Quarterly Report (10-q)

Date : 08/08/2019 @ 10:09AM
Source : Edgar (US Regulatory)
Stock : Delek US Holdings Inc New (DK)
Quote : 35.59  -1.1 (-3.00%) @ 8:15PM

Quarterly Report (10-q)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form  10-Q
(Mark One)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
 
 
 
For the quarterly period ended
June 30, 2019
 
or
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
 
For the transition period from                      to                     
Commission file number 001-38142
DELEK US HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware
DKLOGOA18.JPG
35-2581557
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
7102 Commerce Way
Brentwood
Tennessee
37027
(Address of principal executive offices)
 
 
(Zip Code)
( 615 771-6701
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol
Name of Each Exchange on Which Registered
Common Stock, par value $0.01
DK
New York Stock Exchange
At August 2, 2019 , there were 75,335,208 shares of common stock, $0.01 par value, outstanding (excluding securities held by, or for the account of, the Company or its subsidiaries).


Table of Contents

Delek US Holdings, Inc.
Quarterly Report on Form 10-Q
For the Quarterly Period Ended June 30, 2019

 
 

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Financial Statements

Part I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Delek US Holdings, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(In millions, except share and per share data)
 
 
June 30, 2019
 
December 31, 2018
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
951.4

 
$
1,079.3

Accounts receivable, net
 
847.4

 
514.4

Accounts receivable from related parties
 
4.2

 

Inventories, net of inventory valuation reserves
 
891.6

 
690.9

Other current assets
 
92.7

 
135.7

Total current assets
 
2,787.3

 
2,420.3

Property, plant and equipment:
 
 
 
 
Property, plant and equipment
 
3,201.1

 
2,999.6

Less: accumulated depreciation
 
(896.1
)
 
(804.7
)
Property, plant and equipment, net
 
2,305.0

 
2,194.9

Operating lease right-of-use assets
 
199.2

 

Goodwill
 
856.6

 
857.8

Other intangibles, net
 
93.5

 
104.4

Equity method investments
 
273.6

 
130.3

Other non-current assets
 
58.0

 
52.9

Total assets
 
$
6,573.2

 
$
5,760.6

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
1,336.6

 
$
1,009.7

Accounts payable to related parties
 
3.5

 
1.5

Current portion of long-term debt
 
64.4

 
32.0

Obligation under Supply and Offtake Agreements
 
257.7

 
312.6

Current portion of operating lease liabilities
 
45.7

 

Accrued expenses and other current liabilities
 
350.8

 
307.7

Total current liabilities
 
2,058.7

 
1,663.5

Non-current liabilities:
 
 
 
 
Long-term debt, net of current portion
 
1,852.3

 
1,751.3

Obligation under Supply and Offtake Agreements
 
122.8

 
49.6

Environmental liabilities, net of current portion
 
138.6

 
139.5

Asset retirement obligations
 
72.6

 
75.5

Deferred tax liabilities
 
229.2

 
210.2

Operating lease liabilities, net of current portion
 
155.6

 

Other non-current liabilities
 
57.2

 
62.9

Total non-current liabilities
 
2,628.3

 
2,289.0

Stockholders’ equity:
 
 
 
 
Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued and outstanding
 

 

Common stock, $0.01 par value, 110,000,000 shares authorized, 90,861,698 shares and 90,478,075 shares issued at June 30, 2019 and December 31, 2018, respectively
 
0.9

 
0.9

Additional paid-in capital
 
1,140.3

 
1,135.4

Accumulated other comprehensive income
 
26.3

 
28.6

Treasury stock, 15,416,502 shares and 12,477,780 shares, at cost, as of June 30, 2019 and December 31, 2018, respectively
 
(618.9
)
 
(514.1
)
Retained earnings
 
1,165.9

 
981.8

Non-controlling interests in subsidiaries
 
171.7

 
175.5

Total stockholders’ equity
 
1,886.2

 
1,808.1

Total liabilities and stockholders’ equity
 
$
6,573.2

 
$
5,760.6


See accompanying notes to condensed consolidated financial statements

     
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Financial Statements

Delek US Holdings, Inc.
Condensed Consolidated Statements of Income (Unaudited)
(In millions, except share and per share)
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
 
 
2019
 
2018 (1)
 
2019
 
2018 (1),(2)
Net revenues
 
$
2,480.3

 
$
2,636.9

 
$
4,680.2

 
$
4,990.1

Cost of sales:
 
 
 
 
 
 
 
 
Cost of materials and other
 
2,067.7

 
2,250.2

 
3,767.1

 
4,293.0

Operating expenses (excluding depreciation and amortization presented below)
 
135.8

 
131.4

 
276.7

 
264.3

Depreciation and amortization
 
42.6

 
40.4

 
81.9

 
78.2

Total cost of sales
 
2,246.1

 
2,422.0

 
4,125.7

 
4,635.5

Operating expenses related to retail and wholesale business (excluding depreciation and amortization presented below)
 
26.5

 
26.1

 
52.3

 
51.3

General and administrative expenses
 
69.5

 
52.9

 
131.7

 
118.1

Depreciation and amortization
 
7.5

 
8.8

 
15.0

 
19.0

Other operating income, net
 
(3.6
)
 
(8.0
)
 
(1.2
)
 
(7.7
)
Total operating costs and expenses
 
2,346.0

 
2,501.8

 
4,323.5

 
4,816.2

Operating income
 
134.3

 
135.1

 
356.7

 
173.9

Interest expense
 
32.8

 
31.5

 
61.5

 
64.0

Interest income
 
(3.3
)
 
(0.9
)
 
(5.8
)
 
(1.6
)
Income from equity method investments
 
(9.3
)
 
(2.9
)
 
(11.9
)
 
(2.9
)
Gain on sale of business
 

 
(13.2
)
 

 
(13.2
)
Impairment loss on assets held for sale
 

 

 

 
27.5

Loss on extinguishment of debt
 

 

 

 
9.0

Other expense (income), net
 
4.9

 
0.3

 
3.5

 
(0.4
)
Total non-operating expenses, net
 
25.1

 
14.8

 
47.3

 
82.4

Income from continuing operations before income tax expense
 
109.2

 
120.3

 
309.4

 
91.5

Income tax expense
 
24.6

 
32.8

 
70.4

 
21.3

Income from continuing operations, net of tax
 
84.6

 
87.5

 
239.0

 
70.2

Discontinued operations:
 
 
 
 
 
 
 
 
Loss from discontinued operations, including loss on sale of discontinued operations
 
(1.0
)
 
(1.0
)
 
(1.0
)
 
(11.5
)
Income tax benefit
 
(0.2
)
 
(0.2
)
 
(0.2
)
 
(2.5
)
Loss from discontinued operations, net of tax
 
(0.8
)
 
(0.8
)
 
(0.8
)
 
(9.0
)
Net income
 
83.8

 
86.7

 
238.2

 
61.2

Net income attributed to non-controlling interests
 
6.5

 
7.6

 
11.6

 
22.5

Net income attributable to Delek
 
$
77.3

 
$
79.1

 
$
226.6

 
$
38.7

Basic income (loss) per share:
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
1.02

 
$
0.95

 
$
2.95

 
$
0.67

Loss from discontinued operations
 
(0.01
)
 
$
(0.01
)
 
(0.01
)
 
(0.21
)
Total basic income per share
 
$
1.01

 
$
0.94

 
$
2.94

 
$
0.46

Diluted income (loss) per share:
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
1.01

 
$
0.90

 
$
2.92

 
$
0.65

Loss from discontinued operations
 
(0.01
)
 
(0.01
)
 
(0.01
)
 
(0.20
)
Total diluted income per share
 
$
1.00

 
$
0.89

 
$
2.91

 
$
0.45

Dividends declared per common share outstanding
 
$
0.28

 
$
0.25

 
$
0.55

 
$
0.45

(1)  
Net revenues and cost of materials and other for the three and six months ended June 30, 2018 reflect a correction of an intercompany elimination which resulted in an increase in those accounts of $73.4 million not previously reflected on the unaudited consolidated financial statements in our June 30, 2018 Quarterly Report on Form 10-Q filed on August 9, 2018. Such amounts are not considered material to the financial statements and had no impact to operating income or net income for those periods. See Note 23 to our annual audited consolidated financial statements included in Part II, Item 8 of our 2018 Annual Report on Form 10-K, as amended and filed on June 27, 2019, for further discussion.
(2)  
Income tax expense for the six months ended June 30, 2018 reflects a correction made in our 2018 Annual Report on Form 10-K (as originally filed on March 1, 2019) to record additional deferred tax expense totaling $5.5 million related to the recognition of a valuation allowance on deferred tax assets recognized in connection with the Big Spring Logistic Assets Acquisition (see Note 5 ) not previously reported in our June 30, 2018 Quarterly Report on Form 10-Q filed on August 09, 2018. Such amount is not considered material to the financial statements or the trend of earnings for that period. See Note 23 to our annual audited consolidated financial statements included in Part II, Item 8 of our 2018 Annual Report on Form 10-K, as amended and filed on June 27, 2019, for further discussion.
See accompanying notes to condensed consolidated financial statements

     
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Financial Statements

Delek US Holdings, Inc.
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
(In millions)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Net income attributable to Delek
 
$
77.3

 
$
79.1

 
$
226.6

 
$
38.7

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Commodity contracts designated as cash flow hedges:
 
 
 
 
 
 
 
 
Unrealized losses
 
(31.3
)
 
(74.7
)
 
(37.3
)
 
(72.0
)
Realized losses reclassified to cost of materials and other
 
14.8

 
8.8

 
33.9

 
8.8

Net losses related to commodity cash flow hedges
 
(16.5
)
 
(65.9
)
 
(3.4
)
 
(63.2
)
Income tax benefit
 
3.5

 
13.9

 
0.7

 
13.3

Net comprehensive loss on commodity contracts designated as cash flow hedges
 
(13.0
)
 
(52.0
)
 
(2.7
)
 
(49.9
)
 
 
 
 
 
 
 
 
 
Interest rate contracts designated as cash flow hedges:
 
 
 
 
 
 
 
 
Unrealized losses
 

 

 

 
(1.3
)
Realized losses reclassified to interest expense
 

 

 

 
0.7

Net losses related to interest rate cash flow hedges
 

 

 

 
(0.6
)
Income tax benefit
 

 

 

 
0.1

Net comprehensive loss on interest rate contracts designated as cash flow hedges
 

 

 

 
(0.5
)
 
 
 
 
 
 
 
 
 
Foreign currency translation (loss) gain, net of taxes
 
(0.1
)
 
(0.2
)
 
0.1

 
(0.6
)
 
 
 
 
 
 
 
 
 
Postretirement benefit plans:
 
 
 
 
 
 
 
 
Unrealized gain arising during the year related to:
 
 
 
 
 
 
 
 
  Net actuarial gain
 

 

 

 
0.2

Gain reclassified to earnings:
 
 
 
 
 
 
 
 
   Recognized due to curtailment and settlement
 

 

 

 
(0.1
)
   Amortization of net actuarial loss
 
0.2

 

 
0.4

 

Increase related to postretirement benefit plans, net
 
0.2

 

 
0.4

 
0.1

Income tax expense
 
(0.1
)
 

 
(0.1
)
 

Net comprehensive income on postretirement benefit plans, net of taxes
 
0.1

 

 
0.3

 
0.1

Total other comprehensive loss
 
(13.0
)
 
(52.2
)
 
(2.3
)
 
(50.9
)
Comprehensive income (loss) attributable to Delek
 
$
64.3

 
$
26.9

 
$
224.3

 
$
(12.2
)

See accompanying notes to condensed consolidated financial statements


     
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Financial Statements

Delek US Holdings, Inc.
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
(In millions, except share and per share data)
 
 
Three Months Ended June 30, 2019
 
 
Common Stock
Additional Paid-in Capital
 
Accumulated Other Comprehensive Income
 
Retained Earnings
 
Treasury Stock
Non-Controlling Interest in Subsidiaries
 
Total Stockholders' Equity
 
 
Shares
 
Amount
 
Shares
 
Amount
 
Balance at
March 31, 2019
90,722,641

 
$
0.9

 
$
1,135.5

 
$
39.3

 
$
1,110.1

 
(13,769,424
)
 
$
(560.3
)
 
$
173.0

 
$
1,898.5

Net income

 

 

 

 
77.3

 

 

 
6.5

 
83.8

Other comprehensive loss related to commodity contracts, net

 

 

 
(13.0
)
 

 

 

 

 
(13.0
)
Other comprehensive income related to postretirement benefit plans, net

 

 

 
0.1

 

 

 

 

 
0.1

Foreign currency translation loss, net

 

 

 
(0.1
)
 

 

 

 

 
(0.1
)
Common stock dividends ($0.28 per share)

 

 

 

 
(21.5
)
 

 

 

 
(21.5
)
Distributions to non-controlling interests

 

 

 

 

 

 

 
(7.9
)
 
(7.9
)
Equity-based compensation expense

 

 
6.7

 

 

 

 

 
0.1

 
6.8

Repurchase of common stock

 

 

 

 

 
(1,647,078
)
 
(58.6
)
 

 
(58.6
)
Taxes paid due to the net settlement of equity-based compensation

 

 
(2.4
)
 

 

 

 

 

 
(2.4
)
Exercise of equity-based awards
139,057

 

 

 

 

 

 

 

 

Other

 

 
0.5

 

 

 

 

 

 
0.5

Balance at
June 30, 2019
90,861,698

 
$
0.9

 
$
1,140.3

 
$
26.3

 
$
1,165.9

 
(15,416,502
)
 
$
(618.9
)
 
$
171.7

 
$
1,886.2










     
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Financial Statements

Delek US Holdings, Inc.
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (Continued)
(In millions, except share and per share data)
 
 
Three Months Ended June 30, 2018
 
 
Common Stock
 
Additional Paid-in Capital
 
Accumulated Other Comprehensive Income
 
Retained Earnings
 
Treasury Stock
 
Non-Controlling Interest in Subsidiaries
 
Total Stockholders' Equity
 
 
Shares
 
Amount
 
 
 
 
Shares
 
Amount
 
 
Balance at
March 31, 2018
87,305,668

 
$
0.9

 
$
1,043.3

 
$
10.0

 
$
664.3

 
(3,332,555
)
 
$
(120.3
)
 
$
176.1

 
$
1,774.3

Net income

 

 

 

 
79.1

 

 

 
7.6

 
86.7

Other comprehensive loss related to commodity contracts, net

 

 

 
(52.0
)
 

 

 

 

 
(52.0
)
Other comprehensive loss related to interest rate contracts, net

 

 

 

 

 

 

 

 

Foreign currency translation loss, net

 

 

 
(0.2
)
 

 

 

 

 
(0.2
)
Common stock dividends ($0.25 per share)

 

 

 

 
(20.8
)
 

 

 

 
(20.8
)
Distribution to non-controlling interest

 

 

 

 

 

 

 
(7.2
)
 
(7.2
)
Equity-based compensation expense

 

 
5.6

 

 

 

 

 

 
5.6

Repurchase of common stock

 

 

 

 

 
(371,271
)
 
(20.0
)
 

 
(20.0
)
Taxes paid due to the net settlement of equity-based compensation

 

 
(7.0
)
 

 

 

 

 

 
(7.0
)
Exercise of equity-based awards
324,658

 

 

 

 

 

 

 

 

Other
789

 

 
(0.1
)
 
(0.2
)
 
0.2

 

 

 

 
(0.1
)
Balance at
June 30, 2018
87,631,115

 
$
0.9

 
$
1,041.8

 
$
(42.4
)
 
$
722.8

 
(3,703,826
)
 
$
(140.3
)
 
$
176.5

 
$
1,759.3






     
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Financial Statements

Delek US Holdings, Inc.
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
(In millions, except share and per share data)
 
 
Six Months Ended June 30, 2019
 
 
Common Stock
Additional Paid-in Capital
 
Accumulated Other Comprehensive Income
 
Retained Earnings
 
Treasury Stock
Non-Controlling Interest in Subsidiaries
 
Total Stockholders' Equity
 
 
Shares
 
Amount
 
Shares
 
Amount
 
Balance at
December 31, 2018
90,478,075

 
$
0.9

 
$
1,135.4

 
$
28.6

 
$
981.8

 
(12,477,780
)
 
$
(514.1
)
 
$
175.5

 
$
1,808.1

Net income

 

 

 

 
226.6

 

 

 
11.6

 
238.2

Other comprehensive loss related to commodity contracts, net

 

 

 
(2.7
)
 

 

 

 

 
(2.7
)
Other comprehensive income related to postretirement benefit plans, net

 

 

 
0.3

 

 

 

 

 
0.3

Foreign currency translation gain, net

 

 

 
0.1

 

 

 

 

 
0.1

Common stock dividends ($0.55 per share)

 

 

 

 
(42.5
)
 

 

 

 
(42.5
)
Distributions to non-controlling interests

 

 

 

 

 

 

 
(15.6
)
 
(15.6
)
Equity-based compensation expense

 

 
11.6

 

 

 

 

 
0.2

 
11.8

Repurchase of common stock

 

 

 

 

 
(2,938,722
)
 
(104.8
)
 

 
(104.8
)
Taxes paid due to the net settlement of equity-based compensation

 

 
(6.9
)
 

 

 

 

 

 
(6.9
)
Exercise of equity-based awards
383,623

 

 

 

 

 

 

 

 

Other

 

 
0.2

 

 

 

 

 

 
0.2

Balance at
June 30, 2019
90,861,698

 
$
0.9

 
$
1,140.3

 
$
26.3

 
$
1,165.9

 
(15,416,502
)
 
$
(618.9
)
 
$
171.7

 
$
1,886.2










     
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Financial Statements

Delek US Holdings, Inc.
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (Continued)
(In millions, except share and per share data)
 
 
Six Months Ended June 30, 2018
 
 
Common Stock
 
Additional Paid-in Capital
 
Accumulated Other Comprehensive Income
 
Retained Earnings
 
Treasury Stock
 
Non-Controlling Interest in Subsidiaries
 
Total Stockholders' Equity
 
 
Shares
 
Amount
 
 
 
 
Shares
 
Amount
 
 
Balance at
December 31, 2017
81,533,548

 
$
0.8

 
$
900.1

 
$
6.9

 
$
767.8

 
(762,623
)
 
$
(25.0
)
 
$
313.6

 
$
1,964.2

Net income

 

 

 

 
38.7

 

 

 
22.5

 
61.2

Other comprehensive loss related to commodity contracts, net

 

 

 
(49.9
)
 

 

 

 

 
(49.9
)
Other comprehensive income related to postretirement benefit plans, net

 

 

 
0.1

 

 

 

 

 
0.1

Other comprehensive loss related to interest rate contracts, net

 

 

 
(0.4
)
 

 

 

 

 
(0.4
)
Foreign currency translation loss, net

 

 

 
(0.6
)
 

 

 

 

 
(0.6
)
Common stock dividends ($0.45 per share)

 

 

 

 
(37.8
)
 

 

 

 
(37.8
)
Distribution to non-controlling interest

 

 

 

 

 

 

 
(14.1
)
 
(14.1
)
Equity-based compensation expense

 

 
10.2

 

 

 

 

 
0.2

 
10.4

Issuance of stock for non-controlling interest repurchase, net of tax
5,649,373

 
0.1

 
140.4

 

 

 

 

 
(127.0
)
 
13.5

De-recognition of non-controlling interest

 

 

 

 

 

 

 
(18.7
)
 
(18.7
)
Reclassification for stranded tax effects resulting from the the Tax Reform Act (see Note 14)

 

 

 
1.6

 
(1.6
)
 

 

 

 

Cumulative effect of adopting accounting principle regarding income tax effect of intra-equity transfers

 

 

 

 
(44.4
)
 

 

 

 
(44.4
)
Repurchase of common stock

 

 

 

 

 
(2,941,203
)
 
(115.3
)
 

 
(115.3
)
Taxes paid due to the net settlement of equity-based compensation

 

 
(8.8
)
 

 

 

 

 

 
(8.8
)
Exercise of equity-based awards
447,405

 

 

 

 

 

 

 

 

Other
789

 

 
(0.1
)
 
(0.1
)
 
0.1

 

 

 

 
(0.1
)
Balance at
June 30, 2018
87,631,115

 
$
0.9

 
$
1,041.8

 
$
(42.4
)
 
$
722.8

 
(3,703,826
)
 
$
(140.3
)
 
$
176.5

 
$
1,759.3


See accompanying notes to condensed consolidated financial statements


     
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Financial Statements

Delek US Holdings, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In millions)
 
 
Six Months Ended June 30,
 
 
2019
 
2018
Cash flows from operating activities:
 
 
 
 
Net income
 
$
238.2

 
$
61.2

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 

 
 
Depreciation and amortization
 
96.9

 
97.2

Amortization of deferred financing costs and debt discount
 
3.2

 
4.8

 Non-cash lease expense
 
16.5

 

Accretion of environmental liabilities and asset retirement obligations
 
1.4

 
1.8

Amortization of unfavorable contract liability
 

 
(2.2
)
Deferred income taxes
 
16.0

 
(65.3
)
Income from equity method investments
 
(11.9
)
 
(2.9
)
Dividends from equity method investments
 
4.2

 
2.3

Loss on disposal of assets
 
3.6

 
1.3

Loss on extinguishment of debt
 

 
9.0

Gain on sale of business
 

 
(13.2
)
Impairment of assets held for sale
 

 
27.5

Equity-based compensation expense
 
11.8

 
10.4

Income tax benefit of equity-based compensation
 
(1.7
)
 

Loss from discontinued operations
 
0.8

 
9.0

Changes in assets and liabilities, net of acquisitions:
 
 

 
 

Accounts receivable
 
(332.6
)
 
(177.7
)
Inventories and other current assets
 
(192.5
)
 
(46.2
)
Fair value of derivatives
 
22.3

 
(112.6
)
Accounts payable and other current liabilities
 
349.5

 
43.6

Obligation under Supply and Offtake Agreement
 
18.3

 
24.7

Non-current assets and liabilities, net
 
(8.6
)
 
6.5

Cash provided by (used in) operating activities - continuing operations
 
235.4

 
(120.8
)
Cash used in operating activities - discontinued operations
 

 
(15.6
)
Net cash provided by (used in) operating activities
 
235.4

 
(136.4
)
Cash flows from investing activities:
 
 

 
 
Equity method investment contributions
 
(136.4
)
 
(0.2
)
Distributions from equity method investments
 
0.8

 
0.7

Purchases of property, plant and equipment
 
(199.9
)
 
(142.5
)
Purchase of intangible assets
 

 
(0.5
)
Proceeds from sale of property, plant and equipment
 
0.3

 
0.3

Proceeds from sale of retail stores
 
5.8

 

Proceeds from sale of business
 

 
110.8

Proceeds from sales of discontinued operations
 

 
39.7

Cash (used in) provided by investing activities - continuing operations
 
(329.4
)
 
8.3

Cash provided by investing activities - discontinued operations
 

 
5.5

Net cash (used in) provided by investing activities
 
(329.4
)
 
13.8

Delek US Holdings, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited) (continued)
(In millions)
 
 
Six Months Ended June 30,
 
 
2019
 
2018
Cash flows from financing activities:
 
 

 
 
Proceeds from long-term revolvers
 
$
987.5

 
$
1,569.6

Payments on long-term revolvers
 
(1,072.5
)
 
(1,017.6
)
Proceeds from term debt
 
246.7

 
690.6

Payments on term debt
 
(29.1
)
 
(672.9
)
Proceeds from product financing agreements
 
19.8

 

Repayments of product financing agreements
 
(15.6
)
 
(72.4
)
Taxes paid due to the net settlement of equity-based compensation
 
(6.9
)
 
(8.8
)
Repurchase of common stock
 
(104.8
)
 
(115.3
)
Distribution to non-controlling interest
 
(15.6
)
 
(14.1
)
Dividends paid
 
(42.5
)
 
(37.8
)
Deferred financing costs paid
 
(0.9
)
 
(7.8
)
Cash (used in) provided by financing activities - continuing operations
 
(33.9
)
 
313.5

Cash used in financing activities - discontinued operations
 

 

Net cash (used in) provided by financing activities
 
(33.9
)
 
313.5

Net (decrease) increase in cash and cash equivalents
 
(127.9
)
 
190.9

Cash and cash equivalents at the beginning of the period
 
1,079.3

 
941.9

Cash and cash equivalents of continuing operations at the end of the period
 
$
951.4

 
$
1,132.8

Supplemental disclosures of cash flow information:
 
 
 
 
Cash paid during the period for:
 
 
 
 
Interest, net of capitalized interest of $0.7 million and $0.4 million in the 2019 and 2018 periods, respectively
 
$
60.4

 
$
62.7

Income taxes
 
$
66.1

 
$
5.7

Non-cash investing activities:
 
 
 
 
Common stock issued in connection with the buyout of Alon Partnership non-controlling interest
 
$

 
$
127.0

Increase (decrease) in accrued capital expenditures
 
$
14.5

 
$
(17.9
)
Non-cash financing activities:
 
 
 
 
 Non-cash lease liability arising from recognition of right of use assets upon adoption of ASU 2016-02
 
$
211.0

 
$

Non-cash lease liability arising from obtaining right of use assets during the period
 
$
8.1

 
$


See accompanying notes to condensed consolidated financial statements

     
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Notes to Condensed Consolidated Financial Statements (Unaudited)


Note 1 - Organization and Basis of Presentation
Delek US Holdings, Inc. operates through its consolidated subsidiaries, which include Delek US Energy, Inc. (and its subsidiaries) and Alon USA Energy, Inc. ("Alon") (and its subsidiaries).
Effective July 1, 2017 (the "Effective Time"), we acquired the outstanding common stock of Alon (previously listed under NYSE: ALJ) (the "Delek/Alon Merger", as further discussed in Note 2 ), resulting in a new post-combination consolidated registrant renamed as Delek US Holdings, Inc. (“New Delek”), with Alon and the previous Delek US Holdings, Inc. (“Old Delek”) surviving as wholly-owned subsidiaries. New Delek is the successor issuer to Old Delek and Alon pursuant to Rule 12g-3(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In addition, as a result of the Delek/Alon Merger, the shares of common stock of Old Delek and Alon were delisted from the New York Stock Exchange ("NYSE") in July 2017, and their respective reporting obligations under the Exchange Act were terminated.
Unless otherwise indicated or the context requires otherwise, the disclosures and financial information included in this report for the periods prior to July 1, 2017 reflect that of Old Delek, and the disclosures and financial information included in this report for the periods beginning July 1, 2017 reflect that of New Delek. The terms "we," "our," "us," "Delek" and the "Company" are used in this report to refer to Old Delek and its consolidated subsidiaries for the periods prior to July 1, 2017, and New Delek and its consolidated subsidiaries for the periods on or after July 1, 2017, unless otherwise noted. New Delek's Common Stock is listed on the NYSE under the symbol "DK."
Our condensed consolidated financial statements include the accounts of Delek and its subsidiaries. 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 GAAP applied on a consistent basis with those of the annual audited consolidated financial statements included in our Annual Report on Form 10-K as amended and filed with the Securities and Exchange Commission ("SEC") on June 27, 2019 (the "Annual Report on Form 10-K") 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 the notes thereto for the year ended December 31, 2018 included in our Annual Report on Form 10-K.
Our condensed consolidated financial statements include Delek Logistics Partners, LP ("Delek Logistics"), which is a variable interest entity. As the indirect owner of the general partner of Delek Logistics, we have the ability to direct the activities of this entity that most significantly impact its economic performance. We are also considered to be the primary beneficiary for accounting purposes for this entity and are Delek Logistics' primary customer. As Delek Logistics does not derive an amount of gross margin material to us from third parties, there is limited risk to Delek associated with Delek Logistics' operations. However, in the event that Delek Logistics incurs a loss, our operating results will reflect such loss, net of intercompany eliminations, to the extent of our ownership interest in this entity.
In the opinion of management, all adjustments necessary for a fair presentation of the financial condition and the results of operations for the interim periods have been included. All significant intercompany transactions and account balances have been eliminated in consolidation. 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 prior period amounts have been reclassified in order to conform to the current period presentation. Additionally, certain changes to presentation of the prior period statements of income have been made in order to conform to the current period presentation, primarily relating to the addition of a subtotal entitled 'cost of sales' which includes all costs directly attributable to the generation of the related revenue, as defined by GAAP, and the retitling of what was previously referred to as 'cost of goods sold' to 'cost of materials and other'. In connection with this change in presentation, we revised our related accounting policy, as presented in our 2018 Annual Report on Form 10-K.

     
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Notes to Condensed Consolidated Financial Statements (Unaudited)

New Accounting Pronouncements Adopted During 2019
Accounting Standards Update ("ASU") 2016-02, Leases
In February 2016, the Financial Accounting Standards Board (the "FASB") issued guidance that requires the recognition of a lease liability and a right-of-use asset, initially measured at the present value of the lease payments, in the statement of financial condition for all leases with terms longer than one year. The guidance was subsequently amended to consider the impact of practical expedients and provide additional clarifications. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We adopted the new lease standard on January 1, 2019. We elected the package of practical expedients which, among other things, allows us to carry forward the historical lease classification. For certain lease classes, we have elected the practical expedient not to separate lease and non-lease components, which allows us to combine the components if certain criteria are met. Further, we elected the optional transition method, which allows us to recognize a cumulative-effect adjustment to the opening balance sheet of retained earnings at the date of adoption and to not recast our comparative periods. We have not elected the hindsight practical expedient, which would have allowed us to use hindsight in determining the reasonably certain lease term. The adoption of the lease accounting guidance had no impact on January 1, 2019 retained earnings and resulted in the recognition of a $211.0 million lease liability and a corresponding right-of-use asset on our consolidated balance sheet. The adoption did not have a material impact on our consolidated income statement. See Note 20 for further information.
ASU 2017-12, Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities
In August 2017, the FASB issued guidance to better align financial reporting for hedging activities with the economic objectives of those activities for both financial (e.g., interest rate) and commodity risks. The guidance was intended to create more transparency in the presentation of financial results, both on the face of the financial statements and in the footnotes, and simplify the application of hedge accounting guidance. This guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Companies are required to apply the guidance on a modified retrospective transition method in which the cumulative effect of the change is recognized within equity in the consolidated balance sheet as of the date of adoption. We adopted this guidance on January 1, 2019 and the adoption did not have a material impact on our business, financial condition or results of operations. See Note 11 for further information.
Accounting Pronouncements Not Yet Adopted
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. Early adoption is permitted, including adoption in any interim period for which financial statements have not been issued. Entities can choose to adopt the new guidance prospectively or retrospectively. We expect to adopt this guidance on or before 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 2018-14, Compensation - Changes to the Disclosure Requirements for Defined Benefit Plans
In August 2018, the FASB issued guidance related to disclosure requirements for defined benefit plans. The pronouncement eliminates, modifies and adds disclosure requirements for defined benefit plans. The pronouncement is effective for fiscal years ending after December 15, 2020, and early adoption is permitted. We expect to adopt this guidance on or before the effective date and do not expect adopting this new guidance will have a material impact on our business, financial condition or results of operations.
ASU 2018-13, Fair Value Measurement - Changes to the Disclosure Requirements for Fair Value Measurement
In August 2018, 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, with early adoption permitted. We expect to adopt this guidance on or before the effective date and do not expect adopting this new guidance will 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 expect to adopt this guidance on or before 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.

     
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Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 2 - Acquisitions
In January 2017, we announced that Old Delek (and various related entities) entered into a merger agreement with Alon, as amended (the "Merger Agreement"). The related Merger (as previously defined, the "Delek/Alon Merger") was effective July 1, 2017 (as previously defined, the “Effective Time”), resulting in a new post-combination consolidated registrant renamed as Delek US Holdings, Inc. (as previously defined, “New Delek”), with Alon and Old Delek surviving as wholly-owned subsidiaries of New Delek. New Delek is the successor issuer to Old Delek and Alon pursuant to Rule 12g-3(c) under the Exchange Act, as amended. In addition, as a result of the Delek/Alon Merger, the shares of common stock of Old Delek and Alon were delisted from the NYSE in July 2017, and their respective reporting obligations under the Exchange Act were terminated.
In connection with the Delek/Alon Merger, Alon, New Delek and U.S. Bank National Association, as trustee (the “Trustee”) entered into a First Supplemental Indenture (the “Supplemental Indenture”), effective as of July 1, 2017, which provided for Alon's 3.00% Convertible Senior Notes due 2018, which were previously convertible into Alon Common Stock, to thereafter be convertible into New Delek Common Stock based on the exchange rate applied in the Delek/Alon Merger (the “Convertible Notes”). Additionally, in connection with the Convertible Notes, Alon also entered into equity instruments, including call options (the "Call Options") and warrants (the "Warrants"), designed, in combination, to hedge a portion of the risk associated with the potential exercise of the conversion feature of the Convertible Notes and to mitigate the dilutive effect of such potential conversion. These instruments were also exchanged in connection with the Delek/Alon Merger into instruments that were indexed to New Delek Common Stock. See Note 10 for further discussion of these instruments and subsequent activity.
The Delek/Alon Merger was accounted for using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized on the balance sheet at their fair values as of the acquisition date. Transaction costs incurred by the Company in connection with the Delek/Alon Merger totaled $1.8 million and $6.6 million for the three and six months ended June 30, 2018 , respectively. Such costs were included in general and administrative expenses in the accompanying condensed consolidated statements of income.
The final allocation of the aggregate purchase price (which was finalized as of June 30, 2018) is summarized as follows (in millions), and is inclusive of our discontinued Paramount and Long Beach, California refinery and California renewable fuels facility operations (collectively, the "California Discontinued Entities," discussed in Note 7 ):
Delek common stock issued
 
19,250,795

 
 
Ending price per share of Delek Common Stock immediately before the Effective Time
 
$
26.44

 
 
Total value of common stock consideration
 
 
 
$
509.0

Additional consideration  (1)
 
 
 
21.7

Fair value of Delek's pre-existing equity method investment in Alon (2)
 
 
 
449.0

 
 
 
 
979.7

Less: Fair value of net assets acquired
 
 
 
109.0

Goodwill (excess of purchase price over fair value of net assets acquired)
 
 
 
$
870.7


(1)  
Additional consideration includes the fair value of certain equity instruments originally indexed to Alon stock that were exchanged for instruments indexed to New Delek's stock, as well as the fair value of certain share-based payments that were required to be exchanged for awards indexed to New Delek's stock in connection with the Delek/Alon Merger.
(2) The fair value of Delek's pre-existing equity method investment in Alon was based on the quoted market price of shares of Alon.


During the three and six months ended June 30, 2018 , certain immaterial catch-up adjustments were recorded related to accretion of environmental liabilities and amortization of leasehold intangibles identified and valued during the final months of the measurement period.

Note 3 - Segment Data
We aggregate our operating units into three reportable segments: refining, logistics and retail.
Operations that are not specifically included in the reportable segments are included in corporate, other and eliminations, which consist of the following: our corporate activities; results of certain immaterial operating segments, including our Canadian crude trading operations (as discussed in Note 11 ); Alon's asphalt terminal operations acquired as part of the Delek/Alon Merger and subsequently substantially disposed in the second quarter of 2018 (see Note 7 for further discussion); the California Discontinued Entities which were acquired as part of the Delek/Alon Merger and subsequently disposed over the first seven months of 2018 (see Note 7 for further discussion); and intercompany eliminations.

     
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Notes to Condensed Consolidated Financial Statements (Unaudited)

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 the reportable segments based on the 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 refining segment processes crude oil and other feedstocks for the manufacture of transportation motor fuels, including various grades of gasoline, diesel fuel and aviation fuel, asphalt and other petroleum-based products that are distributed through owned and third-party product terminals. The refining segment has a combined nameplate capacity of 302,000 barrels per day ("bpd") as of June 30, 2019 , including the 75,000 bpd Tyler, Texas refinery (the "Tyler refinery"), the 80,000 bpd El Dorado, Arkansas refinery (the "El Dorado refinery"), the 73,000 bpd Big Spring, Texas refinery (the "Big Spring refinery"), and the 74,000 bpd Krotz Springs, Louisiana refinery (the "Krotz Springs refinery"), as well as a non-operating refinery located in Bakersfield, California. The refining segment also owns and operates two biodiesel facilities involved in the production of biodiesel fuels and related activities, located in Crossett, Arkansas and Cleburn, Texas. The refining segment's petroleum-based products are marketed primarily in the south central, southwestern and western regions of the United States, and the refining segment also ships and sells gasoline into wholesale markets in the southern and eastern United States. Motor fuels are sold under the Alon or Delek brand through various terminals to supply Alon or Delek branded retail sites. In addition, we sell motor fuels through our wholesale distribution network on an unbranded basis.
Our refining segment has service agreements with our logistics segment, which, among other things, requires the refining segment to pay service fees based on the number of gallons sold and to share a portion of the margin achieved in return for providing marketing, sales and customer services at the Tyler refinery, and effective March 1, 2018, at the Big Spring refinery (see Note 5 for further discussion regarding the Big Spring marketing agreement). These intercompany transaction fees in regards to the Tyler refinery were $5.1 million and $9.9 million during the three and six months ended June 30, 2019 , respectively, and $5.5 million and $10.5 million during the three and six months ended June 30, 2018 , respectively. The intercompany transaction fees in regards to the Big Spring refinery were $3.4 million and $7.0 million for the three and six months ended June 30, 2019 , resp