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Leases | 12 Months Ended
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Dec. 31, 2024
Leases [Abstract] |
Leases | Leases Lessee We have noncancelable operating leases primarily associated with rights-of-way and transportation equipment. Our remaining lease terms range from less than one year to 41 years with renewal options ranging from 3 to 40 years, and some agreements have multiple renewal options. The components of lease cost are as follows (in thousands) (1):
|  |  | Years Ended December 31,
|  |  |  |  | 2024 |  | 2023 |  | 2022
Operating lease cost |  |  |  |  | $ | 10,370 |  |  | $ | 11,533 |  |  | $ | 12,054 |
Short-term lease cost |  |  |  |  | 7,359 |  |  | 5,031 |  |  | 2,541 |
Variable lease cost |  |  |  |  | 1,261 |  |  | 3,826 |  |  | 4,803 |
Total lease cost |  |  |  |  | $ | 18,990 |  |  | $ | 20,390 |  |  | $ | 19,398 |
(1) Includes an immaterial amount of financing lease cost. |  |  |  |  |  |  |  |  |
Supplemental balance sheet information related to leases is as follows: |  |  |  |  |  |  |  |  |
|  | Years Ended December 31,
|  | 2024 |  | 2023
Weighted-average remaining lease term (years) for operating leases |  | 3.4 |  | 3.5
Weighted-average discount rate (1) operating leases |  | 7.4 | % |  | 7.3 | %
Weighted-average remaining lease term (years) for finance lease |  | 3.5 |  | 3.6
Weighted-average discount rate (1) finance lease |  | 8.4 | % |  | 7.2 | %
(1) Our discount rate is primarily based on our incremental borrowing rate in accordance with ASC 842. |  |  |  |  |  |  |  |  |
Supplemental cash flow and other information related to leases are as follows (in thousands): |  |  |  |  |  |  |  |  |
|  |  |  |  | Years Ended December 31,
|  |  |  |  | 2024 |  | 2023 |  | 2022
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |  |  |  |  |
Operating cash flows from operating leases |  |  |  |  | $ | (8,101) |  |  | $ | (9,588) |  |  | $ | (12,054) |
Leased assets obtained in exchange for new operating lease liabilities |  |  |  |  | $ | 3,665 |  |  | $ | 3,804 |  |  | $ | 12,682 |
Leased assets obtained in exchange for new financing lease liabilities |  |  |  |  | $ | — |  |  | $ | 1,162 |  |  | $ | 35 |
Maturities of lease liabilities as of December 31, 2024 are as follows (in thousands):
Year Ended December 31, | Operating |  | Finance
2025 | $ | 5,924 |  |  | $ | 283 |
2026 | 2,871 |  |  | 263 |
2027 | 1,906 |  |  | 263 |
2028 | 905 |  |  | 154 |
2029 | 234 |  |  | — |
2030 and thereafter | 984 |  |  | — |
Total lease payments | 12,824 |  |  | 963 |
Less: present value discount | 1,480 |  |  | 127 |
Lease liabilities | $ | 11,344 |  |  | $ | 836 |
Lessor We are the lessor under certain agreements for gathering, transportation, storage, terminalling, and offloading with Delek Holdings. These agreements have remaining terms ranging from 3 to 12 years with renewal options ranging from 2 to 10 years, and some agreements have multiple renewal options. Revenue from these leases are recorded in affiliate revenue in the consolidated statements of income. For details on Lease Revenue, see Note 5. During 2024, we executed renewals to certain agreements between DKL and Delek Holdings. The renewals required the embedded leases within these agreements to be reassessed under ASC 842. As a result of these lease assessments, certain leases were reclassified from an operating lease to a sales-type lease. Accordingly, the underlying property, plant and equipment, net, and associated deferred revenue, if any, were derecognized and the present value of the future lease payments and the unguaranteed residual value of the assets were recorded as a net investment in sales-type lease during the respective periods. The net investment in sales-type leases is recorded utilizing the estimated fair value of the underlying leased assets at contract modification date and are nonrecurring fair value measurements. The leased assets were valued using a cost method valuation approach which utilizes Level 3 inputs. We recognized any billings in excess of minimum volume requirements as variable lease payments, and these variable lease payments were recorded in Net Revenues - Affiliate in the accompanying consolidated statements of income and comprehensive income. Lease income included in the consolidated statements of income and comprehensive income was as follows:
|  | Year Ended December 31,
(in thousands) |  |  | 2024 | 2023 | 2022
Operating leases: |  |  |  |  |
Lease revenue |  |  | $ | 268,843 |  | $ | 311,096 |  | $ | 287,370 |
Sales-type leases: |  |  |  |  |
Interest income (Sales-type rental revenue-fixed minimum) |  |  | 47,709 |  | — |  | — |
Lease revenue (Revenue from variable lease payments) |  |  | 7,673 |  | — |  | — |
Sales-type lease income |  |  | $ | 55,382 |  | $ | — |  | $ | — |
We did not elect to use the practical expedient to combine lease and non-lease components for lessor arrangements. The tables below represent the portion of the contracts allocated to the lease component based on relative standalone selling price. The following presents the consolidated financial statement impact of sales-type leases on commencement or modification date for the year ended December 31, 2024. There were no amounts recognized for the year ended December 31, 2023. These transactions are non-cash transactions. The amount recognized on commencement date was recorded in contributions in the consolidated statements of partners' equity (deficit), given the underlying agreements are between entities under common control.
|  | Year Ended December 31,
(in thousands) |  |  |  | 2024 |
Lease receivables |  |  |  | $ | 217,263 |  |
Unguaranteed residual assets |  |  |  | 10,573 |  |
Property, plant and equipment, net |  |  |  | (108,143) |  |
Amount recognized on commencement date |  |  |  | $ | 119,693 |  |
The following is a schedule of annual undiscounted minimum future lease cash receipts on the non-cancelable operating leases as of December 31, 2024 (in thousands):
2025 | $ | 108,376 |
2026 | 105,957 |
2027 | 93,867 |
2028 | 63,306 |
2029 | 57,194 |
2030 and thereafter | 16,258 |
Total minimum future lease revenue | $ | 444,958 |
Annual future minimum undiscounted lease receipts under our sales-type leases were as follows as of December 31, 2024 (in thousands):
2025 | $ | 104,323 |
2026 | 83,926 |
2027 | 78,858 |
2028 | 78,858 |
2029 | 78,858 |
2030 and thereafter | 262,763 |
Total minimum future lease revenue | 687,586 |
Less: Imputed interest | 483,783 |
Lease receivable (1) | $ | 203,803 |
Current lease receivables (2) | $ | 22,783 |
Long-term lease receivables (3) | $ | 181,020 |
Unguaranteed residual assets (3) | $ | 12,106 |
(1) This amount does not include the unguaranteed residual assets. (2) Presented in Lease receivable - affiliate, in the consolidated balance sheets. (3) Presented in Net lease investment - affiliate in the consolidated balance sheets.
The following table summarized our investment in assets held under operating lease by major classes (in thousands):
| December 31,
| 2024 |  | 2023
Land | $ | 11,643 |  |  | $ | 14,946 |
Building and building improvements | 387 |  |  | 853 |
Pipelines, tanks and terminals | 419,528 |  |  | 664,567 |
Other equipment | 2,229 |  |  | 3,856 |
Property, plant and equipment | 433,787 |  |  | 684,222 |
Less: accumulated depreciation | 143,961 |  |  | 253,955 |
Property, plant and equipment, net | $ | 289,826 |  |  | $ | 430,267 |
Capital expenditures related to assets subject to sales-type lease arrangements were $0.6 million for the year ended December 31, 2024. There were no capital expenditures related to assets subject to sales-type lease arrangements for both the years ended December 31, 2023 and 2022. These amounts are reflected as additions to property, plant and equipment in the consolidated statements of cash flows.
Leases | Leases Lessee We have noncancelable operating leases primarily associated with rights-of-way and transportation equipment. Our remaining lease terms range from less than one year to 41 years with renewal options ranging from 3 to 40 years, and some agreements have multiple renewal options. The components of lease cost are as follows (in thousands) (1):
|  |  | Years Ended December 31,
|  |  |  |  | 2024 |  | 2023 |  | 2022
Operating lease cost |  |  |  |  | $ | 10,370 |  |  | $ | 11,533 |  |  | $ | 12,054 |
Short-term lease cost |  |  |  |  | 7,359 |  |  | 5,031 |  |  | 2,541 |
Variable lease cost |  |  |  |  | 1,261 |  |  | 3,826 |  |  | 4,803 |
Total lease cost |  |  |  |  | $ | 18,990 |  |  | $ | 20,390 |  |  | $ | 19,398 |
(1) Includes an immaterial amount of financing lease cost. |  |  |  |  |  |  |  |  |
Supplemental balance sheet information related to leases is as follows: |  |  |  |  |  |  |  |  |
|  | Years Ended December 31,
|  | 2024 |  | 2023
Weighted-average remaining lease term (years) for operating leases |  | 3.4 |  | 3.5
Weighted-average discount rate (1) operating leases |  | 7.4 | % |  | 7.3 | %
Weighted-average remaining lease term (years) for finance lease |  | 3.5 |  | 3.6
Weighted-average discount rate (1) finance lease |  | 8.4 | % |  | 7.2 | %
(1) Our discount rate is primarily based on our incremental borrowing rate in accordance with ASC 842. |  |  |  |  |  |  |  |  |
Supplemental cash flow and other information related to leases are as follows (in thousands): |  |  |  |  |  |  |  |  |
|  |  |  |  | Years Ended December 31,
|  |  |  |  | 2024 |  | 2023 |  | 2022
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |  |  |  |  |
Operating cash flows from operating leases |  |  |  |  | $ | (8,101) |  |  | $ | (9,588) |  |  | $ | (12,054) |
Leased assets obtained in exchange for new operating lease liabilities |  |  |  |  | $ | 3,665 |  |  | $ | 3,804 |  |  | $ | 12,682 |
Leased assets obtained in exchange for new financing lease liabilities |  |  |  |  | $ | — |  |  | $ | 1,162 |  |  | $ | 35 |
Maturities of lease liabilities as of December 31, 2024 are as follows (in thousands):
Year Ended December 31, | Operating |  | Finance
2025 | $ | 5,924 |  |  | $ | 283 |
2026 | 2,871 |  |  | 263 |
2027 | 1,906 |  |  | 263 |
2028 | 905 |  |  | 154 |
2029 | 234 |  |  | — |
2030 and thereafter | 984 |  |  | — |
Total lease payments | 12,824 |  |  | 963 |
Less: present value discount | 1,480 |  |  | 127 |
Lease liabilities | $ | 11,344 |  |  | $ | 836 |
Lessor We are the lessor under certain agreements for gathering, transportation, storage, terminalling, and offloading with Delek Holdings. These agreements have remaining terms ranging from 3 to 12 years with renewal options ranging from 2 to 10 years, and some agreements have multiple renewal options. Revenue from these leases are recorded in affiliate revenue in the consolidated statements of income. For details on Lease Revenue, see Note 5. During 2024, we executed renewals to certain agreements between DKL and Delek Holdings. The renewals required the embedded leases within these agreements to be reassessed under ASC 842. As a result of these lease assessments, certain leases were reclassified from an operating lease to a sales-type lease. Accordingly, the underlying property, plant and equipment, net, and associated deferred revenue, if any, were derecognized and the present value of the future lease payments and the unguaranteed residual value of the assets were recorded as a net investment in sales-type lease during the respective periods. The net investment in sales-type leases is recorded utilizing the estimated fair value of the underlying leased assets at contract modification date and are nonrecurring fair value measurements. The leased assets were valued using a cost method valuation approach which utilizes Level 3 inputs. We recognized any billings in excess of minimum volume requirements as variable lease payments, and these variable lease payments were recorded in Net Revenues - Affiliate in the accompanying consolidated statements of income and comprehensive income. Lease income included in the consolidated statements of income and comprehensive income was as follows:
|  | Year Ended December 31,
(in thousands) |  |  | 2024 | 2023 | 2022
Operating leases: |  |  |  |  |
Lease revenue |  |  | $ | 268,843 |  | $ | 311,096 |  | $ | 287,370 |
Sales-type leases: |  |  |  |  |
Interest income (Sales-type rental revenue-fixed minimum) |  |  | 47,709 |  | — |  | — |
Lease revenue (Revenue from variable lease payments) |  |  | 7,673 |  | — |  | — |
Sales-type lease income |  |  | $ | 55,382 |  | $ | — |  | $ | — |
We did not elect to use the practical expedient to combine lease and non-lease components for lessor arrangements. The tables below represent the portion of the contracts allocated to the lease component based on relative standalone selling price. The following presents the consolidated financial statement impact of sales-type leases on commencement or modification date for the year ended December 31, 2024. There were no amounts recognized for the year ended December 31, 2023. These transactions are non-cash transactions. The amount recognized on commencement date was recorded in contributions in the consolidated statements of partners' equity (deficit), given the underlying agreements are between entities under common control.
|  | Year Ended December 31,
(in thousands) |  |  |  | 2024 |
Lease receivables |  |  |  | $ | 217,263 |  |
Unguaranteed residual assets |  |  |  | 10,573 |  |
Property, plant and equipment, net |  |  |  | (108,143) |  |
Amount recognized on commencement date |  |  |  | $ | 119,693 |  |
The following is a schedule of annual undiscounted minimum future lease cash receipts on the non-cancelable operating leases as of December 31, 2024 (in thousands):
2025 | $ | 108,376 |
2026 | 105,957 |
2027 | 93,867 |
2028 | 63,306 |
2029 | 57,194 |
2030 and thereafter | 16,258 |
Total minimum future lease revenue | $ | 444,958 |
Annual future minimum undiscounted lease receipts under our sales-type leases were as follows as of December 31, 2024 (in thousands):
2025 | $ | 104,323 |
2026 | 83,926 |
2027 | 78,858 |
2028 | 78,858 |
2029 | 78,858 |
2030 and thereafter | 262,763 |
Total minimum future lease revenue | 687,586 |
Less: Imputed interest | 483,783 |
Lease receivable (1) | $ | 203,803 |
Current lease receivables (2) | $ | 22,783 |
Long-term lease receivables (3) | $ | 181,020 |
Unguaranteed residual assets (3) | $ | 12,106 |
(1) This amount does not include the unguaranteed residual assets. (2) Presented in Lease receivable - affiliate, in the consolidated balance sheets. (3) Presented in Net lease investment - affiliate in the consolidated balance sheets.
The following table summarized our investment in assets held under operating lease by major classes (in thousands):
| December 31,
| 2024 |  | 2023
Land | $ | 11,643 |  |  | $ | 14,946 |
Building and building improvements | 387 |  |  | 853 |
Pipelines, tanks and terminals | 419,528 |  |  | 664,567 |
Other equipment | 2,229 |  |  | 3,856 |
Property, plant and equipment | 433,787 |  |  | 684,222 |
Less: accumulated depreciation | 143,961 |  |  | 253,955 |
Property, plant and equipment, net | $ | 289,826 |  |  | $ | 430,267 |
Capital expenditures related to assets subject to sales-type lease arrangements were $0.6 million for the year ended December 31, 2024. There were no capital expenditures related to assets subject to sales-type lease arrangements for both the years ended December 31, 2023 and 2022. These amounts are reflected as additions to property, plant and equipment in the consolidated statements of cash flows.

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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 842 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/842-20/tableOfContent + Details
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- Definition The entire disclosure for lessor's operating leases. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 842 -SubTopic 30 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/842-30/tableOfContent + Details
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