Quarterly Report (10-q)

Date : 05/09/2019 @ 11:13AM
Source : Edgar (US Regulatory)
Stock : Delek US Holdings, Inc. (DK)
Quote : 36.23  0.84 (2.37%) @ 8:47PM

Quarterly Report (10-q)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form  10-Q
(Mark One)
þ
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
 
 
 
For the quarterly period ended March 31, 2019
or
o
 
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 þ No o
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 þ No o
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 þ
 
Accelerated filer o
 
Non-accelerated filer o
 
Smaller reporting company o
 
Emerging growth company o
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
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 $.01
DK
New York Stock Exchange

At May 3, 2019 , there were 76,855,503 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 March 31, 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)
 
 
March 31, 2019
 
December 31, 2018
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
989.7

 
$
1,079.3

Accounts receivable, net
 
780.2

 
514.4

Inventories, net of inventory valuation reserves
 
905.8

 
690.9

Other current assets
 
85.0

 
135.7

Total current assets
 
2,760.7

 
2,420.3

Property, plant and equipment:
 
 
 
 
Property, plant and equipment
 
3,121.4

 
2,999.6

Less: accumulated depreciation
 
(849.1
)
 
(804.7
)
Property, plant and equipment, net
 
2,272.3

 
2,194.9

Operating lease right-of-use assets
 
198.3

 

Goodwill
 
857.8

 
857.8

Other intangibles, net
 
94.9

 
104.4

Equity method investments
 
135.0

 
130.3

Other non-current assets
 
52.8

 
52.9

Total assets
 
$
6,371.8

 
$
5,760.6

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
1,232.8

 
$
1,009.7

Accounts payable to related parties
 
1.3

 
1.5

Current portion of long-term debt
 
32.0

 
32.0

Obligation under Supply and Offtake Agreements
 
158.9

 
312.6

Current portion of operating lease liabilities
 
43.3

 

Accrued expenses and other current liabilities
 
392.6

 
307.7

Total current liabilities
 
1,860.9

 
1,663.5

Non-current liabilities:
 
 
 
 
Long-term debt, net of current portion
 
1,729.1

 
1,751.3

Obligation under Supply and Offtake Agreements
 
225.9

 
49.6

Environmental liabilities, net of current portion
 
139.5

 
139.5

Asset retirement obligations
 
74.7

 
75.5

Deferred tax liabilities
 
226.7

 
210.2

Operating lease liabilities, net of current portion
 
157.5

 

Other non-current liabilities
 
59.0

 
62.9

Total non-current liabilities
 
2,612.4

 
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, 90,722,641 shares and 90,478,075 shares issued at March 31, 2019 and December 31, 2018, respectively
 
0.9

 
0.9

Additional paid-in capital
 
1,135.5

 
1,135.4

Accumulated other comprehensive income
 
39.3

 
28.6

Treasury stock, 13,769,424 shares and 12,477,780 shares, at cost, as of March 31, 2019 and December 31, 2018, respectively
 
(560.3
)
 
(514.1
)
Retained earnings
 
1,110.1

 
981.8

Non-controlling interests in subsidiaries
 
173.0

 
175.5

Total stockholders’ equity
 
1,898.5

 
1,808.1

Total liabilities and stockholders’ equity
 
$
6,371.8

 
$
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
 
 
March 31,
 
 
2019
 
2018 (1)
Net revenues
 
$
2,199.9

 
$
2,353.2

Cost of sales:
 
 
 
 
Cost of materials and other
 
1,699.4

 
2,042.8

Operating expenses (excluding depreciation and amortization presented below)
 
140.9

 
132.9

Depreciation and amortization
 
39.3

 
37.8

Total cost of sales
 
1,879.6

 
2,213.5

Operating expenses related to retail and wholesale business (excluding depreciation and amortization presented below)
 
25.8

 
25.2

General and administrative expenses
 
62.2

 
65.2

Depreciation and amortization
 
7.5

 
10.2

Other operating expense, net
 
2.4

 
0.3

Total operating costs and expenses
 
1,977.5

 
2,314.4

Operating income
 
222.4

 
38.8

Interest expense
 
28.7

 
32.5

Interest income
 
(2.5
)
 
(0.7
)
Income from equity method investments
 
(2.6
)
 

Impairment loss on assets held for sale
 

 
27.5

Loss on extinguishment of debt
 

 
9.0

Other income, net
 
(1.4
)
 
(0.7
)
Total non-operating expenses, net
 
22.2

 
67.6

Income (loss) from continuing operations before income tax expense (benefit)
 
200.2

 
(28.8
)
Income tax expense (benefit)
 
45.8

 
(11.5
)
Income (loss) from continuing operations, net of tax
 
154.4

 
(17.3
)
Discontinued operations:
 
 
 
 
Loss from discontinued operations, including gain (loss) on sale of discontinued operations
 

 
(10.5
)
Income tax benefit
 

 
(2.3
)
Loss from discontinued operations, net of tax
 

 
(8.2
)
Net income (loss)
 
154.4

 
(25.5
)
Net income attributed to non-controlling interests
 
5.1

 
14.9

Net income (loss) attributable to Delek
 
$
149.3

 
$
(40.4
)
Basic income (loss) per share:
 
 
 
 
Income (loss) from continuing operations
 
$
1.92

 
$
(0.29
)
Loss from discontinued operations
 
$

 
$
(0.20
)
Total basic income (loss) per share
 
$
1.92

 
$
(0.49
)
Diluted income (loss) per share:
 
 
 
 
Income (loss) from continuing operations
 
$
1.90

 
$
(0.29
)
(Loss) from discontinued operations
 
$

 
$
(0.20
)
Total diluted income (loss) per share
 
$
1.90

 
$
(0.49
)
Weighted average common shares outstanding:
 
 
 
 
Basic
 
77,793,278

 
82,252,405

Diluted
 
78,446,690

 
82,252,405

Dividends declared per common share outstanding
 
$
0.27

 
$
0.20

(1)  
Income tax benefit for the quarter ended March 31, 2018 reflects a correction made in our 2018 Annual Report on Form 10-K (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 March 31, 2018 Quarterly Report on Form 10-Q filed on May 10, 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 filed on March 1, 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 March 31,
 
 
2019
 
2018
Net income (loss) attributable to Delek
 
$
149.3

 
$
(40.4
)
Other comprehensive income (loss):
 
 
 
 
Commodity contracts designated as cash flow hedges:
 
 
 
 
Unrealized (losses) gains
 
(6.0
)
 
2.7

Realized losses reclassified to cost of materials and other
 
19.1

 

Net gains related to commodity cash flow hedges
 
13.1

 
2.7

Income tax expense
 
(2.8
)
 
(0.6
)
Net comprehensive income on commodity contracts designated as cash flow hedges
 
10.3

 
2.1

 
 
 
 
 
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
 

 
0.2

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

 
(0.4
)
 
 
 
 
 
Foreign currency translation gain (loss), net of taxes
 
0.2

 
(0.4
)
 
 
 
 
 
Postretirement benefit plans:
 
 
 
 
Unrealized gain arising during the year related to:
 
 
 
 
  Net actuarial gain
 
0.2

 
0.2

Gain reclassified to earnings:
 
 
 
 
   Recognized due to curtailment and settlement
 

 
(0.1
)
Net comprehensive income on postretirement benefit plans, net of taxes
 
0.2

 
0.1

Total other comprehensive income
 
10.7

 
1.4

Comprehensive income (loss) attributable to Delek
 
$
160.0

 
$
(39.0
)

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)
 
 
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

 

 

 

 
149.3

 

 

 
5.1

 
154.4

Other comprehensive income related to commodity contracts

 

 

 
10.3

 

 

 

 

 
10.3

Other comprehensive income related to postretirement benefit plans

 

 

 
0.2

 

 

 

 

 
0.2

Foreign currency translation gain

 

 

 
0.2

 

 

 

 

 
0.2

Common stock dividends ($0.27 per share)

 

 

 

 
(21.0
)
 

 

 

 
(21.0
)
Distributions to non-controlling interests

 

 

 

 

 

 

 
(7.7
)
 
(7.7
)
Equity-based compensation expense

 

 
4.9

 

 

 

 

 
0.1

 
5.0

Repurchase of common stock

 

 

 

 

 
(1,291,644
)
 
(46.2
)
 

 
(46.2
)
Taxes due to the net settlement of equity-based compensation

 

 
(4.5
)
 

 

 

 

 

 
(4.5
)
Exercise of equity-based awards
244,566

 

 

 

 

 

 

 

 

Other

 

 
(0.3
)
 

 

 

 

 

 
(0.3
)
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




















     
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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)

 
 
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

 

 

 

 
(40.4
)
 

 

 
14.9

 
(25.5
)
Other comprehensive income related to commodity contracts

 

 

 
2.1

 

 

 

 

 
2.1

Other comprehensive loss related to postretirement benefit plans

 

 

 
0.1

 

 

 

 

 
0.1

Other comprehensive loss related to interest rate contracts

 

 

 
(0.4
)
 

 

 

 

 
(0.4
)
Foreign currency translation loss

 

 

 
(0.4
)
 

 

 

 

 
(0.4
)
Common stock dividends ($0.20 per share)

 

 

 

 
(17.0
)
 

 

 

 
(17.0
)
Distributions to non-controlling interests

 

 

 

 

 

 

 
(6.9
)
 
(6.9
)
Equity-based compensation expense

 

 
4.6

 

 

 

 

 
0.2

 
4.8

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 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

 

 

 

 

 
(2,569,932
)
 
(95.3
)
 

 
(95.3
)
Taxes due to the net settlement of equity-based compensation

 

 
(1.8
)
 

 

 

 

 

 
(1.8
)
Exercise of equity-based awards
122,747

 

 

 

 

 

 

 

 

Other

 

 

 
0.1

 
(0.1
)
 

 

 

 

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


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)
 
 
Three Months Ended March 31,
 
 
2019
 
2018
Cash flows from operating activities:
 
 
 
 
Net income (loss)
 
$
154.4

 
$
(25.5
)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
 
 

 
 
Depreciation and amortization
 
46.8

 
48.0

Amortization of deferred financing costs and debt discount
 
1.9

 
2.0

 Non-cash lease expense
 
9.3

 

Accretion of environmental liabilities and asset retirement obligations
 
0.7

 
1.3

Amortization of unfavorable contract liability
 

 
(1.5
)
Deferred income taxes
 
10.9

 
(69.1
)
(Income) loss from equity method investments
 
(2.6
)
 

Dividends from equity method investments
 
1.9

 
1.0

Loss on interest rate derivative
 

 
0.7

Loss on disposal of assets
 
5.6

 
0.3

Loss on extinguishment of debt
 

 
9.0

Impairment of assets held for sale
 

 
27.5

Equity-based compensation expense
 
5.0

 
4.8

Income tax benefit of equity-based compensation
 
(1.4
)
 

Loss from discontinued operations
 

 
8.2

Changes in assets and liabilities, net of acquisitions:
 
 

 
 

Accounts receivable
 
(265.8
)
 
(29.1
)
Inventories and other current assets
 
(192.5
)
 
(206.5
)
Fair value of derivatives
 
43.5

 
(18.3
)
Accounts payable and other current liabilities
 
292.4

 
(52.0
)
Obligation under Supply and Offtake Agreement
 
22.6

 
71.8

Non-current assets and liabilities, net
 
0.7

 
52.3

Cash provided by (used in) operating activities - continuing operations
 
133.4

 
(175.1
)
Cash used in operating activities - discontinued operations
 

 
(15.6
)
Net cash provided by (used in) operating activities
 
133.4

 
(190.7
)
Cash flows from investing activities:
 
 

 
 
Equity method investment contributions
 
(4.8
)
 

Distributions from equity method investments
 
0.8

 
0.7

Capital expenditures for property, plant, equipment and refinery turnaround activities
 
(124.0
)
 
(71.0
)
Purchase of intangible assets
 

 
(1.6
)
Proceeds from sale of property, plant and equipment
 
1.0

 
0.1

Proceeds from sales of discontinued operations
 

 
39.7

Cash used in investing activities - continuing operations
 
(127.0
)
 
(32.1
)
Cash provided by investing activities - discontinued operations
 

 
5.5

Net cash used in investing activities
 
(127.0
)
 
(26.6
)
Delek US Holdings, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited) (continued)
(In millions)
 
 
Three Months Ended March 31,
 
 
2019
 
2018
Cash flows from financing activities:
 
 

 
 
Proceeds from long-term revolvers
 
437.8

 
1,078.7

Payments on long-term revolvers
 
(433.3
)
 
(608.9
)
Proceeds from term debt
 

 
690.6

Payments on term debt
 
(26.8
)
 
(671.1
)
Proceeds from product financing agreements
 
15.6

 

Repayments of product financing agreements
 
(9.0
)
 
(72.4
)
Taxes paid due to the net settlement of equity-based compensation
 
(4.5
)
 
(1.8
)
Repurchase of common stock
 
(46.2
)
 
(95.3
)
Distribution to non-controlling interest
 
(7.7
)
 
(6.9
)
Dividends paid
 
(21.0
)
 
(17.0
)
Deferred financing costs paid
 
(0.9
)
 
(2.5
)
Cash (used in) provided by financing activities - continuing operations
 
(96.0
)
 
293.4

Cash used in financing activities - discontinued operations
 

 

Net cash (used in) provided by financing activities
 
(96.0
)
 
293.4

Net (decrease) increase in cash and cash equivalents
 
(89.6
)
 
76.1

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

 
941.9

Cash and cash equivalents at the end of the period
 
989.7

 
1,018.0

Less cash and cash equivalents of discontinued operations at the end of the period
 

 

Cash and cash equivalents of continuing operations at the end of the period
 
$
989.7

 
$
1,018.0

Supplemental disclosures of cash flow information:
 
 
 
 
Cash paid during the period for:
 
 
 
 
Interest, net of capitalized interest of $0.3 million and $0.2 million in the 2019 and 2018 periods, respectively
 
$
25.1

 
$
32.7

Income taxes
 
$
0.1

 
$

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

 
$
127.0

(Decrease) increase in accrued capital expenditures
 
$
4.4

 
$
(0.9
)
Non-cash financing activities:
 
 
 
 
 Non-cash lease liability arising from recognition of right of use assets upon adoption of ASU 2016-02
 
$
211.0

 
$


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 filed with the Securities and Exchange Commission ("SEC") on March 1, 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 have revised our related accounting policy, as presented in our 2018 Annual Report on Form 10-K.
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

     
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Notes to Condensed Consolidated Financial Statements (Unaudited)

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 .
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. Financial institutions and other 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.

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

     
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Notes to Condensed Consolidated Financial Statements (Unaudited)

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 $4.8 million for the three months ended March 31, 2018 . 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 months ended March 31, 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.
Included in our corporate, other and elimination segment are 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.
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. Operations that are not specifically included in the reportable segments are included in the corporate and other category, which primarily consists of net revenues, operating costs and expenses, depreciation and amortization expense and interest income and expense associated with our discontinued operations and with our corporate headquarters.
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 March 31, 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"),

     
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Notes to Condensed Consolidated Financial Statements (Unaudited)

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 a sharing of 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 $4.8 million and $5.0 million during the three months ended March 31, 2019 and 2018 , respectively. The intercompany transaction fees in regards to the Big Spring refinery were $3.7 million and $1.1 million for the three months ended March 31, 2019 and 2018 , respectively. Additionally, the refining segment purchases finished product and pays crude transportation, terminalling and storage fees to the logistics segment for the utilization of pipeline, terminal and storage assets, including, effective March 1, 2018, those related to the Big Spring Logistic Assets Acquisition discussed further in Note 5 . These costs and fees were $52.2 million and $54.3 million during the three months ended March 31, 2019 and 2018 , respectively. The logistics segment also sold $0.4 million and $1.2 million of renewable identification numbers ("RINs") to the refining segment during the three months ended March 31, 2019 and 2018 , respectively. The refining segment recorded refined product sales revenues from the retail segment of $90.2 million and $96.3 million during the three months ended March 31, 2019 and 2018 , respectively. The refining segment includes refined product sales revenues from our logistics segment of $79.5 million and $83.4 million during the three months ended March 31, 2019 and 2018 , respectively. The refining segment also includes sales revenues of $14.9 million and $3.4 million from sales of asphalt to our corporate, other and eliminations segment during the three months ended March 31, 2019 and 2018 .
Our logistics segment owns and operates crude oil and refined products logistics and marketing assets. The logistics segment generates revenue by charging fees for gathering, transporting and storing crude oil and for marketing, distributing, transporting and storing intermediate and refined products in select regions of the southeastern United States and west Texas for our refining segment and third parties, and sales of wholesale products in the west Texas market. The logistics segment is currently managing a long-term capital project on our behalf for the construction of a gathering system in the Permian Basin. The logistics segment received management fees of $1.8 million during the three months ended March 31, 2019 , from the corporate, other and eliminations segment for the management of this project. The logistics segment incurs some of the costs in connection with the construction of the assets and is subsequently reimbursed by the corporate, other and eliminations segment.
Our retail segment consists of approximately 281 owned and leased convenience store sites as of March 31, 2019 , located primarily in central and west Texas and New Mexico. These convenience stores typically offer various grades of gasoline and diesel primarily under the Alon or Delek brand name and food products, food service, tobacco products, non-alcoholic and alcoholic beverages, general merchandise as well as money orders to the public, primarily under the 7-Eleven and Alon brand names. Substantially all of the motor fuel sold through our retail segment is supplied by our Big Spring refinery, which is transferred to the retail segment at prices substantially determined by reference to published commodity pricing information. In November 2018, we terminated the license agreement with 7-Eleven, Inc. and the terms of such termination require the removal of all 7-Eleven branding on a store-by-store basis by the earlier of December 31, 2021 or the date upon which our last 7-Eleven store is de-identified or closed. Merchandise sales at our convenience store sites will continue to be sold under the 7-Eleven brand name until 7-Eleven branding is removed at such convenience store sites pursuant to the termination.
All inter-segment transactions have been eliminated in consolidation.

     
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Notes to Condensed Consolidated Financial Statements (Unaudited)

The following is a summary of business segment operating performance as measured by contribution margin for the period indicated (in millions):
 
 
Three Months Ended March 31, 2019
(In millions)
 
Refining
 
Logistics
 
Retail
 
Corporate,
Other and Eliminations
 
Consolidated
Net revenues (excluding intercompany fees and sales)
 
$
1,907.4

 
$
89.6

 
$
197.2

 
$
5.7

 
$
2,199.9

Intercompany fees and sales  
 
184.6

 
62.9

 

 
(247.5
)
 

Operating costs and expenses:
 
 
 
 
 
 
 
 
 
 
Cost of materials and other
 
1,676.7

 
96.3

 
163.4

 
(237.0
)
 
1,699.4

Operating expenses (excluding depreciation and amortization presented below)
 
121.0

 
16.1

 
23.6

 
6.0

 
166.7

Segment contribution margin
 
$
294.3

 
$
40.1

 
$
10.2

 
$
(10.8
)
 
333.8

Depreciation and amortization
 
31.1

 
6.5

 
4.3

 
4.9

 
46.8

General and administrative expenses
 
 
 
 
 
 
 
 
 
62.2

Other operating expense, net
 
 
 
 
 
 
 
 
 
2.4

Operating income
 
 
 
 
 
 
 
 
 
$
222.4

Total assets
 
$
6,607.2

 
$
640.2

 
$
339.0

 
$
(1,214.6
)
 
$
6,371.8

Capital spending (excluding business combinations)
 
$
81.7

 
$
0.9

 
$
5.1

 
$
40.7

 
$
128.4


 
 
 
 
 
 
 
 
 
 
 

 
 
Three Months Ended March 31, 2018
 
 
Refining
 
Logistics
 
Retail
 
Corporate,
Other and Eliminations
 
 
Consolidated
Net revenues (excluding intercompany fees and sales)
 
$
1,942.8

 
$
106.3

 
$
209.6

 
$
94.5

 
$
2,353.2

Intercompany fees and sales
 
183.1

 
61.6

 

 
(244.7
)
 

Operating costs and expenses:
 
 
 
 
 
 
 
 
 
 
Cost of materials and other
 
1,878.0

 
119.0

 
173.2

 
(127.4
)
 
2,042.8

Operating expenses (excluding depreciation and amortization presented below)
 
114.7

 
12.6

 
24.5

 
6.3

 
158.1

Segment contribution margin
 
$
133.2

 
$
36.3

 
$
11.9

 
$
(29.1
)
 
152.3

Depreciation and amortization
 
32.2

 
6.0

 
6.9

 
2.9

 
48.0

General and administrative expenses
 
 
 
 
 
 
 
 
 
65.2

Other operating expense, net
 
 
 
 
 
 
 
 
 
0.3

Operating income
 
 
 
 
 
 
 
 
 
$
38.8

Total assets (1)
 
$
5,565.8

 
$
665.9

 
$
325.9

 
$
(472.9
)
 
$
6,084.7

Capital spending (excluding business combinations) (2)
 
$
51.5

 
$
2.2

 
$
2.0

 
$
14.4

 
$
70.1

 
 
 
 
 
 
 
 
 
 
 

(1)  
Assets held for sale of $120.7 million are included in the corporate, other and eliminations segment as of March 31, 2018.
(2)  
Capital spending excludes transaction costs capitalized in the amount of $0.4 million during the three months ended March 31, 2018 , that relate to the Big Spring Logistic Assets Acquisition (as defined in Note 5 ).



     
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Notes to Condensed Consolidated Financial Statements (Unaudited)

Property, plant and equipment and accumulated depreciation as of March 31, 2019 and depreciation expense by reporting segment for the three months ended March 31, 2019 are as follows (in millions):
 
 
Refining
 
Logistics
 
Retail
 
Corporate,
Other and Eliminations
 
Consolidated
Property, plant and equipment
 
$
2,306.5

 
$
453.6

 
$
150.8

 
$
210.5

 
$
3,121.4

Less: Accumulated depreciation
 
(613.1
)
 
(146.7
)
 
(33.3
)
 
(56.0
)
 
(849.1
)
Property, plant and equipment, net
 
$
1,693.4

 
$
306.9

 
$
117.5

 
$
154.5

 
$
2,272.3

Depreciation expense
 
$
28.9

 
$
6.5

 
$
4.1

 
$
4.9

 
$
44.4


In accordance with Accounting Standards Codification ("ASC") 360, Property, Plant and Equipment ("ASC 360"), Delek evaluates the realizability of property, plant and equipment as events occur that might indicate potential impairment. There were no indicators of impairment related to our property, plant and equipment as of March 31, 2019 .

Note 4 - Earnings (Loss) Per Share
Basic earnings per share (or "EPS") is computed by dividing net income (loss) by the weighted average common shares outstanding. Diluted earnings per share is computed by dividing net income (loss), as adjusted for changes to income that would result from the assumed settlement of the dilutive equity instruments included in diluted weighted average common shares outstanding, by the diluted weighted average common shares outstanding. For all periods presented, we have outstanding various equity-based compensation awards that are considered in our diluted EPS calculation (when to do so would be dilutive), and is inclusive of awards disclosed in Note 17 to these condensed consolidated financial statements. For those instruments that are indexed to our common stock, they are generally dilutive when the market price of the underlying indexed share of common stock is in excess of the exercise price. Additionally, in connection with the Delek/Alon Merger, we assumed certain equity instruments, including conversion options (associated with the Convertible Notes) and Warrants, that may be dilutive (see discussion of these instruments in Note 10 ). The Convertible Notes conversion options were dilutive during the period they were outstanding when the incremental EPS calculated by dividing the increase in income associated with the elimination of interest expense on the convertible debt, net of tax, by the number of shares that would be issued upon conversion using the treasury stock method (which is applicable because of the cash settlement feature associated with the underlying principal) is dilutive to the overall diluted EPS calculation. The Warrants are generally dilutive during the period they are outstanding when the market price of the underlying indexed share of common stock is in excess of the exercise price. All such instruments that may otherwise be dilutive may not be dilutive when there is a net loss for the period. On September 17, 2018, Delek settled the Convertible Notes for a combination of cash and shares of New Delek Common Stock (See Note 10 ) and in November 2018, Delek entered into Warrant Unwind Agreements (the "Unwind Agreements" - See Note 10 ) with the holders of our outstanding common stock warrants; therefore, these instruments were only potentially dilutive for EPS for the three months ended March 31, 2018 .

     
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Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table sets forth the computation of basic and diluted earnings per share.
 
 
Three Months Ended
 
 
March 31,
 
 
2019

2018
Numerator:
 
 
 
 
Numerator for EPS - continuing operations
 
 
 
 
Income (loss) from continuing operations
 
$
154.4

 
$
(17.3
)
Less: Income from continuing operations attributed to non-controlling interest
 
5.1

 
6.8

Numerator for diluted EPS - continuing operations attributable to Delek
 
$
149.3

 
$
(24.1
)
 
 
 
 
 
Numerator for EPS - discontinued operations
 
 
 
 
Loss from discontinued operations
 
$

 
$
(8.2
)
Less: Income from discontinued operations attributed to non-controlling interest
 

 
8.1

Loss from discontinued operations attributable to Delek
 
$

 
$
(16.3
)
 
 
 
 
 
Denominator:
 
 
 
 
Weighted average common shares outstanding (denominator for basic EPS)
 
77,793,278

 
82,252,405

Dilutive effect of stock-based awards
 
653,412

 

Weighted average common shares outstanding, assuming dilution (denominator for diluted EPS)
 
78,446,690

 
82,252,405

 
 
 
 
 
EPS:
 
 
 
 
Basic income (loss) per share:
 
 
 
 
Income (loss) from continuing operations
 
$
1.92

 
$
(0.29
)
Loss from discontinued operations
 
$

 
(0.20
)
Total basic income (loss) per share
 
$
1.92

 
$
(0.49
)
Diluted income (loss) per share:
 
 
 
 
Income (loss) from continuing operations
 
$
1.90

 
$
(0.29
)
Loss from discontinued operations
 
$

 
(0.20
)
Total diluted income (loss) per share
 
$
1.90

 
$
(0.49
)
 
 
 
 
 
The following equity instruments were excluded from the diluted weighted average common shares outstanding because their effect would be antidilutive:
 
 
 
 
 
 
 
 
 
Antidilutive stock-based compensation (because average share price is less than exercise price)
 
2,173,510

 
820,730

Antidilutive due to loss
 

 
1,112,419

Total antidilutive stock-based compensation
 
2,173,510

 
1,933,149

 
 
 
 
 
Antidilutive convertible debt instruments due to loss
 

 
1,458,780

 
 
 
 
 
Antidilutive warrants due to loss
 

 
161,344





Note 5 - Delek Logistics and the Alon Partnership
Delek Logistics
Delek Logistics is a publicly traded limited partnership that was formed by Delek in 2012 to own, operate, acquire and construct crude oil and refined products logistics and marketing assets. A substantial majority of Delek Logistics' assets are integral to Delek’s refining and marketing operations. As of March 31, 2019 , we owned a 61.4% limited partner interest in Delek Logistics, consisting of 15,294,046 common units, and a 94.6% interest in Delek Logistics GP, LLC, which owns the entire 2.0% general partner interest, consisting of 498,110 general partner units, in Delek Logistics and all of the incentive distribution rights.

     
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Notes to Condensed Consolidated Financial Statements (Unaudited)

The limited partner interests in Delek Logistics not owned by us are reflected in net income attributable to non-controlling interest in the accompanying condensed consolidated statements of income and in non-controlling interest in subsidiaries in the accompanying condensed consolidated balance sheets.
In March 2018, a subsidiary of Delek Logistics completed the acquisition from a subsidiary of Delek (the "Alon Partnership") of storage tanks and terminals that support the Big Spring refinery (the "Big Spring Logistic Assets Acquisition"), which included the execution of related commercial agreements. In addition, a new marketing agreement was entered into between the subsidiary of Delek Logistics and the Alon Partnership pursuant to which the subsidiary of Delek Logistics provides marketing services for product sales from the Big Spring refinery. The cash paid for the transferred assets was $170.8 million , subject to certain post-closing adjustments, and the cash paid for the marketing agreement was $144.2 million . The transactions were financed with borrowings under the 2014 Facility revolving credit agreement (as defined in Note 10 of the condensed consolidated financial statements). Additionally, the transaction resulted in the creation of a deferred tax asset related to the tax-book basis difference in the sold assets totaling $98.8 million , against which we have recorded a valuation allowance totaling $5.5 million for the portion of the deferred tax asset that relates to basis difference attributable to the non-controlling interest and therefore may not be realizable. Prior periods have not been recast in our Segment Data Note 3 , as these assets did not constitute a business in accordance with ASU 2017-01, Clarifying the Definition of a Business , and were accounted for as acquisitions of assets between entities under common control.
We have agreements with Delek Logistics that, among other things, establish fees for certain administrative and operational services provided by us and our subsidiaries to Delek Logistics, provide certain indemnification obligations and establish terms for fee-based commercial logistics and marketing services provided by Delek Logistics and its subsidiaries to us, including new agreements related to the Big Spring Logistic Assets Acquisition. The revenues and expenses associated with these agreements are eliminated in consolidation.
Delek Logistics is a variable interest entity, as defined under GAAP, and is consolidated into our condensed consolidated financial statements, representing our logistics segment. With the exception of intercompany balances and the marketing agreement intangible asset and Delek's related deferred revenue which are eliminated in consolidation, the Delek Logistics condensed consolidated balance sheets as of March 31, 2019 and December 31, 2018 , as presented below, are included in the consolidated balance sheets of Delek (unaudited, in millions).
 
 
March 31,
2019
 
December 31,
2018
 
 
 
ASSETS
 
 
 
 
Cash and cash equivalents
 
$
5.4

 
$
4.5

Accounts receivable
 
21.5

 
21.6

Inventory
 
6.7

 
5.5

Other current assets
 
0.6

 
1.0

Property, plant and equipment, net
 
306.9

 
312.6

Equity method investments
 
107.8

 
104.8

Operating lease right-of-use assets
 
19.2

 

Goodwill
 
12.2

 
12.2

Intangible assets, net
 
136.4

 
138.2

Other non-current assets
 
23.5

 
24.2

Total assets
 
$
640.2

 
$
624.6

LIABILITIES AND DEFICIT
 
 
 
 
Accounts payable
 
$
5.5

 
$
14.2

Accounts payable to related parties
 
10.5

 
7.8

Current portion of operating lease liabilities
 
4.3

 

Accrued expenses and other current liabilities
 
18.7

 
14.5

Long-term debt
 
705.2

 
700.4

Asset retirement obligations
 
5.3

 
5.2

Operating lease liabilities, net of current portion
 
14.9

 

Other non-current liabilities
 
17.7

 
17.3

Deficit
 
(141.9
)
 
(134.8
)
Total liabilities and deficit
 
$
640.2

 
$
624.6




     
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Notes to Condensed Consolidated Financial Statements (Unaudited)

Alon Partnership
As part of the Delek/Alon Merger, we acquired a majority interest in the Alon Partnership, which owns the assets and conducts the operations of the Big Spring refinery and the associated integrated wholesale marketing operations. On February 7, 2018 (the "Merger Date"), Delek acquired from the Alon Partnership all of the outstanding limited partner units that Delek did not already own in an all-equity transaction (the "Alon Partnership Merger"). Delek owned approximately 51.0 million limited partner units of the Alon Partnership, or approximately 81.6% of the outstanding units, immediately prior to the Merger Date. Under terms of the merger agreement, the owners of the remaining outstanding units in the Alon Partnership that Delek did not own immediately prior to the Merger Date received a fixed exchange ratio of 0.49 shares of New Delek common stock for each limited partner unit of the Alon Partnership, resulting in the issuance of approximately 5.6 million shares of New Delek common stock to the public unitholders of the Alon Partnership. Because the transaction represented a combination of ownership interests under common control, the transfer of equity from non-controlling interest to owned interest (additional paid-in capital) was recorded at carrying value and no gain or loss was recognized in connection with the transaction. Additionally, book-tax basis difference was created as a result of the transaction that resulted in a deferred tax asset of approximately $13.5 million , net of a valuation allowance on certain state income tax components, that also increased additional paid-in capital. Transaction costs incurred by the Company in connection with the Alon Partnership Merger totaled approximately $3.3 million for the three months ended March 31, 2018 . Such costs were included in general and administrative expenses in the accompanying condensed consolidated statements of income.
Prior to the Merger Date, the Alon Partnership was a variable interest entity for which Delek was the primary beneficiary. As of March 31, 2019 and December 31, 2018 , the Alon Partnership is included in Delek's condensed consolidated balance sheet as a wholly-owned subsidiary.

Note 6 - Equity Method Investments
Delek Logistics has two joint ventures that own and operate logistics assets, and which serve third parties and subsidiaries of Delek. As of March 31, 2019 and December 31, 2018 , Delek Logistics' investment balances in these joint ventures totaled $107.8 million and $104.8 million , respectively, and were accounted for using the equity method.
Delek Renewables, LLC, a wholly-owned subsidiary of Delek, has a joint venture that owns, operates and maintains a terminal consisting of an ethanol unit train facility with an ethanol tank in North Little Rock, Arkansas. As of March 31, 2019 and December 31, 2018 , Delek Renewables, LLC's investment balance in this joint venture was $3.9 million and $2.4 million respectively, and was accounted for using the equity method. The investment in this joint venture is reflected in the refining segment.
Effective with the Delek/Alon Merger, we acquired a 50% interest in two joint ventures that own asphalt terminals located in Fernley, Nevada, and Brownwood, Texas. On May 21, 2018, Delek sold its 50% interest in the asphalt terminal located in Fernley, Nevada. See Note 7 for further discussion. As of March 31, 2019 and December 31, 2018 , Delek's investment balance in the Brownwood, Texas joint venture was $23.3 million and $23.1 million , respectively. This investment is accounted for using the equity method and is included as part of total assets in the corporate, other and eliminations segment.

Note 7 - Discontinued Operations and Assets Held for Sale
Asphalt Terminals Held for Sale
On February 12, 2018, Delek announced it had reached a definitive agreement to sell certain assets and operations of four asphalt terminals (included in Delek's corporate, other and eliminations segment), as well as an equity method investment in an additional asphalt terminal located in Femley, Nevada, to an affiliate of Andeavor. On May 21, 2018, Delek completed the transaction and received net proceeds of approximately $110.8 million , inclusive of the $75.0 million base proceeds as well as certain working capital adjustments. The assets associated with the owned terminals met the definition of held for sale pursuant to ASC 360 as of February 1, 2018, but did not meet the definition of discontinued operations pursuant to ASC 205-20, Presentation of Financial Statements - Discontinued Operations ("ASC 205-20"), as the sale of these asphalt assets did not represent a strategic shift that would have a major effect on the entity's operations and financial results. Accordingly, depreciation ceased as of February 1, 2018, and the assets to be sold were reclassified to assets held for sale as of that date and were written down to the estimated fair value less costs to sell, resulting in an impairment loss on assets held for sale of $27.5 million for the three months ended March 31, 2018 . All goodwill associated with the asphalt operations sold was written off in connection with the impairment charge discussed above. In connection with the completion of the sale transaction in the second quarter of 2018 , we recognized a gain of approximately $13.3 million , resulting primarily from the recognition of certain additional proceeds at closing associated with the asphalt terminals which were not previously determinable/probable and the recognition of the gain on the sale of the joint venture which was not previously recognized as held for sale (as it did not meet the criteria).

     
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Notes to Condensed Consolidated Financial Statements (Unaudited)

California Discontinued Entities
During the third quarter 2017, we committed to a plan to sell certain assets associated with our Paramount and Long Beach, California refineries and our California renewable fuels facility (as previously defined, the "California Discontinued Entities"). Such operations were designated and reported as discontinued operations. On March 16, 2018, Delek sold to World Energy, LLC (i) all of Delek’s membership interests in the California renewable fuels facility ("AltAir") (ii) certain refining assets and other related assets located in Paramount, California and (iii) certain associated tank farm and pipeline assets and other related assets located in California. Upon final settlement (excluding contingent components), Delek expects to receive net cash proceeds of approximately $85.2 million , which includes a post-closing working capital settlement, Delek’s portion of the expected biodiesel tax credit for 2017 and certain customary adjustments. The sale resulted in a loss on sale of discontinued operations totaling approximately $41.4 million of which $41.2 million was recorded during the three months ended March 31, 2018 . Of the total expected proceeds, $54.6 million was received during the three months ended March 31, 2018 ( $14.9 million of which were included in net cash flows from investing activities in discontinued operations). As of March 31, 2019 , we have received a total of $70.4 million of the total expected proceeds. Additionally, Delek will be entitled to its pro rata portion of any tax credits relating to AltAir activities in 2018 earned through the sale date if the 2018 biodiesel tax credit is re-enacted. A receivable for such additional contingent proceeds will be recorded when the criteria for recognition are met, which is predicated upon reenactment of the tax credit and determination of the amounts earned by AltAir.
The transaction to dispose of certain assets and liabilities associated with our Long Beach, California refinery to Bridge Point Long Beach, LLC closed July 17, 2018 resulting in initial cash proceeds of approximately $14.5 million , net of expenses, and resulting in a gain on sale of discontinued operations of approximately $1.4 million during the third quarter of 2018.
The operating results, net of tax, from discontinued operations associated with the California Discontinued Entities are presented separately in Delek’s condensed consolidated statements of income and the notes to the condensed consolidated financial statements have been adjusted to exclude the discontinued operations. Components of amounts reflected in income from discontinued operations are as follows (in millions):
 
Three Months Ended
 
 
March 31, 2018
Net revenues
 
32.5

Cost of sales:
 
 
Cost of materials and other
 
3.8

Operating expenses (excluding depreciation and amortization)
 
(7.8
)
Total cost of sales
 
(4.0
)
General and administrative expenses
 
(1.1
)
Interest income
 
0.3

Other income, net
 
3.0

Loss on sale of California Discontinued Entities
 
(41.2
)
Loss from discontinued operations before taxes
 
(10.5
)
Income tax benefit
 
(2.3
)
Loss from discontinued operations, net of tax
 
$
(8.2
)


Included in loss from discontinued operations is net income attributable to non-controlling interest totaling $8.1 million related to AltAir for the three months ended March 31, 2018 .

Note 8 - Inventory
Crude oil, work in process, refined products, blendstocks and asphalt inventory for all of our operations, excluding the Tyler refinery and fuel inventory in our retail segment, are stated at the lower of cost determined using the first-in, first-out (“FIFO”) basis or net realizable value. Cost of all inventory at the Tyler refinery is determined using the last-in, first-out ("LIFO") inventory valuation method and inventory is stated at the lower of cost or market.  Retail merchandise inventory consists of cigarettes, beer, convenience merchandise and food service merchandise and is stated at estimated cost as determined by the retail inventory method.

     
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Notes to Condensed Consolidated Financial Statements (Unaudited)

Carrying value of inventories consisted of the following (in millions):
 
 
March 31,
2019
 
December 31,
2018
Refinery raw materials and supplies
 
$
436.6

 
$
289.0