,961 ) $ ( 3,224 ) $ ( 78,315 )

Cash distributions

( 7,819 ) ( 18,671 ) ( 9,478 ) ( 35,968 )

Net income attributable to partners

11,258 35,070 — 46,328

Cash distribution to general partner for conversion of its economic interest and IDR elimination — — ( 45,000 ) ( 45,000 )

Non-cash conversion of general partner's economic interest and IDR elimination — ( 57,702 ) 57,702 —

Sponsor contribution of fixed assets — 1,378 — 1,378

Balance at September 30, 2020 $ 164,313 $ ( 275,767 ) $ — $ ( 111,454 )

Common - Public Common -

Delek Holdings General Partner Total

Balance at June 30, 2019 167,254 ( 305,827 ) ( 5,727 ) ( 144,300 )

Common - Public Common - Delek Holdings Total

Balance at December 31, 2020 $ 164,614 $ ( 272,915 ) $ ( 108,301 )

Cash distributions ( 7,914 ) ( 31,619 ) ( 39,533 )

1 unchanged sentence

Other 139 38 177

Balance at September 30, 2019 $ 167,650 $ ( 305,152 ) $ ( 4,988 ) $ ( 142,490 )

Balance at March 31, 2021 $ 164,100 $ ( 275,490 ) $ ( 111,390 )

Common - Public Common -

2 unchanged sentences

Cash distributions ( 8,081 ) ( 13,535 ) ( 9,017 ) ( 30,633 )

( 23,653 ) ( 46,220 ) ( 27,635 ) ( 97,508 )

General partner units issued to maintain 2 % interest

2 unchanged sentences

Issuance of units in connection with the Big Spring Gathering Assets Acquisition — 107,323 2,190 109,513

Cash distribution to Delek Holdings for Trucking Assets Acquisition — ( 46,607 ) ( 951 ) ( 47,558 )

Cash distribution to general partner for conversion of its economic interest and IDR elimination — — ( 45,000 ) ( 45,000 )

Non-cash conversion of general partner's economic interest and IDR elimination — ( 57,702 ) 57,702 —

Sponsor contribution of fixed assets — 1,378 — 1,378

Other 304 $ ( 264 ) $ 1 41

Balance at September 30, 2020 $ 164,313 $ ( 275,767 ) $ — ( 111,454 )

Common - Public Common -

Delek Holdings General Partner Total

Balance at December 31, 2018 $ 171,023 $ ( 299,360 ) $ ( 6,486 ) $ ( 134,823 )

Cash distributions (1)

( 22,580 ) ( 37,929 ) ( 22,762 ) ( 83,271 )

General partner units issued to maintain 2 % interest

Net income attributable to partners 19,027 31,841 24,244 75,112

Other 180 296 8 484

Balance at September 30, 2019 $ 167,650 $ ( 305,152 ) $ ( 4,988 ) $ ( 142,490 )

(1) Cash distributions include a nominal amount related to distribution equivalents on vested phantom units for the nine months ended September 30, 2020 and 2019.

Balance at March 31, 2020 $ 158,332 $ ( 199,943 ) $ ( 2,785 ) $ ( 44,396 )

See accompanying notes to the condensed consolidated financial statements

3 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

23 unchanged sentences

Proceeds from sales of property, plant and equipment 83 107

Purchases of intangible assets ( 474 ) —

Distributions from equity method investments 3,924 110

6 unchanged sentences

Distributions to common unitholders - Delek Holdings ( 31,619 ) ( 13,535 )

Distributions to Delek Holdings unitholders and general partner related to Trucking Assets Acquisition ( 47,558 ) —

Distribution to general partner for conversion of its interest and IDR elimination ( 45,000 ) —

Proceeds from revolving credit facility 77,500 261,400

1 unchanged sentence

Net cash (used in) provided by financing activities ( 48,633 ) 75,973

Net increase in cash and cash equivalents 479 1,831

Net (decrease) increase in cash and cash equivalents 9,134 ( 1,369 )

Cash and cash equivalents at the beginning of the period 4,243 5,545

5 unchanged sentences

Non-cash investing activities:

(Decrease) increase in accrued capital expenditures $ ( 948 ) $ 1,274

Increase in accrued capital expenditures in accounts payable/receivable related parties $ 3,119 $ —

Decrease in accrued capital expenditures $ ( 1,439 ) $ ( 1,220 )

Equity issuance to Delek Holdings unitholders in connection with Big Spring Gathering Assets Acquisition $ — $ 109,513

1 unchanged sentence

Non-cash lease liability arising from obtaining right of use assets during the period $ 2,623 $ —

Non-cash lease liability arising from recognition of right of use assets upon adoption of ASU 2016-02 — $ 20,202

Sponsor contribution of property, plant and equipment $ 1,378 $ —

See accompanying notes to the condensed consolidated financial statements

11 unchanged sentences

Our unaudited condensed consolidated financial statements have been prepared in conformity with U.S.

GAAP applied on a consistent basis with those of the annual audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 (our "Annual Report on Form 10-K"), filed with the Securities and Exchange Commission (the "SEC") on February 27, 2020 and in accordance with the rules and regulations of the SEC.

GAAP applied on a consistent basis with those of the annual audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 (our "Annual Report on Form 10-K"), filed with the U.S.

Securities and Exchange Commission (the "SEC") on March 1, 2021 and in accordance with the rules and regulations of the SEC.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2020 included in our Annual Report on Form 10-K .

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Risks and Uncertainties Arising from the COVID-19 Pandemic

The outbreak of COVID-19 and its development into a pandemic in March 2020 (the "COVID-19 Pandemic") has resulted in significant economic disruption globally, including in the U.S.

The on-going impact of the COVID-19 outbreak and its development into a pandemic in March 2020 (the “COVID-19 Pandemic” or the “Pandemic”), the restrictions imposed to prevent its spread, the challenges with the vaccination rollout, and the spread of new variants of the virus, continue to cause 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 social distancing 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 and resulted in airlines dramatically cutting back on flights and a decrease in motor vehicle use at a time when seasonal driving patterns typically result in an increase of consumer demand for gasoline.

As a result, there has also been a decline in the demand for, and thus also the market prices of, crude oil and certain products, particularly refined petroleum products that we receive revenue for the transportation and storage services we provide.

In addition, the decline in demand impacted the sales volumes in our wholesale marketing business.

There is continued uncertainty about the duration of the COVID-19 Pandemic which caused depressed consumer demand for gasoline and other hydrocarbons during 2020 in the United States.

Therefore, downward pressure on commodity prices has remained and could continue for the foreseeable future.

Compared to the prior year, the first quarter of 2021 has witnessed economic recovery trends including a resumption of flights by major airlines and increased motor vehicle use.

This has in turn resulted in increased demand for, thus also the market prices of, crude oil and certain products, particularly refined petroleum products that we receive revenue for the transportation and storage services we provide and an increase in demand and sales volumes in our wholesale marketing business.

As of March 31, 2021 there is continued uncertainty about the duration and future impact of the COVID-19 Pandemic.

Our business model, which includes executing minimum volume commitment contracts with our major customers, to an extent, cushioned us from the impact of the COVID-19 Pandemic in 2020 and during the first quarter of 2021.

Uncertainties related to the impact of the COVID-19 Pandemic and other events exist that could impact our future results of operations and financial position, the nature of which and the extent to which are currently unknown.

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 GAAP, we have considered them in the preparation of our unaudited financial statements as of and for the three and nine months ended September 30, 2020.

The application of accounting policies impacted by such considerations include (but are not necessarily limited to) the following:

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 GAAP, we have considered them in the preparation of our financial statements as of and for the three months ended March 31, 2021.

Notes to Condensed Consolidated Financial Statements (Unaudited)

• The interim evaluation of indefinite-lived intangibles and goodwill for potential impairment, where indicators exist, as defined by GAAP;

• The interim evaluation of long-lived assets for potential impairment, where indicators exist, as defined by GAAP;

• The interim evaluation of joint ventures for potential impairment, where indicators exist, as defined by GAAP;

• The evaluation of inventory valuation allowances that may be warranted under the lower of cost or net realizable value analysis, pursuant to GAAP;

• The consideration of debt modifications and or covenant requirements, as applicable;

• The evaluation of commitments and contingencies, including changes in concentrations, as applicable;

• The interim evaluation of the risk of credit losses and the determination of our allowance for credit losses, pursuant to GAAP;

• The interim evaluation of our ability to continue as a going concern.

New Accounting Pronouncements Adopted During 2021

ASU 2018-13, Fair Value Measurement - Changes to the Disclosure Requirements for Fair Value Measurement

In August 2018, the Financial Accounting Standards Board (the "FASB") issued guidance related to disclosure requirements for fair value measurements.

The pronouncement eliminates, modifies and adds disclosure requirements for fair value measurements.

The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019.

We adopted this guidance on January 1, 2020 and the adoption did not have a material impact on our business, financial condition or results of operations.

ASU 2016-13, Financial Instruments - Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued guidance requiring the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

Organizations will now use forward-looking information to better inform their credit loss estimates.

This guidance is effective for interim and annual periods beginning after December 15, 2019.

We adopted this guidance on January 1, 2020 using the modified retrospective approach as of the adoption date.

The adoption did not have a material impact on the Partnership’s operating results, financial position or disclosures.

ASU 2018-15, Intangible - Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract

In August 2018, the FASB issued guidance related to customers' accounting for implementation costs incurred in a cloud computing arrangement that is considered a service contract.

This pronouncement aligns the requirements for capitalizing implementation costs in such arrangements with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019.

Entities can choose to adopt the new guidance prospectively or retrospectively.

We adopted this guidance on January 1, 2020 and elected the prospective method.

The adoption did not have a material impact on the Partnership's financial condition or results of operations.

Accounting Pronouncements Not Yet Adopted

ASU 2019-12, Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued guidance intended to simplify various aspects related to accounting for income taxes, eliminate certain exceptions within Accounting Standards Codification ("ASC") 740 and clarify certain aspects of the current guidance to promote consistency among reporting entities.

In December 2019, the Financial Accounting Standards Board (the “FASB”) issued guidance intended to simplify various aspects related to accounting for income taxes, eliminate certain exceptions within Accounting Standards Codification ("ASC") 740 and clarify certain aspects of the current guidance to promote consistency among reporting entities.

The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 2020, with early adoption permitted.

We expect to adopt this guidance on the effective date and are currently evaluating the impact that adopting this new guidance may have on our business, financial condition and results of operations.

We adopted this guidance prospectively on January 1, 2021.

The adoption of this guidance did not have a material impact on our business, financial condition or results of operations.

ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815

1 unchanged sentence

The pronouncement is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020, and early adoption is permitted.

We do not expect that the adoption of this ASU on its effective date will have a material impact on our business, financial condition or results of operations.

Notes to Condensed Consolidated Financial Statements (Unaudited)

We adopted this guidance prospectively on January 1, 2021.

The adoption of this guidance did not have a material impact on our business, financial condition or results of operations.

Accounting Pronouncements Not Yet Adopted

ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848)

1 unchanged sentence

This guidance is effective for all entities any time beginning on March 12, 2020 through December 31, 2022 and may be applied from the beginning of an interim period that includes the issuance date of the ASU.

The Partnership is currently evaluating the impact this guidance may have on its consolidated financial statements and related disclosures.

The Partnership is evaluating the impact of this guidance but does not currently expect that adopting this new guidance will have a material impact on its condensed consolidated financial statements and related disclosures.

Note 2 - Acquisitions

10 unchanged sentences

Accordingly, the Trucking Assets were recorded at amounts based on Delek Holdings' historical carrying value as of the acquisition date.

The carrying value of the Trucking Assets as of the acquisition date was $ 13.3 million, consisting of $ 0.5 million of owned assets and $ 12.8 million Right of Use asset for leased assets.

The Right of Use assets offsets with an equivalent operating lease liability.

The carrying value of the Trucking Assets as of the acquisition date was $ 13.3 million, consisting of $ 0.5 million of owned assets and a $ 12.8 million right of use asset for leased assets.

The right of use asset offsets with an equivalent operating lease liability.

Prior periods have not been recast as these assets do not constitute a business in accordance with Accounting Standard Update 2017-01, Clarifying the Definition of a Business ("ASU 2017-01").

We incurred approximately $ 0.3 million of acquisition costs related to the Trucking Assets Acquisition.

We capitalized approximately $ 0.3 million of acquisition costs related to the Trucking Assets Acquisition.

Big Spring Gathering Assets Acquisition

1 unchanged sentence

The total consideration was subject to certain post-closing adjustments and was comprised of $ 100.0 million in cash and 5.0 million common units representing limited partner interest in us.

We financed the cash component of this acquisition with borrowings from the DKL Credit Facility.

We financed the cash component of this acquisition with borrowings from the DKL Credit Facility (as defined in Note 7).

Notes to Condensed Consolidated Financial Statements (Unaudited)

The Big Spring Gathering Assets are recorded in our pipelines and transportation segment and include:

11 unchanged sentences

The carrying value of the Big Spring Gathering Assets as of the acquisition date was $ 209.5 million.

Pursuant to the common control guidance, the 5.0 million units issued (which had a closing market price of $ 9.10 per unit on the transaction date) were recorded in equity at $ 109.5 million, representing the net carrying value of the Big Spring Gathering Assets purchased of $ 209.5 million less the $ 100.0 million cash

Notes to Condensed Consolidated Financial Statements (Unaudited)

consideration.

Prior periods have not been recast as these assets do not constitute a business in accordance with ASU 2017-01.

We incurred approximately $ 0.7 million of acquisition costs related to the Big Spring Gathering Assets Acquisition.

We capitalized approximately $ 0.7 million of acquisition costs related to the Big Spring Gathering Assets Acquisition.

Note 3 - Related Party Transactions

3 unchanged sentences

In November 2017, Delek Holdings opted to renew certain of these agreements for subsequent five-year terms expiring in November 2022.

In the case of our marketing agreement with Delek Holdings with respect to the Tyler Refinery, the initial term has been extended through 2026.

The current term of certain of our agreements with Delek Holdings were required to be further extended pursuant to the amended and restated DKL Credit Facility (as defined in Note 7), which extensions were effective in the fourth quarter of 2018.

The fees under each agreement are payable to us monthly by Delek Holdings or certain third parties to whom Delek Holdings has assigned certain of its rights and are generally subject to increase or decrease on July 1 of each year, by the amount of any change in various inflation-based indices, including the Federal Energy Regulatory Commission ("FERC") oil pipeline index or various iterations of the consumer price index ("CPI") and the producer price index ("PPI");

In the case of our marketing agreement with Delek Holdings with respect to the Tyler Refinery, the initial term was extended through 2026.

Effective fourth quarter of 2018, the term of certain of our agreements with Delek Holdings were further extended pursuant to the requirements of the amended and restated DKL Credit Facility (as defined in Note 7).

The fees under each agreement are payable to us monthly by Delek Holdings or certain third parties to whom Delek Holdings has assigned certain of its rights and are generally subject to increase or decrease on July 1 of each year, by the amount of any change in various inflation-based indices, including the Federal Energy Regulatory Commission (the "FERC") oil pipeline index or various iterations of the consumer price index ("CPI") and the producer price index ("PPI");

provided, however, that in no event will the fees be adjusted below the amount initially set forth in the applicable agreement.

In most circumstances, if Delek Holdings or the applicable third party assignee fails to meet or exceed the minimum volume or throughput commitment during any calendar quarter, Delek Holdings, and not any third party assignee, will be required to make a quarterly shortfall payment to us equal to the volume of the shortfall multiplied by the applicable fee, subject to certain exceptions as specified in the applicable agreement.

Carry-over of any volumes or revenue in excess of such commitment to any subsequent quarter is not permitted.

With the exception of the Big Spring T&D Agreement executed in March 2020, carry-over of any volumes or revenue in excess of such commitment to any subsequent quarter is not permitted.

Under each of these agreements, we are required to maintain the capabilities of our pipelines and terminals, such that Delek Holdings may throughput and/or store, as the case may be, specified volumes of crude oil, intermediate and refined products.

2 unchanged sentences

See our Annual Report on Form 10-K for a more complete description of our material commercial agreements and other agreements with Delek Holdings.

Effective May 1, 2020, we entered into the Trucking Assets TSA Agreement with Delek Holdings.

Under the Trucking Assets TSA Agreement, we will operate a truck based operation that transports various products throughout Arkansas, Oklahoma and Texas and gather, coordinate the pickup of, transport and deliver such products, as well as provide ancillary services as requested.

Pursuant to the Trucking Assets TSA Agreement, Delek Holdings has committed to minimum revenue of $ 39.0 million per year.

The initial term of the Trucking Assets TSA Agreement is 10 years, and thereafter Delek Holdings has the option to extend the Trucking Assets TSA Agreement for two additional two-year terms.

Effective March 31, 2020, we entered into the Big Spring T&D Agreement with Delek Holdings.

Under the Big Spring T&D Agreement, we will operate and maintain the Big Spring Gathering Assets connecting Delek Holdings' interests in and to certain crude oil with the Partnership's Big Spring, Texas terminal and provide gathering, transportation and other related services with respect to any and all crude produced from Delek Holdings' and certain other producers’ respective interests for delivery at the Big Spring Terminal.

Pursuant to the Big Spring T&D Agreement, Delek Holdings has committed to ship 120,000 bpd on the Big Spring Gathering Assets and 50,000 bpd to a redelivery point in Howard County, Texas (collectively, the Minimum Volume Commitments “MVCs”).

Pursuant to the Big Spring T&D Agreement, we also agreed to spend up to $ 33.8 million over three years to connect additional receipt points and, in connection with such expenditures, the MVCs will increase to provide the Partnership a 12.5 % return on the actual costs directly incurred and paid by the Partnership pursuant to the terms set forth in the Big Spring T&D Agreement.

The initial term of the Big Spring T&D Agreement is 10 years, and thereafter Delek Holdings has the option to extend the Big Spring T&D Agreement for two additional five-year terms.

Following the initial term and any such extensions, the Big Spring T&D Agreement will continue on a year-to-year basis unless terminated by either party upon 90 days’ written notice.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Other Agreements with Delek Holdings

1 unchanged sentence

Omnibus Agreement

Notes to Condensed Consolidated Financial Statements (Unaudited)

The Partnership entered into an omnibus agreement with Delek Holdings, Delek Logistics Operating, LLC, Lion Oil Company and certain of the Partnership's and Delek Holdings' other subsidiaries on November 7, 2012, which has been amended from time to time in connection with acquisitions from Delek Holdings (collectively, as amended, the "Omnibus Agreement").

The Omnibus Agreement governs the provision of certain operational services and reimbursement obligations, among other matters, between the Partnership and Delek Holdings, and obligates us to pay an annual fee of $ 4.7 million to Delek Holdings for its provision of centralized corporate services to the Partnership.

Pursuant to the terms of the Omnibus Agreement, we were reimbursed by Delek Holdings for certain capital expenditures of a nominal amount and $ 0.6 million during the three and nine months ended September 30, 2020, respectively, and $ 0.8 million and $ 2.3 million during the three and nine months ended September 30, 2019, respectively.

Pursuant to the terms of the Omnibus Agreement, we are reimbursed by Delek Holdings for certain capital expenditures.

There were no reimbursements by Delek Holdings during the three months ended March 31, 2021 During the three months ended March 31, 2020, we were reimbursed by Delek Holdings for certain capital expenditures in the amount of $ 0.6 million.

These amounts are recorded in other long-term liabilities and are amortized to revenue over the life of the underlying revenue agreement corresponding to the asset.

Ad ditionally, we are reimbursed or indemnified, as the case may be, for costs incurred in excess of certain amounts related to certain asset failures, pursuant to the terms of the Omnibus Agreeme nt.

As of September 30, 2020, we have recorded a nominal receivable from related parties for these matters for which we expect to be reimbursed.

As of March 31, 2021, we have recorded a nominal receivable from related parties for these matters for which we expect to be reimbursed.

These reimbursements are recorded as reductions to operating expense.

We were reimbursed a no minal amount and $ 0.1 million for these matters during the three and nine months ended September 30, 2020, respectively, and $ 0.3 million and $ 6.0 million during the three and nine months ended September 30, 2019, respectively.

We were reimbursed a nominal amount for these matters during the both three months ended March 31, 2021 and 2020.

Other Transactions

The Partnership manages a long-term capital project on behalf of Delek Holdings pursuant to a construction management and operating agreement (the "DPG Management Agreement") for the construction of a 250-mile gathering system in the Permian Basin.

The majority of the gathering system has been constructed, however, additional costs pertaining to a pipeline connection that was not contributed to the Partnership continue to be incurred and are still subject to the terms of the DPG Management Agreement.

The majority of the gathering system has been constructed, however, additional costs pertaining to a pipeline connection that was not acquired by the Partnership continue to be incurred and are still subject to the terms of the DPG Management Agreement.

The Partnership is also considered the operator for the project and is responsible for oversight of the project design, procurement and construction of project segments and provides other related services.

1 unchanged sentence

The agreement extends through December 2022.

Total fees paid to the Partnership were $ 0.4 million and $ 1.6 million for the three and nine months ended September 30, 2020, respectively, and $ 0.8 million and $ 3.6 million for the three and nine months ended September 30, 2019, respectively, which are recorded in affiliate revenue in our condensed consolidated statements of income.

Total fees paid to the Partnership were $ 0.4 million and $ 0.9 million for the three months ended March 31, 2021 and 2020, respectively, which are recorded in affiliate revenue in our condensed consolidated statements of income.

Additionally, the Partnership incurs the costs in connection with the construction of the assets and is subsequently reimbursed by Delek Holdings.

1 unchanged sentence

Unregistered Sale of Equity Securities

In connection with the Partnership's issuance of the new units ("Additional Units") under the Big Spring Gathering Assets Acquisition and in accordance with the Partnership's First Amended and Restated Agreement of Limited Partnership, as amended (the"Partnership Agreement"), the Partnership issued general partner units to the general partner in an amount necessary to maintain its 2% general partner interest as defined in the Partnership Agreement.

The sale and issuance of the Additional Units and such general partner units in connection with the Big Spring Gathering Assets Acquisition is exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.

Additionally, in March 2020, Delek Marketing & Supply, LLC ("Delek Marketing") repurchased 451,822 units from an unaffiliated investor pursuant to a Common Unit Purchase Agreement between Delek Marketing and such investor.

In connection with the Partnership's issuance of the common limited partner units under the Big Spring Gathering Assets Acquisition and in accordance with the Partnership's First Amended and Restated Agreement of Limited Partnership, as amended (the "Prior Partnership Agreement", as amended and restated by the Partnership's Second Amended and Restated Agreement of Limited Partnership (the "Partnership Agreement")), the Partnership issued general partner units to the general partner in an amount necessary to maintain its 2% general partner interest as defined in the Prior Partnership Agreement.

The sale and issuance of the Additional Units (as defined below) and such general partner units in connection with the Big Spring Gathering Assets Acquisition is exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.

Additionally, in March 2020, Delek Marketing & Supply, LLC ("Delek Marketing"), a wholly owned subsidiary of Delek Holdings, repurchased 451,822 common limited partner units from an unaffiliated investor pursuant to a Common Unit Purchase Agreement between Delek Marketing and such investor.

The purchase price of the units amounted to approximately $ 5.0 million.

As a result of the transaction, Delek Holdings' ownership in our outstanding limited partner units increased to 64.5 % from 62.6 %.

Delek Holdings' ownership in our common limited partner units was further increased to 70.5 % as a result of the issuance of 5.0 million Additional Units in connection with the Big Spring Gathering Assets Acquisition described above.

In August 2020, Delek Holdings ownership in our common limited partner units was further increased to approximately 80.0 % in connection with the IDR Restructuring Transaction, where the Partnership issued 14.0 million Additional Units to Delek Holdings.

Delek Holdings' ownership in our common limited partner units was further increased to 70.5 % as a result of the issuance of 5.0 million common limited partner units (the “Additional Units”) in connection with the Big Spring Gathering Assets Acquisition described above.

In August 2020, Delek Holdings' ownership in our common limited partner units was further increased to approximately 80.0 % in connection with the IDR Restructuring Transaction, where the Partnership issued 14.0 million of the Partnership's newly issued common limited partner units to Delek Holdings.

Amendment No.

2 unchanged sentences

2 (“Amendment No.

2”) to the Partnership Agreement, effective upon adoption.

2”) to the Prior Partnership Agreement, effective upon adoption.

Amendment No.

2 amended the Partnership Agreement to provide for a waiver of distributions in respect of the Incentive Distribution Rights ("IDRs") for General Partner Additional Units ("GP Additional Units") associated with the 5.0 million Additional Units for at least two years, through at least the distribution for the quarter ending March 31, 2022 ( the “IDR Waiver”).

2 amended the Prior Partnership Agreement to provide for a waiver of distributions in respect of the IDRs for General Partner Additional Units ("GP

Notes to Condensed Consolidated Financial Statements (Unaudited)

Additional Units") associated with the 5.0 million Additional Units for at least two years, through at least the distribution for the quarter ending March 31, 2022 ( the “IDR Waiver”).

The IDR Waiver essentially reduced the distribution made to the holders of the IDRs during this period, as the holders would not receive a share of the distribution made on the GP Additional Units.

1 unchanged sentence

Conversion of GP Economic Interest and Elimination of IDRs

Notes to Condensed Consolidated Financial Statements (Unaudited)

On August 13, 2020, we closed the transaction contemplated by a definitive exchange agreement with Delek Holdings to eliminate all of the IDRs held by the general partner and convert the 2 % general partner economic interest into a non-economic general partner interest, all in exchange for 14.0 million of the Partnership's newly issued common limited partner units and $ 45.0 million cash.

Contemporaneously, Delek Holdings purchased a 5.2 % ownership interest in our general partner from certain affiliates who were also members of our general partner's management and board of directors.

Delek Holdings now owns 100 % interest in the general partner and owns approximately 34.7 million common limited partner units, representing approximately 80 % of the Partnership's outstanding common limited partner units.

To implement the transaction, our Partnership Agreement was amended and restated.

Delek Holdings now owns a 100 % interest in the general partner and owns approximately 34.7 million common limited partner units, representing approximately 80 % of the Partnership's outstanding common limited partner units.

To implement the transaction, our Prior Partnership Agreement was amended and restated.

Summary of Transactions

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A summary of revenue, purchases from affiliates and expense transactions with Delek Holdings and its affiliates are as follows (in thousands):

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

2020 2019 2020 2019

Three Months Ended March 31,

Revenues $ 96,194 $ 106,699

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Quarterly Cash Distributions

Prior to August 13, 2020, our common and general partner unitholders and the holders of IDRs were entitled to receive quarterly distributions of available cash as determined by the board of directors of our general partner in accordance with the terms and provisions of our Partnership Agreement.

Pursuant to the IDR Restructuring Transaction on August 13, 2020, the general partner will no longer receive any cash distributions.

In February, May and August 2020, we paid quarterly cash distributions of $ 30.6 million, $ 30.9 million and $ 36.0 million, respectively, of which $ 22.6 million, $ 23.2 million and $ 28.1 million, respectively, were paid to Delek Holdings' limited partner interest and our general partner.

In February, May and August 2019, we paid quarterly cash distributions of $ 26.9 million and $ 27.4 million and $ 28.9 million, respectively, of which $ 19.6 million, $ 20.0 million and $ 21.2 million were paid to Delek Holdings and our general partner.

On October 27, 2020, our board of directors declared a quarterly cash distribution totaling $ 39.3 million, based on the available cash as of the date of determination for the end of the third quarter of 2020, payable on November 12, 2020, of which $ 31.4 million is expected to be paid to Delek Holdings.

In February 2021, we paid quarterly cash distributions of $ 39.5 million, of which $ 31.6 million were paid to Delek Holdings.

In February 2020, we paid quarterly cash distributions of $ 30.6 million, of which $ 22.6 million were paid to Delek Holdings and our general partner.

On April 29, 2021, our board of directors declared a quarterly cash distribution totaling $ 40.0 million, based on the available cash as of the date of determination for the end of the first quarter of 2021, payable on May 14, 2021, of which $ 32.0 million is expected to be paid to Delek Holdings.

Note 4 - Revenues

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and for wholesale marketing in the West Texas area.

A significant portion of our revenue is derived from long-term commercial agreements with Delek Holdings, which provide for annual fee adjustments for increases or decreases in the CPI, PPI or FERC index (refer to Note 3 for a more detailed description of these agreements).

A significant portion of our revenue is derived from long-term commercial agreements with Delek Holdings, which provide for annual fee adjustments for increases or decreases in the CPI, PPI or the FERC index (refer to Note 3 for a more detailed description of these agreements).

In addition to the services we provide to Delek Holdings, we also generate substantial revenue from crude oil, intermediate and refined products transportation services for, and terminalling and marketing services to, third parties primarily in Texas, New Mexico, Tennessee and Arkansas.

Certain of these services are provided pursuant to contractual agreements with third parties.

Certain of these services

Notes to Condensed Consolidated Financial Statements (Unaudited)

are provided pursuant to contractual agreements with third parties.

Payment terms require customers to pay shortly after delivery and do not contain significant financing components.

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Therefore, the combined component is accounted for under the applicable lease accounting guidance.

Of our $ 467.5 million net property, plant, and equipment balance as of September 30, 2020, $ 394.6 million is subject to operating leases under our commercial agreements.

Of our $ 462.1 million net property, plant, and equipment balance as of March 31, 2021, $ 339.2 million is subject to operating leases under our commercial agreements.

These agreements do not include options for the lessee to purchase our leasing equipment, nor do they include any material residual value guarantees or material restrictive covenants.

The following table represents a disaggregation of revenue for each reportable segment for the periods indicated (in thousands):

Three Months Ended September 30, 2020

Three Months Ended March 31, 2021

Pipelines and Transportation Wholesale Marketing and Terminalling Consolidated

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Service Revenue - Affiliate (1)

Product Revenue - Third Party — 43,660 43,660

Product Revenue - Affiliate — 5,844 5,844

Lease Revenue - Affiliate (1)

1,224 8,082 9,306

Total Revenue $ 71,479 $ 70,789 $ 142,268

(1) Net of $ 1.8 million of amortization expense for the three months ended September 30, 2020, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.

Three Months Ended September 30, 2019

Pipelines and Transportation Wholesale Marketing and Terminalling Consolidated

Service Revenue - Third Party $ 5,281 $ 221 $ 5,502

Service Revenue - Affiliate 2,856 9,578 12,434

Product Revenue - Third Party — 54,710 54,710

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Lease Revenue - Affiliate 61,824 8,677 70,501

36,448 11,260 47,708

Total Revenue $ 64,975 $ 87,938 $ 152,913

(1) Net of $ 1.8 million of amortization expense for the three months ended September 30, 2019, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.

Nine Months Ended September 30, 2020

(1) Net of $ 1.8 million of amortization expense for the three months ended March 31, 2021, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.

Three Months Ended March 31, 2020

Pipelines and Transportation Wholesale Marketing and Terminalling Consolidated

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Service Revenue - Affiliate (1)

Product Revenue - Third Party — 118,478 118,478

Product Revenue - Affiliate — 64,067 64,067

Lease Revenue - Affiliate (1)

4,888 7,982 12,870

Total Revenue $ 182,872 $ 240,434 $ 423,306

(1) Net of $ 5.4 million of amortization expense for the nine months ended September 30, 2020, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.

Nine Months Ended September 30, 2019

Pipelines and Transportation Wholesale Marketing and Terminalling Consolidated

Service Revenue - Third Party $ 16,733 $ 525 $ 17,258

Service Revenue - Affiliate 8,171 26,438 34,609

Product Revenue - Third Party — 47,046 47,046

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Lease Revenue - Affiliate 33,614 8,712 42,326

104,523 29,320 133,843

Total Revenue $ 47,967 $ 115,434 $ 163,401

(1) Net of $ 5.4 million of amortization expense for the nine months ended September 30, 2019, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.

As of September 30, 2020, we expect to recognize $ 1.6 billion in lease revenues related to our unfulfilled performance obligations pertaining to the minimum volume commitments and capacity utilization under the non-cancelable terms of our commercial agreements with Delek Holdings.

(1) Net of $ 1.8 million of amortization expense for the three months ended March 31, 2020, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment .

As of March 31, 2021, we expect to recognize $ 1.5 billion in lease revenues related to our unfulfilled performance obligations pertaining to the minimum volume commitments and capacity utilization under the non-cancelable terms of our commercial agreements with Delek Holdings.

Most of these agreements have an initial term ranging from five to ten years , which may be extended for various renewal terms.

We disclose information about remaining performance obligations that have original expected durations of greater than one year .

Our unfulfilled performance obligations as of September 30, 2020 were as follows (in thousands):

Our unfulfilled performance obligations as of March 31, 2021 were as follows (in thousands):

Remainder of 2021 202,154

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Total expected revenue on remaining performance obligations $ 1,479,592

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 5 - Net Income Per Unit

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Basic net income per unit applicable to limited partners was computed by dividing limited partners’ interest in net income, after deducting our general partner’s 2 % interest and IDRs, by the weighted-average number of outstanding common units.

Our net income was allocated to our general partner and limited partners in accordance with their respective partnership percentages after giving effect to priority income allocations for IDRs, which are held by our general partner pursuant to our Partnership Agreement.

Our net income was allocated to our general partner and limited partners in accordance with their respective partnership percentages after giving effect to priority income allocations for IDRs, which were held by our general partner pursuant to our Prior Partnership Agreement.

Earnings in excess of distributions were allocated to our general partner and limited partners based on their respective ownership interests.

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As discussed in Note 3 - Related Party Transactions, pursuant to Amendment No.

2 to the Partnership Agreement, an agreement was reached for a waiver of distributions in respect of the IDRs for the GP Additional Units associated with the 5.0 million Additional Units issued in connection with the Big Spring Gathering Assets Acquisition for at least two years, through at least the distribution for the quarter ending March 31, 2022.

2 to the Prior Partnership Agreement, an agreement was reached for a waiver of distributions in respect of the IDRs for the GP Additional Units associated with the 5.0 million Additional Units issued in connection with the Big Spring Gathering Assets Acquisition for at least two years, through at least the distribution for the quarter ending March 31, 2022.

The IDR Waiver essentially reduced the distribution made to the holders of the IDRs during this period, as the holders would not receive a share of the distribution made on the GP Additional Units.

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Refer to Note 3 for additional details.

The IDRs were eliminated in the IDR Restructuring Transaction on August 13, 2020.

Subsequently, the IDRs were eliminated in the IDR Restructuring Transaction on August 13, 2020.

Diluted net income per unit applicable to common limited partners includes the effects of potentially dilutive units on our common units.

As of September 30, 2020, the only potentially dilutive units outstanding consist of unvested phantom units.

As of March 31, 2021, the only potentially dilutive units outstanding consist of unvested phantom units.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Our distributions earned with respect to a given period are declared subsequent to quarter end.

Therefore, the table below represents total cash distributions applicable to the period in which the distributions are earned.

The expected date of distribution for the distributions earned during the period ended September 30, 2020 is November 12, 2020.

The expected date of distribution for the distributions earned during the period ended March 31, 2021 is May 14, 2021.

Payments made to our unitholders are determined in relation to actual distributions declared and are not based on the net income allocations used in the calculation of net income per unit.

The calculation of net income per unit is as follows (dollars in thousands, except units and per unit amounts):

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

2020 2019 2020 2019

Three Months Ended March 31,

Net income attributable to partners $ 36,267 $ 27,796

General partner's distribution (including IDRs) (1)

— 8,892 18,618 24,475

Limited partners' distribution 39,968 21,739

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Distributions (including IDRs) (1)

$ — $ 8,892 $ 18,618 $ 24,475

Allocation of earnings in excess (deficit) of distributions — ( 62 )

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See Note 8 for further discussion related to IDRs.

(2) There were no outstanding common units excluded from the diluted earnings per unit calculation for the three and nine months ended September 30, 2020 and 2019.

(2) There were no outstanding common units excluded from the diluted earnings per unit calculation for the three months ended March 31, 2021 and 2020.

Note 6 - Inventory

Inventories consisted of $ 1.7 million and $ 12.6 million of refined petroleum products as of September 30, 2020 and December 31, 2019, each of which are net of lower of cost or net realizable value reserve of a nominal amount.

Inventories consisted of $ 1.9 million and $ 3.1 million of refined petroleum products as of March 31, 2021 and December 31, 2020, each of which are net of lower of cost or net realizable value reserve of a nominal amount.

Inventory is stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis.

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The DKL Credit Facility also contains an accordion feature whereby the Partnership can increase the size of the credit facility to an aggregate of $ 1.0 billion, subject to receiving increased or new commitments from lenders and the satisfaction of certain other conditions precedent.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The obligations under the DKL Credit Facility remain secured by first priority liens on substantially all of the Partnership's and its subsidiaries' tangible and intangible assets.

Additionally, Delek Marketing, a subsidiary of Delek Holdings, had provided a limited guaranty of the Partnership's obligations under the DKL Credit Facility.

Delek Marketing's guaranty was (i) limited to an amount equal to the principal amount, plus unpaid and accrued interest, of a promissory note made by Delek Holdings in favor of Delek Marketing (the "Holdings Note") and (ii) secured by Delek Marketing's pledge of the Holdings Note to the lenders under the DKL Credit Facility.

Effective March 30, 2020, Delek Marketing's limited guaranty and pledge of the Holdings Note was terminated pursuant to a guaranty and pledge release approved by the required lenders under the DKL Credit Facility.

Notes to Condensed Consolidated Financial Statements (Unaudited)

In connection with the IDR Restructuring Transaction, the Partnership entered into a First Amendment to the DKL Credit Facility (the "First Amendment") which, among other things, permitted the exchange of the IDRs and the general partner interest in the Partnership for the non-economic general partner interest, the newly issued limited partner interests in the Partnership, plus $ 45.0 million in cash.

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dollars bear interest at either a U.S.

dollar prime rate , plus an applicable margin, or the London Interbank Offered Rate (" LIBOR "), plus an applicable margin, at the election of the borrowers.

dollar prime rate , plus an applicable margin, or the LIBOR , plus an applicable margin, at the election of the borrowers.

Borrowings denominated in Canadian dollars bear interest at either a Canadian dollar prime rate , plus an applicable margin, or the Canadian Dealer Offered Rate , plus an applicable margin, at the election of the borrowers.

The applicable margin in each case and the fee payable for any unused revolving commitments vary based upon the Partnership's most recent total leverage ratio calculation delivered to the lenders, as called for and defined under the terms of the DKL Credit Facility.

At September 30, 2020, the weighted average interest rate for our borrowings under the facility was approximately 2.69 %.

At March 31, 2021, the weighted average interest rate for our borrowings under the facility was approximately 2.45 %.

Additionally, the DKL Credit Facility requires us to pay a leverage ratio dependent quarterly fee on the average unused revolving commitment.

As of September 30, 2020, this fee was 0.40 % per year.

As of September 30, 2020, we had $ 760.7 million of outstanding borrowings under the DKL Credit Facility, with no letters of credit in place.

Unused credit commitments under the DKL Credit Facility as of September 30, 2020, were $ 89.3 million.

As of March 31, 2021, this fee was 0.35 % per year.

As of March 31, 2021, we had $ 737.5 million of outstanding borrowings under the DKL Credit Facility, with no letters of credit in place.

Unused credit commitments under the DKL Credit Facility as of March 31, 2021 were $ 112.5 million.

6.750 % Senior Notes Due 2025

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Interest on the 2025 Notes is payable semi-annually in arrears on each May 15 and November 15, commencing November 15, 2017.

Beginning on May 15, 2020, th e Issuers may, subject to certain conditions and limitations, redeem all or part of the 2025 Notes at a redemption price of 105.063 % of the redeemed principal for the twelve-month period beginning on May 15, 2020, 103.375 % for the twelve-month period beginning on May 15, 2021, 101.688 % for the twelve-month period beginning on May 15, 2022 and 100.00 % beginning on May 15, 2023 and thereafter, plus accrued and unpaid interest, if any.

Th e Issuers may, subject to certain conditions and limitations, redeem all or part of the 2025 Notes at a redemption price of 105.063 % of the redeemed principal during the twelve-month period beginning on May 15, 2020, 103.375 % for the twelve-month period beginning on May 15, 2021, 101.688 % for the twelve-month period beginning on May 15, 2022 and 100.00 % beginning on May 15, 2023 and thereafter, plus accrued and unpaid interest, if any.

In the event of a change of control, accompanied or followed by a ratings downgrade within a certain period of time, subject to certain conditions and limitations, the Issuers will be obligated to make an offer for the purchase of the 2025 Notes from holders at a price equal to 101 % of the principal amount thereof, plus accrued and unpaid interest.

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The terms of the exchange notes that were issued in May 2018 as a result of the exchange (also referred to as the "2025 Notes") are substantially identical to the terms of the original 2025 Notes.

As of September 30, 2020, we had $ 250.0 million in outstanding principal amount of the 2025 Notes.

As of September 30, 2020, the effective interest rate related to the 2025 Notes was approximately 7.22 %.

Outstanding borrowings under the 2025 Notes are net of deferred financing costs and debt discount of $ 3.5 million and $ 1.1 million, respectively, as of September 30, 2020, and $ 4.0 million and $ 1.3 million, respectively, as of December 31, 2019.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of March 31, 2021, we had $ 250.0 million in outstanding principal amount of the 2025 Notes.

As of March 31, 2021, the effective interest rate related to the 2025 Notes was approximately 7.25 %.

Outstanding borrowings under the 2025 Notes are net of deferred financing costs and debt discount of $ 3.1 million and $ 1.0 million, respectively, as of March 31, 2021, and $ 3.3 million and $ 1.0 million, respectively, as of December 31, 2020.

Note 8 - Equity

We had approximately 8,687,371 common limited partner units held by the public outstanding as of September 30, 2020.

Additionally, as of September 30, 2020, Delek Holdings owned an approximately 80.0 % interest in us, consisting of 34,745,868 common limited partner units.

Effective August 13, 2020, the Partnership closed on the IDR Restructuring Transaction, contemporaneous with this transaction, Delek Holdings purchased a 5.2 % ownership interest in our general partner from certain affiliates, who were also members of our general partner's management and board of directors, at fair market value.

We had 8,697,468 common limited partner units held by the public outstanding as of March 31, 2021.

Additionally, as of March 31, 2021, Delek Holdings owned an 80.0 % limited partner interest in us, consisting of 34,745,868 common limited partner units.

Effective August 13, 2020, the Partnership closed on the IDR Restructuring Transaction, and contemporaneous with this transaction, Delek Holdings purchased a 5.2 % ownership interest in our general partner from certain affiliates, who were also members of our general partner's management and board of directors, at fair market value.

Delek Holdings now owns 100 % of the outstanding ownership interest in our general partner.

As part of this transaction, we expensed approximately $ 1.1 million of transaction costs.

In August 2020, we filed a shelf registration statement, which subsequently became effective, with the U.S.

Securities and Exchange Commission for the proposed re-sale or other disposition from time to time by Delek Holdings of up to 14.0 million common limited partner units representing limited partner interests in the Partnership.

We will not sell any securities under this shelf registration statement and we will not receive any proceeds from the sale of securities by Delek Holdings.

In August 2020, we filed a shelf registration statement with the SEC, which subsequently became effective, for the proposed re-sale or other disposition from time to time by Delek Holdings of up to 14.0 million of our common limited partner units.

As of March 31, 2021, we

Notes to Condensed Consolidated Financial Statements (Unaudited)

had not sold any securities under this shelf registration statement and we will not receive any proceeds from the sale of securities by Delek Holdings.

Equity Activity

The table below summarizes the changes in the number of units outstanding from December 31, 2019 through September 30, 2020.

Common - Public Common - Delek Holdings General Partner Total

Balance at December 31, 2019 9,131,579 15,294,046 498,482 24,924,107

General partner units issued to maintain 2% interest — — 102,196 102,196

Unit-based compensation awards (1)

7,614 — — 7,614

Big Spring Gathering Assets Acquisition equity issuance — 5,000,000 — 5,000,000

Delek Holdings unit purchases from public ( 451,822 ) 451,822 — —

General Partner units converted to non-economic general partner interest — — ( 600,678 ) ( 600,678 )

Common limited partner units issued in IDR Restructuring Transaction — 14,000,000 — 14,000,000

Balance at September 30, 2020 8,687,371 34,745,868 — 43,433,239

(1) Unit-based compensation awards are presented net of 481 units withheld for taxes as of September 30, 2020.

There were no changes in the number of common limited partner units outstanding from December 31, 2020 through March 31, 2021.

Issuance of Additional Securities

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The following table presents the allocation of the general partner's interest in net income (in thousands, except percentage of ownership interest):

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

2020 2019 2020 2019

Three Months Ended March 31,

Net income attributable to partners $ 36,267 $ 27,796

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Total general partner's interest in net income $ — $ 9,077

Notes to Condensed Consolidated Financial Statements (Unaudited)

Incentive Distribution Rights ("IDRs")

Effective August 13, 2020, the Partnership closed on the IDR Restructuring Transaction and the general partner no longer receives any cash distributions.

Prior to August 13, 2020, our general partner was entitled to 2.0 % of all quarterly distributions that we make prior to our liquidation.

Prior to August 13, 2020, our general partner was entitled to 2.0 % of all quarterly distributions.

Our general partner had the right, but not the obligation, to contribute up to a proportionate amount of capital to us to maintain its current general partner interest.

Our general partner held IDRs that entitled it to receive increasing percentages, up to a maximum of 48.0 %, of the cash we distributed from operating surplus (as defined in our Partnership Agreement) in excess of 0.43125 per unit per quarter.

Our general partner held IDRs that entitled it to receive increasing percentages, up to a maximum of 48.0 %, of the cash we distributed from operating surplus (as defined in our Prior Partnership Agreement) in excess of $ 0.43125 per unit per quarter.

The maximum distribution was 48.0 % and did not include any distributions that our general partner or its affiliates may have received on common or general partner units that it owns.

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Pursuant to Amendment No.

2 to the Partnership Agreement, prior to the IDR Restructuring Transaction, an agreement was reached for a waiver of distributions in respect of the IDRs associated with the 5.0 million Additional Units for at least two years, through at least the distribution for the quarter ending March 31, 2022 (the "IDR Waiver").

2 to the Prior Partnership Agreement, prior to the IDR Restructuring Transaction, an agreement was reached for a waiver of distributions in respect of the IDRs associated with the 5.0 million Additional Units for at least two years, through at least the distribution for the quarter ending March 31, 2022 (the "IDR Waiver").

The IDR Waiver essentially reduced the distribution made to the holders of the IDRs during this period, as the holders would not receive a share of the distribution made on the Additional Units.

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Our Partnership Agreement sets forth the calculation to be used to determine the amount and priority of available cash distributions that our limited partner unitholders will receive.

The cash distributions for periods before August 13, 2020 include distributions to the 2% general partner interest which was converted to non-economic general partner interest and IDRs which were permanently eliminated.

The cash distributions for periods before August 13, 2020 include distributions to the 2% general partner interest which was converted to a non-economic general partner interest and IDRs which were permanently eliminated.

Our distributions earned with respect to a given period are declared subsequent to quarter end.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The table below summarizes the quarterly distributions related to our quarterly financial results:

Quarter Ended Total Quarterly Distribution Per Limited Partner Unit Total Quarterly Distribution Per Limited Partner Unit, Annualized Total Cash Distribution, (in thousands) Date of Distribution Unitholders Record Date

September 30, 2019 $ 0.880 $ 3.52 $ 30,379 November 12, 2019 November 4, 2019

December 31, 2019 $ 0.885 $ 3.54 $ 30,634 February 12, 2020 February 4, 2020

Quarter Ended Total Quarterly Distribution Per Limited Partner Unit Total Cash Distribution

(in thousands) Date of Distribution Unitholders Record Date

March 31, 2020 $ 0.890 $ 30,878 May 12, 2020 May 5, 2020

June 30, 2020 $ 0.900 $ 35,969 August 12, 2020 August 7, 2020

September 30, 2020 $ 0.905 $ 3.62 $ 39,308 November 12, 2020 (1)

November 6, 2020

September 30, 2020 $ 0.905 $ 39,308 November 12, 2020 November 6, 2020

December 31, 2020 $ 0.910 $ 39,533 February 9, 2021 February 2, 2021

March 31, 2021 $ 0.920 $ 39,968 May 14, 2021 (1)

(1) Expected date of distribution.

The allocations of total quarterly cash distributions made to limited partners for the three and nine months ended September 30, 2020 and 2019 are set forth in the table below.

The allocations of total quarterly cash distributions made to limited partners for the three months ended March 31, 2021 and 2020 are set forth in the table below.

Distributions earned with respect to a given period are declared subsequent to quarter end.

Therefore, the table below presents total cash distributions applicable to the period in which the distributions are earned (in thousands, except per unit amounts):

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

2020 2019 2020 2019

Three Months Ended March 31,

General partner's distributions:

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The LTIP is administered by the Conflicts Committee of the board of directors.

Equity-based compensation expense is included in general and administrative expenses in the accompanying condensed consolidated statements of income and comprehensive income and is immaterial for the three and nine months ended September 30, 2020 and 2019.

Note 10 - Equity Method Investments

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We contributed $ 3.5 million related to such expansion project in May 2019.

During the nine months ended September 30, 2020, we made additional capital contributions totaling $ 11.8 million based on capital calls received.

During the three months ended March 31, 2021, we made additional capital contributions totaling $ 1.4 million based on capital calls received.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Summarized unaudited financial information for Red River on a 100% basis is shown below (in thousands):

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Current Assets $ 8,441 $ 13,488

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Current liabilities $ 10,093 $ 7,789

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

2020 2019 2020 2019

Three Months Ended March 31,

Revenues $ 9,043 $ 10,096

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Combined summarized unaudited financial information for these two equity method investees on a 100% basis is shown below (in thousands):

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Current assets $ 22,879 $ 20,763

1 unchanged sentence

Current liabilities $ 4,995 $ 1,496

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

2020 2019 2020 2019

Three Months Ended March 31,

Revenues $ 9,626 $ 15,447

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The Partnership's investments in these three entities were financed through a combination of cash from operations and borrowings under the DKL Credit Facility.

As of September 30, 2020 and December 31, 2019, the Partnership's investment balance in these joint ventures was $ 255.4 million and $ 247.0 million, respectively.

As of March 31, 2021 and December 31, 2020, the Partnership's investment balance in these joint ventures was $ 251.4 million and $ 253.7 million, respectively.

We do not consolidate any part of the assets or liabilities or operating results of our equity method investees.

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Our investment in these joint ventures is reflected in our pipelines and transportation segment.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 11 - Segment Data

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(i) pipelines and transportation and (ii) wholesale marketing and terminalling:

• The assets and investments reported in the pipelines and transportation segment provide crude oil gathering and crude oil, intermediate and refined products transportation and storage services to Delek Holdings' refining operations and independent third parties.

• The wholesale marketing and terminalling segment provides wholesale marketing and terminalling services to Delek Holdings' refining operations and independent third parties.

• The assets and investments reported in the pipeline and transportation segment provide crude oil gathering and crude oil, intermediate and refined products transportation and storage services to Delek Holdings' refining operations and independent third parties.

• The wholesale marketing and terminalling segment provides marketing services for the refined products output of the Delek Holdings' refineries, engages in wholesale activity at our terminals and terminals owned by third parties, whereby we purchase light product for sale and exchange to third parties, and provides terminalling services at our refined products terminals to independent third parties and Delek Holdings.

Our operating segments adhere to the accounting policies used for our consolidated financial statements.

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Segment contribution margin is defined as net revenues less cost of materials and other and operating expenses, excluding depreciation and amortization.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following is a summary of business segment operating performance as measured by contribution margin for the periods indicated (in thousands):

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

2020 2019 2020 2019

The following is a summary of business segment operating performance as measured by contribution margin for the periods indicated:

(in thousands) Three Months Ended March 31,

Pipelines and Transportation

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See Note 3 for additional information.

The following table summarizes the total assets for each segment as of September 30, 2020 and December 31, 2019 (in thousands):

September 30, 2020 December 31, 2019

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table summarizes the total assets for each segment as of March 31, 2021 and December 31, 2020 (in thousands).

Assets for each segment include property, plant and equipment, equity method investments, intangible assets and inventory.

March 31, 2021 December 31, 2020

Pipelines and transportation $ 705,262 $ 723,317

Wholesale marketing and terminalling 217,384 206,918

Other 26,224 26,182

Total assets $ 948,870 $ 956,417

Notes to Condensed Consolidated Financial Statements (Unaudited)

Property, plant and equipment and accumulated depreciation as of September 30, 2020 and depreciation expense by reporting segment for the three and nine months ended September 30, 2020 were as follows (in thousands):

Property, plant and equipment and accumulated depreciation as of March 31, 2021 and depreciation expense by reporting segment for the three months ended March 31, 2021 were as follows (in thousands):

Pipelines and Transportation Wholesale Marketing and Terminalling Consolidated

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Property, plant and equipment, net $ 401,801 $ 60,256 $ 462,057

$ 402,241 $ 65,260 $ 467,501

Depreciation expense for the three months ended September 30, 2020 $ 7,738 $ 1,721 $ 9,459

Depreciation expense for the nine months ended September 30, 2020 $ 19,364 $ 5,088 $ 24,452

(1) Segment assets data as of September 30, 2020 includes $ 118.2 million adjustment to re-classify property, plant and equipment between Wholesale Marketing and Terminalling segment and Pipelines and Transportation segment to record a correction that was not reflected in the November 4, 2020 Earnings Release.

Such amounts are not considered material to the financial statements and had no impact to the consolidated assets, operating income, segment contribution or net income.

Depreciation expense for the three months ended March 31, 2021 $ 8,827 $ 1,912 $ 10,739

In accordance with ASC 360, Property, Plant & Equipment , we evaluate the realizability of property, plant and equipment as events occur that might indicate potential impairment.

There were no indicators of impairment of our property, plant and equipment as of September 30, 2020.

There were no indicators of impairment of our property, plant and equipment as of March 31, 2021.

Note 12 - Income Taxes

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We believe that our current operations are in substantial compliance with existing environmental and safety requirements.

However, there have been and we expect that there will continue to be ongoing discussions about environmental and safety matters between us and federal and state authorities, including notices of violations, citations and other enforcement actions, some of which have resulted or may result in changes to operating procedures and in capital expenditures.

While it is often difficult to quantify future environmental or safety

However, there

Notes to Condensed Consolidated Financial Statements (Unaudited)

related expenditures, we anticipate that continuing capital investments and changes in operating procedures will be required to comply with existing and new requirements, as well as evolving interpretations and more strict enforcement of existing laws and regulations.

have been and we expect that there will continue to be ongoing discussions about environmental and safety matters between us and federal and state authorities, including notices of violations, citations and other enforcement actions, some of which have resulted or may result in changes to operating procedures and in capital expenditures.

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 to comply with existing and new requirements, as well as evolving interpretations and more strict enforcement of existing laws and regulations.

Releases of hydrocarbons or hazardous substances into the environment could, to the extent the event is not insured, or is not a reimbursable event under the Omnibus Agreement, subject us to substantial expenses, including costs to respond to, contain and remediate a release, to comply with applicable laws and regulations and to resolve claims by third parties for personal injury, property damage or natural resources damages.

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We have experienced several crude oil and other releases involving our assets.

There were no material releases that occurred during the nine months ended September 30, 2020, and there were five releases that occurred throughout the year 2019.

Cleanup operations and site maintenance and remediation efforts on these and other releases are at various stages of completion.

The majority of the remediation efforts for these releases are substantially completed or have received regulatory closure.

With the exception of the Sulphur Springs release defined below, we expect regulatory closure in 2020 for the release sites that have not yet received it.

Many of the releases have occurred on our system of common carrier pipelines which gather crude in southern Arkansas and northern Louisiana, and which are primarily located within 60 miles of Delek Holdings’ El Dorado refinery ("El Dorado Gathering System").

During the year ended December 31, 2019, we decommissioned certain sections of the El Dorado Gathering System in an effort to improve the safety and integrity of the system.

The decommissioning of these sections was completed in August 2019.

The project did not have a material effect on our financial results.

There were no material releases that occurred during the three months ended March 31, 2021.

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

We expect regulatory closure in 2021 for the release sites that have not yet received it and do not anticipate material costs associated with any fines or penalties or to complete activities that may be needed to achieve regulatory closure.

Regulatory authorities could require additional remediation based on the results of our remediation efforts.

We may incur additional expenses as a result of further scrutiny by regulatory authorities and continued compliance with laws and regulations to which our assets are subject.

As of September 30, 2020, we have accrued $ 0.3 million for remediation and other such matters related to these releases.

As of March 31, 2021, we have accrued $ 0.3 million for remediation and other such matters related to these releases.

On October 3, 2019, a release of diesel fuel involving one of our pipelines occurred near Sulphur Springs, Texas (the "Sulphur Springs Release").

Cleanup operations and site maintenance and remediation on this release have been substantially completed where such costs incurred totaled $ 7.1 million during 2019.

During the three and nine months ended September 30, 2020, we incurred approximately $ 0.1 million and $ 0.4 million of additional costs related to final clean-up of this release, respectively.

The release is currently in boom maintenance.

Ground water monitoring wells were installed in the third quarter of 2020.

We expect to conduct quarterly ground water monitoring for at least one year.

Additionally, during the third quarter ended September 30, 2020 we conducted creek bed sediment sampling and the results indicated no issues with the groundwater.

Cleanup operations and site maintenance and remediation on this release have been substantially completed where such costs incurred totaled $ 7.1 million during 2019 and $ 0.5 million during 2020.

During the three months ended March 31, 2021, we incurred a nominal amount of additional costs related to final clean-up of this release.

Ground water monitoring wells were installed in the third quarter of 2020 and will be monitored quarterly until the site is closed.

Additionally, in the third quarter of 2020 we conducted creek bed sediment sampling and the results indicated no issues with the groundwater.

In the fourth quarter of 2020 we submitted an actual property assessment report that assessed site conditions and recommends closure of the site.

Closure of the site was approved in the first quarter of 2021.

The ground water monitoring wells are scheduled to be removed in the second quarter of 2021.

We filed suit in January 2020 against a third party contractor, seeking damages related to this release;

two related actions were filed in November and December 2020 by and against the contractor's insurance company seeking judgments related to insurance coverage.

We have not received notification that any legal action with respect to fines and penalties will be pursued by the regulatory agencies.

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We do not believe the total costs associated with these events, whether alone or in the aggregate, including any fines or penalties and net of available insurance, indemnification or reimbursement, will have a material adverse effect upon our business, financial condition or results of operations.

During both the three and nine months ended September 30, 2020, we recorded a nominal amount of expenses.

Additionally, during the three and nine months ended September 30, 2019, we recorded a nominal amount and $ 0.3 million of expenses, respectively, which is net of total reimbursable costs of $ 0.5 million and $ 4.6 million for the three and nine months ended September 30, 2019, respectively, from Delek Holdings pursuant to the terms of the Omnibus Agreement.

During the three months ended March 31, 2021 and 2020, we recorded $ 0.1 million and a nominal amount of crude oil and other releases remediation expenses, net of reimbursable costs, respectively.

Note 14 - Leases

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The following table presents additional information related to our operating leases in accordance ASC 842:

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

Three Months Ended March 31,

(in thousands) 2021 2020

Lease Cost (1)

Operating lease cost $ 2,744 $ 600

Short-term lease cost (2)

382 47 1,459 850

Variable lease costs — 212

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Leased assets obtained in exchange for new operating lease liabilities $ 2,623 $ —

September 30, 2020

March 31, 2021 March 31, 2020

Weighted-average remaining lease term (years) for operating leases 3.5 3.8

Weighted-average discount rate (3) operating leases

Weighted-average remaining lease term (years) for financing lease 2.7 0.0

Weighted-average discount rate (3) financing lease

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

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

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Distribution Declaration

On October 27, 2020, our general partner's board of directors declared a quarterly cash distribution of $ 0.905 per unit, payable on November 12, 2020, to unitholders of record on November 6, 2020.

On April 29, 2021, our general partner's board of directors declared a quarterly cash distribution of $ 0.920 per unit, payable on May 14, 2021, to unitholders of record on May 10, 2021.

Exclusivity Supply Agreement

In May 2021, we executed a strategic exclusivity supply agreement with Baker Petrolite LLC (an affiliate of Baker Hughes Company) ("Baker"), for the supply of chemicals to meet IMO regulations through blending competencies utilizing proprietary intellectual property.

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

Terms of the agreement are intended to incentivize a cooperative arrangement relating to strategic blending activities to be operated by the Partnership, and provide for profit sharing opportunities through a variable price structure.

Annual minimum requirements under the contract are nominal and may be applied towards purchases.

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