UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

Delek Logistics Partners, LP

Quarterly Report on Form 10-Q

For the Quarterly Period Ended March 31, 20212022

Part I - FINANCIAL INFORMATION

As used in this report, the terms "Delek Logistics Partners, LP," the "Partnership," "we," "us," or "our" may refer to Delek Logistics Partners, LP, one or more of its consolidated subsidiaries or all of them taken as a whole.

The Partnership is a Delaware limited partnership formed in April 2012 by Delek US Holdings, Inc. ("Delek Holdings") and its subsidiary Delek Logistics GP, LLC, our general partner (our "general partner").

Effective August 13, 2020,On April 8, 2022, DKL Delaware Gathering, LLC (the “Purchaser”), a subsidiary of the Partnership, closedentered into a Membership Interest Purchase Agreement with 3 Bear Energy – New Mexico LLC (the “Seller”) to purchase 100% of the transaction contemplated bylimited liability company interests in 3 Bear Delaware Holding – NM, LLC (the “Purchased Interests”), related to Seller’s crude oil and gas gathering, processing and transportation businesses, as well as water disposal and recycling operations, in the Delaware Basin in New Mexico (the “Purchase Agreement”). The Partnership also entered into a definitive exchangeguaranty agreement with the general partnerSeller in order to eliminate allguaranty the payment obligations of the incentive distribution rights ("IDRs") held byPurchaser under the general partner and convert the 2% general partner interest into a non-economic general partner interest, all in exchange for 14.0 million newly issued common limited partner units and $45.0 million in cash ("IDR Restructuring Transaction"). Refer to Note 3 - Related Party Transactions for further information, Note 5 - Net Income per Unit for more information on how these transactions impact our earnings per unit calculations, and Note 8 - Equity for additional information on the impact to our equity accounts.

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted, although management believes that the disclosures herein are adequate to make the financial information presented not misleading. Our unaudited condensed consolidated financial statements have been prepared in conformity with U.S. GAAP applied on a consistent basis with those of the annual audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 20202021 (our "Annual Report on Form 10-K"), filed with the U.S. Securities and Exchange Commission (the "SEC") on March 1, 2021February 25, 2022 and in accordance with the rules and regulations of the SEC. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 20202021 included in our Annual Report on Form 10-K.

All adjustments necessary for a fair presentation of the financial position and the results of operations for the interim periods presented have been included. All intercompany accounts and transactions have been eliminated. Such intercompany transactions do not include those with Delek Holdings or our general partner, which are presented as related parties in these accompanying condensed consolidated financial statements. All adjustments are of a normal, recurring nature. Operating results for the interim period should not be viewed as representative of results that may be expected for any future interim period or for the full year.

Reclassifications

Certain immaterialIn the current period, we reassessed the classification of certain expenses and made certain reclassification adjustments to better represent the nature of those expenses. Accordingly, we have made reclassifications have been made to the prior period presentation in order to conform to thethis revised current period presentation.classification, which resulted in an immaterial decrease in the prior period general and administrative expenses and an increase in the prior period operating expenses.

Risks and Uncertainties Arising from the COVID-19 Pandemic

The on-going impactDuring the quarter ended March 31, 2022, the economic environment in which we operate continued to improve as a result of the COVID-19 outbreakwidespread availability of vaccines and its development into a pandemic in March 2020 (the “COVID-19 Pandemic” or the “Pandemic”), the restrictions imposed to prevent its spread, the challenges with the vaccination rollout, and the spread of new variants of the virus, continue to cause significant economic disruption globally, includingtesting in the U.S. and specific geographic areas where we operate. Comparedover recent months which, in turn, has contributed to the prior year, the first quarter of 2021 has witnessed economic recovery trends including a resumption of flights by major airlinesreturn to work, return to schools, and increased motor vehicle use. This hastravel, with a corresponding increase in turn resulted in increasedthe demand for thus also the market prices of, crude oilvehicle motor fuel and certain products, particularly refined petroleum products thatjet fuel. While we receive revenue for the transportation and storage services we provide and an increase in demand and sales volumes in our wholesale marketing business. As of March 31, 2021 there is continued uncertainty about the duration and future impact of the COVID-19 Pandemic.

ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848)

In March 2020, the FASB issued an amendment which is intended to provide temporary optional expedients and exceptions to GAAP guidance on contracts, hedge accounting and other transactions affected by the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank rates. This guidance is effective for all entities any time beginning on March 12, 2020 through December 31, 2022 and may be applied from the beginning of an interim period that includes the issuance date of the ASU. The Partnership is evaluating the impact of this guidance but does not currently expect that adopting this new guidance will have a material impact on its condensed consolidated financial statements and related disclosures.

Commercial Agreements

Under each of these agreements, we are required to maintain the capabilities of our pipelines and terminals, such that Delek Holdings may throughput and/or store, as the case may be, specified volumes of crude oil, intermediate and refined products. To the extent that Delek Holdings is prevented by our failure to maintain such capacities from throughputting or storing such specified volumes for more than 30 days per year, Delek Holdings' minimum throughput commitment will be reduced proportionately and prorated for the portion of the quarter during which the specified throughput capacity was unavailable, and/or the storage fee will be reduced, prorated for the portion of the month during which the specified storage capacity was unavailable. Such reduction would occur even if actual throughput or storage amounts were below the minimum volume commitment levels.

See our Annual Report on Form 10-K for a more complete description of our material commercial agreements and other agreements with Delek Holdings.

Other Agreements with Delek Holdings

In addition to the commercial agreements described above, the Partnership has entered into the following agreements with Delek Holdings:

Omnibus Agreement

The Partnership entered into an omnibus agreement with Delek Holdings, Delek Logistics Operating, LLC, Lion Oil Company, LLC (formerly known as Lion Oil Company) and certain of the Partnership's and Delek Holdings' other subsidiaries on November 7, 2012, which has been amended from time to time in connection with acquisitions from Delek Holdings (collectively, as amended, the "Omnibus Agreement"). The Omnibus Agreement governs the provision of certain operational services and reimbursement obligations, among other matters, between the Partnership and Delek Holdings, and obligates us to pay an annual fee of $4.7$4.6 million to Delek Holdings for its provision of centralized corporate services to the Partnership.

The Partnership manages a long-term capital projectprojects on behalf of Delek Holdings pursuant to a construction management and operating agreement (the "DPG Management Agreement") for the construction of a 250-mile gathering systemsystems in the Permian Basin. The majority of the gathering system hassystems have been constructed, however, additional costs pertaining to a pipeline connection that was not acquired by the Partnership continue to be incurred and are still subject to the terms of the DPG Management Agreement. The Partnership is also considered the operator for the project and is responsible for oversight of the project design, procurement and construction of project segments and provides other related services. Pursuant to the terms of the DPG Management Agreement, the Partnership receives a monthly operating services fee and a construction services fee, which includes the Partnership's direct costs of managing the project plus an additional percentage fee of the construction costs of each project segment. The agreement extends through December 2022. Total fees paid to the Partnership were $0.4 million and $0.9 million for both the three months ended March 31, 20212022 and 2020, respectively,2021, which are recorded in affiliate revenue in our condensed consolidated statements of income. Additionally, the Partnership incurs the costs in connection with the construction of the assets and is subsequently reimbursed by Delek Holdings. Amounts reimbursable by Delek Holdings are recorded in accounts receivable from related parties.

Summary of Transactions

Revenues from affiliates consist primarily of revenues from gathering, transportation, storage, offloading, Renewable Identification Numbers ("RINs"), wholesale marketing and products terminalling services provided primarily to Delek Holdings based on regulated tariff rates or contractually based fees and product sales. Affiliate operating expenses are primarily comprised of amounts we reimburse Delek Holdings, or our general partner, as the case may be, for the services provided to us under the Partnership Agreement. These expenses could also include reimbursement and indemnification amounts from Delek Holdings, as provided under the Omnibus Agreement. Additionally, the Partnership is required to reimburse Delek Holdings for direct or allocated costs and expenses incurred by Delek Holdings on behalf of the Partnership and for charges Delek Holdings incurred for the management and operation of our logistics assets, including an annual fee for various centralized corporate services, which are included in general and administrative expenses. In addition to these transactions, we purchase refined products and bulk biofuels from Delek Holdings, the costs of which are included in cost of materials and other.

A summary of revenue, purchases from affiliates and expense transactions with Delek Holdings and its affiliates are as follows (in thousands):

Quarterly Cash Distributions

Prior to August 13, 2020, our common and general partner unitholders and the holders of IDRs were entitled to receiveIn February 2022, we paid quarterly cash distributions of available cash as determined by the board$42.4 million, of directors of our general partner in accordance with the terms and provisions of our Prior Partnership Agreement. Pursuantwhich $33.8 million were paid to the IDR Restructuring Transaction on August 13, 2020, the general partner will no longer receive any cash distributions.Delek Holdings. In February 2021, we paid quarterly cash distributions of $39.5 million, of which $31.6 million were paid to Delek Holdings. In February 2020, we paid quarterly cash distributions of $30.6 million, of which $22.6 million were paid to Delek Holdings and our general partner. On April 29, 2021,25, 2022, our board of directors declared a quarterly cash distribution totaling $40.0$42.6 million, based on the available cash as of the date of determination, for the end of the first quarter of 2021,2022, payable on May 14, 2021,12, 2022, of which $32.0$33.6 million is expected to be paid to Delek Holdings.

We generate revenue by charging fees for gathering, transporting, offloading and storing crude oil; for storing intermediate products and feed stocks; for distributing, transporting and storing refined products; for marketing refined products output of Delek Holdings' Tyler and Big Spring refineries; and for wholesale marketing in the West Texas area. A significant portion of our revenue is derived from long-term commercial agreements with Delek Holdings, which provide for annual fee adjustments for increases or decreases in the CPI, PPI or the FERC index (refer to Note 32 for a more detailed description of these agreements). In addition to the services we provide to Delek Holdings, we also generate substantial revenue from crude oil, intermediate and refined products transportation services for, and terminalling and marketing services to, third parties primarily in Texas, New Mexico, Tennessee and Arkansas. Certain of these services

The following table represents a disaggregation of revenue for each reportable segmentthe pipeline and transportation and wholesale marketing and terminalling segments for the periods indicated (in thousands):

Basic net income per unit applicable to limited partners is computed by dividing limited partners' interest in net income by the weighted-average number of outstanding common units. Prior to August 13, 2020, we had more than one class of participating securities and used the two class method to calculate the net income per unit applicable to the limited partners. The classes of participating units prior to August 13, 2020 consisted of limited partner units, general partner units and IDRs. Pursuant to the IDR Restructuring Transaction, the IDRs were eliminated and the 2% general partner economic interest was converted to a non-economic general partner interest. Effective August 13, 2020, the common limited partner units are the only participating security for cash distributions. Refer to Note 8 - Equity for a discussion of the elimination of the IDRs and conversion of the 2% general partner economic interest effective August 13, 2020.

Diluted net income per unit applicable to common limited partners includes the effects of potentially dilutive units on our common units. As of March 31, 2021,2022, the only potentially dilutive units outstanding consist of unvested phantom units.

Our distributions earned with respect to a given period are declared subsequent to quarter end. Therefore, the table below represents total cash distributions applicable to the period in which the distributions are earned. The expected date of distribution for the distributions earned during the period ended March 31, 20212022 is May 14, 2021. 12, 2022.

Payments made to our unitholders are determined in relation to actual distributions declared and are not based on the net income allocations used in the calculation of net income per unit. The calculation of net income per unit is as follows (dollars in thousands, except units and per unit amounts):

Inventories consisted of $1.9$1.8 million and $3.1$2.4 million of refined petroleum products as of March 31, 20212022 and December 31, 2020,2021, respectively, each of which are net of lower of cost or net realizable value reserve of a nominal amount. Inventory is stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. We recognize lower of cost or net realizable value charges as a component of cost of materials and other in the consolidated statements of income and comprehensive income.

DKL Credit Facility

On September 28, 2018, the Partnership entered into a third amended and restated senior secured revolving credit agreement (hereafter, the "DKL Credit Facility") with Fifth Third Bank ("Fifth Third"), as administrative agent, and a syndicate of lenders with total lender commitments of $850.0 million. The DKL Credit Facility contains a dual currency borrowing tranche that permits draw downs in U.S. or Canadian dollars. The DKL Credit Facility also contains an accordion feature whereby the Partnership can increase the size of the credit facility to an aggregate of $1.0 billion, subject to receiving increased or new commitments from lenders and the satisfaction of certain other conditions precedent.

The obligations under the DKL Credit Facility remain secured by first priority liens on substantially all of the Partnership's and its subsidiaries' tangible and intangible assets.

The applicable margin in each case and the fee payable for any unused revolving commitments vary based upon the Partnership's most recent total leverage ratio calculation delivered to the lenders, as called for and defined under the terms of the DKL Credit Facility. At March 31, 2021,2022, the weighted average interest rate for our borrowings under the facility was approximately 2.45%2.67%. Additionally, the DKL Credit Facility requires us to pay a leverage ratio dependent quarterly fee on the average unused revolving commitment. As of March 31, 2021,2022, this fee was 0.35%0.30% per year.

As of March 31, 2021,2022, we had $737.5$264.1 million of outstanding borrowings under the DKL Credit Facility, with 0no letters of credit in place. Unused credit commitments under the DKL Credit Facility as of March 31, 20212022 were $112.5$585.9 million.

6.750% Senior Notes Due 2025

On April 25, 2018, we made an offer to exchange the 2025 Notes and the related guarantees that were validly tendered and not validly withdrawn for an equal principal amount of exchange notes that are freely tradeable, as required under the terms of the original indenture. The terms of the exchange notes that were issued in May 2018 as a result of the exchange (also referred to as the "2025 Notes") are substantially identical to the terms of the original 2025 Notes.

As of March 31, 2021,2022, we had $250.0 million in outstanding principal amount of the 2025 Notes. As of March 31, 2021,2022, the effective interest rate related to the 2025 Notes was approximately 7.25%7.20%.

Outstanding borrowings under the 2025 Notes are net ofinclude deferred financing costs and debt discount of $3.1$2.3 million and $1.0$0.7 million, respectively, as of March 31, 2021,2022, and $3.3$2.5 million and $1.0$0.8 million, respectively, as of December 31, 2020.

We had 8,697,4689,162,504 common limited partner units held by the public outstanding as of March 31, 2021.2022. Additionally, as of March 31, 2021,2022, Delek Holdings owned an 80.0%78.9% limited partner interest in us, consisting of 34,745,86834,311,278 common limited partner units. Effective August 13, 2020, the Partnership closed on the IDR Restructuring Transaction, and contemporaneous with this transaction, Delek Holdings purchased a 5.2% ownership interest in our general partner from certain affiliates, who were also members of our general partner's management and board of directors, at fair market value. Delek Holdings now owns 100% of the outstanding ownership interest in our general partner. As part of this transaction, we expensed approximately $1.1 million of transaction costs.

In August 2020,On April 14, 2022, we filed a shelf registration statement with the SEC, which subsequently became effective, forwas declared on April 29, 2022, which provides the proposed re-sale or other disposition from timePartnership the ability to time by Delek Holdings ofoffer up to 14.0$200.0 million of our common limited partner units. Asunits from time to time and through one or more methods of March 31,distribution, subject to market conditions and our capital needs.

There were noThe table below summarizes the changes in the number of common limited partner units outstanding from December 31, 20202021 through March 31, 2021.2022.

Issuance of Additional Securities

Our Partnership Agreement authorizes us to issue an unlimited number of additional partnership securities for the consideration and on the terms and conditions determined by our general partner without the approval of the unitholders. Costs associated with the issuance of securities are allocated to all unitholders' capital accounts based on their ownership interest at the time of issuance.

Our Partnership Agreement sets forth the calculation to be used to determine the amount and priority of available cash distributions that our limited partner unitholders will receive. The cash distributions for periods before August 13, 2020 include distributions to the 2% general partner interest which was converted to a non-economic general partner interest and IDRs which were permanently eliminated. Our distributions earned with respect to a given period are declared subsequent to quarter end.