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

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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 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." See Note 2 for further information.

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 located in Howard, Borden and Martin Counties, Texas (the "Big Spring Gathering System"), and certain related assets, such transaction the "Big Spring Gathering Assets Acquisition." See Note 2 for further information.

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, 2019 (our "Annual Report on Form 10-K"), filed with the Securities and Exchange Commission (the "SEC") on February 27, 2020 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, 2019 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

The recent outbreak of COVID-19 and its development into a pandemic in March 2020 (the "COVID-19 Pandemic") has resulted in significant economic disruption globally, including in the U.S. and specific geographic areas where we operate. Actions taken by various governmental authorities, individuals and companies around the world to prevent the spread of COVID-19 through social distancing have restricted travel, many business operations, public gatherings and the overall level of individual movement and in-person interaction across the globe. This has in turn significantly reduced global economic activity and resulted in airlines dramatically cutting back on flights and a decrease in motor vehicle use at a time when seasonal driving patterns typically result in an increase of consumer demand for gasoline. As a result, there has also been a decline in the demand for, and thus also the market prices of, crude oil and certain products, particularly refined petroleum products that we receive revenue for the transportation and storage services we provide. In addition, the decline in demand impacted the sales volumes in our wholesale marketing business. In April and June 2020, an agreement was reached to cut oil production between the members of the Organization of Petroleum Exporting Countries ("OPEC") and other leading oil producing countries (together with OPEC, “OPEC+”), as part of the efforts to resolve the oil production disputes that significantly affected crude oil prices beginning in the first quarter of 2020 and to provide stability in the oil markets. While OPEC+ have reached an agreement to cut oil production, there is uncertainty about the duration of the COVID-19 Pandemic which caused storage constraints, in the early part of the second quarter of 2020, in the United States resulting from over-supply of produced oil. Therefore, downward pressure on commodity prices has remained and could continue for the foreseeable future.

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 financial statement impact under GAAP, we have considered them in the preparation of our unaudited financial statements as of and for the three and six months ended June 30, 2020. The application of accounting policies impacted by such considerations include (but are not necessarily limited to) the following:

•	The interim evaluation of indefinite-lived intangibles and goodwill for potential impairment, where indicators exist, as defined by GAAP;

•	The interim evaluation of long-lived assets for potential impairment, where indicators exist, as defined by GAAP;

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•	The interim evaluation of joint ventures for potential impairment, where indicators exist, as defined by GAAP;

•	The evaluation of inventory valuation allowances that may be warranted under the lower of cost or net realizable value analysis, pursuant to GAAP;

•	The consideration of debt modifications and or covenant requirements, as applicable;

•	The evaluation of commitments and contingencies, including changes in concentrations, as applicable;

•	The interim evaluation of the risk of credit losses and the determination of our allowance for credit losses, pursuant to GAAP; and

•	The interim evaluation of our ability to continue as a going concern.

New Accounting Pronouncements Adopted During 2020

ASU 2018-13, Fair Value Measurement - Changes to the Disclosure Requirements for Fair Value Measurement

In August 2018, the Financial Accounting Standards Board (the "FASB") issued guidance related to disclosure requirements for fair value measurements. The pronouncement eliminates, modifies and adds disclosure requirements for fair value measurements. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. We adopted this guidance on January 1, 2020 and the adoption did not have a material impact on our business, financial condition or results of operations.

ASU 2016-13, Financial Instruments - Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued guidance requiring the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Organizations will now use forward-looking information to better inform their credit loss estimates. This guidance is effective for interim and annual periods beginning after December 15, 2019. We adopted this guidance on January 1, 2020 using the modified retrospective approach as of the adoption date. The adoption did not have a material impact on the Partnership’s operating results, financial position or disclosures.

ASU 2018-15, Intangible - Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract

In August 2018, the FASB issued guidance related to customers' accounting for implementation costs incurred in a cloud computing arrangement that is considered a service contract. This pronouncement aligns the requirements for capitalizing implementation costs in such arrangements with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. Entities can choose to adopt the new guidance prospectively or retrospectively. We adopted this guidance on January 1, 2020 and elected the prospective method. The adoption did not have a material impact on our business, financial condition or results of operations.

Accounting Pronouncements Not Yet Adopted

ASU 2019-12, Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued guidance intended to simplify various aspects related to accounting for income taxes, eliminate certain exceptions within ASC 740 and clarify certain aspects of the current guidance to promote consistency among reporting entities. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 2020, with early adoption permitted. We expect to adopt this guidance on the effective date and are currently evaluating the impact that adopting this new guidance will have on our business, financial condition and results of operations.

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 FASB issued 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 do not expect that the adoption of this ASU on its effective date will have a material impact on our business, financial condition or results of operations.

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 currently evaluating the impact this guidance may have on its consolidated financial statements and related disclosures.

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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. The total consideration is subject to certain post-closing adjustments and 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 Throughput and Deficiency Agreement (the “Trucking Assets T&D Agreement”). Under the Trucking Assets T&D 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 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 $12.8 million of Right of Use asset for leased assets and 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 incurred approximately $0.3 million of acquisition costs related to the Trucking Assets Acquisition.

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. The total consideration was subject to certain post-closing adjustments and was comprised of $100.0 million in cash and 5.0 million common units representing limited partnership interest in us. We financed the cash component of this acquisition with borrowings from the DKL Credit Facility.

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

•	Crude oil pipelines;

•	Approximately 200 miles of gathering systems (Bayswater Battery, Guidon, Tiger Battery, SM Energy Vizzini);

•	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 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 incurred approximately $0.7 million of acquisition costs related to the Big Spring Gathering Assets Acquisition.

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

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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 has been extended through 2026. The current term of certain of our agreements with Delek Holdings were required to be further extended pursuant to the amended and restated DKL Credit Facility (as defined in Note 7), which extensions were effective in the fourth quarter of 2018. 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 ("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 from throughputting or storing such specified volumes for more than 30 days per year, Delek Holdings' minimum throughput commitment will be reduced proportionately and prorated for the portion of the quarter during which the specified throughput capacity was unavailable, and/or the storage fee will be reduced, prorated for the portion of the month during which the specified storage capacity was unavailable. Such reduction would occur even if actual throughput or storage amounts were below the minimum volume commitment levels.

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

Effective May 1, 2020, we entered into the Trucking Assets T&D Agreement with Delek Holdings. Under the Trucking Assets T&D Agreement, we will operate a truck based operation that transports various products throughout Arkansas, Oklahoma and Texas and gather, coordinate the pickup of, transport and deliver such products, as well as provide ancillary services as requested. Pursuant to the Trucking Assets T&D Agreement, Delek Holdings has committed to minimum revenue of $39.0 million per year. The initial term of the Trucking Assets T&D Agreement is 10 years, and thereafter Delek Holdings has the option to extend the Trucking Assets T&D Agreement for two additional two-year terms.

Effective March 31, 2020, we entered into the Big Spring T&D Agreement with Delek Holdings. Under the Big Spring T&D Agreement, we 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 Delek Holdings' and certain other producers’ respective interests for delivery at the Big Spring Terminal. Pursuant to the Big Spring T&D Agreement, Delek Holdings has committed to ship 120,000 bpd on the Big Spring Gathering Assets and 50,000 bpd to a redelivery point in Howard County, Texas (collectively, the Minimum Volume Commitments “MVCs”). Pursuant to the Big Spring T&D Agreement, we also agreed to spend up to $33.8 million over three years to connect additional receipt points and, in connection with such expenditures, the MVCs will increase to provide the Partnership a 12.5% return on the actual costs directly incurred and paid by the Partnership pursuant to the terms set forth in the Big Spring T&D Agreement. The initial term of the Big Spring T&D Agreement is 10 years, and thereafter Delek Holdings has the option to extend the Big Spring T&D Agreement for two additional five-year terms. Following the initial term and any such extensions, the Big Spring T&D Agreement will continue on a year-to-year basis unless terminated by either party upon 90 days’ written notice.

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, our general partner, Delek Logistics Operating, LLC, 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 $4.1 million to Delek Holdings for its provision of centralized corporate services to the Partnership.

Pursuant to the terms of the Omnibus Agreement, we were reimbursed by Delek Holdings for certain capital expenditures of a nominal amount and $0.6 million during the three and six months ended June 30, 2020, respectively, and $0.7 million and $1.5 million during the three and six months ended June 30, 2019, 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

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be, for costs incurred in excess of certain amounts related to certain asset failures, pursuant to the terms of the Omnibus Agreement. As of June 30, 2020, we have recorded a nominal receivable from related parties for these matters for which we expect to be reimbursed. These reimbursements are recorded as reductions to operating expense. We were reimbursed a nominal amount and $0.1 million for these matters during the three and six months ended June 30, 2020, respectively, and $2.2 million and $5.7 million during the three and six months ended June 30, 2019, respectively.

Other Transactions

The Partnership manages a long-term capital project on behalf of Delek Holdings pursuant to a construction management and operating agreement (the "DPG Management Agreement") for the construction of a 250-mile gathering system in the Permian Basin. The majority of the gathering system has been constructed, however, additional costs pertaining to a pipeline connection that was not contributed to 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 six months ended June 30, 2020, respectively, and $1.0 million and $2.8 million for the three and six months ended June 30, 2019, 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 new units ("Additional 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 "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 "Partnership Agreement"). The sale and issuance of the Additional Units 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") repurchased 451,822 units from an investor pursuant to a Common Unit Purchase Agreement ("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 Additional Units in connection with the Big Spring Gathering Assets Acquisition described above.

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 the general partner adopted Amendment No. 2 (“Amendment No. 2”) to the Partnership Agreement, effective upon adoption. Amendment No. 2 amends the Partnership Agreement to provide for a waiver of distributions in respect of the Incentive Distribution Rights ("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 reduces 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 IDR Waiver will automatically and permanently expire if, following the payment of a distribution in respect of a quarter ending on or after March 31, 2022, Delek Logistics has generated distributable cash flow in the most recent four consecutive quarters that, in the aggregate, would have resulted in total distribution coverage (on a pro forma basis without giving effect to the IDR Waiver) of at least 110% or 1.1x over such period. The IDR Waiver remains effective if this condition is not met. Following the termination of the IDR Waiver, the holders of the IDRs will receive distributions on all units, including the Additional Units.

In addition, in connection with any sale or exchange of the IDRs to or with the Partnership, the IDRs shall be treated as if such waiver had not and never will expire, regardless of whether such waiver has actually expired. An additional waiver letter was signed that waived all of the distributions for the first quarter of 2020 on the Additional Units with respect to the base distribution and the IDRs.

Pursuant to Amendment Number 2, the IDR majority unitholders have the right, subject to certain conditions following the termination of the IDR Waiver, to make an election (the “IDR Reset Election”) to cause the minimum quarterly distribution and the target distributions to be reset ("the IDR Reset"). In connection with the IDR Reset, the IDR Unitholders will become entitled to receive their respective proportionate share of Common Units (the “IDR Reset Common Units”) derived by dividing (i) the average amount of IDR cash distributions made by the Partnership by (ii) the average of the cash distributions made by the Partnership in respect of each Common Unit, and in each case for the two full Quarters immediately before the Reset Notice.

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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 June 30,								Six Months Ended June 30,
	2020				2019				2020				2019
Revenues	$	87,629			$	61,918			$	194,328			$	124,883
Purchases from Affiliates	$	29,730			$	73,213			$	110,493			$	152,647
Operating and maintenance expenses	$	10,310			$	10,590			$	23,067			$	20,515
General and administrative expenses	$	2,703			$	1,748			$	6,072			$	3,118

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Quarterly Cash Distributions

Our common and general partner unitholders and the holders of IDRs are entitled to receive quarterly distributions of available cash as it is determined by the board of directors of our general partner in accordance with the terms and provisions of our Partnership Agreement. In February and May 2020, we paid quarterly cash distributions of $30.6 million and $30.9 million, respectively, of which $22.6 million and $23.2 million, respectively, were paid to Delek Holdings and our general partner. In February and May 2019, we paid quarterly cash distributions of $26.9 million and $27.4 million, respectively, of which $19.6 million and $20.0 million were paid to Delek Holdings and our general partner. On July 24, 2020, our general partner's board of directors declared a quarterly cash distribution totaling $36.0 million, based on the available cash as of the date of determination for the end of the second quarter of 2020, payable on August 12, 2020, of which $28.2 million is expected to be paid to Delek Holdings and our general partner, including the distribution as holder of the IDRs described in Note 8.

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 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 Accounting Standards Codification ("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 $473.7 million net property, plant, and equipment balance as of June 30, 2020, $358.5 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.

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

		Three Months Ended June 30, 2020
		Pipelines and Transportation				Wholesale Marketing and Terminalling				Consolidated
Service Revenue - Third Party		$	2,032			$	204			$	2,236
Product Revenue - Third Party		—				27,772				27,772
Product Revenue - Affiliate		—				6,720				6,720
Lease Revenue - Affiliate (1)		61,394				19,515				80,909
Total Revenue		$	63,426			$	54,211			$	117,637

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

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		Three Months Ended June 30, 2019
		Pipelines and Transportation				Wholesale Marketing and Terminalling				Consolidated
Service Revenue - Third Party		$	7,477			$	184			$	7,661
Product Revenue - Third Party		—				85,763				85,763
Product Revenue - Affiliate		—				7,187				7,187
Lease Revenue - Affiliate (1)		36,731				18,000				54,731
Total Revenue		$	44,208			$	111,134			$	155,342

⁽¹⁾ Net of $1.8 million of amortization expense for the three months ended June 30, 2019, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.

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		Six Months Ended June 30, 2020
		Pipelines and Transportation				Wholesale Marketing and Terminalling				Consolidated
Service Revenue - Third Party		$	11,496			$	396			$	11,892
Product Revenue - Third Party		—				74,818				74,818
Product Revenue - Affiliate		—				58,222				58,222
Lease Revenue - Affiliate (1)		99,897				36,209				136,106
Total Revenue		$	111,393			$	169,645			$	281,038

⁽¹⁾ Net of $3.6 million of amortization expense for the six months ended June 30, 2020, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.

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		Six Months Ended June 30, 2019
		Pipelines and Transportation				Wholesale Marketing and Terminalling				Consolidated
Service Revenue - Third Party		$	11,451			$	304			$	11,755
Product Revenue - Third Party		—				171,187				171,187
Product Revenue - Affiliate		—				16,573				16,573
Lease Revenue - Affiliate (1)		73,390				34,920				108,310
Total Revenue		$	84,841			$	222,984			$	307,825

⁽¹⁾ Net of $3.6 million of amortization expense for the six months ended June 30, 2019, related to a customer contract intangible asset recorded in the wholesale marketing and terminalling segment.

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As of June 30, 2020, we expect to recognize $1.6 billion in lease revenues 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 June 30, 2020 were as follows (in thousands):

Remainder of 2020		134,043
2021		267,990
2022		249,850
2023		240,489
2024 and thereafter		$	733,292
Total expected revenue on remaining performance obligations		$	1,625,664

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We use the two-class method when calculating the net income per unit applicable to limited partners because we have more than one participating class of securities. Our participating securities consist of common units, general partner units and IDRs. The two-class method is based on the weighted-average number of common units outstanding during the period. Basic net income per unit applicable to limited partners is 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 is 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 are held by our general partner pursuant to our Partnership Agreement. The IDRs are paid following the close of each quarter.

Pursuant to Amendment No. 2 to the 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 for at least two years, through at least the distribution for the quarter ending March 31, 2022 ("IDR Waiver"). The IDR Waiver essentially reduces 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. An additional waiver letter was signed that waived all of the distributions for the first quarter of 2020 on the Additional Units with respect to base distributions and the IDRs. Refer Note 3 for additional details.

Earnings in excess of distributions are allocated to our general partner and limited partners based on their respective ownership interests. 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.

Diluted net income per unit applicable to common limited partners includes the effects of potentially dilutive units on our common units. As of June 30, 2020, 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 June 30, 2020 is August 12, 2020. The calculation of net income per unit is as follows (dollars in thousands, except units and per unit amounts):

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	Three Months Ended June 30,								Six Months Ended June 30,
	2020				2019				2020				2019
Net income attributable to partners	$	44,415			$	24,885			$	72,211			$	44,581
Less: General partner's distribution (including IDRs) (1)	9,479				8,160				18,618				15,583
Less: Limited partners' distribution	26,490				20,754				48,229				40,769
Earnings in excess (deficit) of distributions	$	8,446			$	(4,029	)		$	5,364			$	(11,771	)
General partner's earnings:
Distributions (including IDRs) (1)	$	9,479			$	8,160			$	18,618			$	15,583
Allocation of earnings in excess (deficit) of distributions	168				(81		)		106				(235		)
Total general partner's earnings	$	9,647			$	8,079			$	18,724			$	15,348
Limited partners' earnings on common units:
Distributions	$	26,490			$	20,754			$	48,229			$	40,769
Allocation of earnings in excess (deficit) of distributions	8,278				(3,948		)		5,258				(11,536		)
Total limited partners' earnings on common units	$	34,768			$	16,806			$	53,487			$	29,233
Weighted average limited partner units outstanding:
Common units - basic	29,427,298				24,409,359				26,953,934				24,408,270
Common units - diluted	29,430,555				24,414,343				26,956,523				24,414,077
Net income per limited partner unit:
Common units - basic	$	1.18			$	0.69			$	1.98			$	1.20
Common units - diluted (2)	$	1.18			$	0.69			$	1.98			$	1.20

⁽¹⁾ General partner distributions (including IDRs) consist of the 2.0% general partner interest and IDRs, which represent 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. See Note 8 for further discussion related to IDRs.

⁽²⁾ Outstanding common unit equivalents totaling 18,270 were excluded from the diluted earnings per unit calculation for the three and six months ended June 30, 2020. There were no outstanding common units excluded from the diluted earnings per unit calculation for the three and six months ended June 30, 2019.

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DKL Credit Facility

Prior to September 28, 2018, the Partnership had a $700.0 million senior secured revolving credit agreement with Fifth Third Bank ("Fifth Third"), as administrative agent, and a syndicate of lenders (the "2014 Facility"), which had a maturity date of December 30, 2019. The obligations under the 2014 Facility were secured by a first priority lien on substantially all of the Partnership's tangible and intangible assets. Additionally, a subsidiary of Delek Holdings provided a limited guaranty of the Partnership's obligations under the 2014 Facility.

On September 28, 2018, the Partnership entered into a third amended and restated senior secured revolving credit agreement, which amended and restated the 2014 Facility (hereafter, the "DKL Credit Facility") with Fifth Third, as administrative agent, and a syndicate of lenders. The DKL Credit Facility contains a dual currency borrowing tranche that permits draw downs in U.S. or Canadian dollars. Under the terms of the DKL Credit Facility, among other things, the lender commitments were increased to $850.0 million. 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. Additionally, Delek Marketing, a subsidiary of Delek Holdings, had provided a limited guaranty of the Partnership's obligations under the DKL Credit Facility. Delek Marketing's guaranty was (i) limited to an amount equal to the principal amount, plus unpaid and accrued interest, of a promissory note made by Delek Holdings in favor of Delek Marketing (the "Holdings Note") and (ii) secured by Delek Marketing's pledge of the Holdings Note to the lenders under the DKL Credit Facility. Effective March 30, 2020, Delek Marketing's

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limited guaranty and pledge of the Holdings Note was terminated pursuant to a guaranty and pledge release approved by the required lenders under the DKL Credit Facility.

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 London Interbank Offered Rate ("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 June 30, 2020, the weighted average interest rate for our borrowings under the facility was approximately 2.78%. Additionally, the DKL Credit Facility requires us to pay a leverage ratio dependent quarterly fee on the average unused revolving commitment. As of June 30, 2020, this fee was 0.40% per year.

As of June 30, 2020, we had $750.0 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 June 30, 2020, were $100.0 million.

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, commencing November 15, 2017.

Beginning on May 15, 2020, the Issuers may, subject to certain conditions and limitations, redeem all or part of the 2025 Notes at a redemption price of 105.063% of the redeemed principal for the twelve-month period beginning on May 15, 2020, 103.375% for 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 June 30, 2020, we had $250.0 million in outstanding principal amount of the 2025 Notes. As of June 30, 2020, the effective interest rate related to the 2025 Notes was approximately 7.22%.

We had 8,687,371 common limited partner units held by the public outstanding as of June 30, 2020. Additionally, as of June 30, 2020, Delek Holdings owned a 69.1% interest in us, consisting of 20,745,868 common limited partner units (representing a 70.5% interest), and a 94.8% interest in our general partner, which owns the entire 2.0% general partner interest consisting of 600,678 general partner units. During the second quarter of 2020, Delek Holdings purchased 0.2% in our general partner from an affiliate at fair market value. As of June 30, 2020, affiliates, who are also members of our general partner's management and board of directors, own the remaining 5.2% interest in our general partner.

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Equity Activity

The table below summarizes the changes in the number of units outstanding from December 31, 2019 through June 30, 2020.

	Common - Public			Common - Delek Holdings			General Partner			Total
Balance at December 31, 2019	9,131,579			15,294,046			498,482			24,924,107
General partner units issued to maintain 2% interest	—			—			102,196			102,196
Unit-based compensation awards (1)	7,614			—			—			7,614
Big Spring Gathering Assets Acquisition equity issuance	—			5,000,000			—			5,000,000
Delek Holdings Unit purchases from public	(451,822	)		451,822			—			—
Balance at June 30, 2020	8,687,371			20,745,868			600,678			30,033,917

⁽¹⁾ Unit-based compensation awards are presented net of 481 units withheld for taxes as of June 30, 2020.

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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.

Allocations of Net Income

Our Partnership Agreement contains provisions for the allocation of net income and loss to the unitholders and our general partner. 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. Normal allocations according to percentage interests are made after giving effect to priority income allocations in an amount equal to incentive cash distributions allocated 100% to our general partner.

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 June 30,								Six Months Ended June 30,
	2020				2019				2020				2019
Net income attributable to partners	$	44,415			$	24,885			$	72,211			$	44,581
Less: General partner's IDRs	(8,937		)		(7,736		)		(17,632		)		(14,751		)
Net income available to partners	$	35,478			$	17,149			$	54,579			$	29,830
General partner's ownership interest	2.0		%		2.0		%		2.0		%		2.0		%
General partner's allocated interest in net income	$	710			$	343			1,092				$	597
General partner's IDRs	8,937				7,736				17,632				14,751
Total general partner's interest in net income	$	9,647			$	8,079			$	18,724			$	15,348

Incentive Distribution Rights

Our general partner is currently entitled to 2.0% of all quarterly distributions that we make prior to our liquidation. Our general partner has the right, but not the obligation, to contribute up to a proportionate amount of capital to us to maintain its current general partner interest. The general partner's 2.0% interest in these distributions may be reduced if we issue additional units in the future and our general partner does not contribute a proportionate amount of capital to us to maintain its 2.0% general partner interest. Our general partner also currently holds IDRs that entitle it to receive increasing percentages, up to a maximum of 48.0%, of the cash we distribute from operating surplus (as defined in our Partnership Agreement) in excess of 0.43125 per unit per quarter. The maximum distribution is 48.0% and does not include any distributions that our general partner or its affiliates may receive on common or general partner units that it owns. The IDRs held by our general partner currently entitle it to receive the maximum distribution.

Pursuant to Amendment No. 2 to the Partnership Agreement, an agreement was reached for a waiver of distributions in respect of the IDRs 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 reduces 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 Additional Units. An additional waiver letter was signed that waived all of the distributions for the first quarter of 2020 on the Additional Units with respect to base distributions and the IDRs. Refer to Note 3 for additional details.

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Cash Distributions

Our Partnership Agreement sets forth the calculation to be used to determine the amount and priority of available cash distributions that our limited partner unitholders and general partner will receive. Our distributions earned with respect to a given period are declared subsequent to quarter end. The table below summarizes the quarterly distributions related to our quarterly financial results:

Quarter Ended		Total Quarterly Distribution Per Limited Partner Unit				Total Quarterly Distribution Per Limited Partner Unit, Annualized				Total Cash Distribution, including general partner interest and IDRs (in thousands)				Date of Distribution		Unitholders Record Date
June 30, 2019		$	0.850			$	3.40			$	28,914			August 13, 2019		August 5, 2019
September 30, 2019		$	0.880			$	3.52			$	30,379			November 12, 2019		November 4, 2019
December 31, 2019		$	0.885			$	3.54			$	30,634			February 12, 2020		February 4, 2020
March 31, 2020		$	0.890			$	3.56			$	30,878			May 12, 2020		May 5, 2020
June 30, 2020		$	0.900			$	3.60			$	35,969			August 12, 2020 (1)		August 7, 2020

⁽¹⁾ Expected date of distribution.

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The allocations of total quarterly cash distributions made to general and limited partners for the three and six months ended June 30, 2020 and 2019 are set forth in the table below. Distributions earned with respect to a given period are declared subsequent to quarter end. Therefore, the table below presents total cash distributions applicable to the period in which the distributions are earned (in thousands, except per unit amounts):

	Three Months Ended June 30,								Six Months Ended June 30,
	2020				2019				2020				2019
General partner's distributions:
General partner's distributions	$	542			$	424			$	986			$	832
General partner's IDRs	8,937				7,736				17,632				14,751
Total general partner's distributions	9,479				8,160				18,618				15,583
Limited partners' distributions:
Common limited partners' distributions	26,490				20,754				48,229				40,769
Total cash distributions	$	35,969			$	28,914			$	66,847			$	56,352
Cash distributions per limited partner unit	$	0.900			$	0.850			$	1.790			$	1.670

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In May 2019, the Partnership, through its wholly owned indirect subsidiary DKL Pipeline, LLC (“DKL Pipeline”), entered into a Contribution and Subscription Agreement (the “Contribution Agreement”) with Plains Pipeline, L.P. (“Plains”) and Red River Pipeline Company LLC (“Red River”). Pursuant to the Contribution Agreement, DKL Pipeline contributed $124.7 million, substantially all of which was financed by borrowings under the DKL Credit Facility, to Red River in exchange for a 33% membership interest in Red River and DKL Pipeline’s admission as a member of Red River. In addition, we contributed $0.4 million of start up capital pursuant to the Amended and Restated Limited Liability Company Agreement. Red River owns a crude oil pipeline running from Cushing, Oklahoma to Longview, Texas, with an expansion project planned to increase the pipeline capacity, which is expected to be completed in the third quarter of 2020. We contributed an additional $3.5

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million related to such expansion project in May 2019. During the six months ended June 30, 2020, we made additional capital contributions totaling $10.5 million based on capital calls received.

Summarized unaudited financial information for Red River on a 100% basis is shown below (in thousands):

	June 30, 2020				December 31, 2019
Current Assets	$	11,376			$	9,278
Non-current Assets	$	416,554			$	381,778
Current liabilities	$	17,869			$	8,291

	Three Months Ended June 30,								Six Months Ended June 30,
	2020				2019				2020				2019
Revenues	$	11,873			$	14,391			$	21,969			$	26,017
Gross profit	$	7,175			$	9,191			$	13,062			$	14,466
Operating income	$	7,000			$	8,942			$	12,697			$	13,652
Net income	$	7,025			$	8,942			$	12,746			$	13,652

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We have two joint ventures that have constructed separate crude oil pipeline systems and related ancillary assets, which are serving third parties and subsidiaries of Delek Holdings. We own a 50% membership interest in the entity formed with an affiliate of Plains All American Pipeline, L.P. ("CP LLC") to operate one of these pipeline systems (the "Caddo Pipeline") and a 33% membership interest in the entity formed with Rangeland Energy II, LLC ("Rangeland Energy") to operate the other pipeline system (the "RIO Pipeline"). During 2018, Rangeland Energy was acquired by Andeavor and the legal entity in which we have an equity investment became Andeavor Logistics RIO Pipeline LLC ("Andeavor Logistics").

Combined summarized unaudited financial information for these two equity method investees on a 100% basis is shown below (in thousands):

	June 30, 2020				December 31, 2019
Current assets	$	20,040			$	29,476
Non-current assets	$	258,751			$	262,300
Current liabilities	$	2,381			$	6,391

	Three Months Ended June 30,								Six Months Ended June 30,
	2020				2019				2020				2019
Revenues	$	12,738			$	10,077			$	28,185			$	19,191
Gross profit	$	8,198			$	5,688			$	18,834			$	10,584
Operating income	$	7,724			$	5,223			$	17,864			$	9,624
Net Income	$	7,729			$	5,249			$	17,887			$	9,666

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The Partnership's investments in these three entities were financed through a combination of cash from operations and borrowings under the DKL Credit Facility.  As of June 30, 2020 and December 31, 2019, the Partnership's investment balance in these joint ventures was $255.3 million and $247.0 million, respectively.

We do not consolidate any part of the assets or liabilities or operating results of our equity method investees. Our share of net income or loss of the investees will increase or decrease, as applicable, the carrying value of our investments in unconsolidated affiliates. With respect to our equity method investments, we determined that these entities do not represent variable interest entities and consolidation is not required. We have the ability to exercise significant influence over each of these joint ventures through our participation in the management committees, which make all significant decisions. However, since all significant decisions require the consent of the other investor(s) without regard to economic interest, we have determined that we have joint control and have applied the equity method of accounting. Our investment in these joint ventures is reflected in our pipelines and transportation segment.

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We aggregate our operating segments into two reportable segments: (i) pipelines and transportation and (ii) wholesale marketing and terminalling:

•	The assets and investments reported in the pipelines and transportation segment provide crude oil gathering and crude oil, intermediate and refined products transportation and storage services to Delek Holdings' refining operations and independent third parties.

•	The wholesale marketing and terminalling segment provides wholesale marketing and terminalling services to Delek Holdings' refining operations and independent third parties.

Our operating segments adhere to the accounting policies used for our consolidated financial statements. Our operating segments are managed separately because each segment requires different industry knowledge, technology and marketing strategies. Decisions concerning the allocation of resources and assessment of operating performance are made based on this segmentation. Management measures the operating performance of each of its reportable segments based on segment contribution margin. Segment contribution margin is defined as net revenues less cost of materials and other and operating expenses, excluding depreciation and amortization.

The following is a summary of business segment operating performance as measured by contribution margin for the periods indicated (in thousands):

	Three Months Ended June 30,								Six Months Ended June 30,
	2020				2019				2020				2019
Pipelines and Transportation
Net revenues:
Affiliate	$	61,394			$	36,731			$	99,897			$	73,390
Third party	$	2,032			7,477				11,496				11,451
Total pipelines and transportation	63,426				44,208				111,393				84,841
Cost of materials and other	11,182				7,357				17,280				12,924
Operating expenses (excluding depreciation and amortization)	9,731				12,728				21,187				23,562
Segment contribution margin	$	42,513			$	24,123			$	72,926			$	48,355
Capital spending	$	417			$	818			$	863			$	1,242
Wholesale Marketing and Terminalling
Net revenues:
Affiliate (1)	$	26,235			$	25,187			$	94,431			$	51,493
Third party	27,976				85,947				75,214				171,491
Total wholesale marketing and terminalling	54,211				111,134				169,645				222,984
Cost of materials and other	32,710				86,497				127,905				177,195
Operating expenses (excluding depreciation and amortization)	2,718				4,599				6,006				9,823
Segment contribution margin	$	18,783			$	20,038			$	35,734			$	35,966
Capital spending	$	235			$	524			$	2,818			$	1,004
Consolidated
Net revenues:
Affiliate	$	87,629			$	61,918			$	194,328			$	124,883
Third party	30,008				93,424				86,710				182,942
Total Consolidated	117,637				155,342				281,038				307,825
Cost of materials and other	43,892				93,854				145,185				190,119
Operating expenses (excluding depreciation and amortization presented below)	12,449				17,327				27,193				33,385
Contribution margin	$	61,296			$	44,161			108,660				84,321
General and administrative expenses	4,721				5,293				10,851				9,766
Depreciation and amortization	8,694				6,639				14,993				13,213
Other operating income, net	—				(27		)		(107		)		(25		)
Operating income	$	47,881			$	32,256			$	82,923			$	61,367
Capital spending	$	652			$	1,342			$	3,681			$	2,246

⁽¹⁾ Affiliate revenue for the wholesale marketing and terminalling segment is presented net of amortization expense pertaining to the Marketing Contract Intangible Acquisition. See Note 3 for additional information.

The following table summarizes the total assets for each segment as of June 30, 2020 and December 31, 2019 (in thousands):

	June 30, 2020				December 31, 2019
Pipelines and transportation	$	836,510			$	537,580
Wholesale marketing and terminalling	137,227				206,867
Total assets	$	973,737			$	744,447

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Property, plant and equipment and accumulated depreciation as of June 30, 2020 and depreciation expense by reporting segment for the three and six months ended June 30, 2020 were as follows (in thousands):

	Pipelines and Transportation				Wholesale Marketing and Terminalling				Consolidated
Property, plant and equipment	$	566,780			$	114,189			$	680,969
Less: accumulated depreciation	(159,341		)		(47,884		)		(207,225		)
Property, plant and equipment, net	$	407,439			$	66,305			$	473,744
Depreciation expense for the three months ended June 30, 2020	$	6,947			$	1,674			$	8,621
Depreciation expense for the six months ended June 30, 2020	$	11,553			$	3,367			$	14,920

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For tax purposes, each partner of the Partnership is required to take into account its share of income, gain, loss and deduction in computing its federal and state income tax liabilities, regardless of whether cash distributions are made to such partner by the Partnership. The taxable income reportable to each partner takes into account differences between the tax basis and fair market value of our assets, the acquisition price of such partner's units and the taxable income allocation requirements under our Partnership Agreement.

Litigation

In the ordinary conduct of our business, we are from time to time subject to lawsuits, investigations and claims, including environmental claims and employee-related matters. Although we cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against us, including civil penalties or other enforcement actions, we do not believe that any currently pending legal proceeding or proceedings to which we are a party will have a material adverse effect on our financial statements. See "Crude Oil and Other Releases" below for discussion of an enforcement action.

Environmental, Health and Safety

We are subject to extensive federal, state and local environmental and safety laws and regulations enforced by various agencies, including the Environmental Protection Agency (the "EPA"), the United States Department of Transportation, the Occupational Safety and Health Administration, as well as numerous state, regional and local environmental, safety and pipeline agencies. These laws and regulations govern the discharge of materials into the environment, waste management practices and pollution prevention measures, as well as the safe operation of our pipelines and the safety of our workers and the public. Numerous permits or other authorizations are required under these laws and regulations for the operation of our terminals, pipelines, saltwells, trucks and related operations, and may be subject to revocation, modification and renewal. See "Crude Oil and Other Releases" below for discussion of an enforcement action.

These laws and permits raise potential exposure to future claims and lawsuits involving environmental and safety matters, which could include soil and water contamination, air pollution, personal injury and property damage allegedly caused by substances which we handled, used, released or disposed of, transported, or that relate to pre-existing conditions for which we have assumed responsibility. We believe that our current operations are in substantial compliance with existing environmental and safety requirements. However, there have been and we expect that there will continue to be ongoing discussions about environmental and safety matters between us and federal and state authorities, including notices of violations, citations and other enforcement actions, some of which have resulted or may result in changes to operating procedures and in capital expenditures. While it is often difficult to quantify future environmental or safety related expenditures, we anticipate that continuing capital investments and changes in operating procedures will be required to comply with existing and new requirements, as well as evolving interpretations and more strict enforcement of existing laws and regulations.

Releases of hydrocarbons or hazardous substances into the environment could, to the extent the event is not insured, or is not a reimbursable event under the Omnibus Agreement, subject us to substantial expenses, including costs to respond to, contain and remediate a release, to comply with applicable laws and regulations and to resolve claims by third parties for personal injury, property damage or natural resources damages.

Crude Oil and Other Releases

We have experienced several crude oil and other releases involving our assets. There were no material releases that occurred during the six months ended June 30, 2020, and five releases that occurred throughout the year 2019. Cleanup operations and site maintenance and remediation efforts on these and other releases are at various stages of completion. The majority of the remediation efforts for these releases are substantially completed or have received regulatory closure. With the exception of the Sulphur Springs release defined below, we expect regulatory closure in 2020 for the release sites that have not yet received it.

Many of the releases have occurred on our system of common carrier pipelines which gather crude in southern Arkansas and northern Louisiana, and which are primarily located within 60 miles of Delek Holdings’ El Dorado refinery ("El Dorado Gathering System"). During the year ended December 31, 2019, we decommissioned certain sections of the El Dorado Gathering System in an effort to improve the safety and integrity of the system. The decommissioning of these sections was completed in August 2019. The project did not have a material effect on the financial results.

Regulatory authorities could require additional remediation based on the results of our remediation efforts. We may incur additional expenses as a result of further scrutiny by regulatory authorities and continued compliance with laws and regulations to which our assets are subject. As of June 30, 2020, we have accrued $0.3 million for remediation and other such matters related to these releases.

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On October 3, 2019, a release of diesel fuel involving one of our pipelines occurred near Sulphur Springs, Texas (the "Sulphur Springs Release"). Cleanup operations and site maintenance and remediation on this release have been substantially completed where such costs incurred totaled $7.1 million during 2019. During the three and six months ended June 30, 2020, we incurred approximately $0.1 million and $0.3 million of additional costs related to final clean-up of this release, respectively. The release is currently in boom maintenance. Ground water monitoring wells were installed in the second quarter of 2020. We expect to conduct quarterly ground water monitoring for at least a year. Additionally, we will be conducting creek bed sediment sampling in the third quarter of 2020. We have filed suit in January 2020 against a third party contractor, seeking damages related to this release. We have not received notification that any legal action with respect to fines and penalties will be pursued by the regulatory agencies.

Expenses incurred for the remediation of these crude oil and other releases are included in operating expenses in our condensed consolidated statements of income and comprehensive income. The majority of our releases have been subsequently reimbursed by Delek Holdings pursuant to the terms of the Omnibus Agreement, with the exception of Sulphur Springs Release above as it is not covered under the Omnibus Agreement. Reimbursements are recorded as a reduction to operating expense. We do not believe the total costs associated with these events, whether alone or in the aggregate, including any fines or penalties and net of available insurance, indemnification or reimbursement, will have a material adverse effect upon our business, financial condition or results of operations.

During both three and six months ended June 30, 2020, we recorded a nominal amount of expenses, net of reimbursable costs of a nominal amount for both the three and six months ended June 30, 2020, respectively. Additionally, during the three and six months ended June 30, 2019, we recorded $0.2 million and $0.3 million of expenses, respectively, which is net of total reimbursable costs of $0.7 million and $4.1 million for the three and six months ended June 30, 2019, respectively, from Delek Holdings pursuant to the terms of the Omnibus Agreement.

Letters of Credit

We lease certain pipeline and transportation equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term.

Our leases do not have any outstanding renewal options. Certain leases also include options to purchase the leased equipment.

Certain of our lease agreements include rates based on equipment usage and others include rate inflationary indices based increases. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

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The following table presents additional information related to our operating leases in accordance ASC 842:

	Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)	2020				2019				2020				2019
Lease Cost
Operating lease cost	$	1,926			$	1,472			$	2,526			$	2,899
Short-term lease cost (1)	757				326				1,077				803
Variable lease costs	60				—				272				—
Total lease cost	$	2,743			$	1,798			$	3,875			$	3,702
Other Information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	(1,926	)		$	(1,472	)		$	(2,526	)		$	(2,899	)
Leased assets obtained in exchange for new operating lease liabilities	$	15,779			$	—			$	15,779			$	—
									June 30, 2020
Weighted-average remaining lease term (years) for operating leases									3.8
Weighted-average discount rate (2) operating leases									5.8		%

⁽¹⁾ Includes an immaterial amount of variable lease cost.

⁽²⁾ Our discount rate is primarily based on our incremental borrowing rate in accordance with ASC 842.     

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Distribution Declaration

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Customers directly impacted by COVID-19 Pandemic and other events in terms of demand for refined product may reduce throughputs which could, likewise, impact the throughput demand for our pipelines, and may seek to renegotiate minimums under contractual force majeure provisions. Such reductions could have a significant impact on our revenues, cost of sales, operating income and liquidity, as well to the carrying value of long-lived or indefinite-lived assets;

•	Customers may experience financial difficulties which could interrupt the volumes ordered by those customers and/or could impact the credit worthiness of such customers and the collectability of their outstanding receivables;

•	Equity method investees may be significantly impacted by the COVID-19 Pandemic and/or other events, which may increase the risk of impairment of those investments;

•

The decline in demand and pricing on our wholesale marketing segment and a decline in demand for pipelines and transportation impacting current results and/or forecasts could result in impairments in certain of our long-lived or indefinite-lived assets, including goodwill, or have other financial statement impacts that cannot currently be anticipated (see also Note 1 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional discussion of specific financial statement risks);

•	While our current liquidity needs are managed by existing facilities, sources of future liquidity needs may be impacted by the volatility in the debt market and the availability and pricing of such funds as a result of the COVID-19 Pandemic and other events; and

•	The U.S. Federal Government has enacted certain stimulus and relief measures and is continuing to consider additional relief legislation. To the extent that the provisions do not directly impact the Partnership in the current period or are intended to stimulate or provide relief to the greater U.S. economy and/or consumer, the impact and success of such efforts remains unknown.

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•	Reducing planned capital expenditures for 2020;

•	Identifying alternative financing solutions to enhance our access to sources of liquidity;

•	Enacting cost reduction measures across the organization, including reducing contract services, reducing overtime and reducing or eliminating non-critical travel which serves the dual purpose of also complying with recommendations made by the state and federal governments because of the COVID-19 Pandemic;

•	Implementing regular site cleaning and disinfecting procedures;

•	Adopting remote working where possible. Where on-site operations are required, masks are mandatory and our employees have adopted social distancing; and

•	Working with our employees to implement other site-specific precautionary measures to reduce the risk of exposure.

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•	Delek Holdings' utilization of our assets in excess of its minimum volume commitments;

•	our ability to identify and execute acquisitions and organic expansion projects, and capture incremental volume increases from Delek Holdings or third parties;

•	our ability to increase throughput volumes at our refined products terminals and provide additional ancillary services at those terminals;

•	our ability to identify and serve new customers in our marketing and trucking operations; and

•	our ability to make connections to third-party facilities and pipelines.

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•	decreases in the average volumes sold and decreases in the average sales prices per gallon of gasoline and diesel in our West Texas marketing operations.

◦	the average volumes of diesel sold decreased 10.2 million gallons, partially offset by a 1.1 million increase of gasoline gallons sold.

◦	the average sales prices per gallon of diesel and gasoline sold decreased $1.11 per gallon and $1.09 per gallon, respectively.

•	Increased revenues associated with agreements executed in connection with Big Spring Gathering System and Delek Trucking acquisitions, which were effective March 31, 2020 and May 1, 2020, respectively. Refer to Note 2 of the condensed consolidated financial statements in Item 1, Financial Statements, for additional information.

•	decreases in the average sales prices per gallon and volumes of diesel gallon sold, partially offset by increases in the average sales volume of gasoline in our West Texas marketing operations:

◦	the average volumes of gasoline sold increased 14.4 million gallons, partially offset by a 11.5 million decrease of diesel gallons sold.

◦	the average sales prices per gallon of gasoline and diesel sold decreased $0.47 per gallon and $0.68 per gallon, respectively.

•	Increased revenues associated with agreements executed in connection with Big Spring Gathering System and Delek Trucking acquisitions, which were effective March 31, 2020 and May 1, 2020, respectively. Refer to Note 2 of the condensed consolidated financial statements in Item 1, Financial Statements, for additional information.

•	increased revenues at our El Dorado Gathering System and Magnolia Pipeline as result of increased throughput during the six months ended June 30, 2020 when compared to the six months ended June 30, 2019.

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•	decreases in the average volumes sold and average cost per gallon of gasoline and diesel sold in our West Texas marketing operations:

◦	the average volumes of diesel sold decreased 10.2 million gallons, partially offset by a 1.1 million increase in gasoline gallons sold.

◦	the average cost per gallon of gasoline and diesel sold decreased $0.96 per gallon and $1.03 per gallon, respectively.

•	increase in the average volumes sold, partially offset by decreases in the average cost per gallon of gasoline and diesel sold in our West Texas marketing operations:

◦	the average volumes of gasoline sold increased 14.4 million gallons, partially offset by a 11.5 million decrease of diesel gallons sold.

◦	the average cost per gallon of gasoline and diesel sold decreased $0.41 per gallon and $0.61 per gallon, respectively.

•	decrease in employee and outside services costs due to measures implemented to respond to COVID-19 including delaying non-essential projects; and

•	decrease in utilities and other variable expenses due to lower production.

•	decrease in employee and outside services costs due to measures implemented to respond to COVID-19 including delaying non-essential projects;

•	lower operating costs associated with allocated contract services pertaining to certain of our assets; and

•	decreases in variable expenses such as utilities, maintenance and materials costs due to lower production.

•	a reduction in expenses related to travel, training and other expenses.

•	increases in allocated employee headcount in various operational groups as the Partnership continues to experience growth.

•	increases in legal and professional consulting fees due to various transactions undertaken by the Partnership.

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•	addition of assets to our asset base as a result of the Trucking Assets Acquisition and Big Spring Gathering Assets Acquisition.

•	addition of assets to our asset base as a result of the Trucking Assets Acquisition and the Big Spring Gathering Assets Acquisition.

•	lower floating interest rates applicable to the DKL Credit Facility;

•	partially offset by increased borrowings under the DKL Credit Facility as a result of our Big Spring Gathering Assets Acquisition and Trucking Assets Acquisition.

•	the addition of the Red River Pipeline Joint Venture, acquired in May 2019, as a result of the Partnership's efforts to grow the midstream business.

•	the addition of the Red River Pipeline Joint Venture, acquired in May 2019, as a result of the Partnership's efforts to grow the midstream business; and

•	an increase in income from our investments in Andeavor Logistics and CP LLC (as defined in Note 10), which operate the RIO Pipeline and the Caddo Pipeline System, respectively, as a result of increased revenues for both pipeline systems.

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•	increased revenues associated with agreements executed in connection with the Big Spring Gathering Assets Acquisition and the Trucking Assets Acquisition, which were effective March 31, 2020 and May 1, 2020, respectively. Refer to Note 2 of the condensed consolidated financial statements in Item 1, Financial Statements, for additional information.

•	increased revenues associated with agreements executed in connection with the Big Spring Gathering Assets Acquisition and the Trucking Assets Acquisition, which were effective March 31, 2020 and May 1, 2020, respectively. Refer to Note 2 of the condensed consolidated financial statements in Item 1, Financial Statements, for additional information.

•	increased revenues at our El Dorado Gathering System and Magnolia Pipeline as result of increased throughput during the six months ended June 30, 2020 when compared to the six months ended June 30, 2019.

•	increases in transportation costs related to our trucking assets, including driver wages and benefits and fuel expenses proportionate to increase in fees, insurance, supplies and maintenance expenses.

•	increases in transportation costs related to our trucking assets, including driver wages and benefits and fuel expense proportionate to increase in fees, insurance, supplies and maintenance expenses.

•	decrease in employee and outside services costs due to measures implemented to respond to COVID-19 including delaying non-essential projects; and

•	decrease in utilities and other variable expenses due to lower production.

•	decrease in employee and outside services costs due to measures implemented to respond to COVID-19 including delaying non-essential projects; and

•	decrease in utilities and other variable expenses due to lower production.

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•	increases in revenues associated with agreements executed in connection with the Big Spring Gathering Assets Acquisition and the Trucking Assets Acquisition; and

•	decreases in operating expenses.

•	increases in revenues associated with agreements executed in connection with the Big Spring Gathering Assets Acquisition and the Trucking Assets Acquisition, Paline Pipeline, and El Dorado Assets; and

•	decreases in operating expenses.

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•	decreases in the average volumes sold and in average sales prices per gallon of gasoline and diesel sold in our West Texas marketing operations.

◦	the average volumes of diesel sold decreased 10.2 million gallons, partially offset by a 1.1 million increase of gasoline gallons sold.

◦	the average sales prices per gallon of gasoline and diesel sold decreased $1.09 per gallon and $1.11 per gallon, respectively.

•	increases in the average volumes sold offset by decreases in the average sales prices per gallon of gasoline and diesel in our West Texas marketing operations.

◦	the average volumes of gasoline sold increased 14.4 million gallons partially offset by decrease of 11.5 million gallons in diesel sold.

◦	the average sales prices per gallon of gasoline and diesel sold decreased $0.47 per gallon and $0.68 per gallon, respectively.

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•	decreases in the average volumes and in the average cost per gallon of gasoline and diesel sold in our West Texas marketing operations.

◦	the average volumes of diesel sold decreased 10.2 million gallons, partially offset by a 1.1 million increase of gasoline gallons sold.

◦	the average cost per gallon of gasoline and diesel sold decreased $0.96 per gallon and $1.03 per gallon, respectively.

•	decreases in the average volumes and in the average cost per gallon of gasoline and diesel sold in our West Texas marketing operations.

◦	the average volumes of gasoline sold increased 14.4 million gallons partially offset by decrease of 11.5 million gallons in diesel sold.

◦	the average cost per gallon of gasoline and diesel sold decreased $0.41 per gallon and $0.61 per gallon, respectively.

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•	lower operating costs associated with allocated contract services pertaining to certain of our assets; and

•	decreases in variable expenses such as utilities, maintenance and material costs.

•	lower operating costs associated with allocated contract services pertaining to certain of our assets; and

•	decreases in variable expenses such as utilities, maintenance and materials costs.

•	decreases in the volumes of diesel sold and in average prices of diesel and gasoline in our West Texas marketing operations; and

•	decreases in cost of materials and other due to lower volumes of diesel sold as described above.

•	decreases in average cost per gallon of diesel and gasoline sold as described above.

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(1)	Expected date of distribution.

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•	An aggregate principal amount of $750.0 million under the Delek Logistics Credit Facility ("revolving credit facility"), due on September 28, 2023, with average borrowing rate of 2.78%.

•	An aggregate principal amount of $245.2 million, under the Delek Logistics Notes (6.75% senior notes), due in 2025, with effective interest rate of 7.22%.

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(1)

Maintenance capital expenditures represent cash expenditures (including expenditures for the addition or improvement to, or the replacement of, our capital assets, and for the acquisition of existing, or the construction or development of new, capital assets) made to maintain our long-term operating income or operating capacity. Examples of maintenance capital expenditures are expenditures for the repair, refurbishment and replacement of pipelines, tanks and terminals, to maintain equipment reliability, integrity and safety and to address environmental laws and regulations. Delek Holdings has agreed to reimburse us with respect to certain assets it has transferred to us pursuant to the terms of the Omnibus Agreement (as defined in Note 3 to our accompanying condensed consolidated financial statements).

(2)

The majority of the $2.4 million and $11.1 million budgeted for maintenance and discretionary projects in the pipelines and transportation segment is expected to be spent on scheduled maintenance and improvements to certain of our tanks and pipelines and developments to the Big Spring Gathering Assets, respectively. Effective March 31, 2020 and May 1, 2020, the pipelines and transportation segments includes the Big Spring Gathering Assets acquired in the Big Spring Gathering Assets Acquisition and Trucking Assets acquired in the Trucking Assets Acquisition, respectively. See Note 2 to our accompanying condensed consolidated financial statements for further information.

(3)	The majority of the $1.1 million and $1.5 million budgeted for maintenance and discretionary projects in the wholesale marketing and terminalling segment relates to scheduled maintenance and and improvements to certain of our terminalling facilities and developments on the Big Spring Refinery to Magellan Pipeline, respectively.

(4)	Capital spending excludes transaction costs capitalized in the amount of $0.3 million and $0.7 million that relate to the Trucking Assets Acquisition and the Big Spring Gathering Assets Acquisition, respectively.

(5)	Excludes rights-of-way spending of a nominal amount.

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