What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-11-05 compared with 2021-08-05 · 178 added, 175 removed, 544 unchanged (39% of the section changed)

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and any of its subsidiaries, other than the Partnership and its subsidiaries and its general partner.

Effective August 13, 2020, the Partnership closed the transaction contemplated by a definitive exchange agreement with the general partner to eliminate all of the incentive distribution rights ("IDRs") held by the general partner and convert the 2% general partner interest into a non-economic general partner interest, such transaction the "IDR Restructuring Transaction." See Note 3 of the accompanying condensed consolidated financial statements for further information.

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." See Note 2 of the accompanying condensed consolidated financial statements for further information.

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 Assets"), and certain related assets, such transaction the "Big Spring Gathering Assets Acquisition." See Note 2 of the accompanying condensed consolidated financial statements for further information.

Effective August 13, 2020, the Partnership closed the transaction contemplated by a definitive exchange agreement with the general partner to eliminate all of the incentive distribution rights ("IDRs") held by the general partner and convert the 2% general partner interest into a non-economic general partner interest, such transaction the "IDR Restructuring Transaction." See Note 3 to the accompanying condensed consolidated financial statements for further information.

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." See Note 2 to the accompanying condensed consolidated financial statements for further information.

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 Assets"), and certain related assets, such transaction the "Big Spring Gathering Assets Acquisition." See Note 2 to the accompanying condensed consolidated financial statements for further information.

The Partnership announces material information to the public about the Partnership, its products and services and other matters through a variety of means, including filings with the Securities and Exchange Commission, press releases, public conference calls, the Partnership's website (www.deleklogistics.com), the investor relations section of the website (ir.deleklogistics.com), the news section of its website (www.deleklogistics.com/news), and/or social media, including its Twitter account (@DelekUSLogistics).

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The taxable income reportable to each partner takes into account differences between the tax basis and the fair market value of our assets and financial reporting bases of assets and liabilities, the acquisition price of the partner's units and the taxable income allocation requirements under the Partnership's Second Amended and Restated Agreement of Limited Partnership (the "Partnership Agreement").

economic activity continued on a recovery trend during the quarter ended June 30, 2021, albeit remaining subject to heightened levels of uncertainty related the on-going impact of the COVID-19 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 the on-going impact of the COVID-19 Pandemic, and the spread of new variants of the virus.

Most of the COVID-19 Pandemic related restrictions imposed in the prior year have been eased, major airlines have resumed their flights, motor vehicle use continues to increase and government vaccination campaigns continue.

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

The economic recovery has in turn resulted in increased demand and market prices for crude oil and other products, particularly refined petroleum products that we receive revenue for transporting and storing.

It has also resulted in an increase in demand and sales volumes in our wholesale marketing business.

Crude oil production as the consumption of the hydrocarbon products continued to increase.

Crude oil production as well as the consumption of the hydrocarbon products continued to increase.

Although we expect the direct effects from the Pandemic on U.S.

oil consumption to continue to decrease, some consumption patterns may be more lasting, including increased working from home and changes in travel behavior, which could limit growth in gasoline and jet fuel consumption.

Furthermore, as of June 30, 2021, the COVID-19 Pandemic, specifically the spread of the Delta variant of the virus, continues to cause significant economic disruption globally, including in the U.S.

Furthermore, as of September 30, 2021, the COVID-19 Pandemic and the spread of new variants of the virus, continues to cause significant economic disruption globally, including in the U.S.

and specific geographic areas where we operate.

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Additionally, increased infection rates could impact our logistics operations, particularly in high-infection states, if our employees are personally affected by the illness, both through direct infection and quarantine procedures.

During the three and six months ended June 30, 2021, both our West Texas wholesale marketing business and many of our pipeline and transportation customers experienced an increase in demand and pricing due to the resumption of some economic activities as discussed above.

For the six months ended June 30, 2021, the impact of this positive trend was netted by the reduced volumes during the severe freezing conditions experienced in February 2021.

During the three and nine months ended September 30, 2021, both our West Texas wholesale marketing business and many of our pipeline and transportation customers experienced an increase in demand and pricing due to the resumption of some economic activities as discussed above.

For the nine months ended September 30, 2021, the impact of this positive trend was netted by the reduced volumes during the severe freezing conditions experienced in February 2021.

Our pipelines and transportation revenue streams were largely protected by minimum volume commitments under existing throughput contracts with customers during the current and prior periods, but continued pressure on our customers could present risks to our existing and new business opportunities as well as on collectability on our receivables.

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To the extent that uncertainties related to the COVID-19 Pandemic have been identified and are believed to have an impact on our current period results of operations or financial position based on the requirements for assessing such financial statement impact under U.S.

generally accepted accounting principles, we have considered them in the preparation of our condensed consolidated financial statements as of and for the three and six months ended June 30, 2021, which are included in Item 1.

Management's Discussion and Analysis

generally accepted accounting principles, we have considered them in the preparation of our condensed consolidated financial statements as of and for the three and nine months ended September 30, 2021, which are included in Item 1.

of this Quarterly Report on Form 10-Q.

Other uncertainties related to the impact of the COVID-19 Pandemic and other events may exist that have not been identified, and could impact our future results of operations and financial position, the nature of which and the extent to which are currently unknown.

Management's Discussion and Analysis

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

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On May 24, 2021, the Partnership and its 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 the Issuers’ 7.125% Senior Notes due 2028 (the “2028 Notes”), along with the related guarantees of the 2028 Notes.

We used the net proceeds from the sale of the 2028 Notes to repay a portion of the outstanding borrowings under our revolving credit facility.

("Finance Corp." and together with the Partnership, the "Issuers") issued $400.0 million in aggregate principal amount of the Issuers’ 7.125% Senior Notes due 2028 (the “2028 Notes”), along with the related guarantees of the 2028 Notes.

We used the net proceeds from the sale of the 2028 Notes to repay a

Management's Discussion and Analysis

portion of the outstanding borrowings under our revolving credit facility.

See Note 7 to our accompanying condensed consolidated financial statements for additional information.

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

Those chemicals allow us, through blending competencies utilizing proprietary intellectual property, to clarify

Management's Discussion and Analysis

slurry which can then be used in International Maritime Organization-compliant products.

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

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

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■ EBITDA and distributable cash flow (as such terms are defined below).

Management's Discussion and Analysis

The amount of revenue we generate primarily depends on the volumes of crude oil and refined products that we handle in our pipeline, transportation, terminalling, storage and marketing operations.

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• our ability to increase throughput volumes at our refined products terminals and provide additional ancillary services at those terminals;

Management's Discussion and Analysis

• our ability to identify and serve new customers in our marketing and trucking operations;

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(iv) gains and losses related to our commodity hedging activities.

The Partnership has declared its intent to make a cash distribution to its unitholders at a distribution rate of $0.94 per unit for the quarter ended June 30, 2021 ($3.76 per unit on an annualized basis).

Management's Discussion and Analysis

The Partnership has declared its intent to make a cash distribution to its unitholders at a distribution rate of $0.95 per unit for the quarter ended September 30, 2021 ($3.80 per unit on an annualized basis).

Our Partnership Agreement requires that the Partnership distribute all of its available cash (as defined in the Partnership Agreement) to its unitholders quarterly.

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See Note 8 to the accompanying condensed consolidated financial statements for a discussion of historic cash distributions.

Management's Discussion and Analysis

Market Trends

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In particular, crude oil prices and the prices of related refined products have the ability to influence drilling activity in many basins and the amounts of capital spending that crude oil exploration and production companies incur to support future growth.

During the three and six months ended June 30, 2021, the U.S.

During the three and nine months ended September 30, 2021, the U.S.

economic activity continued its recovery path resulting in increases in consumption and demand for crude oil and refined products, although heightened uncertainty still remains due to the on-going COVID-19 Pandemic and the spread of new variants of the virus.

Compared to the three and six months ended June 30, 2020, where reduced demand for crude oil and refined products related to the COVID-19 Pandemic, combined with production increases from OPEC+, had led to a significant reduction in crude oil prices, crude oil prices during the three and six months ended June 30, 2021 have been increasing.

The price of oil (WTI Cushing) closed at $73.47 per barrel on June 30, 2021, $34.20 per barrel higher than in June of last year.

The opening January 2021 price of oil (WTI Cushing) was $47.62 and reached the January 2021 high closing price of oil of $53.57 per barrel, which further increased to $61.45 beginning April 2021 and reached a high of $74.24 per barrel on June 25, 2021.

Due to the sustained increase in oil prices, during the three and six months ended June 30, 2021, we experienced improved margins in the West Texas area, and better throughput for our assets with improved gross margins, when compared to the same period in 2020.

Compared to the three and nine months ended September 30, 2020, where reduced demand for crude oil and refined products related to the COVID-19 Pandemic, combined with production increases from OPEC+, had led to a significant reduction in crude oil prices, crude oil prices during the three and nine months ended September 30, 2021 were steadily increasing.

The price of oil (WTI Cushing) closed at $75.03 per barrel on September 30, 2021, $34.81 per barrel higher than on September 30, 2020.

Due to the sustained increase in oil prices, during the three and nine months ended September 30, 2021, we experienced improved margins in the West Texas area, and better throughput for our assets with improved gross margins, when compared to the same period in 2020.

We believe we are strategically positioned, in these tougher market conditions to continue developing profitable growth projects that are needed to support future distribution growth in the midstream energy sector for the Partnership.

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Additionally, volatility in crude oil, intermediate and refined products prices in the West Texas area and the value attributable to RINs can affect the results of our West Texas operations.

For example, demand for refined products from our West Texas operations to industries that support crude oil exploration and production was subdued during the three and six months ended June 30, 2020 due to the impact of the COVID-19 Pandemic leading to lower demand and sales of refined products and remained largely depressed during most of 2020.

For example, demand for refined products from our West Texas operations to industries that support crude oil exploration and production was subdued during the three and nine months ended September 30, 2020 due to the impact of the COVID-19 Pandemic leading to lower demand and sales of refined products and remained largely depressed during most of 2020.

As discussed above, the U.S.

economic activity is recovering and demand for and prices of crude oil and related refined products increased during the three and six months ended June 30, 2021 as consumption of oil increased spurred by easing of COVID-19 related restrictions.

economic activity is recovering and demand for and prices of crude oil and related refined products increased during the three and nine months ended September 30, 2021 as consumption of oil increased spurred by easing of COVID-19 related restrictions.

Although we expect the direct effects from the pandemic on U.S.

oil consumption to decrease, some consumption patterns may be more lasting, including increased working from home and changes in travel behavior, which could limit growth in gasoline and jet fuel consumption.

See the chart below for the high, low and average price per barrel of WTI crude oil for each of the quarterly periods in 2020 and for the two quarterly periods in 2021.

See the chart below for the high, low and average price per barrel of WTI crude oil for each of the quarterly periods in 2020 and for the three quarterly periods in 2021.

Management's Discussion and Analysis

The volatility of refined products prices may impact our margin in the West Texas operations when the selling price of refined products does not adjust as quickly as the purchase price.

See the charts below for the range of prices per gallon of gasoline and diesel for each of the quarterly periods in 2020 and for the two quarterly periods in 2021.

See the charts below for the range of prices per gallon of gasoline and diesel for each of the quarterly periods in 2020 and for the three quarterly periods in 2021.

Management's Discussion and Analysis

Our West Texas operations can benefit from RINs that are generated by ethanol blending activities.

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The RINs we generate are sold primarily to Delek Holdings at market prices.

We sold approximately $3.1 million and $5.4 million of RINs to Delek Holdings during the three and six months ended June 30, 2021, respectively.

Additionally, we sold approximately $0.6 million and $1.5 million of RINs to Delek Holdings during the three and six months ended June 30, 2020, respectively.

See below for the high, low and average prices of RINs for each of the quarterly periods in 2020 and in the two quarterly periods in 2021.

Management's Discussion and Analysis

We sold approximately $2.7 million and $8.1 million of RINs to Delek Holdings during the three and nine months ended September 30, 2021, respectively.

Additionally, we sold approximately $0.8 million and $2.3 million of RINs to Delek Holdings during the three and nine months ended September 30, 2020, respectively.

See below for the high, low and average prices of RINs for each of the quarterly periods in 2020 and in the three quarterly periods in 2021.

All of these factors are subject to change over time.

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Contractual Obligations

There have been no material changes to our contractual obligations and commercial commitments during the three and six months ended June 30, 2021 from those disclosed in our Annual Report on Form 10-K.

There have been no material changes to our contractual obligations and commercial commitments during the three and nine months ended September 30, 2021 from those disclosed in our Annual Report on Form 10-K.

Critical Accounting Policies

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(i) evaluating impairment for property, plant and equipment and intangibles, and (ii) evaluating potential impairment of goodwill.

During the three months ended June 30, 2021, we updated our critical accounting policies to include accounting policies that have become critical as a result of new events.

Accordingly we are adding a critical accounting policy related to equity method investments impairment assessment as follows:

During the nine months ended September 30, 2021, we updated our critical accounting policies to include accounting policies that have become critical as a result of new events.

Accordingly we added a critical accounting policy related to equity method investments impairment assessment as follows:

Equity Method Investments and Impairment

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The new cost basis of the investment is not changed for subsequent recoveries in fair value.

As of June 30, 2021, we identified the non-renewal of a significant revenue contract which expires on August 31, 2021 by a customer and major shareholder of Andeavor Logistics RIO Pipeline LLC ("Andeavor Logistics") and lower competitor tariff rates compared to FERC approved tariff rates as triggering events requiring that we perform an impairment assessment on our equity method investment.

During the second quarter ended June 30, 2021, we identified the non-renewal of a significant revenue contract which expired on August 31, 2021 by a customer and major shareholder of Andeavor Logistics RIO Pipeline LLC ("Andeavor Logistics") and lower competitor tariff rates compared to FERC approved tariff rates as triggering events requiring that we perform an impairment assessment on our equity method investment.

The fair value of our equity method investment was estimated using the income approach and the market approach.

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This included sensitivity analysis and stress testing on certain of our inputs to our valuation model, including the estimated revenue (including the throughput barrel per day and tariff rates), EBITDA margin and WACC.

Based on our analyses, we determined that there is no other than temporary impairment on our equity method investment as of June 30, 2021.

Management's Discussion and Analysis

We performed a sensitivity analysis on our impairment test as of June 30, 2021, noting the following:

Equity Method Investment Balance at June 30, 2021 Stress Testing Range of Estimated Fair Values % Estimated Fair Value exceeds Carrying Value (1)

Increase in WACC that could cause impairment (2)

Decrease in long-term growth rate that could cause impairment (2)

Andeavor Logistics $ 47,693 $44,292 - $62,667 < 5% 0.2% 0.5%

(1) Carrying Value compared to our selected Fair Value Point Estimate

(2) Assumes no other changes in any of the key assumptions related to the selected Point Estimate.

Based on our analyses, we determined that there was no other than temporary impairment on our equity method investment as of June 30, 2021.

As of September 30, 2021 we performed a qualitative assessment evaluating whether there were any significant changes in the key assumptions and other significant inputs in our valuation model and concluded that there were no significant changes that would warrant a quantitative assessment to be performed.

Qualitative matters that may impact our estimates of the fair value of our equity method investment include assumptions regarding the timing of another throughput contract and ramp up of throughput volumes, timing of competitor tariff rates recovery compared to FERC tariff rates, the pipeline location and resultant impact on possible customers capacity utilization, the Delaware Permian Basin takeaway and production levels, regulatory impacts, competitors entering the location by building competing pipelines, and other operational issues which might affect Andeavor Logistics’ ability to scale up throughput capacity.

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If actual results were subsequently materially lower than expected, if significant adverse changes were to occur in its operating environment, if a significant increase in the discount rate were to be needed, and/or if changes in other assumptions were to happen, the Partnership’s estimate of the fair value of its equity investment could change materially.

Management's Discussion and Analysis

Non-GAAP Measures

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The financial statements, together with the following information, are intended to provide investors with a reasonable basis for assessing our historical operations, but should not serve as the only criteria for predicting our future performance.

The following table and discussion present a summary of our consolidated results of operations for the three and six months ended June 30, 2021 and 2020, including a reconciliation of net income to EBITDA and net cash flow provided by operating activities to distributable cash flow.

The following table and discussion present a summary of our consolidated results of operations for the three and nine months ended September 30, 2021 and 2020, including a reconciliation of net income to EBITDA and net cash flow provided by operating activities to distributable cash flow.

Statement of Operations Data (in thousands, except unit and 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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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)

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

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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 costs and expenses 7,153 5,605 17,854 16,082

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

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

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

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

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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

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Reconciliation of net income to EBITDA (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

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

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

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

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

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Reconciliation of net cash from operating activities to distributable cash flow (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

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Deferred income taxes (138) (47) (203) (990)

Other operating income, net 136 — 219 107

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

Distributable cash flow (3)

$ 55,515 $ 59,098 $ 161,929 $ 151,800

(1) For a definition of distributable cash flow, please see "Non-GAAP Measures" above.

(1) Maintenance and regulatory capital expenditures represent cash expenditures (including expenditures for the addition or improvement to, or the replacement of, our capital assets, and for the acquisition of existing, or the construction or development of new, capital assets) made to maintain our long-term operating income or operating capacity.

Examples of maintenance and regulatory capital expenditures are expenditures for the repair, refurbishment and replacement of pipelines and terminals, to maintain equipment reliability, integrity and safety and to address environmental laws and regulations.

(3) For the three and six month periods ended June 30, 2021 and 2020, Delek Holdings reimbursed us for certain capital expenditures pursuant to the terms of the Omnibus Agreement (as defined in Note 3 to our accompanying condensed consolidated financial statements).

(2) For the three and nine month periods ended September 30, 2021 and 2020, Delek Holdings reimbursed us for certain capital expenditures pursuant to the terms of the Omnibus Agreement (as defined in Note 3 to our accompanying condensed consolidated financial statements).

(3) For a definition of distributable cash flow, please see "Non-GAAP Measures" above.

Management's Discussion and Analysis

Results of Operations

Consolidated Results of Operations — Comparison of the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020

Consolidated Results of Operations — Comparison of the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020

The table below presents a summary of our consolidated results of operations.

The discussion immediately following presents the consolidated results of operations (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

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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

Net revenues increased by $50.8 million, or 43.2%, in the second quarter of 2021 compared to the second quarter of 2020, primarily driven by the following:

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

See Note 2 of the condensed consolidated financial statements in Item 1.

Financial Statements, for additional information.

• increases in the average sales prices per gallon of gasoline and diesel sold and increases in the volumes of diesel and gasoline sold in our West Texas marketing operations.

Net revenues increased by $47.4 million, or 33.3%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

• increased revenues at our Big Spring Refinery Crude Pipeline (the "BSR Crude Pipeline"), as a result of new contracts executed in the second quarter of 2020, which had higher throughput volumes during the third quarter of 2021 compared to the third quarter of 2020;

• increased revenues for the Trucking Assets, due to higher volumes transported from El Dorado;

• increase in revenues for the Paline pipeline and Plains connection system, due to higher throughput volumes;

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

◦ the average sales prices per gallon of gasoline and diesel sold increased $0.93 per gallon and $0.95 per gallon, respectively;

◦ the volume of diesel and gasoline sold increased by 0.7 million gallons, and 0.3 million gallons, respectively.

Net revenues increased by $40.4 million, or 14.4%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily driven by the following:

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

See Note 2 of the condensed consolidated financial statements in Item 1.

◦ the average volumes of gasoline sold increased by 2.9 million gallons, partially offset by a 0.5 million gallons decrease in the average volumes of diesel sold.

Net revenues increased by $87.7 million, or 20.7%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

• increased revenues associated with agreements executed in connection with the Big Spring Gathering Assets and the Trucking Assets acquisitions, which were effective March 31, 2020 and May 1, 2020, respectively.

See Note 2 to the condensed consolidated financial statements in Item 1.

Financial Statements, for additional information;

• increased revenues at our Big Spring Refinery Crude Pipeline (the "BSR Crude Pipeline"), as a result of new contracts executed in the second quarter of 2020.

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

• increases in the average sales prices per gallon of gasoline and diesel sold, partially offset by decreases in the average volumes of gasoline and diesel sold in our West Texas marketing operations:

◦ the average sales prices per gallon of gasoline and diesel sold increased by $0.57 per gallon and $0.55 per gallon, respectively;

Management's Discussion and Analysis

◦ the average sales prices per gallon of gasoline and diesel sold increased by $0.69 per gallon and $0.69 per gallon, respectively;

◦ the volume of gasoline and diesel sold decreased by 10.7 million gallons and 9.0 million gallons, respectively.

Such increases were partially offset by the following:

• decreases in throughputs due to the impact of the severe freezing conditions that affected most of the regions where we operate resulting in lower volumes outside of contractual minimum volume commitments during the six months ended June 30, 2021 when compared to the six months ended June 30, 2020.

• decreases in throughputs due to the impact of the severe freezing conditions that affected most of the regions where we operate resulting in lower volumes outside of contractual minimum volume commitments during the nine months ended September 30, 2021 when compared to the nine months ended September 30, 2020;

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

Cost of Materials and Other

Cost of materials and other increased by $44.8 million, or 102.1%, in the second quarter of 2021 compared to the second quarter of 2020, primarily driven by the following:

• increases in the average cost per gallon of gasoline and diesel sold, and increases in the volume of diesel and gasoline sold in our West Texas marketing operations:

Cost of materials and other increased by $44.4 million, or 73.2%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

• increases in the average cost per gallon of gasoline and diesel sold and average volumes of gasoline sold, partially offset by a decrease in the average volumes of diesel sold in our West Texas marketing operations:

◦ the average cost per gallon of gasoline and diesel sold increased $1.01 per gallon and $0.96 per gallon, respectively;

◦ the volume of diesel and gasoline sold increased by 0.7 million gallons and 0.3 million gallons, respectively.

Cost of materials and other increased by $24.7 million, or 17.0%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily driven by the following:

◦ the average volumes of gasoline sold increased by 2.9 million gallons, partially offset by a 0.5 million gallons decrease in the average volumes of diesel sold.

Cost of materials and other increased by $69.1 million, or 33.6%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

• increases in the average cost per gallon of gasoline and diesel sold, partially offset by decreases in the average volumes of gasoline and diesel sold in our West Texas marketing operations:

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Operating Expenses

Operating expenses increased by $3.0 million, or 24.4%, in the second quarter of 2021 compared to the second quarter of 2020, primarily driven by the following:

Operating expenses increased by $3.1 million, or 21.9%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

• increases in employee and outside service costs after cost cutting measures previously implemented to respond to the COVID-19 Pandemic, including delaying non-essential projects, ended;

• increase in energy costs, due to higher natural gas prices;

• increases in utilities, maintenance and other variable expenses due to higher throughput.

Operating expenses increased by $2.3 million, or 8.6%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily driven by the following:

Operating expenses increased by $5.5 million, or 13.3%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

• increases in employee and outside service costs after cost cutting measures implemented to respond to the COVID-19 Pandemic, including delaying non-essential projects, ended;

• increase in energy costs due to higher natural gas prices;

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

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

General and Administrative Expenses

General and administrative expenses increased by $1.4 million, or 28.7%, in the second quarter of 2021 compared to the second quarter of 2020, primarily driven by the following:

• increase in legal and professional consulting fees due to transactions during the quarter.

Management's Discussion and Analysis

General and administrative expenses increased by $0.1 million, or 0.8%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

General and Administrative Expenses

The changes in general and administrative expenses for both the third quarter of 2021 compared to the third quarter of 2020 and the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 were immaterial.

Depreciation and Amortization

Depreciation and amortization increased by $1.3 million, or 14.6%, in the second quarter of 2021 compared to the second quarter of 2020, primarily driven by the following:

• addition of assets to our asset base as a result of the Trucking Assets Acquisition and the Big Spring Gathering Assets Acquisition.

Depreciation and amortization increased by $5.7 million, or 38.1%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily driven by the following:

Depreciation and amortization increased by $0.7 million, or 7.4%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

• additions to assets as part of operational growth projects.

Depreciation and amortization increased by $6.4 million, or 26.2%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

• addition of assets to our asset base as a result of the Trucking Assets Acquisition and the Big Spring Gathering Assets Acquisition.

Interest Expense

During the three months ended June 30, 2021 we incurred $11.7 million of interest expense, compared to $10.7 million during the three months ended June 30, 2020, an increase of $1.0 million, or 9.3%.

During the three months ended September 30, 2021 we incurred $14.5 million of interest expense, compared to $10.4 million during the three months ended September 30, 2020, an increase of $4.1 million, or 40.0%.

This increase was primarily driven by the following:

• increased borrowings under the DKL Credit Facility as a result of the Trucking Assets Acquisition and the IDR Restructuring Transaction;

• higher fixed rate interest on the new 2028 Notes during the third quarter of 2021 compared to our floating interest rates under the DKL Credit Facility;

• partially offset by a decrease in floating interest rates applicable to the DKL Credit Facility and lower total debt levels.

During the nine months ended September 30, 2021 we incurred $35.9 million of interest expense, compared to $32.9 million during the nine months ended September 30, 2020, an increase of $3.0 million, or 9.3%.

This increase was primarily driven by the following:

• higher fixed rate interest on the new 2028 Notes issued during second quarter of 2021 compared to our floating interest rates under the DKL Credit Facility;

• increased borrowings under the DKL Credit Facility as a result of our Big Spring Gathering Assets Acquisition, the Trucking Assets Acquisition and the IDR Restructuring Transaction;

• partially offset by a decrease in floating interest rates applicable to the DKL Credit Facility.

During the six months ended June 30, 2021 we incurred $21.4 million of interest expense, compared to $22.5 million during the six months ended June 30, 2020, a decrease of $1.1 million, or 4.9%.

This decrease was primarily driven by the following:

• lower floating interest rates applicable to the DKL Credit Facility;

• partially offset by increased borrowings under the DKL Credit Facility as a result of our Big Spring Gathering Assets Acquisition, the Trucking Assets Acquisition and the IDR Restructuring Transaction;

• higher fixed rate interest on the new 2028 Notes issued during second quarter of 2021 compared to our floating interest rates under the DKL Credit Facility.

Results from Equity Method Investments

We recognized income of $6.6 million from equity method investments during the second quarter of 2021 compared to $6.5 million for the second quarter of 2020, an increase of $0.1 million, or 1.5%.

During the six months ended June 30, 2021 we recognized income of $10.7 million from equity method investments, compared to $12.0 million for the six months ended June 30, 2020, a decrease of $1.3 million, or 11.0%.

This decrease was primarily driven by the following:

• decrease in income from our equity method investments due to lower volumes as the impact of the February 2021 severe freezing conditions was pervasive across all of our equity method investments' pipeline systems.

We recognized income of $7.3 million from equity method investments during the third quarter of 2021 compared to $4.9 million for the third quarter of 2020, an increase of $2.4 million, or 49.4%.

This increase was primarily driven by the following:

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

Caddo and Rio equity method investments income slightly increased as well.

During the nine months ended September 30, 2021 we recognized income of $18.0 million from equity method investments, compared to $16.9 million for the nine months ended September 30, 2020, an increase of $1.1 million, or 6.4%.

This increase was primarily driven by the following:

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

Caddo and Rio equity method investments income slightly increased as well;

• partially offset by lower income from our equity method investments in the first quarter of 2021 due to lower volumes as the impact of the February 2021 severe freezing conditions was pervasive across all of our equity method investments' pipeline systems.

Management's Discussion and Analysis

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In addition to these operating systems, we own or lease 264 tractors and 353 trailers used to haul primarily crude oil and other products for related and third parties.

The following tables and discussion present the results of operations and certain operating statistics of the pipelines and transportation segment for the three and six months ended June 30, 2021 and 2020:

The following tables and discussion present the results of operations and certain operating statistics of the pipelines and transportation segment for the three and nine months ended September 30, 2021 and 2020:

Pipelines and Transportation

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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Throughputs (average bpd)

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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Management's Discussion and Analysis

Comparison of the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020

Net revenues for the pipelines and transportation segment increased by $7.0 million, or 11.1%, in the second quarter of 2021 compared to the second quarter of 2020, primarily driven by the following:

• increased revenues associated with agreements executed in connection with the Big Spring Gathering Assets Acquisition and the Trucking Assets Acquisition, which were effective March 31, 2020 and May 1, 2020, respectively.

See Note 2 of the condensed consolidated financial statements in Item 1.

Financial Statements, for additional information.

Net revenues for the pipelines and transportation segment increased by $24.0 million, or 21.6%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily driven by the following:

Comparison of the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020

Net revenues for the pipelines and transportation segment increased by $4.7 million, or 6.6%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

• increased revenues at our BSR Crude Pipeline, as a result of new contracts executed in the second quarter of 2020, which had higher throughput volumes during the third quarter of 2021 compared to the third quarter of 2020;

• increased revenues for the El Dorado trucking due to higher volumes transported;

• increase in revenues for the Paline pipeline and Plains connection due to higher throughput volumes.

Net revenues for the pipelines and transportation segment increased by $28.7 million, or 15.7%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

See Note 2 of the condensed consolidated financial statements in Item 1.

See Note 2 to the condensed consolidated financial statements in Item 1.

Financial Statements, for additional information;

• increased revenues at our BSR Crude Pipeline, as a result of new contracts executed in the second quarter of 2020, during the six months ended June 30, 2021 when compared to the six months ended June 30, 2020;

• partially offset by decreases in throughputs due to the impact of the severe freezing conditions that affected most of the regions where we operate resulting in lower volumes outside of contractual minimum volume commitments and decreases in throughputs at the Paline pipeline due to scheduled pipeline maintenance during the six months ended June 30, 2021 when compared to the six months ended June 30, 2020.

• increased revenues at our BSR Crude Pipeline, as a result of new contracts executed in the second quarter of 2020, during the nine months ended September 30, 2021 when compared to the nine months ended September 30, 2020;

• partially offset by decreases in throughputs due to the impact of the severe freezing conditions that affected most of the regions where we operate resulting in lower volumes outside of contractual minimum volume commitments and decreases in throughputs at the Paline pipeline due to scheduled pipeline maintenance during the nine months ended September 30, 2021 when compared to the nine months ended September 30, 2020.

Cost of Materials and Other

Cost of materials and other for the pipelines and transportation segment increased $3.2 million, or 28.3%, in the second quarter of 2021 compared to the second quarter of 2020, primarily driven by the following:

Cost of materials and other for the pipelines and transportation segment increased $0.8 million, or 5.8%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

• increases in transportation costs related to our trucking assets, including driver wages and benefits and fuel expenses proportionate to increase in fees, insurance, supplies and maintenance expenses.

Cost of materials and other for the pipelines and transportation segment increased by $10.1 million, or 58.7%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily driven by the following:

Cost of materials and other for the pipelines and transportation segment increased by $11.0 million, or 34.7%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

• increases in transportation costs related to our Trucking Assets due to the Trucking Assets Acquisition, which was effective May 1, 2020;

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Operating Expenses

Operating expenses for the pipelines and transportation segment increased by $1.1 million, or 11.6%, in the second quarter of 2021 compared to the second quarter of 2020, primarily driven by the following:

Operating expenses for the pipelines and transportation segment increased by $2.9 million, or 27.3%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

• increase in employee and outside service costs compared to same period prior year when cost cutting measures were implemented to respond to the COVID-19 Pandemic including delaying non-essential projects;

• increase in energy costs due to higher natural gas prices;

• increase in utilities and other variable expenses due to higher throughputs.

Operating expenses for the pipelines and transportation segment decreased by $0.2 million, or 0.7%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily driven by the following:

Management's Discussion and Analysis

• decreases in employee and outside service costs during the first quarter of 2021 when cost cutting measures implemented to respond to the COVID-19 Pandemic, including delaying non-essential projects, were still in place;

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

Operating expenses for the pipelines and transportation segment increased by $2.8 million, or 8.7%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

• increase in energy costs due to higher natural gas prices;

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

Contribution Margin

Contribution margin for the pipelines and transportation segment increased by $2.7 million, or 6.4%, in the second quarter of 2021 compared to the second quarter of 2020, primarily driven by the following:

• increases in revenues associated with agreements executed in connection with the Big Spring Gathering Assets Acquisition and the Trucking Assets Acquisition;

Contribution margin for the pipelines and transportation segment increased by $1.0 million, or 2.1%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

• increases in revenue due to higher throughput volumes as explained above;

• partially offset by increases in operating expenses.

Contribution margin for the pipelines and transportation segment increased by $14.0 million, or 19.2%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily driven by the following:

Contribution margin for the pipelines and transportation segment increased by $15.0 million, or 12.6%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

• increases in revenues associated with agreements executed in connection with the Big Spring Gathering Assets Acquisition, the Trucking Assets Acquisition and the BSR Crude Pipeline;

• decreases in operating expenses;

• partially offset by the increase in cost of materials and other in connection with the Trucking Assets Acquisition.

• partially offset by the increase in cost of materials and other in connection with the Trucking Assets Acquisition and an increase in operating expenses.

Management's Discussion and Analysis

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We use our wholesale marketing and terminalling assets to generate revenue by providing wholesale marketing and terminalling services to Delek Holdings' refining operations and to independent third parties.

The tables and discussion below present the results of operations and certain operating statistics of the wholesale marketing and terminalling segment for the three and six months ended June 30, 2021 and 2020 :

The tables and discussion below present the results of operations and certain operating statistics of the wholesale marketing and terminalling segment for the three and nine months ended September 30, 2021 and 2020 :

Wholesale Marketing and Terminalling

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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Operating Information

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

Comparison of the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020

Net revenues for the wholesale marketing and terminalling segment increased by $43.8 million, or 80.9%, in the second quarter of 2021 compared to the second quarter of 2020, primarily driven by the following:

• increases in the average sales prices per gallon of gasoline and diesel sold and increases in the volumes of diesel and gasoline sold in our West Texas marketing operations.

Comparison of the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020

Net revenues for the wholesale marketing and terminalling segment increased by $42.6 million, or 60.2%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

◦ the average sales prices per gallon of gasoline and diesel sold increased $0.93 per gallon and $0.95 per gallon, respectively;

◦ the volume of diesel and gasoline sold increased by 0.7 million gallons and 0.3 million gallons, respectively.

Net revenues for the wholesale marketing and terminalling segment increased by $16.3 million, or 9.6%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily driven by the following:

◦ the average volumes of gasoline sold increased by 2.9 million gallons, partially offset by a 0.5 million gallons decrease in the average volumes of diesel sold.

Net revenues for the wholesale marketing and terminalling segment increased by $59.0 million, or 24.5%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

Management's Discussion and Analysis

◦ the average sales prices per gallon of gasoline and diesel sold increased by $0.69 per gallon and $0.69 per gallon, respectively;

◦ the volume of gasoline and diesel sold decreased by 13.6 million gallons and 8.5 million gallons, respectively.

Management's Discussion and Analysis

◦ the average volumes of gasoline and diesel sold decreased by 10.7 million gallons and 9.0 million gallons, respectively.

The following charts show summaries of the average sales prices per gallon of gasoline and diesel and refined products volume impacting our West Texas operations.

Cost of Materials and Other

Cost of materials and other for our wholesale marketing and terminalling segment increased by $41.6 million, or 127.3%, in the second quarter of 2021 compared to the second quarter of 2020, primarily driven by the following:

• increases in the average cost per gallon of gasoline and diesel sold and increases in the volumes of diesel and gasoline sold in our West Texas marketing operations.

Cost of materials and other for our wholesale marketing and terminalling segment increased by $43.6 million, or 94.1%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

• increases in the average cost per gallon of gasoline and diesel sold and average volumes of gasoline sold, partially offset by decreases in the average volumes of diesel sold in our West Texas marketing operations:

◦ the average cost per gallon of gasoline and diesel sold increased $1.01 per gallon and $0.96 per gallon, respectively;

◦ the volume of diesel and gasoline sold increased by 0.7 million gallons and 0.3 million gallons, respectively.

Cost of materials and other for our wholesale marketing and terminalling segment increased by $14.5 million, or 11.4%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily driven by the following:

◦ the average volumes of gasoline sold increased by 2.9 million gallons, partially offset by a 0.5 million gallons decrease in the average volumes of diesel sold.

Management's Discussion and Analysis

Cost of materials and other for our wholesale marketing and terminalling segment increased by $58.1 million, or 33.4%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

• increases in the average cost per gallon of gasoline and diesel sold, partially offset by decreases in the average volumes of gasoline and diesel sold in our West Texas marketing operations:

◦ the average cost per gallon of gasoline and diesel sold increased by $0.75 per gallon and $0.68 per gallon, respectively;

Management's Discussion and Analysis

◦ the average volumes of gasoline and diesel sold decreased by 10.7 million gallons and 9.0 million gallons, respectively.

The following chart shows a summary of the average prices per gallon of gasoline and diesel sold in our West Texas operations for the three and six months ended June 30, 2021 and 2020.

The following chart shows a summary of the average prices per gallon of gasoline and diesel sold in our West Texas operations for the three and nine months ended September 30, 2021 and 2020.

Refer to the Refined Products Volume chart above for a summary of volumes impacting our West Texas operations.

Operating Expenses

Operating expenses increased by $1.9 million, or 70.1%, in the in the second quarter of 2021 compared to the second quarter of 2020, primarily driven by the following:

Operating expenses increased by $0.2 million, or 5.3%, in the in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

• increases in variable expenses such as utilities, maintenance and material costs;

• this increase was partially offset by lower operating costs associated with allocated contract services pertaining to certain of our assets.

Operating expenses increased by $2.5 million, or 41.6%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily driven by the following:

Operating expenses increased by $2.7 million, or 28.9%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by the following:

• increases in variable expenses such as utilities, maintenance and material costs;

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

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Contribution Margin

Contribution margin for the wholesale marketing and terminalling segment increased by $0.3 million, or 1.5%, in the second quarter of 2021 compared to the second quarter of 2020, primarily driven by the following:

• increase in revenue due to increases in average price per gallon of diesel and gasoline as described above.

Such increases were offset by:

• increase in cost of materials and other due to increases in average cost per gallon of diesel and gasoline sold as described above.

The decrease of $0.7 million, or 2.0%, in contribution margin for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 was due to increases in cost of materials and other and operating expenses offset by increases in revenue as described above.

Contribution margin for the wholesale marketing and terminalling segment decreased by $1.2 million, or 5.5%, in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the following:

Management's Discussion and Analysis

• increase in cost of materials and other due to increases in average cost per gallon of diesel and gasoline sold as described above.

Such decreases were offset by:

• increase in revenue due to increases in average price per gallon of diesel and gasoline as described above.

The decrease of $1.9 million, or 3.4%, in contribution margin for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 was due to increases in cost of materials and other and operating expenses offset by increases in revenue as described above.

Liquidity and Capital Resources

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(iv) potential issuance of additional debt securities.

At June 30, 2021 our total liquidity amounted to $563.4 million, comprised of $561.2 million in unused credit commitments under the DKL Credit Facility and $2.2 million in cash and cash equivalents.

At September 30, 2021 our total liquidity amounted to $594.0 million, comprised of $589.1 million in unused credit commitments under the DKL Credit Facility and $4.9 million in cash and cash equivalents.

We have the ability to increase the DKL Credit Facility to $1.0 billion subject to receiving increased or new commitments from lenders and meeting certain requirements under the credit facility.

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Management continues to actively respond to the impact of the COVID-19 Pandemic to enhance our liquidity position.

Such actions include reducing planned capital expenditures for 2021, seeking alternative financing solutions and enacting cost reduction measures.

Such actions include seeking alternative financing solutions and enacting cost reduction measures.

Refer to the Business Overview section of this MD&A for a complete discussion of the uncertainties identified by management and the actions taken to respond to the COVID-19 Pandemic.

We believe we were in compliance with the covenants in all our debt facilities as of June 30, 2021.

We believe we were in compliance with the covenants in all our debt facilities as of September 30, 2021.

After considering the potential effect of the uncertainty created by the COVID-19 Pandemic on our operations, we currently expect to remain in compliance with our debt covenants.

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Cash Distributions

On July 26, 2021, our board of directors declared a distribution of $0.940 per common unit (the "Distribution"), which equates to approximately $40.8 million per quarter, based on the number of common units expected to be outstanding as of August 5, 2021.

The Distribution is expected to be paid on August 11, 2021 to common unitholders of record on August 5, 2021 and represents a 4.4% increase over the second quarter 2020 distribution.

On October 26, 2021, the board of directors of our general partner declared a distribution of $0.950 per common unit (the "Distribution"), which equates to approximately $41.3 million per quarter, based on the number of common units expected to be outstanding as of November 5, 2021.

The Distribution is expected to be paid on November 10, 2021 to common unitholders of record on November 5, 2021

Management's Discussion and Analysis

and represents a 5.0% increase over the third quarter 2020 distribution.

We have set a distribution growth guidance of 5% for the full year 2021.

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Although our Partnership Agreement requires that we distribute all of our available cash each quarter, we do not otherwise have a legal obligation to distribute any particular amount per common unit.

Management's Discussion and Analysis

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, including general partner interest and IDRs (in thousands) Date of Distribution Unitholders Record Date

June 30, 2020 $ 0.900 $ 3.60 $ 35,969 August 12, 2020 August 7, 2020

September 30, 2020 $ 0.905 $ 3.62 $ 39,308 November 12, 2020 November 6, 2020

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August 5, 2021

September 30, 2021 $ 0.950 $ 3.80 $ 41,286 November 10, 2021 (1)

November 5, 2021

(1) Expected date of distribution.

The following table sets forth a summary of our consolidated cash flows for the six months ended June 30, 2021 and 2020 (in thousands):

Six Months Ended June 30,

The following table sets forth a summary of our consolidated cash flows for the nine months ended September 30, 2021 and 2020 (in thousands):

Nine Months Ended September 30,

Net cash provided by operating activities $ 222,276 $ 134,654

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Operating Activities

Net cash provided by operating activities was $147.5 million for the six months ended June 30, 2021, compared to $72.4 million for the six months ended June 30, 2020, resulting in a $75.1 million increase in net cash provided by operating activities.

The cash receipts from customer activities increased by $40.7 million and cash payments to suppliers and for allocations from Delek Holdings for salaries decreased by $34.4 million.

Net cash provided by operating activities was $222.3 million for the nine months ended September 30, 2021, compared to $134.7 million for the nine months ended September 30, 2020, resulting in a $87.6 million increase in net cash provided by operating activities.

The cash receipts from customer activities increased by $89.3 million and cash payments to suppliers and for allocations from Delek Holdings for salaries increased by $6.7 million.

In addition, cash dividends received from equity method investments decreased by $2.7 million and cash paid for debt interest decreased by $7.7 million.

Investing Activities

Net cash used in investing activities decreased by $109.0 million during the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

The decrease in cash used in investing activities was primarily due to lower contributions to equity method investments and no acquisitions during the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

We disbursed $1.4 million in additional contributions to our equity method investments during the six months ended June 30, 2021 compared to $10.5 million during the six months ended June 30, 2020.

Net cash used in investing activities decreased by $108.4 million during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The decrease in cash used in investing activities was primarily due to lower contributions to equity method investments and no acquisitions during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

We disbursed $1.4 million in additional contributions to our equity method investments during the nine months ended September 30, 2021 compared to $11.8 million during the nine months ended September 30, 2020.

The Big Spring Gathering Assets Acquisition, effective on March 31, 2020, was partially financed with cash from a drawdown of the DKL Credit Facility amounting to $100.0 million which was recorded in investing activities and the Trucking Assets Acquisition was financed with cash from drawdowns of the DKL Credit Facility amounting to $48 million of which $0.5 million was recorded as investing activity with $47.6 million recorded in financing activities as a distribution to Delek Holdings and the other owners of our general partner prior to the IDR Restructuring Transaction pursuant to the asset acquisitions under common control guidance.

Transaction costs paid amounting to $1.0 million were capitalized for the Big Spring Gathering Assets Acquisition and the Trucking Assets Acquisition.

There was no asset acquisition during the six months ended June 30, 2021.

In addition there were additions to property, plant and equipment amounting to $8.8 million, additions to intangible assets amounting to $0.7 million and distributions from equity method investments amounting $5.4 million during the six months ended June 30, 2021 compared to additions to property, plant and equipment amounting to $5.0 million and distributions from equity method investments amounting to $1.7 million during the six months ended June 30, 2020.

Financing Activities

Net cash used in financing activities amounted to $144.4 million during the six months ended June 30, 2021 compared to $52.5 million net cash provided by financing activities during the six months ended June 30, 2020.

We repaid $457.8 million under the revolving credit facility during the six months ended June 30, 2021, compared to net proceeds of $161.6 million under the revolving credit facility during the six months ended June 30, 2020.

In addition, we paid quarterly cash distributions totaling $79.5 million during the six months ended June 30, 2021, compared to quarterly cash distributions totaling $61.5 million during the six months ended June 30, 2020.

On May 24, 2021, the

There was no asset acquisition during the nine months ended September 30, 2021.

In addition there were additions to property, plant and equipment amounting to $12.4 million, additions to intangible assets amounting to $0.7 million and distributions from equity method investments amounting $6.2 million during the nine months ended September 30, 2021 compared to additions to property, plant and equipment amounting to $6.9 million and distributions from equity method investments amounting to $2.7 million during the nine months ended September 30, 2020.

Management's Discussion and Analysis

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").

Financing Activities

Net cash used in financing activities amounted to $213.7 million during the nine months ended September 30, 2021 compared to $17.8 million net cash provided by financing activities during the nine months ended September 30, 2020.

We repaid $485.7 million under the revolving credit facility during the nine months ended September 30, 2021, compared to net proceeds of $172.3 million under the revolving credit facility during the nine months ended September 30, 2020.

In addition, we paid quarterly cash distributions totaling $120.4 million during the nine months ended September 30, 2021, compared to quarterly cash distributions totaling $97.5 million during the nine months ended September 30, 2020.

Payments to Delek Holdings unitholders related to Trucking Assets Acquisition amounting to $47.6 million and payments to our general partner for conversion of its interest and elimination of IDR amounting to $45.0 million were recorded in financing activities during the nine months ended September 30, 2020 and there were no such payments during the nine months ended September 30, 2021.

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

("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").

Proceeds of $400.0 million were received and deferred financing costs amounting to $6.2 million were paid.

The Partnership used the net proceeds received from the sale of the 2028 Notes to repay portion of the outstanding borrowings under the revolving credit facility.

The sources of cash during the six months ended June 30, 2020 primarily consisted of the $100.0 million drawdown under the DKL Credit Facility to part-finance the Big Spring Gathering Assets Acquisition.

The sources of cash during the nine months ended September 30, 2020 primarily consisted of the $100.0 million drawdown under the DKL Credit Facility to part-finance the Big Spring Gathering Assets Acquisition.

The Big Spring Gathering Assets Acquisition was also financed by the issuance of 5.0 million units to Delek US Energy, Inc.

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Debt Overview

As of June 30, 2021, we had total indebtedness of $928.7 million comprised of $288.8 million under the amended and restated senior secured revolving agreement (the "DKL Credit Facility"), $246.2 million of 6.75% senior notes due 2025 (the “2025 Notes”), the latter net of deferred financing costs and original issue discount, and $393.7 million of the 2028 Notes, net of deferred financing costs.

As of September 30, 2021, we had total indebtedness of $901.4 million comprised of $260.9 million under the amended and restated senior secured revolving agreement (the "DKL Credit Facility"), $246.4 million of 6.75% senior notes due 2025 (the “2025 Notes”), the latter net of deferred financing costs and original issue discount, and $394.1 million of the 2028 Notes, net of deferred financing costs.

Deferred financing costs and original issue discount on the 2025 Notes amounted to $2.7 million and $0.9 million, respectively.

Deferred financing costs on the 2028 Notes amounted to $5.9 million.

The decrease of $63.6 million in our long-term debt balance compared to the balance at December 31, 2020 resulted from the payments under the DKL Credit Facility during the six months ended June 30, 2021 and amortization of the deferred financing costs and original issuance discount under our 2025 Notes, partially offset by the incurrence of the new 2028 Notes.

As of June 30, 2021, our total indebtedness consisted of:

The decrease of $90.9 million in our long-term debt balance compared to the balance at December 31, 2020 resulted from the payments under the DKL Credit Facility during the nine months ended September 30, 2021, partially offset by the amortization of the deferred financing costs and original issuance discount under our 2025 and 2028 Notes and by the incurrence of the new 2028 Notes.

As of September 30, 2021, our total indebtedness consisted of:

• An aggregate principal amount of $260.9 million under the DKL Credit Facility ("revolving credit facility"), due on September 28, 2023, with an average borrowing rate of 2.62%.

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• An aggregate principal amount of $394.1 million, under the 2028 Notes (7.125% senior notes), due in 2028, with an effective interest rate of 7.41%.

We believe we were in compliance with the covenants in all our debt facilities as of June 30, 2021.

We believe we were in compliance with the covenants in all our debt facilities as of September 30, 2021.

See Note 7 to our accompanying condensed consolidated financial statements for a complete discussion of our third-party indebtedness.

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

Management's Discussion and Analysis

On March 31, 2020, we issued 5.0 million units to Delek Holdings as part of the consideration for the Big Spring Gathering Assets Acquisition.

3 unchanged sentences

An additional waiver letter was signed that waived all of the distributions for the first quarter of 2020 on the Additional Units with respect to base distributions and the IDRs.

The IDR Restructuring Transaction on August 13,

Management's Discussion and Analysis

2020 permanently eliminated all of the IDRs.

The IDR Restructuring Transaction on August 13, 2020 permanently eliminated all of the IDRs.

See Note 3 to our accompanying condensed consolidated financial statements for additional details.

1 unchanged sentence

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

The following table summarizes our actual capital expenditures for the six months ended June 30, 2021 and planned capital expenditures for the full year 2021 by segment and by major category (in thousands):

Full Year 2021 Forecast Six Months Ended June 30, 2021

The following table summarizes our actual capital expenditures for the nine months ended September 30, 2021 and planned capital expenditures for the full year 2021 by segment and by major category (in thousands):

Full Year 2021 Forecast Nine Months Ended September 30, 2021

Pipelines and Transportation

23 unchanged sentences

Off-Balance Sheet Arrangements

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

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

Management's Discussion and Analysis

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis