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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, 2022

☐						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.)
7102 Commerce Way			Brentwood			Tennessee			37027
(Address of principal executive offices)									(Zip Code)

(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

DK

New York Stock Exchange

At April 29, 2022, there were 70,745,085 shares of common stock, $0.01 par value, outstanding (excluding securities held by, or for the account of, the Company or its subsidiaries).

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 Statements 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			33
Item 3. Quantitative and Qualitative Disclosures about Market Risk			64
Item 4. Controls and Procedures			65
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			66
Item 1A. Risk Factors			66
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			67
Item 5. Other Information			67
Item 6. Exhibits			68
Signatures			69

						March 31, 2022						December 31, 2021 As Adjusted (1)
ASSETS
Current assets:
Cash and cash equivalents						$	854.1					$	856.5
Accounts receivable, net						1,405.0						776.6
Inventories, net of inventory valuation reserves						1,624.2						1,260.7
Other current assets						309.1						126.0
Total current assets						4,192.4						3,019.8
Property, plant and equipment:
Property, plant and equipment						3,675.0						3,645.4
Less: accumulated depreciation						(1,401.0)						(1,338.1)
Property, plant and equipment, net						2,274.0						2,307.3
Operating lease right-of-use assets						196.0						208.5
Goodwill						729.4						729.7
Other intangibles, net						103.7						102.7
Equity method investments						347.8						344.1
Other non-current assets						103.4						100.5
Total assets						$	7,946.7					$	6,812.6
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable						$	2,548.1					$	1,695.3
Current portion of long-term debt						82.1						92.2
Obligation under Supply and Offtake Agreements						589.3						487.5
Current portion of operating lease liabilities						52.2						53.9
Accrued expenses and other current liabilities						1,032.3						797.8
Total current liabilities						4,304.0						3,126.7
Non-current liabilities:
Long-term debt, net of current portion						2,130.7						2,125.8
Environmental liabilities, net of current portion						109.2						109.5
Asset retirement obligations						38.5						38.3
Deferred tax liabilities						218.7						214.5
Operating lease liabilities, net of current portion						141.0						152.0
Other non-current liabilities						29.9						31.8
Total non-current liabilities						2,668.0						2,671.9
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, 88,320,612 shares and 91,772,080 shares issued at March 31, 2022 and December 31, 2021, respectively						0.9						0.9
Additional paid-in capital						1,156.0						1,206.5
Accumulated other comprehensive loss						(3.9)						(3.8)
Treasury stock, 17,575,527 shares, at cost, as of March 31, 2022 and December 31, 2021						(694.1)						(694.1)
Retained earnings						391.3						384.7
Non-controlling interests in subsidiaries						124.5						119.8
Total stockholders’ equity						974.7						1,014.0
Total liabilities and stockholders’ equity						$	7,946.7					$	6,812.6

(1) Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories. See Note 6 for further discussion.

See accompanying notes to condensed consolidated financial statements

												Three Months Ended
												March 31,
																								2021
																		2022						As Adjusted (1)
Net revenues																		$	4,459.1					$	2,392.2
Cost of sales:
Cost of materials and other																		4,152.5						2,172.8
Operating expenses (excluding depreciation and amortization presented below)																		139.5						129.9
Depreciation and amortization																		62.7						62.3
Total cost of sales																		4,354.7						2,365.0
Operating expenses related to retail and wholesale business (excluding depreciation and amortization presented below)																		27.4						25.4
General and administrative expenses																		53.1						41.1
Depreciation and amortization																		5.6						6.2
Other operating (income) expense, net																		(28.4)						1.9
Total operating costs and expenses																		4,412.4						2,439.6
Operating income (loss)																		46.7						(47.4)
Interest expense, net																		38.4						29.4
Income from equity method investments																		(10.9)						(4.8)
Other expense (income), net																		1.3						(1.0)
Total non-operating expense, net																		28.8						23.6
Income (loss) before income tax expense (benefit)																		17.9						(71.0)
Income tax expense (benefit)																		3.1						(8.3)
Net income (loss)																		14.8						(62.7)
Net income attributed to non-controlling interests																		8.2						7.3
Net income (loss) attributable to Delek																		$	6.6					$	(70.0)
Basic income (loss) per share																		$	0.09					$	(0.95)
Diluted income (loss) per share																		$	0.09					$	(0.95)

(1) Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories. See Note 6 for further discussion.

See accompanying notes to condensed consolidated financial statements

												Three Months Ended
												March 31,
																								2021
																		2022						As Adjusted (1)
Net income (loss)																		$	14.8					$	(62.7)
Other comprehensive income (loss):
Commodity contracts designated as cash flow hedges:
Comprehensive loss on commodity contracts designated as cash flow hedges, net of taxes																		—						(0.2)
Other loss , net of taxes																		(0.1)						—
Total other comprehensive loss																		(0.1)						(0.2)
Comprehensive income (loss)																		14.7						(62.9)
Comprehensive income attributable to non-controlling interest																		8.2						7.3
Comprehensive income (loss) attributable to Delek																		$	6.5					$	(70.2)

(1) Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories. See Note 6 for further discussion.

See accompanying notes to condensed consolidated financial statements

						Three Months Ended March 31, 2022
						Common Stock												Additional Paid-in Capital						Accumulated Other Comprehensive Income						Retained Earnings						Treasury Stock												Non-Controlling Interest in Subsidiaries						Total Stockholders' Equity
						Shares						Amount																								Shares						Amount
Balance at December 31, 2021, As Adjusted (1)						91,772,080						$	0.9					$	1,206.5					$	(3.8)					$	384.7					(17,575,527)						$	(694.1)					$	119.8					$	1,014.0
Net income						—						—						—						—						6.6						—						—						8.2						14.8
Distributions to non-controlling interests						—						—						—						—						—						—						—						(8.7)						(8.7)
Equity-based compensation expense						—						—						5.3						—						—						—						—						0.1						5.4
Sale of Delek Logistic common limited partner units, net						—						—						8.5						—						—						—						—						5.1						13.6
Purchase of Delek common stock from IEP Energy Holding LLC						(3,497,268)						—						(64.0)						—						—						—						—						—						(64.0)
Taxes paid due to the net settlement of equity-based compensation						—						—						(0.3)						—						—						—						—						—						(0.3)
Exercise of equity-based awards						45,800						—						—						—						—						—						—						—						—
Other						—						—						—						(0.1)						—						—						—						—						(0.1)
Balance at March 31, 2022						88,320,612						$	0.9					$	1,156.0					$	(3.9)					$	391.3					(17,575,527)						$	(694.1)					$	124.5					$	974.7

						Three Months Ended March 31, 2021
						Common Stock												Additional Paid-in Capital						Accumulated Other Comprehensive Income						Retained Earnings As Adjusted (1)						Treasury Stock												Non-Controlling Interest in Subsidiaries						Total Stockholders' Equity As Adjusted (1)
						Shares						Amount																								Shares						Amount
Balance at December 31, 2020						91,356,868						$	0.9					$	1,185.1					$	(7.2)					$	522.0					(17,575,527)						$	(694.1)					$	118.4					$	1,125.1
Cumulative effect of change in accounting method for certain inventory from LIFO to FIFO, net						—						—						—						—						(8.7)						—						—						—						(8.7)
Net (loss) income						—						—						—						—						(70.0)						—						—						7.3						(62.7)
Other comprehensive loss related to commodity contracts, net						—						—						—						(0.2)						—						—						—						—						(0.2)
Distribution to non-controlling interest						—						—						—						—						—						—						—						(8.0)						(8.0)
Equity-based compensation expense						—						—						4.6						—						—						—						—						—						4.6
Taxes paid due to the net settlement of equity-based compensation						—						—						(1.1)						—						—						—						—						—						(1.1)
Exercise of equity-based awards						93,856						—						—						—						—						—						—						—						—
Other						—						—						—						—						(0.2)						—						—						—						(0.2)
Balance at March 31, 2021, As Adjusted (1)						91,450,724						$	0.9					$	1,188.6					$	(7.4)					$	443.1					(17,575,527)						$	(694.1)					$	117.7					$	1,048.8

(1) Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories. See Note 6 for further discussion.

See accompanying notes to condensed consolidated financial statements

						Three Months Ended March 31,
												2021
						2022						As Adjusted (1)
Cash flows from operating activities:
Net income (loss)						$	14.8					$	(62.7)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization						68.3						68.5
Non-cash lease expense						13.4						15.3
Deferred income taxes						10.4						8.9
Income from equity method investments						(10.9)						(4.8)
Dividends from equity method investments						6.6						5.7
Non-cash lower of cost or market/net realizable value adjustment						(8.5)						0.8
Equity-based compensation expense						5.4						4.6
Other						4.7						3.9
Changes in assets and liabilities:
Accounts receivable						(628.4)						(192.3)
Inventories and other current assets						(465.2)						(343.6)
Fair value of derivatives						(68.3)						(91.9)
Accounts payable and other current liabilities						988.6						510.3
Obligation under Supply and Offtake Agreements						101.8						51.6
Non-current assets and liabilities, net						(5.9)						(8.6)
Net cash provided by (used in) operating activities						26.8						(34.3)
Cash flows from investing activities:
Equity method investment contributions						—						(1.5)
Distributions from equity method investments						0.6						4.0
Purchases of property, plant and equipment						(29.5)						(48.3)
Purchase of intangible assets						(2.4)						(0.5)
Proceeds from sale of property, plant and equipment						1.0						0.2
Insurance proceeds						0.1						—
Net cash used in investing activities						(30.2)						(46.1)
Cash flows from financing activities:
Proceeds from long-term revolvers						415.1						609.0
Payments on long-term revolvers						(409.0)						(568.1)
Payments on term debt						(13.3)						(23.3)
Proceeds from product financing agreements						317.9						277.2
Repayments of product financing agreements						(253.1)						(199.3)
Taxes paid due to the net settlement of equity-based compensation						(0.3)						(1.1)
Distribution to non-controlling interest						(8.7)						(8.0)
Proceeds from sale of Delek Logistics LP common limited partner units						16.4						—
Purchase of Delek common stock from IEP Energy Holding LLC						(64.0)						—
Net cash provided by financing activities						1.0						86.4
Net (decrease) increase in cash and cash equivalents						(2.4)						6.0
Cash and cash equivalents at the beginning of the period						856.5						787.5
Cash and cash equivalents at the end of the period						$	854.1					$	793.5

						Three Months Ended March 31,
												2021
						2022						As Adjusted (1)
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of capitalized interest of $0.4 million in both the 2022 and 2021 periods						$	24.4					$	142.1
Income taxes						$	1.0					$	0.1
Non-cash investing activities:
Increase in accrued capital expenditures						$	3.4					$	18.8
Non-cash financing activities:
Non-cash lease liability arising from obtaining right of use assets during the period						$	1.5					$	19.6

(1) Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories. See Note 6 for further discussion.

See accompanying notes to condensed consolidated financial statements

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 25, 2022 (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, 2021 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. As Delek Logistics does not derive an amount of gross margin material to us from third parties, there is limited risk to Delek associated with Delek Logistics' operations. However, 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.

With the exception of the policy updates below, there have been no new or material changes to the significant accounting policies discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Risks and Uncertainties Related to the COVID-19 Pandemic

During the quarter ended March 31, 2022, the economic environment in which we operate continued to improve as a result of the widespread availability of vaccines and testing in the U.S. over recent months which, in turn, has contributed to return to work, return to schools, and increased travel, with a corresponding increase in the demand for vehicle motor fuel and jet fuel. While we continue to face uncertainties around the COVID-19 Pandemic in terms of new variants, these stabilization trends as well as other factors impacting demand for our products, such as the global supply constraints caused by the military conflict between Russia and the Ukraine have mitigated the risks that remaining Pandemic-related uncertainties could have a material adverse impact on our financial position or results of operations. While these remaining uncertainties did not have a material impact on the preparation of our unaudited financial statements as of and for the three months ended March 31, 2022, to the extent these uncertainties were identified and were believed to have had a material impact on our prior year 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, 2022. 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 derivatives and hedge accounting for counterparty risk and changes in forecasted transactions, as provided for under GAAP;

•The evaluation of inventory valuation allowances that may be warranted under the lower of cost or net realizable value analysis, for first-in, first-out (“FIFO”) costing method, 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;

•The interim evaluation of the impact of changing forecasts on our assessment of deferred tax asset valuation allowances and annual effective tax rates; and

•The interim evaluation of our ability to continue as a going concern.

As of January 1, 2022, we changed our method for accounting for inventory held at the Tyler Refinery to the FIFO costing method from the last-in, first-out ("LIFO") costing method, which will conform the Company’s refining inventory to a single method of accounting. Total inventories accounted for using LIFO, prior to the accounting method change, comprised 28.0% of the Company’s total inventories as of December 31, 2021. This change in accounting method is preferable because it provides better consistency across our refineries and improves transparency, and results in recognition that better reflects the physical flow of inventory and more accurately reflects the current value of inventory. The effects of this change have been retrospectively applied to all periods presented with a cumulative effect adjustment reflected in the January 1, 2021 beginning retained earnings. See Note 6 - Inventory for additional information.

Certain prior period amounts have been reclassified in order to conform to the current period presentation.

ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity

In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-06, which is intended to simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity's own equity. The pronouncement is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2021. We adopted this guidance on January 1, 2022 and the adoption did not have a material impact on our business, financial condition or results of operations.

Accounting Pronouncements Not Yet Adopted

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

In March 2020, the FASB issued an amendment which is intended to provide temporary optional expedients and exceptions to GAAP guidance on contracts, hedge accounting and other transactions affected by the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank rates. This guidance is effective for all entities at 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 Company is currently evaluating the impact this guidance may have on its condensed consolidated financial statements and related disclosures.

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);

•wholesale crude operations;

•Alon's asphalt terminal operations; and

•intercompany eliminations.

Decisions concerning the allocation of resources and assessment of operating performance are made based on this segmentation. Management measures the operating performance of each of the reportable segments based on the segment contribution margin. Segment contribution margin is defined as net revenues less cost of materials and other and operating expenses, excluding depreciation and amortization.

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 has a combined nameplate capacity of 302,000 barrels per day ("bpd") as of March 31, 2022, including the following:

•75,000 bpd Tyler, Texas refinery (the "Tyler refinery");

•80,000 bpd El Dorado, Arkansas refinery (the "El Dorado refinery");

•73,000 bpd Big Spring, Texas refinery (the "Big Spring refinery"); and

•74,000 bpd 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. The biodiesel industry has historically been substantially aided by federal and state tax incentives. One tax incentive program that has been significant to our renewable fuels facilities is the federal blender's tax credit (also known as the biodiesel tax credit or "BTC"). The BTC provides a $1.00 refundable tax credit per gallon of pure biodiesel to the first blender of biodiesel with petroleum-based diesel fuel. The blender's tax credit was re-enacted in December 2019 for the years 2020 through 2022.

On May 7, 2020, we sold our equity interests in Alon Bakersfield Property, Inc., an indirect wholly-owned subsidiary that owned our non-operating refinery located in Bakersfield, California, to a subsidiary of Global Clean Energy Holdings, Inc. (“GCE”). As part of the transaction, GCE granted a call option to Delek to acquire up to a 33 1/3% limited member interest in the acquiring subsidiary of GCE for up to $13.3 million, subject to certain adjustments. Such option is exercisable by Delek through the 90th day after GCE demonstrates commercial operations, as contractually defined, which has not yet occurred as of March 31, 2022.

The refining segment's petroleum-based products are marketed primarily in the south central, southwestern and western regions of the United States. This segment also ships and sells gasoline into wholesale markets in the southern and eastern United States. Motor fuels are sold under the Alon or Delek brand through various terminals to supply Alon or Delek branded retail sites. In addition, Alon sells motor fuels through its wholesale distribution network on an unbranded basis.

Logistics Segment

Our logistics segment owns and operates crude oil and refined products logistics and marketing assets. The logistics segment generates revenue by charging fees for gathering, transporting and storing crude oil and for marketing, distributing, transporting and storing intermediate and refined products in select regions of the southeastern United States 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 248 owned and leased convenience store sites as of March 31, 2022, located primarily in West Texas and New Mexico. These convenience stores typically offer various grades of gasoline and diesel primarily under the Alon or Delek brand name and food products, food service, tobacco products, non-alcoholic and alcoholic beverages, general merchandise as well as money grams to the public, primarily under the 7-Eleven and DK or Alon brand names. 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. In November 2018, we terminated the license agreement with 7-Eleven, Inc. The terms of such agreement and subsequent amendments require the removal of all 7-Eleven branding on a store-by-store basis by December 31, 2023.

Significant Inter-segment Transactions

All inter-segment transactions have been eliminated in consolidation and consist primarily of the following:

•refining segment refined product sales to the retail segment to be sold through the store locations;

•refining segment sales of asphalt and refined product to entities included in corporate, other and eliminations;

•logistics segment service fee revenue under service agreements with the refining segment based on the number of gallons sold and to share a portion of the margin achieved in return for providing marketing, sales and customer services;

•logistics segment sales of wholesale finished product to our refining segment; and

•logistics segment crude transportation, terminalling and storage fee revenue from our refining segment for the utilization of pipeline, terminal and storage assets.

The following is a summary of business segment operating performance as measured by contribution margin for the period indicated (in millions):

						Three Months Ended March 31, 2022
						Refining						Logistics						Retail						Corporate, Other and Eliminations						Consolidated
Net revenues (excluding inter-segment fees and revenues)						$	3,267.9					$	82.8					$	209.5					$	898.9					$	4,459.1
Inter-segment fees and revenues						225.8						123.8						—						(349.6)						—
Operating costs and expenses:
Cost of materials and other						3,276.9						126.2						173.0						576.4						4,152.5
Operating expenses (excluding depreciation and amortization presented below)						119.9						18.1						22.7						6.2						166.9
Segment contribution margin						$	96.9					$	62.3					$	13.8					$	(33.3)					139.7
Income from equity method investments						0.2						7.0						—						3.7
Segment contribution margin and income (loss) from equity method investments						$	97.1					$	69.3					$	13.8					$	(29.6)
Depreciation and amortization						$	52.8					$	10.4					$	3.5					$	1.6					68.3
General and administrative expenses																														53.1
Other operating income, net																														(28.4)
Operating income																														$	46.7
Capital spending (excluding business combinations)						$	14.3					$	9.1					$	3.0					$	6.5					$	32.9

						Three Months Ended March 31, 2021
						Refining (1)						Logistics						Retail						Corporate, Other and Eliminations						Consolidated (1)
Net revenues (excluding inter-segment fees and revenues)						$	1,584.5					$	56.7					$	174.8					$	576.2					$	2,392.2
Inter-segment fees and revenues						155.6						96.2						—						(251.8)						—
Operating costs and expenses:
Cost of materials and other						1,615.0						81.1						136.5						340.2						2,172.8
Operating expenses (excluding depreciation and amortization presented below)						114.7						14.9						21.6						4.1						155.3
Segment contribution margin						$	10.4					$	56.9					$	16.7					$	(19.9)					64.1
Income from equity method investments						0.2						4.0						—						0.6
Segment contribution margin and income (loss) from equity method investments						$	10.6					$	60.9					$	16.7					$	(19.3)
Depreciation and amortization						$	52.1					$	10.7					$	3.2					$	2.5					68.5
General and administrative expenses																														41.1
Other operating expense, net																														1.9
Operating loss																														$	(47.4)
Capital spending (excluding business combinations)						$	57.8					$	7.8					$	0.8					$	0.6					$	67.0

(1) Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories. See Note 6 for further discussion.

						Refining						Logistics						Retail						Corporate, Other and Eliminations						Consolidated
Total assets						$	7,842.9					$	935.3					$	255.4					$	(1,086.9)					$	7,946.7
Less:
Inter-segment notes receivable						(1,026.8)						—						—						1,026.8						—
Inter-segment right of use lease assets						(245.2)						—						—						245.2						—
Total assets, excluding inter-segment notes receivable and right of use assets						$	6,570.9					$	935.3					$	255.4					$	185.1					$	7,946.7

						Refining						Logistics						Retail						Corporate, Other and Eliminations						Consolidated
Property, plant and equipment						$	2,677.7					$	724.9					$	170.0					$	102.4					$	3,675.0
Less: Accumulated depreciation						(995.0)						(276.6)						(62.0)						(67.4)						(1,401.0)
Property, plant and equipment, net						$	1,682.7					$	448.3					$	108.0					$	35.0					$	2,274.0
Depreciation expense for the three months ended March 31, 2022						$	51.1					$	10.4					$	3.3					$	1.6					$	66.4

In accordance with Accounting Standards Codification ("ASC") 360, Property, Plant and Equipment ("ASC 360"), Delek evaluates the realizability of property, plant and equipment as events occur that might indicate potential impairment. There were no indicators of impairment related to our property, plant and equipment as of March 31, 2022 (see Note 1 for further discussion on the impact of the COVID-19 Pandemic).

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 (loss), 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.

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

												Three Months Ended
												March 31,
																		2022						2021 (1)
Numerator:
Numerator for EPS
Net income (loss)																		$	14.8					$	(62.7)
Less: Income attributed to non-controlling interest																		8.2						7.3
Numerator for basic and diluted EPS attributable to Delek																		$	6.6					$	(70.0)
Denominator:
Weighted average common shares outstanding (denominator for basic EPS)																		73,236,274						73,803,772
Dilutive effect of stock-based awards																		412,992						—
Weighted average common shares outstanding, assuming dilution (denominator for diluted EPS)																		73,649,266						73,803,772
EPS:
Basic income (loss) per share																		$	0.09					$	(0.95)
Diluted income (loss) per share																		$	0.09					$	(0.95)
The following equity instruments were excluded from the diluted weighted average common shares outstanding because their effect would be antidilutive:
Antidilutive stock-based compensation (because average share price is less than exercise price)																		3,088,678						2,733,056
Antidilutive due to loss																		—						634,006
Total antidilutive stock-based compensation																		3,088,678						3,367,062

(1) Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories. See Note 6 for further discussion.

Delek Logistics is a publicly traded limited partnership that was formed by Delek in 2012 to own, operate, acquire and construct crude oil and refined products logistics and marketing assets. A substantial majority of Delek Logistics' assets are integral to Delek’s refining and marketing operations. As of March 31, 2022, we owned a 78.9% 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 April 14, 2022, Delek Logistics filed a shelf registration statement with the SEC registering for the potential sale, from time to time by Delek Logistics, of up to $200.0 million of common limited partner units of Delek Logistics.

On December 20, 2021, Delek commenced a program to sell up to 434,590 common limited partner units representing limited partner interests in Delek Logistics over the next three months in open market transactions conducted pursuant to Rule 144 under the Securities Act of 1933, as amended, and a Rule 10b5-1 trading plan all of which were sold as of March 18, 2022. For the three months ended March 31, 2022, we sold 385,522 units for gross proceeds of $16.4 million; $13.6 million net of taxes.

In August 2020, Delek Logistics filed a shelf registration statement, which subsequently became effective, with the SEC for the proposed re-sale or other disposition from time to time by Delek of up to 14.0 million common limited partner units representing our limited partner interests in Delek Logistics. No units were sold as of March 31, 2022.

We have agreements with Delek Logistics that, among other things, establish fees for certain administrative and operational services provided by us and our subsidiaries to Delek Logistics, provide certain indemnification obligations and establish terms for fee-based commercial logistics and marketing services provided by Delek Logistics and its subsidiaries to us. The revenues and expenses associated with these agreements are eliminated in consolidation.

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 as presented below are included in the condensed consolidated balance sheets of Delek (unaudited, in millions).

						March 31, 2022						December 31, 2021
ASSETS
Cash and cash equivalents						$	2.7					$	4.3
Accounts receivable						20.4						15.4
Accounts receivable from related parties						—						—
Inventory						1.8						2.4
Other current assets						1.5						1.0
Property, plant and equipment, net						448.3						449.4
Equity method investments						249.9						250.0
Operating lease right-of-use assets						19.1						20.9
Goodwill						12.2						12.2
Intangible assets, net						154.5						153.9
Other non-current assets						24.9						25.6
Total assets						$	935.3					$	935.1
LIABILITIES AND DEFICIT
Accounts payable						$	12.6					$	8.2
Accounts payable to related parties						50.3						64.4
Current portion of operating lease liabilities						6.7						6.8
Accrued expenses and other current liabilities						26.7						17.4
Long-term debt						905.5						899.0
Asset retirement obligations						6.6						6.5
Operating lease liabilities, net of current portion						12.4						14.1
Other non-current liabilities						21.0						22.7
Deficit						(106.5)						(104.0)
Total liabilities and deficit						$	935.3					$	935.1

On February 21, 2020, we, through our wholly-owned direct subsidiary Delek Energy, entered into the W2W Holdings LLC Agreement with MPLX Operations LLC ("MPLX") (collectively, with its wholly-owned subsidiaries, the "WWP Project Financing Joint Venture" or the "WWP Project Financing JV"). The WWP Project Financing JV was created for the specific purpose of obtaining financing to fund our combined capital calls resulting from and occurring during the construction period of the pipeline system under the Wink to Webster Pipeline LLC ("WWP") Joint Venture, and to service that debt. In connection with the arrangement, both Delek Energy and MPLX contributed their respective 15% ownership interests in WWP to the WWP Project Financing JV as collateral for and in service of the related project financing. Accordingly, distributions received from WWP through the WWP Project Financing JV will first be applied in service of the related project financing debt, with excess distributions being made to the members of the WWP Project Financing JV as provided for in the W2W Holdings LLC Agreement and as allowed under the project financing debt. The obligations of the members under the W2W Holdings LLC Agreement are guaranteed by the parents of the members of the WWP Project Financing JV.

The Company evaluated Delek Energy's investment in W2W Holdings LLC ("HoldCo") and determined that HoldCo is a VIE. The Company determined it is not the primary beneficiary since it does not have the power to direct activities that most significantly impact HoldCo. The Company does not hold a controlling financial interest in HoldCo because no single party has the power to direct the activities that most significantly impact HoldCo’s economic performance since power to make the decisions about the significant activities is shared equally with MPLX and all significant decisions require unanimous consent of the board of directors of HoldCo. The Company accounts for its investment in HoldCo using the equity method of accounting due to its significant influence with its 50% membership interest.

The Company's maximum exposure to any losses incurred by HoldCo is limited to its investment. As of March 31, 2022, except for the guarantee of member obligations under the W2W Holdings LLC Agreement, the Company does not have other existing guarantees with or to HoldCo, or any third-party for work contracted with it.

As of March 31, 2022 and December 31, 2021, Delek's investment balance in WWP Project Financing Joint Venture totaled $51.4 million and $49.3 million, respectively, and is included as part of total assets in corporate, other and eliminations in our segment disclosure. In

addition on the investment, we recognized an income (loss) of $2.1 million and $(0.3) million for the three months ended March 31, 2022 and 2021, 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, 2022 and December 31, 2021, Delek's investment balance in Red River totaled $144.6 million and $144.0 million, respectively. During the three months ended March 31, 2022 and 2021, respectively, we made no capital contributions and $1.4 million in capital contributions based on capital calls received. We recognized income on the investment totaling $5.2 million and $2.2 million for the three months ended March 31, 2022 and 2021, respectively. This investment is accounted for using the equity method and is included as part of total assets in our logistics segment.

In addition to Red River, Delek Logistics has two joint ventures that own and operate logistics assets, and which serve third parties and subsidiaries of Delek. 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 (the "Caddo Pipeline") and a 33% membership interest in Andeavor Logistics Rio Pipeline LLC which operates the other pipeline system (the "Rio Pipeline"). As of March 31, 2022 and December 31, 2021, Delek Logistics' investment balances in these joint ventures totaled $105.3 million and $106.0 million, respectively, and were accounted for using the equity method. We recognized income on these investments totaling $1.8 million for both the three months ended March 31, 2022 and 2021.

We have a 50% interest in a joint venture that owns an asphalt terminal located in Brownwood, Texas. As of March 31, 2022 and December 31, 2021, Delek's investment balance in this joint venture was $43.2 million and $41.6 million, respectively. We recognized income on this investment totaling $1.6 million and $0.9 million for the three months ended March 31, 2022 and 2021, respectively. This investment is accounted for using the equity method and is included as part of total assets in corporate, other and eliminations in our segment disclosure.

Crude oil, work in process, 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 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.

Effective January 1, 2022, we changed our method for valuing the inventory held at the Tyler Refinery to the FIFO inventory valuation method from the LIFO inventory valuation method. Total inventories accounted for using LIFO, prior to the accounting method change, comprised 28.0% of the Company’s total inventories as of December 31, 2021. This change in accounting method is preferable because it provides better consistency across our refineries and improved transparency, and results in recognition that better reflects the physical flow of inventory and more accurately reflects the current value of inventory. After this change, we no longer utilize the LIFO valuation method and the majority of our inventories are now valued using the FIFO cost method, with the remainder valued using the Retail method for the retail segment inventory. The effects of this change have been retrospectively applied to all periods presented. This change resulted in a decrease to retained earnings of $8.7 million as of January 1, 2021 in accordance with ASC 250, Accounting Changes and Error Corrections.

												December 31, 2021
						March 31, 2022						As Adjusted (1)
Refinery raw materials and supplies						$	774.1					$	516.0
Refinery work in process						186.3						156.2
Refinery finished goods						622.8						550.6
Retail fuel						11.0						9.3
Retail merchandise						28.2						26.2
Logistics refined products						1.8						2.4
Total inventories						$	1,624.2					$	1,260.7

(1) Adjusted to reflect the retrospective change in accounting policy from LIFO to FIFO for certain inventories, as described above.

						Three Months Ended March 31, 2021
(In millions)						As Reported (using LIFO)						Adjustment						As Adjusted (using FIFO)
Condensed Consolidated Statements of Income
Cost of materials and other						$	2,205.5					$	(32.7)					$	2,172.8
Total cost of sales						2,397.7						(32.7)						2,365.0
Loss before income tax benefit						(103.7)						32.7						(71.0)
Income tax benefit						(12.4)						4.1						(8.3)
Net loss						(91.3)						28.6						(62.7)
Net loss attributable to Delek						(98.6)						28.6						(70.0)
Net loss per share attributable to Delek
Basic						$	(1.34)					$	0.39					$	(0.95)
Diluted						$	(1.34)					$	0.39					$	(0.95)

						December 31, 2021
(In millions)						As Reported (using LIFO)						Adjustment						As Adjusted (using FIFO)
Condensed Consolidated Balance Sheet
Inventories, net of inventory valuation reserves						$	1,176.1					$	84.6					$	1,260.7
Total Assets						6,728.0						84.6						6,812.6
Deferred tax liabilities						196.4						18.1						214.5
Retained Earnings						318.2						66.5						384.7
Total liabilities and stockholders' equity						6,728.0						84.6						6,812.6

						Three Months Ended March 31, 2021
(In millions)						As Reported (using LIFO)						Adjustment						As Adjusted (using FIFO)
Condensed Consolidated Statements of Cash Flows
Net loss						$	(91.3)					$	28.6					$	(62.7)
Non-cash lower of cost or market/net realizable value adjustment						(20.4)						21.2						0.8
Deferred income taxes						5.1						3.8						8.9
Inventories and other current assets						(304.2)						(39.4)						(343.6)
Accounts payable and other current liabilities						524.5						(14.2)						510.3

The following tables reflect the effect of the change in the accounting principle on the current period Condensed Consolidated Financial Statements:

						Three Months Ended March 31, 2022
(In millions)						As Computed (using LIFO)						As Reported (using FIFO)						Effect of Change
Condensed Consolidated Statements of Income
Cost of materials and other						$	4,273.6					$	4,152.5					$	121.1
Total cost of sales						4,475.8						4,354.7						121.1
(Loss) income before income tax (benefit) expense						(103.2)						17.9						(121.1)
Income tax (benefit) expense						(21.2)						3.1						(24.3)
Net (loss) income attributable to Delek						(90.2)						6.6						(96.8)
Net (loss) income per share attributable to Delek
Basic						$	(1.23)					$	0.09					$	(1.32)
Diluted						$	(1.23)					$	0.09					$	(1.32)