Quick10K

Delek Logistics Partners

Price	1.00		EPS	-94,808,000
Shares	-0		P/E	-0
MCap	-0		P/FCF	-0
Net Debt	-6		EBIT	130
TEV	-6		TEV/EBIT	-0
TTM 2019-09-30, in MM, except price, ratios

10-Q	2021-03-31	Filed 2021-05-07 Print
10-K	2020-12-31	Filed 2021-03-01 Print
10-Q	2020-09-30	Filed 2020-11-09 Print
10-Q	2020-06-30	Filed 2020-08-07 Print
10-Q	2020-03-31	Filed 2020-05-08 Print
10-K	2019-12-31	Filed 2020-02-28 Print
10-Q	2019-09-30	Filed 2019-11-08 Print
10-Q	2019-06-30	Filed 2019-08-08 Print
10-Q	2019-03-31	Filed 2019-05-09 Print
10-K	2018-12-31	Filed 2019-03-01 Print
10-Q	2018-09-30	Filed 2018-11-09 Print
10-Q	2018-06-30	Filed 2018-08-09 Print
10-Q	2018-03-31	Filed 2018-05-10 Print
10-K	2017-12-31	Filed 2018-03-01 Print
10-Q	2017-09-30	Filed 2017-11-09 Print
10-Q	2017-06-30	Filed 2017-08-07 Print
10-Q	2017-03-31	Filed 2017-05-09 Print
10-K	2016-12-31	Filed 2017-02-28 Print
10-Q	2016-09-30	Filed 2016-11-03 Print
10-Q	2016-06-30	Filed 2016-08-05 Print
10-Q	2016-03-31	Filed 2016-05-06 Print
10-K	2015-12-31	Filed 2016-02-29 Print
10-Q	2015-06-30	Filed 2015-11-06 Print
10-Q	2015-06-30	Filed 2015-08-06 Print
10-Q	2015-03-31	Filed 2015-05-08 Print
10-K	2014-12-31	Filed 2015-02-26 Print
10-Q	2014-09-30	Filed 2014-11-06 Print
10-Q	2014-06-30	Filed 2014-08-08 Print
10-Q	2014-03-31	Filed 2014-05-08 Print
10-K	2013-12-31	Filed 2014-03-05 Print
10-Q	2013-09-30	Filed 2013-11-07 Print
10-Q	2013-06-30	Filed 2013-08-08 Print
10-Q	2013-03-31	Filed 2013-05-09 Print
10-K	2012-12-31	Filed 2013-03-12 Print
10-Q	2012-09-30	Filed 2012-12-14 Print

8-K	2021-02-23	Earnings, Exhibits
8-K	2021-01-26	Officers, Regulation FD, Exhibits
8-K	2021-01-25	Regulation FD, Exhibits
8-K	2020-12-07	Regulation FD, Exhibits
8-K	2020-11-24
8-K	2020-11-04
8-K	2020-10-27
8-K	2020-09-01
8-K	2020-08-12
8-K	2020-08-11
8-K	2020-08-04
8-K	2020-07-27
8-K	2020-07-26
8-K	2020-05-21
8-K	2020-05-15
8-K	2020-05-05
8-K	2020-04-21
8-K	2020-04-06
8-K	2020-03-31
8-K	2020-03-31
8-K	2020-02-25
8-K	2020-02-25
8-K	2020-01-24
8-K	2019-12-10
8-K	2019-11-04
8-K	2019-10-25
8-K	2019-08-16
8-K	2019-08-05
8-K	2019-07-24
8-K	2019-05-28
8-K	2019-05-14
8-K	2019-05-06
8-K	2019-04-26
8-K	2019-03-05
8-K	2019-02-19
8-K	2019-01-24
8-K	2018-12-03
8-K	2018-11-13
8-K	2018-11-06
8-K	2018-10-23
8-K	2018-09-28
8-K	2018-08-24
8-K	2018-08-13
8-K	2018-08-08
8-K	2018-08-07
8-K	2018-07-24
8-K	2018-05-22
8-K	2018-05-21
8-K	2018-05-07
8-K	2018-04-26
8-K	2018-03-28
8-K	2018-03-20
8-K	2018-03-20
8-K	2018-03-02
8-K	2018-03-01
8-K	2018-02-26
8-K	2018-02-16
8-K	2018-01-23

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Balance Sheet	Income Statement	Cash Flow
CopyHistoryView Assets, Equity	CopyHistoryView Rev, G Profit, Net Income	CopyHistoryView Ops, Inv, Fin

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Part I - FINANCIAL INFORMATION

Item 1. Financial Statements

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Note 1 - Organization and Basis of Presentation

As used in this report, the terms "Delek Logistics Partners, LP," the "Partnership," "we," "us," or "our" may refer to Delek Logistics Partners, LP, one or more of its consolidated subsidiaries or all of them taken as a whole.

The Partnership is a Delaware limited partnership formed in April 2012 by Delek US Holdings, Inc. ("Delek Holdings") and its subsidiary Delek Logistics GP, LLC, our general partner (our "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, all in exchange for 14.0 million newly issued common limited partner units and $45.0 million in cash ("IDR Restructuring Transaction"). Refer to Note 3 - Related Party Transactions for further information, Note 5 - Net Income per Unit for more information on how these transactions impact our earnings per unit calculations, and Note 8 - Equity for additional information on the impact to our equity accounts.

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 for further information.

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." See Note 2 for further information.

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted, although management believes that the disclosures herein are adequate to make the financial information presented not misleading. Our unaudited condensed consolidated financial statements have been prepared in conformity with U.S. GAAP applied on a consistent basis with those of the annual audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 (our "Annual Report on Form 10-K"), filed with the U.S. Securities and Exchange Commission (the "SEC") on March 1, 2021 and in accordance with the rules and regulations of the SEC. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2020 included in our Annual Report on Form 10-K.

All adjustments necessary for a fair presentation of the financial position and the results of operations for the interim periods presented have been included. All intercompany accounts and transactions have been eliminated. Such intercompany transactions do not include those with Delek Holdings or our general partner, which are presented as related parties in these accompanying condensed consolidated financial statements. All adjustments are of a normal, recurring nature. Operating results for the interim period should not be viewed as representative of results that may be expected for any future interim period or for the full year.

Reclassifications

Certain immaterial reclassifications have been made to prior period presentation in order to conform to the current period presentation.

Risks and Uncertainties Arising from the COVID-19 Pandemic

The on-going impact of the COVID-19 outbreak and its development into a pandemic in March 2020 (the “COVID-19 Pandemic” or the “Pandemic”), the restrictions imposed to prevent its spread, the challenges with the vaccination rollout, and the spread of new variants of the virus, continue to cause significant economic disruption globally, including in the U.S. and specific geographic areas where we operate. Compared to the prior year, the first quarter of 2021 has witnessed economic recovery trends including a resumption of flights by major airlines and increased motor vehicle use. This has in turn resulted in increased demand for, thus also the market prices of, crude oil and certain products, particularly refined petroleum products that we receive revenue for the transportation and storage services we provide and an increase in demand and sales volumes in our wholesale marketing business. As of March 31, 2021 there is continued uncertainty about the duration and future impact of the COVID-19 Pandemic.

Our business model, which includes executing minimum volume commitment contracts with our major customers, to an extent, cushioned us from the impact of the COVID-19 Pandemic in 2020 and during the first quarter of 2021. Uncertainties related to the impact of the COVID-19 Pandemic and other events exist that could impact our future results of operations and financial position, the nature of which and the extent to which are currently unknown. To the extent these uncertainties have been identified and are believed to have an impact on our current period results of operations or financial position based on the requirements for assessing such financial statement impact under GAAP, we have considered them in the preparation of our financial statements as of and for the three months ended March 31, 2021.

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New Accounting Pronouncements Adopted During 2021

ASU 2019-12, Simplifying the Accounting for Income Taxes

In December 2019, the Financial Accounting Standards Board (the “FASB”) issued guidance intended to simplify various aspects related to accounting for income taxes, eliminate certain exceptions within Accounting Standards Codification ("ASC") 740 and clarify certain aspects of the current guidance to promote consistency among reporting entities. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 2020, with early adoption permitted. We adopted this guidance prospectively on January 1, 2021. The adoption of this guidance did not have a material impact on our business, financial condition or results of operations.

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

In January 2020, the FASB issued ASU 2020-01 which is intended to clarify interactions between the guidance to account for certain equity securities under Topics 321, 323 and 815, and improve current GAAP by reducing diversity in practice and increasing comparability of accounting. The pronouncement is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020, and early adoption is permitted. We adopted this guidance prospectively on January 1, 2021. The adoption of this guidance did not have a material impact on our business, financial condition or results of operations.

Accounting Pronouncements Not Yet Adopted

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

In March 2020, the FASB issued an amendment which is intended to provide temporary optional expedients and exceptions to GAAP guidance on contracts, hedge accounting and other transactions affected by the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank rates. This guidance is effective for all entities any time beginning on March 12, 2020 through December 31, 2022 and may be applied from the beginning of an interim period that includes the issuance date of the ASU. The Partnership is evaluating the impact of this guidance but does not currently expect that adopting this new guidance will have a material impact on its condensed consolidated financial statements and related disclosures.

Note 2 - Acquisitions

Trucking Assets Acquisition

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 from Delek Holdings. The total consideration is subject to certain post-closing adjustments and 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).

The Trucking Assets are recorded in our pipelines and transportation segment and include approximately 150 trucks and trailers, which are primarily leased or owned, respectively.

In connection with the closing of the transaction, Delek Holdings, the Partnership and various of their respective subsidiaries entered into a Transportation Services Agreement (the “Trucking Assets TSA Agreement”). 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. See Note 3 for more detailed descriptions of these agreements.

The Trucking Assets Acquisition was considered a transaction between entities under common control. Accordingly, the Trucking Assets were recorded at amounts based on Delek Holdings' historical carrying value as of the acquisition date. The carrying value of the Trucking Assets as of the acquisition date was $13.3 million, consisting of $0.5 million of owned assets and a $12.8 million right of use asset for leased assets. The right of use asset offsets with an equivalent operating lease liability. Prior periods have not been recast as these assets do not constitute a business in accordance with Accounting Standard Update 2017-01, Clarifying the Definition of a Business ("ASU 2017-01"). We capitalized approximately $0.3 million of acquisition costs related to the Trucking Assets Acquisition.

Big Spring Gathering Assets Acquisition

Effective March 31, 2020, the Partnership, through its wholly-owned subsidiary DKL Permian Gathering, LLC, acquired the Big Spring Gathering Assets from Delek Holdings, located in Howard, Borden and Martin Counties, Texas. The total consideration was subject to certain post-closing adjustments and was comprised of $100.0 million in cash and 5.0 million common units representing limited partner interest in us. We financed the cash component of this acquisition with borrowings from the DKL Credit Facility (as defined in Note 7).

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

•Crude oil pipelines;

•Approximately 200 miles of gathering systems;

•Approximately 65 Tank battery connections;

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

•Applicable rights-of-way.

In connection with the closing of the transaction, Delek Holdings, the Partnership and various of their respective subsidiaries entered into a Throughput and Deficiency Agreement (the “Big Spring T&D Agreement”). 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. See Note 3 for more detailed descriptions of these agreements.

The Big Spring Gathering Assets Acquisition was considered a transaction between entities under common control. Accordingly, the Big Spring Gathering Assets were recorded at amounts based on Delek Holdings' historical carrying value as of the acquisition date. The carrying value of the Big Spring Gathering Assets as of the acquisition date was $209.5 million. Pursuant to the common control guidance, the 5.0 million units issued (which had a closing market price of $9.10 per unit on the transaction date) were recorded in equity at $109.5 million, representing the net carrying value of the Big Spring Gathering Assets purchased of $209.5 million less the $100.0 million cash consideration. Prior periods have not been recast as these assets do not constitute a business in accordance with ASU 2017-01. We capitalized approximately $0.7 million of acquisition costs related to the Big Spring Gathering Assets Acquisition.

Note 3 - Related Party Transactions

Commercial Agreements

The Partnership has a number of long-term, fee-based commercial agreements with Delek Holdings under which we provide various services, including crude oil gathering and crude oil, intermediate and refined products transportation and storage services, and marketing, terminalling and offloading services to Delek Holdings. Most of these agreements have an initial term ranging from five to ten years, which may be extended for various renewal terms at the option of Delek Holdings. In November 2017, Delek Holdings opted to renew certain of these agreements for subsequent five-year terms expiring in November 2022. In the case of our marketing agreement with Delek Holdings with respect to the Tyler Refinery, the initial term was extended through 2026. Effective fourth quarter of 2018, the term of certain of our agreements with Delek Holdings were further extended pursuant to the requirements of the amended and restated DKL Credit Facility (as defined in Note 7). The fees under each agreement are payable to us monthly by Delek Holdings or certain third parties to whom Delek Holdings has assigned certain of its rights and are generally subject to increase or decrease on July 1 of each year, by the amount of any change in various inflation-based indices, including the Federal Energy Regulatory Commission (the "FERC") oil pipeline index or various iterations of the consumer price index ("CPI") and the producer price index ("PPI"); provided, however, that in no event will the fees be adjusted below the amount initially set forth in the applicable agreement. In most circumstances, if Delek Holdings or the applicable third party assignee fails to meet or exceed the minimum volume or throughput commitment during any calendar quarter, Delek Holdings, and not any third party assignee, will be required to make a quarterly shortfall payment to us equal to the volume of the shortfall multiplied by the applicable fee, subject to certain exceptions as specified in the applicable agreement. With the exception of the Big Spring T&D Agreement executed in March 2020, carry-over of any volumes or revenue in excess of such commitment to any subsequent quarter is not permitted.

Under each of these agreements, we are required to maintain the capabilities of our pipelines and terminals, such that Delek Holdings may throughput and/or store, as the case may be, specified volumes of crude oil, intermediate and refined products. To the extent that Delek Holdings is prevented by our failure to maintain such capacities from throughputting or 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. Such reduction would occur even if actual throughput or storage amounts were below the minimum volume commitment levels.

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

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Other Agreements with Delek Holdings

In addition to the commercial agreements described above, the Partnership has entered into the following agreements with Delek Holdings:

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 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 months ended March 31, 2021 During the three months ended March 31, 2020, we were reimbursed by Delek Holdings for certain capital expenditures in the amount of $0.6 million. These amounts are recorded in other long-term liabilities and are amortized to revenue over the life of the underlying revenue agreement corresponding to the asset. 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 Agreement. As of March 31, 2021, we have recorded a nominal receivable from related parties for these matters for which we expect to be reimbursed. These reimbursements are recorded as reductions to operating expense. We were reimbursed a nominal amount for these matters during the both three months ended March 31, 2021 and 2020.

Other Transactions

The Partnership manages a long-term capital project on behalf of Delek Holdings pursuant to a construction management and operating agreement (the "DPG Management Agreement") for the construction of a 250-mile gathering system in the Permian Basin. The majority of the gathering system has been constructed, however, additional costs pertaining to a pipeline connection that was not acquired by the Partnership continue to be incurred and are still subject to the terms of the DPG Management Agreement. The Partnership is also considered the operator for the project and is responsible for oversight of the project design, procurement and construction of project segments and provides other related services. Pursuant to the terms of the DPG Management Agreement, the Partnership receives a monthly operating services fee and a construction services fee, which includes the Partnership's direct costs of managing the project plus an additional percentage fee of the construction costs of each project segment. The agreement extends through December 2022. Total fees paid to the Partnership were $0.4 million and $0.9 million for the three months ended March 31, 2021 and 2020, respectively, which are recorded in affiliate revenue in our condensed consolidated statements of income. Additionally, the Partnership incurs the costs in connection with the construction of the assets and is subsequently reimbursed by Delek Holdings. Amounts reimbursable by Delek Holdings are recorded in accounts receivable from related parties.

Unregistered Sale of Equity Securities

In connection with the Partnership's issuance of the common limited partner units under the Big Spring Gathering Assets Acquisition and in accordance with the Partnership's First Amended and Restated Agreement of Limited Partnership, as amended (the "Prior Partnership Agreement", as amended and restated by the Partnership's Second Amended and Restated Agreement of Limited Partnership (the "Partnership Agreement")), the Partnership issued general partner units to the general partner in an amount necessary to maintain its 2% general partner interest as defined in the Prior Partnership Agreement. The sale and issuance of the Additional Units (as defined below) and such general partner units in connection with the Big Spring Gathering Assets Acquisition is exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.

Additionally, in March 2020, Delek Marketing & Supply, LLC ("Delek Marketing"), a wholly owned subsidiary of Delek Holdings, repurchased 451,822 common limited partner units from an unaffiliated investor pursuant to a Common Unit Purchase Agreement between Delek Marketing and such investor. The purchase price of the units amounted to approximately $5.0 million. As a result of the transaction, Delek Holdings' ownership in our outstanding limited partner units increased to 64.5% from 62.6%. Delek Holdings' ownership in our common limited partner units was further increased to 70.5% as a result of the issuance of 5.0 million common limited partner units (the “Additional Units”) in connection with the Big Spring Gathering Assets Acquisition described above.

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

Amendment No. 2 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. 2 (“Amendment No. 2”) to the Prior Partnership Agreement, effective upon adoption. Amendment No. 2 amended the Prior Partnership Agreement to provide for a waiver of distributions in respect of the IDRs for General Partner Additional Units ("GP

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Additional Units") associated with the 5.0 million Additional Units for at least two years, through at least the distribution for the quarter ending March 31, 2022 (the “IDR Waiver”). The IDR Waiver essentially reduced the distribution made to the holders of the IDRs during this period, as the holders would not receive a share of the distribution made on the GP Additional Units. The IDRs were eliminated in the IDR Restructuring Transaction on August 13, 2020.

Conversion of GP Economic Interest and Elimination of IDRs

On August 13, 2020, we closed the transaction contemplated by a definitive exchange agreement with Delek Holdings to eliminate all of the IDRs held by the general partner and convert the 2% general partner economic interest into a non-economic general partner interest, all in exchange for 14.0 million of the Partnership's newly issued common limited partner units and $45.0 million cash. Contemporaneously, Delek Holdings purchased a 5.2% ownership interest in our general partner from certain affiliates who were also members of our general partner's management and board of directors. Delek Holdings now owns a 100% interest in the general partner and owns approximately 34.7 million common limited partner units, representing approximately 80% of the Partnership's outstanding common limited partner units. To implement the transaction, our Prior Partnership Agreement was amended and restated.

Summary of Transactions

Revenues from affiliates consist primarily of revenues from gathering, transportation, storage, offloading, Renewable Identification Numbers ("RINs"), wholesale marketing and products terminalling services provided primarily to Delek Holdings based on regulated tariff rates or contractually based fees and product sales. Affiliate operating expenses are primarily comprised of amounts we reimburse Delek Holdings, or our general partner, as the case may be, for the services provided to us under the Partnership Agreement. These expenses could also include reimbursement and indemnification amounts from Delek Holdings, as provided under the Omnibus Agreement. Additionally, the Partnership is required to reimburse Delek Holdings for direct or allocated costs and expenses incurred by Delek Holdings on behalf of the Partnership and for charges Delek Holdings incurred for the management and operation of our logistics assets, including an annual fee for various centralized corporate services, which are included in general and administrative expenses. In addition to these transactions, we purchase refined products and bulk biofuels from Delek Holdings, the costs of which are included in cost of materials and other.

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

Copy History

									Three Months Ended March 31,
															2021						2020
Revenues															$	96,194					$	106,699
Purchases from Affiliates															$	65,815					$	80,763
Operating and maintenance expenses															$	10,084					$	12,757
General and administrative expenses															$	2,119					$	3,369

Quarterly Cash Distributions

Prior to August 13, 2020, our common and general partner unitholders and the holders of IDRs were entitled to receive quarterly distributions of available cash as determined by the board of directors of our general partner in accordance with the terms and provisions of our Prior Partnership Agreement. Pursuant to the IDR Restructuring Transaction on August 13, 2020, the general partner will no longer receive any cash distributions. In February 2021, we paid quarterly cash distributions of $39.5 million, of which $31.6 million were paid to Delek Holdings. In February 2020, we paid quarterly cash distributions of $30.6 million, of which $22.6 million were paid to Delek Holdings and our general partner. On April 29, 2021, our board of directors declared a quarterly cash distribution totaling $40.0 million, based on the available cash as of the date of determination for the end of the first quarter of 2021, payable on May 14, 2021, of which $32.0 million is expected to be paid to Delek Holdings.

Note 4 - Revenues

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are provided pursuant to contractual agreements with third parties. Payment terms require customers to pay shortly after delivery and do not contain significant financing components.

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 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. We have determined that the predominant component of the related agreements currently in effect is the lease component. Therefore, the combined component is accounted for under the applicable lease accounting guidance. Of our $462.1 million net property, plant, and equipment balance as of March 31, 2021, $339.2 million is subject to operating leases under our commercial agreements. These agreements do not include options for the lessee to purchase our leasing equipment, nor do they include any material residual value guarantees or material restrictive covenants.

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

Copy History

						Three Months Ended March 31, 2021
						Pipelines and Transportation						Wholesale Marketing and Terminalling						Consolidated
Service Revenue - Third Party						$	1,927					$	82					$	2,009
Service Revenue - Affiliate (1)						1,224						8,082						9,306
Product Revenue - Third Party						—						54,710						54,710
Product Revenue - Affiliate						—						16,387						16,387
Lease Revenue - Affiliate						61,824						8,677						70,501
Total Revenue						$	64,975					$	87,938					$	152,913

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

Copy History

						Three Months Ended March 31, 2020
						Pipelines and Transportation						Wholesale Marketing and Terminalling						Consolidated
Service Revenue - Third Party						$	9,465					$	191					$	9,656
Service Revenue - Affiliate (1)						4,888						7,982						12,870
Product Revenue - Third Party						—						47,046						47,046
Product Revenue - Affiliate						—						51,503						51,503
Lease Revenue - Affiliate						33,614						8,712						42,326
Total Revenue						$	47,967					$	115,434					$	163,401

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

As of March 31, 2021, we expect to recognize $1.5 billion in lease revenues related to our unfulfilled performance obligations pertaining to the minimum volume commitments and capacity utilization under the non-cancelable terms of our commercial agreements with Delek Holdings. Most of these agreements have an initial term ranging from five to ten years, which may be extended for various renewal terms. We disclose information about remaining performance obligations that have original expected durations of greater than one year.

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

Copy History

Remainder of 2021						202,154
2022						250,145
2023						241,631
2024						166,697
2025 and thereafter						$	618,965
Total expected revenue on remaining performance obligations						$	1,479,592

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Note 5 - Net Income Per Unit

Basic net income per unit applicable to limited partners is computed by dividing limited partners' interest in net income by the weighted-average number of outstanding common units. Prior to August 13, 2020, we had more than one class of participating securities and used the two class method to calculate the net income per unit applicable to the limited partners. The classes of participating units prior to August 13, 2020 consisted of limited partner units, general partner units and IDRs. Pursuant to the IDR Restructuring Transaction, the IDRs were eliminated and the 2% general partner economic interest was converted to a non-economic general partner interest. Effective August 13, 2020, the common limited partner units are the only participating security for cash distributions. Refer to Note 8 - Equity for a discussion of the elimination of the IDRs and conversion of the 2% general partner economic interest effective August 13, 2020.

The two-class method was based on the weighted-average number of common units outstanding during the period. Basic net income per unit applicable to limited partners was computed by dividing limited partners’ interest in net income, after deducting our general partner’s 2% interest and IDRs, by the weighted-average number of outstanding common units. Our net income was allocated to our general partner and limited partners in accordance with their respective partnership percentages after giving effect to priority income allocations for IDRs, which 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. The IDRs were paid following the close of each quarter.

As discussed in Note 3 - Related Party Transactions, pursuant to Amendment No. 2 to the Prior Partnership Agreement, an agreement was reached for a waiver of distributions in respect of the IDRs for the GP Additional Units associated with the 5.0 million Additional Units issued in connection with the Big Spring Gathering Assets Acquisition for at least two years, through at least the distribution for the quarter ending March 31, 2022. The IDR Waiver essentially reduced the distribution made to the holders of the IDRs during this period, as the holders would not receive a share of the distribution made on the GP Additional Units. 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. Refer to Note 3 for additional details. Subsequently, the IDRs were eliminated in the IDR Restructuring Transaction on August 13, 2020.

Diluted net income per unit applicable to common limited partners includes the effects of potentially dilutive units on our common units. As of March 31, 2021, the only potentially dilutive units outstanding consist of unvested phantom units.

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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 March 31, 2021 is May 14, 2021. Payments made to our unitholders are determined in relation to actual distributions declared and are not based on the net income allocations used in the calculation of net income per unit. The calculation of net income per unit is as follows (dollars in thousands, except units and per unit amounts):

Copy History

									Three Months Ended March 31,
															2021						2020
Net income attributable to partners															$	36,267					$	27,796
Less: General partner's distribution (including IDRs) (1)															—						9,139
Less: Limited partners' distribution															39,968						21,739
Earnings in excess (deficit) of distributions															$	(3,701)					$	(3,082)
General partner's earnings:
Distributions (including IDRs) (1)															$	—					$	9,139
Allocation of earnings in excess (deficit) of distributions															—						(62)
Total general partner's earnings															$	—					$	9,077
Limited partners' earnings on common units:
Distributions															$	39,968					$	21,739
Allocation of earnings in excess (deficit) of distributions															(3,701)						(3,020)
Total limited partners' earnings on common units															$	36,267					$	18,719
Weighted average limited partner units outstanding:
Common units - basic															43,443,336						24,480,570
Common units - diluted															43,449,059						24,485,336
Net income per limited partner unit:
Common units - basic															$	0.83					$	0.76
Common units - diluted (2)															$	0.83					$	0.76

(1) Prior to August 13, 2020, general partner distributions (including IDRs) consisted of the 2.0% general partner interest and IDRs, which represented the right of the general partner to receive increasing percentages of quarterly distributions of available cash from operating surplus in excess of 0.43125 per unit per quarter. 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. See Note 8 for further discussion related to IDRs.

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

Note 6 - Inventory

Note 7 - Long-Term Obligations

DKL Credit Facility

On September 28, 2018, the Partnership entered into a third amended and restated senior secured revolving credit agreement (hereafter, the "DKL Credit Facility") with Fifth Third Bank ("Fifth Third"), as administrative agent, and a syndicate of lenders with total lender commitments of $850.0 million. The DKL Credit Facility contains a dual currency borrowing tranche that permits draw downs in U.S. or Canadian dollars. The DKL Credit Facility also contains an accordion feature whereby the Partnership can increase the size of the credit facility to an aggregate of $1.0 billion, subject to receiving increased or new commitments from lenders and the satisfaction of certain other conditions precedent.

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

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In connection with the IDR Restructuring Transaction, the Partnership entered into a First Amendment to the DKL Credit Facility (the "First Amendment") which, among other things, permitted the exchange of the IDRs and the general partner interest in the Partnership for the non-economic general partner interest, the newly issued limited partner interests in the Partnership, plus $45.0 million in cash. The First Amendment also modified the total leverage and senior leverage ratios (as defined in the DKL Credit Facility) calculations to reduce the total funded debt (as defined in the DKL Credit Facility) component thereof by the total amount of unrestricted consolidated cash and cash equivalents on the balance sheet of the Partnership and its subsidiaries up to $20.0 million.

The DKL Credit Facility has a maturity date of September 28, 2023. Borrowings denominated in U.S. dollars bear interest at either a U.S. dollar prime rate, plus an applicable margin, or the LIBOR, plus an applicable margin, at the election of the borrowers. Borrowings denominated in Canadian dollars bear interest at either a Canadian dollar prime rate, plus an applicable margin, or the Canadian Dealer Offered Rate, plus an applicable margin, at the election of the borrowers.

The applicable margin in each case and the fee payable for any unused revolving commitments vary based upon the Partnership's most recent total leverage ratio calculation delivered to the lenders, as called for and defined under the terms of the DKL Credit Facility. At March 31, 2021, the weighted average interest rate for our borrowings under the facility was approximately 2.45%. Additionally, the DKL Credit Facility requires us to pay a leverage ratio dependent quarterly fee on the average unused revolving commitment. As of March 31, 2021, this fee was 0.35% per year.

As of March 31, 2021, we had $737.5 million of outstanding borrowings under the DKL Credit Facility, with no letters of credit in place. Unused credit commitments under the DKL Credit Facility as of March 31, 2021 were $112.5 million.

6.750% Senior Notes Due 2025

On May 23, 2017, the Partnership and Delek Logistics Finance Corp., a Delaware corporation and a wholly-owned subsidiary of the Partnership (“Finance Corp.” and together with the Partnership, the “Issuers”), issued $250.0 million in aggregate principal amount of 6.75% senior notes due 2025 (the “2025 Notes”) at a discount. The 2025 Notes are general unsecured senior obligations of the Issuers. The 2025 Notes are unconditionally guaranteed jointly and severally on a senior unsecured basis by the Partnership's existing subsidiaries (other than Finance Corp., the "Guarantors") and will be unconditionally guaranteed on the same basis by certain of the Partnership’s future subsidiaries. The 2025 Notes rank equal in right of payment with all existing and future senior indebtedness of the Issuers, and senior in right of payment to any future subordinated indebtedness of the Issuers. Interest on the 2025 Notes is payable semi-annually in arrears on each May 15 and November 15, commencing November 15, 2017.

The Issuers may, subject to certain conditions and limitations, redeem all or part of the 2025 Notes at a redemption price of 105.063% of the redeemed principal during the twelve-month period beginning on May 15, 2020, 103.375% for the twelve-month period beginning on May 15, 2021, 101.688% for the twelve-month period beginning on May 15, 2022 and 100.00% beginning on May 15, 2023 and thereafter, plus accrued and unpaid interest, if any. In the event of a change of control, accompanied or followed by a ratings downgrade within a certain period of time, subject to certain conditions and limitations, the Issuers will be obligated to make an offer for the purchase of the 2025 Notes from holders at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest.

On April 25, 2018, we made an offer to exchange the 2025 Notes and the related guarantees that were validly tendered and not validly withdrawn for an equal principal amount of exchange notes that are freely tradeable, as required under the terms of the original indenture. The terms of the exchange notes that were issued in May 2018 as a result of the exchange (also referred to as the "2025 Notes") are substantially identical to the terms of the original 2025 Notes.

As of March 31, 2021, we had $250.0 million in outstanding principal amount of the 2025 Notes. As of March 31, 2021, the effective interest rate related to the 2025 Notes was approximately 7.25%.

Note 8 - Equity

We had 8,697,468 common limited partner units held by the public outstanding as of March 31, 2021. Additionally, as of March 31, 2021, Delek Holdings owned an 80.0% limited partner interest in us, consisting of 34,745,868 common limited partner units. Effective August 13, 2020, the Partnership closed on the IDR Restructuring Transaction, and contemporaneous with this transaction, Delek Holdings purchased a 5.2% ownership interest in our general partner from certain affiliates, who were also members of our general partner's management and board of directors, at fair market value. Delek Holdings now owns 100% of the outstanding ownership interest in our general partner. As part of this transaction, we expensed approximately $1.1 million of transaction costs.

In August 2020, we filed a shelf registration statement with the SEC, which subsequently became effective, for the proposed re-sale or other disposition from time to time by Delek Holdings of up to 14.0 million of our common limited partner units. As of March 31, 2021, we

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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

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

Issuance of Additional Securities

Our Partnership Agreement authorizes us to issue an unlimited number of additional partnership securities for the consideration and on the terms and conditions determined by our general partner without the approval of the unitholders. Costs associated with the issuance of securities are allocated to all unitholders' capital accounts based on their ownership interest at the time of issuance.

Allocations of Net Income

Our Partnership Agreement contains provisions for the allocation of net income and loss to the unitholders. For purposes of maintaining partner capital accounts, the Partnership Agreement specifies that items of income and loss shall be allocated among the partners in accordance with their respective percentage interest. Prior to August 13, 2020, normal allocations were made according to percentage interests after giving effect to priority income allocations in an amount equal to incentive cash distributions allocated 100% to our general partner. Effective August 13, 2020, the IDRs were eliminated and the 2% general partner economic interest was converted to a non-economic general partner interest that no longer receives cash distributions.

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

Copy History

									Three Months Ended March 31,
															2021						2020
Net income attributable to partners															$	36,267					$	27,796
Less: General partner's IDRs															—						(8,695)
Net income available to partners															$	36,267					$	19,101
General partner's ownership interest															—		%				2.0		%
General partner's allocated interest in net income															—						$	382
General partner's IDRs															—						8,695
Total general partner's interest in net income															$	—					$	9,077

Incentive Distribution Rights ("IDRs")

Effective August 13, 2020, the Partnership closed on the IDR Restructuring Transaction and the general partner no longer receives any cash distributions. Prior to August 13, 2020, our general partner was entitled to 2.0% of all quarterly distributions. Our general partner had the right, but not the obligation, to contribute up to a proportionate amount of capital to us to maintain its current general partner interest. Our general partner held IDRs that entitled it to receive increasing percentages, up to a maximum of 48.0%, of the cash we distributed from operating surplus (as defined in our Prior Partnership Agreement) in excess of $0.43125 per unit per quarter. The maximum distribution was 48.0% and did not include any distributions that our general partner or its affiliates may have received on common or general partner units that it owns. As of August 12, 2020, the IDRs held by our general partner were entitled to receive the maximum distribution.

Pursuant to Amendment No. 2 to the Prior Partnership Agreement, prior to the IDR Restructuring Transaction, an agreement was reached for a waiver of distributions in respect of the IDRs associated with the 5.0 million Additional Units for at least two years, through at least the distribution for the quarter ending March 31, 2022 (the "IDR Waiver"). The IDR Waiver essentially reduced the distribution made to the holders of the IDRs during this period, as the holders would not receive a share of the distribution made on the Additional Units. 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. Refer to Note 3 for additional details.

Cash Distributions

Our Partnership Agreement sets forth the calculation to be used to determine the amount and priority of available cash distributions that our limited partner unitholders will receive. The cash distributions for periods before August 13, 2020 include distributions to the 2% general partner interest which was converted to a non-economic general partner interest and IDRs which were permanently eliminated. Our distributions earned with respect to a given period are declared subsequent to quarter end.

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

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Quarter Ended						Total Quarterly Distribution Per Limited Partner Unit						Total Cash Distribution (in thousands)						Date of Distribution						Unitholders Record Date
March 31, 2020						$	0.890					$	30,878					May 12, 2020						May 5, 2020
June 30, 2020						$	0.900					$	35,969					August 12, 2020						August 7, 2020
September 30, 2020						$	0.905					$	39,308					November 12, 2020						November 6, 2020
December 31, 2020						$	0.910					$	39,533					February 9, 2021						February 2, 2021
March 31, 2021						$	0.920					$	39,968					May 14, 2021 (1)						May 10, 2021

(1) Expected date of distribution.

The allocations of total quarterly cash distributions made to limited partners for the three months ended March 31, 2021 and 2020 are set forth in the table below. Distributions earned with respect to a given period are declared subsequent to quarter end. Therefore, the table below presents total cash distributions applicable to the period in which the distributions are earned (in thousands, except per unit amounts):

Copy History

									Three Months Ended March 31,
															2021						2020
General partner's distributions:
General partner's distributions															$	—					$	444
General partner's IDRs															—						8,695
Total general partner's distributions															—						9,139
Limited partners' distributions:
Common limited partners' distributions															39,968						21,739
Total cash distributions															$	39,968					$	30,878
Cash distributions per limited partner unit															$	0.920					$	0.890

Note 9 - Equity Based Compensation

Note 10 - Equity Method Investments

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

Copy History

			March 31, 2021						December 31, 2020
Current Assets			$	8,441					$	13,488
Non-current Assets			$	410,772					$	413,259
Current liabilities			$	10,093					$	7,789

Copy History

									Three Months Ended March 31,
															2021						2020
Revenues															$	9,043					$	10,096
Gross profit															$	3,625					$	5,887
Operating income															$	3,439					$	5,697
Net income															$	3,439					$	5,721

We have two joint ventures that have constructed separate crude oil pipeline systems and related ancillary assets, which are serving third parties and subsidiaries of Delek Holdings. We own a 50% membership interest in the entity formed with an affiliate of Plains All American Pipeline, L.P. ("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").

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

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			March 31, 2021						December 31, 2020
Current assets			$	22,879					$	20,763
Non-current assets			$	251,121					$	253,862
Current liabilities			$	4,995					$	1,496

Copy History

									Three Months Ended March 31,
															2021						2020
Revenues															$	9,626					$	15,447
Gross profit															$	4,966					$	10,636
Operating income															$	4,478					$	10,140
Net Income															$	4,179					$	10,158

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

We do not consolidate any part of the assets or liabilities or operating results of our equity method investees. Our share of net income or loss of the investees will increase or decrease, as applicable, the carrying value of our investments in unconsolidated affiliates. With respect to our equity method investments, we determined that these entities do not represent variable interest entities and consolidation is not required. We have the ability to exercise significant influence over each of these joint ventures through our participation in the management committees, which make all significant decisions. However, since all significant decisions require the consent of the other investor(s) without regard to economic interest, we have determined that we have joint control and have applied the equity method of accounting. Our investment in these joint ventures is reflected in our pipelines and transportation segment.

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Note 11 - Segment Data

We aggregate our operating segments into two reportable segments: (i) pipelines and transportation and (ii) wholesale marketing and terminalling:

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

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

Our operating segments adhere to the accounting policies used for our consolidated financial statements. Our operating segments are managed separately because each segment requires different industry knowledge, technology and marketing strategies. Decisions concerning the allocation of resources and assessment of operating performance are made based on this segmentation. Management measures the operating performance of each of its reportable segments based on segment contribution margin. Segment contribution margin is defined as net revenues less cost of materials and other and operating expenses, excluding depreciation and amortization.

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

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(in thousands)									Three Months Ended March 31,
															2021						2020
Pipelines and Transportation
Net revenues:
Affiliate															$	63,048					$	38,502
Third party															1,927						9,465
Total pipelines and transportation															64,975						47,967
Cost of materials and other