Segment Data

9 Months Ended

Sep. 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 September 30,					Nine Months Ended September 30,
	2019			2018		2019			2018
Pipelines and Transportation
Net revenues:
Affiliate	$	39,304		$	36,132	$	112,694		$	99,624
Third party	5,281			3,653		16,733			11,618
Total pipelines and transportation	44,585			39,785		129,427			111,242
Cost of materials and other	4,947			5,055		17,871			14,691
Operating expenses (excluding depreciation and amortization)	12,547			9,499		36,109			29,054
Segment contribution margin	$	27,091		$	25,231	$	75,447		$	67,497
Capital spending ⁽¹⁾	$	3,103		$	2,086	$	4,345		$	4,320

Wholesale Marketing and Terminalling
Net revenues:
Affiliate ⁽²⁾	$	27,343		$	27,703	$	78,836		$	78,935
Third party	65,628			96,622		237,119			308,134
Total wholesale marketing and terminalling	92,971			124,325		315,955			387,069
Cost of materials and other	67,647			100,541		244,842			315,953
Operating expenses (excluding depreciation and amortization)	5,888			5,896		15,711			13,835
Segment contribution margin	$	19,436		$	17,888	$	55,402		$	57,281
Capital spending ⁽¹⁾	$	889		$	905	$	1,893		$	3,120

Consolidated
Net revenues:
Affiliate	$	66,647		$	63,835	$	191,530		$	178,559
Third party	70,909			100,275		253,852			319,752
Total Consolidated	137,556			164,110		445,382			498,311
Cost of materials and other	72,594			105,596		262,713			330,644
Operating expenses (excluding depreciation and amortization presented below)	18,435			15,395		51,820			42,889
Contribution margin	$	46,527		$	43,119	$	130,849		$	124,778
General and administrative expenses	5,280			3,076		15,046			9,798
Depreciation and amortization	6,588			6,702		19,801			19,721
(Gain) loss on asset disposals	(70		)	717		(95		)	648
Operating income	$	34,729		$	32,624	$	96,097		$	94,611
Capital spending ⁽¹⁾	$	3,992		$	2,991	$	6,238		$	7,440

⁽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 nine months ended September 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 September 30, 2019 and December 31, 2018 (in thousands):



	September 30, 2019		December 31, 2018
Pipelines and transportation	$	529,219	$	387,333
Wholesale marketing and terminalling	238,588		237,260
Total assets	$	767,807	$	624,593

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



	Pipelines and Transportation			Wholesale Marketing and Terminalling			Consolidated
Property, plant and equipment	$	361,478		$	96,238		$	457,716
Less: accumulated depreciation	(122,397		)	(37,226		)	(159,623		)
Property, plant and equipment, net	$	239,081		$	59,012		$	298,093
Depreciation expense for the three months ended September 30, 2019	$	5,240		$	1,348		$	6,588
Depreciation expense for the nine months ended September 30, 2019	$	15,784		$	4,017		$	19,801

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 September 30, 2019.