dk-20240331

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, 2024


☐						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 001-38142

DELEK US HOLDINGS, INC.

(Exact name of registrant as specified in its charter)


Delaware			35-2581557
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

310 Seven Springs Way, Suite 500	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)

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 ☑

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common Stock, par value $0.01

New York Stock Exchange

At May 1, 2024, there were 64,131,074 shares of common stock, $0.01 par value, outstanding (excluding securities held by, or for the account of, the Company or its subsidiaries).

Table of Contents

Delek US Holdings, Inc.

Quarterly Report on Form 10-Q

For the Quarterly Period Ended March 31, 2024






































PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)						3
Condensed Consolidated Balance Sheets						3
Condensed Consolidated Statements of Income						4
Condensed Consolidated Statements of Comprehensive Income						5
Condensed Consolidated Statement s of Changes in Stockholders' Equity						6
Condensed Consolidated Statements of Cash Flows						7
Notes to Condensed Consolidated Financial Statements						8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						24
Item 3. Quantitative and Qualitative Disclosures about Market Risk						53
Item 4. Controls and Procedures						55

PART II. OTHER INFORMATION
Item 1. Legal Proceedings						56
Item 1A. Risk Factors						56

Item 5. Other Information						56
Item 6. Exhibits						56
Signatures						57


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Financial Statements

Part I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Delek US Holdings, Inc.

Condensed Consolidated Balance Sheets (unaudited)

(In millions, except share and per share data)


	March 31, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	753.4	$	822.2
Accounts receivable, net	831.7		783.7


Inventories, net of inventory valuation reserves	1,037.8		981.9

Other current assets	85.2		78.2
Total current assets	2,708.1		2,666.0
Property, plant and equipment:
Property, plant and equipment	4,736.4		4,690.7
Less: accumulated depreciation	(1,932.1)		(1,845.5)
Property, plant and equipment, net	2,804.3		2,845.2
Operating lease right-of-use assets	142.2		148.2
Goodwill	729.4		729.4
Other intangibles, net	291.0		296.2
Equity method investments	370.3		360.7
Other non-current assets	135.0		126.1
Total assets	$	7,180.3	$	7,171.8
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,732.3	$	1,814.3


Current portion of long-term debt	14.5		44.5
Current portion of obligation under Inventory Intermediation Agreement	—		0.4
Current portion of operating lease liabilities	51.5		54.7
Accrued expenses and other current liabilities	808.2		771.2
Total current liabilities	2,606.5		2,685.1
Non-current liabilities:
Long-term debt, net of current portion	2,482.4		2,555.3
Obligation under Inventory Intermediation Agreement	492.7		407.2
Environmental liabilities, net of current portion	110.5		110.9
Asset retirement obligations	43.6		43.3
Deferred tax liabilities	269.6		264.1
Operating lease liabilities, net of current portion	104.7		111.2
Other non-current liabilities	35.2		35.0
Total non-current liabilities	3,538.7		3,527.0
Stockholders’ equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued and outstanding	—		—
Common stock, $0.01 par value, 110,000,000 shares authorized, 81,626,016 shares and 81,539,871 shares issued at March 31, 2024 and December 31, 2023, respectively	0.8		0.8
Additional paid-in capital	1,171.8		1,113.6
Accumulated other comprehensive loss	(4.8)		(4.8)
Treasury stock, 17,575,527 shares, at cost, at March 31, 2024 and December 31, 2023, respectively	(694.1)		(694.1)
Retained earnings	381.5		430.0
Non-controlling interests in subsidiaries	179.9		114.2
Total stockholders’ equity	1,035.1		959.7
Total liabilities and stockholders’ equity	$	7,180.3	$	7,171.8

See accompanying notes to the condensed consolidated financial statements


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Financial Statements

Delek US Holdings, Inc.

Condensed Consolidated Statements of Income (unaudited)

(In millions, except share and per share data)


	Three Months Ended March 31,

		2024		2023
Net revenues		$	3,227.6	$	3,924.3
Cost of sales:
Cost of materials and other		2,797.3		3,439.6
Operating expenses (excluding depreciation and amortization presented below)		213.8		170.8
Depreciation and amortization		86.4		76.8
Total cost of sales		3,097.5		3,687.2


Operating expenses related to retail and wholesale business (excluding depreciation and amortization presented below)		25.8		27.0
General and administrative expenses		64.4		71.5
Depreciation and amortization		8.8		6.6

Other operating income, net		(1.6)		(10.8)
Total operating costs and expenses		3,194.9		3,781.5
Operating income		32.7		142.8
Interest expense, net		87.7		76.5
Income from equity method investments		(21.9)		(14.6)






Other income, net		(0.7)		(7.1)
Total non-operating expense, net		65.1		54.8
(Loss) income before income tax (benefit) expense		(32.4)		88.0
Income tax (benefit) expense		(7.2)		15.8





Net (loss) income		(25.2)		72.2
Net income attributed to non-controlling interests		7.4		7.9
Net (loss) income attributable to Delek		$	(32.6)	$	64.3



Basic (loss) income per share		$	(0.51)	$	0.96



Diluted (loss) income per share		$	(0.51)	$	0.95
Weighted average common shares outstanding:
Basic		64,021,988		66,951,975
Diluted		64,021,988		67,369,374

See accompanying notes to the condensed consolidated financial statements


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Financial Statements

Delek US Holdings, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited)

(In millions)


	Three Months Ended March 31,

		2024		2023
Net (loss) income		$	(25.2)	$	72.2





























Comprehensive (loss) income		$	(25.2)	$	72.2
Comprehensive income attributable to non-controlling interest		7.4		7.9
Comprehensive (loss) income attributable to Delek		$	(32.6)	$	64.3

See accompanying notes to the condensed consolidated financial statements


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Financial Statements

Delek US Holdings, Inc.

Condensed Consolidated Statements of Changes in Stockholders' Equity (unaudited)

(In millions, except share and per share data)


	Three Months Ended March 31, 2024
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Treasury Shares			Non-Controlling Interest in Subsidiaries		Total Stockholders' Equity
	Shares	Amount								Shares	Amount
Balance at December 31, 2023	81,539,871	$	0.8	$	1,113.6	$	(4.8)	$	430.0	(17,575,527)	$	(694.1)	$	114.2	$	959.7


Net (loss) income	—	—		—		—		(32.6)		—	—		7.4		(25.2)



Common stock dividends ($0.245 per share)	—	—		—		—		(15.7)		—	—		—		(15.7)
Distributions to non-controlling interests	—	—		—		—		—		—	—		(9.8)		(9.8)
Equity-based compensation expense	—	—		7.0		—		—		—	—		0.2		7.2






Taxes paid due to the net settlement of equity-based compensation	—	—		(0.5)		—		—		—	—		(0.3)		(0.8)
Exercise of equity-based awards	44,374	—		—		—		—		—	—		—		—
Equity attributable to issuance of Delek Logistic common limited partner units, net of tax	—	—		50.5		—		—		—	—		68.4		118.9
Other	41,771	—		1.2		—		(0.2)		—	—		(0.2)		0.8
Balance at March 31, 2024	81,626,016	$	0.8	$	1,171.8	$	(4.8)	$	381.5	(17,575,527)	$	(694.1)	$	179.9	$	1,035.1


	Three Months Ended March 31, 2023
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Treasury Stock			Non-Controlling Interest in Subsidiaries		Total Stockholders' Equity
	Shares	Amount								Shares	Amount
Balance at December 31, 2022	84,509,517	$	0.9	$	1,134.1	$	(5.2)	$	507.9	(17,575,527)	$	(694.1)	$	125.9	$	1,069.5
Net income	—	—		—		—		64.3		—	—		7.9		72.2
Common stock dividends ($0.220 per share)	—	—		—		—		(14.7)		—	—		—		(14.7)
Equity-based compensation expense	—	—		6.3		—		—		—	—		0.1		6.4
Distributions to non-controlling interests	—	—		—		—		—		—	—		(9.5)		(9.5)

Repurchase of common stock	(16,292)	—		(0.2)		—		(0.2)		—	—		—		(0.4)

Taxes paid due to the net settlement of equity-based compensation	—	—		(0.5)		—		—		—	—		(0.1)		(0.6)
Exercise of equity-based awards	53,643	—		—		—		—		—	—		—		—
Other	22,235	—		1.5		—		(0.1)		—	—		—		1.4
Balance at March 31, 2023	84,569,103	$	0.9	$	1,141.2	$	(5.2)	$	557.2	(17,575,527)	$	(694.1)	$	124.3	$	1,124.3

See accompanying notes to the condensed consolidated financial statements


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Financial Statements

Delek US Holdings, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

(In millions)


	Three Months Ended March 31,

	2024		2023
Cash flows from operating activities:
Net (loss) income	$	(25.2)	$	72.2
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	95.2		83.4

Non-cash lease expense	14.1		15.4
Deferred income taxes	(8.1)		16.6

Income from equity method investments	(21.9)		(14.6)
Dividends from equity method investments	9.5		8.7
Non-cash lower of cost or market/net realizable value adjustment	(8.8)		(1.7)


Loss on extinguishment of debt	3.6		—



Equity-based compensation expense	7.2		6.4
Other	(0.1)		3.3
Changes in assets and liabilities:
Accounts receivable	(48.0)		395.9
Inventories and other current assets	(48.3)		166.8
Fair value of derivatives	13.5		(0.4)
Accounts payable and other current liabilities	110.4		(293.1)
Obligation under Inventory Intermediation Agreements	85.1		(63.5)
Non-current assets and liabilities, net	(11.5)		(0.3)


Net cash provided by operating activities	166.7		395.1
Cash flows from investing activities:


Distributions from equity method investments	2.8		2.1
Purchases of property, plant and equipment	(47.3)		(211.3)
Purchase of equity securities	—		(7.5)
Purchases of intangible assets	(0.7)		(0.6)

Insurance proceeds	3.6		—
Other	—		(4.8)



Net cash used in investing activities	(41.6)		(222.1)
Cash flows from financing activities:
Proceeds from long-term revolvers	1,493.1		848.6
Payments on long-term revolvers	(1,708.4)		(1,123.5)
Proceeds from term debt	650.0		—
Payments on term debt	(533.7)		(6.1)

Proceeds from product and other financing agreements	101.0		335.0
Repayments of product and other financing agreements	(290.7)		(236.1)
Proceeds from Inventory Intermediation Agreement	—		32.2
Proceeds from termination of Supply & Offtake Obligation	—		25.8
Taxes paid due to the net settlement of equity-based compensation	(0.8)		(0.6)

Repurchase of common stock	—		(0.4)

Distribution to non-controlling interest	(9.8)		(9.5)

Proceeds from issuance of Delek Logistic common limited partner units, net	132.3		—

Payment of debt extinguishment costs	(0.3)		—
Dividends paid	(15.7)		(14.7)

Deferred financing costs paid	(10.9)		—


Net used in financing activities	(193.9)		(149.3)
Net (decrease) increase in cash and cash equivalents	(68.8)		23.7
Cash and cash equivalents at the beginning of the period	822.2		841.3


Cash and cash equivalents at the end of the period	$	753.4	$	865.0

Delek US Holdings, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited) (Continued)

(In millions)


	Three Months Ended March 31,
	2024		2023







































































Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of capitalized interest of $0.2 million and $0.9 million in the 2024 and 2023 periods, respectively	$	75.2	105.7
Income taxes	$	—	$	0.1
Non-cash investing activities:


Decrease in accrued capital expenditures	$	(1.4)	$	(19.2)
Non-cash financing activities:

Non-cash lease liability arising from obtaining right-of-use assets during the period	$	9.0	$	19.8

See accompanying notes to the condensed consolidated financial statements


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Notes to Consolidated Financial Statements

Delek US Holdings, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

1. Organization and Basis of Presentation

Delek US Holdings, Inc. operates through its consolidated subsidiaries, which include Delek US Energy, Inc. ("Delek Energy") (and its subsidiaries) and Alon USA Energy, Inc. ("Alon") (and its subsidiaries). The terms "we," "our," "us," "Delek" and the "Company" are used in this report to refer to Delek and its consolidated subsidiaries. Delek's common stock is listed on the New York Stock Exchange ("NYSE") under the symbol "DK."

Our condensed consolidated financial statements include the accounts of Delek and its subsidiaries. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with United States ("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 GAAP applied on a consistent basis with those of the annual audited consolidated financial statements included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on February 28, 2024 (the "Annual Report on Form 10-K") 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 the notes thereto for the year ended December 31, 2023 included in our Annual Report on Form 10-K.

Our condensed consolidated financial statements include Delek Logistics Partners, LP ("Delek Logistics", NYSE:DKL), which is a variable interest entity ("VIE"). As the indirect owner of the general partner of Delek Logistics, we have the ability to direct the activities of this entity that most significantly impact its economic performance. We are also considered to be the primary beneficiary for accounting purposes for this entity and are Delek Logistics' primary customer. In the event that Delek Logistics incurs a loss, our operating results will reflect such loss, net of intercompany eliminations, to the extent of our ownership interest in this entity.

In the opinion of management, all adjustments necessary for a fair presentation of the financial condition and the results of operations for the interim periods have been included. All significant intercompany transactions and account balances have been eliminated in consolidation. 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.

Accounting Pronouncements Not Yet Adopted

ASU 2023-09, Income Taxes(Topic 740): Improvements to Income Tax Disclosures

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09 Income Taxes(Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"). The standard is intended to enhance the transparency and decision usefulness of income tax disclosures. ASU 2023-09 requires disaggregated information about a reporting entity's effective tax rate reconciliation as well as information on income taxes paid. The amendments in this ASU are effective for annual periods beginning after December 15, 2024, with early adoption permitted, and should be applied on a prospective basis with the option to apply the standard retrospectively. The Company is currently evaluating the provisions of the amendments and the impact on its future condensed consolidated financial statements, but does not currently expect adopting this new guidance will have a material impact on our condensed consolidated financial statements and related disclosures.

ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"). ASU 2023-07 expands reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the chief decision maker ("CODM") and included within each reported measure of a segment's profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment's profit or loss and assets. The ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment's profit or loss in assessing segment performance and deciding how to allocate resources. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, and should be applied retrospectively to all prior periods presented in the financial statements. The adoption of ASU 2023-07 should not have a material impact on our condensed consolidated financial statements and related disclosures. See Note 2 for further information.


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Notes to Consolidated Financial Statements

ASU 2023-06, Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative

In October 2023, the FASB issued ASU 2023-06 Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative ("ASU 2023-06"). The main provision of ASU 2023-06 is to clarify or improve disclosure and presentation requirements of a variety of topics, which will allow users to more easily compare entities subject to the SEC's existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the FASB accounting standard codification with the SEC's regulations. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Company is currently evaluating the provisions of the amendments and the impact on its future condensed consolidated financial statements, but does not currently expect adopting this new guidance will have a material impact on our condensed consolidated financial statements and related disclosures.

2. Segment Data

We aggregate our operating units into three reportable segments: Refining, Logistics, and Retail. Operations that are not specifically included in the reportable segments are included in Corporate, Other and Eliminations, which consist of the following:

•our corporate activities;

•results of certain immaterial operating segments, including our Canadian crude trading operations (as discussed in Note 9); and

•intercompany eliminations.

The disaggregated financial results for the reporting segments have been prepared using a management approach, which is consistent with the basis and manner in which management internally disaggregates financial information for the purposes of assisting internal operating decisions. The CODM evaluates performance based upon EBITDA attributable to Delek. We define EBITDA attributable to Delek for any period as net income (loss) attributable to Delek plus interest expense, income tax expense (benefit), depreciation and amortization. Segment EBITDA should not be considered a substitute for results prepared in accordance with U.S. GAAP and should not be considered alternatives to net income (loss), which is the most directly comparable financial measure to EBITDA that is in accordance with U.S. GAAP. Segment EBITDA, as determined and measured by us, should also not be compared to similarly titled measures reported by other companies.

Assets by segment are not a measure used to assess the performance of the Company by the CODM and thus are not disclosed.

Refining Segment

The refining segment processes crude oil and other feedstocks for the manufacture of transportation motor fuels, including various grades of gasoline, diesel fuel and aviation fuel, asphalt and other petroleum-based products that are distributed through owned and third-party product terminals. The refining segment includes the following:

•Tyler, Texas refinery (the "Tyler refinery");

•El Dorado, Arkansas refinery (the "El Dorado refinery");

•Big Spring, Texas refinery (the "Big Spring refinery"); and

•Krotz Springs, Louisiana refinery (the "Krotz Springs refinery").

The refining segment also owns and operates three biodiesel facilities involved in the production of biodiesel fuels and related activities, located in Crossett, Arkansas, Cleburne, Texas and New Albany, Mississippi. In addition, the refining segment includes our wholesale crude operations.

Logistics Segment

Our logistics segment owns and operates crude oil, refined products and natural gas logistics and marketing assets as well as water disposal and recycling assets. The logistics segment generates revenue by charging fees for gathering, transporting and storing crude oil and natural gas, marketing, distributing, transporting and storing intermediate and refined products and disposing and recycling water in select regions of the southeastern United States, the Delaware Basin in New Mexico and West Texas for our refining segment and third parties, and sales of wholesale products in the West Texas market.

Retail Segment

Our retail segment consists of 250 owned and leased convenience store sites as of March 31, 2024, located primarily in West Texas and New Mexico. These convenience stores typically offer various grades of fuel, food and beverage products, general merchandise, and certain food and other services. Substantially all of the motor fuel sold through our retail segment is supplied by our Big Spring refinery, which is transferred to the retail segment at prices substantially determined by reference to published commodity pricing information.

Business Segment Operating Performance

The following is a summary of business segment operating performance as measured by EBITDA attributable to Delek for the period indicated (in millions):


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Notes to Consolidated Financial Statements


	Three Months Ended March 31, 2024
(In millions)	Refining		Logistics		Retail		Corporate, Other and Eliminations		Consolidated
Net revenues (excluding intercompany fees and revenues)	$	2,921.6	$	112.5	$	193.5	$	—	$	3,227.6
Inter-segment fees and revenues	186.7		139.6		—		(326.3)		—
Total revenues	$	3,108.3	$	252.1	$	193.5	$	(326.3)	$	3,227.6

Segment EBITDA attributable to Delek	$	101.1	$	99.7	$	6.5	$	(64.2)	$	143.1
Depreciation and amortization	(61.4)		(26.5)		(3.5)		(3.8)		(95.2)
Interest expense, net	(12.1)		(40.3)		—		(35.3)		(87.7)
Income tax benefit									7.2
Net loss attributable to Delek									$	(32.6)

Income from equity method investments	$	—	$	(8.5)	$	—	$	(13.4)	$	(21.9)
Capital spending (1)	$	21.5	$	15.2	$	4.1	$	5.1	$	45.9


	Three Months Ended March 31, 2023
(In millions)	Refining		Logistics		Retail		Corporate, Other and Eliminations		Consolidated
Net revenues (excluding intercompany fees and revenues)	$	3,600.8	$	118.5	$	205.0	$	—	$	3,924.3
Inter-segment fees and revenues	193.7		125.0		—		(318.7)		—
Total revenues	$	3,794.5	$	243.5	$	205.0	$	(318.7)	$	3,924.3

Segment EBITDA attributable to Delek	$	192.1	$	91.4	$	6.4	$	(49.9)	$	240.0
Depreciation and amortization	(56.6)		(21.1)		(2.7)		(3.0)		(83.4)
Interest expense, net	(9.0)		(32.6)		(0.2)		(34.7)		(76.5)
Income tax expense									(15.8)
Net income attributable to Delek									$	64.3

Income from equity method investments	$	(0.4)	$	(6.3)	$	—	$	(7.9)	$	(14.6)
Capital spending (1)	$	147.6	$	36.1	$	2.7	$	5.7	$	192.1

(1) Capital spending includes additions on an accrual basis.

3. Earnings Per Share

Basic earnings per share (or "EPS") is computed by dividing net income (loss) by the weighted average common shares outstanding. Diluted earnings per share is computed by dividing net income, as adjusted for changes to income that would result from the assumed settlement of the dilutive equity instruments included in diluted weighted average common shares outstanding, by the diluted weighted average common shares outstanding. For all periods presented, we have outstanding various equity-based compensation awards that are considered in our diluted EPS calculation (when to do so would be dilutive), and is inclusive of awards disclosed in Note 15 to these condensed consolidated financial statements. For those instruments that are indexed to our common stock, they are generally dilutive when the market price of the underlying indexed share of common stock is in excess of the exercise price.


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Notes to Consolidated Financial Statements

The following table sets forth the computation of basic and diluted earnings per share.


	Three Months Ended March 31,
		2024		2023
Numerator:
Numerator for EPS
Net (loss) income		$	(25.2)	$	72.2
Less: Income attributed to non-controlling interests		7.4		7.9


Numerator for basic and diluted EPS attributable to Delek		$	(32.6)	$	64.3








Denominator:
Weighted average common shares outstanding (denominator for basic EPS)		64,021,988		66,951,975


Dilutive effect of stock-based awards		—		417,399
Weighted average common shares outstanding, assuming dilution (denominator for diluted EPS)		64,021,988		67,369,374

EPS:



Basic (loss) income per share		$	(0.51)	$	0.96



Diluted (loss) income per share		$	(0.51)	$	0.95

The following equity instruments were excluded from the diluted weighted average common shares outstanding because their effect would be anti-dilutive:
Antidilutive stock-based compensation (because average share price is less than exercise price)		829,292		2,181,281
Antidilutive due to loss		550,254		—
Total antidilutive stock-based compensation		1,379,546		2,181,281

4. Delek Logistics

Delek Logistics is a publicly traded limited partnership formed by Delek in 2012 that owns and operates crude oil, refined products and natural gas logistics and marketing assets as well as water disposal and recycling assets. A substantial majority of Delek Logistics' assets are integral to Delek’s refining and marketing operations. As of March 31, 2024, we owned a 72.7% interest in Delek Logistics, consisting of 34,311,278 common limited partner units and the non-economic general partner interest. The limited partner interests in Delek Logistics not owned by us are reflected in net income attributable to non-controlling interest in the accompanying condensed consolidated statements of income and in non-controlling interest in subsidiaries in the accompanying condensed consolidated balance sheets.

On March 12, 2024, Delek Logistics completed a public offering of its common units in which it sold 3,584,416 common units (including an overallotment option of 467,532 common units) to the underwriters of the offering at a price to the public of $38.50 per unit. The proceeds received from this offering (net of underwriting discounts, commissions and expenses) were $132.3 million and were used to repay a portion of the outstanding borrowings under the Delek Logistics Revolving Facility (defined below). Underwriting discounts totaled $5.5 million.

As a result of this common unit issuance and our resulting Delek Logistics ownership change, we adjusted additional paid-in capital and equity attributable to Delek Logistics’ non-controlling interest holders to reallocate Delek Logistics' equity among its unitholders.

Delek Logistics is a VIE, as defined under GAAP, and is consolidated into our condensed consolidated financial statements, representing our logistics segment. The assets of Delek Logistics can only be used to settle its own obligations and its creditors have no recourse to our assets. Exclusive of intercompany balances and the marketing agreement intangible asset between Delek Logistics and Delek which are eliminated in consolidation, the Delek Logistics condensed consolidated balance sheets are included in the condensed consolidated balance sheets of Delek. The Delek Logistics condensed consolidated balance sheets are presented below (in millions):


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Notes to Consolidated Financial Statements


	As of March 31, 2024		As of December 31, 2023
ASSETS
Cash and cash equivalents	$	9.7	$	3.8
Accounts receivable	57.0		41.1
Accounts receivable from related parties	36.6		28.4
Inventory	1.7		2.3
Other current assets	0.6		0.7
Property, plant and equipment, net	930.0		936.2
Equity method investments	238.2		241.3
Operating lease right-of-use assets	17.6		19.0
Goodwill	12.2		12.2
Intangible assets, net	337.3		343.0
Other non-current assets	13.5		14.2
Total assets	$	1,654.4	$	1,642.2
LIABILITIES AND DEFICIT
Accounts payable	$	26.3	$	26.3
Accounts payable to related parties	—		—
Current portion of long-term debt	—		30.0
Current portion of operating lease liabilities	6.4		6.7
Accrued expenses and other current liabilities	24.5		27.6
Long-term debt	1,601.2		1,673.8
Asset retirement obligations	10.2		10.0
Operating lease liabilities, net of current portion	7.4		8.3
Other non-current liabilities	20.9		21.4
Deficit	(42.5)		(161.9)
Total liabilities and deficit	$	1,654.4	$	1,642.2

5. Equity Method Investments

Wink to Webster Pipeline

Through our wholly-owned direct subsidiary Delek Energy, we own a 50% investment in W2W Holdings LLC ("HoldCo") which was formed by us and MPLX Operations LLC ("MPLX") to obtain financing and fund capital calls associated with our collective and contributed interests in the Wink to Webster Pipeline LLC ("WWP") Joint Venture. The Company has determined that HoldCo is a VIE. While we have the ability to exert significant influence through participation in board and management committees, we are not the primary beneficiary since we do not have a controlling financial interest in HoldCo, and no single party has the power to direct the activities that most significantly impact HoldCo's economic performance.

Distributions received from WWP are first applied to service the debt of HoldCo's wholly owned finance LLC, with excess distributions being made to the HoldCo members as provided for in the W2W Holdings LLC Agreement and as allowed for under its debt agreements. The obligations of the HoldCo members under the W2W Holdings LLC Agreement are guaranteed by the parents of the member entities.

As of March 31, 2024, except for the guarantee of member obligations under the joint venture, we do not have other guarantees with or to HoldCo, nor any third-party associated with HoldCo contracted work. The Company's maximum exposure to any losses incurred by HoldCo is limited to its investment.

As of March 31, 2024 and December 31, 2023, Delek's HoldCo investment balance totaled $60.8 million and $51.4 million, respectively.

Delek Logistics Investments

Delek Logistics has a 33% membership interest in Red River Pipeline Company LLC (“Red River”), which owns a 16-inch crude oil pipeline running from Cushing, Oklahoma to Longview, Texas. As of March 31, 2024 and December 31, 2023, Delek's investment balance in Red River totaled $140.0 million and $141.1 million, respectively.

In addition to Red River, Delek Logistics has two other pipeline joint ventures in which we own a 50% membership interest in the entity formed with an affiliate of Plains All American Pipeline, L.P. to operate one of these pipeline systems and a 33% membership interest in Andeavor Logistics Rio Pipeline LLC which operates the other pipeline system. As of March 31, 2024 and December 31, 2023, Delek Logistics' investment balance in these joint ventures was $98.2 million and $100.3 million.


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Notes to Consolidated Financial Statements

Other Investments

In addition to our pipeline joint ventures, we also have a 50% interest in a joint venture that owns asphalt terminals located in the southwestern region of the U.S., as well as a 50% interest in a joint venture that owns, operates and maintains a terminal consisting of an ethanol unit train facility with an ethanol tank in Arkansas. As of March 31, 2024 and December 31, 2023, Delek's investment balance in these joint ventures was $71.3 million and $67.9 million, respectively.

6. Inventory

Crude oil feedstocks, refined products, blendstocks and asphalt inventory for all of our operations, excluding merchandise inventory in our retail segment, are stated at the lower of cost determined using the first-in, first-out ("FIFO") basis or net realizable value. Retail merchandise inventory consists of cigarettes, beer, convenience merchandise and food service merchandise and is stated at estimated cost as determined by the retail inventory method.

The following table presents the components of inventory for each period presented:


	Titled Inventory		Inventory Intermediation Agreement (1)		Total
March 31, 2024
Feedstocks, raw materials and supplies	$	294.1	$	150.5	$	444.6
Refined products and blendstock	245.0		316.5		561.5
Merchandise inventory and other	31.7		—		31.7
Total	$	570.8	$	467.0	$	1,037.8

December 31, 2023
Feedstocks, raw materials and supplies	$	250.2	$	116.9	$	367.1
Refined products and blendstock	278.6		304.8		583.4
Merchandise inventory and other	31.4		—		31.4
Total	$	560.2	$	421.7	$	981.9

(1) Refer to Note 7 - Inventory Intermediation Obligations for further information.

At March 31, 2024, we recorded a pre-tax inventory valuation reserve of $2.8 million due to a market price decline below our cost of certain inventory products. At December 31, 2023, we recorded a pre-tax inventory valuation reserve of $11.6 million. For the three months ended March 31, 2024 and 2023, we recognized a net reduction in cost of materials and other in the accompanying condensed consolidated statements of income related to the change in pre-tax inventory valuation of $8.8 million and $1.7 million, respectively.


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Notes to Consolidated Financial Statements

7. Inventory Intermediation Obligations

The following table summarizes our outstanding obligations under our Inventory Intermediation Agreement:


	As of March 31, 2024		As of December 31, 2023
Obligations under Inventory Intermediation Agreement
Obligations related to Base Layer Volumes	$	492.7	$	407.2
Current portion	—		0.4
Total obligations under Inventory Intermediation Agreement	$	492.7	$	407.6
Other (receivable) payable for monthly activity true-up	$	(23.8)	$	(9.3)

Included in the Inventory Intermediation Agreement are cost of financing associated with the value of the inventory and other periodic charges, which we include in interest expense, net in the condensed consolidated statements of income. In addition to the cost of financing charges, we have other intermediation fees which include market structure settlements, where we may pay or receive amounts based on market conditions and volumes subject to the intermediation agreement. These market structure settlements are recorded in cost of materials and other in the condensed consolidated statements of income. The following table summarizes these fees:


	Three Months Ended March 31,
		2024		2023
Net fees and (income) expenses:
Inventory intermediation fees		$	(5.6)	$	5.9
Interest expense, net		$	16.5	$	14.0

Inventory Intermediation Agreement

On December 22, 2022, Delek entered into an inventory intermediation agreement ("Inventory Intermediation Agreement") with Citigroup Energy Inc. ("Citi") in connection with DK Trading & Supply, LLC ("DKTS"), an indirect subsidiary of Delek. Pursuant to the Inventory Intermediation Agreement, Citi will (i) purchase from and sell to DKTS crude oil and other petroleum feedstocks in connection with refining processing operations at El Dorado, Big Spring, and Krotz Springs, (ii) purchase from and sell to DKTS all refined products produced by such refineries other than certain excluded products and (iii) in connection with such purchases and sales, DKTS will enter into certain market risk hedges in each case, on the terms and subject to certain conditions. The Inventory Intermediation Agreement results in up to $800 million of working capital capacity for DKTS.

On December 21, 2023, DKTS amended the Inventory Intermediation Agreement to among other things, (i) extend the term of the Inventory Intermediation Agreement from December 30, 2024 to January 31, 2026, (ii) reduce Citi’s unilateral term extension option from a twelve month extension period to a six month extension period and (iii) increase the amount of the payment deferral mechanism from $70 million to $250 million. As of March 31, 2024 and December 31, 2023, we had letters of credit outstanding of $185.0 million and $230.0 million, respectively, supporting the Inventory Intermediation Agreement.

The Inventory Intermediation Agreement provides for the lease to Citi of crude oil and refined product storage facilities. At the inception of the Inventory Intermediation Agreement, we transferred title to a certain number of barrels of crude and other inventories to Citi, and the Inventory Intermediation Agreement requires the repurchase of the remaining inventory (including certain "Base Layer Volumes") at termination. As of March 31, 2024 and December 31, 2023, the volumes subject to the Inventory Intermediation Agreement totaled 5.5 million barrels and 5.4 million barrels, including Base Layer Volumes associated with our non-current inventory intermediation obligation of 5.5 million barrels.

The Inventory Intermediation Agreement is accounted for as an inventory financing arrangement under the fair value election provided by Accounting Standards Codification ("ASC") 815 Derivatives and Hedging ("ASC 815") and ASC 825, Financial Instruments ("ASC 825"). Therefore, the crude oil and refined products barrels subject to the Inventory Intermediation Agreement will continue to be reported in our condensed consolidated balance sheets until processed and sold to a third party. At each reporting period, we record a liability equal to the repurchase obligation to Citi at current market prices. The repurchase obligations associated with the Base Layer Volumes are reflected as non-current liabilities on our condensed consolidated balance sheets to the extent that they are not contractually due within twelve months. The remaining obligation resulting from our monthly activity, including long and short inventory positions valued at market-indexed pricing, are included in current liabilities (or receivables) on our condensed consolidated balance sheets.

Gains (losses) related to changes in fair value due to commodity-index price are recorded as a component of cost of materials and other in the condensed consolidated statements of income. With respect to the repurchase obligation, we recognized losses attributable to changes in fair value due to commodity-index price totaling $81.8 million and gains totaling $12.7 million during the three months ended March 31, 2024 and 2023, respectively.


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Notes to Consolidated Financial Statements

8. Long-Term Obligations

Outstanding borrowings under debt instruments are as follows (in millions):


	March 31, 2024		December 31, 2023

Delek Term Loan Credit Facility	938.1		940.5
Delek Logistics Revolving Facility	565.2		780.5
Delek Logistics Term Loan Facility	—		281.3
Delek Logistics 2025 Notes	—		250.0
Delek Logistics 2028 Notes	400.0		400.0
Delek Logistics 2029 Notes	650.0		—
United Community Bank Revolver	5.0		5.0
Principle amount of long-term debt	2,558.3		2,657.3
Less: Unamortized discount and deferred financing costs	(61.4)		(57.5)
Total debt, net of unamortized discount and deferred financing costs	2,496.9		2,599.8
Less: Current portion of long-term debt	14.5		44.5
Long-term debt, net of current portion	$	2,482.4	$	2,555.3

Delek Term Loan Credit Facility

On November 18, 2022, Delek entered into an amended and restated term loan credit agreement (the "Delek Term Loan Credit Facility") providing for a senior secured term loan facility in an initial principal of $950.0 million at a discount of 4.00%. This senior secured facility allows for $400.0 million in incremental loans subject to certain restrictions. Repayment terms include quarterly principal payments of $2.4 million with the balance of principal due on November 19, 2029. At Delek’s option, borrowings bear interest at either the Adjusted Term Secured Overnight Financing Rate ("SOFR") or base rate as defined by the agreement, plus an applicable margin of 2.50% per annum with respect to base rate borrowings and 3.50% per annum with respect to SOFR borrowings. At March 31, 2024 and December 31, 2023, the weighted average borrowing rate was approximately 8.93% and 8.96%, respectively. The effective interest rate was 10.15% as of March 31, 2024.

Delek Logistics Term Loan Facility

On October 13, 2022, Delek Logistics entered into a senior secured term loan with an original principal of $300.0 million ("the Delek Logistics Term Loan Facility"). The outstanding principal balance of $281.3 million was paid on March 13, 2024 from a portion of the proceeds received from the issuance of the Delek Logistics 2029 Notes as indicated below. At Delek Logistics' option, borrowings bore interest at either the SOFR or U.S. dollar prime rate, plus an applicable margin. The applicable margin was 2.50% for the first year and 3.00% for the second year for U.S. dollar primate rate borrowings. SOFR borrowings include a credit spread adjustment of 0.10% to 0.25% plus an applicable margin of 3.50% for the first year and 4.00% for the second year. Debt extinguishment costs were $2.1 million and are recorded in interest expense, net in the accompanying condensed consolidated statements of income.

Revolving Credit Facilities

Available capacity and amounts outstanding for each of our revolving credit facilities as of March 31, 2024 are shown below (in millions):


	Total Capacity		Outstanding Borrowings		Outstanding Letters of Credit		Available Capacity		Maturity Date
Delek Revolving Credit Facility (1)	$	1,100.0	$	—	$	280.5	$	819.5	October 26, 2027
Delek Logistics Revolving Facility (2)	$	1,150.0	$	565.2	$	—	$	584.8	October 13, 2027
United Community Bank Revolver (3)	$	25.0	$	5.0	$	—	$	20.0	June 30, 2024

(1) Total capacity includes letters of credit up to $500.0 million. This facility requires a quarterly unused commitment fee based on average commitment usage, currently at 0.30% per annum. Interest is measured at either the SOFR, base rate, or Canadian dollar bankers’ acceptances rate (“CDOR”), plus an applicable margin of 0.25% to 0.75% per annum with respect to base rate borrowings or 1.25% to 1.75% per annum with respect to SOFR and CDOR.
(2) Total capacity includes letters of credit up to $146.9 million and $31.9 million for swing line loans. This facility requires a quarterly unused commitment fee based on average commitment usage, currently at 0.45% per annum. Interest is measured at either the U.S. dollar prime rate plus an applicable margin of 1.00% to 2.00% depending on Delek Logistics’ leverage ratio, or a SOFR rate plus a credit spread adjustment of 0.10% to 0.25% and an applicable margin ranging from 2.00% to 3.00% depending on the leverage ratio. As of March 31, 2024 and December 31, 2023, the weighted average interest rate was 8.18% and 8.46%, respectively.
(3) Interest is measured as a variable rate equal to the Wall Street Journal Prime Rate minus 0.75%. Requires a quarterly fee of 0.25% per year on the average unused revolving commitment. The weighted average borrowing rate as of March 31, 2024 and December 31, 2023 was 7.75% and 7.75%, respectively.


15 \|

Notes to Consolidated Financial Statements

Delek Logistics Revolving Facility

On March 29, 2024, Delek Logistics entered into a fourth amendment to the Delek Logistics Revolving Facility which among other things increased the U.S. Revolving Credit Commitments (as defined in the Delek Logistics Credit Facility) by an amount equal to $100.0 million resulting in aggregate lender commitments under the Delek Logistics Revolving Credit Facility in an amount of $1,150.0 million.

Delek Logistics 2029 Notes

On March 13, 2024, Delek Logistics and its wholly owned subsidiary Delek Logistics Finance Corp. (“Finance Corp.” and together with Delek Logistics, the “Co-issuers”), sold $650.0 million in aggregate principal amount of the Co-issuers 8.625% Senior Notes due 2029 (the “Delek Logistics 2029 Notes”), at par, pursuant to an indenture with U.S. Bank Trust Company, National Association as trustee. Net proceeds were used to redeem the Delek Logistics 2025 Notes including accrued interest, pay off the Delek Logistics Term Loan Facility including accrued interest and to repay a portion of the outstanding borrowings under the Delek Logistics Revolving Facility.

On April 17, 2024, the Co-issuers sold $200.0 million in aggregate principal amount of additional 8.625% senior notes due 2029 (the “Additional 2029 Notes”), at 101.25%. The Additional 2029 Notes were issued under the same indenture as the Delek Logistics 2029 Notes and formed a part of the same series of notes as the Delek Logistics 2029 Notes. The net proceeds were used to repay a portion of the outstanding borrowings under the Delek Logistics Revolving Facility.

The Delek Logistics 2029 Notes are general unsecured senior obligations of the Co-issuers and are unconditionally guaranteed jointly and severally on a senior unsecured basis by Delek Logistics’ subsidiaries other than Finance Corp. and will be unconditionally guaranteed on the same basis by certain of Delek Logistics’ future subsidiaries. The Delek Logistics 2029 Notes rank equal in right of payment with all existing and future senior indebtedness of the Co-issuers, and senior in right of payment to any future subordinated indebtedness of the Co-issuers. Delek Logistics recorded $10.4 million of debt issuance costs which will be amortized over the term of the Delek Logistics 2029 Notes and included in interest expense in the condensed consolidated statements of income. The Delek Logistics 2029 Notes will mature on March 15, 2029, and interest is payable semi-annually in arrears on each March 15 and September 15, commencing September 15, 2024.

At any time prior to March 15, 2026, the Co-issuers may redeem up to 35% of the aggregate principal amount of the Delek Logistics 2029 Notes with the net cash proceeds of one or more equity offerings by Delek Logistics at a redemption price of 108.625% of the redeemed principal amount, plus accrued and unpaid interest, if any, subject to certain conditions and limitations. Prior to March 15, 2026, the Co-issuers may also redeem all or part of the Delek Logistics 2029 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 March 15, 2026, the Co-issuers may, subject to certain conditions and limitations, redeem all or part of the Delek Logistics 2029 Notes, at a redemption price of 104.313% of the redeemed principal for the twelve-month period beginning on March 15, 2026, 102.156% for the twelve-month period beginning on March 15, 2027, and 100.00% beginning on March 15, 2028 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 Co-issuers will be obligated to make an offer for the purchase of the Delek Logistics 2029 Notes from holders at a price equal to 101.00% of the principal amount thereof, plus accrued and unpaid interest.

As of March 31, 2024, the effective interest rate was 8.81%.

Delek Logistics 2028 Notes

On May 24, 2021, Delek Logistics and Finance Corp. issued general unsecured senior obligations comprised of $400.0 million in aggregate principal amount of 7.125% senior notes maturing June 1, 2028 ("the Delek Logistics 2028 Notes"). The Delek Logistics 2028 Notes are unconditionally guaranteed jointly and severally on a senior unsecured basis by Delek Logistics’ subsidiaries (other than Finance Corp.) and will be unconditionally guaranteed on the same basis by certain of Delek Logistics’ future subsidiaries. Interest is payable semi-annually in arrears on June 1 and December 1. As of March 31, 2024, the effective interest rate was 7.39%.

Delek Logistics 2025 Notes

In May 2018, Delek Logistics and Finance Corp. issued general unsecured senior obligations comprised of $250.0 million in aggregate principal of 6.75% senior notes maturing on May 15, 2025 ("the Delek Logistics 2025 Notes"). Concurrent with the issuance of the Delek Logistics 2029 Notes, Delek Logistics made a cash tender offer (the "Offer") for all of the outstanding Delek Logistic 2025 Notes with a conditional notice of full redemption for the remaining balance not received from the Offer. The Company received tenders from holders of approximately $156.2 million in aggregate principal amount. All the remaining Delek Logistic 2025 Notes were redeemed by March 29, 2024, pursuant to the notice of conditional redemption. Debt extinguishment costs were $1.5 million and are recorded in interest expense, net in the accompanying condensed consolidated statements of income.

Guarantees Under Revolver and Term Facilities

The obligations of the borrowers under the Delek Term Loan Credit Facility and the Delek Revolving Credit Facility are guaranteed by Delek and each of its direct and indirect, existing and future, wholly-owned domestic subsidiaries, subject to customary exceptions and limitations, and excluding Delek Logistics Partners, LP, Delek Logistics GP, LLC, and each subsidiary of the foregoing (collectively, the "MLP Subsidiaries"). Borrowings under the Delek Term Loan Credit Facility and the Delek Revolving Credit Facility are also guaranteed by DK Canada Energy ULC, a British Columbia unlimited liability company and a wholly-owned restricted subsidiary of Delek.


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Notes to Consolidated Financial Statements

The obligations under the Delek Logistics Revolving Facility are secured by first priority liens on substantially all of Delek Logistics' tangible and intangible assets.

Restrictive Terms and Covenants

Under the terms of our debt facilities, we are required to comply with usual and customary financial and non-financial covenants. Certain of our debt facilities contain limitations on future transactions such as incurrence of additional indebtedness, investments, affiliate transactions, asset acquisitions or dispositions, and dividends or distributions. As of March 31, 2024, we were in compliance with covenants on all of our debt instruments.

Some of Delek's subsidiaries have restrictions in their respective credit facilities limiting their use of assets. As of March 31, 2024, we had no subsidiaries with restricted net assets which would prohibit earnings from being transferred to the parent company for its use.

9. Derivative Instruments

We use the majority of our derivatives to reduce normal operating and market risks with the primary objective of reducing the impact of market price volatility on our results of operations. As such, our use of derivative contracts is aimed at:

•limiting our exposure to commodity price fluctuations on inventory above or below target levels (where appropriate) within each of our segments;

•managing our exposure to commodity price risk associated with the purchase or sale of crude oil, feedstocks/intermediates and finished grade fuel within each of our segments;

•managing our exposure to market crack spread fluctuations;

•managing the cost of our Renewable Identification Numbers ("RINs") credits required by the U.S. Environmental Protection Agency ("EPA") to blend biofuels into fuel products ("RINs Obligation") using future commitments to purchase or sell RINs at fixed prices and quantities; and

•limiting the exposure to interest rate fluctuations on our floating rate borrowings.

We primarily utilize commodity swaps, futures, forward contracts and options contracts, generally with maturity dates of three years or less, and from time to time interest rate swaps or caps to achieve these objectives. Futures contracts are standardized agreements, traded on a futures exchange, to buy or sell the commodity at a predetermined price and location at a specified future date. Options provide the right, but not the obligation to buy or sell a commodity at a specified price in the future. Commodity swaps and futures contracts require cash settlement for the commodity based on the difference between a fixed or floating price and the market price on the settlement date, and options require payment/receipt of an upfront premium. Because these derivatives are entered into to achieve objectives specifically related to our inventory and production risks, such gains and losses (to the extent not designated as accounting hedges and recognized on an unrealized basis in other comprehensive income) are recognized in cost of materials and other.

Forward contracts are agreements to buy or sell a commodity at a predetermined price at a specified future date, and for our transactions, generally require physical delivery. Forward contracts where the underlying commodity will be used or sold in the normal course of business qualify as normal purchases and normal sales ("NPNS") pursuant to ASC 815. If we elect the NPNS exception, such forward contracts are not accounted for as derivative instruments but rather are accounted for under other applicable GAAP. Commodity forward contracts accounted for as derivative instruments are recorded at fair value with changes in fair value recognized in earnings in the period of change. Our Canadian crude trading operations are accounted for as derivative instruments, and the related unrealized and realized gains and losses are recognized in other operating income, net on the condensed consolidated statements of income. Additionally, as of and for the three months ended March 31, 2024, other forward contracts accounted for as derivatives that are specific to managing crude costs rather than for trading purposes are recognized in cost of materials and other on the condensed consolidated statements of income in our refining segment, and are included in our disclosures of commodity derivatives in the tables below.

Futures, swaps or other commodity related derivative instruments that are utilized to specifically provide economic hedges on our Canadian forward contract or investment positions are recognized in other operating income, net because that is where the related underlying transactions are reflected.

From time to time, we also enter into future commitments to purchase or sell RINs at fixed prices and quantities, which are used to manage the costs associated with our RINs Obligation. These future RINs commitment contracts meet the definition of derivative instruments under ASC 815, and are recorded at estimated fair value in accordance with the provisions of ASC 815. Changes in the fair value of these future RINs commitment contracts are recorded in cost of materials and other on the condensed consolidated statements of income. As of March 31, 2024, we do not believe there is any material credit risk with respect to the counterparties to any of our derivative contracts.

The following table presents the fair value of our derivative instruments as of March 31, 2024 and December 31, 2023. The fair value amounts below are presented on a gross basis and do not reflect the netting of asset and liability positions permitted under our master netting arrangements, including cash collateral on deposit with our counterparties. We have elected to offset the recognized fair value amounts for multiple derivative instruments executed with the same counterparty in our financial statements. As a result, the asset and liability amounts below differ from the amounts presented in our condensed consolidated balance sheets. See Note 10 for further information regarding the fair value of derivative instruments (in millions).


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Notes to Consolidated Financial Statements


		March 31, 2024				December 31, 2023
Derivative Type	Balance Sheet Location	Assets		Liabilities		Assets		Liabilities
Derivatives not designated as hedging instruments:
Commodity derivatives (1)	Other current assets	$	—	$	—	$	6.6	$	(7.1)
Commodity derivatives (1)	Other current liabilities	12.9		(23.2)		—		(0.8)
Commodity derivatives (1)	Other long-term assets	—		—		—		—

RINs commitment contracts (2)	Other current assets	8.2		—		—		—
RINs commitment contracts (2)	Other current liabilities	—		(19.7)		—		(3.1)
Total gross fair value of derivatives		21.1		(42.9)		6.6		(11.0)
Less: Counterparty netting and cash collateral (3)		12.9		(18.6)		5.3		(7.1)
Total net fair value of derivatives		$	8.2	$	(24.3)	$	1.3	$	(3.9)

(1)As of March 31, 2024 and December 31, 2023, we had open derivative positions representing 43,355,000 and 55,336,870 barrels, respectively, of crude oil and refined petroleum products.

(2)As of March 31, 2024 and December 31, 2023, we had open RINs commitment contracts representing 161,850,000 and 41,636,461 RINs, respectively.

(3)As of March 31, 2024 and December 31, 2023, $5.7 million and $1.8 million, respectively, of cash collateral held by counterparties has been netted with the derivatives with each counterparty.

Total gains (losses) on our non-trading commodity derivatives and RINs commitment contracts recorded in the condensed consolidated statements of income are as follows (in millions) (2):


	Three Months Ended March 31,
		2024		2023
(Losses) gains on hedging derivatives not designated as hedging instruments recognized in cost of materials and other (1)		$	(21.7)	$	5.3
Losses on non-trading physical forward contract commodity derivatives in cost of materials and other		—		(2.4)



Total (losses) gains		$	(21.7)	$	2.9

(1) (Losses) gains on commodity derivatives that are economic hedges but not designated as hedging instruments include unrealized (losses) gains of $(9.0) million and $30.0 million for the three months ended March 31, 2024 and 2023, respectively.

(2) See separate table below for disclosures about "trading derivatives."

Total gains (losses) on our trading derivatives (none of which were designated as hedging instruments) recorded in other operating (income) expense, net on the condensed consolidated statements of income are as follows (in millions):


	Three Months Ended March 31,
		2024		2023

Trading Physical Forward Contract Commodity Derivatives
Realized gains		$	0.2	$	1.4
Unrealized losses		—		(1.8)
Total		$	0.2	$	(0.4)

Trading Hedging Commodity Derivatives
Realized gains		$	—	$	1.4
Unrealized gains		—		1.1
Total		$	—	$	2.5


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Notes to Consolidated Financial Statements

10. Fair Value Measurements

Our assets and liabilities that are measured at fair value include commodity derivatives, investment commodities, environmental credits obligations, and our Inventory Intermediation Agreement. ASC 820, Fair Value Measurements ("ASC 820") requires disclosures that categorize assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included within Level 1 for the asset or liability, either directly or indirectly through market-corroborated inputs. Level 3 inputs are unobservable inputs for the asset or liability reflecting our assumptions about pricing by market participants.

Our commodity derivative contracts, which consist of commodity swaps, exchange-traded futures, options and physical commodity forward purchase and sale contracts (that do not qualify for the NPNS exception under ASC 815), are valued based on exchange pricing and/or price index developers such as Platts or Argus and are, therefore, classified as Level 2.

Our RINs commitment contracts are future commitments to purchase or sell RINs at fixed prices and quantities, which are used to manage the costs associated with our Consolidated Net RINs Obligation. These RINs commitment contracts (which are forward contracts accounted for as derivatives – see Note 9) are categorized as Level 2, and are measured at fair value based on quoted prices from an independent pricing service.

Our environmental credits obligation includes the Consolidated Net RINs Obligation, as well as other environmental credit obligation positions subject to fair value accounting pursuant to our accounting policy. The environmental credits obligation is categorized as Level 2, if measured at fair value either directly through observable inputs or indirectly through market-corroborated inputs, and gains (losses) related to changes in fair value are recorded as a component of cost of materials and other in the condensed consolidated statements of income. With respect to our Consolidated Net RINs Obligation, we recognized no gain on changes in fair value for the three months ended March 31, 2024 and a gain totaling $0.3 million for the three months ended March 31, 2023, primarily attributable to changes in the market prices of the underlying credits that occurred at the end of each quarter.

We elected to account for our Inventory Intermediation step-out liability at fair value in accordance with ASC 825, as it pertains to the fair value option. This standard permits the election to carry financial instruments and certain other items similar to financial instruments at fair value on the balance sheet, with all changes in fair value reported in earnings. With respect to the Inventory Intermediation Agreement, we apply fair value measurement as follows: (1) we determine fair value for our amended variable step-out liability based on changes in fair value related to market volatility based on a floating commodity-index price, and for our amended fixed step-out liability based on changes to interest rates and the timing and amount of expected future cash settlements where such obligation is categorized as Level 2. Gains (losses) related to changes in fair value due to commodity-index price are recorded as a component of cost of materials and other, and changes in fair value due to interest rate risk are recorded as a component of interest expense in the condensed consolidated statements of income; and (2) we determine fair value of the commodity-indexed revolving over/short inventory financing liability based on the market prices for the consigned crude oil and refined products collateralizing the financing/funding where such obligation is categorized as Level 2 and is presented in the current portion of the obligation under Inventory Intermediation Agreement on our condensed consolidated balance sheets. Gains (losses) related to the change in fair value are recorded as a component of cost of materials and other in the condensed consolidated statements of income. See Note 7 for discussion of gains and losses recognized from changes in fair value.

The fair value of the Delek Logistics 2028 Notes is measured based on quoted market prices in an active market, defined as Level 1 in the fair value hierarchy. The carrying value (excluding unamortized debt issuance costs) and estimated fair value of these notes was $400.0 million and $391.4 million, respectively, as of March 31, 2024, and $400.0 million and $380.4 million, respectively, at December 31, 2023.

Also, the fair value of the Delek Logistics 2029 Notes is measured based on quoted market prices in an active market, defined as Level 1 in the fair value hierarchy. The carrying value (excluding unamortized debt issuance costs) and estimated fair value of these notes was $650.0 million and $664.3 million, respectively, as of March 31, 2024.


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Notes to Consolidated Financial Statements

The fair value approximates the historical or amortized cost basis comprising our carrying value for all other financial instruments and therefore are not included in the table below. The fair value hierarchy for our financial assets and liabilities accounted for at fair value on a recurring basis was as follows (in millions):


	As of March 31, 2024
	Level 1		Level 2		Level 3		Total
Assets
Commodity derivatives	$	—	$	12.9	$	—	$	12.9

RINs commitment contracts	—		8.2		—		8.2


Total assets	—		21.1		—		21.1
Liabilities

Commodity derivatives	—		(23.2)		—		(23.2)
RINs commitment contracts	—		(19.7)		—		(19.7)
Environmental credits obligation deficit	—		(113.1)		—		(113.1)
Inventory Intermediation Agreement obligation	—		(492.7)		—		(492.7)
Total liabilities	—		(648.7)		—		(648.7)
Net liabilities	$	—	$	(627.6)	$	—	$	(627.6)


	As of December 31, 2023
	Level 1		Level 2		Level 3		Total
Assets
Commodity derivatives	$	—	$	6.6	$	—	$	6.6

RINs commitment contracts	—		—		—		—

Total assets	—		6.6		—		6.6
Liabilities
Commodity derivatives	—		(7.9)		—		(7.9)

RINs commitment contracts	—		(3.1)		—		(3.1)
Environmental credits obligation deficit	—		(39.6)		—		(39.6)
Inventory Intermediation Agreement obligation	—		(407.6)		—		(407.6)
Total liabilities	—		(458.2)		—		(458.2)
Net liabilities	$	—	$	(451.6)	$	—	$	(451.6)

The derivative values above are based on analysis of each contract as the fundamental unit of account as required by ASC 820. In the table above, derivative assets and liabilities with the same counterparty are not netted where the legal right of offset exists. This differs from the presentation in the financial statements which reflects our policy, wherein we have elected to offset the fair value amounts recognized for multiple derivative instruments executed with the same counterparty and where the legal right of offset exists. As of March 31, 2024 and December 31, 2023, $5.7 million and $1.8 million, respectively, of cash collateral was held by counterparty brokerage firms and has been netted with the net derivative positions with each counterparty. See Note 9 for further information regarding derivative instruments.

11. Commitments and Contingencies

Litigation

In the ordinary conduct of our business, we are from time to time subject to lawsuits, investigations and claims, including environmental claims and employee-related matters. Although we cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against us, including civil penalties or other enforcement actions, we do not believe that any currently pending legal proceeding or proceedings to which we are a party will have a material adverse effect on our financial statements. Certain environmental matters that have or may result in penalties or assessments are discussed below in the "Environmental, Health and Safety" section of this note.


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Notes to Consolidated Financial Statements

Environmental, Health and Safety

We are subject to extensive federal, state and local environmental and safety laws and regulations enforced by various agencies, including the EPA, the U.S. Department of Transportation and the Occupational Safety and Health Administration, as well as numerous state, regional and local environmental, safety and pipeline agencies. These laws and regulations govern the discharge of materials into the environment, waste management practices, pollution prevention measures and the composition of the fuels we produce, as well as the safe operation of our plants and pipelines and the safety of our workers and the public. Numerous permits or other authorizations are required under these laws and regulations for the operation of our refineries, renewable fuels facilities, terminals, pipelines, underground storage tanks, trucks, rail cars and related operations, and may be subject to revocation, modification and renewal.

These laws and permits raise potential exposure to future claims and lawsuits involving environmental and safety matters which could include soil and water contamination, air pollution, personal injury and property damage allegedly caused by substances which we manufactured, handled, used, released or disposed of, transported, or that relate to pre-existing conditions for which we have assumed responsibility. We believe that our current operations are in substantial compliance with existing environmental and safety requirements. However, there have been and will continue to be ongoing discussions about environmental and safety matters between us and federal and state authorities, including notices of violations, citations and other enforcement actions, some of which have resulted or may result in changes to operating procedures and in capital expenditures. While it is often difficult to quantify future environmental or safety related expenditures, we anticipate that continuing capital investments and changes in operating procedures will be required for the foreseeable future to comply with existing and new requirements, as well as evolving interpretations and more strict enforcement of existing laws and regulations.

As of March 31, 2024, we have recorded an environmental liability of approximately $113.4 million, primarily related to the estimated probable costs of remediating or otherwise addressing certain environmental issues of a non-capital nature at our refineries, as well as terminals, some of which we no longer own. This liability includes estimated costs for ongoing investigation and remediation efforts for known contamination of soil and groundwater. Approximately $2.9 million of the total liability is expected to be expended over the next 12 months, with most of the balance expended by 2032, although some costs may extend up to 30 years. In the future, we could be required to extend the expected remediation period or undertake additional investigations of our refineries, pipelines and terminal facilities, which could result in the recognition of additional remediation liabilities.

Included in our environmental liabilities as of both March 31, 2024 and December 31, 2023 is a liability totaling $78.5 million related to a property that we have historically operated as an asphalt and marine fuel terminal both as an owner and, subsequently, as a lessee under an in-substance lease agreement (the “License Agreement”). The License Agreement, which provided us the license to continue operating our asphalt and marine fuel terminal operations on the property for a term of ten years and expired in June 2020, also ascribed a contractual noncontingent indemnification guarantee to certain of our wholly-owned subsidiaries related to certain incremental environmental remediation activities, predicated on the completion of certain property development activities ascribed to the lessor. Our combined liability, comprised of our environmental liability plus the estimated fair value of the noncontingent guarantee liability, was recorded in connection with the Delek/Alon Merger, effective July 1, 2017. While the License Agreement expired in June 2020, it is currently being disputed in litigation where we have determined that no loss accrual is necessary and that the amount of incremental loss that is reasonably possible is immaterial as of March 31, 2024. Such ongoing dispute causes sufficient uncertainty around the release of risk and the appropriate joint and several liability allocations thereunder that we cannot currently determine a more reasonable estimate of the potential total contingent liability that is probable, nor do we have sufficient information to better estimate the fair value of any remaining noncontingent guarantee liability. As such, as of March 31, 2024 and December 31, 2023, except for accretion and expenditures, our combined environmental liability related to the terminal and property remained unchanged.

We are also subject to various regulatory requirements related to carbon emissions and the compliance requirements to remit environmental credit obligations due to the EPA or other regulatory agencies, the most significant of which relates to the RINs Obligation subject to the EPA’s Renewable Fuel Standard - 2 ("RFS-2") regulations. The RFS-2 regulations are highly complex and evolving, requiring us to periodically update our compliance systems. As part of our on-going monitoring and compliance efforts, on an annual basis we engage a third party to perform procedures to review our RINs inventory, processes and compliance. The results of such procedures may include procedural findings but may also include findings regarding the usage of RINs to meet past obligations, the treatment of exported RINs, and the propriety of RINs on-hand and related adjustments to our RINs inventory, which (to the extent they are valued) offset our RINs Obligation. Such adjustments may also require communication with the EPA if they involve reportable non-compliance which could lead to the assessment of penalties.


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Notes to Consolidated Financial Statements

12. Income Taxes

Under ASC 740, Income Taxes (“ASC 740”), we generally use an estimated annual tax rate to record income taxes. For interim financial reporting, except in specified cases, the quarterly income tax provision aligns with the estimated annual tax rate, updated each quarter based on revised full-year pre-tax book earnings. In certain situations, the estimated annual tax rate may distort the interim income tax provision due to significant permanent differences. In such cases, the interim income tax provision is based on the year-to-date effective tax rate, adjusting for permanent differences proportionally. In the three months ended March 31, 2024, income taxes were calculated based on the year-to-date effective tax rate. In the three months ended March 31, 2023, income taxes were calculated based on the estimated annual tax rate. Our effective tax rate was 22.2% and 18.0% for the three months ended March 31, 2024 and 2023, respectively. The difference between the effective tax rate and the statutory rate is generally attributable to permanent differences and discrete items. The change in our effective tax rate for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was primarily due to an decrease in quarter to date pre-tax earnings and the impact of fixed dollar favorable permanent adjustments on the quarter when applying a year-to-date effective tax rate.

13. Related Party Transactions

Our related party transactions consist primarily of transactions with our equity method investees (See Note 5). Transactions with our related parties were as follows for the periods presented (in millions):


	Three Months Ended March 31,
		2024		2023
Revenues (1)		$	22.0	$	17.9
Cost of materials and other (2)		$	57.8	$	45.5

(1)Consists primarily of asphalt sales which are recorded in corporate, other and eliminations segment.

(2)Consists primarily of pipeline throughput fees paid by the refining segment and asphalt purchases.

14. Other Current Assets and Liabilities

The detail of other current assets is as follows (in millions):


Other Current Assets	March 31, 2024		December 31, 2023
Prepaid expenses	$	62.1	$	47.8
Income and other tax receivables	8.4		15.5
Short-term derivative assets (see Note 9)	8.2		1.3
Investment commodities	1.9		4.0



Other	4.6		9.6
Total	$	85.2	$	78.2

The detail of accrued expenses and other current liabilities is as follows (in millions):


Accrued Expenses and Other Current Liabilities	March 31, 2024		December 31, 2023

Crude purchase liabilities	$	288.9	$	190.7
Income and other taxes payable	158.7		166.9
Consolidated Net RINs Obligation deficit (see Note 10)	113.1		39.6
Deferred revenue	66.7		16.0
Employee costs	61.5		67.0
Product financing agreements	31.0		224.2
Short-term derivative liabilities (see Note 9)	24.3		3.9
Other	64.0		62.9
Total	$	808.2	$	771.2


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Notes to Consolidated Financial Statements

15. Equity-Based Compensation

Delek US Holdings, Inc. 2006 and 2016 and Alon USA Energy, Inc. 2005 Long-Term Incentive Plans (collectively, the "Incentive Plans")

Compensation expense related to equity-based awards granted under the Incentive Plans amounted to $6.3 million and $5.9 million for the three months ended March 31, 2024 and 2023, respectively. These amounts are included in general and administrative expenses and operating expenses in the accompanying condensed consolidated statements of income. As of March 31, 2024, there was $42.7 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements, which is expected to be recognized over a weighted-average period of 1.5 years.