BRENTWOOD, Tenn., Nov. 4, 2020 /PRNewswire/ -- Delek Logistics Partners, LP (NYSE: DKL) ("Delek Logistics") today announced its financial results for the third quarter 2020. For the three months ended September 30, 2020, Delek Logistics reported net income attributable to all partners of $46.3 million, or $1.26 per diluted common limited partner unit. This compares to net income attributable to all partners of $30.5 million, or $0.89 per diluted common limited partner unit, in the third quarter 2019. Net cash from operating activities was $62.3 million in the third quarter 2020 compared to $35.0 million in the third quarter 2019. Distributable cash flow was $59.1 million in the third quarter 2020, compared to $33.7 million in the third quarter 2019. Reconciliation of net cash from operating activities as reported under U.S. GAAP to distributable cash flow is included in the financial tables attached to this release.          

For the third quarter 2020, earnings before interest, taxes, depreciation and amortization ("EBITDA") was $67.8 million compared to $51.5 million in the third quarter 2019. Results improved on a year-over-year basis primarily due to the drop down of the Big Spring Gathering System and Trucking Assets, increased crude gathering, and a reduction in operating expenses by $4.2 million primarily due to a decrease in contract services. Reconciliation of net income attributable to all partners as reported under U.S. GAAP to EBITDA is included in the financial tables attached to this release.

Uzi Yemin, Chairman, President and Chief Executive Officer of Delek Logistics' general partner, remarked: "Our financial performance remains resilient despite a challenging energy environment. Third quarter EBITDA and net income increased approximately 32% and 52%, respectively, versus last year. Third quarter distribution growth was 2.8% on a year-over-year basis and we are on-track to deliver 5% distribution growth on a full-year basis."

Mr. Yemin continued, "During the quarter, we eliminated the incentive distribution rights (IDRs), which removes an overhang from DKL shares and lowers our cost of capital. This better positions us to pursue growth opportunities going forward. Our distribution coverage and leverage ratios have already exceeded our year-end targets and create flexibility. Finally, the Red River pipeline expansion was completed in the quarter and should provide financial momentum into 2021."

Distribution and Liquidity

On October 27, 2020, Delek Logistics declared a quarterly cash distribution of $0.905 per common limited partner unit for the third quarter 2020, which equates to $3.62 per common limited partner unit on an annualized basis. This distribution will be paid on November 12, 2020 to unitholders of record on November 6, 2020. This represents a 0.6% increase from the second quarter 2020 distribution of $0.900 per common limited partner unit, or $3.60 per common limited partner unit on an annualized basis, and a 2.8% increase over Delek Logistics' third quarter 2019 distribution of $0.88 per common limited partner unit, or $3.52 per common limited partner unit annualized. For the third quarter 2020, the total cash distribution declared to all partners was approximately $39.3 million, resulting in a distributable cash flow coverage ratio was 1.50x.

As of September 30, 2020, Delek Logistics had total debt of approximately $1,006.1 million and cash of $6.0 million. Additional borrowing capacity, subject to certain covenants, under the $850.0 million credit facility was $89.3 million. The total leverage ratio, calculated in accordance with the credit facility, for the third quarter 2020 was approximately 3.9x, which is within the current requirements of the maximum allowable leverage ratio of 5.5x.

Financial Results

Revenue for the third quarter 2020 was $142.3 million compared to $137.6 million in the prior-year period. The increase in revenue is primarily attributable to the drop down of the Big Spring Gathering System and Trucking Assets. Total operating expenses were $14.2 million in the third quarter 2020, compared to $18.4 million in the third quarter 2019. The decrease was primarily due to cost control measures put in place at the end of the first quarter 2020. Total contribution margin was $67.3 million in the third quarter 2020 compared to $46.5 million in the third quarter 2019, mainly driven by the aforementioned contribution from new assets and lower expenses. General and administrative expenses were $6.1 million for the third quarter 2020, compared to $5.3 million in the prior-year period.

Pipelines and Transportation Segment

Contribution margin in the third quarter 2020 was $46.4 million compared to $27.1 million in the third quarter 2019.  The recent drop down of the Big Spring Gathering System and the Trucking Assets were the primary drivers behind the year-over-year growth. Operating expenses were $10.7 million in the third quarter 2020 compared to $12.5 million in the prior-year period.

Wholesale Marketing and Terminalling Segment

During the third quarter 2020, contribution margin was $21.0 million, compared to $19.4 million in the third quarter 2019. The change in contribution margin was primarily due to lower operating expenses which were $3.5 million in the third quarter 2020, compared to $5.9 million in the third quarter 2019.

Average West Texas wholesale throughput in the third quarter 2020 was 9,948 barrels per day compared to 9,535 barrels per day in the third quarter 2019. The West Texas gross margin per barrel decreased year-over-year to $3.42 per barrel and included approximately $0.8 million, or $0.87 per barrel, from renewable identification numbers (RINs) generated in the quarter. During the third quarter 2019, the West Texas gross margin per barrel was $4.82 per barrel and included $0.3 million from RINs, or $0.38 per barrel.

Average terminalling throughput volume of 160,843 barrels per day during the third quarter 2020 decreased on a year-over-year basis from 170,727 barrels per day in the third quarter 2019.  During the third quarter 2020, average volume under the East Texas marketing agreement with Delek US was 73,417 barrels per day compared to 83,953 barrels per day during the third quarter 2019.

Third Quarter 2020 Results | Conference Call Information

Delek Logistics will hold a conference call to discuss its third quarter 2020 results on Thursday, November 5, 2020 at 7:30 a.m. Central Time. Investors will have the opportunity to listen to the conference call live by going to www.DelekLogistics.com. Participants are encouraged to register at least 15 minutes early to download and install any necessary software.  An archived version of the replay will also be available at www.DelekLogistics.com for 90 days.    

Investors may also wish to listen to Delek US' (NYSE: DK) third quarter 2020 earnings conference call on Thursday, November 5, 2020 at 8:30 a.m. Central Time and review Delek US' earnings press release. Market trends and information disclosed by Delek US may be relevant to Delek Logistics, as it is a consolidated subsidiary of Delek US. Investors can find information related to Delek US and the timing of its earnings release online by going to www.DelekUS.com.

About Delek Logistics Partners, LP

Delek Logistics Partners, LP, headquartered in Brentwood, Tennessee, was formed by Delek US Holdings, Inc. (NYSE: DK) to own, operate, acquire and construct crude oil and refined products logistics and marketing assets.

Safe Harbor Provisions Regarding Forward-Looking Statements

This press release contains forward-looking statements that are based upon current expectations and involve a number of risks and uncertainties. Statements concerning current estimates, expectations and projections about future results, performance, prospects, opportunities, plans, actions and events and other statements, concerns, or matters that are not historical facts are "forward-looking statements," as that term is defined under the federal securities laws. These statements contain words such as "possible," "believe," "should," "could," "would," "predict," "plan," "estimate," "intend," "may," "anticipate," "will," "if,"  "expect" or similar expressions, as well as statements in the future tense, and can be impacted by numerous factors, including the fact that a substantial majority of Delek Logistics' contribution margin is derived from Delek US, thereby subjecting us to Delek US' business risks; risks relating to the securities markets generally; risks and costs relating to the age and operational hazards of our assets including, without limitation, costs, penalties, regulatory or legal actions and other effects related to releases, spills and other hazards inherent in transporting and storing crude oil and intermediate and finished petroleum products; the impact of adverse market conditions affecting the utilization of Delek Logistics' assets and business performance, including margins generated by its wholesale fuel business; the impact of the COVID-19 outbreak on the demand for crude oil, refined products and transportation and storage services; uncertainties regarding future decisions by OPEC regarding production and pricing disputes between OPEC members and Russia; an inability of Delek US to grow as expected as it relates to our potential future growth opportunities, including dropdowns, and other potential benefits; the results of our investments in joint ventures; the ability of the Red River joint venture to complete the expansion to increase the Red River pipeline capacity; adverse changes in laws including with respect to tax and regulatory matters; and other risks as disclosed in our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other reports and filings with the United States Securities and Exchange Commission. Forward-looking statements include, but are not limited to, statements regarding future growth at Delek Logistics; distributions and the amounts and timing thereof; potential dropdown inventory; expected earnings or returns from joint ventures or other acquisitions; expansion projects; ability to create long-term value for our unit holders; financial flexibility and borrowing capacity; and distribution growth of 5% or at all. Forward-looking statements should not be read as a guarantee of future performance or results and will not be accurate indications of the times at, or by, which such performance or results will be achieved.  Forward-looking information is based on information available at the time and/or management's good faith belief with respect to future events, and is subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements.  Delek Logistics undertakes no obligation to update or revise any such forward-looking statements to reflect events or circumstances that occur, or which Delek Logistics becomes aware of, after the date hereof, except as required by applicable law or regulation

Non-GAAP Disclosures:

Our management uses certain "non-GAAP" operational measures to evaluate our operating segment performance and non-GAAP financial measures to evaluate past performance and prospects for the future to supplement our GAAP financial information presented in accordance with U.S. GAAP. These financial and operational non-GAAP measures are important factors in assessing our operating results and profitability and include:

• Earnings before interest, taxes, depreciation and amortization ("EBITDA") - calculated as net income before net interest expense, income tax expense, depreciation and amortization expense, including amortization of customer contract intangible assets, which is included as a component of net revenues in our accompanying condensed consolidated statements of income.
• Distributable cash flow - calculated as net cash flow from operating activities plus or minus changes in assets and liabilities, less maintenance capital expenditures net of reimbursements and other adjustments not expected to settle in cash.  Delek Logistics believes this is an appropriate reflection of a liquidity measure by which users of its financial statements can assess its ability to generate cash.

EBITDA and distributable cash flow are non GAAP supplemental financial measures that management and external users of our condensed consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:           

• Delek Logistics' operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or, in the case of EBITDA, financing methods;
• the ability of our assets to generate sufficient cash flow to make distributions to our unitholders;
• Delek Logistics' ability to incur and service debt and fund capital expenditures; and
• the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

Delek Logistics believes that the presentation of EBITDA, distributable cash flow and distributable cash flow coverage ratio provide useful information to investors in assessing its financial condition, its results of operations and the cash flow its business is generating. EBITDA, distributable cash flow and distributable cash flow coverage ratio should not be considered in isolation or as alternatives to net income, operating income, cash flow from operating activities or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP. 

Non-GAAP measures have important limitations as analytical tools, because they exclude some, but not all, items that affect net income and net cash provided by operating activities. These measures should not be considered substitutes for their most directly comparable U.S. GAAP financial measures. Additionally, because EBITDA and distributable cash flow may be defined differently by other partnerships in its industry, Delek Logistics' definitions of EBITDA and distributable cash flow may not be comparable to similarly titled measures of other partnerships, thereby diminishing their utility.  See the accompanying tables in this earnings release for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures. 

⁽¹⁾ The distributions for the three and nine months ended September 30, 2020 reflect the impact of the distribution waiver that waived all of the distributions for the first quarter of 2020 on the 5.0 million Additional Units, related to the Big Spring Gathering Assets transaction, with respect to base distributions and the IDRs. In addition, the distributions for the three and nine months ended September 30, 2020 reflect the waiver of distributions in respect of the IDRs associated with the Additional Units for at least two years. The IDRs were eliminated in the Restructuring Transaction on August 13, 2020.

⁽²⁾  Distributable cash flow coverage ratio is calculated by dividing distributable cash flow by distributions to be paid in each respective period.

⁽¹⁾ Affiliate revenue for the wholesale marketing and terminalling segment is presented net of amortization expense pertaining to the marketing contract intangible we acquired in connection with the Big Spring acquisition.  

⁽¹⁾ Throughput for the Big Spring Gathering Assets are for approximately 180 days we owned the assets following the Big Spring Gathering Assets Acquisition effective March 31, 2020. 

⁽²⁾ Excludes jet fuel and petroleum coke.

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

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SOURCE Delek Logistics

BRENTWOOD, Tenn., Nov. 4, 2020 /PRNewswire/ -- Delek US Holdings, Inc. (NYSE: DK) ("Delek US") today announced financial results for its third quarter ended September 30, 2020. Delek US reported a third quarter 2020 net loss of $(88.1) million, or $(1.20) per share, versus net income of $51.3 million, or $0.68 per diluted share, for the quarter ended September 30, 2019. On an adjusted basis, Delek US reported an Adjusted net loss of $(73.9) million, or $(1.01) per share, for the third quarter 2020. This compares to Adjusted net income of $76.7 million, or $1.01 per share, in the prior-year period. Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") was $21.9 million for the third quarter compared to Adjusted EBITDA of $184.2 million in the prior-year period. Reconciliations of net income reported under U.S. GAAP to Adjusted net income and Adjusted EBITDA are included in the financial tables attached to this release.

Adjusted quarterly results include approximately $30.9 million (after-tax), or $0.42 per share, of benefits which is comprised of the following: a net favorable impact of $26.1 million pre-tax from a combination of "other inventory" and the sale of purchased products, partially offset by fixed crude price transactions. The bulk of these items are outlined in the tables on page 13. Additionally, there is a realized hedging gain in the amount of $25.1 million pre-tax outlined by segment in the tables on page 10. Finally, there was a tax headwind of $8.7 million resulting from applying the revised annual estimated effective tax rate to second quarter's year-to-date results.

Uzi Yemin, Chairman, President and Chief Executive Officer of Delek US, stated, "Decisive actions are being taken to improve the cash flow profile of our company. This includes an 8% reduction in our workforce, 40% reduction in CAPEX year-over-year and optimization of operations at the Krotz Springs refinery. The collective impact of these actions along with a contribution from other initiatives is expected to favorably impact cash flows by approximately $200 million in 2021."

Mr. Yemin continued, "During the quarter, our ownership in DKL increased to 80% as a result of the IDR simplification. Given the current market capitalization of DKL, this represents significant value within the Delek portfolio. We recently published our 2020 sustainability report with enhanced disclosure and progress on the ESG front. In renewables, our three bio diesel plants continue operating safely and reliably and we maintain an option to participate in a 33% interest in the Global Clean Energy conversion of the Bakersfield refinery into a renewable diesel plant. As of September 30th, the company had a cash balance of $808 million and is well positioned for a turbulent macro environment."

Quarterly Dividend

The Board has elected to suspend quarterly dividend payments at this time in an effort to maintain a flexible balance sheet. At this juncture, potential share repurchases would take priority over future dividends or growth capital. At September 30, 2020, there was approximately $229.7 of total available authorization to repurchase shares.

Liquidity

As of September 30, 2020, Delek US had a cash balance of $807.9 million and total consolidated long-term debt of $2,474.0 million, resulting in net debt of $1,666.1 million.  As of September 30, 2020, Delek Logistics Partners, LP (NYSE: DKL) ("Delek Logistics") had $1,006.1 million of total debt and $6.0 million of cash, which is included in the consolidated amounts on Delek US' balance sheet. Excluding Delek Logistics, Delek US had approximately $801.9 million in cash and $1,467.9 million of debt, or a $666.0 million net debt position. We recorded a federal income tax receivable totaling $165.6 million as of September 30, 2020, related to the federal net operating loss carryback, which we expect to collect in the first half of 2021.

Refining Segment

Refining contribution margin decreased to $(17.8) million in the third quarter 2020 from $150.1 million in the third quarter 2019. On an adjusted basis, adjusted refining contribution margin was $5.4 million in the third quarter 2020 compared to $173.5 million in the third quarter 2019. The current period adjusted refining contribution margin reflects $37.8 million of favorable other inventory impact, $0.4 million of gains related to the sale of purchased product, and $35.7 million of realized hedging gains, partially offset by a $11.4 million loss from fixed price crude cost transactions. Other inventory impacts, aside from LCM, are outlined by refinery in the tables on page 13.

On a year-over-year basis, results were reduced primarily due to lower crude oil differentials and crack spreads as a result of decreased demand due to COVID-19. During the third quarter 2020, Delek US's benchmark crack spreads were down an average of approximately  58.0% from prior-year levels. Additionally, the realized Midland-Cushing crude oil premium was $0.46 per barrel compared to a realized discount of $0.94 per barrel in the prior-year period.These factors were partially offset by the crude oil futures market that was in contango of $0.27 per barrel in the third quarter 2020 compared to contango of $0.08 per barrel in the third quarter 2019.

In light of the weak macro environment, we elected to pull forward turnaround work into the fourth quarter on certain units at the Krotz Springs refinery that will be conducted on a straight-time basis. This will allow us to continue running the more profitable units of the refinery and should help improve economics toward a break-even level. The cost to perform this work is estimated at $10 million and is included in our CAPEX program. After this work is complete in the first quarter of next year and depending on market conditions, we have the flexibility to optimize operations at Krotz Springs by operating only the units that are producing favorable margins, thereby reducing unnecessary operating expenses, or moving back to full utilization at the facility, should the macro environment and margins improve.

Logistics Segment

The logistics segment contribution margin in the third quarter 2020 was $67.2 million compared to $46.6 million in the third quarter 2019. Results improved on a year-over-year basis primarily due to the drop down of the Big Spring Gathering System and Trucking Assets, increased crude gathering, and a reduction in operating expenses by $4.2 million primarily due to a decrease in contract services.

Logistics segment contribution margin reflected an other inventory impact to earnings relating to its West Texas inventory consisting of a charge totaling $0.3 million during the third quarter 2020 compared to no charge during the third quarter 2019.

Retail Segment

For the third quarter 2020, contribution margin was $18.3 million compared to $18.6 million in the prior-year period for the retail segment. Merchandise sales were approximately $86.8 million with an average retail margin of 31.6% in the third quarter 2020, compared to merchandise sales of approximately $81.5 million with an average retail margin of 30.5% in the prior-year period. Approximately 45.1 million retail fuel gallons were sold at an average margin of $0.31 per gallon in the third quarter 2020 compared to 54.9 million retail fuel gallons sold at an average margin of $0.32 per gallon in the third quarter 2019. In the third quarter 2020, the average merchandise store count was 253 compared to 263 in the prior-year period. On a same store sales basis in the third quarter 2020, merchandise sales increased 8.7% and fuel gallons sold decreased 19.3% compared to the prior-year period.

Corporate/Other

Contribution margin from Corporate/Other was a loss of $20.4 million in the third quarter 2020 compared to a loss of $12.0 million in the prior-year period. Note, hedging gains (losses) related to the refining segment have been reclassified from the corporate and other segment to the refining segment starting in the first quarter of 2020 and have been retrospectively reclassified in 2019 for comparison purposes. The decrease versus year-ago contribution margin was largely attributable to realized hedging losses as highlighted in the tables on page 10.

Corporate/Other segment contribution margin reflected an other inventory impact to earnings consisting of a detriment totaling $1.1 million during the third quarter 2020 compared to no detriment during the third quarter 2019.

The Wink to Webster crude oil pipeline, in which Delek US has an indirect investment stake through our 50% equity ownership in a financing joint venture with MPLX, remains on schedule, with segments and assets expected to come on-line throughout 2021.The main segment of the pipeline system started transporting Permian crude oil and condensate from Midland, Texas to Houston in October, 2020. The 36-inch diameter pipeline, which is underpinned by a significant volume of long-term commitments, will originate in the Permian Basin and have destination points in the Houston market.

Third Quarter 2020 Results | Conference Call Information

Delek US will hold a conference call to discuss its third quarter 2020 results on Thursday, November 5, 2020 at 8:30 a.m. Central Time. Investors will have the opportunity to listen to the conference call live by going to www.DelekUS.com and clicking on the Investor Relations tab. Participants are encouraged to register at least 15 minutes early to download and install any necessary software. Presentation materials accompanying the call will be available on the investor relations tab of the Delek US website approximately five minutes prior to the start of the call. For those who cannot listen to the live broadcast, the online replay will be available on the website for 90 days.

Investors may also wish to listen to Delek Logistics' (NYSE: DKL) third quarter 2020 earnings conference call that will be held on Thursday, November 5, 2020 at 7:30 a.m. Central Time and review Delek Logistics' earnings press release. Market trends and information disclosed by Delek Logistics may be relevant to the logistics segment reported by Delek US. Both a replay of the conference call and press release for Delek Logistics are available online at www.deleklogistics.com.

About Delek US Holdings, Inc.

Delek US Holdings, Inc. is a diversified downstream energy company with assets in petroleum refining, logistics, renewable fuels and convenience store retailing.  The refining assets consist of refineries operated in Tyler and Big Spring, Texas, El Dorado, Arkansas and Krotz Springs, Louisiana with a combined nameplate crude throughput capacity of 302,000 barrels per day.

The logistics operations primarily consist of Delek Logistics Partners, LP (NYSE: DKL).  Delek US Holdings, Inc. and its affiliates own approximately 80% (including the general partner interest) of Delek Logistics Partners, LP.  Delek Logistics Partners, LP is a growth-oriented master limited partnership focused on owning and operating midstream energy infrastructure assets. 

The convenience store retail operates approximately 253 convenience stores in central and West Texas and New Mexico.

Safe Harbor Provisions Regarding Forward-Looking Statements

This press release contains forward-looking statements that are based upon current expectations and involve a number of risks and uncertainties. Statements concerning current estimates, expectations and projections about future results, performance, prospects, opportunities, plans, actions and events and other statements, concerns, or matters that are not historical facts are "forward-looking statements," as that term is defined under the federal securities laws.  These statements contain words such as "possible," "believe," "should," "could," "would," "predict," "plan," "estimate," "intend," "may," "anticipate," "will," "if", "potential," "expect" or similar expressions, as well as statements in the future tense. These forward-looking statements include, but are not limited to, statements regarding throughput at the Company's refineries; crude oil prices, discounts and quality and our ability to benefit therefrom; share repurchases; cost reductions; payments of dividends; growth; investments into our business; the performance and execution of our midstream growth initiatives, including the Big Spring Gathering System, the Red River joint venture and the Wink to Webster long-haul crude oil pipeline, and the flexibility, benefits and the expected returns therefrom; RINs waivers and tax credits and the value and benefit therefrom; cash and liquidity; opportunities and anticipated performance and financial position.

Investors are cautioned that the following important factors, among others, may affect these forward-looking statements. These factors include, but are not limited to: uncertainty related to timing and amount of future share repurchases and dividend payments; risks and uncertainties with respect to the quantities and costs of crude oil we are able to obtain and the price of the refined petroleum products we ultimately sell, including uncertainties regarding future decisions by OPEC regarding production and pricing disputes between OPEC members and Russia; uncertainty relating to the impact of the COVID-19 outbreak on the demand for crude oil, refined products and transportation and storage services; Delek US' ability to realize cost reductions; risks related to Delek US' exposure to Permian Basin crude oil, such as supply, pricing, gathering, production and transportation capacity; gains and losses from derivative instruments; risks associated with acquisitions and dispositions; acquired assets may suffer a diminishment in fair value as a result of which we may need to record a write-down or impairment in carrying value of the asset; the possibility of litigation challenging renewable fuel standard waivers; changes in the scope, costs, and/or timing of capital and maintenance projects; the ability to grow the Big Spring Gathering System; the ability of the Red River joint venture to complete the expansion project to increase the Red River pipeline capacity; the ability of the joint venture to construct the Wink to Webster long haul crude oil pipeline; operating hazards inherent in transporting, storing and processing crude oil and intermediate and finished petroleum products; our competitive position and the effects of competition; the projected growth of the industries in which we operate; general economic and business conditions affecting the geographic areas in which we operate; and other risks described in Delek US' filings with the United States Securities and Exchange Commission (the "SEC"), including risks disclosed in our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other filings and reports with the SEC.

Forward-looking statements should not be read as a guarantee of future performance or results and will not be accurate indications of the times at, or by, which such performance or results will be achieved.  Forward-looking information is based on information available at the time and/or management's good faith belief with respect to future events, and is subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements.  Delek US undertakes no obligation to update or revise any such forward-looking statements to reflect events or circumstances that occur, or which Delek US becomes aware of, after the date hereof, except as required by applicable law or regulation.

Non-GAAP Disclosures:

Our management uses certain "non-GAAP" operational measures to evaluate our operating segment performance and non-GAAP financial measures to evaluate past performance and prospects for the future to supplement our GAAP financial information presented in accordance with U.S. GAAP. These financial and operational non-GAAP measures are important factors in assessing our operating results and profitability and include:

• Adjusted net income (loss) - calculated as net income attributable to Delek US adjusted for certain identified infrequently occurring items, non-cash items and items that are not attributable to our on-going operations (collectively, "Adjusting Items") recorded during the period;
• Adjusted net income (loss) per share - calculated as Adjusted net income (loss) divided by weighted average shares outstanding, assuming dilution, as adjusted for any anti-dilutive instruments that may not be permitted for consideration in GAAP earnings per share calculations but that nonetheless favorably impact dilution;
• Earnings before interest, taxes, depreciation and amortization ("EBITDA") - calculated as net income attributable to Delek adjusted to add back interest expense, income tax expense, depreciation and amortization;
• Adjusted EBITDA - calculated as EBITDA adjusted for the identified Adjusting Items in Adjusted net income (loss) that do not relate to interest expense, income tax expense, depreciation or amortization, and adjusted to include income (loss) attributable to non-controlling interests;
• Adjusted Segment Contribution Margin - calculated as Segment Contribution Margin adjusted for the identified Adjusting Items in Adjusted net income (loss) that impact Segment Contribution Margin;
• Refining margin - calculated as the difference between total refining revenues and total cost of materials and other;
• Adjusted refining margin - calculated as refining margin adjusted for certain identified infrequently occurring items, non-cash items and items that are not attributable to our on-going refining operations recorded during the period;
• Refining margin per sales barrel - calculated as refining margin divided by our average refining sales in barrels per day (excluding purchased barrels) multiplied by 1,000 and multiplied by the number of days in the period; and
• Adjusted refining margin per sales barrel - calculated as adjusted refining margin divided by our average refining sales in barrels per day (excluding purchased barrels) multiplied by 1,000 and multiplied by the number of days in the period;

We believe these non-GAAP operational and financial measures are useful to investors, lenders, ratings agencies and analysts to assess our ongoing performance because, when reconciled to their most comparable GAAP financial measure, they provide improved comparability between periods through the exclusion of certain items that we believe are not indicative of our core operating performance and that may obscure our underlying results and trends.

Non-GAAP measures have important limitations as analytical tools, because they exclude some, but not all, items that affect net earnings and operating income. These measures should not be considered substitutes for their most directly comparable U.S. GAAP financial measures.  Additionally, because Adjusted net income or loss, Adjusted net income or loss per share, EBITDA and adjusted EBITDA, and Adjusted Segment Contribution Margin or any of our other identified non-GAAP measures may be defined differently by other companies in its industry, Delek US' definition may not be comparable to similarly titled measures of other companies. See the accompanying tables in this earnings release for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures.