EX-99.1 2 dkl-ex991xearningsrele.htm EX-99.1 PRESS RELEASE Document
Exhibit 99.1
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Delek Logistics Partners, LP Reports Second Quarter 2020 Results
•Reported second quarter net income attributable to all partners of $44.4 million; EBITDA increased 44.9% year-over-year
•Limited Partners' interest in net income increased approximately 107% y/y
•Second quarter distributable cash flow coverage ratio of 1.58x and total leverage ratio below 4.1x
•Exceeded year-end distribution coverage target of 1.4 - 1.5x in the second quarter
•Recent asset drop downs, business initiatives and asset optimization lead to improving outlook in 2H20
•Jefferson agreement supports Paline Pipeline and creates flexibility for customers
•Declared second quarter distribution of $0.90 per limited partner unit; reflects 5.9% percent increase year-over-year
•Reiterating 5% distribution growth in 2020 versus year-ago levels

BRENTWOOD, Tenn., August 4, 2020 -- Delek Logistics Partners, LP (NYSE: DKL) ("Delek Logistics") today announced its financial results for the second quarter 2020. For the three months ended June 30, 2020, Delek Logistics reported net income attributable to all partners of $44.4 million, or $1.18 per diluted common limited partner unit. This compares to net income attributable to all partners of $24.9 million, or $0.69 per diluted common limited partner unit, in the second quarter 2019. Net cash from operating activities was $37.5 million in the second quarter 2020 compared to $24.8 million in the second quarter 2019. Distributable cash flow was $57.0 million in the second quarter 2020, compared to $31.2 million in the second quarter 2019. Reconciliation of net cash from operating activities as reported under U.S. GAAP to distributable cash flow is included in the financial tables attached to this release.
For the second quarter 2020, earnings before interest, taxes, depreciation and amortization ("EBITDA") was $64.8 million compared to $44.8 million in the second quarter 2019. Results improved on a year-over-year basis primarily due to the drop down of the Big Spring Gathering System and Trucking Assets, increased crude gathering, operating expense reductions and an increase in income from equity method investments. This was partially offset by a lower West Texas gross margin on a year-over-year basis. Reconciliation of net income attributable to all partners as reported under U.S. GAAP to EBITDA is included in the financial tables attached to this release.
Uzi Yemin, Chairman, President and Chief Executive Officer of Delek Logistics' general partner, remarked: "Despite continued macro volatility stemming from COVID-19, Delek Logistics delivered stellar financial performance in the second quarter, with EBITDA and Limited Partners interest in net income increasing approximately 45% and 107%, respectively, versus last year. Second quarter distribution growth was 5.9% on a year-over-year basis.
The combination of recent asset drop downs from our sponsor Delek US Holdings, Inc. (NYSE: DK) ("Delek US") along with internal business initiatives, asset optimization efforts and the Red River pipeline expansion, which is currently underway, should lead to improving performance in the second half of the year. I am pleased to announce an agreement with Jefferson Energy, that will provide Jefferson's Beaumont Terminal with direct connection to the Paline Pipeline. This agreement expands Paline's reach by giving shippers increased destination points for their crude leading to better flexibility for our customers."
Mr. Yemin continued, "Our strong outlook gives us confidence in delivering 5% distribution growth on a year-over-year basis in 2020. We have already exceeded our distribution coverage target in the second quarter, well in advanced of our guidance to achieve this by year-end and we remain confident in reducing the leverage ratio below 4.0x before the end of the year."
Distribution and Liquidity
On July 24, 2020, Delek Logistics declared a quarterly cash distribution of $0.90 per common limited partner unit for the second quarter 2020, which equates to $3.60 per common limited partner unit on an annualized basis. This distribution will be paid on August 12, 2020 to unitholders of record on August 7, 2020. This represents a 1.1% increase from the first quarter 2020 distribution of $0.89 per common limited partner unit, or $3.56 per common limited partner unit on an annualized basis, and a 5.9% increase over Delek Logistics’ second quarter 2019 distribution of $0.85 per common limited partner unit, or $3.40 per common limited partner unit annualized. For the second quarter 2020, the total cash distribution declared to all partners, including incentive distribution rights (IDRs), was approximately $36.0 million. Based on the distribution for the second quarter 2020, the distributable cash flow coverage ratio for the second quarter was 1.58x.
As of June 30, 2020, Delek Logistics had total debt of approximately $995.2 million and cash of $16.2 million. Additional borrowing capacity, subject to certain covenants, under the $850.0 million credit facility was $100.0 million. The total leverage ratio, calculated in accordance with the credit facility, for the second quarter 2020 was below 4.1x, which is within the current requirements of the maximum allowable leverage ratio of 5.5x.
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Financial Results
Revenue for the second quarter 2020 was $117.6 million compared to $155.3 million in the prior-year period. The decrease in revenue is primarily due to lower commodity prices and average throughput volumes. Total operating expenses were $12.4 million in the second quarter 2020, compared to $17.3 million in the second quarter 2019. The decrease was primarily due to cost control measures put in place at the end of the first quarter 2020. Total contribution margin was $61.3 million in the second quarter 2020 compared to $44.2 million in the second quarter 2019, mainly driven by the contribution from new assets and lower expenses. General and administrative expenses were $4.7 million for the second quarter 2020, compared to $5.3 million in the prior-year period.
Pipelines and Transportation Segment
Contribution margin in the second quarter 2020 was $42.5 million compared to $24.1 million in the second quarter 2019. The recent drop down of Big Spring Gathering System and the Trucking Assets were the primary drivers behind the year over year growth. Operating expenses were $9.7 million in the second quarter 2020 compared to $12.7 million in the prior-year period.
Wholesale Marketing and Terminalling Segment
During the second quarter 2020, contribution margin was $18.8 million, compared to $20.0 million in the second quarter 2019. This decrease was primarily due to lower terminalling throughput and gross margin in west Texas. Operating expenses of $2.7 million in the second quarter 2020 were lower than the $4.6 million in the prior-year period.
Lower demand negatively impacted volumes and margins in the west Texas wholesale business. Average throughput in the second quarter 2020 was 9,143 barrels per day compared to 11,404 barrels per day in the second quarter 2019. The west Texas gross margin per barrel decreased year-over-year to $0.64 per barrel and included approximately $0.6 million, or $0.76 per barrel, from renewable identification numbers (RINs) generated in the quarter. During the second quarter 2019, the west Texas gross margin per barrel was $6.25 per barrel and included $0.3 million from RINs, or $0.25 per barrel.
Average terminalling throughput volume of 138,593 barrels per day during the second quarter 2020 decreased on a year-over-year basis from 156,922 barrels per day in the second quarter 2019. During the second quarter 2020, average volume under the East Texas marketing agreement with Delek US was 65,028 barrels per day compared to 71,123 barrels per day during the second quarter 2019.
Second Quarter 2020 Results | Conference Call Information
Delek Logistics will hold a conference call to discuss its second quarter 2020 results on Wednesday, August 5, 2020 at 7:30 a.m. Central Time. Investors will have the opportunity to listen to the conference call live by going to www.DelekLogistics.com. Participants are encouraged to register at least 15 minutes early to download and install any necessary software. An archived version of the replay will also be available at www.DelekLogistics.com for 90 days.
Investors may also wish to listen to Delek US’ (NYSE: DK) second quarter 2020 earnings conference call on Wednesday, August 5, 2020 at 8:30 a.m. Central Time and review Delek US’ earnings press release. Market trends and information disclosed by Delek US may be relevant to Delek Logistics, as it is a consolidated subsidiary of Delek US. Investors can find information related to Delek US and the timing of its earnings release online by going to www.DelekUS.com.
About Delek Logistics Partners, LP
Delek Logistics Partners, LP, headquartered in Brentwood, Tennessee, was formed by Delek US Holdings, Inc. (NYSE: DK) to own, operate, acquire and construct crude oil and refined products logistics and marketing assets.
Safe Harbor Provisions Regarding Forward-Looking Statements
This press release contains forward-looking statements that are based upon current expectations and involve a number of risks and uncertainties. Statements concerning current estimates, expectations and projections about future results, performance, prospects, opportunities, plans, actions and events and other statements, concerns, or matters that are not historical facts are “forward-looking statements,” as that term is defined under the federal securities laws. These statements contain words such as “possible,” “believe,” “should,” “could,” “would,” “predict,” “plan,” “estimate,” “intend,” “may,” “anticipate,” “will,” “if,” “expect” or similar expressions, as well as statements in the future tense, and can be impacted by numerous factors, including the fact that a substantial majority of Delek Logistics' contribution margin is derived from Delek US, thereby subjecting us to Delek US' business risks; risks relating to the securities markets generally; risks and costs relating to the age and operational hazards of our assets including, without limitation, costs, penalties, regulatory or legal actions and other effects related to releases, spills and other hazards inherent in transporting and storing crude oil and intermediate and finished petroleum products; the impact of adverse market conditions affecting the utilization of Delek Logistics' assets and business performance, including margins generated by its wholesale fuel business; the impact of the COVID-19 outbreak on the demand for crude oil, refined products and transportation and storage services; uncertainties regarding future decisions by OPEC regarding production and pricing disputes between OPEC members and Russia; an inability of Delek US to grow as expected as it relates to our potential future growth opportunities, including dropdowns, and other potential benefits; the results of our investments in joint ventures; the ability of the Red River joint venture to complete the expansion to increase the Red River pipeline capacity; adverse changes in laws including with respect to tax and regulatory matters; and other risks as disclosed in our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other reports
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and filings with the United States Securities and Exchange Commission. Forward looking statements include, but are not limited to, statements regarding future growth at Delek Logistics; distributions and the amounts and timing thereof; potential dropdown inventory and the evaluation of incentive distribution rights; expected earnings or returns from joint ventures or other acquisitions; expansion projects; ability to create long-term value for our unit holders; financial flexibility and borrowing capacity; and distribution growth of 5% or at all. Forward-looking statements should not be read as a guarantee of future performance or results and will not be accurate indications of the times at, or by, which such performance or results will be achieved.  Forward-looking information is based on information available at the time and/or management's good faith belief with respect to future events, and is subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements.  Delek Logistics undertakes no obligation to update or revise any such forward-looking statements to reflect events or circumstances that occur, or which Delek Logistics becomes aware of, after the date hereof, except as required by applicable law or regulation
Non-GAAP Disclosures:
Our management uses certain "non-GAAP" operational measures to evaluate our operating segment performance and non-GAAP financial measures to evaluate past performance and prospects for the future to supplement our GAAP financial information presented in accordance with U.S. GAAP. These financial and operational non-GAAP measures are important factors in assessing our operating results and profitability and include:
•Earnings before interest, taxes, depreciation and amortization ("EBITDA") - calculated as net income before net interest expense, income tax expense, depreciation and amortization expense, including amortization of customer contract intangible assets, which is included as a component of net revenues in our accompanying condensed consolidated statements of income.
•Distributable cash flow - calculated as net cash flow from operating activities plus or minus changes in assets and liabilities, less maintenance capital expenditures net of reimbursements and other adjustments not expected to settle in cash. Delek Logistics believes this is an appropriate reflection of a liquidity measure by which users of its financial statements can assess its ability to generate cash.
EBITDA and distributable cash flow are non-U.S. GAAP supplemental financial measures that management and external users of our condensed consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:  
•Delek Logistics' operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or, in the case of EBITDA, financing methods;
•the ability of our assets to generate sufficient cash flow to make distributions to our unitholders;
•Delek Logistics' ability to incur and service debt and fund capital expenditures; and
•the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.
Delek Logistics believes that the presentation of EBITDA, distributable cash flow and distributable cash flow coverage ratio provide useful information to investors in assessing its financial condition, its results of operations and the cash flow its business is generating. EBITDA, distributable cash flow and distributable cash flow coverage ratio should not be considered in isolation or as alternatives to net income, operating income, cash flow from operating activities or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP.
Non-GAAP measures have important limitations as analytical tools, because they exclude some, but not all, items that affect net income and net cash provided by operating activities. These measures should not be considered substitutes for their most directly comparable U.S. GAAP financial measures. Additionally, because EBITDA and distributable cash flow may be defined differently by other partnerships in its industry, Delek Logistics' definitions of EBITDA and distributable cash flow may not be comparable to similarly titled measures of other partnerships, thereby diminishing their utility. See the accompanying tables in this earnings release for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures.
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Delek Logistics Partners, LP
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands, except unit and per unit data)
June 30, 2020December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents$16,196  $5,545  
   Accounts receivable15,907  13,204  
Accounts receivable from related parties8,755  —  
Inventory2,140  12,617  
Other current assets499  2,204  
Total current assets43,497  33,570  
Property, plant and equipment:  
Property, plant and equipment680,969  461,325  
Less: accumulated depreciation(207,225) (166,281) 
Property, plant and equipment, net473,744  295,044  
Equity method investments 255,323  246,984  
Operating lease right-of-use assets18,884  3,745  
Goodwill12,203  12,203  
Marketing Contract Intangible, net127,393  130,999  
Rights-of-way35,698  15,597  
Other non-current assets6,995  6,305  
Total assets$973,737  $744,447  
LIABILITIES AND DEFICIT  
Current liabilities:  
Accounts payable$1,795  $12,471  
Accounts payable to related parties—  8,898  
Interest payable2,596  2,572  
Excise and other taxes payable4,330  3,941  
Current portion of operating lease liabilities5,793  1,435  
Accrued expenses and other current liabilities3,461  5,765  
Total current liabilities17,975  35,082  
Non-current liabilities:
Long-term debt995,200  833,110  
Asset retirement obligations5,802  5,588  
Deferred tax liabilities1,158  215  
Operating lease liabilities, net of current portion13,091  2,310  
Other non-current liabilities18,826  19,261  
Total non-current liabilities1,034,077  860,484  
Total liabilities1,052,052  895,566  
Equity (Deficit):
Common unitholders - public; 8,687,371 units issued and outstanding at June 30, 2020 (9,131,579 at December 31, 2019)160,870  164,436  
Common unitholders - Delek Holdings; 20,745,868 units issued and outstanding at June 30, 2020 (15,294,046 at December 31, 2019)(235,961) (310,513) 
General partner - 600,678 units issued and outstanding at June 30, 2020 (498,482 at December 31, 2019) (3,224) (5,042) 
Total deficit(78,315) (151,119) 
Total liabilities and deficit $973,737  $744,447  
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Delek Logistics Partners, LP
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except unit and per unit data)
Three Months Ended June 30,Six Months Ended June 30,
 2020201920202019
Net revenues:
Affiliate$87,629  $61,918  $194,328  $124,883  
Third-party30,008  93,424  86,710  182,942  
Net revenues117,637  155,342  281,038  307,825  
Cost of sales:
Cost of materials and other43,892  93,854  145,185  190,119  
Operating expenses (excluding depreciation and amortization presented below)11,623  16,521  25,577  31,828  
Depreciation and amortization8,223  6,188  14,026  12,312  
Total cost of sales63,738  116,563  184,788  234,259  
Operating expenses related to wholesale business (excluding depreciation and amortization presented below)826  806  1,616  1,557  
General and administrative expenses4,721  5,293  10,851  9,766  
Depreciation and amortization471  451  967  901  
Other operating income, net—  (27) (107) (25) 
Total operating costs and expenses69,756  123,086  198,115  246,458  
Operating income47,881  32,256  82,923  61,367  
Interest expense, net10,670  11,354  22,494  22,655  
Income from equity method investments (6,462) (4,515) (12,015) (6,466) 
Other (income) expense, net(2) 461  (2) 461  
Total non-operating expenses, net4,206  7,300  10,477  16,650  
Income before income tax expense43,675  24,956  72,446  44,717  
Income tax (benefit) expense(740) 71  235  136  
Net income attributable to partners$44,415  $24,885  $72,211  $44,581  
Comprehensive income attributable to partners$44,415  $24,885  $72,211  $44,581  
Less: General partner's interest in net income, including incentive distribution rights9,647  8,079  18,724  15,348  
Limited partners' interest in net income$34,768  $16,806  $53,487  $29,233  
Net income per limited partner unit:
Common units - basic$1.18  $0.69  $1.98  $1.20  
Common units - diluted$1.18  $0.69  $1.98  $1.20  
Weighted average limited partner units outstanding:
Common units - basic29,427,298  24,409,359  26,953,934  24,408,270  
Common units - diluted29,430,555  24,414,343  26,956,523  24,414,077  
Cash distribution per limited partner unit$0.900  $0.850  $1.790  $1.670  


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Delek Logistics Partners, LP
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
Six Months Ended June 30,
 20202019
Cash flows from operating activities
Net cash provided by operating activities$72,381  $51,823  
Cash flows from investing activities
Net cash used in investing activities(114,242) (136,556) 
Cash flows from financing activities
Net cash provided by financing activities52,512  85,651  
Net increase in cash and cash equivalents10,651  918  
Cash and cash equivalents at the beginning of the period5,545  4,522  
Cash and cash equivalents at the end of the period$16,196  $5,440  

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Delek Logistics Partners, LP
Reconciliation of Amounts Reported Under U.S. GAAP
(In thousands)
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Reconciliation of Net Income to EBITDA:
Net income$44,415  $24,885  $72,211  $44,581  
Add:
Income tax (benefit) expense(740) 71  235  136  
Depreciation and amortization8,694  6,639  14,993  13,213  
Amortization of customer contract intangible assets1,803  1,802  3,605  3,605  
Interest expense, net10,670  11,354  22,494  22,655  
EBITDA$64,842  $44,751  $113,538  $84,190  
Reconciliation of net cash from operating activities to distributable cash flow:
Net cash provided by operating activities$37,545  $24,806  $72,381  $51,823  
Changes in assets and liabilities19,345  7,133  20,999  9,489  
Non-cash lease expense(366) (393) (640) (1,409) 
Distributions from equity method investments in investing activities 1,580  —  1,690  804  
Maintenance and regulatory capital expenditures (98) (963) (726) (1,781) 
Reimbursement from Delek Holdings for capital expenditures
16  670  55  1,384  
Accretion of asset retirement obligations(107) (99) (214) (198) 
Deferred income taxes(943) 3  (943) 3  
Other operating income, net—  27  107  25  
Distributable Cash Flow $56,972  $31,184  $92,709  $60,140  
Delek Logistics Partners, LP
Distributable Coverage Ratio Calculation
(In thousands)
 Three Months Ended June 30,Six Months Ended June 30,
Distributions to partners of Delek Logistics, LP2020201920202019
Limited partners' distribution on common units$26,490  $20,755  $48,229  $40,769  
General partner's distributions542  423  986  831  
General partner's incentive distribution rights8,937  7,736  17,632  14,752  
Total distributions to be paid (2)
$35,969  $28,914  $66,847  $56,352  
Distributable cash flow$56,972  $31,184  $92,709  $60,140  
Distributable cash flow coverage ratio (1)
1.58x1.08x1.39x1.07x
(1) Distributable cash flow coverage ratio is calculated by dividing distributable cash flow by distributions to be paid in each respective period.
(2) The distributions for the six months ended June 30, 2020 reflect the impact of the distribution waiver that waived all of the distributions for the first quarter of 2020 on the 5.0 million Additional Units, related to the Big Spring Gathering Assets transaction, with respect to base distributions and the IDRs. In addition, the distributions for the three and six months ended June 30, 2020 reflect the waiver of distributions in respect of the IDRs associated with the Additional Units for at least two years.
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Delek Logistics Partners, LP
Segment Data (unaudited)
(In thousands)
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Pipelines and Transportation
Net revenues:
Affiliate$61,394  $36,731  $99,897  $73,390  
Third party2,032  7,477  11,496  11,451  
Total pipelines and transportation 63,426  44,208  111,393  84,841  
     Cost of sales:
Cost of materials and other11,182  7,357  17,280  12,924  
Operating expenses (excluding depreciation and amortization)9,731  12,728  21,187  23,562  
Segment contribution margin$42,513  $24,123  $72,926  $48,355  
Total Assets$836,510  $525,070  
Wholesale Marketing and Terminalling
Net revenues:
   Affiliates (1)
$26,235  $25,187  $94,431  $51,493  
Third party27,976  85,947  75,214  171,491  
Total wholesale marketing and terminalling54,211  111,134  169,645  222,984  
     Cost of sales:
Cost of materials and other32,710  86,497  127,905  177,195  
Operating expenses (excluding depreciation and amortization)2,718  4,599  6,006  9,823  
Segment contribution margin$18,783  $20,038  $35,734  $35,966  
Total Assets$137,227  244,240  
Consolidated
Net revenues:
Affiliates$87,629  $61,918  $194,328  $124,883  
Third party30,008  93,424  86,710  182,942  
Total consolidated117,637  155,342  281,038  307,825  
Cost of sales:
Cost of materials and other43,892  93,854  145,185  190,119  
Operating expenses (excluding depreciation and amortization presented below)12,449  17,327  27,193  33,385  
Contribution margin61,296  44,161  108,660  84,321  
General and administrative expenses4,721  5,293  10,851  9,766  
Depreciation and amortization8,694  6,639  14,993  13,213  
Other operating income, net—  (27) (107) (25) 
Operating income$47,881  $32,256  $82,923  $61,367  
Total Assets$973,737  $769,310  
(1) Affiliate revenue for the wholesale marketing and terminalling segment is presented net of amortization expense pertaining to the marketing contract intangible we acquired in connection with the Big Spring acquisition.

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Delek Logistics Partners, LP
Segment Capital Spending
 (In thousands)
 Three Months Ended June 30,Six Months Ended June 30,
Pipelines and Transportation 2020201920202019
Maintenance capital spending$119  $818  $430  $1,228  
Discretionary capital spending298  —  433  14  
Segment capital spending$417  $818  863  1,242  
Wholesale Marketing and Terminalling
Maintenance capital spending
$232  $302  1,362  409  
Discretionary capital spending3  222  1,456  595  
Segment capital spending$235  $524  2,818  1,004  
Consolidated
Maintenance capital spending$351  $1,120  1,792  1,637  
Discretionary capital spending301  222  1,889  609  
Total capital spending$652  $1,342  $3,681  $2,246  
Delek Logistics Partners, LP
Segment Data (Unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Pipelines and Transportation Segment:
Throughputs (average bpd)
El Dorado Assets:
    Crude pipelines (non-gathered)79,066  37,625  75,995  33,179  
    Refined products pipelines to Enterprise Systems56,093  29,893  55,110  26,511  
El Dorado Gathering System 9,447  14,315  13,449  14,798  
East Texas Crude Logistics System10,275  19,550  12,224  18,835  
Big Spring Gathering Assets105,162  —  105,162  —  
Wholesale Marketing and Terminalling Segment:
East Texas - Tyler Refinery sales volumes (average bpd) (1)
65,028  71,123  68,839  69,857  
Big Spring marketing throughputs (average bpd)76,004  82,964  71,195  85,339  
West Texas marketing throughputs (average bpd) 9,143  11,404  12,612  12,418  
West Texas gross margin per barrel$0.64  $6.25  $1.96  $4.84  
Terminalling throughputs (average bpd)138,593  156,922  136,961  154,643  
(1) Excludes jet fuel and petroleum coke.
Investor/Media Relations Contacts:
Blake Fernandez, Senior Vice President of Investor Relations and Market Intelligence, 615-224-1312

Media/Public Affairs Contact:
Michael P. Ralsky, Vice President - Government Affairs, Public Affairs & Communications, 615-435-1407


Information about Delek Logistics Partners, LP can be found on its website (www.deleklogistics.com), investor relations webpage (ir.deleklogistics.com), news webpage (www.deleklogistics.com/news) and its Twitter account (@DelekLogistics).

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