Segment Data

12 Months Ended

Dec. 31, 2018

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


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


•	The wholesale marketing and terminalling segment provides wholesale marketing and terminalling services to Delek Holdings' refining operations and independent third parties.

Our operating segments adhere to the accounting policies used for our consolidated financial statements, as described in Note 2. Our operating segments are managed separately because each segment requires different industry knowledge, technology and marketing strategies. Decisions concerning the allocation of resources and assessment of operating performance are made based on this segmentation. Management measures the operating performance of each of its reportable segments based on segment contribution margin. Segment contribution margin is defined as net revenues less cost of materials and other and operating expenses, excluding depreciation and amortization.

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



	Year Ended December 31,
	2018		2017			2016
Pipelines and Transportation
Net revenues:
Affiliate	138,418		$	109,298		103,749
Third party	15,149		12,431			18,423
Total pipelines and transportation	153,567		121,729			122,172
Cost of materials and other	19,878		18,210			19,425
Operating expenses (excluding depreciation and amortization)	39,934		33,240			29,235
Segment contribution margin	$	93,755	$	70,279		$	73,512
Capital spending ⁽¹⁾	$	6,840	$	14,262		$	8,478

Wholesale Marketing and Terminalling
Net revenues:
Affiliate ⁽²⁾	102,391		46,982			45,815
Third party	401,651		369,364			280,072
Total wholesale marketing and terminalling	504,042		416,346			325,887
Cost of materials and other	409,183		354,680			282,733
Operating expenses (excluding depreciation and amortization)	18,810		10,034			7,963
Segment contribution margin	$	76,049	$	51,632		$	35,191
Capital spending ⁽¹⁾	$	4,725	$	4,141		$	3,289

Consolidated
Net revenues:
Affiliate	$	240,809	$	156,280		$	149,564
Third party	416,800		381,795			298,495
Total Consolidated	657,609		538,075			448,059
Cost of materials and other	429,061		372,890			302,158
Operating expenses (excluding depreciation and amortization presented below)	58,744		43,274			37,198
Contribution margin	169,804		121,911			108,703
General and administrative expenses	17,166		11,840			10,256
Depreciation and amortization	25,990		21,914			20,813
Loss (gain) on asset disposals	891		(20		)	(16		)
Operating income	$	125,757	$	88,177		$	77,650
Capital spending ⁽¹⁾	$	11,565	$	18,403		$	11,767

⁽¹⁾ Capital spending excludes transaction costs capitalized in the amount of $0.4 million that relate to the Big Spring Logistic Assets Acquisition for the year ended December 31, 2018.

⁽²⁾ Affiliate revenue for the wholesale marketing and terminalling segment is presented net of amortization expense pertaining to the Marketing Contract Intangible Acquisition. See Note 3 for additional information.

The following table summarizes the total assets for each segment as of December 31, 2018 and 2017 (in thousands).



	Year Ended December 31,
	2018		2017
Pipelines and transportation	$	387,333	$	349,351
Wholesale marketing and terminalling	237,260		94,179
Total assets	$	624,593	$	443,530