UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	September 30, 2021

or

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from                      to

Commission file number 001-35721

DELEK LOGISTICS PARTNERS, LP

(Exact name of registrant as specified in its charter)

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)

(615) 771-6701

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Units Representing Limited Partnership Interests	DKL	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☑ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

At October 29, 2021, there were 43,459,063 common limited partner units outstanding.

Table of Contents

Delek Logistics Partners, LP

Quarterly Report on Form 10-Q

For the Quarterly Period Ended September 30, 2021

PART I. FINANCIAL INFORMATION				PART II. OTHER INFORMATION
3	Item 1. Financial Statements (unaudited)			51	Item 1. Legal Proceedings
	3	Condensed Consolidated Balance Sheets
	4	Condensed Consolidated Statements of Income and Comprehensive Income		51	Item 1A. Risk Factors
	6	Condensed Consolidated Statements of Partner's Equity (Deficit)
	5	Condensed Consolidated Statements of Cash Flows		51	Item 6. Exhibits
	7	Notes to Condensed Consolidated Financial Statements
		7	Note 1 - Organization and Basis of Presentation	52	Signatures
		8	Note 2 - Acquisitions
		9	Note 3 - Related Party Transactions
		12	Note 4 - Revenues
		13	Note 5 - Net Income Per Unit
		14	Note 6 - Inventory
		14	Note 7 - Long-Term Obligations
		16	Note 8 - Equity
		18	Note 9 - Equity Based Compensation
		18	Note 10 - Equity Method Investments
		19	Note 11 - Segments
		21	Note 12 - Income Taxes
		21	Note 13 - Commitments and Contingencies
		22	Note 14 - Leases
		23	Note 15 - Subsequent Events
24	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	35	Summary of Financial and Other Information
	37	Results of Operations
		37	Consolidated
		40	Pipelines and Transportation
		43	Wholesale Marketing and Terminalling
	46	Liquidity and Capital Resources
50	Item 3. Quantitative and Qualitative Disclosures about Market Risk
50	Item 4. Controls and Procedures

2 |

Financial Statements

Part I - FINANCIAL INFORMATION

Item 1. Financial Statements

Delek Logistics Partners, LP

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except unit and per unit data)

	September 30, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	4,864	$	4,243
Accounts receivable	18,421		15,676
Accounts receivable from related parties	—		5,932
Inventory	2,222		3,127
Other current assets	1,081		331
Total current assets	26,588		29,309
Property, plant and equipment:
Property, plant and equipment	704,905		692,282
Less: accumulated depreciation	(256,696)		(227,470)
Property, plant and equipment, net	448,209		464,812
Equity method investments	251,919		253,675
Operating lease right-of-use assets	22,911		24,199
Goodwill	12,203		12,203
Marketing contract intangible, net	118,380		123,788
Rights-of-way	37,062		36,316
Other non-current assets	13,271		12,115
Total assets	$	930,543	$	956,417
LIABILITIES AND DEFICIT
Current liabilities:
Accounts payable	$	7,441	$	6,659
Accounts payable to related parties	44,574		—
Interest payable	17,037		2,452
Excise and other taxes payable	3,798		4,969
Current portion of operating lease liabilities	7,364		8,691
Accrued expenses and other current liabilities	7,830		5,529
Total current liabilities	88,044		28,300
Non-current liabilities:
Long-term debt	901,404		992,291
Asset retirement obligations	6,361		6,015
Operating lease liabilities, net of current portion	15,489		15,418
Other non-current liabilities	23,998		22,694
Total non-current liabilities	947,252		1,036,418
Equity (Deficit):
Common unitholders - public; 8,713,195 units issued and outstanding at September 30, 2021 (8,697,468 at December 31, 2020)	165,281		164,614
Common unitholders - Delek Holdings; 34,745,868 units issued and outstanding at September 30, 2021 (34,745,868 at December 31, 2020)	(270,034)		(272,915)
Total deficit	(104,753)		(108,301)
Total liabilities and deficit	$	930,543	$	956,417

See accompanying notes to the condensed consolidated financial statements

3 |

Financial Statements

Delek Logistics Partners, LP

Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited)

(in thousands, except unit and per unit data)

	Three months ended				Nine months ended
	September 30,				September 30,
	2021		2020		2021		2020
Net revenues:
Affiliates (1)	$	123,519	$	95,410	$	308,435	$	289,739
Third party	66,108		46,858		202,583		133,567
Net revenues	189,627		142,268		511,018		423,306
Cost of sales:
Cost of materials and other	105,129		60,692		274,995		205,877
Operating expenses (excluding depreciation and amortization presented below)	16,830		13,694		45,201		39,271
Depreciation and amortization	9,666		8,931		29,393		22,957
Total cost of sales	131,625		83,317		349,589		268,105
Operating expenses related to wholesale business (excluding depreciation and amortization presented below)	515		536		1,741		2,152
General and administrative expenses	6,141		6,122		17,018		16,973
Depreciation and amortization	490		528		1,469		1,495
Other operating expense (income), net	273		—		54		(107)
Total operating costs and expenses	139,044		90,503		369,871		288,618
Operating income	50,583		51,765		141,147		134,688
Interest expense, net	14,529		10,360		35,924		32,854
Income from equity method investments	(7,261)		(4,860)		(17,952)		(16,875)
Other (income) expense, net	(115)		105		(118)		103
Total non-operating expenses, net	7,153		5,605		17,854		16,082
Income before income tax (benefit) expense	43,430		46,160		123,293		118,606
Income tax (benefit) expense	(194)		(168)		156		67
Net income attributable to partners	$	43,624	$	46,328	$	123,137	$	118,539
Comprehensive income attributable to partners	$	43,624	$	46,328	$	123,137	$	118,539
Less: General partner's interest in net income, including incentive distribution rights (2)	—		—		—		18,724
Limited partners' interest in net income	$	43,624	$	46,328	$	123,137	$	99,815
Net income per limited partner unit:
Common units - basic	$	1.00	$	1.26	$	2.83	$	3.30
Common units - diluted	$	1.00	$	1.26	$	2.83	$	3.30
Weighted average limited partner units outstanding:
Common units - basic	43,454,535		36,889,761		43,447,739		30,290,051
Common units - diluted	43,468,289		36,894,043		43,457,857		30,292,261
Cash distributions per limited partner unit	$	0.950	$	0.905	$	3.800	$	2.695

(1)    See Note 3 for a description of our material affiliate revenue transactions.

(2)    See Note 3 for a description of the IDR Restructuring Transaction.

See accompanying notes to the condensed consolidated financial statements

4 |

Financial Statements

Delek Logistics Partners, LP

Condensed Consolidated Statements of Partners' Equity (Deficit) (Unaudited)

(in thousands)

	Common - Public		Common - Delek Holdings		Total
Balance at June 30, 2021	$	164,679	$	(272,525)	$	(107,846)
Cash distributions (1)	(8,237)		(32,661)		(40,898)
Net income attributable to partners	8,745		34,879		43,624
Other	94		273		367
Balance at September 30, 2021	$	165,281	$	(270,034)	$	(104,753)

(1) Cash distributions include a nominal amount related to distribution equivalents on vested phantom units for the three months ended September 30, 2021.

	Common - Public		Common - Delek Holdings		General Partner		Total
Balance at June 30, 2020	$	160,870	$	(235,961)	$	(3,224)	$	(78,315)
Cash distributions	(7,819)		(18,671)		(9,478)		(35,968)
Net income attributable to partners	11,258		35,070		—		46,328
Distribution to general partner for conversion of its economic interest and IDR elimination	—		—		(45,000)		(45,000)
Non-cash conversion of general partner's economic interest and IDR elimination	—		(57,702)		57,702		—
Sponsor Contribution of fixed assets	—		1,378		—		1,378
Other	4		119		—		123
Balance at September 30, 2020	$	164,313	$	(275,767)	$	—	$	(111,454)

	Common - Public		Common - Delek Holdings		Total
Balance at December 31, 2020	$	164,614	$	(272,915)	$	(108,301)
Cash distributions	(24,153)		(96,246)		(120,399)
Net income attributable to partners	24,673		98,464		123,137
Other	147		663		810
Balance at September 30, 2021	$	165,281	$	(270,034)	$	(104,753)

	Common - Public		Common - Delek Holdings		General Partner		Total
Balance at December 31, 2019	$	164,436	$	(310,513)	$	(5,042)	$	(151,119)
Cash distributions (2)	(23,653)		(46,220)		(27,635)		(97,508)
General partner units issued to maintain 2% interest	—		—		10		10
Net income attributable to partners	28,172		71,642		18,725		118,539
Delek Holdings unit purchases	(4,979)		4,979		—		—
Issuance of units in connection with the Big Spring Gathering Assets Acquisition	—		107,323		2,190		109,513
Distribution to Delek Holdings for Trucking Assets Acquisition	—		(46,607)		(951)		(47,558)
Distribution to general partner for conversion of its economic interest and IDR elimination	—		—		(45,000)		(45,000)
Non-cash conversion of general partner's economic interest and IDR elimination	—		(57,702)		57,702		—
Sponsor Contribution of fixed assets	—		1,378		—		1,378
Other	337		(47)		1		291
Balance at September 30, 2020	$	164,313	$	(275,767)	$	—	$	(111,454)

(2) Cash distributions include $0.1 million and a nominal amount related to distribution equivalents on vested phantom units for the nine months ended September 30, 2021 and 2020, respectively.

See accompanying notes to the condensed consolidated financial statements

5 |

Financial Statements

Delek Logistics Partners, LP

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

	Nine Months Ended September 30,
	2021		2020
Cash flows from operating activities:
Net income	$	123,137	$	118,539
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	30,862		24,452
Non-cash lease expense	6,967		2,236
Amortization of customer contract intangible assets	5,408		5,408
Amortization of deferred revenue	(1,475)		(1,418)
Amortization of deferred financing costs and debt discount	2,169		1,786
Income from equity method investments	(17,952)		(16,875)
Dividends from equity method investments	14,849		17,572
Other non-cash adjustments	1,413		1,495
Changes in assets and liabilities:
Accounts receivable	(2,745)		(4,268)
Inventories and other current assets	109		12,714
Accounts payable and other current liabilities	12,323		(7,638)
Accounts receivable/payable to related parties	47,483		(19,002)
Non-current assets and liabilities, net	(272)		(347)
Net cash provided by operating activities	222,276		134,654
Cash flows from investing activities:
Asset acquisitions from Delek Holdings, net of assumed liabilities	—		(100,527)
Purchases of property, plant and equipment	(12,352)		(6,918)
Proceeds from sales of property, plant and equipment	275		107
Purchases of intangible assets	(746)		—
Distributions from equity method investments	6,245		2,723
Equity method investment contributions	(1,393)		(11,804)
Net cash used in investing activities	(7,971)		(116,419)
Cash flows from financing activities:
Proceeds from issuance of additional units to maintain 2% General Partner interest	—		10
Distributions to general partner	—		(27,635)
Distributions to common unitholders - public	(24,153)		(23,653)
Distributions to common unitholders - Delek Holdings	(96,246)		(46,220)
Distributions to Delek Holdings unitholders and general partner related to Trucking Assets Acquisition	—		(47,558)
Distribution to general partner for conversion of its interest and IDR elimination	—		(45,000)
Proceeds from revolving credit facility	236,000		515,900
Payments on revolving credit facility	(721,700)		(343,600)
Proceeds from issuance of senior notes	400,000		—
Deferred financing costs paid in connection with debt issuances	(6,216)		—
Payments on financing lease liabilities	(1,369)		—
Net cash used in financing activities	(213,684)		(17,756)
Net increase in cash and cash equivalents	621		479
Cash and cash equivalents at the beginning of the period	4,243		5,545
Cash and cash equivalents at the end of the period	$	4,864	$	6,024
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	19,170	$	26,895
Income taxes	$	—	$	141
Non-cash investing activities:
Increase (decrease) in accrued capital expenditures and other	$	1,638	$	(948)
Equity issuance to Delek Holdings unitholders in connection with Big Spring Gathering Assets Acquisition	$	—	$	109,513
Non-cash financing activities:
Non-cash lease liability arising from obtaining right of use assets during the period	$	8,750	$	16,644
Sponsor contribution of property, plant and equipment	$	—	$	1,378

See accompanying notes to the condensed consolidated financial statements

6 |

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1 - Organization and Basis of Presentation

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, the Partnership closed the transaction contemplated by a definitive exchange agreement with the general partner to eliminate all of the incentive distribution rights ("IDRs") held by the general partner and convert the 2% general partner interest into a non-economic general partner interest, such transaction the "IDR Restructuring Transaction."

Effective May 1, 2020, the Partnership, through its wholly-owned subsidiary DKL Transportation, LLC, acquired Delek Trucking, LLC consisting of certain leased and owned tractors and trailers and related assets (the "Trucking Assets") from Delek Holdings, such transaction the "Trucking Assets Acquisition."

In addition, effective March 31, 2020, the Partnership, through its wholly-owned subsidiary DKL Permian Gathering, LLC, acquired from Delek Holdings a crude oil gathering system and certain related assets, located in Howard, Borden and Martin Counties, Texas (the "Big Spring Gathering Assets"), such transaction the "Big Spring Gathering Assets Acquisition."

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, 2020 (our "Annual Report on Form 10-K"), filed with the U.S. Securities and Exchange Commission (the "SEC") on March 1, 2021 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, 2020 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 immaterial reclassifications have been made to prior period presentation in order to conform to the current period presentation.

Risks and Uncertainties Arising from the COVID-19 Pandemic

U.S. economic activity continued on a recovery trend during the quarter ended September 30, 2021. The spike in number of new cases due to the COVID-19 delta variant did not slow down the economic recovery. Towards the end of third quarter the trend started to show a reduction in the number of new COVID-19 cases and in the number of COVID-19 related hospitalizations. However, we remain subject to heightened levels of uncertainty related to the on-going impact of the COVID-19 outbreak that developed into a pandemic in March 2020 (the “COVID-19 Pandemic” or the “Pandemic”), and the spread of new variants of the virus. Some of the restrictions imposed in the prior year to prevent its spread have been eased and the government vaccination campaigns continue to yield positive results in terms of increase in the number of people who have been inoculated, a critical requirement to continue removing restrictions. Additional government measures to curb the spread of the virus include the proposed government mandates for employers to require mandatory vaccination or COVID-19 weekly testing for employees.

Compared to the prior year, the economic recovery trends in the three and nine months ended September 30, 2021 included a resumption of flights by major airlines and increased motor vehicle use. This has in turn resulted in increased demand and market prices for crude oil and other products, particularly refined petroleum products from which we receive revenue for transporting and storing. We also saw an increase in demand and sales volumes in our wholesale marketing business during the three and nine months ended September 30, 2021. Nonetheless, there remains continued uncertainty about the duration and future impact of the COVID-19 Pandemic.

Our business model, which includes executing minimum volume commitment contracts with our major customers, to an extent, cushioned us from the impact of the COVID-19 Pandemic in 2020 and during the three and nine months ended September 30, 2021. Uncertainties related to the impact of the COVID-19 Pandemic and other events exist that could impact our future results of operations and financial position, the nature of which and the extent to which are currently unknown. To the extent these uncertainties have been identified and are believed to have an impact on our current period results of operations or financial position based on the requirements for assessing such

7 |

Notes to Condensed Consolidated Financial Statements (Unaudited)

financial statement impact under GAAP, we have considered them in the preparation of our financial statements as of and for the three and nine months ended September 30, 2021.

New Accounting Pronouncements Adopted During 2021

ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815

In January 2020, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Codification ("ASU") 2020-01 which is intended to clarify interactions between the guidance to account for certain equity securities under Topics 321, 323 and 815, and improve current GAAP by reducing diversity in practice and increasing comparability of accounting. The pronouncement is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020, and early adoption is permitted. We adopted this guidance prospectively on January 1, 2021. The adoption of this guidance did not have a material impact on our business, financial condition or results of operations.

Accounting Pronouncements Not Yet Adopted

ASU No. 2021-05, Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments

In July 2021, the FASB issued an amendment which is intended to provide lease classification guidance for Lessors on how to classify and account for a lease with variable lease payments that do not depend on a reference index or a rate. The amendments are effective for fiscal years beginning after December 15, 2021, for all entities, and interim periods within those fiscal years for public business entities and interim periods within fiscal years beginning after December 15, 2022, for all other entities. The Partnership is evaluating the impact of this guidance but does not believe this new guidance will have a material impact on its condensed consolidated financial statements and related disclosures.

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.

Note 2 - Acquisitions

Trucking Assets Acquisition

Effective May 1, 2020, the Partnership, through its wholly-owned subsidiary DKL Transportation, LLC, acquired Delek Trucking, LLC consisting of certain leased and owned tractors and trailers and related assets from Delek Holdings. See our Annual Report on Form 10-K for further information. The total consideration was approximately $48.0 million in cash. We financed this acquisition with a combination of cash on hand and borrowings under the DKL Credit Facility (as defined in Note 7).

The Trucking Assets are recorded in our pipelines and transportation segment and include approximately 150 trucks and trailers, which are primarily leased or owned, respectively.

In connection with the closing of the transaction, Delek Holdings, the Partnership and various of their respective subsidiaries entered into a Transportation Services Agreement (the “Trucking Assets TSA Agreement”). Under the Trucking Assets TSA Agreement, the Partnership will gather, coordinate pickup of, transport and deliver petroleum products for Delek Holdings, as well as provide ancillary services as requested. The transaction and related agreements were approved by the Conflicts Committee of the Board of Directors of the Partnership's general partner, which is comprised solely of independent directors. See Note 3 for more detailed descriptions of these agreements.

The Trucking Assets Acquisition was considered a transaction between entities under common control. Accordingly, the Trucking Assets were recorded at amounts based on Delek Holdings' historical carrying value as of the acquisition date. The carrying value of the Trucking Assets as of the acquisition date was $13.3 million, consisting of $0.5 million of owned assets and a $12.8 million right of use asset for leased assets. The right of use asset offsets with an equivalent operating lease liability. Prior periods have not been recast as these assets do not constitute a business in accordance with Accounting Standard Update 2017-01, Clarifying the Definition of a Business ("ASU 2017-01"). We capitalized approximately $0.3 million of acquisition costs related to the Trucking Assets Acquisition.

8 |

Notes to Condensed Consolidated Financial Statements (Unaudited)

Big Spring Gathering Assets Acquisition

Effective March 31, 2020, the Partnership, through its wholly-owned subsidiary DKL Permian Gathering, LLC, acquired the Big Spring Gathering Assets from Delek Holdings, located in Howard, Borden and Martin Counties, Texas. See our Annual Report on Form 10-K for further information. The total consideration was comprised of $100.0 million in cash and 5.0 million common units representing limited partner interest in us. We financed the cash component of this acquisition with borrowings from the DKL Credit Facility (as defined in Note 7).

The Big Spring Gathering Assets are recorded in our pipelines and transportation segment and include:

•Crude oil pipelines;

•Approximately 200 miles of gathering systems;

•Approximately 65 Tank battery connections;

•Terminals (total storage of approximately 650,000 bbls); and

•Applicable rights-of-way.

In connection with the closing of the transaction, Delek Holdings, the Partnership and various of their respective subsidiaries entered into a Throughput and Deficiency Agreement (the “Big Spring T&D Agreement”). Under the Big Spring T&D Agreement, the Partnership will operate and maintain the Big Spring Gathering Assets connecting Delek Holdings' interests in and to certain crude oil with the Partnership's Big Spring, Texas terminal and provide gathering, transportation and other related services with respect to any and all crude produced from shipper’s and certain other producers’ respective interests for delivery at the Big Spring Terminal. The transaction and related agreements were approved by the Conflicts Committee of the Board of Directors of the Partnership's general partner, which is comprised solely of independent directors. See Note 3 for more detailed descriptions of these agreements.

The Big Spring Gathering Assets Acquisition was considered a transaction between entities under common control. Accordingly, the Big Spring Gathering Assets were recorded at amounts based on Delek Holdings' historical carrying value as of the acquisition date. The carrying value of the Big Spring Gathering Assets as of the acquisition date was $209.5 million. Pursuant to the common control guidance, the 5.0 million units issued (which had a closing market price of $9.10 per unit on the transaction date) were recorded in equity at $109.5 million, representing the net carrying value of the Big Spring Gathering Assets purchased of $209.5 million less the $100.0 million cash consideration. Prior periods have not been recast as these assets do not constitute a business in accordance with ASU 2017-01. We capitalized approximately $0.7 million of acquisition costs related to the Big Spring Gathering Assets Acquisition.

Note 3 - Related Party Transactions

Commercial Agreements

The Partnership has a number of long-term, fee-based commercial agreements with Delek Holdings under which we provide various services, including crude oil gathering and crude oil, intermediate and refined products transportation and storage services, and marketing, terminalling and offloading services to Delek Holdings. Most of these agreements have an initial term ranging from five to ten years, which may be extended for various renewal terms at the option of Delek Holdings. In November 2017, Delek Holdings opted to renew certain of these agreements for subsequent five-year terms expiring in November 2022. In the case of our marketing agreement with Delek Holdings with respect to the Tyler Refinery, the initial term was extended through 2026. Effective fourth quarter of 2018, the term of certain of our agreements with Delek Holdings were further extended pursuant to the requirements of the amended and restated DKL Credit Facility (as defined in Note 7). The fees under each agreement are payable to us monthly by Delek Holdings or certain third parties to whom Delek Holdings has assigned certain of its rights and are generally subject to increase or decrease on July 1 of each year, by the amount of any change in various inflation-based indices, including the Federal Energy Regulatory Commission (the "FERC") oil pipeline index or various iterations of the consumer price index ("CPI") and the producer price index ("PPI"); provided, however, that in no event will the fees be adjusted below the amount initially set forth in the applicable agreement. In most circumstances, if Delek Holdings or the applicable third party assignee fails to meet or exceed the minimum volume or throughput commitment during any calendar quarter, Delek Holdings, and not any third party assignee, will be required to make a quarterly shortfall payment to us equal to the volume of the shortfall multiplied by the applicable fee, subject to certain exceptions as specified in the applicable agreement. Carry-over of any volumes or revenue in excess of such commitment to any subsequent quarter is not permitted.

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 to throughput or from 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

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Notes to Condensed Consolidated Financial Statements (Unaudited)

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 million to Delek Holdings for its provision of centralized corporate services to the Partnership.

Pursuant to the terms of the Omnibus Agreement, we are reimbursed by Delek Holdings for certain capital expenditures. There were no reimbursements by Delek Holdings during the three and nine months ended September 30, 2021. During the three and nine months ended September 30, 2020, we were reimbursed by Delek Holdings for certain capital expenditures of a nominal amount and $0.6 million, respectively. These amounts are recorded in other long-term liabilities and are amortized to revenue over the life of the underlying revenue agreement corresponding to the asset. Additionally, we are reimbursed or indemnified, as the case may be, for costs incurred in excess of certain amounts related to certain asset failures, pursuant to the terms of the Omnibus Agreement. As of September 30, 2021, there was no receivable from related parties for these matters. These reimbursements are recorded as reductions to operating expense. We were reimbursed nominal amounts for these matters in each of the three and nine month periods ended September 30, 2021 and 2020.

Other Transactions

The Partnership manages long-term capital projects on behalf of Delek Holdings pursuant to a construction management and operating agreement (the "DPG Management Agreement") for the construction of gathering systems in the Permian Basin. The majority of the gathering systems 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 $1.2 million for the three and nine months ended September 30, 2021, respectively, and $0.4 million and $1.6 million for the three and nine months ended September 30, 2020, respectively, 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.

Unregistered Sale of Equity Securities

In connection with the Partnership's issuance of the common limited partner units under the Big Spring Gathering Assets Acquisition and in accordance with the Partnership's First Amended and Restated Agreement of Limited Partnership, as amended (the "Prior Partnership Agreement", as amended and restated by the Partnership's Second Amended and Restated Agreement of Limited Partnership (the "Partnership Agreement")), the Partnership issued general partner units to the general partner in an amount necessary to maintain its 2% general partner interest as defined in the Prior Partnership Agreement. The sale and issuance of the Additional Units (as defined below) and such general partner units in connection with the Big Spring Gathering Assets Acquisition is exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.

Additionally, in March 2020, Delek Marketing & Supply, LLC ("Delek Marketing"), a wholly owned subsidiary of Delek Holdings, repurchased 451,822 common limited partner units from an unaffiliated investor pursuant to a Common Unit Purchase Agreement between Delek Marketing and such investor. The purchase price of the units amounted to approximately $5.0 million. As a result of the transaction, Delek Holdings' ownership in our outstanding limited partner units increased to 64.5% from 62.6%. Delek Holdings' ownership in our common limited partner units was further increased to 70.5% as a result of the issuance of 5.0 million common limited partner units (the “Additional Units”) in connection with the Big Spring Gathering Assets Acquisition described above.

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Notes to Condensed Consolidated Financial Statements (Unaudited)

In August 2020, Delek Holdings' ownership in our common limited partner units was further increased to approximately 80.0% in connection with the IDR Restructuring Transaction, where the Partnership issued 14.0 million of the Partnership's newly issued common limited partner units to Delek Holdings.

Amendment No. 2 to the First Amended and Restated Agreement of Limited Partnership of Delek Logistics Partners, LP

On March 31, 2020, in connection with the completion of the Big Spring Gathering Assets Acquisition, the board of directors of the general partner adopted Amendment No. 2 (“Amendment No. 2”) to the Prior Partnership Agreement, effective upon adoption. Amendment No. 2 amended the Prior Partnership Agreement to provide for a waiver of distributions in respect of the IDRs for General Partner Additional Units ("GP Additional Units") associated with the 5.0 million Additional Units for at least two years, through at least the distribution for the quarter ending March 31, 2022 (the “IDR Waiver”). The IDR Waiver essentially reduced the distribution made to the holders of the IDRs during this period, as the holders would not receive a share of the distribution made on the GP Additional Units. The IDRs were eliminated in the IDR Restructuring Transaction on August 13, 2020.

Conversion of GP Economic Interest and Elimination of IDRs

On August 13, 2020, we closed the transaction contemplated by a definitive exchange agreement with Delek Holdings to eliminate all of the IDRs held by the general partner and convert the 2% general partner economic interest into a non-economic general partner interest, all in exchange for 14.0 million of the Partnership's newly issued common limited partner units and $45.0 million cash. Contemporaneously, 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. Delek Holdings now owns a 100% interest in the general partner and owns approximately 34.7 million common limited partner units, representing approximately 80% of the Partnership's outstanding common limited partner units. To implement the transaction, our Prior Partnership Agreement was amended and restated.

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):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues	$	123,519	$	95,410	$	308,435	$	289,739
Purchases from Affiliates	$	89,852	$	45,186	$	229,810	$	155,679
Operating and maintenance expenses	$	10,656	$	10,330	$	30,217	$	33,397
General and administrative expenses	$	2,681	$	3,250	$	6,794	$	9,322

Quarterly Cash Distributions

Prior to August 13, 2020, our common and general partner unitholders and the holders of IDRs were entitled to receive quarterly distributions of available cash as determined by the board of directors of our general partner in accordance with the terms and provisions of our Prior Partnership Agreement. Pursuant to the IDR Restructuring Transaction on August 13, 2020, the general partner will no longer receive any cash distributions. In February, May and August 2021, we paid quarterly cash distributions of $39.5 million, $40.0 million and $40.8 million, respectively, of which $31.6 million, $32.0 million and $32.7 million, respectively, were paid to Delek Holdings. In February, May and August 2020, we paid quarterly cash distributions of $30.6 million, $30.9 million and $36.0 million, respectively, of which $22.6 million, $23.2 million and $28.1 million, respectively, were paid to Delek Holdings and our general partner. On October 26, 2021, our board of directors declared a quarterly cash distribution totaling $41.3 million, based on the available cash as of the date of determination, for the end of the third quarter of 2021, payable on November 10, 2021, of which $33.0 million is expected to be paid to Delek Holdings.

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Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 4 - Revenues

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 3 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 are provided pursuant to contractual agreements with third parties. Payment terms require customers to pay shortly after delivery and do not contain significant financing components.

The majority of our commercial agreements with Delek Holdings meet the definition of a lease because: (1) performance of the contracts is dependent on specified property, plant or equipment and (2) it is remote that one or more parties other than Delek Holdings will take more than a minor amount of the output associated with the specified property, plant or equipment. As part of our adoption of ASC 842, Leases ("ASC 842"), we applied the permitted practical expedient to not separate lease and non-lease components under the predominance principle to designated asset classes associated with the provision of logistics services. We have determined that the predominant component of the related agreements currently in effect is the lease component. Therefore, the combined component is accounted for under the applicable lease accounting guidance. Of our $448.2 million net property, plant, and equipment balance as of September 30, 2021, $428.0 million is subject to operating leases under our commercial agreements. These agreements do not include options for the lessee to purchase our leasing equipment, nor do they include any material residual value guarantees or material restrictive covenants.

The following table represents a disaggregation of revenue for each reportable segment for the periods indicated (in thousands):

	Three Months Ended September 30, 2021
	Pipelines and Transportation		Wholesale Marketing and Terminalling		Consolidated
Service Revenue - Third Party	$	5,323	$	139	$	5,462
Service Revenue - Affiliate	4,484		9,241		13,725
Product Revenue - Third Party	—		60,645		60,645
Product Revenue - Affiliate	—		34,325		34,325
Lease Revenue - Affiliate (1)	66,395		9,075		75,470
Total Revenue	$	76,202	$	113,425	$	189,627

(1) Net of $1.8 million of amortization expense for the three months ended September 30, 2021, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.

	Nine Months Ended September 30, 2021
	Pipelines and Transportation		Wholesale Marketing and Terminalling		Consolidated
Service Revenue - Third Party	$	12,021	$	358	$	12,379
Service Revenue - Affiliate	9,505		25,877		35,382
Product Revenue - Third Party	—		190,204		190,204
Product Revenue - Affiliate	—		54,453		54,453
Lease Revenue - Affiliate (1)	190,086		28,514		218,600
Total Revenue	$	211,612	$	299,406	$	511,018

(1) Net of $5.4 million of amortization expense for the nine months ended September 30, 2021, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.

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Notes to Condensed Consolidated Financial Statements (Unaudited)

	Three Months Ended September 30, 2020
	Pipelines and Transportation		Wholesale Marketing and Terminalling		Consolidated
Service Revenue - Third Party	$	3,035	$	163	$	3,198
Service Revenue - Affiliate	5,633		8,708		14,341
Product Revenue - Third Party	—		43,660		43,660
Product Revenue - Affiliate	—		5,844		5,844
Lease Revenue - Affiliate (1)	62,811		12,414		75,225
Total Revenue	$	71,479	$	70,789	$	142,268

(1) Net of $1.8 million of amortization expense for the three months ended September 30, 2020, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.

	Nine Months Ended September 30, 2020
	Pipelines and Transportation		Wholesale Marketing and Terminalling		Consolidated
Service Revenue - Third Party	$	14,587	$	502	$	15,089
Service Revenue - Affiliate	13,848		24,500		38,348
Product Revenue - Third Party	—		118,478		118,478
Product Revenue - Affiliate	—		64,067		64,067
Lease Revenue - Affiliate (1)	154,437		32,887		187,324
Total Revenue	$	182,872	$	240,434	$	423,306

(1) Net of $5.4 million of amortization expense for the nine months ended September 30, 2020, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.

As of September 30, 2021, we expect to recognize $1.5 billion in future lease revenues, for periods up to financial year 2030, related to our unfulfilled performance obligations pertaining to the minimum volume commitments and capacity utilization under the non-cancelable terms of our commercial agreements with Delek Holdings. Most of these agreements have an initial term ranging from five to ten years, which may be extended for various renewal terms. We disclose information about remaining performance obligations that have original expected durations of greater than one year.

Our unfulfilled performance obligations as of September 30, 2021 were as follows (in thousands):

Remainder of 2021	$	68,285
2022	272,345
2023	266,395
2024	190,134
2025 and thereafter	732,925
Total expected revenue on remaining performance obligations	$	1,530,084

Note 5 - Net Income Per Unit

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 3 for additional details.

The two-class method was based on the weighted-average number of common units outstanding during the period. Basic net income per unit applicable to limited partners was computed by dividing limited partners’ interest in net income, after deducting our general partner’s 2% interest and IDRs, by the weighted-average number of outstanding common units. Our net income was allocated to our general partner and limited partners in accordance with their respective partnership percentages after giving effect to priority income allocations for IDRs, which were held by our general partner pursuant to our Prior Partnership Agreement. Earnings in excess of distributions were

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Notes to Condensed Consolidated Financial Statements (Unaudited)

allocated to our general partner and limited partners based on their respective ownership interests. The IDRs were paid following the close of each quarter.

Pursuant to Amendment No. 2 to the Prior Partnership Agreement, an agreement was reached for a waiver of distributions in respect of the IDRs for the GP Additional Units associated with the 5.0 million Additional Units issued in connection with the Big Spring Gathering Assets Acquisition for at least two years, through at least the distribution for the quarter ending March 31, 2022. Refer to Note 3 for additional details.

Diluted net income per unit applicable to common limited partners includes the effects of potentially dilutive units on our common units. As of September 30, 2021, 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 September 30, 2021 is November 10, 2021. 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):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income attributable to partners	$	43,624	$	46,328	$	123,137	$	118,539
Less: General partner's distribution (including IDRs) (1)	—		—		—		18,618
Less: Limited partners' distribution	41,286		39,307		122,100		87,536
Earnings in excess (deficit) of distributions	$	2,338	$	7,021	$	1,037	$	12,385
General partner's earnings:
Distributions (including IDRs) (1)	$	—	$	—	$	—	$	18,618
Allocation of earnings in excess (deficit) of distributions	—		—		—		106
Total general partner's earnings	$	—	$	—	$	—	$	18,724
Limited partners' earnings on common units:
Distributions	$	41,286	$	39,307	$	122,100	$	87,536
Allocation of earnings in excess (deficit) of distributions	2,338		7,021		1,037		12,279
Total limited partners' earnings on common units	$	43,624	$	46,328	$	123,137	$	99,815
Weighted average limited partner units outstanding:
Common units - basic	43,454,535		36,889,761		43,447,739		30,290,051
Common units - diluted	43,468,289		36,894,043		43,457,857		30,292,261
Net income per limited partner unit:
Common units - basic	$	1.00	$	1.26	$	2.83	$	3.30
Common units - diluted (2)	$	1.00	$	1.26	$	2.83	$	3.30

(1) Prior to August 13, 2020, general partner distributions (including IDRs) consisted of the 2.0% general partner interest and IDRs, which represented the right of the general partner to receive increasing percentages of quarterly distributions of available cash from operating surplus in excess of 0.43125 per unit per quarter. In connection with the IDR Restructuring Transaction on August 13, 2020, the IDRs were eliminated and the general partner interest became a non-economic general partner interest.

(2) There were no outstanding common units excluded from the diluted earnings per unit calculation for the three and nine months ended September 30, 2021 and 2020.

Note 6 - Inventory

Inventories consisted of $2.2 million and $3.1 million of refined petroleum products as of September 30, 2021 and December 31, 2020, 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.

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Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 7 - Long-Term Obligations

7.125% Senior Notes due 2028

On May 24, 2021, the Partnership and our wholly owned subsidiary Delek Logistics Finance Corp. ("Finance Corp." and together with the Partnership, the "Issuers") issued $400.0 million in aggregate principal amount of 7.125% senior notes due 2028 (the "2028 Notes") at par, pursuant to an indenture with U.S. Bank, National Association as trustee. The 2028 Notes are general unsecured senior obligations of the Issuers and are unconditionally guaranteed jointly and severally on a senior unsecured basis by the Partnership's subsidiaries other than Finance Corp., and will be unconditionally guaranteed on the same basis by certain of the Partnership’s future subsidiaries. The 2028 Notes rank equal in right of payment with all existing and future senior indebtedness of the Issuers, and senior in right payment to any future subordinated indebtedness of the Issuers. The 2028 Notes will mature on June 1, 2028, and interest on the 2028 Notes is payable semi-annually in arrears on each June 1 and December 1, commencing December 1, 2021.

At any time prior to June 1, 2024, the Issuers may redeem up to 35% of the aggregate principal amount of the 2028 Notes with the net cash proceeds of one or more equity offerings by the Partnership at a redemption price of 107.125% of the redeemed principal amount, plus accrued and unpaid interest, if any, subject to certain conditions and limitations. Prior to June 1, 2024, the Issuers may also redeem all or part of the 2028 Notes at a redemption price of the principal amount plus accrued and unpaid interest, if any, plus a "make whole" premium, subject to certain conditions and limitations. In addition, beginning on June 1, 2024, the Issuers may, subject to certain conditions and limitations, redeem all or part of the 2028 Notes, at a redemption price of 103.563% of the redeemed principal for the twelve-month period beginning on June 1, 2024, 101.781% for the twelve-month period beginning on June 1, 2025, and 100.00% beginning on June 1, 2026 and thereafter, plus accrued and unpaid interest, if any.

In the event of a change of control, accompanied or followed by a ratings downgrade within a certain period of time, subject to certain conditions and limitations, the Issuers will be obligated to make an offer for the purchase of the 2028 Notes from holders at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest.

As of September 30, 2021, we had $400.0 million in outstanding principal amount under the 2028 Notes, and the effective interest rate was 7.41%. Outstanding borrowings under the 2028 Notes are net of deferred financing costs amounting to $5.9 million as of September 30, 2021.

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.

In connection with the IDR Restructuring Transaction, the Partnership entered into a First Amendment to the DKL Credit Facility (the "First Amendment") which, among other things, permitted the exchange of the IDRs and the general partner interest in the Partnership for the non-economic general partner interest, the newly issued limited partner interests in the Partnership, plus $45.0 million in cash. The First Amendment also modified the total leverage and senior leverage ratios (as defined in the DKL Credit Facility) calculations to reduce the total funded debt (as defined in the DKL Credit Facility) component thereof by the total amount of unrestricted consolidated cash and cash equivalents on the balance sheet of the Partnership and its subsidiaries up to $20.0 million.

The DKL Credit Facility has a maturity date of September 28, 2023. Borrowings denominated in U.S. dollars bear interest at either a U.S. dollar prime rate, plus an applicable margin, or the LIBOR, plus an applicable margin, at the election of the borrowers. Borrowings denominated in Canadian dollars bear interest at either a Canadian dollar prime rate, plus an applicable margin, or the Canadian Dealer Offered Rate, plus an applicable margin, at the election of the borrowers.

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 September 30, 2021, the weighted average interest rate for our borrowings under the facility was approximately 2.62%. Additionally, the DKL Credit Facility requires us to pay a leverage ratio dependent quarterly fee on the average unused revolving commitment. As of September 30, 2021, this fee was 0.35% per year.

As of September 30, 2021, we had $260.9 million of outstanding borrowings under the DKL Credit Facility, with no letters of credit in place. Unused credit commitments under the DKL Credit Facility as of September 30, 2021 were $589.1 million.

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Notes to Condensed Consolidated Financial Statements (Unaudited)

6.750% Senior Notes Due 2025

On May 23, 2017, the Partnership and Delek Logistics Finance Corp., a Delaware corporation and a wholly-owned subsidiary of the Partnership (“Finance Corp.” and together with the Partnership, the “Issuers”), issued $250.0 million in aggregate principal amount of 6.75% senior notes due 2025 (the “2025 Notes”) at a discount. The 2025 Notes are general unsecured senior obligations of the Issuers. The 2025 Notes are unconditionally guaranteed jointly and severally on a senior unsecured basis by the Partnership's existing subsidiaries (other than Finance Corp., the "Guarantors") and will be unconditionally guaranteed on the same basis by certain of the Partnership’s future subsidiaries. The 2025 Notes rank equal in right of payment with all existing and future senior indebtedness of the Issuers, and senior in right of payment to any future subordinated indebtedness of the Issuers. Interest on the 2025 Notes is payable semi-annually in arrears on each May 15 and November 15.

The Issuers may, subject to certain conditions and limitations, redeem all or part of the 2025 Notes at a redemption price of 103.375% of the redeemed principal during the twelve-month period beginning on May 15, 2021, 101.688% for the twelve-month period beginning on May 15, 2022 and 100.00% beginning on May 15, 2023 and thereafter, plus accrued and unpaid interest, if any. In the event of a change of control, accompanied or followed by a ratings downgrade within a certain period of time, subject to certain conditions and limitations, the Issuers will be obligated to make an offer for the purchase of the 2025 Notes from holders at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest.

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 September 30, 2021, we had $250.0 million in outstanding principal amount of the 2025 Notes. As of September 30, 2021, the effective interest rate related to the 2025 Notes was approximately 7.21%.

Outstanding borrowings under the 2025 Notes are net of deferred financing costs and debt discount of $2.7 million and $0.9 million, respectively, as of September 30, 2021, and $3.3 million and $1.0 million, respectively, as of December 31, 2020.

Note 8 - Equity

We had 8,713,195 common limited partner units held by the public outstanding as of September 30, 2021. Additionally, as of September 30, 2021, Delek Holdings owned an 80.0% limited partner interest in us, consisting of 34,745,868 common limited partner units. Effective August 13, 2020, the Partnership closed on the IDR Restructuring Transaction. As part of this transaction, we expensed approximately $1.1 million of transaction costs. Refer to Note 3 for additional details.

In August 2020, we filed a shelf registration statement with the SEC, which subsequently became effective, for the proposed re-sale or other disposition from time to time by Delek Holdings of up to 14.0 million of our common limited partner units. As of September 30, 2021, Delek Holdings had not sold any securities under this shelf registration statement and we will not receive any proceeds from the sale of securities by Delek Holdings.

Equity Activity

The table below summarizes the changes in the number of limited partner units outstanding from December 31, 2020 through September 30, 2021.

	Common - Public	Common - Delek Holdings	Total
Balance at December 31, 2020	8,697,468	34,745,868	43,443,336
Unit-based compensation awards (1)	15,727	—	15,727
Balance at September 30, 2021	8,713,195	34,745,868	43,459,063

(1) Unit-based compensation awards are presented net of 3,237 units withheld for taxes as of September 30, 2021.

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.

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Notes to Condensed Consolidated Financial Statements (Unaudited)

Allocations of Net Income

Our Partnership Agreement contains provisions for the allocation of net income and loss to the unitholders. For purposes of maintaining partner capital accounts, the Partnership Agreement specifies that items of income and loss shall be allocated among the partners in accordance with their respective percentage interest. Prior to August 13, 2020, normal allocations were made according to percentage interests after giving effect to priority income allocations in an amount equal to incentive cash distributions allocated 100% to our general partner. Effective August 13, 2020, the IDRs were eliminated and the 2% general partner economic interest was converted to a non-economic general partner interest that no longer receives cash distributions. Refer to Note 3 for additional details.

The following table presents the allocation of the general partner's interest in net income (in thousands, except percentage of ownership interest):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income attributable to partners	$	43,624	$	46,328	$	123,137	$	118,539
Less: General partner's IDRs	—		—		—		(17,632)
Net income available to partners