What changed in this filing

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Item 1. Financial Statements

2021-11-05 compared with 2021-08-05 · 163 added, 145 removed, 640 unchanged (32% of the section changed)

3 unchanged sentences

(in thousands, except unit and per unit data)

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Current assets:

33 unchanged sentences

Common unitholders - public;

8,707,565 units issued and outstanding at June 30, 2021 ( 8,697,468 at December 31, 2020)

8,713,195 units issued and outstanding at September 30, 2021 ( 8,697,468 at December 31, 2020)

165,281 164,614

Common unitholders - Delek Holdings;

34,745,868 units issued and outstanding at June 30, 2021 ( 34,745,868 at December 31, 2020)

34,745,868 units issued and outstanding at September 30, 2021 ( 34,745,868 at December 31, 2020)

( 270,034 ) ( 272,915 )

6 unchanged sentences

(in thousands, except unit and per unit data)

Three months ended Six months ended

June 30, June 30,

Three months ended Nine months ended

September 30, September 30,

2021 2020 2021 2020

12 unchanged sentences

Depreciation and amortization 490 528 1,469 1,495

Other operating income, net ( 136 ) — ( 219 ) ( 107 )

Other operating expense (income), net 273 — 54 ( 107 )

Total operating costs and expenses 139,044 90,503 369,871 288,618

2 unchanged sentences

Income from equity method investments ( 7,261 ) ( 4,860 ) ( 17,952 ) ( 16,875 )

Other income, net ( 34 ) ( 2 ) ( 3 ) ( 2 )

Other (income) expense, net ( 115 ) 105 ( 118 ) 103

Total non-operating expenses, net 7,153 5,605 17,854 16,082

Income before income tax expense (benefit) 43,412 43,675 79,863 72,446

Income tax expense (benefit) 166 ( 740 ) 350 235

Income before income tax (benefit) expense 43,430 46,160 123,293 118,606

Income tax (benefit) expense ( 194 ) ( 168 ) 156 67

Net income attributable to partners $ 43,624 $ 46,328 $ 123,137 $ 118,539

1 unchanged sentence

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

— 9,647 — 18,724

Limited partners' interest in net income $ 43,624 $ 46,328 $ 123,137 $ 99,815

15 unchanged sentences

Delek Holdings Total

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

Balance at June 30, 2021 $ 164,679 $ ( 272,525 ) $ ( 107,846 )

Cash distributions (1)

2 unchanged sentences

8,745 34,879 43,624

( 86 ) 351 265

Balance at June 30, 2021 $ 164,678 $ ( 272,525 ) $ ( 107,847 )

Balance at September 30, 2021 $ 165,281 $ ( 270,034 ) $ ( 104,753 )

(1) Cash distributions include a nominal amount related to distribution equivalents on vested phantom units for the three months ended September 30, 2021 .

Common - Public Common -

Delek Holdings General Partner Total

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

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

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

( 7,753 ) ( 14,014 ) ( 9,139 ) ( 30,906 )

General partner units issued to maintain 2 % interest

Net income attributable to partners 11,258 35,070 — 46,328

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

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 4 119 — 123

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

(1) Cash distributions include a nominal amount related to distribution equivalents on vested phantom units.

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

Common - Public Common -

4 unchanged sentences

Other 147 663 810

Balance at June 30, 2021 $ 164,678 $ ( 272,525 ) $ ( 107,847 )

Balance at September 30, 2021 $ 165,281 $ ( 270,034 ) $ ( 104,753 )

Common - Public Common -

2 unchanged sentences

Cash distributions (2)

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

General partner units issued to maintain 2 % interest

3 unchanged sentences

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

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 337 ( 47 ) 1 291

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

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

(2) Cash distributions include $ 0.1 million and a nominal amount related to distribution equivalents on vested phantom units for the nine months ended September 30, 2021 and 2020, respectively.

See accompanying notes to the condensed consolidated financial statements

3 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

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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 236,000 515,900

3 unchanged sentences

Payments on financing lease liabilities ( 1,369 ) —

Net cash (used in) provided by financing activities ( 144,383 ) 52,512

Net (decrease) increase in cash and cash equivalents ( 2,070 ) 10,651

Net cash used in financing activities ( 213,684 ) ( 17,756 )

Net increase in cash and cash equivalents 621 479

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

3 unchanged sentences

Interest $ 19,170 $ 26,895

Income taxes $ — $ 141

Non-cash investing activities:

Increase (decrease) in accrued capital expenditures $ 1,557 $ ( 1,317 )

Increase (decrease) in accrued capital expenditures and other $ 1,638 $ ( 948 )

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 $ 8,750 $ 16,644

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

See accompanying notes to the condensed consolidated financial statements

6 unchanged sentences

Effective May 1, 2020, the Partnership, through its wholly-owned subsidiary DKL Transportation, LLC, acquired Delek Trucking, LLC consisting of certain leased and owned tractors and trailers and related assets (the "Trucking Assets") from Delek Holdings, such transaction the "Trucking Assets Acquisition."

In addition, effective March 31, 2020, the Partnership, through its wholly-owned subsidiary DKL Permian Gathering, LLC, acquired from Delek Holdings a crude oil gathering system located in Howard, Borden and Martin Counties, Texas (the "Big Spring Gathering System"), and certain related assets, such transaction the "Big Spring Gathering Assets Acquisition."

In addition, effective March 31, 2020, the Partnership, through its wholly-owned subsidiary DKL Permian Gathering, LLC, acquired from Delek Holdings a crude oil gathering system and certain related assets, located in Howard, Borden and Martin Counties, Texas (the "Big Spring Gathering Assets"), such transaction the "Big Spring Gathering Assets Acquisition."

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S.

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Risks and Uncertainties Arising from the COVID-19 Pandemic

economic activity continued on a recovery trend during the quarter ended June 30, 2021, albeit remaining subject to heightened levels of uncertainty related to the on-going impact of the COVID-19 outbreak that developed into a pandemic in March 2020 (the “COVID-19 Pandemic” or the “Pandemic”), and the spread of new variants of the virus.

economic activity continued on a recovery trend during the quarter ended September 30, 2021.

The spike in number of new cases due to the COVID-19 delta variant did not slow down the economic recovery.

Towards the end of third quarter the trend started to show a reduction in the number of new COVID-19 cases and in the number of COVID-19 related hospitalizations.

However, we remain subject to heightened levels of uncertainty related to the on-going impact of the COVID-19 outbreak that developed into a pandemic in March 2020 (the “COVID-19 Pandemic” or the “Pandemic”), and the spread of new variants of the virus.

Some of the restrictions imposed in the prior year to prevent its spread have been eased and the government vaccination campaigns continue to yield positive results in terms of increase in the number of people who have been inoculated, a critical requirement to continue removing restrictions.

Compared to the prior year, the economic recovery trends in the three and six months ended June 30, 2021 included a resumption of flights by major airlines and increased motor vehicle use.

Additional government measures to curb the spread of the virus include the proposed government mandates for employers to require mandatory vaccination or COVID-19 weekly testing for employees.

Compared to the prior year, the economic recovery trends in the three and nine months ended September 30, 2021 included a resumption of flights by major airlines and increased motor vehicle use.

This has in turn resulted in increased demand and market prices for crude oil and other products, particularly refined petroleum products from which we receive revenue for transporting and storing.

We also saw an increase in demand and sales volumes in our wholesale marketing business during the three and six months ended June 30, 2021.

We also saw an increase in demand and sales volumes in our wholesale marketing business during the three and nine months ended September 30, 2021.

Nonetheless, there remains 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 three and six months ended June 30, 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 financial statements as of and for the three and six months ended June 30, 2021.

Notes to Condensed Consolidated Financial Statements (Unaudited)

financial statement impact under GAAP, we have considered them in the preparation of our financial statements as of and for the three and nine months ended September 30, 2021.

New Accounting Pronouncements Adopted During 2021

5 unchanged sentences

Accounting Pronouncements Not Yet Adopted

2021-05, Leases (Topic 842):

Lessors—Certain Leases with Variable Lease Payments

In July 2021, the FASB issued an amendment which is intended to provide lease classification guidance for Lessors on how to classify and account for a lease with variable lease payments that do not depend on a reference index or a rate.

The amendments are effective for fiscal years beginning after December 15, 2021, for all entities, and interim periods within those fiscal years for public business entities and interim periods within fiscal years beginning after December 15, 2022, for all other entities.

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

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

6 unchanged sentences

See our Annual Report on Form 10-K for further information.

The total consideration is subject to certain post-closing adjustments and was approximately $ 48.0 million in cash.

The total consideration was approximately $ 48.0 million in cash.

We financed this acquisition with a combination of cash on hand and borrowings under the DKL Credit Facility (as defined in Note 7).

2 unchanged sentences

Under the Trucking Assets TSA Agreement, the Partnership will gather, coordinate pickup of, transport and deliver petroleum products for Delek Holdings, as well as provide ancillary services as requested.

The transaction and related agreements were approved by the Conflicts Committee of the Partnership's general partner, which is comprised solely of independent directors.

The transaction and related agreements were approved by the Conflicts Committee of the Board of Directors of the Partnership's general partner, which is comprised solely of independent directors.

See Note 3 for more detailed descriptions of these agreements.

5 unchanged sentences

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

Big Spring Gathering Assets Acquisition

1 unchanged sentence

See our Annual Report on Form 10-K for further information.

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.

The total consideration 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 (as defined in Note 7).

4 unchanged sentences

• Terminals (total storage of approximately 650,000 bbls);

Notes to Condensed Consolidated Financial Statements (Unaudited)

• Applicable rights-of-way.

1 unchanged sentence

Under the Big Spring T&D Agreement, the Partnership 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 shipper’s and certain other producers’ respective interests for delivery at the Big Spring Terminal.

The transaction and related agreements were approved by the Conflicts Committee of the Partnership's general partner, which is comprised solely of independent directors.

The transaction and related agreements were approved by the Conflicts Committee of the Board of Directors of the Partnership's general partner, which is comprised solely of independent directors.

See Note 3 for more detailed descriptions of these agreements.

15 unchanged sentences

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.

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.

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.

To the extent that Delek Holdings is prevented by our failure to maintain such capacities to throughput or from storing such specified volumes for more than 30 days per year, Delek Holdings' minimum throughput commitment will be reduced proportionately and prorated for the portion of the quarter during which the specified throughput capacity was unavailable, and/or the storage fee will be reduced, prorated for the portion of the month during which the specified storage capacity was unavailable.

Notes to Condensed Consolidated Financial Statements (Unaudited)

month during which the specified storage capacity was unavailable.

Such reduction would occur even if actual throughput or storage amounts were below the minimum volume commitment levels.

3 unchanged sentences

Omnibus Agreement

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

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.

The Partnership entered into an omnibus agreement with Delek Holdings, Delek Logistics Operating, LLC, Lion Oil Company, LLC (formerly known as 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 are reimbursed by Delek Holdings for certain capital expenditures.

There were no reimbursements by Delek Holdings during the three and six months ended June 30, 2021.

During the three and six months ended June 30, 2020, we were reimbursed by Delek Holdings for certain capital expenditures of a nominal amount and $ 0.6 million, respectively.

There were no reimbursements by Delek Holdings during the three and nine months ended September 30, 2021.

During the three and nine months ended September 30, 2020, we were reimbursed by Delek Holdings for certain capital expenditures of a nominal amount and $ 0.6 million, respectively.

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.

Additionally, 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 June 30, 2021, there was no receivable from related parties for these matters.

As of September 30, 2021, there was no receivable from related parties for these matters.

These reimbursements are recorded as reductions to operating expense.

We were reimbursed a nominal amount for these matters during the both three and six months ended June 30, 2021, and a nominal amount and $ 0.1 million during the three and six months ended June 30, 2020, respectively.

We were reimbursed nominal amounts for these matters in each of the three and nine month periods ended September 30, 2021 and 2020.

Other Transactions

4 unchanged sentences

The agreement extends through December 2022.

Total fees paid to the Partnership were $ 0.4 million and $ 0.8 million for the three and six months ended June 30, 2021, respectively, and $ 0.4 million and $ 1.2 million for the three and six months ended June 30, 2020, 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 $ 1.2 million for the three and nine months ended September 30, 2021, respectively, and $ 0.4 million and $ 1.6 million for the three and nine months ended September 30, 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.

7 unchanged sentences

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.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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.

1 unchanged sentence

2 to the First Amended and Restated Agreement of Limited Partnership of Delek Logistics Partners, LP

On March 31, 2020, in connection with the completion of the Big Spring Gathering Assets Acquisition, the Board of the general partner adopted Amendment No.

On March 31, 2020, in connection with the completion of the Big Spring Gathering Assets Acquisition, the board of directors of the general partner adopted Amendment No.

2 (“Amendment No.

4 unchanged sentences

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

Conversion of GP Economic Interest and Elimination of IDRs

10 unchanged sentences

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

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

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

2021 2020 2021 2020

8 unchanged sentences

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

In February and May 2021, we paid quarterly cash distributions of $ 39.5 million and $ 40.0 million, of which $ 31.6 million and $ 32.0 million, respectively, were paid to Delek Holdings.

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

On July 26, 2021, our board of directors declared a quarterly cash distribution totaling $ 40.8 million, based on the available cash as of the date of determination, for the end of the second quarter of 2021, payable on August 11, 2021, of which $ 32.7 million is expected to be paid to Delek Holdings.

In February, May and August 2021, we paid quarterly cash distributions of $ 39.5 million, $ 40.0 million and $ 40.8 million, respectively, of which $ 31.6 million, $ 32.0 million and $ 32.7 million, respectively, were paid to Delek Holdings.

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 and our general partner.

On October 26, 2021, our board of directors declared a quarterly cash distribution totaling $ 41.3 million, based on the available cash as of the date of determination, for the end of the third quarter of 2021, payable on November 10, 2021, of which $ 33.0 million is expected to be paid to Delek Holdings.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 4 - Revenues

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The majority of our commercial agreements with Delek Holdings meet the definition of a lease because:

(1) performance of the contracts is dependent on specified property, plant or equipment and (2) it is remote that one or more parties other than Delek Holdings will take more

Notes to Condensed Consolidated Financial Statements (Unaudited)

than a minor amount of the output associated with the specified property, plant or equipment.

(1) performance of the contracts is dependent on specified property, plant or equipment and (2) it is remote that one or more parties other than Delek Holdings will take more than a minor amount of the output associated with the specified property, plant or equipment.

As part of our adoption of ASC 842, Leases ("ASC 842"), we applied the permitted practical expedient to not separate lease and non-lease components under the predominance principle to designated asset classes associated with the provision of logistics services.

1 unchanged sentence

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

Of our $ 454.8 million net property, plant, and equipment balance as of June 30, 2021, $ 383.0 million is subject to operating leases under our commercial agreements.

Of our $ 448.2 million net property, plant, and equipment balance as of September 30, 2021, $ 428.0 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 June 30, 2021

Three Months Ended September 30, 2021

Pipelines and Transportation Wholesale Marketing and Terminalling Consolidated

6 unchanged sentences

Total Revenue $ 76,202 $ 113,425 $ 189,627

(1) Net of $ 1.8 million of amortization expense for the three months ended June 30, 2021, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.

Six Months Ended June 30, 2021

(1) Net of $ 1.8 million of amortization expense for the three months ended September 30, 2021, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.

Nine Months Ended September 30, 2021

Pipelines and Transportation Wholesale Marketing and Terminalling Consolidated

6 unchanged sentences

Total Revenue $ 211,612 $ 299,406 $ 511,018

(1) Net of $ 3.6 million of amortization expense for the six months ended June 30, 2021, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.

Three Months Ended June 30, 2020

(1) Net of $ 5.4 million of amortization expense for the nine months ended September 30, 2021, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Three Months Ended September 30, 2020

Pipelines and Transportation Wholesale Marketing and Terminalling Consolidated

6 unchanged sentences

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

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

Six Months Ended June 30, 2020

(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.

Nine Months Ended September 30, 2020

Pipelines and Transportation Wholesale Marketing and Terminalling Consolidated

6 unchanged sentences

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

(1) Net of $ 3.6 million of amortization expense for the six months ended June 30, 2020, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment .

As of June 30, 2021, we expect to recognize $ 1.4 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 $ 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 .

As of September 30, 2021, we expect to recognize $ 1.5 billion in future lease revenues, for periods up to financial year 2030, 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 June 30, 2021 were as follows (in thousands):

Our unfulfilled performance obligations as of September 30, 2021 were as follows (in thousands):

Remainder of 2021 $ 68,285

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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.

Earnings in excess of distributions were

Notes to Condensed Consolidated Financial Statements (Unaudited)

allocated to our general partner and limited partners based on their respective ownership interests.

The IDRs were paid following the close of each quarter.

3 unchanged sentences

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

As of June 30, 2021, the only potentially dilutive units outstanding consist of unvested phantom units.

As of September 30, 2021, the only potentially dilutive units outstanding consist of unvested phantom units.

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 June 30, 2021 is August 11, 2021.

The expected date of distribution for the distributions earned during the period ended September 30, 2021 is November 10, 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):

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

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

2021 2020 2021 2020

1 unchanged sentence

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

— 9,479 — 18,618

Limited partners' distribution 41,286 39,307 122,100 87,536

18 unchanged sentences

In connection with the IDR Restructuring Transaction on August 13, 2020, the IDRs were eliminated and the general partner interest became a non-economic general partner interest.

(2) Outstanding common units totaling 3,662 and 1,841 were excluded from the diluted earnings per unit calculation for the three and six months ended June 30, 2021, respectively.

Outstanding common units totaling 18,270 were excluded from the diluted earnings per unit calculation for both the three and six months ended June 30, 2020.

(2) There were no outstanding common units excluded from the diluted earnings per unit calculation for the three and nine months ended September 30, 2021 and 2020.

Note 6 - Inventory

Inventories consisted of $ 2.0 million and $ 3.1 million of refined petroleum products as of June 30, 2021 and December 31, 2020, each of which are net of lower of cost or net realizable value reserve of a nominal amount.

Inventories consisted of $ 2.2 million and $ 3.1 million of refined petroleum products as of September 30, 2021 and December 31, 2020, respectively, 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.

We recognize lower of cost or net realizable value charges as a component of cost of materials and other in the consolidated statements of income and comprehensive income.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 7 - Long-Term Obligations

1 unchanged sentence

On May 24, 2021, the Partnership and our wholly owned subsidiary Delek Logistics Finance Corp.

("Finance Corp." and together with the Partnership, the "Issuers") sold $ 400.0 million in aggregate principal amount of 7.125 % senior notes due 2028 (the "2028 Notes") at par, pursuant to an indenture with U.S.

("Finance Corp." and together with the Partnership, the "Issuers") issued $ 400.0 million in aggregate principal amount of 7.125 % senior notes due 2028 (the "2028 Notes") at par, pursuant to an indenture with U.S.

Bank, National Association as trustee.

4 unchanged sentences

Prior to June 1, 2024, the Issuers may also redeem all or part of the 2028 Notes at a redemption price of the principal amount plus accrued and unpaid interest, if any, plus a "make whole" premium, subject to certain conditions and limitations.

In addition, beginning on June 1, 2024, the Issuers may, subject to certain conditions and limitations, redeem all or part of the 2028 Notes, at a redemption price of 103.563 % of the redeemed principal for the twelve-month period beginning on June 1, 2024, 101.781 % for the twelve-month period beginning on June 1, 2025, and 100.00 %

Notes to Condensed Consolidated Financial Statements (Unaudited)

beginning on June 1, 2026 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 2028 Notes from holders at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest.

As of June 30, 2021, we had $ 400.0 million in outstanding principal amount under the 2028 Notes, and the effective interest rate was 7.41%.

Outstanding borrowings under the 2028 Notes are net of deferred financing costs amounting to $ 6.3 million as of June 30, 2021.

As of September 30, 2021, we had $ 400.0 million in outstanding principal amount under the 2028 Notes, and the effective interest rate was 7.41%.

Outstanding borrowings under the 2028 Notes are net of deferred financing costs amounting to $ 5.9 million as of September 30, 2021.

DKL Credit Facility

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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 June 30, 2021, the weighted average interest rate for our borrowings under the facility was approximately 2.50 %.

At September 30, 2021, the weighted average interest rate for our borrowings under the facility was approximately 2.62 %.

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

As of June 30, 2021, this fee was 0.35 % per year.

As of June 30, 2021, we had $ 288.8 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 June 30, 2021 were $ 561.2 million.

As of September 30, 2021, this fee was 0.35 % per year.

As of September 30, 2021, we had $ 260.9 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, 2021 were $ 589.1 million.

Notes to Condensed Consolidated Financial Statements (Unaudited)

6.750 % Senior Notes Due 2025

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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.

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of June 30, 2021, we had $ 250.0 million in outstanding principal amount of the 2025 Notes.

As of June 30, 2021, the effective interest rate related to the 2025 Notes was approximately 7.21 %.

Outstanding borrowings under the 2025 Notes are net of deferred financing costs and debt discount of $ 2.9 million and $ 0.9 million, respectively, as of June 30, 2021, and $ 3.3 million and $ 1.0 million, respectively, as of December 31, 2020.

As of September 30, 2021, we had $ 250.0 million in outstanding principal amount of the 2025 Notes.

As of September 30, 2021, the effective interest rate related to the 2025 Notes was approximately 7.21 %.

Outstanding borrowings under the 2025 Notes are net of deferred financing costs and debt discount of $ 2.7 million and $ 0.9 million, respectively, as of September 30, 2021, and $ 3.3 million and $ 1.0 million, respectively, as of December 31, 2020.

Note 8 - Equity

We had 8,707,565 common limited partner units held by the public outstanding as of June 30, 2021.

Additionally, as of June 30, 2021, Delek Holdings owned an 80.0 % limited partner interest in us, consisting of 34,745,868 common limited partner units.

We had 8,713,195 common limited partner units held by the public outstanding as of September 30, 2021.

Additionally, as of September 30, 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.

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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 June 30, 2021, we 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.

As of September 30, 2021, Delek Holdings 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 limited partner units outstanding from December 31, 2020 through June 30, 2021.

The table below summarizes the changes in the number of limited partner units outstanding from December 31, 2020 through September 30, 2021.

Common - Public Common - Delek Holdings Total

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15,727 — 15,727

Balance at June 30, 2021 8,707,565 34,745,868 43,453,433

(1) Unit-based compensation awards are presented net of 445 units withheld for taxes as of June 30, 2021.

Balance at September 30, 2021 8,713,195 34,745,868 43,459,063

(1) Unit-based compensation awards are presented net of 3,237 units withheld for taxes as of September 30, 2021.

Issuance of Additional Securities

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Costs associated with the issuance of securities are allocated to all unitholders' capital accounts based on their ownership interest at the time of issuance.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Allocations of Net Income

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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 June 30, Six Months Ended June 30,

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

2021 2020 2021 2020

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Total general partner's interest in net income $ — $ — $ — $ 18,724

Notes to Condensed Consolidated Financial Statements (Unaudited)

Incentive Distribution Rights ("IDRs")

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(in thousands) Date of Distribution Unitholders Record Date

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

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

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March 31, 2021 $ 0.920 $ 39,968 May 14, 2021 May 10, 2021

June 30, 2021 $ 0.940 $ 40,846 August 11, 2021 (1)

August 5, 2021

June 30, 2021 $ 0.940 $ 40,846 August 11, 2021 August 5, 2021

September 30, 2021 $ 0.950 $ 41,286 November 10, 2021 (1)

November 5, 2021

(1) Expected date of distribution.

The allocations of total quarterly cash distributions made to limited partners for the three and six months ended June 30, 2021 and 2020 are set forth in the table below.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The allocations of total quarterly cash distributions made to limited partners for the three and nine months ended September 30, 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 June 30, Six Months Ended June 30,

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

2021 2020 2021 2020

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The Delek Logistics GP, LLC 2012 Long-Term Incentive Plan (the "LTIP") was adopted by the Delek Logistics GP, LLC board of directors in connection with the completion of our initial public offering in November 2012.

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 six months ended June 30, 2021 and 2020.

On June 9, 2021, the LTIP was amended to increase the number of units representing limited partner interest in the Partnership (the "Common Units") authorized for issuance by 300,000 Units to 912,207 Common Units.

The LTIP is administered by the Conflicts Committee of the board of our general partner.

Additionally, the term of the LTIP was extended to June 9, 2031.

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We contributed $ 3.5 million related to such expansion project in May 2019 and during 2020 made additional capital contributions of $ 12.2 million based on capital calls received.

During the six months ended June 30, 2021, we made additional capital contributions totaling $ 1.4 million based on capital calls received.

During the nine months ended September 30, 2021, we made additional capital contributions totaling $ 1.4 million based on capital calls received.

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

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Current Assets $ 25,444 $ 13,488

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Current liabilities $ 11,786 $ 7,789

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

2021 2020 2021 2020

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("CP LLC") to operate one of these pipeline systems (the "Caddo Pipeline") and a 33 % membership interest in the entity formed with Rangeland Energy II, LLC ("Rangeland Energy") to operate the other pipeline system (the "Rio Pipeline").

During 2018, Rangeland Energy was acquired by Andeavor and the legal entity in which we have an equity investment became Andeavor Logistics Rio Pipeline LLC ("Andeavor Logistics").

During 2018, Rangeland Energy was acquired by Andeavor (which was subsequently acquired by Marathon Petroleum Corporation) and the legal entity in which we have an equity investment became Andeavor Logistics Rio Pipeline LLC ("Andeavor Logistics").

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

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Current assets $ 20,790 $ 20,763

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Current liabilities $ 3,731 $ 1,496

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

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

2021 2020 2021 2020

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Net Income $ 6,300 $ 9,136 $ 19,023 $ 27,023

Notes to Condensed Consolidated Financial Statements (Unaudited)

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 June 30, 2021 and December 31, 2020, the Partnership's investment balance in these joint ventures was $ 252.0 million and $ 253.7 million, respectively.

As of September 30, 2021 and December 31, 2020, the Partnership's investment balance in these joint ventures was $ 251.9 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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• 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.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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 June 30, Six Months Ended June 30,

(in thousands) Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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Depreciation and amortization 10,156 9,459 30,862 24,452

Other operating income, net ( 136 ) — ( 219 ) ( 107 )

Other operating expense (income), net 273 — 54 ( 107 )

Operating income $ 50,583 $ 51,765 $ 141,147 $ 134,688

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See Note 4 for additional information.

The following table summarizes the total assets for each segment as of June 30, 2021 and December 31, 2020 (in thousands).

The following table summarizes the total assets for each segment as of September 30, 2021 and December 31, 2020 (in thousands).

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

June 30, 2021 December 31, 2020

Notes to Condensed Consolidated Financial Statements (Unaudited)

September 30, 2021 December 31, 2020

Pipelines and transportation $ 692,901 $ 723,317

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Total assets 930,543 $ 956,417

Notes to Condensed Consolidated Financial Statements (Unaudited)

Property, plant and equipment and accumulated depreciation as of June 30, 2021 and depreciation expense by reporting segment for the three and six months ended June 30, 2021 were as follows (in thousands):

Property, plant and equipment and accumulated depreciation as of September 30, 2021 and depreciation expense by reporting segment for the three and nine months ended September 30, 2021 were as follows (in thousands):

Pipelines and Transportation Wholesale Marketing and Terminalling Consolidated

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Property, plant and equipment, net $ 389,862 $ 58,347 $ 448,209

Depreciation expense for the three months ended June 30, 2021 $ 8,035 $ 1,932 $ 9,967

Depreciation expense for the six months ended June 30, 2021 $ 16,862 $ 3,844 $ 20,706

Depreciation expense for the three months ended September 30, 2021 $ 8,056 $ 2,100 $ 10,156

Depreciation expense for the nine months ended September 30, 2021 $ 24,918 $ 5,944 $ 30,862

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 June 30, 2021.

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

However, there

Notes to Condensed Consolidated Financial Statements (Unaudited)

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.

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.

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.

Crude Oil and Other Releases

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

There were no material releases that occurred during the six months ended June 30, 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 June 30, 2021, we have accrued $ 0.3 million for remediation and other such matters related to these releases.

During the nine months ended September 30, 2021, there was one significant release of finished product, involving one of our pipelines and it occurred in August 2021.

This release of finished product from our Greenville pipeline occurred near Dixon, Texas (the "Greenville Dixon Release").

Cleanup operations, site maintenance and remediation on this release are currently on-going where such costs incurred as of September 30, 2021 totaled $ 0.3 million.

Additionally, as of September 30, 2021 we have accrued $ 2.4 million for remediation and other such matters related to this release.

The affected area is currently being treated to bring it to acceptable residential levels protective of groundwater.

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

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

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.

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

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

The majority of our releases have been subsequently reimbursed by Delek Holdings pursuant to the terms of the Omnibus Agreement, with the exception of the Sulphur Springs Release above as it is not covered under the Omnibus Agreement.

The majority of our releases have been subsequently reimbursed by Delek Holdings pursuant to the terms of the Omnibus Agreement, with the exception of the Sulphur Springs Release and the Greenville Dixon Release noted above as they are not covered under the Omnibus Agreement.

Reimbursements are recorded as a reduction to operating expense.

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 the three and six months ended June 30, 2021 and 2020, the crude oil and other releases remediation expenses, net of reimbursable costs, were immaterial.

During the three and nine months ended September 30, 2021 and 2020, the crude oil and other releases remediation expenses, net of reimbursable costs, were immaterial.

Note 14 - Leases

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

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

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

(in thousands) 2021 2020 2021 2020

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Short-term lease cost 484 382 1,262 1,459

631 817 778 1,349

Variable lease costs 276 829 235 1,101

Total lease cost $ 4,419 $ 3,798 $ 11,265 $ 7,673

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Leased assets obtained in exchange for new operating lease liabilities $ 318 $ 865 $ 5,679 $ 16,644

$ 2,736 $ 15,779 $ 5,572 $ 15,779

June 30, 2021 June 30, 2020

Lease assets obtained in exchange for new financing liabilities $ 2,858 $ — $ 3,071 $ —

September 30, 2021 September 30, 2020

Weighted-average remaining lease term (years) for operating leases 4.8 3.7

Weighted-average discount rate (2) operating leases

Notes to Condensed Consolidated Financial Statements (Unaudited)

Weighted-average remaining lease term (years) for financing lease 6.7 0.0

Weighted-average discount rate (2) financing lease

(1) Includes an immaterial amount of financing lease.

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

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

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Distribution Declaration

On July 26, 2021, our general partner's board of directors declared a quarterly cash distribution of $ 0.940 per unit, payable on August 11, 2021, to unitholders of record on August 5, 2021.

On October 26, 2021, our general partner's board of directors declared a quarterly cash distribution of $ 0.950 per unit, payable on November 10, 2021, to unitholders of record on November 5, 2021.

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