Segment Data

6 Months Ended

Jun. 30, 2019

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. 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):



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Pipelines and Transportation
Net revenues:
Affiliate	$	36,731		$	34,030		$	73,390		$	63,492
Third party	7,477			3,714			11,451			7,965
Total pipelines and transportation	44,208			37,744			84,841			71,457
Cost of materials and other	7,357			5,195			12,924			9,636
Operating expenses (excluding depreciation and amortization)	12,728			9,933			23,562			19,555
Segment contribution margin	$	24,123		$	22,616		$	48,355		$	42,266
Capital spending ⁽¹⁾	$	818		$	826		$	1,242		$	2,234

Wholesale Marketing and Terminalling
Net revenues:
Affiliate ⁽²⁾	$	25,187		$	19,050		$	51,493		$	51,232
Third party	85,947			109,486			171,491			211,512
Total wholesale marketing and terminalling	111,134			128,536			222,984			262,744
Cost of materials and other	86,497			100,821			177,195			215,412
Operating expenses (excluding depreciation and amortization)	4,599			4,984			9,823			7,939
Segment contribution margin	$	20,038		$	22,731		$	35,966		$	39,393
Capital spending ⁽¹⁾	$	524		$	1,426		$	1,004		$	2,215

Consolidated
Net revenues:
Affiliate	$	61,918		$	53,080		$	124,883		$	114,724
Third party	93,424			113,200			182,942			219,477
Total Consolidated	155,342			166,280			307,825			334,201
Cost of materials and other	93,854			106,016			190,119			225,048
Operating expenses (excluding depreciation and amortization presented below)	17,327			14,917			33,385			27,494
Contribution margin	$	44,161		$	45,347		$	84,321		$	81,659
General and administrative expenses	5,293			3,747			9,766			6,722
Depreciation and amortization	6,639			7,019			13,213			13,019
Gain on asset disposals	(27		)	(129		)	(25		)	(69		)
Operating income	$	32,256		$	34,710		$	61,367		$	61,987
Capital spending ⁽¹⁾	$	1,342		$	2,252		$	2,246		$	4,449

⁽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 six months ended June 30, 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 June 30, 2019 and December 31, 2018 (in thousands):



	June 30, 2019		December 31, 2018
Pipelines and transportation	$	525,070	$	387,333
Wholesale marketing and terminalling	244,240		237,260
Total assets	$	769,310	$	624,593

Property, plant and equipment and accumulated depreciation as of June 30, 2019 and depreciation expense by reporting segment for the three and six months ended June 30, 2019 were as follows (in thousands):



	Pipelines and Transportation			Wholesale Marketing and Terminalling			Consolidated
Property, plant and equipment	$	359,632		$	94,949		$	454,581
Less: accumulated depreciation	(117,158		)	(35,878		)	(153,036		)
Property, plant and equipment, net	$	242,474		$	59,071		$	301,545
Depreciation expense for the three months ended June 30, 2019	$	5,303		$	1,336		$	6,639
Depreciation expense for the six months ended June 30, 2019	$	10,544		$	2,669		$	13,213

In accordance with ASC 360, Property, Plant & Equipment, we evaluate the realizability of property, plant and equipment as events occur that might indicate potential impairment. There were no indicators of impairment of our property, plant and equipment as of June 30, 2019.