Delek Logistics Partners, LP 10-Q for FY2022 Q1

Delek Logistics Partners, LP (DKL)

10-Q 2022-05-05 For: 2022-03-31

Added on April 09, 2026

About this 10-Q

Delek Logistics Partners, LP filed this 10-Q on May 5, 2022, covering the quarter ended March 31, 2022 (FY2022 Q1).

Headline figures

Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $206.58M; up 35.1% from $152.91M a year earlier
Net income: $39.51M; up 9.0% from net income of $36.27M a year earlier

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Delaware			45-5379027
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

7102 Commerce Way	Brentwood	Tennessee	37027
(Address of principal executive offices)			(Zip Code)


PART I. FINANCIAL INFORMATION				PART II. OTHER INFORMATION

3	Item 1. Financial Statements (unaudited)			44	Item 1. Legal Proceedings
	3	Condensed Consolidated Balance Sheets
	4	Condensed Consolidated Statements of Income and Comprehensive Income		44	Item 1A. Risk Factors
	6	Condensed Consolidated Statements of Partner's Equity (Deficit)
	5	Condensed Consolidated Statements of Cash Flows		45	Item 5. Other Information
	7	Notes to Condensed Consolidated Financial Statements
		7	Note 1 - Organization and Basis of Presentation	45	Item 6. Exhibits
		8	Note 2 - Related Party Transactions
		9	Note 3 - Revenues	46	Signatures
		11	Note 4 - Net Income Per Unit
		11	Note 5 - Inventory
		11	Note 6 - Long-Term Obligations
		13	Note 7 - Equity
		13	Note 8 - Equity Based Compensation
		14	Note 9 - Equity Method Investments
		15	Note 10 - Segments
		17	Note 11 - Income Taxes
		17	Note 12 - Commitments and Contingencies
		19	Note 13 - Leases
		19	Note 14 - Subsequent Events

21	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	31	Summary of Financial and Other Information
	33	Results of Operations
		33	Consolidated
		35	Pipelines and Transportation
		37	Wholesale Marketing and Terminalling
		39	Investments in Pipeline Joint Ventures
	39	Liquidity and Capital Resources

43	Item 3. Quantitative and Qualitative Disclosures about Market Risk

43	Item 4. Controls and Procedures


	March 31, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	2,726	$	4,292
Accounts receivable	20,350		15,384

Inventory	1,779		2,406

Other current assets	1,466		951
Total current assets	26,321		23,033
Property, plant and equipment:
Property, plant and equipment	724,921		715,870
Less: accumulated depreciation	(276,587)		(266,482)
Property, plant and equipment, net	448,334		449,388
Equity method investments	249,893		250,030
Operating lease right-of-use assets	19,135		20,933
Goodwill	12,203		12,203
Marketing contract intangible, net	114,774		116,577
Rights-of-way	39,705		37,280
Other non-current assets	24,901		25,627
Total assets	$	935,266	$	935,071
LIABILITIES AND DEFICIT
Current liabilities:
Accounts payable	$	12,627	$	8,160
Accounts payable to related parties	50,282		64,423

Interest payable	16,317		5,024
Excise and other taxes payable	4,023		5,280
Current portion of operating lease liabilities	6,688		6,811
Accrued expenses and other current liabilities	6,327		7,117
Total current liabilities	96,264		96,815
Non-current liabilities:
Long-term debt	905,536		898,970

Asset retirement obligations	6,600		6,476

Operating lease liabilities, net of current portion	12,401		14,071
Other non-current liabilities	20,987		22,731
Total non-current liabilities	945,524		942,248
Equity (Deficit):
Common unitholders - public; 9,162,504 units issued and outstanding at March 31, 2022 (8,774,053 at December 31, 2021)	170,696		166,067
Common unitholders - Delek Holdings; 34,311,278 units issued and outstanding at March 31, 2022 (34,696,800 at December 31, 2021)	(277,218)		(270,059)
Total deficit	(106,522)		(103,992)
Total liabilities and deficit	$	935,266	$	935,071


	Three months ended
	March 31,
		2022		2021
Net revenues:
Affiliates (1)		$	123,754	$	96,194
Third party		82,827		56,719
Net revenues		206,581		152,913
Cost of sales:
Cost of materials and other		126,194		81,171
Operating expenses (excluding depreciation and amortization presented below)		17,543		14,250
Depreciation and amortization		9,861		10,247
Total cost of sales		153,598		105,668
Operating expenses related to wholesale business (excluding depreciation and amortization presented below)		564		561
General and administrative expenses		5,095		4,105
Depreciation and amortization		474		492
Other operating expense (income), net		12		(83)
Total operating costs and expenses		159,743		110,743
Operating income		46,838		42,170
Interest expense, net		14,250		9,737
Income from equity method investments		(7,026)		(4,049)
Other (income) expense, net		(1)		31
Total non-operating expenses, net		7,223		5,719
Income before income tax expense		39,615		36,451
Income tax expense		101		184


Net income attributable to partners		$	39,514	$	36,267
Comprehensive income attributable to partners		$	39,514	$	36,267




Net income per limited partner unit:
Common units - basic		$	0.91	$	0.83
Common units - diluted		$	0.91	$	0.83

Weighted average limited partner units outstanding:
Common units - basic		43,471,536		43,443,336
Common units - diluted		43,481,572		43,449,059

Cash distributions per limited partner unit		$	0.98	$	0.92


	Common - Public		Common - Delek Holdings		Total
Balance at December 31, 2021	$	166,067	$	(270,059)	$	(103,992)
Cash distributions (1)	(8,570)		(33,830)		(42,400)
Net income attributable to partners	8,328		31,186		39,514
Delek Holdings unit sale to public	5,110		(5,110)		—
Other	(239)		595		356
Balance at March 31, 2022	$	170,696	$	(277,218)	$	(106,522)


☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

						For the transition period from to


	Three Months Ended March 31,
	2022		2021
Cash flows from operating activities:
Net income	$	39,514	$	36,267
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	10,335		10,739
Non-cash lease expense	1,798		2,018
Amortization of customer contract intangible assets	1,803		1,803
Amortization of deferred revenue	(444)		(538)
Amortization of deferred financing costs and debt discount	847		625

Income from equity method investments	(7,026)		(4,049)
Dividends from equity method investments	6,613		3,730


Other non-cash adjustments	492		274
Changes in assets and liabilities:
Accounts receivable	(4,966)		3,354
Inventories and other current assets	112		1,020
Accounts payable and other current liabilities	14,157		(390)
Accounts receivable/payable to related parties	(14,141)		7,359
Non-current assets and liabilities, net	(1,174)		(480)
Net cash provided by operating activities	47,920		61,732
Cash flows from investing activities:


Purchases of property, plant and equipment	(10,613)		(6,119)
Proceeds from sales of property, plant and equipment	12		83
Purchases of intangible assets	(2,425)		(474)
Distributions from equity method investments	550		3,924
Equity method investment contributions	—		(1,379)
Net cash used in investing activities	(12,476)		(3,965)
Cash flows from financing activities:


Distributions to common unitholders - public	(8,570)		(7,914)
Distributions to common unitholders - Delek Holdings	(33,830)		(31,619)


Proceeds from revolving credit facility	113,600		77,500
Payments on revolving credit facility	(107,500)		(86,600)


Payments on financing lease liabilities	(710)		—
Net cash used in financing activities	(37,010)		(48,633)
Net (decrease) increase in cash and cash equivalents	(1,566)		9,134
Cash and cash equivalents at the beginning of the period	4,292		4,243
Cash and cash equivalents at the end of the period	$	2,726	$	13,377
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	2,110	$	4,937

Non-cash investing activities:
Increase in accrued capital expenditures in accounts payable/receivable related parties	$	—	$	3,119
Decrease in accrued capital expenditures and other	$	(1,527)	$	(1,439)

Non-cash financing activities:
Non-cash lease liability arising from obtaining right of use assets during the period	$	—	$	2,623


	Three Months Ended March 31, 2022
	Pipelines and Transportation		Wholesale Marketing and Terminalling		Consolidated
Service Revenue - Third Party	$	4,782	$	—	$	4,782
Service Revenue - Affiliate (1)	4,004		8,545		12,549
Product Revenue - Third Party	—		78,045		78,045
Product Revenue - Affiliate	—		31,746		31,746
Lease Revenue - Affiliate	67,019		12,440		79,459
Total Revenue	$	75,805	$	130,776	$	206,581


	Three Months Ended March 31, 2021
	Pipelines and Transportation		Wholesale Marketing and Terminalling		Consolidated
Service Revenue - Third Party	$	1,927	$	82	$	2,009
Service Revenue - Affiliate (1)	1,224		8,082		9,306
Product Revenue - Third Party	—		54,710		54,710
Product Revenue - Affiliate	—		16,387		16,387
Lease Revenue - Affiliate	61,824		8,677		70,501
Total Revenue	$	64,975	$	87,938	$	152,913


Remainder of 2022	$	206,379
2023	268,042
2024	192,400
2025	169,227
2026 and thereafter	573,893
Total expected revenue on remaining performance obligations	$	1,409,941


Quarter Ended	Total Quarterly Distribution Per Limited Partner Unit		Total Cash Distribution (in thousands)		Date of Distribution	Unitholders Record Date
March 31, 2021	$	0.920	$	39,968	May 14, 2021	May 10, 2021
June 30, 2021	$	0.940	$	40,846	August 11, 2021	August 5, 2021
September 30, 2021	$	0.950	$	41,286	November 10, 2021	November 5, 2021
December 31, 2021	$	0.975	$	42,384	February 8, 2022	February 1, 2022
March 31, 2022	$	0.980	$	42,604	May 12, 2022 (1)	May 5, 2022


	March 31, 2022		December 31, 2021
Current Assets	$	28,830	$	28,735
Non-current Assets	$	401,283	$	403,692
Current liabilities	$	6,637	$	10,040


	March 31, 2022		December 31, 2021
Red River	$	144,567	$	144,041
CP LLC	$	61,926	$	61,670
Andeavor Logistics	$	43,400	$	44,319


(in thousands)	Three Months Ended March 31,
		2022		2021
Pipelines and Transportation
Net revenues:
Affiliate		$	71,023	$	63,048
Third party		4,782		1,927
Total pipelines and transportation		75,805		64,975

Cost of materials and other		19,602		13,079
Operating expenses (excluding depreciation and amortization)		12,958		10,172
Segment contribution margin		$	43,245	$	41,724







Capital spending (1)		$	8,149	$	5,845

Wholesale Marketing and Terminalling
Net revenues:
Affiliate (2)		$	52,731	$	33,146
Third party		78,045		54,792
Total wholesale marketing and terminalling		130,776		87,938

Cost of materials and other		106,592		68,092
Operating expenses (excluding depreciation and amortization)		5,149		4,639
Segment contribution margin		$	19,035	$	15,207







Capital spending (1)		$	937	$	1,954

Investments in Pipeline Joint Ventures
Income from equity method investments		$	(7,026)	$	(4,049)
Equity method investments contributions		$	—	$	(1,379)

Consolidated
Net revenues:
Affiliate		$	123,754	$	96,194
Third party		82,827		56,719
Total Consolidated		206,581		152,913

Cost of materials and other		126,194		81,171
Operating expenses (excluding depreciation and amortization presented below)		18,107		14,811
Contribution margin		62,280		56,931



General and administrative expenses		5,095		4,105
Depreciation and amortization		10,335		10,739
Other operating expense (income), net		12		(83)
Operating income		46,838		42,170
Interest expense, net		14,250		9,737
Income from equity method investments		(7,026)		(4,049)
Other (income) expense, net		(1)		31
Total non-operating expenses, net		7,223		5,719
Income before income tax expense		39,615		36,451
Income tax expense		101		184
Net income attributable to partners		$	39,514	$	36,267
Capital spending (1)		$	9,086	$	7,799


■volumes (including pipeline throughput and terminal volumes)
■contribution margin per barrel
■operating and maintenance expenses
■cost of materials and other
■EBITDA and distributable cash flow (as such terms are defined below).


(i)all costs of purchased refined products in our wholesale marketing and terminalling segment, as well as additives and related transportation of such products;						(ii)costs associated with the operation of our trucking assets, which primarily include allocated employee costs and other costs related to fuel, truck leases and repairs and maintenance;
(iii)the cost of pipeline capacity leased from any third parties; and						(iv)gains and losses related to our commodity hedging activities.


•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. The Partnership believes this is an appropriate reflection of a liquidity measure by which users of its financial statements can assess its ability to generate cash.


(1)			Maintenance and regulatory capital expenditures represent cash expenditures (including expenditures for the addition or improvement to, or the replacement of, our capital assets, and for the acquisition of existing, or the construction or development of new, capital assets) made to maintain our long-term operating income or operating capacity. Examples of maintenance and regulatory capital expenditures are expenditures for the repair, refurbishment and replacement of pipelines and terminals, to maintain equipment reliability, integrity and safety and to address environmental laws and regulations.
(2)			For the three month periods ended March 31, 2022 and 2021, Delek Holdings reimbursed us for certain capital expenditures pursuant to the terms of the Omnibus Agreement (as defined in Note 2 to our accompanying condensed consolidated financial statements).
(3)			For a definition of distributable cash flow, please see "Non-GAAP Measures" above.


Segment contribution margin = Net revenues - Cost of materials and other - Operating expenses, excluding depreciation and amortization


Throughputs (average bpd)
	Three Months Ended March 31,
		2022	2021










El Dorado Assets:
Crude pipelines (non-gathered)		72,872	44,118
Refined products pipelines to Enterprise Systems		59,522	26,349
El Dorado Gathering System		16,156	11,880
East Texas Crude Logistics System		16,056	26,075

Permian Gathering System (1)		100,325	73,724
Plains Connection System		162,007	108,361
Trucking Assets		9,306	10,187


Operating Information
	Three Months Ended March 31,
		2022		2021









East Texas - Tyler Refinery sales volumes (average bpd) (1)		70,578		71,963
Big Spring marketing throughputs (average bpd)		75,549		72,927
West Texas marketing throughputs (average bpd)		9,913		10,138
West Texas gross margin per barrel		$	3.04	$	3.42



Terminalling throughputs (average bpd) (2)		137,622		144,539


(1)			Excludes jet fuel and petroleum coke.
(2)			Consists of terminalling throughputs at our Tyler, Big Spring, Big Sandy and Mount Pleasant, Texas, El Dorado and North Little Rock, Arkansas and Memphis and Nashville, Tennessee terminals.


(i) cash generated from operations;			(iii) potential issuance of additional equity; and
(ii) borrowings under our revolving credit facility;			(iv) potential issuance of additional debt securities.


	Full Year 2022 Forecast		Three Months Ended March 31, 2022
Pipelines and Transportation
Regulatory (2)	$	5,265	$	1,251
Maintenance (1)	5,780		29
Discretionary projects (2)	58,823		6,869
Pipelines and transportation segment total (4)	$	69,868	$	8,149

Wholesale Marketing and Terminalling
Regulatory (3)	$	2,292	$	792
Maintenance (1)	215		—
Discretionary (3)	225		145
Wholesale marketing and terminalling segment total (4)	$	2,732	$	937




Total capital spending (4)	$	72,600	$	9,086


Exhibit No.		Description
































2.1		Membership Interest Purchase Agreement, dated as of April 8, 2022, by and between 3 Bear Energy - New Mexico LLC and DKL Delaware Gathering, LLC (incorporated by reference to Exhibit 2.1 to the Partnership's Current Report on Form 8-K filed on April 11, 2022).
31.1	#	Certification of Delek Logistics GP, LLC's Chief Executive Officer pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities Exchange Act of 1934, as amended.
31.2	#	Certification of Delek Logistics GP, LLC's Chief Financial Officer pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities Exchange Act of 1934, as amended.
32.1	##	Certification of Delek Logistics GP, LLC's Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	##	Certification of Delek Logistics GP, LLC's Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101		The following materials from Delek Logistics Partners, LP's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 (Unaudited), (ii) Condensed Consolidated Statements of Income and Comprehensive Income for the three months ended March 31, 2022 and 2021 (Unaudited), (iii) Condensed Consolidated Statement of Partners' Equity (Deficit) for the three months ended March 31, 2022 and 2021 (Unaudited), (iv) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (Unaudited), and (v) Notes to Condensed Consolidated Financial Statements (Unaudited).
104		The cover page from Delek Logistics Partners, LP's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 has been formatted in Inline XBRL.


Delek Logistics Partners, LP
By:			Delek Logistics GP, LLC
			Its General Partner

By:			/s/ Ezra Uzi Yemin
			Ezra Uzi Yemin
			Chairman and Chief Executive Officer (Principal Executive Officer)

By:			/s/ Reuven Spiegel
			Reuven Spiegel
			Executive Vice President and Chief Financial Officer (Principal Financial Officer)

By:			/s/ Robert Wright
			Robert Wright
			Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)


By:			/s/ Ezra Uzi Yemin
			Ezra Uzi Yemin,
			Chairman and Chief Executive Officer (Principal Executive Officer) of Delek Logistics GP, LLC (the general partner of Delek Logistics Partners, LP)


By:			/s/ Reuven Spiegel
			Reuven Spiegel,
			Executive Vice President and Chief Financial Officer (Principal Financial Officer) of Delek Logistics GP, LLC (the general partner of Delek Logistics Partners, LP)