Company Quick10K Filing
Delek Logistics Partners
Price1.00 EPS-94,808,000
Shares-0 P/E-0
MCap-0 P/FCF-0
Net Debt-6 EBIT130
TEV-6 TEV/EBIT-0
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-08
10-K 2019-12-31 Filed 2020-02-28
10-Q 2019-09-30 Filed 2019-11-08
10-Q 2019-06-30 Filed 2019-08-08
10-Q 2019-03-31 Filed 2019-05-09
10-K 2018-12-31 Filed 2019-03-01
10-Q 2018-09-30 Filed 2018-11-09
10-Q 2018-06-30 Filed 2018-08-09
10-Q 2018-03-31 Filed 2018-05-10
10-K 2017-12-31 Filed 2018-03-01
10-Q 2017-09-30 Filed 2017-11-09
10-Q 2017-06-30 Filed 2017-08-07
10-Q 2017-03-31 Filed 2017-05-09
10-K 2016-12-31 Filed 2017-02-28
10-Q 2016-09-30 Filed 2016-11-03
10-Q 2016-06-30 Filed 2016-08-05
10-Q 2016-03-31 Filed 2016-05-06
10-K 2015-12-31 Filed 2016-02-29
10-Q 2015-06-30 Filed 2015-11-06
10-Q 2015-06-30 Filed 2015-08-06
10-Q 2015-03-31 Filed 2015-05-08
10-K 2014-12-31 Filed 2015-02-26
10-Q 2014-09-30 Filed 2014-11-06
10-Q 2014-06-30 Filed 2014-08-08
10-Q 2014-03-31 Filed 2014-05-08
10-K 2013-12-31 Filed 2014-03-05
10-Q 2013-09-30 Filed 2013-11-07
10-Q 2013-06-30 Filed 2013-08-08
10-Q 2013-03-31 Filed 2013-05-09
10-K 2012-12-31 Filed 2013-03-12
10-Q 2012-09-30 Filed 2012-12-14
8-K 2020-05-05 Earnings, Exhibits
8-K 2020-04-21 Regulation FD, Exhibits
8-K 2020-04-06 Officers, Regulation FD, Exhibits
8-K 2020-03-31 Regulation FD, Exhibits
8-K 2020-03-31 Enter Agreement, M&A, Sale of Shares, Amend Bylaw, Other Events, Exhibits
8-K 2020-02-25 Earnings, Exhibits
8-K 2020-02-25 Officers, Regulation FD, Exhibits
8-K 2020-01-24 Regulation FD, Exhibits
8-K 2019-12-10 Regulation FD, Exhibits
8-K 2019-11-04 Earnings, Exhibits
8-K 2019-10-25 Regulation FD, Exhibits
8-K 2019-08-16 Officers, Exhibits
8-K 2019-08-05 Earnings, Exhibits
8-K 2019-07-24 Regulation FD, Exhibits
8-K 2019-05-28 Enter Agreement, M&A, Regulation FD, Exhibits
8-K 2019-05-14 Regulation FD, Exhibits
8-K 2019-05-06 Earnings, Exhibits
8-K 2019-04-26 Regulation FD, Exhibits
8-K 2019-03-05 Officers, Exhibits
8-K 2019-02-19 Earnings, Exhibits
8-K 2019-01-24 Regulation FD, Exhibits
8-K 2018-12-03 Regulation FD, Exhibits
8-K 2018-11-13 Regulation FD, Exhibits
8-K 2018-11-06 Earnings, Exhibits
8-K 2018-10-23 Regulation FD, Exhibits
8-K 2018-09-28 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-08-24 Regulation FD, Exhibits
8-K 2018-08-13 Regulation FD, Exhibits
8-K 2018-08-08 Regulation FD, Exhibits
8-K 2018-08-07 Earnings, Exhibits
8-K 2018-07-24 Regulation FD, Exhibits
8-K 2018-05-22 Regulation FD, Exhibits
8-K 2018-05-21 Officers, Regulation FD, Exhibits
8-K 2018-05-07 Earnings, Exhibits
8-K 2018-04-26 Regulation FD, Exhibits
8-K 2018-03-28 Regulation FD, Exhibits
8-K 2018-03-20 Enter Agreement, M&A, Exhibits
8-K 2018-03-20 Officers
8-K 2018-03-02 Enter Agreement, Exhibits
8-K 2018-03-01 Other Events, Exhibits
8-K 2018-02-26 Earnings, Exhibits
8-K 2018-02-16 Other Events, Exhibits
8-K 2018-01-23 Regulation FD, Exhibits

DKL 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Note 1 - Organization and Basis of Presentation
Note 2 - Acquisitions
Note 3 - Related Party Transactions
Note 4 - Revenues
Note 5 - Net Income per Unit
Note 6 - Inventory
Note 7 - Long - Term Obligations
Note 8 - Equity
Note 9 - Equity Based Compensation
Note 10 - Equity Method Investments
Note 11 - Segment Data
Note 12 - Income Taxes
Note 13 - Commitments and Contingencies
Note 14 - Leases
Note 15 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
EX-31.1 dkl-ex311xceocertifica.htm
EX-31.2 dkl-ex312xcfocertifica.htm
EX-32.1 dkl-ex321xceocertifica.htm
EX-32.2 dkl-ex322xcfocertifica.htm

Delek Logistics Partners Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
77058740422138-1452012201420172020
Assets, Equity
2502001501005002012201420172020
Rev, G Profit, Net Income
20011632-52-136-2202012201420172020
Ops, Inv, Fin

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
 
 
 
For the quarterly period ended
March 31, 2020
 
or
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
 
For the transition period from                      to                     
Commission file number 001-35721
DELEK LOGISTICS PARTNERS, LP
(Exact name of registrant as specified in its charter)
Delaware
globe03.jpg
45-5379027
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
7102 Commerce Way
Brentwood
Tennessee
37027
(Address of principal executive offices)
 
 
(Zip Code)
(615) 771-6701
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol
Name of Each Exchange on Which Registered
Common Units Representing Limited Partnership Interests
DKL
New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer 
Smaller reporting company 
Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
At May 1, 2020, there were 29,425,625 common limited partner units and 600,523 general partner units outstanding.


Table of Contents

Delek Logistics Partners, LP
Quarterly Report on Form 10-Q
For the Quarterly Period Ended March 31, 2020

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

deleklogisticswcapsulehori03.jpg

           
2 |  
deleklogisticswcapsulehor02.jpg




Financial Statements

Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Delek Logistics Partners, LP
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except unit and per unit data)
 
March 31, 2020
 
December 31, 2019
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
4,176

 
$
5,545

Accounts receivable
12,392

 
13,204

Inventory
5,133

 
12,617

Other current assets
926

 
2,204

Total current assets
22,627

 
33,570

Property, plant and equipment:
 
 
 
Property, plant and equipment
665,718

 
461,325

Less: accumulated depreciation
(186,249
)
 
(166,281
)
Property, plant and equipment, net
479,469

 
295,044

Equity method investments
255,743

 
246,984

Operating lease right-of-use assets
3,471

 
3,745

Goodwill
12,203

 
12,203

Marketing Contract Intangible, net
129,196

 
130,999

Rights-of-way
37,329

 
15,597

Other non-current assets
6,198

 
6,305

Total assets
$
946,236

 
$
744,447

LIABILITIES AND DEFICIT
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
4,385

 
$
12,471

Accounts payable to related parties
2,075

 
8,898

Interest payable
6,919

 
2,572

Excise and other taxes payable
4,088

 
3,941

Current portion of operating lease liabilities
1,456

 
1,435

Accrued expenses and other current liabilities
3,719

 
5,765

Total current liabilities
22,642

 
35,082

Non-current liabilities:
 
 
 
Long-term debt
939,955

 
833,110

Asset retirement obligations
5,695

 
5,588

Deferred tax liabilities
1,027

 
215

Operating lease liabilities, net of current portion
2,015

 
2,310

Other non-current liabilities
19,298

 
19,261

Total non-current liabilities
967,990

 
860,484

Equity (Deficit):
 
 
 
Common unitholders - public; 8,679,757 units issued and outstanding at March 31, 2020 (9,131,579 at December 31, 2019)
158,332

 
164,436

Common unitholders - Delek Holdings; 20,745,868 units issued and outstanding at March 31, 2020 (15,294,046 at December 31, 2019)
(199,943
)
 
(310,513
)
General partner - 600,523 units issued and outstanding at March 31, 2020 (498,482 at December 31, 2019)
(2,785
)
 
(5,042
)
Total deficit
(44,396
)
 
(151,119
)
Total liabilities and deficit
$
946,236

 
$
744,447

 
See accompanying notes to the condensed consolidated financial statements

           
3 |  
deleklogisticswcapsulehor02.jpg




Financial Statements

Delek Logistics Partners, LP
Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited)
(in thousands, except unit and per unit data)
 
Three months ended
 
March 31,
 
2020
 
2019
Net revenues:
 
 
 
   Affiliates (1)
$
106,699

 
$
62,965

   Third party
56,702

 
89,518

     Net revenues
163,401

 
152,483

Cost of sales:
 
 
 
Cost of materials and other
101,293

 
96,265

Operating expenses (excluding depreciation and amortization presented below)
13,954

 
15,307

Depreciation and amortization
5,803

 
6,124

Total cost of sales
121,050

 
117,696

Operating expenses related to wholesale business (excluding depreciation and amortization presented below)
790

 
751

General and administrative expenses
6,130

 
4,473

Depreciation and amortization
496

 
450

Other operating (income) expense, net
(107
)
 
2

Total operating costs and expenses
128,359

 
123,372

Operating income
35,042

 
29,111

Interest expense, net
11,824

 
11,301

Income from equity method investments
(5,553
)
 
(1,951
)
Total non-operating expenses, net
6,271

 
9,350

Income before income tax expense
28,771

 
19,761

Income tax expense
975

 
65

Net income attributable to partners
$
27,796

 
$
19,696

Comprehensive income attributable to partners
$
27,796

 
$
19,696

 
 
 
 
Less: General partner's interest in net income, including incentive distribution rights
9,077

 
7,270

Limited partners' interest in net income
$
18,719

 
$
12,426

 
 
 
 
Net income per limited partner unit:
 
 
 
Common units - basic
$
0.76

 
$
0.51

Common units - diluted
$
0.76

 
$
0.51

 
 
 
 
Weighted average limited partner units outstanding:
 
 
 
Common units - basic
24,480,570

 
24,407,168

Common units - diluted
24,485,336

 
24,416,058

 
 
 
 
Cash distributions per limited partner unit
$
0.890

 
$
0.820


(1) 
See Note 3 for a description of our material affiliate revenue transactions.
See accompanying notes to the condensed consolidated financial statements

           
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Financial Statements

Delek Logistics Partners, LP
Condensed Consolidated Statements of Partners' Equity (Deficit) (Unaudited)
(in thousands)
 
Common - Public
 
Common - Delek Holdings
 
General Partner
 
Total
Balance at December 31, 2019
$
164,436

 
$
(310,513
)
 
$
(5,042
)
 
$
(151,119
)
Cash distributions
(8,081
)
 
(13,535
)
 
(9,017
)
 
(30,633
)
General partner units issued to maintain 2% interest

 

 
6

 
6

Net income attributable to partners
6,652

 
12,067

 
9,077

 
27,796

Delek Holdings Unit purchases
(4,979
)
 
4,979

 

 

Issuance of units in connection with the Big Spring Gathering Assets Acquisition

 
107,323

 
2,190

 
109,513

Other
304

 
(264
)
 
1

 
41

Balance at March 31, 2020
$
158,332

 
$
(199,943
)
 
$
(2,785
)
 
$
(44,396
)


 
Common - Public
 
Common -
Delek Holdings
 
General Partner
 
Total
Balance at December 31, 2018
$
171,023

 
$
(299,360
)
 
$
(6,486
)
 
(134,823
)
Cash distributions (1)
(7,352
)
 
(12,388
)
 
(7,179
)
 
(26,919
)
General partner units issued to maintain 2% interest

 

 
2

 
2

Net income attributable to partners
4,664

 
7,762

 
7,270

 
19,696

Other
54

 
84

 
1

 
139

Balance at March 31, 2019
$
168,389

 
$
(303,902
)
 
$
(6,392
)
 
$
(141,905
)
(1) Cash distributions include a nominal amount related to distribution equivalents on vested phantom units.     


See accompanying notes to the condensed consolidated financial statements

           
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Financial Statements

Delek Logistics Partners, LP
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
 
Three Months Ended March 31,
 
2020
 
2019
Cash flows from operating activities:
 
 
 
Net income
$
27,796

 
$
19,696

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
6,299

 
6,574

Non-cash lease expense
274

 
1,016

Amortization of customer contract intangible assets
1,803

 
1,803

Amortization of deferred revenue
(473
)
 
(402
)
Amortization of deferred financing costs and debt discount
574

 
905

Accretion of asset retirement obligations
107

 
99

Income from equity method investments
(5,553
)
 
(1,951
)
Dividends from equity method investments
4,913

 
1,488

(Gain) loss on asset disposals
(107
)
 
2

Other non-cash adjustments
855

 
956

Changes in assets and liabilities:
 
 
 
Accounts receivable
812

 
48

Inventories and other current assets
8,762

 
(838
)
Accounts payable and other current liabilities
(4,692
)
 
(5,177
)
Accounts receivable/payable to related parties
(6,823
)
 
2,689

Non-current assets and liabilities, net
287

 
109

Net cash provided by operating activities
34,834

 
27,017

Cash flows from investing activities:
 
 
 
Big Spring Gathering Assets Acquisition
(100,000
)
 

Purchases of property, plant and equipment
(4,164
)
 
(1,181
)
Proceeds from sales of property, plant and equipment
107

 
12

Distributions from equity method investments
110

 
804

Equity method investment contributions
(8,229
)
 
(3,401
)
Net cash used in investing activities
(112,176
)
 
(3,766
)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of additional units to maintain 2% General Partner interest
6

 
2

Distributions to general partner
(9,017
)
 
(7,179
)
Distributions to common unitholders - public
(8,081
)
 
(7,352
)
Distributions to common unitholders - Delek Holdings
(13,535
)
 
(12,388
)
Proceeds from revolving credit facility
261,400

 
119,000

Payments on revolving credit facility
(154,800
)
 
(114,500
)
Net cash provided by (used in) financing activities
75,973

 
(22,417
)
Net increase (decrease) in cash and cash equivalents
(1,369
)
 
834

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

 
4,522

Cash and cash equivalents at the end of the period
$
4,176

 
$
5,356

Supplemental disclosures of cash flow information:
 
 
 
Cash paid during the period for:
 
 
 
Interest
$
6,903

 
$
5,997

Income taxes
$
3

 
$
58

Non-cash investing activities:
 

 
 

Decrease in accrued capital expenditures
$
(1,220
)
 
$
(276
)
Equity issuance to Delek Holdings unitholders in connection with Big Spring Gathering Assets Acquisition
$
109,513

 
$

Non-cash financing activities:
 
 
 
Non-cash lease liability arising from recognition of right of use assets upon adoption of ASU 2016-02
$

 
$
2,645



See accompanying notes to the condensed consolidated financial statements

           
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Notes to Condensed Consolidated Financial Statements (Unaudited)


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 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, 2019 (our "Annual Report on Form 10-K"), filed with the Securities and Exchange Commission (the "SEC") on February 27, 2020 and in accordance with the rules and regulations of the SEC. 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, 2019 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 and the OPEC Production Disputes
The recent outbreak of COVID-19 and its development into a Pandemic in March 2020 (the "COVID-19 Pandemic") has resulted in significant economic disruption globally, including in the U.S. and specific geographic areas where we operate. Actions taken by various governmental authorities, individuals and companies around the world to prevent the spread of COVID-19 through social distancing have restricted travel, many business operations, public gatherings and the overall level of individual movement and in-person interaction across the globe. This has in turn significantly reduced global economic activity and resulted in airlines dramatically cutting back on flights and a decrease in motor vehicle use at a time when seasonal driving patterns typically result in an increase of consumer demand for gasoline. As a result, there has also been a decline in the demand for, and thus also the market prices of, crude oil and certain products, particularly refined petroleum products that we receive revenue for the transportation and storage services we provide. In addition, recent events concerning the dispute over production levels between Russia and the members of the Organization of Petroleum Exporting Countries ("OPEC"), particularly Saudi Arabia, and the subsequent actions taken by such countries as a result thereof, including Saudi Arabia discounting the price of its crude oil exports (the "OPEC Production Disputes"), have exacerbated the decline in crude oil prices and have contributed to an increase in crude oil price volatility.
Uncertainties related to the impact of the COVID-19 Pandemic and the OPEC Production Disputes exist that could impact our future results of operations and financial position, the nature of which and the extent to which are currently unknown. To the extent these uncertainties have been identified and are believed to have an impact on our current period results of operations or financial position based on the requirements for assessing such financial statement impact under GAAP, we have considered them in the preparation of our unaudited financial statements as of and for the three months ended March 31, 2020. The application of accounting policies impacted by such considerations include (but are not necessarily limited to) the following:
The interim evaluation of indefinite-lived intangibles and goodwill for potential impairment, where indicators exist, as defined by GAAP;
The interim evaluation of long-lived assets for potential impairment, where indicators exist, as defined by GAAP;
The interim evaluation of joint ventures for potential impairment, where indicators exist, as defined by GAAP;
The evaluation of inventory valuation allowances that may be warranted under the lower of cost or net realizable value analysis, pursuant to GAAP;
The consideration of debt modifications and or covenant requirements, as applicable;
The evaluation of commitments and contingencies, including changes in concentrations, as applicable;

           
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Notes to Condensed Consolidated Financial Statements (Unaudited)

The interim evaluation of the risk of credit losses and the determination of our allowance for credit losses, pursuant to GAAP; and
The interim evaluation of our ability to continue as a going concern.
New Accounting Pronouncements Adopted During 2020
ASU 2018-13, Fair Value Measurement - Changes to the Disclosure Requirements for Fair Value Measurement
In August 2018, the Financial Accounting Standards Board (the "FASB") issued guidance related to disclosure requirements for fair value measurements. The pronouncement eliminates, modifies and adds disclosure requirements for fair value measurements. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. We adopted this guidance on January 1, 2020 and the adoption did not have a material impact on our business, financial condition or results of operations.
ASU 2016-13, Financial Instruments - Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued guidance requiring the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Organizations will now use forward-looking information to better inform their credit loss estimates. This guidance is effective for interim and annual periods beginning after December 15, 2019. We adopted this guidance on January 1, 2020 using the modified retrospective approach as of the adoption date. The adoption did not have a material impact on the Partnership’s operating results, financial position or disclosures.
ASU 2018-15, Intangible - Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract
In August 2018, the FASB issued guidance related to customers' accounting for implementation costs incurred in a cloud computing arrangement that is considered a service contract. This pronouncement aligns the requirements for capitalizing implementation costs in such arrangements with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This pronouncement is effective for fiscal year, and for interim periods within those fiscal years, beginning after December 15, 2019. Entities can choose to adopt the new guidance prospectively or retrospectively. We adopted this guidance on January 1, 2020 and elected the prospective method. The adoption did not have a material impact on our business, financial condition or results of operations.
Accounting Pronouncements Not Yet Adopted
ASU 2019-12, Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued guidance intended to simplify various aspects related to accounting for income taxes, eliminate certain exceptions within ASC 740 and clarify certain aspects of the current guidance to promote consistency among reporting entities. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 2020, with early adoption permitted. We expect to adopt this guidance on the effective date and are currently evaluating the impact that adopting this new guidance will have on our business, financial condition and 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 do not expect the adoption of this ASU on its effective date will have a material impact on our business, financial condition or results of operations.
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 currently evaluating the impact this guidance may have on its consolidated financial statements and related disclosures.

           
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Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 2 - Acquisitions
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 is subject to certain post-closing adjustments and was comprised of $100.0 million in cash and 5.0 million common units representing limited partnership interest in us. We financed the cash component of this acquisition with borrowings from the DKL Credit Facility.
The Big Spring Gathering Assets are recorded in our pipelines and transportation segment and include:
Crude oil pipelines;
Approximately 200 miles of gathering systems (Bayswater Battery, Guidon, Tiger Battery, SM Energy Vizzini);
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 “T&D Agreement”). Under the 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 Accounting Standard Update 2017-01, "Clarifying the Definition of a Business" ("ASU 2017-01").
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 has been extended through 2026. The current term of certain of our agreements with Delek Holdings were required to be further extended pursuant to the amended and restated DKL Credit Facility (as defined in Note 7), which extensions were effective in the fourth quarter of 2018. The fees under each agreement are payable to us monthly by Delek Holdings or certain third parties to whom Delek Holdings has assigned certain of its rights and are generally subject to increase or decrease on July 1 of each year, by the amount of any change in various inflation-based indices, including the Federal Energy Regulatory Commission ("FERC") oil pipeline index or various iterations of the consumer price index ("CPI") and the producer price index ("PPI"); provided, however, that in no event will the fees be adjusted below the amount initially set forth in the applicable agreement. In most circumstances, if Delek Holdings or the applicable third party assignee fails to meet or exceed the minimum volume or throughput commitment during any calendar quarter, Delek Holdings, and not any third party assignee, will be required to make a quarterly shortfall payment to us equal to the volume of the shortfall multiplied by the applicable fee, subject to certain exceptions as specified in the applicable agreement. Carry-over of any volumes or revenue in excess of such commitment to any subsequent quarter is not permitted.
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.

           
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Notes to Condensed Consolidated Financial Statements (Unaudited)

See our Annual Report on Form 10-K for a more complete description of our material commercial agreements and other agreements with Delek Holdings.
Effective March 31, 2020, we entered into a Throughput and Deficiency Agreement (the “T&D Agreement”) with Delek Holdings. Under the T&D Agreement, we will operate and maintain the Big Spring Gathering Assets connecting Delek Holdings' interests in and to certain crude oil with the Partnership's Big Spring, Texas terminal and provide gathering, transportation and other related services with respect to any and all crude produced from Delek Holdings' and certain other producers’ respective interests for delivery at the Big Spring Terminal. Pursuant to the T&D Agreement, Delek Holdings has committed to ship 120,000 bpd on the Big Spring Gathering Assets and 50,000 bpd to a redelivery point in Howard County, Texas (collectively, the “MVCs”). Pursuant to the T&D Agreement, we also agreed to spend up to $33.8 million over three years to connect additional receipt points and, in connection with such expenditures, the MVCs will increase to provide the Partnership a 12.5% return on the actual costs directly incurred and paid by the Partnership pursuant to the terms set forth in the T&D Agreement. The initial term of the T&D Agreement is 10 years, and thereafter Delek Holdings has the option to extend the T&D Agreement for two additional five-year terms. Following the initial term and any such extensions, the T&D Agreement will continue on a year-to-year basis unless terminated by either party upon 90 days’ written notice.
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, our general partner, 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 $4.1 million to Delek Holdings for its provision of centralized corporate services to the Partnership.
Pursuant to the terms of the Omnibus Agreement, we were reimbursed by Delek Holdings for certain capital expenditures in the amount of $0.6 million and $0.8 million during the three months ended March 31, 2020 and 2019, respectively. These amounts are recorded in other long-term liabilities and are amortized to revenue over the life of the underlying revenue agreement corresponding to the asset. Additionally, we are reimbursed or indemnified, as the case may be, for costs incurred in excess of certain amounts related to certain asset failures, pursuant to the terms of the Omnibus Agreement. As of March 31, 2020, 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 three months ended March 31, 2020. Additionally, we were reimbursed $3.5 million for these matters during the three months ended March 31, 2019.
Other Transactions
The Partnership manages a long-term capital project on behalf of Delek Holdings pursuant to a construction management and operating agreement (the "DPG Management Agreement") for the construction of a 250-mile gathering system in the Permian Basin. The majority of the gathering system has been constructed, however, additional costs pertaining to a pipeline connection that was not contributed to the Partnership continue to be incurred and are still subject to the terms of the DPG Management Agreement. The 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 for the three months ended March 31, 2020 and 2019 were $0.9 million and $1.9 million, respectively, and are recorded in affiliate revenue in our condensed consolidated statement 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 and registered Sale of Equity Securities
In connection with the Partnership's issuance of the new units ("Additional Units") under the Big Spring Gathering Assets Acquisition and in accordance with the Partnership Agreement, the Partnership issued general partner units to the general partner in an amount necessary to maintain its 2% general partner interest (as defined in the "Partnership Agreement"). The sale and issuance of the Additional Units and such general partner units in connection with the Big Spring Gathering Assets Acquisition is exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.
Additionally, in March 2020, Delek Marketing & Supply, LLC ("Delek Marketing") repurchased 451,822 units from an investor pursuant to a Common Unit Purchase Agreement ("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

           
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Notes to Condensed Consolidated Financial Statements (Unaudited)

increased to 64.5% from 62.6%. Delek Holdings' ownership in our common limited partner units was further increased to 70.5% as a result of the issuance of 5.0 million Additional Units in connection with the Big Spring Gathering Assets Acquisition described above.
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 Partnership Agreement, effective upon adoption. Amendment No. 2 amends the Partnership Agreement to provide for a waiver of distributions in respect of the Incentive Distribution Rights ("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 reduces 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. The IDR Waiver will automatically and permanently expire if, following the payment of a distribution in respect of a quarter ending on or after March 31, 2022, Delek Logistics has generated distributable cash flow in the most recent four consecutive quarters that, in the aggregate, would have resulted in total distribution coverage (on a pro forma basis without giving effect to the IDR Waiver) of at least 110% or 1.1x over such period. The IDR Waiver remains effective if this condition is not met. Following the termination of the IDR Waiver, the holders of the IDRs will receive distributions on all units, including the Additional Units.
In addition, in connection with any sale or exchange of the IDRs to or with the Partnership, the IDRs shall be treated as if such waiver had not and never will expire, regardless of whether such waiver has actually expired. An additional waiver letter has been signed that waives all of the distributions for the first quarter of 2020 on the Additional Units with respect to the base distribution and the IDRs.
Pursuant to Amendment Number 2, the IDR majority unitholders have the right, subject to certain conditions following the termination of the IDR Waiver, to make an election (the “IDR Reset Election”) to cause the minimum quarterly distribution and the target distributions to be reset ("the IDR Reset"). In connection with the IDR Reset, the IDR Unitholders will become entitled to receive their respective proportionate share of Common Units (the “IDR Reset Common Units”) derived by dividing (i) the average amount of IDR cash distributions made by the Partnership by (ii) the average of the cash distributions made by the Partnership in respect of each Common Unit, and in each case for the two full Quarters immediately before the Reset Notice.
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):
 
Three Months Ended March 31,
 
2020
 
2019
Revenues
$
106,699

 
$
62,965

Purchases from Affiliates
$
80,763

 
$
79,434

Operating and maintenance expenses 
$
12,757

 
$
9,925

General and administrative expenses 
$
3,369

 
$
1,370


Quarterly Cash Distributions
Our common and general partner unitholders and the holders of IDRs are entitled to receive quarterly distributions of available cash as it is determined by the board of directors of our general partner in accordance with the terms and provisions of our Partnership Agreement. 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. In February 2019, we paid quarterly cash distributions of $26.9 million, of which $19.6 million were paid to Delek Holdings and our general partner. On April 21, 2020, our general partner's board of directors declared a quarterly cash distribution totaling $30.9 million, based on the available cash as of the date of determination for the end of the first quarter of 2020, payable on May 12, 2020, of which $23.2 million is expected to be paid to Delek Holdings and our general partner, including the distribution as holder of the IDRs described in Note 8.

           
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Note 4 - Revenues
We generate revenue by charging fees for gathering, transporting, offloading and storing crude oil; for storing intermediate products and feed stocks; for distributing, transporting and storing refined products; for marketing refined products output of Delek Holdings' Tyler and Big Spring refineries; and for wholesale marketing in the West Texas area. A significant portion of our revenue is derived from long-term commercial agreements with Delek Holdings, which provide for annual fee adjustments for increases or decreases in the CPI, PPI or FERC index (refer to Note 3 for a more detailed description of these agreements). In addition to the services we provide to Delek Holdings, we also generate substantial revenue from crude oil, intermediate and refined products transportation services for, and terminalling and marketing services to, third parties primarily in Texas, New Mexico, Tennessee and Arkansas. Certain of these services are provided pursuant to contractual agreements with third parties. 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 Accounting Standards Codification ("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 $479.5 million net property, plant, and equipment balance as of March 31, 2020, $279.0 million is subject to operating leases under our commercial agreements. These agreements do not include options for the lessee to purchase our leasing equipment, nor do they include any material residual value guarantees or material restrictive covenants.
The following table represents a disaggregation of revenue for each reportable segment for the periods indicated (in thousands):
 
 
Three Months Ended March 31, 2020
 
 
Pipelines and Transportation
 
Wholesale Marketing and Terminalling
 
Consolidated
Service Revenue - Third Party
 
$
9,465

 
$
191

 
$
9,656

Product Revenue - Third Party
 

 
47,046

 
47,046

Product Revenue - Affiliate
 

 
51,503

 
51,503

Lease Revenue - Affiliate (1)
 
38,502

 
16,694

 
55,196

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.

 
 
Three Months Ended March 31, 2019
 
 
Pipelines and Transportation
 
Wholesale Marketing and Terminalling
 
Consolidated
Service Revenue - Third Party
 
$
3,974

 
$
120

 
$
4,094

Product Revenue - Third Party
 

 
85,424

 
85,424

Product Revenue - Affiliate
 

 
9,386

 
9,386

Lease Revenue - Affiliate (1)
 
36,659

 
16,920

 
53,579

Total Revenue
 
$
40,633

 
$
111,850

 
$
152,483

(1) Net of $1.8 million of amortization expense for the three months ended March 31, 2019, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.


As of March 31, 2020, we expect to recognize $1.3 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.

           
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Our unfulfilled performance obligations as of March 31, 2020 were as follows (in thousands):
Remainder of 2020
 
157,039

2021
 
209,150

2022
 
208,095

2023
 
202,287

2024 and thereafter
 
$
504,649

Total expected revenue on remaining performance obligations
 
$
1,281,220




Note 5 - Net Income Per Unit
We use the two-class method when calculating the net income per unit applicable to limited partners because we have more than one participating class of securities. Our participating securities consist of common units, general partner units and IDRs. The two-class method is based on the weighted-average number of common units outstanding during the period. Basic net income per unit applicable to limited partners is 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 is allocated to our general partner and limited partners in accordance with their respective partnership percentages after giving effect to priority income allocations for IDRs, which are held by our general partner pursuant to our Partnership Agreement. The IDRs are paid following the close of each quarter.
Pursuant to Amendment No. 2 to the Partnership Agreement, 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 ("IDR Waiver"). The IDR Waiver essentially reduces 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 has been signed that waives all of the distributions for the first quarter of 2020 on the Additional Units with respect to base distributions and the IDRs. Refer Note 3 for additional details.
Earnings in excess of distributions are allocated to our general partner and limited partners based on their respective ownership interests. 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.
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, 2020, the only potentially dilutive units outstanding consist of unvested phantom units.
Our distributions earned with respect to a given period are declared subsequent to quarter end. Therefore, the table below represents total cash distributions applicable to the period in which the distributions are earned. The expected date of distribution for the distributions earned during the period ended March 31, 2020 is May 12, 2020. The calculation of net income per unit is as follows (dollars in thousands, except units and per unit amounts):

           
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Three Months Ended March 31,
 
2020
 
2019
Net income attributable to partners
$
27,796

 
$
19,696

Less: General partner's distribution (including IDRs) (1)
9,139

 
7,424

Less: Limited partners' distribution
21,739

 
20,014

Distributions in excess of earnings
$
(3,082
)
 
$
(7,742
)
 
 
 
 
General partner's earnings:
 
 
 
Distributions (including IDRs) (1)
$
9,139

 
$
7,424

Distributions in excess of earnings
(62
)
 
(154
)
Total general partner's earnings
$
9,077

 
$
7,270

 
 
 
 
Limited partners' earnings on common units:
 
 
 
Distributions
$
21,739

 
$
20,014

Distributions in excess of earnings
(3,020
)
 
(7,588
)
Total limited partners' earnings on common units
$
18,719

 
$
12,426

 
 
 
 
Weighted average limited partner units outstanding:
 
 
 
Common units - basic
24,480,570

 
24,407,168

Common units - diluted
24,485,336

 
24,416,058

 
 
 
 
Net income per limited partner unit:
 
 
 
Common units - basic
$
0.76

 
$
0.51

Common units - diluted (2) 
$
0.76

 
$
0.51


(1) General partner distributions (including IDRs) consist of the 2.0% general partner interest and IDRs, which represent 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. 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, 2020 and 2019.
Note 6 - Inventory
Inventories consisted of $5.1 million and $12.6 million of refined petroleum products as of March 31, 2020 and December 31, 2019, respectively. Inventory is stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. We recognize lower of cost or net realizable value charges as a component of cost of materials and other in the consolidated statements of income and comprehensive income, which amounted to $2.9 million and a nominal amount during the three months ended March 31, 2020 and 2019, respectively.

           
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Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 7 - Long-Term Obligations
DKL Credit Facility
Prior to September 28, 2018, the Partnership had a $700.0 million senior secured revolving credit agreement with Fifth Third Bank ("Fifth Third"), as administrative agent, and a syndicate of lenders (the "2014 Facility") with a $100.0 million accordion feature, bearing interest at (i) either a U.S. dollar prime rate or a LIBOR Rate for borrowings denominated in U.S. Dollars, or (ii) either a Canadian dollar prime rate, or a Canadian Dealer Offered Rate, for borrowings denominated in Canadian dollars (in each case plus applicable margins, at the election of the borrowers and as a function of draw down currency). The 2014 Facility had a maturity date of December 30, 2019. The obligations under the 2014 Facility were secured by a first priority lien on substantially all of the Partnership's tangible and intangible assets. Additionally, a subsidiary of Delek Holdings provided a limited guaranty of the Partnership's obligations under the 2014 Facility.
On September 28, 2018, the Partnership entered into a third amended and restated senior secured revolving credit agreement, which amended and restated the 2014 Facility (hereafter, the "DKL Credit Facility") with Fifth Third, as administrative agent, and a syndicate of lenders. The DKL Credit Facility contains a dual currency borrowing tranche that permits draw downs in U.S. or Canadian dollars. Under the terms of the DKL Credit Facility, among other things, the lender commitments were increased to $850.0 million. 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. Additionally, Delek Marketing, a subsidiary of Delek Holdings, had provided a limited guaranty of the Partnership's obligations under the DKL Credit Facility. Delek Marketing's guaranty was (i) limited to an amount equal to the principal amount, plus unpaid and accrued interest, of a promissory note made by Delek Holdings in favor of Delek Marketing (the "Holdings Note") and (ii) secured by Delek Marketing's pledge of the Holdings Note to the lenders under the DKL Credit Facility. Effective March 30, 2020, Delek Marketing's limited guaranty and pledge of the Holdings Note was terminated pursuant to a guaranty and pledge release approved by the required lenders under the DKL Credit Facility.
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 London Interbank Offered Rate ("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, 2020, the weighted average interest rate for our borrowings under the facility was approximately 3.70%. 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, 2020, this fee was 0.40% per year.
As of March 31, 2020, we had $695.0 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, 2020, were $155.0 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.
At any time prior to May 15, 2020, the Issuers may redeem up to 35% of the aggregate principal amount of the 2025 Notes with the net cash proceeds of one or more equity offerings by the Partnership at a redemption price of 106.750% of the redeemed principal amount, plus accrued and unpaid interest, if any, subject to certain conditions and limitations. Prior to May 15, 2020, the Issuers may redeem all or part of the 2025 Notes at a redemption price of the principal amount, plus accrued and unpaid interest, if any, plus a "make whole" premium, subject to certain conditions and limitations. In addition, beginning on May 15, 2020, 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 for the twelve-month period beginning on May 15, 2020, 103.375% for the twelve-month period beginning on May 15, 2021, 101.688% for the twelve-month period beginning on May 15, 2022 and 100.00% beginning on May 15, 2023 and thereafter, plus accrued and unpaid interest, if any. In the event of a change of control, accompanied or followed by a ratings downgrade within a certain period of time, subject to certain conditions and limitations, the Issuers will be obligated to make an offer for the purchase of the 2025 Notes from holders at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest.

           
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Notes to Condensed Consolidated Financial Statements (Unaudited)

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, 2020, we had $250.0 million in outstanding principal amount of the 2025 Notes. As of March 31, 2020, the effective interest rate related to the 2025 Notes was approximately 7.2%.
Outstanding borrowings under the 2025 Notes are net of deferred financing costs and debt discount of $3.8 million and $1.2 million, respectively, as of March 31, 2020, and $4.0 million and $1.3 million, respectively, as of December 31, 2019.
Note 8 - Equity
We had 8,679,757 common limited partner units held by the public outstanding as of March 31, 2020. Additionally, as of March 31, 2020, Delek Holdings owned a 69.1% limited partner interest in us, consisting of 20,745,868 common limited partner units and a 94.6% interest in our general partner, which owns the entire 2.0% general partner interest consisting of 600,523 general partner units. Affiliates, who are also members of our general partner's management and board of directors, own the remaining 5.4% interest in our general partner.
Equity Activity
The table below summarizes the changes in the number of units outstanding from December 31, 2019 through March 31, 2020.
 
Common - Public
 
Common - Delek Holdings
 
General Partner
 
Total
Balance at December 31, 2019
9,131,579

 
15,294,046

 
498,482

 
24,924,107

General partner units issued to maintain 2% interest

 

 
102,041

 
102,041

Big Spring Gathering Assets Acquisition equity issuance

 
5,000,000

 

 
5,000,000

Delek Holdings Unit purchases from public
(451,822
)
 
451,822

 

 

Balance at March 31, 2020
8,679,757

 
20,745,868

 
600,523

 
30,026,148



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 and our general partner. 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. Normal allocations according to percentage interests are made after giving effect to priority income allocations in an amount equal to incentive cash distributions allocated 100% to our general partner.
The following table presents the allocation of the general partner's interest in net income (in thousands, except percentage of ownership interest):
 
Three Months Ended March 31,
 
2020
 
2019
Net income attributable to partners
$
27,796

 
$
19,696

Less: General partner's IDRs
(8,695
)
 
(7,016
)
Net income available to partners
$
19,101

 
$
12,680

General partner's ownership interest
2.0
%
 
2.0
%
General partner's allocated interest in net income
382

 
$
254

General partner's IDRs
8,695

 
7,016

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

 
$
7,270




           
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Notes to Condensed Consolidated Financial Statements (Unaudited)

Incentive Distribution Rights
Our general partner is currently entitled to 2.0% of all quarterly distributions that we make prior to our liquidation. Our general partner has the right, but not the obligation, to contribute up to a proportionate amount of capital to us to maintain its current general partner interest. The general partner's 2.0% interest in these distributions may be reduced if we issue additional units in the future and our general partner does not contribute a proportionate amount of capital to us to maintain its 2.0% general partner interest. Our general partner also currently holds IDRs that entitle it to receive increasing percentages, up to a maximum of 48.0%, of the cash we distribute from operating surplus (as defined in our Partnership Agreement) in excess of 0.43125 per unit per quarter. The maximum distribution is 48.0% and does not include any distributions that our general partner or its affiliates may receive on common or general partner units that it owns. The IDRs held by our general partner currently entitle it to receive the maximum distribution.
Pursuant to Amendment No. 2 to the Partnership Agreement, 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 reduces 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 has been signed that waives 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 and general partner will receive. Our distributions earned with respect to a given period are declared subsequent to quarter end. 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
March 31, 2019
 
$
0.820

 
$
3.28

 
$
27,438

 
May 14, 2019
 
May 7, 2019
June 30, 2019
 
$
0.850

 
$
3.40

 
$
28,914

 
August 13, 2019
 
August 5, 2019
September 30, 2019
 
$
0.880

 
$
3.52

 
$
30,379

 
November 12, 2019
 
November 4, 2019
December 31, 2019
 
$
0.885

 
$
3.54

 
$
30,634

 
February 12, 2020
 
February 4, 2020
March 31, 2020
 
$
0.890

 
$
3.56

 
$
30,878

 
May 12, 2020 (1)
 
May 5, 2020
(1) Expected date of distribution.

The allocations of total quarterly cash distributions made to general and limited partners for the three months ended March 31, 2020 and 2019 are set forth in the table below. Distributions earned with respect to a given period are declared subsequent to quarter end. Therefore, the table below presents total cash distributions applicable to the period in which the distributions are earned (in thousands, except per unit amounts):
 
Three Months Ended March 31,
 
2020
 
2019
General partner's distributions:
 
 
 
     General partner's distributions
$
444

 
$
408

     General partner's IDRs
8,695

 
7,016

          Total general partner's distributions
9,139

 
7,424

 
 
 
 
Limited partners' distributions:
 
 
 
          Common limited partners' distributions
21,739

 
20,014

 
 
 
 
               Total cash distributions
$
30,878

 
$
27,438

 
 
 
 
Cash distributions per limited partner unit
$
0.890

 
$
0.820




           
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Note 9 - Equity Based Compensation
The Delek Logistics GP, LLC 2012 Long-Term Incentive Plan (the "LTIP") was adopted by the Delek Logistics GP, LLC board of directors in connection with the completion of our initial public offering in November 2012. The LTIP is administered by the Conflicts Committee of the board of directors of our general partner. Equity-based compensation expense is included in general and administrative expenses in the accompanying condensed consolidated statements of income and comprehensive income is immaterial for the three months ended March 31, 2020 and 2019.
Note 10 - Equity Method Investments
In May 2019, the Partnership, through its wholly owned indirect subsidiary DKL Pipeline, LLC (“DKL Pipeline”), entered into a Contribution and Subscription Agreement (the “Contribution Agreement”) with Plains Pipeline, L.P. (“Plains”) and Red River Pipeline Company LLC (“Red River”). Pursuant to the Contribution Agreement, DKL Pipeline contributed $124.7 million, substantially all of which was financed by borrowings under the DKL Credit Facility, to Red River in exchange for a 33% membership interest in Red River and DKL Pipeline’s admission as a member of Red River. In addition, we contributed $0.4 million of start up capital pursuant to the Amended and Restated Limited Liability Company Agreement. Red River owns a crude oil pipeline running from Cushing, Oklahoma to Longview, Texas, with an expansion project planned to increase the pipeline capacity, which is expected to be completed during the first half of 2020. We contributed an additional $3.5 million related to such expansion project in May 2019. During the first quarter of 2020, we made additional capital contributions totaling $8.2 million based on capital calls received.
Summarized unaudited financial information for Red River on a 100% basis is shown below (in thousands):
 
March 31, 2020